Morning Express 10 September 2013

Focus of the Day Indices

China Market Strategy

1d % 0.57 1.88 3.40 2.05 0.88 1.47 0.94 1.00 1.26 -0.25 -0.22 0.01

Ytd % 0.41 -7.94 -2.51 1.27 18.02 17.48 14.95 17.22 22.74 10.73 10.97 8.72

Comments:

Brent Gold Silver Copper JPY GBP EURO

Close 113.72 1,387.10 23.73 7,196.00 99.72 1.57 1.33

3m % 8.76 0.04 8.18 -0.47 -0.96 0.80 -0.02

Ytd % 2.35 -17.21 -21.81 -9.27 -13.01 -3.43 0.47

1) CPI was in line with consensus. While the Aug CPI came in line with market expectation of 2.6%, it was lower than our projection of 2.8% on smaller growth in food prices. PPI was largely in line with both the consensus and our forecast of -1.7%.

bps change HIBOR 0.38 US 10 yield 2.91 Source: Bloomberg

3m 0.01 0.70

6m 0.00 0.87

2) CPI dropped on high base last year. The YoY growth of CPI in Aug came in 0.1ppt lower than that reported in July but the MoM growth expanded from 0.1% in Jul to 0.5% on higher hog and vegetable prices. The YoY decline could mainly be attributed to the high base last year. Looking forward, we expect the CPI to climb steadily in the future amid the economic recovery. Our full-year CPI estimate is 2.6%.

HSI Technical

Running of the bulls Hao HONG, CFA

[email protected]




Shanghai’s rally yesterday was historic;




Fed’s tapering needs not be bad for China.

Strategy

China Macro Comments on China’s Aug CPI data Miaoxian LI

[email protected]

Economics

China’s CPI grew 2.6% YoY in Aug, compared with the previous reading of 2.7%; Aug PPI dropped 1.6% YoY, better than the previous decline of 2.3%.

3) PPI rebounded on low base and economic recovery. The PPI decline in Aug narrowed by 0.7ppt from Jul mainly on low base last year. The improvement in economy also helped lift industrial product prices by 0.1ppt. The rebound of PPI imply a recovery in the earnings of manufacturers and should be seen as a positive. 4) Relaxation of monetary policies unlikely given the “lower limit” concept. Although it is unlikely for the CPI to climb sharply in the near future, the current economy has improved to a level far better than the government’s lower limit. Together with the ample money supply, we think the relaxation of monetary policies is unlikely, as evidenced by the PBoC’s net withdrawal from the open market last week.

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Close HSI 22,751 H Shares 10,529 SH A 2,316 SH B 248 SZ A 1,086 SZ B 836 DJIA 15,063 S&P 500 1,672 Nasdaq 3,706 FTSE 6,531 CAC 4,040 DAX 8,276 Source: Bloomberg

Indicators

HSI 50 d MA 200 d MA 14 d RSI Short Sell (HK$m) Source: Bloomberg

22,751 21,729 22,276 65 5,400

BOCOM Int'l Corporate Access 12 Sep 16 Sep

Shineway (2877.HK) Baoxin Auto (1293.HK)(Beijing)

Morning Express

10 September 2013

Hang Seng Index (1 year)

Banking Sector Preferred shares can only address short-term non-core T1 capital inadequacy

20,000

MP

UP

OP

Preferred shares are considered non-core or other T1 capital and can only address short-term non-core T1 capital inadequacy. The replenishment of core T1 capital has to rely on equity financing. The credit rating will be downgraded if the banks could not meet the regulatory requirements of core T1 CAR, which will affect overall rating and expansions. Compared with ordinary shares, the issuance of preferred shares contributed positively to ordinary shareholders’ ROE but banks are unlikely to issue a large amount of preferred shares in the near term, in our view. Banks with adequate core T1 capital but inadequate other capitals should benefit most from the trial issuance of preferred shares. The T1 capital of MSB/Huaxia Bank/ABC/BOC could not meet the regulatory requirements and should be more inclined to issue preferred shares. We think other banks would also issue preferred shares if these shares could be converted into ordinary shares in the future. The approval for the selling of preferred shares, if confirmed, should further drive up the sector. Maintain “OUTPEFORM” rating for the sector.

18,000

6/9/12 6/10/12 6/11/12 6/12/12 6/1/13 6/2/13 6/3/13 6/4/13 6/5/13 6/6/13 6/7/13 6/8/13 6/9/13

[email protected]

22,000

Source: Company data, Bloomberg

HS China Enterprise Index (1 year) 13,000 12,000 11,000 10,000 9,000 8,000

6/9/12 6/10/12 6/11/12 6/12/12 6/1/13 6/2/13 6/3/13 6/4/13 6/5/13 6/6/13 6/7/13 6/8/13 6/9/13

Qingli YANG

24,000

Source: Company data, Bloomberg

Shanghai A-shares (1 year) 2,600

Vinda (3331.HK) Neutral

Last Close: HK$10.88

[email protected] Upside: +10%

2,000 BUY

SELL

Stock

Target Price: HK$12.00↑

We successfully foretold Vinda’s acquisition story by its existing second largest shareholder SCA (SCAB SS), which proposed to fully acquire Vinda at HK$11.00 per share in cash on Monday. In our opinion, this is a win-win deal, which enables SCA to fulfill its China ambition at a fair price while helping Vinda to increase its competitiveness in China’s tissue, baby diaper and incontinence product sectors with the aid of SCA’s global brand network and technical know-how. The offer price of HK$11.00 looks reasonable (or a bit lower given this is a buyout), implying 19.6x our 2014E EPS. We understand this may be partly due to SCA’s intention to keep Vinda’s listing status. We think more earnings-accretive events could be announced post the deal (eg. SCA may inject the acquired Everbeauty business into Vinda). Moreover, Vinda should have a stronger balance sheet under SCA’s worldwide umbrella. Accompanying the clearer visibility on Vinda’s acquisition story and its improving investment profile backed by SCA, we raise our target P/E from 18.0x (25% discount to Hengan’s 24x) to 21.6x (10% discount), and derive our new TP of HK$12.00 on 21.6x our 2014E EPS (from HK$10.00). Reiterate BUY given Vinda’s transforming story, from a pure tissue company in China into a more diversified tissue and hygiene product player in the near future, in our opinion.

Download our reports from Bloomberg: BOCM〈enter〉

1,800 6/9 /12 6/10/12 6/11/12 6/12/12 6/1 /13 6/2 /13 6/3 /13 6/4 /13 6/5 /13 6/6 /13 6/7 /13 6/8 /13 6/9 /13

Summer WANG

2,200

Source: Company data, Bloomberg

Shenzhen A-shares (1 year) 1,100 1,000 90 0 80 0 70 0 6/9/12 6/10/12 6/11/12 6/12/12 6/1/13 6/2/13 6/3/13 6/4/13 6/5/13 6/6/13 6/7/13 6/8/13 6/9/13

Benefit from SCA’s legacy; maintain BUY

2,400

LT BUY

Source: Company data, Bloomberg

Morning Express

10 September 2013

Belle (1880.HK) Neutral

Another acquisition in just a month Phoebe WONG Last Closing: HK$10.92

BUY

SELL

[email protected] Upside: -8%

LT BUY

Stock

Target Price: HK$10.00→

Belle announced its proposal to acquire Longhao, a China casual footwear retailer, for a cash consideration of no more than Rmb700m. This is the second acquisition in a month, following the acquisition of 32% stake in Baroque Japan in Aug. Our view is neutral to slightly positive. Despite the lack of financial information disclosed, we expect the net profit impact to be insignificant in the initial years due to its small scale of operation. That said, we see growth potential given Longhao is mainly focused on high-end men footwear (operating under 2 self-owned brands: SKAP and DRAGONSEA), a market in which Belle currently has no direct presence (only through licensed brands such as Clarks). By leveraging Belle’s nationwide distribution channels and expertise, we believe this will strengthen Belle’s market share and earnings stream in China's footwear market through meaningful network expansion and synergistic effect. Reiterate Neutral and target price of HK$10 (based on 14.8x FY14E PE, continuing on par with peers).

China Property Sector Weathered the low season; ready for another sales peak Toni HO, CFA

[email protected]

UP

MP

OP

Contracted sales performance generally surpassed expectation in August, despite the traditional low season. Contracted sales revenue rose 16% MoM on average. Contracted ASP dropped 7% MoM, due to the inventory sales. However, price cuts were not common actually. Going forward, many developers, such as Shimao (813 HK), Country Garden (2007 HK) and R&F (2777 HK), are set to accelerate new project launches amid the traditional peak season of “Golden September and Silver October”. We expect the monthly contracted sales revenue to fare even better in the near term. Also, we suggest focusing on those laggards, such as Agile (3383 HK) and Evergrande (3333 HK). We believe the prolonged contracted sales momentum has outweighed fear of a new round of policy tightening. The sector is currently trading at a 40% discount to NAV. We believe the sector deserves to trade at a 25%-40% NAV discount, being the high end of the 2009-2012 valuation range. We maintain “Outperform” sector rating.

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Morning Express

10 September 2013

Skyworth Digital (751.HK) Neutral

Skyworth Digital released operational data of August 2013 Miles XIE Last Closing: HK$4.21

SELL

[email protected] Upside: +16.4%

LT BUY BUY

Stock

Target Price: HK$4.90→

Event: Skyworth Digital (751.HK) released operational data of August 2013.

Comments: 1) Domestic LCD TV shipments climbed by 3.9% to 779k units in August, slightly improving from 3.7% growth in the previous month. It suggested the company’s better resistance to the side effects of the expiration of energy-saving subsidy scheme in May, probably due to its better product mix, in our view. 2) In terms of high-end premium products, 3D TV shipments amounted to 439k units, which accounted for merely 56.4% of domestic LCD TV shipments and was a respectable level. Cloud TV shipments reached 260K units, which accounted for 33.3% of domestic LCD TV shipments. The proportion of high-end premium products remained at decent levels, which reflected the market demand trend for high-end 3D and cloud TVs. 3) Overall, the operational data in August were satisfactory. The decent level of high-end premium products boosted the average selling price, leading to 8% growth in domestic TV revenue in August. We maintain LT-Buy rating and target price of HK$4.9.

TCL Multimedia (1070.HK) Neutral

TCL Multimedia released operational data of August 2013 Miles XIE Last Closing: HK$4.02

[email protected] Upside: +8.2%

LT BUY BUY

SELL

Stock

Target Price: HK$4.35→

Event: TCL Multimedia (1070.HK) released operational data of August 2013.

Comments: 1) LCD TV shipments in August climbed by 13.4% YoY to 1.5mn units, further improving from 5.5% growth in the previous month. Aggregate LCD TV shipments for the first eight months climbed by 17.7% to 10.5mn units, accounting for approximately 58.5% of the 18mn-unit shipment target in 2013. 2) In the PRC market, LCD TV shipments reported 9.3% YoY growth to 875k units in August, which reversed the 35.5% and 19.9% decline in the previous two months, respectively. In the overseas market, LCD TV shipments increased by 19.2% YoY to 672k units, mainly attributable to the strategic OEM business.

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Morning Express

10 September 2013

3) In terms of high-end product mix, shipments of 3D TVs and smart TVs amounted to 201k and 178k units in the PRC market, accounting for 23% and 20.3% of total domestic LCD TV shipment volume, respectively, maintaining similar levels as the past few months. 4) LCD TV shipments in August reversed the downward trend in the PRC market, showing the impact of the termination of energy-saving subsidy scheme at the end of May has been moderating. On the other hand, in terms of the proportion of high-end premium products, there is still room for further improvement. We maintain our Neutral rating and target price of HK$4.35.

Winteam (570.HK) 1H13: Key NDR takeaways Christopher Lui

[email protected]

Last Closing: HK$2.85

Not Rated

We hosted an NDR for Winteam. Our gut feel is that Winteam’s 2H13 bottom line may be better than 1H13 in terms of absolute number, but YOY growth may be weak, if any. Management discussed the weak 1H13 top line and bottom line while providing insights for 2H13/2014 and also their sales target for the out years. We also managed to take a quick peek at Tongjitang and its impact to Winteam’s financials as the deal is expected to close in October/November. 2H13 outlook: We except similar top line growth profile as 1H13. 2H13 bottom line growth may be weak due to tough comps and impact from one-timers. The 1H13 weak Bi Yan Kang sales were due to the absence of advertisement in 2H12 and 1H13. The company’s 2014 and 2015 sales targets are HK$3.8bn and 5bn, respectively.

Container Shipping Weekly Weekly container shipping commentary Geoffrey CHENG, CFA [email protected]

UP

MP

OP

The postponed rate hike for implementation on the Asia-Europe tradelane in mid-September is likely to be postponed further. The Shanghai Container Freight Index (SCFI) reversed its course to spiral down again after the breakout the week before. The market now expects a rush of cargoes from China in the next two weeks before the Mid-Antumn and National Day holidays. The stock prices of the container shipping companies outperformed the market last week while the news related to container freight rate were not in any way favorable to the sector, in our view. We remain our MARKET PERFORM recommendation at the moment.

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10 September 2013

China Market Strategy

Hao Hong, CFA

Running of the Bulls

[email protected]

“Most of the change we think we see in life is due to truths being in and out of favor.” – Robert Frost Shanghai’s rally yesterday was historic: Potential preference shares issuance, the Free Trade Zones, good exports, subdued inflation and expanding PMI: Amid a flurry of good news, Shanghai registered its best gain in a long while. Indeed, it has pierced through its 200-day moving average, with one of the strongest volume in the past 14 years. A day such as yesterday is comparable to the days in mid 2005 and early 2009 – the precursors of subsequent strong bull runs (Focus Chart 1). While it would be hasty to declare the prolonged bear market is finally over, we have good reasons to believe that we are closer to the end of the tunnel than to the beginning. Many are scrambling to find a reason for such a historic moment, yet the aforementioned positive developments are just excuses. More importantly, economic fundamentals are quietly shifting in the face of the hard-landing clan. This important change, coupled with marginal positive changes in liquidity conditions from current account and the introduction of treasury bond futures, have induced a change in market expectations. When market expectation has been set so low, as evidenced by extremely depressed market sentiment previously, any slight change in status quo can produce a power rally – such as yesterday. Forex fund position has turned positive on the PBoC’s balance sheet - a reversal of the declines seen in June and July. Further, because of the Cheapest to Deliver rule (CTD), T-bond futures are a better short for hedging existing cash positions, especially when bond yields are set to rise secularly beyond the immediate term. As such, the bond futures releases liquidity previously locked up in bonds, and rotates it into equity. This is contrary to the popular belief that the T-bond futures would drain liquidity from stocks. Improving liquidity and fundamentals, concurrent with good news, are welcome changes in a market that has been dull for a while. Fed’s tapering needs not be bad for China: Consensus believes Fed’s tapering will induce a surge in global interest rates. But ten-year yield has surged, and the historic surge has been the biggest since 1962 (Focus Chart 2, upper chart). And it could be argued that this surge has less to do with Fed tapering, but more with the simultaneous recovery in the US and China, as evidenced by the concurrent rise between the Economic Surprise Index and 10-year yield (Focus Chart 2, lower chart). Further, note that most of the expansion in the Fed’s balance sheet in the past few years has been achieved through the accumulation of excess reserve (Focus Chart 3). That is, commercial banks have been reluctant to lend, and chosen to park the money with the Fed instead. In other words, the “animal spirit” has been one the most important factors driving the fall in interest rates and the recovery in the US stock market, instead of liquidity alone. As such, how the Fed manages the market expectations about its tapering is probably more important than the act itself. As we have noted in a series of our recent reports, important historical correlations between asset classes are experiencing significant changes. As such, strategies based on past observations are prone to errors. For instance, the US treasury yield used to be positively correlated with stock return since 2009, a sign of asset class rotation between bonds and stocks – till recently. Such risk-on/off trades hint at constraints of liquidity supply, rather than abundance of liquidity. If rising bond yield has been a strong headwind for stocks, and if it has surged to an extreme and has hit the wall, then falling bond yield in the immediate future should support stocks instead. And the Chinese stock market return has touched its lows that historically suggest a rebound (Focus Chart 2, upper chart). The financial market is the only place when things are on sale but everyone runs for the exit. After a strong surge of ~20% from 1,849 seen on June 25, a prevailing definition of bull market, many are now concerned that the bull has returned all too soon and too fast. Yet underneath all this sentimental delicacy is a reflection of entrenched pessimism. As such, we believe that the rally we have been writing about since June 25 has not been exhausted (Against All Odds, June 25, 2013), and we will likely see further gains ahead.

Download our reports from Bloomberg: BOCM〈enter〉

9 September 2013

Last Close: HK$10.88

Upside: +10%

Target Price: HK$12.00↑

Consumer Staples Sector

Vinda (3331 HK)

UP

MP

OP

Benefit from SCA’s legacy; maintain BUY Financial Highlights Year ending 31 Dec 2010 2011 2012 2013E Revenue (HK$m) 3,602 4,765 6,024 6,945 Revenue YoY growth 29.8% 32.3% 26.4% 15.3% Gross margin 29.5% 27.2% 30.8% 28.8% Operating margin 12.9% 10.6% 12.9% 11.3% Net profit (HK$m) 369 406 537 564 Diluted EPS (HK$) 0.40 0.43 0.54 0.56 EPS YoY growth -8.9% 7.0% 27.1% 2.9% P/E 19.5x ROE (average) 15.5% 13.9% 14.8% 13.0% Source: Company data, BOCOM Int’l estimates, P/E based on HK10.88 as of 9 Sept 2013

2014E 8,155 17.4% 28.0% 10.1% 566 0.56 0.0% 19.5x 11.9%

2015E 9,504 16.5% 28.0% 10.1% 661 0.65 16.2% 16.8x 12.7%

We made another great call. We successfully foretold Vinda’s acquisition story by its existing second largest shareholder SCA (SCAB SS), which proposed to fully acquire Vinda at HK$11.00 per share in cash. The share price soared 37% on Monday. In our opinion, this is a win-win deal, which enables SCA to fulfill its China ambition at a fair price (19.6x 2014 P/E) while helping Vinda to increase its competitiveness in China’s tissue, baby diaper and incontinence product sectors with the aid of SCA’s global brand network and technical know-how. We maintain BUY on Vinda. SCA is to become Vinda’s largest and active shareholder. SCA made a public conditional cash offer for Vinda at HK$11.00 per share. The deal is within our expectation given SCA’s deep interest in China and Vinda’s solid leadership in China’s tissue market associated with its undemanding valuation (see our report Vinda – could be another “Magic”; upgrade to BUY dated 30 August, 2013). SCA at present owns 22% equity stake in Vinda with two board seats (up from 14% post-IPO in Jul 2007). The acquisition offer is conditional upon SCA achieving an ownership in Vinda above 50%. SCA will release the complete prospectus for the offer by 30 Sept 2013, and expect to finalize the transaction in 4Q13. Given China’s highly-fragmented tissue market (Vinda’s value share below 10%, in our estimate), we do not think the Ministry of Commerce of PRC will disapprove the deal. We are positive on Vinda’s prospects post acquisition. The offer price of HK$11.00 looks reasonable (or a bit lower given this is a buyout), implying 19.6x our 2014E EPS. We understand this may be partly due to SCA’s intention to keep Vinda’s listing status (to guarantee the necessary 50%+ stake but avoid placing down shares after getting no less than 90% stake). In our opinion, Vinda's integration into SCA's global umbrella should help the company maximize its sales potential especially in tissues, baby diapers and incontinence products (eg. co-branding with SCA’s signature TENA brand) in China and other Asian countries and streamline its business operation. And we think more earnings-accretive events could be announced post the deal (eg. SCA may inject the acquired Everbeauty business into Vinda). Moreover, Vinda should have a stronger balance sheet under SCA’s worldwide portfolio. Neutral to positive impact on Hengan. We continue to favor Hengan (1044 HK, BUY, TP HK$95.00). Four major reasons: 1) We do not think the Vinda-SCA alliance will pose any negative impact on Hengan in the short to medium term. Hengan has competed with multinationals like P&G (PG US) and Kimberly Clark (KMB US) and (… to be continued in page 2) Download our reports from Bloomberg: BOCM [enter]

Neutral

LT BUY BUY

SELL

Stock

We are the FIRST and ONLY sell-side analyst to foretell Vinda’s acquisition story by its second largest shareholder SCA (SCAB SS), following our successful call in Magic (1633 HK). “Vinda is a strong player in the Chinese tissue market and has demonstrated healthy growth and profitability. As a majority shareholder, we would see the potential to further strengthen the company to ensure its future competitiveness.” -- Jan Johansson, President & CEO of SCA

Stock data 52w High-Low (HK$) 12.38-7.22 Market cap (US$m) 1,401 3m ADTV (US$m) 3 No. of shares (m) 998 Free float 52% 1m change 28% YTD change 3% Auditor PwC Source: Bloomberg, Company data 1-year performance chart HSI Index

20%

Vinda

10% 0% Sep-12 -10%

Dec-12

Mar-13

Jun-13

-20% -30% -40%

Source: Bloomberg

Summer WANG [email protected] Tel: +852 2977 9221

Sep-13

10 September 201 3

Last Closing: HK$10.92

Downside: 8%

Target Price: HK$10.00→

Consumer Discretionary Sector

Belle (1880.HK)

UP

MP

OP

Another acquisition in just a month Financial Highlights Year ended Dec FY10 23,706 Revenue (RMB m) 20 Revenue growth (%) 3,425 Net profit (RMB m) N/A vs. Consensus (%) 0.41 EPS (RMB) 35 EPS growth (%) 23.0 PER (x) 0.31 DPS (RMB) 3.3 Yield (%) Source: Company data, BOCOM Int’l estimates

FY11 28,945 22 4,255 N/A 0.50 24 18.0 0.15 1.7

FY12 32,859 14 4,352 N/A 0.52 2 17.2 0.16 1.8

FY13E 34,939 6 4,269 -6 0.51 -2 17.7 0.20 2.3

FY14E 37,023 6 4,654 -9 0.55 9 16.2 0.22 2.5

Neutral

LT BUY BUY

SELL

Stock

Stock data

Belle announced its proposal to acquire Longhao, a China casual footwear retailer, for a cash consideration of no more than Rmb700m. This is the second acquisition in a month, following the acquisition of 32% stake in Baroque Japan in Aug. Our view is neutral to slightly positive. Despite the lack of financial information disclosed, we expect the net profit impact to be insignificant in the initial years due to its small scale of operation. That said, we see growth potential given Longhao is mainly focused on high-end men footwear (operating under 2 self-owned brands: SKAP and DRAGONSEA), a market in which Belle currently has no direct presence (only through licensed brands such as Clarks). By leveraging Belle’s nationwide distribution channels and expertise, we believe this will strengthen Belle’s market share and earnings stream in China's footwear market through meaningful network expansion and synergistic effect. Reiterate Neutral and target price of HK$10 (based on 14.8x FY14E PE, continuing on par with peers).

52w High 52w Low Market cap (HK$m) Issued shares (m) Avg daily vol (m) 1-mth change（%） YTD change（%） 50d MA 200d MA 14-day RSI Source: Company data, Bloomberg

18.58 9.83 92,102 8,434.2 18.0 -4.7 -35.1 11.06 13.66 45.45

1 Year Performance chart 40% 30% 20% 10% 0% -10% -20% -30% -40% Sep-12

Deal valuation. With no financial information disclosed, we are unable to value the deal at this stage, though we believe it is likely priced at no more than a high single-digit PE. In terms of funding, due to Belle’s cash-rich position with our estimated FY13E net cash of Rmb8.8bn, the acquisition can be well financed by its internal resources, in our view. Deal highlights. Belle announced it has entered into an agreement to acquire Longhao for not more than Rmb700m. Longhao is an unlisted mid to high-end China casual footwear retailer (established in 1987), operating under two self-owned brands. SKAP is the core brand, mainly engaged in the high-end market for men and women. ASP range of SKAP is Rmb1,300 - 2,400 for its footwear and Rmb1,600 – 4,700 for its leather bags. Dragonsea is for men only, targeting the mid to high-end market with ASP ranging from Rmb200 to 900. In addition, Longhao runs a licensing business, including Timberland. According to its website, Longhao had over 600 stores in 2010.

HSI

Dec-12

1880.HK

Mar-13

Jun-13

Sep-13

Source: Company data, Bloomberg

Phoebe Wong [email protected] Tel: (852) 2977 9391

Figure 1: Valuation comparison of China’s footwear retailers Footwear

Bloomberg

Rating

Code Belle

Mkt Cap

Price

Price

(HK$m)

9/9/13

Target

FY13E

–––– PER (x) –––– FY14E

Net Profit Growth (%) FY13E

FY14E

Revenue growth (%) FY13E

FY14E

FY13E

––––Yield (%)–––– FY14E

1880 HK

Neutral

92,102

10.92

10.00

17.7

16.2

(2)

9

6

6

2.3

2.5

Le Saunda *

738 HK

Neutral

1,918

3.00

2.30

12.2

10.6

3

15

10

12

3.7

4.2

Daphne

210 HK

Sell

8,262

5.01

4.70

14.7

13.8

(33)

7

(1)

7

2.2

2.4

1028 HK

NR

5,660

2.83

na

15.6

12.7

(6)

25

8

18

2.1

2.3

15.0

13.3

(10)

14

6

11

2.6

2.8

C. Banner

Average Source: Company, Bloomberg, BOCOM International estimates * FY13/14E data are estimates, as year end is in Feb.

Download our reports from Bloomberg: BOCM〈enter〉

10 September 2013

Sector Update

China Property Sector

China Property Sector

UP

Weathered the low season; ready for another sales peak

MP

OP

Valuation summary Company

BBG 9 Sep Code Price

Rating

(HK$) Agile Shimao Yuexiu CR Land R&F SinoOcean Greentown SOHO BCL CIFI

3383.HK 813.HK 123.HK 1109.HK 2777.HK 3377.HK 3900.HK 410.HK 2868.HK 884.HK

8.68 18.50 2.17 21.80 12.34 4.81 15.44 6.61 2.82 1.40

BUY BUY BUY LT BUY Neutral Neutral Neutral Neutral SELL BUY

Target Upside Price

FY13E NAV

NAV (disc)

(HK$)

(%)

(HK$)

(%)

15.40 20.90 3.00 26.50 14.50 5.20 15.50 6.50 2.40 2.40

77 13 38 22 18 8 0 (2) (15) 71

25.60 27.90 5.00 29.40 24.20 8.00 23.90 10.00 4.70 4.40

(66) (34) (57) (26) (49) (40) (35) (34) (40) (68)

–––– P/E –––– FY13E FY14E (x) 4.7 8.2 8.6 13.7 5.9 8.6 5.1 7.4 3.6 4.6

(x) 4.3 6.8 6.7 11.3 5.3 6.5 4.8 11.9 3.3 3.3

–––– P/B –––– FY13E FY14E (x) 0.8 1.2 0.7 1.7 1.1 0.5 1.0 0.8 0.5 0.8

(x) 0.7 1.1 0.6 1.5 0.9 0.5 0.9 0.8 0.5 0.7

Contracted sales revenue rose 16% MoM despite low season in August.

–––– Yield –––– FY13E FY14E (%) 4.9 3.3 4.1 1.8 6.8 6.3 4.9 4.9 8.3 4.3

(%) 5.3 4.0 5.2 2.2 7.0 7.9 5.3 5.0 9.0 6.1

Contracted ASP dropped 7% MoM, due to the inventory sales. Price cuts were not common. Anticipate better sales performance amid the peak season with more new project launches. Prolonged contracted sales momentum has outweighed fear of a new round of policy tightening. Maintain “Outperform” sector rating.

Source: Company, BOCOM Int’l estimates

Contracted sales remained solid despite traditional low season. Developers generally achieved better-than-expected contracted sales performance in August. Most of them still managed to achieve MoM revenue growth, even though only a few new projects were launched. They were able to target end-user demand strategically by selling mid-to-high-end properties with reasonable pricing. While contracted ASP was somewhat dampened by the inventory sales and lack of new projects launched during the period, we observed that price cuts were not common actually. The selling prices for most of the existing projects were able to remain steady. As a whole, 16 developers have announced contracted sales data. Contracted sales revenue rose 16% MoM, or 26% YoY, on average during the period. 10 out of 16 developers recorded MoM increases in sales revenue. Contracted ASP dropped 7% MoM on average. 8M13 contracted sales revenue rose 29% YoY and achieved 68% of the full-year target on average, compared with 60% achieved in 8M12. More to come ahead of the peak season. Many developers are set to accelerate new project launches amid the traditional peak season of “Golden September and Silver October”. We learned that Shimao (813 HK), Country Garden (2007 HK) and R&F (2777 HK) plan to launch a number of new projects in the coming one to two months. Given the robust end-user demand, optimistic sentiment towards the sector and the comfortable credit environment, we expect monthly contracted sales revenue to fare even better in the near term. Select the catch-up plays; Agile remains our top pick. Overall, we expect the developers’ fundamentals to continue to benefit from the contracted sales momentum in the near term, which has outweighed the prior fear of a new round of policy tightening. Besides those developers which are set to benefit from new project launches, we suggest focusing on those laggards which have fallen behind on year-to-date contracted sales but have potential for contracted sales catch-up, such as Agile (3383 HK) and Evergrande (3333 HK). The sector is currently trading at a 40% discount to NAV. We maintain our optimistic view towards the sector and we believe the sector deserves to trade at a 25%-40% NAV discount, being the high end of the 2009-2012 valuation range. We maintain “Outperform” sector rating.

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Relative performance of China Property Sector 60% Sector 40%

20%

0% HSI -20% 10/9/2012

10/12/2012

10/3/2013

10/6/2013

Source: Company data, Bloomberg

Toni Ho, CFA, FRM [email protected] Tel: (852) 2977 9220

09 September 2013

Last Closing: HK$2.85

Healthcare Sector

Winteam (570.HK)

Not Rated

1H13: Key NDR takeaways

We hosted an NDR for Winteam. Our gut feel is that Winteam’s 2H13 bottom line may be better than 1H13 in terms of absolute number, but YOY growth may be weak, if any. Management discussed the weak 1H13 top line and bottom line while providing insights for 2H13/2014 and also their sales target for the out years. We also managed to take a quick peek at Tongjitang and its impact to Winteam’s financials as the deal is expected to close in October/November. 2H13 outlook: We believe the top line growth for 2H13 may be similar to that of 1H13 (i.e. high single-digits/low double-digits). There could be margin pressure as there will be 1) a new depreciation amount of HK$1mn for Medi-World’s new plant; and 2) higher selling cost as % of sales in 2H13 compared with 1H13 as the company prepares to re-launch its Bi Yan Kang advertising campaign (at least HK$10mn to be spent in 4Q13). A one-timer of HK$5mn integration cost (final installment for Tongjitang) should also be booked in 2H13. Therefore, we do not expect much bottom line growth for 2H13. Tongjitang financial impact: We believe Tongjitang can provide per month sales of HK$120mn and net income of HK$16mn (our assumptions include: +20% YOY proxy from industry sales growth in 2013 on top of Tongjitang’s 2012 sales of HK$1.2bn and net margin of 13.3%). The share dilution could be ~40% (~0.7bn shares increase on top of 1H13’s 1.8bn shares). The company expects to book Tongjitang’s 4Q13 financials as the deal should close by October ‘13.

2H13 outlook: We except similar top line growth profile as in 1H13. 2H13 bottom line growth may be weak due to tough comps and impact from one-timers. 1H13 weak Bi Yan Kang sales due to no advertisement made in 2H12 and 1H13 2014 and 2015 sales target of HK$3.8bn and 5bn, respectively

Stock data 52-week high 52-week low Market capitalization (US$mn) Number of shares (mn) 1 month average daily volume (mn) 1 month performance (% ) YTD performance (% ) 50-day moving average 200-day moving average 14-day relative strength index

4.63 1.46 784 2,133 5.0 -17% 78% 3.42 2.88 29

Source: Company data, Bloomberg

Weak 1H13 top line growth explained: 1) Sales growth of Bi Yan Kang slowed down, due to the suspension of advertising efforts. 2) Vitamin C Yin Qiao sales were greatly affected after CFDA suspended a Shenzhen manufacturer’s sales of the product. The media reported some patients experienced adverse reactions (rashes). 3) Low-margin products were not a priority as the company decided not to put as much effort on them as before. Sales from this segment might be flattish going forward. Weak 1H13 bottom line growth explained: Management explained its bottom line growth might have been masked by: 1) HK$6mn bottom line loss from its Biotech arm; and 2) HK$7mn integration costs for its Tongjitang deal. Management explained if the amount of HK$13mn were to be added back, the bottom line growth could be double-digits instead of the current flattish growth. Please see inside for: 1) Capex, 2) Winteam/Tongjitang sales team integration, 3) Bi Yan Kang, 4) Yu Ping Feng, 5) XLGB, 6) Medicinal wine, 7) Sheng Tong Ping, 8) High working capital, and 9) Guidance and targets.

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1 Year Performance chart 240 220 200 180 160 140 120 100 80 09/06/12

HSI

12/06/12

570-HK

03/06/13

06/06/13

Source: Company, Bloomberg

Christopher Lui [email protected] Tel: (852) 2977 9203

09/06/13

10 September 2013

Container Shipping Weekly

Container Shipping Sector

Container Shipping Sector

UP

Weekly container shipping commentary

Container shipping companies - Valuation summary Company

BBG

Sh. Price

Rating Target

name

code

9 Sep 13

Price

(LC)

(LC)

(%)

(X)

(X)

(X)

(X)

(X)

(X)

3.20

(20.0)

N.A.

N.A.

41.9

1.31

1.40

1.33

4.0 NEUTRAL

+/-

–––––– PER ––––––

–––––– PBR ––––––

2012 2013E 2014E

2012 2013E 2014E

China COSCO

1919 HK

CSCL

2866 HK

LT BUY

2.25

0.5

40.3

N.A

15.6

0.80

0.78

0.72

NOL

NOL SP

1.115 NEUTRAL

1.15

3.1

N.A.

N.A.

9.8

0.96

0.97

0.88

OOIL

316 HK

45.15

BUY

52.5

16.3

12.2

17.0

9.1

0.80

0.77

0.72

SITC

1308 HK

2.97 NEUTRAL

2.90

(2.4)

10.5

9.2

8.8

1.40

1.28

1.18

2.24

Source: Company, BOCOM Int’l estimates

News flow – Nothing special in sight. While the stock market seemed to be active last week as a result of positive sentiment, the container shipping market was indeed relatively quiet. The postponed rate hike for implementation on the Asia-Europe tradelane in mid-September seems to be ready for further postponement. The only notable news was perhaps the cancellation of headhaul voyages on the Asia-Europe tradelane by G6 during the National Day holidays of China in October. Drewry, a shipping consultant, highlighted in a recent report the ambition of United Arab Shipping Company (UASC) to play a more significant role on the Asia-Europe tradelane ahead by referring to the recent order of five 18,000-TEU vessels by the company. Reality – the SCFI breakout proved to be short-lived. As a result of the freight rate decline on various tradelanes, the Shanghai Container Freight Index (SCFI) reversed its course to decline 3.4% WoW last week. The freight rate on the Asia-Europe tradelane declined 9.3% WoW. The rate hike on Far East – Middle East tradelane also proved to be short-lived, down 10.4% WoW after the 26.5% WoW jump the week before. In contrast, the freight rate on the Transpacific tradelane climbed 1.2% WoW last week, after the 4.0% WoW increase the week before. As China will have the Mid-Autumn Festival and National Day holidays in the second half of September, the shipping consultants expect that there will be a cargo rush in the next two weeks, which could be positive for freight rates ahead. We maintain our MARKET PERFORM recommendation. The sector outperformed the Hang Seng Index last week as a result of halo effect from the strong rise in the Baltic Dry Bulk Index as well as the expectation of good August trade growth data to be released by China over the weekend. In the meantime, we maintain our MARKTET REFORM recommendation as the current freight rate environment is still not very much favorable to the container shipping companies.

Download our reports from Bloomberg: BOCM〈enter〉

MP

OP

The postponed rate hike for implementation on the Asia-Europe tradelane in mid-September is likely to be postponed further. The Shanghai Container Freight Index (SCFI) reversed its course to spiral down again after the breakout the week before. The market now expects a rush of cargoes from China in the next two weeks before the Mid-Autumn and National Day holidays. Stock prices of the container shipping companies outperformed the market last week while the news related to container freight rate were not in any way favorable to the sector, in our view. We remain our MARKET PERFORM recommendation at the moment.

Geoffrey Cheng, CFA [email protected] Tel: (852) 2977 9380

Morning Express

10 September 2013

Market Review Hong Kong stocks advanced on Monday with the Hang Seng Index rising 129.43 points, or 0.57%, to 22,750. Stocks rose following the release of China trade figures over the weekend, which showed exports grew 7.2% in August versus the estimate of 5.5%. Financial names jumped after media reported ABC (1288.HK) may stage preferred shares trial. ABC jumped 4.58%. PetroChina (857.HK) rose 1.26%. China Business News reported that five executives including managers from PetroChina and its parent had been summoned by the authorities. US stocks climbed following upbeat Chinese exports data. The DJIA rose 140.62 points, or 0.9%, to close at 15,063.12. The S&P 500 gained 16.54 points, or 1%, to 1,671.71, with materials and technology leading gains. European stocks fell as uncertainty over Syria continued to weigh on sentiment. The Stoxx Europe 600 fell 0.1% to close at 305.84.

News Reaction China to launch a new round of promotions for new energy vehicles, says Minister of Science and Technology. Minister of China’s Ministry of Science and Technology (MOST) Wan Gang said the state council has approved the application for the promotion of new energy vehicles. Four ministries including MIIT and the MOST are formulating the details of the policy, which will soon be introduced. Wan also revealed that the Beijing city will extend its trials for electric car, hoping to complete the infrastructure network in the next 3 years. Ping An (2318.HK) subscribes new shares of Ping An Bank for RMB14.8bn to boost the bank’s capital level. Ping An announced that it entered into a share subscription agreement with Ping An bank, pursuant to which Pin An agreed to subscribe for not more than 1.323bn Ping An Bank shares at a cash consideration of RMB11.17 per share. The consideration will be settled by Ping An Insurance’ internal resources. The subscription consideration will help Ping An Bank to replenish its core capital and increase its CAR so as to meet the capital regulatory requirements. Belle (1880.HK) acquired mainlaind footwear retailer Longhao Tiandi for HK$890m. Belle announced that it will acquire the mainland footwear retailer, Longhao Tiandi, for a consideration of no more than RMB700m (or HK$887m). The acquisition is expected to complete by 1Q14. The acquisition will help complement Belle’s current portfolio of brands as it enables it to own and operate a self-owned brand in the high-end casual footwear sector. CSR and CNR share RMB50bn locomotive units orders from China Railway Corporation. Local media revealed that the CSR received China Railway Corporation’s orders for 91 locomotive units with speed of 250km/h and 17 locomotive units with speed of 350km/h, while CNR received orders for 46 locomotive units running in high altitude and low temperature areas and 5 locomotive units with speed of 350km/h. The unit price for the locomotive units is around RMB130m. Since locomotive products are the most profitable products for CSR and CNR, it is expected that the latest tender will bring a significant impact to these two companies’ earnings. Sinopec to produce lower sulfur gasoline from Oct. Reuters reported that except for two subsidiary plants that are undergoing maintenance, Sinopec will cut sulfur in all its gasoline production from 150ppm to 50ppm from 1 Oct 2013, citing a company official. The new standard will reach nation IV, which is similar to Euro IV.

Download our reports from Bloomberg: BOCM〈enter〉

Morning Express

10 September 2013

Economic releases for this week - USA

Economic releases for this week - China Survey

Prior

12.3 0.1% 0.1% 81.7

13.8 1.3% 0.0% 0.1% 82.1

10-Sep Consumer Credit(US$ bn) 11-Sep MBA mortgage applications 12-Sep Initial jobless claims (k) 13-Sep PPI (MoM) 13-Sep PPI ex food & energy (MoM) 13-Sep U of Michigan confidence Source: Bloomberg

-

Survey

Prior

-

-

-

Source: Bloomberg

BOCOM Research Latest Reports Data

Report

Analyst

09 Sep 2013

Winteam (570.HK) – 1H13: Key NDR takeaways

Christopher Lui

09 Sep 2013

Intime (1833.HK) - Takeaways from post-results conference call

Albert Yip, CFA

09 Sep 2013

Hilong Holding Limited (1623.HK) - Highlights from two-day Hilong roadshow

Fei Wu

06 Sep 2013

Brokerage Sector - 1H13 review – in the process of business quality improvement

Li Wenbing

06 Sep 2013

Cathay Pacific Airways (293 HK) - High profile objection to Jetstar application

Geoffrey Cheng, CFA

06 Sep 2013

Healthcare Sector - Weekly Dose

Christopher Lui

05 Sep 2013

China Macro - Aug econ data preview: De-leveraging has never happened

Li Miaoxian

04 Sep 2013

China Market Strategy - The Most Hated Trades

Hao Hong, CFA

04 Sep 2013

Wison Engineering (2236.HK) – Clarifying the market concern – but near term concern still exists

Geoffrey Cheng, CFA

04 Sep 2013

Kingsoft (3888.HK) – Key NDR takeaways – Look beyond the financials; lift TP on mobile growth strategy

Ma Yuan (Martina), Ph.D, Gu Xinyu (Connie), CPA

03 Sep 2013

HK Consumer - Jul retail sales growth lower than expected

Phoebe Wong, Albert Yip, CFA

03 Sep 2013

Container Shipping Sector - Weekly container shipping commentary

Geoffrey Cheng, CFA

02 Sep 2013

Shineway (2877.HK) –1H13 earnings: Sales in-line; net income above consensus

Christopher Lui

02 Sep 2013

Lifestyle (1212.HK) – Spin-off by separate listing got greenlight

Phoebe Wong

02 Sep 2013

China Galaxy Securities (6881.HK) - Results missed due to higher costs; Buy maintained

Li Wenbing

02 Sep 2013

China Eastern Airlines (670.HK) - 1H13 result review - result bloated by foreign exchange gain

Geoffrey Cheng, CFA

02 Sep 2013

Sa Sa (178.HK) - Growth momentum well on track; operating top international brand counters made a big step forward Phoebe Wong for brand image upgrade

30 Aug 2013

Vinda (3331 HK) – Could be another "Magic"; upgrade to BUY

Summer WANG

30 Aug 2013

Healthcare Sector - Weekly Dose

Christopher Lui

30 Aug 2013

CITICS (6030.HK) - Results largely in line; Buy maintained

Li Wenbing

Source: Company data, BOCOM International

Download our reports from Bloomberg: BOCM〈enter〉

Morning Express

10 September 2013

Hang Seng Index Constituents Company name CHEUNG KONG HANG LUNG PROPER HENGAN INTL CHINA SHENHUA-H HANG SENG BK CHINA RES LAND COSCO PAC LTD HENDERSON LAND D AIA GROUP LTD HUTCHISON WHAMPO KUNLUN ENERGY CO IND & COMM BK-H CHINA MERCHANT WANT WANT CHINA SUN HUNG KAI PRO NEW WORLD DEV BELLE INTERNATIO CHINA COAL ENE-H SWIRE PACIFIC-A SANDS CHINA LTD CLP HLDGS LTD BANK EAST ASIA PING AN INSURA-H BOC HONG KONG HO CHINA LIFE INS-H CITIC PACIFIC CHINA RES ENTERP CATHAY PAC AIR HONG KG CHINA GS TINGYI HLDG CO ESPRIT HLDGS BANK OF COMMUN-H CHINA PETROLEU-H HONG KONG EXCHNG BANK OF CHINA-H WHARF HLDG LI & FUNG LTD HSBC HLDGS PLC POWER ASSETS HOL MTR CORP CHINA OVERSEAS TENCENT HOLDINGS CHINA UNICOM HON SINO LAND CO CHINA RES POWER PETROCHINA CO-H CNOOC LTD CHINA CONST BA-H CHINA MOBILE LENOVO GROUP LTD

HANG SENG INDEX

BBG code

Share price (HK$)

Mkt cap (HK$m)

5d chg (%)

Ytd chg (%)

–––– 52-week –––– Hi Lo (HK$) (HK$)

1 HK 101 HK 1044 HK 1088 HK 11 HK 1109 HK 1199 HK 12 HK 1299 HK 13 HK 135 HK 1398 HK 144 HK 151 HK 16 HK 17 HK 1880 HK 1898 HK 19 HK 1928 HK 2 HK 23 HK 2318 HK 2388 HK 2628 HK 267 HK 291 HK 293 HK 3 HK 322 HK 330 HK 3328 HK 386 HK 388 HK 3988 HK 4 HK 494 HK 5 HK 6 HK 66 HK 688 HK 700 HK 762 HK 83 HK 836 HK 857 HK 883 HK 939 HK 941 HK 992 HK

113.20 25.90 87.60 26.35 124.60 21.80 11.92 46.90 35.00 92.95 11.32 5.39 27.20 11.22 103.00 11.68 10.92 4.89 92.05 46.40 62.80 31.20 58.85 25.25 20.80 9.46 23.55 14.12 18.30 21.80 12.56 5.74 6.16 125.80 3.50 67.00 11.40 85.65 67.85 30.05 23.10 390.40 12.18 10.90 17.34 8.81 16.20 6.01 86.10 7.74

262,190 115,993 107,869 453,925 238,216 127,079 33,465 125,859 421,540 396,280 91,267 1,826,531 68,617 148,370 275,109 73,720 92,102 82,694 138,171 373,999 158,661 70,651 412,253 266,963 540,479 34,524 56,586 55,546 174,942 121,957 24,364 425,241 688,953 145,171 998,668 202,992 95,309 1,597,877 144,810 174,224 188,787 725,548 288,804 64,831 82,958 1,837,284 723,289 1,499,968 1,730,715 80,425

0.1 4.6 2.0 4.2 1.7 1.6 3.5 -0.3 1.3 1.7 0.9 3.3 2.1 -2.9 1.3 4.1 1.9 4.7 0.5 -0.2 1.1 2.8 4.8 2.4 6.4 5.1 4.9 4.3 0.2 11.9 -2.6 8.3 7.1 3.5 4.8 3.6 0.5 3.1 0.0 1.2 -2.1 3.7 1.2 3.2 0.3 3.2 2.0 3.3 1.1 2.5

-4.9 -15.9 25.2 -22.4 5.0 3.3 8.0 -5.7 15.7 14.9 -30.0 -2.0 9.5 5.1 -11.4 -2.8 -35.1 -41.9 -4.0 36.7 -3.2 5.2 -9.3 4.8 -17.8 -18.2 -15.7 -0.7 -4.8 1.2 16.9 -1.7 -8.8 -4.6 1.2 10.6 -16.7 5.4 2.5 -1.5 0.0 56.8 -1.9 -21.8 -12.3 -19.8 -3.5 -3.4 -4.6 10.3

132.70 31.65 89.30 35.45 132.80 24.70 13.32 54.46 37.50 94.00 17.32 6.00 29.00 12.52 130.80 15.12 18.58 9.04 103.80 47.55 69.90 32.70 72.70 28.00 27.35 14.12 29.15 15.78 21.73 25.00 14.08 6.70 7.36 150.70 4.00 79.20 14.78 90.70 80.40 32.90 25.60 392.40 13.80 15.60 26.05 11.32 17.38 6.75 91.80 9.07

98.00 23.90 67.00 18.10 110.60 15.96 9.27 42.00 27.30 68.85 10.74 4.16 20.50 9.28 93.05 9.75 9.83 3.66 87.50 26.35 61.00 26.50 47.85 22.85 17.00 7.90 21.55 12.00 16.64 18.20 9.09 4.71 5.02 106.40 2.79 48.35 9.85 69.25 62.10 27.05 17.70 237.00 9.46 10.02 15.62 7.73 12.04 4.93 74.90 6.08

8.7 15.4 28.7 8.8 8.3 11.3 13.9 6.1 15.6 14.0 13.6 5.8 17.0 30.3 6.1 4.8 17.0 7.4 8.9 27.8 17.7 10.6 15.3 12.7 26.3 10.3 20.8 29.6 24.2 42.9 N/A 5.3 8.0 33.7 5.2 5.0 30.6 12.7 14.2 12.6 8.8 39.2 25.4 5.5 8.2 10.6 8.6 5.7 10.5 15.4

9.5 24.5 27.2 9.3 10.5 13.7 7.8 15.4 17.8 13.5 12.4 5.8 16.5 28.4 13.8 10.9 16.4 8.8 16.2 23.3 16.5 12.6 13.2 12.2 16.9 8.9 31.6 24.5 23.4 36.0 N/A 5.5 7.9 30.9 5.3 15.4 21.0 11.4 14.2 20.0 9.7 35.8 20.9 12.7 7.9 10.1 9.2 5.6 10.7 13.7

8.7 19.6 22.7 9.2 14.2 11.3 11.9 14.5 15.5 11.9 10.9 5.4 14.6 24.5 12.3 9.6 14.7 8.7 13.3 19.0 14.8 12.4 11.2 11.4 13.8 9.3 25.0 13.4 21.8 29.0 61.0 5.2 7.4 27.5 5.1 15.2 16.9 10.6 13.8 16.3 8.2 28.5 15.1 11.1 7.6 9.4 8.8 5.3 11.0 11.9

22,750.7

13,633,400

2.6

0.4

23,944.7

19,426.4

10.5

10.9

10.1

Source: Bloomberg

Download our reports from Bloomberg: BOCM〈enter〉

–––––––––– PE ––––––––––– 2012A 2013E 2014E (X) (X) (X)

Yield

P/B

(%)

(X)

2.8 2.9 2.1 4.6 4.3 1.6 3.1 2.1 1.1 2.3 2.0 N/A 2.6 2.2 3.3 3.4 1.9 5.4 3.8 2.9 4.1 3.4 N/A 4.9 0.9 4.2 1.2 1.0 1.8 1.1 1.1 5.3 5.0 2.6 6.3 2.5 2.7 4.3 3.7 2.6 1.8 0.3 1.2 4.6 3.1 N/A 3.5 N/A 4.1 2.4

0.8 1.0 7.0 1.6 2.3 1.7 1.0 0.5 2.0 1.1 2.0 1.3 1.5 11.3 0.7 0.5 3.0 0.6 0.7 9.4 1.8 1.2 2.1 1.8 2.0 0.4 1.4 1.0 3.7 6.0 1.2 0.8 1.0 8.1 0.9 0.8 2.7 1.2 2.3 1.2 1.9 12.2 1.1 0.6 1.4 1.2 1.7 1.2 1.8 3.7

3.6

1.4

Morning Express

10 September 2013

China Ent Index Constituents Company

BBG

Share

Mkt

5d

Ytd

name

code

price

cap

chg

chg

Hi

Lo

–––– 52-week ––––

––––––––––– PE ––––––––––– 2012A

2013E

Yield

P/B

2014E

(HK$)

(HK$m)

(%)

(%)

(HK$)

(HK$)

(X)

(X)

(X)

(%)

(X)

SHANDONG WEIG-H

1066 HK

8.57

38,362.51

16.3

11.2

11.4

6.5

32.5

29.4

23.5

0.9

3.2

CHINA SHENHUA-H

1088 HK

26.35

453,925.06

4.2

-22.4

35.5

18.1

8.8

9.3

9.2

4.6

1.6

SINOPHARM-H

1099 HK

19.78

50,800.85

3.0

-18.4

28.1

18.1

17.7

16.5

13.6

1.6

1.9

CHINA SHIPPING-H

1138 HK

4.56

19,320.08

15.7

2.7

5.3

2.9

N/A

N/A

N/A

0.0

0.5

ZOOMLION HEAVY-H

1157 HK

6.94

55,563.88

10.3

-39.2

12.2

4.7

9.1

7.4

6.5

3.7

1.0

YANZHOU COAL-H

1171 HK

7.27

53,613.61

2.0

-43.3

14.5

5.1

N/A

49.5

15.6

6.3

0.7

AGRICULTURAL-H

1288 HK

3.65 1,125,522.13

7.0

-4.7

4.4

2.8

6.0

5.8

5.4

N/A

1.2

NEW CHINA LIFE-H

1336 HK

86,935.10

7.3

-22.6

33.9

20.1

19.1

13.5

10.9

0.0

1.6

IND & COMM BK-H

1398 HK

5.39 1,826,530.88

3.3

-2.0

6.0

4.2

5.8

5.8

5.4

N/A

1.3

TSINGTAO BREW-H

168 HK

60.15

76,573.64

2.5

31.5

63.9

40.3

29.9

31.4

27.5

N/A

4.8

CHINA COM CONS-H

1800 HK

6.23

89,942.55

2.8

-16.7

8.4

5.3

6.3

5.9

5.4

N/A

0.9

CHINA COAL ENE-H

1898 HK

4.89

82,694.05

4.7

-41.9

9.0

3.7

7.4

8.8

8.7

5.4

0.6

CHINA MINSHENG-H

1988 HK

9.25

345,337.75

7.1

3.2

12.3

5.8

N/A

5.0

4.6

N/A

1.2

GUANGZHOU AUTO-H

2238 HK

8.94

68,405.72

6.6

30.1

9.2

4.8

51.5

18.2

12.2

1.1

1.4

PING AN INSURA-H

2318 HK

58.85

412,252.69

4.8

-9.3

72.7

47.9

15.3

13.2

11.2

N/A

2.1

PICC PROPERTY &

2328 HK

11.22

142,204.00

3.1

8.1

11.7

8.2

10.0

10.0

9.6

2.7

2.1

GREAT WALL MOT-H

2333 HK

41.10

163,632.39

2.9

68.1

41.8

18.0

13.3

12.5

10.5

N/A

4.1

WEICHAI POWER-H

2338 HK

31.30

53,229.39

7.0

-9.0

38.9

22.1

15.6

13.5

11.6

1.3

1.9

ALUMINUM CORP-H

2600 HK

2.80

53,039.91

5.7

-21.1

4.2

2.2

N/A

N/A

N/A

N/A

0.7

CHINA PACIFIC-H

2601 HK

29.15

228,487.38

8.2

1.7

32.5

22.3

39.0

21.1

17.8

1.5

2.2

CHINA LIFE INS-H

2628 HK

20.80

540,479.19

6.4

-17.8

27.4

17.0

26.3

16.9

13.8

0.9

2.0

CHINA OILFIELD-H

2883 HK

20.25

96,642.84

4.1

26.7

20.3

12.7

13.5

12.6

11.3

1.9

2.1

ZIJIN MINING-H

2899 HK

1.94

65,115.21

-1.0

-36.4

3.3

1.4

8.5

12.3

13.6

N/A

1.2

CHINA NATL BDG-H

3323 HK

7.66

41,356.54

4.9

-32.5

12.8

6.1

6.5

6.1

5.1

2.6

1.1

BANK OF COMMUN-H

3328 HK

5.74

425,241.00

8.3

-1.7

6.7

4.7

5.3

5.5

5.2

5.3

0.8

JIANGXI COPPER-H

358 HK

15.84

67,252.25

4.2

-22.4

22.0

11.5

11.6

13.9

12.7

4.0

1.0

CHINA PETROLEU-H

386 HK

6.16

688,953.38

7.1

-8.8

7.4

5.0

8.0

7.9

7.4

5.0

1.0

CHINA RAIL GR-H

390 HK

4.36

79,194.58

9.0

-3.8

5.0

3.2

8.7

8.7

7.9

1.5

0.9

CHINA MERCH BK-H

3968 HK

14.74

326,849.59

6.7

-11.8

18.6

11.7

5.2

5.5

5.2

5.4

1.2

BANK OF CHINA-H

3988 HK

3.50

998,668.19

4.8

1.2

4.0

2.8

5.2

5.3

5.1

6.3

0.9

489 HK

11.24

96,845.19

2.7

-6.0

13.3

8.5

8.3

7.7

7.2

1.7

1.3

CITIC SECURITI-H

6030 HK

15.94

166,489.81

4.0

-18.7

21.4

12.2

33.1

26.5

19.8

2.4

1.6

HAITONG SECURI-H

6837 HK

12.04

147,045.05

6.0

-9.5

14.1

8.6

24.8

20.8

17.0

1.3

1.5

CHINA TELECOM-H

728 HK

4.19

339,106.63

5.8

-2.8

4.9

3.5

16.1

14.8

12.4

2.0

1.0

AIR CHINA LTD-H

753 HK

5.29

69,483.25

5.6

-19.2

7.4

4.5

10.6

12.0

10.1

1.4

1.1

PETROCHINA CO-H

857 HK

8.81 1,837,284.00

3.2

-19.8

11.3

7.7

10.6

10.1

9.4

N/A

1.2

HUANENG POWER-H

902 HK

7.21

98,134.12

-4.4

0.6

9.8

5.2

8.9

7.4

7.3

3.7

1.4

ANHUI CONCH-H

914 HK

26.80

116,970.61

3.9

-5.0

31.7

19.2

17.3

13.4

11.6

1.2

2.3

CHINA LONGYUAN-H

916 HK

7.72

62,482.58

-7.7

44.0

8.6

4.8

18.3

15.9

12.6

1.0

1.6

CHINA CONST BA-H

939 HK

6.01 1,499,967.75

3.3

-3.4

6.8

4.9

5.7

5.6

5.3

N/A

1.2

CHINA CITIC BK-H

998 HK

4.16

227,637.80

9.8

-9.6

5.5

3.4

4.8

4.6

4.3

4.6

0.7

10,529

4,225,685

4.7

-7.9

12,354.2

8,640.9

8.2

7.8

7.2

4.1

1.3

DONGFENG MOTOR-H

HANG SENG CHINA ENT INDX

22.80

Source: Bloomberg

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Morning Express

10 September 2013

BOCOM International 11/F, Man Yee Building, 68 Des Voeux Road, Central, Hong Kong Main: + 852 3710 3328

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Rating System Company Rating

Sector Rating

Buy: Expect more than 20% upside in 12 months LT Buy: Expect more than 20% upside but longer than 12 months Neutral: Expect low volatility Sell: Expect more than 20% downside in 12 months

Outperform (“OP”): Expect more than 10% upside in 12 months Market perform (“MP”): Expect low volatility Underperform (“UP”): Expect more than 10% downside in 12 months

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@bocomgroup.com

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(852) 2977 9393

raymond.cheng

Strategy Hao HONG, CFA

@bocomgroup.com

Economics (852) 2977 9384

hao.hong

Qingli YANG

(852) 2977 9212

yangqingli

Shanshan LI

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lishanshan

Li WAN

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wanli

Banks

Miaoxian LI

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miaoxian.li

Fei WU

(852) 2977 9392

fei.wu

Tony LIU

(852) 2977 9390

xutong.liu

Oil & Gas/ Gas Utilities

Consumer

Property

Phoebe WONG

(852) 2977 9391

phoebe.wong

Alfred LAU, CFA, FRM

(852) 2977 9235

alfred.lau

Summer WANG

(852) 2977 9221

summer.wang

Toni HO, CFA, FRM

(852) 2977 9220

toni.ho

Albert YIP, CFA

(852) 2977 9205

albertyip

Kevin WANG

(852) 2977 9386

kevin.wang

(852) 2977 9203

christopher.lui

(86) 21 6065 3606

louis.sun

(86) 10 8800 9788 - 8053

liwenbing

(852) 2977 9209

lizhiwu

Yuan MA

(86) 10 8800 9788 - 8039

yuan.ma

(852) 2977 9216

miles.xie

Connie GU, CPA

(86) 10 8800 9788 - 8045

conniegu

(852) 2977 9243

jovi.li

(86) 10 8800 9788 - 8041

benjaminpei

Healthcare Christopher Lui

Renewable Energy

Insurance Jerry LI

Telecom & Small/ Mid-Caps

Internet

Benjamin PEI

Zhiwu LI

Technology

Metals & Mining Jovi LI

Louis Sun

Miles XIE

Transportation & Industrial/ Automobile

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Geoffrey CHENG, CFA

(852) 2977 9380

geoffrey.cheng

Wei YAO

(86) 21 6065 3675

wei.yao

Ian FENG

(852) 2977 9381

Yinan.feng

Morning Express

10 September 2013

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