2010 May - Morning Pack (DBS Group) For Asian Stocks

Regional
Morning Pack
DBS Group Research . Equity 5 May 2010
Spotlight On
(SP) Singapore Telecom: Reversal of traditional role BUY; S$2.96; ST SP; Price Target: 12-month S$3.40 (Prev S$3.50) Mature markets to outshine regional associates in 4Q10F a reversal of traditional role. SingTel may report 4Q10F profit of S$973m (+1% yoy, -2% qoq) in line with street expectations. Special dividends cannot be ruled out, in our view. FY11F earnings lowered by 2.5% due to weaker than expected Telkomsel. TP lowered to S$3.40 BUY quality blue chip at 12x PER (Hist. average 13.4x)
Ideas & Updates

SINGAPORE First Ship Lease Trust: Unexpected counterparty issues HOLD (downgrade from BUY) S$0.545; FSLT SP; Price Target: 12Month S$0.55 (Prev S$0.78) Singapore Telecom See Spotlight MALAYSIA Digi.Com: Optimizing balance sheet HOLD; RM22.68; DIGI MK; Price Target: 12-Month RM20.90 (Prev RM21.60) HONG KONG HK/China Strategy Update See Spotlight THAILAND Public Holiday KOREA Daewoong Pharmaceutical: Substantial improvement in 4QFY09, BUY, TP (12M): W80,000 CP (5/3): W50,300 Nepes Corp.: Decent 1Q result largest quarterly earnings expected in 2Q BUY, TP (12M): W26,000 (upgrade) CP (5/3): W18,850 SFA Engineering : Poised to benefit the most from Samsung Electronics business expansion BUY, TP (12M): W100,000 CP (May 4): W58,800
(HK) HK/China Strategy Update: Awaiting a breakthrough Hang Seng Index to stay at 19,500 - 23,000 pending breakthrough catalysts. Stock market illiquidity and volatility worsen as catalysts becoming mixed Defensive strategy for long-funds, ie yield and PRC supportive sectors
Results
SINGAPORE Raffles Education (RLS SP): Below expectation ST Engineering (STE SP): Below expectation
Singapore Research Team 6533 9688 research@dbsvickers.com www.dbsvickers.com In Singapore, this research report or research analyses may only be distributed to Institutional Investors, Expert Investors or Accredited Investors as defined in the Securities and Futures Act, Chapter 289 of Singapore. Recipients of this report, received from DBS Vickers Research (Singapore) Pte Ltd (DBSVR), are to contact DBSVR at +65 6398 7954 in respect of any matters arising from or in connection with this report.
Regional
Morning Pack
Analyst Roadshows & Events 2010*
Events China Property Field Trip to Dalian and Shenyang Consumer Sector POA Conference POA Conference Date 04 07 May 17 21 May 24 25 May 26 27 May Location CH US UK US DBSV Analyst Indices Asia JCI Index PCOMP KLCI KOSPI SET STI MXFEJ index Taiex Nikkei 225 BSE Sensex Hang Seng HSCEI Index HSCCI Index Shanghai A U.S./Others Dow Jones S&P NASDAQ FTSE 100 DAX Index Closed as 4.05.10 2,959 3,291 1,343 1,719 797 2,901 454 7,931 11,057 17,137 20,763 11,864 3,897 2,835 10,927 1,174 2,424 5,411 6,007
Key Indices
% chg vs previous close -0.1 0.0 -0.3 -0.1 4.4 -1.5 -0.2 -0.3 1.2 -1.4 -0.2 -0.7 -0.6 -1.2 -2.0 -2.4 -3.0 -2.6 -2.6
YTD (%) 16.8 7.8 5.5 2.1 8.5 0.1 0.8 -3.1 4.8 -1.9 -5.1 -7.3 -4.0 -13.5 4.8 5.2 6.8 0.0 0.8
QTD (%) 6.5 4.1 1.7 1.5 1.1 0.5 0.3 0.1 -0.3 -2.2 -2.2 -4.3 -5.0 -8.8 0.6 0.4 1.1 -4.7 -2.4
MTD (%) -0.4 0.0 -0.3 -1.3 4.4 -2.5 -1.5 -0.9 0.0 -2.4 -1.6 -2.6 -2.5 -1.2 -0.7 -1.1 -1.5 -2.6 -2.1
Mavis Hui, Titus Wu
NDCR Corp Mtg/Lunch/Conf Call 2010*

Events OUE Date 11 May Location SG DBSV Analyst
*To register your interest in the above events, please contact your DBSV Sales representative.
Market Data
Earnings Gth (%) 10F 11F PE (x) 10F 11F
Singapore Malaysia HK HSI HK HSCCI (Red) HK HSCEI (H) Thailand Indonesia
20.1 17.5 24.6 23.4 31.1 15.6 17.3
14.4 12.6 15.8 15.2 18.3 12.9 18.0
14.5 16.3 13.9 15.6 11.9 10.9 14.9
12.7 14.5 12.0 13.5 10.1 9.7 12.9
Source: Bloomberg
Source: DBS Vickers
Commodity Indicators
Commodities Crude Oil Nickel Spot Coal Spot Tin Steel Copper Gold Spot Soybean Oil Spot Soybean Spot Sugar Spot Rice Wheat Spot Palm Oil Spot (CIF R) Palm Oil Spot (FOB Msia) Crude Oil Brent Spot Corn Spot Rubber Spot USD/barrel USD/mt USD/mt USD/mt RMB/mt USD/lb USD/t. oz USD/pound USD/bushel USD/pound USD/cwt USD/bushel USD/mt RM/mt USD/barrel USD/bushel SGD/gram Latest Closing 83 24,596 106 17,850 4,499 368 1,172 36.11 9.65 18.82 12.33 4.73 828 2,566 85 3.43 541 Previous Closing 86 26,244 18,250 4,499 368 1,171 36.40 9.64 19.30 12.32 4.64 838 2,561 86 3.46 544
-2.9% -5.2% -31 .4% -1 9.8% -0.6% 2.8% -0.9% 9.9% -7.8% 33.5% -40% -20% 0% 20% 40% YTD % chng
4.3% 33.3% 23.0% 5.3% 1 8.2% 2.1 % 6.8%
Crude Oil Nickel Spo t Co al Spo t Tin Steel Co pper Go ld Spo t So ybean Oil Spo t So ybean Spo t Sugar Spo t Rice Wheat Spo t P alm Oil Spo t (CIF R) P alm Oil Spo t (FOB M sia) Crude Oil B rent Spo t Co rn Spo t Rubber Spo t 60%
Source: Bloomberg
Credit Spreads
Latest Closing 481 289 150 24 Previous Closing 494 289 150 20
YTD % chng 1 0% 2% -1 4% -20% -1 5% -1 0% -5% 0% 5% 1 0% CB OE SP X Vo latility US IG CDS A sia Co nvertible B o nds 1 5%
US Junk Bond Asia Convertible Bonds US IG CDS CBOE SPX Volatility
Source: Bloomberg
Page 2
Regional Market Focus
High Conviction Picks

DBS Group Research . Equity
High Conviction Stock Picks
Price 4-May 10 (LCY) 4.11 9.90 6.85 7.65 22.80 165.50 97.25 269.00 40.75 5,700 28,950 223,000 Target Price (LCY) 5.60 10.70 8.30 9.00 28.00 202.04 110.00 303.00 44.00 6,600 33,000 280,000 Upside (%) 36 8 21 18 23 22 13 13 8 16 14 26 % Chg -1w (8) 1 (2) 2 (13) 3 6 4 7 8 12 (6) % Chg since Entry Date 24 0 (1) 2 (4) 20 24 16 6 32 7 (1) Date of Entry to List 8-Feb-10 30-Apr-10 26-Apr-10 12-Apr-10 30-Apr-10 8-Feb-10 1-Mar-10 1-Mar-10 5-Apr-10 8-Feb-10 12-Apr-10 5-Apr-10 Mcap US$m 6,171 1,965 31,689 16,751 5,101 38,974 7,197 23,585 2,374 13,232 9,992 2,433 3mths Avg Daily T/O US$m 16 4 28 22 16 105 30 60 1 17 95 12
5 May 2010
Company Large Caps (>US$2bn) Sembcorp Marine Venture Corporation Wilmar International Maybank China Mengniu Tencent KASIKORNBANK PTT Thai Union Frozen Bank Mandiri Kia Motors CJ CheilJedang
Exch SG SG SG MY HK HK TH TH TH IND KS KS
Sector Ind Media Consumer Goods Banks Consumer Goods Technology Banks Oil & Gas Consumer Goods Banks Consumer Goods Consumer Goods
Company Big Caps (>$2bn) Sembcorp Marine
Reasons for Picks / Potential Catalysts Catalysts in the form of contract announcements Evidence of sustainable margins in quarterly result announcements Indication on the use of the S$2b MTN facility may signal future acquisitions. Return to quality earnings: Strong margin recovery likely back to 7% by year end starting from 6.2% in Q1, all thanks to deliberate business retooling. Healthy sales growth: Besides low margin turnkey business for HP, other businesses are bouncing back healthily. Venture added more ODM customers in Q1 and engaging more, which bodes well for good margins sustainability. Solid balance sheet helps it secure supplies amid industry wide component shortage: Ventures solid balance sheet enables it to stock up more components than competitors whose growth are poised to be crimped by industry-wide component tightness. Leading position in China's vegetable oil market with deep distribution network Large economies of scale, global market intelligence support for low-cost origination and processing Continued expansion in India, Indonesia and Africa provides long-term growth beyond China Strong management team makes Wilmar's model impossible to replicate market share (22%) in domestic deposits.
Venture Corporation
Wilmar International
Maybank
Strong domestic franchise for consumer and business loans, placing it in a solid position to ride on the economic recovery. Largest Indonesian operation poised for robust 20% loans growth and 35% 3-year earnings CAGR. Sharp improvement emerging. Major laggard, being the only large cap bank trading below +1 SD. Low foreign shareholding level (11%) versus CIMB (40%) and
Public Bank (26%).
China Mengniu
Strong earnings recovery with record high earnings in FY09 Potential for ASP hike could benefit margin Valuation still lagged behind other F&B peers 30% organic growth underpinned by low paying ratio and high affordability for its instant messaging and online games. Extra growth will stem from its social network services and 3G MVAS. Valuation is undemanding in view of its growth outlook. Expect strong loan growth of 7% for FY10F, with leading share in high-yield SME loans segment. Sustainable high NIM, fee income growth and good asset quality with the lowest NPL ratio at 3.76%. Higher ROE of 16.1% in 2011 vs 12.6% in 2009, premised on K-Transformation and channel expansion projects completion in 2011-12. Strong fundamentals with positive long-term growth. Beneficiary of strong crude oil price and strong performance at PTTEP. Expect strong earnings growth of 26% and 31% in 2010-11.
Tencent
KASIKORNBANK
PTT
In Singapore, this research report or research analyses may only be distributed to Institutional Investors, Expert Investors or Accredited Investors as defined in the Securities and Futures Act, Chapter 289 of Singapore. www.dbsvickers.com Refer to important disclosures at the end of this report
Regional Market Focus High Conviction Pick
Company Big Caps (>$2bn) Thai Union Frozen
Reasons for Picks / Potential Catalysts Strong margins from value-added products and stable tuna prices as well as effective cost management. FY10F net profit is expected to grow 16% y-o-y to Bt3.9bn, premised on improvement at all subsidiaries, higher volume from capacity expansion, and recovering consumption Share price remains a laggard compared to its peers.
Bank Mandiri
Improving ROE profile, fuelled by lower costs of funds and lower provisions Recovering loan growth and improving asset quality Beneficiary of economic recovery, given exposure to infrastructure and agribusiness segment. Another advantage comes from its position as the largest state-owned bank.
Kia Motors
1Q10F operating profit expected to grow 252% YoY. (Sales KRW4,737bn, OP KRW313bn) Best line-up of new model launches since acquisition. KIA's new SUV model, Sorneto R, is receiving good response in the US market, which should raise KIA's Georgia factory utilization. Raw sugar price has plunged 34% YTD, wheat and soybean prices have fallen 10% and 18% respectively. Weaker agricultural commodity prices will rein in raw material costs. Value of Samsung Life shares not reflected in the share price at 12.7x FY10F P/E
CJ CheilJedang
Source: Bloomberg, DBS Vickers, Hanadaetoo Securities
Company Small & Mid Caps (<US$2bn) CDL Hospitality Ho Bee IJM Corp MRCB Neo-Neon New World Dept Store Amata Corp Major Cineplex Group Thai Airways International PT Timah LG International Infraware
Exch
Sector
Price 4-May 10 (LCY)
Target Price (LCY)
Upside (%)
% Chg -1w
% Chg since Entry Date
Date of Entry to List
Mcap US$m
3mths Avg Daily T/O US$m
SG SG MY MY HK HK TH TH TH IND KS KS
Reits Real Estate Infrastructure Conglomerate Consumer Goods Consumer Services Real Estate Consumer Services Consumer Services Basic Material Utility/E&P Internet/Comm.
1.94 1.60 5.00 1.51 5.75 6.74 7.45 8.90 26.00 2,550 32,500 10,200
2.20 2.12 6.00 2.25 8.39 8.80 11.03 12.30 33.50 2,950 45,000 22,402
13 32 20 49 46 31 48 38 29 16 38 120
3 (5) 2 (3) 7 (2) 8 6 4 (6) (1) (4)
1 (3) 16 15 6 (1) (9) (3) 42 28 8 (20)
3-May-10 8-Feb-10 8-Feb-10 8-Feb-10 30-Apr-10 23-Apr-10 5-Apr-10 5-Apr-10 8-Feb-10 8-Feb-10 12-Apr-10 12-Apr-10
1,176 854 2,060 640 678 1,464 534 243 1,366 1,421 1,113 164
2 2 4 4 3 1 1 1 7 4 8 4
Company Small & Mid Caps (<$2bn) CDL Hospitality Trusts Ho Bee
Reasons for Picks /Potential Catalysts Stunning 38% yoy spike in RevPAR for April 2010 paves the way for a robust 2Q10 Acquisitions offer upside to earnings, potentially add13 Scts to our target price. Highest exposure to Sentosa Cove, which is expected to see improved interest after opening of Resorts World Recent acquisition in China and potential for future acquisitions represent a new growth angle Attributable number of unsold units in Singapore landbank is low, reducing impact of policy risk
IJM Corp
Most diversified Malaysian contractor that offers resilient earnings Strategy to bid for a large pool of contracts gives it the highest probability of new wins Resurgence in the India construction market where IJM has a stronghold
MRCB
Scarcity premium as the only listed GLC-contractor Expected to clinch a sizeable government land deal using proceeds from rights issue Ability to deliver earnings is improving.
Neo-Neon
One of the largest manufacturers of LED decorative lighting products Strong earnings growth from replacement wave of incandescent lighting products Strong order flow for its LED white light products
Page 2
Regional Market Focus High Conviction Picks
Company Small & Mid Caps (<$2bn) New World Dept Store
Reasons for Picks /Potential Catalysts Strong acquisition potentials given abundant net cash of c.HK$3bn Potential benefits from better consumption, driven by Expo in major Shanghai market Undemanding valuation of c.21x PE (adjusted for 2010 calendar year) against close peers
Amata Corporation
AMATAs land sales picked up nicely since 4Q09, in line with global economic recovery. Momentum should continue in 2010. Strong earnings jump expected in 2010 and 2011, on the back of recovering land sales Attractive valuation, trading at a deep discount to RNAV of Bt12.26. We maintain BUY with a TP of Bt11.03, based on 10% discount to RNAV.
Major Cineplex
Strong ticket sales, boosted by economic recovery and attractive film line-up. High-margin ad income also picked up strongly, following increase in moviegoers. An absence of loss contribution from CAWOW at c. Bt30-40m a year..
Thai Airways International
Expect 1Q10F earning to beat the record turnaround earning in 4Q09. Operation is strengthening. Traffic to turnaround after the prolonged protest comes to an end soon. Airspace in Europe has reopened. Attractive valuation, trading at below its PBV band, cheapest airline in the region.
PT Timah
2010 outlook underpinned by firmer tin prices and volumes on the back of the global economic recovery Ramping up off-shore production, which commands relatively better margins than in-land production Attractive valuation
LG International
Expect strong earnings improvement in 1Q10F Rising commodity prices will boost value of E&P assets CDM projects expected to start contributing to earnings
Infraware
Near term price weakness due to paid/bonus issue of new shares. Possible commercialization of Polaris 7.0 browser in the U.S.
Source: Bloomberg, DBS Vickers, Hanadaetoo Securities
Page 3
Singapore Company Focus
First Ship Lease Trust

Bloomberg: FSLT SP EQUITY
Reuters: FSLT.SI
5 May 2010
HOLD S$0.545 STI : 2,901.18

(downgrade from BUY) Price Target : 12-Month S$ 0.55 (Prev S$ 0.78) Reason for Report : Contract breach by counterparty Potential Catalyst: Clarity on future deployment of affected vessels Analyst Suvro Sarkar +65 6398 7973 suvro@dbsvickers.com
Unexpected counterparty issues

Key customer Groda Shipping reneges on contract, returns product tankers prematurely to cut losses Worst case, DPU down 15-18% in FY10-11 Risk of knock-on effect on other customers, despite the presence of corporate guarantees as recourse
Downgrade to HOLD, TP reduced to S$0.55

Charterer wants to return 2 vessels prematurely. FSLT has been requested to take immediate re-delivery of two of their vessels by charterer Groda Shipping, much before the scheduled charter expiry of November 2014. The two vessels are product tankers of about 47,000 dwt each and are currently on a back-to-back sub-charter to Russian statecontrolled energy company OJSC Rosneft, under a long-term Contract of Affreightment (COA). Utilisation by Rosneft was probably low and high bunker prices rendered the arrangement unsustainable for Groda. FSLT is likely to settle amicably and will receive US$3m security deposit on each vessel, which translates to about 5 months charter-hire. Impact cash flow significantly. The two charters are currently fixed at US$20,700 per day each and contribute about 15% to FSLT's topline. The ships are still employed by Rosneft and FSLT could go into a direct contract with them. However, the COA revenue should be significantly lower than the current bareboat charter rate, and FSLT would have to assume operating risks as well. The other option for FSLT is to rd scout for 3 party employment, but current charter rates could be around 40% lower than the existing bareboat rate. Quarterly DPU could fall to 1.1UScts from 1.5UScts in the near term. Assuming a conservative 50% cut in income from the Groda vessels, our DPU estimate for FY10-11 is reduced by 15-18% to 4.8-5.3UScts from 5.6-6.5UScts earlier. Pending further clarity on negotiations with Groda and how the trustee manager employs the ships in future, we downgrade the stock to HOLD at a TP of S$0.55 (higher peg of 12% target yield to reflect increased risk of charter renegotiations by customers). Impact on DPU could be lower if part of the U$6m security is channeled into distributions.
At A Glance Issued Capital (m shrs) Mkt. Cap (S$m/US$m) Major Shareholders FSL Holdings Pte Ltd (%) Bridge Partners (%) Deutsche Bank (%) Free Float (%) Avg. Daily Vol.(000)
Price Relative
S$ 1 .7 0 1 .5 0 1 .3 0 1 .1 0 0 .9 0 0 .7 0 0 .5 0 0 .3 0 2007 19 2008 2009 2010 69 119 R e la t iv e In d e x 219
169
F ir s t S h ip L e a s e T r u s t (L H S )
R e la t iv e S T I IN D E X (R H S )
Forecasts and Valuation

FY Dec (US$ m) 2008A 2009A 2010F 2011F
Turnover EBITDA Pre-tax Profit Net Profit Net Pft (Pre Ex.) EPS (S cts) EPS Pre Ex. (S cts) EPS Gth Pre Ex (%) Diluted EPS (S cts) Net DPS (S cts) BV Per Share (S cts) PE (X) PE Pre Ex. (X) P/Cash Flow (X) EV/EBITDA (X) Net Div Yield (%) P/Book Value (X) Net Debt/Equity (X) ROAE (%) DPU Rev (%): Consensus DPU (S cts):
87 79 5 5 5 1.3 1.3 (24) 1.3 15.9 104.2 41.0 41.0 3.3 8.6 29.1 0.5 1.3 1.2
99 92 8 8 8 2.2 2.2 64 2.2 9.7 87.8 25.1 25.1 3.0 7.0 17.8 0.6 1.1 2.2
96 90 (2) (3) (3) (0.6) (0.6) nm (0.6) 6.6 80.7 nm nm 3.9 7.1 12.0 0.7 1.2 (0.7) (15.4) 8.3
94 87 (5) (5) (5) (1.1) (1.1) 95 (1.1) 7.4 72.2 nm nm 4.1 7.0 13.5 0.8 1.2 (1.5) (17.6) 8.6
599 326 / 236 26.4 6.0 5.0 37.4 1,154
ICB Industry : Financials ICB Sector: Equity Investment Instruments Principal Business: Provides leasing services on a long term bareboat charter basis to the international shipping industry. Currently owns a fleet of 23 vessels.
Source of all data: Company, DBS Vickers, Bloomberg
www.dbsvickers.com Refer to important disclosures at the end of this report ed: MY / sa: JC
Company Focus First Ship Lease Trust

Income Statement (US$ m)
FY Dec 2008A 2009A 2010F 2011F
Balance Sheet (US$ m)

FY Dec 2008A 2009A 2010F 2011F
Turnover Cost of Goods Sold Gross Profit Other Opng (Exp)/Inc Operating Profit Other Non Opg (Exp)/Inc Associates & JV Inc Net Interest (Exp)/Inc Exceptional Gain/(Loss) Pre-tax Profit Tax Minority Interest Preference Dividend Net Profit Net Profit before Except. EBITDA Sales Gth (%) EBITDA Gth (%) Opg Profit Gth (%) Net Profit Gth (%) Effective Tax Rate (%)
FY Dec
87 (63) 24 0 24 0 0 (19) 0 5 0 0 0 5 5 79 112.7 107.7 156.8 (23.5) N/A

2008A
99 (68) 31 0 31 0 0 (23) 0 8 0 0 0 8 8 92 14.0 17.0 28.5 74.6 N/A

2009A
96 (69) 27 0 27 0 0 (29) 0 (2) 0 0 0 (3) (3) 90 (2.4) (2.7) (13.2) NM N/A

2010F
94 (70) 24 0 24 0 0 (29) 0 (5) 0 0 0 (5) (5) 87 (2.5) (2.7) (9.0) 95.2 N/A
2011F
Net Fixed Assets Invts in Associates & JVs Other LT Assets Cash & ST Invts Inventory Debtors Other Current Assets Total Assets ST Debt Other Current Liab LT Debt Other LT Liabilities Shareholders Equity Minority Interests Total Cap. & Liab. Non-Cash Wkg. Capital Net Cash/(Debt)
906 0 0 27 0 0 0 933 0 45 509 0 378 0 933 (45) (483)
845 0 0 57 0 1 0 903 32 20 456 15 381 0 903 (18) (432)
782 0 0 53 0 2 0 838 32 17 424 15 350 0 838 (15) (403)
719 0 0 53 0 2 0 775 32 17 398 15 313 0 775 (15) (377)
Cash Flow Statement (US$ m)

Pre-Tax Profit Dep. & Amort. Tax Paid Assoc. & JV Inc/(loss) Chg in Wkg.Cap. Other Operating CF Net Operating CF Capital Exp.(net) Other Invts.(net) Invts in Assoc. & JV Div from Assoc & JV Other Investing CF Net Investing CF Div Paid Chg in Gross Debt Capital Issues Other Financing CF Net Financing CF Net Cashflow
Rates & Ratio

FY Dec 2008A 2009A 2010F 2011F
5 55 0 0 0 21 81 (354) 0 0 0 1 (353) (54) 350 0 (15) 281 8
8 61 0 0 (1) 24 92 0 0 0 0 0 0 (45) (21) 28 (25) (62) 30
(2) 63 0 0 (4) 0 57 0 0 0 0 0 0 (28) (32) 0 0 (60) (4)
(5) 63 0 0 0 0 58 0 0 0 0 0 0 (32) (26) 0 0 (58) 0
Quarterly / Interim Income Statement (US$ m)

FY Dec 2Q2009 3Q2009 4Q2009 1Q2010
Gross Margins (%) Opg Profit Margin (%) Net Profit Margin (%) ROAE (%) ROA (%) ROCE (%) Div Payout Ratio (%) Net Interest Cover (x) Asset Turnover (x) Debtors Turn (avg days) Creditors Turn (avg days) Inventory Turn (avg days) Current Ratio (x) Quick Ratio (x) Net Debt/Equity (X) Net Debt/Equity ex MI (X) Capex to Debt (%) Z-Score (X) N. Cash/(Debt)PS (US cts.) Opg CFPS (US cts.) Free CFPS (US cts.)
P/BV (x)
(x) 1.4 1.2 1.0 0.8 0.6 0.4 0.2
27.8 27.8 5.6 1.2 0.6 3.2 1,195.4 1.2 0.1 2.7 144.0 N/A 0.6 0.6 1.3 1.3 69.5 0.2 (96.3) 16.1 (54.5)
31.4 31.4 8.5 2.2 0.9 3.5 498.4 1.4 0.1 3.0 278.9 N/A 1.1 1.1 1.1 1.1 0.0 0.2 (72.1) 17.4 17.2
27.9 27.9 (2.6) (0.7) (0.3) 3.2 N/A 0.9 0.1 6.7 175.3 N/A 1.1 1.1 1.2 1.2 0.0 0.3 (67.4) 10.1 9.5
26.0 26.0 (5.3) (1.5) (0.6) 3.1 N/A 0.8 0.1 8.6 95.8 N/A 1.1 1.1 1.2 1.2 0.0 0.3 (63.0) 9.7 9.7
Turnover Cost of Goods Sold Gross Profit Other Oper. (Exp)/Inc Operating Profit Other Non Opg (Exp)/Inc Associates & JV Inc Net Interest (Exp)/Inc Exceptional Gain/(Loss) Pre-tax Profit Tax Minority Interest Net Profit Net profit bef Except. EBITDA Sales Gth (%) EBITDA Gth (%) Opg Profit Gth (%) Net Profit Gth (%) Gross Margins (%) Opg Profit Margins (%) Net Profit Margins (%)
25 (17) 8 0 8 0 0 (6) 0 2 0 0 2 2 23 0.1 0.3 0.8 52.9 31.8 31.8 9.4
25 (17) 8 0 8 0 0 (5) 0 3 0 0 3 3 23 (0.9) (1.1) (3.1) 16.6 31.0 31.0 11.1
24 (17) 8 0 8 0 0 (6) 0 2 0 0 2 2 23 (0.6) (0.1) (0.2) (34.1) 31.2 31.2 7.4
24 (17) 7 0 7 0 0 (7) 0 1 0 0 1 1 23 (0.2) (0.4) (3.4) (62.0) 30.2 30.2 2.8
Mar-07
Sep-07
Mar-08
Sep-08
Mar-09
Sep-09
Mar-10
Source: Company, DBS Vickers
Page 2
Singapore Company Focus
Singapore Telecom
Bloomberg: ST SP
Reuters: STEL.SI
5 May 2010
BUY S$2.96 STI : 2,901.18

Price Target : 12-month S$ 3.40 (Prev S$3.50) Reason for Report : 4QFY10F earnings preview Potential Catalyst: Special dividends Analyst Sachin Mittal +65 6398 7950 sachin@dbsvickers.com
Reversal of traditional role

Mature markets to outshine regional associates in 4Q10F a reversal of traditional role. SingTel may report 4Q10F profit of S$973m (+1% yoy, 2% qoq) in line with street expectations. Special dividends cannot be ruled out, in our view. FY11F earnings lowered by 2.5% due to weaker than expected Telkomsel. TP lowered to S$3.40 BUY quality blue chip at 12x PER (Hist. average 13.4x)
Price Relative
S$ 4 .4 0 200 3 .9 0 3 .4 0 2 .9 0 2 .4 0 1 .9 0 2006 180 160 140 120 100 80 2010 R e la tiv e In d e x 220
2007
2008
2009
Expect in line 4Q10 results on 13 May, despite weak associate numbers. Consensus has not caught up with the strong Singapore earnings (up 7% yoy) and Optus earnings (up 17% yoy in AUD) in 9M10, attributed to exclusive iPhone advantage in Singapore and decrease in debt & interest expenses at Optus. While we know that Bharti and Telkomsel are down sequentially in 4Q10F, Singapore and Optus should be up sequentially in a seasonally strong 4Q10F. Growth from regional associates and Optus. Despite potential single-digit earnings decline at Bharti, associate contribution should witness low-single digit growth, thanks to (i) lower losses at Warid, PBTL and (ii) single-digit earnings growth at Telkomsel, AIS. Optus earnings are expected to register single digit growth (in AUD terms) helped further by strong AUD. Singapore earnings may not grow due to high content costs and the launch of National Broadband Network. Special dividends cannot be ruled out with 4Q10F results. We believe that Bharti would manage its debt (for Zain acquisition) through free cash flow and listing of tower subsidiary Bharti Infratel (rather than raising equity at AirTel level). This leaves SingTel with the flexibility of paying out additional 8-10 Scents in special dividends, in our view.
S in g a p o re T e le co m (LH S)
R e la tive S T I IN D EX (R H S )

FY Mar (S$ m) 2009A 2010F 2011F 2012F
Turnover EBITDA Pre-tax Profit Net Profit Net Pft (Pre Ex.) EPS (S cts) EPS Pre Ex. (S cts) EPS Gth Pre Ex (%) Diluted EPS (S cts) Net DPS (S cts) BV Per Share (S cts) PE (X) PE Pre Ex. (X) P/Cash Flow (X) EV/EBITDA (X) Net Div Yield (%) P/Book Value (X) Net Debt/Equity (X) ROAE (%) Earnings Rev (%): Consensus EPS (S cts):
14,933 6,458 4,429 3,448 3,454 21.7 21.7 (6) 21.7 12.6 128.8 13.6 13.6 15.0 8.2 4.3 2.3 0.3 16.6
16,227 7,173 5,008 3,867 3,867 24.3 24.3 12 24.3 14.1 140.6 12.2 12.2 13.8 7.3 4.8 2.1 0.2 18.1 0.8 24.2
17,142 7,477 5,201 4,000 4,000 25.2 25.2 3 25.2 14.6 151.6 11.8 11.8 13.0 6.9 4.9 2.0 0.2 17.2 (2.5) 25.6
17,536 7,818 5,496 4,238 4,238 26.7 26.7 6 26.7 15.5 163.7 11.1 11.1 12.7 6.5 5.2 1.8 0.2 16.9 27.7
ICB Industry : Telecommunications ICB Sector: Telecommunications Principal Business: SingTel operates and provides telecommunication systems and services and engages in investment holdings.
At A Glance Issued Capital (m shrs) Mkt. Cap (S$m/US$m) Major Shareholders Temasek Holdings Pte Ltd (%) Capital Group Companies (%) Free Float (%) Avg. Daily Vol.(000)
15,932 47,160 / 34,147 54.1 4.9 41.0 16,023
Source of all data: Company, DBS Vickers, Bloomberg
www.dbsvickers.com Refer to important disclosures at the end of this report ed: JS / sa: JC
Company Focus Singapore Telecom
4Q10F earnings preview Underlying net profit (S$m) Singapore Associates 4Q09
365
3Q10 4Q10F yoy

343 360 -1%
qoq
5% 4Q is stronger QoQ due to lower promotions than 3Q. 4Q may be slightly weak YoY due to higher acquisition costs for mio TV and more iPhone related competition -9% Down QoQ due to (I) Bharti's net profit contribution declining 4% qoq to S$196m (ii) Telkomsel's contribution down 12% qoq at S$151m (iii) AIS contribution up 12% qoq at S$40m 0% 4Q is stronger QoQ due to lower promotions than 3Q. iPhone sales have helped Optus acquire high value customers -35% -2% Assuming stable yoy tax on dividends from associates.
418
460
418
0%
Australia Withholding Tax Total

Source: DBS Vickers
194 -18 959
210 -23 990
210 -15 973
8% -17% 1%
Strong Singapore and Optus performance to offset associate weakness. Consensus has not caught up with the strong 7% & 17% yoy growth in Singapore and Optus earnings in 9M10 respectively. This is clearly ahead of management guidance of low-single digit growth. Singapore growth can be attributed to early iPhone advantage. Optus growth can be attributed to a decrease in debt and interest expenses. Bharti & Telkomsels earnings were down 7% &14% sequentially with Telkomsel as the key disappointment. However, Singapore and Optus should be up sequentially as 4Q earnings are typically strong after festive promotions in 3Q.
Special dividends cannot be ruled out with 4Q10F results. Rather than raising equity at the Airtel level, Bharti may raise funding at its tower subsidiary Bharti Infratel, which could be public listed to pay for the debt raised for Zain acquisition. This should provide enough financial flexibility to SingTel. We do not rule out 8-10 cents in special dividends (2-3% yield) with 4Q10F results.
Estimated earnings contribution of Singapore, associates and Australia

Underlying net profit (S$m) Singapore Associates FY09 1245 1624 FY10F 1359 1847 FY11F 1360 1887 FY12F 1373 2088 Mobile and IT business growth should offset data business and pay TV weakness in FY11F & 12F Warid & PBTL losses should reduce to S$30m in FY11F from S$75 in FY10F. Bharti and Globe earnings decline in FY11F but recover in FY12F. Telkomsel should rebound in FY11F after recent disappointments 10% earnings growth in FY11F partly driven by 5% stronger AUD
Australia Withholding Tax
645 -51 3463
761 -100 3867
838 -85 4000
864 -85 4240
Source: DBS Vickers
Page 2

Barring Singapore, expect growth from Australia and associates. Market is very much aware that Singapore earnings may not grow in FY11F due to (i) weakness in the data business due to National Broadband Network and (ii) higher cost of English Premier League content. Regional associate earnings may grow by 2% yoy mainly driven by (i) 5% yoy earnings growth at Telkomsel which is expected to rebound in the next quarter (ii) Warid and PRTL losses reduced by S$45m despite 7-8% yoy decline in Bhartis net profit. Optus earnings in AUD may grow in low-single digits, helped by 5% stronger AUD/SGD exchange rate. AUD/SGD average exchange rate should be around 1.20 in FY10 compared to our 1.26 assumption in FY11.
Sum-of-the-parts valuation based on market price of listed associates

Company Basis SingTel's Stake Value of Stake (S$m) Contribution per share (S$) Percentage Contribution
SingTel + Optus Bharti Telkomsel Globe Thai associate Others SOTP Valuation
At DCF-based target price assuming 8.5% WACC (9.5% earlier) and 1% terminal growth rate. Consensus target price of INR 330 Valuation at 15x FY10 (Dec year) PER At consensus target price of PHP1065 per share At fair value of THB110 per share. Includes Singpost, and others 5% holding company discount (SingTel does not have absolute control over associates performance; currency risks) 10% holding company discount (reflecting higher risks) No holding company discount (reflecting improving regional currencies
100% 30.4% 35.0% 47.3% 21.5%
27,722 12,182 9,387 2,074 3039 719
1.75 (prev 1.60) 0.73 (Prev 0.65) 0.58 (prev 0.69) 0.12 0.20 0.04 3.42
50% 21% 19% 4% 6% 1%
3.34 3.50
Source: DBS Vickers
Historical 1-Year Forward PER

(S$) 4.50 18x 16x
Mean 13.4x +1 Dev 15.8x -1 Dev 8.7x
4.00
3.50
14x 12x
3.00
2.50
10x
2.00 05 06 07 08 09 10
Source: DBS Vickers
Page 3

Income Statement (S$ m)
FY Mar 2009A 2010F 2011F 2012F
Balance Sheet (S$ m)

FY Mar 2009A 2010F 2011F 2012F
Turnover Other Opng (Exp)/Inc Operating Profit Other Non Opg (Exp)/Inc Associates & JV Inc Net Interest (Exp)/Inc Exceptional Gain/(Loss) Pre-tax Profit Tax Minority Interest Preference Dividend Net Profit Net Profit before Except. EBITDA Sales Gth (%) EBITDA Gth (%) Opg Profit Gth (%) Net Profit Gth (%) Effective Tax Rate (%)
14,933 (1,641) 2,697 (24) 2,051 (288) (6) 4,429 (982) 0 0 3,448 3,454 6,458 0.6 (7.6) 1.9 (13.0) 22.2
2009A
16,227 (1,904) 2,963 (50) 2,364 (269) 0 5,008 (1,141) 0 0 3,867 3,867 7,173 8.7 11.1 9.9 12.2 22.8
2010F
17,142 (1,934) 3,101 (50) 2,400 (250) 0 5,201 (1,201) 0 0 4,000 4,000 7,477 5.6 4.2 4.6 3.4 23.1
2011F
17,536 (1,998) 3,142 (50) 2,636 (232) 0 5,496 (1,258) 0 0 4,238 4,238 7,818 2.3 4.6 1.3 6.0 22.9
2012F
9,784 7,931 11,746 1,076 107 2,575 37 33,255 1,427 3,676 5,668 1,984 20,464 24 33,243 (958) (6,019)
10,037 8,951 11,706 1,788 116 2,798 37 35,433 1,427 4,042 5,668 1,939 22,332 24 35,432 (1,092) (5,307)
10,268 9,850 11,721 2,457 122 2,956 37 37,411 1,427 4,267 5,668 1,939 24,089 24 37,414 (1,152) (4,638)
10,514 10,811 11,533 3,172 125 3,023 37 39,216 1,427 4,360 5,668 1,731 26,007 24 39,218 (1,175) (3,923)
Cash Flow Statement (S$ m)

FY Mar
Rates & Ratio

FY Mar 2009A 2010F 2011F 2012F
4,429 1,734 (335) (2,051) 441 (124) 4,094 (1,847) 0 (194) 1,068 (349) (1,322) (1,999) (466) 0 (603) (3,068) (296)
5,008 1,897 (503) (2,364) 26 (158) 3,906 (2,007) 0 0 813 0 (1,193) (2,000) 0 0 0 (2,000) 713
5,201 2,028 (610) (2,400) 19 (188) 4,050 (2,088) 0 0 952 0 (1,136) (2,243) 0 0 0 (2,243) 671
5,496 2,093 (652) (2,636) 8 (219) 4,090 (2,135) 0 0 1,083 0 (1,052) (2,320) 0 0 0 (2,320) 718
Opg Profit Margin (%) Net Profit Margin (%) ROAE (%) ROA (%) ROCE (%) Div Payout Ratio (%) Net Interest Cover (x) Asset Turnover (x) Debtors Turn (avg days) Creditors Turn (avg days) Inventory Turn (avg days) Current Ratio (x) Quick Ratio (x) Net Debt/Equity (X) Net Debt/Equity ex MI (X) Capex to Debt (%) Z-Score (X) N. Cash/(Debt)PS (S cts) Opg CFPS (S cts) Free CFPS (S cts)
18.1 23.1 16.6 10.1 7.0 58.0 9.4 0.4 62.7 122.7 4.4 0.7 0.7 0.3 0.3 26.0 4.3 (37.9) 23.0 14.1
18.3 23.8 18.1 11.3 7.5 58.0 11.0 0.5 60.4 120.2 4.3 0.9 0.8 0.2 0.2 28.3 4.0 (33.4) 24.4 12.0
18.1 23.3 17.2 11.0 7.4 58.0 12.4 0.5 61.3 120.8 4.3 1.0 1.0 0.2 0.2 29.4 4.1 (29.2) 25.4 12.4
17.9 24.2 16.9 11.1 7.1 58.0 13.6 0.5 62.2 122.8 4.4 1.1 1.1 0.2 0.2 30.1 4.1 (24.7) 25.7 12.3
Quarterly / Interim Income Statement (S$ m)

FY Mar 4Q2009 1Q2010 2Q2010 3Q2010
Turnover Other Oper. (Exp)/Inc Operating Profit Other Non Opg (Exp)/Inc Associates & JV Inc Net Interest (Exp)/Inc Exceptional Gain/(Loss) Pre-tax Profit Tax Minority Interest Net Profit Net profit bef Except. EBITDA Sales Gth (%) EBITDA Gth (%) Opg Profit Gth (%) Net Profit Gth (%) Opg Profit Margins (%) Net Profit Margins (%)
3,566 (387) 737 0 531 (52) (122) 1,094 (191) 0 903 1,025 1,681 (3.6) 9.0 10.8 13.0 20.7 25.3
3,848 (417) 686 0 647 (84) 0 1,249 (304) 0 945 945 1,775 7.9 5.6 (6.9) 4.7 17.8 24.6
4,103 (444) 685 0 606 (69) 4 1,226 (271) 0 955 951 1,755 6.6 (1.1) (0.1) 1.1 16.7 23.3
4,450 (463) 748 0 592 (75) 0 1,265 (275) 0 990 990 1,825 8.5 4.0 9.2 3.7 16.8 22.2
Page 4
Malaysia Company Focus
Digi.Com
Bloomberg: DIGI MK
Reuters: DSOM.KL
5 May 2010
HOLD RM22.68 KLCI : 1,342.89

Price Target : 12-Month RM 20.90 (Prev RM 21.60) Reason for Report : Revision of gearing assumption following 1Q10 Result Analyst Malaysia Research Team +603 2711 2222 general@hwangdbsvickers.com.my
Optimizing balance sheet

Annualized 1Q10 result is within expectation Optimal net gearing target of 54%-82% implies additional dividends and lower cash balance Hence, we cut DCF-based TP to RM20.90 from RM21.60 (no special DPS); total return (upside plus dividends) is mostly unchanged Maintain HOLD for total 7% net dividend yield
Price Relative
RM 28.40 Relative Index 266 246 23.40 226 206 18.40 186 166 146 13.40 126 106 8.40 2006 2007 2008 2009 86 2010
Digi.Com (LHS)
Relative KLCI INDEX (RHS)
1Q10 result in line. Digi reported net profit of RM278m (+13% q-o-q; +1% y-o-y) on the back of RM1.3b revenue (+3% q-o-q; + 6% y-o-y). EBITDA margin improved 2ppt q-o-q to 44.6% as a result of good cost management (lower network, traffic and staff costs). It has 77k mobile broadband customers (vs. c. 50k Dec09) and broadband coverage is c. 30% now. Margins should normalize in subsequent quarters. Price pressure and immediate recognition of handset subsidies (instead of capitalizing and amortizing) will keep margins low. We expect the launch of iPhone packages in Apr10 to raise 2Q10 revenue, but that would also mean higher handset subsidies and traffic costs. Our FY10F EBITDA margin assumption is unchanged at 43.6% vs. 44.6% in 1Q10. Higher dividends from higher debt. Maiden guidance on long term net gearing implies additional (special) dividends. Assuming mid-point target net gearing of 68%, we raised FY10F DPS by 58 sen (2.5% yield) and FY11F by 26 sen (1.1%), bringing total net yields to 7.4% (122% net payout) and 6.2% (98%), respectively. Digi announced a 35 sen net DPS (1.5% yield) yesterday. Net debt/EBITDA is comfortable at <0.4x, with capacity for further special dividends.
At A Glance Issued Capital (m shrs) Mkt. Cap (RMm/US$m) Major Shareholders Telenor (%) Employee Provident Fund (%) Time dotCom (%) Free Float (%) Avg. Daily Vol.(000) 778 17,634 / 5,493 49.0 10.2 7.1 33.7 387

FY Dec (RM m) 2009A 2010F 2011F 2012F
Turnover EBITDA Pre-tax Profit Net Profit Net Pft (Pre Ex.) EPS (sen) EPS Pre Ex. (sen) EPS Gth Pre Ex (%) Diluted EPS (sen) Net DPS (sen) BV Per Share (sen) PE (X) PE Pre Ex. (X) P/Cash Flow (X) EV/EBITDA (X) Net Div Yield (%) P/Book Value (X) Net Debt/Equity (X) ROAE (%) Earnings Rev (%): Consensus EPS (sen):
4,910 2,125 1,366 1,000 1,000 128.7 128.7 (15) 128.7 178.0 195.7 17.6 17.6 10.2 8.5 7.8 11.6 0.3 58.5
5,155 2,248 1,434 1,076 1,076 138.3 138.3 8 138.3 168.8 165.3 16.4 16.4 9.7 8.2 7.4 13.7 0.7 76.7 (1.6) 138.8
5,437 2,371 1,486 1,115 1,115 143.4 143.4 4 143.4 140.5 168.1 15.8 15.8 9.1 7.8 6.2 13.5 0.7 86.0 (1.9) 145.6
5,704 2,486 1,683 1,262 1,262 162.4 162.4 13 162.4 159.1 171.4 14.0 14.0 8.8 7.5 7.0 13.2 0.7 95.7 (2.2) 156.8
ICB Industry : Telecommunications ICB Sector: Mobile Telecommunications Principal Business: A Malaysia-focused GSM cellular operator.
Source of all data: Company, DBS Vickers, Bloomberg Recipients of this report, received from DBS Vickers Research (Singapore) Pte Ltd (DBSVR), are to contact DBSVR at +65 6398 7954 in respect of any matters arising from or in connection with this report.
In Singapore, this research report or research analyses may only be distributed to Institutional Investors, Expert Investors or Accredited Investors as defined in the Securities and Futures Act, Chapter 289 of Singapore. www.dbsvickers.com Refer to important disclosures at the end of this report ed: SGC / sa:WMT
Company Focus Digi.Com
Fig. 1: 1Q10 result review (Q-o-q comparison)

FY Dec (RMm) 1Q10 1Q09 % chg y-o-y 4Q09 % chg q-o-q Comments
Profit & Loss Revenue 1,290.4 1,218.4 5.9 1,247.6 3.4 Driven by 3% q-o-q increase in subscriber base to 7.9m as its prepaid Easy Plan gained traction. Meanwhile, blended ARPU eased 2% q-o-q to RM53. 209.9 (0.1) Network, traffic and staff costs eased 0.4ppt-0.7ppt each as Digi implemented cost management measures. 8.4 2.1 Y-o-y increase resulted from amortizing 3G spectra licence. 11.8 (12.2) 12.4 10.9 12.9 Lifted by lower network, traffic and staff costs.
Other income Operating expenses EBITDA Depreciation EBIT Net interest inc/(exp) Pre-tax profit Tax Net profit EBITDA margin (%) Tax rate (%) Subscribers (000) Prepaid Postpaid Total subscribers ARPU (RM) Prepaid Postpaid Blended
1.9 (716.4) 575.8 (190.7) 385.2 (6.7) 378.5 (100.2) 278.3 44.6 26.5
6.3 (681.2) 543.5 (165.1) 378.3 (5.9) 372.5 (97.0) 275.4 44.6 26.0
(70.2) 5.2 6.0 15.5 1.8 13.2 1.6 3.3 1.0
0.6 (717.0) 531.2 (186.8) 344.5 (7.6) 336.9 (90.4) 246.5 42.6 26.8
6,677 1,270 7,947
5,990 1,165 7,155
11.5 9.0 11.1
6,485 1,235 7,720
3.0 Easy Plan gained traction. 2.8 Expected to rise after Digi launched iPhone packages in Apr10. 2.9
48 82 53
50 84 56
(4.0) (2.4) (5.4)
48 83 54
0.0 (1.2) (1.9)
Source: Company, HwangDBS Vickers Research
Page 2
Fig. 2: Digi Cashflow Summary

FYE Dec (RMm) 3Q09 4Q09 1Q10 FY09A FY10F FY11F Comments
PBT Non-cash Interest expense Interest income Net change in working capital Interest paid Others Taxes paid Cashflows from operations Purchase of PPE & intangibles Interest received Others Cashflows from investing Net change in borrowings Dividends paid
333.2 262.4 10.1 (3.2) 51.3 (6.1) (52.9) (90.0) 504.9 (207.4) 3.1 0.0 (204.3) 300.0 (381.0)
336.9 265.5 11.3 (3.7) 89.7 (8.8) (51.4) (69.7) 569.8 (227.9) 3.8 0.1 (223.9) 49.7 (583.1)
378.5 252.6 10.2 (3.5) 59.1 (10.9) (52.4) (80.3) 553.4 (84.6) 3.2 0.2 (81.2) 200.0 (419.9)
1,366.5 750.5 78.9 (15.0) (17.4) (78.9) 67.7 (321.4) 1,830.9 (717.4) 13.6 0.2 (703.6) 523.5 (1,376.2)
1,434.1 820.3 78.1 (14.2) 72.0 (78.1) 52.3 (400.3) 1,964.2 (915.5) 15.0 0.0 (900.5) 360.4 (1,312.2)
1,486.4 736.7 79.8 (13.5) 67.8 (79.8) 196.8 (427.9) 2,046.3 (893.7) Additional capex to roll out 3G networks more aggressively in FY10F. 14.2 0.0 (879.5) (12.6) (1,092.5) Additional (special) dividends going forward, based on maiden guidance of target net gearing. (1,105.1) (20.4) 408.7 388.2
Cashflows from financing Net change in cashflows Beginning cash Ending cash
(81.0) 219.6 398.1 617.7
(533.4) (187.5) 617.7 430.2
(219.9) 252.3 430.2 682.5
(852.7) 98.9 331.3 430.2
(951.9) (21.5) 430.2 408.7
Source: Company and HwangDBS Vickers Research
Page 3

Fig. 3: Peer comparison - Valuations
Stock Indonesia (IDR) Indosat Telekomunikasi Indonesia Malaysia (MYR) Digi.Com Green Packet Axiata Maxis Telekom Malaysia Singapore (SGD) MobileOne Singapore Telecom Starhub Price Target Ratings EV/EBITDA CY09 CY10 CY11 6.3 5.0 6.0 4.8 5.6 4.4 Net Dividend Yield CY09 CY10 CY11 2.3 4.0 2.1 4.2 2.3 4.7 CY09 21.3 12.8 PE (x) CY10 23.7 12.9 CY11 21.9 11.4
5,900 7,850
5,400 10,000
Fully Valued Buy
22.68 0.96 3.89 5.32 3.49
20.90 1.75 4.20 5.60 3.45
Hold Buy Hold Hold Hold
8.5 n.m. 7.3 9.2 5.0
8.2 n.m. 6.4 8.3 5.2
7.8 20.5 5.7 7.7 5.0
7.8 0.0 0.0 4.6 33.7
7.4 0.0 0.0 5.1 5.6
6.2 0.0 0.6 5.5 5.6
17.6 (2.6) 28.0 16.4 20.4
16.4 (5.3) 19.1 14.7 24.3
15.8 (8.5) 16.7 13.6 24.7
2.12 2.96 2.30
2.28 3.40 2.06
Buy Buy Fully Valued
7.0 8.2 7.1
6.8 7.3 6.9
6.5 6.9 7.2
6.4 4.3 8.0
6.6 4.8 8.7
6.8 4.9 7.2
13.0 13.6 12.3
12.1 12.2 13.4
11.7 11.8 14.0
South Korea (KRW) LG Dacom LG Telecom SK Telecom Simple average
17,800 8,300 172,500
20,000 9,500 210,000
Hold Hold Buy
4.7 3.3 4.4 6.0
4.2 3.0 3.9 5.6
3.8 7.2 3.7 5.5
3.0 4.2 5.4
3.5 4.6 5.4
4.0 4.7 5.4
12.3 8.1 10.9 15.8
10.0 7.2 10.8 15.0
8.5 6.5 10.3 13.9
Source: Bloomberg, companies, DBS Vickers Research and HwangDBS Vickers Research
Fig. 4: Peer comparison - Gearing

Stock Indonesia (IDR) Indosat Telekomunikasi Indonesia Malaysia (MYR) Digi.Com Green Packet Axiata Maxis Telekom Malaysia Singapore (SGD) MobileOne Singapore Telecom Starhub Price EBITDA margin CY09 CY10 CY11 47.7% 53.9% 48.4% 52.9% 49.5% 53.4% Net gearing (x) CY09 CY10 CY11 1.2 0.3 1.3 0.2 1.4 0.1 Net Debt/EBITDA (x) CY09 CY10 CY11 2.6 0.4 2.6 0.3 2.5 0.1
5,900 7,850
22.68 0.96 3.89 5.32 3.49
43.3% (48.7%) 42.9% 50.4% 36.0%
43.6% (6.0%) 43.0% 50.4% 33.4%
43.6% 12.8% 43.2% 50.0% 34.0%
0.3 0.3 0.5 0.4 0.4
0.7 2.1 0.4 0.3 0.4
0.7 4.2 0.3 0.2 0.4
0.2 n.m. 1.8 0.9 1.0
0.4 n.m. 1.2 0.7 1.0
0.4 12.1 0.9 0.5 1.0
2.12 2.96 2.30
38.7% 43.2% 30.4%
35.1% 44.2% 30.3%
35.1% 43.6% 29.5%
0.9 0.3 5.7
0.8 0.2 7.1
0.5 0.2 19.7
0.7 0.9 1.0
0.7 0.7 1.0
0.5 0.6 1.1
South Korea (KRW) LG Dacom 17,800 19.1% 19.5% 19.6% 7.4 LG Telecom 8,300 18.3% 18.7% 8.4% 22.3 SK Telecom 172,500 33.4% 34.2% 32.8% 25.5 Source: Bloomberg, companies, DBS Vickers Research and HwangDBS Vickers Research
5.6 15.6 18.4
1.1 22.0 10.3
0.4 0.7 1.0
0.3 0.5 0.6
0.0 1.8 0.3
Page 4

Income Statement (RM m)
FY Dec 2009A 2010F 2011F 2012F
Balance Sheet (RM m)

FY Dec 2009A 2010F 2011F 2012F
Turnover Other Opng (Exp)/Inc Operating Profit Other Non Opg (Exp)/Inc Associates & JV Inc Net Interest (Exp)/Inc Exceptional Gain/(Loss) Pre-tax Profit Tax Minority Interest Preference Dividend Net Profit Net Profit before Except. EBITDA Sales Gth (%) EBITDA Gth (%) Opg Profit Gth (%) Net Profit Gth (%) Effective Tax Rate (%)
4,910 (722) 1,393 0 0 (27) 0 1,366 (366) 0 0 1,000 1,000 2,125 2.0 (2.8) (10.1) (12.3) 26.8
5,155 (741) 1,498 0 0 (64) 0 1,434 (359) 0 0 1,076 1,076 2,248 5.0 5.8 7.5 7.5 25.0
5,437 (811) 1,550 0 0 (64) 0 1,486 (372) 0 0 1,115 1,115 2,371 5.5 5.4 3.5 3.6 25.0
5,704 (727) 1,750 0 0 (66) 0 1,683 (421) 0 0 1,262 1,262 2,486 4.9 4.9 12.9 13.2 25.0
2,896 0 962 441 13 420 0 4,732 150 1,876 772 413 1,521 0 4,732 (1,443) (481)
3,130 0 894 419 14 441 0 4,898 510 1,957 772 374 1,285 0 4,898 (1,502) (863)
3,273 0 825 399 14 466 0 4,977 498 2,061 772 339 1,307 0 4,977 (1,581) (871)
3,475 0 757 379 15 488 0 5,115 526 2,178 772 307 1,332 0 5,115 (1,674) (919)
Cash Flow Statement (RM m)

FY Dec 2009A 2010F 2011F 2012F
Rates & Ratio

FY Dec 2009A 2010F 2011F 2012F
1,366 1,017 (347) 0 (138) (244) 1,655 (717) 0 0 0 14 (704) (1,376) 523 0 0 (853) 99
1,434 750 (321) 0 (17) (15) 1,831 (916) 0 0 0 15 (901) (1,312) 360 0 0 (952) (22)
1,486 820 (400) 0 72 (14) 1,964 (894) 0 0 0 14 (879) (1,093) (13) 0 0 (1,105) (20)
1,683 737 (428) 0 68 (14) 2,046 (870) 0 0 0 14 (857) (1,237) 28 0 0 (1,209) (19)
Opg Profit Margin (%) Net Profit Margin (%) ROAE (%) ROA (%) ROCE (%) Div Payout Ratio (%) Net Interest Cover (x) Asset Turnover (x) Debtors Turn (avg days) Creditors Turn (avg days) Inventory Turn (avg days) Current Ratio (x) Quick Ratio (x) Net Debt/Equity (X) Net Debt/Equity ex MI (X) Capex to Debt (%) Z-Score (X) N. Cash/(Debt)PS (sen) Opg CFPS (sen) Free CFPS (sen)
28.4 20.4 58.5 21.3 36.8 138.3 51.6 1.0 31.3 258.5 2.7 0.4 0.4 0.3 0.3 77.8 6.3 (61.9) 230.6 120.6
29.1 20.9 76.7 22.3 38.8 122.0 23.4 1.1 30.5 246.1 2.2 0.4 0.3 0.7 0.7 71.4 5.6 (111.0) 237.7 117.7
28.5 20.5 86.0 22.6 39.7 98.0 24.3 1.1 30.4 247.9 2.3 0.3 0.3 0.7 0.7 70.4 5.2 (112.0) 243.4 137.7
30.7 22.1 95.7 25.0 44.8 98.0 26.4 1.1 30.5 236.2 2.2 0.3 0.3 0.7 0.7 67.1 5.2 (118.1) 254.5 151.2
Quarterly / Interim Income Statement (RM m)

FY Dec 2Q2009 3Q2009 4Q2009 1Q2010
Segmental Breakdown / Key Assumptions

FY Dec 2009A 2010F 2011F 2012F
Turnover Other Oper. (Exp)/Inc Operating Profit Other Non Opg (Exp)/Inc Associates & JV Inc Net Interest (Exp)/Inc Exceptional Gain/(Loss) Pre-tax Profit Tax Minority Interest Net Profit Net profit bef Except. EBITDA Sales Gth (%) EBITDA Gth (%) Opg Profit Gth (%) Net Profit Gth (%) Opg Profit Margins (%) Net Profit Margins (%)
1,205 (189) 331 0 0 (7) 0 324 (89) 0 234 234 521 (1.1) (4.0) (12.6) (14.9) 27.4 19.5
1,239 (187) 340 0 0 (7) 0 333 (89) 0 244 244 528 2.8 1.3 2.9 4.1 27.5 19.7
1,248 (186) 344 0 0 (8) 0 337 (90) 0 246 246 531 0.7 0.5 1.3 1.0 27.6 19.8
1,290 (189) 385 0 0 (7) 0 379 (100) 0 278 278 576 3.4 8.4 11.8 12.9 29.8 21.6
Revenues (RM m) Wireless Wholesale Others Total Key Assumptions Total subscribers (000s) ARPU (RM) EBITDA Margin % Capex (RMm)
4,847 0 63 4,910 7,720.0 54.7 43.3 717.4
5,093 0 63 5,155 8,621.7 51.9 43.6 915.5
5,375 0 63 5,437
5,641 0 63 5,704
9,483.9 10,432.3 49.5 47.2 43.6 43.6 893.7 870.4
Page 5
Hong Kong / China Market Focus
Strategy Update
DBS Group Research . Equity 4 May 2010
Awaiting a breakthrough
Hang Seng Index to stay at 19,500 - 23,000 pending breakthrough catalysts. Stock market illiquidity and volatility worsen as catalysts becoming mixed Defensive strategy for long-funds, ie yield and PRC supportive sectors
HSI : 21,109
ANALYST Derek Cheung (852) 2971 1703 derek_cheung@hk.dbsvickers.com
Key Indices
Current 21,109 1,711 4,591 2,474 3,997 12,181 -1 Mth % -0.6% -0.9% -1.5% 0.8% -2.5% -1.7%
Range-trading. We believe Hang Seng Index would continue to stay within the 19,500-23,000 range. Before any breakthrough either on the upside or downside, market turnover will remain relatively low, worsening the market volatility. The author continues to believe the market will likely break through on the downside, expecting a material (>30%) correction. Investors not buying when valuation becomes reasonable?! It is interesting to note that many investors are standing on the sidelines even though the Hang Seng Index PER has fallen back to the more reasonable level of 14x, taking into account the consensus 24.6% 2010 profit growth expectation. Unlike in 2009, investors piled in despite very high valuations expecting strong profit growth (from low base). Major swing factors. Breakthrough will likely come from (1) sustainability of US recovery; (2) development of Euro zone debt crisis; (3) China liquidity and economic policies; (4) crystallization of consensus profit forecast; (5) USD outlook; (6) Rmb exchange rate outlook Defensive strategy. We like Link REIT (823 HK), Giordano (709 HK), Gome (493 HK) and Yue Yuen (551 HK) for yields, lower multiples and/or for being relatively insulated from the continuous tightening policies. For large cap stocks, Cheung Kong (1 HK), Hang Seng Bank (11 HK) and China Telecom (728 HK) will likely outperform the broader market. We believe Hongkong Land (HKL SP) should underperform within the next two weeks.
Hang Seng Index HS Large Cap HS Mid Cap HS Small Cap HS China Aff HS China Ent
Market Key Data

(%) HSI HSCCI (Red) HSCEI (H) (x) HSI HSCCI (Red) HSCEI (H) 09E 17.5 19.7 15.9 09E 12.7 7.4 22.5 EPS Gth 10F 24.6 23.4 31.0 PER 10F 14.1 15.9 12.2 Div Yield 09E 10F 2.8 3.1 1.7 2.0 2.2 2.9
11F 15.8 15.2 18.4 11F 12.2 13.8 10.3
11F 3.6 2.2 3.5
EV/EBITDA 09E 10F 11F 8.7 7.1 6.4 n.a. n.a. n.a. n.a. n.a. n.a.
Source: DBSV, Bloomberg
In Singapore, this research report or research analyses may only be distributed to Institutional Investors, Expert Investors or Accredited Investors as defined in the Securities and Futures Act, Chapter 289 of Singapore. www.dbsvickers.com Refer to important disclosures at the end of this report ed-JS / sa- TW
Market Focus Strategy Update
Market Data
Index Hang Seng HS China Ent HS China Aff HS Large Cap HS Mid Cap HS Small Cap Transactions: Volume (bn shs) Value (HK$bn) Close 30-Apr-10 21,109 12,181 3,997 1,711 4,591 2,474 YTD 9,588 5,227 Chng Net 1 m -131 -216 -105 -15 -69 19 -1 m th (%) -1 -2 -3 -1 -1 1 -3 m th (%) 4 5 2 4 8 9 -6 mth (%) -3 -5 -1 -2 3 8 - 12 m th (%) 36 34 22 39 47 84 52-Week High 23,100 13,863 4,457 1,849 4,872 2,554 Low 15,204 8,980 3,224 1,196 3,053 1,324
Source: Bloomberg
Hang Seng Index breakthrough factors For any stock market breakthrough, we have to monitor the following factors closely : US sentiment improving US stock market has hit record high driven by positive economic data, corporate results and probably significant amount of capital fleeing for safety from the Euro zone, which is reflected in the strong USD versus Euro and Pound Sterling. The sustainability of these trends will be a major potential factor for breaking through the HSI trading range. The financial market reforms in the US would also be a swing factor. Euro zone debt crisis It is generally believed the sovereign debt problems among some of the Euro zone countries will be resolved although the situation seems to be getting worse. No one has the crystal ball to predict how this crisis will end, but it is certainly a major swing factor for the stock market. Chinas determination to cool off The Chinese government has continuously introduced new measures to cool its property market in the past few weeks. For details, please see the series of notes issued by our China property analyst, Carol Wu, in April 2010. Through the share price performance of the China property developers and the actions of various developers, many still believe this time is no different from the numerous failed attempts in the past to stabilize the property market. In view of the very strong economic growth, noticeably higher inflation, improved sentiment towards US economic outlook and concern about property market rally affecting social stability, we believe the
Central Governments determination to cool the market is stronger than what many believe. Some quarters expect that the tightening policies on the property market would drive liquidity to flow from real estate into equities. We believe any such liquidity movement would not be significant enough to drive up the stock market as these commentaries assume the abundant overall market liquidity will remain a constant, which obviously would not be the case. China banks: Required Reserve Ratio
x 20.0 18.0 16.0 14.0 12.0 10.0 8.0 6.0 4.0 2.0 0.0 Jan-06 Aug-06 Aug-07 Aug-08 Aug-09 Aug-10 May-06 Dec-06 Dec-07 Dec-08 Dec-09 Apr-07 Apr-08 Apr-09 Apr-10 %
Required Reserve Ratio (RHS)
Source: Bloomberg, PBOC, DBS Vickers
Page 2
China loan growth

2008: 4,904 2009: 9,577 2010F: 7,250 1Q10 : 2,600 (36% of total) 2Q10F: 2,175 (30% of total) 3Q10F: 1,450 (20% of total) 4Q10F: 1,025 (14% of total) 1,900 1,700 1,500 1,300 1,100 900 700 500 300 100 (100) (300) (500) (RMBbn)
as probably a significant amount of liquidity has been fleeing to safety by buying USD fixed income and equity products. USD vs HS Index
1/DXY Index 0.0140 24,000 22,000 20,000 18,000 0.0125 16,000 0.0120 0.0115 0.0110 J an-09 F eb-09 Mar-09 Apr-09 May-09 J un-09 J ul-09 S ep-09 Oct-09 Nov-09 Dec-09 J an-10 F eb-10 Apr-10 DXY Index (LHS ) HS I (R HS ) 14,000 12,000 10,000
1,892
0.0135
1,530
1,390
0.0130
1,070 592 1,617 665
804 243 283 464 319 332 382 272 375 182 477 772
356 410
253 295 380
700 510
517
Source: Bloomberg
Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08 Jul-08 Aug-08 Sep-08 Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09 Nov-09 Dec-09 Jan-10 Feb-10 Mar-10
Hedge funds looking at >30% Rmb appreciation The Rmb speculation has cooled off as nothing happened following US Treasury Secretary Geithners visit to China. The consensus is expecting Rmb to appreciate ~3% as reflected in the Rmb Non-deliverable Forwards. Based on our understanding, many hedge funds are expecting >30% Rmb appreciation in the next few years. For more analysis, please see page 12 for the English translation of the authors commentary published in the Hong Kong Economic Times on 19 April 2010. Top picks
Retail Medium/LT & other enterprise Discounted bills ST enterprise loans
` Source: CEIC, DBS Vickers
Strong consensus profit growth The consensus is expecting 24.6% profit growth for Hang Seng Index constituent stocks in 2010, a major swing factor for the stock market. However, we dont have a crystal ball to tell if this will materialise. Unlike in 2009 when YoY growths would almost certainly be significant due to low base. Our China Property analyst believes the consensus profit forecast for many Chinese property companies will be cut in view of the expected slower sales and lower property prices. USD strength The non-stop decline in the USD was basically the key stock market driver for 2009. HS Index performed exactly in line with the inverse of USD exchange rate in 2009. This driving force will unlikely repeat in 2010 in view of underlying problem with Euro, the higher interest rate of USD versus JPY and the proactive actions of the US Government to support USD probably for refinancing of its sovereign debts. The recent outperformance of USD hasnt brought its stock market down
We like Link REIT (823 HK), Giordano (709 HK), Gome (493 HK) and Yue Yuen (551 HK) for yields, lower multiples and/or for being relatively insulated from the continuous tightening policies. For large cap stocks, Cheung Kong (1 HK), Hang Seng Bank (11 HK) and China Telecom (728 HK) will likely outperform the broader market. Being major outperformers, we believe Hong Kong landlords, including Hongkong Land (HKL SP), should underperform within the next two weeks.
Page 3
April Review Hang Seng Index continued its strength in 1H April for the same factors that drove the market rally since February: Western China drought Strong A-share market for strong economy, margin financing and index futures trading Expectation of ~12% GDP growth to be reported Lack of new policies after two congress sessions Agricultural Bank IPO Expected Rmb appreciation after US softened its tone Strong US market for recovery story and low interest rate expectation Speculation that USD is peaking
16,000 14,000 12,000 10,000 8,000 6,000 4,000 Apr-09 HSCEI
HS Index & HSCEI Past 1 year

24,000 22,000 20,000 18,000 16,000 14,000 12,000 Apr-09 HSI
250-day MA
50-day MA
Jul-09
Oct-09
Jan-10
Apr-10
250-day MA
Hang Seng Index fell from 22,157 to the current 21,109 after disappointment on Rmb appreciation speculation and the continuous new tightening measures to cool off its property market. HSI Sectors Performance - 1M
50-day MA
Jul-09
Oct-09
Jan-10
Apr-10
Source: Bloomberg
Source: DBS Vickers, Bloomberg
Page 4
Recent significant macro data China
Foreign currency reserve assets of Hong Kong amounted to US$258.8bn at the end of March, an increase of US$600m from a month earlier. Earnings upgrades/downgrades
Retail sales rose 17.9 % YoY to RMB3.6374 trillion during the first quarter, urban consumption hit RMB3.06 trillion, up 18.4% YoY while rural spending was up 15.4% to RMB580.3bn. China's industrial output increased 19.6 % YoY in the first quarter of 2010. The industrial output of State-owned enterprises and the State-owned businesses was up 20% while that for foreign-invested businesses was up 19%. Fiscal revenue rose 34% to RMB1.96 trillion in the first quarter. Revenue was up 36.8% YoY to RMB602.3bn in March. GDP grew 11.9% in the first quarter YoY, up 5.7 percentage point from same period last year and that China's GDP totalled RMB8.05trillion in the first three months. Foreign direct investment was up 7.7 % YoY to US$23.44bn in the first quarter. Foreign exchange reserves was US$2.4471 trillion at the end of March, representing a 25.25% increase YoY. M2 was up 22.5% while M1 was up 30% in March YoY. Trade deficit was recorded in March, the first time in six years. Exports was up 24.3% YoY at US$112.11bn while the imports was up 66% YoY to US$119.35bn, resulting in a trade deficit of US$7.24bn. Hong Kong Composite CPI rose 2% in March YoY, slightly larger than the average rate of increase in January and February (1.9%). Netting out the effects of all government's oneoff relief measures, the year-on-year rate of increase in the Composite CPI in March was 0.8%, same as the average rate of increase in January and February Volume of total exports of goods increased by 21.2% YoY in March. The volume of imports of goods increased by 29.2% in February 2010, the volume of total exports of goods increased by 24.8%. Concurrently, the volume of imports of goods increased by 20.5%. Seasonally adjusted unemployment rate decreased from 4.6% in December 2009 - February 2010 to 4.4% in January - March 2010. Meanwhile, the underemployment rate increased slightly from 2.1% to 2.2%.
Our analysts have upgraded the earnings of Shipping and Auto sectors based on a mid-cycle outlook, which is consistent with our regional strategists outlook. On the other hand, this month is probably the first time in many months we see earnings downgrades in some sectors. Earnings upgrade Hang Seng Index constituents
2010F Earnings Current -1m HK$m HK$m 182,036 182,073 16,627 16,393 18,873 19,117 78,550 79,036 39,630 38,965 42,645 42,846 378,362 378,430 Chg % 0.0 1.4 -1.3 -0.6 1.7 -0.5 0.0
Banking and Finance Comm/Ind Hongs/Conglomerates Power, Infra & Utilities Properties Telecom Total
Earnings upgrade HSCEI Index constituents

2010F Earnings Current -1m HK$m HK$m 2,931 2,528 48,047 48,074 102,092 102,694 654 648 1,434 1,307 5,436 5,394 412 412 12,663 11,405 2,205 1,024 4,159 4,521 1,858 1,858 181,891 179,864 Chg % 16.0 -0.1 -0.6 1.0 9.8 0.8 0.0 11.0 115.3 -8.0 0.0 1.1
Consumer Energy Financials Industrial Goods Information Technolgy Materials Pharma & Healthcare Property & Construction Services Telecom & Technology Utilities Total
Page 5
Aggregate earnings for HSI
Hang Seng Index PE Band
HK$m Banking and Finan Comm/Ind Hongs/Conglomera Power, Infra & Utili Properties Telecom HSI Total
2009 131,892 11,362 20,323 63,564 35,031 41,429 303,600
09F % Chg
2010
10F % Chg 38 24 13 -7 46 3 25
2011 106,650 9,988 9,620 33,933 14,609 19,134 193,934
11F % Chg 23 9 1 22 27 3 16
34,000 22x 29,000 24,000 19,000 14,000 9x 9,000 4,000 J an-99 S ep-99 May-00 J an-01 S ep-01 May-02 J an-03 S ep-03 May-04 J an-05 S ep-05 May-06 J an-07 S ep-07 May-08 J an-09 S ep-09 May-10 19x 15x 12x
16 84,948 -2 8,121 15 9,213 205 32,138 51 14,218 -11 18,653 13 167,292
After the latest round of earnings review based on our regional strategists outlook, DBS expects 25% and 31% 2010 earnings growth for component stocks in the HS Index and HSCEI respectively. Aggregate earnings for HSCEI
09F % 2009 Chg 2,592 39,028 78,686 597 1,038 1,701 278 10,185 -457 3,368 1,868 138,885 61 18 24 -9 254 -37 44 38 -110 513 -307 23 10F % 2010 Chg 2,931 48,049 102,092 654 1,434 5,436 412 12,661 2,205 4,289 1,858 182,021 13 23 30 10 38 220 48 24 -583 27 -1 31 11F % 2011 Chg 3,319 54,037 122,193 703 1,829 6,763 565 15,040 3,255 5,435 2,196 215,335 13 12 20 7 28 24 37 19 48 27 18 18
Source: Datastream, DBS Vickers
HK$m Consumer Energy Financials Industrial Goods Info Technolgy Materials Pharm/Healthcare Ppty/Construction Services Telecom/Tech Utilities HSCEI
Normally used as a benchmark for bottom-fishing in a bear market, HS Index FY09 PBV is now trading at 1.83x, versus 5year and 10-year averages of 1.93x and 1.94x respectively. Hang Seng Index PBV Band
41,000 36,000 31,000 26,000 21,000 16,000 3.1x 2.6x 2.1x 1.6x 1.1x Jan-99 Aug-99 Mar-00 Oct-00 May-01 Dec-01 Jul-02 Feb-03 Sep-03 Apr-04 Nov-04 Jun-05 Jan-06 Aug-06 Mar-07 Oct-07 May-08 Dec-08 Jul-09 Feb-10
Valuations The Hang Seng Index and HSCEI are now trading at 14.1x and 12.2x FY10 PER, assuming 25% and 31% profit growth in 2010 respectively. These are versus 5-year, 10-year and 20-year HSI average PER of about 14-15x and the 19x in 1997, 2000 and 2007 bubbles. Assuming the forecast earnings growth of 16% for HS Index and 18% for HSCEI in 2011 is achievable, 2011 PER for HSI and HSCEI would then be 12.2x and 10.3x respectively. Interestingly, investors are not buying when Hang Seng Index PER has fallen to more reasonable level assuming the consensus profit forecasts are achievable.
11,000 6,000
Source: Datastream, DBS Vickers
Page 6
Hang Seng China Enterprises Index PE Band
Hang Seng forward PE (consensus)
30,500 25,500 20,500 15,500 10,500 5,500 500 Dec-08 Mar-07 May-08 Dec-01 Jul-02 Feb-03 Sep-03 Nov-04 Jun-05 Jan-06 Aug-06 Apr-04 Jul-09 Feb-10 Oct-07 28x 23x 18x 13x 7x
x
25 20 15 10 5 0 J an-80 J an-82 J an-84 J an-86 J an-88 J an-90 J an-92 J an-94 J an-96 J an-98 J an-00 J an-02 J an-04 J an-06 J an-08 J an-10 Average: 13.6x
Source: Bloomberg, DBS Vickers
Source: DBS Vickers
HSCEI PER and PBV are now at 15.9x and 2.3x, versus the respective averages of 17.2x and 1.74x since its inception in 2001. Hang Seng China Enterprises Index PBV Band
Hang Seng forward PBV (consensus)

(x) 3.5 3.0 +2SD +1SD Mean -1SD -2SD 1.0 0.5
30,500 25,500 20,500 15,500 10,500 1.6x 5,500 500 0.6x Jan-01 Aug-01 Mar-02 Oct-02 May-03 Dec-03 Jul-04 Feb-05 Sep-05 Apr-06 Nov-06 Jun-07 Jan-08 Aug-08 Mar-09 Oct-09 May-10 4.5x 3.6x 2.6x
2.5 2.0 1.5
0.0 1993 1995 1997 1999 2001 2003 2005 2007 2009
Page 7
Source: Bloomberg Source: Bloomberg, DBS Vickers
Economic Indicators
2006A China GDP Growth (%) FDI (US$bn) Exports (yoy %) Retail Sales (yoy %) CPI (yoy %) Hong Kong GDP Growth (%) CPI (yoy %) 11.6 73 27 13.7 1.5 7.0 2.0 2007A 13.0 84 26 16.8 4.8 6.4 2.0 2008A 9.6 108 17 21.6 5.9 2.1 4.3 2009F 8.7 90 -15.8 15.5 -0.7 -2.7 0.5 2010F 11.0 100 15 16.5 4.0 5.5 3.0 2011F 10.0 120 18 17.0 3.0 4.5 3.0
Source: DBS Economics Research
Valuation HSI
Index 30-Apr Finance Power, Infrastructure & Utilities Properties Hongs/Conglomerates Com m/Ind Telecom HSI HSCCI 21109 Earnings Growth (%) 09E 10F 11F 16 -2 15 205 51 -11 13 7 38 24 13 -7 46 3 25 23 23 9 1 22 27 3 16 15 PE (x) 10F 13.3 13.6 14.6 17.3 24.5 12.0 14.1 15.9 Yield (%) 09E 10F 11F 3.1 2.7 2.3 2.7 1.5 3.5 2.8 1.7 3.5 3.0 2.5 2.8 2.0 3.6 3.1 2.0 4.4 3.2 2.5 2.9 2.4 3.7 3.6 2.2
09E 18.4 16.9 16.5 16.1 35.9 12.3 17.5 19.7
11F 10.8 12.5 14.4 14.2 19.4 11.7 12.2 13.8
Source: DBS Vickers

Valuation HSCEI
30-Apr Consumer Energy Financials Industrial Goods Information Technolgy Materials Pharmac eutic al & Healthcare Property & Construction Services Telecom & Technology Utilities 09E 61 18 24 -9 254 -37 44 38 -110 519 -307 10F 13 23 30 10 38 220 48 24 -583 24 -1 11F 13 12 20 7 28 24 37 19 48 29 18 09E 16.7 13.3 15.1 16.8 35.0 54.0 84.0 13.4 -156.5 19.4 13.0 10F 14.8 10.8 11.6 15.3 25.4 16.9 56.8 10.8 32.4 15.6 13.0 11F 13.1 9.6 9.7 14.3 19.9 13.6 41.4 9.1 21.9 12.1 11.0 09E 0.8 2.5 2.5 1.6 0.5 0.9 0.9 1.5 0.9 1.6 4.4 10F 0.7 3.2 3.3 1.9 0.6 1.9 0.4 2.1 1.0 2.3 4.3 11F 0.8 3.5 4.1 2.0 0.7 2.2 0.6 2.5 1.3 3.0 5.0
HSCEI
12181
23
31
18
15.9
12.2
10.3
2.2
2.9
3.5
Source: DBS Vickers
Page 8
Sector Strategy
prepare for all these, developers need to explore different funding channels, including bond market. Is 13% coupon rate too high? The coupon rate often depends on rating, maturity, bond size, and track record of issuers. As recent bonds issuances from some developers, such as Evergrande and Kaisa, have seen their coupon rates reaching13% or above, many investors are concerned over the financial positions of these developers. If we factor in RMB appreciation, long maturity, savings from withholding tax, the effective interest rate for 13% coupon bonds may be c.10%. Unless developers can secure loans from domestic or overseas banks, paying a coupon rate of 13% may be still doable compared to an interest rate of at least 18% from private capital. Yet, we believe such high coupon rate will add significant financial burden to developers if the bond size is large. For example, Evergrande has to pay more than RMB 1.2bn a year in interest expenses for the bonds it just raised. There have been reports in the past few months that some smaller developers have to borrow from finance companies, which are mostly illegal in China, at very high interest rates. Sell into strength. We believe the operating environment has turned much more difficult for developers compared to 2009 as government intensifies its effort to cool down the sector. Developers with high net debt ratio, such as Greentown and Guangzhou R&F, may suffer more than developers with strong cash positions and capability to obtain cheaper capital. We suggest investors to sell on any rebound. We suggest only long funds to buy strong players and commercial plays on dips. We favour China Overseas (688 HK), CR Land (1109 HK), Franshion (817 HK), and SOHO China (410 HK). Franshion and SOHOs commercial property focus implies lower policy risk to impact their growth ahead. Consumer Retail sales in China sustained 17.9% y-o-y growth to reach RMB3.6 trillion in 1Q10, up 2.9ppt against the same period last year and ran in line with expectations of 17.5% growth for full-year 2010. Sales from enterprises above designated size grew strongly by 29.6% to RMB1.3 trillion in 1Q10. Spectacular growth was seen in government-supported industries, including automobiles (up 39.8%) and home appliances & audio-visual products (up 29.6%). The boom in real estate since 2Q09 also continued to report strong deliveries of new properties, indirectly supporting a 37.6% increase in furniture sales.
We like Link REIT (823 HK), Giordano (709 HK), Gome (493 HK) and Yue Yuen (551 HK) for yields, lower multiples and/or for being relatively insulated from the continuous tightening policies. For large cap stocks, Cheung Kong (1 HK), Hang Seng Bank (11 HK) and China Telecom (728 HK) will likely outperform the broader market.
Being major outperformers, we believe Hong Kong landlords, including Hongkong Land (HKL SP), should underperform within the next two weeks. China Banking According to our Banking analyst, higher down-payment requirement and mortgage rates for second/multiple homebuyers are neutral to slightly positive to banks' earnings & risk management. Banks' earnings are more sensitive to NIM than volume. Our simple estimate showed banks' earnings can be boosted slightly by 1% with 3bps NIM improvement being offset by 1% reduction in overall loans. Admittedly, property prices in tier one cities are unaffordable. We believe this is the right policy by the Central government to pre-empt further expansion of the asset bubble in China. Hence, this helps in bringing a long-term positive implication to Chinese banks asset quality. Our positive view remains intact, though short-term sentiment may remain subdued. Valuation remains attractive with benefits from potential RMB appreciation and interest rate hike in 2Q10. Our top-pick remains China Construction Bank (939 HK). China Property - Eight developers tapped the overseas bond market. In April, eight developers issued or are proposing to issue senior notes with coupon rates ranging from 8.9% to 13.5%. It highlights the urgency of developers to improve their cash position. Liquidity for developers is getting tight. While most developers are in a rich cash position, it does not mean there is no crisis ahead. Sales may slow faster than expected. Banks are turning selective in issuing loans. Not much flexibility is given for delay of land premium payment. Settlement of land appreciation tax may be accelerated. Trust loans, a channel that a growing number of developers use to fund their operations, may be included into the loan quota set by PBOC. If implemented, it will get more difficult for developers to obtain trust loans due to quota limit. Moreover, there may be more attractive acquisition opportunities ahead as the market slows down. To
Page 9
Overall, most major consumer segments continue to expect an optimistic business outlook ahead. Upcoming 1Q10 results should reveal some strong performances across major operators on improving sentiment. The impending World Expo event (May-Oct10) could also likely uphold regional consumption amid expectations of more tourist spending in Greater Shanghai area. We continue to stay positive across the China consumer sector. We like Gome (493.HK) for its benefits from supportive governement subsidies to drive consumption of the home appliance sector, Want Want (151.HK) for its pickup in rice crackers and robust beverage sales; Golden Eagle (3308.HK) for its robust growth momentum, as well as New World Dept Store (825.HK) and Beijing Jingkelong (814.HK) for their undemanding valuation and decent growth prospects. China retail sales
R MB bn 1,400 1,200 1,000 800 600 400 200 0 J an-07 MarMayJ ul-07 S epNovJ an-08 MarMayJ ul-08 S epNovJ an-09 MarMayJ ul-09 S epNovJ an-10 Mar% 35 30 25 20 15 10 5 0
coming months. The Tung Chung and Fanling sites up for auction should fit in with their business models. In our view, NAV growth will be driven by land bank expansion rather than further price appreciation. It is because further housing price rally could prompt the government to introduce more policies that may eventually lead to a market correction. Upcoming project launches as share catalysts. The launches of The Hermitage in Tai Kok Tsui and Larvotto in Ap Lei Chau could boost sentiment towards Sino Land (83 HK) and Kerry Properties (683 HK), which are our preferred plays in the coming months. K.Wah International (173 HK) appears undervalued, with the planned launch of the Shiu Fai Terrace project as a key share price catalyst. But increasing policy risk in China remains a share overhang given its Shanghai property exposure. Oil As expected, the crude price has lifted its trading range between US$80-90 a barrel in 2Q10, driven by 1) the continuous low interest rate environment in the US; 2) the anticipation of oil demand recovery on higher global GDP targets and 3) easing concern over the Europe government debt crisis. As a result of the higher crude price, China has raised the retail price of gasoline and diesel by Rmb320/tonne and jet fuel price by Rmb500/tonne on 14th April, which should improve the refining margin in 2Q10. The compliance of government in following the new pricing mechanism, despite the inflation concern, should send a positive sign for the upcoming natural gas price reform. In 2Q10, positive share price catalysts should come from the following aspects: 1) natural gas price reform in 1H10, which will benefit Petrochina (857 HK) the most; 2) Rmb appreciation where Sinopec will be the largest beneficiary. Major risk factors will come from the possible new natural resource tax that will increase oil companies tax burden. However, we expect the new natural resource tax impact should be offset by the natural gas price reform and possible upward adjustment of the threshold for the current special levy. In terms of valuation, Sinopec (386 HK) remains our long-term pick given its attractive valuation discount to the sector peers. Despite the over-supply risk from the refining and chemical markets in 2H10, the injection of more assets from parent will improve its earnings visibility. Telecoms The telcos posted better than expected subscriber (subs) figures in March, which suggests that they have
C hina R etail S ales
Yoy % growth
Source: CEIC,
HK Property - More land for private residential development. The government has been raising land supply, especially those for small-to-medium sized units, in recent months. We estimate that over 11,000 units could be built on the sites sold over the past six months. Two more sites scheduled for auction in May, could provide another 3,000 units. With more land sales, housing supply should return to normal levels after three to four years. This should raise hopes for a soft landing as prospective homebuyers could gradually realise this change and adjust home purchase behaviour. Property developers should also speed up their home sales to strengthen financial muscle for acquisitions, thus moderating housing price growth. NAV growth to be driven by land banking, not price appreciation. We expect property giants SHKP (16 HK) and Cheung Kong (1 HK) to expedite their land purchase in the
Page 10
enhanced efforts in 3G promotion. China Mobile (941 HK) (CM) added 5.971m mobile subs, including 3.41m net add in 3G network subs. Though the figure includes its wireless home phone subs (ARPU at the level of traditional fixed-line), the figure is still well above expectation and suggests that CM has achieved initial success in migrating its 2G subs to 3G services. This will reduce market concern over CM losing high-end 2G subs to rivals. Meanwhile, this also suggests that CMs 3G network is better than what the market has believed. China Telecom (728 HK) (CT) added 3.3m mobile subs, the highest level since it acquired the mobile business in mid-08. Looking ahead, we believe CT should be able to sustain 3m-plus net adds in the coming months, given that it is going to launch a series of high-end 3G handset models in May. This should be a driver for its mobile subs growth. China Unicom (762 HK) (CU) added 759,000 3G subs and 873,000 2G subs (better than expected). However, the 3G subs growth is not surprising, and it is still not fast enough to trigger a forecast revision. Overall, our view is not changed on the sector. CT remains our top pick, which we still like for its attractive valuation. We are still concerned with the earnings downside risks with CU. We remain positive on the equipment sector. After the recent pullback in share prices (especially ZTE) following the telcos announcing capex cuts, valuation is more attractive. Most companies are giving better-than-expected guidance on growth outlook. ZTE (763 HK) aims to become a top tier global equipment vendor with revenue in the range of USD30bnUSD40bn in five years. Combas (2342 HK) management is very confident in overseas expansion, given that it has made
breakthroughs in three big markets including the US (AT&T), India (Reliance) and South America (Telefonica etc.). CCS (552 HK) also surprised the market by guiding double-digit revenue growth and improving gross margin in the coming few years. As the largest wholesale provider of the Chinese telcos international telecom traffic, Citic 1616 (1883 HK) is a major beneficiary of the Shanghai Expo. As such, we have maintained our buy calls on all the four companies. We favor ZTE and Comba for their sustainable growth outlook, while we also like CCS and Citic 1616 for attractive valuations. Toll Road - More wheels hitting the roads. The number of motor vehicles in China increased by 23% in 2009 to 63mn by end 2009, growing at 16% CAGR from less than 15mn in 1999. As a result, we have seen highway traffic volumes in China growing at 29% and 23% respectively for passenger traffic and freight traffic in 1Q10. 1Q10 auto sales up 72%. The strong momentum of auto sales continued in 2010, with 4.6mn units sold in 1Q10, up 72% yo-y, as the Chinese government has extended most of the related stimulus policies into 2010. We believe the continued increase in auto sales ensures rosy prospects for the long-term growth of highway traffic volumes. An imminent catalyst - Shanghai World Expo. The event will last from May to October 2010, expecting to attract 70m visitors to the city. Jiangsu Expressway (177 HK) and Zhejiang Expressway (576 HK) are expected to benefit from the event, as their key assets serve as major gateways to Shanghai.
Page 11
The speculation of further Rmb appreciation would also attract Appendix - Hedge funds looking at >30% Rmb appreciation liquidity from overseas investors for Hong Kong assets given there are still capital account and foreign exchange controls in (Hong Kong Economic Times 19 April 2010) China and it may not be easy for to invest in China directly. Hong Kong Dollar assets are well perceived to be a close proxy 2%-3% appreciation. Why bother? for Rmb assets given the close ties between the two economies. This is coupled with relatively tight supply, strong balance As speculated in various news reports and Rmb Nonsheets of Hong Kong people and the persistent abnormally low deliverables Forwards, the market is basically universally interest rate. expecting 2%-3% Rmb appreciation this year. If this is what the market is really looking at, I have to say this is the last chance to get out of both the equity and property market because (1) 2-3% appreciation is insignificant versus the eg equity market rally so far for this theme and (2) Rmb appreciation speculation may then cool off for a few months probably until US mid-term election becomes a hot topic. Some expect US$1:Rmb4.00 Based on the authors understanding, material numbers of overseas hedge funds have been expecting a very significant Rmb appreciation (vs USD) to say USD1.00:Rmb4.00 from the current US$1.00:Rmb6.80, implying 70% appreciation in the next few years. A major international broker also speculated a few years back that Rmb exchange rate will rise to US$1.00:Rmb5.00, implying 36% upside. Any Rmb appreciation, no matter how small, will only reinforce these speculations more, attracting more believers globally, and in turn bringing in more hot money for Rmb or Rmbrelated assets. No liquidity shortage for Rmb or Rmb-related asset market Investment market is always forward looking. Unless the government clamps the property market down with administrative measures, which current consensus view believes is unlikely for its significant implications on overall economy while global economy has yet to be on a firm recovery path, asset market will continue to be supported by the global liquidity expecting significant amount of currency appreciation. Hong Kong property market an immediate beneficiary Hong Kong will import inflation should Rmb appreciate given its heavy reliance on China for supplies. The stronger Rmb purchasing power would also boost up demand from Mainlanders for Hong Kong properties as Hong Kong assets would immediately become cheaper from their perspective. As we all know, the sharp rebound of Hong Kong property market has been supported substantially by Rmb liquidity. Given the increasing linkage between Hong Kong and China, the cheaper Hong Kong dollar products from Mainlanders perspectives also mean the Hong Kong economy will be a beneficiary that will also support its property market. The biggest risk factor for Hong Kong property market is the liquidity tightening in China while impact from 2%-3% Rmb appreciation is not significant fundamentally. All assume immaterial impact on Chinese economy The author doesnt buy the argument that Rmb appreciation would benefit Chinese economy, eg through consumption. Economy will almost certainly be dampened by the resulting weaker exports, which in turn will affect genuine consumption. The recent trade deficit data was materially driven by PRC government investment, higher commodity/oil import prices, rather than consumption. The impact from the say 2%-3% appreciation shouldnt be material, but the speculated US$1.00:Rmb5:00 exchange rate may have significant negative impact on overall economy and then property market, which the author doesnt believe would happen given the Chinese government fully understands the implications from the Japanese experience and still have full control over its exchange rate. Chinese property market Rmb exchange rate not the issue The risk factor for Chinese property market is the policy risk, not Rmb exchange rate. Assuming any Rmb appreciation is mild and orderly, which will be the likely scenario, housing price would still be on upward trend given the strong genuine demand, strong economy, still abundant liquidity and relatively not-so-much new primary market supply. However, the current housing price level is truly beyond the reach of most people, which put social stability at risk and it is generally believed more measures will be introduced to ensure a stable housing market. The Government will also continue to tighten in terms of ways for global liquidity to invest in property market.
Page 12
Some argue the stronger Rmb would mean smaller upward pressure for housing prices. The Chinese property market should be affected by domestic factors (theoretically not global arbitrage liquidity) given the foreign exchange and capital account controls. The resulting weaker housing market would come from weaker economy, eg through weaker exports, which the Government shouldnt want to see. China is still not a free market driven economy, it can easily instruct the banks to tighten lending to the bubble sectors, eg property, without the need to raise interest rate or exchange rate, which would in turn would attract more hot
money, which is not an outcome the Central Government would like to see. The Government has been trying hard to use market tools to regulate the economy. If this initiative fails, administrative measures would be introduced. Bottomline The author believes many will likely be disappointed about the amount and pace of Rmb appreciation given this is not in the national interest of Chinese economy.
Page 13
DBSV HK UNIVERSE: EARNINGS GUIDE

Stock Code Company FYE 3988 3328 998 939 3968 1988 1398 Banking and Finance (China) Bank of China * Bank of Communications * China CITIC Bank * China Construction Bank * China Merchants Bank * China Minsheng Bank * ICBC * Sector Banking and Finance (HK) Bank of China HK * Bank of East Asia * Dah Sing Financial * Hang Seng Bank * HK Exchanges & Clearing * HSBC Holdings * ICBC Asia * Wing Hang * Sector Basic Materials Angang Steel * China BlueChem * China Shenhua Energy * Maanshan I & S * Yanzhou Coal Sector Conglomerates-HK Wharf Holdings * # Wheelock * Sector Consumer Goods Automobiles and Parts Brilliance China * Denway Motors * Dongfeng Motor Group * Geely Automobile * Sector Food and Beverages China Foods * China Green % * China Mengniu % China Yurun * Kingway Brewery Tingyi Holding * Tsingtao Brewery * Vitasoy* Want Want China * Sector Dec Dec Dec Dec Dec Dec Dec Mkt Cap HK$bn 305 203 62 1,420 75 28 472 2,564 197 57 12 205 138 1,377 26 23 1,838 13 9 114 7 41 170 115 49 243 Mkt Cap US$m 39,270 26,087 8,020 182,931 9,602 3,651 60,773 330,333 25,442 7,353 1,504 26,353 17,805 177,355 3,356 3,010 236,735 1,656 1,106 14,623 906 5,273 21,908 14,793 6,256 31245 price (HK$) 3-May 4.01 8.78 5.02 6.32 19.06 8.24 5.68 12-m target (HK$) 5.00 10.30 6.20 7.80 22.50 8.10 7.00 % upside 24.7 17.3 23.5 23.4 18.0 (1.7) 23.2 % chng 3m 6m 12m 4 (9) 9 (5) (10) (16) 4 (4) 4 (0) 4 n.a. (3) (8) Av 6m daily T/O (m shs) Net Profit (HK$m) 10F 11F 121,683 47,672 20,933 161,147 30,520 15,332 190,105 587,393 16,439 3,163 1,163 15,103 5,549 82,002 2,244 1,596 127,259 5,966 1,593 41,149 2,568 6,762 52,072 6,335 4,056 18,921 139,811 58,414 27,052 193,395 40,201 19,282 226,548 704,704 18,726 3,725 1,436 17,234 6,125 115,205 2,657 2,067 167,176 7,619 2,137 49,922 3,406 8,155 63,621 6,898 4,695 20,857 CAGR EPS 09-11 (HK$) 10F 11F (%) 0.48 0.85 0.55 0.71 1.50 0.70 0.57 0.55 1.04 0.69 0.85 1.86 0.87 0.68 23 22 28 28 31 10 25 PER (x) 10F 11F 8.4 10.4 9.2 8.9 12.7 11.8 10.0 9.2 12.0 18.2 10.0 13.5 25.0 16.9 11.6 14.8 16.0 14.4 14.0 16.1 12.2 15.2 15.5 18.1 12.0 15.6 7.3 8.5 7.2 7.4 10.2 9.5 8.4 7.7 10.5 15.7 8.1 11.9 22.6 12.1 10.2 11.4 12.3 11.2 10.5 13.3 9.2 12.6 12.6 16.6 10.3 14.1 EV/EBITDA P/BV # P/Sales (x) (x) (x) 10F 11F 10F 10F n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 1.5 1.8 1.4 2.0 2.6 1.6 2.1 n.a. n.a. n.a. n.a. n.a. n.a. n.a. Div Yield (%) 10F 11F 5.2 3.1 2.6 4.5 1.8 1.3 4.4 6.9 3.8 3.3 5.4 2.4 1.6 5.3 Latest Reported Data (%) Gear ROA ROE n.a. n.a. n.a. n.a. n.a. n.a. n.a. 1.0% 1.0% 1.1% 1.2% 1.0% 0.8% 1.2% 17% 19% 13% 21% 21% 15% 19% Disclosure Legend
Rcmd B B B B H H B
Analyst Jasmine Lai Jasmine Lai Jasmine Lai Jasmine Lai Jasmine Lai Jasmine Lai Jasmine Lai
38 1,485.3 39 489.0 41 268.3 40 2,264.5 88 666.6 n.a. 194.0 27 1,818.9
2388 23 440 11 388 5 349 302
Dec Dec Dec Dec Dec Dec Dec Dec
18.68 28.10 44.85 107.00 128.30 79.00 19.76 79.20
22.00 34.65 53.00 130.00 145.00 91.00 22.20 81.50
17.8 23.3 18.2 21.5 13.0 15.2 12.3 2.9
B B B B H H B B
10 2 17 (2) (6) (8) 23 14
3 5 3 (4) (6) (8) 9 5
69 51 97 24 42 44 98 72
258.0 76.7 14.7 224.0 652.7 2,083.6 28.8 42.9
1.55 1.54 4.47 7.90 5.14 4.68 1.71 5.36
1.77 1.79 5.52 9.01 5.67 6.51 1.94 6.95
17 13 51 14 14 57 0 31
n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.
1.8 1.3 0.9 3.3 16.4 1.3 1.3 1.7
5.4 3.3 0.0 5.9 3.6 3.0 4.2 1.2
6.2 3.8 0.0 6.7 4.0 4.1 5.3 4.0
1.2% 0.0% 0.7% 1.9% 8.7% 0.2% 1% 1%
15% 0.1% 6% 26% 61% 5% 16% 10%
Jasmine Lai Jasmine Lai Jasmine Lai Jasmine Lai Jasmine Lai Jasmine Lai Jasmine Lai Jasmine Lai
Note 2
347 3983 1088 323 1171
Dec Dec Dec Dec Dec
11.84 4.85 33.40 4.06 20.90
13.70 5.87 41.00 5.10 22.70
15.7 21.0 22.8 25.6 8.6
H B B H B
(17) (16) (4) 17 (1) (6) (13) (13) 31 72
26 17 54 27 185
258.8 41.5 692.1 119.7 355.1
0.82 0.35 2.07 0.33 1.37
1.05 0.46 2.51 0.44 1.66
198 38 18 176 31
7.2 7.0 8.8 4.0 8.7
5.9 5.2 7.1 3.2 7.0
1.3 1.8 3.0 1.0 2.7
0.8 2.8 4.3 0.4 3.2
3.5 2.1 2.2 4.1 2.0
4.5 2.8 2.6 5.4 2.4
57% cash 5% 36% cash
1% 8% 11% 1% 22%
1% 10% 20% 1% 27%
E Y Lee / P H Ho Rachel Miu J Ng / P H Ho E Y Lee / P H Ho J Ng / P H Ho
4 20
Dec Dec
41.70 23.90
50.50 31.65
21.1 32.4
B B
5 12
(0) (2)
62 42
21.9 21.9
2.30 2.00
2.50 2.31
-6 3
13.0 7.6
12.8 6.9
0.8 0.8
6.2 11.3
2.4 0.5
2.4 0.5
23% 58%
4% 1%
7% 4%
Jeff Yau Jeff Yau
1114 203 489 175
Dec Dec Dec Dec
14 34 31 25 90 16 8 41 42 3 108 25 6 79 327
1,853 4,351 4,039 3,169 11559 2,011 6,240 5,225 5,349 364 13,890 3,219 778 10,212 47288
2.88 4.49 10.98 3.36
2.80 4.56 14.90 4.40
(2.8) 1.5 35.7 31.0
B H B H
35 (3) 3 (8)
77 15 17 24
405 37 88 220
112.4 153.3 375.8 281.9
809 2,638 8,054 1,791 12,482 769 584 1,624 1,915 69 3,532 1,629 280 3,015 13,419
976 2,895 9,131 2,055 14,081 1,102 685 2,100 2,339 95 4,167 1,830 315 3,799 16,433
0.16 0.35 0.93 0.24
0.20 0.39 1.06 0.28
n.a. 15 13 20
17.8 12.8 11.7 13.7 13.2 20.3 15.5 25.0 20.6 40.8 30.5 31.6 21.5 26.3 25.7
14.7 11.7 10.4 12.0 11.6 14.2 13.3 19.3 16.8 29.6 25.9 28.2 19.1 20.8 20.9
7.3 nm 4.5 8.6
6.4 nm 3.7 7.1
2.2 1.9 2.5 2.8
5.6 13.0 0.8 9.5
0.0 2.3 0.9 1.3
0.0 2.3 1.0 1.7
cash cash cash cash
-11% 17% 9% 13%
-30% 17% 25% 27%
Rachel Miu Rachel Miu Rachel Miu Rachel Miu
506 904 2319 1068 124 322 168 345 151
Dec Apr Dec Dec Dec Dec Dec Mar Dec
5.59 9.24 23.35 23.55 1.65 19.30 38.15 5.93 6.00
7.90 9.56 28.00 27.50 1.45 17.80 37.20 5.20 6.50
41.3 3.5 19.9 16.8 (12.1) (7.8) (2.5) (12.3) 8.3
B H B B H H H H Review
(18) 4 (6) (0) 10 7 0 10 15
(2) 38 4 39 29 8 20 28 23
49 48 68 155 94 104 89 73 54
34.7 28.9 177.2 427.0 1.5 67.1 63.7 6.9 74.3
0.28 0.59 0.94 1.14 0.04 0.63 1.21 0.28 0.23
0.39 0.70 1.21 1.40 0.06 0.75 1.35 0.31 0.29
39 15 25 13 76 18 12 20 25
11.2 8.5 13.1 15.2 8.7 14.0 15.4 11.4 19.2
7.9 7.0 10.0 12.0 7.2 11.9 13.5 10.2 15.0
2.5 2.4 3.6 4.0 0.9 8.0 4.8 4.5 8.7
0.8 3.7 1.1 2.3 1.6 2.3 2.2 2.0 4.5
1.8 1.8 0.8 1.4 0.0 1.6 0.5 4.1 3.2
2.7 1.8 1.0 1.7 0.0 1.9 0.6 4.4 4.1
cash cash cash cash 6% cash cash cash cash
5% 13% -9% 16% -1% 12% 18% 11% 21%
11% 19% -20% 26% -1% 29% 18% 17% 32%
T Wu / A Hui Rachel Miu Alice Hui A Hui / T Wu Alice Hui Alice Hui Alice Hui Alice Hui A Hui / T Wu
DBSV Universe 1 of 5

Stock Code Company FYE 1044 494 2331 3828 1868 321 1386 551 Household/Personal Hengan * Li & Fung * Li Ning * Ming Fai * Neo-Neon * Texwinca * Walker Group * Yue Yuen * Sector Consumer Services Retailers Aeon Stores * Beijing Jingkelong * % Esprit Holdings * Giordano * Glorious Sun * Golden Eagle ~ Gome Elec Appliances * Lianhua Supermarket * Lifestyle * New World Dept Stores * Oriental Watch * Parkson * Sa Sa * Times Ltd Wumart * Sector Media Next Media * Pico Far East * TVB * Sector Travel & Leisure Ajisen China * Air China Cafe de Coral * Cathay Pacific * China Eastern Airline China Southern Airlines HK & Shanghai Hotels Little Sheep * Sector Dec Dec Dec Dec Dec Mar Mar Sep Mkt Cap HK$bn 73 143 32 2 5.1 11 1 46 312 3 2 70 6 4 30 38 5.8 25 11.2 1 35 9 5 9 251 3 2 16 21 9 37 11 64 15 10 18 4 167 Mkt Cap US$m 9,385 18,405 4,071 255 658 1,451 115 5,895 40234 409 210 9,042 709 468 3,831 4,946 747 3,185 1,442 99 4,456 1,113 603 1,095 32,355 432 230 2,009 2670 1,131 4,756 1,374 8,189 1,936 1,282 2,326 571 21565 price (HK$) 3-May 59.75 37.70 30.10 3.30 5.58 8.44 1.43 27.75 12-m target (HK$) 72.00 50.40 34.65 2.30 8.39 8.15 0.72 27.90 % upside 20.5 33.7 15.1 (30.3) 50.4 (3.4) (49.7) 0.5 % chng 3m 6m 12m 12 22 6 18 18 39 113 173 (11) 8 19 26 1 74 15 22 84 71 88 267 230 78 198 61 Av 6m daily T/O (m shs) 124.5 284.9 76.5 22.8 27.1 11.8 0.8 145.0 Net Profit (HK$m) 10F 11F 2,399 5,067 1,307 98 200 977 1 3,777 13,827 273 216 5,010 326 297 1,065 2,238 714 1,135 570 97 1,288 387 185 667 14,468 270 179 906 1,354 377 3,666 505 4,011 1,077 1,283 615 238 11,773 2,944 7,041 1,603 125 355 1,114 38 4,101 17,322 282 255 5,774 359 339 1,378 2,904 850 1,311 707 128 1,665 457 219 855 17,481 284 220 1,064 1,568 496 3,715 588 5,159 1,581 800 729 318 13,385 CAGR EPS (HK$) 09-11 10F 11F (%) 1.97 1.34 1.25 0.16 0.22 0.74 0.002 2.29 2.41 1.86 1.53 0.21 0.39 0.84 0.061 2.49 17 43 22 14 41 14 n.a. 7 PER (x) 10F 11F 30.4 28.1 24.1 20.2 25.5 11.5 685.1 12.1 22.2 14.2 18.3 13.8 16.9 12.2 27.4 16.8 24.4 21.7 19.7 7.4 26.8 22.2 25.3 34.0 17.9 12.4 10.0 15.5 14.1 23.3 28.0 20.9 15.8 45.0 25.0 29.4 18.6 21.3 24.7 20.2 19.7 15.8 14.3 10.1 23.3 11.2 17.8 11.3 18.7 12.2 15.3 10.7 21.2 12.9 20.5 18.8 15.8 5.6 20.7 18.8 21.4 26.9 14.9 11.8 8.1 13.7 12.9 17.7 27.6 18.0 12.3 40.7 40.1 24.8 13.9 18.0 EV/EBITDA P/BV # P/Sales (x) (x) (x) 10F 11F 10F 10F 21.0 21.1 14.4 10.8 13.6 7.3 13.9 8.8 16.9 15.9 11.7 8.4 8.6 6.3 8.9 7.9 7.2 7.4 8.1 2.4 1.5 2.4 1.3 1.8 5.5 0.1 0.2 2.1 3.1 1.1 0.8 1.1 Div Yield (%) 10F 11F 2.1 2.8 1.7 2.0 1.0 5.7 0.0 3.7 2.6 4.0 2.0 2.5 1.7 6.5 1.1 4.0 Latest Reported Data (%) Gear ROA ROE 3% 13% cash cash cash 11% cash 23% 13% 8% 20% 9% 4% 15% 14% 9% 21% 22% 40% 12% 6% 26% 20% 17% Disclosure Legend
Rcmd B B B B B H H H
Analyst Patricia Yeung Patricia Yeung Alice Hui Patricia Yeung Patricia Yeung Alice Hui Alice Hui Patricia Yeung
984 814 330 709 393 3308 493 980 1212 825 398 3368 178 1832 8277
Dec Dec Jun Dec Dec Dec Dec Dec Dec Jun Mar Dec Mar Dec Dec
12.20 8.96 54.85 3.69 3.43 15.32 2.55 28.00 14.74 6.64 1.97 12.32 6.21 5.36 16.78
14.20 10.34 64.00 3.25 3.13 18.41 3.66 28.77 14.47 8.80 2.10 12.45 5.96 5.58 15.03
16.4 15.4 16.7 (11.9) (8.7) 20.2 43.5 2.8 (1.8) 32.5 6.6 1.1 (4.0) 4.1 (10.4)
H B H H H B B H H B B H H H H
(7) 22 (5) 47 22 8 (6) 20 8 (3) 19 (4) 16 0 21
(9) 57 10 92 41 14 9 73 18 (3) 30 (1) 62 0 28
24 193 17 132 72 145 153 204 98 52 95 25 140 225 142
0.3 7.4 301.6 13.1 6.8 50.9 246.1 26.8 21.1 10.0 1.9 76.9 32.7 n.a. 21.4
0.86 0.49 3.97 0.22 0.28 0.56 0.15 1.15 0.68 0.34 0.27 0.46 0.28 0.21 0.49
1.08 0.48 4.51 0.24 0.32 0.72 0.20 1.37 0.79 0.42 0.35 0.59 0.33 0.25 0.62
25 8 9 12 12 29 30 21 17 14 6 27 20 18 24
8.8 8.4 9.2 9.0 4.5 15.2 7.0 9.5 13.5 8.4 7.3 15.5 15.1 12.1 17.7
7.0 7.5 8.1 7.8 n.a. 11.5 4.5 8.0 10.7 7.7 6.3 11.7 12.8 10.9 13.9
2.4 2.6 4.4 2.6 1.8 13.0 2.4 5.3 3.6 2.3 0.5 6.7 7.4 2.8 5.3
0.4 0.2 2.0 1.2 0.6 11.0 0.7 0.6 0.8 5.6 0.3 6.5 0.7 0.8 1.3
3.2 2.3 5.2 4.7 4.9 2.0 1.2 1.4 1.9 2.3 2.2 1.7 4.1 1.2 1.2
3.9 2.7 6.0 5.2 5.6 2.6 1.5 1.7 2.2 2.8 2.9 2.2 4.8 1.4 1.5
cash 73% Cash cash cash cash cash cash 9% cash 3% cash cash cash cash
7% 3% 35% 11% 27% 14% 4% 3% 9% 12% 11% 9% 21% 5% 7%
20% 11% 46% 16% 4% 41% 14% 20% 19% 19% 15% 27% 28% 11% 19%
Mavis Hui Mavis Hui Alice Hui Alice Hui Alice Hui Mavis Hui Mavis Hui Mavis Hui Mavis Hui Mavis Hui Mavis Hui Mavis Hui Mavis Hui Mavis Hui Mavis Hui
Note 2
282 752 511
Mar Oct Dec
1.39 1.49 35.60
1.15 2.00 37.20
(17.3) 34.2 4.5
FV B H
26 (3) (1)
39 3 (2)
35 104 29
3.2 4.5 24.1
0.11 0.15 2.30
0.12 0.18 2.59
5 33 17
5.0 4.3 9.1
6.0 3.3 7.9
1.0 1.7 2.5
1.1 0.7 3.7
0.0 5.0 3.5
0.0 6.2 4.1
cash cash cash
11% 10% 12%
15% 21% 14%
Mavis Hui Mavis Hui Mavis Hui
538 753 341 293 670 1055 45 968
Dec Dec Mar Dec Dec Dec Dec Dec
8.22 8.38 19.06 16.16 4.30 4.01 12.28 4.31
8.50 4.46 18.00 17.52 1.60 1.58 13.12 5.00
3.4 (46.8) (5.6) 8.4 (62.8) (60.6) 6.8 16.0
H H H B FV FV B B
17 23 22 94 11 12 20 31 57 106 45 77 12 14 12 (3)
113 128 32 80 226 119 108 43
11.3 168.2 12.3 89.3 79.1 112.2 5.3 3.2
0.35 0.30 0.91 1.02 0.10 0.16 0.42 0.23
0.46 0.30 1.06 1.31 0.11 0.10 0.50 0.31
26 10 15 5 -6 11 41 34
11.0 4.1 12.1 7.8 n.a. 8.5 n.a. 10.3
8.1 n.a. 10.4 6.8 n.a. 3.0 n.a. 7.5
3.3 3.5 4.1 1.4 3.7 2.4 0.6 3.3
3.3 1.7 2.1 0.9 0.6 0.5 4.1 2.0
1.9 0.0 3.8 2.5 0.0 n.a. 0.9 2.2
2.5 0.0 4.4 2.5 0.0 n.a. 1.2 2.9
cash 237% cash 62% cash 541% 6% cash
12% -10% 17% 4% -22% -6% 3% 13%
14% -36% 19% 12% 303% -50% 4% 21%
T Wu / A Hui Paul Yong Alice Hui Paul Yong Paul Yong Paul Yong Ken Chen T Wu / A Hui

Stock Code Company FYE 1800 1186 390 1766 3311 Construction and Materials China Comm Construction * China Railway Construction * China Railway Group * China South Locomotive * China State Construction * Sector Industrial AMVIG * China Automation * China High Speed * Cosco International * Huabao * Lee and Man Paper * Nine Dragons * Solargiga Energy * Sector Infrastructure, Environmental Beijing Enterprises Water * % China Everbright Intl * New Environmental Energy % Tianjin Cap Environmental * Sector Insurance China Life * China Pacific Insurance PICC Ping An Sector Oil & Gas CNOOC * PetroChina * Sinopec * Sector Pharmaceuticals & Healthcare China Pharmaceutical * China Shineway * Guangzhou Pharm * Mingyuan Medicare * Shandong Weigao * Sino Biopharmaceutical * Sinopharm Group * Sector Power (China) China Resources Power * Datang Intl * Huaneng Power * Sector Power, Infra & Utilities CLP Holdings * HK & China Gas HK Electric * Cheung Kong Infrastructure Sector Dec Dec Dec Dec Dec Mkt Cap HK$bn 32 20 23 12 8 94 5 6 23 7 28 32 61 3 165 11 14 2 1.0 28 261 75 25 169 531 618 189 103 911 9 19 2 3 16 16 25 90 73 11 14 97 132 123 98 65.710 419 Mkt Cap US$m 4,124 2,522 2,900 1,538 1,033 12,117 684 817 3,025 852 3,648 4,069 7,797 379 21,271 1,430 1,787 205 127 3,548 33,646 9,670 3,250 21,804 68,370 79,640 24,408 13,316 117,364 1,190 2,445 258 419 2,021 2,121 3,166 11,620 9,432 1,358 1,767 12,557 16,970 15,897 12,675 8,465 54,007 price (HK$) 3-May 7.23 9.43 5.35 5.90 2.71 12-m target (HK$) 8.94 16.78 8.40 6.80 4.23 % upside 23.7 77.9 57.0 15.3 56.1 % chng 3m 6m 12m (5) (13) (11) (8) (10) (14) 11 37 (1) (13) (23) (13) 0 68 51 Av 6m daily T/O (m shs) 177.4 118.3 138.2 44.4 16.1 Net Profit (HK$m) 10F 11F 10,214 9,682 9,957 2,690 736 33,279 493 331 1,682 772 1,315 1,735 2,693 88 9108 305 450 166 312 1,233 43,360 8,645 2,782 15,630 70,417 11,633 11,972 12,053 3,304 870 39,832 574 454 1,908 916 1,535 2,061 3,658 108 11214 624 657 305 333 1,919 54,491 10,201 3,622 18,064 86,378 CAGR EPS (HK$) 09-11 10F 11F (%) 0.69 0.78 0.47 0.23 0.25 0.78 0.97 0.57 0.28 0.29 19 26 24 32 14 PER (x) 10F 11F 10.5 12.0 11.4 26.0 10.9 12.0 10.8 19.2 14.0 8.6 21.3 18.2 21.9 33.0 16.4 41.1 30.8 11.2 13.2 29.3 22.9 32.2 29.2 31.1 26.5 12.4 10.6 6.6 10.9 12.8 20.8 24.4 15.7 43.2 31.3 56.7 27.8 13.6 17.2 10.8 13.4 15.6 26.0 13.5 14.6 23.9 9.2 9.7 9.5 21.2 9.2 10.1 9.2 14.0 12.3 7.2 18.3 15.3 16.5 26.9 13.4 21.5 21.1 6.6 12.4 18.4 18.2 27.3 22.5 26.9 21.7 11.3 10.0 5.8 10.0 14.2 16.6 19.6 12.0 33.6 23.3 41.3 22.9 11.7 13.4 9.5 11.4 15.1 24.0 13.2 13.8 22.9 EV/EBITDA P/BV # P/Sales (x) (x) (x) 10F 11F 10F 10F 6.8 3.7 6.5 11.7 5.1 5.3 2.5 3.9 10.6 3.9 1.5 1.7 1.4 3.1 1.7 0.3 0.2 0.2 0.8 0.5 Div Yield (%) 10F 11F 2.4 2.1 1.7 1.1 2.8 2.7 2.6 2.1 1.3 3.3 Latest Reported Data (%) Gear ROA ROE 57% Cash 7% cash cash 3% 3% 1% 4% 6% 14% 13% 2% 14% 18% Disclosure Legend
Rcmd B B B B B
Analyst Rachel Miu Rachel Miu Rachel Miu Rachel Miu Rachel Miu
2300 569 658 517 336 2314 2689 757
Dec Dec Dec Dec Mar Mar Jun Dec
5.75 6.30 18.86 4.38 9.05 6.94 13.12 1.63
6.22 7.20 21.00 5.96 10.90 5.90 15.90 2.00
8.2 14.3 11.3 36.1 20.4 (15.0) 21.2 22.7
B B B B H B B H
79 25 19 14 10 33 14 (8)
68 35 24 36 25 78 14 (7)
19 141 35 83 66 379 269 (9)
22.6 20.5 139.5 38.2 54.8 84.3 158.7 5.8
0.53 0.33 1.35 0.51 0.42 0.38 0.60 0.05
0.62 0.45 1.53 0.61 0.49 0.45 0.80 0.06
36 34 32 4 17 161 35 n.a.
4.9 12.8 9.8 6.5 16.6 14.6 15.2 17.5
4.0 9.5 8.3 5.5 13.1 12.6 12.4 15.5
1.1 3.6 3.5 0.9 7.6 3.1 2.7 1.6
1.8 3.7 2.8 1.4 12.0 3.0 2.8 3.9
2.8 1.2 2.0 2.3 1.7 1.4 0.5 1.1
3.2 1.8 2.3 2.8 1.6 1.6 0.6 1.3
cash cash 22% cash cash 81% 83% cash
4% 12% 10% 11% 44% 3% 5% -5%
7% 19% 23% 14% 44% 4% 12% -7%
Patricia Yeung Rachel Miu Dennis Lam Gideon Lo Patricia Yeung Patricia Yeung Patricia Yeung Dennis Lam
371 257 3989 1065
Dec Dec Dec Dec
3.10 3.81 1.87 2.89
3.92 5.01 3.11 2.78
26.5 31.5 66.3 (3.8)
B B B H
14 55 (7) 6 (13) (14) (7) 18
220 113 484 77
18.2 29.5 22.9 7.6
0.08 0.12 0.17 0.22
0.14 0.18 0.28 0.23
82 26 n.a. 10
24.4 18.5 7.7 3.2
15.6 14.5 7.0 2.6
3.7 2.8 0.8 1.1
3.0 5.9 1.3 0.7
0.0 0.5 0.0 1.0
0.0 0.7 0.0 1.1
53% 73% 70% 78%
1% 6% -2% 3%
2% 12% -6% 8%
Patricia Yeung Patricia Yeung Patricia Yeung Patricia Yeung
Note 2
2628 2601 2328 2318
Dec Dec Dec Dec
35.10 32.45 7.30 66.15
42.67 40.43 4.32 71.02
21.6 24.6 (40.8) 7.4
B B FV H
1 (3) 2 n.a. (0) 27 5 (3)
28 1,435.5 n.a. 361.5 65 159.7 36 584.3
1.53 1.01 0.25 2.13
1.93 1.19 0.33 2.46
21 12 41 18
2.9 ** 2.3 ** n.a. 2.8 **
2.6 ** 2.0 ** n.a. 2.3 **
3.7 2.7 2.9 4.1
4.9 3.0 0.5 2.7
1.3 0.9 1.2 0.9
1.7 1.1 1.5 1.0
n.a. n.a. n.a. n.a.
2% 1% 0% 0%
23% 5% 0% 0%
Dennis Lam Dennis Lam Dennis Lam Dennis Lam
883 857 386
Dec Dec Dec
13.84 8.98 6.16
14.41 11.10 7.80
4.1 23.6 26.6
B B B
12 (2) (1)
20 (3) (7)
59 31 1
1,034.8 815.3 717.7
49,878 54,860 155,160 163,720 81,180 91,689 286,218 310,269 725 913 302 205 914 525 1,422 1,422 5,371 2,176 5,030 12,578 8,449 4,776 7,303 4,495 25,023 652 1,143 376 274 1,174 708 1,952 1,952 6,273 2,788 5,714 14,775 8,737 5,160 7,433 4,751 26,081
1.12 0.85 0.94
1.23 0.89 1.06
28 18 14
6.7 5.5 4.0
6.2 5.1 3.4
2.7 1.6 1.1
3.7 1.2 0.3
2.9 4.2 3.8
2.9 4.5 4.3
cash 9% 33%
23% 21% 7%
30% 15% 18%
Gideon Lo Gideon Lo Gideon Lo
1093 2877 874 233 8199 1177 1099
Dec Dec Dec Dec Dec Dec Dec
6.02 22.95 9.10 0.93 36.65 3.45 35.60
4.80 25.30 8.93 1.43 26.50 3.60 34.00
(20.3) 10.2 (1.9) 53.8 (27.7) 4.3 (4.5)
H H B B FV B H
43 35 55 107 40 116 (23) (11) 34 29 52 88 12 32
55 384 195 63 150 393 n.a.
69.7 87.9 20.3 73.9 28.2 87.4 213.5
0.47 1.10 0.37 0.06 0.85 0.11 0.63
0.42 1.38 0.46 0.08 1.09 0.15 0.86
-18 14 24 76 28 30 42
6.1 14.3 14.2 10.5 34.2 12.9 25.0
6.0 11.1 11.6 8.0 26.3 9.6 18.6
1.7 5.3 1.8 2.1 9.8 5.0 6.0
1.2 8.0 1.5 6.2 5.4 3.8 0.3
3.1 2.4 0.8 1.3 0.6 1.6 0.4
2.8 3.0 1.3 2.5 0.7 2.1 0.6
2% cash cash cash cash cash cash
12% 27% 3% 5% 17% 11% 4%
20% 32% 6% 6% 23% 17% 30%
Gideon Lo Gideon Lo Gideon Lo Gideon Lo Gideon Lo Gideon Lo Gideon Lo
836 991 902
Dec Dec Dec
15.60 3.18 4.49
19.80 2.95 4.80
26.9 (7.2) 6.9
B FV H
0 (2) (12) (13) (5) (10)
(9) (15) (15)
122.9 75.2 181.2
1.15 0.19 0.42
1.34 0.24 0.47
6 30 1
10.1 10.3 6.6
8.5 9.7 6.4
1.8 1.1 1.1
1.6 0.7 0.5
2.2 2.9 5.5
2.6 3.7 6.2
111% 341% 153%
5% 1% 3%
16% 5% 13%
June Ng June Ng June Ng
2 3 6 1038
Dec Dec Dec Dec
54.75 18.90 46.10 29.15
52.80 15.10 47.05 33.15
(3.6) (20.1) 2.1 13.7
FV FV H B
3 11 7 (1)
6 6 12 8
4 30 1 (3)
194.7 139.4 196.8 37.1
3.51 0.73 3.42 1.99
3.63 0.79 3.48 2.11
8 7 4 -8
8.5 28.1 12.5 114.0
8.3 27.2 12.3 136.9
1.8 3.5 1.9 1.6
2.6 9.6 9.5 28.5
4.5 2.1 4.8 4.5
4.5 2.3 4.9 4.8
41% 5% 4% 6%
8% 9% 12% 9%
16% 14% 17% 12%
J Ng J Ng / W K Lee J Ng / W K Lee J Ng

Stock Code Company FYE Properties-China CC Land * # China Overseas * # China Resources Land * # Franshion Properties * # Shimao Property * # Shui On Land * # Sino-Ocean Land * # Soho China * # Sector Properties-HK 1 Cheung Kong * # 41 Great Eagle * # 10 Hang Lung Group # ^ * 101 Hang Lung Properties # ^* 12 Henderson Land * # ^ HKL SP Hongkong Land * ^ # @ 14 Hysan Development * # 173 K Wah Intl * 683 Kerry Properties * # 66 MTR * ^ # 17 New World Dev # * 16 SHK Properties # ^ * 83 Sino Land * # 88 Tai Cheung * # Sector Transportation - Marine 1919 China COSCO Holdings * 2866 China Shipping Container * 1138 China Shipping Dev * 316 Orient Overseas * 2343 Pacific Basin Shipping * Sector Transportation - Toll Road 995 Anhui Expressway * 177 Jiangsu Expressway * 737 Hopewell Highway* 548 Shenzhen Expressway * 107 Sichuan Expressway * 576 Zhejiang Expressway * Sector 1224 688 1109 817 813 272 3377 410 Dec Dec Dec Dec Dec Dec Dec Dec Mkt Cap HK$bn 7 121 69 20 42 18 33 22 325 223 14 51 118 105 93 24 7 51 154 54 280 68 3 1,241 26 12 15 38 11 102 2 9 15 3 4 10 43 Mkt Cap US$m 940 15,575 8,911 2,608 5,396 2,284 4,241 2,860 41875 28,748 1,753 6,617 15,174 13,468 11,989 3,126 897 6,615 19,891 6,894 36,007 8,735 366 159,914 3,294 1,585 1,960 4,865 1,454 13,158 315 1,162 1,904 374 519 1,330 5,603 price (HK$) 3-May 2.84 14.80 13.74 2.21 11.82 3.53 5.84 4.28 12-m target (HK$) 3.74 21.60 21.58 3.36 18.31 5.20 7.50 4.99 % upside 31.7 45.9 57.1 52.0 54.9 47.3 28.4 16.6 % chng 3m 6m 12m (3) 0 (10) (15) (5) (10) (11) 10 (32) (10) (24) 2 (16) (28) (24) 2 9 8 (2) 5 35 16 1 14 Av 6m daily T/O (m shs) 20.3 583.1 339.8 25.5 289.1 81.9 250.8 43.7 Net Profit (HK$m) 10F 11F 54 8,797 4,168 1,694 4,670 1,551 2,850 3,805 27,536 20,259 1,218 3,914 7,001 4,854 726 1,077 789 2,675 7,525 9,403 15,150 3,068 298 77,659 583 (1,032) 1,882 9,099 655 11,187 700 2,346 1,025 715 1,334 2,066 8,187 802 10,777 4,646 1,118 5,162 1,327 3,651 2,694 29,375 20,890 1,130 3,218 5,710 5,176 518 1,084 1,525 3,718 6,322 4,941 16,674 3,228 360 74,134 3,942 1,499 2,304 2,414 729 10,888 785 2,887 1,078 811 1,458 2,162 9,181 CAGR EPS (HK$) 09-11 10F 11F (%) 0.02 1.08 0.83 0.11 1.30 0.31 0.51 0.70 0.31 1.32 0.93 0.08 1.44 0.26 0.65 0.34 n.a. 20 21 -24 16 -35 42 -31 PER (x) 10F 11F 136.2 13.7 16.6 20.9 9.1 11.4 11.6 6.1 14.1 11.0 11.2 13.1 16.8 21.5 16.5 22.5 8.8 19.1 20.5 5.7 18.4 21.9 9.5 15.4 173.7 nm 21.2 4.2 17.2 6.6 11.7 15.8 14.4 11.8 10.3 15.1 13.8 9.1 11.2 14.9 26.1 8.2 13.4 9.0 12.6 13.1 10.7 12.0 15.9 20.6 20.2 23.2 22.4 4.6 13.8 24.4 10.8 16.8 20.9 7.9 15.6 25.7 25.6 17.3 15.6 15.4 11.7 10.5 12.9 13.7 10.4 9.4 14.5 12.7 EV/EBITDA P/BV # P/Sales (x) (x) (x) 10F 11F 10F 10F 74.8 7.9 10.5 10.7 6.2 8.5 10.3 3.5 11.7 6.9 9.1 14.5 5.3 11.8 7.7 7.2 0.5 0.9 0.6 0.5 0.5 0.5 0.7 0.6 3.4 2.5 2.8 3.1 1.5 2.3 1.6 1.3 Div Yield (%) 10F 11F 0.0 1.5 1.2 0.9 3.5 2.0 2.2 4.9 2.2 1.8 1.3 0.7 4.2 2.0 2.8 2.4 Latest Reported Data (%) Gear ROA ROE 12% 1% 29% 31% 65% 34% 26% Cash -5% 7% 4% 3% 2% 7% 3% 10% -9% 20% 8% 8% 5% 14% 8% 21% Disclosure Legend
Rcmd H B B B B B H B
Analyst D Wang / C Wu C Wu / D Wang C Wu / D Wang C Wu / D Wang C Wu / D Wang C Wu / D Wang C Wu / D Wang C Wu / D Wang
Dec Dec Jun Jun Dec Dec Dec Dec Dec Dec Jun Jun Jun Mar
96.35 21.85 38.40 28.40 48.70 5.33 23.10 2.81 35.80 26.95 13.72 109.00 13.82 4.60
112.00 24.82 44.20 31.65 64.10 5.50 24.60 4.15 48.40 32.70 17.22 124.90 17.96 5.52
14.6 12.2 13.6 10.3 28.5 2.9 5.8 42.9 31.7 21.3 23.0 13.1 27.0 18.0
B B B B B B H B B B H B B B
2 (1) 9 9 7 (2) 7 (3) (5) (12) 17 16 10 3 6 8 (2) (15) 5 2 1 (16) 5 (4) 3 (2) 6 7
19 103 34 29 33 113 63 130 51 37 34 35 38 56
406.2 12.2 31.2 150.9 297.4 11.6 30.1 36.7 101.6 98.8 117.0 731.3 134.2 1.5
8.75 1.96 2.93 1.69 2.26 0.32 1.03 0.32 1.87 1.31 2.41 5.91 0.63 0.48
9.02 1.82 2.41 1.38 2.41 0.23 1.03 0.62 2.60 1.10 1.27 6.50 0.66 0.58
2 -6 49 55 -8 -18 -2 29 32 -7 52 16 -6 31
15.1 10.9 9.3 13.3 37.0 19.6 21.6 10.1 17.1 18.8 14.0 21.8 21.9 8.8
16.8 9.8 11.2 16.0 32.6 23.5 21.3 5.5 29.4 18.8 16.7 16.8 31.4 7.2
0.8 0.5 0.7 0.9 0.7 1.0 0.7 0.5 0.7 0.8 0.5 0.8 0.7 0.4
5.4 3.1 6.1 9.3 10.8 9.0 14.8 2.1 2.6 5.6 1.7 8.6 10.6 6.0
2.9 2.5 2.1 2.7 2.3 3.0 2.9 3.9 2.5 2.1 2.6 2.6 2.9 5.2
2.9 2.5 2.1 2.7 2.3 3.0 2.9 5.0 3.4 2.2 2.6 2.8 2.9 6.3
16% 5% 5% Cash 19% 18% 9% 37% 24% 22% 46% 15% 16% Cash
7% 5% 2% 7% 3% 4% 3% 6% 3% 5% 1% 4% 4% 9%
8% 7% 4% 8% 5% 6% 4% 11% 4% 7% 3% 6% 6% 10%
Jeff Yau Jeff Yau Jeff Yau Jeff Yau Jeff Yau Jeff Yau Jeff Yau Jeff Yau Jeff Yau Jeff Yau Jeff Yau Jeff Yau Jeff Yau Jeff Yau
Dec Dec Dec Dec Dec
9.91 3.28 11.74 60.35 5.85
7.80 2.88 9.80 69.00 5.68
(21.3) (12.2) (16.5) 14.3 (2.9)
FV FV FV B FV
2 5 (7) 6 (6)
1 17 8 61 3
55 74 31 169 50
315.1 167.6 149.4 94.8 90.7
0.06 -0.09 0.55 14.54 0.34
0.39 0.13 0.68 3.86 0.38
n.a. n.a. 38 n.a. -9
15.8 47.2 12.4 10.0 9.0
11.6 10.7 11.0 6.2 8.1
2.1 1.4 1.6 1.0 1.0
0.6 1.3 3.2 0.9 1.9
0.0 0.0 1.4 1.4 2.9
0.7 0.0 1.7 1.4 3.2
cash 25% 36% 1% cash
10% -13.8% 3% -5% cash
24% -22.8% 5% -10% 14%
Gideon Lo Gideon Lo Gideon Lo Gideon Lo Gideon Lo
Dec Dec Jun Dec Dec Dec
4.96 7.38 4.99 3.88 4.50 7.20
6.26 8.31 5.22 4.76 5.73 7.81
26.2 12.6 4.6 22.7 27.3 8.5
B B H B B B
(8) 2 (2) (6) 7 2
4 7 8 5 32 11
27 33 18 32 131 8
11.4 29.1 5.4 17.8 13.1 81.3
0.42 0.47 0.35 0.33 0.44 0.48
0.47 0.57 0.36 0.37 0.48 0.50
2 11 1 15 18 3
6.3 9.7 16.9 11.6 7.6 6.5
5.7 8.1 13.3 10.3 6.7 5.9
1.3 2.1 1.8 0.9 2.1 1.9
2.3 5.7 12.3 1.8 3.6 4.3
4.2 4.8 6.8 4.1 3.9 4.6
4.7 5.9 7.1 4.6 4.2 4.8
34% 45% cash 108% 26% cash
7% 9% 11% 3% 7% 7%
13% 14% 18% 7% 10% 14%
P Yong / P Xu P Yong / P Xu P Yong / P Xu P Yong / P Xu P Yong / P Xu P Yong / P Xu

Stock Code Company FYE Technology Software & Computer Services Alibaba.com Ltd * % Chinasoft Intl * % Kingdee * Tencent * % Inspur * % Kingsoft * Sector Hardware & Equipment AAC Acoustics * ASM Pacific * China Comservice * Comba * Digital China * Lenovo Group * TPV Technology * ZTE * % Sector Telecom China Mobile * China Telecom * China Unicom * CITIC 1616 * Sector Real Estate Investment Trust ** Champion REIT * Fortune REIT * Prosperity REIT * The Link REIT * Sector Mkt Cap HK$bn Mkt Cap US$m price (HK$) 3-May 12-m target (HK$) % upside % chng 3m 6m 12m Av 6m daily T/O (m shs) Net Profit (HK$m) 10F 11F CAGR EPS (HK$) 09-11 10F 11F (%) PER (x) 10F 11F EV/EBITDA P/BV # P/Sales (x) (x) (x) 10F 11F 10F 10F Div Yield (%) 10F 11F Latest Reported Data (%) Gear ROA ROE Disclosure Legend
Rcmd
Analyst
1688 354 268 700 596 3888
Dec Dec Dec Dec Dec Dec
75 2 6.4 301 3 7 394 16 29 8 12 13 58 14 15 164 1,538 50 230 4.944 1,822 17 5.990 2 43 68
9,720 235 827 38,725 389 896 50791 2,060 3,785 996 1,588 1,636 7,414 1,795 1,916 21189 198,095 6,382 29,655 637 234,769 2,244 772 239 5,486 8,740
14.96 1.80 3.12 164.40 0.80 6.26
13.80 1.58 3.60 202.00 1.81 11.00
(7.8) (12.2) 15.4 22.9 126.3 75.7
S B B B B B
(18) 59 49 9 (33) (1)
(16) 143 82 19 (29) (14)
64 200 136 139 (41) 77
134.5 9.6 29.3 747.9 43.5 79.8
1,403 96 301 7,821 418 640 10,679 1,060 1,680 2,078 627 829 1,312 1,249 3,425 12,260
1,725 153 351 9,939 551 834 13,553 1,246 2,060 2,494 775 642 2,472 1,336 4,593 15,618
0.28 0.08 0.15 4.19 0.09 0.60
0.34 0.12 0.17 5.32 0.12 0.77
22 n.a. 18 30 27 37
54.3 22.8 21.1 39.2 8.9 10.5 37.7 15.1 17.4 10.8 21.6 14.4 41.3 10.0 20.0 17.8 11.3 14.0 23.3 10.4 12.2 nmf nmf nmf nmf nmf
44.2 14.4 18.4 30.9 6.8 8.1 29.8 12.8 14.2 9.0 18.2 18.6 21.9 9.4 17.1 14.6 11.1 10.9 20.0 8.3 11.8 nmf nmf nmf nmf nmf
36.9 8.1 16.5 27.9 2.8 6.6
29.0 5.5 13.8 21.2 1.5 4.4
10.6 2.0 3.9 14.6 1.4 3.0
30.7 1.1 4.5 16.2 1.0 4.7
0.0 0.0 0.9 0.4 2.3 3.5
0.0 1.6 1.1 0.5 4.1 4.5
cash cash cash cash cash cash
17% -9% 16% 38% 14% 21%
27% -16% 24% 54% 22% 27%
Steven Liu Steven Liu Steven Liu Steven Liu Steven Liu Steven Liu
2018 522 552 2342 861 992 903 763
Dec Dec Dec Dec Mar Mar Dec Dec
13.02 74.50 3.88 11.46 12.44 5.88 5.94 28.35
17.20 85.00 6.00 12.80 10.00 6.00 6.50 30.22
32.1 14.1 54.6 11.7 (19.6) 2.0 9.4 6.6
B B B B S H B B
(4) 12 (6) 37 1 4 14 (10)
41 26 (4) 44 52 36 8 (3)
209 116 (16) 314 193 176 130 61
44.5 67.8 70.7 115.7 61.9 234.7 84.5 250.5
0.86 4.28 0.36 0.53 0.86 0.14 0.59 1.42
1.01 5.25 0.43 0.63 0.67 0.27 0.63 1.66
33 48 17 13 0 n.a. 10 25
10.0 12.5 4.2 14.9 11.7 12.0 5.5 10.7
8.0 10.3 3.6 12.4 10.3 7.5 4.8 9.5
3.4 7.4 1.4 4.3 3.1 4.8 1.0 3.1
7.2 5.4 0.3 2.5 0.2 0.5 0.2 0.9
2.7 5.0 3.7 1.4 1.7 0.5 3.0 1.1
4.1 6.2 4.5 1.8 1.3 1.7 3.2 1.4
cash cash cash cash 1% cash 23% 26%
15% 24% 6% 7% 6% -3% 3% 4%
19% 30% 13% 12% 22% -15% 7% 16%
Dennis Lam Dennis Lam Steven Liu Steven Liu Steven Liu Dennis Lam Dennis Lam Steven Liu
941 728 762 1883
Dec Dec Dec Dec
76.65 3.57 9.77 2.50
88.00 4.40 8.30 3.68
14.8 23.2 (15.0) 47.2
B B FV B
0 4 9 13
6 4 (0) (9)
14 2,060.6 (7) 463.6 10 480.3 81 8.2
135,765 138,713 20,681 26,612 9,888 11,494 554 718 166,889 177,536 993 379 143 2,144 3,659 889 401 98 2,393 3,782 # P/NAV
6.76 0.26 0.42 0.24
6.89 0.33 0.49 0.30
3 27 3 27
4.5 3.7 4.2 6.7
4.1 3.1 4.0 5.1
2.4 1.1 1.0 2.8
0.6 1.1 0.2 1.4
3.9 2.5 1.7 4.8
4.0 3.3 2.0 6.0
cash 32% 23% cash
17% 3.3% 2% 15%
25% 6.6% 5% 23%
Steven Liu Steven Liu Steven Liu Steven Liu
2778 778 808 823
Dec Dec Dec Mar
3.59 3.60 1.39 19.34
3.39 3.71 1.56 22.50
(5.6) 3.1 12.2 16.3
H B B B
5 15 4 2
10 31 6 13
101 48 60 28
21.4 15.2 2.5 108.0
n.a. n.a. n.a. n.a.
n.a. n.a. n.a. n.a.
n.a. n.a. n.a. n.a. *09 Actual
nmf nmf nmf nmf
nmf nmf nmf nmf
0.6 0.7 0.6 1.3
9.3 7.4 7.1 8.6
5.7 6.3 7.7 5.1 ** P/EV
5.1 6.6 7.4 5.7
32% 26% 36% 24%
9% 3% 2% n.a.
13% 4% 6% n.a.
Jeff Yau Jeff Yau Jeff Yau Jeff Yau
Note 2, 3, 4, 5
@ denominated in USD
^ underlying profit
~ Core profit and EPS
% - Fully Diluted EPS
Note 1: Note 2:
Note 3: Note 4:
As at the date specified above, DBSVHK and its affiliates hold a proprietary position in these companies. DBSVHK, DBSVR, DBSVS, DBS Bank Ltd and/or other affiliates of DBSVUSA, within the past 12 months, have received compensation and/or within the next 3 months seek to obtain compensation for investment banking services from these companies. DBSVHK, DBSVR, DBSVS, DBS Bank Ltd and/or other affiliates of DBSVUSA beneficially own a total of 1% or more of any class of common equity securities of these companies. DBSVHK, DBSVR, DBSVS, DBS Bank Ltd and/or other affiliates of DBSVUSA beneficially own a total of 5% or more of any class of common equity securities of these companies.
Note 5: Dual listing in Singapore under FRT SP
Pharmaceuticals
Daewoong Pharmaceutical (069620)

Substantial improvement in 4QFY09
Solid top-line growth supported by strong sales capability
Daewoong Pharmaceutical posted a decent 4Q result (fiscal year ends March), meeting our expectations: sales increased 11.7% y-y to W156bn, and operating profit rose 460.7% to W22bn. Of note, the company showed a solid top-line growth thanks to strong sales capability although operating environment has worsened due to the governments rebate regulations. Looking at individual products, dementia treatment Gliatilin and antidiarrheal drug Smecta increased by 16% each, and antiallergic medicine Allelock and antilipemic drug Speetin grew by 21% and 40%, respectively. In particular, sales of Albis, which has been approved for treatment of gastritis and gastric ulcer, jumped 36.1% to W12bn.
B
May 4, 2010 Analyst Yoon Cho
UY
Earnings Review
Company Analysis
TP (12M): W80,000
CP (5/3): W50,300
Much better margin on favorable forex effects and lower marketing cost
The company posted poor operating result until 2QFY09 due to the weak won, as imported original drugs account for a large share of ETC sales. But 4Q gross margin jumped from 41.4% a year ago to 48.3% because COGS ratio improved as the won/dollar rate recently declined y-y. SG&A expense to sales ratio decreased from 38.6% to 34.0%, thanks to lower marketing cost on the rebate regulation and cost-saving efforts. Thus, 4Qs operating margin soared to 14.2% from 2.8% a year ago.
Recipients of this report, received from DBS Vickers Research (Singapore) Pte Ltd (DBSVR), are to contact DBSVR Lee Eun Young at +65 6398 7964 eunyoung@dbsvickers.com in respect of any matters arising from or in connection with the analysis or this report.
Key Data
KOSPI 52 week High/Low(W) Market cap (W bn/ US$ mn) Shares out (000) 60-D avg. daily volume (000) 60-D avg. daily value (W bn) DPS (W, 09) DPS Est. (W, 10) Foreign ownership (%) Performance Absolute Relative 1M 2.2 2.4 6M (3.5) (14.5) 1,721.21 65,080/46,375 527.4/ 481.5 10,708.3 15.7 0.8 750 750 11.44 12M (11.7) (37.4)
Earnings momentum to continue in FY10

The company has strengthened earnings stability on the back of strong growth in 4Q. It is expected to show strong earnings momentum in FY10, supported by steady growth of core products, the launch of seven first generic drugs and six active pharmaceutical ingredients, and favorable forex effects. FY10 sales and OP are projected to rise 10.6% and 22.0% y-y, respectively, to W672bn and W91bn.
Consensus Data
2010 Sales (Wbn) OP (Wbn) NP (Wbn) EPS (W) BPS (W) 606.2 67.5 48.8 4,806 30,364 2011 673. 79.7 60.9 5,827 34,900
Stock Price
Financial Data
Sales OP PTP NP EPS Chg P/E P/B EV/EBITDA ROE BPS Net DER Wbn Wbn Wbn Wbn W % X X X % W % 2008 484.2 74.2 79.7 59.0 5,508 21.6 9.3 1.9 5.9 24.8 26,438 (3.5) 2009 547.7 43.2 44.5 32.9 3,070 (44.3) 16.3 1.8 10.2 12.2 28,538 23.5 2010F 607.5 74.7 71.3 49.6 4,636 51.0 10.9 1.5 6.9 16.8 32,749 14.7 2011F 671.6 91.2 88.7 62.1 5,800 25.1 8.7 1.3 5.7 18.0 37,893 10.8 2012F 751.2 106.4 103.7 72.6 6,778 16.9 7.4 1.1 4.9 17.9 43,994 7.4
(W K) 90 80 70 60 50 40 09.4
Daewoong P harmaceutical Relative performance(RH 110 S) 100 90 80 70 60 50 09.7 09.10 10.1 10.4
Note: 2010F means the period from April 2009 to March 2010 Source: company data, Hana Daetoo Securities
In Singapore, this research report or research analyses may only be distributed to Institutional Investors, Expert Investors or Accredited Investors as defined in the Securities and Futures Act, Chapter 289 of Singapore.
sa: YM
Equity Research
Daewoong Pharmaceutical
May 4, 2010
Table 1. Comparison with Hana Daetoo estimates

4Q09P 3Q09 Growth (QoQ) 154.3 23.2 21.8 16.3 15.0 14.1 10.6 1.0 -4.3 3.2 -3.7 4Q08 Market Consensus Growth Diff. (YoY) 139.5 4.0 1.6 3.6 2.9 1.1 2.6 11.8 455.0 1306.3 336.1 153.5 18.9 21.5 17.9 12.3 14.0 11.7 1.6 17.5 4.7 -12.3 1.9 0.4 -1.6
(W bn, %,%P)
Hana Daetoo est. Diff.
Earnings (W bn) Sales OP PTP NP Margins (%) OPM PTPM NPM 14.2 14.4 10.1 13.4 18.3 14.5 0.9 -3.8 -4.4 155.9 22.2 22.5 15.7 155.6 20.8 28.4 22.5 0.2 6.7 -20.8 -30.2
Source : Fnguide, Hana Daetoo Securities
Chart 1. Growth to recover from FY10 thanks to new products

(W bn) 900 800 700 600 500 400 300 200 100 0 06 07 08 09P 10F 11F 12F 0 5 15 10 20 sales (L HS) y-y growth (RHS) (%) 25
Chart 2. Margins to improve from FY10 on won appreciation

60% 55% 50% 45% 40% 35% 30% 25% 20% 05 06 07 08 09P 10F 11F 12F gross margin (L HS) SG& expense to sales ratio (L A HS) operating margin (RHS) 20% 18% 16% 14% 12% 10% 8% 6% 4% 2% 0%
Source: company data, Hana Daetoo Securities
May 4, 2010
Summary financials
Income Statement
Sales Cost of goods sold Gross Profit SG&A expenses Operating profit Non-operating income Interest income Equity-method profit Forex gains Others Pre-tax profit Taxes Continuing OP Discontinued OP Net profit NOPAT EBITDA Growth (%) Sales EBITDA OP Continuing OP EPS Profitability (%) Gross profit margin EBITDA margin OP margin Continuing OP margin 2008 484.2 224.0 260.3 186.0 74.2 5.5 1.5 0.6 (4.8) 8.2 79.7 20.7 59.0 0.0 59.0 57.8 89.5 20.9 17.2 5.6 21.6 21.6 53.8 18.5 15.3 12.2 2009 547.7 294.3 253.3 210.1 43.2 1.3 (1.2) (0.9) (22.5) 26.0 44.5 11.7 32.9 0.0 32.9 33.7 57.4 13.1 (35.8) (41.8) (44.3) (44.3) 46.3 10.5 7.9 6.0 2010F 607.5 315.9 291.6 216.8 74.7 (3.4) (1.1) (1.0) (26.0) 24.7 71.3 21.7 49.6 0.0 49.6 50.4 83.5 10.9 45.4 73.0 51.0 51.0 48.0 13.7 12.3 8.2 2011F 671.6 337.5 334.1 242.9 91.2 (2.4) (0.8) (1.1) 0.3 (0.8) 88.7 26.6 62.1 0.0 62.1 62.7 100.1 10.6 19.9 22.0 25.1 25.1 49.7 14.9 13.6 9.2
(W bn)
Balance Sheet
Current assets Cash & equivalents Financial goods Accounts receivable Inventories Others Fixed assets Investment assets Tangible assets Intangible assets Total assets Current liabilities Accounts payable Short-term borrowings Current portion of LT debt Others Long-term liabilities Bonds Long-term debt Others Total liabilities Capital stock Capital surplus Capital adjustments Other comprehensive income Retained earnings Total equity Net debt 2008 228.5 28.3 10.7 91.1 72.6 25.8 158.4 27.4 112.5 3.7 386.9 85.5 39.3 0.0 0.0 46.2 37.7 29.6 0.0 8.1 123.2 24.7 104.7 (19.4) (0.4) 154.1 263.7 (9.3) 2009 256.7 35.5 13.7 99.6 77.6 30.3 222.7 27.9 135.3 10.0 479.3 102.0 42.4 15.0 0.0 44.5 104.2 98.5 0.0 5.7 206.2 25.4 104.0 (32.4) (3.4) 179.7 273.2 64.3 2010F 286.8 38.0 13.8 110.0 88.0 37.0 227.7 28.5 134.0 10.4 514.5 91.0 45.0 0.0 0.0 46.0 105.3 98.5 0.0 6.8 196.3 25.4 104.0 (32.4) (1.1) 222.4 318.2 46.6 2011F 330.3 45.0 12.3 118.0 100.0 55.0 232.0 28.3 132.1 11.0 562.3 85.0 42.0 0.0 0.0 43.0 104.0 97.5 0.0 6.5 189.0 25.4 104.0 (32.4) (1.1) 277.5 373.3 40.2
(W bn)
2012F 751.2 374.0 377.2 270.8 106.4 (2.8) (0.5) (0.3) 0.4 (2.4) 103.7 31.1 72.6 0.0 72.6 72.9 114.4 11.9 14.3 16.7 16.9 16.9 50.2 15.2 14.2 9.7
2012F 379.2 52.0 12.2 135.0 115.0 65.0 239.1 29.0 130.4 11.8 618.4 77.0 37.0 0.0 0.0 40.0 102.7 96.5 0.0 6.2 179.7 25.4 104.0 (32.4) (1.1) 342.8 438.7 32.3
Financial ratios
2008 Per share value (W) EPS BPS CFPS EBITDAPS SPS DPS Indicators (x) PER PBR PCFR EV/EBITDA PSR Ratios (%) ROE ROA ROIC Liabilities/equity Net debt/equity Interest coverage (x) 5,508 26,438 2,572 8,356 45,221 800 9.3 1.9 19.9 5.9 1.1 24.8 16.6 26.8 46.7 (3.5) 49.6 2009 3,070 28,538 1,540 5,363 51,144 750 16.3 1.8 32.5 10.2 1.0 12.2 7.6 11.4 75.5 23.5 9.5 2010F 4,636 32,749 2,893 7,795 56,728 750 10.9 1.5 17.4 6.9 0.9 16.8 10.0 14.4 61.7 14.7 16.2 2011F 5,800 37,893 2,121 9,346 62,718 750 8.7 1.3 23.7 5.7 0.8 18.0 11.5 16.1 50.6 10.8 20.7 2012F 6,778 43,994 2,515 10,680 70,151 750 7.4 1.1 20.0 4.9 0.7 17.9 12.3 16.5 41.0 7.4 25.3
Cash Flow
Operating cash flow Net profit Chg in non-cash items Depreciation Forex gains (losses) Equity method gains (losses) Others Chg in working capital Investment cash flow Chg in investment assets Chg in tangible assets Others Financing cash flow Chg in bonds Recapitalization Cash dividends Others Chg in cash Unlevered CFO Free Cash Flow 2008 26.4 59.0 18.2 11.3 3.3 (0.6) 4.2 (50.8) (38.6) (0.6) (35.5) (2.6) 0.9 8.2 0.0 (7.3) 0.0 11.3 27.5 (19.0) 2009 17.4 32.9 17.7 11.7 22.5 0.9 (17.5) (33.2) (74.6) (1.5) (19.3) (53.7) 64.5 67.5 0.7 (7.3) 3.6 7.3 16.5 (49.3) 2010F 31.7 49.6 22.0 11.0 26.0 1.0 (16.1) (39.9) (1.9) (1.6) (7.8) 7.4 (27.4) (15.0) 0.0 (6.9) (5.5) 2.5 31.0 22.9 2011F 23.3 62.1 20.3 10.6 (0.3) 1.1 8.9 (59.1) (1.9) (1.0) (6.7) 5.8 (14.4) (1.0) 0.0 (7.0) (6.4) 7.0 22.7 14.0
(W bn)
2012F 27.3 72.6 20.8 10.2 (0.4) 0.3 10.7 (66.1) (5.3) (1.0) (6.4) 2.1 (15.0) (1.0) 0.0 (7.2) (6.8) 7.0 26.9 15.5
Source: company data, Hana Daetoo Securities estimates
Country Aggregates
2010 9.9 12.7 14.5 PER(x) 2011 9.1 10.7 12.1 12M Fwd 9.6 11.9 13.6 EPS growth (%) 2010 2011 41.3 8.6 32.7 17.6 30.7 20.0
Sector Aggregates
Korea Emerging Market World
Source : MSCI I/B/E/S Aggregates
* MSCI Pharmaceuticals Industry
May 4, 2010
Rating & target price changes

Daewoong Pharmaceutical Date 10.5.3 10.2.4 10.1.18 09.11.3 09.10.5 09.8.24 09.7.14 09.7.13 09.4.30 09.4.17 09.3.20 09.1.23 09.1.14 08.11.14 08.10.27 08.10.15 08.10.10 08.7.28 08.7.9 Rating BUY BUY BUY BUY BUY BUY BUY BUY BUY BUY BUY BUY BUY BUY BUY BUY BUY BUY BUY Target Price (W) 80,000 80,000 80,000 80,000 80,000 80,000 80,000 80,000 80,000 80,000 70,000 57,000 62,000 62,000 57,000 66,000 66,000 114,000 114,000
(W) 150,000 100,000 50,000 0 08.5
T arget Price
08.8
08.11
09.2
09.5
09.8
09.11
10.2
10.5
Hana Research Center Rating Definitions

Stock ratings for the next twelve months Rating Definition BUY Target Price implies at least 15% upside potential Target Price implies less than 15% upside or downside Neutral potential Reduce Target Price implies at least 15% downside potential Sector ratings for the next twelve months Rating Definition Overweight Sector index implies at least 15% upside potential Sector index implies less than 15% upside or downside Neutral potential Underweight Sector index implies at least 15% downside potential
Compliance Notice

As of May 4, 2010, Hana Daetoo Securities does not own over 1% of the outstanding shares of the company covered in this report. This report accurately reflects the research analysts personal views and was written without any undue external influence or interference, and no part of his or her compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed by that analyst in the report. As of May 4, 2010, the analyst does not own any shares of the company covered in this report. As of May 4, 2010, this report was not provided in advance to an institutional investor or other third party.
Display
Nepes Corp. (033640)

Decent 1Q result largest quarterly earnings expected in 2Q
1Q sales +20.9% y-y, OP +36.9% y-y 2Q sales and OP to rise 16.9% and 17.0% y-y, respectively
Nepes posted solid 1Q result, meeting our expectations, thanks to 1) larger shipments of small- and medium-sized products, 2) decent growth in LCD packaging, and 3) strong performance of the chemical materials segment. 1Q sales and operating profit increased 20.9% and 36.9% y-y, respectively, to W56bn and W6bn. We expect the company to post the largest quarterly earnings in 2Q on the back of benefits from Samsung Electronics G8 line expansion, solid price growth, higher supply share in Samsung Electronics, and better performance of the chemical materials segment. 2Q sales and OP are projected to rise 20.7% and 40.9% q-q, respectively, to W67bn and W8bn.
B
May 4, 2010 Analyst Jeong Lee
UY
Upgrade Target Price

Company Analysis
TP (12M): W26,000 (upgrade)

CP (5/3): W18,850
Upgrade TP to W26,000, maintain BUY

We raise our target price from W20,000 to W26,000, reflecting the upward revision of FY10 and FY11 earnings estimates and a change in valuation method. Our TP is 3.0/2.5x FY10E/11E BPS. We maintain BUY as our TP suggests a 37.9% upside potential.
Key Data
KOSDAQ 52 week High/Low(W) Market cap (W bn/ US$ mn) Shares out (000) 60-D avg. daily volume (000) 60-D avg. daily value (W bn) DPS (W, 09) DPS Est. (W, 10) Foreign ownership (%) Performance Absolute Relative 1M 18.6 17.6 6M 25.7 17.1 519.78 19,000/8,850 350.3/ 313.2 18,585.9 299.1 4.6 50 50 6.36 12M 106.0 102.3
Five investment points

We see five investment positives: 1) strong earnings growth in 2010 on expansion of bumping and packaging processing, driven by domestic panel makers G8 line expansion and solid price growth on the back of LDI shortage; 2) higher market share as competitors are put out of business; 3) stronger demand for bumping processing for handsets; 4) better earnings of chemical materials business with stable margins; and 5) expansion into color paste business through the establishment of a joint venture, Iridos, with Solvay of Belgium, which should strengthen Nepes competitiveness in the mid and long term.
Consensus Data
2010 Sales (Wbn) OP (Wbn) NP (Wbn) EPS (W) BPS (W) 272.8 34.2 29.3 1,588 8,322 2011 319. 40.6 35.5 1,922 10,120
Financial Data
Sales OP PTP NP EPS Chg P/E P/B EV/EBITDA ROE BPS Net DER Wbn Wbn Wbn Wbn W % X X X % W % 2008 189.4 20.3 (5.6) (4.5) (240) 0.0 (10.5) 0.4 5.7 (4.3) 5,953 31.2 2009 220.7 25.0 24.8 19.8 1,068 0.0 13.9 2.1 6.5 17.2 7,104 5.7 2010F 275.6 35.8 36.5 29.2 1,571 47.1 12.0 2.2 6.5 20.5 8,626 1.6 2011F 330.8 41.0 43.0 34.4 1,849 17.7 10.2 1.8 5.3 19.9 10,427 (4.8) 2012F 370.0 43.5 46.1 36.9 1,986 7.4 9.5 1.5 4.6 17.8 12,364 (13.1)
Stock Price
(W K) Nepes Corp. Relative performance(RHS) 21 170 16 11 6 09.5 09.8 09.11 10.2 120 220
70
sa: YM
Equity Research
Nepes Corp.
May 4, 2010
1. 1Q review: decent earnings growth continued

(1) 1Q sales +20.9% y-y, OP +36.9% y-y
1Q sales and OP declined 1.7% and 5.3% q-q, respectively
Despite seasonal weakness, Nepes posted a solid 1Q result, meeting our expectations, thanks to 1) larger shipments of small- and medium-sized products, 2) decent growth in LCD packaging, and 3) strong performance of the chemical materials segment. 1Q sales increased 20.9% y-y to W56bn, but declined 1.7% q-q due to seasonality and won appreciation. Operating profit rose 36.9% y-y to W6bn, but decreased 5.3% q-q owing to falling won/dollar rate and price cuts.
Table 1. 1Q review
1Q10P 4Q09 Growth (QoQ) 56.5 6.2 7.0 5.9 10.9 12.3 10.4 -1.7 -5.3 -13.8 -18.0 1Q09 Growth (YoY) 46.0 4.3 2.7 2.0 9.3 5.8 4.3 20.9 36.9 125.7 144.5 Market Consensus Diff.
(W bn, %)
Hana Daetoo est. Diff.
Earnings (W bn) Sales OP PTP NP Margins (%) OPM PTPM NPM 10.5 10.8 8.7 11.2 12.1 9.7 10.3 10.4 8.3 55.6 5.9 6.0 4.8 58.8 6.6 7.1 5.7 -5.4 -11.2 -15.2 -15.3 57.1 5.9 6.0 4.8 -2.7 -0.6 1.1 1.3
Source : Fnguide, Hana Daetoo Securities
(2) 2Q sales and OP to climb 20.7% and 40.9% q-q, respectively

2Q sales and OP to rise 16.9% and 17.0% y-y, respectively
We expect the company to post the largest quarterly earnings in 2Q on the back of benefits from Samsung Electronics G8 line expansion, solid price growth, higher supply share in Samsung Electronics, and better performance of the chemical materials segment. 2Q sales and OP are projected to rise 20.7% and 40.9% q-q, respectively, to W67bn and W8bn.
Table 2. Quarterly earnings trend

2Q10 2008 1Q09 2Q09 3Q09 4Q09 2009 1Q10 F Earnings (W bn) Sales OP PTP NP Margins (%) OPM PTPM NPM % of sales (%) Semiconductor Chemical materials 60.5 39.5 50.7 49.3 57.0 43.0 56.9 43.1 53.5 46.5 54.8 45.2 51.1 48.9 51.4 48.6 49.2 50.8 48.5 51.5 50.0 50.0 47.7 52.3 49.8 50.2 48.1 51.9 45.9 54.1 10.7 -3.0 -2.4 9.3 5.8 4.3 12.3 13.8 10.6 12.4 12.0 9.8 10.9 12.2 10.3 11.3 11.2 9.0 10.5 10.8 8.7 12.3 12.4 9.9 14.1 14.4 11.5 14.2 14.5 11.6 13.0 13.2 10.6 11.6 12.1 9.7 11.7 12.2 9.8 13.3 13.9 11.2 12.8 13.4 10.8 189.4 20.3 -5.6 -4.5 46.0 4.3 2.7 2.0 57.4 7.1 7.9 6.1 60.8 7.5 7.3 6.0 56.5 220.7 6.2 6.9 5.8 25.0 24.8 19.8 55.6 5.9 6.0 4.8 67.1 8.3 8.3 6.7 77.0 10.9 11.1 8.9 75.9 275.6 10.8 11.0 8.8 35.8 36.5 29.2 71.9 8.3 8.7 7.0 82.5 9.6 10.1 8.1 87.8 11.7 12.2 9.8 3Q10 F 4Q10 1Q11 2010F F F 2Q11 F 3Q11 F
(W bn, %)
4Q11 2011F 2012F F 88.6 330.8 370.0 11.3 11.9 9.5 41.0 43.0 34.4 12.4 13.0 10.4 47.8 52.2 43.5 46.1 36.9 11.8 12.5 10.0 44.4 55.6
Source: Hana Daetoo Securities
Nepes Corp.
May 4, 2010
(3) FY10/FY11 earnings estimates revised upward

Our forecast for FY10 sales and OP are revised upward by 1.9% and 19.1%, respectively
We raise our estimates for FY10 and FY11 earnings to reflect 1) solid price growth on LDI shortage, 2) benefits from G8 line expansion by Samsung Electronics and LG Display, 3) higher supply share in Samsung Electronics, and 4) expansion of packaging capacity. We revise upward our forecast for FY10 sales and OP by 1.9% and 19.1%, respectively, to W276bn and W36bn. Our estimates for FY11 sales and OP are adjusted upward by 2.8% and 10.8%, respectively, to W331bn and W41bn.
Table 3. Revision of earnings estimates

Previously 2010F Earnings (W bn) Sales OP PTP NP Margins (%) OPM PTPM NPM
(W bn, %)
Revised 2011F 2010F 2011F
Chg. 2010F 2011F
270.4 30.0 30.6 24.5
321.8 37.0 39.0 31.2
275.6 35.8 36.5 29.2
330.8 41.0 43.0 34.4
1.9 19.1 19.1 19.1
2.8 10.8 10.2 10.2
11.1 11.3 9.1
11.5 12.1 9.7
13.0 13.2 10.6
12.4 13.0 10.4
Nepes Corp.
May 4, 2010
2. Valuation and investment strategy

(1) Upgrade TP to W26,000, maintain BUY
Upgrade TP to W26,000 a 37.9% upside potential
We raise our target price from W20,000 to W26,000, reflecting the upward revision of FY10 and FY11 earnings estimates and a change in valuation method. Our TP is 3.0/2.5x FY10E/11E BPS. We maintain BUY as our TP suggests a 37.9% upside potential. The stock price has risen by 18.6% compared to one month ago and 25.7% compared to six months ago on the back of 1) stronger-than-expected LCD demand, 2) greater earnings momentum supported by high supply share in Samsung Electronics, and 3) a bullish stock market. We recommend taking a positive view on the stock in the mid and long term, as earnings growth continued on expansion of packaging processing, larger market share, and benefits from domestic panel makers G8 line expansion in 2Q.
Table 4. Valuation trend

2004 P/E(x) High Low Average P/B(x) High Low Average EV/EBITDA(x) High Low Average OPM (%) ROE (%) 10.6 5.7 8.1 17.5 46.0 12.5 6.4 8.7 16.4 26.9 16.1 6.4 9.9 6.6 7.2 8.5 4.8 6.3 8.9 9.2 12.7 4.9 9.0 10.7 -4.3 6.9 1.3 4.5 11.3 17.2 5.6 2.5 4.0 3.8 1.8 2.5 3.7 1.2 2.1 2.2 1.1 1.5 1.4 0.3 0.9 2.3 0.4 1.5 14.9 6.7 10.8 17.0 8.1 11.5 53.0 17.3 30.4 25.1 12.3 17.2 -32.1 -7.9 -20.7 14.7 2.4 9.4 2005 2006 2007 2008 2009
(x, %)
AVG 15.4 6.5 9.8
3.2 1.2 2.1
11.2 4.9 7.8 11.9 17.0
Nepes Corp.
May 4, 2010
Five investment points

1) Earnings growth on expansion of bumping and packaging processing, 2) Stronger demand for bumping processing for handsets, 3) Higher market share as overseas competitors have been put out of business, 4) Better earnings of chemical materials business, 5) Expansion into color paste business through subsidiary
We see five investment positives: 1) Better-than-expected earnings on expansion of DDI bumping and packaging processing. Nepes earnings are improving considerably as overseas competitors are put out of business, Nepes faces rising back-end processing needs as chip makers reduce investment in back-end processing, packaging demand is increasing thanks to new investment by panel manufacturers, and price growth has been solid due to DDI shortage. 2) Stronger demand for bumping processing for handsets owing to the growth of smartphone market, etc. The growth of high-margin bumping processing contributes to the companys profitability improvement. 3) Higher market share as overseas competitors have been put out of business since 2009. That means the expansion of production line by domestic panel makers, which have strong positions in the global market, has a great positive impact on Nepes earnings growth. 4) Better earnings of chemical materials business (which accounts for 40% of total sales) due to panel makers investment in new production lines. 5) Expansion into color paste business through the establishment of a joint venture, Iridos, with Solvay of Belgium, which should strengthen Nepess competitiveness in the mid and long term.
Nepes Corp.
May 4, 2010
Summary financials
Income Statement
Sales Cost of goods sold Gross Profit SG&A expenses Operating profit Non-operating income Interest income Equity-method profit Forex gains Others Pre-tax profit Taxes Continuing OP Discontinued OP Net profit NOPAT EBITDA Growth (%) Sales EBITDA OP Continuing OP EPS Profitability (%) Gross profit margin EBITDA margin OP margin Continuing OP margin 2008 189.4 155.2 34.2 13.9 20.3 (25.9) (1.9) (5.4) (10.9) (7.8) (5.6) (1.2) (4.5) 0.0 (4.5) (3.0) 13.8 21.6 (57.3) 45.3 0.0 0.0 18.0 7.3 10.7 (2.4) 2009 220.7 177.0 43.7 18.7 25.0 (0.3) (1.3) (1.1) 1.2 0.8 24.8 4.9 19.8 0.0 19.8 20.9 43.4 16.5 215.4 23.3 0.0 0.0 19.8 19.7 11.3 9.0 2010F 275.6 222.3 53.4 17.6 35.8 0.7 (0.2) 0.4 0.4 0.1 36.5 7.3 29.2 0.0 29.2 29.4 54.3 24.9 25.0 42.8 47.1 47.1 19.4 19.7 13.0 10.6 2011F 330.8 270.3 60.5 19.5 41.0 2.0 0.2 1.4 0.4 0.0 43.0 8.6 34.4 0.0 34.4 34.2 64.0 20.0 17.9 14.5 17.7 17.7 18.3 19.4 12.4 10.4
(W bn)
Balance Sheet
Current assets Cash & equivalents Financial goods Accounts receivable Inventories Others Fixed assets Investment assets Tangible assets Intangible assets Total assets Current liabilities Accounts payable Short-term borrowings Current portion of LT debt Others Long-term liabilities Bonds Long-term debt Others Total liabilities Capital stock Capital surplus Capital adjustments Other comprehensive income Retained earnings Total equity Net debt 2008 71.8 10.9 19.5 23.1 11.5 6.8 118.9 15.7 93.7 1.1 190.8 57.3 11.5 11.7 21.5 12.7 30.9 0.0 30.0 0.9 88.2 9.4 46.1 (8.2) 1.9 53.3 102.6 32.0 2009 98.9 13.9 29.2 33.5 13.9 8.4 115.2 15.0 90.6 1.0 214.1 65.9 17.0 14.0 19.6 15.3 20.2 2.1 15.6 2.6 86.1 9.4 48.5 (4.5) 1.5 73.1 128.0 7.3 2010F 99.3 17.4 12.2 41.9 17.4 10.5 133.8 16.3 106.2 0.4 233.1 59.1 21.4 14.6 3.8 19.3 17.7 2.0 12.5 3.2 76.8 9.4 48.5 (4.5) 1.5 101.4 156.3 2.6 2011F 121.1 15.0 22.2 50.2 21.2 12.5 150.8 18.9 119.2 (0.4) 271.9 66.0 26.0 13.4 3.2 23.4 16.1 2.3 10.0 3.9 82.2 9.4 48.5 (4.5) 1.5 134.9 189.8 (9.1)
(W bn)
2012F 370.0 302.4 67.7 24.2 43.5 2.6 0.6 1.6 0.4 0.0 46.1 9.2 36.9 0.0 36.9 36.4 69.6 11.9 8.7 6.2 7.4 7.4 18.3 18.8 11.8 10.0
2012F 140.3 16.8 36.7 56.2 23.7 7.0 169.7 21.6 134.7 (1.2) 310.1 69.3 29.1 11.2 2.7 26.2 15.0 2.7 8.0 4.4 84.3 9.4 48.5 (4.5) 1.5 170.9 225.8 (29.6)
Financial ratios
2008 Per share value (W) EPS BPS CFPS EBITDAPS SPS DPS Indicators (x) PER PBR PCFR EV/EBITDA PSR Ratios (%) ROE ROA ROIC Liabilities/equity Net debt/equity Interest coverage (x) (240) 5,953 1,572 740 10,173 0 (10.5) 0.4 1.6 5.7 0.2 (4.3) (2.4) (2.2) 86.0 31.2 5.5 2009 1,068 7,104 1,629 2,337 11,876 50 13.9 2.1 9.1 6.5 1.2 17.2 9.8 15.5 67.3 5.7 8.3 2010F 1,571 8,626 2,213 2,921 14,830 50 12.0 2.2 8.5 6.5 1.3 20.5 13.1 20.0 49.1 1.6 17.5 2011F 1,849 10,427 2,680 3,444 17,798 50 10.2 1.8 7.0 5.3 1.1 19.9 13.6 20.2 43.3 (4.8) 22.6 2012F 1,986 12,364 3,432 3,744 19,910 50 9.5 1.5 5.5 4.6 0.9 17.8 12.7 19.3 37.3 (13.1) 27.1
Cash Flow
Operating cash flow Net profit Chg in non-cash items Depreciation Forex gains (losses) Equity method gains (losses) Others Chg in working capital Investment cash flow Chg in investment assets Chg in tangible assets Others Financing cash flow Chg in bonds Recapitalization Cash dividends Others Chg in cash Unlevered CFO Free Cash Flow 2008 30.7 (4.5) 35.8 17.5 9.4 5.4 3.5 (0.6) (21.3) (5.6) (13.3) (2.3) (8.0) (6.9) 0.0 0.0 (1.1) (1.5) 29.3 0.9 2009 31.3 19.8 18.4 17.4 (1.2) 1.1 1.1 (6.9) (29.4) (0.4) (14.0) (15.1) 0.7 4.3 0.0 0.0 (3.6) 2.6 30.3 20.2 2010F 41.3 29.2 18.3 17.6 (0.4) (0.4) 1.6 (6.2) (18.1) (0.9) (33.1) 15.9 (19.8) (18.3) 0.0 (0.9) (0.6) 3.5 41.1 5.8 2011F 49.7 34.4 21.3 21.3 (0.4) (1.4) 1.8 (6.0) (46.5) (1.1) (34.4) (11.0) (5.6) (4.1) 0.0 (0.9) (0.5) (2.4) 49.8 12.5
(W bn)
2012F 63.3 36.9 24.0 24.1 (0.4) (1.6) 1.9 2.4 (55.6) (1.1) (39.9) (14.5) (5.9) (4.2) 0.0 (0.9) (0.8) 1.8 63.8 20.8
Country Aggregates
Sector Aggregates
2010 -11.7 14.2 PER(x) 2011 -10.4 12.6 12M Fwd -11.3 13.6 EPS growth (%) 2010 2011 --30.3 12.5 39.9 12.5
Source : MSCI I/B/E/S Aggregates
Nepes Corp.
May 4, 2010

Nepes Corp. Date 10.5.4 10.4.20 10.3.4 09.12.16 09.10.14 09.4.13 09.3.23 09.1.13 08.9.11 08.5.13 Rating BUY BUY BUY BUY BUY Neutral Neutral Neutral Neutral Neutral Target Price (W) 26,000 20,000 20,000 20,000 17,000 10,000 6,000 3,300 4,700 8,000
(W) 30,000 20,000 10,000 0 08.5 08.8
Nepes Corp.
T arget Price
08.11
09.2
09.5
09.8
09.11
10.2
10.5

Compliance Notice

Display
SFA Engineering (056190)

Poised to benefit the most from Samsung Electronics business expansion
Samsung Electronics acquired 10% stake in SFA Engineering
Samsung Electronics announced that it bought a 10% stake in SFA Engineering for the purpose of taking part in management. This move will enable Samsung Electronics to expand the vertical integration of equipment and components productions by acquiring a core equipment manufacturer, and thus to strengthen competitiveness further in the mid to long-term. For SFA Engineering, Samsungs investment will help the company to pave the way for evolving into one of the leading equipment companies not only in the LCD industry but also in the OLED industry and thus to be able to match Japans Tokyo Electron and the US Applied Materials.
B
May 4, 2010 Analyst Jeong Lee
UY
TP upgraded
Company Analysis
TP (12M): W100,000
CP (May 4): W58,800
TP raised to W100,000, BUY maintained

We maintain BUY and raise the target price to W100,000, to reflect 1) potential synergies on Samsung Electronics equity investment; 2) likely benefits from Samsung Electronics expansion in semiconductor and display businesses in 2010-11; 3) higher target valuation multiple on the back of the potential growth as a core display/ semiconductor equipment manufacturer; and 4) upward revisions to 2010-11 earnings forecasts to factor in strong order momentum.
Key Data
KOSDAQ 52 week High/Low(W) Market cap (Wbn/US$mn) Shares out (000) 60-D avg. daily volume (000) 60-D avg. daily value (W bn) DPS (W, 09) DPS Est. (W, 10) Foreign ownership (%) Performance 1M 18.2 17.3 6M 54.1 45.6 Absolute Relative 519.78 58,800/30,700 535.7/ 478.8 9,110.0 97.6 4.5 400 400 5.73 12M 16.4 12.7
2010 preview: sales up 21.6%, OP up 60.4% y-y

Earnings are expected to grow substantially in 2010, supported by a remarkable increase in display equipment and distribution automation system orders and stronger new equipment sales. We project 2010 sales and operating profit to grow by 21.6% and 60.4% y-y, respectively, to W391.4bn and W38.4bn. In 2011, when synergies with Samsung Electronics are factored in, sales and operating profit are forecast to increase by 31.3% and 46.1% y-y, respectively, to W570.1bn and W71.2bn, backed by a big jump in display equipment sales.
Consensus Data
2010 Sales (Wbn) OP (Wbn) NP (Wbn) EPS (W) BPS (W) 356.9 31.3 29.7 3,256 28,087 2011 438.4 44.6 40.8 4,482 31,865
Stock Price
Financial Data
Sales OP PTP NP EPS Chg P/E P/B EV/EBITDA ROE BPS Net DER Wbn Wbn Wbn Wbn W % X X X % W % 2008 430.8 53.5 68.5 49.8 5,465 18.4 6.0 1.3 2.6 23.4 26,302 (57.9) 2009 307.1 15.2 25.1 18.0 1,979 (63.8) 16.9 1.2 7.9 8.0 26,916 (47.8) 2010F 391.4 38.4 47.6 35.7 3,916 97.9 15.0 1.9 8.9 14.6 30,443 (44.7) 2011F 570.1 71.2 81.9 61.4 6,739 72.1 8.7 1.6 4.8 21.2 36,794 (46.1) 2012F 744.6 103.0 115.5 86.6 9,509 41.1 6.2 1.3 2.9 24.1 45,915 (50.4)
(W K) 80 70 60
SF E A ngineering Relative performance(RHS) 130 110 90
50 40 30 09.5 09.8 09.11 10.2 70 50
sa: YM
Equity Research
SFA Engineering
May 4, 2010
1. Samsung Electronics acquired 10% stake

(1) Set to become a core equipment manufacturers
Set to grow to become one of the globally leading equipment companies
Samsung Electronics announced that it bought a 10% stake in SFA Engineering for the purpose of taking part in management. Samsung Electronics will make management decisions jointly with the largest shareholder DY-Holdings (31.8% stake). This move will enable Samsung Electronics to expand the vertical integration of equipment and components productions by acquiring a core equipment manufacturer, and thus to strengthen competitiveness further in the mid to long-term. For SFA Engineering, Samsungs investment will help the company to pave the way for evolving into one of the leading equipment companies not only in the LCD industry but also in the OLED industry and thus to be able to match Japans Tokyo Electron and the US Applied Materials. Some could question about the low acquisition price but it does not appear to be a big issue, since the price is similar to the one (W41,980/share) at which DYHoldings bought its stake in SFA Engineering from Lazard Fund on March 4. More noteworthy is that SFA Engineering could enjoy high synergies on Samsung Electronics investment and be able to evolve into one of the globally leading equipment companies in the mid- to long-term.
Table 1. Valuation
2002 P/E(x) High Low Average P/B(x) High Low Average EV/EBITDA(x) High Low Average OPM (%) ROE (%) 2003 2004 2005 2006 2007 2008 2009
(x, %)
AVG
19.2 4.6 9.5
11.6 3.2 7.3
6.2 3.1 4.6
6.5 3.8 5.4
6.2 4.1 5.2
15.4 5.2 9.8
13.9 3.7 10.1
27.2 14.1 20.0
13.3 5.2 9.0
4.1 1.0 2.0
2.7 0.7 1.7
2.0 1.0 1.5
2.3 1.4 1.9
1.9 1.3 1.6
3.2 1.1 2.0
3.1 0.8 2.3
2.2 1.1 1.6
2.7 1.0 1.8
13.1 1.9 5.7 11.4 23.1
6.5 0.2 3.2 10.7 26.5
1.5 -0.9 0.3 12.9 36.5
1.8 -0.3 0.9 13.3 42.3
2.9 1.3 2.1 16.8 37.5
9.2 1.4 4.9 14.4 22.5
8.6 0.8 5.7 12.4 23.4
13.4 5.1 8.8 4.9 8.0
7.4 1.3 4.1 12.1 27.5
SFA Engineering
May 4, 2010
(2) TP upgraded to W100,000, BUY maintained

TP upgraded to W100,000, 1) strong synergies 2) benefits from Samsungs business expansion 3) higher target valuation multiple 4) upward revisions to earnings forecasts
We maintain BUY and raise the target price by 33.3% to W100,000, to reflect 1) potential synergies on Samsung Electronics equity investment; 2) likely benefits from Samsung Electronics expansion in semiconductor and display businesses in 2010-11; 3) higher target valuation multiple on the back of the potential growth as a core semiconductor/display equipment manufacturer; and 4) upward revisions to 2010-11 earnings forecasts to factor in strong order momentum. The new target price, which is 3.3x/2.7x FY10/11E BPS, suggests a 70.1% upside potential. The target P/B multiple (3x) and P/E multiple (25x) can be seen as high, but compared with its peers, we do not think the valuation multiples are high. Particularly, considering potential earnings growth in the mid-to long-term based on synergies with Samsung Electronics, we think our valuation multiples are appropriate. The stock price has risen by 18.2% and 54.1% compared with one month and six months ago, respectively, supported by 1) high expectations for Samsung Electronics equity investment, and 2) bright long-term earnings outlook on robust order inflow. The companys competitiveness is likely to continue to strengthen on the back of strong long-term order momentum and diversified product lineups. We consider it is appropriate to take a positive view on the stock from a mid-to longterm perspective, since new products are likely to give a boost to earnings growth, going forward.
SFA Engineering
May 4, 2010
Table 2. Global Peer Group Valuation

SFA Engineering 399.0 330.1 399.1 242.0 307.6 472.7 67.1 47.5 49.6 12.0 24.8 46.2 56.1 45.2 46.1 14.2 24.6 42.8 16.8 14.4 12.4 4.9 8.8 9.9 5.2 9.8 10.1 20.0 15.0 11.4 1.6 2.0 2.3 1.6 1.7 1.5 2.1 4.9 5.7 8.8 9.7 7.2 37.5 22.5 23.4 8.0 12.0 14.4 Jusung Engineering 126.9 228.2 141.0 134.1 187.4 216.8 12.9 34.1 -17.0 11.4 27.1 33.1 17.7 42.4 -27.3 1.6 19.9 24.0 10.2 14.9 -12.0 8.5 13.4 14.6 13.6 13.8 n/a 212.5 22.7 16.5 1.7 2.9 2.9 2.6 3.1 2.6 13.0 13.8 n/a 41.3 16.2 12.9 13.3 24.5 -17.0 1.3 14.4 16.6 TEL 5,958.5 7,288.6 7,955.6 5,076.7 4,359.0 6,451.0 669.6 1,231.7 1,479.4 147.0 -142.0 742.0 424.6 780.7 933.1 75.4 -150.0 484.0 11.2 16.9 18.6 2.9 -3.3 11.5 11.8 9.6 142.5 n/a n/a 24.4 2.2 1.9 1.9 2.0 2.2 2.0 5.0 4.4 23.1 238.0 129.8 10.3 21.8 21.3 1.3 -3.1 -2.9 7.4
(US$mn, x, %)
Sales
OP
NP
OPM
P/E
P/B
EV/EBITDA
ROE
2006 2007 2008 2009 2010F 2011F 2006 2007 2008 2009 2010F 2011F 2006 2007 2008 2009 2010F 2011F 2006 2007 2008 2009 2010F 2011F 2006 2007 2008 2009 2010F 2011F 2006 2007 2008 2009 2010F 2011F 2006 2007 2008 2009 2010F 2011F 2006 2007 2008 2009 2010F 2011F
Applied Novellus Materials 9,167.0 1,658.5 9,734.9 1,570.0 8,024.5 1,011.4 4,807.1 639.2 8,222.8 1,133.0 9,684.9 1,355.1 2,232.7 315.5 2,397.9 262.1 1,445.7 15.8 -356.3 -51.4 1,334.5 230.3 2,128.6 316.0 1,516.7 190.0 1,710.2 213.7 964.0 -13.4 -342.5 -85.2 842.7 178.5 1,510.2 236.0 24.4 19.0 24.6 16.7 18.0 1.6 -7.4 -8.0 16.2 20.3 22.0 23.3 18.3 18.5 14.0 16.1 16.5 325.9 n/a n/a 19.9 13.9 12.2 10.6 3.9 2.4 3.1 1.9 2.2 1.0 2.4 1.9 2.4 1.8 2.1 1.6 9.0 8.6 9.0 7.5 8.4 20.9 n/a n/a 10.4 7.5 6.9 6.0 19.5 10.5 23.6 12.7 13.0 -1.0 -3.8 -6.5 7.7 9.6 12.5 11.3
Note 1: Overseas companies numbers for 2009, 2010, 2011 based on market consensus, domestic companies numbers based on Hana Daetoo estimates Note 2: based on won/dollar of 1,139 (as of March 26, 2010) Source: Hana Daetoo Securities
SFA Engineering
May 4, 2010
(3) Five investment points We see five investment points for SFA Engineering. 1) Samsung Electronics equity investment is expected to generate strong synergies. Backed by Samsung Electronics strong supports, SFA Engineering will likely become one of the core semiconductor/display equipment manufacturers and thus match Japans Tokyo Electron and the US Applied Materials. 2) Since Samsung Electronics is expected to aggressively expand semiconductor and display businesses in 2010-11, SFA Engineering is positioned to benefit the most. The company is projected to have strong growth momentum, thanks to stronger core businesses (display equipment and distribution automation system) and contributions from new business. Particularly, new areas such as OLED and PE-CVD are likely to make contributions to sales from 2H10. 3) Higher valuation multiples can be applied, because the company is set to become a core display/semiconductor equipment manufacturer in the mid-term. Considering strong synergies on Samsung Electronics investment and bright midto long-term earnings outlook, we think it is appropriate to apply premium in valuation. 4) The companys fiscal health is good on the back of large cash assets. As of end2009, the company held about W111bn in cash assets, about 20.6% of its market cap which shows a remarkably strong fiscal health compared with its peers. In order to become a core equipment maker, one of the keys is to have large cash assets and in this respect, SFA Engineering appears to be a front-runner among domestic equipment companies. 5) Growth potential is strong. The company is not only accelerating development of PECVD equipment, a core LCD manufacturing equipment, but also concentrating energy on developing equipment for AMOLED and LED. In addition, it is expanding into solar cell business based on advanced factory automation technologies. Moreover, since the company shows strong technological prowess through Korea Superconducting Tokamak Advanced Research (KSTAR), its longterm growth potential looks strong. KSTAR is part of the ITER project -- nuclear fusion research project. Orders related with the ITER project are likely to pick up in 2010.
SFA Engineering
May 4, 2010
2. Earnings growth to accelerate from 2Q

(1) 2010 preview: sales up 12.3% y-y, OP up 46.2% y-y
2011 preview Sales up 31.3% y-y, OP up 46.1% y-y
Earnings are expected to grow substantially in 2010, supported by a remarkable increase in display equipment and distribution automation system orders and stronger new equipment sales. We project 2010 sales and operating profit to grow by 21.6% and 60.4% y-y, respectively, to W391.4bn and W38.4bn. In 2011, when synergies with Samsung Electronics are factored in, sales and operating profit are forecast to increase by 31.3% and 46.1% y-y, respectively, to W570.1bn and W71.2bn, backed by a big jump in display equipment sales following Samsung Electronics expansion of display business. If investment in OLED increases further, the company could beat our forecasts.
Table 3. Quarterly forecasts

2008 1Q09 2Q09 3Q09 4Q09 2009 1Q10 Result (Wbn) Sales OP PTP NP Margins (%) OPM PTPM NPM Sales breakdown (%) FA equipment Automation system 12.4 15.9 11.6 -1.7 0.7 0.3 3.8 10.5 7.6 6.0 6.5 4.9 7.5 10.9 7.7 4.9 8.2 5.9 2.5 6.3 4.7 7.8 11.0 8.2 11.6 13.2 9.9 12.0 14.0 10.5 9.8 12.2 9.1 10.0 12.4 9.3 11.0 13.2 9.9 13.5 15.0 11.2 14.0 15.8 11.8 430.8 53.5 68.5 49.8 47.0 -0.8 0.3 0.1 63.0 2.4 6.6 4.8 74.6 122.5 307.1 4.5 4.8 3.7 9.2 13.3 9.4 15.2 25.1 18.0 50.2 1.3 3.2 2.4 78.9 6.2 8.7 6.5 126.9 14.7 16.8 12.6 135.3 391.4 16.2 18.9 14.2 38.4 47.6 35.7 95.4 9.5 11.8 8.9 132.2 168.9 14.5 17.4 13.1 22.8 25.3 18.9 2Q10 F 3Q10 F 4Q10 1Q11 2010F F F 2Q11 F 3Q11 F
(Wbn, %)
4Q11 2011F 2012F F 173.6 570.1 744.6 24.3 27.4 20.5 71.2 103.0 81.9 115.5 61.4 12.5 14.4 10.8 86.6 13.8 15.5 11.6
73.5 26.5
79.8 20.2
83.7 16.3
79.3 20.7
62.3 37.7
73.5 26.5
83.8 16.2
72.0 28.0
62.7 37.3
68.4 31.6
69.3 30.7
77.8 22.2
76.5 23.5
76.2 23.8
81.4 18.6
78.1 21.9
83.3 16.7
SFA Engineering
May 4, 2010
(2)1Q10 preview: sales up 6.9% y-y, OP to turn positive y-y

1Q10 preview Sales down 59.0% q-q, OP down 86.3% q-q
Despite larger-than-expected orders at display equipment and distribution automation system divisions, SFA Engineering is projected to have a substantial drop in earnings in 1Q10 compared with the previous quarter due to a weak season in terms of equipment delivery. 1Q sales and operating profit are estimated to decline by 59.0% and 86.3% q-q, respectively, to W50.2bn and W1.3bn. Compared with the year-ago quarter, sales should post a 6.9% increase, while the company should return to an operating profit from a loss a year ago. Earnings are likely to improve substantially from 2Q on the back of stronger-thanexpected order trend. Particularly, earnings growth should accelerate in the second half, and new equipments such as OLED and PE-CVD are likely to make contributions to sales growth. We project 2Q sales and operating profit to increase by 57.2% and 390.5% q-q, respectively, to W78.9bn and W6.2bn.
Table 4. 1Q Preview
1Q10F 4Q09 Growth (QoQ) Result (Wbn) Sales OP PTP NP Margin (%) OPM PTPM NPM 2.5 3.7 2.8 7.5 10.9 7.7 -1.7 0.7 0.3 4.2 6.3 4.9 3.2 4.3 3.2 1Q09 Growth (YoY) Market Consensus Diff
(Wbn, %)
Hana Daetoo Est. Diff
50.2 1.3 1.9 1.4
122.5 9.2 13.3 9.4
-59.0 -86.3 -86.0 -85.1
47.0 -0.8 0.3 0.1
6.9 TP 483.2 1,044.9
57.5 2.4 3.6 2.8
-12.7 -47.7 -48.1 -49.9
53.2 1.7 2.3 1.7
-5.6 -26.3 -18.9 -18.9
Source: Fnguide, Hana Daetoo Securities
SFA Engineering
May 4, 2010
Summary financials
Income Statement
2008 Sales Cost of goods sold Gross Profit SG&A expenses Operating profit Non-operating income Interest income Equity-method profit Forex gains Others Pre-tax profit Taxes Continuing OP Discontinued OP Net profit NOPAT EBITDA Growth (%) Sales EBITDA OP Continuing OP EPS Profitability (%) Gross profit margin EBITDA margin OP margin Continuing OP margin 430.8 355.1 75.7 22.2 53.5 15.0 7.5 0.5 5.6 1.4 68.5 18.7 49.8 0.0 49.8 44.3 65.5 40.4 20.1 21.4 18.4 18.4 17.6 15.2 12.4 11.6 2009 307.1 270.4 36.7 21.5 15.2 9.9 4.9 1.2 (1.8) 5.6 25.1 7.0 18.0 0.0 18.0 14.5 24.7 (28.7) (62.3) (71.6) (63.8) (63.8) 12.0 8.0 4.9 5.9 2010F 391.4 327.6 63.8 25.4 38.4 9.2 6.9 1.0 (0.7) 2.0 47.6 11.9 35.7 0.0 35.7 30.5 47.0 27.5 90.2 152.7 97.9 97.9 16.3 12.0 9.8 9.1 2011F 570.1 465.5 104.5 33.4 71.2 10.7 8.4 1.0 (0.7) 2.0 81.9 20.5 61.4 0.0 61.4 55.1 81.4 45.6 73.5 85.5 72.1 72.1 18.3 14.3 12.5 10.8
(W bn)
Balance Sheet
2008 Current assets Cash & equivalents Financial goods Accounts receivable Inventories Others Fixed assets Investment assets Tangible assets Intangible assets Total assets Current liabilities Accounts payable Short-term borrowings Current portion of LT debt Others Long-term liabilities Bonds Long-term debt Others Total liabilities Capital stock Capital surplus Capital adjustments Other comprehensive income Retained earnings Total equity Net debt 274.3 36.0 74.1 46.5 109.3 8.4 142.7 43.2 90.3 0.0 417.0 178.0 41.2 0.0 0.0 136.8 16.3 0.0 0.0 16.3 194.3 4.6 24.7 (16.9) 0.1 210.3 222.7 (128.9) 2009 166.6 26.1 65.2 38.5 26.8 10.0 143.1 43.8 90.8 0.0 309.7 69.3 30.2 0.0 0.0 39.0 12.1 0.0 0.0 12.1 81.4 4.6 24.7 (16.9) 0.1 215.9 228.3 (109.1) 2010F 193.0 33.2 65.5 49.1 32.4 12.8 166.1 41.2 114.0 0.0 359.0 83.9 36.6 0.0 0.0 47.3 14.7 0.0 0.0 14.7 98.6 4.6 24.7 (16.9) 0.1 248.0 260.4 (116.5) 2011F 265.0 48.4 80.4 71.5 46.1 18.6 193.4 41.4 136.2 0.0 458.4 119.3 52.0 0.0 0.0 67.2 20.9 0.0 0.0 20.9 140.1 4.6 24.7 (16.9) 0.1 305.9 318.3 (146.7)
(W bn)
2012F 744.6 598.7 146.0 43.0 103.0 12.5 10.2 1.0 (0.7) 2.0 115.5 28.9 86.6 0.0 86.6 79.0 114.8 30.6 41.0 44.7 41.1 41.1 19.6 15.4 13.8 11.6
2012F 361.2 63.2 121.1 93.3 59.2 24.3 220.3 42.8 156.9 0.0 581.6 153.4 66.9 0.0 0.0 86.4 26.8 0.0 0.0 26.8 180.2 4.6 24.7 (16.9) 0.1 389.0 401.4 (202.1)
(W bn)
Financial Indicators
2008 Per share value (W) EPS BPS CFPS EBITDAPS SPS DPS Indicators (x) PER PBR PCFR EV/EBITDA PSR Ratios (%) ROE ROA ROIC Liabilities/equity Net debt/equity Interest coverage (x) 5,465 26,302 3,951 7,186 47,291 1,400 6.0 1.3 8.4 2.6 0.7 23.4 12.5 58.5 87.2 (57.9) 0.0 2009 1,979 26,916 (33) 2,710 33,707 400 16.9 1.2 (1,005.1) 7.9 1.0 8.0 5.0 13.6 35.6 (47.8) 0.0 2010F 3,916 30,443 4,619 5,154 42,967 400 15.0 1.9 12.7 8.9 1.4 14.6 10.7 23.2 37.9 (44.7) 0.0 2011F 6,739 36,794 7,508 8,940 62,577 400 8.7 1.6 7.8 4.8 0.9 21.2 15.0 34.9 44.0 (46.1) 0.0 2012F 9,509 45,915 10,588 12,606 81,740 400 6.2 1.3 5.6 2.9 0.7 24.1 16.7 42.6 44.9 (50.4) 0.0
Cash Flow
Operating cash flow Net profit Chg in non-cash items Depreciation Forex gains (losses) Equity method gains (losses) Others Chg in working capital Investment cash flow Chg in investment assets Chg in tangible assets Others Financing cash flow Chg in bonds Recapitalization Cash dividends Others Chg in cash Unlevered CFO Free Cash Flow 2008 30.5 49.8 5.7 4.5 (2.6) (0.5) 4.3 (25.0) 26.8 (5.0) (12.4) 44.2 (29.7) 0.0 0.0 (12.8) (16.9) (27.6) 36.0 8.2 2009 (3.9) 18.0 4.4 4.6 1.8 (1.2) (0.8) (26.3) 13.8 0.6 (3.8) 16.9 (21.3) 0.0 0.0 (12.4) (8.9) (11.4) (0.3) (10.9) 2010F 36.9 35.7 8.7 6.3 0.7 (1.0) 2.8 (7.5) (24.1) 3.5 (29.5) 1.8 (5.7) 0.0 0.0 (3.5) (2.2) 7.2 42.1 5.8 2011F 62.1 61.4 10.5 8.0 0.7 (1.0) 2.8 (9.7) (44.9) 0.8 (30.2) (15.5) (2.1) 0.0 0.0 (3.5) 1.5 15.2 68.4 27.4
2012F 88.8 86.6 12.0 9.5 0.7 (1.0) 2.8 (9.8) (71.7) (0.4) (30.2) (41.1) (2.3) 0.0 0.0 (3.5) 1.2 14.8 96.5 51.4
Country Aggregates
Sector Aggregates
Source: MSCI I/B/E/S Aggregates
SFA Engineering
May 4, 2010

SFA Engineering Date 10.5.4 10.4.20 10.3.29 10.3.19 10.2.12 09.12.16 09.11.9 09.10.14 09.8.17 09.5.27 09.5.11 09.4.13 09.3.23 09.2.24 09.2.10 09.1.13 08.12.16 08.11.6 08.10.21 08.9.11 08.9.10 08.5.30 08.5.9 Rating Target Price (W) BUY 100,000 BUY 75,000 BUY 75,000 BUY 50,000 BUY 50,000 BUY 50,000 BUY 60,000 BUY 60,000 BUY 60,000 BUY 70,000 BUY 70,000 BUY 70,000 BUY 70,000 BUY 70,000 BUY 50,000 BUY 50,000 BUY 50,000 BUY 50,000 BUY 80,000 BUY 80,000 Sector analyst changed BUY 90,000 BUY 90,000
(W) 150,000 100,000 50,000 0 08.5 08.8
SF Engineering A
T arget Price
08.11
09.2
09.5
09.8
09.11
10.2
10.5

Compliance Notice

May 4, 2010
GENERAL DISCLOSURE/DISCLAIMER BY HANA DAETOO SECURITIES CO LTD This report was written by Hana Daetoo Securities Co Ltd to help its clients invest in securities over which Hana Daetoo Securities Co Ltd holds the copyright. This report cannot be copied, redistributed, forwarded or altered in any way without the consent of Hana Daetoo Securities Co Ltd. This report has been prepared by Hana Daetoo Securities Co Ltd and is provided for information purposes only. Under no circumstances is it to be used or considered as an offer to sell, or a solicitation of any offer to buy. We make no representation as to its accuracy or completeness and it should not be relied upon as such. The company accepts no liability whatsoever for any direct or consequential loss arising from any use of this report or its contents. The final investment decision is based on the clients judgment, and this report cannot be used as evidence in any legal dispute related to investment decisions. ANALYST CERTIFICATION BY HANA DAETOO SECURITIES CO LTD The research analyst primarily responsible for the content of this research report, in part or in whole, certifies that the views about the companies and their securities expressed in this report accurately reflect his/her personal views. The analyst also certifies that no part of his/her compensation was, is, or will be, directly, or indirectly, related to specific recommendations or views expressed in this report. As of 4 May 2010 the analyst and his / her spouse and/or relatives who are financially dependent on the analyst, do not hold interests in the securities recommended in this report (interest includes direct or indirect ownership of securities, directorships and trustee positions). GENERAL DISCLOSURE/DISCLAIMER BY DBS VICKERS RESEARCH (SINGAPORE) PTE LTD This document is published and distributed by DBS Vickers Research (Singapore) Pte Ltd ("DBSVR"), a direct wholly-owned subsidiary of DBS Vickers Securities (Singapore) Pte Ltd ("DBSVS") and an indirect wholly-owned subsidiary of DBS Vickers Securities Holdings Pte Ltd ("DBSVH"). [This report is intended for clients of DBSV Group only and no part of this document may be (i) copied, photocopied or duplicated in any form or by any means or (ii) redistributed without the prior written consent of DBSVR.] The research is based on information obtained from sources believed to be reliable, but we do not make any representation or warranty as to its accuracy, completeness or correctness. Opinions expressed are subject to change without notice. This document is prepared for general circulation. Any recommendation contained in this document does not have regard to the specific investment objectives, financial situation and the particular needs of any specific addressee. This document is for the information of addressees only and is not to be taken in substitution for the exercise of judgement by addressees, who should obtain separate legal or financial advice. DBSVR accepts no liability whatsoever for any direct or consequential loss arising from any use of this document or further communication given in relation to this document. This document is not to be construed as an offer or a solicitation of an offer to buy or sell any securities. DBSVH is a wholly-owned subsidiary of DBS Bank Ltd. DBS Bank Ltd along with its affiliates and/or persons associated with any of them may from time to time have interests in the securities mentioned in this document. DBSVR, DBSVS, DBS Bank Ltd and their associates, their directors, and/or employees may have positions in, and may effect transactions in securities mentioned herein and may also perform or seek to perform broking, investment banking and other banking services for these companies. The assumptions for commodities in this report are for the purpose of forecasting earnings of the companies mentioned herein. They are not to be construed as recommendations to trade in the physical commodities or in futures contracts relating to the commodities mentioned in this report. DBSVUSA does not have its own investment banking or research department, nor has it participated in any investment banking transaction as a manager or co-manager in the past twelve months. Any US persons wishing to obtain further information, including any clarification on disclosures in this disclaimer, or to effect a transaction in any security discussed in this document should contact DBSVUSA exclusively. COMPANY-SPECIFIC / REGULATORY DISCLOSURES BY DBS VICKERS RESEARCH (SINGAPORE) PTE LTD 1. 2. DBS Vickers Securities (Singapore) Pte Ltd and its subsidiaries do not have a proprietary position in the securities recommended in this report as of 3 May 2010 DBSVR, DBSVS, DBS Bank Ltd and/or other affiliates of DBS Vickers Securities (USA) Inc ("DBSVUSA"), a U.S.registered broker-dealer, may beneficially own a total of 1% or more of any class of common equity securities of the subject company as of 4 May 2010 Compensation for investment banking services: 1) DBSVR, DBSVS, DBS Bank Ltd and/or other affiliates of DBSVUSA may have received compensation, within the past 12 months, and within the next 3 months may receive or intends to seek compensation for investment banking services from the subject company. DBSVUSA does not have its own investment banking or research department, nor has it participated in any investment banking transaction as a manager or co-manager in the past twelve months. Any US persons wishing to obtain further information, including any clarification on disclosures in this disclaimer, or to effect a transaction in any security discussed in this document should contact DBSVUSA exclusively.
3.
2)
10
May 4, 2010
RESTRICTIONS ON DISTRIBUTION General This report is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation. Singapore This report is being distributed in Singapore by DBSVR, which holds a Financial Advisers licence and is regulated by the MAS. This report may additionally be distributed in Singapore by DBSVS (Company Regn. No. 198600294G), which is an Exempt Financial Adviser as defined under the Financial Advisers Act. Any research report produced by a foreign DBS Vickers entity, analyst or affiliate is distributed in Singapore only to Institutional Investors, Expert Investors or Accredited Investors as defined in the Securities and Futures Act, Chap. 289 of Singapore. Any distribution of research reports published by a foreign-related corporation of DBSVR/DBSVS to Accredited Investors is provided pursuant to the approval by MAS of research distribution arrangements under Paragraph 11 of the First Schedule to the FAA. This report is being distributed in the UK by DBS Vickers Securities (UK) Ltd, who is an authorised person in the meaning of the Financial Services and Markets Act and is regulated by The Financial Services Authority. Research distributed in the UK is intended only for institutional clients. . This report is being distributed in Dubai/United Arab Emirates by DBS Bank Ltd, Dubai (PO Box 506538, 3 Floor, Building 3, Gate Precinct, DIFC, Dubai, United Arab Emirates) and is intended only for clients who meet the DFSA regulatory criteria to be a Professional Client. It should not be relied upon by or distributed to Retail Clients. DBS Bank Ltd, Dubai is regulated by the Dubai Financial Services Authority. Neither this report nor any copy hereof may be taken or distributed into the United States or to any U.S. person except in compliance with any applicable U.S. laws and regulations. In any other jurisdictions, except if otherwise restricted by laws or regulations, this report is intended only for professional, institutional or sophisticated investors as defined in the laws and regulations of such jurisdictions. DBS Vickers Research (Singapore) Pte Ltd 8 Cross Street, #02-01 PWC Building, Singapore 048424 Tel. 65-6533 9688, Fax: 65-6226 8048 Company Regn. No. 198600295W DBS Vickers Securities Regional Offices HONG KONG DBS Vickers (Hong Kong) Ltd 18th Floor Man Yee Building 68 Des Voeux Road Central Central, Hong Kong Tel: 852-2820 4888 Fax: 852-2868 1523 Participant of The Stock Exchange of HK Limited INDONESIA PT DBS Vickers Securities (Indonesia) Plaza Permata, Top Floor Jl. M.H. Thamrin Kav. 57 Jakarta 10350 Tel: 62-21-3983 2668 Fax: 62-21-3983 2669 MALAYSIA Hwang-DBS Vickers Research Sdn Bhd Suite 26.03, 26Floor Menara Keck Seng 203 Jalan Bukit Bintang 55100 Kuala Lumpur Tel: 60-3-2711 2222 Fax: 60-3-2711 2333 UNITED STATES DBS Vickers Securities (USA) Inc 805 Third Avenue Suite 1201 New York, New York 10022 Tel: 1-212-826 1888 Fax: 1-212-826 8704 Member of FINRA and SIPC SINGAPORE DBS Vickers Securities (Singapore) Pte Ltd 8 Cross Street #02-00 PWC Building Singapore 048424 Tel: 65-6533 9688 Fax: 65-6226 8048
rd
United Kingdom
Dubai/United Arab Emirates
United States
Other jurisdictions
UNITED KINGDOM DBS Vickers Securities (UK) Ltd 4th Floor Paternoster House 65 St Pauls Churchyard London EC4M 8AB Tel: 44-20-7618 1888 Fax: 44-20-7618 1900 Regulated by The Financial Services Authority
THAILAND DBS Vickers Securities (Thailand) Co Ltd 15th Floor Siam Tower 989 Rama 1 Road Pathumwan, Bangkok 10330 Tel: 66-2-658 1222 Fax: 66-2-658 1269
Hana Daetoo Securities KOREA Hana Daetoo Securities Co Ltd 14th Floor Hana Daetoo Building 27-3, Youido-Dong, Youngdeungpo-Gu Seoul, Korea 150-705 Tel: 82-2-3771-7740 Fax: 82-2-3771-8580
11
Singapore Result Snapshot
Raffles Education
Bloomberg: RLS SP
Reuters: RLSE.SI
5 May 2010 FULLY VALUED S$0.38

EPS (S cts) 3.5 1.5 1.8 EPS Gth Pre-Ex (%) 1 (57) 20 EPS Revision (8.7) Price Target : S$ 0.33 (Prev S$ 0.32) PE (x) PBV (x) Net Dividend Yield (%) 0.0 1.9 10.8 0.0 1.8 24.8 0.0 1.6 20.7
Revenue down, costs up

Reporting Period 3Q FY10 Performance Below Mkt Cap S$984m US$712m FY 2009A 2010F 2011F
Result Summary
FYE Jun (S$m) Sales Operating Expense Operating Profit Other Op Income EBIT Finance Cost Share of Associates Exceptional Pretax Profit Tax Minority Interests Net Profit Recurrent Profit EPS (S cts) 3Q09 3Q10 YoY 9M09 9M10 YoY
At a Glance
3Q10 below expectations, recurring earnings -64% yoy Earnings to remain lackluster and will take time to pick up Maintain Fully Valued, TP: S$0.33 based on 18x FY11F EPS
49.9 44.7 (10) (35.9) (37.4) 4 13.9 7.3 (48) 1.1 1.0 (13) 15.1 8.3 (62) (2.7) (3.3) 24 (1.5) 0.1 nm (26.6) 5.5 nm (15.6) 10.5 nm (0.8) (1.0) 20 (0.0) (0.4) 2,418 (16.5) 9.1 nm 10.1 (0.6) 3.6 0.4 (64) 157.2 143.4 (9) (95.1) (107.9) 13 62.0 35.5 (43) 19.2 2.5 (87) 38.0 (53) 81.2 (7.4) (9.6) 31 0.2 0.2 (1) (26.6) 5.5 nm 47.6 34.1 (28) (5.0) (3.0) (40) (0.6) (1.0) 66 42.0 30.1 (28) 68.6 24.7 (64) (29) PPT chg (25)
EBIT margin
30.2% 18.5%
nm 1.6 1.1 PPT chg (12) 51.7% 26.5%
Comment on Results 3Q10 came in below expectations. Excluding the S$5.5m gain on investment properties, 3Q recurring earnings was down 64% yoy as revenue slipped by 10% to S$44.7m, mainly due to slower enrolment and higher expenses. Student population was down to 30,830 (3Q09: 32,797) mainly due to 10% drop in NES students (since 1Q10). PES intake was stagnant amid financial crisis. Staff costs increased 17% yoy due to higher headcount (2,919 vs 2,726 in 3Q09) as the company started more schools in the region (5 in FY09; 8 in FY10). As a result, 9M10 EBIT margin and recurrent net margin fell 25 ppt and 26 ppt yoy respectively. Earnings to be plagued by start up costs. We expect marginal 8% growth in revenue for FY11F on a pick up in enrolment at its new schools. However, start-up expenses (at 8 new colleges in FY10) will plague earnings. As such, we revised our FY11F earnings down by 8.7% on higher staff and other operating expenses. Recommendation Maintain FV, TP adjusted to S$0.33, as we roll valuation forward to FY11F PE. We expect earnings to remain lackluster and will need time to recover to pre-crisis level as it ramp-up opening of new schools. OUC listing - a big bet. OUC recorded S$5.2m net profit on S$22.1m revenue in 9MFY10. The Group has divested a 10% stake in OUC to Khazanah for RMB300m in Mar. More recently, AIF Capital is looking to acquire 10% stake for RMB350m, with an implied value of c.1.8x P/B and c.100x current P/E, which looks stretched in our view. However, we believe the parties are motivated by the Groups plan to list OUC in HK by 2012, as previously announced. This is an upside risk to our call, but we believe near term earnings will weigh on share price. ANALYST: Andy SIM +65 6398 7969 andysim@dbsvickers.com Patrick XU +65 6398 7957 patrickxu@dbsvickers.com
Recurrent net margin 20.2% 8.1%
(12) 43.6% 17.2% (26)
Price Relative
S$ 1 .7 0 1 .5 0 1 .3 0 1 .1 0 0 .9 0 0 .7 0 0 .5 0 0 .3 0 2006 R e la t iv e In d e x 205 185 165 145 125 105 85 65 2007 2008 2009 45 2010
R a f f le s E d u c a t io n (L H S )
R e la t iv e S T I IN D E X ( R H S )
Student population
3Q09 PES+PNES NES Total OUC 11,213 21,584 32,797 34,708 4Q09 11,244 21,584 32,828 34,708 1Q10 12,082 19,427 31,509 34,898 2Q10 11,611 19,427 31,038 36,114 3Q10 11,403 19,427 30,830 36,114
PES = Private Education System PNES = Private National Education System NES = National Education System OUC = Oriental University City
www.dbsvickers.com Refer to important disclosures at the end of this report ed: MY / sa: JC
Result Snapshot Raffles Education
Deteriorating Sequential Results

FYE Jun (S$m) Sales Personnel expenses Dep & amortisation exp Other operating exp Total Operating Expense Operating Profit Other Operating Income EBIT Finance Cost Share of Associates Exceptional Gains/(Losses) Pretax Profit Tax Minority Interests Net Profit Recurrent Profit 3Q09 49.9 (12.1) (3.8) (20.1) (35.9) 13.9 1.1 15.1 (2.7) (1.5) (26.6) (15.6) (0.8) (0.0) (16.5) 10.1 4Q09 44.8 (17.2) (3.7) (17.7) (38.5) 6.3 19.0 25.3 (2.2) 0.1 2.2 25.3 (16.3) 0.1 9.1 13.4 1Q10 51.6 (12.7) (3.6) (18.2) (34.6) 16.9 0.7 17.6 (3.3) 0.1 0.0 14.4 (0.3) (0.1) 14.0 14.0 2Q10 47.2 (13.5) (3.6) (18.8) (35.8) 11.3 0.8 12.1 (3.0) 0.1 0.0 9.1 (1.7) (0.4) 7.0 7.0 3Q10 44.7 (14.1) (3.8) (19.5) (37.4) 7.3 1.0 8.3 (3.3) 0.1 5.5 10.5 (1.0) (0.4) 9.1 3.6 Y-o-Y chg (10) 17 2 (3) 4 (48) (13) (45) 24 nm nm nm 20 nm nm (64) Q-o-Q chg (5) 5 6 4 4 (36) 27 (32) 9 38 nm 15 (40) (3) 29 (49) Comments Mainly due to shrinking student population Recruiting teachers for new schools, including S$560k of CEOs profit share for 3Q10
Disposal gain of land held by OUC in 4Q09 Declining EBIT
Revaluation gain of OUCs property in 3Q10
Declining recurrent profit
Page 2
Singapore Result Snapshot
ST Engineering
Bloomberg: STE SP
Reuters: STEG.SI
5 May 2010 BUY S$3.13

Price Target : S$ 3.55 (Prev S$ 3.70) EPS Revision Down 3.6% Down 4.2% PE (x) 21.2 20.0 18.7 PBV (x) 6.0 5.8 5.5 Net Dividend Yield (%) 4.3 4.5 4.8
Currency issues derail earnings slightly

Reporting Period 1Q 2010 Performance Slightly Below Mkt Cap S$9,471m US$6,857m FY 2009A 2010F 2011F EPS (S cts) 14.7 15.7 16.8 EPS Gth Pre-Ex (%) (6) 6 7
Result Summary
FY Dec (S$ m) 1Q2009 1Q2010 yoy chg
At a Glance Net profit of S$93m (including forex losses) was slightly below our estimates as Aerospace earnings disappointed Earnings should, however, gather momentum in 2H10 as new projects in Aerospace, Land Systems contribute Management more upbeat on prospects for rest of year, expects FY10 Group PBT to be higher than FY09 Maintain BUY with reduced TP of S$3.55 as we trim our FY10 EPS estimates by 3.6% on account of weaker US$
P&L Items Sales Gross Profit EBIT Exceptional Gain/(Loss) Pretax Profit Net Profit EPS (S cts) Gross Margin (%) BS & CF Items Operating Cashflow Capex Net Cash/(Debt)
1,318.2 245.1 113.6 0.0 111.3 85.2 2.8 18.6 351.5 52.6 473.0
1,360.9 269.4 112.0 0.0 116.6 92.8 3.1 19.8 456.6 62.3 720.3
3.2 9.9 (1.4) N/A 4.7 8.9 8.5
Price Relative
S$ 4 .3 0 3 .8 0 3 .3 0 2 .8 0 2 .3 0 87 1 .8 0 2006 67 2010 R e la t iv e In d e x 207 187 167 147 127 107
Comment on Results Weak margins and forex losses. Owing to a slowdown in the components business, Aerospace division margins weakened to 9.6% in 1Q10 vs. 12.9% in 4Q09 and PBT declined 26% q-o-q. As a result, the Groups reported net profit of S$92.8m (up 9% y-o-y, down 28% q-o-q), on the back of S$1.36bn in revenues, came in slightly below our estimates, even after adjusting for a forex loss of S$8.3m. Being more heavily exposed to the heavy maintenance business, the ongoing recovery in air travel has had a more lagged effect on STEs MRO business than earlier anticipated. Land Systems PBT was also down 13% y-o-y, partly due to a weak Euro. Recommendation Management seemed more upbeat about the Groups prospects for the rest of the year, as they now expect FY10 PBT to be higher than FY09 PBT, rather than comparable as guided at end-FY09. This comes on the back of a robust orderbook of S$11.8bn, up significantly from the S$10.3bn as of end-FY09. The new contract from Jet Airways (India) should commence in 2Q10, and a majority of the Warthog deliveries to the UK MOD are also scheduled for 2H10. On the PTF conversion front, 3 aircraft were redelivered in 1Q10 and another 14 aircraft are scheduled for redelivery in FY10, thus adding to Aerospace division profitability. Key risk is currency. Every 1 % change in USD/SGD rate affects topline by S$13m and bottomline by about S$1.3m. Thus, given the prospects of a weaker US$ our economist recently revised his end-FY10 USD/SGD target to 1.34 from 1.38 we trim our FY1011 EPS estimates by 3-4% and adjust our TP to S$3.55. Maintain BUY; given the largely stable earnings base and decent dividend yield of 4.5%.
ANALYST: Janice CHUA +65 6398 7954 janicechua@dbsvickers.com
2007
2008
2009
S T E n g in e e r in g ( L H S )
R e la t iv e S T I IN D E X ( R H S )
STE Orderbook progression chart

S$m 14.0 12.0 10.0 8.0 6.0 4.0 2.0 0.0 FY04 FY05 F Y06 FY07 FY08 FY09 1Q10 5.3 5.4 7.4 9.5 11.8 10.0 10.3
www.dbsvickers.com Refer to important disclosures at the end of this report ed: JS / sa: JC
Result Snapshot ST Engineering
ST Engineering Blended Valuation Summary

Method P/E Div Yield (Desired) DCF Average No of shares Value per share Basis (FY10) 472.6 14.1 Parameter 23.0 4 Value per share 10871 10634 10654 10720 3018 3.55
Source: DBS Vickers
ST Engineering PE valuation trading range (2001 present)

5.0 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jul-01 Jul-02 Jul-03 Jul-04 Jul-05 Jul-06 Jul-07 Jul-08 Jul-09 26x 23x 20x 17x 14x
Source: Bloomberg, DBS Vickers
Page 2
Regional Morning Pack
DBSV recommendations are based an Absolute Total Return* Rating system, defined as follows: STRONG BUY (>20% total return over the next 3 months, with identifiable share price catalysts within this time frame) BUY (>15% total return over the next 12 months for small caps, >10% for large caps) HOLD (-10% to +15% total return over the next 12 months for small caps, -10% to +10% for large caps) FULLY VALUED (negative total return i.e. > -10% over the next 12 months) SELL (negative total return of > -20% over the next 3 months, with identifiable catalysts within this time frame)
Share price appreciation + dividends

DBS Vickers Research is available on the following electronic platforms: DBS Vickers (www.dbsvresearch.com); Thomson (www.thomson.com/financial); Factset (www.factset.com); Reuters (www.rbr.reuters.com); Capital IQ (www.capitaliq.com) and Bloomberg (DBSR GO). For access, please contact your DBSV salesperson.
GENERAL DISCLOSURE/DISCLAIMER This document is published by DBS Vickers Research (Singapore) Pte Ltd ("DBSVR"), a direct wholly-owned subsidiary of DBS Vickers Securities (Singapore) Pte Ltd ("DBSVS") and an indirect wholly-owned subsidiary of DBS Vickers Securities Holdings Pte Ltd ("DBSVH"). [This report is intended for clients of DBSV Group only and no part of this document may be (i) copied, photocopied or duplicated in any form by any means or (ii) redistributed without the prior written consent of DBSVR.] The research is based on information obtained from sources believed to be reliable, but we do not make any representation or warranty as to its accuracy, completeness or correctness. Opinions expressed are subject to change without notice. This document is prepared for general circulation. Any recommendation contained in this document does not have regard to the specific investment objectives, financial situation and the particular needs of any specific addressee. This document is for the information of addressees only and is not to be taken in substitution for the exercise of judgement by addressees, who should obtain separate legal or financial advice. DBSVR accepts no liability whatsoever for any direct or consequential loss arising from any use of this document or further communication given in relation to this document. This document is not to be construed as an offer or a solicitation of an offer to buy or sell any securities. DBSVH is a whollyowned subsidiary of DBS Bank Ltd. DBS Bank Ltd along with its affiliates and/or persons associated with any of them may from time to time have interests in the securities mentioned in this document. DBSVR, DBSVS, DBS Bank Ltd and their associates, their directors, and/or employees may have positions in, and may effect transactions in securities mentioned herein and may also perform or seek to perform broking, investment banking and other banking services for these companies. The assumptions for commodities in this report are for the purpose of forecasting earnings of the companies mentioned herein. They are not to be construed as recommendations to trade in the physical commodities or in futures contracts relating to the commodities mentioned in this report. DBSVUSA does not have its own investment banking or research department, nor has it participated in any investment banking transaction as a manager or co-manager in the past twelve months. Any US persons wishing to obtain further information, including any clarification on disclosures in this disclaimer, or to effect a transaction in any security discussed in this document should contact DBSVUSA exclusively. ANALYST CERTIFICATION The research analyst primarily responsible for the content of this research report, in part or in whole, certifies that the views about the companies and their securities expressed in this report accurately reflect his/her personal views. The analyst also certifies that no part of his/her compensation was, is, or will be, directly, or indirectly, related to specific recommendations or views expressed in this report. As of 5 May 2010, the analyst and his / her spouse and/or relatives who are financially dependent on the analyst, do not hold interests in the securities recommended in this report (interest includes direct or indirect ownership of securities, directorships and trustee positions). COMPANY-SPECIFIC / REGULATORY DISCLOSURES 1. DBS Vickers Securities (Singapore) Pte Ltd and its subsidiaries have a proprietary position in HK Land (HKL SP) as of 30 April 2010. PT. DBS Vickers Securities Indonesia ("DBSVI") have a proprietary position in the mentioned company recommended in this report as of 30 March 2010. DBS Bank Ltd has been appointed as the designated market maker of structured warrant(s) for Wilmar issued by DBS Bank Ltd. DBSVHK, DBSVR, DBSVS, DBS Bank Ltd and/or other affiliates of DBS Vickers Securities (USA) Inc ("DBSVUSA"), a U.S.registered broker-dealer, beneficially own a total of 1% or more of any class of common equity securities of Fortune REIT (778 HK / FRT SP) mentioned in this document as of the latest available date of the updated information. DBSVHK, DBSVR, DBSVS, DBS Bank Ltd and/or other affiliates of DBS Vickers Securities (USA) Inc ("DBSVUSA"), a U.S.registered broker-dealer, beneficially own a total of 5% or more of any class of common equity securities of Fortune REIT (778 HK / FRT SP), CDL Hospitality mentioned in this document as of 5 May 2010. Compensation for investment banking services: 1) DBSVHK, DBSVR, DBSVS, DBS Bank Ltd and/or other affiliates of DBSVUSA have received compensation, within the past 12 months, and within the next 3 months may receive or intends to seek compensation for investment banking services from Fortune REIT (778 HK / FRT SP), Beijing Enterprise Water (371 HK), Beijing Jingkelong (814 HK), HSBC
2. 3.
4.
Regional Morning Pack
(5 HK), Singtel mentioned in this document. 2) DBSVUSA does not have its own investment banking or research department, nor has it participated in any investment banking transaction as a manager or co-manager in the past twelve months. Any US persons wishing to obtain further information, including any clarification on disclosures in this disclaimer, or to effect a transaction in any security discussed in this document should contact DBSVUSA exclusively.
RESTRICTIONS ON DISTRIBUTION General This report is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation. Australia This report is being distributed in Australia by DBSVR and DBSVS, which are exempted from the requirement to hold an Australian financial services licence under the Corporation Act 2001 [CA] in respect of financial services provided to the recipients. DBSVR and DBSVS are regulated by the Monetary Authority of Singapore [MAS] under the laws of Singapore, which differ from Australian laws. Distribution of this report is intended only for wholesale investors within the meaning of the CA. This report is being distributed in Hong Kong by DBS Vickers (Hong Kong) Limited which is licensed and regulated by the Hong Kong Securities and Futures Commission. This report is being distributed in Singapore by DBSVR, which holds a Financial Advisers licence and is regulated by the MAS. This report may additionally be distributed in Singapore by DBSVS (Company Regn. No. 198600294G), which is an Exempt Financial Adviser as defined under the Financial Advisers Act. Any research report produced by a foreign DBS Vickers entity, analyst or affiliate is distributed in Singapore only to Institutional Investors, Expert Investors or Accredited Investors as defined in the Securities and Futures Act, Chap. 289 of Singapore. Any distribution of research reports published by a foreign-related corporation of DBSVR/DBSVS to Accredited Investors is provided pursuant to the approval by MAS of research distribution arrangements under Paragraph 11 of the First Schedule to the FAA. This report is being distributed in the UK by DBS Vickers Securities (UK) Ltd, who is an authorised person in the meaning of the Financial Services and Markets Act and is regulated by The Financial Services Authority. Research distributed in the UK is intended only for institutional clients. This report is being distributed in Dubai/United Arab Emirates by DBS Bank Ltd, Dubai (PO Box 506538, 3rd Floor, Building 3, Gate Precinct, DIFC, Dubai, United Arab Emirates) and is intended only for clients who meet the DFSA regulatory criteria to be a Professional Client. It should not be relied upon by or distributed to Retail Clients. DBS Bank Ltd, Dubai is regulated by the Dubai Financial Services Authority. Neither this report nor any copy hereof may be taken or distributed into the United States or to any U.S. person except in compliance with any applicable U.S. laws and regulations. In any other jurisdictions, except if otherwise restricted by laws or regulations, this report is intended only for qualified, professional, institutional or sophisticated investors as defined in the laws and regulations of such jurisdictions.
Hong Kong
Singapore
United Kingdom
Dubai/ United Arab Emirates
United States
Other jurisdictions
DBS Vickers Research (Singapore) Pte Ltd 8 Cross Street, #02-01 PWC Building, Singapore 048424 Tel. 65-6533 9688, Fax: 65-6226 8048 Company Regn. No. 198600295W

2010 May - Morning Pack (DBS Group) For Asian Stocks

Enviado por

Dados do documento

Título original

Direitos autorais

Formatos disponíveis

Compartilhar este documento

Compartilhar ou incorporar documento

Opções de compartilhamento

Você considera este documento útil?

Este conteúdo é inapropriado?

Direitos autorais:

Formatos disponíveis

2010 May - Morning Pack (DBS Group) For Asian Stocks

Enviado por

Direitos autorais:

Formatos disponíveis

Regional

Ideas & Updates

Mavis Hui, Titus Wu

NDCR Corp Mtg/Lunch/Conf Call 2010*

Singapore Malaysia HK HSI HK HSCCI (Red) HK HSCEI (H) Thailand Indonesia

20.1 17.5 24.6 23.4 31.1 15.6 17.3

14.4 12.6 15.8 15.2 18.3 12.9 18.0

14.5 16.3 13.9 15.6 11.9 10.9 14.9

12.7 14.5 12.0 13.5 10.1 9.7 12.9

Source: DBS Vickers

4.3% 33.3% 23.0% 5.3% 1 8.2% 2.1 % 6.8%

US Junk Bond Asia Convertible Bonds US IG CDS CBOE SPX Volatility

Regional Market Focus

High Conviction Picks

Company Big Caps (>$2bn) Sembcorp Marine

Regional Market Focus High Conviction Pick

Company Big Caps (>$2bn) Thai Union Frozen

Source: Bloomberg, DBS Vickers, Hanadaetoo Securities

Price 4-May 10 (LCY)

Target Price (LCY)

% Chg since Entry Date

Date of Entry to List

3mths Avg Daily T/O US$m

3 (5) 2 (3) 7 (2) 8 6 4 (6) (1) (4)

1 (3) 16 15 6 (1) (9) (3) 42 28 8 (20)

Regional Market Focus High Conviction Picks

Thai Airways International

Source: Bloomberg, DBS Vickers, Hanadaetoo Securities

Singapore Company Focus

First Ship Lease Trust

DBS Group Research . Equity

HOLD S$0.545 STI : 2,901.18

Unexpected counterparty issues

Downgrade to HOLD, TP reduced to S$0.55

Forecasts and Valuation

599 326 / 236 26.4 6.0 5.0 37.4 1,154

Source of all data: Company, DBS Vickers, Bloomberg

Company Focus First Ship Lease Trust

Balance Sheet (US$ m)

87 (63) 24 0 24 0 0 (19) 0 5 0 0 0 5 5 79 112.7 107.7 156.8 (23.5) N/A

99 (68) 31 0 31 0 0 (23) 0 8 0 0 0 8 8 92 14.0 17.0 28.5 74.6 N/A

96 (69) 27 0 27 0 0 (29) 0 (2) 0 0 0 (3) (3) 90 (2.4) (2.7) (13.2) NM N/A

906 0 0 27 0 0 0 933 0 45 509 0 378 0 933 (45) (483)

845 0 0 57 0 1 0 903 32 20 456 15 381 0 903 (18) (432)

782 0 0 53 0 2 0 838 32 17 424 15 350 0 838 (15) (403)

719 0 0 53 0 2 0 775 32 17 398 15 313 0 775 (15) (377)

Cash Flow Statement (US$ m)

Rates & Ratio

5 55 0 0 0 21 81 (354) 0 0 0 1 (353) (54) 350 0 (15) 281 8

8 61 0 0 (1) 24 92 0 0 0 0 0 0 (45) (21) 28 (25) (62) 30

(2) 63 0 0 (4) 0 57 0 0 0 0 0 0 (28) (32) 0 0 (60) (4)

(5) 63 0 0 0 0 58 0 0 0 0 0 0 (32) (26) 0 0 (58) 0

Quarterly / Interim Income Statement (US$ m)

25 (17) 8 0 8 0 0 (6) 0 2 0 0 2 2 23 0.1 0.3 0.8 52.9 31.8 31.8 9.4

25 (17) 8 0 8 0 0 (5) 0 3 0 0 3 3 23 (0.9) (1.1) (3.1) 16.6 31.0 31.0 11.1

24 (17) 8 0 8 0 0 (6) 0 2 0 0 2 2 23 (0.6) (0.1) (0.2) (34.1) 31.2 31.2 7.4

24 (17) 7 0 7 0 0 (7) 0 1 0 0 1 1 23 (0.2) (0.4) (3.4) (62.0) 30.2 30.2 2.8

Source: Company, DBS Vickers

Singapore Company Focus

DBS Group Research . Equity

BUY S$2.96 STI : 2,901.18

Reversal of traditional role

Forecasts and Valuation