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Navigator
HK/China Equities
31 Mar 2011
HSI and HSCEI - 12M
Market Highlights 26000 15000
4 China Southern Airlines: Earnings risk discounted 25000
14000
4 China Unicom: Substantial hike in handset subsidy 24000
4 Evergrande Real Estate: Skyrocketing results 13000
4 Ping An Insurance: Strong growth justifies premium valuation
23000
12000
22000
Daily Spotlights 21000 11000
4 Belle International (1880.HK, $14.20, HOLD) 20000
10000
19000
9000
18000
Market Highlights 17000
8000
China Southern Airlines (1055.HK, $3.40,
16000 7000
3/30/2010 5/1/2010 6/2/2010 7/4/2010 8/5/2010 9/6/2010 10/8/2010 11/9/2010 12/11/2010 1/12/2011 2/13/2011 3/17/2011
BUY): Earnings risk discounted
HSI Index PX_LAST HSCEI Index PX_LAST
Market Statistics
What’s new: CSA reported a strong set of FY10 results, with its top and
Indices Day Hi Day Lo Close Change
bottom lines coming in at Rmb76.5b and Rmb5,795m, up 40% and 17x,
HSI (Blue Chips) 23,505 23,181 23,451 +391(+1.7%)
respectively. Total passenger and cargo traffic income surged 37% and HSCCI (Red Chips) 4,197 4,147 4,196 +54(+1.3%)
87% yoy to Rmb68.7b and Rmb5.4b during FY10. A major gauge of HSCEI (H-shares) 13,187 13,004 13,162 +242(+1.9%)
GEMI (GEM) 774 767 771 +3(+0.4%)
operating efficiency, CSA’s passenger load factor edged up 3.9 ppts yoy
to 79.2%. Total Mkt Turnover ($m): 89,481 YTD Daily Avg: 76,156
Main Board 89,078 100% 75,787
Our analysis and comments: Excluding the exceptional gain of HSI (Blue Chips) 36,274 41%
HSCCI (Red Chips) 7,133 8%
Rmb1.10b from the disposal of its entire 50% stake in a jet engine HSCEI (H-shares) 22,566 25%
maintenance joint venture to its parent for Rmb1.6b, and the significantly GEM Board 402 0% 369
higher exchange gain of about Rmb1.75b, CSA’s recurring earnings of HSI Futures Hi Lo Close Change
about Rmb3.7b for FY10 don’t merely represent continuing improvement Mar 23,435 23,188 23,402 +332
Vol / Open int. 14,655 / 30,313
from an instant shift to the black of Rmb330m in FY09 after a dismal loss Apr 23,513 23,166 23,436 +395
of Rmb4,823m in FY08. They also represent an annual profit higher than Vol / Open int. 77,106 / 74,389
any since listing in 1997, mainly boosted by resilient traffic growth and HSCEI Futures Hi Lo Close Change
improved operating efficiency. Mar 13,154 13,000 13,130 +206
Vol / Open int. 13,060 / 39,937
Apr 13,152 12,945 13,114 +239
Despite the threat from a sustained rebound in fuel prices in recent Vol / Open int. 43,360 / 88,877
months, the impact on the airlines would be mitigated by the collection Moving Average 10-day 50-day 250-day
of a fuel surcharge. The fuel surcharge mechanism for domestic routes HSI 22,861 23,286 22,102
changed in November 2009, whereby the National Development HSCEI 12,785 12,632 12,356
and Reform Commission loosened control and granted mainland
airlines autonomy to impose surcharges, which allows for more timely Other Key Asian Market Indexes
adjustments. The company guided that the fuel surcharge compensated Indexes Close Change
AOI (Australia) 4,822 +66 (+1.4%)
for about 70% of the fuel price hike in FY10. Composite Index (Kuala Lumpur) 1,532 +12 (+0.8%)
CSI 300 3,256 -2 (-0.1%)
While we expect a yoy drop of about 20% in the company’s underlying KOSPI (Korea) 2,091 +19 (+0.9%)
net profit in FY11 amid the impact of the fuel cost hike, we believe the Nikkei 225 (Japan) 9,709 +250 (+2.6%)
earnings risk is largely discounted after its underperformance in recent SET Index (Thailand) 1,050 +14 (+1.3%)
Shanghai A-shares 3,095 -2 (-0.1%)
months, as CSA is trading at an undemanding forward FY11 EV/EBITDA Shenzhen A-shares 1,323 -11 (-0.8%)
valuation of 5.2x and a P/B of 1.1x. Straits Times Index (Singapore) 3,095 +38 (+1.3%)
Analyst: Cho Fook Tat (852-3723 2923, ft.cho@htisec.com) TAIEX (Taiwan) 8,646 +50 (+0.6%)
Source: Bloomberg
Page 1
Navigator Report
China Unicom (0762.HK, $12.64, HOLD): Substantial hike in handset
subsidy
What’s new: CU reported in-line FY10 revenue of Our analysis and comments: The
Rmb171b, up 12% yoy, while its net profit of Rmb3.9b, lower-than-expected FY10 earnings were mainly a
which implies a 60% yoy drop, was behind market result of a substantial hike in handset subsidy expense.
expectations and 17% lower than our forecast. Its 2G, The company reported a net subsidy expense of
3G and blended mobile ARPU of Rmb39.5, Rmb124 Rmb3.2b in FY10. Management indicated that about
and Rmb43.7 were largely in-line with our projections 46% of its handset subsidies was recognized as
of Rmb39, Rmb122 and Rmb43.4. handset revenues in FY10 using the new accounting
approach, implying that the company spent
From 4Q10 the company started adopting the relative
approximately Rmb6.9b on gross handset subsidies in
fair value method accounting policy retrospectively
FY10, significantly higher than its earlier guidance of
from 1 January 2010 to account for preferential
Rmb3-5b.
promotional packages that bundle the sale of handsets
and provision of services. Under this method, the total The company is targeting to add 35m mobile
contract consideration of such preferential packages subscribers in FY11, of which 25m will be 3G users.
is allocated to service revenue, recognized based This is an aggressive target in our view, given that it
upon the actual usage of mobile services, and sales only added 2.6m 3G users in the first two months of
of handsets are recognized immediately when sold to FY11, meaning that CU would need more than 2.2m
customers, based on their relative fair values. 3G net adds per month for the rest of the year.
The adoption of such fair value method resulted in an CU will continue to stay aggressive on 3G handset
increase in revenue, net profit and earnings per share subsidies in order to drive up its subscriber base and
of Rmb3.2b, Rmb2.4b and Rmb0.11, respectively, for market share: it intends to spend 30% of revenue from
FY10. its 3G business on its net handset subsidy. We believe
this could have a negative impact on the company’s
CU spent Rmb70b on capex in FY10, slightly lower
profitability outlook in the near future and thus continue
than its previous target of Rmb73.5b and guided FY11
our Hold call on the counter.
capex of Rmb73.8b. It has also cut its DPS by half for
Analyst: Alex Lee
the year to Rmb0.08.
(852-3926 8947, alex.lh.lee@htisec.com)
Evergrande Real Estate (3333.HK, $4.17, BUY): Skyrocketing results
What’s new: Evergrande reported an eightfold jump Evergrande’s presale ASP steadily improved over
in its FY10 revenue to Rmb45.8b and nearly18x leap the last two years, suggesting further margin growth
in underlying profit attributable to shareholders to in FY11. In FY10, a total of nearly 9m m2 of GFA was
Rmb5.1b. Management has proposed a dividend of completed, an impressive surge from FY09’s 1.1m m2.
Rmb0.1268/share that implies a dividend yield of 3.7% The company’s land bank now includes a total GFA of
for the stock. over 100m m2, of which 23m m2 is under construction
this year. Both numbers are the largest in the sector.
Our analysis and comments: As the most transparent
developer, Evergrande holds monthly analyst Thanks to proactive financing in Hong Kong and
meetings to disclose its sales performance and issue outstanding presale proceeds, Evergrande’s
business updates. Consequently, investors have high financial position remained healthy despite generous
expectations of what is to be announced and the acquisitions and heavy capex. At end-FY10, cash
company’s share price has been rising in recent days in on hand amounted to Rmb20b and net gearing was
anticipation of a strong set of results. 53%. In FY10, management demonstrated it ability to
generate amazing growth amid the market volatility.
Revenue recognized in 2H10 was Rmb25.4b, a hoh
With a market cap of $60b, Evergrande is trading at
increase of around 25%, while core net profit surged
an attractive FY11 P/E of 6x. We maintain our Buy
84% hoh due to much better margins. Most revenue
recommendation.
recognized in 1H10 was presold in 2008 at low prices
Analyst: Hugo Hou
and margins. Gross margin rose nearly 9 ppts to 33.%
(852-3723 2921, hugo.lz.hou@htisec.com)
in 2H10 and net margin also jumped from 1H10’s
9.5% to 2H10’s 14%. With relatively stable costs,
www.htisec.com Page 2
Navigator Report
Ping An Insurance (2318.HK, $77.15, BUY): Strong growth justifies
premium valuation
What’s new: PAI reported that its FY10 net profit rising by 20% and 38%, respectively. The surge in
rose 25% to Rmb17,311m, with EPS rising 22% to general insurance profit was driven by strong growth
Rmb2.30. The company has declared a final divided in underwriting profit, as the combined ratio for this
of Rmb0.40, bringing FY10 DPS to Rmb0.55. Among segment fell 5.4 ppts to 93.2%. Ping An Bank reported
major business segments, net profit for life insurance a 61% surge in its bottom line with the group’s 29.9%
fell 19%, but profit for property and casualty insurance, stake in Shenzhen Development Bank contributing
banking, and securities business soared 473%, 167% the rest. PAI is fast achieving its goal of becoming a
and 49%, respectively. The embedded value for the major financial conglomerate with strong synergies
group’s life business rose 20% yoy. among its major business segments, as the company
indicated that cross-selling has contributed some 42%
Our analysis and comments: The results were
of auto premium income, 55% of newly issued credit
slightly ahead of market expectations. Although the
cards and 35% of newly added retail deposits. We have
life insurance business reported a decline in profit,
fine-tuned our target price to $100.70 based on 2.5x
this was mainly due to investment write-downs as
our projected end-FY11 embedded value for the group.
the total investment yield fell to 4.9% from 6.4%.
Analyst: Paul Lee
The operating figures remained robust with overall
(852-3723 2916, paul.kh.lee@htisec.com)
premium and first-year premium for individual life
Daily Spotlights
Belle International (1880.HK, $14.20, HOLD) Analyst : Winnie Fong
(852-3723 2911, winnie.ym.fong@htisec.com)
4 After fine-tuning our earnings model on the heels of and improved gross margins for acquired
our review of its FY10 results, we have set our new businesses. Company-owned labels will remain the
target price on the stock at $15.60, representing a key revenue driver in the near future.
forward FY11 P/E of 27x or a PEG of 1.4x based 4 Attributable to the completion of internal process
on our projected EPS CAGR of 19% for FY10-12. reengineering, acquired brands’ SSS growth
4 Excluding the gain on disposal of Rmb31m, the and revenue growth were above average, while
FY10 results were in line with our expectations. the Senda and Basto brands have more than
Revenue in FY10 surged 20% yoy to Rmb23.7b doubled sales value within the three years since
driven by the stable footwear growth and acquisition. Labels such as Senda and Basto will
recovering sportswear demand. Net profit continue to increase contribution and improve
increased 35% yoy to Rmb3,424m. performance, a result of the integration of sales
4 Belle’s FY10 footwear performance continued efforts and improved R&D. The operating leverage
to improve and remained the company’s resulting from stringent cost control improved the
core business. Belle achieved double-digit footwear operating margin by 2.3-ppt to 23.7%
same-store-sales growth of 17%, posting 18% in FY10, leading to a 38% yoy leap in operating
in 1H10 compared to 16.5% in 2H10. During the profit to Rmb3,472m. As the sportswear market
period, Belle aggressively expanded the footwear is undergoing structural adjustment, footwear is
store network for a 23% yoy rise to 8,312 locations. expected to continue to outperform sportswear.
As most of the new outlets were opened in the third 4 Separately, sportswear profitability improved
and fourth quarters, higher contribution is expected notably with operating profit up 31% yoy to
for FY11. About 81% of Belle’s footwear outlets are Rmb577m in FY10. Revenue recorded a modest
located in second and third-tier markets. The store rise of 13% yoy to Rmb9,057m with SSS growth
expansion will continue to focus on cities with lower rebounding to 5%. First-tier sportswear brands
penetration rates, especially for the more mature also posted a recovery, up 16% yoy to Rmb7,800m
brands such as Belle. The strategy will speed up and contributing 86% of sportswear revenue. After
footwear sales growth, benefiting from the country’s cutting underperforming locations, Belle continued
increasing urbanization and the lower-tier markets’ to expand its sportswear segment, for a total of
faster growth potential. 3,655 locations at end-FY10 and of them first-tier
4 Owing to the store expansion and strong SSS brands accounted for 77% of sportswear stores.
growth, footwear revenue climbed 25% yoy to The more aggressive expansion of the first-tier
Rmb14.6b. The major contributor continued to brands will further enhance overall gross margin.
be company-owned brands which accounted for 4 As footwear and sportswear are labour intensive,
91% of segment turnover, growing 25% yoy to the ongoing increase in wage cost will have a
Rmb13.4b. Gross margin increased 2.6-ppt yoy to negative impact on Belle. We believe gross margin
68% in FY10 attributable to reduced discounting will continue to be underpinned by the ASP hike
www.htisec.com Page 3
Navigator Report
and reduced price discounting, offsetting the effects network and multi-brand strategy should assure its
of rising raw material and labour costs. competitiveness and allow it to retain the top slot
4 Belle maintained a sound financial position with net in the mainland market. The further integration of
cash of Rmb5,212m at end-FY10. Looking forward, Mirabell, acquired in FY08, is expected to increase
the company will expand the number of outlets synergy and economies of scale, and improve
of its existing core footwear brands such as Belle overall operating efficiency. Given its liquid financial
with an increased focus on second and third-tier position, we believe the company can finance its
markets. The company’s strong brand recognition, expansion through internal resources.
leading position in the industry, national retail
This is a summary of the detailed report to be published separately.
Price Information Share Price - 12M
Issued shares: 8,434.2m
Current market cap: $119,766m
Target price: $15.60 Next 12M: +10%
Past 1M: +5%; 3M: +9%; 12M: +38%
P/L Information
Y/E: 31/12 FY10 FY11F FY12F
Net profit Rmb3,306m Rmb4,138m Rmb4,926m
EPS Rmb0.30 Rmb0.49 Rmb0.58
+26% +33% +22%
DPS Rmb0.08 Rmb0.13 Rmb0.16
P/E 40.0 30.0 24.5
Yield 0.7% 1.9% 1.3%
www.htisec.com Page 4
Navigator Report
Tracking of HSI Constituents Tracking of HSCEI Constituents
SEHK Stock Close Change Turnover P/E Yield Index Weighting SEHK Stock Close Change Turnover P/E Yield Index Weighting
Code ($) (%) ($m) (x) (%) Change (%) Code ($) (%) ($m) (x) (%) Change (%)
Finance 45.4 168 Tsingtao Brew 38.25 (0.5) 93.2 35.3 0.5 (0.3) 0.4
5 HSBC Hldgs 82.00 0.6 2758.7 14.4 3.4 20.5 14.3 347 Angang Steel 10.58 4.3 280.7 31.3 1.7 2.4 0.4
11 Hang Seng Bank 126.00 0.6 226.7 16.2 4.1 2.3 1.6 358 Jiangxi Copper 26.00 5.5 1549.8 13.8 0.9 9.3 1.4
23 Bank of E Asia 33.10 2.0 130.4 17.2 2.8 4.1 0.9
388 HKEx 167.00 0.9 862.5 35.7 2.5 5.5 2.8 386 Sinopec Corp 7.81 1.4 991.1 7.9 3.2 9.1 4.9
939 CCB 7.25 1.5 2374.1 10.9 3.5 25.2 7.1 390 China Railway 5.18 0.4 51.2 14.1 1.4 0.4 0.8
1398 ICBC 6.38 1.3 1736.7 14.7 3.0 18.6 6.3 489 Dongfeng Group 12.52 3.8 453.8 15.2 0.8 6.2 1.3
2318 Ping An 77.15 2.8 1204.5 28.2 0.8 13.8 2.2 728 China Telecom 4.70 1.3 300.7 20.8 1.8 4.1 2.5
2388 BOC Hong Kong 25.05 0.4 623.0 16.4 3.9 1.4 1.5
2628 China Life 28.65 2.3 1804.7 20.2 1.7 18.5 3.5 753 Air China 7.36 2.8 148.3 6.0 1.9 2.3 0.6
3328 Bankcomm 8.32 1.1 347.4 12.6 2.6 2.3 0.9 763 ZTE 35.05 1.2 93.4 25.2 1.0 1.0 0.7
3988 Bank of China 4.29 0.9 1669.5 9.3 4.0 9.6 4.4 857 PetroChina 11.68 3.2 1611.4 13.0 3.4 37.5 9.2
Utilities 4.8 902 Huaneng Power 4.50 (0.2) 99.6 13.5 5.3 (0.2) 0.5
2 CLP Hldgs 62.75 0.6 224.8 14.6 4.0 2.4 1.8 914 Anhui Conch 47.20 3.5 418.7 22.8 0.8 6.5 1.5
3 HK & China Gas 18.84 1.7 159.2 24.2 1.9 5.3 1.3
6 Power Assets 52.15 1.4 226.2 15.5 4.1 3.7 1.2 916 China Longyuan 8.26 0.1 208.8 25.8 0.8 0.1 0.6
836 China Res Power 14.98 2.6 153.5 14.3 2.2 2.7 0.5 939 CCB 7.25 1.5 2374.1 10.9 3.5 20.2 10.1
Properties 10.3 998 CITIC Bank 5.55 0.7 307.6 13.2 1.8 1.4 1.4
1 Cheung Kong 127.40 4.0 1352.6 11.2 2.3 26.0 2.9 1088 China Shenhua 36.15 1.4 776.5 15.9 2.5 8.4 4.6
12 Henderson Land 52.85 2.1 290.7 7.2 1.9 4.6 0.9 1099 Sinopharm 27.70 0.0 35.9 44.0 0.7 0.0 0.7
16 SHK Prop 122.80 1.7 700.7 11.2 2.2 12.4 3.1
83 Sino Land 13.80 2.2 110.6 11.0 2.9 3.0 0.6 1138 China Ship Dev 8.78 0.6 30.8 14.7 2.3 0.3 0.4
101 Hang Lung Prop 33.55 2.6 232.2 6.3 2.1 8.0 1.3 1171 Yanzhou Coal 28.15 5.8 806.5 12.5 2.5 15.0 2.1
688 China Overseas 15.74 3.3 484.3 10.4 1.7 7.8 1.1 1186 China Rail Cons 8.36 2.0 70.3 13.7 2.2 1.6 0.6
1109 China Res Land 14.12 5.1 414.3 11.8 2.2 4.9 0.4 1211 BYD Company 29.55 (0.2) 97.2 22.5 0.0 (0.1) 0.6
Com & Ind 39.5
4 Wharf (Hldgs) 53.45 2.6 476.8 4.1 1.9 7.8 1.3 1288 ABC 4.24 2.7 1615.4 10.8 1.5 12.5 3.7
13 Hutchison 93.35 5.1 4431.5 19.9 2.1 37.0 3.2 1398 ICBC 6.38 1.3 1736.7 14.7 3.0 16.6 10.1
17 New World Dev 13.84 1.0 103.1 4.6 2.8 1.4 0.6 1800 China Comm Cons 7.21 (1.2) 322.8 9.1 2.6 (2.0) 1.2
19 Swire Pacific ‘A’ 113.60 2.2 280.4 4.5 3.1 6.6 1.3 1898 China Coal 10.62 1.9 545.0 16.0 1.8 4.1 1.6
66 MTR Corporation 28.80 1.4 144.1 13.7 2.1 2.2 0.7 1919 China COSCO 8.00 (1.1) 201.6 10.0 1.3 (1.2) 0.8
144 China Mer Hldgs 33.00 2.3 274.8 29.2 1.7 3.2 0.6
267 CITIC Pacific 21.70 1.9 154.6 8.9 2.1 2.0 0.5 1988 Minsheng Banking 7.26 1.8 289.3 9.3 1.6 2.7 1.1
291 China Resources 30.75 0.8 145.8 27.5 1.7 1.1 0.6 2238 GAC GROUP 9.30 2.1 80.1 8.5 2.5 2.1 0.8
293 Cathay Pac Air 18.64 1.6 192.6 5.2 6.0 1.4 0.4 2318 Ping An 77.15 2.8 1204.5 28.2 0.8 17.8 5.0
330 Esprit Hldgs 35.60 3.8 297.7 10.6 4.0 6.1 0.7 2328 PICC P & C 9.12 2.5 129.8 16.4 0.0 2.6 0.8
386 Sinopec Corp 7.81 1.4 991.1 7.9 3.2 7.1 2.1
494 Li & Fung 39.95 5.0 1033.1 35.7 2.3 20.4 1.8 2600 CHALCO 7.50 0.4 281.7 105.5 0.2 0.6 1.1
700 Tencent 195.20 2.6 1804.2 37.1 0.3 19.3 3.2 2601 CPIC 32.90 1.4 330.4 27.7 1.3 2.8 1.6
762 China Unicom 12.64 (3.5) 1006.4 65.2 0.8 (8.3) 1.0 2628 China Life 28.65 2.3 1804.7 20.2 1.7 23.9 8.0
857 PetroChina 11.68 3.2 1611.4 13.0 3.4 29.0 4.0 2777 R&F Properties 11.56 4.0 217.5 7.2 5.1 2.2 0.4
883 CNOOC 19.46 2.3 1554.8 13.4 2.4 30.0 5.7
941 China Mobile 71.85 0.4 1652.7 10.2 4.2 5.7 7.0 2883 China Oilfield 17.26 1.3 137.4 15.8 1.2 1.7 1.0
1088 China Shenhua 36.15 1.4 776.5 15.9 2.5 6.5 2.0 2899 Zijin Mining 6.19 1.8 79.9 22.7 1.8 2.2 0.9
1199 COSCO Pacific 14.26 0.6 113.9 16.9 3.1 0.5 0.4 3323 CNBM 27.50 5.4 467.1 25.2 0.3 10.0 1.5
1880 Belle Int’l 14.20 2.3 265.9 29.4 2.6 5.7 1.1 3328 Bankcomm 8.32 1.1 347.4 12.6 2.6 3.0 2.1
1898 China Coal 10.62 1.9 545.0 16.0 1.8 3.1 0.7
2038 FIH 4.89 1.5 48.7 114.6 0.0 0.6 0.2 3968 CM Bank 21.30 0.7 305.9 19.7 1.1 2.9 3.1
2600 CHALCO 7.50 0.4 281.7 105.5 0.2 0.5 0.5 3988 Bank of China 4.29 0.9 1669.5 9.3 4.0 12.3 10.0
Source: Bloomberg, HSI Services Ltd. Source: Bloomberg, HSI Services Ltd.
Note: Announced historical figures are used in computing yield and P/E ratio.
Ten Largest Gainers Ten Largest Losers Ten Most Active
SEHK Price Change SEHK Price Change SEHK PriceTurnover
Code Stock ($) (%) Code Stock ($) (%) Code Stock ($) ($m)
8292 HC Int'l 1.600 +42.9 2999 Hanny Hldgs Rts 0.081 -27.7 13 Hutchison Whampoa 93.35 4432.0
768 UBA Inv 0.140 +15.7 307 UP Energy Dev 0.136 -20.9 5 HSBC 82.00 2759.0
723 Sustain Forest 0.480 +15.7 1328 Int'l Elite 1.130 -13.1 939 CCB 7.25 2374.0
1110 Kingworld 2.220 +12.7 8235 CCID Consulting 0.630 -11.3 2628 China Life 28.65 1805.0
948 Z-Obee 1.620 +12.5 141 Great China 0.960 -11.1 700 Tencent 195.20 1804.0
458 Tristate Hldgs 4.400 +11.4 732 Truly Int'l 1.770 -10.6 1398 ICBC 6.38 1737.0
2011 Kee 1.380 +10.4 8047 Palmpay China 0.260 -10.3 3988 Bank of China 4.29 1669.0
317 Guangzhou Ship 15.900 +10.1 8106 Zheda Lande 0.305 -10.3 941 China Mobile 71.85 1653.0
642 Paladin Pref 0.220 +10.0 8078 China3D Digit 0.081 -10.0 1288 ABC 4.24 1615.0
3355 ASMC 0.590 +9.3 176 United Pacific 0.270 -10.0 857 PetroChina 11.68 1611.0
Source: Etnet Source: Etnet Source: Etnet
Notes: (1) "$" refers to HK dollars throughout this report unless otherwise stated. (2) Share prices and indices are as of 30 Mar 2011 (HSI: 23,451)
Recommendation Policy
BUY if current price is more than 10% below AFV. AFV (Assessed Fair Value) is arrived at based on various appropriate valuations,
HOLD if current price within +/-10% from AFV. including P/E, Yield, NAV, DCF, EV/EBITDA, and management quality, etc, with
SELL if current price is more than 10% above AFV. regard to prevailing interest rates and comparative valuations.
Disclaimer
Issued by Haitong International Research Limited (“HTIRL”) licensed corporation to carry on Type 4 (advising on securities) regulated activity for the purpose of the Securities and Futures
Ordinance (Cap. 571), approved for distribution by: Haitong International Securities Company Limited (“HTISCL”) and/or Haitong International Investment Services Limited (“HTIIS”) (both
are licensed corporations to carry on Type 1 (dealing in securities) regulated activity) in Hong Kong. The information and opinions contained in this document have been compiled or arrived
at from sources believed to be reliable and in good faith but no representation or warranty, express or implied, is made by HTIRL, HTISCL, HTIIS or any other members of the Haitong
International Securities Group (“HTISG”) from which this document may be received, as to their accuracy, completeness or correctness. All opinions expressed herein are subject to change
without notice. This document is for information purpose only. Descriptions of any companies or their securities mentioned herein are not intended to be complete and this document is
not, and should not be construed expressly or impliedly as, an offer to buy or sell securities. Neither HTIRL, HTISCL, HTIIS nor HTISG accepts any liability whatsoever for any direct or
consequential loss arising from any use of the materials contained in this document. This document is for the use of intended recipients only and may not be reproduced, distributed or
published for any purpose without prior consent of HTIRL. Each analyst who is primarily responsible for the content of this research is licensed under the Securities and Futures Ordinance
and certifies that all of the views represent accurately his or her personal views about the securities and issuers covered in the research. An affiliated company(ies) of Haitong International
Research Limited make(s) a market in the securities herein covered and/or any warrants or options on these securities herein covered. An affiliated company(ies) of Haitong International
Research Limited has, presently or within the last 12 months, an investment banking relationship with the listed corporation herein covered.
www.htisec.com Page 5
