Docstoc

Diawa - Bull-Bear Debate

Document Sample
Diawa - Bull-Bear Debate Powered By Docstoc
					                                                                                                                        Asia ex Japan
                                                                                                                         6 March 2012




Are Asia's top performers still                                                                   Bull-Bear
buys?
                                                                                                   Debate
• 70 stocks in Asia with a market cap of US$5bn or more have risen
  at least 30% year-to-date
• Since 30% in two months equals 381% annualised, the burden of
  proof on these stocks lies with the bulls
• We put the bulls to the test in this report on 16 of these high-flyers



John Hetherington, CFA
(852) 2773 8787
john.hetherington@hk.daiwacm.com




Important disclosures, including any required research certifications, are provided on the last three pages of this report.
                                                                              Bull-Bear Debate
                                                                                       6 March 2012




Table of contents


                                                  Contents

           Company                                           Bloomberg code     Page

           Axis Bank                                         AXSB IN              8
           CapitaLand                                        CAPL SP             10
           CNOOC                                             883 HK              12
           GAC Group                                         2238 HK             14
           GS Holdings                                       078930 KS           16
           HTC                                               2498 TT             18
           Hynix Semiconductor                               000660 KS           20
           Larsen & Toubro                                   LT IN               22
           Power Finance                                     POWF IN             24
           Samsung Heavy Industries                          010140 KS           26
           SembCorp Marine                                   SMM SP              28
           Tata Motors                                       TTMT IN             30
           Tata Steel                                        TATA IN             32
           United Company RUSAL                              486 HK              34
           Wharf                                             4 HK                36
           Woori Financial                                   053000 KS           38

         All prices as of close on 2 March 2012
                                                                                                                                        Bull-Bear Debate
                                                                                                                                                           6 March 2012




Contributing Daiwa
analysts:
Punit Srivastava
                                                Introduction
Axis Bank                                       John Hetherington, CFA (852) 2773 8787 john.hetherington@hk.daiwacm.com
Power Finance
David Lum, CFA                                  Bull vs Bear
CapitaLand
Adrian Loh                                      Selecting the stocks to analyse
CNOOC                                           There are 70 stocks with a market cap of US$5bn or more in Asia ex-Japan that
SembCorp Marine
                                                have returned more than 30% in US dollar terms in the first two months of this year.
Jeff Chung                                      If this pace of stock appreciation were maintained for the rest of the year, the worst
GAC Group                                       performer amongst the 70 would produce an annual return of 381%. Of course,
Jihye Choi                                      unless Asia were on the brink of hyperinflation, this would be an extremely unlikely
GS Holdings                                     outcome. But the absurdity of the annualised number does raise an important
Alex Chang                                      question: how can the rapid share price appreciation experienced by some of the
HTC                                             biggest stocks in Asia so far this year be sustained?
Jae H. Lee
Hynix Semiconductor                             We will leave it to the strategists to argue the top-down merits of Asian equities as
Saurabh Mehta                                   an asset class at current valuations, and attempt in this report to tackle the question
Larsen & Toubro                                 from the other direction. We have selected 16 of this year’s 70 Asian high-flyers and
Sung Yop Chung                                  examined their investment cases from both a bullish and bearish perspective. We
Samsung Heavy Industries                        have deliberately chosen stocks that not only have had stellar starts to the year but
Ambrish Mishra                                  ones that, when taken together, offer a broad country and industry representation in
Tata Motors                                     the analysis. If we had selected stocks simply based on performance, there would
Deepak Poddar                                   have been a high degree of repetition in our company write-ups. For example, the
Tata Steel                                      two best-performing Korean large-caps are shipbuilders, while Hong Kong/China has
Alexander Latzer
                                                been largely led by property, material, gaming and auto stocks. In India, the rally has
United Company RUSAL                            been all about materials, finance companies and autos.
Jonas Kan, CFA
Wharf                                           There did, however, prove to be limits in how far we could reach in attempting to
                                                achieve a broad geographic representation. The best-performing Malaysian large-
Anderson Cha
Woori Financial
                                                cap, Hong Leong Bank (HLBK MK, NR), has returned only 18% in US dollar terms
                                                this year. Thailand and the Philippines together have seven stocks among the 70
The devil's advocates:                          leaders in Asia, but these stocks are not within Daiwa’s universe of coverage. In
                                                Indonesia, only Sampoerna (HMSP IJ, NR) ranks among the best in the region,
John Hetherington, CFA
(852) 2773 8787                                 while the real story in that country is that nearly 40% of the large-caps have
john.hetherington@hk.daiwacm.com                produced negative returns year-to-date (through 2 March) — by far the largest
Tathagata Guha Roy                              proportion among the nine stock markets in Asia ex-Japan covered by Daiwa.
(852) 2773 8731
tathagata.guharoy@hk.daiwacm.com

Top 50 Large-Cap Performers in Asia ex-Japan YTD
                  (Mkt Cap >US$5bn, local currency returns)
                                                                                                     (Mkt Cap >US$5bn, USD returns)

                                                                                                                                            HK/China, 16
               HK/China, 19                                India, 14

                                                                                                India, 16




                  Philippines, 3                          Korea, 7                                                                           Korea, 7
                       Thailand, 1                                                              Philippines, 3
                           Indonesia, 1        Singapore, 3
                                      Taiwan, 2                                                       Thailand, 1                    Singapore, 3
                                                                                                          Indonesia, 1
                                                                                                                         Taiwan, 3

Sources: Bloomberg, Daiwa                                                   Sources: Bloomberg, Daiwa



                                                                          -1-
                                                                          Bull-Bear Debate
                                                                                          6 March 2012




There were no real constraints on industry selection, since the markets themselves
did the screening. High-beta sectors are not surprisingly broadly represented,
including property, finance, material, energy, auto, capital goods and technology
plays. Below is the final list of stocks covered in this report:

                                                                     YTD Return (%)           US$ return
Company                     BBG Code        Market         Sector     (lcy)       (US$)    Annualized (%)
Guangzhou Auto                2238 HK    HK/China           Autos        41          41               683
Rusal                          486 HK    HK/China        Materials       37          37               568
Wharf                            4 HK    HK/China        Property        34          34               474
CNOOC                          883 HK    HK/China          Energy        28          29               350
Tata Motors                   TTMT IN         India         Autos        50          61             1,600
Axis Bank                     AXSB IN         India       Finance        44          55             1,264
Power Finance                POWF IN          India       Finance        39          49               999
Tata Steel                    TATA IN         India      Materials       39          49               984
Larsen & Toubro                  LT IN        India    Cap Goods         31          40               651
Samsung Heavy               010140 KS        Korea    Shipbuilding       46          51             1,063
Hynix                       000660 KS        Korea    Technology         39          43               761
GS Holdings                 078930 KS        Korea         Energy        29          33               457
Woori Finance               053000 KS        Korea        Finance        27          31               414
SembCorp Marine               SMM SP     Singapore    Shipbuilding       42          47               910
CapitaLand                   CAPL SP     Singapore       Property        39          44               780
HTC                           2498 TT       Taiwan    Technology         30          33               458
Sources: Bloomberg, Daiwa



Burden of proof is on the bulls
The work behind this report began with an analysis of the performance of 330 stocks
in Asia, excluding Japan and Australia, with a market cap of at least US$5bn (see
pages 4-6 for a graphical depiction of the returns for this group). The range of US
dollar returns this year has been extremely broad, from +86% for Reliance Power to
a 15% decline in China Unicom’s share price. But, where there has been a
tremendous amount of concentration is in the direction of returns, with only 26 of the
330 monitored stocks in the red so far in 2012, while nearly three-quarters of these
produced capital losses of less than 5%. Meanwhile, the average return y-t-d for all
330 stocks has been 19% (182% annualised), with the mean being +17%.

These would be fantastic performance numbers for an entire year, but this is the
context that investors now find in Asian equity markets after only two months. The
bulls, who are probably as surprised as anyone by the pace of recovery in share
prices, are the ones who face the highest hurdle in defending continued investment
in many of Asia’s largest stocks. The bears need only point to the unsustainability of
such a rapid advance in prices, as well as the lingering instability of so many
economies around the world. This has indeed proved to be the major challenge of
this report, with the burden of proof lying in the Daiwa house view as the
recommendation on 12 of the 16 profiled stocks is either Buy (1) or Outperform (2).

Where the bull arguments are strongest
The bull case has the strongest foundation in generally two situations: where the
starting valuation in mid-December, when this strong rally began, was at
exceptionally low levels; and with companies that have a strong, structural growth or
recovery story. Of the 16 stocks covered in this report, two stand out in one or both
of these situations:

Tata Steel: Over 2011, Tata’s share price had more than halved, with the PBR
falling to near the 2009 global financial crisis low. The stock since then soared 50%,
before correcting, but even now PBR and EV/EBITDA valuations look compelling.
Considering that there is upside to return forecasts, as iron ore and coking coal
prices continue to slide, as Daiwa forecasts, and the Corus business recovers, there
look to be compelling reasons still to be positive on this stock.

                             -2-
                                                                Bull-Bear Debate
                                                                            6 March 2012




Wharf: At the December 2010 low, Wharf was priced at a very wide 60% discount to
NAV, which is the sort of valuation that only occurs in crises. Admittedly, asset
values in Hong Kong and China may come off, but there is substantial cushion in the
stock even now, as the discount has only narrowed to 43%, which historically has
been a profitable entry point. As Wharf has positive news flow in commercial
property launches in China, the risk-reward balance still looks favourable.

Where the bull arguments are weakest
The biggest challenge for the bulls is in high-flying stocks that are in effect proxies
on single commodities that have also run hard this year. The dilemma is that the bull
argument ultimately centres on the likely direction of the price of the commodity
itself, which more often than not depends on how optimistic a view one takes on
global demand.

Oil, for example, has run up largely on geopolitical tensions in the Middle East, but
faces headwinds from greatly reduced consumption in the US on the back of fewer
miles travelled and more fuel-efficient vehicles, as well as from a very weak
economy in Europe, and slower growth in China. Stocks in this report that are highly
influenced by the oil price are:

CNOOC: A pure China play on oil exploration.

Samsung Heavy: Highly dependent on LNGC and offshore vessel construction
orders.

SembCorp Marine: A Singapore offshore oil rig builder.

The other commodity play that appears in this report is Rusal, which is exposed
through not only its core aluminium smelting business, but also through its 25%
interest in Norilsk Nickel. Aluminium prices were earlier this month up 20% from their
December lows, with nickel 30% higher in January, though much of the latter’s gains
are already disappearing.

Moving from commodities to tech, the stock that the bulls will be especially
challenged by sometime this year is HTC. As Daiwa analyst Alex Chang has argued,
the company will have a narrow window of a few months to sell its new handsets
before heavyweights Apple and Samsung Electronics launch their own refreshed
products. To believe that HTC’s sales will fare well when that happens to a large
extent depends on the hope that the iPhone 5 and Galaxy SIII will flop.

Finally, the bears likely have the edge on Tata Motors. The stock has been driven
by sales volume and margin surprises at subsidiary JLR, while the domestic Indian
business continues to languish. It is going to be very difficult for further upside
surprises to materialise, as earnings forecasts inherently assume nearly 20%
volume growth for JLR in FY13 and a record EBITDA margin that was based on a
one-off improvement in capacity utilisation.




                          -3-
                                                                                         (20)
                                                                                         (10)
                                                                                                                           (20)
                                                                                                                           (10)




                                                                                           10
                                                                                           20
                                                                                           30
                                                                                           40
                                                                                           50
                                                                                           60
                                                                                           70
                                                                                           80




                                                                                            0
                                                                                                                             10
                                                                                                                             20
                                                                                                                             30
                                                                                                                             40
                                                                                                                             50
                                                                                                                             60
                                                                                                                             70
                                                                                                                             80




                                                         (20)
                                                         (10)
                                                                                                                              0




                                                           10
                                                           20
                                                           30
                                                           40
                                                           50
                                                           60
                                                           70
                                                           80




                                                            0
                                   DAEWOO SHIPBLDG                   RELIANCE POWER                    ALIBABA.COM LTD
                                          SK HOLDINGS                                                EVERGRANDE REAL
                                                                     MARUTI SUZUKI IN
                                   HYNIX SEMICONDUC                                                 KERRY PROPERTIES
                                                                      TATA STEEL LTD                   UNITED CO RUSAL
                                        SK INNOVATION
                                       WOORI FINANCE                    ICICI BANK LTD               GALAXY ENTERTAIN




      Sources: Bloomberg, Daiwa
                                            S-OIL CORP                                                      PRADA S.P.A.
                                                                    LARSEN & TOUBRO
                                                                                                    TENCENT HOLDINGS
                                  HYUNDAI ENG&CONS                   STEEL AUTHORITY                    CHINA LIFE INS-H
                                     LG DISPLAY CO LT
                                                                     BANK OF BARODA                        LI & FUNG LTD
                                       HYUNDAI STEEL
                                                                                                    LONGFOR PROPERTI
                                      LG ELECTRONICS                PUNJAB NATL BANK
                                                                                                       CHINA OVERSEAS
                                              LG CORP                  HDFC BANK LTD                      CHEUNG KONG
                                  SAMSUNG C&T CORP                                                    CHINA COAL ENE-H
                                                                            NHPC LTD




                                                                                            India




                                                            Korea
                                  SAMSUNG ELECTRON                                                      BANK OF CHINA-H           HK/ China
                                       DOOSAN HEAVY                     RELIANCE INDS
                                                                                                          HANG SENG BK
                                      LOTTE SHOPPING                 SUN PHARMA INDU                     CHINA RES LAND
                                    KIA MOTORS CORP                                                  CHINA RES CEMENT
                                                                            NTPC LTD
                                                                                                                                              % return in local currency




                                      SAMSUNG SDI CO                                                    YUE YUEN INDUS
                                   LG HOUSEHOLD & H                  OIL & NATURAL GA
                                                                                                     CHINA PETROLEU-H
                                          SK TELECOM                 AMBUJA CEMENTS                  HONG KG CHINA GS
                                    KOREA LIFE INSUR                     OIL INDIA LTD                  SWIRE PACIFIC-A
                                       HYUNDAI MOBIS                                                   BRILLIANCE CHINA
                                                                     HOUSING DEV FIN
                                   AMOREPACIFIC COR                                                      BANK EAST ASIA
                                    HANKOOK TIRE CO                            ITC LTD              POWER ASSETS HOL
                                                                                                                                                                           Top Large-Cap Performers in Asia ex-Japan YTD




                                              KT CORP                       CIPLA LTD                CHEUNG KG INFRAS
                                            KT&G CORP                                                 CHOW TAI FOOK JE




-4-
                                                         (20)
                                                         (10)
                                                           10
                                                           20
                                                           30
                                                           40
                                                           50
                                                           60
                                                           70
                                                           80




                                                            0
                                                                                         (20)
                                                                                         (10)
                                                                                                                           (20)
                                                                                                                           (10)




                                                                                           10
                                                                                           20
                                                                                           30
                                                                                           40
                                                                                           50
                                                                                           60
                                                                                           70
                                                                                           80
                                                                                                                             10
                                                                                                                             20
                                                                                                                             30
                                                                                                                             40
                                                                                                                             50
                                                                                                                             60
                                                                                                                             70
                                                                                                                             80




                                                                                            0
                                                                                                                              0




                                   DAEWOO SHIPBLDG                   RELIANCE POWER                    ALIBABA.COM LTD
                                          SK HOLDINGS                                                EVERGRANDE REAL
                                                                     MARUTI SUZUKI IN
                                   HYNIX SEMICONDUC                                                 KERRY PROPERTIES
                                                                      TATA STEEL LTD                   UNITED CO RUSAL
                                        SK INNOVATION
                                       WOORI FINANCE                   ICICI BANK LTD                GALAXY ENTERTAIN




      Sources: Bloomberg, Daiwa
                                            S-OIL CORP                                                      PRADA S.P.A.
                                                                    LARSEN & TOUBRO
                                                                                                    TENCENT HOLDINGS
                                  HYUNDAI ENG&CONS
                                                                    STEEL AUTHORITY                     CHINA LIFE INS-H
                                     LG DISPLAY CO LT
                                                                     BANK OF BARODA                        LI & FUNG LTD
                                       HYUNDAI STEEL
                                                                                                    LONGFOR PROPERTI
                                      LG ELECTRONICS                PUNJAB NATL BANK
                                                                                                       CHINA OVERSEAS
                                              LG CORP                  HDFC BANK LTD                      CHEUNG KONG
                                  SAMSUNG C&T CORP                                                    CHINA COAL ENE-H
                                                                                            India




                                                            Korea
                                                                            NHPC LTD
                                  SAMSUNG ELECTRON                                                      BANK OF CHINA-H
                                                                                                                                  HK/ China




                                       DOOSAN HEAVY                    RELIANCE INDS                      HANG SENG BK
                                                                                                                                              % return in USD




                                      LOTTE SHOPPING                SUN PHARMA INDU                      CHINA RES LAND
                                    KIA MOTORS CORP                                                  CHINA RES CEMENT
                                                                            NTPC LTD
                                      SAMSUNG SDI CO                                                    YUE YUEN INDUS
                                   LG HOUSEHOLD & H                 OIL & NATURAL GA                 CHINA PETROLEU-H
                                           SK TELECOM                AMBUJA CEMENTS                  HONG KG CHINA GS
                                    KOREA LIFE INSUR                                                    SWIRE PACIFIC-A
                                                                         OIL INDIA LTD
                                       HYUNDAI MOBIS                                                   BRILLIANCE CHINA
                                                                     HOUSING DEV FIN                     BANK EAST ASIA
                                   AMOREPACIFIC COR
                                    HANKOOK TIRE CO                           ITC LTD               POWER ASSETS HOL
                                               KT CORP                                               CHEUNG KG INFRAS
                                                                            CIPLA LTD
                                                                                                      CHOW TAI FOOK JE
                                            KT&G CORP
                                                                                                                                                                                                                           6 March 2012
                                                                                                                                                                                                                                          Bull-Bear Debate
                                                       (20)
                                                       (10)
                                                         10
                                                         20
                                                         30
                                                         40
                                                         50
                                                         60
                                                         70
                                                         80
                                                                                          (20)
                                                                                          (10)




                                                          0
                                                                                                                          (20)
                                                                                                                          (10)




                                                                                            10
                                                                                            20
                                                                                            30
                                                                                            40
                                                                                            50
                                                                                            60
                                                                                            70
                                                                                            80
                                                                                                                            10
                                                                                                                            20
                                                                                                                            30
                                                                                                                            40
                                                                                                                            50
                                                                                                                            60
                                                                                                                            70
                                                                                                                            80




                                                                                             0
                                                                                                                             0
                                  INDORAMA VENTURE                   FOXCONN TECHNOLO                 SEMBCORP MARINE

                                          CP ALL PCL                          HTC CORP                 SEMBCORP INDUS

                                      SHIN CORP PCL                   UNITED MICROELEC                NOBLE GROUP LTD




      Sources: Bloomberg, Daiwa
                                   PTT GLOBAL CHEM                    FORMOSA CHEM & F                   THAI BEVERAGE

                                  KASIKORNBANK PCL                    QUANTA COMPUTER                   HONGKONG LAND

                                   BANPU PUB CO LTD                   COMPAL ELECTRON
                                                                                                      UNITED OVERSEAS
                                  BANGKOK BANK PUB                    CHENG SHIN RUBBE
                                                                                                       SINGAPORE EXCH
                                                                        DELTA ELECT INC




                                                                                             Taiwan
                                    KRUNG THAI BANK




                                                          Thailand
                                                                                                             OCBC BANK       Singapore
                                     ADVANCED INFO                     CHINA STEEL CORP
                                                                                                       GREAT EAST HOLD
                                            PTT PCL                     FUBON FINANCIAL
                                                                                                      OLAM INTERNATION
                                                                                                                                         % return in local currency




                                    SIAM CEMENT PCL                    CHINATRUST FINAN
                                                                                                       SINGAPORE AIRLIN
                                  CHAROEN POK FOOD                     CATHAY FINANCIAL
                                                                                                      FRASER AND NEAVE
                                   SIAM COMM BK PCL                  FORMOSA PETROCHE
                                                                                                      GOLDEN AGRI-RESO
                                    PTT EXPL & PROD                   TAIWAN MOBILE CO
                                                                                                      WILMAR INTERNATI
                                  TOTAL ACCESS COM                   CHUNGHWA TELECOM




-5-
                                                                                                                                                                      Top Large-Cap Performers in Asia ex-Japan YTD (cont’d)




                                                                                          (20)
                                                                                          (10)
                                                                                            10
                                                                                            20
                                                                                            30
                                                                                            40
                                                                                            50
                                                                                            60
                                                                                            70
                                                                                            80




                                                                                             0




                                                       (20)
                                                       (10)
                                                                                                                          (20)
                                                                                                                          (10)




                                                         10
                                                         20
                                                         30
                                                         40
                                                         50
                                                         60
                                                         70
                                                         80
                                                                                                                            10
                                                                                                                            20
                                                                                                                            30
                                                                                                                            40
                                                                                                                            50
                                                                                                                            60
                                                                                                                            70
                                                                                                                            80




                                                          0
                                                                                                                             0




                                                                     FOXCONN TECHNOLO                 SEMBCORP MARINE
                                  INDORAMA VENTURE

                                          CP ALL PCL                          HTC CORP                 SEMBCORP INDUS

                                      SHIN CORP PCL                   UNITED MICROELEC                NOBLE GROUP LTD




      Sources: Bloomberg, Daiwa
                                   PTT GLOBAL CHEM                    FORMOSA CHEM & F                   THAI BEVERAGE
                                  KASIKORNBANK PCL                    QUANTA COMPUTER                   HONGKONG LAND
                                   BANPU PUB CO LTD                   COMPAL ELECTRON
                                                                                                      UNITED OVERSEAS
                                  BANGKOK BANK PUB                    CHENG SHIN RUBBE
                                                                                                       SINGAPORE EXCH
                                    KRUNG THAI BANK
                                                                                             Taiwan




                                                                        DELTA ELECT INC




                                                          Thailand
                                                                                                                             Singapore




                                                                                                             OCBC BANK
                                     ADVANCED INFO                     CHINA STEEL CORP
                                                                                                                                         % return in USD




                                                                                                       GREAT EAST HOLD
                                            PTT PCL                     FUBON FINANCIAL
                                                                                                      OLAM INTERNATION
                                    SIAM CEMENT PCL                    CHINATRUST FINAN
                                                                                                       SINGAPORE AIRLIN
                                  CHAROEN POK FOOD
                                                                       CATHAY FINANCIAL
                                   SIAM COMM BK PCL                                                   FRASER AND NEAVE
                                                                     FORMOSA PETROCHE
                                    PTT EXPL & PROD                                                   GOLDEN AGRI-RESO
                                                                      TAIWAN MOBILE CO
                                  TOTAL ACCESS COM                                                    WILMAR INTERNATI
                                                                     CHUNGHWA TELECOM
                                                                                                                                                                                                                               6 March 2012
                                                                                                                                                                                                                                              Bull-Bear Debate
                                                                                                                                (20)
                                                                                                                                (10)
                                                                                                                                  10
                                                                                                                                  20
                                                                                                                                  30
                                                                                                                                  40
                                                                                                                                  50
                                                                                                                                  60
                                                                                                                                  70
                                                                                                                                  80




                                                                                                                                   0




                                                       (20)
                                                       (10)
                                                         10
                                                         20
                                                         30
                                                         40
                                                         50
                                                         60
                                                         70
                                                         80




                                                          0
                                                                                             (20)
                                                                                             (10)
                                                                                               10
                                                                                               20
                                                                                               30
                                                                                               40
                                                                                               50
                                                                                               60
                                                                                               70
                                                                                               80




                                                                                                0
                                  HM SAMPOERNA TBK                     HONG LEONG BANK
                                                                                                              AYALA LAND INC
                                  TAMBANG BATUBARA                                 PCHEM
                                                                      PETRONAS GAS BHD                           AYALA CORP
                                  PERUSAHAAN GAS N
                                                                              SIME DARBY




      Sources: Bloomberg, Daiwa
                                  INDO TAMBANGRAYA
                                                                               MAXIS BHD                     BANK PHILIPPINE
                                   UNITED TRACTORS                          DIGI.COM BHD
                                    BUMI RESOURCES                      TENAGA NASIONAL                      SM PRIME HLDGS
                                  ADARO ENERGY TBK                        AMMB HLDG BHD
                                  INDOCEMENT TUNGG                     TELEKOM MALAYSIA                       ABOITIZ EQUITY
                                                                                MISC BHD
                                    UNILEVER IND TBK
                                                                                                             PHILIPP LONG DIS




                                                                                                Malaysia
                                                                         RHB CAPITAL BHD




                                                          Indonesia
                                                                                                                                   Philippines
                                     TELEKOMUNIKASI
                                                                       KUALA LUMPUR KEP
                                   BAYAN RESOURCES                                                           SM INVESTMENTS
                                                                      PETRONAS DAGANGA
                                   SEMEN GRESIK TBK                      PUBLIC BANK BHD
                                                                                                                                                 % return in local currency




                                   BANK RAKYAT INDO                     MALAYAN BANKING                       ABOITIZ POWER

                                   BANK NEGARA INDO                    GENTING MALAYSIA
                                                                                                             MANILA ELECTRIC
                                   BANK CENTRAL ASI                          IOI CORP BHD
                                                                       AXIATA GROUP BER
                                       BANK MANDIRI                                                              SAN MIGUEL
                                                                      PPB GROUP BERHAD
                                   ASTRA INTERNATIO
                                                                       CIMB GROUP HOLDI
                                                                                                           SAN MIGUEL BREWE
                                  GUDANG GARAM TBK                           GENTING BHD




-6-
                                                                                                                                                                              Top Large-Cap Performers in Asia ex-Japan YTD (cont’d)




                                                                                                                                (20)
                                                                                                                                (10)
                                                                                                                                  10
                                                                                                                                  20
                                                                                                                                  30
                                                                                                                                  40
                                                                                                                                  50
                                                                                                                                  60
                                                                                                                                  70
                                                                                                                                  80




                                                                                                                                   0




                                                       (20)
                                                       (10)
                                                                                             (20)
                                                                                             (10)




                                                         10
                                                         20
                                                         30
                                                         40
                                                         50
                                                         60
                                                         70
                                                         80
                                                                                               10
                                                                                               20
                                                                                               30
                                                                                               40
                                                                                               50
                                                                                               60
                                                                                               70
                                                                                               80




                                                          0
                                                                                                0
                                  HM SAMPOERNA TBK                      HONG LEONG BANK
                                                                                                              AYALA LAND INC
                                  TAMBANG BATUBARA                                  PCHEM
                                                                       PETRONAS GAS BHD
                                  PERUSAHAAN GAS N                                                               AYALA CORP
                                                                               SIME DARBY




      Sources: Bloomberg, Daiwa
                                  INDO TAMBANGRAYA
                                                                                 MAXIS BHD                   BANK PHILIPPINE
                                   UNITED TRACTORS                           DIGI.COM BHD
                                    BUMI RESOURCES                       TENAGA NASIONAL                     SM PRIME HLDGS
                                  ADARO ENERGY TBK                         AMMB HLDG BHD
                                  INDOCEMENT TUNGG                     TELEKOM MALAYSIA                       ABOITIZ EQUITY
                                                                                  MISC BHD
                                    UNILEVER IND TBK
                                                                          RHB CAPITAL BHD                    PHILIPP LONG DIS
                                                                                                Malaysia




                                                          Indonesia
                                     TELEKOMUNIKASI
                                                                                                                                   Philippines




                                                                       KUALA LUMPUR KEP
                                   BAYAN RESOURCES
                                                                                                                                                 % return in USD




                                                                      PETRONAS DAGANGA                       SM INVESTMENTS
                                   SEMEN GRESIK TBK                       PUBLIC BANK BHD
                                   BANK RAKYAT INDO                     MALAYAN BANKING                       ABOITIZ POWER
                                   BANK NEGARA INDO                     GENTING MALAYSIA
                                                                             IOI CORP BHD                    MANILA ELECTRIC
                                   BANK CENTRAL ASI
                                                                        AXIATA GROUP BER
                                       BANK MANDIRI                   PPB GROUP BERHAD                           SAN MIGUEL
                                   ASTRA INTERNATIO                     CIMB GROUP HOLDI
                                  GUDANG GARAM TBK                           GENTING BHD                   SAN MIGUEL BREWE
                                                                                                                                                                                                                                       6 March 2012
                                                                                                                                                                                                                                                      Bull-Bear Debate
             Bull-Bear Debate
                     6 March 2012




Company Section




       -7-
                                                                                                     Bull-Bear Debate
                                                                                                                  6 March 2012




Axis Bank (AXSB IN)
Rating: Buy (1), Rs1,167 (2 March 2012), target price: Rs1,470 (+26%)
Punit Srivastava (91) 22 6622 1013 (punit.srivastava@in.daiwacm.com)


Why has this stock been such a star?
Axis Bank shares recently went through a two- to three-month period of being extremely undervalued relative
to their trading history since 2004, trading close to a PBR of 1.5x on concerns that Axis Bank’s balance sheet
was vulnerable in a rising-interest-rate environment. With India’s interest-rate cycle turning, a recent 50%-
plus rise in the share price has taken the stock’s PBR above 2x, close to its past-four-year average.


Bull case (Daiwa analyst’s view)                                  Bear case
Axis Bank has the best risk-reward profile among the              The share-price rise of more than 50% YTD has
large private-sector banks in India. Based on our                 factored in most of the benefits of a turn in the
FY13 forecasts, the company has an ROE similar to                 interest-rate cycle. Axis Bank’s NIM is one of the
that of HDFC Bank (and far higher than ICICI Bank),               most volatile among the private banks, its deposit
while it has a lower PBR than HDFC Bank (2x                       franchise is inferior to HDFC Bank, and its loan book
compared with 3.5x).                                              is more risky.

About 40% of its deposits are short-duration term                 While the interest-rate cycle may have turned in
deposits that can be re-priced quickly. So it will be a           India, interest rates are unlikely to fall sharply. The
big beneficiary of falling interest rates, as the cost of         crude-oil price has risen sharply and is likely to
its deposits can fall sharply, leading to expanded net-           remain high, while the fiscal deficit remains
interest margins (NIM).                                           stubbornly high. The deposit re-pricing argument
                                                                  becomes significant only in an environment of
The company has suffered from a perception that its               sharply falling interest rates.
loan book is riskier than that of HDFC Bank (with
ICICI Bank’s seen as riskier still). However, over the            HDFC Bank has more than 50% of its loan book in
past five years, Axis Bank’s average credit cost has              the retail segment compared with 20% for Axis Bank.
been 1.1% compared with 1.6% for HDFC Bank. The                   This gives it greater stability in asset yields and more
market now recognises that this perception is                     protection in a downturn. The premium that the
incorrect, and that Axis Bank’s PBR should move                   market gives to HDFC Bank is based on this, and the
closer to that of HDFC Bank.                                      rerating will not happen unless Axis Bank increases
                                                                  its exposure to the retail segment substantially.
Catalyst: About 20% of Axis Bank’s loans are to the
power and other infrastructure-related sectors. The               Catalyst: Power and other infrastructure projects are
policy paralysis of the central government dampened               vulnerable to various policy measures. Although
investment in these sectors over the past 12 months.              some measures have been announced, much
With the recent bold reforms on coal availability                 remains to be done, and the political environment is
announced by the government and the interest-rate                 not conducive to swift decision making. Interest rates
cycle turning, we could see further investments in                may not increase further, but are likely to remain high
these sectors, leading to higher loan growth and a                over the short and medium term.
further rerating of the stock.
                                                                  Valuation: HDFC Bank has a much greater
Valuation: Axis Bank is one of the fastest-growing                exposure to the retail segment in its loan book. It also
private banks in terms of assets and profitability, with          has a much better deposit franchise. This leads to
a diversified loan book, a high ROE of 20.4% for                  more stable NIMs across business cycles. Axis
FY13E, and a current one-year forward PBR of 2.0x.                Bank’s NIMs are very volatile. So there is a good
Banks such as HDFC Bank (ROE: 20.8%, one-year                     reason for HDFC Bank trading at a premium to Axis
forward PBR of 3.5x) and YES Bank (ROE: 22.6%,                    Bank.
one-year forward PBR of 2.2x), which have similar
ROEs are trading at premiums to Axis Bank. So a
further rerating of the stock is possible, in our view.

                                                            -8-
                                                                                                                                                                                                                                                           Bull-Bear Debate
                                                                                                                                                                                                                                                                                             6 March 2012




Axis Bank: how the consensus view has evolved (weekly data)

 160                                                                                                                                                                                                                                                                                                         5.0
 150                                                                                                                                                                                                                                                                                                         4.5
 140                                                                                                                                                                                                                                                                                                         4.0
 130
                                                                                                                                                                                                                                                                                                             3.5
 120
                                                                                                                                                                                                                                                                                                             3.0
 110
                                                                                                                                                                                                                                                                                                             2.5
 100
   90                                                                                                                                                                                                                                                                                                        2.0

   80                                                                                                                                                                                                                                                                                                        1.5

   70                                                                                                                                                                                                                                                                                                        1.0
                                                                                                   10/10/2010

                                                                                                                11/13/2010

                                                                                                                             12/17/2010




                                                                                                                                                                                                                                              10/19/2011

                                                                                                                                                                                                                                                           11/22/2011

                                                                                                                                                                                                                                                                         12/26/2011
                                                                        8/3/2010

                                                                                      9/6/2010




                                                                                                                                                                                5/2/2011

                                                                                                                                                                                           6/5/2011

                                                                                                                                                                                                         7/9/2011




                                                                                                                                                                                                                                                                                                  3/3/2012
        2/14/2010

                     3/20/2010

                                 4/23/2010

                                             5/27/2010

                                                            6/30/2010




                                                                                                                                           1/20/2011

                                                                                                                                                       2/23/2011

                                                                                                                                                                    3/29/2011




                                                                                                                                                                                                                    8/12/2011

                                                                                                                                                                                                                                 9/15/2011




                                                                                                                                                                                                                                                                                      1/29/2012
                    Consensus 2013 EPS, rebased (Rs) (LHS)                                                             Share Price, rebased (Rs) (LHS)                                                Consensus rating: 1 = strong sell, 5 = strong buy - (RHS)
Source: Bloomberg
                                                                                                                                                                                                                                                                                      Can reprice quickly

  Income statement (Rs m)                                                                                                                                              Balance sheet (Rs m)
Year to 31 Mar                                              2010             2011                   2012E             2013E                 2014E                  Year to 31 Mar                                                2010                 2011              2012E              2013E              2014E
Net-interest income                                        50,045           65,630                 78,747             95,911              118,171                  Loans & accrued interest (gross)
Fees & commission (net) (+)                                25,652           33,574                 40,961             49,153                58,000                 (+)                                                   1,052,421           1,435,969            1,767,199           2,119,470          2,587,179
Operating income                                           89,503         111,951                131,534            158,636               192,958                  Customer deposits (+)                                 1,413,002           1,892,378            2,346,549           2,839,324          3,435,582
Total expenses                                           (37,097)         (47 794)                ( 8,967)          (70,760)              (84,001)                 Total assets                                          1,806,479           2,427,134            2,943,405           3,471,662          4,117,843
Pre-provision operating profit                             52,406           64,157                 72,567             87,876              108,957                  Total liabilities                                     1,646,034           2,237,145            2,721,688           3,211,672          3,809,309
Total provisions (FIN)                                   (13,888)         (12,793)               (13,007)           (13,532)              (14,660)                 Shareholders equity                                     160,445             189,988              221,717             259,989            308,534
Profit before tax                                          38,517           51,364                 59,560             74,344                94,298                 Source: Company, Daiwa forecasts
Taxes on profit (-)                                      (13,372)         (17,479)               (19,059)           (25,277)              (32,061)
Adj. net profit                                            25,145           33,885                 40,501             49,067                62,236
Source: Company, Daiwa forecasts                                                                                                                                       Ratios and valuation data (Rs)
  Capital adequacy and asset quality                                                                                                                               Year to 31 Mar                                                2010                 2011              2012E              2013E              2014E
Year to 31 Mar                                             2010                2011               2012E                  2013E             2014E                   EPS (adjusted)                                                  66                   83                 97                116                147
Total provisions/NPAs %                                   68.2%               74.3%               72.7%                  75.0%             80.0%                   Net DPS                                                         12                   14                 15                 18                 22
Source: Company, Daiwa forecasts
                                                                                                                                                                   Book value per share (BVPS)                                    396                  463                522                613                727
                                                                                                                                                                   Source: Company, Daiwa forecasts
  Aggregated items – financial (Rs m)                                                                                                                                                                                                                                   One of the most volatile
Year to 31 Mar                                             2010             2011                  2012E               2013E     2014E                                                                                                                                   NIMs among private banks
Cash & equivalent                                        152,064          214,087                235,495             259,045   284,949
                                                                                                                                                                       Industry-specific (non KPI) – financial
Investment securities                                    559,748          719,916                863,899             993,484 1,112,702
                                                                                                                                                                   Year to 31 Mar                                                2010               2011                2012E              2013E              2014E
Source: Company, Daiwa forecasts
                                                                                                                                                                   Net-interest margin (%)                                       3.8%               3.5%                 3.2%               3.4%               3.4%
  Common items                                                                                                                                                     Credit cost (bps)                                             4.5%               4.5%                 5.7%               5.5%               5.2%
Year to 31 Mar                                              2010                   2011            2012E                 2013E             2014E                   NPL (%)                                                       1.3%               1.1%                 1.2%               1.1%               1.1%
Earnings Yield (recurrent,%)                                  6.3                    7.9              9.2                  11.0              14.0                  Loan growth (%)                                              28.1%              36.4%                23.1%              19.9%               2.1%
EPS (Adjusted) Growth % (YoY)                                29.9                   26.2             16.8                  19.2              26.8                  Deposit growth (%)                                           20.4%              33.9%                24.0%              21.0%              21.0%
P/E (Adjusted) (X)                                           17.7                   14.0             12.0                  10.1               8.0                  Loan to deposit ratio (%)                                    74.5%              75.9%                75.3%              74.6%              75.3%
Price/ BVPS (X)                                               2.9                    2.5              2.2                   1.9               1.6                  Fee-to-income ratio (%)                                      41.4%              42.7%                44.8%              44.6%              43.5%
BVPS Growth % (YoY)                                          39.2                   16.9             12.9                  17.3              18.7                  Expense-to-income ratio (%)                                   3.8%               3.5%                 3.2%               3.4%               3.4%
Source: Company, Daiwa forecasts                                                                                                                                   Source: Company, Daiwa forecasts
Cheap versus peers


                    Company profile
              Axis Bank began operations in 1994 after the Reserve Bank of India issued licences to private banks. The bank was promoted
              jointly by the administrator of the specified undertaking of the Unit Trust of India, the Life Insurance Corporation of India, and
              General Insurance Corporation of India. As at 31 December 2011, it had a network of 1,493 branches and 8,324 ATMs, one of the
              largest ATM networks in the country.



                                                                                                                                                       -9-
                                                                                                     Bull-Bear Debate
                                                                                                                 6 March 2012




CapitaLand (CAPL SP)
Rating: Sell (5), S$3.07 (2 March 2012), target price: S$2.17 (-29%)
David Lum, CFA (65) 6329 2102 (david.lum@sg.daiwacm.com)


Why has this stock been such a star?
The reasons include playing catch-up (severe underperformance against the market in 2010-11), the market’s
expectations of property-policy relaxation, and management’s receptiveness to shoring up its financial
management.


Bull case                                                            Bear case (Daiwa analyst's view)
CapitaLand has a 65.5% stake in CapitaMalls Asia                     CapitaLand's share-price appreciation is unlikely to
(CMA SP, S$1.525, Outperform [2]), which                             continue as Singapore has just entered a multi-year
accounted for 28% of the group’s net profit in 2011.                 downturn in the residential-property market. Daiwa
The outlook for Asia’s retail-mall sector is positive. In            expects home prices to fall 20-25% over the next
2011, tenant sales at CMA’s malls grew by 13% YoY                    three years, weighed down by the steady build-up of
in China and 5.5% YoY in Singapore. CMA's 2012                       unsold inventory and a rising pipeline of completions.
earnings could surprise on the upside, as the
majority of its malls are operational and income-                    There is no basis for expecting the Singapore
producing. CMA’s management has stated that 2012                     Government to relax its hawkish housing policy any
could be an ‘inflection point’ for the company.                      time soon. The 10% additional buyer's stamp duty for
                                                                     foreign purchasers was imposed on 8 December
Despite headline concerns regarding its exposure to                  2011. Any home-price resilience would only increase
China and Singapore, CapitaLand has a balanced                       the risk of more punitive measures, in our view.
and manageable exposure to these residential-                        Policy relaxation is only likely on evidence that the
property markets, at only 10% and 14%, respectively,                 residential market is at risk of collapsing, which of
of its total assets. CapitaLand also has the financial               course would imply a much lower CapitaLand share
muscle (net debt-to-equity of 0.40x as at the end of                 price.
2011) to ride out any downturns.
                                                                     CapitaLand plans to launch 800-1,000 units annually
Further steps to lift the ROE above Daiwa’s forecast                 in Singapore over the next 2-3 years. However, there
range of 4.4-5.9% in 2012-14 would be a major share-                 are execution risks in 2012 from the 500-unit Sky
price driver. CapitaLand's recently articulated                      Habitat, which would have to be priced at a
dividend-payout policy of at least 30% of adjusted net               significant premium in the suburban Bishan market
profit and its initiation of share buybacks in 2011                  as the breakeven price is about S$1,300/sq ft), and
suggest a renewed focus on improving financial                       the release of more units in the d'Leedon (27% sold)
indicators and a welcomed acknowledgement that                       and The Interlace (67% sold) projects. These
sitting on S$3-4bn of excess cash is a suboptimal                    projects will struggle to sell well given their
financial strategy.                                                  aggressive price points.

Catalysts: The most likely positive catalysts for                    Catalysts: The main downside risk for CapitaLand
CapitaLand will be a positive earnings surprise from                 would be a sudden downturn in the Singapore
CMA, and progress in clearing unsold residential                     residential market, with home prices declining by
inventory in China, which reached 2,400 units as at                  more than 15% and take-up rates for new launches
the end of 2011. The latter will be more easily                      falling below 50%.
achieved as macro policy in China eases.
                                                                     Valuation: Daiwa’s S$2.17 target price is based on a
Valuation: Valuations are not demanding at 2013-14E                  trough PER multiple of 12x, which was reached
PERs of 14-15x, 2012-14E dividend yields of 2%, and a                during the global financial crisis, to the average of
wide discount to BVPS (2011) of S$3.51. CapitaLand's                 Daiwa 2012-13E EPS forecast. Although the target
share price is at a premium of 4% to Daiwa’s estimated               multiple might appear low, CapitaLand has traded at
NAV of S$2.94, while the stock has traded at an                      NAV discounts of as much as 20-50% in previous
average premium of 5% to NAV since 2007.                             property and stock market downturns.

                                                            - 10 -
                                                                                                                                                                                                                                                        Bull-Bear Debate
                                                                                                                                                                                                                                                                                           6 March 2012




CapitaLand: how the consensus view has evolved (weekly data)

 160                                                                                                                                                                                                                                                                                                       5.0


 140                                                                                                                                                                                                                                                                                                       4.5


 120                                                                                                                                                                                                                                                                                                       4.0


 100                                                                                                                                                                                                                                                                                                       3.5


   80                                                                                                                                                                                                                                                                                                      3.0


   60                                                                                                                                                                                                                                                                                                      2.5


   40                                                                                                                                                                                                                                                                                                      2.0
        2/12/2010

                     3/18/2010

                                 4/21/2010

                                             5/25/2010

                                                           6/28/2010




                                                                                                 10/8/2010




                                                                                                                                       1/18/2011

                                                                                                                                                   2/21/2011

                                                                                                                                                                3/27/2011

                                                                                                                                                                            4/30/2011




                                                                                                                                                                                                                 8/10/2011

                                                                                                                                                                                                                               9/13/2011




                                                                                                                                                                                                                                                                                    1/27/2012
                                                                                                             11/11/2010

                                                                                                                          12/15/2010




                                                                                                                                                                                                                                           10/17/2011

                                                                                                                                                                                                                                                        11/20/2011

                                                                                                                                                                                                                                                                       12/24/2011
                                                                       8/1/2010

                                                                                     9/4/2010




                                                                                                                                                                                        6/3/2011

                                                                                                                                                                                                      7/7/2011




                                                                                                                                                                                                                                                                                                3/1/2012
                    Consensus 2012 EPS, rebased (S$) (LHS)                                                           Share Price, rebased (S$) (LHS)                                               Consensus rating: 1 = strong sell, 5 = strong buy - (RHS)
Source: Bloomberg


  Profit and loss (S$m)                                                                                                                                           Balance sheet (S$m)
Yr to 31 Dec                                              2010                     2011       2012E      2013E   2014E                                         As at 31 Dec                                                    2010             2011                 2012E              2013E              2014E
Total revenue                                             3,383                   3,020        3,880      4,897   4 441                                        Total current assets                                          15,194           15,134                 14,124             13,797             13,539
Gross profit                                              1,338                   1,073        1,377      1,714   1,555                                        Fixed assets                                                   1,049            1,076                  1,086              1,097              1,107
EBITDA(adj.)                                              2,700                   2,165        1,693      1,979   2,077                                        Total assets                                                  31,887           35,319                 35,673             36,429             37,274
Operating profit                                          2,584                   2,087        1,615      1,901   1,999                                        Total current liabilities                                      4,308            3,572                  3,552              3,532              3,512
Net interest income/(expenses)                            (448)                   (473)        (508)      (523)   (542)                                        Long-term debt                                                 8,596           11,330                 11,367             11,497             11,636
Assoc/forex/extraord./others                                  -                       -            -          -       -                                        Total liabilities                                             14,022           16,080                 16,096             16,207             16,326
Net profit (adj.)                                         1,426                   1,057          658        877     952                                        Shareholders’ equity                                          14,032           14,902                 15,227             15,858             16,565
EPS (adj.) (S$)                                           0.335                   0.248        0.155      0.207   0.224                                        Enterprise value                                              10,038           12,609                 14,115             14,589             15,006
Net DPS (S$)                                              0.060                   0.080        0.060      0.060   0.060                                        Net debt/(cash)                                                3,168            5,926                  7,518              8,075              8,573
Source: Company, Daiwa forecasts                                                          Valuations not demanding, but                                        Source: Company, Daiwa forecasts
                                                                                          have been much lower in prior                                                                                                                                                 New commitment to better
                                                                                          property market downturns                                                                                                                                                     capital management
  Cash flow (S$m)                                                                                                                                                 Key ratios (%)
Y/e 31 Dec                                                 2010               2011               2012E                2013E            2014E                   Y/e 31 Dec                                                     2010                2011               2012E               2013E              2014E
Profit before tax                                          2,136             1,614                1,107                1,377            1,457                  Sales growth % (YoY)                                            14.4              (10.8)                 28.5               26.2               (9.3)
Change in working capital                                      82          (1,321)                (565)                (120)            (120)                  EPS (adjusted) growth % (YoY)                                   27.7              (25.9)               (37.5)               33.3                 8.6
Cash flow from operations                                    905             (802)                (192)                  516              609                  Gross-profit margin                                             39.6                35.5                 35.5               35.0               35.0
Capital expenditure                                          (88)            (135)                  (10)                 (11)             (11)                 Operating-profit margin                                         76.4                69.1                 41.6               38.8               45.0
Cash flow from investing                                 (1,817)           (1,110)                (352)                (145)            (159)                  ROAE                                                            10.4                 7.3                  4.4                5.6                 5.9
Net share issues/(repurchases)                                 22              (61)                    -                    -                -                 Net debt to equity                                              22.6                39.8                 49.4               50.9               51.8
Cash flow from financing                                   (590)               982              (1,012)                (798)            (809)                  PER (adjusted) (x)                                               9.2                12.4                 19.8               14.9               13.7
Change in cash                                           (1,540)             (926)              (1,556)                (427)            (358)                  Price/BVPS (x)                                                   0.9                 0.9                  0.9                0.8                 0.8
Free cash flow                                               817             (937)                (202)                  506              599                  Net dividend yield %                                             2.0                 2.6                  2.0                2.0                 2.0
Source: Company, Daiwa forecasts                                                                                                                               Source: Company, Daiwa forecasts




                    Company profile
              CapitaLand is one of Asia's largest integrated real-estate companies. Its real-estate and hospitality portfolio, which includes
              homes, offices, shopping malls, serviced residences, mixed developments, and affordable homes, spans more than 110 cities in
              over 20 countries. CapitaLand's geographic exposure by total assets includes Singapore (34%), China (38%), Australia (17%), the
              rest of Asia (8%), and Europe (3%) as at 31 December 2011.




                                                                                                                                                   - 11 -
                                                                                                     Bull-Bear Debate
                                                                                                                  6 March 2012




CNOOC (883 HK)
Rating: Buy (1), HK$17.44 (2 March 2012), target price: HK$20.60 (+18%)
Adrian Loh (65) 6499 6548 (adrian.loh@sg.daiwacm.com)
Maurine Wan (852) 2848 4451 (maurine.wan@hk.daiwacm.com)


Why has this stock been such a star?
The rising oil price, due largely to US-Iran tensions, has been a key driver of CNOOC’s share-price performance
year-to-date. Further, and more importantly, it appears that the Bloomberg-consensus earnings-forecast
downgrades from production disappointments troughed in 2011, and that 2012 could well be incrementally
better for forecasts.


Bull case (Daiwa analyst’s view)                                   Bear case
CNOOC shares lagged in 2011, down 24% during                       One of the key reasons for CNOOC’s market ‘darling’
the year (vs. the 17% fall in the HSI over the same                status over the past 10 years was its tremendous
period) largely as a result of production                          production growth rate (14% CAGR from 2000-10).
disappointments. At its trough, we estimate its share              But as the firm has grown, the higher base has
price was factoring in a sub-US$50 oil price versus a              caught up and the company will inevitably face a
market oil price that was 70-80% higher than that. As              slower annual growth rate. This appears to be
such, its recent price performance has seen a                      happening now and, thus, its PER premium over the
rebound from an oversold position to the recent oil-               other China oils should disappear soon. In addition,
price spike. But even after this catch-up, the market              there is a perception that the company is chasing
appears to be pricing in only US$68/bbl oil,                       M&A targets to offset the declining production rates
suggesting far greater upside as investors become                  at its fields offshore China. Despite its history of
more comfortable with production.                                  doing well in terms of acquisitions, the perception of
                                                                   it possibly overpaying could scare off some investors.
Expectations for CNOOC’s 2012 production growth
are unreasonably low, in our view. Its production                  Part of the disappointment last year was
guidance of 300-340mmboe implies 0-2.7% YoY                        management’s poor communication after the Penglai
growth, is conservative after 2011’s difficulties. We              oil spill, which raised questions about the company’s
forecast c.4%.This is before we factor in potential                corporate governance.
upside surprises from the Eagle Ford exploration
wells, which should drive growth from 2013.                        CNOOC’s share price is closely correlated to the
                                                                   price of oil and given that there is around US$10-
Catalysts: We forecast that, after having been offline             20/bbl of ‘Iran risk premium’ in the oil price, any
for nearly a year, Penglai 19-3 will restart production            resolution of US-Iran tensions is likely to result in the
in 2Q12, which should remove ongoing concerns in                   risk premium evaporating, potentially taking down
the market. Drillbit news flow could also be a                     CNOOC’s share price with it.
consistent share-price catalyst throughout 2012,
given that CNOOC will be drilling 114 exploration                  Catalysts: Should the Penglai field not restart in
wells this year, of which three will be drilled in                 1H12, this would likely disappoint the market. This
deepwater China. The 114 wells will be the most that               field accounts for c.8% of CNOOC’s total production
CNOOC has ever drilled on an annual basis.                         and hence is highly valuable, especially considering
                                                                   it is a wholly oil-producing field and not gas.
Valuation: The stock is trading currently at a 2012E
PER of 10.2x, below the company’s 10-year average                  Valuation: While CNOOC’s current PER valuations
PER of 11.1x. This is based on an oil-price                        are attractive relative to its peers (PetroChina and
assumption of US$105, below the current price of                   PTTEP for example), PER contraction may occur if
US$124. In addition, we highlight that the company is              we see any pull-back in the oil price, especially given
currently cheaper on a PER basis relative to                       that the oil price has spiked up to near pre-global
PetroChina, which is trading at a 2012E PER of                     financial crisis levels, which could neutralise the
10.1x. We note that PetroChina’s average PER over                  effects of any resumption of global economic growth.
the past 10-years is 10.1x vs. CNOOC’s 11.1x.

                                                          - 12 -
                                                                                                                                                                                                                                                        Bull-Bear Debate
                                                                                                                                                                                                                                                                                           6 March 2012




CNOOC Ltd: how the consensus view has evolved (weekly data)

 250                                                                                                                                                                                                                                                                                                        5.0

 230

 210                                                                                                                                                                                                                                                                                                        4.5

 190
                                                                                                                                                                                                                                                                                                            4.0
 170

 150
                                                                                                                                                                                                                                                                                                            3.5
 130

 110                                                                                                                                                                                                                                                                                                        3.0
   90

   70                                                                                                                                                                                                                                                                                                       2.5
                                                                                                             11/11/2010

                                                                                                                          12/15/2010




                                                                                                                                                                                                                                           10/17/2011

                                                                                                                                                                                                                                                        11/20/2011

                                                                                                                                                                                                                                                                        12/24/2011
                                                                         8/1/2010

                                                                                    9/4/2010




                                                                                                                                                                                           6/3/2011

                                                                                                                                                                                                        7/7/2011




                                                                                                                                                                                                                                                                                                 3/1/2012
        2/12/2010

                      3/18/2010

                                  4/21/2010

                                              5/25/2010

                                                             6/28/2010




                                                                                                 10/8/2010




                                                                                                                                         1/18/2011

                                                                                                                                                      2/21/2011

                                                                                                                                                                   3/27/2011

                                                                                                                                                                               4/30/2011




                                                                                                                                                                                                                   8/10/2011

                                                                                                                                                                                                                               9/13/2011




                                                                                                                                                                                                                                                                                     1/27/2012
                    Consensus 2012 EPS, rebased (Rmb) (LHS)                                                           Share Price, rebased (HK$) (LHS)                                                Consensus rating: 1 = strong sell, 5 = strong buy - (RHS)
Source: Bloomberg

  Profit and loss (Rmb m)                                                                                                                                            Balance sheet (Rmb m)
Yr to 31 Dec                                                2009             2010                2011E              2012E               2013E                     As at 31 Dec                                                 2009            2010                    2011E           2012E                  2013E
Total revenue                                             105,195          183,053             231,382            228,001              251,976                    Total current assets                                       70,871        100,653                   120,475         132,323                140,269
Gross profit                                               72,249          134,613             173,476            170,108              187,170                    Fixed assets                                             165,320         212,331                   245,641         269,429                293,874
EBITDA(adj.)                                               56,267           99,092             116,794            115,444              126,804                    Total assets                                             242,268         327,926                   381,395         417,107                448,963
Operating profit                                           40,325           71,405              89,096             86,957               94,250                    Total current liabilities                                  31,042          69,410                    68,461          66,886                 70,790
Net interest income/(expenses)                                104            (518)              (1,970)            (1,410)               (421)                    Long-term debt                                             18,570          11,716                    24,716          21,416                  5,116
Assoc/forex/extraord./others                                  393            1,763                2,100              1,714               1,200                    Total liabilities                                          68,333        112,160                   124,451         119,892                107,892
Net profit (adj.)                                          29,486           54,410              63,351             61,955               67,471                    Shareholders’ equity                                     173,936         215,766                   256,944         297,215                341,071
EPS (adj.) (Rmb)                                            0.660            1.218                1.418              1.387               1.510                    Enterprise value                                         599,023         595,258                   596,642         580,908                560,597
Net DPS (Rmb)                                               0.350            0.396                0.496              0.485               0.529                    Net debt/(cash)                                          (33,375)        (37,140)                  (35,756)        (51,490)               (71,801)
Source: Company, Daiwa forecasts                                                                                                                                  Source: Company, Daiwa forecasts
                                                                                                                                                                                                                                                                        No longer a growth stock.
                                                                                                                                                                                                                                                                        Deserves to be de-rated
  Cash flow (Rmb m)                                                                                                                                                  Key ratios (%)
Y/e 31 Dec                                                   2009             2010               2011E             2012E                 2013E                    Y/e 31 Dec                                                   2009            2010                    2011E           2012E                  2013E
Profit before tax                                           40,821           72,650              89,226            87,261                95,030                   Sales growth % (YoY)                                       (16.5)             74.0                     26.4            (1.5)                  10.5
Change in working capital                                    1,706            5,497             (9,155)             (990)                   (30)                  EPS (adjusted) growth % (YoY)                              (33.6)             84.5                     16.4            (2.2)                   8.9
Cash flow from operations                                   52,858           87,977              83,834            91,173              101,420                    Gross-profit margin                                           68.7            73.5                     75.0            74.6                   74.3
Capital expenditure                                       (42,417)         (25,726)            (43,523)          (52,275)              (57,000)                   Operating-profit margin                                       38.3            39.0                     38.5            38.1                   37.4
Cash flow from investing                                  (40,541)         (51,530)            (61,978)          (53,685)              (57,421)                   ROAE                                                          17.6            27.9                     26.8            22.4                   21.1
Net share issues/(repurchases)                                   -                -                   -                 -                      -                  Net debt to equity                                       net cash        net cash                  net cash        net cash               net cash
Cash flow from financing                                   (9,403)          (4,676)             (9,173)          (24,984)              (39,915)                   PER (adjusted) (x)                                            21.4            11.6                     10.0            10.2                    9.4
Change in cash                                               2,853           31,707              12,616            12,434                 4,011                   Price/BVPS (x)                                                 3.6             2.9                      2.5              2.1                   1.9
Free cash flow                                              10,441           62,251              40,311            38,898                44,420                   Net dividend yield %                                           2.5             2.8                      3.5              3.4                   3.7
Source: Company, Daiwa forecasts                                                                                                                                  Source: Company, Daiwa forecasts

                                                                                                                                                                                                                                                                          Pricing in only US$70 oil




                    Company profile
               CNOOC was incorporated in Hong Kong in August 1999. The company is China’s largest offshore producer of crude oil and
               natural gas, with four major offshore production areas: Bohai Bay, the Western South China Sea, the Eastern South China Sea,
               and the East China Sea. In 2010, the company produced over 900,000boepd of oil and gas and had 2,995mmboe of proved oil
               and gas reserves as at 31 December 2010.




                                                                                                                                                     - 13 -
                                                                                                     Bull-Bear Debate
                                                                                                                  6 March 2012




GAC Group (2238 HK)
Underperform (4), HK$9.13 (2 March 2012), Target price: $6.8 (-26%)
Jeff Chung (852) 2773 8783 (jeff.chung@hk.daiwacm.com)


Why has this stock been such a star?
The launch of the new Toyota Camry in 4Q11 has proven to be a great success, with GAC-Toyota’s unit sales up
22% YoY for January 2012, after adjusting for the Lunar New Year effect.


Bull case                                                           Bear case (Daiwa analyst’s view)
New Camry takes the lead: if we compare GAC’s                       Disappointing January 2012 sales: the group’s two
January 2012 sales with those in February 2011                      key joint ventures, GAC-Toyota and GAC-Honda,
(months when the Lunar New Year fell), GAC-Toyota                   recorded sales-volume dips of minus 26% YoY and
sales were up 22%, with new Camry sales up 37%                      minus 55% YoY, respectively, for January 2012,
YoY, at 11,373 units. As a new version of the Accord                worse than the mass market’s minus 24% YoY dip.
should be launched in March 2012, GAC’s overall                     The sales volume for GAC’s domestic brand the
1Q12 YoY sales volume is likely to rebound strongly.                Everus also fell by minus 59% YoY for the same
                                                                    period. If the company keep missing its sales targets,
The acquisition of Changfeng, likely to be completed                the margin-squeeze pressure that we saw in 2011 is
in 1H12, should enhance GAC’s sales exposure to                     likely to extend into 2012.
SUVs, improve its product mix and widen its ASP
range, helping the company penetrate and gain                       Concentrating on the B-class segment, with limited
market share in the third- and fourth-tier cities in the            SUV exposure: apart from the SUV Highlander,
future. GAC will benefit from Changfeng’s production                GAC’s key products, the Camry and Accord, both
of the Liebao and Pajero; we forecast monthly sales                 come under the B-class segment, which sees higher
of both models totaling 3,000 units for Changfeng,                  competition from entry-level premium German cars.
under GAC, in 2Q12, which is similar to GAC’s                       Therefore, we think GAC has a high concentration
combined sales of Everus and Trumpchi in 2011.                      risk as it has a relatively narrower product mix than
                                                                    other names, such as Dongfeng Motor (HK 489,
HEVs will fill the gap: Daiwa’s Pan-Asia auto team                  HK$14.48, Buy [1]).
does not see EVs emerging as a mainstream ‘green
car’ option from a global perspective. Hybrid electric              VW poses new threat: the joint venture First Auto Work-
vehicles (HEVs) are likely to fill the gap. As Toyota               VW (Not listed) is building an assembly plant in Foshan,
currently supplies more than 60% of global HEV                      Guangdong Province, which is close to GAC’s
demand, GAC should benefit from this once Toyota                    headquarters. Once completed, VW should be able to
decides to undertake mass-production in China                       penetrate Guangdong province with its potential
during the 12th Five-Year Plan.                                     product mix of the Audi A4, Jetta, Golf, Magotan and
                                                                    Sagitar. This is likely to pose a big threat to GAC’s
Catalysts: We forecast the launch of the new Accord                 regional strength in nearby provinces.
in March to result in a monthly sales volume of more
than 15,000 units after a three-month ramp-up. As                   Catalysts: The raising of the fuel-efficiency subsidy
such, GAC’s 2012 sales volume should rise by 12%                    by the PRC Government this year is likely to be the
YoY, from negative growth in 2011, helping to drive                 main downside risk for GAC, as its key products are
up the share price.                                                 all equipped with highly-emitting engines that are
                                                                    larger than 1.6L.
Valuation: The stock is trading currently at 2012E
PER of 10.1x. Given that most of GAC’s key                          Valuation: The stock is trading currently at 2012E
products come with 5-star safety ratings, we believe                PER of 10.1x. With its poor January sales,
the stock deserves to trade at a premium to the                     concentration risk and competition from other Joint
MSCI China Auto’s 10-year average PER of 10.5x,                     ventures, we expect the stock to trade below the
especially if the market conditions improve in 2012.                sector average of 8.5x 2012E PER, especially amid
                                                                    the single-digit sales volume growth environment that
                                                                    we see.

                                                           - 14 -
                                                                                                                                                                                                                                                       Bull-Bear Debate
                                                                                                                                                                                                                                                                                     6 March 2012




GAC: how the consensus view has evolved (weekly data)

                                                                                                                                                                                                                                                                                                         5.0
 190

                                                                                                                                                                                                                                                                                                         4.5
 170

 150                                                                                                                                                                                                                                                                                                     4.0

 130
                                                                                                                                                                                                                                                                                                         3.5

 110
                                                                                                                                                                                                                                                                                                         3.0
  90

                                                                                                                                                                                                                                                                                                         2.5
  70

  50                                                                                                                                                                                                                                                                                                     2.0
                                                                                                          11/11/2010

                                                                                                                          12/15/2010




                                                                                                                                                                                                                                          10/17/2011

                                                                                                                                                                                                                                                        11/20/2011

                                                                                                                                                                                                                                                                     12/24/2011
                                                                       8/1/2010

                                                                                  9/4/2010




                                                                                                                                                                                         6/3/2011

                                                                                                                                                                                                      7/7/2011




                                                                                                                                                                                                                                                                                              3/1/2012
       2/12/2010

                      3/18/2010

                                  4/21/2010

                                              5/25/2010

                                                           6/28/2010




                                                                                              10/8/2010




                                                                                                                                       1/18/2011

                                                                                                                                                    2/21/2011

                                                                                                                                                                 3/27/2011

                                                                                                                                                                             4/30/2011




                                                                                                                                                                                                                 8/10/2011

                                                                                                                                                                                                                             9/13/2011




                                                                                                                                                                                                                                                                                  1/27/2012
                    Consensus 2012 EPS, rebased (Rmb) (LHS)                                                            Share Price, rebased (HK$) (LHS)                                             Consensus rating: 1 = strong sell, 5 = strong buy - (RHS)
Source: Bloomberg


  Profit and loss (Rmb m)                                                                                                                                          Balance sheet (Rmb m)
Yr to 31 Dec                                               2009               2010           2011E                2012E                2013E                    As at 31 Dec                                              2009              2010                  2011E             2012E              2013E
Total revenue                                             50,254             59,848          64,433               76,709               88,615                   Total current assets                                     28,378            33,524                 33,713            40,979             49,502
Gross profit                                               8,336             10,272          10,284               13,160               15,384                   Fixed assets                                              8,338             8,841                 12,264            15,364             16,264
EBITDA(adj.)                                               4,189              6,295           6,239                7,879                9,440                   Total assets                                             43,628            51,379                 56,291            67,157             77,379
Operating profit                                           3,220              5,321           4,639                5,979                7,340                   Total current liabilities                                21,086            24,129                 24,543            30,485             34,521
Net interest income/(expenses)                                45                 41             (20)                   0                    0                   Long-term debt                                            1,070             1,365                  1,365             1,365              1,365
Assoc/forex/extraord./others                                 716              1,130           1,300                  500                  800                   Total liabilities                                        22,167            25,518                 25,931            31,874             35,909
Net profit (adj.)                                          2,032              4,295           4,448                4,874                6,137                   Shareholders’ equity                                     13,060            25,612                 30,060            34,934             41,071
EPS (adj.) (Rmb)                                           0.541              0.919           0.672                0.736                0.927                   Enterprise value                                         20,471            18,003                 30,091            24,769             17,710
Net DPS (Rmb)                                              0.000              0.110           0.109                0.110                0.139                   Net debt/(cash)                                        (15,750)          (16,880)               (19,259)          (24,631)           (31,740)
Source: Company, Daiwa forecasts                                                                                                                                Source: Company, Daiwa forecasts
                                                                                                                                                                                                                                           New launches should drive growth,
                                                                                                                                                                                                                                           as long as JVs don’t disappoint
  Cash flow (Rmb m)                                                                                                                                                Key ratios (%)
Y/e 31 Dec                                                  2009              2010            2011E                2012E                2013E                   Y/e 31 Dec                                                 2009              2010                2011E              2012E             2013E
Profit before tax                                           3,980             6,492            5,919                6,479                8,140                  Sales growth % (YoY)                                        14.8              19.1                   7.7              19.1              15.5
Change in working capital                                   4,218           (1,752)            2,104                3,497                2,022                  EPS (adjusted) growth % (YoY)                               12.6              69.8                (26.9)               9.6              25.9    &
Cash flow from operations                                   7,417             2,624            5,873                9,621                9,059                  Gross-profit margin                                         16.6              17.2                  16.0              17.2              17.4
Capital expenditure                                       (3,206)           (2,719)          (4,062)              (5,000)              (3,000)                  Operating-profit margin                                      6.4               8.9                   7.2               7.8               8.3
Cash flow from investing                                  (8,009)             1,012          (4,773)              (4,750)              (2,750)                  ROAE                                                        16.6              22.2                  16.0              15.0              16.1
Net share issues/(repurchases)                                  0                  0               0                    0                    0                  Net debt to equity                                     net cash          net cash              net cash           net cash          net cash
Cash flow from financing                                    6,345               947            1,921                2,155                2,454                  PER (adjusted) (x)                                          13.7               8.1                  11.0              10.1               8.0
Change in cash                                              5,753             4,583            3,020                7,026                8,763                  Price/BVPS (x)                                               2.1               1.4                   1.6               1.4               1.2
Free cash flow                                              4,211               (95)           1,811                4,621                6,059                  Net dividend yield %                                           -               1.5                   1.5               1.5               1.9
Source: Company, Daiwa forecasts                                                                                                                                Source: Company, Daiwa forecasts
                                                                                                      Valuations look attractive



                     Company profile
                   Guangzhou Automobile Group manufactures, sells, and services automobiles. The company also makes automobile parts and
                   components, and is involved in auto financing and related services for both the overseas and domestic markets. In 2010, the
                   company had a 5% share of China's PV market. It has already launched its own brand, the Trumpchi, in late 2010.




                                                                                                                                                   - 15 -
                                                                                                   Bull-Bear Debate
                                                                                                                6 March 2012




GS Holdings (078930 KS)
Rating: Outperform (2), W65,400 (2 Mar 2012), target price: W73,000 (12%)
Jihye Choi (822) 787 9121 (jihye.choi@kr.daiwacm.com)


Why has this stock been such a star?
Having lagged the market for most of last year, GS Holdings’ (GS) share price has outperformed YTD along
with most material stocks in Asia. At the stock-specific level, the fact that GS Caltex acts as a hedge on a
deterioration in the Iran situation also works positively for the share price.


Bull case (Daiwa analyst’s view)                                   Bear case
Petrochemical subsidiary GS Caltex accounts for 70-                GS Caltex’s high gearing is a fundamental problem.
80% of GS’s operating profit. GS Caltex’s PX                       As a result of expanding its upgrading facilities, the
business, which has a capacity of 1.2m tonnes/year,                company’s net debt-to-equity ratio increased to 93%
will benefit from the rapid expansion in the as the                at the end of 2011 from 82% one year earlier, making
polyester industry on the back of burgeoning demand                it the most highly geared Korea refiner. Also, the
from China, and the fact that little PX capacity                   company’s proportion of foreign-exchange-
additions are planned in Asia over 2011-13. As a                   denominated debt is more than 30% larger than its
result, the PX-naphtha spread will be robust over the              peers, making GS Caltex especially vulnerable to
next three years.                                                  Won depreciation.

At 28%, GS Caltex has the highest upgrading facility               GS Caltex is not well-positioned in the businesses
ratio in Korea after completing its new heavy-oil                  that are growing, unlike its Korea peers. SK
upgrader at the end of 2010. The company plans to                  Innovation plans to acquire another E&P field and S-
complete another residual fluidised catalytic cracking             Oil became the largest PX-maker in Korea after
facility in 2012, which would raise its upgrading-                 expanding capacity in 2Q10. E&P and PX are likely
facility ratio to 35%. Following the commissioning of              to be growth activities in 2012, given high oil prices
these facilities, we forecast GS Caltex’s refineries to            and strong spreads. GS Caltex, on the other hand, is
have an operating margin of 2.7% for 2013, despite                 mostly focused on refining, having not yet been able
the weakening complex-margin trend globally.                       to find a strong medium-to-long term growth driver.

While Daiwa forecasts Asia’s complex refining                      The 30%-owned GS Home Shopping lacks an
margin to be US$9.4/bbl for 2012, the YTD margin                   efficient merchandising strategy compared with its
has been stronger than expected at US$11.5/bbl. If                 peers, which could have a slight impact on GS’s
this very profitable trend continues, GS, along with               profit growth. Daiwa forecasts GS Home Shopping’s
the other Korea refiners, will see strong earnings                 EPS to rise by 8% YoY for 2013 compared with its
growth this year.                                                  peers’ average of 14%.

Catalysts: GS Caltex’s 1Q12 results are likely to be               Catalysts: The high net gearing is likely to weigh
a positive catalyst, backed by an improved refining                more heavily on GS than its peers, especially as
margin, which so far this year has averaged                        refining margins fall. This could be troubling if the
US$11.50/bbl compared with US$9.70 for 4Q11.                       company has difficulty passing on rising crude costs
                                                                   due to excess refining supply in the region.
Valuation: The stock’s valuation is attractive, trading
at a PER of 6.2x on our 2012 EPS forecast, more
than a 20% discount to the past-eight-year average.                Valuation: The stock is currently trading at a
Its current valuation is most attractive compared with             discount (6.2x 2012E PER) to SK Innovation (7.9x
those of peers such as SK Innovation (trading at 7.9x              2012E PER). As a holding company, which owns
our 2012 EPS forecast) and S-Oil (10x 2012E). Over                 50% of GS Caltex, GS should trade at a discount to
the past eight years, GS’ share price has shown a                  SK Innovation, and over the past seven years SK
strong positive relationship with the crude-oil price.             Innovation has on average traded at a 26% PER
                                                                   premium to GS.


                                                          - 16 -
                                                                                                                                                                                                                                                        Bull-Bear Debate
                                                                                                                                                                                                                                                                                          6 March 2012




GS Holdings: how the consensus view has evolved (weekly data)

                                                                                                                                                                                                                                                                                                             5.0
 290

                                                                                                                                                                                                                                                                                                             4.5
 240

                                                                                                                                                                                                                                                                                                             4.0
 190
                                                                                                                                                                                                                                                                                                             3.5

 140
                                                                                                                                                                                                                                                                                                             3.0

  90
                                                                                                                                                                                                                                                                                                             2.5


  40                                                                                                                                                                                                                                                                                                         2.0
       2/12/2010

                   3/18/2010

                               4/21/2010

                                           5/25/2010

                                                       6/28/2010




                                                                                             10/8/2010




                                                                                                                                       1/18/2011

                                                                                                                                                    2/21/2011

                                                                                                                                                                 3/27/2011

                                                                                                                                                                             4/30/2011




                                                                                                                                                                                                                  8/10/2011

                                                                                                                                                                                                                               9/13/2011




                                                                                                                                                                                                                                                                                      1/27/2012
                                                                                                         11/11/2010

                                                                                                                          12/15/2010




                                                                                                                                                                                                                                           10/17/2011

                                                                                                                                                                                                                                                          11/20/2011

                                                                                                                                                                                                                                                                         12/24/2011
                                                                   8/1/2010

                                                                                  9/4/2010




                                                                                                                                                                                         6/3/2011

                                                                                                                                                                                                       7/7/2011




                                                                                                                                                                                                                                                                                                  3/1/2012
                   Consensus 2012 EPS, rebased (W) (LHS)                                                          Share Price, rebased (W) (LHS)                                                    Consensus rating: 1 = strong sell, 5 = strong buy - (RHS)
Source: Bloomberg
                                                                                                                                                                                                                          While low at the group level, GS Caltex’s gearing is
  Profit and loss (Wbn)                                                                                                                                            Balance sheet (Wbn)                                    very high, with high foreign-denominated debt
Yr to 31 Dec                                           2009                   2010           2011E                2012E                2013E                    As at 31 Dec                                                  2009              2010                   2011E            2012E                2013E
Total revenue                                            534                    929           8,498                9,353               10,369                   Total current assets                                             59                96                   1,810            2,178                2,521
Gross profit                                             531                    927           1,675                2,240                2,398                   Fixed assets                                                    560               553                   1,731            1,731                1,731
EBITDA(adj.)                                             505                    889             940                1,313                1,365                   Total assets                                                  5,172             5,931                   9,596           10,842               12,091
Operating profit                                         499                    883             933                1,306                1,358                   Total current liabilities                                       152               348                   2,032            2,057                2,139
Net interest income/(expenses)                              8                      9            (36)                 (16)                 (16)                  Long-term debt                                                  527               329                     597              797                  897
Assoc/forex/extraord./others                              (0)                    (0)               0                  (0)                  (0)                  Total liabilities                                             1,090             1,069                   2,958            3,183                3,365
Net profit (adj.)                                        496                    801             762                  984                1,024                   Shareholders’ equity                                          4,082             4,861                   5,838            6,808                7,775
EPS (adj.) (W)                                         5,342                  8,623           8,205               10,597               11,028                   Enterprise value                                              6,694             6,643                   8,087            7,981                7,993
Net DPS (W)                                            1,000                  1,250           1,300                1,800                1,900                   Net debt/(cash)                                                 619               568                   1,212            1,056                  968
Source: Company, Daiwa forecasts                                                                                                                                Source: Company, Daiwa forecasts


  Cash flow (Wbn)                                                                                                                                                  Key ratios (%)
Y/e 31 Dec                                             2009                   2010           2011E                    2012E            2013E                    Y/e 31 Dec                                                    2009                2010                 2011E             2012E               2013E
Profit before tax                                        506                    891            897                     1,290            1,342                   Sales growth % (YoY)                                          283.2                74.0                 815.1              10.1                10.9
Change in working capital                                  0                      0               0                       13              (72)                  EPS (adjusted) growth % (YoY)                                 342.3                61.4                  (4.8)             29.1                 4.1
Cash flow from operation                                  31                    146              52                      289              268                   Gross-profit margin                                            99.5                99.8                  19.7              23.9                23.1
Capital expenditure                                    (122)                   (22)            (90)                       (7)              (7)                  Operating-profit margin                                        93.4                95.0                  11.0              14.0                13.1
Cash flow from investing                                (99)                   (24)            (90)                       (7)              (7)                  ROAE                                                           13.0                17.9                  14.3              15.6                14.1
Net share issues/(repurchases)                           311                    101            268                       200              100                   Net debt to equity                                             15.2                11.7                  20.8              15.5                12.4
Cash flow from financing                                  80                  (105)            350                        73              (73)                  PER (adjusted) (x)                                             12.2                 7.6                    8.0              6.2                 5.9
Change in cash                                            12                     17            311                       356              188                   Price/BVPS (x)                                                  1.5                 1.3                    1.0              0.9                 0.8
Free cash flow                                          (91)                    123            (38)                      283              261                   Net dividend yield %                                            1.5                 1.9                    2.0              2.8                 2.9
Source: Company, Daiwa forecasts                                                                                                                                Source: Company, Daiwa forecasts                                                        GS Caltex is benefiting from
                                                                                                                                                                                                                                                        surprisingly healthy refining margins


                   Company profile
               GS Holdings was formed in 2004 following the restructuring of LG Group. The primary investment of GS Holdings is a 50%
               stake in GS Caltex (a joint venture with Chevron), which is Korea’s second-largest refiner in terms of CDU (crude distillation
               unit). Other investments include a 66% stake in GS Retail, 30% stake in GS Home Shopping, and 70% stake in GS EPS.




                                                                                                                                                   - 17 -
                                                                                                   Bull-Bear Debate
                                                                                                                6 March 2012




HTC (2498 TT)
Rating: Sell (5), NT$644 (2 March 2012), target price: NT$267 (-57.6%)

Alex Chang (886) 2 8758 6248 (alex.chang@daiwacm-cathay.com.tw)


Why has this stock been such a star?
The stock has performed very well over the past three months on expectations of very strong sales in 2Q12,
when HTC will be one of the only leading smartphone makers to launch new products.


Bull case                                                         Bear case (Daiwa analyst’s view)
HTC plans to launch three new models in 2Q11,                     HTC is seeing declines in economies of scale in
which is likely boost sell-in shipments and revenue               manufacturing, leading to contractions in both its
growth sharply, potentially by as much as 50% QoQ                 blended ASP and gross margin for 2012 and 2013.
given a low base for 1Q12. The key feature additions              We forecast YoY revenue declines of 23% for 2012,
to these models should include AMOLED screens,                    and net-profit falls of 54% for 2012 and 24% for
making the company only the second smartphone                     2013.
maker after Samsung Electronics (Samsung) to use
this leading technology.                                          Although sales of HTC’s three new models will boost
                                                                  2Q12 sales from a low level in 1Q12, the sales
If the launches of the Samsung Galaxy SIII and                    opportunity is likely to be remarkably short. HTC is
Apple iPhone 5 are delayed, this would provide                    likely to face further competitive pressure from the
HTC’s new models with an extended sales window,                   launch of Samsung’s Galaxy SIII in 2Q12 and
allowing increased shipment volume, market share,                 Apple’s iPhone 5 in 3Q12, and a potential repeat of
and earnings. If Apple and Samsung fail to start                  its poor 4Q11 showing. The risk to HTC would be
shipments by August, then they risk missing 3Q12                  magnified if Samsung held back AMOLED screen
completely, which would likely threaten their                     shipments for its own use, thus reducing the number
Christmas season sales. This, of course, would help               of smartphones HTC would be physically able to sell.
competitors such as HTC, in our view.
                                                                  As Daiwa discussed in a recent report, HTC’s
HTC is becoming aggressive in expanding in China.                 shipments over the next few quarters are likely to
It is the only major global smartphone maker that is              disappoint the market due to delays in receiving
entering the market with Chinese-language content,                sufficient quantities of Qualcomm chipsets, as a
supported materially by the chairwoman’s interest in              result of the manufacturing process being less
Hong Kong media company TVB and other China-                      smooth than originally expected by HTC’s
based application content providers.                              management.

Catalysts: The near-term catalyst is likely to be very            Catalysts: Due to the Qualcomm chipset shipment
strong smartphone shipments being announced for                   delays, HTC’s new phone sales in the next few
2Q12. While the market expects a good quarter, the                quarters are likely to miss market expectations. Also,
potential for a positive surprise is high due to                  there is the ongoing risk of HTC having to delay its
product-launch delays by Apple and Samsung.                       new model launches. In addition, given that the
                                                                  Samsung Galaxy SIII and Apple iPhone 5 are due to
Valuation: The stock is trading at a PER of 11.6x on              be launched in the next few quarters, HTC is likely to
the Bloomberg-consensus 2012 earnings forecast,                   see a similar plunge in shipments to that in 4Q11.
which is below the mid-point of the past-10-year
valuation range for the stock. There is reason to                 Valuation: We value the stock at a deservedly low
believe the earnings-forecast revisions trend for HTC             PER of 8x 2012E. Over the past five years it has
has bottomed out, especially if 2Q12 exceeds                      traded as high as 17x, when its products were
expectations, which could easily happen due to the                successfully competing against the iPhone, and as
Samsung and Apple delays, which could extend into                 low as 8x, when the company was struggling to find
3Q12. Given this, both the PER multiple and                       the next big thing, with the latter closely resembling
earnings could easily climb much higher from here.                the current situation.

                                                         - 18 -
                                                                                                                                                                                                                                                       Bull-Bear Debate
                                                                                                                                                                                                                                                                                                6 March 2012




HTC: how the consensus view has evolved (weekly data)

 500                                                                                                                                                                                                                                                                                                           5.0

 450
                                                                                                                                                                                                                                                                                                               4.5
 400

 350                                                                                                                                                                                                                                                                                                           4.0

 300
                                                                                                                                                                                                                                                                                                               3.5
 250

 200                                                                                                                                                                                                                                                                                                           3.0

 150
                                                                                                                                                                                                                                                                                                               2.5
 100

  50                                                                                                                                                                                                                                                                                                           2.0
       2/13/2010

                    3/19/2010

                                4/22/2010

                                            5/26/2010

                                                          6/29/2010




                                                                                             10/9/2010




                                                                                                                                       1/19/2011

                                                                                                                                                   2/22/2011

                                                                                                                                                                 3/28/2011




                                                                                                                                                                                                               8/11/2011

                                                                                                                                                                                                                              9/14/2011




                                                                                                                                                                                                                                                                                    1/28/2012
                                                                                                         11/12/2010

                                                                                                                         12/16/2010




                                                                                                                                                                                                                                          10/18/2011

                                                                                                                                                                                                                                                       11/21/2011

                                                                                                                                                                                                                                                                       12/25/2011
                                                                      8/2/2010

                                                                                 9/5/2010




                                                                                                                                                                             5/1/2011

                                                                                                                                                                                        6/4/2011

                                                                                                                                                                                                    7/8/2011




                                                                                                                                                                                                                                                                                                  3/2/2012
                   Consensus 2012 EPS, rebased (NT$) (LHS)                                                            Share Price, rebased (NT$) (LHS)                                             Consensus rating: 1 = strong sell, 5 = strong buy - (RHS)
Source: Bloomberg                                                                                                                                                                                                                                                   The bulls and bears diverge
                                                                                                                                                                                                                                                                    over expected success of new
  Profit and loss (NT$m)                                                                                                                                              Balance sheet (NT$m)                                                                          phone launches in 2012
Yr to 31 Dec                                              2009              2010             2011E               2012E                 2013E                     As at 31 Dec                                                 2009             2010                    2011E           2012E                    2013E
Total revenue                                           144,493           278,761           465,794             356,785               364,137                    Total current assets                                      104,901          168,640                   219,772         183,082                  198,048
Gross profit                                             46,163            83,869           131,680              86,644                81,095                    Fixed assets                                                 9,900           14,024                   16,963          25,087                   34,933
EBITDA(adj.)                                             25,597            45,135            71,046              35, 29                28,705                    Total assets                                              119,429          190,382                   255,193         226,221                  252,939
Operating profit                                         24,623            44,132            68,876              32,357                24,721                    Total current liabilities                                   53,729         115,641                   157,044         110,502                  138,984
Net interest income/(expenses)                              360               310               660                 739                   754                    Long-term debt                                                  24               12                        -               -                        -
Assoc/forex/extraord./others                                414               521             2,008                 (84)                  (76)                   Total liabilities                                           53,754         115,667                   158,746         110,542                  139,029
Net profit (adj.)                                        22,614            39,515            62,049              28,440                21,589                    Shareholders’ equity                                        65,640           74,714                   96,447         115,877                  114,001
EPS (adj.) (NT$)                                         28.664            48.327            72.828              33.380                25.339                    Enterprise value                                          441,052          451,226                   430,009         412,137                  442,852
Net DPS (NT$)                                            27.000            26.000            37.000              50.979                23.366                    Net debt/(cash)                                           (67,057)         (75,343)                (118,679)       (136,551)                (105,836)
                   Source: Company, Daiwa forecasts                                                                                                              Source: Company, Daiwa forecasts


  Cash flow (NT$m)                                                                                                                                                    Key ratios (%)
Y/e 31 Dec                                                 2009               2010            2011E              2012E                  2013E                    Y/e 31 Dec                                                    2009            2010                    2011E             2012E                  2013E
Profit before tax                                         25,396            44,964            71,544             33,013                 25,399                   Sales growth % (YoY)                                          (5.2)            92.9                     67.1             (23.4)                    2.1
Change in working capital                                  1,604           ( 6,580)            9,360             23,776               (17,336)                   EPS (adjusted) growth % (YoY)                               (24.2)             68.6                     50.7             (54.2)                 (24.1)
Cash flow from operations                                 27,717            29,475          105,201              84,464                 37,305                   Gross-profit margin                                            31.9            30.1                     28.3               24.3                   22.3
Capital expenditure                                      (1,911)            (4,991)          (9,226)           (11,554)               (11,554)                   Operating-profit margin                                        17.0            15.8                     14.8                9.1                    6.8
Cash flow from investing                                 (4,742)            (3,808)         (16,961)           (15,848)               (17,648)                   ROAE                                                           34.5            52.9                     64.3               24.5                   18.9
Net share issues/(repurchases)                           (2,407)          (11,687)          (15,959)           (16,318)               (16,688)                   Net debt to equity                                        net cash        net cash                  net cash          net cash               net cash
Cash flow from financing                                (22,569)          (31,877)          (46,139)           (50,744)               (50,372)                   PER (adjusted) (x)                                             22.5            13.3                      8.8               19.3                   25.4
Change in cash                                               397            (6,748)           42,482             17,872               (30,715)                   Price/BVPS (x)                                                  7.7             7.0                      5.7                4.7                    4.8
Free cash flow                                            25,806            24,484            95,975             72,910                 25,751                   Net dividend yield %                                            4.2             4.0                      5.7                7.9                    3.6
Source: Company, Daiwa forecasts                                                                                                                                 Source: Company, Daiwa forecasts
                                                                                                                                                               Margins at risk as economies of scale
                                                                                                                                                               lost in face of strong competition


                   Company profile
               HTC is the current market-share leader in terms of both Android and Windows CE Mobile smartphone devices. The company
               has business relationships with more than 70 telecom-service providers in over 50 countries. In addition, HTC is the early
               runner in 4G smartphones ahead of peers and a global market-share leader in 4G smartphones.




                                                                                                                                                   - 19 -
                                                                                                 Bull-Bear Debate
                                                                                                              6 March 2012




Hynix Semiconductor (000660 KS)
Rating: Outperform (2), W30,450 (2 March 2012), target price: W32,000 (+5.1%)

Jae H. Lee (82) 2 787 9173 (jhlee@kr.daiwacm.com)

Why has this stock been such a star?
The stock has rallied on expectations of potential industry consolidation. Given the recent bankruptcy protection
filing by Elpida, we believe that substantial capacity cuts or asset sales are likely for the troubled DRAM maker,
which could have a positive impact on the DRAM industry.


Bull case (Daiwa analyst’s view)                                Bear case
Hynix is likely to become the key beneficiary of                DRAM demand remains weak for 1Q12 due to the
potential industry consolidation in the DRAM market.            faltering global economy and Thailand floods
Although Elpida’s (Not rated) management said it will           affecting PC production. In addition, Hynix’s
make an effort to turn the company around and its               management has raised concerns over the sharp
production lines will continue to operate, we think             price decline for mobile DRAM in 1Q12 due to
there could be radical changes to Elpida’s business             seasonal reasons and as the competition intensifies.
model as creditors of Elpida gain control.
                                                                Following Elpida’s slide into bankruptcy protection,
We believe that a production cutback for Elpida is              there are concerns in the market that Micron
likely in the near term, in order to stop the bleeding          Technology (Not rated) and Toshiba (6502 JP, ¥354,
from huge losses. In addition, as Hynix has sold off            Outperform [2]) are likely candidates to acquire
many of its non-core assets when the company filed              Elpida’s fab, and potentially pose a competitive threat
for a workout programme in 2001, we think that asset            to existing DRAM makers.
sales are also likely for Elpida.
                                                                In comparison with Samsung Electronics (005930
In comparison to its competitors, we believe Hynix              KS, W1,182,000, Outperform [2]), Hynix still lags the
has successfully widened its gap on a technological             leader in terms of process migration and profitability.
basis, given its superior product mix and profitability.        However, Hynix has raised its capex to W4.2tn for
In addition, SK Telecom’s (017670 KS, W146,000,                 2012 from W3.4tn for 2011, expanding its NAND-
Hold [3]) recent acquisition of a stake in Hynix should         flash business as well as cost reduction efforts in
provide Hynix with ample capital resources, while               DRAM.
most of its competitors’ financials continue to
deteriorate amid huge operating losses.                         There are market concerns that DRAM prices will
                                                                remain under pressure due to weak demand. In
Although we forecast Hynix to continue to post                  addition, since many second-tier DRAM makers have
operating loss for 1Q12, we expect its earnings to              already lowered their fab utilisation rates amid weak
turn around from 2Q12, on the back of a potential               prices, these capacity could be added in the near
DRAM price recovery.                                            term due to Elpida’s woes.

Catalysts: We believe the DRAM price trend is the               Catalysts: DRAM prices will likely remain as the key
near-term share-price catalyst, as mainstream DRAM              earnings driver for Hynix. Potential inventory sell-off
prices have risen by 15% on the spot market over the            by financially distressed second-tier DRAM makers
past one week. Meanwhile, as the company plans                  may put downward pressure on DRAM prices. In
capex of W4.2tn for 2012, we expect an annual cost              addition, as process technology becomes more
reduction of 20-30% YoY, and potential upside to its            advanced, lower production yield may lead to slower
earnings are likely.                                            cost reductions for Hynix.

Valuation: Hynix shares are trading at a 2012E PBR              Valuation: Based on the Bloomberg consensus,
of 2.2x, versus its past-3-year trading range of 1.2-           Hynix shares are trading at a 2012E PBR of 1.9x,
2.5x. Our six-month target price of W32,000 is based            near the mid-cycle PBR of 1.8x. However, given the
on a mid- to peak-cycle PBR of 2.3x.                            recent strength in DRAM spot prices, there could be
                                                                upside to the consensus forecasts, in our view.

                                                           - 20 -
                                                                                                                                                                                                                                                     Bull-Bear Debate
                                                                                                                                                                                                                                                                                        6 March 2012




Hynix Semiconductor: how the consensus view has evolved (weekly data)

 170                                                                                                                                                                                                                                                                                                       5.0

 160
                                                                                                                                                                                                                                                                                                           4.5
 150

 140                                                                                                                                                                                                                                                                                                       4.0

 130
                                                                                                                                                                                                                                                                                                           3.5
 120

 110                                                                                                                                                                                                                                                                                                       3.0

 100
                                                                                                                                                                                                                                                                                                           2.5
  90

  80                                                                                                                                                                                                                                                                                                       2.0
                                                                                                       11/11/2010

                                                                                                                    12/15/2010




                                                                                                                                                                                                                                        10/17/2011

                                                                                                                                                                                                                                                       11/20/2011

                                                                                                                                                                                                                                                                       12/24/2011
                                                                    8/1/2010

                                                                               9/4/2010




                                                                                                                                                                                    6/3/2011

                                                                                                                                                                                                  7/7/2011




                                                                                                                                                                                                                                                                                                3/1/2012
       2/12/2010

                   3/18/2010

                               4/21/2010

                                           5/25/2010

                                                        6/28/2010




                                                                                           10/8/2010




                                                                                                                                  1/18/2011

                                                                                                                                               2/21/2011

                                                                                                                                                            3/27/2011

                                                                                                                                                                        4/30/2011




                                                                                                                                                                                                             8/10/2011

                                                                                                                                                                                                                            9/13/2011




                                                                                                                                                                                                                                                                                    1/27/2012
                   Consensus 2012 EPS, rebased (W) (LHS)                                                        Share Price, rebased (W) (LHS)                                                 Consensus rating: 1 = strong sell, 5 = strong buy - (RHS)
Source: Bloomberg
                                                                                                                                                                                                                                                        …the result of which would
                                                                                                                                                                                                                                                        have a big impact on Hynix
  Profit and loss (Wbn)                                                                                                                                       Balance sheet (Wbn)
Yr to 31 Dec                                            2009             2010             2011E              2012E                2013E                    As at 31 Dec                                                    2009            2010                     2011E             2012E                2013E
Total revenue                                           7,906           12,099            10,396             11,173               13,390                   Total current assets                                           4,917           5,692                      4,937             4,936                5,647
Gross profit                                            1,627            4,779             1,675              2,848                3,762                   Fixed assets                                                  10,143          10,817                     11,197            12,019               12,819
EBITDA(adj.)                                            2,458            5,835             3,445              4,552                5,423                   Total assets                                                  16,304          17,584                     17,238            18,195               19,890
Operating profit                                        (249)            3,040               325              1,174                1,823                   Total current liabilities                                      5,769           5,342                      4,968             4,589                4,407
Net interest income/(expenses)                          (404)            (282)             (302)              (338)                (321)                   Long-term debt                                                 3,984           3,393                      3,946             4,276                4,574
Assoc/forex/extraord./others                              282              (62)                22               183                  185                   Total liabilities                                             10,384           9,415                      9,363             9,426                9,650
Net profit (adj.)                                       (333)            2,656               (56)               953                1,560                   Shareholders’ equity                                           5,452           8,170                      7,875             8,769               10,241
EPS (adj.) (W)                                          (593)            4,500               (94)             1,609                2,634                   Enterprise value                                              24,325          21,703                     22,931            22,563               21,999
Net DPS (W)                                                 -          200.000                  -           100.000              150.000                   Net debt/(cash)                                                5,437           3,729                      4,900             4,532                3,968
Source: Company, Daiwa forecasts                                                                                                                           Source: Company, Daiwa forecasts
                                                                                                                                                                                                                                                     A big uncertainly is whether
                                                                                                                                                                                                                                                     Elpida capacity will leave the
  Cash flow (Wbn)                                                                                                                                             Key ratios (%)                                                                         market…
Y/e 31 Dec                                               2009              2010            2011E                2012E             2013E                    Y/e 31 Dec                                                     2009                 2010                 2011E              2012E               2013E
Profit before tax                                        (371)             2,696               45                1,020             1,687                   Sales growth % (YoY)                                            16.0                 53.0                 (14.1)               7.5                19.8
Change in working capital                                (894)                96            (712)                  281               (97)                  EPS (adjusted) growth % (YoY)                                      -                    -                      -                 -                63.7
                                                                                                                                                                                                                                                                                                                    &
Cash flow from operations                                1,340             5,908            2,318                4,655             5,116                   Gross-profit margin                                             20.6                 39.5                   16.1              25.5                28.1
Capital expenditure                                      (756)           (3,411)          (3,500)              (4,200)           (4,400)                   Operating-profit margin                                        (3.1)                 25.1                    3.1              10.5                13.6
Cash flow from investing                               (1,004)           (4,709)          (3,390)              (4,327)           (4,749)                   ROAE                                                           (6.3)                 39.0                  (0.7)              11.5                16.4
Net share issues/(repurchases)                           1,031                 -                9                    -                  -                  Net debt to equity                                              99.7                 45.6                   62.2              51.7                38.7
Cash flow from financing                                   355           (1,140)              761                (282)             (240)                   PER (adjusted) (x)                                              n.a.                  6.8                   n.a.              18.9                11.6
Change in cash                                             682                38            (311)                   46               127                   Price/BVPS (x)                                                   3.2                  2.3                    2.4               2.2                 1.9
Free cash flow                                             585             2,497          (1,182)                  455               716                   Net dividend yield %                                               -                  0.7                      -               0.3                 0.5
Source: Company, Daiwa forecasts                                                              Attractively priced at the                                   Source: Company, Daiwa forecasts
                                                                                                                                                                                                                                                                        Tepid ROE recovery likely
                                                                                              recovery stage of the cycle


                   Company profile
               Hynix is the second-largest DRAM manufacturer globally, with a 21.5% market share (based on revenue) for 2010. The
               company's core products are DRAM and NAND-flash memory chip, but it also has small exposure to CMOS image sensors.
               Hynix has production facilities in Korea and in Wuxi, China.




                                                                                                                                              - 21 -
                                                                                                 Bull-Bear Debate
                                                                                                             6 March 2012




Larsen & Toubro (LT IN)
Rating: Outperform (2), Rs1,300 (2 March 2012), target price: Rs1,630 (+25%)
Saurabh Mehta (91) 22 6622 1009 (saurabh.mehta@in.daiwacm.com)


Why has this stock been such a star?
Larsen and Toubro (L&T) has outperformed the SENSEX by 15% so far this year, due to initial signs of a revival in
the capex cycle and expectations that interest rates have peaked, both of which should help the company.


Bull case (Daiwa analyst’s view)                                Bear case
In the current weak macro environment, we prefer                L&T has cut its FY12 new-order guidance twice so
diversified capital goods players, such as L&T, which           far, from a peak expectation of 15–20% YoY to the
would be a primary beneficiary of the likely revival in         current 5% YoY. The risk clearly is that management
industrial capex. Given its strong order backlog of             guidance is a moving target and the potential for
Rs1.45tn and strong execution, we forecast revenue              disappointment is high. Disappointment could also be
growth of 19% p.a. and earnings growth of 15% p.a.              coming from purely economic reasons, leading to
over FY11-14, backed by a 3x book-to-bill ratio.                lower-than-expected new order inflow.

L&T looks best-positioned to capitalise on the upturn           The EBITDA margin is likely to come under pressure
in the capex cycles of the railway, mining and                  due to increased domestic and international
defence sectors, which are benefitting from positive            competition, especially in the oil and gas
government policy changes. Investment in railways,              infrastructure and power segments. Also, L&T’s
for example, is set to accelerate, driven by a new              Rs350bn of unexecuted orders from the power sector
dedicated freight corridor, funded by Japanese                  (25% of its total backlog) could be delayed or
investment. Also, increased local sourcing in defence           cancelled due to the structural challenges faced by
contracts could be the next demand driver.                      the sector, as Bharat Heavy Electricals showed a few
                                                                weeks ago.
The overall order-inflow growth of L&T outperforms
that of its peers whenever there is revival in the              L&T has increased its exposure to power generation,
capex cycle, and is the key driver of the share price           power-equipment manufacturing, and BOT road, port
at such times. For example, the company is less                 and metro-rail projects, with a total investment so far
dependent on orders from the power sector, where                of Rs56bn, and has said it aims to raise this to
the financial health of the state electricity boards is         Rs155bn over the next few years. This strategy is
weak and there are coal shortages, issues that                  likely to prove ROE-dilutive, as the core construction
competitor Bharat Heavy Electricals has to face.                business is much more profitable. We forecast an
                                                                average ROE of 19% for FY10-14, down from 29%
Catalysts: Order inflow will be what drives the share           for FY05-09.
price. We forecast L&T to see Rs880bn of new
orders in FY13, driven by roads, rail, airports, and oil        Catalysts: The share price is driven entirely by order
and gas infrastructure. This order amount represents            flow. Following the 31% YTD rise in the share price,
about 10% YoY growth. A pick-up in order inflows                expectations of a strong recovery in orders are priced
has in the past been followed by upward revisions to            in. However, the risk of disappointment is high,
the Bloomberg-consensus earnings forecasts.                     especially if government policy fails once again to be
                                                                supportive due to bureaucratic delays.
Valuation: Despite the 15% YTD outperformance,
the stock is trading at a 39% discount to its average           Valuation: Earnings growth for L&T is slowing, from
PER of 22x over the last seven years, which is the              an average of 39% for FY05-09 to 17% for FY10-14,
longest period for which it is possible to compare              based on Daiwa’s forecasts. Also, average order-
L&T’s operations on a like-for-like basis. While                inflow growth was 32% for FY05-09 versus 12% in
earnings growth has slowed from a few years ago,                FY10-14E. Adding in the possibility of L&T recording
L&T’s PER premium is likely to be sustained as it is            a YoY decline in new orders for FY12, it is hard to
the broadest play on infrastructure development in              see why the stock should trade at a 40% premium to
India.                                                          its downcycle PER of 10x.

                                                           - 22 -
                                                                                                                                                                                                                                                     Bull-Bear Debate
                                                                                                                                                                                                                                                                                       6 March 2012




Larsen & Toubro: how the consensus view has evolved (weekly data)

                                                                                                                                                                                                                                                                                                          5.0
 190

                                                                                                                                                                                                                                                                                                          4.5
 170

 150                                                                                                                                                                                                                                                                                                      4.0

 130
                                                                                                                                                                                                                                                                                                          3.5

 110
                                                                                                                                                                                                                                                                                                          3.0
  90

                                                                                                                                                                                                                                                                                                          2.5
  70

  50                                                                                                                                                                                                                                                                                                      2.0
                                                                                                          11/12/2010

                                                                                                                       12/16/2010




                                                                                                                                                                                                                                        10/18/2011

                                                                                                                                                                                                                                                       11/21/2011

                                                                                                                                                                                                                                                                      12/25/2011
                                                                      8/2/2010

                                                                                 9/5/2010




                                                                                                                                                                           5/1/2011

                                                                                                                                                                                      6/4/2011

                                                                                                                                                                                                    7/8/2011




                                                                                                                                                                                                                                                                                               3/2/2012
       2/13/2010

                    3/19/2010

                                4/22/2010

                                            5/26/2010

                                                          6/29/2010




                                                                                              10/9/2010




                                                                                                                                     1/19/2011

                                                                                                                                                  2/22/2011

                                                                                                                                                               3/28/2011




                                                                                                                                                                                                               8/11/2011

                                                                                                                                                                                                                            9/14/2011




                                                                                                                                                                                                                                                                                   1/28/2012
                   Consensus 2013 EPS, rebased (Rs) (LHS)                                                          Share Price, rebased (Rs) (LHS)                                               Consensus rating: 1 = strong sell, 5 = strong buy - (RHS)
Source: Bloomberg


  Profit and loss (Rs m)                                                                                                                                         Balance sheet (Rs m)
Yr to 31 Mar                                               2010             2011              2012E              2013E                2014E                   As at 31 Mar                                               2010      2011     2012E     2013E     2014E
Total revenue                                           439,698          520,891            631,859            773,522              877,937                   Total Current Assets                                     510,553   654,835   655,067   763,903   877,639
Gross profit                                            117,136          145,483            167,443            204,983              232,653                   Fixed Assets                                             120,704   159,573   184,547   195,854   204,911
EBITDA(adj.)                                             63,697           76,910             88,460            104,425              118,521                   Total Assets                                             709,632   945,777   985,748 1,107,891 1,232,685
Operating profit                                         54,411           64,467             73,434             85,733               97,579                   Total Current Liabilities                                406,136   563,749   575,911   647,857   714,359
Net interest income/(expenses)                           (5,553)          (5,262)            (7,419)            (7,408)              (7,619)                  Long Term Debt                                            58,113    69,179    58,420    60,895    63,494
Assoc/forex/extraord./others                             28,352             9,622              6,596              8,398                8,574                  Total Liabilities                                        488,846   685,012   686,415   760,836   829,937
Net profit (adj.)                                        35,267           42,822             48,834             58,290               66,202                   Shareholders Equity                                      209,913   250,506   288,732   336,060   391,301
EPS (adj.) (Rs)                                          58.348           70.848             80.793             96.438              109.528                   Enterprise Value                                         896,220 1,000,926 1,038,854 1,047,720 1,039,076
Net DPS (Rs)                                             12.692           14.606             15.000             15.500               15.500                   Net Debt/(Cash)                                           99,801   205,120   242,706   251,179   242,082
Source: Company, Daiwa forecasts                                                                                                                              Source: Company, Daiwa forecasts
                                                                                                                                                                                                                                                     Favourable government policy
                                                                                                                                                                                                                                                     changes to drive growth
  Cash flow (Rs m)                                                                                                                                               Key ratios (%)
Y/e 31 Mar                                                 2010             2011              2012E              2013E                2014E                   Y/e 31 Mar                                                   2010                2011                 2012E             2013E               2014E
Profit Before Tax                                         77,210           68,826             72,611             86,723               98,534                  Sales growth % (YoY)                                           8.6                18.5                  21.3              22.4                13.5
Change in Working Capital                               (28,318)         (70,007)           (36,415)           (42,888)             (35,539)                  EPS (adjusted) growth % (YoY)                                 16.9                21.4                  14.0              19.4                13.6
Cash Flow from Operations                                 45,645         (10 239)             33,612             40,143               57,747                  Gross-profit margin                                           26.6                27.9                  26.5              26.5                26.5
Capital Expenditure                                     (44,800)         (68,942)           (40,000)           (30,000)             (30,000)                  Operating-profit margin                                       12.4                12.4                  11.6              11.1                11.1
Cash Flow from Investing                                (51,078)         (59,576)           (35,035)           (28,972)             (28,131)                  ROAE                                                          20.2                18.6                  18.1              18.7                18.2
Net share issues/(repurchases)                            21,327            3,473                  -                  -                    -                  Net debt to equity                                            47.5                81.9                  84.1              74.7                61.9
Cash flow from Financing                                  48,808           78,682           (17,028)             12,089               17,828                  PER (adjusted) (x)                                            22.3                18.3                  16.1              13.5                11.9
Change in cash                                            43,376            8,867           (18,451)             23,260               47,444                  Price/BVPS (x)                                                 3.7                 3.1                   2.7               2.3                 2.0
Free cash flow                                               845         (79,180)            (6,388)             10,143               27,747                  Net dividend yield %                                           1.0                 1.1                   1.2               1.2                 1.2
Source: Company, Daiwa forecasts                                                                 Margin pressure risk from                                    Source: Company, Daiwa forecasts
                                                                                                 international competition


                   Company profile
               L&T is an engineering & construction (E&C) conglomerate. The company has varied interests in the IT-services and financial-
               services sectors. For FY11, the company recorded revenue of Rs521bn and a net profit of Rs43bn.




                                                                                                                                                 - 23 -
                                                                                                  Bull-Bear Debate
                                                                                                              6 March 2012




Power Finance (POWF IN)
Rating: Buy (1), Rs192 (2 March 2012), target price: Rs230 (+20%)
Punit Srivastava (91) 22 6622 1013 (punit.srivastava@in.daiwacm.com)


Why has this stock been such a star?
After months of policy paralysis, the central government told Coal India to sign fuel supply agreements (FSA)
with power producers guaranteeing at least 80% of their requirements. This removed a big overhang for Power
Finance’s (PFC) main customers. The completion of a bond issue, supported by expectations of interest rates
falling, also helped PFC borrow from the wholesale market.


Bull case (Daiwa analyst’s view)                                 Bear case
The government has ordered Coal India to sign FSAs               PFC’s share price rallied sharply on the FSA news.
with power projects and to guarantee 80% of the                  There is still uncertainty over who will bear the cost
requirements. The company will have to import coal               of imported coal. There is also uncertainty whether
to cover any shortfall. As these FSAs are due to be              the power distribution companies will renew their
signed by end of March 2012, there could be a                    power-purchase agreements (PPA) as their ability to
rerating of PFC.                                                 buy higher priced power is unclear.

There has been continuing concern among investors                In the last five years the private sector has become a
about bad debts rising, as the financial viability of the        significant player in power generation. Hence, it is no
projects to which PFC lends is shaky. However, over              longer a business of one government arm lending to
the last 30 years, the company has never had a                   another. The risk of lending to this sector has
problem as the central government has always come                increased as a result.
up with a solution.
                                                                 The key issue is the cost of power to consumers. If
PFC has very low exposure (less than 5%) to the                  the distribution companies cannot raise prices due to
loss-making power-distribution sector. The company               political pressure, they cannot buy higher-cost power
mainly finances power-generation projects that are               from the generation companies. There would be
viable and can generate a good cash flow once they               scepticism about the benefits from the PPAs
start operation, and power demand growth in the                  between distributors and generators if the distribution
country should remain very high for the next few                 companies continue to record huge losses.
years.
                                                                 Catalyst: The 80% FSA target is too ambitious.
Catalyst: PFC has had volatile quarterly NIMs due to             Meeting demand through imported coal is difficult, as
its unhedged foreign-exchange position (about 85%                its cost is about 50% higher than domestic coal, and
unhedged). However, the government recently                      state-controlled distribution companies may refuse to
allowed the company to amortise mark-to-market                   agree on the new PPAs as a result.
losses over the life of the loan, which should lower
this volatility and lead to higher valuations.                   Valuation: The stock has already been rerated,
                                                                 going from having a one-year forward PBR of 0.8x to
Valuation: Over the past five years, the stock has               1.1x in just two months on the back of the FSA news.
had a PBR as high as 2.5x due to healthy asset                   The long-term average PBR multiple of 1.8x is due to
quality, low provisions, rising NIMs, high ROEs of 17-           extremely high valuations of 2.5x at one time due to
20%, and no cap on foreign investment despite being              excessive optimism. The market is now aware of the
state-owned. As the problems in the power sector                 huge problems in the power sector and the all-time
are addressed, PFC should again earn superior                    high valuations are unlikely to be repeated.
returns, driving a move from the current PBR of 1.1x
on our FY13 BVPS forecast to at least its past-five-
year mean of 1.8x.




                                                            - 24 -
                                                                                                                                                                                                                                                              Bull-Bear Debate
                                                                                                                                                                                                                                                                                                     6 March 2012




Power Finance: how the consensus view has evolved (weekly data)

                                                                                                                                                                                                                                                                                                                      5.0
  150
                                                                                                                                                                                                                                                                                                                      4.5
  130                                                                                                                                                                                                                                                                                                                 4.0

  110                                                                                                                                                                                                                                                                                                                 3.5

                                                                                                                                                                                                                                                                                                                      3.0
   90
                                                                                                                                                                                                                                                                                                                      2.5
   70
                                                                                                                                                                                                                                                                                                                      2.0
   50
                                                                                                                                                                                                                                                                                                                      1.5

   30                                                                                                                                                                                                                                                                                                                 1.0
        2/14/2010

                     3/20/2010

                                 4/23/2010

                                             5/27/2010

                                                           6/30/2010




                                                                                                                                            1/20/2011

                                                                                                                                                         2/23/2011

                                                                                                                                                                      3/29/2011




                                                                                                                                                                                                                      8/12/2011

                                                                                                                                                                                                                                    9/15/2011




                                                                                                                                                                                                                                                                                               1/29/2012
                                                                                                   10/10/2010

                                                                                                                11/13/2010

                                                                                                                             12/17/2010




                                                                                                                                                                                                                                                10/19/2011

                                                                                                                                                                                                                                                                11/22/2011

                                                                                                                                                                                                                                                                                12/26/2011
                                                                       8/3/2010

                                                                                      9/6/2010




                                                                                                                                                                                  5/2/2011

                                                                                                                                                                                             6/5/2011

                                                                                                                                                                                                           7/9/2011




                                                                                                                                                                                                                                                                                                           3/3/2012
                    Consensus 2013 EPS, rebased (Rs) (LHS)                                                             Share Price, rebased (Rs) (LHS)                                                  Consensus rating: 1 = strong sell, 5 = strong buy - (RHS)
Source: Bloomberg
 Bad debts look secure with new fuel supply agreement ruling
  Income statement (Rs m)                                                                                                                                               Balance sheet (Rs m)
Year to 31 Mar                                             2010              2011                  2012E             2013E                  2014E                    Year to 31 Mar                                          2010               2011                         2012E               2013E                2014E
Net-interest in ome                                      29,098            35,273                  43,365            54,666                 65,657                   Loans & accrued interest
Fees & commission (net)                                     (37)               896                  1,835             1,635                  1,635                   (gross)                                          798,630                 996,067            1,228,663                   1,473,130           1,765,090
Operating income                                         29,957             36,64                  45,710            56,861                 67,852                   Customer deposits                                      -                       -                    -                           -                   -
Total expenses                                           (1,091)             (969)                (1,244)           (1,425)                (1,632)                   Total assets                                     849,775               1,046,338            1,264,185                   1,507,836           1,800,256
Pre-provision operating profit                           28,866            35,679                  44,466            55,437                 66,220                   Total liabilities                                723,115                 903,539            1,063,758                   1,277,806           1,535,028
Total provisions                                              21             (317)                (1,600)           (2,100)                (2,800)                   Shareholders equity                              126,660                 142,800              200,428                     230,030             265,228
Profit before tax                                        30,107            35,442                  40,956            53,337                 63,420                   Source: Company, Daiwa forecasts
Taxes on profit                                          (6,555)           (9,246)               (10,717)          (13,868)               (16,489)
Adj. net profit                                          23,462            26,556                  30,240            39,469                 46,931
Source: Company, Daiwa forecasts                                                                                                                                        Ratios and valuation data (Rs)
                                                                                                                                                                     Year to 31 Mar                                               2010                 2011                   2012E                 2013E             2014E
  Capital adequacy and asset quality                                                                                                                                 EPS (adjusted)                                                 20                   23                      25                    30                36
Year to 31 Mar                                            2010                2011                2012E                 2013E              2014E                     Net DPS                                                         5                    5                       6                     7                 7
Total provisions/NPAs %                                   0.538               0.156                0.851                 0.841              0.819                    Book value per sh re (BVPS)                                   110                  124                     152                   174               201
Source: Company, Daiwa forecasts                                                                                                                                     Source: Company, Daiwa forecasts
  Aggregated items – financial (Rs m)
Year to 31 Mar                                            2010                2011                2012E                 2013E              2014E
                                                                                                                                                                        Industry-specific (Non KPI) – financial
Cash & equivalent                                        13943               23503                25853                 28438              31282
                                                                                                                                                                     Year to 31 Mar                                               2010                 2011                   2012E                 2013E             2014E
Investment securities                                      310                 539                  539                   539                539
                                                                                                                                                                     Net-interest margin (%)                                        4.0                  3.9                     3.8                   4.0               4.0
Source: Company, Daiwa forecasts
                                                                                                                                                                     Cost of funds (%)                                              8.2                  8.3                     8.9                   8.8               8.6
  Common items                                                                                                                                                       NPL (%)                                                        0.0                  0.2                     1.3                   1.2               1.1
Year to 31 Mar                                             2010                   2011            2012E                 2013E              2014E                     Loan growth (%)                                               23.9                 24.7                    23.4                  19.9              19.8
Earnings Yield (recurrent,%)                                10.6                   12.0             12.7                  15.5               18.5                    Fee-to-income ratio (%)                                        3.6                  2.6                     2.7                   2.5               2.4
EPS (Adjusted) Growth % (YoY)                               33.0                   13.2              5.9                  22.0               18.9                    Expense-to-income ratio (%)                                    4.0                  3.9                     3.8                   4.0               4.0
P/E (Adjusted) (X)                                           9.4                    8.3              7.8                   6.4                5.4                    Source: Company, Daiwa forecasts
Price/ BVPS (X)                                              1.7                    1.5              1.3                   1.1                1.0                                                                                                            New accounting rules will lead to
BPS Growth % (YoY)                                          16.8                   12.7             22.0                  14.8               15.3                                                                                                            less volatile NIMs
Source: Company, Daiwa forecasts
 Historical peak PBR valuations of over 2x are unlikely to be repeated


                    Company profile
              Power Finance Corporation was incorporated in 1986 and was given the status of a Nav-Ratna public-sector unit by the
              government in June 2007. It is a leading power-finance company in India with a balance-sheet size of Rs1,248bn as at 31
              December 2011. Power Finance Corporation is also a nodal agency for awarding ultra-mega power projects and for
              implementing Accelerated Power Development and Reforms Programme schemes to reduce the aggregate technical and
              commercial losses of state power utilities.


                                                                                                                                                        - 25 -
                                                                                                 Bull-Bear Debate
                                                                                                              6 March 2012




Samsung Heavy Industries (010140 KS)
Rating: Outperform (2), W40,700 (2 Mar 2012), target price: W42,000 (+3%)
Sung Yop Chung (82) 2 787 9157 (sychung@kr.daiwacm.com)


Why has this stock been such a star?
Samsung Heavy Industries’ (SHI) share price is up 46% YTD in absolute terms, bolstered by the expectation of
further large order wins of LNGCs and offshore structures/vessels, having announced a US$2.7bn order for a
central processing facility (CPF) from Inpex Operations Australia in early February.


Bull case (Daiwa analyst’s view)                               Bear case
SHI is a major beneficiary of what we see as solid             Despite some optimistic forecasts of solid order
order momentum for LNGCs and offshore vessels,                 momentum for LNGCs and drillships, orders in 1H12
given the increasing focus on new energy sources               are more likely to decelerate HoH, given the high
following the earthquake in Japan last year, which             base in 2011. Furthermore, unless there is a full-
has resulted in strong charter rates for LNGCs and             fledged recovery in the shipbuilding cycle, with new
greater deep-water drilling activity. The company has          shipbuilding orders for conventional vessel segments
a global market share of 29% for LNGCs and 48%                 also recovering, the company’s earnings and share
for drillships, based on order-intakes since 1996.             price will most likely be capped.

SHI is likely to exceed its new-order target of                The strong start to the year for equity markets masks
US$13.7bn for 2012, which would be its third-highest           the fact that economies are still struggling. Europe,
amount of shipbuilding orders since 2004. We                   for one, may be avoiding a systemic crisis but it is
forecast US$14bn worth of new orders, and believe              unlikely it will avoid a recession. The collapse in
the company could exceed that number because,                  intra-Asia trade is also worrying. In this context, there
among the major global shipyards, it has the greatest          is plenty of incentive to defer or cancel LNGC and
percentage of its order book in LNGCs at 13% and in            drillship orders, especially considering the high cost
offshore structures and vessels at 53%.                        of these vessels.

SHI’s upbeat guidance for 2012 revenue of                      While the Korea shipbuilders, including SHI, account
US$14.9bn looks achievable, given our view of an               for the lion’s share of energy-related orders, these
improved product mix from deliveries of LNGCs and              segments will likely also face an oversupply in the
drillships amounting to 11 each in 2012, compared              future, as ultimately occurs in all parts of the shipping
with 8 and 6, respectively, in 2011.                           market. Current valuations seem to under-price this
                                                               risk.
Catalysts: New orders have shown a positive
correlation of 76% with SHI’s share-price since 2007.          Catalysts: As the 76% correlation discussed in the
As this is likely to be a strong year for new orders,          bull case clearly demonstrates, the share prices of
including press reports of a possible US$400m order            SHI and all the other shipbuilders rise and fall with
for two LNGCs for Australia’s Gorgon project, the              the trend in new orders. With the share price up
positive catalysts should be numerous.                         nearly 80% from the September 2011 low, and only
                                                               one-third off the 2007 frothy peak, expectations are
Valuation: The stock started this year with a PBR of           likely to be disappointed.
1.3x and is now trading closer to 1.9x, but still lower
than its past-8-year average of 3.5x. While this does          Valuation: This year will likely be an average one for
not signal an industry-wide recovery, SHI’s strong             SHI, not a great one. On the most optimistic forecast,
order outlook and recovery in profitability from 2Q12          new orders will be 30% below the company’s best
should help drive the share price upward, noting that          year, 2007. The 15% ROE, based on the consensus
its valuation peaked at 6.5x in 2007, a year in which          forecast, will be the lowest in six years, with at best a
it recorded an all-time high order intake of US$21bn.          marginal improvement in 2013. Priced at nearly 2x
                                                               book, it is hard to argue for a further rerating in this
                                                               context. In fact, taking profit makes more sense.


                                                          - 26 -
                                                                                                                                                                                                                                                        Bull-Bear Debate
                                                                                                                                                                                                                                                                                           6 March 2012




Samsung Heavy Industries : how the consensus view has evolved (weekly data)

  250                                                                                                                                                                                                                                                                                                      5.0

  230

  210                                                                                                                                                                                                                                                                                                      4.5

  190
                                                                                                                                                                                                                                                                                                           4.0
  170

  150
                                                                                                                                                                                                                                                                                                           3.5
  130

  110                                                                                                                                                                                                                                                                                                      3.0
   90

   70                                                                                                                                                                                                                                                                                                      2.5
                                                                                                            11/11/2010

                                                                                                                         12/15/2010




                                                                                                                                                                                                                                           10/17/2011

                                                                                                                                                                                                                                                        11/20/2011

                                                                                                                                                                                                                                                                       12/24/2011
                                                                         8/1/2010

                                                                                    9/4/2010




                                                                                                                                                                                        6/3/2011

                                                                                                                                                                                                      7/7/2011




                                                                                                                                                                                                                                                                                                3/1/2012
        2/12/2010

                     3/18/2010

                                 4/21/2010

                                             5/25/2010

                                                           6/28/2010




                                                                                                10/8/2010




                                                                                                                                      1/18/2011

                                                                                                                                                   2/21/2011

                                                                                                                                                                3/27/2011

                                                                                                                                                                            4/30/2011




                                                                                                                                                                                                                 8/10/2011

                                                                                                                                                                                                                               9/13/2011




                                                                                                                                                                                                                                                                                    1/27/2012
                    Consensus 2012 EPS, rebased (W) (LHS)                                                           Share Price, rebased (W) (LHS)                                                 Consensus rating: 1 = strong sell, 5 = strong buy - (RHS)
Source: Bloomberg
                                                                         Upside to consensus revenue forecast,
                                                                       based on optimistic company guidance
  Profit and loss (Wbn)                                                                                                                                           Balance sheet (Wbn)
Yr to 31 Dec                                              2009                 2010            2011E                2012E             2013E                    As at 31 Dec                                                    2009             2010                 2011E               2012E             2013E
Total revenue                                            13,095               13,071           13,359               14,423            15,099                   Total current assets                                          11,855           11,694                  9,803              10,287             9,903
Gross profit                                              1,139                1,759            1,551                1,377             1,694                   Fixed assets                                                   4,237            4,316                  4,394               4,462             4,463
EBITDA(adj.)                                                963                1,556            1,285                1,071             1,340                   Total assets                                                  20,188           17,995                 15,967              16,608            16,318
Operating profit                                            794                1,378            1,102                  882             1,144                   Total current liabilities                                     12,646           12,123                  9,481              10,093             9,299
Net interest income/(expenses)                               58                   36              192                  247               245                   Long-term debt                                                 1,272              748                    809               1,117               689
Assoc/forex/extraord./others                                  3                (151)            (132)                (218)             (141)                   Total liabilities                                             17,347           14,179                 11,460              11,564            10,486
Net profit (adj.)                                           670                  977              864                  710               973                   Shareholders’ equity                                           2,841            3,816                  4,507               5,044             5,832
EPS (adj.) (W)                                            2,901                4,229            3,742                3,076             4,216                   Enterprise value                                              11,212           11,148                  9,689              10,166             9,485
Net DPS (W)                                                 500                  500              600                  600               650                   Net debt/(cash)                                                1,816            1,752                    293                 769                88
Source: Company, Daiwa forecasts                                                                                                                               Source: Company, Daiwa forecasts


  Cash flow ( Wbn )                                                                                                                                               Key ratios (%)
Y/e 31 Dec                                                 2009                 2010           2011E                 2012E            2013E                    Y/e 31 Dec                                                     2009                 2010              2011E               2012E              2013E
Profit before tax                                            855                1,262           1,162                   911            1,248                   Sales growth % (YoY)                                            22.8                (0.2)                 2.2                 8.0               4.7
Change in working capital                                (5,681)              (1,793)             (49)                (421)            (915)                   EPS (adjusted) growth % (YoY)                                    6.8                 45.8              (11.5)              (17.8)              37.0
Cash flow from operations                                (3,162)                  944             433                 (171)              565                   Gross-profit margin                                              8.7                 13.5                11.6                 9.5              11.2
Capital expenditure                                        (721)                (368)           (350)                 (332)            (316)                   Operating-profit margin                                          6.1                 10.5                 8.2                 6.1               7.6
Cash flow from investing                                     877                (693)           (239)                 (655)            (412)                   ROAE                                                            25.9                 29.3                20.8                14.9              17.9
Net share issues/(repurchases)                                 0                    1                -                    -                 -                  Net debt to equity                                              63.9                 45.9                 6.5                15.3               1.5
Cash flow from financing                                   2,491                (376)             365                   884              (12)                  PER (adjusted) (x)                                              14.0                  9.6                10.9                13.2               9.7
Change in cash                                               206                (125)             559                    58              141                   Price/BVPS (x)                                                   3.3                  2.5                 2.1                 1.9               1.6
Free cash flow                                           (3,884)                  575               83                (503)              249                   Net dividend yield %                                             1.2                  1.2                 1.5                 1.5               1.6
Source: Company, Daiwa forecasts                                                                                                                               Source: Company, Daiwa forecasts
                                                                                                                                                                Valuations seem fair considering what is even an
                                                                                                                                                                optimistic forecast set to be an average year


                    Company profile
              Established in 1974, Samsung Heavy Industries (SHI) is the second-largest shipyard in the world, with an annual capacity of
              2.6m CGT. SHI has a strong competitive advantage in building LNG carriers, containerships, Floating Production Storage and
              Offloading (FPSO) vessels and drillships. The company also has a construction business unit, which focuses only on the
              domestic market.




                                                                                                                                                  - 27 -
                                                                                                Bull-Bear Debate
                                                                                                             6 March 2012




SembCorp Marine (SMM SP)
Rating: Outperform (2), S$5.43 (2 Mar 2012), target price: S$5.85 (+7.7%)
Adrian Loh (65) 6499 6548 (adrian.loh@sg.daiwacm.com)


Why has this stock been such a star?
The market expects the velocity of new-rig orders to be better relative to Keppel Corp (Keppel), given the
company’s perceived capacity constraints following last year’s strong orders. This view has been underpinned
by a stronger-than-expected oil price YTD, in our view. As a pure play on the rig-order cycle, SembCorp Marine
(SMM) has benefited from the incremental flow of money into a risk-on market.


Bull case (Daiwa analyst’s view)                               Bear case
Two recent events have given us a more positive                The market has been waiting for the Petrobras
view on the rig-order cycle: a new drillship order for         orders for at least two years, so the issue is well-
SMM on 6 February 2012, and Keppel’s                           known. Any delays beyond 1H12 would clearly be
semisubmersible order in 4Q11 – both of which were             negative for share-price sentiment.
from Sete Brazil, one of the key companies tasked
with giving out the Petrobras orders in 1H12. We see           SMM is more of an oil-price play than one would
these two deepwater orders as a turning point for              imagine. Its share price has a close correlation to the
new rig orders in 2012.                                        crude-oil price, and not to order-win announcements.
                                                               Should the oil price decline in the near term due to
With political risk levels high due to concerns about          renewed fears about global growth, or the
Iran, we expect producers to continue to focus on              evaporation of the ‘Iran risk premium’, we should
more stable yet difficult deepwater projects. This will        expect a negative effect on SMM.
lead directly to increased orders at a time when
pricing power is shifting towards the manufacturers            The China yards could pose a meaningful
as capacity fills.                                             competitive threat to SMM by taking away business
                                                               from the company. Thus far in 2012, the China yards
Catalyst: Petrobras has given its approval for Sete            have not seen significant order flow. However,
Brazil to order 26 rigs, and we expect SMM to win six          should the global economic situation improve and
of these. We expect this to occur in 1H12. In                  order flow return to the rig market, the China yards
addition, we believe that global GDP growth                    could ‘buy’ market share by offering cheap financing.
prospects have marginally improved going forward               On a long-term basis, the potential for China
and, combined with higher-than-expected crude-oil              manufacturers to close their technology gap with
prices YTD, independent rig owners could be                    SMM is a real threat.
encouraged to order more assets.
                                                               Catalyst: Even if SMM wins the Petrobras orders,
Valuation: The stock is trading currently at a PER of          any change in the share price could be muted given
16.1x on our 2012 EPS forecast, below its 2001-                that this issue has been well-known by the market for
2011 average of about 17x. Should the                          the past two years. In addition, SMM’s share price
macroeconomic situation improve further, we note               could be affected by ‘buy on rumour and sell on fact’,
that SMM’s +1SD PER is a whopping 24.7x, which                 and thus even decline following any Petrobras order
implies a blended DCF/PER valuation of S$6.75. We              announcement.
note that at its peak in 2007, the stock traded at
nearly a 20% premium to its NPV compared with the              Valuation: Should the macroeconomic situation
current premium of 3%.                                         deteriorate from here, we highlight that SMM’s -1SD
                                                               PER is 9.7x, which implies a blended DCF/PER
                                                               valuation of $4.22. At present, the stock is trading on
                                                               a PER of 16.1x on our 2012 forecast compared with
                                                               its trough PER of 4x in 2008.




                                                          - 28 -
                                                                                                                                                                                                                                                        Bull-Bear Debate
                                                                                                                                                                                                                                                                                            6 March 2012




SembCorp Marine: how the consensus view has evolved (weekly data)

 250                                                                                                                                                                                                                                                                                                         5.0

 230

 210                                                                                                                                                                                                                                                                                                         4.5

 190
                                                                                                                                                                                                                                                                                                             4.0
 170

 150
                                                                                                                                                                                                                                                                                                             3.5
 130

 110                                                                                                                                                                                                                                                                                                         3.0
   90

   70                                                                                                                                                                                                                                                                                                        2.5
                                                                                                           11/11/2010

                                                                                                                        12/15/2010




                                                                                                                                                                                                                                           10/17/2011

                                                                                                                                                                                                                                                        11/20/2011

                                                                                                                                                                                                                                                                         12/24/2011
                                                                     8/1/2010

                                                                                    9/4/2010




                                                                                                                                                                                       6/3/2011

                                                                                                                                                                                                     7/7/2011




                                                                                                                                                                                                                                                                                                  3/1/2012
        2/12/2010

                     3/18/2010

                                 4/21/2010

                                             5/25/2010

                                                         6/28/2010




                                                                                               10/8/2010




                                                                                                                                     1/18/2011

                                                                                                                                                  2/21/2011

                                                                                                                                                               3/27/2011

                                                                                                                                                                           4/30/2011




                                                                                                                                                                                                                8/10/2011

                                                                                                                                                                                                                               9/13/2011




                                                                                                                                                                                                                                                                                      1/27/2012
                    Consensus 2012 EPS, rebased (S$) (LHS)                                                         Share Price, rebased (S$) (LHS)                                                Consensus rating: 1 = strong sell, 5 = strong buy - (RHS)
Source: Bloomberg
                                                                The new order cycle looks to be turning up
  Profit and loss (S$m)                                                                                                                                          Balance sheet (S$m)
Yr to 31 Dec                                             2010                   2011           2012E                2013E            2014E                    As at 31 Dec                                                    2010              2011                   2012E               2013E               2014E
Total revenue                                            4,555                  3,960           5,911                6,099            6,164                   Total current assets                                            3,900             3,399                   4,027               4,159               4,140
Gross profit                                             1,129                    866           1,005                1,037            1,110                   Fixed assets                                                      682             1,034                   1,737               2,321               2,706
EBITDA(adj.)                                             1,026                    821             904                  949            1,019                   Total assets                                                    5,279             5,052                   6,454               7,221               7,633
Operating profit                                           943                    737             817                  843              913                   Total current liabilities                                       2,449             2,400                   3,585               3,701               3,727
Net interest income/(expenses)                              (7)                    (2)            (10)                 (10)              (9)                  Long-term debt                                                      -                 -                       -                 300                 300
Assoc/forex/extraord./others                               142                    125               94                 110              110                   Total liabilities                                               2,592             2,546                   3,730               4,147               4,172
Net profit (adj.)                                          808                    752             704                  736              792                   Shareholders’ equity                                            2,599             2,414                   2,597               2,911               3,259
EPS (adj.) (S$)                                          0.390                  0.361           0.337                0.350            0.375                   Enterprise value                                                8,156             9,080                   9,263               9,547               9,216
Net DPS (S$)                                             0.360                  0.250           0.202                0.211            0.225                   Net debt/(cash)                                               (2,907)           (1,955)                 (1,804)             (1,566)             (1,947)
Source: Company, Daiwa forecasts                                                                                                                              Source: Company, Daiwa forecasts

                                                                                                                                                                                                                                                              Stock is priced for a recovery
  Cash flow (S$m)                                                                                                                                                Key ratios (%)
Y/e 31 Dec                                               2010                   2011           2012E                2013E            2014E                    Y/e 31 Dec                                                    2010               2011                    2012E            2013E                  2014E
Profit before tax                                        1,078                    860             901                  943            1,014                   Sales growth % (YoY)                                        (20.4)             (13.1)                      49.3              3.2                    1.1
Change in working capital                                  376                  (418)             233                   29              400                   EPS (adjusted) growth % (YoY)                                  13.4              (7.4)                     (6.8)             4.1                    7.1
Cash flow from operations                                1,305                    326           1,102                  812            1,251                   Gross-profit margin                                            24.8               21.9                     17.0             17.0                   18.0
Capital expenditure                                        (73)                 (438)           (800)                (700)            (500)                   Operating-profit margin                                        20.7               18.6                     13.8             13.8                   14.8
Cash flow from investing                                   (72)                 (477)           (732)                (627)            (427)                   ROAE                                                           36.0               30.0                     28.1             26.7                   25.7
Net share issues/(repurchases)                               16                    14               -                    -                1                   Net debt to equity                                        net cash           net cash                  net cash         net cash               net cash
Cash flow from financing                                 (323)                  (765)           (521)                (122)            (443)                   PER (adjusted) (x)                                             13.9               15.0                     16.1             15.5                   14.5
Change in cash                                             937                  (925)           (151)                   63              380                   Price/BVPS (x)                                                  4.3                4.7                       4.4             3.9                    3.5
Free cash flow                                           1,232                  (112)             302                  112              751                   Net dividend yield %                                            6.6                4.6                       3.7             3.9                    4.1



                    Company profile
               SembCorp Marine (SembMarine) is a Singapore-based offshore and marine company, offering construction, overhaul,
               conversion, and repair services for commercial shipping vessels, as well as offshore-energy exploration and production vessels.




                                                                                                                                                 - 29 -
                                                                                                  Bull-Bear Debate
                                                                                                              6 March 2012




Tata Motors (TTMT IN)
Rating: Hold (3), Rs268 (2 Mar 2012), target price: Rs263 (-2%)
Ambrish Mishra (91) 22 6622 1060 (ambrish.mishra@in.daiwacm.com)


Why has this stock been such a star?
Tata Motors’ 50% return YTD has been driven by sales of the Land Rover Evoque being much higher than
expected. The 3Q FY12 results showed strong Jaguar Land Rover (JLR) shipments (rising from 20,700/month in
1Q FY12 to 28,800/month in 3Q FY12) and an EBITDA margin of 18.5%: 3-4pp above the market’s expectations.
This led to sharp rises in the Bloomberg-consensus earnings forecasts for FY12-13, as the JLR business is much
bigger than the India business, which is struggling.

Bull case (Daiwa analyst’s view)                                Bear case
Good sales of the Evoque should translate into a                JLR remains the key for further forecast increases.
higher consolidated EBITDA margin and double-digit-             The consensus forecast now factors in a record JLR
percentage earnings growth for FY13-14. The JLR                 EBITDA margin (of about 16%) and optimistic
business remains cheap on implied EV/EBITDA,                    volume growth (up15-18% or 350,000-370,000 units)
while further good news about JLR, the                          for FY13. It would be difficult for the company to
announcement of a joint venture in China, and a                 positively surprise the market on these assumptions.
turnaround in the India business could push the
share price higher.                                             The India passenger-car business will likely struggle
                                                                as it does not have a competitive product line. The
At 6.7% (for 3Q FY12), the EBITDA margin for the                commercial-vehicle segment should see a slowdown
India business looks to have bottomed and should                in sales-volume growth into FY13. So the India
improve in FY13 on the back of good sales-volume                business might bump along the bottom for a while.
growth, product-price rises and lower commodity
prices.                                                         The earnings-growth momentum for the JLR
                                                                business has likely peaked, partly as amortisation
One of our concerns about Tata Motors has been its              charges for R&D and product development should
debt: its consolidated debt-to-equity ratio is currently        increase in line with the new model-launch pipeline
0.56x. JLR has net cash of £240m, which along with              over the next 2-3 years. Also, JLR’s effective tax rate
strong cash flow of about £2bn annually should cover            is likely to increase with a higher proportion of profit
its business investment needs comfortably.                      coming from non-UK markets, where the company
                                                                does not benefit from any tax shield.
Catalyst: An announcement about the listing of JLR,
the launch of a joint venture in China, and improving           Catalyst: JLR is still susceptible to negative
fundamentals in Europe are the key positive catalysts           surprises from further bad news in Europe (Spain,
for Tata Motors. Of these, the China joint venture is           Italy), the appreciation of the Pound against the US
the most imminent, as the company is close to                   Dollar and an inability to meet the raised ASP and
completion an agreement with Chery.                             EBITDA-margin forecasts as the effect of the Evoque
                                                                runs out.
Valuation: The stock’s valuation has increased since
October 2011, to an EV/EBITDA of 4.3x based on                  Valuation: The share-price rally over the past 2-3
our consolidated FY13 forecast, which we believe is             months has discounted both the fundamental
justified by the strong earnings growth for the past            improvement and the surprise element. Based on
few quarters. JLR deserves more than the implied                FY13E, the stock is trading at an implied EV/EBITDA
FY13 EV/EBITDA valuation of 3.5x, based on us                   of about 3.5x for JLR and 8x for the India business,
assigning a target multiple of 7.5x for the India               which is not cheap. A rerating of the India business
business. If the latter surprises positively in terms of        would require further surprises, which is unlikely.
earnings growth, the EV/EBITDA valuation could rise
to the 8.5-9x seen in previous upcycles.




                                                           - 30 -
                                                                                                                                                                                                                                                             Bull-Bear Debate
                                                                                                                                                                                                                                                                                                 6 March 2012




Tata Motors: how the consensus view has evolved (weekly data)

                                                                                                                                                                                                                                                                                                                  5.0
  290
                                                                                                                                                                                                                                                                                                                  4.8
                                                                                                                                                                                                                                                                                                                  4.6
  240                                                                                                                                                                                                                                                                                                             4.4
                                                                                                                                                                                                                                                                                                                  4.2

  190                                                                                                                                                                                                                                                                                                             4.0
                                                                                                                                                                                                                                                                                                                  3.8
                                                                                                                                                                                                                                                                                                                  3.6
  140
                                                                                                                                                                                                                                                                                                                  3.4
                                                                                                                                                                                                                                                                                                                  3.2
   90                                                                                                                                                                                                                                                                                                             3.0
        2/14/2010

                     3/20/2010

                                 4/23/2010

                                               5/27/2010

                                                              6/30/2010




                                                                                                                                            1/20/2011

                                                                                                                                                         2/23/2011

                                                                                                                                                                      3/29/2011




                                                                                                                                                                                                                      8/12/2011

                                                                                                                                                                                                                                    9/15/2011




                                                                                                                                                                                                                                                                                           1/29/2012
                                                                                                  10/10/2010

                                                                                                               11/13/2010

                                                                                                                            12/17/2010




                                                                                                                                                                                                                                                10/19/2011

                                                                                                                                                                                                                                                               11/22/2011

                                                                                                                                                                                                                                                                              12/26/2011
                                                                          8/3/2010

                                                                                     9/6/2010




                                                                                                                                                                                  5/2/2011

                                                                                                                                                                                             6/5/2011

                                                                                                                                                                                                           7/9/2011




                                                                                                                                                                                                                                                                                                       3/3/2012
                    Consensus 2013 EPS, rebased (Rs) (LHS)                                                             Share Price, rebased (Rs) (LHS)                                                  Consensus rating: 1 = strong sell, 5 = strong buy - (RHS)
Source: Bloomberg
                                                                                                                                                                             The India business is struggling without a competitive product line
  Tata Motors: consolidated financials, valuations                                                                                                                      Tata Motors: sum-of-the-parts fair value calculation
Rs m                                             FY11                         F12E                        FY13E                             FY14E                                                                                                                                     Firm value              Value /
                                                                                                                                                                     Particulars                                                   Parameter                 Multiple
Net sales                                    1,243,008                    1,613,570                    1,839,577                         2,055,218                                                                                                                                       (Rs bn)           share (Rs)
EBIDTA                                         169,996                      210,845                      242,676                           267,397                    Tata Motors (SA)                                            EV / EBIDTA                           7.5                  359                  108
Adj. PAT                                        94,324                      109 981                      120,961                           132,086                    JLR                                                         EV / EBIDTA                           3.5                  593                  178
Adj. EPS, Rs                                      29.6                         33.1                         36.4                              39.8                    Subsidiaries, Assoc & Others                                   PAT / BV                                                 72                   22
PER, (x)                                           9.1                          8.1                          7.4                               6.7                    Total firm value                                                                                                     1,024                  308
EV/EBIDTA, (x)                                      6.0                          5.0                          4.3                               3.9                   (-) Net Debt                                                                                                         (150)                 (45)
                                                                                                                                                                      Equity Fair Value                                                                                                      874                  263
Source: company, Daiwa forecasts                                                                                                                                     Source: Company, Daiwa forecasts
                                                                                                                                                                                                                                                The implied valuation of JLR is low
  Profit and loss (Rsm)                                                                                                                                                 Balance sheet (Rs m)
Yr to 31 Mar                                                   2010           2011                2012E              2013E                  2014E                    As at 31 Mar                                                2010              2011    2012E     2013E     2014E
Total revenue                                              355,930         480 405              537,742            583,43                 660,739                    Total Current Assets                                     115,380           140,906   166,533   163,398   175,265
Gross profit                                                112, 38        139,731              146,309            163,052                187,143                    Fixed Assets                                             164,360           174,756   186,570   188,228   189,018
EBITDA(adj.)                                                 41,782          47,713              39,985             49,351                 59,895                    Total Assets                                             503,109           541,905   579,345   577,868   590,525
Operating profit                                             31,443          34,106              24,574             31,661                 40,660                    Total Current Liabilities                                188,706           179,861   198,511   202,940   210,002
Net interest income/(expenses)                             (11,038)        (11,440)              (8,981)            (9,999)                (9,487)                   Long Term Debt                                           151,279           141,679   146,679   141,679   141,679
Assoc/forex/extraord./others                                  6,939           (700)                  391                634                    766                   Total Liabilities                                        353,455           341,772   365,421   364,851   371,913
Net profit (adj.)                                            14,544          19,590              14,385             18,283                 25,551                    Shareholders Equity                                      149,655           200,133   213,924   213,017   218,611
EPS (adj.) (Rs)                                               5.098           6.144                4.329              5.502                  7.689                   Enterprise Value                                         912,332           988,140 1,015,411 1,020,174 1,020,860
Net DPS (Rs)                                                  3.011           4.000                4.400              5.000                  5.200                   Net Debt/(Cash)                                          148,727           134,698   126,045   130,808   131,495
Source: Company, Daiwa forecasts                                                                                                                                     Source: Company, Daiwa forecasts
                                                                                                                                                                                                                                   Recovering margins thanks to JLR’s success
  Cash flow (Rs m)                                                                                                                                                      Key ratios (%)
Y/e 31 Mar                                                 2010                2011               2012E             2013E                   2014E                    Y/e 31 Mar                                                   2010                 2011                 2012E               2013E             2014E
Profit Before Tax                                        27,345              21,965               15,983            22,297                  31,939                   Sales growth % (YoY)                                          39.5                 35.0                   11.9                8.5              13.2
Change in Working Capital                                53,022            (29,943)                6,676            2,199)                 (5,491)                   EPS (adjusted) growth % (YoY)                                185.2                 20.5                 (29.5)               27.1              39.8
Cash Flow from operations                                99,524              10,224               45,454            43,773                  48,782                   Gross-profit margin                                           31.7                29.1                    27.2               27.9              28.3
Capital Expenditure                                    (28,706)            (24,004)             (27,225)          (19,348)                (20,025)                   Operating-profit margin                                        8.8                  7.1                    4.6                5.4               6.2
Cash Flow from Investing                              (122,394)            (26,877)             (27,225)          (19,348)                (20,025)                   ROAE                                                          10.7                 11.2                    6.9                8.6              11.8
Net share issues/(repurchases)                           14,048              51,453               20,042                 -                       -                   Net debt to equity                                            99.4                 67.3                   58.9               61.4              60.1
Cash flow from Financing                                 28,983              23,409                (826)          (38,188)                (33,444)                   PER (adjusted) (x)                                            52.5                43.6                    61.8               48.6              34.8
Change in cash                                           13,970               5,285               13,653          (13,763)                 (4,686)                   Price/BVPS (x)                                                 5.1                  4.3                    4.2                4.2               4.1
Free cash flow                                           70,818            (13,780)               18,229            24,425                  28,757                   Net dividend yield %                                           1.1                  1.5                    1.6                1.9               1.9
Source: Company, Daiwa forecasts                                                                                                                                     Source: Company, Daiwa forecasts



                    Company profile
              Tata Motors is India's largest automobile company with consolidated revenue of US$20bn for FY10. It is the leader in the
              commercial-vehicle segment and the third-largest player in the passenger-car segment. Through subsidiaries and associate
              companies, Tata Motors has operations in the UK, South Korea, Thailand, and Spain. Among them is Jaguar Land Rover, a
              business comprising the two iconic British brands, which was acquired in 2008.


                                                                                                                                                        - 31 -
                                                                                                Bull-Bear Debate
                                                                                                             6 March 2012




Tata Steel (TATA IN)
Rating: Buy (1), Rs466 (2 Mar 2012), target price: Rs559 (+20%)
Deepak Poddar (91) 22 6622 1016 (deepak.poddar@in.daiwacm.com)


Why has this stock been such a star?
Tata Steel’s share price has outperformed the SENSEX by 22% YTD, which we believe is due largely to market
expectations of earnings bottoming out for the company. Steel prices in Europe have increased recently, and with
iron ore and coking coal prices coming down, earnings should improve further.


Bull case (Daiwa analyst’s view)                               Bear case
Tata Steel’s India business should rise on the back of         The basic problem with Tata Steel is that it went and
the improving economy, increasing steel prices and             bought a business in Europe that dwarfs its India
additional capacity. Earnings at the company’s                 business in terms of revenue, but has a fraction of its
Europe operation (Corus) should bottom out in 3Q               profitability (EBITDA/tonne of US$30-50 compared
FY12 as a result of decreasing raw-material costs              with US$325-375). The company is still trying to
and some increases in product prices.                          digest Corus, and over the medium term the Corus
                                                               tail will likely be wagging the Tata Steel dog.
Unlike the India operation, Corus buys all its raw
materials. Decreases in iron-ore and coking-coal               Tata Steel has huge exposure to the Europe
prices should lead to a turnaround in the EBITDA               economy and any worsening of the macroeconomic
margin. We forecast a 230bps expansion in the                  factors there are likely to affect Corus’ sales volume.
company’s consolidated EBITDA margin for FY13,                 While the company is guiding for flat volume growth
based on Daiwa forecasts for iron-ore and coking-              for FY13, we see a high chance of a negative
coal prices to decline by 17% and 21%, respectively,           surprise.
for 2012.
                                                               Regardless of what happens in India, Corus will likely
Daiwa forecasts India’s steel consumption to                   continue to face challenging market conditions. The
increase by 8.2% YoY for FY13 (up from 5.3% YoY                improvement in the India operation has been largely
for FY12) as monetary policy is likely to start being          discounted, and additional bad news from Europe will
eased from March, which should benefit steel                   likely put pressure on the stock.
consumption in India. We also expect India steel
prices to remain stable on the back of domestic                Catalyst: Apart from the risk of capacity-expansion
demand and steel prices to recover in China and                delays, the ramp-up in volume is likely to happen
Europe.                                                        slowly. Management is guiding for only an additional
                                                               1mtpa of volume in FY13, meaning that the
Catalyst: A 2.9mtpa (or 43%) capacity expansion in             commissioning of this project is likely to prove a
India is on track and is due to come on stream by              failed catalyst. At the same time, the Europe situation
March 2012, which would drive Tata’s India division            remains an enduring weight around this company’s
volume and earnings growth in FY13 and remain one              neck.
of the key share-price catalysts.
                                                               Valuation: Although the stock appears attractive on
Valuation: Despite its strong outperformance YTD,              a PBR basis, it is still trading at an EV/EBITDA
the stock is currently trading at a PBR (ex-goodwill)          multiple of 5.0x on Daiwa’s FY13 forecasts, 10%
of 1.4x on Daiwa’s FY13 BVPS forecast, which is                above the 2009 valuation low, while the systemic risk
close to its trough valuation of 1.3x during the global        at Corus remains large. The valuation needs to be
financial crisis in FY09. Due to the positive factors          treated with care, as another impairment charge
discussed above, the stock could easily be rerated to          against the goodwill is hardly out of the question.
a PBR of 1.6-2.0x, which is in line with its past one
and two-year averages.




                                                          - 32 -
                                                                                                                                                                                                                                                              Bull-Bear Debate
                                                                                                                                                                                                                                                                                                  6 March 2012




Tata steel: how the consensus view has evolved (weekly data)

                                                                                                                                                                                                                                                                                                                   5.0
 160
                                                                                                                                                                                                                                                                                                                   4.5
 140

                                                                                                                                                                                                                                                                                                                   4.0
 120

                                                                                                                                                                                                                                                                                                                   3.5
 100

                                                                                                                                                                                                                                                                                                                   3.0
   80


   60                                                                                                                                                                                                                                                                                                              2.5


   40                                                                                                                                                                                                                                                                                                              2.0
                                                                                                  10/10/2010

                                                                                                               11/13/2010

                                                                                                                            12/17/2010




                                                                                                                                                                                                                                                10/19/2011

                                                                                                                                                                                                                                                                11/22/2011

                                                                                                                                                                                                                                                                               12/26/2011
                                                                        8/3/2010

                                                                                   9/6/2010




                                                                                                                                                                                  5/2/2011

                                                                                                                                                                                             6/5/2011

                                                                                                                                                                                                           7/9/2011




                                                                                                                                                                                                                                                                                                        3/3/2012
        2/14/2010

                     3/20/2010

                                 4/23/2010

                                             5/27/2010

                                                            6/30/2010




                                                                                                                                            1/20/2011

                                                                                                                                                         2/23/2011

                                                                                                                                                                      3/29/2011




                                                                                                                                                                                                                      8/12/2011

                                                                                                                                                                                                                                    9/15/2011




                                                                                                                                                                                                                                                                                            1/29/2012
                    Consensus 2013 EPS, rebased (Rs) (LHS)                                                            Share Price, rebased (Rs) (LHS)                                                   Consensus rating: 1 = strong sell, 5 = strong buy - (RHS)
Source: Bloomberg


  Profit and loss (Rs m)                                                                                                                                                Balance sheet (Rs m)
Yr to 31 Mar                                             2010               2011     2012E     2013E     2014E                                                       As at 31 Mar                                              2010      2011    2012E     2013E     2014E
Total revenue                                       1,023,931           1,18 ,531 1,356,534 1,496,254 1,496,745                                                      Total Current Assets                                   457,965   629,252   634,776   669,390   652,681
Gross profit                                          583,016            648,186    693,345   794,734   845,475                                                      Fixed Assets                                           457,958   523,934   583,898   633,112   712,455
EBITDA(adj.)                                            80,427            159, 56   135,469   183,882   205,046                                                      Total Assets                                         1,097,381 1,354,831 1,420,319 1,504,147 1,566,781
                                                                                                                                                                     Total Current Liabilities                              299,827   337,610   344,299   362,379   351,886
Operating profit                                        35,509           115,808     90,433   133,096   154,389
                                                                                                                                                                     Long Term Debt                                         531,004   606,843   611,843   616,843   621,843
Net interest income/(expenses)                        (30,221)           (27,700) (29,376) (36,998) (38,198)                                                         Total Liabilities                                      860,227   975,129   986,395 1,009,475 1,003,982
Assoc/forex/extraord./others                           (4,979)             32,867    42,984     7,055     5,966                                                      Shareholders Equity                                    228,314   370,814   425,036   485,784   553,911
Net profit (adj.)                                      (6,785)             66,679    38,794    70,669    85,176                                                      Enterprise Value                                       866,144   922,250   923,290   914,875   888,154
EPS (adj.) (Rs)                                        (7.645)             69.500    40.430    72.750    87.680                                                      Net Debt/(Cash)                                        443,838   466,352   467,391   453,385   426,664
Net DPS (Rs)                                             7.947             11.083    13.804    13.977    14.373
Source: Company, Daiwa forecasts                                                                                                                                     Source: Company, Daiwa forecasts
                                                                                                                                                                                                                                         India operations are driving growth, but
                                                                                                                                                                                                                                       Corus’ European business is more important
  Cash flow (Rs m)                                                                                                                                                      Key ratios (%)
Y/e 31 Mar                                                  2010             2011                 2012E           2013E                     2014E                    Y/e 31 Mar                                                    2010                2011                  2012E               2013E              2014E
Profit Before Tax                                             310         120,974               104,040          103,153                   122,157                   Sales growth % (YoY)                                         (30.5)                16.0                    14.2               10.3                0.0
Change in Working Capital                                  46,465         (71,749)                 7,390           2,56                     37,037                   EPS (adjusted) growth % (YoY)                                     -                   -                  (41.8)               79.9               20.5
Cash Flow from Operations                                104 710            64,584              101,848          151,213                   203,525                   Gross-profit margin                                            56.9                54.6                    51.1               53.1               56.5
Capital Expenditure                                      (69,472)         (73,503)            (105,000)        (100,000)                 (130,000)
                                                                                                                                                                     Operating-profit margin                                         3.5                 9.8                     6.7                8.9               10.3
Cash Flow from Investing                                 (46,964)         (83,785)             (52,017)         (92,946)                 (124,034)
                                                                                                                                                                     ROAE                                                          (3.0)                22.3                     9.7               15.5               16.4
Net share issues/(repurchases)                             24,215           45,462                     7           7,128                         -
Cash flow from Financing                                 (51,350)           59,930             (35,872)         (39,261)                  (47,769)                   Net debt to equity                                           194.4                125.8                  110.0                93.3               77.0
Change in cash                                              6,396           40,729               13,960           19,006                    31,721                   PER (adjusted) (x)                                           (60.9)                 6.7                    11.5                6.4                5.3
Free cash flow                                             35,238          (8,919)               (3,152)          51,213                    73,525                   Price/BVPS (x)                                                  5.0                 2.1                     1.6                1.4                1.1
                                                                                                                                                                     Net dividend yield %                                            1.7                 2.4                     3.0                3.0                3.1
Source: Company, Daiwa forecasts                                                                                                                                     Source: Company, Daiwa forecasts                                                        Margins up in 2013E thanks to lower
                                                                                                                                                                                                                                                             raw material pricing




                    Company profile
              Tata Steel is the world’s eighth-largest steel producer, with key steel facilities in India, Europe and Southeast Asia. The
              company’s acquisition of Corus in 2007 moved it up to the 8th spot globally, from 45th beforehand. The company sold 23.9m
              tonnes of saleable steel in FY11




                                                                                                                                                        - 33 -
                                                                                                  Bull-Bear Debate
                                                                                                               6 March 2012




United Company RUSAL (486 HK)
Rating: Buy (1), HK$6.75 (2 Mar 2012), target price: HK$8.50 (+26%)
Alexander Latzer (852) 2848 4463 (alexander.latzer@hk.daiwacm.com)


Why has this stock been such a star?
Aluminium and nickel prices rose from low levels; credit terms with lenders amended; Rouble strengthened.


Bull case (Daiwa analyst’s view)                               Bear case
Rusal’s electricity costs are partially linked to              Aluminium prices are likely to be undermined as
aluminium prices, which lessens the impact on                  supply growth outpaces demand growth, with the risk
earnings when the metal price falls while allowing for         the highest in China while producers ex-China resist
upside when it rises. We expect its operating costs to         further cuts. As a result, Rusal’s cash flows would
benefit from the addition of new low-cost hydro-               decrease, requiring cutbacks to expansion plans.
based capacity in the next few years.
                                                               Nickel prices are also likely to succumb to new supply
Rusal is also investing in technologies to increase its        as global producers refuse to cut production. As the
higher-value product offerings for the automotive,             value of NN falls, dividends would be reduced, and
packaging, and lithographic markets. Production of             result in the stock’s value falling below the level of
higher-value aluminium alloys in the Aluminium                 Rusal’s preferred selling price for its 25% stake in the
Division East is forecast by Rusal to increase by 70%          company.
over the next five years to 2016, to 1,930,000 tonnes.
                                                               Aluminium oversupply is likely to worsen this year,
Daiwa forecasts that global aluminium prices will find         resulting in rising London Metals Exchange (LME)
support as high-cost producers continue to cut                 inventories and also the release of excess supply to the
production, while low-cost Rusal remains profitable            market. This would push down currently high physical
and generates cash to pay down debt and invest in              market premiums that producers receive above the
new low-cost expansion. Spot market aluminium                  level of the spot market price quoted on the LME. A
premiums are also likely to remain high this year. We          lower premium implies a lower selling price for
expect profits at Norilsk Nickel (NN) (Not rated) to           producers.
remain stable, providing a steady stream of dividends
and an option to sell out, which would nearly                  Catalysts: Profitability in 2011 was eroded by low
eliminate Rusal’s debt.                                        prices and rising costs, which is likely to lead to
                                                               downside adjustments to Rusal’s business plan for
Catalysts: Continuing improvement in global                    2012, below market expectations. Delays in new
economic growth and decreasing market risk                     projects may be necessary to preserve cash for debt
aversion. Rusal’s 2011 results should allay fears,             repayment.
showing a healthy cash position, good cash/cost
management, further debt repayments, and new                   Valuation: Rusal’s valuation contains a discount for
projects on time and budget.                                   high debt, country risk (including governance issues),
                                                               and a lack of direct ownership of its power supply in
Valuation: Daiwa’s DCF-derived six-month target                Siberia. While a sale of its stake in NN would address
price of HK$8.50 is based on a WACC of 11.5% and               the debt issue, its multiple should remain in line with
an aluminium price of US$2,756/tonne (US$1.25/lb).             higher-cost peers. If industry conditions improve, all
Rusal’s 25% interest in NN is worth about US$9bn,              producers’ multiples should increase and that benefit
versus debt of US$11.4bn. By selling its stake in NN           could be played in a higher-cost producer but one
and paying off debt, Rusal’s 2012E EV/EBITDA                   operating in a lower-risk country with self-owned power
multiple would fall to about 5.5x, which appears low           assets. In this case, Rusal’s 5-6x 2012E EV/EBITDA
versus the peer group given its growth potential and           multiple excluding NN in current market conditions, in
current cycle-low earnings. The shares could easily            line with its higher-cost western world peer group, looks
trade at a premium to higher-cost peers, implying a            fair.
2012E EV/EBITDA multiple ex-NN of about 7-8x.


                                                          - 34 -
                                                                                                                                                                                                                                            Bull-Bear Debate
                                                                                                                                                                                                                                                                             6 March 2012




Rusal: how the consensus view has evolved (weekly data)

 220                                                                                                                                                                                                                                                                                             5.0

 200
                                                                                                                                                                                                                                                                                                 4.5
 180

 160                                                                                                                                                                                                                                                                                             4.0

 140
                                                                                                                                                                                                                                                                                                 3.5
 120

 100                                                                                                                                                                                                                                                                                             3.0

  80
                                                                                                                                                                                                                                                                                                 2.5
  60

  40                                                                                                                                                                                                                                                                                             2.0
       2/26/2010




                                            6/11/2010

                                                          7/16/2010

                                                                       8/20/2010

                                                                                   9/24/2010




                                                                                                                12/3/2010




                                                                                                                                           2/11/2011

                                                                                                                                                       3/18/2011

                                                                                                                                                                     4/22/2011

                                                                                                                                                                                 5/27/2011




                                                                                                                                                                                                                                                                        1/27/2012
                                                                                                   10/29/2010




                                                                                                                                                                                                                               10/14/2011

                                                                                                                                                                                                                                            11/18/2011

                                                                                                                                                                                                                                                           12/23/2011
                      4/2/2010

                                 5/7/2010




                                                                                                                            1/7/2011




                                                                                                                                                                                             7/1/2011

                                                                                                                                                                                                        8/5/2011

                                                                                                                                                                                                                    9/9/2011




                                                                                                                                                                                                                                                                                      3/2/2012
                    Consensus 2012 EPS, rebased (US$) (LHS)                                                     Share Price, rebased (HK$) (LHS)                                             Consensus rating: 1 = strong sell, 5 = strong buy - (RHS)
Source: Bloomberg
                                                                      Risk of cuts to projected sales this year
  Profit and loss (US$m)                                                                                                                                           Balance sheet (US$m)
Yr to 31 Dec                                             2009              2010                 2011E           2012E                  2013E                 As at 31 Dec                                            2009             2010               2011E             2012E                 2013E
Total revenue                                            8,165           10,979                12,415           11,488                 13,098                Total current assets                                   3,624            3,978                4,817             4,888                 5,349
Gross profit                                             2,0 1             3,982                 4,410           3,758                  4,801                Fixed assets                                           6,088            5,875                6,358             6,731                 6,666
EBITDA(adj.)                                               596             2,597                 2,780           2,330                  3,179                Total assets                                          23,886           26,525               27,955            28,689                29,392
Operating profit                                            10             2,099                 2,260           1,776                  2,625                Total current liabilities                              4,968            2,968                3,301             2,996                 2,859
Net interest income/(expenses)                           (666)           (1,430)               (1,000)           (725)                  (665)                Long-term debt                                        11,117           10,602                9,928             9,578                 8,528
Assoc/forex/extraord./others                             1,495             2,342                   801             610                    556                Total liabilities                                     17,554           15,069               14,341            13,664                12,477
Net profit (adj.)                                          821             2,867                 1,676           1,412                  2,139                Shareholders’ equity                                   6,332           11,456               13,614            15,025                16,914
EPS (adj.) (US$)                                         0.064             0.192                 0.110           0.093                  0.141                Enterprise value                                      14,982           12,183               11,520            10,669                 9,050
Net DPS (US$)                                            0.000             0.000                 0.000           0.000                  0.035                Net debt/(cash)                                       13,633           11,472               10,956            10,410                 9,069
Source: Company, Daiwa forecasts                                                                                                                            Source: Company, Daiwa forecasts


  Cash flow (US$m)                                                                                                                                                 Key ratios (%)
Y/e 31 Dec                                                2009             2010                 2011E            2012E                  2013E                Y/e 31 Dec                                             2009                2010             2011E              2012E                2013E
Profit before tax                                           839            3,011                 2,061            1,661                  2,516               Sales growth % (YoY)                                  (47.9)                34.5               13.1              (7.5)                14.0
Change in working capital                                 1,013            (709)                  (63 )           (188)                  (314)               EPS (adjusted) growth % (YoY)                              -               198.1             (42.5)             (15.8)                51.5
Cash flow from operations                                 1,286            1,738                 1,619            1,167                  1,823               Gross-profit margin                                     25.0                36.3               35.5               32.7                36.7
Capital expenditure                                       (239)            (361)                 (959)            (927)                  (489)               Operating-profit margin                                  0.1                19.1               18.2               15.5                20.0
Cash flow from investing                                  (301)            (442)                 (589)            (622)                  (211)               ROAE                                                    15.2                32.2               13.4                9.9                13.4
Net share issues/(repurchases)                          (1,169)            1,294                 (276)                 0                     0               Net debt to equity                                    215.3                100.1               80.5               69.3                53.6
Cash flow from financing                                (1,451)          (1,024)               (1,059)            (600)                (1,571)               PER (adjusted) (x)                                      13.5                 4.5                7.9                9.4                 6.2
Change in cash                                            (470)              271                   (19)             (54)                    41               Price/BVPS (x)                                           1.8                 1.1                1.0                0.9                 0.8
Free cash flow                                            1,047            1,377                   660              241                  1,334               Net dividend yield %                                       -                   -                  -                  -                 4.0
Source: Company, Daiwa forecasts                                                                                                                            Source: Company, Daiwa forecasts
                                                                                                                                                                                                                                                            Valuations look fair considering
Healthy cash flows and able to pay down debt                                                                                                                                                                                                             the country risk premium



                     Company profile
                   UC RUSAL Plc is the world's largest producer of aluminium, including aluminium alloys and value-added products. The
                   company is vertically integrated with self-supplied bauxite and the capacity to produce alumina in excess of the internal
                   requirement of its aluminum smelters. The company's core smelters are located in Siberia and benefit from stranded supplies of
                   low cost hydro-electric power. The company is headquartered in Moscow with principal operations located in Russia.




                                                                                                                                                - 35 -
                                                                                                  Bull-Bear Debate
                                                                                                               6 March 2012




Wharf (4 HK)
Rating: Buy (1), HK$46.95 (2 Mar 2012), target price: HK$56.9 (+21%)
Jonas Kan, CFA (852) 2848 4439 (jonas.kan@hk.daiwacm.com)


Why has this stock been such a star?
Like all property stocks in Hong Kong, Wharf was sold off heavily in 2011 as part of the global risk-off trade.
The recovery this year is hence off a low base, while growing signs of easing monetary policies in China, and a
likely end to tightening in Hong Kong, have made deeply-discounted asset plays more attractive.


Bull case (Daiwa analyst’s view)                                 Bear case
Wharf’s share price fell sharply in 2011, and dropped            Let’s be honest: long-established and conservatively-
40% for the year as a whole. At the December low,                run Wharf is really a leveraged play on excessive
the stock was priced at an extremely cheap 60%                   luxury-good consumption by newly enriched
discount to NAV, implying that the more than 30%                 Mainland Chinese. Once the policies that have lined
appreciation seen so far in 2012 is nothing more than            so many pockets turn in China, then Wharf’s ‘great’
a minor rebound from a deeply-oversold position.                 investment story will likely implode.

The core investment story for Wharf remains as solid             One of Wharf’s flagships, Harbour City, is a prime
as ever, in our view. Retail-sales growth at its major           example. Over 50% of tenant turnover in this
Hong Kong properties remained strong for 2011,                   property is from Mainland tourist spending. The
rising 35% YoY at Harbour City and 24% YoY at                    percentage is lower but still material for Wharf’s other
Times Square. Meanwhile, we believe residential                  Hong Kong flagship, Times Square, but together the
sales in China, reached nearly Rmb13bn last year                 retail portion of these properties makes up 40% of
which, while below the company’s Rmb15bn target,                 Wharf’s gross asset value (GAV), with another 20%
still represents a 45% YoY increase.                             coming from various China properties.

Rental-income growth in China is also strong as new              Another 30% of GAV is in office and residential
landmark properties open for business. Occupancy                 properties in Hong Kong, the inflated values of which
at Wheelock Square in Shanghai has now exceeded                  are heavily dependent on Mainland investment. If
80%, while the re-opening of Chongqing Times                     these risks were not enough, there is also the
Square will be an important earnings driver over the             lingering threat that the Hong Kong Government will
next few years. In addition, the contribution from               demand much higher payments on the Ocean
Chengdu Times Square will start kicking in from mid-             Terminal site, the current land lease for which
2013 onward.                                                     expires in June.

Catalysts: Announced leasing progress for the                    Catalysts: Poor residential sales in China are a
Chengdu IFC project and other China investment                   definite downside risk for this stock, while weakening
properties, and the next financial results (which we             retail-sales growth in Hong Kong could also be an
expect to show a surge in China property sale profits)           overhang if it marks a turning point in this
are potential share-price catalysts.                             staggeringly large economic bubble.

Valuation: Despite the strong rally this year, the               Valuation: We believe price-to-NAV is a dangerous
stock is still trading at a 43% discount to our forecast         measure to rely on, when asset values are at inflated
end-2012 NAV of HK$82.50. This compares with an                  levels. When the cycle turns, the NAV forecast can
average discount of 31% since 1990. Except from                  actually fall much faster than underlying asset prices,
1998-2003, a period when Hong Kong suffered                      due to balance-sheet leverage. Hence, Wharf’s 43%
deflation, and the global financial crisis, a discount of        NAV discount at current valuations may turn out to
more than 40% has generally been a profitable entry              be much narrower once the inevitable property
point.                                                           correction occurs.




                                                            - 36 -
                                                                                                                                                                                                                                                        Bull-Bear Debate
                                                                                                                                                                                                                                                                                           6 March 2012




Wharf: how the consensus view has evolved (weekly data)

 160                                                                                                                                                                                                                                                                                                        5.0

 150
                                                                                                                                                                                                                                                                                                            4.5
 140
                                                                                                                                                                                                                                                                                                            4.0
 130

 120                                                                                                                                                                                                                                                                                                        3.5

 110
                                                                                                                                                                                                                                                                                                            3.0
 100
                                                                                                                                                                                                                                                                                                            2.5
   90

   80                                                                                                                                                                                                                                                                                                       2.0
        2/12/2010

                     3/18/2010

                                 4/21/2010

                                             5/25/2010

                                                           6/28/2010




                                                                                               10/8/2010




                                                                                                                                      1/18/2011

                                                                                                                                                   2/21/2011

                                                                                                                                                                3/27/2011

                                                                                                                                                                            4/30/2011




                                                                                                                                                                                                                8/10/2011

                                                                                                                                                                                                                               9/13/2011




                                                                                                                                                                                                                                                                                     1/27/2012
                                                                                                           11/11/2010

                                                                                                                        12/15/2010




                                                                                                                                                                                                                                           10/17/2011

                                                                                                                                                                                                                                                        11/20/2011

                                                                                                                                                                                                                                                                        12/24/2011
                                                                       8/1/2010

                                                                                  9/4/2010




                                                                                                                                                                                        6/3/2011

                                                                                                                                                                                                     7/7/2011




                                                                                                                                                                                                                                                                                                 3/1/2012
                    Consensus 2012 EPS, rebased (HK$) (LHS)                                                        Share Price, rebased (HK$) (LHS)                                                Consensus rating: 1 = strong sell, 5 = strong buy - (RHS)
Source: Bloomberg


  Profit and loss (HK$m)                                                                                                                                          Balance sheet (HK$m)
Yr to 31 Dec                                              2009               2010             2011E                2012E              2013E                    As at 31 Dec                                                    2009           2010                    2011E            2012E                 2013E
Total revenue                                            17,553             19,380            23,157               25,604             29,672                   Total current assets                                          41,857         50,427                    52,055           53,519                55,472
Gross profit                                             11,484             12,308            14,302               16,154             18,164                   Fixed assets                                                 134,002        166,638                   170,854          177,184               184,170
EBITDA(adj.)                                             10,030             10,700            12,855               14,678             16,613                   Total assets                                                 190,461        242,225                   251,954          261,634               271,822
Operating profit                                          8,729              9,372            11,465               13,216             15,093                   Total current liabilities                                     18,249         22,709                    26,109           28,899                30,709
Net interest income/(expenses)                            (338)              (996)             (642)                (812)              (743)                   Long-term debt                                                31,516         41,760                    41,760           41,760                41,760
Assoc/forex/extraord./others                              1,749              1,198               520                  597                648                   Total liabilities                                             68,297         71,576                    75,189           78,279                80,399
Net profit (adj.)                                         6,424              7,905             8,610                9,630             11,110                   Shareholders’ equity                                         115,210        163,089                   168,945          175,395               183,173
EPS (adj.) (HK$)                                          2.333              2.870             2.895                3.179              3.668                   Enterprise value                                             145,897        149,232                   161,002          161,263               156,347
Net DPS (HK$)                                             1.000              1.000             1.050                1.100              1.200                   Net debt/(cash)                                               21,432         32,689                    34,420           36,301                32,235
Source: Company, Daiwa forecasts                                                                                                                               Source: Company, Daiwa forecasts
                                                                                                                                                                                                                                       Opening of new commercial properties in
                                                                                                                                                                                                                                       China and residential sales driving growth
  Cash flow (HK$m)                                                                                                                                                Key ratios (%)
Y/e 31 Dec                                                 2009             2010               2011E             2012E                 2013E                   Y/e 31 Dec                                                     2009                 2010               2011E               2012E              2013E
Profit before tax                                        10,140             9,574              11,343            13,001                14,998                  Sales growth % (YoY)                                            10.1                 10.4                19.5                10.6               15.9
Change in working capital                                    963              320               4,820             5,560                 6,120                  EPS (adjusted) growth % (YoY)                                   52.7                 23.1                 0.9                 9.8               15.4
Cash flow from operations                                  9,567           11,170              16,022            18,048                20,131                  Gross-profit margin                                             65.4                 63.5                61.8                63.1               61.2
Capital expenditure                                      (8,520)         (18,423)            (23,560)          (15,420)              (11,250)                  Operating-profit margin                                         49.7                 48.4                49.5                51.6               50.9
Cash flow from investing                                 (5,212)         (18,173)            (23,330)          (15,179)              (11,003)                  ROAE                                                             6.0                  5.7                 5.2                 5.6                6.2
Net share issues/(repurchases)                                 -                -              10,052                 -                     -                  Net debt to equity                                              18.6                 20.0                20.4                20.7               17.6
Cash flow from financing                                 (1,829)          (4,254)               5,577           (4,750)               (5,062)                  PER (adjusted) (x)                                              20.1                 16.4                16.2                14.8               12.8
Change in cash                                             2,526         (11,257)             (1,731)           (1,881)                 4,066                  Price/BVPS (x)                                                   1.1                  0.8                 0.8                 0.8                0.8
Free cash flow                                             1,047          (7,253)             (7,538)             2,628                 8,881                  Net dividend yield %                                             2.1                  2.1                 2.2                 2.3                2.6
Source: Company, Daiwa forecasts                                                                                                                               Source: Company, Daiwa forecasts
                                                                                                                                                                Valued cheaply versus assets but the risk is that Hong Kong properties are
                                                                                                                                                                hugely over-valued and will likely correct sharply


                    Company profile
              Wharf is one of the largest property investors in Hong Kong, with its two key properties, Harbour City and Times Square,
              accounting for more than 60% of its assets and operating profit. In addition to its investment-property portfolio, the company
              has investments in ports, as well as the media and telecom sectors. In recent years, it has been expanding its investments in
              China and has a long-term target of having about half of its assets in Hong Kong and half in the Mainland.




                                                                                                                                                  - 37 -
                                                                                                Bull-Bear Debate
                                                                                                             6 March 2012




Woori Financial (053000 KS)
Rating: Outperform (2), W12,000 (2 Mar 2012), target price: W13,600 (+13%)
Anderson Cha (822) 787 9185 (anderson.cha@kr.daiwacm.com)


Why has this stock been such a star?
After experiencing a peak-to-trough 40% decline in 2H11, Woori Financial’s (Woori) share price has since
recovered more than half the loss. While there were not any definitive stock-specific catalysts, the low valuation
and the fact that the banks are a proxy for the domestic economy were the likely factors behind the rebound.

Bull case (Daiwa analyst’s view)                               Bear case
While it has been a great start to the year for Woori,         Despite a substantial improvement in recent
we believe there is still plenty of upside left for the        quarters, asset quality remains the overwhelming
share price. Given the stock’s high beta in the sector,        investment concern with respect to this stock. The
we believe Woori should continue to be one of the              group’s 4Q11 NPL ratio of 1.96% is still the highest
key beneficiaries of the recovery in the PBR                   among the banks Daiwa covers in Korea. Although
valuations of the bank stocks ahead of a turnaround            the rate of NPL recovery started to outpace the rate
in the macroeconomic outlook. Daiwa’s economics                of fresh migration to NPLs from 2Q11, Woori is
team forecasts Korea’s GDP to bottom out in 1Q12.              widely believed to have the largest exposure to
                                                               construction companies/shipbuilders (eg, Sung-dong
We believe the stock’s current distressed valuation of         Shipyard) that are in financial distress.
a PBR of 0.5x on our 2012 BVPS forecast argues
strongly for a further rebound in the share price at a         Negative developments in Woori’s non-banking
point in the cycle when there is a recovery in NPLs.           subsidiaries are another concern. In particular, it has
Woori’s NPL ratio fell below 2% in 4Q11 for the first          been losing market share in the highly lucrative
time in seven quarters, the result of an ongoing effort        credit-card business, which could bode ill for the
to clean up the balance sheet, along with stabilising          group’s overall profitability. Woori’s credit-card
underlying asset quality.                                      division lost 0.73pp in market share from FY08 to
                                                               FY11, while the credit-card division accounts for
Meanwhile, we believe securing anchor investors for            about 7.8% of total group earnings.
the majority stake in Woori would be seen positively           The government’s proposed share sale is a saga
by investors given that current PBR multiple is being          without end. A former leader of the current ruling
weighed down mainly by this issue.                             party has suggested a voucher-based privatisation
                                                               scheme for Woori, which could magnify the share
Catalysts: We believe the government attracting                overhang once the existing government shares are in
anchor investors to take the majority stake would              public hands.
definitely be a positive share-price catalyst.
Sovereign wealth funds from the United Arab                    Catalysts: we believe the privatisation is more likely
Emirates and Qatar expressed an interest in taking             to be a negative share-price catalyst than a positive
on the stake in early-2011, but the talks stalled,             one. How easy will it be for the Korea Government to
mainly because of the complexity of the relevant law           attract foreign investors for the majority stake in
at the time.                                                   Woori given the lengthy and highly litigious road
                                                               Lone Star had to take to offload its stake in Korea
Valuation: despite a sizable rebound in the share              Exchange Bank.
price since the December low, the stock still looks
inexpensive, trading at a PBR of 0.5x on our 2012              Valuation: the stock may be trading at low PBR
forecast, equivalent to a 20% discount to its Korea            multiples, but that is because it deserves to. The
peers. The stock has been trading at an average of             average ROE over the last four years was 8.4% and
0.65x on a one-year forward PBR basis since 2010,              this was inflated by the13.6% return that we forecast
while we forecast the underlying ROAE to be flat at            for 2011, which Daiwa forecasts to fall to 9.5% for
9.5% for 2012.                                                 2012. This number assumes no nasty provisioning
                                                               surprises, which may be risky to assume in a year of
Bear
                                                               slow global growth.

                                                          - 38 -
                                                                                                                                                                                                                                                         Bull-Bear Debate
                                                                                                                                                                                                                                                                                            6 March 2012




Woori Financial: how the consensus view has evolved (weekly data)

                                                                                                                                                                                                                                                                                                             5.0
 190
                                                                                                                                                                                                                                                                                                             4.5
 170

 150                                                                                                                                                                                                                                                                                                         4.0

 130
                                                                                                                                                                                                                                                                                                             3.5
 110
                                                                                                                                                                                                                                                                                                             3.0
   90
                                                                                                                                                                                                                                                                                                             2.5
   70

   50                                                                                                                                                                                                                                                                                                        2.0
        2/12/2010

                    3/18/2010

                                4/21/2010

                                            5/25/2010

                                                          6/28/2010




                                                                                                10/8/2010




                                                                                                                                      1/18/2011

                                                                                                                                                   2/21/2011

                                                                                                                                                                3/27/2011

                                                                                                                                                                            4/30/2011




                                                                                                                                                                                                                 8/10/2011

                                                                                                                                                                                                                                9/13/2011




                                                                                                                                                                                                                                                                                      1/27/2012
                                                                                                            11/11/2010

                                                                                                                         12/15/2010




                                                                                                                                                                                                                                            10/17/2011

                                                                                                                                                                                                                                                         11/20/2011

                                                                                                                                                                                                                                                                         12/24/2011
                                                                      8/1/2010

                                                                                    9/4/2010




                                                                                                                                                                                        6/3/2011

                                                                                                                                                                                                      7/7/2011




                                                                                                                                                                                                                                                                                                  3/1/2012
                    Consensus 2012 EPS, rebased (W) (LHS)                                                            Share Price, rebased (W) (LHS)                                                Consensus rating: 1 = strong sell, 5 = strong buy - (RHS)
Source: Bloomberg


  Income statement (Wbn)                                                                                                                                       Balance sheet (Wbn)
Year to 31 Dec                                            2009              2010                2011E               2012E              2013E                   As at 31 Dec                                                     2009           2010                    2011E            2012E                 2013E
Net-interest income                                       5,808             6,464                7,262               7,534              7,911                  Loans & accrued interest (gross)                              200,625        200,391                   239,169          255,911               271,266
Fees & commission (net)                                   1,077             1,058                1,195               1,140              1,152                  Customer deposits                                             178,677        187,009                   195,930          209,646               224,321
Operating income                                          6,912             7,917                9,212               8,675              9,013                  Total assets                                                  284,928        291,428                   312,804          323,752               346,415
Total expenses                                          (3,253)           (3,401)              (3,782)             (4,038)            (4,280)                  Total liabilities                                             268,940        274,509                   290,711          299,768               320,022
Pre-provision operating profit                            3,659             4,516                5,430               4,637              4,733                  Shareholders equity                                            13,721         14,539                    17,234           18,397                19,968
Total provisions                                        (2,276)           (2,678)              (2,243)             (2,047)            (1,628)                  Source: Company, Daiwa forecasts
Profit before tax                                         1,460             1,795                3,203               2,607              3,122
Taxes on profit                                           (403)             (496)                (750)               (613)              (734)
Adj. net profit                                           1,026             1,195                2,156               1,690              2,077
                                                                                                                                                                  Ratios and valuation data (W)
Source: Company, Daiwa forecasts
                                                                                                                                                               Year to 31 Dec                                                  2009              2010                  2011E              2012E               2013E
  Capital adequacy and asset quality                                                                                                                           EPS (adjusted)                                                  1,273            1,483                   2,675              2,097               2,577
Year to 31 Dec                                           2009                    2010          2011E                 2012E            2013E                    Net DPS                                                           100              250                     268                210                 258
Total provisions/NPAs %                                  151.6                    88.9          142.7                 162.9             61.0                   Book value per share (BVPS)                                    17,023           18,038                  21,382             22,825              24,774
Source: Company, Daiwa forecasts                                                                                                                               Source: Company, Daiwa forecasts
                                                                                                                                                                                                                    NPLs recovering with the economy and
  Aggregated items – financial (Wbn)                                                                                                                                                                                management efforts to clean up the balance sheet
Year to 31 Dec                                           2009                2010              2011E                2012E             2013E
Cash & equivalent                                       21,150             21,380               6,417                7,059             7,765
                                                                                                                                                                  Industry-specific (Non KPI) – financial
Investment securities                                   49,308             56,002              65,308               67,442            69,654                   Year to 31 Dec                                                  2009                2010                2011E               2012E              2013E
Source: Company, Daiwa forecasts
                                                                                                                                                               Net interest margin (%)                                            2.0                 2.3                 2.5                 2.5                2.5
                                                                                                                                                               Credit cost (bps)                                                 112                 133                   94                  80                 60
  Common items                                                                                                                                                 NPLs/gross loans (%)                                               1.4                 2.7                 1.2                 1.2                1.1
Year to 31 Dec                                           2009                    2010          2011E                 2012E            2013E                    Loan growth (%)                                                    0.0               (0.1)                19.4                 7.0                6.0
Earnings Yield (recurrent,%)                              10.6                   12.4            22.3                   17.5            21.5                   Deposit growth (%)                                                 5.0                 4.7                 4.8                 7.0                7.0
EPS (Adjusted) Growth % (YoY)                            125.8                    16.5           80.4                 (21.6)            22.9                   Loan to deposit ratio (%)                                       112.3               107.2                122.1               122.1              120.9
P/E (Adjusted) (X)                                         9.4                     8.1            4.5                    5.7             4.7                   Expense to income ratio (%)                                      47.1                43.0                 41.1                46.5               47.5
Price/ BVPS (X)                                            0.7                     0.7            0.6                    0.5             0.5                   Source: Company, Daiwa forecasts
BPS Growth % (YoY)                                        12.4                     6.0           18.5                    6.7             8.5
Source: Company, Daiwa forecasts
Cheap for a reason, with sector-high NPLs, single-digit ROEs, and a major share sale overhang


                    Company profile
              Woori FG was established as Korea’s first financial-holding company in April 2001 as a government measure to revive non-
              viable companies through the injection of public funds. It now holds Woori Bank, which is the second-largest commercial bank
              in Korea in terms of total assets, two regional banks (Kwangju Bank and Kyongnam Bank), Woori Investment & Securities, and
              six other financial subsidiaries.



                                                                                                                                                  - 39 -
                                                                                                                                                                                                                      Bull-Bear Debate
                                                                                                                                                                                                                                           6 March 2012




  GS Holdings: share price and Daiwa recommendation trend
Date                                                 3/5/2012                      1/25/2012
Target price                                           73,000                         64,000
Rating                                                      2                              2

 120,000


 100,000


   80,000                                                                                                                                                                                                                                                    73,000
                                                                                                                                                                                                                                           64,000
   60,000


   40,000


   20,000


        0
                                                                                                                                Feb-11




                                                                                                                                                                                                                                                   Feb-12
                                                                Aug-10

                                                                         Sep-10




                                                                                              Nov-10

                                                                                                       Dec-10




                                                                                                                                                                                        Aug-11

                                                                                                                                                                                                    Sep-11




                                                                                                                                                                                                                       Nov-11

                                                                                                                                                                                                                                Dec-11
                                                       Jul-10




                                                                                                                                                                             Jul-11
                       Apr-10




                                                                                    Oct-10




                                                                                                                                                  Apr-11




                                                                                                                                                                                                             Oct-11
                                 May-10

                                          Jun-10




                                                                                                                    Jan-11




                                                                                                                                                           May-11

                                                                                                                                                                    Jun-11




                                                                                                                                                                                                                                         Jan-12
             Mar-10




                                                                                                                                         Mar-11




                                                                                                                                                                                                                                                               Mar-12
                                                                                                                Closing price (W)                    Target price (W)

Source: Daiwa


  SHI: share prices and Daiwa recommendation trends
Date                                               02/02/2012                     01/11/2011                       24/08/2011                          07/07/2011                     25/01/2011                       20/12/2010                     03/11/2010
Target price                                           42,000                         36,000                           40,000                              55,000                         50,000                           45,000                         38,000
Rating                                                      2                              2                                2                                   2                              2                                2                              2


Date                                               29/09/2010                     14/04/2010
Target price                                           34,000                         24,000
Rating                                                      2                              3

  60,000                                                                                                                                                                     55,000
                                                                                                                             50,000
  50,000                                                                                                    45,000
                                                                                                                                                                                                                                                  42,000
                                                                                                                                                                                                 40,000
                                                                                             38,000
  40,000                                                                                                                                                                                                              36,000
                                                                                  34,000

  30,000               24,000

  20,000


  10,000


       0
                                                                                                                                Feb-11




                                                                                                                                                                                                                                                    Feb-12
                                                                Aug-10

                                                                         Sep-10




                                                                                              Nov-10

                                                                                                       Dec-10




                                                                                                                                                                                        Aug-11

                                                                                                                                                                                                    Sep-11




                                                                                                                                                                                                                       Nov-11

                                                                                                                                                                                                                                Dec-11
                                                      Jul-10




                                                                                                                                                                             Jul-11
                      Apr-10




                                                                                    Oct-10




                                                                                                                                                  Apr-11




                                                                                                                                                                                                             Oct-11
                                May-10

                                          Jun-10




                                                                                                                   Jan-11




                                                                                                                                                           May-11

                                                                                                                                                                    Jun-11




                                                                                                                                                                                                                                         Jan-12
            Mar-10




                                                                                                                                         Mar-11




                                                                                                                                                                                                                                                               Mar-12




                                                                                                            Target price (W)                       Closing price (W)

Source: Daiwa




                                                                                                                                - 40 -
                                                                                                                                                                                                                                                                            Bull-Bear Debate
                                                                                                                                                                                                                                                                                                         6 March 2012




  Hynix: share price and Daiwa recommendation trend
Date                                                         02/02/2012                                   27/10/2011                                27/09/2011                                 21/07/2011                               13/07/2011                           07/06/2011                              26/04/2011
Target price                                                     32,000                                       28,000                                    26,000                                     30,000                                   32,000                               38,000                                  40,000
Rating                                                                2                                            2                                         2                                          2                                        2                                    2                                       2

Date                                                         18/01/2011                                   14/10/2010                                22/07/2010                                     22/04/10                               31/03/10
Target price                                                     32,000                                       27,000                                    30,000                                      35,000                                 32,000
Rating                                                                2                                            2                                         2                                            2                                      2
  45,000
                                                                                                                                                                                                  40,000
  40,000                                                                                                                                                                                                            38,000
                                      35,000
  35,000                32,000                                                                                                                             32,000                                                               32,000                                                                           32,000
                                                                           30,000
  30,000                                                                                                                                                                                                                                    30,000                             28,000
                                                                                                                    27,000                                                                                                                                       26,000
  25,000

  20,000

  15,000

  10,000

   5,000

       0
           Feb-10




                                                                                                                                                                           Feb-11




                                                                                                                                                                                                                                                                                                                               Feb-12
                                                                                             Aug-10

                                                                                                           Sep-10




                                                                                                                                    Nov-10

                                                                                                                                                  Dec-10




                                                                                                                                                                                                                                                     Aug-11

                                                                                                                                                                                                                                                                 Sep-11




                                                                                                                                                                                                                                                                                          Nov-11

                                                                                                                                                                                                                                                                                                     Dec-11
                                                                               Jul-10




                                                                                                                                                                                                                                         Jul-11
                                       Apr-10




                                                                                                                       Oct-10




                                                                                                                                                                                                    Apr-11




                                                                                                                                                                                                                                                                             Oct-11
                                                    May-10

                                                                  Jun-10




                                                                                                                                                               Jan-11




                                                                                                                                                                                                                May-11

                                                                                                                                                                                                                            Jun-11




                                                                                                                                                                                                                                                                                                                 Jan-12
                         Mar-10




                                                                                                                                                                                      Mar-11




                                                                                                                                                Target price (W)                           Closing price (W)

Source: Daiwa


  Woori FG: share price and Daiwa recommendation trend
Date                                                             2/17/2012                                10/20/2011                                       2/7/2011                               8/27/2010                              7/23/2010                                    5/3/2010                               4/1/2010
Target price                                                        13,600                                    11,900                                         19,700                                  14,600                                 18,600                                      22,800                                 19,600
Rating                                                                   2                                         2                                              1                                       3                                      2                                           2                                      2

   25,000                               22,800

                        19,600                                                                                                                                      19,700
   20,000                                                                     18,600

                                                                                            14,600
                                                                                                                                                                                                                                                                                                                      13,600
   15,000
                                                                                                                                                                                                                                                                          11,900

   10,000


    5,000


           0
                                                                     Jul-10




                                                                                                              Oct-10




                                                                                                                                                                                                                               Jul-11




                                                                                                                                                                                                                                                                   Oct-11
                                                        Jun-10




                                                                                                                                                      Jan-11




                                                                                                                                                                                                                   Jun-11




                                                                                                                                                                                                                                                                                                        Jan-12
                                           May-10




                                                                                                                                                                                                       May-11
               Mar-10




                                                                                                                                                                  Feb-11

                                                                                                                                                                             Mar-11




                                                                                                                                                                                                                                                                                                                    Feb-12

                                                                                                                                                                                                                                                                                                                                 Mar-12
                                                                                   Aug-10

                                                                                                 Sep-10




                                                                                                                           Nov-10

                                                                                                                                       Dec-10




                                                                                                                                                                                                                                            Aug-11

                                                                                                                                                                                                                                                        Sep-11




                                                                                                                                                                                                                                                                                Nov-11

                                                                                                                                                                                                                                                                                            Dec-11
                             Apr-10




                                                                                                                                                                                         Apr-11




                                                                                                                                                 Target price (W)                              Closing price (W)

Source: Daiwa




                                                                                                                                                                 - 41 -
         Bull-Bear Debate
                 6 March 2012




- 42 -
         Bull-Bear Debate
                 6 March 2012




- 43 -
         Bull-Bear Debate
                 6 March 2012




- 44 -
                                                                                                                               Bull-Bear Debate
                                                                                                                                                  6 March 2012




Daiwa’s Asia Pacific Research Directory
Hong Kong
Regional Research Head                                                           Nagahisa MIYABE       (852) 2848 4971     nagahisa.miyabe@hk.daiwacm.com
Regional Research Co-head                                                        Christopher LOBELLO   (852) 2848 4916     christopher.lobello@hk.daiwacm.com
Head of Product Management                                                       John HETHERINGTON     (852) 2773 8787     john.hetherington@hk.daiwacm.com
Head of Thematic Research; Product Management                                    Tathagata Guha ROY    (852) 2773 8731     tathagata.guharoy@hk.daiwacm.com
Head of China Research, Chief Economist (Regional)                               Mingchun SUN          (852) 2773 8751     mingchun.sun@hk.daiwacm.com
Macro Economics (Regional)                                                       Kevin LAI             (852) 2848 4926     kevin.lai@hk.daiwacm.com
Head of Hong Kong Research; Regional Property Coordinator;                       Jonas KAN             (852) 2848 4439     jonas.kan@hk.daiwacm.com
Co-head of Hong Kong and China Property; Property Developers (Hong Kong)
Automobiles and Components (China)                                               Jeff CHUNG            (852) 2773 8783     jeff.chung@hk.daiwacm.com
Head of Greater China FIG; Banking (Hong Kong, China)                            Grace WU              (852) 2532 4383     grace.wu@hk.daiwacm.com
Banking (Hong Kong, China)                                                       Queenie POON          (852) 2532 4381     queenie.poon@hk.daiwacm.com
Capital Goods –Electronics Equipments and Machinery (Hong Kong, China)           Joseph HO             (852) 2848 4443     joseph.ho@hk.daiwacm.com
Consumer, Pharmaceuticals and Healthcare (China)                                 Hongxia ZHU           (852) 2848 4460     hongxia.zhu@hk.daiwacm.com
Internet (Hong Kong, China)                                                      Alicia HU             (852) 2532 4180     alicia.hu@hk.daiwacm.com
Regional Head of IT/Electronics; Semiconductor/IC Design (Regional)              Eric CHEN             (852) 2773 8702     eric.chen@hk.daiwacm.com
IT/Electronics - Semiconductor/IC Design (Taiwan)                                Ashley CHUNG          (852) 2848 4431     ashley.chung@hk.daiwacm.com
Regional Head of Materials; Materials/Energy (Regional)                          Alexander LATZER      (852) 2848 4463     alexander.latzer@hk.daiwacm.com
Materials (China)                                                                Felix LAM             (852) 2532 4341     felix.lam@hk.daiwacm.com
Regional Head of Small/Medium Cap; Small/Medium Cap (Regional)                   Mark CHANG            (852) 2773 8729     mark.chang@hk.daiwacm.com
Small/Medium Cap (Regional)                                                      John CHOI             (852) 2773 8730     john.choi@hk.daiwacm.com
Head of Solar                                                                    Pranab Kumar SARMAH   (852) 2848 4441     pranab.sarmah@hk.daiwacm.com
Transportation – Aviation, Land and Transportation Infrastructure (Regional)     Kelvin LAU            (852) 2848 4467     kelvin.lau@hk.daiwacm.com
Regional Head of Clean Energy and Utilities; Utilities; Power Equipment;         Dave DAI              (852) 2848 4068     dave.dai@hk.daiwacm.com
Renewables (Hong Kong, China)
Head of Custom Products Group; Custom Products Group                             Justin LAU            (852) 2773 8741     justin.lau@hk.daiwacm.com
Custom Products Group                                                            Philip LO             (852) 2773 8714     philip.lo@hk.daiwacm.com
Custom Products Group                                                            Jibo MA               (852) 2848 4489     jibo.ma@hk.daiwacm.com


South Korea
Head of Research; Strategy; Banking/Finance                                      Chang H LEE           (82) 2 787 9177     chlee@kr.daiwacm.com
Regional Head of Automobiles and Components; Automobiles; Shipbuilding; Steel    Sung Yop CHUNG        (82) 2 787 9157     sychung@kr.daiwacm.com
Banking/Finance                                                                  Anderson CHA          (82) 2 787 9185     anderson.cha@kr.daiwacm.com
Capital Goods (Construction and Machinery)                                       Mike OH               (82) 2 787 9179     mike.oh@kr.daiwacm.com
Consumer/Retail                                                                  Sang Hee PARK         (82) 2 787 9165     sanghee.park@kr.daiwacm.com
IT/Electronics (Tech Hardware and Memory Chips)                                  Jae H LEE             (82) 2 787 9173     jhlee@kr.daiwacm.com
Materials (Chemicals); Oil and Gas                                               Jihye CHOI            (82) 2 787 9121     jihye.choi@kr.daiwacm.com
Telecommunications; Software (Internet/Online Games)                             Thomas Y KWON         (82) 2 787 9181     yskwon@kr.daiwacm.com
Custom Products Group                                                            Shannen PARK          (82) 2 787 9184     shannen.park@kr.daiwacm.com


Taiwan
Banking/Diversified Financials                                                   Jerry YANG            (886) 2 8758 6252   jerry.yang@daiwacm-cathay.com.tw
Consumer/Retail                                                                  Yoshihiko KAWASHIMA   (886) 2 8758 6247   y.kawashima@daiwacm-cathay.com.tw
IT/Technology Hardware (Communications Equipment); Software; Small/Medium Caps   Christine WANG        (886) 2 8758 6249   christine.wang@daiwacm-cathay.com.tw
IT/Technology Hardware (Handsets and Components)                                 Alex CHANG            (886) 2 8758 6248   alex.chang@daiwacm-cathay.com.tw
IT/Technology Hardware (PC Hardware - Panels)                                    Chris LIN             (886) 2 8758 6251   chris.lin@daiwacm-cathay.com.tw


India
Head of India Research; Pharmaceuticals and Healthcare                           Kartik A. MEHTA       (91) 22 6622 1012   kartik.mehta@in.daiwacm.com
Deputy Head of Research; Strategy; Banking/Finance                               Punit SRIVASTAVA      (91) 22 6622 1013   punit.srivastava@in.daiwacm.com
All Industries                                                                   Fumio YOKOMICHI       (91) 22 6622 1003   fumio.yokomichi@in.daiwacm.com
Automobiles and Components                                                       Ambrish MISHRA        (91) 22 6622 1060   ambrish.mishra@in.daiwacm.com
Capital Goods/Utilities                                                          Saurabh MEHTA         (91) 22 6622 1009   saurabh.mehta@in.daiwacm.com
FMCG; Consumer                                                                   Percy PANTHAKI        (91) 22 6622 1063   percy.panthaki@in.daiwacm.com




                                                                                 - 45 -
                                                                                                                                          Bull-Bear Debate
                                                                                                                                                           6 March 2012




Singapore
Head of Singapore Research                                                           Tony DARWELL           (65) 6321 3050            tony.darwell@sg.daiwacm.com
Quantitative Research                                                                Josh CHERIAN           (65) 6499 6549            josh.cherian@sg.daiwacm.com
Quantitative Research                                                                Suzanne HO             (65) 6499 6545            suzanne.ho@sg.daiwacm.com
Banking (ASEAN)                                                                      Srikanth VADLAMANI     (65) 6499 6570            srikanth.vadlamani@sg.daiwacm.com
Regional Head of Oil and Gas; Oil and Gas (ASEAN and China); Capital Goods (Singapore) Adrian LOH           (65) 6499 6548            adrian.loh@sg.daiwacm.com
Property and REITs                                                                   David LUM              (65) 6329 2102            david.lum@sg.daiwacm.com
Head of ASEAN & India Telecommunications; Telecommunications (ASEAN & India)         Ramakrishna MARUVADA   (65) 6499 6543            ramakrishna.maruvada@sg.daiwacm.com
Thematic Research                                                                    Amy CHEW               (65) 6321 3085            amy.chew@sg.daiwacm.com


Philippines
Head of the Philippines Research; Strategy; Capital Goods; Materials                 Rommel RODRIGO         (63) 2 813 7344 ext 302 rommel.rodrigo@dbpdaiwacm.com.ph
Economy; Consumer; Power and Utilities; Transportation – Aviation                    Alvin AROGO            (63) 2 813 7344 ext 301   alvin.arogo@dbpdaiwacm.com.ph
Property; Banking; Transportation – Port                                             Danielo PICACHE        (63) 2 813 7344 ext 293 danielo.picache@dbpdaiwacm.com.ph




                                                                                     - 46 -
                                                                                                                                              Bull-Bear Debate
                                                                                                                                                                 6 March 2012




Daiwa’s Office
Office / Branch / Affiliate                                       Address                                                                   Tel                 Fax
DAIWA SECURITIES GROUP INC
HEAD OFFICE                                                       Gran Tokyo North Tower, 1-9-1, Marunouchi, Chiyoda-ku, Tokyo, 100-6753 (81) 3 5555 3111       (81) 3 5555 0661
Daiwa Securities Trust Company                                    One Evertrust Plaza, Jersey City, NJ 07302, U.S.A.                        (1) 201 333 7300    (1) 201 333 7726
Daiwa Securities Trust and Banking (Europe) PLC (Head Office)     5 King William Street, London EC4N 7JB, United Kingdom                    (44) 207 320 8000 (44) 207 410 0129
Daiwa Securities Trust and Banking (Europe) PLC (Dublin Branch)   Level 3, Block 5, Harcourt Centre, Harcourt Road, Dublin 2, Ireland       (353) 1 603 9900    (353) 1 478 3469


DAIWA CAPITAL MARKETS LIMITED
HEAD OFFICE                                                       Gran Tokyo North Tower, 1-9-1, Marunouchi, Chiyoda-ku,                    (03) 5555 3111      (03) 5555 0661
                                                                  Tokyo, 100-6753
Daiwa Capital Markets America Inc                                 Financial Square, 32 Old Slip, New York, NY10005, U.S.A.                  (1) 212 612 7000    (1) 212 612 7100
Daiwa Capital Markets America Inc. San Francisco Branch           555 California Street, Suite 3360, San Francisco, CA 94104, U.S.A.        (1) 415 955 8100    (1) 415 956 1935
Daiwa Capital Markets Europe Limited                              5 King William Street, London EC4N 7AX, United Kingdom                    (44) 20 7597 8000 (44) 20 7597 8600
Daiwa Capital Markets Europe Limited, Frankfurt Branch            Trianon Building, Mainzer Landstrasse 16, 60325 Frankfurt am Main,        (49) 69 717 080     (49) 69 723 340
                                                                  Federal Republic of Germany
Daiwa Capital Markets Europe Limited, Paris Branch                127, Avenue des Champs-Elysées, 75008 Paris, France                       (33) 1 56 262 200   (33) 1 47 550 808
Daiwa Capital Markets Europe Limited, Geneva Branch               50 rue du Rhône, P.O.Box 3198, 1211 Geneva 3, Switzerland                 (41) 22 818 7400    (41) 22 818 7441
Daiwa Capital Markets Europe Limited, Milan Branch                Via Senato 14/16, 20121 Milan, Italy                                      (39) 02 763 271     (39) 02 763 27250
Daiwa Capital Markets Europe Limited,                             25/9, build. 1, Per. Sivtsev Vrazhek, Moscow 119002, Russian Federation   (7) 495 617 1960    (7) 495 244 1977
Moscow Representative Office
Daiwa Capital Markets Europe Limited, Bahrain Branch              7th Floor, The Tower, Bahrain Commercial Complex, P.O. Box 30069,         (973) 17 534 452    (973) 17 535 113
                                                                  Manama, Bahrain
Daiwa Capital Markets Europe Limited, Dubai Branch                The Gate village Building 1, 1st floor, Unit-6, DIFC, P.O.Box-506657,     (971) 47 090 401    (971) 43 230 332
                                                                  Dubai, UAE.
Daiwa Capital Markets Hong Kong Limited                           Level 28, One Pacific Place, 88 Queensway, Hong Kong                      (852) 2525 0121     (852) 2845 1621
Daiwa Capital Markets Singapore Limited                           6 Shenton Way #26-08, DBS Building Tower Two, Singapore 068809,           (65) 6220 3666      (65) 6223 6198
                                                                  Republic of Singapore
Daiwa Capital Markets Australia Limited                           Level 34, Rialto North Tower, 525 Collins Street, Melbourne,              (61) 3 9916 1300    (61) 3 9916 1330
                                                                  Victoria 3000, Australia
DBP-Daiwa Capital Markets Philippines, Inc                        18th Floor, Citibank Tower, 8741 Paseo de Roxas, Salcedo Village,         (632) 813 7344      (632) 848 0105
                                                                  Makati City, Republic of the Philippines
Daiwa-Cathay Capital Markets Co Ltd                               14/F, 200, Keelung Road, Sec 1, Taipei, Taiwan, R.O.C.                    (886) 2 2723 9698 (886) 2 2345 3638
Daiwa Securities Capital Markets Korea Co., Ltd.                  One IFC, 10 Gukjegeumyung-Ro, Yeouido-dong, Yeongdeungpo-gu,              (82) 2 787 9100     (82) 2 787 9191
                                                                  Seoul, 150-876, Korea
Daiwa Securities Capital Markets Co Ltd,                          Room 3503/3504, SK Tower,                                                 (86) 10 6500 6688 (86) 10 6500 3594
Beijing Representative Office                                     No.6 Jia Jianguomen Wai Avenue, Chaoyang District,
                                                                  Beijing 100022, People’s Republic of China
Daiwa SSC Securities Co Ltd                                       45/F, Hang Seng Tower, 1000 Lujiazui Ring Road,                           (86) 21 3858 2000 (86) 21 3858 2111
                                                                  Pudong, Shanghai 200120, People’s Republic of China
Daiwa Securities Capital Markets Co. Ltd,                         Level 8 Zuellig House, 1 Sliom Road,                                      (66) 2 231 8381     (66) 2 231 8121
Bangkok Representative Office                                     Bangkok 10500, Thailand
Daiwa Capital Markets India Private Ltd                           10th Floor, 3 North Avenue, Maker Maxity, Bandra Kurla Complex,           (91) 22 6622 1000 (91) 22 6622 1019
                                                                  Bandra East, Mumbai – 400051, India
Daiwa Securities Capital Markets Co. Ltd,                         Suite 405, Pacific Palace Building, 83B, Ly Thuong Kiet Street,           (84) 4 3946 0460    (84) 4 3946 0461
Hanoi Representative Office                                       Hoan Kiem Dist. Hanoi, Vietnam


DAIWA INSTITUTE OF RESEARCH LTD
HEAD OFFICE                                                       15-6, Fuyuki, Koto-ku, Tokyo, 135-8460, Japan                             (81) 3 5620 5100    (81) 3 5620 5603
MARUNOUCHI OFFICE                                                 Gran Tokyo North Tower, 1-9-1, Marunouchi, Chiyoda-ku, Tokyo, 100-6756 (81) 3 5555 7011       (81) 3 5202 2021


New York Research Center                                          11th Floor, Financial Square, 32 Old Slip, NY, NY 10005-3504, U.S.A.      (1) 212 612 6100    (1) 212 612 8417
London Research Centre                                            3/F, 5 King William Street, London, EC4N 7AX, United Kingdom              (44) 207 597 8000 (44) 207 597 8550




                                                                                   - 47 -
                                                                                                                                                                 Bull-Bear Debate
                                                                                                                                                                                      6 March 2012




Disclaimer
This publication is produced by Daiwa Securities Group Inc. and/or its non-U.S. affiliates, and distributed by Daiwa Securities Group Inc. and/or its non-U.S. affiliates, except to the extent
expressly provided herein. This publication and the contents hereof are intended for information purposes only, and may be subject to change without further notice. Any use, disclosure,
distribution, dissemination, copying, printing or reliance on this publication for any other purpose without our prior consent or approval is strictly prohibited. Neither Daiwa Securities Group
Inc. nor any of its respective parent, holding, subsidiaries or affiliates, nor any of its respective directors, officers, servants and employees, represent nor warrant the accuracy or completeness
of the information contained herein or as to the existence of other facts which might be significant, and will not accept any responsibility or liability whatsoever for any use of or reliance upon
this publication or any of the contents hereof. Neither this publication, nor any content hereof, constitute, or are to be construed as, an offer or solicitation of an offer to buy or sell any of the
securities or investments mentioned herein in any country or jurisdiction nor, unless expressly provided, any recommendation or investment opinion or advice. Any view, recommendation,
opinion or advice expressed in this publication may not necessarily reflect those of Daiwa Securities Capital Markets Co. Ltd., and/or its affiliates nor any of its respective directors, officers,
servants and employees except where the publication states otherwise. This research report is not to be relied upon by any person in making any investment decision or otherwise advising with
respect to, or dealing in, the securities mentioned, as it does not take into account the specific investment objectives, financial situation and particular needs of any person.

Daiwa Securities Group Inc., its subsidiaries or affiliates, or its or their respective directors, officers and employees from time to time have trades as principals, or have positions in, or have
other interests in the securities of the company under research including derivatives in respect of such securities or may have also performed investment banking and other services for the
issuer of such securities. The following are additional disclosures.

Japan
Daiwa Securities Capital Markets Co. Ltd
Daiwa Securities Capital Markets Co. Ltd is a subsidiary of Daiwa Securities Group Inc.
Investment Banking Relationship
Within the preceding 12 months, The subsidiaries and/or affiliates of Daiwa Securities Group Inc. * has lead-managed public offerings and/or secondary offerings (excluding straight bonds) of
the securities of the following companies: Patel Engineering (PEC IN); International Taifeng Holdings Limited (873 HK); Sihuan Pharmaceutical Holdings Group Limited (460 HK); Strides
Arcolab Limited (STR IN); China Metal Resources Holding Limited (8071 HK); China 33 Media Group Limited (8087 HK); Sabana Shari’ah Compliant Industrial Real Estate Investment Trust
(SSREIT SP); SBI Holdings Inc. (6488 HK); Shunfeng Photovoltaic International Limited (1165 HK); Rexlot Holdings Limited (555 HK).
*Subsidiaries of Daiwa Securities Group Inc. for the purposes of this section shall mean any one or more of:
• Daiwa Capital Markets Hong Kong Limited
• Daiwa Capital Markets Singapore Limited
• Daiwa Capital Markets Australia Limited
• Daiwa Capital Markets India Private Limited
• Daiwa-Cathay Capital Markets Co., Ltd.
• Daiwa Securities Capital Markets Korea Co., Ltd.

Hong Kong
This research is distributed in Hong Kong by Daiwa Capital Markets Hong Kong Limited (“DHK”) which is regulated by the Hong Kong Securities and Futures Commission. Recipients of this
research in Hong Kong may contact DHK in respect of any matter arising from or in connection with this research.
Ownership of Securities
For “Ownership of Securities” information, please visit BlueMatrix disclosure Link at https://daiwa3.bluematrix.com/sellside/Disclosures.action.
Investment Banking Relationship
For “Investment Banking Relationship”, please visit BlueMatrix disclosure Link at https://daiwa3.bluematrix.com/sellside/Disclosures.action.
Relevant Relationship (DHK)
DHK may from time to time have an individual employed by or associated with it serves as an officer of any of the companies under its research coverage.
DHK market making
DHK may from time to time make a market in securities covered by this research.

Korea
The developing analyst of this research and analysis material hereby states and confirms that the contents of this material correctly reflect the analyst’s views and opinions and that the analyst
has not been placed under inappropriate pressure or interruption by an external party.

Name of Analyst : Jihye Choi/Jae H. Lee/Sung Yop Chung/Anderson Cha

Disclosure of Analysts’ Interests
If an analyst engaging in or a person who exercises influences on the preparation or publication of a Research Report containing recommendations for general investors to trade financial
investment instruments with regard to which the analyst or the influential person has personal interests and if the recommendations contained in the Report may have impacts on the personal
interests, Daiwa Securities Capital Markets Korea Co., Ltd.(“Daiwa Securities Korea”)shall ensure that the Analyst or the influential person notifies that he/she has personal interests with
regard to:

1.   The equity, the equity-linked bonds and the instruments with the subscription right to the equity issued by the legal entity covered in the Research Report (or the legal entity subject to the
     investment recommendations);
2.   The stock option granted by the legal entity covered in the Research Report (or the legal entity subject to the investment recommendations); or
3.   The equity futures, the equity options and the equity-linked warrants backed by the equity prescribed in the preceding Paragraph 1 as the underlying assets.

Legal Entities subject to Research Report Coverage Restrictions
Daiwa Securities Korea hereby states and confirms that Daiwa Securities Korea has no conflicts of interests with the legal entity covered in this Research Report:

1.   In that Daiwa Securities Korea does NOT offer direct or indirect payment guarantee for the legal entity by means of, for instance, guarantee, endorsement, provision of collaterals or the
     acquisition of debts;
2.   In that Daiwa Securities Korea does NOT own one-hundredth (or 1/100) or more of the total number of outstanding equities issued by the legal entity;
3.   In that The legal entity is NOT an affiliated company of Daiwa Securities Korea pursuant to Sub-paragraph 3, Article 2 of the Monopoly Regulation and Fair Trade Act of Korea;
4.   In that, although Daiwa Securities Korea offers advisory services for the legal entity with regard to an M&A deal, the size of the M&A deal does NOT exceed five-hundredths (or 5/100) of
     the total asset size or the total number of equities issued and outstanding of the legal entity;
5.   In that, although Daiwa Securities Korea acted in the capacity of a Lead Underwriter for the initial public offering of the legal entity, more than one-year has passed since the IPO date;
6.   In that Daiwa Securities Korea is NOT designated by the legal entity as the ‘tender offer agent’ pursuant to the Paragraph 2, Article 133 of the Financial Services and Capital Market Act or
     the legal entity is NOT the issuer of the equity subject to the proposed tender offer; this requirement, however applies until the maturity of the tender offer period; or
7.   In that Daiwa Securities Korea does NOT have significant or material interests with regard to the legal entity.

Disclosure of Prior Distribution to Third Party
This report has not been distributed to the third party in advance prior to public release.

The following explains the rating system in the report as compared to KOSPI, based on the beliefs of the author(s) of this report.

"1": the security could outperform the KOSPI by more than 15% over the next six months.
"2": the security is expected to outperform the KOSPI by 5-15% over the next six months.
"3": the security is expected to perform within 5% of the KOSPI (better or worse) over the next six months.
"4": the security is expected to underperform the KOSPI by 5-15% over the next six months.
"5": the security could underperform the KOSPI by more than 15% over the next six months.

“Positive” means that the analyst expects the sector to outperform the KOSPI over the next six months.
“Neutral” means that the analyst expects the sector to be in-line with the KOSPI over the next six months
“Negative” means that the analyst expects the sector to underperform the KOSPI over the next six months

Additional information may be available upon request.




                                                                                                - 48 -
                                                                                                                                                                 Bull-Bear Debate
                                                                                                                                                                                     6 March 2012




Singapore
This research is distributed in Singapore by Daiwa Capital Markets Singapore Limited and it may only be distributed in Singapore to accredited investors, expert investors and institutional
investors as defined in the Financial Advisers Regulations and the Securities and Futures Act (Chapter 289), as amended from time to time. By virtue of distribution to these category of
investors, Daiwa Capital Markets Singapore Limited and its representatives are not required to comply with Section 36 of the Financial Advisers Act (Chapter 110) (Section 36 relates to
disclosure of Daiwa Capital Markets Singapore Limited’s interest and/or its representative’s interest in securities). Recipients of this research in Singapore may contact Daiwa Capital Markets
Singapore Limited in respect of any matter arising from or in connection with the research.

Australia
This research is distributed in Australia by Daiwa Capital Markets Stockbroking Limited and it may only be distributed in Australia to wholesale investors within the meaning of the
Corporations Act. Recipients of this research in Australia may contact Daiwa Capital Markets Stockbroking Limited in respect of any matter arising from or in connection with the research.
Ownership of Securities
For “Ownership of Securities” information, please visit BlueMatrix disclosure Link at https://daiwa3.bluematrix.com/sellside/Disclosures.action.

India
This research is distributed by Daiwa Capital Markets India Private Limited (DAIWA) which is an intermediary registered with Securities & Exchange Board of India. This report is not to be
considered as an offer or solicitation for any dealings in securities. While the information in this report has been compiled by DAIWA in good faith from sources believed to be reliable, no
representation or warranty, express of implied, is made or given as to its accuracy, completeness or correctness. DAIWA its officers, employees, representatives and agents accept no liability
whatsoever for any loss or damage whether direct, indirect, consequential or otherwise howsoever arising (whether in negligence or otherwise) out of or in connection with or from any use of
or reliance on the contents of and/or omissions from this document. Consequently DAIWA expressly disclaims any and all liability for, or based on or relating to any such information
contained in or errors in or omissions in this report. Accordingly, you are recommended to seek your own legal, tax or other advice and should rely solely on your own judgment, review and
analysis, in evaluating the information in this document. The data contained in this document is subject to change without any prior notice DAIWA reserves its right to modify this report as
maybe required from time to time. DAIWA is committed to providing independent recommendations to its Clients and would be happy to provide any information in response to any query
from its Clients. This report is strictly confidential and is being furnished to you solely for your information. The information contained in this document should not be reproduced (in whole or
in part) or redistributed in any form to any other person. We and our group companies, affiliates, officers, directors and employees may from time to time, have long or short positions, in and
buy sell the securities thereof, of company(ies) mentioned herein or be engaged in any other transactions involving such securities and earn brokerage or other compensation or act as advisor
or have the potential conflict of interest with respect to any recommendation and related information or opinion. DAIWA prohibits its analyst and their family members from maintaining a
financial interest in the securities or derivatives of any companies that the analyst cover. This report is not intended or directed for distribution to, or use by any person, citizen or entity which
is resident or located in any state or country or jurisdiction where such publication, distribution or use would be contrary to any statutory legislation, or regulation which would require DAIWA
and its affiliates/ group companies to any registration or licensing requirements. The views expressed in the report accurately reflect the analyst’s personal views about the securities and
issuers that are subject of the Report, and that no part of the analyst’s compensation was, is or will be directly or indirectly, related to the recommendations or views expressed in the Report.
This report does not recommend to US recipients the use of Daiwa Capital Markets India Private Limited or any of its non – US affiliates to effect trades in any securities and is not supplied
with any understanding that US recipients will direct commission business to Daiwa Capital Markets India Private Limited.

Taiwan
This research is distributed in Taiwan by Daiwa-Cathay Capital Markets Co., Ltd and it may only be distributed in Taiwan to institutional investors or specific investors who have signed
recommendation contracts with Daiwa-Cathay Capital Markets Co., Ltd in accordance with the Operational Regulations Governing Securities Firms Recommending Trades in Securities to
Customers. Recipients of this research in Taiwan may contact Daiwa-Cathay Capital Markets Co., Ltd in respect of any matter arising from or in connection with the research.

Philippines
This research is distributed in the Philippines by DBP-Daiwa Capital Markets Philippines, Inc. which is regulated by the Philippines Securities and Exchange Commission and the Philippines
Stock Exchange, Inc. Recipients of this research in the Philippines may contact DBP-Daiwa Capital Markets Philippines, Inc. in respect of any matter arising from or in connection with the
research. DBP-Daiwa Capital Markets Philippines, Inc. recommends that investors independently assess, with a professional advisor, the specific financial risks as well as the legal, regulatory,
tax, accounting, and other consequences of a proposed transaction. DBP-Daiwa Capital Markets Philippines, Inc. may have positions or may be materially interested in the securities in any of
the markets mentioned in the publication or may have performed other services for the issuers of such securities.
For relevant securities and trading rules please visit SEC and PSE Link at http://www.sec.gov.ph/irr/AmendedIRRfinalversion.pdf and http://www.pse.com.ph/ respectively.

United Kingdom
This research report is produced by Daiwa Securities Capital Markets Co., Ltd and/or its affiliates and is distributed by Daiwa Capital Markets Europe Limited in the European Union, Iceland,
Liechtenstein, Norway and Switzerland. Daiwa Capital Markets Europe Limited is authorised and regulated by The Financial Services Authority (“FSA”) and is a member of the London Stock
Exchange, Chi-X, Eurex and NYSE Liffe. Daiwa Capital Markets Europe Limited and its affiliates may, from time to time, to the extent permitted by law, participate or invest in other financing
transactions with the issuers of the securities referred to herein (the “Securities”), perform services for or solicit business from such issuers, and/or have a position or effect transactions in the
Securities or options thereof and/or may have acted as an underwriter during the past twelve months for the issuer of such securities. In addition, employees of Daiwa Capital Markets Europe
Limited and its affiliates may have positions and effect transactions in such securities or options and may serve as Directors of such issuers. Daiwa Capital Markets Europe Limited may, to the
extent permitted by applicable UK law and other applicable law or regulation, effect transactions in the Securities before this material is published to recipients.

This publication is intended for investors who are not Retail Clients in the United Kingdom within the meaning of the Rules of the FSA and should not therefore be distributed to such Retail
Clients in the United Kingdom. Should you enter into investment business with Daiwa Capital Markets Europe’s affiliates outside the United Kingdom, we are obliged to advise that the
protection afforded by the United Kingdom regulatory system may not apply; in particular, the benefits of the Financial Services Compensation Scheme may not be available.

Daiwa Capital Markets Europe Limited has in place organisational arrangements for the prevention and avoidance of conflicts of interest. Our conflict management policy is available at
http://www.uk.daiwacm.com/about-us/corporate-governance-and-regulatory. Regulatory disclosures of investment banking relationships are available at
https://daiwa3.bluematrix.com/sellside/Disclosures.action.

United States
This report is distributed in the U.S. by Daiwa Capital Markets America Inc. (DCMA). It may not be accurate or complete and should not be relied upon as such. It reflects the preparer’s views
at the time of its preparation, but may not reflect events occurring after its preparation; nor does it reflect DCMA’s views at any time. Neither DCMA nor the preparer has any obligation to
update this report or to continue to prepare research on this subject. This report is not an offer to sell or the solicitation of any offer to buy securities. Unless this report says otherwise, any
recommendation it makes is risky and appropriate only for sophisticated speculative investors able to incur significant losses. Readers should consult their financial advisors to determine
whether any such recommendation is consistent with their own investment objectives, financial situation and needs. This report does not recommend to U.S. recipients the use of any of
DCMA’s non-U.S. affiliates to effect trades in any security and is not supplied with any understanding that U.S. recipients of this report will direct commission business to such non-U.S.
entities. Unless applicable law permits otherwise, non-U.S. customers wishing to effect a transaction in any securities referenced in this material should contact a Daiwa entity in their local
jurisdiction. Most countries throughout the world have their own laws regulating the types of securities and other investment products which may be offered to their residents, as well as a
process for doing so. As a result, the securities discussed in this report may not be eligible for sales in some jurisdictions. Customers wishing to obtain further information about this report
should contact DCMA: Daiwa Capital Markets America Inc., Financial Square, 32 Old Slip, New York, New York 10005 (telephone 212-612-7000).

Ownership of Securities
For “Ownership of Securities” information please visit BlueMatrix disclosure Link at https://daiwa3.bluematrix.com/sellside/Disclosures.action.

Investment Banking Relationships
For “Investment Banking Relationships” please visit BlueMatrix disclosure link at https://daiwa3.bluematrix.com/sellside/Disclosures.action.

DCMA Market Making
For “DCMA Market Making” please visit BlueMatrix disclosure link at https://daiwa3.bluematrix.com/sellside/Disclosures.action.




                                                                                               - 49 -
                                                                                                                                                              Bull-Bear Debate
                                                                                                                                                                                  6 March 2012




Research Analyst Conflicts
For updates on “Research Analyst Conflicts” please visit BlueMatrix disclosure link at https://daiwa3.bluematrix.com/sellside/Disclosures.action. The principal research analysts who
prepared this report have no financial interest in securities of the issuers covered in the report, are not (nor are any members of their household) an officer, director or advisory board member
of the issuer(s) covered in the report, and are not aware of any material relevant conflict of interest involving the analyst or DCMA, and did not receive any compensation from the issuer during
the past 12 months except as noted: no exceptions.

Research Analyst Certification
For updates on “Research Analyst Certification” and “Rating System” please visit BlueMatrix disclosure link at https://daiwa3.bluematrix.com/sellside/Disclosures.action. The views about any
and all of the subject securities and issuers expressed in this Research Report accurately reflect the personal views of the research analyst(s) primarily responsible for this report (or the views
of the firm producing the report if no individual analysts[s] is named on the report); and no part of the compensation of such analyst(s) (or no part of the compensation of the firm if no
individual analyst[s)] is named on the report) was, is, or will be directly or indirectly related to the specific recommendations or views contained in this Research Report.

The following explains the rating system in the report as compared to relevant local indices, based on the beliefs of the author of the report.
"1": the security could outperform the local index by more than 15% over the next six months.
"2": the security is expected to outperform the local index by 5-15% over the next six months.
"3": the security is expected to perform within 5% of the local index (better or worse) over the next six months.
"4": the security is expected to underperform the local index by 5-15% over the next six months.
"5": the security could underperform the local index by more than 15% over the next six months.

Additional information may be available upon request.

Japan - additional notification items pursuant to Article 37 of the Financial Instruments and Exchange Law
(This Notification is only applicable where report is distributed by Daiwa Securities Capital Markets Co. Ltd.)

If you decide to enter into a business arrangement with us based on the information described in materials presented along with this document, we ask you to pay close attention to the
following items.
• In addition to the purchase price of a financial instrument, we will collect a trading commission* for each transaction as agreed beforehand with you. Since commissions may be included in
   the purchase price or may not be charged for certain transactions, we recommend that you confirm the commission for each transaction.
• In some cases, we may also charge a maximum of ¥ 2 million (including tax) per year as a standing proxy fee for our deposit of your securities, if you are a non-resident of Japan.
• For derivative and margin transactions etc., we may require collateral or margin requirements in accordance with an agreement made beforehand with you. Ordinarily in such cases, the
   amount of the transaction will be in excess of the required collateral or margin requirements.
• There is a risk that you will incur losses on your transactions due to changes in the market price of financial instruments based on fluctuations in interest rates, exchange rates, stock prices,
   real estate prices, commodity prices, and others. In addition, depending on the content of the transaction, the loss could exceed the amount of the collateral or margin requirements.
• There may be a difference between bid price etc. and ask price etc. of OTC derivatives handled by us.
• Before engaging in any trading, please thoroughly confirm accounting and tax treatments regarding your trading in financial instruments with such experts as certified public accountants.
   *The amount of the trading commission cannot be stated here in advance because it will be determined between our company and you based on current market conditions and the content of
   each transaction etc.

When making an actual transaction, please be sure to carefully read the materials presented to you prior to the execution of agreement, and to take responsibility for your own decisions
regarding the signing of the agreement with us.

                                                                                        Corporate Name: Daiwa Securities Capital Markets Co. Ltd.
                                                                                                        Financial instruments firm: chief of Kanto Local Finance Bureau (Kin-sho) No.109
                                                                                        Memberships:    Japan Securities Dealers Association, Financial Futures Association of Japan
                                                                                                        Japan Securities Investment Advisers Association
                                                                                                        Type II Financial Instruments Firms Association

				
DOCUMENT INFO
Shared By:
Categories:
Tags: Diawa
Stats:
views:80
posted:6/14/2012
language:Swedish
pages:52