GREATER CHINA CONSUMER WEEKLY

10 January 2011

Update on watch, jewellery and luxuries market UOB Kay Hian Top Consumer Picks
Current Target 2010
Montblanc expanding in its largest single market, China. Montblanc Stock Price Price PE
Group will continue to expand in Asia as economic growth boosts Company code (HK$) (HK$) (x)
consumption of luxury goods. China has overtaken the US as Montblanc’s Top BUYs
biggest individual market and sales growth is seen in its other Asian markets Daphne 210 HK 7.96 11.70 20.7
too. Sa Sa 178 HK 4.85 5.20 17.6
Shenguan 829 HK 9.81 11.20 27.7
Luxury brands encouraging Chinese consumers to spend on home Luk Fook 590 HK 26.05 45.30 24.1
turf. Some luxury brands are planning to raise retail prices in Europe. In
addition, luxury brands are improving product availability and enhancing Top SELLs
customer service to meet growing demand in China. Parkson 3368 HK 13.04 11.30 30.9
Source: UOB Kay Hian
Richemont’s profit up 88% in 1HFY11 with strong growth in Asia. Cie.
Financiere Richemont SA (CFR VX), the world’s largest jewellery maker, Last Week’s Top Gainers
Current 1 wk 2010
reported strong 1HFY11 results with net profit soaring 88% yoy. Sales rose
Stock Price % chg PE
50% yoy in the Asia-Pacific region, the company’s second-biggest market. Company code (lcy) (%) (x)
Chia Tai 121 HK 0.29 13.7 n.a.
Robust Hong Kong Swiss watch market in Nov 10. Despite the high
Geely 175 HK 3.85 13.2 17.6
base in Nov 09, total Swiss watch exports surged 29.7% yoy in Nov 10 to
Golden Eagle 3308 HK 21.50 12.2 38.5
CHF1.78b. The strong climb was led by Hong Kong, the world’s largest China Foods 506 HK 5.49 10.7 28.9
Swiss watch market. Hong Kong recorded 71.2% yoy growth, indicating Daphne 210 HK 7.96 9.3 20.7
Swiss watch retailers’ optimism over the market outlook. Source: UOB Kay Hian
Emperor – Raising target price to reflect further re-rating potential. We Last Week’s Top Losers
raise our target PE for Emperor Watch & Jewellery (887 HK) from 18x to Current 1 wk 2010
20x to reflect its further re-rating potential as it will benefit the most from the Stock Price % chg PE
continued strong visitor arrivals from mainland China. Company code (lcy) (%) (x)
China Lilang 1234 HK 10.80 (10.0) 20.1
Mainland China and Hong Kong jewellery markets continue to Great Wall 2333 HK 22.15 (7.7) 11.1
blossom. Mainland China’s retail sales of gold, silver and jewellery soared Natural Beauty 157 HK 1.94 (7.6) n.a.
82.5% yoy in Nov 10 to Rmb11.6b. Hong Kong’s retail sales of jewellery, Pou Sheng 3813 HK 1.25 (7.4) 20.1
watches and clocks, and valuable gifts surged 34.9% yoy to HK$5.1b. In Luk Fook 590 HK 26.05 (4.1) 24.1

particular, there are signs that the growth momentum in mainland China’s Source: UOB Kay Hian
jewellery market is accelerating.
Strong market growth expected in foreseeable future. We expect retail Analysts
sales growth of jewellery to continue to outpace overall retail sales growth in Greater China Consumer Team
Hong Kong and mainland China, underpinned by increasing personal +852 2236 6799
income of mainland Chinese and low personal consumption of jewellery. In researchhk@uobkayhian.com.hk
fact, we believe personal income of mainland Chinese in second-tier cities is
approaching the threshold that will trigger jewellery consumption. After
apartments and automobiles, jewellery will be the next consumer item
sought by mainland Chinese. Jewellery consumption is still limited to first-
and second-tier cities. Thus, lower-tier cities will be the next earnings driver
in the long haul.

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Update on watch, jewellery and luxuries market

Highlights
 Montblanc expanding in its largest single market, China. Montblanc
Group will continue to expand in Asia as economic growth boosts
consumption of luxury goods. China has overtaken the US as Montblanc’s
biggest individual market and sales growth is also seen in other Asian
markets.
 Luxury brands encouraging Chinese consumers to spend on home
turf. Some luxury brands are planning to raise retail prices in Europe.
Gucci plans to raise some prices by more than 5% to reduce the spread
between Europe and other countries. Louis Vuitton will lift prices
significantly in Europe. Salvatore Ferragamo may rebalance prices
worldwide in 2011 to reduce the excessive price gaps among different
markets. In addition, luxury brands are improving product availability and
enhancing customer service to meet growing demand in China.
 Richemont’s profit up 88% in 1HFY11 with strong growth in Asia. Cie.
Financiere Richemont SA (Richemont), the world’s largest jewellery maker,
reported strong 1HFY11 results with net profit soaring 88% yoy to €646m,
higher than market expectations of €517m. Richemont’s sales rose 50%
yoy in the Asia-Pacific region, the company’s second-biggest market.
 Robust Hong Kong Swiss watch market in Nov 10. Despite the high
base in Nov 09, total Swiss watch exports went up significantly in Nov 10,
up 29.7% yoy to CHF1.78b. The strong climb was led by Hong Kong,
which recorded a 71.2% yoy growth, indicating Swiss watch retailers’
optimism over the market outlook. China registered a 39.3% yoy growth in
Swiss watch imports in Nov 10. During Jan-Nov 10, China’s Swiss watch
market still grew faster than Hong Kong’s (China: 54.9% yoy vs Hong Kong:
45.9% yoy).
 Emperor – Raising target price to reflect further re-rating potential.
We raise our target PE for Emperor Watch & Jewellery (EWJ) from 18x to
20x to reflect its further re-rating potential as it will benefit the most from
the continued strong visitor arrivals from mainland China. About 90% of
EWJ’s earnings are derived from Hong Kong and Macau. We raise our
target price to HK$1.50 which is based on 2011 PE.
 Mainland China and Hong Kong jewellery markets continue to
blossom. Mainland China’s retail sales of gold, silver and jewellery soared
82.5% yoy in Nov 10 to Rmb11.6b. Hong Kong’s retail sales of jewellery,
watches and clocks, and valuable gifts surged 34.9% yoy to HK$5.1b. In
particular, there are signs that the growth momentum in mainland China’s
jewellery market is accelerating.
 Strong market growth expected in foreseeable future. We expect retail
sales growth of jewellery to continue to outpace overall retail sales growth
in Hong Kong and mainland China, underpinned by the increasing personal
income of mainland Chinese and low personal consumption of jewellery. In
fact, we believe personal income of mainland Chinese in second-tier cities
Analyst
is approaching the threshold that will trigger jewellery consumption. After
Tommy Ho
apartments and automobiles, jewellery will be the next consumer item
(852) 2236 6757
sought by mainland Chinese. Jewellery consumption is still limited to first- tommy.ho@uobkayhian.com.hk
and second-tier cities. Thus, lower-tier cities will be the next earnings driver
in the long haul.
Figure 1: Peer Comparison
Price Target Market
7 Jan 11 Price cap --------------PE (x)---------------- ROE
Ticker Rec (HK$) (HK$) (US$m) 2010F 2011F 2012F 2009
Hengdeli 3389 HK BUY 4.79 Under Review 2,515 30.9 24.9 20.7 14.7
Emperor Watch & Jewellery 887 HK BUY 1.15 1.5 668 60.0 15.1 10.6 13.3
Luk Fook 590 HK BUY 26.05 45.3 1,655 24.1 16.4 13.8 23.8
Chow Sang Sang 116 HK Not Rated 18.88 n.a. 1,466 n.a. n.a. n.a. 16.1
Source: UOB Kay Hian, Bloomberg

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 UOBKayHian

Overall luxuries
 Montblanc expanding in its largest single market, China. Montblanc
Group, under the auspicies of Richemont (NOT RATED), will continue to
expand in Asia as economic growth boosts consumption of luxury goods.
Montblanc, which entered China in the early 1990s and has almost 100
outlets in 48 cities in China, plans to open 4-5 new stores there in 2011.
Founded in 1906, Montblanc sells its gold and diamond-encrusted pens,
watches, cuff links, jewellery, perfume and leather accessories in about 70
countries through its own 360 boutiques and other retailers. China has
overtaken the US as Montblanc’s biggest individual market and sales
growth is also seen in other Asian countries.
 Luxury brands encouraging Chinese consumers to spend on home
turf. Some luxury brands are planning to raise retail prices in Europe.
According to PPR (PP FP/NOT RATED), Gucci plans to raise some prices
by more than 5% to reduce the spread between Europe and other
countries. Louis Vuitton will lift prices significantly in Europe. Salvatore
Ferragamo may rebalance prices worldwide in 2011 to reduce the
excessive price gaps among different markets. In addition, luxury brands
are improving product availability and enhancing customer service to meet
growing demand in China.

Watches
 Hong Kong and China Swiss watch markets saw strong Nov 10.
Despite the high base in Nov 09, total Swiss watch exports rocketed in Nov
10, up 29.7% yoy to CHF1.78b. The surge was led by Hong Kong, the
world’s largest Swiss watch market. Hong Kong recorded 71.2% yoy
growth, indicating Swiss watch retailers’ optimism over the market outlook.
China registered a 39.3% yoy growth in Swiss watch imports in Nov 10.
During Jan-Nov 10, China’s Swiss watch market still grew faster than Hong
Kong’s (China 54.9% yoy vs Hong Kong 45.9% yoy).

Figure 2: World Distribution Of Swiss Watch Exports (Nov 10)

2010 Nov 2009 Nov 2008 Nov Change in % Change in %
Ranking Market (CHFm) (CHFm) (CHFm) 2010 vs 2009 2010 vs 2008
1 Hong Kong 359.6 210.0 242.5 71.2% 48.3%
2 USA 187.0 158.8 200.0 17.7% (6.5%)
3 France 129.7 89.0 110.2 45.6% 17.7%
4 Singapore 118.7 70.6 61.5 68.1% 93.0%
5 Italy 114.9 88.9 95.9 29.3% 19.9%
6 China 108.3 77.8 56.7 39.3% 91.1%
7 Japan 91.8 67.9 102.8 35.1% (10.7%)
8 Germany 72.0 75.3 94.6 (4.3%) (23.9%)
9 United Kingdom 69.2 54.2 65.7 27.6% 5.3%
10 United Arab Emirates 62.0 40.8 66.5 52.0% (6.8%)
Total value 1,777.2 1,369.9 1,516.6 29.7% 17.2%
Source: Federation of the Swiss Watch Industry FH, UOB Kay Hian

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Figure 3: World Distribution Of Swiss Watch Exports (Jan-Nov 10)

Jan-Nov 10 Jan-Nov 09 Jan-Nov 08 Change in % Change in %
Ranking Market (CHFm) (CHFm) (CHFm) 2010 vs 2009 2010 vs 2008
1 Hong Kong 2,845.8 1,951.2 2,527.6 45.9% 12.6%
2 USA 1,533.4 1,333.2 2,206.1 15.0% (30.5%)
3 France 1,057.5 889.0 1,025.8 19.0% 3.1%
4 China 966.7 624.0 773.0 54.9% 25.1%
5 Italy 861.1 837.7 951.4 2.8% (9.5%)
6 Singapore 840.1 613.7 723.4 36.9% 16.1%
7 Japan 725.6 700.1 1,059.7 3.6% (31.5%)
8 Germany 706.7 734.2 843.2 (3.7%) (16.2%)
9 United Kingdom 547.6 498.6 587.6 9.8% (6.8%)
10 United Arab Emirates 517.1 397.3 607.8 30.2% (14.9%)
Total value 14,615.1 12,002.1 15,711.5 21.8% (7.0%)
Source: Federation of the Swiss Watch Industry FH, UOB Kay Hian

 EWJ – Fair value loss in CBs and warrant shares will likely exceed
expectations. Share price of EWJ (BUY) has gone up almost 100% since
the issuance of convertible bonds and warrant shares to DE Shaw and
LVMH Group. The strong share price performance increased the fair value
loss associated with the dilutive securities. We expect fair value loss to be
higher than our expectations. We have cut our 2010 earnings forecasts
from HK$220m to HK$117m to reflect this non-cash item. Stripping out this
non-cash item, we expect net profit in 2010 to surge 63% yoy to HK$320m.
 EWJ – Raising target price to reflect further re-rating potential. We
raise our target PE for EWJ from 18x to 20, to reflect its further re-rating
potential as it will benefit the most from the continued strong visitor arrivals
from mainland China. About 90% of EWJ’s earnings are derived from Hong
Kong and Macau. We raise our target price to HK$1.50.

Figure 4: Visitor Arrivals From Mainland China To Hong Kong

('000)
2 ,5 0 0 6 0 .0 %
5 0 .0 %
2 ,0 0 0
4 0 .0 %
1 ,5 0 0 3 0 .0 %
2 0 .0 %
1 ,0 0 0 1 0 .0 %
0 .0 %
500
(1 0 % )
00 (2 0 % )
Ja n 0 5 Nov 05 Se p 0 6 Ju l 0 7 Ma y 0 8 Ma r 0 9 Ja n 1 0 Nov 10

N u m b e r o f vis ito r a rriva ls (L H S)

yo y ch a n g e (R H S)

Source: HKTB, UOB Kay Hian

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Jewellery
 Richemont’s profit up 88% in 1HFY11 with strong growth in Asia.
Richemont reported strong 1HFY11 results with net profit soaring 88% yoy
to €646m, higher than market expectations of €517m. Richemont’s sales
rose 50% yoy in the Asia-Pacific region, the company’s second-biggest
market. According to Hurun Wealth Report, Cartier, under Richemont’s
brand portfolio, is the most preferred luxury jewellery brand.
 Mainland China and Hong Kong jewellery markets continue to
blossom. Mainland China’s retail sales of gold, silver and jewellery soared
82.5% yoy in Nov 10 to Rmb11.6b. Hong Kong’s retail sales of jewellery,
watches and clocks, and valuable gifts surged 34.9% yoy to HK$5.1b in
Nov 10. There are signs that the growth momentum in mainland China’s
jewellery market is accelerating. Having said that, we believe the strong
growth in mainland China is driven more by an increase in the number of
jewellery shops than by same-store sales (SSS) growth amid a proliferation
of more new department stores and shopping malls. On the other hand, we
believe Hong Kong’s market growth is driven more by SSS growth amid
the limited growth in retail space.
Figure 5: Mainland China And Hong Kong Retail Sales of Jewellery
China Retail Sales of Gold, Silver and yoy chg Hong Kong retail sales of jewellery, watches and yoy chg
Month Jewellery (Rmbm) (%) clocks, and valuable gifts (HK$m) (%)
Jan 10 10,510 23.2 5,543 26.6
Feb 10 11,471 68.4 4,829 47.2
Mar 10 8,940 55.2 4,269 41.3
Apr 10 8,290 47.2 4,359 35.8
May 10 11,040 58.8 4,719 47.8
Jun 10 9,230 57.2 4,592 30.6
Jul 10 9,020 55.2 5,163 36.7
Aug 10 10,230 50.9 5,158 37.7
Sep 10 10,900 63.9 4,587 33.5
Oct 10 12,400 64.5 5,255 40.3
Nov 10 11,550 82.5 5,108 34.9
Jan-Nov 10 113,581 56.3 53,585 37.1
Source: CEIC, C&S, UOB Kay Hian

 Strong market growth expected in foreseeable future. We expect retail

sales growth of jewellery to continue to outpace overall retail sales growth
in Hong Kong and mainland China. The jewellery markets in Hong Kong
and mainland China are expected to deliver strong growth in the
foreseeable future underpinned by the increasing personal income of
mainland Chinese and low personal consumption of jewellery. In fact, we
believe personal income of mainland Chinese in second-tier cities is
approaching the threshold that triggers jewellery consumption. After
apartments and automobiles, jewellery will be the next consumer item
sought by mainland Chinese. Jewellery consumption is still limited to first-
and second-tier cities. Thus, lower-tier cities will be the next earnings driver
in the long haul.

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 UOBKayHian

Figure 6: China Retail Sales Growth Of Gold, Silver & Jewellery vs Overall
Retail Sales Growth
100%

80%

60%
yoy growth

40%

20%

0%
Jan-98

Jan-99

Jan-00

Jan-01

Jan-02

Jan-03

Jan-04

Jan-05

Jan-06

Jan-07

Jan-08

Jan-09

Jan-10
-2 0 %

-4 0 %
M o n th

C h in a R e t a il S a le s o f G o ld , S ilve r & J e w e lle ry C h in a T o t a l R e t a il S a le s

Source: CEIC, UOB Kay Hian

Figure 7: Retail Sales Growth By Category Of Retail Outlets In Hong Kong

(Jan-Nov 10)
Jew ellery , w atc hes and c loc ks , and v aluable
37.1%
gif ts
22.2% Elec tric al goods and photographic equipment
18.2% A ll retail outlets
17.4% Medic ines and c os metic s

16.8% Clothing, f ootw ear and allied produc ts

16.7% Department s tores

13.7% Furniture and f ix tures
Food, alc oholic drinks and tobac c o (other than
9.7%
s upermarkets )
4.9% Supermarkets

0.0% 20.0% 40.0%

Source: C&S, UOB Kay Hian

Figure 8: China Retail Sales Of Gold, Silver And Jewellery

14,000 100%
12,000 80%
10,000 60%
yoy change
Rmb m

8,000 40%
6,000 20%
4,000 0%
2,000 -20%
0 -40%
9/ 8

9/ 3

9/ 8
11 998

7/ 99
5/ 00

3/ 1
1/ 02
11 003

7/ 4
5/ 05
3/ 06

1/ 7
11 08

7/ 09
10
99

00

00
0

0
19
20
20

20

20

20
20
20

20

20
20
/1

/2

/2
1

2
1/

Re ta il Sa le s o f G o ld , S ilv e r & Je w e lle r y (L HS ) y o y c h a n g e ( RHS )

Source: CEIC, UOB Kay Hian

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Figure 9: Gold Price

y oy c hange (U S $ /o z)

60 .0 % 1600

50 .0 % 1400

G o ld P r ic e ( R H S )
40 .0 % 1200

30 .0 % 1000

20 .0 % 800

10 .0 % 600
y oy c h a n g e (L H S )

0 .0 % 400
J an F eb A pr M ay J ul S ep O c t D ec F eb M ar M ay J ul A ug O c t D ec
-1 0 .0 % 09 09 09 09 09 09 09 09 10 10 10 10 10 10 10 200

-2 0 .0 % 0

Source: Bloomberg, UOB Kay Hian

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Figure 10: Retail Sales Figure 11: CPI

(%) (%)
25 10
8
20
6
15
4
10 2

5 0
-2
0
-4
Se r 00

Se r 01

Se 02

Se r 03

Se r 04

Se 05

Se r 06

Se r 07

Se 08

Se r 09

Se r 10
M 00

M 01

M 02

M 03

M 04

M 05

M 06

M 07

M 08

M 09

10
ar

ar

ar
p

p
a

a
M

Source: China Statistical Bureau Source: China Statistical Bureau

Figure 12: PMI − Manufacturing Employment Index Figure 13: PMI − Non-manufacturing Employment Index
(%)
60 60
58
56
55
54
52
50 50
48
46 45
44
42
40 40
Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov
p 5

Se 06

p 7

p 8

Se 09

p 0
J u r 06

J u r 07

J u 08

J u r 09

J u r 10
D 05
M 05

ec 6
M 06

D 07
M 07

D 08
M 08

D 09
M 09

10
Se n 0

Se n 0

Se n 0

Se n 1
D 0

08 08 08 08 08 08 09 09 09 09 09 09
n

n
ar
ec

ec

ec

ec
p

p
a

a
Ju

Source: CICC Source: CICC

Figure 14: Per Capita Disposable Income

Figure 15: Per Capita Consumption Expenditure
(%) (%)
25 18
16
20 14
12
15
10
10 8
6
5 4
2
0 0
Se 3

Se 04

Se 5

Se 06

Se 7

Se 08

Se 9

10
M 3

M 4

M 5

M 6

M 7

M 8

M 9

Se 03

Se 04

Se 05

Se 6

Se 07

Se 8

Se 09

10
M 3

M 4

M 5

06

M 7

08

M 9
0

0
0

0
0

0
ar

ar

ar

ar

ar

ar

ar

ar
p

ar

ar

ar

ar

ar

ar

ar

ar
p

p
M

Source: China Statistical Bureau Source: China Statistical Bureau

Figure 16: Consumer Confidence Index Figure 17: Consumer Loans

(%)
115 60
55
110 50
45
40
105 35
30
25
100 20
15
10
95 5
0
90 Mar 09 Jun 09 Sep 09 Dec 09 Mar 10 Jun 10 Sep 10

Source: China Statistical Bureau Source: China Statistical Bureau

Page 8
 UOBKayHian

Figure 18: Valuation

Div Net
Market Last Price Target/Fair % % PE EPS PEG yield gearin P/B ROE ROA
Company Ticker Cap Rec (7 Jan 11) Price chg chg % chg (x) CAGR (x) (%) g (%) (x) (%) (%)
(US$m) (lcy) (lcy) 1W 3M 1Y 2009 2010F 2011F 2011-12F 2011F 2009 2009 2009 2009 2009
APPAREL
Bosideng 3998 HK 3,299 Not Rated 3.29 n.a. 6.1 1.5 88.0 32.9 23.7 18.1 20.9 0.9 5.3 (81) 3.3 16.1 13.7
(10.0
1,672 2.1
China Lilang 1234 HK Not Rated 10.80 n.a. ) (14.7) 77.3 26.6 20.1 20.8 24.7 0.8 (63) 6.8 29.1 21.1
Esprit 330 HK 6,332 SELL 38.10 38.80 3.0 (11.2) (31.1) 10.2 11.6 14.7 2.1 7.2 3.3 (26) 3.0 27.7 19.1
Evergreen 238 HK 667 Not Rated 5.26 n.a. 1.0 n.a. n.a. 43.3 24.9 n.a. n.a. n.a. n.a. 41 n.a. 70.5 31.3
Giordano 709 HK 926 HOLD 4.81 2.55 6.2 6.9 111.8 39.6 33.3 28.8 n.a. n.a. 3.4 (34) 3.7 14.5 10.7
IT Ltd. 999 HK 917 Not Rated 6.15 n.a. 4.4 7.7 324.1 153.8 26.7 21.1 22.6 0.9 3.5 (37) 6.8 19.5 14.3
Ports Design 589 HK 1,568 HOLD 21.55 23.00 0.5 4.4 (8.9) 22.8 18.7 17.5 n.a. n.a. 2.8 (53) 7.9 37.9 21.4
Trinity 891 HK 1,611 Not Rated 7.93 n.a. (3.2) 3.5 95.3 39.6 39.3 28.5 30.6 0.9 2.3 10 6.3 10.7 5.7

Average 1.6 (0.9) 93.5 46.1 24.8 21.3 20.2 2.1 3.3 (30) 5.4 28.3 17.2

AUTO
Brilliance 1114 HK 3,782 HOLD 5.88 4.30 (0.8) 7.7 157.9 Loss 25.7 20.8 20.1 1.0 0.0 3 4.6 n.a. n.a.
BYD 1211 HK 25,274 SELL 43.05 35.00 5.4 (25.7) (34.6) 21.4 24.5 25.0 17.1 1.5 0.6 7 5.0 27.1 10.3
Dongfeng 489 HK 15,742 HOLD 14.16 15.30 5.7 (7.1) 21.4 17.2 9.9 9.9 5.0 2.0 1.1 (38) 3.8 25.3 8.6
Geely 175 HK 3,632 SELL 3.85 2.80 13.2 5.5 (6.8) 19.9 17.6 16.6 2.4 7.0 1.0 21 3.8 22.4 8.2
Guangzhou Auto 2238 HK 8,377 Not Rated 10.56 n.a. (1.5) n.a. n.a. 16.6 10.9 9.7 21.1 0.5 n.a. (69) n.a. 16.6 5.5
Great Wall 2333 HK 3,130 Not Rated 22.15 n.a. (7.7) 7.5 136.4 12.8 11.1 9.1 26.6 0.3 2.1 (13) 2.8 14.3 7.9
Qingling 1122 HK 772 Not Rated 2.41 n.a. 3.4 (4.0) 16.4 18.2 15.8 14.8 18.9 0.8 4.9 (73) 0.7 3.4 2.8
Sinotruk 3808 HK 2,804 Not Rated 7.87 n.a. (1.7) 1.9 (23.1) 15.3 13.6 12.7 14.3 0.9 0.7 (21) 1.2 6.8 2.9
Dah Chong Hong 1828 HK 1,856 Not Rated 8.00 n.a. (3.0) (19.8) 131.2 15.6 15.1 11.4 24.9 0.5 2.8 14 2.7 13.8 6.3
Zhongsheng 881 HK 4,102 Not Rated 16.66 n.a. (1.4) (5.7) n.a. 48.6 27.2 17.8 121.5 0.1 n.a. 79 n.a. 25.2 9.7

Average 1.1 (4.4) 49.9 20.6 17.1 14.8 27.2 1.5 1.7 (9) 3.1 17.2 6.9

CATERING
Ajisen 538 HK 1,797 Not Rated 13.04 n.a. (0.2) 3.0 90.9 37.2 32.8 25.7 25.6 1.0 0.9 (72) 5.9 13.7 11.7
Café de Coral 341 HK 1,410 Not Rated 19.56 n.a. 1.8 (12.1) 7.6 21.2 21.1 19.0 17.6 1.1 2.8 (36) 4.6 19.6 15.9
Fairwood 52 HK 177 Not Rated 10.94 n.a. (0.2) 14.8 41.1 12.0 10.9 9.9 n.a. n.a. 4.9 (39) n.a. 23.7 14.1
Little Sheep 968 HK 672 Not Rated 5.07 n.a. 3.3 (3.2) 17.6 28.8 23.9 18.9 22.3 0.8 1.5 (31) 4.4 15.8 12.8
Tao Heung 573 HK 364 BUY 2.78 2.50 3.0 (7.3) (12.0) 13.5 12.1 10.1 n.a. n.a. 4.0 (39) n.a. 19.3 14.9

Average 1.5 (1.0) 29.0 22.5 20.1 16.7 21.8 1.0 2.8 (44) 4.9 18.4 13.9

CONSUMER STAPLES
Hengan 1044 HK 10,784 HOLD 68.55 69.00 2.2 (7.2) 23.8 39.5 31.6 25.8 20.4 1.3 1.9 (14) 9.8 27.3 17.5
Vinda 3331 HK 1,050 Not Rated 9.00 n.a. 4.8 (13.0) 64.8 19.6 21.0 16.1 30.8 0.5 1.9 26 n.a. 21.1 11.9
Sa Sa Int'l 178 HK 1,741 BUY 4.85 5.20 0.0 55.2 92.9 21.2 17.6 26.2 26.0 0.5 1.3 (54) 12.3 32.9 25.4
Natural Beauty 157 HK 501 Not Rated 1.94 n.a. (7.6) 2.1 35.7 68.8 n.a. n.a. n.a. n.a. 4.9 (64) n.a. 17.4 14.8
L’occitane 973 HK 3,964 Not Rated 20.80 n.a. (3.3) (5.0) n.a. 50.4 32.2 29.4 22.9 1.3 n.a. 12 n.a. 47.7 19.3

Average (0.8) 6.4 54.3 39.1 25.6 21.1 25.0 0.9 2.5 (19) 11.0 29.3 17.8

DEPARTMENT STORES
Under
5,387 0.8
Golden Eagle 3308 HK BUY 21.50 Review 12.2 3.6 44.5 49.6 38.5 28.2 23.0 1.2 (60) 14.6 11.0 4.7
Intime 1833 HK 2,558 BUY 11.32 15.00 (0.4) 4.8 48.2 52.4 31.1 23.2 30.0 0.8 1.9 0 5.0 13.8 6.3
Lifestyle 1212 HK 4,185 HOLD 19.38 20.90 1.3 (5.5) 27.5 28.5 25.0 21.9 3.0 7.3 2.1 1 5.6 20.2 10.0
Maoye 848 HK 2,480 Not Rated 3.74 n.a. 6.6 5.9 57.8 31.9 29.0 24.0 52.6 0.5 1.3 25 5.5 15.0 7.4
New World Dept 825 HK 1,429 Not Rated 6.57 n.a. 2.7 (17.5) (14.3) 20.5 19.3 16.1 16.9 1.0 2.1 (75) 2.5 12.6 8.5
Parkson 3368 HK 4,723 SELL 13.04 11.30 8.8 (5.5) (11.1) 35.9 30.9 25.1 13.1 1.9 1.4 11 7.9 24.7 8.7
PCD Stores 331 HK 1,314 Not Rated 2.41 n.a. 3.4 1.3 n.a. 25.9 27.4 21.0 30.6 0.7 0.0 (70) 4.0 n.a. 9.5
Renhe Commercial 1387 HK 3,974 Not Rated 1.40 n.a. 2.9 (3.4) (29.3) 6.2 6.1 4.8 25.9 0.2 n.a. (41) 1.8 43.8 38.5
Link REIT 823 HK 7,103 Not Rated 25.00 n.a. 3.5 4.2 29.4 5.6 23.0 21.1 8.6 2.7 n.a. 27 n.a. 30.6 19.3

Average 4.9 (1.8) 25.4 34.9 28.8 22.8 24.2 1.9 1.4 (24) 6.4 16.2 7.9

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Figure 18: Valuation (cont’d)

Div Net
Market Last Price Target/Fair % % % PE EPS PEG yield gearing P/B ROE ROA
Company Ticker Cap Rec (7 Jan 11) Price chg chg chg (x) CAGR (x) (%) (%) (x) (%) (%)
(US$m) (lcy) (lcy) 1W 3M 1Y 2009 2010F 2011F 2011-12F 2011F 2009 2009 2009 2009 2009
F&B
China Foods 506 HK 1,977 BUY 5.49 6.00 10.7 (14.9) (27.5) 27.5 28.9 21.1 29.6 0.7 1.3 (15) 2.5 10.7 5.0
China Huiyuan 1886 HK 1,014 SELL 5.35 2.00 0.0 (3.9) (7.4) Loss 52.3 45.3 n.a. n.a. 0.9 14 1.5 5.0 3.3
China Mengniu 2319 HK 4,696 HOLD 20.95 22.15 1.7 (14.7) (22.3) 28.8 23.6 19.8 14.8 1.3 0.6 (52) 4.0 17.1 8.8
China Yurun 1068 HK 5,894 HOLD 27.30 26.70 6.8 (6.7) 21.9 25.1 18.3 22.0 10.5 2.1 1.4 9 5.9 25.7 16.4
Dynasty 828 HK 720 BUY 4.48 3.47 4.2 (15.3) 63.5 35.6 32.0 27.2 13.9 1.9 2.0 (56) 3.0 8.8 6.9
Tingyi 322 HK 14,777 Not Rated 20.50 n.a. 3.0 (7.2) 12.3 32.4 33.0 27.8 22.1 1.3 1.2 (9) 9.8 28.7 12.0
Uni-president 220 HK 2,067 Not Rated 4.45 n.a. 7.0 (25.1) (18.7) 22.5 18.2 18.7 23.9 0.8 1.2 (52) 2.2 11.6 9.2
Want Want China 151 HK 11,572 Not Rated 6.79 n.a. (0.3) (9.2) 24.1 32.7 30.1 23.7 18.9 1.3 2.8 (35) 10.8 32.6 19.6
Shenguan 829 HK 2,101 BUY 9.81 11.20 (3.6) 6.2 n.a. 43.9 27.7 21.0 29.6 0.7 0.7 (63) 7.8 37.3 29.4
Tsingtao Brew 168 HK 7,103 BUY 40.75 46.60 0.1 (7.5) (4.5) 37.6 29.9 24.9 14.3 1.7 0.5 (44) 6.3 17.5 9.1

Average 3.0 (9.8) 4.6 31.8 29.4 25.2 19.7 1.3 1.3 (30) 5.4 19.5 12.0

FOOTWEAR
Belle 1880 HK 15,192 BUY 13.96 14.70 6.2 (4.3) 53.3 40.9 29.0 23.8 21.1 1.1 0.9 (31) 6.6 17.7 14.3
Daphne 210 HK 1,682 BUY 7.96 11.70 9.3 (13.7) 19.2 23.2 20.7 17.0 25.6 0.7 1.4 (48) 5.5 29.4 17.3
Le Saunda 738 HK 342 Not Rated 4.15 n.a. (3.0) 0.0 130.6 36.8 21.6 15.8 22.8 0.7 3.4 (31) 2.9 29.4 17.3
Stella Int'l 1836 HK 1,583 Not Rated 15.44 n.a. (0.4) 2.1 9.3 15.6 13.8 11.8 23.8 0.5 4.7 (54) 2.0 13.4 11.3
Walker Group 1386 HK 120 Not Rated 1.49 n.a. (0.7) 5.7 10.4 Loss 317.0 248.3 16.7 14.9 0.0 (29) 1.2 0.4 0.3

Average 2.3 (2.0) 44.5 29.1 80.4 63.3 22.0 3.6 2.1 (39) 3.6 18.1 12.1

HOME PRODUCTS
Gome 493 HK 5,828 Not Rated 3.00 n.a. 7.1 30.4 4.5 21.2 21.1 17.5 24.7 0.7 0.0 (3) 3.5 13.8 4.5
Huiyin 1280 HK 283 Not Rated 2.09 n.a. (2.3) (8.7) n.a. 21.1 16.7 8.2 (23.8) n.a. n.a. 40 n.a. 17.4 10.7
Haier Electronics 1169 HK 2,275 Not Rated 8.70 n.a. (3.8) 29.9 81.2 32.1 22.9 16.7 7.7 2.2 0.0 (78) 10.7 n.a. 8.1
Skyworth 751 HK 1,497 Not Rated 4.59 n.a. (0.4) (15.9) (41.0) 10.7 10.2 8.6 4.3 2.0 2.4 91 n.a. 24.7 8.3
TCL 1070 HK 427 Not Rated 3.27 n.a. 5.8 (8.4) (61.6) 8.4 Loss 9.9 41.9 0.2 2.9 20 0.9 11.5 2.9
Man Wah 1999 HK 1,566 Not Rated 12.50 n.a. (1.0) 37.8 n.a. 39.1 14.7 14.6 31.9 0.5 n.a. (20) 11.0 n.a. 41.8
Royale Furniture 1198 HK 448 Not Rated 3.57 n.a. 0.8 22.7 197.5 10.0 12.1 9.0 24.1 0.4 4.5 (14) n.a. 24.4 15.8

Average 1.3 5.4 (4.2) 22.1 17.1 12.6 14.5 1.1 2.0 8.5 6.5 16.8 12.7

LUXURY GOODS RETAILERS

Chow Sang Sang 116 HK 1,466 Not Rated 18.88 n.a. (0.6) 6.9 92.7 19.8 n.a. n.a. n.a. n.a. 2.6 5 n.a. 16.1 11.4
Emperor Watch & Jewellery 590 HK 668 BUY 1.15 1.50 2.7 35.3 125.5 26.5 60.0 15.1 42.7 0.4 148.7 (15) 3.4 13.3 11.6
Luk Fook 860 HK 1,655 BUY 26.05 45.30 (4.1) 52.3 273.2 46.6 24.1 16.4 19.1 0.9 3.1 2 n.a. 36.4 24.4
Ming Feng Jewellery 887 HK 133 Not Rated 0.77 n.a. (3.8) 2.7 34.7 59.9 12.8 15.4 50.0 0.3 0.0 1 n.a. 2.3 1.5
Sparkle Roll 970 HK 489 Not Rated 1.41 n.a. (2.1) 13.7 113.6 Loss 33.5 19.3 35.0 0.6 0.5 (11) n.a. 15.6 11.0
Xinyu Hengdeli 3389 HK 2,515 BUY 4.79 Under Review 3.5 19.8 65.7 45.0 30.9 24.9 19.1 1.3 0.9 (0) 4.7 14.7 7.6

Average (0.7) 21.8 117.6 39.5 26.7 18.3 33.2 0.7 26.0 (3) 4.1 16.4 11.2

SPORTSWEAR
Anta 2020 HK 4,267 Not Rated 13.28 n.a. 7.6 (22.6) 15.6 20.1 19.0 15.6 20.5 0.8 2.3 (77) 5.7 26.2 22.6
China Dongxiang 3818 HK 2,515 HOLD 3.44 3.50 2.4 (28.2) (39.4) 11.8 10.4 9.9 10.0 1.0 1.5 (87) 2.2 20.7 19.2
Li Ning 2331 HK 2,243 HOLD 16.64 22.70 1.0 (31.7) (39.0) 16.1 13.4 12.2 7.2 1.7 2.0 (35) 6.0 41.3 19.4
Peak Sport 1968 HK 1,483 Not Rated 5.22 n.a. 2.4 (16.2) n.a. 12.8 11.7 9.4 24.4 0.4 3.7 (57) 3.1 33.3 26.0
Xtep 1368 HK 1,567 BUY 5.52 8.80 1.1 (19.4) 12.2 16.3 13.5 11.2 18.2 0.6 3.1 (84) 3.5 23.0 18.7
361 Degrees 1361 HK 1,582 Not Rated 5.57 n.a. (0.5) (26.4) 10.1 11.7 11.0 9.9 19.5 0.5 2.7 (61) n.a. 31.0 21.2
Pou Sheng 3813 HK 573 Not Rated 1.25 n.a. (7.4) 8.7 5.0 n.a. 20.1 13.4 50.0 0.3 0.0 12 0.9 -0.5 (0.3)

Average (0.7) (17.0) (2.9) 14.8 14.2 11.6 21.4 0.7 2.2 (56) 3.6 25.0 18.1

SUPERMARKETS
Beijing Jingkelong 814 HK 585 Not Rated 11.00 n.a. 6.8 20.9 66.7 26.1 21.4 19.3 17.5 1.1 3.2 76 2.8 10.9 3.3
Chia Tai 121 HK 344 Not Rated 0.29 n.a. 13.7 1.8 27.8 Loss n.a. n.a. n.a. n.a. 0.0 2,573 n.a. n.a. -3.3
Convenience Retail 8052 HK 296 Not Rated 3.14 n.a. (0.6) (1.3) 58.5 17.7 n.a. n.a. n.a. n.a. 2.5 (47) n.a. 11.7 5.9
CRE 291 HK 10,047 Not Rated 32.50 n.a. 2.0 (1.1) 9.1 26.6 36.8 28.7 22.0 1.3 1.7 10 2.9 11.4 4.0
Lianhua 980 HK 2,917 BUY 36.35 35.00 (2.2) 13.8 62.6 39.3 30.1 24.3 22.4 1.1 1.2 (202) 7.2 19.9 3.4
Wumart 8277 HK 3,067 Not Rated 19.00 n.a. (0.8) 1.4 42.9 40.6 37.4 30.8 21.9 1.4 1.1 (30) 5.8 18.6 6.9

Average (0.8) 1.4 42.9 30.1 31.4 25.8 21.0 1.2 1.6 396.8 4.7 14.5 3.4

Source: Bloomberg, UOB Kay Hian

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 UOBKayHian

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