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JP Morgan Emerging markets

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Emerging Markets Equity Research 02 December 2009

Emerging Equity Markets Year Ahead
Stock Ideas for 2010
Emerging Markets Equity Research Adrian MowatAC
(852) 2800-8599 adrian.mowat@jpmorgan.com For a full list of authors please refer to the sector and country head list on the back page

% of global consumption

The chart shows emerging economies and US consumption as a percentage of global consumption. Source: J.P. Morgan Economics.

J.P. Morgan Securities (Asia Pacific) Limited

See page 396 for analyst certification and important disclosures, including non-US analyst disclosures.

J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Emerging Market Year Ahead - Stocks for 2010
What to own What to avoid
• Banks: China, Korea, Taiwan, Thailand, Brazil, Mexico, • Telcos: China, India, Korea, Brazil, Mexico, Central Europe Turkey, Russia, South Africa, MENA • Consumer Discretionary: Brazil, Mexico • Technology: ex-PC ODMs • Transportation: especially, airlines • Other Industrials: India capex and investment cycle • Telecom capital management: Malaysia, Taiwan • Energy: Brazil, Russia • Smaller sectors in country: China internet, China gas, China food inflation, Indonesian interest rate sensitive, Abu Dhabi Real Estate, South African Platinum Focus on sectors within countries rather than country recommendations A detailed view on our country and sector recommendations within EM is available on Page 11. For more detail please see country and sector pages. • Utilities • Cement: China, India • Consumer Discretionary: South Africa • Smaller sectors in country: Taiwan Insurance, Dubai Property

• Internet & Media: China, Turkey, South Africa, Russia • Consumer Staples: India, Indonesia, Brazil, Mexico

97 Top Picks
See pages 109 to 287
Examples of top picks
Code VAKBN TI GAZP RU CTCM US 006400 KS ASYAB TI 2610 TT LH TB TOP TB QTEL QD LSRG LI Top Picks Vakifbank Gazprom CTC Media Samsung SDI Bank Asya China Airlines Land & Houses Thai Oil Public Company Qtel LSR County Turkey Russia Russia South Korea Turkey Taiwan Thailand Thailand Qatar Russia To PT (%) 73 71 69 67 66 60 60 56 55 54 Code TII US 2498 TT TMX US USIM5 BZ 762 HK 2338 HK 857 HK MER PM PCU US HUVR IN

48 Stocks to Avoid
See pages 289 to 371
Examples of stocks to avoid
Stocks to avoid Telmex Internacional HTC Corp Telmex Usiminas China Unicom Weichai Power PetroChina Manila Electric Co Southern Copper Hindustan Unilever County Mexico Taiwan Mexico Brazil Hong Kong China China Philippines United States India To PT (%) (34) (31) (26) (23) (22) (22) (21) (21) (21) (20)

Source: J.P. Morgan. Note: To PT = Returns to analyst price target from 27 Nov 2009.

Source: J.P. Morgan. Note: To PT = Returns to analyst price target from 27 Nov 2009.

The Year Ahead Process
The goal of this document is to present our key strategy themes for 2010 using most and least favored stocks from J.P. Morgan’s team of analysts. Both J.P. Morgan EM equity research analysts and our macroeconomic team have been involved in the production of this document. The process started with the Strategy Team briefing analysts on our key themes and macroeconomic forecasts for 2010. Analysts then reviewed their earnings models and presented their top picks and stocks to avoid to both their sector and country strategists. The sector and country teams then produced their list of top long and short ideas, which were then compiled by the regional strategy teams. These ideas form the core of this document.

Table of contents
Investment strategy ............................................................ 4 Surprises for 2010 ............................................................26 Rates outlook....................................................................27 Economic outlook ............................................................32 Economic forecasts ..........................................................42 Country strategy ...............................................................47 Sector strategy ..................................................................77 Summary tables of stock ideas .........................................93 Top picks........................................................................109 Stocks to avoid ...............................................................289 Strategy dashboards........................................................373

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Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Higher Markets with Higher Volatility
The drivers – three steps to heaven
1. Compression in risk premiums 2. Economic and earnings recovery 3. Overshoot as risk-free rates remain low for long (See page 4 for details)

Potential returns
MSCI EM end-2010 target 1300 (+30%) • Implied end-2010 forward P/E of 14x (J.P. Morgan estimate) • Currency, earnings estimate revisions, and low riskfree rates provide upside. (See page 4 for details)

Investment themes
1. Stay high beta for now – front-loaded returns 2. Economic growth surprises pessimistic expectations

Risks are high for year-one of recovery
• Investor driven correction in commodity prices • G3 bond volatility Lack of G3 policy flexibility Rapid rise in EM inflation resulting in faster tightening Risk appetite fades, driving investors back into low beta defensive markets like SA, Israel and Malaysia

3. 2010 is the year of G3 monetary stimulus – no change in • G3 rates in 2010 • 4. Earnings estimate revisions drive markets • 5. Focus on sectors in countries 6. Policy normalization outside G3 – source of volatility rather than a cap on returns 7. Inflation ends the party in emerging markets before developed markets. Enjoy the party until inflation exceeds central bank target zone 8. M&A 9. BRIC consumers (See page 4)

• Dubai World debt moratorium impacts ability to raise EM corporate debt (For more risks please see page 12)

Key issues for 2010 – briefing notes
1. A longer perspective on asset performance 2. The policy risk to the asset inflation trade 3. And now the monetary stimulus 4. The rolling recovery trade of 2009: and settling the decoupling debate 5. Potential bond market volatility 6. Now is the time for earnings estimate revisions 7. Falling inflation with growth 8. Fiscal outlook 9. South Africa - 2010 Soccer World Cup Winners (See page 15)

Market performance
Figure 1: MSCI EM and MSCI World
1400 1200 1000 800 600 400 200 0 88 90 92 94 96 98 00 02 04 06 08 MSCI EM MSCI World

Source: Bloomberg. Chart rebased to 100 in 1988

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Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Emerging Market Equity Strategy
For now we remain positive on EM equities. The factors supporting the powerful recovery from the October 2008 lows remain in place. These conditions are: compression in excessive risk premiums, economic and earnings recovery trade, and overshoot as risk-free rates remain low. MSCI EM could retest its all-time high. Our end-2010 index target for MSCI EM is 1300, +30%. This implies an end-2010 forward PE of 14. The return is 10% in excess of consensus earnings forecasts. In our view, the difference will be made up of currency appreciation and earnings revisions. The low for EM was 454 on 27 October 2008. The index has more than doubled since then. To retest its high the index would need to increase by 38%. The low in developed markets was on 9 March. The MSCI World index has rallied 70% from its 2009 low. Stay high beta, for now – front-loaded returns Early 2010 conditions should continue to be very favourable for EM equities in our view, with strong growth, positive earnings estimate revisions, acceptable inflation, and ongoing rally in credit markets. The stage three of the bull market is an overshoot in valuations as risk-free rates stay low for long. A less favourable base effect for inflation plus a potential slowing in earnings estimate revisions may make 2H10 more challenging. P/Es could decline in this phase.
Figure 2: Bungee jump or slingshot?
310 280 250 220 190 160 130 100 70 -24m -18m -12m -6m Trough +6m +12m +18m +24m Gulf War Mex ican crisis Asian crisis Tech bubble Credit crisis

Figure 3: Beta versus PE
18.0 16.0 14.0 12.0 10.0 8.0 0.4 0.6 0.8 1.0 1.2 1.4 Taiw an Malay sia Phil China Mex ico Poland Indonesia Brazil India

Thailand S Africa

Hungary Czech Korea Turkey

Russia

Source: Bloomberg. Note: Two year weekly beta for MSCI indices vs. MSCI EM. Forward PE on y-axis and Beta on the x-axis.

Figure 4: EM consumption exceeded US consumption in 2008!
40 36 32 28 24 20 16 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 US EM

Source: J.P. Morgan economics. Note: Chart shows EM and US consumption as % of global consumption.

Source: Datastream, 27 October 2009. Note: Chart shows the performance of MSCI EM US$ index two years pre and post crisis lows. Note: MSCI EM (USD) is indexed to 100 at the trough of each crisis.

A quick review EM survived ‘the big ugly experiment’: a combination of a severe financial shock, the deepest developed consumer recession since WWII, the lagged impact of anti-inflation policies, and a sharp drop in commodity prices. The main conclusion of the experiment is that the domestic inflation/monetary cycles were more dominant than external demand. This economic decoupling during the stress test supports a higher relative valuation of EM equities versus developed world equities. But global capital flows do link EM monetary policy to record low G3 rates resulting in the risk of a boom bust cycle and asset bubbles. Policymakers in EM are moving to restrict capital flows and non-conventional measures to control asset prices. A combination of higher economic and asset volatility, with policy risk, may be negative for equity valuations.

4

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Risks are high for the first year of the global recovery The bulk of the risks are global rather than EM centric. Please see page 12 for risks. The three key risks or sources of volatility are: • G3 bond volatility • Commodity volatility • Policy risks Post the synchronized global recession and the credit crunch, EM has earned a lower risk premium. Emerging economies led the global recovery. Decoupling proved? Decoupling in a global economy and capital markets was literally impossible. But EMs did prove they can generate their own recovery rather than rely on the developed world consumer. EM consumption exceeded US consumption in 2008. An overweight in EM equities vs DM is consensus; as is an OW in BRICs vs EM. Both have been successful strategies. However, EM was led by sectors driven by global growth, not local; note the performance of our demand classification indices, global consumer +97% , global price taker +95%, ahead of domestic consumption +58% (these indices are published in our weekly dashboards). Bungee jump or slingshot? EM equities have recovered 115% from their 2008 lows. EMBI spreads have tightened from a peak of 865bp to 310bp. But the threeyear CAGR for EM equities is just 4% and EMBI spreads averaged 195bp in 06/07. The catalyst for the rally from March was the evidence of stabilization in developed world end-demand. Cyclical sectors outperformed: technology, materials, consumer discretionary and energy. Extreme volatility in equities, currencies, commodities and bonds makes assessment of fair value very difficult. Many investors struggled to join the rally this year as they anchored on the lows and were reluctant to buy after sharp gains. To provide a longer perspective please see the briefing note, a longer perspective on asset performance. This reviews three, five and eight year CAGR. The five-year CAGR for MSCI BRIC is 22%, ahead of MSCI EM CAGR of 14% and significantly ahead of MSCI World’s +1%. The material and energy bull market partly explains the outperformance of BRIC,

although non-commodity sectors have also done well. Within EM, the previously important markets of Korea, Malaysia, Mexico, Taiwan and South Africa underperformed. This is consistent with the underperformance of nominal GDP in these countries. BRIC nominal GDP is 60% of EM nominal GDP. Will non-BRIC markets drop off the radar screen? Yes, unless they offer a premium growth rate or acceleration in trend growth. There are strong arguments in favour of Indonesia joining the BRIC grouping. But the country needs to demonstrate to long-term direct investors that there is sufficient effective protection of their legal interest in order to be permanently promoted to the BRIC league. An overweight BRIC consumer is consensus. This has been a good trade with strong relative returns from BRIC financials and consumer discretionary. The valuations relative to history and market are high; Brazil, Brazil Materials, Brazil Energy, Brazil Financials, India Financials, Mexico Materials, SA Materials and Indonesia are more than one standard deviation above their long-term average relative to history and EM. However, the premium in these sectors is modest compared to the actual returns achieved (for more see page 9).
Figure 5: Performance of BRIC vs MSCI EM
160

130

100

70 Jan-02

Jan-04

Jan-06

Jan-08

Source: Datastream, 24 November 2009.

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Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Economic growth surprises low expectations In our view, the consensus is skeptical of sustainable growth. This supports a cyclical bias even with the ISM above 50. Our base case is: • No change in G3 interest rates in 2010 • Above-consensus US and European 2010 GDP growth of 3.3% and 2.6% respectively The three drivers of economic growth in 2010 are: • Industrial production/inventory cycle • Exports • Delayed monetary stimulus The relationship between final sales and production indicates substantial de-stocking in the past three quarters. As end demand slowly recovers, production needs to increase faster due to low inventories. The turn in IP is typically durable and sustained for 13 months on average. This is a normal feature of a recovery. Global growth of 3.5% in 2010 should support a recovery in external demand for most economies. Sequential trends are consistent with 2010 oya% export growth. 2010 is the year of G3 monetary stimulus Three conditions are required for a monetary stimulus: available credit; low market rates; and willing borrowers. If credit markets continue to rally and J.P. Morgan economic growth numbers are correct, these conditions will be met in 2010. Counter-intuitively exit strategies signal that the monetary stimulus is building. Note, this is primarily a developed market event. China monetary stimulus fed through rapidly. Current account deficit economies will benefit from this delayed stimulus into 2010, i.e., India, Turkey, South Africa, etc. (See page 17 for more on the delayed monetary stimulus.) Earnings estimate revisions will now drive stocks Stocks are driven primarily by earnings estimate revisions rather than a compression in risk premiums. This argues for a cyclical bias. Potentially ‘scarred and overworked’ analysts are even slower to upgrade. In this phase, markets trade expensive. Please see Steve Malin’s briefing on page 19 for more on the power of earnings estimate revisions after the economic recovery.

Figure 6: Tracking inventory - Global IP and final sales proxy
115 110 105 100 95 90 85 00 01 02 03 04 05 06 07 08 09 10
Source: J.P. Morgan, September 2009.

J.P.Morgan final sales proxy Industrial production

Figure 7: Sequential recovery in exports growth (% oya)
40 30 20 10 0 -10 -20 -30 -40 -50 Oct-07 Feb-08 Jun-08 Taiwan Korea China

Oct-08

Feb-09

Jun-09

Oct-09

Source: J.P. Morgan, October 2009.

Figure 8: Emerging markets can rise with interest rates (%)
1500 1200 900 600 300 0 88 90 92 94 96 98 00 02 04 06 08
Source: Datastream, MSCI, IBES, J.P. Morgan economics

MSCI EM Index (LHS) Fed Funds target rate (RHS)

10 8 6 4 2 0

Focus on sectors in countries The rolling country-by-country growth recovery trade is done. Economic decoupling occurred with the global recovery led by India, Indonesia and China. The balance of EM Asia, Brazil, Russia and Turkey recovered a quarter before DM (see page 18 for more on the rolling recovery). Country asset allocation needed to lead the economic recovery by a quarter. Thus country relative performance changed during the year. Sector strategy was more stable with a bias towards cycles.

6

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Now that the rolling recovery trade is done, the confidence in country calls is lower. Focus on key sectors within countries that offer: (1) High probability of positive EPS revisions (2) High secular and/or defensive growth The Secular and Cyclical Trade Overweight Turkey: We believe that Turkey could outperform EM and CEEMEA as structurally lower inflation and interest rates result in higher trend; India in the mid-90s is good example of this trend. The IMF standby program, if signed, should ease Turkey’s reliance on external financing and reduce the crowding out of the private sector. These improved fundamentals are neither reflected in valuations nor relative performance. Turkey’s forward PE of 9 is at a significant discount to MSCI EM's 13. The index has marginally underperformed MSCI EM year to date. Since midMarch 2009, the local currency index is in line with MSCI EM. Higher trend growth and lower interest rates are positive for Turkish banks, a large part of the benchmark. We forecast an acceleration of earnings growth from 10-20% in 2010 to 20-30% in 2011. Deterioration in global credit markets and/or delays in negotiating a deal with the IMF are a threat. J.P. Morgan forecasts a 2010 current account deficit of 2% of GDP. Overweight Mexico Catalysts are clear. A robust 3.3% - around 100bps above consensus - US economic recovery, led by manufacturing (+4.5% in 2010), which is the key linkage between the US and Mexico. IP is 30% of Mexico GDP, and 80% of exports go to the US. Mexico’s historical beta to global GDP recovery is over 2.0x. This drives a forecast 11 point Mexico GDP swing into next year, the second highest globally and arguably with upside risks. The currency also offers short-term upside, as a clear EM underperformer YTD, and with oil prices (1/3 fiscal revenue) set to remain high. In this context, fiscal and rating concerns are overdone and likely well-priced short term, though remain real long term, as fiscal revenue/GDP is low (22% GDP), and poorly structured (off falling oil production). The market is under-owned by foreign investors; local pension funds only have 8% in domestic equities, and EM investors are OW, but focused on the defensive 2/3 of the market. We focus on the 1/3 cyclical portion of the market for cheaper asset values, and stronger earnings

leverage. We are also bullish the S+P 500, and the correlation with the Mexbol is very high. The market is trading below its 5-year average multiple, and earnings momentum is positive (Q3 index EPS +20% oya).
Figure 9: Turkey – Structurally low policy rates and inflation
50 40 30 20 10 0 03 04 05 06 07 08 09
Source: J.P. Morgan economics, October 2009.

CPI

Policy Rate

Figure 10: Mexico - second highest GDP swing (11pt) in 2010
15% 12% 9% 6% 3% 0% South Africa Korea Chile India Russia Taiwan Mexico Turkey China Brazil

Source: J.P. Morgan economics. Note: Chart shows the difference between 2009 and 2010 GDP growth forecast.

Figure 11: Secular decline in interest rates
Turkey Brazil Mex ico Philippines Indonesia India Thailand Korea South Africa Taiw an Malay sia China Russia -3 -1 2 5 7 10

Source: J.P. Morgan economics. Difference between 5 year average policy rate (2004-08) and Average forecasted policy rate in 2009-10, ranked by greatest difference.

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Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Policy normalization outside G3 Not all countries will be subject to the same disinflationary forces. A number of smaller economies, quasi peripheral to the G3, have suffered much less during the recession, and are thus likely to normalize monetary policy earlier. Israel and Australia have started increasing policy rates and are set to continue. Other countries will likely follow suit in coming months— Norway, Czech, Korea, and Brazil—by our forecast, an earlier start of the rate normalization cycle should benefit their currencies and hurt their bond markets. The impact on their equity markets is less obvious but will likely be a small negative. Inflation ends the party in EM before DM The inflation cycle could be desynchronized. EM inflation models are unlikely to be accurate due to the short history of post pegged exchange rate inflation. Asia is more at risk due to limited currency appreciation relative to LATAM and EMEA. All one can do is monitor the data. The table below is published in both Perspectives and Portfolios and Key Trades and Risks every two weeks. The table monitors inflation relative to central bank target zones. Inflation today is benign but base effects in 2010 will be less favorable. The message from the previous inflation cycle was to sell equities when the inflation rate breached the central banks’ target zone. Conditions supportive for M&A activity Low funding costs and generally healthy balance sheets provide supportive financial conditions for corporate activity. Improvement in the global economic situation is increasing the confidence of business and financial investors. The diversity of potential participants makes

today’s situation unusual. At the simplest level companies are returning capital to investors either via higher dividends or through capital reduction. EM companies continue to expand regionally and globally. Private equity funds are far more developed and disciplined compared to the past. Most of the large private equity funds will continue to lead deals. This is not a one-way trend, with EM companies now acquiring developed-world businesses.
Figure 12: MSCI EM PE and US interest rates (%)
40 35 30 25 20 15 10 5 88 90 92 94 96 98 00 02 04 06 08
Source: Datastream, MSCI, IBES, J.P. Morgan economics

MSCI EM Fw d PE (LHS) Fed Funds target rate (RHS)

10 8 6 4 2 0

Figure 13: EM average policy rates (%)
25 20 15 10 5 0 -5 98 99 00 01 02 03 04 05 06 07 08 09
Source: J.P. Morgan economics, September 2009.

Nominal Real

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Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Table 1: Monetary policy and inflation
% US core PPI US core CPI US Unit Labor Costs Inflation Data Japan CPI Malaysia CPI Taiwan CPI China CPI Czech CPI Chile CPI Thailand CPI Philippines CPI India Wholesale Price Index South Korea CPI Indonesia CPI Colombia CPI Poland CPI Israel CPI Brazil CPI Mexico CPI Hungary CPI Turkey CPI South Africa CPI Russia CPI Venezuela CPI Inflation Target (Central Bank) na na na 2.5 - 3.0 2.0 4.8 2.0-4.0 3.0 (±1.0) 0-3.5 3.0-5.0 5.5 2.5 - 3.5 4.0-6.0 3.5 - 4.5 1.5 - 3.5 1.0 - 3.0 4.5 (±2) 3 (±1) 2.0-4.0 7.5(±2) 3.0 - 6.0 10.5 19.5 Current CPI 1.8 1.5 (1.4) -2.2 -2.0 -0.9 -0.8 -0.3 0.2 0.4 0.7 1.5 2.0 2.6 3.2 3.4 3.8 4.3 4.9 4.9 5.1 6.1 15.1 28.9 Food CPI na na na -0.5 -19.5 1.4 1.5 -5.8 1.0 1.6 2.2 15.7 4.6 4.8 2.2 4.5 1.6 3.5 7.0 3.0 5.8 4.9 8.4 na Change in CPI in last 12 months (2.2) (1.0) 0.0 -4.3 -10.2 -4.0 -5.4 -6.7 -8.6 -3.5 -11.1 -9.3 -2.8 -9.2 -4.4 -1.1 0.5 -1.9 -0.6 -0.8 -6.9 -7.0 6.6 -7.1 CPI Forecast 2009 end (J.P. Morgan) 2.7 1.7 na -1.3 0.2 -0.8 -0.6 1.2 1.5 -0.9 2.0 8.2 2.8 4.7 4.5 3.5 na 5.1 5.4 4.2 6.1 7.2 12.0 na J.P. Morgan forecast 2009 On Hold On Hold On Hold On Hold On Hold On Hold On Hold On Hold On Hold On Hold On Hold On Hold On Hold On Hold On Hold On Hold On Hold On Hold On Hold Easing Easing On Hold On Hold Accommodating

Source: Bloomberg, J.P. Morgan Economics. 4 November 2009. Inflation targets are extracted from ‘EM Inflation: Trouble Beyond the Headlines’, Hensley et al, 7 July 2008.

Check the valuation signal
Expensive (more than 1sd above 10 year average PE) Cheap (At or less than 10 year average PE) Relative to country/sector history Relative to country/sector history • Brazil, Mexico, India and Indonesia • Turkey, Israel, Chile, Thailand • Energy: Brazil and China • IT: Korea, Taiwan and India • Materials: Mexico, SA, Brazil, Korea, Taiwan • Telecom: SA and China • Financials: Brazil, Korea, India, SA, Taiwan • Russia energy, Israel Healthcare, Turkey financials • China Industrials and Mexico CS Relative to EM • Brazil and Indonesia • Financials: Brazil and India • Materials: Mexico, Brazil, SA • Energy: Brazil Relative to EM • Russia, Turkey, SA, Korea, Poland, China, Hungary Israel, Chile, Taiwan, Malaysia, Philippines, Thailand • IT: Korea, Taiwan, India • Telecom: SA, China, Mexico • CD: Korea and SA • Financials: Turkey, China • Korea Industrials, Russia energy, Israel Healthcare

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Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Table 2: Hindsight sector valuations
Sector Current 13.2 6.9 13.0 8.7 13.6 8.1 9.6 10.8 16.5 9.5 18.9 12.7 13.8 9.0 13.5 14.6 21.2 15.0 11.9 10.0 17.7 15.1 10.2 12.4 18.4 8.7 20.1 12.0 10.4 12.5 9.9 14.4 14.8 15.7 10.9 11.7 15.2 9.7 14.0 16.8 10.9 18.5 17.1 15.6 20.2 12.5 13.0 14.9 12m Forward PE 10yr Average +1sd 9.4 11.4 7.2 9.6 6.8 9.7 8.1 10.5 7.8 10.1 9.5 13.2 8.3 10.1 8.0 10.1 8.2 10.6 8.4 11.6 12.5 15.7 12.4 14.8 10.5 14.5 9.6 12.4 11.2 15.1 12.0 13.7 12.4 18.9 8.0 10.0 10.0 11.4 9.1 11.0 14.1 17.5 12.9 16.0 11.2 16.2 21.5 32.5 15.0 17.5 7.9 10.0 25.3 48.5 10.3 12.4 14.7 25.7 15.8 23.6 8.3 9.8 14.1 19.0 13.5 18.2 18.2 30.7 9.9 11.9 15.9 19.6 15.6 17.7 7.3 9.6 9.1 12.3 14.9 19.1 13.9 34.6 13.5 17.3 11.6 14.7 14.4 16.4 14.5 17.1 9.4 11.9 11.1 13.0 14.0 16.3 12m Forward PE relative to EM 10yr Average +1sd 0.9 1.0 0.7 0.9 0.6 0.8 0.7 0.9 0.7 0.8 0.9 1.2 0.7 0.9 0.7 0.9 0.7 1.0 0.8 1.0 1.1 1.4 1.1 1.3 1.0 1.3 0.9 1.1 1.0 1.4 1.1 1.2 1.1 1.6 0.7 0.9 0.9 1.0 0.8 1.0 1.3 1.5 1.2 1.4 1.0 1.6 1.9 3.0 1.4 1.6 0.7 0.9 2.2 3.7 0.9 1.1 1.3 2.0 1.4 2.0 0.8 0.9 1.3 1.7 1.2 1.6 1.7 3.0 0.9 1.0 1.5 1.8 1.4 1.6 0.7 0.8 0.8 1.0 1.4 1.8 1.2 2.4 1.2 1.5 1.1 1.3 1.3 1.5 1.3 1.6 0.8 1.1 1.3 1.5

Brazil Financials Russia Energy Brazil Energy Russia Brazil Turkey Financials South Africa Energy Korea Financials Mexico Materials Korea Industrials South Africa Materials Mexico Telecommunication Services India Energy Turkey Korea Consumer Staples Mexico India Financials Brazil Materials South Africa Korea India Poland Korea Information Technology Israel Health Care Mexico Consumer Staples Korea Consumer Discretionary India Information Technology South Africa Consumer Discretionary South Africa Telecommunication Services China Telecommunication Services* South Africa Financials China Financials China Taiwan Information Technology Hungary Israel Chile Korea Materials Indonesia Taiwan Thailand China Industrials Taiwan Materials Malaysia Taiwan Financials China Energy* EM Philippines

-1sd 7.4 4.8 4.0 5.8 5.5 5.8 6.5 5.9 5.7 5.2 9.2 10.1 6.4 6.9 7.3 10.3 5.8 6.0 8.6 7.2 10.8 9.8 6.2 10.6 12.4 5.9 2.2 8.1 3.7 8.1 6.7 9.3 8.7 5.6 8.0 12.1 13.4 5.0 6.0 10.7 -6.9 9.6 8.5 12.4 11.9 6.9 9.1 11.7

Current 1.0 0.5 1.0 0.7 1.0 0.6 0.7 0.8 1.3 0.7 1.5 1.0 1.1 0.7 1.0 1.1 1.6 1.2 0.9 0.8 1.4 1.2 0.8 1.0 1.4 0.7 1.5 0.9 0.8 1.0 0.8 1.1 1.1 1.2 0.8 0.9 1.2 0.7 1.1 1.3 0.8 1.4 1.3 1.2 1.6 1.0 1.1

-1sd 0.7 0.5 0.4 0.5 0.6 0.5 0.5 0.6 0.5 0.5 0.9 1.0 0.6 0.7 0.7 1.0 0.6 0.6 0.8 0.7 1.1 1.0 0.5 0.9 1.1 0.6 0.7 0.8 0.6 0.7 0.6 0.9 0.9 0.4 0.8 1.1 1.2 0.5 0.6 1.0 0.0 1.0 0.8 1.2 1.1 0.6 1.1

Source: IBES, Datastream. Red (dark grey) denotes expensive ie more than 1sd, Green (light grey) denotes at or less than 10 year average. Note: * China Energy and China Telecom averages are from June 2000.

10

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Focus on sectors within countries rather than country recommendations
The table below provides a level summary of our views on sectors within countries. Financials are 25%, Materials is 15% and Energy is 16% of EM. All recommendations are relative to EM. The Industrials sector consists of an eclectic group of stocks. We do not rate the sector. We are overweight early cyclicals and transportation sub-sectors.
Table 3: Key country and sector recommendations
Country/Sector EM Brazil Brazil Materials Brazil Energy Brazil Financials China China Financials China Energy China Telecommunication China Industrials Hungary India India Financials India Energy India IT Indonesia Israel Israel Health Care Korea Korea IT Korea Financials Korea Industrials Korea Materials Korea CD Korea Consumer Staples Malaysia Mexico Mexico Telecommunication Mexico Consumer Staples Mexico Materials Philippines Poland Russia Russia Energy South Africa South Africa Materials South Africa Financials SA Telecommunication SA Consumer Discretionary South Africa Energy Taiwan Taiwan IT Taiwan Financials Taiwan Materials Thailand Turkey Turkey Financials Wts 100 16.8 4.8 4.6 3.7 18.3 7.2 3.2 2.4 1.6 0.6 7.5 1.9 1.3 1.2 1.8 2.7 1.5 12.6 3.5 2.4 1.9 1.8 1.4 0.7 2.7 4.4 1.8 1.0 0.7 0.4 1.3 6.6 4.0 6.9 1.9 1.8 0.9 0.8 0.7 11.1 6.6 1.7 1.4 1.2 1.3 0.8 Reco -N N OW OW UW OW UW UW n/a N OW OW OW N N UW UW N OW OW n/a N N N UW OW UW N OW OW N OW OW N UW OW UW N UW OW OW OW UW OW OW OW US$ Return (%) 1 yr 3 yr 106 22 155 97 174 124 199 150 156 72 103 53 120 67 131 50 20 20 97 37 109 (6) 124 25 145 30 105 60 114 (1) 209 57 57 47 32 68 128 (1) 135 (6) 172 (12) 108 (10) 182 76 164 19 52 (3) 65 41 69 4 51 17 63 22 199 (26) 86 23 55 (10) 103 (26) 84 (34) 91 19 106 (1) 80 18 63 44 150 38 83 27 92 5 118 (3) 93 (8) 62 44 94 16 96 23 127 35 09E 5 yr 119 371 393 581 490 191 270 201 197 86 43 184 219 367 117 207 94 103 84 58 101 174 215 79 101 85 127 189 153 59 125 76 72 57 89 69 70 116 125 139 37 43 (4) 89 61 87 128 X 15.8 16.6 20.8 15.1 15.9 17.5 17.4 15.4 12.3 22.2 12.5 20.7 25.1 17.4 21.5 15.8 15.3 15.9 13.7 18.2 16.0 11.2 12.0 10.5 13.9 18.1 18.1 13.2 22.4 48.4 16.8 16.8 11.3 7.9 14.9 34.6 11.7 11.9 14.8 12.0 30.5 33.2 29.2 27.3 12.4 9.7 8.3 PE 10E X 12.7 13.3 14.1 13.0 12.9 14.3 13.6 13.1 12.4 17.1 10.9 17.0 20.7 12.7 18.5 14.5 11.8 11.9 11.2 14.2 11.6 9.7 10.0 9.5 13.6 15.6 14.9 12.4 18.1 20.5 15.1 14.6 8.6 6.8 11.6 17.9 9.7 10.3 12.1 9.4 19.1 18.8 19.5 21.5 11.2 8.8 7.9 EPS Growth 11E 09E 10E (%) X (%) (%) CAGR 05 10E 10.8 (4) 24 7.2 11.4 (11) 25 4.8 11.5 (40) 48 2.9 12.3 (22) 16 3.2 10.6 6 24 5.8 12.2 9 22 13.5 11.1 18 29 29.3 11.6 (11) 17 6.6 11.8 (14) (0) 14.8 13.9 56 29 3.9 8.6 (41) 15 (1.5) 13.9 3 22 14.0 17.1 (2) 21 13.3 11.4 7 37 18.3 15.6 2 16 17.9 12.2 7 10 14.2 10.1 19 30 10.7 NA 8 34 16.6 9.3 44 22 4.6 10.9 NM 28 3.9 9.3 (27) 38 0.2 8.5 55 15 15.4 8.7 (12) 20 5.8 7.9 56 10 8.6 12.0 9 2 11.9 13.1 0 16 6.4 12.1 9 22 7.0 11.2 24 7 16.3 14.5 23 24 13.9 10.1 (48) 136 (13.7) 13.2 24 11 5.5 11.3 (34) 15 (3.0) 6.5 (33) 32 4.5 5.5 (24) 15 2.3 9.4 (13) 29 11.8 13.7 (45) 93 20.6 7.8 (14) 21 7.4 9.0 2 16 13.8 9.8 11 22 12.0 7.4 (18) 28 9.4 13.4 8 60 (0.7) 12.3 (13) 77 4.0 15.2 NM 50 6.0 16.2 (17) 27 (13.0) 9.3 28 10 (2.4) 7.4 6 11 11.1 6.6 23 5 16.4 ROE DY 10E % 10E% 2.2 13.0 2.7 14.6 2.4 11.9 2.3 37.3 2.3 15.7 2.2 14.2 2.4 15.6 2.7 14.7 3.5 14.9 1.4 8.0 1.8 11.1 1.0 15.0 0.9 11.3 1.1 15.6 1.3 27.0 2.7 23.7 1.4 12.9 0.9 NA 1.2 10.3 0.2 10.4 1.0 7.8 1.3 12.8 1.6 11.7 1.4 12.0 1.7 16.9 2.7 10.9 2.3 15.2 3.3 39.4 1.3 14.9 2.0 2.6 3.8 14.3 3.3 9.6 1.3 10.5 1.4 11.9 2.8 14.7 1.4 7.8 4.1 13.3 2.4 19.2 2.0 16.5 3.0 16.7 3.0 6.4 2.9 6.7 2.7 5.0 3.1 6.8 3.3 13.7 2.8 16.6 2.0 18.3 03-08 Avg 15.6 18.6 28.2 27.1 21.9 15.5 10.8 21.0 18.1 11.7 22.3 20.9 15.9 20.7 30.0 24.8 12.6 16.1 13.7 17.2 10.9 10.7 16.9 13.6 14.9 12.9 18.2 30.4 15.3 14.4 13.2 15.6 15.8 16.0 18.4 10.3 19.2 26.7 20.9 23.7 12.4 13.3 6.1 19.7 19.4 17.4 17.1

Source: J.P. Morgan Asian strategy team, MSCI, Datastream. Table sorted by descending weight in index, countries first followed by country-sectors. 10 November 2009.

11

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Risks to our strategy
Bond market volatility The end of QE plus banks unwilling to add to duration risk is a dangerous technical situation for government bonds. Risks assets typically struggle as bond yields rapidly increase to "normal" levels. Please see Mercury Rising on page 22 which highlights the relationship between bond market volatility and EM corrections. Dubai World debt moratorium Our base case is that this is a Dubai-specific rather than pan-EM issue. The risk is that we underestimate the damage to investor confidence in the region. Lack of G3 policy flexibility High fiscal deficits and record low interest rates limit policymakers’ ability to respond to a relapse in growth. A growth relapse is not our base case. If it occurred it would be a serious blow to risk assets. Credit spreads could expand and equities fall. Please see page 23 for a review of the impact of fiscal stimulus on growth and potential fiscal drag in 2011. Central banks target asset prices We are in a post Greenspan world; central banks target asset prices and the common wisdom is that the market cannot be trusted. Brazil "got away with" market intervention. The Brazilian market outperformed last week despite implementing a 2% tax on speculative inflows. This tax is politically appealing as it targets international "speculators" who are viewed to be behind the credit crunch and putting at risk Brazilian manufacturing jobs (and they do not get a vote in the 2010 Brazilian presidential election). China and India already have capital controls. It is now open season for non-market policies as central banks attempt to manage conflicting policy goals. Be careful in the consensus asset inflation trade. More rapid increase in Asian inflation With the exception of Thailand, J.P. Morgan's inflation forecasts for 2010 are within the central bank target zones. Modeling inflation in emerging economies is difficult due to the short history of floating exchange rates and large weighting to food and other primary products. The base effect for commodities is notably unfavourable in 1H10. There is a risk that inflation increases faster than our forecast. This would be negative for equities. The lack of a valuation cushion Valuations in EM and DM are mid a wide and statistically debatable valuation range. If news flow remains incrementally positive then it is not a challenge to performance, but there is no valuation cushion.
Figure 14: Global Bond Supply ($tr)
$7 Gov ernment Corporates incl Gov t Guranteed $6 $5 Agencies, Supra, Muni, etc Securitized

$4

$3

$2 $1

$0 2009 2010

Source: J.P. Morgan. Global bond supply and demand 2009 in $tr, demand and supply figures are annualized, supply is calculated by the change in bond out standings at face value, demand is calculated by the change in bond out standings at market value. 2010 forecast $tr, demand and supply figures are annualized.

Figure 15: Global Bond Demand ($tr)
QE $7 $6 $5 $4 Banks FX Reserv es Retail Bond Funds Other

$3 $2 $1 $0 2009 2010

Source: J.P. Morgan. Global bond supply and demand 2009 in $tr, demand and supply figures are annualized, supply is calculated by the change in bond out standings at face value, demand is calculated by the change in bond out standings at market value. 2010 forecast $tr, demand and supply figures are annualized.

12

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Uncertain outlook for commodity Financial investors’ influence on commodity prices is now substantial .Commodities rallied prior to the recovery rather than typically lagging the recovery. With zero interest rates investor flows could remain strong, pushing up commodity prices which would be negative for growth. It is also possible that flows reverse. Upwardly sloping forward curves result in a negative roll or high cost of carry for financial investors. Investors may become discouraged by the low returns available due to the negative carry.
Figure 16: Oil forward curve ($/bbl)
100 95 90 85 80 75 10 11 12 13 14 15 16 17
Source: Bloomberg.

Renminbi and Asian currencies The RMB effectively re-pegged to the US dollar 15 months ago. With headline inflation and exports down year over year, we see no catalyst for Beijing to change policy until mid 2010. The RMB is anchoring other Asian currencies as they try to maximize export competitiveness. Election-induced volatility Several emerging markets go into election in 2010. This could be a source of volatility for the markets. Korea’s regional election in June 2010 is going to be the last nation-wide election before the presidential election in 2012, meaning the current ruling party is likely to put every effort to win the election. Brazil elects a new president in October 2010. The base case is the current PT-led centre-left coalition remains in power. With fewer macro issues in play this time around, the potential outcome is less dramatic, though pre-election volatility is likely, and sectoral and micro risks are on the rise. Colombia elects a new President in May 2010, with uncertainty as to whether current President Uribe can run again.
Table 4: 2010 Election Calendar
Jan Feb Mar Colombia Legislative election 14 Mar Jul Apr Hungary Parliamentary election Aug

Crude Oil, WTI : 11/24/2009

Figure 17: The financial investor is also driving commodities Cumulative inflows into commodity fund by year (US$ billion)
45 40 35 30 25 20 15 10 5 0 2004 2006 2008 2005 2007 2009 39.9

20.1 17.5 13.0 12.1 8.9 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

May Philippines Legislative & Presidential election, 10 May Colombia Presidential election, 30 May Sep

Jun Czech Republic Parliamentary, First Round Hungary Presidential election

Source: J.P. Morgan, up to October 2009.

Carry trade volatility The carry trade is a poorly defined term. We use it as shorthand for investors’ desire to generate a return when cash returns are zero. This may simply be the switch from cash to higher risk asset. It will also include currency forwards as investors search for higher yielding FX. Invariably momentum in risk assets will attract the leveraged investor. The correction in carry trades can be sharp.

Korea Regional election Oct Nov Poland Presidential election, First Round Brazil Presidential election, First Round 3 Oct

Dec

Source: IFES.

13

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Managing Risks
Risks for the first year of recovery are high. Investors should consider protecting their portfolios. Option implied volatility has fallen from the highs in 2008, it is reasonable to buy portfolio insurance by going long index puts. Recent research from J.P. Morgan's Equity Derivatives and Delta one strategy team shows that investors who want to protect their portfolios beyond a three-month period had to bear a 30% annualized cost of rolling the long VIX futures position. The research suggests that the recent increase in correlation between the USD, VIX and equity prices can be used as a more efficient way to achieve diversification and portfolio insurance. While we believe that investors should not overemphasize this casual relationship between asset markets and the USD, we recommend building a small USD long in portfolios to protect against sharp market corrections. This tail risk is particularly important for investors reporting performance in USD terms; if equity markets were to drop 20%, and the USD appreciates by 17%, a dollardenominated foreign portfolio would fall in value by

35%. Since January 2009, on average, the VIX tended to increase by 1.2 points for every 1% strengthening in the Dollar and this was strongly negatively correlated with equity markets. Our base case assumes emerging market FX appreciation. Hedging the portfolio with a position in USD is an inexpensive way to diversify sudden EM FX depreciation when risk aversion spikes.
Figure 18: Correlation between DXY and EM FX index - Very Negative
0.2 0.0 -0.2 -0.4 -0.6 -0.8 -1.0 93 95 97 99 01 03 05 07 09
Source: Bloomberg.

14

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

A longer perspective on asset performance
To avoid being drowned by an anchor and provide an objective perspective of asset performance, we look back at three, five and eight-year US$ returns. The three-year CAGR for EM equities is just 4.3%. This is higher than -6.8% CAGR return from DM equities. MSCI EM outperformed the DM world index over these years. More recently, ‘BIC’ has driven returns as Russia underperformed by 16% over three years and 4% over three years. Note the divergence in performance of oil and Russian equities and ruble. At a sector level, Commodities have outperformed, along with consumer stocks. Financials managed to outperform only marginally. IT has been the worst performing sector. Currency returns are a meaningful part of the US$ returns on equity indices. The currency bloc matters, as shown in Table 6. CE3 currencies have appreciated the most, along with the Euro. Interestingly, Asian currencies ex the RMB and Thai Baht, have been laggards. The Mexican Peso is a notable underperformer in Latam.
Table 5: MSCI EM Sector performance (% for US$ indices)
MSCI EM Sector EM Energy EM Materials EM Cons Disc EM Cons Staples EM Utilities EM Financials EM Industrials EM Telecoms EM IT Weight 15.0 6.6 5.4 2.2 0.0 12.9 5.3 3.5 8.9 3yr CAGR 5 10 5 11 7 5 0 2 -3 5yr CAGR 19 18 11 19 17 15 11 13 7 8yr CAGR 24 22 18 17 17 16 16 12 8

Table 7: Major EM country index performance (% for US$ indices)
Country Colombia Egypt Peru Indonesia Czech Republic Brazil India BRIC China Hungary Russia Thailand South Africa Chile Turkey EM Morocco Mexico Korea Poland Philippines Malaysia Israel Taiwan World Weight 0.6 0.5 0.7 1.8 0.4 16.8 7.5 49.1 18.3 0.6 6.5 1.2 7.0 1.3 1.3 100 0.3 4.4 12.6 1.3 0.4 2.7 2.7 11.1 3yr CAGR 17 0 28 11 2 21 6 8 13 -7 -13 1 2 10 2 4 7 -1 -3 -8 3 8 10 -4 -7 5yr CAGR 27 25 31 21 15 30 21 21 21 3 8 6 9 15 9 13 19 15 11 7 14 9 11 2 0 8yr CAGR 40 34 33 32 30 26 22 21 19 17 17 17 16 16 16 16 15 15 13 12 12 11 9 4 2

Source: MSCI. Sorted descending 8 year CAGR. Grey line separates perf rel to EM

Table 8: Major EM country sector CAGR returns (%)
Country Sector Brazil Materials India Energy Brazil Energy S Africa Cons Disc China Energy India Financials S Africa Telecoms Brazil Financials Korea Materials Korea Industrials Korea Cons Discr Mexico Telecoms India IT Korea Cons Staples Turkey Financials China Financials Israel Health Care Russia Energy Taiwan Materials Korea IT Mexico Cons Staples China Industrials S Africa Financials China Telecoms S Africa Materials Mexico Materials Korea Financials Taiwan Financials South Africa Energy Taiwan IT Weight 4.8 1.3 4.6 0.8 3.3 1.9 0.9 3.7 1.8 1.9 1.4 1.8 1.2 0.7 0.7 7.2 1.5 3.9 1.4 3.5 1.0 1.6 1.8 2.3 1.9 0.7 2.3 1.7 0.7 6.6 3 year CAGR 27 16 32 9 12 8 12 17 19 -5 5 4 -2 -2 8 17 18 -15 7 -3 6 9 2 4 -2 -11 -6 -5 6 -4 5 year CAGR 32 35 41 13 21 25 13 37 22 20 11 21 15 14 16 28 14 8 6 9 18 11 6 21 8 7 13 -3 16 5 8 year CAGR 38 35 33 31 30 30 29 28 24 21 20 20 18 18 18 18 17 16 16 16 15 15 14 12 12 10 8 4 3 1

Source: MSCI. Sorted descending 8 year CAGR. Grey line separates perf rel to EM

Table 6: Currency and commodity performance (%)
Currency WTI Crude GSCI Industrial Metals Czech Koruna GSCI Agricultural Index Euro Hungarian Forint Polish Zloty Brazilian Real S African Rand Thai Baht Chinese Yuan EM Currency Basket Israeli Shekel Malaysian Ringgit Philipine Peso Indonesian Rupiah Korean Won Taiwanese Dollar Russian Ruble Indian Rupee Turkish Lira Mexican Peso Dollar Index 3yr CAGR 10 -8 7 9 5 4 2 8 -1 3 5 0 5 2 2 -1 -7 1 -3 -1 -1 -5 -4 5yr CAGR 9 10 6 14 3 1 3 10 -5 4 4 1 3 2 4 -1 -2 0 0 -1 -1 -3 -2 8yr CAGR 19 13 10 10 7 6 5 5 4 4 2 2 2 1 1 1 1 1 0 0 0 -4 -6

Source: MSCI. Sorted descending 8 year CAGR. Grey line separates perf rel to EM .

Source: Bloomberg. Sorted descending 8 year CAGR. Grey line separates perf rel to EM . J.P. Morgan. The EM Currency Basket is calculated using the difference in the returns in the MSCI EM local and USD indices. All performance versus the US$ except Dollar Index

15

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

The Policy Risk to the Asset Inflation Trade
On 19 October 2009, the Brazil government announced a 2% upfront charge for foreign investors making portfolio investments in local fixed income and equities (IOF). The government was concerned about the pace of Real (BRL) appreciation; +35% ytd. If BRL resumes its appreciation trend further measures are possible. Minister Mantega said that the “FX floating regime” remains in place and he is supportive of capital markets, but the intention is to avoid “excessive BRL appreciation.” Brazilian authorities have voiced concern about the exchange rate, and the more the BRL appreciates the greater the policy risks. We believe that with Brazil’s successful experiment last week, there is the risk that other central banks attempt non-market policies to manage conflicting policy goals. The Brazil government's move was not a surprise as they were vocal about their concerns with BRL appreciation. The size and breadth of the move, however, was a surprise. Between March and October 2008, Brazil imposed a 1.5% IOF on fixed income investments by foreigners. The currency continued to appreciate until July 2008. MSCI Brazil underperformed MSCI EM by only 1% in the week post the imposition of IOF (19-23 October 2009). Brazil has ‘gotten away’ with the capital control. This is in sharp contrast the Thai experience (see below) Policy risks growing The lack of a sustained negative response to Brazil’s capital control measure may encourage other central banks to implement non-conventional policies. This, we believe, is a risk to the consensus asset inflation trade. Learning from the Thai experience In December 2006, the Thai government imposed FX controls on all inbound portfolio capital. The initial rules implied that foreigners would have to deposit 30% of the funds brought into the country as a reserve with the central bank and only the remaining 70% could be invested. For withdrawing capital within one year, only two-thirds of the amount would be refunded. The stock market dropped 17% the following day. This pushed the government to change their stance and limit the controls to inflows in bonds and commercial paper.
Figure 19: A muted response from Brazil
116 112 108 104 100 01-Oct 07-Oct 13-Oct 19-Oct 25-Oct
Source: MSCI, Bloomberg, J.P. Morgan. The Brazilian Real index is inverted. Indices rebased to 100 on 1 October 2009. The red line shows the announcement of the IOF tax.

MSCI Brazil

BRL Currency

Figure 20: Relative performance post knee-jerk reaction positive
108 107 106 105 104 103 102 101 100 01-Oct 07-Oct 13-Oct 19-Oct 25-Oct
Source: MSCI, Bloomberg, J.P. Morgan.

MSCI Brazil relativ e to MSCI EM

Figure 21: The Thai experience—Impact on currency
37.5 36.5 35.5 34.5 33.5 32.5 1-Dec-06
Source: Bloomberg.

Thai Baht Onshore

Thai Baht Offshore 22-Dec-06 12-Jan-07 2-Feb-07 23-Feb-07

Figure 22: The Thai experience – Impact on the stock market
330 310 290 270 250 230 1-Dec-06 22-Dec-06 12-Jan-07 2-Feb-07 23-Feb-07
Source: MSCI, Bloomberg.

16

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

And now the monetary stimulus
Monetary stimulus requires three conditions: available credit, at an attractive interest rate, and willing borrowers. An ongoing rally in the credit markets provides the first two conditions. By mid-2010 several quarters of economic expansion should boost business confidence. Initially the effect will be a reduction in borrowers’ propensity to repay loans. This is a developed world event. The monetary stimulus in EM, particularly in China, fed through rapidly in 2009. The technical position in investment-grade bonds may get more favorable. The negative carry between shortterm working capital loans and long term interest rates should discourage further bond issuance. The momentum of returns in credit markets is likely to continue to attract investors. This combination results in further spread reduction and absolute decline in yields. Higher risk bonds are likely to follow this trend. The irony of the post-credit-crunch interest-rate dynamic is that the improvement in credit markets allows central banks to move away from emergency interest rates. Investors should view this as a bullish sign. As we highlighted in our guide to monetary policy in EM (26 August 2009, Mowat et al) the nominalization of interest rates is concurrent with strong markets and economies. It is only when higher inflation drives central bank policy action, that investors should sell equities. Please see our extended markers for a summary of inflation and central bank target ranges.

Figure 23: Compression in excessive risk premium – Yields for government and corporate bonds plus earnings yield for US and emerging equity markets
22 20 18 16 14 12 EMBI 10 8 6 4 US 10 y r 2 0 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 1 month T-Bill Negativ e Yields Juli Av g : 6% JULI

US High Yield CEMBI US EARNINGS YIELD EMBI JULI US 10 Yr EM EARNINGS YIELD 1 Month T-Bill

High 21.0 14.3 11.4 12.0 8.7 5.2 17.3 5.2

Low 7.5 5.7 6.1 6.3 4.9 2.1 6.8 (0.1)

Avg 05-07 8.4 6.4 6.6 7.0 5.7 4.6 8.7 4.0

Spot 9.8 7.0 6.9 6.7 5.3 3.5 7.6 0.1

Diff 1.4 0.6 0.3 (0.3) (0.4) (1.1) (1.2) (4.0)

US HY US Earnings EM Earnings y ield y ield CEMBI

Source: J.P. Morgan, Bloomberg, 6 November 2009.Note: JULI = J.P. Morgan high grade bond index, CEMBI = emerging market corporate bond index

17

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

The rolling recovery trade of 2009: And settling the decoupling debate
The debate on economic decoupling is settled. Emerging economies led the recovery out of the synchronized recession in 4Q08. Growth remains robust despite weak exports. Domestic inflation and monetary conditions appear to be the dominant drivers of EM growth. The evidence of capital market decoupling is more limited. Correlation between DM and EM is a function of common investors. That said, the low in EM equities was on 27 October 2008, four months ahead of the developed equity markets. China, India and Indonesia led the economic recovery in 1Q09. This recovery broadened to the balance of Asia, Brazil, Russia and Turkey in 2Q09. Developed economies returned to growth in 3Q09. Finally Hungary and South Africa return to growth in 4Q09. Markets typically outperformed in the three months prior to their recovery. Within EM exporters started to outperform in 2Q09. The rolling recovery trade is now mature. For the past two years, stock price movements have been dominated by macro factors. In 2010, we would expect a more normal balance of stock specific factors and macro factors driving share prices.

Table 9: Rolling with the decoupled recovery – Real GDP growth (QoQ SAAR) in key Emerging markets; recession in red, recovery in green
QoQ saar EM Asia China India Indonesia Korea Malaysia Philippines Taiwan Thailand Lat Am Brazil Colombia Mexico EMEA Czech Hungary Poland Russia South Africa Turkey USA Euro area Japan Australia Hong Kong Singapore Avg 20032007 8.4 11.1 9.3 5.8 4.4 6.1 5.7 5.1 5.8 5.2 4.1 6.4 3.5 6.4 5.6 3.4 5.5 7.4 4.7 6.8 2.9 2.1 2.1 3.4 6.8 7.7 1Q08 7.6 10.7 6.9 5.9 4.4 7.2 0.4 3.6 4.7 5.4 7.5 -1.4 4.5 6.1 0.5 3.5 6.1 7.2 1.7 7.7 -0.7 3.1 3.5 3.0 4.1 12.2 2Q08 4.9 8.7 5.9 6.8 1.7 2.3 7.1 -2.3 0.3 4.7 6.2 2.9 1.1 5.1 5.0 -0.9 4.1 7.1 5.0 -4.5 1.5 -1.3 -2.8 1.4 -3.9 -7.7 3Q08 3.8 5.8 7.7 5.2 1.0 0.6 3.0 -2.9 2.2 1.4 5.5 0.0 -2.7 3.4 1.8 -3.8 1.6 5.9 0.2 -5.6 -2.7 -1.5 -5.1 1.3 -3.2 -2.1 4Q08 -5.3 2.4 1.6 1.9 -18.8 -8.8 1.1 -27.2 -21.5 -8.5 -12.8 -5.6 -9.2 -9.3 -5.0 -7.4 -0.4 -14.2 -1.8 -21.6 -5.4 -7.1 -12.8 -2.8 -7.4 -16.4 1Q09 2.5 8.4 8.2 4.9 0.5 -17.7 -8.1 -10.2 -7.2 -10.0 -3.8 1.1 -21.2 -20.2 -17.9 -10.0 0.4 -33.6 -6.4 -14.4 -6.4 -9.6 -12.4 1.6 -16.1 -12.2 2Q09 12.6 14.8 6.7 4.3 11.0 12.8 10.0 20.7 9.6 0.8 7.8 2.7 -4.4 2.2 0.4 -7.9 2.8 4.9 -3.0 19.1 -0.7 -0.7 2.3 2.5 13.9 20.7 3Q09E 9.8 10.0* 9.0 5.3 12.3 6.1 4.0 11.5 7.0 6.0 7.2 1.9 10.1 6.6 4.5 -2.0 5.5 9.5 0.5 11.7 3.5 3.0 3.0 1.2 9.0 14.9 4Q09E 5.3 9.1 -1.0 3.5 4.0 4.5 4.0 4.2 5.3 5.6 6.7 3.2 7.5 5.0 5.0 2.5 3.0 6.5 3.4 4.5 3.5 2.5 2.5 3.8 5.0 -2.0 1Q10E 6.8 9.0 10.0 5.5 2.0 1.6 5.0 3.8 4.9 4.7 4.3 3.5 3.7 3.5 2.8 2.0 2.5 4.5 4.4 0.0 3.0 3.0 2.5 2.1 4.2 4.1 2Q10E 7.0 9.5 7.0 6.0 3.5 4.9 5.0 4.0 5.7 3.2 5.0 4.3 -0.6 3.3 2.5 2.0 3.0 4.0 3.8 3.6 4.0 3.0 1.5 2.4 4.0 7.4 3Q10E 7.3 9.3 9.6 6.0 3.5 4.9 5.0 3.8 7.0 3.9 4.0 5.5 3.3 3.4 2.2 2.5 3.5 4.0 3.6 8.2 4.0 3.0 1.5 4.4 3.8 8.2 4Q10E 7.0 8.7 9.0 6.0 3.5 4.9 5.0 3.8 7.0 2.3 4.0 4.5 -0.9 3.6 2.0 2.5 3.5 4.5 4.1 8.2 3.5 2.5 2.0 6.2 3.5 8.2

Source: Actual data plus J.P. Morgan estimates, 11 November 2009. *Reported for China.

18

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Reiterating our overweight on earnings revisions
Steve MalinAC, Head of Quant Research Those familiar with our research may detect a sense of irony in our title because the reality is that there are very few periods when we would not advocate being overweight on earnings revisions—it is after all one of the most consistent quant strategies for alpha delivery. Occasionally earnings revisions do fail, as they did last year and early this year. The severity of the underperformance was dramatic and enough to make some ask the question “Is it broken for good?” We believe not. Based on the strength of the recovery from prior failure periods we believe that now is exactly the time to focus on changes in earnings estimates. Why do earnings revisions work? Earnings revisions belong to the momentum family of alpha drivers. Research into momentum is extensive and while the jury is still out as to why it works, even the most ardent advocates of ‘efficient markets’ struggle to deny that it exists. Whilst this isn’t the forum for a detailed discussion, arguably the most convincing arguments for ‘why earnings revisions work’ stem from behavioral finance. In this field the behavior and reaction of analysts to events that make them acknowledge their under/overstated opinion about a company’s future have been studied in depth. In a nutshell earnings revisions trend and are serially correlated (i.e. when one analyst upgrades others follow), the market typically underreacts to these changes and this makes the signal systematically exploitable. Do they work in emerging markets? Using our extensive global back-testing infrastructure we have investigated the performance of various forms of earnings momentum in numerous universes. The conclusion is invariably the same. Earnings revisions have been a strong driver of returns over the long term in emerging markets – indeed it is one of the strongest universes for observing the phenomena globally.
Figure 24: The L/S return to Earnings Revisions in GEM
800 700 600 500 400 300 200 100 0 Nov-94 Nov-95 Nov-96 Nov-97 Nov-98 Nov-99 Nov-00 Nov-01 Nov-02 Nov-03 Nov-04 Nov-05 Nov-06 Nov-07 Nov-08 Base

Source: Thomson, J.P. Morgan calcs.

Why did they fail recently? During the crisis and subsequent recovery macro drivers, not micro drivers such as earnings revisions were driving markets. The rapid deterioration in the economic data took analysts by surprise and for most of 2008 and part of 2009 analysts simply played catch-up. As far as the market was concerned EPS changes were at best not relevant and at worst behind the curve resulting in the strategy generating negative returns. Have they failed before? The recent period was a record period of underperformance but earnings revisions have failed before; notably in 97 and 01 (See below). Remember, momentum relies on serial correlation. That is, what has worked in the past is most likely to continue to work in the future. Conditions of rapid changes in risk appetite plus limited guidance from companies have contributed to the underperformance of the strategy. The period 97/98 was the Asia financial crisis and 01/02 was the fallout from the Tech sell-off as well as Sep 11th. This was followed by a slight recovery before the Asia region lurched into SARS. What happened next? The point that we would most like to stress is that in both previous ‘failure cases’ when revisions started to work again they did extremely well. Whilst this is observable on the 12-month rolling return chart above, for clarity we also demonstrate this in the annotated draw-down chart and success rate (i.e. the number of positive L/S return months in the rolling year) chart below.

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Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

From March 1998 Earnings Revisions generated +32% of alpha on a long/short basis as it recovered very quickly. Similarly Jan 02 to Aug 03 saw a +28% L/S return. What has happened this time? (So far) The ‘drought’ in the performance of earnings revisions was finally broken at the end of May. Subsequently investing in earnings revisions has been a winning strategy five months in succession (and it is again up this month at the time of writing). In summary we continue to be very optimistic about the earnings revisions based strategies in the current environment. The speed and magnitude of previous recoveries in performance are evident and we are already seeing effectiveness improve. In addition the fundamental support for earnings revisions is strong. The correlation between stocks and markets continues to drop back suggesting that ‘micro’ is getting the better of ‘macro’ and hence stock picking opportunities are likely to continue to improve. With the revisions environment having normalized and all the ‘easy yards’ already accomplished for valuations it seems reasonable that attention will remain on earnings going forwards. With clarity returning as each reporting period passes and the endorsement of most market strategists (who are suggesting the economic picture will continue to improve), the stage appears set. How do you find revisions for stocks? We calculate earnings revision rankings for stocks and sectors globally on a daily basis. Please contact Steve Malin or Rob Smith at quant.research@jpmorgan.com for more in formation on accessing the latest information via our web portal or to receive latest changes direct to your inbox.

Figure 25: The 12-month rolling return to Earnings Revisions in GEM
50% 40% 30% 20% 10% 0% -10% -20% -30% Dec-94 Dec-95 Dec-96 Dec-97 Dec-98 Dec-99 Dec-00 Dec-01 Dec-02 Dec-03 Dec-04 Dec-05 Dec-06 Dec-07
Jun-07 Jun-08

Source: Thomson, J.P. Morgan Calcs.

Figure 26: Draw-down analysis – Recovery periods are strong
Jun-94 Jun-95 Jun-96 Jun-97 Jun-98 Jun-99 Jun-00 Jun-01 Jun-02 Jun-03 Jun-04 Jun-05 Jun-06 Jun-09

0% -5% -10% -15% -20% -25%

+28% Jan 02 to Aug 03

+32% March 98 to March 99 +8% Since Jun 09

Source: Thomson, J.P. Morgan Calcs.

Figure 27: Strategy success rate (rolling year)
120% 100% 80% 60% 40% 20% 0% Nov-94 Nov-95 Nov-96 Nov-97 Nov-98 Nov-99 Nov-00 Nov-01 Nov-02 Nov-03 Nov-04 Nov-05 Nov-06 Nov-07 Nov-08

Average success rate > 70% of months in any rolling 12 month period

Sharp Recovery following Sharp fall in effectiveness

Source: Thomson, J.P. Morgan Calcs.

Figure 28: Recent returns… back on track
4% 2% 0% -2% -4% -6% -8% Nov-08 Jul-08 Jun-08 Jan-09 Dec-08 Oct-08 Jun-09 Jul-09 Mar-08 May-08 Mar-09 May-09 Aug-08 Sep-08 Feb-09 Aug-09 Sep-09 Oct-09 Apr-08 Apr-09

Source: Thomson, J.P. Morgan Calcs.

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Dec-08

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

The odd couple: Above-trend growth and falling core inflation
(David Hensley AC and Joseph LuptonAC extracts from ‘Global core inflation falling fast’, GDW 21 August 2009) J.P. Morgan’s global economic outlook stands apart from the consensus. The forecast is for a sustained return to above-trend growth beginning this quarter and a continued slide in core inflation to near zero in the developed economies (DM) by late next year (see Slack Attack, Global Issues, May 29, 2009). This sounds incongruous; however a resumption of above trendgrowth accompanied by falling core inflation is standard operating procedure after deep economic downturns. Developed market core inflation is now at 1.1% oya, down from the peak at 1.9% oya in August last year. The current level is equal to the previous low in 2003. This is accompanied by depressed wage growth. The output gap and the death of the pricing power Our core inflation forecast is underpinned by the huge output gap in the economy. This large and growing amount of resource slack is a reflection of the extraordinarily low levels of aggregate demand and resource utilization. Global output gap is estimated to reach -4.9% of GDP in 2Q09. The measure of resource utilization, which is a weighted average of the rates of unemployment and manufacturing capacity utilization, was 3.8 standard deviations below its norm. In the past, economic recessions and the accompanying buildup of slack consistently have delivered a significant decline in core inflation and wage growth (see Slack Attack). Core inflation tends to move slowly in the developed world, meaning that the full transmission of resource slack to pricing tends to occur with a lag. The large decline in core inflation to date was magnified by passthrough from energy prices in 2H08. The death of pricing power is apparent when looking at core inflation and energy prices in 1H09 casually. This shows little a pass through of the bounce in energy prices into core inflation. Either businesses were unable to pass through higher energy costs because of the weak economy, or this was offset by disinflationary pressure elsewhere. Either way, it appears that the surging output gap already is taking a toll on pricing power. EM decline limited to Asia The shallower recession in EM suggests a smaller reduction in core inflation for the group. However, the actual reduction has been more dramatic with core inflation falling 1.5% to 2.4% from last year’s peak. This decline is entirely due to EM Asia, especially China. Core inflation has plateaued in Latam and CEEMEA.
Figure 29: Developed market core inflation (US core ex tobacco)
%oya

1.9

1.6

1.3

1.0 03 04 05 06 07 08 09 10

Source: J.P. Morgan.

Figure 30: Resource utilization and core CPI, developed economies
2 1 0 -1 -2 -3 -4 -5 90 92 94 96 98 00 02 04 06 08 10 Resource utilization Core CPI Std. dev . from 1990-2007 av g %-pt; 8 qtr chg in %oy a inflation rate 2 1 0 -1 -2 -3 -4

Source: J.P. Morgan.

Figure 31: EM consumer prices excluding food and energy
% change over 12 months

8 6 4 2 0 -2 Jan 03 Jan 04 Jan 05 Jan 06 Jan 07 Jan 08

CEEMEA Latam EM EM Asia

Jan 09

Jan 10

Source: J.P. Morgan.

21

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Fear bond market volatility – Mercury may rise in 2010
EM equities typically correct when bond market volatility rise. Statically this is when the 10-year UST yield exceeds two standard deviations versus its three month moving average. Since 2004, the mercury rising indicator has correctly signaled corrections in seven out of 10 occasions. Yields are low but the curve is steep The current 10-year UST yield of 3.5% is low relative to the long term history. But the yield is steep; the average curve is 1.75%. The curve steepness rewards duration risk and banks have rapid accumulated USTs. The appetite is finite. US fiscal deficit The US Fiscal deficit is estimated at US$1.35 trillion in 2010 following a deficit of US$1.6 trillion for 2009. The net US treasury paper issuance in 2010 is estimated at US$1.8 trillion; this is larger than the US$1.6 trillion estimated to be issued in 2009. Potentially, the market’s inability to digest the large sustained fiscal deficits and issuance of treasury papers may cause UST yields to rise rapidly in 2010. End of quantitative easing Reinforced by the FOMC statement in November, we expect the Fed to continue with its already scheduled purchases, concluding purchases in 1Q10. Our baseline does not expect any further announcements of new purchasing programs, nor does it expect the Fed to alter the already announced amounts of purchases. The end of quantitative easing could result in higher bond yields in 2010. The mercury rising indicator We define a rapid adjustment in 10-year UST yields as a change in the yields that is greater than 2 standard deviations relative to the three-month moving average. We emphasize that this indicator does not identify market tops. Note that in March 2006 the indicator signaled a “sell”, and although three-month forward returns were -5% in EM equities, the MSCI EMF rallied a further 15% from March levels before peaking in May 2006. As a result, we interpret the signal as an early warning sign to begin reducing risk. We believe that emerging markets are susceptible to sharp corrections as volatility spikes in global markets. Our work on quantifying the relationship between the direction of US Treasury yields and EM equity returns suggests that the probability of such a correction in 2010 is high if UST yields rise rapidly and increases the risk of a rapid adjustment. We advise investors to monitor the pace of change in 10-year UST yields in 2010.

Figure 32: The mercury rising indicator – MSCI EM and UST # of standard deviations from three-month moving average
3 2 1 0 -1 -2 -3 Jan-04 MSCI EM (Log scale RHS) Jul-04 Jan-05 Jul-05 10 y r UST Yield # of SD relativ e to 3mma

Jan-06

Jul-06

Jan-07

Jul-07

Jan-08

Jul-08

Jan-09

Jul-09

Source: Bloomberg, MSCI, J.P. Morgan.

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Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

The manic-depressive's guide to the fiscal outlook
Originally from the GDW, 11 September 2009 The fiscal impetus from the economic stimulus package ramped up earlier this year. More recently, the overall flow of spending is starting to level off and, looking ahead a few quarters, spending will decline incrementally. This prospect has raised fears of a “double-dip” recession as the boost to growth from the stimulus turns into a drag. Given the most likely path for spending, these fears appear greatly overblown. The reason is that spending ramped up much more quickly than it will ramp down. As such, the drag from waning stimulus over the course of the next year should be relatively modest: By our calculations the drag should be less than 1% point on average. A more significant hit could come in early 2011, when not only do most of the stimulus measures come off, but some of the Bush-era tax cuts are set to expire. While that prospect poses downside risk to 2011, much political uncertainty remains regarding how much stimulus will roll off versus be renewed. While the likelihood of a stimulus-induced double-dip in 2010 looks comfortably low, the longer-term budget outlook remains uncomfortably perilous. We project that the federal budget deficit for FY2010 will come in at $1,350bn, an improvement from the $1,600bn projected for FY2009 but not a huge improvement given how terrible the backdrop was for the last fiscal year. Looking further ahead, the stream of deficits in either the administration’s or the CBO’s estimates looks very worrying. As bad as that is, estimates that also realistically incorporate current policies look terrifying. There have been episodes in the past when deficit projections looked awful—such as the early 1990s—but the outcome turned out better. That said, the challenges look much greater this time around and will require even more political will to be resolved. Stimulus so far Through September 4, $96bn of stimulus funds have been paid out, which is about 19% of the $500B allocated to spending measures. The bar chart presents our estimates of how much the stimulus has contributed, and will contribute, to overall growth. According to our estimates, the stimulus has contributed, or will contribute, about 2-3%-pts to GDP growth, on average, in each of the last three quarters of the year.
Figure 33: Estimated contribution of fiscal policy to GDP growth
4 3 2 1 0 -1 -2 -3 2009 2010 2011

Source: J.P. Morgan. % saar. Includes

After that, going into next year we expect that stimulus support will decline and subtract from GDP growth, on average in the magnitude of about 0.5%-pt per quarter. The growth rate drag in 2010 is expected to be smaller than the growth rate boost in 2009 because the stimulus spending should decline at a slower pace than it increased. That holds true at least until the beginning of 2011, at which point things get interesting. Currently, not only should much of the stimulus spending begin to dry up in 2011, but the Making Work Pay tax credit for lower-income households and the Bush-era tax cuts for upper-income households are both scheduled to expire at the beginning of 2011. Fiscal challenge for DM The deficit for the 2009 fiscal year is likely to come in a little under $1,600bn. We project a deficit for FY2010 of $1,350bn. Considering how dire the economic and financial situation was in the 2009 fiscal year, the improvement in 2010 does not look all that impressive. We do not have official deficit projections for years further out, though it is safe to project an incredibly gloomy fiscal outlook. Our best guess for FY2011 is a deficit of around $1,100bn—that is, after incorporating the expiration of the Bush tax cuts. (In the event, the expiration of upper-income Bush tax cuts should add about $30bn to FY2011 revenue). For years beyond 2011 the improvement in the deficits is likely to be only modest and nowhere near enough to bring the deficit anywhere close to balance. Over the next 10 years, even the administration’s assessment of the budget outlook sees the deficit never falling below $700bn, and the cumulative deficits over that period are projected to be $9tn. While the CBO has yet to update its estimate of the administration’s budget, when it does it will likely add $1tn to the administration’s 10-year deficit total. A similarly gloomy picture emerges from analysis conducted by the Committee for a Responsible Federal
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Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Budget, which realistically extends current policies— such as the AMT patch—to arrive at a $12.6tn 10-year deficit estimate. Another case in point is Japan. The latest OECD data (June 2009) showed that gross financial liabilities (debt) of Japan’s general government were 172% of GDP in 2008, and are expected to exceed 200% by 2010, by far the highest level among major countries One grim point should be noted to connect the comments earlier in this note to the immediately preceding discussion. As we noted regarding early 2011, even modest fiscal “restraint”— coming from a starting point of 11% of GDP deficits— will be a hit to economic growth. If, at some point, the political establishment shows the will to return the deficit to a more reasonable 2-3% of GDP, the cumulative drag of a fiscal rebalancing of up to 8% of GDP poses a long run cyclical drag; the implications of the political establishment not showing that will, however, is even more depressing. Fiscal Cushion in EM Public sector debt to GDP ratios in Emerging markets are much better developed markets. The public sector debt as a percent of GDP is the largest in Brazil and India among the emerging markets, and we expect it to be around 70% for Brazil and 46% for India in 2010. This makes for good comparison with the G3 countries where the public debt is as much as the GDP itself or even more. For more, see Key Trades and Risks, Mowat et al, October 21, 2009, and JGB challenge: Exploding public debt amid falling domestic saving, October 21, 2009.

Table 10: General Government Fiscal Deficit (% of GDP)
Fiscal Position 2008 2009 -2.6 -6.8 -3.1 -7.7 -3.2 -10.2 -6.0 -9.7 -2.0 -4.0 -5.9 -9.1 -0.8 -3.5 -0.6 -3.3 -1.3 -2.5 8.7 -4.5 -1.4 -3.0 -1.8 -3.9 2.4 -1.6 -1.4 -3.6 -0.5 -3.0 -5.0 -6.0 -6.5 -6.3 -1.3 -2.4 1.5 -2.0 -4.8 -7.0 -1.3 -1.5 5.0 -2.0 -1.2 -3.6 -2.5 -5.0 0.8 -3.6 -2.0 -5.0 -3.0 -2.6 -0.3 -3.0 -2.5 -3.2 5.7 -4.0 1.0 -3.8 -1.3 -2.3 Change 2008 to 2009 Cyclical Disc -2.5 -1.7 -2.9 -1.7 -5.0 -2.0 -1.7 -2.0 -1.0 -1.0 -1.6 -1.6 -1.3 -1.5 -1.7 -1.0 -0.9 -0.3 -10.6 -2.6 -1.6 0.0 -0.7 -1.4 -1.5 -2.5 -0.1 -2.1 -0.4 -2.1 2.0 -3.0 5.2 -5.0 -1.1 0.0 -2.4 -1.1 -1.0 -1.2 -0.2 0.0 -7.0 0.0 -1.8 -0.6 -1.1 -1.4 -3.8 -0.5 -3.0 0.0 0.4 0.0 -2.7 0.0 -0.7 0.0 -8.6 -1.1 -3.2 -1.6 -1.0 0.0 Public debt (% of GDP) 2010 F na na 227 na 82 na na 70 9 44 36 25 Na 20 Na 46 35 44 44 62 na na 39 na 38 80 na 53 7 38 50

Global Developed US1 Japan Euro area UK Emerging Latam Brazil Chile Colombia Mexico Peru Em Asia China2 Hong Kong India Indonesia Korea Malaysia Philippines Singapore Taiwan Thailand CEEMEA Czech Rep Hungary Israel Poland Russia South Africa Turkey

Source: J.P. Morgan economics 'Priming the Pump’, Lupton and Hensley, 13 February 09 1: Discretionary stimulus for the US only includes spending and tax measures related to boosting economic activity and not the measures being undertaken to support financial markets. Consequently, roughly $400bn of financial support is included as cyclical. 2: China’s widely announced stimulus plan amounted to roughly 7% of GDP in 2009. However, we only show the 30% of this, that is expected to be financed by the public sector.

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Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

South Africa - 2010 Soccer World Cup Winners
Figure 34 summarizes the average outperformance of equity market sectors relative to MSCI World in the previous three World Cups (earlier historical analysis constrained by data availability). IT, Telcos and Consumer Discretionary were the stand-out sector winners during previous World Cups. We expect similar benefits for these sectors in SA with MTN, in particular, appearing very well-placed given that it is the first African World Cup Sponsor, making it a direct beneficiary from increased sales and awareness. We expect accommodation, transportation, food, beverage, and leisure sectors to benefit from soccerrelated consumption. SABMiller, City Lodge, Sun International, Comair, 1Time, Naspers, Rainbow, Famous Brands and Imperial would be our top strategy picks in these sectors. A beneficiary in the banking sector is likely to be FirstRand given that it is an official sponsor and via the Visa link benefits from tapping into that customer base. Construction was an early beneficiary of the World Cup spending given the capex on new soccer stadiums, transport links etc, but much of this has largely occurred and we believe for this sector to be rejuvenated it requires new private sector capex to be forthcoming, in particular, new mining capex. Our favourite SA Soccer World Cup strategy picks include MTN, Vodacom, SABMiller, City Lodge, Sun International, Naspers, FirstRand, Rainbow, Famous Brands, Comair, 1Time, Imperial and Bidvest .

Figure 34: Hosting countries’ equity sector performance relative to MSCI World sectors

40 35 30 25 20 15 10 5 0

Health.Care

Utilities

Industrials

Cons.Stap.

Cons. Disc

Telecoms

Financials

Materials

IT

Source: MSCI, Datastream, J.P. Morgan calculations. Chart shows the % rel. performance versus MSCI World, six months in the run-up to World Cup

Table 11: SA Soccer World Cup strategy picks
MTN Vodacom SABMiller City Lodge Sun International Naspers FirstRand Rainbow Famous Brands Comair 1Time Imperial Bidvest Bloomberg Ticker MTN SJ VOD SJ SAB SJ CLH SJ SUI SJ NPN SJ FSR SJ RBW SJ FBR SJ COM SJ 1TM SJ IPL SJ BVT SJ Price 119.8 55.9 209.9 78.2 93.9 282.9 17.4 15.9 20.0 2.2 0.8 82.1 121.7 JPM Rec. OW Neutral Neutral NR NR OW OW Neutral NR NR NR NR NR Analyst Jean-Charles Lemardeley Jean-Charles Lemardeley Mike J. Gibbs Ziyad Joosub Mervin Naidoo Vikhyat Sharma -

Source: J.P. Morgan estimates. Note: JPMorgan does not have coverage of certain of the stocks in the leisure, air transport and industrial sectors as shown above. City Lodge, Sun International, Famous Brands, Comair, 1 Time, Imperial and Bidvest have been included in our list of top picks purely to reflect our positive stance on Soccer World Cup-related stocks. J.P. Morgan has no fundamental opinion on these companies.

Energy

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Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

None of these events reflect an official J.P. Morgan view; they are intended to stimulate discussion

Surprises for 2010
The US dollar strengthens. This is driven by the better-than-expected US growth. Initially, emerging equity markets and commodities decline as traders assume that the casual inverse relationship between EM equities and the DXY will dominate. The “new dollar funded” carry trade unwinds, adding to the sell-off. Eventually, as investors recognize that healthy US growth is good for equities, markets recover. And of course, the “old yen funded” carry trade is reinstated. The renminbi appreciates by more than 10%. Our base case is a very modest appreciation from Rmb/US$6.82 to 6.5 by end-10. A recovery in exports plus the move to positive inflation encourages Beijing to allow faster appreciation. Other Asian currencies rally more than the Rmb. This move combined with the increased use of Rmb in trade settlement is the start of the Asian renminbi block. MSCI announces that it will include China A-shares in standard indices. Initially, a limited investibility factor is applied. Assuming a 35% free-float in the Ashare market, China moves from 18% to 37% of MSCI EM. This event is destabilizing. Investors have the Hobson choice of needing to be ahead of large capital inflows but recognizing they are buying expensive stocks. Run on the Japanese yen and Japanese Government Bonds. International investors would require a risk premium to fund a country where public sector debt to GDP is 190% in 2009 (J.P. Morgan estimate) but for now, Japan’s excess savings are sufficient. In JGB challenge: exploding public debt amid falling domestic savings, Kanno et al, 21 October 2009, we estimate that assuming no major fiscal initiatives, demographic demands should push this ratio to 300% by 2019. Current demographic trend could push the savings rate to zero in five years. This, plus the strong yen hollowing out Japanese manufacturing, could require foreign savings to fill the gap. Today’s 10-year JGB yield of 1.34% is too low to attract foreign capital. Too many speculators drink at the commodity’s kool-aid fountain; commodity and energy prices rise choking off a fragile recovery. In contrast to above, commodity investors become frustrated with low financial returns due to the cost of roll (upward sloping future curves). This results in 2009 record inflows into energy and commodity funds reversing. Although the sharp fall in commodity and energy prices is unnerving, the resulting stimulus underpins the recovery. Developed economies property markets, after a relief rally, stagnate in real terms as better economic data drive up mortgage costs. EM FX bubble builds despite unconventional policies used to lean against the trend.

DXY strength…new carry trade unwinds

Rmb stronger than 6.5/US$

China 37% of EM

Run on JPY and JGB

Momentum of flows in commodity funds pushes up prices and chokes growth

Run on commodity funds

Don’t be too keen to return to property

EM FX momentum unstoppable

26

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Emerging Market Rates Outlook
Emerging Markets pass a stress test
Investing in EM assets has been a one-way bet over the past year. Across all asset classes (e.g., equities, sovereign credit, corporate credit and local markets), EM strongly outperformed (chart 1). Going into 2010, EM fundamental and financial markets outlook remain robust. EM is shedding its image as the most volatile asset class. The outperformance of EM fixed income in the midst of market turbulence in 2008 and the subsequent outperformance over the past year as the market recovered have resulted in a re-rating of EM risk. Even frontier EM countries have outperformed. With EM growth and yields well above developed markets, EM will continue to move into the mainstream as an asset class in 2010. We expect a first quarter rally as both EMBIG cashflows and strategic inflows from nontraditional investors are high. External demand for EM assets remains strong and we expect inflows into EM fixed income to reach $30-35bn in 2010 compared to only $18bn this year. Worldwide pension funds are starting from a position of close to zero allocation to Emerging Markets, and yet assets are more than $17bn. New and growing sources of inflows include high grade crossover investors, US pension and endowment allocations, sovereign wealth funds and Japanese retail allocations.
Figure 35: Asset class performance

Joyce ChangAC
(1-212) 834-4203 joyce.chang@jpmorgan.com J.P. Morgan Securities Inc., New York

surpassing that of the US. Indeed, over the past four years, EM contributed more to global GDP growth than the whole of developed markets. In 2010, EM growth will recover to 5.8%oya, with risks to the upside, while G-3 growth will remain below par at only 2.7%. We recommend overweight positions in EM credit (both sovereign and corporate) versus developed fixed income markets. We also expect EM local markets, as tracked in J.P. Morgan’s GBI-EM index, to generate double-digit returns next year. 2009 will be remembered as the year that EM carried the global economy, with EM consumption well surpassing that of the US. Indeed, over the past four years, EM contributed more to global GDP growth than the whole of developed markets. In 2010, EM growth will recover to 5.8%oya, with risks to the upside, while G-3 growth will remain below par at only 2.7%. We recommend overweight positions in EM credit (both sovereign and corporate) versus developed fixed income markets. We also expect EM local markets, as tracked in J.P. Morgan’s GBI-EM index, to generate double-digit returns next year.

EM valuations more compelling than US High Grade markets
Yields for the EMBIG have fallen to 6.49% (close to the record low of 6.34% reached in April 2007), but remain much higher than US investment grade yields (5.2%) and yields for the Barclay’s Global Aggregate index (3%). Other US fixed income asset classes will deliver near flat or negative returns for the full year 2010, assuming our preliminary spread and yield forecasts for 2010 are accurate. We expect EMBIG returns in 2010 to reach a maximum of 6.5% compared to 4.5% for US investment grade. We have been overweight the EMBIG for the past seven months and upgraded several smaller weighted EM countries in the benchmark index last week. In addition to our overweight recommendations in Dominican Republic, Indonesia, Mexico, and Russia, we upgraded Poland, Hungary, Jamaica, and Belize to Overweight. We downgraded high beta Venezuela to Marketweight from Overweight and maintained the overweight in Argentina but switch assets for relative value considerations.

Source: J.P. Morgan, 1-J.P. Morgan commodity total return index, 2-Barclays capital global aggregate

2009 will be remembered as the year that EM carried the global economy, with EM consumption well

27

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

EM sovereigns have already prefinanced one-third of the total $66bn EM sovereign financing needs. EM sovereign issuance for the year reached $71 billion last week. Note that five countries – Argentina, Poland, Russia, Turkey and Venezuela – account for nearly 50% of total EM sovereign issuance needs. Technicals for the EMBIG remain favorable as coupons and amortizations are also the highest in 1Q10, with cashflow of $21.5 billion to be put to work (chart 2). EM sovereign cash flows will total $56.4bn in 2010 versus $66.5bn in sovereign financing requirements.
Figure 36: EMBIG coupons and amortizations highest in 1Q10

Figure 37: EM local yields remain attractive

Source: J.P. Morgan.

Source: J.P. Morgan.

Shift the focus to local markets: GBI-EM returns to reach 12% in 2010
After a brief dip during the credit crisis, international demand for EM bond markets is growing again, particularly for high carry markets. The weak USD trend will persist next year and J.P. Morgan forecasts EUR/USD bottoming at 1.62 in mid-2010 before recovering to end the year at 1.50. The Fed is proving more comfortable with a zero rate environment than almost every other G-10 or EM central bank and the most recent balance of payments data indicate that the US is also suffering from a re-emergence of net FDI/M&A outflows and weaker equity inflows than other countries, highlighting that USD weakness is more than a simple carry trade.

We favor the higher carry currencies going into 2010 and recommend TRY, RUB, PLN and HUF in particular, as all are likely to deliver returns in excess of 15%. While FX intervention is likely to intensify in Asia and Latin America, CEEMEA countries are more focused on FX reserve accumulation. Brazil was the outperformer in 2009 (+25%), but the most attractive opportunities for 2010 are concentrated in the CEEMEA region. Appetite for local rates remains subdued due to the growing uncertainty about the timing and pace of monetary policy normalization. EM local markets debt returns (USD unhedged) break down roughly into half local rates returns and half FX returns. Our bottoms-up return forecast for the GBI-EM Global Diversified index, which is the leading EM local markets benchmark, is 12% in 2010.

EM Corporates likely to outperform EM sovereigns and US High Grade
The resilience shown by EM Corporates throughout the credit crisis has improved their profile amongst investors, with the asset class likely to garner a greater following as valuations in developed credit markets look increasingly expensive. Although the pace of the market’s recovery has brought us back to precrisis levels, we believe that there is still room for spreads to tighten and set a year-end 2010 target for the CEMBI Broad at 300bp versus 388bp at present. . There were notable casualties in 2009, with combined defaults and debt exchanges rising to 10.8% of the EM corporate high yield bond stock (compared with a par-weighted default rate of 10.96% and 16.24% including distressed exchanges in the US high yield market), many of the concerns that shaped expectations for a more serious

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Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

collapse and prolonged period of market weakness at the end of 2008—such as rising capital flight and mounting external refinancing risks in Russia, unhedged corporate derivative exposures in Brazil and Mexico, the downturn in and overheated real estate markets in China and Dubai respectively, and short-term FX funding needs in Korea—have come to pass without prompting broader systemic failures. At the aggregate level, we move EM Corporates as an asset class (CEMBI Broad) to Overweight relative to EM sovereigns (EMBIG) and US credit (JULI). At the regional level, we expect credits from Asia and Europe to contribute the lion’s share of the spread tightening followed by Latin America, while at the country level we still expect some of the more significant spread opportunities in higher beta countries such as Indonesia, India, Kazakhstan and Argentina, although note that these account for less than 6% of the corporate index. We believe that Russian corporate performance will be much more muted in 2010 despite the macro backdrop for Russia and the CIS, which is likely to be significantly improved as commodity prices recover. We do not believe that developments in Dubai will have a long-term impact on the EM quasi-sovereign sector outside of the Middle East region.

We project a total of 14 countries across EM regions tightening monetary policy next year, either by raising reserve requirements or interest rates. However, the still depressed size of the global pie is an obstacle to the relative adjustments that are needed and markets have arguably priced too much tightening in. Even after three quarters of expansion, EM export volumes stand about 10% below their previous peak. For China, which provided an important part of demand stimulus to lift the global economy, export volumes are still 20% below their peaks. It is in this context that Chinese authorities can justify their dollar peg. Other Asian export-intensive countries, in turn, maintain a tight leash on their currencies in order to limit the loss of competitiveness against China. A world in which US interest rates are likely to remain close to zero and the renminbi is held artificially low may serve domestic needs but is producing undesirable consequences and finger-pointing on a global level. The reluctance to lean too heavily on rate hikes has prompted EM policymakers to rely on other measures. EM foreign exchange reserves have increased by US$700 bn this year to reach US$4.2 trillion and some countries are actively managing bank reserve requirements. Brazil recently introduced a financial transactions tax (IOF) on portfolio inflows and other countries are shifting in a similar direction.

Economic recovery to prompt earlier tightening in EM during 2010
While the world needs accommodative policies, a onesize fits all policy stance is increasingly inappropriate as utilization rates are widely divergent despite a world generating synchronized above-trend growth. The most severe decline in employment by far has taken place in the US where utilization rates stand at historic lows. By contrast, our aggregate measure of EM utilization rates is close to its long-term norm (chart 3). In addition to the relatively modest loss of jobs in emerging market economies, this contrast reflects the very high EM utilization rates at the time the recession began. With policymakers having moved uniformly into aggressive easing mode at this time last year, a quicker move toward EM policy normalization is appropriate. Asset price inflation is also become a greater concern, particularly for EM Asia central bankers. Easy monetary conditions, high household savings rates, intact banking systems, and strong housing demand have led to sharp rebounds in residential real estate prices. The dollar carry trade is fueled both by low US rates and the understanding that Asian currencies are artificially low.

EM issuance to go further down the credit curve
The issuance outlook for 2010 remains biased towards investment grade bonds. In 2009, we estimate that 60% of issuance from EMBIG-eligible sovereign issuers came from investment grade credits. In net terms, we estimate that issuance year-to-date has been just below the fullyear coupons and amortizations by $1.7bn. However, we estimate investment grade net issuance at $6.0bn, contributing towards the upward drift in index rating. For 2010, we estimate gross EMBIG sovereign issuance at $66.5bn, with net issuance estimated at $14.4bn. Of this net issuance figure, we estimate investment grade net supply will reach $9.7bn, or 68% of the total, again contributing to upward ratings momentum. EM Corporates, mainly quasi-sovereigns, have issued $118bn this year—decisively breaking through our full year forecast of $103bn—concentrated in investment grade issuance. Rather than slowing down as the end of year approaches, supply remains extremely
29

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

strong with a record of over $23bn sold in the month of October, and 60% of total supply for the year issued since July. Deal sizes have averaged $720mn, substantially larger than previous averages of $380mn in 2008 and $371mn in 2007, as quasi-sovereign and investment grade corporates have dominated the new issue space. Of the $118bn issued this year, roughly 61% has come from the quasi-sovereign segment (including supranational banks), just under one-quarter from investment grade corporates, and the balance of around 15% from high yield corporates. We estimate that the EM corporate bond stock now stands at $589bn versus $529bn at the start of the year. Sovereign ratings downgrades were much lighter during the recent down cycle and thus ratings agencies have been less aggressive in upgrading countries since the financial storm has passed. Rating downgrades exceeded upgrades in 2008 and so far in 2009 for S&P and Moody’s, after eight years in a row in which the up moves exceeded the down ones. However, this will reverse again in 2010, when the number of upgrades is expected to be small but to exceed downgrades. Since 2008, the following sovereigns have been downgraded: El Salvador, Estonia, Hungary, Jamaica, Latvia, Lithuania, Mexico, Nigeria and Ukraine. However, a handful of EM countries have actually been upgraded, including Belize, Bolivia, Chile, Ecuador, Indonesia, Lebanon, Pakistan, Philippines, South Africa, Uruguay, and most notably Brazil. In contrast, the ratings cycle point to more downgrades in the developed market countries in the coming years. Indeed, using current and projected debt/GDP levels, the analysis of our global fixed income analysts finds that Spain, Ireland and Greece may suffer additional 1-2 notch downgrades by 2011.

inflows to Emerging Market dedicated funds have increased sharply from the end-April lows.
Figure 38: Cumulative flows to US real money funds has reached $18bn year-to-date, excluding fund flows from Japan
US$ 40 b 30 20 10 0 -10 -20 Jan Feb Mar Apr May Jun 2005
Source: J.P. Morgan.

Jul 2007

Aug Sep Oct Nov Dec 2008 2009

2006

EM fixed income inflows will catch up in 2010
We estimate cumulative inflows to EM debt real money funds at $17.8 billion so far this year, the majority of which has come from strategic allocations (chart 4). Next year, inflows should rebound to the $30-35bn range recorded in 2006-2008. Real money remains overweight as asset allocations increase, while hedge funds have not increased exposure. Indeed, in their 3Q09 update, Hedge Fund Research (HFR) noted that Emerging Market hedge fund assets increased to $86.5bn but only because of performance, with net flows virtually flat at -$37mn, bringing year-to-date net outflows to $8.9bn. By contrast,

Japanese demand for carry is strong and rising. Cumulative inflows from Japan to Emerging Market bonds over the past 5 years had reached $38bn, and has also been far more stable than similar inflows to EM bond funds in the US and Europe. The pattern of inflows from Japan has shifted significantly over the past few years. Earlier inflows were to EM hard currency bond funds, but these ceased in early 2008. Inflows to EM local currency bond funds started increasing more rapidly in mid-2007 and peaked in 3Q08, although they have started to grow again since mid-2009. Inflows to EM hard currency funds have now resumed, but only in EM FX overlay strategies in which the investor buys USDdenominated credit assets but the coupon is paid out in currencies ranging from AUD, to ZAR, TRY and BRL.

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Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Trading themes
Stay overweight the EMBIG versus US High Grade. EMBIG spreads to tighten to 250bp by end-2010, implying a total return of maximum 6.5% compared to only 4.5% for US High Grade and flat returns in other US fixed income markets. Position for a rally in 1Q10, when nearly 50% of EMBIG cashflows ($51.8bn) are generated. Strategic inflows into EM fixed income have reached $18bn so far in 2009 and may more than double next year with increased demand from non-traditional investors. We stay overweight Argentina, Belize, Dominican Republic, Hungary, Indonesia, Jamaica, Mexico, Poland and Russia sovereign debt. Overweight EM Corporates vs. both EM sovereigns and US High Grade We forecast the CEMBI Broad at 325bp versus 403bp currently, with the EM high yield corporate default rate to fall to 2.2% from an estimated 12.3% this year. EM Corporate credits from Asia and Emerging Europe offering the most attractive opportunities, while new issues continue to offer better liquidity than secondary market. While refinancing risk was clearly a concern last year, access to alternative sources of capital including local markets, has reduced this risk in a number of key markets. In 2010, we expect the default rate for the asset class to fall to 2.2% of the EM corporate high yield bond stock or just under 1% of the total bond stock. Shift the focus to local markets, with the GBI-EM return likely to reach 12% in 2010 EM FX appreciation will endure at least through 1H10 amid USD weakness. We favor the higher carry currencies going into 2010 and recommend TRY, RUB, PLN and HUF in particular, as all are likely to deliver returns in excess of 15%. EM Asia local yield curves likely to be higher and flatter by end-2010 Inflation and monetary policy are the big questions for Asia, not growth. It will be difficult to bring interest rates up as long as central banks resist fx appreciation. In addition, continued capital inflows are likely into Asian bonds as the growth differential between Asia and developed market economies expands further. Since some of these flows will be parked in local bonds, it is not clear that yield curves will immediately rise from here—at least not in 1H10. Only in 2Q10, when we expect it will become clear that Chinese tightening and/or fx appreciation is near, will we see curves meaningfully flatten across the region.

The economic recovery will see monetary stimulus removed across CEEMEA The central banks of Poland, South Africa, the Czech Republic, Turkey and Israel are expected to tighten policy in 2010. In Hungary and Russia currency appreciation is expected to result in further easing. However, the normalization of monetary policy should not prevent bond markets from delivering positive returns in 2010, as this unwind is already anticipated in bond prices. The divergence between fx-implied yields and local t-bill yields and the lack of concerns over capital controls suggests carry trades are better expressed in local instruments. Spreads are especially wide in 1year t-bills versus fx implied rates in Israel (195bp), Hungary (150bp) and Poland (130bp). Linkers offer best value in Latin America rates While central banks have been focusing on current goldilocks (the 4Q09 rebound has taken place amid low inflation) and in some cases even protest the tightening priced in by local yield curves, market participants have been wary of policy rate levels and fiscal policies that are turning increasingly pro-cyclical. The “low for long” message seems at odds with the fact that Latin countries are coming out of this recession with much tighter slack than G3 and in some cases already buoyant credit markets. We favor outright exposure through linkers across the region. They look especially cheap in Chile and Colombia. In Chile we recommend receiving 2Y UF outright. On the breakeven side, Mexico stands-out. We believe inflation is unlikely to move below 5% in 2010 due to the fiscal reform, and recommend buying 3Y B/E inflation through UDI-TIIE swaps

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Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Emerging Asia Economic outlook
EM Asia growth set to return to trend in 2010, but watch for choppiness After a traumatic entrance into 2009 that set the stage for a full-year growth performance (4.2%) well below the region’s potential, EM Asia is set to turn in a solid, trendlike year of growth in 2010. Indeed, if the J.P. Morgan forecast of US GDP growth reaching 3.5% is achieved, then there is upside risk to our forecast of 7.3% GDP growth in EM Asia next year. At the same time, developed market growth still poses a downside risk to EM Asian GDP as our region remains full-coupled to the fortunes of the US and the Euro Area, in particular. Domestic stimulus, including sizable monetary support, has clearly helped China and other key countries in the region recover quickly in 2009. However, it is exactly the concern over DM growth (with no bravado of de-coupling heard from Asian policymakers) that will ensure that stimulative policies are only gradually normalized in 2010. A useful reminder of the volatility of the GDP growth in EM Asia is playing out as we enter 2010 as the region rolls down after achieving extremely high growth in the middle of 2009. On the J.P. Morgan forecast, EM Asia is on track to slow down to about a 5% growth pace in 4Q after averaging over 11% in 2Q and 3Q. It is a clear possibility that some high beta economies such as Singapore actually contract in 4Q. So, while the growth recovery in EM Asia has been undeniably impressive, markets should tighten their safety belts as choppiness looks like could be a continuing theme going into 2010.
Figure 39: EM Asia—GDP growth
5 0 5 0 -5 0 2005 2006 2007 %q/q, saar 2008 2009 2010 oya Forecasts

David FernandezAC
(65) 6882-2461 david.g.fernandez@jpmorgan.com J.P. Morgan Securities Singapore Private Limited

Early policy normalization from India and Korea, but don’t get carried away Policymakers in China and the rest of EM Asia are still unlikely to make major adjustments to monetary policy in the near term. The Bank of Korea and the Reserve Bank of India have been leaders in signalling to the market that they will be willing to begin to normalize monetary conditions relatively early, with policy rate changes expected from both Korea and India in 1Q10. But the BoK MPC is also aware that the market has taken that message to heart and is pricing in 100-150bp of tightening over the next six months. Indonesia is another case where we believe the market has gotten ahead of itself. For 2010, Bank Indonesia believes that inflation will return to “normal levels in the 5±1% range” and importantly sees medium-term inflation declining toward 3% over time based on the strong commitment by BI and the government to fighting inflation. Clearly, this is not a central bank that wants to feed expectations of early tightening. Overall, be aware that the market can overshoot in its expectations of tightening, and we should expect Asian policymakers to tread carefully in sending such signals too strongly, especially early in 2010. The market is also keenly focused on China, but we similarly think expectations of policy changes there may be overdone. We think PBoC will move in stages, relying more on open market operations to withdraw excess liquidity, and combine that with sector-specific actions, like a partial withdrawal of the stimulus provided to real estate late last year, to contain the risk of an asset bubble and inflation. As for policy adjustment through the Rmb, China’s policymakers still view the 2010 economic recovery in developed markets, especially in the US, with a high degree of uncertainty. Over time, possibly by 2Q, they may take a view that global recovery is on a surer footing, with a turn to positive oya export growth from China being a concrete signal of such a turn. But, only when such confidence is achieved will the Rmb begin to resume a gradual appreciation trend. J.P. Morgan’s forecast is for Rmb/US$ to reach 6.5 by end-10, with the appreciation only taking on meaningful momentum by 2Q10.

Source: J.P. Morgan economics.

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Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

After dropping in 2009, EM Asia’s external surpluses stabilize For two consecutive years, EM Asia’s CA surpluses have dropped significantly. However, the global growth recovery and an expectation that oil prices will stay in a range of $70-90, should make 2010 a year of stabilization in the region’s CA surplus. In total, EM Asia is expected to run a CA surplus of 5.3% of GDP compared with 5.5% in 2009. Importantly, China’s surplus will stabilize as a share of GDP, meaning the absolute size of the surplus will rise by over $40 billion versus 2009. On the other side, Korea and Thailand are expected to see strong domestic growth which will push import growth higher than exports, resulting still in CA surpluses, but of a smaller magnitude.

Table 12: Asia—Current account balance forecasts
Japan Australia New Zealand Em Asia ex China and India China Hong Kong India Indonesia Korea Malaysia Philippines Singapore Thailand Taiwan 2007 212.739 -50.279 -19.289 518.596 164.643 371.833 25.527 -18.668 10.155 7.335 29.105 7.119 39.167 14.049 32.975 2008 158.867 -44.683 -11.706 489.034 114.292 404.905 30.623 -29.733 0.312 -5.292 38.722 4.227 22.878 -2.503 24.894 2009E 133.941 -41.780 -5.342 460.478 165.449 326.213 26.113 -31.195 6.094 38.463 32.576 5.852 14.105 12.912 29.345 2010E 115.677 -50.840 -9.591 468.875 141.090 368.346 25.863 -41.040 5.173 17.120 40.148 3.051 17.521 4.818 27.875

Source: J.P Morgan economics. Figures in US$ billions.

Except for south Asia, the rest of the region will again run significant CA surpluses. Combined with capital inflows from equity and fixed income, as well as FDI, we forecast regional FX reserves to rise another $350 billion in 2010. Global rebalancing certainly has a long way to go.

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Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

CEEMEA Differentiated Rebound
Energy Exporters to Shine J.P. Morgan forecasts that 2010 average CEEMEA growth will be 4.5% (at potential) given that a substantial amount of global de-leveraging has already occurred, a significant part of the global economy remains committed to fiscal stimulus, and global interest rates are forecast to remain low. Yet for 2010 we foresee great differentiation across countries, with only Russia, Qatar, and Nigeria predicted to grow faster than potential. Our 2010 growth forecast for Russia (5%) is well above consensus, and we see upside risks to that forecast given buoyant oil prices, sound macro management, declining interest rates, and an anticipated revival in consumption. For Turkey, our forecast of 5% growth is based on our belief that an IMF agreement will be reached by early 2010, allowing the authorities to avoid crowding out the private sector. Even though the South African consumer will remain under pressure until well into 2010, better external conditions, an inventory rebound and the 2010 FIFA World Cup are likely to produce 3% growth by our estimates. Recent GDP data showed that countries with IMFimposed fiscal restraints and a large share of fx borrowing - Hungary and Romania - remained in recession in the past quarter, although the pace of their output contraction eased. The magnitude of fiscal tightening has been by far the greatest in Hungary - the main reason for its underperformance. The recovery in the rest of Central Europe has been much more closely aligned with the Euro area cycle as these countries have been able to implement modest fiscal stimulus and were much less exposed to fx borrowing. We predict 2011 growth will be even stronger than in 2010 across most of the region, with even Hungary and Romania returning to an acceptable pace of expansion. Upside risks to our 2011 forecasts are related to interest rates remaining low for even longer than we forecast and to potentially higher commodity prices than we are incorporating (for example, we assume oil prices will be 11% higher than the 2009 average in 2010 and 21% higher in 2011). Downside risks include increasing capital controls and protectionism. Other 2010 CEEMEA indicators are mostly reassuring. Inflation remains within acceptable limits in most
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Michael MarreseAC
(1-212) 834-4876 michael.marrese@jpmorgan.com J.P. Morgan Securities Inc

countries. Current-account balances are moving into surpluses for most energy exporters, except for comfortably financeable deficits in Nigeria and Egypt. Only in Romania do we forecast a rapidly widening current account deficit. There is fiscal consolidation across all CEEMEA countries because revenue performance is set to improve and the size of fiscal stimulus packages is declining.
Table 13: CEEMEA GDP growth forecasts
Real GDP (%) Czech Rep Egypt** Hungary Israel Kazakhstan Nigeria Poland Qatar Romania Russia South Africa Turkey UAE Ukraine CEEMEA* 2009 -4.0 4.7 -6.5 0.0 0.3 2.8 1.7 10.0 -6.0 -8.5 -2.0 -5.3 0.3 -15.2 -3.8 2010 2.5 5.0 1.0 3.0 2.0 9.6 3.2 22.0 2.0 5.0 3.0 5.0 2.9 3.0 4.5 2011 4.0 5.5 4.0 4.5 2.8 8.0 4.0 14.6 5.0 5.0 3.5 5.5 4.2 5.0 5.0 Potential GDP Growth 4.0 6.0 3.5 4.0 7.0 8.0 4.5 4.6 5.0 4.0 3.2 5.5 3.5 4.5 4.6

Source: National statistics offices and J.P. Morgan estimates *Weighted average; **Fiscal year

Table 14: CEEMEA Macro 2010 Forecasts
CA Balance Fiscal Balance Public debt % of GDP % of GDP % of GDP -2.5 -4.0 37.8 -3.1 -8.5 78.0 -2.0 -3.8 80.5 2.0 -4.0 84.0 6.2 0.0 10.4 -3.0 -0.3 12.0 -2.8 -5.5 53.5 42.1 15.8 6.2 -6.5 -7.0 24.5 4.0 -5.6 7.4 -4.8 -6.2 37.9 -2.6 0.9 51.4 10.6 8.6 16.4 -0.9 -6.2 43.0 1.3 -3.1 33.7 CPI %eop 3.2 15.3 3.0 3.4 8.0 8.1 2.5 4.5 6.0 7.5 4.9 5.1 4.2 15.8 6.2

Czech Rep Egypt** Hungary Israel Kazakhstan Nigeria Poland Qatar*** Romania Russia South Africa Turkey UAE Ukraine CEEMEA*

Source: National statistics offices and J.P. Morgan estimates *Weighted average; **Fiscal year; *** Inflation is average not eop

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Brazil: Monetary policy normalization in sight
• Reduced economic slack and expansionary fiscal policies to trigger early normalization in rates • New measures to lean against BRL strength are likely • Hold positive carry DVO1 neutral exposure

Fabio Akira HashizumeAC
(55-11) 3048-3634 Fabio.Akira@jpmorgan.com Banco J.P. Morgan S.A.

tightening cycle of 200bp in 2010, with most of the hikes implemented in the first half of next year. The unbalanced policy mix is conducive to further appreciation—and further FX intervention. The likely combination of an expansionary fiscal policy, higher interest rates, and global USD weakness supports a stronger BRL. In turn, this is likely to trigger a new round of ad hoc measures to curb currency appreciation. Much like the 2% IOF tax on foreign capital inflows of last month, we believe new measures will produce noise, but will not be able to contain BRL strength driven by a global trend of USD weakness. Thus, we could see the USD/BRL as low as 1.60 during the first half of 2010. However, in the second half, when our global FX strategists anticipate a reversion in the weak USD trend, and Brazil’s current account deficit will be heading to a level above 3.0% of GDP, we believe BRL could start to depreciate, ending the year at 1.75 against USD. Presidential elections are important to clarify fiscal policy beyond 2010. In October, Brazilians will go to the polls to elect a new president, after eight years of the Lula administration. We think a large shift in economic policy is unlikely, but the leading contenders have not yet unveiled their ideas on this front. What is becoming increasingly necessary, is a fiscal adjustment at the beginning of the next administration, given the pace of deterioration of fiscal accounts in recent months, and the prospects for next year.

Fundamentals and politics in 2010
Brazil enjoyed a non-inflationary economic recovery in 2009. After facing the sharpest recession of its recent history, Brazil’s economy printed an impressive 7.8%q/q (saar) growth rate in 2Q09. Encouragingly, the economic data flow thereafter is indicating that the slowdown, if any, in the second half of this year will be just marginal. Thus, Brazil stands out as one of the few countries registering positive growth rates already this year (0.3%), and the risk to our 5.0% forecast for 2010 is becoming biased to the upside. The pillar of this year’s recovery has been household consumption—supported by a strong labor market, fiscal and quasi-fiscal stimuli, and an early revival in credit markets. Although consumption will remain upbeat next year, we think the main driver of next year’s GDP will be a rebound in capital formation. So far, huge economic slack at the beginning of the year along with the exchange rate appreciation has supported strong activity indicators without stoking inflation. IPCA inflation should end 2009 at 4.3%, down from 5.9% in 2008, but we see increasing inflation risks for 2010. Emerging inflation risks will require early policy normalization in 2010. The side effect of a faster-than anticipated recovery has been a tightening of all measures of economic slack: among others, the unemployment rate is close to historical lows, and the manufacturing utilization rate is already above its longterm average. This suggests that some degree of normalization in the current stimulative stance of fiscal and monetary policies is necessary to reduce prospective inflationary risks. However, 2010 is an election year and thus fiscal policy is unlikely to adjust in the near term. In fact, fiscal authorities are signaling that next year’s 3.3% of GDP target for the primary surplus will be downgraded to accommodate the generous expenditure side of the 2010 budget in the face of underperforming tax revenues. This places the burden of anti-inflation policy on monetary authorities, and we forecast a

Market strategy
In FX, buy (1x2) 2-month 1.734 USD put/BRL call spread (1.734;1.662): Entered October 23 at 190bp cost. In rates, receive Jan’13 versus pay Jan’15 (DV01 neutral steepener): Entered November 20 at 43bp. Favor NTNF ’17 over BRL Global ’16: Entered June 26 at 207bp. Receive Jan’13 versus pay Jan’12 and Jan’14 (1x2x1 fly): Entered October 23 at 40bp. Target: 15bp; stop: 55bp.

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Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Russia: Recovering from deep recession
• Russia’s GDP expected to grow 5% in 2010 • BoP to be supportive for ruble strengthening • Despite gradual fiscal consolidation, Russia is likely to issue US$9 billion of Eurobonds next year

Anatoliy ShalAC
7(495) 937-7321 anatoliy.a.shal@jpmorgan.com J.P. Morgan Bank International LLC

capital inflows may well bring net flows closer to breakeven. Gradual fiscal consolidation and higher oil prices are unlikely to prevent Russia from issuing US$9 billion of Eurobonds in 2010 and a similar amount in 2011. With Urals at US$68/bbl, we see Russia’s federal budget deficit at 5.6% of GDP next year, a small improvement from just above 6% expected in 2009. This reduction is likely to come from measures to contain spending and higher tax collection from the non-oil sector. That said, despite higher oil prices, the budget’s oil revenues are likely to shrink as a percentage of GDP due to a stronger ruble. As a result, the non-oil fiscal gap, which better describes the fiscal position of an oil economy, may shrink more than the headline deficit from -14.1% in 2009 to -12.8% in 2010 and -10.2% in 2011. Despite these improvements, we expect that Russia’s financing needs will remain high and will be only partially covered by use of oil savings. In 2010, Russia may need to borrow up to US$20 billion on domestic and US$9 billion on Eurobond markets, we estimate.

Fundamentals and politics in 2010
We expect Russia’s economy to expand annually 5% in 2010 and 2011, recovering from the deep recession of 2008-2009, when the peak to trough GDP decline exceeded 12%. With the initial impulse received from net exports and higher commodity prices, the economy will, however, need to find a stronger 2010 underpinning for domestic demand (which in 2009 has been weak). Both consumption and investment are likely to be supported by spillover effects from higher oil revenues, improving confidence, and easing financial conditions. The corporate sector is expected to enjoy better access to external financing, while domestic banks, after a sharp phase of deleveraging (the loan to deposit ratio dropped from 1.13 to 1.00 during January – September 09), are expected to restart lending from early 2010. The renewed buildup of reserves by the CBR and external financing of fiscal deficits by MinFin are expected to keep domestic liquidity abundant. Disinflation is expected to continue through 1H10, despite increasing money supply and lower policy rates. As the amount of slack in the economy remains high—the negative output gap of around 5% of potential GDP is expected to close slowly in coming years—while the ruble is strengthening, core inflation will keep slowing. Supported by higher commodity prices, the balance of payments is expected to exhibit a large surplus next year. The current account is projected to be 4% of GDP in 2010, down from an estimated 4.8% in 2009. Although export revenues will rise on higher oil prices (Urals up from US$59 to US$68/bbl in 2010), this will be offset by growing imports, which are expected to recover on the back of a strengthening ruble and domestic demand. We also conservatively assume that net private capital outflows could moderate from around US$40 billion in 2009 to US$20 billion in 2010. However, should oil prices surprise on the upside or the CBR be too rigid in exchange rate and interest rate policies, speculative

Market strategy
Stay overweight in EMBIG: We expect Russia’s new Eurobonds to be SEC-registered, which may be followed by SEC registration of existing ’18s, ’28s, and ’30s notes. This should trigger inclusion of those bonds in the Barclays Capital US Aggregate Index, and attract a new client pool to purchase Russian SEC-registered issues. We recommend short USD/RUB for 2010: The prospect of further dollar weakness and higher commodity prices bodes well for RUB in 2010. Further, as growth recovers and reserves return to a more comfortable level, the CBR is expected to scale back its intervention and allow faster appreciation. We target USD/RUB 26.5 and 33 versus the basket by end-2010. We recommend long 4-year OFZs: While supply is increasing, the CBR continues to provide liquidity to the banking system to support issuance, while encouraging banks to increase the quality of balance sheet assets, indicating a bias to support government debt supply.

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Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

India: RBI to focus on financial stability
• Industry derives strength from increased festive demand; capital goods expansion is welcome • Mixed external trade signals suggest the recovery is still not secure • RBI to be on guard against shift in inflation expectations; tightening likely in 1Q10

Jahangir AzizAC
(9122) 6157-3385 jahangir.x.aziz@jpmorgan.com J.P. Morgan India Private Limited

Fundamentals and politics in 2010
Industrial activity strengthened in September supported by festive demand. But October Markit manufacturing PMI declined to 55 due to destocking after the festivals. In details, IP strengthened as total production grew a healthy 1.1%m/m (sa), to be up a robust 9.1%oya. With this, the average for the first half of FY10 improved to 6.5%oya from 5.0% in the first half of FY09. September production derived support from capital goods (7.5%m/m, sa) and consumer durables (4.3%). Continued strength in motor vehicle sales and increased production of white goods to meet festival demand also likely boosted total output. On a year-ago basis, IP growth is expected to print relatively strong numbers in the second half of FY10, largely supported by a very low base from the abysmally weak growth last year. Merchandise trade data continue to show mixed signs of revival. The trade deficit narrowed to US$7.8 billion in September from US$8.3 billion in August. A modest gain in exports (1.6%m/m, sa) together with a contraction in imports (-5.6%) helped narrow the trade gap. With this, the trade deficit for the first half of FY10 stood at US$46.7 billion versus US$76.0 billion in first half of FY09. Sequentially, exports expanded for the sixth consecutive month. However, the year-ago comparison continued to contract (-13.8%oya), weighed down by last year’s high base. Imports contracted for the ninth consecutive month (-31.3%oya). Still-weak exports together with sluggish nonoil imports suggest that the pace of economic revival is not yet secure. Upside pressure from food prices is likely to ease, but year-ago prints to rise on a fading favorable base effect. October inflation declined 0.2%m/m (sa) to be up 1.34% on a year-ago basis. The fall in overall inflation was largely driven by the dip in prices of primary articles. Importantly, the food index, as well as the overall index sequentially declined for the first time since

February this year. A muted pace of core inflation (0.0%m/m, sa) suggests that demand-side pressures remain weak. The upward pressure on food prices is likely to ease as the heightened festive demand declines. Expectations of an improved winter crop will also help alleviate the pressure. However, a rise in global commodity prices will be critical in determining the impact on overall prices. On headline inflation, with the high base effect expected to fade, the year-ago prints will likely increase. We expect the year-ago print to be around 7.5% by end-March 2010. On policy, increased focus on financial stability would keep the RBI on guard against material shifts in inflation expectations. Even if core inflation remains benign, we expect that fears of easy liquidity spawning potential asset price bubbles could prompt the central bank to tighten. In October, RBI withdrew unconventional measures that were deemed no longer necessary with improving domestic and financial markets. We expect that the tightening will likely be initiated by a 50bp hike in the cash reserve ratio followed by 25bp hikes in the policy rates in 1Q10 and 2Q10.

Market strategy
In FX, we recommended holding on to USD/INR shorts, entered at 46.95, and target 45 by December: The push toward a stronger INR continues as risk sentiment improves and capital flows continue to be strong. Offshore parties have driven the INR rally so far. Onshore exporters have yet to position and retain the key to the next down move, which will depend on the timing of the introduction of economic reform bills in Parliament. In rates, we are bullish on 5-year bonds, but neutral on OIS swaps: Yields are at one-year highs, as the G-sec calendar is coming to an end in January, and as loan growth remains anemic. However, the 1-year swap has dropped into the LAF corridor, so further downside is limited. Meanwhile, we are not keen to pay as negative carry is extremely steep.

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Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

China: Recovery despite policy fine-tuning
• Exports, consumption, and housing should be key growth drivers in 2H09 and 2010 • CPI and PPI on recovering trend, but sequential trend rose at a slower pace in October • Major near-term monetary policy shift unlikely; central bank focus is on managing excess liquidity

Grace NgAC
(852) 2800-7002 grace.h.ng@jpmorgan.com JPMorgan Chase Bank, N.A., Hong Kong

the PPI front picked up strongly during 3Q, it has eased going into 4Q. If this trend continues, it should further calm inflation concerns going into next year. It will be important to monitor the authorities’ macro policy tone, especially in the run-up to the annual central economic work summit to be held early next month. On monetary policy, we expect the PBoC to normalize overall monetary conditions in stages, relying on open market operations to withdraw excess liquidity in the near term, combined with sector-specific actions like a partial withdrawal of the stimulus provided to real estate to contain the risk of an asset bubble and inflation. We expect the benchmark policy rates to start rising by mid-2010, with a total of two 27bp hikes over the rest of next year. On the currency front, the PBoC’s latest tone hints at greater flexibility in the exchange rate, which would likely begin sometime in 2Q10 in our view, when over-year-ago export growth resumes and when officials are convinced the global recovery is on a sure footing. Our forecast is for CNY/USD to reach 6.5 by end-2010.

Fundamentals and politics in 2010
China’s economy continued to record a solid pace of recovery in 3Q09, rising at 8.9%oya. In seasonally adjusted terms, we calculate that real GDP rose 10.0%q/q (saar) in 3Q, easing modestly from the 14.8% spike in 2Q. October data confirmed that the Chinese economy’s upbeat momentum continued into 4Q, adding to the strong gain in activity seen in September. The latest data also support our view that the major sources of growth in the Chinese economy have been broadening from public investment to include consumption, private investment, and the steady recovery in exports. We expect the economy to continue to grow solidly in the coming quarters. On the back of the 3Q GDP report, we have fine-tuned the 2009 full-year GDP growth forecast to 8.6% (previous forecast: 8.4%), while keeping the 2010 GDP growth forecast at 9.5%. Continuing with the theme of broadening sources of growth, we expect the key growth drivers to include a solid recovery in exports. Our global team is looking for a sustained, synchronized expansion of the global economy through 2010. As such, net external trade, which had been a significant drag on China’s overall growth since late last year, would likely come back to contribute positively to GDP growth again. On the domestic front, we look for a broad-based pickup in private consumption, along with improving labor markets and hence household income, on top of further fiscal stimulus, and marked expansion in private housing investment as well as other private sector investment. Encouragingly, the growth-inflation balance improved somewhat in October, with notable easing in the pace of the sequential gain in food prices and PPI. October headline CPI fell 0.5%oya, translating into a slower pace of monthly gain of 0.2%m/m, compared to 0.3%m/m and 0.4% in September and August, respectively, which in turn reflects the slower pace of the rise in food prices. While pipeline inflation pressure from
38

Market strategy
In FX, we remain short USD/CNY via the longerdated 12-month NDFs: Policymakers should tighten into 2010 as growth and exports settle into a more sustainable pattern. The NDF dollar discount and negative carry to short USD/CNY widened during President Obama’s recent official visit to China, but we view this pre-positioning as overdone, and would look to build short USD/CNY positions should the NDFs pull back. In interest rate markets, we stay with our recommendation of a 1s/5s steepening trade on the ND-OIS swap curve: Liquidity will remain flush until the RRR is hiked (likely in 2Q) as ongoing open market operation withdrawals are not strong enough to fully sterilize FX inflows. Meanwhile, the long end of the curve will suffer as upbeat growth is priced into the 5year sector.

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

South Africa: A slow recovery is in store
• The consumer will remain under pressure until well into 2010 • Inflation pressures will continue to ease and the output gap will allow rates to stay low • The political outlook is settled, but pressures for higher spending will persist

Graham StockAC
(44-20) 7777-3430 graham.stock@jpmorgan.com JPMorgan Chase Bank N.A, London Branch

Fundamentals and politics in 2010
The South African economy has suffered given the global contraction. We estimate that domestic economic activity only just turned positive last quarter. Monthly economic activity reports have revealed fewer signs of a recovery in consumer spending than in other countries. While the drags from sticky inflation and labor market uncertainty should fade as 2010 progresses, the drop in household wealth and restricted access to credit will likely dampen expenditure growth relative to growth in disposable income until late in the year. A bounce is on the way. Despite lackluster consumer spending, we think the improvement in external demand and easing in inventory reduction is set to boost GDP, helping to lift the economy out of recession. We believe that the inventory drawdown in the first half of 2009 has created the scope for a bounce when the cycle finally turns, and we expect economic growth of 3% in 2010. The banking sector has weathered the crisis in better shape than its counterparts elsewhere, which will help to underpin the recovery. We estimate the 2010 FIFA World Cup will add around 0.4%-pts to GDP next year. The downward trend in inflation will likely be interrupted by base effects at the start of 2010. The significant output gap, fading supply shocks in food inflation, and pass-through from rand strength since March should all sustain the ongoing moderation in headline inflation, which fell to 6.1%oya in September. Base effects from sharp declines in food and fuel prices at end-2008 will delay re-entry into the 3-6% target band until the first quarter of 2010, but headline inflation will hold close to the midpoint through much of the year. Although electricity tariff hikes of up to 45% pose the main threat to the inflation outlook, we think the large output gap and moderate pace of recovery will encourage the SARB to keep rates on hold at 7% until late in 2010.

The current account adjustment should fade steadily as domestic demand recovers. The slowdown in domestic activity and lower dividend outflows should bring the current account deficit down to 4.7% of GDP this year. We expect a similar level in 2010 as household consumption expenditure lags the recovery. Financing for the deficit remains comfortable, thanks to buoyant portfolio, FDI, and public sector borrowing inflows. President Zuma assumed office in April 2009 and the ANC’s dominance remains intact. Nevertheless, slow growth and heavy job losses are likely to fuel social pressures and criticism of the government from within the ANC and its alliance partners. The government has not engaged in active fiscal stimulus beyond allowing the deficit to widen due to the weak revenue performance and pushing ahead with existing infrastructure investment plans. The consolidated 2009/10 fiscal year budget deficit is expected to widen to around 7.5% of GDP, taking the public sector borrowing requirement to 12% of GDP as the parastatals maintain their investment programs. We are encouraged by the expenditure discipline shown in the Medium-Term Budget Policy Statement, and expect the government to be marketfriendly.

Market strategy
Marketweight external debt: Net 2010 issuance of US$2 billion will be absorbed easily, but we think South Africa will remain vulnerable to any global downturn. In local rates, we recommend overweight positions for 2010. International and local investors are closing out their underweight positions. Bonds should benefit from lower inflation expectations and high local yields should be attractive for carry-focused investors. Supply from national government and parastatal issuers is a concern, but the high yields compensate adequately for this factor. We are neutral USD/ZAR for 2010: The early resumption of equity portfolio flows and a narrowing of the current account deficit resulted in a strong ZAR performance in 2009. At a grassroots level, opposition to ZAR appreciation has increased and, in our view, there is a risk that some controls are imposed on inflows. Therefore, with the SARB once again accumulating reserves, we project 7.40 in USD/ZAR at end-2010, broadly unchanged.
39

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Emerging Markets Corporate Outlook - 2010
The resilience shown by EM corporates throughout the credit crisis has improved their profile among investors, with the asset class likely to garner a greater following as valuations in developed credit markets look increasingly expensive. Although there were notable casualties in 2009, with combined defaults and debt exchanges rising to 12.3% of the EM corporate high yield bond stock (compared with a par-weighted default rate of 16.24% including distressed exchanges in the US high yield market), many of the concerns that shaped expectations for a more serious collapse and prolonged period of market weakness at the end of 2008—such as rising capital flight and mounting external refinancing risks in Russia, unhedged corporate derivative exposures in Brazil and Mexico, the downturn in China’s real estate market, and short-term FX funding needs in Korea—have come to pass without prompting broader systemic failures. Of particular note was the generally proactive and targeted response of governments in respective markets to provide financial support packages to ease financial stress in the corporate sector. The one exception was of course Dubai, which decided recently to call a standstill on the debt of its largest stateowned entity, Dubai World and its property subsidiary Nakheel. Looking to 2010, we remain constructive on EM corporates as an asset class despite this year’s stellar performance. Although the pace of the market’s recovery has brought us back to pre-crisis levels, we believe that there is still room for spreads to tighten toward our 2010 year-end target of 325bp for the CEMBI Broad versus 403bp as of November 30, 2009. We do not expect the recent Dubai event to have a long-lasting impact on EM corporate valuations outside of the Middle East region and see this spread compression next year driven by stable yields and rising interest rates, based on the core assumption that the shape of the global recovery will remain robust and technicals generally supportive. We also note that the EM corporate indices have rebalanced toward higher-quality assets over the course of 2009, given the bias of new issuance this year. With over 80% of new issuance coming from investment grade credits (versus an overall debt stock that is 69% investment grade), there has been an associated tightening in index spreads. We caution that our year-end point target is unlikely to be reached in a straight line as market volatility returns in an intensifying debate over the pace at which monetary policies are normalized globally.
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Warren MarAC
(1-212) 834-4274 warren.j.mar@jpmorgan.com J.P. Morgan Securities Inc.

Our strategy for 2010 recognizes that yields have retraced to historical lows and spreads to levels closer to long-run averages, and that tighter valuations will need to be driven much more by relative value considerations. At the aggregate level, we move EM corporates as an asset class (CEMBI Broad) to Overweight relative to EM sovereigns (EMBIG) and US credit (JULI). At the regional level, we expect credits from Asia and Europe to contribute the lion’s share of the spread tightening, followed by Latin America, while at the country level we still expect some of the more significant spread opportunities to be in the higher-beta countries such as Indonesia, India, Kazakhstan, and Argentina, although note that these account for less than 6% of the corporate index. We believe that Russian corporate performance will be more muted in 2010 despite the improved macro backdrop as commodity prices recover. Looking into the first quarter of 2010, we are likely to continue to favor new issues for adding risk, with supply expected to reach around US$128bn. New issues in our view are most likely to offer investors the best avenue for adding meaningful positions with secondary market liquidity expected to remain constrained. Looking out over the first half of 2010, we favor a more active approach to rotating out of lowerbeta credits and into higher-beta opportunities in order to enhance overall returns (premised on credit fundamentals continuing to show sequential improvements) and selectively taking profits in names that were the first to benefit from the market’s recovery, and where technicals have clearly contributed to pushing prices beyond fair value.
Table 15: Key forecasts
Current/year-todate (as of November 30, 2009 403 118,166 41,693 20,283 38,313 17,877 12.3 11.0 18.4 5.9 4.4 2010 Direction/mar targets ket impact and forecasts) 325 ↓; positive 127,500 ↑; neutral 45,000 30,000 42,500 10,000 2.2 2.4 2.1 2.0 2.9

CEMBI Broad (SOT) EM corporate supply (US$ millions) Asia Emerging Europe Latin America Middle East and Africa EM corporate defaults (%)1 Asia Emerging Europe Latin America Middle East and Africa

↓; positive

Source: J.P. Morgan 1. Current year-to-date and 2010 default rates calculated as a percentage of Total Bond Stock as of December 31, 2008, and October 30, 2009, respectively and assumes that Nakheel defaults in 2009.

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Given the foregoing, we have identified three different sets of recommendations: High-conviction trades: driven by a particular event or expectations for an individual credit; High-beta recommendations: based on an assumption that market fundamentals and technicals remain supportive of an aggressive strategy; and Low-beta recommendations: based on an assumption that market conditions deteriorate, suggesting more defensive positioning. The high conviction trades are summarized in the table below, but for the extended table of high and low beta recommendations please see our detailed report ‘Emerging Markets Corporate Strategy and Outlook for 2010’ dated November 23rd.
Table 16: High-Conviction Buy Recommendations
Issue Chinatrust UT2 5.625% call 2015 DBS FRN call 2016 ICICI 6.375% call 2017 Henderson Land 5.5% 2019 Korea Hydro 6.25% 2014 BUMA 11.75% 2014 Ticker, rating CHIFIN, Baa1/BBB/ADBSSP, Aa2/A+/A+ ICICI Baa3/BB/BB HENLND, NR/NR/NR KOHNPW, A2/A/A+ PTBMMU, Ba3/NR/BBCLPKIJ, B2/NR/BBLIPPO, B1/B/B+ LAIFNG, B1/B+/NR PAITON, B1/B/NR Region Asia Asia Asia Asia Asia Asia Z-spread/ price 600bp DM+261bp 535bp 260bp 199bp 942bp Rationale After raising US$1 billion of equity, concerns over asset quality drag should be eased. FRNs remain chronically cheap, but we like the prospects for longer-duration FRNs to trade up as and when US rates shift higher. High-quality bank is defensive in downturns. One of the highest-yielding bonds in Asia, with reassurance from dated structure. September earnings demonstrate bank is shifting to more defensive franchise, which we believe spreads do not yet reflect. Offers best value in the HK property space, in our view. Currently trades 6065bp wider than Swire, but we believe the fair value is just 20bp wider. Lack of ratings has been a key overhang on performance. Our top pick in the Korean quasi-sovereign corporate land. Though supply in the space could continue to be an overhang in the near term, taking a mediumterm view, we see value in these bonds. We like this as a short- to medium-term play. BUMA is Indonesia’s secondlargest coal mining contractor, with almost all the major miners as its customers. In our view, one of the few better-quality HY corporates yielding in double digits. Short-dated bond with decent carry. Expect company to successfully refinance/ exchange with the capital markets now open. Also sitting on high cash balance. Self-sustaining operations even at CPO prices of US$450/ton (versus ytd average of around US$600/ton). Stable recurrent income from hotels and hospitals portfolio provides a cushion in the current downturn. Has lower structural subordination risks compared to China property counterparts. Benefits from a portfolio of investment properties that provides stable rental income that helps to fund working capital needs. Indonesian IPP with PLN as sole off-taker. Bonds have sinking fund provision, which reduces average life to around 2.3 years. We believe there are sufficient protective mechanisms in place for the existing lenders before the company starts raising debt for the new plant. Among the cheapest Gazprom bonds on the curve, like 52bp pickup to 8.125% ’14s. The negative basis of -195bp to 5-year GAZPRU CDS also looks attractive. The cheapest of Russian quasi-sovereigns; expect the company’s credit profile to improve further in 2010. We believe that Alliance offers the best upside potential amongst the distressed Kazakh names. We see restructuring well advanced and deal risk low. A full subsidiary of Italy’s Unicredito, ATF is well provisioned and well capitalized and likely to further gain market share in 2010. Good outright value and cheap to ’16s.

Ciliandra 10.75% 2011

Asia

736bp

Lippo Karawaci 8.875% 2011 Lai Fung 9.125% 2014 Paiton 9.34% 2014

Asia Asia Asia

893bp 857bp 647bp

Gazprom 10.5% 2014 Alrosa 8.875% 2014 Alliance Bank 9.25% 2013 ATF 9.25% 2012

GAZPRU, Baa1/NR/NR ALROSA, Ba3/NR/B ALLIBK, C/SDRD ATFBP, Ba3/B/B-

CEEMEA CEEMEA CEEMEA CEEMEA

436bp 602bp US$29.5 731bp

Pricing as of November 12, 2009. Source: J.P. Morgan.

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Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Economics Forecasts
GDP and CPI growth forecasts
Real GDP % over a year ago 2008 2009E 2010E The Americas United States Canada Latin America Argentina Brazil Chile Colombia Ecuador Mexico Peru Venezuela Asia/Pacific Japan Australia New Zealand Asia ex Japan China Hong Kong India Indonesia Korea Malaysia Philippines Singapore Taiwan Thailand Africa/Middle East Israel South Africa Europe Euro area Germany France Italy Norway Sweden Switzerland United Kingdom Emerging Europe Czech Republic Hungary Poland Romania Russia Turkey Global Developed markets Emerging markets 0.4 0.4 3.8 6.8 5.1 3.2 2.4 6.5 1.3 9.8 4.8 -0.7 2.4 0.1 5.8 9.0 2.4 6.1 6.1 2.2 4.6 3.8 1.1 0.7 2.6 4.0 3.1 0.6 1.0 0.3 -1.0 2.1 -0.5 1.8 0.6 4.1 2.7 0.6 5.0 7.1 5.6 0.9 1.3 0.4 5.0 -2.5 -2.6 -3.1 -4.0 0.3 -1.5 -0.5 -1.0 -7.0 1.0 -2.5 -5.2 1.0 -1.3 4.2 8.6 -3.3 6.0 4.3 0.2 -2.4 1.5 -2.1 -3.0 -3.1 0.0 -2.0 -3.9 -4.7 -2.3 -4.8 -1.1 -4.2 -1.3 -4.6 -5.3 -4.0 -6.5 1.7 -6.0 -8.5 -5.3 -2.5 -3.4 0.7 3.2 2.4 4.0 4.0 5.0 5.0 3.0 1.5 3.5 5.4 1.5 2.4 2.9 2.8 7.3 9.5 4.5 7.5 5.3 4.7 5.0 5.0 6.5 5.8 6.1 3.0 3.0 2.5 3.4 2.5 1.7 2.8 3.2 2.2 1.6 4.0 2.5 1.0 3.2 2.0 5.0 5.0 3.3 2.7 5.8 2Q09 -0.7 -3.4 2.0 1.1 7.8 -1.2 2.7 -1.0 -1.1 -1.6 -4.1 2.7 2.5 0.3 12.4 14.8 14.8 6.7 4.3 11.0 10.1 7.0 21.7 18.8 9.0 1.0 -3.0 -0.7 1.8 1.1 -1.9 1.3 1.2 -1.0 -2.3 2.1 1.2 -7.9 2.8 … 4.5 … 1.4 -0.3 7.6 Real GDP % over previous period, saar 3Q09 4Q09E 1Q10E 2Q10E 3Q10E 2.8 0.5 5.7 -14.0 7.2 4.6 1.9 -2.0 12.2 8.0 -7.8 4.8 1.2 2.5 9.3 10.0 1.6 9.0 5.3 12.3 9.4 4.1 14.2 8.3 5.5 2.2 0.5 1.5 2.9 1.1 2.4 2.0 0.7 1.8 -1.2 4.7 3.2 -7.0 5.5 … 7.9 … 3.4 2.3 7.3 3.5 3.0 6.0 -4.0 6.7 10.0 3.2 0.0 7.5 13.0 5.0 2.5 3.8 2.1 5.4 9.1 5.0 -1.0 3.5 4.0 4.5 4.0 -3.6 6.0 5.3 2.5 3.4 2.5 4.0 2.5 1.0 3.0 4.0 2.3 2.0 4.9 5.0 3.5 3.0 … 6.5 … 3.4 2.9 5.4 3.0 3.0 4.7 12.0 4.3 6.0 3.5 2.0 3.7 3.0 3.0 2.5 2.1 2.6 6.9 9.0 4.2 10.0 5.5 2.0 1.6 5.0 8.2 3.8 4.9 3.0 4.4 3.0 3.5 3.0 2.0 3.0 4.0 2.5 2.0 3.4 2.8 3.0 2.5 … 4.5 … 3.4 2.8 5.6 4.0 3.0 3.1 10.0 5.0 4.0 4.3 2.5 -0.6 3.5 3.0 1.5 2.4 4.3 7.1 9.5 4.0 7.0 6.0 3.5 4.9 5.0 7.0 5.0 5.7 3.0 3.8 3.0 3.5 3.0 2.0 3.0 3.5 2.5 2.5 3.2 2.5 2.5 3.0 … 4.0 … 3.6 3.1 5.3 4.0 3.5 4.0 6.0 4.0 2.0 5.5 4.0 3.3 3.5 5.0 1.5 4.4 3.4 7.3 9.3 3.8 9.6 6.0 3.5 4.9 5.0 4.9 4.6 7.0 3.0 3.6 3.0 3.5 3.0 2.0 3.0 3.5 3.0 2.8 3.3 2.2 2.5 3.5 … 4.0 … 3.7 3.2 5.7 4Q10E 3.5 4.0 1.9 4.0 4.0 3.0 4.5 4.0 -0.9 4.0 0.0 2.0 6.2 2.8 6.9 8.7 3.5 9.0 6.0 3.5 4.9 5.0 4.9 3.5 7.0 3.0 4.1 2.5 2.5 2.5 2.5 3.0 3.0 3.0 3.5 3.6 2.0 3.5 3.5 … 4.5 … 3.4 3.0 5.0 Consumer Prices % over a year ago 2Q09 4Q09E 2Q10E 4Q10E -1.6 -0.9 5.9 5.9 4.4 -0.6 3.2 3.5 5.1 1.9 28.7 -2.2 1.3 1.7 1.4 -1.3 -0.9 11.8 2.8 2.0 -2.4 0.3 -0.4 -1.3 -2.2 3.2 6.4 -0.4 -0.4 -0.5 0.1 1.8 -1.1 -1.0 1.5 7.0 0.1 5.0 3.5 5.0 11.4 5.3 -0.1 -1.0 3.5 1.2 0.8 5.6 6.0 4.2 -0.8 3.3 3.5 4.6 1.1 29.0 -1.8 2.1 2.6 2.7 0.9 -0.4 12.2 2.8 2.5 -1.2 3.0 -0.8 -1.0 1.4 3.3 6.2 0.3 0.3 0.6 1.0 1.3 -0.3 -0.4 2.2 6.2 0.6 5.1 3.4 4.7 9.5 5.0 1.2 0.5 4.0 2.2 1.4 6.8 10.0 4.5 2.0 3.9 2.4 5.3 1.5 34.2 -1.8 2.5 2.4 4.3 3.2 0.6 11.9 4.9 3.0 0.5 3.6 1.9 1.8 4.6 3.4 4.3 0.9 0.5 1.0 1.4 1.0 0.8 0.6 2.3 5.2 1.9 3.7 2.1 5.5 7.0 6.3 1.9 1.1 5.0 1.1 2.3 7.2 10.2 4.7 2.6 4.3 4.0 5.2 2.0 37.9 -1.3 2.6 1.7 3.4 2.7 2.1 6.2 6.0 3.3 1.5 3.7 1.8 2.1 4.0 3.3 4.8 1.2 0.3 0.7 1.0 0.4 0.5 0.7 1.4 5.3 3.6 2.8 2.3 6.5 7.4 5.2 1.6 0.8 4.6

Source: J.P. Morgan economics, 27 November 2009.

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Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Sources of GDP Growth
Country USA Real GDP Consumption Fixed investment Net external demand UK Real GDP Consumption Fixed investment Net external demand Euro Real GDP Consumption Fixed investment Net external demand Japan Real GDP Consumption Fixed investment Net external demand Australia Real GDP Consumption Fixed investment Net external demand Brazil Real GDP Consumption Fixed investment Net external demand China Real GDP Consumption Fixed investment Net external demand Czech Republic Real GDP Consumption Fixed investment Net external demand Hong Kong Real GDP Consumption Fixed investment Net external demand Hungary Real GDP Consumption Fixed investment Net external demand India Real GDP Consumption Fixed Investment Net external demand Indonesia Real GDP Consumption Fixed investment Net external demand Korea Real GDP Consumption Fixed investment Net external demand Malaysia Real GDP Consumption Fixed investment Net external demand Mexico Real GDP Consumption Fixed investment Net external demand 2007 88.7 16.2 -4.9 84.7 18.7 -3.4 76.3 22.2 1.5 72.1 23.2 4.7 73.7 28.6 -2.3 78.4 19.3 2.3 48.9 41.7 9.4 68.2 31.0 0.8 68.2 20.9 10.8 74.1 22.5 3.5 66.9 37.4 -4.3 65.4 25.1 9.5 67.6 28.9 3.4 63.4 22.4 14.2 80.0 22.9 -2.9 Share of Real GDP 2008 2009 88.7 15.0 -3.7 85.4 17.6 -2.9 76.5 22.0 1.6 73.1 22.0 4.9 74.1 29.9 -4.0 78.6 21.2 0.2 48.7 42.4 8.8 68.3 29.3 2.4 67.7 20.2 12.2 73.4 22.8 3.8 66.5 39.3 -5.8 65.3 25.1 9.6 67.2 28.4 4.4 66.1 20.8 13.1 80.1 23.8 -3.9 90.9 11.8 -2.7 88.2 13.9 -2.1 79.5 20.0 0.4 76.9 20.4 2.7 74.3 27.8 -2.1 81.0 18.6 0.4 48.9 45.4 5.7 71.9 25.8 2.3 69.6 19.8 10.6 74.0 15.6 10.4 64.7 41.7 -6.3 66.3 23.8 9.9 68.2 23.9 7.9 65.0 19.8 15.2 80.9 21.7 -2.6 2010 89.8 12.8 -2.6 87.9 13.8 -1.6 78.6 20.4 1.0 76.2 20.0 3.9 73.6 28.0 -1.6 81.3 19.7 -1.1 48.9 45.7 5.4 71.1 27.8 1.1 69.8 19.8 10.4 72.1 15.1 12.9 63.2 45.8 -9.0 66.1 24.1 9.8 67.6 25.8 6.6 63.8 23.3 12.9 80.3 22.3 -2.6 Contribution to Real GDP growth 2007 2008 2009 2010 2.1 0.4 -2.4 3.3 2.2 0.4 0.0 1.8 -0.6 -1.2 -3.5 1.4 0.6 1.2 1.0 0.0 2.6 0.6 -4.7 1.6 1.6 1.1 -1.3 1.0 1.5 -1.0 -4.3 0.1 -0.5 0.5 0.9 0.4 2.7 0.6 -3.9 2.5 1.8 0.6 0.0 1.1 0.5 0.0 -2.7 0.9 0.4 0.0 -1.1 0.5 2.3 -0.7 -5.2 2.4 0.9 0.6 -0.1 1.3 0.2 -1.4 -2.6 0.0 1.2 0.1 -2.5 1.1 4.0 2.4 1.0 2.9 2.9 2.2 0.9 1.5 3.1 2.0 -1.9 1.0 -2.0 -1.8 1.9 0.4 5.7 5.1 0.3 5.0 4.6 4.3 2.6 4.3 2.2 2.9 -2.6 2.1 -1.1 -2.1 0.2 -1.5 13.0 9.0 8.6 9.5 4.7 4.2 4.4 4.5 5.6 4.6 6.8 4.7 2.7 0.2 -2.6 0.2 6.1 2.7 -4.0 2.5 2.6 2.0 0.7 1.0 2.8 -0.9 -4.5 2.6 0.7 1.6 -0.2 -1.2 6.4 2.4 -3.3 4.5 5.3 1.0 -0.3 3.3 1.6 -0.3 -1.0 0.9 -0.6 1.6 -2.0 0.3 1.2 0.6 -6.5 1.0 -1.2 -0.2 -4.3 -1.2 -0.7 0.5 -8.2 -0.4 3.1 0.3 6.0 2.6 9.1 6.1 6.0 7.5 5.2 3.6 2.1 3.2 5.2 4.3 4.9 7.5 -1.3 -1.8 -0.9 -3.3 6.3 6.1 4.3 5.3 3.2 3.9 3.8 3.3 2.4 1.5 -0.2 1.5 0.6 0.7 0.8 0.5 5.1 2.2 0.2 4.7 3.5 1.1 1.1 2.5 0.9 0.1 -4.5 3.1 0.7 1.1 3.5 -1.0 6.3 4.6 -2.4 5.0 6.1 5.7 -2.6 2.0 1.2 -0.5 -1.5 4.7 -1.0 -0.5 1.8 -1.7 3.6 1.3 -7.0 3.5 2.9 1.1 -4.8 2.2 1.3 1.2 -3.6 1.4 -0.6 -1.0 1.5 -0.1 GDP Deflator Y/Y 2008 2009 2010 2.4 1.5 0.8

3.0

0.8

1.7

2.3

1.2

1.3

-0.9

0.0

-2.0

6.7

0.3

1.1

5.9

4.0

4.5

7.6

-0.5

2.5

14.2

8.0

12.2

1.4

-0.5

0.8

3.5

4.0

3.0

8.5

4.5

5.8

18.3

6.0

6.5

2.7

0.2

2.0

10.3

2.0

5.0

6.6

3.1

3.7

43

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Sources of GDP Growth (cont'd)
Country Philippine Real GDP Consumption Fixed investment Net external demand Poland Real GDP Consumption Fixed investment Net external demand Russia Real GDP Consumption Fixed investment Net external demand Singapore Real GDP Consumption Fixed investment Net external demand South Africa Real GDP Consumption Fixed investment Net external demand Taiwan Real GDP Consumption Fixed Investment Net external demand Thailand Real GDP Consumption Fixed investment Net external demand Turkey Real GDP Consumption Fixed investment Net external demand
Source: J.P. Morgan economics.

2007 84.2 12.1 3.7 78.4 26.0 -4.4 73.6 30.0 -3.6 48.5 20.3 31.2 87.5 20.3 -7.8 65.8 19.0 15.2 60.9 23.1 16.0 79.0 25.6 -4.6

Share of Real GDP 2008 2009 84.7 13.9 1.4 79.4 25.5 -4.9 76.3 32.5 -8.9 49.7 29.9 20.4 87.4 20.5 -7.9 65.7 17.0 17.3 60.7 24.0 15.4 79.0 23.9 -2.9 85.0 14.9 0.1 79.8 22.5 -2.4 80.8 18.1 1.1 50.0 28.5 21.5 87.7 19.9 -7.5 68.9 13.9 17.1 62.3 20.0 17.8 79.4 20.4 0.2

2010 84.6 17.5 -2.1 79.5 21.9 -1.3 79.5 19.3 1.1 48.6 28.1 23.3 86.6 21.4 -8.1 67.4 14.6 18.0 60.8 23.5 15.7 78.5 21.3 0.2

Contribution to Real GDP growth 2007 2008 2009 2010 7.1 3.8 1.5 5.0 5.2 3.7 1.7 3.8 -3.2 2.4 1.2 3.5 5.1 -2.3 -1.3 -2.2 6.8 5.0 1.7 3.2 3.7 4.9 1.8 2.2 5.3 0.8 -2.6 0.0 -2.2 -0.7 2.5 1.0 8.1 5.6 -8.5 5.0 8.2 7.0 -2.4 2.7 6.5 4.3 -16.0 2.2 -6.7 -5.8 9.9 0.1 7.8 1.1 -2.1 6.5 2.3 1.7 -0.7 1.7 1.9 10.0 -2.0 1.4 3.6 -10.6 0.7 3.3 5.1 3.1 -2.0 3.0 5.4 2.6 -1.4 1.5 1.1 0.8 -1.0 2.2 -1.4 -0.3 0.5 -0.8 5.7 0.1 -3.8 5.8 1.4 0.0 0.7 2.4 0.5 -2.0 -3.6 1.5 3.8 2.1 -0.8 1.9 4.9 2.6 -3.1 6.1 1.7 1.3 -0.3 2.2 0.3 1.5 -4.6 5.0 3.0 -0.2 1.8 -1.1 4.7 0.9 -5.3 5.0 3.8 0.7 -3.8 3.0 2.1 -1.5 -4.5 1.9 -1.2 1.7 3.0 0.1

GDP Deflator Y/Y 2008 2009 2010 7.5 3.0 4.0

5.0

1.7

3.2

19.2

3.0

6.5

1.1

-0.5

2.5

10.8

8.0

6.0

-2.4

-0.2

1.0

2.3

2.5

5.0

11.7

5.5

5.3

44

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Interest Rate Forecasts
Global excluding US Developed Emerging Latin America CEEMEA EM Asia The Americas United States Canada Brazil Mexico Chile Colombia Peru Europe/Africa Euro area United Kingdom Sweden Norway Czech Republic Hungary Israel Poland Romania Russia South Africa Switzerland Turkey Asia/Pacific Australia New Zealand Japan Hong Kong China Korea Indonesia India Malaysia Philippines Thailand Taiwan Change from Official interest rate Current Aug '07 (bp) Last change GDP-weighted average 1.31 -341 GDP-weighted average 1.86 -257 GDP-weighted average 0.49 -365 GDP-weighted average 4.54 -246 GDP-weighted average 5.75 -306 GDP-weighted average 4.78 -222 GDP-weighted average 4.00 -232 GDP-weighted average Federal funds rate Overnight funding rate SELIC overnight rate Repo rate Discount rate Repo rate Reference rate GDP-weighted average Refi rate Repo rate Repo rate Deposit rate 2-week repo rate 2-week deposit rate Base rate 7-day intervention rate Base rate 1-week deposit rate Repo rate 3-month Swiss Libor Overnight borrowing rate GDP-weighted average Cash rate Cash rate Overnight call rate Discount window base 1-year working capital Base rate BI rate Repo rate Overnight policy rate Reverse repo rate 1-day repo rate Official discount rate 0.75 0.125 0.25 8.75 4.50 0.50 4.00 1.25 1.36 1.00 0.50 0.25 1.50 1.25 7.00 0.75 3.50 8.00 4.75 7.00 0.25 6.50 2.08 3.50 2.50 0.10 0.50 5.31 2.00 6.50 4.75 2.00 4.00 1.25 1.25 -484 -512.5 -425 -275 -275 -500 -525 -350 -323 -300 -525 -325 -325 -200 -75 -325 -125 100 150 -300 -225 -1100 -147 -300 -575 -40 -625 -171 -300 -175 -300 -150 -200 -200 -188 16 Dec 08 (-87.5bp) 21 Apr 09 (-25bp) 22 Jul 09 (-50bp) 17 Jul 09 (-25bp) 9 Jul 09 (-25bp) 25 Sep 09 (-50bp) 6 Aug 09 (-75bp) 7 May 09 (-25bp) 5 Mar 09 (-50bp) 2 Jul 09 (-25bp) 28 Oct 09 (+25bp) 6 Aug 09 (-25bp) 19 Oct 09 (-50bp) 23 Aug 09 (+25bp) 24 Jun 09 (-25bp) 29 Sep 09 (-50bp) 29 Oct 09 (-50bp) 13 Aug 09 (-50bp) 12 Mar 09 (-25bp) 19 Nov 09 (-25bp) 3 Nov 09 (+25bp) 30 Apr 09 (-50bp) 19 Dec 08 (-20bp) 17 Dec 08 (-100bp) 22 Dec 08 (-27bp) 12 Feb 09 (-50bp) 5 Aug 09 (-25bp) 21 Apr 09 (-25bp) 24 Feb 09 (-50bp) 9 Jul 09 (-25bp) 8 Apr 09 (-25bp) 18 Feb 09 (-25bp) Forecast next Next meeting change Dec 09E Mar 10E Jun 10E Sep 10E Dec 10E 1.30 1.32 1.36 1.43 1.48 1.85 1.88 1.94 2.04 2.12 0.50 0.51 0.52 0.54 0.57 4.47 4.56 4.71 4.94 5.13 5.75 6.13 6.66 6.94 7.03 4.44 4.29 4.23 4.58 4.87 4.00 4.07 4.17 4.34 4.53 0.75 0.125 0.25 8.75 4.50 0.50 4.00 1.25 1.32 1.00 0.50 0.25 1.50 1.25 6.00 0.75 3.50 8.00 4.00 7.00 0.25 6.50 2.09 3.75 2.50 0.10 0.50 5.31 2.00 6.50 4.75 2.00 4.00 1.25 1.25 0.79 0.125 0.25 9.75 4.50 0.50 4.00 1.25 1.31 1.00 0.50 0.25 1.75 1.25 5.50 1.25 3.50 7.75 3.50 7.00 0.25 6.50 2.14 4.00 2.50 0.10 0.50 5.31 2.25 6.50 5.00 2.00 4.00 1.25 1.25 0.85 0.125 0.25 10.75 4.75 1.00 4.00 1.25 1.30 1.00 0.50 0.25 2.00 1.75 5.50 2.25 3.50 7.50 3.00 7.00 0.25 6.50 2.21 4.50 2.50 0.10 0.50 5.31 2.50 6.50 5.25 2.25 4.00 1.50 1.25 0.88 0.125 0.25 10.75 5.25 2.00 4.00 1.25 1.39 1.00 0.75 0.25 2.25 2.50 5.50 3.25 4.00 7.25 3.00 7.00 0.25 7.50 2.31 4.75 3.50 0.10 0.50 5.58 2.75 6.50 5.25 2.50 4.00 1.75 1.25 0.89 0.125 0.25 10.75 5.25 3.50 4.00 1.25 1.46 1.00 1.00 0.25 2.25 3.00 5.50 4.00 4.50 7.00 3.00 7.50 0.25 8.00 2.42 5.00 4.00 0.10 0.50 5.85 3.00 6.50 5.25 3.00 4.25 2.00 1.375

16 Dec 09 08 Dec 09 09 Dec 09 27 Nov 09 10 Dec 09 23 Nov 09 10 Dec 09 03 Dec 09 10 Dec 09 16 Dec 09 16 Dec 09 16 Dec 09 23 Nov 09 23 Nov 09 25 Nov 09 05 Jan 09 24 Nov 09 17 Dec 09 10 Dec 09 17 Dec 09 01 Dec 09 09 Dec 09 18 Dec 09 17 Dec 09 2Q 09 09 Dec 09 03 Dec 09 1Q 10 24 Nov 09 17 Dec 09 02 Dec 09 4Q 09

on hold on hold Jan 10 (+50bp) Jun 10 (+25bp) 2Q 10 (+50bp) on hold on hold on hold 3Q 10 (+25bp) on hold 3 Feb 10 (+25bp) 2Q 10 (+25bp) 24 Nov 09 (-50bp) 1Q 10 (+25bp) 3Q 10 (+25bp) 1Q 10 (-25bp) 24 Nov 09 (-50bp) 4Q 10 (+50bp) on hold 3Q 10 (+50bp) 1 Dec 09 (+25bp) 8 Jul 10 (+50bp) on hold on hold 3Q 10 (+27bp) 1Q 10 (+25bp) on hold 1Q 10 (+25bp) 2Q 10 (+25bp) 4Q 10 (+25bp) 2Q 10 (+25bp) 4Q 10 (+12.5bp)

Source: J.P. Morgan economics, 20 November 2009. Bold denotes move this week and forecast changes. Underline denotes policy meeting during upcoming week.

45

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Exchange rate Forecasts
Country Euro Sterling Yen Australia China Hong Kong India Indonesia Korea Malaysia Philippines Singapore Taiwan Thailand Argentina Brazil Chile Colombia Mexico Peru Venezuela South Africa Czech Republic Hungary Poland Russia Turkey 2005 1.22 1.79 112 0.76 8.18 7.79 44.0 9840 1026 3.78 54.98 1.67 32.30 40.63 2.94 2.39 552 2319 10.83 3.32 2.148 6.40 24.32 204 3.25 28.42 1.35 FX rate vs US dollar annual average 2006 2007 2008 2009E 1.27 1.39 1.48 1.42 1.85 2.00 1.78 1.57 117 117 101 94 0.75 7.93 7.77 45.1 9135 950 3.64 50.85 1.58 32.65 37.70 3.08 2.16 534 2379 11.00 3.27 2.147 7.01 22.24 211 3.11 26.92 1.47 0.85 7.54 7.80 40.7 9176 929 3.41 45.24 1.49 32.79 34.37 3.12 1.90 519 2053 10.93 3.11 2.148 7.00 19.92 179 2.69 25.29 1.27 0.83 6.88 7.77 44.6 9730 1127 3.34 45.26 1.40 31.44 33.39 3.19 1.90 538 2045 11.42 2.97 2.147 8.41 16.94 169 2.43 25.53 1.34 0.81 6.81 7.76 47.8 10101 1239 3.49 47.5 1.43 32.44 33.99 3.86 1.96 554 2170 13.46 3.00 2.148 8.02 18.36 196 3.07 30.83 1.52 2010E 1.56 1.69 85 1.00 6.67 7.79 43.3 9175 1120 3.29 45.50 1.35 30.50 32.38 4.08 1.66 491 1931 12.78 2.78 2.363 7.35 16.01 165 2.55 26.41 1.40 1Q09 1.32 1.43 99 0.69 6.83 7.75 50.6 11550 1375 3.65 48.26 1.52 33.92 35.47 3.71 2.32 584 2556 14.17 3.17 2.147 9.54 20.67 233 3.50 33.96 1.66 2Q09 1.40 1.65 96 0.81 6.83 7.75 47.8 10208 1275 3.52 48.16 1.45 32.86 34.07 3.80 1.95 533 2143 13.19 3.01 2.147 7.73 18.53 194 3.17 31.16 1.54 FX rate vs US dollar*** Quarter end forecasts 3Q09 Current 1Q10E 2Q10E 3Q10E 1.46 1.49 1.55 1.62 1.55 1.60 1.65 1.65 1.74 1.68 90 89 85 82 85 0.88 6.83 7.75 47.7 9645 1177 3.46 47.60 1.41 32.00 33.41 3.84 1.77 550 1931 13.50 2.88 2.147 7.52 17.25 184 2.87 30.03 1.48 0.92 6.83 7.75 46.6 9465 1159 3.39 46.90 1.39 32.39 33.25 3.80 1.73 502 1969 13.08 2.88 2.147 7.60 17.44 181 2.79 28.99 1.50 0.95 6.75 7.77 45.0 9000 1130 3.35 46.00 1.36 31.00 33.00 4.00 1.65 475 1925 12.80 2.80 2.150 7.40 16.26 168 2.65 26.85 1.45 1.02 6.70 7.78 43.5 9000 1130 3.30 45.50 1.35 30.50 32.50 3.95 1.60 490 1850 12.50 2.75 2.150 7.20 15.43 157 2.47 25.41 1.40 1.01 6.65 7.80 42.8 9200 1100 3.25 45.50 1.34 30.50 32.00 4.10 1.65 500 1950 12.80 2.78 2.150 7.40 16.00 165 2.55 26.45 1.40 4Q10E 1.50 1.67 89 1.00 6.58 7.80 42.0 9500 1120 3.25 45.00 1.33 30.00 32.00 4.25 1.75 500 2000 13.00 2.80 3.000 7.40 16.33 170 2.53 26.94 1.35

Source: Datastream, J.P. Morgan estimates, current as of 24 November 2009

Commodities Forecast
Commodity Forecast WTI oil $/bbl Natural gas $/mmbtu Gold ($/oz) Silver ($/oz) Platinum ($/oz) Palladium ($/oz) Copper ($/metric ton) Aluminium ($/metric ton) Zinc ($/metric ton) Nickel ($/metric ton) Corn ($/bushel) Wheat ($/bushel) Soybeans ($/bushel)
Source: J.P. Morgan, 20 November 2009.

Current 76.7 3.2 1142 18.2 1435 360 6731 1720 2196 16658 3.6 4.0 10.2

4Q09E 70.0 5.0 1000 16.1 1275 290 5950 1825 1850 18000 3.7 5.0 9.6

1Q10E 70.0 6.0 1050 16.7 1300 300 6250 1900 1950 19000 4.0 5.4 9.8

2Q10E 65.0 5.5 1000 15.6 1325 300 6000 1850 1900 17000 4.2 5.4 9.6

3Q10E 70.0 5.8 1000 15.6 1350 300 5750 1825 1875 16500 4.1 5.2 9.4

4Q10E 70.0 6.5 975 15.2 1375 325 5800 1800 1850 16000 4.1 5.1 9.1

46

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

EM Markets’ Overviews
47

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Brazil
Stellar Growth amid Low Global Rates
Key country dynamics Brazilian growth at 5% (with upside potential) in 2010e is only behind China and India. A powerful infrastructure story related to the oil exploration in the presalt areas, the Soccer World Cup in 2014 and the Olympic Games in 2016 are key in attracting investment and enhancing the long-term growth potential. On the downside, yet another hiking cycle is likely to start in 2009, which could derail the attractive domestic demand story. Fiscal policy is lax, leading to an increase in debt, and the reversal of this trend is unlikely in 2010 considering the general elections. The presidential race could be noise and will determine policy direction as well as the continuation of enhanced role of the public sector in key sectors (oil, mining, utilities, among others). Implications of a global recovery The global crisis presented Brazil with a stress test and it came through very successfully. It is now that Brazil is really enjoying the status of an investment grade country in terms of attracting global funds. Brazil remains the gold medalist in terms of high interest rates and therefore, is also attractive from the flow of funds point of view, leading the BRL to be the best among the best-performing currencies in the world in 2009. Authorities responded to that by imposing a 2% tax on foreign portfolio inflows, and exchange rate policy now remains an uncertainty. How much have valuations already discounted a recovery We think that the key metric to watch is consensus EPS. They have increased by only 11% from the trough of the crisis until the present, a far cry from the average 36% rise in past cycles. As EPS rise, valuations which today are pretty much at record highs should abate. Still, we think Brazil deserves a premium to its historical values. The question now is how much of a premium is deserved on a relative basis. Recommendations We have exposure to domestic cyclical names that benefit from a stronger consumer and are also upbeat on energy. On the domestic side we like homebuilder PDG, financial Santander, and CBD, which is repricing from a staple name to a discretionary. We like growth names NET and ALL. We remain OW Petrobras on higher oil prices and the growth coming from the new offshore wells. We avoid defensives utilities, telecom and staples.
Top picks and stocks to avoid
Price (LC) Top picks Petrobras Santander Brazil Stocks to avoid Usiminas CPFL Energia3 39.2 23.0 50.3 32.7 Code PETR4 SANB11 USIM5 CPFE3 Rating OW OW UW UW Mkt cap (US$MM) 212,864 50,351 14,452 9,040 P/E (x) 09E 13.1 17.3 37.8 13.0 10E 11.9 13.5 14.6 11.2 09E 3.0 1.3 1.3 2.5 EPS (LC) 10E 3.3 1.7 3.5 2.9 Div. yield 10E (%) 1.7 3.3 2.1 8.5 ROE 10E (%) 17.4 12.0 10.9 27.2

Emy Shayo ChermanAC
(55-11) 3048-6684 emy.shayo@jpmorgan.com Banco J.P. Morgan S.A.

MSCI Brazil: Absolute and relative to MSCI Asia Pacific ex-Japan

700 600 500 400 300 200 100 0 97 99 01 03 05 07 09 Absolute Relativ e
Source: MSCI, Datastream.

Source: Bloomberg, J.P. Morgan estimates. Note: Share prices and valuations are as of 25 November 2009.

48

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Brazil Scorecard
Key Financial Data Summary EPS Growth 2007 2008E 2009E 2010E 19.5 -9.1 -11.4 24.9 P/E 13.4 14.7 16.6 13.3 ROE 22.6 17.3 14.5 17.4 Yield 2.3 3.0 2.7 2.9 3 Month Long Bond Inflation Real 3 Month Local Interest Rates and Inflation Trend Spot 8.7 9.8 4.3 4.3 -3M ∆ 0.1 0.6 0.0 0.1 Risk Appetite - EMF 0.2 -0.3 -0.8 - Cons 0.0 0.7 1.2 US$ Spread BAA EMBI Country Country Relative Economic Momentum GDP GDP SAAR Q4 09E 6.7 Q1 10E 4.3 Q2 10E 5.0 Q3 10E 4.0 EM Funds* LatAm* Brazil Spot 2.9 3.2 2.2 -0.9 Month 4,063 242 651 -3M ∆ 0.0 -0.7 -0.5 0.3 09 YTD Avg 5,164 758 895 +3M ∆ na 0.8 na na 12-Mo Avg 4,870 688 754 +3M ∆ na -1.0 -0.1 na

GDP (YoY) 2008 2009E 2010E

Forecast 5.1 0.3 5.0

Economic Forecasts -3M ∆ -0.2 0.7 0.5

Foreign Fund Flows (US$ mils)

MSCI Brazil Absolute and Relative to EMF Index
1200 1000 800 600 400 BY/EY 200 BY/DY 0 Jan-03 Dec-03 Nov-04 Oct-05 Sep-06 Aug-07 Jul-08 Jun-09 0 Absolute Relative to MSCI EMF FWD PER PER PBR DY

MSCI Fair value Range
(96225) (104896) (66011) (123402) (179326) (213292) (172103) (241407) (212484) (224148) (387224) (338028)

50000 100000 150000 200000 250000 300000 350000 400000

Currency Outlook (BRL/USD)
2.8 2.6 2.4 2.2 2.0 1.8 1.6 1.4 Dec 04 J.P. Morgan Consensus Spot Forecast J.P. Morgan forecast: end Dec 09: 1.80 end Mar 10: 1.80 end Jun 10: 1.80 Consensus

EPS Integer over Time
130 120 110 100 90 80 70 60 50 Feb 08 May 08 Aug 08 Nov 08 Feb 09 May 09 Aug 09 Nov 09 2009 2010

Apr 06

Aug 07

Dec 08

Mar 10

Source: MSCI, Bloomberg, IBES, Datastream, CEIC, J.P. Morgan, Consensus Economics. Unless stated all forecasts are J.P. Morgan’s. The scorecards are designed to assist in tracking trends and expectations. -3M∆ refers to the change in this factor over the past three months and +3M∆ refers to the forecast change in this factor over the next three months. The Economic Forecast table contains J.P. Morgan’s real GDP forecasts, the change in these forecasts over the past three months, the difference between these forecasts and the average for emerging markets and the final column is the difference between J.P. Morgan's forecast and consensus expectations. The MSCI Fair Value chart is designed to show current valuations relative 10 year valuation history. The vertical dotted line is the current index level. The five horizontal bars show a +/- one standard deviation range for these valuation measures. A dotted line to the left indicates a market that is cheap relative to history. *US Mutual fund subscriptions.

49

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

China
Focus on defensive growth in 2010
Key country dynamics We expect MSCI China to resume its rally from now to 1Q10, in light of positive fundamentals including: (1) the expected material improvements in the liquidity situation in early 2010 as banks tend to front-load their lending ; (2) our view that the government will not start serious tightening until at least 2QFY10; (3) China’s strong economic growth momentum; (4) the strong 4Q09 earnings results, to be released in 1QFY10; and (5) faster Rmb appreciation expected in 2010. The key investment strategy for 2010 should be to focus on stocks as characterized by defensive growth, given: (1) the expected broad-based tightening to kick in as of 2Q10; and (2) a potential sharp slowdown in fixed asset investment growth in 2011 as the two-year (FY09/10) economic stimulus policies fade away. Implications of a global recovery We expect China’s economy to continue to grow solidly in 2010 (real FY10 GDP growth forecast at 9.5%). Continuing with the theme of a sustained and synchronized expansion of the global economy through 2010, we expect net external trade would likely come back to contribute positively to GDP growth again. On the domestic front, we look for a broad-based pickup in private consumption, along with improving labor markets and hence household income, and marked expansion in private housing investment as well as other private sector investment. Meanwhile, we believe the central government has enough leeway to smooth growth should external demand or private activities disappoint again. How much have valuations already discounted a recovery We believe there is still a decent upside for MSCI China, as the expected solid earnings growth for corporate China should at least underpin its valuations at above historical mean levels. Based on our EPS growth forecast of 20.1% for MSCI China for FY10, we have our end-FY10 MSCI China index target of 78, based on 17.2x FY10E P/E, or a 10% premium above the long-term average trailing P/E. Recommendations We recommend to Overweight banks with good earnings visibility and the potential for NIM expansion, upstream energy (coal and oil) as an inflation hedge, and defensive growth stocks, which include internet, gas, tissue and diapers, and consumer staples. We Underweight property, the most-likely target for the potential tightening by the government, telecom, downstream commodities, shipping, and construction names. We introduce two pair trades: (1) Long Netease/Short China Unicom on lower penetration rate, thus greater growth potential for internet sector than telecom sector; and (2) Long Xinao Gas/Short Datang International on better growth prospects for gas sector than IPPs.
Top picks and stocks to avoid
Price (LC) Top picks Xinao Gas Baidu.com Bank of China – H China Mengniu Dairy China Yurun Food Stocks to avoid China Unicom Datang Intl 17.28 386.37 4.53 23.7 17.76 10.42 3.72 Code 2688.HK BIDU US 3988.HK 2319.HK 1068.HK 0728.HK 0991.HK Rating OW OW OW OW OW UW N Mkt cap (US$MM) 2,341 13,374 153,822 5,309 3,833 31,679 5,596 P/E (x) 09E 21.2 63.0 12.3 25.6 14.7 23.9 25.6 10E 18.5 42.2 8.7 22.4 11.2 34.6 15.6 EPS (LC) 09E 0.8 6.1 0.3 0.8 1.2 0.4 0.1 10E 0.9 9.2 0.5 0.9 1.6 0.3 0.2 Div. yield 10E (%) 1.4 0.0 5.2 0.0 2.3 1.3 3.1 ROE 10E (%) 12.6 29.6 20.5 16.3 25.6 3.0 9.4

Frank LiAC
(852) 2800-8511 frank.m.li@jpmorgan.com J.P. Morgan Securities (Asia Pacific) Limited

Flagship reports
• Views from the Bund • Where to find the next ten-baggers (September 07, 2009) • Focus on defensive growth (October 21, 2009) • China Strategy Dashboards

MSCI China: Absolute and relative to MSCI Asia Pacific ex-Japan

150 130 110 90 70 50 30 10 97 99 01 03 05 07 09 Absolute Relativ e
Source: MSCI, Datastream.

MSCI performance table
MSCI China Weightings in Region MSCI Total Mkt Cap. (US$B) 2009 P/E Ratio (x) 2010 P/E Ratio (x) 2011 P/E Ratio (x) 2010 Yield (%) 2010 ROE (%) 2wk 3mth YTD 2.7 12.2 61.3 18.4% 572.3 17.6 14.4 12.2 2.6 16.2

Source: Datastream, IBES, MSCI, JPMorgan estimates. Prices and valuations are as of November 20, 2009

Source: Bloomberg, J.P. Morgan estimates. Share prices and valuations are as of 5 November 2009. Note: Price and valuation for the US-Listed Baidu are updated as of 4 November 2009.

50

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

China Scorecard
Key Financial Data Summary EPS Growth 2007 2008E 2009E 2010E 31.2 -12.7 9.1 22.0 P/E 16.8 19.2 17.6 14.4 ROE 19.4 15.0 15.0 16.2 Yield 2.2 2.1 2.2 2.6 3 Month Long Bond Inflation Real 3 Month Local Interest Rates and Inflation Trend Spot 2.0 3.7 -0.8 2.8 -3M ∆ 0.0 0.2 0.4 -0.4 Risk Appetite - EMF 4.1 8.0 3.7 - Cons 0.0 0.3 0.0 US$ Spread BAA EMBI Country Country Relative Economic Momentum GDP GDP SAAR Q4 09E 9.1 Q1 10E 9.0 Q2 10E 9.5 Q3 10E 9.3 EM Funds* Asia ex Japan* China Spot 2.9 3.2 0.8 -2.3 Month 4,063 1,245 -50 -3M ∆ 0.0 -0.7 -0.4 0.4 09 YTD Avg 5,164 1,566 499 +3M ∆ na 0.8 na na 12-Mo Avg 4,870 1,452 611 +3M ∆ -1.2 -0.3 1.7 -2.9

GDP (YoY) 2008 2009E 2010E

Forecast 9.0 8.6 9.5

Economic Forecasts -3M ∆ 0.1 0.2 0.5

Foreign Fund Flows (US$ mils)

MSCI China Absolute and Relative to EMF Index
800 700 600 500 400 300 200 100 0 Jan-03 Dec-03 Nov-04 Oct-05 Sep-06 Aug-07 Jul-08 Jun-09 BY/EY BY/DY 10 30 PER PBR DY (27) Absolute Relative to MSCI EMF FWD PER (30)

MSCI Fair value Range
(61) (41) (72) (67) (43) (47) (47) 50 70 90 110 (77) (123) (132) 130 150

Currency Outlook (CNY/USD)
8.5 Spot Forecast Consensus

EPS Integer over Time
120 110 100 2009 2010

8.0

7.5

7.0

J.P. Morgan forecast: end Dec 09: 6.75 end Mar 10: 6.70 end Jun 10: 6.65

Consensus

90 80

6.5

J.P. Morgan

70 60 Feb 08

6.0 Dec 04

Apr 06

Aug 07

Dec 08

Mar 10

May 08

Aug 08

Nov 08

Feb 09

May 09

Aug 09

Nov 09

Source: MSCI, Bloomberg, IBES, Datastream, CEIC, J.P. Morgan, Consensus Economics. Unless stated all forecasts are J.P. Morgan’s. The scorecards are designed to assist in tracking trends and expectations. -3M∆ refers to the change in this factor over the past three months and +3M∆ refers to the forecast change in this factor over the next three months. The Economic Forecast table contains J.P. Morgan’s real GDP forecasts, the change in these forecasts over the past three months, the difference between these forecasts and the average for emerging markets and the final column is the difference between J.P. Morgan's forecast and consensus expectations. The MSCI Fair Value chart is designed to show current valuations relative 10 year valuation history. The vertical dotted line is the current index level. The five horizontal bars show a +/- one standard deviation range for these valuation measures. A dotted line to the left indicates a market that is cheap relative to history. *US Mutual fund subscriptions.

51

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

India
Recovery to broaden; challenging policy environment
Key country dynamics We are constructive on economic growth and corporate earnings over 2010. A low base effect should help too, particularly over 1H. Financial markets appear to have stabilized. The decisive mandate in the national elections gives the government considerable policy flexibility to pursue reforms and growth. Corporate and consumer sentiment have improved considerably due to these positives. The government and regulators face challenges on the policy front though. Given rising inflation, we expect a tightening in monetary policy over 1H. The fiscal deficit remains at elevated levels, raising the specter of a withdrawal of fiscal stimuli at some point over CY10. Any delayed impact of the deficient monsoon on consumption remains a near-term cyclical risk. Implications of a global recovery The Indian economy is relatively less dependent on exports (c15%). A global recovery is likely to have a positive impact on IT services, metals and energy. More significant is the dependence on foreign capital. A sustained improvement herein is imperative to fund local growth. How much have valuations already discounted a recovery? Indian equities have re-rated sharply since March on the back of an improvement in global risk appetite and the decisive mandate in the national elections. Current valuations at 15x FY11E are at a marginal discount to historic comparatives and factor in healthy growth expectations (estimated at 21% over FY11E). Rising inflation and potential tightening in monetary policy imply that market returns over CY10 could be led more by forecast earnings growth as compared to re-rating. Recommendations We expect the government policy to focus on reviving the investment cycle. We overweight capital goods and infrastructure. A pick up in credit growth coupled with bottoming out of asset quality issues augurs well for financials. We are selective on global sectors given volatility in data flow and an appreciating rupee. The lagged impact of a deficient monsoon and a potential withdrawal of fiscal stimuli are key risk factors for the consumption cycle. Telecom and cement sectors will remain adversely impacted due to competitive pressures.
Top picks and stocks to avoid
Price (LC) Top picks Infosys Technologies ICICI Bank Unitech Larsen & Toubro Stocks to avoid Hindustan Unilever Reliance Power Idea Cellular 2,218 849 86 1,576 265 144 50 Code INFY.BO ICBK.BO UNTE.BO LART.BO HLL.BO RPOL.BO IDEA.BO Rating OW OW OW N UW UW UW Mkt cap (US$MM) 27,166 20,197 4,431 20,208 12,414 7,417 3,320 P/E (x) FY 10E FY11E 21 27 15 27 25 55 46 18 NA 13 23 22 43 NA EPS (LC) FY 10E FY11E 107 32 6 58 10 3 1 124 NA 7 68 12 3 (4) Div. yield FY10E (%) 1.2 1.4 0.2 0.7 3.0 0.0 0.0 ROE FY10E (%) 29 8 12 22 106 4 6

Bharat IyerAC
(91-22) 6157-3600 bharat.x.iyer@jpmorgan.com J.P. Morgan Securities Indta Pvt. Ltd.

Flagship reports
• Stratoscope • Color of Money • Q-View MSCI India: Absolute and relative to MSCI Asia Pacific ex-Japan

700 600 500 400 300 200 100 0 97 99 01 03 05 07 09 Absolute Relativ e
Source: MSCI, Datastream.

MSCI performance table
MSCI India Weightings in Region MSCI Total Mkt Cap. (US$B) 2009 P/E Ratio (x) 2010 P/E Ratio (x) 2011 P/E Ratio (x) 2010 Yield (%) 2010 ROE (%) 2wk 3mth YTD 6.0 15.8 86.1 7.5% 232.6 21.1 17.3 14.1 1.1 17.0

Source: Datastream, IBES, MSCI, JPMorgan estimates. Prices and valuations are as of November 20, 2009

Source: Bloomberg, J.P. Morgan estimates. Note: Share prices and valuations are as of 10 November 2009. 52

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

India Scorecard
Key Financial Data Summary EPS Growth 2007 2008E 2009E 2010E 18.6 -1.1 3.3 21.7 P/E 21.5 21.8 21.1 17.3 ROE 20.1 16.3 15.9 17.0 Yield 1.3 1.0 1.0 1.1 3 Month Long Bond Inflation Real 3 Month Local Interest Rates and Inflation Trend Spot 3.7 7.3 11.7 -8.1 -3M ∆ -0.1 -0.2 0.0 -0.1 Risk Appetite - EMF 1.2 5.4 1.7 - Cons 0.0 -1.2 na US$ Spread BAA EMBI Country Country Relative Economic Momentum GDP GDP SAAR Q4 09E -1.0 Q1 10E 10.0 Q2 10E 7.0 Q3 10E 9.6 EM Funds* Asia ex Japan* India Spot 2.9 3.2 na na Month 4,063 1,245 1,153 -3M ∆ 0.0 -0.7 na na 09 YTD Avg 5,164 1,566 1,405 +3M ∆ na 0.8 na na 12-Mo Avg 4,870 1,452 1,310 +3M ∆ -0.7 0.2 0.5 -1.1

GDP (YoY) 2008 2009E 2010E

Forecast 6.1 6.0 7.5

Economic Forecasts -3M ∆ -0.1 -0.2 0.3

Foreign Fund Flows (US$ mils)

MSCI India Absolute and Relative to EMF Index
800 700 600 500 400 300 200 100 0 Jan-03 Dec-03 Nov-04 Oct-05 Sep-06 Aug-07 Jul-08 Jun-09 BY/EY BY/DY 150 PER PBR DY Absolute Relative to MSCI EMF FWD PER (322)

MSCI Fair value Range
(538) (389) (466) (361) (416) (378) 300 450 600 750 (833) 900 1050 (553) (1015) (698) (783)

Currency Outlook (INR/USD)
54 52 50 48 46 44 42 40 38 Dec 04 J.P. Morgan J.P. Morgan forecast: end Dec 09: 45.0 end Mar 10: 43.5 end Jun 10: 42.8 Spot Forecast Consensus

EPS Integer over Time
130 120
Consensus

2009

2010

110 100 90 80 70 60 Feb 08

Apr 06

Aug 07

Dec 08

Mar 10

May 08

Aug 08

Nov 08

Feb 09

May 09

Aug 09

Nov 09

Source: MSCI, Bloomberg, IBES, Datastream, CEIC, J.P. Morgan, Consensus Economics. Unless stated all forecasts are J.P. Morgan’s. The scorecards are designed to assist in tracking trends and expectations. -3M∆ refers to the change in this factor over the past three months and +3M∆ refers to the forecast change in this factor over the next three months. The Economic Forecast table contains J.P. Morgan’s real GDP forecasts, the change in these forecasts over the past three months, the difference between these forecasts and the average for emerging markets and the final column is the difference between J.P. Morgan's forecast and consensus expectations. The MSCI Fair Value chart is designed to show current valuations relative 10 year valuation history. The vertical dotted line is the current index level. The five horizontal bars show a +/- one standard deviation range for these valuation measures. A dotted line to the left indicates a market that is cheap relative to history. *US Mutual fund subscriptions.

53

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Indonesia
Opportunity knocking
Key country dynamics A resilient economy, benign inflation, easy liquidity and favorable politics have aligned to drive Indonesian equities significantly higher in 2009. We believe that the country is on the cusp of a substantial opportunity to raise its growth trajectory in coming years. The newly-formed presidential delivery unit offers a structure to deliver on high current expectations about infrastructure development and reform, evidence of its success could be a source of further upside. We see domestic cyclical momentum driving earnings in FY10E, and the credit cycle is also showing signs of life. Inflation risks could drive rates mildly higher, but see a case for lower real rates, supported sovereign credit rating upgrades. The major risk is weak execution on growth and governance reforms. Implications of a global recovery The resilience of growth and the stability of the fiscal, and BoP positions through the crisis have raised Indonesia’s economic and political credibility. As growth returns elsewhere, Indonesia’s allure as a pocket of growth, which brought it attention in 2009, may diminish next year. How much have valuations already discounted a recovery In 2010 the emphasis may shift from recovery to growth. Market valuations are over 1sigma higher than long-term valuations, and to some extent, therefore, probably discount future earnings revisions. However, FY10E EPS forecasts have risen 11% over the past six months, but remain 27% below where they were a year back. Recommendations Our main thematics to play in Indonesia remain—interest rate-sensitive sectors, power sector supply chain/feedstock, and domestic consumption plays. We have Overweight rating on Astra International—as a high-quality rate sensitive and consumption exposure. We also are incrementally positive on banks, with BCA as our main Overweight. We recommend PTBA among coal stocks—a beneficiary from any improved thrust on infrastructure development. Finally, we recommend ANTM, where we think that a strong volume growth profile could be boosted if the company grows from being a preferred partner for mining MNCs seeking avenues to invest in Indonesia. Our main Underweight recommendations are Unilever and BRI.
Top picks and stocks to avoid
Price (LC) Top picks Astra International BCA PTBA ANTM Stocks to avoid Unilever Bank Rakyat 29,800 4,600 14,450 2,300 10,200 7,200 Code ASII IJ BBCA IJ PTBA IJ ANTM IJ UNVR IJ BBRI IJ Rating OW OW OW OW UW UW Mkt cap (US$MM) 12,759 11,995 3,494 2,302 8,166 9,392 P/E (x) 09E 14.2 17.4 10.5 49.1 29.4 12.5 10E 11.7 12.9 23.6 18.8 24.0 10.5 EPS (LC) 09E 2,096 265 1,371 46.9 347 577 10E 2,540 356 612 122.3 425 684 Div. yield 10E (%) 2.8% 3.0% 2.4% 1.0% 350 3.2% ROE 10E (%) 24.9% 29.2% 22.6% 13.6% 89.8% 28.4%

Aditya SrinathAC
(62-21) 5291-8573 aditya.srinath@jpmorgan.com PT J.P. Morgan Securities Indonesia

Flagship reports
• Currency + Commodity (March 20, 2009) • An Agenda for the Next 5 years (May-09) • Notes of Caution (Sept-09) MSCI Indonesia: Absolute and relative to MSCI Asia Pacific ex-Japan

400 300 200 100 0 97 99 01 03 05 07 09 Absolute Relativ e
Source: MSCI, Datastream.

MSCI performance table
MSCI Indonesia Weightings in Region MSCI Total Mkt Cap. (US$B) 2009 P/E Ratio (x) 2010 P/E Ratio (x) 2011 P/E Ratio (x) 2010 Yield (%) 2010 ROE (%) 2wk 3mth YTD 5.0 9.5 88.6 1.8% 56.3 21.1 15.0 12.6 3.1 24.3

Source: Datastream, IBES, MSCI, JPMorgan estimates. Prices and valuations are as of November 20, 2009

Source: Bloomberg, J.P. Morgan estimates. Note: Share prices and valuations are as of 5 November 2009.

54

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Indonesia Scorecard
Key Financial Data Summary EPS Growth 2007 2008E 2009E 2010E 61.4 -1.4 6.8 9.6 P/E 17.3 17.5 16.4 15.0 Economic Forecasts -3M ∆ 0.0 0.2 0.3 ROE 27.4 27.0 25.3 24.3 Yield 3.2 2.6 2.6 3.1 3 Month Long Bond Inflation Real 3 Month Local Interest Rates and Inflation Trend Spot 6.6 10.3 2.7 3.9 -3M ∆ 0.0 -0.4 0.0 -0.1 Risk Appetite - EMF 1.2 3.7 -0.5 - Cons 0.0 0.0 -0.3 US$ Spread BAA EMBI Country Country Relative Economic Momentum GDP GDP SAAR Q4 09E 3.5 Q1 10E 5.5 Q2 10E 6.0 Q3 10E 6.0 EM Funds* Asia ex Japan* Indonesia Spot 2.9 3.2 na na Month 4,063 1,245 113 -3M ∆ 0.0 -0.7 na na 09 YTD Avg 5,164 1,566 82 +3M ∆ na 0.8 na na 12-Mo Avg 4,870 1,452 81 +3M ∆ 0.2 0.2 0.1 0.1

GDP (YoY) 2008 2009E 2010E

Forecast 6.1 4.3 5.3

Foreign Fund Flows (US$ mils)

MSCI Indonesia Absolute and Relative to EMF Index
800 700 600 500 400 300 200 100 0 Jan-03 Dec-03 Nov-04 Oct-05 Sep-06 Aug-07 Jul-08 Jun-09 BY/EY BY/DY 0 (952) 1000 PER PBR DY (1431) Absolute Relative to MSCI EMF FWD PER (1341)

MSCI Fair value Range
(3544) (2160) (3015) (2395) (2591) (5684) (6218) (4961)

2000

3000

4000

5000

6000

7000

8000

Currency Outlook (IDR/USD)
14,000 13,000 12,000 11,000 Consensus 10,000 9,000 J.P. Morgan 8,000 Dec 04 Spot Forecast Consensus

EPS Integer over Time
130 120 110 100 90 80 70 60 Feb 08 2009 2010

J.P. Morgan forecast: end Dec 09: 9000 end Mar 10: 9000 end Jun 10: 9200

Apr 06

Aug 07

Dec 08

Mar 10

May 08

Aug 08

Nov 08

Feb 09

May 09

Aug 09

Nov 09

Source: MSCI, Bloomberg, IBES, Datastream, CEIC, J.P. Morgan, Consensus Economics. Unless stated all forecasts are J.P. Morgan’s. The scorecards are designed to assist in tracking trends and expectations. -3M∆ refers to the change in this factor over the past three months and +3M∆ refers to the forecast change in this factor over the next three months. The Economic Forecast table contains J.P. Morgan’s real GDP forecasts, the change in these forecasts over the past three months, the difference between these forecasts and the average for emerging markets and the final column is the difference between J.P. Morgan's forecast and consensus expectations. The MSCI Fair Value chart is designed to show current valuations relative 10 year valuation history. The vertical dotted line is the current index level. The five horizontal bars show a +/- one standard deviation range for these valuation measures. A dotted line to the left indicates a market that is cheap relative to history. *US Mutual fund subscriptions.

55

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Malaysia
Looking for deliverance
Key country dynamics We expect PM Najib Razak’s administration to pick up pace in awarding many of the much-anticipated large-scale infrastructure projects and focusing on the implementation of earlier-announced policy reform measures in 2010. With global economies recovering, private sector confidence is likely to return, enabling the new policy measures to gain traction. Also, domestic liquidity conditions remain relatively flush with interest rates at an all-time low of 2% for the Overnight Policy Rate and LD ratios still at 78%. Bank Negara continues to mop up M$200B of excess liquidity as at end-September 2009. We expect inflationary conditions to remain benign with our current forecast for 2010 at 0.8%, although we do expect Malaysia to raise interest rates for 2010 by 100bp to 3% beginning 2Q10, in line with the region as the economic momentum gains strength. Implications of a global recovery The improvement in the external sector due to the global recovery will boost near-term growth as the new administration looks to stimulate domestic growth with new liberalization policies design to spur private investment. Public expenditure will gradually be reduced from peak deficit levels of 7.4% in 2009 as the government looks towards the private sector to stimulate economic growth. Confidence in PM Najib’s administration is key as the government has been prone to policy flip flops in the past. How much have valuations already discounted a recovery Current forward P/Es of 16x are between +1std and +2std dev. levels. However, with some scope for further earnings upgrades as the economic recovery flows through, we believe there is still scope for further upside to the market over the next 12 months. Also, foreign investors are underweight on the Malaysian market. In our view, should the government execute on its reform measures, we expect to see foreign investors return, driving P/E multiples to 17-18x, similar to the past few market peaks. Recommendations Incremental foreign portfolio flow will drive up valuations of key liquid stock names, especially those with a positive macro outlook in light of the structural reform expected. Top picks are Public and AMMB on banks, Tenaga for GLCs reform and Genting. Avoid stocks lacking growth or catalyst, are YTL Power (yield plays to underperform) and MISC (lacks near-term catalyst).
Top picks and stocks to avoid
Price (LC) Top picks Public Bank 10.9 Tenaga 8.4 Genting 7.15 AMMB 4.7 Stocks to avoid MISC 8.9 YTL Power 2.15 Code PBKF MK TNB MK GENT MK AMM MK MISF MK YTLP MK Rating OW OW OW OW N N Mkt cap (US$MM) 11257 10655 7745 4142 9680 3755 P/E (x) 09E 15.2 15.6 24.9 13.6 25.9 14.4 10E 12.9 14.3 20.3 11.4 20.2 10.7 09E 0.72 0.53 0.29 0.32 0.34 0.15 EPS (LC) 10E 0.85 0.62 0.35 0.39 0.44 0.20 Div. yield 10E (%) 3.9 2.8 0.7 1.7 3.9 2.1 ROE 10E (%) 29.5 9.3 9.4 11.0 5.9 18.2

Chris Oh, CFAAC
(60-3) 2770-4728 chris.ch.oh@jpmorgan.com JPMorgan Securities (Malaysia) Sdn. Bhd. (18146X)

Flagship reports
• Looking for Deliverance (11/05/2009) • 2010 Budget (10/23/2009) • Introducing June 2010 KLCI of 1350 (08/20/2009) • 2H09 market outlook (06/10/2009) • 2nd Stimulus Package (03/10/2009) • Shifting Sands Series (02/04/2009, 03/27/2009, 04/09/2009, 04/23/2009, 07/16/2009) MSCI Malaysia: Absolute and relative to MSCI Asia Pacific ex-Japan

120 100 80 60 40 20 97 99 01 03 05 07 09 Absolute Relativ e
Source: MSCI, Datastream.

MSCI performance table
MSCI Malaysia Weightings in Region MSCI Total Mkt Cap. (US$B) 2009 P/E Ratio (x) 2010 P/E Ratio (x) 2011 P/E Ratio (x) 2010 Yield (%) 2010 ROE (%) 2wk 3mth YTD 1.2 8.5 47.0 2.7% 83.8 18.3 15.8 13.1 3.1 12.3

Source: Datastream, IBES, MSCI, JPMorgan estimates. Prices and valuations are as of November 20, 2009

Source: Bloomberg, J.P. Morgan estimates. Note: Share prices and valuations are as of 5 November 2009. MISC Berhad - F: We downgraded to UW with new PT of M$7.7 on November 24." and "YTL Power: We downgraded to UW on November 19.

56

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Malaysia Scorecard
Key Financial Data Summary EPS Growth 2007 2008E 2009E 2010E 44.3 -14.1 0.0 15.7 P/E 15.7 18.3 18.3 15.8 ROE 14.5 11.5 11.0 12.3 Yield 3.2 2.9 2.7 3.1 3 Month Long Bond Inflation Real 3 Month Local Interest Rates and Inflation Trend Spot 2.1 4.3 -2.1 4.2 -3M ∆ 0.0 0.2 0.4 -0.4 Risk Appetite - EMF -0.3 -3.0 -0.8 - Cons 0.0 1.4 0.8 US$ Spread BAA EMBI Country Country Relative Economic Momentum GDP GDP SAAR Q4 09E 4.5 Q1 10E 1.6 Q2 10E 4.9 Q3 10E 4.9 EM Funds* Asia ex Japan* Malaysia Spot 2.9 3.2 1.6 -1.5 Month 4,063 1,245 45 -3M ∆ 0.0 -0.7 -0.2 0.5 09 YTD Avg 5,164 1,566 -18 +3M ∆ na 0.8 na na 12-Mo Avg 4,870 1,452 -87 +3M ∆ 0.0 0.0 0.9 -0.9

GDP (YoY) 2008 2009E 2010E

Forecast 4.6 -2.4 5.0

Economic Forecasts -3M ∆ -0.5 0.6 0.6

Foreign Fund Flows (US$ mils)

MSCI Malaysia Absolute and Relative to EMF Index
300 250 200 150 100 50 0 -50 -100 -150 Jan-03 Dec-03 Nov-04 Oct-05 Sep-06 Aug-07 Jul-08 Jun-09 Absolute Relative to MSCI EMF FWD PER PER PBR DY BY/EY BY/DY 0 (196) (323) 300 (319) (391) (342) (370)

MSCI Fair value Range
(521) (650) (693) (715) (1115) (1301) 600 900 1200 1500 1800 2100

Currency Outlook (MYR/USD)
4.0 3.9 3.8 3.7 3.6 3.5 3.4 3.3 3.2 3.1 3.0 2.9 Dec 04 Apr 06 Aug 07 Dec 08 Mar 10 J.P. Morgan forecast: end Dec 09: 3.35 end Mar 10: 3.30 end Jun 10: 3.25 Consensus Spot Forecast Consensus

EPS Integer over Time
110 100 90 80 70 60 Feb 08 2009 2010

J.P. Morgan

May 08

Aug 08

Nov 08

Feb 09

May 09

Aug 09

Nov 09

Source: MSCI, Bloomberg, IBES, Datastream, CEIC, J.P. Morgan, Consensus Economics. Unless stated all forecasts are J.P. Morgan’s. The scorecards are designed to assist in tracking trends and expectations. -3M∆ refers to the change in this factor over the past three months and +3M∆ refers to the forecast change in this factor over the next three months. The Economic Forecast table contains J.P. Morgan’s real GDP forecasts, the change in these forecasts over the past three months, the difference between these forecasts and the average for emerging markets and the final column is the difference between J.P. Morgan's forecast and consensus expectations. The MSCI Fair Value chart is designed to show current valuations relative 10 year valuation history. The vertical dotted line is the current index level. The five horizontal bars show a +/- one standard deviation range for these valuation measures. A dotted line to the left indicates a market that is cheap relative to history. *US Mutual fund subscriptions.

57

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Mexico
Cyclical Upside
Key country dynamics Mexico suffered in 2009 from a cyclically weak economy, driven by the US and H1N1 influenza. Fiscal and rating concerns were also high, as the government implemented a contentious and watered-down 1.0% GDP fiscal adjustment despite the macro weakness. Nevertheless, Mexico’s fiscal revenue/GDP remains low (22% GDP) and poorly structured (1/3 oil). The equity market performed better, helped by index composition (70% defensives) and hence robust earnings (positive 2009, despite GDP plunge). For 2010 we expect a 10.5-point swing of Mexico GDP (from -7.0% to +3.5%), the second highest we forecast globally, after Russia (13.5 points). With the output gap to remain large and inflationary pressures likely ones of supply-side shock, we see a rate hike only in June 2010, and +75bps for the year. Risk/reward is high given strong US linkages and fiscal dynamics. Implications of a global recovery Mexico historical GDP beta to global recovery is over 2.0x, vs overall EM 1.3x. Main driver is the US (destination of 80% exports) and manufacturing. We forecast 4.5% 2010 growth in US manufacturing after -11.4% in 2009e. Oil remains important. US$59 bbl is the budgetary oil forecast, comfortably below our $70 end-2010 forecast and spot closer to $80. The peso has lagged the YTD rally in EM currencies, and there is arguably upside risk. How much have valuations already discounted a recovery? MSCI Mexico 12m forward earnings fell 27% peak to trough and have rebounded 13%. They remain 20% from their highs. This recovery should continue (recent Q3 earnings +20% oya, with 60% of Mexbol reports beating consensus). The market is trading around 14.6x 2010e earnings, below the 5year average (15.6x). We see room for earnings to surprise on the back of the GDP recovery, as well as US$ gains on an appreciating peso. Recommendations Our portfolio is focused on the 1/3 of the index made up of cyclicals (banks, homebuilders, steel, cement, mining), where we see greater earnings recovery leverage and cheaper asset valuations, rather than on the more defensive (staples and telecoms) 2/3s of the index.
Top picks and stocks to avoid
Price (LC) Top picks Ternium Urbi Stocks to avoid Telmex Internacional Telmex 32.5 26.2 15.1 17.7 Code TX URBI* TII TMX Rating OW OW UW UW Mkt cap (US$MM) 6,515 1,986 13,561 16,104 P/E (x) 09E 26.2 13.3 22.4 10.7 10E 15.2 10.1 20.4 12.0 09E 1.2 2.0 0.7 1.6 EPS (LC) 10E 2.1 2.6 0.7 1.5 Div. yield 10E (%) 4.2 0.0 2.5 4.0 ROE 10E (%) 8.4 13.8 9.7 48.6

Ben LaidlerAC
(212) 622-5252 ben.m.laidler@jpmorgan.com J.P. Morgan Securities Inc.

MSCI Mexico: Absolute and relative to MSCI Asia Pacific ex-Japan

800 700 600 500 400 300 200 100 0 97 99 01 03 05 07 09 Absolute Relativ e
Source: MSCI, Datastream.

Source: Bloomberg, J.P. Morgan estimates. Note: Share prices and valuations are as of 25 November 2009.

58

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Mexico Scorecard
Key Financial Data Summary EPS Growth 2007 2008E 2009E 2010E 12.4 -27.2 8.9 21.6 P/E 14.4 19.7 18.1 14.9 ROE 25.1 8.3 8.7 17.2 Yield 2.5 2.0 2.3 2.5 3 Month Long Bond Inflation Real 3 Month Local Interest Rates and Inflation Trend Spot 4.8 5.2 4.9 -0.1 -3M ∆ 0.1 0.1 -0.2 0.3 Risk Appetite - EMF -3.6 -7.6 -2.3 - Cons 0.0 0.0 0.7 US$ Spread BAA EMBI Country Country Relative Economic Momentum GDP GDP SAAR Q4 09E 7.5 Q1 10E 3.7 Q2 10E -0.6 Q3 10E 3.3 EM Funds* LatAm* Mexico Spot 2.9 3.2 2.1 -1.0 Month 4,063 242 98 -3M ∆ 0.0 -0.7 -0.6 0.2 09 YTD Avg 5,164 758 52 +3M ∆ na 0.8 na na 12-Mo Avg 4,870 688 -17 +3M ∆ na na -0.3 na

GDP (YoY) 2008 2009E 2010E

Forecast 1.3 -7.0 3.5

Economic Forecasts -3M ∆ 0.0 -0.5 -1.5

Foreign Fund Flows (US$ mils)

MSCI Mexico Absolute and Relative to EMF Index
500 450 400 350 300 250 200 150 100 50 Jan-03 Dec-03 Nov-04 Oct-05 Sep-06 Aug-07 Jul-08 Jun-09 Absolute Relative to MSCI EMF FWD PER PER PBR DY BY/EY BY/DY 0 (9498) (11984)

MSCI Fair value Range
(19534) (26417) (36263) (36774) (27110) (41868)

(15042)

(30060) 10000 20000 30000 40000 50000 60000

Currency Outlook (MXN/USD)
16.0 15.0 14.0 13.0 12.0 11.0 J.P. Morgan forecast: end Dec 09: 13.00 end Mar 10: 12.50 end Jun 10: 12.50 Spot Forecast Consensus

EPS Integer over Time
110 100
Consensus

2009

2010

90 80 70

J.P. Morgan

10.0 9.0 Dec 04

Apr 06

Aug 07

Dec 08

Mar 10

60 Feb 08

May 08

Aug 08

Nov 08

Feb 09

May 09

Aug 09

Nov 09

Source: MSCI, Bloomberg, IBES, Datastream, CEIC, J.P. Morgan, Consensus Economics. Unless stated all forecasts are J.P. Morgan’s. The scorecards are designed to assist in tracking trends and expectations. -3M∆ refers to the change in this factor over the past three months and +3M∆ refers to the forecast change in this factor over the next three months. The Economic Forecast table contains J.P. Morgan’s real GDP forecasts, the change in these forecasts over the past three months, the difference between these forecasts and the average for emerging markets and the final column is the difference between J.P. Morgan's forecast and consensus expectations. The MSCI Fair Value chart is designed to show current valuations relative 10 year valuation history. The vertical dotted line is the current index level. The five horizontal bars show a +/- one standard deviation range for these valuation measures. A dotted line to the left indicates a market that is cheap relative to history. *US Mutual fund subscriptions.

59

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Philippines
Positioned for a consumption-led upturn
Key country dynamics With nearly 80% of the country’s GDP driven by private consumption, economic growth has proven to be resilient through the crisis. The main fuel for domestic consumption is the strength in OFW remittances due to strong demand for Filipino workers abroad, who are increasingly higher-skilled and higher-paid service workers. The sustained double-digit growth in the BPO sector and its multiplier effect on the economy should likewise remain a driver as these are relatively higher-paid employees. Main weaknesses in the Philippine dynamic remain weak foreign direct investments and the government’s lack of fiscal flexibility that has crowded out the private sector and hampered the investment cycle in the country. Implications of a global recovery Positioned for a consumption led upturn: We believe the Philippines economy in 2010 will move to an above-trend and above-consensus growth of 5%oya, driven by a revival in consumption and government spending. Remittances should continue to positively surprise as the job order pipeline remains robust, equivalent to seven months worth of deployment with a bias for service and professional workers. National elections are scheduled in May, where it is estimated that the five presidential candidates alone will spend at least Php25 billion, equivalent to 0.3% of GDP. As domestic confidence recovers, there is also sizable pent-up demand in the economy to boost growth, reflected by the all-time high spread between GNP and GDP. Corporate balance sheets are robust to support expansion plans to capture this consumption upturn. How much have valuations already discounted a recovery Valuations are still attractive: The PSEi now stands near its LT average P/E of 15x. Valuations are still attractive, in our view, with previous rallies after a bear market low having reached a high of +1SD-2SD (18x-22x). Furthermore, we believe consensus estimates remain conservative with plenty of room for upgrades. Following downgrades of as much as -30%, the Street has only upgraded EPS by 6%. Recommendations Our favored sectors are property, banks, and utilities, which have compelling valuations and attractive growth prospects. Our top picks are ALI, MBT, EDC, and MWC. Our top avoid is Meralco.
Kelly Lim-BateAC
(632) 878-1188 kelly.s.lim-bate@jpmorgan.com J.P. Morgan Securities Philippines Inc.

Flagship reports
• Philippine Strategy: Hitting a macro sweet spot (Sept 24, 2009) • Philippine Trendwatch: 3Q09 Turning the corner (Oct 06, 2009) • Philippine Real Estate: Buy on Dips (Jun 17, 2009) • Metrobank: Upgrade to OW on PPOP/RoE momentum (Nov 5, 2009) • Ayala Corp: More upside (Jul 10, 2009) MSCI Philippines: Absolute and relative to MSCI Asia Pacific ex-Japan

110 90 70 50 30 10 97 99 01 03 05 07 09 Absolute Relativ e
Source: MSCI, Datastream.

MSCI performance table
MSCI Philippines Weightings in Region MSCI Total Mkt Cap. (US$B) 2009 P/E Ratio (x) 2010 P/E Ratio (x) 2011 P/E Ratio (x) 2010 Yield (%) 2010 ROE (%) 2wk 3mth YTD 5.2 10.0 57.8 0.4% 13.4 17.0 15.4 13.5 4.0 15.5

Source: Datastream, IBES, MSCI, JPMorgan estimates. Prices and valuations are as of November 20, 2009

Top picks and stocks to avoid
Price (LC) Top picks Ayala Land Metrobank Energy Dev. Corp Manila Water Stock to avoid Manila Electric 12 43.5 4.15 16.25 207 Code ALI MBT EDC MWC MER Rating OW OW OW OW N Mkt cap (US$MM) 3319 1677 1328 700 4883 P/E (x) 09E 40.9 16.5 10.9 9.0 30.0 10E 40.3 11.2 11.0 8.1 18.0 EPS (LC) 09E 0.29 2.63 0.38 1.80 6.90 10E 0.30 3.88 0.38 2.01 11.51 Div. yield 10E (%) 0.5 2.3 3.2 3.2 2.8 ROE 10E (%) 7.2 10.9 24.2 24.2 21.6

Source: Bloomberg, J.P. Morgan estimates. Note: Share prices and valuations are as of 12 November 2009.

60

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Philippines Scorecard
Key Financial Data Summary EPS Growth 2007 2008E 2009E 2010E 8.3 -16.0 25.1 10.8 P/E 17.9 21.3 17.0 15.4 ROE 14.1 12.3 14.9 15.5 Yield 4.0 3.4 3.8 4.0 3 Month Long Bond Inflation Real 3 Month Local Interest Rates and Inflation Trend Spot 3.8 7.9 1.6 2.2 -3M ∆ -0.1 0.0 1.6 -1.7 Risk Appetite - EMF -1.1 0.9 -0.8 - Cons 0.0 -0.6 0.9 US$ Spread BAA EMBI Country Country Relative Economic Momentum GDP GDP SAAR Q4 09E 4.0 Q1 10E 5.0 Q2 10E 5.0 Q3 10E 5.0 EM Funds* Asia ex Japan* Philippines Spot 2.9 3.2 2.4 -0.7 Month 4,063 1,245 98 -3M ∆ 0.0 -0.7 -0.6 0.2 09 YTD Avg 5,164 1,566 9 +3M ∆ na 0.8 na na 12-Mo Avg 4,870 1,452 -19 +3M ∆ 0.3 0.6 1.4 -1.1

GDP (YoY) 2008 2009E 2010E

Forecast 3.8 1.5 5.0

Economic Forecasts -3M ∆ -0.8 0.1 0.0

Foreign Fund Flows (US$ mils)

MSCI Philippines Absolute and Relative to EMF Index
500 400 300 200 100 BY/DY 0 Jan-03 Dec-03 Nov-04 Oct-05 Sep-06 Aug-07 Jul-08 Jun-09 0 500 Absolute Relative to MSCI EMF FWD PER PER PBR DY BY/EY (525) (282) (435) (308)

MSCI Fair value Range
(503) (901) (761) (741) (1436) (896) 1000 1500 2000 2500 3000

Currency Outlook (PHP/USD)
58 56 54 52 50 48 46 44 42 40 38 36 Dec 04 J.P. Morgan forecast: end Dec 09: 46.0 end Mar 10: 45.5 end Jun 10: 45.5 J.P. Morgan Consensus Spot Forecast Consensus

EPS Integer over Time
110 100 90 80 70 60 Feb 08 2009 2010

Apr 06

Aug 07

Dec 08

Mar 10

May 08

Aug 08

Nov 08

Feb 09

May 09

Aug 09

Nov 09

Source: MSCI, Bloomberg, IBES, Datastream, CEIC, J.P. Morgan, Consensus Economics. Unless stated all forecasts are J.P. Morgan’s. The scorecards are designed to assist in tracking trends and expectations. -3M∆ refers to the change in this factor over the past three months and +3M∆ refers to the forecast change in this factor over the next three months. The Economic Forecast table contains J.P. Morgan’s real GDP forecasts, the change in these forecasts over the past three months, the difference between these forecasts and the average for emerging markets and the final column is the difference between J.P. Morgan's forecast and consensus expectations. The MSCI Fair Value chart is designed to show current valuations relative 10 year valuation history. The vertical dotted line is the current index level. The five horizontal bars show a +/- one standard deviation range for these valuation measures. A dotted line to the left indicates a market that is cheap relative to history. *US Mutual fund subscriptions.

61

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Russia
Leveraged play on cyclical recovery
Key country dynamics Russia has been a top performer among GEMs since the February trough (MSCI RU +150%), but it is still a laggard from the start of the downturn in July 2008. The country has been hard hit by one of the worst GDP contractions (2009 JPMe -8.5%), with JPMe earnings falling -30% y/y. Surging risks resulted, in addition to earnings declines, in a nasty multiples contraction. Conversely, the recent rerating reflects a better outlook. Implications of a global recovery The oil price, Russia’s key external variable, has more than doubled since January; the main economic aggregates have picked up and the ruble has gained over 20% from its low. The MSCI Russia 12M forward P/E has risen to 9.5x from 3x ytd. Forward EPS bottomed out in April, rising c.40% to date. With 2010 JPMe real GDP growth at 5.0%, we expect a recovery in earnings and a leaner cost base is a margin booster, in addition to rising revenue. Banks should be able to cut provisioning expense, the main bottom line spoiler, by over 50-75%, in our view. As the CBR reduced the benchmark rate by 400bp this year and with liquidity improving, the leveraged segments - like materials, telecoms and developers - should see big relief from lower interest expenses. We estimate 2010 aggregate earnings should rise 41% and the momentum should extend into 2011. The extensive 2009-2011 earnings swings reflect the dependence on cyclical commodities. How much have valuations already discounted a recovery? At a 9.5x MSCI Russia 12M forward P/E, the 30% discount to GEMs is abnormally high (against the 3Y pre-crisis average of 15%). Moreover, Russia’s earnings growth (>40% in 2010E and 2011E), is double the GEMs average, invalidating the main reason for the discount in our view. Recommendations We remain OW Russia in the GEM context owing to our OW stance on Energy –we see the most upside in Energy, Telecoms and Financials. Our top picks include Gazprom (on expected volumes and price recovery), Sberbank (with strong margins driving revenue and decline in provisioning allowing for recovery of earnings), and MMK (due to the expected pick-up of domestic demand). Our choice of stock to avoid is Severstal.
Top picks and stocks to avoid
Price ($) Top picks Gazprom Sberbank Stocks to avoid Severstal 6.30 2.50 8.80 Code GAZP RU SBER RU CHMF RU Rating OW OW UW Mkt cap (US$MM) 144,366 55,147 8,868 P/E (x) 09E 6.96 103.8 n/a 10E 5.76 17.2 15.9 EPS ($) 09E 0.90 0.02 -0.40 10E 1.09 0.15 0.55 Div. yield 10E (%) 0.8% 0.9% 0.7% ROE 10E (%) 12.3% 12.6% 6.4%

Alex Kantarovich AC
(7-495) 967-3172 alex.kantarovich@jpmorgan.com J.P. Morgan Bank International LLC

Flagship reports
• Russia-2010: well-positioned among GEMs (11/06/2009) • Real winners of $100 oil (10/14/2009) • Index targets upped, earnings to replace COE as main driver (07/29/2009) • Earnings at trough, risk premiums contracting, international liquidity wanted (04/14/2009) MSCI Russia: Absolute and relative to MSCI Asia Pacific ex-Japan

500 400 300 200 100 0 97 99 01 03 05 07 09 Absolute Relativ e
Source: MSCI, Datastream.

Source: Bloomberg, J.P. Morgan estimates. Note: Share prices and valuations are as of cob 23 November 2009.

62

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Russia Scorecard
Key Financial Data Summary EPS Growth 2007 2008E 2009E 2010E 30.8 -3.6 -33.5 32.3 P/E 7.3 7.6 11.3 8.6 ROE 16.5 15.9 10.7 13.1 Yield 1.8 0.7 1.3 1.7 3 Month Long Bond Inflation Real 3 Month Local Interest Rates and Inflation Trend Spot 9.3 9.3 9.7 -0.4 -3M ∆ -2.0 -2.0 -1.9 -0.2 Risk Appetite - EMF 0.7 -9.1 -0.8 - Cons 0.0 -0.8 2.0 US$ Spread BAA EMBI Country Country Relative Economic Momentum GDP GDP SAAR Q4 09E 6.5 Q1 10E 4.5 Q2 10E 4.0 Q3 10E 4.0 EM Funds* EM Europe* Russia Spot 2.9 3.2 2.5 -0.7 Month 4,063 -157 187 -3M ∆ 0.0 -0.7 -1.4 -0.7 09 YTD Avg 5,164 171 173 +3M ∆ na 0.8 na na 12-Mo Avg 4,870 102 -81 +3M ∆ na na -0.2 na

GDP (YoY) 2008 2009E 2010E

Forecast 5.6 -8.5 5.0

Economic Forecasts -3M ∆ 0.0 0.0 0.0

Foreign Fund Flows (US$ mils)

MSCI Russia Absolute and Relative to EMF Index
600 500 400 300 200 100 BY/DY 0 Jan-03 Dec-03 Nov-04 Oct-05 Sep-06 Aug-07 Jul-08 Jun-09 0 Absolute Relative to MSCI EMF FWD PER PER PBR DY BY/EY (447) (345) (508) (441)

MSCI Fair value Range
(932) (1378) (1130) (1677) Not meaningful Not meaningful

500

1000

1500

2000

2500

Currency Outlook (RUB/USD)
43 Spot Forecast Consensus

EPS Integer over Time
140 120 100
Consensus

2009

2010

39

35

J.P. Morgan forecast: end Dec 09: 28.16 end Mar 10: 28.98 end Jun 10: 29.30

31

80 60
J.P. Morgan

27

23 Dec 04

Apr 06

Aug 07

Dec 08

Mar 10

40 Feb 08

May 08

Aug 08

Nov 08

Feb 09

May 09

Aug 09

Nov 09

Source: MSCI, Bloomberg, IBES, Datastream, CEIC, J.P. Morgan, Consensus Economics. Unless stated all forecasts are J.P. Morgan’s. The scorecards are designed to assist in tracking trends and expectations. -3M∆ refers to the change in this factor over the past three months and +3M∆ refers to the forecast change in this factor over the next three months. The Economic Forecast table contains J.P. Morgan’s real GDP forecasts, the change in these forecasts over the past three months, the difference between these forecasts and the average for emerging markets and the final column is the difference between J.P. Morgan's forecast and consensus expectations. The MSCI Fair Value chart is designed to show current valuations relative 10 year valuation history. The vertical dotted line is the current index level. The five horizontal bars show a +/- one standard deviation range for these valuation measures. A dotted line to the left indicates a market that is cheap relative to history. *US Mutual fund subscriptions.

63

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

South Africa
Catch-up and carry trade in 2010
Key country dynamics We forecast a rebound in SA real GDP growth to 3% in 2010 from -2% in 2009, driven by inventory restocking and a recovery in mining & manufacturing production. While SA’s earnings recovery has lagged and been disappointing in 2009, we believe it could surprise on the upside in 2010. The fall in SA earnings growth in 2009 is the biggest on record versus previous earnings recessionary periods (-28% vs ave EPS fall -9.3%). Implications of a global recovery The strongest beneficiary of the global recovery in SA is the high beta rand exchange rate, which we expect to remain strong in 1H10. The rand has been one of the best performing currencies in 2009 supported by the carry trade, high commodity prices and healthy risk appetite and we expect this to persist in 1H10 as the dollar is forecast to remain weak. Later in 2010 as the dollar regains its footing, we expect some rand weakness and hedge for this via Platinum exposure. Our bottom-up earnings estimates for 2010 are similar for Resources, Financials and Industrials at 20-25%. In 2011E, however, we see a stronger rebound in Resources earnings (+41% versus c20% for Financials & Industrials) on some rand weakness. This suggests a tilt to Resources in 2H10. In 1H10, however, domestic cyclical stocks should continue to be supported by an extended period of flat short rates. How much have valuations already discounted a recovery SA’s valuations are undemanding; forward P/E of 11.9 versus 13 for MSCI EM. SA has underperformed MSCI EM year to date in local currency terms (SA 39.6% vs 70% for EMF). In dollars SA performance has been marginally lower than EMF (SA 99% vs 102% for EMF). While MSCI EMF has rerated 125% in 2009 to date, MSCI SA has rerated only 47%. We expect some rerating catch-up in 2010 as SA’s economic recovery gathers momentum, having lagged the recovery in the rest of EM. Recommendations We recommend OW domestic SA, but include Platinum too as a rand hedge. Our favourite sectors: Media, Banks, General Industrials, selected Retailers and Platinum. Our top stock picks include Anglo Plat, Northam, Absa, JD Group and Naspers. Our choice of stocks to avoid is Nedbank.
Deanne GordonAC
(+27) 21 712 0875 deanne.gordon@jpmorgan.com J.P. Morgan Equities Ltd

Flagship reports
• South African Year Ahead: Team SA – stronger earnings kick in 2010 (26/11/2009) • Investment in South Africa: Cyclical Recovery and rerating catch-up (01/10/2009) • Fund Managers’ Companion: Continue to favour cyclicals (07/08/2009)

MSCI South Africa: Absolute and relative to MSCI Asia Pacific ex-Japan

400 300 200 100 0 97 99 01 03 05 07 09 Absolute Relativ e
Source: MSCI, Datastream.

Top picks and stocks to avoid
Price (ZAR) Top picks Anglo Plat ABSA Northam JD Group Naspers 70500 12600 4100 4370 28200 Code AMS SJ ASA SJ NHM SJ JDG SJ NPN SJ Rating OW OW OW OW OW Mkt cap (US$MM) 22067 11617 1938 1034 15002 P/E (x) 09E 66.5 11.0 22.4 37.5 23.9 10E 31.2 8.2 31.3 7.3 19.2 EPS (TKY) 09E 1060.0 1216.5 183.0 116.5 1178.8 10E 2260.0 1581.4 131.0 597.1 1469.1 Div. yield 10E (%) NM 5.5% 1.5% 0.1 NM ROE 10E (%) 14.5% 18.4% 5.6% 18.8% 12.0%

Source: Bloomberg, J.P. Morgan estimates. Note: Share prices and valuations are as of cob 23 November 2009.

64

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

South Africa Scorecard
Key Financial Data Summary EPS Growth 2007 2008E 2009E 2010E 21.5 8.3 -13.4 28.7 P/E 14.0 12.9 14.9 11.6 ROE 18.3 17.6 14.9 17.4 Yield 3.6 3.5 2.8 3.4 3 Month Long Bond Inflation Real 3 Month Local Interest Rates and Inflation Trend Spot 7.0 9.0 6.1 0.9 -3M ∆ 0.0 1.6 -0.6 0.6 Risk Appetite - EMF -1.8 -2.6 -2.8 - Cons 0.0 0.0 0.7 US$ Spread BAA EMBI Country Country Relative Economic Momentum GDP GDP SAAR Q4 09E 3.4 Q1 10E 4.4 Q2 10E 3.8 Q3 10E 3.6 EM Funds* EM Europe* South Africa Spot 2.9 3.2 1.7 -1.5 Month 4,063 -157 298 -3M ∆ 0.0 -0.7 -0.7 0.1 09 YTD Avg 5,164 171 789 +3M ∆ na 0.8 na na 12-Mo Avg 4,870 102 710 +3M ∆ na na 0.0 na

GDP (YoY) 2008 2009E 2010E

Forecast 3.1 -2.0 3.0

Economic Forecasts -3M ∆ 0.0 0.0 0.5

Foreign Fund Flows (US$ mils)

MSCI South Africa Absolute and Relative to EMF Index
400 350 300 250 200 150 100 50 0 -50 Jan-03 Dec-03 Nov-04 Oct-05 Sep-06 Aug-07 Jul-08 Jun-09 BY/EY BY/DY 300 (546) (508) Absolute Relative to MSCI EMF FWD PER PER PBR DY (518) (546) (560) (520)

MSCI Fair value Range
(725) (727) (765) (706) (1110) (1098) 600 900 1200 1500 1800

Currency Outlook (ZAR/USD)
15.0 Spot J.P. Morgan forecast: end Dec 09: 7.30 end Mar 10: 7.80 end Jun 10: 8.00 Consensus 9.0 Forecast Consensus

EPS Integer over Time
135 125 115 105 95 85 2009 2010

13.0

11.0

7.0

J.P. Morgan

75 65 Feb 08

5.0 Dec 04

Apr 06

Aug 07

Dec 08

Mar 10

May 08

Aug 08

Nov 08

Feb 09

May 09

Aug 09

Nov 09

Source: MSCI, Bloomberg, IBES, Datastream, CEIC, J.P. Morgan, Consensus Economics. Unless stated all forecasts are J.P. Morgan’s. The scorecards are designed to assist in tracking trends and expectations. -3M∆ refers to the change in this factor over the past three months and +3M∆ refers to the forecast change in this factor over the next three months. The Economic Forecast table contains J.P. Morgan’s real GDP forecasts, the change in these forecasts over the past three months, the difference between these forecasts and the average for emerging markets and the final column is the difference between J.P. Morgan's forecast and consensus expectations. The MSCI Fair Value chart is designed to show current valuations relative 10 year valuation history. The vertical dotted line is the current index level. The five horizontal bars show a +/- one standard deviation range for these valuation measures. A dotted line to the left indicates a market that is cheap relative to history. *US Mutual fund subscriptions.

65

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

South Korea
Won to be a big swing factor in 2010
Key country dynamics Three key dynamics for the Korea market in 2010 are expected to be: (1) Won’s movement; (2) an interest rate hike; and (3) regional election. First, the market’s concern that Korean exporters would be sizably hampered by a strong Won in 2010 seems overdone, in our view. Market consensus for Won/US$ by end-10 has fallen near to 1,000 vs. J.P. Morgan’s forecast of 1,150. We remain bullish on Korean auto makers in particular, expecting strong sales volume growth would outweigh the adverse impact of FX move. Second, monetary policy normalization is expected to begin in 1Q10, which is potential negative for the Korean consumer segment due to the household sector’s rising debt service burden. However, the funding cost of corporates with lower credit rating is not likely to rise significantly, as there is further room for credit spread contraction with credit spread of BBB-rated corporates still remaining 400bp higher than the pre-crisis level. Last, upcoming regional election in June 2010 is going to be the last nation-wide election before the presidential election in 2012, meaning the current ruling party is likely to put every effort to win the election. Potentially, the current government might extend some pro-growth policies and try to keep housing prices stable. If property market prices move up to a worrisome level, however, it is a risk for a more aggressive monetary tightening. Implications of a global recovery Korean economic indicators have surprised the market on the upside until recently with further acceleration of 3Q09 real GDP growth. However, we expect Korea’s economic growth to track relatively moderate and stable contour in 2010. The market focus now seems to be moving to liquidity flows. Korean equity funds invested in domestic market have been showing large outflows in 2009 YTD despite more than the 40% rally. We expect fund inflows into equity funds going into 2010, but the magnitude of fund inflows to equity funds is likely to be the key to how high KOSPI can reach from the current level. How much have valuations already discounted a recovery J.P. Morgan considers the current market has largely reflected the economic recovery story and prices in some moderation down the road, expecting relatively moderate upside of KOSPI. Our KOSPI target is 1,850 by the end of 2010, based on our price target for companies under our coverage universe and a forward P/E multiple of 11.8x. Recommendations We remain bullish on export names and the financial sector for 2010, keeping Hyundai Motors and Shinhan Financial Group on our top picks list, while we prefer low beta stocks in the consumer universe such as Amorepacific.
Top picks and stocks to avoid
Price (LC) Top picks Hyundai Motor Samsung SDI Shinhan FG Amorepacific SK Energy Stock to avoid S-Oil Corp 104,000 147,000 45,750 845,000 111,500 57,900 Code 005380 KS 006400 KS 055550 KS 090430 KS 096770 KS 010950 KS Rating OW OW OW OW OW N Mkt cap (US$MM) 19,419 5,658 18,410 4,123 8,700 5,526 P/E (x) 09E 9.6 22.2 14.7 24.2 9.7 10.6 10E 9.1 16.8 10.5 22.6 7.9 9.9 EPS (LC) 09E 10,798 6,627 3,122 34,940 11,357 5,457 10E 11,486 8,758 4,365 37,312 13,955 5,841 Div. yield 10E (%) 0.96 1.30 1.97 0.83 2.08 3.11 ROE 10E (%) 14.2 7.3 11.8 17.2 15.0 16.0

Scott Seo AC
(822) 758-5759 scott.seo@jpmorgan.com J.P. Morgan Securities (Far East) Ltd, Seoul Branch

Flagship reports
• J.P. Morgan's Heart & Seoul - KRW fears likely to be short-lived (Feb/25/2009) • J.P. Morgan's Heart & Seoul - 2Q09 earnings preview (July/10/2009) • J.P. Morgan's Heart & Seoul - 3Q09 earnings preview (Oct/13/2009) MSCI South Korea: Absolute and relative to MSCI Asia Pacific ex-Japan

500 400 300 200 100 0 97 99 01 03 05 07 09 Absolute
Source: MSCI, Datastream.

Relativ e

MSCI performance table
MSCI South Korea Weightings in Region MSCI Total Mkt Cap. (US$B) 2009 P/E Ratio (x) 2010 P/E Ratio (x) 2011 P/E Ratio (x) 2010 Yield (%) 2010 ROE (%) 2wk 3mth YTD 3.7 4.5 50.8 12.8% 398.3 14.3 11.7 9.7 1.2 12.0

Source: Datastream, IBES, MSCI, JPMorgan estimates. Prices and valuations are as of November 20, 2009

Source: Bloomberg, J.P. Morgan estimates. Note: Share prices and valuations are as of 5 November 2009. Amorepacific upgraded to OW on November 7. 66

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Korea Scorecard
Key Financial Data Summary EPS Growth 2007 2008E 2009E 2010E 9.8 -36.7 44.7 22.0 P/E 13.1 20.7 14.3 11.7 ROE 13.5 8.0 10.7 12.0 Yield 1.6 1.1 1.1 1.2 3 Month Long Bond Inflation Real 3 Month Local Interest Rates and Inflation Trend Spot 2.9 5.4 2.0 1.0 -3M ∆ 0.1 0.0 0.4 -0.3 Risk Appetite - EMF -2.7 -0.4 -1.1 - Cons 0.0 1.8 1.0 US$ Spread BAA EMBI Country Country Relative Economic Momentum GDP GDP SAAR Q4 09E 4.0 Q1 10E 2.0 Q2 10E 3.5 Q3 10E 3.5 EM Funds* Asia ex Japan* Korea Spot 2.9 3.2 na na Month 4,063 1,245 1,404 -3M ∆ 0.0 -0.7 na na 09 YTD Avg 5,164 1,566 2,066 +3M ∆ na 0.8 na na 12-Mo Avg 4,870 1,452 1,947 +3M ∆ -0.5 -0.4 0.5 -1.1

GDP (YoY) 2008 2009E 2010E

Forecast 2.2 0.2 4.7

Economic Forecasts -3M ∆ -0.3 1.0 0.7

Foreign Fund Flows (US$ mils)

MSCI Korea Absolute and Relative to EMF Index
450 400 350 300 250 200 150 100 50 0 Jan-03 Dec-03 Nov-04 Oct-05 Sep-06 Aug-07 Jul-08 Jun-09 PER PBR DY BY/EY BY/DY 0 Absolute Relative to MSCI EMF FWD PER (184)

MSCI Fair value Range
(379) (319) (282) (221) (143) (176) 300 600 (684) 900 1200 (370) (495) (670)

Currency Outlook (KRW/USD)
1,650 1,550 1,450 1,350 1,250 J.P. Morgan forecast: end Dec 09: 1130 end Mar 10: 1130 end Jun 10: 1110 Spot Forecast Consensus

EPS Integer over Time
120 110 100
Consensus

2009

2010

90 80

1,150 1,050 950 850 Dec 04 J.P. Morgan

70 60 50 Feb 08

Apr 06

Aug 07

Dec 08

Mar 10

May 08

Aug 08

Nov 08

Feb 09

May 09

Aug 09

Nov 09

Source: MSCI, Bloomberg, IBES, Datastream, CEIC, J.P. Morgan, Consensus Economics. Unless stated all forecasts are J.P. Morgan’s. The scorecards are designed to assist in tracking trends and expectations. -3M∆ refers to the change in this factor over the past three months and +3M∆ refers to the forecast change in this factor over the next three months. The Economic Forecast table contains J.P. Morgan’s real GDP forecasts, the change in these forecasts over the past three months, the difference between these forecasts and the average for emerging markets and the final column is the difference between J.P. Morgan's forecast and consensus expectations. The MSCI Fair Value chart is designed to show current valuations relative 10 year valuation history. The vertical dotted line is the current index level. The five horizontal bars show a +/- one standard deviation range for these valuation measures. A dotted line to the left indicates a market that is cheap relative to history. *US Mutual fund subscriptions.

67

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Taiwan
Year of sustainable growth
Key country dynamics Potential positive catalysts for Taiwan include: (1) broader-based growth in global economy; (2) continued earnings upgrades; (3) recovered capex and capex cycle; (4) cross-strait development and achievement; and (5) consensus underweight on Taiwan by EM PMs. Meanwhile, potential negative risks include: (1) the end of monetary easing; (2) strong currency; and (3) delay in free trade agreement negotiations. In 2009/10, Taiwan experienced a structural change driven by the pro-growth China policy, fiscal stimulus and tax reform. Implications of a global recovery Taiwan as an export-driven economy is highly leveraged to the global economic cycle. We believe the strength of the recovery in 2010 will be rather strong considering the degree of contraction in 2009 is the sharpest in history. Historical experience suggests that there is potential 10-15% upside to our recently upgraded 2010 GDP growth estimate for Taiwan of 5.8%. During the recession, Taiwan’s CBC has cut the discount rate seven times to a historical low of 1.25%. Unprecedented monetary easing leads to a huge increase in liquidity. Together with fiscal stimulus and capital repatriation, liquidity will remain one of the drivers in the equity market next year, in our view. How much have valuations already discounted a recovery Consensus earnings estimates have been consistently revising up since March this year. MSCI-Taiwan forward P/E is now at around 21x, versus the historical range of 12x-40x post tech bubble. While today’s valuation is around the average of the historical range, we believe earnings upgrades will be a powerful driver for the equity market’s performance and stock re-rating in 2010. We recommend investors focus on sectors or stocks that will deliver above-peer or sector average growth in 2010. Recommendations Taiwan remains an Overweight market in our regional portfolio. By sector, we are Overweight on tech and financial with funding sources from telecom and consumer. Within tech, we prefer branded PC over ODM, and white-box handset over smartphone. In financial, we prefer brokers and banks than insurance. Our top picks are UMC, Acer, Hon Hai, Fubon and Nan Ya Plastics, while we would avoid Quanta, HTC and Taishin FHC. Our Dec-10 index target is 8800, based on the analysis of the historical trend P/E and 2010 forward earnings.
Top picks and stocks to avoid
Price (LC) Top picks UMC Acer Hon Hai Fubon FHC Nan Ya Plastics Stocks to avoid Quanta HTC Taishin FHC 15.5 77.8 132.0 38.8 53.2 65.5 340.0 12.7 Code 2303 TT 2353 TT 2317 TT 2881 TT 1303 TT 2382 TT 2498 TT 2887 TT Rating OW OW OW OW OW UW UW UW Mkt cap (US$MM) 6,184 6,419 34,788 9,673 12,833 7,497 8,314 2,716 P/E (x) 09E 69.3 17.5 16.4 14.7 32.3 10.8 11.0 7.6 10E 15.4 12.0 13.0 11.6 22.1 10.3 13.6 17.8 EPS (LC) 09E 0.22 4.44 8.05 2.63 1.65 6.05 31.01 1.66 10E 1.01 6.48 10.12 3.33 2.40 6.37 25.06 0.71 Div. yield 10E (%) 0.0 3.9 1.9 5.2 2.9 4.9 5.9 5.5 ROE 10E (%) 6.0 17.6 18.2 14.0 8.2 20.6 27.6 6.5

Nick LaiAC
(886-2) 2725-9864 nick.yc.lai@jpmorgan.com J.P. Morgan Securities (Taiwan) Limited.

Flagship reports
• Upgrade Taiwan to OW (03/30/2009) • Another step forward on China policy (04/15/2009) • Upgrade index target to 8,000 (04/28/2009) • Circle of life: from recovery to growth (09/01/2009) • The weight on a strong NT$ (10/12/2009) • Seeking for growth in 2010 (10/23/2009) MSCI Taiwan: Absolute and relative to MSCI Asia Pacific ex-Japan

140 110 80 50 20 97 99 01 03 05 07 09 Absolute Relativ e
Source: MSCI, Datastream.

MSCI performance table
MSCI Taiwan Weightings in Region MSCI Total Mkt Cap. (US$B) 2009 P/E Ratio (x) 2010 P/E Ratio (x) 2011 P/E Ratio (x) 2010 Yield (%) 2010 ROE (%) 2wk 3mth YTD 2.5 13.1 60.4 11.1% 344.3 30.6 19.3 13.4 3.3 10.0

Source: Datastream, IBES, MSCI, JPMorgan estimates. Prices and valuations are as of November 20, 2009

Source: Bloomberg, J.P. Morgan estimates. Note: Share prices and valuations are as of 5 November 2009. 68

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Taiwan Scorecard
Key Financial Data Summary EPS Growth 2007 2008E 2009E 2010E 28.2 -68.7 9.2 58.7 P/E 10.5 33.4 30.6 19.3 ROE 17.3 5.6 6.5 10.0 Yield 4.6 3.7 3.0 3.3 3 Month Long Bond Inflation Real 3 Month Local Interest Rates and Inflation Trend Spot 0.9 1.4 -1.2 2.1 -3M ∆ 0.0 -0.1 0.5 -0.5 Risk Appetite - EMF -4.8 -4.4 0.0 - Cons 0.0 0.6 1.3 US$ Spread BAA EMBI Country Country Relative Economic Momentum GDP GDP SAAR Q4 09E 4.2 Q1 10E 3.8 Q2 10E 4.0 Q3 10E 3.8 EM Funds* Asia ex Japan* Taiwan Spot 2.9 3.2 na na Month 4,063 1,245 1,668 -3M ∆ 0.0 -0.7 na na 09 YTD Avg 5,164 1,566 1,059 +3M ∆ na 0.8 na na 12-Mo Avg 4,870 1,452 1,012 +3M ∆ -0.4 0.3 0.2 -0.6

GDP (YoY) 2008 2009E 2010E

Forecast 0.1 -3.8 5.8

Economic Forecasts -3M ∆ 0.0 0.0 0.4

Foreign Fund Flows (US$ mils)

MSCI Taiwan Absolute and Relative (vs EMF) Index
250 200 150 100 50 0 -50 -100 -150 -200 Jan-03 Dec-03 Nov-04 Oct-05 Sep-06 Aug-07 Jul-08 Jun-09 BY/EY (200) BY/DY 0 (427) 500 Absolute Relative to MSCI EMF (120) FWD PER (140) PER PBR (225) DY (267) (252) (311) (421)

MSCI Fair value Range

(1152) (1422)

1000

1500

2000

2500

3000

3500

Currency Outlook (TWD/USD)
38 37 36 35 34 33 32 31 30 29 Dec 04 J.P. Morgan J.P. Morgan forecast: end Dec 09: 31.0 end Mar 10: 30.5 end Jun 10: 30.5 Consensus Spot Forecast Consensus

EPS Integer over Time
120 100 80 60 40 20 0 Feb 08 2009 2010

Apr 06

Aug 07

Dec 08

Mar 10

May 08

Aug 08

Nov 08

Feb 09

May 09

Aug 09

Nov 09

Source: MSCI, Bloomberg, IBES, Datastream, CEIC, J.P. Morgan, Consensus Economics. Unless stated all forecasts are J.P. Morgan’s. The scorecards are designed to assist in tracking trends and expectations. -3M∆ refers to the change in this factor over the past three months and +3M∆ refers to the forecast change in this factor over the next three months. The Economic Forecast table contains J.P. Morgan’s real GDP forecasts, the change in these forecasts over the past three months, the difference between these forecasts and the average for emerging markets and the final column is the difference between J.P. Morgan's forecast and consensus expectations. The MSCI Fair Value chart is designed to show current valuations relative 10 year valuation history. The vertical dotted line is the current index level. The five horizontal bars show a +/- one standard deviation range for these valuation measures. A dotted line to the left indicates a market that is cheap relative to history. *US Mutual fund subscriptions.

69

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Thailand
Strong outlook with implementation risk
Key country dynamics Key positives are: (1) a multi-year pro-cyclical fiscal stimulus that will augment external demand; (2) sustained high excess liquidity that supports risk assets; and (3) potential for earnings upgrades, particularly in banks/property. Key negatives are: (1) propensity for renewed political turbulence; (2) potential weak implementation on fiscal stimulus; and (3) unpredictable policy/governance environment. Implications of a global recovery The primary impact of the downturn on Thailand has been operational, rather than on the balance sheet. With exports accounting for 70% of GDP, the impact of the sharp fall in external demand drove what will likely be a -3.1% GDP contraction in 2009. A moderate total external debt of US$65 billion or 25% of GDP allowed balance sheets to remain solvent. However, the impact of lower government revenue and increased stimulus expenditure has raised public debt/GDP to 45% from 37% pre-crisis. Thailand is also very leveraged into an external demand recovery, with strong second-order effects on private consumption likely as employment ramps up. Thailand is also distinguished by a policy initiative to deploy a large (US$43 billion) procyclical fiscal stimulus from 2010-12. The front-end of the stimulus is laborand rural-intensive and is targeted to deliver a large multiplier effect that should allow Thailand to outperform regional peers in 2010. How much have valuations already discounted a recovery A modest recovery in 2010 has been discounted by the SET’s 60% rise YTD. However, expectations are low, in our view, and likely to see further upgrades in 2010. We note that although 2010 earnings forecasts fell 32% from the peak to trough, upgrades have been just 5%. SET and MSCI Thai valuations have gone from bargain basement levels in early Mar-09 to above LT averages and back again, with the 12-month forward P/E for MSCI Thai now at 11.5x (post-2000 mean of 10.9x). We anticipate earnings revisions combined with multiple expansion back to the levels of 2003 (12x or +0.5 standard deviation above LT average P/E) could underpin the upside in the SET well above 800 in 2010. Post-previous downturns in 2003 and 2006, P/E ratings peaked at 12x and 15x, respectively.
Top picks and stocks to avoid
Price (Bt) Top picks Siam Commercial Bank Land & Houses (F) C P All PTT Thai Oil Stocks to avoid TMB Bank 78.75 6.30 19.10 234.00 40.75 1.12 Code SCB.BK LHf.BK CPALL.BK PTT.BK TOP.BK TMB.BK Rating OW OW OW OW OW N Mkt cap (US$MM) 8,002 1,892 2,571 19,852 2,490 1,394 P/E (x) 09E 12.6 17.7 20.9 11.3 6.1 23.1 10E 10.7 17.2 17.4 9.2 5.8 14.7 EPS (Bt) 09E 10E 6.3 0.4 0.9 20.7 6.7 0.0 7.4 0.4 1.1 25.5 7.1 0.1 Div. yield 10E (%) 2.8 5.8 4.3 3.6 7.4 0.0 ROE 10E (%) 17.0 14.1 31.9 16.0 19.8 6.8

Sriyan PieterszAC
(662) 684-2670 sriyan.pietersz@jpmorgan.com JPMorgan Securities (Thailand) Limited

Flagship reports
• Thai banks: Increase in earnings estimates (October 12, 2009) • Thai Investor Tour (September 23, 2009) • Back to 2003? (August 20, 2009) • Revisiting valuations (June 8, 2009) MSCI Thailand: Absolute and relative to MSCI Asia Pacific ex-Japan

140 110 80 50 20 97 99 01 03 05 07 09 Absolute Relativ e
Source: MSCI, Datastream.

MSCI performance table
MSCI Thailand Weightings in Region MSCI Total Mkt Cap. (US$B) 2009 P/E Ratio (x) 2010 P/E Ratio (x) 2011 P/E Ratio (x) 2010 Yield (%) 2010 ROE (%) 2wk 3mth YTD -0.9 4.2 53.0 1.2% 37.5 12.5 11.3 9.4 3.8 14.4

Source: Datastream, IBES, MSCI, JPMorgan estimates. Prices and valuations are as of November 20, 2009

Source: Bloomberg, J.P. Morgan estimates. Note: Share prices and valuations are as of 5 November 2009.

70

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Thailand Scorecard
Key Financial Data Summary EPS Growth 2007 2008E 2009E 2010E -37.3 56.6 28.7 10.1 P/E 25.1 16.0 12.5 11.3 ROE 7.4 11.6 14.3 14.4 Yield 4.3 3.6 3.3 3.8 3 Month Long Bond Inflation Real 3 Month Local Interest Rates and Inflation Trend Spot 1.4 4.4 0.5 0.9 -3M ∆ 0.0 0.8 1.5 -1.5 Risk Appetite - EMF -2.3 -3.7 0.3 - Cons 0.0 0.7 3.1 US$ Spread BAA EMBI Country Country Relative Economic Momentum GDP GDP SAAR Q4 09E 5.3 Q1 10E 4.9 Q2 10E 5.7 Q3 10E 7.0 EM Funds* Asia ex Japan* Thailand Spot 2.9 3.2 0.5 -2.6 Month 4,063 1,245 -254 -3M ∆ 0.0 -0.7 0.0 0.7 09 YTD Avg 5,164 1,566 129 +3M ∆ na 0.8 na na 12-Mo Avg 4,870 1,452 90 +3M ∆ -0.1 -0.4 0.9 -1.0

GDP (YoY) 2008 2009E 2010E

Forecast 2.6 -3.1 6.1

Economic Forecasts -3M ∆ -0.8 0.0 0.0

Foreign Fund Flows (US$ mils)

MSCI Thailand Absolute and Relative to EMF Index
400 350 300 250 200 150 100 50 0 Jan-03 Dec-03 Nov-04 Oct-05 Sep-06 Aug-07 Jul-08 Jun-09 PER PBR DY (231) (218) (184) Absolute Relative to MSCI EMF FWD PER (115)

MSCI Fair value Range
(381) (500) (466) (379) (840) (914) 300 600 900 1200 1500

BY/EY (127) BY/DY (127) 0

Currency Outlook (THB/USD)
43 41 39 37 35 33 31 29 J.P. Morgan forecast: end Dec 09: 33.00 end Mar 10: 32.50 end Jun 10: 32.00 Consensus Spot Forecast Consensus

EPS Integer over Time
120 110 100 90 80
J.P. Morgan

2009

2010

70 60 Feb 08

27 Dec 04

Apr 06

Aug 07

Dec 08

Mar 10

May 08

Aug 08

Nov 08

Feb 09

May 09

Aug 09

Nov 09

Source: MSCI, Bloomberg, IBES, Datastream, CEIC, J.P. Morgan, Consensus Economics. Unless stated all forecasts are J.P. Morgan’s. The scorecards are designed to assist in tracking trends and expectations. -3M∆ refers to the change in this factor over the past three months and +3M∆ refers to the forecast change in this factor over the next three months. The Economic Forecast table contains J.P. Morgan’s real GDP forecasts, the change in these forecasts over the past three months, the difference between these forecasts and the average for emerging markets and the final column is the difference between J.P. Morgan's forecast and consensus expectations. The MSCI Fair Value chart is designed to show current valuations relative 10 year valuation history. The vertical dotted line is the current index level. The five horizontal bars show a +/- one standard deviation range for these valuation measures. A dotted line to the left indicates a market that is cheap relative to history. *US Mutual fund subscriptions.

71

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Turkey
Inflection point in 2010
Key country dynamics J.P. Morgan forecast a GDP recovery in 2010 to 5% versus the 5.3% contraction in 2009. The conditions and timing of the IMF agreement outlook will influence the economic outlook. We expect the IMF three-year stand by program with total funding of US$ 45 billion to be signed in 2010. The program will ease Turkey’s reliance on external financing and reduce the crowding out of the private sector. The government borrowing program will dominate the financial markets in 1Q10. Banks should benefit from higher credit growth in 2H10. The recession has created a substantial output gap, limiting the risk of inflation. Implications of a global recovery Turkey’s current account deficit was less than forecast in 2009 due to modest import growth combined with resilient exports, notably ex EU. Turkish exporters will benefit from a recovery in European and middle-east demand and an increase in tourism as discretionary spending recovers. A $1/bbl rise in oil prices (assuming a similar rise in other energy prices) widens Turkey’s CAD about $500 million. For the 2010 outlook, our economist assumes a 13% increase in energy prices over the 2009 average. How much have valuations already discounted a recovery Turkey’s valuations are undemanding; forward PE of 9 versus 13 for MSCI EM. The index has marginally underperformed MSCI EM year to date. Since mid-March 2009, the local currency index is in line with MSCI EM while it has outperformed by 30% in US$ terms. Turkish financials are flat relative to EM financials YTD and have marginally outperformed by 13% since midMarch. Turkey valuations discount a recovery in line with the EM benchmark Recommendations We are neutral Turkey recognizing the importance of the agreement with the IMF next year. We forecast a moderation in financials EPS growth from 3050% growth in 2009 to 10-20% in 2010. We forecast 2011 EPS growth to accelerate towards 20-30%; which in our view will get gradually priced in 2H10. Current valuations (single digit PE 10E; P/NAV average of about 1.5) are not pricing in medium-term growth prospects and earnings acceleration in 2H10 and 2011E. Media companies should benefit from a recovery in business discretionary spending and auto companies focused on exports should be leveraged to the Euro zone recovery. The key medium call on Turkey is whether it has moved into a period of sustained single digit inflation and interest rates. This should help Turkish trend growth accelerate.
Top picks and stocks to avoid
Price (LC) Top picks Asya Vakifbank 3.1 3.2 Code ASYAB TI VAKBN TI Rating OW OW Mkt cap (US$MM) 1845.5 5428 P/E (x) 09E 10 7.5 10E 6.8 6.5 EPS (LC) 09E 0.3 0.4 10E 0.5 0.5 Div. yield 10E (%) 4.0% 5.5% ROE 10E (%) 22.1% 17.8%

Adrian MowatAC
(852) 2800-8599 adrian.mowat@jpmorgan.com J.P. Morgan Securities (Asia Pacific) Limited

MSCI Turkey: Absolute and relative to MSCI EMEA

4000 3000 2000 1000 0 97 99 01 03 05 07 09 Absolute Relativ e
Source: MSCI, Bloomberg, J.P. Morgan.

MSCI performance table
MSCI Turkey Weightings in Region MSCI Total Mkt Cap. (US$B) 2009 P/E Ratio (x) 2010 P/E Ratio (x) 2011 P/E Ratio (x) 2010 Yield (%) 2010 ROE (%)
Source: Datastream, IBES, MSCI. Prices and valuations are as of November 20, 2009

2wk 3mth YTD -4.5 -5.6 58.9 1.3% 40.8 9.7 8.8 7.4 3.5 17.3

Source: Bloomberg, J.P. Morgan estimates. Note: Share prices and valuations are as of 20 November 2009.

72

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Turkey Scorecard
Key Financial Data Summary EPS Growth 2007 2008E 2009E 2010E 56.9 -11.2 6.4 10.8 P/E 9.2 10.3 9.7 8.8 ROE 18.5 16.7 17.7 17.3 Yield 4.7 3.9 2.8 3.5 3 Month Long Bond Inflation Real 3 Month Local Interest Rates and Inflation Trend Spot 7.1 8.2 5.1 2.0 -3M ∆ -1.3 -1.7 -0.2 -1.1 Risk Appetite - EMF -4.0 -5.9 -0.8 - Cons 0.0 0.5 1.5 US$ Spread BAA EMBI Country Country Relative Economic Momentum GDP GDP SAAR Q4 09E 4.5 Q1 10E 0.0 Q2 10E 3.6 Q3 10E 8.2 EM Funds* EM Europe* Turkey Spot 2.9 3.2 2.5 -0.6 Month 4,063 -157 21 -3M ∆ 0.0 -0.7 -0.6 0.2 09 YTD Avg 5,164 171 -1 +3M ∆ na 0.8 na na 12-Mo Avg 4,870 102 -33 +3M ∆ na -1.7 -0.1 na

GDP (YoY) 2008 2009E 2010E

Forecast 0.9 -5.3 5.0

Economic Forecasts -3M ∆ -0.8 -0.6 2.0

Foreign Fund Flows (US$ mils)

MSCI Turkey Absolute and Relative to EMF Index
800 700 600 500 400 300 200 100 0 Jan-03 Dec-03 Nov-04 Oct-05 Sep-06 Aug-07 Jul-08 Jun-09 DY BY/EY BY/DY 0 (348262) PER PBR (397670) Absolute Relative to MSCI EMF FWD PER (376414)

MSCI Fair value Range
(850646) (1349945) (1340990) (1075084) (648389) (1194998) 500000 1000000 1500000 2000000

(464556)

Currency Outlook (TRL/USD)
2.20 2.10 2.00 1.90 1.80 1.70 1.60 1.50 1.40 1.30 1.20 1.10 Dec 04 Apr 06 Aug 07 Dec 08 J.P. Morgan Consensus J.P. Morgan forecast: end Dec 09: 1.40 end Mar 10: 1.45 end Jun 10: 1.45 Spot Forecast Consensus

EPS Integer over Time
120 110 100 90 80 70 60 50 Feb 08 2009 2010

Mar 10

May 08

Aug 08

Nov 08

Feb 09

May 09

Aug 09

Nov 09

Source: MSCI, Bloomberg, IBES, Datastream, CEIC, J.P. Morgan, Consensus Economics. Unless stated all forecasts are J.P. Morgan’s. The scorecards are designed to assist in tracking trends and expectations. -3M∆ refers to the change in this factor over the past three months and +3M∆ refers to the forecast change in this factor over the next three months. The Economic Forecast table contains J.P. Morgan’s real GDP forecasts, the change in these forecasts over the past three months, the difference between these forecasts and the average for emerging markets and the final column is the difference between J.P. Morgan's forecast and consensus expectations. The MSCI Fair Value chart is designed to show current valuations relative 10 year valuation history. The vertical dotted line is the current index level. The five horizontal bars show a +/- one standard deviation range for these valuation measures. A dotted line to the left indicates a market that is cheap relative to history. *US Mutual fund subscriptions.

73

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

MENA
Geared play into a global economic recovery
Key country dynamics The economic backdrop for the MENA region is relatively resilient. Benefiting from several years of high budget surpluses and the ~70% recovery in the oil price since its lows in Feb-09, we expect the Gulf countries to continue their growth path, mainly driven by sizeable infrastructure projects (e.g. KSA, Qatar, UAE) budgeted at an estimated oil price of around $40/bbl (vs JPME $69). Historical market valuations and foreign ownership remain relatively low compared with other EMs. We believe the reaction of the global equity markets to the recent Dubai World restructuring announcement has been overdone and feel going forward there is an increasing need for differentiation between Dubai and the other MENA markets. Dubai accounts for 7% of the market weight of the GCC200 index. Implications of a global recovery In our view the MENA region is a geared play into a global economic recovery, mainly due to its natural resource wealth (e.g. ~2/3 of world oil reserves and ~45% of world gas reserves) supporting sovereign flows and regional investments. In the U.A.E., we believe the government’s intention is to limit the restructuring to Dubai World (incl. property developer Nakheel) and federal support is likely to be more selective going forward. We see the USD5bn in bonds recently taken up by two Abu Dhabi banks for the DFSF and reaffirming statements from the U.A.E. Central Bank to support liquidity of the U.A.E banking system as a clear sign of federal unity. How much have valuations already discounted a recovery? With regional issues being addressed and worked out (e.g. restructuring of Dubai World, Saad/Algosaibi debts), we believe the lagging performance of regional equity markets is likely to catch up with the recent strong EM performance. While global risk appetite for equities continues to increase, the GCC200 index is still around 50% below its high in Jan-08, whereas the MSCI EM is only around 25% below its high in Nov-07. Recommendations We accept that the restructuring of Dubai World could have been better communicated to financial markets, but believe that the reaction of the financial markets to this news creates attractive opportunities for investors in our preferred MENA names with no or little exposure to Dubai: Aldar Properties (Aldar) in the property sector, First Gulf Bank (FGB) in the financial sector and Qatar Telecom (Qtel) in the telecom sector.
Top picks and stocks to avoid
Price (LC) Top picks Aldar FGB Qtel 5.46 18.75 150.90 Code ALDAR UH FGB UH Qtel QD Rating OW OW OW Mkt cap (US$MM) 3,835 7,025 6,093 P/E (x) 09E 7.98 8.59 5.75 10E 6.42 7.81 5.83 EPS (LC) 09E 0.68 2.18 20.39 10E 0.85 2.40 20.42 Div. yield 10E (%) 0.0% 1.9% 7.3% ROE 10E (%) 11.0% 17.0% 11.1%

Christian KernAC
(971-4) 428 1789 christian.a.kern@jpmorgan.com JPMorgan Chase Bank, N.A., Dubai Branch

Flagship reports
• MENA Telecom Sector - Initiating coverage on GCC telecoms (Oct 8, 2009) • MENA Property Sector - Initiating coverage on UAE property (Aug 10, 2009) • MENA Financial Sector - Initiating coverage on UAE banks (Jul 1, 2009)

Figure 1: GCC200 vs EM
220 200 180 160 140 120 100 80 Mar-09

Apr-09

May-09

Jun-09

Jul-09 MXEF Index

Aug-09

Sep-09

Oct-09

Nov-09

BGCC200 Index

Source: Bloomberg

Table 1: Market Weights of BGCC200
Saudi Arabia Qatar Kuwait Abu Dhabi Dubai Oman Bahrain
Source: Bloomberg and J.P. Morgan.

52% 14% 12% 11% 7% 2% 2%

Source: Bloomberg, J.P. Morgan estimates. Note: Share prices and valuations are as of cob 23 November 2009.

74

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

MENA Equity Research
Extended stock coverage into MENA region
Over the past few months, we have built our Dubai-based equity research team and have extended stock coverage into the MENA region. With financials, real estate and telecoms, we cover the three main sectors in the MENA region. This already includes more than a dozen key stocks in our coverage universe which we will extend on an ongoing basis. Financials – Abu Dhabi banks attractively positioned vs CEEMEA peers We believe Abu Dhabi banks are attractively placed to benefit from balance sheet growth, driven by economic flows arising out of a) the rising price of crude oil supporting the Abu Dhabi's finances and b) Abu Dhabi's continuing infrastructure investments supported by strong capitalization and sovereign backing within the shareholding structure. Notwithstanding the further expected asset quality deterioration, to some extent potentially arising out of the Dubai World restructuring (where NBAD and FGB have limited exposure vs. their balance sheet size) and its secondary impacts, we believe that strong coverage ratios and pre-provisioning profits provide an ample buffer for our OW Abu Dhabi names to suffer a rise in NPLs without making any losses on the bottom line. Rising investor risk appetite in GEMs and attractive valuations of Abu Dhabi banks - trading at a more than 20% NAV discount vs. their CEEMEA peers - is likely in our view to help close the 35%-45% upsides to Dec-10 PTs that we see in our OW Abu Dhabi stocks. Our key recommendation within MENA financials is First Gulf Bank. Real estate – need for differentiation As the local equity markets gradually absorb the impact of the announced restructuring of Dubai World and the recent rise in Dubai and Abu Dhabi CDS spreads, we see an increasing need for differentiation between Dubai and Abu Dhabi fundamentals. We remain OW on Abu Dhabi property stocks and highlight that while investor risk appetite may reduce in the near to medium term, broad sector dynamics remain unchanged and favourable for Abu Dhabi-based property developers. As Dubai suffers from a housing surplus with vacancy levels as high as 25% in certain areas, Abu Dhabi continues to face a housing shortage unlikely to be met until 2011-2012 due to limited supply in the pipeline. While U.A.E. property prices are down 4550% from peak levels, we prefer exposure to Abu Dhabi-based developers, as they enjoy stronger underlying fundamentals. Our key recommendation within MENA real estate is Abu Dhabi-focused Aldar Properties. Telecoms – good time to add to GCC telecom positions While local equity markets digest the Dubai World restructuring news, we highlight four reasons why we believe it is a good time to add to GCC telecom positions: 1) strong valuation support; 2) our expectations of good 4Q results; 3) room to catch up for GCC markets; and 4) risk appetite for emerging markets continues to improve. Our top pick within MENA telcos is Qatar Telecom, rated Overweight with more than 50% prospective upside and one of our key stock calls in our JPM CEEMEA telecom universe.
MENA Equity Research: Christian KernAC (Telecoms/Infrastructure)
(971-4) 428-1789 christian.a.kern@jpmorgan.com JPMorgan Chase Bank, N.A., Dubai Branch

Alex Comer (Petrochemicals)
(44-20) 7325-1964 alex.r.comer@jpmorgan.com J.P. Morgan Securities Ltd.

Naresh Bilandani (Financials)
(971-4) 428-1763 naresh.n.bilandani@jpmorgan.com JPMorgan Chase Bank, N.A., Dubai Branch

Muneeza Hasan (Real Estate/Construction)
(971-4) 428-1766 muneeza.z.hasan@jpmorgan.com JPMorgan Chase Bank, N.A., Dubai Branch

Ranjan Sharma
(91-22) 6157-3305 ranjan.x.sharma@jpmorgan.com J.P. Morgan India Private Limited

For MENA Equity Sales advice, please contact: Stephen Daly
(971-4) 428-1715 stephen.a.daly@jpmorgan.com JPMorgan Chase Bank, N.A., Dubai Branch

Sadiq Hussain
(971-4) 428-1741 sadiq.s.hussain@jpmorgan.com JPMorgan Chase Bank, N.A., Dubai Branch

Flagship reports
• MENA Telecom Sector - Initiating coverage on GCC telecoms (Oct 8, 2009) • SABIC – A geared play on oil and cyclical recovery: Initiate with OW (Sept 3, 2009) • MENA Property Sector - Initiating coverage on UAE property (Aug 10, 2009)
• MENA Financial Sector - Initiating coverage on

UAE banks (Jul 1, 2009)

75

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

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76

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Sector Overviews
77

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Agribusiness, Pulp and Paper
Long Logistics, Short Sugar
Key sector dynamics The agribusiness sector is more about supply than demand. Hence, the global recovery is less of a factor than the outlook for supply, with some exceptions. The three exceptions within our coverage are: (1) ethanol demand; (2) cotton demand; and (3) freight prices. The pulp and paper sector is more leveraged to rising economic activity than the agribusiness sector. Implications of a global recovery Because it is linked to higher economic activity and rising oil prices, ethanol demand should benefit next year. However, demand is also tied to government policies and, in Brazil, sales of flexfuel vehicles. In fact, demand has continued to be strong throughout the downturn in Brazil due to incentives for car purchases. Hence it is hard to see a significant acceleration of the trend next year. Cotton demand, on the other hand, is tied to global economic recovery, and we are starting to see signs of an improvement, which would benefit producers such as SLC Agricola (SLCE3/N). However, the global cotton stock-to-use ratio is still extremely high at 47%, so we expect it will take some time to work this down to more “bullish” levels. Finally, logistics prices will benefit as industrial activity picks up, tightening the availability of transportation. Pulp and paper sector demand benefits from economic recovery – due both to rising consumer demand and to rising employment (printing and writing papers). While we expect employment to be a laggard, rising consumer demand should benefit demand for consumer packaging, such as boxboard. How much have valuations already discounted a recovery? We think valuations for the sugar/ethanol sector are the most stretched, with the market valuing peak earnings (on peak sugar prices) as the new normal. Grain markets seem to be factoring in some recovery in supply-demand in both the grains and cotton. On the other hand, we think the pulp/paper and logistics sectors are not giving full value to the recovery. Recommendations Our top pick in the LatAm agribusiness sector is railroad operator ALL (ALLL11/OW). We also like the pulp/paper producer Suzano (SUZB5/BZ). We would highlight sugar/ethanol stocks as ones to avoid, especially Acucar Guarani (ACGU3/UW), which is the most levered and least profitable of the three producers.
Top picks and stocks to avoid
Price Top picks ALL Suzano Stocks to avoid Guarani 16.45 17.90 4.94 Code ALLL11 SUZB5 ACGU3 Rating OW OW UW Mkt cap (US$MM) 6,185 3,059 811 P/E (x) 09E 24.1 6.2 NM 10E 18.1 14.8 45.2 EPS (Ps) 09E 0.74 2.79 -0.29 10E 0.87 1.18 0.11 Div. yield 10E (%) 1.7% 0.7% 0 ROE 10E (%) 17.0% 7.9% 2.9%

Brazil Agribusiness Debbie Bobovnikova, CFAAC
(1-212) 622 3489 debbie.bobovnikova@jpmorgan.com J.P. Morgan Securities Inc.

Flagship reports
• Suzano : Inflection Point in Earnings Upgrade to OW (11/10/2009) • SLC Agricola : Lowering Est and Price Target on Lower 09/10 Growth Outlook (10/27/2009) • LatAm Agribusiness : Sector Guide: Key Discussions at 2nd Annual Conference (10/22/2009) • SLC Agricola : Disappointing 2Q Results Adj. Est. and Downgrading to Neutral, Intro 2010 Price Target (08/13/2009) • ALL: CEO Call Highlights (4/19/2009) • LatAm Agribusiness: Sugar Logistics Agreement - LT Positive for ALL (3/10/2009) MSCI EM Agribusiness: Absolute and relative to MSCI EM

300 250 200 150 100 50 97 99 01 03 05 07 09 Relativ e
Source: MSCI, Datastream.

Absolute

Source: Bloomberg, J.P. Morgan estimates. Note: Share prices and valuations are as of 25 November 2009.

78

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Autos & Industrials
Focus on sustainable growth names
Key sector dynamics Looking into 2010, we believe the regional auto sector should be supported by key positives including: (1) continued demand recovery, as driven by rising household disposable income, low penetration, and a relatively loose credit environment. Among others, China is riding the third auto boom on the breakout of car demand in tier-three cities. In India, the acceleration in economic growth could be conducive for sustained auto demand recovery entering 2010; and (2) accommodative policies. We believe the chance for China to renew the preferential tax cut policies on expiration at the end of the year is at around 70% as the government wants to ensure policy continuity for promoting domestic consumption. In India, while some of the stimulus measures (such as excise duty cuts) may be partially rolled back next year, the overall policy environment remains favorable; and (3) relatively low cost of raw materials. On the other hand, a possible sharp rebound in oil prices and potential monetary tightening could still weigh on the sector: a broad-based tightening in China is expected to kick in as of 2Q10, while India’s central bank has signaled that it will end its stance of monetary easing in early 2010. Implications of a global recovery The synchronized global economic recovery and resultant rebound in auto demand recovery in developed markets could benefit most export-oriented auto players such as Korean names. For China and India, whose auto markets are generally domestic consumption-driven, a solid recovery in exports could help improve their labor markets, their household disposable income growth and their car consumption. Meanwhile, we expect more Chinese auto companies may seek mergers and acquisitions in overseas markets in 2010 on the back of the improved economic outlook in developed markets. How much have valuations already discounted a recovery Regional auto producers are generally trading at around mid-cycle valuations, with leading auto names trading at above mid-cycle valuations. For instance, DongFeng Motor is now trading at 11.2x FY10E P/E, about one-standard deviation above the average historical prospective P/E of 8.3x. Meanwhile, Maruti Suzuki is trading at 15.4x FY10E P/E, versus its trough prospective P/E of 8.0x, and historical average prospective P/E of 14.0x. Recommendations We prefer domestic consumption-driven auto names such as China autos and India autos due to the low penetration rates in these markets to exports-driven auto names such as Korean autos. Our top picks within the region include Maruti Suzuki, Astra International, Hyundai Motor and Yulon Motor. Our stocks to avoid list includes Weichai Power.
Top picks and stocks to avoid
Price (LC) Top picks Hyundai Motor Company Astra International DongFeng Motor Co., Ltd. Maruti Suzuki India Ltd Yulon Motor Co., Ltd. Stock to avoid Weichai Power 94600 32000 11.0 1567 39.0 60.3 Code 005380 KS ASII IJ 489 HK MSIL IN 2201 TT 2338 HK Rating OW OW OW OW OW N Mkt cap (US$MM) 17762 13587 12207 9716 1895 6941 P/E (x) 09E 8.8 15.3 15.0 37.2 41.5 9.9 10E 8.2 12.6 13.2 19.9 56.6 8.6 EPS (LC) 09E 10E 10798 2097 0.7 42.2 0.9 6.1 11486 2541 0.8 78.8 0.7 7.0 Div. yield 10E (%) 1.6 3.2 1.3 0.4 0.5 0.8 ROE 10E (%) 10.1 24.9 23.6 21.6 1.8 45.2

Frank LiAC
(852)-2800-8511 frank.m.li@jpmorgan.com J.P. Morgan Securities (Asia Pacific) Limited

Flagship reports
• DongFeng Motor Co., Ltd.–Pole position (Jan 16, 2009) • China autos–Staging an earlier-thanexpected recovery in FY09 (Mar 30, 2009) • AutoWIN & Auto WINdata–Regional auto sector views, sales trends, forecasts etc (Monthly) • Brilliance China–A phoenix is China’s auto sector(Oct 30, 2009) • India Auto Manufacture: Stay invested, More steam ahead (Aug 6, 2009) • Hyundai Mobis: Small step to holding co., stronger recurring profit profile, battery venture in the works. Upgrade to OW (Aug 30, 2009) MSCI Autos and MSCI Autos relative to MSCI Emerging Markets Autos

175 150 125 100 75 50 25 97 99 01 03 05 07 09 Relativ e Absolute
Source: MSCI, Datastream.

Source: Bloomberg, J.P. Morgan estimates. Note: Share prices and valuations are as of 5 November 2009. *Indian companies have March year-end.

79

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Consumer
Selective stock picking
Key sector dynamics
Vineet Sharma, CFAAC
(852) 2800-8523 vineet.k.sharma@jpmorgan.com J.P. Morgan Securities (Asia Pacific) Limited

Discretionary consumption trends in Asia will continue to be influenced by wage growth and ‘wealth creation’ from the property market and local stock markets. The return of modest inflation in food prices augurs well for staples. An end to aggressive discounting to clear inventories is near, which should aid margin recovery. In LATAM, declining interest spreads, easing credit supply, increasing consumer confidence, higher disposable income, increase in employment, and declining food inflation have allowed for a better share of wallet for discretionary items. However, retail sales growth in Mexico still remains under pressure. In 2010 we believe earnings growth for Russian consumer names should be driven by recovery in consumption, business expansion and M&A activity, as well as a stronger ruble. Implications of a global recovery Export driven economies such as China and Korea should benefit the most from global recovery. Better economic fundamentals, stability in wages, employment and improving confidence should propel consumer spending in 2010. We expect consolidation to continue for LATAM food and beverages and Russian retail. However, all is not well for SA and Mexico. There is a risk that household credit growth could remain muted for long in SA, depressing household consumption. Mexico, which relies heavily on the US through exports and workers' remittances, will take a while before it revives. How much have valuations already discounted a recovery We are positive on dominant staples in Asia and expect them to benefit from benign inflation. Expectations are quite low for Chinese discretionary names. In LATAM, though current prices have started to reflect the strong recovery in retail sales, they are still 20-35% below peak. In SA, furniture counters still have scope to rerate. Our sector analysts in Russia are of the view that expected recovery in consumer purchasing power is partially priced in.
Recommendations

Andrea TeixeiraAC
(1-212) 622-6735 andrea.f.teixeira@jpmorgan.com

Alan AlanisAC
(1-212) 622-3697 alan.alanis@jpmorgan.comJ.P. Morgan Securities Inc.

Sean HolmesAC
(27-11) 507-0373 sean.x.holmes@jpmorgan.com J.P. Morgan Equities Ltd.

Elena JouronovaAC
+7 495 967 3888 elena.jouronova@jpmorgan.com J.P. Morgan Bank International LLC

Flagship reports
• Identifying potential short-term and long term winners (10/18/09) • China Discretionary: Time to take profit or ride the momentum? (06/09/09) • SA Retail: In pursuit of value • Russian Retail: Growth outlook improving on faster expansion and stronger FX MSCI EM Consumer: Absolute and relative to MSCI EM 270 210 150 90 30

We like United Spirits in Asia as a play on the fastest growing spirits market globally. Our top picks in CEEMEA are JD Group and Magnit in CEEMEA, and FEMSA and LAME in LATAM.

97 99 01 03 05 07 09 Relativ e
Source: MSCI, Datastream.

Absolute

Top picks and stocks to avoid
Price (LC) Top picks JD Group Femsa China Mengniu Dairy Co. United Spirits Limited LAME Magnit OAO Stocks to avoid Massmart Soriana Hindustan Unilever Ltd. 4340 45.2 23.1 1228 13.9 59.5 8519.0 31.8 284.3 Code JDG SJ FMX US 2319 HK UNSP IN LAME4 BZ MGNT RU MSM SJ SORIANAB MM HUVR IN Rtg OW OW OW OW OW OW UW UW UW Mkt cap (US$MM) 937 16174 5165 3309 5519 4953 2270 4376 13305 P/E (x) 09E 37.3 24.7 28.2 44.0 58.8 91.5 14.4 20.6 25.3 10E 7.3 20.3 24.8 34.8 34.9 58.9 14.7 18.5 27.3 EPS (LC) 09E 116.5 1.8 0.8 27.9 0.2 0.7 592 1.5 11.3 10E 597.1 2.2 0.9 35.3 0.4 1.0 581 1.7 10.4 Div. yield 10E (%) 0.0 1.1 0.0 0.3 1.1 0.0 4.4 0.5 2.6 ROE 10E (%) 18.8 10.3 17.5 12.6 62.9 29.3 35.8 9.3 99.5

Source: Bloomberg, J.P. Morgan estimates. Note: Share prices and valuations are as of 27 November 2009.

80

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Energy
Oil price recovery done
Key sector dynamics
Brynjar Bustnes AC
(852) 2800-8578 brynjar.e.bustnes@jpmorgan.com J.P.Morgan Securities (Asia Pacific) Limited

Demand data does not support current oil prices, and inventories are high and OPEC’s compliance is fading. Weak demand and non-OPEC production would put downward pressure on oil. We expect gasoline demand to stay weak, due to weak US demand. Distillate demand is expected to return to growth as a dominating EM market product. Since 2009, Russian oils have had to pay lower royalties and have enjoyed extensive tax breaks on Greenfield developments. We might see further tax initiatives to encourage output growth in Russia. In LATAM, active rigs have increased 2% since August ’07 while they have declined 44% in the US and 9% in the Middle East, the largest producing region globally
Implications of a global recovery

Nadia KazakovaAC
(7-495) 937 7329 nadia.kazakova@jpmorgan.com J.P Morgan Securities Ltd.

Sergio TorresAC
(212) 622-3378 sergio.torres@jpmorgan.com J.P. Morgan Securities

Oil prices are at the high-end of the trading range (US$60- 80/bbl). High oil prices have pushed oil companies’ earnings up. In Russia, we estimate output might be up be over 1% in 2009E and could rise by 2.6% y/y in 2010E (to 10.1MMbppd), driven by the launch of East Siberian greenfields projects. In Asia, Petchem had a strong recovery but ME capacity is still missing. Next year this capacity should have a major negative impact on margins, despite a potential pick-up in demand.
How much have valuations already discounted a recovery

Flagship reports
• One Minute on Oil (ad hoc) • Crude Reality (weekly) • Russian Gas: Gazprom revisited
• Russia Integrated Oils: Oil shares hit year-

endPTs. • Petrobras: More Oil Than Meets the Eye MSCI EM Energy: Absolute and relative to MSCI EM

Our sector analysts in Asia are positive on integrated and refining relative to upstream/ petchem. Integrated/less oil leverage stocks are currently cheapest with rerating or positive news being potential drivers. Russian integrated oils are also trading at 12%-19% discounts to historical average PERs, and have not yet discounted a recovery.
Recommendations

700 600 500 400 300 200 100 0 97 99 01 03 05 07 09 Relativ e
Source: MSCI, Datastream.

We like Rosneft and Gazprom in CEEMEA, and Sinopec and SK Energy in Asia. In LATAM, we prefer stocks that can deliver production growth on top of revenue enhancement driven by the value of crude. Our top picks reflect our optimism for Brazilian offshore: OGX and Petrobras. Our stock to avoid is Ecopetrol.
Top picks and stocks to avoid
Price (LC) Code Top picks Gazprom Rosneft SK Energy Co Ltd Sinopec Corp - H Petrobras OGX Stocks to avoid Lukoil Ecopetrol PetroChina 5.6 7.9 108000 6.4 38.5 1430 GAZP RU ROSN LI 096770 KS 386 HK PETR4 BZ OGXP3 BZ Rtg OW OW OW OW OW OW N UW UW Mkt cap (US$MM) 133282 83620 8512 136013 206917 26309 47291 53189 339259 P/E (x) 09E 6.3 11.8 9.5 8.6 12.9 nm 6.6 16.8 15.4 10E 5.2 7.2 7.7 8.3 11.7 nm 6.4 13.2 13.8

Absolute

EPS (LC) 09E 0.9 0.7 11357 0.7 3.0 16.4 8 154 0.6

10E 1.1 1.1 13955 0.8 3.3 5.7 9 197 0.7

Div. yield 10E (%) 0.0 1.4 2.1 3.0 1.7 0.0 2.5 4.6 3.2

ROE 10E (%) 12.3 19.5 14.7 16.6 17.4 3.8 12.5 27.1 14.0

55.6 LKOH RU 2600.0 ECOPETL CB 9.4 857 HK

Source: Bloomberg, J.P. Morgan estimates. Note: Share prices and valuations are as of 27 November 2009.

81

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Financials
Credit trends improving
Key sector dynamics
Sunil GargAC
(852) 2800-8518 sunil.garg@jpmorgan.com J.P. Morgan Securities (Asia Pacific) Limited

We expect credit demand to recover cyclically in EM in sync with economic growth and backed by a continuation of monetary policy. Nominal interest rate increases are expected to drive modest NIM expansion. Credit trends are improving in the region and this bodes well for the re-emergence of loan growth. Valuations are pretty cheap in CEEMEA and we believe P/NAV above 3 could be the peak of the market by 2011. We fear non conventional intervention in credit markets in Asia.
Implications of a global recovery

Paul FormankoAC
(+44) 207-325-6028 paul.formanko@jpmorgan.com J.P. Morgan Securities Ltd.

Bank earnings lag economic recoveries, and to that extent, 2010 promises to be a seriously positive earnings recovery year in EM. We might however see regulatory insistence on reducing leverage in the business over the next few years. In LATAM, economic conditions differ throughout the region. We expect an increase in loan origination and a fall in early stage delinquencies in Brazil. The move from deflation to inflation would improve the NIMs in Chilean banks. In CEEMEA, Turkish financials should do well in the medium to long term. SA banks are likely to be a 2H story in our view and could underperform in 1H vs some of their peers in CEE, Turkey, Russia and GCC because of a delayed earnings rebound, defensive balance sheets and investor preference for higher beta banking stocks.
How much have valuations already discounted a recovery

Saul MartinezAC
(1-212) 622-3602 Saul.martinez@jpmorgan.com J.P. Morgan Securities Inc.

Flagship reports
• From Fear to Growth (05-09) • The Empire Strikes Back (10 -09) • CEEMEA Financials: Beyond 2009 • MENA Financials: Initiating coverage on UAE banks • Santander Brasil: Closing the GAAP MSCI EM Financials: Absolute and relative to MSCI EM 270

Despite a substantial 121% rally in MSCI Asia financials from Mar-09 lows, we see an c20% upside to consensus estimates in Asia. Similarly in LATAM, as profits improve we see meaningful multiple expansion still likely at Bradesco, Santander Brasil and Bancolombia. In CEEMEA, valuations are still cheap and have not completely discounted a recovery. Recommendations Our top picks in Asia include BOC (growth opportunity), Fubon (a play on structural turnaround in Taiwan). In LATAM, we like Santander Brasil. Our top picks from CEEMEA are Vakifbank (cheap valuation) and Sberbank.

210 150 90 30 97 99 01 03 05 07 09 Relativ e Absolute
Source: MSCI, Datastream.

Top picks and stocks to avoid
Price (LC) Code Top picks Vakifbank Bank of China - H Shinhan Financial Group Fubon Financial Holdings Santander Brazil Sberbank Stocks to avoid Nedbank Group Ltd Bank Rakyat Indonesia Banorte 3.1 4.1 44150 36.0 22.0 2.2 VAKBN TI 3988 HK 055550 KS 2881 TT SANB11 BZ SBER RU Rtg OW OW OW OW OW OW Mkt cap (US$MM) 5059 145716 17845 9034 47594 48139 7334 9896 7083 P/E (x) 09E 6.8 12.7 16.2 13.6 16.5 111.5 12.3 13.3 15.8 10E 5.8 9.0 10.6 10.8 12.9 14.9 9.1 11.2 13.1 EPS (LC) 09E 0.5 0.3 2717 2.6 1.3 0.0 901 577 2.9 10E 0.5 0.5 4165 3.3 1.7 0.2 1216 684 3.5 Div. yield 10E (%) 6.1 5.0 2.0 5.6 3.3 0.9 4.9 3.0 0.4 ROE 10E (%) 18.9 21.3 11.8 14.0 12.0 12.6 13.2 28.4 15.2

11120.0 NED SJ UW 7650.0 BBRI IJ UW 45.9 GFNORTEO MM N

Source: Bloomberg, J.P. Morgan estimates. Note: Share prices and valuations are as of 27 November 2009.

82

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

India IT services
Improving fundamentals but mostly reflected in share prices; we see limited upside
Key sector dynamics The IT services and software sector has seen a good rebound in terms of revenues, earnings and share prices along with greater confidence from CIOs to spend on technology. While the sector saw better resilience than global IT even in 2008 due to the anti-cyclical nature of the sector (cost pressure in downturns force CIOs to move work offshore due to significant cost savings), improvement in outlook for the banking sector has been a key driver in the past three months. We note that the banking sector is the largest contributor of revenues for Indian IT companies. Moving forward, developed market economic recovery (primarily the US and the UK) and general CIO sentiment remain key for the sustenance of growth in 2010. The other key variable is currency—a strengthening rupee will be negative for the sector. Implications of a global recovery We believe that the global downturn has led to further polarization of business towards large players. Further, Satyam’s debacle and expanding service portfolio of large players are accelerating the move towards large players. We believe that large players would be the first ones to benefit from the recovery as technology spending improves. However, a sustained recovery should eventually benefit mid-sized players as well. Further, we do think that hardware and semiconductor has a higher leverage to economic recovery and would benefit more than IT services (given that IT services is slightly anti-cyclical). How much have valuations already discounted a recovery We believe that valuations for the sector are largely discounting a recovery with most analysts already factoring in ~20% growth in 2010E and P/Es at 17-19x. We do not see a significant P/E re-rating from here with estimate upgrades key for further share price upsides. Hence, we expect stocks to have limited absolute upside (~10-15%), although downsides may be limited as well given continued global recovery. Recommendations Infosys remains our top pick in the large-cap sector given its top-tier execution and management quality. Among mid-caps, we believe Mindtree has the best management and quality systems. Vanceinfo is our pick from the Chinese IT services sector. Among stocks to avoid, we are negative on HCL Infosystems.
Top picks and stocks to avoid
Price Top picks MindTree Ltd. Infosys Technologies VanceInfo Technologies Inc. Stock to avoid HCL Infosystems 634.5 2327.9 17.6 146.8 Code MTCL IN INFO IN VIT US HCLI IN Rating OW OW OW N Mkt cap (US$MM) 537 28638 782 687 P/E (x) 09E 80.8 22.8 34.5 10.5 10E 12.6 21.8 26.1 10.1 09E 7.9 102 0.5 14.0 EPS 10E 50.4 107 0.7 14.6 Div. yield 10E (%) 0.8 1.3 0.0 4.1 ROE 10E (%) 33.8 29.6 19.2 18.7

Manoj SinglaAC
(91-22) 6157-3587 manoj.singla@jpmorgan.com J.P. Morgan India Private Limited

Flagship reports
• Indian IT Services: (11/05/2009) • Hexaware: Turnaround at mid-cycle (10/09/2009) • Polaris Software: A leveraged play to the recovery in financial services IT spending (10/09/2009) • Infotech Enterprises: Engineered for growth (10/09/2009) MSCI Software Services and MSCI Software Services relative to MSCI Emerging Markets Software Service

500 400 300 200 100 0 97 99 01 03 05 07 09 Relativ e Absolute
Source: MSCI, Datastream.

Source: Bloomberg, J.P. Morgan estimates. Note: Share prices and valuations are as of 5 November 2009.

83

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Internet and Media
Expect reaccelerating ad spend growth
Key sector dynamics
Jean-Charles LemardeleyAC
(44-20) 7325 5763 jean-charles.lemardeley@jpmorgan.com J.P. Morgan Securities Ltd

Advertising is going through a deep global recession that has hit previously fast growing emerging markets harder than developed markets, as some of the price increases in recent years have unraveled. Most markets in Central and Eastern Europe are down 25-35% from 2008. While television is holding up better than print and other media (except online), it is also shrinking in excess of 20% in most markets. Many broadcasters report that they believe they have reached the trough, although the recovery has yet to start. Online portals in Asia are likely to see a gradual recovery in earnings in FY10, mainly driven by the increased online ad spending. We expect internet ad spending in China to see significant pick up in 2010, benefited by higher ad rates, and events like World Expo and World Cup. The structural growth of Korean online market on the other hand is capped given Korea’s high penetration of online ads. The online recruitment industry in India is a late cycle-play on the economic recovery.
Implications of a global recovery

Dick WeiAC
(852) 2800-8535 dick.x.wei@jpmorgan.com J.P. Morgan Securities (Asia Pacific) Limited

Manoj SinglaAC
(91-22) 6157-3587 manoj.singla@jpmorgan.com J.P. Morgan India Private Limited

Flagship reports
• CEEMEA Telecoms and Media: Key Sector Views and Global Weekly Perspective • NCsoft: Aion's flight to the US and Europe MSCI EM Internet and Media: Absolute and relative to MSCI EM 240

Recovery in EM advertising markets post crisis and deep recessions usually takes 2-3 years. This would point to stabilization in 2H09/1H10, followed by a fairly rapid recovery. In our view, while the secular concerns that have been in place since long before the crisis are still in place, this is more than offset by the still strong growth potential in ad markets in the region. Chinese domestic spending growth will likely lead to a pick-up in financial services, auto, real estate and general industries ad-spending next year.
How much have valuations already discounted a recovery

200 160 120 80 40 97 99 01 03 05 07 09 Relativ e
Source: MSCI, Datastream.

Most internet stocks have recovered YTD in 2009. 2010 recovery still has not fully reflected in the share prices. Stocks of CEEMEA broadcasters, particularly CTCM and CME, have only partially priced in the recovery. Recommendations Our top picks in the space are Russian broadcaster CTC Media and internet companies Sohu.com, Info Edge India, Baidu & NCsoft.
Top picks and stocks to avoid
Price (LC) Code Top picks Sohu.Com CTC Media Info Edge India Baidu.com NCsoft Stocks to avoid The9 Limited 56.0 15.0 806.4 442.2 145000.0 SOHU US CTCM US INFOE IN BIDU US 036570 KS Rtg OW OW OW OW OW N Mkt cap (US$MM) 2154 2276 472 15338 2682 214 P/E (x) 09E 15.2 17.8 36.9 72.1 71.5 NM 10E 13.2 15.6 38.3 48.3 77.4 NM

Absolute

EPS (LC) 09E 3.7 0.8 21.9 6.1 2029 -1.7

10E 4.2 1.0 21.1 9.2 1874 -2.1

Div. yield 10E (%) 0.0 0.0 0.0 0.0 0.0 0.0

ROE 10E (%) 24.5 19.7 16.2 36.0 7.6 -18.1

7.6 NCTY US

Source: Bloomberg, J.P. Morgan estimates. Note: Share prices and valuations are as of 27 November 2009.

84

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Metals and Mining
Emerging Stronger in 2010
Key sector dynamics
Steve ShepherdAC
(27-11) 507 0386 steve.a.shepherd@jpmorgan.com

We are bullish on the real estate sector, driven by robust demand from China and expected above trend growth in the developed economies in 2010. However, what could contain external supply is a strengthening ruble and rand. This could force the exporters to shrink their export flow in exchange for the benefits of domestic supply. This especially holds true for Russia which expects a +16% y/y growth in steel demand (JPM e). In SA, platinum supply is likely to be constrained by ongoing enforced safety-related production stoppages, low rand PGM basket prices, an uncertain outlook for an inadequate electricity and water supply to fund new mining projects, and uncertainty regarding BBBEE/nationalisation issues.
Implications of a global recovery

Yuriy VlasovAC
(7-495) 967-7033 yuriy.a.vlasov@jpmorgan.com J.P. Morgan Bank International LLC

Rodolfo R. De Angele, CFAAC
(55-11) 3048-3888 rodolfo.r.angele@jpmorgan.com Banco J.P. Morgan S.A.

Flagship reports
• Platinum Foresight: Recovery Ahead • Russian Steel : Time to revisit investment case • Russian Metals & Mining: Shifting the goalpost to end of 2010 • Latin Steels: Expectations are just too high

The demand for commodities is highly leveraged to a global recovery, and the commodities sector should emerge much stronger in 2010. The demand situation is improving across the world, driven earlier by restocking demand and later by recovery in real demand, mainly in China. The key risks remain in the form of stabilization of inventories at below-normal levels.
How much have valuations already discounted a recovery

The market sees a steady recovery path for the sector in 2010. In SA, we believe the ingredients are coming together for another surge in PGM prices, possibly in 2010/11. On the other hand, valuations seem stretched in LATAM. The stocks in the sector already seem to be discounting healthy growth in volumes along with a robust pricing scenario.
Recommendations

MSCI EM Metals and Mining: Absolute and relative to MSCI EM 800

700 600 500 400 300 200 100 0 97 99 01 03 05 07 09 Relativ e Absolute
Source: MSCI, Datastream.

We like MMK (strong domestic footprint) in Russia. In SA, the only “shop for platinum” in the world our top pick is highly geared AngloPlat. In LATAM, we continue to prefer stocks that are cheap, at least on a relative basis. Our top picks are Ternium and Group Mexico. We recommend that investors avoid Usiminas (UW), as we maintain our cautious view on Brazilian flat-steel prices.
Top picks and stocks to avoid
Price (LC) Code Top picks Grupo Mexico Ternium MMK Northam Platinum Ltd Anglo Platinum Stocks to avoid Usiminas Southern Copper 30.5 33.4 0.7 3950.0 73504.0 GMEXICOB MM TX US MAGN RU NHM SJ AMS SJ Rtg OW OW OW OW OW UW UW Mkt cap (US$MM) 18135 6686 8269 1883 23168 14367 30481 P/E (x) 09E 19.5 26.9 74.0 21.6 69.3 38.0 30.4 10E 13.7 15.6 18.5 30.2 32.5 14.6 20.3

EPS (LC) 09E 0.1 1.2 0.01 183 1060 1.3 1.2

10E 0.2 2.1 0.04 131 2260 3.5 1.8

Div. yield 10E (%) 3.4 4.1 1.4 1.5 0.0 2.1 2.5

ROE 10E (%) 23.2 8.4 4.9 5.6 14.5 10.9 31.9

50.5 USIM5 BZ 35.9 PCU US

Source: Bloomberg, J.P. Morgan estimates. Note: Share prices and valuations are as of 27 November 2009.

85

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Real estate
Away from manufacturers to landowners
Key sector dynamics
Christopher GeeAC
(65) 6882-2345 christopher.ka.gee@jpmorgan.com J.P. Morgan Securities Singapore Private Limited

EM homebuilders rebounded strongly in 2009, primarily on account of low interest rates and abundant liquidity. On the other hand, property prices in the MENA region and Russia fell c. 35-50% from their 2008 peak. We expect property prices to stabilize next year as the macroeconomic landscape improves and demand starts to recover. In LatAm, we prefer the Brazil HBs over the Mexico HBs given a more favorable growth outlook in Brazil.
Implications of a global recovery

Elena JouronovaAC
+7 495 967 3888 elena.jouronova@jpmorgan.com JPMorgan Bank International LLC

With improving global dynamics and strengthening oil prices, the UAE and Russian economic fundamentals are stabilizing. The liquidity situation, which was very tight in 1H09, is easing, with banks opening up to mortgage lending. On the back of Dubai World restructuring, we see an increasing need for differentiation between Dubai and Abu Dhabi fundamentals; broad sector dynamics continue to remain favorable for Abu Dhabi based property developers. In Asia, homebuilders would face competition in markets like China and India where strong debt and equity capital markets have restored the balance sheets of second or third-tier homebuilders who may now compete for land and with new launches. In LATAM, Brazil should grow stronger than Mexico; we see upside in both.
How much have valuations already discounted a recovery

Muneeza HasanAC
+971 4 428-1766 muneeza.z.hasan@jpmorgan.com JPMorgan Chase Bank N.A. Dubai Branch

Adrian E HuertaAC
(52 81) 8152-8720 adrian.huerta@jpmorgan.com J.P. Morgan Casa de Bolsa, S.A. de C.V., J.P. Morgan Grupo Financiero

Flagship reports
• MENA Property Sector-Initiating coverage on UAE property • Russian Homebuilders • The Bricks & Mortar Report • Asian REITs Report: August 09 • BZ-HB – Benefiting from the Crisis MSCI EM Real Estate: Absolute and relative to MSCI EM 120

Real estate prices have limited downside in Abu Dhabi and Russia from current levels with tough industry fundamentals gradually being priced in. Property prices are down c. 45-50% from peaks in the UAE and 35% in Russia. In LatAm, we believe that a recovery is more priced in for Mexico HBs relative to Brazil HBs. Residential home pricing has rebounded in most of Asia, and regulators are acting to stem exceptional price increases as we saw in Korea, Singapore. Asian property stocks are trading at a 17% discount to NAVs, with some mild potential for discount narrowing in 2010.
Recommendations

Our top pick from MENA is Abu Dhabi focused Aldar Properties. We favour homebuilder LSR in Russia. Our top picks among the LatAm HBs are PDG and Urbi. In Asia, we like stocks with greater commercial real estate exposure. We retain our UW on China HBs, and are OW on HK REITs.
Top picks and stocks to avoid
Price (LC) Code Top picks Aldar Properties Urbi PDG Realty LSR Ayala Land Stocks to avoid Homex Beijing Capital Land New World China Land 5.5 25.3 17.4 6.5 11.8 ALDAR UH URBI* MM PDGR3 BZ LSRG LI ALI PM Rtg OW OW OW OW OW N N UW Mkt cap (US$MM) 3867 1889 3647 3044 3231 1824 1063 2146 P/E (x) 09E 8.1 12.8 21.2 50.0 40.1 9.7 19.2 10.1 10E 6.5 9.7 14.7 17.6 39.4 8.2 12.0 20.2

90 60 30 0 97 99 01 03 05 07 09 Relativ e
Source: MSCI, Datastream.

Absolute

EPS (LC) 09E 0.7 2.0 0.8 0.1 0.3 7.3 0.2 0.3

10E 0.9 2.6 1.2 0.4 0.3 8.7 0.3 0.1

Div. yield 10E (%) 0.0 0.0 1.2 0.0 0.5 0.0 2.8 2.4

ROE 10E (%) 11.0 13.8 19.7 11.8 7.1 19.2 14.1 2.1

71.0 HOMEX* MM 4.0 2868 HK 2.9 917 HK

Source: Bloomberg, J.P. Morgan estimates. Note: Share prices and valuations are as of 27 November 2009.

86

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Semiconductor
The margin trends between upstream and downstream would be the key factor to watch
Key sector dynamics We went through a sudden and substantial inventory de-stocking to restocking in a short period, mainly driven by macro issues. Now, the global market volatility has already been covered and overall situation is back to normal. In 2009, downstream companies (especially assemblers) have enjoyed decent margins due to low component prices and better expected end-demand, while component makers suffered from margin pressure due to falling UT given high fixed costs. We expect the trend to reverse in 2010 since semiconductor companies are likely see robust volume recovery with an end-demand recovery. Implications of a global recovery We expect key end-demand to show double-digit growth in 2010, with 10.3% increase in PC shipments, 12.1% increase in handset market, and 20% growth in LCD TV. Due to the low base in 2009 and ongoing ASP decline, we expect overall market size to be still below recent peak level. Hence, we forecast the tech space to experience more moderate growth rather than a sharp recovery due to a combination of ASP decline and relatively high base in 2H09. How much have valuations already discounted a recovery Most tech stocks are trading at mid-cycle valuations, except for some subsectors such as TFT-LCD (close to trough value) and LED (close to peak value). Hence, earnings momentum in sub-sectors would be key catalysts to individual stocks since current share prices seem to be priced in a moderate recovery in 2010. Recommendations We prefer multi-year growth story such as rechargeable battery for EV (SDI), LED TV theme (SEMCO), and solar supply chains (OCI). We continue to believe foundry and back-end companies are likely to benefit given robust volume growth and relatively moderate ASP decline. We recommend a pair trading (Long Korea panels and Short Taiwan panels) in the TFT-LCD space. For DRAMs, we expect DRAM price momentum to start loosening by the year-end, so investors would find a good entry point after a share price correction.
Top picks and stocks to avoid
Price (LC) Top picks Powertech Technology Inc LG Display TSMC UMC Stock to avoid AU Optronics 88.2 30950 60.0 15.6 32.9 Code 6239 TT 034220 KS 2330 TT 2303 TT 2409 TT Rating OW OW OW OW UW Mkt cap (US$MM) 1826 9439 48056 6266 8982 P/E (x) 09E 10E 11.0 11.3 17.5 69.8 NM 8.2 8.6 13.8 15.5 43.6 EPS (LC) 09E 10E 8.0 2738 3.4 0.2 -2.0 10.8 3612 4.4 1.0 0.8 Div. yield 10E (%) 5.1 2.3 5.0 0.0 0.0 ROE 10E (%) 27.6 12.7 25.1 6.0 2.3

JJ ParkAC
(822) 758-5717 jj.park@jpmorgan.com J.P.Morgan Securities (Far East) Limited, Seuoul Branch

Flagship reports
• Semiconductor Migration (09/21/2009) • Display Tracker (09/29/2009) • Korea Technology (10/14 /2009) • TSMC: Looking for… (10/08/2009) • IC Assembly & Testing (10/18/2009) MSCI Semiconductors and MSCI Semiconductors relative to MSCI Emerging Markets Semiconductors

250 200 150 100 50 01 02 03 04 05 06 07 08 09 Relativ e
Source: MSCI, Datastream.

Absolute

Source: Bloomberg, J.P. Morgan estimates. Note: Share prices and valuations are as of 5 November 2009. LG Display upgraded to OW on November 12. 87

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Technology Hardware
Content meeting hardware
Key sector dynamics Our three sector-wide themes are: (1) content becomes the key focus: cloud computing, smartphone app store, internet explorer TV—favoring companies involved in application store, input and network interface; (2) hardware commoditization leads up to a secular fall in hardware price point; (3) accelerated outsourcing—LCD TV mega outsourcing trend and Nokia moving away from Japanese vendors; (4) handset winners take it all—iPhone ending exclusivity, Moto moving to whitebox model for EM; and (5) PC pricing power shifting from ODMs to brands. Implications of a global recovery Downstream pricing power is falling. Consumers are trading down during the downturn—this will likely continue as employment rate is still weak. A much faster-than-expected recovery in global manufacturing is causing supply bottlenecks, e.g., labor shortage is re-surfacing in Chinese coastal areas, while upstream vendors are now running at high utilization rates. Corporate IT spending will likely pick up from 2010 onward, due to a rebound in corporate profits and also an aging PC installation base. We expect a gradual, rather than a sharp, rebound, due to the high unemployment rate. How much have valuations already discounted a recovery Most PC stocks are now trading at three-year high in valuations, both on P/E and P/B terms; thus Windows 7 launch is already in the price, and partially due to the corporate upgrade cycle as well. Handset stocks are still trading towards the lower-end of the historical range, though probably justified considering a much slower growth trajectory in the next decade. Recommendations Pricing power (Acer and AsusTek) and an addressable market expansion (Hon Hai, AAC Acoustics and Mediatek) are the key criteria for our stock picks. We would avoid areas with elevated competition (HTC, Quanta and BYD Electronics). With the uncertainty in the timing of corporate upgrade cycle, we prefer a pair trade strategy to LONG Catcher and AVOID Compal.
Alvin KwockAC
(852) 2800-8533 alvin.yl.kwock@jpmorgan.com J.P. Morgan Securities (Asia Pacific) Ltd.

Flagship reports
• Acer: More catalysts for margin upside in 2010/11, introduce Jun-10 TP at NT$83 (8/20/2009) • Mediatek: Smartphone strategy: Low price device, lots of contents (9/15/2009) • PC forecasts: Unit resilient in 2009, raise 2010/11 forecasts on corporate rebound and rising EM penetration (9/21/2009) • Notebook ODMs: 2003-04 Déjà vu: Win 7 Optimism, Calpella GM woes (9/25, 2009) • Hon Hai: Improving revenue outlook for 2010, raise PT to NT$155 (11/5/2009) • China IT Distribution Primer: A complex web (11/13/2009) MSCI Technology Hardware and MSCI Technology Hardware relative to MSCI Emerging Markets Technology Hardware

370 320 270 220 170 120 70 97 99 01 03 05 07 09 Relativ e Absolute
Source: MSCI, Datastream.

Top picks and stocks to avoid
Price (LC) Top picks MediaTek Inc. Acer Inc AAC Acoustic ASUSTek Computer Hon Hai Precision Stocks to avoid Quanta Computer Inc. HTC Corp BYD Electronic Pair Trade Long Catcher Avoid Compal 504.0 79.5 10.1 63.0 135.0 63.1 362.5 5.7 80.2 40.35 Code Rating Mkt cap (US$MM) 16993 6604 1607 8275 35820 7271 8925 1646 1,653 5,024 P/E (x) 09E 14.5 17.9 19.7 22.0 16.8 10.4 12.9 22.8 15.4 10.6 10E 11.9 12.3 12.6 13.1 13.3 9.9 14.8 16.3 11.0 11.6 EPS (LC) 09E 34.8 4.4 0.5 2.9 8.0 6.1 28.1 0.2 5.2 3.8 10E 42.4 6.5 0.8 4.8 10.1 6.4 24.6 0.3 7.3 3.5 Div. yield 10E (%) 4.9 3.8 3.2 2.5 1.9 5.1 5.4 0.0 2.8 5.9 ROE 10E (%) 37.4 17.6 26.4 11.6 18.0 20.6 24.6 11.4 12.9 14.8

2454 TT 2353 TT 2018 HK 2357 TT 2317 TT 2382 TT 2498 TT 285 HK 2474 TT 2324 TT

OW OW OW OW OW UW UW UW OW UW

Source: Bloomberg, J.P. Morgan estimates. Note: Share prices and valuations are as of 5 November 2009. 88

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Telecom
Limited exposure in selective growth markets
Key sector dynamics As a non-cyclical sector, telecom stocks have been less sensitive to an improving macro economic environment in 2009; specific local market competition risks matter more. In CEEMEA, the crisis has had a visible impact on revenue growth, resulting in significantly slower growth in previously fast expanding markets or even contraction in the more mature ones. Within Asia, in 2009, the perceived growth markets of India and China have been burdened with excess capacity and competition. Implications of a global recovery Although telecom revenues are closely correlated to GDP growth, the swings in telecom revenues above or below GDP tend to be small, indicating that telcos should be good defensive stocks. Select stocks in CEEMEA offer exposure to high growth markets in Africa. Growth in Asia remains sluggish despite the recovery due to competition and overcapacity; we recommend investors own ex-growth Taiwanese and Malay stocks with strong capital management ideas How much have valuations already discounted a recovery Telecom sector share price underperformance YTD is not surprising. We expect this trend to last into 2010 and therefore we remain Underweight the sector for next year. The MSCI EM telecom index has lagged the broader MSCI EM index by nearly 30% YTD. Valuations in the sector are not rich but not cheap either. We think the sector is close to fairly valued, so a selective exposure is better. Recommendations Telecoms in emerging markets are largely going ex-growth. We recommend exposure to stocks that are exposed to selective growth markets or are focused on capital management. In CEEMEA, a number of reasonably priced growth stocks are available. Our top picks are MTN, QTel and Turk Telekom. Central European incumbents are unattractive. In Asia, we recommend defensive Far East Tone. Telmex, in Latam, should be avoided as it faces declining core voice trends, aggressive regulation and in 2010 negative impact of new taxes and is richly valued. China suffers overcapacity and China Unicom, is vulnerable to further downside.
Andre BaggioAC
(55-11) 3048-3427 andre.baggio@jpmorgan.com Banco J.P. Morgan S.A.

Jean-Charles LemardeleyAC
+44 (0) 20 7325 5763 jean-charles.lemardeley@jpmorgan.com J.P. Morgan Securities Ltd

Tim StoreyAC
(852) 2800-8563 tim.storey@jpmorgan.com J.P. Morgan Securities (Asia Pacific) Limited

Flagship reports
• CEEMEA Telecoms and Media: Key Sector Views and Global Weekly Perspective • CEEMEA Telecoms: Revisiting the secular growth case (February 06, 2009) • LatAm Mobile: Lessons on termination rates from Europe (Jul-09) • Br Mobile Key call: Quality Matters (Jul-09) • AP Telecom Daily • Asia Telecom Outlook (April/7/2009) • China: 3G too expensive (Oct/6/2009) MSCI EM Telecom: Absolute and relative to MSCI EM 280

240 200 160 120 80 40 97 99 01 03 05 07 09 Relativ e Absolute
Source: MSCI, Datastream.

Top picks and stocks to avoid
Price (LC) Code Top picks Turk Telekom Qtel MTN Group Limited Far EasTone Tele. Totvs Stocks to Avoid Magyar Telekom Telmex China Unicom 4.4 148.7 11465.0 37.0 104.5 TTKOM TI QTEL QD MTN SJ 4904 TT TOTS3 BZ Rating OW OW OW OW OW UW UW UW Mkt cap (US$MM) 9987 5989 27920 3729 1853 4133 16224 31314 P/E (x) 09E 9.6 7.5 11.3 13.3 20.2 9.0 11.0 26.8 10E 7.2 7.3 9.7 11.9 15.8 8.9 12.3 38.8 EPS (LC) 09E 0.5 20 1016 2.8 5.2 81 1.6 0.4 10E 0.6 20 1180 3.1 6.6 82 1.5 0.3 Div. yield 10E (%) 10.0 7.4 2.5 7.3 1.1 10.2 4.0 1.2 ROE 10E (%) 35.3 19.3 21.6 14.0 34.1 9.6 48.6 3.0

726.0 MTEL HB 17.9 TMX US 10.3 762 HK

Source: Bloomberg, J.P. Morgan estimates. Note: Share prices and valuations are as of 27 November 2009.

89

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Transportation
Darkest before dawn
Key sector dynamics
Corrine PngAC
(65) 6882-1514 corrine.ht.png@jpmorgan.com J.P. Morgan Securities Singapore Private Limited

We forecast a moderate 7% and 8% rebound in passenger and shipping volumes in 2010, respectively. However, upside surprises are possible as passenger and cargo demand has historically grown at 1.7x and 2.0x real GDP growth, respectively, and J.P. Morgan Economics team forecasts a 7.2% real GDP growth for Asia ex-Japan in 2010. We are more bullish on the airline and land transport sectors’ earnings recovery than shipping as the former does not face structural overcapacity once demand normalizes. Airport operators’ performance is strongly correlated to passenger traffic volumes, and given Mexico’s exposure to tourism, we believe the sector could benefit significantly from a synchronized economic recovery. A smaller supply-demand gap could drive an earlier re-rating. Rebounding fuel prices are less of a concern when demand recovers, as surcharges help to offset this impact. Most transport stocks benefit from a weak US$ given their large US$ capex and debt. This downturn will drive consolidation but crossborder M&As are more difficult due to regulatory restrictions and political sensitivity.
Implications of a global recovery

Adrian E HuertaAC
(52 81) 8152-8720 adrian.huerta@jpmorgan.com J.P. Morgan Casa de Bolsa, S.A. de C.V., J.P. Morgan Grupo Financiero

Flagship reports
• Airline Traffic Monitor (Monthly) • Transportation: 2H09 Outlook and Beyond • MX-AP – Not ready to take off MSCI EM Transportation: Absolute and relative to MSCI EM

180 150 120 90 60 30 0 97 99 01 03 05 07 09 Relativ e Absolute
Source: MSCI, Datastream.

Transport stocks are early cyclicals and have begun to price in part of the recovery. Most are near their historical average valuations. Although the stocks could trade range-bound for the near-term or correct when they announce weak 2H/4Q results, we see any weakness as a good opportunity to accumulate airlines, select shipping and land transport companies as they have historically provided large returns in a cyclical upturn. We expect traffic to improve in 2010 mainly due to better comps.
How much have valuations already discounted a recovery

Looking at P/E 12 months forward, companies are trading on average at an 8% premium to the last 24 months’ average. GAP is trading with the highest premium, 19%, vs 6% for Asur and 1% for OMA. Recommendations Our top picks are Asur, Container Corp of India and China Airlines.
Top picks and stocks to avoid
Price (LC) Code Top picks Asur Container Corporation of India China Airlines Stocks to avoid GAP China Cosco Holdings China Southern Airlines Rtg Mkt cap (US$MM) 1445 3221 1410 1520 18608 5529 P/E (x) 09E 20.1 18.3 NM 19.6 NM 33.2 10E 17.1 16.9 80.0 18.7 49.2 82.4

EPS (LC) 09E 3.1 63.1 -2.3 1.8 -0.3 0.1

10E 3.7 68.4 0.1 1.9 0.2 0.0

Div. yield 10E (%) 3.5 1.2 0.0 5.0 0.4 0.0

ROE 10E (%) 17.2 21.5 1.3 34.3 4.2 2.3

63.0 ASURB MM OW 1155.0 CCRI IN 10.0 2610 TT 35.4 GAPB MM 9.7 1919 HK 2.5 1055 HK OW OW N N N

Source: Bloomberg, J.P. Morgan estimates. Note: Share prices and valuations are as of 27 November 2009.

90

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Utilities
Still a defensive sector
Key sector dynamics The long term growth prospects of utilities in EM remains positive due to low penetration. However, regulated prices and returns, raw material price inflation and competition in some markets make this sector unattractive. In Russia, a considerable portion of the wholesale electricity market has been liberalized. In Asia, Hong Kong/Indian/Thailand power utilities have an automatic cost pass-through mechanism and are preferred as they are insulated to cost price inflation. Latam utilities face a lot of competition and tight government returns. Implications of a global recovery Utilities’ volumes are linked to the global recovery and the uptick in IP. However, they are likely to underperform the market and unlikely to re-rate significantly as some utilities face margin pressures. We expect 2010 will be more supportive for power equipment manufacturers. How much have valuations already discounted a recovery Following the significant re-rating since Mar-09, most of the utilities in Asia are trading at close to our price targets, and hence we do believe recovery has been well discounted by the market already. Russian utilities seem attractive if earnings projections are based on continuing market liberalization. Recommendations In Brazil, we recommend looking at the distribution companies and the Chilean utility ENERSIS (ENERSIS/ENI), due to its leverage to a recovery in electricity demand in the Andean countries. In Russia, RusHydro is an interesting stock, as it is becoming attractive on a relative basis. RusHydro trades at 5.6x 2011E EV/EBITDA vs. 9.7x for international peers. In Asia, we recommend Xinao and PGAS within the gas utilities sector on >20% core EPS CAGR from FY08-11E on low penetration rates. We also like Tata Power on 25% EPS CAGR from FY08-11E driven by continued capacity addition protected by strong coal linkages.
Anderson Frey, CFAAC
(1-212) 622 6615 anderson.frey@jpmorgan.com J.P. Morgan Securities Inc.

Edmond LeeAC
(852) 2800-8575 edmond.ch.lee@jpmorgan.com J.P. Morgan Securities (Asia Pacific) Limited

Sergey ArininAC
(7-495) 967-7031 sergey.v.arinin@jpmorgan.com J.P. Morgan Bank International LLC

Flagship reports
• BRAZILIAN ELECTRIC UTILITIES : 2010 Outlook (11/08/09) • ENERSIS: Long-Term Value, Recovery Upside, Upgrade to OW (11/09/09) • China Infra-Strategy: From recovery potential to sustainable GARP (Aug09) • China Power Checkers: Plenty of –VE drivers but catch up potential intact (Oct09) • RusHydro: Looking beyond the accident: do not overlook positive triggers, upgrading to OW (09/30/2009) MSCI EM Utility: Absolute and relative to MSCI EM 190

150 110 70 30 97 99 01 03 05 07 09 Relativ e Absolute
Source: MSCI, Bloomberg, J.P. Morgan.

Top picks and stocks to avoid
Price (LC) Code Top picks Enersis RusHydro Perusahaan Gas Negara Tata Power Xinao Gas Stocks to Avoid Sabesp CPFL Energia Datang International 182.8 0.04 3575.0 1321.0 18.2 ENERSIS CI HYDR RU PGAS IJ TPWR IN 2688 HK Rating OW OW OW OW OW UW UW N Mkt cap (US$MM) 12070 9898 9089 6723 2471 4040 8851 12610 P/E (x) 09E 8.4 13.8 13.9 24.0 23.3 5.5 12.9 23.8 10E 9.1 14.5 14.8 18.4 18.8 5.8 11.1 14.6 EPS (LC) 09E 22 0.003 256 55.0 0.8 5.7 2.5 0.1 10E 20 0.003 242 71.6 1.0 5.4 2.9 0.2 Div. yield 10E (%) 4.5 0.000 2.9 1.1 1.3 4.7 8.6 3.3 ROE 10E (%) 18.6 6.0 41.8 12.8 14.5 10.0 27.2 7.2

31.2 SBSP3 BZ 32.4 CPFE3 BZ 3.3 991 HK

Source: Bloomberg, J.P. Morgan estimates. Note: Share prices and valuations are as of 27 November 2009.

91

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

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Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Stocks for 2010
93

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Large-cap ideas: J.P. Morgan’s large-cap top picks
Share Name Price (LC) Gazprom 6 Vakifbank 3 Aldar Properties 5.5 Rosneft 8.1 Turk Telekom 4 Qtel 148.7 SK Energy Co Ltd 108000 First Gulf Bank 18.8 ABSA Group Ltd 12421 Hyundai Motor Company 94600 Sinopec Corp - H 6.4 LG Display 30950 PTT Public Company 222 Bank of China - H 4 Enersis 185 MTN Group Limited 11540 Shinhan Financial Group 44150 Siam Commercial Bank 78.5 Fubon Financial Holdings 36 Petrobras 38.5 All 16 MediaTek Inc. 504.0 Far EasTone Tele 37.0 Credicorp 72 Acer Inc 79.5 Copel 34 Astra International 32000.0 Public Bank (F) 10.9 Santander Brazil 22 Bancolombia 42.8 ASUSTek Computer 63.0 Bank Central Asia (BCA) 4675 DongFeng Motor Co., Ltd. 11.0 Hon Hai Precision 135.0 Grupo Mexico 30.5 Unitech Ltd 79.3 TSMC 60.0 Pacific Rubiales 15.0 Tenaga 8.4 Samsung SDI 125500 RusHydro 0.0 PDG Realty 17 Perusahaan Gas Negara 3575 Sberbank 2.3 Suzano 17.6 AMMB Holdings 5 UMC 15.6 Ternium 31.8 China Yurun Food Group 18 Container Corporation of India 1144 LSR 6.5 Tata Power 1321.0 MMK 0.7 Naspers Ltd 27900.0 Buenaventura 39.8 Genting 7.1 Maruti Suzuki India Ltd 1567 Femsa 44.5 Tambang Batubara Bukit 15800 Price Target (LC) 10 5 8 10.3 6 230.0 150000 26.0 15371 140000 8.5 40000 315 6 241 15843 60000 110.0 54 46.0 21 630 45.0 88 92.0 38 37000.0 14 28 50.0 70.0 5500 13.0 155.0 31.5 120 72.0 18.0 10.3 210000 0 19 4700 3.0 22 5.3 19.0 31.0 21 1260 10.0 1450 1.1 34108.7 34.0 8.5 1630 50.0 22500 % Change to target 75.8 73.1 41.6 27.3 36.4 54.7 38.9 38.7 23.8 48.0 33.9 29.2 41.9 38.0 30.2 37.3 35.9 40.1 50.2 19.6 35.5 25.0 21.6 22.7 15.7 12.2 15.6 26.6 26.2 16.9 11.1 17.6 18.4 14.8 3.3 51.3 20.0 20.2 22.3 67.3 9.0 10.3 31.5 34.2 25.0 7.1 21.8 (2.5) 16.9 10.1 53.8 9.8 52.7 22.3 (14.7) 20.6 4.0 12.3 42.4 Bloomberg Code GAZP RU VAKBN TI ALDAR UH ROSN LI TTKOM TI QTEL QD 096770 KS FGB UH ASA SJ 005380 KS 386 HK 034220 KS PTT TB 3988 HK ENERSIS CI MTN SJ 055550 KS SCB TB 2881 TT PETR4 BZ ALLL11 BZ 2454 TT 4904 TT BAP US 2353 TT CPLE6 BZ ASII IJ PBKF MK SANB11 BZ CIB US 2357 TT BBCA IJ 489 HK 2317 TT GMEXICOB MM UT IN 2330 TT PRE CN TNB MK 006400 KS HYDR RU PDGR3 BZ PGAS IJ SBER RU SUZB5 BZ AMM MK 2303 TT TX US 1068 HK CCRI IN LSRG LI TPWR IN MAGN RU NPN SJ BVN US GENT MK MSIL IN FMX US PTBA IJ JPM Rating OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW N OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW N OW OW OW OW Mkt Cap, US$ MM 133282 5104 3867 85739 10078 5989 8516 7019 12012 17769 136013 9444 18910 145716 12217 28599 17853 8009 9037 209104 6130 16998 3730 5721 6606 5300 13587 11289 48486 8426 8277 12088 12207 35831 18350 4055 48071 3014 10716 4876 9898 3651 9089 48571 3145 4331 6268 6373 3877 3187 3044 6713 8269 15161 10983 7659 9701 15937 3818 P/E (X) 2009E 2010E 6.3 5.2 6.8 5.8 8.1 6.5 12.1 7.4 9.6 7.2 7.5 7.3 9.5 7.7 8.6 7.8 10.9 8.1 8.8 8.2 8.6 8.3 11.3 8.6 10.7 8.7 12.7 9.0 8.4 9.1 11.4 9.8 16.2 10.6 12.5 10.6 13.6 10.8 12.9 11.7 15.2 11.8 14.5 11.9 13.3 11.9 12.9 12.0 17.9 12.3 9.4 12.4 15.3 12.6 15.2 12.9 16.5 12.9 15.3 12.9 22.0 13.1 17.6 13.1 15.0 13.2 16.8 13.3 19.5 13.7 10.8 13.7 17.5 13.8 nm 14.0 39.9 14.0 18.9 14.3 13.8 14.5 21.2 14.7 13.9 14.8 112.5 15.0 6.3 14.9 15.5 15.4 69.8 15.5 26.9 15.6 19.0 16.7 18.1 16.7 50.0 17.6 24.0 18.4 74.0 18.5 23.7 19.0 19.6 19.4 24.5 19.7 37.2 19.9 24.7 20.3 12.7 21.1 EPS (LC) Yield (%) 2009E 2010E 2010E 0.9 1.1 0.0 0.5 0.5 6.1 0.7 0.9 0.0 0.7 1.1 1.4 0.5 0.6 10.0 19.7 20.4 7.4 11357 13955 2.1 2.2 2.4 1.9 1144 1542 5.2 10798 11486 1.6 0.7 0.8 3.0 2738 3612 2.3 20.7 25.5 3.8 0 0 5.0 21.8 20.0 4.4 1016 1180 2.5 2717 4165 2.0 6.3 7.4 2.8 3 3 5.6 3.0 3.3 1.7 1.0 1.3 1.8 34.8 42.4 4.9 2.8 3.1 7.3 5.7 6.2 2.8 4.4 6.5 3.8 3.6 2.7 2.1 2097 2541 3.2 0.7 0.8 3.9 1 2 3.3 2.9 3.4 2.7 2.9 4.8 2.5 265 356 2.9 0.7 0.8 1.3 8.0 10.1 1.9 0.1 0.2 3.4 7 6 0.1 3.4 4.4 5.0 -0.6 1.1 0.0 0.2 0.6 1.6 6627 8758 0.0 0 0 0.0 1 1 1.2 256 242 2.9 0.0 0.2 0.9 2.8 1.2 0.7 0.3 0.3 1.6 0.2 1.0 0.0 1.2 2.1 4.3 1 1 1.5 63.1 68.4 1.2 0.1 0.4 0.0 55.0 71.6 1.1 0.0 0.0 1.4 1179 1469 1.0 2.1 2.1 0.3 0.3 0.4 0.7 42.2 78.8 0.4 1.8 2.2 1.1 1241 750 3.9 ROE (%) 2010E 12.3 18.9 11.0 19.5 35.3 19.3 14.7 16.9 18.4 10.1 16.6 12.7 16.0 21.3 18.6 21.6 11.8 16.7 14.0 17.4 17.0 37.4 14.0 20.5 17.6 7.9 24.9 29.5 12.0 19.2 11.6 29.2 23.6 18.0 23.2 17.2 25.1 21.6 9.7 7.6 6.0 19.7 41.8 12.6 7.5 11.0 6.0 8.4 20.6 21.5 11.8 12.8 4.9 12.0 21.5 9.6 21.6 10.3 28.1

94

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Large-cap ideas: J.P. Morgan’s large-cap top picks (cont'd)
Name Infosys Technologies Nan Ya Plastics Corp Amorepacific Corp China Mengniu Dairy Co. Ltd. ICICI Bank Larsen & Toubro Anglo Platinum United Spirits Limited LAME Ayala Land Baidu.com Magnit OAO OGX Share Price (LC) 2327.9 54.1 859000 23 851 1589.5 74900.0 1228.0 14.0 11.8 434.2 59.5 1416.0 Price Target (LC) 2550.0 61.0 998000 23 NA 1675.0 91000.0 1140.0 17.0 13.9 460.0 80 2030.0 % Change to target 9.5 12.8 16.2 (0.2) 5.4 21.5 (7.2) 21.8 18.3 5.9 34.5 43.4 Bloomberg Code INFO IN 1303 TT 090430 KS 2319 HK ICICIBC IN LT IN AMS SJ UNSP IN LAME4 BZ ALI PM BIDU US MGNT RU OGXP3 BZ JPM Rating OW OW OW OW OW N OW OW OW OW OW OW OW Mkt Cap, US$ MM 28593 13143 4282 5165 20307 20441 24025 3304 5626 3230 15063 4953 26325 P/E (X) 2009E 2010E 22.8 21.8 32.9 22.5 24.6 23.0 28.2 24.8 26.6 26.8 31.0 27.6 70.7 33.1 44.0 34.8 58.8 34.9 40.1 39.4 70.8 47.4 91.5 58.9 nm nm EPS (LC) Yield (%) 2009E 2010E 2010E 102.0 107.0 1.3 1.6 2.4 2.9 34940 37312 0.0 1 1 0.0 32 32 1.4 51.2 57.6 0.0 1060 2260 0.0 27.9 35.3 0.3 0.2 0.4 1.1 0.3 0.3 0.5 6.1 9.2 0.0 0.7 1.0 0.0 16.4 5.7 0.0 ROE (%) 2010E 29.6 8.2 18.5 17.5 7.1 19.2 14.5 12.6 62.9 7.1 36.0 29.3 3.8

Source: Datastream, MSCI, IBES, J.P. Morgan estimates Note: Prices and valuations as of November 27, 2009. Large cap are stocks with market cap over US$ 3 billion. Sorted in ascending order of 2010E PE

Large-cap ideas: J.P. Morgan’s large-cap stocks to avoid
Share Name Price (LC) Sabesp 32 Lukoil 56.8 Weichai Power 60.3 Magyar Telekom 727.0 Nedbank Group Ltd 11250.0 S-Oil Corp 54500 Quanta Computer Inc. 63 CPFL Energia 32.7 Bank Rakyat Indonesia 7650.0 Redecard 26.4 YTL Power 2.3 Telmex 17.6 Banorte 47 Ecopetrol 2585.0 Severstal 8 PetroChina 9.4 Cencosud 1490 Datang International 3.3 Usiminas 50.0 HTC Corp 362.5 Grupo Modelo 65.3 Manila Electric Company 209 Soriana 31.8 Southern Copper 34.6 Telmex Internacional 15 SQM 38.0 Unilever Indonesia Tbk 10950.0 Hindustan Unilever Limited 284.3 VTB 4.3 China Unicom 10.3 MISC Berhad - F 8.9 AU Optronics 32.9 China Cosco Holdings, Ltd. 10 Reliance Power 141.1 Idea Cellular Limited 49.0 China Southern Airlines 3 Price Target (LC) 32 75.0 47.0 685.8 10747.0 64000 57.0 34.0 6650.0 32.0 2.1 13.0 49 2795.0 8 7.4 1578 4.3 38.5 250.0 60.0 165 31.0 28 10 33.0 9700.0 225.0 4 8.0 7.7 27.0 10.0 122.0 45.0 2 % Change to target 1.2 32.0 (22.0) (5.7) (4.5) 17.4 (9.7) 4.0 (13.1) 21.4 (7.5) (26.3) 5.4 8.1 4.9 (21.1) 5.9 28.7 (23.0) (31.0) (8.1) (21.1) (2.5) (20.6) (33.6) (13.1) (11.4) (20.9) 0.9 (22.3) (13.0) (17.9) 2.7 (13.5) (8.1) (16.7) Bloomberg Code SBSP3 BZ LKOH RU 2338 HK MTEL HB NED SJ 010950 KS 2382 TT CPFE3 BZ BBRI IJ RDCD3 BZ YTLP MK TMX US GFNORTEO MM ECOPETL CB CHMF RU 857 HK CENCOSUD CI 991 HK USIM5 BZ 2498 TT GMODELOC MM MER PM SORIANAB MM PCU US TII US SQM US UNVR IJ HUVR IN VTBR LI 762 HK MISF MK 2409 TT 1919 HK RPWR IN IDEA IN 1055 HK JPM Rating UW N N UW UW N UW UW UW N UW UW N UW UW UW UW N UW UW N N UW UW UW UW UW UW UW UW UW UW N UW UW N Mkt Cap, US$ MM 4143 48312 6941 4148 7551 5232 7273 9027 9896 10208 3987 16052 7253 52376 7590 339259 6586 12610 14413 8927 16314 4997 4423 29444 13512 9995 8762 13284 22229 31314 9654 8985 18608 7246 3251 5529 P/E (X) 2009E 2010E 5.5 5.8 6.7 6.6 9.9 8.6 9.0 8.9 12.5 9.3 10.0 9.3 10.4 9.9 12.9 11.1 13.3 11.2 12.7 11.6 21.4 11.8 11.0 12.3 15.8 13.1 16.8 13.2 NM 13.7 15.4 13.8 17.4 14.4 23.8 14.6 38.0 14.6 12.9 14.8 24.2 18.0 30.3 18.2 20.6 18.5 30.4 20.3 23.4 21.3 30.9 25.5 31.6 25.8 25.3 27.3 NM 38.6 26.8 38.8 23.4 41.0 NM 43.6 NM 49.2 138.3 54.4 16.2 65.3 33.2 82.4 EPS (LC) Yield (%) ROE (%) 2009E 2010E 2010E 2010E 5.7 5.4 4.6 10.0 8.4 8.7 2.4 12.5 6.1 7.0 0.8 45.2 80.8 81.9 10.2 9.6 901 1216 4.8 13.2 5457 5841 3.3 16.3 6.1 6.4 5.1 20.6 2.5 2.9 8.5 27.2 577 684 3.0 28.4 2.1 2.3 7.4 97.9 0.1 0.2 6.6 18.2 1.6 1.5 4.1 48.6 2.9 3.5 0.4 15.2 154 197 4.6 27.1 -0.4 0.6 0.8 6.4 0.6 0.7 3.2 14.0 84.5 102.0 2.1 9.8 0.1 0.2 3.3 7.2 1.3 3.5 2.1 10.9 28.1 24.6 5.4 24.6 2.7 3.6 2.3 14.7 7 12 3.5 20.1 1.5 1.7 0.5 9.3 1.2 1.8 2.5 31.9 1 1 2.4 9.7 1.3 1.5 0.0 28.2 347 425 3.2 86.6 11.3 10.4 2.6 99.5 -0.3 0.1 0.5 3.5 0.4 0.3 1.2 3.0 0.4 0.2 4.0 3.9 -2.0 0.8 0.0 2.3 -0.3 0.2 0.4 4.2 1.0 2.6 0.0 4.4 3.0 0.7 0.0 1.6 0 0 0.0 2.3

Source: Datastream, MSCI, IBES, J.P. Morgan estimates Note: Prices and valuations as of November 27, 2009. Large cap are stocks with market cap over US$ 3 billion. Sorted in ascending order of 2010E PE

95

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Mid-cap ideas: J.P. Morgan mid-cap top picks
Name Thai Oil Public Company Bank Asya Powertech Technology Inc Urbi Arca Energy Development (EDC) Metropolitan Bank AAC Acoustic Sohu.Com Land & Houses CTC Media Totvs Asur PT Aneka Tambang Tbk Xinao Gas CP All Pcl Northam Platinum Ltd Yulon Motor Co., Ltd. NCsoft China Airlines Share Price Target % Change Bloomberg Price (LC) (LC) to target Code 39.8 62.0 56.0 TOP TB 3.0 5.0 65.6 ASYAB TI 88.2 108.0 22.4 6239 TT 25.5 34.0 33.4 URBI* MM 37.4 44.0 17.6 ARCA* MM 4.1 5.6 38.3 EDC PM 45.5 50.0 9.9 MBT PM 10.1 14.6 44.0 2018 HK 54 74 36.3 SOHU US 6.0 9.5 59.7 LH TB 14.8 25.0 68.7 CTCM US 102.0 125.0 22.5 TOTS3 BZ 61.6 53.0 (13.9) ASURB MM 2250.0 2750.0 22.2 ANTM IJ 18 22 21.7 2688 HK 20.8 23.0 10.6 CPALL TB 3980.0 6100.0 53.3 NHM SJ 39.0 50.0 28.2 2201 TT 145000.0 190000.0 31.0 036570 KS 10.0 16.0 60.5 2610 TT JPM Rating OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW Mkt Cap, US$ MM 2439 1779 1827 1923 2330 1610 1744 1607 2087 1794 2255 1828 1427 2251 2471 2811 1930 1895 2683 1410 P/E (X) EPS (LC) 2009E 2010E 2009E 2010E 6.0 5.6 6.7 7.1 9.4 6.7 0.3 0.5 11.0 8.2 8.0 10.8 12.8 9.7 2.0 2.6 11.1 10.4 3.4 3.6 10.6 10.7 0.4 0.4 17.0 11.5 2.7 4.0 19.7 12.6 0.5 0.8 14.8 12.8 4 4 14.8 13.3 0.4 0.4 17.6 15.4 0.8 1.0 20.2 15.8 5.2 6.6 20.1 17.1 3.1 3.7 48.0 18.4 46.9 122.3 23.3 18.8 0.8 1 22.7 19.0 0.9 1.1 21.7 30.4 183.0 131.0 41.5 56.6 0.9 0.7 71.5 77.4 2029.0 1873.6 NM 80.0 -2.3 0.1 Yield (%) 2010E 7.5 3.6 5.1 0.0 5.2 9.3 2.6 3.2 0.0 7.5 0.0 1.1 3.6 1.0 1.3 4.0 1.5 0.5 0.0 0.0 ROE (%) 2010E 19.8 22.0 27.6 13.8 17.0 24.2 1012.7 26.4 24.5 17.3 19.7 34.1 17.2 13.6 14.5 31.9 5.6 1.8 7.6 1.3

Source: Datastream, MSCI, IBES, J.P. Morgan estimates Note: Prices and valuations as of November 27, 2009. Mid cap are stocks with market cap between US$1billion & US$3billion. Sorted in ascending order of 2010E PE

Mid-cap ideas: J.P. Morgan mid-cap stocks to avoid
Name Homex Beijing Capital Land TMB Bank Public Company Massmart BYD Electronic Taishin Financial Holdings GAP New World China Land Exito Share Price Target % Change Bloomberg Price (LC) (LC) to target Code 73.4 102.0 39.0 HOMEX* MM 4 4 (12.5) 2868 HK 1.1 1.0 (6.5) TMB TB 8440.0 7390.0 (12.4) MSM SJ 5.7 3.6 (36.4) 285 HK 12.2 12.0 (1.2) 2887 TT 35.6 30.0 (15.8) GAPB MM 2.9 3.2 9.0 917 HK 17140.0 17800.0 3.9 EXITO CB JPM Rating N N N UW UW UW N UW N Mkt Cap, US$ MM 1904 1063 1337 2288 1646 2146 1545 2146 2478 P/E (X) 2009E 2010E 9.7 8.2 19.2 12.0 22.1 14.1 14.3 14.5 22.8 16.3 7.3 17.1 19.6 18.7 10.1 20.2 32.7 30.2 EPS (LC) 2009E 2010E 7.3 8.7 0.2 0.3 0.0 0.1 592.0 580.9 0.2 0.3 1.7 0.7 1.8 1.9 0.3 0.1 526.0 570.3 Yield (%) 2010E 0.0 2.8 0.0 4.4 0.0 5.9 5.0 2.4 0.4 ROE (%) 2010E 19.2 14.1 6.8 35.8 11.4 6.5 34.3 2.1 3.4

Source: Datastream, MSCI, IBES, J.P. Morgan estimates. Note: Prices and valuations as of November 27, 2009. Mid cap are stocks with market cap between US$1billion & US$3billion. Sorted in ascending order of 2010E PE. Note: BYD Electronic - We revised PT to HK$4.8 on November 29.

96

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Small-cap ideas: J.P. Morgan small-cap top picks
Name JD Group Manila Water Company MindTree Ltd. VanceInfo Technologies Info Edge India Share Price (LC) 4390.0 16.0 634.5 16.6 806.4 Price Target % Change Bloomberg (LC) to target Code 5253 19.7 JDG SJ 19.0 18.8 MWC PM 700.0 10.3 MTCL IN 23 38.3 VIT US 900 11.6 INFOE IN JPM Rating OW OW OW OW OW P/E (X) Mkt Cap, US$ MM 2009E 2010E 965 37.7 7.4 680 10.7 9.5 536 80.8 12.6 741 32.7 24.7 472 36.9 38.3 EPS (LC) Yield (%) 2009E 2010E 2010E 116.5 597.1 0.0 1.5 1.7 3.2 7.9 50.4 0.8 0.5 0.7 0.0 21.9 21.1 0.0 ROE (%) 2010E 18.8 22.1 33.8 19.2 16.2

Source: Datastream, MSCI, IBES, J.P. Morgan estimates Note: Prices and valuations as of November 27, 2009. Small cap are stocks with market cap less than US$1billion. Sorted in ascending order of 2010E PE

Small-cap ideas: J.P. Morgan small-cap stocks to avoid
Name HCL Infosystems Guarani The9 Limited Share Price (LC) 146.8 4.9 7.5 Price Target (LC) 160.0 NA 6.5 % Change to target 9.0 (12.8) Bloomberg Code HCLI IN ACGU3 BZ NCTY US JPM Rating N UW N Mkt Cap, US$ MM 686 800 209 P/E (X) 2009E 2010E 10.5 10.1 nm 44.9 NM NM EPS (LC) 2009E 2010E 14.0 14.6 -0.3 0.1 -1.7 -2.1 Yield (%) 2010E 4.1 0.0 0.0 ROE (%) 2010E 18.7 2.9 -18.1

Source: Datastream, MSCI, IBES, J.P. Morgan estimates Note: Prices and valuations as of November 27, 2009. Small cap are stocks with market cap less than US$1billion. Sorted in ascending order of 2010E PE

97

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Top Picks by country strategists
Name Brazil Petrobras All Copel Santander Brazil PDG Realty Suzano Totvs LAME OGX China Bank of China - H China Yurun Food Group Xinao Gas China Mengniu Dairy Co. Ltd. Baidu.com India Unitech Ltd Infosys Technologies ICICI Bank Larsen & Toubro Indonesia Astra International Bank Central Asia (BCA) PT Aneka Tambang Tbk Tambang Batubara Bukit Asam Korea SK Energy Co Ltd Hyundai Motor Company Shinhan Financial Group Samsung SDI Amorepacific Corp Malaysia Public Bank (F) Tenaga AMMB Holdings Genting Mexico Urbi Arca Grupo Mexico Ternium Asur Femsa Philippines Manila Water Company Inc Energy Development (EDC) Metropolitan Bank Ayala Land Russia Gazprom Sberbank South Africa JD Group ABSA Group Ltd Naspers Ltd Northam Platinum Ltd Anglo Platinum Share Price Target % Change Bloomberg Price (LC) (LC) to target Code 38.5 15.5 33.9 22.2 17.2 17.6 102.0 14.0 1416.0 4.1 18.0 18.2 23.1 434.2 79.3 2327.9 850.9 1589.5 32000.0 4675.0 2250.0 15800.0 108000 94600 44150 125500 859000 10.9 8.4 4.9 7.1 25.5 37.4 30.5 31.8 61.6 44.5 16.0 4.1 45.5 11.8 5.6 2.3 4390.0 12421.0 27900.0 3980.0 74900.0 46.0 21.0 38.0 28.0 19.0 22.0 125.0 17.0 2030.0 5.7 21.0 22.2 23.0 460 120.0 2550.0 NA 1675.0 37000 5500 2750 22500 150000 140000 60000 210000 998000 13.8 10.3 5.3 8.5 34.0 44.0 31.5 31.0 53.0 50.0 19.0 5.6 50.0 13.9 9.9 3.0 5253.0 15371.0 34108.7 6100.0 91000.0 19.6 35.5 12.2 26.2 10.3 25.0 22.5 21.8 43.4 38.0 16.9 21.7 (0.2) 5.9 51.3 9.5 5.4 15.6 17.6 22.2 42.4 38.9 48.0 35.9 67.3 16.2 26.6 22.3 7.1 20.6 33.4 17.6 3.3 (2.5) (13.9) 12.3 18.8 38.3 9.9 18.3 PETR4 BZ ALLL11 BZ CPLE6 BZ SANB11 BZ PDGR3 BZ SUZB5 BZ TOTS3 BZ LAME4 BZ OGXP3 BZ 3988 HK 1068 HK 2688 HK 2319 HK BIDU US UT IN INFO IN ICICIBC IN LT IN ASII IJ BBCA IJ ANTM IJ PTBA IJ 096770 KS 005380 KS 055550 KS 006400 KS 090430 KS PBKF MK TNB MK AMM MK GENT MK URBI* MM ARCA* MM GMEXICOB MM TX US ASURB MM FMX US MWC PM EDC PM MBT PM ALI PM JPM Rating OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW N OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW P/E (X) EPS (LC) Mkt Cap, Yield (%) ROE (%) US$ MM 2009E 2010E 20099E 2010E 2010E 2010E 209104 6130 5300 48486 3651 3145 1828 5626 26325 145716 3877 2471 5165 15063 4055 28593 20307 20441 13587 12088 2251 3818 8516 17769 17853 4876 4282 11289 10716 4331 7659 1923 2330 18350 6373 1427 15937 680 1610 1744 3230 133282 48571 965 12012 15161 1930 24025 12.9 15.2 9.4 16.5 21.2 6.3 20.2 58.8 nm 12.7 19.0 23.3 28.2 70.8 10.8 22.8 26.6 31.0 15.3 17.6 48.0 12.7 9.5 8.8 16.2 18.9 24.6 15.2 39.9 15.5 24.5 12.8 11.1 19.5 26.9 20.1 24.7 10.7 10.6 17.0 40.1 6.3 112.5 37.7 10.9 23.7 21.7 70.7 11.7 11.8 12.4 12.9 14.7 14.9 15.8 34.9 nm 9.0 16.7 18.8 24.8 47.4 13.7 21.8 26.8 27.6 12.6 13.1 18.4 21.1 7.7 8.2 10.6 14.3 23.0 12.9 14.0 15.4 19.7 9.7 10.4 13.7 15.6 17.1 20.3 9.5 10.7 11.5 39.4 5.2 15.0 7.4 8.1 19.0 30.4 33.1 3.0 1.0 3.6 1.3 0.8 2.8 5.2 0.2 16.4 0.3 0.9 0.8 0.8 6.1 7.4 102.0 32.0 51.2 2097 265 47 1241 11357 10798 2717 6627 34940 0.7 0.2 0.3 0.3 2.0 3.4 0.1 1.2 3.1 1.8 1.5 0.4 2.7 0.3 0.9 0.0 116 1144 1179 183 1060 3.3 1.3 2.7 1.7 1.2 1.2 6.6 0.4 5.7 0.5 1.1 1.0 0.9 9.2 5.8 107.0 31.8 57.6 2541 356 122 750 13955 11486 4165 8758 37312 0.8 0.6 0.3 0.4 2.6 3.6 0.2 2.1 3.7 2.2 1.7 0.4 4.0 0.3 1.1 0.2 597 1542 1469 131 2260 1.7 1.8 2.1 3.3 1.2 0.7 1.1 1.1 0.0 5.0 1.5 1.3 0.0 0.0 0.1 1.3 1.4 0.0 3.2 2.9 1.0 3.9 2.1 1.6 2.0 0.0 0.0 3.9 1.6 1.6 0.7 0.0 5.2 3.4 4.3 3.6 1.1 3.2 9.3 2.6 0.5 0.0 0.9 0.0 5.2 1.0 1.5 0.0 17.4 17.0 7.9 12.0 19.7 7.5 34.1 62.9 3.8 21.3 20.6 14.5 17.5 36.0 17.2 29.6 7.1 19.2 24.9 29.2 13.6 28.1 14.7 10.1 11.8 7.6 18.5 29.5 9.7 11.0 9.6 13.8 17.0 23.2 8.4 17.2 10.3 22.1 24.2 1012.7 7.1 12.3 12.6 18.8 18.4 12.0 5.6 14.5

75.8 GAZP RU 34.2 SBER RU 19.7 23.8 22.3 53.3 21.5 JDG SJ ASA SJ NPN SJ NHM SJ AMS SJ

98

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Emerging Markets Equity Research 02 December 2009

Top Picks by country strategists (cont'd)
Name Taiwan Fubon Financial Holdings Acer Inc Hon Hai Precision UMC Nan Ya Plastics Corp Thailand Thai Oil Public Company PTT Public Company Siam Commercial Bank Land & Houses CP All Pcl Turkey Vakifbank Bank Asya MENA Aldar Properties Qtel First Gulf Bank Chile Enersis Peru Credicorp Buenaventura Colombia Bancolombia Pacific Rubiales Share Price Target % Change Bloomberg Price (LC) (LC) to target Code 36.0 79.5 135.0 15.6 54.1 39.8 222.0 78.5 6.0 20.8 3.1 3.0 5.5 148.7 18.8 185.1 71.7 39.8 42.8 15.0 54.0 92 155 19.0 61.0 62.0 315 110 9.5 23.0 5 5.0 7.8 230 26 241.0 88.0 34 50.0 18 50.2 15.7 14.8 21.8 12.8 56.0 41.9 40.1 59.7 10.6 2881 TT 2353 TT 2317 TT 2303 TT 1303 TT TOP TB PTT TB SCB TB LH TB CPALL TB JPM Rating OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW N N OW OW P/E (X) EPS (LC) Mkt Cap, Yield (%) ROE (%) US$ MM 2009E 2010E 20099E 2010E 2010E 2010E 9037 6606 35831 6268 13143 2439 18910 8009 1794 2811 5104 1779 3867 5989 7019 12217 5721 10983 8426 3014 13.6 17.9 16.8 69.8 32.9 6.0 10.7 12.5 14.8 22.7 6.8 9.4 8.1 7.5 8.6 8.4 12.9 19.6 15.3 nm 10.8 12.3 13.3 15.5 22.5 5.6 8.7 10.6 13.3 19.0 5.8 6.7 6.5 7.3 7.8 9.1 12.0 19.4 12.9 14.0 2.6 4.4 8.0 0.2 1.6 6.7 20.7 6.3 0.4 0.9 0.5 0.3 0.7 19.7 2.2 21.8 5.7 2.1 2.9 -0.6 3.3 6.5 10.1 1.0 2.4 7.1 25.5 7.4 0.4 1.1 0.5 0.5 0.9 20.4 2.4 20.0 6.2 2.1 3.4 1.1 5.6 3.8 1.9 0.0 2.9 7.5 3.8 2.8 7.5 4.0 6.1 3.6 0.0 7.4 1.9 4.4 2.8 0.3 2.7 0.0 14.0 17.6 18.0 6.0 8.2 19.8 16.0 16.7 17.3 31.9 18.9 22.0 11.0 19.3 16.9 18.6 20.5 21.5 19.2 21.6

73.1 VAKBN TI 65.6 ASYAB TI 41.6 ALDAR UH 54.7 QTEL QD 38.7 FGB UH 30.2 ENERSIS CI 22.7 BAP US (14.7) BVN US 16.9 CIB US 20.2 PRE CN

Source: Datastream, MSCI, IBES, J.P. Morgan estimates Note: Prices and valuations as of November 27, 2009. Sorted in ascending order of 2010E PE

99

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Emerging Markets Equity Research 02 December 2009

Stocks to avoid by country strategists
Name Brazil Sabesp CPFL Energia Redecard Usiminas Guarani China Datang International China Unicom India Hindustan Unilever Limited Reliance Power Idea Cellular Limited Indonesia Bank Rakyat Indonesia Unilever Indonesia Tbk Korea S-Oil Corp Malaysia YTL Power MISC Berhad - F Mexico Homex Telmex Banorte Grupo Modelo Soriana GAP Telmex Internacional Philippines Manila Electric Company Russia Severstal VTB Taiwan Quanta Computer Inc. HTC Corp Taishin Financial Holdings Thailand TMB Bank Public Company Chile Cencosud SQM Peru Southern Copper Colombia Ecopetrol Exito Share Price Target % Change Bloomberg Price (LC) (LC) to target Code 31.6 32.7 26.4 50.0 4.9 3.3 10.3 284.3 141.1 49.0 7650.0 10950.0 54500.0 2.3 8.9 73.4 17.6 46.5 65.3 31.8 35.6 15.1 209.0 7.5 4.3 63.1 362.5 12.2 1.1 1490.0 38.0 34.6 2585.0 17140.0 32.0 34.0 32.0 38.5 NA 4.3 8.0 225.0 122.0 45.0 6650.0 9700.0 64000.0 2.1 7.7 102.0 13.0 49.0 60.0 31.0 30.0 10.0 165.0 7.9 4.3 57.0 250.0 12.0 1.0 1578.0 33.0 27.5 2795.0 17800.0 1.2 4.0 21.4 (23.0) SBSP3 BZ CPFE3 BZ RDCD3 BZ USIM5 BZ ACGU3 BZ JPM Rating UW UW N UW UW N UW UW UW UW UW UW N UW UW N UW N N UW N UW N UW UW UW UW UW N UW UW UW UW N P/E (X) Mkt Cap, US$ MM 2009E 2010E 4143 9027 10208 14413 800 12610 31314 13284 7246 3251 9896 8762 5232 3987 9654 1904 16052 7253 16314 4423 1545 13512 4997 7590 22229 7273 8927 2146 1337 6586 9995 29444 52376 2478 5.5 12.9 12.7 38.0 nm 23.8 26.8 25.3 138.3 16.2 13.3 31.6 10.0 21.4 23.4 9.7 11.0 15.8 24.2 20.6 19.6 23.4 30.3 NM NM 10.4 12.9 7.3 22.1 17.4 30.9 30.4 16.8 32.7 5.8 11.1 11.6 14.6 44.9 14.6 38.8 27.3 54.4 65.3 11.2 25.8 9.3 11.8 41.0 8.2 12.3 13.1 18.0 18.5 18.7 21.3 18.2 13.7 38.6 9.9 14.8 17.1 14.1 14.4 25.5 20.3 13.2 30.2 EPS (LC) 2009E 2010E 5.7 2.5 2.1 1.3 -0.3 0.1 0.4 11.3 1.0 3.0 577.3 346.8 5457 0.1 0.4 7.3 1.6 2.9 2.7 1.5 1.8 0.7 6.9 -0.4 (0.3) 6.1 28.1 1.7 0.0 84.5 1.3 1.2 154.3 526.0 5.4 2.9 2.3 3.5 0.1 0.2 0.3 10.4 2.6 0.7 684.3 425.0 5841 0.2 0.2 8.7 1.5 3.5 3.6 1.7 1.9 0.7 11.5 0.6 0.1 6.4 24.6 0.7 0.1 102.0 1.5 1.8 197.5 570.3 Yield (%) 2010E 4.6 8.5 7.4 2.1 0.0 3.3 1.2 2.6 0.0 0.0 3.0 3.2 3.3 6.6 4.0 0.0 4.1 0.4 2.3 0.5 5.0 2.4 3.5 0.8 0.5 5.1 5.4 5.9 0.0 2.1 0.0 2.5 4.6 0.4 ROE (%) 2010E 10.0 27.2 97.9 10.9 2.9 7.2 3.0 99.5 4.4 1.6 28.4 86.6 16.3 18.2 3.9 19.2 48.6 15.2 14.7 9.3 34.3 9.7 20.1 6.4 3.5 20.6 24.6 6.5 6.8 9.8 28.2 31.9 27.1 3.4

28.7 991 HK (22.3) 762 HK (20.9) HUVR IN (13.5) RPWR IN (8.1) IDEA IN (13.1) BBRI IJ (11.4) UNVR IJ 17.4 010950 KS (7.5) YTLP MK (13.0) MISF MK 39.0 (26.3) 5.4 (8.1) (2.5) (15.8) (33.6) HOMEX* MM TMX US GFNORTEO MM GMODELOC MM SORIANAB MM GAPB MM TII US

(21.1) MER PM 4.9 CHMF RU 0.9 VTBR LI (9.7) 2382 TT (31.0) 2498 TT (1.2) 2887 TT (6.5) TMB TB 5.9 CENCOSUD CI (13.1) SQM US (20.6) PCU US 8.1 ECOPETL CB 3.9 EXITO CB

Source: Datastream, MSCI, IBES, J.P. Morgan estimates Note: Prices and valuations as of November 27, 2009. Sorted in ascending order of 2010E PE

100

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Emerging Markets Equity Research 02 December 2009

Top Picks by Sector Heads
Name Share Price (LC) Price % Target Change Bloomberg (LC) to target Code 48.0 15.6 18.4 4.0 28.2 005380 KS ASII IJ 489 HK MSIL IN 2201 TT JPM Rating OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW Mkt Cap, US$ MM 17769 13587 12207 9701 1895 6130 3145 965 15937 5165 3304 5626 4953 133282 85739 8516 136013 209104 26325 5104 145716 17853 9037 48486 48571 2087 2255 472 15063 2683 18350 6373 8269 1930 24025 3867 1923 3651 3044 3230 16998 6606 1607 8277 35831 1827 9444 48071 6268 536 28593 741 EPS (LC) P/E (X) Yield (%) ROE (%) 2009E 2010E 2009E 2010E 2010E 2010E 8.8 15.3 15.0 37.2 41.5 15.2 6.3 37.7 24.7 28.2 44.0 58.8 91.5 6.3 12.1 9.5 8.6 12.9 nm 6.8 12.7 16.2 13.6 16.5 112.5 14.8 17.6 36.9 70.8 71.5 19.5 26.9 74.0 21.7 70.7 8.1 12.8 21.2 50.0 40.1 14.5 17.9 19.7 22.0 16.8 11.0 11.3 17.5 69.8 80.8 22.8 32.7 8.2 12.6 13.2 19.9 56.6 11.8 14.9 7.4 20.3 24.8 34.8 34.9 58.9 5.2 7.4 7.7 8.3 11.7 nm 5.8 9.0 10.6 10.8 12.9 15.0 12.8 15.4 38.3 47.4 77.4 13.7 15.6 18.5 30.4 33.1 6.5 9.7 14.7 17.6 39.4 11.9 12.3 12.6 13.1 13.3 8.2 8.6 13.8 15.5 12.6 21.8 24.7 10798 2097 0.7 42.2 0.9 1.0 2.8 116.5 1.8 0.8 27.9 0.2 0.7 0.9 0.7 11357 0.7 3.0 16.4 0.5 0.3 2717 2.6 1.3 0.0 3.7 0.8 21.9 6.1 2029 0.1 1.2 0.01 183 1060 0.7 2.0 0.8 0.1 0.3 34.8 4.4 0.5 2.9 8.0 8.0 2738 3.4 0.2 7.9 102 0.5 11486 2541 0.8 78.8 0.7 1.3 1.2 597.1 2.2 0.9 35.3 0.4 1.0 1.1 1.1 13955 0.8 3.3 5.7 0.5 0.5 4165 3.3 1.7 0.2 4.2 1.0 21.1 9.2 1874 0.2 2.1 0.04 131 2260 0.9 2.6 1.2 0.4 0.3 42.4 6.5 0.8 4.8 10.1 10.8 3612 4.4 1.0 50.4 107 0.7 1.6 3.2 1.3 0.4 0.5 1.8 0.7 0.0 1.1 0.0 0.3 1.1 0.0 0.0 1.4 2.1 3.0 1.7 0.0 6.1 5.0 2.0 5.6 3.3 0.9 0.0 0.0 0.0 0.0 0.0 3.4 4.3 1.4 1.5 0.0 0.0 0.0 1.2 0.0 0.5 4.9 3.8 3.2 2.5 1.9 5.1 2.3 5.0 0.0 0.8 1.3 0.0 10.1 24.9 23.6 21.6 1.8 17.0 7.5 18.8 10.3 17.5 12.6 62.9 29.3 12.3 19.5 14.7 16.6 17.4 3.8 18.9 21.3 11.8 14.0 12.0 12.6 24.5 19.7 16.2 36.0 7.6 23.2 8.4 4.9 5.6 14.5 11.0 13.8 19.7 11.8 7.1 37.4 17.6 26.4 11.6 18.0 27.6 12.7 25.1 6.0 33.8 29.6 19.2

Auto Hyundai Motor Company 94600 140000 Astra International 32000 37000 DongFeng Motor Co., Ltd. 11.0 13.0 Maruti Suzuki India Ltd 1567 1630 Yulon Motor Co., Ltd. 39.0 50.0 Agribusiness, Pulp and Paper All 15.5 21.0 Suzano 17.6 22.0 Consumer JD Group 4390 5253 Femsa 44.5 50.0 China Mengniu Dairy Co. Ltd. 23.1 23.0 United Spirits Limited 1228 1140 LAME 14.0 17.0 Magnit OAO 59.5 80.0 Energy Gazprom 5.6 9.9 Rosneft 8.1 10.3 SK Energy Co Ltd 108000 150000 Sinopec Corp - H 6.4 8.5 Petrobras 38.5 46.0 OGX 1416 2030 Financial Services Vakifbank 3.1 5.4 Bank of China - H 4.1 5.7 Shinhan Financial Group 44150 60000 Fubon Financial Holdings 36.0 54.0 Santander Brazil 22.2 28.0 Sberbank 2.3 3.0 Internet & Media Sohu.Com 54.3 74.0 CTC Media 14.8 25.0 Info Edge India 806.4 900.0 Baidu.com 434.2 460.0 NCsoft 145000.0 190000.0 Metals & Mining Grupo Mexico 30.5 31.5 Ternium 31.8 31.0 MMK 0.7 1.1 Northam Platinum Ltd 3980.0 6100.0 Anglo Platinum 74900.0 91000.0 Real Estate Aldar Properties 5.5 7.8 Urbi 25.5 34.0 PDG Realty 17.2 19.0 LSR 6.5 10.0 Ayala Land 11.8 13.9 Technology - Hardware MediaTek Inc. 504.0 630.0 Acer Inc 79.5 92.0 AAC Acoustic 10.1 14.6 ASUSTek Computer 63.0 70.0 Hon Hai Precision 135.0 155.0 Technology - Tech Panel/Semiconductor Powertech Technology Inc 88.2 108.0 LG Display 30950 40000 TSMC 60.0 72.0 UMC 15.6 19.0 Technology - IT Services MindTree Ltd. 634.5 700.0 Infosys Technologies 2327.9 2550.0 VanceInfo Technologies Inc. 16.6 23.0

35.5 ALLL11 BZ 25.0 SUZB5 BZ 19.7 12.3 (0.2) (7.2) 21.8 34.5 75.8 27.3 38.9 33.9 19.6 43.4 73.1 38.0 35.9 50.2 26.2 34.2 36.3 68.7 11.6 5.9 31.0 3.3 (2.5) 52.7 53.3 21.5 41.6 33.4 10.3 53.8 18.3 25.0 15.7 44.0 11.1 14.8 22.4 29.2 20.0 21.8 JDG SJ FMX US 2319 HK UNSP IN LAME4 BZ MGNT RU GAZP RU ROSN LI 096770 KS 386 HK PETR4 BZ OGXP3 BZ VAKBN TI 3988 HK 055550 KS 2881 TT SANB11 BZ SBER RU SOHU US CTCM US INFOE IN BIDU US 036570 KS GMEXICOB MM TX US MAGN RU NHM SJ AMS SJ ALDAR UH URBI* MM PDGR3 BZ LSRG LI ALI PM 2454 TT 2353 TT 2018 HK 2357 TT 2317 TT 6239 TT 034220 KS 2330 TT 2303 TT

10.3 MTCL IN 9.5 INFO IN 38.3 VIT US

101

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Emerging Markets Equity Research 02 December 2009

Top Picks by Sector Heads (cont'd)
Name Telecoms Turk Telekom Qtel MTN Group Limited Far EasTone Telecommunications Co., Ltd Totvs Transportation Asur Container Corporation of India Ltd China Airlines Utilities Enersis RusHydro Perusahaan Gas Negara Tata Power Xinao Gas Share Price (LC) 4.4 148.7 11540.0 37.0 102.0 61.6 1144.4 10.0 185.1 0.04 3575.0 1321.0 18.2 Price % Target Change Bloomberg (LC) to target Code 6.0 230.0 15843.0 45.0 125.0 53.0 1260.0 16.0 241.0 0.04 4700.0 1450.0 22.2 36.4 TTKOM TI 54.7 QTEL QD 37.3 MTN SJ 21.6 4904 TT 22.5 TOTS3 BZ (13.9) ASURB MM 10.1 CCRI IN 60.5 2610 TT 30.2 9.0 31.5 9.8 21.7 ENERSIS CI HYDR RU PGAS IJ TPWR IN 2688 HK JPM Rating OW OW OW OW OW OW OW OW OW OW OW OW OW Mkt Cap, US$ MM 10078 5989 28599 3730 1828 1427 3187 1410 12217 9898 9089 6713 2471 EPS (LC) P/E (X) Yield (%) ROE (%) 2009E 2010E 2009E 2010E 2010E 2010E 9.6 7.5 11.4 13.3 20.2 20.1 18.1 NM 8.4 13.8 13.9 24.0 23.3 7.2 7.3 9.8 11.9 15.8 17.1 16.7 80.0 9.1 14.5 14.8 18.4 18.8 0.5 20 1016 2.8 5.2 3.1 63.1 -2.3 22 0.003 256 55.0 0.8 0.6 20 1180 3.1 6.6 3.7 68.4 0.1 20 0.003 242 71.6 1.0 10.0 7.4 2.5 7.3 1.1 3.6 1.2 0.0 4.4 0.000 2.9 1.1 1.3 35.3 19.3 21.6 14.0 34.1 17.2 21.5 1.3 18.6 6.0 41.8 12.8 14.5

Source: Datastream, MSCI, IBES, J.P. Morgan estimates Note: Prices and valuations as of November 27, 2009. Sorted in ascending order of 2010E PE

102

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Emerging Markets Equity Research 02 December 2009

Stocks to Avoid by Sector Heads
Name Share Price (LC) Price Target % Change Bloomberg (LC) to target Code (22.0) 2338 HK - ACGU3 BZ (12.4) MSM SJ (2.5) SORIANAB MM (20.9) HUVR IN 32.0 LKOH RU 8.1 ECOPETL CB (21.1) 857 HK JPM Rating N UW UW UW UW N UW UW Mkt Cap, US$ MM 6941 800 2288 4423 13284 48312 52376 339259 7551 9896 7253 209 14413 29444 1904 1063 2146 7273 8927 1646 8985 686 4148 16052 31314 1545 18608 5529 4143 9027 12610 P/E (X) 2009E 2010E 9.9 nm 14.3 20.6 25.3 6.7 16.8 15.4 12.5 13.3 15.8 NM 38.0 30.4 9.7 19.2 10.1 10.4 12.9 22.8 NM 10.5 9.0 11.0 26.8 19.6 NM 33.2 5.5 12.9 23.8 8.6 44.9 14.5 18.5 27.3 6.6 13.2 13.8 9.3 11.2 13.1 NM 14.6 20.3 8.2 12.0 20.2 9.9 14.8 16.3 43.6 10.1 8.9 12.3 38.8 18.7 49.2 82.4 5.8 11.1 14.6 EPS (LC) Yield (%) 2009E 2010E 2010E 6.1 -0.3 592 1.5 11.3 8 154 0.6 901 577 2.9 -1.7 1.3 1.2 7.3 0.2 0.3 6.1 28.1 0.2 -2.0 14.0 81 1.6 0.4 1.8 -0.3 0.1 5.7 2.5 0.1 7.0 0.1 581 1.7 10.4 9 197 0.7 1216 684 3.5 -2.1 3.5 1.8 8.7 0.3 0.1 6.4 24.6 0.3 0.8 14.6 82 1.5 0.3 1.9 0.2 0.0 5.4 2.9 0.2 0.8 0.0 4.4 0.5 2.6 2.4 4.6 3.2 4.8 3.0 0.4 0.0 2.1 2.5 0.0 2.8 2.4 5.1 5.4 0.0 0.0 4.1 10.2 4.1 1.2 5.0 0.4 0.0 4.6 8.5 3.3 ROE (%) 2010E 45.2 2.9 35.8 9.3 99.5 12.5 27.1 14.0 13.2 28.4 15.2 -18.1 10.9 31.9 19.2 14.1 2.1 20.6 24.6 11.4 2.3 18.7 9.6 48.6 3.0 34.3 4.2 2.3 10.0 27.2 7.2

Auto Weichai Power 60.3 47.0 Agribusiness, Pulp and Paper Guarani 4.9 NA Consumer Massmart 8440.0 7390.0 Soriana 31.8 31.0 Hindustan Unilever Ltd. 284.3 225.0 Energy Lukoil 56.8 75.0 Ecopetrol 2585.0 2795.0 PetroChina 9.4 7.4 Financial Services Nedbank Group Ltd 11250.0 10747.0 Bank Rakyat Indonesia 7650.0 6650.0 Banorte 46.5 49.0 Internet & Media The9 Limited 7.5 6.5 Metals & Mining Usiminas 50.0 38.5 Southern Copper 34.6 27.5 Real Estate Homex 73.4 102.0 Beijing Capital Land 4.0 3.5 New World China Land 2.9 3.2 Technology - Hardware Quanta Computer Inc. 63.1 57.0 HTC Corp 362.5 250.0 BYD Electronic 5.7 3.6 Technology - Tech Panel/Semiconductor AU Optronics 32.9 27.0 Technology - IT Services HCL Infosystems 146.8 160.0 Telecoms Magyar Telekom 727.0 685.8 Telmex 17.6 13.0 China Unicom 10.3 8.0 Transportation GAP 35.6 30.0 China Cosco Holdings 9.7 10.0 China Southern Airlines 2.5 2.1 Utilities Sabesp 31.6 32.0 CPFL Energia 32.7 34.0 Datang International 3.3 4.3
Source: Datastream, MSCI, IBES, J.P. Morgan estimates.

(4.5) NED SJ UW (13.1) BBRI IJ UW 5.4 GFNORTEO MM N (12.8) NCTY US (23.0) USIM5 BZ (20.6) PCU US 39.0 HOMEX* MM (12.5) 2868 HK 9.0 917 HK (9.7) 2382 TT (31.0) 2498 TT (36.4) 285 HK (17.9) 2409 TT 9.0 HCLI IN (5.7) MTEL HB (26.3) TMX US (22.3) 762 HK (15.8) GAPB MM 2.7 1919 HK (16.7) 1055 HK 1.2 SBSP3 BZ 4.0 CPFE3 BZ 28.7 991 HK N UW UW N N UW UW UW UW UW N UW UW UW N N N UW UW N

Note: Prices and valuations as of November 27, 2009. Sorted in ascending order of 2010E PE. Note: BYD Electronic - We revised PT to HK$4.8 on November 29.

103

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Contrarian calls
2009 losers picked to be 2010 winners (Stocks with relative underperformance end 2008 to date and top pick)
Name Share Price (LC) Price % Target Change Bloomberg JPM (LC) to target Code Rating 75.8 41.6 36.4 19.7 54.7 38.9 23.8 33.9 29.2 41.9 30.2 18.8 37.3 33.4 17.6 50.2 21.6 22.7 26.6 17.6 36.3 59.7 20.0 22.3 (13.9) 12.3 12.8 16.2 (7.2) 60.5 GAZP RU ALDAR UH TTKOM TI JDG SJ QTEL QD 096770 KS ASA SJ 386 HK 034220 KS PTT TB ENERSIS CI MWC PM MTN SJ URBI* MM ARCA* MM 2881 TT 4904 TT BAP US PBKF MK BBCA IJ SOHU US LH TB 2330 TT TNB MK ASURB MM FMX US 1303 TT 090430 KS UNSP IN 2610 TT OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW N OW OW OW OW OW OW OW OW OW OW OW OW Mkt Cap, US$ MM 133282 3867 10078 965 5989 8516 12012 136013 9444 18910 12217 680 28599 1923 2330 9037 3730 5721 11289 12088 2087 1794 48071 10716 1427 15937 13143 4282 3304 1410 P/E (X) Yield (%) ROE (%) 2009E 2010E 2010E 2010E 6.3 8.1 9.6 37.7 7.5 9.5 10.9 8.6 11.3 10.7 8.4 10.7 11.4 12.8 11.1 13.6 13.3 12.9 15.2 17.6 14.8 14.8 17.5 39.9 20.1 24.7 32.9 24.6 44.0 NM 5.2 6.5 7.2 7.4 7.3 7.7 8.1 8.3 8.6 8.7 9.1 9.5 9.8 9.7 10.4 10.8 11.9 12.0 12.9 13.1 12.8 13.3 13.8 14.0 17.1 20.3 22.5 23.0 34.8 80.0 0.0 0.0 10.0 0.0 7.4 2.1 5.2 3.0 2.3 3.8 4.4 3.2 2.5 0.0 5.2 5.6 7.3 2.8 3.9 2.9 0.0 7.5 5.0 1.6 3.6 1.1 2.9 0.0 0.3 0.0 12.3 11.0 35.3 18.8 19.3 14.7 18.4 16.6 12.7 16.0 18.6 22.1 21.6 13.8 17.0 14.0 14.0 20.5 29.5 29.2 24.5 17.3 25.1 9.7 17.2 10.3 8.2 18.5 12.6 1.3 Performance end 08 to date (%) Absolute Rel to Region 52.3 38.8 27.0 47.4 35.8 58.4 42.0 35.4 62.8 32.5 44.1 21.8 31.8 42.6 63.9 52.7 0.7 47.8 30.7 66.8 18.3 65.3 37.9 37.5 30.9 50.0 60.2 45.0 42.5 -7.5 (16.6) (30.2) (41.9) (21.6) (33.1) (10.6) (26.9) (33.6) (6.2) (36.4) (24.8) (47.2) (37.1) (26.4) (5.0) (16.3) (68.3) (21.1) (38.2) (2.2) (50.7) (3.6) (31.1) (31.5) (38.1) (18.9) (8.7) (23.9) (26.4) (76.5)

Top Picks Gazprom 5.6 9.9 Aldar Properties 5.5 7.8 Turk Telekom 4 6.0 JD Group 4390.0 5253.0 Qtel 148.7 230.0 SK Energy Co Ltd 108000.0 150000.0 ABSA Group Ltd 12421.0 15371.0 Sinopec Corp - H 6 9 LG Display 30950.0 40000.0 PTT Public Company 222 315 Enersis 185.1 241.0 Manila Water Company Inc 16.0 19.0 MTN Group Limited 11540 15843.0 Urbi 25.5 34.0 Arca 37 44.0 Fubon Financial Holdings 36.0 54.0 Far EasTone Telecommunications 37.0 45.0 Credicorp 71.7 88.0 Public Bank (F) 10.9 13.8 Bank Central Asia (BCA) 4675 5500.0 Sohu.Com 54.3 74.0 Land & Houses 6 10 TSMC 60.0 72.0 Tenaga 8.4 10.3 Asur 61.6 53.0 Femsa 45 50.0 Nan Ya Plastics Corp 54 61 Amorepacific Corp 859000 998000 United Spirits Limited 1228.0 1140.0 China Airlines 10.0 16.0
Source: Datastream, MSCI, IBES, J.P. Morgan estimates.

Note: Prices and valuations as of November 27, 2009. Sorted in ascending order of 2010E PE.

104

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

2009 winners picked to be 2010 losers (Stocks with relative outperformance end 2008 to date and stocks to avoid)
Name Stocks to Avoid Lukoil Weichai Power Quanta Computer Inc. HCL Infosystems Bank Rakyat Indonesia Beijing Capital Land Banorte Severstal TMB Bank Public Co. Cencosud Usiminas BYD Electronic Taishin Financial Holdings Manila Electric Co. Southern Copper Exito VTB Guarani China Cosco Holdings China Southern Airlines Share Price (LC) 56.8 60.3 63.1 146.8 7650.0 4.0 46.5 7.5 1.1 1490.0 50.0 5.7 12.2 209.0 34.6 17140.0 4.3 4.9 9.7 2.5 Price Target % Change Bloomberg (LC) to target Code 75 47.0 57 160.0 6650.0 3.5 49.0 8 1.0 1578.0 38.5 4 12.0 165 27.5 17800 4.3 NA 10 2.1 32.0 (22.0) (9.7) 9.0 (13.1) (12.5) 5.4 4.9 (6.5) 5.9 (23.0) (36.4) (1.2) (21.1) (20.6) 3.9 0.9 2.7 (16.7) LKOH RU 2338 HK 2382 TT HCLI IN BBRI IJ 2868 HK GFNORTEO MM CHMF RU TMB TB CENCOSUD CI USIM5 BZ 285 HK 2887 TT MER PM PCU US EXITO CB VTBR LI ACGU3 BZ 1919 HK 1055 HK JPM Rating N N UW N UW N N UW N UW UW UW UW N UW N UW UW N N Mkt Cap, US$ MM 48312 6941 7273 686 9896 1063 7253 7590 1337 6586 14413 1646 2146 4997 29444 2478 22229 800 18608 5529 P/E (X) Yield (%) ROE (%) 2009E 2010E 2010E 2010E 6.7 9.9 10.4 10.5 13.3 19.2 15.8 NM 22.1 17.4 38.0 22.8 7.3 30.3 30.4 32.7 NM nm NM 33.2 6.6 8.6 9.9 10.1 11.2 12.0 13.1 13.7 14.1 14.4 14.6 16.3 17.1 18.2 20.3 30.2 38.6 44.9 49.2 82.4 2.4 0.8 5.1 4.1 3.0 2.8 0.4 0.8 0.0 2.1 2.1 0.0 5.9 3.5 2.5 0.4 0.5 0.0 0.4 0.0 12.5 45.2 20.6 18.7 28.4 14.1 15.2 6.4 6.8 9.8 10.9 11.4 6.5 20.1 31.9 3.4 3.5 2.9 4.2 2.3 Performance end 08 to date (%) Absolute Rel to Region 73.8 312.7 87.0 71.4 93.9 222.6 97.6 130.8 89.5 111.3 154.3 107.3 113.4 253.6 123.3 92.4 89.9 221.4 80.7 95.3 4.8 243.7 18.0 2.5 24.9 153.6 28.7 61.8 20.5 42.4 85.3 38.4 44.4 184.6 54.3 23.4 20.9 152.4 11.8 26.4

Source: Datastream, MSCI, IBES, J.P. Morgan estimates. Note: Prices and valuations as of November 27, 2009. Sorted in ascending order of 2010E PE. Note: BYD Electronic - We revised PT to HK$4.8 on November 29.

105

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Running with 2009 winners (Stocks with relative outperformance end 2008 to date and top picks)
Name Top Picks Thai Oil Public Company Vakifbank Bank Asya Rosneft First Gulf Bank Powertech Technology Inc Hyundai Motor Company Bank of China - H Shinhan Financial Group Siam Commercial Bank Energy Development Corp. Metropolitan Bank Petrobras All MediaTek Inc. Acer Inc Copel MindTree Ltd. AAC Acoustic Astra International Bancolombia ASUSTek Computer DongFeng Motor Co., Ltd. Hon Hai Precision Grupo Mexico Unitech Ltd Pacific Rubiales Samsung SDI RusHydro PDG Realty Perusahaan Gas Negara Sberbank Suzano AMMB Holdings UMC CTC Media Totvs China Yurun Food Group Container Corp. of India LSR PT Aneka Tambang Tbk Tata Power MMK Xinao Gas CP All Pcl Naspers Ltd Buenaventura Genting Maruti Suzuki India Ltd Tambang Batubara Bukit Asam Infosys Technologies Share Price (LC) Price Target (LC) % Change Bloomberg to target Code 56.0 73.1 65.6 27.3 38.7 22.4 48.0 38.0 35.9 40.1 38.3 9.9 19.6 35.5 25.0 15.7 12.2 10.3 44.0 15.6 16.9 11.1 18.4 14.8 3.3 51.3 20.2 67.3 9.0 10.3 31.5 34.2 25.0 7.1 21.8 68.7 22.5 16.9 10.1 53.8 22.2 9.8 52.7 21.7 10.6 22.3 (14.7) 20.6 4.0 TOP TB VAKBN TI ASYAB TI ROSN LI FGB UH 6239 TT 005380 KS 3988 HK 055550 KS SCB TB EDC PM MBT PM PETR4 BZ ALLL11 BZ 2454 TT 2353 TT CPLE6 BZ MTCL IN 2018 HK ASII IJ CIB US 2357 TT 489 HK 2317 TT GMEXICOB MM UT IN PRE CN 006400 KS HYDR RU PDGR3 BZ PGAS IJ SBER RU SUZB5 BZ AMM MK 2303 TT CTCM US TOTS3 BZ 1068 HK CCRI IN LSRG LI ANTM IJ TPWR IN MAGN RU 2688 HK CPALL TB NPN SJ BVN US GENT MK MSIL IN JPM Mkt Cap, Rating US$ MM OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW N OW OW OW OW 2439 5104 1779 85739 7019 1827 17769 145716 17853 8009 1610 1744 209104 6130 16998 6606 5300 536 1607 13587 8426 8277 12207 35831 18350 4055 3014 4876 9898 3651 9089 48571 3145 4331 6268 2255 1828 3877 3187 3044 2251 6713 8269 2471 2811 15161 10983 7659 9701 3818 28593 P/E (X) 2009E 2010E 6.0 6.8 9.4 12.1 8.6 11.0 8.8 12.7 16.2 12.5 10.6 17.0 12.9 15.2 14.5 17.9 9.4 80.8 19.7 15.3 15.3 22.0 15.0 16.8 19.5 10.8 nm 18.9 13.8 21.2 13.9 112.5 6.3 15.5 69.8 17.6 20.2 19.0 18.1 50.0 48.0 24.0 74.0 23.3 22.7 23.7 19.6 24.5 37.2 12.7 22.8 5.6 5.8 6.7 7.4 7.8 8.2 8.2 9.0 10.6 10.6 10.7 11.5 11.7 11.8 11.9 12.3 12.4 12.6 12.6 12.6 12.9 13.1 13.2 13.3 13.7 13.7 14.0 14.3 14.5 14.7 14.8 15.0 14.9 15.4 15.5 15.4 15.8 16.7 16.7 17.6 18.4 18.4 18.5 18.8 19.0 19.0 19.4 19.7 19.9 21.1 21.8 Yield (%) 2010E 7.5 6.1 3.6 1.4 1.9 5.1 1.6 5.0 2.0 2.8 9.3 2.6 1.7 1.8 4.9 3.8 2.1 0.8 3.2 3.2 2.7 2.5 1.3 1.9 3.4 0.1 0.0 0.0 0.0 1.2 2.9 0.9 0.7 1.6 0.0 0.0 1.1 1.5 1.2 0.0 1.0 1.1 1.4 1.3 4.0 1.0 0.3 0.7 0.4 3.9 1.3 ROE Performance end 08 to date (%) (%) 2010E Absolute Rel to Region 19.8 18.9 22.0 19.5 16.9 27.6 10.1 21.3 11.8 16.7 24.2 1012.7 17.4 17.0 37.4 17.6 7.9 33.8 26.4 24.9 19.2 11.6 23.6 18.0 23.2 17.2 21.6 7.6 6.0 19.7 41.8 12.6 7.5 11.0 6.0 19.7 34.1 20.6 21.5 11.8 13.6 12.8 4.9 14.5 31.9 12.0 21.5 9.6 21.6 28.1 29.6 76.0 168.0 161.6 111.2 104.9 72.2 164.0 94.8 71.0 70.0 168.7 99.5 124.8 110.9 132.5 91.3 86.9 178.0 191.4 251.6 86.8 74.1 339.2 145.5 284.3 87.0 691.7 151.5 74.6 316.3 122.8 201.4 94.2 102.4 113.1 211.7 277.2 97.1 93.0 755.3 139.3 75.8 174.1 123.3 76.7 110.3 108.3 94.4 198.3 165.5 112.2 7.0 99.0 92.7 42.3 36.0 3.2 95.1 25.9 2.1 1.0 99.7 30.6 55.9 41.9 63.5 22.4 17.9 109.0 122.4 182.7 17.9 5.2 270.2 76.5 215.3 18.0 622.7 82.6 5.7 247.4 53.9 132.4 25.2 33.5 44.2 142.7 208.2 28.2 24.0 686.3 70.4 6.9 105.1 54.3 7.7 41.4 39.4 25.5 129.4 96.5 43.3

39.8 62.0 3.1 5.4 3.0 5.0 8.1 10.3 18.8 26.0 88.2 108.0 94600.0 140000.0 4.1 5.7 44150.0 60000.0 78.5 110.0 4.1 5.6 45.5 50.0 38.5 46.0 15.5 21.0 504.0 630.0 79.5 92.0 33.9 38.0 634.5 700.0 10.1 14.6 32000.0 37000.0 42.8 50.0 63.0 70.0 11.0 13.0 135.0 155.0 30.5 31.5 79.3 120.0 15.0 18.0 125500.0 210000.0 0.0 0.0 17.2 19.0 3575.0 4700.0 2.3 3.0 17.6 22.0 4.9 5.3 15.6 19.0 14.8 25.0 102.0 125.0 18.0 21.0 1144.4 1260.0 6.5 10.0 2250.0 2750.0 1321.0 1450.0 0.7 1.1 18.2 22.2 20.8 23.0 27900.0 34108.7 39.8 34.0 7.1 8.5 1567.2 1630.0 15800.0 2327.9 22500.0 2550.0

42.4 PTBA IJ 9.5 INFO IN

106

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Running with 2009 winners (Stocks with relative outperformance end 2008 to date and top picks) (cont'd)
Name China Mengniu Dairy Co. VanceInfo Technologies ICICI Bank Larsen & Toubro Northam Platinum Ltd Anglo Platinum LAME Info Edge India Ayala Land Baidu.com Yulon Motor Co., Ltd. Magnit OAO NCsoft OGX Price Share Target Price (LC) (LC) 23.1 23.0 16.6 23.0 850.9 NA 1589.5 1675.0 3980.0 6100.0 74900.0 91000.0 14.0 17.0 806.4 900.0 11.8 13.9 434.2 460.0 39.0 50.0 59.5 80.0 145000.0 190000.0 1416.0 2030.0 % Change to target (0.2) 38.3 5.4 53.3 21.5 21.8 11.6 18.3 5.9 28.2 34.5 31.0 43.4 Bloomberg Code 2319 HK VIT US ICICIBC IN LT IN NHM SJ AMS SJ LAME4 BZ INFOE IN ALI PM BIDU US 2201 TT MGNT RU 036570 KS OGXP3 BZ JPM Mkt Cap, Rating US$ MM OW 5165 OW 741 OW 20307 N 20441 OW 1930 OW 24025 OW 5626 OW 472 OW 3230 OW 15063 OW 1895 OW 4953 OW 2683 OW 26325 P/E (X) 2009E 28.2 32.7 26.6 31.0 21.7 70.7 58.8 36.9 40.1 70.8 41.5 91.5 71.5 nm P/E (X) 2010E 24.8 24.7 26.8 27.6 30.4 33.1 34.9 38.3 39.4 47.4 56.6 58.9 77.4 nm Yield (%) 2010E 0.0 0.0 1.4 0.0 1.5 0.0 1.1 0.0 0.5 0.0 0.5 0.0 0.0 0.0 ROE Performance end 08 to date (%) (%) 2010E Absolute Rel to Region 17.5 128.7 59.7 19.2 269.5 200.5 7.1 91.9 23.0 19.2 102.5 33.5 5.6 140.7 71.7 14.5 77.4 8.5 62.9 196.9 127.9 16.2 102.3 33.4 7.1 85.2 16.2 36.0 238.7 169.7 1.8 180.8 111.8 29.3 270.7 201.8 7.6 204.4 135.5 3.8 263.0 194.1

Source: Datastream, MSCI, IBES, J.P. Morgan estimates Note: Prices and valuations as of November 27, 2009. Sorted in ascending order of 2010E PE

107

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Emerging Markets Equity Research 02 December 2009

Non-consensus top picks and stocks to avoid
Name Top Picks Anglo Platinum Stocks to Avoid Sabesp Lukoil Homex Weichai Power S-Oil Corp Quanta Computer Inc. HCL Infosystems Redecard HTC Corp CPFL Energia Bank Rakyat Indonesia PetroChina Cencosud Beijing Capital Land GAP YTL Power Datang International Grupo Modelo SQM China Southern Airlines Usiminas Severstal Guarani AU Optronics Share Price (LC) 74900 31.6 56.8 73.4 60.3 54500 63.1 147 26.4 363 32.7 7650 9.4 1490 4.0 35.6 2.3 3.3 65.3 38.0 2.5 50.0 7.5 4.9 32.9 Price Target % Change Bloomberg (LC) to target Code 91000 32.0 75.0 102.0 47.0 64000 57.0 160.0 32.0 250 34.0 6650 7.4 1578 3.5 30.0 2.1 4.3 60.0 33.0 2.1 38.5 7.9 NA 27.0 21.5 AMS SJ 1.2 32.0 39.0 (22.0) 17.4 (9.7) 9.0 21.4 (31.0) 4.0 (13.1) (21.1) 5.9 (12.5) (15.8) (7.5) 28.7 (8.1) (13.1) (16.7) (23.0) 4.9 (17.9) JPM Rating OW IBES Rating UW OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW OW Mkt Cap, US$ MM 24025 4143 48312 1904 6941 5232 7273 686 10208 8927 9027 9896 339259 6586 1063 1545 3987 12610 16314 9995 5529 14413 7590 800 8985 P/E (X) 2009E 2010E 70.7 5.5 6.7 9.7 9.9 10.0 10.4 10.5 12.7 12.9 12.9 13.3 15.4 17.4 19.2 19.6 21.4 23.8 24.2 30.9 33.2 38.0 NM nm NM 33.1 5.8 6.6 8.2 8.6 9.3 9.9 10.1 11.6 14.8 11.1 11.2 13.8 14.4 12.0 18.7 11.8 14.6 18.0 25.5 82.4 14.6 13.7 44.9 43.6 Yield (%) 2010E 0.0 4.6 2.4 0.0 0.8 3.3 5.1 4.1 7.4 5.4 8.5 3.0 3.2 2.1 2.8 5.0 6.6 3.3 2.3 0.0 0.0 2.1 0.8 0.0 0.0 ROE (%) 2010E 14.5 10.0 12.5 19.2 45.2 16.3 20.6 18.7 97.9 24.6 27.2 28.4 14.0 9.8 14.1 34.3 18.2 7.2 14.7 28.2 2.3 10.9 6.4 2.9 2.3

SBSP3 BZ UW LKOH RU N HOMEX* MM N 2338 HK N 010950 KS N 2382 TT UW HCLI IN N RDCD3 BZ N 2498 TT UW CPFE3 BZ UW BBRI IJ UW 857 HK UW CENCOSUD CI UW 2868 HK N GAPB MM N YTLP MK UW 991 HK N GMODELOC MM N SQM US UW 1055 HK N USIM5 BZ UW CHMF RU UW ACGU3 BZ UW 2409 TT UW

Source: Datastream, MSCI, IBES, J.P. Morgan estimates. Note: Prices and valuations as of November 27, 2009. Sorted in ascending order of 2010E PE.

108

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Emerging Markets Equity Research 02 December 2009

Top Picks
109

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

AAC Acoustics
www.aacacoustic.com
Company description AAC Acoustics is a manufacturer of miniature acoustic components, which are mainly used in mobile handsets. It manufactures speakers, receivers, MFDs, microphones, vibrators, and other acoustic components for handsets. Its key customers include Nokia, Motorola, and leading smartphone players such as Apple and RIM. The company is also diversifying into non-acoustic components, which include phone camera lenses, ceramic components and antennae. Post mortem AAC continues to gain share within Nokia in speaker and receiver, as well as penetrating into new segments such as microphone and vibrator. Besides, smartphone opportunities and non-acoustic forays provide AAC a strong mid/long-term growth outlook, in our opinion. We expect its margins to continue to improve through 2010, mainly due to newer products and better mix (due to higher smartphone content). Potential for earnings upgrades We estimate that a 1% upside in top line will lead to a 1.5% increase in net profit. We believe AAC is not sensitive to credit cost fluctuation as it is operating at minimal debt level. How much recovery is priced into the stock? The stock has risen from nearly 4x forward P/E in Dec-08, when the handset industry was looking at a 10% decline in 2009, to about 12x forward P/E, when we are looking at a 12% handset industry growth in 2010. Hence, any improvement in handset outlook and better visibility should lead to a further re-rating of the stock. Price target and key risks Our Dec-10 PT of HK$11 is based on our 10-year DCF valuation, assuming a WACC of 9%, a terminal growth rate of 0%, and a risk-free rate of 2.4%. Our PT implies an FY10E P/E of 14x, the mid-point of its historical trading range of 4x-20x. A key risk to our PT is global handset demand volatility.
Bloomberg: 2018 HK; Reuters: 2018.HK
Rmb in millions, year-end December Sales Net profit EPS (Rmb) FD EPS (Rmb) DPS (Rmb) Sales growth (%) Net profit growth (%) EPS growth (%) ROE (%) P/E (x) FD P/E (x) FY08 2,256 590 0.48 0.48 0.10 15.6% 7.8% 8.2% 20.8% 17.7 17.7 FY09E 2,239 596 0.49 0.49 0.19 (0.8%) 0.2% 1.1% 18.2% 17.5 17.5 FY10E 3,093 873 0.71 0.71 0.28 38.2% 47.3% 46.5% 23.7% 12.0 12.0 FY11E 3,809 1,072 0.87 0.87 0.35 23.1% 22.8% 22.7% 25.1% 9.7 9.7

Overweight
HK$9.65 Price Target: HK$11

HK/China Technology Hardware Charles GuoAC
(852) 2800-8532 charles.x.guo@jpmorgan.com J.P. Morgan Securities (Asia Pacific) Limited

Price performance
1 2 9 6 3 0 No v-08 Feb-09 M ay-09 A ug-09 No v-09 A A C A co ustics (HK$ ) HSI (rebased)

Source: Bloomberg.

Performance
1M Absolute (%) Relative (%)
Source: Bloomberg.

3M 37.9 31.5

12M 44.7 66.7

15.4 9.8

Company data
52-week range (HK$) Mkt cap. (HK$MM) Mkt cap. (US$MM) Avg daily value (US$MM) Avg daily volume (MM) Shares O/S (MM) Date of price Index: Hang Seng Free float (%) Exchange rate
Source: Bloomberg.

2.20-10.22 11,850 1,529 1.9 2.0 1,228 5-Nov-09 21,479 53 7.8

Source: Company, Bloomberg, J.P. Morgan estimates. Note: Share price and valuation are as of 5 November 2009. We raised our PT to HK$14.6 on 10 Nov 2009. 110

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

AAC Acoustics: Summary of financials
Profit and loss statement
Rmb in millions, year-end December Revenues Cost of Goods Sold Gross Profit SGA &RD Expenses Operating Profit (EBIT) EBITDA Interest Income Interest Expense Investment Income (Exp.) Non-Operating Income (Exp.) Earnings before tax Tax Net Income (Reported) Rmb EPS (Reported) BPS DPS Shares Outstanding (MM)
Source: Company, J.P. Morgan estimates.

Cash flow statement
Rmb in millions, year-end December FY09E 2,239 1,259 980 275 651 813 0 -5 0 8 654 -62 596 FY10E 3,093 1,713 1,380 327 983 1175 0 -4 0 0 979 -108 873 FY11E 3,809 2,122 1,688 396 1,206 1437 0 -4 0 0 1,202 -132 1072 Net Income Depr. & Amortisation Change in working capital Other Cash flow from operations Capex Disposal/(purchase) Cash flow from investing Free cash flow Equity raised/ (repaid) Debt raised/ (repaid) Other Dividends paid Cash flow from financing Net change in cash Beginning cash Ending cash FY08 590 133 93 2 818 -438 -113 -551 380 -66 37 0 0 -28 232 1,051 1,283 FY09E 596 162 -389 -5 364 -228 -11 -239 136 -38 38 -3 -239 -241 -115 1,283 1,167 FY10E 873 192 99 -2 1,163 -400 0 -400 763 0 -108 2 -349 -456 307 1,167 1,474 FY11E 1,072 231 -122 -2 1,178 -400 0 -400 778 0 15 2 -429 -412 366 1,474 1,840 FY08 2,256 1,316 940 272 631 764 0 -10 0 -5 616 -26 590

0.48 2.53 0.10 1,230

0.49 2.79 0.19 1,228

0.71 3.22 0.28 1,228

0.87 3.74 0.35 1,228

Source: Company, J.P. Morgan estimates.

Balance sheet
Rmb in millions, year-end December Cash and cash equivalents Accounts receivable Inventories Others Current assets LT investments Net fixed assets Others Total assets Liabilities ST loans Payables Others Total current liabilities Long term debt Other liabilities Total liabilities Shareholders' equity FY08 1,283 574 296 102 2,254 0 1,359 91 3,704 FY09E 1,167 1,022 530 104 2,824 0 1,425 102 4,351 FY10E 1,474 1,114 434 104 3,125 0 1,633 102 4,860 FY11E 1,840 1,292 504 104 3,741 0 1,803 102 5,645

Ratio analysis
%, year-end December Gross Margin EBITDA margin Operating Margin Net Margin SG&A/Sales Sales growth Operating Profit Growth Net profit growth EPS (Reported) growth Interest coverage (x) Net debt to total capital Net debt to equity Asset Turnover Working Capital Turns (X) ROE ROIC ROIC (net of cash) FY08 41.7 33.9 28.0 26.2 12.1 15.6 5.5 7.8 8.2 62.9 Net Cash Net Cash 60.9 1.4 20.8 19.8 32.0 FY09E 43.8 36.3 29.1 26.6 12.3 -0.8 3.2 0.2 1.1 134.3 Net Cash Net Cash 51.5 1.3 18.2 17.1 26.3 FY10E 44.6 38.0 31.8 28.2 10.6 38.2 50.9 47.3 46.5 243.6 Net Cash Net Cash 63.6 1.5 23.7 22.6 34.3 FY11E 44.3 37.7 31.7 28.1 10.4 23.1 22.7 22.8 22.7 298.9 Net Cash Net Cash 67.5 1.6 25.1 24.3 39.0

200 366 23 589 0 0 589 3,108

239 632 53 923 0 0 923 3,428

130 719 59 908 0 0 908 3,952

145 836 69 1050 0 0 1050 4,595

Source: Company, J.P. Morgan estimates.

Source: Company, J.P. Morgan estimates.

111

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

ABSA Group Ltd
www.absa.co.za
Company description Absa provides the most geared play on the domestic retail market and its investment banking division provides a more robust earnings base off which to grow in our view. Growth opportunities in Africa are currently limited to investment banking and bancassurance/wealth management. Absa is 58% held by Barclays. Post mortem Mortgage impairment unwind should support earnings growth during FY10E and FY11E. We expect NIR growth to be a key earnings differentiator and ASA is well positioned for NIR growth from its: (i) large and established retail banking franchise, distribution and cross-sell ability; and (ii) established and growing corporate franchises, enjoying flow, scale as well as strong client relationships in our view. Potential for earnings upgrades Top line across the SA banks is set remain relatively sluggish and the negative endowment should exacerbate margin pressure. We expect robust NIR growth and the mortgage impairment unwind should support earnings growth during FY10E and FY11E. A more expansionary stance introduces upside risk to FY10E, whilst a healthy banking system provides downside protection. How much recovery is priced into the stock? Absa remains our top pick in the sector, with a cheap valuation not reflecting its strong ROE franchise and robust earnings trajectory in our view. Management instability however remains a key overhang. Price target and key risks Our Jun-10 price target of 15,371c is calculated at the lower of our SOTP and economic valuation methodology, rolled forward at COE. Key risks to rating and PT include significant variation to our base case interest rate assumptions, while a collapse in the property market could significantly impact the value of realizations.

Overweight
R126.00 23 November 2009 Price Target: R153.71 Jun 2010

South Africa Computer Hardware Mervin NaidooAC
(27-11) 507-0716 mervin.x.naidoo@jpmorgan.com J.P. Morgan Equities Ltd.

Absa relative price performance
3.0 2.0 1.0 0.0 02 03 04 05 06 07 08 09
Source: I-Net.

112

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

ABSA Group Ltd: Summary of Financials
Profit and Loss Statement R mn millions, year end Dec Net interest income % Change Y/Y Non-interest income Fees & commissions % change Y/Y Trading revenues % change Y/Y Other Income Total operating revenues % change Y/Y Admin expenses % change Y/Y Other expenses Pre-provision operating profit % change Y/Y Loan loss provisions Other provisions Other nonrecurrent items Earnings before tax % change Y/Y Tax (charge) % Tax rate Minorities Net Income (Reported) Balance sheet R mn millions, year end Dec ASSETS Net customer loans % change Y/Y Loan loss reserves Investments Other interest earning assets % change Y/Y Average interest earnings assets Goodwill Other assets Total assets LIABILITIES Customer deposits % change Y/Y Long term funding Interbank funding Average interest bearing liabs Other liabilities Retirement benefit liabilities Shareholders' equity Minorities Total liabilities FY08A 22,106 17.0% 13,343 35,449 16.3% -21,193 14.9% 21,048 27.5% 8,858 15,209 8.0% 3,966 26.1% 194 10,592 FY09E 21,815 (1.3%) 14,947 36,763 3.7% -22,285 5.2% 21,482 2.1% 14,513 11,220 (26.2%) 2,995 25.0% 229 7,996 FY10E 22,920 5.1% 17,585 40,504 10.2% -24,029 7.8% 23,658 10.1% 14,147 15,606 39.1% 4,271 26.0% 252 11,083 Ratio Analysis FY11E R mn millions, year end Dec Per Share Data 25,966 EPS Reported 13.3% EPSAdjusted 20,005 % Change Y/Y - DPS % Change Y/Y - Dividend yield - Payout ratio - BV per share 45,971 NAV per share 13.5% Shares outstanding -26,707 11.1% Return ratios - RoRWA 26,760 Pre-tax ROE 13.1% ROE 14,933 RoNAV - Revenues 20,315 NIM (NII / RWA) 30.2% Non-IR / average assets 5,731 Total rev / average assets 27.0% NII / Total revenues 277 Fees / Total revenues 14,307 Trading / Total revenues FY08A 1567.56 1,412.10 7.3% 595 6.2% 5.5% 38.0% 6,950.10 6,950.10 680.3 FY09E 1143.53 1,216.48 (13.9%) 500 -15.9% 4.3% 43.8% 7,892.95 7,892.95 718.2 FY10E 1542.41 1,581.38 30.0% 642 28.4% 5.5% 41.7% 8,878.82 8,878.82 718.9 FY11E 1987.04 2,039.56 29.0% 828 28.8% 7.0% 41.6% 10,125.50 10,125.50 721.1

23.4% 23.7%

16.4% 16.8%

18.4% 18.7%

20.9% 21.2%

1.9% 5.2% 45.8% 54.2% -

1.9% 4.4% 35.5% 64.5% -

2.1% 4.9% 38.4% 61.6% -

2.2% 5.3% 42.3% 57.7% -

FY08A

FY09E

FY10E

FY11E R mn millions, year end Dec Cost ratios Cost / income Cost / assets Staff numbers Balance Sheet Gearing Loan / deposit Investments / assets Loan / assets Customer deposits / liabilities LT Debt / liabilities Asset Quality / Capital Loan loss reserves / loans NPLs / loans LLP / RWA Loan loss reserves / NPLs Growth in NPLs RWAs % YoY change Core Tier 1 Total Tier 1

FY08A

FY09E

FY10E

FY11E

532,171 16.7% 8,858 597,154 957 62,228 773,758

521,753 (2.0%) 14,513 670,570 957 67,206 785,714

567,625 8.8% 14,147 702,657 957 72,583 856,082

639,774 12.7% 14,933 777,464 957 78,389 955,051

49.4% 3.0% 37,828

50.1% 2.9% 35,558

49.6% 2.9% 35,558

49.2% 2.9% 35,914

132.1% 4.2% 68.8% 60.6% 24.7%

120.2% 4.5% 66.4% 59.6% 25.9%

127.7% 4.5% 66.3% 58.3% 26.6%

132.6% 4.5% 67.0% 57.9% 26.8%

436,914 18.6% 182,840 402,730 1,042 720,792

431,200 (1.3%) 191,627 434,057 1,271 723,111

458,084 6.2% 214,065 444,642 1,523 786,083

506,686 10.6% 239,195 482,385 1,800 875,594

1.6% 3.5% 46.8% 158.8% -

2.7% 7.3% 36.9% 107.8% -

2.4% 6.4% 38.2% (5.7%) -

2.3% 5.6% 40.5% (0.5%) -

Source: Company reports and J.P. Morgan estimates.

113

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Acer Inc.
www.acer.com
Company description Acer (TWSE: 2353) is the No #2 notebook PC brand globally and operates four sub brands—Acer, Gateway, Packard Bell and e-machines. It operates a purely outsourced business model with what we believe to be a high degree of focus on channel management and branding. Post mortem We believe Acer has negotiated the downturn well, with a strong focus on inventory, receivables management, and lower price points (netbooks). Acer has invested in the expansion of its China business. The company’s OP margins have also been on an upswing as Acer has kept its OPEX under a tight control. In 2009, Acer has benefited from the consolidation in the NB brand market share, and emerged as the clear No #2 in PCs, surpassing Dell. Potential for earnings upgrades We believe the potential for upward earnings estimate revisions comes from OP margin upside through: (1) better pricing vis-à-vis ODM vendors; and (2) a focus on more profitable growth with disciplined pricing to distributors. Improvement in product mix towards emerging markets should also facilitate this process. Acer is trying to offer a broader SME product line and is also considering avenues to tap into the corporate market. If these come through, then we see upside risk to revenue growth assumptions for 2010. How much recovery is priced into the stock? Acer’s strong execution and market share gains appear to be priced into its share price. What is not yet priced in, in our view, is the potential for margin expansion, which leaves room for earnings upside in 2010E. The market ascribes a zero value to Acer’s smartphone foray, which even if moderately successful, could trigger a re-rating. Price target and key risks Our Jun-10 PT of NT$92 implies 15x 2010E core earnings, which we believe is fair, supported by 36%/19% OP profit growth in 2010/2011E, largely driven by OP margin expansion. A key risk to our PT is increase in competition.
Bloomberg: 2353.TT; Reuters: 2353.TW
NT$ in billions, year-end December Sales Operating profit EBITDA Pre-tax profit Net profit MV of employee bonus Adjusted net profit New Taiwan GAAP EPS (NT$)* New Taiwan GAAP P/E (x) NEW Taiwan GAAP EPS growth YE BPS (NT$) P/BV (x) FY08 FY09E 546 574 13.7 15.3 14.6 16.1 14.8 15.3 11.7 11.8 2.1 2.2 11.7 11.8 4.62 4.44 16.8 17.5 4% -4% 32.62 35.36 2.4 2.2 FY10E FY11E 668 766 ROE (%) 20.9 24.9 Core ROIC (%) 21.7 25.7 Core adjusted EPS 21.7 26.3 Core OP growth (%) 17.4 21.0 Core adjusted P/E (x) 3.1 3.8 Quarterly EPS (NT$) 17.4 21.0 EPS (FY08) 6.48 7.82 EPS (FY09E) 12.0 9.9 EPS (FY10E) 46% 21% DPS (NT$) 38.53 42.40 2.0 1.8 Jun-10 PT FY08 14.7 14.0 4.43 55% 17.7 1Q 1.21 0.77 1.36 3.60 NT$

Overweight
NT$77.8 Price Target: NT$92

Taiwan Computer Hardware Gokul HariharanAC
(852) 2800-8564 gokul.hariharan@jpmorgan.com

Alvin KwockAC
(852) 2800-8533 alvin.yl.kwock@jpmorgan.com J.P. Morgan Securities (Asia Pacific) Limited

Price performance
90 NT$ 60 30
Nov-08 Feb-09 May-09 Aug-09 Nov-09

2353.TW share price (NT$) TSE (rebased)

Source: Bloomberg.

Performance
1M Absolute (%) Relative (%)
Source: Bloomberg.

3M 14.3 5.6

12M 72.1 13.1

-1.8 -0.8

Company data
52-week range (NT$) Mkt cap. (NT$B) Mkt cap. (US$B) Avg daily value (US$MM) Avg daily volume (MM) Shares O/S (MM) Date of price Index: TWSE Free float (%) Exchange rate
Source: Bloomberg.

36.6-86.5 208.94 6.42 36.36 36.36 2,686 5-Nov-09 7.417 68 32.5

FY09E FY10E FY11E 13.4 16.8 18.5 13.7 17.9 19.1 4.23 6.18 7.38 12% 36% 19% 17.7 12.1 10.1 2Q 3Q 4Q 1.20 1.15 1.06 0.89 1.29 1.49 1.38 1.76 1.96 2.00 3.15 4.10 92

Source: Company, Bloomberg, J.P. Morgan estimates. Note: Share price and valuation are as of 5 November 2009. 114

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Acer Inc.: Summary of financials
NT$ in millions, year-end December Income statement Revenues Cost of Goods Sold Gross profit R&D Expenses SG&A Expenses Operating Profit (EBIT) EBITDA Interest Income Interest Expense Investment Income (Exp.) Non-Operating Income (Exp.) Earnings before tax Tax Net income Net Income (new TW GAAP) EPS (reported) (NT$) EPS (new TW GAAP) (NT$) BPS (NT$) DPS (NT$) Shares Outstanding (MM) Balance sheet Cash and Cash Equivalents Accounts receivable Inventories Others Current assets LT investments Net fixed assets Other long term assets Total Assets Liabilities ST Debt Payables Others Total current liabilities Long term debt Other liabilities Total liabilities Shareholder's equity FY08 546,274 489,377 56,897 550 41,113 13,683 14,639 1,208 -1,306 404 428 14,807 -3,169 11,742 11,742 4.62 4.62 32.62 2.00 2,643 FY08 22,142 108,668 40,028 15,553 186,391 6,774 5,988 44,290 243,442 9,337 72,116 67,862 149,315 4,135 7,115 160,565 82,878 FY09E 574,380 516,089 58,290 924 39,857 15,275 16,091 570 -562 318 (289) 15,318 -3,479 11,838 11,838 4.44 4.44 35.36 3.15 2,686 FY09E 40,946 138,570 55,428 16,859 251,804 9,174 4,447 33,499 298,924 1,360 107,737 67,437 176,535 20,701 7,517 204,752 94,171 FY10E 667,558 596,908 70,649 1,068 45,679 20,928 21,706 1,075 -1,272 300 708 21,739 -4,348 17,391 17,391 6.48 6.48 38.53 4.10 2,686 FY10E 40,527 162,508 65,003 19,772 287,810 9,125 3,669 33,499 334,103 1,578 125,626 71,897 199,101 24,013 7,517 230,631 103,472 FY11E 765,826 684,704 81,123 1,225 51,387 24,917 25,661 1,209 -1,349 300 1,189 26,266 -5,253 21,013 21,013 7.82 7.82 42.40 5.00 2,686 FY11E 48,785 178,899 71,560 20,730 319,973 8,844 2,925 33,499 365,241 1,626 138,330 79,149 219,105 24,744 7,517 251,366 113,875 Ratio analysis % Gross margin EBITDA margin Operating margin Net profit margin R&D/sales SG&A/Sales Sales growth EBIT growth Net profit growth (%) EPS (Reported) growth EPS (new TW GAAP) growth Interest coverage (x) Net Debt to total Capital Net debt to equity Sales/Assets (x) Working Capital Turns (X) ROE ROIC Core ROIC Cash flow statement Net income Depreciation & amortisation Other Non-Cash Items Change in working capital Cash flow from operations Capex Disposal/ (purchase) Net Cash from Investing Free cash Flow Equity raised/(repaid) Debt raised/(repaid) Other Dividends Cash flow from financing Net change in cash Beginning cash Ending cash FY08 10.4 2.7 2.5 2.1 0.1 7.5 18 34 -9 -13 4 10 -9 -10 2.2 3.0 14.7 11.7 14.0 FY08 11,742 956 0 -8,043 4,551 1,673 4,430 -6,350 -6,634 5,634 -8,709 -2,274 -8,655 -14,004 -15,803 37,945 22,142 FY09E 10.1 2.8 2.7 2.1 0.2 6.9 5 12 1 -4 -4 27 -16 -20 1.9 3.1 13.4 11.6 13.7 FY09E 11,838 816 0 -11,412 1,242 1,019 -2,400 9,116 12,440 -1,160 8,589 6,304 -5,286 8,447 18,805 22,142 40,946 FY10E 10.6 3.3 3.1 2.6 0.2 6.8 16 37 47 46 46 16 -12 -14 2.0 3.2 16.8 15.0 17.9 FY10E 17,391 777 0 -14,077 4,092 0 49 49 3,792 0 3,530 0 -8,091 -4,560 -420 40,946 40,527 FY11E 10.6 3.4 3.3 2.7 0.2 6.7 15 19 21 21 21 18 -16 -20 2.1 0.0 18.5 16.0 19.1 FY11E 21,013 744 0 -3,949 17,808 0 281 281 17,508 0 779 0 -10,610 -9,831 8,259 40,527 48,785

Source: Company reports and J.P. Morgan estimates.

115

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Aldar Properties
www.aldar.com
Company description Aldar Properties is Abu Dhabi’s largest property developer, with a diversified construction portfolio and 37% sovereign ownership. Tasked with implementing Abu Dhabi’s Plan 2030, Aldar operates as a master developer, sourcing land for development, selling completed residential properties and developing recurring income-generating assets. Aldar was listed on the Abu Dhabi stock Exchange in April 2005, where the company has a foreign ownership limit of 40%. Post mortem Al Raha Beach and Yas Island are the company’s two most important projects and account for over 70% of the total landbank under development. With a total built-up area of 6.4Mn Sq M, Al Raha is a mixed-used residential project with residential handovers starting from mid 2010. Yas Island, which accounts for a sizable portion of Aldar’s investment property portfolio, is one of the two key tourist destinations being developed in Abu Dhabi, with a flagship Formula 1 race track, theme parks, retail and hospitality. The two projects account for 54% of Aldar's SOTP-based NAV. Potential for earnings upgrades For future sales, we assume 30-35% lower residential and land sale prices from the peak in 2008. However, while there have not been any new residential launches this year, the recent pick-up in land transactions is encouraging - 3Q09 land sales by Aldar were at prices that were 80-85% above our forecasts. As the market stabilizes and retail investors’ confidence is restored, better then forecast prices for future residential and land sales could serve as key triggers for profitability growth and stock performance. Price target and key risks Aldar, our top pick and one of the preferred names in our EMEA property universe, trades at attractive valuations (30% discount to our Dec 2010 SOTPbased PT of AED7.8 – favourable compared to its regional peers at 20-25% premiums). Key risks include Aldar’s high exposure to external debt, where an extended property market downturn could restrict Aldar’s ability to meet its debt obligation. Although we see this as unlikely as the company enjoys strong govt. support and is critical to Abu Dhabi’s plan 2030.
Bloomberg: ALDAR UH; Reuters: ALDR.AD
AED Mn; year end December Sales Net profit Headline EPS (AED) Adjusted EPS (AED) Sales growth (%) Net profit growth (%) P/E (x) Net D/E P/BV ROE (%) FY08 4,978 3,447 1.34 0.74 306% 53% 4.1 66% 0.88 21% FY09E 2,574 1,764 0.68 0.02 -48% -49% 8.0 124% 0.79 10% FY10E 7,189 2,192 0.85 0.32 179% 24% 6.4 107% 0.70 11% FY11E 6,901 2,539 0.98 0.56 -4% 16% 5.5 94% 0.63 11%

Overweight
Price: AED5.46 Price Target: AED7.8

MENA UAE Property Muneeza HasanAC (Real Estate/Construction)
(971-4) 428-1766 muneeza.z.hasan@jpmorgan.com JPMorgan Chase Bank N.A. Dubai Branch

Price Performance
6 Dh 4 2
Nov-08 Feb-09 May-09 Aug-09 Nov-09

Source: Bloomberg

Performance
Absolute (%)
Source: Bloomberg

1M -12.0

3M 17.7

12M 9.3

Company data
Price (Dh) Date of price Price Target (Dh) 52-week range (Rs) Market cap (AED Mn) Market cap (US$ Mn)
Source: Bloomberg & J.P. Morgan

5.46 23-Nov-09 7.8 6.65 - 1.96 14,075 3,835

Source: Company, Bloomberg, J.P. Morgan estimates. Note: Share price and valuations are as of cob 23 November 2009.

116

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Aldar Properties: Summary of Financials
Profit and Loss statement Dh in millions, year-end Dec Sales % change Y/Y Gross Profit % change Y/Y EBITDA % change Y/Y EBIT % change Y/Y Net Interest Earnings before tax % change Y/Y Revaluation gain Net Income (Reported) % change Y/Y Net Income (Adjusted) % change Y/Y Shares Outstanding EPS (reported) % change Y/Y Balance sheet Dh in millions, year-end Dec Cash and cash equivalents Accounts receivable Trading property under development Other Current assets Investment property Investment property under development Others Total assets ST loans Payables Others Total current liabilities Long term debt Other liabilities Total liabilities Minorities Shareholders' equity Total Liabilities & Shareholders Equity
Source: Company reports and J.P. Morgan estimates.

FY08A FY09E 4,978 305.8% 2,683 379.2% 2,310 (4.3%) 3,818 59.4% (371) 3,447 77.5% 1,533 3,447 77.5% 1,914 1494.2% 2,577.9 1.34 53.1% 2,574 (48.3%) 978 (63.6%) 306 (86.8%) 1,843 (51.7%) (79) 1,764 (48.8%) 1,700 1,764 (48.8%) 64 (96.7%) 2,577.9 0.68 (48.8%)

FY10E FY11E Cash flow statement Dh in millions, year-end Dec 7,189 6,901 Net Income 179.3% (4.0%) Depreciation & amortisation 2,495 2,904 Change in working capital ex capex 155.1% 16.4% Fair value gain on investment prop. 1,630 2,287 Other 433.1% 40.3% Cash flow from operations 2,788 3,164 51.3% 13.5% Capex (596) (625) Other adjustments 2,192 2,539 Free cash flow 24.3% 15.8% Cashflow from Investments 1,360 1,088 2,192 2,539 Debt raised/(repaid) 24.3% 15.8% Dividends paid 832 1,451 Others 1206.9% 74.4% Cashflow from Financing 2,577.9 2,577.9 Change in Cash 0.85 0.98 Beginning cash 24.3% 15.8% Ending cash FY10E FY11E Ratio Analysis Dh in millions, year-end Dec 11,783 12,108 Gross Margin 5,751 5,866 EBITDA Margin 10,502 12,806 EBIT margin - Adjusted net profit margin 28,036 30,781 SG&A/Sales 10,190 19,124 20,287 16,645 Sales growth 1,895 1,478 EBITDA growth 64,042 71,795 Adjusted net profit growth 2,683 2,683 Adjusted EPS growth 8,627 6,901 299 7,303 Interest coverage (x) 11,609 16,887 Net debt to Total Capital 32,423 32,409 Net debt to Equity 1,927 1,912 44,054 49,319 Sales/assets 0 0 ROE 19,988 22,476 ROCE 64,042 71,795

FY08A 3,447 14 2,335 -1,533 4,645

FY09E 1,764 163 (692) -1,700 (386)

FY10E FY11E 2,192 2,539 203 211 525 5,164 -1,360 -1,088 2,155 7,451 (904) (6,853) (253) 417 1,015 318 (1,157) (6,436) 0 0 231 231 633 2,246 2,879 0 (51) (65) (65) 325 2,879 3,204

(16,341) (10,063) (4,523) (544) (9,060) (9,757) (20,864) (10,607) 17,361 (232) (1,137) 16,224 (196) 3,358 3,163 FY08A 53.9% 46.4% 76.7% 38.4% 3.1% 305.8% (4.3%) 1494.2% 1274.8% 10,614 0 (457) 10,156 (916) 3,163 2,246 FY09E 38.0% 11.9% 71.6% 2.5% 5.0%

FY08A FY09E 12,066 5,651 7,130 24,847 5,149 15,804 1,098 49,767 2,683 7,464 2,136 12,283 21,429 1,546 33,735 0 16,032 49,767 11,150 6,176 11,471 28,798 6,210 21,394 1,642 61,520 2,683 6,948 1,878 11,509 32,193 1,696 43,724 0 17,796 61,520

FY10E FY11E 34.7% 22.7% 38.8% 11.6% 4.5% 42.1% 33.1% 45.9% 21.0% 4.5%

(48.3%) 179.3% (4.0%) (86.8%) 433.1% 40.3% (96.7%) 1206.9% 74.4% (96.7%) 1206.9% 74.4% 4.7 5.1 33.4% 29.4% 107.2% 93.8% 11.2% 9.6% 11.0% 11.3% 2.7% 3.8%

10.3 23.3 21.1% 35.8% 75.1% 123.9% 10.0% 21.5% 6.1% 4.2% 9.9% 0.3%

117

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

América Latina Logística (ALL)
www.all-logistica.com
Company description América Latina Logística (ALL) is the largest independent provider of logistics services in South America. It operates rail service on over 20,000 km of track in Brazil and Argentina and has an intermodal trucking business. 70% of its volumes (and a higher % of profits) come from shipping agricultural products, mainly soy, soy meal, corn, sugar, and fertilizer. Post mortem The company has continued to invest in efficiency and capacity expansion throughout the downturn, which should allow it to benefit from higher volumes and lower costs as well as from higher prices during the recovery. In addition, the economic downturn has increased new industrial business as clients focused again on cost control and decided to finally make the switch to cheaper rail transport (vs. truck). Potential for earnings upgrades Economic recovery, as well as a significant recovery in agricultural production in Argentina and Brazil, will likely help ALL grow its front haul and back haul (mostly fertilizer) traffic. It should also force truck rates up, allowing ALL to increase its rates, which are referenced to truck rates. How much recovery is priced into the stock? We think ALL valuations are not factoring in a significant recovery in volumes and yields next year. ALL is trading at 7.9x ’10e EBITDA compared to hist. avg of 10.6x. It’s also trading at a 10% discount to US peers, whereas historically it has traded at a significant premium. Price target and key risks We have a R$21/share price target for Dec ’09. It is based on a mix of DCF analysis and a 10.6x historical multiple on 2010e EBITDA. Key risk is recovery in prices, diesel prices and operational problems (accidents). ALL shares are much less volatile than those of the rest of our agribusiness coverage.

Overweight
R$15.5 Price Target: R$21.0

Brazil Agribusiness Debbie Bobovnikova, CFAAC
(1-212) 622 3489 debbie.bobovnikova@jpmorgan.com J.P. Morgan Securities Inc.

Price performance
R$

20.0 15.0 10.0 5.0 0.0
Nov-08 M ar-09 Jul-09 Nov-09

Source: Bloomberg.

Performance
1M Absolute (%) Relative (%) 22% 19% 3M 17% 1% 12M 33 % -49 %

Source: Bloomberg. As of Nov 17 09.

Company data
52-week range (BRL) Mkt cap. (BRL) Mkt cap. (US$MM) Avg daily value (US$MM) Avg daily volume (MM) Shares O/S (MM) Date of price Index: iBovespa Free float (%) Exchange rate
Source: Bloomberg

7.49-16.57 10,808 6,276 42.8 5.2 688 11/25/09 67,917 92% 1.7221

Bloomberg: ALLL11 BZ; Reuters: ALLL11.SA
BRL in millions, year-end December Sales Net profit EPS (LC) FD EPS (LC) DPS (LC) Sales growth (%) Net profit growth (%) EPS growth (%) ROE (%) P/E (x) FD P/E (x) FY08 2,530 293 0.51 0.05 0.13 19% 35% 35% 11% 30.3 19.74 FY09E 2,862 448 0.78 0.07 0.19 13% 53% 53% 15% 19.8 14.80 FY10E 3,191 598 1.04 0.09 0.26 12% 33% 33% 17% 14.8 11.46 FY11E 3,570 772 1.34 0.11 0.34 12% 29% 29% 19% 11.5 9.20

Source: Company, Bloomberg, J.P. Morgan estimates. Note: Share price and valuations are as of 25 November 2009.

118

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

América Latina Logística: Summary of financials
Profit and loss statement
BRL in millions, year-end December Revenue % change Y/Y Gross margin (%) EBITDA % change Y/Y EBITDA margin (%) EBIT % change Y/Y EBIT margin (%) Net interest Earnings before tax % change Y/Y Tax as % of EBT Net income (reported) % change Y/Y Shares O/S (MM) EPS (reported) (LC) FY08 2,515 18.7% 51.6% 1,182 29% 47% 933 134% 37% 206 222 -17% (16) -7% 206 -5% 576 0.36 FY09E 2,862 13% 41% 1,477 20% 52% 1,043 17% 36% -452 591 62% -143 24% 448 53% 576 0.78 FY10E 3,191 12% 40% 1,689 14% 53% 1,140 9% 36% -354 787 33% -189 24% 598 33% 576 1.04 FY11E 3,570 12% 40% 1,924 14% 54% 1,293 13% 36% -278 1,016 29% -244 24% 772 29% 576 1.34

Cash flow statement
BRL in millions, year-end December EBIT Depreciation & amortization Change in working capital Taxes Cash flow from operations Capex Disposal/(purchase) Net interest Free cash flow Equity raised/(repaid) Debt raised/(repaid) Other Dividends Beginning cash Ending cash DPS (LC) FY08 933 (194) -450 (49) 461 790 (415) 363 -741 1,816 2,643 FY09E 1,043 -256 -22 -143 1,079 -624 222 -521 0 0 0 -112 2,196 1,635 0.19 FY10E 1,140 -310 125 -189 1,331 -644 198 -333 0 0 0 -149 1,635 1,302 0.26 FY11E 1,293 -350 51 -244 1,396 -661 159 -252 0 0 0 -193 1,302 1,050 0.34

Source: Company, J.P. Morgan estimates.

Source: Company, J.P. Morgan estimates.

Ratio analysis Balance sheet
BRL in millions, year-end December Cash and cash equivalents Accounts receivable Inventories Others Current assets LT investments Net fixed assets Total assets Liabilities ST loans Payables Others Total current liabilities Long-term debt Other liabilities Total liabilities Shareholders’ equity BVPS (LC) FY08 2,643 154 94 430 3,320 3,721 4,724 11,765 765 987 547 2,300 5,049 1,902 9,251 2,496 4.33 FY09E 1,635 212 101 279 2,228 652 4,331 10,128 928 425 2,145 3,530 1,384 7,059 3,070 5.33 FY10E 1,302 237 108 303 1,950 652 4,665 10,185 663 546 2,060 3,278 1,329 6,667 3,518 6.11 FY11E 1,050 265 118 330 1,764 652 4,975 10,309 398 582 1,912 3,026 1,274 6,212 4,097 7.11 %, year-end December EBITDA margin Operating margin Net profit margin SG&A/sales Sales growth Net profit growth Sales per share growth EPS growth Interest coverage (x) Net debt to total capital Net debt to equity Sales/assets EBIT margin ROCE Assets/equity (x) ROI ROE FY08 47% 37% 8% 0.03 19% -5% -31% -5% 1.08 0.27 1.27 0.21 37% 0.10 4.71 1.8% 8.3% FY09E 52% 36% 16% 4% 13% 53% 13% 53% 1.77 92% 0.92 0.28 36% 0.13 3.30 4.0% 15.0% FY10E 53% 36% 19% 3% 12% 33% 12% 33% 2.24 75% 0.75 0.31 36% 0.14 2.90 6.0% 17.0% FY11E 54% 36% 22% 3% 12% 29% 12% 29% 3.28 58% 0.58 0.35 36% 0.15 2.52 7.0% 19.0%

Source: Company, J.P. Morgan estimates.

Source: Company, J.P. Morgan estimates.

119

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

AMMB Holdings
www.ambg.com.my
Company description AMMB Holdings is the holding company of the AmBank Group, one of Malaysia’s premier financial services group with leadership positions in the commercial banking, investment banking and insurance sectors. The AmBank Group has total assets of M$86.5B, 186 branches nationwide and a staff strength close to 10,000. Post mortem With a leading wholesale investment banking franchise, we expect the bank to benefit from the capital market pick-up in tandem with the improvement in the economy. Also, recent liberalization measures should create a more vibrant capital market which we believe AMMB will benefit from. We also expect ANZ management’s transformation efforts to pay off in the coming 18 months as the group has developed new income streams, namely treasury whilst strengthening the consumer and SME banking business and enhanced its risk management system. Potential for earnings upgrades We see scope for significant earnings upgrades as the wholesale banking is a flow business where earnings flow straight through the bottom-line. Also, earlier concerns on rising credit costs should dissipate in tandem with the improving economy. How much recovery is priced into the stock? The stock is trading at a P/B of 1.5x which we believe does not reflect the potential of the transformational changes that ANZ is putting through as well as the upside income potential for the wholesale banking business. Price target and key risks Our Jun-10 PT of M$5.25 is based on a two-stage DDM model assuming sustainable ROEs of 16%. The key risk is that capital markets fail to recover and that the economic recovery stalls.
Bloomberg: AMM MK; Reuters: AMMB.KL
M$ in millions, year-end March Net profit Basic EPS (sen) Cash adj. EPS (sen) DPS (sen) Basic EPS growth (%) ROE (%) P/E (basic) (x) BVPS (M$) Tangible NAV P/BV (x) Div. yield (%) FY09 861 32.3 32.3 6.0 14.2 11.6 14.6 2.8 3.5 1.7 1.3 FY10E 935 31.8 31.8 7.9 -1.5 11.0 14.8 3.1 3.7 1.5 1.7 FY11E 1,262 41.9 41.9 16.7 31.7 13.1 11.2 3.3 3.9 1.4 3.6 FY11E 1,569 52.1 52.1 20.8 24.4 14.9 9.0 3.6 4.2 1.3 4.4

Overweight
Price: M$4.70 Price Target: M$5.25

Malaysia Banks Chris Oh, CFAAC
(60-3) 2770-4728 chris.ch.oh@jpmorgan.com JPMorgan Securities (Malaysia) Sdn. Bhd. (18146-X)

Price performance
M$
5 4 3 2 1 10-08 01-09 04-09 07-09 10-09

Source: Bloomberg.

Performance
Absolute (%) Relative (%)
Source: Bloomberg.

1M 7.6 4.3

3M 10.8 4.3

12M 88.8 37.8

Company data
52-wk range (M$) Mkt. cap (M$MM) Mkt. cap (US$MM) Liquidity (US$MM) Avg. daily volume (MM) Shares O/S (MM) Date of price KLCI Index Free float (%) Exchange rate
Source: Bloomberg.

1.94-4.83 14,166.67 4,140.49 9.1 7.2 3,014.2 5-Nov-09 1254.0 46.4 3.42

Source: Company, Bloomberg, J.P. Morgan estimates. Note: Share price and valuations are as of 5 November 2009.

120

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

AMMB Holdings: Summary of financials
Income statement - M$mn
Margins (% of earning assets) Earning assets/assets NIM (as % of avg. assets) Net interest income Total non-interest revenues Fee income FX/trading gains Other operating income Total operating revenues Operating costs Operating profit Loan loss provisions Other provisions Exceptionals Disposals/ other income Pre-tax profit Tax [rate] Minorities/preference dividends Attributable net income 2009 2.19% 94% 2.05% 1,776 1,495 457 (6) 1,044 3,271 (1,612) 1,659 (344) (97) (0) 1,218 (339) (17) 861 2009 56,948 (1,821) 58,769 8,806 17,250 81,020 1,808 89,893 Interbank funding Customer deposits Long-term bond funding Other interest-bearing liabilities Average interest-bearing liab. = (B) Average assets Shareholders' equity Risk-weighted assets Average risk-weighted assets 6,135 64,132 3,854 3,215 74,160 86,542 7,736 62,954 64,414 2010E 2.11% 94% 1.99% 1,814 1,684 463 132 1,089 3,498 (1,699) 1,799 (431) (80) (25) 1,263 (328) 935 2010E 60,118 (2,177) 62,295 9,285 15,267 85,836 1,781 91,942 6,239 65,217 3,279 3,107 77,589 90,918 9,279 64,389 63,672 2011E 2.06% 94% 1.95% 1,885 2,045 606 178 1,261 3,929 (1,807) 2,123 (365) (50) (25) 1,683 (421) 1,262 2011E 66,078 (2,447) 68,525 9,793 17,500 91,332 1,753 101,433 6,881 71,928 3,279 3,558 81,744 96,688 10,036 71,036 67,713 2012E 2.08% 94% 1.97% 2,081 2,306 697 222 1,387 4,387 (1,867) 2,520 (352) (50) (25) 2,093 (523) 1,569 2012E 71,316 (2,690) 74,007 10,329 19,500 99,827 1,725 109,883 7,446 77,827 3,279 4,046 89,122 105,658 10,978 76,954 73,995 2% -1% 6% 9% -26% 6% 7% 8% -3% 5% 5% 20% 15% 5% 6% 8% 14% 9% 9% 9% 0% 15% 0% 2% 0% 10% 0% 8% 8% 2% 10% 8% 0% 2% 28% 0% 29% 09/08 8% -25% 7% -9% 38% 7% 0% 4% 26% 0% 9% 10E/09E 6% 20% 6% 5% -11% 6% 0% 33% 25% 0% 35% 11E/10E 10% 12% 10% 5% 15% 6% 0% 24% 25% 0% 24% 12E/11E 8% 10% 8% 5% 11% 9% 09/08 3% 0% 3% 10% -14% -14% -102% 12% -2% 5% -9% -33% 10E/09E -4% 1% -3% 2% 13% 1% -2319% 4% 7% 5% 8% 25% 11E/10E -2% 0% -2% 4% 21% 31% 35% 16% 12% 6% 18% -15% 12E/11E 1% 0% 1% 10% 13% 15% 25% 10% 12% 3% 19% -4%

Balance sheet gearing
Loan/deposit Investment/assets Loan/assets Customer deposits/liab. Long-term debt/liabilities

2009 89% 10% 63% 78% 5%

2010E 92% 10% 65% 79% 4%

2011E 92% 10% 65% 79% 4%

2012E 92% 9% 65% 79% 3%

Asset quality/capital
Loan loss reserves/loans NPLs/loans Loan loss reserves/NPLs Growth in NPLs Tier 1 Ratio Total CAR

2009 3.1% 4.1% 75.1% -32.6% 9.7% 15.5% 2009 0.32 0.06 0.19 2.84 2,723 2009 2.05% 1.73% 45.7% 3.78% 49.3% 1.86% 1.92% -0.59% 67.9% 1.41% 27.9% -0.02% 0.99% 1.34% 8.61% 11.6%

2010E 3.5% 4.8% 73.0% 22.9% 11.8% 17.4% 2010E 0.33 0.08 0.24 3.08 2,941 2010E 1.99% 1.85% 48.1% 3.85% 48.6% 1.87% 1.98% -0.69% 68.5% 1.39% 26.0% 0.00% 1.03% 1.47% 9.36% 11.0%

2011E 3.6% 4.7% 76.7% 6.9% 11.7% 16.8% 2011E 0.43 0.17 0.39 3.33 3,014 2011E 1.95% 2.11% 52.0% 4.06% 46.0% 1.87% 2.20% -0.53% 70.9% 1.74% 25.0% 0.00% 1.31% 1.86% 9.99% 13.1%

2012E 3.6% 4.6% 79.5% 0.0% 12.1% 16.8% 2012E 0.53 0.21 0.39 3.64 3,014 2012E 1.97% 2.18% 52.6% 4.15% 42.6% 1.77% 2.38% -0.48% 70.0% 1.98% 25.0% 0.00% 1.49% 2.12% 9.94% 14.9%

Per share data
EPS (M$) Dividend (M$) Payout ratio NAV Avg. Shares issued (MM) DuPont NIR/avg. assets Non IR/avg. assets Non IR/total revenue Total rev/avg. assets Cost/income Cost/assets Goodwill amort. Operating ROAA LLP/loans Loans/assets Other inc: provs Pre-tax ROAA Tax MI ROAA RoRWA Equity/assets ROE

Key balance sheet - M$mn
Net customer loans Loans loss reserves Gross loans Investments Other earning assets Average earning assets = (A) Goodwill Total assets

Source: Company, J.P. Morgan estimates

121

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Amorepacific
www.amorepacific.com
Company description Amorepacific is the leading cosmetic company in Korea with a 35% market share in the domestic cosmetic market. It dominates in the premium channel, with over 60% of the door-to-door market and holds around a 16% share in the department store channel. Post mortem The company is the leader in the Korean cosmetic segment where market leaders continue gaining pricing power and competitiveness. The company’s future value would come largely from its growth prospects in China. While the company has been expanding its stores over the past 4~5 years, its brand building efforts have been less of a focus area, thus the same-store sales growth has been 3~4%. Starting next year, Amorepacific will start to carry out mass-marketing through TV and this is likely to start boosting brand recognition. Together with its third brand introduction, Sul Hwa Soo, we expect Amorepacific’s sales growth to take on a stronger growth momentum going into 2011. Potential for earnings upgrades In the near future, earnings surprise is likely to come from the domestic premium side, in our view. We believe there is a good chance that Amorepacific will narrow the market share gain it lost in the department store channel this year as foreign brands aggressively raised their prices due to currency movements. How much recovery is priced into the stock? We believe there is around a 22% upside potential from the current share price over the next one year. The share currently trades at 20tx 2011E earnings. However, going into 2010, Amorepacific’s earnings growth could outshine other consumer companies. While 2010 prospects are priced in, the likely growth continuity into 2011 is not priced in for now. Price target and key risks Our Dec-10 price target of W998,000 is based on 20x 2011E earnings. 20x is the average P/E since 2006. A key risk to our price target is domestic macro conditions.
Bloomberg: 090430 KS; Reuters: 090430.KS
Won in billions, year-end December Sales Operating profit Net profit EPS (W) EPS growth (%) P/E (x) BVPS (W) P/B (x) DPS (W) Dividend yield (%) ROE (%) FY08 1,531 255 170 24,666 -4.3 33.9 161,600 5.2 4,999 0.6 15.3 FY09E 1,756 317 241 34,940 41.7 24.0 186,994 4.5 5,004 0.6 18.7 FY10E 1,907 366 258 37,312 6.8 22.4 217,317 3.9 6,990 0.8 17.2 FY11E 2,062 398 345 49,922 33.8 16.8 259,777 3.2 7,464 0.9 19.2 52-week range (W) Market cap (WB) Market cap (US$MM) Shares issued (MM) Free Float (%) Avg daily value (US$MM) Avg daily volume (Shares) Index (KOSPI) Exchange rate (W/US$1)

Overweight
W837,000 Price Target: W998,000

South Korea Cosmetics Jinah LeeAC
(822) 758-5723 jinah.lee@jpmorgan.com J.P. Morgan Securities (Far East) Limited, Seoul Branch

Price performance
W 850,000 650,000 450,000 Oct-08 Feb-09 Jun-09 KOSPI Oct-09 HMC
Source: Bloomberg.

Performance
1M Absolute (%) Relative (%)
Source: Bloomberg.

3M 17.9 17.3

12M 41.1 (2.0)

2.1 3.8

Company data
52-week range (W) Mkt cap. (WB) Mkt cap. (US$MM) Avg daily value (US$MM) Avg daily volume Shares O/S (MM) Date of price Index: KOSPI Free float (%) Exchange rate
Source: Bloomberg.

875,000~524,000 4,892 4,188 11.2 22,100 6.9 6-Nov-09 1,572.46 47 1,168.0

875,000~524,000 4,892 4,188 6.9 47 11.2 22,100 1,572.46 1,168.0

Source: Company, Bloomberg, J.P. Morgan estimates. Note: Share price and valuations are as of 6 November 2009.

122

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Amorepacific: Summary of financials
Won in billions, year-end December P/L Net Sales Cosmetics Premium Mass Export MB&S Operating Profit Cosmetics MB&S OPM Cosmetics MB&S Non-opg Income Interest Income Gain on Equity Method Others Non-operating Expenses Loss on Equity Method Others Pre-tax profit Income Taxes Net Profit C/F Operating CF Net profit Additions Depreciation Prov for Severance Equity method loss Deductions Working capital Receivablees Inventory Payables Retirement pay Cash Flows from Investing Cash Flows from Financing Increase in Cash Cash at the Beginning Cash at the End 2007 1,357 1,108 754 308 25 249 249 244 4 72.3% 87.5% -2.6% 35 11 11 13 35 28 7 249 71 178 2007 227 178 108 50 22 28 14 -45 10 -31 7 -18 -221 -31 -25 130 105 2008 1,531 1,269 816 403 37 261 255 256 0 66.3% 80.1% -4.0% 35 13 2 20 46 35 11 244 74 170 2008 238 170 125 57 22 35 8 -49 -18 -29 11 -20 -172 -35 32 105 137 2009E 1,756 1,469 891 510 56 287 317 295 22 71.7% 79.6% 27.7% 38 9 17 15 35 19 16 320 79 241 2009E 326 241 106 64 18 19 11 -9 -15 -19 6 -11 -232 -35 60 137 196 2010E 1,907 1,605 930 581 83 303 366 340 27 76.1% 83.8% 31.7% 3 12 -13 17 28 14 13 341 84 258 2010E 310 258 110 78 18 14 24 -31 -11 -14 5 -11 -207 -48 55 196 251 2011E 2,062 1,738 965 637 125 324 398 363 35 76.4% 82.6% 39.7% 81 22 34 16 23 8 15 456 112 345 2011E 464 345 110 83 19 8 -41 -31 -11 -14 5 -11 -120 -52 293 251 441 EPS (Won) P/E (times) Shares outstanding (MM) BVPS (Won) Price/Book ROE (%) DPS (W)
Source: J.P. Morgan estimates, Company data.

B/S Total Assets Current Assets Quick Assets Inventory Non-current Assets Investment Assets Tangible Assets Intangible Assets Other Non-current Assets Total Liabilities Current Liabilities Others Non-current Liabilities Total Stockholders' Equity Paid-in Capital Common Stock Preferred Stock Capital Surplus Capital Adjustment Retained Earnings

2007 1,268 414 300 114 854 140 651 17 46 315 177 67 138 953 35 29 5 713 -1 203

2008 1,455 445 303 142 1,010 149 779 24 58 340 199 71 140 1,115 35 29 5 713 -1 339

2009E 1,625 481 319 161 1,145 155 912 22 56 372 226 80 146 1,291 35 29 5 713 -2 545

2010E 2,400 561 385 176 1,276 157 1,041 22 56 400 246 87 154 1,500 35 29 5 713 -2 754

2011E 2,192 878 689 190 1,314 158 1,078 22 56 429 266 94 163 1,793 35 29 5 713 -2 1,047

Ratio Growth Sales growth Cosmetics Premium Mass Export MB&S Operating profit growth Cosmetics MB&S Net profit growth Equity method gain/oper profit Equity method loss/oper profit Net contribution to operating profit

2007

2008 12.8% 14.5% 8.2% 30.8% 48.0% 4.8% 2.6% 4.5% n.a. -4.3%

2009E 14.6% 15.8% 9.2% 26.6% 50.0% 10.1% 24.2% 15.3% n.a. 41.7% 5.4% 6.0% -0.6% 34,940 24.0 6.9 186,994 4.5 18.7% 5,004

2010E 8.6% 9.2% 4.3% 13.8% 50.0% 5.4% 15.5% 15.2% 18.5% 6.8% -3.6% 3.9% -7.5% 37,312 22.4 6.9 217,317 3.9 17.2% 6,990

2011E 8.1% 8.3% 3.8% 9.7% 50.0% 7.0% 8.7% 7.0% 31.4% 33.8% 8.6% 2.1% 6.5% 49,922 16.8 6.9 259,777 3.2 19.2% 7,464

4.5% 11.4% -6.9% 25,770 32.5 6.9 138,124 6.1 18.7% 4,503

0.9% 13.8% -12.9% 24,666 33.9 6.9 161,600 5.2 15.3% 4,999

123

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Anglo Platinum
www.angloplatinum.com
Company description AMS is the world’s largest PGM producer, operating multiple sites in SA and Zimbabwe. Under Neville Nicolau (new CEO) the group is being restructured. A 15% (at least) headcount cut and the redrawing of operations management boundaries at problematical Rustenburg and at Amandelbult are positives. Nicolau is the first mining engineer at the helm in decades - and his experience should be key to “getting the mining right” after a decade of poor performance in our view. The group’s entered into JVs with mid-tier and BEE miners and has developed a significant 3rd party concentrate purchasing business. Moreover, by allowing some partners control of mines improved focus and better costs control should result, in our view. Post mortem AMS has been a perennial underperformer in the Pt sector over the past decade. We can see this reversing under the new regime. Moreover, our analysis indicates that AMS is well positioned to move platinum production from its mines up by around 10% (200-250koz) within 6 months in response to strong demand, if needed - no other producer can do this. Potential for earnings upgrades It is hard to accurately predict the impact of restructuring on costs. We think the market is likely to underestimate the potential benefits. AMS’ peers have little hope of matching it in terms of costs containment in our view. The group’s profits and valuation are highly geared to a recovery in rand metal prices. How much recovery is priced into the stock? While the group is already factoring some price recovery, at mid-cycle prices, we estimate that it currently trades at around 80% of our fair value. Price target and key risks Our Aug-10 DCF-based price target is R910/sh. The key risks are that the rand PGM basket price fails to recover and/or the ops fail to turn as we expect.
Bloomberg: AMS SJ; Reuters: AMSJ.J
Rand millions, year-end Dec Sales Net profit FD EPS (SAcps) DPS (SAcps) Sales growth (%) Net profit growth (%) EPS growth (%) ROE (%) FD P/E (x) FY08 50,765 13,280 5,610 3,500 8.9 8.0 7.1 45.6 13.2 FY09E 36,735 2,521 1,060 0 -27.6 -81.0 Nm 7.9 69.7 FY10E 44,351 5,376 2,260 0 20.7 113.2 113.2 14.5 32.7 FY11E 55,196 9,779 4,110 2,160 24.5 81.9 81.9 23.3 18.0

Overweight
Price: 73,384c Price Target: 91,000c

South Africa Gold & Precious Metals Steve ShepherdAC
(27-11) 507 0386 steve.a.shepherd@jpmorgan.com

Allan CookeAC
(27-11) 507 0384 allan.j.cooke@jpmorgan.com J.P. Morgan Equities Ltd.
Price Performance
75,000 65,000 c 55,000 45,000 35,000
Nov-08 Feb-09 May-09 Aug-09 Nov-09

Source: Bloomberg

Performance
Absolute (%)
Source: Bloomberg

1M 9.7

3M 8.9

12M 76.7

Company data
Price(c) Date of Price Price Target (c) Price Target End Date 52-week Range (c) Mkt Cap (Rbn) Shares O/S (mn)
Source: Bloomberg, J.P. Morgan

73,384 23-Nov-09 91,000 31-Aug-10 76,820 – 36,800 174.80 238

Source: Company, Bloomberg, J.P. Morgan estimates. Note: Share price and valuations are as of cob 23 November 2009.

124

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Anglo Platinum: Summary of Financials
Production & Economic Assumptions Year end Dec FY07A Platinum ($/oz) 1,302 Palladium ($/oz) 355 Rhodium ($/oz) 4,344 Nickel ($/ton) 37,567 Avg exch. rate (R/$) 7.04 Cash Costs ($/oz Pt) Sales Volumes Platinum (koz) Palladium (koz) Rhodium (koz) Nickel (t) Profit & Loss Statement R in millions, year end Dec Revenues % change Y/Y EBITDA % change Y/Y EBIT % change Y/Y Net interest Earnings before tax % change Y/Y Tax Tax as % of EBT Net income (reported) % change Y/Y Shares Outstanding EPS (Adjusted) % change Y/Y DPS (Gross) % change Y/Y Cash Flow Statement R in millions, year end Dec EBIT Depreciation & Amortization Change in working capital Taxes Cash flow from Operations Capex Disposals/(Purchase) Net interest Free Cash flow Free Cash flow per share Equity raised/ repaid Debt raised/ repaid Dividends paid Other Beginning Cash Ending Cash 1,409 FY08A 1,570 355 5,174 21,583 8.08 1,628 FY09E 1,183 250 1,458 14,831 8.56 1,357 FY10E 1,338 306 1,788 15,875 8.65 1,372 FY11E 1,469 425 2,625 15,000 9.24 1,390 Current Liabilities Debt Other Liabilities Shareholder's Equity Minorities Total Liabilities & Shareholders Equity Ratio Analysis Year end Dec
Gross Margin (%)

Balance Sheet R in millions, year end Dec Property, Plant & Equipment Net Fixed Assets Cash and Cash equivalents Others Current Assets Total Assets

FY07A 20,697 39,218 3,833 10,999 14,832 54,050 6,547 7,465 11,265 28,773 0 54,050

FY08A 28,435 49,953 2,476 16,239 18,715 68,668 10,567 15,820 12,785 29,496 0 68,668

FY09E 34,761 57,471 1,210 17,794 19,003 76,474 8,828 21,056 12,273 34,317 0 76,474

FY10E 41,296 64,006 2,088 21,049 23,137 87,142 10,443 24,556 12,450 39,693 0 87,142

FY11E 47,668 70,378 2,613 24,967 27,580 97,958 12,387 26,056 15,190 44,325 0 97,958

2,479 1,390 307 20,273

2,220 1,319 311 16,036

2,400 1,292 326 19,615

2,539 1,518 344 24,679

2,621 1,561 345 25,400

FY07A FY08A FY09E 46,616 50,765 36,735 19.1% 8.9% (27.6%) 20,573 16,540 6,302 14.0% (19.6%) (61.9%) 18,654 17,654 3,471 14.7% (5.4%) (80.3%) 221 118 (127) 19,323 17,988 3,397 15.6% (6.9%) (81.1%) (6,656) (4,470) (749) 34.4% 24.8% 22.1% 12,294 13,280 2,521 4.6% 8.0% (81.0%) 234.70 236.80 238.15 5,240 5,610 1,060 NM 7.1% NM 5,200 3,500 0 (1.9%) (32.7%) (100.0%)

FY10E 44,351 20.7% 11,566 83.5% 7,442 114.4% (57) 7,405 118.0% (1,888) 25.5% 5,376 113.2% 238.20 2,260 113.2% 0 -

FY11E 55,196 24.5% 18,778 62.4% 13,976 87.8% (143) 13,870 87.3% (3,884) 28.0% 9,779 81.9% 238.20 4,110 81.9% 2,160 -

FY07A FY08A
41.0% 33.7%

FY09E FY10E FY11E
10.2% 17.1% 25.9%

EBITDA Margin (%) EBIT Margin (%) Net Margin (%) FCF Margin (%) Interest Coverage (x) Net debt to equity (%) Sales/Assets (x) ROE (%) ROIC (%) P/E (x) EV/EBITDA (x)
EV/FCF (x)

44.1% 32.6% 17.2% 40.0% 34.8% 9.4% 26.4% 26.2% 6.9% 6.9% 5.8% (19.4%) 84.4 149.6 12.6% 45.2% 0.9 0.8 42.8% 45.6% 42.7% 35.1% 14.1 8.8
56.5

26.1% 34.0% 16.8% 25.3% 12.1% 17.7% (6.4%) 2.9%

27.4 130.2 97.9 57.8% 56.6% 52.9% 0.5 0.5 0.6 7.9% 14.5% 23.3% 5.5% 9.5% 15.5% 69.7 28.8
(25.5)

13.2 11.0
61.8

32.7 15.7
(64.2)

18.0 9.7
112.9

Dividend Yield (%)
FCF Yield (%)

7.0%
2.0%

4.7%
1.8%

0.0%

0.0%

2.9%
1.0%

(4.4%) (1.7%)

FY07A 18,654 2,757 110 (6,821) 13,862

FY08A 17,654 3,313 2,555 (1,799) 17,296

FY09E 3,471 3,899 (1,470) (575) 4,256

FY10E 7,442 4,384 (1,640) (123) 9,803

FY11E 13,976 4,937 (1,974) (1,964) 14,840

Valuation & Recommendation NPV P/NPV PT PT/NPV PT Date Recommendation

86,200 0.79 91,000 1.1 31-Aug-10 OW

(10,653) (14,362) 632 (194) 5 (99) 3,209 2,934 13.6 12.3 0 0 7,575 10,501 (12,658) (14,237) 346 (262) 4,724 3,833 3,833 2,476

(11,368) (12,628) (13,234) Weekly Mkt Turnover ($ millions) 1,712 260 136 JSE (78) (57) (143) LSE (7,111) (2,824) 1,606 ADR (29.9) (11.9) 6.7 0 4,445 (61) (173) 2,476 1,210 0 3,500 0 0 1,210 2,088 0 1,500 Weekly Mkt Turnover/Mkt Cap (%) (2,573) JSE 0 LSE ADR 2,088 2,613

220 0 1

1.0% 0.0% 0.0%

Source: Company reports and J.P. Morgan estimates.

125

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Astra International
www.astra.co.id
Company description Astra International is part of the Jardine Matheson group. It is the partner/distributor for Japanese majors including Toyota, Daihatsu, Honda (two-wheelers) and Komatsu. Astra also holds majority stakes in United Tractors (59.5%) and Astra Agro Lestari (80%). Post mortem Astra’s solid balance sheet and reputation have resulted in market share gains during the downturn. We see improved pricing power, resulting from a stronger rupiah in core auto businesses, offsetting vulnerability from UNTR and AALI, which are weak currency beneficiaries. As a result of proactive management in the car and financial services business, supported by the strong growth in United Tractors, Astra should be able to end 2009 without a significant earnings decline, which we think is creditable. Potential for earnings upgrades We think that the auto cycle is in early stages of recovery, and have been surprised by two- and four-wheeler vehicle volumes in recent months. We think that the stronger-than-expected vehicle volumes could set the stage for earnings upgrades going into 2010. If the recovery in two-wheeler profitability seen in 3Q proves sustainable, it could provide added impetus to earnings. How much recovery is priced into the stock? We think that the emphasis on stock drivers is likely to shift from recovery to growth. The fact that a recovery which is underway is probably priced in, but the strength of the recovery is being underestimated. Price target and key risks We have an SOTP-based Dec-10 PT of Rp37,000 for Astra. Our PT uses J.P. Morgan PTs (DCF-based) for listed subsidiaries UNTR and AALI. We use the market values of smaller quoted holdings (Bank Permata, Astra Auto Parts and Astra Graphia) and DCF/DDM-based valuations for motor businesses and financial services business. Our valuation assumes a 10.5% risk-free rate and a 5.5% equity risk premium, translating into a 16% cost of equity. Using market values, as opposed to J.P. Morgan PTs, would imply a share price of Rp36,000 for Astra. Risks to our PT are if higher rates hit the recovery and the fact that the stock may be well owned. We see Astra as being in the midst of a re-rating relative to the market which is yet incomplete, and expect further outperformance.
Bloomberg: ASII IJ; Reuters: ASII.JK
Rp in mn, year-end Dec Revenue (Rp bn) Net Profit (Rp bn) Asia EPS (Rp) DPS (Rp) Revenue growth (%) EPS growth (%) ROCE ROE P/E P/BV EV/EBITDA Dividend Yield FY07A FY08E FY09E FY10E FY11E 70,183 97,064 90,236 108,131 125,185 6,519 8,965 8,487 10,284 12,100 1,610.35 2,214.75 2,096.50 2,540.53 644 910 839 1,016 26.0% 38.4% -7.1% 19.8% 15.8% 75.6% 37.5% -5.3% 21.2% 21.6% 26.1% 22.5% 23.9% 24.7% 26.4% 29.9% 23.8% 24.9% 25.2% 18.8 13.7 14.5 11.9 4.5 3.6 3.2 2.3 1.1 0.9 1.2 1.2 1.0 2.1% 3.0% 2.8% 3.3%

Overweight
Rp29,800 Price Target: Rp37,000

Indonesia Auto Parts Aditya Srinath, CFAAC
(62-21) 5291-8573 aditya.srinath@jpmorgan.com PT J.P. Morgan Securities Indonesia

Price performance
35,000 Rp 20,000 5,000
Nov-08 Feb-09 May-09 Aug-09 Nov-09

ASII.JK share price (Rp) JCI (rebased)

Source: Bloomberg.

Performance
1M Absolute (%) Relative (%)
Source: Bloomberg.

3M -1.4 -1.1

12M 212.1 134.4

-7.6 -4.6

Company data
52-week range (Rp) Mkt cap. (RpMM) Mkt cap. (US$MM) Avg daily val (US$MM) Avg daily volume (MM) Shares O/S (MM) Date of price Index: JCI Free float (%) Exchange rate
Source: Bloomberg.

7,800-35,300 120,640,979 12,814 12.82 2.75 4,048 5-Nov-09 2382 49.9 9,415

Source: Company, Bloomberg, J.P. Morgan estimates. Note: Share price and valuations are as of 5 November 2009.

126

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Astra International: Summary of financials
Rp in billions, year end December
Income statement FY06 Revenues % change Y/Y EBITDA % change Y/Y EBIT % change Y/Y EBIT Margin Net Interest Earnings before tax % change Y/Y Tax as % of EBT Net income (reported) % change Y/Y Shares outstanding EPS (reported) % change Y/Y 55,709 (9.7%) 8,177 -11.1% 6,256 NM 11.2% -336 5,944 -27.5% -1,453 24.4% 3,712 -31.9% 4 916.94 (31.9%) FY07 70,183 26.0% 12,289 50.3% 9,997 59.8% 14.2% -288 10,634 78.9% -2,663 25.0% 6,519 75.6% 4 1,610.35 75.6% FY08E 97,064 38.4% 16,032 30.5% 13,490 34.9% 13.8% 142 14,960 40.7% -3,944 26.4% 8,965 37.5% 4 2,214.75 37.5% FY09E 90,236 (7.1%) 16,596 3.5% 13,301 NM 14.7% -583 14,183 -5.2% -3,533 24.9% 8,487 -5.3% 4 2,096.50 (5.3%) FY10E 108,131 19.8% 19,517 17.6% 15,843 19.1% 14.6% -786 15,950 12.5% -3,530 22.1% 10,284 21.2% 4 2,540.53 21.2% EBIT Depr. & amortization Change in working capital Taxes Cash flow from operations Capex Disposal/(purchase) Net Interest Other Free cash flow Equity raised/(repaid) Debt raised/(repaid) Other Dividends paid Beginning cash Ending cash DPS Ratio Analysis FY06 Cash and cash equivalents Accounts receivable Inventories Others Current assets LT investments Net fixed assets Total Assets Liabilities Short-term loans Payables Others Total current liabilities Long-term debt Other liabilities Total Liabilities Shareholders' equity BVPS 4,820 4,558 4,001 2,024 15,822 13,030 57,929 FY07 6,322 6,018 4,582 2,409 19,532 14,127 63,520 FY08E 8,877 6,474 8,666 2,040 26,124 20,679 80,740 FY09E 4,099 8,139 7,226 3,214 22,778 21,884 84,850 FY10E 3,513 EBITDA margin 9,433 Operating margin 8,284 Net margin 3,851 25,181 Sales per share growth - Sales growth 21,710 Net profit growth 96,493 EPS growth Interest coverage (x) 12,963 3,390 7,073 20,037 10,215 721 31,498 22,376 5,527 10,998 4,434 10,236 21,234 8,848 828 31,512 26,963 6,660 12,979 6,815 13,837 26,816 10,554 1,902 40,163 33,080 8,172 12,800 5,713 12,225 25,025 10,733 1,933 38,681 38,172 9,430 12,800 6,554 14,067 26,867 13,733 1,963 43,653 44,342 13,053 Net debt to equity Sales/assets Assets/equity ROE ROCE FY06 14.6% 11.19% 6.6% FY07 17.4% 14.19% 9.3% FY08E 16.4% 13.84% 9.2% FY09E 18.3% 14.69% 9.4% FY10E 18.0% 14.60% 9.5% Cash flow statement FY06 6,256 1,921 -128 -1453 5,505 -3,455 -652 -336 4,333 2,049 0 -3,341 -531 -1,781 4,510 5,239 440 FY07 9,997 2,292 737 -2663 9,549 -3,389 -541 -288 -783 6,160 0 -3,333 1,848 -2,607 5,239 6,523 644 FY08E 13,490 2,542 -571 -3944 11,162 -9,094 -318 142 -4,076 2,069 -0 3,688 4,425 -3,684 6,523 8,944 910 FY09E 13,301 3,295 -3,011 -3533 8,770 -4,500 0 -583 -6,250 4,270 0 0 630 -3,395 8,944 4,199 839 FY10E 15,843 3,675 -1,147 -3530 12,811 -3,500 0 -786 -9,414 9,311 0 3,000 630 -4,114 4,199 3,613 1,016

Balance sheet

(9.7%) (9.7%) -31.9% (31.9%) 24.36 83.8% 0.94 2.59 17.3% 13.5%

26.0% 26.0% 75.6% 75.6% 42.68 54.0% 1.16 2.36 26.4% 21.6%

38.4% 38.4% 37.5% 37.5% 48.6% 1.35 2.44 29.9% 26.1%

(7.1%) (7.1%) -5.3% (5.3%) 28.47 54.3% 1.09 2.23 23.8% 22.5%

19.8% 19.8% 21.2% 21.2% 24.82 55.6% 1.20 2.20 24.9% 23.9%

Source: Company reports, J.P. Morgan estimates.

127

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Asustek Computer
www.asus.com
Company description Asus (TWSE: 2357) is the largest motherboards maker in the world. Starting with its MB business, Asus has rapidly grown in the NB space, especially for netbook. Currently, NB accounts for more than 70% of its revenue. The company’s products include MB, NB, Eee PC, GPS smartphone, and PC peripherals. Post mortem After facing serious inventory issues in 4Q08 and burdened by a heavy mix of high-end products, Asus was in a restructuring mode in 1H09. It has reoriented product its line-up towards the mainstream market, and instituted more cost control measures, by adopting common platforms in NBs, and streamlining a number of models. As a result, Asus posted a strong recovery in profitability in 3Q09, with its NB volume also recovering back to 2008 levels. Potential for earnings upgrades With a stronger-than-expected operating margin recovery in 3Q09, we believe the Street’s upward earning estimate revisions are still on. Our 2010 earnings estimate is about 17% higher than current Bloomberg consensus estimate. We expect revenue momentum to surprise on the upside in 2010, as Asus’ key markets—Eastern Europe and China—are likely to post strong growth in NB. How much recovery is priced into the stock? Volume recovery in 2H09 for Asus appears to be priced into the stock, but we believe margin expectations have stayed low. Going into 2010, there is still investor skepticism regarding Asus’ ability to continue gaining market share and keep OP margins stable, which should provide an upside opportunity for the stock, in our view. Price target and key risks Our Jun-10 PT of NT$70 implies 14x FY10E earnings, given the strong OP margin improvement and sustainability of Asus’ cost-down measures in notebook business. 14x P/E represents the mid-point of Asus’ historical trading range. A key risk to our PT is execution issues in the mainstream NB rollout.

Overweight
Price: NT$60.9 Price Target: NT$70

Taiwan Computer Hardware Gokul HariharanAC
(852) 2800-8564 gokul.hariharan@jpmorgan.com

Alvin KwockAC
(852) 2800-8533 alvin.yl.kwock@jpmorgan.com J.P. Morgan Securities (Asia Pacific) Limited

Price performance
80 NT$ 50 20
Nov-08 Feb-09 May-09 Aug-09 Nov-09

2357.TW share price (NT$ TSE (rebased)

Source: Bloomberg.

Performance
1M Absolute (%) Relative (%)
Source: Bloomberg.

3M 23.28 13.82

12M 30.11 -12.68

13.20 13.51

Company data
52-week range (NT$) Mkt cap. (NT$B) Mkt cap. (US$B) Avg daily value (US$B) Avg daily volume (MM) Shares O/S (MM) Date of price Index: TWSE Free float (%) Exchange rate
Source: Bloomberg.

29.4-63.8 259 8 40 26 4,247 5-Nov-09 7,417.5 95 32.5

Bloomberg: 2357.TT; Reuters: 2357.TW
NT$ in billions, year-end December Sales Operating profit EBITDA Pre-tax profit Net profit MV of employee bonus Adjusted net profit New Taiwan GAAP EPS (NT$)* New Taiwan GAAP P/E (x) sales growth New Taiwan GAAP EPS growth Normalized OP growth FY08 FY09E 266.9 236.6 11.4 4.5 12.4 5.8 20.6 14.0 16.5 12.2 1.00 -0.15 16.5 12.2 3.73 2.87 16.3 21.2 -65% -11% -26% -23% -44% -56% FY10E FY11E 277.3 316.1 YE BPS (NT$) 13.7 15.4 P/BV (x) 15.2 17.3 ROE 24.3 27.0 Core ROIC (%) 20.6 22.8 DPS (NT$) 2.27 2.55 Quarterly EPS (NT$) 20.6 22.8 EPS (FY08) 4.82 5.34 EPS (FY09E) 12.6 11.4 EPS (FY10E) 17% 14% 68% 11% 218% 13% Jun -10 PT FY08 39.2 1.6 9.5 16.6 4.3 1Q 1.56 0.11 0.99 FY09E FY10E FY11E 40.0 43.3 45.2 1.5 1.4 1.3 7.2 11.6 12.1 3.6 0.8 6.0 2.0 1.5 2.9 2Q 3Q 4Q 1.23 1.54 -0.66 -0.03 1.53 1.26 1.04 1.36 1.43 NT$ 70

Source: Company, Bloomberg, J.P. Morgan estimates. Note: Share price and valuation are as of 5 November 2009.

128

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Asustek Computer: Summary of financials
NT$ in billions, year-end December Income statement FY08 Revenues Cost of Goods Sold Gross Profit R&D Expenses SG&A Expenses Operating Profit (EBIT) EBITDA Interest Income Interest Expense Investment Income (Exp.) Non-Operating Income (Exp.) Earnings before tax Tax Net Income (Reported) Net Income (Adjusted) EPS (Reported) (NT$) EPS (Adjusted) (NT$) BPS (NT$) DPS (NT$) Shares Outstanding (B) Balance sheet FY08 Cash and cash equivalents Accounts receivable Inventories Others Current assets LT investments Net fixed assets Others Total assets ST loans Payables Others Total current liabilities Long term debt Other liabilities Total liabilities Shareholders' equity 23.7 43.2 41.8 10.9 119.6 111.5 3.7 1.6 236.5 12.7 27.5 26.7 66.9 0.0 0.0 66.9 166.8 FY09E 27.0 40.1 36.1 11.7 114.9 120.6 4.8 0.6 240.9 14.5 36.1 19.4 70.0 0.0 0.0 70.0 170.9 FY10E 29.1 47.2 42.5 13.8 132.5 128.2 4.8 0.6 266.1 15.7 42.5 22.8 81.1 0.0 0.0 81.1 185.1 FY11E 25.7 53.2 47.9 15.5 142.3 136.1 4.8 0.6 283.8 16.9 47.9 25.7 90.5 0.0 0.0 90.5 193.3 Net Income Depr. & Amortisation Change in working capital Other Cash flow from operations Capex Disposal/ (purchase) Cash flow from investing Free cash flow Equity raised/ (repaid) Debt raised/ (repaid) Other Dividends paid Cash flow from financing Net change in cash Beginning cash Ending cash 266.9 227.5 39.4 7.3 19.7 11.4 12.4 1.1 -1.0 4.0 5.1 20.6 4.1 16.5 16.5 3.73 3.73 39.21 1.98 4.4 FY09E 236.6 208.0 28.6 6.0 16.2 4.5 5.8 1.0 -0.9 7.0 2.4 14.0 1.7 12.2 12.2 2.87 2.87 40.00 1.54 4.3 FY10E 277.3 235.4 41.9 7.0 18.9 13.7 15.2 1.0 -1.0 7.6 3.0 24.3 3.7 20.6 20.6 4.82 4.82 43.31 2.88 4.3 FY11E 316.1 269.0 47.0 7.9 21.2 15.4 17.3 1.1 -0.9 7.9 3.5 27.0 4.2 22.8 22.8 5.34 5.34 45.23 0.00 4.3 Ratio analysis % Gross Margin EBITDA margin Operating Margin Net Margin R&D/sales SG&A/Sales Sales growth Operating Profit Growth Net profit (Adjusted) growth EPS (Reported) growth EPS (Adjusted) growth Interest coverage (x) Net debt to total capital Net debt to equity Asset Turnover (%) Working Capital Turns (X) ROE ROCE FY08 14.8 4.6 4.3 6.2 2.7 7.4 FY09E 12.1 2.4 1.9 5.2 2.5 6.8 -11.3 -60.4 -25.7 -23.1 -23.1 -5.1 -6.7 -7.3 98.2 4.8 7.2 5.3 FY10E 15.1 5.5 4.9 7.4 2.5 6.8 17.2 203.0 68.5 68.0 68.0 -13.4 -6.6 -7.2 104.2 5.8 11.6 9.8 FY11E 14.9 5.5 4.9 7.2 2.5 6.7 14.0 12.7 10.7 10.7 10.7 -17.1 -4.2 -4.5 111.4 6.1 12.1 10.9

-11.8 -6.1 -6.6 112.9 3.2 9.5 8.1

Cash flow statement FY09E 12.2 1.2 9.3 0.0 22.8 -2.3 -8.1 -10.4 20.4 1.4 1.8 -1.1 -8.4 -6.3 6.0 23.7 29.7 FY10E 20.6 1.5 -5.7 0.0 16.4 -1.5 -7.6 -9.1 14.9 0.0 1.2 0.2 -6.6 -5.2 2.1 27.0 29.1 FY11E 22.8 1.8 -4.9 0.0 19.8 -1.8 -7.9 -9.7 17.9 0.0 1.2 -2.3 -12.3 -13.4 -3.4 29.1 25.7

Source: Company reports and J.P. Morgan estimates.

129

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Ayala Land
www.ayalaland.com.ph
Company description Ayala Land is the largest and most diversified developer in the Philippines with interests in housing, retail, office, and hotel development. It is a major landlord in the prime CBDs of Makati and Fort Bonifacio. While traditionally known as a high-end property developer, Ayala Land has in recent years leveraged on its brand equity to tap the lower-income markets. Post mortem The company has over 4,000 ha of land bank that is good for at least 10 years of development. Its pricing power is strong owing to the Ayala reputation for quality products and services. Cost efficiency has been an ongoing issue for the company, but this could change with the new President at the helm who has a track record of reaping operational efficiency. We believe the company’s conservative balance sheet has allowed it weather the crisis well, and seize opportunities in striking joint-venture/land lease deals to grow its market share. Potential for earnings upgrades Property volumes are highly leveraged to an economic upturn, fueled by growing overseas foreign remittances and low interest rates. The company’s move to aggressively launch more projects (in line with its target to double earnings and ROE in five years) should further boost volume sales. Potential margin increase from lower costs should lead to positive earnings estimate revisions, in our view. How much recovery is priced into the stock? We believe the stock has priced in very little of a recovery as it is trading at a 42% discount to NAV, equivalent to -1SD, and more than the 35% average during the 2002-03 trough of the property market. Price target and key risks Our Dec-10 PT of Php13.9 is based on a 25% discount to NAV, equivalent to the historical average of the past 17 years. Key risks to our PT are a decline in land values and a sharp rise in interest rates.
Bloomberg: ALI PM.TT; Reuters: ALI.PS
P h p in m n , y e a r -e n d D e c R e venu e N e t P ro fit E P S (P h p ) D P S (P h p ) R e v e n u e g ro w th (% ) E P S g ro w th (% ) ROCE ROE P /E ( x ) P /B V (x ) E V /E B IT D A ( x ) D iv id e n d Y ie ld FY08A 2 9 ,2 9 5 4 ,8 1 2 .3 0 .3 7 0 .0 6 3 6 .3 % 1 0 .3 % 9 .9 % 1 0 .2 % 3 2 .3 3 .2 2 6 .0 0 .5 % FY09E 2 6 ,6 4 3 3 ,7 9 9 .7 0 .2 9 0 .0 6 -9 .1 % -2 1 .0 % 7 .4 % 7 .5 % 4 0 .9 2 .9 3 1 .4 0 .5 %

Overweight
Php12.00 Price Target: Php13.90

Philippines Real Estate Kelly Lim-BateAC
(632) 878-1188 kelly.s.lim-bate@jpmorgan.com J.P. Morgan Securities Philippines Inc.

Price performance
20 18 16 14 12 10 8 6 4 2 0 Jan-06 Jan-07 Jan-08 Jan-09 Jul-06 Jul-07 Jul-08 Jul-09

Source: Bloomberg.

Performance
1M Absolute (%) Relative (%)
Source: Bloomberg.

3M 6.8 6.1

12M 65.3 20.1

-12.8 -15.9

Company data
52-week range (Php) Mkt cap. (PhpMM) Mkt cap. (US$MM) Avg daily value (US$MM) Avg daily volume (MM) Shares O/S (MM) Date of price Index: PSEi Free float (%) Exchange rate
Source: Bloomberg.

4.90-12.50 155,556 3,330 2 12.1 12,963 12-Nov-09 3,074 46 46.72

FY10E 2 6 ,6 8 8 3 ,8 6 9 .2 0 .3 0 0 .0 6 0 .2 % 1 .8 % 7 .6 % 7 .1 % 4 0 .2 2 .8 2 9 .5 0 .5 %

FY11E 3 1 ,7 2 2 4 ,4 4 8 .4 0 .3 4 0 .0 6 1 8 .9 % 1 5 .0 % 8 .6 % 7 .7 % 3 5 .0 2 .6 2 5 .1 0 .5 %

Source: Company, Bloomberg, J.P. Morgan estimates. Note: Share price and valuation are as of 12 November 2009.

130

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Ayala Land: Summary of financials
Php in millions, year-end December Income statement FY07 Revenues % change Y/Y EBITDA % change Y/Y EBIT % change Y/Y EBIT Margin Net Interest Earnings before tax % change Y/Y Tax as % of EBT Net income (reported) % change Y/Y Shares outstanding EPS (reported) (Php) % change Y/Y 21,490 (4.5%) 4,989 3.6% 4,989 3.6% 23.2% 277 6,652 13.8% -1,556 23.4% 4,386 13.5% 13,035 0.34 13.3% FY08 FY09E FY10E 26,688 0.2% 5,369 7.1% 5,369 7.1% 20.1% 106 6,448 3.1% -1,698 26.3% 3,869 1.8% 12,963 0.30 1.8% FY11E 31,722 18.9% 6,370 18.6% 6,370 18.6% 20.1% 134 7,574 17.5% -2,079 27.4% 4,448 15.0% 12,963 0.34 15.0% EBIT Depr. & amortization Change in working capital Taxes Cash flow from operations Capex Disposal/(purchase) Net Interest Other Free cash flow Equity raised/(repaid) Debt raised/(repaid) Other Dividends paid Beginning cash Ending cash DPS (Php) Cash flow statement FY07 4,989 3,660 -1556 8,530 1,390 -810 277 9,920 1,361 -3,655 -47 -1,084 4,631 11,272 0.05 FY08 6,042 -1,223 -2065 3,616 -5,693 918 522 -2,077 -765 -2,710 995 -951 11,272 12,655 0.06 FY09E 5,013 1,992 -1575 7,256 -5,340 -1,689 356 1,916 0 -107 0 -778 15,443 14,786 0.06 FY10E 5,369 1,989 -1698 7,387 -6,772 -716 106 615 0 0 0 -778 14,786 13,906 0.06 FY11E 6,370 1,371 -2079 7,578 -8,694 518 134 -1,116 0 0 0 -778 13,906 12,530 0.06 29,295 26,643 36.3% (9.1%) 6,042 5,013 21.1% -17.0% 6,042 5,013 21.1% NM 20.6% 18.8% 522 356 7,448 6,254 12.0% -16.0% -2,065 -1,575 27.7% 25.2% 4,812 3,800 9.7% -21.0% 12,963 12,963 0.37 0.29 10.3% (21.0%)

Balance sheet FY07 Cash and cash equivalents Accounts receivable Inventories Others Current assets LT investments Net fixed assets Total Assets Liabilities Short-term loans Payables Others Total current liabilities Long-term debt Other liabilities Total Liabilities Shareholders' equity BVPS (Php) 13,626 11,125 6,696 2,533 33,979 FY08 15,443 15,796 8,140 4,556 43,935 FY09E 14,786 12,092 6,792 4,556 38,226 FY10E 13,906 11,392 6,175 4,556 36,030 FY11E

Ratio analysis FY07 FY08 FY09E FY10E FY11E

28,587 31,628 20,415 24,890 82,981 100,453

12,530 EBITDA margin 12,563 Operating margin 6,555 Net margin 4,556 36,206 Sales per share growth 38,855 45,720 52,251 Sales growth 22,842 22,166 23,209 Net profit growth 99,923 103,916 111,665 EPS growth Interest coverage (x)

23.2% 20.6% 18.8% 20.1% 20.1% 24.50% 22.40% 20.15% 20.52% 20.50% 20.4% 16.4% 14.3% 14.5% 14.0%

(4.7%) (4.5%) 13.5% 13.3% -8.1% 0.27 1.82 10.2% 9.1%

37.1% (9.1%) 36.3% (9.1%) 9.7% -21.0% 10.3% (21.0%) 2.8% 0.32 2.05 10.2% 9.9% 3.7% 0.27 1.89 7.5% 7.4%

0.2% 0.2% 1.8% 1.8% 5.0% 0.26 1.86 7.1% 7.6%

18.9% 18.9% 15.0% 15.0% 7.1% 0.29 1.87 7.7% 8.6%

3,990 15,759 790 20,539 6,150 5,547 32,235 45,705 3.51

1,524 20,654 1,205 23,383 15,228 6,799 45,410 49,028 3.78

1,280 17,706 1,094 20,079 15,365 5,536 40,980 52,827 4.08

1,280 18,382 1,090 20,752 15,365 4,884 41,000 55,919 4.31

1,280 21,115 1,280 23,675 15,365 4,992 44,032 59,589 4.60

Net debt to equity Sales/assets Assets/equity ROE ROCE

Source: Company reports and J.P. Morgan estimates.

131

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Baidu
www.baidu.com
Company description Baidu is a leading internet search provider in China with a focus on Chinese web pages. The company generates majority of its revenue through pay-perclick advertising and customized search solutions. It is the number 1 site in China in terms of traffic reach, according to Alexa. Post mortem Baidu remains the dominant player in China’s search market with ~63% market share as of 3Q09 in China (according to Analysys). We expect Baidu to maintain its leadership in China due to: (1) its good Chinese search technology; (2) our view that Baidu’s products are tailored better to local needs; (3) its strong local brand name; (4) good relationship with the Chinese government; and (5) it has among the widest distribution networks in China (a key to market development and driving sales), and is well ahead of other competitors in search. Potential for earnings upgrades We believe there are earnings upside potential in 2010, with: (1) transition to Phoenix Nest monetization system; (2) domestic economic growth to lead to an upside in search ad spending; and (3) expect eCommerce growth to lead to search spending upside. We also expect some margin leverage in SG&A. How much recovery is priced into the stock? With a weak 4Q09 guidance, shares have recently seen some weakness. Hence, we believe investors have given a big discount to the potential ad recovery in 2010. We note that the softness is mainly due to the earlier-thanexpected transition from the classic bidding system in Phoenix Nest. We expect incremental positive datapoint on ad segment in early 2010 to be the driver of the stock. Price target and key risks Our Dec-10 PT of US$460 is based on DCF valuation. Our nominal case DCF valuation suggests a valuation of: US$459.8. (20% long-term growth from 2014–2018E, 15% growth from 2019E – 2025E). We use WACC of 12% and 0% terminal growth. Downside risks to our rating and price target include: (1) slower-than-expected online search spending; (2) large infrastructure-related expense; (3) unsuccessful Japan initiatives; and (4) and potential margin decline due to TAC.
Bloomberg: BIDU US; Reuters: BIDU
US$ in millions, year-end December Sales Net profit GAAP EPS (US$) Adj. EPS (US$) DPS (US$) Sales growth (%) Net profit growth (%) EPS growth (%) ROE (%) GAAP P/E (x) Adj. P/E (x) FY08 465.5 152.5 4.39 4.74 0 100.9 82.6 82.5 44.3 97.4 90.1 FY09E 644.7 213.5 6.13 6.51 0 38.5 40.0 39.7 39.3 69.7 65.6 FY10E 916.7 322.9 9.15 9.56 0 42.2 51.2 49.3 37.6 46.7 44.7 FY11E 1,321.7 470.3 13.14 13.59 0 44.2 45.7 43.6 35.7 32.5 31.4

Overweight
US$386.37 Price Target: US$460.00

China IT and Internet Dick WeiAC
(852) 2800-8535 dick.x.wei@jpmorgan.com J.P. Morgan Securities (Asia Pacific) Limited

Price performance
US$
400 $ 250 100
Oct-08 Jan-09 Apr-09 Jul-09 Oct-09

BIDU share price ($) NASDAQ Composite (rebased)

Source: Bloomberg.

Performance
1M Absolute (%) Relative (%)
Source: Bloomberg.

3M 22.5 15.0

12M 133.4 90.1

3.3 2.8

Company data
52-week range (US$) Mkt cap. (Rmb MM) Mkt cap. (US$ MM) Avg daily value (US$MM) Avg daily volume (MM) Shares O/S (MM) Date of price Index: NASDAQ Free float (%) Exchange rate
Source: Company, Bloomberg.

100.5-439.9 100,700 14,760 60.7 1.8 35 12-Nov-09 2056 74 6.83

Source: Company, Bloomberg, J.P. Morgan estimates. Note: Share price and valuations are as of 12 November 2009.

132

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Baidu: Summary of financials
Profit and loss statement
US$ in millions, year-end December Revenue % change Y/Y Gross margin (%) EBITDA % change Y/Y EBITDA margin (%) EBIT % change Y/Y EBIT margin (%) Net interest Earnings before tax % change Y/Y Tax as % of EBT Net income (reported) % change Y/Y Shares O/S (MM) EPS (reported) (US$) FY08 465.5 100.9 64.0 211.4 107.0 45.4 159.6 119.7 34.3 6.9 169.4 107.1 16.9 9.97 152.5 82.6 34.8 4.39 FY09E 644.7 38.5 63.4 293.8 39.0 45.6 232.2 45.46 36.0 5.6 240.6 42 27.1 11.25 213.5 40.0 34.8 6.13 FY10E 916.7 42.2 62.6 431.4 46.8 47.1 352.6 51.87 38.5 15.7 368.9 53.34 46.0 12.47 322.9 51.2 35.3 9.15 FY11E 1,321.7 44.2 62.4 614.0 42.3 46.5 516.4 46.45 39.1 26.0 543.0 47.19 72.7 13.38 470.3 45.7 35.8 13.14

Cash flow statement
US$ in millions, year-end December Net Income Depr. & Amortisation Change in working capital Other Cash flow from operations Capex / Investments Others Cash flow from investing Free cash flow Equity raised/ (repaid) Debt raised/ (repaid) Other Dividends paid Cash flow from financing Net change in cash Beginning cash Ending cash FY08 153 40 24 38 254 -59 -34 -93 195 -9 0 4 0 -5 176 211 388 FY09E 214 48 36 13 311 -81 0 -81 230 28 0 -3 0 25 257 388 644 FY10E 323 64 76 14 477 -76 0 -76 401 50 0 0 0 50 451 644 1,095 FY11E 470 82 85 16 653 -94 0 -94 559 60 0 0 0 60 618 1,095 1,713

Source: Company, J.P. Morgan estimates.

Source: Company, J.P. Morgan estimates.

Balance sheet
US$ in millions, year-end December Cash and cash equivalents Accounts receivable Inventories Others Current assets LT investments Net fixed assets Other LT assets Total assets Liabilities ST loans Payables Others Total current liabilities Long term debt Other liabilities Total liabilities Shareholders' equity
Source: Company, J.P. Morgan estimates.

Ratio analysis
FY08 388 14 0 14 415 2 129 28 573 0 62 62 124 0 0 124 450 FY09E 644 20 0 24 688 2 160 30 880 0 87 89 176 0 1 177 703 FY10E 1,095 30 0 36 1,161 2 173 29 1,366 0 138 137 275 0 1 275 1,090 FY11E 1,713 41 0 50 1,805 2 187 28 2,021 0 196 189 385 0 1 386 1,636 %, year-end December EBITDA margin Operating Margin Net Margin R&D/sales SG&A/Sales Sales growth Operating Profit Growth Net profit growth Diluted EPS growth Net debt to total capital Net debt to equity Asset Turnover Working Capital Turns (X) ROE ROIC FY08 45.4 34.3 32.8 7.8 19.3 100.9 119.7 82.6 82.5 -86.2 -86.2 81.2 2.1 44.3 42.8 FY09E 45.6 36.0 33.1 8.4 17.0 38.5 45.5 40.0 39.7 -91.6 -91.6 73.3 1.6 39.3 38.5 FY10E 47.1 38.5 35.2 8.1 14.5 42.2 51.9 51.2 49.3 -100.4 -100.4 67.1 1.3 37.6 36.2 FY11E 46.5 39.1 35.6 7.5 14.6 44.2 46.4 45.7 43.6 -104.7 -104.7 65.4 1.1 35.7 34.1

Source: Company, J.P. Morgan estimates.

133

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Bank Asya
www.bankasya.com
Company description The largest of four banks (and the only independent as the other 3 have been acquired by GCC strategic partners) in a niche, fast growth participation sector (CAGR in assets 03-09 c.35-40%) in Turkey. Its footprint includes 155 branches; it had some TRY11bn (US$7.3bn) in assets in Q3. Despite the severe 2008-09 recession, Asya delivered some 19% loan growth YTD to September and has made profits in every one of the past 11 quarters with average ROE near 20% - it has historically achieved ROE of over 30%. Post mortem We expect profits of TRY285mn (EPS of TRY0.32 in 09E), up 15% yoy; despite the fact that due to its participation model Asya has been unable to benefit either from securities gains or more aggressive liability re-pricing enjoyed by its peers and cost of risk YTD has been running over 350bps in 2009. However, we expect EPS growth to accelerate towards 40% levels (net profits EPS of TRY0.45 in 10E and EPS TRY0.60 in 11E). Potential for earnings upgrades At US$42bn market cap, the stock is still below the radar screen - we expect more international research coverage; JPM expects earnings upgrades to continue throughout 2010, supported by macro strengthening towards 5% GDP growth, driving some 34% loan growth in 10E and 26% by 11E, well supported by core Tier 1 of 14.5% (09E) and improving capital generation into recovery. How much recovery is priced into the stock? From the February 09 trough, Asya shares have rallied over 200% from TRY1 to over TRY3. Since August the shares have stagnated, despite attractive valuation of <7 x PE (10E) and 1.4 P/NAV for what is essentially a mid 20s ROE franchise. JPM’s Gordon growth model suggests a TRY5 fair value (YE10E) - some 65% upside from present levels. Price target and key risks Our Dec-10 PT of TRY5 is based on our Gordon growth model using 23% ROE, 15% COE & 5% LT growth rate. Key risks include further economic deterioration and the oil price hitting >$110, negatively impacting CAR.
Bloomberg: ASYAB TI Reuters: ASYAB.IS
TRY million, year-end Dec Pre-provision op. profit Net profit EPS (TRY) EPS growth (%) Tier I ratio (%) NPL ratio (%) Dividend yield RONAV (%) P/E (x) P/NAV FY08 469 247 0.27 11% 13.1% 5.1% 0% 22% 11.2 2.0 FY09E 603 285 0.32 15% 14.5% 7.5% 0% 18% 9.7 1.6 FY10E 683 404 0.45 42% 13.2% 6.8% 4% 22% 6.8 1.4 FY11E 844 537 0.60 33% 12.9% 5.8% 5% 25% 5.1 1.2

Overweight, AFL
Price: TRY3.06 Price Target: TRY5.00

CEEMEA Banks Paul FormankoAC
(+44) 207-325-6028 paul.formanko@jpmorgan.com J.P. Morgan Securities Ltd.

Price Performance
3.5 TL 2.5 1.5 0.5
Nov-08 Feb-09 May-09 Aug-09 Nov-09

Source: Company data, Bloomberg

Performance
Absolute (%) 1M -13.6 3M 3.4 12M 163.8

Company data
52-week range (LC) Mkt cap. (TLMM) Mkt cap. (US$MM) Avg daily value (US$MM) Avg daily volume (MM) Shares O/S (MM) Date of price Index: ISE Free float (%) Exchange rate(USD/TRY)
Source: Bloomberg

3.68-0.94 2,,754 1,842 18.4 9.3 900 23 Nov 09 45801 45.5% 1.5

Source: Company, Bloomberg, J.P. Morgan estimates. Note: Share price and valuations are as of cob 23 November 2009.

134

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Bank Asya: Summary of Financials
Profit and Loss Statement TL in millions, year end Dec Net interest income % Change Y/Y Non-interest income Fees & commissions % change Y/Y Trading revenues % change Y/Y Other Income Total operating revenues % change Y/Y Admin expenses % change Y/Y Other expenses Pre-provision operating profit % change Y/Y Loan loss provisions Other provisions Earnings before tax % change Y/Y Tax (charge) % Tax rate Minorities Net Income (Reported) FY07A FY08A FY09E 609 21.5% 459 260 15.0% 93 56.5% 106 1,068 24.4% -259 20.0% (206) 603 28.8% -248 356 14.1% (71) 20.0% 0 285 Ratio Analysis FY10E FY11E TL in millions, year end Dec Per Share Data 766 910 EPS Reported 25.8% 18.8% EPSAdjusted 437 533 % Change Y/Y 317 403 DPS 22.0% 27.0% % Change Y/Y 48 50 Dividend yield (48.4%) 4.2% Payout ratio 72 80 BV per share 1,203 1,443 NAV per share 12.6% 19.9% Shares outstanding -290 -334 12.0% 15.0% Return ratios (230) (265) RoRWA 683 844 Pre-tax ROE 13.1% 23.6% ROE -178 -173 RoNAV 505 672 Revenues 41.9% 33.0% NIM (NII / RWA) (101) (134) Non-IR / average assets 20.0% 20.0% Total rev / average assets 0 0 NII / Total revenues 404 537 Fees / Total revenues Trading / Total revenues FY07A 0.25 0.25 51.2% 0.00 0.0% 0.0% 0.95 0.95 900.0 FY08A FY09E FY10E FY11E 0.27 0.27 11.4% 0.00 0.0% 0.0% 1.56 1.56 900.0 0.32 0.32 15.5% 0.00 0.0% 0.0% 1.88 1.88 900.0 0.45 0.45 41.9% 0.11 3.7% 25.0% 2.21 2.21 900.0 0.60 0.60 33.0% 0.15 33.0% 4.9% 25.0% 2.66 2.66 900.0

417 501 45.4% 20.2% 245 357 145 226 36.3% 56.3% 15 59 180.1% 305.3% 85 72 662 859 45.2% 29.7% -147 -216 39.1% 46.9% (119) (174) 396 469 46.1% 18.3% -123 -157 273 312 39.1% 14.3% (52) (65) 18.9% 21.0% 0 0 221 247

4.8% 36.7% 29.8% 29.8%

3.0% 27.6% 21.8% 21.8%

2.5% 23.0% 18.4% 18.4%

3.0% 27.4% 22.0% 22.0%

3.2% 30.6% 24.5% 24.5%

8.2% 4.7% 12.7% 63.0% 21.9% 0.7%

7.2% 5.0% 12.0% 58.4% 26.3% 1.8%

6.6% 4.8% 11.2% 57.0% 24.4% 18.5%

6.6% 3.7% 10.1% 63.7% 26.4% 1.7%

6.5% 3.7% 10.1% 63.1% 27.9% 1.4%

Balance sheet TL in millions, year end Dec ASSETS Net customer loans % change Y/Y Loan loss reserves Investments Other interest earning assets % change Y/Y Average interest earnings assets Goodwill Other assets Total assets LIABILITIES Customer deposits % change Y/Y Long term funding Interbank funding Average interest bearing liabs Other liabilities Retirement benefit liabilities Shareholders' equity Minorities Total liabilities & Shareholders Equity
Source: Company reports and J.P. Morgan estimates.

FY07A

FY08A FY09E

FY10E FY11E TL in millions, year end Dec Cost ratios 9,979 12,558 Cost / income 31.0% 25.9% Cost / assets 436 522 Staff numbers 437 480 0 0 Balance Sheet Gearing - Loan / deposit 11,580 13,908 Investments / assets - Loan / assets 514 706 Customer deposits / liabilities 12,845 15,612 LT Debt / liabilities Asset Quality / Capital 10,266 12,568 Loan loss reserves / loans 20.0% 22.4% NPLs / loans 0 0 LLP / RWA 470 597 Loan loss reserves / NPLs 9,844 11,950 Growth in NPLs 118 54 RWAs % YoY change 1,991 2,394 Core Tier 1 0 0 Total Tier 1 12,845 15,612

FY07A

FY08A FY09E FY10E FY11E

4,610 50.6% 145 136 0 5,114 132 6,260

6,381 7,617 38.4% 19.4% 197 347 192 400 0 0 6,981 9,197 0 288 425 8,109 10,937

40.2% 4.2% 3,329

45.4% 4.8% 3,806

43.5% 4.2% 4,250

43.3% 4.1% 4,250

41.5% 3.8% 4,250

91.9% 105.2% 2.2% 2.4% 71.3% 78.2% 92.7% 94.0% 5.8% 6.8%

86.2% 3.7% 69.6% 96.8% 4.3%

94.7% 3.4% 79.3% 98.9% 4.3%

97.8% 3.1% 82.2% 99.6% 4.5%

4,698 46.8% 0 313 4,176 385 854 0 6,260

5,843 8,555 24.4% 46.4% 0 0 458 398 5,661 7,627 405 296 1,404 1,688 0 0 8,109 10,937

3.2% 5.3% 2.19% 61.4% 82.7% 5,620 59.9% 15.2% 15.2%

3.1% 4.6% 4.3% 4.6% 5.1% 7.5% 6.8% 5.8% 1.46% 2.13% 1.18% 0.93% 60.5% 60.7% 62.9% 80.0% 37.8% 75.7% 21.3% 7.5% 10,702 11,642 15,071 18,615 90.4% 8.8% 29.4% 23.5% 13.1% 14.5% 13.2% 12.9% 13.1% 14.5% 13.2% 12.9%

135

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Bank Central Asia
www.klikbca.co.id
Company description BCA is Indonesia’s largest private sector bank. The major shareholder is the Hartono family (Djarum group). The bank has a pre-eminent position in payment/transaction banking in Indonesia, and an exceptionally strong deposit franchise. The bank has a strong corporate lending business, and is expanding its presence in various consumer lending segments. Post mortem BCA came through the crisis largely unscathed; its low LDR and high capitalization protected it from risks on the liabilities side, while pricing power in loans returned. Although non-performing loans rose starting in 4Q last year, they have started declining in 3QFY09. Potential for earnings upgrades We think that the credit cycle in Indonesia is just starting to turn, while credit quality is likely to have bottom out. Mildly higher rates in 2010 could result in margin compression being arrested. Combined with lower tax rates, these add up to a positive picture for earnings. We think the consensus earnings growth of 15% for FY10E is too conservative; our forecasts are 13% higher than consensus. How much recovery is priced into the stock? Among banks, BCA is strongly leveraged to a credit cycle recovery, with lending having outpaced industry growth in 6 out of last 7 years. We do not think that a credit cycle recovery is priced into BCA, as the stock has underperformed the JCI by 33% YTD and in line with the sector since the end of 3QFY09. Price target and key risks We have a DDM-based Dec-10 PT of Rp5,500 for BCA (10.5% Rf, β=1, 15.8% cost of equity, normalized ROE: 29.44), in line with BCA’s 52-week high. High multiples are a risk to our PT, although they have sustained over the recent past. Investor perception on management changes if any could also be a risk to our PT.
Bloomberg: BBCA IJ; Reuters: BBCA JK
Year-end Dec (Rp in mn) Operating Profit Net Profit Cash EPS (Rp) Fully Diluted EPS (Rp) DPS (Rp) EPS growth (%) ROE P/E BVPS (Rp) P/BV Div. Yield

Overweight
Rp4,600 Price Target: Rp5,500

Indonesia Banks Aditya Srinath, CFAAC
(62-21) 5291-8573 aditya.srinath@jpmorgan.com PT J.P. Morgan Securities Indonesia

Price performance
5,000 Rp 3,500 2,000
Nov-08 Feb-09 May-09 Aug-09 Nov-09

BBCA.JK share price (Rp) JCI (rebased)

Source: Bloomberg.

Performance
1M Absolute (%) Relative (%)
Source: Bloomberg.

3M 12.4 12.7

12M 63.8 -13.9

0.5 3.5

Company data
52-week range (Rp) Mkt cap. (RpMM) Mkt cap. (US$MM) Avg daily value (US$MM) Avg daily volume (MM) Shares O/S (MM) Date of price Index: JCI Free float (%) Exchange rate
Source: Bloomberg.

2,275-5,500 113,413,046 11,995 4.5 16.2 24,655 5-Nov-09 2395 52 9,455.00

FY06A FY07A FY08A FY09E FY10E 6,577,242 6,520,046 9,422,056 11,258,657 12,425,255 4,242,926 4,489,369 5,776,139 6,537,782 8,766,378 172 182 234 265 356 172 182 234 265 356 72 85 63 157 137 17.8% 5.8% 28.7% 13.2% 34.1% 25.0% 23.3% 26.4% 25.8% 29.2% 27.4 25.9 20.2 17.8 13.3 733 829 944 1,109 1,328 6.4 5.7 5.0 4.3 3.6 1.5% 1.8% 1.3% 3.3% 2.9%

Source: Company, Bloomberg, J.P. Morgan estimates. Note: Share price and valuations are as of 05 November 2009.

136

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Bank Central Asia: Summary of financials
Income Statement Rp in millions, year end Dec NIM (as % of avg. assets) Earning assets/assets Margins (% of earning assets) Net Interest Income Total Non-Interest Income Fee Income Dealing Income Other Operating Income Total operating revenues Operating costs Pre-Prov. Profits Provisions Other Inc/Exp. Exceptionals Disposals/ other income Pre-tax Tax Minorities Other Distbn. Attributable Income Per Share Data Rp EPS DPS Payout Book value Fully Diluted Shares Growth Rates FY06 7.5% 73.5% 5.5% 9,006,566 FY07 6.7% 67.9% 4.6% FY08 7.3% 69.2% 5.0% FY09E 7.6% 73.6% 5.6% FY10E FY06 13.5% 17.9% 17.7% 14.0% 11.6% FY07 34.1% 23.9% 23.3% 13.1% 34.5% FY08 FY09E FY10E 36.9% 10.8% 12.6% 13.9% 35.6% 7.7% 8.9% 8.7% 17.5% 9.4% 21.2% 15.1% 16.8% 19.7% 5.1% 7.5% Loans 75.8% Deposits 5.7% Assets Equity 9,029,239 11,675,823 14,409,658 16,436,368 RWA Net Interest Income Non-Interest Income of which Fee Grth Revenues Costs Pre-Provision Profits Loan Loss Provisions Pre-Tax Attributable Income EPS DPS

2,701,636 3,396,249 4,542,707 4,588,133 4,542,499 2,701,636 3,396,249 4,542,707 4,588,133 4,542,499 11,708,202 12,425,488 16,218,530 18,997,791 20,978,867 -5,130,960 -5,905,442 -6,796,474 -7,739,134 -8,553,612 6,577,242 568,564 57,925 7,203,731 1,823,794 -117 4,242,926 FY06 172.15 72 42.1% 733 -

6,520,046 9,422,056 11,258,657 12,425,255 188,786 1,754,149 3,110,979 1,535,400 70,370 52,136 224,349 68,118 - Balance Sheet Gearing 6,779,202 11,228,341 14,593,985 14,028,773 Loan/deposit 1,912,378 1,943,904 1,834,245 2,191,595 Investment/assets -117 0 0 0 Loan/Assets - Customer deposits/liab. 4,489,369 5,776,139 6,537,782 8,766,378 LT debt/liabilities FY07 182.09 85 46.5% 829 FY08 234.28 63 26.8% 944 FY09E 265.17 157 59.3% 1,066 FY10E 355.56 137 38.5% 1,301 Asset Quality/Capital Loan loss reserves/loans NPLs/loans Loan loss reserves/NPLs Growth in NPLs Tier 1 Ratio Total CAR Du-Pont Analysis NIM (as % of avg. assets) Earning assets/assets Margins (as % of Avg. Assets) Non-Int. Rev./ Revenues Non IR/Avg. Assets Revenue/Assets Cost/Income Cost/Assets Pre-Provision ROA LLP/Loans Loan/Assets Other Prov, Income/ Assets Operating ROA Pre-Tax ROA Tax rate Minorities & Outside Distbn. ROA RORWA Equity/Assets ROE

23.7% 0.3% 29.3% 23.4% 14.1% 5.9% 25.7% 33.8% 1.0% -1.0% 5.9% 25.7% 33.8% 1.0% -1.0% 1904.5% 612.6% 3052.6% 1713.6% 1042.8% 14.8% 15.1% 15.1% 13.9% 10.5% 22.6% -0.9% 44.5% 19.5% 10.4% 58.0% -66.8% 829.2% 77.3% -50.6% 17.9% 5.8% 28.7% 13.2% 34.1% 17.8% 5.8% 28.7% 13.2% 34.1% -19.6% 17.0% -25.8% 150.5% -12.9% FY06 40.2% 27.8% 33.8% 86.4% 1.3% FY07 43.6% 21.5% 37.0% 86.8% 1.7% FY08 FY09E FY10E 53.8% 53.2% 56.1% 16.2% 17.4% 15.5% 44.8% 43.5% 45.3% 85.3% 85.5% 84.3% 2.1% 1.2% 1.1% FY08 FY09E FY10E 2.4% 4.4% 4.2% 0.6% 2.0% 1.4% 0.0% 0.0% 0.0% 0.8% 260.0% -15.1% 14.9% 16.4% 19.1% 16.6% 17.9% 20.6% FY08 FY09E FY10E 7.3% 7.6% 7.5% 69.2% 73.6% 75.8% 5.0% 5.6% 5.7% 28.0% 24.2% 21.7% 2.0% 1.8% 1.6% 6.6% 7.1% 6.7% 41.9% 40.7% 40.8% 2.9% 3.0% 3.0% 9.5% 10.1% 9.7% 1.6% 2.7% 1.1% 42.1% 45.7% 46.4% 0.0% 0.1% 0.0% 4.1% 4.4% 4.3% 10.2% 11.5% 10.2% 0.0% 0.0% 0.0% 2.5% 2.6% 3.0% 5.0% 4.7% 5.8% 9.4% 9.9% 10.4% 26.4% 25.8% 29.2%

FY06 FY07 2.8% 2.0% 1.3% 0.8% 0.0% 0.0% -13.6% -16.1% 20.0% 17.3% 22.7% FY06 7.5% 73.5% 5.5% 23.1% 1.7% 6.6% 43.8% 3.1% 9.8% 1.0% 35.3% 0.0% 4.0% 10.1% -0.0% 2.6% 6.1% 10.4% 25.0% 19.6% FY07 6.7% 67.9% 4.6% 27.3% 1.7% 5.7% 47.5% 3.0% 8.7% 0.2% 36.4% 0.0% 3.3% 8.8% -0.0% 2.3% 5.2% 9.8% 23.3%

Key Balance sheet Rp in millions FY06 FY07 FY08 FY09E FY10E Net Loans 59,688,265 80,702,481 110,026,231 116,102,488 141,049,817 LLR -1,734,043 -1,686,152 -2,757,475 -5,343,629 -6,183,812 Gross Loans 61,422,308 82,388,633 112,783,706 121,446,118 147,233,629 NPLs 798,021 669,697 674,769 2,428,922 2,061,271 Investments 49,139,082 46,777,950 39,810,702 46,558,992 48,261,992 Other earning assets 7,810,359 9,222,138 14,501,875 16,018,526 18,649,026 Avg. IEA 120,140,797 134,032,960 160,337,276 188,492,548 219,184,868 Goodwill Assets 176,798,726 218,005,008 245,569,856 266,872,414 311,630,335 Deposits Long-term bond funding Other Borrowings Avg. IBL Avg. Assets Common Equity RWA Avg. RWA 152,736,195 189,172,191 209,528,921 228,154,034 262,571,409 2,330,275 3,680,719 5,082,101 3,286,094 3,286,094 0 0 0 0 0 143,052,642 173,959,690 203,731,966 223,025,575 248,648,815 163,489,739 197,401,867 231,787,432 256,221,135 289,251,374 18,067,360 20,441,731 23,279,310 27,349,615 32,738,090 73,537,710 98,937,004 134,164,949 146,769,973 154,197,597 69,721,059 86,237,357 116,550,976 140,467,461 150,483,785

Source: Company reports and J.P. Morgan estimates.

137

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Bank of China – H
www.boc.cn
Company description One of the “big four” banks in China, BOC has the most extensive international branch network among all Chinese banks and a dominant over-40% market share in China’s FX-related banking business. It has a strong universal banking platform, with presence in investment banking, insurance, fund management, financial leasing. Post mortem Bank of China delivered stronger-than-sector average loan increase. In Rmbdenominated lending, market share increased by 1ppt. BoC is also a major beneficiary of stronger foreign-currency lending. The bank expects more market share gain and still relatively solid loan growth despite a slowdown. Meanwhile, asset quality further has been proven in the past one year, with significant improvement in asset quality and NPL coverage. We expect more ROE improvement going forward. A structural change in business mix may improve underlying profitability and NIM, particularly driven by the 5ppt increase in the percentage of Rmb-denominated loans, and rising spread in both Rmb and foreign-currency assets. Also, discontinuation of overseas securities provisioning will also contribute nearly 1ppt ROE improvement. Potential for earnings upgrades We believe NIM expansion could be bigger than its key peers and better than our expectation. The major potential upside surprise may come from the writeback of its overseas impairment reserves. With a provision ratio of 45% collectively on US MBS securities, we believe at least over US$2 billion can be written back. How much recovery is priced into the stock At 1.7x FY10E P/B and below 9x FY10E P/E, we believe the share price has not priced in the expected significant ROE improvement in the next two years or its better-than-peers earnings trend. Price target and key risks Our current DDM-based Dec-09 price target is HK$5.7, implying a P/BV of 2.4x and P/E of 12x (FY10E). We assume a risk-free rate of 5.3%, cost of equity of 11.1% and terminal “g” of 5.8%. Key risks to PT are unexpected prolonged weakness in US credit market and drastic Rmb appreciation.

Overweight
HK$4.54 Price Target: HK$5.7

China Banks Samuel ChenAC
(852) 2800-8557 samuel.s.chen@jpmorgan.com J.P. MorganSecurities(Asia Pacific) Limited

12M share price performance
5.5 4.5 3.5 2.5 1.5 Nov08 H-share A-share

Jan09

Mar- May09 09

Jul09

Sep09

Nov09

Source: Bloomberg.

Performance
H Absolute (%) A Absolute (%)
Source: Bloomberg.

1M 14.1 6.4

3M 19.3 (9.6)

12M 101.8 36.5

Company data (H-shares)
52-week range (HK$) Mkt cap (US$MM) Mkt cap (A+H) (US$MM) Avg daily val (US$MM) Avg daily volume (MM) Shares O/S (A+H MM) Date of price Index: I Free float (%) Exchange rate
Source: Bloomberg.

1.84 – 4.66 44,336 152,429 173 325 253,839 5-Nov-09 21615 100 7.75

3988 HK; 601988 CH
RmbMM, Y/E Dec Attributable earnings EPS (Rmb) DPS (Rmb EPS growth (%) ROE (%) ROA (%) P/E (x) – H share BVPS (Rmb) P/BV (x) – H share Div. yield (%)- H FY07 56,248 0.22 0.10 22.1 14.0 0.99 18.2x 1.66 2.44x 2.5 FY08 64,360 0.25 0.13 14.4 14.5 0.99 15.9x 1.83 2.21x 3.2 FY09E 82,529 0.33 0.16 28.2 16.9 1.03 12.4x 2.01 2.01x 4.0 FY10E 117,024 0.46 0.21 41.8 21.3 1.21 8.8x 2.32 1.74x 5.1 FY11E 151,011 0.59 0.27 29.0 23.6 1.35 6.8x 2.72 1.48x 6.6

Source: Company data, Bloomberg, J.P. Morgan estimates. Share price is as of 5 November 2009.

138

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Bank of China – H: Summary of financials
Rmb million, year end December 31
Income statement - Rmb mn 2007 2008 2009E 2010E 2011E Growth Rates 2007 2008 2009E 2010E 2011E

Margins (% of Earning Assets) Earning Assets/Assets NIM (as % of avg. Assets) Net Interest Income Total Non-Interest Revenues Fee income Dealing income Other operating income Total operating revenues Operating costs Operating profit Loan Loss Provisions Other provisions Exceptionals Disposals/ Other income Pre-tax profit Tax Minorities/preference dividends Attributable net income Common dividends

2.76% 98% 2.70% 152,745 31,427 35,535 -11,972 7,864 184,172 -75,392 108,780 -8,252 -12,011 917 1,263 90,697 -28,661 -5,788 56,248 25,384

2.63% 96% 2.52% 162,936 56,750 39,947 7,054 9,749 219,686 -89,078 130,608 -16,792 -28,239 876 726 87,179 -21,285 -1,534 64,360 32,999

2.05% 99% 2.02% 161,566 62,846 47,140 5,328 10,378 224,411 -91,252 133,159 -17,006 -3,616 300 800 113,637 -27,273 -3,835 82,529 41,265

2.28% 98% 2.24% 215,703 72,817 58,735 2,807 11,275 288,520 -109,398 179,121 -24,182 3,363 600 880 159,782 -38,348 -4,410 117,024 52,661

2.44% Loans 99% Deposits 2.41% Assets Equity 269,068 Net Interest Income 86,766 Non-Interest Income 71,285 of which Fee Grth 2,763 Revenues 12,718 Costs 355,834 Pre-Provision Profits -132,363 Loan Loss Provisions 223,471 Pre-Tax -26,171 Attributable Income 5,982 EPS 800 DPS 1,000 205,082 Balance Sheet Gearing -49,220 -4,851 Loan/Deposit 151,011 Investment/Assets 67,955 Loan/Assets Customer deposits/Liab. LT Debt/Liabilities 2011E 0.59 0.27 45% 2.72 253,839 0.88 Asset Quality/Capital Loan loss reserves/Loans Impaired loan ratio Impaired loan coverage Growth in NPLs Tier 1 Ratio Total CAR

17% 8% 12% 10% 26% 74% 76% 32% 23% 39% -33% 34% 31% 22% 150% 2007 65% 29% 48% 79% 1% 2007 3.5% 3.17% 106% -13% 10.7% 13.3%

16% 16% 16% 10% 7% 81% 12% 19% 18% 20% 103% -4% 14% 14% 30% 2008 65% 24% 47% 79% 1% 2008 3.3% 2.76% 117% 1% 10.8% 13.4%

44% 30% 25% 10% -1% 11% 18% 2% 2% 2% 1% 30% 28% 28% 25% 2009E 72% 22% 55% 81% 1% 2009E 2.4% 1.54% 155% -19% 9.7% 12.2%

18% 16% 17% 15% 34% 16% 25% 29% 20% 35% 42% 41% 42% 42% 28% 2010E 73% 21% 55% 80% 1% 2010E 2.3% 1.21% 187% -8% 9.5% 12.0%

14% 15% 15% 17% 25% 19% 21% 23% 21% 25% 8% 28% 29% 29% 29% 2011E 72% 20% 55% 80% 1% 2011E 2.2% 1.00% 220% -6% 9.7% 12.1%

Per Share Data restated EPS (Rmb/ share) restated DPS (Rmb/ share) Payout restated BVPS (Rmb/ share) Avg. Shares Issued PPOP per share

2007 0.22 0.10 45% 1.66 253,821 0.43

2008 0.25 0.13 51% 1.83 253,839 0.51

2009E 0.33 0.16 50% 2.01 253,839 0.52

2010E 0.46 0.21 45% 2.32 253,839 0.71

Key balance sheet - Rmb mn Net Customer Loans Loans loss reserves Gross Loans Investments Other Earning Assets Average Earning Assets Goodwill Total assets Interbank funding Customer deposits LT Sub-debt Other Interest Bearing Liabilities Avg. Interest Bearing Liab. Average Assets Shareholders' equity Risk Weighted Assets Avg. Risk Weighted Assets

2007 2,754,493 (96,068) 2,850,561 1,712,927 1,209,213 5,526,875 5,991,217 663,815 4,400,111 60,000 142,754 5,075,454 5,659,435 420,430 3,754,108 3,611,563

2008 3,189,652 (106,494) 3,296,146 1,646,208 1,768,611 6,191,254 6,951,680 859,343 5,102,111 60,000 115,780 5,686,870 6,471,449 464,258 3,966,943 3,860,526

2009E 4,644,187 (113,441) 4,757,627 1,877,456 1,812,180 7,883,995 8,722,923 1,074,179 6,614,742 74,000 90,692 7,284,272 7,994,048 510,788 5,233,754 4,600,348

2010E 5,472,823 (126,603) 5,599,426 2,138,132 2,155,239 9,460,301 10,196,948 1,342,723 7,687,214 94,000 90,692 8,518,481 9,649,134 589,836 6,118,169 5,675,961

2011E Du-Pont Analysis 6,262,050 (139,997) 6,402,047 2,381,082 2,615,753 11,018,963 11,727,765 1,597,841 8,838,238 94,000 95,421 9,904,776 11,181,603 690,158 7,036,659 6,577,414 NIR/Avg. Assets Non IR/Avg. Assets Non IR/Total Rev Total Rev/Avg. Assets Cost/Income Cost/Assets Goodwill Amort. Pre-prov.g Op. ROAA LLP/Loans Loan/Assets Other inc:provs Pre-tax ROAA Tax MI ROAA RoRWA Equity/Assets ROE

2007 2.70% 0.56% 17.1% 3.25% 40.9% 1.33% 0.0% 1.92% -0.31% 47.1% -0.17% 1.60% 31.6% -0.10% 0.99% 1.56% 7.1% 14.0%

2008 2.52% 0.88% 25.8% 3.39% 40.5% 1.38% 0.0% 2.02% -0.53% 49.2% -0.41% 1.35% 24.4% -0.02% 0.99% 1.67% 6.8% 14.5%

2009E 2.02% 0.79% 28.0% 2.81% 40.7% 1.14% 0.0% 1.67% -0.40% 52.8% -0.03% 1.42% 24.0% -0.05% 1.03% 1.79% 6.1% 16.9%

2010E 2.24% 0.75% 25.2% 2.99% 37.9% 1.13% 0.0% 1.86% -0.44% 57.6% 0.05% 1.66% 24.0% -0.05% 1.21% 2.06% 5.7% 21.3%

2011E 2.41% 0.78% 24.4% 3.18% 37.2% 1.18% 0.0% 2.00% -0.40% 57.8% 0.07% 1.83% 24.0% -0.04% 1.35% 2.30% 5.7% 23.6%

Source: Company reports and J.P. Morgan estimates.

139

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Catcher Technology
www.catcher.com.tw
Company description Catcher (TWSE: 2474) is a leading aluminum and magnesium casing maker in Taiwan. The company is primarily engaged in manufacturing and sales of a wide spectrum of light metal casing products in 3C area, but mainly in NB. Post mortem Catcher’s profitability is highly dependent on: (1) the utilization rate; and (2) corporate demand. Given that PC brands prefer aluminum for their thin and light models, we expect Catcher to be a key beneficiary of this trend in 2010. In addition, a potential pick up in corporate demand from 2H10 should also help Catcher. While Foxconn Tech should benefit from rising metal adoption, Hon Hai’s aggressive notebook ODM plans could limit the upside for Foxconn Tech, which benefits Catcher. Potential for earnings upgrades We believe the potential for upward earnings estimate revisions comes from both revenue and OP margin upside through: (1) an improvement in yield; and (2) a strong pick up in the utilization rate on favorable industry trend. How much recovery is priced into the stock? The recovery in 2009 might be already in the price but we believe the strong momentum in 2010 is not. We believe the market is overly concerned about the impact on gross margins due to increasing competition and is not fully factoring in the extent of operating leverage in Catcher’s business model. Price target and key risks Our Jun-10 PT of NT$112 is based on 15x FY10E earnings. 15x is the average P/E multiple since 2002, which we believe is a fair valuation for Catcher. With 40/12% potential earnings growth in 2010/11E and industry trends becoming in favor of light metal, we believe Catcher should merit a valuation re-rating as a pure-play notebook light metal vendor. A key risk to our PT is execution issue in the ramp up of new models in 2010.
Bloomberg: 2474.TT; Reuters: 2474.TW
NT$ in millions, year-end December FY08 FY09E FY10E FY11E Sales 19,049 18,422 24,610 29,215 Operating profit 4,989 3,747 5,375 6,018 EBITDA 6,481 5,819 7,678 8,346 Pre-tax profit 4,932 4,073 5,715 6,407 Net profit (reported) 4,346 3,449 4,843 5,432 MV of employee bonus 543 427 586 657 Net profit (adjusted) 4,346 3,449 4,843 5,432 New Taiwan GAAP EPS (NT$) 6.63 5.22 7.28 8.17 New Taiwan GAAP P/E (x) 12.1 15.4 11.0 9.8 YE BPS (NT$) 44.8 54.4 58.8 63.1 P/BV (x) 1.8 1.5 1.4 1.3 Net debt (3.49) net cash net cash net cash ROE (%) Core ROIC (%) Cash div (NT$) Quarterly EPS (NT$) EPS (FY07) EPS (FY08) EPS (FY09E) Sales growth EPS growth Jun-10 PT FY08 15.7% 17.5% 4.0 1Q 2.60 1.31 1.00 5% -38% NT$

Overweight
Price: NT$80.2 Price Target: NT$112

Taiwan Computer Hardware Gokul HariharanAC
(852) 2800-8564 gokul.hariharan@jpmorgan.com J.P. Morgan Securities (Asia Pacific) Limited

Price performance
100 NT$ 70 40
Nov-08 Feb-09 May-09 Aug-09 Nov-09

2474.TW share price (NT$ TSE (rebased)

Source: Bloomberg.

Performance
1M Absolute (%) Relative (%)
Source: Bloomberg.

3M 3.0 -5.7

12M 17.7 -41.3

-3.6 -2.6

Company data
52-week range (NT$) Mkt cap. (NT$MM) Mkt cap. (US$MM) Avg daily value (US$MM) Avg daily volume (MM) Shares O/S (MM) Date of price Index: TWSE Free float (%) Exchange rate
Source: Bloomberg.

41.36-94.00 53,326 1,639 34 13.48 664.9 5-Nov-09 7,417 70 32.5

FY09E FY10E FY11E 10.5% 12.9% 13.4% 10.5% 13.9% 14.1% 1.0 2.3 3.0 2Q 3Q 4Q 1.78 2.98 3.26 1.38 2.14 1.81 1.10 1.41 1.71 -3% 34% 19% -21% 40% 12% 112

Source: Company, Bloomberg, J.P. Morgan estimates. Note: Share price and valuation are as of 5 November 2009.

140

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Catcher Technology: Summary of financials
NT$ in millions, year-end December Profit and loss statement Revenues % change Y/Y Gross margin (%) EBITDA % change Y/Y EBITDA margin (%) EBIT % change Y/Y EBIT margin (%) Net interest Earnings before tax % change Y/Y Tax as % of EBIT Net income (reported) % change Y/Y Net income (adjusted) % change Y/Y Shares outstanding (MM) EPS (reported) EPS (adjusted) Balance sheet Cash and Cash Equivalents Accounts receivable Inventories Others Current assets LT investments Net fixed assets Total Assets Liabilities ST bank loans Payables Others Total current liabilities Long term debt Other liabilities Total liabilities Shareholder's equity BVPS (NT$) FY08 7,375 8,206 2,964 4,239 22,783 413 19,894 44,627 6,785 2,242 1,882 10,910 4,084 80 15,074 29,553 44.80 FY09E 11,250 8,017 2,898 5,985 28,150 486 20,024 49,202 5,003 2,204 2,394 9,602 3,335 69 13,006 36,196 54.44 FY10E 10,305 11,173 4,039 8,341 33,858 526 20,721 55,647 5,777 3,494 3,337 12,607 3,851 69 16,528 39,120 58.83 FY11E 11,704 12,133 4,387 9,058 37,282 569 21,393 59,787 6,068 4,007 3,624 13,699 4,045 69 17,813 41,974 63.13 FY08 19,049 5.3% 40.2% 6,481 -19.4% 34.0% 4,989 -32.9% 26.2% 83 4,932 -36.0% 571 11.4% 4,346 -39.7% 4,346 -37.3% 655 6.63 6.63 FY09E 18,422 -3.3% 34.1% 5,819 -10.2% 31.6% 3,747 -24.9% 20.3% -76 4,073 -17.4% 618 16.5% 3,449 -20.7% 3,449 -20.7% 661 5.22 5.22 FY10E 24,610 33.6% 35.7% 7,678 31.9% 31.2% 5,375 43.5% 21.8% -8 5,715 40.3% 872 16.2% 4,843 40.4% 4,843 40.4% 665 7.28 7.28 FY11E 29,215 18.7% 33.9% 8,346 8.7% 28.6% 6,018 12.0% 20.6% -19 6,407 12.1% 975 16.2% 5,432 12.1% 5,432 12.1% 665 8.17 8.17 Ratio analysis EBITDA margin (%) Operating margin (%) Net profit margin (%) SG&A/sales (%) Sales per share growth (%) Sales growth (%) Net profit growth (repo’d) (%) Net profit growth (adj) (%) EPS growth (reported) (%) EPS growth (adjusted) (%) Interest Coverage (x) Net debt to total Capital (%) Net debt to equity (%) Sales/Assets (%) Assets/Equity (%) ROE (%) ROCE (%) FY08 34.0% 26.2% 22.8% 6.9% 4.8% 5.3% -39.7% -37.3% -40.0% -37.6% 19.7 9% 12% 43% 151.0% 15.7% 12.1% FY09E 31.6% 20.3% 18.7% 6.9% -4.1% -3.3% -20.7% -20.7% -21.3% -21.3% 19.8 -7% -8% 37% 135.9% 10.5% 7.5% FY10E 31.2% 21.8% 19.7% 7.0% 32.8% 33.6% 40.4% 40.4% 39.6% 39.6% 37.2 -1% -2% 44% 142.2% 12.9% 9.8% FY11E 28.6% 20.6% 18.6% 6.5% 18.7% 18.7% 12.1% 12.1% 12.1% 12.1% 37.9 -3% -4% 49% 142.4% 13.4% 10.1%

Cash flow statement EBIT Depreciation & amortisation Change in working capital Taxes Cash flow from operations Capex Disposal/ (purchase) Net Interest Free cash Flow Equity raised/(repaid) Debt raised/(repaid) Other Dividends Beginning cash Ending cash DPS (NT$) FY08 4,989 1,492 -4,950 571 2,102 -7,115 -853 83 -5,013 581 4,197 -2,608 15 10,972 7,375 4.00 FY09E 3,747 2,072 -1,017 618 5,419 -2,202 921 -76 3,217 652 -2,531 2,285 -593 7,375 11,250 1.00 FY10E 5,375 2,302 -4,420 872 4,129 -3,000 -40 -8 1,129 0 1,289 -1,820 -1,496 11,250 10,305 2.25 FY11E 6,018 2,329 -1,225 975 8,097 -3,000 -43 -19 5,097 0 485 -2,125 -1,995 10,305 11,704 3.00

Source: Company reports and J.P. Morgan estimates.

141

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

China Airlines
www.china-airlines.com
Company description China Airlines (CAL) is Taiwan’s government-owned carrier with a wellbalanced revenue mix, including 53% contribution from passenger revenue; 42% from cargo revenue; and 5% from other services. Post mortem China Airlines has one of the youngest fleets versus Asian and global peers, implying better operating efficiency; its safety track record has improved significantly in the past five years. CAL also has easier access to credit and relatively low funding costs despite its high financial leverage. Potential for earnings upgrades Direct flights represent a structural change for the Taiwan airlines and will likely start to have a bigger impact on the airline’s earnings in 2010. We expect, Contrary to the market’s common perception, CAL to be a bigger beneficiary of the progressive liberalization of China-Taiwan direct flights than EVA, with a c.17% boost to its 2010 revenue, helped by its 94% stake in Mandarin Airlines. How much recovery is priced into the stock? Little of the recovery has been priced in as CAL has significantly lagged the market and sector recovery, and management continues to sound bearish on the outlook and it incurred substantial losses in 2009. However, we expect CAL to provide substantial absolute and relative upside in 2010 as the cycle and its earnings recover. Price target and key risks Our Dec-10 PT of NT$16 based on 1.7x P/BV, 1 std dev above CAL’s average valuation, as we expect better-than-mid-cycle results in 2010 and near-peak-cycle earnings by 2011. Key risks to our PT include: (1) volatile fuel prices; (2) high gearing; (3) aircraft incidents; and (4) delays in crossstraits flights liberalization.

Overweight
NT$9.99 Price Target: NT$16.00

Taiwan Transportation, Airlines Corrine PngAC
(65) 6882-1514 corrine.ht.png@jpmorgan.com J.P. Morgan Securities (Asia Pacific) Limited

Price performance
16 NT$ 12 8
Nov-08 Feb-09 May-09 Aug-09 Nov-09

2610.TW share price (NT$ TSE (rebased)

Source: Bloomberg.

Performance
1M Absolute (%) Relative (%)
Source: Bloomberg.

3M -22.1% -29.4%

12M -5.1% -54.7%

-6.5% -7.2%

Company data
52-week range (NT$) Mkt cap. (NT$MM) Mkt cap. (US$MM) Avg daily value (US$MM) Avg daily volume (MM) Shares O/S (MM) Date of price Index: TWSE Free float (%) Exchange rate
Source: Bloomberg.

8.67-14.58 45,677 1,403 16.35 39.65 4,572 5-Nov-09 7,417.46 40 33

Bloomberg: 2610 TT; Reuters: 2610.TW
NT$ in millions, year-end December Sales Net profit EPS (NT$) FD EPS (LC) DPS (NT$) Sales growth (%) Net profit growth (%) EPS growth (%) ROE (%) P/E (x) FD P/E (x) FY08 125,221 -32,352 (7.11) (7.11) 0.00 -1.4 nm 1.036.5 -75.4 -1.4 -1.4 FY09E 95,738 -8,969 (2.26) (2.26) 0.00 -23.5 nm -68.2 -25.7 -4.5 -4.5 FY10E 122,660 495 (0.12) (0.12) 0.00 28.1 nm 105.5 1.3 80.6 80.6 FY11E 141,301 3,562 (0.90) (0.90) 0.00 15.2 619 618.8 8.6 11.2 11.2

Source: Company, Bloomberg, J.P. Morgan estimates. Note: Share price and valuation are as of 5 November 2009. 142

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

China Airlines: Summary of financials
NT$ in millions, year end December Income statement FY07 FY08 FY09E FY10E FY11E Revenue 126,993 125,221 95,738 122,660 141,301 % change Y/Y 4.1% (1.4%) (23.5%) 28.1% 15.2% EBITDA 12,213 104 3,323 14,913 18,740 % change Y/Y -10.1% -99.2% 3102.7% 348.8% 25.7% EBIT 1,351 -10,206 -7,065 4,076 7,454 % change Y/Y NM NM NM NM 82.9% EBIT margin 1.1% -8.2% -7.4% 3.3% 5.3% Net interest -4,751 -4,097 -3,434 -3,723 -3,623 Earnings before tax -3,138 -36,690 -9,169 562 4,039 % change Y/Y -2239.1% 1069.2% -75.0% -106.1% 618.8% Tax 619 4,339 200 -66 -478 As % of EBT 19.7% 11.8% 2.2% 11.8% 11.8% Net income (reported) -2,519 -32,352 -8,969 495 3,562 % change Y/Y -441.1% 1184.5% -72.3% -105.5% 618.8% Shares outstanding 4,026 4,551 3,972 3,972 3,972 EPS (reported) (NT$) (0.63) (7.11) (2.26) 0.12 0.90 % change Y/Y (426.8%) 1036.5% (68.2%) (105.5%) 618.8% Cash flow statement EBIT Depr. & amortization Change in working capital Taxes Cash flow from operations Capex Disposal/(purchase) Net Interest Other Free cash flow Equity raised/(repaid) Debt raised/(repaid) Other Dividends paid Beginning cash Ending cash DPS (NT$) Ratio analysis FY07 FY08 FY09E 6,088 7,282 11,251 12,458 8,913 6,815 5,381 5,152 3,939 3,429 930 886 27,357 22,277 22,890 FY10E 11,671 8,731 5,046 926 26,375 FY11E 12,208 10,058 5,813 954 29,034 EBITDA margin Operating margin Net margin FY07 FY08 FY09E 9.6% 0.1% 3.5% 1.06% (8.15%) (7.38%) -2.0% -25.8% -9.4% FY10E FY11E 12.2% 13.3% 3.32% 5.28% 0.4% 2.5% FY07 FY08 FY09E 1,351 -10,206 -7,065 10,863 10,310 10,388 7,092 1,977 -920 -119 -95 200 15,886 -2,252 -831 FY10E 4,076 10,837 1,296 -66 12,421 FY11E 7,454 11,286 898 -478 15,537

953 5,389 -10,000 -10,000 -10,000 15,456 10,894 0 0 0 -4,751 -4,097 -3,434 -3,723 -3,623 -3,318 -631 0 0 0 16,839 3,137 -10,831 2,421 5,537 -14,383 -469 5,245 6,088 0.00 -7,599 -4,000 0 0 6,088 7,282 7,282 11,251 0.00 0.00 -2,000 -5,000 0 0 11,251 11,671 11,671 12,208 0.00 0.00

Balance sheet Cash and cash equivalents Accounts receivable Inventories Others Current assets LT investments Net fixed assets Total assets Liabilities Short-term loans Payables Others Total current liabilities Long-term debt Other liabilities Total liabilities Shareholders' equity BVPS (NT$)

15,687 20,443 20,443 20,443 20,443 177,104 165,349 164,961 164,124 162,838 230,808 218,060 218,116 220,972 222,553

Sales per share growth Sales growth Net profit growth EPS growth Interest coverage (x)

(0.3%) (12.8%) (12.4%) 28.1% 15.2% 4.1% (1.4%) (23.5%) 28.1% 15.2% -441.1% 1184.5% -72.3% -105.5% 618.8% (426.8%) 1036.5% (68.2%) (105.5%) 618.8% 2.57 0.03 0.97 4.01 5.17

30,204 13,808 10,918 54,930 106,717 13,991 175,638 55,170 13.70

30,692 11,878 32,436 75,006 98,485 13,085 187,374 30,686 6.74

21,692 17,692 12,692 9,082 11,635 13,404 30,957 32,764 34,015 61,730 62,091 60,110 103,485 105,485 105,485 13,085 13,085 13,085 179,099 181,459 179,479 39,017 39,513 43,075 9.82 9.95 10.84

Net debt to equity Sales/assets Assets/equity ROE ROCE

236.5% 284.0% 326.9% 284.0% 256.6% 0.54 0.56 0.44 0.56 0.64 4.18 7.11 7.02 6.76 6.11 (4.6%) (75.4%) (25.7%) 1.3% 8.6% 0.7% -5.8% -4.4% 2.5% 4.6%

Source: Company reports, J.P. Morgan estimates.

143

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

China Mengniu Dairy
www.mengniu.com.cn
Company description Mengjiu is a leading dairy producer in China. Its major products include liquid milk products and ice cream. In 2008, it was ranked No.1 in the sectors of liquid milk, yogurt and ice cream in China’s dairy industry. Post mortem Liquid milk gross margin and EBIT margin are at the low-end in the China F&B sector. We believe one reason for this is the aggressive pricing of sector majors, Mengniu and Yili. EBIT margins of both companies have declined since 2002. Mengniu management indicated that after the melamine incident, the company has been focusing more on high-end product mix and profitability rather than on market share. We believe as dairy processors become more rational, EBIT margin would have more upside potential. Meanwhile, we believe the melamine incident in China has resulted in consumers being more willing to pay for high-end products. Potential for earnings upgrades We have factored in raw milk price increases in China and the EBIT margin assumption for FY09 and FY10 are 6.5% and 7.2%, respectively. Earnings upgrades will come from margin expansion rather than from revenue surprises. How much recovery is priced into the stock? The share price is trading at 25x FY09E earnings and 21x FY10E earnings. This is at the low end of big-cap China consumer staples. Price target and key risks Our DCF-based Dec-09 price target is HK$23 (free cash flow = cash flow from operation – capex; WACC = 12%. We assume a terminal growth rate from 2018 of 2%). Key risks to our price target are: (1) if the selling expense surges again; (2) an unexpected change in raw milk prices; and (3) any food safety issue in China.
Bloomberg: 2319 HK; Reuters: 2319.HK
Rmb in millions, year-end December Sales Net profit EPS (Rmb) DPS (Rmb) Sales growth (%) Net profit growth (%) EPS growth (%) ROE (%) P/E (x) P/BV (x) EV/EBITDA (x) Dividend yield (%) FY08 23,865 (952) (0.61) 0.15 11.9 -201.7 -191.8 -21.3 -34.3 7.3 -69.7 0.7% FY09E 25,106 1,347 0.78 0.16 5.2 -241.5 -227.3 15.7 23.3 3.7 10.5 0.9% FY10E 27,239 1,615 0.93 0.19 8.5 19.9 19.9 16.3 19.5 3.2 8.3 1.0% FY11E 29,941 1,857 1.07 0.21 9.9 15.0 15.0 16.3 16.9 2.8 0.0 1.2%

Overweight
HK$23.70 Price Target: HK$23.00

Country Food & Food Manufacture Jasmine BaiAC
(852) 2800 8559 jasmine.d.bai@jpmorgan.com J.P. Morgan Securities (Asia Pacific) Limited

Price performance
HK$
25 20 HK$ 15 10 5 0 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09

2319.HK Share Price (HK$

Source: Bloomberg.

Performance
1M Absolute (%) Relative (%)
Source: Bloomberg.

3M 29.1 24.3

12M 251.1 206.4

17.0 11.9

Company data
52-week range (HK$) Mkt cap. (HK$ MM) Mkt cap. (US$MM) Avg daily value (US$MM) Avg daily volume (MM) Shares O/S (MM) Date of price Index: I Free float (%) Exchange rate
Source: Bloomberg.

6.2 – 23.7 41,146 5,309 23.5 9.2 1736 5-Nov-09 21479 43.8 7.75

Source: Company, Bloomberg, J.P. Morgan estimates. Note: Share price and valuations are as of 5 November 2009. 144

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

China Mengniu Dairy: Summary of financials
Profit and loss statement
Rmb in millions, year-end December Revenues % change yoy Gross Profit EBITDA % change yoy EBITDA margin (%) EBIT % change yoy EBIT margin (%) Net interest Earnings before tax % change yoy Tax % of EBT Net income % change yoy No. of shares outstanding EPS (Rmb) FY08 23,865 11.9% 4,669 (504) -130.8% -2.1% -1134 -201.6% -4.8% 15 -1089 -196.4% 161 14.8% -952 -201.7% 1562 -0.61 FY09E 25,106 5.2% 6,510 2,337 -563.6% 9.3% 1640 -244.6% 6.5% 9 1664 -252.7% -200 12.0% 1347 -241.5% 1736 0.78 FY10E 27,239 8.5% 7,111 2,727 16.7% 10.0% 1950 18.9% 7.2% 39 2004 20.4% -261 13.0% 1614 19.8% 1736 0.93 FY11E 29,941 9.9% 7,920 3,116 14.3% 10.4% 2276 16.8% 7.6% 68 2361 17.8% -354 15.0% 1854 14.9% 1736 1.07

Cash flow statement
Rmb in millions, year-end December Earnings before tax Depreciation & amortisation Change in working capital Others Cash flow from operations Capex Others Cash flow from investing Free Cash Flow Equity raised/(repaid) Debt raised/(repaid) Dividends paid Others Cash flow from financing Net change in cash DPS (Rmb) FY08 (1,134) 640 927 155 587 (828) (422) (1,250) (663) 0 1,302 (228) 80 1,155 492 0.15 FY09E 1,640 707 (1,518) (191) 638 (850) (15) (865) (227) 3,058 (670) (269) 2,119 1892 0.16 FY10E 1,950 787 637 (222) 3,152 (1,100) (16) (1,116) 2,036 (404) (323) (727) 1309 0.19 FY11E 2,276 850 (705) (286) 2,135 (730) (17) (747) 1,389 (99) (371) (470) 919 0.21

Source: Company, J.P. Morgan estimates. Source: Company, J.P. Morgan estimates.

Balance sheet
Rmb in millions, year-end December Cash and cash equivalents Accounts receivable Inventories Others Current assets Net fixed assets Other non current assets Total assets Liabilities Short Term loans Accounts payable Others Total current liabilities Long term debt Total liabilities Shareholder's equity BVPS (Rmb) FY08 3,042 349 824 507 4,723 5,751 559 11,033 1,282 4,202 0 5,483 628 6,568 4,465 2.86 FY09E 4,934 614 1,213 507 7,269 5,893 574 13,736 132 3,338 0 3,470 1,108 5,152 8,600 4.96 FY10E 6,243 580 992 507 8,323 6,207 590 15,119 228 3,720 0 3,948 608 5,260 9,891 5.70 FY11E 7,162 897 1,662 507 10,228 6,087 606 16,921 129 4,002 0 4,131 608 5,596 11,374 6.55

Ratio analysis
%, year-end December Gross margin EBITDA margin Operating margin Net profit margin Sales growth Net profit growth EPS growth Net debt to equity Sales/assets (x) Assets/equity (x) ROE ROCE FY08 19.6% -2.1% -4.8% -4.0% 11.9% -201.7% -191.8% -25.4% 2.2 2.5 -21.3% -20.4% FY09E 25.9% 9.3% 6.5% 5.4% 5.2% -241.5% -227.3% -43.0% 1.8 1.6 15.7% 16.0% FY10E 26.1% 10.0% 7.2% 5.9% 8.5% 19.8% 19.8% -54.7% 1.8 1.5 16.3% 17.5% FY11E 26.5% 10.4% 7.6% 6.2% 9.9% 14.9% 14.9% -56.5% 1.8 1.5 16.3% 17.8%

Source: Company, J.P. Morgan estimates.

Source: Company, J.P. Morgan estimates.

145

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

China Yurun Food Group
www.yurun.com.hk
Company description China Yurun Food is a leading meat processing company in China. Its business includes upstream hog slaughtering and downstream meat processing. China Yurun has been expanding capacity over years and we expect it to benefit from industry consolidation. Post mortem With a one-year view, China Yurun should be a key beneficiary of hog price inflation in China. We expect hog prices to start increasing in December due to: (1) peak season of the Chinese New Year; and (2) potential hog supply reduction, if hog farmers sell more hogs now due to pig disease worry. China Yurun’s 70% EBIT comes from its slaughtering business, which benefits from hog price increases. Also, in case of a hog price upturn, we could see less inventory risk. Potential for earnings upgrades We have assumed hog prices at Rmb12.1/kg and Rmb13.8/kg for FY09 and FY10, respectively. If hog prices go beyond our expectation next year, this could be an upside risk to our earnings estimates. In 1H09, the company reported impressive product-mix improvement, which is likely to surprise margins on the upside. How much recovery is priced into the stock? China Yurun’s share price is trading at 23x of FY09E earnings and 17x FY10E earnings. We believe the margin expansion backed by products mix improvement has not priced in. Recommendation and key risks We see China Yurun as a half commodity, and a half branded consumer company. In our view, this is the best entry point in the cycle and we observe impressive product-mix improvement. Key risks to our view include: (1) outbreak of unexpected food safety issue in the pork processing sector; and (2) unexpected government action.

Overweight
HK$17.76

China Food & Food Manufacture Jasmine BaiAC
(852) 2800 8559 Jasmine.d.bai@jpmorgan.com J.P. Morgan Securities (Asia Pacific) Limited

Price performance
HK$
19 17 15 13 HK$ 11 9 7 5 Nov-08

Feb-09

May-09

Aug-09

Nov-09

1068.HK Share Price (HK$

Source: Bloomberg.

Performance
1M Absolute (%) Relative (%)
Source: Bloomberg.

3M 39.0% 34.2%

12M 89.9% 45.2%

4.7% -0.4%

Company data
52-week range (HK$) Mkt cap. (HK$ MM) Mkt cap. (US$MM) Avg daily value (US$MM) Avg daily volume (MM) Shares O/S (MM) Date of price Index: HSI Free float (%) Exchange rate
Source: Bloomberg.

8.18 – 17.76 29,703 3,833 17.17 8.9 1673 Nov. 5, 2009 21,479 59.2% 7.75

Bloomberg: 1068HK; Reuters: 1068.HK
HK$ in millions, year-end December Sales Net profit EPS (HK$) Sales growth (%) Net profit growth (%) Recurring EPS growth(%) EPS growth (%) ROE (%) P/E (x) Recurring P/E (X) P/BV (x) EV/EBITDA (x) Dividend yield (%) FY08 13,024 1138 0.74 50.8% 11.5% 11.2% 30.9% 21.7% 24.1 32.0 5.2 23.5 1.1 FY09E 14,047 1525 0.91 7.9% 49.9% 37.5% 24.0% 19.0% 19.4 23.3 3.7 15.6 1.3 FY10E 20,246 1717 1.03 44.1% 34.9% 34.9% 12.6% 18.4% 17.3 17.3 3.2 13.2 1.5 FY11E 25,092 2003 1.20 23.9% 16.6% 16.6% 16.6% 18.5% 14.8 14.8 2.7 10.7 1.7

Source: Company, Bloomberg, J.P. Morgan estimates. Note: Share price and valuation are as of 5 November 2009. We revised PT to HK$21 on November 19. 146

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

China Yurun Food Group: Summary of financials
HK$ in millions, year-end December Income statement 2008 Revenues 13,024 % change yoy 50.8% Gross Profit 1,690 EBITDA 1304 % change yoy 36.7% EBITDA margin (%) 10.0% EBIT 1175 % change yoy 34.8% EBIT margin (%) 9.0% Recurring EBIT 982 Interest Expense 64 Earnings before tax 1238 % change yoy 35.8% Recurring earrings before tax 950 % change yoy 16.7% Tax -101 % of EBT -8.2% Net income 1138 Recurring net income 849 % change yoy 11.5% No. of shares outstanding 1531 Recurring EPS (HK$) 0.55 EPS (HK$) 0.74 Balance sheet Cash and cash equivalents Trade & other receivables Inventories Others Total current assets Net fixed assets Others Total assets Liabilities Short Term loans Trade & other payables Others Total current liabilities Long term debt Others Total liabilities Shareholder's equity Capital employeed BVPS (HK$)
Source: Company, J.P. Morgan estimates.

2009E 14,047 7.9% 2,193 1889 44.8% 13.4% 1729 47.1% 12.3% 1609 -52 1676 35.3% 1554 63.5% -151 -9.0% 1525 1273 49.9% 1669 0.76 0.91 2008 1,209 704 703 640 3,256 2,588 2,477 8,321 1,096 903 20 2,018 1,011 57 3,086 5,235 7112 3.42

2010E 20,246 44.1% 2,950 2282 20.8% 11.3% 1981 14.6% 9.8% 1981 -29 1951 16.4% 1951 25.6% -234 -12.0% 1717 1717 34.9% 1669 1.03 1.03

2011E 25,092 23.9% 3,589 2776 21.6% 11.1% 2355 18.9% 9.4% 2355 -26 2329 19.3% 2329 19.3% -326 -14.0% 2003 2003 16.6% 1669 1.20 1.20 2010E 637 1,446 1,441 71 3,596 5,817 2,379 11,792 0 1,441 20 1,462 950 57 2,469 9,323 11154 5.59 2011E 730 1,792 1,792 71 4,386 6,561 2,373 13,319 0 1,792 20 1,812 636 57 2,505 10,814 12589 6.48

Cash flow statement EBIT Depreciation & amortization Change in working capital Others Cash flow from operations Capex Sale of assets Free Cash Flow Cash flow from investing Equity raised/(repaid) Debt raised/(repaid) Dividends paid Cash flow from financing Net change in cash DPS (HK$) Ratio analysis 0.19

2008 1,175 129 172 -282 1,195 -1882 0 -688 -2,022 31 250 -291 -10 -837 0.23

2009E 1,729 160 -499 -152 1,239 -1938 -699 -1,938 1,675 -588 -390 697 -2 0.26

2010E 1,981 301 -443 -235 1,604 -1740 -136 -1,740 -81 -439 -520 -656 0.31

2011E 2,355 420 -346 -327 2,103 -1158 945 -1,158 -340 -512 -852 93

2009E 1,293 1,003 988 71 3,356 4,372 2,385 10,112 638 988 20 1,646 364 57 2,067 8,045 8819 4.82

Gross margin EBITDA margin Operating margin Recuring operating margin Net profit margin Recurring net profit margin Sales growth Net profit growth EPS growth Interest coverage (x) Net debt to equity Sales/assets (x) Assets/equity (x) ROE ROCE Recuring ROCE Sales/non-current assets (x)

2008 13.0% 10.0% 9.0% 7.5% 8.7% 6.5% 50.8% 11.5% 30.9% -18.4 17.1% 1.6 1.6 21.7% 16.5% 13.8% 2.57

2009E 15.6% 13.4% 12.3% 11.5% 10.9% 9.1% 7.9% 49.9% 24.0% 33.1 Net cash 1.4 1.3 19.0% 19.6% 18.3% 2.08

2010E 14.6% 11.3% 9.8% 9.8% 8.5% 8.5% 44.1% 34.9% 12.6% 68.2 3.4% 1.7 1.3 18.4% 17.8% 17.8% 2.47

2011E 14.3% 11.1% 9.4% 9.4% 8.0% 8.0% 23.9% 16.6% 16.6% 92.1 Net cash 1.9 1.2 18.5% 18.7% 18.7% 2.81

147

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Container Corporation of India Ltd.
www.concorindia.com
Company description Concor is India’s largest railway container transport operator with a market share in excess of 90%. Concor has a dominant network of 60 ICDs and over 200 rakes. The company is reliant on India’s foreign trade segment, as it derives 80% of revenue from this segment. Post Mortem Concor has longstanding tie-ups with shippers and has invested in port infrastructure, which gives it a head-start over competition. We believe that the company enjoys pricing power and is likely to sustain its profitability, given the inherent advantages that containerized rail transport enjoy over other modes of transport. Further, in the current downturn, competition has been impacted as cash flows were impacted adversely given that they were in the midst of a capital intensive phase. Potential for earnings upgrades The potential upgrades would be driven by stronger-than-anticipated volume growth in the export segments, which is leveraged to the global recovery. How much recovery is priced into the stock? While container volumes have risen from trough levels, volumes remain benign. Consequently, while valuations have risen from trough levels, factoring in the recovery, we believe that as the growth momentum accelerates, valuations will likely re-rate further. Price target and key risks We expect Concor’s earnings to grow by 22% over FY11E, driven by rising sales and an improved margin outlook (given the revival in the EXIM segment).We have a Mar-10 PT of Rs1,260—which is at a 10% premium to its DCF-based value. At this price, the stock is valued at one-year forward P/E of 15x on FY11E EPS, which is at a 10% premium to the company’s historical five-year trading multiple. We believe that the valuations are justified given that growth over the next 12-18 months will be driven by a revival in the EXIM segment (earnings growth of 22% in FY11E). Risks to our price target include a delayed global recovery as well as an increase in the competitive environment.
Bloomberg: CCRI.IN; Reuters: CCRI.BO
Rs n millions, year-end March Net sales Net profit EPS (Rs) DPS (Rs) Net sales growth (%) Net profit growth (%) EPS growth (%) ROE (%) BVPS (Rs) P/E (x) EV/EBITDA (%) FY08 33,473 7,505 57.9 13 10 8 8 23.6 245 19.7 14.9 FY09E 34,172 7,915 60.9 14 2 5 5 21.0 289 18.7 14.0 FY10E 39,484 8,909 68.5 14 16 13 13 20.1 342 16.6 11.9 FY11E 45,103 10,902 83.9 17 14 22 22 20.7 405 13.6 9.5

Overweight
Rs1,138.7 Price Target: Rs1,260

India Logistics & Freight Aditya MakhariaAC
(91-22) 6157-3596 aditya.s.makharia@jpmchase.com J.P. Morgan India Private Limited

Price performance
(Rs)
1,300 1,100 900 700 500 Nov-08 Aug-09 Feb-09 May-09 Nov-09

Source: Bloomberg.

Performance
1M Absolute (%) Relative (%) -6 -1 3M +1 0 12M +75 +16

Source: Company data, Bloomberg.

Company data
52-week range (Rs) Mkt cap. (RsMM) Mkt cap. (US$MM) Avg daily value (US$MM) Avg daily volume (MM) Shares O/S (MM) Date of price Index: SENSEX Free float (%) Exchange rate
Source: Bloomberg.

540-1,355 148,007 3,147 2.0 0.1 130 5-Nov-09 16064 37 47.03

Source: Company, Bloomberg, J.P. Morgan estimates. Note: Share price and valuations are as of 5 November 2009. 148

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Container Corporation of India Ltd.: Summary of financials
Profit and loss statement
Rs in millions, year-end March Revenues % change Y/Y EBITDA % change Y/Y EBITDA Margin (%) Depreciation Other Income Interest Expense Earnings before tax Tax as % of EBT Net Income (Adjusted) Change (%) Prior Period adjustments Net Income (Reported) Shares Outstanding (in M) EPS (Adjusted) % change Y/Y DPS (Rs) Div Payout Ratio(%) FY08 33,473 10% 8,904 0% 26.6% 1,063 1,645 0 9,485 1,980 20.9 7,505 8% 17 7,522 65 57.9 8% 13 22% FY09 34,172 2% 9,311 5% 27.2% 1,159 2,111 0 10,262 2,347 22.9 7,915 5% (3) 7,912 130 60.9 5% 14 23% FY10E 39,484 16% 10,720 15% 27.2% 1,330 2,106 0 11,496 2,587 22.5 8,909 13% 8,909 130 68.5 13% 14 21% FY11E 45,103 14% 12,854 20% 28.5% 1,537 2,659 0 13,977 3,075 22.0 10,902 22% 10,902 130 83.9 22% 17 21%

Cash flow statement
Rs in millions, year-end March FY08 EBIT Depreciation & amortization Dec/(Inc) in Working Capital Taxes Cash flow from operations Extra ordinary Items Net Capex (Pur)/Sale of Invest. Free cash flow Equity raised/ (repaid) Debt raised/ (repaid) Dividends paid Net Interest (Paid)/ Recd CF fron financing activity Cash generated Beginning cash Ending cash 7,840 1,063 (379) (1,856) 6,668 17 -1,892 -237 4,556 40 0 -1,652 1,645 33 4,589 10,626 15,215 FY09 8,151 1,159 336 (2,147) 7,500 -3 -4,733 -477 2,286 0 0 -1,977 2,111 134 2,420 15,215 17,635 FY10E 9,390 1,330 (271) (2,393) 8,056 0 -5,000 -500 2,556 0 0 -2,129 2,106 -23 2,533 17,635 20,168 FY11E 11,317 1,537 (207) (2,862) 9,785 0 -4,000 -500 5,285 0 0 -2,140 2,659 519 5,805 20,168 25,973

Source: Company, J.P. Morgan estimates.

Source: Company, J.P. Morgan estimates.

Ratio analysis Balance sheet
Rs in millions, year-end March Net fixed assets Capital WIP Trade investments Cash Accounts receivable Inventories Loans & Advances Current assets Payables Others Total current liabilities Net Current Assets Total Assets Debt Deferred Tax Share Capital Networth Liabilities BVPS (Rs per share) FY08 16,652 1,721 1,554 15,215 137 48 3,621 19,021 4,144 1,227 5,371 13,650 33,576 1,737 650 31,839 33,576 245 FY09 19,490 2,457 2,031 17,635 157 51 3,936 21,780 4,802 1,395 6,197 15,582 39,560 1,938 1,300 37,622 39,560 289 FY10E 23,160 2,457 2,531 20,168 182 108 4,253 24,711 5,106 1,230 6,336 18,375 46,522 2,131 1,300 44,391 46,522 342 FY11E 25,623 2,457 3,031 25,973 207 124 4,601 30,905 5,560 1,437 6,997 23,908 55,018 2,344 1,300 52,674 55,018 405 EBITDA margin(%) Sales growth(%) Net profit growth(%) EPS growth(%) Dividend Payout (%) P/E (x) Cash P/E (x) EV/EBITDA (x) EV/Sales (x) Price to Book Value (x) Dividend Yield(%) Debt to equity (x) Net profit margin(%) Sales/assets (x) Assets/equity (x) ROE (%) ROCE (%) ROIC(%) %, year-end March FY08 26.6 10 8 8 22 19.7 17.2 14.9 4.0 4.6 1.1 0.0 22.4 1.0 1.1 23.6 28.2 42.7 FY09 27.2 2 5 5 23 18.7 16.3 14.0 3.8 3.9 1.2 0.0 23.2 0.9 1.1 21.0 25.9 37.2 FY10E 27.2 16 13 13 21 16.6 14.5 11.9 3.2 3.3 1.3 0.0 22.6 0.8 1.0 20.1 24.7 35.6 FY11E 28.5 14 22 22 21 13.6 11.9 9.5 2.7 2.8 1.5 0.0 24.2 0.8 1.0 20.7 25.4 39.0

Source: Company, J.P. Morgan estimates.

Source: Company, J.P. Morgan estimates.

149

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

CP All Pcl
www.cpall.co.th
Company description CPALL is the largest convenient store (CVS) operator in Thailand, managing 4,912 stores countrywide. Post mortem CPALL has a quasi-monopoly position in the Thai convenience store space, with more than 10x more stores than its closest competitor, Family Mart (525 stores). 1H09 same store sales grew at a 9.1% Y/Y pace, which far exceeded its target of 3-5% despite aggressive store expansion, and was a major achievement in a deflationary environment. Its gross margin improved to 27.5% in 2Q09 from 27.2% in FY08, due to rising food product mix in stores. Potential for earnings upgrades CPALL should see sales accelerate in an inflationary environment, supported by the end of the government’s subsidy on utilities, which should boost POS bill payment fees. The SP fiscal stimulus should also drive higher sales via the consumption multiplier. CPALL paid Bt0.60 dividend per share for FY08 operations (72% payout), and with high cash balances, we believe the company will continue its high dividend payout policy. How much recovery is priced into the stock? CPALL has been a defensive outperformer, given its domestic orientation and net cash balance sheet. Its current P/E of 17.4x is near top historical range, but its superior growth profile justifies further re-rating, in our view, as does valuation based on enterprise value, free cash flow, and ROE. Price target and key risks Our Dec-10 PT of Bt23 is based on our dividend discount model with a terminal growth of 4% and a WACC of 11.2% (assuming a risk-free rate of 5%, a risk premium of 6.2%, and a beta of 1). Key risks to our PT include higher-than-expected capex and operating expenses.
Bloomberg: CPALL TB; Reuters: CPALL.BK
Bt in millions, year-end December Revenue Net profit EPS (Bt) DPS (Bt) Revenue growth (%) EPS growth (%) ROE (%) P/E (x) P/BV (x) Dividend Yield (%) FY08 92,959 3,740 0.83 0.60 20.0 48.6 31.2 22.9 6.5 3.1 FY09E 105,044 4,109 0.91 0.69 13.0 9.9 29.7 20.9 5.9 3.6 FY10E 115,548 4,929 1.10 0.82 10.0 20.0 31.9 17.4 5.2 4.3 FY11E 127,103 5,389 1.20 0.90 10.0 9.3 31.3 15.9 4.8 4.7

Overweight
Price: Bt19.10 Price Target: Bt23.00

Thailand Broadlines/Department Stores Anne JirajariyavechAC
(66-2) 684-2684 anne.x.jirajariyavech@jpmorgan.com JPMorgan Securities (Thailand) Limited

Price performance
20 Bt 14 8 Nov-08 Feb-09 May-09 Aug-09 Nov-09 CPALL.BK share price (Bt) SET (rebased)

Source: Bloomberg.

Performance
1M Absolute (%) Relative (%)
Source: Bloomberg.

3M 14.4 7.9

12M 94.9 45.8

-4.0 1.1

Company data
52-week range (Bt) Mkt cap. (BtMM) Mkt cap. (US$MM) Avg daily value (US$MM) Avg daily volume (MM) Shares O/S (MM) Date of price Index: SET Free float (%) Exchange rate
Source: Bloomberg.

9.65-20.30 85,819 2,571 5.0 4.9 4,493 5-Nov-09 682 41 33.38

Source: Company, Bloomberg, J.P. Morgan estimates. Note: Share price and valuation are as of 5 November 2009.

150

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

CP All Pcl: Summary of financials
Profit and Loss statement THB in millions, year-end Dec Revenues % change Y/Y Gross Margin (% ) EBITDA % change Y/Y EBITDA Margin (% ) EBIT % change Y/Y EBIT Margin (% ) Net Interest Earnings before tax % change Y/Y Tax as % of EBT Equity income and minorities Extra items Net Income (Reported) % change Y/Y Shares Outstanding EPS (reported) % change Y/Y Balance sheet THB in millions, year-end Dec Cash and cash equivalents Accounts receivable Inventories Others Current assets LT investments Net fixed assets Total assets Liabilities ST loans Payables Others Total current liabilities Long term debt Other liabilities Total liabilities Shareholders' equity BVPS FY08A 92,959 20.0 26.7 6,330 38.7 6.8 4,107 58.0 4.4 576 4,684 50.2 946 20.2 0.0 2.6 3,740 49.4 4,493 0.83 49 FY09E 105,044 13.0 27.0 7,907 24.9 7.5 5,179 26.1 4.9 450 5,629 20.2 1,520 27.0 0.0 0.0 4,109 9.9 4,493 0.91 10 FY10E 115,548 10.0 27.2 9,728 23.0 8.4 6,303 21.7 5.5 450 6,753 20.0 1,823 27.0 0.0 0.0 4,929 20.0 4,493 1.10 20 FY11E 127,103 10.0 26.9 11,070 13.8 8.7 6,933 10.0 5.5 450 7,383 9.3 1,993 27.0 0.0 0.0 5,389 9.3 4,493 1.20 9 Cash flow statement THB in millions, year-end Dec EBIT Depreciation & amortisation Change in working capital Taxes Cash flow from operations Capex Disposal/ (purchase) Net Interest Free cash flow Equity raised/ (repaid) Debt raised/ (repaid) Other Dividends paid Beginning cash Ending cash DPS FY08A 4,107 2,223 -663 -862 4,805 -2,868 0 493 2,430 135 0 -1,353 -1,565 9,340 8,987 0.60 FY09E 5,179 2,729 106 -1,452 6,562 -4,490 0 383 2,454 0 0 0 -2,696 8,987 8,745 0.69 FY10E 6,303 3,426 1,138 -1,756 9,110 -4,805 0 383 4,688 0 0 0 -3,082 8,745 10,351 0.82 FY11E 6,933 4,138 1,308 -1,926 10,453 -5,142 0 383 5,694 0 0 0 -3,697 10,351 12,347 0.90

FY08A 8,987 97 4,940 2,322 16,346 7,961 9,317 33,624

FY09E 8,745 97 5,533 2,624 16,999 7,961 11,079 36,038

FY10E 10,351 97 6,044 2,886 19,377 7,961 12,458 39,796

FY11E 12,347 97 6,648 3,175 22,267 7,961 13,462 43,690

Ratio Analysis % , year-end Dec EBITDA margin Operating margin Net profit margin

FY08A 6.8 4.2 4.0

FY09E 7.5 4.7 3.9

FY10E 8.4 5.2 4.3

FY11E 8.7 5.2 4.2

Sales per share growth Sales growth Net profit growth EPS growth

19.4 20.0 49.4 48.6

13.0 13.0 9.9 9.9

10.0 10.0 20.0 20.0

-100.0 10.0 9.3 9.3

0 12,611 6,487 19,098 0 1,396 20,495 13,129 2.92

0 12,769 7,330 20,100 0 1,396 21,496 14,542 3.24

0 13,947 8,063 22,010 0 1,396 23,406 16,390 3.65

0 15,341 8,870 24,211 0 1,396 25,607 18,082 4.02

Net debt to total capital Net debt to equity Sales/ avg operating assets Assets/equity Net Debt/EBITDA ROE

0 n/a 5705 281 -142 31.2

0 n/a 2744 260 -111 29.7

0 n/a 2181 257 -106 31.9

0 n/a 2184 253 0 31.3

Source: Company reports and J.P. Morgan estimates.

151

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

CTC Media
www.ctcmedia.ru
Company description CTC Media is Russia’s leading independent broadcaster, operating three nationwide networks: CTC, Domashny and DTV, with a combined audience share of 12.7% over 9M09. The network’s programming is entertainmentfocused, with almost all its revenue coming from the sale of television advertising. Major shareholders are MTG (39.44%) and Alfa Group (26%). Post mortem Considering the very difficult operating environment in 2009, CTCM has fared relatively well, controlling costs better than its listed peers, gaining audience share and significantly boosting its power ratio. While part of the power ratio improvement may be reversed in 2010, we believe that it also in part reflects the strength of the franchise, while the cost and audience share performance underline the improvement in company management over the past two years. Potential for earnings upgrades CTCM seems determined to keep advertising prices flat this year, as the average sell-out ratio for 2009 is likely to remain in the low 90% region. Encouragingly, CTC confirmed the reduction of long-term pricing contracts with Video International to roughly 30-35% (vs. 60-70% previously). This implies that there may be scope for price increases in 2H10 in case there is a more robust economic recovery in 2010. At this point, we see the scope for upgrades as moderate in 2010 but more significant in 2011 and beyond as we expect rapid recovery in the ad market then. In the long run, we believe that CTC Media offers investors exposure to strong secular growth prospects. How much recovery is priced into the stock? Looking at implied valuations 3 to 4 years out, we believe that the recovery is only partially priced in. Price target and key risks Our PT of $25 for year-end 2010 is based on a discounted terminal value and dividend analysis using an exit multiple of 13x P/E year end 2013E. Key downside risks are potential market share and earnings volatility in a highly fragmented Russian television market.
Bloomberg: CTCM US; Reuters: CTCM
$ in millions, year end Dec Sales Net profit EPS DPS Sales growth (%) Net profit growth (%) EPS growth (%) ROE (%) P/E (x) FY08 640 22 0.15 0.04 35.60% -83.50% NM 4% n/a FY09E 481 128 0.84 0 -24.90% 470.60% 470.60% 21% 19.2 FY10E 534 147 0.96 0 11.10% 14.50% 14.50% 21% 16.8 FY11E 690 197 1.29 0.93 29.10% 34.20% 34.20% 26% 12.5

Overweight
Price: $15.59 Price Target: $25.00

Russia Media Jean-Charles LemardeleyAC
+44 (0) 20 7325 5763 jean-charles.lemardeley@jpmorgan.com J.P. Morgan Securities Ltd.

Price Performance
20 15 $ 10 5 0
Nov-08 Feb-09 May-09 Aug-09 Nov-09

Source: Company data, Bloomberg

Performance
1M Absolute (%) -17%
Source: Company data, Bloomberg

3M 17%

12M 290%

Company data
52-week range ($) Mkt cap. ($ bn) Shares O/S (mn) Date of price Price Target End Date Free float (%) Avg daily volume (MM) Avg daily value (US$MM) 20.07-2.37 2.5 158 23-Nov-09 31-Dec-10 25% 0.470 7.1

Source: Company data, Bloomberg, J.P Morgan estimates

Source: Company, Bloomberg, J.P. Morgan estimates. Note: Share price and valuations are as of cob 23 November 2009.

152

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

CTC Media: Summary of Financials
Profit and Loss Statement $ in millions, year end Dec Revenues % Change Y/Y EBITDA % Change Y/Y EBITDA Margin EBIT % Change Y/Y EBIT Margin Net Interest PBT % change Y/Y Net Income (clean) % change Y/Y Average Shares Clean EPS % change Y/Y DPS Balance sheet $ in millions, year end Dec Cash and cash equivalents Accounts Receivables ST financial assets Others Current assets LT investments Net fixed assets Total assets ST loans Payables Others Total current liabilities Long term debt Other liabilities Total liabilities Shareholders' equity FY08 640 35.6% 280 27.1% 43.8% 34 -82.3% 5.3% (3) 4 -97.9% 22 -83.5% 152 0.15 NM 0.04 FY09E 481 -24.9% 195 -30.4% 40.6% 184 439.1% 38.3% (2) 184 4078.2% 128 470.6% 152 0.84 470.6% 0.00 FY10E 534 11.1% 221 13.0% 41.3% 209 13.3% 39.1% 4 214 16.5% 147 14.5% 152 0.96 14.5% 0.00 FY11E 690 29.1% 292 32.4% 42.3% 280 34.1% 40.6% 8 290 35.6% 197 34.2% 152 1.29 34.2% 0.93 Cash flow statement FY12E $ in millions, year end Dec 859 24.5% 374 28.1% 43.5% 362 29.2% 42.1% 10 373 28.7% 251 27.4% 152 1.65 27.4% 1.49 Cash EBITDA Interest Tax Other Cash flow from operations Capex PPE Net investments CF from investments Dividends Share (buybacks)/ issue CF to Shareholders FCF to debt OpFCF (EBITDA - PPE) EFCF pre Div, PPE FY08 269 (3) (20) 15 261 (5) (414) (419) (6) (6) (164) 264 (158) FY09E 187 (2) (54) 14 145 (11) (12) (23) 0 0 123 177 123 FY10E 212 4 (64) 2 153 (8) (17) (25) 0 0 128 204 128 FY11E 280 8 (87) 33 235 (10) 0 (10) (147) (147) 78 270 224 FY12E 359 10 (112) 2 259 (13) 0 (13) (236) (236) 10 346 246

FY08 98 34 131 263 521 23 807 62 41 89 192 28 39 260 547

FY09E 199 30 116 344 519 27 891 55 36 86 177 14 39 230 661

FY10E 321 16 44 381 524 24 929 52 21 74 148 11 39 197 732

FY11E 414 21 57 491 547 23 1,061 67 44 96 207 11 39 258 804

Ratio Analysis FY12E $ in millions, year end Dec 473 26 71 569 575 24 1,168 83 34 120 238 44 39 320 848 EBITDA margin EBIT Margin Net profit margin Capex/sales Depreciation/Sales Revenue growth EBITDA Growth EPS Growth Net debt/EBITDA CF to Shareholders FCF to debt OpFCF (EBITDA - PPE) EFCF pre Div, PPE

FY08 43.8% 5.3% 3.5% 0.8% 2.1% 35.6% 27.1% NM (0.0) (6) (164) 264 (158)

FY09E 40.6% 38.3% 26.6% 2.2% 2.3% -24.9% -30.4% 470.6% (0.7) 0 123 177 123

FY10E 41.3% 39.1% 27.4% 1.5% 2.2% 11.1% 13.0% 14.5% (1.2) 0 128 204 128

FY11E 42.3% 40.6% 28.5% 1.5% 1.8% 29.1% 32.4% 34.2% (1.2) (147) 78 270 224

FY12E 43.5% 42.1% 29.2% 1.5% 1.5% 24.5% 28.1% 27.4% (1.0) (236) 10 346 246

Source: Company reports and J.P. Morgan estimates.

153

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

DongFeng Motor Co., Ltd
www.dfmc.com
Company description DongFeng Motor Co., Ltd. is China’s third-largest auto producer operating a comprehensive auto-related business comprising passenger vehicles, commercial vehicles, auto engines and auto parts. Its market share in China’s passenger vehicles and commercial vehicles was around 11.3% in FY08. Post mortem DongFeng Motor is our top pick among large-cap names in China’s auto sector, as: (1) DFM, which holds a leading position in most of its wide range of auto businesses, is well positioned to ride China’s third auto boom due to the break out of car demand in tier-three cities due to its multi-strategicpartner business model (Honda, Nissan and PSA); and (2) it has been a consistent outperformer since its listing, whether during the cyclical upturn in FY06 and FY07, or during the cyclical downturn in FY05 and FY08. Potential for earnings upgrades We see good potential for consensus earnings estimate upgrades, because: (1) we expect its commercial vehicle business to perform much better than expected as of 2H09 due to accelerating fixed asset investment growth in China. We expect its commercial vehicle business to contribute Rmb608 million profit in FY09 compared with only Rmb75 million in 1H09; (2) we expect its DongFeng PSA business to contribute a much stronger-thanexpected profit of Rmb1,002 million in FY09 versus around Rmb114 million in 1H09 because of the sharp rise in its PSA sales volume as of 2Q09. We now expect its Dongfeng PSA to sell 260,000 cars in FY09 versus its target of 210,000 and its PSA business’ breakeven point of around 200,000. How much recovery is priced into the stock? While its 326% return this year has discounted a lot of good news about the current third auto boom, and Dongfeng’s strong earnings growth, we still see 24% upside to our PT of HK$13, with an estimated over 20% rise in consensus FY09/FY10 earnings estimates in coming months. Price target and key risks Our Jun-10 price target of HK$13.0 is based on 14x FY10E P/E, which is two standard deviations above the average historical prospective P/E of 8.3x. Key risks to our price target include the possible removal of the vehicle purchase tax cut policy upon expiration at the end of the year.
Bloomberg: 489 HK; Reuters: 489.HK
Rmb in millions, year-end December Revenue EBITDA EBIT Net profit EPS (Rmb) DPS (Rmb) EV/EBITDA EV/EBIT Dividend yield (%) P/E (x) P/B (x) ROE (%) FY07 59,318 5,724 3,941 3,770 0.44 0.05 13.5 19.6 0.5 21.0 4.5 24 FY08 70,569 7,215 5,190 4,040 0.47 0.05 10.2 14.2 0.5 19.6 3.7 21 FY09E 93,503 10,609 8,127 6,309 0.73 0.11 5.6 7.3 1.3 11.3 2.6 26 FY10E 104,169 11,616 9,080 7,162 0.83 0.15 4.7 6.1 1.8 9.9 2.1 24

Overweight
HK$10.46
Price Target: HK$13.0

China Auto & Industrials Frank LiAC
852-2800-8511 frank.m.li@jpmorgan.com J.P. Morgan Securities (Asia Pacific) Limited

Price performance
12.0 10.0 8.0 6.0 4.0 2.0 0.0 Nov -08 Feb-09 May -09 Aug-09 Nov -09

Dongfeng Motor-H Share Price HSCEI(rebased)

Source: Bloomberg.

Performance
1M Absolute (%) Relative (%)
Source: Bloomberg.

3M 32 25

12M 403 326

26 19

Company data
52-week range (HK$) Mkt cap. (HK$MM) Mkt cap. (US$MM) Avg daily value (US$MM) Avg daily volume (MM) Shares O/S (MM) Date of price HSCEI Free float (%) Exchange rate
Source: Company data, Bloomberg.

1.45-10.52 90,125 11,629 19 26 2,856 5-Nov-09 12805 31 7.75

FY11E 113,431 12,893 10,236 7,946 0.92 0.18 3.8 4.8 2.2 8.9 1.8 22

Source: Company, Bloomberg, J.P. Morgan estimates. Note: Share price and valuations are as of 5 November 2009.

154

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

DongFeng Motor Co., Ltd: Summary of financials
Rmb in millions, year-end December Profit and Loss statement FY07 Revenues 59,318 % change Y/Y 22.9 Gross profit 9,815 % change Y/Y 19.6 Gross margin (%) 16.5 Operating profit 3,941 % change Y/Y 37.5 Operating Margin (%) 6.6 Net Interest -175 Earnings before tax 3,835 % change Y/Y 43.2 Tax 202 Net Income (Reported) 3770 % change Y/Y 81 Net Margin (%) 6.4 Wt. avg. share number (MM) 8616 Wt. avg. EPS (Rmb) 0.44 Balance sheet Cash and cash equivalents Accounts receivable Inventories Others Current assets LT investments Net fixed assets Other LT assets Total assets ST loans Payables Others Total current liabilities Long term debt Other LT liabilities Total non-current liabilities Total liabilities Shareholders' equity Minority interest
Source: Company, J.P. Morgan estimates.

Cash flow statement FY08 70,569 19.0 11,881 21.0 16.8 5,190 31.7 7.4 -393 4,892 27.6 -647 4040 7 5.7 8616 0.47 FY08 14,113 2,101 9,356 10,378 35,948 787 18,189 40,789 59,765 6,919 10,259 16,285 33463 1781 319 2100 35563 21365 2837 FY09E 93,503 32.5 16,783 41.3 17.9 8,127 56.6 8.7 -265 7,892 61.3 -1263 6309 56 6.7 8616 0.73 FY09E 19,378 2,784 12,231 13,163 47,555 787 18,713 52,562 72,063 6,500 13,411 19,973 39884 1500 236 1736 41620 27286 3157 FY10E 104,169 11.4 18,510 10.3 17.8 9,080 11.7 8.7 49 9,177 16.3 -1652 7162 14 6.9 8616 0.83 FY10E 22,980 3,101 13,656 14,620 54,358 787 21,036 59,608 81,430 5,900 14,974 22,199 43072 1100 236 1336 44408 33501 3521 FY11E 113,431 8.9 20,090 8.5 17.7 10,236 12.7 9.0 181 10,437 13.7 -2087 7946 11 7.0 8616 0.92 FY11E 27,587 3,377 14,880 15,886 61,730 787 23,208 66,787 90,782 5,300 16,317 24,112 45728 700 236 936 46664 40194 3924 Profit before tax Depreciation & amortization Change in working capital Others Cash flow from operations Purchase of fixed assets Others Cash flow from investment Equity raised/ (repaid) Debt raised/ (repaid) Other Dividends paid Cash flow from financing Beginning cash Ending cash Ratio analysis %, year-end December Gross margin Operating margin Net profit margin SG&A/sales Sales growth Net profit growth Gross profit growth Operating profit growth ROE FY07 3,835 2,026 -48 -711 5,102 -2,751 -529 -3,280 0 105 -138 -345 -378 5,659 7,103 FY07 16.5 6.6 6.4 8.7 22.9 81.2 19.6 37.5 23.6 FY08 4,892 2,318 1,657 -1,119 7,748 -4,080 -3,700 -7,780 0 435 76 -388 123 7,103 12,416 FY08 16.8 7.4 5.7 8.4 19.0 7.2 21.0 31.7 20.7 FY09E 7,892 2,834 1,276 -1,445 10,556 -4,000 -204 -4,204 0 -700 0 -388 -1,088 12,416 17,681 FY09E 17.9 8.7 6.7 8.2 32.5 56.2 41.3 56.6 25.9 FY10E 9,177 2,960 589 -2,123 10,602 -4,800 -254 -5,054 0 -1,000 0 -946 -1,946 17,681 21,283 FY10E 17.8 8.7 6.9 7.8 11.4 13.5 10.3 11.7 23.6 FY11E 10,437 3,140 490 -2,613 11,454 -4,800 206 -4,594 0 -1,000 0 -1,253 -2,253 21,283 25,890 FY11E 17.7 9.0 7.0 7.4 8.9 11.0 8.5 12.7 21.6

FY07 10,473 2,229 7,573 11,070 31,345 677 16,438 35,082 52,197 5,751 9,650 13,599 29000 2514 284 2798 31798 17713 2686

155

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Energy Development Corporation
www.energy.com.ph
Company description Energy Development Corporation owns 150MW of steam capacity and 1050MW of power ‘plus’ steam capacity with take-or-pay contracts with NPC (for 695MW of total power capacity). EDC also owns a 60% stake in 112MW Pantabangan-Masiway hydro plant with the remaining stake being held by its parent, First Gen. Post mortem Although the financial crisis had limited impact on EDC’s core business, given its take-or-pay contracts and US$ linked tariffs, it was negatively affected due to its ¥-denominated debt and concerns about the financial viability of its recent parent, First Gen, given its premium pricing on EDC’s purchase undertaken by it in November 2007. Potential for earnings upgrades We see potential earnings upgrades linked largely to the execution of its recently acquired 305MW Palipinon-Tonngonan. We could see upgrades in case of other efficiencies and rehabilitation of 49MW Northern Negros plant. How much recovery is priced into the stock? We see upside risks to its current valuation, primarily driven by potential earnings upside from its recent plant acquisition and tax savings due to RE Law. Price target and key risks Our DCF-based Dec-10 PT of Php5.6 implies FY10E P/E of 14.7x and 2.3% yield. We arrive at our PT by discounting EDC’s FCF to 2031, when the Geothermal Service Contract would expire. We incorporate terminal value but with a 0% ‘g’. Key risks to our PT include execution risk associated with the Palinpinon-Tongonan plant rehabilitation.

Overweight
Php4.05 Price Target: Php5.60

Independent Power Producers Ajay MirchandaniAC
(65) 6882-2419 ajay.mirchandani@jpmorgan.com J.P. Morgan Securities Singapore Private Limited

Price performance (Php)
6 4 2 0 Nov-08 Sep-09 Mar-09 Jan-09 Jul-09 May-09 Nov-09

Source: Bloomberg.

Performance
1M Absolute (%) Relative (%)
Source: Bloomberg.

3M 12.5 6.0

12M 58.2 11.4

8.9 4.5

Company data
52-week range (Php) Mkt cap. (PhpMM) Mkt cap. (US$MM) Avg daily value (US$MM) Avg daily volume (MM) Shares O/S (MM) Date of price Index: PSEi Free float (%) Exchange rate
Source: Bloomberg.

2.7-4.1 75,937 1,602 2.5 30 18,750 5-Nov-09 2,944 60 47.6

Bloomberg: EDC PM; Reuters: EDC.PS
Php in millions, year-end December Recurring net profit Recurring EPS (Php) DPS (Php) P/E (x) P/BV (x) EV/EBITDA (x) Operating cash flow / EV (%) Dividend yield (%) RoE (%) Net debt (%) FY08 5,532 0.37 0.13 13.7 2.2 8.7 8.2% 3.1% 20.3% 122.1% FY09E 5,965 0.38 0.13 12.7 2.3 8.8 10.6% 3.3% 22.1% 114.0% FY10E 7,089 0.38 0.13 10.7 2.4 7.7 12.0% 3.3% 22.4% 109.6% FY11E 6,931 0.37 0.13 11.0 2.1 7.2 13.3% 3.2% 19.2% 77.8%

Source: Company, Bloomberg, J.P. Morgan estimates. Note: Share price and valuation are as of 5 November 2009.

156

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Energy Development Corporation: Summary of financials
Php in millions, year-end December Profit & loss statement Electricity Steam Others Consolidated Revenue BOT fees Other purchased services & utilities Operations & maintenance expenses Depreciation & Amortization Royalty fee Others Proforma EBITDA EBITDA EBIT Interest expenses Interest Income Profit before Tax taxation Profit after tax Core Net Income Key ratios Gross Margins (%) EBITDA Margins (%) Op Margin (%) Sales growth (%) Core Net profit growth (%) No. of O/S shares (MM) EPS (Php) DPS (Php) Dvd payout ratio (%) BVPS Debt / Equity (%) Net Debt / Equity (%) ROE (%) ROCE (%) EBITDA / Gross Interest EBITDA / Net Interest receivables (days) FY08 65.4% 53.1% 49.7% 3.7% -1.3% 15,000 0.37 0.13 34% 1.8 86.9% 122.1% 4.8% 12.7% 4.8 5.7 156.2 FY09E 62.6% 48.0% 44.4% 7.4% 7.8% 15,625 0.38 0.13 35% 1.7 114.5% 114.0% 22.1% 13.0% 3.4 4.1 157.8 FY10E 64.9% 51.4% 46.8% 14.0% 18.8% 18,750 0.38 0.13 35% 1.7 115.5% 109.6% 22.4% 14.9% 3.4 4.0 156.7 FY11E 65.0% 51.2% 46.0% 0.2% -2.2% 18,750 0.37 0.13 35% 1.9 100.0% 77.8% 19.2% 14.5% 3.7 4.0 148.0 FY08 12,518 4,242 726 19,595 (394) (1,130) (4,661) (676) (590) (2,410) 10,409 10,409 9,734 (2,153) 333 2,653 (1,308) 1,308 5,532 FY09E 13,544 4,753 784 21,051 (885) (1,331) (5,434) (775) (214) (3,072) 10,113 10,113 9,338 (2,958) 475 6,855 (685) 5,965 5,965 FY10E 16,344 4,974 823 23,996 (1,400) (1,562) (5,255) (1,105) (218) (3,223) 12,339 12,339 11,233 (3,671) 563 8,126 (813) 7,089 7,089 FY11E 17,161 5,144 0 24,040 (1,400) (1,410) (5,384) (1,234) (222) (3,326) 12,298 12,298 11,064 (3,305) 214 7,972 (797) 6,931 6,931 Balance sheet Share capital Reserves & Surplus Share holders equity Minorities Long term debt BOT lease obligations Royalty fee payable Other non-current liabilities Total Non-current Liabilities Total Liabilities Property, plant and equipment Production wells/Intangible assets BOT power plants / concession receivable Exploratory & development costs Other Non-current assets Current Assets Cash and Bank Balances Account Receivables Other current assets Current Liabilities Accounts Payable Current portion of debt & BOT fees other current liabilities Total Assets Cash flow statement EBITDA Concession Receivable impact less: Net Interest less: tax less: changes in Working Capital Others Operational Cash Flow Capital Expenditure Investment, dividend from associates Cash flow from investments Free cash Flow Repayment of Debt Payment of BOT Lease Dividends paid to shareholders Equity raised / write-offs / Cashflow from financing Exchange rate Movement in Net Debt/Net Cash FY08 10,450 0 (1,602) (1,731) 2189 (134) 9,172 (6,119) 1,317 (4,538) 4,634 (528) (245) (5,303) (404) (6,976) 2 (2,339) FY09E 10,113 2,048 (2,483) (685) (134) 0 8,859 (505) 419 (86) 8,773 10,428 (112) (2,088) (4111) 4,117 0 12,890 FY10E 12,339 2,111 (3,108) (813) (329) 0 10,200 (11,585) (0) (11,585) (1,385) (7,733) 0 (2,481) 0 (10,215) 0 (11,599) FY11E 12,298 2,230 (3,092) (797) 58 0 10,697 (1,690) (0) (1,690) 9,007 (395) 0 (2,426) 0 (2,821) 0 6,186 FY08 15,000 5,898 27,251 1,484 23,557 0 0 1,339 24,896 53,632 5,280 9,389 32,647 1,000 9,731 11,233 957 5,412 2,815 15,648 2,980 10,785 1,884 53,632 FY09E 15,000 5,665 27,018 1,688 30,924 0 0 1,339 32,263 60,969 5,417 9,107 30,536 1,000 9,187 24,704 13847 5,814 2,932 18,982 3,357 13,733 1,891 60,969 FY10E 15,000 10,273 31,626 1,912 36,529 0 0 1,339 37,868 71,406 16,304 8,825 28,306 1,000 9,062 14,272 2248 6,628 3,167 6,363 4,058 395 1,910 71,406 FY11E 15,000 14,778 36,131 2,156 36,133 0 0 1,339 37,473 75,759 17,166 8,543 25,950 1,000 8,937 20,600 8434 6,640 3,170 6,437 4,126 395 1,915 75,759

Source: Company, J.P. Morgan estimates.

157

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Enersis
www.enersis.cl
Company description Enersis is one of the main privately owned multinational electric power corporations in Latin America. It currently holds direct and indirect participation in electric power generation, transmission, and distribution businesses in Argentina, Brazil, Chile, Colombia, and Peru. The Enersis Group generating companies boast an installed capacity of 14,280 MW and through the distribution companies supply electricity to near 12.5 million customers, or approximately 45 million inhabitants. The controlling shareholder of Enersis is Endesa, a Spanish multinational that holds 60.62% ownership. Post mortem Within a regional context, we believe the greatest recovery opportunities in the utilities space lie along the Andean corridor, where a combination of strong market position (leaders in key cities) and supportive regulatory frameworks should allow the company to capture demand recovery. Potential for earnings upgrades Given the predictable cash flows of the company, we see modest upside risk on greater-than-expected demand recovery. How much recovery is priced into the stock? Since Enersis is a defensive company listed in a defensive market, the shares have underperformed significantly in the past six months at both the regional and country level despite continued high cash generation and long-term value. Therefore, we feel that recovery is generally not priced in. Price target and key risks We derive our PT of Ch$241 from our DCF-based SOTP analysis. Risks to our thesis include lower generation prices in Chile, upcoming distribution tariff settings, and AFP overhang,
Bloomberg: ENERSIS CI, ENI; Reuters: ENE.SN, ENI.N
LC in /billions, year-end Dec 31 Sales Net profit EPS (LC) FD EPS (LC) DPS (LC) Sales growth (%) Net profit growth (%) EPS growth (%) ROE (%) FY08 6,595.0 599.28 18.35 18.35 3.9 44.0% 208.3% 208.3% 19.4% FY09E 6,280.4 712.16 21.81 21.81 12.1 (4.8%) 9.7% 9.7% 18.9% FY10E 5,936.6 654.11 20.03 20.03 8.6 (5.5%) (10.3%) (10.3%) 14.2% FY11E 5,914.2 678.35 20.78 20.78 8.9 (0.4%) 3.7% 3.7% 12.4%

Overweight
Ch$189 Price Target: Ch$241

Chile Latin American Utilities Brian P. ChaseAC
+562 425 5245 brian.p.chase@jpmorgan.com Inversiones y Asesorias Chase Manhattan Ltda.

Performance
Absolute (%) Relative (%)
Source: Bloomberg

1M -4.5 0.4

3M -5.7 -5.7

12M 7.4 -20.4

Company data
52-week range (LC) Mkt cap. (LCBN) Mkt cap. (US$MM) Avg daily value (US$MM) Avg daily volume (MM) Shares O/S (MM) Date of price Index: Free float (%) Exchange rate
Source: Bloomberg

161.2-208.5 6,171 12,379 7.8 32.7 11/25/2009 IPSA 196 R$493/US$

Source: Company, Bloomberg, J.P. Morgan estimates. Note: Share price and valuations are as of 25 November 2009.

158

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Enersis: Summary of financials
Profit and loss statement
LC in billions, year-end Dec 31 Revenue % change Y/Y Gross margin (%) EBITDA % change Y/Y EBITDA margin (%) EBIT % change Y/Y EBIT margin (%) Net interest Earnings before tax % change Y/Y Tax as % of EBT Net income (reported) % change Y/Y Shares O/S (MM) EPS (reported) (LC) FY08 6,595.0 44.0% 48.2% 2,379.3 53.9% 2,379.3 1,930.0 29.3% (319.0) 1,651.3 (396.6) -20.5% 599.28 208.3% 32.7 18.35 FY09E 6,280.4 (4.8%) 51.7% 2,499.0 5.0% 2,499.0 2,049.7 6.2% 32.6% (301.8) 1,754.6 6.3% (378.0) -18.4% 712.16 9.7% 32.7 21.81 FY10E 5,936.6 (5.5%) 52.0% 2,408.9 (3.6%) 2,408.9 1,917.3 -6.5% 32.3% (296.1) 1,623.9 -7.4% (389.7) -20.3% 654.11 (10.3%) 32.7 20.03 FY11E 5,914.2 (0.4%) 52.4% 2,411.2 0.1% 2,411.2 1,907.9 -0.5% 32.3% (226.5) 1,684.1 3.7% (404.2) -21.2% 678.35 3.7% 32.7 20.78

Cash flow statement
LC in billions, year-end Dec 31 Net income Depreciation & amortization Change in working capital Cash flow from operations Capex Disposal/(purchase) Intangibles Investing Cash Flow Equity raised/(repaid) Debt raised/(repaid) Other Dividends Beginning cash Ending cash DPS (LC) Net income FY08 565.3 609.2 191.8 1,366.4 (826.8) (382.2) (5.3) (1,214.2) 0 366.2 12.6 (128.4) 498.4 900.9 3.9 565.3 FY09E 402.1 575.1 876.6 1,853.9 (889.6) 0.0 0.0 (889.6) 0 0.0 0.0 (395.7) 900.8 1,469.4 12.1 402.1 FY10E 412.3 575.2 597.8 1,585.3 (781.4) 0.0 0.0 (781.4) 0 0.0 0.0 (281.5) 1469.4 1,991.8 8.6 412.3 FY11E 440.5 582.6 715.0 1,738.1 (691.0) 0.0 0.0 (691.0) 0 0.0 0.0 (292.2) 1991.8 2,746.7 8.9 440.5

Source: Company, J.P. Morgan estimates.

Source: Company, J.P. Morgan estimates.

Ratio analysis Balance sheet
LC in billions, year-end Dec 31 Cash and cash equivalents Accounts receivable Inventories Others Current assets LT investments Net fixed assets Total assets Liabilities ST loans Payables Others Total current liabilities Long-term debt Other liabilities Total liabilities Shareholders’ equity BVPS (LC) FY08 1,318.1 1,338.3 99.4 171.0 2,926.8 2430.4 8,577.3 13,934.4 1,247.3 1,099.8 338.2 2,685.3 3,821.8 1398.2 7,905.3 3,091.3 94.5 FY09E 1,540.7 1,381.6 96.4 177.5 3,196.2 2386.7 8,748.9 14,331.8 767.7 1,039.8 326.6 2,134.1 3,703.0 1558.4 7,395.5 3,772.2 115.4 FY10E 2,317.4 1,301.8 91.9 167.2 3,878.4 2373.0 8,855.2 15,106.5 767.7 991.7 307.7 2,067.1 3,703.0 1558.4 7,328.5 4,613.9 141.1 FY11E 2,964.9 1,330.0 92.6 170.9 4,558.4 2359.4 9,075.7 15,993.4 767.7 999.0 314.4 2,081.1 3,703.0 1558.4 7,342.5 5,486.8 167.8 %, year-end Dec 31 EBITDA margin Operating margin Net profit margin SG&A/sales Sales growth Net profit growth Sales per share growth EPS growth Interest coverage (x) Net debt to total capital Net debt to equity Sales/assets EBIT margin ROCE Assets/equity (x) ROI ROE FY08 36.1% 29.3% 9.1% -12.1% 44.0% 208.3% 44.0% 208.3% 7.46 0.46 1.21 0.47 0.29 NA 4.51 NA 19.4% FY09E 39.8% 32.6% 11.3% -11.9% (4.8%) 9.7% (4.8%) 9.7% 8.28 0.36 0.78 0.44 0.33 NA 3.80 NA 18.9% FY10E 40.6% 32.3% 11.0% -11.5% (5.5%) (10.3%) (5.5%) (10.3%) 8.13 0.24 0.47 0.39 0.32 NA 3.27 NA 14.2% FY11E 40.8% 32.3% 11.5% -11.6% (0.4%) 3.7% (0.4%) 3.7% 10.64 0.15 0.27 0.37 0.32 NA 2.91 NA 12.4%

Source: Company, J.P. Morgan estimates.

Source: Company, J.P. Morgan estimates.

159

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Far Eastone Telecommunications
www.fetnet.net
Company description Far Eastone (FET) is a wireless operator in Taiwan with licences to operate both 2G and 3G networks. FET began 2G operations in January 1998 and acquired KG Telecom from the Koo Group in 2004. FET owns a 24.5% stake in NCIC, a small fixed-line operator in Taiwan focused on the enterprise segment. Douglas Hsu’s Far Eastern Group is FET’s largest shareholder with a 45.5% stake. Strategic partners, NTT DoCoMo and SingTel, hold 4.5% and 4.0% stakes in the company, respectively. Post mortem FET has a strong position in the Taiwan mobile market with a 26% market share, and has withstood the economic downturn very well, in our view. With a net cash balance sheet, and NT$19.5 billion in capital surplus and NT$9.0 billion in legal reserves, the pending changes in Taiwan corporate law means FET will be able to tap into these accounts to maintain high dividend levels if necessary. Capital management will be a key focus in 2010, in our view. Potential for earnings upgrades Mobile fundamentals at FET remain weak but have shown signs of turning the corner in the 3Q09 results. We believe earnings are likely to find a trough in 2009 as mobile business turns around and investors focus on 2010 numbers, which should be better than 2009. We believe the potential risk for upward earning estimates is high. Non-operating loss items are likely to narrow as the operating performance of NCIC turns positive in 2010. How much recovery is priced into the stock? Taiwan telcos are not recovery plays but are more known for their stable earnings streams and high dividend yields. We believe FET offers a little more excitement that that, although we expect an increase in positive news flow regarding China Mobile’s strategic stake. In our view, announcements regarding the strategic partnership in 2010 should heighten investor interest in the name and any JV investments with CM should be positive for FET in the long run. Price target and key risks Our DCF-based Dec-10 price target of HK$45 assumes a WACC of 9.4%, a terminal growth rate of -2%, and a beta of 1.05. Key risks to our PT are irrational mobile competition in Taiwan, and negative regulatory policies.
Bloomberg: 4904 TT; Reuters: 4904.TW
NT$ in millions, year-end December Revenue EBITDA Net profit EPS (NT$) DPS (NT$) Sales growth (%) Net profit growth (%) Dividend yield (%) ROE (%) P/E (x) EV/EBITDA (x) FY08 62,518 25,252 10,161 3.12 2.80 -2.4% -12.6% 7.6 13.5 11.9 4.3 FY09E 58,658 23,162 9,049 2.78 2.42 -6.2% -10.9% 6.6 12.7 13.3 4.6 FY10E 59,463 23,422 10,111 3.10 2.70 1.4% 11.7% 7.3 14.0 11.9 4.3 FY11E 59,495 23,375 10,706 3.29 2.86 0.1% 5.9% 7.7 14.4 11.3 4.1

Overweight
NT$37.00 Price Target: NT$45.00

Taiwan Telecommunications Jimmy CheongAC
(852) 2800-8566 jimmy.j.cheong@jpmorgan.com J.P. Morgan Securities (Asia Pacific) Ltd

Price performance
NT$

55

50

45

40

35

30 Jul-08 Jan-08 May-08 Jan-09 May-09 Sep-08 Jul-09 Nov-07 Nov-08 Sep-09 Mar-08 Mar-09

Source: Bloomberg.

Performance
1M Absolute (%) Relative (%)
Source: Bloomberg.

3M -1.9 -9.2

12M -10.5 -39.1

0.1 -0.6

Company data
52-week range (NT$) Mkt cap. (NT$) Mkt cap. (US$MM) Avg daily value (US$MM) Avg daily volume (MM) Shares O/S (MM) Date of price Index: Taiwan SE Free float (%) Exchange rate (NT$/ US$)
Source: Bloomberg.

29.25-41.00 120,238 3,695 7.2 6.3 3,258.5 5-Nov-09 7,417 42.0 32.54

Source: Company, Bloomberg, J.P. Morgan estimates. Note: Share price and valuation are as of 5 November 2009. 160

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Far Eastone Telecommunications: Summary of financials
NT$ in millions, year-end December Profit and loss Revenue EBITDA Depreciation Amortization Operating profit EBIT Interest income Interest expense Associates Profit before tax Tax Net profit Shares Out EPS (NT$) DPS (NT$) DPS payout ratio Revenue growth EBITDA growth Net profit growth EPS growth DPS growth Ratios 2006 EBITDA margin FCF margin ROE ROC ROA Tax rate Capex/sales Debt/capital Net (debt) or cash/equity Interest cover (x) 42.4% 26.2% 17.9% 20.4% 17.2% 19.3% 9.0% 7.4% -3.7% -1,299 2007 41.1% 25.5% 15.2% 18.6% 15.8% 21.6% 9.0% 3.7% -11.1% 182 2008 40.4% 21.1% 13.5% 18.4% 15.5% 24.8% 12.0% 2.7% -9.9% 161 2009E 39.5% 21.7% 12.7% 16.6% 13.8% 24.8% 12.0% 0.6% -12.4% 203 2010E 39.4% 22.8% 14.0% 17.2% 14.4% 20.0% 12.0% 0.6% -20.0% 131 Cash flow from operations Capex Cash flow from other investing Cash flow from financing Change in cash for year Beginning cash Closing cash 2006 67,227 28,506 (11,818) (111) 16,578 16,150 82 (104) (22) 16,128 (3,111) 13,156 -9.7% 3,873 3.40 3.10 91% -6.5% -7.8% -10.6% -10.6% 0.0% 2007 64,037 26,329 (11,213) (64) 15,052 14,419 186 (42) 144 14,563 (3,141) 11,619 -9.7% 3,873 3.00 3.10 103% -4.7% -7.6% -11.7% -11.7% 0.0% 2008 62,518 25,252 (10,851) (61) 14,341 13,167 180 (23) 157 13,324 (3,302) 10,161 -8.5% 3,259 3.12 2.80 88% -2.4% -4.1% -12.6% 3.9% -9.7% 2009E 58,658 23,162 (10,988) (120) 12,053 11,653 147 (33) 114 11,767 (2,918) 9,049 -11.7% 3,259 2.78 2.42 87% -6.2% -8.3% -10.9% -10.9% -13.4% 2010E 59,463 23,422 (10,793) (120) 12,509 12,209 188 (8) 179 12,388 (2,478) 10,111 5.3% 3,259 3.10 2.70 87% 1.4% 1.1% 11.7% 11.7% 11.4% Balance sheet Cash and equivalents Accounts receivable Inventories Others Total current assets Net fixed assets Other long term assets Total assets ST loans Others Total current liabilities Long term debt Other liabilities Total liabilities Shareholders' equity Total liabilities and equity (Net debt)/cash Book value/share (NT$) Cash flow 2006 25,968 (6,081) (454) (16,222) 3,211 4,640 7,852 2007 24,947 (5,786) (1,564) (15,170) 2,427 7,852 10,279 2008 23,410 (7,470) (154) (18,828) -3,042 10,279 7,236 2009E 20,040 (7,031) (154) (12,600) 255 7,236 7,492 2010E 21,048 (7,141) (154) (7,899) 5,854 7,492 13,346 2006 7,852 6,096 973 2,815 17,735 54,666 21,280 93,681 3,168 12,438 15,605 2,822 463 18,891 74,790 93,681 2,768 19.31 2007 10,278 6,507 671 3,383 20,839 48,929 26,773 96,541 3,018 12,115 15,133 74 919 16,125 80,415 96,541 8,828 20.76 2008 7,236 6,181 853 3,753 18,022 45,428 25,048 88,499 1,936 13,303 15,239 27 991 16,257 72,241 88,499 7,030 22.17 2009E 7,492 5,799 800 3,696 17,788 41,471 26,557 85,816 400 12,226 12,625 27 991 13,644 72,172 85,816 8,822 22.15 2010E 13,346 5,879 811 3,708 23,744 37,819 26,208 87,771 400 11,970 12,370 27 991 13,389 74,383 87,771 14,676 22.83

Source: Company and J.P. Morgan estimates.

161

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

FEMSA
www.femsa.com
Company description FEMSA (FMX) is a leading beverage company and convenience store operator in Latin America, with $14bn in 2009E sales. The company operates through its 3 subsidiaries; Cerveza, which has beer operations in Mexico and Brazil and exports to the US; KOF, the largest Coke bottler in LatAm and second largest in world by sales volume and Oxxo, which is the largest and fastest growing chain of convenience stores in Mexico, with almost 7,000 locations and expanding at a pace of +800 stores per year. Post mortem FMX used the crisis to capture the trade-down of consumers looking for value. In our view, investors should pay special attention to such companies because they (1) are operating in oligopolies with low competitive intensity; (2) have strong brands and pricing power; (3) have high barriers to entry and (4) generate significant free cash flow with returns above cost of capital. Potential for earnings upgrades FEMSA being a leader in soft drinks has pricing power. In beer, they are price followers; the leaders are already taking pricing and they are following. Oxxo should continue to expand regardless of the economic scenarios. How much recovery is priced into the stock? FEMSA’s revenue and EBITDA will greatly benefit from a US economic recovery as in beer its stronghold territories are the North of Mexico. In our view, this not fully priced into the stock. Its current net debt/EBITDA ratio is 0.7x. Even without further economic improvements it has FCF yield of 10% with ROIC of 13%. The stock is trading at 7.4x '10E EBITDA. We believe there is upside risk to our estimates with the recovery and our Dec ‘10 $50 PT may be conservative. Price target and key risks Our Dec ’10 PT of $50 for FMX is based on SOTP valuation where we assign multiples to each of its business units. FMX has high correlation to Ps$ and so is expected to have more upside if the peso strengthens further. Risks are mainly macro, devaluation of Ps$ and large dilutive acquisitions.

Overweight
Price: $45.20 Price Target: $50

Latin America Food & Beverages Alan AlanisAC
(1-212) 622 3697 alan.alanis@jpmorgan.com J.P. Morgan Securities Inc.

Price performance
US$
55 45 35 25 15 Nov Feb May Aug Nov

Source: Bloomberg

Performance
1M Absolute (%) Relative (%)
Source: Bloomberg

3M 14.1% 3.0%

12M 63.5% 1.0%

-0.9% -4.6%

Company data
52-week range (LC) Mkt cap. (Ps MM) Mkt cap. (US$MM) Avg daily value (US$MM) Avg daily volume (MM) Shares O/S (MM) Date of price Index: Mexican Bolsa Free float (%) Exchange rate
Source: Bloomberg.

19.91-45.98 207.53 16.2 73.8 1.5 358 11/25/2009 31,364 60% 12.8

Bloomberg: FMX US; Reuters: FMX.N
Ps in millions, year-end December Sales Net profit EPS (LC) FD EPS (LC) DPS (LC) Sales growth (%) Net profit growth (%) EPS growth (%) ROE (%) P/E (x) FD P/E (x) FY08 163,289 8,964 2.51 2.51 0.45 11% -25% -25% 11% 32.5x 32.5x FY09E 193,273 12,968 3.62 3.62 0.45 18% 45% 45% 12% 24.3x 24.3x FY10E 213,244 15,594 4.36 4.36 0.54 10% 20% 20% 13% 20.0x 20.0x FY11E 229,381 17,352 4.85 4.85 0.65 8% 11% 11% 13% 17.7x 17.7x

Source: Company, Bloomberg, J.P. Morgan estimates. Note: Share price and valuations are as of 25 November 2009. 162

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

FEMSA: Summary of financials
Profit and loss statement
Ps in millions/billions, year-end December Revenue % change Y/Y Gross margin (%) EBITDA % change Y/Y EBITDA margin (%) EBIT % change Y/Y EBIT margin (%) Net interest Earnings before tax % change Y/Y Tax as % of EBT Net income (reported) % change Y/Y Shares O/S (MM) EPS (reported) (LC) FY08 163,289 11% 46% 31,040 12% 19% 22,216 14% 14% 4,188 13,119 -22% 4,155 32% 8,964 -25% 3,578 2.51 FY09E 193,273 18% 46% 36,648 18% 19% 26,317 18% 14% 4,769 18,914 44% 5,946 31% 12,968 45% 3,578 3.62 FY10E 213,244 10% 44% 40,241 10% 19% 28,684 9% 13% 3,889 22,277 18% 6,683 30% 15,594 20% 3,578 4.36 FY11E 229,381 8% 44% 43,378 8% 19% 30,759 7% 13% 3,201 24,789 11% 7,437 30% 17,352 11% 3,578 4.85

Cash flow statement
Ps in millions/billions, year-end December EBIT Depreciation & amortization Change in working capital Taxes Cash flow from operations Capex Disposal/(purchase) Net interest Free cash flow Equity raised/(repaid) Debt raised/(repaid) Other Dividends Beginning cash Ending cash DPS (LC) FY08 22,216 8,824 1,187 4,155 18,975 14,223 4,188 11,339 0 610 1,045 1,620 10,456 13,313 0.45 FY09E 26,317 10,331 3 5,946 23,302 11,773 4,769 16,982 0 1,404 975 1,620 9,110 25,083 0.45 FY10E 28,684 11,557 1,497 6,683 28,648 13,538 3,889 19,595 0 (4,049) 1,519 1,945 15,095 22,792 0.54 FY11E 30,759 12,619 240 7,437 30,211 14,561 3,201 19,829 0 (2,440) 1,012 2,339 22,792 33,473 0.65

Source: Company, J.P. Morgan estimates.

Source: Company, J.P. Morgan estimates.

Ratio analysis Balance sheet
Ps in millions/billions, year-end December Cash and cash equivalents Accounts receivable Inventories Others Current assets LT investments Net fixed assets Total assets Liabilities ST loans Others Total current liabilities Long-term debt Other liabilities Total liabilities Shareholders’ equity BVPS (LC) FY08 9,110 10,759 13,065 6,083 39,017 65,299 61,425 146,023 11,648 32,104 43,752 31,275 13,118 44,393 96,895 27.08 FY09E 15,095 12,179 13,026 5,451 45,751 69,468 70,640 155,722 8,221 32,856 41,077 32,679 14,093 46,772 113,625 31.75 FY10E 22,792 10,971 14,581 6,770 55,114 64,060 78,029 160,641 6,961 36,019 42,981 28,630 15,612 44,242 128,533 35.92 FY11E 33,473 11,682 15,526 7,209 67,890 58,242 85,788 163,785 6,101 38,354 44,455 26,190 16,623 42,814 144,406 40.36 %, year-end December EBITDA margin Operating margin Net profit margin SG&A/sales Sales growth Net profit growth Sales per share growth EPS growth Interest coverage (x) Net debt to total capital Net debt to equity Sales/assets EBIT margin ROCE Assets/equity (x) ROI ROE FY08 19.0% 13.6% 5.5% 33% 11% -25% 11% -25% 4.67 24% 35% 0.88 14% 22% 1.91 12% 11% FY09E 19.0% 13.6% 6.7% 32% 18% 45% 18% 45% 4.99 17% 23% 0.96 14% 23% 1.77 13% 12% FY10E 18.9% 13.5% 7.3% 31% 10% 20% 10% 20% 6.52 8% 10% 0.99 13% 24% 1.68 13% 13% FY11E 18.9% 13.4% 7.6% 31% 8% 11% 8% 11% 7.72 -1% -1% 0.99 13% 26% 1.60 13% 13%

Source: Company, J.P. Morgan estimates.

Source: Company, J.P. Morgan estimates.

163

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

First Gulf Bank
www.fgb.ae
Company description First Gulf Bank is the 4th largest bank in the UAE and among the Top-10 banks in the MENA region (by assets). Incorporated in 1979, the bank is c.65% owned by the Abu Dhabi ruling family and commands a franchise of 18 branches in the UAE and presence in Libya, Singapore, Qatar, U.K. & India, c.1,000 full-time employees and c.$25bn in loans & c.$24bn in customer deposits. Post mortem FGB’s key strengths, which we see benefiting its stock vs. peers, are i) robust capital (Tier I 17%, CAR 20% 09E) – among the best in CEEMEA space – backed by sovereign ownership giving comfort on b/s profile and ii) est. asset quality deterioration lower vs. CEEMEA peers, with NPLs peaking at just 3.5% 10E (incl. >100% coverage). FGB’s higher-than-peers exposure to Abu Dhabi retail / HNWI is reflected in its strong NIM of c.3.6% 09E, 3.4% 10E & fee income, >1% of avg. assets (peer Abu Dhabi banks lower) while FGB’s <20% C/I ratio 09E-11E clearly reflects the efficiency of its business model. Potential for earnings upgrades We have been more conservative vs. mgmt. guidance on asset quality deterioration going into FY10E, expecting NPLs to peak at 3.5% 10E; lower than expected NPLs could provide material upside to JPM & consensus earnings estimates. FGB currently trades at a 30% discount to NAV valuations of Turkish, Russian & CEE banks under JPM coverage, despite being well poised to deliver comparable superior returns (RONAV 17%-19% 10E-11E). We believe that this valuation gap should narrow, with the fair trading multiple of FGB being 1.6x10E book in our view vs. 1.3x10E book currently, implying 34% upside from current price levels. Price target and key risks Our Dec-10 PT of AED26/sh is based on the Gordon growth model using 17% ROE, 12.5% COE & 6% LT growth rate. Key risks include worse than expected loan/deposit growth or asset quality deterioration.
Bloomberg: FGB.UH; Reuters: FGB.AD
AED, year-end Dec Pre-provision op. profit, mn Net profit, mn EPS EPS growth (%) Tier I ratio (%) NPL ratio (%) Dividend yield RONAV (%) P/E (x) P/NAV FY08 3,407 3,005 2.19 50% 14.6% 0.6% 1.9% 23% 8.6 1.6 FY09E 4,447 3,000 2.18 0% 17.0% 2.0% 1.7% 17% 8.6 1.4 FY10E 5,315 3,299 2.40 10% 16.1% 3.5% 1.9% 17% 7.8 1.2 FY11E 6,219 4,276 2.85 19% 15.2% 3.1% 2.3% 19% 6.6 1.1

Overweight
Price: AED 18.75 Price Target: AED 26.00

United Arab Emirates Banks Naresh BilandaniAC
(+971) 44 281763 naresh.n.bilandani@jpmorgan.com J.P. Morgan Chase Bank N.A., Dubai Branch
Price Performance
18 Dh 14 10 6
Nov-08 Feb-09 May-09 Aug-09 Nov-09

Source: Bloomberg

Performance
Absolute (%)
Source: Bloomberg

1M -1.1%

3M 17.6%

12M 81.2%

Company data
52-week range (Dh) Mkt cap. (DhBN) Mkt cap. (US$BN) Avg daily value (US$MM) Avg daily volume (MM) Shares O/S (MM) Date of price Index: Free float (%) Exchange rate (Dh/$)
Source: Bloomberg

19.75-6.55 25.8 7.0 3.15 0.65 1,375 23-Nov-09 ADSMI 34.1% 3.7

Source: Company, Bloomberg, J.P. Morgan estimates. Note: Share price and valuations are as of cob 23 November 2009.

164

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

First Gulf Bank: Summary of Financials
Profit and Loss Statement Dh in millions, year end Dec Net interest income % Change Y/Y Non-interest income Fees & commissions % change Y/Y Trading revenues % change Y/Y Other Income Total operating revenues % change Y/Y Core Operating Revenues Admin expenses % change Y/Y Other expenses Pre-provision operating profit % change Y/Y Loan loss provisions Earnings before tax % change Y/Y Tax (charge) % Tax rate Minorities Net Income (Reported) Balance sheet Dh in millions, year end Dec ASSETS Net customer loans % change Y/Y Loan loss reserves Other interest earning assets % change Y/Y Average interest earnings assets Goodwill Other assets Total assets LIABILITIES Customer deposits % change Y/Y Long term funding Interbank funding Other Interest Bearing Liabilities Average interest bearing liabs Other liabilities Shareholders' equity Minorities Total liabilities & Shareholders Equity FY07A FY08A FY09E FY10E 4,340 12.1% 2,138 1,631 25.0% 372 42.4% 135 6,478 17.3% 1,123 8.0% 40 5,315 19.5% 2,066 3,296 10.0% 0 0.0% 3 3,299 Ratio Analysis FY11E Dh in millions, year end Dec Per Share Data 4,850 EPSAdjusted 11.7% % Change Y/Y 2,676 DPS 1,956 % Change Y/Y 19.9% Dividend yield 509 Payout ratio 37.0% BV per share 211 NAV per share 7,526 Shares outstanding 16.2% - Return ratios 1,263 RoRWA 12.4% Pre-tax ROE 44 ROE 6,219 RoNAV 17.0% 2,011 Revenues 4,271 NIM (NII / RWA) 29.6% Non-IR / average assets 0 Total rev / average assets 0.0% NII / Total revenues 5 Fees / Total revenues 4,276 Trading / Total revenues FY07A 1.46 18.9% 0.18 (74.0%) 1.0% 12.4% 7.36 7.36 1,375.0 FY08A 2.19 49.7% 0.35 91.0% 1.9% 15.9% 11.81 11.81 1,375.0 FY09E 2.18 (0.2%) 0.33 (5.7%) 1.7% 15.0% 13.14 13.14 1,375.0 FY10E 2.40 10.0% 0.36 10.0% 1.9% 15.0% 15.29 15.29 1,375.0 FY11E 2.85 18.8% 0.43 18.8% 2.3% 15.0% 16.54 16.54 1,500.0

1,331 2,580 3,871 10.2% 93.8% 50.0% 1,422 1,961 1,653 462 1,114 1,305 63.9% 141.3% 17.1% 399 66 261 363.9% (83.5%) 295.0% 561 781 87 2,753 4,542 5,524 33.8% 65.0% 21.6% 585 1,096 1,040 54.0% 87.3% (5.1%) 25 39 37 2,142 3,407 4,447 29.3% 59.0% 30.5% 207 566 1,478 2,008 2,997 2,997 30.8% 49.3% 0.0% 0 0 0 0.0% 0.0% 0.0% 0 8 3 2,008 3,005 3,000

4.0% 21.0% 21.0% 21.0%

3.4% 22.8% 22.8% 22.8%

2.5% 17.5% 17.5% 17.5%

2.3% 16.9% 16.9% 16.9%

2.4% 18.7% 18.7% 18.7%

2.1% 2.4% 4.6% 48.4% 16.8% 14.5%

2.3% 2.2% 5.0% 56.8% 24.5% 1.5%

2.9% 1.4% 4.7% 70.1% 23.6% 4.7%

2.7% 1.6% 4.7% 67.0% 25.2% 5.7%

2.5% 1.7% 4.6% 64.4% 26.0% 6.8%

FY07A

FY08A

FY09E

FY10E

FY11E Dh in millions, year end Dec

FY07A

FY08A

FY09E

FY10E

FY11E

Cost ratios 44,409 79,363 93,543 112,511 138,412 Cost / income 76.5% 78.7% 17.9% 20.3% 23.0% Cost / assets 654 1,141 2,442 4,030 4,936 23,273 17,822 23,111 25,916 28,677 10.3% (23.4%) 29.7% 12.1% 10.7% Balance Sheet Gearing 56,974 82,434 106,920 127,541 152,758 Loan / deposit - Investments / assets - Loan / assets 73,198 107,522 126,330 147,762 176,077 Customer deposits / liabilities LT Debt / liabilities 52,256 73,963 88,040 105,183 126,208 Asset Quality / Capital 51.8% 41.5% 19.0% 19.5% 20.0% Loan loss reserves / loans 0 0 8,510 8,510 8,510 NPLs / loans 2,786 3,113 3,891 4,864 6,079 LLP / RWA 5,785 9,985 5,031 5,634 6,479 Loan loss reserves / NPLs 49,478 73,944 96,266 114,831 135,734 Tangible Equity/Assets - RWAs 10,120 16,245 18,074 21,023 24,804 % YoY change 0 374 374 374 374 Core Tier 1 73,198 107,522 126,330 147,762 176,077 Total Tier 1 Capital Adequacy Ratio

22.2% 0.8%

25.0% 1.1%

19.5% 0.9%

18.0% 0.8%

17.4% 0.7%

85.0% 107.3% 106.3% 107.0% 109.7% 13.8% 9.3% 9.7% 9.0% 8.0% 60.7% 73.8% 74.0% 76.1% 78.6% 85.9% 85.0% 83.5% 84.7% 85.7% 0.0% 0.0% 7.9% 6.7% 5.6%

1.8% 1.8% 2.8% 3.8% 3.8% 1.0% 0.6% 2.0% 3.5% 3.1% 1.02% 1.03% 1.85% 2.55% 2.58% 144.4% 232.9% 128.7% 99.7% 109.4% 64,149 110,350 131,797 158,142 191,348 74.5% 72.0% 19.4% 20.0% 21.0% 15.5% 14.1% 12.8% 12.6% 12.3% 15.0% 14.6% 17.0% 16.1% 15.2% 15.0% 14.1% 20.0% 18.5% 17.3%

Source: Company reports and J.P. Morgan estimates.

165

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Fubon Financial Holdings
www.fubon.com/financial
Company description Fubon is principally engaged in securities, banking, life insurance, and P&C sectors It recently expanded its life business through M&A. Its 19.9% stake in Xiamen City Bank, via 75%-owned Fubon Bank (HK), should provide a better entrance for a potential China opportunity, in our view. Post mortem During the financial crisis, Fubon acquired one company. This acquisition has not only helped Fubon move up the rank to become the No #2 player in the life insurance industry but also provided support to its ROE. Potential for earnings upgrades We believe Fubon is best positioned in the domestic reflation environment. Our estimated breakeven point for Fubon Life (pro forma) is only 3.1% versus 3.8%-4.0% for Cathay and Shinkong; this means Fubon should be best positioned for reflation and deserves a higher valuation (if unrealized gains on property gains are included). Meanwhile, Fubon has been redeploying capital to the property market and overseas bond market (i.e., carry trade) to improve its earnings. How much recovery is priced into the stock? After the acquisition of the company, we expect the sustainable ROE of Fubon to improve to 13%-14% from the historical level of 7%-8%. This should be driven by: (1) strong profitability of life business; and (2) strong FYP growth, which should help lock-in low-cost liabilities. We do not think this has been fully priced in as the improved ROE should deserve higher P/BV (versus the current level of 1.6x P/BV). Price target and key risks We remain OW on Fubon with our PT of NT$54 (SOTP-based, Dec-10). Key risks to our PT are: (1) a worse-than-expected recovery in exports, which could lead to credit-quality deterioration; (2) worse-than-expected outcome of cross-straits negotiations; (3) unfavorable regulatory changes and M&A terms.

Overwight
NT$39.35 Price Target: NT$54

Taiwan Banks Dexter HsuAC
(886-2) 2725-9868 dexter.st.hsu@jpmorgan.com J.P. Morgan Securities (Taiwan) Limited

Price performance
2.0 1.5 1.0 0.5 Nov -08 Feb-09 May -09 Taishin (2887.TW) Taiex Aug-09 Nov -09

Source: TEJ.

Performance
1M Absolute (%) Relative (%)
Source: TEJ.

3M 24.5 13.3

12M 89.6 23.4

0.8 -0.1

Company data
52-week range (NT$) Mkt cap. (NTMM) Mkt cap. (US$MM) Avg daily value (US$MM) Avg daily volume (MM) Shares O/S (MM) Date of price TSE Free float (%) Exchange rate
Source: Bloomberg.

16.65-40.45 319,733 9,901 46.6 42.3 8,125 12-Nov-09 7,671 52 32.29

Bloomberg: 2881 TT; Reuters: 2881.TW
NT$ in millions, year-end December Operating profit Net profit EPS (NT$) FD EPS (NT$) DPS (NT$) EPS growth (%) ROE (%) P/E (x) BVPS (NT$) P/BV (x) Dividend yield (%) FY08 17,262 10,875 1.41 1.41 0.00 -24.6 7.0 27.9 18.62 2.1 0.0 FY09E 27,235 21,404 2.63 2.63 1.58 87.0 13.0 14.9 22.73 1.7 4.0 FY10E 34,631 27,060 3.33 3.33 2.00 26.4 14.0 11.8 24.97 1.6 5.1 FY11E 35,853 26,905 3.31 3.31 1.99 -0.6 12.9 11.9 26.29 1.5 5.0

Source: Company, Bloomberg, J.P. Morgan estimates. Note: Share price and valuation are as of 12 November 2009.

166

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Fubon Financial Holdings: Summary of financials
Income statement - NT$ mn NIMs (as % of Avg. IEA) Avg. IEA/Avg. Assets Margins (as % of Avg. Assets) Interest Earned Interest Suspended Interest Expense Net Interest Income Non-Interest Income Fees Insurance Dealing Other Revenues Total Revenues Costs Pre-Prov. Profits Provisions Other Inc/Exp. Exceptionals Disposals/ Other income Pre-tax Tax Minorities Other Distbn. Attributable Income 2007 1.43% 108.6% 1.56% 47,844 0 -20,298 27,547 28,616 15,294 2,763 11,037 -478 56,162 -29,173 26,990 -10,303 0 0 0 16,687 -2,257 0 0 14,430 2008 1.41% 108.8% 1.54% 49,421 0 -20,084 29,336 18,171 10,467 1,563 5,544 597 47,507 -30,245 17,262 -5,512 0 0 0 11,751 -878 0 0 10,873 2009E 2.01% 102.5% 2.07% 56,905 0 -9,648 47,257 21,028 14,017 -5,836 9,983 2,864 68,285 -41,050 27,235 -3,137 0 0 0 24,098 -2,694 0 0 21,404 2010E 2.02% 98.2% 1.99% 60,271 0 -7,152 53,119 26,326 16,767 -7,178 10,733 6,004 79,445 -44,814 34,631 -4,082 0 0 0 30,549 -3,489 0 0 27,060 2011E 2.13% 100.8% 2.15% 70,067 0 -8,176 61,891 21,283 17,546 -9,298 5,505 7,530 83,174 -47,321 35,853 -4,553 0 0 0 31,300 -4,395 0 0 26,905 Growth Rates Loans Deposits Assets Equity RWA 2007 6.3% 4.2% 5.1% 1.3% 17.0% 2008 13.5% 17.6% 10.7% -13.3% 7.0% 2009E 7.8% 6.3% 28.0% 28.5% 2.8% 2010E 9.4% 4.1% 8.2% 9.9% 6.2% 2011E 10.4% 3.8% 7.6% 5.3% 7.3%

Net Interest Income Non-Interest Income of which Fee Grth Revenues Costs Pre-Provision Profits Loan Loss Provisions Pre-Tax Attributable Income EPS DPS Balance Sheet Gearing Loan/Deposits Investment/Assets Loan/Assets Customer deposits/Liab. LT Debt/Liabilities Asset Quality/Capital Loan loss reserves/Loans NPL/Loans Coverage Growth in NPLs Tier 1 Ratio Total CAR

3.1% 27.3% 50.2% 14.2% 15.7% 12.5% -31.5% 86.4% 71.8% 79.5% 50.0% 2007 81.9% 31.5% 37.8% 49.7% 3.0% 2007 0.90% 1.18% 76.3% -33.9% 9.56% 9.6%

6.5% -36.5% -31.6% -15.4% 3.7% -36.0% -46.5% -29.6% -24.7% -24.6% -100.0% 2008 79.0% 33.7% 38.7% 52.1% 3.1% 2008 0.70% 0.98% 71.4% -6.3% 9.46% 11.2%

61.1% 15.7% 33.9% 43.7% 35.7% 57.8% -43.1% 105.1% 96.9% 87.0% nm 2009E 80.1% 56.2% 32.6% 43.3% 2.7% 2009E 0.56% 0.73% 76.1% -19.4% 9.72% 11.1%

12.4% 25.2% 19.6% 16.3% 9.2% 27.2% 30.1% 26.8% 26.4% 26.4% 26.4% 2010E 84.2% 56.0% 33.0% 41.7% 2.5% 2010E 0.54% 0.67% 80.9% 0.0% 9.51% 10.8%

16.5% -19.2% 4.6% 4.7% 5.6% 3.5% 11.5% 2.5% -0.6% -0.6% -0.6% 2011E 89.5% 55.4% 33.8% 40.2% 2.3% 2011E 0.53% 0.61% 86.7% 0.0% 9.35% 10.6%

Per Share Data (NT$/ share) EPS DPS Payout Book Value Fully Diluted Shares

2007 1.87 1.50 0% 21.47 7,719

2008 1.41 0.00 112% 18.62 7,719

2009E 2.63 1.58 76% 22.73 8,125

2010E 3.33 2.00 63% 24.97 8,125

2011E 3.31 1.99 0% 26.29 8,125

Key balance sheet - NT$ mn Net Loans LLR Gross Loans NPLs Investments Other Earning Assets Avg. IEA Goodwill Assets

2007 685,183 -6,245 691,428 8,182 570,580 122,759 1,374,421 497 1,812,745

2008 777,352 -5,476 782,828 7,667 675,562 124,505 1,483,830 497 2,006,720

2009E 837,734 -4,698 842,432 6,177 1,443,530 105,328 1,987,093 0 2,567,627

2010E 916,335 -4,996 921,331 6,177 1,555,773 104,742 2,486,568 0 2,779,190

2011E 1,011,274 -5,357 1,016,631 6,177 1,655,469 113,327 2,683,636 0 2,990,759

Du-Pont Analysis

2007

2008

2009E

2010E

2011E

Deposits Long-term bond funding Other Borrowings Avg. IBL Avg. Assets Common Equity RWA Avg. RWA

836,544 49,760 132,306 1,011,351 1,768,643 165,728 726,540 673,762

984,101 57,596 64,587 1,062,448 1,909,733 143,715 777,318 751,929

1,046,233 64,436 103,584 1,160,269 2,287,174 184,681 798,777 788,048

1,088,878 64,436 104,291 1,235,929 2,673,409 202,899 848,346 823,561

1,130,351 64,436 78,784 1,265,588 2,884,975 213,567 910,115 879,230

Margins (as % of Avg. Assets) Non IR/Avg. Assets Non-Int. Rev./ Revenues Revenue/Assets Cost/Income Cost/Assets of which Goodwill Amort. Operating ROA LLP/Loans Loan/Assets Other Prov, Income/ Assets Pre-Tax ROA Tax Rate Minorities & Outside Distbn. ROA RoRWA Equity/Assets ROE

1.56% 1.62% 51.0% 3.18% 51.9% 1.65% 0.00% 1.53% -1.55% 37.6% 0.00% 0.94% -13.5% 0.00% 0.82% 2.14% 9.31% 8.76%

1.54% 0.95% 38.2% 2.49% 63.7% 1.58% 0.00% 0.90% -0.75% 38.3% 0.00% 0.62% -7.5% 0.00% 0.57% 1.45% 8.10% 7.03%

2.07% 0.92% 30.8% 2.99% 60.1% 1.79% 0.00% 1.19% -0.39% 35.3% 0.00% 1.05% -11.2% 0.00% 0.94% 2.72% 7.18% 13.04%

1.99% 0.98% 33.1% 2.97% 56.4% 1.68% 0.00% 1.30% -0.47% 32.8% 0.00% 1.14% -11.4% 0.00% 1.01% 3.29% 7.25% 13.96%

2.15% 0.74% 25.6% 2.88% 56.9% 1.64% 0.00% 1.24% -0.47% 33.4% 0.00% 1.08% -14.0% 0.00% 0.93% 3.06% 7.22% 12.92%

Source: Company data, J.P. Morgan estimates.

Fubon Financial: SOTP valuation
NT$MM Taipei Fubon Bank Fubon Life Fubon Securities Fubon Insurance Fubon Bank (Hong Kong) Fubon Investment Trust Others & Liabilities Dividend Total Shares O/S Fair Value
Source: J.P. Morgan estimates. 167

Sh. Equity 83,525 102,767 30,812 19,278 14,862 965 -17,526 25,286 214,681

Implied P/BV 1.79 1.63 1.60 1.70 1.35 1.30 1.00 1.00 1.99

Implied value 149,135 167,514 49,299 32,772 20,063 1,254 -17,526 25,286 427,797 8,125 52.7

% cont. 35% 39% 12% 8% 5% 0% -4% 6% 100%

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Gazprom
www.gazprom.com
Company description Gazprom is the largest Russian gas producer. The company owns the Russian gas transportation network and holds the Russian gas export monopoly by law. We forecast the company’s gas output to decline 17% y/y to 458 bcm this year due to weak demand and recover 6% y/y in 2010E. Gazprom owns a 95.7% stake in Gazprom Neft (approx. 1 mmbpd annual crude output). Total proven hydrocarbon reserves amounted to 117 bn boe, 3P – 140 bn boe (end-2008). Gazprom owns power generating and other large non-core assets, including banking and real estate. The government is the largest shareholder in Gazprom with a 50.1% stake. Post mortem The drop in domestic gas demand and output in 2009 proved deeper than expected. High-margin export sales were further weakened by oversupply of gas in Europe. We forecast gas price recovery in 2010 and improvement in export and domestic demand only from 2011. Short term, we believe Gazprom might struggle to place minimum contract volumes in Europe in 2009-2010, but it is unlikely to compromise on prices. Mid term, we see Gazprom’s position in Europe as relatively secure. Potential for earnings upgrades We see potential for an earnings upgrade if volume recovery in 2010-2011 is faster than expected and oil/gas prices are higher than estimated (JPMe $70/bbl for 2010 and $87/bbl for 2011). Our EBITDA and net income estimates are a modest 5% above Bloomberg consensus for 2010-2011. How much recovery is priced into the stock? Gazprom shares are traded at a 5.7x 12M forward PER, which suggests a 3539% discount to 10-year and 5-year PER averages respectively, which might be excessive given that the company is at the trough of the earnings cycle. Price target and key risks Our PT (Dec-10) for Gazprom is $9.9/share, based on a 50% DCF-based fair value (WACC at 10.0% and terminal growth rate at 2.5%) and 50% multiplebased PER (‘10E). The key risks: increasing competition, lower gas prices.
Bloomberg: GAZP RU; Reuters: GAZP.RTS
$ in millions, year-end December Sales Net profit EPS (LC) FD EPS (LC) DPS (LC) Sales growth (%) Net profit growth (%) EPS growth (%) ROE (%) P/E (x) FD P/E (x) FY08 141,520 30,593 1.34 1.34 0.09 52% 31% 31% 20% 4.7 4.7 FY09E 96,011 20,730 0.90 0.90 0.10 -32% -32% -32% 12% 7.0 7.0 FY10E 112,363 25,049 1.09 1.09 0.05 17% 21% 21% 12% 5.8 5.8 FY11E 134,672 33,498 1.46 1.46 0.07 20% 34% 34% 14% 4.3 4.3

Overweight
Price: 6.30 Price Target: $9.90

Russia Russian Oil & Gas Nadia KazakovaAC
(7-495) 937 7329 nadia.kazakova@jpmorgan.com J.P Morgan Securities Ltd.

Price Performance
7.0 6.0 $ 5.0 4.0 3.0
Nov-08 Feb-09 May-09 Aug-09 Nov-09

Source: Bloomberg

Performance
Absolute (%)
Source: Bloomberg

1M -16.2

3M 8.2

12M 40.0

Company data
52-week range ($) Mkt cap. (US$MM) Avg daily value (US$MM) Avg daily volume (MM) Shares O/S (MM) Date of price Index: RTS Free float (%) Exchange rate
Source: Bloomberg, J.P. Morgan

2.98-6.88 144,366 934 152 22,915 23-11-09 1466.77 40% 1

Source: Company, Bloomberg, J.P. Morgan estimates. Note: Share price and valuations are as of cob 23 November 2009.

168

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Gazprom: Summary of Financials
Profit and Loss Statement $ in millions, year end Dec Revenues % change Y/Y Gross Margin (%) EBITDA % change Y/Y EBITDA Margin EBIT % change Y/Y EBIT Margin Net Interest Earnings before tax % change Y/Y Tax as a % of EBT Net Income (Reported) % change Y/Y Shares Outstanding EPS (reported) % change Y/Y Balance sheet $ in millions, year end Dec Cash and cash equivalents Accounts receivable Inventories Others Current assets LT investments Net fixed assets Total assets Liabilities ST loans Payables Others Total current liabilities Long term debt Other liabilities Total liabilities Shareholders' equity BVPS FY08 FY09E FY10E FY11E Cash flow statement FY12E $ in millions, year end Dec FY08 FY09E FY10E FY11E FY12E

141,520 96,011 112,363 134,672 148,784 EBIT 52.2% (32.2%) 17.0% 19.9% 10.5% Depreciation & amortisation 40.1% 45.9% 45.9% 46.9% 48.9% Change in working capital/Other 58,973 36,555 42,699 53,084 62,305 Taxes 82.7% (38.0%) 16.8% 24.3% 17.4% Cash flow from operations 41.7% 38.1% 38.0% 39.4% 41.9% 51,112 28,483 33,841 42,244 50,894 Capex 103.6% (44.3%) 18.8% 24.8% 20.5% Disposal/(Purchase)/Other 36.1% 29.7% 30.1% 31.4% 34.2% Net Interest (514) (1,466) (1,875) (1,559) (744) Free cash flow 42,726 27,463 33,381 44,780 54,884 26.3% (35.7%) 21.5% 34.2% 22.6% Equity raised/repaid (10,853) (5,591) (6,880) (9,290) (11,374) Debt Raised/repaid 21.2% 19.6% 20.3% 22.0% 22.3% Other 30,593 20,730 25,049 33,498 41,034 Dividends paid 30.7% (32.2%) 20.8% 33.7% 22.5% Beginning cash 22,915.31 22,915.31 22,915.31 22,915.31 22,915.31 Ending cash 1.34 0.90 1.09 1.46 1.79 DPS 30.7% (32.2%) 20.8% 33.7% 22.5% Ratio Analysis FY12E $ in millions, year end Dec 33,614 39,284 14,637 15,717 103,251 EBITDA margin Operating margin Net profit margin SG&A/Sales

51,112 28,483 33,841 42,244 50,894 7,861 8,071 8,858 10,840 11,411 (7,285) 4,578 (3,712) (5,612) (4,993) (10,853) (5,591) (6,880) (9,290) (11,374) 40,836 35,542 32,108 38,181 45,938 (28,743) (19,969) (25,695) (29,512) (26,930) (7,274) (15,883) (6,766) (5,456) (5,506) (514) (1,466) (1,875) (1,559) (744) 4,350 258 590 6,175 19,029 (518) 0 0 0 2,647 (1,008) 5,410 7,381 (2,735) 1,319 (1,282) (2,376) (2,463) (1,219) (1,585) (2,016) 11,225 13,828 12,733 16,067 13,828 12,733 16,067 25,460 0.10 0.05 0.07 0.09 0 (5,701) (2,514) (2,764) 25,460 33,614 0.12

FY08 11,689 22,980 9,416 9,361 53,446 27,328 136,685 243,709

FY09E 12,733 25,118 9,403 10,068 57,321 79,271 157,381 283,967

FY10E 16,067 29,518 11,049 11,808 68,442 72,523 180,738 316,960

FY11E 25,460 35,285 13,239 14,065 88,050 56,759 219,722 359,884

FY08 41.7% 36.1% 21.6% (1.6%)

FY09E 38.1% 29.7% 21.6% 7.8%

FY10E 38.0% 30.1% 22.3% 7.9% 10.9% 20.8% 12.3% 11.7% 9,032 1,151 7,881 760 18.1 19.1% 41,814 0.8

FY11E 39.4% 31.4% 24.9% 7.5% 10.4% 33.7% 14.1% 12.5% 9,285 1,194 8,091 613 27.1 13.7% 34,954 0.6

FY12E 41.9% 34.2% 27.6% 7.0% 9.9% 22.5% 14.7% 13.9% 9,366 1,178 8,188 613 68.4 5.5% 16,334 0.2

Sales per share growth 62,615 EPS growth 234,396 395,730 ROE ROCE 13,295 29,316 799 43,410 36,652 17,747 97,809 278,208 12.14 Production (mboe/day) Production oil (mbpd) Production gas (mboe/day) Refining throughput (mbpd) Interest coverage (x) Net debt to equity Net debt Net debt/EBITDA (ny)

8.6% 11.0% 30.7% (32.2%) 19.5% 19.4% 10,076 1,163 8,914 566 99.5 20.8% 34,738 0.9 11.6% 11.7% 8,553 1,151 7,403 687 19.4 22.5% 43,196 1.0

14,982 17,820 0 32,802 31,445 12,432 76,679 156,559 6.83

16,733 20,123 699 37,555 39,195 14,859 91,610 178,628 7.80

10,053 23,661 740 34,453 47,828 15,822 98,103 203,676 8.89

12,313 27,420 798 40,531 48,101 16,872 105,504 237,175 10.35

Source: Company reports and J.P. Morgan estimates.

169

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Genting
www.genting.com
Company description Genting Bhd is an investment holding company and its subsidiaries are principally involved in leisure and hospitality, where Genting Malaysia owns and operates the sole casino in Malaysia while Genting Singapore is set to open 1 of 2 casinos in Singapore next year. Other subsidiaries are involved in power generation, oil palm plantation, property development and oil & gas. Post mortem Its Malaysian resort has proven to be resilient in the crisis with visitor arrivals in 1H09 remaining flat Y/Y at 9.5MM, while revenue is up 2% Y/Y. Potential for earnings upgrades For its Malaysian resort, we have factored in a 6% decline in casino revenue and 5% decline in overall revenue in 2010 (vs. 2000 recovery of 7% post crisis). Meanwhile, our EBITDA forecast for Genting Singapore is below consensus estimates by 37% for FY10E and 24% for FY11E. How much recovery is priced into the stock? The stock has not fully priced in a recovery, in our view. Genting’s share price is still trading at approximately 20-25% discount to its SOTP (based on current share prices of listed subsidiaries), which is below the three-year average of 18%. Meanwhile, its subsidiary, Genting Malaysia, is trading at 6.4x FY10E EV/EBITDA, which is 1 std deviation below the eight-year mean of 8.3x. Price target and key risks Our Jun-10 PT is based upon a 15% discount to our SOTP value as we believe that discount will narrow slightly from the three-year average of 18% and current discount of 20-25% when Singapore opens next year. Genting Bhd will then become a purer casino play. In the past, the discount has narrowed to 0 once in early 2007 post the winning of Singapore casino license. In arriving at our SOTP value, Genting’s stakes in Genting Malaysia, Genting Singapore and Genting Plantations are valued at our PT of M$3.50, S$1.15 and M$6.70, respectively. Key risks to our PT are a slower-thanexpected recovery in casino markets and prolonged health scares.
Bloomberg: GENT MK; Reuters: GENT.KL
M$ millions, year-end December Sales Core net profit Core EPS (M$) DPS (M$) Sales growth (%) Net profit growth (%) EPS growth (%) ROE (%) ROCE (%) P/E (x) P/BV (x) EV/EBITDA (x) Net div yield (%) FY07 8,484 1,467 0.40 0.27 22.2 24.2 23.9 16.1 17.9 18.1 2.1 8.3 3.7 FY08 9,083 1,129 0.30 0.05 7.1 -23.0 -23.1 4.6 15.6 23.5 2.1 9.1 0.7 FY09E 7,704 1,066 0.29 0.05 -15.2 -5.6 -5.6 8.0 8.2 24.9 1.99 12.5 0.7 FY10E 11,552 1,327 0.36 0.05 49.9 24.5 24.5 9.2 11.2 20.0 1.8 9.9 0.7 FY11E 14,691 1,740 0.47 0.05 27.2 31.1 31.1 10.9 14.1 15.2 1.7 7.0 0.7

Overweight
Price M$7.15 Price Target: M$8.50

Malaysia Gaming Nicole GohAC
(60-3) 2270-4702 nicole.sy.goh@jpmorgan.com JPMorgan Securities (Malaysia) Sdn. Bhd. (18146-X)

Price performance
M$
8 6 4 2 10-08 01-09 04-09 07-09 10-09

Source: Bloomberg.

Performance
Absolute (%) Relative (%)
Source: Bloomberg.

1M 2.3 -0.8

3M 11.7 5.1

12M 45.3 6.1

Company data
52-wk range (M$) Mkt. cap (M$MM) Mkt. cap (US$MM) Liquidity (US$MM) Avg. daily volume (MM) Shares O/S (MM) Date of price KLCI Index Free float (%) Exchange rate
Source: Bloomberg.

M$3.08-7.87 26488.61 7741.81 15.2 7.6 3704.7 5-Nov-09 1254.0 60.3 3.42

Source: Company, Bloomberg, J.P. Morgan estimates. Note: Share price and valuations are as of 5 November 2009.

170

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Genting: Summary of financials
Profit and Loss statem ent M YR in m illions, year-end Dec Revenues % change Y/Y Gross M argin (% ) EBITDA % change Y/Y EBITDA M argin (% ) EBIT % change Y/Y EBIT M argin (% ) Net Interest Earnings before tax % change Y/Y Tax as % of EBT Net Incom e % change Y/Y Shares Outstanding Core EPS- M $ % change Y/Y Balance sheet M YR in m illions, year-end Dec Cash and cash equivalents Accounts receivable Inventories Others Current assets LT investm ents Net fixed assets Total assets Liabilities Payables ST loans Others Total current liabilities Long term debt Other liabilities Total liabilities Shareholders' equity BVPS - M $ FY07A 8,484 22.2 44.6 3,785 11.1 44.6 3,170 9.2 37.4 -109 3,040 10.6 (662) 21.8 1,989 32.2 3704 0.396 -2.7 FY07A 9,590 830 311 268 10,999 10,277 8,903 30,179 FY08A 9,083 7.1 38.6 3,505 -7.4 38.6 2,847 -10.2 31.3 -54 2,868 -5.7 (751) 26.2 569 -71.4 3708 0.304 -23.1 FY08A 9,467 1,090 376 201 11,133 8,626 10,692 30,451 FY09E 7,704 -15.2 35.9 2,763 -21.2 35.9 2,205 -22.6 28.6 -2 2,241 -21.9 (560) 25.0 1,066 87.3 3708 0.287 -5.6 FY09E 15,242 950 603 1,005 17,800 8,663 15,987 42,450 FY10E 11,552 49.9 32.2 3,716 34.5 32.2 2,879 30.6 24.9 170 3,089 37.9 (772) 25.0 1,327 24.5 3708 0.358 24.5 FY10E 11,523 1,424 951 2,088 15,985 8,704 19,511 44,200 FY11E 14,691 27.2 34.6 5,078 36.6 34.6 4,013 39.4 27.3 263 4,317 39.8 (1,079) 25.0 1,740 31.1 3708 0.469 31.1 FY11E 15,395 1,811 1,170 3,676 22,053 8,745 19,754 50,551 Cash flow statem ent M YR in m illions, year-end Dec EBIT Depreciation & am ortisation Change in working capital Taxes Others Cash flow from operations Capex Disposal/ (purchase) Others Free cash flow Debt raised/ (repaid) Equity raised/ (repaid) Dividends paid Other Beginning cash Ending cash Gross DPS - M $ Ratio Analysis % , year-end Dec EBITDA m argin Operating m argin Net profit m argin SG&A/sales Sales per share growth Sales growth Net profit growth EPS growth Interest coverage (x) Net debt to total capital (x) Net debt to equity (x) Sales/assets (x) Assets/equity (x) ROE ROCE FY07A 3,170 615 89 (662) (367) 2,844 (2,858) 870 318 1,175 2,467 0 (1,316) (871) 8,078 9,590 0.370 FY07A 44.6 44.6 23.4 n.a. 21.9 22.2 32.2 (2.7) FY08A 2,847 658 128 (751) 216 2,518 (5,539) 2,650 265 (105) 1,088 0 (524) (731) 9,590 9,467 0.071 FY08A 38.6 38.6 6.3 n.a. 6.9 7.1 (71.4) (23.1) FY09E 2,205 558 9 (560) 302 2,514 (5,853) 0 0 (3,340) 7,874 1,730 (195) (293) 9,467 15,242 0.070 FY09E 35.9 35.9 13.8 n.a. (15.2) (15.2) 87.3 (5.6) FY10E 2,879 837 221 (772) 371 3,536 (4,361) 0 0 (825) (2,406) 0 (195) (294) 15,242 11,523 0.070 FY10E 32.2 32.2 11.5 n.a. 49.9 49.9 24.5 24.5 FY11E 4,013 1,065 52 (1,079) 465 4,516 (1,308) 0 0 3,208 1,152 0 (195) (293) 11,523 15,395 0.070 FY11E 34.6 34.6 11.8 n.a. 27.2 27.2 31.1 31.1

1,369 1,293 258 2,920 4,029 1,692 8,642 12,355 3.34

1,512 442 251 2,206 5,414 1,417 9,037 12,442 3.36

1,808 1,293 251 3,352 12,438 2,032 17,821 13,313 3.59

2,852 1,293 251 4,395 10,032 3,022 17,449 14,446 3.90

3,511 1,293 251 5,054 11,183 4,520 20,757 15,991 4.31

9.5 13.0 9.4 18.4 25.2 Net cash Net cash Net cash Net cash Net cash Net cash Net cash Net cash Net cash Net cash 0.3 0.3 0.2 0.3 0.3 2.4 2.4 3.2 3.1 3.2 16.1 17.9 4.6 15.6 8.0 8.2 9.2 11.2 10.9 14.1

Source: Company, J.P. Morgan estimates

Genting Bhd—PT derivation
Listed subsidiaries Genting Malaysia Genting Plantations Genting Singapore Landmarks Unlisted subsidiaries Power Property Management fees from Resorts Oil & gas Wisma Genting Company level cash / investments Total No of shares RNAV (M$/share) % discount June-10 price target
Source: J.P. Morgan estimates.

% owned 48% 55% 54% 30% 100% 55% 100% 95% 100%

No of shares 5,860 753 11,586 481

Price (M$) 3.50 6.70 2.74 1.42

Market value 9,927 2,774 16,958 202 29,862 3,151 506 5,328 443 97 9,525 -2,118 37,268 3,708 10.05 15% 8.54

M$ / share 2.68 0.75 4.57 0.05 8.05 0.85 0.14 1.44 0.12 0.03 2.57 -0.57 10.05 15% 8.54

Valuation method Based on JPM June-10 target price Based on JPM June-10 target price Based on JPM June-10 target price Based on current share price of M$0.95/ share Based on 1.0X historical book Based on 1.0X book Based on DCF Based on 10X P/E Based on net BV

171

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Grupo Aeroportuario del Sureste
www.asur.com.mx
Company description ASUR has a 50-year concession to operate 9 airports in the southeast of Mexico. Its airport in Cancun, the biggest tourist destination in Mexico, is the second largest in Mexico and accounts for 47% of ASUR’s volumes. The company’s EBITDA margin, at 64%, topped the industry average of 61%in the 9M09. Post mortem Mexican airports were severely impacted by the economic crisis that hit domestic and international traffic. The swine flu outbreak also had a significant negative impact in the 2Q09. We expect a gradual recovery that already started in 3Q, and we believe that international traffic will recover faster, especially on the back of a US economic recovery. In this case, we believe that ASUR is better positioned relative to its peers as it depends more on international traffic. Potential for earnings upgrades The main upside risk to our estimates are related to a better-than-expected recovery in traffic volumes. We expect flat volumes in 4Q09 vs a 14% decrease in 3Q09 yoy, and for the full year we expect volumes to be down 9% and to recover 9% next year. How much recovery is priced into the stock? Although ASUR’s share price has recover significantly over the last three months, YTD it is still underperforming, up 22% vs +40% for the Bolsa. We believe that as volumes start to recover we could see this underperformance start to reverse over the next coming months. Price target and key risks We rate ASUR an OW relative to the other airport companies in Mexico. Our Dec-09 price target of Ps53 (US$41 per ADR) is based on a DCF model using a WACC of 10.5%. ASUR is the company most exposed to hurricanes, given its airports’ locations.
Bloomberg: ASURB MM Reuters: ASURB MM.SA
LC in millions, year-end December Sales Net profit EPS (LC) FD EPS (LC) DPS (LC) Sales growth (%) Net profit growth (%) EPS growth (%) ROE (%) P/E (x) FD P/E (x) FY08 3,169 1,049 3.50 3.50 2.00 13.7% 100.9% 100.9% 15.3% 18.0 18.0 FY09E 3,216 941 3.14 3.14 6.28 1.5% -10.4% -10.4% 15.7% 20.1 20.1 FY10E 3,548 1,107 3.69 3.69 2.19 10.3% 17.7% 17.7% 17.2% 17.1 17.1 FY11E 3,833 1,223 4.08 4.08 2.58 8.0% 10.4% 10.4% 17.8% 15.5 15.5

Neutral
Ps63.04 Price Target: Ps53.00

Mexico Airport Operators Adrian E HuertaAC
(52 81) 8152-8720 adrian.huerta@jpmorgan.com J.P. Morgan Casa de Bolsa, S.A. de C.V., J.P. Morgan Grupo Financiero

Performance
1M Absolute (%) Relative (%)
Source: Bloomberg.

3M 11 4

12M 84 32

11 15

Company data
52-week range (LC) Mkt cap. (LCMM) Mkt cap. (US$MM) Avg daily value (US$MM) Avg daily volume (MM) Shares O/S (MM) Date of price Index: IBOV Free float (%) Exchange rate
Source: Bloomberg.

24.92-49.10 18,585 1,447 3.8 0.2 300.00 11/25/2009 31,364 74% 12.84

Source: Company, Bloomberg, J.P. Morgan estimates. Note: Share price and valuations are as of 25th November 2009.

172

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Asur: Summary of financials
Profit and loss statement
LC in millions, year-end December Revenue % change Y/Y Gross margin (%) EBITDA % change Y/Y EBITDA margin (%) EBIT % change Y/Y EBIT margin (%) Net interest Earnings before tax % change Y/Y Tax as % of EBT Net income (reported) % change Y/Y Shares O/S (MM) EPS (reported) (LC) FY08 3,169 13.7% NA 1,985 16.3% 62.7% 1,384 18.7% 43.7% 174 1,548 31.1% (499) 32.2% 1,049 100.9% 300 3.50 FY09E 3,216 1.5% NA 1,972 -0.6% 61.3% 1,320 -4.6% 41.0% 76 1,386 -10.5% (445) 32.1% 941 -10.4% 300 3.14 FY10E 3,548 10.3% NA 2,202 11.6% 62.1% 1,505 14.0% 42.4% 33 1,538 11.0% (431) 28.0% 1,107 17.7% 300 3.69 FY11E 3,833 8.0% NA 2,389 8.5% 62.3% 1,671 11.0% 43.6% 28 1,698 10.4% (476) 28.0% 1,223 10.4% 300 4.08

Cash flow statement
LC in millions, year-end December EBIT Depreciation & amortization Change in working capital Taxes Cash flow from operations Capex Disposal/(purchase) Net interest Free cash flow Equity raised/(repaid) Debt raised/(repaid) Other Dividends Beginning cash Ending cash DPS (LC) FY08 1,384 602 (90) (499) 946 (936) 142 174 451 0 0 0 (600) 1,926 1,734 2.00 FY09E 1,320 653 (60) (445) 1,423 (670) 142 76 988 0 0 0 (1,884) 1,734 636 6.28 FY10E 1,505 697 (42) (431) 1,848 (1,400) 142 33 428 0 0 0 (658) 636 426 2.19 FY11E 1,671 718 (36) (476) 2,000 (900) 142 28 1,080 0 0 0 (775) 426 751 2.58

Source: Company, J.P. Morgan estimates.

Source: Company, J.P. Morgan estimates.

Ratio analysis Balance sheet
LC in millions, year-end December Cash and cash equivalents Accounts receivable Inventories Others Current assets LT investments Net fixed assets Total assets Liabilities ST loans Payables Others Total current liabilities Long-term debt Other liabilities Total liabilities Shareholders’ equity BVPS (LC) FY08 1,734 361 8 747 2,849 8,095 6,430 17,375 0 10 585 595 0 1,824 2,420 14,955 49.85 FY09E 636 444 10 683 1,773 8,037 6,508 16,318 0 35 279 315 0 1,992 2,306 14,012 46.71 FY10E 426 489 10 683 1,608 8,037 7,211 16,857 0 39 279 318 0 2,078 2,396 14,460 48.20 FY11E 751 529 10 683 1,972 8,037 7,393 17,403 0 42 279 321 0 2,173 2,494 14,908 49.69 %, year-end December EBITDA margin Operating margin Net profit margin SG&A/sales Sales growth Net profit growth Sales per share growth EPS growth Interest coverage (x) Net debt to total capital Net debt to equity Sales/assets EBIT margin ROCE Assets/equity (x) ROI ROE FY08 62.7% 43.7% 33.1% 25.6% 13.7% 101% 13.7% 100.9% 621.61 -11.6% -11.6% 0.18 43.7% 10.1% 1.16 10.1% 15.3% FY09E 61.3% 41.0% 29.3% 26.6% 1.5% -10% 1.5% -10.4% 2,170.83 -4.5% -4.5% 0.20 41.0% 13.4% 1.16 13.4% 15.7% FY10E 62.1% 42.4% 31.2% 25.9% 10.3% 18% 10.3% 17.7% 0.00 -2.9% -2.9% 0.21 42.4% 13.9% 1.17 13.9% 17.2% FY11E 62.3% 43.6% 31.9% 25.5% 8.0% 10% 8.0% 10.4% 0.00 -5.0% -5.0% 0.22 43.6% 14.4% 1.17 14.4% 17.8%

Source: Company, J.P. Morgan estimates.

Source: Company, J.P. Morgan estimates.

173

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Hon Hai Precision
www.foxconn.com
Company description With strong execution and a unique business model, eCMMS, Hon Hai has become the largest electronics manufacturing services (EMS) provider globally. Its product portfolio includes all the 3C products. Post mortem We believe Hon Hai has demonstrated its strong execution capability by eliminating costs aggressively and carrying out its moves into inner China plants, although the benefits are still yet to accrue completely. Revenue momentum however, has been disappointing in 2009, weighed down by higher corporate exposure and sharp revenue declines at the handset division, FIH. Apple iPhone momentum, however, has been quite strong in 2009. Potential for earnings upgrades We expect revenue growth to surprise on upside in 2010, as server and networking should post significant rebound, once corporate demand recovers. Second, iPhone going non-exclusive in key markets should lift shipment outlook significantly, as Hon Hai remains the sole supplier. New initiatives like LCD TV EMS should start coming through in 2010, while FIH also could see a turnaround in revenue momentum as handset orders recover and smartphone ODM business model takes shape. We expect further improvements in OP margins as SG&A expenses and depreciation peak out in 2H09 and 1H10, respectively, while Hon Hai’s earnings power should be helped by much lower tax rates in new facilities. How much recovery is priced into the stock? The margin recovery is now getting priced in, but revenue momentum should continue to surprise in 2010, in our view. In addition, operating leverage from FIH has also been underestimated by the market. Price target and key risks Our Jun-10 PT of NT$155 is based on 14x FY10E earnings. Our current target multiple is at the low end of the stock’s historical trading multiple, given top-line growth is not likely to return to the 30+% level. Key risks to our PT include execution issues in new projects; and a delayed corporate IT spending cycle.
Bloomberg: 2317.TT; Reuters: 2317.TW
NT$ in millions, year-end December Sales Operating profit EBITDA Pre-tax profit Reported net profit MV of employee bonus Adjusted net profit New Taiwan GAAP EPS (NT$)* New Taiwan GAAP P/E (x) P/BV (x) YE BPS (NT$) Net debt FY08 FY09E FY10E FY11E 1,950 1,951 2,392 2,742 73.3 83.9 111.4 126.9 106.0 124.9 156.7 174.9 72.6 85.9 114.0 130.1 55.1 68.6 86.8 99.7 3.4 5.6 7.4 8.6 55.1 68.6 86.8 99.7 6.57 8.05 10.12 11.62 20 16 13 11 3.1 2.5 2.2 1.9 42 52 60 68 (11) net cash net cash net cash ROE (%) Core ROIC (%) DPS (cash, NT$) Quarterly EPS (NT$) EPS (FY08) EPS (FY09E) EPS (FY10E) sales growth EPS growth Norm. OP growth Jun-10 PT FY08 15 14 2.3 1Q 1.93 1.58 2.08 15% -5% -18% NT$

Overweight
Price: NT$132 Price Target: NT$155

Taiwan Computer Hardware Gokul HariharanAC
(852) 2800-8564 gokul.hariharan@jpmorgan.com

Alvin KwockAC
(852) 2800-8533 alvin.yl.kwock@jpmorgan.com J.P. Morgan Securities (Asia Pacific) Limited

Price performance
120 NT$ 80 40
Nov-08 Feb-09 May-09 Aug-09 Nov-09

2317.TW share price (NT$ TSE (rebased)

Source: Bloomberg.

Performance
1M Absolute (%) Relative (%)
Source: Bloomberg.

3M 20.55 11.30

12M 100.00 34.23

5.60 5.89

Company data
52-week range (NT$) Mkt cap. (NT$B) Mkt cap. (US$B) Avg daily value (US$MM) Avg daily volume (MM) Shares O/S (MM) Date of price Index: TWSE Free float (%) Exchange rate
Source: Bloomberg.

45.7-138.5 1,132 34.8 135.0 39.4 8,579 5-Nov-09 7,417.46 78 32.5

FY09E FY10E FY11E 17 17 17 15 18 19 1.0 2.5 3.2 2Q 3Q 4Q 1.43 2.12 1.09 1.76 2.16 2.54 2.25 2.68 3.11 0% 23% 15% 22% 26% 15% 16% 34% 14% 155

Source: Company, Bloomberg, J.P. Morgan estimates. Note: Share price and valuation are as of 5 November 2009. 174

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Hon Hai Precision: Summary of financials
NT$ in millions, year-end December Income statement Revenues Cost of Goods Sold Gross Profit R&D Expenses SG&A Expenses Operating Profit (EBIT) EBITDA Interest Income Interest Expense Investment Income (Exp.) Other Non-Op Income (Exp.) Earnings before tax Tax Net Income (Reported) Net Income (Adjusted) EPS (Reported, NT$) EPS (Adjusted, NT$) BPS (NT$) DPS (NT$) Shares Outstanding (B) Balance sheet Cash and Cash Equivalents Account Receivables Inventory Total Other Current Assets Total Current Assets LT investments Net fixed assets Others Total assets ST Debt Accounts Payable Other Current Liabilities Total Current Liabilities Long Term Debt Other Long Term Liabilities Total liabilities Shareholders' equity FY08 FY09E FY10E FY11E 1,950.5 1,950.6 2,392.4 2,742.0 1,779.7 1,771.8 2,177.5 2,502.9 170.8 178.8 214.9 239.2 23.7 23.6 24.4 26.3 71.2 67.4 73.2 79.0 73.3 83.9 111.4 126.9 106.0 124.9 156.7 174.9 4.7 0.7 0.9 1.1 -6.7 -2.8 -2.9 -3.0 2.0 1.6 1.7 1.8 -0.7 2.5 2.9 3.3 72.6 85.9 114.0 130.1 -15.9 -14.8 -21.1 -22.8 55.1 68.6 86.8 99.7 55.1 68.6 86.8 99.7 6.57 6.57 42.36 2.27 8.39 8.05 8.05 52.45 0.96 8.53 10.12 10.12 60.16 2.52 8.58 11.62 11.62 68.47 3.19 8.58 Ratio Analysis % Gross Margin EBITDA margin Operating margin Net profit margin R&D/sales SG&A/Sales Sales growth EBIT growth Net profit growth EPS (Reported) growth EPS (TW GAAP) growth Interest coverage (x) Net debt to total capital Net debt to equity Asset Turnover Working Capital Turns (X) ROE ROIC ROIC (net of cash) Cash flow statement Net Income Depr. & Amortisation Change in working capital Other Cash flow from operations Capex Disposal/ (purchase) Cash flow from investing Free cash flow Equity raised/ (repaid) Debt raised/ (repaid) Other Dividends paid Cash flow from financing Net change in cash Beginning cash Ending cash FY08 8.8 5.4 3.8 2.8 1.2 3.6 14.6 (21.6) (29.0) (30.3) (5.4) 54 2.2 2.9 222 14.3 15.5 11.9 14.2 FY08 55.1 32.7 -0.3 1.6 89.1 -84.1 18.9 -65.2 5.0 -3.0 -22.7 -22.2 -20.4 -68.3 -44.4 144.4 100.0 FY09E 9.2 6.4 4.3 3.5 1.2 3.5 0.0 14.4 24.5 22.5 22.5 61 -2.8 -3.6 192 11.1 16.9 13.6 16.0 FY09E 68.6 41.0 -32.7 2.5 79.4 -32.3 -23.6 -55.9 47.1 29.2 3.0 -15.5 -10.6 6.0 29.6 100.0 129.6 FY10E 9.0 6.6 4.7 3.6 1.0 3.1 22.6 32.8 26.4 25.7 25.7 78 -6.6 -8.3 201 9.7 16.8 13.8 17.3 FY10E 86.8 45.3 -24.7 6.1 113.5 -34.6 -31.7 -66.3 78.9 1.0 11.9 6.1 -27.8 -8.7 38.6 129.6 168.1 FY11E 8.7 6.4 4.6 3.6 1.0 2.9 14.6 13.9 14.9 14.8 14.8 91 -11.2 -13.6 205 8.9 16.9 14.2 18.3 FY11E 99.7 48.0 -18.4 7.6 136.9 -40.5 -31.8 -72.2 96.5 0.2 1.3 7.5 -35.0 -26.0 38.7 168.1 206.8

FY08 FY09E FY10E FY11E 100.0 129.6 168.1 206.8 267.3 332.0 400.2 451.6 166.7 179.3 216.1 243.9 24.7 40.4 48.7 54.9 558.7 681.2 833.0 957.3 35.0 253.9 30.9 878.6 59.9 266.1 96.1 422.1 50.6 44.7 517.5 361.2 55.6 245.3 33.9 1,016.0 43.9 325.5 96.9 466.3 69.6 30.1 566.1 450.0 79.3 234.5 41.9 1,188.8 43.9 394.1 116.8 554.9 81.6 36.3 672.7 516.1 103.1 227.0 49.9 1,337.2 43.9 446.2 131.9 622.0 82.9 43.9 748.7 588.5

Source: Company reports and J.P. Morgan estimates.

175

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Hyundai Motor Company
www.hyundai.com
Company description Hyundai Motor Company (HMC) is the largest auto maker in Korea, with a 50% domestic market share. HMC owns 38% in KIA Motors, the secondlargest auto maker in Korea, together dominating over 80% of the Korean market. Post mortem We believe market share gains achieved during the downturn will work as substantial leverage when demand normalizes in the US and Europe. Given geographical revenue exposure and product mix towards less luxury, HMC is favorably positioned to enjoy continued emerging market growth, in our view. On the cost side, reduction in COGS could be most substantial among leading auto makers as platform integration gains momentum. Potential for earnings upgrades Management guidance for 2010 global shipment is 3.3 million, implying a 10% Y/Y growth, versus our assumption of 3.2 million, implying a 7% Y/Y growth. Given high operating leverage, we estimate every 5% change creates +/- 15% swing in operating profit. We do not expect domestic plant volume to surprise on the upside. However, if (1) normalization of the US auto demand takes place faster than expected, and (2) China market’s growth is further fueled by extension of tax incentives, our assumption could prove to be conservative. How much recovery is priced into the stock? After a strong 2009, we expect a 9% Y/Y decline in 2010. We believe this potential pay-back in early 2010 is well known and partially priced in. On the other hand, we have increased shipment growth outlook for most of other global regions. Especially, we believe structural margin recovery in its US business is not priced in and will drive the share price in 2010. Price target and key risks Our Jun-10 base-case price target is based on 12x is W140,000. We apply a 10% premium to the mid-cycle P/E of 11x to derive our target multiple of 12x, given continued RP improvement and long-term value creation from the US market. Key downside risks to our PT include: (1) short-term volatility in FX; and (2) pay back in the domestic market in 1Q10.
Bloomberg: 005380. KS; Reuters: 005380 KS
Won in billions, year-end December Sales Net profit EPS (Won) DPS (Won) Sales growth (%) Net profit growth (%) ROE (%) P/E (x) FY08 32,190 1,448 5,325 1,000 5.6 -13.9 8.5 19.2 FY09E 31,058 2,989 10,993 1,000 -3.5 106.4 15.6 9.3 FY10E 32,349 3,257 11,979 1,050 4.2 9.0 14.7 8.5 FY11E 33,917 3,474 12,776 1,100 4.8 6.7 13.8 8.0

Overweight
W102,000 Price Target: W140,000

South Korea Automobile Manufacture Wansun ParkAC
(82-2) 758-5722 wansun.c.park@jpmorgan.com J.P. Morgan Securities (Far East) Limited, Seoul Branch

Price performance
110,000 70,000 30,000 Oct-08 Feb-09 Jun-09 Oct-09 HMC KOSPI
Source: Bloomberg.

W

Performance
1M Absolute (%) Relative (%)
Source: Bloomberg.

3M 10.4 0.5

12M 86.1 31.4

-1.0 -3.4

Company data
52-wk range (Won) Mkt cap. (WB) Mkt cap. (US$MM) Avg daily val (US$MM) Avg daily volume (MM) Shares O/S (MM) Date of price Index: KOSPI Free float (%) Exchange rate
Source: Bloomberg.

35,750-118,000 22,468 19,045 187.6 2.1 220.3 5-Nov-09 1,552.24 62.9 1,179.7

Source: Company, Bloomberg, J.P. Morgan estimates. Note: Share price and valuation are as of 5 November 2009.

176

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Hyundai Motor Company: Summary of financials
Profit and loss statement
Won in billions, year-end December Revenues % change Y/Y COGS Gross Profit Gross Margin (%) EBITDA Operating Profit % change Y/Y Operating Margin (%) Net Interest Net equity method gains Recurring Profit Tax as % of recurring profit Net Income (Reported) % change Y/Y Shares Outstanding (MM) EPS (reported) (Won) FY08 32,190 5.6 25,059 7,131 22.2 3,221 1,877 3.4 5.8 203 21 1,795 347 19.3 1,448 (13.9) 285 5,325 FY09E 31,058 (3.5) 24,059 6,799 21.9 3,470 2,113 12.6 6.8 57 1,276 3,810 821 21.5 2,989 106.4 285 10,993 FY10E 32,349 4.2 24,987 7,362 22.8 3,582 2,194 3.8 6.8 109 1,816 4,101 844 20.6 3,257 9.0 285 11,979 FY11E 33,917 4.8 26,144 7,773 22.9 3,785 2,361 7.6 7.0 152 1,830 4,397 923 21.0 3,474 6.7 285 12,776

Cash flow statement
Won in billions, year-end December Operating profit Depreciation & amortization Change in working capital Taxes Cash flow from operations Capex Disposal/ (purchase) Net Interest Free cash flow Equity raised/ (repaid) Debt raised/ (repaid) Dividends paid Beginning cash Ending cash DPS (Won) FY08 1,877 1,344 -1,059 347 2,024 -1,495 -841 203 -312 0 1,105 -276 4,496 5,013 1,000 FY09E 2,113 1,356 11 821 3,248 -1,677 -1,161 57 409 0 -304 -236 5,013 4,883 1,000 FY10E 2,194 1,387 354 844 3,601 -1,845 -400 109 1,356 0 -3 -292 4,883 5,945 1,050 FY11E 2,361 1,424 75 923 3,616 -2,029 -390 152 1,197 0 -3 -292 5,945 6,847 1,100

Source: Company, J.P. Morgan estimates.

Source: Company, J.P. Morgan estimates.

Balance sheet
Won in billions, year-end December Cash and cash equivalents Accounts receivable Inventories Others Current assets LT investments Net fixed assets Total assets ST loans Payables Others Total current liabilities Long term debt Other liabilities Total liabilities Shareholders' equity BVPS (Won) FY08 5,013 2,513 1,809 965 10,301 10,507 11,360 32,168 1,688 2,444 3,784 7,915 1,263 3,337 12,515 19,652 94,103 FY09E 4,883 2,334 1,729 864 9,810 12,851 11,548 34,209 1,187 2,420 3,457 7,064 1,460 3,219 11,744 22,465 107,572 FY10E 5,945 2,330 1,771 932 10,978 15,067 11,627 37,672 1,187 2,610 3,728 7,525 1,457 3,259 12,242 25,430 121,771 FY11E 6,847 2,465 1,873 986 12,171 17,287 11,799 41,257 1,187 2,760 3,943 7,891 1,454 3,299 12,644 28,613 137,008

Ratio analysis
%, year-end December Gross margin (%) Operating margin (%) Net profit margin (%) SG&A/sales (%) Sales growth (%) Operating profit growth (%) Net profit growth (%) Interest coverage (x) Net debt to total capital (%) Net debt to equity (%) Sales/assets (x) Assets/equity (x) ROE (%) ROCE (%) FY08 22.2 5.8 4.5 16.3 5.6 3.4 (13.9) (9.3) (11.7) (10.5) 1.0 1.6 8.5 12.8 FY09E 21.9 6.8 9.6 15.1 (3.5) 12.6 106.4 (36.9) (11.1) (10.0) 0.9 1.5 15.6 12.4 FY10E 22.8 6.8 10.1 16.0 4.2 3.8 9.0 (20.1) (14.9) (13.0) 0.9 1.5 14.7 11.4 FY11E 22.9 7.0 10.2 16.0 4.8 7.6 6.7 (15.6) (17.2) (14.7) 0.8 1.4 13.8 11.0

Source: Company, J.P. Morgan estimates.

Source: Company, J.P. Morgan estimates.

177

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

ICICI Bank
www.icicibank.com
Company description ICICI Bank is the second-largest bank in India with a market share of ~10%. It enjoys a leading market share in most retail loan segments. After the ~38% credit CAGR over FY04-08, ICICI is currently in a consolidation phase with a larger focus on profitability than growth. Post mortem ICICI has rightly over the past six quarters slowed down on growth with greater emphasis on profitability. ICICI has been able to show considerable success in building a stronger liability franchise (~1,000bp increase in CASA), bringing costs under control (down ~30%) and stabilize asset quality. With improving CASA, lower operating costs and a lesser riskier asset portfolio, core ROAs are expected to show a significant improvement. Potential for earnings upgrades With ICICI continuing with its cautious approach on credit growth, we believe stabilizing asset quality, lower slippages and credit costs could lead to potential earnings upgrade. We expect profitability for its international subsidiaries to improve as global economy recovers. Also, robust capital markets could provide upside potential through the listing of the insurance arm and strong earnings from the flow business. How much recovery is priced into the stock? ICICI has recovered 3x from its March lows (0.5x one-year forward bookdistress case scenario) and is currently trading at ~1.7x 1-year forward book. We believe the stock is currently pricing in an improving economic scenario but a revival in credit demand and lower slippages earnings can surprise positively. Recommendation and key risks We have an Overweight recommendation on ICICI with significant improvement expected in core ROAs. Key risks to our recommendation are slower-than-expected credit growth revival and higher-than-expected slippages.

Overweight
Rs845

India Banks Sunil GargAC
(852) 2800-8518 sunil.garg@jpmorgan.com J.P. Morgan Securities (Asia Pacific) Limited

Price performance
300 250 200 150 100 50 0 N v-08 o Feb 9 -0 ICICI Sensex

A -0 ug 9

Source: Bloomberg.

Performance
1M Absolute (%) Relative (%)
Source: Bloomberg.

M y-09 a

3M 9 8

12M 87 29

-7 -3

Company data
52-week range (Rs) Mkt cap. (RsMM) Mkt cap. (US$MM) Avg daily value (US$MM) Avg daily volume (MM) Shares O/S (MM) Date of price Free float (%) Exchange rate Rs/US$ 252-971 904,710 19,249 105.1 7,200 1113.7 5-Nov-09 96 47

Source: Bloomberg, J.P. Morgan estimates.

Bloomberg: ICICIBC IN; Reuters: ICB.BO
Rs in millions, year-end March Net profit Basic EPS (rep'd) (Rs) Basic EPS growth (%) P/E (basic) (x) BVPS (Rs) P/BV (x) ROE (%) Tier 1 ratio (%) DPS (Rs) Dividend yield (%) FY05 20,052 29.6 11.3 27.7 170.3 4.8 19.5 7.6 8.5 1 FY06 25,401 31.2 5.4 26.3 249.6 3.3 14.6 9.2 8.5 1 FY07 31,100 34.8 11.3 23.6 270.4 3.0 13.4 7.4 10.0 1 FY08 41,581 41.3 18.9 19.8 417.5 2.0 11.7 11.8 11.0 1 FY09 37,581 33.8 -18.3 24.3 444.9 1.8 7.8 11.8 11.0 1

Source: Company, Bloomberg, J.P. Morgan estimates. Share price as of 5 November, 2009.

178

N v-09 o

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

ICICI Bank: Summary of financials

Source: Company, J.P. Morgan estimates.

179

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Info Edge India
www.infoedge.in
Company description Info Edge operates India’s leading online recruitment and classifieds portal (Naukri.com) launched in 1997 and forms the backbone of Info Edge’s business. It also generates revenue through a matrimony portal (Jeevansathi.com) and a property portal (99acres.com)—which are still in the development phase. It also has recently launched an education portal, Shiksha.com. Post mortem Info Edge’s revenue growth is leveraged to the hiring cycle in Indian IT and infrastructure sectors. The slowdown in the domestic economy impacted the revenue growth over the past year as companies reduced hiring levels. Potential for earnings upgrades We believe Info Edge is a late-cycle play on the economic recovery in India. We expect revenue growth to be driven by a recovery in domestic economy and Indian IT companies looking at hiring significant number of people over the next one-two years. With higher operating leverage and lower losses in other segments, earnings growth recovery should be sharper. Moreover, with competition potentially more impacted over the past two-three quarters, we believe Info Edge can gain market share as the recruitment segment recovers. How much recovery is priced into the stock? We estimate revenue/EPS CAGR of 27%/28% in FY10-12. We expect the stock price to track the earnings recovery over the next 9-12 months, driving our positive view on the stock. Price target and key risks Our Jun-10 price target of Rs900 is based on 30x one-year forward Jun-10E EPS—in line with the historical trading range. While valuations are not cheap, we note that global internet stocks trade at high valuations due to inherent operating leverage in the business model. Key downside risks to our price target are a decline in the overall economic recovery leading to lower recruitment than expected and a drop in market share due to increased competition across sites.

Overweight
Rs703 Price Target: Rs900

India Internet Nishit JasaniAC
(91-22) 6157-3578 nsihit.x.jasani@jpmorgan.com J.P. Morgan India Private Limited

Price performance
120 100 80 60 40 20 0 Info Edge Sensex (rebased)

Source: Bloomberg.

Performance
1M Absolute (%) Relative (%)
Source: Bloomberg.

Company data
52-week range (Rs) Mkt cap. (RsB) Mkt cap. (US$MM) Avg daily value (US$MM) Avg daily volume (MM) Shares O/S (MM) Date of price Index: Sensex Free float (%) Exchange rate
Source: Bloomberg,

Bloomberg: INFOE IN; Reuters: INED.BO
Rs in millions, year-end March Sales Net profit EPS (Rs) FD EPS (Rs) DPS (Rs) Sales growth (%) Net profit growth (%) EPS growth (%) ROE (%) P/E (x) FD P/E (x) FY09 2,452 597 21.9 21.9 0.0 12.0 7.6 7.6 20.1 32.2 32.2 FY10E 2,268 575 21.1 21.1 0.0 -7.5 -3.7 -3.7 16.2 33.4 33.4 FY11E 2,866 749 27.4 27.4 0.0 26.4 30.3 30.3 17.7 25.6 25.6 FY12E 3,645 944 34.6 34.6 0.0 27.2 26.0 26.0 18.6 20.3 20.3

Source: Company, Bloomberg, J.P. Morgan estimates. Note: Share price and valuations are as of 5 November 2009. 180

Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08 Jul-08 Aug-08 Sep-08 Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09 Nov-09

3M 13.1 11.9

12M 74.2 9.7

3.4 8.5

376-813 19.2 408.0 0.3 0.02 27 5-11-09 16063.9 46 Rs47.0/US$

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Info Edge India: Summary of financials
Profit and loss statement
Rs in millions, year-end March Revenue % change Y/Y Gross margin (%) EBITDA % change Y/Y EBITDA margin (%) EBIT % change Y/Y EBIT margin (%) Net interest Earnings before tax % change Y/Y Tax as % of EBT Net income (reported) % change Y/Y Shares O/S (MM) EPS (reported) (Rs) FY09 2,452 12.0 n.m. 669 5.5 27.3 598 3.3 24.4 (17) 867 10.3 270 31.2 597 7.6 27 21.9 FY10E 2,268 -7.5 n.m. 597 -10.8 26.3 527 -12.0 23.2 135 845 -2.5 271 32.0 575 -3.7 27 21.1 FY11E 2,866 26.4 n.m. 867 45.2 30.2 776 47.3 27.1 302 1,078 27.5 329 30.5 749 30.3 27 27.4 FY12E 3,645 27.2 n.m. 1094 26.2 30.0 983 26.7 27.0 375 1,358 26.0 414 30.5 944 26.0 27 34.6

Cash flow statement
Rs in millions, year-end March EBIT Depreciation & amortization Change in working capital Taxes Cash flow from operations Capex Disposal/(purchase) Net interest Free cash flow Equity raised/(repaid) Debt raised/(repaid) Other Dividends Beginning cash Ending cash DPS (Rs) FY09 598 71 -297 270 371 -74 371 (17) 297 0 -1 -11 0 3,119 3,373 0.0 FY10E 527 70 -102 271 543 -67 543 135 476 0 2 4 0 3,373 3,884 0.0 FY11E 776 91 84 329 924 -100 924 302 824 0 0 0 0 3,884 4,707 0.0 FY12E 983 111 255 414 1,309 -100 1,309 375 1,209 0 0 0 0 4,707 5,917 0.0

Source: Company, J.P. Morgan estimates.

Source: Company, J.P. Morgan estimates.

Ratio analysis Balance sheet
Rs in millions, year-end March Cash and cash equivalents Accounts receivable Inventories Others Current assets LT investments Net fixed assets Total assets Liabilities ST loans Payables Others Total current liabilities Long-term debt Other liabilities Total liabilities Shareholders’ equity BVPS (Rs) FY09 3,373 38 0 185 3,596 57 384 4,037 0 61 705 766 3 0 769 3,267 119.7 FY10E 3,884 40 0 298 4,222 16 381 4,620 0 61 708 769 5 0 773 3,846 140.9 FY11E 4,707 53 0 380 5,140 16 390 5,547 0 80 867 947 5 0 952 4,595 168.4 FY12E 5,917 65 0 461 6,442 16 379 6,837 0 98 1,195 1,294 5 0 1,298 5,539 202.9 Rs in millions, year-end March EBITDA margin Operating margin Net profit margin SG&A/sales Sales growth Net profit growth Sales per share growth EPS growth Interest coverage (x) Net debt to total capital Net debt to equity Sales/assets EBIT margin ROCE Assets/equity (x) ROI ROE FY09 27.3 24.4 24.3 17.7 12.0 7.6 12.0 7.6 34.7 n.m. n.m. 61.0 24.4 14.2 1.2 n.m. 20.1 FY10E 26.3 23.2 25.3 17.9 -7.5 -3.7 -7.5 -3.7 52.0 n.m. n.m. 49.4 23.2 10.3 1.2 n.m. 16.2 FY11E 30.2 27.1 26.1 17.3 26.4 30.3 26.4 30.3 68.3 n.m. n.m. 52.0 27.1 13.1 1.2 n.m. 17.7 FY12E 30.0 27.0 25.9 17.0 27.2 26.0 27.2 26.0 86.5 n.m. n.m. 53.5 27.0 13.8 1.2 n.m. 18.6

Source: Company, J.P. Morgan estimates.

Source: Company, J.P. Morgan estimates.

181

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Infosys Technologies
www.infosys.com
Company description Infosys is the bellwether stock in the Indian IT Services space with a revenue of US$4.7 billion in FY09. The company provides an array of services including application development and maintenance, package implementation, testing, BPO and consulting to 550+ clients. Infosys has 100,000+ employees and provides services across several verticals including the financial, manufacturing, telecom and retail sectors. Post mortem Infosys has shown the anti-cyclical nature of the offshore industry over the past year with revenue still holding on despite the sharp fall in technology spending globally. In fact, there has been an increased move towards offshoring due to lower IT budgets and the pressure on CIOs to cut costs. Stability in global economies combined with the improved outlook of the financial sector has started to help Infosys and we expect growth to accelerate in 2010. Potential for earnings upgrades Consensus FY10/11 EPS estimates for Infosys have moved up from ~Rs98/105 in the beginning of the year to ~Rs104/115 currently. While FY10 estimates might not increase from here, we expect further ~5-10% upgrades for FY11/12. How much recovery is priced into the stock? While consensus estimates would move up further, we think valuations at FY11E P/E of 18x has already discounted most of the upside. Further, we believe that it will be difficult for Infosys to grow in excess of 20% given the huge base and our view that IT services spending growth will lag hardware and software in 2010. Price target and key risks Our Jun-10 price target of Rs2,550 is based on a one-year forward P/E multiple of 19x—in line with target P/E multiples for TCS/Wipro and higher than the historical average for the past four-five years. Key risks to our price target are rupee/US$ appreciation and protectionism.
Bloomberg: INFO IN; Reuters: INFY.BO
Rs in millions, year-end March Sales Net profit EPS (Rs) FD EPS (Rs) DPS (Rs) Sales growth (%) Net profit growth (%) EPS growth (%) ROE (%) P/E (x) FD P/E (x) FY09 216,823 58,411 102.0 102.0 23.5 29.9 30.1 29.8 32.6 21.8 21.8 FY10E 224,215 61,256 107.0 107.0 30.0 3.4 4.9 4.8 29.9 20.8 20.8 FY11E 265,974 71,188 124.3 124.3 30.0 18.6 16.2 16.2 28.7 17.9 17.9 FY12E 321,417 83,844 146.4 146.4 30.0 20.8 17.8 17.8 27.4 15.2 15.2

Overweight
Rs2,222 Price Target: Rs2,550

India IT Services Manoj SinglaAC
(+91-22) 6157-3587 manoj.singla@jpmorgan.com J.P. Morgan India Private Limited

Price performance
150 100 50 0 Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08 Jul-08 Aug-08 Sep-08 Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09 Nov-09 Infosy s Sensex (rebased)

Source: Bloomberg.

Performance
1M Absolute (%) Relative (%)
Source: Bloomberg.

3M 5.9 4.8

12M 68.1 5.9

-4.4 0.4

Company data
52-week range (Rs) Mkt cap. (RsB) Mkt cap. (US$B) Avg daily value (US$MM) Avg daily volume (MM) Shares O/S (MM) Date of price Index: Sensex Free float (%) Exchange rate
Source: Bloomberg.

1,065-2,421 1,272.1 27.0 72.35 1.8 573 5-11-09 16063.9 84 Rs47.8/US$

Source: Company, Bloomberg, J.P. Morgan estimates. Note: Share price and valuations are as of 5 November 2009.

182

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Infosys Technologies: Summary of financials
Profit and loss statement
Rs in millions, year-end March Revenue % change Y/Y Gross margin (%) EBITDA % change Y/Y EBITDA margin (%) EBIT % change Y/Y EBIT margin (%) Net interest Earnings before tax % change Y/Y Tax as % of EBT Net income (reported) % change Y/Y Shares O/S (MM) EPS (reported) (INR) FY09 216,823 29.9 42.2 71463 37.6 33.0 63,853 38.9 29.4 4,791 68,594 29.4 10,183 14.8 58,411 30.1 573 102.0 FY10E 224,215 3.4 42.0 75350 5.4 33.6 66,440 4.1 29.6 9,156 76,789 11.9 15,533 20.2 61,256 4.9 573 107.0 FY11E 265,974 18.6 41.4 88031 16.8 33.1 78,308 17.9 29.4 9,368 91,266 18.9 20,079 22.0 71,188 16.2 573 124.3 FY12E 321,417 20.8 40.2 102967 17.0 32.0 91,257 16.5 28.4 10,457 107,492 17.8 23,648 22.0 83,844 17.8 573 146.4

Cash flow statement
Rs in millions, year-end March EBIT Depreciation & amortization Change in working capital Taxes Cash flow from operations Capex Disposal/(purchase) Net interest Free cash flow Equity raised/(repaid) Debt raised/(repaid) Other Dividends Beginning cash Ending cash DPS (Rs) FY09 63,853 7,610 -3,050 10,183 62,970 -13,372 62,970 4,791 49,598 -9,817 0 2,349 -13,147 83,082 109,910 23.5 FY10E 66,440 8,911 -14,495 15,533 55,672 -3,731 55,672 9,156 51,941 -13,085 0 -214 -17,447 86,723 129,886 30.0 FY11E 78,308 9,723 -14,040 20,079 66,870 -11,040 66,870 9,368 55,830 -2,920 0 0 -17,178 113,001 164,698 30.0 FY12E 91,257 11,710 -12,430 23,648 83,124 -11,040 83,124 10,457 72,084 -2,920 0 0 -17,178 143,288 215,765 30.0

Source: Company, J.P. Morgan estimates.

Source: Company, J.P. Morgan estimates.

Ratio analysis Balance sheet
Rs in millions, year-end March Cash and cash equivalents Accounts receivable Inventories Others Current assets LT investments Net fixed assets Total assets Liabilities ST loans Payables Others Total current liabilities Long-term debt Other liabilities Total liabilities Shareholders’ equity BVPS (INR) FY09 109,910 36,721 0 11,615 158,246 0 46,662 221,951 0 254 26,983 27,237 0 2,790 30,026 191,924 335.2 FY10E 129,886 36,505 0 22,973 189,363 460 41,483 249,108 0 102 23,781 23,883 0 2,576 26,459 222,649 388.8 FY11E 164,698 45,949 0 28,916 239,564 1,380 42,800 301,546 0 129 25,102 25,231 0 2,576 27,807 273,738 478.1 FY12E 215,765 54,313 0 34,179 304,257 2,300 42,130 366,489 0 157 26,271 26,428 0 2,576 29,004 337,485 589.4 Rs in millions, year-end March EBITDA margin Operating margin Net profit margin SG&A/sales Sales growth Net profit growth Sales per share growth EPS growth Interest coverage (x) Net debt to total capital Net debt to equity Sales/assets EBIT margin ROCE Assets/equity (x) ROI ROE FY09 33.0 29.4 26.9 12.8 29.9 30.1 29.7 29.8 n.m. n.m. n.m. 97.7 29.4 30.7 1.2 54.4 32.6 FY10E 33.6 29.6 27.3 12.4 3.4 4.9 3.4 4.8 n.m. n.m. n.m. 90.0 29.6 26.3 1.1 49.2 29.9 FY11E 33.1 29.4 26.8 12.0 18.6 16.2 18.6 16.2 n.m. n.m. n.m. 88.2 29.4 25.0 1.1 49.5 28.7 FY12E 32.0 28.4 26.1 11.8 20.8 17.8 20.8 17.8 n.m. n.m. n.m. 87.7 28.4 23.8 1.1 50.4 27.4

Source: Company, J.P. Morgan estimates.

Source: Company, J.P. Morgan estimates.

183

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

JD Group
www.jdgroup.co.za
Company description JD Group is a credit-based furniture retailer with eight chains in Southern Africa and one in Poland. Post mortem a) Sharp earnings recovery off a depressed base: We expect the retailer’s core operating margin (traditional retail and financial services) to come in at c7% FY09E. This is well below the long-run average (14 years) of c14% and well off peak levels (c21%). b) Significant value unlock potential: We see opportunity for group RoE to improve from c10% FY08 to c30% over the medium term, driven by: i) margin recovery through stronger sales and lower bad debts, and ii) improved capital management in financial services. Potential for earnings upgrades We see lower bad debts as a key earnings driver over the medium term – normalising to a bad debt ratio of c12% (from c23 H1 09). How much recovery is priced into the stock? The share is priced on a 12m fwd P/E of 6.9x (33% discount to its historical rating), and at a 40% discount to the clothing retailers at 11.5x. In our view, its 12-month P/NAV rating of 1.3x is also not demanding; trading well below its historical average of 2.0x. Price target and key risks Our May-10 PT of 5,253c is based on our SOTP P/E-based valuation. Risks include: sharper slowdown in volume growth and higher bad debts; stronger volume growth and better than expected control over costs; and corporate action which could potentially unlock significant value.
Bloomberg: JDG SJ; Reuters: JDGJ.J
Rand millions, year-end Aug Sales Net profit FD EPS (SAcps) DPS (SAcps) Sales growth (%) Net profit growth (%) EPS growth (%) ROE (%) FD P/E (x) FY08 12,610 514 298.27 152.00 -2.4 -53.8 -51.1 10.4 15.3 FY09E 12,643 192 116.47 67.67 0.3 -62.6 61.0 4.0 39.2 FY10E 13,312 986 597.06 302.40 5.3 412.6 412.6 18.8 7.7 FY11E 14,587 1,283 776.84 393.45 9.6 30.1 30.1 21.8 5.9

Overweight
Price: 4,570c Price Target: 5,253c

South Africa Speciality Retailing Sean HolmesAC
(27-11) 507 0373 sean.x.holmes@jpmorgan.com J.P. Morgan Equities Ltd.

Price Performance
4,500 c 3,500 2,500
Nov-08 Feb-09 May-09 Aug-09 Nov-09

Source: Bloomberg

Performance
Absolute (%)
Source: Bloomberg

1M 3.3

3M 6.3

12M 51.8

Company data
Price(c) Date of Price Price Target (c) Price Target End Date 52-week Range (c) Mkt Cap (Rbn) Shares O/S (mn)
Source: Bloomberg, J.P. Morgan

4,570 23-Nov-09 5,253 31-May-10 5,020 – 2,600 8.23 180

Source: Company, Bloomberg, J.P. Morgan estimates. Note: Share price and valuations are as of cob 23 November 2009.

184

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

JD Group: Summary of Financials
Income Statement R in millions, year end Aug Sales % YOY Change Revenue % YOY Change Operating Costs % YOY Change Bad Debts % YOY Change Operating Profit % YOY Change Taxation Effective Tax rate Net Profit after tax % YOY Change Headline Earnings % YOY Change Balance sheet R in millions, year end Aug ASSETS Total Non current assets Inventory % YOY Change Trade Debtors % YOY Change Other current assets Cash and Cash equivalents Total Current assets Total Assets EQUITY Ordinary Shareholders Equity Minority Interest Total Equity Interest bearing liabilities Other non current liabilities Total non current liabilities Trade accounts payable Other current liabilities Total current liabilities Total Liabilities FY07 Cash Flow Statement FY08 FY09E FY10E FY11E R in millions, year end Aug FY07 715 FY08 FY09E FY10E FY11E 1,253 136 555 723 12,914 12,610 12,643 13,312 14,587 Cash flow from operating activities 8.2% (2.4%) 0.3% 5.3% 9.6% Cash flow from investing activities - Cash flow from financing activities - Net increase / (decrease) in cash - Foreign exchange differences - Cash at beginning of year - Cash at end of year 1,591 797 871 1,493 1,897 Ratio Analysis -21.4% -49.9% 9.3% 71.4% 27.1% (398) (215) (544) (442) (587) Per Share Data 26.3% 29.5% 71.9% 30.5% 31.0% Diluted HEPS (cps) 1,113 514 192 986 1,283 % YOY Change (23.6%) (53.8%) (62.6%) 412.6% 30.1% DPS (cps) - % YOY Change - Dividend cover NAV per share (cps) FY07 FY08 FY09E FY10E FY11E Profitability GP Margin Operating Margin - Operating costs/Revenue - Trading Densities - Revenue per sqm - Operating profit per sqm 1,135 1,095 1,349 1,472 Return Ratios - ROE 8,673 9,188 10,290 11,489 ROA ROIC 4,813 4,813 3,860 4,913 71 4,984 4,204 5,553 6,223 Capital Management 93 117 Net interest bearing debt/Equity 5,646 6,340 Net interest bearing debt/EBIT 4,645 - Credit Management - Total bad debts/Avg gross debtors Liquidity - Current Assets : Current Liabilities - Current Assets less Inventory : Current Liabilities 5,149

609.80 (24.0%) 303.00 2,838.2

298.27 116.47 597.06 776.84 (51.1%) (61.0%) 412.6% 30.1% 152.00 67.69 302.40 393.45 2,834.5 3,001.8 3,392.4 3,802.0

975 8,891

-

-

-

-

-

-

-

-

-

-

20.9% 11.7% 35.2%

10.4% 5.9% 18.9%

4.0% 2.2% 25.8%

18.8% 21.8% 10.1% 11.8% 29.8% 25.8%

5,048 5,048 3,843

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

Source: Company reports and J.P. Morgan estimates.

185

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Land & Houses
www.lh.co.th
Company description Land & Houses (LH) is the largest residential developer in Thailand. LH has a pre-built single detached housing (SDH) model, and a very broad product range, from middle to upper end of the market. It has the largest share in the single-detached housing market and a significant presence in the townhouse market. Revenue from developing condominiums is still small relative to its peers, but is set to rise. Post mortem Following the blow-out in global financial market in late FY08, consumer confidence slumped and access to bank credit tightened, causing a sharp cutback in new property supply and demand. Hence, leading developers, such as LH, have gained market share. With improving demand, driven by low deposit returns, low mortgage rates, and improved availability of mortgages, pricing power has improved. Further, costs are falling as high priced materials inventory is depleted, boosting profit margins. With large banks, such as SCB, continuing to favor LH for both development and mortgage credits, market position is likely to strengthen in 2010. Potential for earnings upgrades Short lead time of the pre-built model and a lengthening launch pipeline suggests that LH will be able to generate additional revenue upside in 2010/11, while a changing higher product mix should boost margin. Financial leverage to higher interest costs is low given a 49% gearing ratio. How much recovery is priced into the stock? LH trades on a mid-range P/E of 17.2x, with an understated E, in our view. Historically, LH has traded up to 26x-30x in previous recoveries. Price target and key risks Our Dec-10 PT of Bt8 is based on 21.7x FY10E EPS. The target P/E is based on the historical P/E average of LH during the three-year period from FY0608. Key risks to our PT include consumer confidence, volatility in construction cost, and the job market.
Bloomberg: LH TB; Reuters: LHf.BK
Bt in millions, year-end December Revenue Net profit EPS (Bt) DPS (Bt) Revenue growth (%) EPS growth (%) ROCE (%) ROE (%) P/E (x) P/BV (x) Dividend Yield (%) FY08 15,410 3,428 0.34 0.34 -14.0 -6.1 11.2 13.7 18.4 2.4 5.4 FY09E 16,910 3,567 0.36 0.36 7.8 4.1 11.9 13.7 17.7 2.4 5.6 FY10E 17,535 3,671 0.37 0.37 3.8 2.9 12.5 14.1 17.2 2.4 5.8 FY11E 20,656 4,383 0.44 0.44 16.8 19.4 15.3 16.9 14.4 2.4 6.9

Overweight
Price: Bt6.30 Price Target: Bt8.00

Thailand Property Anne JirajariyavechAC
(66-2) 684-2684 anne.x.jirajariyavech@jpmorgan.com JPMorgan Securities (Thailand) Limited

Price performance
8 5 2 Nov-08 Feb-09 May-09 Aug-09 Nov-09 LHf.BK share price (Bt) SET (rebased)

Bt

Source: Bloomberg.

Performance
1M Absolute (%) Relative (%)
Source: Bloomberg.

3M -3.1 -9.6

12M 58.3 9.2

-12.5 -7.4

Company data
52-week range (Bt) Mkt cap. (BtMM) Mkt cap. (US$MM) Avg daily value (US$MM) Avg daily volume (MM) Shares O/S (MM) Date of price Index: SET Free float (%) Exchange rate
Source: Bloomberg.

2.56-7.75 63,163 1,892 8.1 46.9 10,026 5-Nov-09 682 51 33.38

Source: Company, Bloomberg, J.P. Morgan estimates. Note: Share price and valuations are as of 5 November 2009. We raised our PT to Bt9.5 on 13 Nov 2009.

186

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Land & Houses: Summary of financials
Bt in millions, year-end December Profit and Loss Statement FY08 Revenues % change Y/Y EBIT % change Y/Y EBIT margin (%) Net Interest Earnings before tax % change Y/Y Tax as % of EBT Net income (reported) % change Y/Y Core net profit % change Y/Y Shares outstanding EPS (reported) (Bt) % change Y/Y Core EPS (Bt) % change Y/Y Balance sheet FY08 Cash and cash equivalents Accounts receivable Inventories Others Current assets LT investments Net fixed assets Total Assets Liabilities ST Loans Payables Others Total current liabilities Long-term debt Other liabilities Total Liabilities Minorities Shareholders' equity BVPS (Bt) 1,233 10 24,303 384 25,931 11,335 8,891 46,156 FY09E 2,687 10 23,166 384 26,247 11,335 8,574 46,156 FY10E 907 10 22,762 384 24,063 11,335 8,258 43,656 FY11E 747 EBIT Margin 10 Operating margin 23,238 Net margin 384 24,380 Sales per share growth 11,335 Sales growth 7,942 Net profit growth 43,656 EPS growth Interest coverage (x) Net debt to total capital Net debt to equity Sales/assets Assets/equity ROE ROCE 15,410 (14.0%) 4,490 3.2% 26.4% 4,366 6.2% -927 110.1% 3,428 8.5% 3,506 12.9% 10,026 0.34 (6.1%) 0.35 -2.3% FY09E 16,910 7.8% 5,003 11.4% 27.3% 4,529 3.7% -1,229 117.5% 3,567 4.1% 3,367 -4.0% 10,026 0.36 4.1% 0.34 -4.0% FY10E 17,535 3.8% 5,122 2.4% 27.0% 4,669 3.1% -1,266 116.5% 3,671 2.9% 3,471 3.1% 10,026 0.37 2.9% 0.35 3.1% FY11E 20,656 16.8% 6,063 18.4% 27.3% 5,631 20.6% -1,516 113.3% 4,383 19.4% 4,183 20.5% 10,026 0.44 19.4% 0.42 20.5% EBIT Depr. & amortization Change in working capital Tax Cash flow from operations Capex Disposal/(purchase) Net Interest Free cash flow Equity raised/(repaid) Debt raised/(repaid) Other Dividends paid Beginning cash Ending cash DPS (Bt) Cash flow statement FY08 4,490 316 -1,954 -927 153 -169 -15 2,720 2,339 0 -3,946 1,027 1,233 0.34 FY09E 5,003 316 1,260 -1229 5,229 -206 5,023 -1 0 0 -3,567 1,233 2,687 0.36 FY10E 5,122 316 533 -1266 4,590 -125 4,465 0 -2,500 0 -3,671 2,687 907 0.37 FY11E 6,063 316 -347 -1516 4,616 -194 4,422 0 0 0 -4,383 907 747 0.44

Ratio analysis FY08 26.4% 26.91% 20.2% FY09E 27.3% 26.23% 19.5% FY10E 27.0% 25.90% 19.3% FY11E 27.3% 26.41% 19.7%

(25.6%) (14.0%) 8.5% (6.1%) 37.3% 59.7% 0.39 1.78 13.7% 11.2%

7.8% 7.8% 4.1% 4.1% 32.0% 51.8% 0.40 1.76 13.7% 11.9%

3.8% 3.8% 2.9% 2.9% 31.2% 49.1% 0.42 1.58 14.1% 12.5%

16.8% 16.8% 19.4% 19.4% 32.6% 49.7% 0.51 1.56 16.9% 15.3%

4,433 1,353 1,324 7,111 11,709 197 19,017 1,183 25,957 2.59

4,433 1,353 1,324 7,111 11,709 197 19,017 1,183 25,957 2.59

4,433 1,353 1,324 7,111 9,209 197 16,517 1,183 25,957 2.59

4,433 1,353 1,324 7,111 9,209 197 16,517 1,183 25,957 2.59

Source: Company reports and J.P. Morgan estimates.

187

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Larsen & Toubro
www.larsentoubro.com
Company description L&T is a well established E&C company with businesses across verticalsinfrastructure, metals, power, hydrocarbons etc. It has a heavy engineering and electricals business as well, and is capable of doing large turnkey projects from design to fabrication, construction and installation. L&T has forayed into finance, IT and infrastructure development, and now views these as core areas as well. L&T is professionally managed, with employee trust owning 12.7% of the shares, rest is held by institutions. Management is ambitious and has rightly identified growth areas from time to time, the most recent being power plant equipment in direct competition to BHEL. Post mortem L&T has reported weak execution in 1H, although order inflows picked up substantially over the last 3 months mainly on the back of large power equipment and hydrocarbon orders. Post downturn, L&T has raised US$600MM equity funds for growth plans through the QIP and FCCB route. Potential for earnings upgrades The current OB is strong and supports our revenue estimates through 1Q FY12. We, however, believe potential for near-term upgrades is limited. Reasons: A) asking rate of top-line growth, at ~18% for balance FY10, already implies a sharp pick-up in execution and growth, especially the hitherto slow-moving projects. B) E&C margins are already close to their alltime high. However, we expect the markets to react positively to any substantial pick-up in order flows, which should make it positive on FY12. How much recovery is priced into the stock? Order flows were exceptionally strong in 2Q FY10. Management has generated expectations of continuation of these order flows—markets currently not believing it. Any signs of these big orders should be a key driver. Price target and key risks Our SOTP-based Sep-10 PT at Rs1,675 (parent business: Rs1,413/share; balance contributed by subsidiaries: Rs172/share; and investments: Rs90/share) implies 24.8x FY11E EPS. Although expensive at 22.3x FY11E, continued order flow momentum will likely provide valuation support. Weak inflows and execution are key risks to our PT.
Bloomberg: LT.IN; Reuters: LART.BO
Rs in millions, year-end March Net sales Net profit Consolidated EPS (Rs) Net sales growth (%) Net profit growth (%) ROE (%) ROCE (%) P/E (x) P/BV (x) EV/EBITDA (x) FY09 404,799 30,004 51.2 37.4 31.0 28.3 16.1 29.4 5.9 21.6 FY10E 446,638 33,755 57.6 10.3 12.5 29.1 15.2 26.2 4.4 17.5 FY11E 523,403 39,576 67.6 17.2 17.2 17.9 15.3 22.3 3.7 15.1 FY12E 633,367 47,655 81.4 21.0 20.4 18.0 16.9 18.5 3.1 12.7

Neutral
Rs1,542.3 Price Target: Rs1,675

India Engineering Shilpa KrishnanAC
(91-22) 6157-3580 shilpa.x.krishnan@jpmorgan.com J.P. Morgan India Private Limited

Price performance
Rs
2000 1500 1000 500 0 Oct-08

Dec-08

Mar-09

Jun-09

Aug-09

Oct-09

Source: Bloomberg.

Performance
1M Absolute (%) Relative (%)
Source: Bloomberg.

3M (0) 1

12M 75 20

(9) (2)

Company data
52-week range (Rs) Mkt cap. (RsB) Mkt cap. (US$B) Avg daily value (US$MM) Avg daily volume (MM) Shares O/S (MM) Date of price Index: BSE Free float (%) Exchange rate (Rs/US$)
Source: Bloomberg.

557-1800 903 19.0 73.9 2.2 598.9 5-Nov-09 16,064 78% 47.4

Source: Company, Bloomberg, J.P. Morgan estimates. Note: Share price and valuation are as of 5 November 2009.

188

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Larsen & Toubro: Summary of financials
Profit and loss statement
Rs in millions, year-end March Revenues % change Y/Y EBITDA % change Y/Y EBITDA Margin (%) EBIT % change Y/Y EBIT Margin (%) Net Interest Earnings before tax % change Y/Y Tax as % of EBT Net Income (pre exceptionals) % change Y/Y Shares Outstanding EPS (pre exceptionals) (Rs) % change Y/Y FY09 404,799 37% 49,587 34% 12% 42,303 32% 10% 1,134 43,437 28% (14,257) 33% 30,004 31% 585.7 51.2 31% FY10E 446,638 10% 62,912 27% 14% 54,467 29% 12% (3,725) 50,742 17% (16,987) 33% 33,755 13% 585.7 57.6 13% FY11E 523,403 17% 71,151 13% 14% 61,969 14% 12% (2,462) 59,507 17% (19,932) 33% 39,576 17% 585.7 67.6 17% FY12E 633,367 21% 86,684 22% 14% 76,702 24% 12% (5,828) 70,874 19% (23,219) 33% 47,655 20% 585.7 81.4 20%

Cash flow statement
Rs in millions, year-end March EBIT Depreciation & amortisation Change in working capital Taxes Others Cash flow from operations Capex Investments Free cash flow Equity raised/ (repaid) Debt raised/ (repaid) Dividends paid Beginning cash Ending cash FY09 42,303 7,283 (31,386) (14,257) 8,204 12,148 (77,120) (12,531) (77,504) 587 80,632 (5,556) 15,608 14,590 FY10E 54,467 8,444 (39,937) (16,987) 2,386 8,374 (16,434) (18,998) (27,058) 0 20,606 0 14,590 8,143 FY11E 61,969 9,182 (6,339) (19,932) (6,433) 38,448 (5,939) (10,609) 21,900 0 (19,548) 0 8,139 10,495 FY12E 76,702 9,982 (48,872) (23,219) (9,589) 5,003 (17,011) (11,227) (23,235) 0 21,223 0 10,490 8,484

Source: Company, J.P. Morgan estimates.

Source: Company, J.P. Morgan estimates.

Ratio analysis Balance sheet
Rs in millions, year-end March Cash and cash equivalents Net Current assets Investments Gross Fixed assets Acc. Depreciation Net Block Total assets Liabilities Secured Loans Unsecured Loans Deferred Tax Liability Share holder's Funds Capital Reserves and Surplus BVPS (Rs) FY09 14,590 116,935 68055 186,388 30,497 155,891 355,472 104,949 98,751 1,308 150,463 1,171 149,291 257 FY10E 8,139 156,872 87053 202,822 27,596 175,226 427,289 134,794 89,899 921 201,674 1,171 200,502 344 FY11E 10,490 163,210 97662 208,761 32,807 175,954 447,316 110,380 94,765 921 241,249 1,171 240,078 412 FY12E 8,478 212,082 108889 225,772 39,028 186,745 516,194 125,764 100,604 921 288,904 1,171 287,733 493 %, year-end March EBITDA margin Net profit margin Sales growth Net profit growth EPS growth Net debt to total capital (exInv) Sales/assets Assets/equity ROE ROCE FY09 12% 7% 37% 31% 31% 53% 1.1 2.4 28% 16% FY10E 14% 8% 10% 13% 13% 51% 1.0 2.1 29% 15% FY11E 14% 8% 17% 17% 17% 44% 1.2 1.9 18% 15% FY12E 14% 8% 21% 20% 20% 42% 1.2 1.8 18% 17%

Source: Company, J.P. Morgan estimates.

Source: Company, J.P. Morgan estimates.

189

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

LG Display
www.lgdisplay.com
Company description LG Display Co., Ltd. Develops and manufactures digital display products. The company’s products include thin film transistor-liquid crystal displays (TFTLCD) for notebook and desktop computer monitors, TVs, mobile phones, and medical equipment. LG display provides its products mainly to overseas markets. Post mortem Comparative advantage in LED TV panel production: According to management estimates, LGD will complete the full product line-ups for LED TV, and aims to achieve higher LED TV panel proportion than the industry average for 2010E. Given our expectation on LED TV penetration rate of 15-20% for the industry as a whole, the future growth outlook for LGD in emerging LED TV market looks bright. Potential for earnings upgrades The magnitude of panel price decline would be rather moderate: Given the inventory adjustment from downstream customers, demand is likely to show a continuous downward trend in 4Q09, which would result in panel price declines. However, we believe that the industry-wide inventory level will be maintained at a healthy level due to solid sell-through, especially during the China Golden Week. In addition, as the economy is recovering fast, the oversupply problem will likely be less severe than in previous years. how much recovery is priced into the stock? LGD will continue to generate stable FCF with an upward ROE trend: We believe LGD is likely to post strong FCF in FY10 and FY11, due to the increase in EBITDA along with the stable capex trend. We also expect ROE to remain in double-digits in the next two years. Compared to its global peers, we forecast LGD to show the highest sales growth on the back of an increase in fab efficiency and stable margins due to the strong customer base. Also, despite efficient fab, its current market capitalization as a percentage of total capacity is undervalued relative to its global peers. Price target and key risks We recently upgraded LGD to Overweight from our long-standing Neutral rating with our revised P/BV-based Dec-10 price target of W40,000. Our price target implies 1.2x FY10E book and 1.0x FY11E book, Given the sustainable FCF (W1.5 trillion/year) and double-digit ROE. Key risks to our PT are sudden and substantial changes in panel prices And a recovery in global consumption.

Overweight
W29,650 Price Target: W40,000

South Korea Semiconductors JJ ParkAC
(822) 758 5717 jj.park@jpmorgan.com J.P. Morgan Securities (Far East) Ltd, Seoul Branch

Liang-Chun LinAC
(886-2) 2725 9863 liang.c.lin@jpmorgan.com J.P. Morgan Securities (Taiwan) Ltd

Marcus ShinAC
(822) 758 5712 marcus.j.shin@jpmorgan.com J.P. Morgan Securities (Far East) Ltd, Seoul Branch

Price performance
W 35,000 25,000 15,000 Oct-08 Feb-09 LGD Jun-09 Oct-09 KOSPI

Source: Bloomberg, J.P. Morgan.

Performance
1M Absolute (%) Relative (%)
Source: J.P. Morgan.

3M -13 -12

12M 24 -8

-8 -5

Company data

52-week range (W) Mkt cap. (WB) Mkt cap. (US$MM) Avg daily value (US$MM) Avg daily volume (MM) Shares O/S (MM) Date of price Index: KOSPI Free float (%) Exchange rate
Source: Bloomberg, J.P, Morgan.

40,950-17,250 10,609 8,993 120.8 4.1 358 5-Nov-09 1552 57.9 1,178/1

Reuters: 034220.KS; Bloomberg: 034220 KS
WB, year-end Dec Sales Operating profit Net profit EPS (W) Cash ROE (%) P/E (x) BPS (W) EV/EBITDA (x) Div yield (%) FY08 16,264 1,735 1,087 3,037 3,423 12.4 9.8 25,959 3.0 2 FY09E 20,088 1,103 980 2,738 2,051 10.1 10.8 28,179 3.4 2 FY10E 21,188 1,478 1,292 3,612 1,707 12.7 8.2 28,510 2.9 2 FY11E 22,682 1,910 1,656 4,627 2,311 14.6 6.4 34,965 2.3 2

Source: Company reports, Bloomberg, J.P. Morgan estimates. Share price and valuations are as of 5 November, 2009. We upgraded to OW with PT of W40,000 on November 12.

190

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

LG Display: Summary of financials
Won in billions, year-end December

Income statement
Revenues COGS Depreciation Gross Profit EBIT Net Interest Income Pre-tax Profit Tax Expense/(Credit) Net Income Shares outstanding (mil.) EPS (Won) Sequential Growth Revenues Gross Profit EBIT Pre-tax Profit EPS FY08 16,264 13,617 2,541 2,647 1,735 56 1,311 225 1,087 358 3,037 13% 18% 15% -15% -19% FY09E 20,088 17,906 2,850 2,182 1,103 -15 1,084 104 980 358 2,738 24% -18% -36% -17% -10% FY10E 21,188 18,543 3,035 2,645 1,478 -33 1,494 202 1,292 358 3,612 5% 21% 34% 38% 32% FY11E 22,682 19,500 3,109 3,182 1,910 -6 1,914 258 1,656 358 4,627 7% 20% 29% 28% 28%

Balance sheet
Cash and Cash Equivalents Accounts receivable Inventories Others current assets Current assets LT investments Net fixed assets Other long term assets Total Assets ST Debt and CPLTD Account Payables Other current liabilities Total current liabilities Long term debt Other Long term liabilities Total liabilities Shareholder's equity Total Liabilities and Equity BVPS (Won) FY08 3,423 2,005 1,137 454 7,018 900 9,270 200 17,388 1,154 988 2,644 4,786 1,243 581 8,100 9,289 17,388 25,959 FY09E 2,051 3,084 1,357 635 7,127 1,092 9,918 210 18,346 1,314 1,981 2,241 5,536 0 1,063 8,263 10,083 18,346 28,179 FY10E 1,707 2,782 1,334 573 6,396 1,098 9,960 206 17,660 1,051 1,861 2,022 4,934 0 1,010 7,458 10,201 17,660 28,510 FY11E 2,311 3,387 1,223 697 7,617 1,144 10,224 178 19,164 220 2,051 2,461 4,733 0 705 6,653 12,511 19,164 34,965

Cash flow statement
FY08 Net Income Depreciation & amortization Other non-cash items Change in working capital Cash flow from operations Purchase of PP&E Disposal/ (purchase) Cash flow from investing Equity raised/(repaid) Debt raised/(repaid) Other charges Cash dividends Cash flow from Financing Net Changes in Cash Beginning cash Ending cash DPS (Won) 1,087 2,541 0 1,814 5,441 -4,283 -595 -4,878 0 965 -88 0 878 1,441 1,981 3,423 750 FY09E 980 2,850 0 -890 2,939 -3,498 -202 -3,700 0 -427 -185 0 0 -1,372 3,423 2,051 750 FY10E 1,292 3,035 0 48 4,375 -3,077 -2 -3,079 0 -466 -914 -260 0 -343 2,051 1,707 750 FY11E 1,656 3,109 0 12 4,776 -3,373 -19 -3,392 0 -1,435 914 -260 -781 603 1,707 2,311 750

%, year-end December FY08 Gross Margin (%) EBIT Margin (%) Net profit margin (%) COGS/sales (%) SG&A/sales (%) Sales per share growth (%) Sales growth (%) EBIT growth (%) Net profit growth (%) EPS growth (%) Interest Coverage (x) Inventory Turnover (x) Net Debt to total Capital (%) Net debt to equity (%) Sales/Assets (%) Assets/Equity (%) ROE (%) ROIC (%) 16.3% 10.7% 6.7% 83.7% 3.2% 13.3% 13.3% 15.4% -19.1% -19.1% -11.3 14.3 3% 5% 94% 187% 12% 14% Q1 FY10E Sales Net income EPS (Won) 5,013 118 331 FY09E 10.9% 5.5% 4.9% 89.1% 3.1% 23.5% 23.5% -36.5% -9.9% -9.9% -8.4 14.8 5% 9% 109% 182% 10% 9% Q2 5,243 263 735 FY10E 12.5% 7.0% 6.1% 87.5% 3.2% 5.5% 5.5% 34.0% 31.9% 31.9% -17.2 15.9 5% 8% 120% 173% 13% 11% Q3 5,398 426 1,191 FY11E 14.0% 8.4% 7.3% 86.0% 3.3% 7.1% 7.1% 29.2% 28.1% 28.1% -32.0 18.6 -5% -7% 118% 153% 15% 14% Q4 5,534 485 1,354

Ratio analysis

Quarterly data Q1 FY09E Sales Net income EPS (Won) 3,666 -255 -713 Q2 4,891 302 844 Q3 5,974 559 1,562 Q4 5,557 374 1,044

Source: Company data, J.P. Morgan estimates.

191

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Lojas Americanas
www.americanas.com.br
Company description Americanas is one of the most traditional retail chains in Brazil, operating 471 stores and three distribution centers. In addition, the company also has a 57% stake in B2W (N), the largest e-commerce platform in Brazil, and has a JV with Itau Unibanco (FAI) that offers credit and financial products to clients. Post mortem LAME’s unique business model taps the fastest-growing segments of the population and has few competitors and resilient same store sales growth. In addition, the company announced that it will double the number of stores (by +400) in the next four years, which we believe is doable, given LAME’s accretive ROE, leading to faster breakeven of the new stores (1.5-2.5 years), and the low average number of employees (about 25/store). Also, with the decline in interest spreads, supported by strong economic recovery, the private label card penetration increased by 180bp yoy to 15.3% in 3Q. Potential for earnings upgrades On the back of its aggressive store expansion plan, we expect LAME to post high-double-digit top-line growth for at least the next four years. In addition, LAME should also benefit from strong top-line growth at B2W, in which it has ~57% stake, supported by the greater availability of cheap financing. How much recovery is priced into the stock? Although the stock has more than doubled year to date (like most retailers in Brazil), clearly reflecting the strong economic recovery; it is still ~ 29% below its highest level. Current valuations still look unwarranted, with LAME trading at 31% discount to historical P/E average which will likely narrow, in our view, given the aggressive store layout and strong 3Q results. Price target and key risks Our Dec 2010 price targets of R$17/R$14 for PN/ON shares is based on a sum-of-the-parts DCF of the brick-and-mortar stores, financial, and internet divisions. Main risks to our thesis are (1) delay in FAI maturation, (2) economic slowdown, and (3) a potential hike in delinquency rates.
Bloomberg: LAME4 BZ / LAME3 BZ; Reuters: LAME4.SA / LAME3.SA
R$ in millions, year-end December Sales Net profit EPS (R$) FD EPS (R$) DPS (R$) Sales growth (%) Net profit growth (%) EPS growth (%) ROE (%) P/E (x) FD P/E (x) FY08 3,933 117 0.16 0.16 0.05 22.5% 13.2% 13.4% 43.7% 78.7x 78.7x FY09E 4,532 177 0.24 0.24 0.19 15.2% 51.9% 52.5% 51.3% 59.3x 59.3x FY10E 5,158 290 0.40 0.40 0.15 13.8% 63.6% 63.6% 62.9% 36.3x 36.3x FY11E 6,186 379 0.52 0.52 0.12 19.9% 30.7% 30.7% 54.3% 27.7x 27.7x

Overweight
R$13.42/R$11.54 Price Target: R$17.00 (PN/LAME4)/ R$14.00 (ON/LAME3)

Brazil Retail Andrea TeixeiraAC
(1-212) 622-6735 andrea.f.teixeira@jpmorgan.com J.P. Morgan Securities Inc.

Price performance (R$)
15 12 9 6 3 Dec-08 Feb-09 Jan-09 Mar-09 Jun-09 Aug-09 Nov-08 Sep-09 Oct-09 Apr-09 Jul-09 May-09 Nov-09

Source: Bloomberg.

Performance
1M Absolute (%) Relative (%)
Source: Bloomberg.

3M 25.1% 7.5%

12M 115.2% 29.0%

22.5% 18.2%

Company data
52-week range (R$) Mkt cap. (R$MM) Mkt cap. (US$MM) Avg daily value (US$MM) Avg daily volume (MM) Shares O/S (MM) Date of price Index: IBOV Free float (%) Exchange rate
Source: Bloomberg.

5.29 - 14.67 10,068 5,846 18.7 2.6 473 25/11 67,917 62.1% 1.72

Source: Company, Bloomberg, J.P. Morgan estimates. Note: Share price and valuations are as of 25 November 2009. * The estimates are for the parent company

192

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Lojas Americanas: Summary of financials
Profit and loss statement
R$ in millions, year-end December Revenue % change Y/Y Gross margin (%) EBITDA % change Y/Y EBITDA margin (%) EBIT % change Y/Y EBIT margin (%) Net interest Earnings before tax % change Y/Y Tax as % of EBT Net income (reported) % change Y/Y Shares O/S (MM) EPS (reported) (R$) FY08 3,933 22.5% 31.2% 541 37.5% 13.8% 419 38.3% 10.6% (208) 142 -8.0% (48) 33.6% 117 13.2% 0.16 0.16 FY09E 4,532 15.2% 30.1% 624 15.3% 13.8% 508 21.3% 11.2% (246) 262 84.8% (97) 37.1% 177 51.9% 0.24 0.24 FY10E 5,158 13.8% 30.8% 757 21.4% 14.7% 625 23.0% 12.1% (302) 322 23.1% (106) 32.8% 290 63.6% 0.40 0.40 FY11E 6,186 19.9% 31.0% 917 21.1% 14.8% 765 22.4% 12.4% (408) 356 10.5% (101) 28.3% 379 30.7% 0.52 0.52

Cash flow statement
R$ in millions, year-end December EBIT Depreciation & amortization Change in working capital Taxes Cash flow from operations Capex Disposal/(purchase) Net interest Free cash flow Equity raised/(repaid) Debt raised/(repaid) Other Dividends Beginning cash Ending cash DPS (R$) FY08 419 122 38 (48) 51 274 0 (208) 86 (26) 607 (114) (37) 776 1,097 0.05 FY09E 508 116 79 (97) 345 84 0 (246) 288 (2) (51) 1 (136) 1,097 1,161 0.19 FY10E 625 132 11 (106) 146 232 0 (302) 302 0 0 0 (107) 1,161 888 0.15 FY11E 765 152 11 (101) 519 300 0 (408) 346 0 0 0 (89) 888 882 0.12

Source: Company, J.P. Morgan estimates. * The estimates are for the parent company.

Source: Company, J.P. Morgan estimates. * The estimates are for the parent company.

Ratio analysis Balance sheet
R$ in millions, year-end December Cash and cash equivalents Accounts receivable Inventories Others Current assets LT investments Net fixed assets Total assets Liabilities ST loans Payables Others Total current liabilities Long-term debt Other liabilities Total liabilities Shareholders’ equity BVPS (R$) FY08 1,097 176 655 241 2,169 492 913 3,892 790 954 255 1,999 1,442 74 3,571 321 0.44 FY09E 1,161 197 767 270 2,395 511 917 4,118 429 1,117 299 1,846 1,751 83 3,749 369 0.51 FY10E 888 177 873 301 2,239 591 1,098 4,132 429 1,012 223 1,664 1,751 88 3,580 553 0.76 FY11E 882 213 1,076 361 2,532 727 1,382 4,739 429 1,247 275 1,952 1,751 105 3,897 842 1.16 %, year-end December EBITDA margin Operating margin Net profit margin SG&A/sales Sales growth Net profit growth Sales per share growth EPS growth Interest coverage (x) Net debt to total capital Net debt to equity Sales/assets EBIT margin ROCE Assets/equity (x) ROI ROE FY08 13.8% 10.6% 3.0% 20.5% 22.5% 13.2% 22.7% 13.4% 1.20 0.44 3.53 1.01 10.6% 22.1% 12.1 23.7% 43.7% FY09E 13.8% 11.2% 3.9% 18.8% 15.2% 51.9% 15.7% 52.5% (2.48) 0.40 2.76 1.10 11.2% 22.4% 11.2 34.7% 51.3% FY10E 14.7% 12.1% 5.6% 18.7% 13.8% 63.6% 13.8% 63.6% 1.93 0.47 2.34 1.25 12.1% 25.3% 7.5 49.0% 62.9% FY11E 14.8% 12.4% 6.1% 18.6% 19.9% 30.7% 19.9% 30.7% 1.62 0.43 1.54 1.31 12.4% 27.5% 5.6 52.1% 54.3%

Source: Company, J.P. Morgan estimates. * The estimates are for the parent company.

Source: Company, J.P. Morgan estimates. * The estimates are for the parent company.

193

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

LSR Group
www.lsrgroup.ru
Company description LSR Group is one of the leading vertically-integrated developers in St. Petersburg, engaged in the high-end, upper-middle class and mass market residential and commercial housing segments. It is also the number one building materials company in the St. Petersburg and Leningrad regions, with the capacity to produce aggregates, various types of concrete and bricks. Post mortem In 1H09 LSR suffered from a financing dry-up, a collapse in demand for building materials (the segment’s EBITDA fell 95% y/y) and weak housing sales. Nevertheless, the company solved debt and cash flow problems towards 2H09, emerging as one of the strongest players from the downturn: bonds were refinanced with new bank loans, financing was secured for the cement project, and several housing contracts were concluded with the government. Potential for earnings upgrades For LSR high financial leverage (total debt at $1.2 bn, debt-to-equity is 110%) translates into high EPS sensitivity to cost of debt, implying that the company is a winner in the declining interest rate environment. How much recovery is priced into the stock? LSR has been the darling of the market and one of the best performing Russian stocks in 2009 (+834% ytd vs. +135% for the RTS Index), driven by contracting risk premium. We believe the shares are likely to continue performing better than the Russian real estate universe on a 6-12 month horizon as in our view company fundamentals are not fully priced in. Price target and key risks We assume 5% growth in ruble residential prices in St. Petersburg, a 25-50% increase in LSR’s building materials sales volumes and 5-10% higher prices. Our end-10 DCF-based PT is $10.0. The key risk we highlight is a slower than expected property market revival.
Bloomberg: LSRG LI; Reuters: LSRGq.L
$ mn, year-end Dec Sales Net profit EPS ($) FD EPS ($) DPS ($) Sales growth (%) Net profit growth (%) EPS growth (%) ROE (%) P/E (x) FD P/E (x) FY08 2,004 (329) -0.70 -0.70 0 42.9% n/a n/a 17.7% n/a n/a FY09E 1,415 60 0.13 0.13 0 -29.4% n/a n/a 9.9% 54.6 54.6 FY10E 1,935 175 0.37 0.37 0 36.8% 192% 192% 11.8% 19.2 19.2 FY11E 2,016 247 0.53 0.53 0 4.2% 41% 41% 14.3% 13.4 13.4

Overweight
Price:$7.10 Price Target: $10.00

Russia Property Elena JouronovaAC
(7 495 967 3888 elena.jouronova@jpmorgan.com J.P. Morgan Bank International LLC

Price Performance
8 6 $ 4 2 0
Nov-08 Feb-09 May-09 Aug-09 Nov-09

Source: Bloomberg

Performance
Absolute (%)
Source: Bloomberg

1M 1.4

3M 94.5

12M 680.2

Company data
52-week range ($) Mkt cap. (US$MM) Avg daily value (US$MM) Avg daily volume (MM) Shares O/S (mn) Date of price Index: RTS Free float (%) Exchange rate
Source: Bloomberg

0.53-7.49 3,323 2.8 0.562 468 23-Nov-09 1466.77 18% 28.79

Source: Company, Bloomberg, J.P. Morgan estimates. Note: Share price and valuations are as of cob 23 November 2009.

194

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

LSR Group: Summary of financials
Profit and Loss statement $ in millions Revenue % change Y/Y Gross Profit % change Y/Y EBITDA % change Y/Y EBIT % change Y/Y Interest Earnings before tax % change Y/Y Tax as % of EBT Net Income (Reported) % change Y/Y Shares Outstanding EPS (reported) % change Y/Y Balance sheet $ in millions Cash and cash equivalents Accounts receivable Inventories Other Current assets LT investments Net fixed assets Total assets ST loans Payables Others Total current liabilities Long term debt Other liabilities Total liabilities Shareholders' equity FY08A FY09E FY10E FY11E FY12E Cash flow statement $ in millions FY08A FY09E FY10E FY11E FY12E 2,004 1,415 1,935 2,016 2,281 Net Income 42.9% -29.4% 36.8% 4.2% 13.2% Depreciation & amortisation 724 484 591 669 788 Revaluation gain 54.6% -33.2% 22.1% 13.2% 17.8% Change in working capital 530 382 438 508 613 Other 71.4% -28.0% 14.9% 15.9% 20.8% Cash flow from operations (217) 259 378 433 528 -138.6% -219.3% 45.7% 14.4% 22.0% Capex (108) (155) (153) (114) (91) Disposals/ (purchase) -413 83 225 319 437 Free cash flow -184.5% -120.1% 170.8% 41.7% 37.0% 91 (21) (45) (64) (87) Equity raised/(repaid) (22.0%) (25.2%) (20.0%) (20.0%) (20.0%) Debt raised/(repaid) (329) 60 175 247 339 Other -194.6% -118.3% 189.7% 41.7% 37.0% Dividends paid 468.3 468.3 468.3 468.3 468.3 Beginning cash -0.70 0.13 0.37 0.53 0.72 Ending cash (194.6%) (118.3%) 189.7% 41.7% 37.0% DPS FY08A FY09E FY10E FY11E FY12E Ratio Analysis $ in millions 469 592 1,353 7 2,421 Gross Margin EBITDA Margin EBIT margin Adjusted net profit margin SG&A/Sales (329) 82 665 (131) -112 176 (704) 0 (528) 0 364 (81) 0 355 110 FY08A 60 57 65 (82) 24 124 (308) 0 (184) 0 228 0 0 110 154 FY09E 175 60 0 (47) 5 193 (142) 0 52 0 -85 0 0 154 121 FY10E 247 75 0 (35) 8 296 (42) 0 254 0 -169 0 0 121 206 FY11E 339 86 0 (39) 10 396 (49) 348 0 -85 0 0 206 470 FY12E

110 456 1,710 7 2,283 252 1,593 3,877 613 1,323 30 1,967 642 78 2,686 1,190

155 469 1,472 7 2,102 252 1,756 3,858 339 982 30 1,351 1,095 78 2,523 1,335

122 486 1,385 7 2,000 252 1,837 3,837 169 865 30 1,065 1,179 78 2,322 1,515

206 541 1,365 7 2,119 252 1,804 3,923 85 865 30 980 1,095 78 2,153 1,770

36.1% 26.5% -10.8% 10.3% -13.8%

34.2% 27.0% 18.3% 9.2% -11.3%

30.5% 22.7% 19.5% 9.0% -11.0% 36.8% 14.9% 34.7% 34.7% 2.5 32.0% 81.0% 0.5 253.3% 11.8% 13.6%

33.2% 25.2% 21.5% 12.3% -11.7% 4.2% 15.9% 41.7% 41.7% 3.8 24.8% 55.0% 0.5 221.7% 14.3% 14.7%

34.5% 26.9% 23.1% 14.9% -11.4% 13.2% 20.8% 37.0% 37.0% 5.8 14.9% 29.5% 0.5 197.6% 16.4% 17.3%

252 Sales growth 1,767 EBITDA growth 4,187 Adjusted net profit growth Adjusted EPS growth 250 865 Interest coverage (x) 30 Net debt to Total Capital 1,146 Net debt to Equity 845 Sales/assets 78 Assets/equity 2,068 ROE 2,119 ROCE

42.9% -29.4% 71.4% -28.0% 109.7% (37.0%) 109.7% NM 2.0 1.7 29.5% 33.1% 96.2% 95.8% 0.5 0.4 325.7% 289.1% 17.7% 9.9% 23.4% 12.9%

Source: Company reports and J.P. Morgan estimates.

195

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Magnit
www.tander.ru
Company description Magnit is Russia's largest retailer in terms of store network: the chain operates 3,020 discounters and 22 hypermarkets with a net selling area of 988k sq m as of October 2009. The company is predominantly a regional player and focuses on small cities with fewer than 500k inhabitants. Magnit's operations are supported by an efficient logistics system that comprises 9 distribution centers with 184k sq m capacity and a fleet of 1,345 trucks, which allows the company to control 73% of its supplies. Post mortem Magnit faces lower competition from modern retail as it operates in small regional towns. Coupled with increasing bargaining power with suppliers, this could allow the company to preserve its lucrative operating margins. Format-wise, diversification towards hypermarkets provides an opportunity to benefit in a recovery scenario. Armed with new capital, Magnit is likely to continue rapid store roll-out and gain market share; we forecast 2009-13 EBITDA CAGR of 29%, the highest in our consumer universe. Potential for earnings upgrades A strengthening ruble creates upside potential to consensus earnings estimates for Magnit, in our view. How much recovery is priced into the stock? Magnit trades in line with global retailers despite superior growth prospects. In historical terms valuations are c. 20% above the average pre-crisis level, but we expect consensus to move higher on faster store roll-out and better Fx. Price target and key risks Our end-10 DCF-based PT is $17.5/GDR and $80/local share. We believe Magnit’s strong logistics backbone, recapitalized balance sheet (after the $370mn equity-raising in 3Q09) and experienced management team position it well for rapid expansion and double-digit earnings growth. Key risks are ruble weakness, slowing LFL sales growth and execution of the hypermarket strategy, in our view.
Bloomberg: MGNT LI; Reuters: MGNTq.L
$ in millions, year-end Dec Sales Net profit EPS ($) FD EPS ($) DPS (LC) Sales growth (%) Net profit growth (%) EPS growth (%) ROE (%) P/E (x) FD P/E (x) FY08 5,348 188 0.45 0.45 n/a 45% 94% 94% 30% 31.8 31.8 FY09E 5,326 272 0.65 0.65 n/a 0% 45% 45% 26% 22.0 22.0 FY10E 7,751 421 1.01 1.01 n/a 46% 55% 55% 29% 14.2 14.2 FY11E 9,927 552 1.33 1.33 n/a 28% 31% 31% 29% 10.7 10.7

Overweight
Price: $14.30 Price Target: $17.50

Russia Consumer Elena JouronovaAC
(7 495 967 3888 elena.jouronova@jpmorgan.com J.P. Morgan Bank International LLC
Price Performance
14 $ 10 6 2
Nov-08 Feb-09 May-09 Aug-09 Nov-09

Source: Bloomberg

Performance
Absolute (%)
Source: Bloomberg

1M 10.0

3M 31.2

12M 308.6

Company data
52-week range ($) Mkt cap. (US$MM) Avg daily value (US$MM) Avg daily volume (MM) Shares O/S (MM) Date of price Index: RTS Free float (%) Exchange rate
Source: Bloomberg

2.76-15.40 5,952 8.1 0.610 445 23-Nov-09 1466.77 46% 28.79

Source: Company, Bloomberg, J.P. Morgan estimates. Note: Share price and valuations are as of cob 23 November 2009.

196

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Magnit: Summary of Financials
Profit and Loss Statement $ in millions, year end Dec Revenues Cost of goods sold Gross profit Operating costs EBITDA EBIT Net Interest Other Earnings before tax Tax as % of EBT Net Income (reported) Net Income (adjusted) EPS (adjusted) Balance sheet $ in millions, year end Dec Cash & cash equivalents Accounts receivables Inventories Other Total current assets PP&E Other non-current assets Total assets Short term debt Payables Other Total current liabilities Long term debt Other Total non-current liabilities Shareholders' equity Total equity & liabilities FY08 5,348 -4,188 1,160 -847 402 313 (60) 7 0 FY09E 5,326 -4,104 1,222 -824 489 398 (50) 0 FY10E 7,751 -5,970 1,781 -1,199 714 582 (42) 0 FY11E 9,927 -7,648 2,279 -1,536 912 743 (35) 0 Cash flow statement FY12E $ in millions, year end Dec 12,454 -9,615 2,839 -1,927 1,124 912 (32) EBT Depreciation & amortisation Change In working capital Other Cash flow from operations FY08 260 89 138 (66) 420 (567) (9) (155) 200 0 -51 (6) FY09E 348 91 105 (77) 467 (500) 0 (33) 0 0 0 (33) FY10E 540 132 64 (119) 617 (584) 0 33 0 0 0 33 FY11E 708 169 71 (156) 792 (795) 0 (3) 0 0 0 (3) FY12E 880 212 80 (194) 978 (720) 0 258 0 0 0 258

260 348 540 708 (72) (77) (119) (156) (27.6%) (22.0%) (22.0%) (22.0%) 188 272 421 552 188 272 421 552 0.45 0.65 1.01 1.33

Capex Other 880 Free cash flow (194) (22.0%) Financing cash flow 686 Dividends paid 686 Forex effect 1.65 Net change in cash Ratio Analysis FY12E $ in millions, year end Dec 370 145 929 2 1,446 3,327 20 EBITDA margin Operating margin Net profit margin SG&A/sales

FY08 115 53 323 2 493 1,331 20 1,844 243 583 0 826 163 18 181 837 1,844

FY09E 82 63 370 2 517 1,740 20 2,277 229 642 0 871 155 18 173 1,234 2,277

FY10E 115 90 544 2 752 2,193 20 2,964 229 924 0 1,153 155 18 173 1,638 2,964

FY11E 112 116 718 2 948 2,818 20 3,786 229 1,194 0 1,423 155 18 173 2,190 3,786

FY08

FY09E

FY10E

FY11E

FY12E

7.5% 9.2% 9.2% 9.2% 9.0% 5.9% 7.5% 7.5% 7.5% 7.3% 3.5% 5.1% 5.4% 5.6% 5.5% (15.8%) (15.5%) (15.5%) (15.5%) (15.5%) 45.5% 83.2% 89.0% 94.3% 406 291 0.7 5.2 34.8% 2.9 2.2 29.7% 10.8% 19.2% (0.4%) 21.7% 27.3% 44.8% 384 301 0.6 8.0 24.4% 2.3 1.8 26.2% 13.2% 21.7% 45.5% 46.0% 46.1% 55.1% 384 269 0.4 13.9 16.4% 2.6 1.8 29.3% 16.1% 25.0% 28.1% 27.7% 27.7% 31.0% 384 272 0.3 21.0 12.4% 2.6 1.7 28.8% 16.4% 25.2% 25.5% 23.3% 22.8% 24.4% 384 14 0.0 28.3 0.5% 2.6 1.7 27.1% 16.0% 24.4%

Sales growth EBITDA growth EBIT growth 4,793 Net profit growth 229 1,515 0 1,744 155 18 173 Gross Debt Net Debt Net Debt/EBITDA Interest coverage (x) Net Debt to Equity Sales/assets Assets/equity ROE 2,876 ROA 4,793 ROIC

Source: Company reports and J.P. Morgan estimates.

197

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Manila Water
www.manilawater.com
Company description Manila Water operates a water distribution network within East Zone of Metro Manila under a concession agreement, which will expire in 2022 (being extended to 2037), earning an allowed ‘real’ IRR of 9.3% on its investments. Post mortem While free cash flow remains negative for Manila Water, with its low gearing, tariff hike is the key driver for the company, in our view. While we did not see any tariff hike at the start of the year, this was more than offset by (a) inflation adjustment; and (b) concession extension of 15 years earlier in the year. Potential for earnings upgrades While we see limited upside risk to our earning estimates, given the relatively high visibility for annual tariff hikes, we should see earnings growth coming through due to the concession extension allowed earlier this year because of lower depreciation expenses. How much recovery is priced into the stock? We see upside risk to the current share price, as we believe the concession extension has not been fully priced in. Moreover, we believe the upcoming annual tariff hike should act as a key catalyst. Price target and key risks Our Dec-09 PT of Php19 implies 12.7x FY09E P/E, 7.6x EV/EBITDA, and 2.4% yield. We derive our PT by discounting Manila Water’s FCF until 2037 (when the ‘extended’ concession expires), and estimate cash flows will turn positive only by 2015/16. In our DCF valuation, we assume a risk-free rate of 8.5%, a terminal growth rate of 0%, and a beta of 1.0. Key risks to our PT include delays in the implementation of allowed tariff increases; and a worse-than-expected delay in implementation of the extension.
Bloomberg: MWC PM; Reuters: MWC PS
Php in millions, year-end December Adjusted net profit EPS (Php) % growth Y/Y DPS (Php) P/E (x) P/BV (x) EV/EBITDA (x) Dividend yield (%) RoE (%) Net debt FY08 2,748 1.14 4% 0.35 14.1 2.1 7.2 2.8% 21% 49% FY09E 3,630 1.50 32% 0.46 10.7 1.8 6.6 3.7% 23% 54% FY10E 4,057 1.68 12% 0.52 9.5 1.5 6.0 4.1% 22% 58% FY11E 4,546 1.88 12% 0.58 8.5 1.3 5.5 4.6% 21% 58%

Overweight
Php16.00 Price Target: Php19.00

Water Ajay MirchandaniAC
(65) 6882-2419 ajay.mirchandani@jpmorgan.com J.P. Morgan Securities Singapore Private Limited

Price performance (Php)
20 15 10 5 0

Nov-08

Aug-09

Feb-09

Source: Bloomberg.

Performance
1M Absolute (%) Relative (%)
Source: Bloomberg.

May-09

3M 3.2 -3.3

1.6 -2.8

6.7 -40.1

Company data
52-week range (Php) Mkt cap. (PhpMM) Mkt cap. (US$MM) Avg daily value (US$MM) Avg daily volume (MM) Shares O/S (MM) Date of price Index: PSEi Free float (%) Exchange rate 9.4-16.5 32,317 679 0.7 3.5 2,020 5-Nov-09 2,944 38 47.6

Source: Company, Bloomberg, J.P. Morgan estimates. Note: Share price and valuation are as of 5 November 2009.

198

Nov-09

12M

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Manila Water: Summary of financials
Php in millions, year-end December Profit & loss statement Core Revenue Others Total Revenue Operating Costs SG&A expenses Depreciation & Amortization Foreign currency differential less FX gain (losses) EBITDA EBIT Interest Expense Interest Income Profit before tax Income tax Profit after tax less Preferred Dividends Net Income Key ratios EBITDA Margins (%) EBIT Margin (%) No. of O/S shares (Mils) EPS (Php) DPS (Php) Dvd payout ratio (%) BVPS Debt / Equity (%) Net Debt (%) ROE (%) ROCE (%) EBITDA / Gross Interest Expense Accounts receivables (days) FY08 71.6% 50.4% 2019.8 1.14 0.35 31% 6.0 92.4 48.7 20.7% 19.3% 9.3 24.3 FY09E 68.7% 56.4% 2019.8 1.50 0.46 31% 7.0 76.2 53.9 23.4% 20.6% 6.9 24.3 FY10E 70.0% 57.9% 2019.8 1.68 0.52 31% 8.2 93.9 57.6 22.3% 20.1% 6.3 24.3 FY11E 71.2% 58.8% 2019.8 1.88 0.58 31% 9.5 79.9 58.5 21.5% 19.6% 6.1 24.3 Cash flow statement EBITDA less: Net Interest less: tax less: changes in Working Capital Others Operational Cash Flow Capital Expenditure others Cash flow from investments Free cash flow Dividends Paid Debt paid others Cashflow from financing Movement in Net Debt/Net Cash FY08 6380 (484) (951) 501 568 6014 (3826) (3929) (7755) (1741) (887) 5429 (349) 4193 2,452 FY09E 7232 (797) (1547) 312 0 5201 (5950) (324) (6274) 0 (1159) (336) 62 (1433) (2,506) FY10E 8299 (1057) (1710) (344) 0 5188 (6200) 0 (6200) 0 (1291) 5698 54 4461 3,449 FY11E 9465 (1255) (1913) (430) 0 5867 (6450) 0 (6450) 0 (1441) (265) 56 (1651) (2,233) FY08 8,914 82 8,996 (1,930) (576) (1891) (28) 6,380 4,490 (689) 205 4,256 (1,469) 2,788 (40) 2,748 FY09E 10,529 85 10,614 (2,346) (651) (1293) (300) 7,232 5,940 (1,041) 244 5,243 (1,573) 3,670 (40) 3,630 FY10E 11,858 87 11,946 (2,573) (686) (1439) (300) 8,299 6,861 (1,320) 263 5,854 (1,756) 4,097 (40) 4,057 FY11E 13,286 90 13,376 (2,798) (723) (1658) (300) 9,465 7,807 (1,542) 287 6,552 (1,966) 4,586 (40) 4,546 Balance sheet Share capital Preferred Stock Reserves & Surplus cost of preferred & treasury stock& others Share holders equity Long term debt Other non-current liabilities Service Concession Obligation Total Liabilities Service Con. Assets / PPE Non Current Assets Current Assets Cash and Bank Balances Account Receivables Other current assets Current Liabilities Accounts Payable current portion of debt Other current liabilities Total Assets FY08 5368 900 8776 (594) 14,458 12897 1,307 3475 32,137 24637 3137 8595 7357 593 645 4231 2740 455 110 32,137 FY09E 5368 900 11287 (594) 16,961 12008 1,369 3475 33,814 29611 3137 6313 4851 701 762 5247 3277 907 110 33,814 FY10E 5368 900 14094 (594) 19,768 17328 1,423 3475 41,994 34372 3137 9947 8300 789 858 5462 3117 1235 110 41,994 FY11E 5368 900 17238 (594) 22,913 16940 1,479 3475 44,807 39164 3137 7912 6067 884 961 5405 2886 1358 110 44,807

Source: Company, J.P. Morgan estimates.

199

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Maruti Suzuki India Ltd.
www.marutisuzuki.com
Company description Maruti Suzuki India Ltd, a 54% subsidiary of Suzuki Motor Corporation of Japan, is India’s largest passenger car company with a market share of over 50% in the domestic car market. Maruti is emerging as a manufacturing base for Suzuki globally, as the company has ramped up exports of the small car ‘A Star’ to Europe. Post mortem Maruti’s broad-based portfolio in the mass market A2 segment along with its widespread distribution network and strong brand equity have enabled the company to sustain a 50% market share in the domestic market. Over the year, the company has diversified revenues by ramping up its exports (c.15% of sales). Potential for earnings upgrades The potential upgrades would be driven by higher-than-expected domestic economic growth which could result in volume growth surprising on the upside. How much recovery is priced into the stock? The growth in the Indian passenger car segment (+16% YTD) has been aided by the stimulus measures as well as revival in economic growth. While stock valuations have expanded to reflect a pick-up in growth, the share price should now be driven by sustained volume growth (given the improving domestic growth outlook). Price target and key risks We expect volume growth to come in at 15% CAGR over FY09-11E, driven by a revival in domestic markets. We expect EBITDA margins to expand on improved utilization levels, given the revival in growth. As a result, we expect earnings to grow at 50% CAGR over FY09-11E. We have a Mar-10 PT of Rs1,630, based on 13x one-year forward cash earnings. We are valuing the company in line with growth cycle multiples, which is at the upper end of the valuation band, i.e. +1 standard deviation above the mean. Key risks to our PT include a slowdown in the economy and depreciation of Rs vs. yen.
Bloomberg: MSIL.IN; Reuters: MRTI.BO
Rs in millions, year-end March Net sales Net profit EPS (Rs) Cash EPS (Rs) DPS (Rs) Net sales growth (%) EPS growth (%) Cash EPS growth (%) ROE (%) P/E (x) Cash P/E (x) EV/EBITDA (x) FY08 179,362 17,308 59.9 79.5 5.0 22 11 25 20.6 24.8 18.7 17.1 FY09 204,554 12,186 42.2 66.6 3.5 14 -30 -16 13.0 35.2 22.3 23.8 FY10E 267,202 22,771 78.8 107.1 6.3 31 87 61 19.9 18.9 13.9 12.8 FY11E 310,413 27,426 94.9 125.3 7.1 16 20 17 19.6 15.7 11.9 10.7

Overweight
Rs1,485.7 Price Target: Rs1,630

India Automobiles Aditya MakhariaAC
(91-22) 6157-3596 aditya.s.makharia@jpmchase.com J.P. Morgan India Private Limited

Price performance
2,000 1,500 1,000 500 N-08 M-09 N-09 A-09 F-09

Source: Bloomberg.

Performance
1M Absolute (%) Relative (%)
Source: Bloomberg.

3M +3 +2

12M +141 +80

-7 -2

Company data
52-week range (Rs) Mkt cap. (RsMM) Mkt cap. (US$MM) Avg daily value (US$MM) Avg daily volume (MM) Shares O/S (MM) Date of price Index: SENSEX Free float (%) Exchange rate
Source: Bloomberg.

428-1,740 429,367 9,130 35.4 1.1 289 5-Nov-09 16064 46 47.03

Source: Company, Bloomberg, J.P. Morgan estimates. Note: Share price and valuations are as of 5 November 2009.

200

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Maruti Suzuki India Ltd: Summary of financials
Profit and loss statement
Rs in millions, year–end March FY08 Revenues % change Y/Y EBITDA % change Y/Y EBITDA margin (%) EBIT % change Y/Y Interest expense Other income Earnings before tax % change Y/Y Tax as % of EBT Net income (Adjustedl) % change Y/Y Shares outstanding EPS (pre-exceptional) % change Y/Y Dividend per share Div payout (%) 179,362 22% 22,432 13% 12.5% 16,750 -3% 596 8,876 25,030 10% 7,722 30.9% 17,308 11% 289 59.9 11% 5.0 8% FY09 204,554 14% 16,189 -28% 7.9% 9,124 -46% 510 9,985 16,757 -33% 4,571 27.3% 12,186 -30% 289 42.2 -30% 3.5 8% FY10E 267,202 31% 29,392 82% 11.0% 21,215 133% 217 11,424 32,072 91% 9,301 29.0% 22,771 87% 289 78.8 87% 6.3 8% FY11E 310,413 16% 33,959 16% 10.9% 25,165 19% 193 13,332 38,304 19% 10,878 28.4% 27,426 20% 289 94.9 20% 7.1 8%

Cash flow statement
Rs in millions, year–end March FY08 EBIT Depreciation & amortization Dec/(Inc) in Working Capital Taxes Cash flow from operations Net Capex (Pur) / Sale of investments Net Interest (Paid)/ Recd Cash flow from investing Income from Investments Change in net worth Debt raised/ (repaid) Other Dividends paid Cash generated Beginning cash Ending cash 16,750 5,682 -266 -7,696 14,470 -17,024 -17,715 -596 -35,335 8,876 -248 2,693 -1,445 -10,989 14,228 3,239 FY09 7,282 7,065 -2,063 -4,721 7,563 -16,058 20,074 -510 3,506 9,985 -1,880 -2,013 -1,011 16,150 3,240 19,390 FY10E 20,865 8,178 -2,503 -9,184 17,355 -18,000 -5,000 -217 -23,217 11,424 0 500 -1,822 4,241 19,390 23,631 FY11E 25,165 8,794 -2,627 -10,756 20,576 -18,000 -10,000 -193 -28,193 13,332 0 500 -2,057 4,158 23,630 27,788

Source: Company, J.P. Morgan estimates.

Source: Company, J.P. Morgan estimates.

Balance sheet
Rs in millions, year – end March Cash Cash equivalents Accounts receivable Inventories Others Current assets LT investments Net fixed assets Total assets Liabilities Payables Others Total current liabilities Total debt Other liabilities Total liabilities Shareholders’ equity Shareholders’ net worth BVPS (Rs per share) FY08 3,240 48,656 6,555 10,380 10,734 79,565 3,151 40,328 123,044 24,492 3,695 28,187 9,001 1,701 38,889 1,445 84,154 291 FY09 19,390 27,907 9,189 9,023 17,309 82,818 3,826 49,321 135,965 30,169 3,807 33,976 6,988 1,551 42,515 1,445 93,449 323 FY10E 23,630 32,907 10,249 13,909 18,942 99,636 3,826 59,143 162,606 34,291 4,761 39,052 7,488 1,668 48,208 1,445 114,398 396 FY11E 27,788 42,907 13,607 17,009 20,738 122,049 3,826 68,350 194,225 39,527 5,152 44,679 7,988 1,791 54,457 1,445 139,767 484

Ratio analysis
%, year-end March EBITDA margin Net profit margin Sales growth Net profit growth EPS growth Cash EPS Growth P/E (x) Cash PE (x) EV/EBITDA (x) EV/Sales (x) Price to Book Value (x) Dividend Yield Debt to equity ROE ROCE FY08 12.5 9.7 22 11 11 25 24.8 18.7 17.1 2.1 5.1 0.3 0.1 20.6 27.0 FY09 7.9 6.0 14 (30) (30) (16) 35.2 22.3 23.8 1.9 4.6 0.2 0.1 13.0 16.9 FY10E 11.0 8.6 31 87 87 61 18.9 13.9 12.8 1.4 3.8 0.4 0.1 19.9 26.1 FY11E 10.9 8.9 16 20 20 17 15.7 11.9 10.7 1.2 3.1 0.5 0.1 19.6 25.7

Source: Company, J.P. Morgan estimates.

Source: Company, J.P. Morgan estimates.

201

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

MediaTek Inc.
www.mediatek.com
Company description Mediatek is a leading ables company across all applications it is present: among the top 3 in handset baseband; #1 in HDTV controller; #1 in PC optical storage and DVD/Blu-ray; and among the top 3 in GPS. Its key customers are China handset brands, LGE, Sony, Samsung and Philips. Post mortem In 2009, Mediatek has replicated its success in other emerging markets. We believe the past recession has helped the company, as the “cheaper good effect” has turned consumers more receptive to whitebox products. Potential for earnings upgrades Consensus expects about 10-15% revenue growth in 2010, which we believe is too conservative considering a 15% EM unit growth. Mediatek has gained a 6-7%/year EM share since 2005. With a 33% of the global EM share in 2009, we believe Mediatek may not hit a ceiling until its reaches a 50-60% share, based on the experiences in China handset market and mature markets such as consumer DVD. We believe market is too bearish on the company’s ASP and margin outlook. As the China handset market is moving from traditional feature phones to pseudo-smartphones, Mediatek may pull away from competition if it faces a lot more building blocks to get there (such as content/apps; improved graphics for better 3D UI; WiFi/touchpad controller); Mediatek has prepared for this trend for 2-3 years. Content is also another significant driver for the long term, in our view. How much recovery is priced into the stock? Despite a strong run up YTD, we believe the stock only reflects a 93% EPS growth in 2009, but not future growth opportunities in non-China share gains, global brand opportunities (LG/Moto) and its content story. The stock is still trading near the low-end of its historical range and well below global comps. Price target and key risks Our Jun-10 PT of NT$630 is based on 15x FY10E earnings (vs. the historical P/E range of 14x-30x), or ~0.9x PEG in 2009-11E. We believe 15x is fair, given our expectation of 22%/14% EPS growth in 2010/11. A key risk to our PT is if Spreadtrum brings in a global chip vendor as a strategic shareholder; this could promptly reduce the product breadth disadvantage vs. Mediatek.
Bloomberg: 2454 TT; Reuters: 2454.TW

Overweight
Price: NT$480.0 Price Target: NT$630

Taiwan Semiconductors Alvin KwockAC
(852) 2800-8533 alvin.yl.kwock@jpmorgan.com

Charles Guo
(852) 2800-8532 charles.x.guo@jpmorgan.com J.P. Morgan Securities (Asia Pacific) Ltd.

Price performance
450 NT$ 300 150
Oct-08 Jan-09 Apr-09 Jul-09 Oct-09

2454.TW share price (NT$ TSE (rebased)

Source: Bloomberg.

Performance
Absolute (%) Relative (%)
Source: Bloomberg.

1M -9.1 -8.8

3M 1.3 -6.5

12M 71.8 15.3

Company data
52-week range (NT$) Mkt cap. (NT$B) Mkt cap. (US$B) Avg daily val (US$MM) Avg daily volume (MM) Shares O/S (MM) Date of price Index: TWSE Free float (%) Exchange rate
Source: Bloomberg.

176.65-540.00 523.3 16.09 128.81 9.42 1,090 5-Nov-09 7,417.46 80.8 32.5

NT$ in billions, year-end December FY08 FY09E FY10E FY11E FY08 FY09E FY10E FY11E Sales 90.2 115.8 142.2 164.8 ROE (%) 22.9 39.9 37.4 33.2 Operating profit 22.1 37.7 47.1 53.1 CORE ROIC (%) 60.3 130.5 152.7 160.2 Pre-tax profit 21.1 38.7 49.8 57.0 Quarterly EPS (NT$) 1Q 2Q 3Q 4Q Net profit 19.2 37.6 46.4 53.0 EPS (FY09E) 3.83 4.84 6.70 2.68 MV of employee bonus 1.1 9.8 11.6 14.2 EPS (FY10E) 6.51 8.52 10.85 8.88 New Taiwan GAAP EPS 18.0 34.8 42.4 48.4 EPS (FY11E) 7.25 10.40 12.80 11.98 New Taiwan GAAP P/E (x) 26.6 13.8 11.3 9.9 Performance 1M 3M 6M 12M Cash 38.7 68.6 105.4 142.6 Absolute (%) -9.1 1.3 22.1 71.8 Gross debt 0.0 0.0 0.0 0.0 Relative (%) -8.8 -6.5 5.0 15.3 Equity 81.6 107.0 140.8 178.2 TWSE index (%) -0.3 8.3 16.3 49.0 YE BPS (NT$) 75.9 98.1 128.2 162.3 DCF value (6/2010) NT$ 747 Cash div. (NT$/share) 18.6 13.9 24.7 30.4 Price target (6/2010) NT$ 630
Source: Company, Bloomberg, J.P. Morgan estimates. Note: Share price and valuation are as of 5 November 2009. 202

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

MediaTek Inc.: Summary of financials
NT$ in billions, year-end December Income statement FY07A Revenues Cost of Goods Sold Gross Profit R&D Expenses SG&A Expenses Operating Profit (EBIT) EBITDA Interest Income Interest Expense Investment Income (Exp.) Non-Op Income (Exp.) Earnings before tax Tax Net Income (Reported) Net Income (New TW GAAP) NT$ EPS (Reported) EPS (New Taiwan GAAP) BPS DPS Shares Outstanding (MM) Balance sheet FY07A Cash and cash equivalents Accounts receivable Inventories Others Current assets LT investments Net fixed assets Others Total assets Liabilities ST loans Payables Others Total current liabilities Long term debt Other liabilities Total liabilities Shareholders' equity 45.7 5.5 9.5 1.9 62.6 27.6 5.2 1.9 97.3 0.0 6.6 4.6 11.3 0.0 0.1 11.4 85.9 FY08A 38.7 2.5 3.4 1.2 45.8 35.1 5.2 10.5 96.6 0.0 3.8 11.1 14.9 0.0 0.1 15.0 81.6 FY09E 68.6 12.9 4.0 5.3 90.9 40.2 2.3 9.7 143.1 0.0 8.0 28.0 36.1 0.0 0.1 36.1 107.0 FY10E 105.4 17.3 5.6 7.2 135.5 40.4 4.3 9.7 190.0 0.0 11.4 37.7 49.1 0.0 0.1 49.1 140.8 FY11E 142.6 19.2 6.4 8.0 176.2 40.7 6.3 9.7 233.0 0.0 12.9 41.8 54.7 0.0 0.1 54.8 178.2 Net Income Depr. & Amortisation Change in working capital Other Cash flow from ops. Capex Disposal/ (purchase) Cash flow from investing Free cash flow Equity raised/ (repaid) Debt raised/ (repaid) Other Dividends paid Cash flow from financing Net change in cash Beginning cash Ending cash 80.4 34.2 46.2 9.1 4.1 33.0 33.6 1.6 0.0 1.6 -0.1 36.0 -1.5 34.6 26.0 33.3 25.0 81.6 14.0 1,039.0 FY08A 90.2 41.8 48.4 15.8 4.0 22.1 25.0 1.3 0.0 0.0 -2.3 21.1 -1.9 19.2 19.2 18.0 18.0 75.9 18.6 1,063.4 FY09E 115.8 47.7 68.1 14.2 4.5 37.7 40.9 0.6 0.0 0.3 0.2 38.7 -1.1 37.6 37.6 34.8 34.8 98.1 13.9 1,082.0 FY10E 142.2 58.8 83.3 19.4 5.2 47.1 49.0 2.5 0.0 0.2 0.0 49.8 -3.5 46.4 46.4 42.4 42.4 128.2 24.7 1,092.1 FY11E 164.8 69.4 95.3 22.3 5.7 53.1 55.0 3.6 0.0 0.3 0.0 57.0 -4.0 53.0 53.0 48.4 48.4 162.3 30.4 1,095.2 Ratio analysis % Gross Margin EBITDA margin Operating Margin Net Margin R&D/sales SG&A/Sales Sales growth Operating Profit Growth Net profit growth EPS (Reported) growth EPS (New GAAP) growth Net debt to total capital Net debt to equity Asset Turnover Working Capital Turns (X) ROE ROIC ROIC (net of cash) Cash flow statement FY07A 34.6 0.7 -6.6 0.0 28.7 -1.1 -5.1 -6.2 27.6 3.3 0.0 0.0 -14.5 -11.2 11.3 39.4 50.7 FY08A 19.2 2.9 13.4 0.0 35.5 -2.9 -16.1 -19.0 32.6 3.2 0.0 0.0 -19.8 -16.5 -0.1 45.7 45.6 FY09E 37.6 3.2 6.1 0.0 46.9 -0.2 -4.3 -4.6 46.6 19.7 0.0 0.0 -15.0 4.7 47.0 38.7 85.6 FY10E 46.4 1.9 5.1 0.0 53.3 -3.9 -0.2 -4.1 49.4 14.5 0.0 0.0 -27.0 -12.5 36.7 68.6 105.4 FY11E 53.0 1.9 2.2 0.0 57.1 -3.9 -0.3 -4.2 53.2 17.6 0.0 0.0 -33.3 -15.7 37.3 105.4 142.6 FY07A 57.4 41.8 41.0 43.0 11.3 5.1 51.7 45.0 53.1 49.9 149.7 -53.2 -53.2 82.6 1.8 45.0 43.2 96.8 FY08A 53.7 27.7 24.5 21.3 17.6 4.5 12.2 -32.8 -44.5 -45.8 -27.9 -47.4 -47.4 93.4 2.2 29.9 21.5 43.3 FY09E 58.8 35.3 32.6 32.5 12.2 3.9 28.3 70.3 96.1 92.8 92.8 -64.2 -64.2 80.9 2.7 52.0 39.4 91.2 FY10E 58.6 34.5 33.2 32.6 13.6 3.7 22.7 25.0 23.2 22.0 22.0 -74.8 -74.8 74.8 2.0 46.1 35.6 119.3 FY11E 57.9 33.4 32.2 32.2 13.5 3.5 15.9 12.6 14.3 14.0 14.0 -80.1 -80.1 70.7 1.6 41.5 31.2 139.8

Source: Company, J.P. Morgan estimates.

203

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Metropolitan Bank & Trust Co.
www.metrobank.com.ph
Company description Metrobank is one of the top three banks in the Philippines. MBT was established in 1962 and achieved progress in the 1980s after it obtained its universal banking license and acquired a controlling interest in PSBank. MBT offers a full range of banking products, including bancassurance, insurance, and investment management. With assets of nearly Php777 billion, the bank has over 700 domestic branches. Post mortem MBT has made significant improvement in its credit risk management over the past three years. Entire credit risk underwriting process was revamped, while relationship-based lending and exceptions are being curtailed. Asset quality has been stable in the past two years, with NPL ratio at 4.8% in June 2009, versus the system NPL and NPA ratio of 3.79% and 4.38%, respectively. Potential for earnings upgrades MBT has a high operating leverage. We estimate that every 5% change in top line translates into a corresponding 14% change in PPOP and a 17% change in EPS. Bottom-line impact of credit cost changes is also substantial—every 10bp change corresponds to a 4% change in EPS. How much recovery is priced into the stock? RoE has been in single digits over the past 10 years, except in 2007 due to the exceptional boost from bond gains. This was primarily driven by higher credit costs. We expect improvement in credit risk management and the charge-off of the remaining SPV debt of Php4.8 billion this year to be key catalysts for a re-rating. Price target and key risks Our Dec-10 PT of Php50 is based on a 2-stage DDM. We use a fair P/BVbased multiple of 0.92x, with a normalized RoE of 13.4%, cost of capital of 14%, and a growth rate of 7%. Key risks to our PT include a delay in cleanup of the book, and capital call.
Bloomberg: MBT PM; Reuters: MBT.PS
Php in millions, year-end December Operating profit Net profit EPS (Php) DPS (Php) EPS growth (%) ROE (%) P/E (x) BVPS (Php) P/BV (x) Div yield (%) FY08 10,361 4,408 2.44 0.60 -39.9% 7.2% 16.8 32.5 1.26 1.5% FY09E 13,475 4,844 2.68 0.80 9.9% 8.0% 15.3 34.3 1.20 2.0% FY10E 14,619 7,154 3.96 1.20 47.7% 11.1% 10.4 36.9 1.11 2.9% FY11E 17,354 9,574 5.30 1.60 33.8% 13.7% 7.7 40.4 1.02 3.9%

Overweight
Php41.00 Price Target: Php50.00

Philippines Banks Harsh Wardhan ModiAC
(65) 6882-2450 harsh.w.modi@jpmorgan.com J.P. Morgan Securities Singapore Private Limited

Price performance
45 Php 30 15
Oc t-08 Jan -09 Ap r-09 Ju l-09 Oc t-09

M BT. PS s hare pric e (Php PS E (reba se d)

Source: Reuters.

Performance
1M Absolute (%) Relative (%)
Source: Reuters.

3M 31.2 10.6

12M 50.0 21.4

12.0 7.9

Company data
52-week range (Php) Mkt cap. (PhpMM) Mkt cap. (US$MM) Avg daily value (US$MM) Avg daily volume (MM) Shares O/S (MM) Date of price Index: PSEi Free float (%) Exchange rate
Source: Bloomberg.

43-19.50 74,098 1,555 2.2 2.3 1,807 5-Nov-09 2,945 44 47.6

Source: Company, Bloomberg, J.P. Morgan estimates. Note: Share price and valuation are as of 5 November 2009.

204

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Metropolitan Bank & Trust Co.: Summary of financials
Income statement - Php mn Margins (% of Earning Ass Earning Assets/Assets NIM (as % of avg. Assets) Net Interest Income Total Non-Interest Revenue Fee income FX/Trading gains Other operating income Total operating revenues Operating costs Operating profit Loan Loss Provisions Other provisions Exceptionals Disposals/ Other income Pre-tax profit Tax Minorities/preference dividen Attributable net income 2007 3.52% 89% 3.15% 21,466 14,906 5,507 5,757 3,642 36,371 -22,174 14,198 -7,787 0 0 1,396 7,807 -88 -675 7,043 2008 3.46% 90% 3.12% 23,069 11,486 6,783 -504 5,208 34,555 -24,194 10,361 -3,248 0 0 992 8,104 -3,027 -669 4,408 2009E 3.51% 91% 3.18% 25,256 13,831 6,444 3,482 3,906 39,087 -25,612 13,475 -3,087 -3,000 0 1,000 8,388 -2,852 -692 4,844 2010E 3.58% 91% 3.25% 28,186 12,930 7,088 1,741 4,101 41,116 -26,497 14,619 -1,730 -1,500 0 1,000 12,389 -4,212 -1,022 7,154 2011E 3.62% 91% 3.30% 31,249 Net Interest Incom 14,049 7,797 1,741 4,511 45,297 -27,943 17,354 -975 -800 0 1,000 16,579 -5,637 -1,368 9,574 Loan/Deposit Investment/Assets Loan/Assets Customer deposits/ LT Debt/Liabilities Per Share Data EPS (Php/ share) DPS (Php/ share) Payout NAV Avg. Shares Issued 2007 4.1 1.2 29.6% 35.5 1,736 2008 2.4 0.6 24.6% 32.5 1,807 2009E 2.7 0.8 29.8% 34.3 1,807 2010E 4.0 1.2 30.3% 36.9 1,807 2011E 5.3 1.6 30.2% 40.4 1,807 Tier 1 Ratio Total CAR Key balance sheet - Php m Net Customer Loans Loans loss reserves Gross Loans Investments Other Earning Assets Total assets Customer deposits Long-term bond funding Other Interest Bearing Liabili Average Assets Shareholders' equity Risk Weighted Assets 2007 304,898 12,769 317,667 127,359 200,994 716,068 529,543 18,620 93,429 682,427 74,476 452,295 2008 358,163 13,541 371,704 147,501 191,118 666,068 764,809 585,307 15,856 94,642 633,023 740,439 69,005 501,085 476,690 2009E 372,686 13,127 385,813 185,815 194,465 719,101 823,336 612,236 22,199 116,498 686,293 794,073 72,403 543,402 522,243 2010E 419,162 13,357 432,520 198,822 217,223 787,553 908,712 690,736 22,199 118,388 752,380 866,024 77,388 599,750 571,576 2011E 474,283 13,332 487,615 212,739 220,848 863,723 984,058 757,416 22,199 120,373 824,970 946,385 84,071 639,638 619,694 Du-Pont Analysis NIR/Avg. Assets Non IR/Avg. Asset Non IR/Total Rev Total Rev/Avg. As Cost/Income Cost/Assets Operating ROAA LLP/Loans Other inc:provs Pre-tax ROAA Tax MI ROAA RoRWA Equity/Assets ROE 9.1% 13.9% 2007 3.15% 2.18% 41.0% 5.33% 61.0% 3.25% 0.9% -2.5% 0.00% 1.1% -1.1% -0.1% 1.0% 1.7% 9.2% 11.2% 9.7% 13.4% 2008 3.12% 1.55% 33.2% 4.67% 70.0% 3.27% 1.0% -0.9% 0.00% 1.1% -37.4% -0.1% 0.6% 0.9% 8.3% 7.2% 10.1% 13.6% 2009E 3.18% 1.74% 35.4% 4.92% 65.5% 3.23% 1.3% -0.8% 0.38% 1.1% -34.0% -0.1% 0.6% 0.9% 7.6% 8.0% 10.0% 13.1% 2010E 3.25% 1.49% 31.4% 4.75% 64.4% 3.06% 1.5% -0.4% 0.17% 1.4% -34.0% -0.1% 0.8% 1.3% 7.4% 11.1% 10.4% 13.4% 2011E 3.30% 1.48% 31.0% 4.79% 61.7% 2.95% 1.7% -0.2% 0.08% 1.8% -34.0% -0.1% 1.0% 1.5% 7.4% 13.7% Asset Quality/Cap Loan loss reserves/ NPLs/loans Loan loss reserves/ Growth in NPLs 58% 18% 43% 74% 3% 2007 -4.2% 5.0% 80% -18% 61% 19% 47% 77% 2% 2008 -3.8% 4.2% 86% -2% 61% 23% 45% 74% 3% 2009E -3.5% 4.5% 76% 9% 61% 22% 46% 76% 3% 2010E -3.2% 4.2% 73% 7% 63% 22% 48% 77% 2% 2011E -2.8% 3.9% 69% 5% Balance Sheet Gea 2007 2008 2009E 2010E 2011E Non-Interest Income of which Fee Grth Revenues Costs Pre-Provision Prof Loan Loss Provision Pre-Tax Attributable Incom EPS DPS 12% 2% 10% 8% 6% 11% -4% 47% 27% 21% 20.0% 7% -23% 23% -5% 9% -27% -58% 4% -37% -40% -50.0% 9% 20% -5% 13% 6% 30% -5% 4% 10% 10% 33.3% 12% -7% 10% 5% 3% 8% -44% 48% 48% 48% 50.0% 11% 9% 10% 10% 5% 19% -44% 34% 34% 34% 33.3% Growth Rates Loans Deposits Assets Equity 2007 7% 8% 10% 3% 2008 17% 11% 7% -7% 2009E 4% 5% 8% 5% 2010E 12% 13% 10% 7% 2011E 13% 10% 8% 9%

Average Earning Assets = 610,626

Average Interest Bearing L 578,013

Average Risk Weighted As 418,974
Source: Company data, J.P. Morgan estimates.

205

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

MindTree
www.mindtree.com
Company description MindTree is a mid-sized Indian IT services company, founded in 1999. The company is structured into two business units that focus on software development (IT Services) and R&D services. The company has clients that range from Fortune 100 companies to enterprise software organizations. It had posted an industry-leading revenue growth of 42% over FY05-09. The company has a marquee client base, systems/processes that are ahead of its mid-cap peer group and higher offshore mix than peers. Post mortem MindTree saw a revenue slowdown from some of its customers impacted by the slowdown. The company is now seeing increasing volumes from most of its top-tier customers; this, we believe, led to 4% Q/Q volume growth in the past quarter and expectation of a volume recovery going forward. Given the good execution and increased deal signings, we believe MindTree is in a position to post a 15-20% revenue growth over the next 1-2 years with stable margins. Potential for earnings upgrades We expect a 10%-15% upside to consensus’ FY10/11 EPS estimates for MindTree, and believe the stock will re-rate as consensus estimates increase over the next 1-2 quarters. How much recovery is priced into the stock? We believe IT spend recovery will affect mid-cap Indian IT stocks with a lag compared to large-caps. Hence, we expect mid-caps to see more absolute upside than large caps and MindTree is our top pick in the mid-cap space. Price target and key risks Our Jun-10 price target of Rs700 is based on a one-year forward P/E multiple of 12x—at a 30%-35% discount to the target P/E multiples of top-tier Indian IT companies (Infosys/TCS/Wipro). Key risks to our price target are rupee/US$ appreciation and protectionism.
Bloomberg: MTCL IN; Reuters: MINT.BO
Rs in millions, year-end March Sales Net profit EPS (Rs) FD EPS (Rs) DPS (Rs) Sales growth (%) Net profit growth (%) EPS growth (%) ROE (%) P/E (x) FD P/E (x) FY09 10,126 300 7.9 7.9 1.0 36.9 -71.0 -71.0 5.6 76.7 76.7 FY10E 12,867 1,965 50.4 50.4 4.5 27.1 554.9 554.9 33.8 12.0 12.0 FY11E 15,017 2,079 53.3 53.3 5.5 16.7 5.8 5.8 28.7 11.3 11.3 FY12E 17,908 2,512 62.8 62.8 6.5 19.2 20.8 20.8 27.1 9.6 9.6

Overweight
Rs603 Price Target: Rs700

India IT Services Manoj SinglaAC
(91-22) 6157-3587 manoj.singla@jpmorgan.com J.P. Morgan India Private Limited

Price performance
150 100 50 0 Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08 Jul-08 Aug-08 Sep-08 Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09 Nov-09 MindTree Sensex (rebased)

Source: Bloomberg.

Performance
1M Absolute (%) Relative (%)
Source: Bloomberg.

3M 34.6 33.3

12M 134.7 47.8

0.2 5.2

Company data
52-week range (Rs) Mkt cap. (Rs B) Mkt cap. (US$MM) Avg daily value (US$MM) Avg daily volume (MM) Shares O/S (MM) Date of price Index: Sensex Free float (%) Exchange rate (Rs/US$)
Source: Bloomberg.

181-650 22.76 483.8 4.2 0.41 38 5-Nov-09 16,063.9 23 47.0

Source: Company, Bloomberg, J.P. Morgan estimates. Note: Share price and valuation are as of 5 November 2009.

206

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

MindTree: Summary of financials
Profit and loss statement
Rs in millions, year-end March Revenue % change Y/Y Gross margin (%) EBITDA % change Y/Y EBITDA margin (%) EBIT % change Y/Y EBIT margin (%) Net interest Earnings before tax % change Y/Y Tax as % of EBT Net income (reported) % change Y/Y Shares O/S (MM) EPS (reported) (Rs) FY09 10,126 36.9 39.1 2641 110.6 26.1 2,173 142.0 21.5 (83) 325 -70.9 25 7.8 300 -71.0 39 7.9 FY10E 12,867 27.1 33.4 2449 -7.3 19.0 1,798 -17.2 14.0 50 2,237 587.3 272 12.2 1,965 554.9 39 50.4 FY11E 15,017 16.7 33.0 3009 22.9 20.0 2,289 27.3 15.2 157 2,446 9.4 367 15.0 2,079 5.8 40 53.3 FY12E 17,908 19.2 33.0 3665 21.8 20.5 2,858 24.8 16.0 283 3,140 28.4 628 20.0 2,512 20.8 41 62.8

Cash flow statement
Rs in millions, year-end March EBIT Depreciation & amortization Change in working capital Taxes Cash flow from operations Capex Disposal/(purchase) Net interest Free cash flow Equity raised/(repaid) Debt raised/(repaid) Other Dividends Beginning cash Ending cash DPS (Rs) FY09 2,173 469 717 25 1,485 -317 1,485 (83) 1,169 -292 476 -58 -44 1,942 477 1.0 FY10E 1,798 650 -1,425 272 1,191 -889 1,191 50 302 -740 -1,363 206 -205 477 1,533 4.5 FY11E 2,289 720 -583 367 2,217 -600 2,217 157 1,617 2 0 0 -251 1,533 2,901 5.5 FY12E 2,858 807 -513 628 2,807 -600 2,807 283 2,207 2 0 0 -304 2,901 4,806 6.5

Source: Company, J.P. Morgan estimates.

Source: Company, J.P. Morgan estimates.

Ratio analysis Balance sheet
Rs in millions, year-end March Cash and cash equivalents Accounts receivable Inventories Others Current assets LT investments Net fixed assets Total assets Liabilities ST loans Payables Others Total current liabilities Long-term debt Other liabilities Total liabilities Shareholders’ equity BVPS (Rs) FY09 477 2,150 0 1,231 3,858 2,920 2,438 9,360 0 2,499 0 2,499 1,394 164 4,057 5,304 136.1 FY10E 1,533 2,586 0 1,995 6,114 0 2,677 8,998 0 2,274 0 2,274 31 370 2,674 6,323 162.2 FY11E 2,901 3,068 0 2,542 8,511 0 2,557 11,275 0 2,720 0 2,720 31 370 3,121 8,154 203.9 FY12E 4,806 3,639 0 3,015 11,461 0 2,349 14,017 0 3,252 0 3,252 31 370 3,653 10,364 252.9 Rs in millions, year-end March EBITDA margin Operating margin Net profit margin SG&A/sales Sales growth Net profit growth Sales per share growth EPS growth Interest coverage (x) Net debt to total capital Net debt to equity Sales/assets EBIT margin ROCE Assets/equity (x) ROI ROE FY09 26.1 21.5 3.0 17.7 36.9 -71.0 33.1 -71.2 13.4 13.7 17.3 108.2 21.5 22.5 1.8 33.5 5.6 FY10E 19.0 14.0 15.3 19.4 27.1 554.9 27.1 541.2 64.4 n.m. n.m. 143.0 14.0 24.7 1.4 32.2 33.8 FY11E 20.0 15.2 13.8 17.7 16.7 5.8 13.8 5.8 374.9 n.m. n.m. 133.2 15.2 25.9 1.4 29.0 28.7 FY12E 20.5 16.0 14.0 17.0 19.2 20.8 16.3 17.8 467.9 n.m. n.m. 127.8 16.0 24.1 1.4 31.2 27.1

Source: Company, J.P. Morgan estimates.

Source: Company, J.P. Morgan estimates.

207

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

MMK
www.mmk.ru
Company description With 13.3mn t of crude steel production (2008), MMK is the leading Russian flat steel producer and 23rd largest steelmaker in the world (2008). With exposure to the tubular and machine-building industries, MMK has established the strongest footprint in the domestic market among the Russian steelmakers. Export is traditionally focused on the Middle East and Turkey, where MMK is building 2 processing warehouses and a re-rolling plant. In 2H09 MMK acquired Russian coal miner Belon, improving its downstream integration. In the short term, the company plans to install and commission Mill 2000, aiming to produce high-quality automotive steel. Post mortem With the domestic market on the recovery path, MMK is strengthening its position in the domestic market. Acquisition of the coal business (Belon) should support MMK’s cost base. Prudent borrowing has paid off as the company has emerged with a strong balance sheet after the downturn. Potential for earnings upgrades Operating at 85% utilisation in 4Q09, MMK has the potential for volume growth, however, we believe the largest impact on EPS should come from a combination of improved product mix, strengthened domestic prices and ruble appreciation. How much recovery is priced into the stock? We estimate that with an increase in domestic steel demand in 2010 (JPMe +16% y/y), MMK should benefit from a higher operating margin due to a domestic price premium. Inclusion in MSCI Russia is an extra trigger, we believe. Price target and key risks Our end-10, DCF-based PT is $1.13/sh. Key risks are a decline in domestic steel consumption (particularly in the tubular and machine-building industries), weak flat-steel prices and a strong ruble.
Bloomberg: MAGN RU; Reuters: MAGN.MM
$ in millions, year-end December Sales Net profit EPS ($) FD EPS ($) DPS ($) Sales growth (%) Net profit growth (%) EPS growth (%) ROE (%) P/E (x) FD P/E (x) FY08 10,550 1,075 0.096 0.147 0.05 29% -39% -39% 11% 8.6 5.4 FY09E 4,512 136 0.012 0.095 0.03 -57% -87% -87% 1% 68.1 69.2 FY10E 5,919 501 0.045 0.056 0.00 31% 268% 268% 5% 14.5 12.9 FY11E 8,406 1,094 0.098 0.063 0.01 42% 118% 118% 10% 8.5 6.7

Overweight
Price: $0.83 Price Target: $1.13

Russia Metals & mining Yuriy VlasovAC
(7-495) 967-7033 yuriy.a.vlasov@jpmorgan.com J.P. Morgan Bank International LLC

Price Performance
0.9 0.7 $ 0.5 0.3 0.1
Nov-08 Feb-09 May-09 Aug-09 Nov-09

Source: Bloomberg

Performance
Absolute (%) Relative (%)
Source: Bloomberg

1M 7% 5%

3M 32% -9%

12M 315% 117%

Company data
52-week range ($) Mkt cap. (US$MM) Avg daily value (US$MM) Avg daily volume (MM) Shares O/S (MM) Date of price Index: RTS Free float (%) Exchange rate
Source: Bloomberg

0.15- 0.83 9,263 3.5 618 11,160 23-Nov-09 1467 12% 1.00

Source: Company, Bloomberg, J.P. Morgan estimates. Note: Share price and valuations are as at cob 23 November 2009.

208

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

MMK: Summary of Financials
Profit and Loss Statement $ in millions, year end Dec Revenues % Change Y/Y Gross Margin (%) EBITDA % Change Y/Y EBITDA Margin (%) EBIT % Change Y/Y EBIT Margin Net Interest Earnings before tax % change Y/Y Tax as % of EBT Net Income (Reported) % change Y/Y Shares Outstanding EPS (Reported) % Change Y/Y Balance sheet $ in millions, year end Dec Cash and cash equivalents Accounts Receivable Inventories Others Current assets LT investments Net fixed assets Total assets ST loans Payables Others Total current liabilities Long term debt Other liabilities Total liabilities Shareholders' equity BVPS FY08 FY09E FY10E 10,550 4,512 5,919 28.7% -57.2% 31.2% 25.7% 23.7% 33.0% 2,204 813 1,358 -7.9% -63.1% 67.0% 20.9% 18.0% 22.9% 1,259 175 688 -40.9% -86.1% 293.1% 11.9% 3.9% 11.6% (18) (38) (28) 1,106 193 705 -51.8% -82.5% 264.5% (25) (46) (141) 27.5% 24.0% 20.0% 1,075 136 501 -39.3% -87.4% 268.4% 11,160.3 11,160.3 11,160.3 FY11E 8,406 42.0% 36.0% 2,262 66.6% 26.9% 1,558 126.6% 18.5% (28) 1,580 124.2% (316) 20.0% 1,094 118.4% 11,160.3 Cash flow statement $ in millions, year end Dec EBIT Depreciation & amortization Change in working capital Taxes Cash flow from operations Capex Disposals/(purchase) Net Interest Free cash flow Equity raised/repaid Debt Raised/repaid Other Dividends paid Beginning cash Ending cash - DPS Ratio Analysis $ in millions, year end Dec EBITDA margin Operating margin Net Profit margin SG&A/Sales FY08 1,259 945 (269) 25 1,935 (2,112) 0 (18) 946 412 (314) 256 1,106 0.03 FY09E 175 638 153 0 966 (1,021) 0 (38) (83) 300 0 1,106 1,287 0.00 FY10E 688 670 33 0 1,391 (1,200) 0 (28) 67 250 (75) 1,287 1,493 0.01 FY11E 1,558 704 (202) 0 2,060 (1,400) 0 (28) 366 -125 (164) 1,493 1,534 0.01

FY08 FY09E FY10E 1,106 991 996 3,628 1,287 524 527 2,873 1,493 555 557 3,141

FY11E 1,534 787 791 3,648 358

FY08 20.9% 10.2% 10.2% -4.9% 24.9% 28.7% -39.3% 69.9 6.3% 0.7 146.9% 11.1% 10.9%

FY09E 18.0% 3.9% 3.0% -7.7% -57.2% -57.2% -87.4% 4.6 7.4% 0.3 141.4% 1.4% 1.5%

FY10E 22.9% 11.6% 8.5% -6.9% 31.2% 31.2% 268.4% 24.6 7.5% 0.4 143.7% 4.9% 5.4%

FY11E 26.9% 18.5% 13.0% -5.9% 42.0% 42.0% 118.4% 55.7 5.3% 0.5 142.8% 9.8% 11.4%

358 358 358 14,197 13,860 14,694 1,276 1,321 2,640 405 4,345 9,663 1 1,276 1,276 537 632 1,856 1,951 705 955 3,861 4,206 9,799 10,225 1 1

Sales per share growth Sales growth - Net profit growth 15,934 EPS growth Interest coverage (x) Net debt to Total Capital - Net debt to equity 2,216 Sales/assets (x) 830 Assets/Equity ROE 4,346 ROCE 11,155 1 1,276 897

Source: Company reports and J.P. Morgan estimates.

209

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

MTN
www.mtn.com
Company description MTN is a leading MNO on the African continent and the Middle East. The group has a presence in 21 countries - key markets include Nigeria, South Africa, Iran, Ghana, Cote d’Ivoire and Syria. We forecast MTN to report FY09E revenue of R122.8bn, and EBITDA of R50.3bn. Post mortem Post the protracted and ultimately unsuccessful negotiations with Bharti, operationally sound H109A results and the strength in the rand exchange rate against the US$ that renders MTN less attractive for rand-based investors, we estimate that MTN is trading on a normalized free cash flow yield of 1314% on 2010E, placing it amongst the most attractively valued mobile stocks in our EM universe, despite being one of the most promising growth stories and one of the most respected names in the sector. Our FY09E headline EPS of 1016c represents YoY growth of 18.6%, driven by an increase of 21.8% YoY in total subscribers (to 110.5m). In our view, the key drivers for the stock should be strong underlying growth and a stabilisation in the rand exchange rate. A strong operating performance would likely help the market refocus on MTN's strong growth prospects. How much recovery is priced into the stock? We believe that at these levels, the MTN does not fully price in the likely growth recovery we expect in 2010, and neither do we think it prices in the strong growth potential we believe remains beyond then. Price target and key risks Our Sep-10 DCF and multiples-based TP is 15,843c, supported by higher relative multiples as potential M&A activity ceases to influence pricing and rand growth recovers. Key risks include: 1) increasing competitive pressures and regulation, particularly if MTR cuts are followed by deep price discounting; 2) macro & political uncertainty; and 3) fluctuations in the rand. JPM sees only limited further upside and scope for some reversal of the recent strength in 2010.
Bloomberg: MTN SJ; Reuters: MTNJ.J
Rand millions, year-end Dec Sales Net profit FD EPS (SAcps) DPS (SAcps) Sales growth (%) Net profit growth (%) EPS growth (%) ROE (%) FD P/E (x) FY08 102,526 16,675 893.93 181 40.2 33.1 32.9 27.2 13.4 FY09E 122,754 18,896 1,016.48 205 19.7 13.3 13.7 22.7 11.7 FY10E 133,897 21,806 1,179.95 285 9.1 15.4 16.1 21.6 10.1 FY11E 148,398 355 10.8 -

Overweight
Price: 11,940c Price Target: 15,843c

South Africa Wireless Services Jean-Charles LemardeleyC
(44-20) 7325 5763 jean-charles.lemardeley@jpmorgan.com J.P. Morgan Securities Ltd.

Price Performance
14,000 12,000 c 10,000 8,000
Nov-08 Feb-09 May-09 Aug-09 Nov-09

Source: Bloomberg

Performance
Absolute (%)
Source: Bloomberg

1M -4.3

3M -5.6

12M 18.9

Company data
Price(c) Date of Price Price Target (c) Price Target End Date 52-week Range (c) Mkt Cap (Rbn) Shares O/S (mn) Mkt Cap ($bn)
Source: Bloomberg, J.P. Morgan

11,940 23-Nov-09 15,843 01-Sep-10 13,600 – 8,181 219.70 1,840 28.9

Source: Company, Bloomberg, J.P. Morgan estimates. Note: Share price and valuations are as of cob 23 November 2009.

210

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

MTN Group Limited: Summary of Financials
Profit and Loss Statement R in millions, year end Dec Revenues % Change Y/Y EBITDA % Change Y/Y EBITDA Margin EBIT % Change Y/Y EBIT Margin Net Interest PBT % change Y/Y Net Income (clean) % change Y/Y Average Shares Clean EPS % change Y/Y DPS Balance sheet R in millions, year end Dec Cash and cash equivalents Accounts Receivables ST financial assets Others Current assets LT investments Net fixed assets Total assets ST loans Payables Others Total current liabilities Long term debt Other liabilities Total liabilities Shareholders' equity FY08 FY09E FY10E Cash flow statement FY11E FY12E R in millions, year end Dec Cash EBITDA Interest Tax Other Cash flow from operations Capex PPE Net investments CF from investments Dividends Share (buybacks)/ issue CF to Shareholders FCF to debt OpFCF (EBITDA - PPE) EFCF pre Div, PPE FY08 (1,917) (6,781) 0 45,416 FY09E FY10E FY11E FY12E 102,526 122,754 133,897 148,398 40.2% 19.7% 9.1% 10.8% 43,166 50,272 55,173 61,220 35.5% 16.5% 9.7% 11.0% 42.1% 41.0% 41.2% 41.3% 30,212 35,931 40,663 45,055 33.1% 18.9% 13.2% 10.8% 29.5% 29.3% 30.4% 30.4% (1,917) (3,265) (2,150) 28,295 32,666 38,513 44.9% 15.4% 17.9% 16,675 18,896 21,806 33.1% 13.3% 15.4% 893.93 1,016.48 1,179.95 32.9% 13.7% 16.1% 181 205 285 355 (3,265) (2,150) (8,270) (10,480) 0 0 51,032 55,566 61,220 -

(28,263) (30,661) (22,475) (2,536) (3,381) (3,788) -

FY08 5,340 169,054 89,202 75,696

FY09E 5,340 176,792 81,566 90,676

FY10E

Ratio Analysis FY11E FY12E R in millions, year end Dec EBITDA margin EBIT Margin Net profit margin Capex/sales Depreciation/Sales Revenue growth EBITDA Growth EPS Growth Net debt/EBITDA CF to Shareholders FCF to debt OpFCF (EBITDA - PPE) EFCF pre Div, PPE

FY08 42.1% 29.5% 16.3% 21.0% 40.2% 35.5% 32.9% 0.6 -

FY09E 41.0% 29.3% 15.4% 27.6% 19.7% 16.5% 13.7% 0.3 -

FY10E FY11E FY12E 41.2% 30.4% 16.3% 25.0% 9.1% 9.7% 16.1% 0.2 41.3% 30.4% 10.8% 11.0% -

5,183 5,183 191,312 212,519 75,510 71,984 110,803 135,035

Source: Company reports and J.P. Morgan estimates.

211

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Nan Ya Plastics Corp
www.npc.com.tw
Company description Nan Ya Plastics (NYP) is one of the largest polyester and MEG producers in Asia. The company started out as a PVC processor, taking PVC powder from Formosa Plastics and producing PVC pipes, film, leather, which they continue to do so today. Aside from MEG, they also produce other specialty chemicals such as 1,4-Butanediol and TDI. In recent years, they have expanded to the electronics sector with subsidiaries producing products such as DRAM and PCB, with NYP supplying raw materials to the latter. Post mortem We expect NYP to post superior earnings growth in 2010 than other Formosa Group members, as its electronics business continues to improve. This year NYP has benefited from the unexpected turnaround in the petrochemicals industry and jump in DRAM prices from $0.85/Gb in January to $2.74/Gb now, while the PCB business continues to grow on the back of strong demand for electronics. Potential for earnings downgrade The major downside risk to NYP earnings in 2010, in our view, is MEG spreads contracting further due to new capacities from the Middle East. However, with YTD MEG spreads hovering around $120/ton, we think the downside is limited, given it is already near cash costs. How much upside is priced into the stock? As consensus earnings estimates for the DRAM business has continued to lag the actual results, we believe there is room for further upside if DRAM prices stay at current levels and Nanya Tech completes its transition to the 50nm technology in 1Q10 and potentially turn profitable in 2010. Price target and key risks Our Dec-10 PT of NT$61 is based on 2.0x 2010E BV, similar to levels we have valued Formosa Plastics at. While contribution from FPCC is expected to decline, this will be offset by earnings from Nanya Tech and Nan Ya PCB. A key downside risk to our PT is MEG overcapacity, which could negatively affect NYP’s chemical earnings.
Bloomberg: 1303 TT; Reuters: 1303.TW
NT$ in millions, year-end December Sales Net profit EPS (NT$) DPS (NT$) Sales growth (%) Net profit growth (%) EPS growth (%) ROE (%) P/E (x) P/BV (x) FY08 208,179 9,386 1.23 6.70 -8.7% -84.1% -84.1% 3.7% 43.2 1.8 FY09E 159,970 12,919 1.65 0.80 -23.4% 37.7% 33.6% 5.7% 32.2 1.8 FY10E 188,196 18,873 2.40 1.07 17.6% 46.1% 46.1% 8.2% 22.2 1.8 FY11E 224,757 28,226 3.59 1.56 19.4% 49.6% 49.6% 11.8% 14.8 1.7

Overweight
NT$53.20 Price Target: NT$61.00

Taiwan Petrochemicals Samuel Lee, CFAAC
(852) 2800-8536 samuel.sw.lee@jpmorgan.com J.P. Morgan Securities (Asia Pacific) Limited

Price performance
70 NT$ 50 30
Nov-08 Feb-09 May-09 Aug-09 Nov-09

1303.TW share price (NT$ TSE (rebased)

Source: Bloomberg.

Performance
1M Absolute (%) Relative (%)
Source: Bloomberg.

3M 28.1 16.9

12M 35.7 -30.5

3.8 2.9

Company data
52-week range (NT$) Mkt cap. (NT$ MM) Mkt cap. (US$MM) Avg daily value (US$MM) Avg daily volume (MM) Shares O/S (MM) Date of price Index: TWSE Free float (%) Exchange rate
Source: Bloomberg.

30.49-57.20 417,726 12,853 378.25 8.73 7,852 5-Nov-09 7,417 74.3 32.5

Source: Company, Bloomberg, J.P. Morgan estimates. Note: Share price and valuation are as of 5 November 2009.

212

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Nan Ya Plastics Corp: Summary of financials
NT$ in millions, year-end December Income statement FY07 Revenues % change Y/Y EBITDA % change Y/Y EBIT % change Y/Y EBIT Margin Net Interest Earnings before tax % change Y/Y Tax as % of EBT Net income (reported) % change Y/Y Shares outstanding EPS (reported) % change Y/Y FY08 FY09E FY10E FY11E Cash flow statement FY07 36,744 8,727 -8,341 -8263 70,313 -5,595 3,725 -2,042 -19,648 64,719 FY08 FY09E FY10E 13,663 8,326 8,339 -1731 19,818 -2,914 -1,985 -4,809 16,904 FY11E 17,036 8,326 10,710 -2588 20,938 -1,457 -1,887 -4,638 19,481

228,700 208,719 159,970 188,196 224,757 EBIT 25.9% (8.7%) (23.4%) 17.6% 19.4% Depr. & amortization 45,471 20,680 17,708 21,989 25,362 Change in working capital 78.6% -54.5% -14.4% 24.2% 15.3% Taxes 36,744 11,962 9,381 13,663 17,036 Cash flow from operations 109.1% NM NM 45.6% 24.7% 16.1% 5.7% 5.9% 7.3% 7.6% Capex -2,042 -2,034 -1,567 -1,985 -1,887 Disposal/(purchase) 67,310 9,387 14,219 20,603 30,814 Net Interest 29.3% -86.1% 51.5% 44.9% 49.6% Other -8,263 -1 -1,299 -1,731 -2,588 Free cash flow 12.3% 0.0% 9.1% 8.4% 8.4% 59,047 9,386 12,919 18,873 28,226 Equity raised/(repaid) 23.9% -84.1% 37.6% 46.1% 49.6% Debt raised/(repaid) 7,624 7,624 7,852 7,852 7,852 Other 7.75 1.23 1.65 2.40 3.59 Dividends paid 23.9% (84.1%) 33.6% 46.1% 49.6% Beginning cash Ending cash DPS

11,962 9,381 8,717 8,326 -334 -14,713 -1 -1299 49,218 39,738 -5,447 380 -2,034 -6,513 43,771 -5,827 -1,567 -3,149 33,911

-7,287 13,705 -14,283 -11,574 -5,058 -260 -22 823 0 0 -38,026 -51,041 -6,099 -8,398 -12,267 2,852 2,432 2,159 12,339 4,262 2,432 2,159 12,339 4,262 1,581 6.70 0.80 1.07 1.56 2.34

Balance sheet FY07 Cash and cash equivalents Accounts receivable Inventories Others Current assets LT investments Net fixed assets Total Assets Liabilities Short-term loans Payables Others Total current liabilities Long-term debt Other liabilities Total Liabilities Shareholders' equity BVPS 2,432 55,320 26,219 1,567 120,655 FY08 2,159 42,623 20,843 1,782 84,250 FY09E 12,339 32,668 15,975 1,782 81,291 FY10E 4,262 38,432 18,793 1,782 83,650 FY11E

Ratio analysis FY07 19.9% 16.07% 25.8% FY08 9.9% 5.73% 4.5% FY09E 11.1% 5.86% 8.1% FY10E 11.7% 7.26% 10.0% FY11E 11.3% 7.58% 12.6%

1,581 EBITDA margin 45,898 Operating margin 22,444 Net margin 1,782 92,085 Sales per share growth - Sales growth 79,212 77,389 75,390 68,971 58,989 Net profit growth 417,955 349,026 335,959 333,463 334,827 EPS growth Interest coverage (x) 21,577 23,217 22,827 34,310 13,215 3,986 1,750 1,356 1,570 1,869 34,224 12,967 12,725 12,836 13,111 55,801 36,183 35,552 47,146 26,326 56,454 72,544 57,746 34,688 50,725 17,193 15,090 15,913 15,913 15,913 129,447 123,818 109,210 97,747 92,965 288,508 225,208 226,749 235,716 241,862 37.84 29.54 28.88 30.02 30.80 Net debt to equity Sales/assets Assets/equity ROE ROCE

25.9% (8.7%) (25.6%) 25.9% (8.7%) (23.4%) 23.9% -84.1% 37.6% 23.9% (84.1%) 33.6% 22.27 15.1% 0.58 1.45 22.0% 10.6% 10.17 29.9% 0.54 1.55 3.7% 3.5% 11.30 22.0% 0.47 1.48 5.7% 3.0%

17.6% 17.6% 46.1% 46.1% 11.08 19.2% 0.56 1.41 8.2% 4.5%

19.4% 19.4% 49.6% 49.6% 13.44 17.6% 0.67 1.77 11.8% 5.6%

Source: Company reports, J.P. Morgan estimates.

213

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Naspers
www.naspers.co.za
Company description Naspers is a leading multinational media group. The group’s principal operations are in internet platforms, pay-television and the provision of related technologies and print media. Most of Naspers’ operations hold leading positions in their relative markets. Post mortem The past year has been characterised by a distinct outperformance of Naspers relative to the industrial index - we believe the strong performance is primarily driven by increased contributions from offshore equity-accounted results (i.e. Tencent, Abril and Mail.ru), resilient subscriber growth, combined with strong free cash flow generation in the Pay TV segment and an ongoing systematic decrease in global emerging market risk aversion. How much recovery is priced into the stock? Both P/E and EV/EBITDA multiples for Naspers reflect steamy valuations relative to historical averages. We attribute this to an evolving business mix, with the group’s valuation and earnings contributions being increasingly weighted in high-growth emerging market internet assets. We believe 1) strong momentum in equity-accounted earnings, 2) increased earnings contribution from emerging market internet assets, and 3) a resilient margin and subscriber growth story in the Pay TV segment, are not fully discounted in the current share price, and therefore are supportive of our thesis of further upside potential. Price target and key risks We maintain our Overweight rating on Naspers. Our revised SOTP-based Nov-10 TP is 34,109cps (fair value 30,267cps). We believe the key risks to our target price being achieved include 1) poor operational performance; 2) regulatory and exchange rate risk being greater than anticipated; and 3) increasing competitive pressures.
Bloomberg: NPN SJ; Reuters: NPNJ.J
Rand millions, year-end Dec Sales Net profit FD EPS (SAcps) DPS (SAcps) Sales growth (%) Net profit growth (%) EPS growth (%) ROE (%) FD P/E (x) FY09A 26,690 5,761 1178.8 207 30.1 68.5 8.6 24.9 FY10E 31,200 4,226 1469.11 269 16.9 -26.6 24.6 12.0 19.9 FY11E 36,029 5,636 1881.14 356 15.5 33.4 28.1 14.6 15.6 FY12E 4,0827 7,315 2370.63 458 13.3 29.8 26.0 16.5 12.4

Overweight
Price: 29,225c Price Target: 34,109c

South Africa Entertainment Ziyad JoosubAC
(27-11) 507 0456 ziyad.x.joosub@jpmorgan.com J.P. Morgan Equities Ltd.

Price Performance
30,000 24,000 c 18,000 12,000
Nov-08 Feb-09 May-09 Aug-09 Nov-09

Source: Bloomberg

Performance
Absolute (%)
Source: Bloomberg

1M 2.2

3M 19.6

12M 100.2

Company data
Price(c) Date of Price Price Target (c) Price Target End Date 52-week Range (c) Mkt Cap (Rbn) Shares O/S (mn) Free Float
Source: Bloomberg, J.P. Morgan

29,225 23-Nov-09 34,109 30-Nov-10 29,484 – 13,692 118.31 405 100.0%

Source: Company, Bloomberg, J.P. Morgan estimates. Note: Share price and valuations are as of cob 23 November 2009.

214

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Naspers Ltd: Summary of Financials
Profit and Loss statement R in millions, year end Mar Revenues % change Y/Y Gross Margin (%) EBITDA % change Y/Y EBITDA Margin (%) EBIT % change Y/Y EBIT Margin (%) Net Interest and associates Earnings before tax % change Y/Y Tax as % of EBT Net Income (Reported) % change Y/Y Shares Outstanding EPS (reported) % change Y/Y Balance sheet R in millions, year end Mar Cash and cash equivalents Non-cash current assets Current assets Tangible assets Investments Intangible assets Total assets Liabilities ST loans Other current liabilities Total current liabilities Long term debt Other liabilities Total liabilities Shareholders' equity FY08 20,518 19.2% 47.5% 4,997 17.3% 24.4% 3,878 13.5% 18.9% 1,005 4,899 59.0% (1,378) 28.1% 3,418 71.0% 370.6 Cash flow statement FY09 FY10E FY11E FY12E R in millions, year end Mar 26,690 30.1% 49.3% 6,026 20.6% 22.6% 3,783 -2.4% 14.2% (303) 3,516 -28.2% (1,436) 40.8% 5,761 68.5% 372.5 31,200 16.9% 48.8% 7,112 18.0% 22.8% 4,625 22.3% 14.8% (78) 4,573 30.1% (1,610) 35.2% 4,226 -26.6% 372.5 36,029 15.5% 48.9% 8,596 20.9% 23.9% 5,826 26.0% 16.2% (182) 5,673 24.1% (1,877) 33.1% 5,636 33.4% 372.5 40,827 13.3% 49.0% 9,923 15.4% 24.3% 6,872 18.0% 16.8% (306) 6,599 16.3% (1,983) 30.0% 7,315 29.8% 372.5 EBIT Depreciation & amortisation Change in working capital Cash flow from ops (pre tax) Taxes Capex Acquisitions / divestments Net interest Free cash flow (post interests) Equity raised/(repaid) Debt raised/(repaid) Dividends received Beginning cash Ending cash DPS FY08 3,878 1,120 (97) 3,307 (1,113) (17,218) 2,116 96 9,625 11,481 6,690 180 FY09 3,783 2,243 (909) 2,722 (1,077) 2,294 2,082 17 -5,737 6,690 5,724 207 FY10E 4,625 2,486 (97) 1,735 (1,185) (3,142) 3,664 339 197 5,724 4,150 269 FY11E 5,826 2,771 (609) 1,369 (1,304) 1,153 4,166 0 164 4,150 6,049 356 FY12E 6,872 3,051 (625) 1,112 (1,434) 2,035 5,206 0 106 6,049 8,425 458

FY08

Ratio Analysis FY09 FY10E FY11E FY12E R in millions, year end Mar

FY08 19.2% 13.5% 59.0% 1.3 18.5%

FY09 30.1% -2.4% -28.2% 0.5 8.4%

FY10E 16.9% 22.3% 30.1% 0.8 13.2%

FY11E 15.5% 26.0% 24.1% 0.5 9.2%

FY12E 13.3% 18.0% 16.3% 0.3 5.0%

7,573 6,642 5,067 6,966 9,342 DTH subscribers 751 1,069 1,182 1,301 1,437 Broadband subsribers 14,970 13,687 12,133 15,016 18,387 DTH churn (%) DTH gross additions 19,889 22,905 28,517 30,462 33,151 DTH ARPU (R annualised) 12,633 14,331 16,166 18,627 21,948 Broadband/telephony ARPU (R) 24,914 20,916 25,321 25,650 25,882 Revnue growth 57,524 54,560 59,828 66,185 73,749 EBIT growth Net profit growth EPS growth 2,197 2,845 3,171 3,520 3,866 8,779 8,646 8,802 9,487 10,135 Net debt/EBITDA 10,592 10,352 11,096 12,135 13,130 Net debt to equity 11,741 6,906 7,251 7,613 7,994 331 710 830 958 1,086 24,376 19,343 20,966 22,927 24,792 33,147 35,217 38,861 43,259 48,956 EV/EBITDA P/E EV-FCF Yield (%) Equity-FCF Yield (%)

15.2 12.0 10.5 8.6 7.2 3582.0% 3484.4% 2040.9% 1766.3% 1382.0% 1.8% 1.8% 3.2% 3.6% 4.5%

Source: Company reports and J.P. Morgan estimates.

215

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Ncsoft
www.ncsoft.com
Company description Ncsoft, established in 1997, is a global online gaming company specializing in the MMORPG genre. It develops and publishes global MMORPG hits, such as Lineage I & II, and commercialized another hit title, Aion, in Korea, China, Japan, Taiwan, the US and Europe in 2009. The stock is a part of the KOSPI 200 index. Management holds a 30% stake in the company. Post mortem Online gaming companies have been less affected by the economic turmoil, as online games offer better entertainment value per dollar spent than other entertainment objects, in our view. Hence, the impact of economic recovery would have limited impact on the Ncsoft’s sales and margin. However, we estimate the successful launch of Aion in the US and Europe will improve operating margin to 38% in FY10, up from 14.4% in FY08 and 33.6% in FY09E. Potential for earnings upgrades We estimate the company’s high operating leverage will drive its earnings to grow 33% in FY10. Typically, new games, once commercialized, require only a limited level of opex, while the required R&D would have already been spent during the development period. Hence, we estimate Ncsoft’s free cash flow will rapidly rise for the next 2-3 years and cash assets will accumulate briskly to a 60% level of total assets by 2011. How much recovery is priced into the stock? We think Ncsoft’s business is less relevant for the economic recovery. However, we deem the stock attractive now at 14x FY10E earnings, given we estimate Ncsoft’s earnings will grow 33% in FY10 and 25% in FY11. Price target and key risks Our Dec-10 price target of W190,000 is based on a 10-year DCF valuation, assuming an OP margin of 37-40%, a terminal growth rate of 0%, and a WACC of 10.5%. Our price target implies 20x FY10E and 16x FY11E earnings. A key downside risk to our PT is weaker-than-expected traffic for Aion in the US and Europe.
Bloomberg: 036570.KS; Reuters: 036570.KS
Won in billions, year-end December Sales Net profit EPS (Won) DPS (Won) Sales growth (%) Net profit growth (%) EPS growth (%) ROE (%) P/E (x) FY07 347 26 1,216 1,470 5.2% -43.1% -44.9% 6.0% 104.5 FY08 602 151 7,033 821 73.7% 490.6% 478.5% 32.4% 18.1 FY09E 693 200 9,334 2,172 15.0% 32.2% 32.7% 33.9% 13.6 FY10E 890 249 11,584 2,706 28.4% 24.6% 24.1% 33.4% 11.0

Overweight
W124,500 Price Target: W190,000

South Korea Internet Angela HongAC
(82-2) 758-5719 Angela.s.hong@jpmorgan.com J.P. Morgan Securities (Far East) Limited, Seoul Branch

Price performance
250,000 200,000 W 150,000 100,000 50,000 0 Nov-08 Feb-09 May-09 Aug-09 Nov-09 036570.KS share price (W) KOSPI (rebased)

Source Bloomberg.

Performance
1M Absolute (%) Relative (%)
Source Bloomberg.

3M -8.7 -8.8

12M 213.1 137.0

-16.5 -14.1

Company data
52-week range (Won) Mkt cap (WB) Mkt cap. (US$MM) Avg daily value (US$MM) Avg daily volume (WB) Shares O/S (MM) Date of price Index: KOSPI Free float (%) Exchange rate
Source: Bloomberg.

36,000-201,500 2,744 2,325 62.2 73.4 22 5-Nov-09 1,552.24 61.7 1,180

Source: Company, Bloomberg, J.P. Morgan estimates. Note: Share price and valuation are as of 5 November 2009.

216

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Ncsoft: Summary of financials
Won in billions, year-end December SALES Aion Lineage Lineage II City of Heroes / Villains GuildWars Royalty Others Operating expenses Labor Depreciation and amortization Operating R&D Commissions Sales commissions Advertising costs Others OPERATING PROFIT EBITDA Non-operating income/(loss) Pretax profit Effective tax rate (%) Net profit Minority Interest CONSOLIDATED NET PROFIT Key ratios Growth (%) Sales Operating profit EBITDA Pretax profit Net profit Profitability (%) EBITDA margin Operating margin Pretax margin Net profit margin ROE ROA Ratio (%) Total liabilities to equity Net debt(cash) to equity Current ratio FY08 347 10 113 147 24 23 20 4 343 65 22 47 29 6 12 163 50 72 (9) 41 32.5 28 2 26 FY08 5.2 1.2 4.0 (34.0) (39.8) 20.8 14.4 11.8 7.4 6.0 4.8 22.2 (56.5) 322.8 FY09E 602 234 107 152 26 19 56 8 400 85 26 44 43 18 17 166 202 229 6 208 25.0 156 5 151 FY09E 73.7 304.1 217.3 407.3 464.0 38.0 33.6 34.5 25.1 32.4 26.3 19.1 (57.5) 393.7 FY10E 693 314 105 151 26 20 64 14 430 92 33 48 42 21 14 180 263 296 11 274 25.0 205 5 200 FY10E 15.0 29.9 29.5 31.5 31.5 42.7 37.9 39.5 28.9 33.9 28.0 18.9 (65.9) 430.5 FY11E 890 320 102 149 27 50 70 172 563 101 44 62 53 27 22 254 327 371 14 341 25.0 256 6 249 FY10E 28.4 24.3 25.3 24.6 24.6 41.7 36.7 38.3 28.0 33.4 28.0 16.3 (69.3) 517.4 TOTAL ASSETS Current assets Cash & equivalents Marketable securities Accounts receivable Inventory Others Non-current assets Net PP&E Gross PP&E Accumulated depreciation Investment assets Intangible assets Other assets TOTAL LIABILITIES Current liabilities Accounts payable Other short-term liabilities LT Liabilities Bond LT Loans Shareholders’ equity Paid-in capital Capital surplus Retained earnings Capital adjustments Total liabs/shrhdrs’ equity Consolidated cash flow statement Cash Flow from Operations Net Profit D&A Other non-cash items Increase in AR Cash Flow from Investments Capital expenditures Increase in financial investment Increase in intangible assets Other changes in investing activities Cash Flow from Financing Increase in paid-in capital Increase/(decrease) in capital adjustment Net increase/(decrease) in bond Dividend paid Increase/(decrease) in cash FY08 519 304 51 188 38 2 24 215 163 252 89 16 17 19 94 83 1 82 11 0 0 424 10 148 343 (88) 519 FY08 66 26 20 18 (2) (3) (52) 10 (13) 52 (74) 0 (23) 0 0 0 FY09E 632 399 117 188 66 4 24 233 173 282 109 22 18 20 101 90 1 89 12 0 0 530 10 148 479 (118) 632 FY09E 153 151 26 5 28 (49) (30) 40 (8) (51) (39) 0 (37) 0 -19 65 FY10E 797 546 254 188 76 4 24 251 184 316 132 28 19 21 127 115 1 114 12 0 0 670 10 148 639 (138) 797 FY10E 228 200 33 4 10 (56) (34) (10) (8) (4) (35) (30) 0 -9 137 FY11E 983 712 397 188 98 5 24 271 195 359 164 35 20 22 138 125 1 124 13 0 0 845 10 148 839 (163) 983 FY11E 275 249 44 4 22 (67) (43) (10) (11) (4) (65) (20) 0 -15 143

Source: Company data, J.P. Morgan estimates.

217

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Northam Platinum
www.northam.co.za
Company description The group operates the deepest platinum mine in the world, and is planning to begin to develop its recently acquired E Bushveld, shallow, Booysendal property in a “modular” fashion starting in 2010. Northam is 63% owned by BEE mining holding company Mvelaphanda Resources, which in terms of new JSE rules must be dismantled as it’s deemed a pyramid company. MVL has stated it intends unbundling in early 2010. NHM intends a rights issue to assist funding Booysendal and MVL has said it will follow its rights. Post mortem and potential This well managed mid-tier platinum producer has a huge resource base in excess of 110mozs PGMs relative to its current production rate of c334koz pa, and looks well placed to grow off a relatively low base over the longterm in our view. It was to be acquired by Implats, but negotiations broke down in response to turbulent market conditions last year. We think it possible there’ll be other M&A opportunities for the group to consolidate/cooperate with other producers. We see compelling arguments for southern Booysendal to be developed with AQP’s Everest mine for example. How much recovery is priced into the stock? Our DCF-based valuation model shows NHM trading at a 20% discount to the currently low PGM basket price of cR255,000/kg. It shows that at our calculated mid-cycle price the stock would be worth some R71/share. Price target and key risks Taking account of project and operational execution risk, we have a Sep-10 price target for Northam of R61/share – a 5% discount to our published DCF-based valuation. As with all the platinum producers, a lower than we forecast rand PGM basket price is another key risk to our target.

Overweight
Price: 4122c Price Target: 6100c

South Africa Gold & Presious Metals Steve ShepherdAC
(27-11) 507 0386 steve.a.shepherd@jpmorgan.com

Allan CookeAC
(27-11) 507 0384 allan.j.cooke@jpmorgan.com J.P. Morgan Equities Ltd.

Price Performance
4,500 3,500 c 2,500 1,500
Nov-08 Feb-09 May-09 Aug-09 Nov-09

Source: Bloomberg

Performance
Absolute (%)
Source: Bloomberg

1M 8.0

3M 4.4

12M 89.1

Company data
Price(c) Date of Price Price Target (c) Price Target End Date 52-week Range (c) Mkt Cap (Rbn) Shares O/S (mn)
Source: Bloomberg, J.P. Morgan

4,122 23-Nov-09 6,100 01-Sep-10 4,198 – 1,650 14.83 360

Bloomberg: NHM SJ; Reuters: NHMJ.J
Rand millions, year-end Jun Revenues Net profit FD EPS (SAcps) DPS (SAcps) Sales growth (%) Net profit growth (%) EPS growth (%) ROE (%) FD P/E (x) FY09A 3,186 630 183 78 -18.0 -57.8 nm 11.2 22.3 FY10E 3,910 471 131 60 22.7 -25.3 nm 5.6 31.1 FY11E 6,605 774 215 100 68.9 64.2 64.1 8.8 19.0 FY12E 8,598 1,335 377 150 30.2 75.1 75.3 14.5 10.8

Source: Company, Bloomberg, J.P. Morgan estimates. Note: Share price and valuations are as of cob 23 November 2009.

218

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Northam Platinum Ltd: Summary of Financials
Production & Economic Assumptions Year end Jun FY08A Platinum ($/oz) 1,658 Palladium ($/oz) 396 Rhodium ($/oz) 7,569 Nickel ($/ton) 29,464 Avg exch. rate (R/$) 7.29 Cash Costs ($/oz Pt) Sales Volumes Platinum (koz) Palladium (koz) Rhodium (koz) Nickel (t) Profit & Loss Statement R in millions, year end Jun Revenues % change Y/Y EBITDA % change Y/Y EBIT % change Y/Y Net interest Earnings before tax % change Y/Y Tax Tax as % of EBT Net income (reported) % change Y/Y Shares Outstanding EPS (Adjusted) % change Y/Y DPS (Gross) % change Y/Y Cash Flow Statement R in millions, year end Jun EBIT Depreciation & Amortization Change in working capital Taxes Cash flow from Operations Capex Disposals/(Purchase) Net interest Free Cash flow Free Cash flow per share Equity raised/ repaid Debt raised/ repaid Dividends paid Other Beginning Cash Ending Cash 1,364 FY09A 1,155 240 2,760 13,518 9.02 1,171 Balance Sheet FY10E FY11E FY12E R in millions, year end Jun 1,288 1,388 1,562 Property, Plant & Equipment 291 338 544 Net Fixed Assets 1,656 2,131 2,968 Cash and Cash equivalents 17,250 15,000 15,227 Others 8.16 9.02 9.47 Current Assets Total Assets 1,454 1,558 1,723 Current Liabilities Debt 258 368 388 Other Liabilities 126 181 194 Shareholder's Equity 31 42 44 Minorities 2,374 4,027 4,231 Total Liabilities & Shareholders Equity Ratio Analysis FY10E FY11E FY12E Year end Jun 3,910 6,605 8,598 Gross Margin (%) 22.7% 68.9% 30.2% EBITDA Margin (%) 854 1,434 2,264 EBIT Margin (%) (15.3%) 67.9% 57.9% Net Margin (%) 623 1,128 1,928 FCF Margin (%) (26.6%) 81.1% 70.9% 78 (16) (29) Interest Coverage (x) 647 1,062 1,860 Net debt to equity (%) (36.2%) 64.2% 75.1% Sales/Assets (x) (176) (289) (506) 27.2% 27.2% 27.2% ROE (%) 471 774 1,355 ROIC (%) (25.3%) 64.2% 75.1% 359.69 359.69 359.69 P/E (x) 131 215 377 EV/EBITDA (x) NM 64.1% 75.3% EV/FCF (x) 60 100 150 Dividend Yield (%) (23.1%) 66.7% 50.0% FCF Yield (%) Valuation & Recommendation FY10E FY11E FY12E NPV 623 1,128 1,928 P/NPV 231 306 336 PT (51) (141) (92) PT/NPV (95) (219) (406) PT Date 709 1,074 1,766 Recommendation (1,221) (1,369) 78 (16) (512) (295) (1.4) (0.8) 0 0 (241) (19) 921 227 0 700 (283) (31) 227 302 (807) Weekly Mkt Turnover ($ millions) - JSE (29) 959 2.7 0 (300) Weekly Mkt Turnover/Mkt Cap (%) (447) JSE (54) 302 431 FY08A 1,684 1,756 1,500 864 2,364 4,120 772 0 444 2,904 0 4,120 FY09A 7,460 7,737 921 695 1,616 9,353 538 0 483 8,332 0 9,353 FY10E FY11E FY12E 8,465 9,536 10,001 8,761 9,853 10,340 227 302 431 853 1,441 1,876 1,080 1,743 2,307 9,841 11,596 12,647 660 1,115 1,452 0 700 400 610 820 1,075 8,570 8,961 9,720 0 0 0 9,841 11,596 12,647

170 81 21 1,110

202 98 27 1,529

FY08A 3,886 3.9% 2,443 13.7% 2,294 13.5% 95 2,359 12.3% (866) 36.7% 1,493 12.5% 238.01 627 12.0% 330 (37.1%)

FY09A 3,186 (18.0%) 1,009 (58.7%) 848 (63.0%) 130 1,015 (57.0%) (384) 37.9% 630 (57.8%) 344.56 183 NM 78 (76.4%)

FY08A
62.9%

FY09A
31.7%

FY10E FY11E FY12E
21.8% 21.7% 26.3%

62.9% 59.0% 38.4% 30.6%

31.7% 21.8% 26.6% 15.9% 19.8% 12.0% 3.7% (13.1%) 8.0 (2.6%) 0.4 5.6% 5.5% 31.5 15.8
(26.4)

21.7% 17.1% 11.7% (4.5%)

26.3% 22.4% 15.8% 11.2%

24.0 6.5 (51.6%) (11.1%) 0.9 0.3 56.5% 110.7% 6.6 5.5
11.4

71.7 65.8 4.4% (0.3%) 0.6 0.7 8.8% 14.5% 9.0% 14.4% 19.2 9.4
(45.9)

11.2% 10.6% 22.5 13.4
115.1

10.9 6.0
14.1

8.0%
8.2%

1.9%
0.8%

1.5%
(3.5%)

2.4%
(2.0%)

3.6%
6.6%

FY08A 2,294 149 (243) (748) 1,451 (262) (2) 95 1,189 5.0 22 0 (1,010) (5) 1,210 1,500

FY09A 848 161 259 (792) 476 (358) (22) 130 118 0.3 4 0 (802) (6) 1,500 921

6,400 0.63 6,100 1.0 01-Sep-10 OW

25

1.3%

Source: Company reports and J.P. Morgan estimates.

219

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

OGX Petróleo S.A.
www.ogx.com.br
Company description OGX is our preferred stock to play the potential of Brazilian offshore. OGX is an E& P startup incorporated in Brazil with exploration rights for 7,000 km2 offshore and 21,470 km2 onshore. Of its resource base, 54% is in the Campos basin; a highly productive area that accounts for 85% of Brazil’s oil production. According to independent appraiser DeGolyer & MacNaughton, OGX’s portfolio boasts net risked prospective resources of 6.8 billion boe as of Sep ’09 (upgraded from 4.8 billion boe as of March ’08). Post mortem Its key competitive advantage, geological engineering know-how, allowed OGX to emerge from the downturn stronger and with plans for first oil in 2011 untarnished. Based on successful exploration and a new geological assessment, OGX has increased its 4-year drilling program to 79 wells from 51 wells previously. OGX has made discoveries for 0.9-2.0 bn boe. Potential for earnings upgrades We believe more drilling should translate into more discoveries and eventually into reserves which deserve a higher value. This should drive NAV estimates, the main driver of price targets (over earnings) given that OGX is not producing oil yet. How much recovery is priced into the stock? In our view, 2010 should be a transformational year for OGX: by year-end it should have booked some reserves, have more prospective resources and a more diversified portfolio. OGX is trading at $5.0/boe of resources. Global E&P stocks trade at $7.4/boe of 1P reserves. Price target and key risks We use an NAV model to derive our target based on $80/bbl long-term oil prices and a 12% discount rate. Risks to our target are: Sensitivity to oil prices, uncertainty over capital expenditures, unsuccessful wells.
Bloomberg: OGXP3 BZ; Reuters: OGXP3.SA
US$ in millions, year-end December 31 Sales Net profit EPS (LC) FD EPS (LC) DPS (LC) Sales growth (%) Net profit growth (%) EPS growth (%) ROE (%) P/E (x) FD P/E (x) FY08 0 192 5.94 5.94 0% 0% 0% 0% 247.3 247.3 FY09E 0 529 16.36 16.36 0% 175% 175% 0% 89.9 89.9 FY10E 0 183 5.66 5.66 0% -65% -65% 0% 259.6 259.6 FY11E 69 71 2.19 2.19 NM -61% -61% 0% 671.0 671.0

Overweight
R$1,397 Price Target: R$2,030

Brazil Exploration & Production Sergio TorresAC
(212) 622 3378 sergio.torres@jpmorgan.com J.P. Morgan Securities

Price performance
Price Performance
1,800 1,400 R$ 1,000 600 200
Nov-08 Feb-09 May-09 Aug-09 Nov-09

Source: Bloomberg.

Performance
1M Absolute (%) Relative (%)
Source: Bloomberg.

3M 43.6 29.0

12M 454.3 152.4

-10.6 1.7

Company data
52-week range (LC) Mkt cap. (LCMM) Mkt cap. (US$MM) Avg daily value (US$MM) Avg daily volume (MM) Shares O/S (MM) Date of price Index: IBOV Free float (%) Exchange rate 258 - 1696 47,509 27,588 43,866 82,205 32.3 11/25/2009 IBOV 38.70% 1.7

Source: Company, Bloomberg, J.P. Morgan estimates. Note: Share price and valuations are as of 25 November 2009.

220

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

OGX: Summary of financials
Profit and loss statement
USD in millions, year-end December 31 Revenue % change Y/Y Gross margin (%) EBITDA % change Y/Y EBITDA margin (%) EBIT % change Y/Y EBIT margin (%) Net interest Earnings before tax % change Y/Y Tax as % of EBT Net income (reported) % change Y/Y Shares O/S (MM) EPS (reported) (LC) FY08 0 (106) (106) 403 297 (105) 35% 192 32.32 5.94 FY09E 0 (33) -69% (33) -69% 834 801 170% (272) 34% 529 175% 32.32 16.36 FY10E 0 (50) 52% (50) 52% 327 277 -65% (94) 34% 183 -65% 32.32 5.66 FY11E 69 10% (63) 26% -91% (63) 26% -91% 170 107 -61% (36) 34% 71 -61% 32.32 2.19

Cash flow statement
USD in millions, year-end December 31 EBIT Depreciation & amortization Change in working capital Taxes Cash flow from operations Capex Disposal/(purchase) Net interest Free cash flow Equity raised/(repaid) Debt raised/(repaid) Other Dividends Beginning cash Ending cash DPS (LC) FY08 (105.6) (104.9) (210.5) 403 4,292 500 3,334 FY09E (33.0) (272.4) (305.4) (196.1) 834 276 3,334 3,611 FY10E (50.0) (94.3) (144.3) (717.5) 327 (585) 3,611 3,025 FY11E (63.1) 0.1 (36.5) (99.5) (639.0) 170 (749) 3,025 2,276

Source: Company, J.P. Morgan estimates.

Source: Company, J.P. Morgan estimates.

Ratio analysis Balance sheet
USD in millions, year-end December 31 Cash and cash equivalents Accounts receivable Inventories Others Current assets LT investments Net fixed assets Total assets Liabilities ST loans Payables Others Total current liabilities Long-term debt Other liabilities Total liabilities Shareholders’ equity BVPS (LC) FY08 3,334 10 0 19 3,363 0 5 4,465 0 0 12 300 311 0 1 313 4,049 125.3 FY09E 3,611 10 0 19 3,639 0 59 4,795 0 0 12 300 311 0 1 313 4,482 138.7 FY10E 3,025 10 0 19 3,054 0 162 4,313 0 0 12 300 311 0 1 313 4,000 123.8 FY11E 2,276 10 0 19 2,305 0 1,628 5,029 0 0 12 300 311 0 1 313 4,717 145.9 %, year-end December 31 EBITDA margin Operating margin Net profit margin SG&A/sales Sales growth Net profit growth Sales per share growth EPS growth Interest coverage (x) Net debt to total capital Net debt to equity Sales/assets EBIT margin ROCE Assets/equity (x) ROI ROE FY08 NM NM 0% 0% 1.1 5% FY09E 175% 175% 0% 0% 1.0 4% FY10E -65% -65% 0% 0% 1.1 5% FY11E -91% -61% -61% 1% -91% 0% 0.9 4%

Source: Company, J.P. Morgan estimates.

Source: Company, J.P. Morgan estimates.

221

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

PDG Realty
www.pdgrealty.com.br
Company description PDG, one of the largest developers in Brazil, is mainly focused on the lowerincome segment through Goldfarb and on the middle- and high-income segments through CHL. The company’s business model is to co-develop real estate projects with other real estate developers and to make equity investments in attractive companies. This unique model should allow PDG to benefit and to participate in sector consolidation. Post mortem The company has one of the best management teams in Brazil and manages its cash and balance sheet prudently by holding a low level of inventories and a low-cost operating platform. This should allow the company to benefit from stronger housing demand in Brazil. Potential for earnings upgrades We believe that the company could still surprise positively not only via organic growth but also by acquiring attractive undervalued companies. It should also benefit from a potential recovery of the middle- and high-income segments, which is not the case with MRV. How much recovery is priced into the stock? Pre-sales have already recovered considerably, up 70% qoq in 2Q and up another 11% in 3Q, but the stock price has also recovered significantly, up 240% from its lows in March and up 215% YTD (+81% for the Bovespa). While the performance is significant, we believe there is further room to rerate as the stock is trading at 2.5x P/BV and 14.9x times 10e P/E. The stock traded as high as 5.0x on P/BV back in 07. Price target and key risks We rate PDG Overweight with a Dec-10 price target of R$19, which is the average of our DCF-based valuation and GGM-based valuation. The COE of 12.4% is based on a beta of 1.25, country risk of 2.6%, and a risk-free rate of 3.5%, resulting in a WACC of 11.0%. Main risk is CEF execution of the MCMV program given PDG’s dependency on the lower-income segments.
Bloomberg: PDGR3 BZ Reuters: PDGR3.SA
LC in millions, year-end December Sales Net profit EPS (LC) FD EPS (LC) DPS (LC) Sales growth (%) Net profit growth (%) EPS growth (%) ROE (%) P/E (x) FD P/E (x) FY08 1,231 182 0.57 0.57 123.0% 43.0% 43.0% 12.9% 30.9 30.9 FY09E 2,292 319 1.03 1.03 0.15 86.2% 75.0% 75.0% 18.2% 17.0 17.0 FY10E 2,814 459 1.42 1.42 0.25 22.8% 43.6% 43.6% 19.7% 12.4 12.4 FY11E 3,349 580 1.80 1.80 0.36 19.0% 26.5% 26.5% 20.3% 9.8 9.8

Overweight
R$17.59 Price Target: R$19.00

Brazil Brazilian Homebuilders Adrian E HuertaAC
(52 81) 8152-8720 adrian.huerta@jpmorgan.com J.P. Morgan Casa de Bolsa, S.A. de C.V., J.P. Morgan Grupo Financiero

Performance
1M Absolute (%) Relative (%)
Source: Bloomeberg

3M 21 6

12M 286 204

11 9

Company data
52-week range (LC) Mkt cap. (LCMM) Mkt cap. (US$MM) Avg daily value (US$MM) Avg daily volume (MM) Shares O/S (MM) Date of price Index: IBOV Free float (%) Exchange rate
Source: Bloomberg.

5.78-17.59 6,485 3,765 22.4 2.4 366.40 11/25/2009 67,917 56% 1.72

Source: Company, Bloomberg, J.P. Morgan estimates. Note: Share price and valuations are as of 25 November 2009.

222

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

PDG: Summary of financials
Profit and loss statement
LC in millions, year-end December Revenue % change Y/Y Gross margin (%) EBITDA % change Y/Y EBITDA margin (%) EBIT % change Y/Y EBIT margin (%) Net interest Earnings before tax % change Y/Y Tax as % of EBT Net income (reported) % change Y/Y Shares O/S (MM) EPS (reported) (LC) FY08 1,231 123% 35.2% 257 88.9% 20.9% 209 89.3% 17.0% 13 231 91.2% (33) 14.4% 182 43.0% 292 0.57 FY09E 2,292 86% 30.1% 510 98.1% 22.2% 387 85.1% 16.9% (8) 397 71.7% (74) 18.7% 319 75.0% 309 1.03 FY10E 2,814 23% 31.2% 674 32.3% 24.0% 538 38.9% 19.1% 3 560 41.2% (97) 17.3% 459 43.6% 322 1.42 FY11E 3,349 19% 32.5% 832 23.4% 24.8% 703 30.7% 21.0% (23) 701 25.2% (115) 16.4% 580 26.5% 322 1.80

Cash flow statement
LC in millions, year-end December EBIT Depreciation & amortization Change in working capital Taxes Cash flow from operations Capex Disposal/(purchase) Net interest Free cash flow Equity raised/(repaid) Debt raised/(repaid) Other Dividends Beginning cash Ending cash DPS (LC) FY08 209 29 (963) (33) (548) (96) (288) 13 (831) 0 376 0 0 716 256 FY09E 387 8 (1,262) (74) (879) (7) (127) (8) (834) 0 750 0 46 256 154 0.15 FY10E 538 10 (498) (97) (825) (28) (28) 3 51 214 500 0 80 154 736 0.25 FY11E 703 12 (499) (115) 220 (33) (33) (23) 184 0 200 0 115 736 887 0.36

Source: Company, J.P. Morgan estimates.

Source: Company, J.P. Morgan estimates.

Ratio analysis Balance sheet
LC in millions, year-end December Cash and cash equivalents Accounts receivable Inventories Others Current assets LT investments Net fixed assets Total assets Liabilities ST loans Payables Others Total current liabilities Long-term debt Other liabilities Total liabilities Shareholders’ equity BVPS (LC) FY08 256 1,264 1,056 137 1,966 63 76 3,247 219 291 212 722 647 232 1,602 1,476 5.06 FY09E 154 2,386 1,463 157 3,922 53 78 4,822 485 556 344 1,385 1,132 249 2,766 2,029 6.56 FY10E 736 2,775 1,559 157 4,949 53 97 5,906 635 543 344 1,521 1,482 249 3,252 2,622 8.14 FY11E 887 3,211 1,654 157 5,588 53 118 6,610 695 576 344 1,614 1,622 249 3,485 3,087 9.59 %, year-end December EBITDA margin Operating margin Net profit margin SG&A/sales Sales growth Net profit growth Sales per share growth EPS growth Interest coverage (x) Net debt to total capital Net debt to equity Sales/assets EBIT margin ROCE Assets/equity (x) ROI ROE FY08 20.9% 17.0% 14.8% 17.4% 123.0% 43.0% 122.6% 43.0% (2.02) 28.1% 41.3% 0.38 17.0% 9.6% 2.20 9.6% 12.9% FY09E 22.2% 16.9% 13.9% 12.4% 86.2% 75.0% 75.7% 75.0% (7.57) 39.8% 72.1% 0.48 16.9% 12.2% 2.38 12.2% 18.2% FY10E 24.0% 19.1% 16.3% 11.4% 22.8% 43.6% 18.0% 43.6% (10.80) 28.9% 52.7% 0.48 19.1% 12.3% 2.25 12.3% 19.7% FY11E 24.8% 21.0% 17.3% 10.9% 19.0% 26.5% 19.0% 26.5% (6.25) 26.3% 46.3% 0.51 21.0% 13.4% 2.14 13.4% 20.3%

Source: Company, J.P. Morgan estimates.

Source: Company, J.P. Morgan estimates.

223

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Powertech Technology Inc.
www.pti.com
Company description Powertech (TAIEX: 6239) (PTI) is the largest independent provider of memory IC backend services, including IC chip probing, packaging and testing. Its customer base includes tier-I IDM and ables companies such as Toshiba, Elpida, Kingston, Sandisk, SST, IM Flash, Powerchip and ProMos. Post mortem PTI stands to be the primary beneficiary of Toshiba’s NAND flash outsourcing. We believe: (1) the growth perspective in NAND flash business; (2) the benefit from a meaningful increase in 2010E capex budget of memory companies; and (3) GM back to 26% and above-26% ROE estimates, should drive the company’s earnings in 2010. Potential for earnings upgrades Powertech should benefit from a meaningful increase in memory capex. We have witnessed a series of capex increases in the memory industry across the board and Powertech’s sales growth is correlated with supply growth in memory. How much recovery is priced into the stock? The market was once concerned about the technology migration progress of Elpida’s DRAM and Toshiba’s NAND flash. However, we believe Elpida has already caught up with 45nm DDR3 pilot production in 4Q09, and Toshiba is also on the right track of moving on 32nm NAND flash in 1Q10. Therefore, we believe this concern should ease as Powertech has seen promising progress in the technology advancement by its major clients. We expect further share price upside once the market prices in the improvement in its 1H10 outlook. Price target and key risks Our Dec-10 PT of NT$108 is based on 9x FTM (Dec-10) earnings due to the higher earnings estimates. The 9x FTM earnings is the average of the FTM P/E multiple during the past three years. A key risk to our PT is another oversupply scenario followed by a sharp fall in ASP in the memory industry.
Bloomberg: 6239 TT; Reuters: 6239.TW
NT$ in millions, year-end December Sales Net profit EPS (NT$) FD EPS (NT$) DPS (NT$) Sales growth (%) Net profit growth (%) EPS growth (%) ROE (%) P/E (x) FD P/E (x) FY08 31,189 6,545 10.11 10.11 3.50 28% 6% 56% 33 9.0 9.0 FY09E 29,784 4,914 7.38 7.38 4.00 -5% -25% -27% 22 12.3 12.3 FY10E 34,998 6,866 10.26 10.26 3.00 18% 40% 39% 25.8 8.9 8.9 FY11E 38,930 7,535 11.26 11.26 4.16 11% 10% 10% 26 8.1 8.1

Overweight
NT$91.10 Price Target: NT$108

Taiwan Semiconductor Equipment Patrick LiaoAC
(886-2) 2725-9874 patrick.kh.liao@jpmorgan.com J.P. Morgan Securities (Taiwan) Limited

Price performance
NT$
110 90 70 50 30 Nov -08 Feb-09 May -09 Aug-09 Nov -09

6239 TT Equity

TWSE Index

Source: Bloomberg.

Performance
1M Absolute (%) Relative (%)
Source: Bloomberg.

3M 12.5 3.9

12M 86.8 25.4

-2.3 -2.0

Company data
52-week range (NT$) Mkt cap. (NT$B) Mkt cap. (US$B) Avg daily value (US$MM) Avg daily volume (MM) Shares O/S (MM) Date of price Index: TAIEX (TWSE) Free float (%) Exchange rate
Source: Bloomberg.

35.0-99.4 60.98 1.86 18.4 7.8 669 5-Nov-09 7,417.5 60 32.5

Source: Company, Bloomberg, J.P. Morgan estimates. Note: Share price and valuation are as of 5 November 2009.

224

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Powertech Technology Inc.: Summary of financials
NT$ in millions, year-end December Income statement FY08A Revenues Cost of Goods Sold Gross Profit R&D Expenses SG&A Expenses Operating Profit (EBIT) EBITDA Interest Income Interest Expense Investment Income (Exp) Non-Operating Income (Exp) Earnings before tax Tax Net Income (Reported) Net Income (new TW GAAP) EPS (Reported, NT$) EPS (New TW GAAP, NT$) BPS (NT$) DPS (NT$) Shares Outstanding (MM) Balance sheet FY08A Cash and cash equivalents Accounts receivable Inventories Others Current assets LT investments Net fixed assets Others Total assets ST loans Payables Others Total current liabilities Long term debt Other liabilities Total liabilities Shareholders' equity
Source: Company, J.P. Morgan estimates. 225

FY09E 29,784 22,740 7,044 767 209 5,738 13,934 44 336 5 (104) 5,346 433 4,914 4,914 7.38 7.38 34.60 4.00 666

FY10E 34,998 25,863 9,134 735 315 7,632 16,255 93 414 140 7,451 585 6,866 6,866 10.26 10.26 39.74 3.00 669

FY11E 38,930 28,846 10,085 818 389 8,381 17,164 147 490 140 8,178 643 7,535 7,535 11.26 11.26 43.66 4.16 669

Ratio analysis % Gross Margin EBITDA margin Operating Margin Net Margin R&D/sales SG&A/Sales Sales growth Operating Profit Growth Net profit growth EPS (Reported) growth EPS (TW GAAP) growth Interest coverage (x) Net debt to total capital Net debt to equity Asset Turnover Working Capital Turns (X) ROE ROIC ROIC (net of cash) Cash flow statement

FY08A 27.4 46.7 23.4 21.0 2.1 0.5 27.6 3.0 59.9 3.7 56.2 16.2 32.7 57.8 71.4 9.2 33.3 21.8 22.8

FY09E 23.6 46.8 19.3 16.5 2.6 0.7 -4.5 -21.4 -24.9 -27.0 -27.0 17.1 32.4 59.6 63.0 4.5 22.0 14.4 15.0

FY10E 26.1 46.4 21.8 19.6 2.1 0.9 17.5 33.0 39.7 39.0 39.0 18.4 24.1 42.2 66.5 4.5 25.8 17.8 18.7

FY11E 25.9 44.1 21.5 19.4 2.1 1.0 11.2 9.8 9.7 9.7 9.7 17.1 21.8 37.6 67.7 4.8 25.8 18.4 19.3

31,189 22,640 8,549 649 159 7,299 14,555 37 450 9 (333) 6,562 17 6,545 6,545 10.11 10.11 32.48 3.50 647

FY09E 5,687 11,256 938 437 18,318 3,036 23,763 2,163 47,281 9,513 1,546 3,079 14,138 9,982 24,119 23,161

FY10E 8,727 12,041 1,003 523 22,294 3,036 25,140 2,163 52,634 9,730 1,516 4,578 15,824 10,210 26,033 26,600

FY11E 10,215 13,953 1,163 606 25,936 3,036 26,358 2,163 57,493 10,347 1,761 5,305 17,414 10,857 28,271 29,222 Net Income Depr. & Amortisation Change in working capital Other Cash flow from operations Capex Disposal/ (purchase) Cash flow investment Free cash flow Equity raised/ (repaid) Debt raised/ (repaid) Other financing charges Dividends paid Cash flow financing Net Change in Cash Beginning cash Ending cash

FY08A 6,545 7,256 -3,758 0 10,043 -7,149 -197 -7,346 2,894 1,230 2,637 -1,576 -2,675 -384 2,314 1,778 4,092

FY09E 4,914 8,196 -2,727 0 10,383 -6,435 -1,945 -8,380 3,948 1,890 2,957 -2,873 -2,385 -410 1,592 4,095 5,687

FY10E 6,866 8,623 532 0 16,022 -10,000 0 -10,000 6,022 0 445 0 -3,427 -2,982 3,040 5,687 8,727

FY11E 7,535 8,782 -1,181 0 15,136 -10,000 0 -10,000 5,136 0 1,265 0 -4,913 -3,648 1,488 8,727 10,215

4,095 9,748 739 302 14,884 1,685 25,524 1,569 43,662 3,203 1,345 4,165 8,713 13,334 103 22,150 21,512

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

PT Aneka Tambang Tbk
www.antam.com
Company description The state-owned PT Aneka Tambang (ANTM) is one of the largest nickel miners in Indonesia and it has an installed capacity of about 26,000 tons. Besides its ferronickel operation, ANTM is also involved in gold, silver, and bauxite mining. Although small, its precious metal business is growing and ANTM is likely to expand this operation via exploration and acquisitions. In term of operation, nickel prices and costs will be the key profit drivers, in our view. Given ANTM’s main fuel is oil, the company is one of the high cost producers of nickel in the world. With its investments in coal-fired power plant, ANTM expects to reduce costs to the industry average or slightly below the industry average levels. Post mortem In FY10, J.P. Morgan expects nickel price to rise from US$15,567/ton to US$17,125/ton. Gold should stay fairly steady, rising from US$948/t.oz to US$1,006/t.oz. Nickel volume is likely to rise from 12,000 tons to 17,000 tons, up 41.7%, as Ferronickel III resumes production. If ANTM is able to secure Newmont Batu Hijau at favorable terms, it would bode well for its share price, in our view. Potential for earnings upgrades If nickel prices overshoot 10%, our FY10 EPS forecast would rise 20.1%. If volume swings 10%, our FY10 EPS forecast would rise 8.5%. A 10% reduction in production cost should cause EPS to increase 17.5%. How much recovery is priced into the stock? We believe Chinese restocking has been priced in, but the low level of inventory in western hemisphere may not have been priced in by the market. Price target and key risks Given that we expect a brighter FY10, we maintain our OW rating and our SOTP/DCF-based Jun-10 PT of Rp3,000, assuming a risk-free rate of 10.5%, an equity-risk premium of 5.5%, and a terminal growth rate of 5.5%. Key risks to our PT include: (1) an unexpected correction in nickel prices; and (2) smaller-than-expected dip in costs.

Overweight
Rp2,300 Price Target: Rp3,000

Indonesia Mining Stevanus JuandaAC
(62-21) 5291-8574 stevanus.x.juanda@jpmorgan.com PT J.P. Morgan Securities Indonesia

Price performance
Units
3,500.0 2,500.0 1,500.0 500.0

Nov-08

Feb-09

May-09

Aug-09

Nov-09

Source: Bloomberg.

Performance
1M Absolute (%) Relative (%)
Source: Bloomberg.

3M 0.0 -2.4

12M 119.1 41.4

-7.1 -2.7

Company data
52-wk range (Rp) Mkt cap. (RpB) Mkt cap. (US$MM) Avg daily value (US$MM) Avg daily volume (MM) Shares O/S (MM) Date of price Index: JCI Free float (%) Exchange rate
Source: Bloomberg.

900-2,725 21,938 2,302 24 1,642 10 5-Nov-09 2,372 35.0 9,530

Bloomberg: ANTM IJ; Reuters: ANTM.JK
Rp in billions, year-end December Sales Net profit EPS (Rp) Core EPS (Rp) DPS (Rp) Sales growth (%) Net profit growth (%) EPS growth (%) ROE (%) P/E (x) Core P/E (x) FY08 9,592.0 1,368.1 143.4 197.3 215.2 -20.1% -73.3% -73.3% 16.3% 16.0 11.7 FY09E 8,331.0 544.0 57.0 76.2 57.4 -13.1% -60.2% -60.2% 6.7% 40.3 30.2 FY10E 10,408.2 1,339.9 140.5 134.3 28.5 24.9% 146.3% 146.3% 15.3% 16.4 17.1 FY11E 12,110.5 1,597.9 167.5 169.9 70.2 16.4% 19.3% 19.3% 16.5% 13.7 13.5

Source: Company, Bloomberg, J.P. Morgan estimates. Note: Share price and valuation are as of 5 November 2009. We revised PT to Rp2,750 on November 18. 226

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

PT Aneka Tambang Tbk: Summary of financials

ANTM – SOTP valuation
RpB, %, Rp Nickel Gold mining Silver Gold Trading Bauxite HQ Allocation June-10 SOTP fair value June-10 DCF fair value June-10 PT
Source: J.P. Morgan estimates.

Value (Rp B) 25,694.6 6,388.8 1,572.4 1,253.9 -268.9 -7,178.5

% ownership 100% 100% 100% 100% 100% 100%

Value per share (Rp) 2,694 670 165 131 -28 -753 2,879 3,049 2,964

227

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

PT Perusahaan Gas Negara Tbk
www.pgn.co.id
Company description PGAS enjoys a near monopolistic business model: it has more than 90% market share in gas distribution market and more than 85% market share in gas transmission market. The distribution division historically has contributed more than 95% of its annual operating profit. Historically, PGAS’ share price performance has been driven by net and core income growth. Earnings wise, the company will likely depend on volume, ASP, and cost of gas. When Rp depreciates, its reported net income could be negatively affected by foreign translation (non-cash) losses, but operating profit should benefit and visa versa. Post mortem We expect the power plant sector to be the driver of volume and profit growth in the next three years as PLN converts its diesel power plants into gas and coal. In FY09-10E, volume should increase significantly on the back of ramp up in volume at PLTU Muara Tawar and supply to additional three power plants. We expect PGAS to raise selling prices by 6.5% in FY10. The increase in volume and selling price will cause core earnings to rise by 24.4% Y/Y, by our estimates. Potential for earnings upgrade Upward earnings estimate revision is possible if the selling price is increased or volume delivered (14% increase Y/Y) is more than expected. How much recovery is priced into the stock? We believe the increased demand from PLGU Muara Tawar is already in the price. However, the ultimate demand coming from other power plants is yet to be known. Price target and key risks Given that we expect strong results in the future, we maintain our OW rating and our Jun-10 DCF-based PT of Rp4,700 (assuming a risk-free rate of 0.5%, a risk premium of 5.5%, and a terminal growth rate of 7.0%). Key risks to our view and PT include: (1) lower-than-expected distribution volume, distribution margin, and transmission fee; and (2) higher-thanexpected cost of gas.
Bloomberg: PGAS IJ; Reuters: PGAS.JK
Rp in billions, year-end December Sales Net profit EPS (Rp) Core EPS (Rp) DPS (Rp) Sales growth (%) Net profit growth (%) EPS growth (%) ROE (%) P/E (x) Core P/E (x) FY08 12,793.8 633.9 26.4 102.1 41.7 45.4% -45.6% -45.6% 9.7% 138.1 35.7 FY09E 17,652.4 6,148.4 256.5 208.8 102.6 38.0% 870.0% 870.0% 63.7% 14.2 17.5 FY10E 20,477.8 5,801.2 242.0 259.7 121.0 16.0% -5.6% -5.6% 41.8% 15.1 14.1 FY11E 21,476.0 6,764.7 282.2 282.5 141.1 4.9% 16.6% 16.6% 38.7% 12.9 12.9

Overweight
Rp3,650 Price Target: Rp4,700

Indonesia Natural Gas Pipeline and Distribution Stevanus JuandaAC
(62-21) 5291-8574 stevanus.x.juanda@jpmorgan.com PT J.P. Morgan Securities Indonesia

Price performance
4,000.0 3,000.0 2,000.0 1,000.0 Nov-08 Feb-09 May-09 Aug-09 Nov-09

Source: Bloomberg.

Performance
1M Absolute (%) Relative (%)
Source: Bloomberg.

3M 5.0 2.7

12M 116.1 38.4

-2.0 2.4

Company data
52-week range (Rp) Mkt cap. (RpB) Mkt cap. (US$MM) Avg daily value (US$MM) Avg daily volume (MM) Shares O/S (MM) Date of price Index: JCI Free float (%) Exchange rate
Source: Bloomberg.

1,580-3,775 88,482 9,285 12.4 34.0 24,242 5-Nov-09 2,367 31 9,530

Source: Company, Bloomberg, J.P. Morgan estimates. Note: Share price and valuation are as of 5 November 2009.

228

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

PT Perusahaan Gas Negara Tbk: Summary of financials

Source: Company, J.P. Morgan estimates.

229

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

PTT Public Company
www.pttplc.com
Company description PTT is an integrated energy company with interests in upstream E&P business, mid-stream gas transmission and treatment division and downstream oil refining, oil marketing and petrochemical interests. PTT is a state enterprise entity with the Finance Ministry owning, directly and indirectly, 67% of the firm. Post mortem PTT has an effective monopoly over the gas business. Gas demand from power generation dipped during late 2008-early 2009, but has since recovered slowly. PTT’s upstream earnings were hit badly by collapsing oil prices during the same period but have also recovered strongly since 2Q09. Potential for earnings upgrades PTT’s gas business (due to its high fixed costs) and E&P division both have significant operating leverage. Hence, higher gas revenues and/or higher petroleum prices will likely have a magnified impact on its bottom line. How much recovery is priced into the stock? PTT shares have risen 66% from their lows in Mar-09; hence, the economic recovery has been partially reflected. That said, we believe that the stock has not fully priced all the improvements, given that investors’ sentiment towards PTT has been weighed down by continued legal uncertainty over the group’s petrochemical and energy projects in the Map Ta Phut industrial zone. Price target and key risks Our Jun-10 PT of Bt315 is based on our SOTP valuation that comprises estimated values from PTT’s E&P, gas, petrochemical and refining businesses. The biggest part of PTT's value comes from its core gas separation and transmission business. We value this business using DCF. Our derived WACC of 8.5% is conservatively calculated using a risk-free rate of 5%, a terminal growth rate of 1%, and a beta of 1.2. Key downside risks to our PT are: (1) petroleum prices; (2) domestic gas demand; and (3) regulatory risks.
Bloomberg: PTT TB; Reuters: PTT.BK
Bt in millions, year-end December Revenue Net profit EPS (Bt) DPS (Bt) Revenue growth (%) EPS growth (%) ROCE (%) ROE (%) P/E (x) P/BV (x) Dividend yield (%) FY08 2,000,816 51,705 18.34 8.00 32.7 -47.2 16.9 13.9 12.8 1.7 3.4 FY09E 1,415,312 58,389 20.71 8.00 -29.3 12.9 14.8 14.4 11.3 1.6 3.4 FY10E 1,697,747 71,787 25.47 8.50 20.0 22.9 17.4 16.0 9.2 1.4 3.6 FY11E 1,993,748 89,675 31.81 9.00 17.4 24.9 21.0 17.7 7.4 1.2 3.8

Overweight
Bt234.00 Price Target: Bt315.00

Thailand Integrated oils Sukit ChawalitakulAC
(662) 684-2679 chawalitakul.sukit@jpmorgan.com JPMorgan Securities (Thailand) Limited

Price performance
280 Bt 200 120 Nov-08 Feb-09 May-09 Aug-09 Nov-09 PTT.BK share price (Bt) SET (rebased)

Source: Bloomberg.

Performance
1M Absolute (%) Relative (%)
Source: Bloomberg.

3M -5.6 -12.1

12M 27.9 -21.2

-9.3 -4.2

Company data
52-week range (Bt) Mkt cap. (BtMM) Mkt cap. (US$MM) Avg daily value (US$MM) Avg daily volume (MM) Shares O/S (MM) Date of price Index: SET Free float (%) Exchange rate
Source: Bloomberg.

137-273 662,649 19,852 23.0 2.6 2,832 5-Nov-09 682 47 33.38

Source: Company, Bloomberg, J.P. Morgan estimates. Note: Share price and valuation are as of 5 November 2009.

230

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

PTT Public Company: Summary of financials
Bt in millions, year-end December Income Statement FY07 Revenues % change Y/Y Gross Margin (%) EBITDA % change Y/Y EBITDA Margin (%) EBIT % change Y/Y EBIT Margin (%) Net Interest Earnings before tax % change Y/Y Tax as % of EBT Core net income (reported) % change Y/Y Shares outstanding Core EPS (reported) – (Bt) % change Y/Y FY08 FY09E FY10E FY11E Cash flow statement FY07 139,095 28,450 12,009 -36,180 112,685 FY08 FY09E FY10E FY11E 160,042 48,652 11,836 -53,873 142,611

1,508,335 2,000,816 1,415,312 1,697,747 1,993,748 EBIT 22.9% 32.7% -29.3% 20.0% 17.4% Depr. & amortization 12.3% 10.2% 12.5% 12.4% 12.5% Change in working capital 167,545 135,284 134,944 169,019 208,695 Taxes 11.4% -19.3% -0.3% 25.3% 23.5% Cash flow from operations 11.1% 6.8% 9.5% 10.0% 10.5% 139,095 103,114 97,725 125,309 160,042 Capex 12.2% NM NM 28.2% 27.7% Disposal/(purchase) 9.2% 5.2% 6.9% 7.4% 8.0% Net Interest 1,888 8,555 3,044 3,166 4,737 Free cash flow 140,983 111,669 100,769 128,475 164,779 9.4% -20.8% -9.8% 27.5% 28.3% Equity raised/(repaid) -36,180 -43,884 -31,142 -41,064 -53,873 Debt raised/(repaid) 118.8% 121.1% 133.9% 131.6% 126.7% Other 89,050 52,956 58,651 71,787 89,675 Dividends paid 12.7% -40.5% 10.8% 22.4% 24.9% Beginning cash 2,817 2,819 2,819 2,819 2,819 Ending cash 31.61 18.79 20.81 25.47 31.81 DPS – (Bt) -

103,114 97,725 125,309 32,170 37,218 43,710 12,953 2,051 14,210 -43,884 -31,142 -41,064 119,892 88,958 122,185

-13,984 -92,782 -145,509 -123,645 -94,142 0 0 0 0 0 1,888 8,555 3,044 3,166 4,737 98,701 27,110 -56,551 -1,460 48,469 2,427 5,708 20,022 -29,583 88,219 81,190 11.50 1,245 0 0 0 21,764 18,123 3,700 -27,000 12,132 -8,436 8,555 10,043 -35,238 -16,914 -23,257 -24,666 81,190 92,037 31,453 20,000 92,037 31,453 20,000 27,418 8.00 8.00 8.50 9.00

Balance sheet FY07 Cash and cash equivalents Accounts receivable Inventories Others Current assets LT investments Net fixed assets Total Assets Liabilities ST loans Payables Others Total current liabilities Long-term debt Other liabilities Total Liabilities Shareholders' equity BVPS – (Bt) 81,190 195,263 19,896 18,469 314,818 193,122 315,143 891,523 FY08 92,037 98,892 23,692 28,576 243,197 187,072 375,755 885,205 FY09E 31,453 120,301 24,774 22,861 199,389 FY10E 20,000 144,308 29,742 18,289 212,339 FY11E

Ratio analysis FY07 11.1% 9.2% 6.5% FY08 6.8% 5.2% 2.6% FY09E 9.5% 6.9% 4.1% FY10E FY11E 10.0% 7.4% 4.2% 10.5% 8.0% 4.5%

27,418 EBITDA margin 169,469 Operating margin 34,906 Net profit margin 14,631 246,424

198,097 210,670 226,061 Sales growth 484,046 563,980 609,470 Net profit growth 961,056 1,068,267 1,165,437 EPS growth

22.9% 32.7% 2.3% -47.1% 1.9% -47.2%

-29.3% 12.9% 12.9%

20.0% 22.9% 22.9%

17.4% 24.9% 24.9%

15,007 163,158 65,608 243,773 212,387 36,713 492,873 361,497 128.31

20,796 88,133 71,118 180,047 228,362 46,260 454,669 383,578 136.07

26,728 113,958 64,119 204,806 240,553 38,199 483,558 425,053 150.78

27,098 136,813 79,878 243,789 243,883 46,755 534,426 473,583 168.00

24,398 160,568 94,625 279,591 219,583 56,798 555,972 538,593 191.06

Interest coverage (x) Net debt to equity Sales/assets (x) Assets/equity (x) ROE ROCE

44.9% 1.83 2.47 30.0% 25.3%

42.2% 2.25 2.31 13.9% 16.9%

58.3% 1.53 2.20 14.4% 14.8%

55.9% 1.67 2.19 16.0% 17.4%

42.8% 1.79 2.09 17.7% 21.0%

Source: Company reports and J.P. Morgan estimates.

231

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Public Bank (F)
www.pbebank.com.my
Company description Public Bank is the largest domestic bank in Malaysia by market cap and the third largest by balance sheet. Public Bank also has operations in Hong Kong, China, Cambodia, Vietnam, Laos and Sri Lanka. The bank has: (1) a strong deposit franchise; (2) a prime customer base; and (3) in our view, a best-in-class management team with proven track record. Post mortem The bank continues to deliver robust growth through peak and trough cycles with the bank set to hit an all time high NP of M$2.5 billion for 2009, which is still +3% higher than 2008 (ex the one-off goodwill income of M$145 million). For FY10/11, we expect a EPS CAGR of 15.6% with the bank maintaining the high octane loan growth (15%) while strengthening further its revenue streams via its asset management and bancassurance business. We expect the bank to hit ROE levels of 29% in 2010. Potential for earnings upgrades Being best in class in a cyclical industry in our view, we see potential for further upgrades, especially if there are also tailwinds from PM Najib’s reform measures which hopefully gain positive momentum with the Malaysian Chinese community. How much recovery is priced into the stock? The stock is trading at P/Es of 15.2x/12.9x for FY09E/FY10E, which is comparable with the Malaysian market. In our view, the stock could still see further upside if earnings manages to surprise on the upside Price target and key risks Our Jun-10 PT of M$13.80 is based on our two-stage DDM model assuming sustainable ROE of 28% and COE of 11%. The key risk to our PT is that the stock is priced for perfection where any slippage in expectations could result in a sharp de-rating on valuations.
Bloomberg: PBKF MK; Reuters: PUBMe.KL
M$ in millions, year-end December Net profit Basic EPS (sen) Cash adj. EPS (sen) DPS (sen) Basic EPS growth (%) ROE (%) P/E (basic) (x) BVPS (M$) Tangible NAV P/BV (x) Div. yield (%) FY08 2,581 76.9 76.9 41.3 21.5 27.3 14.2 2.70 2.11 4.04 3.8 FY09E 2,486 71.8 71.8 39.5 -6.6 25.7 15.2 2.76 2.18 3.95 3.6 FY10E 3,005 84.7 84.7 42.4 18.0 29.5 12.9 2.98 2.40 3.65 3.9 FY11E 3,419 96.1 96.1 48.1 13.4 29.8 11.3 3.46 2.88 3.15 4.4

Overweight
Price: M$10.90 Price Target: M$13.80

Malaysia Malaysian Banks Chris Oh, CFAAC
(60-3) 2270-4728 chris.ch.oh@jpmorgan.com JPMorgan Securities (Malaysia) Sdn. Bhd. (18146-X)

Price performance
M$
11 9 7 5 10-08 01-09 04-09 07-09 10-09

Source: Bloomberg.

Performance
Absolute (%) Relative (%)
Source: Bloomberg.

1M 6.9 3.7

3M 9.3 2.8

12M 26.7 -7.5

Company data
52-wk range (M$) Mkt. cap (M$MM) Mkt. cap (US$MM) Liquidity (US$MM) Avg. daily volume (MM) Shares O/S (MM) Date of price KLCI Index Free float (%) Exchange rate
Source: Bloomberg.

M$6.85-10.94 38497.99 11251.79 6.5 2.2 3531.9 5-Nov-09 1,254.0 100.0 3.42

Source: Company, Bloomberg, J.P. Morgan estimates. Note: Share price and valuations are as of 5 November 2009.

232

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Public Bank (F): Summary of financials
Income statement - M$ MM Margins (% of earning assets) Earning assets/assets NIM (as % of avg. assets) Net interest income Total non-interest revenues Fee income FX/trading gains Other operating income Total operating revenues Operating costs Operating profit Loan loss provisions Other provisions Exceptionals Disposals/ other income Pre-tax profit Tax [rate] Minorities/preference dividends Attributable net income Key balance sheet - M$ MM Net customer loans Loans loss reserves Gross loans Investments Other earning assets Average earning assets = (A) Goodwill Total assets Interbank funding Customer deposits Long-term bond funding Other interest-bearing liabilities Average interest-bearing liab. = (B) Average assets Shareholders' equity Risk-weighted assets Average risk-weighted assets 3379 -757 -41 2,581 2008 118,386 (1,932) 120,319 25,263 43,680 178,619 2,072 196,163 5,590 162,280 6,303 3,062 167,107 185,159 9,537 111,623 105,358 2008 2.09% 96.5% 2.01% 3,727 2,012 975 76 961 5,739 -1791 3,948 -581 12 3325 -798 -41 2,486 2009E 139,378 (2,598) 141,976 31,284 37,680 200,101 2,072 226,319 6,037 188,244 8,803 3,307 191,813 211,241 9,785 124,144 117,884 2009E 1.95% 94.7% 1.84% 3,896 1,948 1,003 82 864 5,844 -1843 4,001 -689 13 4019 -965 -49 3,005 2010E 158,689 (3,164) 161,853 39,977 36,680 224,725 2,072 252,647 6,943 210,834 8,803 3,803 218,387 239,483 10,600 140,235 132,189 2010E 1.87% 93.8% 1.75% 4,197 2,286 1,228 86 972 6,483 -1949 4,534 -529 14 4572 -1097 -56 3,419 2010E 174,305 (3,733) 178,038 47,974 34,680 249,601 2,072 277,688 7,637 231,917 8,803 4,184 241,461 265,167 12,316 153,113 146,674 16% 12% 12% 11% 22% 08/07 19% 15% 19% 58% -14% 15% 0% 13% -46% 17% 46% -11% 15% 15% 2% -4% 09E/08E 18% 34% 18% 24% -14% 12% 0% 15% 8% 16% 40% 8% 15% 14% 3% 21% 10E/09E 14% 22% 14% 28% -3% 12% 0% 12% 15% 12% 0% 15% 14% 13% 8% 14% 11E/10E 10% 18% 10% 20% -5% 11% 0% 10% 10% 10% 0% 10% 11% 11% 16% 13% 22% -2% 24% 21% 24% 14% 24% 2011E 1.84% 94.1% 1.73% 4,590 2,512 1,354 91 1,068 7,102 -2031 5,071 -514 14 Per share data EPS (M$) Dividend (M$) Payout ratio NAV Avg. Shares issued (MM) DuPont NIR/avg. assets Non IR/avg. assets Non IR/total revenue Total rev/avg. assets Cost/income Cost/assets Goodwill amort. Operating ROAA LLP/loans Loans/assets Other inc: provs Pre-tax ROAA Tax MI ROAA RoRWA Equity/assets ROE 1.83% 22.4% -0.02% 1.39% 2.45% 5.1% 1.57% 24.0% -0.02% 1.18% 2.11% 4.6% 1.68% 24.0% -0.02% 1.25% 2.27% 4.3% 1.72% 24.0% -0.02% 1.29% 2.33% 4.3% 2.13% -0.53% 59.8% 1.89% -0.53% 62.1% 1.89% -0.35% 63.4% 1.91% -0.30% 64.1% 2008 0.77 0.43 0.56 2.70 3,356 2008 2.01% 1.09% 35.1% 3.10% 31.2% 0.97% 2009E 0.72 0.40 0.56 2.76 3,463 2009E 1.84% 0.92% 33.3% 2.77% 31.5% 0.87% 2010E 0.85 0.42 0.50 2.98 3,549 2010E 1.75% 0.95% 35.3% 2.71% 30.1% 0.81% 2011E 0.96 0.48 0.50 3.46 3,560 2011E 1.73% 0.95% 35.4% 2.68% 28.6% 0.77% 08/07 0% 0% 0% 15% 8% -5% -65% 55% 12% 6% 16% 39% 09E/08E -7% -2% -8% 5% -3% 3% 7% -10% 2% 3% 1% 19% 10E/09E -4% -1% -5% 8% 17% 22% 6% 12% 11% 6% 13% -23% 11E/10E -2% 0% -1% 9% 10% 10% 5% 10% 10% 4% 12% -3% Asset quality/capital Loan loss reserves/loans NPLs/loans Loan loss reserves/NPLs Growth in NPLs Tier 1 Ratio Total CAR 2008 1.6% 1.0% -13.8% 8.6% 14.1% 2009E 1.8% 1.3% 56.4% 7.8% 14.7% 2010E 2.0% 1.6% 36.3% 7.6% 13.9% 2011E 2.1% 1.8% 0.0% 8.2% 14.0% Balance sheet gearing Loan/deposit Investment/assets Loan/assets Customer deposits/liab. Long-term debt/liabilities 2008 73% 13% 60% 87% 3% 2009E 74% 14% 62% 87% 4% 2010E 75% 16% 63% 87% 4% 2011E 75% 17% 63% 87% 3%

159.7% 137.3% 122.6% 114.5%

27.35% 25.73% 29.48% 29.84%

Source: Company, J.P. Morgan estimates.

233

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Qatar Telecom
www.qtel.com.qa
Company description Qtel is the leading provider of telecom services in Qatar and only recently lost its monopoly with the market entry of Vodafone Qatar. Qtel has followed an aggressive expansion strategy over the past few years and now operates in 17 countries in the Middle East, Africa and South-East Asia. Close to 75% of its revenues came from international operations in 2008. Of these revenues its Indonesian subsidiary, Indosat, generated about 1/3. Post mortem We believe Qtel offers a balanced growth/return profile. In our view the company stands out versus its MENA peers due to a well diversified and controlled asset base dominated by i) the high value market in Qatar and ii) the market repair in Indonesia. Its international assets account for 55% of our SOTP value and contribute over 70% to our group EBITDA forecasts in 2012E. Potential for earnings upgrades Our conservative approach reflects recent market liberalization by forecasting ARPU declines of around 30% and EBITDA margin erosion of close to 5pp in the domestic market over the next three years. How much recovery is priced into the stock? Despite being up >30% ytd, we believe Qtel continues to offer a favourable risk/reward profile as GCC markets still have room to catch up with EM market performance and risk appetite for EM markets continues to improve. Price target and key risks Qtel has strong valuation support on most absolute and relative measures as well as in the context of historical trading ranges. Our DCF-based SOTP December 2010 price target for Qtel is QR230, implying more than 50% upside to current trading levels. Key risks to our valuation include i) a worse than expected macro economic environment, ii) start of irrational competition, iii) M&A integration, and iv) foreign exchange risk.
Bloomberg: QTEL QD; Reuters: QTEL QA
QR in millions, year-end December Sales Net profit EPS (QR) DPS (QR) Sales growth (%) Net profit growth (%) EPS growth (%) ROE (%) EV/EBITDA P/E (x) FCF Yield FY08 20,319 2,781 21.3 10.0 92.7% 75.3% 53.7% 9.6% NM NM NM FY09E 23,920 2,990 20.4 10.5 17.7% 7.5% -4.4% 11.8% 5.4 5.7 17.8% FY10E 25,710 2,994 20.4 11.0 7.5% 0.2% 0.2% 11.1% 4.7 5.8 14.9% FY11E 27,098 3,200 21.8 11.5 5.4% 6.9% 6.9% 11.2% 4.1 5.5 16.0%

Overweight
Price: QR 150.9 Price Target: QR 230

Qatar Telecommunications Christian KernAC
(971-4) 428 1789 christian.a.kern@jpmorgan.com JPMorgan Chase Bank, N.A., Dubai Branch
Price Performance
170 150 QR 130 110 90
Nov-08 Feb-09 May-09 Aug-09 Nov-09

Source: Bloomberg

Performance
Absolute (%) Relative (%)
Source: Bloomberg

1M -0.1% 0.3%

3M 4.8% -1.2%

12M 18.7% 30.1%

Company data
52-week range (LC) Mkt cap. (LCMM) Mkt cap. (US$MM) Avg daily value (US$MM) Avg daily volume (MM) Shares O/S (MM) Date of price Index: DSM20 Free float (%) Exchange rate
Source: Bloomberg

163.9-90.3 22,132 6,079 1.55 0.39 147 23-Nov-09 7256 22% 3.64

Source: Company, Bloomberg, J.P. Morgan estimates. Note: Share price and valuations are as of cob 23 November 2009.

234

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Qatar Telecom: Summary of Financials
Profit and Loss Statement QR in millions, year end Dec Revenues % Change Y/Y EBITDA % Change Y/Y EBITDA Margin EBIT % Change Y/Y EBIT Margin Net Interest PBT % change Y/Y Net Income (clean) % change Y/Y Average Shares Clean EPS % change Y/Y DPS Balance sheet QR in millions, year end Dec Cash and cash equivalents Accounts Receivables ST financial assets Others Current assets LT investments Net fixed assets Total assets ST loans Payables Others Total current liabilities Long term debt Other liabilities Total liabilities Total Liabilities & Shareholders' Equity Cash flow statement FY08 FY09E FY10E FY11E FY12E QR in millions, year end Dec 20,319 92.7% 9,825 90.0% 48.4% 5,612 82.2% 27.6% (1,315) 3,099 69.9% 2,781 75.3% 130 21.32 53.7% 10.00 23,920 17.7% 11,408 16.1% 47.7% 5,731 2.1% 24.0% (1,553) 4,620 49.1% 2,990 7.5% 147 20.39 NM 10.50 25,710 7.5% 12,035 5.5% 46.8% 6,149 7.3% 23.9% (1,209) 4,928 6.7% 2,994 0.2% 147 20.42 0.2% 11.00 27,098 5.4% 12,501 3.9% 46.1% 6,458 5.0% 23.8% (1,031) 5,351 8.6% 3,200 6.9% 147 21.82 6.9% 11.50 28,593 5.5% 13,036 4.3% 45.6% 6,906 6.9% 24.2% (819) 5,917 10.6% 3,496 9.3% 147 23.84 9.3% 12.57 Cash EBITDA Interest Tax Other Cash flow from operations Capex PPE Net investments CF from investments Dividends Share (buybacks)/ issue CF to Shareholders FCF to debt OpFCF (EBITDA - PPE) EFCF pre Div, PPE FY08 FY09E FY10E FY11E FY12E 9,825 11,408 12,035 12,501 13,036 (1,315) (1,553) (1,209) (1,031) (819) (1,082) (963) (1,037) (1,111) (1,204) (1,807) 3,146 473 (277) (613) 5,621 12,039 10,263 10,083 10,400 (6,834) (6,170) (4,593) (4,250) (4,223) (2,368) 1,441 662 841 1,053 (9,202) (4,729) (3,931) (3,409) (3,170) (347) (1,793) (1,540) (1,613) (1,687) 5,861 0 0 0 0 5,514 (1,793) (1,540) (1,613) (1,687) 1,932 5,517 4,792 5,060 5,543 2,991 (3,582) 5,238 7,310 7,441 6,332 8,252 6,673 8,813 7,230

Ratio Analysis FY08 FY09E FY10E FY11E FY12E QR in millions, year end Dec 7,845 3,862 272 11,980 38,838 23,480 74,298 7,820 9,709 3,235 20,765 20,155 4,416 45,336 74,297 12,567 4,545 287 17,398 37,855 25,185 80,439 10,732 11,960 5,502 28,194 19,706 7,116 55,016 80,439 17,358 4,885 309 22,552 36,666 25,468 84,685 10,732 12,855 7,199 30,786 19,706 7,316 57,808 84,685 22,418 5,013 325 27,757 35,393 25,421 88,570 10,732 13,549 8,671 32,953 19,706 7,448 60,106 88,570 27,962 5,147 343 33,452 34,120 25,359 92,930 10,732 14,297 9,722 34,751 19,706 8,200 62,657 92,930 EBITDA margin EBIT Margin Net profit margin Capex/sales Depreciation/Sales Revenue growth EBITDA Growth EPS Growth Net debt/EBITDA CF to Shareholders FCF to debt OpFCF (EBITDA - PPE) EFCF pre Div, PPE

FY08 FY09E FY10E FY11E FY12E 48.4% 27.6% 11.2% 33.6% 19.8% 47.7% 24.0% 12.1% 25.8% 22.2% 46.8% 23.9% 11.6% 17.9% 21.4% 7.5% 5.5% 0.2% 46.1% 23.8% 11.8% 15.7% 20.6% 5.4% 3.9% 6.9% 45.6% 24.2% 12.2% 14.8% 19.4% 5.5% 4.3% 9.3%

92.7% 17.7% 90.0% 16.1% 53.7% NM

2.2 1.6 1.1 0.7 0.2 5,514 (1,793) (1,540) (1,613) (1,687) 1,932 5,517 4,792 5,060 5,543 2,991 (3,582) 5,238 7,310 7,441 6,332 8,252 6,673 8,813 7,230

Source: Company reports and J.P. Morgan estimates.

235

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Rosneft
www.rosneft.com
Company description Rosneft is the largest oil company in Russia. We expect crude output at 2.24 mmbpd in 2009. Rosneft’s key upstream assets are: Yuganskneftegas in W. Siberia (‘09E output – 1.33 mmbpd) and Vankorneft in E. Siberia (‘15E output - around 600 mbpd). Proven hydrocarbon reserves (as of end-‘08) stood at 22.3 bn boe, 3P reserves at 48.9 bn boe. In 2009, we estimate the refining coverage ratio at 47%. The government owns a 75.2% stake in Rosneft, while 9.4% is in treasury shares held by the company. Post mortem Rosneft is the fastest growing company in the Russian oil sector, as it ramps up output at 500kbpd Vankor field in E. Siberia. We forecast Rosneft’s output growth at over 2% in ‘09E and 6% y/y in ‘10E (vs. 1.0% and 2.6% for the Russian oil sector). We expect Rosneft to generate cumulative FCF of $25bn in ‘10E-‘12E thanks to low opex, ED tax holidays in E. Siberia and rising oil prices. This should in our view allow Rosneft to reduce financial leverage (from net debt of $19.8bn as of end-09), might improve dividend payments and boost investments into projects with superior return potential. Potential for earnings upgrades Rosneft might show better than expected output growth and should benefit from tax holidays, which we believe is not entirely priced in. Our EBITDA and net income forecasts for Rosneft are 23-25% and 19-24% above Bloomberg consensus respectively. How much recovery is priced into the stock? Based on our analysis, Rosneft trades at 9.8x 12M forward PER, or a 14% discount to historical average PER (since IPO in 2006). In our view, additional tax breaks are not fully priced in and we would expect the company to trade above its historical PER multiples. Price target and key risks Our PT (end-2010) is $10.3, based on 50% DCF (WACC at 11.7% and terminal growth rate at 3.5%) and 50% target (normalized) EV/EBITDA (‘10E). Key risks: oil price volatility, inflation and ruble appreciation.
Bloomberg: ROSN LI; Reuters: ROSNq.L
$ in millions, year-end December Sales Net profit EPS (LC) FD EPS (LC) DPS (LC) Sales growth (%) Net profit growth (%) EPS growth (%) ROE (%) P/E (x) FD P/E (x) FY08 68,991 11,110 1.16 1.16 0.07 40% -14% -14% 33% 7.8 7.8 FY09E 46,793 6,477 0.68 0.68 0.06 -32% -42% -42% 15% 13.3 13.3 FY10E 59,041 10,539 1.10 1.10 0.07 26% 63% 63% 21% 8.2 8.2 FY11E 78,898 14,043 1.47 1.47 0.11 34% 33% 33% 23% 6.1 6.1

Overweight
Price: $9.01 Price Target: $10.3

Russia Russian Oil & Gas Nadia KazakovaAC
(7-495) 937 7329 nadia.kazakova@jpmorgan.com J.P Morgan Securities Ltd.

Price Performance
9 $ 7 5 3
Nov-08 Feb-09 May-09 Aug-09 Nov-09

Source: Bloomberg

Performance
Absolute (%)
Source: Bloomberg

1M -3.2

3M 25.7

12M 109.5

Company data
52-week range ($) Mkt cap. (US$MM) Avg daily value (US$MM) Avg daily volume (MM) Shares O/S (MM) Date of price Index: RTS Free float (%) Exchange rate
Source: Bloomberg, J.P. Morgan

2.61-9.01 86,307 296 33.44 9,579 23-Nov-09 1466.77 11% 1

Source: Company, Bloomberg, J.P. Morgan estimates. Note: Share price and valuations are as of cob 23 November 2009.

236

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Rosneft: Summary of Financials
Profit and Loss Statement $ in millions, year end Dec Revenues % change Y/Y Gross Margin (%) EBITDA % change Y/Y EBITDA Margin EBIT % change Y/Y EBIT Margin Net Interest Earnings before tax % change Y/Y Tax as a % of EBT Net Income (Reported) % change Y/Y Shares Outstanding EPS (reported) % change Y/Y Balance sheet $ in millions, year end Dec Cash and cash equivalents Accounts receivable Inventories Others Current assets LT investments Net fixed assets Total assets Liabilities ST loans Payables Others Total current liabilities Long term debt Other liabilities Total liabilities Shareholders' equity BVPS FY08 FY09E FY10E FY11E Cash flow statement FY12E $ in millions, year end Dec FY08 12,995 3,983 1,617 1,904 16,691 (8,732) (1,350) (737) 5,872 0 (2,536) 126 (538) 998 1,372 0.06 FY09E FY10E FY11E FY12E 8,755 14,348 18,511 19,653 4,724 4,991 5,532 5,782 1,626 (1,056) (2,037) (286) 1,619 2,635 3,511 3,883 13,485 15,648 18,495 21,265 (7,527) (8,825) (8,674) (8,190) (1,319) 255 276 (169) (684) (1,141) (689) (278) 3,955 5,936 9,408 12,629 0 0 0 0 (1,136) 788 (9,258) (8,230) 0 0 0 (0) (695) (1,044) (1,714) (2,516) 1,372 3,220 7,496 4,832 3,220 7,496 4,832 6,290 0.07 0.11 0.18 0.26

68,991 46,793 59,041 78,898 84,589 EBIT 40.2% (32.2%) 26.2% 33.6% 7.2% Depreciation & amortisation 22.2% 25.9% 30.1% 28.1% 27.7% Change in working capital/Other 16,978 13,478 19,339 24,043 25,435 Taxes 21.2% (20.6%) 43.5% 24.3% 5.8% Cash flow from operations 24.6% 28.8% 32.8% 30.5% 30.1% 12,995 8,755 14,348 18,511 19,653 Capex 21.2% (32.6%) 63.9% 29.0% 6.2% Disposal/(Purchase)/Other 18.8% 18.7% 24.3% 23.5% 23.2% Net Interest (737) (684) (1,141) (689) (278) Free cash flow 13,109 8,096 13,174 17,553 19,417 (26.3%) (38.2%) 62.7% 33.2% 10.6% Equity raised/repaid (1,904) (1,619) (2,635) (3,511) (3,883) Debt Raised/repaid 14.5% 20.0% 20.0% 20.0% 20.0% Other 11,110 6,477 10,539 14,043 15,534 Dividends paid (13.6%) (41.7%) 62.7% 33.2% 10.6% Beginning cash 9,597.87 9,597.87 9,597.87 9,598.87 9,599.87 Ending cash 1.16 0.67 1.10 1.46 1.62 DPS (13.6%) (41.7%) 62.7% 33.2% 10.6% Ratio Analysis FY12E $ in millions, year end Dec 6,290 8,675 1,965 3,045 19,976 EBITDA margin Operating margin Net profit margin SG&A/Sales

FY08 1,369 6,299 1,427 3,712 12,807 22,309 55,204 77,513

FY09E 3,220 4,423 1,002 3,395 12,039 21,123 58,007 79,130

FY10E 7,496 5,360 1,214 3,670 17,740 27,052 61,841 88,893

FY11E 4,832 7,767 1,760 3,622 17,980 27,663 64,984 92,647

FY08 24.6% 18.8% 16.1% 2.4%

FY09E FY10E FY11E FY12E 28.8% 32.8% 30.5% 18.7% 24.3% 23.5% 13.8% 17.9% 17.8% 2.9% 2.6% 2.4% 30.1% 23.2% 18.4% 2.4% 7.2% 10.6% 19.5% 20.8% 2,817 2,621 196 1,054 91.7 0.0% 39 (0.1)

Sales per share growth 29,764 EPS growth 67,392 97,156 ROE ROCE 4,416 3,590 1,517 9,523 1,913 5,088 96,746 79,527 8.28 Production (mboe/day) Production oil (mbpd) Production gas (mboe/day) Refining throughput (mbpd) Interest coverage (x) Net debt to equity Net debt Net debt/EBITDA (ny)

40.2% (32.2%) 26.2% 33.6% (13.6%) (41.7%) 62.7% 33.2% 28.6% 20.7% 2,257 2,122 135 988 23.0 57.6% 22,796 1.2 14.5% 19.5% 21.1% 11.7% 17.8% 20.6% 2,375 2,192 183 1,000 2,502 2,325 177 1,054 2,706 2,505 201 1,054

14,084 3,096 1,517 18,697 10,081 9,137 77,513 38,903 4.05

7,964 2,103 1,517 11,584 15,065 7,549 79,577 44,685 4.66

6,765 2,471 1,517 10,753 17,052 6,430 89,110 54,180 5.65

5,917 3,339 1,517 10,773 8,641 5,642 92,261 66,509 6.93

19.7 16.9 34.9 43.7% 29.7% 14.5% 19,809 16,321 9,727 1.3 0.8 0.3

Source: Company reports and J.P. Morgan estimates.

237

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

RusHydro
www.rushydro.ru
Company description RusHydro is the largest power generation company in Russia in terms of installed capacity (about 25GW including Sayano Shushensksya HPP after the recovery of the plant), controlling over half of the country’s hydro power generation facilities and producing about 8% of the country’s electricity. Post Mortem RusHydro experienced a major accident at Sayano-Shushenskaya HPP (SS HPP) which will make the largest plant inoperable for the 2010 and part of 2011. Not surprisingly, the stock has underperformed the market since the accident. However, we estimate the company is still likely to make a sound profit in 2009 given the relatively good 1H09, and it should improve profitability in 2011 when operations at the power plant are resumed.
Potential for earnings upgrades

Overweight
Price: $0.042 Price Target: $0.042

Russia Electric Utilities Sergey ArininAC
(7-495) 967-7031 sergey.v.arinin@jpmorgan.com J.P. Morgan Bank International LLC

Price Performance
0.050 0.040 $ 0.030 0.020 0.010
Nov-08 Feb-09 May-09 Aug-09 Nov-09

We see little scope for earnings upgrades as the company bottom line is likely to remain weak in 2009 and 2010 as a result of the SS HPP accident. Moreover, we believe the market expectations on developments in the electricity market already take into account improvements in electricity demand and pricing.
How much recovery is priced into the stock?

Source: Bloomberg.

Performance
Absolute (%)
Source: Bloomberg.

1M 6%

3M 14%

12M 78%

We believe renewed focus on risks may result in less vulnerability on the downside and greater sensitivity to positive surprises. At the same time, the market may overlook its attractive relative valuation. For example, RusHydro trades at 5.6x 2011E EV/EBITDA vs. 9.7x for international peers. Low valuation compensates for some of the capex and stock overhang risks in our view.
Price target and key risks

Company data
52-week range (RUB) Mkt cap. (RUBMM) Mkt cap. (US$MM) Avg daily value (US$MM) Avg daily volume (MM) Shares O/S (MM) Date of price Index: RTS Free float (%) Exchange rate (RUB/$)
Source: Bloomberg.

Our DCF-based Dec-10 PT is $0.042. The key risks include 1) the risk of capex increase; and 2) new share issue overhang, with issuance already approved.
Bloomberg: HYDR RU; Reuters: HYDR.RTS
RUB in billions, year-end December Revenue Net income EPS (RUB) FD EPS (RUB) DPS (RUB) Revenue growth (%) Net income growth (%) EPS growth (%) ROE (%) P/E (x) FD P/E (x) FY08 107,669 -19,955 -0.070 -0.070 0 35% N.M. N.M. -6% -14.7 -14.7 FY09E 105,048 24,180 0.085 0.085 0 -2% N.M. N.M. 6% 15.6 15.6 FY10E 109,768 23,143 0.081 0.081 0 4% -4% -4% 5% 16.4 16.4 FY11E 139,956 43,968 0.155 0.155 0 28% 90% 90% 9% 9.0 9.0

0.53-1.43 327,859 11,387 28 800 284, 543 23-Nov-09 1466.77 37 28.79

Source: Company, Bloomberg, J.P. Morgan estimates. Note: Share price and valuations are as of cob 23 November 2009. 238

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

RusHydro: Summary of Financials
Profit and Loss Statement $ in millions, year end Dec Sales Gross Operating Profit Depreciation & Amortisation Operating Profit Associate Income Net Interest Profit before tax Income Tax Minority Interests Discontinued items Group Net profit Cashflow statement $ in millions, year end Dec Funds from operations Working Capital Cash flow from operations Capex & Acquisitions Other investing cash flows Cash from investing Dividends paid Cash from financing Free Cash flow before dividends Free cash flow, adjusted Balance Sheet $ in millions, year end Dec Net fixed assets Current assets Total assets Total Debt Shareholders' equity Other liabilities Total liabilities Net debt Capital Employed Valuation ratios FY07 FY08E FY09E FY10E FY11E $ in millions, year end Dec FY07 FY08E FY09E FY10E FY11E 3,105 4,324 3,283 3,409 4,186 P/E (recurrent) - P/E (reported) 330 375 337 404 499 Price to book value 1.1 0.9 0.8 0.7 0.7 412 924 1,079 1,132 1,883 EV/EBITDA 13.9 7.4 7.0 6.8 4.8 - EV/EBIT 25.1 10.5 9.2 9.2 6.1 31 60 0 105 247 FCF yield (pre divs, post mins) (%) 372 864 1,079 1,027 1,636 Dividend yield (%) 117 459 324 308 327 0 19 0 0 0 Per share - $ 255 409 864 821 1,309 FY07 FY08E FY09E FY10E FY11E Recurrent EPS 0.00 (0.00) 0.00 0.00 0.00 Reported EPS Reported DPS FY07 FY08E FY09E FY10E FY11E Adjusted Free cash flow 36 (223) (112) (29) (32) Performance, leverage and return ratios 1,067 1,037 1,203 1,542 2,210 % FY07 FY08E FY09E FY10E FY11E - Gross operating margin - Operating margin (80) 0 0 0 0 Operating profit growth y-o-y 137.4% 124.5% 16.8% 4.8% 66.4% - Recurrent Income growth y-o-y - Reported ROE 4.2% 3.9% 7.0% 6.0% 8.8% - ROCE (EBIT) Net debt/ (equity+minorities) (%) 6.5% -0.5% 1.3% 4.5% 10.9% Net debt /EBITDA (%) EBITDA / net interest FY07 FY08E FY09E FY10E FY11E Reported net income / dividends - Market valuation 12,746 14,502 15,699 18,018 21,116 $ in millions FY07 FY08E FY09E FY10E FY11E 9,465 11,645 13,177 14,330 15,368 Share price (year-end / current) 0.03750 - Number of Shares (million) 284,543.0 284,543.0 284,543.0 284,543.0 284,543.0 3,281 2,857 2,522 3,687 5,749 Market Capitalisation 615 -58 174 642 1,676 EV adjustment - EV 10,347 9,673 9,906 10,373 11,407

Source: Company reports and J.P. Morgan estimates.

239

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Samsung SDI
www.samsungsdi.com
Company description Samsung SDI Co., Ltd. Specializes in manufacturing cathode-ray tubes (CRTs) for televisions and computer monitors. The company also produces PDP panels. SDI is now moving its axis of business into rechargeable batteries (RB) for mobile phones and NBPC, aiming further growth in the HEV/EV area. Post mortem We believe the three-stage earnings drivers are intact: RB for CE in the near term; AM-OLED in the mid-term; and RB for EV in the long term. Also, SDI’s aggressive plan in ESS (energy storage system) will likely reinforce SDI’s multi-year growth story further. Potential for earnings upgrades We still believe the company’s RB will generate sustainable earnings, owing to product-mix change as well as ongoing growth in SMD. Hence, we expect upward revisions to consensus earnings estimates and price target. How much recovery is priced into the stock? Our long-term view is potential upside will be largely driven by SB LiMotive, as the company starts shipping commercial samples in 4Q10, and meaningful volume shipments will likely to take place in 2012. We believe the share price will continue to appreciate as the value of its JV offsets deficits in its existing businesses. Price target and key risks We believe Samsung SDI’s re-rating story is intact, given the potential strong earnings momentum in the next two years. As we expect SDI’s earnings to be driven by its three operations (RB for CE, AM-OLED, and RB for EV), we use a SOTP approach to derive our Dec-10 PT of W210,000, estimating a value for each of its operations (CE RB: W4.3 trillion; SMD: W3.0 trillion; and EV RB: W2.4 trillion). Our PT implies 47% upside potential from the current price. SDI remains on our Asia Analysts’ Focus List, and on the LONG side of our AP Tech Trading Portfolio.
Bloomberg: 006400 KS; Reuters: 006400.KS
Won in billions, year-end December Sales Sales growth Operating profit OP growth Pre-tax profit Net profit EPS (Won) P/E (x) Cash Gross debt Equity Debt-equity FY08 6,250 21% 69 n/a 121 39 807 176.7x 1,280 1,033 4,769 22% FY09E 4,842 -23% 129 88% 292 308 6,405 22.2x 1,353 659 5,157 13% FY10E 4,592 -5% 312 141% 443 407 8,463 16.8x 1,614 441 5,570 8% FY11E 4,663 2% 401 29% 589 542 11,262 12.7x 2,020 274 6,117 4% ROE (%) ROIC (%) BPS (Won) P/BV (x) Div yield (%) EPS FY08 FY09E FY10E Price target Consensus Difference FY08 1% 3% 99,141 1.4x 0.0% 1Q -636 1,197 1,683 210,000 160,000 31.3% FY09E 6% 5% 107,205 1.3x 2.7% 2Q 1,031 1,838 1,746 FY10E 7% 13% 115,780 1.2x 2.7% 3Q 1,220 1,792 2,446

Overweight
W142,500 Price Target: W210,000

South Korea Electronics JJ ParkAC
(822) 758-5717 jj.park@jpmorgan.com

Marcus ShinAC
(822) 758-5712 marcus.j.shin@jpmorgan.com J.P. Morgan Securities (Far East) Ltd, Seoul Branch

Price performance
Won
180,000 W 110,000 40,000 Oct-08 Feb-09 Jun-09 Oct-09 SDI KOSPI
Source: Bloomberg.

Performance
Absolute (%) Relative (%)

1M 2% 6%

3M 33% 32%

12M 101% 64%

Source: Bloomberg.

Company data
52-wk range (Won) Mkt cap. (WB) Mkt cap. (US$MM) Avg daily val (US$MM) Avg daily vol (MM) Shares O/S (MM) Date of price Index: KOSPI Free float (%) Exchange rate
Source: Bloomberg.

52,200-179,000 6,492 5,513 109.5 0.9 46 5-Nov-09 1,552 57.1 1,178

FY11E 9% 18% 127,158 1.1x 2.7% 4Q -809 1,578 2,588

Source: Company, Bloomberg, J.P. Morgan estimates. Note: Share price and valuations are as of 5 November 2009.

240

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Samsung SDI: Summary of financials
Won in billions, year-end December Profit and loss statement Revenues COGS Depreciation Gross Profit EBIT Net Interest Income Pre-tax Profit Tax Expense/(Credit) Net Income Shares outstanding (mil.) EPS (Including pref., Won) Sequential Growth Revenues Gross Profit EBIT Pre-tax Profit EPS (Won) FY08 6,250 5,435 -591 814 69 -7 121 43 39 46 807 21% 191% n/a n/a n/a FY09E 4,842 4,103 -464 739 129 -2 292 12 308 46 6,405 -23% -9% 88% 142% 694% FY10E 4,592 3,734 -455 858 312 7 443 35 407 46 8,463 -5% 16% 141% 52% 32% FY11E 4,663 3,719 -446 944 401 26 589 47 542 46 11,262 2% 10% 29% 33% 33% Balance sheet Cash and Cash Equivalents Accounts receivable Inventories Others current assets Current assets Net fixed assets Investment assets Other long term assets Total Assets ST Debt and CPLTD Account Payables Other current liabilities Total current liabilities Long term debt Other Long term liabilities Total liabilities Shareholder's equity Total Liabilities and Equity BVPS (Won) Cash flow statement Net Income Depreciation & amortization Other non-cash items Change in working capital Cash flow from operations Purchase of PP&E Disposal/ (purchase) Cash flow from investing Equity raised/(repaid) Debt raised/(repaid) Other charges Cash dividends Cash flow from Financing Net Changes in Cash Beginning cash Ending cash DPS (Won) Ratio analysis Gross Margin (%) EBIT Margin (%) Net profit margin (%) COGS/sales (%) SG&A/sales (%) Sales per share growth (%) Sales growth (%) EBIT growth (%) Net profit growth (%) EPS growth (%) Interest Coverage (x) Inventory Turnover (x) Net Debt to total Capital (%) Net debt to equity (%) Sales/Assets (%) Assets/Equity (%) ROE (%) ROIC (%) FY08 1,280 684 420 210 2,594 2,156 1,762 257 6,769 327 280 485 1,093 705 201 2,000 4,769 6,769 99,141 FY09E 1,353 542 426 386 2,706 2,076 2,024 83 6,889 243 321 656 1,220 416 96 1,732 5,157 6,889 107,205 FY10E 1,614 494 389 352 2,849 1,958 2,078 94 6,980 168 281 599 1,048 273 89 1,410 5,570 6,980 115,780 FY11E 2,020 503 395 358 3,277 1,840 2,147 101 7,366 123 284 609 1,016 151 82 1,249 6,117 7,366 127,158

FY08 39 591 0 -108 560 151 -85 66 -5 7 -43 0 -164 463 818 1,280 0

FY09E 308 464 0 172 916 -384 -88 -472 117 -374 -383 0 -371 73 1,280 1,353 250

FY10E 407 455 0 21 884 -338 -65 -403 0 -218 -212 0 -220 261 1,353 1,614 250

FY11E 542 446 0 -9 979 -328 -77 -405 0 -167 -162 0 -169 406 1,614 2,020 250

FY08 13.0% 1.1% 1.2% 87.0% 11.9% 21.4% 21.4% n/a n/a n/a 2.7 12.9 -3.7% -5.2% 92.3% 141.9% 0.8% 2.7% Q1

FY09E 15.3% 2.7% 5.8% 84.7% 12.6% -22.5% -22.5% 88.1% 259.5% 694.1% 5.9 9.6 -10.1% -13.5% 70.3% 133.6% 6.2% 4.6% Q2 1,124 84 1,746

FY10E 18.7% 6.8% 8.9% 81.3% 11.9% -5.2% -5.2% 140.9% 45.6% 32.1% 22.6 9.6 -16.8% -21.1% 65.8% 125.3% 7.3% 13.1% Q3 1,191 118 2,446

FY11E 20.3% 8.6% 11.6% 79.7% 11.7% 1.6% 1.6% 28.5% 33.1% 33.1% 45.1 9.4 -23.7% -28.6% 63.3% 120.4% 8.9% 17.7% Q4 1,173 124 2,588

Quarterly data Q1 2009E Sales Net income EPS (Won) 1,023 58 1,197 Q2 1,187 88 1,838 Q3 1,347 86 1,792 Q4 1,286 76 1,578 2010E Sales Net income EPS (Won) 1,103 81 1,683

Source: Company data, Bloomberg, J.P. Morgan estimates.

241

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Santander Brasil
http://www.santander.com.br
Company description Banco Santander Brasil is the third-largest private bank in Brazil based on total assets, loans, and deposits. Since the late 1990s, the company has grown via various acquisitions, notably the purchases of Banco do Estado de São Paulo (Banespa) in November 2000 and Banco Real from ABN Amro in 2008. The company conducted its IPO on October 6, 2009. Post mortem The third-largest private-sector bank in Brazil, Santander Brasil should benefit from growth in financial services penetration. In addition, an improving credit cycle should allow for solid 20%+ loan growth in 2010 and 2011, in our view, while provisioning levels should decline from relatively high levels. With an estimated 24% BIS ratio, the company has the capital strength to take advantage of growth opportunities while returning ample levels of capital to shareholders (50% dividend payout ratio forecast). Potential for earnings upgrades Difficult to forecast at this point given: 1) the stock is not yet well covered since it only recently IPO’d; and 2) due to accounting differences with other Brazilian banks (its primary reporting framework is IFRS versus Brazilian GAAP for the other Brazilian banks we cover). On the latter point, we adjust IFRS earnings to make earnings estimates more comparable to those of the other Brazilian banks in our coverage universe. How much recovery is priced into the stock? Little, in our view. The stock trades at only 1.6x adjusted book value, compared to 3.5x at Itau Unibanco and 2.8x at Bradesco. We see adjusted ROE expanding in the coming years to the high-teen range (we expect 12% in 2010) and for Santander Brasil’s price-to-book value multiple to expand. Price target and key risks YE10 R$28/share, US$16/ADR (at JPM’s end-2010 FX of R$1.8/US$). We use a residual income model and regression of risk-adjusted ROE to price to book value using a cross-section of Latin American banks. Key risks include execution risk related to integration with Banco Real, continued deterioration in asset quality, and the Brazilian tax authorities deciding to no longer allow goodwill amortization expenses to be tax deductible.

Overweight
SANB11.SA, R$22.71 BSBR, USA $13.34 Price Target: R$28/US$16

Brazil Financial Institutions Saul MartinezAC
(1-212) 622-3602 saul.martinez@jpmorgan.com J.P. Morgan Securities Inc.

Price performance
R$

24 23 22 21 20
out-09 out-09 nov-09 nov-09

Source: Bloomberg.

Performance
1M Absolute (%) Relative (%)
Source: Bloomberg.

3M NA NA

12M NA NA

(6.3) (6.8)

Company data
52-week range (LC) Mkt cap. (Local) Mkt cap. (US$MM) Avg daily value (US$MM) Avg daily volume (MM) Shares O/S (MM) Date of price Index: Bovespa Free float (%) Exchange rate
Source: Bloomberg and J.P. Morgan.

23.70-20.15 86,298 50,692 475.3 21.3 3,800 11/25/2009 67917 18% 1.72

242

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

243

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Sberbank
www.sbrf.ru
Company description Sberbank is Russia's largest bank, with near 50% of total retail deposits and by far the biggest retail network of c.20,000 branches. The bank holds the #1 market share in both corporate and retail loans (32% in each), with the diversified loan book reflecting the Russian GDP structure. Post Mortem Sberbank is well on track to emerge from the downturn in relatively good shape in our view: without a single loss, with a strong Total CAR of 18.4% (not having raised any additional equity), strong NIM (a reflection of the competitive positioning) and a C/I ratio below 40%. JPMe NPL coverage should remain above 100%, and we expect pronounced provision releases on a 2-3 year horizon, a potentially major boost to earnings.
Potential for earnings upgrades

Overweight
Price: $2.50 Price Target: $3.02

Russia Banks Alex Kantarovich, CFAAC
(7-495) 967-3172 alex.kantarovich@jpmorgan.com J.P. Morgan Bank International LLC

Price Performance
3.0 2.0 $ 1.0 0.0
Nov-08 Feb-09 May-09 Aug-09 Nov-09

Both sector and company upgrades have intensified in recent months, however, we argue that consensus still fails to recognize the scope of provisioning normalization, and its impact on the bottom line and equity. We believe that earnings upgrades should continue throughout 2010, with the macro-recovery strengthening and the likelihood of provision releases rising.
How much recovery is priced into the stock?

Source: Bloomberg.

Performance
Absolute (%)
Source: Bloomberg.

1M 3.7

3M 58.5

12M 182.5

From the February 09 trough Sberbank common shares have rallied roughly 400%, beating MSCI Russia Financials and MSCI EM Financials indices. Still, the shares trade on 1.5x 2011E P/B and 5.2 P/E, which in our view look undemanding giving the bank's long-term potential.
Price target and key risks

Company data
52-week range ($) Mkt cap. (US$MM) Avg daily value (US$MM) Avg daily volume (MM) Shares O/S (MM) Date of price Index: RTS Free float (%) Exchange rate (RUB/$)
Source: Bloomberg.

Our Dec-10 PTs of $3.02 for common stock and $2.11 for preference shares are based on the Gordon Growth valuation model. The key risks include the negatives on the macro front and potential weakening of the ruble; reacceleration of NPL growth; more pronounced than expected NIM contraction and inability to deliver on cost control. Launch of ADRs in 1H10 and accelerated reversal of LLRs are among the potential catalysts for the shares, in our view.
Bloomberg: SBER RU; Reuters: SBER.RTS
RUB in billions, year-end December Revenue Net income EPS (RUB) FD EPS (RUB) DPS (RUB) Revenue growth (%) Net income growth (%) EPS growth (%) ROE (%) P/E (x) FD P/E (x) FY08 458 98 4.33 4.33 0.48 30 -8 -11 14.1 14.4 14.4 FY09E 620 18 0.78 0.78 0.12 35 -82 -82 2.3 103.8 103.8 FY10E 612 102 4.50 4.50 0.68 -1 480 480 12.6 17.2 17.2 FY11E 647 338 14.95 14.95 2.39 6 232 232 33.1 5.2 5.2

0.39-2.58 55,147 812 395 22,587 23-Nov-09 1,466.77 43 28.79

Source: Company, Bloomberg, J.P. Morgan estimates. Note: Share price and valuations are as of cob 23 November 2009. 244

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Sberbank: Summary of financials
Income statement $ mn Interest income Interest expense Net interest income YoY change Fees and commissions Trading and other income Non-interest income Yoy change Revenue YoY change Provisions Operating costs Non-recurring items Pre-tax income YoY change Minorities Net income (reported) Net income (adjusted) YoY change Balance sheet $ mn ASSETS Cash and CBR deposits Corporate loans Retail loans Loan-loss reserves Net customer loans YoY change Other IEA Goodwill Other assets Total assets LIABILITIES AND EQUITY Customer deposits YoY change Debt Subordinated debt Other liabilities Shareholders' equity Minorities Total liabilities and equity 2008A 27,598 136,711 42,886 -6,880 172,717 8% 16,886 0 11,931 229,132 2009E 14,349 156,234 37,622 -18,361 175,495 2% 20,484 0 11,780 222,109 2010E 16,374 176,154 41,291 -25,589 191,856 9% 22,903 0 12,210 243,343 2011E 18,974 198,173 46,452 -18,997 225,628 18% 24,516 1 12,684 281,803 2012E 22,528 223,936 52,491 -14,105 262,322 16% 26,129 2 13,335 324,314 Revenue ratios NIM Non-II/ave assets NII/revenues Fees/revenue Trading income/revenue Cost ratios Cost/income Cost/assets 2008A 24,898 -9,711 15,187 54% 3,462 -239 3,223 -18% 18,410 33% -3,931 -8,905 0 5,218 -5% 0 3,926 3,926 -6% 2009E 26,143 -10,957 15,186 0% 3,162 901 4,063 26% 19,249 5% -11,395 -7,174 0 680 -87% 0 544 544 -86% 2010E 27,513 -12,338 15,175 0% 3,896 655 4,551 12% 19,726 2% -7,712 -7,917 0 4,097 503% 0 3,278 3,278 503% 2011E 28,599 -13,097 15,502 2% 4,643 720 5,363 18% 20,865 6% 1,155 -8,408 0 13,612 232% 1 10,890 10,890 232% 2012E 31,704 -14,682 17,023 10% 5,648 810 6,459 20% 23,482 13% 0 -8,631 0 14,851 9% 2 11,881 11,881 9% Share and per share data and ratios 2008A Share and per share data Shares - common (mn) Shares - preferred (mn) Total shares OS (mn) EPS reported ($) EPS adjusted ($) YoY change BVPS ($) Payout ratio DPS - common ($) DPS - preferred ($) Dividend yield - common Dividend yield - preferred Valuation and return ratios P/E ratio P/B ratio ROE ROA 21,587 1,000 22,587 0.1738 0.1738 -9% 1.1297 11% 0.0193 0.0253 0.8% 2.1% 2009E 21,587 1,000 22,587 0.0241 0.0241 -86% 1.0824 10% 0.0036 0.0048 0.1% 0.4% 2010E 21,587 1,000 22,587 0.1451 0.1451 503% 1.2250 10% 0.0221 0.0290 0.9% 2.5% 2011E 21,587 1,000 22,587 0.4821 0.4821 232% 1.6854 15% 0.0771 0.1012 3.1% 0.0% 2012E 21,587 1,000 22,587 0.5260 0.5260 9% 2.0909 25% 0.0883 0.1159 3.5% 0.0%

14.4 2.2 14% 1.7%

103.8 2.3 2% 0.3%

17.2 2.0 13% 1.4%

5.2 1.5 33% 4.1%

4.8 1.2 28% 3.9%

Income statement and balance sheet ratios 2008A 7.6% 1.4% 82% 19% -7% 2009E 8.4% 1.9% 79% 16% 5% 2010E 7.4% 2.0% 77% 20% 3% 2011E 6.7% 2.0% 74% 22% 3% 2012E 6.3% 2.1% 72% 24% 3%

48% 3.8%

37% 3.4%

40% 3.4%

40% 3.2%

37% 2.8%

163,103 3% 10,135 18,239 12,139 25,516 0 229,132

167,951 3% 8,871 17,297 3,541 24,448 0 222,109

185,157 10% 9,677 17,297 3,541 27,670 0 243,343

211,606 14% 11,290 17,297 3,541 38,068 1 281,803

243,346 15% 12,903 17,297 3,541 47,226 2 324,314

Balance sheet and capital ratios Loans/deposits 106% Loans/assets 75% Deposits/liabilities 80% Debt/liabilities 14% LLR/loans 3.8% LLP/loans 2.1% RWA ($ mn) 198,560 Tier 1 CAR Total CAR 12.2% 18.9%

104% 79% 85% 13% 9.5% 6.5% 199,89 8 11.6% 20.3%

104% 79% 86% 13% 11.8% 3.8% 219,00 9 12.0% 19.9%

107% 80% 87% 12% 7.8% -0.5% 253,62 2 14.3% 21.1%

108% 81% 88% 11% 5.1% 0.0% 291,88 3 15.4% 21.3%

Source: Company reports and J.P. Morgan estimates.

245

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Shinhan Financial Group
www.shinhanfg.com
Company description Shinhan Financial Group (SFG), transformed from Shinhan Bank in September 2001, provides a wide range of financial services through its banking and non-banking subsidiaries. Shinhan Bank and Shinhan Card are its flagship subsidiaries. SFG serves more than 20 million customers, from corporates to retail. Post mortem Among Korean banks, SFG had been most committed into de-leveraging and de-risking its balance sheet during the downturn cycle. Between end-FY08 and 3Q09, its loan to deposit ratio declined on the back of proactive deposit gathering and slowdown of loan growth. The tier-1 capital ratio at the group level improved to 8.2% as of 3Q09 (vs 6.8% in 1Q09) due to equity capital increase and prudent management of risk-weighted assets. Potential for earnings upgrades In our view, SFG’s de-leveraging/de-risking of its balance sheet will continue to pay-off in the form of strong earnings recovery. Our positive view on SFG’s upbeat profitability outlook is based on a higher magnitude of NIM expansion than the industry average, as well as lower normalized credit costs. How much recovery is priced into the stock? In our view, earnings recovery in 4Q09, as guided by the management of the group, has largely been priced into SFG’s share price. However, we expect upward earnings estimate revisions to continue throughout 2010, led by higher NIM and increasing confidence on SFG’s credit quality. Price target and key risks We derive our DDM-based Dec-10 PT of W60,000 by applying 1.6x P/BV, which we arrive at by assuming a ROE of 14.8% and a CoE of 11.2%. A key risk to our PT is unexpected bankruptcy cases at Korean companies.
Bloomberg: 055550 KS; Reuters: 055550.KS
Won in billions, year-end December Reported net profit *Attrib. net profit FD EPS (attrib NP) (Won) **Cash adj. EPS (Won) Cash DPS (Won) EPS (attrib NP) growth (%) **Cash adj. EPS growth (%) ROE (%) **Cash adj. ROE (%) P/E (x) P/E (cash adj.) (x) BVPS (Won) P/BV (x) Div. yield (%) FY08 2,019 1,741 4,238 4,990 0 (21.4) (3.4) 13.0 15.3 10.8 9.2 32,187 1.4 0.0 FY09E 1,482 1,239 2,632 3,122 250 (37.9) (37.4) 8.5 10.1 17.5 14.7 32,587 1.4 0.5 FY10E 2,211 1,975 4,040 4,365 900 53.5 39.8 11.8 12.8 11.4 10.5 35,298 1.3 2.0 FY11E 2,647 2,418 4,946 5,236 1,100 22.4 20.0 13.1 13.9 9.3 8.8 39,180 1.2 2.4

Overweight
W45,950 Price Target: W60,000

Korea Banks/Bank-centric FHCs Scott SeoAC
(82-2) 758 5759 scott.seo@jpmorgan.com J.P. Morgan Securities (Far East) Ltd, Seoul Branch

Price performance
70,000 55,000 40,000 25,000 10,000 Nov -08 Mar-09 SFG
Source: Bloomberg.

Jul-09

Nov -09

KOSPI

Performance
Absolute (%) Relative (%)
Source: Bloomberg.

1M 2.6 6.2

3M 10.9 11.4

12M 27.3 -3.1

Company data
52-week range (Won) Mkt cap. (WB) Mkt cap. (US$MM) Avg daily value (US$MM) Avg daily volume (MM) Shares O/S (MM) Date of price Index: KOSPI Free float (%) Exchange rate
Source: Bloomberg.

20,400-49,900 21,789 18,469 107.6 2.4 474 5-Nov-099 1,552.24 86.7 1,179.8

Source: Company, Bloomberg, J.P. Morgan estimates. Note: Share price and valuations are as of 5 November 2009.

246

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Shinhan Financial Group: Summary of financials
Profit and loss statement
Won in billions, year-end December Margins (% of Earning Assets) Earning Assets/Assets NIM (as % of avg. Assets) Net Interest Income Total Non-Interest Rev. Fee income FX/Trading gains Other operating income Total Operating Rev. Operating costs Operating Profit Loan loss provisions Non operating profit Exceptionals Disposals/ Other income Pre-tax Profit Tax Minorities/preference dividends Attributable net income FY08 3.50% 87.9% 3.08% 7,464 1,514 1,358 156 (0) 8,977 (4,894) 4,083 (1,051) (38) 0 (38) 2,994 (969) (284) 1,741 FY09E 2.95% 87.7% 2.58% 6,816 1,512 849 663 0 8,328 (4,440) 3,888 (1,659) (0) 0 (0) 2,229 (725) (265) 1,239 FY10E 3.18% 89.5% 2.84% 7,706 1,706 1,017 689 0 9,412 (4,841) 4,571 (1,344) 34 0 34 3,261 (1,025) (261) 1,975 FY11E 3.26% 89.8% 2.92% 8,385 1,823 1,092 731 0 10,208 (5,048) 5,160 (1,291) 35 0 35 3,904 (1,227) (258) 2,418

Growth rates
%, year-end December Gross loans Customer deposits Total assets Shareholders' equity Net Interest Income Total Non-Interest Revenues Total Operating Revenues Operating costs Pre-provisioning OP Loan loss provisions Attributable net income EPS DPS FY08 15.1% 20.3% 1.7% -1.1% 7.4% -26.9% -0.5% 6.8% -8.0% 40.7% -18.5% -21.4% -100.0% FY09E -1.0% 24.7% 1.5% 19.8% -8.7% -0.1% -7.2% -9.3% -4.8% 57.8% -28.9% -37.9% n.a FY10E 6.0% 7.0% 1.7% 9.4% 13.1% 12.8% 13.0% 9.0% 17.6% -19.0% 59.4% 53.5% 260.0% FY11E 6.0% 6.0% 1.8% 10.9% 8.8% 6.9% 8.5% 4.3% 12.9% -3.9% 22.4% 22.4% 22.2%

Source: Company, J.P. Morgan estimates.

Per share data
Won, year-end December FD EPS (attrib NP) Cash adj. EPS Payout ratio NAV Avg. Shares issued (MM) FY08 4,238 4,990 0.0% 32,187 411 FY09E 2,632 3,122 9.5% 32,587 471 FY10E 4,040 4,365 22.3% 35,298 489 FY11E 4,946 5,236 22.2% 39,180 489

Source: Company, J.P. Morgan estimates.

Source: Company, J.P. Morgan estimates.

Balance sheet
Won in billions, year-end December Net customer loans Gross loans Other Earning Assets Average Earning Assets Total assets Customer deposits Other int. bearing liabilities Avg. int. bearing liabilities Average Assets Shareholders' equity Risk-weighted assets Average RWA FY08 170,345 173,662 15,261 213,195 264,015 105,338 64,724 192,657 242,446 13,581 183,766 159,631 FY09E 168,197 171,935 19,046 231,363 263,317 131,319 52,411 209,675 263,666 16,273 177,608 180,687 FY10E 177,960 182,251 20,379 242,526 278,709 140,511 55,030 218,814 271,013 17,802 187,944 182,776 FY11E 188,717 193,187 21,601 257,394 294,767 148,942 57,757 231,332 286,738 19,751 209,140 198,542

Du-Pont analysis
Year-end December NIR/Avg. Assets Non IR/Total Rev Cost/Income Cost/Assets Operating ROAA Loan/Assets Other inc:provs Tax MI ROAA Equity/Assets ROE FY08 3.08% 16.9% 49.0% 1.82% 1.68% 66.9% -0.02% 32.3% -0.12% 0.72% 5.5% 13.01% FY09E 2.58% 18.2% 48.2% 1.52% 1.47% 65.5% 0.00% 32.5% -0.10% 0.47% 5.5% 8.49% FY10E 2.84% 18.1% 46.8% 1.62% 1.69% 65.3% 0.01% 31.4% -0.10% 0.73% 6.2% 11.83% FY11E 2.92% 17.9% 45.2% 1.61% 1.80% 65.5% 0.01% 31.4% -0.09% 0.84% 6.4% 13.13%

Source: Company, J.P. Morgan estimates.

Source: Company, J.P. Morgan estimates.

247

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Siam Commercial Bank
www.scb.co.th
Company description Siam Commercial Bank (SCB) is the third-largest bank in Thailand with total assets worth Bt1.2 trillion. SCB has the most extensive retail network and franchise with 960 branches and 6,798 ATMs operating countrywide. Post mortem We believe SCB uses the opportunities (when its foreign competitors are exiting the business due to financial difficulties at parent company level) to quickly improve its business and enable the bank to compete with both domestic and foreign peers. In our view, its already strong retail franchise and revamped business banking groups will open up avenues to grab broadbased growth opportunities when economic momentum returns. Potential for earnings upgrades General market expectations continue to be cautious and low. Earnings estimates have been revised up and the stock has rallied just to reflect the out-of-crisis situation, but it still does not reflect a potential economic recovery. We, therefore, see loan growth, NIM recovery, and lower credit costs as key drivers for upward earnings estimate revisions. How much recovery is priced into the stock? SCB’s share price has increased 92% from the trough level as the global economy recovered from the crisis earlier than the market had expected. However, the stock price is still 21% below its pre-crisis level, suggesting that a full recovery is not yet priced in. The market is still concerned about the loan growth recovery and competition-led NIM pressure. Price target and key risks We are Overweight on SCB with our Dec10 PT of Bt110. Our PT is based on a DDM approach, with an ROE of 17.2%, a COE of 11.8%, and a growth rate of 8.0%. Key risks to our PT include weaker-than-expected loan growth and non-NII.
Bloomberg: SCB TB; Reuters: SCB.BK
Bt in millions, year-end December Operating profit Net profit Cash EPS (Bt) FD EPS (Bt) DPS (Bt) EPS growth (%) ROE (%) P/E (x) BVPS (Bt) P/BV (x) Dividend yield (%) FY08 36,042 21,169 6.23 6.23 2.00 22.0 17.9 12.6 37.42 2.1 2.5 FY09E 34,854 21,315 6.27 6.27 2.00 0.7 15.9 12.6 41.69 1.9 2.5 FY10E 40,414 25,066 7.37 7.37 2.20 17.6 16.7 10.7 46.87 1.7 2.8 FY11E 46,489 29,050 8.55 8.55 2.50 15.9 17.2 9.2 52.91 1.5 3.2

Overweight
Bt78.75 Price Target: Bt110.00

Thailand Banks Anne JirajariyavechAC
(66-2) 684-2684 Anne.x.jirajariyavech@jpmorgan.com JPMorgan Securities (Thailand) Limited

Price performance
100 70 40 Nov-08 Feb-09 May-09 Aug-09 Nov-09 SCB.BK share price (Bt) SET (rebased) Bt

Source: Bloomberg.

Performance
1M Absolute (%) Relative (%)
Source: Bloomberg.

3M -2.2 -8.7

12M 34.6 -14.5

-8.2 -3.1

Company data
52-week range (Bt) Mkt cap. (BtMM) Mkt cap. (US$MM) Avg daily value (US$MM) Avg daily volume (MM) Shares O/S (MM) Date of price Index: SET Free float (%) Exchange rate
Source: Bloomberg.

40.75-91.75 267,122 8,002 21.6 10.1 3,392 5-Nov-09 682 72 33.38

Source: Company, Bloomberg, J.P. Morgan estimates. Note: Share price and valuation are as of 5 November 2009.

248

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Siam Commercial Bank: Summary of financials
Income statement - Bt mn 2008 2009E 2010E 2011E Grow th Rates 2008 2009E 2010E 2011E Margins (% of Earning Assets) Earning Assets/Assets NIM (as % of avg. Assets) Net Interest Income Total Non-Interest Revenues Fee income FX/Trading gains Other operating income Total operating revenues Operating costs Operating profit Loan Loss Prov isions Other prov isions Ex ceptionals Disposals/ Other income Pre-tax profit Tax [rate] Minorities/preference div idends Attributable net income 3.90% 94% 3.68% 44,330 21,686 14,923 4,514 2,249 66,016 -29,973 36,042 -4,954 0 -909 0 30,179 -8,888 -123 21,169 3.56% 95% 3.56% 43,623 22,075 16,266 4,684 1,125 65,698 -30,843 34,854 -5,762 0 685 0 29,778 -8,338 -125 21,315 3.60% 95% 3.60% 48,017 25,386 18,706 5,387 1,293 73,402 -32,988 40,414 -5,426 0 0 0 34,988 -9,797 -125 25,066 3.69% 96% 3.69% 52,579 Net Interest Incom e 29,194 21,512 6,195 1,487 81,773 -35,284 46,489 -5,969 0 0 0 40,520 -11,346 -125 29,050 Loan/Deposit Investment/Assets Loan/Assets Customer deposits/Liab. LT Debt/Liabilities Per Share Data EPS (Bt/ share) DPS (Bt/ share) Payout NAV (Bt/ share) Avg. Shares Issued (mn shares) 2008 6.2 2.00 32.1% 37.4 3,399 2009E 6.3 2.00 31.9% 41.7 3,399 2010E 7.4 2.20 29.8% 46.9 3,399 1.77 2011E 8.5 2.50 29.3% 52.9 3,399 Tier 1 Ratio Total CAR 11.0% 15.2% 12.3% 16.4% 13.2% 17.1% 14.3% 17.9% Asset Quality/Capital Loan loss reserves/Loans NPLs/loans Loan loss reserves/NPLs Grow th in NPLs 101% 12% 74% 73% 2% 2008 4.5% 5.5% 83.2% -7.8% 92% 11% 69% 75% 2% 2009E 4.8% 5.5% 88.1% 2.2% 95% 11% 72% 76% 2% 2010E 4.7% 5.4% 87.3% 8.2% 97% 10% 74% 76% 2% 2011E 4.6% 5.2% 88.8% 5.6% Balance Sheet Gearing 2008 2009E 2010E 2011E Non-Interest Income of w hich Fee Grth Revenues Costs Pre-Provision Profits Loan Loss Provisions Pre-Tax Attributable Incom e EPS DPS 13% 18% 11% 15% 4% 25% 23% 21% 22% 22% 0.0% -2% 2% 9% 0% 3% -3% 16% -1% 1% 1% 0.0% 10% 15% 15% 12% 7% 16% -6% 17% 18% 18% 10.0% 10% 15% 15% 11% 7% 15% 10% 16% 16% 16% 13.6% Loans Deposits Assets Equity 6% 7% 7% 15% 2% 12% 9% 11% 10% 7% 7% 12% 10% 7% 7% 13%

Key balance sheet - Bt m n Net Custom er Loans Loans loss reserves Gross Loans Investments Other Earning Assets Average Earning Assets = (A) Goodw ill Total assets Interbank funding Custom er deposits Long-term bond funding Other Interest Bearing Liabilities Average Interest Bearing Liab. = (B) Average Assets Shareholders' equity Risk Weighted Assets Average Risk Weighted Assets

2008 877,480 41,711 919,191 155,197 117,648 1,135,970 1,241,640 28,878 911,482 29,133 144,250 1,007,246 1,203,604 127,205 921,731 855,714

2009E 894,213 45,171 939,384 155,197 228,190 1,225,754 1,352,395 32,344 1,019,921 25,346 132,293 1,079,494 1,297,017 141,721 946,676 934,204

2010E 985,346 48,426 1,033,773 155,197 225,947 1,333,416 1,441,286 32,344 1,091,128 25,346 132,293 1,171,819 1,396,840 159,309 1,008,900 977,788

2011E 1,084,833 52,008 1,136,841 155,197 223,405 1,425,264 1,538,230 32,344 1,167,409 25,346 132,293 1,245,563 1,489,758 179,861 1,076,761 1,042,830

Du-Pont Analysis NIR/Avg. Assets Non IR/Avg. Assets Non IR/Total Rev Total Rev/Avg. Assets Cost/Income Cost/Assets Goodw ill Amort. Operating ROAA LLP/Loans Loan/Assets Other inc:provs Pre-tax ROAA Tax MI ROAA RoRWA Equity/Assets ROE

2008 3.68% 1.80% 32.8% 5.48% 45.4% 2.49% 3.0% -0.55% 74.3% -0.1% 2.5% -29.5% 0.0% 1.8% 2.5% 9.8% 17.9%

2009E 3.36% 1.70% 33.6% 5.07% 46.9% 2.38% 2.7% -0.62% 74.4% 0.1% 2.5% -28.0% 0.0% 1.6% 2.3% 10.3% 15.9%

2010E 3.44% 1.82% 34.6% 5.25% 44.9% 2.36% 2.9% -0.55% 74.4% 0.0% 1.9% -28.0% 0.0% 1.8% 2.6% 10.7% 16.7%

2011E 3.53% 1.96% 35.7% 5.49% 43.1% 2.37% 3.1% -0.55% 73.8% 0.0% 2.3% -28.0% 0.0% 1.9% 2.8% 11.3% 17.2%

Source: Company data, J.P. Morgan estimates.

249

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Sinopec Corp - H
www.sinopec.com
Company description Sinopec is the second-largest oil company in China, with 4.1 billion BOE of proven reserves (25% natural gas) and production of 339 million BOE (14% natural gas). It has a refining capacity of 3,700 BOPD. The company’s marketing operation is primarily through its 29,600 retail outlets nationwide. Sinopec also has 6.2 million, 4.9 million and 2.8 million TPY of ethylene, propylene and PX capacity, respectively. Post mortem Sinopec got hurt the most among Chinese oil companies by high oil prices and controlled product prices last year. This year and for the future, with oil at or below US$80/bbl, the company should enjoy good refining and marketing margins. Upstream appears to improve with crude production growth coming through. Natural gas production is expected to go through a boost in 2010 due to Puguang start-up and further ramp-up to 8 BCM/y. Potential for earnings upgrades There is still some upside in terms of EPS upgrades for Sinopec, with consensus at Rmb0.75 for 2010. Considering Sinopec has shown that it is capable of generating over Rmb0.20+ EPS in a couple of quarters, it may be capable of full-year EPS above Rmb0.80, depending on oil prices and petchem profitability in particular. How much recovery is priced into the stock? Sinopec is neither fully pricing in the NDRC pricing scheme nor a full economic recovery relative to many other oil companies in the region. Hence, we still expect a rerating from current low levels as investors’ confidence in the pricing scheme increases and profitability drives earnings multiples. Price target and key risks We have an Overweight rating and Dec-09 PT of HK$8.50 based on 6.2x 2009 EV/EBITDA. This is in line with where PetroChina currently trades, and we believe it is fair for Sinopec to trade in line with PetroChina, considering the change in the product price regime in China. Risks to our PT are higher oil price and no follow-through by NDRC.
Bloomberg: 386 HK; Reuters: 0386.HK (
Rmb in , year-end Dec Revenue (Rmb mn) Net Profit (Rmb mn) EPS (Rmb) DPS (Rmb) Revenue Growth (%) EPS Growth (%) ROCE ROE P/E P/BV EV/EBITDA Dividend Yield

Overweight
Price: HK$6.73 Price Target: HK$8.50

China Oil & Gas Brynjar BustnesAC
(852) 2800-8578 brynjar.e.bustnes@jpmorgan.com J.P. Morgan Securities (Asia Pacific) Limited

Price performance
10 8 6 4 2 0 Nov -08 Feb-09 May -09 Aug-09 Nov -09

China Petroleu-H Share Price HSCEI(rebased)

Source: Bloomberg.

Performance
1M Absolute (%) Relative (%)
Source: Bloomberg.

3M -5 -11

12M 34 -43

2 -5

Company data
52-week range (HK$) Adj. mkt cap (plug) (RmbMM) Avg daily value ($MM) Avg daily value (HK$MM) Avg daily vol (MM) Shares O/S (MM) Date of price Index: HSCEI Free float (%) Exchange rate
Source: Bloomberg.

3.65-7..26 592,174 142 1,098 205 86,702 5-Nov-09 12,805 19.6 7.75

g

)

FY07A FY08A FY09E FY10E FY11E 1,209,706 1,502,443 1,217,279 1,385,565 1,545,360 56,533 29,769 64,330 66,622 75,235 0.65 0.34 0.74 0.77 0.87 0.16 0.12 0.19 0.19 0.22 13% 24% (19%) 14% 12% 5% (47%) 116% 4% 13% 21% 6% 17% 15% 16% 20% 9% 18% 17% 17% 9.1 17.3 8.0 7.7 6.8 1.7 1.6 1.4 1.2 1.1 5.5 10.1 5.6 5.2 4.6 2.7% 2.0% 3.1% 3.2% 3.7%

Source: Company data, Bloomberg, J.P. Morgan estimates.

250

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Sinopec Corp - H: Summary of financials
Income Statement Rmb in millions, year end Dec Revenues % change Y/Y EBITDA % change Y/Y EBIT % change Y/Y EBIT Margin Net Interest Earnings before tax % change Y/Y Tax as % of EBT Net income (reported) % change Y/Y Shares outstanding EPS (reported) % change Y/Y FY07 FY08 FY09E FY10E FY11E 1,545,360 12% 165,477 11% 105,065 12% 3% -6,394 103,957 13% -25,989 25.0% 75,235 13% 86,702 0.87 13% Cash flow statement Rmb in millions, year end Dec EBIT Depr. & amortization Change in working capital Taxes Cash flow from operations Capex Disposal/(purchase) Net Interest Other Free cash flow Equity raised/(repaid) Debt raised/(repaid) Other Dividends paid Beginning cash Ending cash DPS FY07 85,864 43,315 13,043 -27674 94,873 FY08 FY09E FY10E FY11E 105,065 60,411 -4,712 -25989 134,794

1,209,706 1,502,443 1,217,279 1,385,565 13% 24% (19%) 14% 129,179 73,946 140,022 149,746 13% (43%) 89% 7% 85,864 28,123 90,216 94,018 6% (67%) 221% 4% 4% 1% 4% 3% -6,909 -10,881 -6,141 -6,673 83,464 24,317 89,389 91,968 6% (71%) 268% 3% -24,721 1,883 -22,347 -22,992 29.6% 7.7% 25.0% 25.0% 56,533 29,769 64,330 66,622 5% (47%) 116% 4% 86,702 86,702 86,702 86,702 0.65 0.34 0.74 0.77 5% (47%) 116% 4%

28,123 90,216 94,018 45,823 49,806 55,728 9,371 -23,696 1,760 -21072 -22347 -22992 67,712 93,655 127,949

-109,446 -107,753 -108,000 -108,000 -99,042 413 263 0 0 0 -6,909 -10,881 -6,141 -6,673 -6,394 -14,573 -40,041 -14,345 19,949 35,751 13,614 56,796 45,000 5,000 5,000 -13,872 -12,572 -16,082 -16,656 -18,809 7,063 7,696 7,027 21,521 29,814 -16,961 7,027 21,600 29,814 51,757 0.16 0.12 0.19 0.19 0.22

Balance sheet Rmb in millions, year end Dec Cash and cash equivalents Accounts receivable Inventories Others Current assets LT investments Net fixed assets Total Assets Liabilities Short-term loans Payables Others Total current liabilities Long-term debt Other liabilities Total Liabilities Shareholders' equity BVPS

FY07 7,696 22,947 116,032 37,773 185,116 470,550 732,725

FY08 6,948 12,989 95,255 48,367 164,311 525,151 767,827

FY09E 21,521 10,524 77,176 39,187 149,159 577,528 810,366

FY10E 29,814 11,979 87,845 44,604 174,994 623,692 886,988

Ratio analysis FY11E Rmb in millions, year end Dec 51,757 EBITDA margin 13,360 Operating margin 97,976 Net margin 49,749 213,593 Sales per share growth - Sales growth 655,910 Net profit growth 963,092 EPS growth Interest coverage (x)

FY07 5% 4% 2%

FY08 2% 1% 1%

FY09E 6% 4% 3%

FY10E FY11E 5% 3% 2% 5% 3% 2%

13% 13% 5% 5% 18.70 42% 3.60 2.38 20% 21%

24% 24% (47%) (47%) 6.80 50% 4.01 2.34 9% 6%

(19%) (19%) 116% 116% 22.80 53% 3.09 2.22 18% 17%

14% 14% 4% 4% 22.44 46% 3.27 2.23 17% 15%

12% 12% 13% 13% 25.88 37% 3.34 1.99 17% 16%

44,654 93,049 127,652 265,355 83,134 51,478 399,967 307,433 3.55

74,896 56,667 142,974 274,537 90,254 53,714 418,505 328,669 3.79

74,896 37,574 108,647 221,117 135,254 53,714 410,085 376,916 4.29

74,896 44,472 121,050 240,418 140,254 53,714 434,386 426,883 4.83

74,896 48,741 128,725 252,362 145,254 53,714 451,330 483,309 5.43

Net debt to equity Sales/assets Assets/equity ROE ROCE

Source: Company reports, J.P. Morgan estimates.

251

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

SK Energy Co Ltd
www.skenergy.com
Company description SK Energy (SKE) is the largest Korean refining company with 1,115 BOPD of refining capacity. It also has an upstream segment, which currently produces 30,000 BOEPD with 520 million BOE of reserves. The company also owns 2.7 million TPY of BTX and 0.73 million TPY of ethylene capacity. Post mortem SKE suffered through the crisis primarily on its refining profitability plunging along with a weaker Won hurting its US$-denominated debt. A weaker Won, however, actually helps at the operating line, which has now reversed with the Won’s strengthening. Potential for earnings upgrades There is not much room for EPS upgrades over the next 12 months as we don’t expect refining margins to go back to previous year’s levels. Decent margins will, however, generate a base operating profit, along with additional profits from growing upstream and lube returning into profits, in our view. SKE’s main attraction is its exposure to two exploration blocks in Brazil (BMC30 - Anadarko and BMC32 - Devon operated) which in addition to increasing reserve base will make SKE’s E&P segment sustainable and hence we believe bring about a rerating into an integrated company. How much recovery is priced into the stock? SKE has doubled from market lows and is now pricing in the current market environment of low refining margins and still relatively strong petchem margins. Upstream is not getting much value at all due to lack of information and investor confidence in SKE’s execution capabilities. Price target and key risks We have an Overweight rating and Dec-10 PT of W150,000 based on 7x EV/EBITDA, which is in line with regional refining peers (ex-FPCC). Our PT yields 10x 2010E P/E. Risks to our rating and PT are oil prices, GRMs, petchem margins and operational issues especially upstream.

Overweight
W107,500 Price Target: W150,000

South Korea Refining Brynjar BustnesAC
(852) 2800-8578 brynjar.e.bustnes@jpmorgan.com J.P. Morgan Securities (Asia Pacific) Limited

Price performance
120,000 90,000 60,000 30,000 0 Nov -08 Feb-09 May -09 Aug-09 Nov -09

SK Energy Co Ltd Share Price KOSPI(rebased)

Source: Bloomberg.

Performance
1M Absolute (%) Relative (%)
Source: Bloomberg.

3M 4 5

12M 51 20

-13 -10

Company data
52-week range (W) Mkt cap. (WB) Mkt cap. (US$MM) 3M trd value ($MM) 3M trading vol (MM) Shares O/S (MM) Date of price Index: KOSPI Free float (%) Exchange rate
Source: Bloomberg.

49,700-140,000 9,940 8,435 56.0 0.3 92 5-Nov-09 1,552.24 66.6 1,178

Bloomberg: 096770 KS; Reuters: 096770.KS
W in bn, year-end Dec Revenue Net Profit EPS (W) DPS (W) Revenue Growth (%) EPS growth (%) ROCE ROE P/E P/BV EV/EBITDA Dividend Yield Adjusted EPS (W) Adjusted P/E FY07A 27,788 1,205 10,954 2,100 17% (6%) 15% 17% 9.8 1.6 6.4 2.0% 13,511 8.0 FY08A 45,737 884 9,679 2,100 65% (12%) 10% 13% 11.1 1.3 8.9 2.0% 18,210 5.9 FY09E 34,227 1,038 11,357 2,200 (25%) 17% 11% 13% 9.5 1.2 6.6 2.0% 10,109 10.6 FY10E 38,305 1,275 13,955 2,300 12% 23% 13% 15% 7.7 1.0 5.8 2.1% 13,955 7.7 FY11E 41,382 1,538 16,835 2,400 8% 21% 14% 16% 6.4 0.9 5.0 2.2% 16,835 6.4

Source: Company data, Bloomberg, J.P. Morgan estimates. Adj EPS for forex loss/gain.

252

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

SK Energy Co Ltd: Summary of financials
Income statement Won in billions, year-end Dec Revenues % change Y/Y EBITDA % change Y/Y EBIT % change Y/Y EBIT Margin Net Interest Earnings before tax % change Y/Y Tax as % of EBT Net income (reported) % change Y/Y Shares outstanding EPS (reported) % change Y/Y FY07 FY08 FY09E FY10E 38,305 12% 2,876 14% 2,045 15% 5% -385 1,660 23% -381 22.9% 1,275 23% 91 13,955 23% Cash flow statement FY11E Won in billions, year-end Dec 41,382 8% 3,263 13% 2,377 16% 6% -371 2,006 21% -464 23.1% 1,538 21% 91 16,835 21% EBIT Depr. & amortization Change in working capital Taxes Cash flow from operations Capex Disposal/(purchase) Net Interest Other Free cash flow Equity raised/(repaid) Debt raised/(repaid) Other Dividends paid Beginning cash Ending cash DPS FY07 1,921 443 -599 680 FY08 FY09E FY10E FY11E 1,358 552 -553 1,530 1,770 752 867 2,586 -2,000 0 -423 0 586 -2,000 0 -205 3,606 1,987 2,200 2,045 832 -307 1,730 -1,500 0 -385 0 230 -500 0 -214 1,987 1,503 2,300 2,377 886 -232 2,123 -1,500 0 -371 0 623 0 0 -224 1,503 1,902 2,400

27,788 45,737 34,227 17% 65% (25%) 2,364 1,910 2,522 (7%) (19%) 32% 1,921 1,358 1,770 (10%) (29%) 30% 7% 3% 5% -286 -400 -423 1,636 958 1,347 (10%) (41%) 41% -427 -70 -306 26.1% 7.3% 22.7% 1,205 884 1,038 (13%) (27%) 17% 91 91 91 10,954 9,679 11,357 (6%) (12%) 17%

-1,315 -1,610 321 0 -286 -400 -459 -485 -634 -80 -1,792 2,062 -212 1,313 597 2,100 3,406 7 -194 597 3,606 2,100

Balance sheet Won in billions, year-end Dec Cash and cash equivalents Accounts receivable Inventories Others Current assets LT investments Net fixed assets Total Assets Liabilities Short-term loans Payables Others Total current liabilities Long-term debt Other liabilities Total Liabilities Shareholders' equity BVPS

FY07

FY08 FY09E 1,987 2,116 2,360 1,100 7,578

FY10E 1,503 2,368 2,641 1,100 7,627 3,438 10,249 21,445

Ratio analysis FY11E Won in billions, year-end Dec 1,902 EBITDA margin 2,558 Operating margin 2,853 Net margin 1,100 8,428 Sales per share growth 3,512 Sales growth 10,863 Net profit growth 22,934 EPS growth Interest coverage (x)

FY07 9% 5% 4%

FY08 FY09E FY10E FY11E 4% 4% 2% 7% 5% 3% 8% 5% 3% 8% 6% 4%

597 3,606 3,026 2,827 2,714 3,153 320 1,100 6,707 10,702

4,057 3,291 3,365 4,825 8,332 9,580 15,699 22,456 20,654

27% 17% (13%) (6%) 8.27 58% 1.57 2.54 17% 15%

98% 65% (27%) (12%) 4.78 91% 2.40 3.07 13% 10%

(25%) (25%) 17% 17% 5.96 75% 1.59 2.46 13% 11%

12% 12% 23% 23% 7.48 66% 1.82 2.27 15% 13%

8% 8% 21% 21% 8.79 54% 1.86 2.15 16% 14%

1,995 3,977 2,977 2,538 2,536 1,898 4,594 5,062 4,423 6,590 9,039 7,400 2,765 5,811 4,811 160 290 290 9,514 15,140 12,502 6,186 7,316 8,152 67,702 80,070 90,098

2,977 2,124 4,650 7,627 4,311 290 12,228 9,217 102,596

2,977 2,295 4,820 7,797 4,311 290 12,399 10,536 117,680

Net debt to equity Sales/assets Assets/equity ROE ROCE

Source: Company reports, J.P. Morgan estimates.

253

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Sohu
www.sohu.com
Company description Sohu is a leading online media company in China. The Sohu matrix of websites include: sohu.com (one of the top portals in China), 17173.com, focus.cn and chainren.com. The company also operates two major multiplayer online games named TLBB and Blade Online. The company also launched its third game Blade Hero 2 in 3Q09. Sohu generates approximately half of its revenues from online games and a third from its brand advertising business. Post mortem Sohu remains one of the leading internet portals in China, and is likely to remain among the key beneficiaries of the continued uptrend in online advertising in China. We currently forecast brand advertising to register 23% Y/Y growth in 2009. We expect next year’s brand ad growth to be strong, driven by macro economic improvements, and better contributions from sectors such as automobiles, FMCG (fast-moving consumer goods), and financial services. Potential for earnings upgrades We expect share price drivers for Sohu to come in 1H10, with more clarity on the 2010 brand advertising budget and the launch of new games (2Q10 for Zhong Hua Ying Xiong and 3Q10 for Duke of Mountain Deer). We also expect Sohu’s portal business should have good margin leverage on revenue pick-up, as content costs are mainly fixed costs. Sohu is debt-free. How much recovery is priced into the stock? With muted 3Q09 results and 4Q09 guidance, we believe investors have given a big discount to the potential ad recovery in 2010. We noted that the softness is mainly due to advertisers’ cautious stance on 2009 spending. We expect the good ad spend data point to continue to come in during early 2010. Price target and key risks We maintain OW with our Dec-09 PT of US$74, which implies 18.5x FY09E, 16.3x FY10E, and 13.3x FY11E diluted non-GAAP EPS. Our price target is based on the midpoint of our sum-of-the-parts valuation of US$63US$84. Our Dec-09 DCF value for Sohu is US$75.7, based on a 10-year DCF forecast, WACC of 12%, and a terminal growth rate of 0%. Risks to our price target include a further slowdown in online advertising revenue growth, significant market share loss in online advertising to other websites, delays in upgrades and new game launches, and regulatory changes.
Bloomberg: SOHU US; Reuters: SOHU
US$ in millions, year-end December Sales Net profit GAAP EPS (US$) Adj. EPS (US$) DPS (US$) Sales growth (%) Net profit growth (%) EPS growth (%) ROE (%) GAAP P/E (x) Adj. P/E (x) FY08 429.1 158.6 4.04 4.30 0.00 127.1 354.1 345.6 56.0 13.7 12.9 FY09E 517.2 152.3 3.68 4.01 0.00 20.5 -4.0 -9.0 41.4 15.1 13.9 FY10E 629.9 182.4 4.25 4.54 0.00 21.8 19.8 15.4 35.8 13.1 12.2 FY11E 764.7 230.5 5.28 5.56 0.00 21.4 26.4 24.4 32.4 10.5 10.0

Overweight
US$55.59 Price Target: US$74.00

China IT and Internet Dick WeiAC
(852) 2800-8535 dick.x.wei@jpmorgan.com J.P. Morgan Securities (Asia Pacific) Limited

Price performance
US$
70 $ 50 30
Nov-08 Feb-09 May-09 Aug-09 Nov-09

SOHU share price ($) NASDAQ Composite (rebased)

Source: Bloomberg.

Performance
1M Absolute (%) Relative (%)
Source: Bloomberg.

3M -12.1 -14.3

12M -6.1 -21.6

-14.5 -14.9

Company data
52-week range (US$) Mkt cap. (RmbMM) Mkt cap. (US$MM) Avg daily value (US$MM) Avg daily volume (MM) Shares O/S (MM) Date of price Index: NASDAQ Free float (%) Exchange rate(Rmb/US$)
Source: Company, Bloomberg.

34.1-72.3 14,480 2,120 63.8 0.84 38 12-Nov-09 2,149 45 6.83

Source: Company, Bloomberg, J.P. Morgan estimates. Note: Share price and valuations are as of 12 November 2009.

254

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Sohu: Summary of financials
Profit and loss statement
US$ in millions, year-end December Revenue % change Y/Y Gross margin (%) EBITDA % change Y/Y EBITDA margin (%) EBIT % change Y/Y EBIT margin (%) Net interest Earnings before tax % change Y/Y Tax as % of EBT Net income (reported) % change Y/Y Shares O/S (MM) EPS (reported) (LC) FY08 429.1 127.1 66.6 188.7 260.3 27.7 163.8 400.9 17.3 4.3 167.6 360.8 -9.0 5.4 158.6 354.1 39.2 4.04 FY09E 517.2 20.5 75.3 237.1 25.6 44.0 202.8 23.8 38.2 6.1 209.4 25.0 -28.9 13.8 152.3 -4.0 39.1 3.68 FY10E 629.9 21.8 76.0 289.4 22.0 45.8 251.1 23.8 39.2 9.4 260.5 24.4 -34.8 13.4 182.4 19.8 39.8 4.25 FY11E 764.7 21.4 75.5 353.9 22.3 45.9 311.7 24.1 39.9 12.8 324.6 24.6 -42.8 13.2 230.5 26.4 40.7 5.28

Cash flow statement
US$ in millions, year-end December Net Income Depr. & Amortisation Change in working capital Other Cash flow from operations Capex/investments Others Cash flow from investing Free cash flow Equity raised/ (repaid) Debt raised/ (repaid) Other Dividends paid Cash flow from financing Net change in cash Beginning cash Ending cash FY08 159 14 29 11 213 -24 0 -24 189 -2 0 5 0 3 192 123 314 FY09E 152 16 7 46 222 -19 0 -19 203 16 0 21 0 38 241 314 555 FY10E 182 20 17 61 281 -46 0 -46 236 18 0 -43 0 -26 210 555 765 FY11E 230 24 19 69 343 -55 0 -55 288 19 0 -51 0 -32 256 765 1,021

Source: Company, J.P. Morgan estimates.

Source: Company, J.P. Morgan estimates.

Balance sheet
US$ in millions, year-end December Cash and cash equivalents Accounts receivable Deferred tax Others Current assets LT investments Net fixed assets Others Total assets Liabilities Provisions Payables Others Total current liabilities Long term debt Other liabilities Total liabilities Shareholders' equity FY08 314 37 0 28 379 0 76 67 522 0 4 126 131 0 5 136 386 FY09E 555 42 0 34 632 0 82 64 777 0 5 145 150 0 55 205 572 FY10E 765 52 0 43 860 0 107 63 1,031 0 6 180 186 0 55 241 791 FY11E 1,021 63 0 52 1,136 0 138 63 1,338 0 7 217 224 0 55 279 1,059

Ratio analysis
%, year-end December Gross Margin EBITDA margin Operating Margin Net Margin R&D/sales SG&A/Sales Sales growth Operating Profit Growth Net profit growth EPS (Reported) growth Net debt to total capital Net debt to equity Asset Turnover Working Capital Turns (x) ROE ROIC FY08 75.3 44.0 38.2 37.0 10.0 26.9 127.1 400.9 354.1 345.6 -81.5 -81.5 82.2 2.6 56.0 54.8 FY09E 76.0 45.8 39.2 29.4 9.4 27.3 20.5 23.8 -4.0 -9.0 -97.0 -97.0 66.5 1.4 41.4 40.4 FY10E 75.5 45.9 39.9 29.0 9.1 26.5 21.8 23.8 19.8 15.4 -96.8 -96.8 61.1 1.1 35.8 34.7 FY11E 75.9 46.3 40.8 30.1 9.1 26.0 21.4 24.1 26.4 24.4 -96.5 -96.5 57.2 1.0 32.4 31.3

Source: Company, J.P. Morgan estimates.

Source: Company, J.P. Morgan estimates.

255

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Tambang Batubara Bukit Asam
www.ptba.co.id
Company description Government of Indonesia owns a 65% stake in PTBA. The company’s main coal mine is in Tanjung Enim, South Sumatra. In addition, PTBA owns several mines in South Sumatra, plus potentially acquiring several other mines in Kalimantan. Its total minable reserve stands at 2 billion tons. Post mortem PTBA’s volume could rise from 10.8 million tons in FY08 to 73 million tons by FY15 due to: (1) an expansion of the existing line with PT Kereta Api (10.8 million to 20 million tons); (2) Kalimantan mine acquisitions (0.2 million to 22 million tons); (3) new railways line of Transpacific (additional 20 million tons); and (4) Banjarsari and Bangko Tengah power plants (additional 11 million tons). In term of cost, the company is building a power plant (3x10MW) to support its volume expansion. It is likely that production cost would be reduced by US$32.5 cent/ton once the volume in Tanjung Enim reaches 40 million tons. Potential for earnings upgrades Volume and coal price should be the two key factors that could create potential for earnings upgrade. For every 10% increase in volume and coal price, our FY10 EPS estimate would rise 14.1% and 16.1% Y/Y, respectively. How much recovery is priced into the stock? The first stage of recovery is priced in, but the recovery in the developed markets (such as the US and EU), and increased demand from China are not priced, in our view. There could be some re-rating in coal price that will likely benefit PTBA. Price target and key risks With an increased likelihood of project realizations and our positive view on coal price, we maintain our OW rating and our SOTP-based Jun-10 PT of Rp19,300. Our SOTP valuation is the sum of all the DCF values of PTBA’s projects (assuming a risk-free rate of 10.5%, an equity-risk premium of 5.5%, and a terminal growth rate of 5.5%). We apply a 20% discount to take into account projects delays. Key risk to our PT: execution risks—delays in project and mine acquisitions.
Bloomberg: PTBA IJ; Reuters: PTBA.JK
Rp in billions, year-end December Sales Net profit EPS (Rp) Core EPS (Rp) DPS (Rp) Sales growth (%) Net profit growth (%) EPS growth (%) ROE (%) P/E (x) Core P/E (x) FY08 7,216.2 1,707.8 741.0 739.8 370.5 75.0% 135.2% -335.2% 51.2% 19.5 19.5 FY09E 10,628.4 3,160.5 1,371.3 1,371.3 738.9 47.3% 85.1% -285.1% 61.4% 10.5 10.5 FY10E 9,605.7 1,410.7 612.1 612.1 347.0 -9.6% -55.4% -144.6% 22.6% 23.6 23.5 FY11E 13,789.0 2,138.0 927.6 927.6 531.1 43.6% 51.5% -251.5% 30.7% 15.6 15.5

Overweight
Rp14,450 Price Target: Rp19,300

Indonesia Mining Stevanus JuandaAC
(62-21) 5291-8574 stevanus.x.juanda@jpmorgan.com PT J.P. Morgan Securities Indonesia

Price performance
20,000 15,000 10,000 5,000 0

Nov-08

Feb-09

May-09

Aug-09

Nov-09

Source: Bloomberg.

Performance
1M Absolute (%) Relative (%)
Source: Bloomberg.

3M 6.3 3.9

12M 144.4 66.7

2.5 6.9

Company data
52-week range (Rp) Mkt cap. (RpB) Mkt cap. (US$MM) Avg daily value (US$MM) Avg daily volume (MM) Shares O/S (MM) Date of price Index: JCI Free float (%) Exchange rate
Source: Bloomberg.

5,150-15,500 33,295 3,494 8.0 8.1 2,304 5-Nov-09 2,367 35 9,530

Source: Company, Bloomberg, J.P. Morgan estimates. Note: Share price and valuation are as of 5 November 2009. We raised PT to Rp22,500 on November 22.

256

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Tambang Batubara Bukit Asam: Summary of financials
Year-end Dec Profit and loss statement Cash flow statement
FY07A 4,124 16.7 39.4 999 38.8 24.2 897 36.6 21.8 79 1,010 50.9 283 28.0 720 32.5 2.305 315.1 49.5 FY08A 7,216 75.0 48.9 2,517 152.0 34.9 2,494 178.0 34.6 108 2,552 152.8 837 32.8 1,705 136.8 2.305 741.0 135.2 FY09E 10,628 47.3 55.8 4,474 77.8 42.1 4,393 76.1 41.3 57 4,407 72.7 1,234 28.0 3,161 85.4 2.305 1,371.3 85.1 FY10E 9,606 -9.6 40.5 2,324 -48.1 24.2 2,145 -51.2 22.3 -100 1,914 -56.6 478 25.0 1,411 -55.4 2.305 612.1 -55.4 FY11E 13,789 43.6 43.2 3,867 66.4 28.0 3,603 68.0 26.1 -173 2,890 51.0 723 25.0 2,138 51.5 2.305 927.6 51.5 IDR in billions EBIT Depreciation & amortization Change in working capital Taxes Cash flow from operations Capex Disposal/ (purchase) Net interest Free cash flow Equity raised/ (repaid) Debt raised/ (repaid) Other Dividends paid Beginning cash Ending cash DPS (IDR) FY07A 897 102 579 -214 1,364 -52 -130 62 1,182 0 0 -10 -243 1,295 2,223 165 FY08E 2,494 23 -434 -473 1,610 -86 -343 100 1,180 0 0 0 -380 2,223 3,042 370 FY09E 4,340 82 219 -1,193 3,448 -220 -4,552 57 -1,323 0 3,000 -34 -854 3,042 3,843 739 FY10E 2,089 179 559 -462 2,366 -960 -1,328 -100 78 0 1,000 -63 -1,575 3,843 3,295 347 FY11E 3,216 264 -56 -727 2,696 -781 -1,265 -173 649 0 0 -30 -740 3,295 3,185 531 IDR in billions Revenues % change Y/Y Gross margin (%) EBITDA % change Y/Y EBITDA margin (%) EBIT % change Y/Y EBIT margin (%) Net interest Earnings before tax % change Y/Y Tax as % of EBT Net income (core) % change Y/Y Shares outstanding (B) EPS (fully diluted) (IDR) % change Y/Y

Balance sheet
IDR in billions Cash and cash equivalents Accounts receivable Inventories Others Current assets Other non-current assets Net fixed assets Total assets Liabilities Short-term loans Payables Others Total current liabilities Long-term debt Other liabilities Total liabilities Shareholders' equity BVPS (IDR)
Source: Company, JPMorgan estimates

Ratio analysis
FY07A 2,223 561 271 26 3,080 538 361 3,979 FY08E 3,042 1,377 420 112 4,950 773 384 6,107 FY09E 3,843 1,514 525 162 6,045 5,601 480 12,126 FY10E 3,295 1,304 604 139 5,341 7,014 1,219 13,575 FY11E 3,185 1,645 716 176 5,720 8,373 1,695 15,788 % EBITDA margin Operating margin Net profit margin SG&A/sales Sales per share growth Sales growth Net profit growth EPS growth Interest coverage (x) Net debt to total capital Net debt to equity Sales/assets Assets/equity ROE ROCE FY07A 24.2 21.8 17.6 17.6 16.7 16.7 32.5 49.5 n/a -82.7 -83.1 116.4 148.7 29.2 36.1 FY08E 34.9 34.6 23.7 14.4 75.0 75.0 136.8 135.2 n/a -74.6 -76.1 143.1 152.7 51.2 74.7 FY09E 42.3 41.5 30.1 14.4 47.3 47.3 85.4 85.1 n/a -8.8 -13.4 114.7 192.7 61.4 66.1 FY10E 25.2 23.2 16.4 18.2 -9.6 -9.6 -55.4 -55.4 n/a 6.6 11.4 70.1 219.0 22.6 22.0 FY11E 30.6 28.3 19.9 17.1 43.6 43.6 51.5 51.5 n/a 6.6 10.6 77.3 204.4 30.7 32.9

0 99 645 744 0 547 1,292 2,676 1,161

0 69 1,284 1,353 0 676 2,029 3,998 1,735

0 87 1,606 1,693 3,000 857 5,550 6,294 2,731

0 99 1,846 1,946 4,000 1,003 6,948 6,198 2,689

0 118 2,188 2,306 4,000 1,192 7,498 7,723 3,351

PTBA: Sum-of-the-parts valuation
SOTP NPV of existing coal operation (Rp billion) Banko Tengah PP Banjarsari PP Railways (Transpacific) Integrated transportation Sale of coal to power plants Sale of coal increase (Transpacific) Kalimantan Mines Total NPV (Rp in billion) Debt Cash 20% discount to potential projects delay Equity value per share (Rp)
Source: J.P. Morgan estimates.

US$MM 2,864.30 608.72 185.23 3.17 (10.91) 99.85 355.32 600.87 4,706.55 (368.4)

RpB 29,359.1 6,239.4 1,898.6 32.5 (111.9) 1,023.5 3,642.0 6,158.9 48,242.14 (3,500.00) 3,568.85 (3,776.6) 19,323

J.P. Morgan comment

Assign 80% discount as the further delay likely Assign 80% discount as the further delay likely

257

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Tata Power
www.tatapower.com
Company description Tata Power (TPWR) is a well-established power utility with decades of experience as a power generator and bulk-power supplier. It has 2.8GW of installed capacity, with a good mix of coal, gas, hydro, diesel and renewables. It also holds a 30% stake in Indonesian coal mines KPC and Arutmin, along with Bumi. The company has an under-construction portfolio of 5.29GW, including an Ultra Mega Power Plant at Mundra. It is also going to distribute power in the city of Mumbai, pulling the plug on what it was earlier supplying through Reliance Infrastructure (~500MW). Post mortem Post downturn, improved investor appetite for IPPs has allowed Tata Power to arrange equity funds required over the next two years. The company has raised ~Rs16 billion through a GDR issue in July and Rs13.8 billion through FCCB in November. Maithon (1050MW) and Mundra UMPP (4GW) are on track. Potential for earnings upgrades There is a possibility of upgrades in the near term on account of: (a) extra power (around 150MW) for opportunistic merchant sales; and (b) Tata Power may have more for merchant/own distribution once 500MW power to RELI, being supplied at regulated return, is cut-off. How much recovery is priced into the stock? We believe an established track record in power generation and execution enhances the credibility of its development pipeline relative to peers. Tata Power’s project pipeline is still undervalued, in our view. Price target and key risks Our Mar-10 SOTP-based PT of Rs1,450 includes 44% value from coal mines; 33% from generation; 13% from telecom and financial investments; and 8% from distribution business. At 2.3x P/BV and 12.5x EV/EBITDA, the stock looks cheaper than peers. Key risk to PT is weak outlook for coal prices.
Bloomberg: TPWR.IN; Reuters: TTPW.BO
Rs in millions, year-end March Revenue Adjusted net profit Adjusted EPS (Rs) Adj. net profit growth (%) ROE (%) ROCE (%) ROIC (%) P/E (x) P/B (x) EV/EBITDA (x) FY09 175,875 9,630 43.5 30.0 10.7 12.0 15.3 30.4 3.1 13.5 FY10E 181,651 16,917 71.6 75.7 15.3 11.9 14.9 18.5 2.5 11.6 FY11E 192,794 15,470 65.5 (8.6) 11.7 9.5 11.4 20.2 2.3 12.5 FY12E 220,472 20,452 86.6 32.2 13.9 10.8 12.9 15.3 2.0 10.2

Overweight
Price: Rs1,323.75 Price Target: Rs1,450

India Electric Utilities Shilpa KrishnanAC
(91-22) 6157-3580 shilpa.x.krishnan@jpmorgan.com J.P. Morgan India Private Limited

Price performance
Rs
2000 1500 1000 500 0 Oct-08 Dec-08 Mar-09 Jun-09 Aug-09 Oct-09

Source: Bloomberg.

Performance
1M Absolute (%) Relative (%)
Source: Bloomberg.

3M (2) (1)

12M 73 18

(1) (8)

Company data
52-week range (Rs) Mkt cap. (RsB) Mkt cap. (US$B) Avg daily value (US$MM) Avg daily volume (MM) Shares O/S (MM) Date of price Index: BSE Free float (%) Exchange rate (Rs/US$)
Source: Bloomberg.

596-1,487 306 6.5 17.3 0.6 237.1 5-Nov-09 16,064 69 47.4

Source: Company, Bloomberg, J.P. Morgan estimates. Note: Share price and valuation are as of 5 November 2009.

258

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Tata Power: Summary of financials
Profit and loss statement
Rs in millions, year-end March Revenues % change Y/Y EBITDA % change Y/Y EBITDA Margin (%) Net Interest Earnings before tax % change Y/Y Tax as % of EBT Net Income(adjusted) % change Y/Y Shares Outstanding EPS (adjusted) (Rs) % change Y/Y FY09 175,875 61.5 32,651 56.3 18.6 (7,087) 22,081 78.2 (11,651) 52.8 9,630 30.0 221.4 43.5 29.6 FY10E 181,651 3.3 41,474 27.0 22.8 (7,529) 28,777 30.3 (11,186) 38.9 16,917 75.7 236.2 71.6 64.6 FY11E 192,794 6.1 42,561 2.6 22.1 (8,385) 28,133 (2.2) (11,681) 41.5 15,470 (8.6) 236.2 65.5 (8.6) FY12E 220,472 14.4 55,242 29.8 25.1 (11,041) 37,070 31.8 (15,536) 41.9 20,452 32.2 236.2 86.6 32.2

Cash flow statement
Rs in millions, year-end March EBIT Less: Tax Add: Depreciation Other income Less: Increase in working capital Operating Cash Flow Capital expenditure Investing cash flow Change in equity Net interest payment Dividend payment Principal (payment)/ drawdown) Financing cash flows Opening cash Closing cash FY09 26,086 (11,651) 6,565 3,082 11,013 35,095 (71,095) (69,297) 0 (7,087) (2,852) 50,298 40,359 5,623 11,779 FY10E 34,091 (11,186) 7,383 2,215 (13,504) 18,999 (60,302) (65,150) 16,171 (7,529) (3,959) 44,865 49,549 11,779 15,176 FY11E 33,517 (11,681) 9,044 3,001 831 34,712 (72,292) (72,018) 0 (8,385) (3,620) 53,039 41,034 15,176 18,904 FY12E 45,183 (15,536) 10,058 2,928 1,822 44,455 (64,927) (62,674) 0 (11,041) (4,786) 44,511 28,684 18,904 29,368

Source: Company, J.P. Morgan estimates.

Balance sheet
Rs in millions, year-end March Cash Net current assets ex-cash Investments Net fixed assets Others Total assets Liabilities Long Debt Other Liabilities Share Capital Reserves Shareholders' equity BVPS (Rs) FY09 11,780 -5,126 32,512 142,320 69,153 250,639 141,434 13,572 2,214 83,975 95,633 432 FY10E 15,176 8,378 32,512 152,847 111,544 320,458 186,300 8,723 2,362 112,955 125,436 531 FY11E 18,904 7,548 32,512 194,140 133,499 386,602 239,339 8,997 2,362 124,806 138,267 585 FY12E 29,368 5,726 32,512 194,749 187,759 450,114 283,849 11,250 2,362 140,472 155,015 656

Source: Company, J.P. Morgan estimates.

Ratio analysis
%, year-end March EBITDA margin EBIT margin Net profit margin Revenue growth EBITDA growth Net profit growth EPS growth Average ROE Average ROCE Average ROIC Asset Turnover Leverage FY09 19% 15% 5% 61% 56% 30% 30% 10.7 12.0 15.3 0.7 2.6 FY10E 23% 19% 9% 3% 27% 76% 65% 15.3 11.9 14.9 0.6 2.6 FY11E 22% 17% 8% 6% 3% -9% -9% 11.7 9.5 11.4 0.5 2.8 FY12E 25% 20% 9% 14% 30% 32% 32% 13.9 10.8 12.9 0.5 2.9

Source: Company, J.P. Morgan estimates.

Source: Company, J.P. Morgan estimates.

259

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Tenaga Nasional
www.tenaga.com.my
Company description Tenaga is Malaysia’s national power utility for Peninsula Malaysia and Sabah in East Malaysia. It holds the monopoly in distribution and transmission, and a 50% market share of the grid’s generation capacity with the remaining controlled by the IPPs. Post mortem Fuel cost (i.e. namely coal) is beyond the group’s control. There is no formal ‘fuel-pass-through’ formula currently in place, but we believe this will be addressed under Najib’s new government which is focused on reforms. Until then, the government has demonstrated its commitment on this issue via an informal tariff review every six months for fuel adjustments (tariffs were adjusted accordingly in two of the past three reviews when necessary). Potential for earnings upgrades We forecast power demand growth to recover from -2.6% in FY09 to +7% in FY10E, but a 1% change impacts EPS by 5.3%. We forecast M$3.40:1US$, but a further 1% strength in the Ringgit raises FY10E by 1.4%. How much recovery is priced into the stock? The stock has not fully priced-in a recovery, in our view, trading at 2010E EV/EBITDA of over 6x (regional average: 10x), P/B of 1.3x and P/E of 14x versus its historical mean of 1.9x and 16x/ respectively. Key to a sustainable re-rating is tariff reforms via a ‘fuel-pass-through’ and/or a ‘base-revenue tariff hike’, which the government can more easily push through in an economic recovery. Price target and key risks Our Jun-10 PT of M$10.30 is based on DCF, assuming a WACC of 8%, and terminal growth rate of 2.5%. Key risks to our PT are a slower-than-expected recovery in power demand in FY10E, and a surge in coal cost above our inhouse assumption of US$90/t c.i.f.
Bloomberg: TNB MK; Reuters: TENA.KL
M$ in millions, year-end August Sales Reported net profit Core net profit Core FD EPS (M$) Net DPS (M$) Sales growth (%) Net profit growth (%) EPS growth (%) ROE (%) ROCE (%) P/E (x) P/BV (x) EV/EBITDA (x) Net Div yield (%) FY08 25,750.6 2,594.0 2,559.9 0.59 0.15 10.4 -28.4 -28.6 10.0 7.4 14.3 1.4 7.5 1.8% FY09 28,785.6 917.9 2,157.1 0.50 0.13 11.8 -15.7 -15.7 8.3 7.9 17.0 1.4 7.3 1.6%

Overweight
M$8.40 Price Target: M$10.30

Malaysia Power Utilities Simone YeohAC
(603)-2270 4710 simone.x.yeoh@jpmorgan.com JPMorgan Securities (Malaysia) Sdn. Bhd. (18146-X)

Price performance
M$
9 8 7 6 5 10-08 01-09 04-09 07-09 10-09

Source: Bloomberg.

Performance
Absolute (%) Relative (%)
Source: Bloomberg.

1M 2.4 -0.6

3M 3.2 -2.9

12M 35.5 -1.1

Company data
52-wk range (M$) Mkt. cap (M$MM) Mkt. cap (US$MM) Liquidity (US$MM) Avg. daily volume (MM) Shares O/S (MM) Date of Price KLCI Index Free float (%) Exchange rate
Source: Bloomberg.

5.6-8.6 36,441.78 10650.82 8.3 3.5 4,338.3 5-Nov-09 1254.0 37.2 3.42

FY10E 31,205.9 2,611.8 2,611.8 0.60 0.20 8.4 21.1 21.1 9.3 8.2 14.0 1.3 6.4 2.4%

FY11E 32,732.5 2,879.0 2,879.0 0.66 0.22 4.9 10.2 10.2 9.6 8.4 12.7 1.2 5.9 2.7%

FY12E 34,266.2 3,290.9 3,290.9 0.76 0.28 4.7 14.3 14.3 0.0 0.0 11.1 1.1 0.1 3.3%

Source: Company, Bloomberg, J.P. Morgan estimates. Note: Share price and valuations are as of 5 November 2009.

260

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Tenaga Nasional: Summary of financials
Profit and Loss statement M$ in millions, year-end Aug Revenues % change Y/Y Gross Margin (%) EBITDA before forex gain/loss % change Y/Y EBITDA Margin (%) Op profit before forex gain/loss % change Y/Y EBIT Margin (%) Net Interest Earnings before tax % change Y/Y Tax as % of EBT Core Net Income % change Y/Y Shares Outstanding FD EPS (core) - M$ % change Y/Y Balance sheet M$ in millions, year-end Aug Cash and cash equivalents Accounts receivable Inventories Others Current assets LT investments Net fixed assets Total assets Liabilities ST loans Payables Others Total current liabilities Long term debt Other liabilities Total liabilities Shareholders' equity BVPS - M$ FY08A 25,751 10.4 27.8 7,157 -12.4 27.8 3,601 -35.0 14.0 (1,096) 3,025 -36.5 (425) 14.0 2,560 -28.4 4355 0.588 -28.2 FY09 28,786 11.8 25.7 7,406 3.5 25.7 3,851 6.9 13.4 (1,127) 1,543 -49.0 (690) 44.7 2,157 -15.7 4355 0.495 -15.7 FY10E 31,206 8.4 26.2 8,190 10.6 26.2 4,144 7.6 13.3 (1,130) 3,265 111.6 (653) 20.0 2,612 21.1 4355 0.600 21.1 FY11E 32,732 4.9 26.5 8,685 6.0 26.5 4,440 7.1 13.6 (1,136) 3,599 10.2 (720) 20.0 2,879 10.2 4355 0.661 10.2 FY12E 34,266 4.7 27.3 9,365 7.8 27.3 4,910 10.6 14.3 (1,145) 4,114 14.3 (823) 20.0 3,291 14.3 4355 0.756 14.3 Cash flow statement M$ in millions, year-end Aug Op profit before forex loss/(gain) Depreciation & amortisation Change in w/c Taxes Others Operating Cash Flow Capex Disposal/(purchase) Net interest Free cash flow Equity raised/(repaid) Debt raised/(repaid) Others Dividends paid Beginning cash Ending cash Net DPS - M$ Chg in cash Ratio analysis %, year-end Aug EBITDA margin Operating margin Net profit margin SG&A/sales Sales per share growth Sales growth Net profit growth EPS growth Interest coverage (x) Net debt to total capital (x) Net debt to equity (x) Sales/assets (x) Assets/equity (x) ROE ROCE ROA 7,157 FY08A 0 3,601 3,555 (100) (519) 441 6,978 (4,607) 264 (1,225) 1,410 20 (1,152) 722 (843) 5,323 5,480 0.15 157 157 FY08A 27.8 27.8 9.9 n.a. 10.7 10.4 (28.4) (28.2) -6.5 0.2 0.67 0.4 2.7 10.0 7.4 4.5 7,406 FY09 0 3,851 3,555 364 (690) 534 7,614 (4,320) 0 (1,127) 2,168 0 (124) (645) (649) 5,480 6,229 0.13 749 749 FY09 25.7 25.7 7.5 n.a. 11.8 11.8 (15.7) (15.7) -6.6 0.2 0.63 0.4 2.7 8.3 7.9 3.7 8,190 8,685 FY10E FY11E 0 0 4,144 4,440 4,046 4,246 (11) (7) (653) (720) 568 613 8,095 8,571 (4,750) (5,000) 0 0 (1,130) (1,136) 2,215 2,435 0 0 (169) (585) 6,229 7,690 0.20 1,461 1,461 FY10E 26.2 26.2 8.4 n.a. 8.4 8.4 21.1 21.1 -7.2 0.2 0.53 0.4 2.6 9.3 8.2 4.4 0 0 (159) (886) 7,690 9,080 0.22 1,390 1,390 FY11E 26.5 26.5 8.8 n.a. 4.9 4.9 10.2 10.2 -7.6 0.2 0.45 0.4 2.5 9.6 8.4 4.8 FY12E 4,910 4,456 (7) (823) 666 9,202 (5,000) 0 (1,145) 3,057 0 0 32 (974) 9,080 11,195 0.28 2,115 2,115 FY12E 27.3 27.3 9.6 n.a. 4.7 4.7 14.3 14.3 -8.2 0.1 0.35 0.4 2.5 10.2 8.9 5.5

FY08A 5,480 3,447 2,230 0 11,157 1,205 57,475 69,836

FY09 6,229 3,774 1,956 0 11,959 1,177 58,227 71,363

FY10E 7,690 4,091 2,120 0 13,901 1,206 58,931 74,038

FY11E 9,080 4,292 2,224 0 15,595 1,243 59,685 76,523

FY12E 11,195 4,493 2,328 0 18,015 1,279 60,230 79,524

1,058 5,604 0 6,662 21,682 15,835 44,179 25,657 5.89

1,158 6,105 0 7,263 21,458 16,636 45,357 26,006 5.97

1,158 6,521 0 7,679 21,458 16,868 46,006 28,033 6.44

1,158 6,819 0 7,977 21,458 17,063 46,498 30,026 6.90

1,158 7,117 0 8,275 21,458 17,449 47,182 32,343 7.43

Source: Company Reports and J.P. Morgan Estimates. Note: Core net profit is derived from net profit ex forex translation losses

261

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Ternium S.A.
www.ternium.com
Company description Ternium, mainly through its subsidiaries TX Mexico and Siderar (Arg.), produces flat and long steel products, and has finished steel capacity of 9Mtpy. Owned by the Techint Group (61%) and listed on the NYSE under the symbol TX, it generates ~75% EBITDA from its Mexico operations. Post mortem TX is one of the leading suppliers of flat steel products in Mexico and Argentina and has important access to other regional markets in South & Central America, in addition to NAFTA. Prices in Mexico (~75% of TX’s sales) are closely linked but remain at a marginal premium to those in the US. In addition, TX enjoys the benefits of the presence of high-value-added products, integrated low-cost mills and low dependence on coal, putting it in good stead vis-à-vis its competitors. Finally, management has worked exceptionally well to deliver strong results and four consecutive quarters of positive cash flow and working capital reduction during the peak of crisis. Potential for earnings upgrades After TX posted a 20% EBITDA margin in 3Q09, the Street estimate of 19% for 2010 seems conservative. We believe higher utilization levels (TX guiding for 75% in 4Q09 vs. 70% in 3Q) should result in improved dilution of fixed costs, with potential for further improvement if prices stick to present levels. How much recovery is priced into the stock? Trading at 6.7x ’10e EBITDA, TX remains the cheapest steel stock in our coverage and compares with the peer average of 9.7x. Further, we believe the market is not yet fully discounting the future payments (~$1.0B) from Venezuela for the nationalized asset of Sidor. Price target and key risks Our Dec-10 price target of $31.0 is based on a combination of DCF and multiples analysis, with WACC of 12.0% and perpetuity growth of 3%. The key risks to our thesis are a weaker-than-expected steel price scenario, higher raw material costs and overpayment in an M&A.
Bloomberg: TX; Reuters: TX.N
US$ in millions, Year-end 31st Dec. Sales Net profit (Recuring) EPS (US$) FD EPS (US$) DPS (US$) Sales growth (%) Net profit growth (%) EPS growth (%) ROE (%) P/E (x) FY08 8,496 662 0.36 0.36 0.60 50% 224% -65% 14% 8.7x FY09E 4,739 249 0.28 0.28 -44% -62% -23% 5% 26.8x FY10E 5,775 430 0.21 0.21 1.38 22% 73% -22% 8% 15.5x FY11E 6,158 567 0.28 0.28 1.07 7% 32% 32% 10% 11.8x

Overweight
$33.35 Price Target: $31.00

Luxembourg Metals & Mining Rodolfo R. De Angele, CFAAC
(55-11) 3048-3888 rodolfo.r.angele@jpmorgan.com Banco J.P. Morgan S.A.

Price Performance (US$)
40 30 20 10 0 Nov -08 Mar-09 Jul-09 Nov -09

Source: Bloomberg.

Performance
1M Absolute (%) Relative (%)
Source: Bloomberg.

3M 32% 11%

12M 449% 332%

23% 20%

Company data
52-week range (US$) Mkt cap. (US$MM) Avg daily value (US$MM) Avg daily volume (‘000) Shares O/S (MM) Date of price Index: MSCI LatAm Free float (%) Exchange rate: USD/MXN
Source: Bloomberg.

5.76 – 33.35 6,686.0 14.3 500.0 200 25-Nov-09 4125.9 14% 12.83

Source: Company, Bloomberg, J.P. Morgan estimates. Note: Share price and valuations are as of 25 November 2009.

262

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Ternium S.A.: Summary of financials
Profit and loss statement
US$ in millions, year-end 31-Dec. Revenue % change Y/Y Gross margin (%) EBITDA % change Y/Y EBITDA margin (%) EBIT % change Y/Y EBIT margin (%) Net interest Earnings before tax % change Y/Y Tax as % of EBT Net income (recurring) % change Y/Y Shares O/S (MM) EPS (recurring) (US$) FY08 8,496 50% 9% 2,304 90% 27% 1,885 122% 22% (64) 1,089 51% (262) 24% 662 224% 200 3.30 FY09E 4,739 -44% 17% 571 -75% 12% 190 -90% 4% (14) 247 -77% 11 -5% 249 -62% 200 1.24 FY10E 5,775 22% 23% 1,138 99% 20% 751 295% 13% (5) 688 179% (203) 29% 430 73% 200 2.14 FY11E 6,158 7% 24% 1,304 15% 21% 921 23% 15% 15 908 32% (267) 29% 567 32% 200 2.83

Cash flow statement
US$ in millions, year-end 31-Dec Net income (Reported) Depreciation Change in working capital Cash flow from operations Capital expenditure Other cash (uses)/sources Debt raised/(repaid) Dividends Increase in cash equivalent Ending cash DPS($) FY08 715 419 83 1,052 593 765 (818) (120) (425) 1,156 0.60 FY09E 554 380 (710) 1,644 250 (185) (678) 1,579 1,882 FY10E 430 387 226 591 348 (1,182) (254) (277) 1,148 2,790 1.38 FY11E 567 383 90 860 478 (9) (242) (215) 176 2,732 1.07

Source: Company, J.P. Morgan estimates.

Source: Company, J.P. Morgan estimates.

Balance sheet
US$ in millions, year-end 31-Dec Cash and cash equivalents Accounts receivable Inventories Others Current assets LT investments Net fixed assets Total assets Liabilities ST loans Payables Others Total current liabilities Long-term debt Other liabilities Total liabilities Shareholders’ equity BVPS (US$) FY08 1,156 872 1,827 2 3,856 2,603 4,212 10,671 942 439 355 1,735 2,326 1,049 5,110 4,597 22.9 FY09E 1,882 704 1,183 2 3,771 2,393 4,030 10,195 705 399 256 1,360 1,885 1,062 4,308 4,976 24.8 FY10E 2,790 857 1,355 2 5,005 1,265 3,991 10,261 635 457 313 1,405 1,700 1,116 4,221 5,129 25.6 FY11E 2,732 914 1,425 2 5,074 1,276 4,086 10,436 570 481 333 1,384 1,524 1,136 4,044 5,481 27.3

Ratio analysis
%, year-end 31-Dec EBITDA margin Operating margin Net profit margin SG&A/sales Sales growth Net profit growth Sales per share growth EPS growth Interest coverage (x) Net debt to total capital Net debt to equity Sales/assets EBIT margin ROCE Assets/equity (x) ROIC ROE FY08 27% 22% 8% 0 50% 224% 50% 224% 29.5x 24% 46% 80% 22% 0 2.3x 9% 16% FY09E 12% 4% 5% 0 -44% -62% -44% -62% 13.5x 8% 14% 46% 4% 0 2.0x 2% 11% FY10E 20% 13% 7% 0 22% 73% 22% 73% 139.7x -5% -9% 56% 13% 0 2.0x 6% 8% FY11E 21% 15% 9% 0 7% 32% 7% 32% -60.6x -8% -12% 59% 15% 0 1.9x 7% 10%

Source: Company, J.P. Morgan estimates.

Source: Company, J.P. Morgan estimates.

263

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Thai Oil Public Company
www.thaioil.co.th
Company description Thai Oil (TOP) runs a 275,000bbl/day complex refinery in Sri Racha, 124km southeast of Bangkok. The company also has downstream petrochemical interests (benzene and paraxylene), as well as related lube base, oil transportation and utilities business. TOP is 49%-owned by PTT Public. Post mortem Oil refining is a commoditized industry, hence TOP’s performance is driven by the regional oil refining dynamics (capacity vs. demand), rather than its market’s positioning. That said, the company does have an advantage in running a highly complex refinery (that generally results in higher margins) and downstream divisions (that help balance the refining performance), in our view. Potential for earnings upgrades TOP is highly sensitive to regional gross refining margin (GRM). YTD, GRM has been poor due to over-capacity and soft demand. As we move into 2010, we are positive that a steady demand growth (due to recovering consumption and economic activities) will help to drive higher GRM next year, potentially leading to higher earnings for TOP. How much recovery is priced into the stock? TOP shares have risen 80% from their trough in Mar-09; hence, it appears that some recovery has been discounted in the share price. However, we believe that the market remains skeptical of a strong GRM recovery. Hence, should GRM move significantly higher, this could be viewed an upside surprise for the market. Price target and key risks Our Jun-10 PT of Bt62 is based on our DCF valuation (WACC=9%, g=0%, LT GRM=US$5/bbl). We also incorporate a 20% risk discount to reflect Thailand’s poor regulatory environment. Key risks to our PT include: (1) GRM; (2) aromatics spread; and (3) regulatory risks.
Bloomberg: TOP TB; Reuters: TOP.BK
Bt in millions, year-end December Revenue Net profit EPS (Bt) DPS (Bt) Revenue growth (%) EPS growth (%) ROCE (%) ROE (%) P/E (x) P/BV (x) Dividend yield (%) FY08 399,125 224 0.11 2.75 52.9 -98.8 4.2 0.4 371.5 1.4 6.7 FY09E 252,193 13,618 6.68 2.30 -36.8 5986.3 18.8 21.4 6.1 1.2 5.6 FY10E 281,542 14,391 7.05 3.00 11.6 5.7 19.3 19.8 5.8 1.1 7.4 FY11E 312,538 15,438 7.67 3.50 11.0 8.7 20.7 18.2 5.3 0.9 8.6

Overweight
Price: Bt40.75 Price Target: Bt62.00

Thailand Independent refiners Sukit ChawalitakulAC
(662) 684-2679 chawalitakul.sukit@jpmorgan.com JPMorgan Securities (Thailand) Limited

Price performance
45 Bt 30 15 Nov-08 Feb-09 May-09 Aug-09 Nov-09 TOP.BK share price (Bt) SET (rebased)

Source: Bloomberg.

Performance
1M Absolute (%) Relative (%)
Source: Bloomberg.

3M 4.5 -2.0

12M 84.4 35.3

-7.9 -2.8

Company data
52-week range (Bt) Mkt cap. (BtMM) Mkt cap. (US$MM) Avg daily value (US$MM) Avg daily volume (MM) Shares O/S (MM) Date of price Index: SET Free float (%) Exchange rate
Source: Bloomberg.

18.20-47.25 83,131 2,490 29.6 6.9 2,040 5-Nov-09 682 50 33.38

Source: Company, Bloomberg, J.P. Morgan estimates. Note: Share price and valuation are as of 5 November 2009.

264

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Thai Oil Public Company: Summary of financials
Bt in millions, year-end December Income statement FY07 Revenues % change Y/Y Gross Margin (%) EBITDA % change Y/Y EBITDA Margin (%) EBIT % change Y/Y EBIT Margin (%) Net Interest Earnings before tax % change Y/Y Tax as % of EBT Core net income (reported) % change Y/Y Shares outstanding Core EPS (reported) - (Bt) % change Y/Y FY08 FY09E FY10E FY11E Cash flow statement FY07 FY08 FY09E FY10E FY11E 20,474 20,790 22,081 6,390 6,469 6,780 -752 -3,949 -16 -4,764 -4,994 -6,159 19,968 17,502 23,002 -7,663 -3,300 -1,910 0 0 0 -1,397 -814 316 12,305 14,202 21,092 0 0 0 -10,000 -10,000 -10,000 346 75 81 -4,182 -5,610 -6,885 8,555 4,077 6,015 4,077 5,713 10,007 2.30 3.00 3.50

261,051 399,125 252,193 281,542 312,538 EBIT -6.5% 52.9% -36.8% 11.6% 11.0% Depr. & amortization 11.7% 2.9% 11.2% 10.2% 9.8% Change in working capital 29,642 10,487 26,863 27,259 28,861 Taxes 24.4% -64.6% 156.2% 1.5% 5.9% Cash flow from operations 11.4% 2.6% 10.7% 9.7% 9.2% 24,676 4,339 20,474 20,790 22,081 Capex 29.8% NM 371.9% 1.5% 6.2% Disposal/(purchase) 9.5% 1.1% 8.1% 7.4% 7.1% Net Interest -1,100 -621 -1,397 -814 316 Free cash flow 22,668 -107 19,056 19,976 22,398 27.9% -100.5% -17909.1% 4.8% 12.1% Equity raised/(repaid) -4,755 756 -4,764 -4,994 -6,159 Debt raised/(repaid) 130.8% -9800.9% 141.0% 136.5% 128.9% Other 17,511 313 13,735 14,391 15,647 Dividends paid 19.2% -98.2% 4288.1% 4.8% 8.7% Beginning cash 2,040 2,040 2,040 2,040 2,040 Ending cash 8.58 0.15 6.73 7.05 7.67 DPS - (Bt) 19.2% -98.2% 4,288.1% 4.8% 8.7%

24,676 4,339 4,966 6,148 -1,972 -1,589 -4,755 756 20,372 6,019 -17,112 -6,924 0 0 -1,100 -621 3,260 -905 0 0 740 17,876 2,086 -861 -7,650 -9,180 6,982 4,760 4,760 8,555 4.50 2.75

Balance sheet FY07 Cash and cash equivalents Accounts receivable Inventories Others Current assets LT investments Net fixed assets Total Assets Liabilities ST loans Payables Others Total current liabilities Long-term debt Other liabilities Total Liabilities Shareholders' equity BVPS - (Bt) 4,760 23,045 32,802 1,992 62,599 162 71,439 136,570 FY08 8,555 15,320 20,544 10,179 54,598 1,144 72,215 132,840 FY09E 4,077 20,175 31,369 2,000 57,621 FY10E 5,713 23,931 35,396 2,000 67,040 FY11E

Ratio analysis FY07 11.4% 9.5% 7.3% FY08 2.6% 1.1% 0.1% FY09E FY10E FY11E 10.7% 8.1% 5.4% 9.7% 7.4% 5.1% 9.2% 7.1% 5.0%

10,007 EBITDA margin 26,566 Operating margin 39,469 Net profit margin 2,000 78,042

1,200 1,200 1,200 Sales growth 73,488 70,319 61,902 Net profit growth 139,805 142,790 145,144 EPS growth

-6.5% 52.9% -36.8% 8.3% -98.8% 5986.3% 8.3% -98.8% 5986.3%

11.6% 5.7% 5.7%

11.0% 8.7% 8.7%

1,450 26,127 4,661 32,238 30,741 1,754 64,733 67,387 33.03

12,870 15,670 1,733 30,273 37,197 1,791 69,261 58,921 28.88

6,010 20,166 3,986 30,162 34,057 2,293 66,512 68,357 33.51

4,510 24,019 3,967 32,496 25,557 2,368 60,420 77,138 37.81

1,660 26,783 3,986 32,429 9,407 2,527 44,363 94,963 46.55

Interest coverage (x) Net debt to equity Sales/assets (x) Assets/equity (x) ROE ROCE

26.95 16.89 44.5% 65.7% 2.11 2.96 2.03 2.25 31.0% 0.4% 26.4% 4.2%

19.23 56.6% 1.85 2.05 21.4% 18.8%

33.47 33.5% 1.99 1.87 19.8% 19.3%

1.2% 2.17 1.71 18.2% 20.7%

Source: Company reports and J.P. Morgan estimates.

265

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

TOTVS
www.totvs.com.br
Company description Totvs is the leader in developing and marketing integrated enterprise management software and provision of related services in Brazil. It has a leading position in the SME market for ERP software, with nearly 38% market share. It trades with the ticker TOTS3, is listed in the Novo Mercado segment of the Bovespa exchange, and has an ADTV of US$3mn. Post mortem Core license fee revenue growth reaccelerated in 3Q, partly offset by softer service & maintenance revenues. Net revenues were up 16% y/y. EBITDA grew significantly, up 50% y/y with a 26.3% margin, well above the company’s LT margin guidance (22-25%). Gross license fee revenues, which had been decelerating the last 3 quarters – during a tough economy – improved in 3Q09, rising 10.9% y/y (vs -3% y/y in 2Q09). Potential for earnings upgrades We expect two sources of earning upside. (1) Likely revision of long-term margin guidance by the company as 3Q margins are already well above this guidance (JPMe: 27.4%), (2) Upgrades to revenue forecasts due to cyclical upswing in new license sales as IT demand recovers. How much recovery is priced into the stock? A better license fee trend should help sustain growth in the coming quarters through better maintenance revenues. At 15x P/E 2010e, Totvs trades at no premium to global peers despite its superior growth prospects. Price target and key risks We rate Totvs OW, with an end-2010 PT of R$125 based on a DCF model using a 10.6% WACC and 4% LT growth, in nominal US$ terms. Key risks are 1) investor aversion to small caps, 2) another sharp macro slowdown, and 3) large competitors increasing focus on the SME market.

Overweight
R$101.50 Price Target: R$125.00

Brazil Media and Telecom Andre BaggioAC
(55-11) 3048-3427 andre.baggio@jpmorgan.com Banco J.P. Morgan S.A.

Rajneesh Jhawar
(1-212) 622-6480 rajneesh.x.jhawar@jpmorgan.com J.P.Morgan Securities Inc.

Price performance
R$
120 100 80 60 40 20 0 Oct-08
Source: Bloomberg.

Apr-09

Oct-09

Performance
1M Absolute% Relative % 14.4 10.0 3M 24.4 6.15 12M 184.6 89.5

Source: Bloomberg, relative IBOV, USD prices.

Company data
52-week range (BRL) Mkt cap. (R$ MM) Mkt cap. (US$ MM) Avg daily value (US$MM) Avg daily volume (MM) Shares O/S (MM) Date of price Index: MEXBOL
Source: Bloomberg.

34.00-107.0 3,334 1,936 2.9 .055 31.15 Nov 25 MEXBOL

Bloomberg: TOTS3; Reuters: TOTS3.SA
LC in millions, year-end Dec Sales Net profit EPS (LC) FD EPS (LC) DPS (LC) Sales growth (%) Net profit growth (%) EPS growth (%) ROE (%) P/E (x) FD P/E (x) FY08 845 129 4.51 27.6% 18.3% 16.6% 25.1% 25.8 FY09E 991 161 5.17 17.3% 24.6% 14.7% 32.0% 20.7 FY10E 1,181 206 6.60 19.2% 27.6% 27.6% 34.1% 16.2 FY11E 1,345 241 7.74 13.9% 17.3% 17.3% 37.6% 13.8

Source: Company, Bloomberg, J.P. Morgan estimates. Note: Share price and valuations are as of 25 November 2009.

266

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

TOTVS: Summary of financials
Profit and loss statement
MXN in millions, year-end Dec. Revenue % change Y/Y Gross margin (%) EBITDA % change Y/Y EBITDA margin (%) EBIT % change Y/Y EBIT margin (%) Net interest Earnings before tax % change Y/Y Tax as % of EBT Net income (reported) % change Y/Y Shares O/S (MM) EPS (reported) (LC) FY08 845 27.6% 65.1% 179 22.6% 21.2% 77 -9.4% 9.1% 9 86 -14.5% -12 14.4% 129 18.3% 31 4.51 FY09E 991 17.3% 68.4% 255 42.5% 25.7% 185 141.4% 18.7% -31 154 78.6% -29 18.7% 161 24.6% 31 5.17 FY10E 1,181 19.2% 68.7% 308 20.9% 26.1% 234 26.3% 19.8% -26 207 34.8% -40 19.1% 206 27.6% 31 6.60 FY11E 1,345 13.9% 68.8% 354 14.9% 26.3% 279 19.4% 20.7% -23 256 23.4% -52 20.3% 241 17.3% 31 7.74

Cash flow statement
LC in millions, year-end Dec. EBIT Depreciation & amortization Change in working capital Taxes Cash flow from operations Capex Disposal/(purchase) Net interest Free cash flow Equity raised/(repaid) Debt raised/(repaid) Other Dividends Beginning cash Ending cash DPS (LC) FY08 77 95 -21 147 -23 124 FY09E 185 70 -57 138 -20 118 FY10E 234 74 -25 217 -30 187 FY11E 279 75 -22 257 -34 223

0 276 147 0.00

-36 147 204 1.16

-61 204 330 1.96

-223 330 330 7.17

Source: Company, J.P. Morgan estimates.

Source: Company, J.P. Morgan estimates.

Ratio analysis
%, year-end Dec. EBITDA margin Operating margin Net profit margin SG&A/sales Sales growth Net profit growth Sales per share growth EPS growth Interest coverage (x) Net debt to total capital Net debt to equity Sales/assets EBIT margin ROCE Assets/equity (x) ROI ROE FY08 21.2% 9.1% 15.3% 33.4% 27.6% 18.3% 16.6% 27.5% 50.3% 94.2% 9.1% 10.3% 2.3x 25.1% FY09E 25.7% 18.7% 16.3% 30.3% 17.3% 24.6% 14.7% 22.5% 39.8% 89.8% 18.7% 19.6% 2.1x 32.0% FY10E 26.1% 19.8% 17.4% 29.8% 19.2% 27.6% 27.6% 8.6% 14.2% 96.0% 19.8% 21.9% 2.0x 34.1% FY11E 26.3% 20.7% 17.9% 29.6% 13.9% 17.3% 17.3% 8.8% 14.8% 103.5% 20.7% 25.2% 2.1x 37.6%

Balance sheet
LC in millions, year-end Dec. Cash and cash equivalents Accounts receivable Inventories Others Current assets LT investments Net fixed assets Total assets Liabilities ST loans Payables Others Total current liabilities Long-term debt Other liabilities Total liabilities Shareholders’ equity BVPS (LC) FY08 147 154 44 346 32 1,044 11 33 124 168 366 48 582 456 14.7 FY09E 204 196 82 483 40 1,163 4 29 117 150 419 37 606 551 17.7 FY10E 330 233 98 662 58 1,297 4 34 140 178 419 37 634 654 21.0 FY11E 330 266 112 708 80 1,302 4 39 159 203 419 37 658 631 20.2

Source: Company, J.P. Morgan estimates.

Source: Company, J.P. Morgan estimates.

267

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

TSMC
www.tsmc.com
Company description TSMC (TAIEX: 2330, NYSE: TSM) is the world’s largest dedicated semiconductor foundry, with leading manufacturing capacity, process technology, and the largest portfolio of process-proven libraries, IP, design tools and reference flows in the industry. We expect its total managed capacity in FY10 to grow by 13%, exceeding 11 million of 8" equivalent wafers. Post mortem We believe TSMC will outperform the overall semiconductor industry in 2010, with its revenue growth exceeding the industry average as: (1) it has a diversified product portfolio; and (2) the company is an early mover in advanced technology, which could enjoy price premium. We expect it to continue to see a downward trend in its fixed cost/wafer, given the increase in asset efficiency. Hence, TSMC is likely to post higher ROE and NP margin versus its global peers. Potential for earnings upgrades Despite the high fixed cost structure, TSMC’s profitability has been quite sustainable even in a downturn year such as 2009. Hence, any earnings upside for TSMC should still largely depend on the top-line growth, which could be driven by: (1) better end-demand outlook; (2) an increase in outsourcing orders; and (3) further market share gains. How much recovery is priced into the stock? The stock has been moving sideways, largely due to concerns about price war and a slowdown in end-demand. However, once the market realizes that the company will continue to deliver Y/Y earnings growth from 4Q09 and throughout 2010, the share price will gradually move up, in our view. Price target and key risks We maintain our Overweight rating; our Dec-10 PT of NT$72 is based on 3.1x 12-month forward (FY11E) book value. This multiple is at the mid-tohigh range of its recent trading level and well below the 2000-01 level despite a higher ROE. A key risk to our PT is weakening end-demand in 1Q10.

Overweight
NT$59.70 Price Target: NT$72

Taiwan Semiconductors JJ ParkAC
(822) 758-5717 jj.park@jpmorgan.com J.P. Morgan Securities (Far East) Limited, Seoul Branch

Patrick LiaoAC
(886-2) 2725-9874 patrick.kh.liao@jpmorgan.com J.P. Morgan Securities (Taiwan) Limited

Price performance
NT$
80 70 60 50 40 30 Nov -08 Feb-09 May -09 Aug-09 Nov -09

2330 TT Equity

TWSE Index

Source: Bloomberg.

Performance
1M Absolute (%) Relative (%)
Source: Bloomberg.

3M 4.9 -3.1

12M 25.0 -16.1

-3.7 -3.4

Company data
52-week range (NT$) Mkt cap. (NT$B) 52-week range (NT$) Avg daily value (US$MM) Avg daily volume (MM) Shares O/S (MM) Date of price Index: TAIEX Free float (%) Exchange rate
Source: Bloomberg.

36.2-65.2 1,546 47.53 117 65.4 25,896 5-Nov-09 7,417.5 60 32.5

Bloomberg: 2330 TT; Reuters: 2330.TW
NT$ in billions, year-end December Sales Net profit EPS (NT$) FD EPS (NT$) DPS (NT$) Sales growth (%) Net profit growth (%) EPS growth (%) ROE (%) P/E (x) FD P/E (x) FY08 333.2 99.9 3.83 3.83 3.0 3.3% (8.6%) 17.3% 20.6 15.6 15.6 FY09E 295.1 87.4 3.38 3.38 3.0 (11.4%) (13.0%) (11.7%) 17.9 17.6 17.6 FY10E 367.0 119.9 4.63 4.63 3.0 24.4% 37.2% 36.7% 23.1 12.9 12.9 FY11E 417.4 141.5 5.45 5.45 3.0 13.7% 18.0% 17.8% 24.6 11.0 11.0

Source: Company, Bloomberg, J.P. Morgan estimates. Note: Share price and valuation are as of 5 November 2009.

268

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

TSMC: Summary of financials
NT$ in billions, year-end December Income statement FY08A Revenues Cost of Goods Sold Gross Profit R&D Expenses SG&A Expenses Operating Profit (EBIT) EBITDA Interest Income Interest Expense Investment Income (Exp.) Non-Operating Income (Exp.) Earnings before tax Tax Net Income (Reported) Net Income (Adjusted) NT$ EPS (Reported) EPS (Adjusted) BPS DPS Shares Outstanding (bn) Balance sheet FY08A Cash and cash equivalents Accounts receivable Inventories Others Current assets LT investments Net fixed assets Others Total assets Liabilities ST loans Payables Others Total current liabilities Long term debt Other liabilities Total liabilities Shareholders' equity
Source: Company, J.P. Morgan estimates.

FY09E 295 167 128 21 16 91 173 2.6 0 0.1 0.3 94 -7 87 87 3.38 3.38 19.21 3.0 26

FY10E 367 197 170 25 17 128 216 2.9 0 1.3 0.8 132 -13 120 120 4.63 4.63 20.90 3.0 26

FY11E 417 221 196 28 18 150 240 4.8 0 1.7 0.8 157 -16 142 142 5.45 5.45 23.44 3.0 26

Ratio analysis % Gross Margin EBITDA margin Operating Margin Net Margin R&D/sales SG&A/Sales Sales growth Operating Profit Growth Net profit growth EPS (Reported) growth EPS (Adjusted) growth Interest coverage (x) Net debt to total capital Net debt to equity Asset Turnover Working Capital Turns (X) ROE ROIC CORE ROIC Cash flow statement

FY08A 42.5 55.8 31.3 30.0 6.4 4.8 3.3 -6.5 -8.5 -7.0 17.3 169.8 -36.7 -38.7 59.6 1.7 20.6 30.3 35.2

FY09E 43.4 58.5 31.0 29.6 7.2 5.3 -11.4 -12.5 -12.6 -11.7 -11.7 268.1 -36.9 -37.2 50.9 1.5 17.9 29.1 33.6

FY10E 46.4 58.9 34.8 32.7 6.9 4.8 24.4 39.6 37.2 36.7 36.7 1009.5 -37.9 -38.2 58.8 1.7 23.1 36.3 42.1

FY11E 47.0 57.4 36.0 33.9 6.7 4.3 13.7 17.6 18.0 17.8 17.8 1305.7 -44.2 -44.4 59.4 1.6 24.6 40.8 47.3

333 191 142 21 16 104 186 5.4 -1 0.7 1.6 111 -11 100 100 3.83 3.83 18.65 3.0 26

FY09E 190 40 20 9 259 39 260 22 580

FY10E 211 43 24 13 290 40 272 22 625

FY11E 273 51 29 15 369 42 270 22 703 Net Income Depr. & Amortisation Change in working capital Other Cash flow from operations Capex Disposal/ (purchase) Cash flow from investing Free cash flow Equity raised/ (repaid) Debt raised/ (repaid) Other Dividends paid Cash flow from financing Net change in cash Beginning cash Ending cash

FY08A 100 82 37 1 219 -59 -8 -67 159 -33 -3 -4 -76 -115 37 175 211

FY09E 87 81 -13 0 156 -89 -7 -96 67 0 -21 16 -77 -82 -22 211 190

FY10E 120 89 -7 0 202 -93 -9 -102 109 0 -1 0 -78 -79 21 190 211

FY11E 142 89 -1 0 230 -80 -10 -90 150 0 -1 1 -78 -78 62 211 273

211 18 15 8 253 40 244 23 559

9 6 41 57 16 6 79 480

0 11 52 63 4 15 83 497

0 11 55 67 3 12 82 542

0 14 66 81 2 10 93 610

269

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Turk Telekom
www.turktelekom.com.tr
Company description Within CEEMEA Turk Telekom is a structurally attractive Turkish integrated telecom incumbent with relatively sustainable fixed voice revenues (although these have come under more pressure recently), a dominant position in a growing broadband market with benign competition, and increasing market share in the mobile market. Oger Telekomünikasyon is the controlling shareholder with a 55% stake while 30% is owned by Turkey’s Treasury. Post mortem Turk Telekom’s key objective in mobile over the past year has been to take advantage of Vodafone’s weakness to overtake it decisively and become the number 2 operator in the market, which has yet to happen. However, we still believe that Turk Telekom can pull ahead of Vodafone in terms of service revenues in the 4Q09 and beyond, which the market would receive well in our view. We also expect to see a recovery in the mobile margins. Potential for earnings upgrades We believe that while its key peer Turkcell will be the primary beneficiary given its greater exposure to the Turkish mobile market, Turk Telekom stands to benefit strongly as well from a combination of an improving economy and market repair through solid mobile revenue growth, improved mobile margins and more stable fixed voice revenues. How much recovery is priced into the stock? We believe that the aforementioned macro recovery/market repair is far from fully priced in. Price target and key risks Our recurring FCF yield-based end 2010 target price for Turk Telekom is TRY 6.8. At our TP the stock would trade on a 2010E recurring FCF yield of c.11%. We believe this multiple is justified by the stronger growth in following years than initially estimated due to a slower than expected rampup in mobile margins. Key operating risk - regulatory intervention may lead to greater than expected fixed line revenue erosion; MTR cuts may lead to higher F2M substitution or competition being more aggressive than estimated.
Bloomberg: TTKOM TI; Reuters: TTKOM.IS
YTL in millions, year end Dec Sales Net profit EPS DPS (LC) Sales growth (%) Net profit growth (%) EPS growth (%) ROE (%) P/E (x) FY08 10,195 1,627 0.46 0.78 8.20% -35.00% NM 29% 9.5 FY09E 10,738 1,605 0.46 0.43 5.30% -1.40% NM 30% 9.7 FY10E 11,807 2,120 0.61 0.44 10.00% 32.10% 32.10% 37% 7.3 FY11E 12,585 2,479 0.71 0.54 6.60% 16.90% 16.90% 39% 6.3

Overweight
Price: YTL4.44 Price Target: YTL6.8

Turkey Wireline Services/Incumbents Jean-Charles LemardeleyC
(44-20) 7325 5763 jean-charles.lemardeley@jpmorgan.com J.P. Morgan Securities Ltd.

Price Performance
4.5 TL 3.5 2.5
Nov-08 Feb-09 May-09 Aug-09 Nov-09

Source: Company data, Bloomberg

Performance
Absolute (%) 1M -8% 3M -6% 12M 47%

Source: Company data, Bloomberg

Company data
52-week range (TL) Mkt cap. (YTL bn) Shares O/S (mn) Date of price Price Target End Date Avg daily value (US$MM) Avg daily volume (MM) Free float (%) Exchange rate
Source: Company data, Bloomberg, J.P Morgan

5.06-3.16 15.5 3500 23-Nov-09 31-Dec-10 26 8.38 15% 1.5

Source: Company, Bloomberg, J.P. Morgan estimates. Note: Share price and valuations are as of cob 23 November 2009.

270

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Turk Telekom: Summary of Financials
Profit and Loss Statement TL in millions, year end Dec Revenues % Change Y/Y EBITDA % Change Y/Y EBITDA Margin EBIT % Change Y/Y EBIT Margin Net Interest PBT % change Y/Y Net Income (clean) % change Y/Y Average Shares Clean EPS % change Y/Y DPS Balance sheet TL in millions, year end Dec Cash and cash equivalents Accounts Receivables ST financial assets Others Current assets LT investments Net fixed assets Total assets ST loans Payables Others Total current liabilities Long term debt Other liabilities Total liabilities Shareholders' equity FY08 10,195 8.2% 4,342 1.6% 42.6% 2,710 5.6% 26.6% (574) 2,136 -28.3% 1,627 -35.0% 3,500 0.46 NM 0.78 FY09E 10,738 5.3% 4,296 -1.0% 40.0% 2,519 -7.0% 23.5% 1,454 2,072 -3.0% 1,605 -1.4% 3,500 0.46 NM 0.43 FY10E 11,807 10.0% 4,872 13.4% 41.3% 2,947 17.0% 25.0% (362) 2,586 24.8% 2,120 32.1% 3,500 0.61 32.1% 0.44 FY11E 12,585 6.6% 5,322 9.3% 42.3% 3,287 11.5% 26.1% (300) 2,987 15.5% 2,479 16.9% 3,500 0.71 16.9% 0.54 Cash flow statement FY12E TL in millions, year end Dec 13,483 7.1% 5,839 9.7% 43.3% 3,860 17.4% 28.6% (232) 3,627 21.5% 2,960 19.4% 3,500 0.85 19.4% 0.63 Cash EBITDA Interest Tax Other Cash flow from operations Capex PPE Net investments CF from investments Dividends Share (buybacks)/ issue CF to Shareholders FCF to debt OpFCF (EBITDA - PPE) EFCF pre Div, PPE FY08 4,342 (574) (509) 557 3,816 (1,330) 426 (1,330) (2,744) 2,744 (258) 2,586 2,485 FY09E 4,296 1,454 (467) (2,193) 3,090 (2,216) (135) (2,216) (1,490) 1,490 (616) 2,215 874 FY10E 4,872 (362) (465) 5 4,049 (1,898) 0 (1,898) (1,539) 1,539 612 2,974 2,151 FY11E 5,322 (300) (508) 25 4,539 (1,959) 0 (1,959) (1,899) 1,899 681 3,363 2,580 FY12E 5,839 (232) (667) 59 4,999 (1,979) 0 (1,979) (2,202) 2,202 817 3,860 3,019

FY08 1,042 1,485 0 471 2,998 3,384 6,277 12,659 1,291 932 1,326 3,549 2,960 1,037 7,546 5,114

FY09E 1,124 1,756 25 641 3,545 3,736 6,202 13,483 1,545 604 1,742 3,891 3,231 928 8,050 5,433

FY10E 945 1,907 25 704 3,581 3,736 6,176 13,492 1,653 664 1,915 4,232 2,332 928 7,492 6,000

FY11E 1,007 2,020 25 751 3,803 3,736 6,100 13,638 1,762 708 2,041 4,511 1,604 928 7,043 6,595

Ratio Analysis FY12E TL in millions, year end Dec 1,079 2,151 25 804 4,059 3,736 6,100 13,894 1,888 758 2,187 4,833 733 928 6,494 7,400 EBITDA margin EBIT Margin Net profit margin Capex/sales Depreciation/Sales Revenue growth EBITDA Growth EPS Growth Net debt/EBITDA CF to Shareholders FCF to debt OpFCF (EBITDA - PPE) EFCF pre Div, PPE

FY08 42.6% 26.6% 16.0% 13.1% 16.0% 8.2% 1.6% NM 0.6 2,744 (258) 2,586 2,485

FY09E 40.0% 23.5% 14.9% 20.6% 16.5% 5.3% -1.0% NM 0.7 1,490 (616) 2,215 874

FY10E 41.3% 25.0% 18.0% 16.1% 16.3% 10.0% 13.4% 32.1% 0.5 1,539 612 2,974 2,151

FY11E 42.3% 26.1% 19.7% 15.6% 16.2% 6.6% 9.3% 16.9% 0.3 1,899 681 3,363 2,580

FY12E 43.3% 28.6% 22.0% 14.7% 14.7% 7.1% 9.7% 19.4% 0.2 2,202 817 3,860 3,019

Source: Company reports and J.P. Morgan estimates.

271

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

UMC
www.umc.com
Company description UMC (TAIEX: 2303) is the second-largest dedicated semiconductor foundry, providing wafer manufacturing services. Its key customers include MediaTek, TI, Xilinx, Novatek, Realtek, Broadcom and Infineon. Post mortem UMC’s structural changes undertaken since 3Q08 have led the company to a fundamental improvement, which includes: (1) improvement in operating efficiency; (2) focus on core business instead of largely depending on non-op contribution; (3) more favorable margin outlook; (4) better recognition from the top-tier clients in 65nm production; and (5) solid 2nd-source strategy with a disciplined capacity expansion. Potential for earnings upgrades Given the high fixed cost nature of the foundry industry, we expect UMC to enjoy an amplified growth in its bottom line. We believe UMC will post a near-breakeven profit in 2009. Hence, any small upside to its 2010 revenue could result in a big jump in earnings outlook. How much recovery is priced into the stock? We expect UMC’s revenue to go back to the 2007 level in 2010, supported by strong growth in contribution from advanced technology. We expect the robust demand from emerging markets to be one of the major drivers for the 2010 pick-up; however, this may have not been priced in so far. Price target and key risks Our Dec-10 PT of NT$19 is based on 1.1x FTM (Dec-11E) book, as we believe the company may no longer need to trade at a discount to book, given further improvement in its operation efficiency and better outlook for profitability. A key risk to our PT is a weakening end-demand in 4Q09.

Overweight
NT$15.5 Price Target: NT$19

Taiwan Semiconductors JJ ParkAC
(822) 758-5717 jj.park@jpmorgan.com J.P. Morgan Securities (Far East) Limited, Seoul Branch

Patrick LiaoAC
(886-2) 2725-9874 patrick.kh.liao@jpmorgan.com J.P. Morgan Securities (Taiwan) Limited

Price performance
NT$
19 17 15 13 11 9 7 5

Nov -08

Feb-09

May -09

Aug-09

Nov -09

2303 TT Equity

TWSE Index

Source: Bloomberg.

Performance
1M Absolute (%) Relative (%)
Source: Bloomberg.

3M 16.1 7.2

12M 74.2 16.9

-1.9 -1.6

Company data
52-week range (NT$) Mkt cap. (NT$ B) Mkt cap. (US$ B) Avg daily value (US$MM) Avg daily volume (MM) Shares O/S (MM) Date of price Index: TAIEX Free float (%) Exchange rate
Source: Bloomberg.

6.6-17.2 201.3 6.19 96.1 40.7 12,988 5-Nov-09 7,417.5 50 32.5

Bloomberg: 2330 TT; Reuters: 2303.TW
NT$ in billions, year-end December Sales Net profit EPS (NT$) FD EPS (NT$) DPS (NT$) Sales growth (%) Net profit growth (%) EPS growth (%) ROE (%) P/E (x) FD P/E (x) FY08 92.5 -22.3 -1.76 -1.76 0.8 (13.3%) (231.6%) (242.2%) -10.6 NM NM FY09E 88.5 2.8 0.22 0.22 0.0 (4.3%) 112.8% 112.7% 1.5 69.3 69.3 FY10E 107.0 12.8 1.01 1.01 0.0 20.8% 350.1% 350.0% 6.0 15.4 15.4 FY11E 117.1 16.9 1.33 1.33 0.6 9.4% 32.1% 31.9% 7.5 11.7 11.7

Source: Company, Bloomberg, J.P. Morgan estimates. Note: Share price and valuation are as of 5 November 2009.

272

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

UMC: Summary of financials
NT$ in billions, year-end December Income statement FY08A Revenues Cost of Goods Sold Gross Profit R&D Expenses SG&A Expenses Operating Profit (EBIT) EBITDA Interest Income Interest Expense Investment Income (Exp.) Non-Operating Income (Exp.) Earnings before tax Tax Net Income (Reported) Net Income (Adjusted) NT$ EPS (Reported) EPS (Adjusted) BPS DPS Shares Outstanding (bn) Balance sheet FY08A Cash and cash equivalents Accounts receivable Inventories Others Current assets LT investments Net fixed assets Others Total assets Liabilities ST loans Payables Others Total current liabilities Long term debt Other liabilities Total liabilities Shareholders' equity
Source: Company, J.P. Morgan estimates.

Ratio analysis FY09E 89 72 16 8 4 3 38 0.2 0.1 -1.3 1.5 4 1 3 3 0.22 0.22 16.31 0.00 13 FY10E 107 79 28 10 5 13 45 0.3 0.2 0.6 0.8 14 1 13 13 1.01 1.01 17.31 0.00 13 FY11E 117 85 32 11 6 16 48 0.4 0.2 1.8 1.2 19 2 17 17 1.33 1.33 18.06 0.58 13 % Gross Margin EBITDA margin Operating Margin Net Margin R&D/sales SG&A/Sales Sales growth Operating Profit Growth Net profit growth EPS (Reported) growth EPS (Adjusted) growth Interest coverage (x) Net debt to total capital Net debt to equity Asset Turnover Working Capital Turns (X) ROE ROIC CORE ROIC Cash flow statement FY09E 49 16 9 3 76 69 84 6 235 FY10E 56 17 9 3 84 69 91 6 250 FY11E 57 18 10 3 88 71 99 6 263 Net Income Depr. & Amortisation Change in working capital Other Cash flow from operations Capex Disposal/ (purchase) Cash flow from investing Free cash flow Equity raised/ (repaid) Debt raised/ (repaid) Other Dividends paid Cash flow from financing Net change in cash Beginning cash Ending cash FY08A -22 37 0 0 15 -11 43 32 4 -4 -22 -16 -9 -52 -4 42 38 FY09E 3 34 -7 0 31 -16 -24 -40 14 0 0 20 0 20 11 38 49 FY10E 13 32 2 0 47 -35 -5 -40 12 0 0 0 0 0 7 49 56 FY11E 17 33 -1 0 48 -36 -6 -41 13 0 0 1 -7 -6 1 56 57 FY08A 14.0 40.0 -0.4 -24.1 8.9 5.5 -13.3 -105.9 -231.6 -229.4 -242.2 -6.5 -15.4 -16.1 44.5 2.7 -10.6 2.1 2.1 FY09E 18.1 42.7 3.8 3.2 9.3 5.1 -4.3 939.4 112.8 112.7 112.7 28.5 -18.6 -19.4 37.6 1.8 1.5 2.3 2.7 FY10E 25.8 42.2 11.9 12.0 8.9 5.0 20.8 279.7 350.1 350.0 350.0 71.9 -20.7 -21.5 42.7 1.9 6.0 10.0 11.8 FY11E 27.4 41.2 13.3 14.5 9.1 4.9 9.4 22.6 32.1 31.9 31.9 84.1 -19.9 -20.6 44.5 2.0 7.5 11.2 13.3

93 80 13 8 5 0 37 0.6 0.1 -10.6 -10.8 -21 1 -22 -22 -1.76 -1.76 14.23 0.80 13

38 8 8 1 55 47 100 6 208

0 2 9 11 8 4 23 185

8 4 11 23 1 4 27 208

8 5 12 25 1 4 30 221

8 6 14 28 1 4 32 231

273

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Unitech Ltd
www.unitechgroup.com
Company description Unitech is one of the largest real estate developers in the country with a track record in real estate development of more than 30 years. Unitech has developed 1,200 acres of land in five townships with over 12mqft of real estate development in the past three years. Post mortem Unitech is the best play on a pan-India affordable housing theme, given its primary exposure to the housing segment (70% of NAV). UT’s sales bookings in 1HFY10 have been impressive. It has pre-sold over Rs40 billion of projects/10.1msf of area, placing it well on course to achieve the FY10 sales target of 20msf. Cash flow issues are now sorted out with UT cutting its net debt by almost 40% from peak levels. Historically, execution/transparency have been issues with the company. Incrementally, we see these concerns abating as deliveries have started picking up pace (8-9 msf expected in FY10) and most of the scale-up happening in Uni-homes (easier product to complete). Potential for earnings upgrades UT’s contract sales in 1HFY10 are at Rs 40 billion (10.1 msf). This is 58% of our FY10 sales bookings estimate of Rs 72 billion, implying an upside risk to our and consensus EPS numbers if sales momentum in 2H sustains. Further, UT’s aggressive Mumbai entry (Rs15 billion contracted sales till Sep-09) via the SRA model looks to be under-appreciated and though these sales add to cash flows immediately, they will most likely reflect in EPS numbers FY12 onwards. How much recovery is priced into the stock? UT is trading at 1.6x FY11E P/B and 13x FY11E P/E with an EPS growth of 56% over FY11E/12E. The risk reward on balance seems to be favorable with the market discounting a fair amount of concern on execution and bookings cancellations in future. Valuation cushion and healthy ongoing sales momentum should see the share price re-rating to Rs120 levels. Price target and key risks We have an Overweight recommendation on Unitech with an SOTP-based Mar-10 price target of Rs120. Key risks to our price target include: (a) approval risk in new market entry; (b) execution delays; and (c) de-rating of the physical property market.
Bloomberg: UT IN; Reuters: UNTE.BO
Rs in millions, year-end March Sales Net profit EPS (Rs) P/E (x) ROE (%) ROCE (%) Net debt/Equity (%) P/B FY08 41,152 16,613 10.2 8.3 59 25 189 3.8 FY09 28,502 12,010 7.4 11.5 27 10 163 2.7 FY10E 38,215 13,261 4.2 20.4 17 10 32 1.9 FY11E 50,946 15,476 6.5 13.1 13 10 12 1.6

Overweight
Rs85.2 Price Target: Rs120.00

India Property Saurabh KumarAC
(91-22) 6157-3590 saurabh.s.kumar@jpmorgan.com J.P. Morgan India Private Limited

Price performance
300 200 100 0 1/1/09 4/1/09 7/1/09 10/1/09 Sensex

UT share price
Source: Bloomberg.

Performance
1M Absolute (%) Relative (%)
Source: Bloomberg.

3M -12.7 -13.2

12M 46.8 -2.9

-22.1 -15.0

Company data
52-week range (Rs) Mkt cap. (Rs MM) Mkt cap. (US$MM) Avg daily value (US$MM) Avg daily volume (MM) Shares O/S (MM) Date of price Index: Sensex Free float (%) Exchange rate
Source: Bloomberg.

21.7-118.4 203,337 4,326 151 73 2,386 5-Nov-09 16064 56 47.0

FY12E 71,956 24,445 10.2 8.3 18 15 -7 1.4

Source: Company, Bloomberg, J.P. Morgan estimates. Note: Share price and valuations are as of 5 November 2009.

274

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Unitech Ltd: Summary of financials
Rs in millions, year-end March Income Statement FY08 Revenues % change Y/Y EBITDA % change Y/Y EBITDA Margin (%) EBIT % change Y/Y EBIT Margin (%) Net financial income Earnings before tax % change Y/Y Tax as % of EBT Net Income (adjusted) % change Y/Y Shares Outstanding EPS (adjusted) % change Y/Y Balance sheet Cash Accounts receivable Inventories Others Current assets Total Investments Net fixed assets Liabilities Provisions Total current liabilities Total assets Total debt Other liabilities Total liabilities Shareholders' equity BVPS 41,152 25% 22,038 10% 54% 21,833 10% 53% (1,155) 20,678 15% (3,986) 19% 16,613 27% 1623 10.2 27% FY08 14,083 36,755 136,076 148.35 187,062 14,165 31,442 82,562 9,350 91,912 141,883 85,524 20,354 105,878 36,005 22.2 Cash flow statement FY09 28,502 -31% 15,493 -30% 54% 15,284 -30% 54% (846) 14,438 -30% (2,437) 17% 12,010 -28% 1623 7.4 -28% FY09 6,448 37,876 157,756 107.90 202,189 15,808 33,258 101,827 297 102,124 160,803 90,558 18,550 109,108 51,695 31.8 FY10E 38,215 34% 19,629 27% 51% 19,395 27% 51% (1,980) 17,415 21% (4,180) 24% 9,978 -17% 2386 4.2 -43% FY10E 15,099 40,874 169,510 107.90 225,591 18,780 35,214 115,679 297 115,976 175,281 50,000 17,050 67,050 108,231 45.4 FY11E 50,946 33% 22,232 13% 44% 21,970 13% 43% (1,380) 20,590 18% (5,147) 25% 15,476 55% 2386 6.5 55% FY11E 18,644 44,319 178,710 107.90 241,780 18,780 38,157 140,598 297 140,895 169,494 34,000 12,050 46,050 123,444 51.7 FY12E 71,956 41% 32,652 47% 45% 32,358 47% 45% 620 32,978 60% (8,574) 26% 24,445 58% 2386 10.2 58% FY12E 24,556 49,130 188,331 107.90 262,125 18,780 43,490 168,025 297 168,322 167,746 15,000 6,050 21,050 146,696 61.5 EBIT Depreciation Change in working capital Taxes Others Cash flow from operations Capex Change in investments Interest Free cash flow Equity raised/ (repaid) Debt raised/ (repaid) Dividends paid Beginning cash Ending cash Ratio Analysis %, year-end Mar EBITDA margin EBIT margin Net profit margin Sales growth Net profit growth FY08A 21,833 205 (33,118) (3,986) 2,716 (12,350) (22,964) (8,614) (2,804) (46,731) 45,718 (406) 10,227 14,083 FY09 15,284 209 (3,496) (2,437) 4,119 13,680 (2,157) (5,028) (5,500) 994 0 5,034 (162) 14,083 6,448 FY10E 19,395 234 (900) (4,180) 1,246 15,796 (2,191) (2,972) (3,200) 7,434 46,202 (40,558) (239) 6,448 15,099 FY11E 21,970 262 12,275 (5,147) 1,753 31,113 (3,206) (3,100) 24,807 (16,000) (263) 15,099 18,644 FY12E 32,358 294 12,994 (8,574) 2,162 39,233 (5,627) (1,500) 32,106 (19,000) (1,193) 18,644 24,556

FY08A 54% 53% 40% 25% 27%

FY09 54% 54% 42% -31% -28%

FY10E 51% 51% 26% 34% -17%

FY11E 44% 43% 30% 33% 55%

FY12E 45% 45% 34% 41% 58%

Interest coverage (x) Net debt to total capital Net debt to equity Sales/assets Assets/equity ROE ROCE

7.8 48% 189% 0.3 3.9 59% 25%

2.8 52% 163% 0.2 3.1 27% 10%

6.1 20% 32% 0.2 1.6 17% 10%

7.1 9% 12% 0.3 1.4 13% 10%

21.6 -6% -7% 0.4 1.1 18% 15%

Source: Company data, J.P. Morgan estimates.

Unitech: NAV assuming sale/lease till FY13 and remaining at market value of land
NPV of net bookings for 3 years Rented projects NPV at 11.5% cap rate Market value of land (assuming 30-40% margin) Total GAV UCP value of launched projects Other UCP projects Mumbai land Telecom value at book value of investments Unpaid land ex Dankuni Net debt Warrant issuance Total Value
Source: J.P. Morgan estimates.

FY10 95,820 12,115 215,289 323,224 5,472 2,800 14,000 5,500 (16,422) (35,504) 11,603 310,673

Per share 37 5 82 124 2 1 5 2 (6) (14) 4 119

275

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

United Spirits
www.unitedspirits.in
Company description United Spirits is the leading spirits company in India with over 55% market share. It strengthened its hold over the industry with the acquisition of Shaw Wallace’s spirits business. Whisky accounts for over 60% of its sales volume. Other products include rum, brandy, vodka and wine. In 2007 it acquired bulk scotch manufacturer Whyte & Mackay based in Scotland. Post mortem We see United Spirits as an attractive proxy to the steadily growing domestic spirits market with high entry barriers, with a pan-India presence, popular brand portfolio across price points, and dominant market share of over 55%. While we have always been bullish on the company’s long-term growth prospects, we now find cyclical concerns about high financial leverage and input cost concerns abating. With the recent fund-raising of US$350MM and treasury stake sale proceeds of US$186MM, leverage concerns have been alleviated to a large extent. Net debt/equity has decreased from 3x in FY09 to <1x for FY10E. Potential for earnings upgrades While we don’t anticipate much upside risk to FY10 earnings, lower interest costs and better margin profile could help push up FY11 and FY12 earnings. How much recovery is priced into the stock? UNSP had been a significant underperformer in the Indian consumer space YTD on account of three key concerns: (1) high financial leverage; (2) steep raw material inflation; and (3) high group leverage overhang. Except for the third issue, other concerns appear to be abating. Financial leverage has reduced and input costs seem to have peaked out. Hence, we would expect the stock to outperform the consumer space over next 12-18 months. Price target and key risks We have sum-of-the-parts-based Sept-10 price target of Rs1,140. We use an EV/EBITDA target multiple of 13x for the domestic business, which is at a 20% premium to global spirits companies, and an 8x EV/EBITDA target multiple for the Whyte & Mackay business, which is at a 25% discount to global spirits valuations. Key risks to our PT and rating are: (1) a sharp rise in ENA prices if sugar cane crop this year comes in significantly lower; (2) a significant slowdown in domestic liquor consumption; and (3) high group leverage and promoter’s pledged stake in UNSP.

Overweight
Rs1,091.10 Price Target: Rs1,140.00

India Beverages Latika Chopra, CFAAC
(91-22) 6157-3584 latika.chopra@jpmorgan.com J.P. Morgan India Private Limited

Vineet Sharma, CFA
(852) 2800-8523 vineet.k.sharma@jpmorgan.com J.P. Morgan Securities (Asia Pacific) Limited

Price performance
Rs
1400 1200 1000 800 600 400 200 0 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09

Rs

UNSP.BO Share Price

Source: Bloomberg.

Performance
1M Absolute (%) Relative (%)
Source: Bloomberg.

3M 6.4 5.3

12M 26.5 -32.2

19.6 24.3

Company data
52-week range (Rs) Mkt cap. (Rs MM) Mkt cap. (US$ MM) Avg daily value (US$ MM) Avg daily volume (MM) Shares O/S (MM) Date of price Index: Sensex Free float (%) Exchange rate
Source: Bloomberg.

425.65 – 1,106 137,036 2914 19.5 1.0 126 05 Nov 09 16063.9 63 47.0

Bloomberg: UNSP IN; Reuters: UNSP.BO
Rs MM, year-end March Revenue Net profit EPS (Rs) DPS (Rs) Net sales growth (%) Net profit growth (%) EPS growth (%) ROCE (%) P/E (x) P/BV (x) EV/EBITDA (X) adjusted Dividend yield (%) FY09 54,681 1,872 21.0 2.4 18 14 12 11 50.5 4.0 16.6 0.2 FY10E 62,594 3,691 30.2 3.0 14 97 44 12 35.1 2.5 14.5 0.3 FY11E 71,556 5,860 48.0 4.8 14 59 59 14 22.1 2.2 12.0 0.5 FY12E 80,460 7,643 62.6 6.3 12 30 30 16 16.9 2.0 10.2 0.6

Source: Company, Bloomberg, J.P. Morgan estimates. Note: Share price and valuations are as of 5 November 2009.

276

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

United Spirits: Summary of financials
Rs in millions, year-end March Profit and loss statement FY09 Revenue % change Y/Y EBITDA % change Y/Y EBITDA Margin (%) EBIT % change Y/Y EBIT Margin (%) Interest expense (Net) Earnings before tax % change Y/Y Tax Associates/Minority interest Net Income (Adjusted) % change Y/Y Shares Outstanding EPS (Adjusted) % change Y/Y Balance sheet FY09 Cash and cash equivalents Accounts receivable Inventories Others Current assets Goodwill Investments Net fixed assets Others Total assets Liabilities Payables Others Total current liabilities Total Loans Other liabilities Total liabilities Shareholders' equity BVPS 4,490 8,880 17,458 9,544 40,372 44,738 9,501 16,558 7,249 118,418 13,879 2,584 16,463 73,605 4,494 94,562 23,856 267.4 FY10E 6,294 10,289 20,579 10,499 47,662 44,738 9,501 16,601 7,249 125,751 15,434 2,584 18,019 51,442 4,004 73,465 52,287 427.9 FY11E 4,155 11,763 23,525 11,549 50,992 44,738 9,501 17,564 7,249 130,044 17,644 2,584 20,228 48,742 3,513 72,484 57,561 471.1 FY12E 3,611 13,226 26,453 12,703 55,993 44,738 9,501 18,448 7,249 135,929 19,839 2,584 22,424 46,042 3,022 71,489 64,440 527.4 EBITDA margin EBIT margin Net profit margin 54,681 18% 10,892 1% 20% 9,966 -1% 18% 7,176 2,790 -39% 916 -3 1,872 14% 89 21.0 12% FY10E 62,594 14% 13,227 21% 21% 12,270 23% 20% 6,115 6,155 121% 2,462 -2 3,691 97% 122 30.2 44% FY11E 71,556 14% 15,716 19% 22% 14,679 20% 21% 4,909 9,770 59% 3,908 -2 5,860 59% 122 48.0 59% FY12E 80,460 12% 18,307 16% 23% 17,190 17% 21% 4,449 12,741 30% 5,097 -2 7,643 30% 122 62.6 30% EBIT Depreciation Change in working capital Taxes Interest Others Cash flow from operations Capex Free cash flow Equity raised/ (repaid) Debt raised/ (repaid) Other Dividends paid Change in cash Beginning cash Ending cash DPS Ratio analysis % FY09 20% 18% 3% FY10E 21% 20% 6% FY11E 22% 21% 8% FY12E 23% 21% 9% Cash flow statement FY09 9,966 926 -4,753 -2,314 7,176 -8,646 2,354 -952 1,402 50 -2,294 37 -143 -948 5,437 4,489 2.4 FY10E 12,270 957 -3,930 -2,462 6,115 -6,115 6,835 -1,000 5,835 25,109 -22,163 -6,608 -369 1,805 4,489 6,294 3.0 FY11E 14,679 1,037 -3,260 -3,908 4,909 -4,909 8,548 -2,000 6,548 0 -2,700 -5,401 -586 -2,139 6,294 4,155 4.8 FY12E 17,190 1,117 -3,350 -5,097 4,449 -4,449 9,860 -2,000 7,860 0 -2,700 -4,940 -764 -544 4,155 3,611 6.3

Sales growth Net profit growth EPS growth Interest coverage (x) Net debt to total capital Net debt to equity Sales/assets Assets/equity ROE ROCE

18% 14% 12% 1.4 0.7 2.9 0.5 4.6 8% 11%

14% 97% 44% 2.0 0.6 1.5 0.6 2.8 10% 12%

14% 59% 59% 3.0 0.4 0.8 0.7 2.0 11% 14%

12% 30% 30% 3.9 0.4 0.7 0.7 1.9 13% 16%

Source: Company, J.P. Morgan estimates.

Sum-of-the-parts valuation for UNSP
UNSP - Domestic Whyte & Mackay Total EV Net debt Mcap Target Price
Source: J.P. Morgan estimates.

Target EV/EBITDA Multiple 13 8

Value 145,416 37,650 183,066 43,510 139,556 1,142

277

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Urbi
www.urbi.com
Company description Urbi is one of the largest Mexican lower-income homebuilders, with more than 40k units sold last year and over 300k units built during 28 years of operations. The company also has the highest margins among its peers, with EBITDA margin at 29.9% in 9M09. Post mortem Despite the expected decrease of 13% in revenues this year, we expect Urbi to growth more than its peers in 2010 given (1) its exposure to the northern states of Mexico, which are linked to a recovery in the US; (2) Urbi’s potential to add middle-income and high-income products if demand improves; and (3) its clear expansion strategy. Potential for earnings upgrades We believe that Urbi has a business model that should lead to higher growth vs its peers. Despite a more conservative growth outlook for this year, the company has not stopped its plans to open six new SBUs this year (it had 48 SBUs last year), most of them toward the end of the year, and another 5-6 in 2010. How much recovery is priced into the stock? Urbi is our top pick among the MX HB. The stock has been derated in the past 12 months and now is the cheapest stock on a P/BV basis despite its strong FCF. We believe that the market has not yet given Urbi full recognition for its growth strategy, exposure to northern states and strong free cash flow generation. Price target and key risks We rate Urbi Overweight with a Dec-10 price target of Ps34, which is the average of our DCF-based valuation and GGM-based valuation. The COE of 11.9% is based on a beta of 1.20, country risk of 2.4%, and a risk-free rate of 3.5%, resulting in a WACC of 11.8%. As downside risks to our rating we cite lower-than-expected ROEs and revenue growth, the result of slowerthan-expected expansion.
Bloomberg: Urbi* MM Reuters: Urbi* MM.SA
LC in millions, year-end December Sales Net profit EPS (LC) FD EPS (LC) DPS (LC) Sales growth (%) Net profit growth (%) EPS growth (%) ROE (%) P/E (x) FD P/E (x) FY08 15,003 2,168 2.22 2.22 17.4% 18.3% 18.3% 15.1% 11.7 11.7 FY09E 13,114 1,922 1.97 1.97 -12.6% -11.4% -11.4% 11.8% 13.2 13.2 FY10E 15,738 2,541 2.60 2.60 20.0% 32.2% 32.2% 13.8% 10.0 10.0 FY11E 18,125 3,074 3.15 3.15 15.2% 21.0% 21.0% 14.5% 8.3 8.3

Overweight
Ps25.99 Price Target: Ps34.00

Mexico Mexican Homebuilders Adrian E HuertaAC
(52 81) 8152-8720 adrian.huerta@jpmorgan.com J.P. Morgan Casa de Bolsa, S.A. de C.V., J.P. Morgan Grupo Financiero

Performance
1M Absolute (%) Relative (%)
Source: Bloomberg.

3M -9 -18

12M 27 -25

-12 -13

Company data
52-week range (LC) Mkt cap. (LCMM) Mkt cap. (US$MM) Avg daily value (US$MM) Avg daily volume (MM) Shares O/S (MM) Date of price Index: Bolsa Free float (%) Exchange rate
Source: Bloomberg.

18.00-29.56 25,406 1,979 4.1 2.0 976.45 11/25/2009 31,364 46% 12.84

Source: Company, Bloomberg, J.P. Morgan estimates. Note: Share price and valuations are as of 25 November 2009.

278

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Urbi: Summary of financials
Profit and loss statement
LC in millions, year-end December Revenue % change Y/Y Gross margin (%) EBITDA % change Y/Y EBITDA margin (%) EBIT % change Y/Y EBIT margin (%) Net interest Earnings before tax % change Y/Y Tax as % of EBT Net income (reported) % change Y/Y Shares O/S (MM) EPS (reported) (LC) FY08 15,003 17% 38.0% 4,160 19.4% 27.7% 3,171 11.2% 21.1% (109) 3,085 17.4% (917) 29.7% 2,168 18.3% 976 2.22 FY09E 13,114 -13% 39.2% 3,930 -5.5% 30.0% 2,904 -8.4% 22.1% (193) 2,735 -11.4% (813) 29.7% 1,922 -11.4% 976 1.97 FY10E 15,738 20% 39.2% 4,846 23.3% 30.8% 3,663 26.1% 23.3% (70) 3,616 32.2% (1,075) 29.7% 2,541 32.2% 976 2.60 FY11E 18,125 15% 39.2% 5,589 15.3% 30.8% 4,392 19.9% 24.2% (40) 4,375 21.0% (1,301) 29.7% 3,074 21.0% 976 3.15

Cash flow statement
LC in millions, year-end December EBIT Depreciation & amortization Change in working capital Taxes Cash flow from operations Capex Disposal/(purchase) Net interest Free cash flow Equity raised/(repaid) Debt raised/(repaid) Other Dividends Beginning cash Ending cash DPS (LC) FY08 3,171 (212) (4,492) (917) (2,904) (300) 0 (109) (728) 0 1,808 0 0 3,381 1,985 FY09E 2,904 (212) 851 (813) 2,258 (328) 0 (193) 3,834 0 1,200 0 0 1,985 5,125 FY10E 3,663 (235) (2,210) (1,075) 996 (393) 0 (70) 1,585 0 0 0 0 5,125 5,728 FY11E 4,392 (249) (1,834) (1,301) 1,489 (453) 0 (40) 1,996 0 0 0 0 5,728 6,764 -

Source: Company, J.P. Morgan estimates.

Source: Company, J.P. Morgan estimates.

Ratio analysis Balance sheet
LC in millions, year-end December Cash and cash equivalents Accounts receivable Inventories Others Current assets LT investments Net fixed assets Total assets Liabilities ST loans Payables Others Total current liabilities Long-term debt Other liabilities Total liabilities Shareholders’ equity BVPS (LC) FY08 1,985 11,883 11,178 963 28,666 0 510 30,114 988 2,663 1,014 5,977 4,525 4,235 14,737 15,377 15.75 FY09E 5,125 10,240 11,505 1,166 30,491 0 733 31,889 1,678 2,199 621 5,185 5,035 4,474 14,695 17,194 17.61 FY10E 5,728 11,857 12,470 1,166 33,677 0 891 35,233 1,678 2,572 621 5,558 5,035 4,904 15,498 19,736 20.21 FY11E 6,764 13,159 13,341 1,166 36,886 0 1,096 38,647 1,678 2,911 621 5,897 5,035 4,904 15,837 22,810 23.36 %, year-end December EBITDA margin Operating margin Net profit margin SG&A/sales Sales growth Net profit growth Sales per share growth EPS growth Interest coverage (x) Net debt to total capital Net debt to equity Sales/assets EBIT margin ROCE Assets/equity (x) ROI ROE FY08 27.7% 21.1% 14.5% 10.3% 17.4% 18.3% 17.4% 18.3% 0.00 16.9% 22.9% 0.50 21.1% 15.9% 1.96 15.9% 15.1% FY09E 30.0% 22.1% 14.7% 9.2% -12.6% -11.4% -12.6% -11.4% 0.00 6.6% 9.2% 0.41 22.1% 11.6% 1.85 11.6% 11.8% FY10E 30.8% 23.3% 16.1% 8.4% 20.0% 32.2% 20.0% 32.2% 0.00 3.7% 5.0% 0.45 23.3% 13.4% 1.79 13.4% 13.8% FY11E 30.8% 24.2% 17.0% 8.4% 15.2% 21.0% 15.2% 21.0% 0.00 -0.2% -0.2% 0.47 24.2% 12.4% 1.69 12.4% 14.5%

Source: Company, J.P. Morgan estimates.

Source: Company, J.P. Morgan estimates.

279

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Vakifbank
www.vakifbank.com
Company description Vakifbank is the 6th largest bank (by total assets) in Turkey; the 2nd largest publicly traded state bank with over 500 branches, 9,000 employees and c.TRY35bn in loans & c. TRY43bn in customer deposits. The GDF (Turkish Prime Ministry’s General Directorate of Foundations) manages foundations owning c.58% of Vakifbank shares. Vakifbank is primarily exposed to the corporate sector (c. 55% of loan book), with increasing penetration into retail and consumer segments. Post mortem Vakifbank’s key strengths include i) strong liquidity (L/D ratio of 82%, mostly in TRY) ii) stable deposit base (YTD growth 15%, vs sector c.8%) iii) solid capital base with 09E tier 1 of 14.5%, supporting dividends (09E 25% payout). In our view Vakifbank is adequately positioned for growth into 2010/11 and likely to outpace some of its peers (trend visible in Q3 with c.4% loan growth; capturing 25% of retail mortgage originations), due to its strong local deposit base. We believe loan growth (especially in high margin segments), coupled with normalization of provisions, should drive profitability into 2010 & 2011. Potential for earnings upgrades JPM expects consensus upgrades throughout 2010, supported by macro recovery, volume growth (2010-09E loan growth at 22%), capital generation and asset quality stabilization (11E NPLs at 5% vs 6.2% in 2009E) How much recovery is priced into the stock? Despite its strong performance (YTD up 174% vs sector 86%), Vakif trades at a material discount (10E P/NAV 1x vs sector at 1.5x). We believe rerating into 2010 would drive further share price performance (c.70% upside). Price target and key risks Our Dec-10 PT of TRY5.4 is based on the Gordon growth model (19% ROE, 15% COE & 5% LT growth rate). Key risks include further economic deterioration and the oil price hitting >$110, negatively impacting CAR.
Bloomberg: VAKBN TI; Reuters: VAKBN.IS
TRY in millions, year-end Dec Pre-provision op. profit, mn Net profit, mn EPS EPS growth (%) Tier I ratio (%) NPL ratio (%) Dividend yield RONAV (%) P/E (x) P/NAV FY08 1,550 753 0.30 -17% 14.6% 4.6% 0.0% 13.8% 10.6 1.4 FY09E 2,443 1,140 0.46 51% 14.5% 6.2% 3.6% 18.4% 7.0 1.2 FY10E 2,460 1,362 0.54 19% 13.2% 6.1% 6.0% 18.9% 5.9 1.0 FY11E 2,912 1,811 0.72 33% 12.3% 5.0% 9.1% 22.1% 4.4 0.9

Overweight
Price: TRY 3.2 Price Target: TRY 5.4

CEEMEA Banks Paul FormankoAC
(+44) 207-325-6028 paul.formanko@jpmorgan.com J.P. Morgan Securities Ltd.

Price Performance
4.0 TL 3.0 2.0 1.0
Nov-08 Feb-09 May-09 Aug-09 Nov-09

Source: Bloomberg

Performance
Absolute (%)
Source: Bloomberg

1M -19.2

3M -8.6

12M 199.1

Company data
52-week range (TL) Mkt cap. (YTL bn) Mkt cap. (US$BN) Avg daily value (US$MM) Avg daily volume (MM) Shares O/S (MM) Date of price Index (ISE): Free float (%) Exchange rate(USD/TRY)
Source: Bloomberg

4.12-1.04 8 5.4 37.1 17.5 2,500 23 Nov 09 45801.4 25.18% 1.5

Source: Company, Bloomberg, J.P. Morgan estimates. Note: Share price and valuations are as of cob 23 November 2009.

280

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Vakifbank: Summary of Financials
Profit and Loss Statement TL in millions, year end Dec Net interest income % Change Y/Y Non-interest income Fees & commissions % change Y/Y Trading revenues % change Y/Y Other Income Total operating revenues % change Y/Y Admin expenses % change Y/Y Other expenses Pre-provision operating profit % change Y/Y Loan loss provisions Other provisions Earnings before tax % change Y/Y Tax (charge) % Tax rate Minorities Net Income (Reported) FY07A FY08A Ratio Analysis FY09E FY10E FY11E TL in millions, year end Dec Per Share Data 3,067 3,062 3,444 EPS Reported 55.3% (0.2%) 12.5% EPSAdjusted 906 1,066 1,285 % Change Y/Y 476 571 713 DPS 2.0% 20.0% 25.0% % Change Y/Y 140 144 167 Dividend yield 172.6% 3.0% 16.0% Payout ratio 220 260 290 BV per share 3,973 4,128 4,730 NAV per share 38.5% 3.9% 14.6% Shares outstanding -884 -964 -1,050 16.0% 9.0% 9.0% Return ratios (646) (704) (768) RoRWA 2,443 2,460 2,912 Pre-tax ROE 57.6% 0.7% 18.3% ROE -1,017 -757 -648 RoNAV 1,425 1,703 2,264 Revenues 54.0% 19.5% 32.9% NIM (NII / RWA) (285) (341) (453) Non-IR / average assets 20.0% 20.0% 20.0% Total rev / average assets 0 0 0 NII / Total revenues 1,140 1,362 1,811 Fees / Total revenues Trading / Total revenues FY07A FY08A FY09E FY10E FY11E

1,676 1,975 5.7% 17.8% 820 894 360 466 25.0% 29.3% 48 51 4.5% 8.1% 266 338 2,496 2,869 4.5% 14.9% -537 -762 (8.4%) 41.9% (458) (557) 1,502 1,550 4.3% 3.2% -368 -624 1,299 925 27.6% (28.8%) (227) (172) 17.5% 18.6% 0 0 1,072 753

0.43 0.30 0.46 0.54 0.72 0.36 0.30 0.46 0.54 0.72 7.1% (16.9%) 51.4% 19.5% 32.9% 0.00 0.00 0.11 0.19 0.29 (100.0%) - 67.3% 51.9% 0.0% 0.0% 3.7% 6.1% 9.3% 0.0% 0.0% 25.0% 35.0% 40.0% 2.09 2.27 2.693.06 3.50 2.09 2.27 2.693.06 3.50 2,500.0 2,500.0 2,500.0- 2,500.0 2,500.0

3.5% 26.8% 18.7% 18.7%

2.2% 17.0% 13.8% 13.8%

2.8% 23.0% 18.4% 18.4%

2.8% 23.7% 18.9% 18.9%

3.0% 27.6% 22.1% 22.1%

4.3% 2.1% 6.3% 67.1% 14.4% 1.9%

4.3% 1.9% 6.1% 68.8% 16.3% 1.8%

5.5% 1.6% 7.0% 77.2% 12.0% 3.5%

4.8% 1.7% 6.4% 74.2% 13.8% 3.5%

4.7% 1.8% 6.5% 72.8% 15.1% 3.5%

Balance sheet TL in millions, year end Dec ASSETS Net customer loans % change Y/Y Loan loss reserves Investments Other interest earning assets % change Y/Y Average interest earnings assets Goodwill Other assets Total assets LIABILITIES Customer deposits % change Y/Y Long term funding Interbank funding Average interest bearing liabs Other liabilities Retirement benefit liabilities Shareholders' equity Minorities Total liabilities & Shareholders Equity
Source: Company reports and J.P. Morgan estimates.

FY07A

FY08A

FY09E FY10E FY11E TL in millions, year end Dec Cost ratios Cost / income Cost / assets Staff numbers Balance Sheet Gearing Loan / deposit Investments / assets Loan / assets Customer deposits / liabilities LT Debt / liabilities Asset Quality / Capital Loan loss reserves / loans NPLs / loans LLP / RWA Loan loss reserves / NPLs Growth in NPLs RWAs % YoY change Core Tier 1 Total Tier 1

FY07A

FY08A

FY09E

FY10E

FY11E

23,470 30.1% 1,143 11,508 6,302 38,875 1,479 42,408

30,502 30.0% 1,371 12,039 7,910 46,394 1,788 52,193

34,414 12.8% 1,879 15,076 9,303 55,496 1,865 60,609

41,494 20.6% 2,238 15,478 8,511 63,460 2,018 67,449

50,878 22.6% 2,521 15,927 9,368 72,730 2,130 78,241

39.8% 2.3% 8,700

46.0% 2.5% 9,567

38.5% 2.5% 10,332

40.4% 2.5% 11,159

38.4% 2.3% 12,052

85.3% 27.1% 58.0% 77.6% 0.0%

85.9% 23.1% 61.1% 79.8% 0.0%

83.2% 24.9% 59.3% 80.2% 0.0%

90.4% 22.9% 64.9% 81.0% 0.0%

97.5% 20.4% 68.5% 79.2% 0.0%

28,863 16.2% 6,769 33,441 1,526 5,226 0 42,408

37,120 28.6% 7,457 40,125 1,928 5,671 0 52,193

43,211 16.4% 8,519 48,170 2,127 6,736 0 60,609

48,422 12.1% 8,932 54,558 2,418 7,662 0 67,449

55,018 13.6% 9,612 61,008 4,8468,748 0 78,241

4.6% 4.6% 1.18% 100.0% 14.1% 31,268 50.1% 15.6% 15.6%

4.3% 4.6% 1.66% 94.2% 27.4% 37,682 20.5% 14.6% 14.6%

5.2% 6.2% 2.32% 83.9% 53.9% 43,871 16.4% 14.5% 14.5%

5.1% 6.1% 1.38% 84.5% 18.3% 54,701 24.7% 13.2% 13.2%

4.7% 5.0% 0.96% 93.4% 1.9% 67,565 23.5% 12.3% 12.3%

281

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

VanceInfo Technologies
www.vanceinfo.com
Company description VanceInfo (VIT) is the largest China-based IT services vendor for the US and European clients. It also earns a significant proportion of its revenue from local clients based in China. The company provides research and development, application development and maintenance, and enterprise services. Post mortem The Chinese IT sector is still in its early growth phase. In 2008, VanceInfo’s revenue from entities headquartered in China grew 201% Y/Y. We expect VanceInfo to continue to benefit from IT spending growth in China. In addition, we also expect VIT to benefit from the offshoring market in China which is expected to grow at a CAGR of 23% from 2008 to 2013 versus the 6.2% growth for the offshore industry worldwide (according to IDC data). Potential for earnings upgrades We expect gross margins to improve due to: (1) better billing rates; and (2) improved utilization rates, driven by higher spending from domestic and global customers. How much recovery is priced into the stock? The company may see an upside in its earnings as the global macros improve, from two drivers: (1) improvement in domestic demand as more MNCs increase IT spending in China to capture the higher growth of the country; and (2) IT spending recovery in the US and Europe due to macro improvements. Price target and key risks Our Dec-10 price target of US$23 is based on our DCF valuation with WACC of 11% and 0% terminal growth rate. We assume a long-term sales growth rate of 15%. Our PT implies a PEG ratio of 1.0 on our FY11E earnings and 09-12 EPS CAGR estimates. We believe VanceInfo should at least trade at 1x PEG, given the positive secular growth outlook. Key downside risks to our price target are: (1) slower-than-expected growth in macro and outsourcing activities; and (2) termination of a key account, such a Microsoft, TIBCO, or Huawei.
Bloomberg: VIT US; Reuters: VIT
US$ in millions, year-end December Sales Net profit GAAP EPS (US$) Adj. EPS (US$) DPS (US$) Sales growth (%) Net profit growth (%) EPS growth (%) ROE (%) GAAP P/E (x) Adj. P/E (x) FY08 102.7 16.2 0.40 0.4 0.0 63.7 69.0 79.8 13.3 42.6 39.2 FY09E 143.1 20.1 0.49 0.5 0.0 39.4 24.5 23.1 14.1 34.6 32.3 FY10E 185.7 27.0 0.65 0.7 0.0 29.8 34.1 31.7 15.9 26.2 24.8 FY11E 236.1 35.1 0.83 0.9 0.0 27.2 29.8 28.0 17.4 20.5 19.6

Overweight
US$17.0 Price Target: US$23.00

China IT and Internet Dick WeiAC
(852) 2800-8535 dick.x.wei@jpmorgan.com J.P. Morgan Securities (Asia Pacific) Limited

Price performance
US$
Price Performance
20 $ 10 0
Nov-08 Feb-09 May-09 Aug-09 Nov-09

VIT share price ($ S&P500 (rebased)

Source: Bloomberg.

Performance
1M Absolute (%) Relative (%)
Source: : Bloomberg.

3M 2.1 -2.0

12M 107.5 103.4

-5.6 -7.7

Company data
52-week range (US$) Mkt cap. (Rmb MM) Mkt cap. (US$ MM) Avg daily value (US$MM) Avg daily volume (MM) Shares O/S (MM) Date of price Index: NYSE Free float (%) Exchange rate(Rmb/US$)
Source: Company, Bloomberg.

4.2-21.1 4,776 701 7.61 0.52 41 12-Nov-09 7,063 37 6.83

Source: Company, Bloomberg, J.P. Morgan estimates. Note: Share price and valuations are as of 12 November 2009. 282

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

VanceInfo Technologies: Summary of financials
Profit and loss statement
US$ in millions, year-end December Revenue % change Y/Y Gross margin (%) EBITDA % change Y/Y EBITDA margin (%) EBIT % change Y/Y EBIT margin (%) Net interest Earnings before tax % change Y/Y Tax as % of EBT Net income (reported) % change Y/Y Shares O/S (MM) EPS (reported) (US$) FY08 102.7 63.7 39.0 18.4 61.8 17.9 14.7 66.2 14.3 2.0 17.4 77.3 -1.3 7.5 16.2 69.0 40.2 0.40 FY09E 143.1 39.4 37.2 26.1 41.6 18.2 20.7 40.9 14.5 1.2 21.8 25.7 -1.7 7.8 20.1 24.5 41.3 0.49 FY10E 185.7 29.8 37.0 33.5 28.5 18.1 27.0 30.1 14.5 2.1 29.0 33.0 -2.0 7.0 27.0 34.1 41.8 0.65 FY11E 236.1 27.2 37.3 43.6 30.0 18.5 35.6 32.1 15.1 2.5 38.1 31.3 -3.0 8.0 35.1 29.8 42.4 0.83

Cash flow statement
US$ in millions, year-end December Net Income Depr. & Amortisation Change in working capital Other Cash flow from operations Capex Disposal/ (purchase) Cash flow from investing Free cash flow Equity raised/ (repaid) Debt raised/ (repaid) Other Dividends paid Cash flow from financing Net change in cash F/X effects Beginning cash Ending cash FY08 16.2 3.7 -4.7 0.2 15.4 -6.2 -3.9 -10.0 9.2 2.9 0.0 -5.8 0.0 -2.8 2.5 0.7 78.2 81.4 FY09E 20.1 5.4 -7.7 1.4 19.2 -6.5 0.2 -6.2 12.7 2.1 0.0 0.0 0.0 2.1 15.1 0.0 81.4 96.5 FY10E 27.0 6.6 -5.8 1.5 29.3 -9.7 0.0 -9.7 19.6 0.0 0.0 0.0 0.0 0.0 19.6 0.0 96.5 116.2 FY11E 35.1 8.0 -7.2 1.6 37.5 -11.6 0.0 -11.6 25.8 0.0 0.0 0.0 0.0 0.0 25.8 0.0 116.2 142.0

Source: Company, J.P. Morgan estimates.

Source: Company, J.P. Morgan estimates.

Balance sheet
US$ in millions, year-end December Cash and cash equivalents Accounts receivable Deferred tax Others Current assets LT investments Net fixed assets Others Total assets Liabilities Provisions Payables Others Total current liabilities Long term debt Other liabilities Total liabilities Shareholders' equity FY08 81.4 36.8 0.0 3.4 121.6 2.9 11.3 19.7 155.5 0.0 3.2 18.9 22.1 0.0 1.9 23.9 131.5 FY09E 96.5 51.7 0.0 4.3 152.6 2.6 13.2 18.9 187.2 0.0 4.2 26.0 30.2 0.0 1.9 32.1 155.1 FY10E 116.2 65.5 0.0 4.3 186.0 2.6 17.1 18.1 223.8 0.0 5.4 32.8 38.2 0.0 1.9 40.1 183.6 FY11E 142.0 82.1 0.0 4.3 228.5 2.6 21.4 17.4 269.9 0.0 6.7 40.9 47.7 0.0 1.9 49.6 220.3

Ratio analysis
%, year-end December Gross Margin EBITDA margin Operating Margin Net Margin SG&A/Sales Sales growth Operating Profit Growth Net profit growth EPS (Reported) growth Interest coverage (x) Net debt to total capital Net debt to equity Asset Turnover (%) ROE (%) ROIC (%) FY08 39.0 17.9 14.3 15.8 4.0 63.7 66.2 69.0 79.8 213 n.m. n.m. 66.0 13.3 32.2 FY09E 37.2 18.2 14.5 14.1 3.1 39.4 40.9 24.5 23.1 518 n.m. n.m. 76.4 14.1 31.2 FY10E 37.0 18.1 14.5 14.5 3.0 29.8 30.1 34.1 31.7 n.m. n.m. n.m. 83.0 15.9 34.1 FY11E 37.3 18.5 15.1 14.8 3.0 27.2 32.1 29.8 28.0 n.m. n.m. n.m. 87.5 17.4 37.2

Source: Company, J.P. Morgan estimates.

Source: Company, J.P. Morgan estimates.

283

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Xinao Gas
www.xinaogas.com
Company description Xinao Gas distributes gas in China, with operations in over 70 cities and districts, and covering a total urban population of over 40 million as of December 2008. The group focuses on piped-gas project cities with strong industrial and commercial background. The company has one of the most established track records in the China city gas sector amongst its listed peers. Post mortem (1) Strong project execution track record as evidenced by the >15% ROE delivered over the past 3-5 years. (2) Focus on high-volume gas consumers, such as industrial and commercial users, to foster further volume growth. Potential for earnings upgrades We expect gas supplies in China to improve over the next 1-2 years as more long-distance pipelines (W-E Pipeline No.2 and Sichuan-to-East Pipeline). Also, we expect the impending new gas pricing policy to introduce an automatic cost-pass through mechanism. These measures will likely enhance Xinao’s future gas sales and improve protection on its gas sales margins. How much recovery is priced into the stock? The recovery angle on Xinao comes from potential upside from higher-thanexpected connection fee revenue due to a recovery in the property market. Given management’s conservative guidance and the continued recovery in the property market, we expect more positive surprises. Price target and key risks Our Dec-10 price target of HK$22.2 is based on our DCF valuation, assuming a WACC of 10.1%, and a terminal growth rate of 2%. Key risks to our PT include lower-than-expected gas sales, and new household connections.

Overweight
17.28 Price Target: HK$22.2

China Natural Gas Pipeline and Distribution Boris KanAC
(852) 2800-8573 boris.cw.kan@jpmorgan.com J.P. Morgan Securities (Asia Pacific) Limited

Price performance
18 HK$ 10 2
Oct-08 Jan-09 Apr-09 Jul-09 Oct-09

2688.HK share price (HK$ R-CHIP (rebased)

Source: Bloomberg.

Performance
1M Absolute (%) Relative (%)
Source: Bloomberg.

3M 34% 38%

12M 152% 120%

13% 13%

Company data
52-week range (HK$) Mkt cap. (HK$MM) Mkt cap. (US$MM) Avg daily value (US$MM) Avg daily volume (MM) Shares O/S (MM) Date of price Index (HSI Red Chip) Free float (%) Exchange rate
Source: Bloomberg.

6.0-19.0 17,559 2,266 1.4 1.8 1,050 5-Nov-09 3,292 64 7.75

Bloomberg: 2688 HK; Reuters: 2688.HK
Rmb in millions, year-end December Sales EBITDA Net profit EPS (Rmb cents) Net profit growth (%) EPS growth (%) ROE (%) P/E (x) EV/EBITDA (%) P/BV (x) Dividend yield (%) FY08 8,266 1,779 632 0.62 24.3 21.8 15.8 25.2 12.2 4.1 0.9 FY09E 13,405 2,147 822 0.78 30.3 25.3 17.9 20.1 10.1 3.7 1.1 FY10E 15,151 2,566 1,021 0.97 24.1 24.1 19.2 16.2 8.4 3.2 1.4 FY11E 17,157 2,976 1,237 1.18 21.1 21.1 19.9 13.4 7.3 2.7 1.7

Source: Company, Bloomberg, J.P. Morgan estimates. Note: Share price and valuation are as of 5 November 2009.

284

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Xinao Gas: Summary of financials
Rmb in millions, year-end December Profit and loss statement FY08A Revenues % change Y/Y Gross Margin (%) EBITDA % change Y/Y EBITDA Margin (%) EBIT % change Y/Y EBIT Margin (%) Net Interest Earnings before tax % change Y/Y Tax as % of EBT Net Income (Reported) % change Y/Y Shares Outstanding EPS (reported) (Rmb) % change Y/Y Balance sheet Cash Accounts receivable Inventories Others Current assets LT investments Net fixed assets Total assets Liabilities ST loans Payables Others Total current liabilities Long term debt Other liabilities Total liabilities Shareholders' equity BVPS (Rmb)
Source: Company, J.P. Morgan estimates.

Cash flow statement FY09E 13,405 62.2 25.1 2,147 20.7 16.0 1,841 21.7 13.7 -367 1,473 30.2 (339) 23.0 822 30.3 1050 0.78 25.3 FY09E 1,680 2,745 412 1,290 6,127 2,017 9,328 17,472 1,869 4,464 1,017 7350 3534 1670 12554 4920 4.69 FY10E 15,151 13.0 25.2 2,566 19.5 16.9 2,217 20.5 14.6 -340 1,877 27.4 (469) 25.0 1,021 24.1 1050 0.97 24.1 FY10E 1,933 3,061 466 1,421 6,881 2,206 10,143 19,230 1,869 4,921 1,115 7905 3534 2058 13497 5735 5.46 FY11E 17,157 13.2 25.1 2,976 16.0 17.3 2,588 16.7 15.1 -314 2,274 21.2 (568) 25.0 1,237 21.1 1050 1.18 21.1 FY11E 1,997 3,419 527 1,572 7,515 2,394 10,724 20,633 1,869 5,572 1,229 8670 2723 2528 13921 6715 6.39 EBIT Depreciation & amortisation Change in working capital Taxes Cash flow from operations Capex Disposal/ (purchase) Net Interest Free cash flow Equity raised/ (repaid) Debt raised/ (repaid) Other Dividends paid Beginning cash Ending cash DPS (Rmb) FY08A 1,512 276 206 -186 1,450 -1,186 -229 -381 34 0 804 -503 -119 1,693 1,725 0.16 FY09E 1,841 306 -46 -339 1,694 -1,243 0 -367 395 0 0 0 -158 1,725 1,680 0.20 FY10E 2,217 349 -16 -470 2,093 -1,164 -1 -340 713 0 0 0 -206 1,680 1,933 0.24 FY11E 2,588 388 115 -568 2,667 -969 0 -314 1,366 0 -811 0 -255 1,933 1,997 0.29 8,266 43.6 27.2 1,779 36.8 21.5 1,512 38.0 18.3 -381 1,131 38.9 (260) 23.0 632 24.3 1010 0.62 21.8 FY08A 1,725 1,431 254 944 4,354 1,829 8,391 14,574 1,869 2,752 806 5427 3534 1357 10318 4256 4.21

Ratio analysis % EBITDA margin Operating margin Net profit margin SG&A/sales Sales per share growth Sales growth Net profit growth EPS growth Interest coverage (x) Net debt to equity Sales/assets Assets/equity ROE

FY08A 21.5 18.3 7.6 14.0 43.6 43.6 24.3 21.8 4.0 86.4 56.7 342.4 15.8

FY09E 16.0 13.7 6.1 14.0 62.2 62.2 30.3 25.3 5.0 75.7 76.7 355.1 17.9

FY10E 16.9 14.6 6.7 13.0 13.0 13.0 24.1 24.1 6.5 60.5 78.8 335.3 19.2

FY11E 17.3 15.1 7.2 12.3 13.2 13.2 21.1 21.1 8.2 38.6 83.2 307.3 19.9

285

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Yulon Motor
www.yulon-motor.com.tw
Company description Yulon Motor was established in 1953 and listed on TAIEX in 1976. It is the No.3 auto maker in Taiwan with 11.9% market share year-to-October. The company is now a pure OEM auto maker in Taiwan for Nissan and Buick, while its subsidiary Yulon Nissan (2227 TT) is in charge of sales and R&D after it spun off from Yulon Motor in 2003. Yulon launched its own brand Luxgen MPV in the Taiwan market in 3Q09 and plans to launch in China in 2010. Post mortem Business outlook in 2010:We believe the Taiwan auto market will continue its recovery trend in 2010 with 5% growth to 300,000 units from around 260,000 units in 2009. On a top-down view, we believe Yulon being one of the top three players will benefit from this trend. From a bottom-up perspective, the company’s strong product pipeline has and will continue to assist its market share gain next year. All these will translate into bottom-line growth, in our view. Potential for earnings upgrades Potential benefit from appreciation of land price: On the asset angle, Yulon has exposure to land asset in Taipei County which is planned to be developed into commercial and residential projects in the next couple of years. For the property market, we believe the strength of land price appreciation will be stronger than that of housing prices. Yulon, as a result, could benefit from the appreciation in its land value and hence a rise in its NAV. How much recovery is priced into the stock? Risks to our investment theme: The launch of its own brand product in Taiwan and in the future in China could be a swing factor for Yulon’s financial position and profitability. On land asset, its ability to unlock hidden value could also be a key factor for its earnings growth in the next few years. Price target and key risks We maintain our Overweight rating on Yulon and our Dec-10 PT of NT$50, based on NAV analysis. Risks to our analysis are worse-than-expected sales growth and earnings in both Taiwan and China.
Bloomberg: 2201 TT; Reuters: 2201.TW
NT$ in millions, year-end December Sales Net profit EPS (adj.-NT$) P/E (x) P/B (x) ROE Div yield Sales growth EPS growth Gross margin Net margin 2008 17,504 401 0.26 155.6 1.1 0.7% 1.5% -27.1% -87.7% 10% 2% 2009E 17,367 1,465 0.94 42.6 1.1 2.5% 0.2% -0.8% 265.7% 11% 8% 2010E 18,390 1,075 0.69 61.2 1.1 1.8% 0.7% 5.9% -26.6% 11% 6% 2011E 20,033 1,494 0.96 44.1 1.0 2.5% 0.5% 8.9% 39.0% 10% 7%

Overweight
NT$40.0 Price Target: NT$50.0

Taiwan Automobile Manufacture Nick LaiAC
(886-2) 2725-9864 nick.yc.lai@jpmorgan.com J.P. Morgan Securities (Taiwan) Limited.

Price performance (rebased)
230% 180% 130% 80% 30% -20% Nov-08 Feb-09 May-09 Aug-09 Nov-09 Yulon Motor TSE

Source: Bloomberg.

Performance
1M Absolute (%) Relative (%)
Source: Bloomberg.

3M 32 22

12M 202 91

9 10

Company data
52-wk range (NT$) Mkt cap. (NT$B) Mkt cap. (US$MM) Avg. daily value (US$MM) Avg. daily volume (MM) Avg. daily value (NT$MM) Shares O/S (MM) Date of price Index (TWSE) Free float (%) Exchange rate (NT$/US$1)
Source: Bloomberg.

11.7-42.6 62.8 1,932 21.89 21 712 1,571 5-Nov-09 7,417.5 40 32.5

Source: Company, Bloomberg, J.P. Morgan estimates. Note: Share price and valuations are as of 5 November 2009.

286

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Yulon Motor: Summary of financials
NT$ in millions, year-end December Profit and loss statement 2007 Net Sales 24,025 Gross Profit 2,422 Operating Income 999 Interest Income 108 Investment Income 1,996 Total Non-Op.Income 2,649 Interest Expenses 2 Total Non-Op. Exp. 60 Pre-Tax Income 3,589 Net Income 3,102 EPS (NT$- adj) 2.09 Margin (%) Gross margin Operating margin Net margin Growth (%) Sales PAT EPS Balance sheet NT$mn Cash & Equivalent MarketableSecurity A/R & N/R Inventories Total Current Assets Long-term Investment Total Fixed Assets Total Other Assets Total Assets Short-term Borrow. Bills Issued A/P & N/P Total Current Liab. L-T Liabilities Total Other L-T Liab Total Liabilities Common Stocks Total Equity Total Liab. & Equity 10.1% 4.2% 12.9% -11% 4% 3% 2007 6,877 400 947 3,045 13,018 38,126 14,653 5,091 70,888 3 0 2,111 8,764 0 5,907 14,671 14,773 56,217 70,888 Cash flow statement 2008 17,504 1,825 313 141 0 3,412 0 3,012 713 401 0.26 10.4% 1.8% 2.3% -27.1% -87.1% -87.7% 2008 8,391 122 267 2,010 12,156 36,785 12,322 5,412 66,675 4 0 678 4,338 0 4,921 9,259 15,704 57,416 66,675 2009E 17,367 1,834 808 113 58 915 2 20 1,703 1,465 0.94 10.6% 4.7% 8.4% -0.8% 265.7% 265.7% 2009E 7,691 82 666 2,553 12,358 39,145 12,338 5,327 69,168 5 0 1,696 5,372 0 5,041 10,413 15,704 58,755 69,168 2010E 18,390 1,949 862 100 145 395 0 7 1,250 1,075 0.69 10.6% 4.7% 5.8% 5.9% -26.6% -26.6% 2010E 5,591 82 740 2,703 10,482 42,095 12,135 5,327 70,039 5 0 1,892 5,489 0 5,141 10,629 15,704 59,409 70,039 2011E 20,033 2,050 878 78 629 866 0 8 1,737 1,494 0.96 10.2% 4.4% 7.5% 8.9% 39.0% 39.0% 2011E 4,790 82 808 2,956 10,001 44,045 11,952 5,327 71,325 5 0 2,074 5,590 0 5,141 10,731 15,704 60,594 71,325 Net Income Depreciation Amortization Dec(Inc)-A/R Dec(Inc)-Inventory Inc(Dec)-A/P Other adj. Cash Flow-Operating Sales (Purchase) LT Invest Sales (Purchase) of FA Others Cash Flow-Inv. Free cash flow Dividend Paid Inc(Dec)-S-T Debt Inc(Dec) L-T Debt Others Cash Flow-Financing Cash Equiv.-Begin Cash Equiv.-End Ratio analysis Financial structure Total debt / total asset Net debt to equity Liquidity Current ratio Quick ratio Interest cover (x) Margins Gross margin Operating margin Net margin Profitability ROE ROA ROCE Others BV per share Cash dividend (NT$) Dividend yield (%) 2007 3,102 520 0 (232) 379 323 (834) 3,257 (1,364) 1,416 (42) 9 3,267 (1,228) 3 0 (286) (1,512) 5,122 6,877 2007 7% -5% 1.5 0.9 1,582.6 10% 4% 13% 6% 4% 16% 38 0.8 2% 2008 401 555 0 680 1,035 (1,433) 453 1,690 (2,584) 3,351 79 846 2,536 (883) 2 0 (141) (1,022) 6,877 8,391 2008 0.2% -14.6% 2.8 2.0 10.4% 1.8% 2.3% 0.7% 0.6% 2.0% 37 0.6 1.5% 2009E 1,465 420 20 (399) (543) 1,018 (151) 1,829 (2,360) (435) 391 (2,404) (575) (126) 1 0 0 (125) 8,391 7,691 2009E 0.2% -13.0% 2.3 1.6 709.9 10.6% 4.7% 8.4% 2.5% 2.2% 7.6% 37.4 0.1 0.2% 2010E 1,075 317 20 (74) (149) 197 (446) 940 (2,950) (115) 446 (2,619) (1,679) (421) 0 0 0 (421) 7,691 5,591 2010E 0.2% -9.3% 1.9 1.2 11,776.0 10.6% 4.7% 5.8% 1.8% 1.5% 6.3% 37.8 0.3 0.7% 2011E 1,494 288 20 (67) (254) 181 64 1,726 (1,950) (105) (164) (2,219) (493) (309) 0 0 0 (309) 5,591 4,790 2011E 0.2% -7.8% 1.8 1.0 16,369.1 10.2% 4.4% 7.5% 2.5% 2.1% 9.1% 38.6 0.2 0.5%

Source: Company, J.P. Morgan estimates.

Yulon Motor—NAV analysis
NT$ in millions Auto core business (A) Long-term investments 2227 Yulon Nissan Motor 2204 China Motor 9941 Taiwan Acceptance Other LT investments Total Long-term investment (B) Land/Property Sindian plant Other properties and land Total land/property (C ) Sum-of-the-parts value Net (debt)/ cash in 10E Total value or NAV Fair value: 15% discount to NAV
Source: TEJ, Company, J.P. Morgan estimates. 287

Valuation method 10x core business P/E Market value JPMorgan price target NT$30 Market value 0.6x Book value NT$1mn/ping of land on average NT$0.02mn/ping of land on average (A) + (B) + (C )

Owned by Yulon 100% 47.8% 8.0% 53.3% Land size (ping) 25,310 760,250 785,560

Estimated value 8,616 10,446 3,379 3,908 15,777 33,510 27,628 16,500 44,128 86,254 5,537 91,792 78,023

NAV per share (NT$) 6 7 2 3 10 22 18 11 28 55 4 59 50

Weighting 9% 11% 4% 4% 17% 37% 30% 18% 48% 94% 6% 100%

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

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288

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Stocks to Avoid
289

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Açúcar Guarani
www.acucarguarani.com.br
Company description Guarani is the Brazilian subsidiary of Tereos Group, the fourth-largest sugar and ethanol producer worldwide. On a local level, Guarani is the thirdlargest sugar producer and fifth-largest ethanol producer in Brazil. In the 2009 crop year (ending March ’09), Guarani crushed 14.2mt of sugarcane, of which 29% was owned (61% from third parties) and 63% was destined for sugar production (37% to ethanol). Guarani operates through 6 mills, 5 in the northwestern region of Sao Paulo state and one in Mozambique. Guarani’s shares are listed in Bovespa’s Novo Mercado. Post mortem Guarani has actually been experiencing strong earnings during the downturn due to the unique fundamentals in the sugar market. Looking over the next year, we expect the deficit in sugar to turn to a surplus, with sugar prices to decline in 2H10. Potential for earnings upgrades We think lack of sugarcane integration has hurt Guarani, as its sugarcane costs (80% of total production costs) are linked to movements in sugar and ethanol prices. Input costs should continue to stay high as ethanol price increases are likely to offset any softness in sugar prices. At the same time, the company should benefit from lower interest costs as it is quite levered, at 4x ND/EBITDA. How much recovery is priced into the stock? We think the stock is pricing in spot sugar prices, disregarding the potential for sugar price declines. Guarani is trading at 6.5x consensus EBITDA, a multiple that we would think are fair on normalized, not peak, earnings. Key risks to our rating Key upside risks to our UW rating on Guarani are (1) higher-than-expected sugar prices; and (2) a weaker-than-expected BRL.
Bloomberg: ACGU3 BZ; Reuters: ACGU3.SA
R$ in millions, year-end March Sales Net profit EPS (R$) FD EPS (R$) DPS (LC) Sales growth (%) Net profit growth (%) EPS growth (%) ROE (%) P/E (x) FD P/E (x) FY08 906 (80) (0.48) -0.10 7% -165% -165% -6.6% NM NM FY09E 1,185 (83) (0.50) 0.02 28% 30% 4% -7.6% NM 46.09 FY10E 1,378 31 0.19 0.02 16% -138% -138% 2.8% 46.5 NM FY11E 1,422 25 0.15 0.01 3% -21% -21% 2.2% NM NM

Underweight
R$5.10

Brazil Agribusiness Debbie Bobovnikova, CFAAC
(1-212) 622 3489 debbie.bobovnikova@jpmorgan.com J.P. Morgan Securities Inc.

Price performance
R$

8.0 6.0 4.0 2.0 0.0
Nov-08 M ar-09 Jul-09 Nov-09

Source: Bloomberg.

Performance
1M Absolute (%) Relative (%)
Source: Bloomberg.

3M -10% -25%

12M 153% 71%

-7% -9%

Company data
52-week range (BRL) Mkt cap. (BRL) Mkt cap. (US$MM) Avg daily value (US$MM) Avg daily volume (MM) Shares O/S (MM) Date of price Index: iBovespa Free float (%) Exchange rate
Source:Bloomberg.

1.85-6.34 1,419 824 2.0 0.7 287 11/25/09 67,917 30.7% 1.7221

Source: Company, Bloomberg, J.P. Morgan estimates. Note: Share price and valuations are as of 25 November 2009.

290

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Açúcar Guarani: Summary of financials
Profit and loss statement
R$ in millions, year-end March Revenue % change Y/Y Gross margin (%) EBITDA % change Y/Y EBITDA margin (%) EBIT % change Y/Y EBIT margin (%) Net interest Earnings before tax % change Y/Y Tax as % of EBT Net income (reported) % change Y/Y Shares O/S (MM) EPS (reported) (R$) FY08 906 7.0% 37.2% 117 -53% 13% (34) -23% -4% (80) (86) -147% 14 -16% (80) -165% 167 (0.48) FY09E 1,185 30.7% 41.1% 249 56% 21% 63 -79% 5% (83) (11) -87% 20 -180% (83) 30% 167 (0.50) FY10E 1,378 16.4% 40.5% 281 13% 20% 138 395% 10% 31 142 -1389% (11) -8% 31 -138% 167 0.19 FY11E 1,422 3.1% 39.2% 279 -1% 20% 166 97% 12% 25 133 -6% (9) -6% 25 -21% 167 0.15

Cash flow statement
R$ in millions, year-end March EBIT Depreciation & amortization Change in working capital Taxes Cash flow from operations Capex Disposal/(purchase) Net interest Free cash flow Equity raised/(repaid) Debt raised/(repaid) Other Dividends Beginning cash Ending cash DPS (R$) FY08 (34) (48) 47 (9) -151 325 (12) (86) -45 6 96 FY09E 63 (151) 209 14 11 772 (41) (1,064) 327 96 467 FY10E 138 (187) 89 20 175 421 (47) (170) 0 467 419 FY11E 166 (143) 0 (11) 118 170 2 201 0 419 263 -

Source: Company, J.P. Morgan estimates.

Source: Company, J.P. Morgan estimates.

Ratio analysis Balance sheet
R$ in millions, year-end March Cash and cash equivalents Accounts receivable Inventories Others Current assets LT investments Net fixed assets Total assets Liabilities ST loans Payables Others Total current liabilities Long-term debt Other liabilities Total liabilities Shareholders’ equity BVPS (R$) FY08 96 84 261 86 528 170 1,073 2,500 512 40 183 735 231 320 1,293 1,206 7.21 FY09E 467 120 361 68 1,017 908 1,238 3,163 1,135 55 193 1,383 362 311 2,060 1,102 6.58 FY10E 419 139 338 68 964 908 1,264 3,137 1,084 65 193 1,342 346 311 2,003 1,133 6.77 FY11E 263 144 356 68 831 908 1,397 3,136 1,069 68 193 1,330 341 311 1,986 1,149 6.87 %, year-end March EBITDA margin Operating margin Net profit margin SG&A/sales Sales growth Net profit growth Sales per share growth EPS growth Interest coverage (x) Net debt to total capital Net debt to equity Sales/assets EBIT margin ROCE Assets/equity (x) ROI ROE FY08 13% -4% -9% 0.15 7% -165% -65% -165% (0.36) 0.26 0.54 0.36 -4% -0.02 2.07 -3.2% -6.6% FY09E 21% 5% -7% 0.24 28% 30% 66% 4% 0.64 0.33 0.93 0.37 5% 0.04 2.87 -2.6% -7.6% FY10E 20% 10% 2% 0.20 16% -138% 16% -138% 3.17 0.32 0.89 0.44 10% 0.08 2.77 1.0% 2.8% FY11E 20% 12% 2% 0.20 3% -21% -74% -21% 4.00 0.37 1.00 0.45 12% 0.09 2.73 0.8% 2.2%

Source: Company, J.P. Morgan estimates.

Source: Company, J.P. Morgan estimates.

291

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

AU Optronics
www.auo.com
Company description AU Optronics (AUO) was formed in 2001 by the merger of Acer Display and Unipac Opto; it then merged with QDI in 2006. AUO is one of the top LCD panel suppliers in the world with a 16% market share in 1H09. It currently runs means of 3.5G, 4G, 5G, 6G, 7.5G, and 8.5G fabs. Its major products include small/medium-sized panels, NB panels, monitor panels, and LCD TV panels. Post mortem AUO fared worse than Korean peers, given its more volatile earnings in the down-cycle. Unlike Korean peers who were able to fill the capacity from own brands’ support, AUO ran at a lower UT rate and lost market share, given its widening gap with LGD. We believe the inferior position and smaller scale will cap its potential profit upside. Also, the industry’s cost reduction slowing down due to limited room for component price squeeze and marginal fab migration, compared to 4G/5G/6G migrations in the past. This should limit the margin improvement. Potential for earnings upgrades The company’s earnings are more sensitive to ASP changes. Margin upside should come from better size mix that lifts the blended ASP. How much recovery is priced into the stock? We believe volume recovery from stronger pull-in demand in 2H09 has been priced in. We believe the sector lacks excitement and we do not expect any near-term catalysts to reverse the downward trend of panel prices. Also, with more capacity ramp-up next year, oversupply may persist through 1H10. AUO’s 2009 peak multiple of 1.1x book is lower than its historical trough valuation, yet it is justified by its poor ROE, in our view. Looking ahead to 2010, unless the blended ASP substantially improves due to a product-mix shift, potential profit upside and re-rating are doubtful, in our view. Price target and key risks We maintain our Underweight rating; our Jun-10 price target of NT$27 is based on 0.8x FY10E P/BV, implying a mid-to-trough valuation. A key upside risk to our PT is better mainstream size mix accelerating the margin improvement.
Bloomberg: 2409 TT; Reuters: 2409.TW
NT$ in billions, year-end December Sales Net profit EPS (NT$) BPS (NT$) DPS (NT$) Sales growth (%) Net profit growth (%) EPS growth (%) ROE (%) P/E (x) FY08 423.9 21.3 2.5 35.2 2.5 -11.7 -54.6 -55.8 7.1 11.7 FY09E 348.2 -17.1 -2.0 32.8 0.3 -17.9 -180.5 -176.8 -5.8 nm FY10E 388.4 6.7 0.8 33.5 0.0 11.6 138.9 138.7 2.3 39.5 FY11E 384.5 10.1 1.1 34.3 0.3 -1.0 51.6 51.5 3.4 26.1

Underweight
NT$29.8 Price Target: NT$27

Taiwan Semiconductors Liang-Chun Lin A C
(886-2) 2725-9863 Liang.c.lin@jpmorgan.com J.P. Morgan Securities (Taiwan) Limited.

JJ Park A C
(822) 758-5717 jj.park@jpmorgan.com J.P. Morgan Securities (Far East) Limited, Seoul Branch

Winnie Hong
(886-2) 2725-9899 winnie.wy.hong@jpmorgan.com J.P. Morgan Securities (Taiwan) Limited.

Price performance
170 140 110 80 50 Oct-08 Jan-09 AUO Apr-09 Jul-09 TWSE Oct-09

Source: Bloomberg.

Performance
Absolute (%) Relative (%)

1M -5.4 -3.9

3M -12.1 -18.6

12M 37.3 -13.1

Source: Bloomberg.

Company data
52-week range (NT$) Mkt cap. (NT$B) Mkt cap. (US$B) Avg daily value (US$MM) Avg daily volume (MM) Shares O/S (MM) Date of price Index: TWSE Free float (%) Exchange rate
Source: Bloomberg.

17.3 - 38.2 236.0 8.1 59.9 58.2 8,827 5-Nov 5, 09 7,417 65% NT$32.5/US$1

Source: Company, Bloomberg, J.P. Morgan estimates. Note: Share price and valuations are as of 5 November 2009. 292

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

AU Optronics: Summary of financials
NT$ in billions, year-end December Income statement FY08A Revenues Cost of Goods Sold Gross Profit R&D Expenses SG&A Expenses Operating Profit (EBIT) EBITDA Interest Income Interest Expense Investment Income (Exp.) Non-Operating Income (Exp.) Earnings before tax Tax Net Income (Reported) Net Income (New TWN GAAP) TWD EPS (Reported) EPS (New TWN GAAP) BPS DPS Weighted No. of Shares Outstanding (bn) Balance sheet FY08A Cash and cash equivalents Accounts receivable Inventories Others Current assets LT investments Net fixed assets Total assets Liabilities ST loans Payables Others Total current liabilities Long term debt Other liabilities Total liabilities Shareholders' equity 85.0 23.9 23.6 13.8 146.3 7.8 389.3 566.9 FY09E 69.8 59.1 39.7 7.9 176.6 11.4 394.7 606.8 FY10E 78.1 52.3 38.1 7.6 176.1 12.0 377.6 589.8 FY11E 73.3 55.8 35.7 7.8 172.6 12.4 365.6 574.6 Net Income Depr. & Amortization Change in working capital Other Cash flow from operations Capex Disposal/ (purchase) Free cash flow Equity raised/ (repaid) Debt raised/ (repaid) Other Dividends paid Cash flow from financing Net change in cash Beginning cash Ending cash 423.9 368.6 55.3 5.3 17.9 30.6 111.8 1.8 -4.2 -0.3 -1.6 26.3 -4.6 21.3 21.3 2.5 2.5 35.2 2.5 8.4 FY09E 348.2 341.1 7.1 6.1 14.6 -13.7 76.3 0.3 -3.4 0.3 1.1 -15.4 -1.3 -17.1 -17.1 -2.0 -2.0 32.8 0.3 8.8 FY10E 388.4 355.2 33.3 6.3 16.7 9.9 97.0 0.2 -3.8 0.6 0.8 7.7 -1.1 6.7 6.7 0.8 0.8 33.5 0.0 8.8 FY11E 384.5 346.2 38.3 6.4 17.5 12.9 94.9 1.2 -3.0 0.4 0.2 11.7 -1.6 10.1 10.1 1.1 1.1 34.3 0.3 8.8 Ratio analysis % Gross Margin EBITDA margin Operating Margin Net Margin R&D/sales SG&A/Sales Sales growth Operating Profit Growth Net profit (reported) growth Net profit (New TWN GAAP) growth EPS (Reported) growth EPS (New TWN GAAP) growth Interest coverage (x) Net debt to total capital Net debt to equity Asset Turnover Working Capital Turns (X) ROE ROIC Core ROIC Cash flow statement FY08A 21.3 81.2 30.4 0.4 133.2 -98.4 -3.9 34.9 0.0 -15.0 -2.8 -19.7 -37.4 -6.4 91.4 85.0 FY09E -17.1 90.0 -15.6 0.4 57.7 -70.4 -29.2 -12.6 0.0 6.5 22.7 -2.6 26.7 -15.1 85.0 69.8 FY10E 6.7 87.1 -0.3 0.0 93.4 -70.0 -0.6 23.4 0.0 -14.5 0.0 0.0 -14.5 8.3 69.8 78.1 FY11E 10.1 82.0 -0.5 0.0 91.5 -70.0 -0.4 21.5 0.0 -23.2 -0.5 -2.4 -26.1 -4.9 78.1 73.3 FY08A 13.1 26.4 7.2 5.0 1.3 4.2 -11.7 -51.7 -62.3 -54.6 -63.3 -55.8 7.3 16.8 26.0 74.8 22.8 7.1 6.7 7.5 FY09E 2.0 21.9 -3.9 -4.9 1.8 4.2 -17.9 -144.8 -180.5 -180.5 -176.8 -176.8 -4.0 21.7 34.4 57.4 42.5 -5.8 -3.8 -3.8 FY10E 8.6 25.0 2.5 1.7 1.6 4.3 11.6 172.3 138.9 138.9 138.7 138.7 2.6 17.0 25.9 65.9 0.6 2.3 2.3 2.4 FY11E 10.0 24.7 3.4 2.6 1.7 4.6 -1.0 30.4 51.6 51.6 51.5 51.5 4.3 13.4 19.2 66.9 0.7 3.4 2.9 3.7

48.4 58.2 45.9 152.5 114.3 0.9 267.7 299.3

20.2 78.5 55.3 154.0 149.1 14.2 317.3 289.4

19.3 71.7 53.0 144.1 135.4 14.2 293.7 296.1

18.8 71.2 54.3 144.3 112.7 14.2 271.3 303.4

Source: Company reports, J.P. Morgan estimates.

293

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Bank Rakyat Indonesia
www.bri.co.id
Company description Bank Rakyat has a long history dating back to the 1800s. Owned 57% by the government, BRI is a leading rural micro lender with over 6,000 points of presence across Indonesia. The bank has more recently aggressively grown its corporate lending book, but overall has maintained corporate lending at below 20% of loans. Post mortem BRI continued lending aggressively through the crisis. The bank was not significantly affected by the crisis, although cost of funds went up. The lagged impact of the slowing of the economy has become evident in 3QFY09, as NPLs have bucked the trend of other major banks and increased further. Potential for earnings upgrades BRI’s operating profit fell 53% Q/Q in 3QFY09 and our concern is that high NPLs could result in earnings revisions being biased lower. We are also concerned that BRI’s high pace of lending could be unsustainable, and topline growth may also decelerate. Our thesis on BRI is that the bank is seeing growth pressure in its core micro business, which may subdue medium-term growth rates. How much recovery is priced into the stock? We do not think that recovery expectations per se have driven the stock recently. The stock has rallied by close to 100% since the beginning of the year to a peak in early October, before declining 16% since. Price target and key risks We have a DDM-based Dec-10 PT of Rp6,650 for BRI and an Underweight rating. We estimate that over the long-term sustainable ROE could trend lower to 22.6% and peg long-term growth at 10.75%. We use a 10.5% riskfree rate for Indonesian equities, and value BRI with a 1.07 beta. Key risks to our PT include a reversal in recent asset quality deterioration and a return to growth of the core micro lending customer base.
Bloomberg: BBRIIJ; Reuters: BBRLJK
Year-end Dec (Rp in mn) Operating Profit Net Profit Cash EPS (Rp) Fully Diluted EPS (Rp) DPS (Rp) EPS growth (%) ROE P/E BVPS (Rp) P/BV Div. Yield

Underweight
Rp7,200 Price Target: Rp6,650

Indonesia Banks Aditya Srinath, CFAAC
(62-21) 5291-8573 aditya.srinath@jpmorgan.com PT J.P. Morgan Securities Indonesia

Price performance
8,000 Rp 5,000 2,000
Nov-08 Feb-09 May-09 Aug-09 Nov-09

BBRI.JK share price (Rp) JCI (rebased)

Source: Bloomberg.

Performance
1M Absolute (%) Relative (%)
Source: Bloomberg.

3M 3.5 2.0

12M 112.9 29.8

-8.0 -2.7

Company data
52-week range (Rp) Mkt cap. (RpMM) Mkt cap. (US$MM) Avg daily value (US$MM) Avg daily volume (MM) Shares O/S (MM) Date of price Index: JCI Free float (%) Exchange rate
Source: Bloomberg.

8,700-2,400 88,805,232 9,392 10.1 24.5 12,334 5-Nov-09 2395 43 9,455

FY06A FY07A FY08A FY09E FY10E 7,628,701 9,473,095 11,176,603 14,464,582 14,887,397 52-wk range (Rp) 4,257,572 4,838,001 5,958,368 7,115,768 8,434,584 Market cap (Rp mn) 350 393 484 577 684 Market cap ($ mn) 350 393 484 577 684 Shares outstanding (mn) 157 173 196 227 231 Fiscal Year End 9.8% 12.3% 23.0% 19.4% 18.5% Price (Rp) 28.2% 26.6% 28.5% 28.9% 28.4% Date Of Price 21.3 18.9 15.4 12.9 10.9 Avg daily value (Rp mn) 1,374 1,578 1,814 2,185 2,638 Avg daily value ($ mn) 5.4 4.7 4.1 3.4 2.8 Avg daily vol (mn) 2.1% 2.3% 2.6% 3.0% 3.1% JCI Exchange Rate

8,700 - 2,400 88,805,232 9,392 12,334 Dec 7,200 05 Nov 09 95,601.6 10.1 24.5 2,395 9,455.00

Source: Company, Bloomberg, J.P. Morgan estimates. Note: Share price and valuations are as of 5 November 2009.

294

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Bank Rakyat Indonesia: Summary of financials
Income Statement Rp in millions, year end Dec NIM (as % of avg. assets) Earning assets/assets Margins (% of earning assets) Net Interest Income Total Non-Interest Income Fee Income Dealing Income Other Operating Income Total operating revenues Operating costs Pre-Prov. Profits Provisions Other Inc/Exp. Exceptionals Disposals/ other income Pre-tax Tax Minorities Other Distbn. Attributable Income Per Share Data Rp EPS DPS Payout Book value Fully Diluted Shares Growth Rates FY06 12.2% 78.5% 9.5% FY07 12.0% 74.3% 8.9% FY08 10.8% 77.2% 8.3% FY09E 9.9% 84.2% 8.3% FY10E FY06 19.5% 28.3% 26.0% 26.4% -4.9% FY07 26.2% 33.0% 31.7% 15.2% 37.1% FY08 FY09E FY10E 41.4% 21.7% 20.8% 15.0% 37.1% 20.0% 8.3% 10.3% 20.4% 23.4% 13.6% 15.1% 12.7% 20.8% 20.9% 9.1% Loans 92.7% Deposits 8.4% Assets Equity 13,235,084 16,033,989 18,751,947 21,564,326 24,356,388 RWA 2,039,115 2,429,118 3,379,771 4,485,087 4,178,498 2,039,115 2,429,118 3,379,771 4,485,087 4,178,498 15,274,199 18,463,107 22,131,718 26,049,412 28,534,886 -7,645,498 -8,990,012 -10,955,115 -11,584,830 -13,647,489 Net Interest Income Non-Interest Income of which Fee Grth Revenues Costs Pre-Provision Profits Loan Loss Provisions Pre-Tax Attributable Income EPS DPS

12,459,476 14,747,519 17,505,678 21,179,643 22,830,763 1,844,082 1,917,092 2,830,490 6,220,398 4,868,601 122,102 224,071 475,899 776,943 524,434 - Balance Sheet Gearing 5,906,721 7,780,074 8,822,012 9,460,054 14,617,401 Loan/deposit 1,649,149 2,942,073 2,863,644 1,905,360 2,108,646 Investment/assets 0 0 0 0 0 Loan/Assets - Customer deposits/liab. 4,257,572 4,838,001 5,958,368 7,115,768 8,434,584 LT debt/liabilities FY06 350.10 157 44.7% 1,374 FY07 393.27 173 44.0% 1,578 FY08 483.57 196 40.6% 1,815 FY09E 577.33 227 39.3% 2,207 FY10E 684.33 231 33.7% 2,820 Asset Quality/Capital Loan loss reserves/loans NPLs/loans Loan loss reserves/NPLs Growth in NPLs Tier 1 Ratio Total CAR Du-Pont Analysis NIM (as % of avg. assets) Earning assets/assets Margins (as % of Avg. Assets) Non-Int. Rev./ Revenues Non IR/Avg. Assets Revenue/Assets Cost/Income Cost/Assets Pre-Provision ROA LLP/Loans Loan/Assets Other Prov, Income/ Assets Operating ROA Pre-Tax ROA Tax rate Minorities & Outside Distbn. ROA RORWA Equity/Assets ROE

10.4% 21.1% 17.0% 15.0% 12.9% 75.5% 19.1% 39.1% 32.7% -6.8% 75.5% 19.1% 39.1% 32.7% -6.8% 1614.6% 2087.8% 1987.0% 1770.2% 954.1% 3.2% 17.6% 21.9% 5.7% 17.8% 22.7% 18.4% 18.7% 21.0% 7.8% 327.2% 4.0% 47.6% 119.8% -21.7% 5.3% 31.7% 13.4% 2.3% 16.9% 11.8% 13.6% 23.2% 19.4% 18.5% 9.8% 12.3% 23.0% 19.4% 18.5% 2.9% 10.5% 13.5% 15.6% 1.8% FY06 72.5% 12.9% 54.0% 80.4% 3.9% FY06 7.4% 4.8% 0.0% 22.9% 17.5% 20.1% FY06 12.2% 78.5% 9.5% 13.4% 1.5% 9.9% 50.1% 5.5% 15.4% 2.2% 59.8% 0.1% 5.5% 16.8% 27.9% 0.0% 3.1% 5.6% 10.9% 28.2% FY07 68.8% 11.4% 52.5% 81.3% 3.1% FY07 6.1% 3.4% 0.0% -9.8% 15.1% 16.9% FY07 12.0% 74.3% 8.9% 13.2% 1.4% 9.1% 48.7% 5.0% 14.1% 1.8% 57.0% 0.1% 5.3% 15.2% 37.8% 0.0% 2.7% 5.5% 10.1% 26.6% FY08 FY09E FY10E 79.9% 88.6% 87.4% 8.5% 7.1% 9.3% 62.2% 66.4% 67.8% 81.9% 80.5% 82.1% 3.1% 7.1% 6.3% FY08 FY09E FY10E 5.0% 6.8% 7.7% 2.8% 3.9% 4.4% 0.0% 0.0% 0.0% 15.2% 66.0% -2.2% 13.1% 13.2% 14.8% 13.4% 14.6% 16.0% FY08 FY09E FY10E 10.8% 9.9% 9.1% 77.2% 84.2% 92.7% 8.3% 8.3% 8.4% 15.3% 17.2% 14.6% 1.5% 1.7% 1.4% 9.0% 9.6% 9.3% 49.5% 44.5% 47.8% 4.9% 4.5% 4.7% 13.9% 14.1% 14.1% 1.8% 3.5% 2.3% 61.2% 68.5% 71.7% 0.2% 0.3% 0.2% 5.0% 5.6% 5.2% 15.2% 16.7% 15.9% 32.5% 21.1% 20.0% 0.0% 0.0% 0.0% 2.6% 2.8% 2.9% 4.9% 4.5% 4.6% 9.3% 9.5% 10.3% 28.5% 28.9% 28.4%

Key Balance sheet Rp in millions FY06 FY07 FY08 FY09E FY10E Net Loans 83,564,704 107,014,778 153,102,630 180,162,593 207,305,804 LLR -6,718,048 -6,958,175 -8,005,462 -13,118,735 -13,191,843 Gross Loans 90,282,752 113,972,953 161,108,092 193,281,329 220,497,647 NPLs 4,343,061 3,918,902 4,515,129 7,496,420 7,328,802 Investments 19,908,430 23,220,457 20,929,046 19,393,646 28,447,514 Other earning assets 10,456,418 11,920,588 16,904,315 22,614,563 24,598,466 Avg. IEA 108,862,861 133,214,660 173,708,402 217,757,640 267,401,970 Goodwill Assets 154,725,486 203,734,938 246,076,896 271,309,370 305,728,825 Deposits Long-term bond funding Other Borrowings Avg. IBL Avg. Assets Common Equity RWA Avg. RWA 124,468,339 165,599,983 201,538,339 218,270,497 251,136,665 5,967,194 6,236,244 7,598,124 19,185,389 19,185,389 2,231,431 2,140,253 710,634 2,698,370 2,698,370 114,167,296 148,950,038 189,060,902 221,591,672 251,190,600 138,750,532 179,230,212 224,905,917 258,693,133 288,519,098 16,878,808 19,437,635 22,356,697 26,927,990 32,516,267 74,686,680 102,393,199 140,363,380 173,228,489 209,486,303 76,612,420 88,539,940 121,378,289 156,795,934 191,357,396

Source: Company reports and J.P. Morgan estimates.

295

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Beijing Capital Land
www.bjcapitalland.com.cn
Company description Established in 2002, Beijing Capital Land (BCL) is a quality property developer with a focus on the mid-to-high-end residential and office properties. The company has an attributable development land bank of 3.5 million sqm in seven cities, mainly in Shenyang, Tianjin and Xian. Beijing Capital Group and GIC have 45.6% and 8.1% stakes, respectively. Post mortem Due to aggressive land acquisitions during the peak of the market in FY07, BCL is still highly geared (80% as of 30 June 2009). A recent issue of Rmb1 billion domestic bonds should have extended the maturity profile of its debt; however, at the same time, it reduces the amount of interest expense that could be capitalized. This, in turn, hurts net margin. As of end-October, the company recorded contracted sales of Rmb10 billion, up 295% Y/Y on a low base. We believe this will be difficult to repeat in 2010 as Beijing projects gradually get depleted. Potential for earnings upgrades The key risk to the company’s earnings stems more from completion rather than sales. Completion slippage has been a common phenomenon for Beijing Capital Land. How much recovery is priced into the stock? YTD, the stock has risen 169%, outperforming most of its peers. We believe this has priced in the potential strong boost in earnings for the next year, when this year’s contracted sales get recognized. Price target and key risks Our Dec-09 PT of HK$3.5 is based on 1.8x FY09E P/BV and 9x FY10E P/E, largely in line with BCL’s small cap peers. Key risks to our PT include a slowdown in sales and completion slippage.

Neutral
Price: HK$3.33 Price Target: HK$3.5

China Real Estate Lucia KwongAC
(852) 2800-8526 lucia.yk.kwong@jpmorgan.com J.P. Morgan Securities (Asia Pacific) Ltd

Price performance
HK$
8 7 6 5 4 3 2 1 0 03 04 05 06 07 08 09

Source: Bloomberg.

Performance
1M Absolute (%) Relative (%)
Source: Bloomberg.

3M 2.1 -21.1

12M 173.4 159.0

10.4 3.5

Company data
52-week range (HK$) Mkt cap (HK$MM) Mkt cap (US$MM) Shares O/S (MM) Avg daily value (HK$MM) Avg daily value (US$MM) Avg daily volume (MM) Date of price Exchange rate Index: HSI Free float (%)
Source: Bloomberg.

0.67-4.03 6,857 885 1,021 26.34 3.40 8.41 5 Nov 09 7.75 21,479 67

Bloomberg: 2868.HK; Reuters: 2868.HK
Rmb$ millions, year-end December Sales Net profit Core net profit EPS (Rmb) Core EPS (Rmb) DPS (Rmb) Core net profit growth (%) Core EPS growth (%) ROE (%) P/E (x) NAV per share (HK$) FY07 4,871 525 458 0.259 0.226 0.120 129 100 13 14.0 FY08 5,167 383 342 0.189 0.169 0.080 -25 -25 9 17.8 2.99 FY09E 6,576 422 422 0.208 0.208 0.090 23 23 10 14.1 FY10E 5,141 677 677 0.334 0.334 0.110 61 61 14 8.8

Source: Company, Bloomberg, J.P. Morgan estimates. Note: Share price and valuation are as of 5 November 2009.

296

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

Beijing Capital Land: Summary of financials
Rmb in millions, year-end December Profit and loss statement FY07 Revenues % change Y/Y EBIT % change Y/Y EBIT Margin (%) Net Interest Associates/ JCE Exceptionals Earnings before tax % change Y/Y Tax as % of EBT Net Income (Reported) % change Y/Y Core Net Profit % change Y/Y Shares Outstanding EPS (reported) % change Y/Y Core EPS (Rmb) % change Y/Y Balance sheet 4,871 138.8 1,047 364.5 21.5 -135 58 175 983 363.9 419 -40.0 525 97.4 458 129.5 2028 0.259 72.1 0.226 100.1 FY07 Cash and cash equivalents Accounts receivable Inventories Others Current assets LT investments Net fixed assets Total assets Liabilities ST loans Payables Others Total current liabilities Long term debt Other liabilities Total liabilities Minority interest Shareholders' equity BVPS (Rmb) 2,721 1,222 6,758 36 10,737 1,401 7,880 20,018 FY08 5,167 6.1 1,383 32.1 26.8 -178 21 41 983 10.6 504 -36.5 383 -27.1 342 -25.3 2028 0.189 -27.1 0.169 -25.3 FY08 2,184 2,515 7,749 0 12,448 1,664 4,955 19,068 FY09E 6,576 27.3 1,666 20.5 25.3 -262 21 0 983 12.5 365 -21.9 422 10.1 422 23.3 2028 0.208 10.1 0.208 23.3 FY09E 5,567 915 7,775 0 14,257 2,415 5,255 21,927 FY10E 5,141 -21.8 1,238 -25.7 24.1 22 26 0 983 -9.7 315 -25.4 677 60.6 677 60.6 2028 0.334 60.6 0.334 60.6 FY10E 5,484 415 8,644 0 14,543 3,219 5,355 23,118 Ratio analysis % EBIT margin Operating margin Net profit margin SG&A/sales Sales per share growth Sales growth Net profit growth EPS growth Interest coverage (x) Net debt to total capital Net debt to equity Sales/assets Assets/equity ROE ROCE FY07 21.5 21.5 10.8 FY08 26.8 26.8 7.4 FY09E 25.3 25.3 6.4 FY10E 24.1 24.1 13.2 EBIT Depreciation & amortisation Change in working capital Taxes Other non-cash items Cash flow from operations Capex Disposal/ (purchase) Net Interest Free cash flow Equity raised/ (repaid) Debt raised/ (repaid) Other Dividends paid Beginning cash Ending cash DPS (Rmb) Cash flow statement FY07 1,047 100 -2,477 -260 -84 -1,591 -359 940 -493 -1,154 0 233 0 -139 3,707 2,614 0.120 FY08 1,383 92 -1,830 -560 138 -915 -852 -6 -865 -2,085 0 1,086 0 -168 2,614 2,157 0.080 FY09E 1,666 96 1,613 -365 97 3,010 0 -150 -652 2,383 0 1,800 0 -821 2,157 5,519 0.090 FY10E 1,238 101 -333 -315 102 691 0 -50 -605 445 0 0 0 -517 5,519 5,447 0.110

139 139 97.4 72.1 2.6 33.5 80.4 24.3 438.3 12.6 10.1

6 6 -27.1 -27.1 2.7 42.2 110.7 27.1 448.8 8.7 12.6

27 27 10.1 10.1 3.0 23.6 68.9 30.0 484.3 9.6 12.8

-22 -22 60.6 60.6 2.2 23.3 63.2 22.2 456.6 14.1 9.2

2,534 7,560 6 10,110 3,859 0 14,260 1,191 4,567 2.3

1,223 5,881 0 7,104 5,662 0 12,908 1,911 4,248 2.1

723 6,661 0 7,385 7,962 0 15,488 1,911 4,528 2.2

723 7,316 0 8,039 7,962 0 16,143 1,911 5,063 2.5

Source: Company reports, J.P. Morgan estimates.

297

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

BYD Electronics
www.byd-electronic.com
Company description BYD Electronics (BYDE) provides mechanical components and EMS services to mobile handset OEMs such as Nokia, Motorola, Sony Ericsson and Chinese brands. The company is the handset arm of BYD Co Ltd., which manufactures handset batteries, handset components and automobiles. Post mortem The handset EMS industry faces uncertain growth in the longer term as existing customers continue to lose market share and value shifts away from hardware to software. Besides, our recent checks suggest that FIH and Perlos are taking share away from BYDE in low-end Nokia phones. The market has been optimistic over TD-SCDMA handset/NBPC ODM prospects in 2010; however, we believe TD take-off will be slow. Potential for earnings upgrades There could be some upside for 2H09 earnings, but upside should be limited for 2010, unless TD handset and NB really take off in a big way. How much recovery is priced into the stock? The stock has substantially outperformed this year and is up nearly 173% YTD and has risen 80% in the past month. Although the handset outlook has improved over the past month, structural issues with the EMS industry remain and BYDE continues to lose market share to FIH and Perlos. At nearly 19x FY10E P/E, the stock looks overvalued and we believe has priced in any potential growth over the next two years; hence, we expect it to underperform going forward. Price target and key risks Our Dec-10 PT of HK$3.6 is based on 9x 2010E P/E, which is slightly towards the lower end of the historical range and at a discount to its peers. We believe the multiple is justified, given the poor growth visibility and its share loss at Nokia. Key risks to our PT include: (1) a much sharper-thanexpected handset recovery; (2) Nokia going asset light, which could result in higher outsourcing; and (3) asset infusion from its parent.

Underweight
Price HK$7.48 Price Target: HK$3.6

HK/China Technology Hardware Charles GuoAC
(852) 2800-8532 charles.x.guo@jpmorgan.com J.P. Morgan Securities (Asia Pacific) Limited

Price performance
9 6 3 0 No v-08 Feb-09 M ay-09 A ug-09 No v-09 B YD Elec (HK$ ) HSI (rebased)

Source: Bloomberg.

Performance
1M Absolute (%) Relative (%)
Source: Bloomberg.

3M 55.8 48.7

12M 173.0 88.6

79.8 71.0

Company data
52-week range (HK$) Mkt cap. (HK$MM) Mkt cap. (US$MM) Avg daily value (US$MM) Avg daily volume (MM) Shares O/S (MM) Date of price Index: Hang Seng Free float (%) Exchange rate
Source: Bloomberg.

2.0-9.2 16,860 2,167 7.7 10.2 2,254 5-Nov-09 21,479 34 7.8

Bloomberg: 285 HK; Reuters: 285.HK
Rmb in millions, year-end December Sales Net profit EPS (Rmb) FD EPS (Rmb) DPS (Rmb) Sales growth (%) Net profit growth (%) EPS growth (%) ROE (%) P/E (x) FD P/E (x) FY08 8,555 766 0.34 0.34 0.0 48.3% (30.0%) (42.0%) 14.3% 19.5 19.5 FY09E 8,970 562 0.25 0.25 0.0 4.9% (26.6%) (26.3%) 9.1% 26.4 26.4 FY10E 11,377 790 0.35 0.35 0.0 26.8% 40.4% 39.9% 11.3% 18.9 18.9 FY11E 13,984 797 0.35 0.35 0.0 22.9% 0.9% 0.9% 10.3% 18.7 18.7

Source: Company, Bloomberg, J.P. Morgan estimates. Note: Share price and valuation are as of 5 November 2009. We revised PT to HK$4.8 on November 29.

298

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

BYD Electronics: Summary of financials
Profit and loss statement
Rmb in millions, year-end December Revenues Cost of Goods Sold Gross Profit SGA &RD Expenses Operating Profit (EBIT) EBITDA Interest Income Interest Expense Investment Income (Exp.) Non-OP Income (Exp.) Earnings before tax Tax Net Income (Reported) Rmb EPS (Reported) BPS DPS Shares Outstanding (MM) FY08 8,555 6,846 1,710 717 1,075 1440 70 -40 0 -303 803 -38 766 FY09E 8,970 7,690 1,280 689 700 1181 16 0 0 -91 625 -62 562 FY10E 11,377 9,739 1,638 726 933 1534 16 0 0 -96 854 -64 790 FY11E 13,984 12,220 1,764 860 931 1661 17 0 0 -86 862 -65 797

Cash flow statement
Rmb in millions, year-end December Net Income Depr. & Amortisation Change in working capital Other Cash flow from operations Capex Disposal/(purchase) Cash flow from investing Free cash flow Equity raised/ (repaid) Debt raised/ (repaid) Other Dividends paid Cash flow from financing Net change in cash Beginning cash Ending cash FY08 766 364 -603 490 1,017 -1,719 -341 -2,056 -702 634 -1,283 0 -341 -990 -2,072 3,217 1,145 FY09E 562 481 -346 -1 697 -956 -235 -853 -259 0 -14 182 0 168 11 1,145 1,156 FY10E 790 601 -572 237 1,056 -1,000 103 -1,000 56 0 0 0 0 0 56 1,156 1,212 FY11E 797 730 -718 306 1,115 -1,200 0 -1,200 -85 0 0 0 0 0 -85 1,212 1,127

0.34 2.57 0.00 2,270

0.25 2.90 0.00 2,263

0.35 3.24 0.00 2,272

0.35 3.59 0.00 2,272

Source: Company, J.P. Morgan estimates.

Source: Company, J.P. Morgan estimates.

Balance sheet
Rmb in millions, year-end December Cash and cash equivalents Accounts receivable Inventories Others Current assets LT investments Net fixed assets Others Total assets Liabilities ST loans Payables Others Total current liabilities Long term debt Other liabilities Total liabilities Shareholders' equity FY08 1,145 1,527 1,824 338 4,833 0 3,031 553 8,418 FY09E 1,156 2,272 2,172 329 5,930 0 3,506 451 9,887 FY10E 1,212 2,762 2,649 419 7,041 0 3,906 451 11,397 FY11E 1,127 3,395 3,334 515 8,371 0 4,375 451 13,196

Ratio analysis
%, year-end December Gross Margin EBITDA margin Operating Margin Net Margin SG&A/Sales Sales growth Operating Profit Growth Net profit growth EPS (Reported) growth Interest coverage (x) Net debt to total capital Net debt to equity Asset Turnover Working Capital Turns (x) ROE ROCE FY08 20.0 16.8 12.6 9.0 8.4 48.3 -10.6 -30.0 -42.0 27.2 Net Cash Net Cash 101.6 1.0 14.3 17.2 FY09E 14.3 13.2 7.8 6.3 7.7 4.9 -34.9 -26.6 -26.3 2058.0 Net Cash Net Cash 90.7 1.0 9.1 10.3 FY10E 14.4 13.5 8.2 6.9 6.4 26.8 33.4 40.4 39.9 FY11E 12.6 11.9 6.7 5.7 6.1 22.9 -0.2 0.9 0.9

14 1,468 1,099 2581 0 0 2,581 5,838

0 2,207 1,098 3305 0 0 3,305 6,582

0 2,691 1,335 4026 0 0 4,026 7,372

0 3,387 1,641 5028 0 0 5,028 8,169

Net Cash Net Cash 99.8 1.1 11.3 12.5

Net Cash Net Cash 106.0 1.1 10.3 11.1

Source: Company, J.P. Morgan estimates.

Source: Company, J.P. Morgan estimates.

299

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

China COSCO
www.chinacosco.com
Company description China COSCO is the largest dry bulk shipping operator in the world and its container shipping operation is ranked first in China and seventh-largest globally. It also owns a 51% stake in Cosco Pacific and its 100%-owned logistics arm is the largest in China. Post mortem China Cosco is highly leveraged to the BDI as 90% of its capacity is deployed in the spot market. We believe, its market leadership is enhanced by its integrated model and ability to offer one-stop services to its sizeable customer base. Further asset injections by the parentco are likely in the long term. Potential for earnings upgrades Industry overcapacity will likely persist in 2010; this could cap freight rate and earnings recovery for this large industry player. China COSCO has sizeable total capital commitment amounting to Rmb32B in 2009-2013, plus a large operating lease commitment. We believe the company should have little problem accessing credit going forward; however, it gearing could rise substantially and we do not rule out capital-raising risks. How much recovery is priced into the stock? China Cosco is trading at 1.7x P/BV (12M rolling forward), close to its historical average valuation since listing, but at a substantial premium to regional peers. Although China Cosco should offer greater upside, given its higher operating leverage, we view Pacific Basin Shipping and OOIL as a more defensive play on the recovery in the dry bulk and container shipping sectors, given the continued industry overcapacity risks. Price target and key risks Our Jun-10 PT of HK$10 is based on 1.8x P/BV, China COSCO’s average valuation since listing. Key risks to our PT include: (1) further losses and book value erosion in 2010; (2) volatile fuel prices; and (3) policies dampening iron ore imports.
Bloomberg: 1919 HK; Reuters: 1919.HK
Rmb in millions, year-end December Sales Net profit EPS (Rmb) FD EPS (Rmb) DPS (Rmb) Sales growth (%) Net profit growth (%) EPS growth (%) ROE (%) P/E (x) FD P/E (x) FY08 130,872 11,617 1.14 -0.30 0.23 16.6% -40.4% -47.9% 23.4% 7.7 -28.7 FY09E 70,215 -3,111 -0.30 0.20 0.00 -46.3% nm -126.8% -6.3% -28.7 44.1 FY10E 73,594 2,023 0.20 0.38 0.04 4.8% nm -165.0% 4.2% 44.1 23.1 FY11E 79,685 3,867 0.38 0.08 8.3% 91.1% 91.1% 7.6% 23.1

Neutral
Price: HK$9.83 Price Target: HK$10.00

China Conglomerates & Multi-industry Corrine PngAC
(65) 6882-1514 corrine.ht.png@jpmorgan.com J.P.Morgan Securities (Asia Pacific) Limited

Price performance
14 10 HK$ 6 2 Nov -08

Feb-09

May -09

Aug-09

Nov -09

1919.HK share price (HK$) SHAN.B (rebased)

Source: Bloomberg.

Performance
1M Absolute (%) Relative (%)
Source: Bloomberg.

3M -18.0% -15.1%

12M 129.4% -17.1%

8.1% -4.2%

Company data
52-week range (HK$) Mkt cap. (RmbMM) Mkt cap. (US$MM) Avg daily value (US$MM) Avg daily volume (MM) Shares O/S (MM) Date of price Index: SHAN.B Free float (%) Exchange rate
Source: Bloomberg.

12.78-3.15 22,346 3,273 100.9 81.4 2,581 5-Nov-09 219 99.47 7.75

Source: Company, Bloomberg, J.P. Morgan estimates. Note: Share price and valuation are as of 5 November 2009.

300

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

China Cosco: Summary of financials
Rmb in millions, year end December Income statement FY07 Revenues 112,233 % change Y/Y 43.0% EBITDA 30,805 % change Y/Y 89.1% EBIT 26,668 % change Y/Y 119.6% EBIT Margin 23.8% Net Interest -555 Earnings before tax 26,113 % change Y/Y 130.7% Tax -4,826 as % of EBT 18.5% Net income (reported) 19,482 % change Y/Y 139.7% Shares outstanding 10,216 EPS (reported) (Rmb) 2.18 % change Y/Y 174.2% Cash flow statement FY08 FY09E FY10E FY11E 130,872 70,215 73,594 79,685 16.6% (46.3%) 4.8% 8.3% 19,495 1,651 8,716 11,914 -36.7% -91.5% 427.8% 36.7% 15,794 -3,216 3,585 6,243 NM NM NM 74.2% 12.1% -4.6% 4.9% 7.8% -124 -472 -1,968 -2,713 15,670 -3,688 1,617 3,530 -40.0% -123.5% -143.8% 118.3% -2,963 0 0 0 18.9% 0.0% 0.0% 0.0% 11,617 -3,111 2,023 3,867 -40.4% -126.8% -165.0% 91.1% 10,216 10,216 10,216 10,216 1.14 (0.30) 0.20 0.38 (47.9%) (126.8%) (165.0%) 91.1% EBIT Depr. & amortization Change in working capital Taxes Cash flow from operations Capex Disposal/(purchase) Net Interest Other Free cash flow Equity raised/(repaid) Debt raised/(repaid) Other Dividends paid Beginning cash Ending cash DPS (Rmb) Ratio Analysis FY07 37,624 0 37,624 FY08 31,582 0 31,582 FY09E 9,345 0 9,345 18,594 65,202 93,141 FY10E 5,744 0 5,744 FY11E 4,315 0 4,315 EBITDA margin Operating margin Net margin FY07 FY08 FY09E 27.4% 14.9% 2.4% 17.60% 13.30% (10.52%) 17.4% 8.9% -4.4% FY10E FY11E 11.8% 15.0% 1.55% 4.35% 2.7% 4.9% FY07 FY08 26,668 15,794 4,138 3,702 19,141 -8,695 24,157 25,391 -12,940 -17,999 -555 -124 -7,528 -4,561 11,218 7,392 28,107 2,463 -2,812 -4,050 9,555 37,624 0.18 0 7,925 13,520 -13,926 37,624 31,582 0.23 FY09E -3,216 4,867 -9,203 -7,551 -14,406 -472 1,398 -21,957 0 6,144 -1,870 -2,323 31,582 9,345 0.00 FY10E FY11E 3,585 6,243 5,131 5,671 152 274 8,868 12,188 -20,000 -20,000 -1,968 -2,713 467 287 -11,132 -7,812 0 9,500 -2,435 0 9,345 5,744 0.04 0 9,500 -3,001 -405 5,744 4,315 0.08

Balance sheet Cash and cash equivalents Accounts receivable Inventories Others Current assets LT investments Net fixed assets Total Assets Liabilities Short-term loans Payables Others Total current liabilities Long-term debt Other liabilities Total Liabilities Shareholders' equity BVPS (Rmb)

16,800 18,594 46,003 55,663 100,427 105,839

18,594 18,594 80,071 94,400 104,409 117,309

Sales per share growth Sales growth Net profit growth EPS growth Interest coverage (x)

63.6% 1.9% (46.3%) 4.8% 43.0% 16.6% (46.3%) 4.8% 139.7% -40.4% -126.8% -165.0% 174.2% (47.9%) (126.8%) (165.0%) 55.50 157.85 -45.0% -10.4% 1.35 1.27 3.69 2.97 47.9% 23.4% 44.6% 21.8% 3.50 39.3% 0.71 4.09 (6.3%) -4.2% 4.43 68.0% 0.75 4.98 4.2% 4.4%

8.3% 8.3% 91.1% 91.1% 4.39 85.8% 0.72 6.13 7.6% 6.6%

5,188 21,057 26,245 14,142 2,883 43,270 46,600 4.56

3,629 12,362 15,991 22,785 4,817 43,593 52,492 5.14

0 3,160 3,160 28,929 4,817 36,905 47,057 4.61

0 3,312 3,312 38,429 4,817 46,557 49,080 4.80

0 3,586 3,586 47,929 4,817 56,331 52,542 5.14

Net debt to equity Sales/assets Assets/equity ROE ROCE

Source: Company, J.P. Morgan estimates.

301

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

China Southern Airlines
www.csair.com
Company description China Southern Airlines (CSA) is China’s largest airline in terms of passenger traffic and asset base. It is an amalgamation of Southern, Northern, Xinjiang, Xiamen and a number of other regional airlines as a result of the government-driven industry consolidation. Post mortem CSA has the largest market share in the domestic market with 80% of its business contributed by domestic routes and only 6% of its total revenue exposed to cargo (versus c.15% for the sector). Potential for earnings upgrades We believe CSA has weaker long-term growth prospects versus its peers, given its hub’s close proximity to Hong Kong. In addition, a more developed and efficient railway system in the longer term will likely result in greater competition for CSA and traffic diversion from air to sea for domestic routes. How much recovery is priced into the stock? CSA has been the best performing Asian airline stock year-to-date and is trading at 1.6x P/BV, a 20% premium to its average valuation since listing due to its large exposure to the rebounding domestic passenger demand. Hence, we see limited upside from the current level and expect CSA to underperform its Chinese airline peers as well as the Asian sector average. Price target and key risks Our Jun-10 PT of HK$2.1 is based on 1.3x P/BV, CSA’s average valuation since listing and 1 standard deviation above its average valuation, excluding the M&A speculation period. Key risks to our PT include: (1) excessive domestic price competition; (2) volatile fuel prices; and (3) Influenza A.

Neutral
Price: HK$2.30 Price Target: HK$2.10

Hong Kong Airlines Corrine PngAC
(65) 6882-1514 corrine.ht.png@jpmorgan.com J.P.Morgan Securities (Asia Pacific) Limited

Price performance
3 2 HK$ 1 0 Nov -08

Feb-09

May -09

Aug-09

Nov -09

1055.HK share price (HK$) H-SHARE (rebased)

Source: Bloomberg.

Performance
1M Absolute (%) Relative (%)
Source: Bloomberg.

3M -24.6% -352.7%

12M 85.1% -404.5%

-7.1% -19.4%

Company data
52-week range (HK$) Mkt cap. (RmbMM) Mkt cap. (US$MM) Avg daily value (US$MM) Avg daily volume (MM) Shares O/S (MM) Date of price Index: H-share Free float (%) Exchange rate
Source: Bloomberg.

0.83-3.12 5,029 737 14.24 187.39 2,482 5-Nov-09 17,898 41.0 8

Bloomberg: 1055 HK; Reuters: 1055.HK
Rmb in millions, year-end December Sales Net profit EPS (Rmb) FD EPS (Rmb) DPS (Rmb) Sales growth (%) Net profit growth (%) EPS growth (%) ROE (%) P/E (x) FD P/E (x) FY08 55,288 -4,823 -0.74 0.08 0.00 1.6% nm -274.8% -51.1% -2.8 26.7 FY09E 51,589 607 0.08 0.03 0.00 -6.7% nm -110.3% 6.9% 26.7 66.3 FY10E 58,931 245 0.03 0.08 0.00 14.2% -59.6% -59.7% 2.3% 66.3 25.6 FY11E 65,228 633 0.08 0.00 10.7% 158.4% 159.0% 5.7% 25.6

Source: Company, Bloomberg, J.P. Morgan estimates. Note: Share price and valuation are as of 5 November 2009. 302

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

China Southern Airlines: Summary of financials
Rmb in millions, year-end December Income statement Revenues % change Y/Y EBITDA % change Y/Y EBIT % change Y/Y EBIT Margin Net Interest Earnings before tax % change Y/Y Tax as % of EBT Net income (reported) % change Y/Y Shares outstanding EPS (reported) (Rmb) % change Y/Y FY07 FY08 FY09E FY10E 54,401 55,288 51,589 58,931 17.7% 1.6% (6.7%) 14.2% 7,129 -792 7,507 7,387 26.9% -111.1% -1047.8% -1.6% 1,575 -6,538 1,483 962 144.2% NM NM NM 2.9% -11.8% 2.9% 1.6% -2,218 -1,884 -1,928 -1,857 2,879 -4,724 595 240 706.4% -264.1% -112.6% -59.7% -847 -62 8 3 29.4% 1.3% 1.3% 1.3% 1,839 -4,823 607 245 878.2% -362.3% -112.6% -59.7% 4,374 6,561 8,004 8,004 0.42 (0.74) 0.08 0.03 878.2% (274.8%) (110.3%) (59.7%) FY11E 65,228 10.7% 8,009 8.4% 1,200 24.8% 1.8% -1,773 620 159.0% 8 1.3% 633 159.0% 8,004 0.08 159.0% Cash flow statement EBIT Depr. & amortization Change in working capital Taxes Cash flow from operations Capex Disposal/(purchase) Net Interest Other Free cash flow Equity raised/(repaid) Debt raised/(repaid) Other Dividends paid Beginning cash Ending cash DPS (Rmb) Ratio analysis FY07 3,824 3,633 1,213 120 8,790 2,175 71,041 82,006 FY08 4,649 3,308 1,229 62 9,248 2,142 71,652 83,042 FY09E 7,671 3,087 1,147 62 11,967 2,308 71,628 85,903 FY10E 8,181 3,526 1,310 62 13,079 FY11E 8,310 3,903 1,450 62 13,725 EBITDA margin Operating margin Net margin FY07 FY08 13.1% -1.4% 2.90% (11.83%) 3.4% -8.7% FY09E 14.6% 2.88% 1.2% FY10E FY11E 12.5% 12.3% 1.63% 1.84% 0.4% 1.0% FY07 1,575 5,554 2,252 -88 6,869 -5,214 288 -2,218 370 1,655 0 493 -950 -8 2,264 3,824 0.00 FY08 -6,538 5,746 2,284 -399 1,155 -8,052 312 -1,884 262 -6,897 0 4,788 2,700 -28 3,824 4,649 0.00 FY09E 1,483 6,024 -500 8 5,086 -6,000 0 -1,928 937 -914 0 0 3,000 0 4,649 7,671 0.00 FY10E FY11E 962 1,200 6,425 6,809 993 852 3 8 6,527 7,096 -5,500 0 -1,857 983 1,027 0 -1,500 0 7,671 8,181 0.00 -5,500 0 -1,773 1,033 1,596 0 -2,500 0 8,181 8,310 0.00

Balance sheet Cash and cash equivalents Accounts receivable Inventories Others Current assets LT investments Net fixed assets Total Assets Liabilities Short-term loans Payables Others Total current liabilities Long-term debt Other liabilities Total Liabilities Shareholders' equity BVPS (Rmb)

2,482 2,665 70,703 69,394 86,265 85,784

Sales per share growth Sales growth Net profit growth EPS growth Interest coverage (x)

17.7% (32.2%) (23.5%) 14.2% 10.7% 17.7% 1.6% (6.7%) 14.2% 10.7% 878.2% -362.3% -112.6% -59.7% 159.0% 878.2% (274.8%) (110.3%) (59.7%) 159.0% 3.21 416.6% 0.69 6.91 16.7% 2.6% 0.42 528.4% 0.67 11.83 (51.1%) -10.6% 3.89 3.98 4.52

27,825 1,844 13,042 42,711 21,932 3,053 67,696 11,863 2.71

25,959 1,353 14,226 41,538 28,586 3,439 73,563 7,021 1.07

25,959 1,262 13,513 40,734 28,649 3,439 72,822 10,628 1.33

23,959 1,442 14,929 40,330 29,172 3,439 72,941 10,873 1.36

21,959 1,596 16,143 39,699 28,694 3,439 71,832 11,506 1.44

Net debt to equity Sales/assets Assets/equity ROE ROCE

531.9% 418.1% 378.4% 0.61 0.68 0.76 8.08 7.93 7.46 6.9% 2.3% 5.7% 2.3% 1.5% 1.9%

Source: Company, J.P. Morgan estimates.

303

Adrian Mowat (852) 2800-8599 adrian.mowat@jpmorgan.com

Emerging Markets Equity Research 02 December 2009

China Unicom
www.chinaunicom.com.hk
Company description China Unicom (CU) is a fixed line and mobile operator using the GSM and WCDMA wireless technologies. In 2008, it acquired the fixed-line business of China Netcom in 10 northern Chinese provinces, and operates fixed-line local, long distance and broadband services in those regions. China Unicom operates its wireless services in all provinces in China, and has over 150 million subscribers. It is the second-largest wireless operator in China by subscribers with a 21% market share. The company was listed on the Hong Kong Stock Exchange and the NYSE on June 22, 2000. Post mortem We are concerned with CU’s competitive positioning and the divergence between CU’s reputation as a discount mobile provider with inferior network coverage versus China Mobile and its 3G ambitions to turn itself into a highend operator. Heavy reliance on the success of the iPhone is a flawed strategy, in our view. Will CU’s Rmb41 ARPU customers sign up to 3G plans which are north of Rmb100? Likely no, in our opinion. Potential for earnings upgrades We expect EBITDA margins to continue to deteriorate due to the need to spend aggressively on sales and marketing to roll out 3G and revitalize the Unicom brand. Network maintenan