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Yum Cha 飲 茶 December 15, 2015

Source: Bloomberg

INDICES Closing DoD%

Hang Seng Index 21,309.9 (0.7)

HSCEI 9,315.9 0.1

Shanghai COMP 3,520.7 2.5

Shenzhen COMP 2,239.7 2.0

Gold 1,062.6 0.3

BDIY 508.0 (2.7)

Crude Oil, WTI(US$/BBL) 36.1 (0.5)

Crude Oil, BRENT(US$/BBL) 37.9 (0.0)

HIBOR, 3-M 0.4 0.4

SHIBOR, 3-M 3.0 (0.2)

RMB/USD 6.5 0.1

RESEARCH NOTES

TALKING POINT - LUFAX TO REVEAL PING AN’S HIDDEN VALUE

Lufax, a Chinese P2P lender and broker, is close to completing a round of fundrais-

ing that would value the company at about US$18bn, according to Bloomberg. With a

fundraising size of close to US$1bn, that shows the value of Lufax has expanded

significantly. In an earlier round of private placement in March, the company was

valued at US$10bn. Ping An Insurance [2318.HK; BUY], as the major shareholder

of Lufax, will definitely be the key beneficiary. As of end-2014, Ping An owned

49.99% voting rights in Lufax. Although the latest data is not available at the moment,

we estimate Ping An still owns about 45% of voting rights, representing an attributa-

ble value of HK$63bn, about 8.3% of its market cap. A platform with total transactions

of RMB926.4bn in 9M2015, it should not be a surprise that Lufax’s valuation may go

even higher in future if it becomes a listed company. Further news flow about Lufax is

likely to attract more attention to Ping An and we reiterate our sum-of-the-parts target

price of HK$63.9, representing a 55% upside.

Analyst: Louis Liu; Wong Chi-man, CFA

DATA RELEASES DUE THIS WEEK

Dec 17 China November Property Prices

Dec 17 MNI December Business Indicator

TCL MULTIMEDIA [1070.HK; HK$4.80; NOT-RATED] - We attended the Strategic

Cooperation Conference of TCL Multimedia (TCLM) and LeTV in Shenzhen yester-

day. TCLM announced on last Friday after market close that the company entered

into a share subscription agreement with LeTV. According to the agreement, LeTV

would subscribe 348,850,000 shares of TCLM at HK$6.5 per share. LeTV would

hold around 20.1% of TCLM after completion of the share placement and become

the second largest shareholder. TCLM is penetrating into the high-growth Internet

services sector to tap new business opportunities through its smart TV platform and

vertical payout of applications including games and entertainment. We reiterate the

view that offline companies such as TCLM and Skyworth [0751.HK] would benefit

from partnership with Internet related companies.

Source: CGIS Research

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COMPANY / INDUSTRY NEWS

Analyst: Mark Po, CFA (markpo@chinastock.com.hk; Tel: (852) 3698 6318)

Key takeaways from Strategic Cooperation Conference of TCL Multimedia and LeTV

Strategic Cooperation Conference in Shenzhen. We attended the Strategic Cooperation Conference of TCL Multimedia

and LeTV in Shenzhen yesterday. TCL Multimedia [1070.HK] (TCLM), HK listed subsidiary of TCL Group [000100.CH], an-

nounced on Dec 11st after market close that the company entered into a share subscription agreement with Leshi Zhixin, a sub-

sidiary of LeTV, China’s leading video service provider. According to the agreement, LeTV would subscribe 348,850,000 shares

of TCLM at HK$6.5 per share, equivalent to ~36.6x 2014 PER. LeTV would hold around 20.1% of TCLM after completion of the

share placement and become the second largest shareholder next to TCL group (50.45% stake), while Chairman Li Dongsheng’s

stake would decrease to 2.36%.

Resource coordination in multi-dimensions. Senior management of both TCLM and LeTV including TCLM’s chairman Li

Dongsheng and LeTV’s head Jia Yueting attended the conference. They reiterated the significance of resource coordination in

multi-dimensions such as supply chains, online and offline sales, after-sales service, etc. LeTV would open its premium content

service, cloud platform, big data in E-commerce business and large-screen applications for TCL. TCL would in return open its

supply chain resources covering LED panel, chips, R&D capability and after-sale logistics for LeTV, as well as its vertical layout

of TV applications including HuanTV and Quanqiubo. Although detailed plan of business coordination has yet to unveil, TCLM’s

management believe the cooperation would help drive strategic transformation of the company and both TCLM and LeTV would

enjoy synergy from their strategic partnership.

Leveraging user scale for service upgrade. Number of TCLM’s Smart TV users have already exceeded 11m while the num-

ber of LeTV’s high-end paid Smart TV user is over 4m. The cooperation would combine the two mega-scale platform and devel-

op economic ecosystem. On the TCLM side, accumulated activated users of Quanqiubo has exceeded 4m in Nov 2015, with

250,000 Daily Active Users (DAU), while accumulated terminals of HuanTV reached 32m in Nov 2015, with 7.02 DAUs. On the

LeTV side, its high end online paying users are mainly in tier 1 & 2 cities with higher level of affordability and share a daily aver-

age of 5.78 hours PC usage and 4.2 hour video playing duration. As such, TCLM and LeTV would share their existing user base

in premium vertical service area including LeTV sports, Quanqiubo to achieve synchronism and interaction in content provision.

Meanwhile, both companies could leverage on the big data generated from behavior of active users to guide product innovation

and service upgrade. Management believe both companies would explore more profit models and try to maximize use of their

respective advantages in content and platform.

Complementary effect in expanding overseas footprints. According to IHS, TCLM ranked third with 5.7% global market share

in 1H15 TV sales. Its TV sales in overseas market accounts for ~39.2% of total turnover of TCLM in 9M15, while it continued to

optimise product mix by proactively promoting its curved TVs. It also implemented the TV+ strategy in overseas to gradually ex-

pand the proportion of paid content users, and launched Zing TV in the emerging markets with positive response. According to

management, through cooperation, LeTV could leverage on existing manufacturing, R&D and supply chain resources of TCLM in

overseas market to expand its overseas footprints. At the same time, LeTV’s vast range of exclusive premium video contents wi ll

certainly enrich content of TCLM’s smart TV platform in overseas market. Among its over 5,000 films, 100,000 episodes of TV

series, 240 sports events (70% exclusive), LeTV’s overseas copyright attracts TCLM’s attention in launching its overseas TV+

strategy. Developed E-commerce platform, localization content service, marketing and operating capability under joint cultivation

would all contribute to the enhanced competitiveness in overseas business.

Shares of TCLM performed well before the announcement and the post announcement profit taking activities put pressure on

TCLM shares yesterday. Trending down ASP capped the performance of the company and the industry. TCLM’s management

claimed the FX loss impact (TCLM booked huge exchange loss in Q3 2015) had reduced and the company had taken actions to

reduce its US debt exposure. TCLM is penetrating into the high-growth Internet services sector to tap new business opportunities

through its smart TV platform and vertical payout of applications including games and entertainment (previous partnership with

Tencent). Forming strategic cooperation with leading content & platform provider LeTV may boost sentiment on TCLM. We reiter-

ate the view that offline companies such as TCLM and Skyworth [0751.HK] would benefit from partnership with Internet related

companies.

December 15, 2015

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COMPANY / INDUSTRY NEWS December 15, 2015

Figure 1: Cooperation with LeTV

Source: Company, CGIS Research

Figure 2: Cooperation with LeTV

Source: Company, CGIS Research

Figure 3: Cooperation with LeTV

Source: Company, CGIS Research

Figure 4: Cooperation with LeTV

Source: Company, CGIS Research

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COMPANY / INDUSTRY NEWS December 15, 2015

Figure 5: Peer Comparison

Source: Company, Bloomberg, CGIS Research

Ticker Company PE EV/EBITDA

Price Market Cap 2015F 2016F 2017F 2015F 2016F 2017F 2014 2015F 2014 2015F 2014 2015F 2014 2015F 1M 3M 6M 12M

Lcy US$m x x x x x x x x % % % % % % % % % %

348 HK Lung Cheong Intl Hldgs Ltd 0.35 263 n.a. n.a. n.a. n.a. n.a. n.a. 3.1 n.a. 0.9 n.a. -0.1 n.a. 0.0 n.a. -17.9 -29.6 -64.1 -62.51070 HK Tcl Multimedia Technology 4.80 859 n.a. 23.9 15.4 48.2 14.4 11.4 1.6 1.5 -1.1 -4.0 -1.4 -1.4 1.1 0.4 23.1 28.0 -19.3 37.9751 HK Skyworth Digital Hldgs Ltd 4.66 1,754 7.2 6.5 6.1 6.5 6.0 5.3 1.0 0.9 16.3 12.5 8.9 5.6 4.4 4.5 -4.3 -2.7 -39.0 10.7921 HK Hisense Kelon Elec Hld-H 3.76 1,586 7.9 7.6 6.5 28.3 19.1 16.5 1.1 1.1 58.2 n.a. 3.6 n.a. 0.0 0.0 -5.5 -8.7 -47.0 -45.4382 HK Welling Holding Ltd 1.34 495 n.a. n.a. n.a. n.a. n.a. n.a. 0.9 n.a. 22.9 n.a. 8.4 n.a. 5.6 n.a. 0.0 5.5 -26.8 -16.8449 HK Chigo Holding Ltd 0.12 133 n.a. n.a. n.a. n.a. n.a. n.a. 0.3 n.a. 7.1 n.a. -1.3 n.a. 0.0 n.a. -4.7 -1.6 -39.0 -28.21169 HK Haier Electronics Group Co 14.26 5,139 11.8 11.0 9.6 7.6 6.7 5.9 2.5 2.3 30.7 20.9 9.7 9.3 0.7 0.8 -1.1 13.9 -35.0 -29.4903 HK Tpv Technology Ltd 0.97 294 n.a. n.a. n.a. n.a. n.a. n.a. 0.2 n.a. -2.6 n.a. -0.5 n.a. 1.0 n.a. -14.2 -18.5 -44.6 -47.61249 HK Tonly Electronics Holdings L 4.60 148 n.a. n.a. n.a. n.a. n.a. n.a. 1.0 n.a. 29.8 n.a. 5.2 n.a. 5.4 n.a. -4.2 -1.7 -30.8 -17.4Average 9.0 12.3 9.4 22.6 11.6 9.8 1.3 1.4 18.0 9.8 3.6 4.5 2.0 1.4 -3.2 -1.7 -38.4 -22.1600060 CH Hisense Electric Co Ltd-A 18.87 3,823 16.7 15.0 14.0 13.7 12.1 11.0 2.2 2.1 17.0 12.5 7.0 6.7 n.a. 1.5 10.3 35.0 -44.7 55.1000100 CH Tcl Corp-A 4.10 7,761 15.4 13.2 11.0 13.6 10.9 8.6 2.1 2.0 16.3 13.7 2.9 3.1 n.a. 1.7 0.7 3.0 -44.1 7.0600690 CH Qingdao Haier Co Ltd-A n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 32.6 19.2 5.5 6.7 n.a. n.a. n.a. n.a. n.a. n.a.000333 CH Midea Group Co Ltd-A 30.05 19,849 10.1 8.8 7.4 8.8 7.6 6.5 2.7 2.6 22.6 26.9 10.0 10.6 n.a. 4.1 3.7 15.5 -20.6 21.7000651 CH Gree Electric Appliances I-A 21.60 20,120 9.2 8.3 7.3 4.3 4.0 3.6 2.9 2.6 35.5 29.1 8.7 9.0 n.a. 5.5 16.2 30.9 -30.0 16.9000016 CH Konka Group Co Ltd-A 7.27 2,242 n.a. n.a. n.a. n.a. n.a. n.a. 5.4 n.a. 1.1 n.a. -5.2 n.a. n.a. n.a. 7.4 -40.5 -51.8 142.7600839 CH Sichuan Changhong Electric-A 6.00 4,289 n.a. n.a. n.a. 137.9 96.1 n.a. 2.0 2.0 3.7 -3.8 -0.2 -0.9 n.a. n.a. -11.4 -3.2 -55.1 13.0002045 CH Guoguang Electric Co Ltd-A 21.00 1,356 n.a. n.a. n.a. n.a. n.a. n.a. 6.8 n.a. 6.7 n.a. 2.5 n.a. n.a. n.a. 22.2 227.6 50.9 174.2000418 CH Wuxi Little Swan Co-A 22.22 1,965 15.4 12.5 10.3 8.7 6.9 5.5 2.9 2.8 10.9 18.2 7.5 7.4 n.a. 2.9 3.3 21.8 -10.0 56.0000921 CH Hisense Kelon Electrical-A 9.75 1,586 16.5 11.3 23.2 28.3 19.1 16.5 3.4 3.4 58.2 n.a. 3.0 n.a. 0.0 n.a. 6.1 27.5 -36.7 8.1002508 CH Hangzhou Robam Appliances-A 40.04 3,014 24.7 18.6 14.2 19.6 14.7 11.4 7.2 6.2 20.5 26.6 17.8 18.4 0.8 1.2 -2.3 16.9 -6.9 71.6Average 15.4 12.5 12.5 29.4 21.4 9.0 3.8 3.0 20.4 17.8 5.4 7.6 0.4 2.8 5.6 33.4 -24.9 56.66367 JP Daikin Industries Ltd 8361.00 20,289 18.0 16.2 14.8 9.7 9.0 8.3 2.3 2.2 7.8 12.9 5.6 7.4 n.a. 1.3 -2.4 20.9 -10.9 6.26758 JP Sony Corp 3016.00 31,516 20.8 15.8 13.2 4.8 4.1 3.7 1.4 1.4 2.0 7.4 0.6 1.4 n.a. 0.8 -11.0 -3.2 -20.3 23.66752 JP Panasonic Corp 1261.50 25,619 15.1 12.4 11.2 4.3 4.1 3.9 1.5 1.5 -47.2 10.2 3.7 4.3 n.a. 1.7 -10.5 -0.8 -28.8 -13.86502 JP Toshiba Corp 292.40 10,258 15.9 11.5 10.7 13.3 6.4 6.1 1.2 1.1 8.1 3.9 -0.8 0.5 n.a. 1.0 -0.9 -7.1 -33.2 -43.1Average 17.4 14.0 12.5 8.0 5.9 5.5 1.6 1.5 -7.3 8.6 2.3 3.4 n.a. 1.2 -6.2 2.4 -23.3 -6.8HSI Index -4.9 -1.2 -21.9 -8.3HSCEI Index -8.5 -4.2 -33.4 -17.1SHCOMP Index -1.7 13.0 -31.9 19.8

ROA Div yield Share Price PerformanceP/B ROE

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BUY share price will increase by >20% within 12 months in absolute terms :

SELL share price will decrease by >20% within 12 months in absolute terms :

HOLD no clear catalyst, and downgraded from BUY pending clearer signal to reinstate BUY or further downgrade to outright SELL :