Market

Due to market closures, there will be no publication of Asia First to Market on 1st May 2014.
Publication resumes on 2nd May 2014
Asia Pacific Equity Research

30 April 2014
Top Stories
Samsung's strategic options for ownership restructuring, South Korea (Scott YH Seo) Heart & Seoul analysis part 1: The start Samsung Groups commanding shares of the Korean economy and listed equity market capitalization mean that changes in the Group's ownership structure could have profound implications for the whole Korean market, in our view. In this report and the upcoming series of reports, we review Samsungs strategic options from the perspective of the Group Chairman and related family holdings in the Group. Samsung's strategic options for ownership restructuring, South Korea Heart & Seoul analysis part 2: The financials Part 2 of our series on Samsung Groups restructuring focuses on Samsungs financial companies, along with the Groups upcoming ownership structure changes and continuing regulatory issues, particularly with regard to the Groups reliance on SLI as a vehicle for controlling SEC. SLI, in our opinion, looks well positioned to evolve into a quasi-FHC, linking all major financial affiliates while remaining an anchor for the Group's control of SEC. China Banks (Katherine Lei) 1Q14 results review: asset quality pressure persists, revenue growth mainly driven by non-interest income China banks reported net profit growth of 12% YoY on average in 1Q14, reaching a historical low. However, growth on operating income was 16% YoY, the highest since 1Q12, mainly driven by growth on non-interest income. Asset quality deterioration continues in 1Q14. We believe net profit growth may further decelerate. We continue to prefer big banks due to their stronger deposits franchise, resulting in more stable NIM and asset growth, as well as lower exposure to WMPs and other risk assets. Who will capture consumer time spend?, China (Alex Yao) China Internet pulse: Implications of the government crackdown on online pornography The Chinese government recently initiated a Clean the Web 2014 campaign in an effort to crack down on online pornography. The campaign had an immediate impact on Sina last week, with the company at potential risk of losing licenses and incurring financial losses. We expect webgame developers (e.g. Forgame), social and video platform operators with exposure to UGC (Sina, YY, Youku, Sohu) to be negatively affected by this crackdown over the next few months. On the other hand, we expect the crackdown will drive the usage of: 1) high quality professional content video sites (e.g. Baidu/iQiyi and Tencent); and 2) established gaming operators (Tencent, Qihoo and NetEase). Reiterate OW on Tencent, Baidu and Qihoo. Catcher Technology (2474.TW, OW NT$256.50), Taiwan (William Chen) Upgrade to OW; eyeing a tradable rally We upgrade Catcher to OW from Neutral with a PT of NT$330 (Dec-14) from the previous NT$190 (Jun-14). iPhone business turned our view to Neutral from Underweight last October (here). We are more constructive now given: (1) even better iPhone demand outlook, (2) lower risk of inflating expectations on Samsung (here), and (3) more comfort surrounding supply-demand in the metal casing industry. Changsha Zoomlion Heavy Industry (1157.HK, N HK$5.02), China (Karen Li, CFA) Lowering PT to HK$4.5, 1Q14 results missed expectations once again Zoomlions 1Q14 NPAT came in at Rmb396MM, down 33% Y/Y, achieving only 8% of the Streets full-year estimate, despite a >10% earnings cut over the last one month since the release of its FY13 result.
Send me your feedback!
Click below for the: J.P. Morgan Daily Valuations GLOBAL Stock Guide Daily Global Economic Briefing Link to Other FTMs page Link to J.P. Morgan Markets page Key Rating, Price Target & EPS Changes Markets at a glance AM perspective
Adrian Mowat, Chief Equity Strategist
Consensus Asset Allocation: EM funds asset allocation and performance

EM funds beta relative to MSCI EM
Source: Bloomberg, 25 April 2014. Note: Beta is calculated as the slope of daily average returns of EM funds relative to MSCI EM over one month. The grey line denotes the five year average.
Consensus is now underweight on Russia, where the swing in sentiment was driven by a big drop in gross overweights which fell from 17 to 7. India remains the highest net overweight market in EM (net overweights increased to 26 from 21). The herd continues to be undecided about its position on Brazil and Turkey. Net underweights in Taiwan have decreased to 21 from 43 since Jan 2013. MSCI Taiwan has outperformed EM by 10% over the past year driven by increasing demand from DM economies. We are overweight on Taiwan. For more, please see Consensus Asset Allocation: EM funds asset allocation and performance, Mowat, et al., 27 April 2014
See end pages for analyst certification. For important disclosures, please refer to the disclosure section at the end of the individual linked notes.
J.P. Morgan 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.
Recommendation Changes
Results and Company Views, continued

Ctrip.com International, Ltd (CTRP Overweight), China (Alex Yao) Strategic investments to drive formation of healthy ecosystem in China's online travel market - ALERT Dabur India Limited (DABU.BO Overweight), India (Latika Chopra, CFA) Encouraging volume growth in a challenging macro; stay OW AFL Far East Hospitality Trust (FAEH.SI Underweight), Singapore (Joy Wang) 1Q14 results review: still a soft quarter Godrej Consumer Products Limited (GOCP.BO Overweight), India (Latika Chopra, CFA) Stepping on cost reduction initiatives in an uncertain demand environment IJM Land (IJML.KL Overweight), Malaysia (Simone Yeoh) Show-room time: Bandar Rimbayu 'Phase 3' Industrial and Commercial Bank of China - H (1398.HK Overweight), China (Katherine Lei) 1Q14 results show balanced growth; asset quality remains a concern ING Vysya Bank (VYSA.NS Overweight), India (Seshadri K Sen, CFA) 4Q FY14: Positive surprise on margins LG Electronics (066570.KS Overweight), South Korea (JJ Park) Very strong 1Q14 results despite ongoing loss in handset, and earnings visibility remains high in 2Q14 Malaysia Airports Holdings Berhad (MAHB.KL Overweight), Malaysia (Hoy Kit Mak) One potentially bad and good news each New China Life Insurance Company Ltd - H (1336.HK Underweight), China (MW Kim) 1Q FY14 first cut: strong top-line growth earnings momentum Oil Search (OSH.AX Underweight), China, Australia (Scott L Darling) Sinopec Shanghai Petrochemical, Oil Search: Downside earnings risks remain on chemicals, lowering EPS/PT; Add SPC, Remove OSH from O&G AFL UW Petronet LNG Ltd. (PLNG.BO Overweight), India (Neil Gupte) Muted quarter; focus on volume trajectory PT Ramayana Lestari Sentosa, Tbk (RALS.JK Neutral), Indonesia (Princy Singh) 1Q14: Pressure on gross margins - could be the story for Indo retail sector through 2014 PT Telekomunikasi Indonesia Tbk (TLKM.JK Overweight), Indonesia (Princy Singh) 1Q14 results and management call: Earnings in-line, management looking to steady data pricing
Catcher Technology (2474.TW Overweight), Taiwan

(William Chen) Upgrade to OW; eyeing a tradable rally
Price Target and Estimate Changes

Aluminum Corporation of China - A (601600.SS Neutral), China (Daniel Kang) Chalco: 1Q14 results miss - Losses to persist in 1H14 Aluminum Corporation of China - H (2600.HK Neutral), China (Daniel Kang) Chalco: 1Q14 results miss - Losses to persist in 1H14 Catcher Technology (2474.TW Overweight), Taiwan (William Chen) Upgrade to OW; eyeing a tradable rally Changsha Zoomlion Heavy Industry (1157.HK Neutral), China (Karen Li, CFA) Lowering PT to HK$4.5, 1Q14 results missed expectations once again China Longyuan Power Group Corp. (0916.HK Overweight), China (Boris Kan) 1Q2014 results ahead of estimates Dongfang Electric Corporation Limited - H (1072.HK Neutral), China (Boris Kan) 1Q14 results in line Doosan Heavy Industries & Construction (034020.KS Overweight), South Korea (Wan Sun Park) In-line operating result: expectations rise for new orders and bottoming out of subsidiaries' earnings GS Engineering & Construction (006360.KS Underweight), South Korea (Sokje Lee) 1Q14 results: Modest recovery and cautious order taking Holcim Indonesia (SMCB.JK Overweight), Indonesia (Lydia J Toisuta) 1Q14: better than expected margin gives solid base for FY14 Idea Cellular Limited (IDEA.BO Overweight), India (Viju K George) Exiting FY14 on a nice note; all signs point to a healthy FY15; stay OW LG Innotek (011070.KS Overweight), South Korea (Narci Chang) Upbeat 1Q14 result and 2Q14 guidance; all product segments see strong momentum; reiterate OW L'Occitane International SA (0973.HK Neutral), Hong Kong (Shen Li, CFA) 4Q14 sales update - Japan consumption bring-forward, currency headwinds remain MGM China Holdings Ltd (2282.HK Overweight), Hong Kong (Cusson Leung) 1Q result in-line; Mass market and yield focused optimization as growth drivers
Sesa Sterlite (SESA.NS Overweight), India (Pinakin Parekh, CFA) 4QFY14: Broadly in line quarter, with Aluminum delivering large beat; Small debt reduction a positive signal AFL Shanghai Electric Group Company Limited (2727.HK Underweight), China (Boris Kan) 1Q 2014 earnings a slight miss Shinhan Financial Group (055550.KS Overweight), South Korea (Scott YH Seo) 1Q14 earnings review: Beats expectations and remains our top pick AFL Sinopec Shanghai Petrochemical (0338.HK Underweight), China, Australia (Scott L Darling) Sinopec Shanghai Petrochemical, Oil Search: Downside earnings risks remain on chemicals, lowering EPS/PT; Add SPC, Remove OSH from O&G AFL UW SK Telecom (017670.KS Overweight), South Korea (Stanley Yang) Improving defensive merits in 2Q/2H with 50% market share defended SMIC (0981.HK Neutral), China (Gokul Hariharan) Still in transition; wait for a better entry point WCT Holdings Bhd (WCTE.KL Neutral), Malaysia (Hoy Kit Mak) KLIA2 opening soon, implications for earnings
Public Bank (PUBM.KL Neutral), Malaysia (Harsh Wardhan Modi) M$5B of rights would dilute RoE by 400bp Samsung Card (029780.KS Overweight), South Korea (Scott YH Seo) Samsung's strategic options for ownership restructuring: Heart & Seoul analysis part 2: The financials Samsung Electronics (005930.KS Overweight), South Korea (JJ Park) Robust 1Q14 results, but guidance doesn't seem good enough to surprise the market Samsung Fire & Marine Insurance (000810.KS Overweight), South Korea (Scott YH Seo) Samsung's strategic options for ownership restructuring: Heart & Seoul analysis part 2: The financials Samsung Life Insurance (032830.KS Overweight), South Korea (Scott YH Seo) Samsung's strategic options for ownership restructuring: Heart & Seoul analysis part 2: The financials Samsung Securities (016360.KS Underweight), South Korea (Scott YH Seo) Samsung's strategic options for ownership restructuring: Heart & Seoul analysis part 2: The financials Security Bank Corporation (SECB.PS Overweight), Philippines (Harsh Wardhan Modi) Solid core trends but 1Q misses on treasury Shriram Transport Finance (SRTR.BO Neutral), India (Saurabh Kumar) Growth slowing though asset quality under control; still too early to call a recovery in CV financing cycle Sinopec Corp - H (0386.HK Overweight), China (Scott L Darling) Retail stake to be priced in 3Q14; refining improving in 2Q14, shutting in marginal chemical capacity Sinopharm (1099.HK Overweight), China (Sean Wu) 1Q beat - net profit growth unhampered by high finance cost Sunway REIT (SUNW.KL Neutral), Malaysia, India (Simone Yeoh) 9MFY14 results: Less cautious guidance for FY14E Taiwan Mobile Co., Ltd. (3045.TW Neutral), Taiwan (Lucy Liu) Expect downward earnings revisions; yield provides share price support AFL Tata Steel Ltd (TISC.BO Overweight), India (Pinakin Parekh, CFA) Worst case scenario of a short term ban in Orissa would be a buying opportunity given India & Europe improvement Tsingtao Brewery - H (0168.HK Underweight), China (Ebru Sener Kurumlu) Weak 1Q14 results
Results and Company Views

Air China H (0753.HK Overweight), Hong Kong (Corrine Png) 1Q14 results beat CEA and CSA's; remains our top pick in the Chinese airline sector Bank Central Asia (BCA) (BBCA.JK Neutral), Indonesia (Harsh Wardhan Modi) 1Q14 misses on higher costs (funding, operating and credit) Bank Negara Indonesia Persero (BBNI.JK Underweight), Indonesia (Harsh Wardhan Modi) NPLs deteriorate in 1Q, NIMs next; maintain UW Bank of Communications Co (3328.HK Underweight), China (Katherine Lei) 1Q14: weak deposit franchise resulted in disappointing NIM, loan and deposit growth China Citic Bank - H Share (0998.HK Neutral), China (Katherine Lei) 1Q14: Deteriorating trends on NIM and asset quality overshadow strong top-line growth China Cosco Holdings, Ltd. - H (1919.HK Overweight), China, Hong Kong, Thailand (Corrine Png) 1Q14 results weak, dragged down by vessel disposal losses; highly leveraged to dry bulk recovery China Eastern Airlines - H (0670.HK Neutral), Hong Kong, China (Corrine Png) 1Q14 results weaker than Air China's, but better than CSA's; valuations already near fair value; stay Neutral
China National Building Material (3323.HK Overweight), China (Daniel Kang) 1Q14 results inline - Solid start to the year China Shipping Container Lines - H (2866.HK Overweight), China, Taiwan, Hong Kong (Corrine Png) Turned profitable in 1Q14, beating expectations; low valuations priced in challenging outlook CIMB Group Holdings (CIMB.KL Neutral), Malaysia (Harsh Wardhan Modi) Niaga reported weak 1Q; cost control the key for group RoE CJ O Shopping (035760.KQ Overweight), South Korea (Youna Kim) Largely in-line results CLP Holdings (0002.HK Neutral), Hong Kong (Elaine Wu) Perpetual bond issuance minimizes need for potential equity placement
Strategy
Samsung's strategic options for ownership restructuring, South Korea (Scott YH Seo) Heart & Seoul analysis part 1: The start
Economics
CA surplus in March up for seasonal reasons, South Korea (Jiwon Lim)
Sector Research
China Banks, China (Katherine Lei) 1Q14 results review: asset quality pressure persists, revenue growth mainly driven by non-interest income Singapore Property (Joy Wang) Sims Drive tender closed, land prices continue to soften Who will capture consumer time spend?, China (Alex Yao) China Internet pulse: Implications of the government crackdown on online pornography
Appendix
Key Rating, Price Target & EPS Changes
Rating Changes Company Increases Catcher Technology Price Target Changes Company Increases LG Innotek Catcher Technology Sesa Sterlite Decreases GS Engineering & Construction SK Telecom Sinopec Shanghai Petrochemical Doosan Heavy Industries & Construction Changsha Zoomlion Heavy Industry
Source: J.P. Morgan estimates.
J.P. Morgan EPS Estimate Changes New Rating OW Old Rating N Company Increases Catcher Technology Holcim Indonesia LG Innotek Shinhan Financial Group SK Telecom WCT Holdings Bhd Decreases Aluminum Corporation of China - A Aluminum Corporation of China - H Changsha Zoomlion Heavy Industry Doosan Heavy Industries & Construction Idea Cellular Limited L'Occitane International SA Sesa Sterlite Sinopec Shanghai Petrochemical Revisions GS Engineering & Construction MGM China Holdings Ltd SMIC J.P. Morgan DPS Estimate Changes Company Increases Changsha Zoomlion Heavy Industry Holcim Indonesia L'Occitane International SA Decreases Doosan Heavy Industries & Construction GS Engineering & Construction Sinopec Shanghai Petrochemical Revisions Catcher Technology Sesa Sterlite Current FY +14.4% +0.1% -15.2% -100.0% -18.5% +0.3% 0.0% Next FY +11.8% +14.3% -15.2% -100.0% -15.5% -8.8% -13.2% Current FY +9.7% +7.1% +15.1% +1.7% +11.0% 0.0% -33.0% -33.0% -21.7% -66.4% -12.6% -0.4% -12.2% -16.6% +0.0% +0.7% +6.9% Next FY +18.2% +7.1% +5.1% +0.5% +5.4% +0.6% -101.9% -101.9% -16.9% -51.2% -11.4% -3.2% -7.6% -16.1% -26.5% -0.6% -0.3%
Rating OW OW OW UW OW UW OW N
Price Target New KRW 130,000 NT$330.00 INR265.0 KRW 27,000 KRW 250,000 HK$1.70 KRW 45,000 HK$4.50
Old
KRW 120,000 NT$190.00 INR240.0 KRW 29,000 KRW 260,000 HK$2.00 KRW 49,000 HK$5.30
Markets at a glance
China
SHASHR Index Chg from previous day T/O value (CNYmn / US$MM) Chg from previous day Exchange rate O/N interbank (%) Market cap (CNYBn) Market cap (US$ Bn) FY1E Market P/E FY2E Market P/E 2,115.18 0.84% 56,884 / 9,090 -17.01% CNY6.3 / US$1 2.64 14,708.4 2,350 10.9 9.2
Hong Kong
HSI Index Chg from previous day T/O value (HK$ mn / US$MM) Chg from previous day Exchange rate O/N interbank (%) Market cap (HK$Bn) Market cap (US$ Bn) FY1E Market P/E FY2E Market P/E 22,453.89 1.45% 57,715 / 7,444 9.24% HKD7.75 / US$1 0.05 26,122.7 3,369 14.2 12.3
India
Sensex Index Chg from previous day T/O value (INR MM / US$MM) Chg from previous day Exchange rate O/N interbank (%) Market cap (US$Bn) Market cap (INR Bn) FY1E Market P/E FY2E Market P/E 22,466.19 -0.73% 3,866 / 64 921.61% INR60.4 / US$1 8.00 1256.7 75,934 18.5 16.2
Indonesia
JCI Index Chg from previous day T/O value (Rp bn / US$MM) Chg from previous day Exchange rate O/N interbank (%) Market cap (US$Bn) Market cap (Rp bn) FY1E Market P/E FY2E Market P/E 4,819.68 0.02% 4,496 / 389 -10.70% Rp11,549 / US$1 7.95 419.9 4,848,863 18.4 15.8
Malaysia
KLCI Index Chg from previous day T/O value (MYR MM / US$MM) Chg from previous day Exchange rate O/N interbank (%) Market cap (US$ bn) Market cap (MYR bn) FY1E Market P/E FY2E Market P/E 1,859.34 0.19% 2,202 / 676 26.41% MYR3.26 / US$1 3.00 320.3 1,044 18.4 17.0
Philippines
PSE Index Chg from previous day T/O value (Php MM / US$MM) Chg from previous day Exchange rate O/N interbank (%) Market cap (US$ bn) Market cap (Php bn) FY1E Market P/E FY2E Market P/E 6,636.45 0.49% 6,465 / 145 -13.48% Php44.49 / US$1 3.50 168.6 7,501 19.2 17.2
Singapore
STI Index Chg from previous day T/O value (SGD MM / US$MM) Chg from previous day Exchange rate O/N interbank (%) Market cap (US$ bn) Market cap (SGD bn) FY1E Market P/E FY2E Market P/E 3,237.74 -0.15% 669 / 533 -28.19% SGD1.26 / US$1 0.09 605.5 760 16.6 15.1
South Korea
KOSPI Index Chg from previous day T/O value (KRW bn / US$MM) Chg from previous day Exchange rate O/N interbank (%) Market cap (KRW Bn) Market cap (US$ Bn) FY1E Market P/E FY2E Market P/E 1,964.77 -0.23% 2,935 / 2,848 5.6% KRW1030.57 / US$1 2.50 1,256,815 1,220 13.8 10.8
Taiwan
TWSE Index DoD Change 52-Week Range T/O value (NT$ mn / US$MM) Chg from previous day Exchange rate O/N interbank (%) 10 Year Gov Bond Yield (%) Market cap (NT$Bn) Market cap (US$ Bn) FY1E Market P/E FY2E Market P/E 8,872.11 0.71% 9,022 / 7,663 118,786 / 3,932 8.92% TWD30.2 / US$1 0.39 2.64 25,197.1 943 15.5 12.9
Thailand
SET Index Chg from previous day T/O value (Bt bn / US$MM) Chg from previous day Exchange rate O/N interbank (%) Market cap (US$Bn) Market cap (Bt bn) FY1E Market P/E FY2E Market P/E 1,412.33 0.08% 26 / 814 -29.82% Bt32.27 / US$1 1.90 390.1 12,585 14.0 12.3
Japan
TPX Index Chg from previous day T/O value (JPY bn / US$bn) Chg from previous day Exchange rate O/N interbank (%) Market cap (US$ bn) Market cap (JPY bn) FY1E Market P/E FY2E Market P/E 1,160.74 0.00% 1,574 / 15 0.00% JPY102.61 / US$1 0.15 4058.4 416,431 16.4 18.7
Australia
ASX200 Index Chg from previous day T/O value (AUD MM / US$MM) Chg from previous day Exchange rate O/N interbank (%) Market cap (AUD$ bn) Market cap (US$ bn) FY1E Market P/E FY2E Market P/E 5,486.58 -0.89% 4,473 / 4,821 32.43% AUD0.93 / US$1 2.50 1533.3 1,423 17.0 15.8
UK
UKX Index Chg from previous day T/O value (GBP Bn / US$bn) Chg from previous day Exchange rate O/N interbank (%) Market cap (US$ bn) Market cap (GBP bn) FY1E Market P/E FY2E Market P/E
Source: Bloomberg, J.P. Morgan estimates.
Euro Stoxx
6,700.16 0.22% 4.36 / 7.33 30.12% US$1.68 / GBP1 0.46 3059.1 1,821 13.9 12.7 SX5E Index Chg from previous day T/O value (Euro bn / US$bn) Chg from previous day Exchange rate O/N interbank (%) Market cap (US$ bn) Market cap (Euro bn) FY1E Market P/E FY2E Market P/E 3,165.84 0.59% 8.47 / 11.73 -13.39% US$1.38 / EURO1 2.21 3301.7 2,384 13.9 12.3
US
S&P Index Chg from previous day T/O value (US$ bn) Chg from previous day O/N interbank (%) Market cap (US$ bn) FY1E Market P/E FY2E Market P/E 1,869.43 0.32% 37.21 20.50% 0.09 17222.1 16.0 14.3
Asia Analyst Focus List

Open Trades (as of April 29, 2014 close)
Country India Indonesia Malaysia Philippines Singapore South Korea Taiwan Thailand OW Tata Steel Ltd MNC Sky Vision tbk SapuraKencana Petroleum Bhd Puregold Price Club Singapore Airlines Hyundai Motor Company ASE KASIKORNBANK UW Hero Motocorp Ltd. Bank Danamon Maxis Berhad Globe Telecom Far East Hospitality Trust Samsung Engineering Far EasTone Telecom Sector Autos Consumer Emerging Technology Financials Infrastructure Internet Metals & Mining Oil and Gas Refining and Chemicals SMID-Caps Technology Telecommunications Transportation Utilities & Power Equipment OW Mazda Motor Puregold Price Club Ping An Insurance Group - H CSR Corp Ltd. Tencent Tata Steel Ltd PetroChina TAL Education Group TSMC Singapore Airlines China Everbright International UW DongFeng Motor Co., Ltd. Uni-President China Holdings Ltd Lite-On Technology Corporation Samsung Engineering Sinopec Shanghai Petrochemical VTech Holdings Innolux Corporation Maxis Berhad Hanjin Shipping Co Ltd Shanghai Electric Group
Source: J.P. Morgan
Country relative performance in US$ (MSCI AC Asia Pacific ex JP)
Sector relative performance in US$ (MSCI AC Asia Pacific ex JP)
Source: J.P. Morgan, Bloomberg.
Last Four Weeks Additions

Company Name Mazda Motor (7261) Singapore Airlines Uni-President China Holdings Ltd TSMC MNC Sky Vision tbk Bank Danamon TAL Education Group China Everbright International Sinopec Shanghai Petrochemical BBG Ticker 7261 JT SIA SP 220 HK 2330 TT MSKY IJ BDMN IJ XRS US 257 HK 338 HK Team Head Nick Lai Corrine Png Ebru Sener Kurumlu JJ Park Aditya Srinath, CFA Aditya Srinath, CFA Leon Chik, CFA Boris Kan Scott L Darling Analyst Rating OW OW UW OW OW UW OW OW UW Add Date 4-Apr-14 4-Apr-14 10-Apr-14 17-Apr-14 24-Apr-14 24-Apr-14 24-Apr-14 24-Apr-14 29-Apr-14 Add Price 479.0 10.39 6.61 120.00 2285.00 4355.00 23.33 10.36 1.90 Current Price 460.0 10.35 6.50 120.50 2115.00 4300.00 22.36 9.95 1.90 Price Target 650.0 13.00 4.00 150.00 3100.00 3000.00 34.00 13.00 1.70
Source: J.P. Morgan, Bloomberg. Priced at April 29, 2014
Last Four Weeks Deletions

Company Name SK Innovation Co Ltd Hyundai Motor Company Air China H CJ Cheiljedang Dangdang Ambuja Cements Limited Lotte Chemical Corp SK Hynix Hutchison Telecom Hong Kong Holdings Synnex LPN Development China Resources Power Holdings Xinyi Glass Oil Search
BBG Ticker 096770 KS 005380 KS 753 HK 097950 KS DANG US ACEM IN 011170 KS 000660 KS 215 HK 2347 TT LPN TB 836 HK 868 HK OSH AU
Team Head Samuel Lee, CFA Nick Lai Corrine Png Ebru Sener Kurumlu Alex Yao Daniel Kang Samuel Lee, CFA JJ Park James R. Sullivan, CFA Alvin Kwock Anne Jirajariyavech, CFA Boris Kan Leon Chik, CFA Scott L Darling
Analyst Rating OW OW OW UW UW UW UW OW OW OW UW OW OW UW
Removal Date 2-Apr-14 4-Apr-14 4-Apr-14 7-Apr-14 7-Apr-14 7-Apr-14 7-Apr-14 7-Apr-14 7-Apr-14 8-Apr-14 16-Apr-14 24-Apr-14 24-Apr-14 29-Apr-14
Add Price 140000 244500 5.01 246500 7.81 152.75 177500 38800 2.89 52 15.7 19.14 6.09 8.42
Removal Date Price 120500.00 247500.00 4.67 289500.00 12.85 209.40 191000.00 37000.00 2.54 46.90 18.00 19.72 6.32 8.89
Price Target 160000.00 330000.00 6.00 200000.00 7.50 155.00 155000.00 45000.00 3.50 62.00 14.00 26.60 10.00 7.26
AFL Country team stocks

All stock and market returns shown in local currency (LC) terms, and reflect performance since date added to the AFL. All aggregates include cumulative returns since inception of the AFL on September 2, 2013. Country AFL total aggregate returns are shown in US$ terms. Aggregate US$ return spread uses the MSCI AC Asia Pacific ex JP Index as the benchmark.
Country/Company Name BBG Ticker Tata Steel Ltd TATA IN Hero Motocorp Ltd. HMCL IN Aggregate India performance MNC Sky Vision tbk MSKY IJ Bank Danamon BDMN IJ Aggregate Indonesia performance SapuraKencana Petroleum Bhd SAKP MK Maxis Berhad MAXIS MK Aggregate Malaysia performance Puregold Price Club PGOLD PM Globe Telecom GLO PM Aggregate Philippines performance Singapore Airlines SIA SP Far East Hospitality Trust FEHT SP Aggregate Singapore performance Hyundai Motor Company 005380 KS Samsung Engineering 028050 KS Aggregate South Korea performance ASE 2311 TT Far EasTone Telecom 4904 TT Aggregate Taiwan performance KASIKORNBANK KBANK TB Aggregate Thailand performance Average Country OW (US$) Average Country UW (US$) Aggregate Country (US$)3
Analyst Name Pinakin Parekh, CFA Aditya Makharia Princy Singh Harsh Wardhan Modi Ajay Mirchandani Princy Singh Princy Singh Princy Singh Corrine Png Joy Wang Wan Sun Park Sokje Lee Gokul Hariharan Lucy Liu
Country India India
Rating1 Add Date Add Price OW 2-Sep-13 289.40 UW 19-Feb-14 1944.25 24-Apr-14 24-Apr-14 11-Nov-13 2-Sep-13 2-Sep-13 19-Feb-14 19-Feb-14 19-Feb-14 2285.00 4355.00 4.25 6.87 39.30 1778.00 10.10 0.80
Current Price 405.50 2145.20 2115.00 4300.00 4.33 6.92 45.80 1657.00 10.35 0.89
Indonesia OW Indonesia UW Malaysia Malaysia OW UW
Philippines OW Philippines UW Singapore OW Singapore UW Korea Korea Taiwan Taiwan OW UW OW UW OW
2-Sep-13 244500.00 234000.00 2-Sep-13 84500.00 75100.00 17-Feb-14 14-Nov-13 8-Oct-13 29.50 63.70 177.50 34.40 64.70 191.00
Anne Jirajariyavech, CFA Thailand
Asia Pacific ex JP Asia Pacific ex JP Asia Pacific ex JP
Abs. Perf Spread Over Price Price Target Since Add MSCI Country Target1 End Date Date (%) Index (%)2 550.00 12/31/14 40.1 23.4 1920.00 3/30/15 10.3 2.8 41.9 43.0 3100.00 12/31/14 -7.4 -5.1 3000.00 6/30/15 -1.3 1.1 41.9 36.7 5.70 1/31/16 1.9 0.2 5.25 12/31/14 0.7 -6.4 16.2 16.1 58.00 12/31/14 16.5 5.0 1520.00 12/31/14 -6.8 -11.3 6.8 9.3 13.00 12/31/14 2.5 -1.9 0.80 6/30/14 11.3 6.9 -15.1 -12.1 330000.00 12/1/14 -4.3 -7.5 50000.00 12/31/14 -11.1 -14.3 7.6 7.1 40.00 12/31/14 16.6 10.8 62.00 12/31/14 1.6 -9.0 36.5 35.3 230.00 12/31/14 7.6 9.7 -21.8 -23.4 9.9 10.1 4.0 4.2 5.9 6.1
1 - Rating and price targets reflect J.P. Morgan's fundamental long-term views. 2 Spread over MSCI country indices except for Shanghai listed A-Shares which are spread over SHASHR. 3 - Spread over MSCI country index incorporates the impact of currency movements Source: Bloomberg, J.P. Morgan. Priced at April 29, 2014 (prices and price-related data based on current day's close)
AFL Sector team stocks

All returns shown in US$ terms, and reflect performance since date added to the AFL. All aggregates include cumulative returns since inception of the AFL on September 2, 2013. Aggregate US$ return spread uses the MSCI AC Asia Pacific ex JP Index as the benchmark.
BBG Company Name Ticker Analyst Name MSCI Sector Indices Rating1 Mazda Motor (7261) 7261 JT Akira Kishimoto Autos OW DongFeng Motor Co., Ltd. 489 HK Nick Lai Autos UW Aggregate Autos performance Puregold Price Club PGOLD PM Princy Singh Consumer OW Uni-President China Holdings Ltd 220 HK Ebru Sener Kurumlu Consumer UW Aggregate Consumer performance Lite-On Technology Corporation 2301 TT William Chen Emerging Technology UW Aggregate Emerging Technology performance Ping An Insurance Group - H 2318 HK MW Kim Financials OW Aggregate Financials performance CSR Corp Ltd. 1766 HK Karen Li, CFA Infrastructure OW Samsung Engineering 028050 KS Sokje Lee Infrastructure UW Aggregate Infrastructure performance Tencent 700 HK Alex Yao Internet OW Aggregate Internet performance Tata Steel Ltd TATA IN Pinakin Parekh, CFA Metals & Mining OW Aggregate Metals & Mining performance PetroChina 857 HK Scott L Darling Oil and Gas OW Sinopec Shanghai Petrochemical 338 HK Scott L Darling Oil and Gas UW Aggregate Oil and Gas performance TAL Education Group XRS US Leon Chik, CFA SMID-Caps OW VTech Holdings 303 HK Leon Chik, CFA SMID-Caps UW Aggregate SMID-Caps performance TSMC 2330 TT JJ Park Technology OW Innolux Corporation 3481 TT Narci Chang Technology UW Aggregate Technology performance Maxis Berhad MAXIS MK Princy Singh Telecommunications UW Aggregate Telecom performance Singapore Airlines SIA SP Corrine Png Transportation OW Hanjin Shipping Co Ltd 117930 KS Corrine Png Transportation UW Aggregate Transportation performance China Everbright International 257 HK Elaine Wu Utilities & Power Equipment OW Shanghai Electric Group 2727 HK Boris Kan Utilities & Power Equipment UW Aggregate Utilities & Power Equipment performance Average Sector OW (US$) Average Sector UW (US$) Aggregate Sector Performance
1 - Rating and price targets reflect J.P. Morgan's fundamental long-term views. 2 Spread over MSCI sector indices except for Shanghai listed A-Shares which are spread over SHASHR. Source: Bloomberg, J.P. Morgan. Priced at April 28, 2014 (prices and price-related data based on previous day's close)
Add Date 4-Apr-14 2-Sep-13 19-Feb-14 10-Apr-14 2-Sep-13 2-Sep-13
Add Current Price Price Price Target1 479.0 460.0 650.0 10.94 10.48 8.50 43.80 6.61 50.00 56.15 45.80 6.50 46.15 58.45 58.00 4.00 40.00 88.00
10-Feb-14 5.70 5.88 8.60 11-Mar-14 70900.00 75100.00 50000.00 2-Sep-13 11-Nov-13 2-Sep-13 29-Apr-14 24-Apr-14 9-Jan-14 17-Apr-14 2-Sep-13 19-Feb-14 376.40 360.80 8.54 1.90 23.33 100.60 120.00 14.90 6.95 509.50 405.50 8.97 1.90 22.31 107.50 120.50 10.60 6.92 640.00 550.00 11.25 1.70 34.00 85.00 150.00 10.00 5.25
4-Apr-14 10.39 10.35 13.00 25-Mar-14 6480.00 6120.00 4100.00 24-Apr-14 2-Sep-13 10.36 2.84 9.95 3.00 13.00 2.20
Abs. Perf Price Since Spread Target Add Over MSCI End Date Sector Date (%) Index (%)2 12/31/14 -3.2 -0.1 6/30/14 -4.2 -13.0 3.1 3.7 12/31/14 4.9 -0.1 12/31/14 -1.7 0.7 30.3 30.7 12/31/14 -9.1 -22.6 10.1 9.3 12/31/14 4.1 0.4 -3.4 -3.0 12/31/14 3.2 -3.1 12/31/14 9.9 9.1 -3.4 -3.1 12/31/14 35.4 16.4 -24.9 -24.9 12/31/14 18.4 19.6 -43.2 -43.3 12/31/14 5.1 4.3 12/31/14 0.0 0.0 -2.2 -2.4 12/31/14 -4.2 -1.3 12/31/14 6.9 5.4 -3.6 -2.5 12/31/14 0.3 -0.7 12/31/14 -29.9 -46.4 4.8 4.5 12/31/14 0.7 -1.2 -8.0 -8.8 12/31/14 -0.1 0.7 12/31/14 -1.2 -2.6 -51.1 -50.6 6/30/15 -4.0 -2.4 6/30/14 5.6 -6.4 39.4 39.5 4.3 4.5 6.1 6.3 -1.8 -1.6
J.P Morgans Asia Analyst Focus List (AFL) is a selection of high-conviction stocks collaboratively chosen by each Country and Sector research team across Asia-Pacific. The AFL includes Overweight- and Underweight-rated stocks, Overweight having superior outperformance prospects in a teams universe over the horizon of rating (6-12 months), and Underweight stocks having among the poorer relative performance prospects over the horizon of rating (6-12 months). The aim is to have one Overweight and one Underweight idea from each Research team in the AFL. Analysts can add or delete recommendations at any time and changes will be published, with the analysts rationale, on J.P. Morgan Markets. Please check J.P. Morgan Markets https://www.jpmorganmarkets.com for the most up-to- date AFL at any time, or contact your J.P. Morgan representative. The Analyst Focus List is not a model portfolio. Please refer to specific company research for the fundamental investment thesis for each stock included in this list as well as the analysts complete views. If a stock is placed under research restriction, J.P. Morgan may remove the stock from the AFL pursuant to applicable law and/or J.P. Morgan policy without any further notice. Important disclosures, including price charts for all companies under coverage for at least one year, are available through the search function on J.P. Morgan's website https://jpmm.com/research/disclosures. Total returns exclude commissions. Past results are not indicative of future performance. Additional information available upon request. Japanese stocks included in the Asia AFL are chosen according to the Asia AFL methodology above, independent of the Japanese Analyst Focus List (Japan AFL). Japan stocks are not included at the Country Team level, but may appear in Sector Team selections. To view the Japan AFL and its methodology, click here: Japan Analyst Focus List (Japan AFL)

29 April 2014
Samsung's strategic options for ownership restructuring

Heart & Seoul analysis part 1: The start
Samsung Groups commanding shares of the Korean economy and listed equity market capitalization mean that changes in the Group's ownership structure could have profound implications for the whole Korean market, in our view. Under the strong leadership of Chairman Lee, Kun-hee for the last 27 years, Samsung Group has been transformed into a well-entrenched global manufacturer, competing with other electronics giants for global supremacy. While the timing is not fixed, we think his top priorities ahead of retirement could include: 1) Samsungs positioning within Korea, (2) efficient wealth transfer to the 3rd generation, and (3) business reshuffling for further strong growth in coming decades. In this report and the upcoming series of reports, we review Samsungs strategic options from the perspective of the Group Chairman and related family holdings in the Group. Samsung and Korea. Samsung Group generated ~23% of Koreas GDP as of 2012 and the aggregated market cap of Samsung affiliates accounts for ~28% of KOSPI. Due to the Group's strong presence in the Korea economy, the chairman could be motivated to follow the governments stance and work towards simplifying the Groups ownership structure. In line with this, our base case scenario is that the chairman could pursue: (1) ownership separation (or minimization) between manufacturing and finance, and (2) better co-operation with SMEs. In our view, ownership separation is likely to be a key priority for the chairman as it directly relates to wealth transfer plans for the next generation. Chairmans assets and shareholdings. The chairman's current wealth status (including his spouse), besides his property holdings, can be simplified into two partsshareholdings in SEC (66% in terms of value) and SLI (32%). Given that Samsung's ownership structure is directly/indirectly controlled via SLI, we think the passing down of wealth to the 3rd generation should start with SEVLDs ownership position in SLI, as well as the chairmans own shareholdings in SEC and SLI. Considerations within Samsung Group. The chairman's ownership transfer could pave the way for both improving the Group ownership structure as well as reshuffling the Group business portfolio. Our restructuring scenario centers on: 1) looking for ways to strengthen controls on SEC, 2) outperformers helping the relative underperformers within the Group, 3) growing merger cases among Samsung affiliates due to the ban on additional circular ownership creation, and 4) looking for ways of better utilizing excess capital at Samsung Group financial companies.
Korea Equity Strategy Scott YH Seo

AC
(82-2) 758 5759 scott.seo@jpmorgan.com Bloomberg JPMA SEO <GO> J.P. Morgan Securities (Far East) Ltd, Seoul Branch
JJ Park
(822) 758-5717 jj.park@jpmorgan.com J.P. Morgan Securities (Far East) Ltd, Seoul Branch
Sokje Lee
(82-2) 758-5729 sokje.lee@jpmorgan.com J.P. Morgan Securities (Far East) Ltd, Seoul Branch
MW Kim
(852) 2800-8517 mw.kim@jpmorgan.com J.P. Morgan Securities (Asia Pacific) Limited
Youna Kim
(82-2) 758-5715 youna.kim@jpmorgan.com J.P. Morgan Securities (Far East) Ltd, Seoul Branch
Young Kwon Kim

(82-2) 758- 5733 yk.kim@jpmorgan.com J.P. Morgan Securities (Far East) Ltd, Seoul Branch
Acronyms used in this report:

Name Cheil Industries Cheil Worldwide Hotel Shilla Samsung Asset Mgt. Samsung C&T Samsung Card Samsung Electro-Mechanics Samsung Electronics Samsung Engineering Samsung Everland Samsung F&M Insurance Samsung Fine Chemical Samsung General Chemical Samsung Heavy Industry Samsung Life Insurance Samsung Petrochemical Samsung SDI Samsung SDS Samsung SNS Samsung Securities S One Source: J.P. Morgan. Abbr. CID CWW HTS SAM SCT SSC SEMCO SEC SEG SEVLD SFM SFC SGC SHI SLI SPC SDI SDS SNS SSS SONE
Wealth transfer and tax. Nonetheless, the starting point of the wealth transfer
should be largely focused on the tax consideration from the chairman's point of view since any ownership transfers could bring about sizable tax liabilities for his children, resulting in negative impacts on the Group ownership structure, given the significant wealth accumulation over many years and high inheritance tax rate. Our base case scenario is that the Group might ask SLI and SEC to take bigger roles in husbanding tax liabilities.
See page 17 for analyst certification and important disclosures, including non-US analyst disclosures.
J.P. Morgan 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. www.jpmorganmarkets.com

29 April 2014
Samsung's strategic options for ownership restructuring

Heart & Seoul analysis part 2: The financials
Part 2 of our series on Samsung Groups restructuring focuses on Samsungs financial companies, along with the Groups upcoming ownership structure changes and continuing regulatory issues, particularly with regard to the Groups reliance on SLI as a vehicle for controlling SEC. SLI, in our opinion, looks well positioned to evolve into a quasi-FHC, linking all major financial affiliates while remaining an anchor for the Group's control of SEC. We believe this process could open possibilities for Samsungs financial companies to deploy excess capital. Within this theme, and from the view of minority shareholders, SLI's corporate value would be enhanced as the center of an FHC in our view, but our preferred stock pick is SSC. We see almost neutral share price impact on SFM and SSS. For the idea of collaborative overseas expansion, asset management appears to us the best fit for Samsung Group financial companies. We expect SLI, which is at the top of Samsungs ownership chain, to play a pivotal role in the process of passing down Chairman Lee's wealth to the next generation, given 1) the Lee family's ownership in SLI, 2) SLI's effective control of SEC, and 3) SLIs meaningful ownership stakes in all Samsung financial affiliates. Simply put, the successor of Chairman Lee could effectively control both SEC (and its affiliates) and SLI (and its affiliates), the crown jewels of the Group, once he/she inherits the chairmans stake holdings in SLI, according to our scenario analysis. We expect SLI could emerge as a quasi-FHC by raising its stakes in each financial affiliate to 20%+ (via purchase of affiliates shareholdings including treasury shares). On the flip side, depending on regulatory changes on chaebol ownership, the Group may consider trimming its stakes in SLI and SEC in order to comply with regulatory guidance, and to fund ownership restructuring. Our back-of-the-envelope calculation suggests Samsung financial companies hold aggregate excess capital of c.W17 trillion. After cross-ownership realignments, all Samsung financial companies could potentially return more FCF to shareholders. In our view, ways of deploying the longaccumulated excess capital by Samsung financial companies could include: 1) SLI could purchase SECs stakes in SSC (and then, probable SSC privatization) and convert SAM to a direct subsidiary; 2) SSC (likely) and/or SSS (less likely) could pursue local M&A to increase market share; 3) collaborative overseas M&A focusing on asset management (likely); or 4) collaborative overseas M&A focusing on insurance (less likely).
Equity Ratings and Price Targets Company Samsung Card Samsung Life Insurance Samsung Fire & Marine Insurance Samsung Securities Ticker 029780 KS 032830 KS 000810 KS 016360 KS Mkt Cap (W mn) 4,275,193.00 18,660,000.00 11,359,680.00 2,939,031.00 Rating Price (W) 36,900 96,000 244,000 39,500 Cur OW OW OW UW Prev n/c n/c n/c n/c Price Target Cur Prev 45,000 n/c 145,000 n/c 320,000 n/c 32,000 n/c
South Korea Korea Equity Strategy Scott YH Seo

AC
(82-2) 758 5759 scott.seo@jpmorgan.com Bloomberg JPMA SEO <GO> J.P. Morgan Securities (Far East) Ltd, Seoul Branch
MW Kim
AC
(852) 2800-8517 mw.kim@jpmorgan.com Bloomberg JPMA MKIM <GO> J.P. Morgan Securities (Asia Pacific) Limited
JJ Park
Sokje Lee
(82-2) 758-5729 sokje.lee@jpmorgan.com J.P. Morgan Securities (Far East) Ltd, Seoul Branch
Youna Kim
(82-2) 758-5715 youna.kim@jpmorgan.com J.P. Morgan Securities (Far East) Ltd, Seoul Branch
Young Kwon Kim

Source: Company data, Bloomberg, J.P. Morgan estimates. n/c = no change. All prices as of 28 Apr 14.

30 April 2014
China Banks
1Q14 results review: asset quality pressure persists, revenue growth mainly driven by non-interest income
China banks reported net profit growth of 12% YoY on average in 1Q14, reaching a historical low. However, growth on operating income was 16% YoY, the highest since 1Q12, mainly driven by growth on non-interest income (+32% YoY). Asset quality deterioration continues in 1Q14. We believe net profit growth may further decelerate due to: a) NIM continuing to see pressure amid interest-rate liberalization; b) fee growth may trend down as strong growth in 1Q is partly due to seasonality; c) asset quality deterioration is likely to continue. We continue to prefer big banks due to their stronger deposits franchise, resulting in more stable NIM and asset growth, as well as lower exposure to WMPs and other risk assets. Diverging trends in NIM between Big 4 SOE banks and mid-cap banks continue: On a quarterly basis, Big 4 SOE banks saw flat NIM trend on average, other banks saw NIM contraction of 15bps (Table 3). We believe that big banks with strong deposit franchises are more resilient to rising deposit rates. In addition, low LDR enables them to grow the loan book steadily and reduce reliance on the high-cost interbank funding; their interbank liabilities were only 10% of total liabilities, lower than other banks 21% at the end of 1Q14 (Table 10). SOE banks saw slower growth on non-interest income: Fee income trend has seasonality as some fees are related to asset growth (commitment fees) and there could be some lumpy items charged in 1Q; thus, we mainly look at YoY growth. Big 4 SOE banks fee income growth was 10% YoY, other banks were 41% YoY on average. We believe this could be partly due to small banks have higher risk appetite for innovative business. Other non-interest income growth was 51% YoY for big 4 banks and 75% YoY for other banks on average, we believe this income is volatile and unlikely to be sustainable. Asset quality deterioration continues amid macro slowdown: NPL growth accelerated for the big 4 banks, with NPL rising by 7% qoq and the NPL ratio went up by 2bps on average. For non-big 4 banks, excluding Citic, NPL rose by 2% qoq, decelerating from the previous quarter, likely helped by NPL writeoff/disposal. Citics NPL amount increased by 18% qoq, the highest among peers. Big 4 banks have less appetite for risk: On WMP, only CCB and Bocom disclosed the WMP balance at end-1Q14, CCB saw 3% contraction qoq, BoCom saw qoq growth of 21%. Interbank assets with repurchase agreement accounted for 3% of interbank assets for big 4 banks, and 11% for other banks. In addition, CMB saw significant increase in trust beneficial rights investment, while Citic saw significant increase in investment in assets management plan by brokers, both are non-standardized assets with risks.
Table 1:1Q14 results for the banks Beat / Miss / In line
Banks ABC BOC ICBC CCB CRCB Minsheng CMB Ctic BoCom 1Q14 results In line In line In line In line In line In line/missed Inline / missed In line / missed Missed JPM Comments Balance growth, NIM beats, but fee growth missed. Deposit growth beats, NIM and fee trend in line, asset quality misses No major surprises, key trends in line with expectation No major surprises, key trends in line with expectation Asset quality beat expectations, but NIM and fee income growth disappointed PPoP growth missed expectations due to NIM contraction, but NPL growth is lower than expected. Net profits growth in line, but NIM missed and growth on risk assets faster than expected Net profits growth in line, but NIM missed and growth on risk assets faster than expected Lowest profits growth YoY, NIM, deposits and loan growth are key disappointments
Banks & Financial Services Katherine Lei

AC
(852) 2800-8552 katherine.lei@jpmorgan.com Bloomberg JPMA LEI <GO>
Lu Lu
(852) 2800-8592 lu.lu@jpmorgan.com
Josh Klaczek
(852) 2800-8534 josh.klaczek@jpmorgan.com J.P. Morgan Securities (Asia Pacific) Limited
Source: Company reports, J.P. Morgan estimates.

29 April 2014
Who will capture consumer time spend?

China Internet pulse: Implications of the government crackdown on online pornography
The Chinese government recently initiated a Clean the Web 2014 campaign in an effort to crackdown on online pornography. The campaign had an immediate impact on Sina last week, with the company at potential risk of losing licenses and incurring financial losses. We expect webgame developers (e.g. Forgame), social and video platform operators with exposure to UGC (Sina, YY, Youku, Sohu) to be negatively affected by this crackdown over the next few months. On the other hand, we expect the crackdown will drive the usage of: 1) high quality professional content video sites (e.g. Baidu/iQiyi and Tencent); and 2) established gaming operators (Tencent, Qihoo and NetEase). Reiterate OW on Tencent, Baidu and Qihoo.
Internet Alex Yao
AC
(852) 2800 8535 alex.c.yao@jpmorgan.com Bloomberg JPMA YAO <GO>
Yong Wang
(852) 2800-8579 yong.y.wang@jpmorgan.com J.P. Morgan Securities (Asia Pacific) Limited
The anti-pornography campaign. The Chinese government launched an China Internet top picks anti-pornography campaign Clean the Web 2014 on April 14, aiming to P/E clean up pornographic content on websites, search engines, mobile app Stock Rating Price PT 14E 15E stores, Internet TV sticks, set-top boxes etc. According to Xinhua News Tencent OW 508.5 640 28 21 Agency, the campaign targets four types of content: 1) advertising for Qihoo OW 84.8 165 34 22 pornographic websites; 2) pornographic or vulgar advertisement of game Source: J.P. Morgan estimates, Bloomberg. sites to attract users; 3) pornographic content on online video and online literature sites; 4) spreading pornographic content through mobile apps. As Stock views of April 20, 110 websites had been shut down and over 3,300 accounts on Ticker Rating Price PT BIDU US OW 150.9 217 social network services (incl. Wechat) and 7,000 ads links have been deleted. Baidu Sina SINA US OW 47.9 92 The campaign will last from April to November. Tencent 700 HK OW 508.5 640 Who might be at potential risk? The campaign had a direct impact on Sina last week, leading Sina to start a self content clean-up (please refer to: Potential impact of government crackdown on pornography). We expect internet companies to conduct more stringent internal clean-up of content in the next few months, which might lead to potential traffic loss. We believe companies with more user generated content (UGC) are relatively more vulnerable as the quality of UGC is generally harder to control vs. in-house or professional content. We believe online portals, online literature, online video, social media and online entertainment platforms (e.g. YY) are exposed to regulatory risks. In addition, the control over advertising content of online games (especially webgames) might reduce traffic acquisition efficiency of webgame publishing. We understand that certain webgames rely on vulgar advertisements, which contain vulgar content, to drive traffic. We believe the ban on those advertisements would potentially increase near-term user acquisition costs for webgames publishers without strong organic traffic (Forgame). Who might benefit? In our view, a reduction in the consumption of such content will drive the usage of alternative affordable and entertainmentoriented content. We believe key beneficiaries will be video sites with quality professional video content (e.g. iQiyi/PPS, Tencent), and established gaming platforms with strong organic traffic (Tencent, Qihoo and NetEase).
SouFun Qihoo Phoenix New Media YY Vipshop Forgame Ctrip Sungy Mobile NetEase Youku Sohu Dangdang SFUN US QIHU US FENG US YY US VIPS US 484 HK CTRP US GOMO US NTES US YOKU US SOHU US DANG US OW OW OW OW OW OW OW OW N N N UW 12.2 84.8 9.3 58.4 137.4 34.3 45.0 16.6 68.0 22.8 54.1 11.0 19.60 165 16 105 200 58 52 32 73 26 68 7.5
Source: J.P. Morgan estimates, Bloomberg. Stock prices are as of April 28, 2014

29 April 2014
Overweight
Catcher Technology
Upgrade to OW; eyeing a tradable rally
We upgrade Catcher to OW from Neutral with a PT of NT$330 (Dec-14) from the previous NT$190 (Jun-14). iPhone business turned our view to Neutral from Underweight last October (here). We are more constructive now given: (1) even better iPhone demand outlook, (2) lower risk of inflating expectations on Samsung (here), and (3) more comfort surrounding supply-demand in the metal casing industry in the next 12-18 months. These, combined with likely earnings upside surprises in 2H14 driven by high season, have us expecting a tradable rally following our late upgrade. Solid order outlook driving more capacity expansion: Catcher's YTD announced capex has beat our 2014 forecast (Table 1), making our earlier forecast of iPhone allocation conservative. This, combined with another capacity expansion guided for by the chairman, cause us to revise up our earnings forecast by 10%/18% for 2014/15 accordingly. Metal casing trend sustains longer: The chairman expects metal casing momentum to continue into 2015 without concerns about oversupply. Our bottom-up analysis (Table 3) shows the same thing. Chinese smartphone vendors will play an important role: If they start to upgrade casing material (Unibody/composite) as aggressively as they do in phone cameras, we think the metal casing trend could continue for another 1218 months. Earnings upgrade cycle- second phase starting: In the last two big product up-cycles since 2003, strong revenue growth was followed by great margin improvements (from 45% to 57% in 2004-06; from 35% to 47% in 2010-11). We expect GPM to improve to 44% in 4Q14/2015 from 2013's 42% on better product mix and economies of scale. Management also sees more upside than downside to current margins. Upgrade to OW; expecting a tradable rally: We derive our new PT of NT$330 on higher earnings forecasts and higher valuation multiple (15x 2014E PER vs. previous 11x 2014-15 PER). Historically, Catcher has traded at 15x (Fig 2), or 2-standard deviations, thanks to a combination of product up-cycle and high season (2006-07, 2H08, 2H10, 4Q11). Downside risks: (1) profit-taking after the recent rally; (2) faster market share loss to composite casing in high-end smartphone casing market.
Bloomberg 2474 TT, Reuters 2474.TW
(Year-end Dec, NT$ bn) Sales Operating Profit EBITDA Pretax Profit Adj. Net Profit (New TW GAAP) New TW GAAP EPS (NT$) Net Debt / Equity Y/E BPS (NT$) FY12 FY13 FY14E FY15E 37.03 43.12 53.85 61.40 12.16 13.87 17.96 20.97 16.43 19.08 24.40 28.46 13.95 17.48 18.35 21.42 10.89 13.75 14.09 16.40 14.51 18.32 18.78 21.86 NM NM NM NM 81.54 104.26 118.03 134.88 New TW GAAP P/E P/BV (x) ROE(%) Cash Div (NT$) Quarterly EPS (NT$) EPS (13) EPS (14) E EPS (15) E FY12 17.7 3.1 18.6 0.3 1Q 5.22 3.43 4.51
Previous: Neutral 2474.TW, 2474 TT Price: NT$256.50
Price Target: NT$330.00

Previous: NT$190.00
Taiwan Technology - Hardware William Chen

AC
(886-2) 2725-9871 william.chen@jpmorgan.com Bloomberg JPMA WCHEN <GO> J.P. Morgan Securities (Taiwan) Limited
James Wang
AC
(886-2) 2725-9875 james.p.wang@jpmorgan.com J.P. Morgan Securities (Taiwan) Limited
Alvin Kwock
(852) 2800-8533 alvin.yl.kwock@jpmorgan.com J.P. Morgan Securities (Asia Pacific) Limited
Abs Rel
YTD 30.2% 28.3%
1m 16.1% 15.1%
3m 27.0% 23.3%
12m 75.1% 65.7%
FY13 FY14E FY15E 14.0 13.7 11.7 2.5 2.2 1.9 19.7 16.9 17.3 0.3 0.3 0.2 2Q 3Q 4Q 4.84 3.69 4.56 3.68 5.23 6.44 4.59 5.74 7.02
Target Price (NT$) Price Target End Date Share Outstanding Free float Avg daily volume Avg daily val (USD) Dividend Yield (2014) QFII Holding (%) Market Cap(USD)
330 31-Dec-14 751mn 7.37mn 55.2mn 0.1% 50.0% 6,359mn
Source: Company data, Bloomberg, J. P. Morgan estimates. Note: In Net Debt/Equity, NM means company has net cash

29 April 2014
Changsha Zoomlion Heavy Industry

Lowering PT to HK$4.5, 1Q14 results missed expectations once again
1Q14 delivered one more big disappointment to the Street: Zoomlions 1Q14 NPAT came in at Rmb396MM, down 33% Y/Y, achieving only 8% of the Streets full-year estimate, despite a >10% earnings cut over the last one month since the release of its FY13 result. Zoomlion continued to struggle with margin contraction and negative OpCF: GP margin fell by 4.4ppts Y/Y during 1Q14 driven by margin erosion for its core productconcrete machinery as well as the unfavorable shift in product mix. As Zoomlion discontinued non-recourse receivable factoring since 2H13, it recorded a sharp cash outflow (of Rmb5B) from the operating activities (vs. an outflow of Rmb2.9B oya). The negative cashflow is worrisome to us, particularly given the slowdown in sales (-10% Y/Y) and the rise in down payment (now forming >20% of sales), suggesting the collection on existing receivables has been falling behind schedule. The only key positive is the stabilizing end-user working hours, but it may be still premature to call a bottom on end demand. Mgmt noted the working hours for concrete-mounted pumps and crane machinery stabilized at 70 hours and 174 hours in April, flat Y/Y, although end demand of these two products is mainly linked to property construction activities, for which we still see significant downside risk in a tight credit environment. Receivable balance continued to climb while the past due ratio remained stagnantly high: Ending receivable balance was at Rmb48B as of end-1Q14 (vs. Rmb46B as of end-2013), higher than its total equity. Mgmt noted at the call that the past due ratio remained high, similar to that as of end-2013 (25%). The company keeps its accounting policy for making loss provision equating to 4~5% of its receivable balance; the resulting impairment loss already offset c10% of its operating profit during the quarter; such a provision ratio however appears low in light of the persistent tight credit in China. Factoring in the poor 1Q14 result, we cut our EPS by 17~22% for FY14/15E, lowering our Dec-14 PT to HK$4.5: Our new forecast stands at 31%/43% below consensus. In light of significant earnings downside risk, we keep Neutral despite the stocks seemingly compelling valuation after a 40% correction in the last one year (vs. -8% HSCEI).
Changsha Zoomlion Heavy Industry (Reuters: 1157.HK, Bloomberg: 1157 HK) Rmb in mn, year-end Dec FY12A FY13A FY14E FY15E Revenue (Rmb mn) 48,071 38,542 38,763 40,555 Net Profit (Rmb mn) 7,330 3,844 3,241 3,049 EPS (Rmb) 0.95 0.50 0.42 0.40 DPS (Rmb) 0.20 0.15 0.13 0.12 Revenue growth (%) 3.8% (19.8%) 0.6% 4.6% EPS growth (%) (9.1%) (47.6%) (15.7%) (5.9%) ROCE 14.1% 6.1% 5.5% 5.4% ROE 19.2% 9.3% 7.6% 6.8% P/E (x) 4.3 8.1 9.6 10.2 P/BV (x) 0.8 0.8 0.7 0.7 EV/EBITDA (x) 4.7 10.1 10.2 9.4 Dividend Yield 4.9% 3.7% 3.1% 2.9%
Source: Company data, Bloomberg, J.P. Morgan estimates.
Neutral
1157.HK, 1157 HK Price: HK$5.02
Price Target: HK$4.50

Previous: HK$5.30
China Infrastructure & Industrial Karen Li, CFA

AC
(852) 2800-8589 karen.yy.li@jpmorgan.com Bloomberg JPMA KLI <GO> J.P. Morgan Securities (Asia Pacific) Limited
Price Performance
8.5 7.5 HK$ 6.5 5.5 4.5
Apr-13 Jul-13 Oct-13 Jan-14 Apr-14
1157.HK share price (HK$) HSI (rebased)
Abs Rel
YTD -29.5% -24.3%
1m -11.6% -11.9%
3m -19.6% -20.4%
12m -34.5% -32.5%
FY16E 41,945 3,213 0.42 0.12 3.4% 5.4% 5.4% 6.8% 9.7 0.6 8.7 3.1%
Company Data Shares O/S (mn) Market Cap (Rmb mn) Market Cap ($ mn) Price (HK$) Date Of Price Free Float(%) 3M - Avg daily vol (mn) 3M - Avg daily val (HK$ mn) 3M - Avg daily val ($ mn) HSI Exchange Rate Price Target End Date
7,706 31,197 4,990 5.02 28 Apr 14 10.40 58.91 7.6 2,2132.53 7.75 31-Dec-14

30 April 2014
2600.HK, 2600 HK
Chalco
1Q14 results miss - Losses to persist in 1H14
Neutral Price: HK$2.90
Price Target: HK$2.80 601600.SS, 601600 CH

Neutral Price: Rmb3.16
Price Target: Rmb3.70
Chalco posted a larger-than-expected 1Q14 loss. With aluminum remaining in oversupply, Chalco continues to struggle with its high-cost loss-making aluminum assets. While the company has idled 17% of aluminum capacity, we cut our FY14 forecast by 33% to reflect the weak start to the year. That said, we view Chalco as an event stock driven largely by restructuring efforts to regain profits. We expect the stock to remain range-bound and remain at Neutral. 1Q14 results miss. Chalco reported a 1Q14 net loss (CAS) of Rmb2.16bn. Excluding one-off items, the core net loss was Rmb2.23bn (+49% yoy, +185% qoq), representing 88%/73% of our estimates/consensus. While 1Q14 revenue was weaker than expected (-31% qoq vs. SHFE aluminum price -2% qoq), higher-than-expected production costs pushed gross margins lower, to 0.5% (1Q13: 2.1%, 4Q13: 2.4%). This offset cost-saving benefits from reduced SG&A. Chalcos balance sheet remains stretched with negative FCF (Rmn1.9bn), pushing net gearing up to 255% (237% at end2013). 1H14 to remain in losses. No specific guidance for 2014 was provided, but Chalco indicated that 1H14 will report a loss as industry overcapacity keeps prices depressed. While Chalco has idled high-cost aluminum output by 17% and alumina by 7%, 2QTD aluminum prices are 2% below the 1Q14 average (despite the recent rebound), suggesting a weak start to 2Q14. Aluminum remains our least preferred metal due to significant overcapacity. J.P. Morgan commodities research forecasts LME aluminum prices in a range of US$1,825-1,900/t (spot US$1,829/t). Keep Neutral rating, Dec-14 PT unchanged at HK$2.80. Following the weak 1Q, we cut our FY14 forecast by 33%, to Rmb3.5bn. We maintain our PT of HK$2.80, based on 0.7x P/B. Key risks include aluminum price moves, divestments and equity-raising.
Aluminum Corporation of China Limited (Reuters: 601600.SS, 2600.HK; Bloomberg: 601600 CH, 2600 HK) Rmb in mn, year-end Dec FY12A FY13A FY14E FY15E FY16E Revenue (Rmb mn) 143,437 169,431 136,401 141,462 157,060 Net Profit (Rmb mn) (8,234) 975 (3,490) (2,228) 886 Core Profit (Rmb mn) (8,219) (4,405) (3,490) (2,228) 886 EPS (Rmb) (0.61) 0.07 (0.26) (0.16) 0.07 Core EPS (Rmb) (0.61) (0.33) (0.26) (0.16) 0.07 Revenue growth (%) (1.7%) 18.1% (19.5%) 3.7% 11.0% EPS growth (%) (3559.9%) (111.8%) (457.8%) (36.2%) (139.7%) Core EPS growth (3553.7%) (46.4%) (20.8%) (36.2%) (139.7%) P/E (x) -A Share NM 43.8 NM NM 48.3 P/E (x) -H Share NM 32.4 NM NM 35.7 P/BV (x) -A Share 1.0 1.0 1.0 1.1 1.1 P/BV (x) -H Share 0.7 0.7 0.8 0.8 0.8 EV/EBITDA (x) 244.6 14.2 33.5 24.6 14.3 Dividend Yield -A Share 0.0% 0.0% 0.0% 0.0% 0.3% Dividend Yield -H Share 0.0% 0.0% 0.0% 0.0% 0.3%
China Metals Daniel Kang

AC
(852) 2800 8570 daniel.kang@jpmorgan.com Bloomberg JPMA KANG <GO>
Waiyin Karen Li, CFA

(852) 2800-8561 waiyin.karen.li@jpmorgan.com J.P. Morgan Securities (Asia Pacific) Limited
Price Performance
4 3 2 Apr-13 HK$
Jul-13 2600 HK
Oct-13
Jan-14 Apr-14 HSI Index (rebased)
Source: Bloomberg, J.P. Morgan. YTD 7.41 11.49 1m 9.02 7.14 3m 3.94 2.50 12m 0.69 1.26
Abs Rel
Shares O/S Market Cap Market Cap Price Date Of Price Free Float(%) 3M - Avg daily vol 3M - Avg daily val 3M - Avg daily val SSEA Exchange Rate Price Target End Date
A-shares H-shares 13,524 13,524 Rmb42,737 HK$39,221 $6,835 $5,059 Rmb3.16 HK$2.90 29 Apr 14 29 Apr 14 32.51 13.16 108.24 37.71 $17.3 $4.9 2115.18 2,2453.89 6.25 7.75 31-Dec-14 31-Dec-14

29 April 2014
China Longyuan Power Group Corp.

1Q2014 results ahead of estimates
1Q14 results beat: Longyuan announced its 1Q14 results overnight. Stripping away non-core items of Rmb 47MM (MTM losses on investments, net of tax), core net profits of ~Rmb 766MM represented >25% Y/Y growth and ~23% of full-year consensus numbers, ahead of consensus. The growth was mainly driven by: (1) higher revenue from wind power business (+17% Y/Y), (2) falling coal prices, (3) contributions from 2 x 1,000 new coal-fired units, and (4) lower general & administrative expenses. Revenue from wind power business (+17% Y/Y) grew faster than its power output (+9% Y/Y), as: (1) more wind output came from Southern China (Yunnan, Hainan, Fujian, Zhejiang, Jiangsu and Anhui) with higher tariff, and (2) internal power consumption rate decreased thanks to better wind farm management. Curtailment rate in 1Q14 was 14.7%, lower than 16.8% in 1Q13 but higher than 2013 full-year average (11.8%). Inner Mongolia, Gansu, Hebei and Shandong recorded falling curtailment, while Xinjiang and NE China recorded deteriorating curtailment. Maintenance expenses were not disclosed separately, but were slightly lower Y/Y in 1Q2014, as less maintenance was scheduled in 1Q2014. However, management did not elaborate on whether more maintenance expenses will be incurred in subsequent quarters. Specifically, maintenance expenses (per MWH of wind power output) accounted for 1.2% of total wind power opex, compared to 4% in 1H2013. No new wind capacity addition was made in 1Q14, but capacity addition expected to pick up in 2Q2014. Revenue from coal-fired power / coal trading business decreased by 20% Y/Y, mainly due to lower utilization and lower coal trading volume (down 25% Y/Y), but this was offset by lower fuel cost (down 15% Y/Y). Two 1,000MW thermal power plants under JV with Huaneng commenced operations in 1Q2104. Total net profit of RMB64MM was generated in 1Q14, of which RMB20MM was attributable to Longyuan (31% stake). Positive 6-12M: While uncertainty remains on the companys turbine maintenance expenses, we believe mgmnts prudent expansion plan and determination on efficiency improvement would lead the company to a much healthier market / financial position in the LT.
China Longyuan Power Group Corp. (Reuters: 0916.HK, Bloomberg: 916 HK) Rmb in mn, year-end Dec FY12A FY13A FY14E FY15E Revenue (Rmb mn) 17,288 19,123 21,957 25,115 Net Profit (Rmb mn) 2,593 2,049 3,332 4,378 EPS (Rmb) 0.35 0.26 0.41 0.54 DPS (Rmb) 0.07 0.05 0.08 0.11 Revenue growth (%) 4.2% 10.6% 14.8% 14.4% EPS growth (%) 0.3% (26.4%) 62.6% 31.4% ROCE 6.6% 5.7% 7.6% 8.5% ROE 9.4% 6.8% 10.3% 12.4% P/E (x) 19.7 26.8 16.5 12.6 P/BV (x) 1.7 1.8 1.6 1.5 EV/EBITDA (x) 12.6 11.9 9.8 8.5 Dividend Yield 1.0% 0.7% 1.2% 1.6%
Overweight
0916.HK, 916 HK Price: HK$8.48 Price Target: HK$9.30
China China wind Boris Kan

AC
(852) 2800-8573 boris.cw.kan@jpmorgan.com Bloomberg JPMA KAN <GO>
Elaine Wu
(852) 2800-8575 elaine.wu@jpmorgan.com J.P. Morgan Securities (Asia Pacific) Limited
Price Performance
11 9 HK$ 7 5
0916.HK share price (HK$) HSCEI (rebased)
Abs Rel
YTD -15.4% -6.6%
1m 4.3% 6.6%
3m -10.4% -10.5%
12m 17.8% 27.2%
FY16E 26,833 5,017 0.62 0.12 6.8% 14.6% 8.8% 12.8% 11.0 1.3 8.0 1.8%
Company Data Shares O/S (mn) Market Cap (Rmb mn) Market Cap ($ mn) Price (HK$) Date Of Price Free Float(%) 3M - Avg daily vol (mn) 3M - Avg daily val (HK$ mn) 3M - Avg daily val ($ mn) HSCEI Exchange Rate Price Target End Date
7,482 51,166 8,183 8.48 28 Apr 14 26.0% 22.81 197.07 25.4 9770.10 7.75 31-Dec-14

30 April 2014
Dongfang Electric Corporation Limited - H

1Q14 results in line
1Q14 results in line: Dongfang announced 1Q14 net profit of Rmb418MM (down by 12% Y/Y), largely in line with market expectations. 1Q14 profit represented ~20% of full-year consensus numbers, in line with 1Q13 (~20%). The Y/Y decline was mainly driven by falling gross margins (under PRC GAAP) across all segments, including (1) High Efficiency & Clean Energy segment (down 1.8% Y/Y), New Energy segment (down 6.4% Y/Y), Hydropower & Environment segment (down 0.7% Y/Y), and Construction & Services segment (down 3.6% Y/Y). But the margin decline was partly offset falling SG&A expenses (down 11% Y/Y). New orders in 1Q14 amounted to Rmb12.9B (+32% Y/Y), comprising high-efficiency clean energy (64%), new energy (22%), water energy & environmental protection (2%), and engineering & services (12%). Exports represented 5% of total new orders. Operating CF dropped to a negative position again in 1Q14 to -Rmb786MM (from Rmb134MM in 1Q13). This was mainly due to a decrease in repayments for products sold during the period. Maintain Neutral: We believe the stock is fairly valued at 9-10x 2014E EPS for a stock/sector with limited growth prospects. Analyst conference call will be held at 9:00am HK time on 30 April (Wednesday). China Dial-in No: 400 678 0218/ (010) 5851 1516. Hong Kong Dial-in No: (852)3005 1380. Passcode: 4030.
Neutral
China Industrial Machinery Boris Kan

AC
Elaine Wu
Price Performance
14 HK$ 12 10 8
1072.HK share price (HK$) H-SHARE (rebased)
Abs Rel
YTD -11.2% 1.1%
1m 1.3% 4.1%
3m 9.0% 12.1%
12m 13.1% 22.6%
Dongfang Electric Corporation Limited - H (Reuters: 1072.HK, Bloomberg: 1072 HK) Rmb in mn, year-end Dec FY11A FY12A FY13E FY14E FY15E Revenue (Rmb mn) 42,917 38,079 42,391 41,506 42,303 Net Profit (Rmb mn) 3,056 2,191 2,349 2,105 2,209 EPS (Rmb) 1.53 1.09 1.17 1.05 1.10 DPS (Rmb) 0.16 0.11 0.18 0.16 0.17 Revenue growth (%) 12.7% (11.3%) 11.3% (2.1%) 1.9% EPS growth (%) 18.6% (28.3%) 7.2% (10.4%) 4.9% ROCE 26.1% 16.9% 16.1% 13.3% 13.1% ROE 24.6% 14.9% 14.1% 11.2% 10.6% P/E (x) 6.4 8.9 8.3 9.3 8.8 P/BV (x) 1.4 1.2 1.1 1.0 0.9 Dividend Yield 1.6% 1.2% 1.8% 1.7% 1.7%
Company Data Shares O/S (mn) Market Cap (Rmb mn) Market Cap ($ mn) Price (HK$) Date Of Price Free Float(%) 3M - Avg daily vol (mn) 3M - Avg daily val (HK$ mn) 3M - Avg daily val ($ mn) H-SHARE Exchange Rate Fiscal Year End
2,004 19,521 3,122 12.08 29 Apr 14 1.96 23.61 3.0 1,3536.02 7.75 Dec

29 April 2014
Doosan Heavy Industries & Construction

In-line operating result: expectations rise for new orders and bottoming out of subsidiaries' earnings
In-line 1Q14 operating earnings but miss on NP DHI posted overall in-line
1Q14 result on operation side, with OP coming 5% better than consensus estimate. However, net profit largely fell short, due to higher tax rate.
Overweight
034020.KS, 034020 KS Price: W34,750
Price Target: W45,000

Previous: W49,000
South Korea Korean Autos Wan Sun Park

AC
Divisional margin trend For Doosan Heavy, continuous delay in new orders
took toll on profitability of key segments. OP margin for power and water declined y-y, as delayed new order reduced revenue while raising fixed cost burden. However, casting/forging/construction saw operating deficit shrink y-y, which supported overall margin. On a consolidated basis, OPM recovered to 4.9% from 4.5% a year ago, driven by improvement on DIC and Doosan E&C. 1Q14 new order intake of W800B vs. W10T guidance maintained - Weak new orders is mainly due to delay in Shingori #5/6 project. Despite some delay in 1Q14, we continue to believe W9T new order is doable for full year, given recurring new orders of W5T and high-visibility rollover projects of W4T from 2013 (Shingori #5/6 and Vietnam EPC). Possibility of resumed overseas nuclear order (Finland, Saudi, and UAE for the next 1 year) is also highlighted with potential upside risk to new orders. Subsidiaries earnings outlook bottoming out We expect stronger earnings momentum from affiliates will likely offset the negatives. We see DIC to gain momentum on the back of turnaround in China/Europe and cost cutting. Doosan E&C is also turning around, driven by strong growth in HRSG business, while volatilities from housing projects are declining. Also, we expect a gradual recovery in Doosan Engine, driven by strong order flow throughout 2H13-1Q14. Maintain OW and lower Dec-14 PT to W45,000 At the beginning of the year, management shared strong conviction in new order target of W10.2T. Delays in new orders has led to sideway movements in the share price. We think weak share price sentiment can bottom out, as (1) long awaited new orders are expected to come gradually; (2) subsidiaries earnings (which has been one of major concerns for Doosan Heavy) are recovering. We newly set up consolidated financials, which leads to change in our PT method from SoTP to EV/EBITDA (9.3x on 1-yr forward EBITDA).
Doosan Heavy Industries & Construction (Reuters: 034020.KS, Bloomberg: 034020 KS) Year-end Dec FY12A FY13A FY14E FY15E FY16E Revenue (W bn) 21,274 19,208 19,281 19,947 21,887 Operating Profit (W bn) 586 958 943 1,134 1,369 Net Profit (W bn) 43 69 68 128 230 EPS (W) 478 777 765 1,436 2,583 Revenue growth 150.4% (9.7%) 0.4% 3.5% 9.7% Operating Profit growth 11.4% 63.5% (1.5%) 20.2% 20.7% EPS growth (84.4%) 62.6% (1.7%) 87.8% 79.9% ROA 0.2% 0.2% 0.2% 0.5% 0.8% ROE 1.0% 1.6% 1.4% 2.6% 4.3% P/E (x) 72.7 44.7 45.5 24.2 13.5 P/BV (x) 0.6 0.5 0.5 0.4 0.4 EV/EBITDA (x) 10.2 7.2 7.2 6.1 5.2
(82-2) 758-5722 wansun.c.park@jpmorgan.com Bloomberg JPMA WPARK <GO>
Sangmyeong Kim
(82-2) 758 5710 sangmyeong.kim@jpmorgan.com J.P. Morgan Securities (Far East) Ltd, Seoul Branch
Price Performance
48,000 44,000 W 40,000 36,000 32,000
034020.KS share price (W) KOSPI (rebased)
Abs Rel
YTD 1.0% 1.1%
1m -2.3% -1.5%
3m -5.2% -6.4%
12m -11.9% -13.1%
Company Data 52-week Range (W) Market Cap (W bn) Market Cap ($ mn) Shares O/S (mn) Fiscal Year End Price (W) Date Of Price Free Float(%) 3M - Avg daily vol (mn) 3M - Avg daily val (W bn) 3M - Avg daily val ($ mn) KOSPI Exchange Rate Price Target End Date
48,000-31,700 3,689 3,563 106 Dec 34,750 29 Apr 14 36.5% 0.42 14.76 14.3 1964.77 1,035.25 31-Dec-14

29 April 2014
GS Engineering & Construction

1Q14 results: Modest recovery and cautious order taking
GS E&C reported a positive gross margin of 2.5%, mainly led by its plant engineering (5.8%) and domestic housing business (3.7%). Most figures were in line with market expectations, and GS E&C reiterated its 2014E guidance of W160bn OP (OPM 1.5%). Its new stock issuance this June (20mn shares and 39% of outstanding stocks) will improve its financial stability, but it is EPS dilutive. We maintain our Underweight rating, with a new W27,000 PT based on 8x 2015E EPS, reflecting 28% EPS dilution. Our target EPS is now 2015E, from avg 2014-15 before. Figures in line. GS E&C showed modest recovery of its business with 2.5% GP margin, W18bn operating loss and W36bn net loss. Since the big bath in 1Q13, the company has shown a gradual earnings recovery. 2014 guidance at W160bn positive OP. GS E&C guided W10.6bn revenue, W160bn OP in 2014E with cost saving in its SG&A. The company used to spend W556~644bn on SG&A and aims at a c.W100bn reduction. As for new orders, it achieved W5.0tn in 1Q14 vs. its yearly target of W14tn. The company emphasized that its focus on order biddings is securing profitability, not volume. W550bn stock issuance: improved financial stability but EPS dilutive. Its net debt increased by W446bn to W2,827bn in 1Q14 from 2013. New stock issuance this June (20mn shares, 39.2% of existing stock) will invite cash inflow of W550bn (assuming W27,600 per share issuance) and improved financial stability. However, we need to consider 28% dilution of EPS impact from the issuance. Stabilized but not attractive yet, maintain Underweight. We lower our PT to W27,000 reflecting 28% dilution of EPS; our price target is based on 8.0x 2015E EPS. Key upside risks include successful overseas order wins, faster-than-expected recovery of domestic housing market.
GS Engineering & Construction (Reuters: 006360.KS, Bloomberg: 006360 KS) Year-end Dec FY13A FY14E FY15E Revenue (W bn) 9,566 10,454 11,431 Operating Profit (W bn) (935) 152 364 Net Profit (W bn) (828) 185 240 EPS (W) -16,239 2,612 3,376 BVPS (W) 56,156 52,090 55,480 Revenue growth (0.0%) 9.3% 9.3% EPS growth (1059.4%) (116.1%) 29.3% ROE (25.5%) 5.7% 6.3% P/E (x) NM 13.5 10.5 P/BV (x) 0.6 0.7 0.6 EV/EBITDA (x) NM 13.0 6.7 Dividend Yield 0.0% 0.0% 0.0% ROA (6.8%) 1.5% 2.0%
Underweight
006360.KS, 006360 KS Price: W35,300

Previous: W29,000
South Korea Construction Sokje Lee

AC
(82-2) 758-5729 sokje.lee@jpmorgan.com Bloomberg JPMA SOKJELEE <GO>
Minsung Lee
(822) 758-5728 minsung.lee@jpmorgan.com J.P. Morgan Securities (Far East) Ltd, Seoul Branch
Price Performance
42,000 38,000 W 34,000 30,000 26,000
Abs Rel
YTD 16.1% 16.2%
1m -1.4% -0.6%
3m 4.9% 3.7%
12m 20.5% 19.3%
FY16E 11,796 417 277 3,897 59,391 3.2% 15.4% 6.8% 9.1 0.6 4.8 0.5% 2.2%
Company Data Shares O/S (mn) Market Cap (W bn) Market Cap ($ mn) Price (W) Date Of Price Free Float(%) 3M - Avg daily vol (mn) 3M - Avg daily val (W bn) 3M - Avg daily val ($ mn) KOSPI Exchange Rate Price Target End Date Price Target (W)
51 1,800 1,739 35,300 29 Apr 14 77.3% 1.01 32.20 31.1 1964.77 1,035.25 31-Dec-14 27,000
Source: Company data, Bloomberg, J.P. Morgan estimates. Net profit, EPS and ROE based on owners' net income; BVPS based on owners of parent equity. FY14E-16E estimates based on 71mn O/S shares (after paid-in capital increase).

30 April 2014
Holcim Indonesia
1Q14: better than expected margin gives solid base for FY14
Holcim 1Q14 core EPS (ex forex gain of Rp172bn) was Rp26 vs our estimate of Rp16 due to its operating leverage from non-cement and Malaysia operation. We maintain our OW call with Rp3,100 Jun15 price target. Stock went up 5% on the back of the result and as a result has outperformed the index by 9% YTD. Margin came above estimate. Three key differences in 1Q14 result vs. our estimate were 1) Higher revenue by 6% due to better than expected Malaysia cement sales 2) Higher GPM of 34% vs. 31% (and therefore net margin) due to inventory and 3) Lower depreciation level as new plant hasnt been fully expensed. Given that its cost of cement production was above our estimate, our margin estimates are relatively flat to FY13 as we believe that key costs such as depreciation and electricity tariff hike will start kicking in in the 2Q. However, due to higher 1Q revenue, we adjusted our earnings by 7% in FY14-16. Upward revision is imminent. We think the result will give market comfort especially as margin typically improves from the low of 1Q operations onward. Managements suggestion that it plans to maintain its operating margin vs. FY13 which now looks more achievable to us. SMCB also still has new plant capacity that is yet to be reflected in 1Q14 that could push its top line growth and therefore create further operating leverage. We expect some upward revision to consensus numbers following this result.
Overweight
SMCB.JK, SMCB IJ Price: Rp2,840 Price Target: Rp3,100
Indonesia Indonesia Materials & Mining Lydia J Toisuta

AC
(62-21) 5291-8316 lydia.j.toisuta@jpmorgan.com PT J.P. Morgan Securities Indonesia
Daniel Kang
(852) 2800 8570 daniel.kang@jpmorgan.com J.P. Morgan Securities (Asia Pacific) Limited
Aditya Srinath, CFA

(62-21) 5291-8573 aditya.s.srinath@jpmorgan.com PT J.P. Morgan Securities Indonesia
Price Performance
4,000 3,500 Rp 3,000 2,500 2,000
SMCB.JK share price (Rp) JCI (rebased)
Valuation is on solid fundamentals. We continue using blended average valuation of EV/EBITDA, P/E and P/B-ROE as our fair price methodologies. The key risk to our price target is lower ASP growth and Rupiah depreciation. While YTD stock price has been event driven, we think fundamental data of good 1Q14 earnings and strong Mar14 volume, which have shown some solid ground, could sustain current valuation.
Abs Rel
YTD 22.2% 9.4%
1m -2.9% -1.8%
3m 31.5% 22.4%
12m -22.2% -18.6%
Holcim Indonesia (Reuters: SMCB.JK, Bloomberg: SMCB IJ) Rp in bn, year-end Dec FY11A FY12A FY13A Revenue (Rp bn) 7,524 9,011 9,686 Net Profit (Rp bn) 1,078 1,399 1,313 EPS (Rp) 140.64 182.55 171.34 DPS (Rp) 46.00 46.00 48.00 Revenue growth (%) 26.2% 19.8% 7.5% EPS growth (%) 37.1% 29.8% (6.1%) ROCE 13.1% 15.7% 12.9% ROE 15.0% 17.6% 15.3% P/E (x) 20.2 15.6 16.6 P/BV (x) 2.9 2.6 2.5 EV/EBITDA (x) 6.4 7.0 9.7 Dividend Yield 1.6% 1.6% 1.7%
FY14E 10,658 1,199 156.46 55.91 10.0% (8.7%) 10.2% 13.0% 18.2 2.3 7.8 2.0%
FY15E 12,041 1,442 188.12 76.43 13.0% 20.2% 11.0% 14.3% 15.1 2.1 6.2 2.7%
Company Data Shares O/S (mn) Market Cap (Rp bn) Market Cap ($ bn) Price (Rp) Date Of Price Free Float(%) 3M - Avg daily vol (mn) 3M - Avg daily val (Rp mn) 3M - Avg daily val ($ mn) JCI Exchange Rate Price Target End Date
7,663 21,762.64 1.88 2,840 29 Apr 14 3.28 8,072.51 0.7 4819.68 11,587.49 30-Jun-15

30 April 2014
Idea Cellular Limited

Exiting FY14 on a nice note; all signs point to a healthy FY15; stay OW
Idea continues its strong show (in 4QFY14) with consistent subscriber/ revenue market share gains, healthy revenue growth, accelerated data growth & meaningful EBITDA margin expansion. In Mar-14 quarter, Ideas operational performance remained solid across the board excluding the decline in ARPMs. Management suggests that the decline is primarily due to traffic-mix shift toward Northern & Eastern circles, where Idea is not a dominant player and price realization & the proportion of outgoing calls is relatively low. Management asserted that ARPM expansion will continue in FY15. Idea has been the best operational play over the last several quarters, which we believe will continue. However, an increase in competitive intensity due to Reliance Jios entry into voice market remains the medium- to long-term risk to our positive stance on Idea. Good operational performance with higher-than-expected minutes growth. Idea reported Q/Q revenue growth of 6.5% Q/Q in 4QFY14, meaningfully ahead of our & consensus estimates of 6.0% and 5.1%, respectively. In 4QFY14, Idea reported 8.6% Q/Q increase in total minutes traffic, 5.6% improvement in MoUs, 77% Y/Y data revenue growth, meaningful moderation in subscriber churn, 31% increase in data traffic and healthy margin expansion of 60 bps all the metrics except for ARPM turned out solid. Management provided comforting explanation for ARPM contraction in the quarter - the only weak point. Also, the company continues to invest for footprint expansion (for both 2G & 3G), which will likely support growth in the coming quarters. Hence, we expect Idea to continue its impressive performance in FY15. Added balance sheet pressure due to spectrum renewal & Reliance Jios entry remain key risks. Idea's spectrum ownership in 7 circles is due to expire in the next two years. Idea holds meaningful 900 MHz spectrum in these circles, the price of which will likely be determined/discovered over the next few quarters. The cash outflow to retain its existing spectrum might impact Idea's balance sheet; Leverage metrics needs watching. On account of higher leverage, we revise downwards our FY15/FY16 EPS for Idea by 13%/11%. Investment view: We stay OW on Idea, given its sustained impressive performance, market share gain prowess in a consolidating market and relatively healthy (vs. peers) balance sheet. We see Ideas financials improving on both counts: margins & consistent market share gains. That said, we admit Reliance Jios imminent entry has the potential to disrupt the Indian telecom industry and remains the key risk for our Idea rating and price target. But we see that as potentially a medium- to long-term threat.
Idea Cellular Limited (Reuters: IDEA.BO, Bloomberg: IDEA IN) Rs in mn, year-end Mar FY12A FY13A FY14A Revenue (Rs mn) 195,411 224,577 265,189 EBITDA (Rs mn) 50,923 60,045 83,337 EBITDA Margin 26.1% 26.7% 31.4% Net Profit (Rs mn) 7,229 10,109 19,678 Adjusted EPS (Rs) 2.18 3.05 5.93 Adjusted EPS growth (%) (19.7%) 39.6% 94.3% EV/EBITDA (x) 11.1 9.9 7.9 P/E (x) 64.3 46.0 23.7 FCF to mkt cap (%) (3.0%) 7.5% (16.3%) ROE 5.7% 7.4% 12.8% Net Debt/EBITDA 2.0 2.1 2.3
Overweight
IDEA.BO, IDEA IN Price: Rs140.45 Price Target: Rs170.00
India Technology, Software & IT services Viju K George

AC
(91-22) 6157-3597 viju.k.george@jpmorgan.com Bloomberg JPMA VGEORGE <GO> J.P. Morgan India Private Limited
Amit Sharma
(91-22) 6157 3598 amit.d.sharma@jpmorgan.com J.P. Morgan India Private Limited
James R. Sullivan, CFA

(65) 6882-2374 james.r.sullivan@jpmorgan.com J.P. Morgan Securities Singapore Private Limited
Price Performance
200 180 Rs 160 140 120 100
IDEA.BO share price (Rs) NIFTY (rebased)
Abs Rel
YTD -16.4% -24.0%
1m 3.8% 0.9%
3m -7.9% -16.1%
12m 20.6% 6.0%
FY15E 302,245 97,043 32.1% 23,319 7.02 18.5% 6.7 20.0 4.8% 13.2% 1.9
FY16E 340,077 110,958 32.6% 30,192 9.09 29.5% 5.7 15.4 5.4% 14.8% 1.5
Company Data 52-week Range (Rs) Market Cap (Rs mn) Market Cap ($ mn) Shares O/S (mn) Free Float(%) 3M - Avg daily vol (mn) 3M - Avg daily val ($ mn) NIFTY Exchange Rate Price (Rs) Date Of Price
188.40-115.40 464,728 7,663 3,309 30.5% 6.17 13.9 6761.25 60.65 140.45 25 Apr 14

30 April 2014
LG Innotek
Upbeat 1Q14 result and 2Q14 guidance; all product segments see strong momentum; reiterate OW
LGI reported a robust 1Q14 result on all fronts. Management comments on 2Q14s outlook also appear quite upbeat across almost all product segments, with revenue guided to rise by mid-single digits and OPM staying flat to 1Q14 (see our preview note). We remain confident in our OW thesis of an LED up-cycle and ASP/margin hike in camera module business to serve as dual engines to LGIs 60%+ CAGR OP growth from 2013-15E. We recommend investors accumulate the shares on any weakness. Depreciation about to end for 2009-10 LED capacity Management expects overall top line and margin to improve and plans to focus on improving product mix (lighting portion close to 35-40%). Management also guided for lighting sales to reach W400bn annual target. This is in line with our long-standing view on LED up-cycle. It is worth noting the capacity built during 2009-10 would be fully depreciated during 2014-15 (five-year straight line); hence, reducing LGIs fixed-cost burden significantly. More evidence of Camera Module ASP hikes 8MP and above represented as much as ~80% of camera module sales during 1Q14, up from ~50% a year ago. Aside from continuous pixel migration, if new smartphone models sport OIS, the camera module ASP will rise by 20%+ for every unit. We expect to see further ASP hike, volume increase, and margin expansion for LGI's camera module segment, which supports our robust earnings growth assumption. Raise estimates and PT: We raise our 2014-15 NP/OP estimates to reflect stronger-than-expected OP across all product segments. With the changes, our OP and NP remain well above the Street. We raise our Dec-14 PT to W130,000, based on applying the historical trailing 12month P/BV of 1.7x (where ROE reached the same level as our 2014 ROE forecast) to 2014E diluted BPS. If ROE continues to expand beyond 2014, we believe the valuation multiple will continue to expand.
Bloomberg 011070 KS, Reuters 011070.KS (YE Dec, W bn) FY12 FY13 Sales 5,316 6,212 Operating Profit 75 136 EBITDA 547 665 Net profit -25 16 EPS -1,241 771 BPS (W) 62,878 65,287 P/E (x) NM 145.4 P/BV (x) 1.8 1.7 ROE (%) -1.9 1.2 Net Debt 1,815 1,761 FY15E 7,745 Sales growth 362 OP growth 951 NP growth 219 Quarterly EPS (W) 10,842 EPS (13) 74,472 EPS (14) E 12.0 EPS (15) E 1.5 Price Target 14.7 Consensus PT 1,340 Difference (%) Price Target End Date Source: Company data, Bloomberg, J.P. Morgan estimates. FY14E 6,953 289 841 142 7,049 72,735 18.4 1.5 10.2 1,594 FY12 16.8% NM NM 1Q -409 813 1,736 130,000 107,427 21.0 31-Dec-14 FY13 16.8% 80.6% NM 2Q 342 1,776 2,493 FY14E 11.9% 112.5% 814.9% 3Q 1,375 2,226 3,439
Overweight
011070.KS, 011070 KS Price: W112,000

Previous: W120,000
South Korea Technology - Semiconductors Narci Chang

AC
(886-2) 2725-9899 narci.h.chang@jpmorgan.com Bloomberg JPMA NCHANG <GO> J.P. Morgan Securities (Taiwan) Limited
JJ Park
Jay Kwon
(82-2) 758-5725 jay.h.kwon@jpmorgan.com J.P. Morgan Securities (Far East) Ltd, Seoul Branch
Abs Rel
YTD 34.8% 34.9%
1m 12.0% 12.8%
3m 31.8% 30.6%
12m 26.7% 25.5%
FY15E Date of Price 11.4% 52-Week range 25.0% Market Cap 53.8% Market Cap 4Q Share Out. (Com) -624 Free float 2,235 Avg daily val 3,173 Avg daily val (US$) Avg daily vol. Dividend yield (%) Exchange Rate
29 Apr 14 W$117,500-74,200 W2,258,816BN US$2,182MN 20MN 46.6% W13.7B 13.2MM 0.1MM shares 0.0 1,035.3

29 April 2014
L'Occitane International SA
4Q14 sales update - Japan consumption bringforward, currency headwinds remain
LOccitane reported FY14 SSSG of +3.7% vs. JPMf +1.2%. However, reported sales were in line with JPMf. 4Q14 SSSG was supported by strong sales from Japan (4Q14 SSSG +10% vs. 3Q14 -0.7%). We believe this was a function of a bring-forward of consumption in anticipation of the consumption tax hike in April 2014. We reduce earnings forecasts due to FX movements and lower growth expectations out of HK, France, the U.K. and the U.S. Reported FY14 sales in line with JPMf, implying likely reduction in consensus FY14 earnings forecasts. LOccitane reported FY14 SSSG of +3.7% (vs. JPMf +1.2%). Constant-currency sales grew 9.4% (vs. JPMf +8.8%). However, reported sales grew 1.1%, to 1,055m, in line with JPMf. Prior to the release of this result, our sales forecasts were ~3% below consensus and our NPAT forecasts were ~6% below consensus. Hence, we expect consensus earnings forecasts for FY14 to decline following this release. Strong 4Q14 sales in Japan, although we expect this to normalise somewhat in 1Q15. 4Q14 SSSG was supported by strong sales from Japan with the company indicating 4Q14 SSSG of 10-15% (JPMf +10%). This was partly a function of a bring-forward of consumption in anticipation of the consumption tax rate hike in April 2014, as well as strong execution. Mainland China and Brazil also strong in 4Q, although HK, France, the U.K. and the U.S. weakened. 4Q14 was supported by strong sales out of Mainland China (4Q14 SSSG +11.9%) and Brazil (4Q14 SSSG +58.7%); both were aided by a low base in the comparable period (China 4Q13 SSSG -1%, Brazil 4Q13 SSSG -26%), as well as improved execution. However HK, France, the U.K. and the U.S. weakened. HK weakened as a result of weaker tourist arrivals and weaker macro. Management expects France to remain challenged and forecasts some improvement in the U.K. The U.S. was impacted by adverse weather in Jan-Feb, and the company remains cautious. We reduce earnings forecasts due to FX movements and lower growth expectations out of HK, France, the U.K. and the U.S. Following this release, we reduce our FY15 forecasts by ~3% to reflect updated currency assumptions, given the recent movement in currency, and lower sales growth assumptions in HK, France, the U.K. and the U.S.
L'Occitane International SA (Reuters: 0973.HK, Bloomberg: 973 HK) in mn, year-end Mar FY12A FY13A FY14E Revenue ( mn) 913 1,043 1,055 Net Profit ( mn) 121 123 97 EPS () 0.08 0.08 0.07 Recurring EPS () 0.08 0.08 0.07 DPS () 0.02 0.03 0.02 Revenue growth (%) 18.3% 14.2% 1.1% Net Profit growth (%) 21.8% 1.3% (21.1%) Recurring profit growth 22.5% 1.2% (21.2%) EPS growth (%) 20.2% 1.6% (21.2%) ROE 20.0% 17.8% 13.3% ROA 14.3% 12.6% 9.0% P/E (x) 21.5 21.2 26.9 P/BV (x) 4.0 3.5 3.6 EV/EBITDA (x) 12.9 12.1 13.6 Dividend Yield 1.4% 1.7% 1.3%
Neutral
Hong Kong Specialty Retailing Shen Li, CFA

AC
(852) 2800 8523 shen.w.li@jpmorgan.com Bloomberg JPMA SHLI <GO>
Ebru Sener Kurumlu

(852) 2800-8521 ebru.sener@jpmorgan.com
Henry Tan
(852) 2800-8559 henry.wd.tan@jpmorgan.com J.P. Morgan Securities (Asia Pacific) Limited
Price Performance
24 22 HK$ 20 18 16 14
Abs Rel
YTD 15.2% 18.9%
1m 3.1% 1.3%
3m 20.3% 18.9%
12m -15.2% -14.6%
FY15E 1,104 110 0.07 0.07 0.03 4.7% 13.2% 13.3% 12.9% 14.3% 9.5% 23.8 3.2 12.7 1.6%
FY16E 1,220 127 0.09 0.09 0.03 10.5% 15.8% 15.8% 15.8% 15.0% 10.1% 20.6 2.9 10.9 1.8%
Company Data Shares O/S (mn) Market Cap ( mn) Market Cap ($ mn) Price (HK$) Date Of Price Free Float(%) 3M - Avg daily vol (mn) 3M - Avg daily val (HK$ mn) 3M - Avg daily val ($ mn) HSI Exchange Rate Price Target End Date Price Target (HK$)
1,455 2,575 3,566 19.00 29 Apr 14 30.6% 1.90 32.96 4.3 2,2453.89 7.75 30-Mar-15 18.40

30 April 2014
MGM China Holdings Ltd

1Q result in-line; Mass market and yield focused optimization as growth drivers
MGM China (MGM) reported a 1Q property EBITDA (ex-branding fee) of USD257mn, in-line with our expectation, up 8% qoq. The good result mainly comes from strong mass growth, better luck factor, margin expansion due to favorable revenue mix and operating leverage, and tight cost control. Trading at an undemanding 16x FY14E P/E, with a sustainable 4.5% yield, a growth option from the future Cotai project (to be opened in 2016), and further development of high-margin fast-growing mass market operations, we continue to like MGM China and maintain OW with TP unchanged at HK$38.5. Performance by segment. VIP: Rolling chips volume was down by 13% qoq with favorable VIP win rate at 3.0% (4Q13: 2.8%). Mass & Slot: Total mass revenue is up significantly by 21% qoq vs. industry average of 6% qoq from continued table efficiency improvement as well as a low base from partial impact by Wynns mass market initiatives last quarter. Slot revenue was up 10% qoq (vs. industrys +5%). Margin: EBITDA (ex-branding fee) margin expanded to 27.5%, from 25.9% in 4Q due to: 1) more favorable win rate in 1Q, 2) better revenue mix from significant mass revenue growth than VIP revenue growth, and 3) operating leverage improvement. Mass market growth and yield enhancement are the medium-term drivers. In spite of capacity constraints and intense competition from Cotai, MGM continues to deliver strong EBITDA growth from efficiency enhancement and table yield management efforts. Management have mentioned that detailed customer database building and yield focused optimization initiatives are being executed at MGM Macau. We believe industry-wide robust mass revenue growth and MGM-specific yield-focused optimization efforts (table allocation between VIP and mass/within mass segment, yield management tailored for targeted customer groups, gaming space and non-gaming facility upgrade) will be the medium-term growth drivers before its Cotai property opens in 2016.
Overweight
Hong Kong Regional Gaming Cusson Leung

AC
(852) 2800-8526 cusson.leung@jpmorgan.com Bloomberg JPMA LEUNG <GO>
Daisy Lu
AC
(852) 2800-8593 daisy.y.lu@jpmorgan.com J.P. Morgan Securities (Asia Pacific) Limited

Price Performance
40 35 HK$ 30 25 20 15
Abs Rel
YTD -18.4% -14.7%
1m -0.9% -2.7%
3m -12.6% -14.0%
12m 48.4% 49.0%
Other updates: Cotai progression on track with capex spent in 1Q amounting to US$107mn. Maintain OW, TP unchanged at HK$38.5.
MGM China Holdings Ltd (Reuters: 2282.HK, Bloomberg: 2282 HK) HK$ in mn, year-end Dec FY11A FY12A FY13A Revenue (HK$ mn) 20,293 21,773 25,727 EBITDA (HK$ mn) 4,933 5,309 6,366 Net Profit (HK$ mn) 3,279 4,530 5,334 EPS (HK$) 0.86 1.19 1.40 DPS (HK$) 0.82 1.02 1.51 ROE 111.2% 87.7% 85.9% P/E (x) 31.3 22.7 19.2 Dividend Yield 3.0% 3.8% 5.6% EV/EBITDA 20.5 18.7 15.5 EBITDA Margin 24.3% 24.4% 24.7%
FY14E 28,947 7,460 6,435 1.69 1.25 87.6% 15.9 4.6% 13.5 25.8%
FY15E 32,742 8,295 7,204 1.90 1.20 75.7% 14.2 4.4% 12.6 25.3%
Company Data 52-week Range (HK$) Market Cap (HK$ mn) Market Cap ($ mn) Shares O/S (mn) Price (HK$) Date Of Price 3M - Avg daily vol (mn) 3M - Avg daily val (HK$ mn) Exchange Rate HSI Price Target End Date Price Target (HK$)
35.04-17.25 102,600 13,234 3,800 27.00 29 Apr 14 5.25 158.45 7.75 2,2453.89 31-Dec-14 38.50

29 April 2014
Sesa Sterlite
4QFY14: Broadly in line quarter, with Aluminum delivering large beat; Small debt reduction a positive signal
SSLT reported broadly in line EBITDA at Rs67bn and a large adjusted PAT beat (Rs18bn). Post merger, SSLT continues to benefit from its diversified earnings stream, as the weakness in India zinc, iron ore and power was offset by strong aluminum, zinc international oil, and copper smelting segments. The aluminum operations delivered a strong beat and with LME prices rising, earnings should continue to improve even as we would highlight that SSLT is effectively operating at ~34% utilization. Gross debt declined by Rs34bn, and while the quantum is small (~4%), we view this as a positive signal. While FY15E is likely to be a muted year at two of its key segments- zinc and oil - earnings should remain strong at aluminum and copper, while power should pick up from here. We remain OW with a revised PT of Rs265/share as we roll forward our PT to FY16E. We reduce FY15-16E EPS estimates by 8-5% on lower zinc & oil vols. Aluminum operations deliver a strong beat with multi quarter high EBITDA: The key highlight for the quarter was the ~53% y/y increase in ally EBITDA (Rs5.3bn), even as volumes were broadly flat. CoP at Jharsuguda was at multi year lows (Rs95K in Q4). Going forward, we expect earnings to further pick up from here. Zinc international benefited from inventory sales and management expects flat volumes in FY15. Copper remained strong given elevated Tc/Rc and FY15 should be another strong year. Power earnings came off sharply: Power EBITDA fell ~80% q/q with lower sales and ASP/unit and also Rs2.2bn provision related to tariff dispute. SSLT expects to ramp up the Talwandi Sabo unit in FY15. Zinc India & Oil guidance for FY15E disappointing: Our earnings cut for FY15 is essentially driven by lower volumes at Zinc India and the oil unit. We have subsequently also reduced FY16 volume growth estimates. Debt reduction even as SSLT declares Rs3.25/share DPS: SSLT reported gross debt reduction of Rs34bn q/q which is all the more positive given dividend of Rs9.6bn. One of investors key concerns has been the perceived cash mismatch-hence the gross debt pay down is positive. The capex plan (ex zinc and oil) is muted at ~$250mn which should allow for further debt reduction. FY15 could be a key year for non operational events: We expect the Govts stake sale process in the zinc sub to pick up pace given stressed fiscals. An improvement in the regulatory climate would be positive given the sunken investment in aluminum and power. Key risk is a decline in zinc/oil prices.
Sesa Sterlite (Reuters: SESA.NS, Bloomberg: SSLT IN) Rs in mn, year-end Mar FY12A FY13A FY14E Net Sales (Rs mn) 544,762 557,119 529,422 Net Profit (Rs mn) 61,426 103,895 58,495 EPS (Rs) 20.72 35.04 19.73 Net Profit growth (%) 69.1% (43.7%) ROE 20.1% 15.9% 8.2% P/E (x) 9.3 5.5 9.8 P/BV (x) 0.9 0.8 0.8 EV/EBITDA (x) 4.6 5.8 5.6
Overweight
SESA.NS, SSLT IN Price: Rs193.15
Price Target: Rs265.00

Previous: Rs240.00
India Metals & Mining Pinakin Parekh, CFA

AC
(91-22) 6157-3588 pinakin.m.parekh@jpmorgan.com Bloomberg JPMA PAREKH <GO> J.P. Morgan India Private Limited
Dinesh S. Harchandani, CFA

(91-22) 6157-3583 dinesh.x.harchandani@jpmorgan.com J.P. Morgan India Private Limited
Neha Manpuria
(91-22) 6157-3589 neha.x.manpuria@jpmorgan.com J.P. Morgan India Private Limited
Daniel Kang
(852) 2800 8570 daniel.kang@jpmorgan.com J.P. Morgan Securities (Asia Pacific) Limited
Price Performance
220 200 Rs 180 160 140 120
SESA.NS share price (Rs) BSE30 (rebased)
Abs Rel
YTD -4.4% -11.7%
1m 5.6% 2.7%
3m -3.4% -10.8%
12m 24.5% 7.5%
FY15E 635,661 90,059 30.37 54.0% 11.7% 6.4 0.7 4.3
FY16E 688,217 93,732 31.61 4.1% 11.2% 6.1 0.7 3.8
Company Data 52-week Range (Rs) Market Cap (Rs mn) Market Cap ($ mn) Price (Rs) Date Of Price 3M - Avg daily vol (mn) 3M - Avg daily val ($ mn) BSE30 Price Target End Date Price Target (Rs)
213.30-119.30 572,690 9,443 193.15 28 Apr 14 6.40 19.7 2,2466.19 31-Dec-14 265.00

30 April 2014
Shanghai Electric Group Company Limited

1Q 2014 earnings a slight miss
1Q14 results missed slightly: Shanghai Electric announced 1Q14 net profit of Rmb670MM (+1% Y/Y). 1Q14 net profit represented ~25% of the full-year consensus number, slightly lower than in 1Q13 (28%). Specifically, the companys gross margin improved to 21.0% in 1Q14 from 18.4% in 1Q13, but was largely offset by the significant surges in tax rate (+35% Y/Y) and minority interests (+37% Y/Y). Orders: We expect new orders in 1Q14 to exceed 1Q13 levels due to the low base effect (Rmb5B) and possibly reach Rmb12B. The order backlog should remain largely in line with 4Q14 levels (i.e. Rmb237B). Operating CF: Operating CF remained in negative territory in 1Q14 due to seasonal effects but narrowed to Rmb2.7B in 1Q14 (-29% Y/Y). We raise our PT from HK$2.2 to HK$2.4 as we extend our timeframe from Jun-14 to Dec-14. Maintain UW: The share price has outperformed the market by ~15% over the past 1-2 months amid market expectations of a potential share price convergence between A-shares/H-shares under the through-train ETA. Fundamentally, we remain cautious on demand for coal-fired equipment. The stock is still trading at a demanding valuation, in our view, at 12x 2014E P/E for an ex-growth stock. Analyst conf call will be held at 9am (HKT) on 30 April 2014 (Wednesday). Dial in numbers: (852) 3005 1380 (HK), 400 678 0218/(010) 5851 1516 (PRC) and (65) 6307 7689 (Sing). Passcode 4030.
Underweight
2727.HK, 2727 HK Price: HK$3.00

Previous: HK$2.20

AC
Elaine Wu
Price Performance
3.4 3.0 HK$ 2.6 2.2
Abs Rel
YTD 6.4% 18.7%
1m 4.9% 7.7%
3m 23.5% 26.6%
12m 11.1% 20.6%
Shanghai Electric Group Company Limited (Reuters: 2727.HK, Bloomberg: 2727 HK) Rmb in mn, year-end Dec FY10A FY11A FY12A FY13A FY14E Revenue (Rmb mn) 62,957 71,461 76,591 78,795 80,590 Net Profit (Rmb mn) 2,784 3,183 2,715 2,393 2,605 EPS (Rmb) 0.22 0.25 0.21 0.19 0.20 DPS (Rmb) 0.07 0.07 0.06 0.07 0.08 Revenue growth (%) 9.3% 13.5% 7.2% 2.9% 2.3% EPS growth (%) 11.7% 13.3% (14.7%) (11.8%) 8.9% ROCE 11.2% 11.6% 11.7% 10.4% 11.0% ROE 11.3% 11.3% 9.0% 7.6% 7.8% P/E (x) 11.0 9.7 11.4 13.0 11.9 P/BV (x) 1.1 1.1 1.0 1.0 0.9 Dividend Yield 2.7% 3.1% 2.6% 3.1% 3.4%
12,824 31,025 4,962 3.00 29 Apr 14 17.12 48.17 6.2 1,3536.02 7.75 Dec

29 April 2014
Corrected Note
Shinhan Financial Group

1Q14 earnings review: Beats expectations and remains our top pick
SFG remains our top pick among Korean banks. Despite continuing share price outperformance over peers for the last 12 months, we recommend investors stay with SFG, rather than move into high-beta plays, at this juncture; we believe we might have better re-entry points into second-tier banks in the near future. Our base case involves SFGs earnings growing 16% Y/Y in FY14E with key catalysts of NIM improvement, more benign credit costs and higher volume growth from better economic growth in 2014 than a year ago. Of note, continuing write-backs based on diminishing new NPL formation and NPL coverage above 160% are upside risks to our earnings forecast for SFG. 1Q14 earnings beat market expectations. SFGs 1Q14 NP of W558B was greater than our estimate (W486B) and BBG consensus (W528B). According to our analysis, SFGs clean quarterly NP was kept at cW500B in 1Q14, but the biggest upside surprise during the quarter was lower-than-expected credit costs (33bps (annualized) of loans in 1Q14 vs. 59bps in FY13 and 67bps in FY12) thanks to the groups limited exposure to troubled companies (e.g., KT ENS) and sizable write-backs from fully provisioned legacy assets. SFGs FY14 loan growth target (45%) was on track in 1Q14 (1.7% Q/Q, 3.1% Y/Y), with strong core deposit growth (10.9% Y/Y) on seasonality. SG&A was well controlled (2.1% Y/Y). NIM was the only disappointment, with a flattish Q/Q recurring NIM trend (uptick in bank, but drop in card). Valuation and key risks to our PT. Our DDM-based Dec-14 PT remains W54,000, which implies 1.2x FY14E NAV and 11.8x FY14E earnings. We fine-tune our FY14-FY16 earnings forecasts to reflect the 1Q14 results, changing our NP forecasts less than 2%. The key risk to our view is an unexpected BoK policy rate cut, which could delay our earnings turnaround scenario.
Shinhan Financial Group (Reuters: 055550.KS, Bloomberg: 055550 KS) Year-end Dec FY13A FY14E FY15E Pre-provision OP (W bn) 3,731 4,043 4,532 Reported net profit (W bn) 1,903 2,204 2,429 *Attrib. net profit (W bn) 1,873 2,174 2,429 EPS (W) 3,950 4,585 5,122 Cash DPS (W) 650 750 800 EPS growth (18.8%) 16.1% 11.7% ROE 7.4% 8.2% 8.6% P/E (x) 11.3 9.7 8.7 **Tangible NAV/share (W) 41,114 43,812 48,313 ***Adjusted BV/share (W) 49,243 51,941 56,441 P/Tangible NAV (x) 1.1 1.0 0.9 P/Adjusted BV (x) 0.9 0.9 0.8 Dividend Yield 1.5% 1.7% 1.8% FY16E 4,805 2,582 2,582 5,446 850 6.3% 8.5% 8.2 52,799 60,928 0.8 0.7 1.9%
Overweight
055550.KS, 055550 KS Price: W44,500 Price Target: W54,000
South Korea Banks Scott YH Seo

AC
(82-2) 758 5759 scott.seo@jpmorgan.com Bloomberg JPMA SEO <GO>
Young Kwon Kim

Price Performance
50,000 46,000 W 42,000 38,000 34,000
Abs Rel
YTD -4.2% -4.3%
1m -4.4% -3.8%
3m 0.9% -1.8%
12m 16.7% 15.2%
Source: Company data, Bloomberg, J.P. Morgan estimates. Note: *Excluding preferred dividends and interest expense on hybrid capital, **Subtracting goodwill, capitalized loan loss reserve, preferred shares, and hybrid capital from shareholder's equity. ***Subtracting capitalized loan loss reserve, preferred shares, and hybrid capital from shareholder's equity
Company Data 52-week Range (W) Market Cap (W bn) Market Cap ($ mn) Shares O/S (mn) Fiscal Year End Price (W) Date Of Price 3M - Avg daily val (W bn) 3M - Avg daily val ($ mn) 3M - Avg daily vol (mn) KOSPI Exchange Rate (KRW/USD) Price Target (W) Price Target End Date
48,800-35,800 21,102 20,383 474 Dec 44,500 29 Apr 14 40.41 39.0 0.90 1964.77 1,035.25 54,000 30-Dec-14

29 April 2014
Sinopec Shanghai Petrochemical, Oil Search

Downside earnings risks remain on chemicals, lowering EPS/PT; Add SPC, Remove OSH from O&G AFL UW
SPC reported a net loss of Rmb73mn (Chinese reporting standards) for 1Q14, in line with their previous profit warning in mid April. This is the companys first quarterly loss since 4Q12, highlighting the challenges within the current domestic market particularly in the chemicals segment in the quarter. The net loss reflects lower refinery throughput from weaker oil product demand, losses in its chemicals division and some FX impacts. While refining profitability may improve in 2Q, we remain concerned over SPC's chemicals segment and with the shares trading at c15.6x P/E and c0.9x P/B FY14E, essentially in line with regional peers, we still do not see any compelling reason to turn positive on the name especially relative to its main shareholder, Sinopec which offers better value and yield with reform in progress. Lower volumes, losses in chemicals and FX. SPC has announced an Rmb73mn loss for 1Q (on Chinese reporting standards), which relates to widening losses in chemicals with aromatics and ethylene glycol having dropped significantly and substantial increase [in financial costs]" and lower refining throughput in the quarter. Refining margins may improve, but chemicals risk remain: We expect underlying oil demand to improve in 2Q14 on agricultural activity (spring planting), although the headline apparent oil demand data (refining throughput + net product imports) may be flat to down from lower throughput on peak refinery maintenance. Although theoretical GRMs are currently negative, we expect some improvement as oil product supply tightens around maintenance (see our China Oil Market Update - here). EPS reduced by c16% pa; lower PT: We decrease our EPS estimates on average by c16% for FY14/16 mainly due to downward adjustments to chemical margins and lower oil product volumes assumptions. We subsequently reduce our PT from HK$2.0 to HK$1.7. We add SPC (UW) and remove Oil Search (UW) from the Oil & Gas Asia Analyst Focus List: Oil Search has performed well on the de-risking of the final stages of the execution of the PNG LNG project (see latest note here). LNG is now being produced and operator Exxon now anticipates first LNG sales before mid CY14. Oil Search has twice upgraded CY14 production guidance on the back of upbeat project progress reports from Exxon. SPC offers, in our view, more downside potential.
Equity Ratings and Price Targets Company Sinopec Shanghai Petrochemical Oil Search Ticker 338 HK OSH AU Mkt Cap ($ mn) 2,646.72 11,029.32 Price CCY HKD AUD
0338.HK, 338 HK
Underweight Price: HK$1.90
Price Target: HK$1.70 OSH.AX, OSH AU

Underweight Price: A$8.89
Price Target: A$7.26
China, Australia Asia Oils Scott L Darling

AC
(852) 2800 8578 scott.l.darling@jpmorgan.com Bloomberg JPMA DARLING <GO> J.P. Morgan Securities (Asia Pacific) Limited
Benjamin Wilson
AC
(61-2) 9003-8612 benjamin.x.wilson@jpmorgan.com Bloomberg JPMA WILSON <GO> J.P. Morgan Securities Australia Limited
Michael Stansfield
(852) 2800-8563 michael.stansfield@jpmorgan.com J.P. Morgan Securities (Asia Pacific) Limited
Rating Price 1.90 8.89 Cur UW UW Prev n/c n/c
Price Target Cur Prev 1.70 2.00 7.26 n/c
Source: Company data, Bloomberg, J.P. Morgan estimates. n/c = no change. All prices as of 29 Apr 14.

29 April 2014
SK Telecom
Improving defensive merits in 2Q/2H with 50% market share defended
SKT posted a disappointing set of 1Q earnings results mainly due to a surge in marketing costs and reimbursement for network shutdown. Management reconfirmed its obsessively strong 50% wireless market share defending strategy going forward with tightening regulations on excessive subsidies. With a new PT of W250,000, we recommend investors accumulate the stock on its strengthening defensive merits: (1) the best dividend yield play among Korea telcos, (2) improving earnings visibility in 2Q/2H, and (3) appealing valuation (8.2x 14E P/E). Disappointing 1Q results. SKTs consolidated OP of W252B came in well below consensus estimates mainly due to record high marketing costs of W1.1T (+21% y/y) in 1Q. We estimate W50B one-off reimbursement expense for the network shutdown issue in 1Q. Strong willingness to keep 50% market share. SKTs record high subsidy spending in 1Q clearly demonstrated managements philosophy of The best defense is a good offense. SKTs strong defensive marketing and the government's strict regulation on excessive subsidies will likely keep competitors marketing strategies under control throughout 2014, in our view. Strong earnings turnaround in 2Q/2H. We expect SKT to see dramatic growth of OP in 2Q (W633B, +151% q/q) on the back of operation suspension. 2H earnings outlook remains positive as well. Defensive merits to strengthen. We expect SKTs defensive merits to strengthen going forward with more favorable earnings environment in 2Q/2H and the best dividend yield play (4.6%) among Korea telcos.
Overweight
017670.KS, 017670 KS Price: W206,000

Previous: W260,000
South Korea Wireless Services Stanley Yang

AC
(82-2) 758-5712 stanley.yang@jpmorgan.com Bloomberg JPMA YANG <GO> J.P. Morgan Securities (Far East) Ltd, Seoul Branch
Sally Yoo
(82-2) 758-5383 sally.yoo@jpmorgan.com J.P. Morgan Securities (Far East) Ltd, Seoul Branch
James R. Sullivan, CFA

(65) 6882-2374 james.r.sullivan@jpmorgan.com J.P. Morgan Securities Singapore Private Limited
Price Performance
230,000 W 210,000 190,000 170,000
Abs Rel
YTD -9.6% -9.5%
1m -4.2% -3.4%
3m -4.8% -6.0%
12m 5.1% 3.9%
SK Telecom (Reuters: 017670.KS, Bloomberg: 017670 KS) Year-end Dec FY13A FY14E Revenue (W bn) 16,602 17,065 Operating Pofit (W bn) 2,017 2,019 Net Profit (W bn) 1,610 1,760 EPS (W) 23,093 25,252 Revenue Growth 2.9% 2.8% Operating profit growth 16.6% 0.1% EPS growth 44.3% 9.3% ROE 8.8% 8.4% P/E (x) 8.9 8.2 P/BV (x) 1.2 1.1 EV/EBITDA (x) 5.0 4.8 DPS (W) 9,400 9,400 Dividend Yield 4.6% 4.6%
FY15E 17,508 2,296 1,946 27,921 2.6% 13.7% 10.6% 8.8% 7.4 1.0 4.4 9,400 4.6%
FY16E 17,862 2,442 2,060 29,557 2.0% 6.4% 5.9% 8.8% 7.0 0.9 4.1 9,400 4.6%
Company Data 52-week Range (W) Market Cap (W bn) Market Cap ($ mn) Shares O/S (mn) Fiscal Year End Price (W) Date Of Price Free Float(%) 3M - Avg daily vol (th) 3M - Avg daily val (W bn) 3M - Avg daily val ($ mn) KOSPI Exchange Rate (W/$) Price Target End Date Price Target (W)
240,000192,000 16,633 16,067 81 Dec 206,000 29 Apr 14 56.6% 194.5 40.4 39.0 1,965 1,035 30-Jun-15 250,000

29 April 2014
SMIC
Still in transition; wait for a better entry point
Key messages from SMICs earnings calls were: 1) a strong pick-up seen in 40nm demand after an inventory-related slump in 1Q14, 2) 2014 growth is likely to remain in the 10% range, with limited capacity expansion, 3) 28nm design activity is progressing, but the ramp is likely to be a steady one in 2015 rather than rapid, and 4) GMs have stabilized, while R&D expenses could see some upside in 2H in relation to 28nm spend. On the whole, we continue to believe that 2014 remains a transition year for SMIC, with limited capacity growth and struggles for its core Chinese fabless customer base. We anticipate better growth in 2015, with 28nm ramp-up and supportive government policy, but would wait for better entry points (below HK$0.55 or 0.9x FY14E book) to buy the stock. We adjust our estimates slightly and maintain our Neutral rating. Our Dec-14 PT of HK$0.65 is based on 1x FY14E book, with a 2015E ROE of 7%. 40nm rebounding back to normal in 2Q but likely a slight GM drag: SMIC's 1Q GM surpassed the companys guidance and our expectations. With management indicating product mix as one reason behind GM upticks (of note, 40nm revenue contribution declined to 10% in 1Q vs 16% in 4Q), we believe 40nm profitability still continues to be a drag on overall margins. Hence, once 40/45nm revenues recover, that may be GM-dilutive and hence limit the overall uptick in margins in 2Q/3Q, in our view. Capex moving up but depreciation to remain in check builds some ground for leverage in 2015. Despite upward revisions in FY14 capex guidance, SMIC guided for flat Y/Y deprecation in FY15. This, we believe, will provide some GM leverage for SMIC into FY15, given significant upticks in revenues from new capacity coming online.
Neutral
China Technology Gokul Hariharan

AC
(852) 2800-8564 gokul.hariharan@jpmorgan.com Bloomberg JPMA HARIHARAN <GO> J.P. Morgan Securities (Asia Pacific) Limited
Rahul Chadha
(886-2) 2725 9898 rahul.z.chadha@jpmorgan.com J.P. Morgan Securities (Taiwan) Limited
JJ Park
Price Performance
0.85 0.75 HK$ 0.65 0.55 0.45
China fabless recovery and 28nm readiness are key drivers to watch for:
Despite the cyclical pick-up in 2Q, we continue to believe that SMICs highvolume China fabless customers are still likely to remain under competitive pressure from Mediatek and Intel for most of 2014. However, we do anticipate a better outlook in 2015 in the second stage of the LTE-driven smartphone pickup. At the same time, SMIC would be ready to ramp up its 28nm process node, helping to drive some upside in ASPs and gross margins.
FY12 FY13 1,702 2,069 16 119 582 666 14 181 23 175 NM 678% 0.07 0.52 0.07 0.08 0.0 0.0 1.0 6.8 1.7 6.7 24.1 14.6 FY14E 2,108 147 706 128 132 NM 0.41 0.08 0.0 4.9 4.0 26.0 FY15E 2,420 215 781 199 197 49% 0.60 0.09 0.0 6.8 5.9 19.3 FY12 FY13 FY14E 117.4 15.9 20.3 1.2 1.1 1.0 5.2 4.3 4.5 1.9 -8.9 -8.4
Abs Rel
YTD 1.6% 6.8%
1m 8.5% 8.2%
3m -20.0% -20.8%
12m 14.3% 16.3%
Share Price: HK$0.64, Date of Price: (29 Apr 14), Bloomberg 981 HK, Reuters 0981.HK
(Year-end Dec, US$ M) Revenue Operating profit EBITDA Pre-tax profit Net profit Profit growth (%) EPS * BVPS ($, yr-end) Cash dividend yield (%) ROE (%) ROIC (net of cash, %) Net debt/equity (%) P/E (x) P/B (x) EV/EBITDA (x) FCF/Mkt cap (%) Price target PT (31-Dec-14) Diff from consensus Quarterly EPS * ($) FY13 FY14E FY15E FY15E 13.6 52-Week range HK$ 0.88-0.50 0.9 Share out'g 32,215M 3.9 Avg daily volume 267.6M 7.4 Avg daily val (US$) 24.1M Local Free float 63.7% HK$ 0.65 Market cap (US$) 2.7B (13.3%) Exchange rate HK$ 7.75/US$1 Index (HSI) 2,2132.53 4Q 0.05 0.09 -
1Q 2Q 0.13 0.23 0.05 0.12 -
3Q 0.13 0.15 -
Source: Company Data, Bloomberg, J.P. Morgan estimates *EPS in US$ cents

29 April 2014
WCT Holdings Bhd

KLIA2 opening soon, implications for earnings
Neutral
WCTE.KL, WCTHG MK Price: M$2.25 Price Target: M$2.30
We attended a tour/briefing ahead of the opening of KLIA2. Our key conclusion: it seems that KLIA2 will be ready to open on May 2, dispelling earlier fears of delays. This is positive for WCT, which owns a 70% stake in gateway@KLIA2, a landside shopping mall. Initial losses expected but positive over the longer-term, in line with WCTs plans to grow investment income to 30-35% of EBIT by early 2018. Rental revenues likely to beat our forecast, slight adjustment for FY15.
Malaysia Construction Hoy Kit Mak

AC
(60-3) 2718-0713 hoykit.mak@jpmorgan.com Bloomberg JPMA MAK <GO> JPMorgan Securities (Malaysia) Sdn. Bhd. (18146-X)
KLIA2 likely to open on May 2. Based on our observation, we believe KLIA2 could open on May 2 as planned. This will benefit WCTs 70% stake in gateway@klia2, a 350,000NLA shopping mall within KLIA2. Leases are revised every 3 years, with turnover rent feature (revenue sharing). By May 2, we expect 118 lots out of the 200 lots to be operational. Rental revenues likely to beat, slight earnings adjustment. Achieved tenancy was 80% at an average rental rate of about M$22 psf/month, vs our forecast of M$15-16.5 psf/month. Estimated revenue of about M$7MM/month is 33% ahead our estimates. However, we have assumed no earnings contribution for FY14, which could see downside risk. For the first 6-9 months, there could be some losses due to start up costs etc. and potential compensation sought by retailers as the opening of the mall was delayed due to KLIA2 delays. There is also cumulative interest cost of between M$30-40MM over two years, which we believe WCT hopes to recover from MAHB. Nevertheless, we believe there is a likelihood that any recourse may be in the form of an extended concession rather than cash. We raise net income contribution from gateway@klia2 to M$17.8MM (+17.9%) for FY15 or +0.6% to overall net earnings. SoTP based PT remains unchanged at M$2.30 as impact is negligible.
WCT Holdings Bhd (Reuters: WCTE.KL, Bloomberg: WCTHG MK) M$ in mn, year-end Dec FY12A FY13A FY14E Revenue (M$ mn) 1,560 1,616 1,978 Net Profit (M$ mn) 365 217 187 Core Net Profit (M$ mn) 154 161 187 Reported EPS (M$) 0.37 0.22 0.19 Adj. EPS (M$) 0.10 0.10 0.12 Net DPS (M$) 0.07 0.06 0.06 Revenue growth (%) 1.4% 3.6% 22.4% Adj. EPS growth (%) (22.2%) 4.6% 16.3% ROE 9.3% 8.0% 7.4% ROCE 6.2% 4.8% 5.3% Adj P/E (x) 22.9 21.9 18.8 P/B (x) 1.2 1.1 0.9 EV/EBITDA (x) 10.2 10.4 5.8 Net Div yield (%) 3.0% 2.8% 2.4%
Vanice Siew
(603) 2718-0708 vanice.siew@jpmorgan.com JPMorgan Securities (Malaysia) Sdn. Bhd. (18146-X)
Karen Li, CFA

(852) 2800-8589 karen.yy.li@jpmorgan.com J.P. Morgan Securities (Asia Pacific) Limited
Price Performance
2.6 M$ 2.4 2.2 2.0
WCTE.KL share price (M$) FBMKLCI (rebased)
Abs Rel
YTD 9.8% 9.5%
1m 6.6% 6.1%
3m 8.2% 4.3%
12m -5.5% -14.4%
FY15E 2,210 206 206 0.21 0.13 0.08 11.8% 10.4% 7.0% 5.5% 17.0 0.8 5.0 3.7%
FY16E 2,881 238 238 0.24 0.15 0.08 30.4% 15.2% 7.5% 5.9% 14.8 0.8 4.5 3.7%
Company Data Shares O/S (mn) Market Cap (M$ mn) Market Cap ($ mn) Price (M$) Date Of Price Free Float(%) 3M - Avg daily vol (mn) 3M - Avg daily val (M$ mn) 3M - Avg daily val ($ mn) FBMKLCI Exchange Rate Price Target End Date
986 2,219 680 2.25 29 Apr 14 2.3% 1.65 3.50 1.1 1859.34 3.27 31-Dec-14

29 April 2014
Air China H
1Q14 results beat CEA and CSA's; remains our top pick in the Chinese airline sector
Air Chinas 1Q14 results beat CEA and CSAs. Stay OW We believe Air Chinas near-trough valuations at 0.8x P/BV (51% below its historical average mid-cycle valuation and 71% below peak) already discount the weak ST outlook. Results beat CEA and CSAs: Air China reported a small profit in 1Q14 despite FX losses, better than CEA and CSA which turned loss-making. Air Chinas net profit fell 63% y/y to Rmb93MM in 1Q14 from a net loss of Rmb742MM in 4Q13 (under PRC accounting). Excluding one-off items (mainly Rmb214MM in government grants), Air China was loss-making at the recurring level with a small loss of Rmb121MM and a recurring loss margin of 0.5% in 1Q14. The implied annualized recurring ROE was negative c.1%. Mar14 NAV/share rose 1% q/q to Rmb4.16. Key 1Q14 highlights: Revenue rose 7% y/y, 2% q/q. Operationally, revenue was boosted by the 12% y/y, 6% q/q growth in Air Chinas pax traffic. Cargo traffic rose 11% y/y but fell 11% q/q. Op cost rose 5% y/y but fell 5% q/q. Investment income (which includes Cathay Pacific) fell 40% y/y to Rmb44MM (or 31% of PBT). Taxes fell 51% y/y, implying an effective tax rate of 35%. Comparing Big 3 carriers results: China Southern led in terms of revenue growth, with the top line rising 10% y/y in 1Q14, followed by Air China/CEA at 7%/5%. However, only Air China was profitable, reporting a net margin of 0.4% while CEA/CSA reported a net loss margin of 0.9%/1.2%. Air Chinas recurring earnings outlook should improve in 2014: We believe Air Chinas near-trough valuation of 0.8x P/BV already discounts the weak near-term outlook, and that the recurring earnings outlook will improve in 2014. 1Q14 performance was encouraging, with Air Chinas pax traffic up 12% y/y vs its 9% growth in 2013 and the load factor was steady y/y. Moreover, our channel checks suggest that passenger yields have stabilized with improvements on some routes. Key downside risk: if CNY weakens further, Air China could book substantial forex losses (we factored in Rmb1.9B in FY14E), although its impact will be smaller than for CEA and CSA which have higher financial leverage and a larger share of US$ debt.
Air China H (Reuters: 0753.HK, Bloomberg: 753 HK) Rmb in mn, year-end Dec FY12A FY13A Revenue (Rmb mn) 99,473 98,181 Net Profit (Rmb mn) 4,816 3,264 Recurring Net Profit (Rmb 4,697 1,326 mn) EPS (Rmb) 0.40 0.27 Recurring EPS (Rmb) 0.39 0.11 DPS (Rmb) 0.06 0.05 Revenue growth (%) 1.1% (1.3%) Recurring Net Profit growth 18.5% (71.8%) EPS growth (%) (31.9%) (33.1%) Recurring EPS growth 18.7% (72.1%) ROCE 4.6% 2.1% ROE 10.0% 6.3% P/E (x) 8.9 13.3 P/BV (x) 0.9 0.8 EV/EBITDA (x) 8.5 11.2 Dividend Yield 1.8% 1.4%
Overweight
Hong Kong Airlines Corrine Png

AC
(65) 6882-1514 corrine.ht.png@jpmorgan.com Bloomberg JPMA PNG <GO> J.P. Morgan Securities (Asia Pacific) Limited
Price Performance
7.0 6.0 HK$ 5.0 4.0
Abs Rel
YTD -24.4% -15.6%
1m -4.4% -2.1%
3m -13.3% -13.4%
12m -29.7% -20.3%
FY14E 113,387 1,805 3,746 0.14 0.29 0.13 15.5% 182.5% (48.0%) 165.5% 2.0% 3.3% 25.6 0.8 10.4 3.6%
FY15E 122,497 4,040 4,040 0.31 0.31 0.14 8.0% 7.9% 123.9% 7.9% 3.2% 7.1% 11.4 0.8 8.6 3.9%
FY16E 131,502 4,879 4,879 0.37 0.37 0.17 7.4% 20.8% 20.8% 20.8% 3.4% 8.2% 9.5 0.8 7.9 4.7%
Company Data Shares O/S (mn) Market Cap (Rmb mn) Market Cap ($ mn) Price (HK$) Date Of Price Free Float(%) 3M - Avg daily vol (mn) 3M - Avg daily val (HK$ mn) 3M - Avg daily val ($ mn) HSCEI Exchange Rate Fiscal Year End
12,294 43,426 6,946 4.38 29 Apr 14 26.0% 11.21 53.83 6.9 9770.10 7.75 Dec
29 April 2014
Bank Central Asia (BCA) (BBCA IJ)

1Q14 misses on higher costs (funding, operating and credit)
Neutral
Price: Rp10,600 28 Apr 2014 Price Target: Rp11,000 PT End Date: 30 Jun 2015
BCA reported 1Q14 net profit of Rp3.7tn, up 27% y/y, down 6% q/q and 13% below our estimates. NII came in at Rp7.6tn, up 4% q/q and 1% below our estimates, as the cost of funds increased 50bps q/q, to 2.45%. Margins increased 27bps q/q (24bps below JPMe), to 6.5%. Non-II increased 11% q/q (13% above JPMe) primarily on the back of higher trading gains. However, operating expenses jumped 19% q/q (7% above JPMe) due to higher personnel expenses. Consequently, CIR deteriorated by 538bps q/q, to 48.1%. Loan loss provisions came in at 31bps (ann.) vs. our estimate of 8bps. NPLs increased 9% q/q, with Special Mention loans up 31% q/q. The NPL pickup is partly seasonal, but the extent of the asset quality slippage (albeit from a low base) is worrying. If this weakness is sustained, it poses risks to our estimates and view. Other points: Loans grew 20% y/y (in line with JPMe), to Rp319tn. Corporate, commercial & SME and consumer loans grew 2.9%, 1.4%, 0.1% q/q and 21.0%, 17.4%, 21.8% y/y, respectively. Deposits grew 11% y/y, to Rp408tn. However, total deposits declined 1% q/q, indicating a tight liquidity environment. The CASA ratio declined 116bps q/q, to 77%. The LDR ratio increased 596bps y/y, to 78%. The NPL ratio nudged up 3bps q/q, to 0.5%, driven by commercial & SME and consumer segments. Special Mention loans moved up Rp1.1tn, to Rp4.7tn, primarily due to consumer (within that, due to motorcycle). The coverage ratio declined to 383% from 407% last quarter.
1Q13A 7,724 (1,696) 6,028 1,631 1,423 139 69 7,659 (3,728) 3,931 (380) (12) 84 3,624 (729) (3) 2,892 56,525 266,015 261,691 369,134 1,084 4,324 5.9% 48.7% 72.1% (58) 2Q13A 8,015 (1,757) 6,258 1,796 1,604 97 95 8,054 (3,510) 4,545 (289) (74) 117 4,300 (870) (1) 3,429 57,555 281,504 276,952 379,747 1,182 4,552 5.9% 43.6% 74.1% (42) 3Q13A 8,898 (2,079) 6,818 1,948 1,588 240 121 8,767 (3,441) 5,326 (606) (95) 396 5,021 (983) 1 4,039 61,158 300,217 295,102 401,763 1,351 5,115 6.0% 39.2% 74.7% (83) 4Q13A 9,653 (2,319) 7,334 1,912 1,695 30 187 9,246 (3,953) 5,293 (590) 29 140 4,871 (978) 0 3,894 63,866 313,712 308,101 411,180 1,380 5,611 6.2% 42.8% 76.3% (77) 1Q14E 10,289 (2,566) 7,723 1,884 1,661 60 163 9,608 (4,401) 5,206 (64) (35) 170 5,278 (1,056) 4,222 68,088 318,627 313,048 419,255 1,412 5,579 6.7% 45.8% 76.0% (8) 1Q14A 10,269 (2,640) 7,629 2,120 1,657 284 179 9,749 (4,693) 5,056 (244) (98) (85) 4,629 (958) (7) 3,665 67,826 318,694 312,964 408,471 1,498 5,730 6.5% 48.1% 78.0% (31) YoY 33% 56% 27% 30% 16% 104% 161% 27% 26% 29% -36% 746% -201% 28% 31% 130% 27% QoQ 6% 14% 4% 11% -2% 852% -4% 5% 19% -4% -59% -445% -161% -5% -2% NA -6% JPMe 0% 3% -1% 13% 0% 373% 10% 1% 7% -3% 283% 181% -150% -12% -9% NA -13% 0% 0% 0% -3% 6% 3% (23) 233 202 (23)
Table 1: BBCA: 1Q14 earnings snapshot

Rp in millions, Year-end Dec Interest Income Interest Expense Net Interest Income Non-Interest Income Net Fee income Trading income Other operating income Operating Revenue Operating Costs PPOP Loan loss provisions Other provisions Other income Pre-Tax Tax MI and EO Core Attributable profit Common Equity Gross Loans Net Loans Deposits NPL LLR NIM CIR LDR Credit Costs (bps)
20% 6% 20% 2% 20% 2% 11% -1% 38% 9% 33% 2% Change in bps 55 27 (54) 538 596 173 27 46
29 April 2014
Bank Negara Indonesia Persero (BBNI IJ)

NPLs deteriorate in 1Q, NIMs next; maintain UW
Underweight
Price: Rp4,970 28 Apr 2014 Price Target: Rp4,400 PT End Date: 30 Jun 2015
Bank Negara (BBNI IJ) reported 1Q net profit of Rp2.4tn, up 16% y/y, down 5% q/q and 8% below our estimates. This continues the string of weaker than expected results from Indonesian banks after Mandiri and BCA missed our estimates by 7% and 13% respectively. Miss at BNI was mainly on higher provisions of 198bps (ann.), as NPLs increased 5% q/q and special mention loans moved up 16% q/q. NIM was flat q/q as the bank chose to lever up LDR to 90% from 86% last qtr. This is unsustainable, and hence we expect NIM pressure to start showing up in coming quarters. Management guidance concurred with this view. Operating costs declined 18% q/q to Rp3.4tn, primarily from higher base and in-line with our estimates, leading to CIR of 45%. Our FY14 estimates are 6% below the Street and we expect revisions to start turning negative, leading to stock price decline. Maintain UW. Other key points: CoF increased 40bps q/q to 2.8%, while loans yields remained flat q/q at 10.2%. Since the basic banking spread has declined, we expect NIM to follow once LDR stabilizes or declines. Loans grew 23% y/y (-1% q/q) to Rp247tn. Corporate loans (-1.8% q/q) and consumer loans (flat q/q) now constitute 44.6% and 19.2% of total loan book, respectively. Deposits grew 13% y/y (-6% q/q) to Rp274tn. CASA ratio declined by 205bps q/q to 65%. Number of individual savings accounts declined from 16.2mn in 2013 to 12.9mn in 1Q14 as management cleaned the dormant accounts. LDR increased by 767bps y/y and 440bps q/q to 90%. NPL ratio increased by 13bps q/q to 2.3%. NPL pick-up was driven by deterioration in small business loans, which increased by 53bps q/q to 5.85%. Net new NPLs of Rp1tn were added in 1Q. Special mention loans also increased by 50bps q/q to 3.3%. NPL coverage ratio was broadly flat q/q at 123%.
Management guidance
As per table below, trend observed so far has been mostly negative. Management acknowledged that margins are unsustainable at current levels (6.1%) and will contract slightly in the later part of the year. This is on the back of possibly lower LDR and rising deposit competition.
Table 1: BBNI: Target 2014 and progress in 1Q14
Metric Loan growth Gross NPL Coverage ratio LDR (net loans) Deposit growth CASA growth Saving growth Target 2014 14% - 17% 1.8% - 2.2% 127% - 130% 85% - 87% 13% - 15% 14% - 16% 12% - 15% Progress 1Q2014 -1.4% 2.3% 128% 88.4% -6.1% -10.5% -7.0% Trend + JPMe 2014 14.5% 2.4% 108% 85.0% 12.6% 10.0% 10.0%
29 April 2014
Bank of Communications Co (3328 HK)

1Q14: weak deposit franchise resulted in disappointing NIM, loan and deposit growth
Underweight
Price: HK$4.91 29 Apr 2014 Price Target: HK$4.90 PT End Date: 31 Dec 2014
BoCom reported 1Q14 net profit of Rmb18.7B, up 6% YoY, but lower than expected. We saw disappointments on key trends, including NIM contraction of 13bp qoq, sluggish growth on both loans (+1% qoq) and deposits (-1% qoq), as well as continue asset quality deterioration despite NPLs write-offs and disposals. We believe BoCom will continue to see pressure on profit growth as the relatively weak deposit franchise puts pressure on both NIM and asset growth (due to LDR limitations). The bank might expand its WMPs and risk assets in order to increase fee growth and enhance assets yields, but this could increase the overall risk of the bank. We remain UW on BoCom. What we dont like about the results: NIM contracted by 13bp qoq: Table 2 shows that asset yields went up by 9bp qoq, mainly due to loan yields and interbank yields, which improved by 13bp and 19bp respectively QoQ. However, overall funding costs went up by 15bp qoq, faster than improvement in asset yield. This is mainly due to an increase in deposit costs of 9bp and increase in interbank funding costs. The increase in deposits cost was partly due to a rise in term deposits by 2.8ppt qoq to 57.6% of total deposits; management attributed this to fierce competition from both banks and monetary market funds. The increase in interbank funding costs is likely due to a rise in negotiated deposits from insurance companies, management commented. We believe that as BoComs deposit franchise is relatively weak, its NIM will continue to see pressure, assuming no change in risk appetite (ie. increase risk assets for yield enhancement). Fee income growth slower than peers. Net fee growth was 10% YoY, slower than peers average of 25% YoY. We believe this is partly due to slower loan growth in 1Q; thus loan or credit commitment fees declined by 9% YoY. Laggard in loan and deposit growth; loan-deposit ratio (LDR) a key constraint: Loan growth went up only by 1% qoq, slower than industry growth of 5% qoq. Bocoms corporate loans went up by 1% qoq, discounted bills contracted by 12% qoq, and retail loans went up by 4% qoq, mainly supported by mortgage loans. Management attributed the slower loan growth to LDR constraints as deposit growth contracted and increasing prudence due to rising credit risks. Deposit growth contracted by 1% qoq, lagging industry deposit growth of 5% qoq. The contraction was mainly due to corporate deposits, which shrank by 2% qoq, and retail deposits went up by 2% qoq. BoCom attributed the slower deposit growth to fierce competition and the banks proactive decision to focus on daily-average deposits balance instead of period-end balance. Daily average deposit growth was 1% qoq. As a result, loan-deposit ratio increased 171bp to 80.3%, the highest among peers. BoCom said if it reclassifies insurance companys deposits from interbank to customer deposits, the LDR would be below 75% as required by CBRC; nonetheless, pressure on maintaining LDR below 75% is a key constraint for growth in 2014. Asset quality deterioration: NPL amount and ratio increased by 5% and 4bp qoq, on a net basis. Management commented that net NPL reduction was Rmb5.8B, including Rmb2B of cash recovery, Rmb2B of NP write-offs and Rmb1.8B of NPL disposals (vs Rmb11.8B of NPL write-offs and disposals in FY13). This indicates that gross NPL formation was about Rmb5.5B, and the annualized slippage rate in 1Q14 was slightly higher than in FY13. NPL coverage ratio decreased by 137bp qoq to 212.28% at end 1Q14, and loan loss reserve ratio rose by 7bp qoq to 2.31%.
WMPs: BoCom commented that WMPs increased 21% QoQ. Non-standardized credit assets within WMPs were Rmb168B, accounting for ~2.6% of total assets and 20% of total WMPs. Management commented that WMPs are a key source of revenue. We believe that with limitations on loan growth due to LDR constraints and pressure on NIMs, BoCom might expand its WMP business to improve deposit growth and fee income. What we like about the results Capital ratio improvement: Tier 1 ratio and CAR were 10.04% and 12.19%, respectively, up by 28bp and 11bp qoq. We believe this is likely due to slow growth on RWA, as total assets were flat qoq.
29 April 2014
China Citic Bank - H Share (998 HK)

1Q14: Deteriorating trends on NIM and asset quality overshadow strong top-line growth
Neutral
Price: HK$4.75 29 April 2014 Price Target: HK$4.00 PT End Date: 31 Dec 2014
Citic Bank reported 1Q14 net profit of RMB10.7bn, up 16% YoY. Pre-provision profits went up by 29% YoY, better than expected, fee income (+71% YoY) and other non-interest income (+126% YoY) were the key surprises. However, sequential trends on NIM and asset quality disappointed. In addition, we note interbank liabilities went up by RMB179bn, this was allocated into investments receivables, which went up by RMB175bn in 1Q14; we believe this could potentially lead to duration mismatch for assets and liabilities. Non-interest income growth exceeded expectations: Fee income growth of 71% YoY was the second-highest among China banks in our coverage. We noted trading income of RMB1.3bn in 1Q14, significantly higher than RMB403mil in 1Q13, however, such income may be volatile. NIM contracted by 24bps qoq: Higher than expected, this is likely due to fast growth on interbank liabilities, which went up by RMB178bn or 29% qoq in 1Q14. This is significantly faster than deposits growth of RMB146bn or 6% qoq in 1Q14. Interbank liabilities funding costs is generally higher than deposits costs (for example, the difference was 240bps in 2H13). In addition, rising deposit costs could be another factor for NIM contraction. Fastest NPL growth and lowest loan loss reserve ratio: NPL growth was 18% qoq in 1Q14, the fastest among peers on a sequential basis though in line with trends seen in 4Q13. NPL coverage ratio declined by 15ppt to 192% and loan loss reserve ratio increased by 9bps qoq to 2.21% at the end of 1Q14, still the lowest among peers.
In Rmb mm unless otherwise stated
Key P&L Items NII Non-Interest Income Fees Non-fees Total Income Operating expenses PPOP LLP Pre-Tax Income Tax Attributable Income Key Balance Sheet Items Gross Loans Including NPL amount Total deposits Total assets Equity Key Ratios NIM Cost income ratio ROE ROA NPL Ratio NPL Coverage ratio Loan loss reserve Credit cost LDR Tier 1 Ratio (new) Total CAR (new)
Source: Company reports.
Table 1: Summary of Citic 1Q14 financials

1Q13
19,912 4,241 3,599 642 24,153 (9,259) 14,894 (2,389) 12,367 (3,035) 9,218 1,755,719 15,492 2,457,010 3,119,084 207,965 2.65% 38.3% 18.15% 1.21% 0.88% 243.3% 2.15% 0.56% 71.5% 9.35% 12.13%
2Q13
20,763 4,962 4,378 584 25,725 (8,635) 17,090 (2,443) 14,876 (3,565) 11,173 1,824,552 16,370 2,613,911 3,436,945 211,107 2.55% 33.6% 21.33% 1.36% 0.90% 223.9% 2.01% 0.55% 69.8% 8.92% 11.47%
3Q13
22,129 4,614 4,413 201 26,743 (9,787) 16,956 (2,897) 13,946 (3,350) 10,469 1,882,967 16,978 2,632,476 3,401,408 219,824 2.60% 36.6% 19.44% 1.22% 0.90% 231.9% 2.09% 0.63% 71.5% 9.24% 11.77%
4Q13
22,884 5,308 4,421 887 28,192 (12,754) 15,438 (3,598) 11,358 (2,882) 8,313 1,941,175 19,966 2,651,678 3,641,193 225,601 2.61% 45.2% 14.93% 0.94% 1.03% 206.6% 2.13% 0.75% 73.2% 8.78% 11.24%
1Q14
22,136 7,617 6,168 1,449 29,753 (10,510) 19,243 (4,647) 14,374 (3,443) 10,706 2,043,630 23,584 2,798,070 3,981,514 237,953 2.37% 35.3% 18.48% 1.12% 1.15% 191.9% 2.21% 0.93% 73.0% 8.90% 11.09%
QoQ
-3% 44% 40% 63% 6% -18% 25% 29% 27% 19% 29% 5% 18% 6% 9% 5% -24bp -992bp 355bp 18bp 13bp -15 ppt 9bp 18bp -17bp 12bp -15bp
YoY
11% 80% 71% 126% 23% 14% 29% 95% 16% 13% 16% 16% 52% 14% 28% 14% -28bp -301bp 33bp -9bp 27bp -51 ppt 7bp 37bp 158bp -45bp -104bp

29 April 2014
China Cosco Holdings, Ltd. - H

1Q14 results weak, dragged down by vessel disposal losses; highly leveraged to dry bulk recovery
We believe the worst is over for China Cosco, and are positive on the recovery of the bulk shipping sector, which should benefit China Cosco given its large spot market exposure as one of the worlds largest dry bulk shipping companies. However, the container shipping segment will likely be a drag, as industry overcapacity could cap a freight rate recovery. Our preferred dry bulk picks are Pacific Basin Shipping and Precious Shipping. Turned loss-making again, driven by losses from the disposal and scrapping of vessels in 1Q14: Group revenue fell 7% y/y, 10% q/q. Operating costs fell 12% y/y, 14% q/q, which is positive. Finance costs rose 48% y/y, 228% q/q. Net loss was Rmb1.9B in 1Q14, down 5% y/y and vs net profit of Rmb2.3B in 4Q13 under PRC accounting standards. The results were impacted by losses from the disposal and scrapping of 16 vessels, including 12 containerships and four bulk carriers. Excluding one-offs (mainly Rmb791MM disposal losses, Rmb67MM tax refunds, Rmb334MM writeback of previous provisions for onerous contracts partially offset by new provisions of Rmb181MM), recurring loss was c.Rmb1.3B. Annualized recurring ROE was negative c.22%. Mar-14 BV/shr fell 7% q/q to Rmb2.21. Container shipping highlights freight rates improved q/q: Volumes rose 7% y/y, but fell 9% q/q, while average freight rates in US$ fell 5% y/y, but rose 15% q/q in 1Q14. This led to a 2% y/y and 5% q/q improvement in revenue (excluding charter-out revenue). In comparison, OOILs revenue rose 2% y/y but fell 2% q/q in 1Q14. China Cosco had a fleet of 179 containerships with 843,705 TEUs capacity as at end March. Its order book of owned and charteredin vessels includes eight ships (87,050 TEUs) or c.10% of existing capacity. Dry bulk shipping highlights cargo volume fell as China Cosco continued to restructure its capacity: Shipping volume fell 25% y/y and 18% q/q to 42.0MM tons. Ore shipments fell 33% y/y, coal shipments fell 28%, and others rose 1%. 1Q14 volume breakdown: ore 37% (-5ppts y/y), coal 39% (-2ppts), others 25% (+6ppts). Spot rates improved y/y but fell q/q BCI/BPI rose 61%/47% y/y but fell 30%/27% q/q. China Cosco had a fleet of 292 dry bulk vessels with a total capacity of 26.3MM dwt as at end March. It has 17 vessels on order with a total capacity of 1.7MM dwt or c.6% of its existing capacity.
Overweight
China Shipping Corrine Png

AC
Price Performance
4.2 3.8 HK$ 3.4 3.0 2.6
Abs Rel
YTD -16.9% -8.3%
1m -0.6% 0.6%
3m -5.7% -5.5%
12m -4.0% 4.4%
China Cosco Holdings, Ltd. Rmb in mn, year-end Dec Revenue (Rmb mn) Net Profit (Rmb mn) EPS (Rmb) DPS (Rmb) Revenue growth (%) EPS growth (%) ROCE ROE P/E (x) P/BV (x) EV/EBITDA (x) Dividend Yield
H (Reuters: 1919.HK, Bloomberg: 1919 HK) FY12A FY13A FY14E FY15E 68,268 66,138 69,577 76,497 (9,559) 235 (1,032) 469 (0.94) 0.02 (0.10) 0.05 0.00 0.00 0.00 0.00 (19.3%) (3.1%) 5.2% 9.9% (8.9%) (102.5%) (538.2%) (145.4%) (7.5%) (5.0%) (0.8%) 0.7% (32.0%) 1.0% (4.4%) 2.0% NM 109.9 NM 55.2 1.0 1.1 1.1 1.1 NM NM 23.6 14.6 0.0% 0.0% 0.0% 0.0%
FY16E 82,518 1,213 0.12 0.00 7.9% 158.9% 1.2% 4.9% 21.3 1.0 11.7 0.0%
10,216 25,870 4,138 3.14 29 Apr 14 44.0% 9.32 30.98 4.0 9770.10 7.75 Dec

29 April 2014
China Eastern Airlines - H

1Q14 results weaker than Air China's, but better than CSA's; valuations already near fair value; stay Neutral
CEAs 1Q results were weaker than Air Chinas, but better than CSAs. We remain Neutral on CEA, as we believe it is already near fair value. We see better risk-reward in Air China. Net loss shrank q/q: Net loss rose 56% y/y, but shrank 84% q/q, to Rmb205MM under PRC accounting standards. Annualized ROE was about -3%, and March-14 NAV fell 1% q/q, to Rmb1.93. Key 1Q14 highlights: Revenue rose 5% y/y and 4% q/q, driven by 8% y/y and 7% q/q growth in passenger traffic (domestic +9% y/y, +6% q/q, regional +7% y/y, +10% q/q, intl +5% y/y, +9% q/q). Cargo traffic rose 4% y/y, but fell 14% q/q (intl +5% y/y, -13% q/q, domestic flat y/y, 19% q/q, regional -1% y/y, -11% q/q). Operating costs rose 3% y/y, but fell 6% q/q. Taxes rose 141% y/y. The effective tax rate for 1Q14 was c.34%. Comparing Big 3 carriers results: China Southern led in terms of revenue growth, with the top line rising 10% y/y in 1Q14, followed by Air China/CEA at +7%/+5%. However, only Air China was profitable, with a net margin of 0.4%, while CEA/CSA reported net loss margins of 0.9%/1.2%. Already near fair value; stay Neutral: Although CEAs recurring earnings are expected to improve this year, we believe it is already near fair value and see better risk-reward in Air China. A key risk is potential equity-raising, given its high financial leverage and capex. However, if CEA succeeds in bringing in strategic investor(s), it would be a positive catalyst for the stock. In addition, if the CNY weakens further, CEA could book substantial forex losses (we factored in Rmb1.7B in FY14E).
China Eastern Airlines - H (Reuters: 0670.HK, Bloomberg: 670 HK) Rmb in mn, year-end Dec FY12A FY13A FY14E Revenue (Rmb mn) 85,253 88,245 100,539 Net Profit (Rmb mn) 3,072 2,373 577 Recurring Net Profit (Rmb 2,924 396 2,269 mn) EPS (Rmb) 0.27 0.19 0.05 Recurring EPS (Rmb) 0.26 0.03 0.18 DPS (Rmb) 0.00 0.00 0.00 Revenue growth (%) 3.5% 3.5% 13.9% Recurring Net Profit growth 8.1% (86.4%) 472.6% EPS growth (%) (32.9%) (31.3%) (75.7%) Recurring EPS growth 8.1% (87.9%) 472.6% ROCE 4.9% 1.6% 3.3% ROE 16.5% 10.1% 2.1% P/E (x) 7.0 10.2 41.8 P/BV (x) 1.1 0.9 0.8 EV/EBITDA (x) 8.3 10.8 8.9 Dividend Yield 0.0% 0.0% 0.0%
Neutral
Hong Kong Airlines Corrine Png

AC
Price Performance
3.4 3.0 HK$ 2.6 2.2
Abs Rel
YTD -19.2% -10.6%
1m -7.8% -6.6%
3m -9.6% -9.4%
12m -23.9% -15.5%
FY15E 108,541 2,615 2,615 0.21 0.21 0.00 8.0% 15.3% 353.2% 15.3% 3.3% 8.6% 9.2 0.8 8.7 0.0%
FY16E 116,183 2,737 2,737 0.22 0.22 0.00 7.0% 4.7% 4.7% 4.7% 3.2% 8.3% 8.8 0.7 8.1 0.0%
Company Data Shares O/S (mn) Market Cap (Rmb mn) Market Cap ($ mn) Price (HK$) Date Of Price Free Float(%) 3M - Avg daily vol (mn) 3M - Avg daily val (HK$ mn) 3M - Avg daily val ($ mn) HSCEI Exchange Rate Fiscal Year End Price Target End Date
12,674 24,122 3,858 2.36 29 Apr 14 28.0% 5.27 14.15 1.8 9770.10 7.75 Dec 30-Jun-15

30 April 2014
China National Building Material

1Q14 results inline - Solid start to the year
China National Building Material (CNBM) reported a strong start to the year with sharply higher 1Q14 results (+78% y/y). Importantly, the company continues to make progress in reducing its elevated debt (net) levels. Given policy support on urbanization and reducing overcapacity, as we enter the 2Q peak construction season, we reiterate our OW rating. 1Q14 strong start - NPAT of +78%. CNBM reported 1Q14 NPAT of Rmb556MM (+78% y/y), representing 8% of Street FY14 estimates (Rmb7.0B, JPMe Rmb8.4B), compared to 1Q13 which accounted for 5% of FY13 profits. 1Q14 sales revenue was up 12% y/y while costs were contained at 5% y/y, resulting in a 40% y/y uplift in gross profit (GP) to Rmb5.4B. SG+A (+33% y/y), admin (+22% y/y) and finance costs (+33% y/y). 1Q14 GP/t rose to Rmb69/t for cement on the back of cement ASP of Rmb261/t and sales volume of 49Mt. Free cash flow (FCF) was broadly neutral while net gearing continued its fall to 294% (FY13: 301%). Positive sector outlook, focus on strategy of reducing debt. CNBM did not provide specific guidance in its 1Q results release. In regions in which CNBM competes, we note that prices are showing signs of bottoming out while we estimate cash spreads have begun to recover from their March lows, and nearly double the level in late April 2013. Cement fundamentals remain supportive, in our view, as supply is contained by Chinas policy focus on reducing overcapacity and pollution, while demand is supported by urbanization plans (ie. infrastructure investment, social housing construction, and shanty town renovation among others). Stay OW, with Dec-14 PT of HK$12. We keep our earnings forecasts unchanged, at c20% above Street estimates. Our PT remains at HK$12.00, equating to 6.1x FY14E P/E and 1.2x FY14E P/BV, well below the historical mean (P/E 8.4x, P/BV 1.6x). Near-term catalysts include Street upgrades, cement price rebound on 2Q peak season, and China mini stimulus.
China National Building Material (Reuters: 3323.HK, Bloomberg: 3323 HK) Rmb in mn, year-end Dec FY12A FY13A FY14E FY15E Revenue (Rmb mn) 87,218 117,688 140,491 153,197 Net Profit (Rmb mn) 5,580 5,762 8,441 9,832 EPS (Rmb) 1.03 1.07 1.56 1.82 DPS (Rmb) 0.15 0.15 0.23 0.26 Revenue growth (%) 8.9% 34.9% 19.4% 9.0% EPS growth (%) (30.4%) 3.3% 46.5% 16.5% ROCE 8.7% 8.0% 9.1% 9.9% ROE 19.6% 17.5% 21.7% 21.0% P/E (x) 5.8 5.6 3.8 3.3 P/BV (x) 1.1 0.9 0.8 0.6 EV/EBITDA (x) 9.1 8.7 7.1 6.4 Dividend Yield 2.6% 2.6% 3.8% 4.4%
Overweight
China Cement Daniel Kang

AC
(852) 2800 8570 daniel.kang@jpmorgan.com Bloomberg JPMA KANG <GO>
Waiyin Karen Li, CFA

(852) 2800-8561 waiyin.karen.li@jpmorgan.com J.P. Morgan Securities (Asia Pacific) Limited
Price Performance
10.0 9.0 HK$ 8.0 7.0 6.0
Abs Rel
YTD -11.5% -7.8%
1m -4.8% -6.6%
3m -1.7% -3.1%
12m -20.7% -20.1%
FY16E 166,172 9,937 1.84 0.27 8.5% 1.1% 9.7% 18.0% 3.2 0.5 6.2 4.5%
Company Data Shares O/S (mn) Market Cap (Rmb mn) Market Cap ($ mn) Price (HK$) Date Of Price Free Float(%) 3M - Avg daily vol (mn) 3M - Avg daily val (HK$ mn) 3M - Avg daily val ($ mn) HSI Exchange Rate Price Target End Date
5,399 32,133 5,139 7.38 29 Apr 14 23.85 181.70 23.4 2,2132.53 7.75 31-Dec-14

29 April 2014
China Shipping Container Lines -H

Turned profitable in 1Q14, beating expectations; low valuations priced in challenging outlook
CSCL reported better-than-expected results in 1Q14. However, we are concerned about CSCL's rising capex following its recent 19,000 teu vessel order and meaningful revenue exposure (24%) to the Asia-Europe trade, which will continue to face intensive competitive pressure. Having said that, we see limited downside risk following its recent share price correction and undemanding valuations. However, we prefer OOIL and Evergreen Marine in the regional container shipping sector. Turned profitable in 1Q14: CSCL reported a small net profit of Rmb61MM in 1Q14, an improvement from its net loss of Rmb689MM in 1Q13 and Rmb977MM loss in 4Q13 under PRC accounting standards. The results were boosted by Rmb281MM disposal gains and Rmb19MM government grants in 1Q14. Excluding these, CSCL incurred a small recurring loss of Rmb239MM. March 2014 BV/shr was steady q/q at Rmb2.04. Annualized recurring ROE was negative 4%. Key 1Q14 highlights: Revenue rose 6% y/y but fell 10% q/q, mainly on the back of lower volumes as freight rates rose q/q especially on Asia-Europe and transpacific trades. China-rest of the world spot freight rates fell c.19% y/y but rose c.5% q/q in 1Q14 based on the SCFI (see Table 2 for more details). Operating costs rose 1% y/y but fell 18% q/q, which is positive. Business taxes and surcharges fell 18% y/y, 22% q/q and finance costs rose 27% y/y, 1% q/q. This resulted in a pre-tax profit of Rmb75MM in 1Q14 vs a pre-tax loss of Rmb680MM in 1Q13 and Rmb891MM in 4Q13. Key risks: Key downside risks: 1) global container shipping demand growth stalls or weakens, 2) rising bunker fuel prices and limited, passthrough, 3) prolonged industry oversupply, and 4) slowdown in domestic China container shipping trade. Key upside risks: 1) significant improvement in freight rates, 2) stronger-than- expected demand growth, 3) falling fuel prices, 4) industry returns to demand-supply balance earlier than expected, and 5) industry consolidation.
Overweight
China Shipping Corrine Png

AC
Price Performance
2.3 2.1 HK$ 1.9 1.7 1.5
Abs Rel
YTD -11.4% -2.8%
1m 1.7% 2.9%
3m -1.6% -1.4%
12m -2.7% 5.7%
China Shipping Container Lines - H (Reuters: 2866.HK, Bloomberg: 2866 HK) Rmb in mn, year-end Dec FY12A FY13A FY14E FY15E Revenue (Rmb mn) 32,998 33,917 35,382 38,133 Net Profit (Rmb mn) 525 (2,610) (2,587) (170) EPS (Rmb) 0.04 (0.22) (0.22) (0.01) DPS (Rmb) 0.00 0.00 0.00 0.00 Revenue growth (%) 16.8% 2.8% 4.3% 7.8% EPS growth (%) (119.1%) (597.2%) (0.9%) (93.4%) ROCE 17.9% (5.4%) (4.4%) 0.9% ROE 2.0% (10.4%) (11.5%) (0.8%) P/E (x) 32.1 NM NM NM P/BV (x) 0.6 0.7 0.8 0.8 EV/EBITDA (x) 14.4 NM NM 19.6 Dividend Yield 0.0% 0.0% 0.0% 0.0%
FY16E 39,914 710 0.06 0.00 4.7% (517.2%) 2.6% 3.3% 23.8 0.8 13.7 0.0%
11,683 16,865 2,697 1.79 29 Apr 14 54.0% 16.44 30.59 3.9 9770.10 7.75 Dec
29 April 2014
CIMB Group Holdings (CIMB MK)

Niaga reported weak 1Q; cost control the key for group RoE
Neutral
Price: M$7.48 29 Apr 2014 Price Target: M$7.70 PT End Date: 31 Dec 2014
CIMB Niaga announced 1Q14 net profit of Rp1.1T, up 4% y/y and 3% q/q. PPOP declined 9% q/q due to higher operating costs, leading to a 52% CIR. NII declined 3% q/q as margins compressed 16bp q/q to 5.2%. Net profits were up due to lower credit costs of 49bp (ann.) vs. 89bp (ann.) in 4Q13. In M$ terms, net profit declined 10% q/q as Rp/M$ depreciated, on average, by 13% q/q. Hence, we expect a 3% impact on CIMBs 1Q14 group numbers from these results. Moreover, with capital-raising of M$2.84B in January, we expect a 130bp RoE impact for the group, limiting any near-term upside for the stock price. It is worth noting that Maybank has traded in-line with KLCI since 5 Oct 2012 when the bank raised M$3.66B of capital. We believe that the key shift in CIMBs strategy that can drive RoE and the stock higher is cost containment. The bank reported a 58% CIR in 2013, which we believe allows room for the bank to increase efficiency. While the bank managed personnel costs via VSS last year (M$217MM one-time for M$130MM of recurring savings), we believe only a tight cost control such as in 2011 (flat costs y/y) can meaningfully offset the impact of a higher equity base on RoE. Other than that, we see limited revenue drivers that could lead to substantially higher RoE in 2014/15 due to the challenging macro environment in the key markets of Malaysia and Indonesia. Maintain Neutral. Other key points from Niaga results: Loans grew 13% y/y (+3% q/q) to Rp161T. Consumer loans were up 5.1% y/y, boosted by the personal loans (+62.2% y/y) and credit card sub-segment (+17.4% y/y) SMME loans were up 14.6% y/y, with micro loans up 25.3% y/y Commercial loans up 6.9% y/y Corporate loans up 12.7% y/y, driven by working capital loans (+43.3% y/y)
NPLs were up 18% q/q and NPL ratio deteriorated to 2.6% in 1Q14 (up 12bp y/y and 34bp q/q). Special mention loans were up 51bp y/y (+45bp q/q) to 5.7% ROE declined by 107bp q/q to 16.7%
Key takeaways from analyst briefing

We attended the analyst conference call; notes are as follows: 1H14 outlook is looking tough, 2H14 will be better, after general election. Loan growth is picking up, coming from the corporate side. Maintain low-to-mid-teen loan growth target for 2014. LDR improved: Pushing more of dollar loan, seen an improvement in US$ LDR from 65% in 4Q13 to 72% in 1Q14 Rupiah LDR is about 91% and Dollar LDR is about 72% (bank only) Consolidated LDR is higher at 98%.

30 April 2014
CJ O Shopping
Largely in-line results
CJ O Shopping reported largely in-line results in 1Q14. Gross sales growth was softer than expected, mainly due to weak apparel sales with warmerthan-expected weather. On the margin front, the GPM improved, but this was offset by increased marketing costs. Dividend income was the main reason for net profit that was better than our and market consensus estimates. CJ O Shopping is likely to continue benefiting from strong traffic growth in mobile. Although some cannibalization of TV and PC internet sales seems to be under way, overall traffic to CJ O Shopping is still on the rise, continuously gaining shares from other major retail formats. Although marketing expenses are likely to remain a dragging factor, GPM improvement should keep OPM stable. Maintain OW. Mobile platform gaining share from other platforms: In-line with consumer traffic moving to mobile from internet and catalogue, sales growth on the mobile platform accelerated further, to 312% y/y, while sales declined on all other platforms. Despite the sales decline in TVs, PCs, internet, and catalogue, overall gross sales increased 6% y/y. Going forward, mobile is likely to be the major sales growth driver, as the mobile platform should be able to cover a wider range of consumer groups, in addition to some existing consumers moving to mobile from TV and internet. GPM improved, but rise in marketing expense caused OPM to drop: GPM came in better than expected, thanks to increased contribution from PB, accounting for over 30% in 1Q14, up from 26% in 1Q13. However, OPM was down 20bp due to increased marketing costs, mainly mobile. Marketing expenses are likely to remain elevated for the time being amid competition among e-commerce players and retailers who are trying to expand online and mobile.
CJ O Shopping (Reuters: 035760.KQ, Bloomberg: 035760 KS) Year-end Dec FY12A FY13E Revenue (W bn) 1,077 1,261 Net profit (W bn) 123 108 EPS (W) 19,769 17,461 DPS (W) 2,876 2,541 Revenue growth 20.4% 17.0% Net profit growth 38.7% (11.7%) EPS growth 38.7% (11.7%) ROE 30.1% 21.2% P/E (x) 18.0 20.4 P/BV (x) 4.7 4.0 EV/EBITDA (x) 15.4 13.9 Dividend Yield 0.8% 0.7%
Overweight
035760.KQ, 035760 KS Price: W356,700 Price Target: W452,000
South Korea Specialty Retailing Youna Kim

AC
(82-2) 758-5715 youna.kim@jpmorgan.com Bloomberg JPMA YKIM <GO> J.P. Morgan Securities (Far East) Ltd, Seoul Branch
Sally Yoo
(82-2) 758-5383 sally.yoo@jpmorgan.com J.P. Morgan Securities (Far East) Ltd, Seoul Branch
Ebru Sener Kurumlu

(852) 2800-8521 ebru.sener@jpmorgan.com J.P. Morgan Securities (Asia Pacific) Limited
Price Performance
440,000 400,000 W 360,000 320,000 280,000
035760.KQ share price (W) KOSPI (rebased)
Abs Rel
YTD -16.3% -16.2%
1m -2.3% -1.5%
3m -11.5% -12.7%
12m 10.2% 9.0%
FY14E 1,329 146 23,591 3,432 5.4% 35.1% 35.1% 23.8% 15.1 3.3 10.9 1.0%
FY15E 1,446 169 27,199 3,957 8.8% 15.3% 15.3% 22.5% 13.1 2.7 8.9 1.1%
Company Data 52-week Range (W) Market Cap (W bn) Market Cap ($ mn) Shares O/S (mn) Fiscal Year End Price (W) Date Of Price Free Float(%) 3M - Avg daily vol (th) 3M - Avg daily val (W mn) 3M - Avg daily val ($ mn) KOSPI Exchange Rate Price Target End Date
431,600300,900 2,213 2,138 6 Dec 356,700 29 Apr 14 49.2% 23.1 8,641.3 8.3 1,964.8 1,035.3 31-Dec-14
29 April 2014
CLP Holdings (2 HK)

Perpetual bond issuance minimizes need for potential equity placement
Neutral
Price: HK$62.25 29 Apr 2014 Price Target: HK$65.00 PT End Date: 30 Jun 2015
CLP issues US$500MM perp at 4.25%. CLP Power HK has issued US$500MM of perpetual bonds at 4.25%. The notes are perpetual and non-callable in the first 5.5 years. There will be a coupon step-up of 25 basis points and 75 basis points at Year 10.5 and Year 25.5, respectively. (Source: Company announcement, 29 Apr 2014) JPM comments: Likely to help fund CAPCO acquisition. This bond issuance follows CLPs HK$2.8B sale of some of its minority-owned China power plant assets earlier this month. We believe the asset disposal and bond issuance are to help CLP finance the HK$14B CAPCO acquisition. Positive on balance sheet and gearing: We see the bond issuance as a positive, as it would minimize the need for CLP to issue new shares to fund the CAPCO acquisition. (CLP management was previously exploring the use of equity, bonds, loans or hybrid financing as permanent funding for CAPCO.) In addition, as the notes are accounted for as 100% equity in accounting treatment and 50% equity by credit agencies, the bonds should not have too much impact on CLPs gearing or credit rating, in our view. Maintain Neutral. CLP remains the less exciting HK utility, in our view, with limited catalysts in 2014 given the continued lackluster performance at its overseas businesses. Yet, we believe downside to the share price is likely to be limited given stable DPS growth of 0-2% pa (current yield at ~4.5%). We maintain our Neutral rating on CLP with a Jun-15 PT of HK$65. We prefer CKI (1038 HK) and Power Assets (6 HK) in HK utilities.
Investment Thesis CLP Holdings is one of two integrated power suppliers in HK via its 100%-owned transmission and distribution utility, CLP Power, and 40%-owned generation entity CAPCO. Outside of HK, CLP is one of the largest regional power utilities in Asia with power assets in Australia, India, China, Taiwan and Southeast Asia. Valuation We value CLP using a sum-of-the-parts valuation by valuing each geographical region based on a DCF. Our Jun-15 PT of HK$65 implies FY15E yield of 4.1% and FY15E P/E of 15x.
Segment
Discount rate 5.6% 10.9% 9.6% 11.8% 10.9%
HK Australia China India Southeast Asia and Taiwan Net debt Tariff Stablisation Fund
Source: J.P. Morgan estimates.
Terminal growth rate/ exit multiple 1.0% 9x EBITDA 9x EBITDA 9x EBITDA 9x EBITDA
Valuation methodology DCF DCF DCF DCF DCF
Valuation (HK$MM) 178,876 24,133 21,046 7,504 2,443 (67,498) (1,634) 164,870
NAV per share (HK$) 70.8 9.6 8.3 3.0 1.0 (26.7) (0.6) 65.3
% of total 76.4% 10.3% 9.0% 3.2% 1.0%
100.0%

29 April 2014
Ctrip.com International, Ltd

Strategic investments to drive formation of healthy ecosystem in China's online travel market - ALERT
Ctrip announced yesterday an investment agreement with Tongcheng Network, a local attraction ticket service provider, to invest US$200m cash and become the second-largest shareholder of Tongcheng (second to Tongchengs management team). Separately, Ctrip will invest US$15m in Tuniu, an online packaged tour provider, upon its upcoming IPO. We are positive on these two investments. Maintain OW. Background on Tongcheng. Tongcheng is a leading leisure travel services provider in China, offering booking services for local attraction tickets, selfguided tour packages, hotel room nights, air tickets, etc. Tongcheng is an early mover in the local tour market and has built a strong local attraction network. Tongcheng had a 23.0% share of the local tour market in 2013, followed by Ctrips 7.5%, according to iResearch. Tencent made investments in Tongcheng in 2012 and 2014 with undisclosed shareholding. Moreover, Tongcheng entered into a strategic cooperation with eLong on April 9 to become the exclusive provider of attraction tickets to eLong. J.P. Morgan view: 1) We believe the two investments further demonstrate Ctrips determination to drive the formation of an ecosystem in Chinas online travel market that is centered around Ctrip and to proactively align itself with key players. Ctrip has aligned itself with key players through investment activities in the following upstream, downstream and vertical areas: budget hotels, car rental, vacation rental, cruise travel, attraction tickets and packaged tours. The formation of an ecosystem is likely to accelerate the growth of Chinas online travel market, in our view. 2) We expect the investment in Tongcheng to yield near-term synergies in terms of reducing irrational price wars in the attraction ticket business, which Ctrip started aggressively subsidizing to gain market share from Tongcheng in late 2013, with a peak in 1Q14. We found Ctrip offering coupons of as much as 90% of ticket value in some extreme cases in 1Q. We expect the investment to open the door to a more benign competitive dynamic in this vertical market. We believe it will enable Ctrip to potentially offload attraction ticket booking facilitated by onsite payments (which requires on-the-ground presence) to Tongcheng, with Ctrip likely focusing more on bookings through online payments (similar to group-buy). In March 2014, 57% of Tongchengs attraction ticket offering supported onsite payments vs. 31% of Ctrips, according to ctcnn.com. 3) Aligning Ctrips interest and strategic target with Tencent, another Tongcheng shareholder, could be both a challenge and an opportunity for Ctrip. 4) We see the investment in Tuniu as a longer-term strategic investment and believe near-term synergies might be less significant.
Overweight
CTRP, CTRP US Price: $45.03 28 April 2014
Internet Alex Yao

AC
(852) 2800 8535 alex.c.yao@jpmorgan.com Bloomberg JPMA YAO <GO>
Yong Wang
(852) 2800-8579 yong.y.wang@jpmorgan.com J.P. Morgan Securities (Asia Pacific) Limited
29 April 2014
Dabur India Limited (DABUR IN)

Encouraging volume growth in a challenging macro; stay OW
Overweight
Price: Rs180.10 28 Apr 2014 Price Target: Rs200.00 PT End Date: 31 Mar 2015
Dabur continues to outperform its peer group. It registered robust 9.2% domestic volume growth in Q4FY14 which is quite encouraging in backdrop of a weak consumption scenario. It stated an FY18 organic revenue target of Rs125bn implying CAGR of 15% over FY14-18E, after having met earlier target of achieving sales of Rs70bn and PAT of Rs9bn in FY14. Overall operational performance was in-line with our estimates with consolidated Sales, EBITDA and PAT posting 16%, 16% and 17% y/y growth respectively. Management continues to hold on to 8-10% volume growth guidance for FY15, expecting 1H to be more challenging vs 2H. There has been a fair bit of momentum on new product introductions and more is expected in foods, personal care and healthcare categories over FY15. We expect a combination of steady volume growth (8-10%), price rises, margin expansion and recovery in growth rates for Namaste operations to aid healthy growth in FY15E. Stay OW. Domestic volume growth at 9.2% continues to outperform market growth and is supported by the companys focused strategy to enhance its distribution reach and significant brand investments. Domestic FMCG growth of 14% y/y was led by health supplements (+18% y/y), foods (+21% y/y), toothpaste (+21% y/y), shampoos (+19% y/y) and digestives (+23% y/y).The hair care segment sales growth remains subdued at 6%. Overseas business registered 20% sales growth with double digit constant-currency growth led by GCC, Egypt, Levant and North Africa.
Domestic volume growth trends
16% 14% 12% 10% 8% 6% 4% 2% 0% 12% 10% 10% 9% 7% 5% 10% 8% 7% 15% 12% 10% 12% 9% 11% 9% 9%
Mar/10
Mar/11
Mar/12
Mar/13
Dec/10
Dec/11
Dec/12
Source: Company
Hoping for recovery in urban growth; moving to Project Core. Management expects gradual recovery in FY15 in urban growth rates more back ended towards 2H, though no uptick has been seen so far. They dont expect any significant upside to rural growth rates from current level, however their recent distribution initiative Project Core whereby they aim to increase their direct chemist channel reach from ~52K stores currently (from ~33K in Oct13) to ~75K stores over a year in 150 towns. This initiative would help enhance product width for categories like health supplements, digestives and OTC/Ethicals (chemist channel accounts for ~25% of sales for these) translating into higher and more profitable sales. Poor monsoons remain a key risk for growth in FY15. Selective approach towards creating a differentiated portfolio. Focus categories for Dabur include health supplements, OTC, toothpastes, foods and home care. Company is less optimistic about growth for hair oils (expected at HSD). Within oral care focus is to improve share of Dabur Red and Meswak which now account for
Dec/13
Sep/10
Sep/11
Sep/12
Sep/13
Mar/14
Jun/10
Jun/11
Jun/12
Jun/13
29 April 2014
Far East Hospitality Trust (FEHT SP)

1Q14 results review: still a soft quarter
Underweight
Price: S$0.89 25 Apr 2014 Price Target: S$0.80 PT End Date: 30 Jun 2014
FEHT reported 1Q14 DPU of S1.30/unit, annualizing 6.0% yield, missing both J.P. Morgan and consensus estimates. While distributable income was up 4.5% YoY with Hotel Rendezvous contributions offsetting weaker hotel performance, DPU fell by 5.8% due to a larger equity base post placement. Numbers for Hotel Rendezvous were in line with expectations, but excluding these contributions, both revenues/NPI declined by a low-single digit YoY. Both gearing, averaged borrowing costs were unchanged at 30.9% and 2.2% respectively, with fixed debt hedge ratios at 62%. Note that the trust has an outstanding S$300million, floating-term debt due in 2015. NAV remained stable at S$0.98/unit. The trust will trade ex 1Q14 dividend on 08-May. Diverging hotel / serviced residence performance. Occupancy rates continued to be a drag amidst stable room rate trends, with Hotel RevPAR down 1.3% YoY to S$159/night. Serviced Residence performance remains stable with RevPAU up 1.2% to S$221/night. Both segments however, saw a sliding proportion of corporate travel QoQ due to seasonality, with Hotels down to 45% (4Q13: 47.2%) and SRs down to 76.8% (4Q13: 81.2%). Management also highlighted operating challenges in the Orchard Road hotels from a weaker leisure market, citing strengthening SGD, and intensifying competition. Competition intensity to ramp up end 2014. While sectoral RevPAR trends are expected to benefit from a heavier 1H14 MICE calendar and favourable base effects against 2013 lows, we note that supply intensity is expected to ramp up in the quarters ahead, with c.61% of 2014 supply to complete by 3Q14 and primarily in the Mid to Upscale segment. Visibility on demand recovery continues to remain weak given moderating travel trends, which remains as a key overhang on the sector. We retain our current estimates pending further reviews.
Table 1: Far East Hospitality Trust: 1Q14 results review

S$ in millions, otherwise specified Gross revenue Net property income Borrowing costs Net income Income available for distribution DPU (S) Hotels Occupancy (%) RevPAR (S$/day) Serviced Residences Occupancy (%) RevPAR (S$/day)
Source: Company data.
1Q14 30.7 27.6 -4.2 20.3 23.1 1.30 83% 159 87% 221
4Q13 33.6 30.5 -3.6 24.1 25.1 1.42 86% 167 90% 226
% Q/Q -9% -9% 18% -16% -8% -8% -3% -5% -2% -2%
1Q13 28.1 26.0 -3.7 19.2 22.1 1.38 86% 161 85% 219
% Y/Y 9% 6% 12% 6% 4% -6% -2% -1% 3% 1%
29 April 2014
Godrej Consumer Products Limited (GCPL IN)

Stepping on cost reduction initiatives in an uncertain demand environment
Overweight
GCPLs focus on improving profitability in FY15 is a welcome step, though demand challenges are likely to weigh on near term top-line growth. We believe margins have likely bottomed out in FY14 and expect them to move up in FY15 supported by pricing, better mix and lower cost inflation. Over the medium term rising contribution from new categories, working capital/cost efficiency, improved mix and distribution enhancement would aid healthy growth rates. We maintain our earnings estimates and stay OW on the stock. In the just concluded earnings call, management re-iterated its aim of driving operating profit growth ahead of revenue growth and remains confident of sustaining above industry growth rates. Key takeaways from the call are below: Soaps - Expect recovery in FY15: Sales growth moderated to 1% (vol decline of -4%) in Q4 on account of weak category growth (HSD vol/value decline), extended winter in North India (which accounts for over 50% of GCPLs soaps revenue) and lack of winter soaps products. Mgmt expects growth rates to recover in FY15 off a benign base. Household insecticide New product launches to support growth. HHI registered 17% (2/3rd vol led) growth in Q4. GCPL has been fairly aggressive on new product launches (Fast Card, Good Knight Xpress, AntiRoach Gel), which have seen encouraging consumer response. Competitive intensity sustains at higher levels, though GCPL has been gaining shares on a consistent basis here. Hair Colors Premium variants, rural distribution and marketing investments to drive growth. Q4 growth of 16% was entirely volume led. GCPL sees huge growth potential in this underpenetrated category and expects Expert Crme range to convert more non-users to users and help uptrade existing powder users to more profitable crme. A new product campaign has been launched and premium variants priced at Rs35 (regular pack at Rs30) have been introduced. While FY14 saw push of creme sachets in urban markets, FY15 would witness distribution being extended to rural markets. Mgmt is hopeful of sustaining healthy growth trends in FY15 and is not perturbed by growing competition here (Loreal and Marico launching crme sachets). Indonesia Price hikes aid margins. Reported sales were up 1% y/y (constant currency: 8% with over 2/3rd volume led). Excluding the foods distribution business sales grew 5% impacted by adverse forex movement of 7% and sluggish market. Margins were 18% (-110bp y/y, +200bp q/q) improving sequentially on back of price hikes. Latin America Aiming for margin enhancement. Reported sales growth of 5% y/y was impacted adversely by forex movement of -23%. Constant currency sales growth at 28% (volume growth was high single digit) was healthy supported by continued marketing investments and market share gains. Margin improved substantially to 20% (Q4FY13: 9%, Q3FY14: 9%) led by healthy sales, improved mix (seasonal) and cost efficiency. Mgmt noted that 20% margins were more a one-off on account of seasonality, however they expect annual margins to recover to ~15% levels over the next 18 months. Africa Darling and Rapidol perform well; Kinky continues to disappoint. Africa region posted 39% y/y sales growth aided by favorable 6% forex impact and 15% margins. Hair extensions posted volume led growth. Rapidol registered mid 20s sales growth and 28% EBITDA growth. Kinky continues to face operational challenges and mgmt is hopeful of margin breakeven by later this year. The insecticide foray in Nigeria is progressing well and mgmt is hopeful of extending HHI into more countries in current fiscal.
29 April 2014
IJM Land (IJMLD MK)

Show-room time: Bandar Rimbayu 'Phase 3'
Overweight
Over the past weekend, IJM Land had a preview/pre-launch of Phase 3 of its Bandar Rimbayu project in Klang Valley (this is one of the main launches being watched by the market, and IJM Lands first key project post the cooling measures since Jan-14). The preview saw strong interests (photos of the sales gallery during the event attached below) with all 150 units of linked semi-Ds opened up so far, fully taken-up. This supports our view that landed residential developments priced affordably in choice locations by well reputed developers would likely continue to see good demand amid the sector slowdown. IJM Land (OW) remains our top property pick. Bandar Rimbayu Phase 3 pre-launch over the past weekend. To recap, Bandar Rimbayu is the groups key flagship project in Klang Valley with total project GDV of M$11B to be developed over 10 years. Phase 1 and 2 (GDV: M$300MM each) launched since last year have largely been fully sold (for non-Bumi units). Phase 3, which was previewed over the past weekend, has a total project GDV of M$370MM comprising largely linked semi-Ds priced at M$0.8-1MM per unit. Only 150 non-Bumi units were opened so far, constituting just about 40% of the entire Phase 3 project size, which was fully taken-up during the past weekend though still pending official signing of the S&Ps. Given the location of the project (an emerging hot spot southwards of Klang Valley with improving accessibility via the South Klang Valley Expressway), the affordable pricing range and IJM Lands strong branding, we believe the opening up of subsequent units under Phase 3 upon official launch when the show units are ready, will continue to see good demand. Competition rising but IJM Land has competitive advantages over its peers. While competition will rise with the entry of new listed developers (i.e. Tropicana, Eco World), which have purchased land-bank for development with close proximity to the Bandar Rimbayu project, IJM Lands edge we reiterate lies in: 1) Its low entry cost at M$5psf for its 1,589-acre of land here thereby providing it flexibility to price more competitively (versus M$1718psf for Tropicana and M$35psf for Eco World), and 2) Its first mover advantage having already launched since early-2013 (Tropicana expected to launch in 2H14, while Eco World will launch in 2015). Pre-sales projections. To recap, IJM Land remains the least impacted by the cooling measures among peers (i.e. zero exposure to Nusajaya, Iskandar, and minimal exposure to DIBS which has been banned). Hence, we are forecasting FYE Mar-15E pre-sales for IJM Land to drop by just 5% Y/Y to M$2.0B (versus industry forecast pre-sales drop of 20% Y/Y), followed by a 22% growth or recovery to M$2.5B by FY16E. Other key upcoming launches to watch for the sector. 1) E&Os Avira project in Medini, Iskandar will be launched in May-14 (208 units of landed homes at M$1.3-1.5MM/unit). 3) Sunway Bhds Citrine maiden launch in Medini, Iskandar will be launched by Jun-14 (495 units of residences and office units priced at M$450K/unit onwards with total GDV of M$300MM). 4) IJM Lands Pantai Sentral Park project (high-rise) near Bangsar South at pricing of M$700psf will be launched by Jun-14. Initial response towards these projects specifically has been strong as they are focused on the right segments (i.e. affordable landed), with good location and/or strong product concept. For more details, please refer to our 4th April 2014 updated on IJM Land titled Key Highlights from JPMs Real Estate Conference and our 11th April 2014 presentation titled Malaysian Developers/REITs: Stay with the winners (Key OWs IJM Land, Sunway Bhd, IGB REIT).
29 April 2014
Industrial and Commercial Bank of China - H (1398 HK)

1Q14 results show balanced growth; asset quality remains a concern
Overweight
ICBC reported 1Q14 net profit of RMB73bn, up 7% YoY, accounting for 26% of our FY14 estimate, in line with expectations. PPoP growth was 10% YoY, driven by fee growth (+10% YoY) and net interest income growth (9% YoY). Asset quality trends, loan and deposit growth are in line with expectations. We maintain our OW rating on ICBC due to its stable financial performance, strong liquidity and capital position. NIM: ICBC didnt disclose 1Q14 NIM; according to our calculation, NIM is likely flat qoq. This is in line with trends shown by the other big-4 SOE banks. Asset quality deterioration within expectations: NPL amount increased by 7% qoq, and NPL ratio increased by 3bps to 0.97% at end 1Q14; the deteriorating trend on a sequential basis was similar to 4Q13, in line with expectations. On a Group basis, NPL coverage declined by 11.8ppt qoq to 245.4% and loan-loss reserves declined by 5bps qoq to 2.38% at end 1Q14. However, for domestic business, the loan-loss reserve ratio was 2.52%, higher than CBRC guidelines of 2.5%. Balance sheet growth and liquidity: Loan growth was 5% qoq, in line with industry growth. Deposit growth of 4% is slightly lower than industry growth of 5% qoq. The loan-to-deposits ratio was 68.4% at end 1Q14 on a Group level, while for domestic business, LDR was 67.3%. Balance sheet liquidity remains strong. Capital position improves: The tier-1 ratio improved by 31bps qoq to 10.88%; we believe by adopting IRB in calculating risk-weighted assets, the capital ratio will continue to improve.
1Q13 106,717 38,026 34,185 3,841 144,743 (44,829) 99,914 (12,434) 88,338 (19,525) 68,743 9,264,954 80,237 14,384,273 18,357,278 1,194,175 2.59% 31.0% 23.7% 1.53% 0.87% 288.1% 2.50% 0.55% 64.4% 11.00% 13.68% 2Q13 109,172 37,561 33,197 4,364 146,733 (46,920) 99,813 (9,493) 90,503 (20,839) 69,604 9,437,642 81,768 14,508,402 18,723,353 1,171,507 2.56% 32.0% 23.5% 1.50% 0.87% 288.2% 2.50% 0.41% 65.0% 10.48% 13.11% 3Q13 111,747 29,251 28,121 1,130 140,998 (48,979) 92,019 (6,337) 85,808 (18,514) 67,186 9,644,520 87,361 14,692,718 18,742,548 1,231,739 2.56% 34.7% 22.4% 1.43% 0.91% 268.9% 2.44% 0.27% 65.6% 10.59% 13.17% 4Q13 115,699 30,728 26,823 3,905 146,427 (63,412) 83,015 (9,834) 73,888 (16,694) 57,116 9,922,374 93,689 14,620,825 18,917,752 1,274,134 2.59% 43.3% 18.2% 1.21% 0.94% 257.2% 2.43% 0.40% 67.9% 10.57% 13.12% 1Q14 115,825 41,038 37,682 3,356 156,863 (47,928) 108,935 (13,672) 95,657 (22,196) 73,302 10,372,180 100,550 15,160,980 19,734,683 1,358,485 2.60% 30.6% 22.3% 1.52% 0.97% 245.4% 2.38% 0.54% 68.4% 10.88% 13.22% QoQ 0% 34% 40% -14% 7% -24% 31% 39% 29% 33% 28% 5% 7% 4% 4% 7% 1bp -1275bp 404bp 30bp 3bp -1180bp -5bp 14bp 55bp 31bp 10bp YoY 9% 8% 10% -13% 8% 7% 9% 10% 8% 14% 7% 12% 25% 5% 8% 14% 1bp -42bp -144bp -1bp 10bp -4272bp -12bp -1bp 400bp -12bp -46bp
Table 1: Summary of ICBC 1Q14 financials

In Rmb mm unless otherwise stated Key P&L Items NII Non-Interest Income Fees Others Total Income Operating expenses PPOP LLP Pre-Tax Income Tax Attributable Income Key Balance Sheet Items Gross Loans Including NPL amount Total deposits Total assets Equity Key Ratios NIM Cost income ratio ROE ROA NPL Ratio NPL Coverage ratio Loan loss reserve Credit cost LDR Tier 1 Ratio (new) Total CAR (new)
Investment Thesis Fortress balance sheet with abundant liquidity (LDR 67.9% at end 2013) and strong capital position (Tier 1 10.6% at end 2013).
29 April 2014
ING Vysya Bank (VYSB IN)

4Q FY14: Positive surprise on margins
Overweight
ING Vysya Bank reported PAT of Rs1.39B (down 18% y/y, 19%< JPMe) mainly on account of one-off retirement benefit provisions. Margin improvement surprised us positively. Asset quality deteriorated during the quarter, in line with our expectation. Customer asset growth remained subdued given the weak macro. We maintain our OW on the stock given what we believe to be conservative management and strong deposit profile.
Table 1: 4Q FY14 result s
Rs MM, YE Mar. NII Other income Opex PPOP Provisions PBT Tax rate PAT NIM Cost-Income Tax rate Balance sheet data Loans Deposits CASA Ratio Asset Quality Gross NPA Net NPA Gross NPA (%) Net NPA(%) Credit cost
Source: J.P. Morgan estimates, Company data.
4Q 13 4,237 2,004 3,398 2,843 336 2,507 804 1,703 3.73% 54.5% 32.1% 317,720 413,340 32.5% 5,702 91 1.76% 0.03% 0.42%
3Q 14 4,161 2,146 3,564 2,743 230 2,513 839 1,673 3.55% 56.5% 33.4% 340,484 389,560 34.7% 5,827 731 1.68% 0.21% 0.28%
4Q 14 4,713 2,234 3,836 3,111 406 2,705 703 2,002 3.74% 55.2% 26.0% 358,289 412,168 33.4% 6,442 1,020 1.77% 0.28% 0.46%
YoY 11.2% 11.5% 12.9% 9.4% 20.8% 7.9% -12.5% 17.6% 0.01% 0.77% -6.08% 12.8% -0.3% 0.9% 13.0% 0.0% 0.3% 0.0%
QoQ 13.3% 4.1% 7.6% 13.4% 76.4% 7.7% -16.2% 19.6% 0.19% -1.29% -7.41% 5.2% 5.8% -1.3% 10.6% 39.5% 0.1% 0.1% 0.2%
Margins. Margin improved by 19bp q/q and stood at 3.74% in 4Q FY14, mainly on account of lower COD which declined by 13bp q/q to 7.21%. This was, however, offset by lower YOA which declined by 8bp q/q due to higher growth in low-yielding agri loans. SA balance growth remained strong at 10% q/q; however CA balance declined by 6% q/q which led to a decline in CASA ratio by 130bp to 33.4%. Asset quality. Asset quality deteriorated with incremental slippages at 1% v/s 0.3% in the previous quarter; this resulted in higher credit costs of 0.46% v/s 0.28% in 3Q14. Mid corporate segment contributed to the higher slippages during the quarter. Given the weak macro environment we expect credit costs to remain elevated in the medium term. We maintain our credit cost expectation of 64bp for FY14. Customer asset growth. Customer assets growth remained subdued at 12% y/y and 6% q/q. Growth was mainly driven by SME and Agri loans. Corporate loan growth was subdued at 3% y/y given the weak macro. Deposit growth was flat y/y due to equity-raising during the year and lower reliance on wholesale deposits.
29 April 2014
LG Electronics (066570 KS)

Very strong 1Q14 results despite ongoing loss in handset, and earnings visibility remains high in 2Q14
Overweight
Price: W71,700 29 Apr 2014 Price Target: W80,000 PT End Date: 31 Dec 2014
LG Electronics (LGE) reported a 1Q14 operating profit of W504bn on quarterly sales of W14.1tn, well above our estimates and Street consensus. Despite negative equity contributions, net profit turned to positive W177bn from net losses in 4Q13. The biggest upside came from robust HE business (OPM 4.9%), partially supported by improvement at MC (loss contracted to W9bn). Management guided 2Q14 sales to grow mid-single-digit % on a Y/Y basis and OPM to remain flattish on a Y/Y basis. We see upside to Street consensus and expect the Street to revise up earnings estimates, which would be a positive catalyst to the share price. Robust HE business in 1Q, but 2Q could see decline. Home Entertainment (HE) posted a strong OPM of 4.9% during 1Q14, well above our estimates of 1.8% (the highest level since 2Q12) on the back of solid LCD TV sales amid slow seasonality and ongoing product mix improvement (toward OLED/UHD/3DSmart TVs). The company mentioned that IT product sales also remained solid on strong seasonality in the domestic market. Moving into 2Q14, however, management projects margins will show a 200-300bps decline (guidance of 2-3% range) due to increases in marketing expenditures in preparation for a new model cycle. LGEs HE division has surprised on the upside in the last couple of quarters. Hence, we cautiously expect the HE business to remain strong, even in 2Q14. HA/AC&E likely Y/Y earnings improvement. LGE guided that both Home Appliance (HA) and Air Conditioning & Energy solutions (AC&E) would post Y/Y improvements, citing product mix improvements (increasing premium line-up sales at DM for HA and strong seasonality and increasing Air solution (e.g., humidifiers and air purifiers)). In terms of the top line, the company expects HA revenue to see a Y/Y decline due to a high base impact last year (inclusion of new U.S. channel sales), while AC&E should present Y/Y growth. MC remains uncertain. Shipments and sales both declined sequentially during 1Q due to slow seasonal demand. However, margin was slightly better than our expectation amid weak domestic handset market conditions. Heading into 2Q14, LGE guided its top line to show sequential growth based on low- to midteens handset shipment growth, along with a high-single-digit ASP decline. On smartphone standalone, the company expects 14.5-15M smartphone growth for 2Q14 and plans to roll out the next flagship phone (i.e., G3) in late May-early June, while management didnt commit to a turnaround in the MC division. Share price expectation. Although its handset recovery remains uncertain, other divisions should show strong earnings momentum in 1H due to seasonality for summer products (i.e., AC&E) and robust HE on a stronger-than-expected LCD TV market. Moreover, the increasing value of its affiliates (LGD and LGI) could help the stock higher, in our view. We will revisit our assumptions and earnings estimates. Meanwhile, we maintain our Dec-14 PT of W80,000, which is based on a mid-cycle valuation. Key catalysts include: (1) stronger-than-expected G3 acceptance at market after initial launch; (2) LCD TV demand following the May holiday; and (3) upward earnings revision on the Street.
Investment Thesis LGE has a diversified business portfolio from handsets, TV, and appliances to air conditioning. A stable LCD TV business and potential benefits from a developed market consumption recovery in the appliance business are positives, but intensifying competition in the mobile business (esp. the high-end segment) serves as a negative.
29 April 2014
Malaysia Airports Holdings Berhad (MAHB MK)

One potentially bad and good news each
Overweight
The International Air Transport Association (IATA) has proposed for passenger service charge (PSC) for KLIA main terminal and KLIA2 be balanced at between M$40/pax and M$45/pax for international flights, citing complaints from airlines given the discriminatory rates. Meanwhile, the Public Accounts Committee has questioned the M$100MM cost of building the 2.14km Express Rail Link (ERL) extension line from KLIA main to KLIA2, suggesting it should be borne by MAHB, and not the government.
(Source: The Edge Financial Daily)
Implications on MAHB This is not surprising. If the Malaysian government chooses to adopt IATAs recommendation, this would suggest a reduction in KLIA main terminal PSC from the current M$65/pax to around M$45/pax, while KLIA2 could see an increase from M$32/pax to M$40/pax. In our view, MAHB is unaffected by any proposed reduction in KLIA2 PSC as any shortfall will be compensated fully by Marginal Cost Support (MARCS), as stipulated in the existing concession agreement. On the other hand, for KLIA2, an increase in PSC to say M$40/pax is earnings/SoTP accretive for MAHB since the rate would be higher than existing stipulated rates. Based on preliminary estimates, this suggests a 22% increase to SoTP. On the additional M$100MM ERL cost suggested to be borne by MAHB, this would likely have a 0.7% impact on SoTP. Nevertheless, worst case, we believe MAHB could recoup the additional cost via a longer concession period, or potentially higher PSC. Meanwhile, all eyes will be on the opening of KLIA2 on May 2, plagued by several delays. We attended a tour/briefing ahead of the opening of KLIA2 and our key conclusion is that this time the opening is for real. Successful opening of KLIA2 is one of the main catalysts for MAHB. We like MAHB for exposure to rising Asian low cost air travel, minus AirAsia's fuel cost and currency risk. See MAHB: Observations from KLIA2 tour, looks all set for take-off.
29 April 2014
New China Life Insurance Company Ltd - H (1336 HK)

1Q FY14 first cut: strong top-line growth earnings momentum
Underweight
New China Life reported ~ Rmb1.56B (+6% y/y vs. JPMe: +5% y/y) of weak 1Q14 net profit despite +53% y/y premium growth during the quarter. Coupled with the highest policy surrender rate (2.2%) among the top four life insurers, its strong volume growth backed by single savings-type policies is unlikely to support the earnings growth momentum. In our view, the current consensus 23% net profit growth estimate for FY14 is too optimistic (JPMe: +8% y/y) and NBV growth will be flat in FY14. We believe the current share price does not fairly reflect the negatives, and we maintain our Underweight rating. Volume growth Earnings growth. The company reported ~ Rmb1.56B (+6% y/y) of 1Q14 net profit which is broadly in line with our estimate (~ Rmb1.53B, +5% y/y). In our view, the companys relatively weak earnings growth is largely due to its business model being highly dependent on single-type saving policy sales (i.e. ~70% of FY13 total first year premiums). As the premium growth drives the reserve growth, the chances of delivering decent earnings re-rating looks unlikely for the next several quarters under the current business structure. Thus, we believe that the consensus 23% y/y net profit growth estimate for FY14 is too optimistic (JPMe: +8% y/y). Volume growth NBV growth. Although the industry surrender rate trend is increasing, New China Lifes ratio is the highest among the top four life insurers. This means that the company will find it challenging to capture NBV growth opportunities in the fast-growing healthcare insurance market as the companys key business focus will be cash-flow matching between assets and liabilities. Thus, we believe that, unlike other major insurers, the companys FY14 NBV growth rate will remain flat. Coupled with its weak agency operation, the limited balance sheet budget for the growth will remain another challenge for the companys NBV/ earnings growth outlook, in our view. (For details, please see New China Life Insurance Company Ltd - H: Weak balance sheet suggests limited scale increase potential; downgrade to Underweight (March 27, 2014)) Price target, valuation and key risks. We maintain our Dec-14 EV-based PT of HK$18. Upside risks include faster-than-expected restructuring results and a sustained rally in A-share markets.
Table 1: New China Life: quarterly income statement

Rmb in millions, % Gross written premiums Premium ceded to reinsures Net written premiums Net change in unearned premium reserves Net earned premiums Total technical outgo Surrenders Claims paid Claims recoverable from reinsurers Provision for insurance reserves Insurance reserves recoverable from reinsurers Total expenses Commission and brokerage expenses Administrative expenses Expenses recoverable from reinsurers Business tax and surcharges Underwriting profit 1Q13 31,615 (85) 31,530 (206) 31,324 (30,874) (7,338) (2,792) 109 (20,780) (73) (3,923) (1,727) (2,189) 19 (26) (3,473) 2Q13 19,729 (76) 19,653 (36) 19,617 (19,097) (5,922) (2,121) 66 (11,095) (25) (3,704) (1,348) (2,344) 22 (34) (3,184) 3Q13 20,929 (81) 20,848 74 20,922 (20,803) (7,889) (2,290) 121 (10,717) (28) (3,730) (1,399) (2,361) 55 (25) (3,611) 4Q13 31,367 (51) 31,316 3 31,319 (32,967) (7,646) (2,052) 34 (23,321) 18 (4,928) (1,721) (3,203) 24 (28) (6,576) 1Q14 48,365 (108) 48,257 (186) 48,071 (47,300) (10,576) (3,977) 46 (32,796) 3 (5,116) (2,476) (2,635) 31 (36) (4,345) Chg. q/q 54% 112% 54% n.m. 53% 43% 38% 94% 35% 41% -83% 4% 44% -18% 29% 29% -34% Chg. y/y 53% 27% 53% -10% 53% 53% 44% 42% -58% 58% -104% 30% 43% 20% 63% 38% 25%
29 April 2014
Petronet LNG Ltd. (PLNG IN)

Muted quarter; focus on volume trajectory
Overweight
We expect PLNG to have a muted quarter, with earnings at Rs1.44bn (up 6% q/q; down 41% y/y), as earnings continue to be pressured by low utilization at Kochi, and high interest costs/depreciation. With a moderation in LNG prices this quarter, we expect volumes to pick up, driving sequential earnings growth. While we expect the coming few quarters to remain challenging, we believe this is largely discounted by the stock, and visibility over earnings growth (JPMe 26% CAGR over FY14-17E) will drive stock performance. Another challenging quarter: We expect PLNG to report profit of Rs1.44bn (down 41% y/y; up 6% q/q). Higher interest costs/depreciation on the Kochi terminal will likely keep earnings muted. We expect some growth sequentially, as volumes recover with lower LNG prices in the quarter. Volume trajectory important: We expect volumes to recover this quarter, as LNG prices declined post winter highs. We expect the volume trajectory, particularly commentary around prospects for Kochi utilizations, to be watched keenly by the market. Stock direction: While we expect the next few quarters to be challenging, we believe this is largely discounted by the stock. PLNG is a key beneficiary of Indias structural leverage to LNG we believe visibility of strong earnings growth will drive stock performance over the next 18-24 months.
4QFY13 84,656 79,986 137 190 4,344 247 468 203 3,831 2,451 1QFY14 84,442 79,593 86 785 3,978 240 467 152 3,423 2,253 2QFY14 94,935 90,316 80 900 3,639 386 597 161 2,818 1,818 3QFY14 93,821 89,171 106 1,045 3,499 783 1,017 216 1,916 1,356 4QFY14E 101,075 96,140 115 1,050 3,770 800 1,050 200 2,120 1,442 Y/Y 19% 20% -16% 453% -13% 224% 124% -1% -45% -41% Q/Q 8% 8% 9% 0% 8% 2% 3% -7% 11% 6%
Table 1: Petronet LNG earnings summary

(Rs mn) Net Sales Raw Material Staff Cost Other expenditure EBITDA Interest Depreciation Other Income PBT PAT
Source: Company reports and J.P. Morgan estimates.
Investment Thesis PLNG is the primary play on increasing usage of LNG in India where a large gap between demand and domestic supply will keep demand for LNG in place, in our view. While we believe the next few quarters will be challenging (given low Kochi utilization), the stock price reflects these concerns, in our view. Increasing volumes at Dahej would help drive earnings expansion in FY15-16E. We view PLNG as well positioned for investors with a horizon of 18-24 months. Valuation Our Mar-15 PT of Rs175 is based on DCF, with a WACC of 11.7% and a terminal growth rate of 2%.
Risks to Rating and Price Target Key downside risks include lower-than-expected regas margins and volumes, and execution delays.
29 April 2014
PT Ramayana Lestari Sentosa, Tbk (RALS IJ)

1Q14: Pressure on gross margins - could be the story for Indo retail sector through 2014
Neutral
Price: Rp1,240 28 Apr 2014 Price Target: Rp1,250 PT End Date: 31 Dec 2014
1Q14 core earnings in-line, but EBIT misses estimates. RALS kicked off 1Q result season for Indonesian retailers reporting 200bps YoY gross margin decline, leading to flat EBIT, 15% below our estimates. Core income (adjusted for MTM forex losses) growth of 16% YoY was in-line, buoyed by lower than expected tax in 1Q, while revenue growth of 9.5% YoY was also in-line with our estimates. We believe that recent increase in inventory levels seen for most Indonesian retailers poses a risk to gross margins, as retailers resort to higher discount to clear inventory. High discounting in the industry is also likely to have attendant impact on general pricing levels, and poses risk to margins for retailers that have managed inventory well. Amongst our Indonesian retail coverage, we see highest risk to gross margins for MAPI and ACES (both rated Underweight). Please refer to our recent ASEAN Consumer initiation report for more details on our thesis on Indonesian retailers. Link to report here
Figure 1: RALS - 1Q inventory trend (number of days, ex-concession inventory)
Revenues in Java continue to outperform other regions. 1Q SSSG of 7.5% picked up over 2.2% for full year 2013. 1Q revenues in Java/Bali/Nusa Tenggara grew 13% YoY, outperforming other regions, namely Sumatera (5% YoY), Kalimantan (4% YoY) and Sulawesi & Papua (3% YoY). We note that a large part of RALS consumer base outside Java comprises of minimum wage earners employed in mining/plantation and industrial sectors and slower growth outside of Java could be reflective of pressures in the low coal prices and the attendant pressure on employment in the mining sector in Indonesia. No new stores were opened by the company in 1Q.
29 April 2014
PT Telekomunikasi Indonesia Tbk (TLKM IJ)

1Q14 results and management call: Earnings in-line, management looking to steady data pricing
Overweight
Price: Rp2,270 29 Apr 2014 Price Target: Rp2,720 PT End Date: 31 Dec 2014
1Q14 earnings in-line, management optimistic of pick up through 2014. TLKMs 1Q14 recurring earnings growth of 8.2% YoY was in line with our estimate. Revenues grew 8.6% YoY, driven by 9.8% growth in cellular revenues. EBITDA grew 9.4% YoY, with 40bp improvement in margins, aided by lower employee costs, down 4% YoY. O&M expenses grew 9% YoY; the big disappointment was in a 43% increase in G&A expenses, partly attributable to changes in accounting for provisions for impairments. Management also attributed part of the rise in G&A expenses to its initiatives of setting up more regional offices, and increasing number of employees being moved from headquarters into the regional offices. TLKM maintained revenue growth guidance of revenues in-line or better than industry (6%-7% levels for consolidated revenue growth) and steady-to-slightly-declining EBITDA margin. Wireless operating margins under pressure, as expected. Revenues for wireless operations (Telkomsel) increased 10.2% YoY. The company added 379k net subs in 1Q, taking the total subscriber base to 132.7 mn. ARPU increased 2.7% YoY to Rp37000. Voice revenues grew 6.8% YoY, with data revenue growth of 31.3% being the primary revenue growth driver. EBITDA margins for the wireless operations declined 120bps YoY, driven by higher network opex as TLKM continues to rapidly roll out the wireless network. Depreciation expenses increased 24.8% YoY driven by accelerated network deployment, changes in accounting treatment for tower rent from operating lease to finance lease (of 15000 towers, 7833 are categorized under financial leases, with depreciation on the leases amounting to Rp312B in 1Q14 v/s Rp41B in 1Q13 as per management). TLKM continues with its rapid roll out of the wireless network, adding 4,462BTS in 1Q (taking to total to 74,326). 80% of the BTS additions were 3G. Management has indicated that margin trends for the wireless operations are likely to improve through 2014, as TLKM looks to monetize data better and through more cost-saving initiatives.
Figure 1: EBITDA margin trend for Wireless business (Telkomsel)
64.0% 63.0% 62.0% 61.0% 60.0% 59.0% 58.0% 57.0% 56.0% 55.0% 54.0% 62.8% 60.6% 61.4% 59.6% 57.0% 59.6% 59.1% 57.0% 58.5% 2.50 2.00 1.50 1.00 0.50 0.00 (0.50) (1.00) (1.50) (2.00)
1Q12A
2Q12A
3Q12A
4Q12A
1Q13A
2Q13A
3Q13A
4Q13A
1Q14A
Telkomsel EBITDA margin - LHS

Source: J.P. Morgan estimates, Company data.
% Point change (YoY) - RHS
Data still being priced for adoption, management looking to stabilize pricing. We are increasingly hearing views from wireless telecom company managements in Indonesia that data pricing from current levels need to move up. This view was echoed by TLKM management in the 1Q conference call after data pricing compressing 44.4% YoY during the quarter. As per management, they would look to stabilize data
29 April 2014
Public Bank (PBK MK)

M$5B of rights would dilute RoE by 400bp
Neutral
Price: M$20.16 29 Apr 2014 Price Target: M$16.90 PT End Date: 30 Jun 2014
According to Bloomberg, Public Bank (Public) has proposed a rights issue to raise M$5B. Public has delivered 20% annualized returns over the past 10 years, partly due to high RoE, as the bank was able to maximize its leverage under Basel II regime. At its peak, Asset/Equity was 20x in 2009, when the bank delivered 25% RoE. Since then, leverage has been decreasing, and it stood at 15.1x as of Mar-14. The key reason for lower leverage was the regulatory move towards Basel III. While the absolute leverage ratio has not yet been specified, we sense that minimum CET 1 threshold was about 9.5%, given the capital-raising by Maybank in 2012 and CIMB earlier this year. Publics last reported CET 1 was 8.5%. The risk of a capital call by Public has been around since 2010, when regulatory discussions around Basel III intensified, but the lack of a timeline led the bank to postpone the rights until now. The M$5B of rights adds 244bp to CET1, on 1Q14 numbers, taking total CET1 to 10.94%, which we believe is significantly above minimum requirements. CIMBs CET1 post the placement in January stood at 9.7%. The rights issue amounts to 24.5% of existing shareholders equity of M$20.4B. With this capital call, the leverage would decrease to 12.2x (E/A of 8.2%). Accordingly, RoE for the bank would decrease by almost 400bp. This, in turn, should lead to a meaningful decline in multiples that the stock commands. We stay with the view that any rally in Publics stock price on back of index rebalancing flows (link) would provide an opportunity to trim positions.
Table 1: Gross proceeds utilization and timeline
Details Working capital and general banking purposes Defrayment of estimated expenses in relation to the Proposed Rights Issue Total
Source: Company
M$ bn 4.97 0.03 5.00
Expected timeframe for utilization of proceeds from the date of listing of the Rights Shares Within 12 months Within 3 months
Table 2: Malaysia bank valuations

Company CIMB AMM HLBK PBK MAY RHBC Sector
Source: Bloomberg, J.P. Morgan estimates. Prices as of 29 April 2014
Rating N OW N N N N
Price (M$) 7.48 7.16 14.02 20.16 9.72 8.29
P/E (x) 2014E 13.5 11.8 11.9 16.5 12.5 9.9 11.1
P/BV (x) 2014E 1.71 1.65 1.81 3.11 1.76 1.19 12.7
RoE (%) 2014E 14.8 14.8 14.7 20.5 15.5 12.8 15.5
P/PPOP (x) 2014E 9.3 8.3 9.9 11.5 8.1 6.2 15.2
P/Deposit (%) 2014E 22 23 19 25 19 14 8.9
P/NTA (x) 2014E 2.20 2.15 1.99 3.39 2.00 1.67 20.3
Investment Thesis Public Bank stands out as one of the least risky banks within Malaysia, in our view, reflected in its lowest NPL ratio and high coverage ratio among its Malaysian peers. The stock lies in the first quantile of ASEAN banks based on our fundamental risk analysis, and we deem that this is structurally positive for the bank. Despite this, we are Neutral on the stock as Publics loan growth of 10-11% in 2014E/2015E is slower than the 10-year average historical growth of 17% as

30 April 2014
Samsung Electronics
Robust 1Q14 results, but guidance doesn't seem good enough to surprise the market
Samsung Electronics (SEC) reported OP of W8.5 trillion, which is slightly better than the preliminary result on sales of W54 trillion. The sequential improvement was mainly driven by the IM division (handsets), partly due to one-time gains related to provisions/miscellaneous cost savings. This fully offset the declines in all other divisions. Thanks to a one-time gain from the JV stake sale of W700 billion, SECs net profit surprised on the upside. It is worth noting that its net cash position improved to W49 trillion in 1Q14 from W43 trillion in 4Q13. Mixed guidance on 2Q14 outlook: Management sounded positive on components (DRAM and LCD) but toned down its guidance on the smartphone business, citing intensifying competition and inventory clean-up in the channel ahead of new product launches for low-end-tomid-range smartphones. Management guided its overall earnings to show a sequential improvement while we cautiously expect earnings growth in 2Q14 to be less than the market expects. Positives vs. negatives: Despite concerns about a saturated smartphone market, SEC continued to post robust earnings, resulting in a meaningful improvement in the cash position. Also, the ongoing strength in the DRAM business should be positive for the share price. On the other hand, limited growth opportunities (too big to grow), still-high market expectations, and uncertainty related to System LSI and 3D NAND could limit share price appreciation, in our view. Share price expectations: Upside risk to our 1H14 earnings estimates could be offset by potential downside risks to our 2H14 earnings estimates, depending on the competitive landscape in smartphones and handset-related component businesses (System LSI and OLED). Thus, we expect the stock to remain range-bound for a while. However, given SECs undemanding valuation and ample cash position, we believe the downside risk is limited. We stay Overweight.
Overweight
005930.KS, 005930 KS Price: W1,360,000 Price Target: W1,600,000
South Korea Technology - Semiconductors JJ Park

AC
(822) 758-5717 jj.park@jpmorgan.com Bloomberg JPMA PARK <GO> J.P. Morgan Securities (Far East) Ltd, Seoul Branch
Jay Kwon
(82-2) 758-5725 jay.h.kwon@jpmorgan.com J.P. Morgan Securities (Far East) Ltd, Seoul Branch
Varun Rajwanshi
(91-22) 6157-3277 varun.rajwanshi@jpmorgan.com J.P. Morgan India Private Limited
Price Performance
1,600,000 1,500,000 W 1,400,000 1,300,000 1,200,000
Abs Rel
YTD 3.9% 4.0%
1m 1.9% 2.7%
3m 6.2% 5.0%
12m -8.2% -9.4%
Bloomberg 005930 KS, Reuters 005930.KS (YE Dec, W bn) FY12 FY13 FY14E FY15E FY12 FY13 FY14E FY15E Date of Price 29 Apr 14 Sales 201,104 228,692 234,348 249,534 Sales growth 21.9% 13.7% 2.5% 6.5%52-Week range W$1,559,000-1,209,000 Operating Profit 29,050 36,784 34,198 36,384 OP growth 78.8% 26.6% -7.0% 6.4%Market Cap W200,327BN EBITDA 44,672 53,229 51,646 55,218 NP growth 73.6% 28.1% NM 6.9%Market Cap US$193,506MN Net profit 23,185 29,706 27,485 29,390 Quarterly EPS (W) 1Q 2Q 3Q 4Q Share Out. (Com) 147MN EPS 157,403 201,673 186,595 199,527 EPS (13) 47,366 51,426 54,647 48,234 Free float 72.5% BPS (W) 824,716 1,017,187 1,193,923 1,383,838 EPS (14) E 42,806 42,660 53,896 47,232 Avg daily val W287.9B P/E (x) 8.6 6.7 7.3 6.8 EPS (15) E 44,194 46,032 56,982 52,319 Avg daily val (US$) 278.1MM P/BV (x) 1.6 1.3 1.1 1.0 Price Target 1,600,000 Avg daily vol. 0.2MM shares ROE (%) 20.8 21.9 16.9 15.5 Consensus PT 1,745,000 Dividend yield (%) 1.4 Net Debt -22,553 -44,482 -44,047 -52,076 Difference (%) -8.3 Exchange Rate 1,035.25 Price Target End Date 31-Dec-14 Source: Company data, Bloomberg, J.P. Morgan estimates.
29 April 2014
Security Bank Corporation (SECB PM)

Solid core trends but 1Q misses on treasury
Overweight
Price: Php112.20 28 Apr 2014 Price Target: Php130.00 PT End Date: 31 Dec 2014
Security Bank (SECB PM) released 1Q14 topline numbers, reporting net income of Php1.43bn, up 65% q/q, 17% y/y, and 11% below JPMe. This was despite robust NII growth of 42% y/y to Php2.78bn, 13% above our estimates. Better-than-expected loan growth. SECBs NII growth came on the back of a 39% y/y expansion in loans to Php116bn, beating our loan growth estimates by 3%. Deposits expanded 49% y/y, 7% above JPMe. Impact on trading income. We believe the earnings miss came from weak trading gains, as 10Y bond yields shot up by ~65bps in 1Q14. SECB is under IFRS9, which implies that trading losses will directly affect its bottom line. Details will be released in the 17Q. Stock valuations. SECB is down 3% YTD, underperforming the PSEi by 15%. At its current price, SECB trades at 1.5x 2014E BV on an expected RoE of 14.4%. Given its robust core income growth and low risk, we believe any dip would provide a buying opportunity for the stock.
There are three aspects that will determine whether the bank moves to structurally higher returns in course of next few quarters: SECB has lower leverage at E/A of 12.8% as on Dec-13 vs. 11.5% for the industry. We think it is unlikely that there will be a capital management exercise by the bank to increase leverage. Rather, a combination of high pace of organic and inorganic growth will lead to higher leverage and RoE. The resilience (or otherwise) of treasury income. As of now, the bank makes between Php200-400mn per annum on flow revenues at treasury, with majority of revenues still coming from mark to market of investment portfolio. The pace of shift of revenue mix in favor of flow income and extent of shift of the investment book to lower duration and to HTM will determine the degree of stability in treasury revenues. Non-interest income other than treasury is still in process of gaining scale. A quicker move towards setting up of revenue streams like bancassurance, asset management, etc. while maintaining costs will be the key challenge going forward.
We are awaiting detailed financials before reviewing our estimates, but given that the core trends are in place, we maintain our OW call on the stock despite headline miss.
30 April 2014
Shriram Transport Finance (SHTF IN)

Growth slowing though asset quality under control; still too early to call a recovery in CV financing cycle
Neutral
SHTFs 4Q EPS of Rs13 (down 17% Y/Y) came in below expectations, primarily due to one-off tax adjustment (Rs150MM impact) and lower loan growth. On the operating front, asset quality trends were encouraging, with credit costs coming off in 4Q and GNPA levels well contained. Growth for the company, though, remained sedate (AUM growth flat Q/Q) and the trend is likely to continue in the near term. NIMs (at 6.46%, down 5bp Q/Q) have been coming off over the last few years and are at their lowest in the last five years. While there are signs of the CV cycle bottoming out given recent increases in freight rates, we think it is still too early to call a recovery given overall stressed operator profitability and over-capacity in the industry. Maintain Neutral. Loan growth slowing down AUM at Rs531B fell (by 1% Q/Q) for the second consecutive quarter, given conservative lending stance taken by the company. On a Y/Y basis, growth stood at 7% Y/Y, with disbursement witnessing de-growth of 11% Y/Y. In terms of AUM mix, the New CV segment saw a sharp decline (-34% Y/Y) offsetting the growth in the Used CV segment (+17% Y/Y). The company is guiding to 10-12% AUM growth in FY15; however, this is likely to be 2H-weighted. 1H is likely to remain muted given ongoing elections followed by monsoons and given near-term focus on collections.
30% 25% 20% 15% 10% 5%
Source: Company
Figure 1: SHTF AUM growth trend
25%
24% 23% 20% 22% 20% 16% 11% 13% 16% 19%
24%
25% 22%
15%
7% 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14
Credit costs surprised positively for the Q at 1.8% (vs. 2.2% last Q), especially in the context of stressed profitability of the transport operators and deterioration registered by other peers in the CV segment. The company expects to maintain credit costs within a 1.8-2.1% range going into FY15. GNPA increase (in absolute terms) was also contained at 5% Q/Q in the Mar-Q. Overall GNPA and Net NPA in percentage terms stood at 3.86% (+30bp Q/Q due to base impact) and 0.8% respectively.
29 April 2014
Sinopec Corp - H (386 HK)

Retail stake to be priced in 3Q14; refining improving in 2Q14, shutting in marginal chemical capacity
Overweight
Price: HK$6.81 (intraday - 11:22 AM) 29 Apr 2014 Price Target: HK$8.00 PT End Date: 31 Dec 2014
Management gave a mixed macro picture for 2Q14, guiding that refining continues to improve, while chemicals has severe challenges from low cost imports and weak pricing. Retail segment stake sale remains on track, management guides to meaningful updates beginning in June and pricing sometime in 3Q14. In our view, the 2Q14 oil products environment should improve on recovering demand and upward product pricing adjustments to support GRMs; we remain OW Sinopec. Key takeaways from 1Q14 analyst briefing: Chemicals remain challenging; shutting down marginal capacity Management highlighted that competition from low cost producers in the Middle East and North America is pushing down the prices of chemicals in the domestic market. In response, Sinopec has taken steps in 1Q14 to take offline marginal and unprofitable capacity, citing that ethylene cracker capacity was running at high rates but 5-10% of other downstream capacity was offline during the period. Refining margins improving on new gasoline specs; no change to maintenance schedule: The company stated that the move to higher spec gasoline (China IV) has been supportive of 1Q margins. Steps have been taken to adjust the refining production profile towards higher octane gasoline and to diesel in order to improve margins. There is no change to the current refining maintenance schedule and the company believes that 2Q14 should see an improved refining environment (see our China Oil & Gas update - here). Retail stake sale on track; pricing in 3Q14; proceeds for domestic shale and de-leveraging: The company indicated that it will announce the participants in the investment negotiations in June 14 and that pricing will likely be a 3Q14 event. Currently, proceeds from the stake sale are planned to be used for further development of domestic shale gas projects and debt reduction, although no specifics on amounts were given (announcement to follow). Asset injections still on the table; but not financed by retail proceeds Management highlighted it is still in the process of assessing the overseas assets of the parent, in which a 10-year option to purchase (includes right of first refusal) was announced. No specific details were mentioned on the process used to value the assets, although they did mention independent financial advisors could be used to assist in the process. Any acquisitions of overseas upstream parent assets would need to meet the companys 12% IRR hurdle rate according to management. The company stated that using proceeds from the retail asset stake sale to acquire parent upstream assets would prove complicated as the nature of a related-party transaction would complicate the distribution of this capital; therefore, the company has focused retail stake sale proceeds to domestic shale and debt repayments.
Key takeaways from results

Miss to market estimates; slightly higher than JPMe: Sinopec 1Q14 reported net income at Rmb14.1bn, down 15% y/y and missing consensus (Bloomberg) by c10%, although slightly higher than our forecast (see table below). The miss to market expectations may have been driven by slightly lower oil realizations, weakness in chemicals and an increase in foreign currency exchange losses (Rmb1.5bn, relating to US$ debt), in our view. Recovering upstream, although cost concerns remain: Upstream operating profit of Rmb13.2bn was up 64% q/q, although down c19% y/y, driven by lower realizations and increased exploration costs. Oil/gas production was up c9% y/y, including Sinopec's recent asset injections. Realized oil realizations were down 3.5%, and natural gas realizations were up c19%. The company points to Fuling as a key project (22 wells

29 April 2014
Sinopharm
1Q beat - net profit growth unhampered by high finance cost
Sinopharm reported 1Q14 results showing +20% Y/Y top-line growth and 31% net profit growth, which compared favorably to Shanghai Pharmas results (+8.6% overall, +9.0% distribution; -6.3% net profit), a close competitor. We expect the market to respond favorably to this set of results. We appreciate the persistent concerns about Sinopharms working capital but believe its current valuation, at 15x 2014E EPS, does not reflect its industry leadership and its potential to further consolidate the industry and extract economies of scale. We reiterate OW. 1Q13 sales quite solid compared to 1Q13: Sinopharm reported total 1Q14 sales of Rmb45.8bn, representing Y/Y growth of 20%, compared to +13.5% Y/Y recorded in 1Q13. As a reminder, weak sales growth in 1Q13 was attributable to two rounds of NDRC price cuts since 1Q12, tight reimbursement control toward the end of the fiscal year ending March, and anti-bribery measures. In contrast, only minor price adjustments were carried out to anesthesia medicines since 1Q13 and it may benefit from improving sentiment with the anti-corruption campaign easing a bit. Net profit +30% Y/Y: GM went up 43 bp Y/Y to 8.12% vs. 7.69% in 1Q13, as reinstated. SG&A showed continued sign of leveraging with the ratio rising by 11bp Y/Y to 4.10%. Financing cost was up +47% Y/Y, far outpacing sales growth. Net/net, net profit grew by 31% Y/Y. Sinopharm has tried different ways to control its finance costs, including better control of cash collection at subsidiary levels, issuance of super commercial paper, and tapping the debt market in China. It may eventually see improved finance costs if it can successfully branch into medical services and other areas that may complement its traditional strength in drug distribution. Cash flow improving: Sinopharm had net cash inflow from operations of Rmb40mn, compared to a reinstated outflow of Rmb101mn in 1Q13. Previously, Sinopharm recorded cash inflow of Rmb111mn in 1Q13. Account receivable and inventory increased by 10.8% Y/Y and 1.9%, respectively, both behind sales growth. Sinopharm reported a cash balance of Rmb16.7bn as of March 31, compared to Rmb17.0bn at YE2013.
Sinopharm (Reuters: 1099.HK, Bloomberg: 1099 HK) Rmb in mn, year-end Dec FY12A FY13A Revenue (Rmb mn) 135,787 166,866 Net Profit (Rmb mn) 1,977 2,250 EPS (Rmb) 0.82 0.94 DPS (Rmb) 0.25 0.26 Revenue growth (%) 32.8% 22.9% EPS growth (%) 22.3% 13.8% ROCE 11.5% 12.2% ROE 12.1% 12.6% P/E (x) 19.5 17.1 P/BV (x) 2.3 2.1 EV/EBITDA (x) 9.7 8.5 Dividend Yield 1.6% 1.6%
Overweight
China Healthcare Sean Wu

AC
(852) 2800-8538 sean.wu@jpmorgan.com Bloomberg JPMA SWU <GO> J.P. Morgan Securities (Asia Pacific) Limited
Price Performance
30 HK$ 26 22 18
1099.HK share price (HK$) MSCICNX-HLTH (rebased)
Abs Rel
YTD -8.3% -1.4%
1m -3.6% 1.4%
3m -7.7% -0.2%
12m -13.1% -27.2%
FY14E 198,859 2,793 1.09 0.32 19.2% 16.1% 12.3% 14.2% 14.8 2.0 7.7 2.0%
FY15E 235,381 3,109 1.21 0.35 18.4% 11.3% 12.7% 14.3% 13.3 1.8 7.0 2.2%
FY16E 269,964 3,608 1.40 0.41 14.7% 16.0% 13.1% 14.9% 11.4 1.6 6.2 2.6%
Company Data Shares O/S (mn) Market Cap (Rmb mn) Market Cap ($ mn) Price (HK$) Date Of Price Free Float(%) 3M - Avg daily vol (mn) 3M - Avg daily val (HK$ mn) 3M - Avg daily val ($ mn) MSCICNX-HLTH Exchange Rate Price Target End Date
2,403 38,558 6,167 19.90 28 Apr 14 92.1% 4.63 97.94 12.6 138.72 7.75 31-Dec-14

30 April 2014
Shanghai Electric Group Company Limited

1Q 2014 earnings a slight miss
1Q14 results missed slightly: Shanghai Electric announced 1Q14 net profit of Rmb670MM (+1% Y/Y). 1Q14 net profit represented ~25% of the full-year consensus number, slightly lower than in 1Q13 (28%). Specifically, the companys gross margin improved to 21.0% in 1Q14 from 18.4% in 1Q13, but was largely offset by the significant surges in tax rate (+35% Y/Y) and minority interests (+37% Y/Y). Orders: We expect new orders in 1Q14 to exceed 1Q13 levels due to the low base effect (Rmb5B) and possibly reach Rmb12B. The order backlog should remain largely in line with 4Q14 levels (i.e. Rmb237B). Operating CF: Operating CF remained in negative territory in 1Q14 due to seasonal effects but narrowed to Rmb2.7B in 1Q14 (-29% Y/Y). We raise our PT from HK$2.2 to HK$2.4 as we extend our timeframe from Jun-14 to Dec-14. Maintain UW: The share price has outperformed the market by ~15% over the past 1-2 months amid market expectations of a potential share price convergence between A-shares/H-shares under the through-train ETA. Fundamentally, we remain cautious on demand for coal-fired equipment. The stock is still trading at a demanding valuation, in our view, at 12x 2014E P/E for an ex-growth stock. Analyst conf call will be held at 9am (HKT) on 30 April 2014 (Wednesday). Dial in numbers: (852) 3005 1380 (HK), 400 678 0218/(010) 5851 1516 (PRC) and (65) 6307 7689 (Sing). Passcode 4030.
Underweight
2727.HK, 2727 HK Price: HK$3.00

Previous: HK$2.20

AC
Elaine Wu
Price Performance
3.4 3.0 HK$ 2.6 2.2
Abs Rel
YTD 6.4% 18.7%
1m 4.9% 7.7%
3m 23.5% 26.6%
12m 11.1% 20.6%
Shanghai Electric Group Company Limited (Reuters: 2727.HK, Bloomberg: 2727 HK) Rmb in mn, year-end Dec FY10A FY11A FY12A FY13A FY14E Revenue (Rmb mn) 62,957 71,461 76,591 78,795 80,590 Net Profit (Rmb mn) 2,784 3,183 2,715 2,393 2,605 EPS (Rmb) 0.22 0.25 0.21 0.19 0.20 DPS (Rmb) 0.07 0.07 0.06 0.07 0.08 Revenue growth (%) 9.3% 13.5% 7.2% 2.9% 2.3% EPS growth (%) 11.7% 13.3% (14.7%) (11.8%) 8.9% ROCE 11.2% 11.6% 11.7% 10.4% 11.0% ROE 11.3% 11.3% 9.0% 7.6% 7.8% P/E (x) 11.0 9.7 11.4 13.0 11.9 P/BV (x) 1.1 1.1 1.0 1.0 0.9 Dividend Yield 2.7% 3.1% 2.6% 3.1% 3.4%
12,824 31,025 4,962 3.00 29 Apr 14 17.12 48.17 6.2 1,3536.02 7.75 Dec
29 April 2014
Sunway REIT (SREIT MK)

9MFY14 results: Less cautious guidance for FY14E
Neutral
Sunway REIT (SREIT)s 9MFY14 DPU growth of 0.8% Y/Y came in at 79% of our full-year forecast and 80% of consensus. The better-than-expected performance was due to improving occupancies and income from the Sunway Resort City hotels as well as additional income from completed AEIs at Sunway Pyramid mall. Management is now targeting for flat DPU growth for FY14E as opposed to previous more cautious guidance of a potential DPU drop. Nevertheless, we see limited catalysts for outperformance in 2014 as M-REITs still face overhang from rising rates/US tapering as well as slowing consumption trends. Longer-term prospects are more positive for SREIT as uplift in rentals from Putra mall renovations is estimated to drive 16% DPU growth by FY16E. Maintain Neutral. 9MFY14 DPU up 0.8%Y/Y to 6.33sen (up 1.9% Y/Y in 3QFY14). This constituted 79% of our full-year estimates and 80% of consensus, or ahead of expectations. The stability in profits was achieved despite closure of Sunway Putra Mall since May-13 for major refurbishment, lower income from Sunway Putra Hotel (adjoining to the mall due to disruptions from the refurbishments), as well as higher property operating costs arising from the electricity tariff hike of 16% effective Jan-14 and provision for higher assessment taxes for KL properties. Key drivers. 1) Strong 12% Y/Y rise in NPI for Sunway Pyramid mall helped by double-digit rental reversions (i.e. mid teens). 2) Additional income from completed AEIs at Sunway Pyramid Mall (i.e., Oasis Boulevard 5 involving new and reconfigured NLA of 43,784 sqft, and savings from chillers retrofit). 3) After a weak 1QFY14, hotels in Sunway Resort City continue to show improving occupancies and NPIs, which rose 1% Y/Y for 9MFY14 (-2.8% Y/Y for 1HFY14) with recovery from its clientele in the E&E sector, as well as higher corporate/MICE activities 4) Stable NPI contributions from office assets. Analyst briefing highlights. With stabilization in its hotel operations after weaker trends last year and greater clarity/visibility on the impact of higher cost (i.e., assessment rate hike, higher electricity cost), management is now targeting flat Y/Y DPU growth for FY14E as opposed to previous more cautious guidance of a potential DPU drop (we are currently forecasting a 3.5% Y/Y DPU drop for FY14E). Gearing stood at 32% as at end9MFY14, with 77% of debt on fixed rates and overall cost of debt at 3.85% for 9MFY14. Maintain Neutral. We see stronger catalysts for SREIT emerging mainly upon completion of its Putra Place asset refurbishments by Mar/Apr-15, which will contribute to 16% DPU growth by FY16E. In the nearer term, however, headwinds in 2014 will continue to cap upside (i.e., rising rates/US taper, slowing consumption trends). At current levels, SREIT is trading at a CY14/15E net dividend yield of 5.6%/6.2% (versus the sector average of 5.3%/5.7%), implying yield spreads of 130/190bps compared to the historical long-term average government bond yield of 4.3% (spot: 4.1%). This compares to a fair spread of 140-150bps based on the sectors long-term trading history. In the M-REIT space, our top pick remains IGB REIT (OW), given its lowest occupancy cost (at 9-11%) versus peers (14-17%), providing it with greater ability to raise rentals amid rising cost and slowing consumption.
3Q14 108.1 80.6 74.6% 58.5 61.5 2.10 3Q13 106.4 79.7 74.8% 55.2 58.0 2.06 Y/Y 1.5% 1.2% 5.9% 6.0% 1.9% 2Q14 110.3 84.4 76.5% 62.0 65.3 2.23 Q/Q -2.0% -4.5% -5.7% -5.9% -5.8% 9M14 318.6 242.2 76.0% 175.9 185.1 6.33 9M13 312.0 230.7 73.9% 163.4 171.9 6.28 Y/Y 2.1% 5.0% 7.7% 7.7% 0.8%
Table 1: Sunway REIT 9M14 results summary

M$mn; year-end Jun Revenue Net property income Operating margin PBT Distributable income DPU (sen)
Source: Company data.
29 April 2014
Taiwan Mobile Co., Ltd. (3045 TT)

Expect downward earnings revisions; yield provides share price support
Neutral
Price: NT$97.20 29 Apr 2014 Price Target: NT$102.00 PT End Date: 30 Dec 2014
TWMs 2Q14 earnings growth guidance of a 10% decline came as a disappointment and points to a weaker trend than what is implied in peers guidance. Management reckons profitability may further deteriorate in 3Q14 before meaningful 4G contribution kicks in. Although we now see 5~10% downside to street earnings projections, TWMs commitment to maintaining the current DPS level, which implies a yield of 6%, should provide good support to share price. Maintain Neutral.
ARPU trending better than peers: Mobile ARPU further rose by 2% yoy in 1Q14, while both competitors saw continuous declines. The better trend is attributable to lower voice revenue drop (TWM -5% s. FET -8% and 10%) as the other two are more aggressively offering discounts on the monthly fees for voice packs. As a result, TWM gained 1ppt mobile service revenue market share in 1Q14, vs. FET up 0.3ppt and CHT flattish. Disappointing 2Q guidance; things may get worse in 2H: Management is guiding for a 10% decline in earnings in 2Q14, vs. 7% increase in 1Q14, due to an increase in costs relating to 4G network rollout and direct store additions. Management expects earnings to further deteriorate in 3Q with more 4G-related cost impact, and the downward trend may ease a little bit in 4Q when meaningful 4G contributions start to come in. Based on the guidance, we now see 510% downside risk to streets yoy flattish earnings forecast for 2014. 4G launch likely in July, 700MHz ecosystem developing fast: TWM may get 4G operational license earlier than expected, i.e. in May. However, the company is still looking at launching services in July when the network coverage reaches a certain scale. Given the uncertainty regarding the spectrum swap negotiation with FET, we see an increasing likelihood that both will be only able to launch services in the 700MHz spectrum initially, which will place CHT at an advantage. However, management expects to see a reasonably good selection of eleven 4G handset models (most by major brands) and four tablets available at the initial launch. The faster evolvement of the 700MHz ecosystem may help alleviate concerns regarding the spectrum disadvantage relative to CHT to some extent. Expect downward earnings revision, but still an attractive yield play: The potential earnings cuts may dampen share price upside in the near term. However, we think the high yield of 6% should remain intact in light of TWMs commitment to maintaining DPS. Maintain Neutral.
29 April 2014
Tata Steel Ltd (TATA IN)

Worst case scenario of a short term ban in Orissa would be a buying opportunity given India & Europe improvement
Overweight
Price: Rs425.80 28 Apr 2014 Price Target: Rs550.00 PT End Date: 31 Dec 2014
The Supreme Court (SC) has reserved its interim order on the Orissa iron ore mining case, but is likely to be released over the next few days. Media reports (links attached of reports from ET, FE) suggest that one of the possible outcomes would be a short term ban imposed on mining in Orissa (for a period of ~3 months) and in the meantime Orissa regularizes the mines running on deemed extension. Implications for the steel industry and broader economy: Any iron ore mining ban in Orissa would hurt the steel industry and by extension the broader economy hard, with the severity increasing with the duration of the ban. Long steel production is likely to be impacted the most. Implications for TATA: As we have highlighted previously in our research, all of TATAs iron ore mines in Orissa are working under Environment and Forest clearances and are under deemed extension which started in 2003-05. The SC order in Goa did make deemed extension illegal but only after they had operated for more than 20 years. Even though on the current facts we see little probability of TATAs mines being asked to shut down, we would admit that predicting court judgments is NOT our strong point. On a worst case scenario of a short term iron ore ban in Orissa (up to 3 months) should not create any material impact on TATA given inventories (Orissa mines account for ~30 % of TATAs requirements) and beyond that an increase in iron ore cost should be broadly offset by higher selling prices locally. The impact would be more on sentiment especially given the sharp run up in the stock. However, any correction should be a buying opportunity for 4 simple reasons: a) Demand cycle in Europe is turning after ~5 years of slump. TATA is operating at ~75% utilization and vs. peak EBITDA of ~$2.5bn would end FY14 at ~$500mn EBITDA and given that European demand is improving and so is pricing power, the up-cycle for TATA Europe earnings has just started b) India demand cycle is likely at the bottom after 3 years of very weak demand. A cyclical recovery in India is likely to start over the next 12 months, and TATA with SAIL are the only 2 companies who have new capacity to take advantage of any demand improvement. c) The expected earnings increase over the next 2-3 years (higher volumes even with lower margins would mean higher EBITDA) would come at a time of sharply reducing capex (TATA has been spending on average ~$22.5bn over the last 3 years) allowing large cash flow generation and hence net debt increase. d) Captive iron ore does give TATA India an advantage but is not the only driver for the large profitability gap v/s peers in India. We estimate captive iron ore accounts for ~Rs3000/T of the ~Rs7000/t difference in EBITDA/T between TATA and the next most efficient steel company in India Given the above reasons, any stock price correction on the new flow of Orissa iron ore mining ban should be a buying opportunity in TATA for investors wanting to play an economic rebound in Europe and India http://www.financialexpress.com/news/supreme-court-hints-at-goa-shadow-over-mining-in-odisha/1245113 http://www.orissadiary.com/CurrentNews.asp?id=49527 http://economictimes.indiatimes.com/industry/indl-goods/svs/metals-mining/supreme-court-may-impose-goa-like-miningban-in-odisha/articleshow/34356229.cms Investment Thesis TATA remains our top pick despite the stock being up 50%+ since mid-August vs. the SENSEX up 8% over the same period. In our view, expectations of a potential improvement in European metals demand are positive for TATAs European operations. We believe an improving Europe over the next two years implies further a re-rating of stock. In addition, we
29 April 2014
Tsingtao Brewery - H (168 HK)

Weak 1Q14 results
Underweight
Tsingtao reported weak 1Q14 results with operating profit down 4% y/y (14% below our estimates) despite a stronger-than-expected top-line growth of 17%. The miss at the operating level was due to i) contraction at GPM as the product mix was unfavorable, and ii) high selling expenses reflecting aggressive promotions and marketing, in our view. Net profit was up 20% y/y helped by an increase in government grants (Rmb145MM in FY13 vs Rmb54MM in FY12). We make no changes to our estimates. We reiterate UW given lackluster core earnings growth and the stretched valuation of 27x FY14E P/E, at a 23% premium to consumer staples. Strong sales mainly led by Tier 2 brands. 1Q14 sales increased 17% y/y, mainly driven by volumes (+19%) as ASPs declined by 2%. Tier 2 brand volume increased 29% y/y, continuing the strong momentum in previous periods (+24% in 2H13, +10% in 1H13). Tsingtao brand volume was also strong and rose 12% y/y, reversing the weak trend of previous periods (flat in 2H13, +9% in 1H13). Operating profit, however, declined 4% y/y on higher selling expenses and GPM contraction. 1Q14 operating margin contracted 180bp y/y on the back of: 1) higher selling expenses (21.2% of sales vs. 18.8% in 1Q13); we believe the company engaged in more aggressive promotions and marketing to drive volume growth; and 2) GPM contracted 20bp due to unfavorable mix shift as volumes are largely driven by secondtier brands.
1Q13 6,312 2,093 33.2% -1,489 -23.6% 605 9.6% 41 0 0 3 54 -4 698 -189 -27.0% 510 -22 488 7.7% 1Q14A 7,408 2,445 33.0% -1,866 -25.2% 579 7.8% 85 0 0 -9 147 -13 788 -207 -26.3% 581 4 586 7.9% 13% % chg y/y 17% 17% 1Q14E 6,975 2,320 33.3% -1,650 -23.7% 671 9.6% 60 0 0 3 39 -15 758 -189 -25.0% 568 -24 544 7.8% 4% Actual vs estimates 6% 5%
Table 1: Tsingtao Brewery: 1Q14 Results: Actuals vs. Estimates

Rmb MM Revenue Gross profit Gross margin (%) SG&A as % of sales Operating profit Operating margin (%) Net financial expenses Asset impairment losses Losses on changes in FV Investment income (share of assoc. and JVs) Non-operating income Non-operating expenses PBT Tax expense Tax rate (%) PAT Minority Net income to shareholders Net margin (%)
Source: Company data, J.P. Morgan estimates
-4%
-14%
14% 20%
2% 8%
29 April 2014
Singapore Property
Sims Drive tender closed, land prices continue to soften
The Sims Drive tender saw four bids with Guocoland being the highest bidder at S$530.9million, or S$688psf. This compares with the last bid for a nearby site at Geylang East Avenue 1 at S$776psf with 16 bidders in Jan14. Both sites are close to the Aljunied MRT station. The Sims Drive bid price is 11% lower than the previous bid, indicating a softer land sales market. Recall that a site at Prince Charles Crescent was sold earlier to UOL / Kheng Leong at pricing that was 15% lower. We estimate that breakeven costs for Sims Drive project to be around S$1,050psf, which compares with transaction price between S$1,200 and 1,400 psf for some of the condos in the vicinity including The Waterina, Guillemard Edge and La Fleur. With ongoing price cuts for residential projects including Sky Habitat by CapitaLand, Hallmark Residences by MCL Land, developers with new launches will be forced to relook at their pricing strategy, in our view, to stay competitive. We will continue to see a soft land market going forward with bids coming in at 10-20% below previous land price.
Table 1: Details of Sims Drive GLS site bids
Specified 1. 2. 3. 4.
Source: URA.
Tender Guocoland City Development, Hong Leong and Mitsui Fudosan Far East, FCL and Sekisui House Sim Lian Land
Tender Price (S$ mn) 530.9 502.0 447.8 356.0
Value psf ($psf/GFA) 687.9 650.4 580.2 461.3
Variance -5.4% -15.7% -32.9%
Asia Property and REITs Research Joy Wang AC

(65) 6882-2312 joy.qq.wang@jpmorgan.com Bloomberg JPMA WANG <GO>
Choon Keong Ong, CFA

(65) 6882 -2354 choonkeong.ong@jpmorgan.com J.P. Morgan Securities Singapore Private Limited
www.jpmorganmarkets.com
Sunil Garg (852) 2800-8518 sunil.garg@jpmorgan.com
Asia Pacific Equity Research 2014
Analyst Certification: The research analyst(s) denoted by an AC on the cover of this report certifies (or, where multiple research analysts are primarily responsible for this report, the research analyst denoted by an AC on the cover or within the document individually certifies, with respect to each security or issuer that the research analyst covers in this research) that: (1) all of the views expressed in this report accurately reflect his or her personal views about any and all of the subject securities or issuers; and (2) no part of any of the research analyst's compensation was, is, or will be directly or indirectly related to the specific recommendations or views expressed by the research analyst(s) in this report. For all Korea-based research analysts listed on the front cover, they also certify, as per KOFIA requirements, that their analysis was made in good faith and that the views reflect their own opinion, without undue influence or intervention. Research excerpts: This note includes excerpts from previously published research. For access to the full reports, including analyst certification and important disclosures, investment thesis, valuation methodology, and risks to rating and price targets, please contact your salesperson or the covering analysts team or visit www.jpmorganmarkets.com.
Important Disclosures
Market Maker: JPMS makes a market in the stock of PT Telekomunikasi Indonesia Tbk, Ctrip.com International, Ltd, Baidu.com. Market Maker/ Liquidity Provider: J.P. Morgan Securities plc and/or an affiliate is a market maker and/or liquidity provider in Idea Cellular Limited.
Lead or Co-manager: J.P. Morgan acted as lead or co-manager in a public offering of equity and/or debt securities for Agricultural Bank of China - H, Bank of China - H, China Construction Bank, China Merchants Bank H, Huishang Bank, CJ O Shopping, Sesa Sterlite, MGM China Holdings Ltd, LG Electronics, PT Telekomunikasi Indonesia Tbk, Shinhan Financial Group, Bank of Communications Co, Industrial and Commercial Bank of China - H, Ctrip.com International, Ltd, Tencent, Baidu.com, GS Engineering & Construction, Cheung Kong Infrastructure, Power Assets Holdings Ltd, SMIC, Sinopec Corp - H, Malaysia Airports Holdings Berhad within the past 12 months. Director: An employee, executive officer or director of JPMorgan Chase & Co. and/or J.P. Morgan is a director and/or officer of CLP Holdings. Analyst Position: The following analysts (and/or their associates or household members) own a long position in the shares of Tata Steel Ltd: Sunil Garg.
Beneficial Ownership (1% or more): J.P. Morgan beneficially owns 1% or more of a class of common equity securities of China Minsheng Banking H, China National Building Material, MGM China Holdings Ltd, Ctrip.com International, Ltd, Tencent.
Client: J.P. Morgan currently has, or had within the past 12 months, the following company(ies) as clients: Agricultural Bank of China - H, Bank of China - H, China Construction Bank, China Merchants Bank H, China Minsheng Banking H, Chongqing Rural Commercial Bank, Huishang Bank, Dongfang Electric Corporation Limited - H, Shanghai Electric Group Company Limited, CJ O Shopping, Idea Cellular Limited, China National Building Material, Shriram Transport Finance, Samsung Electronics, Sesa Sterlite, MGM China Holdings Ltd, Holcim Indonesia, China Citic Bank - H Share, Aluminum Corporation of China - H, Aluminum Corporation of China - A, Dabur India Limited, Public Bank, LG Electronics, ING Vysya Bank, Tsingtao Brewery - H, Doosan Heavy Industries & Construction, SK Telecom, Taiwan Mobile Co., Ltd., CIMB Group Holdings, PT Telekomunikasi Indonesia Tbk, Catcher Technology, Air China H, China Eastern Airlines - H, China Southern Airlines - H, Shinhan Financial Group, Bank of Communications Co, Industrial and Commercial Bank of China - H, New China Life Insurance Company Ltd - H, Ctrip.com International, Ltd, Samsung Card, Samsung Life Insurance, Samsung Fire & Marine Insurance, Samsung Securities, Evergreen Marine Corp Taiwan Ltd, Orient Overseas Int'l Ltd, China Cosco Holdings, Ltd. - H, Pacific Basin Shipping, Tencent, Baidu.com, Petronet LNG Ltd., Sinopec Shanghai Petrochemical, Oil Search, GS Engineering & Construction, Bank Negara Indonesia Persero, CLP Holdings, Cheung Kong Infrastructure, Power Assets Holdings Ltd, Changsha Zoomlion Heavy Industry, SMIC, IJM Land, UEM Sunrise Bhd, Security Bank Corporation, Sinopec Corp - H, Tata Steel Ltd, Sinopharm, Malaysia Airports Holdings Berhad, Bank Central Asia (BCA).
Client/Investment Banking: J.P. Morgan currently has, or had within the past 12 months, the following company(ies) as investment banking clients: Agricultural Bank of China - H, Bank of China - H, China Construction Bank, China Merchants Bank H, Huishang Bank, CJ O Shopping, Samsung Electronics, Sesa Sterlite, MGM China Holdings Ltd, Holcim Indonesia, LG Electronics, Doosan Heavy Industries & Construction, CIMB Group Holdings, PT Telekomunikasi Indonesia Tbk, China Southern Airlines - H, Shinhan Financial Group, Bank of Communications Co, Industrial and Commercial Bank of China - H, Ctrip.com International, Ltd, China Cosco Holdings, Ltd. - H, Tencent, Baidu.com, Sinopec Shanghai Petrochemical, GS Engineering & Construction, CLP Holdings, Cheung Kong Infrastructure, Power Assets Holdings Ltd, SMIC, Sinopec Corp - H, Malaysia Airports Holdings Berhad.
Client/Non-Investment Banking, Securities-Related: J.P. Morgan currently has, or had within the past 12 months, the following company(ies) as clients, and the services provided were non-investment-banking, securities-related: Agricultural Bank of China - H, Bank of China - H, China Construction Bank, China Merchants Bank H, China Minsheng Banking H, Huishang Bank, Shanghai Electric Group Company Limited, Idea Cellular Limited, Shriram Transport Finance, Samsung Electronics, Sesa Sterlite, MGM China Holdings Ltd, Holcim Indonesia, China Citic Bank - H Share, Public Bank, LG Electronics, ING Vysya Bank, Doosan Heavy Industries & Construction, CIMB Group Holdings, Catcher Technology, Air China H, China Eastern Airlines - H, China Southern Airlines - H, Shinhan Financial Group, Bank of Communications Co, Industrial and Commercial Bank of China - H, Ctrip.com International, Ltd, Samsung Life Insurance, Samsung Fire & Marine Insurance, Samsung Securities, Evergreen Marine Corp Taiwan Ltd, Orient Overseas Int'l Ltd, China Cosco Holdings, Ltd. - H, Pacific Basin Shipping, Tencent, Bank Negara Indonesia Persero, Cheung Kong Infrastructure, Changsha Zoomlion Heavy Industry, Security Bank Corporation, Sinopec Corp - H, Tata Steel Ltd, Sinopharm, Bank Central Asia (BCA).
Client/Non-Securities-Related: J.P. Morgan currently has, or had within the past 12 months, the following company(ies) as clients, and the services provided were non-securities-related: Agricultural Bank of China - H, Bank of China - H, China Construction Bank, China Minsheng Banking H, Shanghai Electric Group Company Limited, Shriram Transport Finance, Samsung Electronics, Sesa Sterlite, MGM China Holdings Ltd, Holcim Indonesia, LG Electronics, ING Vysya Bank, Doosan Heavy Industries & Construction, SK Telecom, CIMB Group Holdings, Catcher Technology, Air China H, China Southern Airlines - H, Shinhan Financial Group, Bank of Communications Co, Industrial and Commercial Bank of China - H, Samsung Life Insurance,
70
Evergreen Marine Corp Taiwan Ltd, China Cosco Holdings, Ltd. - H, Cheung Kong Infrastructure, Changsha Zoomlion Heavy Industry, Sinopec Corp - H, Tata Steel Ltd, Sinopharm, Bank Central Asia (BCA). Investment Banking (past 12 months): J.P. Morgan received in the past 12 months compensation from investment banking Agricultural Bank of China H, Bank of China - H, China Construction Bank, China Merchants Bank H, Huishang Bank, CJ O Shopping, Samsung Electronics, Sesa Sterlite, MGM China Holdings Ltd, Holcim Indonesia, LG Electronics, Doosan Heavy Industries & Construction, CIMB Group Holdings, PT Telekomunikasi Indonesia Tbk, China Southern Airlines - H, Shinhan Financial Group, Bank of Communications Co, Industrial and Commercial Bank of China - H, Ctrip.com International, Ltd, China Cosco Holdings, Ltd. - H, Tencent, Baidu.com, Sinopec Shanghai Petrochemical, GS Engineering & Construction, CLP Holdings, Cheung Kong Infrastructure, Power Assets Holdings Ltd, SMIC, Sinopec Corp - H, Malaysia Airports Holdings Berhad.
Investment Banking (next 3 months): J.P. Morgan expects to receive, or intends to seek, compensation for investment banking services in the next three months from Agricultural Bank of China - H, Bank of China - H, China Construction Bank, China Merchants Bank H, Huishang Bank, CJ O Shopping, Samsung Electronics, Sesa Sterlite, MGM China Holdings Ltd, Holcim Indonesia, LG Electronics, Doosan Heavy Industries & Construction, CIMB Group Holdings, PT Telekomunikasi Indonesia Tbk, China Southern Airlines - H, Shinhan Financial Group, Bank of Communications Co, Industrial and Commercial Bank of China - H, Ctrip.com International, Ltd, China Cosco Holdings, Ltd. - H, Tencent, Baidu.com, Sinopec Shanghai Petrochemical, GS Engineering & Construction, Bank Negara Indonesia Persero, CLP Holdings, Cheung Kong Infrastructure, Power Assets Holdings Ltd, SMIC, Sinopec Corp - H, Tata Steel Ltd, Malaysia Airports Holdings Berhad.
Non-Investment Banking Compensation: J.P. Morgan has received compensation in the past 12 months for products or services other than investment banking from Agricultural Bank of China - H, Bank of China - H, China Construction Bank, China Merchants Bank H, China Minsheng Banking H, Huishang Bank, Shanghai Electric Group Company Limited, Idea Cellular Limited, Shriram Transport Finance, Samsung Electronics, Sesa Sterlite, MGM China Holdings Ltd, Holcim Indonesia, China Citic Bank - H Share, Public Bank, LG Electronics, ING Vysya Bank, Doosan Heavy Industries & Construction, CIMB Group Holdings, Catcher Technology, Air China H, China Eastern Airlines - H, China Southern Airlines - H, Shinhan Financial Group, Bank of Communications Co, Industrial and Commercial Bank of China - H, Ctrip.com International, Ltd, Samsung Life Insurance, Samsung Fire & Marine Insurance, Samsung Securities, Evergreen Marine Corp Taiwan Ltd, Orient Overseas Int'l Ltd, China Cosco Holdings, Ltd. - H, Pacific Basin Shipping, Tencent, Bank Negara Indonesia Persero, Cheung Kong Infrastructure, Changsha Zoomlion Heavy Industry, Security Bank Corporation, Sinopec Corp - H, Tata Steel Ltd, Sinopharm, Bank Central Asia (BCA).
J.P. Morgan and its affiliates may perform, or may seek to perform, other financial or advisory services for ICBC or its affiliates and may have other interests in or relationships with ICBC or its affiliates, and receive fees, commissions or other compensation in such capacities. This research report and the information herein is not intended to serve as an endorsement of the proposed transaction or result in procurement, withholding or revocation of a proxy or any other action by a security holder. This report is based solely on publicly available information. No representation is made that it is accurate or complete.
"J.P. Morgan Securities plc (J.P. Morgan) is acting as a Joint Global Coordinator and a Joint Bookrunner to Tencent Holdings Limited ('Tencent') on its senior unsecured fixed rate notes offering as announced on 22 Apr 2014. J.P. Morgan will be receiving fees for so acting. J.P. Morgan may perform, or may seek to perform, other financial or advisory services for Tencent or its affiliates and may have other interests in or relationships with Tencent or its affiliates, and receive fees, commissions or other compensation in such capacities. This research report and the information herein is not intended to serve as an endorsement of the possible transaction or result in procurement, withholding or revocation of a proxy or any other action by a security holder. This report is based solely on publicly available information. No representation is made that it is accurate or complete.
"J.P. Morgan Securities plc and\or its affiliates (J.P. Morgan) has been appointed as the placement agent to Malaysia Airports Holdings Berhad (MAHB) on its proposed private placement as announced on 23 December 2013. J.P. Morgan will be receiving fees for so acting. J.P. Morgan and its affiliates may perform, or may seek to perform, other financial or advisory services for MAHB or its affiliates and may have other interests in or relationships with MAHB or its affiliates, and receive fees, commissions or other compensation in such capacities. This research report and the information herein is not intended to serve as an endorsement of the proposed transaction or result in procurement, withholding or revocation of a proxy or any other action by a security holder. This report is based solely on publicly available information. No representation is made that it is accurate or complete."
MSCI: The MSCI sourced information is the exclusive property of MSCI. Without prior written permission of MSCI, this information and any other MSCI intellectual property may not be reproduced, redisseminated or used to create any financial products, including any indices. This information is provided on an 'as is' basis. The user assumes the entire risk of any use made of this information. MSCI, its affiliates and any third party involved in, or related to, computing or compiling the information hereby expressly disclaim all warranties of originality, accuracy, completeness, merchantability or fitness for a particular purpose with respect to any of this information. Without limiting any of the foregoing, in no event shall MSCI, any of its affiliates or any third party involved in, or related to, computing or compiling the information have any liability for any damages of any kind. MSCI and the MSCI indexes are services marks of MSCI and its affiliates. Company-Specific Disclosures: Important disclosures, including price charts, are available for compendium reports and all J.P. Morgancovered companies by visiting https://jpmm.com/research/disclosures, calling 1-800-477-0406, or e-mailing research.disclosure.inquiries@jpmorgan.com with your request. J.P. Morgans Strategy, Technical, and Quantitative Research teams may screen companies not covered by J.P. Morgan. For important disclosures for these companies, please call 1-800-477-0406 or e-mail research.disclosure.inquiries@jpmorgan.com. Explanation of Equity Research Ratings, Designations and Analyst(s) Coverage Universe: J.P. Morgan uses the following rating system: Overweight [Over the next six to twelve months, we expect this stock will outperform the average total return of the stocks in the analysts (or the analysts teams) coverage universe.] Neutral [Over the next six to twelve months, we expect this stock will perform in line with the average total return of the stocks in the analysts (or the analysts teams) coverage universe.] Underweight [Over the next six to twelve months, we expect this stock will underperform the average total return of the stocks in the analysts (or the analysts teams) coverage universe.] Not Rated (NR): J.P. Morgan has removed the rating and, if applicable, the price target, for this stock because of either a lack of a sufficient fundamental basis or for legal, regulatory or policy reasons. The previous rating and, if applicable, the price target, no longer should be relied upon. An NR designation is not a
71
recommendation or a rating. In our Asia (ex-Australia) and U.K. small- and mid-cap equity research, each stocks expected total return is compared to the expected total return of a benchmark country market index, not to those analysts coverage universe. If it does not appear in the Important Disclosures section of this report, the certifying analysts coverage universe can be found on J.P. Morgans research website, www.jpmorganmarkets.com. J.P. Morgan Equity Research Ratings Distribution, as of March 31, 2014
Overweight (buy) 44% 58% 45% 78% Neutral (hold) 44% 49% 48% 67% Underweight (sell) 11% 40% 7% 60%
J.P. Morgan Global Equity Research Coverage IB clients* JPMS Equity Research Coverage IB clients*
*Percentage of investment banking clients in each rating category. For purposes only of FINRA/NYSE ratings distribution rules, our Overweight rating falls into a buy rating category; our Neutral rating falls into a hold rating category; and our Underweight rating falls into a sell rating category. Please note that stocks with an NR designation are not included in the table above.
Equity Valuation and Risks: For valuation methodology and risks associated with covered companies or price targets for covered companies, please see the most recent company-specific research report at http://www.jpmorganmarkets.com, contact the primary analyst or your J.P. Morgan representative, or email research.disclosure.inquiries@jpmorgan.com. Equity Analysts' Compensation: The equity research analysts responsible for the preparation of this report receive compensation based upon various factors, including the quality and accuracy of research, client feedback, competitive factors, and overall firm revenues. Registration of non-US Analysts: Unless otherwise noted, the non-US analysts listed on the front of this report are employees of non-US affiliates of JPMS, are not registered/qualified as research analysts under NASD/NYSE rules, may not be associated persons of JPMS, and may not be subject to FINRA Rule 2711 and NYSE Rule 472 restrictions on communications with covered companies, public appearances, and trading securities held by a research analyst account.
Other Disclosures
J.P. Morgan ("JPM") is the global brand name for J.P. Morgan Securities LLC ("JPMS") and its affiliates worldwide. J.P. Morgan Cazenove is a marketing name for the U.K. investment banking businesses and EMEA cash equities and equity research businesses of JPMorgan Chase & Co. and its subsidiaries. All research reports made available to clients are simultaneously available on our client website, J.P. Morgan Markets. Not all research content is redistributed, e-mailed or made available to third-party aggregators. For all research reports available on a particular stock, please contact your sales representative. Options related research: If the information contained herein regards options related research, such information is available only to persons who have received the proper option risk disclosure documents. For a copy of the Option Clearing Corporation's Characteristics and Risks of Standardized Options, please contact your J.P. Morgan Representative or visit the OCC's website at http://www.optionsclearing.com/publications/risks/riskstoc.pdf Legal Entities Disclosures U.S.: JPMS is a member of NYSE, FINRA, SIPC and the NFA. JPMorgan Chase Bank, N.A. is a member of FDIC. U.K.: JPMorgan Chase N.A., London Branch, is authorised by the Prudential Regulation Authority and is subject to regulation by the Financial Conduct Authority and to limited regulation by the Prudential Regulation Authority. Details about the extent of our regulation by the Prudential Regulation Authority are available from J.P. Morgan on request. J.P. Morgan Securities plc (JPMS plc) is a member of the London Stock Exchange and is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Registered in England & Wales No. 2711006. Registered Office 25 Bank Street, London, E14 5JP. South Africa: J.P. Morgan Equities South Africa Proprietary Limited is a member of the Johannesburg Securities Exchange and is regulated by the Financial Services Board. Hong Kong: J.P. Morgan Securities (Asia Pacific) Limited (CE number AAJ321) is regulated by the Hong Kong Monetary Authority and the Securities and Futures Commission in Hong Kong and/or J.P. Morgan Broking (Hong Kong) Limited (CE number AAB027) is regulated by the Securities and Futures Commission in Hong Kong. Korea: J.P. Morgan Securities (Far East) Ltd, Seoul Branch, is regulated by the Korea Financial Supervisory Service. Australia: J.P. Morgan Australia Limited (JPMAL) (ABN 52 002 888 011/AFS Licence No: 238188) is regulated by ASIC and J.P. Morgan Securities Australia Limited (JPMSAL) (ABN 61 003 245 234/AFS Licence No: 238066) is regulated by ASIC and is a Market, Clearing and Settlement Participant of ASX Limited and CHI-X. Taiwan: J.P.Morgan Securities (Taiwan) Limited is a participant of the Taiwan Stock Exchange (company-type) and regulated by the Taiwan Securities and Futures Bureau. India: J.P. Morgan India Private Limited, having its registered office at J.P. Morgan Tower, Off. C.S.T. Road, Kalina, Santacruz East, Mumbai - 400098, is a member of the National Stock Exchange of India Limited (SEBI Registration Number - INB 230675231/INF 230675231/INE 230675231) and Bombay Stock Exchange Limited (SEBI Registration Number - INB 010675237/INF 010675237) and is regulated by Securities and Exchange Board of India. For non local research reports, this material is not distributed in India by J.P. Morgan India Private Limited. Thailand: This material is issued and distributed in Thailand by JPMorgan Securities (Thailand) Ltd., which is a member of the Stock Exchange of Thailand and is regulated by the Ministry of Finance and the Securities and Exchange Commission and its registered address is 3rd Floor, 20 North Sathorn Road, Silom, Bangrak, Bangkok 10500. Indonesia: PT J.P. Morgan Securities Indonesia is a member of the Indonesia Stock Exchange and is regulated by the OJK a.k.a. BAPEPAM LK. Philippines: J.P. Morgan Securities Philippines Inc. is a Trading Participant of the Philippine Stock Exchange and a member of the Securities Clearing Corporation of the Philippines and the Securities Investor Protection Fund. It is regulated by the Securities and Exchange Commission. Brazil: Banco J.P. Morgan S.A. is regulated by the Comissao de Valores Mobiliarios (CVM) and by the Central Bank of Brazil. Mexico: J.P. Morgan Casa de Bolsa, S.A. de C.V., J.P. Morgan Grupo Financiero is a member of the Mexican Stock Exchange and authorized to act as a broker dealer by the National Banking and Securities Exchange Commission. Singapore: This material is issued and distributed in Singapore by or through J.P. Morgan Securities Singapore Private Limited (JPMSS) [MCI (P) 199/03/2014 and Co. Reg. No.: 199405335R] which is a member of the Singapore Exchange Securities Trading Limited and is regulated by the Monetary Authority of Singapore (MAS) and/or JPMorgan Chase Bank, N.A., Singapore branch (JPMCB Singapore) which is regulated by the MAS. This material is provided in Singapore only to accredited investors, expert investors and institutional investors, as defined in Section 4A of the Securities and Futures Act, Cap. 289. Recipients of this document are to contact JPMSS or JPMCB Singapore in respect of any matters arising from, or in connection with, the document. Japan: JPMorgan Securities Japan Co., Ltd. is regulated by the Financial Services Agency in Japan. Malaysia: This material is issued and distributed in Malaysia by JPMorgan Securities (Malaysia) Sdn Bhd (18146-X) which is a Participating Organization of Bursa Malaysia Berhad and a holder of
72
Capital Markets Services License issued by the Securities Commission in Malaysia. Pakistan: J. P. Morgan Pakistan Broking (Pvt.) Ltd is a member of the Karachi Stock Exchange and regulated by the Securities and Exchange Commission of Pakistan. Saudi Arabia: J.P. Morgan Saudi Arabia Ltd. is authorized by the Capital Market Authority of the Kingdom of Saudi Arabia (CMA) to carry out dealing as an agent, arranging, advising and custody, with respect to securities business under licence number 35-07079 and its registered address is at 8th Floor, Al-Faisaliyah Tower, King Fahad Road, P.O. Box 51907, Riyadh 11553, Kingdom of Saudi Arabia. Dubai: JPMorgan Chase Bank, N.A., Dubai Branch is regulated by the Dubai Financial Services Authority (DFSA) and its registered address is Dubai International Financial Centre - Building 3, Level 7, PO Box 506551, Dubai, UAE. Country and Region Specific Disclosures U.K. and European Economic Area (EEA): Unless specified to the contrary, issued and approved for distribution in the U.K. and the EEA by JPMS plc. Investment research issued by JPMS plc has been prepared in accordance with JPMS plc's policies for managing conflicts of interest arising as a result of publication and distribution of investment research. Many European regulators require a firm to establish, implement and maintain such a policy. This report has been issued in the U.K. only to persons of a kind described in Article 19 (5), 38, 47 and 49 of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (all such persons being referred to as "relevant persons"). This document must not be acted on or relied on by persons who are not relevant persons. Any investment or investment activity to which this document relates is only available to relevant persons and will be engaged in only with relevant persons. In other EEA countries, the report has been issued to persons regarded as professional investors (or equivalent) in their home jurisdiction. Australia: This material is issued and distributed by JPMSAL in Australia to "wholesale clients" only. This material does not take into account the specific investment objectives, financial situation or particular needs of the recipient. The recipient of this material must not distribute it to any third party or outside Australia without the prior written consent of JPMSAL. For the purposes of this paragraph the term "wholesale client" has the meaning given in section 761G of the Corporations Act 2001. Germany: This material is distributed in Germany by J.P. Morgan Securities plc, Frankfurt Branch and J.P.Morgan Chase Bank, N.A., Frankfurt Branch which are regulated by the Bundesanstalt fr Finanzdienstleistungsaufsicht. Hong Kong: The 1% ownership disclosure as of the previous month end satisfies 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. (For research published within the first ten days of the month, the disclosure may be based on the month end data from two months prior.) J.P. Morgan Broking (Hong Kong) Limited is the liquidity provider/market maker for derivative warrants, callable bull bear contracts and stock options listed on the Stock Exchange of Hong Kong Limited. An updated list can be found on HKEx website: http://www.hkex.com.hk. Japan: There is a risk that a loss may occur due to a change in the price of the shares in the case of share trading, and that a loss may occur due to the exchange rate in the case of foreign share trading. In the case of share trading, JPMorgan Securities Japan Co., Ltd., will be receiving a brokerage fee and consumption tax (shouhizei) calculated by multiplying the executed price by the commission rate which was individually agreed between JPMorgan Securities Japan Co., Ltd., and the customer in advance. Financial Instruments Firms: JPMorgan Securities Japan Co., Ltd., Kanto Local Finance Bureau (kinsho) No. 82 Participating Association / Japan Securities Dealers Association, The Financial Futures Association of Japan, Type II Financial Instruments Firms Association and Japan Investment Advisers Association. Korea: This report may have been edited or contributed to from time to time by affiliates of J.P. Morgan Securities (Far East) Ltd, Seoul Branch. Singapore: JPMSS and/or its affiliates may have a holding in any of the securities discussed in this report; for securities where the holding is 1% or greater, the specific holding is disclosed in the Important Disclosures section above. India: For private circulation only, not for sale. Pakistan: For private circulation only, not for sale. New Zealand: This material is issued and distributed by JPMSAL in New Zealand only to persons whose principal business is the investment of money or who, in the course of and for the purposes of their business, habitually invest money. JPMSAL does not issue or distribute this material to members of "the public" as determined in accordance with section 3 of the Securities Act 1978. The recipient of this material must not distribute it to any third party or outside New Zealand without the prior written consent of JPMSAL. Canada: The information contained herein is not, and under no circumstances is to be construed as, a prospectus, an advertisement, a public offering, an offer to sell securities described herein, or solicitation of an offer to buy securities described herein, in Canada or any province or territory thereof. Any offer or sale of the securities described herein in Canada will be made only under an exemption from the requirements to file a prospectus with the relevant Canadian securities regulators and only by a dealer properly registered under applicable securities laws or, alternatively, pursuant to an exemption from the dealer registration requirement in the relevant province or territory of Canada in which such offer or sale is made. The information contained herein is under no circumstances to be construed as investment advice in any province or territory of Canada and is not tailored to the needs of the recipient. To the extent that the information contained herein references securities of an issuer incorporated, formed or created under the laws of Canada or a province or territory of Canada, any trades in such securities must be conducted through a dealer registered in Canada. No securities commission or similar regulatory authority in Canada has reviewed or in any way passed judgment upon these materials, the information contained herein or the merits of the securities described herein, and any representation to the contrary is an offence. Dubai: This report has been issued to persons regarded as professional clients as defined under the DFSA rules. Brazil: Ombudsman J.P. Morgan: 08007700847 / ouvidoria.jp.morgan@jpmorgan.com. General: Additional information is available upon request. Information has been obtained from sources believed to be reliable but JPMorgan Chase & Co. or its affiliates and/or subsidiaries (collectively J.P. Morgan) do not warrant its completeness or accuracy except with respect to any disclosures relative to JPMS and/or its affiliates and the analyst's involvement with the issuer that is the subject of the research. All pricing is as of the close of market for the securities discussed, unless otherwise stated. Opinions and estimates constitute our judgment as of the date of this material and are subject to change without notice. Past performance is not indicative of future results. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The opinions and recommendations herein do not take into account individual client circumstances, objectives, or needs and are not intended as recommendations of particular securities, financial instruments or strategies to particular clients. The recipient of this report must make its own independent decisions regarding any securities or financial instruments mentioned herein. JPMS distributes in the U.S. research published by non-U.S. affiliates and accepts responsibility for its contents. Periodic updates may be provided on companies/industries based on company specific developments or announcements, market conditions or any other publicly available information. Clients should contact analysts and execute transactions through a J.P. Morgan subsidiary or affiliate in their home jurisdiction unless governing law permits otherwise. "Other Disclosures" last revised April 5, 2014.
Copyright 2014 JPMorgan Chase & Co. All rights reserved. This report or any portion hereof may not be reprinted, sold or redistributed without the written consent of J.P. Morgan. #$J&098$#*P
73

Market

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Market

Uploaded by

Copyright:

Available Formats

Due to market closures, there will be no publication of Asia First to Market on 1st May 2014.

Publication resumes on 2nd May 2014

Asia Pacific Equity Research

Consensus Asset Allocation: EM funds asset allocation and performance

Results and Company Views, continued

Catcher Technology (2474.TW Overweight), Taiwan

Price Target and Estimate Changes

Results and Company Views

Asia Analyst Focus List

Source: J.P. Morgan

Country relative performance in US$ (MSCI AC Asia Pacific ex JP)

Sector relative performance in US$ (MSCI AC Asia Pacific ex JP)

Source: J.P. Morgan, Bloomberg.

Source: J.P. Morgan, Bloomberg.

Last Four Weeks Additions

Source: J.P. Morgan, Bloomberg. Priced at April 29, 2014

Last Four Weeks Deletions

AFL Country team stocks

Country India India

Indonesia OW Indonesia UW Malaysia Malaysia OW UW

Philippines OW Philippines UW Singapore OW Singapore UW Korea Korea Taiwan Taiwan OW UW OW UW OW

Anne Jirajariyavech, CFA Thailand

Asia Pacific ex JP Asia Pacific ex JP Asia Pacific ex JP

AFL Sector team stocks

Add Date 4-Apr-14 2-Sep-13 19-Feb-14 10-Apr-14 2-Sep-13 2-Sep-13

Asia Pacific Equity Research

Samsung's strategic options for ownership restructuring

Korea Equity Strategy Scott YH Seo

Young Kwon Kim

Acronyms used in this report:

Asia Pacific Equity Research

Samsung's strategic options for ownership restructuring

South Korea Korea Equity Strategy Scott YH Seo

Young Kwon Kim

Asia Pacific Equity Research

Banks & Financial Services Katherine Lei

(852) 2800-8552 katherine.lei@jpmorgan.com Bloomberg JPMA LEI <GO>

Source: Company reports, J.P. Morgan estimates.

Asia Pacific Equity Research

Who will capture consumer time spend?

(852) 2800 8535 alex.c.yao@jpmorgan.com Bloomberg JPMA YAO <GO>

Asia Pacific Equity Research

Previous: Neutral 2474.TW, 2474 TT Price: NT$256.50

Price Target: NT$330.00

Taiwan Technology - Hardware William Chen

(886-2) 2725-9875 james.p.wang@jpmorgan.com J.P. Morgan Securities (Taiwan) Limited

YTD 30.2% 28.3%

12m 75.1% 65.7%

330 31-Dec-14 751mn 7.37mn 55.2mn 0.1% 50.0% 6,359mn

Asia Pacific Equity Research

Changsha Zoomlion Heavy Industry

Price Target: HK$4.50

China Infrastructure & Industrial Karen Li, CFA

1157.HK share price (HK$) HSI (rebased)

YTD -29.5% -24.3%

12m -34.5% -32.5%

Asia Pacific Equity Research

Neutral Price: HK$2.90

Price Target: HK$2.80 601600.SS, 601600 CH

Price Target: Rmb3.70

China Metals Daniel Kang

(852) 2800 8570 daniel.kang@jpmorgan.com Bloomberg JPMA KANG <GO>

Waiyin Karen Li, CFA

Jan-14 Apr-14 HSI Index (rebased)