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

Monday, 16 May 2011

Asian Daily (Asia Edition)EPS, TP and Rating changes EPS TP (% change) T+1 T+2 Chg Up/Dn Rating PICC 4 5 10 6 N (U) Dr. Reddy's 2 (4) 2 9 O (O) Gammon India 0 (1) (10) 56 O (O) Jaiprakash Associates Ltd.

0 (13) (12) 40 O (O)

Jaiprakash Power Ventures Ltd

(1) 0 0 35 N (N)

Lupin 2 (4) 0 13 O (O) ComfortDelGro (11) (10) (10) 17 O (O) Neptune Orient Lines (17) (11) (1) 24 O (O) AmorePacific (14) 0 0 27 O (O) Hyundai Dept. Store 0 3 15 20 O (O) Korea Life 0 (5) (9) 33 O (O)

C3: Connecting clients to corporates

Hong Kong YTL Corp (YTLS.KL)

Date 16-17 May, Hong Kong Coverage Analyst Tingmin Tan

Mecox Lane Limited (MCOX.O) Post results Date 19 May, Hong Kong Coverage Analyst Wallace Cheung

Giordano Intl. (0709.HK) Post results Date 20 May, Hong Kong Coverage Analyst Gabriel Chan

TMB Bank Public Co Ltd (TMB.BK) Date 31 May, Hong Kong Coverage Analyst Thaniya Kevalee

Singapore YTL Corp (YTLS.KL)

Date 18-19 May, Singapore Coverage Analyst Tingmin Tan

Asian Property Development (AP.BK) Date 19 May, Singapore Coverage Analyst Chai Techakumpuch

US Siam Commercial Bank (SCB.BK)

Date 16-19 May, US Coverage Analyst Dan Fineman

UEM Land Holdings Bhd (ULHB.KL) Date 31-May - 01-June, US Coverage Analyst Ashish Gupta

Europe Wing Hang Bank (0302.HK)

Date 17-18 May, London Coverage Analyst Franco Lam

China Resources Gas Group Limited Date 23-27 May, Europe Coverage Analyst Edwin Pang

Sun Hung Kai Properties (0016.HK) Date 24-26 May, London Coverage Analyst Cusson Leung

Others China Investment Conference

Date 22-24 June, China

Contact cseq.events@credit-suisse.com or Your usual sales representative.

Top of the pack ...

Electrical Equipment Sector – Maintain UW Yang Y. Song (3) New report: They are not cheap – A look at valuation

Wilmar International (WIL SP) – Maintain O Tan Ting Min (4) 22-month lows

Executive Survey: Rising Emerging Market Costs Stephane Rochon (5) The impact to margins and corporate strategy

PICC (2328 HK) – Upgrade to N Arjan van Veen (6) Margins improving, growth re-emerging and capital resolution in 2011?

... and the whole pack Global Executive Survey: Rising Emerging Market Costs Stephane Rochon (5) The impact to margins and corporate strategy

Regional Asia Small-Cap Sector Kenny Lau, CFA (7) David & Goliath Small-Cap Weekly: The battle against Certificates of Confiscation

China Electrical Equipment Sector – Maintain UW Yang Y. Song (3) New report: They are not cheap – A look at valuation Hong Kong/China Textile Sector – Maintain MW Eva Wang (8) World cotton estimates for FY7/12 imply easing supply but continuous shortage Anta Sports (2020 HK) – Maintain O Eva Wang (9) Strong 25% 4Q11 trade fair order growth; 1Q11 review China Investment Conference 2011 Vincent Chan (10) Presenting CIC 2011 China Software & IT Services Sector Vincent Chan (11) Software Expo takeaway: Watch cloud computing, base software and key industries PICC (2328 HK) – Upgrade to N Arjan van Veen (6) Margins improving, growth re-emerging and capital resolution in 2011? Shimao Property (813 HK) – Maintain N Wenhan Chen (12) More launches to come albeit a few already delayed; YTD commercial property sales below guidance

Monday, 16 May 2011

Asian Daily

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Asian indices - performance (% change) Latest 1D 1W 3M YTD ASX300 4,721 0.3 (0.7) (4.5) (0.8) CSEALL 7,320 0.3 0.0 (3.8) 10.3 Hang Seng 23,276 0.9 0.1 0.5 1.0 H-SHARE 12,894 0.8 0.7 3.7 1.6 JCI 3,832 0.6 0.9 12.2 3.5 KLSE 1,541 0.6 1.7 2.3 1.4 KOSPI 2,120 (0.1) (2.8) 6.6 3.4 KSE100 11,967 0.0 0.7 (0.9) (0.5) NIFTY 5,545 1.1 (0.1) 1.2 (9.6) PCOMP 4,292 (0.5) 1.7 12.6 2.2 RED CHIP 4,228 0.4 0.1 4.0 1.4 SET 1,085 (0.1) 3.2 10.5 5.1 STI 3,164 1.1 2.1 2.2 (0.8) TWSE 9,007 (0.3) 0.3 3.4 0.4 VNINDEX 480 (0.5) 1.5 (6.5) (1.0)

Thomson Financial Datastream Asian currencies (vs US$) (% change) Latest 1D 1W 3M YTD A$ 0.9 0.9 (1.7) 5.8 3.9 Bt 30.3 (0.3) (0.4) 1.1 (1.1) D 20,550.0 0.0 0.1 1.7 (5.1) NT$ 28.6 0.3 0.5 2.5 1.8 P 43.1 0.7 0.0 1.3 1.1 PRs 85.2 (0.2) (0.5) (0.1) 0.6 Rp 8,580.0 0.9 0.0 3.9 4.6 Rs 44.9 0.7 (0.3) 1.4 (0.4) S$ 1.2 (0.4) (1.2) 2.5 2.8 SLRs 109.8 0.1 0.0 1.2 1.1 W 1,088.9 (0.7) (0.6) 2.7 2.9

Thomson Financial Datastream Global indices (% change) Latest 1D 1W 3M YTD DJIA 12,596 (0.8) (0.3) 2.5 8.8 S&P 500 1,338 (0.8) (0.2) 0.1 6.4 NASDAQ 2,828 (1.2) 0.0 0.1 6.6 SOX 441 (1.4) (0.6) (5.5) 7.1 EU-STOX 2,619 (0.7) (0.8) (5.1) 1.3 FTSE 5,926 (0.3) (0.9) (2.6) 0.4 DAX 7,403 (0.5) (1.2) (0.1) 7.1 CAC-40 4,019 (0.1) (1.0) (3.2) 5.6 NIKKEI 9,649 (0.7) (2.1) (10.7) (5.7) TOPIX 840 (1.1) (1.9) (13.2) (6.5) 10 YR LB 3.17 (1.6) 0.8 (12.6) (3.7) 2 YR LB 0.53 (3.3) (3.1) (36.2) (10.3) US$:E 1.41 (1.4) (2.2) 4.1 5.3 US$:Y 80.9 (0.2) (0.1) 3.5 0.6 BRENT 113.8 1.0 3.6 13.4 20.7 GOLD 1,494.3 (1.2) (1.0) 8.8 5.8 VIX 17.1 6.5 (7.2) 2.1 (3.8)

Thomson Financial Datastream

MSCI Asian indices – valuation & perf. EPS grth. P/E (x) Performance MSCI Index 10E 11E 10E 11E 1D 1M YTD Asia F X Japan 39 15 14.6 12.0 (1.7) (0.9) 2.0 Asia Pac F X J. 30 17 14.8 12.2 (2.1) (1.3) 2.3 Australia 4 19 16.1 13.7 0.3 (3.5) 3.1 China 34 15 13.3 11.6 0.5 (3.7) 2.1 Hong Kong 34 14 17.3 15.1 1.3 (1.4) 0.5 India 21 19 17.6 14.8 1.3 (7.0) (10.5) Indonesia 16 19 17.6 14.8 0.7 3.5 10.3 Korea 40 22 12.8 10.5 (0.3) 0.0 7.9 Malaysia 32 14 17.2 15.2 1.1 0.8 4.1 Pakistan 31 17 8.8 7.5 (0.3) 0.9 1.6 Philippines 43 9 16.3 15.0 (0.6) (0.2) (1.9) Singapore 27 5 15.0 14.4 1.2 (0.4) 1.2 Sri Lanka 70 15 20.0 17.5 0.2 (4.2) (3.5) Taiwan 83 9 15.7 14.3 (0.4) 4.1 1.9 Thailand 32 14 14.3 12.5 0.2 (1.6) 6.3

* IBES estimates

Hong Kong Hong Kong Economics Christiaan Tuntono (13) Very strong 1Q11 GDP growth prompts forecast upgrade Great Eagle Hdg. (41 HK) – Maintain O Joyce Kwock (14) It's still not late to check in: We expect 1Q11 hotel growth momentum to continue India Areva T&D India Ltd (ATD IN) – Maintain U Venugopal Garre (15) 1Q below estimates; overall T&D competitive environment remains challenging Dr. Reddy's (DRRD IN) – Maintain O Anubhav Aggarwal (16) What’s one-off and what’s not in FY13 guidance? Gammon India (GMON IN) – Maintain O Amish Shah, CFA (17) 4Q11 disappoints on loss-making legacy orders Jaiprakash Associates Ltd. (JPA IN) – Maintain O Amish Shah, CFA (18) Construction margins disappointed but 4Q11 results in line Jaiprakash Power Ventures Ltd (JPVL IN) – Maintain N Amish Shah, CFA (19) In-line 4Q11, planned equity issuance a key trigger for the stock Lupin (LPC IN) – Maintain O Anubhav Aggarwal (20) Margins continue to be subdued despite strong sales Suzlon (SUEL IN) – Maintain N Venugopal Garre (21) Forex gains and accounting change prop an otherwise extremely disappointing 4Q Indonesia Indonesia Cement Sector – Maintain OW Ella Nusantoro (22) Positive domestic cement consumption in April Pakistan National Bank (NBP PA) – Maintain U Farhan Rizvi, CFA (23) 1Q results call – Management positive but NPLs and deposit attrition are key concerns Singapore ComfortDelGro (CD SP) – Maintain O Su Tye Chua (24) 1Q11 below expectation – fuel surge dragged earnings Midas (MIDAS SP) – Maintain O Su Tye Chua (25) 1Q11 in line – Ramp up of new capacities to drive a stronger 2H Neptune Orient Lines (NEPS.SI) – Maintain O Sam Lee (26) 1Q11 loss not unexpected; rebounding rates imply better 2H11 profitability Wilmar International (WIL SP) – Maintain O Tan Ting Min (4) 22-month lows South Korea Korea Economics Christiaan Tuntono (27) The BoK kept the base rate unchanged unexpectedly at 3%, suggesting a slower pace of monetary policy normalisation Korea Banks Sector – Maintain OW Sokmo Yun (28) Key takeaways from system money flow data for April AmorePacific (090430 KS) – Maintain O Sonia Kim (29) Strong 1Q11 sales in domestic luxury end; China another data point of the structural growth Hyundai Dept. Store (069960 KS) – Maintain O Sonia Kim (30) Rerating should continue on strong near-term operations and long-term structural growths Korea Life (088350 KS) – Maintain O Seok Yun, CFA, CA (31) FY11 results support continued profitability normalisation story Taiwan Asia Semiconductor Sector Randy Abrams, CFA (32) 1Q11 inventory analysis: removing tailwind for upstream Taishin Financial Holding (2887 TT) – Maintain O Chung Hsu, CFA (33) New report: Positive 1Q11 results

O=Outperform N=Neutral U=Underperform R=Restricted OW= Overweight MW=Market Weight UW=Underweight Research mailing options To make any changes to your existing research mailing details, please e-mail us directly at asia.research@credit-suisse.com

Sales Contact Hong Kong 852 2101 6218 Singapore 65 6212 3052 London 44 20 7888 4367 New York 1 212 325 5955 Boston 1 617 556 5634

Monday, 16 May 2011

Asian Daily

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Top of the pack ... Electrical Equipment Sector--------------------------------------------- Maintain UNDERWEIGHT New report: They are not cheap � A look at valuation Yang Y. Song / Research Analyst / 852 2101 6550 / yang.y.song@credit-suisse.com Edwin Pang / Research Analyst / 852 2101 6406 / edwin.pang@credit-suisse.com

● Cheap against history: We believe SEG, DEC and HPEC do not look expensive against their historical trading multiples. On forward P/E basis, SEG, DEC and HPEC are trading at 12.5x, 13.5x and 9.6x versus their historical average of 15x, 15x and 10x, respectively.

● But we do not view the historical averages as good indicators for whether the sector is under- or overvalued. Over the past years, we have seen both extreme exuberance and extreme pessimism on these stocks� valuations.

● The sector is expensive compared with Chinese industrials and international peers. Price-to-book versus ROE valuation indicates both SEG and DEC are more than 10% overvalued.

● We think this year�s order flow will continue to be lackluster. The pressure from higher steel cost on gross margin could also surprise on the upside. On a positive note, we believe the current power shortage will prompt Beijing to pursue fuel diversification more aggressively � positive for nuclear but we believe in the near term the sector will continue to trade down as the market takes profits and corrects the over-response to the impact of power shortage.

Valuation metrics Company Ticker CS Price Year P/E (x) P/B Rating Local Target T T+1 T+2 (x)Harbin Power 1133 HK U 8.69 7.40 12/10 11.5 11.6 0.9SEG 2727 HK U 4.14 3.80 12/10 14.6 12.7 1.5Dongfang Electric 1072 HK N 28.50 30.00 12/10 16.5 14.5 3.5Note: O = OUTPERFORM, N = NEUTRAL, U = UNDERPERFORM Source: Company data, Credit Suisse estimates Valuation not rich against historical multiples We believe SEG, DEC and HPEC do not look expensive against their historical trading multiples. On forward P/E basis, SEG, DEC and HPEC are trading at 12.5x, 13.5x and 9.6x versus their historical average of 15x, 15x and 10x, respectively.

But we do not view the historical averages as good indicators for whether the sector is undervalued or overvalued, since over the past years, we have seen both extreme exuberance and extreme pessimism on these stocks� valuations verging on being irrational. For example, in 2010 alone, the forward P/E multiple was as low as 11.2x and as high as 26.2.x for DEC; 12.2x and 20.3x for SEG; and 8.1x and 17.9x for HPEC. Expensive against peers Looking at valuation against the peers including Chinese industrials and international power equipment manufacturers, the sector looks over-valued on both price-to-book versus ROE basis (Figure 1) and P/E versus growth basis.

As shown in Figure 3, SEG�s historical and forecast ROEs have been consistently around 11%, similar to the range of cost of equity (10-12%), which in our view justifies 1.0-1.2x book for this company and translate into a price range of HK$3.17-HK$3.81 (Figure 2), below last Friday�s close of HK$4.14. DEC is also richly valued at 2.7x price to book. Given its 2011/12E ROE at 24.7%/23.2% based on consensus estimates, we think a 2.25x-2.50x P/B range is warranted, giving a price range of HK$23.21-HK$25.79.

HPEC is trading at 0.9x price to book on consensus estimates. But this does not mean it is undervalued � since consensus estimates also point to 9.4%/9.5% ROE for 2011/12 � lower than typical cost of equity of above 10% justifying a price to book ratio of lower than 1.0x. Catalysts In terms of catalysts, we think this year�s order flow will continue to be lacklustre. The pressure from higher steel cost on gross margin could also surprise on the upside, since the room for contract renegotiation with the IPPs to absorb higher raw material cost likely have been reduced. On the positive side, we think the current shortage of power will prompt Beijing to pursue fuel diversification more aggressively � positive for nuclear; hence, we have upgraded DEC to NEUTRAL. We will not be surprised, however, if DEC trades down near term as the market corrects the over-response to the impact of shortage on the sector and continues to take profit.

Figure 1: Price-to-book versus ROE (2012E)

Schneider

ABB

Doosan

SiemensAlstom Cooper

GE

CCCCCRCCChina Railway

Sh. Prime

Haitian

CQME

Weichai

Sinotruk

Zoomlion

Lonking

HPEC

DEC

SEG

R2= 0.74

0.0

0.5

1.0

1.5

2.0

2.5

3.0

5.0 10.0 15.0 20.0 25.02012 ROE

Price to Book (2012)

Source: IBES, Company data, Credit Suisse estimates

Figure 2: Price-to-book-implied trading range 2012E Implied BVPS (IBES) Price/book Price (HK$/share) 2012E HK$ Low High Low High AVG P/E DownsideSEG 3.17 1.00 1.20 3.17 3.81 3.49 10.61 -16%HPEC 10.18 0.70 0.90 7.12 9.16 8.14 9.55 -6%DEC 10.31 2.25 2.50 23.21 25.79 24.50 12.27 -14%Average 10.81 -12%Source: IBES, Credit Suisse estimates

Figure 3: ROE (2005-2012E) 2005 2006 2007 2008 2009 2010 2011E 2012ESEG - 9.2 11.0 9.1 11.1 11.3 11.1 11.3DEC 36.7 42.8 77.5 16.9 30.3 26.4 24.7 23.2HPEC 13.3 19.9 21.5 11.6 7.2 11.2 9.4 9.5Source: IBES

For the full version of this note click here.

Monday, 16 May 2011

Asian Daily

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Wilmar International--------------------------------------------------------- Maintain OUTPERFORM 22-month lows EPS: ◄► TP: ◄► Tan Ting Min / Research Analyst / 603 2723 2080 / tingmin.tan@credit-suisse.com

● Wilmar’s 1Q FY11 core net profit rose 3% YoY and 445% QoQ to US$408 mn. The results will likely be seen as having "normalised" after two consecutive disappointing quarters (3Q and 4Q FY10).

● Better performance in the oilseed, palm merchandising and plantation divisions was offset by lower profits in the consumer product division. As a group, sales volume fell YoY (due to demand rationing) but profitability improved.

● After two quarters of losses, it was a relief to see the oilseed division showing a profit of US$192 mn. 1Q FY11 profits rose 6% YoY, as pre-tax profit per tonne jumped by 21%. However, volumes fell 13% YoY.

● We maintain our OUTPERFORM rating on Wilmar and target price of S$6.40. We believe that the market is not pricing in much expectations, as Wilmar’s 1) share price is at a 22-month low; 2) forward P/E is at a 22-month low; and 3) forward P/E premium to the sector has completely dissipated. Wilmar trades at FY11E and FY12E P/Es of 16x and 15x, respectively.

Wilmar’s 1Q FY11 results review

Wilmar’s 1Q FY11 headline net profit fell by 4%YoY to US$387 mn but core net profit rose 3% YoY and 445% QoQ to US$408 mn. As 1Q FY11 results accounted for a quarter of market full-year

consensus, the results will likely be seen as having "normalised" after two consecutive disappointing quarters (3Q and 4Q FY10).

Better performance in the oilseed, palm merchandising and plantation divisions was offset by lower profits in the consumer product division. As a group, sales volume fell YoY but profitability (expressed as pretax profits per tonne) rose. Oilseeds and grains: After two quarters of losses, it was a relief to see a profit of US$192 mn from the oilseed division. 1Q FY11 profit rose 6%YoY, as margins rose to US$54.7 per tonne in 1Q FY11 versus US$45.1 in 1Q FY10, but volumes fell 13% YoY. Palm and Laurics: 1Q FY11 profit was up 2%YoY, primarily because margins improved (US$35.8 per tonne in 1Q FY11 versus US$30.0 in 1Q FY10), but sales volume fell 15%YoY due partly to demand rationing. Plantations: 1Q FY11 profit rose by 26% YoY, as FFB output rose 17% YoY and CPO spot prices averaged 55% higher YoY at US$1,250/tonne. Consumer products: 1Q FY11 profit was down 21% YoY, as margins deteriorated (US$32.8 per tonne in 1Q FY11 versus US$54.7 in 1Q FY10), with price caps by the Chinese government. Volumes grew strongly by 32%YoY. Pre-tax profit fell 2% QoQ. As edible oil prices have peaked, the pressure on Wilmar has eased. Sugar: Sugar milling incurred losses for seasonal reasons, but sugar refining showed a small gain of US$15.4 mn. Figure 1: 1Q FY11 pre-tax profit breakdown YoY % QoQ % (US$ mn) 1Q FY11 1Q FY10 change 4Q FY10 changePalm merchandising 153.5 150.9 2% 159.1 -3%Oilseed merchandising 192.1 182.0 6% (173.2) n.a.Consumer products 36.8 46.5 -21% 37.5 -2%Plantations 81.8 65.1 26% 129.6 -37%Source: Company data Maintain OUTPERFORM – valuations at 22-month lows We maintain our OUTPERFORM rating on Wilmar and target price of S$6.40. We believe that the market is not pricing in much expectations, as Wilmar’s 1) share price is at a 22-month low; 2) forward P/E is at a 22-month low; and 3) forward P/E premium to the sector has completely dissipated. For confidence to return to this stock, Wilmar would need to show 1) a series of commendable results; 2) when China comes back into favour. Wilmar trades at FY11E and FY12E P/Es of 16x and 15x, respectively.

Figure 2: Wilmar’s 1Q FY11 results Chg Chg CS full-year CS forecast Market full-year MarketYear-end 31 Dec (US$ mn) 1Q FY11 1Q FY10 YoY (%) 4Q FY10 QoQ (%) forecast (%) forecast forecast (%)Sales 9,535.7 6,764.1 41% 9,088.8 5% 41,389 23% 38,864 25%EBIT 339.9 467.6 -27% 57.0 496% 2,190 16% 2,147 16%PBT 501.9 498.9 1% 428.8 17% 2,035 25% 1,973 25%PAT 386.7 401.4 -4% 318.6 21% 1,677 23% 1,568 25%EPS (US cents) 6.00 6.30 -5% 5.00 20% 26.2 23% 24.0 25%EBIT margin (%) 3.6% 6.9% 0.6% 5.3% 5.5% Core net profit 407.8 394.2 3% 74.8 445% 1,677 24% 1,568 26%Source: Company data, Credit Suisse estimates

Price (12 May 11 , S$) 5.09TP (Prev. TP S$) 6.40 (6.40) Est. pot. % chg. to TP 2652-wk range (S$) 6.88 - 5.00Mkt cap (S$/US$ bn) 32.6/ 26.3

Bbg/RIC WIL SP / WLIL.SI Rating (prev. rating) O (O) Shares outstanding (mn) 6,398.93 Daily trad vol - 6m avg (mn) 10.3 Daily trad val - 6m avg (US$ mn) 48.0 Free float (%) 29.0 Major shareholders Wilmar Hldgs Pte Ltd

48.5%

Performance 1M 3M 12MAbsolute (%) (2.7) (3.0) (21.9)Relative (%) (2.4) (4.7) (28.5)

Year 12/09A 12/10A 12/11E 12/12E 12/13ERevenues (US$ mn) 23,885 30,378 41,389 40,115 43,809EBITDA (US$ mn) 2,360 1,744 2,593 2,800 3,055Net profit (US$ mn) 1,882 1,324 1,677 1,794 1,944EPS (US$) 0.28 0.20 0.26 0.27 0.30- Change from prev. EPS (%) n.a. n.a. 0 0 0- Consensus EPS (US$) n.a. n.a. 0.25 0.29 0.33EPS growth (%) 21.7 (29.0) 26.7 6.9 8.4P/E (x) 14.5 20.4 16.1 15.0 13.9Dividend yield (%) 1.3 0.9 1.2 1.3 1.4EV/EBITDA (x) 12.8 20.8 14.7 13.1 12.2P/B (x) 2.4 2.2 1.9 1.7 1.5ROE (%) 18.3 11.6 13.2 12.4 11.9Net debt (net cash)/equity (%) 39.0 84.7 87.3 68.5 60.0 Note1:Ord/ADR=10.0000.Note2:Wilmar International is involved in oil palm cultivation and milling. The company refines, processes, brands, trades and distributes palm oil and lauric related products. In addition, Wilmar trades in soya bean, crude soya bean oil, grains and fertiliser..

Monday, 16 May 2011

Asian Daily

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Executive Survey: Rising Emerging Market Costs -------------------------------------------------- The impact to margins and corporate strategy Stephane Rochon / Research Analyst / 212 538 6827 / stephane.rochon@credit-suisse.com Mujtaba Rana / Research Analyst / 44 20 7883 3773 / mujtaba.rana@credit-suisse.com Richard Kersley / Research Analyst / 44 20 7888 0313 / richard.kersley@credit-suisse.com Jahanzeb Naseer / Research Analyst / 852 2101 6554 / jahanzeb.naseer@credit-suisse.com

● New survey: A new proprietary Credit Suisse global survey of senior corporate executives indicates that cost pressures from emerging economies will continue to rise over the next 12-24 months, pressuring profit margins.

● Costs: Labour costs continue to be a major area of concern with China and India posing the largest threat. Executives are also worried about commodity and transportation costs.

● Margins: While only 21% of respondents expect to have enough pricing power to maintain margins, this is actually up from 7% in our August 2010 China cost survey.

● Strategic reaction: Almost 50% of respondents said they would be at least ‘somewhat likely’ to move sourcing in reaction to continued cost acceleration, although this could require considerable time and resources.

● Investment conclusions: We think the key is to identify industries/ companies with sufficient pricing power to offset the relentless cost increases discussed in this report.

Survey indicates cost pressures to continue to rise A new proprietary Credit Suisse global survey of senior corporate executives indicates that cost pressures from emerging economies will likely continue to rise over the next 12-24 months, pressuring profit margins. While this continues to be an area of significant worry for our surveyed executives, the level of concern has fallen compared with our August 2010 China cost survey, perhaps due to the continued economic recovery and associated boost to executive confidence. Notably, 40% of our 84 respondents were from private companies. Among the results of our survey Costs: Labour costs continue to be a major area of concern with China and India posing the largest threat. Executives are also worried about commodity and transportation costs. Examples of companies exposed to rising EM costs (especially labour costs) include BBY, DKS, TGT, FL, MFB, Home Retail (HOME.L), Tieto (TIE1V.HE), Nitori Holdings (9843 – Japan), Anhui Conch Cement (0914.HK) and China Overseas L&I (0688.HK). The other side of this issue is that rising EM labour costs do represent a structural bull case for some consumer companies – one of our key strategic themes (e.g., Tingyi (0322.HK) and Belle Intl. Holdings (1880.HK)).

Margins: While only 21% of respondents expect to have enough pricing power to maintain margins, this is actually up from 7% in our August 2010 China cost survey.

Strategic reaction: Almost 50% of respondents stated they would be at least ‘somewhat likely’ to move sourcing in reaction to continued cost acceleration, although this could require considerable time and resources. Notably, 80% respondents are considering greater investment in tech and automation to offset higher sourcing costs. Potential beneficiaries include ROK, ACN, ORCL, SAP, TXN, MXIM, ABB (ABBN.VX), Schneider (SCHN. PA) and Keyence (6861 – Tokyo). Investment conclusions: We believe the key is to identify industries/ companies with sufficient pricing power to offset the relentless cost

increases discussed in this report. Perhaps surprisingly, consumer discretionary companies appear relatively confident about their ability to raise prices while health care and telecom respondents were less optimistic on average.

Monday, 16 May 2011

Asian Daily

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PICC ----------------------------------------------------------------------------------Upgrade to NEUTRAL Margins improving, growth re-emerging and capital resolution in 2011? EPS: ▲ TP: ▲ Arjan van Veen / Research Analyst / 852 2101 7508 / arjan.vanveen@credit-suisse.com Frances Feng / Research Analyst / 852 2101 6693 / frances.feng@credit-suisse.com

● PICC hosted an investor day in Guangzhou on Thursday 12 May at its South Information Centre, which hosts its new IT systems and telemarketing centre. Key take-aways for us were:

● 1Q11 margin improving: with a combined ratio in 1Q11 better than 1Q10 and the company confident of continued improving trends as initiatives (driven by IT developments) start to deliver fully. We have upgraded our earnings by 3-5%.

● Growth improving: following a slow start to the year due to the car subsidy removal and Beijing’s quota introduction, growth is improving (Jan -1%, Feb +12%, Mar +21%, Apr +13%).

● Capital resolution in June 2011? Chairman Wu indicated that he was confident PICC would be able to announce its new strategic investor(s) in June 2011 (with Rmb10 bn), which would accelerate the group’s re-capitalisation and restructure.

● We have raised our valuation to HK$ 11.00 per share which assumes Rmb15 bn raised at a 25% discount to the current share price (and 15x P/E) and this leads to a raised NEUTRAL rating.

PICC capital raising scenarios: As highlighted in Figure 1, PICC is the weakest capitalist of the Chinese insurers and technically in breach of minimum capital levels required by the regulator (although above minimum solvency). It is also heavily geared under new draft regulations in relation to maximum gearing levels. PICC is looking to fully list the group (which includes the Life insurance company, of which the currently listed PICC entity owns just 8.6% and is expected to break even during 2011) and re-capitalise through new strategic investors. At the investor day, Chairman Wu indicated that he was confident PICC would be able to announce its new strategic investor(s) in June 2011 (and mentioned Rmb10 bn of new capital), which we deem would accelerate the group’s re-capitalisation and restructuring.

Based on our forecasts, a Rmb10 bn equity raising would increase the solvency ratio at the end of 2012 from 129% (115% in 2010) to 165%, and reduce gearing by 10% (2010: 60%).

Figure 1: PICC weakest capitalised of Chinese insurers China insurance solvency ratio (%) and composition

0%

50%

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450%

1H10

2H10

1H10

2H10

1H10

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1H10

2H10

1H10

2H10

Tier 1 Tier 2 100% MCR = solvecy 150% MCR

China Life Ping An China Pacific China Taiping PICC

Incl 1H11raising

Sources: Company data, Credit Suisse estimates

Our base-case scenario (included in our forecasts) includes a Rmb15 bn capital raising at a 25% discount to the current share price. We highlight that this implies new investors are still buying into the company at 2.8x book value (but price to book then reduces to 2.2x following the raising) and improves the capital ratio from 129% to 183% at the end of 2012.

We highlight that our forecasts would be 16% higher in 2012E if we assumed no capital raising. We assume no dividends are paid in our forecast period.

Figure 2: Capital raising dilution scenarios. Amount Solvency Share Discount Price EPS*Raised (Rmb mn) ratio (%)* price (HK$) (%) to book (x) impact (%) 0 129 10.18 0 3.8 16 10,000 165 10.18 0 3.8 810,000 165 8.65 15 3.25 610,000 165 7.64 25 2.8 5 15,000 183 10.18 0 3.8 515,000 183 8.65 15 3.25 215,000 183 7.64 25 2.8 0 20,000 201 10.18 0 3.8 220,000 201 8.65 15 3.25 -220,000 200 7.64 25 2.8 -420,000 200 6.62 35 2.5 -7* 2012E Source: Company data, Credit Suisse estimates

Price (12 May 11 , HK$) 10.38TP (Prev. TP HK$) 11.00 (10.00) Est. pot. % chg. to TP 652-wk range (HK$) 12.24 - 6.57Mkt cap (HK$/US$ bn) 115.7/ 14.9

Bbg/RIC 2328 HK / 2328.HK Rating (prev. rating) N (U) Shares outstanding (mn) 11,141.80 Daily trad vol - 6m avg (mn) 17.7 Daily trad val - 6m avg (US$ mn) 23.2 Free float (%) 31.0 Major shareholders PICC Holding

Company

Performance 1M 3M 12MAbsolute (%) 6.0 9.6 40.3Relative (%) 8.3 2.1 23.1

Year 12/09A 12/10A 12/11E 12/12E 12/13ENet profit (Rmb mn) 1,783 5,212 6,506 8,264 9,841EPS (Rmb) 0.16 0.47 0.58 0.67 0.73- Change from prev. EPS (%) n.a. n.a. 4 5 3- Consensus EPS (Rmb) n.a. n.a. 0.57 0.68 0.80EPS growth (%) 1,303.9 192.3 24.8 14.9 8.7P/E (x) 54.2 18.5 14.8 12.9 11.9Dividend yield (%) 0 0 0 2.3 2.5P/B (x) 4.4 3.9 3.1 2.3 2.0ROE (%) 8.6 11.6 11.4 13.4 — Note1:PICC P.

Monday, 16 May 2011

Asian Daily

- 7 of 38 -

Regional Asia Small-Cap Sector ---------------------------------------------------------------------------------------- David & Goliath Small-Cap Weekly: The battle against Certificates of Confiscation Kenny Lau, CFA / Research Analyst / 852 2101 7914 / kenny.lau@credit-suisse.com Adrian Chan / Research Analyst / 852 2101 6469 / adrian.c.chan@credit-suisse.com

● The latest issue of our regional small-cap weekly David & Goliath (D&G) has been published. For the full version of this note, click here.

● Experiencing the rapid deterioration of buying power of the Hong Kong dollar amid inflation and weakness against all currencies except the US dollar today, D&G feels that his Hong Kong dollar notes have become ‘Certificates of Confiscation.’

● Some Hong Kong banks are now offering more convenient services to help depositors transfer renminbi to mainland China banks to earn 2.85% for three-month, 3.25% for one-year and 5.25% for five-year on-shore time deposits.

● The Rmb-denominated Hui Xian REIT is now 13% below the IPO price, or a projected yield of 4.87%. Given China’s rate hike trend, a risk premium of 200-300 bp over the one-year time deposit rate for this kind of investment vehicle would not be surprising.

● In this issue of D&G, we include 17 small-cap stories from the region, with two key stories – Skyworth and AirAsia.

Figure 1: Exchange rates: 1 renminbi to Hong Kong dollars

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1.5

3.0

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1981 1986 1991 1996 2001 2006 2011

(HK$)

Source: Datastream, Credit Suisse estimates Cover story: What’s next after Korea? Experiencing the rapid deterioration of buying power of the Hong Kong dollar amid inflation and weakness against all currencies except the US dollar today, D&G feels that his Hong Kong dollar notes have become ‘Certificates of Confiscation.’

D&G continues to passively but effectively hedge his Certificates of Confiscation with Hong Kong physical properties. He has also increased his holding of renminbi, which Credit Suisse projects to appreciate 7-8% against the Hong Kong dollar by end-2012. Given the limited issues of renminbi bonds for retail investors, D&G needs to improve the tiny returns of 0.4% p.a. by making off-shore renminbi time deposit in Hong Kong. Convenient to make Rmb on-shore deposits in Hong Kong Transferring renminbi to mainland China banks, which offer 2.85% for three-month, 3.25% for one-year and 5.25% for five-year on-shore time deposits, is an option. Procedures for making renminbi on-shore time deposits used to be complicated. Some Hong Kong banks, such as Wing Lung Bank, which has been acquired by China Merchants Bank (3968.HK, HK$19.48, NEUTRAL, TP HK$21.60) are now offering more convenient services – customers can do all the processes in Hong Kong without the burden of travelling to China to open a bank account; renminbi can be remitted to Wing Lung’s China

branch in amounts of Rmb80,000 per day without fee (!) for on-shore time deposits at the mainland China rates. Higher risk premium needed for Rmb-denominated REIT Hui Xian REIT (87001.HK, Rmb4.58, Not Rated) is the first and only renminbi-denominated stock listed in Hong Kong. Hui Xian was priced at a 2011 projected annualised yield of 4.25% at the IPO, or a premium of 100 bp to the one-year renminbi on-shore time deposit rate. Hui Xian is now 13% below the IPO price, which would equate to a projected yield of 4.87%. Does this suggest the market requires a higher risk premium for this kind of off-shore renminbi-denominated investment vehicle? D&G cannot say, but notes that given China’s interest rate hike trend, a risk premium of 200-300 bp over the one-year time deposit rate would not be surprising.

Figure 2: Hui Xian’s 2011 yields and premium to 1-year Rmb time deposit

2.5

3.5

4.5

5.5

4.0 4.5 5.0 5.5 6.0 6.5 7.0 7.5 8.0(%)

(Rmb)+1%

+2%+3%

+4%4.87%

Source: Company data, Credit Suisse estimates Davids of the week In this issue of D&G weekly, we include 17 small-cap stories in the region. The two key small-cap stories are:

China: Skyworth Digital’s (0751.HK, HK$5.13, OUTPERFORM [V], TP HK$6.30) April data re-affirm TV industry recovery. We believe the street’s margin and profit forecasts for Skyworth are too conservative. The stock trades at 9.3x FY3/12E P/E with 23% potential downside (Kenny Lau, CFA, kenny.lau@credit-suisse.com).

Malaysia: We have raised forecasts and target price of AirAsia (AIRA.KL, RM3.13, OUTPERFORM, TP RM4.80) on high fare assumptions with new fuel surcharge. The stock trades at a 10.6x 2011E P/E with 53% potential upside (Annuar Aziz, annuar.aziz@credit-suisse.com).

Figure 3: Rel. performance of MSCI AxJ small-cap and MSCI AxJ indices

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May-10 Aug-10 Nov-10 Feb-11 May-11

MSCI AxJ Small-caps MSCI Asia ex. Japan

+18%+14%

Source: Datastream, Credit Suisse estimates

Monday, 16 May 2011

Asian Daily

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China Hong Kong/China Textile Sector------------------------------------ Maintain MARKET WEIGHT World cotton estimates for FY7/12 imply easing supply but continuous shortage Eva Wang / Research Analyst / 852 2101 7365 / eva.wang@credit-suisse.com Kenny Lau, CFA / Research Analyst / 852 2101 7914 / kenny.lau@credit-suisse.com

● USDA released the first estimate for the world cotton in FY7/12, with supply up 8.8% YoY and demand up 2.6% YoY. The ending cotton inventory rose to 40.1%, but it was still at the low end of the historical levels as shown in Figure 1, and it is lower than the base case our sensitivity analysis made last month (supply up 10%, demand up 0% and inventory to usage ratio at 43.0%).

● We believe the next important factor to affect global cotton supply (and therefore cotton prices) would be the weather condition in the harvest season in Sept-Oct in major production countries, which may play an important role in determining cotton output, as witnessed last year.

● We believe for the textile sector, the worst may be over. With the easing raw materials cost pressure, we prefer leading textile companies with good pricing power and strong client relationships.

● However, we believe the 1H11 profitability is still under pressure for textile manufactures due to the high YoY cotton price increases (Figure 4). We expect to see further improvements in margin and order volume in 2H11.

Figure 1: World cotton supply/demand forecasts – new FY7/12 data

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%

Production Consumption Stock/use ratio (rhs)

Source: USDA, as of July year-end Cotton: worst is over, but stock/use will stay low at 40% USDA released the first estimate for the world cotton supply and demand for FY7/12, which includes the harvest season in 2H11. While supply is expected to increase 8.8%, reaching a new high of 124.7 mn bales (27.2 mt), demand will also likely rise 2.6% to 119.5 mn bales (26.0 mt). The end-inventory will be slightly higher at 40.1% (versus 36.5% in FY7/11), but still at the low end of historical levels. Figure 2: World cotton supply to increase 8.8% in FY7/12E

China27%

Pakistan8%

Rest of World10%

African Franc Zone 2%

Brazil7%

Uzbekistan4%

Turkey2%

Australia3%

US14%

India23%

Source: USDA, as of July 2012 year-end

Weather – the next important factor for cotton harvest We believe the market expectation of total cotton supply is likely to remain stable until the harvest season in Sept-Oct later this year, when the weather conditions might play an important role in determining cotton output, as witnessed last year.

Figure 3: World cotton demand/usage +2.6%, still dominated by China

Pakistan9% India

18%China40%

Turkey5%

Indonesia2%US

3%

Bangladesh3%

Brazil4%

Mex ico2% Rest of World

14%

Source: USDA, as of July 2012 year-end Textile sector: easing raw materials cost pressure, but pressure on margins unlikely to be removed till 2H11 For the textile sector, the recent cotton price weakness is positive as long as companies can pass on cost changes quickly to clients, without causing much hurt to end-demand. We prefer leading textile companies with good pricing power and strong client relationship. However, we believe 1H11 profitability is still under pressure for manufactures due to the high YoY cotton price increases (Figure 4). We expect to see more improvement on margin and order volume in 2H11.

Figure 4: 1H11 profitability still under pressure for manufactures on high YoY cotton price increases

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USDA Middling Grade Cotton Av erage Spot PriceUS Cotton Futures No. 2 contractChina Grade 328 Cotton Spot Price XinjiangZCE Cotton No.1 Future Contract

Source: Bloomberg

Valuation Metrics Company Ticker CS Price Year P/E (x) P/B rating Local Target T T+1 T+2 (x)Shenzhou 2313 HK N 9.72 9.10 12/10 7.3 5.8 1.7Texwinca 321 HK N 8.58 8.64 03/10 10.3 8.9 2.2Pacific Textiles 1382 HK O 4.92 5.00 03/10 8.0 6.9 1.9Victory City 539 HK O 1.67 2.18 03/10 5.7 4.6 0.6Texhong 2678 HK O 6.50 9.50 12/10 4.7 4.2 1.6Weiqiao 2698 HK Not rated 6.70 n.a. 12/10 n.a. n.a. n.a.Note: O = OUTPERFORM, N = NEUTRAL, U = UNDERPERFORM Source: Company data, Credit Suisse estimates

Monday, 16 May 2011

Asian Daily

- 9 of 38 -

Anta Sports -------------------------------------------------------------------- Maintain OUTPERFORM Strong 25% 4Q11 trade fair order growth; 1Q11 review EPS: ◄► TP: ◄► Eva Wang / Research Analyst / 852 2101 7365 / eva.wang@credit-suisse.com Kenny Lau, CFA / Research Analyst / 852 2101 7914 / kenny.lau@credit-suisse.com

● Anta announced 25% trade fair order growth for 4Q11, well-ahead of the management previous guidance of 15–20%. With the full-year 2011 order growth averaged at 22%, we believe Anta may achieve higher revenue growth, given its strong sell-through capability and a good track record.

● Anta also announced the operational review for 1Q11. The sales volume grew 9% YoY for footwear and 22% YoY for apparel, in-line with our full-year growth estimates. In terms of sales units, Anta has completed 26% and 30% of our 2011 full-year forecast.

● While the company only opened 76 net new Anta label stores in 1Q11, management is confident to achieve a full-year target of 651, as they will speed up new additions, especially in 2H11. We believe as the industry growth was proved intact and good SSSG indicated stably increasing store efficiency, Anta would maintain a reasonable expansion speed to improve penetration.

● Maintain OUTPERFORM. Our estimates are unchanged at 20% three-year revenue CAGR and 16% earnings CAGR in 2011-13.

Strong 4Q11 trade fair order growth beat management guidance Anta announced 25% trade fair order growth for 4Q11, well-ahead of the management previous guidance of 15–20%. The ASP growth was strong at double digit for both footwear and sportswear due to costs pass-on and improving product mix. According to management, the ASP growth of apparel was more than footwear, partly due to Anta’s strategic focus on the apparel products—improving design variety and tailored products for market penetration in Northern China.

With the full-year 2011 order growth averaged at 22%, we believe that Anta may achieve higher revenue growth given its strong sell-through capability and a good track record as shown in Figure 1. There is potential upside to our forecast.

Figure 1: Trade fair order growth versus realised sales – potential upside remains from CS 2011E revenue growth Dec year-end 2009 2010 2011 Note Trade fair order value YoY growth 25.0% 19.3% 22.3% Reported revenue growth YoY 27.0% 26.1% - CS 2011estimate 22.5%Source: Company data, Credit Suisse estimates 1Q11 operations on track; expect more store opening in 2H Anta also announced the operational review for 1Q11. Sales volume grew 9% YoY for footwear and 22% YoY for apparel, in-line with our full-year growth estimates. In terms of sales units, Anta has completed 26% and 30% of our 2011 full-year forecast.

Figure 2: 1Q11 sales growth on track 1Q11A 2011E 1Q11A vs. 2011ESales volume YoY YoY mn pairs/pieces % completedFootwear 9.0% 10.0% 11.13 26.3Apparel 22.0% 22.0% 18.54 30.0Source: Company data, Credit Suisse estimates

While only 76 new Anta label stores were opened in 1Q11 (to 7,625 in total), behind the full-year target of 651 new stores, management indicated that new store openings would be accelerated, especially in 2H11, and is confident to achieve the full-year target. We believe as the industry growth was proved intact and good SSSG indicated stably increasing store efficiency, Anta would maintain a reasonable expansion speed to improve penetration. Mass market leader; maintain OUTPERFORM We like Anta’s leading position in the mass market sportswear, its good track record of order growth and store efficiency, as well as its strong operational control. We maintain our forecasts at 20% three-year revenue CAGR and 16% earnings CAGR (on higher corporate income tax). Maintain OUTPERFORM.

Figure 3: Trade fair order growth (wholesale value) 2010 avg 1Q11 2Q11 3Q11 4Q11 2011 avgLi Ning 16.9% 5.4% -6% -14% n.a. n.a.Dongxiang* 20.7% 11.8% 2.8% -15%+ n.a. n.a.Anta 19.3% 23% 21% 20% 25% 22.3%Xtep 22.5% 23% 25% 24% 24% 24.0%Peak 32.5% 25% 24% 23.6% 21.1% 23.4%361 Degrees 23.6% 20% 20% 23% 27% 22.5%* Dongxiang 3Q11 trade fair order down mid-teens on retail price tag; given the increased rebates to distributors, the wholesale order should be down high-teens or more Source: Company data, Credit Suisse estimates.

Figure 4: 1Q11 SSSG comparison 1Q10 2Q10 3Q10 4Q10 1Q11Bell Sports 4% 4% 3% 7% 7%Li Ning * 5.0% 4.2% 4.0% 3.6% lsdAnta hsd hsd hsd hsd hsdDongxiang 4.0% 0.4% 4.7% msd NEGATIVE lsdXtep msd hsd ~10% 10%+ hsdPeak 15.3% 12.5% 13.0% 13.1% 12.7%361 Degrees 16.0% 16.9% 16.2% 15.0% 14.7%Notes: hsd = high single digit, lsd = low single digit, msd = mid single digit; *Li Ning’s low single digit SSSG recently reported was for Jan-Apr 2011 Source: Company data, CS estimates

Price (12 May 11, HK$) 13.34TP (Prev. TP HK$) 15.60 (15.60) Est. pot. % chg. To TP 1752-wk range (HK$) 18.50–11.74Mkt cap (HK$/US$ mn) 33,268.3/ 4,280.6

Bbg/RIC 2020 HK / 2020.HK Rating (prev. rating) O (O) Shares outstanding (mn) 2,493.87 Daily trad vol - 6m avg (mn) 7.8 Daily trad val - 6m avg (US$ mn) 14.4 Free float (%) 30.7 Major shareholders Mr. Ding Shizhong

(57.68%)

Performance 1M 3M 12MAbsolute (%) 8.5 13.1 (1.3)Relative (%) 12.1 6.5 (12.4)

Year 12/09A 12/10A 12/11E 12/12E 12/13ERevenues (Rmb mn) 5,875 7,408 9,075 10,793 12,718EBITDA (Rmb mn) 1,459 1,822 2,258 2,646 3,227Net profit (Rmb mn) 1,251 1,551 1,802 2,051 2,438EPS (Rmb) 0.50 0.62 0.72 0.82 0.97- Change from prev. EPS (%) n.a. n.a. 0 0 0- Consensus EPS (Rmb) n.a. n.a. 0.73 0.85 0.97EPS growth (%) 39.7 23.9 16.0 13.8 18.9P/E (x) 22.3 18.0 15.5 13.6 11.5Dividend yield (%) 2.8 3.5 3.9 4.4 5.2EV/EBITDA (x) 17.4 13.4 10.5 8.8 6.9P/B (x) 5.5 4.9 4.3 3.8 3.3ROE (%) 26.2 28.8 29.8 29.9 31.0Net debt (net cash)/equity (%) (47.4) (59.2) (63.8) (62.1) (66.9) Note1: Ord/ADR=25.0000.Note2:Anta engages in the design, manufacturing and marketing of its self-owned mass market ANTA brand sporting goods. It also owns and manages 85% of Fila PRC Trademarks and the entire equity interest of Fila Marketing (HK and Macau).

Monday, 16 May 2011

Asian Daily

- 10 of 38 -

China Investment Conference 2011----------------------------------------------------------------------- Presenting CIC 2011 Vincent Chan / Research Analyst / 852 2101 6568 / vincent.chan@credit-suisse.com

● Credit Suisse 2011 China Investment Conference (CIC), presented jointly with Credit Suisse Founder Securities, will take place on June 22 - 24, 2011 in Chongqing, a rising financial and industrial centre in Western China.

● Credit Suisse will bring to the China Investment Conference top officials from Chongqing, leading industry experts, academic institutions as well as corporate leaders to provide our delegates with unique perspectives on emerging investment themes and specific sectors in China. There will be keynote sessions on topical issues ranging from social stability, monetary and exchange rate policies, to closely watched sectors, such as the future of nuclear power in China.

● In addition to formal presentations, there will be one-on-one meetings and small group discussions with speakers and corporates, and pre-CIC visits to local companies. For further information, please contact your Credit Suisse sales representative.

Side tours Public housing versus private property (Chongqing) ● First-hand information on public housing versus private property in

Chongqing ● Lunch with Chongqing’s public housing expert ● Project tours on both public rental housing and private property

Machinery, utilities and property (Chengdu, Deyang, Chongqing) ● Visit the key players and understand the upcoming market trend ● Company visits: Dongfang Electric, China Erzhong and Honghua ● First-hand information on the latest trend on public housing vs

private property in Chongqing

High speed rail (Guangzhou, Changsha, Wuhan) ● Experience the High Speed Rail that has changed lives by

shortening the travel time between provinces ● Visit the key players in the property, industrials and consumer

sectors in the three cities, and know the upcoming market trends ● Plant tours and store visits

Consumer trip (Chengdu and Chongqing) ● Visit the leading players in Western China: Country Style Cooking,

Chengshang Group, Swellfun, Chongqing Brewery and New Hope ● Management meetings and site visits in the consumer sector, from

department stores operator to animal feeds producer ● Plant tours and store visits

Figure 1: Companies attending – confirmed Company name Bloomberg Code Company name Bloomberg Code360buy Hangzhou Shunwang Technology 300113 SZAluminum Corporation of China Ltd 2600 HK Hollysys Automation Technologies Ltd. HOLI USAngang Steel Co. Ltd 0347 HK Huiyin Household Appliances 1280.HKBaoshan Iron & Steel 600019 CH Jiangxi Copper Company Limited 600362 CHBeijing Century Real Technology 300150 CH Lanxum 300010 CHCC Land Holdings Ltd. 1224 HK Microport Scientific Corporation 0853 HKCNOOC Ltd 883 HK Mongolia Energy 276 HKCSR Corporation Limited 1766.HK PCD Stores Limited (Hong Kong) 331 HKCharm Communications Inc CHRM US Ping An Insurance 2318 HKChina All Access 633 HK Qihoo 360 Technology QIHUChina Coal Energy Company Limited 1898 HK Semiconductor Manufacturing International Corp 981 HKChina Life Insurance Co. 2628 HK Shanghai Electric Group Co., Ltd. 2727 HKChina Medical Technologies CMED US Teamsun 600410 CHChina Merchants Bank 600036 CH Texhong Textile Group Limited 2678.HKChina Merchants Holdings 144 HK Trason Holdings Co. 0325 HKChina Telecom Corporation Limited 728 HK Trina Solar TSL USChina XLX Fertilizer CXLX SG Xingda Int'L Holdings 1899 HKCountry Style Cooking CCSC US Zhaojin 1818 HKGOME Electrical Appliances Holding Ltd. 493 HK Zhongpin Inc HOGS US Guangzhou Auto Group 2238 HK Samling Global Limited 3938 HKHaitian International Holdings Limited 1882 HK Source: Company data, Credit Suisse estimates

Monday, 16 May 2011

Asian Daily

- 11 of 38 -

China Software & IT Services Sector--------------------------------------------------------------------- Software Expo takeaway: Watch cloud computing, base software and key industries Vincent Chan / Research Analyst / 852 2101 6568 / vincent.chan@credit-suisse.com Significant contributor: Archibald Pei

● We attended the China International Software Expo, the largest trade event of the industry, held on 12-14 May. The government is actively encouraging software & IT services, and more favourable policies may be on the way. Cloud computing is certainly the focus of the industry, as well as base and key industries software.

● The officials from MIIT and NDRC emphasised that software & IT services should replace hardware as the centre of IT industry. The government plans to use finance, taxation and industry policies to allocate more resources to software. Base software, i.e., middle ware, database, OS and office software, are firmly supported by policies. Software vendors for key industries like healthcare, government, finance and electricity are likely to benefit most. Almost every major software company is developing “cloud services” platforms, but the result may come after years.

● We maintain our belief that industry-special solution providers, rather than general software vendor and system integrators, will be the winner in China market this decade. Maintain our OUTPERFORM rating on YGSoft, and UNDERPERFORM rating on Ufida.

Valuation metrics Company Ticker CS Price Year P/E (x) P/B Rating Local Target T T+1 T+2 (x)Ufida 600588 CH U 19.64 17.80 12/10 33.5 25.3 5.8YGSoft 002063 CH O 23.00 30.00 12/10 22.5 15.5 6.1Note: O = OUTPERFORM, N = NEUTRAL, U = UNDERPERFORM Source: Company data, our estimates Government support stronger than ever, good for sector At the opening ceremony, Mr. Li Pumin, deputy secretary general of the National Development & Reform Commission (NDRC), said that “software & services should replace hardware as the centre of China’s IT industry”, and further policies will be issued to “improve the creativity of software industry”. Mr. Yang Xueshan, vice minister of the Ministry of Industry & Information Technology (MIIT), indicated that “to expand the usage of native operating system, database, middle ware and office software in government and key industries” is an important task of the MIIT. Government support for the software sector in China is stronger than ever, but the sector underperformed the broad market by 18% so far this year. More favourable policies, together with lower valuation, may lead to a turning point for the sector later. Cloud computing has become the keyword this year The major software players in China are entering the age of “cloud computing”. Ufida and Kingdee have announced “cloud services” strategies, Neusoft is pushing its “healthcare cloud”, and dozens of smaller players are marketing their own niche clouds. Of course, cloud computing enables customers to make more flexible IT budgets and enables vendors to charge service fees instead of license fees. However, we do not expect cloud computing to contribute significant revenue for China’s software industry within 5 years because: 1) most software vendors’ technologies are not advanced enough to provide good cloud services; and 2) there is not enough demand for cloud services in China due to security and legal concerns. We believe that network security vendors will be the first to benefit in “cloud age”.

Figure 1: Software Expo is the industry’s largest trade event

Source: Our research Base software becomes the foundation of industry The government is spending billions of RMB to support China-made “base software”, i.e., operating system, database, middle ware and office software. There are dozens of companies working on them, including Neusoft, China Soft, Kingdee and Taiji. Middle ware will likely be the first native base software to win a significant market share within three years, in our view. Kingdee and China Soft are the two middle ware leaders in China. Software vendor for key industries will benefit more After talking to dozens of companies and experts during the Expo, we feel that software demand in these key industries is high: healthcare, government (incl. social security), finance and electricity. Demand for high-end manufacturing software like MES is also strong. However, general ERP, system integration and services are becoming out of favour. This confirms our belief that industry-specific solution providers, rather than general software vendors, will be the winners in China market this decade. Investors need to catch IT leaders in key industries in order to outperform. Maintain our OUTPERFORM rating on YGSoft and UNDERPERFORM rating on Ufida. Figure 2: A-share software sector underperformed this year

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CSI 300 Index SYWG Software IndexSource: Wind

Monday, 16 May 2011

Asian Daily

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Shimao Property -------------------------------------------------------------------- Maintain NEUTRAL More launches to come albeit a few already delayed; YTD commercial property sales below guidance EPS: ◄► TP: ◄► Wenhan Chen / Research Analyst / 852 2101 6407 / wenhan.chen@credit-suisse.com Jinsong Du / Research Analyst / 852 2101 6589 / jinsong.du@credit-suisse.com Ronney Cheung / Research Analyst / 852 2101 7472 / ronney.cheung@credit-suisse.com

● Shimao will likely launch more phases/projects in Ningbo, Hangzhou, Wuxi and Fuzhou from May. Although there could be some uptick in the company’s contracted sales in the following months due to more saleable resources, we notice that a few of these launches have been already delayed and believe this could happen again if the company finds the market to be unfavourable.

● The company realised Rmb8.5 bn in contracted sales as of April (up 7% YoY) and achieved 24% of its full-year sales target; based on our discussion with the company, we estimate its commercial property sales were less than Rmb2 bn as of April or below 25% of the total sales YTD, which looks a bit behind the company’s guidance.

● Shimao has clarified recently that it sees little possibility of a spin-off of its hotels portfolio in the next 10-12 months. Therefore, the fund-raising is unlikely to happen in the near term to improve the company’s cash flow this year.

● The stock is now trading at a 53% discount to the forward NAV and 7.1x FY11 P/E on CS estimates. Despite more launches likely to come, we are still cautious on its cash flow this year and maintain our NEUTRAL rating.

More launches expected in coming months, while some were previously delayed Shimao stated last week that it would launch more phases/projects from May, among which major ones will be Ningbo Shimao World Bay (ASP: Rmb 12,000/sqm), Ningbo Shimao Coastal Garden (ASP: Rmb 8,000/sqm) in May, Wuxi Transport Shimao (new project with an estimated ASP of Rmb 12,000/sqm) and Hangzhou Shimao Riviera Garden (new project with an estimated ASP of Rmb35,000/sqm) in June, Fuzhou Menhou Shimao (new project) and others in July.

With these more saleable resources, we expect some uptick in the company’s contracted sales in the following months, while we also notice that a few of these launches have been already delayed from their

previous plans, i.e., Hangzhou Shimao Riviera Garden and Wuxi Transport Shimao had been planned to be launched in end-April to May. Therefore, it is possible that the company could further postpone some launches from its current schedule, if it finds the market to be unfavourable. 24% of full-year sales target achieved as of April; commercial properties contributed less than a quarter Shimao’s April contracted sales were at Rmb2.2 bn, up 9% MoM but down 12% YoY. GFA sold in April was around 177 th sqm, up 12% MoM but dropped 36% YoY. The company’s total contracted sales from January to April amounted to Rmb8.5 bn (up 6.7% YoY) or 682 th sqm (down 7.5% YoY); so far, the company has reached 24% of its 2011 full-year target of Rmb36 bn. The implied ASP in April was at Rmb12,452/sqm, down 2% MoM and up 39% YoY – the significant YoY jump was due to a low base in April 2010 and its 1H10 ASP was at Rmb11,213/sqm.

Based on our discussion with the company, we estimate its commercial property sales were less than Rmb2 bn as of April (Shanghai Shimao (600823.SS) achieved Rmb1.57 bn in contracted sales in Q1), accounting for less than 25% of the company’s total sales YTD, which looks a bit behind its guidance of Rmb10 bn out of the total full-year sales of Rmb36 bn from commercial property. Figure 1: Shimao – monthly contracted sales

-500

1,0001,5002,0002,5003,0003,5004,0004,500

Jan-

10Fe

b-10

Mar-1

0Ap

r-10

May-1

0Ju

n-10

Jul-1

0Au

g-10

Sep-

10Oc

t-10

Nov-

10De

c-10

Jan-

11Fe

b-11

Mar-1

1Ap

r-11

Rmb mn

-5,00010,00015,00020,00025,00030,00035,00040,000

Rmb/sqm

Source: Company data, Credit Suisse estimates Hotels portfolio spin-off unlikely in the near term Although management has been talking about separately listing its hotel and tourism projects portfolio for long, the company clarified recently that it sees little possibility of that taking place in the next 10-12 months, as an internal restructuring is still underway. Therefore, a fund-raising is unlikely to happen in the near term to improve the company’s cash flow this year. Maintain NEUTRAL The stock is now trading at a 53% discount to forward NAV and 7.1x FY11E P/E on CS estimate. Despite more launches likely to come, we are still cautious on its cash flow this year and maintain our NEUTRAL rating.

Price (13 May 11, HK$) 10.08TP (Prev. TP HK$) 12.00 (12.00) Est. pot. % chg. to TP 1952-wk range (HK$) 15.50 - 9.78Mkt cap (HK$/US$ mn) 35,774.9/ 4,602.5

Bbg/RIC 813 HK / 0813.HK Rating (prev. rating) N (N) [V] Shares outstanding (mn) 3,549.10 Daily trad vol - 6m avg (mn) 13.8 Daily trad val - 6m avg (US$ mn) 21.6 Free float (%) 41.7 Major shareholders Hui family 55.18%

Performance 1M 3M 12MAbsolute (%) (12.0) (9.2) (14.6)Relative (%) (8.6) (14.8) (23.2)

Year 12/09A 12/10A 12/11E 12/12E 12/13ERevenues (Rmb mn) 17,032 21,789 26,642 33,618 42,915EBITDA (Rmb mn) 6,258 9,575 7,897 9,077 11,283Net profit (Rmb mn) 2,775 3,564 4,182 4,795 6,048EPS (Rmb) 0.80 1.01 1.18 1.35 1.71- Change from prev. EPS (%) n.a. n.a. 0 0 0- Consensus EPS (Rmb) n.a. n.a. 1.19 1.36 1.82EPS growth (%) 138.8 25.1 17.4 14.7 26.1P/E (x) 10.5 8.4 7.1 6.2 4.9Dividend yield (%) 3.5 4.1 3.9 4.5 5.8EV/EBITDA (x) 7.2 5.5 6.8 5.5 4.3P/B (x) 1.3 1.1 1.1 1.0 1.0ROE (%) 13.2 14.2 15.5 16.7 19.7Net debt (net cash)/equity (%) 51.1 67.9 67.6 58.5 52.3 Note 1: Shimao Property is a leading real estate developer in China, specialising in developing large-scale and high-quality projects. Currently, Shimao has about 34.8 mn sqm of land bank in 30 cities, comprising residential, retail, office and hotel properties.

Monday, 16 May 2011

Asian Daily

- 13 of 38 -

Hong Kong Hong Kong Economics --------------------------------------------------------------------------------------- Very strong 1Q11 GDP growth prompts forecast upgrade Christiaan Tuntono / Research Analyst / +852 2101 7409 / christiaan.tuntono@credit-suisse.com

● The Hong Kong economy grew 7.2% YoY in 1Q11, strongly above market expectations. On a quarter-on-quarter seasonally-adjusted basis, GDP grew 2.8%, accelerating from the 1.5% growth seen in the previous quarter.

● Net trade was the main contributor to headline growth at 6.7 pp, while domestic demand contributed only 0.5 pp. This was dragged by a 4.2 pp deduction in inventory; contribution from private consumption was in fact very strong at 4.7 pp.

● The Hong Kong economy has continued benefiting from the recovery of the global economy, resilient China growth, low interest rates, rising asset prices and improving employment conditions. Growth is likely to be resilient this year, but inflationary pressures are expected to rise as well.

● In view of the strong 1Q11 results, we revise up our 2011 GDP growth forecast for Hong Kong to 5.5%, up from 5% previously expected. However, we remain concerned that slower growth in China and the potential normalisation of monetary policy in the US may exert pressure on growth.

Figure 1: Summary of macro indicators and forecasts (% YoY) Govt CS 1Q11 4Q10 3Q10 2Q10 2010 11E 11E 12EGDP 7.2 6.4 6.9 6.7 7.0 5 - 6 5.5 4.8Private consumption 7.6 8.1 5.3 4.1 6.2 - 5.4 4.1Government consumption 2.7 1.6 3.2 2.7 2.7 - 2.8 2.3Gross fixed capital formation -1.1 8.6 -0.3 15.8 7.8 - 7.5 7.9Exports of goods & services 15.1 8.5 19.7 19.7 16.8 - 9.3 7.6Imports of goods & services 11.8 7.5 16.1 22.2 17.3 - 9.2 7.8Current account ($ bn) 13.4 12.4 as a % of GDP 5.5 4.73M HIBOR (% year end) 0.3 1.0GDP drivers: Domestic demand contrib. 0.5 4.0 -1.5 10.0 6.6 - 4.7 5.1Net trade contribution 6.7 2.4 8.4 -3.5 0.3 - 0.9 -0.3CPI 3.9 2.9 2.3 2.5 2.4 5.4* 5.0 5.7Note: *Government forecast is on underlying CPI inflation. Source: Census and Statistics Department, Credit Suisse Robust 1Q11 GDP growth The Hong Kong economy grew 7.2% YoY in 1Q11, strongly above the market expectation of 5.5% YoY. On a quarter-on-quarter seasonally-adjusted basis, GDP grew 2.8%, accelerating from the 1.5% growth seen in the previous quarter. Net trade was the main contributor to headline growth, at 6.7 pp, while domestic demand contributed only 0.5 pp. The weak contribution by domestic demand was dragged by a 4.2 pp deduction in inventory; contribution from private consumption was in fact very strong at 4.7 pp.

It appears to us that the Hong Kong economy has continued benefiting from the recovery of the global economy, resilient China growth, low interest rates, rising asset prices and improving employment conditions. Growth is likely to be resilient this year (barring an unexpected fall in asset prices), but at the same time, inflationary pressures are expected to increase as well. This is due to the mismatch between the strength of the Hong Kong economy and the loose monetary conditions it imported from the US under the US$-HK$ peg (low interest rates, weak currency).

The government now expects 5-6% GDP growth for 2011 (versus 4- 5% before) and has again substantially revised up its underlying CPI inflation forecast to 5.4% (from 4.5% before). In view of the strong 1Q11 results, we revise up our 2011 GDP growth forecast for Hong Kong to 5.5%, up from 5% previously expected. However, we remain concerned that slower growth in China and the potential normalisation of monetary policy in the US may exert pressure on growth. We maintain our headline CPI inflation forecast at 5% (year-average) for 2011, and the underlying inflation forecast at 5.6%. Strong consumption, weak investments, robust net trade Private consumption was robust in 1Q, up 7.2% YoY. On a quarter-on-quarter seasonally-adjusted basis, consumption rose 0.7% from 4Q, which had bounced strongly by 3.7% QoQ, sa in the quarter and 1.8% QoQ, sa in 3Q10. We believe the resilience in asset prices and the continued improvement in employment conditions are likely to support its growth trend going forward.

Gross domestic fixed capital formation contracted 1.1% YoY in 1Q11. Expenditure on machinery, equipment and computer software fell 11.8% YoY, versus a 6.4% YoY increase in 4Q10, reflecting the volatility seen in this component. Expenditure on building and construction was up 13.4% YoY, boosted again by public sector works (+45.1% YoY) on various infrastructure developments, but dragged by a 5% YoY contraction in private construction. It appears to us that private construction activities have not significantly picked up yet, despite rapid land sales and robust home demand.

Net trade was the main driver behind 1Q11 growth, given that the pick up in exports had superceded that for imports. The growth in total exports was strong at 15.1% YoY, exceeding the 11.8% YoY rise in imports. On a quarterly seasonally adjusted basis, goods exports rose 14.4%, driven by the global recovery and strong China demand, while goods imports rose 12%. Services exports rose 4% QoQ (sa) versus a 0.1% QoQ (sa) dip in services imports. Given the low statistical base last year, total net trade jumped over three times from a year ago, making a significant contribution to headline growth. Such robust growth momentum may not repeat in later quarters, in our view, as rising statistical base should mellow the growth pace ahead.

Monday, 16 May 2011

Asian Daily

- 14 of 38 -

Great Eagle Hdg. ------------------------------------------------------------- Maintain OUTPERFORM It's still not late to check in: We expect 1Q11 hotel growth momentum to continue EPS: ◄► TP: ◄► Joyce Kwock / Research Analyst / 852 2101 7496 / joyce.kwock@credit-suisse.com Cusson Leung, CFA / Research Analyst / 852 2101 6621 / cusson.leung@credit-suisse.com

● March 2011 Hong Kong hotel data has shown 18% YoY growth in RevPAR for high tariff hotels. Hong Kong hotel company Kosmopolito and US hotel participant Starwood have reported RevPAR YoY growth of 10–24% for CY1Q11.

● We believe these data points underpin our conservative assumption on Great Eagle’s RevPAR YoY growth for FY11E (7% for Hong Kong hotels; 12% for overseas hotels). Indeed, our channel check finds that Langham London’s rate for standard room is as high as £500 per night for some days in May 2011.

● The implied EV/EBITDA of Great Eagle’s hotel assets is now 3.8x, which is still substantially lower than the other hotel stocks despite the stock’s outperformance in the past month.

● We believe Great Eagle is likely to benefit from (1) strong tourist arrival in Hong Kong; (2) continuous recovery of overseas hotels, especially Langham London; (3) strong demand for Central office including Citibank Plaza. Great Eagle is now trading at a 48% discount to NAV. We maintain OUTPERFORM on the stock.

Our 8% RevPAR growth assumption might be conservative The latest Hong Kong hotel data (March 2011) shows an 18% YoY growth in RevPAR for high tariff hotels, as driven both by increase of occupancy rate (+4 pp YoY) and average room rate (+14% YoY).

Kosmopolito (2266.HK, HK$1.85, OUTPERFORM [V], TP HK$2.56), has reported 24% YoY RevPAR growth for its Hong Kong hotels in CY 1Q11. Starwood (HOT, $59.41, OUTPERFORM [V], TP $75.00) has also reported strong RevPAR growth for its N. American hotels in 1Q11: 10.1% (Sheraton), 10.2% (Westin), 15.6% (St. Regis), 14.6% (W Hotels). These data points underpin our conservative assumption on RevPAR growth for Great Eagle’s hotels for FY11E (7% for Hong Kong hotels; 12% for overseas hotels).

Figure 1: Hong Kong hotel witnessed strong growth in 1Q11 Overall industry stat. Mar-11 YoY growthRevPAR (High tariff) 1,764 + 18%Occupancy (High tariff) 91% + 4 p.p.Occupancy (Tsim Sha Tsui) 91% + 1 p.p.Occupancy (Mongkok) 94% + 1 p.p.Peer comparison: Kosmo hotels Jan - Mar-11 YoY growthRevPAR (Hong Kong) 818 + 24%Avg room rate (Hong Kong) 876 + 20%Occupancy (Hong Kong) 93% 3 p.p.CS assumption: Great Eagle HK hotels FY11 YoY growthRevPAR 1,257 + 7%Avg room rate 1,480 + 5%Occupancy 85% + 1.7 p.p.Source: Company data, Credit Suisse estimates 3.8x implied EV/EBITDA of Great Eagle’s hotel assets Despite the outperformance of Great Eagle (rel. HSI) in the last month, the implied EV/EBITDA of its hotel assets is still at 3.8x, which is substantially lower than other hotel stocks such as Kosmopolito.

Figure 2: We expect Great Eagle’s Hong Kong hotel operations to be as strong as its peers, if not better (chart shows 1M price performance)

9095

100105110115120125

4/12/11 4/19/11 4/26/11 5/3/11 5/10/11

Great Eagle Shangri-La Kosmopolitco7 Days China Lodging

9095

100105110115120125

4/12/11 4/19/11 4/26/11 5/3/11 5/10/11

Great Eagle Shangri-La Kosmopolitco7 Days China Lodging

Source: Company data, Credit Suisse estimates

Figure 3: Implied EV/EBITDA of Great Eagle’s hotels is at 3.8x

-

5.0

10.0

15.0

20.0

25.0

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leex

. C-R

EIT

7 Da

ys

Chin

a Lo

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gri-la Asia

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Source: Company data, Credit Suisse estimates

Price (12 May 11, HK$) 28.20TP (Prev. TP HK$) 38.00 (38.00) Est. pot. % chg. to TP 3552-wk range (HK$) 28.20 - 18.02Mkt cap (HK$/US$ mn) 17,634.4/ 2,269.0

Bbg/RIC 41 HK / 0041.HK Rating (prev. rating) O (O) Shares outstanding (mn) 625.33 Daily trad vol - 6m avg (mn) 1.0 Daily trad val - 6m avg (US$ mn) 3.2 Free float (%) 54.6 Major shareholders The Lo Family

49.22%

Performance 1M 3M 12MAbsolute (%) 7.4 9.9 38.9Relative (%) 11.6 8.8 23.0

Year 12/09A 12/10A 12/11E 12/12E 12/13EEBITDA (HK$ mn) 2,148 2,155 2,079 2,294 2,306Net profit (HK$ mn) 1,306 1,614 1,522 1,711 1,739EPS (HK$) 2.12 2.59 2.44 2.74 2.79- Change from prev. EPS (%) n.a. n.a. 0 0 0- Consensus EPS (HK$) n.a. n.a. 2.17 2.36 2.67EPS growth (%) 362.0 22.0 (5.7) 12.5 1.6P/E (x) 13.3 10.9 11.6 10.3 10.1Dividend yield (%) 1.8 2.0 2.7 3.1 3.1EV/EBITDA (x) 9.4 9.1 9.2 8.1 7.8ROE (%) 6.5 6.3 5.2 5.6 5.5Net debt (net cash)/equity (%) 11.9 6.7 4.8 2.7 0.8NAV per share (HK$) 54.3 Disc./prem. to NAV (%) (48.0) Note 1: Great Eagle Holdings, through its subsidiaries, develops/ invests in properties & operates hotels; it also provides management/ maintenance/ insurance agency services and manages/ finances properties.

Monday, 16 May 2011

Asian Daily

- 15 of 38 -

India Areva T&D India Ltd----------------------------------------------------- Maintain UNDERPERFORM 1Q below estimates; overall T&D competitive environment remains challenging EPS: ◄► TP: ◄► Venugopal Garre / Research Analyst / 91 22 6777 3872 / venugopal.garre@credit-suisse.com Hitesh Das / Research Analyst / 91 22 6777 3862 / hitesh.das@credit-suisse.com

● Areva T&D reported weak March quarter results with PAT ~51% below estimates. We were expecting EBITDA margins to range in early teens this year, given the cost actions by Areva T&D in the past, expected improvement in utilisation rates and no ramp up in costs; however, EBITDA margin of 8.4% was impacted by an unusual increase in other expenses.

● Order inflow in 4Q of ~Rs13 bn was up 29% YoY but largely in line with estimates. Order book at ~Rs52 bn grew only 4% YoY and is indicative of revenue performance over the next few quarters. Management’s commentary also suggests that market environment in 4Q was challenging due to pricing decline and low market growth (due to postponement in power, industrial and infra ordering activities).

● We believe that given the tough operating environment it could be difficult for Areva T&D to grow order inflows in FY11 and this could impact the street’s earnings estimates. We note that Areva T&D has also announced the demerger of its distribution business as that has been globally sold to Schneider. We maintain our UNDERPERFORM rating.

Figure 1: Order book growth impacted by tough competition in the T&D sector and decline in pricing

62%

93% 100%

49%38%

8% 7% 16% 18% 21%10% 3% 4%

0%20%40%60%80%

100%120%

1Q08

2Q08

3Q08

4Q08

1Q09

2Q09

3Q09

4Q09

1Q10

2Q10

3Q10

4Q10

1Q11

O rde rbook gro wthSource: Company data, Credit Suisse estimates

Figure 2: Results below estimates (Rs mn) Mar-10 Dec-10 Mar-11 QoQ YoY Mar-11E A/ENet Sales 7768 13270 9949 -25% 28% 10267 0.97Material cost 5676 9058 6868 -24% 21% 7290 0.94Staff Cost 858 923 904 -2% 5% 791 1.14Others Expenses 813 1507 1340 -11% 65% 961 1.39Total Expenditure 7346 11488 9112 -21% 24% 9042 1.01EBITDA 422 1782 837 -53% 98% 1226 0.68EBITDA Margin 5.4% 13.4% 8.4% 12%Depreciation 237 230 246 7% 4% 226 1.09Interest 134 219 160 -27% 19% 134 1.19Other Income 0 2 0 17 0.00PBT 51 1335 431 -68% 739% 883 0.49PBT Margin 1% 10% 4% -57% 555% 9%Total Tax 17 455 143 -68% 742% 300 0.48Tax Rate 34% 34% 34% 34%Reported PAT 34 881 288 -67% 737% 583 0.49Order inflows 10156 12950 13098 1% 29% 12314 1.06Order backlog 49802 48892 52041 6% 4% 50939 1.02Source: Company data, Credit Suisse estimates

We note that this quarter was supported by a low base and hence the sharp increase in YoY PAT. Areva had just managed to breakeven in March last year as margins had declined sharply due to 1) ramp up of costs in new factories (i.e., low utilisation), 2) higher provisioning for a few systems projects (these are largely SEB related orders), and 3) derivatives mark-to-market adjustment (Rs90 mn impact).

The Board of Directors has given its approval for the demerger of the distribution business to a wholly-owned subsidiary (Smartgrid Automation Distribution and Switchgear Limited). Consequently, Areva has also begun segment reporting of transmission and distribution businesses from this quarter.

Figure 3: Segment data Revenue Rs mnTransmission 7,470 Distribution 2,808 Less Intersegment revenue (329)Net sales 9,949 PBIT Transmission 583 Distribution 48 Unallocated (40)Less interest (160)PBT 431 Capital Employed Transmission 13,882 Distribution 4,005 Unallocated 1,168 Total 19,056 Margins Transmission 8%Distribution 2%Source: Company data, Credit Suisse estimates

Price (13 May 11, Rs) 274.50TP (Prev. TP Rs) 206.50 (206.50) Est. pot. % chg. to TP (25)52-wk range (Rs) 342.75 - 231.00Mkt cap (Rs/US$ mn) 65,634.3/ 1,462.9

Bbg/RIC ATD IN / AREV.NS Rating (prev. rating) U (U) Shares outstanding (mn) 239.11 Daily trad vol - 6m avg (mn) 0.3 Daily trad val - 6m avg (US$ mn) 2.3 Free float (%) 30.0 Major shareholders Areva SA 67%

Performance 1M 3M 12MAbsolute (%) 0.1 (2.3) 6.2Relative (%) 6.4 (6.5) (1.1)

Year 12/08A 12/09A 12/10E 12/11E 12/12ERevenues (Rs mn) 26,412 35,328 41,186 50,887 58,680EBITDA (Rs mn) 4,251 4,188 4,536 5,729 7,050Net profit (Rs mn) 2,160 1,870 1,931 2,558 3,509EPS (Rs) 9.0 7.8 8.1 10.7 14.7- Change from prev. EPS (%) n.a. n.a. 0 0 0- Consensus EPS (Rs) n.a. n.a. 7.2 9.5 12.4EPS growth (%) (0.2) (13.4) 3.3 32.5 37.2P/E (x) 30.4 35.1 34.0 25.7 18.7Dividend yield (%) 0.7 0.6 0.6 0.8 1.1EV/EBITDA (x) 16.4 17.3 15.9 12.6 9.9P/B (x) 9.1 7.6 6.5 5.4 4.4ROE (%) 33.9 23.5 20.5 23.0 25.9Net debt (net cash)/equity (%) 58.5 76.4 63.8 52.0 28.3 Note 1: AREVA T&D India Limited is engaged in the business of transmission and distribution of energy. The company’s products and systems serve to transmit and distribute electricity, as well as operate networks through information management.

Monday, 16 May 2011

Asian Daily

- 16 of 38 -

Dr. Reddy's --------------------------------------------------------------------- Maintain OUTPERFORM What’s one-off and what’s not in FY13 guidance? EPS: ▼ TP: ▲ Anubhav Aggarwal / Research Analyst / 9122 6777 3808 / anubhav.aggarwal@credit-suisse.com

● Management’s FY13 sales guidance of US$2.7 bn includes one-offs, but overall sales should grow in FY14. Assuming no one-offs in FY14, the guidance implies that FY13 one-offs are US$350 mn (at base business growth of 15%). This could add 8% to CS’ FY13E base EPS of Rs97.

● 4Q11 sales were in line (ex. Allegra D-24) but the mix was inferior. India growth was just 5% YoY as aggressive pricing and channel promotion by competitors resulted in a 5% price decline on Dr. Reddy’s portfolio (70% is acute). Dr. Reddy’s expects a bounceback in FY12 but April 2011 AIOCD data still show a weak growth of 6%.

● Gross margins ex. Allegra D-24 declined 180 bp QoQ due to: 1) strong growth of the low-margin API division, 2) incremental OTC sales in Russia are from in-licensed products and at lower margins, 3) 5% price decline on India portfolio and 4) price erosion on Lotrel.

● We maintain our OUTPERFORM, given strong earnings CAGR of 23% until FY13 and multiple support from strong FY13 guidance. We increase our target price by 2%, to Rs1,800, as we roll forward to FY13E base EPS (18x P/E). We reduce our FY12E/13E EPS by 4%/1% due to delay in Fonda launch and increase in interest cost due to bonus debentures.

Figure 1: FY13 guidance vs CS projections (US$ mn) FY11 actual FY13 CS FY13 guidanceGenerics* 507 738 900Branded 576 785 900PSAI 531 658 900Total 1,659 2,307 2,700 *BASF revenues included as part of PSAI. Source: Company data, CS estimates What’s one-off and what’s not in FY13 guidance? Management maintains that with organic growth it currently has revenue visibility until US$2.7 bn in FY13 vs consensus sales estimate of US$2.3 bn. The EPS contribution from extra sales of US$400 mn could be Rs16 and adds 15% to FY13E EPS. The unknown variable is how much of this upside is recurring. The company has also guided that FY13E includes one-offs but total sales in FY14 should grow. Assuming no one-offs in FY14, the guidance

implies that one-offs in FY13 sales amounts to US$350 mn (at base business sales growth of 15%) or half of the sales gap is non-recurring. 4Q11 margins were weak excluding Allegra D-24 Excluding Allegra D-24, sales were in line with our estimates but the product mix was inferior. Indian sales growth was just 5% YoY as aggressive pricing and channel promotion (higher bonus offers) by the competitors in the acute segment resulted in price decline of 5% on Dr. Reddy’s domestic portfolio (70% of the portfolio is acute). Management expects the growth to bounce back in FY12 but April 2011 AIOCD data still shows a weak growth of 6%. Gross margins ex. Allegra D-24 declined 180 bp sequentially due to: 1) strong growth of the low-margin API division, 2) price decline of 5% on domestic portfolio, 3) incremental OTC sales in Russia are from in-licensed products and at lower margins and 4) price erosion has been significant on Lotrel after Par pharma entered in January 2011. Maintain OUTPERFORM; target price of Rs1,800 We maintain our OUTPERFORM, given a strong earnings CAGR of 23% over the next two years and multiple support from strong FY13 guidance. We increase our target price by 2%, to Rs1,800, as we roll forward to FY13E base EPS of Rs97 (18x P/E) and value FTF pipeline at Rs46/share. Our target price has potential upside of: 1) Rs170/share if our estimation of one-offs of US$350 mn in FY13 is correct and 2) Rs200/share from multiple expansion from 18x to 20x (sector average multiple) as we draw closer to FY13E earnings. Key takeaways from the conference call ● Net debt increased US$180 mn QoQ due to bonus debenture issue of

US$113 mn and increase in receivables in the US and API division. ● Allegra market size reduced by 25-30% after the transition from

Rx to OTC. No inventory adjustment is expected in 1Q12 on D-24. ● FY12 capex target is Rs8-9 bn and the capacity should expand by

44% until FY13. ● Dr. Reddy’s is not looking at major acquisitions currently and the

deal size under consideration is US$30-50 mn. Figure 2: Geographical sales split of 4Q11 vs CS estimates

(Rs mn) 4Q11A 4Q11E Diff (%) 4Q10A YoY %Branded markets 6,245 6,184 1% 5,517 13%

India 2,746 3,031 -9% 2,613 5%International 3,499 3,153 11% 2,904 21%

Generics markets 7,294 6,973 5% 5,094 43%US 5,291 4,806 10% 2,990 77%Betapharm 1,166 1,404 -17% 1,501 -22%

PSAI and others 6,638 5,950 12% 5,813 14%Total revenues 20,177 19,107 6% 16,424 23%Source: Company data, Credit Suisse estimates Figure 3: 4Q11 consolidated result vs CS estimates (Rs mn) 4Q11A 4Q11E Diff (%) 4Q10A YoY %Net sales 20,173 19,107 6% 16,424 23%Gross profit 10,949 10,429 5% 8,640 27%EBITDA 3,607 3,476 4% 2,163 67%EBITDA margin 17.9% 18.2% -2% 13.2% 36%Net income 3,346 2,744 22% 1,838 82%Source: Company data, Credit Suisse estimates

Price (13 May 11, Rs) 1,655.45TP (Prev. TP Rs) 1,800 (1,760) Est. pot. % chg. to TP 952-wk range (Rs) 1842.30 - 1264.00Mkt cap (Rs/US$ bn) 280.2/ 6.2

Bbg/RIC DRRD IN / REDY.BO Rating (prev. rating) O (O) Shares outstanding (mn) 169.25 Daily trad vol - 6m avg (mn) 0.0 Daily trad val - 6m avg (US$ mn) 12.6 Free float (%) 73.6 Major shareholders Promoters 26.4%

Performance 1M 3M 12MAbsolute (%) 1.4 10.9 30.4Relative (%) 7.8 6.1 21.4

Year 3/09A 3/10A 3/11E 3/12E 3/13ERevenues (Rs mn) 69,441 70,277 74,693 90,335 103,826EBITDA (Rs mn) 12,947 11,676 12,699 18,568 21,753Net profit (Rs mn) (5168) 1,068 11,040 15,094 17,740EPS (Rs) (31) 6 65 89 105- Change from prev. EPS (%) n.a. n.a. 2 (4) (1)- Consensus EPS (Rs) n.a. n.a. 63.4 84.4 96.4EPS growth (%) n.a. n.a. 927.2 36.7 17.5P/E (x) NM 260.0 25.3 18.5 15.8Dividend yield (%) 0.4 0.7 0.8 1.1 1.2EV/EBITDA (x) 22.7 24.4 23.4 15.4 12.7P/B (x) 6.6 6.5 5.4 4.4 3.6ROE (%) (11.6) 2.5 23.4 26.4 25.4Net debt (net cash)/equity (%) 33.6 10.5 31.9 9.2 (4.7) Note 1: Dr. Reddy's is one of the largest Indian Pharmaceutical companies. Note 2: Dr. Reddy's manufactures and sells bulk drugs and finished dosages – both branded formulations in less regulated markets and generics in the regulated markets.

Monday, 16 May 2011

Asian Daily

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Gammon India----------------------------------------------------------------- Maintain OUTPERFORM 4Q11 disappoints on loss-making legacy orders EPS: ▼ TP: ▼ Amish Shah, CFA / Research Analyst / 9122 6777 3743 / shah.amish@credit-suisse.com Abhishek Bansal / Research Analyst / 91 22 6777 3968 / abhishek.bansal@credit-suisse.com

● Gammon’s reported PAT needs to be adjusted for: 1) Rs1.8 bn received from its real estate subsidiary, Metropolitan Infrahousing, 2) Rs1.7 bn of loss provisioning on revaluation of old fixed-price orders (Kosi & Gorakhpur) and claims writeoff (DMRC order) and 3) Rs250 mn of gains from sale of its stake in Sadbhav Engg.

● 4Q11 recurring PAT of Rs273 mn fell 56% YoY (4% below CS estimate), mainly impacted by its old loss-making fixed-price orders.

● Although Gammon claims it has improved its working capital cycle sequentially, our calculation suggests its working capital cycle (net of cash) increased from 132 days in FY10 to 147 days in FY11.

● Gammon plans to focus on cash flow improvement during FY12 rather than focussing on growth. It therefore guided for just 7-11% top-line growth in FY12. However, it expects margins to improve to 9% as loss-making orders are expected to be completed by December 2011.

● Gammon did not provide any details on its Italian and real estate businesses. We cut our FY12-13E EPS by 1-5% on rising interest rates and reduce target price to Rs164 (from Rs182), based on the value of its construction business, which is at 10x FY12E EPS (vs 12x previously).

4Q11 disappoints as legacy orders impact margins Gammon’s legacy fixed-priced orders that constituted 25% of its order book have fallen to about 10% now. However, led by delays (including external factors such as floods, insurgency, etc.) and rising commodity costs, these orders are now loss-making. Loss at these projects continue to impact Gammon’s performance. 4Q11 operating margins were just 6.3% vs our expectation of 8% and 119 bp lower YoY. Gammon expects to complete these loss-making orders by December 2011. Its reported PAT needs to be adjusted for several one-time items such as: 1) Rs1.8 bn interest income received on debentures of Rs0.8 bn of its real estate subsidiary taken over from ICICI Bank 4-5 years back, 2) Rs1.7 bn loss provisioning on revaluation of its legacy road

projects, Kosi & Gorakhpur and claims writeoff for its DMRC order and 3) Rs250 mn of gains from the sale of its stake in Sadbhav Engg. Working capital cycle though has improved on a sequential basis as guided by the company, we note that it (net of cash) deteriorated during FY11 to 147 days versus 132 days during FY10. Gammon plans to focus on improving working capital cycle during FY12. Figure 1: Gammon India – 4Q FY11 standalone results summary (Rs mn) 4QFY10 4QFY11 % YoY 4QFY11E % differenceOrder book 113,595 150,000 32.0% 155,000 -3.2%Net Sales 16,678 17,379 4.2% 14,500 19.9%Total operating expenses (15,426) (16,282) 5.5% (13,340) 22.1%EBITDA 1,252 1,097 -12.4% 1,160 -5.4%EBITDA margin (%) 7.5% 6.3% (119) 8.0% (169)Depreciation (189) (249) 31.7% (261) -4.8%EBIT 1,063 848 -20.2% 899 -5.6%Net interest expenses (230) (405) 76.4% (520) -22.1%Tax (212) (170) -19.9% (95) 79.2%Tax Rate (%) 25.5% 38.3% 1,286 25.0% N.A.Recurring PAT 621 273 -56.0% 284 -3.9%Exceptionals (73) 331 Nmf - N.A.Reported PAT 548 604 10.3% 284 112.7%Source: Company data, Credit Suisse estimates Muted FY12 sales guidance; expects margin improvement Gammon guided for muted sales growth during FY12 of 7-11%, led by its almost flat order book over the past four quarters and focus on improving cash flow generation and margins during FY12 rather than focussing on growth. Gammon expects the legacy loss-making orders to be completed by December 2011. Besides, on a conservative basis it has already provided for potential loss from these orders until December 2011. This should allow it to improve margins going forward. Gammon plans to reach 9% operating margin during FY12. Order inflows could provide positive surprise, led by order wins at subsidiaries However, order inflows could surprise on potential large road project wins on BOT basis by its subsidiary, GIPL, and potential of it winning the NTPC bulk tender, if it wins its litigation to participate in NTPC’s bulk tender. Besides, our sales growth estimate for FY12 already factors in lower growth, as guided by the company. No clarity provided on its Italian and real estate businesses During the post-results conference call, Gammon provided no details on the performance of its Italian business as well as on the media articles that suggests Gammon is looking to divest its stake in the Italian business. Besides, we await clarity on details of the land bank and development plans for Gammon India’s real estate business. Cut FY12-13E EPS by 1-4%; maintain OUTPERFORM We cut our FY12-13 earnings estimates by 1-5% to factor in rising interest costs. We also cut our price target to Rs164 from Rs182 as we now value its construction business at 10x FY12E EPS versus at 12x earlier led by expectation of lower growth and fall in peer valuation. However, adjusted for valuation of its infrastructure business, the stock now trades at 4-5x core construction earnings, which we believe is inexpensive and thus maintain our OUTPERFORM rating for the stock.

Price (13 May 11, Rs) 105.00TP (Prev. TP Rs) 164 (182) Est. pot. % chg. to TP 5652-wk range (Rs) 229.60 - 103.55Mkt cap (Rs/US$ mn) 13,386.4/ 298.4

Bbg/RIC GMON IN / GAMM.BO Rating (prev. rating) O (O) [V] Shares outstanding (mn) 127.49 Daily trad vol - 6m avg (mn) 0.0 Daily trad val - 6m avg (US$ mn) 0.4 Free float (%) 68.9 Major shareholders —

Performance 1M 3M 12MAbsolute (%) (15.5) (4.5) (50.2)Relative (%) (10.1) (8.7) (53.6)

Year 3/09A 3/10A 3/11E 3/12E 3/13ERevenues (Rs mn) 36,538 44,701 56,089 61,037 68,837EBITDA (Rs mn) 3,364 3,808 4,538 5,171 5,982Net profit (Rs mn) 997 1,448 1,025 1,070 1,298EPS (Rs) 11.4 11.3 7.5 7.8 9.4- Change from prev. EPS (%) n.a. n.a. 0 (1) (5)- Consensus EPS (Rs) n.a. n.a. 13.4 0 0EPS growth (%) 3.8 (0.9) (34.0) 4.4 21.3P/E (x) 9.2 9.3 14.1 13.5 11.1Dividend yield (%) 0.7 0.6 0.4 0.4 0.4EV/EBITDA (x) 6.5 6.6 7.5 5.2 6.4P/B (x) 0.6 0.7 0.7 0.6 0.6ROE (%) 7.1 8.2 5.0 4.9 5.7Net debt (net cash)/equity (%) 52.8 61.0 96.7 59.5 106.4 Note 1: Gammon India is an over 70-year old civil construction company specialising in transportation, power, irrigation and water supply sectors. It owns several infrastructure assets under the BOT route and is planning to enter the real estate development space.

Monday, 16 May 2011

Asian Daily

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Jaiprakash Associates Ltd.----------------------------------------------- Maintain OUTPERFORM Construction margins disappointed but 4Q11 results in line EPS: ▼ TP: ▼ Amish Shah, CFA / Research Analyst / 9122 6777 3743 / shah.amish@credit-suisse.com Abhishek Bansal / Research Analyst / 91 22 6777 3968 / abhishek.bansal@credit-suisse.com

● JPA’s 4Q11 cement business performance was robust, mainly led by an 11% QoQ increase in cement realisation, higher than the industry average of 8.4%, as northern and western India (accounting for most of JPA’s cement sales) saw higher price increases during 4Q. This, coupled with ongoing cost optimisation, led to cement EBIT of Rs2.2 bn being 25% higher than our estimate.

● But construction margins of 12.3% (down 785 bp YoY) were weak and were affected on account of JPA executing a high share of low-margin real estate projects of Jaypee Infratech in Noida during 4Q. Its construction EBIT declined 46% YoY and was 24% below CS estimate.

● Overall, operating results were lower than our estimates. But, led by lower-than-expected depreciation and interest costs, recurring PAT of Rs2.9 bn (up 17% YoY) was in line with our estimate.

● We cut our FY12E-13E EPS by 4-13%, led by our expectation of further increase in coal cost (to impact cement business), lower construction margins and higher interest rates. We lower our target price to Rs123 on our lower cement and construction business valuation and the reduced value of its treasury shares. We maintain our OUTPERFORM rating.

Cement surprises, construction margins weak

Cement prices for the industry in general increased 8.4% QoQ during 4Q11. Price increases in western and northern India, which account for majority of JPA’s sales, were higher than the industry average. This benefited JPA as underscored by its 11% QoQ increase in cement realisation. Figure 1: JPA – cement business performance summary 4QFY10 3QFY11 4QFY11 % QoQ % YoYSales (mn tonnes) 3.6 3.7 4.2 14% 16%Net Sales (Rs mn) 12,334 12,374 15,685 27% 27%Realisation (Rs / tonne) 3,407 3,363 3,734 11% 10%Ebit/ tonne (Rs /tonne) 828 386 531 37% -36%Source: Company data, Credit Suisse estimates Higher cement realisation combined with ongoing cost optimisation at its cement business led to cement operating margin of 14.2% vs our

expectation of 10.5%. This resulted in cement profit of Rs2.2 bn, 25% ahead of our estimate. But, construction profit of Rs2.2 bn was down 46% YoY and 24% below our estimate. Despite stronger-than-expected construction sales, this was led by weak margins that fell to 12.3% (down 785 bp YoY), led by JPA executing a high share of low-margin real estate projects of Jaypee Infratech in Noida.

Figure 2: JPA – Key business segment performance summary 4Q FY10 4Q FY11 % YoY 4Q FY11E % differenceRevenues Cement 12,334 15,685 27% 16,926 -7%Construction 19,958 17,806 -11% 15,500 15%Real Estate 1,244 5,968 380% 3,500 71%EBIT Cement 2,997 2,229 -26% 1,777 25%Construction 4,015 2,185 -46% 2,868 -24%Real Estate 388 2,855 635% 1,575 81%EBIT Margin Cement 24.3% 14.2% (1,009) 10.5% 371Construction 20.1% 12.3% (785) 18.5% (623)Real Estate 31.2% 47.8% 1,661 45.0% 284Source: Company data, Credit Suisse estimates Overall, operating results were lower than our estimates, mainly led by weak construction margins. However, led by lower-than-expected depreciation and interest costs, recurring PAT of Rs2.9b n (up 17% YoY) was in line with our estimate. Reported PAT included prior period adjustment of Rs3.4 mn and writeback of excess tax provided earlier of Rs140.9 mn.

Figure 3: JPA – 4Q FY11 standalone results summary (Rs mn) 4QFY10 4QFY11 % YoY 4QFY11E % differenceSales 32,804 39,053 19 35,144 11Operating expenses (24,915) (31,313) 26 (26,324) 19EBITDA 7,889 7,740 (2) 8,820 (12)EBITDA Margin (%) 24.0% 19.8% (423) 25.1% (528)Depreciation (1,334) (1,507) 13 (1,750) (14)EBIT 6,555 6,234 (5) 7,070 (12)EBIT Margin (%) 20.0% 16.0% (402) 20.1% (415)Net Interest expenses (2,209) (2,355) 7 (3,232) (27)PBT 4,346 3,879 (11) 3,838 1PBT Margin (%) 13.2% 9.9% (331) 10.9% (99)Total Tax (1,890) (997) (47) (959) 4Tax rate (%) 43.5% 25.7% (1,778) 25.0% 71Recurring PAT 2,456 2,882 17 2,878 0Recurring PAT margin (%) 7.5% 7.4% (11) 8.2% (81)Exceptional Items (16) 138 (965) 0 N.A.PAT 2,440 3,020 24 2,878 5Source: Company data, Credit Suisse estimates Cut FY12E-13E EPS by 4-13%; maintain OUTPERFORM We cut our FY12-13 earnings estimate by 4-13%, mainly led by our expectation of increase in coal cost (to impact cement business), lower construction business margins and higher interest rates. Consequently, we cut our price target to Rs123 (from Rs140) on our lower cement and construction business valuation, and the reduced value of its treasury shares. We maintain our OUTPERFORM rating for the stock.

Price (13 May 11, Rs) 87.55TP (Prev. TP Rs) 123 (140) Est. pot. % chg. to TP 4052-wk range (Rs) 139.20 - 73.85Mkt cap (Rs/US$ bn) 186.2/ 4.1

Bbg/RIC JPA IN / JAIA.BO Rating (prev. rating) O (O) [V] Shares outstanding (mn) 2,126.43 Daily trad vol - 6m avg (mn) 2.1 Daily trad val - 6m avg (US$ mn) 30.7 Free float (%) 53.9 Major shareholders —

Performance 1M 3M 12MAbsolute (%) (10.8) 5.9 (34.5)Relative (%) (5.2) 1.3 (39.0)

Year 3/09A 3/10A 3/11E 3/12E 3/13ERevenues (Rs mn) 57,642 100,889 129,776 153,443 168,814EBITDA (Rs mn) 16,762 26,249 28,623 35,072 39,684Net profit (Rs mn) 8,927 9,568 10,487 11,616 13,512EPS (Rs) 4.24 4.50 4.93 5.46 6.35- Change from prev. EPS (%) n.a. n.a. .0000 (13) (4)- Consensus EPS (Rs) n.a. n.a. 5.38 6.48 7.15EPS growth (%) 25.1 6.1 9.4 10.8 16.3P/E (x) 20.6 19.4 17.8 16.0 13.8Dividend yield (%) 0.7 1.0 1.1 1.1 1.1EV/EBITDA (x) 17.2 12.3 11.7 10.2 9.1P/B (x) 2.8 2.2 2.0 1.8 1.6ROE (%) 15.8 12.6 11.8 11.9 12.5Net debt (net cash)/equity (%) 152.3 160.2 159.5 168.6 153.4 Note 1: JPA is an infrastructure conglomerate focused on E&C of hydro power plants. It is planning to emerge as the third-largest cement producer in India, has interests in hydro and thermal power plants, toll roads, real estate, hotels and hospitality sectors.

Monday, 16 May 2011

Asian Daily

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Jaiprakash Power Ventures Ltd------------------------------------------------ Maintain NEUTRAL In-line 4Q11, planned equity issuance a key trigger for the stock EPS: ▼ TP: ◄► Amish Shah, CFA / Research Analyst / 9122 6777 3743 / shah.amish@credit-suisse.com Abhishek Bansal / Research Analyst / 91 22 6777 3968 / abhishek.bansal@credit-suisse.com

● JPVL’s 4Q11 operating results were in-line with our estimates. However, recurring PAT was 4% lower than our expectations on account of slightly higher-than-expected interest expenses.

● Generation at 219mu during 4Q11 declined 17% YoY. However, during FY11, JPVL’s 300MW Baspa-II hydro project recorded the highest generation at about 1.5bu (up 13% YoY).

● Shareholders and creditors of JPVL and its subsidiaries, JKHCL and BPSCL, at the court convened meeting, have approved the amalgamation of these subsidiaries, effective April 2010.

● Last week, JPVL synchronised the first unit (of 250MW) of its 1GW Karcham Wangtoo hydro power project. JPVL believes its PPA with PTC for the sale of 0.8GW power from this project is now void and expects to sell the entire output on merchant basis in the near term. This could provide an upside potential to our FY12 EPS.

● However, JPVL’s balance sheet is highly geared and would require equity issuance during FY12. Our sensitivity analysis suggests planned equity issuance should be earnings accretive and would improve visibility on the company’s ability to execute large projects.

Figure 1: JPVL – quarterly generation from operating projects

In mn kwh 4QFY10 1QFY11 2QFY11 3QFY11 4QFY11Baspa (300 MW) 96 423 712 243 96 Vishnuprayag (400 MW) 167 607 866 428 122 Total generation 263 1,029 1,578 671 219 Source: CEA. 4Q11 operating results in-line JPVL’s 300MW Baspa-II hydro project recorded the highest ever generation at about 1.5bu (up 13% YoY) during FY11, since its commencement in 2003. However, generation at 219mn kwh from its 700MW operating capacity (300MW Baspa and 400MW Vishnuprayag projects) during 4Q11 declined 17% YoY. JPVL’s 4Q11 operating results were in-line with our estimates. Recurring PAT at Rs116 mn declined 81% YoY affected from interest expense on debt taken to finance equity investments of its subsidiaries executing power projects.

Recurring PAT was 4% lower than our estimates, led by slightly higher-than-expected interest expenses. We cut our FY11 earnings by 1% to incorporate this lower-than-expected 4Q results.

Figure 2: JPVL – 4Q11 standalone results summary (Rs mn) 4QFY10 4QFY11 % YoY 4QFY11E % differenceGeneration (mn kWh) 263 219 -17.0% 219 0%Net Sales 1,411 1,415 0.3% 1,425 -1%Operating expenses (328) (250) -23.9% (255) -2%EBITDA 1,083 1,165 7.6% 1,170 0%EBITDA margin (%) 76.8% 82.4% 561 82.1% 2610%Depreciation (235) (234) -0.2% (240) -2%EBIT 848 931 9.8% 930 0%Net interest expenses (115) (787) 586.0% (779) 1%PBT 734 145 -80.3% 151 -4%Tax (125) (29) -77.0% (30) -4%Tax Rate (%) 17.0% 19.9% 19.9%Recurring PAT 609 116 -81.0% 121 -4%Exceptionals (3) 54 0Reported PAT 606 169 -72.0% 121 40%Source: Company data, Credit Suisse estimates Power capacity 3x within a year; commissioning pre-poned JPVL plans to commission its 1GW (4 units of 250MW each) Karcham Wangtoo hydro power project by 2Q FY12 in phases, about 3–4 months ahead of its schedule/our estimates and its 0.5GW Bina-I coal-based project during CY11. This would more than triple its power capacity to 2.2GW within a year (from 0.7GW currently). Early commissioning of Karcham Wangtoo project would allow JPVL to capture high profits earned by hydro projects during the monsoon season (July-Sept). Also, as per JPVL, its agreement to sell 0.8GW power from the project to PTC is now void. The company expects to sell the entire output from the project on merchant basis in the near term. This could provide an upside potential to our earnings estimate for FY12. Planned equity issuance would be earnings accretive and improve visibility on planned projects JPVL has a strong pipeline of coal and hydro power projects under execution. However, one of the key concerns in its ability to execute these projects is its high gearing. JPVL believes that it is adequately funded in the near term, after which funding needs would be supported by cash flows from the commissioning of the Karcham Wangtoo and Bina-I projects.

However, we believe it would have to raise equity by FY12. JPVL has already announced its plans to raise US$500 mn. Our sensitivity analysis suggests that planned equity issuance should be earnings accretive, as it would reduce interest expense from debt taken currently to meet the equity needs of its subsidiary projects. Besides, this should provide visibility on the company’s ability to execute large projects. We see planned equity issuance as a key trigger for the stock.

Price (13 May 11, Rs) 47.25TP (Prev. TP Rs) 64.00 (64.00) Est. pot. % chg. to TP 3552-wk range (Rs) 74.00–36.60Mkt cap (Rs/US$ mn) 99,020.9/ 2,207.1

Bbg/RIC JPVL IN / JAPR.BO Rating (prev. rating) N (N) [V] Shares outstanding (mn) 2,095.68 Daily trad vol - 6m avg (mn) 0.2 Daily trad val - 6m avg (US$ mn) 0.9 Free float (%) 30.5 Major shareholders —

Performance 1M 3M 12MAbsolute (%) (5.0) 18.4 (30.9)Relative (%) 0.9 13.3 (35.6)

Year 3/09A 3/10A 3/11E 3/12E 3/13ERevenues (Rs mn) 2,889 7,178 7,694 21,367 34,952EBITDA (Rs mn) 2,523 6,327 6,468 18,431 26,324Net profit (Rs mn) 1,340 2,421 1,879 4,908 4,092EPS (Rs) 2.73 1.16 0.71 1.85 1.54- Change from prev. EPS (%) n.a. n.a. (1) 0 0- Consensus EPS (Rs) n.a. n.a. 0.74 2.14 2.44EPS growth (%) 0.8 (57.7) (38.7) 161.2 (16.6)P/E (x) 17.3 40.9 66.7 25.5 30.6Dividend yield (%) 3.2 0.5 0.5 0.5 0.5EV/EBITDA (x) 42.6 21.9 36.3 17.3 15.6P/B (x) 2.2 2.9 3.1 2.8 2.6ROE (%) 12.8 10.9 5.1 11.6 8.9Net debt (net cash)/equity (%) 70.1 113.2 330.1 480.1 630.4 Note1: JHPL currently operates 300MW hydro power plant and is planning to merge its group power company JPVL with itself which would result in a diversified portfolio of thermal and hydro power projects with a mix of contracted and merchant power capacity.

Monday, 16 May 2011

Asian Daily

- 20 of 38 -

Lupin ----------------------------------------------------------------------------- Maintain OUTPERFORM Margins continue to be subdued despite strong sales EPS: ▼ TP: ◄► Anubhav Aggarwal / Research Analyst / 9122 6777 3808 / anubhav.aggarwal@credit-suisse.com

● We liked strong sales growth across regions and adjusted for one-offs, sales beat was 4%. Sequential increase in US sales was due to (1) seasonally strong quarter for Suprax, (2) end of channel de-stocking of Dec quarter, (3) Antara sales start growing and (4) benefit of pick-up in Cephs sales due to reduced competition.

● India sales growth was tepid at 16% as Lupin has been shifting focus from anti-infectives to chronics and expects FY12 growth of 20% with launch of more than 40 products.

● Margins continue to be subdued. Gross margins declined QoQ by 180 bp as Lotrel pricing reduced further with the entry of Par Pharma in Jan 2011. EBITDA margin was impacted by (1) high R&D cost at 9.7% of sales versus 8.1% for 9MFY11; (2) expenses for the newly commissioned Indore SEZ. However, margins were weak as it benefitted from (1) forex gain of Rs130 mn (other expenses) & (2) benefit of Salix upfront payment included in sales.

● We maintain OUTPERFORM as FY13 EPS growth of 27% is significant and not yet priced in. FY12 EPS reduces by 4% as upfront payment from Salix has been factored in FY11.

Figure 1: Sales split for 4Q11 versus CS estimates Rs mn 4Q11A 4Q11E Diff (%) 4Q10A YoY %Formulations 12,144 11,517 5% 10,729 13%

Developed markets 7,853 7,290 8% 7,136 10%EU+US 6,235 5,826 7% 5,874 6%Japan 1,618 1,464 11% 1,262 28%

Domestic 3,071 3,128 -2% 2,651 16%Developing markets 1,220 1,099 11% 941 30%

API 2,489 2,493 0% 2,226 12%Source: Company data, Credit Suisse estimates Healthy sales trend across geographies Overall sales were 9% higher than expected but benefitted from upfront payment from Salix. Adjusted for one-offs, sales beat was 4%.

● Sequential improvement in US sales was driven by (1) seasonally strong quarter for Suprax, (2) end of channel de-stocking in Dec quarter, (3) Antara sales have started growing and (4) benefit of

pick-up in cephs sales as a competitor had manufacturing issues. The latter benefit should ramp up further in the June quarter.

● India sales growth was tepid at 16% as Lupin has been shifting focus from anti-infectives to chronics. However, the company expects to grow at 20% in FY12 with launch of more than 40 products. The secondary sales has been strong at 24% in March 2011 (AIOCD) and offers comfort on the guidance.

● Japanese sales growth of 28% was higher than expected. This growth was partly helped by Yen appreciation and new product introduction. Lupin introduced five new products in Japan in FY11 and plans to launch seven new products in FY12.

● Reconciliation of geographical sales split with the reported sales leaves a gap of Rs581 mn, which, we believe, includes the upfront payment from Salix.

Margins weaker than expected Both gross and EBITDA margins were below our expectation. Gross margin declined sequentially by 180 bp as the pricing pressure on Lotrel, with the entry of Par Pharma in Jan 2011, has been significant. EBITDA margin was impacted by (1) high R&D cost which was higher at 9.7% of sales compared to 8.1% for first nine months (2) expenses related to Indore SEZ which has just been commissioned. However, margins benefitted from (1) forex gain of Rs130 mn included in other expenses and (2) benefit of Salix upfront payment has been included in sales. Overall, EBITDA margins were weaker than expected.

Figure 2: 4Q11 consolidated result versus CS estimates Rs mn 4Q11A 4Q11E Diff (%) 4Q10A YoY %Net sales 15,115 13,921 9% 12,848 18%EBITDA 2,687 2,631 2% 2,491 8%EBITDA margin 17.8% 18.9% -1% 19.4% -1.6%Depreciation 463 414 12% 407 14%Other income 453 334 36% 539 -16%Interest cost 78 81 -4% 78 0%Income taxes 312 346 -10% 293 6%Minority interest 16 38 -58% 45 -64%Net income 2,272 2,086 9% 2,207 3%Source: Company data, Credit Suisse estimates Key takeaways from the conference call ● Allernaze: The management confidence appeared low for the

launch of Allernaze in FY12. ● FY12 ANDA filing target is more than 30 (versus 21 ANDAs filed

in FY11) and FY12 launch target is 10 products in the US. ● Lupin has made an upfront payment to Abbott in settlement on

fenofibrate patents and there will not be recurring royalty payments.

● FY12 capex is US$100 mn, similar to FY11. Lupin has already spent more than US$20 mn on biosimilars. Lupin has six products in the pipeline, of which two are entering clinics this month. One of them is a bio-better.

Price (12 May 11, Rs) 423.60TP (Prev. TP Rs) 480 (480) Est. pot. % chg. to TP 1352-wk range (Rs) 516.00 - 352.83Mkt cap (Rs/US$ bn) 189.0/ 4.2

Bbg/RIC LPC IN / LUPN.BO Rating (prev. rating) O (O) Shares outstanding (mn) 446.27 Daily trad vol - 6m avg (mn) 0.1 Daily trad val - 6m avg (US$ mn) 1.4 Free float (%) 47.0 Major shareholders Promoter 53%

Performance 1M 3M 12MAbsolute (%) 3.7 3.1 19.4Relative (%) 7.4 (1.7) 10.1

Year 3/09A 3/10A 3/11E 3/12E 3/13ERevenues (Rs mn) 37,759 47,405 56,959 65,195 74,759EBITDA (Rs mn) 6,485 8,536 10,719 12,520 15,789Net profit (Rs mn) 5,049 6,816 8,795 9,116 11,654EPS (Rs) 12.1 15.9 19.7 20.5 26.2- Change from prev. EPS (%) n.a. n.a. 2 (4) 0- Consensus EPS (Rs) n.a. n.a. 19.1 22.4 27.4EPS growth (%) 22.8 31.9 24.1 3.6 27.8P/E (x) 35.1 26.6 21.5 20.7 16.2Dividend yield (%) 0.7 0.8 1.0 1.0 1.3EV/EBITDA (x) 30.9 23.2 18.3 15.6 12.2P/B (x) 12.4 7.1 5.8 4.8 3.9ROE (%) 37.3 34.1 30.2 25.2 26.3Net debt (net cash)/equity (%) 79.6 36.2 22.5 16.1 5.8 Note 1: Lupin is a vertically integrated Indian pharmaceuticals manufacturer focussing on cephalosporins and anti-TB medicines. It is now expanding in regulated markets, and also changing product mix towards formulations. Note 2: Lupin is a vertically-integrated Indian pharmaceuticals manufacturer focussing on cephs and anti-TB medicines.

Monday, 16 May 2011

Asian Daily

- 21 of 38 -

Suzlon----------------------------------------------------------------------------------- Maintain NEUTRAL Forex gains and accounting change prop an otherwise extremely disappointing 4Q EPS: ◄► TP: ◄► Venugopal Garre / Research Analyst / 91 22 6777 3872 / venugopal.garre@credit-suisse.com Hitesh Das / Research Analyst / 91 22 6777 3862 / hitesh.das@credit-suisse.com

● Suzlon’s 4Q adjusted PAT of Rs1.0 bn was significantly below estimates (over Rs3 bn) and disappointing. The reported PAT included: 1) forex gains of Rs2.2 bn, 2) sudden change in accounting policy at Repower that overstated PAT in 4Q by Rs1.1 bn and sales by Rs9.7 bn, 3) taxes lower by Rs0.55 bn due to recognition of deferred tax assets (auditors have expressed their reservations).

● 4Q wind group sales of 492 MW were below management’s expectation of over 700 MW sales (as highlighted in the 3Q call). Order inflows were only 144 MW. Repower executed only 851 MW in FY11. Guidance for FY12 points at EPS similar to that of consensus and hence an irrelevant datapoint.

● Given an extremely weak quarter and continued stress on balance sheet (debt remains unchanged), steep valuations of the stock could be questioned. We intend to review our earnings model to factor in the changes in accounting norms at Repower and to account for the dilution on new FCCBs.

Accounting policy change surprising The notes to results highlights that until the December quarter, sales at Repower (95% subsidiary of Suzlon) were adjusted to align them to the group’s accounting policy but a detailed exercise by Suzlon’s management suggested that it might be appropriate to treat revenue recognition differently at Repower and Suzlon, given the difference in the nature of customisation of contracts/clauses at Repower and Suzlon. This overstated the March quarter revenues substantially – revenue overstated by Rs9.7 bn and PAT at Repower overstated by Rs1.1 bn. Management’s explanation on the key drivers behind this change in accounting policy is awaited. Auditor qualification (comments) We note that there were auditor comments with regards to: 1) taking credit of deferred tax asset, 2) non-provision of premium on redemption of FCCBs (Rs5.7 bn) and 3) non provision of IDC’s worth Rs0.64 bn with regards to levy by TNEB.

Guidance equates to consensus EPS Suzlon’s management has guided for Rs240-260 bn of consolidated sales with EBIT margins at 7-8%. This amounts to EPS of Rs3.0 (at the mid-point of guidance), in line with the street’s estimates. Given the short cycle nature of the business and an order booking policy that does not require even a financial closure of the project to get completed, we see risk to such guidance as delivery schedules could continue to get postponed, impacting numbers. Suzlon’s management in its 3Q conference call had indicated India sales at over 700 MW; however, actual sales came in at only 492 MW, which highlights the difficulty in predicting sales for even a quarter ahead.

Figure 1: Suzlon wind group – barely manages to breakeven; reported PAT includes Rs2.2 bn of forex gains (Rs mn) Mar-10 Dec-10 Mar-11 QoQ YoY Mar-11EOrder inflows in MW 293 1,488 144 -90% -51% 700Sales in MW 650 461 492 7% -24% 685Order book MW terms 1,126 2,578 2,230 -13% 98% 2,592Sales 41500 25090 30370 21% -27% 37559EBITDA 3800 1730 4700 172% 24% 3716EBITDA margin 9.2% 6.9% 15.5% 9.9%Depreciation 1060 880 1070 22% 1% 751Other income 0 150 220 47% 45Interest 2330 2120 2310 9% -1% 1644Forex loss /(gain) on ZCCB 70 -470 0 -100% -100% 0PBT 480 -1590 1540 -197% 221% 1365Tax 2850 -140 -600 329% -121% 273Reported PAT -2370 -1440 2140 -249% -190% 1092PAT margin -6% -6% 7% 3%Source: Company data, Credit Suisse estimates

Figure 2: Adjusted consolidated PAT at Rs1 bn (Rs mn) Mar-10 Dec-10 Mar-11 QoQ YoYTotal Income 61642 44940 73721 64% 20%Operating profits 5349 1816 10239 464% 91%OPM 9% 4% 14% 244% 60%Interest 3002 2949 3126 6% 4%PBT 1000 -2219 4897 -321% 390%Taxation 2953 308 413 34% -86%Reported PAT -1885 -2539 4316 -270% -329%Source: Company data

Figure 3: Suzlon wind group-debt remains unchanged. (Rs mn) Dec-09 Mar-10 Jun-10 Sep-10 Dec-10 Mar-11Acquisition debt 21590 20830 21550 20850 20730 20690FCCB 22290 21510 22250 21530 21410 21360Capex , WC debt 60860 62840 64730 68320 68980 70280Promoter loans 11750 11750 0 0 0 0Suzlon Wind 116490 116,930 108,530 110,700 111,120 112330Note that the above figures are as of 31 March and do not include the US$150 mn FCCB issue in April. Source: Company data

Price (13 May 11, Rs) 52.90TP (Prev. TP Rs) 49.00 (49.00) Est. pot. % chg. to TP (7)52-wk range (Rs) 66.80 - 44.05Mkt cap (Rs/US$ mn) 95,024.1/ 2,118.0

Bbg/RIC SUEL IN / SUZL.BO Rating (prev. rating) N (N) [V] Shares outstanding (mn) 1,796.30 Daily trad vol - 6m avg (mn) 4.5 Daily trad val - 6m avg (US$ mn) 26.9 Free float (%) 35.0 Major shareholders Promoter group:

65.83%

Performance 1M 3M 12MAbsolute (%) (5.6) 15.6 (20.8)Relative (%) 0.3 10.6 (26.2)

Year 3/09A 3/10A 3/11E 3/12E 3/13ERevenues (Rs mn) 260,817 206,197 178,791 213,581 222,660EBITDA (Rs mn) 23,825 10,125 9,196 19,714 23,236Net profit (Rs mn) 2,748 (10226) (8631) 3,056 3,596EPS (Rs) 1.83 (6.57) (4.89) 1.73 2.04- Change from prev. EPS (%) n.a. n.a. .0000 0- Consensus EPS (Rs) n.a. n.a. (4.14) 2.39 4.17EPS growth (%) (76.7) n.a. n.a. n.a. 17.6P/E (x) 28.8 NM NM 30.5 26.0Dividend yield (%) 0 0 0 0 0EV/EBITDA (x) 8.9 19.0 17.5 8.0 6.2P/B (x) 0.9 1.3 1.4 1.3 1.3ROE (%) 3.3 (13.5) (12.9) 4.4 5.0Net debt (net cash)/equity (%) 107.8 140.8 93.0 84.2 63.7 Note 1: Suzlon is the largest listed alternative energy play in India. It is the largest wind turbine maker in Asia and the fifth-largest in the world with an 8% global market share.

Monday, 16 May 2011

Asian Daily

- 22 of 38 -

Indonesia Indonesia Cement Sector -------------------------------------------------- Maintain OVERWEIGHT Positive domestic cement consumption in April Ella Nusantoro / Research Analyst / 62 21 2553 7917 / ella.nusantoro@credit-suisse.com

● Indonesia Cement Association reported April 2011 cement consumption increased 7% YoY (-3.1% MoM) to 3.8 mn tonnes on the back of a 17% YoY growth (-0.9% MoM) in domestic consumption, while exports fell 82% YoY (-56% MoM).

● YTD, total cement consumption was up 7% YoY to 14.8 mn tonnes, while domestic consumption increased 11% YoY and exports fell 48% YoY. The domestic consumption of 14.3 mn tonnes accounted for 33% of our FY11E forecast. We expect a 6% increase in domestic volume growth and 7.5% increase in ASP this year, which is in line with inflation.

● Market share: Semen Gresik's market share during 4M11 stood at 40.9%, a decline from the 43.2% last year. Indocement remains at around 31% market share, while Holcim Indonesia's market share has risen to 15.2% from 13.6% last year.

● We continue to like Semen Gresik in the sector due to its valuations as well as its ability to serve demand from outside Java, given its diverse plant locations (Java, Sumatera, Sulawesi).

Valuation metrics Company Ticker CS Price Year P/E (x) P/B rating Local Target T T+1 T+2 (x)Semen Gresik SMGR IJ O 9,300 11,000 12/09 15.9 14.4 4.6Indocement INTP IJ N 16,800 17,400 12/10 17.0 14.7 3.9Holcim Indonesia SMCB IJ N 2,125 2,400 12/09 18.9 15.9 3.8Note: O = OUTPERFORM, N = NEUTRAL, U = UNDERPERFORM Source: Company data, Credit Suisse estimates

Figure 1: Indonesia monthly cement consumption (in tonnes)

2250000

2500000

2750000

3000000

3250000

3500000

3750000

4000000

Apr-07 Oct-07 Apr-08 Oct-08 Apr-09 Oct -09 Apr-10 Oct-10 Apr-11Source: Indonesia Cement Association

Figure 2: April cement consumption in ’000 tonnes Apr-09 Apr-10 Mar-11 Apr-11 MoM chg YoY chgBanten 144 170 207 223 8.0% 31.5%Jakarta 265 308 390 369 -5.3% 19.8%West Java 396 459 546 532 -2.6% 15.8%Central Java 327 331 381 393 3.2% 18.8%Yogyakarta 43 46 54 60 10.7% 29.1%East Java 380 371 424 444 4.7% 19.7%Java 1,556 1,685 2,001 2,021 1.0% 19.9%Sumatra 644 765 982 876 -10.8% 14.5%Kalimantan 188 248 259 272 5.3% 9.8%Sulawesi 202 245 278 286 3.1% 16.6%Nusa Tenggara 176 165 178 189 6.5% 14.6%East of Indonesia 84 80 72 89 23.6% 11.7% Total Indonesia 2,850 3,189 3,769 3,734 -0.9% 17.1% Total export 306 369 153 67 -56.0% -81.8% Grand total 3,156 3,558 3,922 3,801 -3.1% 6.8%Outside Java 1,295 1,504 1,768 1,713 -3.1% 13.9%Source: Indonesia Cement Association

Figure 3: Indonesia cement consumption, YTD to April in ’000 tonnes 4M09 4M10 4M11 ChgBanten 558 643 810 25.9%Jakarta 1,082 1,175 1,469 25.0%West Java 1,529 1,749 2,095 19.8%Central Java 1,166 1,288 1,472 14.3%Yogyakarta 165 184 216 17.4%East Java 1,418 1,759 1,699 -3.4%Java 5,918 6,799 7,761 14.2%Sumatra 2,723 3,051 3,474 13.9%Kalimantan 760 995 1,000 0.5%Sulawesi 863 1,032 1,038 0.5%Nusa Tenggara 588 730 754 3.3%East of Indonesia 271 321 281 -12.3% Total Indonesia 11,123 12,927 14,308 10.7% Export 1,117 896 467 -47.8% Grand total 12,240 13,823 14,776 6.9%Outside Java 5,205 6,129 6,547 6.8%Source: Indonesia Cement Association

Figure 4: Domestic cement consumption – breakdown by producer and market share in ’000 tonnes 4M09 4M10 4M11 Chg 4M09 4M10 4M11Semen Andalas 502 536 610 13.8% 4.5% 4.1% 4.3%Semen Padang 1,579 1,634 1,712 4.7% 14.2% 12.6% 12.0%Semen Baturaja 299 323 401 24.1% 2.7% 2.5% 2.8%Indocement 3,305 3,982 4,424 11.1% 29.7% 30.8% 30.9%Holcim Indonesia 1,405 1,752 2,181 24.5% 12.6% 13.6% 15.2%Semen Gresik 2,439 2,897 2,997 3.4% 21.9% 22.4% 20.9%Semen Tonasa 1,076 1,053 1,141 8.3% 9.7% 8.1% 8.0%Semen Bosowa 519 749 844 12.6% 4.7% 5.8% 5.9%Semen Kupang - - - Total 11,123 12,927 14,308 10.7% SGG 5,093 5,585 5,850 4.7% 45.8% 43.2% 40.9%Source: Indonesia Cement Association

Monday, 16 May 2011

Asian Daily

- 23 of 38 -

Pakistan National Bank ------------------------------------------------------------- Maintain UNDERPERFORM 1Q results call – Management positive but NPLs and deposit attrition are key concerns EPS: ◄► TP: ◄► Farhan Rizvi, CFA / Research Analyst / 65 6212 3036 / farhan.rizvi@credit-suisse.com

● NBP conducted its first ever conference call to discuss 1Q11 results released last month , with the President highlighting the three-year strategic direction for the bank.

● The key strategic initiatives outlined by management are: 1) focus on low cost deposits, 2) leveraging of international operations to increase trade business volumes, 3) renewed focus on NPL reduction and recovery, 4) reducing expenses through improved efficiency aided by continued investments in technology.

● The 1Q11 results had outlined inherent risks of attrition in government deposits and asset quality concerns as a quarter of the 9% deposit attrition was contributed by transfer of government deposits to Sindh Bank. Moreover, a 9% (PRs8 bn) NPL accretion demonstrated continued challenges with asset quality.

● We maintain our UNDERPERFORM rating with a target price of PRs47.20 given near-term challenges on deposit attrition and continued deterioration in asset quality. Moreover, likely increase in tax rate in the upcoming budget is another risk for the sector.

Management plans to focus on rural deposit franchise and international business NBP’s management outlined its three-year strategic plan, as it attempts to re-strategise the operations and increase competitiveness and efficiency. Focusing on low cost deposits by increasing rural presence is at the core of the management plans given rising funding cost (41 bp increase in 1Q11) due to attrition of low cost government deposits. Moreover, leverage on the strong international presence to increase trade business volumes is another strategic objective for the bank. The bank is opening a new branch in Sri Lanka as part of these plans while automation of branches including introduction of online banking is also progressing on a fast-track basis. This would help to improve efficiency as well as coordination between domestic and international operations.

Asset quality deteriorates in 1Q11, but management expects improvement NBP continues to face challenges on asset quality with PRs8 bn (9%) NPL accretion in 1Q11. As a result, NPL ratio deteriorated by116 bp to 17.2% and appears to be approaching the historical peak levels of 25% witnessed in 2002. On a positive note, about 35% (PRs3 bn) of new accretions were on account of government backed energy sector lending, which does not require any provisioning. Thus, while loan loss coverage fell to 66%, adjusting for the energy sector lending, the coverage ratio is about 82%. Management appears confident of reversals in energy sector NPLs over the next two-three months, as government plans to inject PRs150 bn in the system to reduce the circular debt in the energy chain.

Figure 1: 1Q 11 results snapshot PRs mn 1Q 11 4Q 10 1Q 10 QoQ (%) YoY (%)Net interest income 10,946 11,560 10,052 (5.3) 8.9Fee income 2,220 2,626 2,239 (15.5) (0.8)Other income 1,437 3,033 1,762 (52.6) (18.4)Non-interest income 3,657 5,659 4,000 (35.4) (8.6)Op. expenses -6,575 -6,757 -5,810 (2.7) 13.2Pre-pro op profit 8,028 10,504 8,243 (23.6) (2.6)Provisions -1,676 -2,425 -1,939 (30.9) (13.6)Core profit 4,220 4,354 4,216 (3.1) 0.1Reported profit 4,220 6,200 4,216 (31.9) 0.1EPS (PRs) 2.5 3.7 2.5Source: Company data, Credit Suisse estimates

Figure 2: Deposit attrition and asset quality deterioration were key highlights of 1Q11 All figures in (%) 1Q 11 4Q 10 1Q 10 QoQ YoY Loan growth 1.6 6.0 (3.1) (4.4) 4.7Deposit growth -8.8 11.8 -1.7 (20.6) (7.1)Investment growth (12.5) 16.8 17.0 (29.3) (29.5)LDR 72.1 64.7 72.0 7.3 0.0Net interest margin 5.3 5.7 5.2 (0.4) 0.0Cost income ratio 46.3 49.1 43.8 (2.8) 2.5NPL ratio 17.2 16.1 14.1 1.2 3.2Prov. (bp of loans) 103 179 149 (76) (45.9)Loan loss coverage 66 84 79 (18) (12.6)ROE 13.4 13.2 14.4 0.2 (1.0)ROA 1.7 1.7 1.8 (0.0) (0.1)Source: Company data, Credit Suisse estimates Deposit attrition and likely increase in corporate tax remain near-term risks NBP witnessed a sharp (9%) attrition in deposits with approximately one-fourth of the decline contributed by transfer of 6% of public sector deposits to the recently formed government-owned Sindh Bank. As a result, NIMs declined by 41 bp QoQ amid a 45 bp increase in funding costs. Further shift of government deposits raises concerns for NBP, as it has the lowest asset yield and highest funding cost among peers banks. Moreover, the government plans to raise the banking sector corporate tax rate by 2.5-5.0% in the upcoming budget is another near-term risk for the sector. We, therefore, maintain our UNDERPERFORM rating on NBP with a target price of PRs47.20.

Price (12 May 11 ) 51.75TP (Prev. TP) 47.20 (47.20) Est. pot. % chg. to TP (9)52-wk range 64 - 49Mkt cap (mn) 87,034.6/ 1,023.7

Bbg/RIC NBP PA / NBPK.KA Rating (prev. rating) U (U) Shares outstanding (mn) 1,681.83 Daily trad vol - 6m avg (mn) 4.7 Daily trad val - 6m avg (mn) 3.2 Free float (%) 23.0 Major shareholders Govt. of Pakistan

(75.6%)

Performance 1M 3M 12MAbsolute (%) (7.6) (12.9) (7.9)Relative (%) (8.9) (13.0) (20.9)

Year 12/09A 12/10A 12/11E 12/12E 12/13EPre-prov Op profit (mn) 30,001 32,023 34,426 35,023 37,686Net profit (mn) 18,216 17,573 18,980 20,583 23,171EPS 10.8 10.4 11.3 12.2 13.8- Change from prev. EPS (%) n.a. n.a. 0 0 0- Consensus EPS n.a. n.a. 11.6 13.1 14.5EPS growth (%) 17.8 (3.5) 8.0 8.5 12.6P/E (x) 4.8 5.0 4.6 4.2 3.8Dividend yield (%) 9.3 14.5 12.1 12.6 13.5BVPS 71.1 76.4 79.5 83.6 88.3P/B (x) 0.7 0.7 0.7 0.6 0.6ROE (%) 16.4 14.2 14.5 15.0 16.0ROA (%) 2.1 1.8 1.8 1.8 1.8Tier 1 (%) 13.7 13.8 15.7 15.3 14.8 Note1:NBP is the largest bank in Pakistan with total assets in excess of PRs1tn (US$11.6bn). Despite a large network the bank has failed to realise its true potential due to limite investment in human capital and technology..

Monday, 16 May 2011

Asian Daily

- 24 of 38 -

Singapore ComfortDelGro---------------------------------------------------------------- Maintain OUTPERFORM 1Q11 below expectation – fuel surge dragged earnings EPS: ▼ TP: ▼ Su Tye Chua / Research Analyst / 65 6212 3014 / sutye.chua@credit-suisse.com Christopher Chang / Research Analyst / 65 6212 3024 / christopher.chang@credit-suisse.com

● CD’s Mar quarter results, with revenue at S$803 mn (+5% YoY) and net profit of S$50.1 mn (-6% YoY), were behind both consensus and our estimates, primarily due to higher-than-expected fuel costs and consumables, in aggregate up 22% YoY.

● In Singapore, operations were buoyed by bus and MRT/LRT ridership growth, at 8% and 17%/13%, respectively. Taxi revenue rose 8% YoY, driven by a larger operating fleet (up 4% YoY) and higher cashless transaction volumes.

● Overseas operations contributed 42% of revenue and profit, led primarily by a 21% YoY jump in its Australian operations, with more services added, and contribution from Swan Taxis (from Nov 2010). Growth in the UK bus and China taxi operations were negatively impacted by unfavourable currency translation.

● Management is guiding for all operations to either be maintained or improve going forward (excluding forex uncertainties). We have lowered our forecasts by 9-11% to reflect the higher fuel price backdrop. However, valuations in our view are undemanding at 13x P/E, on our new S$1.75 TP. We maintain OUTPERFORM.

Figure 1: Revenue breakdown by geography Geography 1Q10 2Q10 3Q10 4Q10 1Q11 %YoY %QoQRevenue 766.9 789.3 823.4 827.3 803.0 4.7 (2.9)Singapore 439.6 450.6 475.1 467.5 470.3 7.0 0.6 UK/Ireland 168.8 174.8 182.4 185.5 157.0 (7.0) (15.4)China 68.9 70.1 68.0 67.7 67.7 (1.7) 0.0 Australia 86.9 91.4 95.4 103.8 105.5 21.4 1.6 Vietnam 2.0 1.5 1.7 2.2 1.8 (10.0) (18.2)Malaysia 0.7 0.9 0.8 0.6 0.7 0.0 16.7

Figure 2: Results summary (S$ mn) 1Q11 1Q10 %YoY FY11E (old) % FY10ERevenue 803.0 766.9 4.7 3,501.0 22.9 Op expenses (716.1) (676.3) 5.9 (3,068.6) 23.3 EBITDA 163.0 162.4 0.4 717.7 22.7 Op profit 86.9 90.6 (4.1) 432.3 20.1 Finance costs (9.3) (8.6) 8.1 (38.6) 24.1 Associates 2.7 2.3 17.4 7.0 38.4 Tax (17.4) (17.1) 1.8 (89.0) 19.5 Net profit 50.1 54.3 (7.7) 252.9 19.8 EBITDA margin (%) 20.3 21.2 20.5 Op margin (%) 10.8 11.8 12.3 Net margin (%) 6.2 7.1 7.2 Source: Company data, Credit Suisse estimates

Figure 3: Revenue and operating profit breakdown 1Q10 2Q10 3Q10 4Q10 1Q11 %YoY %QoQRevenue 766.9 789.3 823.4 827.3 803.0 4.7 (2.9)Bus 378.8 399.2 421.4 412.8 392.0 3.5 (5.0)Bus station 5.8 5.5 6.3 5.1 6.4 10.3 25.5 Rail 31.9 33.4 33.9 35.2 35.4 11.0 0.6 Taxi 236.6 238.7 249.6 257.0 248.3 4.9 (3.4)Automotive engg 76.0 73.1 72.3 78.7 80.0 5.3 1.7 Vehicle inspection 20.1 21.1 21.6 20.9 22.3 10.9 6.7 Car rental 8.2 8.6 8.8 8.0 8.9 8.5 11.3 Driving centre 9.5 9.7 9.5 9.6 9.7 2.1 1.0 Operating profit 90.6 99.3 106.2 92.3 86.9 (4.1) (5.9)Bus 30.7 38.0 42.8 37.7 28.6 (6.8) (24.1)Bus station 2.7 2.6 3.3 2.0 3.1 14.8 55.0 Rail 6.6 7.3 5.8 5.9 7.6 15.2 28.8 Taxi 26.2 32.0 33.7 27.4 29.9 14.1 9.1 Automotive engg 13.3 7.7 9.4 8.7 5.6 (57.9) (35.6)Vehicle inspection 6.5 7.0 6.9 6.9 7.3 12.3 5.8 Car rental 1.6 1.7 1.6 1.0 2.0 25.0 100.0 Driving centre 3.0 3.0 2.7 2.7 2.8 (6.7) 3.7 Source: Company data, Credit Suisse estimates

Figure 4: Historical P/E

5.0

10.0

15.0

20.0

25.0

Apr-03 Apr-04 Apr-05 Apr-06 Apr-07 Apr-08 Apr-09 Apr-10 Apr-11

Average = 14.7+1 Std dev = 17.6

+2 Std dev = 20.6

-1 Std dev = 11.7

-2 Std dev = 8.8

(x)

Source: Bloomberg, Credit Suisse estimates

Price (12 May 11 , S$) 1.49TP (Prev. TP S$) 1.75 (1.95) Est. pot. % chg. to TP 1752-wk range (S$) 1.64 - 1.39Mkt cap (S$/US$ mn) 3,114.9/ 2,514.6

Bbg/RIC CD SP / CMDG.SI Rating (prev. rating) O (O) Shares outstanding (mn) 2,090.54 Daily trad vol - 6m avg (mn) 3.5 Daily trad val - 6m avg (US$ mn) 4.4 Free float (%) 79.0 Major shareholders Singapore Labour

Foundation (12.2%)

Performance 1M 3M 12MAbsolute (%) (4.5) (4.5) —Relative (%) (4.3) (6.1) (8.4)

Year 12/09A 12/10A 12/11E 12/12E 12/13ERevenues (S$ mn) 3,052 3,207 3,501 3,635 3,742EBITDA (S$ mn) 629.8 679.3 673.5 710.6 740.1Net profit (S$ mn) 219.5 228.5 225.5 248.8 267.1EPS (S$) 0.11 0.11 0.11 0.12 0.13- Change from prev. EPS (%) n.a. n.a. (11) (10) (9)- Consensus EPS (S$) n.a. n.a. 0.12 0.13 0.13EPS growth (%) 9.7 4.1 (1.3) 10.3 7.4P/E (x) 14.2 13.6 13.8 12.5 11.6Dividend yield (%) 3.6 3.6 3.6 3.6 3.6EV/EBITDA (x) 5.2 4.8 5.0 4.9 4.6P/B (x) 1.8 1.7 1.6 1.5 1.4ROE (%) 13.5 13.1 12.1 12.6 12.7Net debt (net cash)/equity (%) 7.0 6.9 10.7 12.5 9.2 Note 1: ComfortDelGro is the world’s second largest land transport company with a fleet of 45,000 vehicles. Its businesses include bus, taxi, rail, car leasing, vehicle inspection, insurance brokerage, outdoor advertising, dealership and related services.

Monday, 16 May 2011

Asian Daily

- 25 of 38 -

Midas ----------------------------------------------------------------------------- Maintain OUTPERFORM 1Q11 in line – Ramp up of new capacities to drive a stronger 2H EPS: ◄► TP: ◄► Su Tye Chua / Research Analyst / 65 6212 3014 / sutye.chua@credit-suisse.com Christopher Chang / Research Analyst / 65 6212 3024 / christopher.chang@credit-suisse.com

● Midas has changed its reporting currency from S$ to Rmb, in line with its China-based operational profile. For 1Q11, revenue was Rmb296.5 mn (+33% YoY) and net profit was S$60.4 mn (+25% YoY), with results broadly in line with our estimates.

● The order book is supported by Rmb1.2 bn in railway contracts, which have achieved 60%/20% of our FY11/12 revenue estimates, while revenue for Midas’ downstream metro train manufacturing Puzhen JV is secured until end-2012.

● Plans for Midas’ new facilities in Henan, which should raise extrusion capacities by 40% to 70,000 tonnes, and downstream fabrication by 30% to 1,300 train cars, were firmed up last month, with a key master supply agreement inked with Luoyang CSR thus supporting a stronger earnings profile into FY13.

● We continue to view Midas as well-leveraged into the structural growth theme for China’s railway sector and see further contract wins supporting share price action. We maintain our forecasts and S$1.20 SOTP-based fair value. We stay OUTPERFORM.

Plans for new capacities firmed up Midas in April 2011 firmed up detailed plans for its new plant in Luoyang City, Henan Province. Midas will invest Rmb600-650 mn (from proceeds from its secondary listing in Hong Kong last October) in the new facility, which will house two aluminum alloy extrusion production lines and one downstream fabrication line. Construction of the plant is expected to be completed in 2H12, and should raise Midas’s annual extrusion production capacity by 40% to 70,000 tonnes, and increase its annual downstream fabrication capacity to process train car body components by 30% from 1,000 train cars currently to 1,300 train cars. Key master supply agreement inked More importantly, Midas had then also inked a master supply agreement with Luoyang CSR Mass Transit Vehicle to supply 100% of its requirements for aluminum alloy extrusion products and fabricated parts on a ‘preferred supplier basis’. We believe this investment is

consistent with Midas’ strategy to expand its production capacities in a new geographic location beyond its northeastern China base, and to be in closer proximity to its existing and potential customers. Management has also cited access to a well-developed transportation network, as well as raw material and electricity inputs, which should reduce overall operating costs going forward.

Figure 1: Results summary (Rmb mn) 1Q11 1Q10 %YoY FY11E (old) % FY11ERevenue 296.5 223.0 32.9 1,340.3 22.1Aluminium Alloy 288.7 215.6 33.9 1,300.4 22.2 PE Pipe 7.8 7.4 4.6 39.9 19.4 Gross profit 102.1 72.8 40.3 464.3 22.0 Op profit 79.5 51.4 54.7 360.4 22.1 Associates 4.1 8.0 (48.7) 54.4 7.6 Tax (20.4) (10.4) 96.7 (106.6) 19.2 Net profit 60.4 48.1 25.4 319.8 18.9 EPS (Sct) 5.0 5.0 (0.6) 31.2 15.9 Gross margin (%) 34.4 32.6 - 34.9 -Op margin (%) 26.8 23.0 - 27.6 -Net margin (%) 20.4 21.6 - 22.7 -Source: Company data, Credit Suisse estimates

Figure 2: Aluminium extrusion demand growth in passenger rail industry

010203040506070

07A 08A 09A 10E 11E 12E020406080100120140

High Speed Metro Total (YoY change) - RHS)

(%)('000 tonnes)

Source: CBI China

Figure 3: SOTP valuation FY11 net profit Target PE (x) End-11 value (S$ mn)Midas core business 60.4 Aluminium alloy extrusion 57.4 17.6 1010.4 PE pipes 3.0 6 18.1Associates - Puzhen JV 10.6 12 126.8Equity value 1155.3Fair value (S$) 1.20Source: Company data, Credit Suisse estimates

Price (13 May 11, S$) 0.71TP (Prev. TP S$) 1.20 (1.20) Est. pot. % chg. to TP 7052-wk range (S$) 1.07 - 0.66Mkt cap (Rmb/US$ mn) 4,482.2/ 689.8

Bbg/RIC MIDAS SP / MIDA.SI Rating (prev. rating) O (O) Shares outstanding (mn) 1,218.62 Daily trad vol - 6m avg (mn) 7.7 Daily trad val - 6m avg (US$ mn) 27.0 Free float (%) 30.4 Major shareholders Chen Wei Ping

(24.3%)

Performance 1M 3M 12MAbsolute (%) (13.5) (23.8) (29.1)Relative (%) (13.3) (25.9) (35.8)

Year 12/09A 12/10A 12/11E 12/12E 12/13ERevenues (Rmb mn) 709 1,030 1,340 1,714 1,825EBITDA (Rmb mn) 272.7 333.8 467.7 584.4 596.4Net profit (Rmb mn) 191.8 266.7 338.7 429.8 439.6EPS (Rmb) 0.20 0.26 0.33 0.42 0.43- Change from prev. EPS (%) n.a. n.a. - - -- Consensus EPS (Rmb) n.a. n.a. 0.30 0.37 0.41EPS growth (%) 14.3 31.2 27.0 26.9 2.3P/E (x) 18.5 14.1 11.1 8.8 8.6Dividend yield (%) 10.4 6.7 1.4 1.4 1.5EV/EBITDA (x) 16.4 11.7 9.0 7.5 6.9P/B (x) 10.6 6.5 1.2 1.0 0.9ROE (%) 14.9 12.0 11.1 12.4 11.3Net debt (net cash)/equity (%) (1.4) (20.1) (7.8) (2.4) (8.5) Note 1: Midas designs and manufactures polyethylene pipes and aluminum-alloy extrusion products, supplying to the transport and utilities industries in China.

Monday, 16 May 2011

Asian Daily

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Neptune Orient Lines ------------------------------------------------------- Maintain OUTPERFORM 1Q11 loss not unexpected; rebounding rates imply better 2H11 profitability EPS: ▼ TP: ▼ Sam Lee / Research Analyst / 852 2101 7186 / sam.lee@credit-suisse.com HungBin Toh / Research Analyst / 852 2101 7481 / hungbin.toh@credit-suisse.com

● With weaker seasonal demand, higher fuel prices and falling freight rates sequentially, NOL’s 1Q11 profit slipped to a small loss of US$10 mn, below 4Q10’s profit of US$177 mn. We think this is not a surprise, as most of its global peers have also reported weak 1Q11 results with profits ranging from a few millions to a loss of close to US$30 mn. Flattish unit cost in 1Q11 is a positive.

● NOL’s 1Q11 traffic remained strong, with vessel utilisation actually improving QoQ despite seasonal weakness – this supports our thinking that there was actually not much excess capacity in the system. Freight rates on transpacific and intra-Asia trades are now rebounding and we expect better profitability in 2H11.

● We reduce our FY11E and FY12E earnings by 11-17%, to US$318 mn and US$540 mn, respectively, on significantly higher fuel prices, which are partially offset by higher volume assumptions. NOL’s current forward P/B of 1.1x is at historical average, not excessive considering FY11-12E RoAE of 10-15%. Our new target price of S$2.35 (from S$2.38) is based on 1.3x forward P/B (unchanged), the mid-point between historical average and one standard deviation above.

Unit cost flattish despite much higher fuel prices There was only a small exceptional gain of US$1 mn in the results. Its blended rate fell 6% QoQ, in line with that of the China Containerized Freight Index (CCFI). On the positive side, while freight rates and fuel prices are largely uncontrollable external factors, management kept unit cost flattish. Liner unit operating cost grew only 1% YoY, despite a 25% YoY rise in fuel price. We think this was achieved by good cost control and faster volume growth on the shorter-haul intra-Asia trades (which also had lower unit cost).

Despite seasonal weakness in 1Q11, vessel utilisation actually rose marginally to 92% from 4Q10’s 91%. NOL’s terminal also handled 5% more boxes YoY with utilisation of 77% (88% in 4Q10). With bigger 1Q11 vessel capex of US$304 mn, NOL’s balance sheet deteriorated but remained at comfortable level, with net debt of US$728 mn. Net gearing was 22% as of end-1Q11, rising from 12% in the past quarter.

Figure 1: NOL’s quarterly results (US$ mn) 1Q10 3Q10 4Q10 1Q11 YoY % QoQ %Volume (k TEU) 1,402 1,310 1,658 1,528 9 -8 - Americas 552 540 614 550 0 -10 - Europe 278 280 358 338 22 -6 - Asia / Middle East 572 490 686 640 12 -7Freight rate (US$/TEU) 1,259 1,560 1,378 1,299 3 -6 - Americas 1,670 2,046 1,958 1,898 14 -3 - Europe 1,475 1,699 1,522 1,394 -5 -8 - Asia / Middle East 759 945 785 735 -3 -6Unit cost (US$/TEU) 1,370 1,417 1,357 1,382 1 2Revenue 2,098 2,429 2,774 2,443 16 -12Operating costs -2,096 -2,044 -2,499 -2,354 12 -6EBIT -77 318 202 12 NA -94- Liner -88 301 176 -8 -91 NA- Logistics 15 18 22 21 40 -5Net interest expense -9 -8 -5 -9 -6 69Net profit -98 282 177 -10 NA NAEBIT margins (%) -3.5 13.1 7.1 0.5 4.1 -6.6Source: Company data, Credit Suisse estimates

Bunker fuel price remained stubbornly high at US$622/bbl YTD, and we raise our FY11E and FY12E price assumptions by 7% to US$600/bbl and US$610/bbl (from US$560-570/bbl), respectively. We also cut freight rates marginally by 1%. This is partially offset by our 2% higher FY11-12E volume assumptions, based on stronger volume growth in 1Q11.

Figure 2: Earnings estimate revisions Revised Old 2011E 2012E 2013E 2011E 2012E 2013EVolume (’000 TEU) 6,131 6,499 7,019 6,000 6,360 6,868 Freight rate (US$/TEU) 1,391 1,438 1,489 1,411 1,452 1,507 Fuel price (US$/Ton) 600 610 610 560 570 600Revenue (US$ mn) 10,370 11,449 12,759 10,224 11,242 12,554 Expense (US$ mn) -10,001 -10,846 -11,834 -9,818 -10,609 -11,702Core EBIT (US$ mn) 368 603 925 407 633 851 - Liner 277 496 787 317 528 716 - Logistics 92 107 138 90 105 135 Interest exp (US$ mn) -24 -15 16 -11 17 58 Associates 12 15 17 10 14 14 Net profit 318 540 848 383 608 818 EBIT margin (%) 3.6 5.3 7.2 4.0 5.6 6.8Source: Company data, Credit Suisse estimates

Figure 3: NOL’s 12-month forward P/B at historical average of 1.1x

0.40 .60 .81 .01 .21 .41 .61 .82 .02 .22 .4

Jan-0

0

Jan-0

1

Jan-

02

Jan-

03

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4

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5

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6

Jan-

07

Jan-0

8

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9

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11

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12P/B (x) Target price of S$2.35

Source: Company data, Credit Suisse estimates

Price (13 May 11, S$) 1.90TP (Prev. TP S$) 2.35 (2.38) Est. pot. % chg. to TP 2452-wk range (S$) 2.38 - 1.76Mkt cap (S$/US$ mn) 4,910.8/ 3,942.8

Bbg/RIC NOL SP / NEPS.SI Rating (prev. rating) O (O) Shares outstanding (mn) 2,584.62 Daily trad vol - 6m avg (mn) 11.0 Daily trad val - 6m avg (US$ mn) 18.3 Free float (%) 32.0 Major shareholders Temasek: 68%

Performance 1M 3M 12MAbsolute (%) (5.5) (11.2) (11.6)Relative (%) (5.2) (13.6) (19.9)

Year 12/09A 12/10A 12/11E 12/12E 12/13ERevenues (US$ mn) 6,516 9,422 10,370 11,449 12,759EBITDA (US$ mn) (373) 847 658 909 1,241Net profit (US$ mn) (740.8) 467.6 317.9 539.6 848.5EPS (US$) (0.35) 0.18 0.12 0.21 0.33- Change from prev. EPS (%) n.a. n.a. (17) (11) 4- Consensus EPS (US$) n.a. n.a. 0.16 0.22 0.29EPS growth (%) n.a. n.a. (32.1) 69.7 57.2P/E (x) NM 8.4 12.4 7.3 4.6Dividend yield (%) 0 2.4 2.0 3.4 5.4EV/EBITDA (x) (12.5) 5.2 6.6 4.5 2.8P/B (x) 1.4 1.2 1.1 1.0 0.9ROE (%) (28.2) 15.5 9.5 14.7 20.3Net debt (net cash)/equity (%) 21.4 11.7 9.6 1.7 (9.7) Note 1: Ord/ADR=4.0000. Note 2: Neptune Orient Lines is involved in container shipping and logistics. It is one of the largest container shipping companies in the world by capacity.

Monday, 16 May 2011

Asian Daily

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South Korea Korea Economics ----------------------------------------------------------------------------------------------- The BoK kept the base rate unchanged unexpectedly at 3%, suggesting a slower pace of monetary policy normalisation Christiaan Tuntono / Research Analyst / +852 2101 7409 / christiaan.tuntono@credit-suisse.com

● The BoK has kept its benchmark base rate unchanged at 3% after the May meeting, a surprise to market’s consensus of a hike. The decision was not unanimous, though it reflects the committee as a whole is more dovish than many expected.

● In our view, the pause is in response to three latest developments: 1) the sharp fall of global crude oil prices recently; 2) the moderation of April CPI inflation to 4.2%, dragged by the fall of the volatile vegetable prices; 3) weakened momentum in the construction and property sector.

● But despite these recent trends, the BoK has not altered its sanguine outlook on growth and worrisome outlook on inflation substantially in the policy statement. We do not think the pause in the May meeting means a halt in the BoK monetary policy normalisation process, but it does suggest that the pace of the normalisation would be slower than we previously anticipated.

● We have revised down our policy base rate forecast to 3.75% (from 4.25% before) by end-2011, expecting another three 25 bp hikes by the BoK this year. CPI inflation remained elevated, supporting the continued process of monetary policy normalisation, but its pace and magnitude is likely to be milder.

Figure 1: We expect monetary policy normalization to continue, but at aslower pace than we previously anticipated

-3

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0

123

45

6

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Base rate (%)CPI inf lation (% yoy)Real base rate (%)

Forecast

Source: BoK, Credit Suisse estimates BoK paused unexpectedly in May The Bank of Korea (BoK) has kept its benchmark base rate unchanged at 3% after the May meeting. The decision was a surprise to market’s expectation of a hike, as surveyed by Bloomberg. According to BoK Governor Kim Choong-soo, the decision was not unanimous. But nonetheless it suggests the committee as a whole is more dovish than many expected. In our view, the pause is in response to the three latest developments: 1) the sharp fall of global crude oil prices recently, if proved to be sustainable, may help ease the pressure on imported inflation; 2) the moderation of April CPI inflation to 4.2%, dragged by the fall of the volatile vegetable prices; 3) weakened momentum in the construction and property sector has made the authority more cautious on further rate increases. We believe the BoK has opted to stay on pause in this meeting to better observe the upcoming developments and to provide some breathing room to the sluggish construction sector. Monetary policy normalisation would continue, but at a slower pace But despite these recent trends, the BoK has not altered its outlook on growth and inflation substantially in the policy statement. On growth,

the central bank continues to judge that the economy has maintained its underlying upward trend, while on inflation the BoK has kept the phrase that “there is a possibility of the high rising price trend persisting in the coming months.” With growth outlook staying sanguine and inflation outlook staying worrisome, we do not think the pause in this meeting represents a halt in the BoK monetary policy normalisation process. However, the pause does suggest that the pace of the normalisation seems to be slower than we previously anticipated. Comment from Governor Kim Choong-soo, who said that a “baby-step” in policy rate normalisation does not mean rate hike every two months, and his expectation that global oil prices are unlikely to rise much further underlie a more gradual pace of rate increases going forward. As such, we have revised down our policy base rate forecast to 3.75% (from 4.25% before) by end-2011, expecting another three 25 bp hikes by the BoK this year. We reckon that headline CPI inflation will still hover above the BoK target range of 2% to 4% in April, and may still elevate above 5% in the coming months. This would support the continued process of monetary normalisation (as said by Kim), but its pace and magnitude is likely to be milder this year.

Monday, 16 May 2011

Asian Daily

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Korea Banks Sector ---------------------------------------------------------- Maintain OVERWEIGHT Key takeaways from system money flow data for April Sokmo Yun / Research Analyst / 822 3707 3763 / sokmo.yun@credit-suisse.com Soyeon Hong / Research Analyst / 822 3707 3740 / soyeon.hong@credit-suisse.com

● On 12 May, BOK released the system money flow data for April. Banks’ deposit inflow stood at W12 tn, representing a strong rebound from March (–W3 tn). Inflow to savings deposits was especially strong on higher yield; however, funding competition remains benign for banks due to ample liquidity, in our view.

● Money flow at equity funds turned negative (-W3 tn) for April, dragging down the balance by 5% YTD. Meanwhile, money inflow to brokerage deposit posted at W2 tn, driving up balance by 26% YTD. With the margin trading balance surging, we presume retails are heading more for direct investment and wrap accounts.

● Corporate lending finally showed strong rebound (+W9 tn) pushing up the balance by 4% YTD. This was attributed to both capital needs by corporates and banks’ loan extension efforts. We expect such resilient trend to continue in line with the banks’ full-year loan growth target of around 6%. Mortgage lending remained strong at 9% YoY; however, further growth will likely be capped due to yield increase and fall in apartment completion. We see more upside in SME lending for the remainder of the year.

Valuation metrics Company Ticker CS Price Year P/E (x) P/B (x) Rating Local Target T T+1 T+2 T+2KBFG 105560 KS O 54,300 72,000 12/09 237.5 8.2 0.9SFG 055550 KS O 47,950 66,000 12/09 8.7 7.9 1.0WFH 053000 KS O 13,850 20,000 12/09 9.3 4.9 0.7IBK 024110 KS O 18,400 24,000 12/09 9.2 7.0 1.0Daegu 005270 KS N 15,500 16,000 12/09 9.0 6.4 0.9BSFG 138930 KS N 14,250 15,000 12/09 8.0 6.8 0.9Note: O = OUTPERFORM, N = NEUTRAL, U = UNDERPERFORM Source: Company data, Credit Suisse estimates Strong deposit inflow in April on high yield and strong money inflow to brokerage deposit On 12 May, BOK released the system money flow data for April. The W12 tn of funding inflow at banks was largely driven by money inflow, especially into savings deposits. Amid a flat base rate, banks raised deposit yield, seemingly as a lagging effect from 25 bp base rate hike in March, which led to a continuing inflow to savings deposits. However, due to ample liquidity, the funding environment remains benign for banks. Deposit in MSBs showed marginal increase on higher deposit yield.

However, inappropriate lending by major shareholder and accounting fraud at some MSBs triggered some bank run early May, so we are unsure if positive money inflow to MSBs could sustain for May. Money flow at asset managers again turned negative (-W3 tn) for April. Also W3 tn of outflow was shown in equity fund, dragging down the balance by 5% YTD. Meanwhile, money inflow to brokerage deposit was W2 tn, posting a 26% growth YTD in the balance. We assume that retail investors are heading more for wrap accounts and/or direct investments. As if to show the recent investment frenzy of retail investors, margin trading balance recorded an all-time high, posting W7.2 tn in April. As real interest rate has been negative for five consecutive months, we believe ‘flight to yield’ will likely be accelerated in the short term. Corp lending rebounded; mortgage lending stayed strong On the banks’ lending front, overall corporate loan growth was strong with W9 tn of loan extension resulting in total corporate loan balance

rising 4% YTD. A strong rebound in corporate loan is mainly due to working capital needs by large corporates, banks’ efforts on lending expansion and some seasonal factors (i.e., retaking of temporary repayment at quarter-end and tax payment needs). Lending increase in large corporations seems stronger than in SMEs; however, BOK explained the W1.6 tn of inflow at large corporations was due to reclassifcation of loans for SMEs and financial companies.

Considering that banks guide for full-year loan growth at around 6%, April’s strong loan growth bodes well for banks’ healthy lending outlook. Household lending stayed positive (+W2 tn), mainly on strong mortgage lending. Mortgage loan balance recorded an all-time high, posting W292.3 tn. This is largely attributed to banks’ efforts towards lending expansion through yield cut and new product launches, and some loans taken before the DTI cap was lifted. However, we view continuous increase of mortgage lending yield and fall in new apartment completion will likely cap mortgage loan growth, and credit supply may shift to SMEs for the remainder of the year.

Figure 1: System money flow for April (W tn) Monthly flow Balance 2010 2011 2011 Aug Sep Oct Nov Dec Jan Feb Mar Apr Apr YoY% YTD%Banks -3 -3 14 -2 -9 2 14 -11* 12 1,061 4 2Demand deposit -6 4 -2 0 4 2 2 -6 2 79 7 0Savings ** 11 1 20 4 -7 3 13 4 9 777 14 4CD, RP -6 -3 -5 -5 -4 -3 -1 0 1 50 -48 -6Debenture -2 -5 0 -2 -1 0 0 -9 -1 155 -10 -5MSBs deposit 0 1 0 0 -2 -2 1 0 74 n.a. -4Asset managers 1 -2 0 0 -11 -5 -9 1 -3 299 -12 -5Equity fund -2 -4 -2 -1 -3 -1 1 0 -3 98 -17 -3Hybrid fund 0 0 0 0 -1 0 1 -2 0 31 -6 -6Bond fund 1 1 0 0 -1 -2 -3 -1 1 46 -10 -12MMF 1 -1 1 0 -9 -2 -7 3 -1 60 -26 -10Alternative fund 1 1 1 0 2 0 0 1 0 64 12 3Broker deposit -1 1 1 0 -1 3 -2 1 2 17 23 26Banks lending Corporate loan 0 2 5 1 -13 6 4 3 9 539 4 4 Large corp. 0 2 2 2 -4 2 2 1 6 99 19 13 SME 0 0 3 -1 -9 4 2 2 3 440 1 2Household loan 1 1 3 4 2 -1 2 2 2 437 6 1 Mortgage loan 0 2 2 3 3 1 2 2 2 292 9 3* -W2.7 tn, excluding KB’s reclassification of W8.75 tn worth debentures. ** Savings deposits are sum of time deposits and instant access accounts. Source: Company data, Credit Suisse estimates As of close of business 12 May 2011, Credit Suisse Securities (Europe) Limited, Seoul Branch performs the role of liquidity provider on the warrants of which underlying assets are KBFG/ SFG/ WFH and holds 13,860,200/ 19,450,840/ 21,638,160 of warrants concerned. These may be covered warrants that constitute part of a hedged position. Credit Suisse is acting as financial advisor to the Share Management Council on the potential sale of their collective stake in Hynix Semiconductor. The Share Management Council is composed of the following companies: Korea Exchange Bank; Woori Bank; Korea Development Bank; Shinhan Bank; Resolution & Finance Corp; National Agricultural Cooperative Federation; SH Asset Management; Daewoo Securities; and, Woori Investment and Securities.

Monday, 16 May 2011

Asian Daily

- 29 of 38 -

AmorePacific ------------------------------------------------------------------ Maintain OUTPERFORM Strong 1Q11 sales in domestic luxury end; China another data point of the structural growth EPS: ▲ TP: ◄► Sonia Kim / Research Analyst / 822 3707 3764 / seunghyun.kim@credit-suisse.com Hyewon Cho / Research Analyst / 82 2 3707 3737 / hyewon.cho@credit-suisse.com

● AmorePacific’s 1Q results were strong and appeared to exceed the street’s expectations. Its blended sales rose 18% YoY; GP margin rose 30 bp YoY but OP margin fell 140 bp, largely due to the mix issues of increase in overseas business proportions and higher growth from the domestic cosmetics channels that have higher commissions (i.e., online and the duty free channels).

● Key highlights: 1) In the domestic cosmetics business, the luxury-end cosmetics grew 18% from strong duty-free channel sales (up 56%) and better expected growth in the door-to-door channel (up 13%); 2) the MC&S strong growth (up 23%) from premium and functionality products; and 3) China sales grew 36% YoY from counter penetration and stronger same-store-sales, and US sales grew 42% from penetration into Sephoras and other specialty shops.

● Catalysts: 1) China sales trends, and the execution of its door-to-door strategy from the end of this year; 2) earnings momentum, which may be stronger in 2H than in 1H; and 3) better capita management.

● We reiterate our OUTPERFORM. We believe Amore illustrates the structural growth potential in China, and its market shares in the domestic cosmetics and personal cares may rise further.

Strong 1Q11 – appeared to exceed the street’s expectations AmorePacific’s domestic cosmetics sales rose 17%, overseas cosmetics sales were up 24% and MC&S (personal cares) sales were up 23% YoY. Its GP margin rose 30 bp but OP margin weakened. This was largely due to the mix issues of increase in overseas business proportions and higher growth from the domestic cosmetics channels that have higher commissions (i.e., online and the duty free channels). The luxury-end cosmetics sales rose 18% YoY, driven by AmorePacific (36% up) and Sulwhasoo (20% up). The growth in the door-to-door channel also exceeded expectations, rising 13% YoY (when its salesforce increased only by 3.8%). These were largely from strong duty-free shop sales, continued counter increase and

brand renewals that enhanced the same-store-sales growth. In the overseas business, its OP margin in China fell but this was expected. We believe the sales counters of Mamonde, higher marketing and also the costs related to starting the door-to-door business led the OP margin to fall from 18.7% in 1Q10 to 13.1% in 1Q11. Other regions showed improvements, although the 1Q was generally in the red. Figure 1: 1Q11 headline results

K-IFRS K-GAAP

1Q11 1Q10 YoYCS

FY11E FY10A% of CSE YoY

(W bn) (A) (B) (C) (A/B) (B/C-1)Total sales 692 585 18.3% 2,186 2,059 31.7% 6.2% Cosmetics 576 490 17.5% 1,799 1,708 32.0% 5.4% Mass Cosmetics & Sulloc 116 95 22.5% 387 351 30.0% 10.3%Gross profit 480 404 18.7% 1,607 1,503 29.8% 6.9%Operating profit 148 134 10.9% 401 340 36.9% 17.8% Cosmetics 135 123 9.8% n.a. n.a. n.a. n.a. Mass Cosmetics & Sulloc 14 11 22.7% n.a. n.a. n.a. n.a.Pretax profit 149 133 12.1% 436 356 34.1% 22.6%Net profit 113 102 10.7% 330 284 34.1% 16.1%Margins & margin chgs Gross profit margin 69.3% 69.0% 0.3p.p. 73.5% 73.0% 0.5p.p.Operating profit margin 21.4% 22.8% -1.4p.p. 18.3% 16.5% 1.8p.p. Cosmetics 23.3% 25.0% -1.6p.p. n.a. n.a. n.a. Mass Beauty 11.6% 11.6% 0p.p. n.a. n.a. n.a. Pretax profit margin 21.5% 22.7% -1.2p.p. 19.9% 17.3% 2.7p.p.Net profit margin 16.3% 17.4% -1.1p.p. 15.1% 13.8% 1.3p.p.SG&A cost as % of sales Total SG&A costs 47.9% 46.2% 1.7p.p. 55.2% 53.2% 2p.p.Personnel 8.5% 8.5% 0p.p. 9.7% 9.4% 0.3p.p.Ad & Promo 10.2% 10.4% -0.2p.p. 15.3% 14.3% 1p.p.Commission 17.2% 16.0% 1.1p.p. 12.6% 19.2% -6.6p.p.Cosmetics sales by segments Luxury channel 326 276.4 17.9% 1,120 1,073 29.1% 4.4%Premium channels 168 146.8 14.2% 680 635 24.7% 7.0%Source: Company data, Credit Suisse estimates

Figure 2: Sales and OP margin breakdown, by region Sales (W bn) OP margins 1Q11 1Q10 YoY 1Q11 1Q10 ChgKorea 614.3 522.4 17.6% 23.8% 25.2% -1.4p.p. Cosmetics 498.3 427.7 16.5% 26.6% 28.2% -1.6p.p. MC&S 116 94.7 22.5% 11.6% 11.6% 0p.p.China 44.6 32.9 35.6% 13.1% 18.7% -5.6p.p.France 20.1 19 5.8% -3.6% -18.5% 14.9p.p.USA 3.7 2.6 42.3% -25.1% -36.3% 11.2p.p.Asia ex-China 10.4 7.7 35.1% -14.3% -19.2% 4.9p.p.Source: Company data

Rating history (090430 KS) Date Old rating New rating Old TP New TPDec 14, 2010 NEUTRAL OUTPERFORM W1,000,000 W1,400,000

Price (13 May 11, W) 1,099,000.00TP (Prev. TP W) 1,400,000 (1,400,000) Est. pot. % chg. to TP 2752-wk range (W) 1196000 - 869000Mkt cap (W/US$ bn) 6,424.6/ 5.9

Bbg/RIC 090430 KS / 090430.KS Rating (prev. rating) O (O) Shares outstanding (mn) 5.80 Daily trad vol - 6m avg (mn) .0000 Daily trad val - 6m avg (US$ mn) 12.4 Free float (%) 52.9 Major shareholders Mr. Seo and Pacific

Corp related: 47.09%

Performance 1M 3M 12MAbsolute (%) 5.2 12.0 26.2Relative (%) 5.3 4.5 0.9

Year 12/08A 12/09A 12/10E 12/11E 12/12ERevenues (W bn) 1,531 1,769 2,059 2,279 2,414EBITDA (W bn) 318.4 374.4 414.6 486.3 525.4Net profit (W bn) 164.9 220.0 278.1 323.7 361.4EPS (W) 28,208 37,635 47,570 55,365 61,826- Change from prev. EPS (%) n.a. n.a. (14) 0 1- Consensus EPS (W) n.a. n.a. 47,598 49,877 57,643EPS growth (%) (4.4) 33.4 26.4 16.4 11.7P/E (x) 39.0 29.2 23.1 19.9 17.8Dividend yield (%) 0.5 0.5 0.5 0.6 0.7EV/EBITDA (x) 19.6 16.4 14.8 12.3 10.9P/B (x) 5.8 4.9 4.1 3.5 3.0ROE (%) 15.9 18.2 19.5 19.2 18.2Net debt (net cash)/equity (%) (16.0) (21.3) (18.3) (24.2) (32.3) Note 1: Amorepacific Corp. manufactures/exports skin care/make-up/fragrance products under the brand names Amore, IOPE, Laneige. It also produces personal care/health-related products, such as shampoos, soaps, and health teas. Note 2: FY01-FY06E: Company in net cash position.

Monday, 16 May 2011

Asian Daily

- 30 of 38 -

Hyundai Dept. Store--------------------------------------------------------- Maintain OUTPERFORM Rerating should continue on strong near-term operations and long-term structural growths EPS: ▲ TP: ▲ Sonia Kim / Research Analyst / 822 3707 3764 / seunghyun.kim@credit-suisse.com Hyewon Cho / Research Analyst / 82 2 3707 3737 / hyewon.cho@credit-suisse.com

● Based on our recent visit to Hyundai Department Store, we believe the sales run-rates are ahead of expectation. So far, the April same-store-sales growth appears at around 13% and that for the first two weeks of May above 10%.

● We anticipate positive operating profit margin, as we expect: (1) strong sales to have scale impact and (2) better SG&A management. Longer term, we expect stronger bargaining power as the company expands stores.

● We increase our 2011 EPS by 3% and raise our target price to W190,000 (from W165,000), which is based on 13.5x forward P/E. We note that the earnings may rise further if HDS sells its stakes in Hyundai Merchant Marine (1.3 mn shares).

● We maintain OUTPERFORM as the short-term earnings are strong and the longer-term structural growth in the department stores market will continue to rerate HDS. Catalysts are: (1) monthly sales trends, (2) potential sale of its remaining stakes in Hyundai Merchant marine (011200.KS, W31,800, Not Rated) and (3) store openings, with the next one planned for August 2011 in Daegu city.

Recent run-rates still strong Based on our recent visit to HDS, the sales in 2Q are tracking ahead of expectation. The strength appears more evident for HDS stores than its competing department stores.

We believe the consumption is generally strong in 2Q given: (1) the low rates, (2) strong stock market conditions, which could increase overall wealth level and (3) strong disposable income so far. We also believe the slow property market conditions resulted in a higher disposable income, and consequently, higher spending.

The margin trends surprised positively in 1Q11, largely on lower labour costs from natural attrition and some early retirements that generally occur for the company. Furthermore, the newly built store in Ilsan city (the Kintex mall) or the added space in Joongdong branch

saw stronger-than-anticipated trends. This resulted in a faster breakeven—only within three months.

Longer term, we expect the continuous expansion of stores to result in higher bargaining power during drawing up contracts with the tenants. Historically, gross profit margin has increased by 50-100 bp pa. However, this has stalled, on stronger growth by the luxury segment, which has lower tenant commission structures, and with department stores more cautious about the public or the government’s pressures on tenant’s commission hikes recently. However, we believe HDS may have more room to increase margins, as its procurements or the tenant fee settlement power appears to have increased over 2004-10 compared to other department stores that have been expanding. Raise target price to W190,000 We raise EPS by 3% to reflect the recently strong environment. We also increase our target price to W190,000 (from W165,000) as we roll over our earnings basis and raise our multiple from 12.5x to 13.5x forward P/E. Our new target price provides 20.3% potential upside to the latest share price.

We see more chances of HDS’ multiple rerating, as: (1) the breakup of Shinsegae will give more clarity on HDS’s larger and growing positions in the department stores than Shinsegae’s department stores; and (2) HDS’s expansions so far appear successful. With additional successes, we believe the market will have more confidence in the structural growths and rerate valuation. Maintain OUTPERFORM We believe HDS has positive catalysts: (1) strong sales trends, (2) potential sale of its remaining stakes in Hyundai Merchant marine (1.3 mn shares) which may be worth about W40-45 bn (more than 10% of the pre-tax profit) and (3) new store openings. The next one is planned in Daegui city in August this year. We have six more to come in the next five years. Rating history (069960 KS) Date Old rating New rating Old TP New TP21-Jan-2011 OUTPERFORM OUTPERFORM W145,000 W155,0006-Apr-2011 OUTPERFORM OUTPERFORM W155,000 W165,00011-May-2011 OUTPERFORM OUTPERFORM W165,000 W190,000

Price (13 May 11 , W) 158,000.00TP (Prev. TP W) 190,000 (165,000) Est. pot. % chg. to TP 2052-wk range (W) 166500 - 96300Mkt cap (W/US$ bn) 3,588.5/ 3.3

Bbg/RIC 069960 KS / 069960.KS Rating (prev. rating) O (O) Shares outstanding (mn) 22.70 Daily trad vol - 6m avg (mn) 0.1 Daily trad val - 6m avg (US$ mn) 12.4 Free float (%) 62.7 Major shareholders Chung Family; 20.7%

Performance 1M 3M 12MAbsolute (%) 11.3 26.4 64.1Relative (%) 9.5 17.7 31.0

Year 12/08A 12/09A 12/10E 12/11E 12/12ERevenues (W bn) 1,860 1,952 2,108 2,236 2,552EBITDA (W bn) 198.6 226.1 255.5 287.9 344.8Net profit (W bn) 222.3 239.0 290.1 301.9 350.6EPS (W) 9,779 10,514 12,759 13,279 15,420- Change from prev. EPS (%) n.a. n.a. 0 3 0- Consensus EPS (W) n.a. n.a. 12,891 14,099 15,977EPS growth (%) 22.1 7.5 21.4 4.1 16.1P/E (x) 16.2 15.0 12.4 11.9 10.2Dividend yield (%) 0.4 0.4 0.5 0.8 0.9EV/EBITDA (x) 19.9 17.3 15.0 13.3 10.8P/B (x) 2.4 2.1 1.8 1.5 1.4ROE (%) 15.8 14.9 15.4 13.8 14.0Net debt (net cash)/equity (%) 24.3 18.4 11.4 9.7 5.2 Note 1: Hyundai Department Store Co., Ltd. operates department stores in Seoul and its suburbs under the name of Hyundai Department. The company also produces home shopping programmes for cable channels and sells merchandise through home shopping programmes.

Monday, 16 May 2011

Asian Daily

- 31 of 38 -

Korea Life----------------------------------------------------------------------- Maintain OUTPERFORM FY11 results support continued profitability normalisation story EPS: ▼ TP: ▼ Seok Yun, CFA, CA / Research Analyst / 822 3707 3730 / seok.yun@credit-suisse.com Hyewon Cho / Research Analyst / 82 2 3707 3737 / hyewon.cho@credit-suisse.com

● Korea Life (088350.KS, W7,380, OUTPERFORM, TP W9,800) reported a net profit of W481.3 bn in FY2011 (up 15.1% YoY), which was 14.7% below our full-year estimates.

● But stripping our one-off regulatory reserve strengthening for its variable products, overall results provide no big surprise, and also support the ongoing profitability normalisation outlook.

● We have edged down our FY12 net profit estimates by 5.3% to apply lower net investment yields in the absence of strong trading gains posted last year.

● We believe a more gradual pace of rate hike than earlier thought is now fully priced in, advising investors to purchase the stock given its ongoing profitability normalisation outlook with cheap valuation and high leverage on rising interest rates. We reiterate OUTPERFORM with a reduced 12-month target price of W9,800 (from the previous W10,800).

Korea Life reported net profit of W481.3 bn in FY2011 (up 15.1% YoY), which is 14.7% lower than our full-year estimate of W564.9 bn (or 13.6% below the street consensus) largely due to one-off regulatory

reserves strengthening for guaranteed minimum benefits relating to variable products amounting to W80 bn.

Stripping out the above one-off reserve requirement, overall results not only provide any material variances from our expectation, but also support the company's continued steady profitability normalisation story on the back of: (1) mid-single premium expansion (up 8.1% YoY in annual premium equivalents led by solid expansion in pension and savings policies), (2) improved risk (by 200 bp from 12.2% to 15.2%) and loading margins (200 bp decline in expense ratios to 16.8%) and (3) ongoing liability restructuring with a continued phase-out of legacy savings products with high fixed guaranteed yields (with average crediting rates falling by 15 bp from 6.38% to 6.23%).

Although the company’s continued profitability normalisation outlook remains intact, we inched down our FY12 net profit estimates by 5.3% from W646.4 bn to W611.8 bn (to apply modestly lower net investment yields in the absence of the strong trading gains seen last year), while largely keeping FY13 estimates at W727.3 bn.

This, plus a more gradual pace of rate hike than previously estimated at least over the next three-six months, has led us to reduce our 12-month target price from the previous W10,800 to W9,800 (based on the simple average of 1.2x FY12E P/B and 1.0x FY12E P/EV).

Despite our reduced target price, we believe the stock deserves another look given the combination of: (1) continued profitability normalisation with cheap valuation and (2) high leverage on rising interest rates. We keep OUTPERFORM rating with a reduced 12-month target price of W9,800.

Rating history (088350 KS) Date Old rating New rating Old TP New TPApr 28, 2010 - OUTPERFORM - W10,800May 13, 2011 OUTPERFORM OUTPERFORM W10,800 W9,800

Figure 1: FY11 results summary (W bn) 4QFY11 4QFY10 3QFY11 %YoY %QoQ FY11 FY10 %YoYTotal premiums 2,791.2 2,546.3 3,122.6 9.6 (10.6) 11,083.9 10,499.3 5.6 Net investment income 744.0 551.4 558.3 34.9 33.3 2,596.2 2,354.7 10.3 Fees earned on special account 191.3 198.6 188.2 (3.6) 1.6 734.8 761.5 (3.5)Others 3.4 9.4 2.1 (63.8) 61.2 10.1 17.0 (40.4)Total revenue 2,615.2 2,389.0 2,467.4 9.5 6.0 10,058.8 9,662.5 4.1 Total cost 2,436.6 2,287.9 2,391.3 6.5 1.9 9,407.9 9,116.8 3.2 Net income 123.4 74.4 54.5 65.8 126.3 481.3 418.3 15.1 Total assets 63,720.6 58,997.8 62,798.6 8.0 1.5 63,720.6 58,997.8 8.0 Invested assets 47,360.6 43,874.9 46,516.6 7.9 1.8 47,360.6 43,874.9 7.9 Shareholders' equity 6,165.5 5,679.9 6,108.4 8.5 0.9 6,165.5 5,679.9 8.5 Risk margins (%) 16.0 12.6 12.5 3.4 3.5 15.2 12.2 3.0 Expense ratio (%) 17.6 18.5 15.0 (0.9) 2.7 16.8 18.8 (2.0)Net investment yield (%) 6.52 5.30 4.94 1.22 1.58 5.69 5.66 0.03Average credit rates to policyholders (%) 6.23 6.38 6.29 (0.15) (0.06) 6.23 6.38 -0.15ROA (%) 0.8 0.5 0.4 0.3 0.4 0.8 0.7 0.0 ROE (%) 8.3 6.4 3.7 1.9 4.6 8.1 5.6 2.5 Source: Company data

Price (13 May 11, W) 7,380.00TP (Prev. TP W) 9,800 (10,800) Est. pot. % chg. to TP 3352-wk range (W) 8970 - 6770Mkt cap (W/US$ bn) 6,409.8/ 5.9

Bbg/RIC 088350 KS / 088350.KS Rating (prev. rating) O (O) Shares outstanding (mn) 868.50 Daily trad vol - 6m avg (mn) 1.4 Daily trad val - 6m avg (US$ mn) 9.7 Free float (%) 25.0 Major shareholders Hanwha E&C

(24.9%)

Performance 1M 3M 12MAbsolute (%) (0.3) (3.4) (15.9)Relative (%) (0.2) (9.9) (32.8)

Year 3/09A 3/10A 3/11E 3/12E 3/13ENet profit (W bn) 83.0 418.3 564.9 611.8 727.3EPS (W) 117 585 650 704 837- Change from prev. EPS (%) n.a. n.a. 0 (5) 0- Consensus EPS (W) n.a. n.a. 624 728 825EPS growth (%) (76.9) 400.2 11.2 8.3 18.9P/E (x) 63.1 12.6 11.3 10.5 8.8Dividend yield (%) 0 1.4 2.7 3.4 4.1P/B (x) 1.5 0.9 1.0 1.0 0.9ROE (%) 2.3 9.0 9.5 10.1 10.6 Note 1: Korea Life Insurance Co Ltd. offers a full range of life insurance products such as traditional insurance products (i.e., whole life and variable life insurance), critical illness insurance and annuities.

Monday, 16 May 2011

Asian Daily

- 32 of 38 -

Taiwan Asia Semiconductor Sector --------------------------------------------------------------------------------- 1Q11 inventory analysis: removing tailwind for upstream Randy Abrams, CFA / Research Analyst / 886 2 2715 6366 / randy.abrams@credit-suisse.com

● We publish this daily alongside our global semiconductor team’s inventory update on 151 of 193 companies in our sample (See also, Pitzer/Stein – 1Q11 Inventory Analysis). Key takeaway is that although overall chain inventory remains manageable, semiconductors growing back to their rising long-term trend removes a tailwind and creates risk on any demand disappointment.

● Downstream/tech inventory reasonable. Total tech inventory grew two days to 41 days, below the 2003-10 average of 43 days, though below the seasonal two-day depletion. Downstream tech declined a seasonal one day to 32 days.

● Semiconductor and Taiwan build. Semiconductor inventory grew seven days to 73, above the 2003-10 average of 68 days and 1.4-day build for 1Q. Inventory is moving higher as cycle times lengthen for advanced chips and semis warehouse more for the OEMs. The Taiwan chain also built five days to 30 days, above the normal four-day build and 26-day 2005-10 average.

● Inventory factor keeps our TSMC view over the back-end. With no further inventory tailwind, we wait for better risk-reward on ASE/SPIL below mid-cycle (currently at mid-cycle) due to higher earnings sensitivity to utilisation. We stay constructive on TSMC due to intact competitive position, rising smartphone leverage and 15% discount to our Taiwan universe at 12.2x 2011 EPS.

Figure 1: March inventory shows a semiconductor build Last Five Quarters QoQ 02-09

Mar-10 Jun-10 Sep-10 Dec-10 Mar-11 Chg. AvgSemiconductors 63.2 66.2 64.8 65.7 72.8 7.1 67.3Components 55.9 46.9 45.1 43.9 51.0 7.0 52.7EMS 34.1 35.3 34.7 31.0 37.8 6.8 35.4

Upstream Technology 46.8 47.4 46.8 44.8 51.2 6.4 63.2OEMs 30.7 32.6 30.3 26.0 29.7 3.7 35.4Computing (PCs, Stor, Serv) 21.6 22.5 20.5 16.0 18.4 2.4 24.3Comms (w'line, w'less, data) 41.5 45.4 41.3 38.3 43.4 5.0 46.5System Distributors 37.9 51.2 50.3 60.7 40.9 -19.9 45.1

Downstream Technology 32.6 36.8 34.4 33.2 32.4 -0.8 37.8Total Technology 38.9 41.8 40.1 38.4 40.7 2.3 42.7

Source: Company data Downstream inventory remains in good shape We publish our 1Q11 inventory analysis following 151 of 193 companies in our global sample reporting. Total tech inventory was up 2.3 days to 41 days, slightly below the 2003-11 average of 43 days, but above the seasonal 1.8 day depletion for 1Q. The reasonable inventory is largely from downstream tech, where inventory declined one day to 32 days, as system distributors/retailers cut 20 days post the holidays. Figure 2: Tech inventory reasonable, but semis back to the rising trend

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Source: Company data Semiconductor inventory higher – in-line with rising trend Semiconductor inventory increased seven days to 73, above the 2003-10 average of 68 days and the seasonal 1.4-day build. Semiconductors are above average but in-line with a rising trend for chip companies to carry the inventory burden (more hubs, longer cycle times at advanced nodes). Builds are the highest among IDMs and memory, both up 9

days, with fabless more controlled, up two days for PLDs, three days for comm-ICs and seven days for Asian fabless. Figure 3: Technology and semiconductor builds above seasonal

Total Technology: Inventory Days Semiconductors: Inventory DaysYR 1Q 2Q 3Q 4Q YR 1Q 2Q 3Q 4Q

2003 46 46 44 41 2003 61 65 63 622004 43 46 46 41 2004 66 70 71 672005 42 43 43 41 2005 67 67 66 652006 43 45 46 43 2006 69 74 71 702007 45 45 43 40 2007 79 72 67 642008 42 45 45 42 2008 71 73 68 712009 43 41 38 37 2009 68 65 58 602010 38.9 41.8 40.1 38.4 2010 63.2 66.2 64.8 65.72011 40.7 2011 72.8

Average: 42.9 44.0 43.2 40.3 Average: 68.1 68.9 66.0 65.5Seasonal: -1.8 -1.7 -1.8 -0.9 Seasonal: 1.4 0.2 0.2 0.6Source: Company data Taiwan chain also builds inventory in 1Q11 The Taiwan tech chain also increased five days to 30 days, above the normal four-day build and above the 26-day average from 2005-10. Inventory rebuild was across downstream, with handsets up seven days; display, components and notebooks up six days; and PC motherboards up one day, with distributers working down two days. Consistent with US semis, fabless also built three days, while foundry built six days.

Figure 4: Taiwan Tech inventory increased in 1Q11 Inventory Days 1Q10 2Q10 3Q10 4Q10 1Q11 QoQ 05-10 +/- AvgFoundries 43 43 43 47 53 6 43 10Fabless IC 57 62 68 75 78 3 65 13Test & Packaging 25 26 26 26 26 0 27 -2DRAM 46 47 42 32 44 12 46 -1Total Upstream 42 43 42 40 48 8 44 4PCs / Motherboards 21 28 25 21 22 1 16 6Notebooks 17 16 16 13 19 6 12 7Networking 32 28 27 26 32 5 33 -1Distributors 34 38 35 39 36 -2 37 0Handset Related 21 21 22 21 28 7 21 8Display 36 37 31 31 36 6 34 2Components 35 34 34 30 36 6 33 3Total Downstream 24 26 24 22 27 5 22 4Total Taiwan Chain 27 29 27 25 30 5 26 4

Source: Company data Inventory factor keeps our TSMC view over the back-end As semiconductor inventory is back in-line with its rising trend, we see no further tailwind from inventory, with downside risk of a correction if demand disappoints. We stay positive on TSMC due to its: 1) intact competitive position, which allows it to sustain pricing to offset rising depreciation, 2) growing leverage to smartphone/tablet builds, which remains the strongest tech product cycle and 3) good valuation at a 15% discount to our Taiwan universe at 12.2x P/E.

We keep Neutral on ASE and SPIL due to higher earnings sensitivity to an inventory correction and valuation already at mid-cycle levels. The inventory risk balances out positives, including 1) better managed capex to ease over-supply and lift free cash flow, 2) better cost structure and competitive position from the shift from gold to lower cost copper wirebonding for the Taiwan back-end and 3) a restocking from Asian PC/networking customers and rising demand from smartphone applications into 2H11. ASE is at mid-cycle at 2.0x P/B and SPIL at 1.9x P/B, making both more attractive on a pullback that accounts for the downside risk of an inventory correction.

Monday, 16 May 2011

Asian Daily

- 33 of 38 -

Taishin Financial Holding ------------------------------------------------- Maintain OUTPERFORM New report: Positive 1Q11 results EPS: ◄► TP: ◄► Chung Hsu, CFA / Research Analyst / 8862 2715 6362 / chung.hsu@credit-suisse.com Michelle Chou, CFA / Research Analyst / 886 2 2715 6363 / michelle.chou@credit-suisse.com

● Taishin reported 1Q11 profit of NT$2.7 bn, which was 28% of CS full year estimate and tracking well ahead of consensus. The bank continues to book very strong consumer NPL recoveries and also gave a more positive guidance on loan and fee income growth.

● We estimate Taishin will deliver 41% earnings growth this year, driven by 25% growth in core profit and a much lower tax rate. Earnings will likely stay on an uptrend with peak consumer NPL recoveries this year and a substantial amount of interest expense and preferred dividend savings starting to come through in 2012.

● The redemption of Newbridge’s NT$7 bn CB kicks off Taishin’s debt repayment programme over the next two years, which we estimate will save up to NT$1 bn in interest expense and preferred dividends annually by end-2012. The saving is significant for Taishin compared to our estimate for NT$10.6 bn profit in 2012.

● We estimate Taishin is trading at 12.3x and 1.4x FY11E P/E and P/B, respectively. Maintain OUTPERFORM with TP of NT$19.70.

● For the full version of the report, please click here.

Figure 1: Taishin Bank – quarterly P&L (NT$ mn) 1Q10 2Q10 3Q10 4Q10 1Q11 QoQ YoYNet interest income 2,892 2,946 2,912 2,936 3,054 4% 6%Fee income 1,741 1,868 1,894 1,838 1,814 -1% 4%Other non-interest income 390 286 633 703 449 -36% 15%Operating income 5,023 5,100 5,439 5,477 5,317 -3% 6%Operating expenses (2,783) (2,766) (3,160) (3,510) (3,096) -12% 11%Provision 175 1,080 430 227 468 106% 167%Pre-tax income 2,415 3,416 2,709 2,195 2,689 23% 11%Income tax (509) (1,676) (388) (285) (421) 48% -17%Net income 1,906 1,740 2,321 1,910 2,268 19% 19%Source: Company data, Credit Suisse Research

Figure 2: Recoveries will likely stay strong to 2011 and provide further earnings support

584 621 613 742 731 756 728 739 773

68 27 7087 80 119

24 137264

-

200

400

600

800

1,000

1,200

1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11

Consumer Corporate

(NT$ mn)

Source: Company data, Credit Suisse Research

Figure 3: Taishin is still trading at cycle average P/B

-30

-20

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0

10

20

30

Feb-03 Apr-04 Jun-05 Aug-06 Oct-07 Dec-08 Feb-10 Apr-110.0

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ROE (% ) P/B (x)

+2 std dev

Average

+1 std dev

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-1 std dev

Source: Company data, Credit Suisse estimates

Figure 4: Taishin Bank has one of the highest coverage ratios

323278 269 258

224 201 190 170 151

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-

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200

300

400

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Source: FSC, Credit Suisse Research, data as of December 2010 Sale of CHB stake is the best outcome for Taishin We continue to believe that the CHB stake is unlikely to see quick resolution in the near term and Taishin’s stock has been penalised for a likely loss on the investment. We believe the sale of the CHB stake (rather than a full merger) would be the best outcome for Taishin. Assuming Taishin eventually sells the CHB stake at a 20% loss (or NT$21 per share), this would enable the bank to free up another NT$29 bn (US$1 bn) of capital, which is very sizeable for a bank with a market cap of US$3 bn.

Price (13 May 11, NT$) 17.30TP (Prev. TP NT$) 19.70 (19.70) Est. pot. % chg. to TP 1452-wk range (NT$) 17.8 - 10.9Mkt cap (NT$/US$ bn) 102.3/ 3.6

Bbg/RIC 2887 TT / 2887.TW Rating (prev. rating) O (O) Shares outstanding (mn) 5,910.99 Daily trad vol - 6m avg (mn) 25.0 Daily trad val - 6m avg (US$ mn) 14.0 Free float (%) 60.0 Major shareholders Wu family- 20%,

Newbridge- 7.8%, Quantum Partners-

4.7%

Performance 1M 3M 12MAbsolute (%) 5.2 13.1 35.2Relative (%) 2.5 8.1 16.6

Year 12/09A 12/10A 12/11E 12/12E 12/13EPre-prov op profit (NT$ mn) 17,588 8,080 20,339 24,554 28,539Net profit (NT$ mn) 6,748 6,288 8,893 10,645 12,333EPS (NT$) 1.27 1.06 1.41 1.68 1.95- Change from prev. EPS (%) n.a. n.a. 0 0 0- Consensus EPS (NT$) n.a. n.a. 1.27 1.39 1.54EPS growth (%) n.a. (16.1) 32.2 19.7 15.9P/E (x) 13.6 16.3 12.3 10.3 8.9Dividend yield (%) 0 1.5 1.3 2.4 2.8BVPS (NT$) 12.1 11.9 12.2 13.6 15.1P/B (x) 1.4 1.5 1.4 1.3 1.1ROE (%) 11.2 9.3 12.1 13.0 13.6ROA (%) 0.5 0.6 0.7 0.8 0.8Tier 1 (%) 8.9 9.3 9.7 9.8 9.8 Note 1: Taishin Financial Holdings is a holding company. Through its subsidiaries, the company conducts commercial banking business such as deposits, loans, discount bills, guarantees, remittances and foreign exchange transactions.

Monday, 16 May 2011

Asian Daily

- 34 of 38 -

Recently Published Research

Date Title Author(s) Tel. E-mail Fri 13 May China Insurance Sector Arjan van Veen

Frances Feng 852 2101 7508 852 2101 6693

arjan.vanveen@credit-suisse.com frances.feng@credit-suisse.com

Fri 13 May Jump-Start Asia Research Team 852 2101 6570 jahanzeb.naseer@credit-suisse.com Fri 13 May Malayan Banking Danny Goh 603 2723 2083 danny.goh@credit-suisse.com Fri 13 May NJA Insurance Arjan van Veen 852 2101 7508 arjan.vanveen@credit-suisse.com Fri 13 May Taishin Financial Holding Chung Hsu, CFA

Michelle Chou, CFA 8862 2715 6362 886 2 2715 6363

chung.hsu@credit-suisse.com michelle.chou@credit-suisse.com

Fri 13 May Wilmar International Ltd Tan Ting Min 603 2723 2080 tingmin.tan@credit-suisse.com Thu 12 May Asia Equity Strategy Sakthi Siva

Kin Nang Chik 65 6212 3027 852 2101 7482

sakthi.siva@credit-suisse.com kinnang.chik@credit-suisse.com

Thu 12 May Asia Equity Strategy Sakthi Siva Kin Nang Chik

65 6212 3027 852 2101 7482

sakthi.siva@credit-suisse.com kinnang.chik@credit-suisse.com

Thu 12 May City Developments Tricia Song Adam Quek

65 6212 3141 65 6212 3011

tricia.song@credit-suisse.com adam.quek@credit-suisse.com

Thu 12 May Genting Singapore Foong Wai Loke 603 2723 2082 foongwai.loke@credit-suisse.com Thu 12 May Hong Kong Property Sector Cusson Leung, CFA

Joyce Kwock 852 2101 6621 852 2101 7496

cusson.leung@credit-suisse.com joyce.kwock@credit-suisse.com

Thu 12 May Oversea-Chinese Banking Corporation Sanjay Jain Anand Swaminathan

65 6212 3017 65 6212 3012

sanjay.jain@credit-suisse.com anand.swaminathan@credit-suisse.com

Thu 12 May Shandong Weigao Group Medical Jinsong Du 852 2101 6589 jinsong.du@credit-suisse.com Thu 12 May Singapore Telecom Sean Quek, CFA

Bradley Clibborn 65 6212 3337 61 2 8205 4465

sean.quek@credit-suisse.com bradley.clibborn@credit-suisse.com

Thu 12 May Tencent Holdings Wallace Cheung, CFA 852 2101 7090 wallace.cheung@credit-suisse.com Thu 12 May Wing Hang Bank Franco Lam 852 2101 7642 franco.lam@credit-suisse.com Wed 11 May Asia Equity Strategy Sakthi Siva

Kin Nang Chik 65 6212 3027 852 2101 7482

sakthi.siva@credit-suisse.com kinnang.chik@credit-suisse.com

Wed 11 May China Construction Machinery Sector Victoria Li 86 21 3856 0326 victoria.li@credit-suisse.com Wed 11 May Chinatrust Financial Holding Chung Hsu, CFA

Michelle Chou, CFA 8862 2715 6362 886 2 2715 6363

chung.hsu@credit-suisse.com michelle.chou@credit-suisse.com

Wed 11 May Electrical Equipment Sector Yang Y. Song Edwin Pang

852 2101 6550 852 2101 6406

yang.y.song@credit-suisse.com edwin.pang@credit-suisse.com

Wed 11 May Hutchison Port Holdings Trust Ingrid Wei 86 21 3856 0379 ingrid.wei@credit-suisse.com Wed 11 May India Financials Sector Ashish Gupta 91 22 6777 3895 ashish.gupta@credit-suisse.com Wed 11 May Mapletree Commercial Trust Yvonne Voon

Tricia Song Adam Quek

65 6212 3026 65 6212 3141 65 6212 3011

yvonne.voon@credit-suisse.com tricia.song@credit-suisse.com adam.quek@credit-suisse.com

Wed 11 May Mindray Medical International Ltd Jinsong Du Lefei Sun Duo Chen

852 2101 6589 852 2101 7658 852 2101 7350

jinsong.du@credit-suisse.com lefei.sun@credit-suisse.com duo.chen@credit-suisse.com

Wed 11 May NJA Insurance Weekly Arjan van Veen 852 2101 7508 arjan.vanveen@credit-suisse.com Wed 11 May RDA Microelectronics Randy Abrams 8862 2715 6366 randy.abrams@credit-suisse.com Wed 11 May Reliance Industries Sanjay Mookim

Saurabh Mishra 9122 6777 3806 91 22 6777 3894

sanjay.mookim@credit-suisse.com saurabh.mishra@credit-suisse.com

Companies mentioned 361 Degrees (1361.HK, HK$5.44, NOT RATED) 7 Days Group Holdings Ltd. (SVN.N, $21.42, OUTPERFORM [V], TP $27.00) ABB (ABBN.VX, SFr23.19, OUTPERFORM, TP SFr26.00, MARKET WEIGHT) Advanced Semicon. Engr. (2311.TW, NT$34.35, NEUTRAL, TP NT$39.00) AirAsia (AIRA.KL, RM3.13, OUTPERFORM, TP RM4.80) Alstom (ALSO.PA, Eu41.72, NEUTRAL, TP Eu44.00, MARKET WEIGHT) Amorepacific Corp (090430.KS, W1,099,000, OUTPERFORM, TP W1,400,000) Anta Sports Products Limited (2020.HK, HK$13.34, OUTPERFORM, TP HK$15.60) Areva T&D India Ltd (AREV.NS, Rs274.50, UNDERPERFORM, TP Rs206.50) Belle International Holdings Ltd (1880.HK, HK$14.80, OUTPERFORM, TP HK$16.90) BS Financial Group (138930.KS, W14,250, NEUTRAL, TP W15,000) Cathay Financial Holding (2882.TW, NT$46.7, OUTPERFORM, TP NT$57.50) Champion Real Estate Investment Trust (2778.HK, HK$4.50, NEUTRAL, TP HK$4.41) Chang Hwa Commercial Bank (2801.TW, NT$25.2, NEUTRAL, TP NT$23.50) China Communications Construction Co Ltd (1800.HK, HK$6.78, NEUTRAL, TP HK$7.87) China Dongxiang (3818.HK, HK$2.72, NOT RATED) China Merchants Bank - H (3968.HK, HK$19.48, NEUTRAL, TP HK$21.60)

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China Railway Construction Corporation (1186.HK, HK$6.99, NEUTRAL, TP HK$7.68) China Railway Group Ltd (0390.HK, HK$4.00, NEUTRAL, TP HK$4.43) Chinatrust Financial Holding (2891.TW, NT$25, OUTPERFORM, TP NT$29.00) Chongqing Machinery & Electric Co., Ltd (2722.HK, HK$2.74) Cooper Industries PLC (CBE, $62.85, OUTPERFORM, TP $69.00) Daegu Bank (005270.KS, W15,500, NEUTRAL, TP W16,000) Dongfang Electric Corp (1072.HK, HK$28.50, NEUTRAL [V], TP HK$30.00) Doosan Heavy Industries & Construction (034020.KS, W63,400, NEUTRAL, TP W70,000) Dr. Reddy's Laboratories Limited (REDY.BO, Rs1655.45, OUTPERFORM, TP Rs1800.00) E.Sun Financial Holding Co. (2884.TW, NT$21.65, OUTPERFORM, TP NT$23.00) First Financial Holding Co Ltd (2892.TW, NT$26.55, UNDERPERFORM, TP NT$22.00) Fubon Financial Holding (2881.TW, NT$41.2, NEUTRAL, TP NT$41.50) Gammon India Ltd (GAMM.BO, Rs105.25, OUTPERFORM [V], TP Rs164.00) General Electric (GE, $19.89, OUTPERFORM, TP $23.00) Great Eagle Hdg. (0041.HK, HK$28.20, OUTPERFORM, TP HK$38.00) Haitian International Holdings Limited (1882.HK, HK$11.22, OUTPERFORM [V], TP HK$11.40) Harbin Power Equipment (1133.HK, HK$8.69, UNDERPERFORM [V], TP HK$7.40) Holcim Indonesia TBK PT (SMCB.JK, Rp2125.00, NEUTRAL, TP Rp2400.00) Hua Nan Financial Holding (2880.TW, NT$22.85, UNDERPERFORM, TP NT$20.00) Hui Xian REIT (87001.HK, Rmb4.58, NOT RATED) Hyundai Department Store Co. Ltd (069960.KS, W158,000, OUTPERFORM, TP W190,000) Hyundai Merchant & Marine Co. Ltd (011200.KS, W31,800, NOT RATED) Indocement (INTP.JK, Rp16800.00, NEUTRAL, TP Rp17400.00) Industrial Bank of Korea (024110.KS, W18,400, OUTPERFORM, TP W24,000) Jaiprakash Associates Ltd. (JAIA.BO, Rs87.55, OUTPERFORM [V], TP Rs123.00) KB Financial Group (105560.KS, W54,300, OUTPERFORM, TP W72,000) Korea Life Insurance (088350.KS, W7,380, OUTPERFORM, TP W9,800) Kosmopolito Hotels International Ltd. (2266.HK, HK$1.82, OUTPERFORM [V], TP HK$2.56) Li Ning Co Ltd (2331.HK, HK$15.00, RESTRICTED) Lonking Holdings Ltd. (3339.HK, HK$4.93, RESTRICTED [V]) Mega Financial Holding Co Ltd (2886.TW, NT$24.45, NEUTRAL, TP NT$25.00) Midas Holding Ltd (MIDA.SI, S$.70, OUTPERFORM, TP S$1.20) Neptune Orient Lines (NEPS.SI, S$1.90, OUTPERFORM [V], TP S$2.35) NTPC Ltd (NTPC.BO, Rs175.05, NEUTRAL, TP Rs186.00) Pacific Textiles Group (1382.HK, HK$4.92, OUTPERFORM [V], TP HK$5.00) Par Pharmaceutical (PRX, $35.28) Peak Sport Products Co.Ltd. (1968.HK, HK$5.85, OUTPERFORM, TP HK$6.40) Sadbhav Engineering Ltd (SADE.BO, Rs135.55, NOT RATED) Schneider (SCHN.PA, Eu112.25, OUTPERFORM, TP Eu140.00, MARKET WEIGHT) Schneider (SCHN.PA, Eu112.25, OUTPERFORM, TP Eu140.00, MARKET WEIGHT) Semen Gresik (Persero) (SMGR.JK, Rp9300.00, OUTPERFORM, TP Rp11000.00) Shanghai Electric Group Co., Ltd. (2727.HK, HK$4.14, UNDERPERFORM [V], TP HK$3.80) Shanghai Prime Machinery (2345.HK, HK$1.68, NEUTRAL, TP HK$1.75) Shanghai Shimao (600823.SS, Rmb15.03, NOT RATED) Shangri-la Asia (0069.HK, HK$20.80, OUTPERFORM, TP HK$24.20) Shenzhou International (2313.HK, HK$9.72, NEUTRAL, TP HK$9.10) Shimao Property Holdings Ltd (0813.HK, HK$10.08, NEUTRAL [V], TP HK$12.00) Shin Kong Financial Holding (2888.TW, NT$12.1, NEUTRAL, TP NT$12.00) Shinhan Financial Group (055550.KS, W47,950, OUTPERFORM, TP W66,000) Siemens (SIEGn.DE, Eu93.13, OUTPERFORM, TP Eu113.00, MARKET WEIGHT) Siliconware Precision (2325.TW, NT$38.90, NEUTRAL, TP NT$36.00) Sinopac Holdings (2890.TW, NT$13.65, NEUTRAL, TP NT$14.00) Sinotruk (Hong Kong) Limited (3808.HK, HK$5.96, UNDERPERFORM [V], TP HK$5.50) Skyworth Digital (0751.HK, HK$5.13, OUTPERFORM [V], TP HK$6.30) Starwood Hotels and Resorts Worldwide, Inc. (HOT, $59.15, OUTPERFORM [V], TP $75.00) Suzlon Energy Ltd (SUZL.BO, Rs52.90, NEUTRAL [V], TP Rs49.00) Ta Chong Bank Ltd (2847.TW, NT$11.20, NEUTRAL, TP NT$13.00) Taishin Financial Holding (2887.TW, NT$17.30, OUTPERFORM, TP NT$19.70) Taiwan Semiconductor Manufacturing (2330.TW, NT$75.90, OUTPERFORM, TP NT$86.00) Texhong Textile Group (2678.HK, HK$6.50, OUTPERFORM [V], TP HK$9.50) Texwinca Holdings (0321.HK, HK$8.58, NEUTRAL, TP HK$8.64) Victory City International (0539.HK, HK$1.67, OUTPERFORM, TP HK$2.18) Weichai Power Co. Ltd (2338.HK, HK$47.80, NEUTRAL [V], TP HK$57.00) Weiqiao Textile (2698.HK, HK$6.70, NOT RATED) Woori Finance Holdings (053000.KS, W13,850, OUTPERFORM, TP W20,000) Xtep (1368.HK, HK$5.63, NOT RATED) Yuanta Financial Holding Co Ltd (2885.TW, NT$19.80, OUTPERFORM, TP NT$27.00) Zoomlion Heavy Industry (1157.HK, HK$19.20, OUTPERFORM [V], TP HK$26.41)

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Disclosure Appendix Important Global Disclosures The analysts identified in this report each certify, with respect to the companies or securities that the individual analyzes, that (1) the views expressed in this report accurately reflect his or her personal views about all of the subject companies and securities and (2) no part of his or her compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this report. The analyst(s) responsible for preparing this research report received compensation that is based upon various factors including Credit Suisse's total revenues, a portion of which are generated by Credit Suisse's investment banking activities. Analysts’ stock ratings are defined as follows: Outperform (O): The stock’s total return is expected to outperform the relevant benchmark* by at least 10-15% (or more, depending on perceived risk) over the next 12 months. Neutral (N): The stock’s total return is expected to be in line with the relevant benchmark* (range of ±10-15%) over the next 12 months. Underperform (U): The stock’s total return is expected to underperform the relevant benchmark* by 10-15% or more over the next 12 months. *Relevant benchmark by region: As of 29th May 2009, Australia, New Zealand, U.S. and Canadian ratings are based on (1) a stock’s absolute total return potential to its current share price and (2) the relative attractiveness of a stock’s total return potential within an analyst’s coverage universe**, with Outperforms representing the most attractive, Neutrals the less attractive, and Underperforms the least attractive investment opportunities. Some U.S. and Canadian ratings may fall outside the absolute total return ranges defined above, depending on market conditions and industry factors. For Latin American, Japanese, and non-Japan Asia stocks, ratings are based on a stock’s total return relative to the average total return of the relevant country or regional benchmark; for European stocks, ratings are based on a stock’s total return relative to the analyst's coverage universe**. For Australian and New Zealand stocks a 22% and a 12% threshold replace the 10-15% level in the Outperform and Underperform stock rating definitions, respectively, subject to analysts’ perceived risk. The 22% and 12% thresholds replace the +10-15% and -10-15% levels in the Neutral stock rating definition, respectively, subject to analysts’ perceived risk. **An analyst's coverage universe consists of all companies covered by the analyst within the relevant sector. Restricted (R): In certain circumstances, Credit Suisse policy and/or applicable law and regulations preclude certain types of communications, including an investment recommendation, during the course of Credit Suisse's engagement in an investment banking transaction and in certain other circumstances. Volatility Indicator [V]: A stock is defined as volatile if the stock price has moved up or down by 20% or more in a month in at least 8 of the past 24 months or the analyst expects significant volatility going forward.

Analysts’ coverage universe weightings are distinct from analysts’ stock ratings and are based on the expected performance of an analyst’s coverage universe* versus the relevant broad market benchmark**: Overweight: Industry expected to outperform the relevant broad market benchmark over the next 12 months. Market Weight: Industry expected to perform in-line with the relevant broad market benchmark over the next 12 months. Underweight: Industry expected to underperform the relevant broad market benchmark over the next 12 months. *An analyst’s coverage universe consists of all companies covered by the analyst within the relevant sector. **The broad market benchmark is based on the expected return of the local market index (e.g., the S&P 500 in the U.S.) over the next 12 months. Credit Suisse’s distribution of stock ratings (and banking clients) is:

Global Ratings Distribution Outperform/Buy* 47% (63% banking clients) Neutral/Hold* 40% (57% banking clients) Underperform/Sell* 10% (50% banking clients) Restricted 2%

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

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