2013-7-17 cimb asia pacific daily singapore banks

8/13/2019 2013-7-17 CIMB Asia Pacific Daily Singapore Banks

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ASIA PACIFIC DAILYJuly 17, 2013

Calendar of Events | 2013

Calendar of Events

Jul 2013

SUN MON TUE WED THU FRI SAT1 2 3 4 5 6

Semarang: IndonesiaSite ToursLDN: Australia Media& Telcos MarketingJKT: CIMB StockSelection Tools

Analyst MarketingSIN: Spore StrategyMarketingSIN: Ranhill MgmtDeal RSKL: CIMB StockSelection ToolsKL: UMW Oil & GasCornerstone RS

Semarang: IndonesiaSite ToursSIN: Msia Oil & GasMarketingSIN: Ranhill MgmtDeal RSSYD: LadbrokesConference CallJKT: CIMB StockSelection Tools

Analyst MarketingHK: Spore StrategyMarketingHK: UMW Oil & GasCornerstone RSLDN: Sime DarbyCorporate Lunch

Semarang: IndonesiaSite ToursSIN: Msia Oil & GasMarketingBKK: CIMB StockSelection Tools

Analyst MarketingHK: Spore StrategyMarketingHK: UMW Oil & GasCornerstone RSHK: Ranhill MgmtDeal RS

Bali: Bali ConferenceHK: Msia Oil & GasMarketingHK: Ranhill MgmtDeal RSBKK: CIMB StockSelection Tools

Analyst MarketingKL: SingaporeStrategy MarketingKL: RanhillManagement Deal RSSIN: UMW Oil & GasCornerstone RS

Bali: Bali ConferenceSIN: Courts Asia NDRSIN: UMW Oil & GasCornerstone RSHK: Msia Oil & GasMarketingKL: SingaporeStrategy Marketing

HK: EstablishmentDay US: IndependenceDay

7 8 9 10 11 12 13KL: Sembcorp MarineNDRKL: Msia Oil & GasMarketingKL: UMW Oil & GasCornerstone RSLDN: India CapitalGoods & UtilitiesMarketingSIN: Spore StrategyMarketingSIN: AustraliaConsumer MarketingHK: FujikonIndustrial HoldingsNDR

KL: AustraliaConsumer MarketingLDN: India CapitalGoods & UtilitiesMarketingHK: Korean BanksMarketing

SYD: BrickworksCorporate MeetingLDN: India CapitalGoods & UtilitiesMarketingHK: Korean BanksMarketingHK: AustraliaConsumer MarketingSIN: GMRInfrastructure LtdNDR

LDN: India CapitalGoods & UtilitiesMarketingSIN: Korean BanksMarketingSIN: GMRInfrastructure LtdNDRHK: AustraliaConsumer Marketing

LDN: India CapitalGoods & UtilitiesMarketingHK: GMRInfrastructure LtdNDR

14 15 16 17 18 19 20KL: China Life NDRKL: IndonesiaProperty,Construction &Cement Marketing

SIN: China Life NDRSIN: IndonesiaProperty,Construction &Cement MarketingKL: Nufarm Ltd NDR

SYD: HFC NetworkCorporate LunchSIN: China Life NDRSIN: IndonesiaProperty,Construction &Cement MarketingSIN: Nufarm LtdNDR

SYD: Ovum CorporateLunchHK: China Life NDRHK: IndonesiaProperty,Construction &Cement Marketing

HK: IndonesiaProperty,Construction &Cement Marketing

JPN: Marine Day

21 22 23 24 25 26 27US: M1 NDRKL: Malaysia Banking& Small Cap StocksMarketingHK: AGTech HoldingsNDR

HK: SingaporeCorporate DayUS: M1 NDRKL: Malaysia Banking& Small Cap StocksMarketing

US: M1 NDRKL: China Gas NDR

SIN: China Gas NDRKL: Asian PayTelevision Trust NDR

SIN: China Gas NDR

THB: ArsarahaBucha Day

Selangor: Nuzul

Al-Quran

28 29 30 31SIN: SingaporeAirlines PostResults Lunch

THB: Asanha Bucha

SOURCES: CIMB, COMPANY REPORTS

Page 2


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Calendar of Events

August 2013

SUN MON TUE WED THU FRI SAT

1 2 3

4 5 6 7 8 9 10HK: Texhong TextileGroup NDR

HK: CITIC TelecomNDR

KL, IND, SIN: HariRaya Puasa

KL, IND: HariRaya PuasaSIN: National Day

11 12 13 14 15 16 17SIN: Stelux HoldingsNDR

SIN: Texhong TextileGroup NDRSIN: Stelux HoldingsNDR

IND: IndependenceDay

18 19 20 21 22 23 24KL: Semen IndonesiaNDRKL: PTTGC NDR

KL: PTTGC NDRSG: Shin Corp NDRHK: Nam CheongNDR (Tentative)

SG: Shin Corp NDRKL: Nam CheongNDR (Tentative)

KL: ComforDelgoNDRKL: Shin Corp NDR

KL: ComforDelgoNDRKL: Shin Corp NDR

PHI: Ninoy AquinoDay

25 26 27 28 29 30 31KL: Siam CommercialBank NDR

HK: Emperor Watch& Jewellery NDR

HK: Emperor Watch& Jewellery NDR

UK: Summer BankHoliday ; PHIL:National Heroes Day

KL: National Day


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CIMB Daily Revisions |as at 17 July 2013

CIMB Daily Revisions

Reuters/ Mkt Cap Year EPS ForecastsMarket BBG Date Company (USD M) Lead Analyst Curr Prev Curr Prev End Chg%

Recommendation Price Target

Australia RIO AU 16-Jul-13 Rio Tinto 82,366.12$ Michael EVANS Outperform Outperform A$ 74.10 74.20 2013 -2.5

RIO.AX -0.1% 2014 -0.3

2015 -0.5

Hong Kong 590 HK 16-Jul-13 Luk Fook Holdings 1,583.24$ Larry CHO Neutral Neutral HK$ 21.90 19.90 2014 10.2

0590.HK +10.1% 2015 9.8

2016 9.3

India INFO IN 16-Jul-13 Infosys 26,415.64$ Sandeep SHAH Neutral Neutral Rs 2,950.0 2,415.0 2014 1.7

INFY.BO +22.2% 2015 6.7

2016 5.8

India NITEC IN 17-Jul-13 NIIT Technologies 266.11$ Srinivas SESHADRI Outperform Outperform Rs 323.0 327.0 2014 -2.2

NITT.BO -1.2% 2015 3.5

2016 -3.1

India OBER IN 16-Jul-13 Oberoi Realty Ltd 1,117.72$ Prakash AGARWAL Outperform Outperform Rs 285.0 300.0 2014 -4.7

OEBO.BO -5.0% 2015 -5.6

2016 -6.3

Indonesia ASII IJ 16-Jul-13 Astra International 27,448.52$ Peter P. SUTEDJA, CFA Underperform Outperform Rp 6,600 8,150 2013 -1.7

ASII.JK -19.0% 2014 -3.7

2015 -3.9

South Korea 010950 KS 16-Jul-13 S-Oil Corp 7,421.60$ Peter K. LEE Outperform Outperform W 98,000 105,000 2013 -28.7

010950.KS -6.7% 2014 -7.1

2015 -7.2 SOURCES: CIMB, COMPANY REPORTS

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Mining AUSTRALIA

July 16, 2013

IMPORTANT DISCLOSURES, INCLUDING ANY REQUIRED RESEARCH CERTIFICATIONS, ARE PROVIDED AT THE END OF THIS REPORT.Designed by Eight, Powered by EFA

When no news is good newsRIOs 2Q13 quarterly production report revealed increased coal andcopper production offset by disappointing alumina production and aslightly underwhelming iron ore number. While on balance we viewthe report as marginally on the positive side of expectations, the stockrallied hard, implying to us the market appears braced for bad news.

Taking into account the production

results and making small adjustmentsto June quarter commodity prices,our 2013 EPS forecast has declined by2.6%. Our NPV has fallen negligiblyto A$82.24ps and we retain ourOutperform recommendation with aslightly revised target price ofA$74.10 (previously A$74.20) basedon a 10% discount to our NPV.

What HappenedRIO reported its June quarterproduction, in which it also reiterated

full-year 2013 guidance. Minedcopper production for the group wasincreased by 5% as production atBingham Canyon exceededexpectations, while 2013 aluminaproduction has been cut by 6%. Therewas no change to full-year iron ore orcoal production forecasts. RIO alsoreported its Exploration andEvaluation expenditure for 1H13 wasUS$542m versus US$1,025m for thesame period last year, indicating it is

ahead of its own target of achieving a

US$750m pa cost saving in this area.

What We ThinkWe think the report, while not thestrongest set of numbers, was a goodresult in light of ongoing commodityprice weakness and continueduncertainty regarding the globaleconomic outlook. Falling commodityprices will inevitably force mineclosures and, in this respect, it isunderstandable the market is bracedfor bad news when it comes to mining

stocks. In this context, increased coalproduction, lowering unit costs, aswell as cost savings in Explorationand Evaluation should give investorsconfidence in RIOs ability to meet itscost and production targets.

What You Should DoWe still prefer Rio Tinto to BHP dueto what we view as its superior growthprofile and we believe the stock willre-rate as its higher-returning ironore expansions are commissioned.

CIMB Analyst(s)

Michael EVANS

T(61) 2 9694 [email protected]

Adam MURPHYT(61) 2 9694 [email protected]

Amit RAMDEVT(61) 2 9694 [email protected]

Share price info

Share price perf. (%) 1M 3M 12M

Relative -1.2 0.3 -19.6

Absolute 2.9 1 1.9

Major shareholders % heldBlackrock 6.2

Vanguard 1.1

AFIC 0.8

Rio Tinto FLASH NOTERIO AU / RIO.AX

Current A$55.52 SHORT TERM(3 MTH) LONG TERM

Market Cap Avg Daily Turnover Free Float Target A$74.10

US$81,257m US$154.8m 100.0% Prev. Target A$74.20A$89,460m A$158.8m 1,847m shares Up/Downside 33.5%

Conviction| |

70

78

85

93

100

108

115

46

51

56

61

66

71

76

Price Close Relative to S&P/ASX 200 (RHS)

Source: Bloomberg

5

10

15

Jul-12 Oct-12 Jan-13 Apr-13

Volm

Financial Summary

Dec-11A Dec-12A Dec-13F Dec-14F Dec-15F

Revenue (US$m) 60,537 50,967 54,741 57,010 65,251

Operating EBITDA (US$m) 26,690 16,645 19,126 23,413 27,440

Net Profit (US$m) 5,826 -2,990 9,319 11,724 13,767

Normalised EPS (US$) 8.31 5.04 5.05 6.35 7.45

Normalised EPS Growth 16.5% (39.4%) 0.2% 25.8% 17.4%

FD Normalised P/E (x) 6.07 10.01 9.99 7.94 6.76

DPS (US$) 1.45 1.67 1.67 1.67 2.10

Dividend Yield 2.88% 3.31% 3.31% 3.31% 4.15%

EV/EBITDA (x) 3.87 7.13 6.35 5.12 4.22

P/FCFE (x) 17.4 NA 154.8 26.2 12.8Net Gearing 20.5% 34.0% 33.8% 27.2% 18.8%

P/BV (x) 1.80 1.99 1.69 1.42 1.20

Recurring ROE 28.0% 18.7% 18.3% 19.4% 19.2%

% Change In Normalised EPS Estimates (2.56%) (0.27%) (0.55%)

Normalised EPS/consensus EPS (x) 0.99 1.07 1.14

55.52

74.10

48.63 72.07

Target

52-week share price range

Current

SOURCE: CIMB, COMPANY REPORTS

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July 16, 2013


AUSTRALIA BUILDING MATERIALS SHORT TERM(3 MTH) LONG TERM

Conviction| |

What does it feel like?The significant shift towards multi-family housing starts means thatfrom a materials intensity perspective a housing start today is worthmuch less than a start 10 years ago. While headline housing starts arenow at near-mid-cycle levels, our feels like adjusted housing activityindex indicates that levels remain about 10% below long-term averages.We believe this change is structural, and it carries meaningful

implications for the mid-cycle profitability of Boral (BLD) and CSR.Figure 1: Adjusting starts for intensity

80k

100k

120k

140k

160k

180k

200k

4QFY86 4QFY89 4QFY92 4QFY95 4QFY98 4QFY01 4QFY04 4QFY07 4QFY10

Headline starts Adjusted starts: 'Feels like' index

SOURCES: CIMB, ABS

High-density housing contributed40% of national starts in 2012, upfrom 25% over the past 25 years.Importantly, our analysis indicatesthe value of demand pulled throughfrom an apartment is only about 50%of the level of a detached house. As a

result of this intensity differential andthe shift to apartments, a housingstart today is worth less than inprevious cycles.

A structural changeWe see this trend as structural ratherthan cyclical. We believe affordability,as well as demographic factors suchas shrinking households, increasingimmigration and a broader shift towardsa CBD-centric, service-orientedeconomy underpin this trend.Consistent with commentary from

materials providers and anecdotalindustry feedback, we believe thesetrends are unlikely to reverse. Thisshift to high-density housing willundoubtedly influence mid-cycle

profitability for Australian buildingproducts businesses.

Implication for mid-cycleIn particular, we forecast mid-cycleearnings for Boral and CSRs buildingproducts businesses will be structurallylower than in the past. We haverevisited our mid-cycle assumptionsfor the broader companies. Ouranalysis places BLDs current shareprice on a mid-cycle PER of 11x,which we view as fair, and CSRs on amore attractive 8x PER. On this basis,we prefer CSR to BLD, albeit withsignificant exposure to external factorssuch as FX rates and aluminium prices.

Our sector preferencesWe continue to prefer FletcherBuilding (FBU, Neutral) given the

groups cyclical leverage and industrypositions in New Zealand. We alsomaintain our Neutral rating for CSR,Adelaide Brighton (ABC) and BLD,and our Underperform rating forJames Hardie Industries (JHX).

Notes from the Field

Andrew SCOTT


Niraj SHAHT(61) 2 9694 [email protected]

Many of these changes

are requiring us to adapt ourbusiness, like the shift tomulti-residential, the greater

level of import competition,and we've taken a view thatthese are permanent shifts inthe market.

Rob Sindel, MD CSR

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July 16, 2013


AUSTRALIA GAS TRANSMISSION &DIST

SHORT TERM(3 MTH) LONG TERM

SECTOR FLASH NOTE

APA continues on acquisitiontrailAPA has approached ENV with an indicative and non-binding mergerproposal under which ENV shareholders would receive 0.1678 newAPA stapled securities for each ENV share they ownplus ENVs finaldividend (up to 3.0cps). This implies A$1.10 for each share at an 11%premium to one-month VWAP (1% premium excluding the dividend).

With the HDF transaction now largelybedded down, APA has set its sightson acquiring the 67% of stock in ENVthat it doesnt currently own. WithAPA trading ahead of our unchangedtarget price (A$6.18) and risk that itsincreased exposure to regulationresults in a multiple de-rating if thetransaction proceeds, we downgradeour rating to Neutral. We maintainour Neutral rating for ENV, but

increase our target price to A$1.07 toreflect the merger proposal.

What HappenedAPA announced it has approachedENV with an indicative andnon-binding merger proposal. APAhas offered ENV shareholders 0.1678new APA stapled securities for eachENV share they own plus ENVs finaldividend (up to 3.0cps). This impliesA$1.10 for each share and 11%premium to one-month VWAP. The

proposal is intended to proceed byway of scheme of arrangement andAPA management has indicated abullish timeframe for the deal(completion by December 2013).While due diligence should be promptgiven APAs familiarity with the assets,we believe the process is likely to takelonger given these processes arealways more protracted than firstexpected and the presence of anothersubstantial investor on the register(CKI).With ENVs share price already

trading through the deal terms today,

we also believe APA will likely need tolift its bid to get the deal over the line.

What We ThinkWith APA already holding a 33%stake in ENV, plus operating andmaintaining its assets, a move to fullownership was always on the cards.While the transaction will likely resultin synergies (cA$10m in corporatecosts to start with), one of the key

factors that drew us to APA was itslower-than-peer exposure toregulation and this transaction willlift regulated earnings from 30% to>50%. On our estimates, thecombined entity is likely to trade at11.4x FY14EV/EBITDA versus APAscurrent 13.5x and ENVs 10.9x. WithAPA attracting a premium to peersdue to its growth prospects and lowerregulatory risk, in our view, we believeit is likely APA will trade slightlylower than this implied multiple.

What You Should DoWith the transaction indicative andnon-binding at this stage, we make nochanges to our forecasts. However, wedowngrade APA to Neutral (A$6.18target price) with it having tradedthrough our 12-month target priceand pending a response from ENVsboard of directors in relation to theproposal. We also maintain ourNeutral rating for ENV, albeit with aslightly increased target price ofA$1.07 reflecting the terms of todaysmerger proposal.

CIMB Analyst(s)

Michael NEWBOLD, CFA


Alexander LuT(61) 2 9694 [email protected]

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July 16, 2013


AUSTRALIA STRATEGY

CIMB Short AlphaTop trade: This week we highlight falling short interest in FXJ, withshort positions as a percentage of the register having been trimmedback 8.5% in the last four weeks. Our analyst, Fraser McLeish, pointsto the companys success in reducing the cost base and the fact it has anumber of valuable online assets that are generating strong growthand becoming a larger part of the whole. Over the week we also saw asignificant rise in short positions in SGT, ASL and REA, while a largeproportion of short positions in QBE, DUE and SAI were covered.

Figure 1: Short interest, by sector the rally from a sub-$US1200 gold price enticesshort investors

0%

2%

4%

6%

8%

10%

Discret.R

etail

CapG

oods

Resources

Building

Mats

M

edia

Ironore

Gold

H

ealth

Staples

Chem

icals

Steel

Tran

sport

Infrastru

cture

Utilities

Ins&Div

Fins

B

anks

Ga

ming

BHP&

RIO

Energy

Pro

perty

T

elcos

Average short interest Average short interest 1 month ago

SOURCES: ASIC, CIMB

A short summaryAverage short positions edged higher, to another historical high of 3.1%, as theglobal macro environment continues to drive market positioning. The goldprice has rallied from the brief dip below $US1,200 and short sellers haveseized the opportunity to accumulate positions in the sector (KingsgateConsolidated, Perseus and Silver Lake Resources), with short interest risingfrom 2.7% at 27 June to 3.2%. Also during the week, short interest increased inthe retail discretionary sector (Billabong and David Jones) to 8.8%, just belowthe average for 2013 of 8.9%.

Increasing short interest and days-to-coverStocks with the largest increase in short interest included SingTel, Ausdrill,REA Group, Kingsgate Consolidated and Bradken. The five stocks with thelargest one-week increase in short interest days-to-cover were Navitas (+4.4),Ten Network (+4.1), Harvey Norman (+4.1), Transfield Services (+3.8) andCardno (+3.8).

Decreasing short interestStocks that have seen recent short covering include Fairfax Media, QBE, DUET,

SAI Global, Echo Entertainment and NRW Holdings.


Andrew TANG


Shane LEET(61) 2 9694 [email protected]

Eben VAN WYK, CFAT(61) 2 9694 [email protected]

Watch the costs, and the

profits will take care of

themselves.Andrew Carnegie, Businessman

Highlighted Companies

Fairfax MediaThis week we highlight falling short interest in FXJ,with short positions as a percentage of the registerhaving been trimmed back 8.5% in the last fourweeks. Our analyst, Fraser McLeish, points to thecompanys success in reducing the cost base and thefact it has a number of valuable online assets that aregenerating strong growth and becoming a larger partof the whole.

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July 16, 2013


AUSTRALIA STRATEGY

Still staying on the dividend path(II)An analysis of higher-yielding stock valuation needs to consider notonly the dividend yield, but also the PE ratio and the outlook forpayout ratios. Relative to global peers, the valuation of Australiasbanks looks a little less attractive on these metrics, but it remains

attractive in the consumer staples sector. In telcos and utilities,Australia has less relative value irrespective of the valuation method.

The appeal in dividendsIn our recent report, Still staying on the dividend path (5 July 2013), weargued that despite the increase in recent months, the level of global interestrates is still very low relative to history and seems likely to remain relatively lowfor some time. Furthermore, one implication of slower economic growth andlower interest rates is that dividends are a more important component of aninvestors total return.

The global interest rate outlookRecently we wrote that we expect the US 10-year note to be relatively

range-bound (2.5% to 3.0%) until the data signals a stronger pick-up in USgrowth. We expect this to emerge later in the year, prompting the Fed to movetowards completion of its asset purchase program. However, scenarios onpayroll growth and the implied unemployment rate suggest an increase in theFed funds rate is still a long way off. In our view, markets have fully priced inthe completion of the asset purchase program, but they are struggling to pricein the Fed outlook beyond that.

BanksThe Australian banks look attractive on a dividend yield basis, but on a PE ratiobasis the sector looks expensive relative to global peers. However, relative to itsown history, the PE ratio is not excessively high. The payout ratio is the highestamong our group of global markets and it has been so for at least 11 years.

Consumer staplesLike the banks, the consumer staples sector has the highest payout ratio amongour group of global markets and it has been so for at least 11 years. The PE ratiois in line with the global average and slightly lower than its own history. In ourview, the sector probably offers even better value than the banks on both adividend yield and PE basis.

UtilitiesThe Australian utilities have a slightly higher dividend yield than the globalaverage, but it is lower than it has been in the past. History shows the dividendyield is normally higher than the global average.

TelecommunicationsThe dividend yield on the Australian telco sector (mainly Telstra) is in line withthe global average, but well below its longer-run historical average. On a PEratio basis, the Australian sector is expensive relative to global peers, but it is inline with its longer-run average. The payout ratio is 90% and this is also thelong-run average, but both Finland (97%) and Denmark (95%) offer an evenhigher payout.


Shane LEE


Andrew TANGT(61) 2 9694 [email protected]

I think that the search

or yield, while there is so muchliquidity, is going tocontinue..."

Mark Smith, CEO

ANZ Banking Group

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Oil & Gas Refinery SOUTH KOREA

July 16, 2013


Solid refining fundamentalsAs we highlighted in our recent GSH/SKI notes, we are bullish onrefining margins for the next 12-18 months, based on a benign supplyoutlook. With the weakest quarter out of the way, we expect S-Oil toreport solid earnings from 3Q13.

We cut FY13 EPS by 28% and FY14-15EPS by 7% each to reflect 2Q13s

weakness and several assumptionchanges. As a result, we lower ourtarget price by 7%, still based on 1.9xFY13 P/BV (derived using an FY14ROE of 17%). Nevertheless, maintainOutperform as robust earnings from3Q13 are expected to catalyse itsstock.

What HappenedAfter speaking to S-Oil to gauge itsnear-term earnings outlook, we cutour 2Q13 operating-profit estimate by

60% to W90bn from our early-Mayforecast to account for: 1) a biggerqoq oil-price decline (7% vs. 4%); 2) alarger qoq volume decline from itsmaintenance shutdown (-9% vs. -3%for refined products; other productvolumes also lowered); and 3) anarrower PX-naphtha spread(US$580/t vs. US$600/t), more thanoffsetting b-t-e refining margins in2Q13 (the bulk of FY13 revisionscoming from 2Q13 changes). ForFY14-15, we cut our operating-profit

forecasts by 4% and 1%, respectively,mainly to account for lower oil-priceassumptions.

What We ThinkDespite our reduced earnings, we stay

positive on 2H13-2014 refiningmargins due to a benign supplyoutlook. Even if demand concerns inChina linger on, we believe a lack ofnew refining capacity in the next 18months will lead to healthyimprovements in global refiningutilisation rates. Based on IEAs latestoil-consumption and net-refiningcapacity-addition forecasts, weestimate that the global refiningutilisation rate will improve from82.7% in 2012 to 83.2% in 2013,

83.7% in 2014 and mid-cycle level of84% in 2015.

What You Should DoWhile we like S-Oil, we prefer GSHand SKI at this juncture asuncertainties over S-Oils upcomingcapex programme should remain anoverhang until an announcement ismade (expected by end-2013).Although S-Oil has communicatedthat its dividend policy will notchange, the market appears

concerned that its cash-flow strainsmight lower its dividends.

CIMB Analyst(s)

Peter K. LEE


Share price info


Relative -6.4 -14.7 -23.6

Absolute -7.2 -17.1 -20.2

Major shareholders % held

Aramco OverseasCompany B.V.

35.0

Hanjin Energy 28.4

S-Oil Corp FLASH NOTE010950 KS / 010950.KS

Current W73,900 SHORT TERM(3 MTH) LONG TERM

Market Cap Avg Daily Turnover Free Float Target W98,000

US$7,416m US$19.32m 65.0% Prev. Target W105,000W8,319,869m W21,772m 112.6 m shares Up/Downside 32.6%

Conviction| |

69747883879296101105110114

65,000

75,000

85,000

95,000

105,000

115,000

Price Close Relative to KOSPI (RHS)

Source: Bloomberg

1

1

2


Volm

Financial Summary


Revenue (Wm) 31,913,860 34,723,300 31,580,742 32,375,423 32,196,762

Operat ing EBITDA (Wm) 2,073,500 1,172,770 1,434,291 1,792,410 1,759,570

Net Profit (Wm) 1,190,980 585,160 603,950 1,002,503 972,004

Normalised EPS (W) 10,579 5,198 5,364 8,905 8,634

Normalised EPS Growth 67.6% (50.9%) 3.2% 66.0% (3.0%)


DPS (W) 4,800 2,650 3,500 4,000 4,500

Dividend Yield 6.50% 3.59% 4.74% 5.41% 6.09%

EV/EBITDA (x) 5.11 9.05 7.04 5.33 5.13

P/FCFE (x) NA 14.14 13.86 15.41 15.51Net Gearing 49.2% 43.2% 31.6% 20.1% 10.7%

P/BV (x) 1.59 1.55 1.45 1.32 1.22

Recurring ROE 24.5% 11.0% 10.9% 16.6% 14.8%

% Change In Normalised EPS Est imates (28.7%) (7.1%) (7.2%)


73,900

98,000

70,000 110,500

Target


Current


Page 10


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Plantations MALAYSIA

July 16, 2013


Buy ahead of timber reratingTa Ann started off as a timber company but has since diversified intooil palm. While oil palm is currently the largest profit contributor, oneshould not overlook the potential of its timber business which could seestronger earnings as we expect timber prices to head higher.

We begin coverage on the stock with aTrading Buy call and a target price ofRM4.67, based on an SOP valuation.The stock is not an Outperform as weexpect it to be rerated only in theshort term, driven by rising timberprices. Rerating catalysts could comein the form of stronger timberearnings in the coming quarters.

Timber profits set to recoverFollowing six consecutive quarters ofweak earnings, it is time to relook atthe potential of Ta Ann's timberbusiness as rising log and plywood

prices set the tone for a recovery in itstimber profits. Our channel checksreveal that Sarawak export log priceshave risen by 30-50% since Jan thisyear. This should benefit the group asit is one of the largest timberproducers in Sarawak. It accountedfor 6% of Sarawak's log exports in2012. Additionally, Ta Ann's hugeexposure to Japan (39% of its 2012revenue came from sales of timberproducts to Japan) makes it a goodproxy for the potential upturn in

Japan's housing market, which couldboost plywood prices. We estimate TaAnn's timber earnings to recover froma pretax loss of RM18m in 2012 to a

profit of RM21m this year. Includingthe one-off compensation from itsTasmania venture, we estimate thatthe timber PBT could rise to as muchas RM86m, highest since 2007.

Solid palm oil output growthWe are also positive on Ta Anns oilpalm plantation which is projected tochurn out strong FFB output growthof 10-18% p.a. in FY13-14, driven bynew mature areas and improvingyields from its young estates. There isroom for expansion as 64% of its landbank is not planted. This could keep

the group busy for at least the next 12years based on its current expansiontarget of 3k-5k ha annually.

Attractive valuationTa Ann has underperformed themarket by 29% and its share price hasfallen by 19% in the past 12 monthsdue to weak timber and CPO pricesentiment. We see this as anopportune time to accumulate thestock as it is trading at a 18% discountto our SOP. We expect the company

to report stronger timber earnings inits coming quarterly results in Aug,which could boost sentiment on thestock.

Ta Ann COMPANY NOTETAH MK / TAAN.KL

Current RM3.95 SHORT TERM(3 MTH) LONG TERM

Market Cap Avg Daily Turnover Free Float Target RM4.67

US$458.8m US$0.32m 41.4% Prev. Target N/ARM1,464m RM0.99m 370.7 m shares Up/Downside 18.2%

Conviction| |


SAW Xiao Jun


Ivy NG Lee Fang, CFAT(60) 3 2084 9697E [email protected]

Company Visit Expert Opinion

Channel Check Customer Views

The venture into oil

palm plantations was part ofa strategy to broaden thegroup's earnings base beyondthe sale of logs and plywood.

Dato Wong Kuo Hea,Group Managing Director and CEO

556065707580859095100105

3.1

3.6

4.1

4.6

5.1

P ri ce C lo se R el at iv e t o F BM KL CI ( RH S)

Source: Bloomberg

1

1

2

2


Volm

|

Financial Summary


Revenue (RMm) 925.6 789.9 755.6 967.3 987.7

Operating EBITDA (RMm) 293.1 160.4 155.3 248.1 291.7

Net Profit (RMm) 154.7 57.5 47.2 112.7 138.0

Core EPS (RM) 0.42 0.16 0.13 0.30 0.37

Core EPS Growth 72% (63%) (18%) 139% 22%

FD Core P/E (x) 9.46 25.47 31.00 12.99 10.61

DPS (RM) 0.20 0.05 0.04 0.09 0.11

Dividend Yield 5.06% 1.27% 0.97% 2.31% 2.83%

EV/EBITDA (x) 6.04 11.46 11.78 7.15 5.60

P/FCFE (x) 14.0 314.0 44.9 19.3 8.1Net Gearing 27.7% 34.5% 32.1% 23.6% 9.6%

P/BV (x) 1.30 1.52 1.48 1.34 1.23

Recurring ROE 17.7% 6.0% 4.8% 10.8% 12.1%

% Change In Core EPS Estimates

CIMB/consensus EPS (x) 0.57 0.96 0.99

|

3.95

4.67

3.35 4.98

Target


Current


Page 11


12/26

July 17, 2013


MALAYSIA AVIATION - OVERALL SHORT TERM(3 MTH) LONG TERM

Conviction| |

Whats up, Malindo?Malindos fares on its trunk domestic routes to Kota Kinabalu andKuching from Kuala Lumpur have doubled since the routes werelaunched in March, closing substantially the gap with AirAsias fares.Meanwhile, Malindosfrequencies have also been erratic.

Figure 1: Malindo's fares from KL to Kuching have increased since its launch

116

156

238

308

0

50

100

150

200

250

300

350

1 month's departure 3 months' departure

RM per paxBooked on 20 March Booked on 15 July


Hence, Malindos impact on AirAsiawill be less than feared in 2013. Weremain Overweight on the Malaysianaviation sector, with our topOutperform being AirAsia on the backof the resilience of its business. Wealso like MAHB as we are confidentthat it can open KLIA2 on 2 May 2014as promised. The sector is expected torerate on the back of strong AirAsiaand MAHB earnings.

Key developmentsOver the past four months since itsmaiden flight, Malindo appears tohave revised its plans for a 12-strongjet fleet by end-2013 to a 10-strong jetfleet. But the gap will be plugged byMalindos plans for a 4-strongturbo-prop fleet based out of Subang.Malindo also continues to make plansfor services to India from September,and then to Singapore and China.Disturbingly, several of Malindosmiddle managers have left thecompany to join AirAsia, suggesting

internal discord.

Limited impact so far

We believe that Malindos impact onAirAsia will be limited this year as (1)Malindos frequencies have beenerratic, (2) its fares have doubledsince launch and the gap with AirAsiais now quite small, (3) Malindo maybe targeting too many routes with toofew frequencies to make an impact,and (4) AirAsia remains a veryefficient low-cost operator. We thinkthat MAS will feel more pressure as (1)it is an inefficient operator, (2)

Malindos product resembles MASsproduct the most, and (3) Firefly isnow facing direct competition atSubang Airport.

Will Malindo get to 100?Lion Airs plans to set up a new LCCin Thailand could result in Malindoslowing down the pace of its aircraftexpansion from a stated goal of 100planes in 10 years. Some of Lion Airsaircraft deliveries may be diverted toThailand, especially if Malindo findsthe competitive environment in

Malaysia tougher than expected.Should this happen, AirAsia would bethe biggest beneficiary.


Raymond YAP Kok Hoe, CFA


What keeps me alive

today is my ambition.Rusdi Kirana, Lion Air CEO


AirAsia BhdOutperform, target RM4 (11x CY14 P/E). AirAsia isan LCC behemoth that looks set to dominate Asianskies, with hubs in Malaysia, Thailand, Indonesia,Japan, the Philippines and India. However, it facescompetition in Malaysia from Lion Air's Malindo.

Malaysia Airports HoldingsOutperform, target RM7.55 (DCF on 6.6% WACC,0% LTG). MAHB stands to be a prime beneficiary ofregional airlines' aggressive expansion plans. It mayreceive an ITA of up to 100% of KLIA2's capex, worthmore than RM4bn.

Page 12


13/26

REIT SINGAPORE

July 16, 2013


Quality holdingThere were no major surprises in 1QFY14 as results were in line andmanagement continues to make headway on leasing at newinvestments and seeks growth through asset enhancements. AREITsasset leverage of 28.6% leaves room for growth via acquisitions anddevelopments.

1QFY14s DPU met consensus and our

expectations, forming 25% of ourfull-year estimates. We keep our FY14DPU estimates and DDM-basedtarget price (discount rate of 7.2%)unchanged. We maintain ourOutperform rating, with the catalystsof accretive AEI and assetdevelopments.

No surprisesWe expect steady FY14 DPU growthfrom positive rental reversions andpast investments coming on stream.

1QFY14 DPU was up 0.6% yoy.AREITs portfolio remained healthywith a weighted average rentalreversion of 9.6% in 1Q. This shouldcontinue with current market rents at15-41% higher than passing rents duefor renewal in FY13-14. Coupled withthe AEIs to upgrade older assets,AREIT is well positioned for rentalreversions. Occupancy was a healthy93.6% (vs. 4QFY13s 94.0%), whilemanagement continued to makeheadway on leasing, with the

occupancy of investments completed

in the last 12 months at 77.3% (vs.4QFY13s 62.5%).

Three new AEIsManagement remains on the lookoutfor opportunities to enhance itsportfolios returns and marketability.It has announced three new AEIs(Techquest, LogisTech, CorporationPlace) in 1QFY14, which amounted toa total estimated cost of S$25.4m.Asset leverage remains a low 28.6%(30.5% after committed investments),

which will leave room for growth.

Maintain OutperformAREIT trades at 1.2x P/BV comparedto its historical average of 1.4x sincelisting. We see opportunities toaccumulate AREIT at this level as it isa quality holding, given its prudentmanagement and high quality assets.Its low asset leverage will leave roomfor acquisitions and developmentsupon a potential correction in pricingexpectations by prospective buyers.

CIMB Analyst(s)

TAN Siew Ling

T(65) 6210 [email protected]

Donald CHUAT(65) 6210 [email protected]

Share price info


Relative -5.4 -17.2 -4.7

Absolute -3 -18.9 3.2


Ascendas Funds Mgt 17.0

CBRE 5.0

ING 4.5

Ascendas REIT 1QFY14 RESULTS NOTEAREIT SP / AEMN.SI

Current S$2.24 SHORT TERM(3 MTH) LONG TERM

Market Cap Avg Daily Turnover Free Float Target S$2.50

US$4,249m US$20.82m 83.0% Prev. Target S$2.50S$5,378m S$25.97m 2,399 m shares Up/Downside 11.7%

Conviction| |

Results Comparison

FYE Mar (S$ m)1Q

FY14

1Q

FY13yoy % chg

4Q

FY13qoq % chg

Prev.

FY13FComments

Revenue 150.9 142.0 6.3 145.4 3.8 630.0 In line. 1Q: 24%

Operating costs (53.3) (62.5) (14.7) (41.6) 28.0 (230.7)

EBITDA 97.6 79.4 22.9 103.8 (5.9) 399.4 In line. 1Q: 24%

EBITDA margin (%) 64.7 56.0 63.4

Depn & amort. 0.2 (0.2) (0.4)

EBIT 97.8 79.2 23.5 103.9 (5.9) 399.0 In line. 1Q: 25%

Interest expense (17.6) (24.8) (29.3) (43.5) (59.6) (73.4) In line.

Interest & invt inc 36.4 4.9 638.6 2.4 1,419.9 7.7 Abv. FV gain on CB and collateral loans

Associates' contrib - - - -

Exceptionals & revaln 14.8 17.7 (75.8) 1.5

Pretax profit 131.4 77.0 70.7 123.9 6.1 334.7 Abv. FX gain and gain on disposal

Tax (0.3) (0.4) (23.3) (23.3) (6.3) - -

Tax rate (%) 0.2 0.6 -

Minority interests - - -Net profit 131.1 76.6 71.3 121.9 7.6 334.7 Abv. FX gain and gain on disposal

Distr profit 85.2 76.5 11.3 68.8 23.7 341.8 In line. 1Q: 25%

Core net profit 116.3 58.9 97.6 60.7 91.5 333.2 Abv. FX gain and gain on disposal

DPU (cts) 3.6 3.5 0.6 3.1 16.0 14.2 In line. 1Q: 25%


Page 13


14/26

July 16, 2013


SINGAPORE BANKS SHORT TERM(3 MTH) LONG TERM

SECTOR FLASH NOTE

No reason to be MoodyWe are not perturbed by Moodys downgradeof its outlook forSingapore banks from stable to negative as Singapores bankingsystem has proven to be relatively resilient.

Figure 1: Loan loss coverage ratios have been well above 100% for all three banks

100%

110%

120%

130%

140%

150%

160%

2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13

DBS UOB OCBC


The downgrade was on the back offears of worsening NPL ratios andhigher credit costs as interest ratesrise. Domestically, we believebusiness loans are likely to show thefirst signs of struggle. But history hasshown that non-Singapore loansalways see trouble first and contributemost significantly to NPLs. Weremain Neutral on Singapore banks,with DBS as our top pick for itsmultiple non-interest income drivers.

What HappenedMoodys downgraded its outlook forSingapore banks from stable toneutral yesterday on the belief thatthe increased likelihood of tighteningUS monetary policy is likely to triggera turning point in the credit cycle andlead to worsening NPL ratios andhigher credit costs. MAS respondedwith a statement that Singapore

banks have undergone stress testsand have adequate buffers to copewith higher interest rates.

What We ThinkWhile we agree with Moodysdowngrade on the basis of a weakercredit environment, we believe thatthe Singapore banking system isrelatively resilient and we should notbe overly concerned. During twomajor recessions in the past 16 years,Singapores domestic NPLs did not

really inflate. We believe that thesame will happen this time round.Domestic mortgages have notcontributed significantly to NPLs inthe last two decades and we believethat it will not be a big contributorthis time either.

What You Should DoWe remain Neutral on Singaporebanks. Our top pick is DBS for itstrade finance success and earningsdelivery from multiple fee incomestreams.

CIMB Analyst(s)

Kenneth NG, CFA



DBS GroupSector top pick; Outperform with target price ofS$19.02.1Q ROEs were ahead of peers while P/BVvaluations are still below. Beneficiary of intra-Asiatrade flows and multiple non-interest income drivers.

OCBCUnderperform with target price of S$10.17.Downward pressure on NIMs is likely to persist in thecoming quarters due to lagged mortgage repricing.

United Overseas BankNeutral with target price of S$21.24. We like UOB forits strength in institutional lending. But it is lacking inits WM distribution network. Downward pressure onNIMs is also likely to persist in coming quarters.

Page 14


15/26

July 16, 2013


SINGAPORESTRATEGY FLASH NOTE SHORT TERM(3 MTH) LONG TERM

Conviction| |

Marketing feedbackWe visited institutional investors in four Asian cities recently, andhighlighted how one should think about a Singapore portfolio, afterJuns decimation of interest-rate-sensitive sectors.

Figure 1: Our top picks since 26 Jun 13

-5%

0%

5%

10%

15%

SOURCE: BLOOMBERG

Our key changes were an upgrade ofProperty to Overweight from Neutral(on valuations) and Banksdowngrade to Neutral fromOverweight (on poor upcomingresults expected). Maintain Neutralon the Singapore market with anintact end-CY13 FSSTI target of 3,400,bottom-up. Top picks are DBS, UOL,THBEV, AREIT, BIG, CAPL, EZI,GLP, SATS, KEP and TAT.What HappenedWe narrated our more-positivecountry view since end-Jun, when weupgraded Singapore to Neutral (fromUnderweight). Investors agreed thatSingapore is not expensive, but doesnot have earnings catalysts. Bears feltASEAN markets were not the placesto be in, as any further slowdown inChina is likely to make itself felt soonin the region. Bulls appreciatedSingapore's more defensivecharacteristics.

What We ThinkWe believe Banks will fare better thanREITs as higher long-end interestrates are unlikely to boost customerloan yields immediately while 18% of

REITs debt is sensitive to rising ratesimmediately. We prefer yieldexposure through operatingcompanies with net cash. Investorsquestioned if Telcos high gearingrenders them suitable as hidingplaces when rates rise. We still likeCapital Goods as we attribute theheightened Chinese competition inthe sector to aggressive financing.Short term, investors agreed with usbut longer term, they queried ifSingapore would lose its competitive

edge. As for consumer picks, mostasked about Thai Bev and Courts.Investors were jittery over Tat Hong'sshare-price weakness. New stocksthat came under some scrutinyincluded NOL, as to whether it couldbenefit from a US recovery.What You Should DoOur top picks remain DBS, UOL,THBEV, AREIT, BIG, CAPL, EZI,GLP, SATS, KEP and TAT. Vard hasbeen dropped after our downgrade.REITs are swimming against risingrates and we prefer yield stocks withnet cash and some EPS growth.

CIMB Analyst(s)

Kenneth NG, CFA


Page 15


16/26

Retail HONG KONG

July 16, 2013


Growth outside ChinaGiordanos operating performance should have been resilient in 2Q13despite Chinasoverall market weakness due to bad weather, the avianflu and a sluggish economy. We look beyond China to 2014, when itsrestructuring should be completed.

Thanks to contributions from itsnewly-acquired Middle-East market,

we expect core net profit to grow 15%yoy to HK$354m in 1H13 on 7%topline growth. Maintain Outperformand target price, based on 15x CY14P/E, its 10-year average. Catalysts areexpected from improving Chinaoperations and sustainable marginexpansion.

What HappenedSuffering from unusually cool and wetweather and the avian flu in EasternChina in 2Q13, the groups SSSG had

contracted by a high single digit inApr (-7% in 1Q) in China. However,sales gradually recovered in May andJun with mom improvements, thanksto the closure of non-performingstores in the past 15 months (>160stores) and effective localisedmarketing campaigns. Taiwansrecovery was on track with SSSGturning positive in 2Q (-14% in 1Q) onthe back of successful promotionswhile Hong Kong kept its

low-single-digit SSSG (+3% in 1Q).Singapore is sure to be poor given

Junsair pollution, which kept peopleindoors.

What We ThinkWe believe 2Qs overall performancewas stable, compensated by Indonesiaand Thailand (>20% SSSG in 1Q) aswell as the recovery in Taiwan. Weexpect Chinas profitability toimprove from: 1) healthy inventories;2) fewer discounts offered by its rivals;and 3) gross-margin preservation.Store expansion will focus on Taiwan

and South-East Asia while stores inChina will stay around 1,200.

What You Should DoWe like Giordanos prudentexpansion with diversification inGreater China, South-East Asia andthe Middle East (new contributor) tobalance its business risks and growth.Stay invested for its 5.7% dividendyields and strong balance sheet withHK$1.3bn of net cash on hand.

CIMB Analyst(s)

Ray KWOK

T(852) 2352 1113E [email protected]

Share price info


Relative -4.2 -3.3 17.8

Absolute -2.6 -5.5 29.4


Chow Tai Fook 25.0

Aberdeen Asset

Management Ltd

19.0

Templeton AssetManagement Ltd

7.0

Giordano International FLASH NOTE709 HK / 0709.HK

Current HK$7.21 SHORT TERM(3 MTH) LONG TERM

Market Cap Avg Daily Turnover Free Float Target HK$9.00

US$1,449m US$2.02m 50.8% Prev. Target HK$9.00HK$11,241m HK$15.71m 1,544 m shares Up/Downside 24.8%

Conviction| |

87

93

100

106

113

119

126

132

5.0

5.5

6.0

6.5

7.0

7.5

8.0

8.5

Price C lose Relat ive to HSI (RHS)

Source: Bloomberg

10

20

30

40


Volm

Financial Summary


Revenue (HK$m) 5,614 5,673 6,133 6,638 7,145

Operating EBITDA (HK$m) 856 817 1,024 1,184 1,339

Net Profit (HK$m) 728 826 797 919 1,041

Normalised EPS (HK$) 0.48 0.45 0.52 0.60 0.68

Normalised EPS Growth 29.3% (6.6%) 16.4% 15.3% 13.3%


DPS (HK$) 0.38 0.40 0.41 0.45 0.51

Dividend Yield 5.27% 5.55% 5.67% 6.21% 7.04%

EV/EBITDA (x) 10.85 11.64 9.10 7.61 6.44

P/FCFE (x) 13.13 35.24 12.51 11.29 9.91Net Gearing (42.9%) (37.2%) (42.3%) (46.8%) (51.5%)

P/BV (x) 4.01 3.70 3.46 3.11 2.77

Recurring ROE 28.0% 23.7% 25.7% 27.1% 27.5%

% Change In Normalised EPS Estimates (0%) (0%) (0%)


7.21

9.00

5.31 8.32

Target


Current


Page 16


17/26

Retail HONG KONG

July 16, 2013


Gold price remains the keyDespite the stronger-than-expected 1QFY14 operational performanceand possible upside to consensus earnings, we believe that gold priceuncertainty will remain a key overhang onLuk Fooksvaluation in thenear term. We prefer Chow Tai Fook for its more resilient margins.

We raise our FY14-16 EPS forecastsby 9-10% to factor in the strong 1Q

operational performance, which wasled by robust physical demand due toa drop in gold prices in Apr. We liftour target price to HK$21.9, stillbased on 8x CY14 P/E, 2 s.d. belowthe sectors mid-cycle valuations. Wethink sales and margin trends willstart to normalise in 2Q and maintainour Neutral rating.

What HappenedLuk Fooks 1QFY14 operationalupdate revealed 1) HK SSSG of 83%

(29% in 4QFY13), 2) China SSSG of117% (14% in 4QFY13), 3) SSSG of130% for gold products and 21% forgem-sets, 4) low-single-digit yoy dropin overall retail gross margins, and 5)net addition of 20 POS (fiveself-operated stores and 35 licensedstores).

What We ThinkThe 1QFY14 performance wasstronger than expected and above

rival Chow Tai Fooks (CTF) SSSGrates (HK 68% and China 32%). The

low-single-digit drop in retail grossmargin was largely due to the shift insales mix towards gold products andis comparable to the 3% pt drop ingross margin reported by CTF for thesame period.

What You Should DoLuk Fooks share price has risen 13%(vs. 17% for CTF) over the last fivetrading days in anticipation offavourable numbers after CTFs 1Qresults. While we see potential upside

to consensus forecast, we maintainour Neutral rating as we believe thatthe uncertainties in gold prices willcontinue to weigh on Luk Fooksvaluation in the near term. In thewatch & jewellery sector, we preferCTF for its more resilient margins(higher hedging ratios) and Stelux forits earnings recovery led bycost-cutting initiatives.

CIMB Analyst(s)

Larry CHO

T(852) 2532 1116E [email protected]

Katie ChanT(852) 2539 [email protected]

Share price info


Relative 14.2 1 17.2

Absolute 15.8 -0.7 28.7


Luk Fook (Control) Limted 39.8

Luk Fook Holdings FLASH NOTE590 HK / 0590.HK

Current HK$20.85 SHORT TERM(3 MTH) LONG TERM

Market Cap Avg Daily Turnover Free Float Target HK$21.90

US$1,583m US$6.11m 60.3% Prev. Target HK$19.90HK$12,283m HK$47.40m 589.1 m shares Up/Downside 5.0%

Conviction| |

92101110119128136145154163172

14

19

24

29

Price Close Relative to HSI (RHS)

Source: Bloomberg

5

10

15

20


Volm

Financial Summary

Mar-12A Mar-13A Mar-14F Mar-15F Mar-16F

Revenue (HK$m) 11,907 13,412 17,007 19,115 21,140

Operating EBITDA (HK$m) 1,687 1,611 1,836 2,149 2,475

Net Profit (HK$m) 1,334 1,266 1,429 1,676 1,933

Core EPS (HK$) 2.46 2.13 2.43 2.84 3.28

Core EPS Growth 40.3% (13.4%) 13.9% 17.3% 15.4%

FD Core P/E (x) 9.08 9.79 8.60 7.33 6.35

DPS (HK$) 0.98 0.86 0.97 1.14 1.31

Dividend Yield 4.72% 4.12% 4.66% 5.46% 6.30%

EV/EBITDA (x) 5.91 6.92 6.30 5.21 4.29

P/FCFE (x) NA 97.5 113.1 12.3 9.4Net Gearing (27.2%) (18.3%) (10.3%) (13.5%) (17.9%)

P/BV (x) 2.20 1.91 1.68 1.47 1.28

Recurring ROE 30.0% 20.9% 20.8% 21.3% 21.5%

% Change In Core EPS Estimates 10.2% 9.9% 9.3%


20.85

21.90

16.48 29.70

Target


Current


Page 17


18/26

July 16, 2013


CHINA CEMENT SHORT TERM(3 MTH) LONG TERM

SECTOR FLASH NOTE

Capacity growth: where are therisks?While a concentrated launch of new capacity in 2H13 may create risksfor cement prices in regions with slow demand growth, prices inregions with stronger demand growth and limited new capacity couldbe supported by an improving market balance, in our view.

Figure 1: Incremental improvements in market balance: 2H13F

-40%

-20%

0%

20%

40%

Jiangxi

H

unan

G

D/GX

YRD

Lia

oning

Xinjiang

H

enan

Northwest

Fujian

BJ/T

J/HB

S

C/CQ

Sh

aanxi

Shandong

Hubei

In

ner

Mongolia

Northeast

S

hanxi

(%)

Improving Worsening

* assume same demand growth as in 5M13 SOURCES: CHINA CEMENT ASSOCIATION, CIMB

Shanxi appears to have the biggestrisks given the slowest incrementalchanges in its market balanceexpected in 2H13. At the same time, amore positive outlook for the centraland southern regions backed bystrong demand growth is likely tosupport prices better. We remain

Overweight on the sector withcatalysts expected from a pricerecovery in 4Q13. Shanshui Cementand Anhui Conch are our top picks.

What HappenedChina Cement Association reported39m tpa of new clinker capacitylaunched in 1H13, 58% in westernChina. Another 83m tpa of newclinker capacity could be launched in2H13, with more new lines comingout in the central-northern region.

What We ThinkNew capacity growth in 2013 couldthus be about 7% of end-2012scapacity, which is mostly in line with

our expectations. However, theconcentrated launch of new capacityin 2H13 (potentially delayed from1H13 by tight liquidity) could createpricing pressure if demand growth isslow to catch up with capacity growth.We are more positive on regions withstrong demand growth and limited

capacity additions, including Jiangxi,Hunan, Guangdong and Guangxi, asan improving market balance couldpotentially jack up prices.

What You Should DoIn spite of earnings risks and thepotential for a moderate yoy declinein 1H13 earnings, Shanshui remainsour top pick in the sector as we thinkits low valuations against its historical3-year average has more thanreflected the negatives. We also likeAnhui Conch for its attractive

valuations and market leadership. Itsstrong earnings-growth potential in2H13 could be a strong catalyst forthe stock, we believe.

CIMB Analyst(s)

Kevin YOU



Anhui ConchConch is likely to emerge a winner in the upcomingconsolidation given its strong financials. If thecompany increases its capex by raising net gearingto 120%, FY13 earnings could be lifted by 44%.

CNBMCNBM has been trading at a discount to its peersbecause of its high gearing. Apart from potential

margin expansion from cooperation, we expect i tsproposed H-share placement to reduce gearing andcatalyse its share price in the long term.

Shanshui CementThe company is expected to regain its pricing powerin local markets, thanks to improving cement pricesin Shanshuis surrounding provinces as competitionfrom imports recedes. Its potential cooperation withCNBM will increase its ASPs.

Page 18


19/26

Autos INDONESIA

July 16, 2013

IMPORTANT DISCLOSURES, INCLUDING ANY REQUIRED RESEARCH CERTIFICATIONS, ARE PROVIDED AT THE END OF THIS REPORT.CIMB Securities Limited has had an investment banking relationship with Geely Automobile Holdings within the preceding 12 months. Designed by Eight, Powered by EFA

Biting the bulletIts auto businesses face intense pressure from the competition while thelong-term outlook for LCGC turned out to be less rosy. As its ROE is ona downward trajectory, Astra is heading for a de-rating.

We cut our FY13-15 forecasts by 2-4%,mainly on lower low-cost green car(LCGC) volume and auto margins.

Given all the negatives, we see thatthe stock is heading for a de-rating.Hence, we cut our price target toRp6,600, now based on 2.8x FY14P/BV or the historical valuation if thecost of equity were to increase to15.6% vs. our previous valuation basisof 15x CY14 P/E. We downgrade Astrato Underperform from Outperform.

Competition gets tougher...Margins at the auto dealer level mayremain depressed in the foreseeable

future, as competition intensifies anddealers resort to their aggressivediscounting strategies used 2-3months ago. Given Astras perceivedstrategy of prioritising market shareover margins, the discounting couldpersist for a while, no thanks to itsrecent market share decline in Jun.Thus, our auto margin assumptionsare lowered by 30bp to a moresustainable level of 3.3% in FY13-14, alevel seen back in FY09-10.

... and LCGC is not helpingThe regulatory delays have pushedToyota and Daihatsus LCGC

launches closer to the expected LCGClaunch dates of Astra's competitors.As a result, such launches now may

not alleviate the stress on Astrasmarket share and dealer discounting.Moreover, the proposed regulationsto impose ceiling prices could putdealers at a disadvantage in the longterm, given the more volatile margins.We now expect LCGC sales for Astrato amount to only 30,000 units thisyear, from 70,000 units previously.

De-rating expectedDriven by pressures on the auto andcommodities fronts, Astra's ROE is

poised to decline to 23-25% inFY13-15 from the 5-year average of30%. There could be upside potentialto our ROE forecasts if Astra 1)leverages up, or 2) pays moredividend, though such moves willcontradict its current strategy. Thus,we expect the stock to de-rate to 2.8xFY14 P/BV, which is the historicalvaluation if the cost of equity were toincrease to 15.6% (prev. 13.7%). Webelieve that Astra's current shareprice already reflects the higher cost

of equity. The limited upside potentialunderpins our Underperform call.

Astra International COMPANY NOTEASII IJ / ASII.JK

Current Rp6,850 SHORT TERM(3 MTH) LONG TERM

Market Cap Avg Daily Turnover Free Float Target Rp6,600

US$27,449m US$25.74m 49.0% Prev. Target Rp8,150Rp277,312,352m Rp253,201m 40,484 m shares Up/Downside -3.6%

Conviction| |


Peter P. SUTEDJA, CFA


Company Visit Expert Opinion

Channel Check Customer Views

We are keeping our

target because in Jul, we willlikely get a boost from the IdulFitri festivities.

Johnny Darmawan,Chairman, PT Toyota Astra Motor

73

83

93

103

113

123

133

5,900

6,400

6,900

7,400

7,900

8,400

8,900

Price Close Relat ive to JCI (RHS)

Source: Bloomberg

1

1

2

2


Volb

Financial Summary


Revenue (Rpb) 162,564 188,053 199,702 221,963 239,961

Operating EBITDA (Rpb) 22,602 25,803 26,620 31,068 34,273

Net Profit (Rpb) 17,785 19,421 18,869 21,182 23,184

Core EPS (Rp) 431.2 484.1 466.1 523.2 572.7

Core EPS Growth 21.3% 12.3% (3.7%) 12.3% 9.4%

FD Core P/E (x) 15.89 14.15 14.70 13.09 11.96

DPS (Rp) 202.3 197.7 215.9 209.7 235.5

Dividend Yield 2.95% 2.89% 3.15% 3.06% 3.44%

EV/EBITDA (x) 13.62 12.48 11.79 9.95 8.78

P/FCFE (x) 20.3 109.0 31.3 NA 37.6Net Gearing 42.3% 51.1% 34.8% 26.5% 17.8%

P/BV (x) 4.59 3.89 3.35 2.90 2.54

Recurring ROE 31.8% 29.8% 24.5% 23.8% 22.7%

% Change In Core EPS Estimates (1.66%) (3.61%) (3.95%)


6,850

6,600

6,150 8,600

Target


Current


Page 19


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July 16, 2013


THAILAND STRATEGY SHORT TERM(3 MTH) LONG TERM

Conviction| |

Bottom-fishingA massive correction from foreign sell-offs has presented a greatbuying opportunity as we believe the Thai economy remains strong,albeit normalising towards its long-term growth trend of about 5%.Domestic sectors are still expected to outperform the others.

Figure 1: Bond yields have started to cool off

2.00

2.50

3.00

3.50

4.00

4.50

5.00

1 6 11 16 21 26 31 36 41 46

%


We remain positive on the market butreshuffle our top picks to reflect themore fragile sentiment. We replaceANAN, KK and SCB with BEC, KTBand KBANK. Our other top picks areintact: AMATA, PS, SIRI, MINT, BGH,ROBINS and GLOBAL. Our indextarget is still 1,810 (14.2x CY14 P/E, a3% premium to regional peers).Maintain Positive view with marketcatalysts expected from a passage of

the infrastructure bill and decent2Q13 earnings.

Foreign selling to cool offForeign investors have been netsellers of THB76bn to date, a reversalfrom the inflows last year. Cumulativeforeign inflows since 2009 when QE1started had peaked at aboutTHB155bn in Jan 13 and are nowdown to only THB62bn after recentheavy sell-offs. We believe thatforeign sell-offs should be less

pronounced in the near term, as thepolitical situation is stable andcorporate earnings remain robust.

Short term, our regional strategistsbelieve that capital outflows couldpersist, pressurising asset returns.

LEI and BSI stay strongThe Leading Economic Index,Business Sentiment Index and BOIapplications received remain strong.Demand for property-developmentloans and mortgage loans remainsstrong and we believe that 2H13

presales will stay strong on the backof more project launches. Meanwhile,we estimate that a 1% drop in ChineseGDP will shave only 9bp off ThaisGDP.

Infrastructure billunconstitutional?Contractors seem to believe that if theinfrastructure bill is ruledunconstitutional, any delays will onlybe for a few months. They are not tooworried as they already have huge

backlog orders, which could keepthem busy for the next few years.


Kasem Prunratanamala CFA


LEE Heng GuieT(60) 3 [email protected]

The decision [to take on

the defence portfolio] lies withthe prime minister and thegovernment. We subordinatesmust respect the decision madeby our superiors"

Gen Prayuth Chan-ocha, army chief


KasikornbankKBANK is our long-term sector favourite on the backof its banking and management quality. It can now beowned at an undemanding 8.9x CY14 P/E and 2.0xP/BV (for a 21% ROE) againstSCBs 9.x and .x,respectively.

Krung Thai BankWe see KTB as offering the best value among the bigbanks as it is trading at just 7.2x CY14 P/E and 1.4xP/BV. Earnings drivers could include a moreprofitable loan mix and greater focus on fee income.

BEC WorldWe believe that fears of an analogue-to-digitalterrestrial-TV transition are overplayed, which offersa trading opportunity for BEC. BEC is trading at its3-year average P/E, implying a PEG of 1.

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22/26

Property Development INDIA

July 16, 2013


Weak 1Q; Near-term headwindscreate entry opportunityOberois 1Q PAT rose only 1% yoy (-30% qoq) on account of lowerproperty sales, other income and higher taxes. Property sales declinedover 60% on both square feet and unit basis due to the absence of newlaunches (lack of approvals) and high-priced inventory.

1QFY14 earnings were slightly belowexpectations, at 17% of our full-yearestimate. We expect near-term painfrom weak demand, lack ofapprovals/launches and theoverhang of dilution. We cut ourFY14-16 EPS estimates by 5-6% andSOP-based target by 5% to Rs 285.The stock remains an Outperform,with key catalysts likely from projectlaunches & potential land purchases.

Weak 1Q on lower sales1QFY14 revenues rose 9% yoy (-28%qoq) to Rs2.2bn (Rs1.4bn fromprojects and Rs630m from rentals),but were below our expectations dueto lower property sales. EBITDAmargins rose by 4.6% pts to 61.1%due to sales of existing inventory athigher prices. These, coupled with ahigher tax rate of 31% (vs. 26% inFY13 as there was no contributionfrom the tax-exempt Splendourproject), led to only a 1% yoy rise

(-30% qoq) in net profit to Rs1bn.Property sales declined by 60% yoyand qoq to 49,000 sq. ft. comingfrom 23 units (-63% yoy and -68%qoq, vs. quarterly avg. of 70 units)due to lack of new launches andslower demand for the existinginventory at high prices. Thisresulted in lower sales bookings ofRs925m (-55% yoy, -58% qoq). Ithad a negative operating cashflow ofRs1.2bn due to lower collection fromEsquire (on approval issues) and thecapex on non-cash generatingprojects (Worli & Commerz - 2).

Maintain OutperformWhile we expect near-term pain tocontinue for the next 3-6 months, weexpect Oberoi to launch new projects(Mulund, Worli, Goregaon phase -3,etc.) from 2HFY14 onwards. Thus,we believe the stock correction of16% in the last three months hascreated an entry opportunity.

CIMB Analyst(s)

Prakash AGARWAL


Ashish THAVKART(91) 22 6602 [email protected]

Share price info


Relative -9.4 -24.2 -30.8

Absolute -5.9 -18.3 -14.7


T Rowe Price 1.6

Willian Blair 1.0

Morgan Stanley 0.7

Oberoi Realty Ltd 1QFY14 RESULTS NOTEOBER IN / OEBO.BO

Current Rs202.0 SHORT TERM(3 MTH) LONG TERM

Market Cap Avg Daily Turnover Free Float Target Rs285.0

US$1,107m US$0.48m 21.5% Prev. Target Rs300.0Rs66,303m Rs27.29m 328.2 m shares Up/Downside 41.1%

Conviction| |

Results Comparison

Y-E Mar (Rs m) 1QFY14 1QFY13 4QFY13

yoy %

chg

qoq %

chg

FY13

cum

Prev.

FY14F Comments

Revenues 2,184 1,999 3,039 9.3% -28.1% 10,476 13,097 Revenues were impacted due to lower sales

Operating costs (849) (860) (1,260) -1.3% -32.6% 4,355 5,647

EBITDA 1,335 1,139 1,779 17.2% -25.0% 6,121 7,450

EBITDA margins 61.1% 57.0% 58.5% 58.4% 56.9% Led by sales of existing inventory at higher prices

Depn & amort. (69) (70) (72) -2.3% -4.3% (285) (391)

EBIT 1,266 1,069 1,707 18.5% -25.8% 5,836 7,059

Interest expense (1) (1) (1) -50.0% -14.3% (4) 0

Other income 210 309 221 -32.0% -4.9% 999 1,273

Pretax profit 1,476 1,376 1,928 7.2% -23.4% 6,831 8,332

Tax (457) (368) (476) 24.2% -3.9% (1,783) (2,250) Higher tax was due to no contribution from tax exempt Splendour project

Tax rate (%) 31.0% 26.8% 24.7% 26.1% 27.0%

Net Profit 1,020 1,008 1,452 1.2% -29.8% 5,048 6,083 1QFY14 profit represents 17% of our FY14 forecast

EPS (Rs) 3.1 3.1 4.4 1.1% -29.8% 15.4 18.5


Page 22


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July 16, 2013


INDIA BANKS SHORT TERM(3 MTH) LONG TERM

SECTOR FLASH NOTE

Panic on the streetToday, post the RBI measures to curb exchange rate volatility, shortterm borrowing costs went up by 150bp-200bp and benchmarkgovernment bond yields rose by c.50bp. In the near term, outlook forwholesale funded banks and non-banks remains challenging.

Figure 1: Key forecasts


If the short term borrowing rates andgovernment bond yields continue toremain at elevated levels, it wouldhave its bearing on performance of

banks and non-banks we cover.Further, the rise in government bondyields should adversely affect thetreasury portfolio of most banks,especially public sector banks. Weremain Neutral on the banking sector.Our top PSB picks are Canara Bankand Bank of Baroda (BOB), while welike ICICI Bank among private banks.We recently downgraded IndusindBank to an Underperform.

What HappenedIn order to curb the excess rupee

liquidity and to address the exchangerate volatility, the RBI announced afew measures yesterday (Please referto page 2 for details).

What We ThinkThe increase in short-term wholesaleborrowing costs will have an adverseimpact on banks with a higherproportion of interest-bearingliabilities (IBL, domestic) due tomature in less than one year (Figure6). Among private sector banks, YesBank, ING Vysya Bank and Indusind

Bank have higher proportions of IBLwith maturity of less than one year(Figures 2 and 3). Among publicsector banks (PSB), Corporation Bank,Oriental Bank and Canara Bank have

higher proportions of IBL withmaturity of less than one year(Figures 2 and 3). Among non-banks,those with high-yield loans like auto

finance companies (MMFS and SHTF)are likely to be less affected thanthose with finely-priced loans likehome and infrastructure companies(HDFC and IDFC). The benchmark10-year government bond yield isback at the end-March 2013 level ofaround 8% (Figure 7). Thus, all theunrealised gains on the bonds wouldtechnically have vanished today, on amark-to-market basis for theavailable-for-sale (AFS) category.

What You Should Do

We remain Neutral on the bankingsector. PSB valuations appearundemanding but we are concernedabout their declining low-cost depositratios, retirement benefit costs, assetquality and capital dilution underBasel III. Our top PSB picks areCanara Bank and BOB. We think thatvaluations are fair for most privatesector banks, given their higher ROAs.Our key concern about private sectorbanks in the near term is loan growthdue to the slowdown in the

investment cycle and the broadereconomy. Our top private bank pick isICICI Bank.

CIMB Analyst(s)

Jatinder AGARWAL


Vivek VERMAT(91) 22 6602 [email protected]

Umang SHAHT (91) 22 6602 5163E [email protected]

Page 23


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