jrj.com.cnpg.jrj.com.cn/acc/Res/CN_RES/INVEST/2016/5/6/492145bb-3305-420… · Disclaimer & Disclosures This report must be read with the disclosures in the Disclosure appendix, and

Disclaimer & Disclosures

This report must be read with the disclosures in the Disclosure appendix, and

with the Disclaimer, which forms part of it.

Disclosures for companies can be accessed via the hyperlinks to the original

published research, which can be found in the title

Issuer of report: The Hongkong and Shanghai Banking Corporation Limited

View HSBC Global Research at:

https://www.research.hsbc.com

THIS CONTENT MAY NOT BE DISTRIBUTED TO THE PEOPLE'S REPUBLIC OF CHINA (THE "PRC") (EXCLUDING SPECIAL ADMINISTRATIVE REGIONS OF HONG KONG AND MACAO)

What’s Changed, Research Focus, Today’s Events

Ticker Company Rating was Currency Target was EPS '15e EPS '16e Price Price At Close

Up 1326 TT FCFC Buy Hold TWD 95.00 84.00 4.72(a) 4.85 80.80 03 May BABA US Alibaba Group Buy USD 113.00 111.00 - 16.85(a) 75.82 05 May 002038 CH Beijing SL Pharmaceutical Buy CNY 36.40 33.30 0.84(a) 0.81 29.21 04 May 2474 TT Catcher Technology Buy TWD 295.00 286.00 32.61(a) 27.77 202.00 05 May 1301 TT FPC Buy TWD 90.00 87.00 4.85(a) 4.93 79.00 03 May 6505 TT FPCC Buy TWD 108.00 100.00 4.97(a) 5.11 91.30 03 May AREIT SP Ascendas REIT Hold SGD 2.55 2.50 0.146(a) 0.154 2.40 05 May CSTRL IN Castrol India Ltd Hold INR 427.00 415.00 12.44(a) 14.30 387.95 04 May KLBF IJ Kalbe Farma Hold IDR 1400.00 1250.00 42.47(a) 46.07 1345.00 03 May MPEL US Melco Crown Hold USD 16.60 16.50 0.50(a) 0.29 15.25 03 May 107 HK Sichuan Expressway-H Hold HKD 3.10 2.70 CNY 0.33(a) CNY 0.17 2.74 05 May 601107 CH Sichuan Expressway-A Reduce CNY 2.70 2.40 0.33(a) 0.17 4.46 05 May 601933 CH Yonghui Superstores Reduce CNY 6.66 6.40 0.16(a) 0.16 8.73 04 May

Down 2038 HK FIH Mobile Ltd Hold Buy HKD 2.83 4.52 0.03(a) - 3.19 05 May 1476 TT Eclat Textile Buy TWD 503.00 597.00 15.99(a) 17.77 348.50 04 May HMN IN Emami Ltd Buy INR 1330.00 1400.00 - 15.82(a) 978.20 05 May 3552 TT Tung Thih Electronic Buy TWD 610.00 670.00 9.39(a) 18.51 533.00 05 May 1303 TT NYP Hold TWD 70.00 65.00 4.50(a) 4.96 62.70 03 May SUNP IN Sun Pharma Hold INR 760.00 805.00 19.30(a) 23.54 804.20 04 May Source: Bloomberg, HSBC estimates

Research Focus

Taiwan Petrochemicals - Stay positive on FPG; upgrade FCFC to Buy John Chung*

Higher oil prices and stronger demand outlook in 2017-18e

Convergence of olefin and aromatic cycles starting from 2016e

Valuations still attractive, with yields improving

Eclat Textile (1476 TT) - Buy: New product development to revitalise growth Chloe Wu*

We expect Eclat to resume growth momentum in 2H16e

Eclat translates its R&D to earnings growth on P&L; 25% FY16-18e earnings CAGR

Maintain Buy but cut our target price to TWD503 (from TWD597); share price correction creates re-entry point

FIH Mobile Ltd (2038 HK) - Downgrade to Hold: Negative profit warning Yolanda Wang*

Worse-than-expected competition in component business leads to lower gross margins

Cash is 72% of its market capitalization

Downgrade to Hold from Buy with a TP of HKD2.83 (down from HKD4.52) based on lower PB multiple

6 May 2016

First Light Asia RESEARCH MARKETING ASIA

Ticker Event Rating Target Price Ticker Event NI Bbg

Siemens Ltd SIEM IN Q2 Reduce 786.00 1,131.6 Cognizant Techno CTSH US Q1 59.7 Titan Co Ltd TTAN IN Y Buy 400.00 355.9 Cigna Corp CI US Q1 139.9 Bumrungrad Hospital PCL BH TB Q1 Hold 242.00 203.0 Exelon Corp EXC US Q1 35.2 Novatek Microelectronics Corp 3034 TT Q1 Buy 149.00 113.0 Weyerhaeuser Co WY US Q1 32.0 Inox Wind Ltd INXW IN Y Buy 347.00 271.8 Willis Towers Wa WLTW US Q1 124.2

Source: Bloomberg, HSBC estimates

Alfred Chin* Research Marketing +852 2996 6753 [email protected]

*Employed by a non-US affiliate of HSBC Securities (USA) Inc, and is not registered/qualified pursuant to FINRA regulations

Taiwan Petrochemicals | Eclat Textile | FIH Mobile Ltd | Alibaba Group

RESEARCH MARKETING ASIA

6 May 2016

Research Focus (Contd.,)

Alibaba Group (BABA US) - Buy: Leveraging data to raise the value of its platform Chi Tsang*

Core e-commerce business posts fastest growth in 6 quarters

Stable GMV growth but rising monetization

Maintain Buy and raise SOTP TP to USD113 from USD111; Alibaba is an HSBC Asia Super Ten portfolio constituent

In this document HSBC may comment on the potential economic impact dependent on the outcome of the UK Referendum. HSBC

is not taking a political position and this document and the information contained herein are not intended to promote or procure, or

otherwise be in connection with promoting or procuring, a particular outcome in relation to the question asked in the UK

Referendum.


6 May 2016

Regional

Asia Chart of the Week - Nope, false signal Frederic Neumann

So, we published a chart earlier this week that caused a bit of excitement among our readers. It shows a spike in the new order-to-

inventory ratio for emerging Asia (based on the latest crop of PMIs).

This, ordinarily, points to an acceleration in industrial output in the region.

Trouble is, as helpful as the indicator often proves, at times it can send false signals.

China & Hong Kong

Hong Kong Retail Sales (March 2016) - Pace of decline moderates Julia Wang

The contraction in retail sales eased in March after the Chinese New Year effect faded, but remains at a weak level.

Both the luxury goods sector and the consumer durable goods sector continued to pose double-digit contractions, as a result of a

11% YTD contraction in inbound tourists.

Food and supermarket sales however, held up relatively better.

Nikkei Hong Kong PMI (Apr 2016) - Contracting further John Zhu

The headline Nikkei Hong Kong PMI fell further to 45.3 in April, down from 45.5 in March, signalling a faster deterioration in private

sector activity.

New orders fell at a faster pace, underscoring the overall weakness in demand conditions.

Firms continue to cut jobs as output remains weak.

The Great Mall of China - Air conditioner makers yearning for a hot summer [Corrected] Erwan Rambourg*

April is normally the start of the peak season for air conditioner sales.

However, demand has yet to show strong signs of picking up, based on our recent visits to appliance retailers in south China.

Appliance makers and retailers are hoping for the weather to warm up to drive demand in the peak season.

Beijing SL Pharmaceutical (002038 CH) - Buy: Generic Lenalidomide getting closer to approval Zhijie Zhao*

CFDA announced it had started its on-site inspection of SL Pharm’s generic Lenalidomide

We expect Lenalidomide to contribute RMB4.9bn to SL Pharm at peak sales

Raise TP to RMB36.4 from RMB33.30 on higher PE multiple, reiterate Buy

MGM China (2282 HK) - Buy: 1Q16 in line; Cotai continues to target 1Q17 Scott Chan*

1Q16 was in-line but dampened by unfavorable luck

Cotai construction should be completed in October/November and continues to target 1Q17 opening

Maintain Buy rating and unchanged target price of HKD14.2

Melco Crown (MPEL US) - Hold: 1Q16 in line, repurchasing stake from Crown Scott Chan*

Bad debt provision at Altira offset favourable win rate impact

MPEL to repurchase 9.5% of its shares from Crown Resorts

Maintain Hold and raise TP to USD16.6 from USD16.5

Sichuan Expressway (107 HK/601107 CH) - H: Hold/A: Reduce – Forecast delay in profit ramp up Wei Sim*

Six months delay in the Suining roads’ contribution itself is not a concern, but profitability ramp up will take a few years

We forecast insignificant impact on earnings from the increase in non-toll revenue contribution

Raise H share TP to HKD3.1 (from HKD2.7) maintain Hold, raise A share TP to RMB2.8 (from RMB2.4) maintain Reduce

CNOOC Ltd. (883 HK) - Reduce: Wildfire impact a function of outage duration Thomas C. Hilboldt*

Along with other oil sands operators, Long Lake oil sands facility in Ft. McMurray, Alberta will shut to ensure staff safety

CNOOC Canadian output was c.60kb/d in 2015 or 4% of production; downtime may raise risk to production target

Maintain Reduce with TP of HKD5.55; shares have moved ahead of likely fundamental outcomes

Yonghui Superstores (601933 CH) - Reduce: Unlikely to live up to expectations Lina Yan*

Strong performance in 1Q might not be sustainable

We think market expectations on margins are too high

We increase our DCF-based TP to RMB6.66 (from RMB6.40)


6 May 2016

Korea

Asia EV and Battery - Read-across from Tesla’s 1Q16 results Will Cho*

NCSOFT (036570 KS) - Buy: More catalysts expected for 2H16e Jena Han

Taiwan

Catcher Technology (2474 TT) - Buy: Expectations reset; concerns addressed Carrie Liu*

Tung Thih Electronic (3552 TT) - Buy: April sales weak but auto demand remains solid Joyce Chen*

ASEAN

SembCorp Industries (SCI SP) - Buy: Confident of Utilities’ growth & Marine’s survival Tarun Bhatnagar*

Ascendas REIT (AREIT SP) - Hold: In line with expectations Pratik Burman Ray*

Banco De Oro Unibank (BDO PM) - Hold: No rush to raise capital Xiushi Cai*

Kalbe Farma (KLBF IJ) - Hold: Pharma division continues to be under pressure Permada Darmono*

Hanjaya Mandala Sampoerna (HMSP IJ) - Reduce: Muted Selviana Aripin*

India

Emami Ltd (HMN IN) - Buy: Q4 better than expected, revenue focus in FY17 Amit Sachdeva*

Castrol India Ltd (CSTRL IN) - Hold: Margin expansion priced in Kumar Manish*

Sun Pharma (SUNP IN) - Hold: MK-3222 – positive phase III but is that enough? Girish Bakhru*

Global

EM-8 Rates: Era of easing - Maintain our long duration stance on EM Andre de Silva

Global PMI wrap-up - Struggling for growth James Pomeroy

Market data

Source: Bloomberg

Markets HSBC Last 5d % Forecast GDP (%Yr) Int Rate USD vs CCY HSBC Last 5d % Commodities HSBC Last 5d %

HSI 12,700 11,793 -3.31 US 2.5 0.50-0.75 EUR 1.05 1.14 0.44 Oil 62.5 44.3 -3.71

SHCOMP 3,400 2,998 1.50 China 7.1 4.85 CNY 6.50 6.51 -0.53 Gold 1,233 1278 0.90

TAIEX 8,700 8,168 -4.61 Taiw an 1.3 1.63 TWD 33.0 32.38 -0.24 Coal (Thermal) 85 51 -0.49

KOSPI 1,990 1,977 -1.92 Korea 2.4 1.50 KRW 1,220.0 1164 -2.26 Steel (HRC China) 483 2920 0.69

TOPIX 1,640 1,300 -7.64 Japan 0.6 0-0.10 JPY 125.0 107.3 0.77 Aluminium 1,875 1615 -1.64

BSE 30 25,800 25,262 -1.33 India 7.6 7.25 INR 67.0 66.56 -0.05 Copper 7,100 4880 -1.89

Disclosures & Disclaimer

This report must be read with the disclosures and the analyst certifications in

the Disclosure appendix, and with the Disclaimer, which forms part of it.

Issuer of report: HSBC Securities (Taiwan) Corporation Limited



THIS CONTENT MAY NOT BE DISTRIBUTED TO THE PEOPLE’S REPUBLIC OF CHINA (THE “PRC”) (EXCLUDING THE SPECIAL ADMINISTRATIVE REGIONS OF HONG KONG AND MACAO)

Higher oil prices and stronger demand outlook in 2017-18e

Convergence of olefin and aromatic cycles starting from 2016e

Valuations still attractive, with yields improving

Positive earnings momentum and attractive dividend yields. We upgrade Formosa

Chemicals & Fibre (FCFC) shares from Hold to Buy. We maintain our Buy ratings on

Formosa Plastics (FPC) and Formosa Petrochemical (FPCC) and our Hold rating on

Nan Ya Plastics (NYP). We raise our fair value target prices and our 2016e earnings

estimates by an average of 14% to reflect stronger-than-expected olefin margins (for

FPCC), styrene chain product spreads (for FCFC), PVC margins (for FPC), and one-

off share disposal gains (for NYP). We believe positive earnings momentum and

attractive dividend yields will continue to support valuations in the next 12 months.

Positive implications from rising crude oil prices. HSBC forecasts a recovery in

the Brent crude oil price from USD45/b in 2016e to USD60/b in 2017e and USD75/b

in 2018e. Rising crude oil prices have positive implications for refining and

petrochemical companies, and we believe FPCC is best positioned for earnings

upside in a rising crude oil price environment. FPC is also well positioned with the

highest equity stake in FPCC and FPC USA, a gas-based petrochemical producer

that should see strong margin expansion when the oil price eventually rises.

Improving petrochemical supply demand outlook. We believe petrochemical

demand will strengthen going into 2017e because we expect (1) growth of emerging

economies to accelerate and (2) accelerating GDP growth rates to lead to a higher

petrochemical demand GDP multiplier. On the supply side, light olefins should see new

capacity growth in the next two years, and even more in 2018e, while the aromatics

chain should have relatively limited capacity additions in 2017-18e. We believe FCFC

is best positioned in the medium-term recovery of the aromatics cycle.

Valuation and risks. We continue to base our target prices on DCF. Our 2016e EPS

estimates are 2%, 14%, 1%, and 6% above consensus for FPC, NYP, FCFC, and

FPCC, respectively. Key risks to our stock calls include weaker-than-expected oil

price and petrochemical spreads and unexpected operational issues.

6 May 2016

John Chung*

Head of Research, Taiwan

HSBC Securities (Taiwan) Corporation Limited

[email protected]

+886 2 6631 2868

*Employed by a non-US affiliate of HSBC Securities (USA) Inc, and is not registered/ qualified pursuant to FINRA regulations

Taiwan Petrochemicals EQUITIES CHEMICALS

Taiwan

HSBC Taiwan Petrochemical Sector (TWD)

Company Ticker 3 May _____ TP ______ ___ Rating ___ Upside/ ____ PE (x) ____ ___ PB (x) ____ __ EPS y-o-y ___ ____ ROE _____ Dividend yield price Old New Old New downside 2016e 2017e 2016e 2017e 2016e 2017e 2016e 2017e 2016e 2017e

FPC 1301 TT 79.00 87.00 90.00 Buy Buy 14% 16.0 14.7 1.7 1.6 2% 9% 11% 11% 5% 5% NYP 1303 TT 62.70 65.00 70.00 Hold Hold 12% 12.7 16.9 1.3 1.3 10% -25% 11% 8% 6% 4% FCFC 1326 TT 80.80 84.00 95.00 Hold Buy 18% 16.7 16.0 1.4 1.4 3% 4% 8% 9% 5% 5% FPCC 6505 TT 91.30 100.00 108.00 Buy Buy 18% 17.9 19.3 3.1 3.1 3% -7% 18% 16% 5% 4%


Stay positive on FPG; upgrade FCFC to Buy

3

EQUITIES CHEMICALS

6 May 2016

Six-month share price performance (relative to the Taiex)

FPG companies’ cash dividend yields

Source: TEJ, HSBC Source: Companies, HSBC estimates

Changes to our earnings estimates

Company HSBCe EPS (new) HSBCe EPS (old) _____ Change _____ ___ Consensus ___ ___ Difference ____ 2016e 2017e 2018e 2016e 2017e 2018e 2016e 2017e 2018e 2016e 2017e 2018e 2016e 2017e 2018e

FPC (1301 TT) 4.93 5.37 5.92 4.56 5.28 na 8% 2% na 4.85 5.26 5.33 2% 2% 11% NYP (1303 TT) 4.96 3.72 4.04 3.89 4.30 na 27% -14% na 4.36 4.41 4.58 14% -16% -12% FCFC (1326 TT) 4.85 5.06 5.77 4.29 4.48 5.20 13% 13% 11% 4.79 4.92 5.07 1% 3% 14% FPCC (6505 TT) 5.11 4.74 4.45 4.72 4.41 4.10 8% 8% 9% 4.81 4.99 4.78 6% -5% -7%

Source: Bloomberg consensus, HSBC estimates

-10%

-5%

0%

5%

10%

15%

20%

25%

30-O

ct-1

5

13-N

ov-1

5

27-N

ov-1

5

11-D

ec-1

5

25-D

ec-1

5

8-Ja

n-16

22-J

an-1

6

5-Fe

b-16

19-F

eb-1

6

4-M

ar-1

6

18-M

ar-1

6

1-A

pr-1

6

15-A

pr-1

6

29-A

pr-1

6

FPC NYP FCFC FPCC

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

FPC NYP FCFC FPCC

2015 2016E 2017E







We expect Eclat to resume growth momentum in 2H16e

Eclat translates its R&D to earnings growth on P&L; 25%

FY16-18e earnings CAGR

Maintain Buy but cut our target price to TWD503 (from

TWD597); share price correction creates re-entry point

Growth momentum to resume in 2H16e: Eclat’s share price has corrected 30% from

the peak in early 4Q15, driven by the market’s concern about slowing growth. Learning

from the 1Q16 sales result, we see a delay in orders from clients, but we expect Eclat to

resume growth momentum in 2H16e, driven by (1) the high season effect; (2) new

products to launch in 2H16e; and (3) capacity expansion in FY17e. Eclat will start the

shipment of new high-end personalized functional sportswear in 2H16e, and we expect

new products to account for 7%/30% of FY16/17e group sales, respectively. The new

products enjoy higher ASPs as well as higher margin, and we expect Eclat’s gross margin

to increase to 29.6% in FY17e, up from 28.0% in FY15. The capacity expansion of two

garment plants in mid-1H17e of nearly 30% (for in-house production only) from the

current level should support the manufacture of new products.

Strong R&D as core competitive advantage for Eclat. The “Athleisure” trend has

been the main growth driver in the global apparel market for years, and more

and more non-sports apparel brands have joined the “Athleisure” market. We

expect the rising competition to push these brands to be more aggressive in

new product development. Eclat’s core competitive advantage of strong R&D,

particularly the high-end nylon-based textiles, makes the company superior to

competitors. Eclat’s new high-end products are 100% researched and

developed by Eclat.

Maintain Buy but cut target price to TWD503 (from TWD597), based on 25x (from

28x) forward 12-month 2H16-1H17e PE (rolled over from 2Q16-1Q17e). We cut our

target PE to 25x, which is the high-end of the historical trading band starting from 2012.

We cut FY16/17e EPS forecast by 11.2%/11.7%, respectively to reflect the delay in

orders resulting from channel client’s inventory issue in 1H16 and capacity constraints

until 2H17e. Despite that, we remain positive on Eclat’s FY17e growth; in view of (1) high

season in 2H16e; (2) positive 2H16e outlook from key clients; (3) new products effect;

and (4) capacity expansion in FY17e. We think the market’s low expectation on Eclat’s

1H16e growth is priced in, and it’s time to position for strong growth in FY17e. Our fair

value TP implies 44.3% upside and we maintain a Buy rating. Catalyst: stronger sales

growth and margin expansion, led by new high-end garment products, in 2H16e and

FY17e. Downside risks are macro uncertainties and lower order visibility.

5 May 2016

MAINTAIN BUY

TARGET PRICE (TWD) PREVIOUS TARGET (TWD)

503.00 597.00

SHARE PRICE (TWD) UPSIDE/DOWNSIDE

348.50 +44.3% (as of 04 May 2016)

MARKET DATA Market cap (TWDm) 93,742 Free float 69%

Market cap (USDm) 2,895 BBG 1476 TT

3m ADTV (USDm) 21.3 RIC 1476.TW

FINANCIALS AND RATIOS (TWD) Year to 12/2015a 12/2016e 12/2017e 12/2018e

HSBC EPS 15.99 17.77 23.51 27.96

HSBC EPS (prev) - 20.02 26.62 -

Change (%) - -11.2 -11.7 -

Consensus EPS 15.54 18.48 22.89 26.11

PE (x) 21.8 19.6 14.8 12.5

Dividend yield (%) 3.0 3.3 4.4 5.3

EV/EBITDA (x) 16.5 13.6 10.2 8.4

ROE (%) 39.3 37.5 41.3 40.4

52-WEEK PRICE (TWD)

Source: Thomson Reuters IBES, HSBC estimates

Chloe Wu* Non-tech Analyst


[email protected]

+8862 6631 2866

John Chung* Head of Research, Taiwan HSBC Securities (Taiwan) Corporation Limited

[email protected]

+8862 6631 2868

* Employed by a non-US affiliate of HSBC Securities (USA) Inc, and is not registered/ qualified pursuant to FINRA regulations

Eclat Textile (1476 TT) EQUITIES TEXTILES, APPAREL & LUXURY GOODS

Taiwan

320.00

440.00

560.00

May 15 Nov 15 May 16

Target price: 503.00High: 529.05 Low: 354.00 Current: 348.50

Buy: New product development to revitalise growth

EQUITIES TEXTILES, APPAREL & LUXURY GOODS

5 May 2016

2

Financial statements

Year to 12/2015a 12/2016e 12/2017e 12/2018e

Profit & loss summary (TWDm)

Revenue 25,521 29,441 37,095 43,559

EBITDA 5,594 6,647 8,652 10,229

Depreciation & amortisation -756 -871 -962 -1,054

Operating profit/EBIT 4,838 5,776 7,690 9,175

Net interest 0 -28 -28 -28

PBT 5,121 5,920 7,834 9,319

HSBC PBT 5,121 5,920 7,834 9,319

Taxation -947 -1,141 -1,509 -1,798

Net profit 4,174 4,779 6,325 7,521

HSBC net profit 4,174 4,779 6,325 7,521

Cash flow summary (TWDm)

Cash flow from operations 5,328 6,522 7,521 9,299

Capex -792 -1,000 -800 -800

Cash flow from investment -783 -1,000 -800 -800

Dividends -2,088 -2,824 -3,138 -4,153

Change in net debt -1,771 -1,747 -2,218 -2,692

FCF equity 3,201 4,103 4,933 6,423

Balance sheet summary (TWDm)

Intangible fixed assets 0 0 0 0

Tangible fixed assets 6,591 6,720 6,558 6,304

Current assets 10,672 12,930 16,944 21,178

Cash & others 3,661 5,360 7,576 10,267

Total assets 17,682 19,822 23,674 27,653

Operating liabilities 3,545 3,770 4,437 5,050

Gross debt 2,363 2,314 2,313 2,311

Net debt -1,298 -3,045 -5,263 -7,956

Shareholders' funds 11,774 13,737 16,924 20,292

Invested capital 10,057 10,520 11,489 12,165

Ratio, growth and per share analysis

Year to 12/2015a 12/2016e 12/2017e 12/2018e

Y-o-y % change

Revenue 22.4 15.4 26.0 17.4

EBITDA 37.8 18.8 30.2 18.2

Operating profit 38.0 19.4 33.1 19.3

PBT 37.0 15.6 32.3 19.0

HSBC EPS 39.0 11.1 32.3 18.9

Ratios (%)

Revenue/IC (x) 2.6 2.9 3.4 3.7

ROIC 40.0 45.3 56.4 62.6

ROE 39.3 37.5 41.3 40.4

ROA 25.6 25.6 29.2 29.4

EBITDA margin 21.9 22.6 23.3 23.5

Operating profit margin 19.0 19.6 20.7 21.1

EBITDA/net interest (x) 237.4 309.0 365.3

Net debt/equity -11.0 -22.2 -31.1 -39.2

Net debt/EBITDA (x) -0.2 -0.5 -0.6 -0.8

CF from operations/net debt

Per share data (TWD)

EPS Rep (diluted) 15.99 17.77 23.51 27.96

HSBC EPS (diluted) 15.99 17.77 23.51 27.96

DPS 10.50 11.67 15.44 18.36

Book value 45.11 51.07 62.92 75.44

Valuation data

Year to 12/2015a 12/2016e 12/2017e 12/2018e

EV/sales 3.6 3.1 2.4 2.0

EV/EBITDA 16.5 13.6 10.2 8.4

EV/IC 9.2 8.6 7.7 7.1

PE* 21.8 19.6 14.8 12.5

PB 7.7 6.8 5.5 4.6

FCF yield (%) 3.4 4.4 5.3 6.9

Dividend yield (%) 3.0 3.3 4.4 5.3

* Based on HSBC EPS (diluted)

Issuer information

Share price (TWD) 348.50 Free float 100%

Target price (TWD) 503.00 Sector Textiles, Apparel & Luxury

Goods

Reuters (Equity) 1476.TW Country Taiwan

Bloomberg (Equity) 1476 TT Analyst Chloe Wu

Market cap (USDm) 2,895 Contact +8862 6631 2866

Price relative

Source: HSBC Note: Priced at close of 04 May 2016

140.00

240.00

340.00

440.00

540.00

140.00

240.00

340.00

440.00

540.00

2014 2015 2016 2017

Eclat Textile Co. Ltd Rel to TAIWAN WEIGHTED INDEX

Financials & valuation: Eclat Textile Co. Ltd Buy

In this document HSBC may comment on the potential economic impact dependent on the outcome of the UK Referendum.

HSBC is not taking a political position and this document and the information contained herein are not intended to promote or

procure, or otherwise be in connection with promoting or procuring, a particular outcome in relation to the question asked in

the UK Referendum.

Disclosures & Disclaimer This report must be read with the disclosures and the analyst certifications in the Disclosure appendix, and with the Disclaimer, which forms part of it.




Worse-than-expected competition in component business

leads to lower gross margins

Cash is 72% of its market capitalization

Downgrade to Hold from Buy with a TP of HKD2.83 (down from HKD4.52) based on lower PB multiple

Negative profit warning for 1H16. FIH Mobile issued a profit warning post market

close that the company’s net profit will range from USD10m to USD20m (down

84-92% YoY) in 1H16 on sales of less than USD2.456bn (down 35%+ YoY). Both

sales and net profit are far below consensus estimates of USD3.69bn and USD109m,

respectively. This implies net margin will shrink substantially from 3% in 1H15 to less

than 1%, far below consensus of 3%. The company attributed the shortfall to lower

demands from some of the major customers as a result of customer transition, and

lower other income such as service fees and molding sales from these customers.

The company is scheduled to report interim results in August.

Margins of components likely much lower than expected. FIH Mobile has two

major parts of its business – the lower-margin assembly business and the much more

profitable component business. The gross margin of assembly is merely 1% and we

had initially assumed a rising adoption of FIH components would drive its gross

margin to reach 6.2% in 2016. Assuming a similar level of operating costs, the

company’s guidance implies that the gross margin of components is slightly better

than 2%, implying much worse-than-expected competition in China. We reset our

gross margin assumption from 6.2% to 2.5% in 2016e/2017e.

Affected by weaker-than-expected demand from more profitable customers.

Xiaomi (unlisted) is the most profitable customer because FIH supplies higher margin

components to Xiaomi in addition to assembly, which we estimate accounted for

more than 20-30% of FIH’s 2015 profit. Also, its major global customers including

Sony (6758.JP, not rated), Blackberry (not listed) and Amazon (AMAZ.US, not rated)

all suffer from smartphone growth slowdown with some exiting the market. We

estimate these global brands accounted for 50% of its 1H15 sales. FIH has been

trying to work more closely with Huawei (not listed), the largest Chinese brand,

especially in components, but the progress appears to be slow.

To factor in the shrinking business from global brands, we lower our 2016e/17e sales

by 27%/31% and EPS by 87%/88%. As a result, we estimate RoE will decrease from

7% to 1% in 2016. Downgrade to Hold with new TP of HKD2.83. Assuming much

lower gross margin and lower RoE, we reduce our PB-based TP from HKD4.52 to

HKD2.83 on a lower multiple of 0.8x (from 1.2x). 0.8x is where FIH traded in the

product down-cycle with an RoE of roughly 1% in 2009 since its IPO. Cash (HKD2.3

per share) is 72% of its market cap, which should provide downside support.

FLASHNOTE

6 May 2016

DOWNGRADE TO HOLD

TARGET PRICE (HKD) PREVIOUS TARGET (HKD)

2.83 4.52 SHARE PRICE (HKD) UPSIDE/DOWNSIDE

3.19 -11.3% (as of 05 May 2016)

MARKET DATA Market cap (HKDm) 25,181 Free float 29%Market cap (USDm) 3,244 BBG 2038 HK3m ADTV (USDm) 3.74 RIC 2038.HK

FINANCIALS AND RATIOS (USD) Year to 12/2015a 12/2016e 12/2017e 12/2018eHSBC EPS 0.03 0.00 0.00 0.00HSBC EPS (prev) - 0.03 0.04 0.04Change (%) - -100.0 -100.0 -100.0Consensus EPS 0.03 0.03 0.04 0.04PE (x) 14.1 87.9 89.9 107.3Dividend yield (%) 6.7 1.1 1.1 0.9EV/EBITDA (x) 1.3 4.3 4.0 4.0ROE (%) 5.9 1.0 1.0 0.8

52-WEEK PRICE (HKD)


Yolanda Wang* AnalystHSBC Securities (Taiwan) Corporation Limited [email protected] +8862 6631 2867

Joyce Chen* AnalystHSBC Securities (Taiwan) Corporation Limited [email protected] +8862 6631 2862


FIH Mobile Ltd (2038 HK) EQUITIES ELECTRICAL EQUIPMENT

Hong Kong

2.30

3.70

5.10


Target price: 2.83 High: 4.77 Low: 2.62 Current: 3.19

Downgrade to Hold: Negative profit warning

abc

EQUITIES ELECTRICAL EQUIPMENT

6 May 2016

2

Financial statements Year to 12/2015a 12/2016e 12/2017e 12/2018eProfit & loss summary (USDm) Revenue 7,451 5,620 5,471 4,892EBITDA 469 200 203 198Depreciation & amortisation -157 -160 -163 -166Operating profit/EBIT 312 40 39 32Net interest -6 15 15 15PBT 290 49 48 40HSBC PBT 290 49 48 40Taxation -62 -12 -12 -10Net profit 228 37 36 30HSBC net profit 228 37 36 30Cash flow summary (USDm) Cash flow from operations 877 520 238 217Capex -154 -154 -154 -154Cash flow from investment -271 -154 -154 -154Dividends -192 -217 -37 -36Change in net debt -357 236 -47 -27FCF equity 655 369 87 68Balance sheet summary (USDm) Tangible fixed assets 854 848 839 827Current assets 4,536 3,293 3,231 3,152Cash & others 2,335 2,099 2,146 2,173Total assets 5,805 4,949 4,886 4,802Operating liabilities 2,036 1,360 1,298 1,220Gross debt 13 13 13 13Net debt -2,322 -2,086 -2,133 -2,160Shareholders' funds 3,755 3,575 3,574 3,569Invested capital 1,018 682 626 587

Ratio, growth and per share analysis Year to 12/2015a 12/2016e 12/2017e 12/2018eY-o-y % change Revenue 9.1 -24.6 -2.7 -10.6EBITDA -2.7 -57.3 1.1 -2.2Operating profit -4.3 -87.1 -2.7 -19.7PBT 8.2 -83.2 -2.2 -16.2HSBC EPS 32.5 -84.0 -2.2 -16.2Ratios (%) Revenue/IC (x) 5.4 6.6 8.4 8.1ROIC 17.7 3.6 4.5 3.9ROE 5.9 1.0 1.0 0.8ROA 3.6 0.7 0.7 0.6EBITDA margin 6.3 3.6 3.7 4.0Operating profit margin 4.2 0.7 0.7 0.6EBITDA/net interest (x) 81.2Net debt/equity -61.8 -58.3 -59.7 -60.5Net debt/EBITDA (x) -4.9 -10.4 -10.5 -10.9Per share data (USD) EPS Rep (diluted) 0.03 0.00 0.00 0.00HSBC EPS (diluted) 0.03 0.00 0.00 0.00DPS 0.03 0.00 0.00 0.00Book value 0.48 0.46 0.46 0.46

Key forecast drivers Year to 12/2015a 12/2016e 12/2017e 12/2018eSystems 759 128 40 33Modules 6,846 5,493 5,431 4,859Total sales 7,451 5,620 5,471 4,892

Valuation data Year to 12/2015a 12/2016e 12/2017e 12/2018eEV/sales 0.1 0.2 0.1 0.2EV/EBITDA 1.3 4.3 4.0 4.0EV/IC 0.6 1.3 1.3 1.3PE* 14.1 87.9 89.9 107.3PB 0.9 0.9 0.9 0.9FCF yield (%) 22.2 12.5 3.0 2.3Dividend yield (%) 6.7 1.1 1.1 0.9


Issuer information Share price (HKD) 3.19 Free float 29%Target price (HKD) 2.83 Sector Electrical EquipmentReuters (Equity) 2038.HK Country Hong KongBloomberg (Equity) 2038 HK Analyst Yolanda WangMarket cap (USDm) 3,244 Contact +8862 6631 2867

Price relative


2.30

2.80

3.30

3.80

4.30

4.80

5.30

2.30

2.80

3.30

3.80

4.30

4.80

5.30

2014 2015 2016 2017FIH Mobile Ltd Rel to HANG SENG INDEX

Financials & valuation: FIH Mobile Ltd Hold

In this document HSBC may comment on the potential economic impact dependent on the outcome of the UK Referendum. HSBC is not taking a political position and this document and the information contained herein are not intended to promote or procure, or otherwise be in connection with promoting or procuring, a particular outcome in relation to the question asked in the UK Referendum.







Core e-commerce business posts fastest growth in 6 quarters

Stable GMV growth but rising monetization

Maintain Buy and raise SOTP TP to USD113 from USD111;

Alibaba is an HSBC Asia Super Ten portfolio constituent

Big data driving revenue acceleration. The main value of Alibaba’s business to sellers

is its ability to promote brands, sell products, acquire customers, and maintain customer

relations. This is exemplified by the sheer scale of the platform (423m buyers and

RMB742bn in GMV in the March quarter). Underpinning this is a huge amount of

customer data that management is beginning to offer to merchants to increase its value

even further. This is leading to higher monetization and revenue acceleration. For

example, using customer data, Tmall merchants can customize their virtual stores for

customer types (first time visitor or fan), as well as recommendations, which leads to

more relevant content and higher conversion. China retail revenue grew 41% y-o-y, to

RMB18.3bn, the fastest growth in 6 quarters. Alibaba’s data business, Cloud computing,

also exhibited accelerating growth, up 175% y-o-y to RMB1bn, driven by a doubling of

paying customers (500K) and higher spending.

Strong revenue and margins. Total revenue grew 39% y-o-y to RMB24.2bn, 4%

above our estimate. Monetization for the China e-commerce retail business grew

30bp y-o-y to 2.47%, 6bp higher than our estimate. GMV grew 24% y-o-y, 2ppts

faster than our forecast, and mobile contributed 73% of GMV. Lower spending on

S&M and G&A led to a 6% beat in EBITDA and margins of 48%. EPS of USD0.47

was 5% below our estimate due to losses from Ant Financial. Alibaba generated

RMB4.4bn in free cash flow in the March quarter and RMB51bn in fiscal 2016.

Estimate changes. We raise our revenue estimates on higher monetization and faster

growth for Cloud computing. We also raise margins slightly to reflect better cost control.

We include losses from Lazada. We lower fiscal 2017/2018 EPS by 2%/3%

respectively. Management will give full fiscal-year revenue guidance at its investor day

in June, along with a deep dive on Ant Financial.

Maintain Buy and raise our SOTP TP to USD113 from USD111. Our thesis rests

on three points. First, Alibaba is best positioned to benefit from rising rural

consumption. Second, it will benefit from expanding its selection of quality products

and improving delivery. Third, we see option value in its stake in Ant Financial. At

current levels, Alibaba trades at 24x (17x core) PE for fiscal 2017, for 32% EPS

CAGR from fiscal 2016-2019. We continue to value Alibaba on SOTP basis, using a

DCF for the core business, and assessing its stake in Ant Financial and its

investments at book value. Alibaba is an HSBC Asia Super Ten portfolio constituent.

FLASHNOTE

6 May 2016

MAINTAIN BUY

TARGET PRICE (USD) PREVIOUS TARGET (USD)

113.00 111.00

SHARE PRICE (USD) UPSIDE/DOWNSIDE

75.82 +49.0% (as of 05 May 2016)

MARKET DATA Market cap (USDm) 190,492 Free float 31%

Market cap (USDm) 190,492 BBG BABA US

3m ADTV (USDm) 1,645 RIC BABA.N

FINANCIALS AND RATIOS (CNY) Year to 03/2016a 03/2017e 03/2018e 03/2019e

HSBC EPS 16.85 20.23 29.14 38.95

HSBC EPS (prev) 16.98 20.74 30.27 -

Change (%) -0.8 -2.5 -3.7 -

Consensus EPS 17.26 20.95 26.37 35.69

PE (x) 29.2 24.4 16.9 12.7

Dividend yield (%) 0.0 0.0 0.0 0.0

EV/EBITDA (x) 31.8 22.4 12.4 7.2

ROE (%) 23.5 22.2 27.2 29.3

52-WEEK PRICE (USD)

Source: HSBC estimates, ThomsonReuters IBES

Chi Tsang,* CFA Head of Internet Research, Asia Pacific

The Hongkong and Shanghai Banking Corporation Limited

[email protected]

+852 2822 2590

Alice Cai* Associate analyst The Hongkong and Shanghai Banking Corporation Limited

[email protected]

+852 2996 6584

Qin Wang* Associate


[email protected]

+852 2822 4393


Alibaba Group (BABA US) EQUITIES INTERNET

China

50.00

85.00

120.00



Buy: Leveraging data to raise the value of its platform

EQUITIES INTERNET

6 May 2016

2

Financials & valuation


Year to 03/2016a 03/2017e 03/2018e 03/2019e

Profit & loss summary (CNYm)

Revenue 101,143 149,264 197,905 258,850

EBITDA 32,872 42,897 69,071 99,023

Depreciation & amortisation -3,770 -4,605 -4,642 -4,674


Net interest 50,308 2,388 4,334 7,346

PBT 79,738 38,774 68,357 101,289

HSBC PBT 51,361 62,430 91,091 122,288

Taxation -8,449 -9,975 -16,687 -24,084

Net profit 71,460 29,746 52,401 77,313

HSBC net profit 42,912 51,495 74,201 99,154

Cash flow summary (CNYm)


Capex -8,636 -1,502 -1,909 -4,783

Cash flow from investment -49,152 -43,949 -1,909 -4,783

Dividends 0 0 0 0

Change in net debt 13,399 -41,140 -104,687 -138,846

FCF equity 71,962 48,572 77,957 112,687

Balance sheet summary (CNYm)

Intangible fixed assets 87,015 84,043 81,071 78,099


Current assets 134,070 177,378 286,199 434,007

Cash & others 111,518 148,354 249,241 387,608

Total assets 366,733 456,789 570,850 726,653


Gross debt 6,175 1,871 -1,929 -2,408

Net debt -105,343 -146,483 -251,170 -390,016




Year to 03/2016a 03/2017e 03/2018e 03/2019e

Y-o-y % change

Revenue 32.7 47.6 32.6 30.8

EBITDA 29.1 30.5 61.0 43.4


PBT 159.4 -51.4 76.3 48.2

HSBC EPS 21.3 20.0 44.1 33.6

Ratios (%)

Revenue/IC (x) 1.6 1.9 3.3 7.4

ROIC 39.9 36.7 80.2 206.3

ROE 23.5 22.2 27.2 29.3

ROA 23.4 7.4 10.4 12.1

EBITDA margin 32.5 28.7 34.9 38.3


EBITDA/net interest (x)

Net debt/equity -42.0 -52.6 -75.7 -95.3

Net debt/EBITDA (x) -3.2 -3.4 -3.6 -3.9


Per share data (CNY)

EPS reported (diluted) 28.07 11.68 20.58 30.37

HSBC EPS (diluted) 16.85 20.23 29.14 38.95

DPS 0.00 0.00 0.00 0.00

Book value 85.71 96.57 117.56 147.89

Valuation data

Year to 03/2016a 03/2017e 03/2018e 03/2019e

EV/sales 10.3 6.4 4.3 2.8

EV/EBITDA 31.8 22.4 12.4 7.2

EV/IC 12.4 13.5 17.0 36.8

PE* 29.2 24.4 16.9 12.7

PB 5.7 5.1 4.2 3.3

FCF yield (%) 6.3 4.4 7.0 10.2

Dividend yield (%) 0.0 0.0 0.0 0.0


Price relative


49.00

59.00

69.00

79.00

89.00

99.00

109.00

119.00

129.00

49.00

59.00

69.00

79.00

89.00

99.00

109.00

119.00

129.00

2014 2015 2016 2017Alibaba Group Rel to NASDAQ 100 INDEX




the UK Referendum.







So, we published a chart earlier this week that caused a bit of excitement among

our readers. It shows a spike in the new order-to-inventory ratio for emerging Asia

(based on the latest crop of PMIs). This, ordinarily, points to an acceleration in

industrial output in the region. Trouble is, as helpful as the indicator often proves,

at times it can send false signals. And this is probably one of those times. In fact,

look closely and it quickly becomes clear that the rise in the new order-to-inventory

measure is largely due to a drop in the latter, and not a rise in the former. True, you

might still expect some improvement in production in coming months as stocks

are replenished. However, without a convincing pick-up in new orders, the bounce

will prove decidedly short-lived. In fact, another interpretation is entirely possible:

producers may have allowed inventory to fall in anticipation of weaker demand

ahead. In short, don’t get too excited about the spike in the new order-to-inventory

ratio. Growth can’t be sustained by restocking alone.

A Waldorf salad? I think we’re out of Waldorfs.

Basil Fawlty

Here is the chart that caused a bit of excitement. In our monthly PMI wrap-up, we showed

that a leading indicator for industrial production growth -- new orders minus inventory --

spiked (see Frederic Neumann and Abanti Bhaumik, Who stole my spring bounce:

What the latest PMIs mean for Asia, 2 May, 2016). On the face of it, impressive stuff.

But, as we also noted, it’s important to dig a little deeper. It turns out that our measure

rose largely because of a drop in inventory, not because of a notable pick-up in new

orders. “Same difference” you might argue: after all, the measure has generally

proven to be a useful lead indicator. And, yes, some acceleration in output growth

might occur. But, we suspect, it will disappoint optimists. Consider Chart 2. This

shows the underlying new order and inventory series.

6 May 2016

Frederic Neumann

Economist


[email protected]

+852 2822 4556

Abanti Bhaumik

Economics Associate Bangalore

Asia Chart of the Week ECONOMICS ASIA

Chart 1: PMI new orders minus inventory and industrial production growth

Source: Markit, CEIC, HSBC

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Asia x JN new orders minus inventories (LHS) IP % 3m/3m, Asia weighted avg. ex HK & JP (RHS)

Nope, false signal

ECONOMICS ASIA

6 May 2016

2

Chart 2: Asia ex Japan PMI inventory and new orders (3mma)

Source: Markit, HSBC

Note the plunge inventories in recent months. Ordinarily, that should be positive, prompting a rise

in production as shelves are restocked. However, new orders barely rose (in fact, in April, they

were unchanged compared to March), and the index is still below its rather shallow highs of the

last several years. Contrast this, for example, with the run-up to the Global Financial Crisis, when

new orders soared but inventory plunged; or its aftermath, when the latter could barely keep up

with the former. Surely, for sustained growth, and not just a temporary output bump, new orders

have to rise briskly as well.

Ah, yes, many readers argued, but look at the US. Here, the equivalent ISM measure also points

to a rise in production ahead. This, in turn, should be positive for Asian exports and help support

local output. Well, yes. But it’s important to keep things in perspective. Take a look at Chart 3. This

shows the ISM ‘new orders minus inventory’ series and new export orders for emerging Asia. Given

the correlation between the two, a little lift could still occur, perhaps. But the chart hardly signals an

impending surge in shipments. In fact, last month, new export orders were still contracting. At the

moment, therefore, this particular indicator is more noise than signal.

35

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52

Jun-05 Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 Jun-15

inventory new orders


Chart 3: US ISM new orders minus inventory and Asia ex Japan new export orders

Source: Markit, CEIC, HSBC

30

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60

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Apr-06 Apr-07 Apr-08 Apr-09 Apr-10 Apr-11 Apr-12 Apr-13 Apr-14 Apr-15

US ISM new orders minus inventory Asia ex Japan PMI new export orders (RHS)

Hong Kong Retail Sales (March 2016)Pace of decline moderates The contraction in retail sales eased in March after the Chinese New Year effect faded, but remains at a weak level. Both the luxury goods sector and the consumer durable goods sector continued to pose double-digit contractions, as a result of a 11% YTD contraction in inbound tourists. Food and supermarket sales however, held up relatively better. On balance, the retail sector continues to face headwinds from the slowdown in tourism and the relative strength of the Hong Kong Dollar. This is likely to limit the pace of recovery in the near-term.

Facts• March retail sales values contracted at a slower pace of 9.8% y-o-y, compared with a contraction of 20.6% y-o-y in February and a fall of 13.6% y-o-y over the Jan-Feb period (Bbg: -8.8%, HSBC: -5.5%)

• For Q1-16 as a whole, sales values were down 12.5% y-o-y, compared with a contraction of 6.4% y-o-y in Q4-15

• March retail sales volumes also contracted at a slower pace of 8.8% y-o-y, down from a contraction of 19.5% y-o-y in February and a fall of 12.4% y-o-y over the Jan-Feb period (Bbg: -6.9%, HSBC: -4.6%)

• For Q1-16 as a whole, sales volumes fell by 11.3% y-o-y, compared with a decline of 3.7% y-o-y in Q4-15

• In terms of broad type of retail outlet, consumer durable goods and jewellery, watches and clocks and valuable gifts, continued to be the worst performers both in value and volume terms

• Sales values of jewellery, watches and clocks and valuable gifts contracted by 20.3% y-o-y in March, while sales volumes were down 17.7% y-o-y

• March consumer durable goods sales values fell by 22.6% y-o-y, while sales volumes were down 17.7% y-o-y

Economics - Data Reactions

05 May 2016

JuliaWang

Economist, Greater ChinaThe Hongkong and ShanghaiBanking Corporation Limited+852 3604 [email protected]

View HSBC Global Research at:http://www.research.hsbc.com

Issuer of reportThe Hongkong and ShanghaiBanking Corporation Limited

Disclosures & DisclaimerThis report must be read with thedisclosures and the analystcertifications in the Disclosureappendix, and with the Disclaimer,which forms part of it

In this document HSBC maycomment on the potentialeconomic impact dependent onthe outcome of the UKReferendum. HSBC is not taking apolitical position and this documentand the information containedherein are not intended to promoteor procure, or otherwise be inconnection with promoting orprocuring, a particular outcome inrelation to the question asked inthe UK Referendum.

Figure 1: Retail sales breakdownMonth Feb-16 Mar-16 Feb-16 Mar-16 Feb-16 Mar-16 Mar-16 Seasonal adjustment SA SA NSA NSA NSA NSA % change %M-o-M %M-o-M %Y-o-Y %Y-o-Y YTD YoY YTD YoY %total YTD Total 1.5 -3.9 -20.6 -9.8 -13.6 -12.5 100.0 Food, drinks, tobacco 21.3 -18.7 -10.0 2.6 -1.9 -0.6 8.9 Supermarkets 1.0 -2.3 -7.3 0.0 0.2 0.1 11.8 Fuel -1.3 -2.3 -3.9 -2.0 0.1 -0.6 2.0 Clothing and footwear -1.9 0.8 -18.3 -10.3 -10.7 -10.6 13.9 Durable goods 0.3 -3.6 -32.1 -22.6 -26.1 -25.0 17.7 Department stores -3.1 3.6 -20.7 -5.4 -12.3 -10.4 9.9 Jewellery, watches &valuables

-9.4 2.6 -32.5 -20.3 -24.2 -23.2 14.8

Other 1.9 -1.4 -12.1 0.4 -6.5 -4.5 21.0 Source: CEIC, HSBC

ImplicationsThe March reading for retail sales, the first reading of the year free from distortions from the timing of the Lunar New Year, continues to underscore the weakness in retail sector performance. Year-to-date retail sales fell by 11.3% in volume terms, with sales of luxury items and consumer durable goods still contracting at steep double digit rates. Certain categories of retail sales however, held up relatively better than the others, especially in the sectors less exposed to tourist spending. For instance, food, drinks and tobacco and supermarket sales values actually grew marginally over March, while sales volumes too contracted by a far lesser extent compared to other retail categories.

That being said, the continued fall in total inbound tourists, especially those from Mainland China, will continue to pose downside risks to retail performance in the near term. Although the contraction in tourist arrivals moderated in March, overall tourist arrivals were down 10.9% YTD y-o-y and total tourist arrivals from China declined by 15.1% YTD y-o-y. The relative strength in the Hong Kong dollar, due to its peg with the USD has also likely reduced the purchasing power of visitors in Hong Kong.

Looking ahead, the retail sector is likely to face persistent headwinds from the weakness in inbound tourism, at least in the near-term. While the government has announced a package of relief measures in its 2016 budget, aimed at reviving tourism and boosting consumption, a meaningful recovery in retail sales is still likely to be a while away

Julia Wang, Economist

Aakanksha Bhat, Economics Associate

Economics - Data ReactionsHong Kong Retail Sales (March 2016)05 May 2016

2

Nikkei Hong Kong PMI (Apr 2016)Contracting furtherThe headline Nikkei Hong Kong PMI fell further to 45.3 in April, down from 45.5 in March, signalling a faster deterioration in private sector activity. New orders fell at a faster pace, underscoring the overall weakness in demand conditions. Firms continue to cut jobs as output remains weak. Weak demand at home and from abroad mean Hong Kong’s economic slowdown is likely to continue in the near-term.

Facts4 The headline Nikkei Hong Kong PMI index fell to 45.3 in April, down from 45.5 in March.

The latest reading is the lowest in eight months.4 The output sub-index was unchanged from March and has remained below 50 for over a year

now.4 The employment sub-index ticked up marginally in April, although it continues to remain

below the 50 level. April marks the fourth straight month that firms cut employment overall.4 The new orders sub-index contracted at a faster pace in April, and is at a seven month low.4 The new business from China sub-index continued to contract in April, albeit at a slower pace

than in March.4 Purchase prices rose to above 50 in April, the first expansion in six months. Staff costs

however, fell below the 50 level, marking the first contraction since July 2009.

ImplicationsThe April PMI reading once again underlined the weakness in Hong Kong’s private sector, which has been stuck in contraction for over a year. Both output and new orders remain very weak, suggesting continued contraction in domestic and external demand conditions. Furthermore, China’s slow pace of economic recovery continues to weigh on economic activity in Hong Kong. New orders from China remained in deep contraction in April, although there was an improvement from March. The labour market, which has so far been relatively resilient, has also started to show signs of strain, as staff costs contracted for the first time since July 2009.

Economics - Data Reactions

05 May 2016

JohnZhu

EconomistThe Hongkong and ShanghaiBanking Corporation Limited+852 2996 [email protected]

View HSBC Global Research at:http://www.research.hsbc.com

Issuer of reportThe Hongkong and ShanghaiBanking Corporation Limited

Disclosures & DisclaimerThis report must be read with thedisclosures and the analystcertifications in the Disclosureappendix, and with the Disclaimer,which forms part of it

In this document HSBC maycomment on the potentialeconomic impact dependent onthe outcome of the UKReferendum. HSBC is not taking apolitical position and this documentand the information containedherein are not intended to promoteor procure, or otherwise be inconnection with promoting orprocuring, a particular outcome inrelation to the question asked inthe UK Referendum.

1. Staffing costs fell along with employment

Source: Markit/Nikkei

2. New orders still falling sharply

Source: Markit/Nikkei

Overall, Hong Kong’s economy continues to face substantial challenges from weak global demand and slowing consumption on the domestic front. The retail sector has been bearing the brunt of falling tourist arrivals and a relatively strong Hong Kong Dollar. The cooling property market is also likely to pose downside risks to domestic demand. Given these factors, Hong Kong’s slowdown is likely to continue in the near term.

John Zhu, Economist

Aakanksha Bhat, Economics Associate

Economics - Data ReactionsNikkei Hong Kong PMI (Apr 2016)05 May 2016

2







This content may not be distributed to the People's Republic of China (The "PRC")

(excluding special administrative regions of Hong Kong and Macao)

What’s on our mind?

April is normally the start of the peak season for air conditioner sales. However,

demand has yet to show strong signs of picking up, based on our recent visits to

appliance retailers in south China. Appliance makers and retailers are hoping for the

weather to warm up to drive demand in the peak season. Thanks to wholesale supply

discipline, channel inventory has come down 20-30% vs. the worst time last year.

Positive is that retail prices have held up quite well due to less aggressive

discounting. The sector might be ready for a rebound if sales grow in the peak

season – The HK/China Consumer Team

What’s headline news (see page 2 for other news)

Hong Kong visitor arrivals: Visitor arrivals from mainland China to Hong Kong during

the Labour Day Holiday was up 7% y-o-y (30 April-2 May in 2016 vs. 1-3 May in 2015).

Our latest views (see page 3 for other research)

Jewellery retailers – Higher gold prices did not stop slide in sales 15 Apr

January-March gold jewellery sales disappointed, especially in China. The industry has

entered a phase of slow growth and further re-rated capped by earning cuts.

Downgrade CTF to Reduce, cut TP to HKD4.00 from HKD4.30, LF to Hold, cut TP to

HKD16.30 from HKD20.70, and remain Buy on CSS with a HKD15.90 TP, implying

36% upside.

This note replaces the version of the same date and title published earlier to correct the

old and new rating columns on page 1.

5 May 2016

Erwan Rambourg*

Global Co-Head Consumer & Retail Research


[email protected]

+852 2996 6572

Lina Yan*

HK/China Discretionary Research


[email protected]

+852 2822 4344

Christopher Leung* HK/China Staples Research


[email protected]

+852 2996 6531

Scott Chan*

Macau Gaming Research


[email protected]

+852 3941 7005

Vishal Goel*

Associate

Bangalore


The Great Mall of China EQUITIES CONSUMER & RETAIL

China

Recent target price and rating changes

Date Ticker Company Old TP New TP Old Rating New Rating

5-May MPEL.OQ Melco Crown Entertainment 16.50 16.60 Hold Unchanged 30-Apr 600690.SS Qingdao Haier Co Ltd 10.10 11.10 Buy Unchanged 29-Apr 000858.SZ Wuliangye Yibin Co Ltd 36.00 38.00 Buy Unchanged 23-Apr 600138.SS China CYTS Tours 26.50 25.30 Buy Buy 20-Apr 0027.HK Galaxy Entertainment 31.90 33.30 Buy Unchanged 20-Apr 0200.HK Melco International 11.60 10.70 Buy Hold 20-Apr 2282.HK MGM China 13.70 14.20 Buy Unchanged 20-Apr 1928.HK Sands China 25.00 27.20 Hold Unchanged 20-Apr 0880.HK SJM Holdings 6.10 5.00 Buy Hold 19-Apr 600519.SS Kweichow Moutai Co Ltd 292.00 284.00 Buy Unchanged 18-Apr 2331.HK Li Ning 4.40 4.00 Buy Hold 15-Apr 1929.HK Chow Tai Fook Jewellery 4.30 4.00 Hold Reduce 15-Apr 0590.HK Luk Fook 20.70 16.30 Buy Hold 14-Apr 1913.HK Prada SPA 28.00 26.00 Buy Hold 12-Apr 0322.HK Tingyi 6.70 6.50 Reduce Unchanged 11-Apr 600612.SS Lao Feng Xiang A 64.00 35.00 Buy Reduce 11-Apr 900905.SS Lao Feng Xiang B 7.73 3.05 Buy Reduce 8-Apr 1382.HK Pacific Textiles 12.60 12.00 Hold Unchanged 8-Apr 0551.HK Yue Yuen Industrial 31.60 30.90 Buy Unchanged 6-Apr 1128.HK Wynn Macau 8.50 9.50 Hold Reduce 1-Apr 0493.HK Gome Electrical Appliance 1.52 1.37 Buy Unchanged

Source: HSBC estimates

Air conditioner makers yearning for a hot summer

EQUITIES CONSUMER & RETAIL

5 May 2016

2

Upcoming events

May 2016

Monday Tuesday Wednesday Thursday Friday

9 10 11 12 13

China: CPI/PPI Sun Art: 1Q16 results

Yue Yuen: 1Q16 results

HK: GDP

China: Retail Sales (14 May)

16 17 18 19 20

Source: Bloomberg, Company data

Other consumer news

Sa Sa Labour Day Holiday SSSG +1% y-o-y; profit warning for FY March 2016 4 May

HKEx: During the Labour Day holiday from 30 April to 2 May, Sa Sa reported flat y-o-y retail sales with same-store-sales

+1%. Sales to mainland customers were up 6% on increased volume but were offset by a 13% decline in sales to locals. The

company released a profit warning for FY March 2016, expecting more than a 50% decline in profit due to drops in both sales

and gross profit and reduced operational efficiency as a result.

Macau Labour Day Holiday visitors -1% 3 May

TDM Macau: According to local police, total visitor arrivals to Macau were down 1% y-o-y during the three-day Labour Day

Holiday period.

Peak 4Q16 trade fair saw a low single-digit decline 3 May

HKEx: 1Q16 same-store-sales were flat y-o-y and 4Q16 trade fair orders was down by low single digits, dragged by apparel.

By product category, footwear orders grew by low double digits despite a low single-digit increase in ASPs, whereby apparel

orders declined by low double digits on flat ASPs.

Dah Chong Hong acquires Li & Fung’s Asia consumer and health care distribution business 3 May

HKEx: Dah Chong Hong announced that it entered into a sale and purchase agreement with Li & Fung to acquire 100% of Li

& Fung’s Asia consumer and healthcare distribution business for a total cash consideration of USD350m.

Macau needs to infuse its culture into the luxury market 29 Apr

Macau Daily Times: Andy Hou, General Manager at Chanel Limited Hong Kong and Macau, admitted that Hong Kong and

Macau retail trends are likely to continue deteriorating due to weak visitor arrivals, changes in currency and consumption tax

in China. 35% of the company’s sales are contributed by Chinese but only 8% of clients are purchasing products in China.

Chinese tax-free spending -24% y-o-y in March 28 Apr

Retail in Asia: Chinese tax-free shopping spend fell 24% y-o-y in March. Global Blue attributed some of the decline in March

to the recent terrorist attacks in Paris and Brussels, as well as new visa restrictions on gaining access to the European Union.

Xtep trade fair grew at high single digits; 1Q SSSG up by mid-single digits 28 Apr

HKEx: 4Q16 trade value by order value was up by high single digits, driven by a higher average selling price due to

increased sales of functional footwear. Separately, 1Q16 same-store-sales grew by mid-single digits. Inventory level at the

retail distribution channel was maintained at 4-5 months.

H&M plans to open more stores in China 18 Apr

China Retail News: H&M Group said that the company will continue to expand traditional stores across the world in 2016

and open new stores in the first- and second-tier cities in China. At the same time, the company will develop e-commerce

services and hopes to realise complementary growth within both e-commerce divisions and physical stores.








CFDA announced it had started its on-site inspection of SL

Pharm’s generic Lenalidomide

We expect Lenalidomide to contribute RMB4.9bn to SL Pharm

at peak sales

Raise TP to RMB36.4 from RMB33.30 on higher PE multiple,

reiterate Buy

Another milestone: SL Pharm’s long-anticipated generic Lenalidomide is advancing

in the CFDA’s (China Food and Drug Administration) drug review. After the CFDA

said on 1 May it would grant it fast-track approval, it announced on 3 May that it

would start on-site inspection of Lenalidomide, which is generally perceived as the

last step of a drug’s review. In our opinion, the risk of product withdrawal or rejection

of Lenalidomide is low. Along with Lenalidomide, Hengrui’s white blood stimulator

19K is also on the inspection list. They are both survivors of the CFDA’s harsh

clinical trial data inspection in the past year, following which over 80% of the

applications were withdrawn.

Potential market size in China: Lenalidomide is a chemotherapy drug developed by

US pharma giant Celgene (CELG, USD102.84, not rated). It was approved by the US

FDA as a treatment for Myelodysplastic Syndromes (MDS) in December 2005 and for

Multiple Myeloma (MM) in June 2006. In 2015, Celgene’s global sales of

Lenalidomide totaled USD5.8bn. Lenalidomide is recommended as the first-line

treatment for MDS and second-line treatment for MM. Incidence cases for MDS and

MM are 52k and 26k respectively in China. Based on treatment costs and courses of

treatments, we forecast the market size of patent Lenalidomide for MDS and MM at

RMB45.7bn and RMB3.8bn, respectively. Some charities dealing with rare diseases

in developed areas are sponsoring Lenalidomide’s giveaway campaign on a “buy 3

get 7 free” basis. NHFPC (National Health and Family Planning Commission) has

initiated a program to cut the price of five patent drugs indicated for critical disease

including Celgene’s Lenalidomide by 50%. If Celgene agrees to the price, we think

SL Pharm is likely to price its generic Lenalidomide at a further 50% discount.

Consequently, we have what we think is a conservative estimate of RMB12.3bn

market size (see detailed calculation on page 3). Assuming SL Pharm takes a 40%

market share, we expect Lenalidomide to contribute RMB4.9bn revenue and

RMB1.5bn net profit (30% margin) at peak sales.

Reiterate Buy rating: We cut our 2016/17e EPS by 15%/10% due to the delayed

timeline of product launch from the previous schedule and extend our forecasts to

2018. We expect EPS to grow at 45% CAGR in 2016-18, given the expected fast

ramp-up of Lenalidomide once approved. Our new TP of RMB36.4 from RMB33.3 is

based on a new 2016e PE of 45x (vs 35x) based on 1.0 PEG (2016e PE/2016-17e

CAGR), a discount of 38% to the industry average of 1.6 PEG (due to the uncertainty

of Lenalidomide’s promotion) and implying 32x/21x 2017/18e PE.

5 May 2016

MAINTAIN BUY

TARGET PRICE (CNY) PREVIOUS TARGET (CNY)

36.40 33.30

SHARE PRICE (CNY) UPSIDE/DOWNSIDE

29.21 +24.6% (as of 04 May 2016)

MARKET DATA Market cap (CNYm) 20,016 Free float 100%

Market cap (USDm) 3,081 BBG 002038 CH

3m ADTV (USDm) 35.2 RIC 002038.SZ

FINANCIALS AND RATIOS (CNY) Year to 12/2015a 12/2016e 12/2017e 12/2018e

HSBC EPS 0.84 0.81 1.13 1.74

HSBC EPS (prev) 0.89 0.95 1.25 -

Change (%) -5.6 -14.7 -9.6 -

Consensus EPS 1.19 1.25 1.09 1.52

PE (x) 34.7 36.1 25.9 16.8 Dividend yield (%) 0.7 0.7 0.9 1.4

EV/EBITDA (x) 26.3 26.4 18.7 12.1

ROE (%) 17.1 14.6 18.0 23.6

52-WEEK PRICE (CNY)


Zhijie Zhao* Analyst, Healthcare


[email protected]

+852 2996 6591

Yumeng Wang* Analyst, Healthcare


[email protected]

+852 2996 6586


Beijing SL Pharmaceutical (002038 CH)

EQUITIES PHARMACEUTICALS

China

17.00

35.00

53.00



Buy: Generic Lenalidomide getting closer to approval


5 May 2016

2



Year to 12/2015a 12/2016e 12/2017e 12/2018e

Profit & loss summary (CNYm)

Revenue 1,157 1,232 1,680 2,366

EBITDA 682 671 926 1,389

Depreciation & amortisation -33 -43 -48 -55

Operating profit/EBIT 649 628 878 1,335

Net interest 20 20 25 34

PBT 670 648 902 1,369

HSBC PBT 670 648 902 1,369

Taxation -92 -91 -126 -192

Net profit 576 554 772 1,191

HSBC net profit 576 554 772 1,191

Cash flow summary (CNYm)

Cash flow from operations 505 673 819 853

Capex -130 -184 -236 -170

Cash flow from investment 244 -184 -236 -170

Dividends -137 -132 -184 -284

Change in net debt -613 -301 -420 -415

FCF equity 1,209 350 499 687

Balance sheet summary (CNYm)


Tangible fixed assets 481 590 735 792

Current assets 2,674 2,910 3,336 4,152

Cash & others 1,470 1,771 2,191 2,605

Total assets 3,853 4,193 4,812 5,753

Operating liabilities 112 117 144 191

Gross debt 0 0 0 0

Net debt -1,470 -1,771 -2,191 -2,605




Year to 12/2015a 12/2016e 12/2017e 12/2018e

Y-o-y % change

Revenue -7.0 6.5 36.4 40.8

EBITDA -16.9 -1.6 38.0 50.1

Operating profit -17.9 -3.4 39.8 52.1

PBT -17.6 -3.2 39.2 51.7

HSBC EPS -17.1 -3.8 39.2 54.4

Ratios (%)

Revenue/IC (x) 0.7 0.7 0.9 1.1

ROIC 32.4 32.2 41.9 54.1

ROE 17.1 14.6 18.0 23.6

ROA 15.7 13.4 16.8 21.7

EBITDA margin 59.0 54.5 55.1 58.7



Net debt/equity -40.7 -43.9 -47.3 -47.2

Net debt/EBITDA (x) -2.2 -2.6 -2.4 -1.9


Per share data (CNY)


HSBC EPS (diluted) 0.84 0.81 1.13 1.74

DPS 0.20 0.19 0.27 0.41

Book value 5.22 5.84 6.69 8.02

Key forecast drivers

Year to 12/2015a 12/2016e 12/2017e 12/2018e

Biocoen sales 720 670 671 0

Arsenic trioxide 37 93 157 0

Lenalidomide 0 10 310 0

Valuation data

Year to 12/2015a 12/2016e 12/2017e 12/2018e

EV/sales 15.5 14.4 10.3 7.1

EV/EBITDA 26.3 26.4 18.7 12.1

EV/IC 10.8 10.2 9.1 7.1

PE* 34.7 36.1 25.9 16.8

PB 5.6 5.0 4.4 3.6

FCF yield (%) 6.2 1.8 2.6 3.5

Dividend yield (%) 0.7 0.7 0.9 1.4


Price relative


12.00

17.00

22.00

27.00

32.00

37.00

42.00

47.00

52.00

12.00

17.00

22.00

27.00

32.00

37.00

42.00

47.00

52.00

2014 2015 2016 2017Beijing SL Pharmaceutical Rel to CSI 300 Index




the UK Referendum.







1Q16 was in-line but dampened by unfavorable luck

Cotai construction should be completed in October/November

and continues to target 1Q17 opening

Maintain Buy rating and unchanged target price of HKD14.2

Results highlights: Property EBITDA came in at USD128m (-11%qoq or -23%yoy),

largely in line with HSBCe/consensus estimate. After two quarters of sequential

improvement, margin came off 1.8ppt qoq. Margin was dragged by: 1) unfavorable

luck for in-house VIP and premium mass; 2) lack of bad debt reversal (vs 4Q15) and

3) gaming mix change. Excluding bad debt reversal and adjusting for luck, EBITDA

would have been flat qoq. By segment:

VIP tracked industry growth: VIP volume was down 2%qoq, largely in line with

industry junket volume drop. Revenue was -2%qoq too as win rate was flat qoq

despite the fact that direct VIP did not hold as well.

Mass was dragged by luck: Poor hold in premium mass dampened overall

mass performance. After strong growth in 4Q15, mass revenue was -4%qoq,

underperforming market at large, which grew +3% in the same period. Slot also

saw a weak quarter, -14%qoq, yielding 12% market share vs 14% in 4Q15.

Non-gaming faced keener competition: RevPAR was down 10% qoq on both

lower room rates and occupancy, likely impacted by new hotel room supply in Cotai.

Looking ahead: Management was upbeat about the May Golden Week period. On

newsflow about potential ban of phone betting (Bloomberg, 4 May), the company

expects the government to clarify in the next few days but sees little impact given

86% of their EBITDA is from mass segment. MGM targets to complete construction

of Cotai in late-Oct or early-Nov and continues to aim for 1Q17 opening, subject to

government approval. The company expects to shift 500 full time employees from

existing properties, which would result in 25-30bps improvement in margin.

Maintain Buy with unchanged TP of HKD14.2: MGM continues to remain one of

our preferred stocks in the space due to its valuation and attractive risk/reward

profile. Trading at 10% and 30% discount to sector, based on FY17e EV/EBITDA and

P/E, we believe the Cotai project has barely been priced in. We make no changes to

our forecast and maintain our SoTP target price of HKD14.20. With 33% upside to

our TP, we reiterate Buy rating on MGM China.

FLASHNOTE

6 May 2016

MAINTAIN BUY


14.20

SHARE PRICE (HKD) UPSIDE/DOWNSIDE

10.68 +33.0% (as of 05 May 2016)

MARKET DATA Market cap (HKDm) 40,584 Free float 22%

Market cap (USDm) 5,229 BBG 2282 HK

3m ADTV (USDm) 8.66 RIC 2282.HK

FINANCIALS AND RATIOS (HKD) Year to 12/2015a 12/2016e 12/2017e 12/2018e

HSBC EPS 0.87 0.65 1.01 1.35

HSBC EPS (prev) - - - -

Change (%) - - - -

Consensus EPS 0.82 0.62 0.67 0.99

PE (x) 12.3 16.5 10.6 7.9

Dividend yield (%) 2.3 1.8 2.8 7.6

EV/EBITDA (x) 11.0 15.2 9.4 6.5

ROE (%) 58.7 42.9 48.6 48.1

52-WEEK PRICE (HKD)


Scott Chan* Analyst


[email protected]

+852 3941 7005

Erwan Rambourg* Global Co-Head of Consumer & Retail Research The Hongkong and Shanghai Banking Corporation Limited

[email protected]

+852 2996 6572


MGM China (2282 HK) EQUITIES HOTELS RESTAURANTS & LEISURE

Hong Kong

6.60

12.80

19.00



Buy: 1Q16 in line; Cotai continues to target 1Q17

EQUITIES HOTELS RESTAURANTS & LEISURE

6 May 2016

2



Year to 12/2015a 12/2016e 12/2017e 12/2018e

Profit & loss summary (HKDm)

Revenue 17,191 15,604 23,881 28,631

EBITDA 4,257 3,776 5,965 7,901

Depreciation & amortisation -806 -799 -1,351 -1,872


Net interest -133 -473 -598 -569

PBT 3,129 2,418 3,779 5,422

HSBC PBT 3,319 2,506 4,028 5,462

Taxation -17 -41 -197 -319

Net profit 3,113 2,377 3,582 5,103

HSBC net profit 3,303 2,465 3,831 5,142

Cash flow summary (HKDm)


Capex -4,893 -12,530 -2,975 -1,135


Dividends -4,625 -723 -944 -2,117

Change in net debt 6,433 10,345 -1,220 -4,441

FCF equity -1,698 -9,534 2,402 6,596

Balance sheet summary (HKDm)



Current assets 5,941 4,627 5,474 9,289

Cash & others 5,421 4,056 4,856 8,618

Total assets 21,955 32,373 34,844 37,922


Gross debt 11,757 20,736 20,317 19,637

Net debt 6,336 16,681 15,460 11,019




Year to 12/2015a 12/2016e 12/2017e 12/2018e

Y-o-y % change

Revenue -32.3 -9.2 53.0 19.9

EBITDA -36.1 -11.3 58.0 32.4

Operating profit -41.1 -13.7 55.0 30.7

PBT -45.3 -22.7 56.3 43.5

HSBC EPS -43.3 -25.3 55.4 34.2

Ratios (%)

Revenue/IC (x) 2.0 0.9 1.0 1.2

ROIC 39.2 17.0 18.3 23.7

ROE 58.7 42.9 48.6 48.1

ROA 16.8 10.5 12.4 15.6

EBITDA margin 24.8 24.2 25.0 27.6


EBITDA/net interest (x) 31.9 8.0 10.0 13.9

Net debt/equity 128.9 253.9 167.9 90.4

Net debt/EBITDA (x) 1.5 4.4 2.6 1.4

CF from operations/net debt 50.7 20.3 37.2 75.2

Per share data (HKD)


HSBC EPS (diluted) 0.87 0.65 1.01 1.35

DPS 0.25 0.19 0.30 0.81

Book value 1.29 1.73 2.42 3.21

Valuation data

Year to 12/2015a 12/2016e 12/2017e 12/2018e

EV/sales 2.7 3.7 2.3 1.8

EV/EBITDA 11.0 15.2 9.4 6.5

EV/IC 4.2 2.5 2.3 2.2

PE* 12.3 16.5 10.6 7.9

PB 8.3 6.2 4.4 3.3

FCF yield (%) -4.2 -23.5 5.9 16.3

Dividend yield (%) 2.3 1.8 2.8 7.6


Price relative


4.50

9.50

14.50

19.50

24.50

29.50

34.50

4.50

9.50

14.50

19.50

24.50

29.50

34.50

2014 2015 2016 2017

MGM China Rel to HANG SENG INDEX




the UK Referendum.







Bad debt provision at Altira offset favourable win rate impact

MPEL to repurchase 9.5% of its shares from Crown Resorts

Maintain Hold and raise TP to USD16.6 from USD16.5

Results highlight: Property EBITDA in 1Q16 was USD249m (+6% qoq, flat yoy),

largely in line with consensus estimates and HSBCe. Favourable win rate boosted

EBITDA by USD15m but the impact was offset by a USD18m bad debt provision at

Altira. Excluding these, EBITDA would have been flat qoq. Per management, it has

agreed to repurchase 9.5% of the company’s outstanding shares from Crown Resorts

(CWN AU, not rated) at USD15.5/ADS, a 1.6% premium to 3 May’s closing price of

USD15.25. The shares will be cancelled and the transaction will lead to a higher equity

interest for parent Melco Int’l, to 38% from 34%. The dividend was USD0.0219/ADS, in

line with the 30% payout policy. By property, the results were:

City of Dreams (CoD): VIP volume was down 4%qoq but revenue was up 10%,

thanks to a favourable win rate, which also boosted EBITDA by USD15m. Mass

revenue declined 6% qoq (vs market +3%). Hotel RevPAR was down 7% qoq.

Studio City (MSC): Full-quarter EBITDA came in at USD22m, versus USD13m

in 4Q15, which only incorporated two months of operations. Mass market share

stayed relatively flat qoq on our estimates.

Altira: The property underperformed the market in VIP and mass. VIP revenue was

down 19% qoq despite volume declining only 4%. Mass was down 11% qoq. Bad

debt provision (USD18m) and negative luck impact (USD5m) led to an EBITDA loss.

Philippines: VIP revenue rose 52% qoq as volume picked up (+15% qoq) and luck

normalized. Mass revenue rose 13% qoq. EBITDA reached a new high of USD29m.

Looking ahead: Management saw decent yoy growth in mass during the May Golden

week, but VIP was down mid-teens yoy. Retail extension at CoD should partially open

in July and fully open by the end of this year. MPEL believes the location of MSC has

led to a slower-than-expected ramp-up and is addressing this by enhancing the

connection from CoD. Management remains constructive on the long-term prospects in

Macau. In Manila, management thinks the new casino operator could create synergies

and is excited about the expressway connecting the airport and Entertainment City.

New TP of USD16.6; reiterate Hold: Share repurchasing supports MPEL’s

confidence in Macau in the long run. However, a major shareholder sell-off could be

interpreted negatively by the market, as Crown is divesting itself from Macau for a

potential investment in Las Vegas and Australia, as noted on the results call. While

management also suggested on the call that a further sell-down is unlikely, especially

in the short term, this could remain an overhang. Factoring in the transaction and 1Q

results, we fine-tune our EBITDA by -0.5%/-0.2% and EPS by +2%/+10% for 2016e

and 2017e, respectively. With no change in valuation multiples, our new TP of

USD16.6 (from USD16.5) implies c9% upside; we reiterate our Hold rating.

5 May 2016

MAINTAIN HOLD

TARGET PRICE (USD) PREVIOUS TARGET (USD)

16.60 16.50

SHARE PRICE (USD) UPSIDE/DOWNSIDE

15.25 +8.8% (as of 03 May 2016)

MARKET DATA Market cap (USDm) 8,449 Free float 33%

Market cap (USDm) 8,449 BBG MPEL US

3m ADTV (USDm) 89.4 RIC MPEL.OQ

FINANCIALS AND RATIOS (USD) Year to 12/2015a 12/2016e 12/2017e 12/2018e

HSBC EPS 0.50 0.29 0.45 0.43

HSBC EPS (prev) - 0.28 0.41 0.41

Change (%) - 3.6 9.8 4.9

Consensus EPS 0.33 0.33 0.47 0.67

PE (x) 30.3 52.6 33.9 35.3

Dividend yield (%) 4.7 0.6 0.9 0.8

EV/EBITDA (x) 12.4 11.0 8.5 7.9

ROE (%) 6.4 3.8 6.0 5.7

52-WEEK PRICE (USD)


Scott Chan* Analyst


[email protected]

+852 3941 7005

Erwan Rambourg* Global Co-Head of Consumer & Retail Research The Hongkong and Shanghai Banking Corporation Limited

[email protected]

+852 2996 6572


Melco Crown (MPEL US) EQUITIES HOTELS RESTAURANTS & LEISURE

Hong Kong

10.00

17.50

25.00



Hold: 1Q16 in line, repurchasing stake from Crown

EQUITIES HOTELS RESTAURANTS & LEISURE

5 May 2016

2



Year to 12/2015a 12/2016e 12/2017e 12/2018e

Profit & loss summary (USDm)

Revenue 3,975 4,509 4,523 4,535

EBITDA 817 956 1,144 1,143


Operating profit/EBIT 346 322 473 460

Net interest -104 -184 -169 -154

PBT -60 138 304 306

HSBC PBT 108 138 304 306

Taxation -1 -1 -1 -1

Net profit 106 150 221 213

HSBC net profit 274 150 221 213

Cash flow summary (USDm)


Capex -1,352 -325 -165 -165

Cash flow from investment -470 -326 -165 -165

Dividends -386 -45 -66 -64

Change in net debt 1,546 332 -722 -666

FCF equity -1,220 503 871 823

Balance sheet summary (USDm)

Intangible fixed assets 1,290 1,187 1,084 981


Current assets 3,020 2,393 2,983 2,658

Cash & others 1,928 1,274 1,834 1,509

Total assets 10,410 9,474 9,558 8,714


Gross debt 3,963 3,641 3,479 2,487

Net debt 2,035 2,366 1,645 979




Year to 12/2015a 12/2016e 12/2017e 12/2018e

Y-o-y % change

Revenue -17.2 13.4 0.3 0.3

EBITDA -30.0 17.0 19.7 -0.1

Operating profit -56.6 -6.9 46.7 -2.7

PBT -111.3 120.4 0.5

HSBC EPS -59.9 -42.4 55.1 -3.9

Ratios (%)

Revenue/IC (x) 0.7 0.7 0.7 0.8

ROIC 7.9 6.5 9.5 10.2

ROE 6.4 3.8 6.0 5.7

ROA 0.6 3.3 5.1 5.2

EBITDA margin 20.5 21.2 25.3 25.2



Net debt/equity 41.3 55.9 37.5 21.6


CF from operations/net debt 25.7 35.5 57.9 91.4

Per share data (USD)


HSBC EPS (diluted) 0.50 0.29 0.45 0.43

DPS 0.71 0.09 0.13 0.13

Book value 7.98 7.43 7.58 7.70

Valuation data

Year to 12/2015a 12/2016e 12/2017e 12/2018e

EV/sales 2.6 2.3 2.2 2.0

EV/EBITDA 12.4 11.0 8.5 7.9

EV/IC 1.5 1.7 1.7 1.7

PE* 30.3 52.6 33.9 35.3

PB 1.9 2.1 2.0 2.0

FCF yield (%) -15.0 6.2 10.7 10.1

Dividend yield (%) 4.7 0.6 0.9 0.8


Price relative


7.70

12.70

17.70

22.70

27.70

32.70

37.70

42.70

47.70

7.70

12.70

17.70

22.70

27.70

32.70

37.70

42.70

47.70

Jan-14 Jul-14 Jan-15 Jul-15 Jan-16

Melco Crown Entertainment Rel to HANG SENG INDEX

Valuation (SOTPs components) and risks

Sum-of-the-parts valuation components Risks

1) Altira at 9x FY16e EBITDA, 2) Mocha Clubs at 5x FY16e EBITDA, 3) City of Dreams at 12x FY16e EBITDA, 4) City of Dreams Manila Philippines at 10x FY16e EBITDA, and 5) Studio City at 12x FY16e EBITDA.

Upside risks: earlier and more-than-expected macro easing in China, sharp pickup in Studio City, market share gain upon yield enhancement. Downside risks: China macro slowdown, regulatory risks, especially from China, loss of market share due to competition, and weaker-than-expected margin.

Source: HSBC estimates. We value properties by categorising them as: 1) below industry growth, at 4-9x, and 2) on par with or marginally ahead of industry growth, at 10-13x.

Estimate changes

FY16e FY17e FY18e

Revenue (Old) 4,512 4,524 4,536 Revenue (New) 4,509 4,523 4,535 Change -0.1% 0.0% 0.0% EBITDA (Old) 960 1,146 1,152 EBITDA (New) 956 1,144 1,143 Change -0.5% -0.2% -0.7% HSBC EPS (Old) 0.28 0.41 0.41 HSBC EPS (New) 0.29 0.45 0.43 Change 2% 10% 6%

Source: HSBC




the UK Referendum.






Six months delay in the Suining roads’ contribution itself is not

a concern, but profitability ramp up will take a few years

We forecast insignificant impact on earnings from the increasein non-toll revenue contribution

Raise H share TP to HKD3.1 (from HKD2.7) maintain Hold, raise A share TP to RMB2.8 (from RMB2.4) maintain Reduce

Profitability ramp up on new roads will take 3-4 years

The two new roads: Suining-Guang'an and Suining-Xichong were put into operation

in Dec, 2015. However, these are still only in the testing phase and not collecting tolls

yet. The roads together will increase the mileage under the company’s control by

~28%, and contribute about 13% to toll revenue on full contribution. The delay

pushes back contribution by about six months (i.e. to 2H16 now) but its impact is

insignificant as these roads have concession lives until 2045 end, the longest in the

road portfolio of the company. However, since the roads are new; operations will only

ramp up in time, and the company is forecast to reach 2015 profit levels again only in

FY19. The company had also said that these two roads are likely to drag earnings

growth as they will be loss making in the first couple of years, at least.

Forecast insignificant impact on earnings from increased non-toll contribution

Contribution of ancillary services including income from rental and advertising etc. to

total revenue (excluding construction revenue) is up from 4% in FY11 to 52% in

FY15, while growing at a CAGR of 127%. We think growth of this business has

steadied, and forecast its contribution to total revenue to stabilise at 49%. However,

gas station operations which form the bulk of this business has very low profit margin

and will not contribute significantly to the company’s earnings.

Cut earnings estimates but increase TPs on rolling over to 2016 DCF

Our earnings forecasts for FY16-18 are revised by -38%, -10% and-6% respectively.

We are 39% and 9% below consensus forecasts for FY16-17e earnings. We also roll

over our DCF to FY16end. As a result, we increase our DCF based H share TP to

HKD3.1 (from HKD2.7) and A share TP to RMB2.7 (from RMB2.4). We maintain Hold

on H shares and Reduce on A shares.

H share: upside risks are stronger-than-forecast traffic volume growth on existing

roads, faster than expected ramp up of new roads and reduction in exposure to build

and transfer (BT) projects. Downside risks are slower traffic volume and toll revenue

growth, increased exposure to BT projects, low dividend yield and oil price volatility.

A share: upside risks are the same as for the H shares

6 May 2016

H: MAINTAIN HOLD



2.74 +13.1% (as of 05 May 2016)

A: MAINTAIN REDUCE


2.70 2.40 SHARE PRICE (CNY) UPSIDE/DOWNSIDE

4.46 -39.5% (as of 05 May 2016)

MARKET DATA BBG / RIC 107 HK / 0107.HKMarket cap (HKDm / USDm) 13,975 / 1,801Free float (H / A) 54% / 16%3m ADTV (USDm) 0.61 / 11.5

FINANCIALS AND RATIOS (CNY) Year to 12/2015a 12/2016e 12/2017e 12/2018eHSBC EPS 0.33 0.17 0.26 0.31HSBC EPS (prev) 0.28 0.28 0.29 -Change (%) 17.9 -38.0 -10.4 -Consensus EPS - - - -Source: Thomson Reuters IBES, HSBC estimates

Wei Sim* Infrastructure Analyst, Asia Pacific The Hongkong and Shanghai Banking Corporation [email protected] +852 2996 6602

Shubhi Bansal* Associate Bangalore

* Employed by a non-US affiliate of HSBC Securities (USA) inc and is not registered/ qualified pursuant to FINRA regulators

Sichuan Expressway (107 HK/601107 CH)

EQUITIES TRANSPORT INFRASTRUCTURE

China H: Hold/A: Reduce – Forecast delay in profit ramp up

abc

EQUITIES TRANSPORT INFRASTRUCTURE

6 May 2016

2


Financial statements Year to 12/2015a 12/2016e 12/2017e 12/2018eProfit & loss summary (CNYm) Revenue 11,494 5,919 6,541 6,734EBITDA 2,456 1,982 2,384 2,559Depreciation & amortisation -601 -694 -772 -793Operating profit/EBIT 1,855 1,288 1,612 1,766Net interest -499 -531 -481 -432PBT 1,375 777 1,150 1,355HSBC PBT 1,375 777 1,150 1,355Taxation -270 -194 -288 -339Net profit 1,007 526 804 956HSBC net profit 1,007 526 804 956Cash flow summary (CNYm) Cash flow from operations -1,507 783 1,429 1,552Capex -5,452 -1,391 -1,224 -543Cash flow from investment -1,093 30 28 26Dividends -245 -245 -128 -195Change in net debt 3,618 -523 -1,282 -1,333FCF equity -3,327 58 660 781Balance sheet summary (CNYm) Intangible fixed assets 23,842 23,287 22,657 22,009Tangible fixed assets 2,272 2,265 2,254 2,253Current assets 7,344 6,949 6,318 6,744Cash & others 3,068 2,591 1,872 2,205Total assets 33,458 32,501 31,229 31,006Operating liabilities 4,072 3,825 3,861 3,861Gross debt 16,082 15,082 13,082 12,082Net debt 13,015 12,492 11,210 9,877Shareholders' funds 12,519 12,801 13,477 14,237Invested capital 26,318 26,086 25,496 24,940

Ratio, growth and per share analysis Year to 12/2015a 12/2016e 12/2017e 12/2018eY-o-y % change Revenue 22.0 -48.5 10.5 3.0EBITDA 5.7 -19.3 20.3 7.4Operating profit 4.6 -30.6 25.1 9.6PBT 5.8 -43.5 48.1 17.8HSBC EPS 3.1 -47.7 52.8 18.9Ratios (%) Revenue/IC (x) 0.5 0.2 0.3 0.3ROIC 6.2 3.7 4.7 5.3ROE 15.4 3.9 5.6 6.3ROA 3.0 1.6 2.6 3.1EBITDA margin 21.4 33.5 36.4 38.0Operating profit margin 16.1 21.8 24.6 26.2EBITDA/net interest (x) 4.9 3.7 5.0 5.9Net debt/equity 97.9 91.9 78.5 65.6Net debt/EBITDA (x) 5.3 6.3 4.7 3.9CF from operations/net debt 6.3 12.7 15.7Per share data (CNY) EPS reported (diluted) 0.33 0.17 0.26 0.31HSBC EPS (diluted) 0.33 0.17 0.26 0.31DPS 0.08 0.04 0.06 0.08Book value 4.09 4.19 4.41 4.66

Valuation data: 107 HK Year to 12/2015a 12/2016e 12/2017e 12/2018eEV/sales 2.2 4.1 3.5 3.2EV/EBITDA 10.1 12.2 9.6 8.4EV/IC 0.9 0.9 0.9 0.9PE* 7.0 13.3 8.7 7.3PB 0.6 0.5 0.5 0.5FCF yield (%) -28.4 0.5 5.6 6.7Dividend yield (%) 3.5 1.8 2.8 3.3


Valuation data: 601107 CH Year to 12/2014a 12/2015e 12/2016e 12/2017eEV/sales 2.2 2.2 4.1 3.5EV/EBITDA 9.1 10.1 12.2 9.6EV/IC 1.0 0.9 0.9 0.9PE* 14.0 13.5 25.9 17.0PB 1.2 1.1 1.1 1.0FCF yield (%) -30.3 -28.4 0.5 5.6Dividend yield (%) 1.8 1.8 0.9 1.4


Price relative: 107 HK

Source: HSBC Price relative: 601107 CH

Source: HSBC

Note: Priced at close of 05 May 2016

1.60

2.10

2.60

3.10

3.60

4.10

4.60

5.10

1.60

2.10

2.60

3.10

3.60

4.10

4.60

5.10

2014 2015 2016 2017Sichuan Expressway Rel to HSCEI

1.80

3.80

5.80

7.80

9.80

1.80

3.80

5.80

7.80

9.80

2014 2015 2016 2017Sichuan Expressway A Rel to CSI 300 Index


Disclaimer & Disclosures This report must be read with the disclosures and the analyst certifications in the Disclosure appendix, and with the Disclaimer, which forms part of it.




Along with other oil sands operators, Long Lake oil sands

facility in Ft. McMurray, Alberta will shut to ensure staff safety

CNOOC Canadian output was c.60kb/d in 2015 or 4% of production; downtime may raise risk to production target

Maintain Reduce with TP of HKD5.55; shares have moved ahead of likely fundamental outcomes

Event: A number of large oil sands producers have shut capacity due to a

wildfire in Fort McMurray, Alberta, Canada (Bloomberg reports). Up to 1.4mbd

of Canadian capacity is currently announced as being closed (T1, Page 3).

CNOOC/Nexen’s Long Lake oil sands facility is on the list. No duration for the

shutdown has been provided. Nexen indicated this is a precaution to ensure staff

safety in the event the fire reaches the Long Lake facility (it has not yet). This is the

second 2016 event impacting Long Lake operations; an explosion in January caused

fatalities and reduced output. The fires shutdown will likely further lower CNOOC’s

Canadian production. In 2015, CNOOC Canada was c.4% CNOOC’s oil & gas

production; 58kbd/1308kbd or 21mboe/495mboe.

Implication: Depending on outage duration, it adds risks to CNOOC 2016 production

target of 470-485mboe, and potentially to the physical production and processing

assets. In 2015 before financing expenses, CNOOC's Canadian operations lost

c. USD340m. If lower production levels persist due to the accident/fires, it may help,

but each 10mb of lost production can double CNOOC’s loss in our sensitivity.

Action: The potential lost production is not likely to be significant enough in

isolation for us to adjust our already cautious view, but may push production

profile toward the bottom of the range. Shares have had quick ascent from the

January 2016 lows (mid-HKD6). We believe the company faces a difficult sequence

of quarters ahead due to the low oil price, and the operating difficulties in Canada are

another factor creating operating uncertainty. There is also a possibility global crude

supply/demand balance may improve and lead to firmer crude prices more broadly.

We maintain a Reduce rating on CNOOC with a fair value TP of HKD5.55. We

value CNOOC using a near-term pure PB-based methodology. We assume the fair

value of the shares is 0.5-0.6x book, lower than the 1x PB during the trough cycle in

2008-09, as the company is expected to generate a much lower ROE in 2016 than

was earned in 2009. Specifically, we apply a PB multiple of 0.58x vs an expected

three-year average ROE of 5.2% to the 2016e BVPS. Key upside risks: A sharp oil

price recovery, production growth, effective cost control, limited asset impairments,

reduction of tax policies in countries of operation.

FLASHNOTE

5 May 2016

MAINTAIN REDUCE



9.12 -39.1% (as of 04 May 2016)

MARKET DATA Market cap (HKDm) 407,185 Free float 35%Market cap (USDm) 52,464 BBG 883 HK3m ADTV (USDm) 92.2 RIC 0883.HK

FINANCIALS AND RATIOS (CNY) Year to 12/2015a 12/2016e 12/2017e 12/2018eHSBC EPS 0.45 -0.05 0.49 0.90HSBC EPS (prev) - - - -Change (%) - - - -Consensus EPS 0.39 0.01 0.53 0.88PE (x) 16.8 - 15.7 8.5Dividend yield (%) 5.3 3.4 4.5 5.5EV/EBITDA (x) 5.2 6.0 4.2 3.3ROE (%) 5.3 -0.5 5.8 10.3

52-WEEK PRICE (HKD)


Thomas C. Hilboldt*, CFA Head of Resources & Energy Research, Asia-PacificThe Hongkong and Shanghai Banking Corporation [email protected] +852 2822 2922

Tingting Si* AnalystThe Hongkong and Shanghai Banking Corporation [email protected] +852 2996 6590


CNOOC Ltd. (883 HK) EQUITIES OIL & GAS

China

4.60

9.80

15.00



Reduce: Wildfire impact a function of outage duration

abc

EQUITIES OIL & GAS

5 May 2016

2


Financial statements Year to 12/2015a 12/2016e 12/2017e 12/2018eProfit & loss summary (CNYm) Revenue 171,437 153,318 194,852 241,968EBITDA 90,895 77,793 111,337 139,192Depreciation & amortisation -73,439 -78,228 -80,540 -85,271Operating profit/EBIT 17,456 -435 30,796 53,921Net interest -5,245 -6,552 -7,479 -7,553PBT 17,130 -2,712 29,006 53,321HSBC PBT 17,130 -2,712 29,006 53,321Taxation 3,116 678 -7,251 -13,330Net profit 20,246 -2,034 21,754 39,990HSBC net profit 20,246 -2,034 21,754 39,990Cash flow summary (CNYm) Cash flow from operations 80,095 86,365 77,563 96,113Capex -76,400 -68,385 -66,441 -78,953Cash flow from investment -76,495 -68,384 -66,443 -78,955Dividends -18,160 -11,429 -15,344 -18,789Change in net debt 31,133 -6,552 4,224 1,631FCF equity 90,466 -4,662 48,952 60,666Balance sheet summary (CNYm) Intangible fixed assets 20,747 20,297 19,653 19,365Tangible fixed assets 479,315 466,811 458,811 459,412Current assets 140,211 143,198 171,068 205,709Cash & others 11,867 28,419 25,194 24,563Total assets 664,362 653,191 674,133 712,777Operating liabilities 102,049 95,570 106,285 119,531Gross debt 164,645 174,645 175,645 176,645Net debt 152,778 146,226 150,451 152,082Shareholders' funds 386,041 372,578 378,988 400,190Invested capital 526,357 506,318 518,053 540,391

Ratio, growth and per share analysis Year to 12/2015a 12/2016e 12/2017e 12/2018eY-o-y % change Revenue -37.6 -10.6 27.1 24.2EBITDA -34.7 -14.4 43.1 25.0Operating profit -78.4 -102.5 75.1PBT -79.2 -115.8 83.8HSBC EPS -66.4 -110.0 83.8Ratios (%) Revenue/IC (x) 0.3 0.3 0.4 0.5ROIC 4.0 -0.1 4.5 7.6ROE 5.3 -0.5 5.8 10.3ROA 4.1 0.5 4.2 6.6EBITDA margin 53.0 50.7 57.1 57.5Operating profit margin 10.2 -0.3 15.8 22.3EBITDA/net interest (x) 17.3 11.9 14.9 18.4Net debt/equity 39.6 39.2 39.7 38.0Net debt/EBITDA (x) 1.7 1.9 1.4 1.1CF from operations/net debt 52.4 59.1 51.6 63.2Per share data (CNY) EPS reported (diluted) 0.45 -0.05 0.49 0.90HSBC EPS (diluted) 0.45 -0.05 0.49 0.90DPS 0.41 0.26 0.34 0.42Book value 8.65 8.35 8.49 8.96

Key forecast drivers Year to 12/2015a 12/2016e 12/2017e 12/2018eTotal Production (mboe) 496 475 469 473Brent (USD/b) 54 45 60 75Realized Oil Price(USD/b) 51 44 58 71Realized Gas Price (USD/kcf) 6.4 6.3 6.3 6.6Lifting Costs (USD/b) 9.3 9.2 9.8 11.4

Valuation data Year to 12/2015a 12/2016e 12/2017e 12/2018eEV/sales 2.7 3.0 2.4 1.9EV/EBITDA 5.2 6.0 4.2 3.3EV/IC 0.9 0.9 0.9 0.9PE* 16.8 15.7 8.5PB 0.9 0.9 0.9 0.9FCF yield (%) 28.6 -1.5 15.5 19.4Dividend yield (%) 5.3 3.4 4.5 5.5


Price relative


5.20

7.20

9.20

11.20

13.20

15.20

5.20

7.20

9.20

11.20

13.20

15.20

2014 2015 2016 2017CNOOC Ltd. Rel to HSCEI


Disclaimer & Disclosures This report must be read with the disclosures and the analyst certifications in the Disclosure appendix, and with the Disclaimer, which forms part of it.





Strong performance in 1Q might not be sustainable

We think market expectations on margins are too high

We increase our DCF-based TP to RMB6.66 (from RMB6.40)

Strong performance in 1Q might not be sustainable: Yonghui (YH) delivered strong same store sales growth (SSSG) of 5% (fresh food SSSG was slightly below 5%) in 1Q16, reversing from the negative low single-digit reported in 2H15. Special promotions during the Chinese New Year led to the strong growth. Moreover, by management improving staff incentives as well as implementing more stringent KPIs, stores in its mature regions also started to improve; which underperformed in other regions in 2H15. Despite the increase in promotions, YH’s GPM still improved to 20.5% in 1Q16 from 19.9% in 1Q15 as it benefited from gains on extra inventory procured at the end of 2015. However, we don’t think the synchronised growth between 5% SSSG and 20.5% GPM will sustain, because: 1) extra promotions could create spikes in SSSG but might not be able to reverse the slowing trend from more stores maturing and the cannibalisation effect from e-retail; 2) inflation is unlikely to provide more benefit: food inflation spiked to 6% in 1Q16 from 2% in 4Q15. While higher inflation did not benefit its growth, we believe YH had enjoyed gains on its inventory in 1Q16 from rising inflation. We think such gain is unlikely to continue if food inflation stays flat. For 2016e, we expect SSSG of 1% for its gross profit to grow faster than the 17.5% y-o-y growth in revenue.

Market expectations on margins are too high: YH trades at 43x PE for 2016e on the market consensus diluted EPS estimate − consensus still expects it to deliver 30% growth at the operating profit level in 2016e. We think this is too optimistic, given: 1) the more profitable mature regions are growing much slower: Fujian and West regions accounted for 55% of its sales, and sales from the two regions only grew 5.1% y-o-y in 2H15 (10.5% in 1H15) despite the 19% growth in floor space. If profits decline in mature regions, we expect this would suppress the group’s profitability as its OPM for the mature regions was about 3.7%, above the group’s average OPM of 2%; 2) SGA costs are still rising quickly from new store openings and rising labour costs: while we expect the increase in scale should help partially offset the cost pressure, we believe the market’s expectations for strong margin expansion is unrealistic when the company is targeting gain in market share; 3) we expect SSSG to stay at a low level due to the company’s more mature store profile than some of its peers, and the cannibalisation effect from e-retail. We now expect YH to deliver a 15% EBIT CAGR on a revenue CAGR of 17% for 2015-2018e.

Maintain Reduce on Yonghui with an increased TP of RMB6.66 (from RMB6.40): Our DCF-based TP of RMB6.66 (among the lowest on the Street) implies 38x PE on 2016e diluted EPS vs. its average PE of 27x since 2014 (range 14x-64x). Our FY16e and FY17e profit estimates are 12% and 11% below consensus, respectively. The change in TP is the result of us rolling our DCF model forward by one year, offset by changes in our operating free cash flow forecasts.

5 May 2016

MAINTAIN REDUCE


6.66 6.40 SHARE PRICE (CNY) UPSIDE/DOWNSIDE

8.73 -23.7% (as of 04 May 2016)

MARKET DATA Market cap (CNYm) 35,510 Free float 100%Market cap (USDm) 5,465 BBG 601933 CH3m ADTV (USDm) 38.0 RIC 601933.SS

FINANCIALS AND RATIOS (CNY) Year to 12/2015a 12/2016e 12/2017e 12/2018eHSBC EPS 0.16 0.16 0.20 0.22HSBC EPS (prev) 0.19 0.21 0.24 -Change (%) -15.8 -23.8 -16.7 -Consensus EPS - - - -PE (x) 54.7 53.9 44.3 39.1Dividend yield (%) 1.7 1.0 1.2 1.4EV/EBITDA (x) 16.8 15.0 12.8 11.4ROE (%) 7.0 6.2 7.3 8.0

52-WEEK PRICE (CNY)


Lina Yan* Consumer Analyst, HK / China The Hongkong and Shanghai Banking Corporation [email protected] +852 2822 4344

Erwan Rambourg* Global Co-Head Consumer & Retail ResearchThe Hongkong and Shanghai Banking Corporation [email protected] +852 2996 6572

Vishal Goel* Analyst Bangalore


Yonghui Superstores (601933 CH) EQUITIES FOOD & STAPLES RETAILING

China

5.40

11.70

18.00


Target price: 6.66 High : 16.36 Low: 7.48 Current: 8.73

Reduce: Unlikely to live up to expectations

abc

EQUITIES FOOD & STAPLES RETAILING

5 May 2016

2


Financial statements Year to 12/2015a 12/2016e 12/2017e 12/2018eProfit & loss summary (CNYm) Revenue 42,145 49,503 58,237 66,889EBITDA 1,617 1,803 2,097 2,322Depreciation & amortisation -811 -895 -997 -1,094Operating profit/EBIT 806 907 1,100 1,227Net interest 25 35 38 46PBT 797 1,070 1,295 1,461HSBC PBT 912 1,070 1,295 1,461Taxation -197 -236 -287 -321Net profit 605 842 1,017 1,150HSBC net profit 650 775 943 1,069Cash flow summary (CNYm) Cash flow from operations 1,544 2,032 2,364 2,534Capex -1,313 -1,892 -1,900 -1,914Cash flow from investment -3,067 -1,892 -1,900 -1,914Dividends -610 -421 -508 -575Change in net debt -3,645 294 45 -44FCF equity 98 5 298 422Balance sheet summary (CNYm) Intangible fixed assets 604 569 535 501Tangible fixed assets 3,520 4,236 4,876 5,441Current assets 11,930 12,508 13,363 14,297Cash & others 4,294 4,126 4,086 4,137Total assets 20,304 21,878 23,636 25,391Operating liabilities 8,022 9,048 10,293 11,466Gross debt 0 127 132 138Net debt -4,294 -3,999 -3,954 -3,999Shareholders' funds 12,228 12,648 13,157 13,732Invested capital 2,985 3,385 3,642 3,882

Ratio, growth and per share analysis Year to 12/2015a 12/2016e 12/2017e 12/2018eY-o-y % change Revenue 14.8 17.5 17.6 14.9EBITDA -2.3 11.4 16.3 10.7Operating profit -15.3 12.5 21.2 11.6PBT -26.5 34.2 21.1 12.8HSBC EPS -26.4 1.4 21.8 13.3Ratios (%) Revenue/IC (x) 14.4 15.5 16.6 17.8ROIC 30.6 31.7 33.4 34.0ROE 7.0 6.2 7.3 8.0ROA 3.3 3.8 4.3 4.5EBITDA margin 3.8 3.6 3.6 3.5Operating profit margin 1.9 1.8 1.9 1.8EBITDA/net interest (x) Net debt/equity -35.0 -31.5 -29.9 -29.0Net debt/EBITDA (x) -2.7 -2.2 -1.9 -1.7CF from operations/net debt Per share data (CNY) EPS reported (diluted) 0.15 0.18 0.21 0.24HSBC EPS (diluted) 0.16 0.16 0.20 0.22DPS 0.15 0.09 0.11 0.12Book value 3.01 2.64 2.75 2.87

Key forecast drivers Year to 12/2015a 12/2016e 12/2017e 12/2018eGrowth in No. of stores 0.18 0.16 0.14 0.12Same Store Sales Growth -0.02 0.01 0.00 0.00GPM 0.20 0.20 0.20 0.20OPM 0.02 0.02 0.02 0.02Effective tax rate 0.25 0.22 0.22 0.22



Price relative


3.60

5.60

7.60

9.60

11.60

13.60

15.60

17.60

3.60

5.60

7.60

9.60

11.60

13.60

15.60

17.60

Jan-14 Jul-14 Jan-15 Jul-15 Jan-16Yonghui Superstores Rel to CSI 300 Index





Issuer of report: The Hongkong and Shanghai Banking Corporation Limited, Seoul Securities Branch



THIS CONTENT MAY NOT BE DISTRIBUTED TO THE PEOPLE'S REPUBLIC OF CHINA (THE "PRC")

(EXCLUDING SPECIAL ADMINISTRATIVE REGIONS OF HONG KONG AND MACAO)

Tesla decided to pull ahead with its 500K-unit build plan by 2

years to 2018 and has reaffirmed 2016 delivery guidance…

…which reflects high conviction on demand for EV: mass EV

market is heating up, driven by Tesla

Samsung SDI is our preferred stock as a pure play for the EV

theme; we also like LG Chem on its solid customer base

Accelerating the Gigafactory plan: During the 1Q16 earnings conference call,

Tesla Motors (TSLA US, Not Rated) mentioned it has decided to advance its 500K

unit build plan by two years to 2018 from 2020, given the stronger demand for Model

3. Despite its history of delays, the company aims to increase its production capacity

by five-fold from the 2016 level by 2018. In addition, management maintained its plan

to start battery cell production at the Gigafactory in 4Q16e and expects to produce

100K-200K units of Model 3 in 2H17.

Reaffirmed 2016 delivery guidance: Tesla also affirmed its delivery guidance for

2016 at 80,000-90,000 units, despite weaker-than-expected vehicle sales in 1Q16

(14,810 units sold, falling short of guidance by 8%). Given the 2Q16 guidance of

17,000 units, the company’s annual guidance suggests a big ramp-up in 2H16, with

around 26,600 vehicles being delivered per quarter on average.

Tesla’s high conviction on demand: We believe Tesla’s faster progress on its

Gigafactory plan and confidence in vehicle delivery guidance for 2016e reflects high

conviction on demand for EVs. We also think positive feedback on Model 3 and

recent fuel-economy scandals at major auto makers will heat up the EV market going

forward, putting pressure on the overall auto industry to roll out more EV models.

From a supplier perspective, much stronger demand for Tesla EVs will likely increase

the need for potential vendor expansion by Tesla, which we see as an upside

catalyst for Korea battery makers (Samsung SDI: Scenario analysis on potential

Tesla business, 8 April 2016).

Samsung SDI is our preferred stock for the EV theme as a leveraged play. We

believe a turnaround of large-size battery margin on improving cost structure will

drive substantial earnings growth for Samsung SDI (006400 KS, KRW115,500, Buy,

TP KRW145,000) (Asia EV and Battery: How China is helping to crack the cost

conundrum, 6 April 2016). After significant one-off costs were reflected in 1Q16 due

to sweeping restructuring process, the company’s EV battery cost structure will

improve significantly from 2017e. We also like LG Chem (051910 KS, KRW288,500,

Buy, TP KRW350,000) because of its definite advantage in cost leadership and

broader customer base in the competitive EV battery market. We think it is a good

time to invest in the EV theme in the early stage with strong sales growth, leading to

margin expansion.

FLASHNOTE

5 May 2016

Will Cho*

Analyst, Hardware & Materials

The Hongkong and Shanghai Banking Corporation Limited, Seoul Securities Branch [email protected]

+822 3706 8765

Dennis Yoo*, CFA Analyst


[email protected]

+852 2996 6917

Kenneth Shim*

Research Associate, Tech The Hongkong and Shanghai Banking Corporation Limited, Seoul Securities Branch [email protected]

+822 3706 8779


Asia EV and Battery EQUITIES KOREA TECH

Korea Read-across from Tesla’s 1Q16 results

EQUITIES KOREA TECH

5 May 2016

2

Tesla’s decision to advance 500K unit build plan by two year to 2018 reflects strong confidence in demand

Pre-orders for Tesla’s Model 3 are 3x cumulative sales / 54% of global EV sales

Source: Company data, HSBC Note: Cumulative sales since 2012; pre-orders in the first week of booking Source: Company data, HSBC

Tesla’s vehicle delivery guidance suggests significant sales jump in 2H16e

Global PHEV/BEV sales to increase at CAGR 49% to 3.6m units with penetration reaching 3.8% by 2020e (from 0.4% in 2014)

Note: Figure for 2Q16 is based on the company guidance, and figures for 3Q16 and 4Q16 imply the company’s unchanged full-year guidance of 85,000 units Source: Company data, HSBC

Source: IHS Automotive, CAAM (China Association of Automobile Manufacturers), InsideEVs, IEA (Global EV Outlook 2015), ICCT, HSBC estimates

Valuation and risks

Samsung SDI (006400 KS, KRW115,500, Buy, TP KRW145,000)

Valuation: We use an EV/EBITDA-based sum-of-the-parts (SOTP) methodology to value

Samsung SDI: (1) for the small-size battery unit, we apply a 6.5x 2016e EV/EBITDA (the

average multiple of Panasonic (6752 JT; not rated), Simplo (6121 TT – TWD112.50; Reduce,

TP TWD90), and Dynapack (3211 TT; not rated) in 2009-11, when EV battery earnings were

insignificant and expectations on EVs peaked); (2) for the large-size battery unit, we use a DCF

analysis (assuming 3% risk-free rate, 7.5% equity risk premium, 1.22 beta, and 10% WACC) to

capture strong growth prospects and large losses in the early stage on the business; and (3) for

the electronic materials unit, we apply a 5.8x 2016e EV/EBITDA (the average multiple of Nitto

Denko in 2005-08 when electronics materials margin improved on market share gain). With c26%

upside to our target price we reiterate our Buy rating.

0

100,000

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300,000

400,000

500,000

600,000

2014 2015 2016 2018e 2020e

(Annual capacity as of year-end, unit)

5x

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

Cumulative salesof Tesla

Pre-orders forModel 3

2015 globalPHEV/BEV sales

(Unit)

3x

54%

0

5,000

10,000

15,000

20,000

25,000

30,000

1Q13 1Q14 1Q15 1Q16

(unit)

0.0%

1.0%

2.0%

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0

1,000

2,000

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4,000

5,000

6,000

2009 2011 2013 2015e 2017e 2019e

(K units)

BEV (LHS)

PHEV (LHS)

Full-HEV (LHS)

PHEV/BEV penetration rate (RHS)




the UK Referendum.




Issuer of report: The Hongkong and Shanghai Banking Corporation Limited, Seoul Securities Branch



Expect solid 1Q16 results, driven by B&S and Lineage 1 sales

Momentum set to pick up ahead of June’s Lineage Eternal CBT

Maintain target price of KRW270,000

We note that the disappointing ‘slump’ of Blade & Soul Mobile has put pressure on

NCSOFT share price recently. But we think a solid 1Q16, Lineage Eternal CBT in

2Q16 and a row of mobile game launches in 3Q16 should bring fresh momentum.

1Q16e (due 13 May) results preview. We expect NCSOFT to deliver 1Q16e OP of

KRW74bn (up 65% y-o-y), in line with upward revised consensus estimates. Growth

was driven by (1) stronger-than-expected performance from Blade & Soul (B&S) after

its US/EU launch in January, (2) recognition of Guildwar 2 expansion pack sales and

(3) resilient Lineage 1 sales. In particular, we expect B&S US/EU to have contributed

incremental revenue of KRW15bn in 1Q16, based on strong initial traffic and collector

box sales. This should step down to c.KRW10bn/quarter from 2Q16 with gamer exits,

but still have a positive effect on full-year earnings.

B&S Mobile cools off, but leaves a positive message. Tracking B&S Mobile’s

rankings to date, we conclude that its performance is largely in line with our original

projection (c2% of total 2016e revenue). The title outperformed in the first week of

launch, sitting in the top-10 gross revenue rankings on iOS China; but this has

gradually stabilized at around #60-80. Nonetheless, we view the strong number of

downloads as a positive indicator of the marketing power NC’s IPs (intellectual

property) possess. The market may have taken the recent slump in revenue as a

disappointment, but we see this as a natural shortcoming of the CCG (collectable

card game) genre. We expect better results with the Lineage-based mobile games

lined up for 2H16, which will be of more advanced quality.

Momentum should pick up ahead of Lineage Eternal CBT. On the PC side, we

expect NC to commence the Lineage Eternal (LE) first closed beta test in June.

NCSOFT has flagged numerous times that this will be its next ‘blockbuster’ game

after B&S, which launched four years back. Thus, expectations running up to the

event could drive shares higher. Historically, the stock has traded in a range of 20-

25x PE ahead of major title launches. Comparatively, we think the current 18x PE

offers an attractive entry point for investors to play the new game momentum.

Maintain Buy rating and TP of KRW270,000. We apply an unchanged target 18.8x

PE (global peer average) to our 12 month forward EPS of KRW14,090 (rolled forward

from 2016e). We cut our 2016e OP estimate by 9% to reflect slight delays in 2-3Q16

new game launches, and introduce our 2018 forecasts. Our TP implies 15.4% upside

and we rate the stock Buy given expected better earnings momentum and stronger

new game line up in 2H16e. Downside risks: (1) worse-than-expected performance of

its Lineage-based mobile games; (2) delays in the CBT/ launch schedule of Lineage

Eternal; (3) pull back in global peer valuations, negatively impacting sentiment.

5 May 2016

MAINTAIN BUY

TARGET PRICE (KRW) PREVIOUS TARGET (KRW)

270,000 270,000

SHARE PRICE (KRW) UPSIDE/DOWNSIDE

234,000 +15.4% (as of 04 May 2016)

MARKET DATA Market cap (KRWb) 5,131 Free float 85%

Market cap (USDm) 4,446 BBG 036570 KS

3m ADTV (USDm) 32.4 RIC 036570.KS

FINANCIALS AND RATIOS (KRW) Year to 12/2015a 12/2016e 12/2017e 12/2018e

HSBC EPS 7,542 12,761 15,468 16,457

HSBC EPS (prev) 9,415 14,201 15,490 -

Change (%) -19.9 -10.1 -0.1 -

Consensus EPS 8,896 12,731 16,047 17,867


EV/EBITDA (x) 13.3 8.8 7.0 6.2

ROE (%) 10.6 15.0 16.2 15.4

52-WEEK PRICE (KRW)


Jena Han* Research Analyst, Internet The Hongkong and Shanghai Banking Corporation Limited, Seoul Securities Branch [email protected]

+822 3706 8772

Chi Tsang * Analyst, Head of Asia Internet


[email protected]

+852 2822 2590


NCSOFT (036570 KS) EQUITIES IT SERVICES

Korea

170000

230000

290000


Target price: 270000 High: 263500 Low: 181500 Current: 234000

Buy: More catalysts expected for 2H16e

EQUITIES IT SERVICES

5 May 2016

2


Year to 12/2015a 12/2016e 12/2017e 12/2018e

Profit & loss summary (KRWb)

Revenue 838 992 1,145 1,242

EBITDA 272 387 447 458


Operating profit/EBIT 237 331 400 417

Net interest 20 23 28 34

PBT 240 371 450 479

HSBC PBT 240 371 450 479

Taxation -73 -90 -109 -116

Net profit 165 280 339 361


Cash flow summary (KRWb)


Capex -18 -20 -20 -20

Cash flow from investment -517 -33 -29 -25

Dividends -60 -84 -102 -108

Change in net debt -55 -214 -250 -264

FCF equity 208 274 326 353

Balance sheet summary (KRWb)


Tangible fixed assets 234 200 174 155

Current assets 1,083 1,315 1,583 1,858

Cash & others 953 1,167 1,417 1,681

Total assets 2,219 2,432 2,690 2,962

Operating liabilities 361 372 384 396

Gross debt 0 0 0 0

Net debt -953 -1,167 -1,417 -1,681


Invested capital 67 38 16 -6


Year to 12/2015a 12/2016e 12/2017e 12/2018e

Y-o-y % change

Revenue -0.1 18.3 15.5 8.4

EBITDA -13.5 42.1 15.5 2.4

Operating profit -14.6 39.5 20.7 4.3

PBT -17.1 55.0 21.2 6.4

HSBC EPS -28.1 69.2 21.2 6.4

Ratios (%)

Revenue/IC (x) 6.5 18.9 42.5 240.2

ROIC 127.0 479.2 1124.7 6116.8

ROE 10.6 15.0 16.2 15.4

ROA 7.8 11.3 12.5 11.9

EBITDA margin 32.5 39.0 39.0 36.9



Net debt/equity -53.3 -58.7 -63.5 -67.5

Net debt/EBITDA (x) -3.5 -3.0 -3.2 -3.7


Per share data (KRW)

EPS Rep (diluted) 7,542 12,761 15,468 16,457

HSBC EPS (diluted) 7,542 12,761 15,468 16,457

DPS 2,747 3,828 4,640 4,937

Book value 80,693 89,746 100,719 112,394

Valuation data

Year to 12/2015a 12/2016e 12/2017e 12/2018e

EV/sales 4.3 3.4 2.7 2.3

EV/EBITDA 13.3 8.8 7.0 6.2

EV/IC 54.2 89.1 196.8

PE* 31.0 18.3 15.1 14.2

PB 2.9 2.6 2.3 2.1

FCF yield (%) 4.6 6.0 7.2 7.8

Dividend yield (%) 1.2 1.6 2.0 2.1


Issuer information

Share price (KRW) 234,000 Free float 85%

Target price (KRW) 270,000 Sector It Services

Reuters (Equity) 036570.KS Country Korea

Bloomberg (Equity) 036570 KS Analyst Jena Han


Price relative


100000

150000

200000

250000

100000

150000

200000

250000

2014 2015 2016 2017

NCsoft Rel to KOSPI INDEX

Financials & valuation: NCsoft Buy




the UK Referendum.







1Q16 results and 2Q16 guidance roughly in line with HSBCe

Momentum to pick up in 2H; glass casing yet to pose a threat

Maintain Buy, raise TP to TWD295 (from TWD286), based on

10x (unchanged) forward earnings

1Q results roughly in line with HSBCe. Reported net profit of TWD4.16bn was

down 41% q-o-q and 11% y-o-y, broadly in line with our forecast but 12% lower than

consensus. This was not a surprise as we see downside risks to consensus forecast

as highlighted in Buy: Forecast cuts likely the last piece of bad news, 3 May. 1Q16

GPM of 42.8% was in line with HSBCe 42.7%, but OPM of 34.5% and opex/sales

ratio of 8.4% surprised on the upside, backed by stringent opex control on sales and

administration costs. Such strength was offset by FX loss on TWD appreciation.

2Q guidance cut, but likely in the price. Catcher indicated sales for May and June

will be similar to April (TWD6.04bn, -6% m-o-m/-15% y-o-y), implying 2Q sales c7-8%

q-o-q growth (-10% y-o-y), roughly in-line with our forecast of 8%. While this is lower

than consensus (+19% q-o-q), such weakness is likely discounted. Management

expects momentum to pick up from 3Q on new product launches (iPhone 7 and

major re-design of MacBook) and new project wins, which should help lift ASP given

increasing design complexity. Catcher expects to see y-o-y sales growth for 2H16;

we forecast +5.5%. Full-year sales are guided flat to slightly up, in line with HSBCe.

Glass casing and competition yet to pose a threat. Management does not see

full-glass casing as a feasible solution, as technical difficulties would impact mass

production capability, manufacturing yield and time-to-market. For design that adopts

metal frame, while Catcher has not seen the design in the pipeline yet, management

indicated the processing time would likely be longer and more difficult, as such a

design is complex in order to provide structural support and mechanical strength.

ASP is decided by processing time while margin is a function of yield, efficiency and

scale, so such a change might not be negative for Catcher. Catcher specializes in

metal casing but is diversified from manufacturing technology and material science

angles, which should help it adapt to changes. Management sees limited change in

competitive landscape but believes the opportunities for newcomers are decreasing.

Maintain Buy, raise TP to TWD295. We raise our FY16/17e earnings 2%/4% mainly

to reflect stringent opex control. Our TP is now TWD295 (was TWD286), still based

on 10x forward earnings. Catcher’s share price has dropped 27% y-t-d; at current

levels (7.3x FY16e), we believe most negatives are in the price and consensus

forecast cuts following results could be the last piece of bad news. While the shares

could still react negatively to the weaker guidance, we see limited further downside.

Improving momentum from 2H and more clarity on casing materials changes from

management are key catalysts. Yield of 5% should serve as downside support.

5 May 2016

MAINTAIN BUY


295.00 286.00

SHARE PRICE (TWD) UPSIDE/DOWNSIDE

202.00 +46.0% (as of 05 May 2016)

MARKET DATA Market cap (TWDm) 155,619 Free float 60%

Market cap (USDm) 4,807 BBG 2474 TT

3m ADTV (USDm) 57.6 RIC 2474.TW

FINANCIALS AND RATIOS (TWD) Year to 12/2015a 12/2016e 12/2017e 12/2018e

HSBC EPS 32.61 27.77 30.77 31.85

HSBC EPS (prev) - 27.20 29.62 30.71

Change (%) - 2.1 3.9 3.7

Consensus EPS 32.20 31.35 34.01 29.38


EV/EBITDA (x) 2.8 2.7 2.2 1.7

ROE (%) 23.8 17.0 16.5 15.4

52-WEEK PRICE (TWD)


Carrie Liu* Analyst


[email protected]

+8862 6631 2864

David Huang* Associate


[email protected]

+8862 6631 2865


Catcher Technology (2474 TT) EQUITIES COMPUTERS & PERIPHERALS

Taiwan

170.00

295.00

420.00



Buy: Expectations reset; concerns addressed

EQUITIES COMPUTERS & PERIPHERALS

5 May 2016

2


Year to 12/2015a 12/2016e 12/2017e 12/2018e

Profit & loss summary (TWDm)

Revenue 82,413 82,374 90,490 94,529

EBITDA 39,412 39,886 42,381 43,507



Net interest -310 -310 -310 -310

PBT 34,697 30,106 32,690 33,816

HSBC PBT 34,697 30,106 32,690 33,816

Taxation -9,576 -8,663 -8,916 -9,210

Net profit 25,121 21,395 23,709 24,538

HSBC net profit 25,121 21,395 23,709 24,538

Cash flow summary (TWDm)


Capex -19,811 -13,000 -9,000 -9,000


Dividends -7,704 -7,916 -8,298 -8,588

Change in net debt -10,088 -4,301 -14,876 -17,314

FCF equity 9,715 17,914 24,155 24,987

Balance sheet summary (TWDm)


Current assets 103,551 111,820 130,821 149,276

Cash & others 65,684 68,985 82,861 99,175

Total assets 171,580 188,737 205,508 221,727


Gross debt 22,986 21,986 20,986 19,986

Net debt -42,698 -47,000 -61,876 -79,190




Year to 12/2015a 12/2016e 12/2017e 12/2018e

Y-o-y % change

Revenue 49.1 0.0 9.9 4.5

EBITDA 51.0 1.2 6.3 2.7

Operating profit 46.9 -1.5 7.9 3.6

PBT 47.4 -13.2 8.6 3.4

HSBC EPS 38.6 -14.8 10.8 3.5

Ratios (%)

Revenue/IC (x) 1.2 1.0 1.0 1.1

ROIC 31.9 25.9 25.8 26.8

ROE 23.8 17.0 16.5 15.4

ROA 16.4 12.0 12.2 11.6

EBITDA margin 47.8 48.4 46.8 46.0



Net debt/equity -36.8 -34.5 -40.7 -47.1

Net debt/EBITDA (x) -1.1 -1.2 -1.5 -1.8

Per share data (TWD)

EPS Rep (diluted) 32.61 27.77 30.77 31.85

HSBC EPS (diluted) 32.61 27.77 30.77 31.85

DPS 10.00 10.28 10.77 11.15

Book value 150.12 176.60 196.81 217.59

Valuation data

Year to 12/2015a 12/2016e 12/2017e 12/2018e

EV/sales 1.4 1.3 1.0 0.8

EV/EBITDA 2.8 2.7 2.2 1.7

EV/IC 1.6 1.2 1.0 0.9

PE* 6.2 7.3 6.6 6.3

PB 1.3 1.1 1.0 0.9

FCF yield (%) 6.3 11.6 15.7 16.2

Dividend yield (%) 5.0 5.1 5.3 5.5


Issuer information

Share price (TWD) 202.00 Free float 60%

Target price (TWD) 295.00 Sector Computers & Peripherals

Reuters (Equity) 2474.TW Country Taiwan

Bloomberg (Equity) 2474 TT Analyst Carrie Liu


Price relative


160.00

210.00

260.00

310.00

360.00

410.00

160.00

210.00

260.00

310.00

360.00

410.00

2014 2015 2016 2017

Catcher Technology Rel to TAIWAN WEIGHTED INDEX

Financials & valuation: Catcher Technology Buy




the UK Referendum.






Lower than expected April sales on short-term inventory

adjustment and seasonal weakness

Long-term trend of ADAS dollar content increase remains intact

Maintain Buy; lower TP to TWD610 (from TWD670)

Lower than expected April sales. Tung Thih (TTE) reported April monthly sales of

TWD830mn (down 20% MoM but up 55% YoY). Management guided May sales will be

slightly down MoM with limited visibility into June. As such, we estimate 2Q16 sales to

decline 18% QoQ vs our previous estimate of 3% and consensus of 6% QoQ growth.

China auto demand remains healthy in 2016 despite short-term weakness amid

inventory adjustment. Management attributes the shortfall to lower than expected

demand of China OEMs. Our China auto team believes that the demand slowdown is

mainly due to channel inventory adjustment (1-2 months on our estimates) rather

than fundamental change of overall end demand. The inventory replenish demand

should pick up from September based on normal seasonality of China auto market,

We expect to see 4Q16 sales up 27% QoQ on pull-in demand before the end of the

China car purchase tax subsidy program in December and vehicle camera shipment

kick-off in Shanghai GM.

Long-term trend of ADAS dollar content increase remains intact. We believe

TTE will continue to benefit from rapid advanced driver assistance systems (ADAS)

adoption increase and strong China SUV demand going forward. Some new Chinese

local SUV brands adopted ADAS with a total value of cUSD150-300 up from cUSD55

in 2013.This more than offset the pricing pressure (c. 5% per year), in our view. In

addition, TTE is aggressively promoting higher margin products such as forward

collision warning, lane departure warning, auto parking to leading China OEMs, such

as BAIC Motor (1958 HK, Hold, HKD5.98), South East Motor (non-covered), Great

Wall (2333 HK/601633 CH, Reduce/Reduce, HKD5.77/CNY8.94, and Changan

(200625 CH/000625 CH, Buy/Hold, HKD12.0/CNY15.5). We estimate these products

will account for 5% of total sales in 2018.

Lower TP to TWD610 (from TWD670): To factor in inventory adjustment in

2Q16/3Q16 and smaller degree of operating leverage, we revise down our

2016/2017e EPS 8%/9% to TWD18.4/TWD23.4. We thus lower our TP to TWD610

(rounded), which is based on 26x (unchanged) 2017e PE; 26x is the high-end of

TTE’s historical trading range. We are comfortable with this multiple because the

earnings growth profile for 2015-17e is similar to 2008-10, when the government

released a series of policies that supported China’s auto sector.

6 May 2016

MAINTAIN BUY


610.00 670.00 SHARE PRICE (TWD) UPSIDE/DOWNSIDE

533.00 +14.4% (as of 05 May 2016)

MARKET DATA Market cap (TWDm) 44,950 Free float 80%Market cap (USDm) 1,388 BBG 3552 TT3m ADTV (USDm) 22.7 RIC 3552.TW

FINANCIALS AND RATIOS (TWD) Year to 12/2015a 12/2016e 12/2017e 12/2018eHSBC EPS 9.39 18.51 23.46 27.32HSBC EPS (prev) - 20.12 25.73 29.94Change (%) - -8.0 -8.8 -8.8Consensus EPS 8.94 17.99 24.08 32.14PE (x) 56.8 28.8 22.7 19.5Dividend yield (%) 1.0 1.9 2.5 2.9EV/EBITDA (x) 35.6 19.0 15.3 12.8ROE (%) 22.6 36.5 36.7 35.2

52-WEEK PRICE (TWD)


Joyce Chen* AnalystHSBC Securities (Taiwan) Corporation Limited [email protected] +8862 6631 2862

John Chung* Head of Research, Taiwan HSBC Securities (Taiwan) Corporation Limited [email protected] +8862 6631 2868


Tung Thih Electronic (3552 TT)

EQUITIES AUTO COMPONENTS

Taiwan

72.00

371.00

670.00

May 15 Nov 15 May 16Target price: 610.00High: 585.00 Low: 132.50 Current: 533.00

Buy: April sales weak but auto demand remains solid

abc

EQUITIES AUTO COMPONENTS

6 May 2016

2

Financial statements Year to 12/2015a 12/2016e 12/2017e 12/2018eProfit & loss summary (TWDm) Revenue 7,039 11,197 13,879 16,112EBITDA 1,272 2,324 2,902 3,370Depreciation & amortisation -178 -238 -273 -308Operating profit/EBIT 1,094 2,086 2,629 3,061PBT 1,049 2,074 2,629 3,061HSBC PBT 1,049 2,074 2,629 3,061Taxation -258 -511 -648 -754Net profit 790 1,563 1,981 2,307HSBC net profit 790 1,563 1,981 2,307Cash flow summary (TWDm) Cash flow from operations 94 2,135 855 2,711Capex -229 -600 -350 -350Cash flow from investment 230 -600 -350 -350Dividends -286 -443 -874 -1,108Change in net debt -2 -1,092 369 -1,253FCF equity -394 1,024 -143 1,607Balance sheet summary (TWDm) Tangible fixed assets 1,367 1,728 1,805 1,847Current assets 6,673 8,701 9,732 11,987Cash & others 1,375 2,466 2,097 3,351Total assets 8,384 10,774 11,882 14,178Operating liabilities 2,975 4,246 4,246 5,343Gross debt 1,684 1,684 1,684 1,684Net debt 309 -783 -414 -1,667Shareholders' funds 3,725 4,845 5,952 7,152Invested capital 3,690 3,717 5,194 5,140

Ratio, growth and per share analysis Year to 12/2015a 12/2016e 12/2017e 12/2018eY-o-y % change Revenue 36.9 59.1 24.0 16.1EBITDA 58.8 82.7 24.9 16.1Operating profit 66.3 90.7 26.0 16.5PBT 49.8 97.8 26.8 16.5HSBC EPS 63.1 97.1 26.8 16.5Ratios (%) Revenue/IC (x) 2.0 3.0 3.1 3.1ROIC 23.7 42.4 44.5 44.7ROE 22.6 36.5 36.7 35.2ROA 10.5 16.3 17.5 17.7EBITDA margin 18.1 20.8 20.9 20.9Operating profit margin 15.5 18.6 18.9 19.0Net debt/equity 8.3 -16.2 -6.9 -23.3Net debt/EBITDA (x) 0.2 -0.3 -0.1 -0.5CF from operations/net debt 30.5Per share data (TWD) EPS Rep (diluted) 9.39 18.51 23.46 27.32HSBC EPS (diluted) 9.39 18.51 23.46 27.32DPS 5.25 10.35 13.12 15.28Book value 44.26 57.37 70.48 84.69

Valuation data Year to 12/2015a 12/2016e 12/2017e 12/2018eEV/sales 6.4 3.9 3.2 2.7EV/EBITDA 35.6 19.0 15.3 12.8EV/IC 12.3 11.9 8.6 8.4PE* 56.8 28.8 22.7 19.5PB 12.0 9.3 7.6 6.3FCF yield (%) -0.9 2.3 -0.3 3.6Dividend yield (%) 1.0 1.9 2.5 2.9


Issuer information Share price (TWD) 533.00 Free float 80%Target price (TWD) 610.00 Sector Auto ComponentsReuters (Equity) 3552.TW Country TaiwanBloomberg (Equity) 3552 TT Analyst Joyce ChenMarket cap (USDm) 1,388 Contact +8862 6631 2862

Price relative


16.00

116.00

216.00

316.00

416.00

516.00

616.00

16.00

116.00

216.00

316.00

416.00

516.00

616.00

2014 2015 2016 2017Tung Thih Electronic Rel to TAIWAN WEIGHTED INDEX

Financials & valuation: Tung Thih Electronic Buy





MICA (P) 021/01/2016 MICA (P) 073/06/2015

Issuer of report: The Hongkong and Shanghai Banking Corporation Limited, Singapore Branch



Bullish on Indian and Chinese utilities businesses but Singapore

electricity business is likely to remain weak in next few years

Management confident that marine can survive the downturn

Maintain Buy rating with an unchanged target price of SGD3.33

We hosted SCI’s management including CEO, Tang Kin Fei, CFO, Koh Chiap

Khiong, and Head of Business & Strategic Development, Tan Cheng Guan, for a

lunch with investors. The following issues were discussed:

Indian Utilities expected to grow; may be considered for an IPO: Management

said it expects to potentially IPO the Indian electricity business after owned capacity

reaches scale (in an interview with CNBC India in Nov 2015 the CEO stated that an

IPO is a possibility once the current 2,640 MW thermal capacity doubles). SCI sees

opportunities to buy generation assets in India from distressed companies but will

tread with caution and invest in states where distribution companies have relatively

better financial health. Management stated that it expects the contribution from the

Indian business to increase as revenues improve following the recent signing of

power purchase agreements, and as the interest burden starts reducing.

China Utilities provide steady return: The China utilities business is likely to

provide steady returns from mostly water and waste-water treatment plants for

industries. Management expects that some of the growth will be driven by

improvements in plant specifications to meet new stricter norms of waste-water

treatments, which are likely to lead to an increase in tariffs.

Singapore Utilities unlikely to make a swift recovery: Management stated that the

Singapore power generation business is likely to continue facing overcapacity issues

resulting in lower prices for the next three years. Part of the problem, according to

management, is that some competing utilities are stuck with take-or-pay gas contacts

which lead to higher electricity generation and, consequently, oversupply.

Management believes returns from centralized utility services may improve once

operations of key customer, Jurong Aromatics, start again.

Marine can withstand the present downturn: Management was confident that the

marine business can withstand the current downturn. If Sete were to potentially

cancel part of its contract, management believes the impact would be limited given it

had already received over USD2bn of the USD5.6bn seven rig contract and, so far,

not that much work has been done on the last three rigs. Management believes that

the new yard in Singapore gives the marine business a competitive advantage which

could help it win contracts for new applications.

Maintain Buy with an unchanged SOTP-based TP of SGD3.33: We value the

utilities division on 2016e PE based peer multiple of 10.7x and use Sembcorp

Marine’s (SMM SP, SGD1.59, Reduce) target price of SGD1.49 to value SCI’s 61%

stake in SMM. We use a 10% conglomerate discount to arrive at our target price.

5 May 2016

MAINTAIN BUY

TARGET PRICE (SGD) PREVIOUS TARGET (SGD)

3.33 3.33

SHARE PRICE (SGD) UPSIDE/DOWNSIDE

2.75 +21.1% (as of 04 May 2016)

MARKET DATA Market cap (SGDm) 4,916 Free float 50%

Market cap (USDm) 3,623 BBG SCI SP

3m ADTV (USDm) 14.9 RIC SCIL.SI

FINANCIALS AND RATIOS (SGD) Year to 12/2015a 12/2016e 12/2017e 12/2018e

HSBC EPS 0.394 0.307 0.346 0.415

HSBC EPS (prev) - - - -

Change (%) - - - -

Consensus EPS 0.319 0.305 0.327 0.361

PE (x) 7.0 9.0 8.0 6.6

Dividend yield (%) 4.0 4.5 5.0 6.0

EV/EBITDA (x) 7.7 8.1 7.5 7.0

ROE (%) 11.8 8.4 9.0 10.1

52-WEEK PRICE (SGD)


Tarun Bhatnagar* Analyst The Hongkong and Shanghai Banking Corporation Limited, Singapore Branch

[email protected]

+65 6658 0614


SembCorp Industries (SCI SP) EQUITIES CONGLOMERATES

Singapore

1.90

3.35

4.80



Buy: Confident of Utilities’ growth & Marine’s survival

EQUITIES CONGLOMERATES

5 May 2016

2


Year to 12/2015a 12/2016e 12/2017e 12/2018e

Profit & loss summary (SGDm)

Revenue 9,545 9,167 9,298 9,439

EBITDA 1,226 1,614 1,764 1,849


Operating profit/EBIT 842 1,132 1,260 1,341

Net interest -205 -456 -575 -554

PBT 426 788 883 1,041

HSBC PBT 586 788 883 1,041

Taxation 28 -124 -148 -167

Net profit 549 552 623 746


Cash flow summary (SGDm)

Cash flow from operations -761 -683 1,012 1,098

Capex -1,384 -792 -1,007 -530

Cash flow from investment -1,327 -1,061 -1,007 -530

Dividends -286 -221 -244 -272

Change in net debt 2,153 3,482 91 -494

FCF equity -1,993 325 6 567

Balance sheet summary (SGDm)



Current assets 7,608 7,876 7,982 8,096

Cash & others 1,606 2,105 2,131 2,159

Total assets 19,915 24,113 24,714 24,840


Gross debt 6,833 10,813 10,930 10,465

Net debt 5,226 8,708 8,799 8,306




Year to 12/2015a 12/2016e 12/2017e 12/2018e

Y-o-y % change

Revenue -12.4 -4.0 1.4 1.5

EBITDA -16.0 31.6 9.3 4.9

Operating profit -26.5 34.5 11.3 6.4

PBT -65.8 84.9 12.0 17.9

HSBC EPS -10.1 -22.0 12.7 19.9

Ratios (%)

Revenue/IC (x) 1.0 0.7 0.6 0.6

ROIC 9.4 7.4 6.9 7.2

ROE 11.8 8.4 9.0 10.1

ROA 3.8 4.9 5.1 5.5

EBITDA margin 12.8 17.6 19.0 19.6



Net debt/equity 65.0 103.6 99.5 88.6


CF from operations/net debt 11.5 13.2

Per share data (SGD)

EPS Rep (diluted) 0.305 0.307 0.346 0.415

HSBC EPS (diluted) 0.394 0.307 0.346 0.415

DPS 0.110 0.123 0.138 0.166

Book value 3.599 3.784 3.996 4.262

Valuation data

Year to 12/2015a 12/2016e 12/2017e 12/2018e

EV/sales 1.0 1.4 1.4 1.4

EV/EBITDA 7.7 8.1 7.5 7.0

EV/IC 0.9 0.9 0.9 0.8

PE* 7.0 9.0 8.0 6.6

PB 0.8 0.7 0.7 0.6

FCF yield (%) -47.7 7.3 0.1 12.5

Dividend yield (%) 4.0 4.5 5.0 6.0


Issuer information

Share price (SGD) 2.75 Free float 50%

Target price (SGD) 3.33 Sector Conglomerates

Reuters (Equity) SCIL.SI Country Singapore

Bloomberg (Equity) SCI SP Analyst Tarun Bhatnagar

Market cap (USDm) 3,623 Contact +65 66580614

Price relative


1.70

2.20

2.70

3.20

3.70

4.20

4.70

5.20

5.70

1.70

2.20

2.70

3.20

3.70

4.20

4.70

5.20

5.70

2014 2015 2016 2017

SembCorp Industries Rel to STRAITS TIMES INDEX

Financials & valuation: SembCorp Industries Buy




the UK Referendum.




MICA (P) 021/01/2016 MICA (P) 073/06/2015

Issuer of report: The Hong Kong and Shanghai Banking Corporation Limited, Singapore Branch



FY15/16 results broadly in line with expectations; DPU impact

of recent acquisitions is marginal

Growth prospects in Singapore continue to moderate; focus

will remain on existing markets

Raise TP by 2% to SGD2.55; maintain Hold

FY15/16 results broadly in line; DPU impact of recent acquisitions is marginal

AREIT reported headline FY15/16 DPU of 15.4 SGD cents (HSBC FY15/16e DPU:

15.2 SGD cents; consensus FY15/16e DPU: 15.1 SGD cents). Revenues at

SGD761m (HSBC FY15/16e: SGD720m; consensus FY15/16e: SGD744m) and NPI

at SGD534m (HSBC FY15/16e: SGD500m) were higher for the year due to impact of

recent acquisitions at varying points throughout the year. AREIT registered a net

revaluation loss of SGD6.9m, largely attributed to Australia as transaction costs

associated with the acquisitions during the year as well as the portfolio premium paid

for the 26-asset Australian logistics portfolio could not be fully recouped via valuation

gains for assets within the portfolio. Post results, we have incorporated: a) acquisition

of ONE@Changi City for SGD420m and acquisition of 6-20 Clunies Ross Street for

cSGD80m; and b) issuance of new shares to fund these acquisitions into our

numbers – as a result, while our FY16/17e and FY17/18e revenues and NPI are

revised up by 8%, our FY16/17e and FY17/18e DPU revisions are marginal (c1-2%).

Growth prospects in Singapore continue to moderate

Portfolio-wide like-for-like occupancy and like-for-like occupancy for multi-tenanted

buildings remained stable at c88% and c83% respectively. Rent reversions for

FY15/16 were +7.0% (FY14/15:+8.3%; 4QFY15/16: +5.1%), largely driven by

Business/Science Parks (+9.6%; there are variations within this segment as well),

while reversions in other segments (hi-tech industrial, light industrial and logistics and

distribution centres) remained modest (and mostly lower than reversions in FY14/15).

We expect flat to modest rent reversion, as the gap between market rents and rents

for expiring leases over the next two years has narrowed substantially.

Focus will remain on existing markets; raise TP to SGD2.55 – maintain Hold

Given importance of scale, focus will remain on existing markets (Singapore,

Australia and China) with management noting that entry into a new market won’t

make sense unless there is a large platform they can acquire. Debt metrics remain

stable (vs. end-Dec 2015), with aggregate gearing at c37%, borrowing costs at

2.79%, debt maturity of 3.4 years and 71.9% of debt fixed. We raise our TP by 2% to

SGD2.55 (from SGD2.50) on higher RNAV and DDM valuations. At current price, the

stock is trading at 3% discount to RNAV and FY16/17e fully diluted DPU yield of

6.5% - both close to historical average. Upside is modest at 6.3%; maintain Hold.

FLASHNOTE

6 May 2016

HOLD

TARGET PRICE (SGD) PREVIOUS TARGET (SGD)

2.55 2.50

SHARE PRICE (SGD) UPSIDE/DOWNSIDE

2.40 +6.3% (as of 05 May 2016)

MARKET DATA Market cap (SGDm) 6,145 Free float 78%

Market cap (USDm) 4,529 BBG AREIT SP

3m ADTV (USDm) 17.5 RIC AEMN.SI

FINANCIALS AND RATIOS (SGD) Year to 03/2015a 03/2016a 03/2017e 03/2018e

HSBC DPU 0.146 0.154 0.162 0.165

HSBC DPU (prev) 0.146 0.154 0.150 0.163

Change (%) - - 1.4 1.1

Consensus DPU 0.146 0.154 0.159 0.164

Dividend yield (%) 6.1 6.4 6.8 6.9

Price to NAV 1.2 1.2 1.2 1.2

52-WEEK PRICE (SGD)


Pratik Burman Ray*, CFA Analyst The Hongkong and Shanghai Banking Corporation Limited, Singapore Branch [email protected]

+65 6658 0611

Utkarsh Rastogi* Associate

Bangalore


Ascendas REIT (AREIT SP) EQUITIES REAL ESTATE

Singapore

2.00

2.30

2.60


Target price: 2.50 High: 2.53 Low: 2 .13 Current: 2 .39

Hold: In line with expectations

EQUITIES REAL ESTATE

6 May 2016

2


Year to 03/2015 03/2016 03/2017e 03/2018e

Profit & loss summary (SGDm)

Gross revenue 673 761 834 845

Property expenses (211) (227) (242) (246)

Net property income 463 534 592 599

Asset management and trust expenses (44) (67) (52) (52)

EBIT 419 466 540 547

Net interest expense (105) (77) (99) (99)

Tax (7) (25) (7) (7)

Core net income after tax 307 364 434 441

Payment to perpetual security holders 0 (7) (14) (14)

Core net income after tax (to unit holders) 307 357 419 427

Net investment income (for distribution) 351 378 433 440

Cash flow summary (SGDm)

Cash generated from operations 362 482 546 553

Cash flows from investing activities (638) (1492) 0 0

Cash flows from financing activities 249 1027 (511) (529)

Net change in cash and cash equivalents (27) 16 36 23

Beginning cash and cash equivalents 67 42 56 92

Effect of exchange rate changes 1 (2) 0 0

Cash and cash equivalents at end 42 56 92 115

Balance sheet summary (SGDm)

Non-current assets

Investment properties 7,868 9,599 9,599 9,599

Other non-current assets 135 96 424 400

Total non-current assets 8,003 9,695 10,023 9,999

Current assets

Cash and cash equivalents 42 56 92 115

Other current assets 116 125 133 135

Total current assets 157 181 225 250

Total Assets 8,160 9,876 10,248 10,249

Current liabilities

Short term borrowings 286 1,180 1,180 1,180

Other current liabilities 221 215 226 229

Total current liabilities 507 1,396 1,406 1,410

Non-current liabilities

Interest bearing loans & borrowings 2,442 2,484 2,838 2,838

Other Payables 198 199 197 197

Total non-current liabilities 2,640 2,684 3,036 3,036

Total Liabilities 3,147 4,079 4,442 4,445

Perpetual securities 0 304 304 304

Common equity 5,014 5,492 5,501 5,499

Net assets 5,014 5,797 5,806 5,803

Ratio, growth and per unit analysis

Year to 03/2015 03/2016 03/2017e 03/2018e

Y-o-y % change

Revenue 10% 13% 10% 1%

Net property income 6% 15% 11% 1%

Income after tax -9% 16% 17% 2%

Net investment income (for distribution) 3% 8% 14% 2%

Fully diluted EPU -13% -19% 12% 2%

Fully diluted DPU 3% 5% 1% 2%

Ratios

EBIT margin 62% 61% 65% 65%

Debt/Assets 33% 34% 36% 36%

Net Debt/Assets 33% 33% 35% 35%

(Debt+Perpetual securities)/Assets 33% 37% 39% 39%

(Net debt+Perpetual securities)/Assets 33% 36% 38% 38%

EBIT/Net interest expense 4.0 6.0 5.5 5.5

EBIT/(Net interest expense + Payment to

perpetual holders)

4.0 5.5 4.8 4.8

Net debt/EBIT 6.4 7.7 7.3 7.1

(Net debt + Perpetual securities)/EBIT 6.4 8.4 7.8 7.7

Per unit data (cents) 03/2015 03/2016 03/2017e 03/2018e

Basic EPU 16.5 14.2 15.7 16.0

Diluted EPU 16.5 13.4 15.1 15.3

Basic DPU 14.6 15.4 16.2 16.5

Diluted DPU 14.6 15.4 15.5 15.8

Basic dividend yield 6.1 6.4 6.8 6.9

Fully diluted dividend yield 6.1 6.4 6.5 6.6

RNAV computation (SGDm)

Gross asset valuation % of GAV

Investment Properties

Business & Science Parks 3,970 37%

Hi-Tech Industrial Properties 1,654 15%

Light Industrial Properties 1,071 10%

Logistics & Distribution Centres 1,568 15%

Warehouse Retail Facilities 138 1%

Others/Mixed use development 1,217 11%

Australian assets 1,150 11%

Gross Asset Valuation 10,767 100%

Other assets 277

Total GAV 11,044

Debt (3,665)

Other liabilities (net of conversion of

exchangeables)

(115)

Total liabilities and perpetual securities (4,084)

RNAV 6,961

No. of units (m) 2,812

RNAV / unit (SGD) 2.48

Ascendas REIT: PBV chart

Source: Bloomberg, HSBC

AREIT performance relative to FSSTI & FSTREI

Source: Source: Bloomberg, HSBC

0.9

1.0

1.1

1.2

1.3

1.4

1.5

Jan-10 Nov-10 Oct-11 Sep-12 Aug-13 Jun-14 May-15 Apr-16

AREIT PBV Average +1 stdev -1 stdev

Av g: 1.18

+1 sd: 1.27

-1 sd: 1.10

80

100

120

140

160

Jan-10 Nov-10 Oct-11 Sep-12 Aug-13 Jun-14 May-15 Apr-16

AREIT FSSTI FSTREI

Financials & valuation: Ascendas REIT Hold




the UK Referendum.

Disclosures & Disclaimer This report must be read with the disclosures and the analyst certifications in the Disclosure appendix, and with the Disclaimer, which forms part of it. MICA (P) 021/01/2016 MICA (P) 073/06/2015




HSBC hosted 1Q post-results conference call

Financial targets remain intact, management sees no rush to raise capital

Raise TP to PHP110.20 from PHP100.85; maintain Hold

We hosted BDO’s 1Q16 post-results conference call today with a group of investors.

Here are the key takeaways:

NIM outlook to be flat. The bank aims to maintain its margins at 3.1-3.2%, from

intense competition and excess liquidity pressures. In order to counter potential

aggressive competition from companies like Security Bank, BDO will grow faster in

the provincial areas to ease competitive pressures. The slight drop in NIM QoQ could

be attributed to the rise in deposits at the end of March, which was placed in the

lower-yielding Special Deposit Account (SDA). On the impact of the interest rate

corridor on liquidity, management has taken a neutral stance and has not seen any

material impact from it yet.

Asset quality remains benign. The bank has not seen any stress in its loan

portfolio, supported by healthy economic growth. Therefore, in the near term, its

sustainable credit cost range is likely to be 25-30bp. Given the potential higher

scrutiny on anti-money laundering and on the Middle East region, the bank continues

to see strong growth in its remittance business.

No rush to raise capital. Management believes there is no rush to raise capital at

the moment if the bank continues to grow its loan book in the low to mid-teens range.

However, should loan growth surge due to corporates’ pent-up demand pre-elections

or from infrastructure projects, the bank would then consider raising capital.

Maintain Hold rating, increase target price to PHP110.20 from PHP100.85. We

maintain our Hold rating, as we see a potential share price overhang on concerns

over the bank’s relatively lower capital. Its CET1 stands at 10.5% at the parent level

and 11.4% on a consolidated basis vs peers at 13% (excluding Security Bank). While

its CET1 is still above regulatory requirement of 9.3% (2017 with phased in DSIB),

the gap is quite narrow, in our view. Even though management reiterated its view that

there is no immediate need to raise capital, more often than not the bank has

surpassed its guidance. There is a chance that could happen again, especially as we

expect corporate loans to pick up post-elections. In addition, the stock looks fairly

valued at a PB of 1.7x for 2016e (above its historical mean of 1.6x) with an ROE of

12%. We have raised our TP to PHP110.20 (from PHP100.85) as we change our

GGM assumptions (see pg 3).

5 May 2016

HOLD

TARGET PRICE (PHP) PREVIOUS TARGET (PHP)

110.20 100.85 SHARE PRICE (PHP) UPSIDE/DOWNSIDE

100.30 +9.9% (as of 05 May 2016)

MARKET DATA Market cap (PHPm) 364,538 Free float 43%Market cap (USDm) 7,744 BBG BDO PM3m ADTV (USDm) 5.14 RIC BDO.PS

FINANCIALS AND RATIOS (PHP) Year to 12/2015a 12/2016e 12/2017e 12/2018eHSBC EPS 6.99 7.19 8.26 9.81HSBC EPS (prev) - - - -Change (%) - - - -Consensus EPS 6.75 7.45 8.59 9.76PE (x) 14.4 13.9 12.1 10.2Dividend yield (%) 2.1 2.1 2.4 2.8P/NAV 1.8 1.6 1.5 1.4ROE inc. gwill (%) 13.2 12.4 13.0 14.0

52-WEEK PRICE (PHP)


Xiushi Cai* Banks Analyst The Hongkong and Shanghai Banking Corporation Limited, Singapore Branch [email protected] +65 6658 0617


Banco De Oro Unibank (BDO PM)

EQUITIES COMMERCIAL BANKS

Philippines

90.00

105.00

120.00


Hold: No rush to raise capital

abc

EQUITIES COMMERCIAL BANKS

5 May 2016

2

Financials & valuation: BDO Year to 12/15a 12/16e 12/17e 12/18eP&L Summary (PHPmn) Interest income 72,127 80,500 91,340 105,269 Interest expense (15,166) (17,587) (20,592) (24,112)Net interest income 56,961 62,913 70,748 81,157 Net fees & commissions 16,453 18,263 20,454 23,318 Other income 15,486 16,862 18,570 20,518 Operating income 88,900 98,038 109,772 124,993 Operating expense (55,144) (60,573) (66,401) (73,317)Pre-prov op profit (PPOP) 33,756 37,466 43,371 51,676 Provision charges (3,000) (5,800) (7,000) (8,500)Non-op items 0 0 0 0 Profit before tax 30,756 31,666 36,371 43,176 Taxation (5,701) (5,870) (6,742) (8,003)Minorities + preferences (39) (40) (41) (43)Reported profit 25,016 25,756 29,588 35,130 Core profit 25,016 25,756 29,588 35,130 Balance sheet summary (PHPmn) Ordinary equity 198,990 217,226 238,219 263,323Customer loans (Net) 1,382,752 1,578,909 1,813,944 2,083,620Investment in securities 225,759 246,300 270,930 298,023Customer deposits 1,663,853 1,880,154 2,124,574 2,400,769Debt issued 10,030 10,532 11,058 11,611Interest earning assets 1,827,380 2,007,952 2,254,857 2,563,055Interest bearing liabilities 1,687,050 1,880,803 2,113,647 2,376,504Total assets 2,031,254 2,247,530 2,549,004 2,899,667Capital (%) RWA (PHPmn) 1,503,291 1,713,752 1,970,815 2,266,437Core equity Tier 1 11.4 11.0 10.6 10.3Tier 1 11.7 11.3 10.8 10.5CAR 13.3 12.8 12.1 11.7Per share data (PHP) EPS 6.99 7.19 8.26 9.81 Diluted EPS (HSBC) 6.99 7.19 8.26 9.81 DPS 2.10 2.10 2.40 2.80 NTA 55.74 60.83 66.70 73.71 BV 55.74 60.83 66.70 73.71 Ratios (%) PE (HSBC) 14.4 13.9 12.1 10.2Pre-provision multiple 10.6 9.6 8.3 7.0P/NTA 1.8 1.6 1.5 1.4P/BV 1.8 1.6 1.5 1.4Dividend yield (%) 2.1 2.1 2.4 2.8

Price relative

Source: HSBC

Hold Year to 12/15a 12/16e 12/17e 12/18eRatios (%) Gross yield 3.95 4.01 4.05 4.11Cost of funds 0.90 0.94 0.97 1.01Net interest margin 3.12 3.13 3.14 3.17Non-int inc/operating inc 35.9 35.8 35.6 35.1Customer loans (gross)/deposits 84.7 85.4 86.9 88.5Cost/operating income ratio 62.0 61.8 60.5 58.7Cost/average assets 2.8 2.8 2.8 2.7Net provision/ avg net loans 0.2 0.4 0.4 0.4Gross NPLs/loans 1.2 1.1 1.0 0.9Coverage 155.1 154.7 179.9 212.5Effective tax rate 18.5 18.5 18.5 18.5Core ROA 1.28 1.20 1.23 1.29Core ROE 13.2 12.4 13.0 14.0Growth (Y-o-Y, %) Earning assets 9.6 9.9 12.3 13.7Total assets 9.0 10.6 13.4 13.8Gross loans 13.7 14.0 15.0 15.0Deposits 11.5 13.0 13.0 13.0Net interest income 11.2 10.5 12.5 14.7Non-interest income 8.3 10.0 11.1 12.3Operating income 10.1 10.3 12.0 13.9Total cost 13.6 9.8 9.6 10.4Provision charges -41.3 93.3 20.7 21.4Pre-provision profit 4.9 11.0 15.8 19.1HSBC PBT 13.6 3.0 14.9 18.7HSBC net profit 9.7 3.0 14.9 18.7HSBS EPS 9.7 3.0 14.9 18.7DPS 0.0 0.0 14.3 16.7BVPS 11.1 9.1 9.6 10.5ROAA Decomposition Net Interest Income 2.92 2.94 2.95 2.98Non-Interest Income 1.64 1.64 1.63 1.61Operating Income 4.56 4.58 4.58 4.59Operating Expenses -2.83 -2.83 -2.77 -2.69PPOP 1.73 1.75 1.81 1.90Provisions -0.15 -0.27 -0.29 -0.31Non-op items 0.00 0.00 0.00 0.00Op Inc before Tax 1.58 1.48 1.52 1.58Taxation -0.29 -0.27 -0.28 -0.29Minorities 0.00 0.00 0.00 0.00Reported profit 1.28 1.20 1.23 1.29Leverage 10.3 10.3 10.5 10.9Reported ROE 13.2 12.4 13.0 14.0Source: Company data, HSBC estimates Priced at close of 5 May 2016

61.00

71.00

81.00

91.00

101.00

111.00

121.00

61.00

71.00

81.00

91.00

101.00

111.00

121.00

2014 2015 2016 2017Banco De Oro Unibank Rel to PHISIX







1Q earnings grew by 7% y-o-y but pharma division margin

under pressure

Pharma remains Kalbe’s most profitable business and the universal healthcare plan brings negative headwind

Raise TP to IDR1,400 from IDR1,250 on lower cost of equity and DCF rollover

1Q16 results demonstrate pharma division under pressure: Kalbe Farma posted

revenue growth of 7% y-o-y in 1Q16 mostly driven by its distribution business which

increased sales by 15% y-o-y. The top line growth was in-line with HSBC’s and

Thomson Reuters’ expectations. Gross margin declined by 130bps y-o-y to 48.2% as

Kalbe’s pharma division experienced a gross margin decline of 220bps y-o-y to

57.8%. As a result, gross profit only grew by 4% y-o-y. Thanks to strong opex control,

which increased at a slower pace than gross profit, EBIT managed to still grow by 7%

y-o-y, in line with HSBC’s and consensus forecasts. Earnings increased by a similar

pace of 7% y-o-y, in-line with estimates.

Pharma division margin continues to face headwinds: As we wrote in Rising regulatory risks, 2 February 2016, we believe that the universal healthcare program

will bring pricing pressure on branded generics manufacturers such as Kalbe Farma.

Indeed, the company cited increasing price competition from the universal healthcare

and product mix to be the main culprits behind its pharma margin deterioration. If we

observe Kalbe’s pharma product composition, the driver of the margin deterioration

becomes obvious. Compared to 1Q15, Kalbe’s branded generics contribution has

declined to 56.8% in 1Q16 from 58.8% in the same period last year while unbranded

generics contribution has increased to 14.9% in 1Q16 from 13.8% in 1Q15. This

simply means that unbranded generics are Kalbe’s fastest growing pharma category,

which is margin dilutive. While the nutritionals division continue to grow and gain

market share, we think it will be sometime before it can offset the margin

deterioration at the pharma division.

Maintain Hold and raise TP to IDR1,400 from IDR1,250: We leave our forecasts

broadly unchanged but we raise our DCF-based TP to IDR1,400 from IDR1,250 on

50bps lower cost of equity as calculated by HSBC Global Equity Strategy team for

Indonesia as well as DCF rollover to the present valuation date. Our estimates are in-

line with consensus and our new TP implies a target 2016e PE of 30x. We believe

Kalbe is currently trading close to its fair value, hence our Hold rating.

5 May 2016

MAINTAIN HOLD

TARGET PRICE (IDR) PREVIOUS TARGET (IDR)

1400.00 1250.00 SHARE PRICE (IDR) UPSIDE/DOWNSIDE

1345.00 +4.1% (as of 03 May 2016)

MARKET DATA Market cap (IDRb) 63,047 Free float 43%Market cap (USDm) 4,779 BBG KLBF IJ3m ADTV (USDm) 5.98 RIC KLBF.JK

FINANCIALS AND RATIOS (IDR) Year to 12/2015a 12/2016e 12/2017e 12/2018eHSBC EPS 42.47 46.07 52.35 58.64HSBC EPS (prev) 42.13 45.90 52.16 58.42Change (%) 0.8 0.4 0.4 0.4Consensus EPS 43.60 46.71 53.33 56.98PE (x) 31.7 29.2 25.7 22.9Dividend yield (%) 1.4 1.9 1.6 1.8EV/EBITDA (x) 20.1 18.9 16.5 14.7ROE (%) 20.1 19.7 20.2 20.1

52-WEEK PRICE (IDR)


Permada Darmono* Senior Consumer Analyst, ASEANThe Hongkong and Shanghai Banking Corporation Limited, Singapore Branch [email protected] +65 6658 0613

Selviana Aripin* Consumer Analyst, ASEAN The Hongkong and Shanghai Banking Corporation Limited, Singapore Branch [email protected] +65 6658 0610

Erwan Rambourg* Global Co-Head Consumer & Retail Research The Hongkong and Shanghai Banking Corporation Limited [email protected] +852 2996 6572


Kalbe Farma (KLBF IJ) EQUITIES PHARMACEUTICALS

Indonesia

1100.00

1550.00

2000.00


Hold: Pharma division continues to be under pressure

abc


5 May 2016

2

Financial statements Year to 12/2015a 12/2016e 12/2017e 12/2018eProfit & loss summary (IDRb) Revenue 17,888 19,677 22,038 24,683EBITDA 3,039 3,269 3,720 4,166Depreciation & amortisation -389 -426 -477 -534Operating profit/EBIT 2,650 2,843 3,243 3,632Net interest 58 48 42 47PBT 2,708 2,891 3,285 3,679HSBC PBT 2,708 2,891 3,285 3,679Taxation -663 -672 -764 -855Net profit 1,991 2,160 2,454 2,749HSBC net profit 1,991 2,160 2,454 2,749Cash flow summary (IDRb) Cash flow from operations 2,711 2,419 2,722 3,012Capex -904 -1,364 -636 -713Cash flow from investment -801 -1,034 -312 -378Dividends -870 -1,173 -1,038 -1,163Change in net debt -525 533 -217 -243FCF equity 1,544 753 1,784 1,998Balance sheet summary (IDRb) Intangible fixed assets 415 478 535 599Tangible fixed assets 4,533 5,897 6,533 7,246Current assets 8,748 8,613 9,627 10,762Cash & others 2,719 2,146 2,404 2,692Total assets 13,696 14,988 16,695 18,607Operating liabilities 2,320 2,699 2,951 3,232Gross debt 396 357 397 443Net debt -2,323 -1,790 -2,007 -2,249Shareholders' funds 10,465 11,452 12,867 14,453Invested capital 8,658 10,142 11,341 12,683

Ratio, growth and per share analysis Year to 12/2015a 12/2016e 12/2017e 12/2018eY-o-y % change Revenue 3.0 10.0 12.0 12.0EBITDA -0.7 7.6 13.8 12.0Operating profit -3.8 7.3 14.1 12.0PBT -2.1 6.8 13.6 12.0HSBC EPS -3.6 8.5 13.6 12.0Ratios (%) Revenue/IC (x) 2.2 2.1 2.1 2.1ROIC 24.4 23.5 23.5 23.5ROE 20.1 19.7 20.2 20.1ROA 15.8 15.7 16.1 16.2EBITDA margin 17.0 16.6 16.9 16.9Operating profit margin 14.8 14.4 14.7 14.7EBITDA/net interest (x) Net debt/equity -21.2 -15.0 -15.0 -15.1Net debt/EBITDA (x) -0.8 -0.5 -0.5 -0.5CF from operations/net debt Per share data (IDR) EPS Rep (diluted) 42.47 46.07 52.35 58.64HSBC EPS (diluted) 42.47 46.07 52.35 58.64DPS 18.55 25.02 22.15 24.82Book value 223.25 244.30 274.50 308.32

Key forecast drivers (Revenue, IDRb) Year to 12/2015a 12/2016e 12/2017e 12/2018ePrescription pharmaceuticals 4,293 4,624 5,179 5,800Consumer Health 3,066 3,443 3,857 4,319Nutritionals 5,114 5,903 6,832 7,652Distribution and logistics 5,415 5,706 6,171 6,911Total 17,888 19,677 22,038 24,683



Issuer information Share price (IDR) 1345.00 Free float 43%Target price (IDR) 1400.00 Sector PharmaceuticalsReuters (Equity) KLBF.JK Country IndonesiaBloomberg (Equity) KLBF IJ Analyst Permada DarmonoMarket cap (USDm) 4,779 Contact +65 66580613

Price relative


1000.00

1200.00

1400.00

1600.00

1800.00

2000.00

1000.00

1200.00

1400.00

1600.00

1800.00

2000.00

Jan-14 Jul-14 Jan-15 Jul-15 Jan-16Kalbe Farma Rel to JAKARTA S E COMPOSITE

Financials & valuation: Kalbe Farma Hold






Muted top-line growth in 1Q16; weak volume

Q-o-Q volume and ASP decline in 1Q16 versus 4Q15

Maintain Reduce; increase TP to IDR78,800 (from IDR77,000)

Muted top-line growth in 1Q16

1Q16 revenue of IDR21.9T grew by 2% Y-o-Y versus 1Q15. 1Q16 revenue makes up

22% of HSBC estimates and consensus estimates. The muted revenue growth was

driven by a decline in volume. Industry volume declined by 6% Y-o-Y due to the soft

economy and 2016 excise tax increase. HM Sampoerna’s volume declined by 9% Y-o-Y

in 1Q16. Sampoerna expects a 1-2% Y-o-Y decline in industry volume in 2016. 1Q16

EBIT was flat versus 1Q15. 1Q16 net income grew by 8% versus 1Q15 as a result of a

significant growth in finance income. The growth in the economy-priced segment (so

called “plus 4 cigarettes”) from 5.1% in 1Q15 to 8.1% in 4Q15 and 9.4% in 1Q16

presents a significant challenge to the competitive nature of the industry.

Q-o-Q volume and ASP (ex-tax) declined in 1Q16 vs 4Q15

At first glance, Sampoerna’s top-line growth of 2% Y-o-Y in 1Q16 versus 1Q15 appears

to be encouraging. However, top-line declined by 7% Q-o-Q in 1Q16. Adjusted net

revenue (defined as revenue less excise tax and VAT) grew by 3.0% Y-o-Y in 1Q16

versus 1Q15 but declined by 11.1% Q-o-Q versus 4Q15. Furthermore, we estimate that

ASP, excluding excise tax and VAT, increased by 13.6% Y-o-Y in 1Q16 versus 1Q15

but declined by 1.2% Q-o-Q in 1Q16 versus 4Q15. We remain negative on HM

Sampoerna.

Maintain Reduce rating; increase TP to IDR78,800 (from IDR77,000)

We lower our 2016 assumption for industry volume growth to 0.3%, down from our

previous assumption of 1.8% growth. Given the 5.9% Y-o-Y decline in industry volume

in 1Q16, our assumption for an industry volume growth of 0.3% implies 2.5% Q-o-Q

growth in volume in each of the next three quarters. We also refined our assumptions

for excise tax increase and ASP increase going forward. Our new DDM-derived target

price of IDR78,800 implies 31.9x 2016eP/E and 21.8x 2016e EV/ EBITDA. Upside

risks include a rebound in the Indonesian economy which may bode well for the

consumption of cigarettes, loosening of regulatory constraints on the advertising and

marketing of tobacco products, a change in government policy to one that is supportive

of tobacco production volume, consolidation/ merger among the players in the industry,

positive sentiments towards Indonesia may result in money inflow into HM Sampoerna

stock. In addition, shareholders approved a stock split on 27 April, which should boost

liquidity and may positively impact the stock price.

FLASHNOTE

6 May 2016

MAINTAIN REDUCE

TARGET PRICE (IDR) PREVIOUS TARGET (IDR)

78800.00 77000.00 SHARE PRICE (IDR) UPSIDE/DOWNSIDE

99975.00 -21.2% (as of 04 May 2016)

MARKET DATA Market cap (IDRb) 465,156 Free float 8%Market cap (USDm) 35,118 BBG HMSP IJ3m ADTV (USDm) 5.48 RIC HMSP.JK

FINANCIALS AND RATIOS (IDR) Year to 12/2015a 12/2016e 12/2017e 12/2018eHSBC EPS 2227.36 2497.74 2661.23 2916.62HSBC EPS (prev) - 2460.91 2706.36 3017.43Change (%) - 1.5 -1.7 -3.3Consensus EPS 2333.90 2536.86 2804.67 3068.53PE (x) 44.9 40.0 37.6 34.3Dividend yield (%) 2.6 2.8 2.8 2.9EV/EBITDA (x) 31.6 28.4 26.1 23.5ROE (%) 45.5 33.0 28.5 24.8

52-WEEK PRICE (IDR)


Selviana Aripin*, CFA Analyst, ASEAN The Hongkong and Shanghai Banking Corporation Limited, Singapore Branch [email protected] +65 6658 0610

Permada Darmono* Senior Consumer Analyst, ASEANThe Hongkong and Shanghai Banking Corporation Limited, Singapore Branch [email protected] +65 6658 0613

Erwan Rambourg* Global Co-Head of Consumer & Retail ResearchThe Hongkong and Shanghai Banking Corporation [email protected] +852 2996 6572


Hanjaya Mandala Sampoerna (HMSP IJ)

EQUITIES TOBACCO

Indonesia

64000.00

92000.00

120000.00


Reduce: Muted

abc

EQUITIES TOBACCO

6 May 2016

2

Financial statements Year to 12/2015a 12/2016e 12/2017e 12/2018eProfit & loss summary (IDRb) Revenue 89,069 101,859 116,190 132,592EBITDA 14,724 16,220 17,502 19,111Depreciation & amortisation -676 -773 -881 -1,006Operating profit/EBIT 14,048 15,448 16,621 18,105Net interest -69 249 129 280PBT 13,933 15,624 16,647 18,244HSBC PBT 13,933 15,624 16,647 18,244Taxation -3,569 -4,003 -4,265 -4,674Net profit 10,363 11,621 12,382 13,570HSBC net profit 10,363 11,621 12,382 13,570Cash flow summary (IDRb) Cash flow from operations 4,551 11,199 9,611 10,467Capex -1,023 -1,594 -1,786 -2,044Cash flow from investment -915 -1,594 -1,786 -2,044Dividends -12,250 -13,016 -13,125 -13,570Change in net debt -4,181 -4,212 -5,198 -7,232FCF equity 3,783 9,049 7,887 8,493Balance sheet summary (IDRb) Intangible fixed assets 60 60 60 60Tangible fixed assets 7,845 8,788 9,828 11,022Current assets 28,615 36,023 45,961 58,554Cash & others 1,719 6,222 11,768 19,391Total assets 36,661 45,032 56,036 69,859Operating liabilities 4,581 5,027 5,774 6,617Gross debt 2,041 2,333 2,680 3,072Net debt 323 -3,889 -9,087 -16,319Shareholders' funds 32,016 38,392 48,410 61,118Invested capital 30,221 33,622 38,308 43,628

Ratio, growth and per share analysis Year to 12/2015a 12/2016e 12/2017e 12/2018eY-o-y % change Revenue 10.4 14.4 14.1 14.1EBITDA 2.4 10.2 7.9 9.2Operating profit 1.8 10.0 7.6 8.9PBT 1.6 12.1 6.5 9.6HSBC EPS -4.1 12.1 6.5 9.6Ratios (%) Revenue/IC (x) 3.7 3.2 3.2 3.2ROIC 43.8 36.0 34.4 32.9ROE 45.5 33.0 28.5 24.8ROA 32.2 28.5 24.5 21.6EBITDA margin 16.5 15.9 15.1 14.4Operating profit margin 15.8 15.2 14.3 13.7EBITDA/net interest (x) 212.0Net debt/equity 1.0 -10.1 -18.8 -26.7Net debt/EBITDA (x) 0.0 -0.2 -0.5 -0.9CF from operations/net debt 1411.1Per share data (IDR) EPS Rep (diluted) 2227.36 2497.74 2661.23 2916.62HSBC EPS (diluted) 2227.36 2497.74 2661.23 2916.62DPS 2613.89 2797.47 2820.90 2916.62Book value 6881.14 8251.41 10404.59 13135.93

Key forecast drivers Year to 12/2015a 12/2016e 12/2017e 12/2018eHMSP volume growth - SKT (%) -8 -2 -2 -2HMSP volume growth - SKM FF (% 41 13 15 4HMSP volume growth - SKM LTN ( 1 2 3 7HMSP Volume growth - SPM (%) 0 -1 1 1



Issuer information Share price (IDR) 99975.00 Free float 8%Target price (IDR) 78800.00 Sector TobaccoReuters (Equity) HMSP.JK Country IndonesiaBloomberg (Equity) HMSP IJ Analyst Selviana AripinMarket cap (USDm) 35,118 Contact +65 6658 0610

Price relative


43000.00

53000.00

63000.00

73000.00

83000.00

93000.00

103000.00

113000.00

43000.00

53000.00

63000.00

73000.00

83000.00

93000.00

103000.00

113000.00

Jan-14 Jul-14 Jan-15 Jul-15 Jan-16Hanjaya Mandala Sampoerna Rel to JAKARTA S E COMPOSITE

Financials & valuation: Hanjaya Mandala Sampoerna Reduce



Issuer of report: HSBC Securities and Capital Markets (India) Private Limited



Q4 revenue growth of c21% was better than expected, while

Kesh King revenue was lower sequentially

Emami aims to focus on volume led revenue growth and increase A&P spends significantly in FY17

Constraints on margin expansion near term, but revenue growth momentum a key catalyst. TP to INR1,330 from INR1,400

Q4 results were slightly better than expected: Consolidated revenue/EBITDA grew

by c21% and c30% y-o-y respectively which was slightly better than Bloomberg

consensus expectations. Volume growth of c18% y-o-y was aided by Kesh King

(Emami’s new acquisition), and ex-Kesh King organic volume growth was c6% y-o-y.

Kesh King contributed to 9% of group revenue in Q4. In Emami’s core portfolio,

1) Navratna Cooling oil grew by 4% y-o-y as an extended winter impacted the

performance adversely; 2) Balms grew by 12% y-o-y as it maintained its leadership

3) Fair and handsome growth was flat, 4) Boroplus (winter cream) growth at 41% y-o-y

was impressive as buttressed by the extended winter. Zandu Healthcare portfolio, led

by Pancharishta, grew by 30% y-o-y. International business grew by 17% y-o-y in Q4

as aided by strong performance in Bangladesh and MENA region.

Key points from the conference call: 1) Emami targets an organic revenue growth

of c15% y-o-y in FY17 (led by volume growth of c12%). Including Kesh King overall

revenue growth is likely to be c18% y-o-y and the company aims to generate INR3bn

revenue from Kesh King in FY17. 2) Emami will augment the growth through new

product extensions and launches and aims to increase investments in A&P spends

by 100-150bp, which will constrain margin expansion in FY17 even as gross margin

can still expand by c50bp. 3) It expects international revenue to grow c20% y-o-y and

healthcare portfolio to sustain the revenue growth of 25-30% y-o-y. 4) Summer has

started well, which should benefit the summer portfolio and it hopes for the rural

demand to pick up if the monsoon season is normal. Overall as the summer season

has begun, initial demand trends are encouraging. 5) It will continue to focus on

Zandu Pancharishta as the core growth driver for healthcare and aims to launch

Diabetic product nationally in 2-3 quarters if the trial results are good. 6) It aims to

pay down all the debt by FY18, which is at a borrowing cost of 8.3%.

We retain Buy but lower our TP to INR1,330 (from INR1,400): The current price in

our view builds in very modest long term annualised earnings growth expectations of

c11%. We think maximising revenue is the sensible strategy and growth in Kesh King

will continue to remain a key catalyst for stock performance given the scepticism that

Patanjali has emerged as an active and formidable competition in this segment. We

have lowered our margin assumptions given the company’s guidance and hence

lower our TP to INR1,330 (from INR1,400).

5 May 2016

MAINTAIN BUY

TARGET PRICE (INR) PREVIOUS TARGET (INR)

1330.00 1400.00 SHARE PRICE (INR) UPSIDE/DOWNSIDE

978.20 +36.0% (as of 05 May 2016)

MARKET DATA Market cap (INRm) 222,020 Free float 27%Market cap (USDm) 3,336 BBG HMN IN3m ADTV (USDm) 2.49 RIC EMAM.BO

FINANCIALS AND RATIOS (INR) Year to 03/2016a 03/2017e 03/2018e 03/2019eHSBC EPS 15.82 18.55 25.63 32.67HSBC EPS (prev) 16.01 20.07 27.89 35.59Change (%) -1.2 -7.6 -8.1 -8.2Consensus EPS 22.25 27.51 33.99 -PE (x) 61.8 52.7 38.2 29.9Dividend yield (%) 0.7 0.8 1.0 1.4EV/EBITDA (x) 33.3 27.3 21.9 18.3ROE (%) 27.3 28.0 33.0 35.2

52-WEEK PRICE (INR)


Amit Sachdeva* Consumer and Retail Analyst HSBC Securities and Capital Markets (India) Private Limited [email protected] +9122 2268 1240

Kuldeep Gangwar*, CFA Analyst, Consumer & Retail HSBC Securities and Capital Markets (India) Private Limited [email protected] +9122 3396 0686

Erwan Rambourg* Global Co-Head of Consumer and RetailThe Hongkong and Shanghai Banking Corporation [email protected] +852 2996 6572


Emami Ltd (HMN IN) EQUITIES HOUSEHOLD PRODUCTS

India

820.00

1110.00

1400.00


Buy: Q4 better than expected, revenue focus in FY17

abc

EQUITIES HOUSEHOLD PRODUCTS

5 May 2016

2

Financial statements Year to 03/2016a 03/2017e 03/2018e 03/2019eProfit & loss summary (INRm) Revenue 26,238 31,040 36,218 42,174EBITDA 6,838 8,192 9,969 11,652Depreciation & amortisation -2,550 -2,869 -2,911 -2,947Operating profit/EBIT 4,287 5,323 7,057 8,705Net interest -540 -450 -250 -141PBT 4,171 5,262 7,271 9,267HSBC PBT 4,171 5,262 7,271 9,267Taxation -585 -1,052 -1,454 -1,853Net profit 3,591 4,210 5,817 7,414HSBC net profit 3,591 4,210 5,817 7,414Cash flow summary (INRm) Cash flow from operations 5,444 7,042 8,212 9,589Capex -1,386 -1,552 -1,449 -1,476Cash flow from investment -17,358 -1,162 -985 -772Dividends -1,890 -1,998 -2,376 -3,074Change in net debt 8,977 -3,882 -4,851 -5,742FCF equity 3,979 5,393 6,660 7,993Balance sheet summary (INRm) Intangible fixed assets 14,283 11,783 9,283 6,783Tangible fixed assets 6,137 7,320 8,357 9,386Current assets 4,920 5,836 9,311 15,796Cash & others 1,084 1,966 4,816 10,558Total assets 26,646 26,244 28,256 33,270Operating liabilities 4,615 5,029 5,655 6,422Gross debt 6,714 3,714 1,714 1,714Net debt 5,630 1,749 -3,102 -8,844Shareholders' funds 14,031 16,081 19,197 22,975

Ratio, growth and per share analysis Year to 03/2016a 03/2017e 03/2018e 03/2019eY-o-y % change Revenue 18.3 18.3 16.7 16.4EBITDA 26.6 19.8 21.7 16.9Operating profit -15.2 24.1 32.6 23.3PBT -29.6 26.2 38.2 27.5HSBC EPS -26.8 17.2 38.2 27.5Ratios (%) ROE 27.3 28.0 33.0 35.2ROA 18.7 17.3 22.1 24.5EBITDA margin 26.1 26.4 27.5 27.6Operating profit margin 16.3 17.1 19.5 20.6EBITDA/net interest (x) 12.7 18.2 39.9 82.4Net debt/equity 40.0 10.8 -16.1 -38.4Net debt/EBITDA (x) 0.8 0.2 -0.3 -0.8Per share data (INR) EPS Rep (diluted) 15.82 18.55 25.63 32.67HSBC EPS (diluted) 15.82 18.55 25.63 32.67DPS 7.00 8.00 10.00 13.46Book value 61.83 70.87 84.60 101.25

Valuation data Year to 03/2016a 03/2017e 03/2018e 03/2019eEV/sales 8.7 7.2 6.0 5.1EV/EBITDA 33.3 27.3 21.9 18.3PE* 61.8 52.7 38.2 29.9PB 15.8 13.8 11.6 9.7FCF yield (%) 1.8 2.4 3.0 3.6Dividend yield (%) 0.7 0.8 1.0 1.4


Issuer information Share price (INR) 978.20 Free float 27%Target price (INR) 1330.00 Sector Household ProductsReuters (Equity) EMAM.BO Country IndiaBloomberg (Equity) HMN IN Analyst Amit SachdevaMarket cap (USDm) 3,336 Contact +9122 2268 1240

Price relative


250.00

450.00

650.00

850.00

1050.00

1250.00

1450.00

250.00

450.00

650.00

850.00

1050.00

1250.00

1450.00

2014 2015 2016 2017Emami Ltd Rel to BOMBAY SE SENSITIVE INDEX

Financials & valuation: Emami Ltd Buy








1Q 16 results helped by lower raw material cost and sharp 9%

increase in sales volume against industry growth of 7%

We believe that margin expansion is already priced in; we

expect volume growth to moderate after Q2CY16

Raise TP to INR427 from INR415 as we roll forward valuation

by a quarter; retain Hold rating

1Q 2016 results gain from higher volume: Castrol reported net profit of INR1.7bn

(up 18% y-o-y and 22% q-o-q), ahead of consensus. Gross margin for the quarter

expanded to 54.2% (up 450bp y-o-y) on lower raw material costs. EBITDA at

INR2.5bn grew 34% y-o-y and 20% q-o-q. We estimate gross margins to average

55% in 2016 and taper to 54% in 2018, in line with HSBC’s house forecast for Brent

at USD45/60/75 for CY2016/17/18. Castrol’s volume grew by 9% y-o-y, higher than

the industry growth rate of 7%, as we believe the company is now aggressively

chasing industrial volumes. We believe the 7% industry rate is not sustainable and

therefore expect the growth rate to moderate going forward.

Price setter versus price taker: Historically, during periods of stable base oil prices,

Castrol was a price setter due to strength of its brand, and competitors followed its

lead. With the fall in crude oil and hence base oil price, Castrol’s competitors in the

auto lube space have enjoyed greater flexibility to price products aggressively and

capture market share. Castrol’s strategy is now dependent on competitors’ pricing to

ensure its premium does not exceed 35-40%. However, new product launch and an

uptick in oil price are helping Castrol regain a part of its pricing power.

Margins should improve, but are priced in: We expect margins to improve by

INR3-4/litre for Castrol in CY16e driven by low raw material costs. We expect margin

to peak in Q2CY16 as we believe the company’s raw material cost responds to

international prices with a lag of 5-6 months, and we believe the international price of

base oil bottomed out in Q4CY15. We expect company margins to narrow

moderately post Q2CY16. In our view, these robust gross margins have been

adequately factored into the current share price.

Retain Hold, increase TP to INR427 from INR415: We increased our TP as we roll

forward valuation by one quarter. We continue to value Castrol on a PE of 30x using

the next 4 quarter earnings (9MCY16 and 1QCY17). Our assigned PE multiple of 30x

is in line with historical valuations when earnings growth expectations for Castrol

were higher than 10%. Our TP implies upside of 10%; we have a Hold rating as we

believe the expectation of margin improvement is already factored into the share

price. We introduce estimates for CY2018 in this note. Key upside/downside risks

include lower/higher base oil prices than expected, higher/lower volume growth, and

higher/lower margin expansion than expected.

FLASHNOTE

5 May 2016

MAINTAIN HOLD


427.00 415.00

SHARE PRICE (INR) UPSIDE/DOWNSIDE

387.95 +10.1% (as of 04 May 2016)

MARKET DATA Market cap (INRm) 191,865 Free float 29%

Market cap (USDm) 2,883 BBG CSTRL IN

3m ADTV (USDm) 2.13 RIC CAST.BO

FINANCIALS AND RATIOS (INR) Year to 12/2015a 12/2016e 12/2017e 12/2018e

HSBC EPS 12.44 14.30 14.66 15.19

HSBC EPS (prev) - 13.82 14.51 -

Change (%) - 3.5 1.0 -

Consensus EPS 12.97 13.64 14.48 15.30

PE (x) 31.2 27.1 26.5 25.5

Dividend yield (%) 2.3 2.6 3.0 3.1

EV/EBITDA (x) 20.7 17.8 17.3 16.6

ROE (%) 114.7 110.6 99.7 97.0

52-WEEK PRICE (INR)


Kumar Manish* Analyst HSBC Securities and Capital Markets (India) Private Limited

[email protected]

+9122 2268 1238

Vivek Priyadarshi* Analyst HSBC Securities and Capital Markets (India) Private Limited

[email protected]

+9122 3396 0694


Castrol India Ltd (CSTRL IN) EQUITIES OIL & GAS

India

340.00

435.00

530.00



Hold: Margin expansion priced in

EQUITIES OIL & GAS

5 May 2016

2


Year to 12/2015a 12/2016e 12/2017e 12/2018e

Profit & loss summary (INRm)

Revenue 32,980 33,570 34,637 36,159

EBITDA 8,948 10,368 10,616 11,012



Net interest 951 766 833 885

PBT 9,509 10,718 10,983 11,381

HSBC PBT 9,509 10,718 10,983 11,381

Taxation -3,357 -3,644 -3,734 -3,870

Net profit 6,152 7,074 7,249 7,512

HSBC net profit 6,152 7,074 7,249 7,512

Cash flow summary (INRm)


Capex -379 -500 -500 -500

Cash flow from investment 23 266 333 385

Dividends -5,364 -5,794 -6,785 -7,031

Change in net debt -2,651 -612 -471 -552

FCF equity 7,291 6,405 7,256 7,583

Balance sheet summary (INRm)



Current assets 14,265 15,444 16,105 16,929

Cash & others 6,965 7,577 8,048 8,600

Total assets 16,616 17,879 18,574 19,381


Gross debt 0 0 0 0

Net debt -6,965 -7,577 -8,048 -8,600




Year to 12/2015a 12/2016e 12/2017e 12/2018e

Y-o-y % change

Revenue -2.8 1.8 3.2 4.4

EBITDA 24.9 15.9 2.4 3.7


PBT 30.9 12.7 2.5 3.6

HSBC EPS 29.7 15.0 2.5 3.6

Ratios (%)

Revenue/IC (x) 12.8 14.1 12.8 13.5

ROIC 214.9 275.5 246.7 258.9

ROE 114.7 110.6 99.7 97.0

ROA 39.1 41.0 39.8 39.6

EBITDA margin 27.1 30.9 30.6 30.5



Net debt/equity -121.0 -107.7 -107.3 -107.8

Net debt/EBITDA (x) -0.8 -0.7 -0.8 -0.8


Per share data (INR)

EPS Rep (diluted) 12.44 14.30 14.66 15.19

HSBC EPS (diluted) 12.44 14.30 14.66 15.19

DPS 9.00 10.01 11.73 12.15

Book value 11.64 14.23 15.17 16.14

Valuation data

Year to 12/2015a 12/2016e 12/2017e 12/2018e

EV/sales 5.6 5.5 5.3 5.1

EV/EBITDA 20.7 17.8 17.3 16.6

EV/IC 90.2 67.8 67.8 69.4

PE* 31.2 27.1 26.5 25.5

PB 33.3 27.3 25.6 24.0

FCF yield (%) 3.8 3.3 3.8 4.0

Dividend yield (%) 2.3 2.6 3.0 3.1


Issuer information

Share price (INR) 387.95 Free float 29%

Target price (INR) 427.00 Sector Oil & Gas

Reuters (Equity) CAST.BO Country India

Bloomberg (Equity) CSTRL IN Analyst Kumar Manish


Price relative


210.00

260.00

310.00

360.00

410.00

460.00

510.00

560.00

210.00

260.00

310.00

360.00

410.00

460.00

510.00

560.00

2014 2015 2016 2017

Castrol India Ltd Rel to BOMBAY SE SENSITIVE INDEX

Financials & valuation: Castrol India Ltd Hold




the UK Referendum.







SUNP has reported positive results from two Phase III trials

for its investigational IL-23 inhibitor, MK-3222 (Tildrakizumab)

Success in Phase III trials positive for Sun Pharma, though

data details will decide its positioning in a crowded market

Base case assumption implies USD500m peak US sales for

MK-3222; lower TP to INR760 (from INR805)

Positive results from MK-3222 phase III trials: Sun Pharma reported positive results

for its investigational IL-23 inhibitor drug, MK-3222 (tildrakizumab) from two pivotal

Phase III trials in patients with moderate-to-severe plaque psoriasis. This update is

crucial as MK-3222 is the first sole IL-23 (interleukin-23) inhibitor to demonstrate

positive results in Phase III trials for plaque psoriasis. Sun has met co-primary efficacy

endpoints and also achieved positive results in a comparative study against Enbrel

(etanercept). The company is preparing for regulatory filings with the FDA and will

release detailed findings later.

Battle of winners in a crowded market: Currently biologics are used by c15% of eligible

psoriasis patients, which could go up as efficacy and safety profile of these agents are

further established. Scientific literature and clinical studies have shown that IL agents

have a strong potential to improve PASI/PGA outcomes and overall improving QoL

(quality of life) among psoriasis patients. However, with three approved IL drugs (JNJ’s

Stelara, Novartis’s Cosentyx & Eli Lilly’s Taltz) and four or five more in development,

essentially it comes down to picking the top few. We think detailed data from MK-3222

Phase III studies will be crucial to understanding the positioning of the asset against

comparable treatments.

Scenarios and forecast changes: While there are no head-to-head trials, in this report

we analyse and compare Tildrakizumab and other treatments in the peer group. We have

performed a scenario analysis to forecast potential sales from MK-3222, building in

different assumptions for market share gain and pricing (page 6). Our base case

assumption implies USD500m peak US sales for MK-3222; our peak sales forecasts for

the bull and bear cases are USD1bn and USD230m, respectively. Organic growth has

been weak at the company as new approvals have been few and new filings have

slowed. Our FY17/18e earnings decline by 2.2%/7.6%, respectively, to reflect

adjustments to our model for US sales; we are c3% and 5% below consensus on FY17e

and FY18e EPS. Our revised TP of INR760 (from INR805) is the discounted value of the

one-year forward value, derived using 21x (Gordon growth PE, unchanged, Ke and g cut

to 8.3% and 4% respectively), FY18e EPS of INR37.0 and adding an unchanged NPV

value INR22 for gGleevec and a NPV value of INR20 for MK-3222. Our new TP implies

5.5% downside and we maintain our Hold rating. (Please refer page 4 for details.)

5 May 2016

MAINTAIN HOLD


760.00 805.00

SHARE PRICE (INR) UPSIDE/DOWNSIDE

804.20 -5.5% (as of 04 May 2016)

MARKET DATA Market cap (INRm) 1,935,443 Free float 45%

Market cap (USDm) 29,084 BBG SUNP IN

3m ADTV (USDm) 43.6 RIC SUN.BO

FINANCIALS AND RATIOS (INR) Year to 03/2015a 03/2016e 03/2017e 03/2018e

HSBC EPS 19.30 23.54 31.82 37.01

HSBC EPS (prev) - 23.25 32.54 40.06

Change (%) - 1.2 -2.2 -7.6

Consensus EPS 29.46 22.08 32.81 38.98


EV/EBITDA (x) 24.2 19.9 15.7 13.7

ROE (%) 21.1 20.4 23.1 22.1

52-WEEK PRICE (INR)


Girish Bakhru*, CFA Analyst, South East Asia Healthcare HSBC Securities and Capital Markets (India) Private Limited [email protected]

+9122 22681638

Damayanti Kerai* Analyst, Healthcare & Hospitals HSBC Securities and Capital Markets (India) Private Limited [email protected]

+9122 3396 0692


Sun Pharma (SUNP IN) EQUITIES PHARMACEUTICALS

India

660.00

880.00

1100.00



Hold: MK-3222 – positive phase III but is that enough?


5 May 2016

2



Year to 03/2015a 03/2016e 03/2017e 03/2018e

Profit & loss summary (INRm)

Revenue 274,334 290,134 331,751 363,006

EBITDA 78,667 92,791 116,890 128,196



Net interest -3,222 -4,938 -5,317 -6,077

PBT 64,029 80,481 112,620 123,260

HSBC PBT 64,029 80,481 112,620 123,260

Taxation -9,147 -14,490 -19,145 -20,954

Net profit 45,394 53,320 78,303 89,334

HSBC net profit 46,588 56,815 76,798 89,334

Cash flow summary (INRm)


Capex -82,570 -15,000 -20,000 -20,000


Dividends -8,689 -10,050 -12,059 -14,471

Change in net debt 16,973 -67,942 -28,709 -91,008

FCF equity -34,647 75,152 28,623 91,348

Balance sheet summary (INRm)



Current assets 324,567 376,633 450,686 536,230

Cash & others 137,143 205,085 233,795 324,802

Total assets 471,777 528,631 611,587 704,140


Gross debt 75,963 75,963 75,963 75,963

Net debt -61,180 -129,122 -157,831 -248,839




Year to 03/2015a 03/2016e 03/2017e 03/2018e

Y-o-y % change

Revenue 70.6 5.8 14.3 9.4

EBITDA 12.4 18.0 26.0 9.7


PBT 39.8 25.7 39.9 9.4

HSBC EPS -29.1 22.0 35.2 16.3

Ratios (%)

Revenue/IC (x) 1.7 1.4 1.5 1.5

ROIC 36.6 34.7 40.6 39.8

ROE 21.1 20.4 23.1 22.1

ROA 13.4 11.5 14.5 16.3

EBITDA margin 28.7 32.0 35.2 35.3



Net debt/equity -21.5 -37.9 -37.4 -48.8

Net debt/EBITDA (x) -0.8 -1.4 -1.4 -1.9


Per share data (INR)


HSBC EPS (diluted) 19.30 23.54 31.82 37.01

DPS 3.60 4.16 5.00 6.00

Book value 106.23 124.16 151.60 182.62

Valuation data

Year to 03/2015a 03/2016e 03/2017e 03/2018e

EV/sales 6.9 6.4 5.5 4.8

EV/EBITDA 24.2 19.9 15.7 13.7

EV/IC 9.2 9.5 7.4 7.2

PE* 41.7 34.2 25.3 21.7

PB 7.6 6.5 5.3 4.4

FCF yield (%) -1.8 3.8 1.4 4.6

Dividend yield (%) 0.4 0.5 0.6 0.7


Price relative


410.00

510.00

610.00

710.00

810.00

910.00

1010.00

1110.00

1210.00

410.00

510.00

610.00

710.00

810.00

910.00

1010.00

1110.00

1210.00

2014 2015 2016 2017

Sun Pharma Rel to BOMBAY SE SENSITIVE INDEX




the UK Referendum.


6 May 2016

Research So Far This Week

Ticker Company Rating was Currency Target was EPS '15e EPS '16e Price Price At Close

New 002415 CH Hangzhou Hikvision Digital Buy RMB 40.10 - 1.44(a) 1.66 30.35 28 Apr

Up 004370 KS Nongshim Hold Reduce KRW 380000.00 350000.00 19290.59(a) 22547.26 373,500 29 Apr 090430 KS Amorepacific Buy KRW 540000.00 520000.00 8224.08(a) 11996.68 407500.00 29 Apr 2884 TT E.SUN FHC Buy TWD 22.40 22.10 1.6(a) 1.7 17.70 03 May 012450 KS Hanwha Techwin Buy KRW 55000.00 49000.00 107.99(a) 5732.83 43500.00 02 May 069960 KS Hyundai Dep S Buy KRW 200000.00 190000.00 10294.09(a) 12828.65 147,500 29 Apr

IFAR SP Indofood Agri Buy SGD 0.68 0.54 IDR 259.3(a) IDR 290.2 0.54 02 May

INDF IJ Indofood Sukses Makmur Buy IDR 9700.00 9200.00 348.00(a) 446.29 7025.00 02 May 023530 KS Lotte Shopping Buy KRW 340000.00 300000.00 -12164.39(a) 18598.04 272,000 29 Apr MPI PM Metro Pacific Inv Buy PHP 7.50 7.00 0.37(a) 0.38 5.71 03 May 600690 CH Qingdao Haier Co Ltd Buy CNY 11.10 10.10 0.60(a) 0.64 8.00 28 Apr UPLL IN UPL Limited Buy INR 600.00 565.00 26.69(a) 30.30 516.95 28 Apr VEDL IN Vedanta Limited Buy INR 120.00 100.00 10.6(a) 9.1 104.85 27 Apr 000858 CH Wuliangye Yibin Buy CNY 38.00 36.00 1.63(a) 2.04 27.71 27 Apr YES IN Yes Bank Buy INR 1,134.00 1,041.00 51.53(a) 60.78 944.95 28 Apr CAIR IN Cairn India Limited Hold INR 146.00 134.00 23.85(a) -50.21 151.65 25 Apr 600036 CH China Merchants Bank-A Hold CNY 16.30 15.30 2.29(a) 2.37 17.88 27 Apr 3968 HK China Merchants Bank-H Hold HKD 18.40 17.30 CNY 2.29(a) CNY 2.37 16.70 27 Apr 2891 TT CTBC Financial Holding Hold TWD 16.80 16.10 2.10(a) 1.62 16.40 02 May DABUR IN Dabur India Hold INR 270.00 260.00 - 7.09(a) 269.65 28 Apr IDEA IN Idea Cellular Ltd Hold INR 125.00 118.00 8.88 8.56 118.30 29 Apr ICBP IJ Indofood CBP Hold IDR 17,000 16,650 514.62(a) 569.62 15,275 29 Apr 033780 KS KT&G Hold KRW 120,000 100,000 7273.26(a) 7479.43 123,000 28 Apr 5347 TT Vanguard Int'l Semicon Hold TWD 52.00 51.00 2.51(a) 3.40 49.05 03 May WPRTS MK Westports Holdings Berhad Hold MYR 4.60 4.40 0.15(a) 0.19 4.20 28 Apr

INTP IJ Indocement Reduce IDR 15,900.00 15,300.00 1,176(a) 1,114 19,050.00 02 May

66 HK MTR Corporation Reduce HKD 34.50 32.00 1.87(a) 1.47 38.40 29 Apr

601989 CH CSICL Reduce CNY 5.40 5.20 -0.14(a) 0.03 6.30 29 Apr MRCO IN Marico Industries Reduce INR 205.00 190.00 - 5.62(a) 267.40 02 May

Down HCLT IN HCL Technologies Hold Buy INR 875.00 985.00 - 51.94(a) 837.55 27 Apr

598 HK Sinotrans Reduce Buy HKD 3.10 4.30 0.29(a) 0.29 3.60 02 May

586 HK China Conch Venture Reduce Hold HKD 12.00 11.65 1.08(a) 0.79 15.62 03 May

600270 CH Sinotrans Air Transport Reduce Hold CNY 16.20 22.00 1.12(a) 1.16 18.38 29 Apr

BIDU US Baidu Buy USD 237.00 249.00 CNY 101.07(a) CNY 48.48 186.02 28 Apr ROTH MK BAT Malaysia Buy MYR 62.00 67.00 3.19(a) 3.16 45.88 29 Apr

2474 TT Catcher Technology Buy TWD 286.00 380.00 32.61(a) 27.20 220.00 03 May

2882 TT Cathay FHC Buy TWD 42.00 44.00 4.60(a) 3.49 36.25 02 May

CDREIT SP CDL Hospitality Trusts Buy SGD 1.70 1.80 0.101(a) 0.095 1.455 28 Apr 600372 CH China Avionics System Buy CNY 28 29.6 0.27(a) 0.36 18.97 28 Apr 317 HK CSSC Offshore & Marine-H Buy HKD 33.20 35.40 CNY 0.07(a) CNY 0.33 12.12 28 Apr

3545 TT FocalTech Systems Buy TWD 33.00 36.00 0.80(a) 2.21 27.40 03 May

ICICIBC IN ICICI Bank Buy INR 277.00 341.00 19.31(a) 16.75 236.60 29 Apr 002179 CH JONHON Buy CNY 51.1 52.6 0.94(a) 1.26 36.5 28 Apr SCI SP SembCorp Industries Buy SGD 3.33 3.43 0.394(a) 0.307 2.82 03 May BJAUT IN Bajaj Auto Hold INR 2500.00 2570.00 109.0(a) 128.7 2491.95 29 Apr 5264 TT Casetek Holdings Ltd Hold TWD 155.00 170.00 16.57(a) 14.63 135.00 04 May 600685 CH CSSC Offshore & Marine-A Hold CNY 27.60 29.50 0.07(a) 0.33 25.47 28 Apr 601006 CH Daqin Railway Hold CNY 6.10 7.00 0.85(a) 0.57 6.55 27 Apr HART MK Hartalega Hold MYR 4.47 4.59 - 0.16(a) 4.29 02 May SMGR Semen Indonesia Hold IDR 9,800.00 10,000.00 754.50(a) 734.48 9550.00 02 May 2727 HK Shanghai Electric-H Hold HKD 3.00 3.20 CNY 0.11(a) CNY 0.18 3.26 29 Apr 2325 TT Siliconware Precision Hold TWD 45.00 50.50 2.75(a) 2.79 49.95 28 Apr TVSL IN TVS Motors Hold INR 290.00 300.00 7.3(a) 9.1 287.45 03 May WIKA IJ Wijaya Karya Hold IDR 2870.00 2960.00 101.81 127.65 2650.00 29 Apr 601919 CH China COSCO Holdings-A Reduce CNY 1.40 1.70 -0.39(a) -0.38 5.68 29 Apr 1919 HK China COSCO Holdings-H Reduce HKD 1.60 2.00 CNY -0.39(a) CNY -0.38 3.04 29 Apr 600316 CH Hongdu Aviation Reduce CNY 8.2 8.9 0.11(a) 0.17 18.95 28 Apr 010140 KS Samsung Heavy Industries Reduce KRW 8200.00 8400.00 -5561.76(a) 635.92 10700.00 29 Apr 601727 CH Shanghai Electric-A Reduce CNY 2.60 2.90 0.11(a) 0.18 8.23 29 Apr YZJSGD SP Yangzijiang Shipbuilding Reduce SGD 0.76 0.77 CNY 0.68(a) CNY 0.52 1.00 28 Apr

Source: Bloomberg, HSBC estimates Research Focus 05 May China Real Estate - Re-investment appetite to drive sales execution Derek Kwong* China Conch Venture (586 HK) - Downgrade to Reduce: Flattish 2018 earnings growth Thomas Zhu* E.SUN FHC (2884 TT) - Buy: Waiting for fee growth improvement Anthony Lam* SembCorp Industries (SCI SP) - Buy: Utilities results mixed but growth on track Tarun Bhatnagar*


6 May 2016

04 May Hangzhou Hikvision Digital (002415 CH) - Initiate at Buy: A surveillance stock to keep an eye on Emily Li* Sinotrans Air Transport (600270 CH) - Downgrade to Reduce: Profit growth waning rapidly Parash Jain* Sinotrans (598 HK) - Downgrade to Reduce: Profit growth drivers wanning Parash Jain* Cathay FHC (2882 TT) - Buy: 1Q earnings disappoint but NBV encouraging Christopher Chan* 03 May Korea Consumer - Zeroing in on growth Karen Choi* HCL Technologies (HCLT IN) - Downgrade to Hold: Too many uncertainties Yogesh Aggarwal* ICICI Bank (ICICIBC IN) - Buy: 4QFY16: Pain before the gain Sachin Sheth* HDFC (HDFC IN) - Buy: Underlying trends remain firm Sachin Sheth* Regional 05 May Asia Frontier Insights - We upgrade Sri Lanka to positive, downgrade Vietnam to neutral Devendra Joshi* The Flying Dutchman - First look: Asia’s 1Q16 earnings season Herald van der Linde* Asian FX: Trade idea - Buy TWD-KRW 1m NDF Paul Mackel Who stole my spring bounce? - What the latest PMIs mean for Asia Frederic Neumann 04 May Australian Budget Observer - Softly, softly as the election approaches Paul Bloxham RBA Observer Update - Cut delivered, expect another in Q3 Paul Bloxham What's next for the BoJ? - Latest op-ed published by Nikkei Frederic Neumann 03 May Asia Economics Comment - What could spoil the party Frederic Neumann Asian FX comment - CNY fix - keeping the peace Paul Mackel Commodity prices snapshot - Up again in April, as speculators jump in Paul Bloxham China & Hong Kong 05 May China Pharmaceutical - Zero markup: Pharmas are hurt on margins, distributors may take over more hospital pharmacies Zhijie Zhao* 04 May China PMI wrap-up (April 2016) - Still room for re-stocking Julia Wang China Environmental Services - Strong water orders in 1Q16 Thomas Zhu* Xinyi Solar (968 HK) - Buy: Site visit confirms our positive view Evan Li* Brilliance Auto - Hold: 1Q16: Slow start but not as bad as it seems Carson Ng* Inner Mongolia Yili (600887 CH) - Hold: Inventory pressure still persists Christopher K Leung* Shanghai Electric (2727 HK/ 601727 CH) - H/A: Hold/Reduce: 1Q16 results in line Summer Huang* SJM Holdings (880 HK) - Hold: 1Q16 slight beat; Lisboa Palace on track Scott Chan* Dongfang Electric (1072 HK/600875 CH) - Reduce H/A:1Q16 results missed Summer Huang* MTR Corporation (66 HK) - Reduce: Resilience fully priced in Perveen Wong* New China Life Insurance (1336 HK / 601336 CH) - H/A: Reduce: 1Q earnings 25% of FY16 consensus James Garner * 03 May China Aircraft & Parts - Mixed 16Q1 results Emily Li* China Cement - Anhui and Jiangxi cut 10% and 2% of cement capacities in 2015 Wei Sim* China industrials and infrastructure - Impact from growing onshore bond market stress Anderson Chow* Chinese Insurance - Value-added tax about to come to China Christopher C W Chan* Baidu (BIDU US) - Buy: Executing its mobile gateway strategy Chi Tsang* China Construction Bank(939 HK/601939 CH) - H/A: Buy/Hold: Solid trend from staying defensive Michael Chu* Changan Auto (200625 CH / 000625 CH) - B: Buy / A: Hold: Solid start for Ford in 1Q16 Carson Ng* CSSC Offshore & Marine (317 HK/ 600685 CH) - H/A: Buy/Hold: Positive 16Q1 results Emily Li* Qingdao Haier Co Ltd (600690 CH) - Buy: a global leader with discount to global peers Lina Yan* Shanghai Fosun Pharma (2196 HK/ 600196 CH) - H/A: Buy: 1Q16 results review – A good start Yumeng Wang* Shanghai Mech & Elec. Ind (600835 CH) - Buy: Asset restructuring brings positive impact in 1Q16 Sean Tian* Spring Airlines (601021 CH) - Buy: Results in-line, resilient domestic yield Jack Xu* Wuliangye Yibin (000858 CH) - Buy: A strong start to 2016 Christopher K Leung* China Everbright Bank(6818 HK/601818 CH) - H/A: Hold: Faster asset growth not driving top line Michael Chu* China Merchants Bank (3968 HK / 600036 CH) - Hold (H/A): Solid fundamentals reflected in price Michael Chu* China Minsheng Banking (1988 HK / 600016 CH) - H/A: Hold / Reduce: Improving operating trends but ROE

still falling fast Michael Chu*

China Railway Group (390 HK/601390 CH) - H/A: Hold/Reduce: Higher anxiety after 1Q16 results Anderson Chow* CRCC (1186 HK/601186 CH) - H/A Hold/Reduce: Accumulating risks in 1Q16 Anderson Chow* Daqin Railway (601006 CH) - Hold: Challenging year ahead Lesley Liu* Pudong Development Bank (600000 CH) - Hold: Strong profit growth driven mainly by fee income Michael Chu* Angang Steel (347 HK/000898 CH) - H/A: Reduce: 1Q16 results well flagged Chris Chen* China COSCO Holdings (1919 HK/601919 CH) - H: Reduce/A: Reduce: Bigger is not necessarily better Parash Jain* China Oilfield Services (2883 HK / 601808 CH) - Reduce: Lowest utilization ever, largest loss ever Thomas C. Hilboldt* China Pacific Insurance (2601 HK/601601 CH) - H/A: Reduce: Disappointing 1Q16 earnings James E Garner* CSICL (601989 CH) - Reduce: FY15 results in line Emily Li* Korea 05 May Korea Autos - April sales data: The struggle continues Paul Choi* BNK Financial Group (138930 KS) - Buy: Solid 1Q16 with continued NIM improvement Sinyoung Park* DGB Financial Group (139130 KS) - Buy: 1Q16 earnings beat due to large disposal gains Sinyoung Park* 04 May Korea telcos - Orderly spectrum auction a sector positive Neale Anderson* Seoul Semiconductor (046890 KS) - Reduce: Rising woes from OLED proliferation Will Cho* Korea power - Korean power market data for March Yeon Lee* 03 May Amorepacific (090430 KS) - Buy: China growth story intact Karen Choi* Hanwha Techwin (012450 KS) - Buy: Earnings surprise due to faster margin recovery Ricky Seo* Hotel Shilla (008770 KS) - Buy: Can still climb a wall of worry Karen Choi* Kepco KPS (051600 KS) - Buy: An expected 1Q16 OP miss Yeon Lee* KT Corp (030200 KS) - Buy: Broadband and IPTV the growth drivers in 2016 Neale Anderson* Samsung SDI (006400 KS) - Buy: Restructuring is a sign of bottoming Will Cho* Hankook Tire (161390 KS) - Hold: Strong 1Q16 earnings are already priced-in Paul Choi* KT&G (033780 KS) - Hold: Running out of puff Karen Choi* LG Electronics (066570 KS) - Reduce: Smartphone woes rising again Will Cho*


6 May 2016

Samsung Heavy Industries (010140 KS) - Reduce: 1Q16 review – lower new order guidance Paul Choi* Memory sector - Early signs of price stabilization emerges Ricky Seo* Taiwan 05 May Casetek Holdings Ltd (5264 TT) - Hold: Smartphone progress remains slow Carrie Liu* Vanguard Int'l Semicon (5347 TT) - Hold: Solid results. 2H catalysts limited. Valuation full Steven Pelayo 04 May Catcher Technology (2474 TT) - Buy: Forecast cuts likely the last piece of bad news Carrie Liu* FocalTech Systems (3545 TT) - Buy: rising IDC to drive margin expansion Yolanda Wang* LandMark Optoelectronics (3081 TT) - Buy: Noise to rise, but fundamentals remain strong Jerry Tsai* 03 May Nikkei Taiwan Manufacturing PMI (April 2016) - Momentum weakens Julia Wang Advantech Co Ltd (2395 TT) - Buy: Strong earnings momentum should continue Jenny Lai* Delta Electronics (2308 TT) - Buy: Acquiring building automation capability Jenny Lai* Advanced Semiconductor (2311 TT/ASX US) - Hold: Stock pullback tempting, but some worries too Steven Pelayo* CTBC Financial Holding (2891 TT) - Hold: 2015 dividend and extension of contract with China CITIC Bank Anthony Lam* MediaTek (2454 TT) - Hold: Strong 2Q16 but not sustainable into 2H16 Yolanda Wang* Siliconware Precision (2325 TT) - Hold: Gross margin miss. Now structurally lower Steven Pelayo ASEAN 05 May Indonesia - 1Q GDP a tad soft, but don't let it get you down Su Sian Lim Vietnam at a glance - Out of the soft patch Izumi Devalier Ayala Land (ALI PM) - Buy: Robust and consistent Pratik Burman Ray* Indofood Sukses Makmur (INDF IJ) - Buy: Recovering earnings power Permada Darmono* Metro Pacific Inv (MPI PM) - Buy: Volumes grow as tariff issues remain unresolved Tarun Bhatnagar* 04 May Malaysia - PMI shows April manufacturing contracting the most in five months Su Sian Lim Singapore banks - Soft lending environment but resilient asset quality in 1Q16 Kar Weng Loo* DBS Group (DBS SP) - Buy: Strong non-interest income lifts 1Q16 earnings Kar Weng Loo* Indofood Agri (IFAR SP) - Buy: 1Q outperforms; 2Q should look promising as well Shishir Singh* Hartalega (HART MK) - Hold: Margin squeeze on back of higher overheads Girish Bakhru* Semen Indonesia (SMGR) - Hold: Weaker 1Q but trends stabilizing at lower levels Shishir Singh* Indocement (INTP IJ) - Reduce: EPS contract again but better than expected Shishir Singh* 03 May ASEAN Perspectives - Banking on services Nalin Chutchotitham Indonesia - PMI expands again as domestic orders rise; inflation within target Su Sian Lim Thailand CPI (Apr) - Back above zero: Headline CPI rose 0.1% y-o-y Nalin Chutchotitham BAT Malaysia (ROTH MK) - Buy: Weak 1Q2016 does not negate our thesis Selviana Aripin* CDL Hospitality Trusts (CDREIT SP) - Buy: Negatives are in the price Pratik Burman Ray* UOB (UOB SP) - Buy: 1Q16 should allay concerns on asset quality Kar Weng LOO* OCBC (OCBC SP) - Hold: Hit on multiple fronts in 1Q16 Kar Weng LOO* Indofood CBP (ICBP IJ) - Hold: Bright 1Q performance from Dairy division Permada Darmono* Westports Holdings Berhad (WPRTS MK) - Hold: Strong performance in 1Q16 Parash Jain* Wijaya Karya (WIKA IJ) - Hold: Slower execution and new orders & rights issue cloud the outlook Tarun Bhatnagar* Yangzijiang Shipbuilding (YZJSGD SP) - Reduce: Slowing shipbuilding may lead to growth in financial investments Tarun Bhatnagar* India 05 May Bharat Forge (BHFC IN) - Buy: N America Class 8 truck orders continue to decline; growth still possible despite weak markets Puneet Gulati* 04 May India’s GDP to auto-correct - As prices normalise, GDP overestimation will narrow Pranjul Bhandari Godrej Consumer Products (GCPL IN) - Buy: In line Q4; International performance stands out Amit Sachdeva* TVS Motors (TVSL IN) - Hold: 4Q16: Risk-reward remains less favorable Yogesh Aggarwal* Info Edge India Ltd (INFOE IN) - Reduce: Food start ups and geographical expansion Rajiv Sharma* 03 May India - Manufacturing PMI slows in April due to stagnant orders Pranjul Bhandari India Cement - 1Q16 results: Higher volumes, but not higher EBITDA Jigar Mistry* India IT Services - 4Q16 review: mind the red flags Yogesh Aggarwal* UPL Limited (UPLL IN) - Buy: FY16 ends on a high Alok Deshpande* Vedanta Limited (VEDL IN) - Buy: 4QFY16 results ‒ a decent end to the year Jigar Mistry* Yes Bank (YES IN) - Buy: 4QFY16: If this is a weak cycle, what’s in store? Sachin Sheth* Bajaj Auto (BJAUT IN) - Hold: Glass half empty Yogesh Aggarwal* Cairn India Limited (CAIR IN) - Hold: Stock run up captures upside from potential oil price increase Kumar Manish* Dabur India (DABUR IN) - Hold: In-line Q4, revenue growth the focus for FY17 Amit Sachdeva* Idea Cellular Ltd (IDEA IN) - Hold: Strong 4Q numbers do not imply re-rating Rajiv Sharma* Marico Industries (MRCO IN) - Reduce: Both earnings growth and valuations have now likely peaked Amit Sachdeva* India Petroleum & Chemicals Insight - April 2016 – India demand is in a fast lane Kumar Manish* Global 05 May Currency Weekly - Trading FX in a RORO world David Bloom The demographic divide - Which emerging markets will grow old before they get rich? James Pomeroy Raising climate ambition - UN Synthesis report highlights 2030 emissions gap Wai-Shin Chan 04 May Consumerama - Still time to ride the Korean wave Erwan Rambourg* 03 May HSBC Steel Weekly - India Steel: FY17 looks set to be a good year Jigar Mistry* Equity Insights - Fund holdings: re-energised Robert Parkes*


6 May 2016

Disclosure appendix

Important disclosures

Equities: Stock ratings and basis for financial analysis

HSBC believes an investor's decision to buy or sell a stock should depend on individual circumstances such as the investor's

existing holdings, risk tolerance and other considerations and that investors utilise various disciplines and investment horizons

when making investment decisions. Ratings should not be used or relied on in isolation as investment advice. Different

securities firms use a variety of ratings terms as well as different rating systems to describe their recommendations and

therefore investors should carefully read the definitions of the ratings used in each research report. Further, investors should

carefully read the entire research report and not infer its contents from the rating because research reports contain more

complete information concerning the analysts' views and the basis for the rating.

From 23rd March 2015 HSBC has assigned ratings on the following basis:

The target price is based on the analyst’s assessment of the stock’s actual current value, although we expect it to take six to 12

months for the market price to reflect this. When the target price is more than 20% above the current share price, the stock will

be classified as a Buy; when it is between 5% and 20% above the current share price, the stock may be classified as a Buy or a

Hold; when it is between 5% below and 5% above the current share price, the stock will be classified as a Hold; when it is

between 5% and 20% below the current share price, the stock may be classified as a Hold or a Reduce; and when it is more

than 20% below the current share price, the stock will be classified as a Reduce.

Our ratings are re-calibrated against these bands at the time of any 'material change' (initiation or resumption of coverage,

change in target price or estimates).

Upside/Downside is the percentage difference between the target price and the share price.

Prior to this date, HSBC’s rating structure was applied on the following basis:

For each stock we set a required rate of return calculated from the cost of equity for that stock’s domestic or, as appropriate,

regional market established by our strategy team. The target price for a stock represented the value the analyst expected the

stock to reach over our performance horizon. The performance horizon was 12 months. For a stock to be classified as

Overweight, the potential return, which equals the percentage difference between the current share price and the target price,

including the forecast dividend yield when indicated, had to exceed the required return by at least 5 percentage points over the

succeeding 12 months (or 10 percentage points for a stock classified as Volatile*). For a stock to be classified as Underweight,

the stock was expected to underperform its required return by at least 5 percentage points over the succeeding 12 months (or

10 percentage points for a stock classified as Volatile*). Stocks between these bands were classified as Neutral.

*A stock was classified as volatile if its historical volatility had exceeded 40%, if the stock had been listed for less than 12

months (unless it was in an industry or sector where volatility is low) or if the analyst expected significant volatility. However,

stocks which we did not consider volatile may in fact also have behaved in such a way. Historical volatility was defined as the

past month's average of the daily 365-day moving average volatilities. In order to avoid misleadingly frequent changes in rating,

however, volatility had to move 2.5 percentage points past the 40% benchmark in either direction for a stock's status to change.


6 May 2016

Rating distribution for long-term investment opportunities

As of 05 May 2016, the distribution of all ratings published is as follows:

Buy 45% (27% of these provided with Investment Banking Services)

Hold 40% (26% of these provided with Investment Banking Services)

Sell 15% (18% of these provided with Investment Banking Services)

For the purposes of the distribution above the following mapping structure is used during the transition from the previous to

current rating models: under our previous model, Overweight = Buy, Neutral = Hold and Underweight = Sell; under our current

model Buy = Buy, Hold = Hold and Reduce = Sell. For rating definitions under both models, please see “Stock ratings and basis

for financial analysis” above.

HSBC and its affiliates will from time to time sell to and buy from customers the securities/instruments, both equity and debt

(including derivatives) of companies covered in HSBC Research on a principal or agency basis.

Analysts, economists, and strategists are paid in part by reference to the profitability of HSBC which includes investment

banking, sales & trading, and principal trading revenues.

Whether, or in what time frame, an update of this analysis will be published is not determined in advance.

Economic sanctions imposed by the EU and OFAC prohibit transacting or dealing in new debt or equity of Russian SSI entities.

This report does not constitute advice in relation to any securities issued by Russian SSI entities on or after July 16 2014 and as

such, this report should not be construed as an inducement to transact in any sanctioned securities.

For disclosures in respect of any company mentioned in this report, please see the most recently published report on that

company available at www.hsbcnet.com/research.

Additional disclosures

1 This report is dated as at 06 May 2016.

2 All market data included in this report are dated as at close 05 May 2016, unless otherwise indicated in the report.

3 HSBC has procedures in place to identify and manage any potential conflicts of interest that arise in connection with its

Research business. HSBC's analysts and its other staff who are involved in the preparation and dissemination of Research

operate and have a management reporting line independent of HSBC's Investment Banking business. Information Barrier

procedures are in place between the Investment Banking, Principal Trading, and Research businesses to ensure that any

confidential and/or price sensitive information is handled in an appropriate manner.

4 You are not permitted to use, for reference, any data in this document for the purpose of (i) determining the interest

payable, or other sums due, under loan agreements or under other financial contracts or instruments, (ii) determining the

price at which a financial instrument may be bought or sold or traded or redeemed, or the value of a financial instrument,

and/or (iii) measuring the performance of a financial instrument.


6 May 2016

Disclaimer

Legal entities as at 30 May 2014

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Kong; ‘TW’ HSBC Securities (Taiwan) Corporation Limited; 'CA' HSBC Bank Canada, Toronto; HSBC Bank, Paris Branch;

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