P K Basu - xinhua08.com

SEE APPENDIX I FOR IMPORTANT DISCLOSURES AND ANALYST CERTIFICATIONS

5 November 2012

Regional

Daily

Top Views 3Q12 REVIEW | REC. UPGRADE Mcap USD5.1b ADTV USD5.4m SG: StarHub (STH SP) Gregory Yap P5 Telco | Showing Resilience | BUY | Upside 9% ‐ 3Q12 came in above expectations on better‐than‐expected margins as

the iPhone 5 was launched only late in the quarter. However, we think 4Q12 could also beat expectations as the negative impact of iPhones on margins appears to be fading.

‐ In addition, we now take the view that the lack of BPL will not be a dealbreaker for StarHub even if it decides not to bid, as there are other alternatives. Meanwhile, the record‐low gearing of 0.46x should allow it to sustain dividends into 2013.

‐ Following the last few months’ selling pressure, we believe there is now a chance for the stock to rebound. We upgrade StarHub to BUY with a DDM target price of SGD3.99.

TP UPGRADE Mcap USD1.1b ADTV US1.1m IJ: Bank BJB (BJBR IJ) Rahmi Marina 6 Financials | Benefiting from Multiple Fronts | BUY | Upside 23% ‐ We adjust our FY12F and FY13F earnings for the 5% tax discount that

BJB has been entitled to since 2011. Including the 5% tax benefit, our FY13 net profit estimate would stand at IDR1.5t, implying 14% YoY growth.

‐ NIM has been on an upward trend supported by BJB’s successful expansion into low‐cost funding. Also driving the rising NIM is BJB’s solid consumer lending book, which has one of the lowest NPL rate in the industry of 0.1%.

‐ BJB’s share price bottomed out in mid‐2012 and has trekked northwards since on rising NIMs that is underpinned by product expansion (new foray into the pensioners loan segment) and low funding cost. We see 23% upside to our fair value of IDR1,370/share; additionally, the bank is also very attractive for its above industry’s average dividend yield of circa 7%. Maintain BUY.

QUANT | Tech-Tracks Lee Cheng Hooi 7 Year-End Sluggishness Creeping In? ‐ We view the Malaysian, Thailand, Singapore and Indonesian markets as

technically priced in. With technical bearish divergence creeping into these indices’ indicators, these markets may face an impending consolidation/correctional phase soon.

‐ Hong Kong looks quite resilient with firm inflows of money there, whilst Vietnam is range‐bound ahead of another possible downward phase quite soon.

‐ A stock picker’s market with Buys including PBK MK, 1251 HK, ERAA IJ, CENTEL TB & SUPER SP while we have a Sell on PGD VN.

P K Basu [email protected] (65) 6432 1821 ONG Seng Yeow [email protected] (65) 6432 1832 Benjamin Ho [email protected] (852)22680643

Top Buys…

Company Ticker Spot Target Upside (%)

Yinson YNS MK 1.81 2.54 40.33 Thai Vegetable Oil TVO TB 25.00 34.75 39.0 Perdana Pet PETR MK 0.96 1.30 35.42 Perisai PPT MK 1.04 1.40 34.62 LICHF LICHF IN 249.85 332.00 32.88 SembMarine SMM SP 4.70 6.20 31.91 Dialog DLG MK 2.40 3.05 27.08 B. Armada BAB MK 3.90 4.88 25.1 Wah Seong WSC MK 1.80 2.20 22.22 First Philippine Holdings FPH PM 86.40 103.00 19.21 MMHE MMHE MK 4.79 5.70 19.0 Alam Maritim AMRB MK 0.73 0.85 17.24 Telekom T MK 5.67 6.61 16.6 Genting Malaysia GENM MK 3 4.05 16.38

Top Sells… Company Ticker Spot Target Downside(%) Jai Prakash Associates JPA IN 88.10 47.00 46.65 Ajisen China 538 HK 5.48 3.21 41.42 Idea Cellular IDEA IN 86.45 68.00 21.34 Starhub STH SP 3.65 3.06 16.16

Maybank-KE Events Date Event Location 05-06-Nov Vanke- Non deal roadshow HK 05-Nov D&L Philippines IPO roadshow HK 07-08-Nov D&L Philippines IPO roadshow SP 09-Nov OSIM- Non deal roadshow UK 14-Nov Supergroup- Non deal roadshow SP 12-16 Nov Analyst roadshow: Thai/Phil Strategy |

Maria Lapiz& Luz Lorenzo UK/US

12-16 Nov Maybank - Non deal roadshow UK

mailto:[email protected]


5 November 2012

Regional Daily

2Q13 REVIEW Mcap USD1.8b ADTV USD6.0m IN: Tata Global Beverages (TGBL) Ganesh Ram 8 Cons. Staples | Multiple Growth Drivers | BUY | Upside 17% ‐ Q2 EPS of Rs1.9, +53% QoQ, was above expectations due to profit from

sale of non‐core investments and savings in interest cost and income tax. Earnings growth was supported by rising contribution from the coffee business (28% in Q2FY13 vs. 20% in Q2FY12) led by increased reach and reduced raw material cost. But, gross margin of the India tea business declined due to lag effect of passing through increase in raw material cost.

‐ TGBL is upbeat about its 2 JVs in the water and coffee retailing businesses due to the overwhelming response to its initial launch. We will include the contribution from these JVs to our FY13F EPS of Rs6.8 (+26%) after Q3.

‐ Our TP of Rs175/sh is based on ‘sum‐of‐the‐parts’ valuation. Maintain BUY.

2Q13 REVIEW Mcap USD16.6b ADTV USD10.3m IN: Wipro (WPRO IN) Urmil Shah 9 Tech | Focus on Profitability | BUY | Upside 20% ‐ Q2 EPS of Rs6.5, +23.6% YoY, +1.8% QoQ. Even though WPRO will

continue to trail its peers and software sector, it is showing margin improvement thru pricing and industry leading growth in revenue from the top 10 clients. Weakness in India business and Telecom sector are main factors behind WPRO’s under performance in the past 1 year. It is addressing this by increasing focus on high margin revenue.

‐ Its recent decision to spin off the low margin consumer business (8% of earnings) will also improve margin and ROE profile of the company.

‐ Our FY13F EPS is revised down slightly to Rs26.7 but is still above consensus. We maintain BUY because the stock is fully pricing in slower‐than‐sector growth at a PER of 14x FY13 (30% discount to TCS). Our TP is Rs437/sh based on PER of 16x FY13F.

SMID Caps

2Q13 REVIEW Mcap USD0.7b ADTV USD1.0m IN: Sobha Developers (SOBHA IN) Anubhav Gupta 10 Property | The Robust Momentum Continues | BUY | Upside 17% ‐ 1H accounts for 37% of our full‐year profit forecast of Rs26/sh. SOBHA

has a stock of pre‐ordered homes worth Rs15bn, which secures 2H revenue and more (full‐year profit +25%).

‐ Next year’s 35% profit growth will come from new launches worth Rs15bn over the next 6 months. D/E of 0.7x is comfortable, given that the company’s present land bank is full paid‐up.

‐ We roll forward valuations to FY14 and raise our TP to Rs426/sh from Rs390/sh, at PER of 12x.

5 November 2012

Regional Daily

3Q12 REVIEW Mcap USD220m ADTV US0.05m VN: DHG Pharmaceutical (DHG VN) Hang Vu 11 Healthcare| New Factory to Drive Earnings Growth | BUY | Upside 39% ‐ DHG’s 9M12 revenue increased 17% YoY to VND2,039b, but its profit

only grew 16% YoY to VND358b, because the SG&A to revenue ratio rose from 28% in 9M11 to 30% in 9M12.

‐ DHG’s new factory will double the company’s capacity (currently 4 billion units), when it starts operating in 2Q13.

‐ Revenue and profits are expected to grow about 28% and 25% respectively in 2013, driven by volume growth and ASP increases. The stock is trading at 7.4x FY13 PER versus expected EPS growth of 25% p.a. over 2013‐2015.

Company Notes 3Q12 REVIEW Mcap USD33.2b ADTV USD24.9m IJ: Astra International (ASII IJ) Pandu Anugrah 12 Industrials | Ascending Ride | BUY | Upside 11.4% - Astra International (ASII) reported flat 3Q12 earnings of IDR5.0t (‐1.6%

QoQ), which translate into a 9M12 net profit of IDR14.6t (+8.8% YoY) that is in line with our estimate. ASII’s flat 3Q12 earnings came as no surprise, given the seasonality factor in auto sales and falling commodity prices.

- By incorporating UNTR’s and AALI’s higher margin estimates, we raise ASII’s FY12‐14 operating profit by 9.3%. Nevertheless, we only raised our earnings slightly by 1.4% given lower income from associates and higher interest expense.

‐ Despite headwinds in the commodity sector, we expect Indonesia’s stable economic growth to underpin automotive demand in FY13F‐FY14F. Thus, we reiterate our BUY rating on ASII with unchanged TP of IDR8,800, pegging the stock at 16x FY13 PER.

RG: Plantations Ong Chee Ting 13 Still Weak CPO Export Trend | NEUTRAL - Malaysia’s export estimates for Oct ’12 continued to disappoint despite

low CPO ASP of MYR2,281/t in Oct. - Malaysia’s stockpile looks set to hit 2.7m tonnes end‐Oct ‘12,

dampening hope of a quick recovery in CPO prices. - A slow start to new planting season in South America provides strong

price support for competing oils, and will lift CPO price in 1Q13 when stockpile retreats.

- We retain our Neutral sector weighting on a 12M investment horizon with BUYs on First Resources (TP: SGD2.15) and Sarawak Oil Palms (TP: MYR8.00).

5 November 2012

Regional Daily

3Q12 REVIEW Mcap USD1.6b ADTV USD3.7m SG: Cosco Corp (COSSP) Yeak Chee Keong 14 Industrials | Still Finding Its Bottom| SELL| Downside 17% ‐ 3Q12 results were below our expectations with PATMI of SGD26.6m (‐

17.5% YoY, ‐3.8% QoQ). Cosco has been winning offshore orders but profitability remains questionable. We expect stock price to languish towards lower levels. Maintain Sell and TP of SGD0.73.

‐ Overall gross margin saw marginal improvement due to better product mix but is insufficient to conclude an uptrend. Instead, we believe that negative price pressure could continue to reign in on its projects due to intense competition.

‐ YTD order wins amounted to USD1.2b. While Cosco is still hopeful for USD2.0b order win by year end, we cut our order win assumption to USD1.8b. Our PATMI assumptions for FY12‐14F are also cut by 6‐10%.

3Q12 REVIEW Mcap USD2.6b ADTV USD1.6m IJ: Holcim Indonesia (SMCB IJ) Anthony Yunus 15 Materials | Maximised Capacity Limits Volume Upside| HOLD | Upside ‐ Holcim Indonesia (SMCB) booked a 9M12 net profit of IDR911b, up by

23% YoY, which was mainly supported by 20% YoY growth in revenue. The figure, constituting 79% of our FY estimate, was above our expectations.

‐ We believe SMCB shares have almost fully priced if there is another 4% upside to the share price. Moreover, we expect SMCB’s new capacity (+15%) to be added at around FY14F at the latest. Note that SMCB’s capacity utilisation has reached its peak.

‐ We increase our EPS forecasts by 5%/8%/11% for FY12F/FY13F/FY14F, due to changes in sales volumes and ASP assumptions. In all, we maintain our HOLD stance on the counter with a new TP of IDR3,400 (from IDR2,750), which pegs the stock at FY13F PER of 16.4x. HOLD

3Q12 REVIEW | TP UPGRADE Mcap USD3.4b ADTV USD2.2m IJ: Astra Agro Lestari (AALI IJ) Pandu Anugrah 16 Industrials | 3Q12 Profits Surge on Costs Savings | HOLD | Upside 7.7% ‐ Thanks to the positive knock‐on effect of its cost‐savings programme in

early 3Q12, Astra Agro Lestari (AALI) recorded a 23% QoQ rise in third‐quarter earnings to IDR581b. This brought 9M12 net profit to IDR2.3t, a 10.1% YoY slide but still in line with our full‐year forecast.

‐ We expect CPO production to peak in 4Q12 at 407k tonnes, translating to FY12F CPO sales volume of 1.4m tonnes, up 12% YoY. However, as we expect 4Q12F CPO price to remain weak, earnings growth will remain unexciting. .

‐ Retain HOLD rating on AALI with slightly higher TP of IDR22,500, pegging the stock at FY13 PER of 14x.

3Q12 REVIEW Mcap USD7.0b ADTV USD4.4m PH: Bank of the Philippine Islands (BPI PM) Katherine Tan 17 Financials | Earnings Right On Track | HOLD | Downside 1.2% ‐ Bank of the Philippine Islands (BPI) posted a 9% YoY increase in 3Q12

net income to PHP3.8b. This drove 9M12 earnings to PHP13.2b, up 37% and accounts for 80% of our full‐year estimate.

‐ Net interest income rose 7.8% to PHP20.5b in 9M12, implying a 6% increase to PHP6.7b in 3Q12. Net interest spread was relatively flat but compensated by an 18% expansion in credit demand.

‐ We maintain our earnings forecast of PHP16.5b in 2012 and PHP16.7b in 2013, resulting in an estimated ROE of 17.8% and 16.6%, respectively. Our target price is also kept at PHP80/sh, equivalent to 2.7x 2013F P/BV. HOLD.


Results Review 5 November 2012

Singapore

Co. Reg No: 198700034E MICA (P) : 099/03/2012

StarHub Showing Resilience

Selling pressure should ease. 3Q12 was above expectations and 4Q12 could also beat expectations as the negative impact of iPhones on margins could be fading. Also, we now take the view that lack of BPL will not be a dealbreaker while the record-low gearing should allow it to sustain dividends. We upgrade StarHub to BUY with a DDM TP of SGD3.99. There is a chance for the stock to rebound following the last few months’ selling pressure. Above expectations. The impact of the iPhone on margins has yet to hit. But we now believe the i5’s impact may not be as bad as previous models. We understand StarHub is getting a lower unit cost from Apple. With margins running ahead of full year guidance of 30% so far (3Q12 33.9%, 9M12 32.7%), StarHub has a good chance of doing better than expected. We have raised our FY12 forecast by 8%. Great job on cost control! Another reason for the above-expectations margin was in traffic expenses, an area that we think is more sustainable than other areas. StarHub was able to lower inter-connection rates for its international outbound traffic. Depreciation, another semi-permanent cost item, was also lower than expected. BPL not the end-all and be-all for Pay TV. StarHub is still waiting for SingTel to finalise its deal with FAPL. Nevetheless, it does expect Pay TV churn rate to rise in the next few quarters, as competition from mioTV is definitely rising. With this acknowledgement however, we now think there are ways to limit the damage. For example, StarHub has beefed up its niche content and it now also produces its own local content. It is also possible StarHub may not buy the whole package from BPL but only choose to air the key matches to save costs. Hence, even if it foregoes BPL, net subscriber loss may not exceed 5,000 in 2013, similar to 2010 when SingTel first wrested away BPL. Record low gearing raises confidence in sustained dividend. Net debt/EBITDA fell to a record low of 0.46x in 3Q12 following its recent raising of SGD220m in medium-term notes. With more than SGD500m cash, StarHub’s annual DPS of SGD0.20 is now more assured, as well its ability to meet higher commitments ahead for BPL (if it participates) and 4G spectrum (auction next year). With lower depreciation, it may even be able to raise 2013 DPS to SGD0.22, inline with EPS. StarHub – Summary Earnings Table Source: Maybank-KE FYE Dec (SGD m) 2010A 2011A 2012F 2013F 2014F Revenue 2237.7 2312.0 2401.1 2491.2 2585.7 EBITDA 601.8 676.0 719.9 747.4 774.9 Recurring net profit 263.2 315.5 355.3 368.7 382.5 Recurring basic EPS (cents) 15.3 18.4 20.7 21.5 22.3 EPS growth (%) -17.8 19.8 12.7 3.8 3.7 DPS (cents) 20.0 20.0 20.0 20.0 20.0 PER (x) 23.8 19.9 17.6 17.0 16.4 EV/EBITDA (x) 11.4 10.0 9.4 9.1 8.7 Div Yield (%) 5.5 5.5 5.5 5.5 5.5 P/BV (x) n/m n/m n/m n/m n/m Net debt/EBITDA (x) 1.0 0.8 0.7 0.8 0.6 ROE (%) n/m n/m n/m n/m n/m ROA (%) 14.9 17.9 19.4 18.8 18.9 Consensus net profit (S$'m) 333.2 354.5 371.0

BUY (from Sell) Share price: SGD3.65 Target price: SGD3.99 (from SGD3.06) Gregory Yap [email protected] (65) 6432 1450 Stock Information Description: The second-largest telco and dominant Pay TV operator in Singapore. It operates integrated fixed and mobile telecom services, as well as Internet-related services, mobile solutions and global managed network solutions. Ticker: STH SP Shares Issued (m): 1,714.9 Market Cap (USD m): 5,121.3 3-mth Avg Daily Turnover (USD m): 5.4 ST Index: 3,040.8 Free float (%): 33.5 Major Shareholders: % Asia Mobile Holdings * 56.6 NTT Communications 10.0 * 75% ST Telemedia/25% Qatar Telecom Key Indicators ROE – annualised (%) 88.0 Net cash (SGD m): 0.46 NTA/shr (SGD): 0.63 Interest cover (x): 25.1

Historical Chart

Performance: 52-week High/Low SGD3.88/SGD2.72 1-mth 3-mth 6-mth 1-yr YTD Absolute (%) -1.6 -5.4 14.8 28.5 25.4 Relative (%) -0.4 -5.6 13.5 19.8 9.2


Company Update 5 November 2012

Indonesia

Bank BJB Benefiting from a Lower Tax Rate

Eligible for a 5% tax discount. We adjust our FY12F and FY13F earnings for the 5% tax discount that BJB has been entitled to since 2011 for having more than 40% of its minority shares held by at least 300 parties, each with less than 5% ownership in the bank. BJB only started claiming this tax cut in 9M12, and expects a ~IDR67t restitution from its 2011 tax payment to be realised in 2013. We have not included the carry-forward benefit into our FY13F valuation, as the final amount that the bank will receive is still uncertain. Including the 5% tax benefit, our FY13 net profit estimate would stand at IDR1.5t, implying 14% YoY growth.

Solid base for medium-term growth. Since the beginning of 2012, BJB’s NIM has been on an upward trend. This positive progress was mainly supported by BJB’s successful expansion into low-cost funding. The huge deposit base that the bank is forming, reflected in its LDR of 65%, serves as solid medium-term growth driver especially when combined with its ample CAR of 18.4%. We estimate loan growth of 22% YoY in 2013, in addition to this year’s expansion of 25% YoY. BJB has one of the best consumer lending books in the industry, making up 66% of its total IDR35t loan portfolio, with an NPL rate of 0.1%.

Maintain BUY. Supported by healthy fundamentals, BJB’s share price bottomed out in mid-2012. However, it has not reached our fair value of IDR1,370/share (based on FY13 PER of 8.9x and PBV of 1.9x). On top of this 23% upside potential, the bank is also very attractive for its dividend yield of 6.3% vs. the industry average of 3%. Maintain BUY.

Bank BJB – Summary Earnings Table

FYE Dec (IDR b) 2009 2010 2011 2012F 2013F Operating Income 2,365 3,004 3,399 4,130 4,673 Pre-provision Profit 1,123 1,551 1,622 2,098 2,426 Profit before Tax 985 1,220 1,320 1,648 1,877 Recurring Net Profit 709 890 963 1,306 1,487 Recurring Basic EPS (IDR) 73 92 99 135 153 EPS growth (%) 31 26 8 36 14 Gross DPS (IDR) 119 60 61 74 84 PER (x) 15.2 12.1 11.2 8.2 7.2 Div Yield (%) 10.7 5.4 5.5 6.7 7.6 P/BV (x) 3.5 2.2 2.0 1.7 1.5 Book Value (IDR b) 3,092 4,996 5,387 6,347 7,016 ROAE (%) 16.3 22.0 18.6 22.3 22.3 ROAA (%) 1.7 2.3 2.0 2.1 1.9 Consensus Net Profit (IDR b) 709 890 963 1,236 1,445

Source: Kim Eng

BUY (unchanged) Share price: IDR1,110 Target price: IDR1,370 (from IDR1,230) Rahmi Marina [email protected] (62 21) 2557 1128 Stock Information Description: Bank BJB Tbk is a commercial bank. The bank offers a wide range of banking products and services especially in the consumer segment. Ticker: BJBR.IJ Shares Issued (m): 9,696 Market Cap (USD m): 1,118 3-mth Avg Daily Turnover (USD m): 1.1 IDX index: 4339 Free float (%): 25.0 Major Shareholders: % Local Government of RI 75.0 Key Indicators

NIM (%): 7.1 ROA (%): 2.7 ROE (%): 26.5 CIR (%): 52.3 *Bank only, not consolidated

Historical Chart

Performance: 52-week High/Low IDR1,180/IDR800 1-mth 3-mth 6-mth 1-yr YTD Absolute (%) 0.0 13.3 6.7 13.3 22.0 Relative (%) -1.9 7.3 3.9 -2.0 8.1

TECH-TRACKS

5 November 2012 Page 3 of 23

MXASJ Weekly Chart

Market Commentary

•• The MXASJ’s rebound from the Oct 2008 low of 223.62 took the form of an Elliott Wave 3-3-5 Flat correction to the high of 599.15 (Apr 2011).

• Since that 599.15 high, the index has unfolded

downwards in an Elliott Wave sequence as shown on the chart above. However, it broke a Symmetrical Triangle pattern on the upside eight weeks ago.

• So long as the MXASJ cannot surpass 541.21 (Wave 1

in the current downward sequence), the index will remain under selling pressure in the longer term.

• Support areas may be zones to buy, whilst selling at the

resistances may be wise. Its indicators have all turned positive, with CCI, DMI, MACD and Oscillator showing buy signals. Its Stochastic is negative for now.

• 18 and 40 simple moving averages (SMA) also depict a

triple time frame uptrend for the daily, weekly and monthly charts.

• With the USA’s QE3 in place, most Asian markets

gained ground about eight weeks ago. However, some technical tiredness appears to be creeping in.

• As a result, we advise regional investors to nibble on the

MXASJ, with a stop-loss of 499.

TECHNICALS

52 Week High : 537.80 52 Week Low : 440.25 Last Price : 517.41 Support S1/S2 : 501 & 517 Resistance R1/R2 : 523 & 541 Upside Tgt T1/T2 : 531 & 563 Stop-loss : 499 Upward Period : 2 days to 1 month Strategy : Nibble on Dips CCI : Positive DMI : Positive MACD : Positive Oscillator : Positive RSI : Neutral (58) Stochastic : Negative Trend : Up


2Q13 RESULT REVIEW 5 November 2012

India

Tata Global Beverages (TGBL) Multiple Growth Drivers Q2 EPS of Rs1.9, +53% QoQ, was above expectations due to profit from sale of non-core investments and savings in interest cost and income tax. Earnings growth was supported by rising contribution from the coffee business (28% in Q2 vs. 20% in Q2FY12) led by increased reach and reduced raw material cost. But, gross margin of India tea business declined due to lag effect of passing through increase in raw material cost. TGBL is upbeat about its 2 JVs in the water and coffee retailing businesses due to the overwhelming response to its initial launch. We will include the contribution from these JVs to our FY13F EPS of Rs6.8 (+26%) after Q3. Our TP of Rs175/sh is based on ‘sum-of-the-parts’ valuation. Maintain BUY. Rising demand for premium tea to support gross margin expansion. TGBL is witnessing a sharp rise in demand for high margin green tea, herbal and fruit tea segments globally. In India, realization increased 10% in the past 1 year due to premiumization and increase in selling price. TGBL increased selling price by 5% in Q2. However, this was offset by increase in raw tea price (+21% YoY). TGBL confirmed further increase in selling price in Q3. This would support our FY13 gross margin forecast of 30% for the India tea business. Overseas coffee business rebounds on reach and reduced cost. H1 net profit of Eight O’ clock coffee improved to Rs405m vs. a loss of Rs25m in FY12. This was due to increase in distribution through Keurig, the single serve coffee machine. Further, price of the benchmark Arabica coffee bean declined 16% QoQ which reduced the raw material cost. We increase our FY13 net profit estimate for Eight O’clock coffee to Rs700m from Rs400m. However, we maintain our consolidated FY13F net profit of Rs4.2bn on margin pressure from tea business. Overwhelming response to water and coffee retailing business. For the first time, TGBL announced a target to achieve revenue of Rs5bn in 5 years from each of its 2 JVs with Starbucks and PepsiCo. TGBL has 3 coffee stores in Mumbai and plans to set up 3 more stores in Delhi in Jan ’13. The JV plans to set up 100 stores in 2 years. Further, TGBL received an overwhelming response for the launch of fortified water in Tamil Nadu and Andhra Pradesh and plans to launch pan-India by end-FY14. We will include contribution from these high margin-businesses in our forecast after Q3 when the company provides details. Stock would continue to outperform on multiple growth drivers. We believe TGBL is undervalued at P/S of 1.2x FY13F. We expect investors to re-rate the stock as increasing contribution from the coffee and new businesses would lead to margin expansion and ROE improvement.

TGBL – Summary Earnings Table FY Mar 31 (Rs bn) FY10 FY11 FY12 FY13F FY14F Revenue 57.8 59.8 66.3 74.7 81.2 EBITDA 6.8 5.9 6.2 7.1 8.6 Recurring Net Profit 3.7 2.4 3.3 4.2 5.3 Recurring Basic EPS (Rs) 6.1 4.0 5.4 6.8 8.6 EPS growth (%) nm -34.8 36.3 26.2 25.9 DPS (Rs) 2.0 2.0 2.2 2.3 2.5 PER (x) 24.7 37.9 27.8 22.0 17.5 EV/EBITDA (x) 15.6 18.3 17.2 15.1 12.5 Div Yield (%) 1.3 1.3 1.4 1.5 1.7 P/BV(x) 2.5 2.3 2.0 1.9 1.8 Net Debt/Equity (%) -2.9 1.1 8.1 6.8 2.6 ROE (%) 9.3 6.4 7.8 8.7 10.3 ROA (%) 6.8 6.1 6.6 7.2 8.7 Consensus net profit (Rs bn) - - - 4.3 4.9 Source: Company data, Bloomberg, KESI estimates

BUY (Unchanged) Share price: Rs150/sh Target price: Rs175/sh (Unchanged) Ganesh Ram [email protected] (91) 22 66232607

Stock Information Description: Ticker: TGBL IN Shares Issued (m): 618 Market Cap (US$ bn): 1.8 6-mth Avg Daily Volume (US$m): 6.0 SENSEX: 18,755 Free float (%): 64.8 Major Shareholders: % Tata Group 35.2

Key Indicators (FY13F) ROE – annualised (%) 8.7 Net debt (Rs bn): 3.5 NTA (Rs/sh): 77.9 Interest cover (x): 12.2

Historical Chart

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TGBL SENSEX

Performance: 52-week High/Low Rs165/80 1-mth 3-mth 6-mth 1-yr YTD Absolute (%) 8.7 21.7 32.6 74.5 75.7 Relative (%) 9.0 12.8 24.2 67.2 54.3



2Q12 RESULT REVIEW 5 November 2012

India

Wipro (WPRO) Focus on Profitability

Q2 EPS of Rs6.5, +23.6% YoY, +1.8% QoQ. Even though WPRO will continue to trail its peers and software sector, it is showing margin improvement thru pricing and industry leading growth in revenue from the top 10 clients. Weakness in India business and Telecom sector are main factors behind WPRO’s under performance in the past 1 year. It is addressing this by increasing focus on high margin revenue. Its recent decision to spin off the low margin consumer business (8% of earnings) will also improve margin and ROE profile of the company. Our FY13F EPS is revised down slightly to Rs26.7 but is still above consensus. We maintain BUY because the stock is fully pricing in slower-than-sector growth at a PER of 14x FY13 (30% discount to TCS). Our TP is Rs437/sh based on PER of 16x FY13F. Q2 revenue of Rs106bn, +18% YoY and +1.5% QoQ. Despite an uninspiring growth vs peers WPRO’s Q2 had distinct positives such as - 1) QoQ pricing increase of 1.5% which none of its peers have delivered, 2) 7.5% QoQ growth in revenue from top-10 clients and 3) strong growth in services to energy, utilities and financial services which collectively form 42% of revenue . WPRO now has 9 clients (+1 in Q2) with yearly revenue of USD100m+. H1 is 49% of our FY13F revenue of Rs429bn (+15% YoY). Gross margin +70bp QoQ to 31.2%. This was driven by improved pricing which negated the impact of salary increase given towards the end of Q1. Interest income of Rs2.1bn and capital gains from sale of investments of Rs242mn also aided earnings growth for Q2. H1 EPS is 49% of our revised FY12F EPS of Rs26.7 (+17.8% YoY). Consumer business spin-off to improve profitability, ratios. WPRO expects to complete the formality by end of FY13. On a standalone basis, the software business has a EBIT margin of 19% and ROCE of 44% vs EBIT margin of 7.5% and ROCE of 12% for the consumer business. Investor expectations from WPRO remain low. We maintain our TP because recovery is slow but sure and the new strategy is working. We believe, once WPRO matches sector growth it has a scope to get re-rated and narrow the PER gap with peers. WPRO – Summary Earnings Table FY Mar 31 (Rsm) FY10 FY11 FY12 FY13F FY14F Revenue 272,346 310,542 371,971 429,109 468,495 EBITDA 64,032 72,531 82,124 99,300 108,783 Recurring Net Profit 45,586 52,977 55,731 65,742 72,534 Recurring Basic EPS (Rs) 15.5 21.6 22.7 26.7 29.5 EPS growth (%) 16.7 38.9 5.0 17.8 10.3 DPS (Rs) 3.6 6.0 6.0 6.0 6.0 PER (x) 23.5 16.9 16.1 13.7 12.4 EV/EBITDA (x) 12.4 10.9 9.7 8.0 7.3 Div Yield (%) 1.0 1.6 1.6 1.6 1.6 P/BV(x) 5.9 3.7 3.1 2.7 2.3 Net Debt/Equity (%) -18.7 -24.0 -21.3 -25.5 -31.6 ROE (%) 28.6 25.1 21.2 21.2 20.1 ROA (%) 14.0 14.3 12.9 13.3 13.1 Consensus Net Profit (Rs bn) - - - 64,313 70,201 Source: Company data, Bloomberg, KESI estimates

BUY (Unchanged) Share price: Rs365/sh Target price: Rs437/sh (Unchanged) Urmil Shah [email protected] (91) 22 66232606

Stock Information Description: Provides software services including business application services, IT infrastructure services, application development and maintenance services with more than 900 clients. Ticker: WPRO IN Shares Issued (m): 2,462 Market Cap (US$m): 16.6 6-mth Avg Daily Volume (US$m): 10.3 SENSEX: 18,755 Free float (%): 21.7 Major Shareholders: % Azim Premji 78.3

Key Indicators (FY12F) ROE – annualized (%) 21.2 Net cash (Rs bn): 85.2 Operating CF (Rs bn) 85.0 Interest cover (x): n.a.

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Performance: 52-week High/Low Rs453/ 321 1-mth 3-mth 6-mth 1-yr YTD Abs (%) -4.7 7.2 -9.8 -1.7 -8.6 Rel (%) -4.4 -1.7 -18.2 -9.0 -29.9



2Q13 REVIEW 5 November 2012

India

Sobha Developers (SOBHA) The Robust Momentum Continues Q2 EPS of Rs5.1, +50% YoY, +10% QoQ, as expected. H1 accounts for 37% of our full-year profit forecast of Rs26/sh. SOBHA has a stock of pre-ordered homes worth Rs15bn, which secures H2 revenue and more (full-year profit +25%). Next year’s 35% profit growth will come from new launches worth Rs15bn over the next 6 months. D/E of 0.7x is comfortable, given that the company’s present land bank is full paid-up. We roll forward valuations to FY14 and raise our TP to Rs426/sh from Rs390/sh, at PER of 12x. New launches worth Rs15bn by Mar ‘13. SOBHA has a strong pipeline of 7 housing projects (2.5m sq ft) for this festive season. We expect the company to pre-sell at least 50% of this in H2 led by expected strong demand on the back of low interest rates, aided by the company’s strong brand name in Southern markets. 50% of FY13F presales of Rs20bn achieved in H1, upgrade possible. H1 presales were Rs10bn (+30% YoY). SOBHA has planned new launches worth Rs15bn in H2. We will revisit our FY13 presales forecast in Jan and may upgrade if Q3 presales are better-than-expected. This will drive earnings upgrade for FY14. FY13F EPS +25%, FY14F +35%. The Q2 profit from sale of housing projects was as expected. EBITDA margin was stable at 31% as high RM cost was offset by rise in property prices (quarterly Bangalore property prices increased 7% YoY). We expect H2 to form 63% of our full-year profit forecast. Next year’s profit growth of 35% will come from 20% increase in FY13 presales to Rs20bn. Comfortable D/E of 0.7x. Unlike peers, SOBHA’s interest coverage is 3x (avg sector is 1.3x). This helps the company to fund construction cost from internal CF. Raise TP by 10% Rs426/sh, Maintain BUY recommendation. Y-T-D, the SOBHA stock outperformed peers by 55%. However, it still trades at low PER of 10x FY14F. We maintain BUY based on strong earnings growth. The stock should rally on confirmation of strong presales for Nov-Dec launches.

SOBHA – Summary Earnings Table FY Mar 31 (Rsm) FY10 FY11 FY12 FY13F FY14F Revenue 11,299 14,739 14,079 17,077 22,767 EBITDA 2,463 3,161 4,666 5,489 6,635 Recurring Net Profit 1,341 1,813 2,061 2,551 3,480 Recurring Basic EPS (Rs) 13.7 18.5 21.0 26.0 35.5 EPS growth (%) 166 35 14 24 36 DPS (Rs) 2.5 3.0 5.0 5.0 5.0 PER (x) 47.8 19.6 17.3 14.0 10.2 EV/EBITDA (x) 18.1 14.1 9.6 8.1 6.7 Div Yield (%) 0.7 0.9 1.5 1.5 1.5 P/BV(x) 3.8 1.9 1.8 1.6 1.4 Net Debt/Equity (%) 81.7 65.5 57.9 73.2 76.3 ROE (%) 7.9 9.8 10.3 11.6 14.0 ROA (%) 3.5 4.7 4.9 5.2 6.1 Consensus Net Profit (Rs bn) - - - 2,399 3,209

Source: Company data, Bloomberg, KESI estimates

BUY (Unchanged) Share price: Rs363/sh Target price: Rs426/sh (upgraded from

Rs390/sh) Anubhav Gupta [email protected] (91) 22 66232605

Stock Information Description: SOBHA is South based developer with primary focus in Bangalore market. The company sells 40% of its housing projects to IT professionals in Bangalore. It currently has 38 ongoing residential projects aggregating to 23m sq ft of developable area. Ticker: SOBHA IN Shares Issued (m): 98 Market Cap (US$ bn): 0.7 6-mth Avg Daily Volume (US$m): 1.0 SENSEX: 18,755 Free float (%): 39.4 Major Shareholders: % Sobha Menon & family 60.6 Aranda Investments (Mauritius) Pte Ltd 4.2 Emerging Markets Growth Fund Inc. 3.7

Key Indicators (FY13F) ROE – annualised (%) 11.6 Net debt (Rs bn): 16.0 NTA (Rs/sh): 224.1 Interest cover (x): 2.9

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Performance: 52-week High/Low Rs394/180 1-mth 3-mth 6-mth 1-yr YTD Absolute (%) 1.0 3.7 14.0 50.7 90.2 Relative (%) 1.4 -5.2 5.6 43.4 68.8



Company Update 5 November 2012

Vietnam

DHG Pharmaceutical New Factory to Drive Earnings Growth

9M12 results. DHG’s 9M12 revenue increased 17% YoY to VND2,039b, primarily because of higher ASPs. Gross margins rose from 47.5% in 9M11 to 48.9% in 9M12, however, net profit only grew 16% YoY to VND358b, because the SG&A to revenue ratio rose from 28% in 9M11 to 30% in 9M12 (see below).

Higher SG&A expenses. The selling-expenses-to-revenue ratio (a component of the SG&A ratio) rose from 21% in 9M11 to 22% in 9M12, because DHG accelerated marketing activities in advance of the launch of its new factory, which is expected to start operating in 2Q13. In addition, the administrative-expenses-to-revenue ratio rose from 7% in 9M11 to 8% in 9M12, because of the recent, government mandated minimum wage increase.

New factory to drive profit growth. DHG’s new factory will double the company’s capacity (currently 4 billion units), when it starts operating in 2Q13. Construction of the new factory started in April 2011, and the cost of the new plant, which is expected to be about VND676b (USD32m), is being funded entirely out of DHG’s ample cash pile. The non-Betalactam and Betalactam plants, divisions of the new factory are expected to be completed in 1Q13 and 4Q13, respectively. We expect DHG’s profit to increase by about 25% p.a. over the next three years thanks to the new factory.

Pharmaceutical industry’s positive prospects. Pharmaceutical sales in Vietnam grew 20% CAGR over the last three years. We expect this high growth rate to be maintained over the next few years, thanks to the emerging middle-class and the current low per capita drug consumption in Vietnam (about USD27 versus USD63 in Malaysia, in 2011).

Attractive valuation. We expect revenue and profits to grow about 28% and 25% respectively in 2013, driven by volume growth and ASP increases. The stock is trading at 7.4x FY13 PER versus expected EPS growth of 25% p.a. over 2013-2015. Furthermore we expect the company to continue generating ROE’s of over 30% with no debt. The only real concern for DHG is the stock’s lack of liquidity.

DHG – Summary Earnings Table FYE Dec (VND b) 2009 2010 2011 2012E 2013F Revenue 1746 2035 2491 2884 3698 EBITDA 442 470 539 638 803 Recurring Net Profit 357 381 416 484 605 Recurring Basic EPS (VND) 5579 5911 6399 7429 9288 EPS growth (%) 177 6 8 16 25 DPS (VND) 1500 2500 4000 2000 4000 PER 12.0 11.3 10.5 9.0 7.2 EV/EBITDA (x) 8.6 7.9 7.3 6.4 5.1 Div Yield (%) 2.2 3.7 6.0 3.0 6.0 P/BV(x) 4.2 3.4 3.2 2.5 2.1 Net Gearing (%) (50.5) (49.2) (32.3) (15.8) (14.7) ROE (%) 42 33 31 31 32 ROA (%) 27 23 22 22 22

Source: Maybank IB

BUY Share price: VND67.000 Target price: VND93.000 Hang Vu [email protected] (84) 8 4455.5888 (ext 8087) Stock Information Description: Pharmaceutical company involved in the manufacture and trade of pharmaceuticals, dietary supplement and cosmetics Ticker: DHG VN Shares Issued (m): 65,2 Market Cap (USD m): 220 3-mth Avg Daily Turnover (USD m): 0.05 ST Index: 391.5 Free float (%): 45 Major Shareholders: % SCIC 43,4 Templeton Frontier Markets Fund 8,1 Vietnam Holding Limitted 2,5 Key Indicators ROE – annualised (%) 31 Net cash (USD m): 6.5 NTA/shr (USD): 0.9 Interest cover (x): 242

Historical Chart

Performance: 52-week High/Low VND76.500 / VND52.000 1-mth 3-mth 6-mth 1-yr YTD Absolute (%) -6.9 11.6 8.9 3.1 20.5 R l ti (%)



Indonesia

Astra International Ascending Ride

Seasonally weak 3Q12 sales volume; flat earnings anticipated. Astra International (ASII) reported flat 3Q12 earnings of IDR5.0t (-1.6% QoQ), which translate into a 9M12 net profit of IDR14.6t (+8.8% YoY) that is in line with our estimate. ASII’s flat 3Q12 earnings came as no surprise, given the seasonality factor in auto sales and falling commodity prices that have adversely affected the growth of United Tractors (UNTR.IJ, HOLD) and Astra Agro Lestari (AALI.IJ, HOLD).

Improved 3Q12 operating margin from CPO, infrastructure, and IT. While 3Q12 growth realisation was weak, ASII managed to improve its operating margin to 11.1% to 10.8% in 2Q12. The higher 3Q12 margin (vs. 2Q12) was mainly driven by its cost savings initiative programme in the palm oil division (34.9% vs. 27.2%), along with its margins recovery in the infrastructure (16.6% vs. 15.1%) and information technology (IT) divisions (11.8% vs. 10.0%). Nevertheless, as the margins of the core businesses of automotive and heavy equipment remained flat, 3Q12 operating profit fell by 1.5% QoQ to IDR5.3t. Overall, 9M12 operating profit grew by 14.5% YoY to IDR15.6t.

Marginal FY12F-14F earnings changed. By incorporating UNTR’s and AALI’s higher margin estimates, we raise ASII’s operating profit by 9.3%. Nevertheless, the lower incomes from associates and higher interest expense realisation will offset the margin increases; thus, we only slightly revised our earnings upward by 1.4% for FY12F-14F.

Market proxy’s status remains in FY13; Retain BUY. Despite headwinds in the commodity sector, we expect Indonesia’s stable economic growth to underpin automotive demand in FY13F-FY14F. New growth in the automotive division is likely to come from demand in the new segment of low carbon emission cars and the recovery of the 2W segment. Upside potential could come from the possible recovery of the commodity sectors. Thus, we reiterate our BUY rating on ASII, with TP unchanged at IDR8,800 (implied FY13 PER of 16x). Our TP translates to a potential upside of 11.4%.

Astra International – Summary Earnings Table FYE Dec (IDR b) 2010A 2011A 2012F 2013F 2014FRevenue 129,038 162,564 189,894 217,715 248,749 EBITDA 17,866 21,377 24,539 27,796 31,878 Recurring Net Profit 14,366 17,785 18,977 21,883 25,396 Recurring Basic EPS (IDR) 355 439 469 541 627 EPS Growth (%) 43.1 23.8 6.7 15.3 16.1 DPS (IDR) 158 202 211 243 282

PER (x) 22.4 18.1 17.0 14.7 12.7 EV/EBITDA (x) 17.4 14.3 12.4 11.0 9.5 Div Yield (%) 2.0 2.5 2.7 3.1 3.6 P/BV (x) 6.5 5.3 4.5 3.9 3.3

Net Gearing (%) 50.2 52.8 45.6 41.1 37.6 ROE (%) 32.2 32.4 28.9 28.5 28.2 ROA (%) 14.2 13.4 11.7 12.1 12.5 Consensus Net Profit (IDR b) 18,985 21,951 25,123 Source: Company, Kim Eng estimates

BUY (Unchanged) Share price: IDR7,900 Target price: IDR8,800 (Unchanged) Pandu Anugrah [email protected] (62 21) 2557 1137 Stock Information Description: Astra International was founded in 1957 as a trading company. Over the past 50 years, it has grown to become the largest automotive distribution company in Indonesia, as well as the country’s largest diversified conglomerate with business interests spanning plantation, financial services, heavy equipment and mining, infrastructure, and information technology. Ticker: ASII IJ Shares Issued (m): 40,484 Market Cap (USD m): 33,207 3-mth Avg Daily Turnover (USD m): 24.9 IDX index: 4,339 Free float (%): 49.9 Major Shareholders: % Jardin Cycle & Carriage Ltd 50.1 Key Indicators

ROE (%) 32.4 Net cash (IDR b): 52.8 NTA/shr (IDR): 14,933 Interest cover (x): 25.1

Historical Chart

Performance:

52-week High/Low IDR8,300/IDR6,120 1-mth 3-mth 6-mth 1-yr YTD Absolute (%) 6.8 12.9 7.3 14.5 7.2 Relative (%) 4.8 6.9 4.4 -0.8 -6.7


Sector Update 5 November 2012

PP16832/01/2013 (031128)

Regional

Plantation Still Weak CPO Export Trend

Expect weak 4Q12 CPO price. Malaysia’s export estimates for Oct ’12 continued to disappoint despite low CPO ASP of MYR2,281/t in Oct. Stockpile looks set to hit 2.7m tonnes end-Oct ‘12, dampening hope of a quick recovery in CPO prices. A slow start to new planting season in South America provides strong price support for competing oils, and will lift CPO price in 1Q13 when stockpile retreats. We retain our Neutral sector weighting on a 12M investment horizon with BUYs on First Resources (TP: SGD2.15) and Sarawak Oil Palms (TP: MYR8.00).

Still weak palm oil exports in Oct ’12. Early estimates by independent cargo surveyors Societe Generale de Surveillance and Intertek suggest that Malaysia palm oil exports improved in Oct ’12 to 1,567,112t (+9% MoM) and 1,600,545t (+11% MoM) respectively. Averaging them, Malaysia’s Oct ’12 palm oil exports were 1,583,829t (+5% MoM, -14% YoY). Yet the pace of export growth has been tepid considering Oct ’12 (MPOB) CPO spot ASP has corrected -14% MoM to MYR2,286/t (Sept: MYR2,671/t; Aug: MYR2,843/t).

Expect record stockpile at 2.7m tonnes for Oct ’12. Amidst weak exports and expectation of a flattish-to-marginally higher MoM CPO production in Oct, Malaysia’s palm oil stockpile in Oct ’12 could hit new high at 2.7m tonnes. It remains to be seen if exports will pick up pace in Nov-Dec’12 even with present low spot CPO price of MYR2,357/t. As at 31 Sept ’12, Malaysia had an estimated 1.9m-2.5m tonnes of unutilized CPO duty free quota that could help boost exports in 4Q12. Come 1 Jan ‘13, we expect Malaysia’s new export tax structure (whereby CPO export tax duties were cut to 4.5%-8.5% from ~23%) will help boost Malaysia’s competitiveness vis-à-vis Indonesia.

CPO price to stay weak in 4Q2012. Oct ’12 CPO ASP came in at the low end of our expectations at MYR2,281/t. Our price forecast range of MYR2,300-2,700/t for Oct/Nov is now extended to Dec ’12 if stockpile does not taper off soon. Hopefully, the wide disparity between CPO and soyoil (USD299/t discount) and rapeseed oil (USD370/t) prices will incentivise some buyers to switch to the relatively cheaper palm oil. In the past, the wide disparity in prices between CPO and soyoil of above USD300/t lasted nearly 6 months between June and Nov ‘08.

Slow start to South American planting progress. Weather in South America has been erratic again this planting season. According to Oil World, Argentina has been experiencing relatively wet weather while Central Brazil is quite the opposite with ongoing drought stress. While mid-way through the planting season, it remains questionable to what extent soybeans will benefit in Argentina from an acreage switch of originally intended corn and sunflower areas. Although farmers will make every effort to sow soybeans even at a later time albeit a reduced yield potential, it is still unclear what will be the final accomplishment. At this juncture, the situation in Brazil is relatively better than Argentina. Favourable weather throughout Nov and early Dec ’12 is therefore crucial in achieving the desired planting targets in South America.

NEUTRAL (Unchanged) ONG Chee Ting, CA [email protected] (603) 2297 8678 CHAI Li Shin [email protected] (603) 2297 8684 Regional CPO price forecast 2012F 2013F MYR/t MYR/t Full year average (FOB) 3,150 * 3,000 MDEX: 3M CPO price (2 Nov) 2,496 NA YTD (2 Nov) CPO ASP 3,005 NA

* Under review with downside bias to MYR2,950/t Source: Maybank KE, Bloomberg Regional Plantation coverage Company Rec Price TP Upside Malaysia listed MYR MYR % Sime Darby Buy 9.76 11.00 12.7 IOI Corp Hold 5.03 5.24 4.2 KL Kepong Hold 21.20 23.50 10.8 FGVH Hold 4.67 5.20 11.3 Gent Plant Hold 8.85 9.10 2.8 Swk Oil Palms Buy 6.36 8.00 25.8 TSH Res Hold 2.34 2.35 0.4 Ta Ann Buy 3.80 5.30 39.5 TH Plant Hold 2.34 2.28 -2.6 Singapore listed Wilmar Sell 3.11 2.60 -16.4 First Resources Buy 2.03 2.15 5.9 Indonesia listed Astra Agro Hold 20900 22000 5.3 London Sumatra Buy 2375 3150 32.6

Source: Maybank KE



Singapore

Co. Reg No: 198700034E MICA (P) : 099/03/2012

Cosco Corp Still Finding its Bottom

Below expectations, maintain Sell. 3Q12 results were below our expectations with revenue of SGD937.0m (-3.4% YoY, -3.9% QoQ) and corresponding PATMI of SGD26.6m (-17.5% YoY, -3.8% QoQ). 9M12 net profit made up 71% of our previous full-year forecast. Cosco has been winning offshore orders but at questionable profitability. With persistent weak shipbuilding outlook, we expect stock price to languish towards lower levels. Maintain Sell and TP of SGD0.73. Improved margins on better product mix. Overall gross margin saw a 30bps QoQ improvement to 12.3%, but this was mainly due to better product mix with higher contribution from Marine Engineering segment. The margin improvement was not significant enough to conclude an upward trend. Instead, we believe that negative price pressure could continue to reign in on ship repair, conversion and offshore projects for the Chinese shipyards due to intense competition. Needs to replenish declining orderbooks. Orderbooks are being depleted, standing at USD5.7b currently. 31 outstanding bulk carrier orders would be delivered by end-2013 while the offshore contracts should be completed by end-2014. With YTD order secured of USD1.2b (another USD200m yet to be confirmed), Cosco remains hopeful of USD2.0b order win by year-end. We cut FY12F order win assumptions to USD1.8b Shipbuilding orders are dry but demand should come from offshore and conversion contracts although margins are expected to remain suppressed. Concerns raised on funding needs. Current payment terms for projects are largely on a 20/80 basis (20% downpayment, 80% on delivery) and Cosco may require additional funding to finance high working capital requirements. Net gearing has risen to 0.65x and Cosco expects to shift its debt structure towards higher proportion of long-term debt but has ruled out any immediate needs for equity funding. Valuations still rich. Stock price has retreated about 11% since our last Sell call, but we think that valuation is still rich at current levels. We cut FY12F-14F PATMI forecasts by 6-10% on weak results and our lowered order win assumptions. Maintain Sell and target price of SGD0.73, pegged at 1.3x trough P/BV. Cosco Corp – Summary Earnings Table FYE Dec (SGD m) 2010 2011 2012F 2013F 2014F Revenue 3,861.4 4,162.9 3,993.0 3,467.4 3,574.4 EBITDA 598.5 469.1 481.4 468.1 479.5 Recurring Net Profit 248.8 139.4 108.6 107.3 124.3 Recurring Basic EPS (SGD cts) 11.1 6.23 4.85 4.79 5.55 EPS growth (%) 126.1 -44.0 -22.1 -1.2 15.8 DPS (SGD cts) 4.0 3.0 2.0 2.0 2.0 PER (x) 7.9 14.1 18.1 18.4 15.9 EV/EBITDA (x) 5.4 6.9 6.8 6.9 6.8 Div Yield (%) 4.5 3.4 2.3 2.3 2.3 P/BV(x) 1.6 1.5 1.5 1.4 1.3 Net Gearing (%) 7.0 29.1 62.2 51.0 44.3 ROE (%) 20.8 10.7 8.2 7.7 8.5 ROA (%) 4.1 2.0 1.4 1.5 1.7 Consensus Net Profit (SGD m) 114.15

109.61

123.57

Source: Company, Maybank KE estimates

SELL (Unchanged) Share price: SGD0.880 Target price: SGD0.73 (unchanged) YEAK Chee Keong, CFA [email protected] (65) 6433 5730 Stock Information Description: Currently the largest shipyard group in China, by dock space. Provides ship repair and shipbuilding services. A relatively new entrant in the offshore segment. Ticker: COS SP Shares Issued (m): 2,239.2 Market Cap (USD m): 1,611.8 3-mth Avg Daily Turnover (USD m): 3.7 ST Index: 3,040.75 Free float (%): 36 Major Shareholders: % China Ocean Shipping Group 53 Key Indicators ROE – annualised (%) 8.7 Net gearing (x): 0.65 NAV/shr (SGD): 0.56 Interest cover (x): 3.0

Historical Chart

Performance: 52-week High/Low SGD1.315/SGD0.825 1-mth 3-mth 6-mth 1-yr YTD Absolute (%) -8.8 -7.4 -16.2 -13.7 0.6 Relative (%) -7.7 -7.5 -17.1 -19.6 -12.5

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COS SP Equity



Indonesia

Holcim Indonesia Maximised Capacity Limits Volume Upside

9M12 earnings grew by 10% YoY. Holcim Indonesia (SMCB) booked a 9M12 net profit of IDR911b, up by 23% YoY, which was mainly supported by 20% YoY growth in revenue. The bottomline, constituting 79% of our FY estimate, was above our expectations,. On the operating front, operating profit grew by 22% YoY. On a quarterly basis, net profit grew by 60% QoQ to IDR407b, thanks to the company’s success in reining its COGS (-7% QoQ). In addition, sales volume jumped by 15.6% YoY to 6.2m tonnes in 9M12, thanks to the strong cement demand of Sumatra (+26% YoY) and Kalimantan (+49% YoY), in particular.

ASP increase to offset rising costs. We project that operating margin will decline slightly to 22% in FY12F from 23% in FY11, as the distribution cost is expected to rise by 2-3% YoY. However, we think that SMCB will be able to offset the rising costs in the upcoming year thanks to the expected ASP increase of 3% in FY13F. Given its focus on Java (74% of its sales are from Java) and the strong demand of the region, we think that there may be an upside to the selling price.

We expect up to 4% upside to the share price. We believe SMCB shares have almost fully priced if there is another 4% upside to the share price. Approximately 3% upside is the difference between the latest share price with our target price. Another 1% upside is to reflect the possibilities of strong infrastructure expansion in the upcoming year. Furthermore, we expect SMCB’S new capacity (+15%) to be added at around FY14F at the latest. Note that, SMCB’s capacity utilisation has reached its peak.

Estimates tweaked, maintain HOLD. We raise our cement sales forecasts for SMCB by 0%/4%/8% for FY12F/13F/14F. ASP increases in FY13F and FY14F are in line with our forecast on the domestic cement price. We also increase our EPS forecasts by 5%/8%/11% for FY12F/FY13F/FY14F, due to changes in sales volume and ASP assumptions. We maintain our HOLD stance on the counter with the new TP of IDR3,400 (from IDR2,750), which pegs the stock at FY13F PER of 16.4x.

Holcim Indonesia– Summary Earnings Table FYE Dec (IDR b) 2010A 2011A 2012F 2013F 2014FRevenue 5,961 7,524 8,589 9,747 11,086 EBITDA 1,854 2,214 2,426 2,925 3,278 Recurring Net Profit 828 1,063 1,208 1,591 1,894 Recurring Basic EPS (IDR) 108 139 158 208 247 EPS growth (%) -7.5 28.3 13.6 31.7 19.0 DPS (IDR) 0 22 28 32 42

PER (x) 30.5 23.8 20.9 15.9 13.4 EV/EBITDA (x) 14.2 11.6 10.5 8.4 6.9 Div Yield (%) 0.0 0.7 0.8 1.0 1.3 P/BV(x) 3.7 3.4 2.9 2.5 2.2

Net Gearing (%) 15.4 5.2 1.4 Net cash Net cash ROE (%) 16.3 14.8 14.9 17.0 17.5 ROA (%) 9.4 9.9 10.5 12.8 14.4 Consensus Net Profit (IDR b) 916 999 1,187 1,406 1,611 Source: Kim Eng

HOLD (unchanged) Share price: IDR3,300 Target price: IDR3,400 (from IDR2,750) Anthony Yunus [email protected] (62 21) 2557 1136 Stock Information Description: Holcim Indonesia is a leading fully integrated producer of cement, ready mixed concrete and aggregates with a unique and expanding retail franchise. It offers the most complete end-to-end solution in home building. Ticker: SMCB.IJ Shares Issued (m): 7,663 Market Cap (US$ m): 2,626 3-mth Avg Daily Turnover (US$ m): 1.6 IDX index: 4,339 Free float (%): 19.4 Major Shareholders: % Holderfin BV Netherlands 80.6 Key Indicators

ROE – annualised (%) 14.4 Net cash (IDR b): 431 NTA/shr (IDR): 1,563 Interest cover (x): 15.3

Historical Chart

Performance: 52-week High/Low IDR3,375/IDR1,780 1-mth 3-mth 6-mth 1-yr YTD Absolute (%) 6.5 28.2 24.5 70.1 55.3 Relative (%) 4.5 22.2 21.7 54.8 41.4



Indonesia

Astra Agro Lestari 3Q12 Profits Surge on Cost Savings

3Q12 earnings up 23% QoQ as costs dip; 9M12 net profit in line. Thanks to the positive knock-on effect of its cost-savings programme in early 3Q12, Astra Agro Lestari (AALI) recorded a 23% QoQ rise in third-quarter earnings to IDR581b. This brought 9M12 net profit to IDR2.3t, a 10.1% YoY slide but still in line with our full-year forecast. AALI’s stringent cost control measures include reducing fertiliser application per tree and cutting employee-related facility expenses.

Higher operating margin offsets lower ASP. AALI’s cost-savings programme had led to a significant expansion in operating margin to 42% in 3Q12 from 34.6% in 2Q12. In turn, operating profit swelled 22.5% QoQ to IDR1.0t, bringing 9M12 operating profit to IDR2.4t (-5.5% YoY). The 15% slide in COGS and SG&A in 3Q12 compensated for AALI’s lower ASP realisation of IDR7,473/kg (-7% QoQ).

4Q12 to see weak ASP, higher production and stable costs. With seasonally higher production towards the end of the year, we expect CPO production to peak in 4Q12 at 407k tonnes, translating to FY12F CPO sales volume of 1.4m tonnes, up 12% YoY. However, as we expect 4Q12F CPO price to remain weak at the current level of MYR2,500-2,700/t, we have cut our FY12F ASP by 5% to IDR7,320/kg from IDR7,714/kg previously. On a more positive note, we raise 2012 operating profit by 4.4% to IDR3.2t, premised on AALI’s ability to sustain cost reductions. Our FY12F-14F net profit thus goes up by 5%.

Most consistent production growth; retain HOLD. Despite an old tree age profile of 14 years, high productivity has sustained CPO production growth for AALI, making it as on of the companies in Indonesia with the most consistent production growth. The company’s innovative cost-savings programme is another point in its favour as margin expansion would lead to higher profitability. Nevertheless, we caution that the prospect of a significant CPO price recovery would hinder the company from registering substantial growth. Thus, while we raise our TP slightly to IDR22,500 (Implied FY13 PER of 14x) to reflect our higher earnings assumptions, we retain our HOLD rating on AALI.

Astra Agro Lestari – Summary Earnings Table FYE Dec (IDR b) 2010 2011 2012F 2013F 2014FRevenue 8,844 10,773 11,259 11,719 12,316 EBITDA 3,249 3,527 3,703 3,946 4,125 Recurring Net Profit 2,017 2,406 2,431 2,525 2,657 Recurring Basic EPS (IDR) 1,281 1,528 1,544 1,604 1,687 EPS Growth (%) 21.4 19.3 1.1 3.9 5.2 DPS (IDR) 655 940 993 1,004 1,042

PER (x) 16.3 13.6 13.5 13.0 12.4 EV/EBITDA (x) 9.7 9.1 8.7 8.0 7.5 Div Yield (%) 3.1 4.5 4.8 4.8 5.0 P/BV (x) 4.6 4.0 3.6 3.3 3.0

Net Gearing (%) Net Cash Net Cash Net Cash Net Cash Net Cash ROE (%) 28.0 29.6 24.2 22.8 22.1 ROA (%) 22.9 23.6 18.7 17.8 17.3 Consensus Net Profit (IDR b) - - 2,363 2,612 2,733 Source: Company, Kim Eng estimates

HOLD (unchanged) Share price: IDR20,900 Target price: IDR22,500 (from IDR22,000) Pandu Anugrah [email protected] (62 21) 2557 1137 Stock Information Description: Astra Agro Lestari is the largest listed plantation company in Indonesia. It owns a total planted area of 267,000ha located in Sumatra and Kalimantan. Ticker: AALI IJ Shares Issued (m): 1,575 Market Cap (USD m): 3,417 3-mth Avg Daily Turnover (USD m): 2.2 IDX index: 4,339 Free float (%): 20.32 Major Shareholders: % Astra International 79.68 Key Indicators

ROE – annualised (%) 22 Net cash (IDR b): 372 NTA/shr (IDR): 5,478 Interest cover (x): 229

Historical Chart

Performance: 52-week High/Low IDR24,000/IDR18,000 1-mth 3-mth 6-mth 1-yr YTD Absolute (%) -5.2 -8.1 -2.1 -0.5 -3.9 Relative (%) -7.1 -14.1 -4.9 -15.8 -17.8


PhilippinesInterim results 5 November 2012

Bank of the Phil Islands Earnings right on track

Net income up 9% in 3Q12. Bank of the Philippine Islands (BPI) reported a 9% YoY increase in 3Q12 net income to PHP3.8b. This drove 9M12 earnings to PHP13.2b, up 37% YoY and generally in line with expectations. The result also accounts for 80% of our full-year estimate and 85% of market consensus forecast. HOLD rating stays.

Loan volume offsets flat margins. Net interest income rose 7.8% YoY to PHP20.5b in 9M12, implying a 6% increase to PHP6.7b in 3Q12. Net interest spread was relatively flat but compensated by an 18% expansion in credit demand. Corporate and consumer loans grew at a double-digit rate of 18% and 16%, respectively. Deposits also increased 12% YoY to PHP697b while assets under management expanded 15% to PHP760b.

Gross revenue up 17.6% in 9M12. Non-interest income climbed 11% to PHP5b in 3Q12 and jumped 34% to PHP16b in 9M12. Recall that the bank booked massive trading income of PHP4b in 1Q12. The two-page press statement of the bank didn’t provide the breakdown of other income. Gross revenue went up 7% YoY to PHP11.7b in 3Q12 and 17.6% to PHP36.4b in 9M12.

Provision charges more than doubled. Operating expenses remained subdued in 3Q12, down 3% YoY to PHP5.9b. We estimate cost-to-income ratio at 50% in 3Q12, an improvement from 55% in 3Q11. Meanwhile, BPI has more than doubled provision charges to PHP664m in 3Q12, boosting 9M12 total to PHP2.3b. The bank has been strengthening actuarial reserves for its pre-need subsidiary. Asset quality also improved with net NPL ratio of 1.7% from 2.3% a year ago while reserve cover stood at 137.9%.

Hold (unchanged) Share price: PHP81.00 Target price: PHP80.00 Katherine Tan [email protected] (632) 849 8843

Stock Information Description: Banking Ticker: BPI PM / BPI.PS Shares Issued (m): 3,556 Market Cap (PHPm): 288,036 Market Cap (USDm): 6,995 3-mth Avg Daily Turnover (USDm): 4.41 PSEi: 5,424.51 Free float (%): 46.9 Major Shareholders:

Keeping forecast and HOLD rating. Normalizing the impact of strong treasury gains in 1Q12, BPI reported adjusted ROE and ROA of 16.9% and 1.9% as of end-September 2012. We maintain our current earnings forecast of PHP16.5b in 2012 and PHP16.7b in 2013, resulting in an estimated ROE of 17.8% and 16.6%, respectively. Our target price is also kept at PHP80/sh, equivalent to 2.7x 2013F P/BV. The stock is currently trading at a premium to our TP, thus HOLD rating maintained. Bank of the Philippine Islands — Summary Earnings Table Year End Dec 31 (PHPm) 2009A 2010A 2011A 2012F 2013FOperating Income 34,395 38,407 41,758 48,304 50,043 Pre-provision Profit 14,719 17,453 18,293 22,502 23,007 Profit Before Tax 12,184 13,999 16,143 20,690 20,993 Net Profit To Common 8,516 11,312 12,822 16,464 16,681 EPS (P) 2.62 3.38 3.61 4.63 4.69 EPS growth (%) 32.6 28.7 6.8 28.4 1.3 Net DPS (PHP) 1.80 1.80 1.80 2.30 2.00 PER (x) 30.9 24.0 22.5 17.5 17.3 Net Div Yield (%) 2.2 2.2 2.2 2.8 2.5 P/BV(x) 3.9 3.6 3.2 3.0 2.7 Book Value (PHP) 20.57 22.78 25.07 27.09 29.57 ROAE (%) 13.1 15.3 15.1 17.8 16.6 ROAA (%) 1.2 1.4 1.5 1.9 1.8 Consensus Net Profit (PHPm) Na na na 15,599 17,158 Source: Maybank ATR Kim Eng estimates

% Ayala Group 43.1 Key Indicators

ROE (%) 17.8 Tier-1 CAR (%) 13.5 BV/share (PHP) 27.09 NPL ratio (%) 2.3

Historical Chart

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BPI PM Equity

Performance: 52-week High/Low PHP84.35 / PHP52.00 1-mth 3-mth 6-mth 1-yr YTD Absolute (%) 1.5 11.6 9.9 38.5 46.7 Relative (%) 0.0 9.4 5.6 13.3 22.7

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RESEARCH OFFICES REGIONAL

P K BASU Regional Head, Research & Economics (65) 6432 1821 [email protected]

WONG Chew Hann, CA Acting Regional Head of Institutional Research (603) 2297 8686 [email protected]

ONG Seng Yeow Regional Products & Planning (852) 2268 0644 [email protected]

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Luz LORENZO Economist Philippines | Indonesia (63) 2 849 8836 [email protected]

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Some common terms abbreviated in this report (where they appear): Adex = Advertising Expenditure FCF = Free Cashflow PE = Price Earnings BV = Book Value FV = Fair Value PEG = PE Ratio To Growth CAGR = Compounded Annual Growth Rate FY = Financial Year PER = PE Ratio Capex = Capital Expenditure FYE = Financial Year End QoQ = Quarter-On-Quarter CY = Calendar Year MoM = Month-On-Month ROA = Return On Asset DCF = Discounted Cashflow NAV = Net Asset Value ROE = Return On Equity DPS = Dividend Per Share

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