2013-7-17 CIMB Asia Pacific Daily Singapore Banks

REGIONAL DAILY
July 17, 2013
ASIA PACIFIC
Asia Pacific Daily

Equity Research Reports
AUSTRALIA
1M 4.1% -4.5% -2.6% 1.6% 3.5% -2.5% 15.1% -1.2% 1.4% 2.0% 4.1% -0.9% YTD 7.3% -9.0% -17.6% -5.9% 2.2% 7.6% 40.4% -6.5% 5.8% 1.8% 7.3% 4.3%
| 17 July 2013
Key Metrics
Market Indices
Australia China 'A' China 'H' Hong Kong India Indonesia Japan Korea Malay sia Singapore Taiw an Thailand ASX 200
Shanghai A
HSCEI HSI Sensex JCI Nikkei
Korea Comp
FBMKLCI STI
Taiwan Wgtd
SET
Close 4,986 2,162 9,420 21,312 19,851 4,644 14,599 1,866 1,786 3,225 8,260 1,451
1D 0.1% 0.3% -0.3% 0.0% -0.9% 0.2% 0.6% -0.5% 0.0% -0.4% 0.1% -0.3%
Rio Tinto - When no news is good news (16/07) | P5 Building Materials - What does it feel like? (16/07) | P6 Gas Transmission & Dist - APA continues on acquisition trail (16/07) | P7 Strategy Note - CIMB Short Alpha (16/07) | P8 Strategy Note - Still staying on the dividend path (II) (16/07) | P9
KOREA
S-Oil Corp - Solid refining fundamentals (16/07) | P10
MALAYSIA
Ta Ann - Buy ahead of timber rerating - Initiation (16/07) Aviation - Overall - Whats up, Malindo? (17/07) | P12
| P11
MSCI Asia Pacific XJ

530
SINGAPORE
Ascendas REIT - Quality holding (16/07) | P13 Banks - No reason to be Moody (16/07) | P14 Strategy Flash Note - Marketing feedback (16/07) | P15
480
CHINA/HONG KONG
430
Giordano International - Growth outside China (16/07) | P16 Luk Fook Holdings - Gold price remains the key (16/07) | P17 Cement - Capacity growth: where are the risks? (16/07) | P18
Oct-12 Jan-13 Apr-13 Jul-13
380 Jul-12
INDONESIA THAILAND INDIA
IBES/MSCI Market Valuations

Australia China Hong Kong India Indonesia Korea Malay sia New Zealand Philippines Singapore Taiw an Thailand Asia ex -Japan Asia Pac ex -Japan Forward P/E (x) 13.28 7.93 13.83 13.57 13.85 7.85 15.39 15.69 19.03 13.32 13.58 12.04 10.44 11.04 2 yr EPS Forward Div Growth (%) Yield (%) 2.18 5.07 10.75 4.01 10.63 3.23 13.18 1.76 15.68 2.78 20.92 1.28 4.67 3.24 9.02 5.11 8.72 2.20 4.67 3.76 22.96 3.38 15.85 3.54 14.26 12.03 2.96 3.49 CIMB Rec. Weight UW OW OW N OW OW N n.a. N UW n.a. OW OW n.a.
Astra International - Biting the bullet (16/07) | P19
Strategy Note - Bottom-fishing (16/07) | P20
NIIT Technologies - All eggs in one basket (17/07) | P21 Oberoi Realty Ltd - Weak 1Q; Near-term headwinds create entry opportunity (16/07) | P22 Banks - Panic on the street (16/07) | P23
(to US$1) Australian Dollar China Renminbi Hong Kong Dollar Indian Rupee Indonesian Rupiah Japanese Yen Korean Won Malay sian Ringgit New Zealand Dollar Philippine Peso Singapore Dollar Taiw an Dollar Thai Baht
Regional Currencies
CY13 forecast Close 1.00 0.92 6.45 6.14 7.85 7.76 56.0 59.32 10,000 10,103 88.0 99.52 1,130 1,118.00 3.15 3.19 1.25 0.79 43.0 43.31 1.27 1.26 30.0 29.87 32.0 31.08
1D YTD 1.4% -9.8% 0.0% 2.6% 0.0% 0.1% 1.0% -10.5% -0.3% -10.2% 0.5% -22.7% 0.3% 3.1% 0.1% -0.6% 1.0% 1.1% 0.3% 1.2% 0.4% 2.9% 0.2% 1.4% 0.2% 1.5%
Event/data Jun actual FDI 2Q13 GDP, Jun IPI, FAI & retail s Jun CPI, IPI & May net TIC flow s Jun CPI Jun property prices
Upcoming Major Data Releases

Country China China United States Malay sia China
Date 14-18 Jul 15 Jul 16 Jul 17 Jul 18 Jul

YTD 15.6% 0.0% 64.8%
Commodities
WTI spot (US$/bbl) Gold (US$/oz) Baltic Dry Index
Close 106 1,285 1,152
% chg 0.0% 0.0% 0.1%
IMPORTANT DISCLOSURES, INCLUDING ANY REQUIRED RESEARCH CERTIFICATIONS, ARE PROVIDED AT THE END OF THIS REPORT.
Page 1
Compiled as @:
7/17/2013 2:55:09 AM
ASIA PACIFIC DAILY

July 17, 2013
Calendar of Events
Calendar of Events
2013
Jul 2013
SUN MON
Semarang: Indonesia Site Tours LDN: Australia Media & Telcos Marketing JKT: CIMB Stock Selection Tools Analyst Marketing SIN: Spore Strategy Marketing SIN: Ranhill Mgmt Deal RS KL: CIMB Stock Selection Tools KL: UMW Oil & Gas Cornerstone RS HK: Establishment Day KL: Sembcorp Marine NDR KL: Msia Oil & Gas Marketing KL: UMW Oil & Gas Cornerstone RS LDN: India Capital Goods & Utilities Marketing SIN: Spore Strategy Marketing SIN: Australia Consumer Marketing HK: Fujikon Industrial Holdings NDR KL: China Life NDR KL: Indonesia Property, Construction & Cement Marketing
TUE
1
Semarang: Indonesia Site Tours SIN: Msia Oil & Gas Marketing SIN: Ranhill Mgmt Deal RS SYD: Ladbrokes Conference Call JKT: CIMB Stock Selection Tools Analyst Marketing HK: Spore Strategy Marketing HK: UMW Oil & Gas Cornerstone RS LDN: Sime Darby Corporate Lunch
WED
2
Semarang: Indonesia Site Tours SIN: Msia Oil & Gas Marketing BKK: CIMB Stock Selection Tools Analyst Marketing HK: Spore Strategy Marketing HK: UMW Oil & Gas Cornerstone RS HK: Ranhill Mgmt Deal RS
THU
3
Bali: Bali Conference HK: Msia Oil & Gas Marketing HK: Ranhill Mgmt Deal RS BKK: CIMB Stock Selection Tools Analyst Marketing KL: Singapore Strategy Marketing KL: Ranhill Management Deal RS SIN: UMW Oil & Gas Cornerstone RS
FRI
4
Bali: Bali Conference SIN: Courts Asia NDR SIN: UMW Oil & Gas Cornerstone RS HK: Msia Oil & Gas Marketing KL: Singapore Strategy Marketing
SAT
5 6
KL: Australia Consumer Marketing LDN: India Capital Goods & Utilities Marketing HK: Korean Banks Marketing
SYD: Brickworks Corporate Meeting LDN: India Capital Goods & Utilities Marketing HK: Korean Banks Marketing HK: Australia Consumer Marketing SIN: GMR Infrastructure Ltd NDR
10
US: Independence Day LDN: India Capital Goods & Utilities Marketing SIN: Korean Banks Marketing SIN: GMR Infrastructure Ltd NDR HK: Australia Consumer Marketing
11
LDN: India Capital Goods & Utilities Marketing HK: GMR Infrastructure Ltd NDR
12
13
14
15
SIN: China Life NDR SIN: Indonesia Property, Construction & Cement Marketing KL: Nufarm Ltd NDR
16
21
JPN: Marine Day
SYD: HFC Network Corporate Lunch SIN: China Life NDR SIN: Indonesia Property, Construction & Cement Marketing SIN: Nufarm Ltd NDR US: M1 NDR KL: China Gas NDR
17
SYD: Ovum Corporate Lunch HK: China Life NDR HK: Indonesia Property, Construction & Cement Marketing
18
HK: Indonesia Property, Construction & Cement Marketing
19
20
28
US: M1 NDR KL: Malaysia Banking & Small Cap Stocks Marketing HK: AGTech Holdings NDR THB: Arsaraha Bucha Day SIN: Singapore Airlines Post Results Lunch
22
HK: Singapore Corporate Day US: M1 NDR KL: Malaysia Banking & Small Cap Stocks Marketing
23
24
SIN: China Gas NDR KL: Asian Pay Television Trust NDR
25
SIN: China Gas NDR
26
27
29
30
31
Selangor: Nuzul Al-Quran
THB: Asanha Bucha
SOURCES: CIMB, COMPANY REPORTS
Page 2
ASIA PACIFIC DAILY

July 17, 2013
Calendar of Events
August 2013
SUN
4
MON
5
TUE
6
WED
7
THU
1
HK: Texhong Textile Group NDR KL, IND, SIN: Hari Raya Puasa SIN: Texhong Textile Group NDR SIN: Stelux Holdings NDR
FRI
2
HK: CITIC Telecom NDR KL, IND: Hari Raya Puasa SIN: National Day
SAT
3 10 9
11
12
13
SIN: Stelux Holdings NDR
14
15
16
17
18
KL: Semen Indonesia NDR KL: PTTGC NDR
19
KL: PTTGC NDR SG: Shin Corp NDR HK: Nam Cheong NDR (Tentative)
20
SG: Shin Corp NDR KL: Nam Cheong NDR (Tentative) PHI: Ninoy Aquino Day
21
KL: ComforDelgo NDR KL: Shin Corp NDR
22
KL: ComforDelgo NDR KL: Shin Corp NDR
23
IND: Independence Day
24
25
KL: Siam Commercial Bank NDR UK: Summer Bank Holiday ; PHIL: National Heroes Day
26
27
28
HK: Emperor Watch & Jewellery NDR
29
HK: Emperor Watch & Jewellery NDR
30
KL: National Day
31
Page 3
ASIA PACIFIC DAILY

July 17, 2013
CIMB Daily Revisions

CIMB Daily Revisions
Reuters/ Market BBG Date Company Mkt Cap (USD M) Lead Analyst
| as at 17 July 2013
Recommendation Curr Prev
Price Target Curr Prev
Year EPS Forecasts End Chg%
Australia
RIO AU RIO.AX
16-Jul-13
Rio Tinto
$ 82,366.12 Michael EVANS
Outperform
Outperform
A$
74.10 -0.1%
74.20
2013 2014 2015
-2.5 -0.3 -0.5 10.2 9.8 9.3 1.7 6.7 5.8 -2.2 3.5 -3.1 -4.7 -5.6 -6.3 -1.7 -3.7 -3.9 -28.7 -7.1 -7.2
Hong Kong
590 HK 0590.HK
16-Jul-13
Luk Fook Holdings
$ 1,583.24 Larry CHO
Neutral
Neutral
HK$
21.90 +10.1%
19.90
2014 2015 2016
India
INFO IN INFY.BO
16-Jul-13
Infosys
$ 26,415.64 Sandeep SHAH
Neutral
Neutral
Rs
2,950.0 +22.2%
2,415.0
2014 2015 2016
India
NITEC IN NITT.BO
17-Jul-13
NIIT Technologies
266.11 Srinivas SESHADRI
Outperform
Outperform
Rs
323.0 -1.2%
327.0
2014 2015 2016
India
OBER IN OEBO.BO
16-Jul-13
Oberoi Realty Ltd
$ 1,117.72 Prakash AGARWAL
Outperform
Outperform
Rs
285.0 -5.0%
300.0
2014 2015 2016
Indonesia
ASII IJ ASII.JK
16-Jul-13
Astra International
$ 27,448.52 Peter P. SUTEDJA, CFA
Underperform
Outperform
Rp
6,600 -19.0%
8,150
2013 2014 2015
South Korea
010950 KS 16-Jul-13 010950.KS
S-Oil Corp
$ 7,421.60 Peter K. LEE
Outperform
Outperform
98,000 -6.7%
105,000
2013 2014 2015
Page 4
Mining AUSTRALIA
July 16, 2013
Rio Tinto
FLASH NOTE
Current A$55.52 A$74.10 A$74.20 33.5%
Conviction| |
RIO AU / RIO.AX
SHORT TERM (3 MTH)
LONG TERM
US$81,257m
A$89,460m
Market Cap
US$154.8m
A$158.8m
Avg Daily Turnover
100.0%
Free Float
Target Prev. Target Up/Downside
1,847m shares
CIMB Analyst(s)
When no news is good news

RIOs 2Q13 quarterly production report revealed increased coal and copper production offset by disappointing alumina production and a slightly underwhelming iron ore number. While on balance we view the report as marginally on the positive side of expectations, the stock rallied hard, implying to us the market appears braced for bad news.
Taking into account the production results and making small adjustments to June quarter commodity prices, our 2013 EPS forecast has declined by 2.6%. Our NPV has fallen negligibly to A$82.24ps and we retain our Outperform recommendation with a slightly revised target price of A$74.10 (previously A$74.20) based on a 10% discount to our NPV. ahead of its own target of achieving a US$750m pa cost saving in this area. We think the report, while not the strongest set of numbers, was a good result in light of ongoing commodity price weakness and continued uncertainty regarding the global economic outlook. Falling commodity prices will inevitably force mine closures and, in this respect, it is understandable the market is braced for bad news when it comes to mining stocks. In this context, increased coal production, lowering unit costs, as well as cost savings in Exploration and Evaluation should give investors confidence in RIOs ability to meet its cost and production targets.
Michael EVANS
T (61) 2 9694 6090 E michael.evans@cimb.com
Adam MURPHY Amit RAMDEV
T (61) 2 9694 6091 E adam.murphy@cimb.com T (61) 2 9694 6093 E amit.ramdev@cimb.com
What We Think
Share price info

Share price perf. (%) Relative Absolute Major shareholders Blackrock Vanguard AFIC 1M -1.2 2.9 3M 0.3 1 12M -19.6 1.9 % held 6.2 1.1 0.8
RIO reported its June quarter production, in which it also reiterated full-year 2013 guidance. Mined copper production for the group was increased by 5% as production at Bingham Canyon exceeded expectations, while 2013 alumina production has been cut by 6%. There was no change to full-year iron ore or coal production forecasts. RIO also reported its Exploration and Evaluation expenditure for 1H13 was US$542m versus US$1,025m for the same period last year, indicating it is
What Happened
What You Should Do
We still prefer Rio Tinto to BHP due to what we view as its superior growth profile and we believe the stock will re-rate as its higher-returning iron ore expansions are commissioned.
Price Close 76 71 66 61 56 51 15 46
Vol m
Relative to S&P/ASX 200 (RHS) 115 108 100 93 85 78 70
Financial Summary
Revenue (US$m) Operating EBITDA (US$m) Net Profit (US$m) Normalised EPS (US$) Normalised EPS Growth FD Normalised P/E (x) DPS (US$) Dividend Yield EV/EBITDA (x) P/FCFE (x) Net Gearing P/BV (x) Recurring ROE % Change In Normalised EPS Estimates Normalised EPS/consensus EPS (x) Dec-11A 60,537 26,690 5,826 8.31 16.5% 6.07 1.45 2.88% 3.87 17.4 20.5% 1.80 28.0% Dec-12A 50,967 16,645 -2,990 5.04 (39.4%) 10.01 1.67 3.31% 7.13 NA 34.0% 1.99 18.7% Dec-13F 54,741 19,126 9,319 5.05 0.2% 9.99 1.67 3.31% 6.35 154.8 33.8% 1.69 18.3% (2.56%) 0.99 Dec-14F 57,010 23,413 11,724 6.35 25.8% 7.94 1.67 3.31% 5.12 26.2 27.2% 1.42 19.4% (0.27%) 1.07 Dec-15F 65,251 27,440 13,767 7.45 17.4% 6.76 2.10 4.15% 4.22 12.8 18.8% 1.20 19.2% (0.55%) 1.14
10 5
Jul-12 Oct-12 Source: Bloomberg Jan-13 Apr-13
52-week share price range

55.52
48.63 72.07
Current
Target
74.10
SOURCE: CIMB, COMPANY REPORTS IMPORTANT DISCLOSURES, INCLUDING ANY REQUIRED RESEARCH CERTIFICATIONS, ARE PROVIDED AT THE END OF THIS REPORT. Designed by Eight, Powered by EFA
Page 5
July 16, 2013
AUSTRALIA
BUILDING MATERIALS
SHORT TERM (3 MTH)
LONG TERM
Conviction| |
Notes from the Field
What does it feel like?

The significant shift towards multi-family housing starts means that from a materials intensity perspective a housing start today is worth much less than a start 10 years ago. While headline housing starts are now at near-mid-cycle levels, our feels like adjusted housing activity index indicates that levels remain about 10% below long-term averages. We believe this change is structural, and it carries meaningful implications for the mid-cycle profitability of Boral (BLD) and CSR.
Figure 1: Adjusting starts for intensity
200k
Andrew SCOTT Niraj SHAH
T (61) 2 9694 6081 E andrew.scott@cimb.com T (61) 2 9694 6083 E niraj.shah@cimb.com
180k
160k 140k
Many of these changes are requiring us to adapt our business, like the shift to multi-residential, the greater level of import competition, and we've taken a view that these are permanent shifts in the market.
Rob Sindel, MD CSR
120k
100k 80k 4QFY86
4QFY89
4QFY92
4QFY95 Headline starts
4QFY98
4QFY01
4QFY04
4QFY07
4QFY10
Adjusted starts: 'Feels like' index
SOURCES: CIMB, ABS
High-density housing contributed 40% of national starts in 2012, up from 25% over the past 25 years. Importantly, our analysis indicates the value of demand pulled through from an apartment is only about 50% of the level of a detached house. As a result of this intensity differential and the shift to apartments, a housing start today is worth less than in previous cycles. We see this trend as structural rather than cyclical. We believe affordability, as well as demographic factors such as shrinking households, increasing immigration and a broader shift towards a CBD-centric, service-oriented economy underpin this trend. Consistent with commentary from materials providers and anecdotal industry feedback, we believe these trends are unlikely to reverse. This shift to high-density housing will undoubtedly influence mid-cycle
profitability for Australian building products businesses.
Implication for mid-cycle
A structural change
In particular, we forecast mid-cycle earnings for Boral and CSRs building products businesses will be structurally lower than in the past. We have revisited our mid-cycle assumptions for the broader companies. Our analysis places BLDs current share price on a mid-cycle PER of 11x, which we view as fair, and CSRs on a more attractive 8x PER. On this basis, we prefer CSR to BLD, albeit with significant exposure to external factors such as FX rates and aluminium prices.
Our sector preferences
We continue to prefer Fletcher Building (FBU, Neutral) given the groups cyclical leverage and industry positions in New Zealand. We also maintain our Neutral rating for CSR, Adelaide Brighton (ABC) and BLD, and our Underperform rating for James Hardie Industries (JHX).
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Page 6
July 16, 2013
AUSTRALIA
GAS TRANSMISSION & DIST

|
SHORT TERM (3 MTH)
LONG TERM
SECTOR FLASH NOTE
CIMB Analyst(s)
APA continues on acquisition trail

APA has approached ENV with an indicative and non-binding merger proposal under which ENV shareholders would receive 0.1678 new APA stapled securities for each ENV share they own plus ENVs final dividend (up to 3.0cps). This implies A$1.10 for each share at an 11% premium to one-month VWAP (1% premium excluding the dividend).
With the HDF transaction now largely bedded down, APA has set its sights on acquiring the 67% of stock in ENV that it doesnt currently own. With APA trading ahead of our unchanged target price (A$6.18) and risk that its increased exposure to regulation results in a multiple de-rating if the transaction proceeds, we downgrade our rating to Neutral. We maintain our Neutral rating for ENV, but increase our target price to A$1.07 to reflect the merger proposal. we also believe APA will likely need to lift its bid to get the deal over the line. With APA already holding a 33% stake in ENV, plus operating and maintaining its assets, a move to full ownership was always on the cards. While the transaction will likely result in synergies (cA$10m in corporate costs to start with), one of the key factors that drew us to APA was its lower-than-peer exposure to regulation and this transaction will lift regulated earnings from 30% to >50%. On our estimates, the combined entity is likely to trade at 11.4x FY14EV/EBITDA versus APAs current 13.5x and ENVs 10.9x. With APA attracting a premium to peers due to its growth prospects and lower regulatory risk, in our view, we believe it is likely APA will trade slightly lower than this implied multiple. With the transaction indicative and non-binding at this stage, we make no changes to our forecasts. However, we downgrade APA to Neutral (A$6.18 target price) with it having traded through our 12-month target price and pending a response from ENVs board of directors in relation to the proposal. We also maintain our Neutral rating for ENV, albeit with a slightly increased target price of A$1.07 reflecting the terms of todays merger proposal.
Michael NEWBOLD, CFA Alexander Lu
T (61) 2 9694 6066 E michael.newbold@cimb.com T (61) 2 9694 6096 E Alex.lu@cimb.com
What We Think
What Happened
APA announced it has approached ENV with an indicative and non-binding merger proposal. APA has offered ENV shareholders 0.1678 new APA stapled securities for each ENV share they own plus ENVs final dividend (up to 3.0cps). This implies A$1.10 for each share and 11% premium to one-month VWAP. The proposal is intended to proceed by way of scheme of arrangement and APA management has indicated a bullish timeframe for the deal (completion by December 2013). While due diligence should be prompt given APAs familiarity with the assets, we believe the process is likely to take longer given these processes are always more protracted than first expected and the presence of another substantial investor on the register (CKI). With ENVs share price already trading through the deal terms today,
What You Should Do
IMPORTANT DISCLOSURES, INCLUDING ANY REQUIRED RESEARCH CERTIFICATIONS, ARE PROVIDED AT THE END OF THIS REPORT. Designed by Eight, Powered by EFA
Page 7
July 16, 2013
AUSTRALIA
STRATEGY
CIMB Short Alpha

Top trade: This week we highlight falling short interest in FXJ, with short positions as a percentage of the register having been trimmed back 8.5% in the last four weeks. Our analyst, Fraser McLeish, points to the companys success in reducing the cost base and the fact it has a number of valuable online assets that are generating strong growth and becoming a larger part of the whole. Over the week we also saw a significant rise in short positions in SGT, ASL and REA, while a large proportion of short positions in QBE, DUE and SAI were covered.
Figure 1: Short interest, by sector the rally from a sub-$US1200 gold price entices short investors
10%
8%
Andrew TANG Shane LEE
T (61) 2 9694 6076 E andrew.tang@cimb.com T (61) 2 9694 6054 E shane.lee@cimb.com
Eben VAN WYK, CFA
T (61) 2 9694 6058 E eben.van.wyk@cimb.com
Cap Goods
Building Mats
Infrastructure
BHP & RIO
Resources
Discret. Retail
Andrew Carnegie, Businessman
Highlighted Companies Fairfax Media

This week we highlight falling short interest in FXJ, with short positions as a percentage of the register having been trimmed back 8.5% in the last four weeks. Our analyst, Fraser McLeish, points to the companys success in reducing the cost base and the fact it has a number of valuable online assets that are generating strong growth and becoming a larger part of the whole.
Average short interest
Average short interest 1 month ago
Ins & Div Fins
6% 4% 2%
Transport
Iron ore
Health
Property
Utilities
Staples
Chemicals
Gaming
SOURCES: ASIC, CIMB
Average short positions edged higher, to another historical high of 3.1%, as the global macro environment continues to drive market positioning. The gold price has rallied from the brief dip below $US1,200 and short sellers have seized the opportunity to accumulate positions in the sector (Kingsgate Consolidated, Perseus and Silver Lake Resources), with short interest rising from 2.7% at 27 June to 3.2%. Also during the week, short interest increased in the retail discretionary sector (Billabong and David Jones) to 8.8%, just below the average for 2013 of 8.9%.
A short summary
Increasing short interest and days-to-cover
Stocks with the largest increase in short interest included SingTel, Ausdrill, REA Group, Kingsgate Consolidated and Bradken. The five stocks with the largest one-week increase in short interest days-to-cover were Navitas (+4.4), Ten Network (+4.1), Harvey Norman (+4.1), Transfield Services (+3.8) and Cardno (+3.8).
Decreasing short interest
Stocks that have seen recent short covering include Fairfax Media, QBE, DUET, SAI Global, Echo Entertainment and NRW Holdings.
Page 8
Energy
Telcos
Banks
Watch the costs, and the profits will take care of themselves.
Gold
0%
Media
Steel
July 16, 2013
AUSTRALIA
STRATEGY
Still staying on the dividend path (II)

An analysis of higher-yielding stock valuation needs to consider not only the dividend yield, but also the PE ratio and the outlook for payout ratios. Relative to global peers, the valuation of Australias banks looks a little less attractive on these metrics, but it remains attractive in the consumer staples sector. In telcos and utilities, Australia has less relative value irrespective of the valuation method.
Shane LEE
T (61) 2 9694 6054 E shane.lee@cimb.com
Andrew TANG
T (61) 2 9694 6076 E andrew.tang@cimb.com
The appeal in dividends
I think that the search for yield, while there is so much liquidity, is going to continue..."
In our recent report, Still staying on the dividend path (5 July 2013), we argued that despite the increase in recent months, the level of global interest rates is still very low relative to history and seems likely to remain relatively low for some time. Furthermore, one implication of slower economic growth and lower interest rates is that dividends are a more important component of an investors total return. Recently we wrote that we expect the US 10-year note to be relatively range-bound (2.5% to 3.0%) until the data signals a stronger pick-up in US growth. We expect this to emerge later in the year, prompting the Fed to move towards completion of its asset purchase program. However, scenarios on payroll growth and the implied unemployment rate suggest an increase in the Fed funds rate is still a long way off. In our view, markets have fully priced in the completion of the asset purchase program, but they are struggling to price in the Fed outlook beyond that. The Australian banks look attractive on a dividend yield basis, but on a PE ratio basis the sector looks expensive relative to global peers. However, relative to its own history, the PE ratio is not excessively high. The payout ratio is the highest among our group of global markets and it has been so for at least 11 years.
The global interest rate outlook
Mark Smith, CEO ANZ Banking Group
Banks
Consumer staples
Like the banks, the consumer staples sector has the highest payout ratio among our group of global markets and it has been so for at least 11 years. The PE ratio is in line with the global average and slightly lower than its own history. In our view, the sector probably offers even better value than the banks on both a dividend yield and PE basis.
Utilities
The Australian utilities have a slightly higher dividend yield than the global average, but it is lower than it has been in the past. History shows the dividend yield is normally higher than the global average. The dividend yield on the Australian telco sector (mainly Telstra) is in line with the global average, but well below its longer-run historical average. On a PE ratio basis, the Australian sector is expensive relative to global peers, but it is in line with its longer-run average. The payout ratio is 90% and this is also the long-run average, but both Finland (97%) and Denmark (95%) offer an even higher payout.
Telecommunications
Page 9
Oil & Gas Refinery SOUTH KOREA

July 16, 2013
S-Oil Corp
Market Cap
FLASH NOTE
Current W73,900 W98,000 W105,000 32.6%
Conviction| |
010950 KS / 010950.KS
SHORT TERM (3 MTH)
LONG TERM
US$7,416m
W8,319,869m
US$19.32m
W21,772m
Avg Daily Turnover
65.0%
Free Float
112.6 m shares
CIMB Analyst(s)
Solid refining fundamentals

As we highlighted in our recent GSH/SKI notes, we are bullish on refining margins for the next 12-18 months, based on a benign supply outlook. With the weakest quarter out of the way, we expect S-Oil to report solid earnings from 3Q13.
Peter K. LEE
T (82) 2 6730 6122 E peterk.lee@cimb.com
Share price info

Share price perf. (%) Relative Absolute Major shareholders Aramco Overseas Company B.V. Hanjin Energy 1M -6.4 -7.2 3M -14.7 -17.1 12M -23.6 -20.2 % held 35.0 28.4
We cut FY13 EPS by 28% and FY14-15 EPS by 7% each to reflect 2Q13s weakness and several assumption changes. As a result, we lower our target price by 7%, still based on 1.9x FY13 P/BV (derived using an FY14 ROE of 17%). Nevertheless, maintain Outperform as robust earnings from 3Q13 are expected to catalyse its stock. After speaking to S-Oil to gauge its near-term earnings outlook, we cut our 2Q13 operating-profit estimate by 60% to W90bn from our early-May forecast to account for: 1) a bigger qoq oil-price decline (7% vs. 4%); 2) a larger qoq volume decline from its maintenance shutdown (-9% vs. -3% for refined products; other product volumes also lowered); and 3) a narrower PX-naphtha spread (US$580/t vs. US$600/t), more than offsetting b-t-e refining margins in 2Q13 (the bulk of FY13 revisions coming from 2Q13 changes). For FY14-15, we cut our operating-profit forecasts by 4% and 1%, respectively, mainly to account for lower oil-price assumptions.
What We Think
What Happened
Despite our reduced earnings, we stay positive on 2H13-2014 refining margins due to a benign supply outlook. Even if demand concerns in China linger on, we believe a lack of new refining capacity in the next 18 months will lead to healthy improvements in global refining utilisation rates. Based on IEAs latest oil-consumption and net-refining capacity-addition forecasts, we estimate that the global refining utilisation rate will improve from 82.7% in 2012 to 83.2% in 2013, 83.7% in 2014 and mid-cycle level of 84% in 2015.
While we like S-Oil, we prefer GSH and SKI at this juncture as uncertainties over S-Oils upcoming capex programme should remain an overhang until an announcement is made (expected by end-2013). Although S-Oil has communicated that its dividend policy will not change, the market appears concerned that its cash-flow strains might lower its dividends.
What You Should Do
Price Close 115,000 105,000 95,000 85,000 75,000 2 65,000
Relative to KOSPI (RHS) 114 110 105 101 96 92 87 83 78 74 69
Financial Summary
Revenue (Wm) Operating EBITDA (Wm) Net Profit (Wm) Normalised EPS (W) Normalised EPS Growth FD Normalised P/E (x) DPS (W) Dividend Yield EV/EBITDA (x) P/FCFE (x) Net Gearing P/BV (x) Recurring ROE % Change In Normalised EPS Estimates Normalised EPS/consensus EPS (x) Dec-11A 31,913,860 2,073,500 1,190,980 10,579 67.6% 6.99 4,800 6.50% 5.11 NA 49.2% 1.59 24.5% Dec-12A 34,723,300 1,172,770 585,160 5,198 (50.9%) 14.22 2,650 3.59% 9.05 14.14 43.2% 1.55 11.0% Dec-13F 31,580,742 1,434,291 603,950 5,364 3.2% 13.78 3,500 4.74% 7.04 13.86 31.6% 1.45 10.9% (28.7%) 0.59 Dec-14F 32,375,423 1,792,410 1,002,503 8,905 66.0% 8.30 4,000 5.41% 5.33 15.41 20.1% 1.32 16.6% (7.1%) 0.94 Dec-15F 32,196,762 1,759,570 972,004 8,634 (3.0%) 8.56 4,500 6.09% 5.13 15.51 10.7% 1.22 14.8% (7.2%) 1.30
Vol m
1 1

73,900 70,000
110,500
Current
Target
98,000
Page 10
Plantations MALAYSIA
July 16, 2013
Ta Ann
COMPANY NOTE
Current RM3.95 RM4.67 N/A 18.2%
Conviction| |
TAH MK / TAAN.KL
SHORT TERM (3 MTH)
LONG TERM
US$458.8m
RM1,464m
Market Cap
US$0.32m
RM0.99m
Avg Daily Turnover
41.4%
Free Float
370.7 m shares
Buy ahead of timber rerating

Ta Ann started off as a timber company but has since diversified into oil palm. While oil palm is currently the largest profit contributor, one should not overlook the potential of its timber business which could see stronger earnings as we expect timber prices to head higher.
SAW Xiao Jun
T (60) 3 2084 9203 E xiaojun.saw@cimb.com
Ivy NG Lee Fang, CFA

T (60) 3 2084 9697 E ivy.ng@cimb.com
Company Visit Channel Check
Expert Opinion Customer Views
We begin coverage on the stock with a Trading Buy call and a target price of RM4.67, based on an SOP valuation. The stock is not an Outperform as we expect it to be rerated only in the short term, driven by rising timber prices. Rerating catalysts could come in the form of stronger timber earnings in the coming quarters. Following six consecutive quarters of weak earnings, it is time to relook at the potential of Ta Ann's timber business as rising log and plywood prices set the tone for a recovery in its timber profits. Our channel checks reveal that Sarawak export log prices have risen by 30-50% since Jan this year. This should benefit the group as it is one of the largest timber producers in Sarawak. It accounted for 6% of Sarawak's log exports in 2012. Additionally, Ta Ann's huge exposure to Japan (39% of its 2012 revenue came from sales of timber products to Japan) makes it a good proxy for the potential upturn in Japan's housing market, which could boost plywood prices. We estimate Ta Ann's timber earnings to recover from a pretax loss of RM18m in 2012 to a
Financial Summary
Dec-11A 925.6 293.1 154.7 0.42 72% 9.46 0.20 5.06% 6.04 14.0 27.7% 1.30 17.7%
profit of RM21m this year. Including the one-off compensation from its Tasmania venture, we estimate that the timber PBT could rise to as much as RM86m, highest since 2007.
Solid palm oil output growth
Timber profits set to recover
The venture into oil palm plantations was part of a strategy to broaden the group's earnings base beyond the sale of logs and plywood.
Dato Wong Kuo Hea, Group Managing Director and CEO
We are also positive on Ta Anns oil palm plantation which is projected to churn out strong FFB output growth of 10-18% p.a. in FY13-14, driven by new mature areas and improving yields from its young estates. There is room for expansion as 64% of its land bank is not planted. This could keep the group busy for at least the next 12 years based on its current expansion target of 3k-5k ha annually. Ta Ann has underperformed the market by 29% and its share price has fallen by 19% in the past 12 months due to weak timber and CPO price sentiment. We see this as an opportune time to accumulate the stock as it is trading at a 18% discount to our SOP. We expect the company to report stronger timber earnings in its coming quarterly results in Aug, which could boost sentiment on the stock.
Attractive valuation
Price Close
Relative to FBMKLCI (RHS)
5.1
4.6 4.1 3.6 2 3.1
105 100 95 90 85 80 75 70 65 60 55
Vol m
2
1 1

3.95
3.35
4.98
Current
Target
4.67
Revenue (RMm) Operating EBITDA (RMm) Net Profit (RMm) Core EPS (RM) Core EPS Growth FD Core P/E (x) DPS (RM) Dividend Yield EV/EBITDA (x) P/FCFE (x) Net Gearing P/BV (x) Recurring ROE % Change In Core EPS Estimates CIMB/consensus EPS (x)
|
Dec-12A 789.9 160.4 57.5 0.16 (63%) 25.47 0.05 1.27% 11.46 314.0 34.5% 1.52 6.0%
Dec-13F 755.6 155.3 47.2 0.13 (18%) 31.00 0.04 0.97% 11.78 44.9 32.1% 1.48 4.8% 0.57
Dec-14F 967.3 248.1 112.7 0.30 139% 12.99 0.09 2.31% 7.15 19.3 23.6% 1.34 10.8% 0.96
Dec-15F 987.7 291.7 138.0 0.37 22% 10.61 0.11 2.83% 5.60 8.1 9.6% 1.23 12.1% 0.99
Page 11
July 17, 2013
MALAYSIA
AVIATION - OVERALL
SHORT TERM (3 MTH)
LONG TERM
Conviction| |
Whats up, Malindo?

Malindos fares on its trunk domestic routes to Kota Kinabalu and Kuching from Kuala Lumpur have doubled since the routes were launched in March, closing substantially the gap with AirAsias fares. Meanwhile, Malindos frequencies have also been erratic.
Raymond YAP Kok Hoe, CFA

T (60) 3 2084 9769 E raymond.yap@cimb.com
Figure 1: Malindo's fares from KL to Kuching have increased since its launch
RM per pax
350 308 300 250 238 Booked on 20 March Booked on 15 July
200 156 150 100 50 0 116
What keeps me alive today is my ambition.

Rusdi Kirana, Lion Air CEO
1 month's departure
3 months' departure
Hence, Malindos impact on AirAsia will be less than feared in 2013. We remain Overweight on the Malaysian aviation sector, with our top Outperform being AirAsia on the back of the resilience of its business. We also like MAHB as we are confident that it can open KLIA2 on 2 May 2014 as promised. The sector is expected to rerate on the back of strong AirAsia and MAHB earnings. Over the past four months since its maiden flight, Malindo appears to have revised its plans for a 12-strong jet fleet by end-2013 to a 10-strong jet fleet. But the gap will be plugged by Malindos plans for a 4-strong turbo-prop fleet based out of Subang. Malindo also continues to make plans for services to India from September, and then to Singapore and China. Disturbingly, several of Malindos middle managers have left the company to join AirAsia, suggesting internal discord.
Key developments
We believe that Malindos impact on AirAsia will be limited this year as (1) Malindos frequencies have been erratic, (2) its fares have doubled since launch and the gap with AirAsia is now quite small, (3) Malindo may be targeting too many routes with too few frequencies to make an impact, and (4) AirAsia remains a very efficient low-cost operator. We think that MAS will feel more pressure as (1) it is an inefficient operator, (2) Malindos product resembles MASs product the most, and (3) Firefly is now facing direct competition at Subang Airport.
Will Malindo get to 100?
Highlighted Companies AirAsia Bhd

Outperform, target RM4 (11x CY14 P/E). AirAsia is an LCC behemoth that looks set to dominate Asian skies, with hubs in Malaysia, Thailand, Indonesia, Japan, the Philippines and India. However, it faces competition in Malaysia from Lion Air's Malindo.
Malaysia Airports Holdings

Outperform, target RM7.55 (DCF on 6.6% WACC, 0% LTG). MAHB stands to be a prime beneficiary of regional airlines' aggressive expansion plans. It may receive an ITA of up to 100% of KLIA2's capex, worth more than RM4bn.
Limited impact so far
Lion Airs plans to set up a new LCC in Thailand could result in Malindo slowing down the pace of its aircraft expansion from a stated goal of 100 planes in 10 years. Some of Lion Airs aircraft deliveries may be diverted to Thailand, especially if Malindo finds the competitive environment in Malaysia tougher than expected. Should this happen, AirAsia would be the biggest beneficiary.
Page 12
REIT SINGAPORE
July 16, 2013
Ascendas REIT
AREIT SP / AEMN.SI Current S$2.24 S$2.50 S$2.50 11.7%
Conviction| |
1QFY14 RESULTS NOTE

SHORT TERM (3 MTH) LONG TERM
US$4,249m
S$5,378m
Market Cap
US$20.82m
S$25.97m
Avg Daily Turnover
83.0%
Free Float
2,399 m shares
CIMB Analyst(s)
Quality holding
There were no major surprises in 1QFY14 as results were in line and management continues to make headway on leasing at new investments and seeks growth through asset enhancements. AREITs asset leverage of 28.6% leaves room for growth via acquisitions and developments.
1QFY14s DPU met consensus and our expectations, forming 25% of our full-year estimates. We keep our FY14 DPU estimates and DDM-based target price (discount rate of 7.2%) unchanged. We maintain our Outperform rating, with the catalysts of accretive AEI and asset developments. occupancy of investments completed in the last 12 months at 77.3% (vs. 4QFY13s 62.5%).
TAN Siew Ling Donald CHUA
T (65) 6210 8698 E siewling.tan@cimb.com T (65) 6210 8606 E donald.chua@cimb.com
Three new AEIs
Share price info

Share price perf. (%) Relative Absolute Major shareholders Ascendas Funds Mgt CBRE ING 1M -5.4 -3 3M -17.2 -18.9 12M -4.7 3.2 % held 17.0 5.0 4.5
No surprises
We expect steady FY14 DPU growth from positive rental reversions and past investments coming on stream. 1QFY14 DPU was up 0.6% yoy. AREITs portfolio remained healthy with a weighted average rental reversion of 9.6% in 1Q. This should continue with current market rents at 15-41% higher than passing rents due for renewal in FY13-14. Coupled with the AEIs to upgrade older assets, AREIT is well positioned for rental reversions. Occupancy was a healthy 93.6% (vs. 4QFY13s 94.0%), while management continued to make headway on leasing, with the
4Q qoq % chg FY13 145.4 3.8 (41.6) 28.0 103.8 (5.9) Prev. FY13F 630.0 (230.7) 399.4 63.4 (0.4) 399.0 (73.4) 7.7 1.5 334.7 334.7 341.8 333.2 14.2
Management remains on the lookout for opportunities to enhance its portfolios returns and marketability. It has announced three new AEIs (Techquest, LogisTech, Corporation Place) in 1QFY14, which amounted to a total estimated cost of S$25.4m. Asset leverage remains a low 28.6% (30.5% after committed investments), which will leave room for growth.
Maintain Outperform
AREIT trades at 1.2x P/BV compared to its historical average of 1.4x since listing. We see opportunities to accumulate AREIT at this level as it is a quality holding, given its prudent management and high quality assets. Its low asset leverage will leave room for acquisitions and developments upon a potential correction in pricing expectations by prospective buyers.
Results Comparison
FYE Mar (S$ m) Revenue Operating costs EBITDA EBITDA margin (%) Depn & amort. EBIT Interest expense Interest & invt inc Associates' contrib Exceptionals & revaln Pretax profit Tax Tax rate (%) Minority interests Net profit Distr profit Core net profit DPU (cts)
1Q FY14 150.9 (53.3) 97.6 64.7 0.2 97.8 (17.6) 36.4 14.8 131.4 (0.3) 0.2 131.1 85.2 116.3 3.6
1Q yoy % chg FY13 142.0 6.3 (62.5) (14.7) 79.4 22.9 56.0 (0.2) 79.2 23.5 (24.8) (29.3) 4.9 638.6 17.7 77.0 70.7 (0.4) (23.3) 0.6 76.6 71.3 76.5 11.3 58.9 97.6 3.5 0.6
Comments In line. 1Q: 24% In line. 1Q: 24%
103.9 (43.5) 2.4
(5.9) (59.6) 1,419.9 (75.8) 6.1 (6.3)
In line. 1Q: 25% In line. Abv. FV gain on CB and collateral loans Abv. FX gain and gain on disposal -
123.9 (23.3)
121.9 68.8 60.7 3.1
7.6 23.7 91.5 16.0
Abv. FX gain and gain on disposal In line. 1Q: 25% Abv. FX gain and gain on disposal In line. 1Q: 25%
SOURCE: CIMB, COMPANY REPORTS
Page 13
July 16, 2013
SINGAPORE
BANKS
SHORT TERM (3 MTH)
LONG TERM
CIMB Analyst(s)
No reason to be Moody
We are not perturbed by Moodys downgrade of its outlook for Singapore banks from stable to negative as Singapores banking system has proven to be relatively resilient.
Figure 1: Loan loss coverage ratios have been well above 100% for all three banks
SECTOR FLASH NOTE
Kenneth NG, CFA
T (65) 6210 8610 E kenneth.ng@cimb.com
160%
150%
140%
130%
Highlighted Companies DBS Group

Sector top pick; Outperform with target price of S$19.02. 1Q ROEs were ahead of peers while P/BV valuations are still below. Beneficiary of intra-Asia trade flows and multiple non-interest income drivers.
120%
110%
100% 2Q11 3Q11 4Q11 DBS 1Q12 UOB 2Q12 OCBC 3Q12 4Q12 1Q13
OCBC
Underperform with target price of S$10.17. Downward pressure on NIMs is likely to persist in the coming quarters due to lagged mortgage repricing.
United Overseas Bank

Neutral with target price of S$21.24. We like UOB for its strength in institutional lending. But it is lacking in its WM distribution network. Downward pressure on NIMs is also likely to persist in coming quarters.
The downgrade was on the back of fears of worsening NPL ratios and higher credit costs as interest rates rise. Domestically, we believe business loans are likely to show the first signs of struggle. But history has shown that non-Singapore loans always see trouble first and contribute most significantly to NPLs. We remain Neutral on Singapore banks, with DBS as our top pick for its multiple non-interest income drivers.
What Happened
Moodys downgraded its outlook for Singapore banks from stable to neutral yesterday on the belief that the increased likelihood of tightening US monetary policy is likely to trigger a turning point in the credit cycle and lead to worsening NPL ratios and higher credit costs. MAS responded with a statement that Singapore banks have undergone stress tests and have adequate buffers to cope with higher interest rates.
While we agree with Moodys downgrade on the basis of a weaker credit environment, we believe that the Singapore banking system is relatively resilient and we should not be overly concerned. During two major recessions in the past 16 years, Singapores domestic NPLs did not really inflate. We believe that the same will happen this time round. Domestic mortgages have not contributed significantly to NPLs in the last two decades and we believe that it will not be a big contributor this time either.
What We Think
What You Should Do
We remain Neutral on Singapore banks. Our top pick is DBS for its trade finance success and earnings delivery from multiple fee income streams.
Page 14
July 16, 2013
SINGAPORE
STRATEGY FLASH NOTE
SHORT TERM (3 MTH)
LONG TERM
Conviction| |
CIMB Analyst(s)
Marketing feedback
We visited institutional investors in four Asian cities recently, and highlighted how one should think about a Singapore portfolio, after Juns decimation of interest-rate-sensitive sectors.
Figure 1: Our top picks since 26 Jun 13
Kenneth NG, CFA

T (65) 6210 8610 E kenneth.ng@cimb.com
15%
10%
5%
0%
-5%
SOURCE: BLOOMBERG
Our key changes were an upgrade of Property to Overweight from Neutral (on valuations) and Banks downgrade to Neutral from Overweight (on poor upcoming results expected). Maintain Neutral on the Singapore market with an intact end-CY13 FSSTI target of 3,400, bottom-up. Top picks are DBS, UOL, THBEV, AREIT, BIG, CAPL, EZI, GLP, SATS, KEP and TAT.
What Happened
We narrated our more-positive country view since end-Jun, when we upgraded Singapore to Neutral (from Underweight). Investors agreed that Singapore is not expensive, but does not have earnings catalysts. Bears felt ASEAN markets were not the places to be in, as any further slowdown in China is likely to make itself felt soon in the region. Bulls appreciated Singapore's more defensive characteristics.
REITs debt is sensitive to rising rates immediately. We prefer yield exposure through operating companies with net cash. Investors questioned if Telcos high gearing renders them suitable as hiding places when rates rise. We still like Capital Goods as we attribute the heightened Chinese competition in the sector to aggressive financing. Short term, investors agreed with us but longer term, they queried if Singapore would lose its competitive edge. As for consumer picks, most asked about Thai Bev and Courts. Investors were jittery over Tat Hong's share-price weakness. New stocks that came under some scrutiny included NOL, as to whether it could benefit from a US recovery.
What You Should Do

Our top picks remain DBS, UOL, THBEV, AREIT, BIG, CAPL, EZI, GLP, SATS, KEP and TAT. Vard has been dropped after our downgrade. REITs are swimming against rising rates and we prefer yield stocks with net cash and some EPS growth.
What We Think
We believe Banks will fare better than REITs as higher long-end interest rates are unlikely to boost customer loan yields immediately while 18% of
Page 15
Retail HONG KONG

July 16, 2013
Giordano International
709 HK / 0709.HK Current HK$7.21 HK$9.00 HK$9.00 24.8%
Conviction| |
FLASH NOTE
US$1,449m
HK$11,241m
Market Cap
US$2.02m
HK$15.71m
Avg Daily Turnover
50.8%
Free Float
1,544 m shares
CIMB Analyst(s)
Growth outside China

Giordanos operating performance should have been resilient in 2Q13 despite Chinas overall market weakness due to bad weather, the avian flu and a sluggish economy. We look beyond China to 2014, when its restructuring should be completed.
Ray KWOK
T (852) 2352 1113 E ray.kwok@cimb.com
Share price info

Share price perf. (%) Relative Absolute Major shareholders Chow Tai Fook Aberdeen Asset Management Ltd Templeton Asset Management Ltd 1M -4.2 -2.6 3M -3.3 -5.5 12M 17.8 29.4 % held 25.0 19.0 7.0
Thanks to contributions from its newly-acquired Middle-East market, we expect core net profit to grow 15% yoy to HK$354m in 1H13 on 7% topline growth. Maintain Outperform and target price, based on 15x CY14 P/E, its 10-year average. Catalysts are expected from improving China operations and sustainable margin expansion. Suffering from unusually cool and wet weather and the avian flu in Eastern China in 2Q13, the groups SSSG had contracted by a high single digit in Apr (-7% in 1Q) in China. However, sales gradually recovered in May and Jun with mom improvements, thanks to the closure of non-performing stores in the past 15 months (>160 stores) and effective localised marketing campaigns. Taiwans recovery was on track with SSSG turning positive in 2Q (-14% in 1Q) on the back of successful promotions while Hong Kong kept its
low-single-digit SSSG (+3% in 1Q). Singapore is sure to be poor given Juns air pollution, which kept people indoors. We believe 2Qs overall performance was stable, compensated by Indonesia and Thailand (>20% SSSG in 1Q) as well as the recovery in Taiwan. We expect Chinas profitability to improve from: 1) healthy inventories; 2) fewer discounts offered by its rivals; and 3) gross-margin preservation. Store expansion will focus on Taiwan and South-East Asia while stores in China will stay around 1,200.
What We Think
What Happened
What You Should Do
We like Giordanos prudent expansion with diversification in Greater China, South-East Asia and the Middle East (new contributor) to balance its business risks and growth. Stay invested for its 5.7% dividend yields and strong balance sheet with HK$1.3bn of net cash on hand.
Price Close 8.5
Relative to HSI (RHS) 132
Financial Summary
126 119
113 106 100 93 87
8.0 7.5
7.0 6.5 6.0 5.5 40 5.0 30 20 10

5.31
7.21
8.32
Current
Target
9.00
Revenue (HK$m) Operating EBITDA (HK$m) Net Profit (HK$m) Normalised EPS (HK$) Normalised EPS Growth FD Normalised P/E (x) DPS (HK$) Dividend Yield EV/EBITDA (x) P/FCFE (x) Net Gearing P/BV (x) Recurring ROE % Change In Normalised EPS Estimates Normalised EPS/consensus EPS (x)
Dec-11A 5,614 856 728 0.48 29.3% 15.14 0.38 5.27% 10.85 13.13 (42.9%) 4.01 28.0%
Dec-12A 5,673 817 826 0.45 (6.6%) 16.20 0.40 5.55% 11.64 35.24 (37.2%) 3.70 23.7%
Dec-13F 6,133 1,024 797 0.52 16.4% 13.92 0.41 5.67% 9.10 12.51 (42.3%) 3.46 25.7% (0%) 1.01
Dec-14F 6,638 1,184 919 0.60 15.3% 12.07 0.45 6.21% 7.61 11.29 (46.8%) 3.11 27.1% (0%) 1.03
Dec-15F 7,145 1,339 1,041 0.68 13.3% 10.66 0.51 7.04% 6.44 9.91 (51.5%) 2.77 27.5% (0%) 1.08
Vol m
Page 16
Retail HONG KONG

July 16, 2013
Luk Fook Holdings

590 HK / 0590.HK Current HK$20.85 HK$21.90 HK$19.90 5.0%
Conviction| |
FLASH NOTE
US$1,583m
HK$12,283m
Market Cap
US$6.11m
HK$47.40m
Avg Daily Turnover
60.3%
Free Float
589.1 m shares
CIMB Analyst(s)
Gold price remains the key

Despite the stronger-than-expected 1QFY14 operational performance and possible upside to consensus earnings, we believe that gold price uncertainty will remain a key overhang on Luk Fooks valuation in the near term. We prefer Chow Tai Fook for its more resilient margins.
Larry CHO
T (852) 2532 1116 E larry.cho@cimb.com
Katie Chan
T (852) 2539 1328 E katie.chan@cimb.com
Share price info

Share price perf. (%) Relative Absolute Major shareholders Luk Fook (Control) Limted 1M 14.2 15.8 3M 1 -0.7 12M 17.2 28.7 % held 39.8
We raise our FY14-16 EPS forecasts by 9-10% to factor in the strong 1Q operational performance, which was led by robust physical demand due to a drop in gold prices in Apr. We lift our target price to HK$21.9, still based on 8x CY14 P/E, 2 s.d. below the sectors mid-cycle valuations. We think sales and margin trends will start to normalise in 2Q and maintain our Neutral rating. Luk Fooks 1QFY14 operational update revealed 1) HK SSSG of 83% (29% in 4QFY13), 2) China SSSG of 117% (14% in 4QFY13), 3) SSSG of 130% for gold products and 21% for gem-sets, 4) low-single-digit yoy drop in overall retail gross margins, and 5) net addition of 20 POS (five self-operated stores and 35 licensed stores).
rival Chow Tai Fooks (CTF) SSSG rates (HK 68% and China 32%). The low-single-digit drop in retail gross margin was largely due to the shift in sales mix towards gold products and is comparable to the 3% pt drop in gross margin reported by CTF for the same period. Luk Fooks share price has risen 13% (vs. 17% for CTF) over the last five trading days in anticipation of favourable numbers after CTFs 1Q results. While we see potential upside to consensus forecast, we maintain our Neutral rating as we believe that the uncertainties in gold prices will continue to weigh on Luk Fooks valuation in the near term. In the watch & jewellery sector, we prefer CTF for its more resilient margins (higher hedging ratios) and Stelux for its earnings recovery led by cost-cutting initiatives.
What You Should Do
What Happened
What We Think
The 1QFY14 performance was stronger than expected and above
Price Close
Relative to HSI (RHS) 172 163 154 145 136 128 119 110 101 92
Financial Summary
Revenue (HK$m) Operating EBITDA (HK$m) Net Profit (HK$m) Core EPS (HK$) Core EPS Growth FD Core P/E (x) DPS (HK$) Dividend Yield EV/EBITDA (x) P/FCFE (x) Net Gearing P/BV (x) Recurring ROE % Change In Core EPS Estimates CIMB/consensus EPS (x) Mar-12A 11,907 1,687 1,334 2.46 40.3% 9.08 0.98 4.72% 5.91 NA (27.2%) 2.20 30.0% Mar-13A 13,412 1,611 1,266 2.13 (13.4%) 9.79 0.86 4.12% 6.92 97.5 (18.3%) 1.91 20.9% Mar-14F 17,007 1,836 1,429 2.43 13.9% 8.60 0.97 4.66% 6.30 113.1 (10.3%) 1.68 20.8% 10.2% 1.09 Mar-15F 19,115 2,149 1,676 2.84 17.3% 7.33 1.14 5.46% 5.21 12.3 (13.5%) 1.47 21.3% 9.9% 1.05 Mar-16F 21,140 2,475 1,933 3.28 15.4% 6.35 1.31 6.30% 4.29 9.4 (17.9%) 1.28 21.5% 9.3% 1.02
29 24 19 20 14 15 10 5

20.85 16.48
29.70
Vol m
Current
21.90
Target
Page 17
July 16, 2013
CHINA
CEMENT
SHORT TERM (3 MTH)
LONG TERM
CIMB Analyst(s)
Capacity growth: where are the risks?

While a concentrated launch of new capacity in 2H13 may create risks for cement prices in regions with slow demand growth, prices in regions with stronger demand growth and limited new capacity could be supported by an improving market balance, in our view.
Figure 1: Incremental improvements in market balance: 2H13F
(%) 40%
SECTOR FLASH NOTE
Kevin YOU
T (852) 2532 1112 E kevin.you@cimb.com
Improving
Worsening
Highlighted Companies Anhui Conch

Conch is likely to emerge a winner in the upcoming consolidation given its strong financials. If the company increases its capex by raising net gearing to 120%, FY13 earnings could be lifted by 44%.
20%
0%
-20%
CNBM
CNBM has been trading at a discount to its peers because of its high gearing. Apart from potential margin expansion from cooperation, we expect its proposed H-share placement to reduce gearing and catalyse its share price in the long term.
Hunan
Henan
Shandong
Jiangxi
Xinjiang
Northwest
BJ/TJ/HB
Fujian
Shaanxi
GD/GX
Hubei
-40%
YRD
Northeast
SC/CQ
Shanshui Cement
The company is expected to regain its pricing power in local markets, thanks to improving cement prices in Shanshuis surrounding provinces as competition from imports recedes. Its potential cooperation with CNBM will increase its ASPs.
* assume same demand growth as in 5M13
SOURCES: CHINA CEMENT ASSOCIATION, CIMB
Shanxi appears to have the biggest risks given the slowest incremental changes in its market balance expected in 2H13. At the same time, a more positive outlook for the central and southern regions backed by strong demand growth is likely to support prices better. We remain Overweight on the sector with catalysts expected from a price recovery in 4Q13. Shanshui Cement and Anhui Conch are our top picks.
our expectations. However, the concentrated launch of new capacity in 2H13 (potentially delayed from 1H13 by tight liquidity) could create pricing pressure if demand growth is slow to catch up with capacity growth. We are more positive on regions with strong demand growth and limited capacity additions, including Jiangxi, Hunan, Guangdong and Guangxi, as an improving market balance could potentially jack up prices. In spite of earnings risks and the potential for a moderate yoy decline in 1H13 earnings, Shanshui remains our top pick in the sector as we think its low valuations against its historical 3-year average has more than reflected the negatives. We also like Anhui Conch for its attractive valuations and market leadership. Its strong earnings-growth potential in 2H13 could be a strong catalyst for the stock, we believe.
What Happened
China Cement Association reported 39m tpa of new clinker capacity launched in 1H13, 58% in western China. Another 83m tpa of new clinker capacity could be launched in 2H13, with more new lines coming out in the central-northern region.
What You Should Do
What We Think
New capacity growth in 2013 could thus be about 7% of end-2012s capacity, which is mostly in line with
Page 18
Inner Mongolia
Liaoning
Shanxi
Autos INDONESIA
July 16, 2013
Astra International
ASII IJ / ASII.JK Current Rp6,850 Rp6,600 Rp8,150 -3.6%
Conviction| |
COMPANY NOTE
US$27,449m
Rp277,312,352m
Market Cap
US$25.74m
Rp253,201m
Avg Daily Turnover
49.0%
Free Float
40,484 m shares
Biting the bullet

Its auto businesses face intense pressure from the competition while the long-term outlook for LCGC turned out to be less rosy. As its ROE is on a downward trajectory, Astra is heading for a de-rating.
We cut our FY13-15 forecasts by 2-4%, mainly on lower low-cost green car (LCGC) volume and auto margins. Given all the negatives, we see that the stock is heading for a de-rating. Hence, we cut our price target to Rp6,600, now based on 2.8x FY14 P/BV or the historical valuation if the cost of equity were to increase to 15.6% vs. our previous valuation basis of 15x CY14 P/E. We downgrade Astra to Underperform from Outperform. Margins at the auto dealer level may remain depressed in the foreseeable future, as competition intensifies and dealers resort to their aggressive discounting strategies used 2-3 months ago. Given Astras perceived strategy of prioritising market share over margins, the discounting could persist for a while, no thanks to its recent market share decline in Jun. Thus, our auto margin assumptions are lowered by 30bp to a more sustainable level of 3.3% in FY13-14, a level seen back in FY09-10. launches closer to the expected LCGC launch dates of Astra's competitors. As a result, such launches now may not alleviate the stress on Astras market share and dealer discounting. Moreover, the proposed regulations to impose ceiling prices could put dealers at a disadvantage in the long term, given the more volatile margins. We now expect LCGC sales for Astra to amount to only 30,000 units this year, from 70,000 units previously.
Peter P. SUTEDJA, CFA

T (62) 21 3006 1726 E peter.sutedja@cimb.com
Company Visit Channel Check
Expert Opinion Customer Views
Competition gets tougher...
De-rating expected
We are keeping our target because in Jul, we will likely get a boost from the Idul Fitri festivities.
Johnny Darmawan, Chairman, PT Toyota Astra Motor
... and LCGC is not helping
The regulatory delays have pushed Toyota and Daihatsus LCGC
Driven by pressures on the auto and commodities fronts, Astra's ROE is poised to decline to 23-25% in FY13-15 from the 5-year average of 30%. There could be upside potential to our ROE forecasts if Astra 1) leverages up, or 2) pays more dividend, though such moves will contradict its current strategy. Thus, we expect the stock to de-rate to 2.8x FY14 P/BV, which is the historical valuation if the cost of equity were to increase to 15.6% (prev. 13.7%). We believe that Astra's current share price already reflects the higher cost of equity. The limited upside potential underpins our Underperform call.
Price Close 8,900 8,400 7,900 7,400 6,900 6,400 2 5,900 2 1 1

Jul-12 Oct-12 Source: Bloomberg Jan-13
Relative to JCI (RHS) 133 123 113 103 93 83 73
Financial Summary
Revenue (Rpb) Operating EBITDA (Rpb) Net Profit (Rpb) Core EPS (Rp) Core EPS Growth FD Core P/E (x) DPS (Rp) Dividend Yield EV/EBITDA (x) P/FCFE (x) Net Gearing P/BV (x) Recurring ROE % Change In Core EPS Estimates CIMB/consensus EPS (x) Dec-11A 162,564 22,602 17,785 431.2 21.3% 15.89 202.3 2.95% 13.62 20.3 42.3% 4.59 31.8% Dec-12A 188,053 25,803 19,421 484.1 12.3% 14.15 197.7 2.89% 12.48 109.0 51.1% 3.89 29.8% Dec-13F 199,702 26,620 18,869 466.1 (3.7%) 14.70 215.9 3.15% 11.79 31.3 34.8% 3.35 24.5% (1.66%) 0.95 Dec-14F 221,963 31,068 21,182 523.2 12.3% 13.09 209.7 3.06% 9.95 NA 26.5% 2.90 23.8% (3.61%) 0.93 Dec-15F 239,961 34,273 23,184 572.7 9.4% 11.96 235.5 3.44% 8.78 37.6 17.8% 2.54 22.7% (3.95%) 0.91
Vol b
Apr-13

6,850 6,150
8,600
Current
6,600
Target
SOURCES: CIMB, COMPANY REPORTS IMPORTANT DISCLOSURES, INCLUDING ANY REQUIRED RESEARCH CERTIFICATIONS, ARE PROVIDED AT THE END OF THIS REPORT. CIMB Securities Limited has had an investment banking relationship with Geely Automobile Holdings within the preceding 12 months.
Page 19
July 16, 2013
THAILAND
STRATEGY
SHORT TERM (3 MTH)
LONG TERM
Conviction| |
Bottom-fishing
A massive correction from foreign sell-offs has presented a great buying opportunity as we believe the Thai economy remains strong, albeit normalising towards its long-term growth trend of about 5%. Domestic sectors are still expected to outperform the others.
Kasem Prunratanamala CFA LEE Heng Guie
T (66) 2 6579221 E kasem.prunratanamala@cimb.com T (60) 3 20849667 E hengguie.lee@cimb.com
Figure 1: Bond yields have started to cool off

5.00 4.50 4.00
3.50 3.00 2.50 2.00 1 6 11 16 21 26 31 36 41 46
The decision [to take on the defence portfolio] lies with the prime minister and the government. We subordinates must respect the decision made by our superiors"
Gen Prayuth Chan-ocha, army chief
Highlighted Companies Kasikornbank

KBANK is our long-term sector favourite on the back of its banking and management quality. It can now be owned at an undemanding 8.9x CY14 P/E and 2.0x P/BV (for a 21% ROE) against SCBs 9. x and . x, respectively.
We remain positive on the market but reshuffle our top picks to reflect the more fragile sentiment. We replace ANAN, KK and SCB with BEC, KTB and KBANK. Our other top picks are intact: AMATA, PS, SIRI, MINT, BGH, ROBINS and GLOBAL. Our index target is still 1,810 (14.2x CY14 P/E, a 3% premium to regional peers). Maintain Positive view with market catalysts expected from a passage of the infrastructure bill and decent 2Q13 earnings. Foreign investors have been net sellers of THB76bn to date, a reversal from the inflows last year. Cumulative foreign inflows since 2009 when QE1 started had peaked at about THB155bn in Jan 13 and are now down to only THB62bn after recent heavy sell-offs. We believe that foreign sell-offs should be less pronounced in the near term, as the political situation is stable and corporate earnings remain robust.
Short term, our regional strategists believe that capital outflows could persist, pressurising asset returns. The Leading Economic Index, Business Sentiment Index and BOI applications received remain strong. Demand for property-development loans and mortgage loans remains strong and we believe that 2H13 presales will stay strong on the back of more project launches. Meanwhile, we estimate that a 1% drop in Chinese GDP will shave only 9bp off Thais GDP.
LEI and BSI stay strong
Foreign selling to cool off
Krung Thai Bank

We see KTB as offering the best value among the big banks as it is trading at just 7.2x CY14 P/E and 1.4x P/BV. Earnings drivers could include a more profitable loan mix and greater focus on fee income.
Infrastructure bill unconstitutional?
BEC World
We believe that fears of an analogue-to-digital terrestrial-TV transition are overplayed, which offers a trading opportunity for BEC. BEC is trading at its 3-year average P/E, implying a PEG of 1.
Contractors seem to believe that if the infrastructure bill is ruled unconstitutional, any delays will only be for a few months. They are not too worried as they already have huge backlog orders, which could keep them busy for the next few years.
Page 20
IT ServicesIndia
July 17, 2013
NIIT Technologies
NITEC IN / NITT.BO Current Rs261.6 Rs323.0 Rs327.0 23.5%
Conviction| |
1QFY14 RESULTS NOTE

Market Cap
Avg Daily Turnover
Free Float
US$266.1m
Rs15,785m
US$0.54m
Rs30.34m
68.7%
60.16 m shares
CIMB Analyst(s)
All eggs in one basket

For the second straight quarter, growth was driven by domestic deals (exports declined qoq), while in-line margins were due to lower subcontracting costs. While growth should pick up, NITECs guidance of better-than-industry growth (12-14%) in FY14 now seems aggressive.
The 1Q EPS at 20.7% of our FY14 forecast was 11% ahead of estimates on forex gains, but EBITDA was in line. We lower FY14-16 US$ revenues by 4.8-5.5%, and revise EPS by -3.1 to +3.5% on new INR/USD forecasts. We lower our target P/E to 7.5x FY15 (7.9x previously, on lower visibility). With valuations of 6.1x FY15 EPS, we maintain Outperform with Rs323 price target (from Rs327). Key catalyst is growth pick-up in 2HFY14. As we expected, revenues declined 0.9% qoq (flat in constant currency) to US$97.9m. However, this was led by 10.8% growth in India, while export revenues fell 3.3%, due to c6% drop in Europe. The EBITDA margin at 14.1% (-c200bp qoq) came in as expected despite strong hardware/ licence sales, as sub-contracting costs came off. Strong FX gains at Rs192m (-Rs40m in 4QFY13) drove PAT to Rs565m (+0.7% qoq), 10.5% ahead of our estimate after factoring in a one-off Rs54m dividend tax charge.
Srinivas SESHADRI
T (91) 22 6602 5160 E srinivas.seshadri@cimb.com
Sandeep SHAH
T (91) 22 6602 5159 E sandeep.shah@cimb.com
Anubhav Jain
T (91) 22 6602 5161 E anubhav.jain@cimb.com
Share price info

Share price perf. (%) Relative Absolute Major shareholders Promoters Fidelity Management & Research Blackrock India Equity Fund 1M -4.4 -0.9 3M -9.6 -3.7 12M -22.3 -6.2 % held 31.3 6.3 4.0
India saves the day
The 1Q order intake of US$145m (including US$60m deal from Airports Authority of India) and positive demand trends in the US (five large deals in the pipeline) and Asia imply a strong 2HFY13. However, exports have declined in the past two quarters and the potential cross-currency headwind in 1QFY14 could keep FY14 US$ revenue growth in the single digits vs. NITECs guidance of doing better than the IT industry body NASSCOMs 12-14% growth forecast for the sector. Margins should perk up visibly due to lower pass-through revenues and higher margins from the AAI deal. We lower our target price to Rs323, factoring in 4.8-5.5% forecast downgrades (about half of this from the cross-currency headwind) and lowered target P/E of 7.5x FY15. With the worst likely behind it, and undemanding valuations, we reiterate Outperform on the stock.
Worst seems behind NITEC
Maintain Outperform
Results Comparison
FYE Mar (Rs m) Revenue (US$m) Revenue Operating costs EBITDA EBITDA margin (%) Depn & amort. EBIT Others incl. forex Pretax profit Tax Tax rate (%) Minority interests Net profit EPS (Rs) 1Q FY14 98 5,401 4,637 764 14.15 148 616 224 840 -296 35.24 12 556 8.83 1Q FY13 90 4,815 3,945 870 18.07 126 744 91 835 -296 35.45 13 552 9.61 yoy % chg 8.86 12.17 17.54 -12.18 17.46 -17.20 146.2 0.60 0.00 -0.08 0.72 -8.12 qoq % chg -0.90 0.91 3.32 -11.63 -8.07 -12.44 nm 18.48 129.5 nm -6.55 -5.84 Prev. FY14F 377 20,425 16,917 3,508 17.18 567 2,941 -5.20 2,936 -751 25.58 -52 2,133 34.73 Comments Revenues were largely driven by India (+10.8%), while overseas revenues were down 3.3% qoq EBITDA margin was down c200bp qoq, in line with our forecasts, due to annual wage hikes Lower depreciation due to one-time asset impairment in 43QFY13 Forex gain of Rs192m versus loss of Rs40m in 4Q13 Tax rate of 35.2% in 1Q14 vs 18% in 4Q13 was due to one off charge of dividend tax on repatriation of overseas cash balances
Page 21
Property Development INDIA

July 16, 2013
Oberoi Realty Ltd

OBER IN / OEBO.BO Current Rs202.0 Rs285.0 Rs300.0 41.1%
Conviction| |
1QFY14 RESULTS NOTE

US$1,107m
Rs66,303m
Market Cap
US$0.48m
Rs27.29m
Avg Daily Turnover
21.5%
Free Float
328.2 m shares
CIMB Analyst(s)
Weak 1Q; Near-term headwinds create entry opportunity

Oberois 1Q PAT rose only 1% yoy (-30% qoq) on account of lower property sales, other income and higher taxes. Property sales declined over 60% on both square feet and unit basis due to the absence of new launches (lack of approvals) and high-priced inventory.
1QFY14 earnings were slightly below expectations, at 17% of our full-year estimate. We expect near-term pain from weak demand, lack of approvals/launches and the overhang of dilution. We cut our FY14-16 EPS estimates by 5-6% and SOP-based target by 5% to Rs 285. The stock remains an Outperform, with key catalysts likely from project launches & potential land purchases. 1QFY14 revenues rose 9% yoy (-28% qoq) to Rs2.2bn (Rs1.4bn from projects and Rs630m from rentals), but were below our expectations due to lower property sales. EBITDA margins rose by 4.6% pts to 61.1% due to sales of existing inventory at higher prices. These, coupled with a higher tax rate of 31% (vs. 26% in FY13 as there was no contribution from the tax-exempt Splendour project), led to only a 1% yoy rise (-30% qoq) in net profit to Rs1bn. Property sales declined by 60% yoy and qoq to 49,000 sq. ft. coming from 23 units (-63% yoy and -68% qoq, vs. quarterly avg. of 70 units) due to lack of new launches and slower demand for the existing inventory at high prices. This resulted in lower sales bookings of Rs925m (-55% yoy, -58% qoq). It had a negative operating cashflow of Rs1.2bn due to lower collection from Esquire (on approval issues) and the capex on non-cash generating projects (Worli & Commerz - 2). While we expect near-term pain to continue for the next 3-6 months, we expect Oberoi to launch new projects (Mulund, Worli, Goregaon phase -3, etc.) from 2HFY14 onwards. Thus, we believe the stock correction of 16% in the last three months has created an entry opportunity.
Prakash AGARWAL Ashish THAVKAR
T (91) 22 6602 5153 E prakash.agarwal@cimb.com T (91) 22 6602 5152 E ashish.thavkar@cimb.com
Share price info

Share price perf. (%) Relative Absolute Major shareholders T Rowe Price Willian Blair Morgan Stanley 1M -9.4 -5.9 3M -24.2 -18.3 12M -30.8 -14.7 % held 1.6 1.0 0.7
Weak 1Q on lower sales
Maintain Outperform
Results Comparison
Y-E Mar (Rs m) Revenues Operating costs EBITDA EBITDA margins Depn & amort. EBIT Interest expense Other income Pretax profit Tax Tax rate (%) Net Profit EPS (Rs) 1QFY14 2,184 (849) 1,335 61.1% (69) 1,266 (1) 210 1,476 (457) 31.0% 1,020 3.1 1QFY13 1,999 (860) 1,139 57.0% (70) 1,069 (1) 309 1,376 (368) 26.8% 1,008 3.1 4QFY13 3,039 (1,260) 1,779 58.5% (72) 1,707 (1) 221 1,928 (476) 24.7% 1,452 4.4
yoy % chg 9.3% -1.3% 17.2% -2.3% 18.5% -50.0% -32.0% 7.2% 24.2% 1.2% 1.1%
qoq % chg -28.1% -32.6% -25.0% -4.3% -25.8% -14.3% -4.9% -23.4% -3.9% -29.8% -29.8%
FY13 cum 10,476 4,355 6,121 58.4% (285) 5,836 (4) 999 6,831 (1,783) 26.1% 5,048 15.4
Prev. FY14F 13,097 5,647 7,450 56.9% (391) 7,059 0 1,273 8,332 (2,250) 27.0% 6,083 18.5
Comments Revenues were impacted due to lower sales
Led by sales of existing inventory at higher prices
Higher tax was due to no contribution from tax exempt Splendour project 1QFY14 profit represents 17% of our FY14 forecast
Page 22
July 16, 2013
INDIA
BANKS
SHORT TERM (3 MTH)
LONG TERM
CIMB Analyst(s)
Panic on the street
SECTOR FLASH NOTE
Today, post the RBI measures to curb exchange rate volatility, short term borrowing costs went up by 150bp-200bp and benchmark government bond yields rose by c.50bp. In the near term, outlook for wholesale funded banks and non-banks remains challenging.
Jatinder AGARWAL Vivek VERMA Umang SHAH
Figure 1: Key forecasts
T (91) 22 6602 5158 E jatinder.agarwal@cimb.com T (91) 22 6602 5162 E vivek.verma@cimb.com T (91) 22 6602 5163 E umang.shah@cimb.com
If the short term borrowing rates and government bond yields continue to remain at elevated levels, it would have its bearing on performance of banks and non-banks we cover. Further, the rise in government bond yields should adversely affect the treasury portfolio of most banks, especially public sector banks. We remain Neutral on the banking sector. Our top PSB picks are Canara Bank and Bank of Baroda (BOB), while we like ICICI Bank among private banks. We recently downgraded Indusind Bank to an Underperform. In order to curb the excess rupee liquidity and to address the exchange rate volatility, the RBI announced a few measures yesterday (Please refer to page 2 for details).
What Happened
higher proportions of IBL with maturity of less than one year (Figures 2 and 3). Among non-banks, those with high-yield loans like auto finance companies (MMFS and SHTF) are likely to be less affected than those with finely-priced loans like home and infrastructure companies (HDFC and IDFC). The benchmark 10-year government bond yield is back at the end-March 2013 level of around 8% (Figure 7). Thus, all the unrealised gains on the bonds would technically have vanished today, on a mark-to-market basis for the available-for-sale (AFS) category. We remain Neutral on the banking sector. PSB valuations appear undemanding but we are concerned about their declining low-cost deposit ratios, retirement benefit costs, asset quality and capital dilution under Basel III. Our top PSB picks are Canara Bank and BOB. We think that valuations are fair for most private sector banks, given their higher ROAs. Our key concern about private sector banks in the near term is loan growth due to the slowdown in the investment cycle and the broader economy. Our top private bank pick is ICICI Bank.
What You Should Do
What We Think
The increase in short-term wholesale borrowing costs will have an adverse impact on banks with a higher proportion of interest-bearing liabilities (IBL, domestic) due to mature in less than one year (Figure 6). Among private sector banks, Yes Bank, ING Vysya Bank and Indusind Bank have higher proportions of IBL with maturity of less than one year (Figures 2 and 3). Among public sector banks (PSB), Corporation Bank, Oriental Bank and Canara Bank have
Page 23
ASIA PACIFIC DAILY

July 17, 2013
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Page 24
ASIA PACIFIC DAILY

July 17, 2013
possession for the purposes of issue, whether in Hong Kong or elsewhere, any advertisement, invitation or document relating to the securities covered in this report, which is directed at, or the contents of which are likely to be accessed or read by, the public in Hong Kong (except if permitted to do so under the securities laws of Hong Kong). India: This report is issued and distributed in India by CIMB Securities (India) Private Limited (CIMB India) which is registered with SEBI as a stock-broker under the Securities and Exchange Board of India (Stock Brokers and Sub-Brokers) Regulations, 1992 and in accordance with the provisions of Regulation 4 (g) of the Securities and Exchange Board of India (Investment Advisers) Regulations, 2013, CIMB India is not required to seek registration with SEBI as an Investment Adviser. The research analysts, strategists or economists principally responsible for the preparation of this research report are segregated from the other activities of CIMB India and they have received compensation based upon various factors, including quality, accuracy and value of research, firm profitability or revenues, client feedback and competitive factors. Research analysts', strategists' or economists' compensation is not linked to investment banking or capital markets transactions performed or proposed to be performed by CIMB India or its affiliates. Indonesia: This report is issued and distributed by PT CIMB Securities Indonesia (CIMBI). The views and opinions in this research report are our own as of the date hereof and are subject to change. If the Financial Services and Markets Act of the United Kingdom or the rules of the Financial Services Authority apply to a recipient, our obligations owed to such recipient therein are unaffected. CIMBI has no obligation to update its opinion or the information in this research report. This publication is strictly confidential and is for private circulation only to clients of CIMBI. This publication is being supplied to you strictly on the basis that it will remain confidential. No part of this material may be (i) copied, photocopied, duplicated, stored or reproduced in any form by any means or (ii) redistributed or passed on, directly or indirectly, to any other person in whole or in part, for any purpose without the prior written consent of CIMBI. Neither this report nor any copy hereof may be distributed in Indonesia or to any Indonesian citizens wherever they are domiciled or to Indonesia residents except in compliance with applicable Indonesian capital market laws and regulations. Malaysia: This report is issued and distributed by CIMB Investment Bank Berhad (CIMB). The views and opinions in this research report are our own as of the date hereof and are subject to change. If the Financial Services and Markets Act of the United Kingdom or the rules of the Financial Services Authority apply to a recipient, our obligations owed to such recipient therein are unaffected. CIMB has no obligation to update its opinion or the information in this research report. This publication is strictly confidential and is for private circulation only to clients of CIMB. This publication is being supplied to you strictly on the basis that it will remain confidential. No part of this material may be (i) copied, photocopied, duplicated, stored or reproduced in any form by any means or (ii) redistributed or passed on, directly or indirectly, to any other person in whole or in part, for any purpose without the prior written consent of CIMB. New Zealand: In New Zealand, this report is for distribution 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 pursuant to Section 3(2)(a)(ii) of the Securities Act 1978. Singapore: This report is issued and distributed by CIMB Research Pte Ltd (CIMBR). Recipients of this report are to contact CIMBR in Singapore in respect of any matters arising from, or in connection with, this report. The views and opinions in this research report are our own as of the date hereof and are subject to change. If the Financial Services and Markets Act of the United Kingdom or the rules of the Financial Services Authority apply to a recipient, our obligations owed to such recipient therein are unaffected. CIMBR has no obligation to update its opinion or the information in this research report. This publication is strictly confidential and is for private circulation only. If the recipient of this research report is not an accredited investor, expert investor or institutional investor, CIMBR accepts legal responsibility for the contents of the report without any disclaimer limiting or otherwise curtailing such legal responsibility. This publication is being supplied to you strictly on the basis that it will remain confidential. No part of this material may be (i) copied, photocopied, duplicated, stored or reproduced in any form by any means or (ii) redistributed or passed on, directly or indirectly, to any other person in whole or in part, for any purpose without the prior written consent of CIMBR.. As of July 16, 2013, CIMBR does not have a proprietary position in the recommended securities in this report. South Korea: This report is issued and distributed in South Korea by CIMB Securities Limited, Korea Branch ("CIMB Korea") which is licensed as a cash equity broker, and regulated by the Financial Services Commission and Financial Supervisory Service of Korea. The views and opinions in this research report are our own as of the date hereof and are subject to change, and this report shall not be considered as an offer to subscribe to, or used in connection with, any offer for subscription or sale or marketing or direct or indirect distribution of financial investment instruments and it is not intended as a solicitation for the purchase of any financial investment instrument. This publication is strictly confidential and is for private circulation only, and no part of this material may be (i) copied, photocopied, duplicated, stored or reproduced in any form by any means or (ii) redistributed or passed on, directly or indirectly, to any other person in whole or in part, for any purpose without the prior written consent of CIMB Korea. Sweden: This report contains only marketing information and has not been approved by the Swedish Financial Supervisory Authority. The distribution of this report is not an offer to sell to any person in Sweden or a solicitation to any person in Sweden to buy any instruments described herein and may not be forwarded to the public in Sweden. Taiwan: This research report is not an offer or marketing of foreign securities in Taiwan. The securities as referred to in this research report have not been and will not be registered with the Financial Supervisory Commission of the Republic of China pursuant to relevant securities laws and regulations and may not be offered or sold within the Republic of China through a public offering or in circumstances which constitutes an offer or a placement within the meaning of the Securities and Exchange Law of the Republic of China that requires a registration or approval of the Financial Supervisory Commission of the Republic of China. Thailand: This report is issued and distributed by CIMB Securities (Thailand) Company Limited (CIMBS). The views and opinions in this research report are our own as of the date hereof and are subject to change. If the Financial Services and Markets Act of the United Kingdom or the rules of the Financial Services Authority apply to a recipient, our obligations owed to such recipient therein are unaffected. CIMBS has no obligation to update its opinion or the information in this research report. This publication is strictly confidential and is for private circulation only to clients of CIMBS. This publication is being supplied to you strictly on the basis that it will remain confidential. No part of this material may be (i) copied, photocopied, duplicated, stored or reproduced in any form by any means or (ii) redistributed or passed on, directly or indirectly, to any other person in whole or in part, for any purpose without the prior written consent of CIMBS. Corporate Governance Report: The disclosure of the survey result of the Thai Institute of Directors Association (IOD) regarding corporate governance is made pursuant to the policy of the Office of the Securities and Exchange Commission. The survey of the IOD is based on the information of a company listed on the Stock Exchange of Thailand and the Market for Alternative Investment disclosed to the public and able to be accessed by a general public investor. The result, therefore, is from the perspective of a third party. It is not an evaluation of operation and is not based on inside information. The survey result is as of the date appearing in the Corporate Governance Report of Thai Listed Companies. As a result, the survey result may be changed after that date. CIMBS does not confirm nor certify the accuracy of such survey result. Score Range: 90 100 80 89 70 79 Below 70 or No Survey Result Description: Excellent Very Good Good N/A United Arab Emirates: The distributor of this report has not been approved or licensed by the UAE Central Bank or any other relevant licensing authorities or governmental agencies in the United Arab Emirates. This report is strictly private and confidential and has not been reviewed by, deposited or registered with UAE Central Bank or any other licensing authority or governmental agencies in the United Arab Emirates. This report is being issued outside the United Arab Emirates to a limited number of institutional investors and must not be provided to any person other than the original recipient and may not be reproduced or used for any other purpose. Further, the information contained in this report is not intended to lead to the sale of investments under any subscription agreement or the conclusion of any other contract of whatsoever nature within the territory of the United Arab Emirates. United Kingdom and Europe: In the United Kingdom and European Economic Area, this report is being disseminated by CIMB Securities (UK) Limited (CIMB UK). CIMB UK is authorised and regulated by the Financial Services Authority and its registered office is at 27 Knightsbridge, London, SW1X 7YB. This report is for distribution only to, and is solely directed at, selected persons on the basis that those persons: (a) are persons that are eligible counterparties and professional clients of CIMB UK; (b) have professional experience in matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (as amended, the Order); (c) are persons falling within Article 49 (2) (a) to (d) (high net worth companies, unincorporated associations etc) of the Order; (d) are outside the United Kingdom; or (e) are persons to whom an invitation or inducement to engage in investment activity (within the meaning of section 21 of the Financial Services and Markets Act 2000) in connection with any investments to which this report relates may otherwise lawfully be communicated or caused to be communicated (all such persons together being referred to as relevant persons). This report is directed only at relevant persons and must not be acted on or relied on by persons who are not relevant persons. Any investment or investment activity to which this report relates is available only to relevant persons and will be engaged in only with relevant persons.
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ASIA PACIFIC DAILY

July 17, 2013
Only where this report is labelled as non-independent, it does not provide an impartial or objective assessment of the subject matter and does not constitute independent "investment research" under the applicable rules of the Financial Services Authority in the UK. Consequently, any such non-independent report will not have been prepared in accordance with legal requirements designed to promote the independence of investment research and will not subject to any prohibition on dealing ahead of the dissemination of investment research. United States: This research report is distributed in the United States of America by CIMB Securities (USA) Inc, a U.S.-registered broker-dealer and a related company of CIMB Research Pte Ltd, CIMB Investment Bank Berhad, PT CIMB Securities Indonesia, CIMB Securities (Thailand) Co. Ltd, CIMB Securities Limited, CIMB Securities (Australia) Limited, CIMB Securities (India) Private Limited,and is distributed solely to persons who qualify as "U.S. Institutional Investors" as defined in Rule 15a-6 under the Securities and Exchange Act of 1934. This communication is only for Institutional Investors whose ordinary business activities involve investing in shares, bonds and associated securities and/or derivative securities and who have professional experience in such investments. Any person who is not a U.S. Institutional Investor or Major Institutional Investor must not rely on this communication. The delivery of this research report to any person in the United States of America is not a recommendation to effect any transactions in the securities discussed herein, or an endorsement of any opinion expressed herein. CIMB Securities (USA) Inc, is a FINRA/SIPC member and takes responsibility for the content of this report. For further information or to place an order in any of the above-mentioned securities please contact a registered representative of CIMB Securities (USA) Inc. Other jurisdictions: In any other jurisdictions, except if otherwise restricted by laws or regulations, this report is only for distribution to professional, institutional or sophisticated investors as defined in the laws and regulations of such jurisdictions.
Recommendation Framework #1 * Stock Sector OUTPERFORM: The stock's total return is expected to exceed a relevant OVERWEIGHT: The industry, as defined by the analyst's coverage universe, is benchmark's total return by 5% or more over the next 12 months. expected to outperform the relevant primary market index over the next 12 months. NEUTRAL: The stock's total return is expected to be within +/-5% of a relevant NEUTRAL: The industry, as defined by the analyst's coverage universe, is expected benchmark's total return. to perform in line with the relevant primary market index over the next 12 months. UNDERPERFORM: The stock's total return is expected to be below a relevant UNDERWEIGHT: The industry, as defined by the analyst's coverage universe, is benchmark's total return by 5% or more over the next 12 months. expected to underperform the relevant primary market index over the next 12 months. TRADING BUY: The stock's total return is expected to exceed a relevant TRADING BUY: The industry, as defined by the analyst's coverage universe, is benchmark's total return by 5% or more over the next 3 months. expected to outperform the relevant primary market index over the next 3 months. TRADING SELL: The stock's total return is expected to be below a relevant TRADING SELL: The industry, as defined by the analyst's coverage universe, is benchmark's total return by 5% or more over the next 3 months. expected to underperform the relevant primary market index over the next 3 months. * This framework only applies to stocks listed on the Singapore Stock Exchange, Bursa Malaysia, Stock Exchange of Thailand, Jakarta Stock Exchange, Australian Securities Exchange, Taiwan Stock Exchange and National Stock Exchange of India/Bombay Stock Exchange. Occasionally, it is permitted for the total expected returns to be temporarily outside the prescribed ranges due to extreme market volatility or other justifiable company or industry-specific reasons. CIMB Research Pte Ltd (Co. Reg. No. 198701620M)
Recommendation Framework #2 ** Stock Sector OUTPERFORM: Expected positive total returns of 10% or more over the next 12 OVERWEIGHT: The industry, as defined by the analyst's coverage universe, has a months. high number of stocks that are expected to have total returns of +10% or better over the next 12 months. NEUTRAL: Expected total returns of between -10% and +10% over the next 12 NEUTRAL: The industry, as defined by the analyst's coverage universe, has either (i) months. an equal number of stocks that are expected to have total returns of +10% (or better) or -10% (or worse), or (ii) stocks that are predominantly expected to have total returns that will range from +10% to -10%; both over the next 12 months. UNDERPERFORM: Expected negative total returns of 10% or more over the next 12 UNDERWEIGHT: The industry, as defined by the analyst's coverage universe, has a months. high number of stocks that are expected to have total returns of -10% or worse over the next 12 months. TRADING BUY: Expected positive total returns of 10% or more over the next 3 TRADING BUY: The industry, as defined by the analyst's coverage universe, has a high number of stocks that are expected to have total returns of +10% or better over months. the next 3 months. TRADING SELL: Expected negative total returns of 10% or more over the next 3 TRADING SELL: The industry, as defined by the analyst's coverage universe, has a months. high number of stocks that are expected to have total returns of -10% or worse over the next 3 months. ** This framework only applies to stocks listed on the Korea Exchange, Hong Kong Stock Exchange and China listings on the Singapore Stock Exchange. Occasionally, it is permitted for the total expected returns to be temporarily outside the prescribed ranges due to extreme market volatility or other justifiable company or industry-specific reasons.
Corporate Governance Report of Thai Listed Companies (CGR). CG Rating by the Thai Institute of Directors Association (IOD) in 2012. AAV not available, ADVANC - Excellent, AEONTS Good, AMATA - Very Good, ANAN not available, AOT - Excellent, AP - Very Good, BANPU - Excellent , BAY - Excellent , BBL - Excellent, BCH not available, BCP - Excellent, BEC - Very Good, BGH - not available, BJC Very Good, BH - Very Good, BIGC - Very Good, BTS - Excellent, CCET Good, CENTEL Very Good, CK - Very Good, CPALL - Very Good, CPF - Very Good, CPN - Excellent, DELTA - Very Good, DTAC - Very Good, EGCO Excellent, ERW Excellent, GLOBAL - Good, GLOW - Very Good, GRAMMY Excellent, HANA - Very Good, HEMRAJ - Excellent, HMPRO - Very Good, INTUCH Very Good, ITD Very Good, IVL - Very Good, JAS Very Good, KAMART not available, KBANK - Excellent, KK Excellent, KTB - Excellent, LH - Very Good, LPN - Excellent, MAJOR - Good, MAKRO Very Good, MCOT - Excellent, MINT - Very Good, PS - Excellent, PSL - Excellent, PTT - Excellent, PTTGC - Excellent, PTTEP - Excellent, QH - Excellent, RATCH - Excellent, ROBINS - Excellent, RS Excellent, SAMART Excellent, SC Excellent, SCB - Excellent, SCC - Excellent, SCCC - Very Good, SIRI - Good, SPALI - Very Good, SRICHA not available, SSI not available, STA - Good, STEC - Very Good, TCAP - Very Good, THAI - Excellent, THCOM Very Good, TICON Very Good, TISCO - Excellent, TMB Excellent, TOP - Excellent, TRUE - Very Good, TTW Very Good, TUF - Very Good, VGI not available, WORK Good.
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REGIONAL DAILY

July 17, 2013

Asia Pacific Daily

HSCEI HSI Sensex JCI Nikkei

S-Oil Corp - Solid refining fundamentals (16/07) | P10

MSCI Asia Pacific XJ

INDONESIA THAILAND INDIA

IBES/MSCI Market Valuations

Astra International - Biting the bullet (16/07) | P19

Strategy Note - Bottom-fishing (16/07) | P20

Upcoming Major Data Releases

Date 14-18 Jul 15 Jul 16 Jul 17 Jul 18 Jul

Close 106 1,285 1,152

% chg 0.0% 0.0% 0.1%

ASIA PACIFIC DAILY

JPN: Marine Day

HK: Indonesia Property, Construction & Cement Marketing

SIN: China Gas NDR

Selangor: Nuzul Al-Quran

THB: Asanha Bucha

SOURCES: CIMB, COMPANY REPORTS

ASIA PACIFIC DAILY

SIN: Stelux Holdings NDR

KL: Semen Indonesia NDR KL: PTTGC NDR

KL: ComforDelgo NDR KL: Shin Corp NDR

KL: ComforDelgo NDR KL: Shin Corp NDR

IND: Independence Day

HK: Emperor Watch & Jewellery NDR

HK: Emperor Watch & Jewellery NDR

SOURCES: CIMB, COMPANY REPORTS

ASIA PACIFIC DAILY

CIMB Daily Revisions

Recommendation Curr Prev

Price Target Curr Prev

Year EPS Forecasts End Chg%

$ 82,366.12 Michael EVANS

2013 2014 2015

Luk Fook Holdings

$ 1,583.24 Larry CHO

2014 2015 2016

$ 26,415.64 Sandeep SHAH

2014 2015 2016

266.11 Srinivas SESHADRI

2014 2015 2016

Oberoi Realty Ltd

$ 1,117.72 Prakash AGARWAL

2014 2015 2016

$ 27,448.52 Peter P. SUTEDJA, CFA

2013 2014 2015

010950 KS 16-Jul-13 010950.KS

$ 7,421.60 Peter K. LEE

2013 2014 2015

SOURCES: CIMB, COMPANY REPORTS

SHORT TERM (3 MTH)

Avg Daily Turnover

Target Prev. Target Up/Downside

When no news is good news

T (61) 2 9694 6090 E michael.evans@cimb.com

Adam MURPHY Amit RAMDEV

T (61) 2 9694 6091 E adam.murphy@cimb.com T (61) 2 9694 6093 E amit.ramdev@cimb.com

Share price info

What You Should Do

Relative to S&P/ASX 200 (RHS) 115 108 100 93 85 78 70