Monday, 11 August 2014 the sector will be more obvious. In ...pg.jrj.com.cn/acc/Res/CN_RES/INVEST/2014/8/11/d00c...DISCLOSURE APPENDIX CONTAINS ANALYST CERTIFICATIONS AND THE STATUS

DISCLOSURE APPENDIX CONTAINS ANALYST CERTIFICATIONS AND THE STATUS OF NON-US ANALYSTS. FOR OTHER IMPORTANT DISCLOSURES, visit www.credit-suisse.com/ researchdisclosures or call +1 (877) 291-2683. U.S. Disclosure: Credit Suisse does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision

CREDIT SUISSE SECURITIES RESEARCH & ANALYTICS BEYOND INFORMATION TM

Client-Driven Solutions, Insights, and Access

Monday, 11 August 2014

Asian Daily (Asia Edition)

EPS, TP and Rating changes EPS TP

(% change) T+1 T+2 Chg Up/Dn Rating

China Mobile Limited 0 0 0 11 N (O) CRCement Holdings Ltd 7 0 (7) 21 O (O) Hidili Ind Int'l Dev Ltd n.m n.m (23) (3) N (N) Emami Ltd 4 4 9 18 O (O) Gujarat State Petronet Ltd 0 0 16 17 O (O) Jindal Steel & Power Ltd 0 0 7 (10) N (N) Mahindra & Mahindra 0 0 4 15 O (O) Sun TV Network 0 (14) (18) (2) N (O) Bakrie Telecom PT n.m n.m (60) (68) U (U) SapuraKencana Petroleum Initiation 34 O (NA) Dialog Group Bhd Initiation 11 N (NA) Manila Water Company 14 11 4 (5) N (N) Asiana Airlines n.m (47) (3) (5) U (U) Lotte Shopping (2) 0 0 17 N (N) Chipbond (2) 0 0 8 N (N) Giant Mfg Co Ltd 3 2 2 2 N (N)

Connecting clients to corporates

Hong Kong / China

NagaCorp Limited (3918.HK) Post results Date 11-12 August, Hong Kong

Analyst Isis Wong

Hysan Development Co.(0014.HK) Post-results Date 12 August, Hong Kong

Analyst Joyce Kwock

Wharf Holdings (004.HK) Post-results Date 12 August, Hong Kong

Analyst Joyce Kwock

Champion Real Estate Investment Trust(2778.HK) Date 13-14 August, Hong Kong

Analyst Joyce Kwock

UTAC Date 13-14 August, Hong Kong

Analyst Randy Abrams

Singapore

UTAC Date 11-12 August, Singapore

Analyst Randy Abrams

Asia Pay Television Trust (APTT) Date 12-13 August, Singapore

Analyst Chate Benchavitvilai

Chroma (2360.TW) Date 12-13 August, Singapore

Analyst Jerry Su

GMG Global Ltd (GMGG.SI) Date 13 August, Singapore

Analyst Gerald Wong

Others

North Asia Internet C-Level Conference Date 27-28 August, HK / 29 August, Singapore

Analyst Dick Wei

Asia Chemical Conference Date 02-03 September, Hong Kong

Contact [email protected] or Your usual sales representative.

Top of the pack ...

Malaysia Oil & Gas Services Sector Muzhafar Mukhtar, CFA (3) New report: The margin of safety

China Mobile Limited (0941.HK) – Downgrade to N Colin McCallum, CA (4) Consensus needs to catch up with VAT impact

Taiwan Financial Sector Chung Hsu, CFA (5) Resilient July profits across banks and insurers

Mahindra & Mahindra (MAHM.BO) – Maintain O Jatin Chawla (6) Maintaining profitability in a challenging environment

CS pic of the day

Definite prospects for Malaysian upstream contractors have peaked

Woodmackenzie data indicates Malaysian upstream development capex peaked in 2013. Without a rising

tide lifting all boats, the difference between the small cadre of world-class entities emerging and the rest of

the sector will be more obvious. In Malaysia Oil & Gas Services Sector: The margin of safety, Muzhafar

Mukhtar initiates coverage on Malaysia O&G with two service providers: SapuraKencana

(OUTPERFORM, TP: RM5.70) and Dialog (NEUTRAL, TP: RM2.00).

Source: Woodmackenzie data, Credit Suisse estimates.

Commercial Technical

-

2,000

4,000

6,000

8,000

10,000

USD mn

2003 2005 2007 2009 2011 2013 2015 2017 2019

SAVE THE DATE

15th Annual Asian Technology Conference 10-12 September 2014, Taipei

The technology sector is seeing a good year of earnings upgrades and positive momentum from the launch of

LTE networks in emerging markets, Apple’s upcoming replacement cycle and developments building out the

Cloud ecosystem and products across the developing Internet of Things umbrella. Our Technology Conference

promises a bigger and broader corporate line-up this year across the technology and non-tech Taiwan sectors

featuring established leaders and an emerging crop of high growth companies.

... and the whole pack China

China Economics Dong Tao (7) China’s July exports surprised on the upside

China Economics Dong Tao (8) July CPI inflation stayed muted

https://credit-suisse.dealogic.com/Conferences/Conferences/Custom/List/239?menuItemId=100

https://doc.research-and-analytics.csfb.com/docView?language=ENG&source=ulg&format=PDF&document_id=1036901371&serialid=mcB9YOLzecWxJp7HX9XNq6%2ft3L9J8clN5b0SoKx3udQ%3d



Asian Daily

- 2 of 33 -

Asian indices - performance (% change) Closing 1D 1W 3M YTD

ASX300 5,382 (1.3) (2.1) (0.4) 1.5

CSEALL 6,918 0.1 1.6 10.1 17.0

Hang Seng 24,331 (0.2) (0.8) 11.3 4.4

H-SHARE 10,833 (0.4) (1.4) 11.9 0.2

JCI 5,054 (0.3) (0.7) 3.2 18.2

KLSE 1,840 (1.5) (1.3) (1.4) (1.5)

KOSPI 2,031 (1.1) (2.0) 3.8 1.0

KSE100 29,381 (0.5) (3.1) 3.1 16.3

NIFTY 7,569 (1.1) (0.4) 10.3 20.1

NIKKEI 14,778 (3.0) (4.8) 4.1 (9.3)

TOPIX 1,228 (2.4) (4.1) 5.4 (5.7)

PCOMP 6,880 (1.1) (0.2) 0.5 16.8

RED CHIP 4,679 0.0 0.2 15.1 2.8

SET 1,520 (0.1) 1.3 10.4 17.1

VNINDEX 605 (0.4) 1.9 11.6 20.0 Thomson Reuters Asian currencies (vs US$) (% change) Closing 1D 1W 3M YTD

A$ 0.9 0.3 (0.3) (0.9) 4.1

Bt 32.1 (0.4) (0.1) (1.6) (1.8)

D 21,190.0 0.0 0.0 0.5 0.5

JPY 102.2 0.1 (0.4) 0.0 (3.0)

NT$ 30.0 (0.1) (0.1) (0.4) 0.6

P 43.9 (0.3) 0.6 0.7 (1.0)

PRs 98.8 0.0 0.1 0.3 (6.2)

Rp 11,770.0 (0.2) 0.0 2.1 (3.2)

Rs 61.1 (0.2) (0.1) 2.0 (1.1)

S$ 1.3 (0.1) 0.3 0.0 (1.0)

W 1,036.4 0.0 0.0 1.2 (1.8) Thomson Reuters

Global indices (% change) Closing 1D 1W 3M YTD

DJIA 16,554 1.1 0.4 (0.2) (0.1)

S&P 500 1,932 1.2 0.3 2.8 4.5

NASDAQ 4,371 0.8 0.4 7.3 4.7

SOX 606 1.1 (0.6) 5.3 13.3

EU-STOX 2,898 (0.6) (1.7) (3.0) (0.7)

FTSE 6,567 (0.5) (1.7) (3.6) (2.7)

DAX 9,009 (0.3) (2.2) (6.0) (5.7)

CAC-40 4,148 0.0 (1.3) (7.4) (3.4)

10 YR LB 2 (0.7) (4.1) (8.8) (21.0)

2 YR LB 0 (2.8) (10.9) 9.7 10.6

US$:E 1.34 0.0 (0.1) (2.6) (2.5)

US$:Y 102.15 0.1 (0.4) 0.0 (3.0)

GOLD 0.00 (0.3) 1.2 1.6 8.7

VIX 0.0 (5.3) (7.4) 22.1 14.9 Thomson Reuters

MSCI Asian indices – valuation & perf. EPS grth. P/E (x) Performance

MSCI Index 14E 15E 14E 15E 1D 1M YTD

Asia F X Japan 12 11 12.3 11.0 (0.7) 0.1 6.1

Asia Pac F X J. 12 10 12.8 11.7 (0.9) (0.4) 5.9

Australia 8 6 15.3 14.5 (1.4) (1.8) 5.4

China 8 10 9.8 8.9 (0.2) 5.2 3.2

Hong Kong 8 9 16.0 14.6 (0.4) 3.1 6.2

India 15 15 17.0 14.7 (0.9) (2.3) 18.3

Indonesia 10 13 15.6 13.8 (0.2) (1.0) 26.2

Korea 19 13 10.1 8.9 (1.5) (1.5) 0.7

Malaysia 3 10 16.2 14.7 (1.4) (3.8) (0.5)

Pakistan 30 14 8.9 7.9 (0.7) 0.0 12.4

Philippines 7 14 19.9 17.4 (1.3) (2.1) 18.1

Singapore 7 9 14.4 13.2 (0.8) 0.0 3.8

Sri Lanka 15 10 14.7 13.5 (0.3) (0.3) 8.8

Taiwan 11 12 13.7 12.2 (0.5) (4.8) 8.0

Japan 74 6 13.9 12.4 (2.1) (3.6) (3.7) Thomson Reuters All data as of the most recent market close.

China Market Strategy Vincent Chan (9) New report: Potential plays of 'Shanghai-HK' Connect

China Mobile Limited (0941.HK) – Downgrade to N Colin McCallum, CA (4) Consensus needs to catch up with VAT impact

China Resources Cement Holdings Ltd (1313.HK) – Maintain O Trina Chen (10) 1H14 results summary: Solid 1H14, softening 2H14 mostly in the price

Hidili Industry International Development Limited (1393.HK) – Maintain N Frankie Zhu (11) 1H14 results: Low productoin and coal price extend the losses

Hong Kong

Hysan Development Co. (0014.HK) – Maintain O Joyce Kwock (12) Ripening low-hanging fruit for more rental growth

India

India IT Services Sector Anantha Narayan (13) New report: Aggregate trends look robust

Emami Ltd (EMAM.BO) – Maintain O Arnab Mitra (14) 1Q15: Stellar quarter; high growth likely to continue in the quarters ahead

Gujarat State Petronet Limited (GSPT.BO) – Maintain O Sanjay Mookim (15) 1Q behind; volume growth encouraging; revenue flat on lower ship or pay and change in mix

Jindal Steel & Power Ltd (JNSP.BO) – Maintain N Neelkanth Mishra (16) Steel business aids EBITDA growth; covenant test remains an overhang

Mahindra & Mahindra (MAHM.BO) – Maintain O Jatin Chawla (6) Maintaining profitability in a challenging environment

State Bank Of India (SBI.BO) – Maintain N Ashish Gupta (17) Operationally in line; NPL slippages pick up

Sun TV Network (SUTV.BO) – Downgrade to N Jatin Chawla (18) Headwinds on multiple fronts

Indonesia

Bakrie Telecom PT (BTEL.JK) – Maintain U Colin McCallum, CA (19) Still under structural pressure

Malaysia

Malaysia Oil & Gas Services Sector Muzhafar Mukhtar, CFA (3) New report: The margin of safety

SapuraKencana Petroleum (skpe.kl) – Initiating Coverage with O Muzhafar Mukhtar, CFA (20) New report: Risk-reward balance better now

Dialog Group Bhd (DIAL.KL) – Initiating Coverage with N Muzhafar Mukhtar, CFA (21) New report: Fairly valued for now

Philippines

Manila Water Company (MWC.PS) – Maintain N Alvin Arogo (22) 1H14 profit robust but regulatory overhang remains

Singapore

Venture Corporation (VENM.SI) – Maintain N Anand Swaminathan (23) 2Q14 largely in line, but weaker top-line growth a worry; valuations near post-GFC highs

South Korea

Asiana Airlines (020560.KS) – Maintain U Timothy Ross (24) 2Q14 results

Lotte Shopping (023530.KS) – Maintain N A-Hyung Cho (25) Weak 2Q14 results, as widely expected

Taiwan

Taiwan Financial Sector Chung Hsu, CFA (5) Resilient July profits across banks and insurers

Chipbond (6147.TWO) – Maintain N Jerry Su (26) 3Q to rebound on seasonality but limited potential upside

Giant Manufacturing Co Ltd (9921.TW) – Maintain N Jeremy Chen (27) Strong 2Q14 results at the operating level; tweaking up 2014/15 forecasts

Thailand

Minor International PCL (MINT.BK) – Maintain O Thaniya Kevalee (28) 2Q results: Core profit growth accelerated to 28% YoY

O=Outperform N=Neutral U=Underperform R=Restricted OW= Overweight MW=Market Weight UW=Underweight

Research mailing options To make any changes to your existing research mailing details, please e-mail us directly at [email protected]

Sales Contact Hong Kong 852 2101 7211 Singapore 65 6212 3052 London 44 20 7888 4367 New York 1 212 325 5955 Boston 1 617 556 5634


Asian Daily

- 3 of 33 -

Top of the pack ...

Malaysia Oil & Gas Services Sector ---------------------------------------------------------------------- New report: The margin of safety Muzhafar Mukhtar, CFA / Research Analyst / 60 3 2723 2084 / [email protected]

● We initiate coverage of Malaysia O&G with two service providers: SapuraKencana (OUTPERFORM, TP: RM5.70/share), which straddles both oilfield services and E&P, and Dialog (NEUTRAL, TP: RM2.00/share), which is expanding from its traditional businesses into tank terminals and upstream services. Full report.

● Woodmackenzie data indicates Malaysian upstream development capex peaked in 2013. Without a rising tide lifting all boats, the difference between the small cadre of world-class entities emerging and the rest of the sector will be more obvious.

● We look for economic moats instead of short-term contract flows, try to pay greater focus on what can go wrong instead of the blue-sky potential, and keep our eye on the margin of safety in our search for value (of which growth is but a component).

● The recent de-rating for SapuraKencana has coincided with favourable developments on the ground, resulting in a risk-reward balance that is temporarily favourable. We believe there is a case for investors who cannot wait for a slower pitch to buy it now.

Genuine progress outpaced by optimism

The optimism that understandably accompanies rapid growth in the domestic industry has, in our view, been somewhat exaggerated by stockmarket participants, aided in part by the high level of trapped domestic liquidity. After more established companies changed direction to venture into O&G, SPACs (Special Purpose Acquisition Companies) began to tap the equity market; this has been topped off recently by an un-related business morphing into O&G concerns overnight via reverse takeovers of private entities.

But when the tide washes out…

While the widespread popularity of the sector was easily explained by rising capex in the past, for the first time in four years, development capex is likely to either stagnate or decline over the next ~three years, based on Woodmackenzie data. This sharply differs from still-bullish sentiment among stockmarket participants, stoked by Petronas and government announcements in recent years.

Figure 1: Definite prospects for upstream contractors have peaked Malaysia O&G development capex – commercial and technical reserves

-

2,000

4,000

6,000

8,000

10,000

USDmn Field development capex

Commercial Technical

Source: Woodmackenzie data, Credit Suisse estimates.

…boulders separate from pebbles

The stark difference between the small cadre of world-class service providers emerging and the rest in the field will become more apparent as the previously rising tide recedes. Within this select group, SapuraKencana offers a good risk/reward balance (30% margin of safety) after the de-rating seen in 1H14, which coincided with favourable underlying developments for the business, including the restructuring of its previously burdensome debt maturity profile.

Increasing competition a pertinent risk

Signs of higher levels of competition domestically, spurred on by Petronas, has been seen in the E&C and pipelaying segments. We expect globally-competitive entities such as SapuraKencana or those with a wide economic moat, such as Dialog, to remain bufferred from these developments.

Figure 2: Price multiple comparison TP Last M. cap P/E 2 yr EPS CY15F P/B Dividend yield

Stock Ticker Rating (LC) price* (LC) (USDmn) CY14F CY15F CAGR PEG CY14F CY15F CY14F CY15F

Malaysia O&G services SapuraKencana SKPE.KL O 5.70 4.27 7,975 18.6 13.2 44% 0.3 2.7 2.3 1% 1% Bumi Armada BUAB.KL NR 3.3 3,017 18.9 16.3 17% 0.9 2.0 1.8 1% 2% Dialog DIAL.KL N 2.00 1.81 2,775 34.2 23.4 32% 0.7 3.7 4.9 1% 2% UMW O&G UMOG.KL NR 3.99 2,689 31.4 20.2 31% 0.6 3.0 2.7 0% 0% MMHE MHEB.KL U 3.25 3.35 1,671 20.7 19.3 8% 2.3 1.9 1.8 1% 1% Dayang Enterprise DEHB.KL NR 3.72 957 14.4 12.8 27% 0.5 3.7 3.0 2% 3% Yinson YINS.KL NR 1.04 759 20.5 13.5 na na 2.9 2.5 0% 0% Scomi Energy Services SCES.KL NR 1.49 554 26.1 11.5 119% 0.1 1.8 1.6 0% 0% Perisai Petroleum PPTB.KL NR 3.72 306 18.0 14.0 36% 0.4 4.3 3.3 0% 0% Uzma UZMA.KL NR 4.27 7,975 18.6 13.2 44% 0.3 2.7 2.3 1% 1% Mean 22.3 15.7 39% 0.4 2.9 2.7 1% 1%

Source: IBES data for non-rated, Credit Suisse estimates *Priced as at close 7 August 2014.



Asian Daily

- 4 of 33 -

China Mobile Limited ------------------------------------------------------- Downgrade to NEUTRAL Consensus needs to catch up with VAT impact EPS: ◄► TP: ◄► Colin McCallum, CA / Research Analyst / 852 2101 6514 / [email protected] Jennifer Gao / Research Analyst / 852 2101 6479 / [email protected]

● China Mobile will publish 1H14 results at lunchtime on 14 March. We believe that VAT will have a material impact, with net profit expected to decline by 14.2% YoY.

● While we factored VAT into our forecasts on 1 May 2014, as soon as the details were published, it seems that consensus has been slow to capture the impact; our FY14 earnings forecast is 11.5% below consensus. Furthermore, the adverse reaction to Unicom's 1H14 results, which we believe were strong on fundamentals but also affected cosmetically by VAT, suggests that investors have not fully understood the near-term earnings impact either.

● Big picture, we still expect 2H14 to mark the bottom for China Mobile on earnings and particularly on cash flows, and we maintain our DCF-based target price of HK$94.50.

● However, with only 10.5% potential upside remaining, this only warrants a NEUTRAL rating. We suspect that there could be a more attractive entry point, with more upside, post results. In the meantime, investors should instead look again at Unicom.

Click here for detailed financials

VAT to hit China Mobile revenue and earnings

From 1 June 2014, basic telecoms services, including voice, became subject to an 11.0% VAT rate, while value-added telecoms services, including data, internet access and SMS, became subject to a 6.0% rate. This superseded the business tax, which was at 3.0%. Since China Mobile states revenue net of business tax (and now VAT), the cosmetic impact will be a like-for-like decline in stated revenue starting in June 2014.

2Q14 revenue will therefore be affected by the June VAT imposition, and so we expect a meaningful revenue slowdown, partly offsetting China Mobile's normal seasonal revenue recovery in the quarter following the Chinese New Year. Looking at 1H14 as a whole, service revenue is expected to grow by only 5.1% YoY, versus the 6.9% service revenue growth delivered in 1Q14. The growth dynamics will of course worsen further in 2H14 since VAT is now in full effect.

Figure 2: China Mobile 1H14 results preview Rmb mn 1H14E 2H13A HoH 1H13A YoY

Service revenue 299,075 306,140 -2.3% 284,671 5.1% Operating revenue** 323,737 327,073 -1.0% 303,104 6.8% EBITDA 115,268 116,739 -1.3% 123,700 -6.8% EBITDA margin (%)* 38.5% 38.1% 0.4pp 43.5% -4.9pp Net profit 54,227 58,564 -7.4% 63,181 -14.2%

Source: Company data, Credit Suisse estimates. *EBITDA margin on service revenue, ** includes handset subsidies.

Since only some operating costs are VAT deductible (and since our recent trip to Beijing confirmed that the process of shifting even those costs towards VAT-registered sources has been slow), the decline in revenue from June will also affect EBITDA. Thus we expect a 6.8% YoY decline in 1H14 EBITDA, worse than the 5.9% decline recorded in 1Q14. Similarly, VAT deductions on capex will take time to feed through the P&L account, and we expect earnings to decline 14.2% YoY in 1H14, as VAT exacerbates the trend in declining earnings which was already in place due to the LTE investment 'j-curve' and interconnect changes. Again, the earnings decline should worsen in 2H14, but we expect 2H14 to mark the bottom on earnings and particularly on cash flows.

The market does not seem to be on top of VAT as yet

We incorporated the VAT driven amendments into our forecasts on 1 May 2014, as soon as the details were published. For China Mobile, while we revised down our FY14 earnings by 7.3%, our DCF-based target price was revised up by 3.5%, since capex has become deductible at a rate of 17% (note – the lower capex will feed through depreciation and earnings will recover, but only gradually).

However, the strongly adverse reaction to what we saw as relatively solid Unicom results (with the stock down 8.3% across results) suggests that (1) the market is still myopically focused on near-term earnings, and (2) that consensus has still not properly understood the impact of VAT on those earnings. We note that for FY14 our earnings forecasts for China Mobile are 11.5% below consensus, and we expect consensus to revise down when faced with the 1H14 results.

Figure 2: China telecoms sector—comparative multiples Close Target Up P/E(x) EV/EBITDA(x) FCF yield (%)

HK$ price price (%) 14E 15E 14E 15E 14E 15E

China Mobile 85.5 94.5 10.5% 14.8 15.2 4.6 4.8 -0.7% 1.9% China Unicom 12.6 20.4 62.2% 18.0 13.6 3.8 3.5 3.3% 7.6% China Telecom 4.05 5.15 27.2% 14.2 11.5 3.5 3.3 2.9% 4.0% NJA – integrated* 16.0 14.6 6.9 6.4 4.2% 6.4% NJA – mobile* 17.7 16.8 6.5 6.4 1.0% 3.5%

*NJA: Asia ex Japan. Source: Company data, Credit Suisse estimates.

Revisit China Mobile after 1H14 results

Big picture, we expect 2H14 to mark the bottom on earnings and particularly on cash flows, and we maintain our DCF-based target price of HK$94.50. However, we suspect that there could be a more attractive entry point, with more potential upside, post 1H14 results. In the meantime, investors should instead look again at Unicom, which produced 13.1% EBITDA growth and 25.8% earnings growth into 1H14, but whose share price declined 8.3% across results.

Bbg/RIC 941 HK / 0941.HK Rating (prev. rating) N (O) Shares outstanding (mn) 20,349 Daily trad vol - 6m avg (mn) 18.5 Daily trad val - 6m avg (US$ mn) 179.1 Free float (%) 25.7 Major shareholders China Mobile Comm

Corp (74.24%)

Price (08 Aug 14 , HK$) 85.50 TP (prev. TP HK$) 94.50 (94.50) Est. pot. % chg. to TP 11 52-wk range (HK$) 88.3 - 64.5 Mkt cap (HK$/US$ bn) 1,739.8/ 224.5

Performance 1M 3M 12M

Absolute (%) 11.6 13.8 3.6 Relative (%) 6.7 1.9 (10.9)

Year 12/12A 12/13A 12/14E 12/15E 12/16E

Revenue (Rmb mn) 581,835 630,177 651,928 677,159 714,850 EBITDA (Rmb mn) 275,068 240,426 218,644 230,178 250,260 Net profit (Rmb mn) 150,696 121,692 92,273 89,984 92,235 EPS (Rmb) 7.50 6.05 4.59 4.48 4.59 - Change from prev. EPS (%) n.a. n.a. 0 0 0 - Consensus EPS (Rmb) n.a. n.a. 5.11 4.98 5.20 EPS growth (%) 19.6 (19.3) (24.2) (2.5) 2.5 P/E (x) 9.1 11.2 14.8 15.2 14.8 Dividend yield (%) 4.1 3.9 2.9 2.8 2.9 EV/EBITDA (x) 3.7 4.0 4.6 4.8 4.2 P/B (x) 1.9 1.7 1.6 1.5 1.4 ROE (%) 22.0 16.1 11.3 10.4 10.0 Net debt(cash)/equity (%) (51.4) (52.3) (43.4) (30.1) (35.2)

Note 1: ORD/ADR=5.00. Note 2: China Mobile is the leading cellular service provider in China.

https://rave.credit-suisse.com/research/company/financials?ric=0941.HK


Asian Daily

- 5 of 33 -

Taiwan Financial Sector -------------------------------------------------------------------------------------- Resilient July profits across banks and insurers Chung Hsu, CFA / Research Analyst / 886 2 2715 6362 / [email protected] Michelle Chou, CFA / Research Analyst / 886 2 2715 6363 / [email protected]

● Most Taiwan financials continue to report resilient profits in July and this reaffirms our view that the sector will likely see more earnings upgrades in the next few months with current consensus still expecting too much decline (20% YoY) in 2H14 profits.

● For banks, earnings continue to be supportd by strong WM fees, robust FC loan growth and lower-than-expected credit cost with Taiwan corporates' cash flows and balance sheet in their best condition since 2007. Among bank-centric FHCs, we see best near-term consensus earnings upside in CTBC and SinoPac.

● Insurers’ strong July profits were boosted by dividend income (i.e., Cathay/Fubon each booked NT$6-7 bn dividend income in July) and well-contained FX heding cost. This dividend income support should extend into August’s peak season. Meanwhile, brokers’ profits improved on better turnover and retail long margin balance.

● With the sector likely to lead Taiwan’s earnings upgrade in the coming months (consensus earnings +5% since our sector review, click here), we maintain overweight and CTBC remains our top pick in the sector.

Figure 1: Top picks in Taiwan financials

FY14E FY14E FY14E

Price CS Upside 2014 P/E P/B ROE

(NT$) rat TP (%) EPS (x) (x)* (%)

CTBC Holding 20.7 O 24.5 18.4 2.6 8.1 1.4 18.0

SinoPac Holding 13.9 O 17.0 22.7 1.4 9.7 1.0 10.3

CDF 9.5 O 10.0 5.2 0.7 14.2 0.8 6.0

Source: Company data, Credit Suisse estimates.

Resilient July profits reaffirm our positive view

Taiwan financials reported resilient earnings in July, sustaining the strength from 1H14. This reaffirms our positive view on the sector as we expect the sector to lead Taiwan’s earning upgrade in the coming month. Since our sector review in early July (click here), the sector’s consensus earnings have risen by 5%, though we expect to see more

upgrades as the current expectation of a 20% YoY profit decline in 2H14 (from -28% a month ago) is still too excessive, in our view.

Banks: Sustaining momentum into 2H14

All bank-centric FHCs' July earnings remain strong with aggregate net profit improving by 30% YoY. We expect bank earnings to continue to benefit from strong fee income momentum, robust FC loan growth and lower-than-expected credit cost with Taiwan corporates cash flows and balance sheet in their best condition since 2007. With the TMU business gradually recovers in August, we expect to see more support for banks to offset the impact froom higher business tax increase to 5% from 2%. Among banks, we see the best upside to consensus estimates for CTBC Holding and SinoPac Holding.

Insurers reported strong earnings on dividend income

Insurers reported very strong earnings in July boosted by dividend income and well-contained FX hedging cost. In particular, Cathay and Fubon each booked a NT$6-7 bn dividend income in July. We expect insurers’ dividend support to continue into August amid Taiwan's dividend paying season. Share prices of Taiwan insurers have been supported over the past few months by stronger capital market related earnings while the US bond yield (historically 80% correlated to their share price) declined. For example, Cathay FHC’s share is currently priced for 2.9% US 10-year bond yield (vs the actual yield of 2.5%).

Brokers perform well

Brokerage profits continued to improve with better market turnover (+7% MoM) and a further rise in retail long margins. In particular, CDF reported stronger earnings in the month (+340% MoM), likely boosted by higher dividend income and divestment gains at CDIB as well as MTM gains on its China Life Taiwan stake at KGI.

Figure 2: Monthly earnings for the financials under CS coverage (NT$ mn) Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 7M14 7M14 As a % of CS As a % of EPS (NT$) estimate consensus

Fubon FHC 2,366 982 3,129 2,201 483 6,704 3,717 3,095 2,826 4,521 6,108 11,609 38,957 3.81 87% 98% Cathay FHC 2,750 2,300 1,700 780 (290) 4,030 3,760 4,510 3,070 2,920 12,260 7,730 38,330 3.03 83% 100% Shin Kong FHC 323 (100) 179 (242) (639) (447) 771 1,064 135 (130) 1,951 1,545 4,888 0.43 51% 49%

CTBC Holding 1,676 1,609 1,903 1,872 (542) 2,873 2,484 2,438 1,970 1,856 16,856 2,345 30,822 2.10 82% 92% E. Sun FHC 752 717 716 707 475 1,020 841 1,002 893 904 881 949 6,491 1.00 59% 62% SinoPac Holding 682 780 875 734 820 1,417 1,012 515 648 1,488 2,125 1,213 8,419 1.03 72% 79% Taishin FHC 1,180 1,110 1,130 780 420 1,900 1,430 1,500 1,320 1,240 1,660 1,330 10,370 1.26 70% 80% Mega FHC 1,590 2,260 1,641 1,447 1,202 2,315 3,251 2,479 2,523 2,794 2,773 3,004 19,139 1.54 73% 71% First FHC 1,055 831 627 492 454 1,151 1,049 1,454 1,324 1,642 1,595 1,292 9,508 1.10 78% 81% Hua Nan FHC 816 749 859 785 818 975 996 1,007 878 1,004 1,445 1,362 7,667 0.85 71% 69% CHB 716 809 687 601 690 982 1,240 878 1,180 905 783 1,172 7,140 0.92 71% 72%

CDF 578 558 1,118 209 646 658 788 1,218 703 1,026 408 1,801 6,601 0.45 67% 66%

Source: TEJ, EMOPS, Company data, Credit Suisse estimates

https://doc.research-and-analytics.csfb.com/docView?sourceid=em&document_id=x578161&serialid=QS8D7iACIpi3fJsz4KLodckBU23G7IaUipcV8P01wWs%3d

https://doc.research-and-analytics.csfb.com/docView?sourceid=em&document_id=x578161&serialid=QS8D7iACIpi3fJsz4KLodckBU23G7IaUipcV8P01wWs%3d


Asian Daily

- 6 of 33 -

Mahindra & Mahindra ------------------------------------------------------- Maintain OUTPERFORM Maintaining profitability in a challenging environment EPS: ◄► TP: ▲ Jatin Chawla / Research Analyst / 91 22 6777 3719 / [email protected] Akshay Saxena / Research Analyst / 91 22 6777 3825 / [email protected]

● Results were better than expected with margins for M&M+MVML expanding 50 bp YoY (on comparable numbers for MTBL merger) and profits growing ~5% YoY to ~Rs9 bn. Despite auto volumes declining 5% YoY, margins expanded 60 bp with a ~9% increase in realisations on a better mix, lower discounts vis-à-vis peers and synergy benefits with the MTBL merger.

● Our worry on M&M until April when we turned positive on valuations had been a weak product cycle. But that appears set to change with the company now planning five new launches in the next 15 months (three in passenger and two in commercial). While the compact UV launches are in FY16, Scorpio gets a major refresh next month.

● M&M lowered FY15 tractor growth guidance from 8% to 5%; we have cut our est. from 5% to 0%. It also has a new tractor platform launch next quarter which it hopes will help improve its share.

● We continue to prefer domestic 4W in Indian autos. While Maruti remains our top pick, focus on M&M too should increase as it launches new products across segments (UVs, tractors, Ssangyong). TP rises to Rs1,410 as we roll forward.


New launches should help regain a part of lost share in autos

The company noted that the auto industry is showing signs of a revival with all segments other than LCV returning to growth. M&M is planning five new launches/variants in the next one year of which three will be in the UV space and two in the CV segment. M&M has a huge market share loss in UVs over the past two years due to the absence of products in the thriving compact UV space which the company hopes to rectify with these launches. It has continued to maintain share in the UV2 space (through Scorpio, XUV500 which are seeing good growth); just the absence of products in UV1 space has hurt its market share. Compact UVs have car-like driving characteristics are targeted at even the hatchback car buyers. It expects this trend to continue for the next few years, hence UVs should continue to grow faster than cars. M&M took a 1-1.5% price hike in autos in the quarter while it didn't take any price hike in tractors.

Tractor guidance lowered but expecting better prospects

Management has lowered its tractor growth guidance for FY15 from 8% to 5% due to deficient and delayed monsoon. The deficit though has come down significantly over last month and it expects good rainfall to continue. The sowing area picked up in July and it expects prospects of rabi crop to improve. The company will soon launch a new platform for tractors with which it hopes its market share will improve further (historically, there haven't been major market share movements in tractors). It also lowered its inventory by 3-4 days in the quarter.

Improving profitability despite a volume decline

The key positive has been the company is improving its profitability even with the volume decline. Auto margins expanded ~60 bp YoY while tractor margins improved ~20 bp YoY. The company attributed this to several factors: a lower-than-estimated increase in raw material prices, M&M has done a good job of containing discounts, reasonable price increases and some synergy benefits from the MTBL merger.

Few headwinds in Ssangyong, but growth should improve with new launches

For Ssangyong, it expects volumes to broadly stay flat YoY for CY14 at ~150,000 units with a slowdown in Russia impacting sales. Profitability improved though there was an impact of appreciating KRW and increasing labour costs with new court ruling on labour costs. The new compact SUV, X100, is slated for launch in 1Q CY15; management sees a significant volume increase from this product.

Figure 1: M&M+MVML results summary (base comparable for MTBL) (Rs mn) 1Q14A 4Q14A 1Q15A % YoY % QoQ

Net sales 98,203 102,144 99,073 0.9% -3.0%

EBIDTA 13,526 10,604 14,192 4.9% 33.8%

EBIDTA margin 13.8% 10.4% 14.3%

Reported PAT 8,598 9,676 8,964 4.3% -7.4%


Figure 2: M&M+MVML segmental results (base comparable for MTBL) (Rs mn) 1Q14A 4Q14A 1Q15A % YoY % QoQ

Net sales - Autos 59,806 70,565 59,886 0.1 (15.1) - Tractors 38,995 31,879 39,329 0.9 23.4 PBIT - Autos 5,855 3,344 6,243 6.6 86.7 - Tractors 6,527 5,442 6,661 2.0 22.4 ASP - Autos 486 526 532 9.4 1.0 - Tractors 523 576 528 0.9 (8.4) PBIT margins - Autos 9.8 4.7 10.4 63 bps 569 bps - Tractors 16.7 17.1 16.9 20 bps -13 bps


Bbg/RIC MM IN / MAHM.BO Rating (prev. rating) O (O) Shares outstanding (mn) 615.89 Daily trad vol - 6m avg (mn) 1.3 Daily trad val - 6m avg (US$ mn) 23.7 Free float (%) 73.4 Major shareholders Mahindra group

Price (08 Aug 14 , Rs) 1,229.10 TP (prev. TP Rs) 1,410 (1,350) Est. pot. % chg. to TP 15 52-wk range (Rs) 1246.8 - 766.2 Mkt cap (Rs/US$ bn) 757.0/ 12.4


Absolute (%) 5.7 8.8 42.4 Relative (%) 4.5 1.3 7.6

Year 03/13A 03/14A 03/15E 03/16E 03/17E

Revenue (Rs mn) 404,412 405,085 429,112 499,299 572,157 EBITDA (Rs mn) 47,093 47,212 52,162 62,605 72,584 Net profit (Rs mn) 32,622 37,056 36,525 43,994 50,886 EPS (Rs) 53.1 60.4 59.5 71.7 82.9 - Change from prev. EPS (%) n.a. n.a. 0 0 - Consensus EPS (Rs) n.a. n.a. 63.5 74.6 91.8 EPS growth (%) 13.3 13.6 (1.4) 20.5 15.7 P/E (x) 23.1 20.4 20.7 17.2 14.8 Dividend yield (%) 1.2 1.3 1.3 1.3 1.3 EV/EBITDA (x) 16.2 15.9 14.3 11.6 9.7 P/B (x) 5.1 4.5 3.9 3.3 2.8 ROE (%) 24.3 23.6 20.1 20.8 20.4 Net debt(cash)/equity (%) 3.0 (3.0) (6.6) (13.9) (20.9)

Note 1: ORD/ADR=1.00. Note 2: M&M is engaged in financial services, tourism, infrastructure development, trade and logistics. It operates in nine segments: Automotive, Farm equipment, Financial services, Steel trading and processing, Hospitality, IT services.

https://rave.credit-suisse.com/research/company/financials?ric=MAHM.BO


Asian Daily

- 7 of 33 -

China

China Economics ----------------------------------------------------------------------------------------------- China’s July exports surprised on the upside Dong Tao / Research Analyst / 852 2101 7469 / [email protected] Weishen Deng / Research Analyst / 852 2101 7162 / [email protected]

● China’s export growth increased to 14.5% YoY in August from that of 7.2% YoY in July, against the consensus of 7.0%, while imports contracted by 1.6% YoY. This combination resulted in a record high monthly trade balance of US$47.3 bn.

● This robust export growth figure is a large upside surprise even if taking the high noise associated with the data into account. The surprise index is at 0.90, the highest since January this year.

● We had expected to see improvement in export growth. Channel checks and our analysis pointed to continued improvement in export growth in the month. The contraction in imports is driven by weak commodity imports and the high statistical base.

● A relatively better growth condition in the US and emerging markets should support China's exports. But we are also aware of the potential impact from the on-going geopolitical events. We expect to see the import growth to remain weak in the coming months. Therefore, net trade is still likely to be robust to support the overall GDP growth in the quarter.

China’s export growth increased to 14.5% YoY in August from that of 7.2% YoY in July, while the Bloomberg consensus expected the growth rate to have improved to 7.0%. Imports contracted by 1.6% on a YoY basis, while the consensus expected a positive growth of 2.6%. Such combination between import and export growth resulted in a record high monthly trade balance of US$47.3 bn.

Figure 1: Large positive surprise to the consensus

-4.0

-3.0

-2.0

-1.0

0.0

1.0

2.0

3.0

4.0

Jul-

10

Oct-

10

Jan

-11

Ap

r-11

Jul-

11

Oct-

11

Jan

-12

Ap

r-12

Jul-

12

Oct-

12

Jan

-13

Ap

r-13

Jul-

13

Oct-

13

Jan

-14

Ap

r-14

Jul-

14

Surprise index for export growth

Source: General Administration of Customs, Credit Suisse

A large positive surprise in exports

This robust export growth figure is a large surprise on the upside to the consensus even if taking the high noise associated with the data into account. Figure 1 shows that the surprise index we calculate for export growth. The surprise index is at 0.90, the highest since January this year.

Broadly on track with our forecast

We had expected to see improvement in China’s export growth, based on the channel checks which suggested improvement in order flows since April. Our analysis based on PMI data also pointed to continued improvement in export growth in the month (For details: please see: Asian Daily: HSBC flash PMI gained further strength, published on 24 July). Figure 2 shows the seasonally adjusted underlying path of China's export value. After taken into seasonality and irregular distortions into account, the underlying path of exports continued to improve in July. Meanwhile Figure 3 shows that upward export growth

momentum remained robust. These suggest that headline export growth is likely to remain healthy in the coming months.

Figure 2: Underlying path continued to point upward …

70,000

90,000

110,000

130,000

150,000

170,000

190,000

210,000

Export (seasonally adjusted, USD mn)

Underlying path

Source: General Administration of Customs , Credit Suisse

Figure 3: … with a healthy sequential growth momentum

-6.0

-4.0

-2.0

0.0

2.0

4.0

6.0Export value (underlying path, % 3mma)

Source: General Administration of Customs, Credit Suisse estimates

Weak commodity demand and high base effect are behind the import decline

We expected the import growth to have contracted by -1.0% YoY, while the actual release is largely in line with our expectation. We believe the year-on-year contraction in imports is driven by two key factors. First, weak commodity imports. The domestic investment growth has remained weak in the past months, limiting the demand for commodity imports. The regulatory environment towards the commodity financing has also tightened in recent months. In value terms, the iron ore imports fell by 12.1% YoY (prior -3.3% YoY) and the copper imports contracted by 15.6% YoY (prior -15.6% YoY). Second, the statistical base was set high. Thus, the negative import growth and the large net trade balance did not surprise us.

Robust net trade to support growth

The strong data flow from the US is a positive factor and a relatively better growth condition in the emerging markets should also support China's export performance. But we are also aware of the potential impact from the on-going geopolitical events. We expect to see the import growth to remain weak in the coming months given the uninspiring domestic investment momentum as well as a tight environment towards commodity financing. Therefore, net trade is still likely to be robust to support the overall GDP growth in the quarter, in our opinion.


Asian Daily

- 8 of 33 -

China Economics ----------------------------------------------------------------------------------------------- July CPI inflation stayed muted Dong Tao / Research Analyst / 852 2101 7469 / [email protected] Weishen Deng / Research Analyst / 852 2101 7162 / [email protected]

● China's July headline CPI inflation stayed at 2.3% YoY, unchanged from its earlier. Food inflation came at 3.6% YoY, and non-food inflation moderated to 1.6% YoY versus 1.7% earlier.

● Pork prices saw an increase of 0.7% MoM. It is worth noting that the sequential increase in pork prices in recent months have not yet reversed the capacity reduction in the sow stock. This places upside uncertainty to pork prices in the medium term.

● This data point does not materially change the inflation outlook, in our view. Muted headline inflation leaves room for monetary policy manoeuver, if necessary. However, the PBoC's latest quarterly report has a more hawkish tone towards the inflation outlook and a better growth outlook.

● We share the view with the PBoC that inflation uncertainty is high in the medium term. Higher inflationary uncertainty and an improved growth outlook limit the willingness for the PBoC to ease the monetary policy further. We see the central bank maintaining its neutral policy stance.

Figure 1: Summary of July CPI inflation (% YoY, unless otherwise stated) July June May Apr Mar

Headline CPI 2.3 2.3 2.5 1.8 2.4 %mom, nsa 0.1 -0.1 0.1 -0.3 -0.5 Food CPI 3.6 3.7 4.1 2.3 4.1 %mom, nsa -0.1 -0.4 0.2 -1.3 -1.6 Non-food CPI 1.6 1.7 1.7 1.6 1.5 %mom, nsa 0.1 0.0 0.1 0.2 0.1 Services CPI 2.5 2.6 2.7 2.7 2.8 %mom, nsa 0.5 0.1 0.0 0.2 -0.1 PPI -0.9 -1.1 -1.4 -2.0 -2.3

Source: NBS, Credit Suisse

Figure 2: Food and non-food price dynamics

0

1

2

3

4

5

Dec 1

2

Jan

13

Feb 1

3

Mar 1

3

Ap

r 13

May 1

3

Jun

13

Jul 1

3

Au

g 1

3

Se

p 1

3

Oct 1

3

Nov 1

3

Dec 1

3

Jan

14

Feb 1

4

Mar 1

4

Ap

r 14

May 1

4

Jun

14

Jul 1

4

Contribution to headline from food inflation(% yoy)

Contribution to headline from non-food inflation (% yoy)

Source: NBS, Credit Suisse

China's headline CPI inflation stayed at 2.3% YoY in July, unchanged from its prior and in line with the Bloomberg consensus. For the first seven months of the year, CPI inflation stood at 2.3%.

Food inflation came at 3.6% YoY for the month. Food prices contributed 1.18 pp to the headline in July, a slight change from 1.21 pp in June. Fresh fruit prices increased most among the food basket, by 20.1% YoY. The low base is the key factor behind this YoY jump; sequentially, fresh fruit prices declined by 6.3% MoM. Egg prices increased by 19.5% YoY. The particularly hot weather and the early arrival of mid-autumn festival are the main driving factors, in our view.

We believe double-digit inflation in these two items is a temporary, rather than a persistent, trend.

Pork prices saw a sequential increase of 0.7% MoM, but the very high base set last year resulted in a negative YoY price change at -3.6%. It is worth noting that the sequential increase in pork prices in recent months has not yet helped to reverse the capacity reduction in the sow stock. The sow stock has fallen to a trough level seen in summer 2010. This places upside uncertainty to pork prices in the medium term, in our view (for details, please see China: Don't forget the piglets, 20 May 2014).

Non-food inflation moderated to 1.6% YoY in July, against 1.7% earlier. Sequentially, non-food inflation increased 0.1% MoM. Services inflation increased 0.5% MoM, but this largely represents a seasonal rebound rather than a shift in the underlying dynamics. In fact, in YoY terms, services inflation moderated to 2.5%, the lowest level since January 2013. Tourism cost increased most among the non-food basket, by 4.6% MoM and 7.5% YoY. This largely reflects the summer travel peak, in our view. PPI deflation narrowed further to -0.9% YoY, reflecting the improvement in the production sector.

This data point does not materially change the inflation outlook, in our view. Muted headline inflation leaves room for monetary policy manoeuver, if necessary. However, the PBoC's latest quarterly report has a more hawkish tone towards the inflation outlook and a better growth outlook. We share the view with the PBoC that inflation uncertainty is high in the medium term. Higher inflationary uncertainty and an improved growth outlook limit the willingness for the PBoC to ease the monetary policy further. We see the central bank maintaining its neutral policy stance. The key data point to watch is the fixed asset investment (FAI) growth in July. China's external demand conditions have improved as shown by the recent export data print. However, there is little evidence pointing to improvement in domestic investment activities. July FAI growth will be the first data point to reflect domestic investment activities in China after rounds of selective easing in June.

https://plus.credit-suisse.com/r/SzplGs

https://plus.credit-suisse.com/r/SzplGs


Asian Daily

- 9 of 33 -

China Market Strategy ----------------------------------------------------------------------------------------- New report: Potential plays of 'Shanghai-HK' Connect Vincent Chan / Research Analyst / 852 2101 6568 / [email protected]

● The 'Shanghai-HK' Connect scheme has been announced for almost four months now, and the market expects it to come soon. We highlight in this report the potential beneficiaries of the connect.

● Divide the potential beneficiaries into four types. We divide the potential beneficiaries into four types: (1) Hong Kong-listed stocks unavailable in the A-share market; (2) A-share stocks not listed in the Hong Kong market; (3) dual-listed stocks with an H-share premium over A-share counterparts; and (4) dual-listed stocks with a significant A-share premium over H-share.

● Stocks in each category. We highlight 38 stocks that would benefit from the connect scheme—17 are Hong Kong-listed stocks unavailable to A-share investors, 13 are A-shares not listed in the Hong Kong market and eight are dual-listed stocks with H-share premium over A-share.

■ Focus on A-share blue chips. We think A-share blue chips with no

HK listing (such as SAIC Motor, Industrial Bank, Moutai and

Baosteel) and stocks with a significant H-share premium (such as

Anhui Conch and China Pacific) should be the biggest

beneficiaries.

The 'Shanghai-HK' Connect scheme has been announced for almost

four months now, and the market expects it to come soon. We

highlight in this report the potential beneficiaries of the connect

scheme.

Divide the potential beneficiaries into four types. We divide the

potential beneficiaries into four types: (1). Hong Kong-listed stocks not

available in the A-share market; (2) A-share stocks not listed in the

Hong Kong market; (3) dual-listed stocks with an H-share premium

over A-share counterparts; and (4) dual-listed stocks with a significant

A-share premium over H-share.

Stocks in each category. We highlight a total 38 stocks that we think

would benefit from the connect scheme—17 are Hong Kong listed

stocks unavailable to A-share investors, 13 are A-shares not listed in

the Hong Kong market and eight are dual-listed stocks with a H-share

premium over A-share. We don't have any recommendations for dual-

listed stocks with a significant A-share premium over H-share, as they

usually are very small cap companies with limited institutional interest

and questionable fundamentals.

Focus on A-share blue chips. We believe that initially the fund flow of

international investors into China will be bigger than that from

domestic Chinese institutional investors into HK. Therefore, A-share

blue chips with no HK listing (such as SAIC Motor, Industrial Bank,

Moutai and Baosteel) and stocks with a significant H-share premium

(such as Anhui Conch and China Pacific) should be the biggest

beneficiaries.

Figure 1: Valuation of A-shares not listed in HK Price TP Up/down to 5y CFROI LFY CFROI Mkt-implied HOLT Ticker Name Rat. (LC) (LC) TP(%) median CFROI forecast CFROI upside (%)

600271.SS Aisino Co Ltd O 22.67 28.00 23.51 19.00 18.21 18.61 8.37 74 600019.SS Baoshan Iron & Steel Co O 4.69 5.70 21.54 1.10 1.16 1.23 (2.72) 89 600900.SS China Yangtze Power Co Ltd O 6.74 7.60 12.76 5.80 5.83 6.42 4.95 23 601006.SS Daqin Railway Co Ltd O 7.03 12.00 70.70 11.30 9.49 11.36 (0.42) 101 601166.SS Industrial Bank Co Ltd O 10.54 13.22 25.43 20.30 21.54 15.07 2.13 130 600887.SS Inner Mongolia Yili Indus N/A 25.9 N/A N/A 9.90 13.66 13.64 13.98 (24) 600276.SS Jiangsu Hengrui Medicine N/A 33.01 N/A N/A 16.00 15.94 15.46 14.1 (9) 600519.SS Kweichow Moutai Co Ltd N/A 160.6 N/A N/A 31.20 36.52 28.42 10.51 109 600690.SS Qingdao Haier Co Ltd N/A 15.57 N/A N/A 11.50 12.81 11.49 7.22 41 600104.SS SAIC Motor Corporation Ltd N/A 15.81 N/A N/A 10.20 6.16 7.32 5.91 12 600031.SS Sany Heavy Industry Co Ltd N/A 5.84 N/A N/A 20.40 7.72 8.23 6.01 0 600018.SS Shanghai International Port N/A 4.6 N/A N/A 7.60 7.59 8.83 9.75 (10) 600000.SS Shanghai Pudong Devel Bank O 9.56 12.19 27.53 17.20 17.16 14.39 0.49 148

Source: HOLT ®, Credit Suisse estimates

Figure 2: Valuation of dual-listed stocks with a H-share premium over A-share Price - A Price - A Price - H TP - H Ticker - A Ticker - H Name (Rmb) (HK$) (HK$) H vs. A Rat. (H) (HK$) Upside to TP

600585.SS 0914.HK Anhui Conch Cement Co Ltd 17.92 22.54 29.50 30.87 O 36.00 22.03 601601.SS 2601.HK China Pacific Insurance Gr 19.38 24.38 29.35 20.39 O 36.00 22.66 601628.SS 2628.HK China Life Insurance Co 14.97 18.83 22.70 20.55 N 21.00 (7.49) 601318.SS 2318.HK Ping An Insurance Group Co 42.99 54.08 64.75 19.74 O 82.00 26.64 601088.SS 1088.HK China Shenhua Energy Co 15.40 19.37 23.20 19.76 N 20.70 (10.78) 601186.SS 1186.HK China Railway Construction 5.04 6.34 7.59 19.72 O 9.20 21.21 601288.SS 1288.HK Agricultural Bank Of China 2.49 3.13 3.72 18.77 O 4.70 26.34 601390.SS 0390.HK China Railway Group Ltd 2.84 3.57 4.32 20.93 O 4.85 12.27

Source: HOLT ®, Credit Suisse estimates

https://doc.research-and-analytics.csfb.com/docView?language=ENG&source=ulg&format=PDF&document_id=1036899371&serialid=Q2Ct6cv9Podu65ecZYTWvbWiLajZD5MS5MjaAFRuf%2bI%3d


Asian Daily

- 10 of 33 -

China Resources Cement Holdings Ltd ------------------------------ Maintain OUTPERFORM 1H14 results summary: Solid 1H14, softening 2H14 mostly in the price EPS: ▲ TP: ▼ Trina Chen / Research Analyst / 852 2101 7031 / [email protected] Gary Xu / Research Analyst / 86 21 3856 0335 / [email protected]

● CR Cement's 1H14 net profit was Rmb2.056 bn, or EPS of HK$0.31, up 79% YoY. Excluding the FX loss of HK$146 mn, EPS would be HK$0.33, up 125% YoY, in line with our expectation.

● Sales volume was 34.7 mn t, flat YoY. Unit gross profit was HK$119/t (Rmb93/t), up 82% YoY. SG&A was better than expected. Unit sales expense increased 19% YoY due to the higher transport cost from more intra-province cement sales (GX to GD 20% more), and we estimate the trend will stabilise in 2H14.

● Working capital management was weaker, with slightly higher A/R days and lower A/P days than expected. Cement prices were softer than expected, partly due to the weak season. We expect 2H14 unit gross profit to soften by 20% HoH to HK$100/t (Rmb78/t).

● We revise up earnings by 7% for 2014E to reflect the lower SG&A. Our revised target price is HK$6.7 (from $7.2) due to weaker WC management. Valuation is undemanding, as the share price implies GP (annualised) at HK$99/t. Maintain OUTPERFORM.


Our target price is based on SOTP, including HK$6.2 for cement based on 7x EV/EBITDA on 2014E, HK$0.3 for RMC based on 10x P/E and HK$0.2 for associates on 12x P/E.

Figure 1: Earnings and valuation sensitivity – CRC

CR CEMENT EBITDA/t EPS EV/t Valuation @ EV/EBITDA

2014E 2014E 7x 6x 7x 8x

US$/t HK$/sh US$/t HK$/sh HK$/sh HK$/sh

Base case - US$1.3/t 11.4 0.56 80 4.6 5.7 6.9

Base case 12.7 0.66 89 5.4 6.7 7.9

Base case + US$1.3/t 14.0 0.76 98 6.1 7.6 9.0

For HK$10/t chg in ASP 1.3 0.10 9 0.8 0.9 1.0 Source: Company data, Credit Suisse estimates.

Figure 2: 1H14 results summary – CRC 1H14A 1H13A YoY 1H14E AvE

Total revenue HK$ mn 15,161 12,858 18% 15,186 0% COGS HK$ mn (10,330) (9,892) 4% (10,193) 1% Gross Profit HK$ mn 4,831 2,966 63% 4,993 -3% Sales & dist HK$ mn (840) (703) 19% (963) -13% Admin HK$ mn (883) (853) 3% (1,023) -14% Operating Profit HK$ mn 3,138 1,773 77% 3,127 0% Finance costs HK$ mn (350) (374) -7% (356) -2% Net profit HK$ mn 2,056 1,146 79% 2,127 -3% Recurring NP HK$ mn 2,162 962 125% 2,234 -3% EPS HK$/sh 0.31 0.18 79% 0.33 -3% EPS-recurring HK$/sh 0.33 0.15 125% 0.34 -3%

A/R days days 60 58 4% A/P days days 37 40 -6% Inv days days 49 55 -11% Net debt HK$ mn 17,621 19,390 -9% Net gearing % 67% 87% -19%

Sales-cement/clinker mn tonnes 34.7 35.2 -1.5% 35.9 -3% GD mn tonnes 14.8 13.0 14% 12.3 20% GX mn tonnes 10.3 13.3 -23% 12.5 -18% Fujian mn tonnes 3.9 4.2 -7% 4.3 -11% Hainan mn tonnes 2.4 1.7 35% 1.8 30% Shanxi mn tonnes 1.7 1.5 11% 2.0 -16% Others mn tonnes 1.7 2 10% 2.8 -41% ASP HK$/t 348 291 19% 328 6% Unit gross profit HK$/t 119 66 82% 112 7% Unit EBIT HK$/t 90 43 110% 88 3% Unit EBITDA HK$/t 113 65 74% 108 5%

Sales-concrete mn m3 7.4 6.9 7% 8.4 -12% Unit gross profit HK$/m3 93 95 -2% 92 1% Unit EBIT HK$/m3 24 26 -6% 14 77%


Figure 3: Key assumptions and financials – CRC

CR CEMENT 2012A 2013A 2014E 2015E 2016E

Eq cement capacity mn tonnes 74 76 79 84 91

Eq cement capacity (ex asso)mn tonnes 65 67 71 76 83

Sales volume mn tonnes 65 75 77 82 87

ASP HK$/t 315 314 332 325 328

Unit COGS HK$/t 241 221 223 224 227

Unit SG&A HK$/t 25 24 34 34 34

Unit gross profit HK$/t 74 93 109 101 101

Unit EBIT HK$/t 52 61 78 70 68

Unit EBITDA HK$/t 75 83 99 91 90

Unit financing cost HK$/t 10.7 7.8 8.1 7.8 7.1

Unit NP HK$/t 35 42 54 47 46

Net profit HK$ mn 2,324 3,338 4,307 4,111 4,324

Net profit - recurring HK$ mn 2,285 3,266 4,415 4,111 4,324

EPS HK$/sh 0.36 0.51 0.66 0.63 0.66

BV HK$/sh 3.28 3.81 4.39 4.92 5.49

Net debt HK$ mn 18,642 17,618 18,635 16,558 16,782

Operating cash flow HK$ mn 4,305 5,121 4,936 5,830 5,984

Investing cash flow HK$ mn (4,500) (3,317) (5,496) (3,107) (5,591)

Free cash flow HK$ mn (195) 1,804 (560) 2,723 393

ROE % 11% 14% 16% 14% 13%

ROIC % 7% 8% 9% 9% 8%

Gearing Rate (net debt/equity)% 87% 71% 65% 52% 47% Source: Company data, Credit Suisse estimates.

Bbg/RIC 1313 HK / 1313.HK Rating (prev. rating) O (O) Shares outstanding (mn) 6,532.94 Daily trad vol - 6m avg (mn) 13.1 Daily trad val - 6m avg (US$ mn) 9.1 Free float (%) 27.0 Major shareholders China Resources

National Corporation(73%)

Price (08 Aug 14 , HK$) 5.56 TP (prev. TP HK$) 6.70 (7.20) Est. pot. % chg. to TP 21 52-wk range (HK$) 6.30 - 4.60 Mkt cap (HK$/US$ mn) 36,323.1/ 4,685.9



Year 12/12A 12/13A 12/14E 12/15E 12/16E

Revenue (HK$ mn) 25,345 29,341 31,896 33,145 35,247 EBITDA (HK$ mn) 5,336 6,779 8,368 8,281 8,691 Net profit (HK$ mn) 2,324 3,338 4,307 4,111 4,324 EPS (HK$) 0.36 0.51 0.66 0.63 0.66 - Change from prev. EPS (%) n.a. n.a. 7 0 (2) - Consensus EPS (HK$) n.a. n.a. 0.63 0.70 0.77 EPS growth (%) (44.4) 43.6 28.8 (4.6) 5.2 P/E (x) 15.6 10.9 8.4 8.8 8.4 Dividend yield (%) 1.3 1.3 1.8 1.7 1.8 EV/EBITDA (x) 10.3 8.0 6.6 6.4 6.1 P/B (x) 1.7 1.5 1.3 1.1 1.0 ROE (%) 11.4 14.5 16.1 13.5 12.7 Net debt(cash)/equity (%) 84.9 69.5 63.8 50.6 46.0

Note 1: ORD/ADR=30.00. Note 2: China Resources Cement Holdings Limited is a cement and concrete producer in Southern China. Its operations range from the excavation of limestone to the production, sale and distribution of cement, clinker and concrete.



Asian Daily

- 11 of 33 -

Hidili Industry International Development Limited -----------------------Maintain NEUTRAL 1H14 results: Low productoin and coal price extend the losses EPS: ▼ TP: ▼ Frankie Zhu / Research Analyst / 852 2101 7426 / [email protected]

● Hidili's 1H14 net loss was Rmb968 mn, or EPS of -0.473, up 259% YoY; excluding Rmb710 mn PP&E impairment and Rmb60 mn FX loss, AR provisions and other one-offs, the recurring net loss was Rmb391 mn, worse than consensus due to weak coal prices, and the limited coal output affected by the current coal industry consolidation in southwest provinces.

● Coal output was 0.62mn tonnes, a 21% YoY decline; clean coal sales were 0.27mn tonnes, an 11% decline. Clean coal ASP was Rmb863/t, outperforming the Hebei benchmark as industry consolidation led to a tight local coal market in the southwest region in 1H14. Unit cost was up 4% YoY, yet still higher than normal due to a low production level.

● Net gearing rose to 106% mostly due to PP&E impairment losses. Hidili has identified some of its under-construction mines that may potentially shut down post the industry consolidation. Impairment may further expand if more assets are affected.

● Hidili’s production is gradually recovering, yet uncertainty in govt safety inspection remains. Maintain NEUTRAL and cut TP to HK$1.0 (from HK$1.3) to reflect impairments and lower output.


Figure 1: Quarterly and FY production volume—Hidili mn t 1Q14A 2Q14A 3Q14E 4Q14E FY14E FY15E

Sichuan 0.01 0.02 0.07 0.10 0.20 0.60 Guizhou 0.21 0.39 0.40 0.40 1.40 2.50 Total 0.21 0.41 0.47 0.51 1.60 3.10


Production recovery is too small to turn around earnings

Production gradually has resumed at 5x mines in Sichuan after mining licences are granted in May-July, and 1-4x will be constructed in 2H14 in Guizhou. The constructed capacity may reach 3.4-5.0 mtpa by the end of 2014, on our estimates, yet the production remains largely constrained by ad hoc safety inspections, uncertainty in industry consolidation and the ramp-up pace of individual new mines. The earnings recovery remains remote under current weak coal prices and Hidili’s high financial cost and slow production recovery.

Figure 2: 1H14 results summary—Hidili 1H14A 1H13A YoY 1H14E AvE

Revenue Rmb mn 328 408 -20% 689 -52% Gross profit Rmb mn 50 166 -70% 373 -86% Other OP income Rmb mn (704) 98 -819% 49 n.a. SG&A Rmb mn (189) (231) -18% (269) -30% Operating profit Rmb mn (843) 33 n.a. 154 n.a. Finance cost Rmb mn (274) (259) 6% (168) 63% Net profit Rmb mn (968) (269) 259% 2 n.a. Net profit-recurring Rmb mn (391) (332) 18% 2 n.a. EPS Rmb/sh (0.473) (0.131) 262% 0.001 n.a. EPS-recurring Rmb/sh (0.191) (0.161) 19% 0.001 n.a.

Raw coal output mn tonnes 0.62 0.78 -21% 1.40 -56% Sales volume mn tonnes 0.54 0.63 -15% 0.72 -25% Sales – clean coal mn tonnes 0.27 0.31 -11% 0.50 -45% Hebei HCC US$/t 141 179 -21% 167 -15% ASP - total Rmb/t 595 641 -7% 755 -21% ASP - clean Rmb/t 863 1,059 -18% 986 -12% Unit production cost Rmb/t 598 624 -4% 442 35% Unit EBITDA-self Rmb/t 10 133 -92% 246 -96%

AR days days 250 273 -8% n.a. n.a. AP days days 199 185 8% n.a. n.a. Inv. days days 50 108 -53% n.a. n.a. Net gearing % 106% 81% 25% n.a. n.a. Net debt Rmb mn 6,379 5,676 12% n.a. n.a.


Figure 3: Key assumptions and financials—Hidili

2012A 2013A 2014E 2015E 2016E

Seaborne HCC US$/t 210 159 128 135 145

China Hebei HCC US$/t 199 169 137 141 147

QHD thermal coal US$/t 103 88 80 80 85

ASP Rmb/t 881 635 609 668 706

Output - raw coal mn tonnes 3.5 1.5 1.6 3.1 4.7

Sales - total mn tonnes 1.8 1.1 1.1 1.7 2.8

Sales - clean coal mn tonnes 1.3 0.6 0.7 1.3 2.1

Unit production cost Rmb/t 444 560 614 450 422

Unit operating cost Rmb/t 749 1,025 1,019 786 680

Unit EBIT-self Rmb/t 383 (98) (217) 22 169

Unit EBITDA-self Rmb/t 473 (8) (102) 112 235

Net Profit Rmb mn (147) (425) (1,229) (337) 14

Net Profit (recurring) Rmb mn (130) (807) (588) (337) 14

EPS Rmb/sh (0.07) (0.21) (0.60) (0.16) 0.01

EPS (recurring) Rmb/sh (0.06) (0.39) (0.29) (0.16) 0.01

BV Rmb/sh 3.53 3.39 2.81 2.65 2.65

Net debt Rmb mn 6,988 5,676 7,256 7,754 7,939

Operating cash flow Rmb mn 658 151 (931) (247) 65

Investing cash flow Rmb mn (1,429) 874 (650) (250) (250)

Free cash flow Rmb mn (772) 1,025 (1,581) (497) (185)

ROE % -2% -6% -19% -6% 0%

ROIC % 21% 2% -5% 1% 3%

Net gearing % 96% 81% 126% 143% 146% Source: Company data, Credit Suisse estimates.

Bbg/RIC 1393 HK / 1393.HK Rating (prev. rating) N (N) [V] Shares outstanding (mn) 2,045.60 Daily trad vol - 6m avg (mn) 2.4 Daily trad val - 6m avg (US$ mn) 0.3 Free float (%) 47.0 Major shareholders Mr Xian Yang 53%

Price (08 Aug 14 , HK$) 1.03 TP (prev. TP HK$) 1.00 (1.30) Est. pot. % chg. to TP (3) 52-wk range (HK$) 1.51 - 0.83 Mkt cap (HK$/US$ mn) 2,107.0/ 271.8


Absolute (%) 17.0 14.4 (21.4) Relative (%) 11.8 0.7 (37.1)

Year 12/12A 12/13A 12/14E 12/15E 12/16E

Revenue (Rmb mn) 1,631 729 657 1,156 1,970 EBITDA (Rmb mn) 612.0 (114.7) (757.0) 285.5 756.8 Net profit (Rmb mn) (107) (167) (1229) (337) 14 EPS (Rmb) (0.05) (0.08) (0.60) (0.16) 0.01 - Change from prev. EPS (%) n.a. n.a. n.m n.m - Consensus EPS (Rmb) n.a. n.a. (0.10) -0.00 0.03 EPS growth (%) n.m. n.m. n.m. n.m. n.m. P/E (x) n.m. n.m. n.m. n.m. 121.9 Dividend yield (%) 0 0 0 0 0.2 EV/EBITDA (x) 14.2 (64.0) (11.8) 33.0 12.7 P/B (x) 0.2 0.2 0.3 0.3 0.3 ROE (%) (1.4) (2.3) (19.3) (6.0) 0.3 Net debt(cash)/equity (%) 94.6 80.9 125.5 142.6 145.6

Note 1: ORD/ADR=100.00. Note 2: Hidili is a premium coal production and development company, with major coal assets located in Sichuan, Guizhou, Yunnan of China.



Asian Daily

- 12 of 33 -

Hong Kong

Hysan Development Co. --------------------------------------------------- Maintain OUTPERFORM Ripening low-hanging fruit for more rental growth EPS: ◄► TP: ◄► Joyce Kwock / Research Analyst / 852 2101 7496 / [email protected] Wayne Lee / Research Analyst / 852 2101 7165 / [email protected]

● Hysan announced 1H14 core profit of HK$1.08 bn, up 5% YoY, and higher than consensus of a mild YoY decline. Interestingly, this is the eighth consecutive financial period where we have seen Hysan reporting core profit beating street estimates.

● Hysan announced a new AEI at the Lee Garden mall with an estimated capex of HK$150-200 mn, which will create an extra 10,000 sq ft of retail space across all floors (5,300 sq ft of which has already been committed).

● Hysan has achieved positive rental reversions for its retail and office portfolios in 1H14, at an average increase of 60% and 25%, respectively. This would serve as an organic growth driver for Hysan's rental income for 2H14 and FY15.

● Hysan also has other growth drivers for its rental income in FY14-15. Beyond FY16, we expect the market to start focussing on Sunning re-development. We believe there is room for street EPS estimates to be revised up, due to strong positive rental reversions over the past 18 months. We reiterate OUTPERFORM.


Profit grows even during Sunning re-development

Hysan announced 1H14 core profit of HK$1.08 bn, implying 5% YoY growth. It was higher than consensus of a mild YoY decline, but 3% lower than our estimate. Rental profits from both office and retail portfolios met our forecasts while the rental income decline of 11% YoY from residential was higher than our estimate.

We believe that the street has been too conservative, as they appear to have (1) overlooked the effect of Hysan's marketing strategy on tenant sales and rentals; (2) overlooked the impact of positive rental reversions achieved in the previous period on the future rental income; and (3) over-estimated the loss of income from Sunning re-development.

Indeed, interestingly, this is the eight consecutive financial period where we have seen Hysan reporting core profit beating street estimates.

Pro-active marketing and low base resulted in tenant sale outperformance

As we have pointed out in our previous reports, Hysan has been pro-active in marketing over the past 12 months, including tie-ups with "Captain America", "LINE", "adidas x Captain Tsubasa".

These have resulted in a significant pick-up in shoppers' footfalls and strong tenant sale growth. In 1H14 tenant sales, Hysan's overall retail recorded 16% YoY growth, and Lee Theatre further outshined with 50% YoY growth; in addition, Hysan Place clocked 25% YoY growth.

More low-hanging fruit to ripe: new AEI at Lee Gardens

Hysan has announced a new AEI, at ground floor lobby and higher floors of the Lee Garden mall, to be commenced in 4Q14 and completed in 2H16. With an estimated capex of HK$150-200 mn, an extra 10,000 sq ft of retail space will be created. 5,300 sq ft has already been committed by a luxury brand as its new flagship store.

We deem it as another evidence of Hysan's pro-active strategy to enhance NAV and income, amid various low-hanging fruit in its portfolio.

Sunning re-development is well on track, and scheduled for completion in 2018. This should serve as the medium- to long-term growth driver for Hysan.

Massive positive rental reversions in the past 18 months to improve income growth

Hysan has achieved positive rental reversions for its retail and office rental portfolios in 1H14, at an average increase of 60% and 25%, respectively. Together with positive rental reversions achieved in FY13, we expect this to serve as a key organic growth driver for Hysan's rental income for FY14-15.

We believe there is room for street EPS estimates to be revised up, in light of large positive rental reversions achieved over the past 18 months. We reiterate OUTPERFORM on Hysan, as a retail land lord with income growth supported by a low base and more proactive strategies.

Figure 1: Hysan 1H14 results analysis (HK$ mn) Year to 31 December 1H13A 1H14E 1H14A YoY% A vs E

Net rental income 1,350 1,440 1,418 5% -1% Dividend income from listed inv. 36 38 27 -25% -29% Net interest expense (121) (128) (115) -5% -10% Other income less sundry expenses (104) (102) (112) 8% 10% Operating profit 1,161 1,247 1,218 5% -2% Associated companies 112 124 120 7% -3% Profit before taxation 1,273 1,371 1,338 5% -2% Taxation (188) (202) (187) -1% -7% Minority interest (52) (51) (69) 33% 34% Core profit 1,033 1,117 1,082 5% -3%


Bbg/RIC 14 HK / 0014.HK Rating (prev. rating) O (O) Shares outstanding (mn) 1,063.73 Daily trad vol - 6m avg (mn) 1.1 Daily trad val - 6m avg (US$ mn) 4.8 Free float (%) 59.1 Major shareholders Lee Hysan Estates

(40.9%)

Price (07 Aug 14 , HK$) 36.55 TP (prev. TP HK$) 45.50 (45.50) Est. pot. % chg. to TP 24 52-wk range (HK$) 38.0 - 30.7 Mkt cap (HK$/US$ mn) 38,879.4/ 5,016.1


Absolute (%) — 7.2 5.6 Relative (%) (5.2) (4.4) (7.0)

Year 12/12A 12/13A 12/14E 12/15E 12/16E

EBITDA (HK$ mn) 2,171 2,770 2,991 3,231 3,437 Net profit (HK$ mn) 1,622 2,043 2,257 2,433 2,603 EPS (HK$) 1.53 1.92 2.12 2.29 2.45 - Change from prev. EPS (%) n.a. n.a. 0 0 0 - Consensus EPS (HK$) n.a. n.a. 2.05 2.16 2.31 EPS growth (%) 24.2 25.3 10.5 7.8 7.0 P/E (x) 23.8 19.0 17.2 16.0 14.9 Dividend yield (%) 2.6 3.2 3.5 3.8 4.1 EV/EBITDA (x) 19.6 15.3 13.9 12.7 11.7 ROE (%) 3.0 3.4 3.5 3.8 4.0 Net debt(cash)/equity (%) 6.0 5.1 4.1 3.1 2.0 NAV per share (HK$) — — 63.2 — — Disc./(prem.) to NAV (%) — — 42.2 — —

Note 1: ORD/ADR=2.00. Note 2: Hysan Development Company Limited, through its subsidiaries, invests in and develops real estate. The company's properties include the rental of commercial and luxury residential buildings in Hong Kong. The company also invests in capital markets.



Asian Daily

- 13 of 33 -

India

India IT Services Sector --------------------------------------------------------------------------------------- New report: Aggregate trends look robust Anantha Narayan / Research Analyst / 91 22 6777 3730 / [email protected] Nitin Jain / Research Analyst / 91 22 6777 3851 / [email protected]

● Aggregate trends for the sector look robust: Revenue of the six large companies grew 14% in the quarter (LTM-last 12 months, USD), similar to the growth in the March quarter and well above the low of 10% reached in the March 2013 quarter. Full report.

● Among the industry segments, notably, the telecom segment is showing signs of improvement. Europe continues to be a strong growth driver for the sector and aggregate revenue for the top 5 companies rose 20% (LTM, USD).

● Margins have ticked up in aggregate from year-ago levels: Margins were down sequentially, due to seasonal reasons (wage increases for many companies and visa costs being the key reasons) but were up slightly YoY. There has been a focus to improve utilisation and employee productivity.

● HCL Tech and Tech Mahindra are our top picks: Continuing strength in infra, pick-up in software, sustainable margins and attractive valuations could aid HCLT. Strong positioning in telecom, increasing momentum in enterprise, opportunity to expand margins medium term and valuations could help TechM.

Figure 1: Growth momentum remained strong

6%8%

10%12%14%16%18%20%22%

Mar-12Jun-12Sep-12Dec-12Mar-13Jun-13 Sep-13Dec-13Mar-14Jun-14

Organic revenue growth YoY, US$ (LTM)

Top 6 Indian IT firms

Source: Company data

Aggregate trends for the sector look robust

Aggregate revenue growth remained stable at 14% and margins have ticked up in aggregate from the year-ago levels. The larger companies continue to grow faster—Mindtree is a notable exception among the smaller ones. Notably, the telecom segment is showing signs of improvement and aggregate revenue growth has accelerated to 12% from 1% growth a year ago. Europe remains an important growth driver with 20% growth. Infra remains the best performing service line and HCLT remains the clear leader in this.

Margins have ticked up in aggregate from year-ago levels

Margins were down QoQ due to seasonal reasons (wage increases for many companies and visa costs being the key reasons) but were up slightly YoY. Several companies’ focus is to improve utilisation and employee productivity, and headcount addition has been relatively low. The other notable development is a pickup in attrition for most companies. While increasing attrition is always a worry, this also reflects a robust demand environment and increased hiring of experienced professionals by companies.

HCL Tech and Tech Mahindra are our top picks

While infra growth may slow from the high levels over the past few years for HCLT, we expect growth to remain strong. Continuing strength in infra, pick-up in software, sustainable margins and

attractive valuations are drivers for the HCLT stock. We expect strong positioning in telecom, increasing momentum in enterprise, opportunity to expand margins in the medium term and attractive valuations to drive Tech Mahindra. TCS is growing the fastest, despite a larger scale and higher margins. Wipro's relative valuations are the most attractive and expectations are low. We still see uncertainty on revenue momentum and margin trajectory for Infosys.

Figure 2: LTM EBIT margin trend is still positive

20.0%

21.0%

22.0%

23.0%

24.0%

25.0%

Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14

LTM EBIT margins

Top 5 Indian IT companies Top 6 Indian IT companies


Figure 3: Telecom segment continues to gain momentum

12%

13%

14%

15%

16%

17%

18%

-5%

-3%

-1%

1%

3%

5%

7%

9%

11%

13%

M-12 J-12 S-12 D-12 M-13 J-13 S-13 D-13 M-14 J-14

Top 4 Indian IT companies' (excl Cognizant and HCL

Tech) - Telecom revenue

Organic revenue growth YoY, US$ (LTM) Telecom as % of revenues (RHS)


Figure 4: Contraction in multiples over 1y with some expansion in est.

-40%-30%-20%-10%

0%10%20%30%40%50%60%

TCS Infosys Wipro HCLT TechM

1 year change in rel P/E 1 year change in cons EPS est.


https://doc.research-and-analytics.csfb.com/docView?language=ENG&source=ulg&format=PDF&document_id=1036827381&serialid=DwUSFs8J2GJx8PpJA6%2fdocCpv27EIL9HHxyU24y4X60%3d


Asian Daily

- 14 of 33 -

Emami Ltd ---------------------------------------------------------------------- Maintain OUTPERFORM 1Q15: Stellar quarter; high growth likely to continue in the quarters ahead EPS: ▲ TP: ▲ Arnab Mitra / Research Analyst / 91 22 6777 3806 / [email protected] Akshay Saxena / Research Analyst / 91 22 6777 3825 / [email protected]

● Emami’s 1Q FY15 earnings grew 17% YoY, driven by very strong sales growth of 26% despite a 900 bp increase in tax.

● Revenue growth of 26% YoY was by far the best among Indian FMCG companies this quarter, and was backed up by 13% volume and 20% value growth in the India business. Strong growth was due to a combination of a bounce back in sales in core categories and ~5% sales coming from new products launched in the past two quarters.

● EBITDA margins were flat despite a rise in ad spends by 250 bp to support new launches, as gross margins expanded 250 bp from lower YoY menthol prices and a price hike of ~5%.

● Emami remains our top pick in the Indian midcap consumer space, as we expect it to transition into a more diversified play on health care and personal care in the next 2-3 years, as even one or two moderate successes among the new launches will be very material. We raise our earnings by ~4% to build in higher sales growth, and TP rises to Rs630, maintain OUTPERFORM.


Strong domestic sales growth driven by core and new launches ● Navratna cooling oil, Zandu Balm and Fair & Handsome grew 13-

15%. Zandu’s healthcare portfolio grew 32% YoY and talcum powder grew 29% YoY. There were major market share gains in cooling oils (500+ bp), Fair & Handsome (700+ bp) and talcum powders (300 bp). Emami held market shares in balms.

● Boro Plus declined 16% YoY in what is a very small off season quarter for the company; this also included some returns from the last season where the winter was delayed and the stock sold was not all converted to offtake.

● New launches contributed ~5% to sales, with most brands seeing good initial response, in particular Fair & Handsome face wash has exceeded expectations, and deodorant brand Heat has seen a good initial offtake.

International business grew 104% YoY on a weak base, ~25% growth likely for FY15. The base of international business was weak. However, there is also some sustainable improvement in CIS where Emami’s sales have seen major declines in the past two years due to the issue of counterfeit products. The company is now improving direct distribution and changing packaging, and has also beefed up its team there. While this quarter’s growth is exaggerated by the weak base, we expect 25% growth for FY15 in the international business.

Scale up of high potential new launches can re-rate Emami’s multiples further. Emami has launched four new products in the past six months—Boro Plus face wash, Fair & Handsome face wash, Emami 7-oils-in-one hair oil and HE deodorant. The cumulative category size for these launches is ~Rs45 bn, and hence even a moderate success here would be material for Emami. While these categories are competitive, they are also of high growth and have scope for a new player with relevant insights. The success of brands such as Fogg, Wildstone and Park Avenue in deodorants is an example of how small companies can build a meaningful success in competitive but fast-growing categories. If Emami succeeds in any of these new launches the stock could further re-rate from current levels.

Figure 1: Emami 1Q FY15 Rs mn 1QFY14 1QFY15 % YoY

Net sales 3,837 4,817 25.6% EBITDA 592 750 26.7% EBITDA margin (%) 15.4 15.6 14 bps PBT 702 921 31.2% Tax -95 -213 123.3% Tax rate (%) 13.6 23.1 954 bps Net profit 607 708 16.7% Cost heads Raw materials 41.1 38.6 -255 bps Staff costs 8.9 8.7 -17 bps Advertising expenditure 18.9 21.3 249 bps Other expenditure 15.7 15.8 9 bps


Figure 2: Emami's revenue and volume growth saw a strong rebound

(5.0)

-

5.0

10.0

15.0

20.0

25.0

30.0

1QFY12 3QFY12 1QFY13 3QFY13 1QFY14 3QFY14 1QFY15

Overall Revenue Growth (%) Domestic volume growth


Bbg/RIC HMN IN / EMAM.BO Rating (prev. rating) O (O) Shares outstanding (mn) 226.97 Daily trad vol - 6m avg (mn) 0.2 Daily trad val - 6m avg (US$ mn) 1.4 Free float (%) 30.0 Major shareholders Promoter

Price (08 Aug 14 , Rs) 535.50 TP (prev. TP Rs) 630.00 (580.00) Est. pot. % chg. to TP 18 52-wk range (Rs) 552.5 - 407.0 Mkt cap (Rs/US$ bn) 121.5/ 2.0



Year 03/13A 03/14A 03/15E 03/16E 03/17E

Revenue (Rs mn) 16,991 18,208 21,676 25,363 29,564 EBITDA (Rs mn) 3,473 4,413 5,196 6,243 7,252 Net profit (Rs mn) 3,147 4,025 4,563 5,518 6,469 EPS (Rs) 13.9 17.7 20.1 24.3 28.5 - Change from prev. EPS (%) n.a. n.a. 4 4 - Consensus EPS (Rs) n.a. n.a. 19.2 22.6 26.4 EPS growth (%) 21.6 27.9 13.4 20.9 17.2 P/E (x) 38.6 30.2 26.6 22.0 18.8 Dividend yield (%) 1.0 1.3 1.5 1.8 2.1 EV/EBITDA (x) 34.5 27.0 22.5 18.2 15.2 P/B (x) 15.6 13.1 10.4 8.3 6.7 ROE (%) 42.4 47.3 43.6 41.9 39.5 Net debt(cash)/equity (%) (20.8) (24.3) (41.2) (52.5) (60.8)

Note 1: Emami is a player in the fast moving consumer goods company in India with market leadership in niche catgeories like cooling oils, balms and boro creams.

https://rave.credit-suisse.com/research/company/financials?ric=EMAM.BO


Asian Daily

- 15 of 33 -

Gujarat State Petronet Limited ------------------------------------------ Maintain OUTPERFORM 1Q behind; volume growth encouraging; revenue flat on lower ship or pay and change in mix EPS: ◄► TP: ▲ Sanjay Mookim / Research Analyst / 65 6212 3017 / [email protected] Badrinath Srinivasan / Research Analyst / 91 22 6777 3698 / [email protected]

● GSPL's 1Q FY15 PAT of Rs8.5 bn was down 33% YoY (due to a lack of ship or pay revenue) and was also below estimates. While volumes increased 8% QoQ (slightly below forecasts), revenues were flat QoQ due to: (1) the cessation of residual ship or pay from 4Q FY14 and (2) a shift in mix to lower tariff zones.

● GSPL's volumes seem to have bottomed out and have now seen two quarters of 0.5-1.5 mmscmd sequential growth. We believe this is a result of GSPC's higher offtake after the start of Petronet's second Jetty and stronger LNG volumes at the Hazira terminal.

● GSPL suggests demand for LNG in Gujarat is improving and is hopeful that the trend will continue. Synergies from the merger of GSPC group companies in which GSPL has a stake (Gujarat Gas, GSPC Gas) can be a key catalyst in the medium term.

● We roll forward our DCF and update for the value of investments (at 1x investment on GSPL's books, it has invested an incremental Rs3.8 bn in the SPV for the purchase of Gujarat Gas in FY14). Our target price rises to Rs100. Maintain OUTPERFORM.


Results weak on weaker volume mix, lower take-or-pay

GSPL volumes continue to see an uptick from 3Q14 lows and rose 0.5/1.5mmscmd in the past two quarters. In 1Q, PLNG reported its highest volumes in six quarters; GSPC's (not listed) 1.25MT offtake contract has also begun at Dahej. We believe these are likely behind the smart increases in GSPL transmission volumes QoQ.

Despite stronger volumes, gas segment revenues fell 4% sequentially. Management suggests that this is because: (1) part of the volumes has shifted towards lower-tariff zones and (2) GSPL has stopped accounting for take-or-pay revenues post the Mar-14 quarter (some income was booked in 4Q as well). For context—data from the latest (Jul-14) tariff order suggests a 1% volume shift from Zone 3 to Zone 1 in the high-pressure Gujarat gas grid lowers revenues for this grid by 0.2%. EBITDA was thus 11% below CS/street estimates. Tax rates were 120bp ahead of expectations and PAT missed estimates by 15%.

Figure 1: Despite volume uptick, 1Q weak due to volume mix/take-or-pay QoQ YoY vs. est Rs mn 1Q14 4Q14 1Q15 1Q15E (%) (%) (%)

Income from operations 2,968 2,314 2,309 2,606 (0) (22) (11) Operating expenditure 270 306 305 367 (0) 13 (17) EBITDA 2,698 2,008 2,004 2,240 (0) (26) (11) Other Income 132 145 130 139 (10) (1) (6) Depreciation 458 449 469 467 5 3 0 Interest 380 319 321 354 0 (16) (9) PBT 1,992 1,385 1,344 1,557 (3) (33) (14) Tax 729 471 494 554 5 (32) (11) PAT 1,263 915 850 1,004 (7) (33) (15) EPS 2.24 1.63 1.51 1.78 (7) (33) (15)

QoQ YoY Vs ests Rs per '000 SCM 1Q14 4Q14 1Q15 1Q15E (%) (%) (%)

Gas volumes (mmscm) 2,015 1,869 2,023 2,114 8 0 (4) Average tariff 1,409 1,193 1,072 1,193 (10) (24) (10)

Source: Company data, Credit Suisse estimates

Morbi benefits should continue to accrue

In an earlier note, we had highlighted the c. 5-6% volume growth GSPL could see as ceramic units in Morbi shift from coal towards gas. The Supreme Court in July 2014, however, permitted ceramic units to continue using coal, as long as they employ cleaner technology and gain pollution clearance. We understand from industry that norms are stringent and we believe many ceramic units will still shift to gas in the longer term. GSPL suggests it has not seen any swing away yet.

Figure 2: FY14 deleveraging limited: Rs3.8 bn investments into GGAS

-

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000Largely investments

in Gujarat Gas

INR mn


High operating leverage; maintain OUTPERFORM

GSPL remains highly leveraged to an increase in gas availability in India. Capex intensity has been low for GSPL in previous quarters and receivables have been stable over FY14 as well (as the company incrementally stopped accounting take-or-pay). We update our models for the value of non-current investments (stakes in Gujarat Gas, GSPC Gas and pipeline JVs at 1x book) and roll forward our DCF. Our target price rises to Rs100. Maintain OUTPERFORM.

Bbg/RIC GUJS IN / GSPT.BO Rating (prev. rating) O (O) Shares outstanding (mn) 562.74 Daily trad vol - 6m avg (mn) 1.3 Daily trad val - 6m avg (US$ mn) 1.8 Free float (%) 61.0 Major shareholders GSPC (38%)

Price (07 Aug 14 , Rs) 85.40 TP (prev. TP Rs) 100.00 (86.00) Est. pot. % chg. to TP 17 52-wk range (Rs) 98.0 - 48.5 Mkt cap (Rs/US$ mn) 48,058.0/ 782.5


Absolute (%) (0.8) 16.9 70.8 Relative (%) (0.8) 5.6 33.7

Year 03/13A 03/14A 03/15E 03/16E 03/17E

Revenue (Rs mn) 11,603 10,631 9,024 10,145 11,308 EBITDA (Rs mn) 10,591 9,413 7,849 8,958 10,077 Net profit (Rs mn) 5,381 4,190 3,601 4,519 5,200 EPS (Rs) 9.6 7.4 6.4 8.0 9.2 - Change from prev. EPS (%) n.a. n.a. 0 0 (12) - Consensus EPS (Rs) n.a. n.a. 7.9 8.8 10.8 EPS growth (%) 3.1 (22.1) (14.0) 25.5 15.1 P/E (x) 8.9 11.5 13.3 10.6 9.2 Dividend yield (%) 1.2 0.9 0.8 1.0 4.7 EV/EBITDA (x) 5.3 6.0 6.8 5.8 5.1 P/B (x) 1.6 1.5 1.3 1.2 1.1 ROE (%) 19.9 13.4 10.4 11.8 12.5 Net debt(cash)/equity (%) 26.1 25.0 14.8 9.4 7.8

Note 1: Gujarat State Petronet Ltd (GSPL) is an India-based firm operating the gas transmission network in Gujarat totalling about 2,000 km. It has two segments: Gas Transportation and Windmill.

https://rave.credit-suisse.com/research/company/financials?ric=GSPT.BO


Asian Daily

- 16 of 33 -

Jindal Steel & Power Ltd ----------------------------------------------------------Maintain NEUTRAL Steel business aids EBITDA growth; covenant test remains an overhang EPS: ◄► TP: ▲ Neelkanth Mishra / Research Analyst / 91 22 6777 3716 / [email protected] Prateek Singh / Research Analyst / 91 22 6777 3894 / [email protected]

● Consolidated EBITDA was 12% higher than we expected (Fig 1), as steel profits handsomely beat our estimates, whereas power disappointed again, as did other businesses. EPS beat by 3% as depreciation rose with the commissioning of two Tamnar II units.

● Steel profitability rebounded to US$260/t, the highest since 1Q13. The premium over HRC rose sharply to US$176, and conversion costs fell (Fig 2). Stores and spares/t fell 19% YoY in US$ and 13% in rupee terms. This could be due to lower mining activity.

● With consolidated net debt up Rs10 bn QoQ to Rs375 bn, the hurdle for covenant is now FY15 EBITDA of Rs94 bn (+67% YoY), versus our estimate of Rs73 bn, consensus's Rs78 bn and 1Q annualised Rs61 bn. New facilities have started and should ramp up but concern remains especially on the ramp pace at Tamnar II.

● Ore availability is not an issue yet. We raise steel volumes mildly, and our target price changes to Rs254 from Rs237, as we roll forward to higher volumes. Our concerns on the stretched balance sheet and power exposure continue. Maintain our NEUTRAL.


Steel profitability drives better-than-expected results

Consolidated EBITDA was 12% higher than we expected (Figure 1), as steel profits handsomely beat our estimates, whereas power profitability once again disappointed due to higher costs. Other businesses also did badly. As depreciation rose sharply with the commissioning of two more Tamnar II units, net profit beat by only 3%.

Steel profitability rebounded to US$260/t, the highest since 1Q13. This was helped mainly by a sharp increase in premium over hot-rolled coil steel (HRC) to US$176, and also by sharply lower conversion costs versus our expectations (Figure 2). Stores and spares costs per tonne came below our expectations and fell 19% YoY in US$ and 13% in rupee terms. This could be due to lower mining activity.

Figure 1: 1Q15 results versus estimates (consolidated) Rs mn 1Q15A 1Q15E Diff. 1Q14A YoY %

Net sales 48,704 53,270 -9% 44,908 8% EBITDA 15,210 13,595 12% 12,557 21% Depreciation 6,671 5,514 21% 4,216 58% Net income 4,181 4,062 3% 4,943 -15% EPS 4.57 4.44 3% 5.29 -14%


FY15 covenant test hurdle high: an overhang

Consolidated debt increased Rs10 bn QoQ to Rs375 bn. The trailing 12-month debt/EBITDA covenant test in March 2015 necessitates FY15 EBITDA of Rs94 bn (+67% YoY), versus our estimate of Rs73 bn, consensus's Rs78 bn and 1Q annualised Rs61 bn. A number of new facilities have been commissioned and should ramp up, e.g. Tamnar II 600MW units, the DRI kiln in Angul, the Barbil pellet facility, the Oman SMS, etc. Concern remains over the pace of ramp at Tamnar II in particular.

Figure 2: Operational trends 1Q15A 1Q15E Diff 1Q14A Y/Y%

India steel business Derived steel volumes ('000 t) 737 689 7% 665 11% ASP ($/t) 762 714 7% 756 1% HRC ($/t) 586 586 0% 595 -1% Premium ($/t) 176 128 38% 161 9% Cost ($/t) 501 525 -5% 601 -17% Of which material cost ($/t ) 190 190 0% 251 -24% Conversion Cost ($/t) 311 335 -7% 350 -11% Steel EBITDA/t 260 188 38% 155 68% Power (1,000 MW) Units Sold (mn units) 1,928 1,774 9% 1,966 -2% ASP (Rs/kWh) 3.29 3.31 0% 3.24 1% Captive power units sold (mn units) 275 250 10% 210 31% Global ventures Oman HBI sales (kt) 312 375 -17% 300 4% SA & Mozambique coal sales (kt) 159 300 -47% 180 -12% Wollongong Coal Ltd coal sales (kt) 86 220 -61% - -


Other key takeaways

● The improvement in steel business profitability was despite lower pellet prices (down Rs1000/t, or US$17/t). JSPL is now using more pellets internally, although with the second pellet plant starting, pellet sales should go up.

● Ore availability is not a concern yet, as adequate inventories exist. Sarda mines also have inventory, and are awaiting a letter from the government to restart sales to JSPL. Mining at Sarda is still 2-3 months away, according to JSPL.

● Tamnar II: The first unit has 18% utilisation, as only 150MW could be sold to TN versus the 400MW contracted. This should start by September with the grid improving and utilisation can be 80%. The second unit is to be 70%, but no PPAs yet. For the third and fourth units that don't have linkage, they are evaluating coal imports.

● Losses continue at the ex. GNRE mines in Australia and in Mozambique. They have also been forced to lay off people. JSPL is hopeful of turning around these assets despite low coal prices.

Bbg/RIC JSP IN / JNSP.BO Rating (prev. rating) N (N) Shares outstanding (mn) 914.90 Daily trad vol - 6m avg (mn) 3.3 Daily trad val - 6m avg (US$ mn) 15.6 Free float (%) 41.3 Major shareholders Promoters 58.91%

Price (07 Aug 14 , Rs) 282.60 TP (prev. TP Rs) 254.00 (237.00) Est. pot. % chg. to TP (10) 52-wk range (Rs) 340.2 - 207.4 Mkt cap (Rs/US$ bn) 258.6/ 4.2



Year 03/13A 03/14A 03/15E 03/16E 03/17E

Revenue (Rs mn) 198,068 198,400 249,967 289,384 292,918 EBITDA (Rs mn) 59,944 56,124 72,682 82,775 85,735 Net profit (Rs mn) 29,101 19,104 29,082 33,412 35,656 EPS (Rs) 31.1 20.4 31.1 35.7 38.1 - Change from prev. EPS (%) n.a. n.a. 0 0 - Consensus EPS (Rs) n.a. n.a. 27.6 34.5 38.1 EPS growth (%) (26.6) (34.4) 52.2 14.9 6.7 P/E (x) 9.1 13.8 9.1 7.9 7.4 Dividend yield (%) 0.6 0.5 0.8 0.9 1.0 EV/EBITDA (x) 8.4 10.9 8.9 8.1 7.8 P/B (x) 1.2 1.1 1.0 0.9 0.8 ROE (%) 14.8 8.6 12.0 12.3 11.8 Net debt(cash)/equity (%) 112.0 145.8 146.4 137.3 123.1

Note 1: JSPL is an integrated steel producer and also one of the large power producers in India. It also owns mining assets internationally.

https://rave.credit-suisse.com/research/company/financials?ric=JNSP.BO


Asian Daily

- 17 of 33 -

State Bank Of India ------------------------------------------------------------------Maintain NEUTRAL Operationally in line; NPL slippages pick up EPS: ◄► TP: ◄► Ashish Gupta / Research Analyst / 91 22 6777 3895 / [email protected] Prashant Kumar / Research Analyst / 91 22 6777 3942 / [email protected] Kush Shah / Research Analyst / 91 22 6777 3862 / [email protected]

● SBI's 1Q15 results (+3% YoY) were in line. Asset quality stress continued with NPL addition picking up (3.4% annual). Operationally, it was in line with loan book flat QoQ (+13% YoY), NIMs stable (at ~3.1%) and fee income up 12% YoY. High non-operating income (~21% of PBT) supported reported profits.

● Positives from the results were domestic NIMs inching up (+10 bp) and a pullback in opex (+3% YoY). Cost income improved (down 2% QoQ to 50%), though employee provisions were higher and remain an overhang (please click here).

● NPL slippages picked up on higher slippages from mid corp and agri segments. Reported NPLs were marginally lower QoQ on large sale of NPLs to ARCs (~Rs60 bn). Restructuring (Rs36 bn) was lower, but adjusted for recoveries of ~Rs23 bn against SRs, problem asset addition was high at ~4% p.a. (vs 2.8% in 4Q14).

● With management targeting 15% loan growth and profitability being muted (ROEs of 11.9%), the bank is likely to go for further equity dilution in the current financial year. At 1.3x FY16E adj BV, maintain NEUTRAL.


Top-line growth in line; opex moderates

SBI's 1Q profits were in line with estimates at Rs33 bn (+3% YoY). Asset quality stress has continued with NPL addition picking up to 3.4% (annualized) of loans from 2.9% in 4Q14. NPL provisions were higher at ~1.4% even as the coverage ratio declined (~2% QoQ) on account of higher write-offs. Loan growth was at 13% YoY on strong corporate loan growth (+33% YoY). Management is targeting full-year loan growth of ~15% YoY and domestic NIMs of ~3.5%. Fee income growth (+12%) was lower than expected despite some pick-up on a low base. Opex growth (+3%) was low on controlled other opex. Employee opex was higher than expected on pension provisions.

Large sale of NPLs to ARCs

Reported gross NPLs was marginally lower QoQ on account of sale of NPLs to ARCs (~Rs60 bn) and write-offs. The positive on asset quality

was the lower restructuring (Rs36 bn) during the quarter with the restructuring pipeline coming down at ~Rs35 bn. Slippages from the agri segment picked up, affected by uncertainties around a possible debt waiver in Andhra, Telangana and other election-bound states. The bank also mentioned its exposure to Bhushan Steel at ~Rs60 bn.

The bank sold NPLs of Rs56 bn resulting in recoveries of ~Rs23 bn and one SMA2 account of ~Rs4.9 bn. Adj for SR-based recoveries, problem addition remained high at ~4% annualized (vs ~2.8% in 4Q14). SR outstanding was at ~Rs39 bn (30 bp of loans). Under-provisioning increased as net NPAs (incl SRs) as the percentage of networth increased to 30% (+2% QoQ).

Figure 1: SBI 1Q15—results summary Earnings table (Rs mn) 1Q15 1Q14 YoY (%) 4Q14 QoQ (%)

NII 132,522 115,119 15% 129,028 3% Core non-interest income 36,653 32,733 12% 61,846 -41% Total income 169,175 147,852 14% 190,874 -11% Total operating expenses 87,166 84,349 3% 88,606 -2% Pre-prov profit 82,009 63,503 29% 102,268 -20% Loan loss provisions 39,802 23,538 69% 64,128 -38% Operating profit 41,523 40,154 3% 37,384 11% Treasury* 11,387 6,700 70% 9,983 14% PBT 52,910 46,854 13% 47,367 12% Reported profit 33,491 32,411 3% 30,407 10% Key ratios (%) Loans (Rs bn) 11,989 10,607 13.0% 12,098 -0.9% Deposits (Rs bn) 14,189 12,574 12.8% 13,944 1.8% NIM (%) 3.1 3.2 -3 3.1 2 Gross NPA (%) 4.9 5.6 -65 5.0 -4 Loan loss provisions (%) 1.4 1.0 46 2.3 -87 Coverage ratio (%) 47.2 50.7 -351 49.5 -228 Restr’ing during the qtr (Rs bn) 35.9 43.8 -18.0% 76.4 -52.9% Cost / Income ratio (%) 49.8 52.8 -297 45.5 433 ROA (%) 0.7 0.8 -7 0.7 5 Tier I (%) 9.9% 8.8% 104 9.7% 14


Huge capital needs

ROA and ROE were low at ~0.7% and 12%, respectively. With management targeting 15% loan growth and profitability being muted (ROE of 11.9%), the bank is likely to go for further equity dilution in the current financial year. At 1.3x FY16E adj BV and 7x earnings, maintain NEUTRAL.

Figure 2: Pick-up in NPL slippages vs last quarter

0%

1%

2%

3%

4%

5%

6%

1Q12 3Q12 1Q13 3Q13 1Q14 3Q14 1Q15Net Slippages (%)* Restr'ing during the Q Credit Cost (%) (RHS)

Source: Company data, Credit Suisse estimates. * adj for SRs received

Bbg/RIC SBIN IN / SBI.BO Rating (prev. rating) N (N) Shares outstanding (mn) 746.57 Daily trad vol - 6m avg (mn) 2.5 Daily trad val - 6m avg (US$ mn) 87.9 Free float (%) 40.6 Major shareholders Govt of India (59.4%)

Price (08 Aug 14 , Rs) 2,415.25 TP (prev. TP Rs) 2,405 (2,405) Est. pot. % chg. to TP 0 52-wk range (Rs) 2755.3 - 1473.4 Mkt cap (Rs/US$ bn) 1,803.2/ 29.3



Year 03/13A 03/14A 03/15E 03/16E 03/17E

Pre-prov Op profit (Rs mn) 299,836.0 300,325.1 368,420.1 443,983.2 533,322.4 Net profit (Rs mn) 141,088 110,939 148,495 184,041 217,605 EPS (CS adj. Rs) 206 149 199 247 291 - Change from prev. EPS (%) n.a. n.a. 0 0 - Consensus EPS (Rs) n.a. n.a. 194 247 325 EPS growth (%) 18.2 (28.0) 33.9 23.9 18.2 P/E (x) 11.7 16.3 12.1 9.8 8.3 Dividend yield (%) 1.7 1.3 1.7 2.2 2.9 BVPS (CS adj. Rs) 1,446 1,584 1,736 1,922 2,135 P/B (x) 1.67 1.52 1.39 1.26 1.13 ROE (%) 15.4 10.2 12.0 13.5 14.4 ROA (%) 1.0 0.7 0.8 0.8 0.8 Tier 1 Ratio (%) 9.5 9.7 9.2 8.6 8.1

Note 1: ORD/ADR=2.00. Note 2: State Bank of India is an India-based bank. In addition to banking, the Company, through its subsidiaries, provides a range of financial services, which include life insurance, merchant banking, mutual funds, credit card, factoring, security trading.

https://plus.credit-suisse.com/researchplus/ravDocView?docid=WK66j8

https://rave.credit-suisse.com/research/company/financials?ric=SBI.BO


Asian Daily

- 18 of 33 -

Sun TV Network -------------------------------------------------------------- Downgrade to NEUTRAL Headwinds on multiple fronts EPS: ▼ TP: ▼ Jatin Chawla / Research Analyst / 91 22 6777 3719 / [email protected] Akshay Saxena / Research Analyst / 91 22 6777 3825 / [email protected]

● Results were disappointing with reported PAT at Rs1.65 bn missing our estimate by ~10%, primarily on higher movie costs (likely to remain higher) and higher-than-anticipated IPL losses.

● Despite the company increasing the no of minutes back to 15-16 (not complying with TRAI’s 10+2 ad rule since there is a stay on it), Sun’s quarterly ad revenues were flat YoY. With the hearing on the ad cap set for September, there may be a big disappointment again if Sun TV is forced to cut inventory.

● Cable subscriptions, too, disappointed declining QoQ for the second quarter in a row; the company doesn't see any pick-up here until digitisation is implemented in Phase 3 and 4. An increase in movie acquisition prices means EBIT margins will stay under pressure.

● With media reports (Business Standard) indicating that CBI now has enough evidence to file a charge sheet against Sun TV's promoters on the Aircel-Maxis case, this will remain an additional overhang. Valuation discount to Zee hence is unlikely to decline near term. We cut TP to Rs410 and earnings by ~12% and lower multiple to 15x (from 17.5x), and downgrade it to NEUTRAL.


Cable subscription revenues will pick up only with future phases of digitisation. For the second straight quarter, cable subscription revenues declined on a QoQ basis. Management attributed this to the fact that in the previous two quarters, there was a lot of catch-up from the Rest of India region hence higher revenue. Going forward the quarterly rate of cable subscription revenue should be only in the range of Rs480-500 mn, with a pick-up unlikely before the digitisation is implemented in Phases 3 and 4.

DTH subscription growth remained healthy at 21% YoY and 6% QoQ with DTH subscribers increasing to 10.5 mn. Management expects total subscription revenues to reach Rs15-20 bn by FY17 once the entire digitisation process is complete given strong opportunities from Phase 3 and 4 from the current Rs6.5 bn. International subscription revenues are expected to grow at ~10% in FY15 in constant currency.

Advertising revenues, too, miss expectations slightly. Ad revenue growth was subdued staying flat YoY versus ~20% growth for Zee and double-digit growth for industry. The company attributed this to elections as ad spends were not strong on regional genres with advertisers preferring news channels. This was despite the company exceeding the 10+2 minute ad cap; on the prime-time GEC it has been doing 14-15 minutes of ads per hour and in some other smaller channels (where demand is high) ad inventory goes up to 16 minutes per hour. Management expects a pick-up in 2H from a low base of last year. However, with the hearing in the Delhi High Court on the TRAI ad cap set for next month, there may be some disappointment here if the company is forced to cut inventory to comply.

Others. Losses in IPL increased YoY on account of higher outgo on players' salaries, a shift in venue to outside India for some matches and consequently lower home games, a reduction in the number of matches due to one lesser team and a drop in rankings for the team to sixth (compared with fourth last year) so lower prize money. Management expects losses to decline significantly in FY16 given the strength of IPL brand. Depreciation and amortisation expense for the quarter was higher as movie acquisition costs have moved up over the years. The company is guiding for a ~25% increase in amortisation expense for the year with a quarterly rate of Rs1-1.2 bn.

Figure 1: Sun TV 1Q results summary

Rs mn 1Q14A 4Q14A 1Q15 YoY QoQ

Net sales 6,019 5,202 6,336 5.3% 21.8%

Adjusted sales 5,033 5,202 5,202 3.3% 0.0%

Content costs 450 435 419 -7.0% -3.8%

IPL Franchise fees 851 0 851

Personal costs 442 506 458 3.5% -9.6%

Selling & other expenses 739 260 932 26.0% 258.2%

EBITDA 3,537 4,000 3,677 4.0% -8.1%

EBITDA margins 58.8% 76.9% 58.0%

Adjusted EBITDA 3,844 4,001 4,112 7.0% 2.8%

Adjusted EBITDA margin 76.4% 76.9% 79.0%

Depreciation 1,174 1,123 1,390 18.4% 23.7%

Interest 7 6 8 14.1% 37.3%

Other income 134 132 197 47.1% 49.6%

PBT 2,489 3,003 2,476 -0.5% -17.5%

Tax 845 1,027 820 -3.0% -20.2%

Tax rate 33.9% 34.2% 33.1%

Reported PAT 1,644 1,976 1,656 0.7% -16.2%

Adjusted PAT 1,848 1,976 1,947 5.4% -1.5%

Revenue break-up

Advertising 2,790 2,820 2,804 0.5% -0.6%

Broadcast 350 260 270 -22.9% 3.8%

Cable 420 510 480 14.3% -5.9%

DTH 1,060 1,210 1,280 20.8% 5.8%

International 290 310 330 13.8% 6.5%

Movie & Others 123 92 38

IPL & Champions league 985 0 1,134


Bbg/RIC SUNTV IN / SUTV.BO Rating (prev. rating) N (O) Shares outstanding (mn) 394.08 Daily trad vol - 6m avg (mn) 0.7 Daily trad val - 6m avg (US$ mn) 4.6 Free float (%) 23.0 Major shareholders Promoter

Price (08 Aug 14 , Rs) 419.95 TP (prev. TP Rs) 410.00 (500.00) Est. pot. % chg. to TP (2) 52-wk range (Rs) 468.0 - 327.1 Mkt cap (Rs/US$ bn) 165.5/ 2.7


Absolute (%) (5.0) 16.7 2.3 Relative (%) (6.3) 9.2 (32.5)

Year 03/12A 03/13A 03/14E 03/15E 03/16E

Revenue (Rs mn) 17,574 18,176 20,959 22,992 28,381 EBITDA (Rs mn) 14,007 13,769 14,632 16,369 20,715 Net profit (Rs mn) 6,947 6,833 7,148 7,545 10,000 EPS (Rs) 17.6 17.3 18.1 19.1 25.4 - Change from prev. EPS (%) n.a. n.a. 0 (14) (12) - Consensus EPS (Rs) n.a. n.a. 19.0 22.1 25.9 EPS growth (%) (10.0) (1.6) 4.6 5.5 32.5 P/E (x) 23.8 24.2 23.2 21.9 16.5 Dividend yield (%) 2.3 2.3 2.4 3.0 3.8 EV/EBITDA (x) 11.6 11.7 10.8 9.5 7.4 P/B (x) 6.3 5.7 5.2 4.9 4.6 ROE (%) 27.6 24.7 23.6 23.1 28.7 Net debt(cash)/equity (%) (11.5) (13.6) (24.5) (29.5) (32.3)

Note 1: SUN TV is one of the largest television broadcasters in India. It is a dominant player in South India operating 21 satellite television channels across the local languages of states of Tamil Nadu, Kerela, Karnataka and Andhra Pradesh.

https://rave.credit-suisse.com/research/company/financials?ric=SUTV.BO


Asian Daily

- 19 of 33 -

Indonesia

Bakrie Telecom PT ------------------------------------------------------- Maintain UNDERPERFORM Still under structural pressure EPS: ▼ TP: ▼ Colin McCallum, CA / Research Analyst / 852 2101 6514 / [email protected] Jennifer Gao / Research Analyst / 852 2101 6479 / [email protected]

● Bakrie Telecom published 2Q14 results on 25 July 2014. Gross revenue continued to decline, falling 3.6% QoQ and 26.7% YoY, and it is very clear that Bakrie Telecom continues to lose revenue market share.

● Downward pressure on operating and maintenance expenses, general and admin expenses, marketing costs and even personnel costs was maintained, but the loss of scale continues to cause a major problem for profitability. Thus, despite lower costs, EBITDA still declined by 0.4% QoQ and 36.4% YoY.

● With a forex loss of Rp334 bn in 2Q14, Bakrie Telecom reverted to a net loss in 2Q14. We note that the ratio of net debt to last-twelve-months EBITDA continued to rise, reaching 8.6x in 2Q14.

● As a result of the very weak core 1H14 numbers, we have revised down our FY14 gross revenue and EBITDA forecasts by 24.6% and 24.5%, respectively. This, together with the further increase in the net debt position, leads to our DCF-based target price declining by 60% from Rp40/share to Rp16/share.


Voice and data revenues still declining

Bakrie Telecom published 2Q14 results on 25 July 2014. Gross revenue continued to decline, falling 3.6% QoQ and 26.7% YoY. Compared with Telkomsel (Not listed)'s 4.9% QoQ and 10.3% YoY revenue growth it is very clear that Bakrie Telecom continues to lose revenue market share.

While no MD&A has been published, we would highlight that this trend has been firmly in place now for the past three years, as GSM/HSPA+ operators continue to build scale in the Indonesian market, while CDMA loses traction. Bakrie Telecom’s CDMA/EVDO data product strategies were clearly not strong enough to offset lower traditional voice and SMS revenues.

Operating costs tightly controlled, but EBITDA still falling

Bakrie Telecom continued its downward pressure on operating & maintenance expenses, general and admin expenses, marketing costs and even personnel costs, but the loss of scale continues to cause a major problem for profitability. Thus, despite lower costs, EBITDA still declined by 0.4% QoQ and 36.4% YoY.

Highly geared and loss making– UNDERPERFORM rating maintained

With a forex loss of Rp334 bn in 2Q14, Bakrie Telecom reverted to a net loss in 2Q14. We note that the ratio of net debt to last-twelve-months EBITDA continued to rise, from 6.8x as at 4Q13 to 7.8x as at 1Q14, and now to 8.6x as at 2Q14. Total liabilities currently exceed total assets.

As a result of the very weak core 1H14 numbers, we have revised down our FY14 gross revenue and EBITDA forecasts by 24.6% and 24.5%, respectively. This, together with the further increase in the net debt position, leads to our DCF-based target price declining by 60% from Rp40/share to Rp16/share. We therefore continue to rate Bakrie Telecom UNDERPERFORM.

Figure 1: Bakrie 2Q14 results—QoQ, YoY and versus CS forecasts Rp bn 2Q14A 1Q14A QoQ% 2Q13A YoY%

Gross revenue 408 424 -3.6% 557 -26.7% Net revenue 383 391 -2.0% 530 -27.9% EBITDA 162 163 -0.4% 255 -36.4% EBITDA margin (%) 42.3% 41.6% 0.7pp 48.0% -5.7pp Net profit (527) 211 n.m. (195) n.m.


Figure 2: Model amendments FY14 FY15

Rp bn Previous Revised Chg (%) Previous Revised Chg (%)

Gross revenue 2,716 2,047 -24.6% 2,837 2,049 -27.8% EBITDA 992 749 -24.5% 1,045 754 -27.9% Net loss (962) (1,486) n.m. (516) (1,156) n.m. Target price (Rp) 40 16 -60.0%

Bbg/RIC BTEL IJ / BTEL.JK Rating (prev. rating) U (U) Shares outstanding (mn) 30,585 Daily trad vol - 6m avg (mn) 0.2 Daily trad val - 6m avg (US$ mn) 0.0 Free float (%) 53.8 Major shareholders PT Bakrie & Brothers

Tbk (50.2%)

Price (07 Aug 14 , Rp) 50.00 TP (prev. TP Rp) 16.00 (40.00) Est. pot. % chg. to TP (68) 52-wk range (Rp) 50.0 - 50.0 Mkt cap (Rp/US$ bn) 1,529.2/ 0.1


Absolute (%) — — — Relative (%) (5.4) (13.9) (15.9)

Year 12/12A 12/13A 12/14E 12/15E 12/16E

Revenue (Rp bn) 2,361 2,072 1,933 1,949 2,088 EBITDA (Rp bn) 961.3 911.3 749.3 753.6 805.3 Net profit (Rp bn) (3139) (2646) (1486) (1156) (965) EPS (Rp) (107) (86) (49) (38) (32) - Change from prev. EPS (%) n.a. n.a. n.m n.m n.m - Consensus EPS (Rp) n.a. n.a. (31.4) (16.9) EPS growth (%) n.m. n.m. n.m. n.m. n.m. P/E (x) n.m. n.m. n.m. n.m. n.m. Dividend yield (%) 0 0 0 0 0 EV/EBITDA (x) 6.5 8.4 11.3 11.8 11.3 P/B (x) 0.9 (1.5) (0.6) (0.4) (0.3) ROE (%) (104.5) (838.5) 84.9 37.6 23.4 Net debt(cash)/equity (%) 289.9 (603.7) (277.1) (201.7) (164.3)

Note 1: PT Bakrie Telecom Tbk is an Indonesia-based fixed-wireless telecommunication services provider.

https://rave.credit-suisse.com/research/company/financials?ric=BTEL.JK


Asian Daily

- 20 of 33 -

Malaysia

SapuraKencana Petroleum -------------------------- Initiating Coverage with OUTPERFORM New report: Risk-reward balance better now EPS: TP: Muzhafar Mukhtar, CFA / Research Analyst / 60 3 2723 2084 / [email protected]

● We initiate coverage on SapuraKencana (SAKP) with an OUTPERFORM rating and target price of RM5.70/share, implying a ~30% margin of safety. SAKP is involved in oilfield services, E&P and marginal field development. Full report.

● SAKP's intangible assets (client relationships, operational track record and reputation) are a moderately growing economic moat, supported by strategic assets in its offshore construction fleet and dominance in the profitable and stable tender rig niche.

● Definite prospects include: (1) delivery of new offshore construction and drilling assets, mostly contracted out, in CY14-CY16; (2) development of large gas resources (in block SK310), with first production in FY18/19. Recent discoveries in SK408 indicate scope for upside from indefinite prospects by CY15 end.

● The new debt maturity profile is manageable, a large order book protects cash flows, oil/gas production costs are within the lower regions of the cost curve. The recent de-rating coincided with improving fundamentals, providing a better risk-reward balance.


Across upstream: Oilfield services, E&P, marginal fields

SapuraKencana (SAKP) is an integrated upstream oil & gas company, straddling: (1) oilfield services (it is a contractor for offshore development drilling, offshore construction and subsea services, fabrication, and hook-up and commissioning, with an increasingly global footprint); (2) exploration and production (SAKP has working interests in oil & gas blocks under production sharing contracts in Malaysia); and (3) marginal fields—under risk service contracts, SAKP and its partners develop marginal oil & gas fields in Malaysia and operate production facilities in return for a fixed payment; Petronas remains the owner.

Intangible assets: Moderate but growing economic moat

SAKP's most valuable assets are intangible—track record, client relationships and reputation. This moderate but growing economic

moat is based on a genuine ability to compete (~70% of its order book is outside of Malaysia), and is the result of both organic cultivation and acquisitions. The moat is widest in the Malaysian upstream segment, where SAKP is a key player across oilfield services, E&P and marginal fields, and within the global tender rig niche, where it holds 44% of capacity and has seen its fleet utilised for 94% of their life on average. In EPCIC however, larger players still do not see it as a comparable peer, although trends in its order book and fleet suggest this might only be a matter of time. Its execution track record in OCSS leverages to a large extent on advanced assets in its young fleet, which includes several high-spec strategic assets either already operational or under construction, while the niche nature of tender rigs will likely allow it to maintain its dominance in this profitable, and less cyclical, segment. This requires consistent fleet renewal, however, and we are a bit more sceptical on the long-term durability or relative strength of these competitive advantages.

Risks mostly well-mitigated

Our analysis of the various risks facing investors suggests that most potential problems are adequately mitigated. The only chink in the armour that we see is related to debt (chunky maturity in two years), but our analysis suggests that only in an extremely bearish scenario would this be a real problem, owing to strong earnings visibility from the outstanding order book. Along with a lower dependence on the domestic market, the order book also protects SAKP more from any decline in domestic capex compared to most Malaysian peers. We think underlying production costs for the E&P business is within the lower region of the cost curve, mitigating its direct exposure to oil/gas prices. Management concentration is a key risk, but we are not certain investors would want it mitigated. In the short term, there may be selling pressure ahead of the review of the Shariah-compliant list in November.

Decent margin of safety to intrinsic worth

Our intrinsic value estimate for SAKP is RM5.70/share, which implies a margin of safety of ~30%. We use an economic value-added approach for the oilfield services segments and mostly DCF for the E&P and marginal field assets. Our target price implies a CY15E P/E multiple of 18x, well within the mid-range of those seen across the larger-cap O&G-related stocks in Malaysia, where trapped domestic liquidity bids up prices for larger companies.

The strength of the business and its prospects, quality of management and a decent margin of safety arising from the recent de-rating (despite improving fundamentals, possibly Shariah-related) combine to form an opportunity in our view. In the absence of the ability to adopt a concentrated portfolio strategy, we believe the risk-reward balance is good enough at the moment for investors to contemplate putting their money in.

Bbg/RIC SAKP MK / SKPE.KL Rating (prev. rating) O (NA) Shares outstanding (mn) 5,992.16 Daily trad vol - 6m avg (mn) 8.7 Daily trad val - 6m avg (US$ mn) 11.8 Free float (%) 57.7 Major shareholders Tan Sri Shahril

Shamsudin

Price (07 Aug 14 , RM) 4.27 TP (prev. TP RM) 5.70 (NA) Est. pot. % chg. to TP 33.5 52-wk range (RM) 4.95 - 3.23 Mkt cap (RM/US$ mn) 25,587/ 7,980


Absolute (%) (3.9) (0.7) 11.3 Relative (%) (1.2) 0.7 7.9

Year 01/13A 01/14A 01/15E 01/16E 01/17E

Revenue (RM bn) 6.9 8.4 8.8 11.7 11.0 EBITDA (RM bn) 1.2 1.8 4.1 4.6 4.4 Net profit (RM bn) 0.6 0.9 1.5 2.1 2.1 EPS (RM) 0.13 0.16 0.24 0.33 0.33 - Change from prev. EPS (%) n.a. n.a. - Consensus EPS (RM) n.a. n.a. 0.25 0.29 0.31 EPS growth (%) 1.2 25.1 49.3 40.8 (1.6) P/E (x) 33.4 27.1 18.1 12.9 13.1 Dividend yield (%) 0.0 0.0 0.6 0.8 0.8 EV/EBITDA (x) 24.2 20.1 9.5 8.1 7.9 P/B (x) 3.5 2.6 2.7 2.2 1.9 ROE (%) 15.9 12.8 16.7 19.8 16.4 Net debt(cash)/equity (%) 72.9 113.7 114.9 83.2 57.5

Note 1: SapuraKencana is an integrated upstream oil & gas company. It provides offshore construction, subsea, drilling, and fabrication services, and holds working interests in several oil & gas blocks in Malaysia under its E&P business.

https://doc.research-and-analytics.csfb.com/docView?language=ENG&source=ulg&format=PDF&document_id=1036899391&serialid=t6iDdTWKjfGc0OqLa3Gl%2fWbz%2buA7FQmKrEJCI6l9Oo0%3d

https://rave.credit-suisse.com/research/company/financials?ric=skpe.kl


Asian Daily

- 21 of 33 -

Dialog Group Bhd ---------------------------------------------- Initiating Coverage with NEUTRAL New report: Fairly valued for now Muzhafar Mukhtar, CFA / Research Analyst / 60 3 2723 2084 / [email protected]

● We initiate coverage on Dialog with a NEUTRAL rating and a target price of RM2.00/share, which implies a CY15E P/E of 28x. Dialog is involved in storage tank terminals, upstream services focusing on low projects, and "traditional" businesses (EPC, distribution, plant maintenance, catalyst handling). Full report

● Dialog is building a storage terminal in Pengerang, which we believe will enjoy a wide economic moat due to its proximity to both existing oil trade flows through Singapore and a future source of captive demand in the form of Petronas' RAPID project.

● The continued development of Pengerang and its utilisation will be a key risk to watch, though we are optimistic this is well-mitigated, based on our analysis and channel checks. The eventual entry of Petronas as a user of Pengerang should help crystallise a key economic moat.

● We believe 15-20% growth to 2020 on our forecasts, experienced management and a strong competitive position are reflected in the stock's popularity, which we think is fairly priced now.


Key segments: tank terminals, upstream, traditional

Dialog's business can be split into three broad areas: (1) Tank terminals – storage facilities for petroleum, petroleum products, chemicals, etc. Dialog has a stake in three storage facilities; one each in Kertih, Tanjung Langsat and Pengerang. (2) Upstream services – focused on three projects offshore Sarawak, with Roc Oil and Halliburton. These are low-risk and involve developing discovered reserves or enhancing production. (3) Traditional – distribution (for specialist products/services), EPC/fabrication (mitigate execution risk and maximise profits on tank terminal projects) and plant maintenance/catalyst handling (recurring income).

Pengerang should provide wide economic 'moat' and growth

We believe the jewel in the crown is in Pengerang, where the company is working with partners to develop a deepwater petroleum

terminal. Pengerang should not only provide an avenue for substantial long-term growth, but stands to also be a highly profitable asset with a wide economic moat; reliable and resilient cash flows from this could be used for further growth opportunities. In our view, Pengerang's durable competitive advantage is its proximity to demand: (1) the large and growing oil flows going through Singapore, the regional trading hub, where space for further storage capacity increase is limited; and (2) Petronas' RM90 bn RAPID project, due to start-up only in 2019, is a large potential source of captive demand, which should ensure the deepwater terminal's profitability and growth for a long time to come.

Attractive investment risk profile for the most part…

Our analysis of the company across qualitative and quantitative metrics suggests that investment risks are very well mitigated. The main risk lies in the utilisation of the Pengerang deepwater terminal, which could be affected by: (1) regional storage capacity growth, (2) global oil/trade flows, and (3) the completion and sustainability of RAPID. Secular growth prospects look bright, due to Pengerang and its upstream projects. Regional tank storage capacity is likely to increase in the medium term, but rates could stay resilient and, in the long run, the tightness of space is apparent. The economic moat surrounding the Pengerang terminal will preserve project economics, we think. Our channel checks indicate tight control processes and a culture of zero tolerance for leakages. We believe it has a good reputation for execution and integrity, built upon a solid track record, and that this is another key economic 'moat'. These 'intangible' strengths have supported the partnerships with various reputable players in its tank terminal, distribution, and upstream businesses, in our view. Concerns about management depth are not a problem for Dialog, in our view. A long-serving management team within an industry suffering from human capital shortage indicates a good working environment. Furthermore, management has demonstrated a focus on and good track record of delivering long-term shareholder value. Strong cash flows from mature businesses, solid finances and attractive investment opportunities mitigate the risk of equity calls, in our view.

…but not enough potential upside to stock price

We believe Dialog fits the criteria of a suitable investment, i.e., with regards to secular prospects for earnings growth, management (quality, depth, integrity), economic 'moats' and financial soundness. However, the stock has been a strong performer in recent months. We don't think the margin of safety is wide enough for aggressive accumulation at the moment; our intrinsic value estimate of RM2.00/share (EVA approach for traditional segments, DCF for tank terminal and upstream projects) implies that the stock is fairly priced for the moment.

Bbg/RIC DLG MK / DIAL.KL Rating (prev. rating) N (NA) Shares outstanding (mn) 4,918.39 Daily trad vol - 6m avg (mn) 8.4 Daily trad val - 6m avg (US$ mn) 4.7 Free float (%) 76.6 Major shareholders Dr Ngau Boon Keat

(23%)

Price (07 Aug 14 , RM) 1.81 TP (prev. TP RM) 2.00 (NA) Est. pot. % chg. to TP 10.5 52-wk range (RM) 1.94 - 1.25 Mkt cap (RM/US$ mn) 8,902.3/ 2,776.3


Absolute (%) (6.9) (1.9) 27.0 Relative (%) (5.6) (1.9) 22.1

Year 06/12A 06/13A 06/14E 06/15E 06/16E

Revenue (RM bn) 1.6 2.2 2.4 1.8 2.3 EBITDA (RM bn) 0.2 0.2 0.3 0.2 0.3 Net profit (RM bn) 0.2 0.2 0.3 0.3 0.5 EPS (RM) 0.04 0.04 0.05 0.05 0.10 - Change from prev. EPS (%) n.a. n.a. - Consensus EPS (RM) n.a. n.a. 0.04 0.06 0.07 EPS growth (%) 3.5 4.5 34.5 6.8 82.3 P/E (x) 48.9 47.5 35.3 33.1 18.1 Dividend yield (%) 0.7 0.8 1.0 1.3 1.9 EV/EBITDA (x) 46.5 41.5 35.0 45.7 27.8 P/B (x) 3.6 3.3 2.9 5.4 4.5 ROE (%) 19.9 15.2 18.7 17.7 27.8 Net debt(cash)/equity (%) (20.7) 12.1 8.6 12.9 18.5

Note 1: Dialog holds stakes in several tank terminals for petroleum and petrochemicals in Malaysia. It also provides engineering, construction, fabrication, plant maintenance and catalyst recovery services. It recently entered into marginal field development.

https://doc.research-and-analytics.csfb.com/docView?language=ENG&source=ulg&format=PDF&document_id=1036899381&serialid=mK57au%2beHX5DbzU2abH6%2btMenhJti0SEc0786%2f3npL4%3d

https://rave.credit-suisse.com/research/company/financials?ric=DIAL.KL


Asian Daily

- 22 of 33 -

Philippines

Manila Water Company ------------------------------------------------------------Maintain NEUTRAL 1H14 profit robust but regulatory overhang remains EPS: ▲ TP: ▲ Alvin Arogo / Research Analyst / 63 2 858 7716 / [email protected] Patricia Palanca / Research Analyst / 63 2 858 7752 / [email protected]

● Manila Water reported that its net profit for 1H14 increased by 8% YoY to P3,158 mn from P2,911 mn last year.

● We estimate that half of the incremental net profit came from the 3% YoY growth in its East Zone billed volume. This, in turn, was due to the 3% YoY increase in water connections. Average tariff and average consumption was flat.

● We estimate that the other half came from an increase in the net profit contribution of its non-East Zone businesses to 12% from 9% during the same period last year. We estimate that about 73% of the incremental net profit contribution came from the company's concessions in Kenh Dong and Laguna.

● We maintain our NEUTRAL rating. We believe that Manila Water should eventually receive a favourable decision post arbitration. However, the risk of a negative tariff adjustment remains. Thus the overhang on the stock will likely more than offset the positive momentum of its businesses outside the East Zone.


1H14 profits grew 8% YoY due to a 3% YoY rise in water connections and higher contribution from non-East Zone

Manila Water reported that its net profit for 1H14 increased by 8% YoY to P3,158 mn from P2,911 mn last year. We estimate that half of the incremental profits came from the 3% YoY growth in its East Zone billed volume, which was in turn due to the 3% YoY increase in water connections (average consumption was flat). The other half came from an increase in the net profit contribution of non-East Zone businesses to 12% from 9% same period last year. We estimate that about 73% of this came from the company's concessions in Kenh Dong (Vietnam) and Laguna (Philippines).

Figure 1: Manila Water's 1H14 and 1H13 results highlights 1H14 1H13 Variance %YoY

Revenues (P mn) East zone 7,433 7,135 298 4% Others 680 497 183 37% Consolidated 8,113 7,632 481 6% EBITDA (P mn) East zone 4,342 4,132 210 5% Others 1,436 1,403 33 2% Consolidated 5,778 5,535 243 4% Net income (P mn) East zone 2,786 2,662 124 5% Others 372 249 123 49% Consolidated 3,158 2,911 247 8%


Kenh Dong and Laguna businesses

The company's Kenh Dong business started commercial operations in July 2013, although acquisition of the 47% stake in Kenh Dong Water Supply Joint Stock Company, or KDW, was completed in July 2012. KDW is a Vietnamese company established in 2003 to build, own, and operate major water infrastructure facilities in Ho Chi Minh City. Net profit of the company's Laguna business grew by 116% YoY due to the 208% YoY increase in billed volume, which in turn was due to the 62% YoY increase in water connections. Non-revenue water also decreased to 12% from 23% during the same period last year.

Maintain NEUTRAL

We maintain our NEUTRAL rating. We believe that Manila Water should eventually receive a favourable decision post arbitration. However, the risk of a negative tariff adjustment remains. Thus the overhang on the stock will likely more than offset the positive momentum in its businesses outside the East Zone.

We increase our 2014-15E net profit forecasts by an average of 13%, as we take into account the increase in the profit contribution of its non-East Zone business. We made slight adjustments in our WACC assumptions and this has resulted in a 4% increase in our DCF-based target price to P26.2 from P25.2 previously.

Figure 2: Manila Water's forward P/E from January 2009 to current (x)

4

6

8

10

12

14

16

Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14

Fwd PER Ave-2SD Ave-1SD

Average Ave+1SD Ave+2SD


Bbg/RIC MWC PM / MWC.PS Rating (prev. rating) N (N) Shares outstanding (mn) 2,015.53 Daily trad vol - 6m avg (mn) 2.3 Daily trad val - 6m avg (US$ mn) 1.3 Free float (%) 66.0 Major shareholders Ayala Corporation

(48.8%)

Price (08 Aug 14 , P) 27.70 TP (prev. TP P) 26.20 (25.20) Est. pot. % chg. to TP (5) 52-wk range (P) 33.1 - 21.4 Mkt cap (P/US$ mn) 55,830.1/ 1,270.9


Absolute (%) 4.9 6.5 (10.6) Relative (%) 5.7 6.1 (18.1)

Year 12/12A 12/13A 12/14E 12/15E 12/16E

Revenue (P mn) 14,553 15,926 16,555 17,958 19,648 EBITDA (P mn) 10,169 11,272 11,997 13,218 14,719 Net profit (P mn) 5,161 5,407 5,771 6,364 7,016 EPS (P) 2.53 2.64 2.82 3.11 3.43 - Change from prev. EPS (%) n.a. n.a. 14 11 - Consensus EPS (P) n.a. n.a. 2.63 2.74 3.13 EPS growth (%) 28.7 4.5 6.7 10.3 10.2 P/E (x) 11.0 10.5 9.8 8.9 8.1 Dividend yield (%) 2.1 2.8 3.0 3.3 3.6 EV/EBITDA (x) 7.3 6.7 6.2 5.9 5.4 P/B (x) 2.2 1.9 1.7 1.5 1.3 ROE (%) 21.3 19.2 17.9 17.4 17.0 Net debt(cash)/equity (%) 68.9 62.4 52.9 54.3 53.9

Note 1: ORD/ADR=25.00. Note 2: Manila Water Company (Manila Water) is a Philippines-based company engaged in providing water, sewerage and sanitation services.

https://rave.credit-suisse.com/research/company/financials?ric=MWC.PS


Asian Daily

- 23 of 33 -

Singapore

Venture Corporation ----------------------------------------------------------------Maintain NEUTRAL 2Q14 largely in line, but weaker top-line growth a worry; valuations near post-GFC highs EPS: ◄► TP: ◄► Anand Swaminathan / Research Analyst / 65 6212 3012 / [email protected] Dawei Lee / Research Analyst / 65 6212 3004 / [email protected]

● Venture's 2Q14 net profit of S$33.5 mn (+9.0% QoQ, +11.6% YoY) was largely in line with expectations (1H14 was 46% of our FY14E estimate) with slightly weaker top-line growth offset by a mild margin improvement.

● Top-line growth (2% YoY) decelerated in 2Q14 with the majority of the growth driven by one segment. But still on a 1H basis, almost all segments registered growth. Management mentioned that, although customer sentiment in general remained positive, there was a not a significant improvement versus 1Q.

● The long-awaited turn in the corporate capex cycle is not quite apparent, but there is some shift up the tech curve for network equipment and improvement in the retail consumer segment. But the key near-term uncertainty for Venture remains the consolidation among customers.

● At 14x 12-month P/E, valuations are at post-GFC highs. With a tangible pick-up in top-line momentum still a few quarters away, near-term upside remains limited. Maintain NEUTRAL.


Revenue growth decelerated in 2Q

The better performance of test & measurement segment was driven by increasing market share with new products.

Figure 1: Segmental revenue breakdown (S$ mn) 2Q13 1Q14 2Q14 QoQ% YoY% 6M14 YoY% % share

Total revenue 588 591 601 1.7 2.3 1,192 6.6 100 PC Related 68 65 56 -15.0 -17.9 121 -8.3 13 Printing & Imaging 72 70 68 -3.6 -5.7 138 1.8 11 Networking 96 94 100 6.5 4.6 194 6.6 17 Test & Others 166 182 196 7.7 18.4 379 21.1 28 Retail Solutions 186 179 181 1.3 -2.8 360 1.2 31


Figure 2: Venture—revenue vs net profit (S$ mn)


Slight margin improvement offset weaker top line in 2Q

While management is quite comfortable with net margins of 5-6%, there could be some near-term pressure from higher net tax rates. The flat inventories QoQ were driven partly by better active inventory management by Venture, but expect to go up over the next few quarters. Management expects to maintain quarterly maintenance capex levels at around S$5-10 mn levels.

Figure 3: Venture—financial snapshot (S$ mn) 2Q13 1Q14 2Q14 QoQ% YoY% 6M14 YoY% % FY14E

Revenue 587.7 591.0 601.1 1.7 2.3 1,192 6.6 49.8 Material costs -453.6 -456.8 -461.9 1.1 1.8 -919 6.3 49.9 Gross profit 134.1 134.2 139.2 3.7 3.8 273 7.5 49.2 Staff costs -63.2 -62.7 -62.6 -0.2 -1.0 -125 3.0 49.3 Total oper. costs -90.6 -90.4 -92.7 2.6 2.3 -183.2 6.5 25.0 EBITDA 43.5 43.8 46.5 6.0 6.8 90.3 9.6 49.5 Finance costs -0.3 -0.2 -0.3 18.4 -1.4 -0.5 -10.4 25.4 PBT 34.0 33.8 37.3 10.4 9.6 71.0 13.7 47.6 Net profit 30.1 30.8 33.5 9.0 11.6 64.3 10.7 45.8

Ratios (%) Gross margin 22.8 22.7 23.2 0.4 0.3 22.9 0.2 EBITDA margin 7.4 7.4 7.7 0.3 0.3 7.6 0.2 Net margin 5.1 5.2 5.6 0.4 0.5 5.4 0.2 ROE 6.9 6.6 7.7 1.1 0.8 14.8 2.2 Net debt / Equity -0.1 -0.1 -0.1 0.0 0.0 -0.1 0.1


Valuations (14.4x 12-month P/E) near post-GFC highs, dividend yield of 6% plus remains safe for now

Figure 4: 12-month forward P/E (x)

0

2

4

6

8

10

12

14

16

18

Dec-05 Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13

Avg = 11.7x, Current = 14.4x (+1.1 sd)

Source: Thomson Reuters

Bbg/RIC VMS SP / VENM.SI Rating (prev. rating) N (N) Shares outstanding (mn) 275.01 Daily trad vol - 6m avg (mn) 0.5 Daily trad val - 6m avg (US$ mn) 2.9 Free float (%) 64.7 Major shareholders Aberdeen (23.0%)

Price (08 Aug 14 , S$) 8.03 TP (prev. TP S$) 7.40 (7.40) Est. pot. % chg. to TP (8) 52-wk range (S$) 8.13 - 7.16 Mkt cap (S$/US$ mn) 2,208.3/ 1,764.1



Year 12-12A 12-13A 12-14E 12-15E 12-16E

Revenue (S$ mn) 2,388 2,330 2,395 2,485 2,600 EBITDA (S$ mn) 177.0 177.2 182.5 203.2 221.0 Net profit (S$ mn) 139.7 131.1 140.4 160.2 176.7 EPS (S$) 0.51 0.48 0.51 0.58 0.64 - Change from prev. EPS (%) n.a. n.a. 0 0 0 - Consensus EPS (S$) n.a. n.a. 0.53 0.59 0.64 EPS growth (%) (10.8) (6.1) 6.9 13.9 10.1 P/E (x) 15.8 16.8 15.7 13.8 12.5 Dividend yield (%) 6.2 6.2 6.2 6.2 6.2 EV/EBITDA (x) 10.9 11.2 10.3 9.1 8.2 P/B (x) 1.2 1.2 1.3 1.3 1.3 ROE (%) 7.6 7.2 8.0 9.6 10.5 Net debt(cash)/equity (%) (15.9) (12.5) (19.7) (21.5) (23.3)

Note 1: ORD/ADR=5.00. Note 2: Venture Corporation Limited is a Singapore based company. The principal activities of the Company is to provide manufacturing, design, engineering, customization and logistic services to electronics companies worldwide.

https://rave.credit-suisse.com/research/company/financials?ric=VENM.SI


Asian Daily

- 24 of 33 -

South Korea

Asiana Airlines ------------------------------------------------------------ Maintain UNDERPERFORM 2Q14 results EPS: ▼ TP: ▼ Timothy Ross / Research Analyst / 65 6212 3337 / [email protected]

● Asiana Airlines (OZ) has reported a pre-ex loss of W80 bn, worse than last year's W46 bn loss, and well below both our NPAT estimate of W10 bn and consensus of W8 bn. The reported loss of W24.7 bn included a W56 bn unrealised forex gain.

● Passenger yield fell short of our expectation, while unit costs blew out 7% YoY and 5% more than we had expected, despite the influence of a firmer KRW. Our biggest miss was fuel, where consumption increased despite a younger fleet.

● We have cut our estimates for 2014 and 2015 from a loss of W17.5 bn and a NPAT of W32.6 bn to a loss of W83 bn and a NPAT of W18 bn on higher cost expectations.

● With losses widening in 2Q and now 42% ahead of where they were last year, we fail to see how consensus estimates still predict a profit for the year. Large negative estimate revisions are expected and this will see the stock continue to UNDERPERFORM. We have left our rating unchanged and cut our TP to W4,300—still an above-sector EV/EBITDAR of 8x.


What happened to currency leverage?

Earnings substantially undershot expectations in 2Q14 as total revenue fell short of expectations by W14 bn and cost exceeded projections by W73 bn, with fuel ahead of our forecast by 6% and depreciation and other costs both rising by 18%. A firmer KRW impacted passenger (and freight) yields that actually rose in USD terms as pressure on Japanese route pricing abated, with load factors ahead as Korea’s popularity rose in the PRC and Southeast Asia and it witnessed some recovery in European demand. In KRW terms, however, yield declined >1% YoY. Freight revenues tracked expectations, dropping 5% YoY as weaker demand (on lower capacity) and yields affected performance.

Figure 1: Asiana Airlines operating and financial performance (2Q14) W mn 2Q14A 2Q14E 2Q13A A vs E % YoY % chg

Pax yield 0.10 0.10 0.10 -3% -1% Cgo yield 0.33 0.32 0.33 3% -1% Unit cost 0.58 0.56 0.55 5% 7% Revenue 1,341 1,384 1,308 -3% 2% EBITDAR 131 238 180 -45% -27% EBIT (65) 48 (4) nmf nmf PBT (92) 10 (71) nmf -29% NPAT (pre-x) (80) 10 (46) nmf -76%


The biggest surprise was unit costs: OZ has about 61% of its opex denominated in the USD, but only 15% of its revenues in USD, with a further 6% in JPY. This should mean that it is disproportionately positively impacted by a strengthening KRW. Rather than declining, though, unit costs rose 6.5% YoY.

Figure 2: Asiana Airlines unit operating costs (W/ATK) vs YoY % change

-25.0%

-15.0%

-5.0%

5.0%

15.0%

25.0%

0.45

0.48

0.51

0.54

0.57

0.60

Mar-09 Nov-09 Jul-10 Mar-11 Nov-11 Jul-12 Mar-13 Nov-13

KRW/ATK YoY % ch (RHS)


The delivery of two A380s, an A330 and two A320s—the A380s of which have been balance sheet financed—drove a major increase in depreciation, with the company now guiding to in excess of W250 bn in capex versus W150 bn previously. Despite the rejuvenation of OZ’s fleet, jet fuel efficiency actually deteriorated 2% during the quarter, although this reflected more short-haul flying, which tends to consume more jet kero. Other costs rose sharply on the back of a rise in overflight and airport user charges.

Chinese revenues rose 26% YoY and now account for >23% of passenger revenue—OZ’s largest market, followed by Southeast Asia where revenues rose 14% YoY. The US and Japan saw contributions dwindle, although the former market was largely flat on a constant currency basis. On the cargo front only the EU registered an improvement (up >2% YoY), with revenues from the US down ~2% as currency affected yield, but still accounting for 46% of total. Southeast Asia, China and Japan all registered double-digit declines in revenue as demand fell on these services faster than the leased aircraft that operated many of these services were redelivered to lessors. With pressure on earnings showing no signs of abating and market expectations too high, we see no need to change our UNDERPERFORM rating.

Bbg/RIC 020560 KS / 020560.KS Rating (prev. rating) U (U) Shares outstanding (mn) 195.10 Daily trad vol - 6m avg (mn) 0.5 Daily trad val - 6m avg (US$ mn) 2.4 Free float (%) 50.4 Major shareholders Kumho Ind - 30.1%,

Korea Kumho Petchem - 12.6%,

KDB - 6.3%

Price (08 Aug 14 , W) 4,515.00 TP (prev. TP W) 4,300 (4,420) Est. pot. % chg. to TP (5) 52-wk range (W) 5490.0 - 4450.0 Mkt cap (W/US$ bn) 880.9/ 0.8


Absolute (%) 0.6 (7.7) (3.7) Relative (%) (1.0) (11.5) (11.5)

Year 12/12A 12/13A 12/14E 12/15E 12/16E

Revenue (W bn) 5,888 5,724 5,882 6,121 6,321 EBITDAR 898.7 750.7 811.3 977.0 1,052.1 Net profit (W bn) (46.0) (200.9) (83.1) 18.4 97.8 EPS (W) (237) (1030) (426) 95 501 - Change from prev. EPS (%) n.a. n.a. n.m (47) (4) - Consensus EPS (W) n.a. n.a. 87 322 528 EPS growth (%) n.m. n.m. n.m. n.m. 430.3 P/E (x) n.m. n.m. n.m. 47.8 9.0 Dividend yield (%) 0 0 0 0.0 0.0 EV/EBITDAR (x) 7.9 9.8 9.0 7.5 6.6 P/B (x) 0.9 1.0 1.0 1.0 1.0 ROE (%) (4.9) (21.1) (9.5) 2.2 11.1 Net debt(cash)/equity (%) 308.6 362.6 381.9 350.7 294.3

Note 1: Asiana Airlines, Inc. provides air cargo and passenger transportation services throughout South Korea and overseas. The Company also offers airline catering and on-flight duty free shopping services and operates aircraft leasing business.

https://rave.credit-suisse.com/research/company/financials?ric=020560.KS


Asian Daily

- 25 of 33 -

Lotte Shopping -----------------------------------------------------------------------Maintain NEUTRAL Weak 2Q14 results, as widely expected EPS: ▼ TP: ◄► A-Hyung Cho / Research Analyst / 82 2 3707 3735 / [email protected] Ray Kim / Research Analyst / 82 2 3707 3776 / [email protected]

● 2Q earnings were weaker than estimates, as widely expected by the peer group 2Q operational results released earlier. We cut our EPS estimates by 2% for FY14E to reflect the weaker-than-expected YTD operations.

● Domestic business was hurt mostly by the weak consumer sentiment. Overseas business has not shown signs of a turnaround either. Homeshopping was the only bright spot, benefiting from merchandise mix improvement and fixed commission-based goods.

● During the conference call, the company guided an improving outlook in 2H on anticipation of the government's measures to boost domestic consumption, and thanks to its own efforts to improve structure and cost strategies.

● Valuation looks undemanding given (1) it is trading at the lower end of historical band, (2) 1H operation's lower base on weaker sentiment as well as accounting change. However, among the retailers, we prefer pure/leverage plays that could benefit from the macro recovery. We maintain our NEUTRAL rating.


2Q14 earnings weaker than expected

Overall results were softer on weakened consumer sentiment in 2Q. Department store SSS growth was -0.5% YoY including outlets (or -2.2% for department store only), with most categories, even the luxury brands, posting negative or slightly positive growth. Hypermarket SSS growth was weak as well at -2% YoY. Profitability was further squeezed due to lack of scale. Lotte Hi-mart was weaker at the bottom line on new store opening costs as well as weak summer product sales (A/C, dehumidifiers, etc.).

Positive outlook HoH, albeit from a low base in 1H14

Management guided that, apart from the new store openings, 2H14 should improve HoH on base factor in regulations, consumer sentiment, cost saving efforts and operational efficiency improvement. According to the company, the department store SSS growth reached 3.6% in July and is likely to be 3% in 3Q14. Homeshopping (W34 bn

OP in 2Q, doubling YoY) should continue to improve with better merchandise and channel mix.

Overseas business remains the key concern

Consolidated margin continued to get diluted on worsening profitability of the overseas business. Lotte's China hypermarket SSS growth was -12.9% in 2Q14, on weak China consumer sentiment. The overseas business continues to remain a burden, as the Chinese retail market does not show meaningful signs of improvement.

Figure 1: Quarterly earnings—domestic vs overseas (W bn) 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14

Sales 7,097 7,256 7,248 7,697 7,079 7,155 Domestic 6,373 6,565 6,478 7,067 6,406 6,532 Overseas 724 691 770 630 673 623 OP 345 414 343 383 318 312 Domestic 372 452 377 451 373 359 Overseas -27 -38 -34 -68 -55 -47 Sales YoY* 3% 5% 1% 5% 0% -1% Domestic* 2% 4% 0% 5% 1% -1% Overseas 7% 13% 9% 1% -7% -10%

* Adjusted Lotte Hi-mart figures. Source: Company data.

Figure 2: Lotte Shopping—2Q14 earnings summary 2Q14 Previous results *CS

CS QoQ YoY (W bn) Actual est. Cons. 1Q14 2Q13 (%) (%) FY14E

Gross sales 7,155 7,387 - 7,079 7,256 1.1 -1.4 29,990 Dept. store 2,064 2,116 - 2,136 2,095 -3.4 -1.5 8,787 Hypermarket 2,032 2,203 - 2,192 2,248 -7.3 -9.6 9,113 Hi-mart 977 1,013 - 805 921 21.4 6.1 3,874 Card 460 457 - 425 452 8.2 1.8 1,719 Others 1,622 1,598 - 1,521 1,540 6.6 5.3 6,497 Op. profit 312 404 389 318 414 -1.9 -24.6 1,482 Dept. store 135 176 - 178 179 -24.2 -24.6 733 Hypermarket 9 51 - 34 65 -73.5 -86.2 200 Hi-mart 37 61 - 20 65 85.0 -43.1 174 Card 75 71 - 62 70 21.0 7.1 223 Others 56 46 - 24 35 132.3 60.8 152 NP for majority 220 - 231 113 246 94.7 -10.5 871

GPM (%) 30.3 30.0 - 30.0 29.9 29.7 OPM (%) 4.4 5.5 - 4.5 5.7 4.9 Dept. store 6.5 8.3 - 8.3 8.5 8.3 Hypermarket 0.4 2.3 - 1.6 2.9 2.2 Hi-mart 3.8 6.0 - 2.5 7.1 4.5 Card 16.3 15.5 - 14.6 15.5 12.9 PPM (%) 5.0 - - 3.3 4.7 4.5 NPM (%) 3.1 - - 1.6 3.4 2.9

* Before adjustments. Source: Company data, Bloomberg, Credit Suisse estimates.

Rating history (023530.KS) Date Old rating New rating Old TP New TP

4 Nov, 2013 Neutral Neutral W380,000 W420,000 12 May, 2014 Neutral Neutral W420,000 W350,000

Bbg/RIC 023530 KS / 023530.KS Rating (prev. rating) N (N) Shares outstanding (mn) 31.49 Daily trad vol - 6m avg (mn) 0.0 Daily trad val - 6m avg (US$ mn) 12.8 Free float (%) 30.7 Major shareholders Shin family & related;

70.12%

Price (08 Aug 14 , W) 299,000 TP (prev. TP W) 350,000 (350,000) Est. pot. % chg. to TP 17 52-wk range (W) 410000.0 - 286500.0 Mkt cap (W/US$ bn) 9,415.8/ 9.1


Absolute (%) 0.7 (6.0) (13.8) Relative (%) (0.9) (9.8) (21.6)

Year 12/12A 12/13A 12/14E 12/15E 12/16E

Revenue (W bn) 25,817 29,295 29,759 31,008 32,249 EBITDA (W bn) 2,058 2,198 2,315 2,586 2,854 Net profit (W bn) 1,080 788 857 962 1,081 EPS (W) 37,250 25,038 27,222 30,533 34,316 - Change from prev. EPS (%) n.a. n.a. (2) 0 (2) - Consensus EPS (W) n.a. n.a. 27,742 31,930 34,808 EPS growth (%) 15.9 (32.8) 8.7 12.2 12.4 P/E (x) 8.0 11.9 11.0 9.8 8.7 Dividend yield (%) 0.7 0.7 0.8 0.8 0.8 EV/EBITDA (x) 10.0 9.5 9.0 8.0 7.1 P/B (x) 0.6 0.6 0.5 0.5 0.5 ROE (%) 7.1 4.8 4.9 5.3 5.6 Net debt(cash)/equity (%) 71.7 67.8 63.8 59.7 55.0

Note 1: ORD/ADR=0.05. Note 2: Lotte Shopping operates department stores and discount stores in South Korea. The Company retails clothing, household goods, foods and other items through several branches. It also operates movie theaters.

https://rave.credit-suisse.com/research/company/financials?ric=023530.KS


Asian Daily

- 26 of 33 -

Taiwan

Chipbond -------------------------------------------------------------------------------Maintain NEUTRAL 3Q to rebound on seasonality but limited potential upside EPS: ▼ TP: ◄► Jerry Su / Research Analyst / 886 2 2715 6361 / [email protected] Derrick Yang / Research Analyst / 886 2 2715 6367 / [email protected]

● Chipbond reported 2Q14 EPS of NT$0.70 (net profit: NT$455 mn) with an OP of NT$690 mn, below CS/street. As expected, 2Q14 GM improved 170 bp QoQ to 22.9% on higher loading and greater scale, while tape GM remained at low single % with negative OP.

● 3Q14 sales are guided to improve by 5-10% QoQ on iPhone ramp (12” bumping with a longer testing time) and better shipments for COF and tape (for TVs). GM is expected to improve sequentially as utilisation and tape yield rates improve. We forecast 3Q14 sales growth will be 9% QoQ and GM will improve to 25.1%.

● Although the mass production of larger-sized 5.5” iPhone seems to be a bit delayed on design verification and tests, we think there is no impact to the iPhone driver IC production as the chip can be used on both 4.7” and 5.5” models. Nevertheless, we think display and set shipments could see some push-out into 1Q15.

● We fine-tune our model and lower 2014E EPS by 2% but keep our 2015-16E EPS unchanged. We maintain a NEUTRAL rating with a TP of NT$51, based on 12x 12M P/E. We prefer ChipMOS over Chipbond on higher utilisation and solid shares at Novatek/Himax.


2Q14 EPS below CS and street

2Q14 EPS of NT$0.70 (net profit: NT$455 mn) was below CS and way below consensus. 2Q14 revenue of NT$4,337 mn (up 4% QoQ and up 5% YoY) was already known via monthly sales and was below its orginal guidance of 5-10% QoQ growth. As expected, 2Q14 GM improved 170 bp QoQ to 22.9% on higher utilisation and greater scale, while tape GM remained at low single digits with a negative OP.

2Q14 tape sales increased 11% QoQ vs 3% QoQ for DDI backend. 2Q14 shipments for 8” bumping were down 5% QoQ, 12” bumping were up 14% QoQ on initial ramp of iPhone DDI, COF (mainly for TV) were up 7% QoQ (vs 5% for tape) on a better pull-in for 2H demand, and COG shipments (IT, tablet, smartphone) were up 4% QoQ.

Figure 1: Chipbond 2Q14 results below CS and street (NT$ mn) 2Q14A QoQ% YoY% CS 2Q old Diff.% Street Diff.%

Sales 4,337 4 5 4,337 - 4,456 (3) Gross profit 994 13 (12) 1,004 (1) 980 1 Operating profit 690 21 (20) 701 (2) 652 6 Net income 455 (10) (38) 484 (6) 583 (22) EPS (NT$) 0.70 (10) (43) 0.75 (6) 0.88 (20)

Gross margin % 22.9 23.2 22.0 Op margin % 15.9 16.2 14.6

Source: Company data, Bloomberg, Credit Suisse estimates.

3Q14 sales and GM to rebound on seasonality

3Q sales are guided to grow by 5-10% QoQ on iPhone6 DDI ramp (full quarter contribution vs ~1.5 months in 2Q) and better shipments for COF and tape for TVs. GM is expected to improve sequentially on higher utilisation, longer testing time for high-end smartphone DDIs, and yield improvement for its tape operation. Nevertheless, Chipbond noted that the industry-wide 8” wafer supply tightness could dampen its 3Q sales growth. Moreover, its major customer, Himax, is seeing strong smartphone demand in 3Q for both Chinese and Korean brands, but our checks suggest ChipMOS is gaining more allocation versus Chipbond. We forecast Chipbond's 3Q14 sales growth will be 9% QoQ and GM will improve by 220 bp to 25.1%.

5.5” iPhone production delay will not impact Chipbond

JDI (covered by S. Tsuchiya) mentioned at its result conference (click here) that it is seeing a potential risk of order push-out for its major customer’s product (i.e., iPhone). Our checks suggest the 4.7” iPhone production is on track but the 5.5” model seems to be a bit delayed as the product is still under DVT (Design Verification and Test) stage. We think display and set shipments for 5.5” iPhone could see some push-out into 1Q15 but we think there is no impact to Chipbond as iPhone driver ICs have already started mass production in 2Q14 and the chips can be used on both models. We also think there is no impact to Radiant as the 5.5” model is supposed to be a 2015 project.

Maintain NEUTRAL with a TP of NT$51

We fine-tune our model and lower our 2014E EPS by 2% but keep our 2015-16E EPS unchanged. We maintain a NEUTRAL rating with a target price of NT$51, based on 12x 12M P/E. We prefer ChipMOS over Chipbond on higher utilisation, solid market share at key DDI customers (i.e., Novatek and Himax), multiple business drivers (display driver IC, memory, MEMS/logic), and no drag from tape operations.

Figure 2: Chipbond quarterly P/L (NT$ mn) 3Q13 4Q13 1Q14 2Q14 3Q14E 4Q14E 2013 2014E

Core sales 3,694 3,222 3,495 3,600 3,902 3,838 14,484 14,835 Tape sales 293 614 666 737 814 846 1,327 3,063 Total revenue 3,988 3,836 4,161 4,337 4,715 4,684 15,811 17,897 Gross profit 1,031 743 883 994 1,186 1,197 3,816 4,259 OP profit 749 453 571 690 856 857 2,705 2,973 Net profit 599 445 505 455 749 743 2,501 2,453 EPS (NT$) 1.00 0.69 0.78 0.70 1.16 1.15 4.11 3.78

Core GM (%) 27.9 22.6 25.0 27.2 29.0 29.2 26.2 27.7 Reported GM (%) 25.9 19.4 21.2 22.9 25.1 25.6 24.1 23.8 OPM (%) 18.8 11.8 13.7 15.9 18.1 18.3 17.1 16.6


Bbg/RIC 6147 TT / 6147.TWO Rating (prev. rating) N (N) Shares outstanding (mn) 648.44 Daily trad vol - 6m avg (mn) 9.1 Daily trad val - 6m avg (US$ mn) 16.0 Free float (%) 73.0 Major shareholders Compal

Price (08 Aug 14 , NT$) 47.20 TP (prev. TP NT$) 51.00 (51.00) Est. pot. % chg. to TP 8 52-wk range (NT$) 71.0 - 43.0 Mkt cap (NT$/US$ mn) 30,606.3/ 1,020.4


Absolute (%) (7.5) (8.5) (21.9) Relative (%) (3.1) (11.7) (37.5)

Year 12/12A 12/13A 12/14E 12/15E 12/16E

Revenue (NT$ mn) 15,013 15,811 17,897 20,045 21,950 EBITDA (NT$ mn) 5,642 5,153 6,057 6,821 7,085 Net profit (NT$ mn) 2,549 2,501 2,453 3,294 3,845 EPS (NT$) 4.29 4.11 3.78 5.08 5.93 - Change from prev. EPS (%) n.a. n.a. (2) 0 0 - Consensus EPS (NT$) n.a. n.a. 3.78 4.72 5.58 EPS growth (%) 43.1 (4.2) (7.9) 34.3 16.7 P/E (x) 11.0 11.5 12.5 9.3 8.0 Dividend yield (%) 5.5 5.5 5.6 7.5 8.4 EV/EBITDA (x) 5.6 7.0 5.7 4.7 4.1 P/B (x) 1.6 1.3 1.3 1.3 1.2 ROE (%) 15.0 12.6 11.0 14.0 15.3 Net debt(cash)/equity (%) 6.5 24.1 16.9 6.6 (6.8)

Note 1: Chipbond is a leader in driver IC packaging and test, supplying most of the leading Taiwan driver IC vendors and expanding into new customers in Japan, Korea, and China.

https://rave.credit-suisse.com/research/company/financials?ric=6147.TWO

https://plus.credit-suisse.com/r/wenpjz

https://plus.credit-suisse.com/r/wenpjz


Asian Daily

- 27 of 33 -

Giant Manufacturing Co Ltd ------------------------------------------------------Maintain NEUTRAL Strong 2Q14 results at the operating level; tweaking up 2014/15 forecasts EPS: ▲ TP: ▲ Jeremy Chen / Research Analyst / 886 2 2715 6368 / [email protected] Chris Shieh / Research Analyst / 886 2 2715 6353 / [email protected]

● Strong 2Q14 at the operating level. Despite moderate 8.5% YoY sales growth, Giant's operating profit jumped by 32% on the back of 230 bp GPM expansion due to a better product mix. However, EPS of NT$2.29 was down 19% QoQ and up only 3% YoY due to a higher tax rate (45.1%) and a NT$65 mn FX loss.

● Europe market leading the growth. In 1H14, Europe sales grew by 13%, followed by China's 12%, while the US market was dragged by softer OEM orders from Trek, which represents ~20% of Giant's revenue. Management is expecting a better momentum for Trek in 2H14 with new model launches.

● Margin guidance revised up. Management attributed stronger-than-expected GPM to a sustained recovery from the high-margin European market. Management therefore revised its GPM guidance from 21-22% to 22-23% for the full year.

● Tweaking up our 2014/15E EPS by 3/2% and target price to NT$244, based on same 21x 2015E P/E multiple to reflect better margins. Maintain NEUTRAL as we see the stock as fairly valued.


Giant: Strong 2Q14 at the operating level

Despite moderate 8.5% YoY sales growth, Giant's operating profit jumped by 32% on the back of 230 bp GPM expansion thanks to a sustained recovery from the high-margin Europe market. EPS came in

at NT$2.29, down 19% QoQ but up 3% YoY. We attribute the QoQ decline to (1) higher tax rate (45.1%, NT$1 EPS impact) owing to 10% retained earnings tax as well as a higher tax rate for Europe/US operations (30%); and (2) a NT$65 mn FX loss on NTD appreciation, vs. a NT$91 mn FX gain in 1Q14 (NT$0.4 EPS impact). Net net, 1H14 EPS totalled NT$5.12, up 11.7% YoY.

Europe leading the growth

By region, Europe grew by 13% in 1H14, followed by China's 12%, while the US market was dragged by slower order growth at Trek, which represents ~20% of Giant's revenue. Nevertheless, management is expecting a better momentum for Trek in 2H14 with new model launches.

Raising margin guidance

In view of the sustained recovery from the Europe market, management revised up its GPM guidance from 21-22% to 22-23% for the full year. The strength in Europe was also evidenced by Shimano's stellar 1H results, in which the Europe region sales leaped by 17% YoY. Like Giant, Shimano has also raised its FY14E guidance. It now forecasts revenue will grow 14.4% (vs. +5.9% in prior guidance), operating income will grow 38.8% (vs. +14.9%), and net income will increase by 16.8% YoY (vs. +4.5%).

Figure 1: Giant—2Q14 result overview (NT$ mn) 2Q14 1Q14 QoQ 2Q13 YoY 1H14 1H13 YoY

Total sales 15,138 14,200 6.6% 13,954 8.5% 29,338 27,195 7.9% Gross profit 3,585 3,121 14.9% 2,983 20.2% 6,707 5,784 15.9% Operating profit 1,539 1,203 28.0% 1,166 32.0% 2,742 2,177 26.0% Pre-tax profit 1,570 1,364 15.2% 1,237 27.0% 2,934 2,408 21.8% Net profit 859 1,060 -18.9% 831 3.4% 1,919 1,718 11.7% EPS 2.29 2.83 -18.9% 2.22 3.4% 5.12 4.58 11.7% Margin Gross margin 23.7% 22.0% 21.4% 22.9% 21.3% Op. margin 10.2% 8.5% 8.4% 9.3% 8.0% Net margin 5.7% 7.5% 6.0% 6.5% 6.3% Tax rate 45.1% 21.8% 32.7% 34.3% 28.7%


Tweaking up forecasts, but maintain NEUTRAL

We tweak up our 2014/15E EPS by 3%/2% after incorporating higher GPM assumptions for 2014/15 by 50 bp/40 bp, respectively, to represent a more upbeat sales outlook from developed markets. Our new 2014/15E EPS are NT$10.6/NT$11.6. Accordingly, we bump up our target price to NT$244, which is still based on the same 21x 2015E P/E multiple. We believe the stock is fairly valued at the current level and hence maintain our NEUTRAL rating. In the Taiwan bicycle sector, we prefer Merida for its stronger earnings/cash generation prospects and less demanding valuation.

Valuation metrics Rating TP Up/dn EPS change EPS growth Div. yld ROE P/B Company Ticker (prev. Price chg to TP Year (%) EPS (%) P/E (x) (%) (%) (x)

rating) Local Target (%) (%) T T+1 T+2 T+1 T+2 T+1 T+2 T+1 T+2 T+1 T+1 T+1

Giant 9921.TW N (N) 240.00 244.00 2 2 12/13 3 2 10.6 11.6 14 9 22.5 20.6 2.5 22.1 4.8

Note: O = OUTPERFORM, N = NEUTRAL, U = UNDERPERFORM Source: Company data, Credit Suisse estimates

Bbg/RIC 9921 TT / 9921.TW Rating (prev. rating) N (N) Shares outstanding (mn) 375.06 Daily trad vol - 6m avg (mn) 0.6 Daily trad val - 6m avg (US$ mn) 4.1 Free float (%) 66.0 Major shareholders Mgmt 19.7%

Price (08 Aug 14 , NT$) 240.00 TP (prev. TP NT$) 244.00 (240.00) Est. pot. % chg. to TP 2 52-wk range (NT$) 255.0 - 191.0 Mkt cap (NT$/US$ mn) 90,015.5/ 3,000.9



Year 12/12A 12/13A 12/14E 12/15E 12/16E

Revenue (NT$ mn) 54,041 54,392 59,961 64,465 69,469 EBITDA (NT$ mn) 4,856 5,133 6,051 6,654 7,145 Net profit (NT$ mn) 3,009 3,505 3,992 4,367 4,757 EPS (NT$) 8.0 9.3 10.6 11.6 12.7 - Change from prev. EPS (%) n.a. n.a. 3 2 2 - Consensus EPS (NT$) n.a. n.a. 10.5 11.9 12.9 EPS growth (%) (0.2) 16.5 13.9 9.4 8.9 P/E (x) 29.9 25.7 22.5 20.6 18.9 Dividend yield (%) 2.3 2.3 2.5 2.9 3.2 EV/EBITDA (x) 19.9 18.5 15.7 14.1 13.1 P/B (x) 5.7 5.2 4.8 4.3 4.0 ROE (%) 20.2 21.3 22.1 22.0 22.0 Net debt(cash)/equity (%) 43.5 27.3 24.5 19.4 14.9

Note 1: Giant manufactures and markets a variety of bicycles. The company's products include mountain bicycles, racing bicycles, children bicycles and exercising bicycles. Giant markets its products under the Giant brand name.

https://rave.credit-suisse.com/research/company/financials?ric=9921.TW


Asian Daily

- 28 of 33 -

Thailand

Minor International PCL ---------------------------------------------------- Maintain OUTPERFORM 2Q results: Core profit growth accelerated to 28% YoY EPS: ◄► TP: ◄► Thaniya Kevalee / Research Analyst / 66 2 614 6219 / [email protected] Siriporn Sothikul, CFA / Research Analyst / 662 614 6217 / [email protected]

● MINT reported strong growth in core profit of 28% YoY to Bt547 mn. Profit growth has accelerated from the 19% YoY achieved in 1Q14. Although 1H core profit accounted for 39% of our full-year estimate, it was in line with our expectation (note that its 1H13 accounted for 42% of full-year 2013 profit).

● We expect stronger profit during 2H on: (1) strong recovery in hotels' RevPar in Thailand, particularly Bangkok, which should improve margin on high operating leverage, and (2) stronger revenue from high-end property sales (which was very minimal during 1H). MINT targets to sell 2 units of Samui Estate, while some part of revenue from its new project in Phuket could also be booked this year.

● Our 2014E profit is 11% above consensus and we expect further consensus upgrade post 2Q result.

● We maintain OUTPERFORM on MINT due to strong earnings outlook. MINT also trades at 2015E P/E of 21.1x, at 15% discount to CENTEL and 12% discount to regional peers.


2Q core profit up 28% YoY

MINT reported core profit (excluding after tax one-off gain from revaluation of investment of Bt69 mn) of Bt547 mn, which was up 28% over 2Q13 core profit (Bt429 mn). The growth has accelerated from the 19% achieved in 1Q14. EBITDA margin contracted 0.4% from 2Q13, which was a marked improvement from the 2.9% contraction in 1Q14 (compared with 1Q13). Core profit during 1H14 accounted for 39% of our full-year estimate, but this was in line with our expectation; note that 1H13 core profit accounted for 42% of full-year 2013 profit. Because 1H14 profit was impacted by politics (for its Thai hotels, particularly Bangkok, and QSR businesses), we do expect stronger 2H results.

Improved Thailand's hotels' performance in 2H14…

With stabilised politics, we anticipate recovery in international visitors during 2H. As most hotel operators maintain the average daily room rate (ADR) in spite of low occupancy, we expect higher occupancy rate to

have a strong impact on RevPar and EBITDA margins. Thailand hotels have high operating leverage (high fixed cost), and thus improving occupancy rate can have a significant impact on net profit.

…and potentially stronger property sales

During 1H14, MINT recognised very minimal revenue from property sales; this item is bundled with revenue from Time Share (Anantara Vacation Club) project sales, thus the actual number is not disclosed. Based on discussion with management, we estimate that MINT booked less than Bt100 mn during 1H versus our full-year forecast of Bt1 bn. We expect strong revenue booking in 2H as MINT expects it could sell about 2 units of Samui estate, while some part of revenue from its new high-end resort/residential project in Phuket could also be booked; note that any delay in revenue booking from the Phuket project may cause our earnings to miss (we estimate the miss would not be more than 3-4%), but this is not a major concern as it should be booked in 2015.

Maintain OUTPERFORM

We reiterate MINT as our top pick in the sector. 1H14 core profit accounted for 44% of consensus full-year estimate, implying there is room for further upgrade, in our view. Apart from solid earnings growth, MINT also offers attractive valuation, trading at 2015E P/E of 21.1x, at 15% discount to CENTEL and 12% discount to regional peers.

Figure 1: Quarterly results summary % +/- of Bt mn 2Q13 1Q14 2Q14 % YoY % QoQ 2014F FY14E

Revenues 7,887 9,981 8,515 8.0 -14.7 39,458 47 COGS -3,405 -4,048 -3,822 12.3 -5.6 -16,310 48 Selling and admin -3,472 -3,988 -3,633 4.6 -8.9 -15,456 49 EBITDA 1,010 1,945 1,060 4.9 -45.5 7,693 39 Dep. & amortisation -589 -680 -679 15.3 -0.1 -2,703 50 EBIT 421 1,266 381 -9.6 -69.9 4,990 33 Other income 225 297 332 47.5 11.9 1,237 51 Interest income 61 77 73 20.3 -5.0 144 104 Dividend income 5 0 10 96.8 nm 10 108 Affiliate profit 74 275 106 43.7 -61.4 795 48 Forex 0 0 0 nm nm 0 nm Interest expenses -258 -243 -299 16.0 23.1 -1,089 50 Extraordinary & others * 0 0 87 nm nm 0 nm EBT 529 1,672 690 30.6 -58.7 6,087 39 Tax -83 -212 -72 -13.2 -66.2 -873 33 Minority interest -17 -40 -2 -90.1 -95.8 -156 26

Reported profit 429 1,420 617 43.7 -56.6 5,058 40 Normalised profit 429 1,420 547 27.5 -61.4 5,058 39

EPS (Bt) 0.11 0.36 0.16 43.7 -56.6 1.26 41 Normalised EPS (Bt) 0.11 0.36 0.14 27.5 -61.4 1.26 40

Margins analysis (%) Gross margins 56.8 59.4 55.1 58.7 EBITDA margins 12.8 19.5 12.4 19.5 EBIT margins 5.3 12.7 4.5 12.6 Profit margins 5.4 14.2 6.4 12.8


Bbg/RIC MINT TB / MINT.BK Rating (prev. rating) O (O) Shares outstanding (mn) 4,001.56 Daily trad vol - 6m avg (mn) 9.0 Daily trad val - 6m avg (US$ mn) 7.6 Free float (%) 45.2 Major shareholders Minor Holding

(16.8%)

Price (07 Aug 14, Bt) 33.00 TP (prev. TP Bt) 40.00 (40.00) Est. pot. % chg. to TP 21 52-wk range (Bt) 35.0 - 18.7 Mkt cap (Bt/US$ bn) 132.1/ 4.1



Year 12/12A 12/13A 12/14E 12/15E 12/16E

Revenue (Bt mn) 31,310 34,669 39,458 44,965 49,254 EBITDA (Bt mn) 5,436 6,207 7,693 9,315 10,365 Net profit (Bt mn) 3,071 3,811 5,058 6,267 7,278 EPS (Bt) 0.88 0.98 1.26 1.56 1.81 - Change from prev. EPS (%) n.a. n.a. 0 0 0 - Consensus EPS (Bt) n.a. n.a. 1.13 1.36 1.61 EPS growth (%) 40.8 11.1 28.7 23.9 16.1 P/E (x) 37.4 33.7 26.2 21.1 18.2 Dividend yield (%) 0.9 1.1 1.7 2.1 2.5 EV/EBITDA (x) 28.1 24.5 19.4 15.7 13.6 P/B (x) 6.7 5.3 4.6 4.0 3.5 ROE (%) 18.9 17.6 18.8 20.4 20.8 Net debt (cash)/equity (%) 105.8 73.8 56.7 39.4 21.5

Note 1: ORD/ADR=25.00. Note 2: Minor International Public Co Ltd is a Thailand-based company engaged in the investment activities in hotels, restaurant operations, shopping space and real estate development, retail distribution and product manufacturing, and entertainment business.

https://rave.credit-suisse.com/research/company/financials?ric=MINT.BK


Asian Daily

- 29 of 33 -

Recently Published Research

Date Title Author(s) Tel. E-mail

Mon 11 Aug China Market Strategy - Potential Plays of 'Shanghai-HK' Connect

Vincent Chan 852 2101 6568 [email protected]

Mon 11 Aug Dialog Group Bhd - Fairly valued for now Muzhafar Mukhtar 60 3 2723 2084 [email protected]

Mon 11 Aug Malaysia Oil & Gas Services Sector - The margin of safety Muzhafar Mukhtar 60 3 2723 2084 [email protected]

Mon 11 Aug SapuraKencana Petroleum Bhd - Risk-reward balance better now

Muzhafar Mukhtar 60 3 2723 2084 [email protected]

Fri 8 Aug Boustead Plantation - Fruits from the land Tan Ting Min 60 3 2723 2080 [email protected]

Fri 8 Aug China Unicom Hong Kong Ltd - 1H14 result: 'From the horse's mouth'

Colin McCallum Jennifer Gao

852 2101 6514 852 2101 6479

[email protected] [email protected]

Fri 8 Aug Himax Technologies, Inc. - Strong recovery from 2H14 on share gain and better mix

Jerry Su Derrick Yang

886 2 2715 6361 886 2 2715 6367


Fri 8 Aug Indian IT Services Sector - Aggregate trends look robust Anantha Narayan 91 22 67773730 [email protected]

Fri 8 Aug The Singapore Reporter - Swinging from yield to growth Sanjay Mookim Kwee Hong Ching

65 6212 3017 65 6212 3142


Thu 7 Aug Asia Insurance Weekly - HK new commission rules / Korea dividend upside? / China P&C

Arjan van Veen Frances Feng

852 2101 7508 852 2101 6693


Thu 7 Aug China Brokers Sector - Strong volumes but key catalyst lacking

Frances Feng Arjan van Veen

852 2101 6693 852 2101 7508


Thu 7 Aug China-HK Chronicles - August 2014: Alternative investment universe and discount rate

Vincent Chan Bin Wang

852 2101 6568 852 2101 6702


Thu 7 Aug Jump-Start Asia Research Team 852 2101 7067 [email protected]

Thu 7 Aug Korea Market Strategy - Dividend tax reform: Yet to be upbeat about

Gil Kim Jennifer Yu

82 2 3707 3763 82 2 3707 3738


Companies Mentioned

ABCK (601288.SS, Rmb2.49) Aisino Co., Ltd (600271.SS, Rmb22.67) Asiana Airlines (020560.KS, W4,515, UNDERPERFORM, TP W4,300) Bakrie Telecom PT (BTEL.JK, Rp50, UNDERPERFORM, TP Rp16) Baosteel (600019.SS, Rmb4.69) Bhushan Steel (BSSL.BO, Rs219.35) Cathay Financial Holding (2882.TW, NT$48.3) Central Plaza Hotel PCL (CENTEL.BK, Bt37.0) Chang Hwa Commercial Bank (2801.TW, NT$18.0) China Development Financial (2883.TW, NT$9.51, OUTPERFORM, TP NT$10.0) China Life (601628.SS, Rmb14.97) China Life Taiwan (2823.TW, NT$28.65) China Pacific (601601.SS, Rmb19.38) China Railway (601390.SS, Rmb2.84) China Resources Cement Holdings Ltd (1313.HK, HK$5.56, OUTPERFORM, TP HK$6.7) China Shenhua (601088.SS, Rmb15.4) China Yangtze Power Co Ltd (600900.SS, Rmb6.74) Chipbond (6147.TWO, NT$47.2, NEUTRAL, TP NT$51.0) ChipMOS Technologies Inc. (8150.TW, NT$39.0, OUTPERFORM, TP NT$52.0) CN Railway Const (601186.SS, Rmb5.04) Conch Cement (600585.SS, Rmb17.92) CTBC Holding (2891.TW, NT$20.7, OUTPERFORM, TP NT$24.5) Daqin Railway Co. Ltd. (601006.SS, Rmb7.03) Dayang Hldgs (DEHB.KL, RM3.7) Dialog Group Bhd (DIAL.KL, RM1.78, NEUTRAL, TP RM2.0) Dialog Group Bhd (DIAL.KL, RM1.81, NEUTRAL, TP RM2.0) E.Sun Financial Holding Co. (2884.TW, NT$19.6) First Financial Holding Co Ltd (2892.TW, NT$17.85) Fubon Financial Holding (2881.TW, NT$45.45) Giant Manufacturing Co Ltd (9921.TW, NT$240.0, NEUTRAL, TP NT$244.0) Gujarat Gas (GGAS.BO, Rs446.75) Gujarat State Petronet Limited (GSPT.BO, Rs85.4, OUTPERFORM, TP Rs100.0) Haier (600690.SS, Rmb15.57) Halliburton (HAL.N, $67.37) HCL Technologies (HCLT.BO, Rs1520.75, OUTPERFORM, TP Rs1850.0) Hengrui (600276.SS, Rmb33.01) Hidili Industry International Development Limited (1393.HK, HK$1.03, NEUTRAL[V], TP HK$1.3) Himax Technologies, Inc. (HIMX.OQ, $7.4) Hua Nan Financial Holding (2880.TW, NT$18.85) Hysan Development Co. (0014.HK, HK$36.65, OUTPERFORM, TP HK$45.5) Industrial Bank (601166.SS, Rmb10.54) Infosys Limited (INFY.BO, Rs3514.55, NEUTRAL, TP Rs3700.0) Japan Display (6740.T, ¥527) Jindal Steel & Power Ltd (JNSP.BO, Rs282.6, NEUTRAL, TP Rs254.0) LOTTE Himart (071840.KS, W64,900) Lotte Shopping (023530.KS, W299,000, NEUTRAL, TP W350,000) Mahindra & Mahindra (MAHM.BO, Rs1229.1, OUTPERFORM, TP Rs1410.0) Malaysia Marine and Heavy Engineering Holdings Bhd (MHEB.KL, RM3.28)


Asian Daily

- 30 of 33 -

Manila Water Company (MWC.PS, P27.7, NEUTRAL, TP P26.2) Maruti Suzuki India Ltd (MRTI.BO, Rs2618.45) Mega Financial Holding Co Ltd (2886.TW, NT$26.0) Merida Industry Co Ltd (9914.TW, NT$233.0, OUTPERFORM, TP NT$275.0) Minor International PCL (MINT.BK, Bt33.0, OUTPERFORM, TP Bt40.0) Moutai (600519.SS, Rmb160.6) NM Yili (600887.SS, Rmb25.9) Novatek Microelectronics Corp Ltd (3034.TW, NT$150.5) Perisai Petroleu (PPTB.KL, RM1.47) Petronet LNG Limited (PLNG.BO, Rs169.0) Ping An (601318.SS, Rmb42.99) PT Indosat Tbk (ISAT.JK, Rp3,905) PT Telkom (Telekomunikasi Indo.) (TLKM.JK, Rp2,690) Radiant Opto-Electronics (6176.TW, NT$122.0) Roc Oil Company (ROC.AX, A$0.675) SAIC Motor (600104.SS, Rmb15.81) Sany Heavy Industry (600031.SS, Rmb5.84) SapuraKencana Petroleum Bhd (SKPE.KL, RM4.22, OUTPERFORM, TP RM5.7) SapuraKencana Petroleum Bhd (SKPE.KL, RM4.27, OUTPERFORM, TP RM5.7) Scomi Energy (SCES.KL, RM1.0) Shanghai International Port Group (600018.SS, Rmb4.6) Shanghai Pudong Development Bank (600000.SS, Rmb9.56) Shimano (7309.T, ¥11,840, OUTPERFORM, TP ¥12,700) Shin Kong Financial Holding (2888.TW, NT$9.62) Sinopac Holdings (2890.TW, NT$13.85, OUTPERFORM, TP NT$17.0) Ssangyong Mtr (003620.KS, W7,870) State Bank Of India (SBI.BO, Rs2415.25, NEUTRAL, TP Rs2405.0) Sun TV network (SUTV.BO, Rs419.95, NEUTRAL, TP Rs410.0) Taishin Financial Holding (2887.TW, NT$15.9) Tata Consultancy Services (TCS.BO, Rs2470.2, OUTPERFORM, TP Rs2850.0) Tech Mahindra Limited (TEML.BO, Rs2207.75, OUTPERFORM, TP Rs2600.0) UMW Oil & Gas (UMOG.KL, RM3.99) Uzma Bhd (UZMA.KL, RM3.64) Venture Corporation (VENM.SI, S$8.03, NEUTRAL, TP S$7.4) Wipro Ltd. (WIPR.BO, Rs552.75, OUTPERFORM, TP Rs675.0) XL Axiata Tbk (EXCL.JK, Rp5,600) Yinson Holdings (YINS.KL, RM2.89) Yuanta Financial Holding Co Ltd (2885.TW, NT$16.0) Zee Entertainment Enterprise (ZEE.BO, Rs271.55)


Asian Daily

- 31 of 33 -

Disclosure Appendix

Important Global Disclosures

The analysts identified in this report each certify, with respect to the companies or securities that the individual analyzes, that (1) the views expressed in this report accurately reflect his or her personal views about all of the subject companies and securities and (2) no part of his or her compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this report.

The analyst(s) responsible for preparing this research report received Compensation that is based upon various factors including Credit Suisse's total revenues, a portion of which are generated by Credit Suisse's investment banking activities

As of December 10, 2012 Analysts’ stock rating are defined as follows:

Outperform (O) : The stock’s total return is expected to outperform the relevant benchmark*over the next 12 months.

Neutral (N) : The stock’s total return is expected to be in line with the relevant benchmark* over the next 12 months.

Underperform (U) : The stock’s total return is expected to underperform the relevant benchmark* over the next 12 months.

*Relevant benchmark by region: As of 10th December 2012, Japanese ratings are based on a stock’s total return relative to the analyst's coverage universe which consists of all companies covered by the analyst within the relevant sector, with Outperforms representing the most attractive, Neutrals the less attractive, and Underperforms the least attractive investment opportunities. As of 2nd October 2012, U.S. and Canadian as well as European ra tings are based on a stock’s total return relative to the analyst's coverage universe which consists of all companies covered by the analyst within the relevant sector, with Outperforms representing the most attractive, Neutrals the less attractive, and Underperforms the least attractive investment opportun ities. For Latin American and non-Japan Asia stocks, ratings are based on a stock’s total return relative to the average total return of the relevant country or regional benchmark; prior to 2nd Oc tober 2012 U.S. and Canadian ratings were based on (1) a stock’s absolute total return potential to its current share price and (2) the relative attractiveness of a stock’s total return potential within an analyst’s coverage universe. For Australian and New Zealand stocks, 12-month rolling yield is incorporated in the absolute total return calculation and a 15% and a 7.5% threshold replace the 10-15% level in the Outperform and Underperform stock rating definitions, respectively. The 15% and 7.5% thresholds replace the +10-15% and -10-15% levels in the Neutral stock rating definition, respectively. Prior to 10th December 2012, Japanese ratings were based on a stock’s total return relative to the average total return of the relevant country or regional benchmark.

Restricted (R) : In certain circumstances, Credit Suisse policy and/or applicable law and regulations preclude certain types of communications, including an investment recommendation, during the course of Credit Suisse's engagement in an investment banking transaction and in certain other circumstances.

Volatility Indicator [V] : A stock is defined as volatile if the stock price has moved up or down by 20% or more in a month in at least 8 of the past 24 months or the analyst expects significant volatility going forward.

Analysts’ sector weightings are distinct from analysts’ stock ratings and are based on the analyst’s expectations for the fundamentals and/or valuation of the sector* relative to the group’s historic fundamentals and/or valuation:

Overweight : The analyst’s expectation for the sector’s fundamentals and/or valuation is favorable over the next 12 months.

Market Weight : The analyst’s expectation for the sector’s fundamentals and/or valuation is neutral over the next 12 months.

Underweight : The analyst’s expectation for the sector’s fundamentals and/or valuation is cautious over the next 12 months.

*An analyst’s coverage sector consists of all companies covered by the analyst within the relevant sector. An analyst may cover multiple sectors.

Credit Suisse's distribution of stock ratings (and banking clients) is:

Global Ratings Distribution

Rating Versus universe (%) Of which banking clients (%)

Outperform/Buy* 44% (53% banking clients)

Neutral/Hold* 40% (50% banking clients)

Underperform/Sell* 13% (46% banking clients)

Restricted 3%

*For purposes of the NYSE and NASD ratings distribution disclosure requirements, our stock ratings of Outperform, Neutral, and Underper form most closely correspond to Buy, Hold, and Sell, respectively; however, the meanings are not the same, as our stock ratings are determined on a relative basis. (Please refer to definitions above.) An investor's decision to buy or sell a security should be based on investment objectives, current holdings, and other indivi dual factors.

Credit Suisse’s policy is to update research reports as it deems appropriate, based on developments with the subject company, the sector or the market that may have a material impact on the research views or opinions stated herein.

Credit Suisse's policy is only to publish investment research that is impartial, independent, clear, fair and not misleading. For more detail please refer to Credit Suisse's Policies for Managing Conflicts of Interest in connection with Investment Research: http://www.csfb.com/research and analytics/disclaimer/managing_conflicts_disclaimer.html

Credit Suisse does not provide any tax advice. Any statement herein regarding any US federal tax is not intended or written to be used, and cannot be used, by any taxpayer for the purposes of avoiding any penalties.

Important Regional Disclosures

Singapore recipients should contact Credit Suisse AG, Singapore Branch for any matters arising from this research report.

Restrictions on certain Canadian securities are indicated by the following abbreviations: NVS--Non-Voting shares; RVS--Restricted Voting Shares; SVS--Subordinate Voting Shares.


Asian Daily

- 32 of 33 -

Individuals receiving this report from a Canadian investment dealer that is not affiliated with Credit Suisse should be advised that this report may not contain regulatory disclosures the non-affiliated Canadian investment dealer would be required to make if this were its own report.

For Credit Suisse Securities (Canada), Inc.'s policies and procedures regarding the dissemination of equity research, please visit http://www.csfb.com/legal_terms/canada_research_policy.shtml.

As of the date of this report, Credit Suisse acts as a market maker or liquidity provider in the equities securities that are the subject of this report.

Principal is not guaranteed in the case of equities because equity prices are variable.

Commission is the commission rate or the amount agreed with a customer when setting up an account or at any time after that.

Taiwanese Disclosures: This research report is for reference only. Investors should carefully consider their own investment risk. Investment results are the responsibility of the individual investor. Reports may not be reprinted without permission of CS. Reports written by Taiwan based analysts on non-Taiwan listed companies are not considered recommendations to buy or sell securities under Taiwan Stock Exchange Operational Regulations Governing Securities Firms Recommending Trades in Securities to Customers.

Please find the full reports, including disclosure information, on Credit Suisse's Research and Analytics Website (http://www.researchandanalytics.com)

Important MSCI Disclosures

The MSCI sourced information is the exclusive property of Morgan Stanley Capital International Inc. (MSCI). Without prior written permission of MSCI, this information and any other MSCI intellectual property may not be reproduced, re-disseminated or used to create and financial products, including any indices. This information is provided on an "as is" basis. The user assumes the entire risk of any use made of this information. MSCI, its affiliates and any third party involved in, or related to, computing or compiling the information hereby expressly disclaim all warranties of originality, accuracy, completeness, merchantability or fitness for a particular purpose with respect to any of this information. Without limiting any of the foregoing, in no event shall MSCI, any of its affiliates or any third party involved in, or related to, computing or compiling the information have any liability for any damages of any kind. MSCI, Morgan Stanley Capital International and the MSCI indexes are services marks of MSCI and its affiliates.

The Global Industry Classification Standard (GICS) was developed by and is the exclusive property of Morgan Stanley Capital International Inc. and Standard & Poor’s. GICS is a service mark of MSCI and S&P and has been licensed for use by Credit Suisse.

Important Credit Suisse HOLT Disclosures

With respect to the analysis in this report based on the Credit Suisse HOLT methodology, Credit Suisse certifies that (1) the views expressed in this report accurately reflect the Credit Suisse HOLT methodology and (2) no part of the Firm’s compensation was, is, or will be directly related to the specific views disclosed in this report.

The Credit Suisse HOLT methodology does not assign ratings to a security. It is an analytical tool that involves use of a set of proprietary quantitative algorithms and warranted value calculations, collectively called the Credit Suisse HOLT valuation model, that are consistently applied to all the companies included in its database. Third-party data (including consensus earnings estimates) are systematically translated into a number of default algorithms available in the Credit Suisse HOLT valuation model. The source financial statement, pricing, and earnings data provided by outside data vendors are subject to quality control and may also be adjusted to more closely measure the underlying economics of firm performance. The adjustments provide consistency when analyzing a single company across time, or analyzing multiple companies across industries or national borders. The default scenario that is produced by the Credit Suisse HOLT valuation model establishes the baseline valuation for a security, and a user then may adjust the default variables to produce alternative scenarios, any of which could occur.

Additional information about the Credit Suisse HOLT methodology is available on request.

The Credit Suisse HOLT methodology does not assign a price target to a security. The default scenario that is produced by the Credit Suisse HOLT valuation model establishes a warranted price for a security, and as the third-party data are updated, the warranted price may also change. The default variable may also be adjusted to produce alternative warranted prices, any of which could occur.

CFROI®, HOLT, HOLTfolio, ValueSearch, AggreGator, Signal Flag and “Powered by HOLT” are trademarks or service marks or registered trademarks or registered service marks of Credit Suisse or its affiliates in the United States and other countries. HOLT is a corporate performance and valuation advisory service of Credit Suisse.

For Credit Suisse disclosure information on other companies mentioned in this report, please visit the website at https://rave.credit-suisse.com/disclosures or call +1 (877) 291-2683.


Asian Daily

- 33 of 33 -

References in this report to Credit Suisse include all of the subsidiaries and affiliates of Credit Suisse operating under its investment banking division. For more information on our structure, please use the following link: https://www.credit-suisse.com/who_we_are/en/This report may contain material that is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation or which would subject Credit Suisse AG or its affiliates ("CS") to any registration or licensing requirement within such jurisdiction. All material presented in this report, unless specifically indicated otherwise, is under copyright to CS. None of the material, nor its content, nor any copy of it, may be altered in any way, transmitted to, copied or distributed to any other party, without the prior express written permission of CS. All trademarks, service marks and logos used in this report are trademarks or service marks or registered trademarks or service marks of CS or its affiliates. The information, tools and material presented in this report are provided to you for information purposes only and are not to be used or considered as an offer or the solicitation of an offer to sell or to buy or subscribe for securities or other financial instruments. CS may not have taken any steps to ensure that the securities referred to in this report are suitable for any particular investor. CS will not treat recipients of this report as its customers by virtue of their receiving this report. The investments and services contained or referred to in this report may not be suitable for you and it is recommended that you consult an independent investment advisor if you are in doubt about such investments or investment services. Nothing in this report constitutes investment, legal, accounting or tax advice, or a representation that any investment or strategy is suitable or appropriate to your individual circumstances, or otherwise constitutes a personal recommendation to you. CS does not advise on the tax consequences of investments and you are advised to contact an independent tax adviser. Please note in particular that the bases and levels of taxation may change. Information and opinions presented in this report have been obtained or derived from sources believed by CS to be reliable, but CS makes no representation as to their accuracy or completeness. CS accepts no liability for loss arising from the use of the material presented in this report, except that this exclusion of liability does not apply to the extent that such liability arises under specific statutes or regulations applicable to CS. This report is not to be relied upon in substitution for the exercise of independent judgment. CS may have issued, and may in the future issue, other communications that are inconsistent with, and reach different conclusions from, the information presented in this report. Those communications reflect the different assumptions, views and analytical methods of the analysts who prepared them and CS is under no obligation to ensure that such other communications are brought to the attention of any recipient of this report. Some investments referred to in this report will be offered solely by a single entity and in the case of some investments solely by CS, or an associate of CS or CS may be the only market maker in such investments. Past performance should not be taken as an indication or guarantee of future performance, and no representation or warranty, express or implied, is made regarding future performance. Information, opinions and estimates contained in this report reflect a judgment at its original date of publication by CS and are subject to change without notice. The price, value of and income from any of the securities or financial instruments mentioned in this report can fall as well as rise. The value of securities and financial instruments is subject to exchange rate fluctuation that may have a positive or adverse effect on the price or income of such securities or financial instruments. Investors in securities such as ADR's, the values of which are influenced by currency volatility, effectively assume this risk. Structured securities are complex instruments, typically involve a high degree of risk and are intended for sale only to sophisticated investors who are capable of understanding and assuming the risks involved. The market value of any structured security may be affected by changes in economic, financial and political factors (including, but not limited to, spot and forward interest and exchange rates), time to maturity, market conditions and volatility, and the credit quality of any issuer or reference issuer. Any investor interested in purchasing a structured product should conduct their own investigation and analysis of the product and consult with their own professional advisers as to the risks involved in making such a purchase. Some investments discussed in this report may have a high level of volatility. High volatility investments may experience sudden and large falls in their value causing losses when that investment is realised. Those losses may equal your original investment. Indeed, in the case of some investments the potential losses may exceed the amount of initial investment and, in such circumstances, you may be required to pay more money to support those losses. Income yields from investments may fluctuate and, in consequence, initial capital paid to make the investment may be used as part of that income yield. Some investments may not be readily realisable and it may be difficult to sell or realise those investments, similarly it may prove difficult for you to obtain reliable information about the value, or risks, to which such an investment is exposed. This report may provide the addresses of, or contain hyperlinks to, websites. Except to the extent to which the report refers to website material of CS, CS has not reviewed any such site and takes no responsibility for the content contained therein. Such address or hyperlink (including addresses or hyperlinks to CS's own website material) is provided solely for your convenience and information and the content of any such website does not in any way form part of this document. Accessing such website or following such link through this report or CS's website shall be at your own risk. This report is issued and distributed in Europe (except Switzerland) by Credit Suisse Securities (Europe) Limited, One Cabot Square, London E14 4QJ, England, which is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. This report is being distributed in Germany by Credit Suisse Securities (Europe) Limited Niederlassung Frankfurt am Main regulated by the Bundesanstalt fuer Finanzdienstleistungsaufsicht ("BaFin"). This report is being distributed in the United States and Canada by Credit Suisse Securities (USA) LLC; in Switzerland by Credit Suisse AG; in Brazil by Banco de Investimentos Credit Suisse (Brasil) S.A or its affiliates; in Mexico by Banco Credit Suisse (México), S.A. (transactions related to the securities mentioned in this report will only be effected in compliance with applicable regulation); in Japan by Credit Suisse Securities (Japan) Limited, Financial Instruments Firm, Director-General of Kanto Local Finance Bureau (Kinsho) No. 66, a member of Japan Securities Dealers Association, The Financial Futures Association of Japan, Japan Investment Advisers Association, Type II Financial Instruments Firms Association; elsewhere in Asia/ Pacific by whichever of the following is the appropriately authorised entity in the relevant jurisdiction: Credit Suisse (Hong Kong) Limited, Credit Suisse Equities (Australia) Limited, Credit Suisse Securities (Thailand) Limited, regulated by the Office of the Securities and Exchange Commission, Thailand, having registered address at 990 Abdulrahim Place, 27th Floor, Unit 2701, Rama IV Road, Silom, Bangrak, Bangkok 10500, Thailand, Tel. +66 2614 6000, Credit Suisse Securities (Malaysia) Sdn Bhd, Credit Suisse AG, Singapore Branch, Credit Suisse Securities (India) Private Limited (CIN no. U67120MH1996PTC104392) regulated by the Securities and Exchange Board of India (registration Nos. INB230970637; INF230970637; INB010970631; INF010970631), having registered address at 9th Floor, Ceejay House, Dr.A.B. Road, Worli, Mumbai - 18, India, T- +91-22 6777 3777, Credit Suisse Securities (Europe) Limited, Seoul Branch, Credit Suisse AG, Taipei Securities Branch, PT Credit Suisse Securities Indonesia, Credit Suisse Securities (Philippines ) Inc., and elsewhere in the world by the relevant authorised affiliate of the above. Research on Taiwanese securities produced by Credit Suisse AG, Taipei Securities Branch has been prepared by a registered Senior Business Person. Research provided to residents of Malaysia is authorised by the Head of Research for Credit Suisse Securities (Malaysia) Sdn Bhd, to whom they should direct any queries on +603 2723 2020. This report has been prepared and issued for distribution in Singapore to institutional investors, accredited investors and expert investors (each as defined under the Financial Advisers Regulations) only, and is also distributed by Credit Suisse AG, Singapore branch to overseas investors (as defined under the Financial Advisers Regulations). By virtue of your status as an institutional investor, accredited investor, expert investor or overseas investor, Credit Suisse AG, Singapore branch is exempted from complying with certain compliance requirements under the Financial Advisers Act, Chapter 110 of Singapore (the "FAA"), the Financial Advisers Regulations and the relevant Notices and Guidelines issued thereunder, in respect of any financial advisory service which Credit Suisse AG, Singapore branch may provide to you. This research may not conform to Canadian disclosure requirements. In jurisdictions where CS is not already registered or licensed to trade in securities, transactions will only be effected in accordance with applicable securities legislation, which will vary from jurisdiction to jurisdiction and may require that the trade be made in accordance with applicable exemptions from registration or licensing requirements. Non-U.S. customers wishing to effect a transaction should contact a CS entity in their local jurisdiction unless governing law permits otherwise. U.S. customers wishing to effect a transaction should do so only by contacting a representative at Credit Suisse Securities (USA) LLC in the U.S. Please note that this research was originally prepared and issued by CS for distribution to their market professional and institutional investor customers. Recipients who are not market professional or institutional investor customers of CS should seek the advice of their independent financial advisor prior to taking any investment decision based on this report or for any necessary explanation of its contents. This research may relate to investments or services of a person outside of the UK or to other matters which are not authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority or in respect of which the protections of the Prudential Regulation Authority and Financial Conduct Authority for private customers and/or the UK compensation scheme may not be available, and further details as to where this may be the case are available upon request in respect of this report. CS may provide various services to US municipal entities or obligated persons ("municipalities"), including suggesting individual transactions or trades and entering into such transactions. Any services CS provides to municipalities are not viewed as "advice" within the meaning of Section 975 of the Dodd-Frank Wall Street Reform and Consumer Protection Act. CS is providing any such services and related information solely on an arm's length basis and not as an advisor or fiduciary to the municipality. In connection with the provision of the any such services, there is no agreement, direct or indirect, between any municipality (including the officials, management, employees or agents thereof) and CS for CS to provide advice to the municipality. Municipalities should consult with their financial, accounting and legal advisors regarding any such services provided by CS. In addition, CS is not acting for direct or indirect compensation to solicit the municipality on behalf of an unaffiliated broker, dealer, municipal securities dealer, municipal advisor, or investment adviser for the purpose of obtaining or retaining an engagement by the municipality for or in connection with Municipal Financial Products, the issuance of municipal securities, or of an investment adviser to provide investment advisory services to or on behalf of the municipality. If this report is being distributed by a financial institution other than Credit Suisse AG, or its affiliates, that financial institution is solely responsible for distribution. Clients of that institution should contact that institution to effect a transaction in the securities mentioned in this report or require further information. This report does not constitute investment advice by Credit Suisse to the clients of the distributing financial institution, and neither Credit Suisse AG, its affiliates, and their respective officers, directors and employees accept any liability whatsoever for any direct or consequential loss arising from their use of this report or its content. Principal is not guaranteed. Commission is the commission rate or the amount agreed with a customer when setting up an account or at any time after that.

Copyright © 2014 CREDIT SUISSE AG and/or its affiliates. All rights reserved.

Investment principal on bonds can be eroded depending on sale price or market price. In addition, there are bonds on which investment principal can be eroded due to changes in redemption amounts. Care is required when investing in such instruments. When you purchase non-listed Japanese fixed income securities (Japanese government bonds, Japanese municipal bonds, Japanese government guaranteed bonds, Japanese corporate bonds) from CS as a seller, you will be requested to pay the purchase price only.

AsianDaily_20140811_AM.doc

https://www.credit-suisse.com/who_we_are/en/

Documents

Monday, 11 August 2014 the sector will be more obvious. In ...pg.jrj.com.cn/acc/Res/CN_RES/INVEST/2014/8/11/d00c...DISCLOSURE APPENDIX CONTAINS ANALYST CERTIFICATIONS AND THE STATUS