SEE APPENDIX I FOR IMPORTANT DISCLOSURES AND ANALYST CERTIFICATIONS

16 Jul 2012

Regional

Daily

Top Views INITIATION Mcap USD2.5b ADTV USD2.2m HK: Hopewell Holdings (54 HK) Ivan Cheung 4 Property | All hope ends well | BUY | Upside 30.7% - HHL is an overlooked conglomerate with several re-rating catalysts –

restructuring of infrastructure business, presale of luxury development project, and steady positive rental reversion.

- HHL may reduce its stake in HHI from current 71% to below 50%, resulting in enhancing the former’s balance sheet and corporate profile, thus redirecting its focus to HK/China property developments.

- Upon the completion of Hopewell Centre II in 2018, HHL’s investment property portfolio will be expanded by 31%, comparable to the likes of HK Land, Swire Properties, and Hysan.

IN: India Property Sector Anubhav Gupta 5 In real trouble; only price correction will help | Underweight - In our recent country-wide market survey of developers, we had

concluded end-user demand for New Delhi and Mumbai markets continued to be weak.

- Jan-May sales volumes of housing projects are down 25-30% YoY as customers are delaying purchases because of poor affordability. Developers have cut supply to sustain current property prices.

- However, we found that the Bangalore market is relatively stable with sales volume down just 10%. We maintain negative outlook on Delhi and Mumbai-based developers DLFU, HDIL and GPL and initiate coverage on Bangalore-based SOBHA with BUY rating.

3Q12 Review Mcap USD5.0b ADTV USD8.5m SG: Singapore Press Holdings (SPH SP) Wei Bin 6 Media | Cash is King | BUY | Upside 10.2% - Singapore Press Holdings announced its 3QFYMay12 results, which were

broadly in line with market expectation. Top line registered a 0.9% yoy growth driven by strong performance from Property segment (+12.8% yoy). Core profit before tax increased by 2.2% yoy.

- Operating margin was sustained at 33.5%, marginally improved from last year. Net profit of SGD100m was 13.1% less compared with a year ago. It is mainly because of a 60% decline in investment income due the mark-to-market loss in volatile market condition, which to us is not very worrying.

- Near term catalysts for re-rating will be, spin-off of retail malls into a REIT as well as the return of excess cash to shareholders. Maintain BUY with TP of 4.43 (based on SOTP valuation).

P K BASU pk.basu@maybank-ke.com.sg (65) 6432 1821 ONG Seng Yeow ongsengyeow@maybank-ke.com (852) 2268 0644 THAM Mun Hon, CFA thammunhon@kimeng.com.hk (852) 2268 0630 Jeremy TAN jeremytan@kimeng.com.hk (852) 2268 0635 Today’s Content…

Country Hong Kong Hopewell Holdings India India Property Sector Singapore Singapore Press Holdings Hong Kong Stubs Monitor Philippines Manila Electric Co Malaysia Quill Capita Trust Hong Kong China Agri-Industries Regional Ebbs and Flows China China 2Q12 GDP Singapore Singapore 2Q12 GDP

Top Buys… Company Ticker Spot Target Upside (%) Vinamilk VNM VN 87500 118000 34.9 Philex Mining Corp PX PM 23.15 30.61 32.2 First Philippine Holdings FPH PM 76.90 97.80 27.2 LICHF LICHF IN 263.25 332.00 26.1 SembMarine SMM SP 4.970 6.200 24.7 Yes Bank YES IN 349.25 434.00 24.3 AAPICO Hitech AH TB 14.50 18.00 24.1 B. Armada BAB MK 4.03 4.88 21.1 SapuraKencana SAKP MK 2.24 2.68 19.6 Venture Corp VMS SP 8.070 9.650 19.6 Asian Property Development AP TB 7.25 8.50 17.2

Top Sells… Company Ticker Spot Target Downside (%) Jai Prakash Associates JPA IN 77.55 47.00 -39.4 GMA Network Inc GMAP PM 10 6.90 -32.9 Uni-President 220 HK 8.04 5.60 -30.3 Ayala Land ALI PM 20.65 15.00 -27.4

Maybank-KE Events Date Event Location 16-18 Jul Malaysia Head of Research & Chief

Economist, and Regional Strategist marketing KL

18-20 Jul Singapore HoR & REIT analyst marketing SG 18 Jul Hock Seng Lee NDR KL 19-20 Jul Regional Head, Research & Economics

marketing HK

23-24 Jul Malaysia Head of Research & Chief Economist, and Regional Strategist marketing

SG

24-25 Jul Malaysia Oil & Gas, and Petrochem analysts marketing

SG

26 – 27 Jul Malaysia Oil & Gas, and Petrochem analysts marketing

HK

16 July 2012

Regional Daily

Company Notes QUANTS RESEARCH | Stubs Monitor Jacky Wong 7 Short CKI Stub (1038 HK- 0.339 * 6 HK) - The stub is trading at 1.56 S.D. above its one-year average of 25.2 - CKI is trading at 2.5% discount to its NAV, close to its one-year tightest

discount of 2.1%. - Power Assets accounts for 41% of CKI’s NAV while the stub assets,

including assets in UK, Australia, Canada and etc, accounts for 59%. We believe the company would revert to its one-year average NAV discount of 10.5%.

VISIT NOTE Mcap USD6.7b ADTV USD1.9m PH: Manila Electric Co (MER) Laura Dy-Liacco 8 Utilities | 2Q12 volume sales likely to be strong | HOLD | Upside 3.1% - MER will be releasing its latest interim results in the next couple of

weeks and we expect to see a repeat of 1Q12’s sales performance in 2Q12. Using the generation cost data released by MER each month, we note that utility’s actual GWh purchases or net system input (NSI) for the months of April-June increased 9% to 9,170 GWh. This is comparable with the 10% rise posted in 1Q12.

- We had warned in our previous note that MER’s distribution rates are again expected to decline YoY, resulting in under-recoveries due to the unexpected shift in the revenue mix towards a higher percentage of sales to industrial segments, which has the lowest rate per kWh. We expect 2Q12 distribution rates to remain fairly steady, resulting in additional under-recoveries for the quarter.

- However, the implementation of MER’s updated distribution rates for RY 2013 (July 2012 to June 2013) starting July is expected to improve MER’s overall distribution margins, thereby boosting profits in 2H12. For the full year of 2012, we estimate core earnings will reach PHP16.01b, an 8% increase from the previous year, based on volume growth of 7.4% and average distribution rates of PHP1.60/kWh. Pending the release of MER’s 2Q12 results, we maintain our HOLD rating on its shares based on a PHP250/sh price target.

SMID CAPs | 2Q12 REVIEW Mcap USD0.1b ADTV USD0.2m MK: Quill Capita Trust (QUIL MK) Wong Wei Sum 9 M-REIT | No Surprises | HOLD | Downside 7.6% - QCT’s 6M12 results were in line, accounting for 48-49% of our and

consensus full-year estimates. Its proposed 4.1sen gross DPS for the 1H 2012 was also within expectations.

- Despite its higher-than-average yield of 7.3% (gross) (vs. industry’s 6.8%), we remain skeptical on office REITs given the current oversupply situation in the office market.

- No change to our earnings forecasts and MYR1.10 TP. We maintain Hold on Quill Capita Trust.

16 July 2012

Regional Daily

BREAKING ALERT Mcap USD2.1b ADTV USD4.0m HK: China Agri-Industries (606 HK) Jacqueline Ko 10 Agri-industrial | Unexciting outlook ahead | Not rated - China Agri issued a profit warning for 1H12 as crushing margins were

adversely affected by surging soybean price. Nonetheless, management expects oilseed demand to improve as meat and oil consumption enters the traditional peak season.

- The soybean crushing industry is suffering from overcapacity and hence low utilization. The supply glut is still expected to linger for some time and therefore China Agri is now targeting a lower ex-heading oilseeds crushing margin.

- The company has shifted part of its focus to value-added downstream products; we expect near-term earnings dilution due to channel and brand building efforts.

RG: Ebbs and Flows Tham Mun Hon 11 Show Me The Money - Investors stayed on the side-lines for the week ended 11 July; inflows

into global equities were a low USD130m, down from USD8.8b a week earlier. However, sentiment on Asia ex-Japan continued to improve.

- While all Asia ex-Japan sectors recorded inflows, financials, IT, telecoms and utilities had the best inflows. With better funds flow at both end of the risk spectrum, risk appetite amongst investors despite being on an improving trend still remains relatively weak.

- The data from the latest week is consistent with the pattern of funds flows over the past month where investors are gradually switching from outperforming markets into laggards.

Economics CN: China 2Q12 GDP PK. Basu 12 Up from April’s trough | Stimulus is working (but not enough) - Real GDP decelerated to 7.6% YoY in 2Q 2012 (in line with our estimate),

but rebounding loans stimulated a modest cyclical recovery in FAI and industrial growth from their April trough.

- Policy attention is likely to focus more on boosting consumption over the medium-term, as structural challenges are exacerbated by the FAI-led rebound.

- July rate cuts should have more impact this quarter, helping to stimulate a clear recovery in real GDP in 2H 2012, enabling real GDP to grow 8% in 2012. However, the 2Q 2012 decline in foreign reserves (despite a strong rebound in the trade surplus) suggests substantial capital outflows (likely exacerbated by the surprise weakening of the RMB). For both political and economic reasons, we expect the RMB to resume appreciating against the USD in 2H 2012.

16 July 2012

Regional Daily

SG: 2Q 2012 GDP (Advanced Estimate) Suhaimi Ilias 15 Weaker than expected - 2Q 2012 real GDP shrank -1.1% annualized QoQ and expanded +1.9%

YoY. Consensus was looking at the economy to expand by +0.6% sequentially and +2.3% from a year ago. In 1Q 2012, the economy grew +9.4% QoQ (annualized) and +1.4% YoY.

- Data underscores Asian NIEs susceptibility to global conditions. Singapore’s advanced estimate of 2Q 2012 GDP and South Korea’s unexpected 25bps cut in its benchmark interest rate last week highlight the vulnerability of Asian NIEs economies to the swings in global economy and financial markets, especially amid Eurozone woes and China’s slowdown last quarter.

- Our 2012 real GDP forecast remains at +3% (2011: +4.9%) for now (official forecast: 1%-3%). Crucial trends to watch in this early part of 2H 2012 will be signs that China’s growth slowdown bottomed last quarter, no risk of a sharp slowdown or stagnation in the US economy, and stabilization in the Eurozone sovereign debt crisis.

SEE APPENDIX I FOR IMPORTANT DISCLOSURES AND ANALYST CERTIFICATIONS

Hong Kong Initiating Coverage 16 July 2012

Hopewell Holdings All Hope Ends Well Initiate coverage with BUY at TP of HKD29.15. We believe that HHL is an overlooked mid-cap conglomerate with several re-rating catalysts — a possible restructuring of its infrastructure businesses; the presale of a luxury residential project in early 2013; and steady hikes in the spot rent of its 3.5m sq ft investment property portfolio in Wan Chai and Kowloon Bay . We issue a BUY call on HHL at TP of HKD29.15 (30.7% potential price upside) — a 33% discount (5-year average) to our RNAV of HKD43.50.

Possible reorganisation of infrastructure businesses. Currently, HHL owns 71% of Hopewell Highway Infrastructure (HHI, 737 HK) and 35% of the unlisted Heyuan Power Plant. The options for reorganisation include: 1) distribution in specie of HHI to below 50%-owned, resulting in unconsolidating HHI’s debt by HKD2.86b at HHL’s corporate level. The latter’s corporate profile with be enhanced as a result, redirecting its focus to large-scale property developments in HK/China; and 2) a separate listing of the property businesses.

Conclusion of land premium payable for Hopewell Centre II (HCII). HHL recently concluded the land premium payable of a Wan Chai site for HKD3.7b, which will be developed into 1.1m sq ft HCII, comprising hotel, office and retail complexes. The scheduled completion date of the project is in 2018, which will expand HHL’s investment property portfolio size by 31%. HHL will be one of the largest landlords in the traditional commercial district of Wan Chai on HK Island; its sizable portfolio will be comparable to the likes of HK Land, Swire Properties (1972), and Hysan (14).

Benefiting from de-centralisation theme; development properties as icing. The 3.5m sq ft completed HK investment property portfolio will benefit from the de-centralisation theme due to relative cost benefits. Its flagship office building, Hopewell Centre, has attracted renowned tenants such as Tricor, Bayer, and Principal Insurance. Furthermore, HHL owns three development projects: the luxurious Broadwood Twelve and Lee Tung Street Redevelopment (both in HK) to be completed in 2013 and presold at beginning of 2013, respectively; Hopewell New Town (in Huadu, Guangzhou) will be completed in phases in 2013–2015 and beyond.

Hopewell Holdings – Summary Earnings Table FYE June (HKDm) 2011A 2012F 2013F 2014F Revenue 1,543 1,867 2,156 2,399 EBITDA 511 765 903 1,043 Recurring Net Profit 1,214 1,320 1,308 1,420 Recurring Basic EPS (cents) 138.57 151.38 150.08 162.82 EPS growth (%) 11.53 9.24 (0.86) 8.49 DPS (cents) 148.00 90.83 90.05 97.69 PER 16.09 14.73 14.86 13.70 EV/EBITDA (x) 33.63 22.38 20.21 0.00 Div Yield (%) 6.64 4.07 4.04 4.38 P/BV(x) 0.67 0.65 0.64 0.64 Net Gearing/(Cash) (%) (7.71) (7.77) (3.94) (0.28) ROE (%) 4.54 4.45 4.34 4.67 ROA (%) 3.74 3.54 3.44 3.69 Consensus Net Profit (HKDm) N/A 1,423 1,282 1,342

Source: Company data, Kim Eng Securities

BUY Share price: HKD22.30 Target price: HKD29.15 Ivan CHEUNG, CFA ivancheung@kimeng.com.hk (852) 2268 0634

Stock Information Description: Hopewell Holdings was founded in 1972 involving in property development and investment, infrastructure and hotel businesses in HK and China. Ticker: 54 HK Shares Issued (m): 871.9 Market Cap (USDm): 2,505 3-mth Avg Daily Turnover (USDm): 2.2 HSI: 19,110 Free Float (%): 72.3 Major Shareholders: % Chairman Gordon Wu 27.7 Commonwealth Bank of Australia 9.9 Key Indicators ROE – annualised (%) 4.3 Net cash (HKDm): 1,194 NTA/shr (HKD): 34.7 Interest cover (x): 10.8 Historical Chart

Performance: 52-week High/Low HKD23.97/HKD18.11 1-mth 3-mth 6-mth 1-yr YTD Absolute (%) 11.7 5.6 12.5 (6.9) 13.3 Relative (%) 10.4 11.6 12.4 4.9 9.6

15.0

17.0

19.0

21.0

23.0

25.0

27.0

29.0

Jul 11 Sep 11 Nov 11 Jan 12 Mar 12 May 12 Jul 12

PRICE PRICE REL. TO HANG SENG INDEX

Source: Bloomberg

SEE APPENDIX I FOR IMPORTANT DISCLOSURES AND ANALYST CERTIFICATIONS

Sector Update 16 July 2012

India

India Property Sector In real trouble; only price correction will help Negative on Mumbai, Delhi markets. In our recent country-wide market survey of developers, we had concluded end-user demand for New Delhi and Mumbai markets continued to be weak. Jan-May sales volumes of housing projects are down 25-30% YoY as customers are delaying purchases because of poor affordability. Most projects are running behind schedule due to paucity of funds. Developers have cut supply to sustain current property prices. However, we found that the Bangalore market is relatively stable with sales volume down just 10%. We maintain negative outlook on Delhi and Mumbai-based developers DLF Ltd (DLFU), HDIL Ltd (HDIL) and Godrej Properties (GPL) and initiate coverage on Bangalore-based Sobha Developers (SOBHA) with BUY recommendation. Unsold inventory of 80k homes in Mumbai (worth Rs700bn). This is because sales volume declined 30% in Jan-May. Pre-sales in Mumbai were hurt the most as buyers waited for price correction. In the last 2 years, affordability of home buyers has declined 15% because of high interest rates and property prices. We expect Mumbai sales volume to remain subdued as buyers will return only if developers cut prices or their affordability improves following substantial cut in interest rates. New Delhi’s and NCR’s Jan-May pre-sales down 25%. We believe New Delhi and the NCR markets face maximum risk of price correction as developers may be desperate to sell inventory to generate cash. The financial crunch is most severe for DLFU, Unitech (UT), Omaxe Ltd (OAXE) and Parsvnath Developers (PARSV) because of worsening interest coverage ratios. Fall in Bangalore sales much lower than other cities. Property demand in Bangalore is relatively stable because property prices remained unchanged in the last 1 year vs. 25% rise in Mumbai and Delhi. This suggests that property prices have not been kept artificially high in Bangalore. There is genuine demand in the city because IT companies are still expanding operations and new hiring has not slowed down. Negative on sector but recommend SOBHA, IBREL and MLIFE. SOBHA is operating in Bangalore where there is little threat to property prices and demand from end-customers is strong. We like IBREL, MLIFE because they have projects country wide and have strong B/S. We are negative on DLFU, HDIL and GPL because their major markets are not performing well and they have overleveraged B/S, which may force them to cut inventory price to generate cash. Contractors: Valuation and Recommendation

Mcap CMP TP P/BV(Yr to Mar) Ticker (US$bn) (Rs) (Rs) FY13F FY14F (x) Reco.DFL Ltd DLFU 6.4 211 159 29.0 26.7 1.3 SellGodrej Properties GPL 0.7 522 464 37.9 33.3 2.7 SellHDIL Ltd HDIL 0.7 89 81 4.1 2.7 0.3 SellSobha Developers SOBHA 0.6 337 390 13.0 9.5 1.5 BuyIndiabulls R Estate IBREL 0.5 64 88 10.9 8.9 0.4 BuyMahindra Lifespace MLIFE 0.2 325 393 9.1 7.5 1.0 BuySource: Bloomberg, KESI estimates

PER (x)

Underweight BSE REALTY: 1,725 SENSEX: 17,213 Anubhav Gupta anubhav@maybank-ke.co.in (91) 22 66232605

Historical Chart

-40-30-20-10

010

Jul-11 Nov -11 Mar-12 Jul-12

BSE Realty SENSEX

(%)

Performance: BSE Realty Index 52-week High/Low 2,231/1,367 1-mth 3-mth 6-mth 1-yr YTD Absolute (%) 4.9 -1.8 12.9 -17.3 27.7 Relative (%) 2.7 -1.2 5.5 -10.9 16.6

SEE APPENDIX I FOR IMPORTANT DISCLOSURES AND ANALYST CERTIFICATIONS

Company Update 16 July 2012

Singapore

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

Singapore Press Holdings Cash is King

Respectable results. SPH announced its 3QFYMay12 results, which were broadly in line with market expectations. Top line registered a 0.9% yoy growth, driven by strong performance from the Property segment (+12.8% yoy) despite marginally decline from Newspaper & Magazine segment (-0.6% yoy). Core earnings increased by 2.2% yoy. Maintain BUY with target price of SGD4.43, based on SOTP valuation.

Core ads earnings remain stable. Print advertisement revenue remained stable with a marginally increase of SGD0.7m (+0.4% yoy) driven by 2.9% growth in Display ads. Circulation revenue declined in line with market expectation by SGD2m (-3.6% yoy) but circulation levels were maintained at an average of 1m copies daily.

Property segment to support future growth. SPH’s property segment will be the main growth engine for the whole group in our view. In 3QFY12, rental income rose by SGD5.5m (+12.8%). This was driven by higher rental rate in Paragon as well as contribution from full operation of Clementi Mall.

Operating margin sustained at a healthy 33.5%. Average newsprint cost declined for the second consecutive quarter to USD677/ton from USD690/ton last quarter. Staff cost increased by SGD6m (+6.8%) due to increased headcount from the acquisitions. Operating margin was sustained at 33.5%, marginally improved from last year. Net profit of SGD100m was 13.1% less compared with a year ago. It is mainly because of a 60% decline in investment income due to mark-to-market losses in volatile market condition, which to us is not very worrying.

Maintain BUY, with SOTP TP of SGD4.43. We maintain our BUY call on SPH with SOTP TP of SGD4.43. We believe a potential spin-off of its retail assets will add value to shareholders. Valuation is not expensive at 15.6x FY13F PE and 3.0x FY13F PB given SPH’s monopoly position in media business. Downside should be protected by 6.5% dividends yield.

SPH– Summary Earnings Table FYE Aug(SGD m) 2010 2011 2012F 2013F 2014F Revenue 1381.1 1251.0 1314.0 1323.0 1336.0 EBITDA 637.9 522.9 561.3 564.1 566.2 Recurring Net Profit 497.9 388.6 410.0 415.3 419.1 Recurring Basic EPS (cents) 31.3 24.4 25.7 26.1 26.3 EPS growth (%) 18.0 -22.0 5.5 1.3 0.9 DPS (cents) 27.0 24.4 25.7 26.1 26.3 PER 15.2 12.9 16.5 15.6 15.4 EV/EBITDA (x) 11.6 13.6 12.9 12.9 11.3 Div Yield (%) 6.9 6.0 6.4 6.5 6.5 P/BV(x) 3.2 2.9 3.0 3.0 3.0 Net Cash/share 0.15 0.17 0.08 0.09 0.10 ROE (%) 22.8% 16.8% 17.8% 18.0% 18.2% ROA (%) 13.3% 9.6% 10.7% 11.0% 11.0% Consensus Net Profit (SGD m) 391.2 398.0 411.3 Source: Maybank KE

Buy (unchanged) Share price: SGD4.02 Target price: SGD4.43 (reinitiate) Wei Bin weibin@maybank-ke.com.sg (65) 6432 1455 Stock Information Description: SPH publishes, prints and distributes newspapers and magazines. It also invests in properties, provides multimedia, broadcasting and telecommunication services, manages shopping centers and other commercial properties. Ticker: SPH SP Shares Issued (m): 1,595.3 Market Cap (USD m): 5,058.5 3-mth Avg Daily Turnover (USD m): 8.5 ST Index: 2,995.56 Free float (%): 100 Major Shareholders: % Blackrock Fund Advisors 1.64 Prudential Asset Management 1.58 Vanguard Group Inc 1.04 Key Indicators ROE – annualised (%) 17.8 Net cash (SGD m): 123.5 NTA/shr (SGD): 1.40 Interest cover (x): 10.2

Historical Chart

Performance: 52-week High/Low SGD4.02/SGD3.495 1-mth 3-mth 6-mth 1-yr YTD Absolute (%) 6.9 3.3 8.6 5.5 8.9 Relative (%) -0.5 3.1 1.2 8.8 -3.8

SEE APPENDIX I FOR IMPORTANT DISCLOSURES AND ANALYST CERTIFICATIONS

Hong Kong Quantitative Research 16 July 2012

Stubs Monitor • Short Cheung Kong Infrastructure stub (1038 HK – 0.339 * 6 HK). The

stub is trading at 1.56 S.D. above its one-year average of 25.2. CKI is trading at 2.5% discount to its NAV, close to its one-year tightest discount of 2.1%. Power Assets accounts for 41% of CKI’s NAV while the stub assets, including assets in UK, Australia, Canada and etc, accounts for 59%. We believe the company would revert to its one-year average NAV discount of 10.5%.

Figure 1: CKI NAV premium

Source: Company data, Kim Eng Securities

Figure 2: CKI Stub

Source: Company data, Kim Eng Securities

Stub Alerts – stubs trading near its +/- 2.0 standard deviations (30-day):

Henderson stub (12 HK – 1.33 * 3 HK): +2.04 S.D.

MGM stub (MGM US – 3.964 * 2282 HK): -2.42 S.D.

Hyundai Mipo (010620 KS – 0.303 * 009540 KS): +2.23 S.D.

SingTel stub (ST SP – 0.077 * BHARTI IN): +2.46 S.D.

-40%

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1012141618202224262830

Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 May-12

+2 s.d.

-2 s.d.

one year average

Anita HWANG, CFA anitahwang@kimeng.com.hk (852) 2268 0142 Jacky WONG, CFA jackywong@kimeng.com.hk (852) 2268 0107

SEE APPENDIX I FOR IMPORTANT DISCLOSURES AND ANALYST CERTIFICATIONS

Philippines Company Update 16 July 2012

Manila Electric Co 2Q12 volume sales likely to be strong

GWh purchases up 9% YoY in April-June. Manila Electric Co (MER) will be releasing its latest interim results in the next couple of weeks and we expect to see a repeat of 1Q12’s sales performance in 2Q12. Using the generation cost data released by MER each month, we note that utility’s actual GWh purchases or net system input (NSI) for the months of April-June increased 9% to 9,170 GWh. This is comparable with the 10% rise posted in 1Q12. While the data only represents total purchases and not volume sales, it has been a good indicator of industry trends. MER’s volume sales rose 10% in 1Q12. Revenue growth likely tempered by under-recoveries. We had warned in our previous note that MER’s distribution rates are again expected to decline YoY, resulting in under-recoveries. Recall that 1Q12 distribution revenues grew a mere 2% as average distribution rates fell 8% to PHP1.49/kWH, lower than the PHP1.60/kWh maximum average price (MAP) for regulatory year 2012 (July 2011 to June 2012). This was attributed to the unexpected shift in the revenue mix towards a higher percentage of sales to industrial segments, which has the lowest rate per kWh. We expect 2Q12 distribution rates to remain fairly steady, resulting in additional under-recoveries for the quarter. Expect a stronger 2H12 on improving distribution margins. The implementation of MER’s updated distribution rates for RY 2013 (July 2012 to June 2013) starting July is expected to improve MER’s overall distribution margins, thereby boosting profits in 2H12. Although the RY 2013 MAP of PHP1.6303/kWh is just 1.8% higher than the RY 2012 MAP of PHP1.6012/kWh, the rate of increase differs among customer classes. We expect the under-recoveries to narrow or diminish with the implementation of the new rates. Still a HOLD. While we expect MER’s 2Q12 results to mirror its 1Q12 performance, the recovery in margins in 2H12 should help average out the fluctuations in profit margins over the four quarters. For the full year of 2012, we estimate core earnings will reach PHP16.01b, an 8% increase from the previous year, based on volume growth of 7.4% and average distribution rates of PHP1.60/kWh. In 1Q12, earnings grew 5% to PHP3.42b while distribution rates averaged at PHP1.49/kWh. Pending the release of MER’s 2Q12 results, we maintain our HOLD rating on its shares based on a PHP250/sh price target. Manila Electric Co– Summary Earnings Table FYE 31 Dec (PHPm) 2009A 2010A 2011A 2012F 2013FRevenue 180,758 240,933 256,808 288,618 308,136 EBITDA 12,464 18,204 23,296 29,765 31,714 Recurring Net Profit to Common 7,003 12,155 14,887 16,014 16,984 Recurring Basic EPS (PHP) 6.32 10.78 13.21 14.21 15.07 EPS growth (%) 167.8 70.6 22.5 7.6 6.1 DPS (PHP) 2.40 6.95 7.80 9.24 9.94 PER 39.8 23.3 19.0 17.7 16.7 EV/EBITDA (x) 24.5 17.0 12.7 10.0 9.3 Div Yield (%) 1.0 2.8 3.1 3.7 4.0 P/BV(x) 4.9 4.8 4.4 4.1 3.8 Net Gearing (%) 50.8 45.0 19.0 18.7 12.2 ROE (%) 12.7 20.9 24.3 24.1 23.5 ROA (%) 4.1 6.9 7.6 7.6 7.9 Consensus Net Profit (PHPm) n/a n/a n/a 16,242 17,206Source: MER, Bloomberg, Maybank ATR Kim Eng Securities, Inc

Hold (unchanged) Share price: PHP251.40 Target price: PHP250.00 (Unchanged) Laura Dy-Liacco Laura_DyLiacco@maybank-atrke.com (632) 849 8840

Stock Information Description: MER is engaged in the distribution and sale of electric energy through its distribution network facilities in its franchise areas. Currently, it is also building its own power generation portfolio. Ticker: MER PM / MER.PS Shares Issued (m): 1,127.1 Market Cap (PHP m): 283,363.27 Market Cap (USD m): 6,749.96 3-mth Avg Daily Value (USDm): 1.9 PSEI: 5,214.52 Free float (%): 13 Major Shareholders: % First Pacific Group 45.25 San Miguel Group 27.2 First Philippine Holdings 3.9 Key Indicators

ROE – annualised (%) 24.1 Net debt (PHP m): 13,934 NTA/shr (PHP): 61.5 Interest cover (x): 13.4

Historical Chart

MER PM

171

191

211

231

251

271

Jul-10 Nov-10 Mar-11 Jul-11 Nov-11 Mar-12 Jul-12 Performance: 52-week High/Low PHP295.00/PHP215.00 1-mth 3-mth 6-mth 1-yr YTD Absolute (%) 3.46 (4.05) (4.41) (6.19) (1.41) Relative (%) 1.40 (6.35) (17.43) (24.60) (20.00)

SEE APPENDIX I FOR IMPORTANT DISCLOSURES AND ANALYST CERTIFICATIONS

Results Review 15 July 2012

PP16832/01/2013 (031128)

Malaysia

Quill Capita Trust No surprises

On track. QCT’s 6M12 net profit of MYR17.2m was in line, accounting for 48-49% of our and consensus full-year estimates. Its proposed 4.1sen gross DPS for the 1H 2012 was also within expectations. No change to our earnings forecasts and MYR1.10 TP. Despite its higher-than-average yield of 7.3% (gross) (vs. industry’s 6.8%), we maintain our Hold rating on QCT as we see high occupancy risk in office REITs given the current oversupply situation.

Lower expenses offset the decline in rental revenue. QCT’s 2Q12 net profit was largely unchanged at MYR9.2m, only grew by +0.01% YoY. The decline in rental revenue owing to lower occupancy rates has however been offset by lower interest costs and valuation fee. Sequentially, 2Q net profit grew by 13.6% QoQ thanks to lower property operating and administrative expenses which has more than offset the decline in rental revenue after the expiry of tenancy of QB10-HSBC.

Ability to retain tenants is critical. Leases up for renewal in 2012 and 2013 account for 24% and 25% of total NLA, respectively. Negotiations for the remaining 18% (DHL and BMW where leases are expiring in 4Q12) are ongoing. As at June 2012, QCT’s gearing ratio was largely unchanged at 0.36x (4.32% average cost of debt; all fixed-rate loans) implying an additional new debt headroom of MYR250m based on Securities Commission‘s 0.5x statutory limit.

Prudent acquisition strategies. Given the challenging office market, new acquisitions (likely to be office-retail) must be yield accretive and backed by long leases and rental guarantee. According to Knight Frank Malaysia, KL office market outlook is expected to remain soft for the next 2-3 years given 12m sq ft of new supply coming on stream from now until 2014 (+20% from 61m currently). This could further worsen by several government developments like KL International Financial District, Warisan Merdeka and KL Metropolis.

Quill Capita Trust– Summary Earnings Table FYE Dec (MYR m) 2010A 2011A 2012F 2013F 2014FRevenue 69.3 70.3 68.1 69.8 71.6 EBITDA 68.2 54.0 48.7 50.0 51.5 Recurring Net Profit 32.6 34.3 35.6 36.9 38.4 Recurring Basic EPS (cents) 8.4 8.8 9.1 9.5 9.8 EPS growth (%) 0.5 5.4 3.6 3.7 4.1 DPS (cents) 8.0 8.3 8.7 9.0 9.4 PER 14.3 13.5 13.1 12.6 12.1 EV/EBITDA (x) 10.8 13.7 15.2 14.8 14.4 Div Yield (%) 6.7 7.0 7.3 7.6 7.9 P/BV(x) 0.9 0.9 0.9 0.9 0.9 Net Gearing (%) 36.1 35.7 35.7 35.6 35.5 ROE (%) 6.5 6.8 7.0 7.3 7.5 ROA (%) 3.9 4.0 4.2 4.3 4.5 Consensus Net Profit (MYR m) - - 35.3 37.0 38.5 Source: Maybank IB

Hold (unchanged) Share price: MYR1.19 Target price: MYR1.10 (unchanged) Wong Wei Sum, CFA weisum@maybank-ib.com (03) 2297 8679

Stock Information Description: Real Estate Investment Trust with asset portfolio mostly in office. Ticker: QUIL MK Shares Issued (m): 390.1 Market Cap (MYR m): 464.3 3-mth Avg Daily Turnover (USD m): 0.02 KLCI: 1,626.38 Free float (%): 39.9 Major Shareholders: % Capitacommercial Trust 30.0 Quill Land 12.5 Quill Properties 11.8 Quill Estates 5.7

Historical Chart

Performance: 52-week High/Low MYR1.21/MYR0.99 1-mth 3-mth 6-mth 1-yr YTD Absolute (%) 4.4 7.2 16.7 11.2 10.2 Relative (%) 1.2 3.2 4.3 8.3 3.9

0.00.20.40.60.81.01.21.4

Jul-10 Oct-10Jan-11Apr-11 Jul-11 Oct-11Jan-12Apr-12

QUIL MK Equity

SEE APPENDIX I FOR IMPORTANT DISCLOSURES AND ANALYST CERTIFICATIONS

Hong Kong Company Visit 16 July 2012

China Agri-Industries Unexciting Outlook Ahead Weak 1H12. In late June, China Agr stated that its net profit would drop substantially YoY, owing to margin squeeze and lower forex gains. The market had anticipated weak results, as many oilseed players in the industry were making losses amidst the surging soybean price. Yet, management believes oilseed demand is likely to improve in 2H12, as meat and oil consumption enters the traditional peak season.

Overcapacity unresolved. The soybean crushing industry’s utilisation rate is only 50% in China, following domestic players’ aggressive expansion in previous years. Though the PRC government has restricted overseas players from expanding capacity and has targeted for a total capacity limit of 95m tonnes by 2015, the supply glut is still expected to linger for some time. Thus, pressure on the ASP and margins for the industry will remain. China Agri is now targeting ex-hedging oilseeds margins of 3-5% against its previous target of 5-7%.

Soybean inflation. China relies on foreign suppliers for 80% of its soybean consumption; half of its imported soybeans come from the US. YTD, soybean price has risen by 30% due to unfavourable weather. Looking ahead, industry experts believe that demand growth is likely to exceed supply due to the decline in planting areas and limited upside to yield improvement. The sustained soybean inflation is thus likely to lead to structural margin squeeze, in our view.

Corn processing margin coming down. Most corn refinery names have issued a profit warning due to sluggish upstream demand, rising cost pressure, and weak ASP of downstream products. Corn starch price had fallen since 3Q11, as the ASP of its key derivative starch sweeteners had been declining in tandem with the weakening sugar price. The company intended to increase its corn to starch conversion ratio and move into new areas such as launching MSG in 2H12.

Moving downstream. China Agri has shifted part of its focus to value-added downstream products such as branded rice and animal feeds. The company’s efforts to enhance value chain integration appear to have reduced earnings volatility in the long run. Nonetheless, we expect near-term earnings dilution due to channel and brand building efforts. Its rice unit recorded an increased EBIT loss YoY in FY11, albeit 50% sales growth. Management expects narrowing EBIT loss in FY12E.

Positive FCF in 2012. China Agri will shift its growth strategy from scale expansion to organic growth, as its regional layout has been largely accomplished. Its CAPEX will decrease by 42% YoY to HKD4.4b; around 10% will be spent on the new feeds processing business. Hence, the company is likely to experience positive FCF in 2012. China Agri is trading at 7.0X FY13 consensus PER and 0.74X PBR that is at the low end of the historical range of its PBR band; thus, downside should be minimal. Nonetheless, significant turnaround catalysts have yet to surface.

Not rated Share price: HKD4.01 Jacqueline KO, CFA jacquelineko@kimeng.com.hk (852) 2268 0633

Stock Information Description: China Agri is a leading producer and supplier of processed agricultural products in China. It has five major businesses. Ticker: 606 HK Shares Issued (m): 4,038.4 Market Cap (USDm): 2,076.1 3-mth Avg Daily Turnover (USDm): 4.0 HSI: 19,093 Free Float (%): 42.15 Major Shareholders: % COFCO Corp. 57.85 Key Indicators ROE – annualised (%) 11.5 Net debt (HKDb): 23.7 NTA/shr (HKD): 5.44 Interest cover (x): 5.16 Historical Chart

Performance: 52-week High/Low HKD9.01/HKD3.97 1-mth 3-mth 6-mth 1-yr YTD Absolute (%) (18.5) (26.7) (32.8) (53.6) (32.1) Relative (%) (17.8) (19.3) (33.3) (40.9) (35.7)

0.01.02.03.04.05.06.07.08.09.0

10.0

Jul 11 Sep 11 Nov 11 Jan 12 Mar 12 May 12

PRICE PRICE REL. TO HANG SENG INDEX

Source:

Source: Bloomberg

SEE APPENDIX I FOR IMPORTANT DISCLOSURES AND ANALYST CERTIFICATIONS

Regional Market Strategy 16 July 2012

Ebbs & Flows Staying on the Sidelines In the absence of significant policy announcements and any positive

macro data surprises, investors stayed on the sidelines for the week ended 11 July; inflows into global equities were a low USD130m, down from USD8.8b a week earlier. US equities suffered a minor outflow of USD700m whilst Europe and Japan saw inflows of USD28m and USD106m respectively.

Despite the weaker global investment trends, sentiment on Asia ex-Japan continued to improve as the region recorded an inflow of USD174m in the latest week, the second week of net buying in the past 19 weeks. While funds flowed into all sectors, financials, IT, telecoms and utilities saw the biggest inflows. With better funds flow at both ends of the risk spectrum, we believe that, though improving, investors’ risk appetite remains relatively weak.

At the country level in Asia ex-Japan, only the developed markets of Hong Kong and Singapore saw inflows - and minor ones at that - while Thailand recorded the biggest outflow amongst the emerging markets. The data from the latest week is consistent with the pattern of funds flows over the past month, whereby investors are gradually switching from outperformers into laggards.

Weekly sector flows

% of assets Weekly flow (USD m) YTD flows Country 11-Jul-12 11-Jul-12 4-Jul-12 27-Jun-12 20-Jun-12 USD m % YoY Consumer Discretionary 0.08 17.6 (27.4) (15.0) (105.7) (424) 1.3 Consumer Staples 0.04 4.7 (9.3) 5.8 (61.0) (179) 49.0 Energy 0.07 11.6 (16.0) (79.6) (69.8) (89) 87.0 Financials 0.11 61.3 (39.8) (169.8) (278.2) (742) 57.8 Health Care 0.05 1.6 (5.2) (7.7) (15.2) (51) 71.1 Industrials 0.09 15.7 (6.1) (0.6) (108.9) (488) (18.7) Information Technology 0.11 31.1 33.1 86.5 (206.3) (676) (186.5) Materials 0.07 10.2 (2.2) (5.9) (82.5) (350) (252.6) Telecom Services 0.10 9.6 0.4 (31.4) (52.3) (49) 76.0 Utilities 0.12 4.3 (2.5) (7.3) (13.0) (17) 88.0 Source: EPFR, Maybank-KE

THAM Mun Hon, CFA thammunhon@kimeng.com.hk (852) 2268 0630

SEE APPENDIX I FOR IMPORTANT DISCLOSURES AND ANALYST CERTIFICATIONS

Economics 16 July 2012

PP16832/01/2013 (031128)

Singapore

Weaker than expected

2Q 2012 real GDP shrank -1.1% annualized QoQ and expanded +1.9% YoY. Consensus was looking at the economy to expand by +0.6% sequentially and +2.3% from a year ago. In 1Q 2012, the economy grew +9.4% QoQ (annualized) and +1.4% YoY. Updated 2Q 2012 GDP figures based on full three months data will be out in Aug.

Manufacturing reflected the GDP’s QoQ and YoY split as services and construction growth weakened on both counts. Manufacturing sector’s annualized QoQ and YoY growth were -6% (1Q 2012: +20.9%) and +3.0% (1Q 2012: -0.8%) respectively. At the same time, last quarter saw slower growth in services (2Q 2012: +0.4% ann. QoQ; +1.0% YoY vs. 1Q 2012: +2.7% ann. QoQ; +1.9% YoY) and construction (2Q 2012: +0.3% ann. QoQ; +5.1% YoY vs. 1Q 2012: +27.9% ann. QoQ; +6.9% YoY).

Data underscores Asian NIEs susceptibility to global conditions. Singapore’s advanced estimate of 2Q 2012 GDP and South Korea’s unexpected 25bps cut in its benchmark interest rate last week highlight the vulnerability of Asian NIEs economies to the swings in global economy and financial markets, especially amid Eurozone woes and China’s slowdown last quarter.

Our 2012 real GDP forecast remains at +3% (2011: +4.9%) for now (official forecast: 1%-3%). Crucial trends to watch in this early part of 2H 2012 will be signs that China’s growth slowdown bottomed last quarter, no risk of a sharp slowdown or stagnation in the US economy, and stabilization in the Eurozone sovereign debt crisis.

With eyes now firmly set on policy events. The Monetary Authority of Singapore (MAS) next policy review in Oct 2012 will be a high-importance event. By then, the direction of the economy and inflation in 2H 2012 would have been clearer. We also do not rule out off-Budget measures to stimulate the economy like in 2009 should the downside risk to growth intensifies.

Singapore: Quarterly Real GDP Annualised % QoQ 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 * Overall 19.7 (3.0) 2.0 (2.5) 9.4 (1.1) Manufacturing 80.7 (19.5) 11.0 (11.1) 20.9 (6.0) Construction 8.8 9.5 (4.0) (2.2) 27.9 0.3 Services 4.0 3.7 (0.8) 1.7 2.7 0.4 % YoY Overall 9.1 1.2 6.0 3.6 1.4 1.9 Manufacturing 15.8 (5.9) 13.7 9.2 (0.8) 3.0 Construction 4.2 1.1 2.4 2.9 6.9 5.1 Services 7.5 4.6 3.6 2.1 1.9 1.0 Source: Bloomberg * Advance estimates

2Q 2012 GDP (Advanced Estimate) Suhaimi Ilias suhaimi_ilias@maybank-ib.com (603) 2297 8682 Ramesh Lankanathan ramesh@maybank-ib.com (603) 2297 8685 William Poh william.poh@maybank-ib.com (603) 2297 8683

16 July 2012 Page 2 of 6

Singapore 2Q 2012 GDP (Advanced Estimate)

Singapore: Quarterly Real GDP Growth Singapore: Purchasing Managers Index

(10)

(5)

0

5

10

15

20

25

(20)

(10)

0

10

20

30

40

50

Sep

-07

Dec

-07

Mar

-08

Jun

-08

Sep

-08

Dec

-08

Mar

-09

Jun

-09

Sep

-09

Dec

-09

Mar

-10

Jun

-10

Sep

-10

Dec

-10

Mar

-11

Jun

-11

Sep

-11

Dec

-11

Mar

-12

Jun

-12

Annualised Growth (% QoQ) (LHS) GDP (% YoY)

40

42

44

46

48

50

52

54

56

Jan-

07Ap

r-07

Jul-0

7O

ct-0

7Ja

n-08

Apr-

08Ju

l-08

Oct

-08

Jan-

09Ap

r-09

Jul-0

9O

ct-0

9Ja

n-10

Apr-

10Ju

l-10

Oct

-10

Jan-

11Ap

r-11

Jul-1

1O

ct-1

1Ja

n-12

Apr-

12

Manufacturing Electronics

Source: Bloomberg Source: CEIC

Singapore: Inflation Rate SGD per USD

-2.0-1.00.01.02.03.04.05.06.07.08.0

Jan-

04

Jun-

04

Nov

-04

Apr

-05

Sep-

05

Feb-

06

Jul-0

6

Dec

-06

May

-07

Oct

-07

Mar

-08

Aug

-08

Jan-

09

Jun-

09

Nov

-09

Apr

-10

Sep-

10

Feb-

11

Jul-1

1

Dec

-11

May

-12

MAS Core Inflation: YoY Headline Consumer Price Index (% YoY)

1.00

1.10

1.20

1.30

1.40

1.50

1.60

1.70

1.80

1.90

Sep-

95

Jul-9

6

May

-97

Mar

-98

Jan-

99

Nov

-99

Sep-

00

Jul-0

1

May

-02

Mar

-03

Jan-

04

Nov

-04

Sep-

05

Jul-0

6

May

-07

Mar

-08

Jan-

09

Nov

-09

Sep-

10

Jul-1

1

May

-12

Exchange Rate against US$: Monthly Average Source: CEIC, Monetary Authority of Singapore Source: CEIC

SEE APPENDIX I FOR IMPORTANT DISCLOSURES AND ANALYST CERTIFICATIONS

Economics 16 July 2012

China

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

Up from April’s trough Stimulus is working (but not enough)

Real GDP decelerated to 7.6% YoY in 2Q 2012 (in line with our estimate), but rebounding loans have stimulated a modest cyclical recovery from the April trough. China's real GDP grew 7.6%YoY in 2Q 2012, precisely in line with our estimate and marginally below the Bloomberg consensus of 7.7% (which itself had only moderated to that level in the past fortnight, having been closer to 8% until a month ago). However, it is clear to us that the cyclical trough for China was in April 2012, and there has been a modest recovery since. Recall that bank loans rebounded strongly in May (after the release of the April industrial output and FAI figures), rising by RMB793b for the month. Loans gained further momentum in June, rising by a further RMB920b -- demonstrating the government's clear intent to provide sufficient stimulus to prevent further instability in this leadership-transition year. As Chart 1 shows, real GDP responds with a lag of 2-3 quarters (as evident in 2009) to stronger loan growth.

Chart 1: Stronger loans should begin to boost real GDP soon

6.0007.0008.0009.00010.00011.00012.00013.00014.00015.000

0.0004.0008.000

12.00016.00020.00024.00028.00032.000

Jun-00

Jun-01

Jun-02

Jun-03

Jun-04

Jun-05

Jun-06

Jun-07

Jun-08

Jun-09

Jun-10

Jun-11

Jun-12

GDP growth decelerates despite a rebound in loan growth

Financial Institutional Loans, YoY % (LHS) Real GDP, YTD, YoY % (RHS)

\

Source: Maybank KE, CEIC

FAI and industrial output are clearly up from their April trough. Aided by that burst of additional lending, fixed-asset-investment accelerated (up 20.4%YoY in the ytd, versus 20.1%YoY in Jan-May 2012), and retail sales decelerated only marginally (to 13.7%YoY growth, from 13.8% in May but better than the consensus expectation of 13.4%). Industrial output also decelerated marginally to 9.5% YoY in June (vs 9.6% YoY in May, but better than the April trough of 9.3% YoY).

Prasenjit K. Basu pk.basu@maybank-ke.com.sg (65) 6432 1821

16 July 2012 Page 2 of 7

China | Economics

Chart 2: FAI and industrial growth are marginally stronger than in Apr2012

0.004.008.00

12.0016.0020.0024.0028.0032.0036.0040.00

Jun-06 Jun-07 Jun-08 Jun-09 Jun-10 Jun-11 Jun-12

Mild turnaround in FAI and IP from the April trough

Industrial Prodction YoY % Fixed asset investment: YTD: YoY %FAI: residential building: YTD: YoY %

Source: Maybank KE, CEIC

Policy attention is likely to focus more on boosting consumption over the medium-term, as structural challenges are exacerbated by the FAI-led rebound. The bigger problem, however is that this pattern of growth (with loans financing stronger investment spending, while retail sales lag) has already been identified by Premier Wen Jiabao as "unbalanced and unsustainable". Electricity output was stagnant YoY in June, suggesting continued underlying weakness in the economy -- despite the substantial easing of credit. China continues to suffer from a large overhang of unsold urban homes -- and related overcapacity in construction-related sectors like steel and cement. The easing of credit appears to have boosted home prices more than the real economy. Improving the allocation of credit is therefore likely to receive greater policy attention, going forward. Although the breakdown of FAI for June is not yet available, however, FAI in real estate did lag overall FAI in April-May 2012 (chart 3 below). Loans to SMEs are likely to become more of a focus, going forward, while the targeted fiscal stimulus will aim at boosting consumption (through a limited form of the voucher scheme of 2009), aiding infrastructure-building in the western provinces, and solar and other clean-energy projects.

July rate cuts should have more impact this quarter. However, the June 2012 activity data, of course, do not incorporate the impact of last week’s additional policy rate cut (of 31bp in the benchmark lending rate, plus the liberalization of interest rates that allows banks to lend at interest rates as low as 4.2%, versus the official benchmark of 6%). We continue to expect another 100bp of RRR cuts and real GDP growth of 8% for 2012 (implying a slight acceleration through the rest of 2012, from the cyclical trough in 2Q 2012). The relatively sluggish response of the real economy to the big increase in bank lending over the past two months represents a risk to our forecast trajectory. More policy rate cuts will become necessary if the real economy's response remains sluggish over the next month – but we do expect the economy to begin to respond more clearly to the rate cuts in the current quarter.

One additional source of near-term policy risk is represented by the RMB: as chart 4 shows, China’s foreign reserves declined in 2Q 2012 – despite a sharp rebound in the trade surplus during the quarter. This suggests that there were very substantial capital outflows during

16 July 2012 Page 3 of 7

China | Economics

the quarter, exacerbated by the depreciation of the RMB. For both political and economic reasons, we expect the RMB to resume appreciating in the current quarter; any failure to do so would represent a source of risk to our near-term forecasts.

Chart 4: Decline in foreign reserves despite rebounding trade surplus

02468101214161820222426283032

0

500

1,000

1,500

2,000

2,500

3,000

3,500

Jun-98 Jun-00 Jun-02 Jun-04 Jun-06 Jun-08 Jun-10 Jun-12

China's foreign reserves post a rare quarterly decline

Foreign reserves, US$ bn Resv import cover, months (RHS)

Source: Maybank KE, CEIC

Our medium-term view of the economy remains unchanged, with 7.3% growth in 2013, and 5% in 2014-15. The overhang of excess capacity in urban housing, steel, cement and other industrial sectors will remain a medium-term drag on fixed-investment spending. The 2H 2012 rebound we expect in FAI cannot, therefore, be sustained into 2013 and beyond. In particular, we think the government's commitment to accelerated construction of public housing will not be implementable (as it will exert additional downward pressure on urban housing prices, causing a downward spiral in the housing market, and in local government finances). Once the leadership-transition is completed in March 2013, we expect China to go through a 2-3 period of M2 (and bank credit) growing slower than nominal GDP – to help eliminate the property bubble, causing urban property prices to decline 30-40% in the 2012-2015 period, thereby causing construction investment to decline over the period. Hence we continue to expect real GDP to decelerate to 7.3% growth in 2013, and 5% in 2014-15.

16 July 2012

Regional Daily

RESEARCH OFFICES REGIONAL

P K BASU Regional Head, Research & Economics (65) 6432 1821 pk.basu@maybank-ke.com.sg

WONG Chew Hann, CA Acting Regional Head of Institutional Research (603) 2297 8686 wchewh@maybank-ib.com

THAM Mun Hon Regional Strategist (852) 2268 0630 thammunhon@kimeng.com.hk

ONG Seng Yeow Regional Products & Planning (852) 2268 0644 ongsengyeow@maybank-ke.com.sg

ECONOMICS Suhaimi ILIAS Chief Economist Singapore | Malaysia (603) 2297 8682 suhaimi_ilias@maybank-ib.com

Luz LORENZO Economist Philippines | Indonesia (63) 2 849 8836 luz_lorenzo@maybank-atrke.com

MALAYSIA WONG Chew Hann, CA Head of Research (603) 2297 8686 wchewh@maybank-ib.com Strategy Construction & Infrastructure Desmond CH’NG, ACA (603) 2297 8680 desmond.chng@maybank-ib.com Banking - Regional LIAW Thong Jung (603) 2297 8688 tjliaw@maybank-ib.com Oil & Gas Automotive Shipping ONG Chee Ting (603) 2297 8678 ct.ong@maybank-ib.com Plantations Mohshin AZIZ (603) 2297 8692 mohshin.aziz@maybank-ib.com Aviation Petrochem Power YIN Shao Yang, CPA (603) 2297 8916 samuel.y@maybank-ib.com Gaming – Regional Media Power WONG Wei Sum, CFA (603) 2297 8679 weisum@maybank-ib.com Property & REITs LEE Yen Ling (603) 2297 8691 lee.yl@maybank-ib.com Building Materials Manufacturing Technology

LEE Cheng Hooi Head of Retail chenghooi.lee@maybank-ib.com Technicals

HONG KONG / CHINA Edward FUNG Head of Research (852) 2268 0632 edwardfung@kimeng.com.hk Construction Ivan CHEUNG (852) 2268 0634 ivancheung@kimeng.com.hk Property Industrial Ivan LI (852) 2268 0641 ivanli@kimeng.com.hk Banking & Finance Jacqueline KO (852) 2268 0633 jacquelineko@kimeng.com.hk Consumer Staples Andy POON (852) 2268 0645 andypoon@kimeng.com.hk Telecom & equipment Alex YEUNG (852) 2268 0636 alexyeung@kimeng.com.hk Industrial Catherine CHAN (852) 2268 0631 catherinechan@kimeng.com.hk Cement Jacky WONG, CFA (852) 2268 0107 jackywong@kimeng.com.hk Special Situations Quants Anita HWANG, CFA (852) 2268 0142 anitahwang@kimeng.com.hk Consumer Discretionaries Special Situations

INDIA Jigar SHAH Head of Research (91) 22 6623 2601 jigar@kimeng.co.in Oil & Gas Automobile Cement Anubhav GUPTA (91) 22 6623 2605 anubhav@kimeng.co.in Metal & Mining Capital goods Property Haripreet BATRA (91) 226623 2606 haripreet@kimeng.co.in Software Media Ganesh RAM (91) 226623 2607 ganeshram@kimeng.co.in Telecom Contractor Darpin SHAH (91) 226623 2610 darpin@kimeng.co.in Banking & Financial Services Gagan KWATRA (91 )226623 2612 gagan@kimeng.co.in Small Cap

SINGAPORE Stephanie WONG Head of Research (65) 6432 1451 swong@maybank-ke.com.sg Strategy Small & Mid Caps Gregory YAP (65) 6432 1450 gyap@maybank-ke.com.sg Technology & Manufacturing Telcos - Regional Wilson LIEW (65) 6432 1454 wilsonliew@maybank-ke.com.sg Hotel & Resort Property & Construction James KOH (65) 6432 1431 jameskoh@maybank-ke.com.sg Logistics Resources Consumer Small & Mid Caps YEAK Chee Keong, CFA (65) 6433 5730 yeakcheekeong@maybank-ke.com.sg Healthcare Offshore & Marine Alison FOK (65) 6433 5745 alisonfok@maybank-ke.com.sg Services S-chips Bernard CHIN (65) 6433 5726 bernardchin@maybank-ke.com.sg Transport (Land, Shipping & Aviation) ONG Kian Lin (65) 6432 1470 ongkianlin@maybank-ke.com.sg REITs / Property WeiBin (65) 6432 1455 weibin@maybank-ke.com.sg S-chips Small & Mid Caps

INDONESIA Katarina SETIAWAN Head of Research (62) 21 2557 1125 ksetiawan@kimeng.co.id Consumer Strategy Telcos Lucky ARIESANDI, CFA (62) 21 2557 1127 lariesandi@kimeng.co.id Base metals Coal Oil & Gas Rahmi MARINA (62) 21 2557 1128 rmarina@kimeng.co.id Banking Multifinance Pandu ANUGRAH (62) 21 2557 1137 panugrah@kimeng.co.id Auto Heavy equipment Plantation Toll road Adi N. WICAKSONO (62) 21 2557 1130 anwicaksono@kimeng.co.id Generalist Anthony YUNUS (62) 21 2557 1134 ayunus@kimeng.co.id Cement Infrastructure Property Arwani PRANADJAYA (62) 21 2557 1129 apranadjaya@kimeng.co.id Technicals

PHILIPPINES Luz LORENZO Head of Research +63 2 849 8836 luz_lorenzo@maybank-atrke.com Strategy Laura DY-LIACCO (63) 2 849 8840 laura_dyliacco@maybank-atrke.com Utilities Conglomerates Telcos Lovell SARREAL (63) 2 849 8841 lovell_sarreal@maybank-atrke.com Consumer Media Cement Mining Kenneth NERECINA (63) 2 849 8839 kenneth_nerecina@maybank-atrke.com Conglomerates Property Ports/ Logistics Katherine TAN (63) 2 849 8843 kat_tan@maybank-atrke.com Banks Construction Ramon ADVIENTO (63) 2 849 8842 ramon_adviento@maybank-atrke.com Mining

THAILAND Mayuree CHOWVIKRAN Head of Research (66) 2658 6300 ext 1440 mayuree.c@maybank-ke.co.th Strategy

Maria BRENDA SANCHEZ LAPIZ Co-Head of Research Dir (66) 2257 0250 | (66) 2658 6300 ext 1399 Maria.L@maybank-ke.co.th

Andrew STOTZ Strategist (66) 2658 6300 ext 5091 Andrew@maybank-ke.co.th

Suttatip PEERASUB (66) 2658 6300 ext 1430 suttatip.p@maybank-ke.co.th Media Commerce Sutthichai KUMWORACHAI (66) 2658 6300 ext 1400 sutthichai.k@maybank-ke.co.th Energy Petrochem Termporn TANTIVIVAT (66) 2658 6300 ext 1520 termporn.t@maybank-ke.co.th Property Woraphon WIROONSRI (66) 2658 6300 ext 1560 woraphon.w@maybank-ke.co.th Banking & Finance Jaroonpan WATTANAWONG (66) 2658 6300 ext 1404 jaroonpan.w@maybank-ke.co.th Transportation Small cap. Suchot THIRAWANNARAT (66) 2658 6300 ext 1550 suchot.t@maybank-ke.co.th Automotive Construction Materials Soft commodity

VIETNAM Michael KOKALARI, CFA Head of Research +84 838 38 66 47 michael.kokalari@kimeng.com.vn Strategy Nguyen Thi Ngan Tuyen +84 844 55 58 88 x 8081 tuyen.nguyen@kimeng.com.vn Food and Beverage Oil and Gas Ngo Bich Van +84 844 55 58 88 x 8084 van.ngo@kimeng.com.vn Banking Nguyen Quang Duy +84 844 55 58 88 x 8082 duy.nguyenquang@kimeng.com.vn Rubber Dang Thi Kim Thoa +84 844 55 58 88 x 8083 thoa.dang@kimeng.com.vn Consumer Nguyen Trung Hoa +84 844 55 58 88 x 8088 hoa.nguyen@kimeng.com.vn Steel Sugar Macro

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APPENDIX I: TERMS FOR PROVISION OF REPORT, DISCLAIMERS AND DISCLOSURES DISCLAIMERS This research report is prepared for general circulation and for information purposes only and under no circumstances should it be considered or intended as an offer to sell or a solicitation of an offer to buy the securities referred to herein. Investors should note that values of such securities, if any, may fluctuate and that each security’s price or value may rise or fall. Opinions or recommendations contained herein are in form of technical ratings and fundamental ratings. Technical ratings may differ from fundamental ratings as technical valuations apply different methodologies and are purely based on price and volume-related information extracted from the relevant jurisdiction’s stock exchange in the equity analysis. Accordingly, investors’ returns may be less than the original sum invested. Past performance is not necessarily a guide to future performance. This report is not intended to provide personal investment advice and does not take into account the specific investment objectives, the financial situation and the particular needs of persons who may receive or read this report. Investors should therefore seek financial, legal and other advice regarding the appropriateness of investing in any securities or the investment strategies discussed or recommended in this report. The information contained herein has been obtained from sources believed to be reliable but such sources have not been independently verified by Maybank Investment Bank Berhad, its subsidiary and affiliates (collectively, “MKE”) and consequently no representation is made as to the accuracy or completeness of this report by MKE and it should not be relied upon as such. Accordingly, MKE and its officers, directors, associates, connected parties and/or employees (collectively, “Representatives”) shall not be liable for any direct, indirect or consequential losses or damages that may arise from the use or reliance of this report. Any information, opinions or recommendations contained herein are subject to change at any time, without prior notice. This report may contain forward looking statements which are often but not always identified by the use of words such as “anticipate”, “believe”, “estimate”, “intend”, “plan”, “expect”, “forecast”, “predict” and “project” and statements that an event or result “may”, “will”, “can”, “should”, “could” or “might” occur or be achieved and other similar expressions. Such forward looking statements are based on assumptions made and information currently available to us and are subject to certain risks and uncertainties that could cause the actual results to differ materially from those expressed in any forward looking statements. Readers are cautioned not to place undue relevance on these forward-looking statements. MKE expressly disclaims any obligation to update or revise any such forward looking statements to reflect new information, events or circumstances after the date of this publication or to reflect the occurrence of unanticipated events. MKE and its officers, directors and employees, including persons involved in the preparation or issuance of this report, may, to the extent permitted by law, from time to time participate or invest in financing transactions with the issuer(s) of the securities mentioned in this report, perform services for or solicit business from such issuers, and/or have a position or holding, or other material interest, or effect transactions, in such securities or options thereon, or other investments related thereto. In addition, it may make markets in the securities mentioned in the material presented in this report. MKE may, to the extent permitted by law, act upon or use the information presented herein, or the research or analysis on which they are based, before the material is published. One or more directors, officers and/or employees of MKE may be a director of the issuers of the securities mentioned in this report. This report is prepared for the use of MKE’s clients and may not be reproduced, altered in any way, transmitted to, copied or distributed to any other party in whole or in part in any form or manner without the prior express written consent of MKE and MKE and its Representatives accepts no liability whatsoever for the actions of third parties in this respect. This report is not directed to or intended for distribution to or use by any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation. This report is for distribution only under such circumstances as may be permitted by applicable law. The securities described herein may not be eligible for sale in all jurisdictions or to certain categories of investors. Without prejudice to the foregoing, the reader is to note that additional disclaimers, warnings or qualifications may apply based on geographical location of the person or entity receiving this report. Malaysia Opinions or recommendations contained herein are in the form of technical ratings and fundamental ratings. Technical ratings may differ from fundamental ratings as technical valuations apply different methodologies and are purely based on price and volume-related information extracted from Bursa Malaysia Securities Berhad in the equity analysis. Singapore

This report has been produced as of the date hereof and the information herein may be subject to change. Maybank Kim Eng Research Pte. Ltd. (“Maybank KERPL”) in Singapore has no obligation to update such information for any recipient. For distribution in Singapore, recipients of this report are to contact Maybank KERPL in Singapore in respect of any matters arising from, or in connection with, this report. If the recipient of this report is not an accredited investor, expert investor or institutional investor (as defined under Section 4A of the Singapore Securities and Futures Act), Maybank KERPL shall be legally liable for the contents of this report, with such liability being limited to the extent (if any) as permitted by law. Thailand The disclosure of the survey result of the Thai Institute of Directors Association (“IOD”) regarding corporate governance is made pursuant to the policy of the Office of the Securities and Exchange Commission. The survey of the IOD is based on the information of a company listed on the Stock Exchange of Thailand and the market for Alternative Investment disclosed to the public and able to be accessed by a general public investor. The result, therefore, is from the perspective of a third party. It is not an evaluation of operation and is not based on inside information. The survey result is as of the date appearing in the Corporate Governance Report of Thai Listed Companies. As a result, the survey may be changed after that date. Maybank Kim Eng Securities (Thailand) Public Company Limited (“MBKET”) does not confirm nor certify the accuracy of such survey result. Except as specifically permitted, no part of this presentation may be reproduced or distributed in any manner without the prior written permission of MBKET. MBKET accepts no liability whatsoever for the actions of third parties in this respect. US

This research report prepared by MKE is distributed in the United States (“US”) to Major US Institutional Investors (as defined in Rule 15a-6 under the Securities Exchange Act of 1934, as amended) only by Maybank Kim Eng Securities USA Inc (“Maybank KESUSA”), a broker-dealer registered in the US (registered under Section 15 of the Securities Exchange Act of 1934, as amended). All responsibility for the distribution of this report by Maybank KESUSA in the US shall be borne by Maybank KESUSA. All resulting transactions by a US person or entity should be effected through a registered broker-dealer in the US. This report is not directed at you if MKE is prohibited or restricted by any legislation or regulation in any jurisdiction from making it available to you. You should satisfy yourself before reading it that Maybank KESUSA is permitted to provide research material concerning investments to you under relevant legislation and regulations. UK This document is being distributed by Maybank Kim Eng Securities (London) Ltd (“Maybank KESL”) which is authorized and regulated, by the Financial Services Authority and is for Informational Purposes only. This document is not intended for distribution to anyone defined as a Retail Client under the Financial Services and Markets Act 2000 within the UK. Any inclusion of a third party link is for the recipients convenience only, and that the firm does not take any responsibility for its comments or accuracy, and that access to such links is at the individuals own risk. Nothing in this report should be considered as constituting legal, accounting or tax advice, and that for accurate guidance recipients should consult with their own independent tax advisers.

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DISCLOSURES Legal Entities Disclosures Malaysia: This report is issued and distributed in Malaysia by Maybank Investment Bank Berhad (15938-H) which is a Participating Organization of Bursa Malaysia Berhad and a holder of Capital Markets and Services License issued by the Securities Commission in Malaysia. Singapore: This material is issued and distributed in Singapore by Maybank KERPL (Co. Reg No 197201256N) which is regulated by the Monetary Authority of Singapore. Indonesia: PT Kim Eng Securities (“PTKES”) (Reg. No. KEP-251/PM/1992) is a member of the Indonesia Stock Exchange and is regulated by the BAPEPAM LK. Thailand: MBKET (Reg. No.0107545000314) is a member of the Stock Exchange of Thailand and is regulated by the Ministry of Finance and the Securities and Exchange Commission. Philippines: MATRKES (Reg. No.01-2004-00019) is a member of the Philippines Stock Exchange and is regulated by the Securities and Exchange Commission. Vietnam: Kim Eng Vietnam Securities Company (“KEVS”) (License Number: 71/UBCK-GP) is licensed under the State Securities Commission of Vietnam. Hong Kong: KESHK (Central Entity No AAD284) is regulated by the Securities and Futures Commission. India: Kim Eng Securities India Private Limited (“KESI”) is a participant of the National Stock Exchange of India Limited (Reg No: INF/INB 231452435) and the Bombay Stock Exchange (Reg. No. INF/INB 011452431) and is regulated by Securities and Exchange Board of India. KESI is also registered with SEBI as Category 1 Merchant Banker (Reg. No. INM 000011708) US: Maybank KESUSA is a member of/ and is authorized and regulated by the FINRA – Broker ID 27861. UK: Maybank KESL (Reg No 2377538) is authorized and regulated by the Financial Services Authority. Disclosure of Interest Malaysia: MKE and its Representatives may from time to time have positions or be materially interested in the securities referred to herein and may further act as market maker or may have assumed an underwriting commitment or deal with such securities and may also perform or seek to perform investment banking services, advisory and other services for or relating to those companies. Singapore: As of 16 July 2012, Maybank KERPL and the covering analyst do not have any interest in any companies recommended in this research report. Thailand: MBKET may have a business relationship with or may possibly be an issuer of derivative warrants on the securities /companies mentioned in the research report. Therefore, Investors should exercise their own judgment before making any investment decisions. MBKET, its associates, directors, connected parties and/or employees may from time to time have interests and/or underwriting commitments in the securities mentioned in this report. Hong Kong: KESHK may have financial interests in relation to an issuer or a new listing applicant referred to as defined by the requirements under Paragraph 16.5(a) of the Hong Kong Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission.

As of 16 July 2012, KESHK and the authoring analyst do not have any interest in any companies recommended in this research report.

MKE may have, within the last three years, served as manager or co-manager of a public offering of securities for, or currently may make a primary market in issues of, any or all of the entities mentioned in this report or may be providing, or have provided within the previous 12 months, significant advice or investment services in relation to the investment concerned or a related investment. OTHERS Analyst Certification of Independence The views expressed in this research report accurately reflect the analyst’s personal views about any and all of the subject securities or issuers; and no part of the research analyst’s compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in the report. Reminder Structured securities are complex instruments, typically involve a high degree of risk and are intended for sale only to sophisticated investors who are capable of understanding and assuming the risks involved. The market value of any structured security may be affected by changes in economic, financial and political factors (including, but not limited to, spot and forward interest and exchange rates), time to maturity, market conditions and volatility and the credit quality of any issuer or reference issuer. Any investor interested in purchasing a structured product should conduct its own analysis of the product and consult with its own professional advisers as to the risks involved in making such a purchase. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior consent of MKE.

Definition of Ratings Maybank Kim Eng Research uses the following rating system: BUY Total return is expected to be above 15% in the next 12 months HOLD Total return is expected to be between -15% to +15% in the next 12 months SELL Total return is expected to be below -15% in the next 12 months

Applicability of Ratings The respective analyst maintains a coverage universe of stocks, the list of which may be adjusted according to needs. Investment ratings are only applicable to the stocks which form part of the coverage universe. Reports on companies which are not part of the coverage do not carry investment ratings as we do not actively follow developments in these companies.

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

NTA = Net Tangible Asset ROSF = Return On Shareholders’ Funds EBIT = Earnings Before Interest And Tax P = Price WACC = Weighted Average Cost Of Capital EBITDA = EBIT, Depreciation And Amortisation P.A. = Per Annum YoY = Year-On-Year EPS = Earnings Per Share PAT = Profit After Tax YTD = Year-To-Date EV = Enterprise Value PBT = Profit Before Tax

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Malaysia Maybank Investment Bank Berhad (A Participating Organisation of Bursa Malaysia Securities Berhad) 33rd Floor, Menara Maybank, 100 Jalan Tun Perak, 50050 Kuala Lumpur Tel: (603) 2059 1888; Fax: (603) 2078 4194

Singapore Maybank Kim Eng Securities Pte Ltd Maybank Kim Eng Research Pte Ltd 9 Temasek Boulevard #39-00 Suntec Tower 2 Singapore 038989 Tel: (65) 6336 9090 Fax: (65) 6339 6003

London Maybank Kim Eng Securities (London) Ltd 6/F, 20 St. Dunstan’s Hill London EC3R 8HY, UK Tel: (44) 20 7621 9298 Dealers’ Tel: (44) 20 7626 2828 Fax: (44) 20 7283 6674

New York Maybank Kim Eng Securities USA Inc 777 Third Avenue, 21st Floor New York, NY 10017, U.S.A. Tel: (212) 688 8886 Fax: (212) 688 3500

Stockbroking Business: Level 8, Tower C, Dataran Maybank, No.1, Jalan Maarof 59000 Kuala Lumpur Tel: (603) 2297 8888 Fax: (603) 2282 5136

Hong Kong Kim Eng Securities (HK) Ltd Level 30, Three Pacific Place, 1 Queen’s Road East, Hong Kong Tel: (852) 2268 0800 Fax: (852) 2877 0104

Indonesia PT Kim Eng Securities Plaza Bapindo Citibank Tower 17th Floor Jl Jend. Sudirman Kav. 54-55 Jakarta 12190, Indonesia

Tel: (62) 21 2557 1188 Fax: (62) 21 2557 1189

India Kim Eng Securities India Pvt Ltd 2nd Floor, The International 16, Maharishi Karve Road, Churchgate Station, Mumbai City - 400 020, India Tel: (91).22.6623.2600 Fax: (91).22.6623.2604

Philippines Maybank ATR Kim Eng Securities Inc. 17/F, Tower One & Exchange Plaza Ayala Triangle, Ayala Avenue Makati City, Philippines 1200 Tel: (63) 2 849 8888 Fax: (63) 2 848 5738

Thailand Maybank Kim Eng Securities (Thailand) Public Company Limited 999/9 The Offices at Central World, 20th - 21st Floor, Rama 1 Road Pathumwan, Bangkok 10330, Thailand Tel: (66) 2 658 6817 (sales) Tel: (66) 2 658 6801 (research)

Vietnam In association with Kim Eng Vietnam Securities Company 1st Floor, 255 Tran Hung Dao St. District 1 Ho Chi Minh City, Vietnam Tel : (84) 838 38 66 36 Fax : (84) 838 38 66 39

Saudi Arabia In association with Anfaal Capital Villa 47, Tujjar Jeddah Prince Mohammed bin Abdulaziz Street P.O. Box 126575 Jeddah 21352 Tel: (966) 2 6068686 Fax: (966) 26068787

South Asia Sales Trading Connie TAN connie@maybank-ke.com.sg Tel: (65) 6333 5775 US Toll Free: 1 866 406 7447

North Asia Sales Trading Eddie LAU eddielau@kimeng.com.hk Tel: (852) 2268 0800 US Toll Free: 1 866 598 2267

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