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Asia Pacific Equity Research

9 December 2014

Top Stories
Singapore Property, Singapore (Brandon Lee)
Riding out the waves in 2015; assuming coverage of the sector with a cautious
stance
Property stocks have outperformed the market YTD despite rate hike concerns and
residential sales decline which we expect to persist into 2015. The worst is not over for
the resi sector and the downcycle is likely to continue into 2016. We expect non-resi
developers GLP and CAPL to outperform with their focused strategy. The
governments restructuring efforts are likely to continue for the next 12 months, which
will affect the retail and industrial sectors. However, AREIT and CT look cheap to us on
valuations. In the hospitality sector, we see prolonged competitive headwinds leading
to sustained RevPAR declines. We are positive on office given favorable demandsupply dynamics; we view SUN as the best proxy. We also like CRCT and ART, given
strong FY15E DPU growth and minimal exposure to Singapore.
What to buy for Christmas..., Singapore (James R. Sullivan, CFA)
Trading Port: Singapore Equity Strategy
Weve previously opined on the investment opportunities in Singapore for 2015 but
provide additional backdrop to the likely investment climate in 2015. DBS (OW)
remains our favoured play on Fed rate hikes across Asean and our top pick within
Singapore banks. GLP is our top property pick (OW), while M1 remains our top pick in
Telecoms (OW). We are most cautious on GENS (UW) as we believe weak growth in
the Singapore market and rising expenses will continue to plague the stock.
China Auto Dealers, China (Nick Lai)
Distressed share prices, but now worth a revisit
Auto dealers share prices have corrected by 15-20% in the past three months on
widening price discounts across most premium and mass-market brands as underlying
auto sales slowed along with piling inventory. Fundamentally, we believe auto dealers
in China is an avoid space at this stage of the business cycle when OEMs are still
striving to expand their networks, meaning dealers wont be in the position to pay
much dividends like those in developed markets. Competition also implies longer
payback for new 4S stores. Nevertheless, everything has a price. Dealers share
price correction lately leads us to believe they are worth revisiting and some could be
oversold. We would buy Zhengtong Auto and accumulate Baoxin Auto on any further
weakness.
Fortune Real Estate Investment Trust (FORT.SI, OW HK$7.44), Singapore, Hong
Kong (Amy Luk, CFA)
Staying positive on DPU accretive potential acquisition
We view the proposed acquisition of Laguna Plaza as positive as we estimate the
acquisition is DPU accretive and there is potential synergy with Centre de Laguna in
the existing portfolio. Our PT is revised up to HK$8.6 on our higher FY15E and FY16E
DPU estimates.

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J.P. Morgan Daily Valuations
GLOBAL Stock Guide
Link to Other FTMs page
Link to J.P. Morgan Markets page
Key Rating, Price Target & EPS Changes
Markets at a glance
AM perspective
Adrian Mowat, Chief Equity Strategist

EM Asia wins from lower oil


EM Asia
China
India
Indonesia
Korea
Malaysia
Philippines
Thailand

Net oil exports Impact of $10 increase in oil on


as % of GDP
net oil exports as % of GDP
-2.5
-0.3
-5.6
-0.5
-3.1
-0.3
-5.8
-0.6
0.2
0.0
-4.5
-0.5
-8.3
-0.8

Source: J.P. Morgan economics.

Brent is now 35% below the 12-month moving


average. This is positive for global growth as oil
consumers tend to spend the extra discretionary
income from lower gasoline and diesel prices
while oil producers save the windfall. EM Asian
countries with the exception of Malaysia are net
importers of oil. Lower oil prices should boost
sentiment in countries sensitive to inflation
expectations and countries with fuel subsidies
(India, Indonesia and Thailand). For more,
please see Oil: Winners and Losers, Mowat et al,
28 November 2014.

Hotel Shilla (008770.KS, N W88,200), South Korea (Youna Kim)


Valuation has gotten cheaper, operation risks linger
Hotel Shillas share price is down 27% since the end of August, mainly due to
ongoing concerns about a potential rise in competition for its city DFS with additional
license issuance and risks related to Incheon International Airport DFS bidding
process. Recent news flow suggests both positive developments and downside risks to
Hotel Shilla. We remain cautious until we have more visibility on how the competitive
landscape pans out, depending on the governments additional license issuance.

See end pages for analyst certification. For important disclosures, please refer to the disclosure section at the end of the
individual linked notes.

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.

Price Target and Estimate Changes

Results and Company Views, continued

A-REIT (AEMN.SI Overweight), Singapore


(Brandon Lee)
Vacancy concerns overplayed; assuming coverage with OW rating

Vingroup (VIC VM Not Covered), Vietnam


(Aditya Srinath, CFA)
Investor Trip - Company Visit Note

Ascott Residence Trust (ASRT.SI Overweight), Singapore


(Brandon Lee)
Underappreciated earnings stability and visible inorganic growth;
assuming coverage with OW rating

Strategy

Baoxin Auto Group Limited (1293.HK Neutral), China


(Nick Lai)
China Auto Dealers: Distress share prices but now worth a revisit
CapitaCommercial Trust (CACT.SI Neutral), Singapore, India
(Brandon Lee)
Pastures only greener upon CapitaGreens improved take-up;
assuming coverage with Neutral rating
CapitaLand (CATL.SI Overweight), Singapore
(Brandon Lee)
Change is good; assuming coverage with OW rating

Asia Pacific Strategy Dashboards, Asia Pacific


(Adrian Mowat)
Identifying change and providing perspective on key economic
and equity market data for Asian markets
Global Developed Markets Strategy Dashboards, Global
Emerging Markets
(Adrian Mowat)
Identifying change and providing perspective on key economic
and equity market data for developed markets
GEMs Model Portfolio, Global Emerging Markets
(Adrian Mowat)
Emerging Markets Equity Strategy

CapitaMall Trust (CMLT.SI Overweight), Singapore


(Brandon Lee)
Innate capability undervalued; assuming coverage with OW rating

Indian Equities, India


(Bijay Kumar, CFA)
Multi-baggers Heat Map, Year-end Charateristics and the Risk
Drive

CapitaRetail China Trust (CRCT.SI Overweight), Singapore


(Brandon Lee)
A cut above the rest; assuming coverage with OW

Malaysia Strategy Flash, Malaysia


(Hoy Kit Mak)
Reiterating our bearish near-term view on oil, and implications

CDL Hospitality Trusts (CDLT.SI Underweight), Singapore


(Brandon Lee)
Hospitality headwinds yet to bottom; assuming coverage with
Underweight rating

Singapore Monthly Wrap, Singapore


(James R. Sullivan, CFA)
Nov 14: What to buy for Christmas...

City Developments (CTDM.SI Neutral), Singapore


(Brandon Lee)
Limited near-term catalysts unless measures are withdrawn;
assuming coverage with Neutral rating
Daum Kakao (035720.KQ Neutral), South Korea
(Stanley Yang)
Lower expectations for Kakao business momentum
Fortune Real Estate Investment Trust (FORT.SI Overweight),
Singapore, Hong Kong
(Amy Luk, CFA)
Staying positive on DPU accretive potential acquisition
Frasers Centrepoint Trust (FCRT.SI Underweight), Singapore
(Brandon Lee)
Near-term catalysts lacking; assuming coverage with Underweight
rating
Global Logistic Properties Ltd (GLPL.SI Overweight),
Singapore
(Brandon Lee)
Execution should soon contradict naysayers; assuming coverage
with OW rating
Hotel Shilla (008770.KS Neutral), South Korea
(Youna Kim)
Valuation has gotten cheaper, operation risks linger

Vietnam Vista, Vietnam


(Aditya Srinath, CFA)
Bi-weekly (24 Nov - 08 Dec 2014): Stock market hits six-month
low, dragged by oil & gas sector
What to buy for Christmas..., Singapore, Hong Kong,
Thailand
(James R. Sullivan, CFA)
Trading Port: Singapore Equity Strategy

Economics
November trade report better-than-expected, non-tech sector
recovered but sequential momentum still soft, Taiwan
(Lu Jiang)
The politburo meeting set the tone of 2015 tasks, China
(Haibin Zhu)
Weak exports more than offset by big drop in imports; trade
surplus widened to a new historical high of $54.5 bn, China
(Lu Jiang)

Sector Research
CCL index set new all-time high again, Hong Kong, China
(Cusson Leung)
Views on the Estate: HK/China property monitor

Keppel Land (KLAN.SI Neutral), Singapore


(Brandon Lee)
Fruits not fully borne via ongoing portfolio fine-tuning; assuming
coverage with a Neutral rating

China Metals & Mining, China


(Daniel Kang)
November Trade Copper imports and steel exports climb, iron
ore imports fall

Keppel REIT (KASA.SI Neutral), Singapore


(Brandon Lee)
Pure Grade A exposure priced in; assuming coverage with a
Neutral rating

China Property Weekly, China


(Ryan Li, CFA)
Property sales for the week ending Dec 7, 2014

Mapletree Commercial Trust (MACT.SI Underweight),


Singapore
(Brandon Lee)
VivoCity premium priced in; assuming coverage with UW rating
Mapletree Industrial Trust (MAPI.SI Neutral), Singapore
(Brandon Lee)
Resilient but reasonably priced; assuming coverage with Neutral
rating
Overseas Union Enterprise Ltd (OVES.SI Underweight),
Singapore
(Brandon Lee)
Waiting for the next catalyst; assuming coverage with an UW rating
Suntec REIT (SUNT.SI Overweight), Singapore
(Brandon Lee)
Re-rated by retail rejuvenation; assuming coverage with OW
Zhongsheng Group Holdings (0881.HK Underweight), China
(Nick Lai)
China Auto Dealers: Distress share prices but now worth a revisit

Results and Company Views


China ZhengTong Auto Service Holding Limited (1728.HK
Overweight), China
(Nick Lai)
China Auto Dealers: Distress share prices but now worth a revisit
Crompton Greaves Limited (CROM.BO Neutral), India
(Sumit Kishore)
Management meeting: Slow overseas turnaround; non-core asset
sale; three-year lock-in post-consumer business listing
Far East Hospitality Trust (FAEH.SI Underweight), Singapore
(Brandon Lee)
Hospitality headwinds ongoing; assuming coverage with an UW
rating
Infosys (INFY.BO Overweight), India
(Viju K George)
Infosys 2014 Analyst Meet- Much more than a strategy summit
giving concrete glimpses into the happenings inside; stay OW
Skyworth Digital Holdings (0751.HK Overweight), China
(Leon Chik, CFA)
November stats - start of easy comps for ASPs
Taishin Financial Holdings (2887.TW Neutral), Taiwan
(Jemmy S Huang)
Impairment losses are now a real risk, but this could be the first
step to lifting overhang
Tata Power (TTPW.BO Overweight), India
(Sumit Kishore)
Management meeting- Two tracks on Mundra hearing; Maithon
profitability to improve; Trombay Unit 8 under recovery stops

Container Shipping, Asia Pacific


(Corrine Png)
Spot freight rates continue to fall on long-haul routes; aggressive
rate hikes planned from mid-Dec
Eye on China Consumers - MNC View Series 50, China
(Ebru Sener Kurumlu)
YOOX Black Friday China sales increase fourfold; Guess China
comps continue to be negative in 3Q
Food for Thought, Asia Pacific
(Latika Chopra, CFA)
A closer look at Raw Material/Crude trends and impact on staples
India Materials, India
(Pinakin Parekh, CFA)
Takeaways from New Delhi - Coal block auction rules are
evolving; Aggressive road targets but interesting bottlenecks
India Power Sector, India
(Sumit Kishore)
Takeaways from meeting with Ministry of Coal and IPPs in the run
up to coal block auctions
India Property
(Saurabh Kumar)
Pick up in land sales shows confidence coming back in Mumbai /
NCR
MVNO risks to the Japanese telco market, Japan
(James R. Sullivan, CFA)
Shipyards & Oil Services, Asia Pacific
(Ajay Mirchandani)
Sete Brasil misses yards monthly pay; BAB's CEO resigns;
Maersk targeted in PBR probe
Singapore Property, Singapore
(Brandon Lee)
Riding out the waves in 2015; assuming coverage of the sector
with a cautious stance
Taiwan Contact Lens Sector, Taiwan
(Andre Chang, CFA)
Weak sales continued in November; Drivers still in 2015
The Lodestone, India
(Pinakin Parekh, CFA)
Iron ore, steel and scrap remains steady; Spot Japan aluminum
premiums fall ~5%

Appendix
Key Rating, Price Target & EPS Changes
Price Target Changes
Company
Increases
Fortune Real Estate Investment Trust
Decreases
Hotel Shilla
Daum Kakao
Zhongsheng Group Holdings
Baoxin Auto Group Limited
Source: J.P. Morgan estimates.

J.P. Morgan DPS Estimate Changes


Price Target
New

Rating
OW

HK$8.60

HK$8.30

N
N
UW
N

KRW 94,000
KRW 112,000
HK$7.00
HK$5.60

KRW 113,000
KRW 120,000
HK$8.00
HK$6.00

J.P. Morgan EPS Estimate Changes


Company
Increases
A-REIT
CapitaCommercial Trust
CapitaRetail China Trust
CDL Hospitality Trusts
Fortune Real Estate Investment Trust
Frasers Centrepoint Trust
Global Logistic Properties Ltd
Keppel Land
Mapletree Industrial Trust
Decreases
Ascott Residence Trust
Baoxin Auto Group Limited
CapitaLand
Daum Kakao
Far East Hospitality Trust
ICICI Bank
Keppel REIT
Suntec REIT
Zhongsheng Group Holdings
Revisions
CapitaMall Trust
City Developments
Hotel Shilla
Mapletree Commercial Trust
Overseas Union Enterprise Ltd

Old

Current FY

Next FY

+0.6%
+29.3%
+1.5%
+3.6%
+1.8%
+11.8%
+70.1%
+2.4%

+0.7%
+29.6%
+0.9%
+0.4%
+4.4%
+0.6%
+17.9%
+81.1%
+3.4%

-15.9%
-5.5%
-7.6%
-0.1%
-2.1%
-80.0%
-46.1%
-24.1%
-5.0%

-8.0%
-5.4%
-2.9%
-4.7%
-6.6%
-80.0%
-35.6%
-19.8%
-6.8%

+0.4%
+1.6%
-2.1%
+1.3%
-8.0%

-1.0%
-19.4%
+4.2%
-1.6%
+23.5%

Company
Frasers Centrepoint Trust
Keppel Land
Mapletree Industrial Trust
Decreases
Ascott Residence Trust
CapitaCommercial Trust
CapitaMall Trust
City Developments
Far East Hospitality Trust
Global Logistic Properties Ltd
ICICI Bank
Keppel REIT
Revisions
Baoxin Auto Group Limited
Daum Kakao

Current FY
+2.0%
+44.4%
+2.4%

Next FY
+0.8%
+44.4%
+3.4%

-11.2%
-2.0%
-0.5%
-11.1%
-1.6%
-11.9%
-80.0%
-5.2%

-7.8%
-6.2%
-2.7%
-11.1%
-6.0%
-11.9%
-80.0%
-3.0%
-5.5%
-4.2%

Markets at a glance
China
SHASHR Index
Chg from previous day
T/O value (CNYmn / US$MM)
Chg from previous day
Exchange rate
O/N interbank (%)
Market cap (CNYBn)
Market cap (US$ Bn)
FY1E Market P/E
FY2E Market P/E

Hong Kong
3,164.31
2.82%
594,850 / 96,387
-7.03%
CNY6.2 / US$1
2.66
22,691.6
3,677
17.7
13.9

Indonesia
JCI Index
Chg from previous day
T/O value (Rp bn / US$MM)
Chg from previous day
Exchange rate
O/N interbank (%)
Market cap (US$Bn)
Market cap (Rp bn)
FY1E Market P/E
FY2E Market P/E

3,297.84
-0.17%
590 / 447
-9.49%
SGD1.32 / US$1
0.17
567.9
750
20.0
15.2

Source: Bloomberg, J.P. Morgan estimates.

KOSPI Index
Chg from previous day
T/O value (KRW bn / US$MM)
Chg from previous day
Exchange rate
O/N interbank (%)
Market cap (KRW Bn)
Market cap (US$ Bn)
FY1E Market P/E
FY2E Market P/E

1,575.55
#N/A
61 / 1,856
31.89%
Bt33.05 / US$1
1.90
439.1
14,511
16.2
14.6

TPX Index
Chg from previous day
T/O value (JPY bn / US$bn)
Chg from previous day
Exchange rate
O/N interbank (%)
Market cap (US$ bn)
Market cap (JPY bn)
FY1E Market P/E
FY2E Market P/E

SX5E Index
Chg from previous day
T/O value (Euro bn / US$bn)
Chg from previous day
Exchange rate
O/N interbank (%)
Market cap (US$ bn)
Market cap (Euro bn)
FY1E Market P/E
FY2E Market P/E

28,119.40
-1.19%
779 / 12,595
102.15%
INR61.8 / US$1
8.00
1608.4
99,459
23.9
19.1

PSE Index
Chg from previous day
T/O value (Php MM / US$MM)
Chg from previous day
Exchange rate
O/N interbank (%)
Market cap (US$ bn)
Market cap (Php bn)
FY1E Market P/E
FY2E Market P/E

7,230.56
-0.95%
11,878 / 266
0.01%
Php44.64 / US$1
4.00
186.4
8,322
21.0
18.4

Taiwan
1,978.95
-0.39%
3,174 / 2,840
4.9%
KRW1117.57 / US$1
2.00
1,316,622
1,178
19.7
12.2

TWSE Index
DoD Change
52-Week Range
T/O value (NT$ mn / US$MM)
Chg from previous day
Exchange rate
O/N interbank (%)
10 Year Gov Bond Yield (%)
Market cap (NT$Bn)
Market cap (US$ Bn)
FY1E Market P/E
FY2E Market P/E

9,187.29
-0.21%
9,594 / 8,230
118,640 / 3,801
11.55%
TWD31.2 / US$1
0.39
1.65
26,394.8
965
16.3
14.1

Australia
1,447.58
0.13%
2,419 / 20
5.24%
JPY121.09 / US$1
0.13
4211.8
510,006
19.6
18.1

Euro Stoxx
6,742.84
0.95%
4.01 / 6.24
-9.69%
US$1.56 / GBP1
0.47
2874.9
1,845
14.1
13.6

Sensex Index
Chg from previous day
T/O value (INR bn / US$MM)
Chg from previous day
Exchange rate
O/N interbank (%)
Market cap (US$Bn)
Market cap (INR Bn)
FY1E Market P/E
FY2E Market P/E

Philippines
1,740.84
-0.49%
1,525 / 436
-24.58%
MYR3.50 / US$1
3.25
298.6
1,044
19.1
17.3

Japan

UK
UKX Index
Chg from previous day
T/O value (GBP Bn / US$bn)
Chg from previous day
Exchange rate
O/N interbank (%)
Market cap (US$ bn)
Market cap (GBP bn)
FY1E Market P/E
FY2E Market P/E

KLCI Index
Chg from previous day
T/O value (MYR MM / US$MM)
Chg from previous day
Exchange rate
O/N interbank (%)
Market cap (US$ bn)
Market cap (MYR bn)
FY1E Market P/E
FY2E Market P/E

South Korea

Thailand
SET Index
Chg from previous day
T/O value (Bt bn / US$MM)
Chg from previous day
Exchange rate
O/N interbank (%)
Market cap (US$Bn)
Market cap (Bt bn)
FY1E Market P/E
FY2E Market P/E

24,047.67
0.19%
90,250 / 11,643
0.01%
HKD7.75 / US$1
0.18
30,995.3
3,999
14.4
13.0

Malaysia
5,144.01
-0.85%
4,226 / 341
20.16%
Rp12,390 / US$1
6.64
414.2
5,132,074
19.2
16.7

Singapore
STI Index
Chg from previous day
T/O value (SGD MM / US$MM)
Chg from previous day
Exchange rate
O/N interbank (%)
Market cap (US$ bn)
Market cap (SGD bn)
FY1E Market P/E
FY2E Market P/E

HSI Index
Chg from previous day
T/O value (HK$ mn / US$MM)
Chg from previous day
Exchange rate
O/N interbank (%)
Market cap (HK$Bn)
Market cap (US$ Bn)
FY1E Market P/E
FY2E Market P/E

India

ASX200 Index
Chg from previous day
T/O value (AUD MM / US$MM)
Chg from previous day
Exchange rate
O/N interbank (%)
Market cap (AUD$ bn)
Market cap (US$ bn)
FY1E Market P/E
FY2E Market P/E

5,372.71
0.70%
4,015 / 4,840
9.81%
AUD0.83 / US$1
2.50
1477.7
1,226
17.0
15.5

US
3,277.38
2.70%
10.54 / 12.95
-13.82%
US$1.23 / EURO1
3.21
3086.7
2,513
14.9
13.5

S&P Index
Chg from previous day
T/O value (US$ bn)
Chg from previous day
O/N interbank (%)
Market cap (US$ bn)
FY1E Market P/E
FY2E Market P/E

2,075.37
0.17%
28.61
-1.95%
0.11
18989.0
17.3
16.0

Asia Analyst Focus List


Open Trades (as of December 8, 2014 close)
Country
China
India
Indonesia
Malaysia
Philippines

OW
Guangdong Investment Limited
ICICI Bank
Indocement Tunggal Prakarsa
Tenaga
SM Prime Holdings

UW

Singapore
South Korea
Taiwan
Thailand

Sheng Siong Group


Hyundai Department Store
TSMC
Siam Commercial Bank

Genting Singapore

Coal India
PT Ace Hardware Indonesia, Tbk
Petronas Chemicals Group Berhad
Globe Telecom

Formosa Chemicals and Fibre Corp


CH. Karnchang

Sector
OW
Autos
Great Wall Motor Company Limited
Financials
Bank of China - H
Consumer
Chow Tai Fook Jewellery Company Ltd.
Emerging Technology Chroma ATE
Gaming & Leisure
Infrastructure and
Industrials
Beijing Capital International Airport
Internet
Baidu.com
Oil/Gas - Energy
Basic Materials
Tata Steel Ltd
Power Utilities
Real Estate
SM Prime Holdings
SMID Caps
TAL Education Group
Technology
Samsung Electronics
Telecommunications and
Media
Bharti Infratel Ltd.
Transportation
Air China H

UW
Daihatsu Motor (7262)
AMMB Holdings
PT Ace Hardware Indonesia, Tbk
Lite-On Technology Corporation
Daelim Industrial
Forgame Holdings Ltd
Oil and Natural Gas Corporation
China Coal Energy - H
Shanghai Electric Group Company Limited
Quality Houses
VTech Holdings
ASUSTek Computer
Maxis Berhad
Hanjin Shipping Co Ltd

Source: J.P. Morgan

Country relative performance in US$ (MSCI AC Asia Pacific ex JP)

Source: J.P. Morgan, Bloomberg.

Sector relative performance in US$ (MSCI AC Asia Pacific ex JP)

Source: J.P. Morgan, Bloomberg.

Last Four Weeks Additions


Company Name
Guangdong Investment Limited
ICICI Bank
Indocement Tunggal Prakarsa
SM Prime Holdings
Sheng Siong Group
Hyundai Department Store
TSMC
Siam Commercial Bank
New China Life Insurance Company Ltd - H
Coal India
PT Ace Hardware Indonesia, Tbk
Petronas Chemicals Group Berhad
Lotte Chemical Corp
Formosa Chemicals and Fibre Corp
CH. Karnchang
Great Wall Motor Company Limited
Bank of China - H
Chow Tai Fook Jewellery Company Ltd.
Chroma ATE
Galaxy Entertainment Group
Baidu.com
Sound Global Limited
SM Prime Holdings
Samsung Electronics
Bharti Infratel Ltd.
Daihatsu Motor (7262)
PT Ace Hardware Indonesia, Tbk
Lite-On Technology Corporation
Genting Singapore
Daelim Industrial
Forgame Holdings Ltd
Oil and Natural Gas Corporation
China Coal Energy - H
Shanghai Electric Group Company Limited
Quality Houses
ASUSTek Computer

BBG Ticker
270 HK
ICICIBC IN
INTP IJ
SMPH PM
SSG SP
069960 KS
2330 TT
SCB TB
1336 HK
COAL IN
ACES IJ
PCHEM MK
011170 KS
1326 TT
CK TB
2333 HK
3988 HK
1929 HK
2360 TT
27 HK
BIDU US
967 HK
SMPH PM
005930 KS
BHIN IN
7262 JT
ACES IJ
2301 TT
GENS SP
000210 KS
484 HK
ONGC IN
1898 HK
2727 HK
QH TB
2357 TT

Team Head
Bharat Iyer
Aditya Srinath, CFA
Jeanette Yutan
Scott YH Seo
Alvin Kwock
Anne Jirajariyavech, CFA
Bharat Iyer
Aditya Srinath, CFA
Hoy Kit Mak
Scott YH Seo
Alvin Kwock
Anne Jirajariyavech, CFA
Nick Lai
Josh Klaczek
Ebru Sener Kurumlu
Alvin Kwock
Cusson Leung
Alex Yao
Boris Kan
Cusson Leung
JJ Park
James R. Sullivan, CFA
Nick Lai
Ebru Sener Kurumlu
Alvin Kwock
Cusson Leung
Karen Li, CFA
Alex Yao
Scott L Darling
Daniel Kang
Boris Kan
Cusson Leung
JJ Park

Analyst
Rating
OW
OW
OW
OW
OW
OW
OW
OW
UW
UW
UW
UW
UW
UW
UW
OW
OW
OW
OW
OW
OW
OW
OW
OW
OW
UW
UW
UW
UW
UW
UW
UW
UW
UW
UW
UW

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14-Nov-14
14-Nov-14
14-Nov-14
14-Nov-14
14-Nov-14
14-Nov-14
14-Nov-14
14-Nov-14
14-Nov-14
14-Nov-14
14-Nov-14
14-Nov-14
14-Nov-14
14-Nov-14
14-Nov-14
14-Nov-14
14-Nov-14
14-Nov-14
14-Nov-14
14-Nov-14
14-Nov-14
14-Nov-14
14-Nov-14
14-Nov-14
14-Nov-14
14-Nov-14
14-Nov-14
14-Nov-14
14-Nov-14
14-Nov-14
14-Nov-14
14-Nov-14
14-Nov-14

Add Price
10.8
338
24200
17.78
0.64
133500
135
186
31.75
355.75
795
5.45
164000
68.5
26.5
36.75
3.85
10.74
81.4
54.85
244.09
8.94
17.78
1194000
299.95
1609
795
38.1
1.045
71200
16.66
393.35
4.92
4.65
4.1
321

Current
Price
9.73
353.8
25100
16.7
0.66
124500
138
191
37.5
364.6
760
5.14
180500
67.3
26.25
41.55
4.32
10.3
82.4
46.8
228.31
7.54
16.7
1319000
310.95
1656
760
37
1.095
69500
13.76
368.3
5.09
4.59
3.98
346

Price
Target
11.3
1900
29000
22
0.82
168000
155
228
20
325
490
5
100000
52
23
40
4.3
13.4
105
60
266
11
22
1500000
330
1430
490
38
1
70000
15
355
4
2.8
4
275

Source: J.P. Morgan, Bloomberg. Priced at Dec 08, 2014

Last Four Weeks Deletions


Company Name
Lotte Himart
PetroChina
Hanjin Shipping Co Ltd
ASUSTek Computer
Sun Art Retail Group Limited
Bharat Heavy Electricals (BHEL)
KASIKORNBANK
Maxis Berhad
Universal Robina Corp
China Everbright International
LG Display
PetroChina
Zhongsheng Group Holdings
SPIL
Fubon Financial Holdings
Sun Art Retail Group Limited
Siemens India
UEM Sunrise Bhd
New China Life Insurance Company Ltd - H
Lotte Chemical Corp
Genting Singapore
Sound Global Limited
Galaxy Entertainment Group

BBG Ticker
071840 KS
857 HK
117930 KS
2357 TT
6808 HK
BHEL IN
KBANK TB
MAXIS MK
URC PM
257 HK
034220 KS
857 HK
881 HK
2325 TT
2881 TT
6808 HK
SIEM IN
UEMS MK
1336 HK
011170 KS
GENS SP
967 HK
27 HK

Team Head
Scott YH Seo
Scott YH Seo
Alvin Kwock
Bharat Iyer
Anne Jirajariyavech, CFA
Hoy Kit Mak
Jeanette Yutan
Boris Kan
JJ Park
Scott L Darling
Nick Lai
JJ Park
Josh Klaczek
Ebru Sener Kurumlu
Karen Li, CFA
Cusson Leung
Scott YH Seo
Cusson Leung
Boris Kan
Cusson Leung

Analyst Rating Removal Date Add Price Removal Date Price Price Target
OW
14-Nov-14
74300
73200
91000
OW
14-Nov-14
9.28
8.68
11.5
UW
14-Nov-14
6150
6020
3800
UW
14-Nov-14
309
321
275
UW
14-Nov-14
9.98
8.45
7.3
UW
14-Nov-14
277.8
244.4
175
OW
14-Nov-14
177.5
237
260
UW
14-Nov-14
6.87
6.92
5.1
OW
14-Nov-14
167.4
187
195
OW
14-Nov-14
9.36
11.56
13
OW
14-Nov-14
33750
33750
45000
OW
14-Nov-14
8.54
8.68
11.5
UW
14-Nov-14
9.36
8.2
8
UW
14-Nov-14
46.4
43.95
38
OW
14-Nov-14
41
50.8
54
UW
14-Nov-14
9.05
8.45
7.3
UW
14-Nov-14
851
928.8
645
UW
14-Nov-14
1.97
1.8
1.85
UW
27-Nov-14
31.75
35.2
20
UW
27-Nov-14
164000
175500
100000
UW
27-Nov-14
1.045
1.14
1
OW
5-Dec-14
8.94
7.73
11
OW
8-Dec-14
54.85
46.8
60

Source: J.P. Morgan, Bloomberg.


Japan stocks are not included at the Country Team level. Japan stocks may continue to appear in Sector Team selections. For details on selection process please see Asia AFL methodology.

AFL Country team stocks


All stock and market returns shown in local currency (LC) terms, and reflect performance since date added to the AFL. All aggregates include cumulative returns since inception of the AFL on September 2,
2013. Country AFL total aggregate returns are shown in US$ terms. Aggregate US$ return spread uses the MSCI AC Asia Pacific ex JP Index as the benchmark.

Country/Company Name
Guangdong Investment Limited
Aggregate China performance
ICICI Bank
Coal India
Aggregate India performance
Indocement Tunggal Prakarsa
PT Ace Hardware Indonesia, Tbk
Aggregate Indonesia performance
Tenaga
Petronas Chemicals Group Berhad
Aggregate Malaysia performance
SM Prime Holdings
Globe Telecom
Aggregate Philippines performance
Sheng Siong Group
Genting Singapore
Aggregate Singapore performance
Hyundai Department Store
Aggregate South Korea performance
TSMC
Formosa Chemicals and Fibre Corp
Aggregate Taiwan performance
Siam Commercial Bank
CH. Karnchang
Aggregate Thailand performance

BBG Ticker
270 HK

Analyst Name
Elaine Wu

Country
China

Rating1
OW

Add Date
14-Nov-14

ICICIBC IN
COAL IN

Seshadri K Sen, CFA


Pinakin Parekh, CFA

India
India

OW
UW

14-Nov-14
14-Nov-14

INTP IJ
ACES IJ

Lydia J Toisuta
Princy Singh

Indonesia OW
Indonesia UW

14-Nov-14
14-Nov-14

TNB MK
PCHEM MK

Ajay Mirchandani
Samuel Lee, CFA

Malaysia
Malaysia

OW
UW

14-Nov-14
14-Nov-14

SMPH PM
GLO PM

Jeanette Yutan
Princy Singh

Philippines OW
Philippines UW

14-Nov-14
14-Nov-14

SSG SP
GENS SP

Princy Singh
Daisy Lu

Singapore OW
Singapore UW

14-Nov-14
14-Nov-14

069960 KS

Youna Kim

Korea

OW

14-Nov-14

2330 TT
1326 TT

Gokul Hariharan
Samuel Lee, CFA

Taiwan
Taiwan

OW
UW

14-Nov-14
14-Nov-14

SCB TB
CK TB

Anne Jirajariyavech, CFA


Felicia Tandiyono

Thailand
Thailand

OW
UW

14-Nov-14
14-Nov-14

Asia Pacific ex JP
Asia Pacific ex JP
Asia Pacific ex JP

1 - Rating and price targets reflect J.P. Morgan's fundamental long-term views.
2 Spread over MSCI country indices except for Shanghai listed A-Shares which are spread over SHASHR.
3 - Spread over MSCI country index incorporates the impact of currency movements
Source: Bloomberg, J.P. Morgan. Priced at Dec 08, 2014 (prices and price-related data based on current day's close)

Price Abs. Perf Spread Over


Add Current
Price Target End Since Add MSCI Country
Price
Price Target1
Date Date (%)
Index (%)2
10.80
9.73
11.30 12/31/15
-9.9
-12.2
2.4
-2.3
338
354
2200
9/30/15
4.5
3.9
356
365
325
9/30/15
2.3
1.7
35.3
64.9
24200 25100 29000 12/31/15
3.7
3.1
795
760
490
6/30/15
-4.4
-5.1
29.1
34.5
13.52
13.86
17.70
8/31/15
2.5
6.0
5.45
5.14
5.00 12/31/15
-5.7
-2.2
26.9
33.3
17.78
16.70
22.00 12/31/15
-6.1
-6.3
1690
1780 1570.00
6/30/15
5.3
5.1
-9.7
0.9
0.64
0.66
0.82
6/30/15
3.1
3.1
1.05
1.10
1.00 12/31/15
4.8
4.8
-8.2
-10.2
133500 124500 168000
6/30/15
-6.7
-9.2
-32.7
-23.8
135.00 138.00 155.00
6/30/15
2.2
0.6
68.50
67.30
52.00 12/31/15
-1.8
-3.4
13.6
33.8
186.00 191.00 228.00 12/31/15
2.7
1.1
26.50
26.25
23.00 12/31/15
-0.9
-2.6
4.5
-16.8
3.4
3.3
1.7
1.6
1.7
1.5

AFL Sector team stocks


All returns shown in US$ terms, and reflect performance since date added to the AFL. All aggregates include cumulative returns since inception of the AFL on September 2, 2013. Aggregate US$ return spread
uses the MSCI AC Asia Pacific ex JP Index as the benchmark.

BBG
Company Name
Ticker
Analyst Name
Great Wall Motor Company Limited
2333 HK Nick Lai
Daihatsu Motor (7262)
7262 JT Akira Kishimoto
Aggregate Autos performance
Chow Tai Fook Jewellery Company Ltd.
1929 HK Ebru Sener Kurumlu
PT Ace Hardware Indonesia, Tbk
ACES IJ Princy Singh
Aggregate Consumer performance
Chroma ATE
2360 TT William Chen
Lite-On Technology Corporation
2301 TT William Chen
Aggregate Emerging Technology performance
Bank of China - H
3988 HK Katherine Lei
AMMB Holdings
AMM MK Harsh Wardhan Modi
Aggregate Financials performance
Beijing Capital International Airport
694 HK
Karen Li, CFA
Daelim Industrial
000210 KS Sokje Lee
Aggregate Infrastructure performance
Tata Steel Ltd
TATA IN Pinakin Parekh, CFA
China Coal Energy - H
1898 HK Daniel Kang
Aggregate Basic Materials performance
Aggregate Gaming & Leisure performance
Baidu.com
BIDU US Alex Yao
Forgame Holdings Ltd
484 HK
Alex Yao
Aggregate Internet performance
Oil and Natural Gas Corporation
ONGC IN Scott L Darling
Aggregate Oil and Gas performance
TAL Education Group
XRS US Leon Chik, CFA
VTech Holdings
303 HK
Leon Chik, CFA
Aggregate SMID-Caps performance
Samsung Electronics
005930 KS JJ Park
ASUSTek Computer
2357 TT Gokul Hariharan
Aggregate Technology performance
Bharti Infratel Ltd.
BHIN IN Viju K George
Maxis Berhad
MAXIS MK Princy Singh
Aggregate Telecom performance
Air China H
753 HK
Corrine Png
Hanjin Shipping Co Ltd
117930 KS Corrine Png
Aggregate Transportation performance
SM Prime Holdings
SMPH PM Jeanette Yutan
Quality Houses
QH TB
Anne Jirajariyavech, CFA
Aggregate Real Estate performance
Shanghai Electric Group Company Limited
2727 HK Boris Kan
Aggregate Utilities & Power Equipment performance
Average Sector OW (US$)
Average Sector UW (US$)
Aggregate Sector Performance

Price
Target
End
Date
6/30/15
12/31/15

MSCI Sector Indices


Autos
Autos

Rating1 Add Date


OW
14-Nov-14
UW
14-Nov-14

Add Current
Price
Price
Price Target1
36.8
41.6
50.0
1609
1656
1300

Consumer
Consumer

OW
UW

14-Nov-14
14-Nov-14

10.74
795

10.30
760

12.00 3/31/16
490 6/30/15

Emerging Technology
Emerging Technology

OW
UW

14-Nov-14
14-Nov-14

81.40
38.10

82.40
37.00

105.00 6/30/15
38.00 6/30/15

Financials
Financials

OW
UW

14-Nov-14
14-Nov-14

3.85
6.52

4.32
6.44

4.30 12/31/15
6.20 6/30/15

Infrastructure and Industrials OW


Infrastructure and Industrials UW

14-Nov-14
14-Nov-14

6.05
71200

5.97
69500

8.60 12/31/15
70000 12/31/15

Metals & Mining


Metals & Mining

OW
UW

14-Nov-14
14-Nov-14

478.15
4.92

451.85
5.09

630.00 9/30/15
4.00 12/31/15

Internet
Internet

OW
UW

14-Nov-14
14-Nov-14

249.70
16.66

232.72
13.76

266.00 6/30/15
15.00 6/30/15

Oil and Gas

UW

14-Nov-14

393.25

368.30

355.00 3/31/16

SMID-Caps
SMID-Caps

OW
UW

14-Nov-14
14-Nov-14

32.06
107.30

29.58
106.80

45.00 12/31/15
80.00 12/31/15

Technology
Technology

OW
UW

14-Nov-14 1194000 1319000 1500000 12/31/15


14-Nov-14 321.00 346.00 275.00 12/31/15

Telecommunications
Telecommunications

OW
UW

14-Nov-14
14-Nov-14

298.95
6.92

310.95
6.55

330.00 12/31/15
5.10 12/31/15

Transportation
Transportation

OW
UW

14-Nov-14
14-Nov-14

5.47
6020

5.99
6090

7.00 12/31/15
3800 12/31/15

Real Estate
Real Estate

OW
UW

14-Nov-14
14-Nov-14

17.78
4.10

16.70
3.98

22.00 12/31/15
4.00 12/31/15

Utilities & Power Equipment UW

14-Nov-14

4.65

4.59

2.80 6/30/15

1 - Rating and price targets reflect J.P. Morgan's fundamental long-term views.
2 Spread over MSCI sector indices except for Shanghai listed A-Shares which are spread over SHASHR.
Source: Bloomberg, J.P. Morgan. Priced at Dec 05, 2014 (prices and price-related data based on previous day's close)

Abs. Spread
Perf Over
Since MSCI
Add Sector
Date Index
(%)
(%)2
13.1
11.2
-0.9
-2.8
28.6
27.1
-4.1
-4.4
-5.9
-6.3
-13.2 -13.3
-0.2
-4.7
-4.2
-8.7
54.5
54.5
12.3
9.5
-5.2
-7.9
28.8
28.2
-1.3
0.8
-3.5
-1.5
-34.0 -33.9
-5.8
-6.8
3.5
2.5
-26.3 -26.2
6.4
5.7
-6.8
-6.9
-17.4 -17.5
-57.8 -57.4
-6.7
-4.6
-40.6 -40.4
-7.7
-6.2
-0.4
1.1
47.2
46.5
9.2
9.0
6.3
6.1
-3.8
-2.9
3.6
5.3
-9.1
-7.4
14.7
14.9
9.6
8.0
0.0
-1.5
-15.1 -15.0
-5.4
-7.6
-3.6
-5.8
17.1
16.6
-1.3
0.9
-25.6 -25.9
3.4
3.2
2.0
1.8
1.4
1.3

Asia Pacific Equity Research


09 December 2014

Singapore Property
Riding out the waves in 2015; assuming coverage of
the sector with a cautious stance
Property stocks have outperformed the market YTD despite rate hike concerns
and residential sales decline which we expect to persist into 2015. The worst is not
over for the resi sector and the downcycle is likely to continue into 2016. We
expect non-resi developers GLP and CAPL to outperform with their focused
strategy. The governments restructuring efforts are likely to continue for the next
12 months, which will affect the retail and industrial sectors. However, AREIT
and CT look cheap to us on valuations. In the hospitality sector, we see prolonged
competitive headwinds leading to sustained RevPAR declines. We are positive on
office given favorable demand-supply dynamics; we view SUN as the best proxy.
We also like CRCT and ART, given strong FY15E DPU growth and minimal
exposure to Singapore.
Core geographic focus is key in resi downcycle. We expect resi prices to fall
14% from 4Q13-2016E due to sales decline and rising vacancies, but at a
gradual pace in view of still-reasonable affordability and strong balance sheets.
Therefore, we think it is still early for any policy loosening/withdrawal. We
expect margin compression and inventory cycle declines to persist in 2015E,
suggesting an urgent need to venture offshore. In our view, developers with
proven track records in core overseas markets will reap quicker rewards.
Recurring earnings rule as management reshuffles. Given the challenging
residential market, we expect recurring income from investment properties to be
the key EBIT driver, which will lead to improved RoEs. 2014 saw many senior
management changes among developers, which imply execution will be pivotal
going forward. We review these changes in detail within this report.
Office the best; the rest in duress. We are positive on office given limited
supply in 4Q14-1H16 and good rent growth. We are cautious on industrial due
to policy changes affecting leasing/acquisitions. We are cautious on retail given
labour constraints and rising business costs. We are negative on hospitality due
to supply risk. Our top developer picks are GLP and CAPL given their minimal
Sing resi exposure. Among REITs we like SUN, AREIT, CT, CRCT and ART.

Property
Brandon Lee

AC

(65) 6882-7073
brandon.lee@jpmorgan.com
J.P. Morgan Securities Singapore Private
Limited

Cusson Leung
(852) 2800-8526
cusson.leung@jpmorgan.com
J.P. Morgan Securities (Asia Pacific) Limited

James R. Sullivan, CFA


(65) 6882-2374
james.r.sullivan@jpmorgan.com
J.P. Morgan Securities Singapore Private
Limited

FSTREI vs FSTREH vs FSSTI


FSSTI (LHS) / FSTREI, FSTREH (RHS)
3,500

900
850

3,400

800

3,300

750
3,200

700

3,100

650

3,000
Dec-12
FSSTI

Dec-13
FSTREI

600
Dec-14
FSTREH

Source: Bloomberg.

See page 318 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.
www.jpmorganmarkets.com

Asia Pacific Equity Research


09 December 2014

What to buy for Christmas...


Trading Port: Singapore Equity Strategy
Welcome to the last Trading Port of 2014: Weve previously opined on
the investment opportunities in Singapore for the upcoming Year of the
Goat (please see our detailed Year Ahead report here) but wanted to provide
additional backdrop to the likely investment climate in 2015.

Singapore Strategy
James R. Sullivan, CFA

AC

(65) 6882-2374
james.r.sullivan@jpmorgan.com
Bloomberg JPMA SULLIVAN <GO>

The Relative Attractiveness Quotient: We ranked sectors on (1) earnings


revision momentum, (2) changes in analyst recommendations, and (3) index
weight changes, having assigned equal weights to each, to yield the Relative
Attractiveness Quotient. Banks, Real Estate and Telecom rank high,
whereas Industrials and Consumer rank low. DBS (OW, recent equity
report here, recent credit report here) remains our favoured play on Fed rate
hikes across Asean and our top pick within Singapore banks. GLP is our
top property pick (OW, link to report here), while M1 remains our top pick
in Telecoms (OW, recent report here). We are most cautious on GENS
(UW, recent report here) as we believe weak growth in the Singapore
market and increasing expenses will continue to plague the stock.

J.P. Morgan Securities Singapore Private


Limited

Sunil Garg

AC

(852) 2800-8518
sunil.garg@jpmorgan.com
Bloomberg JPMA GARG <GO>
J.P. Morgan Securities (Asia Pacific) Limited

Adrian Mowat
(852) 2800-8599
adrian.mowat@jpmorgan.com
Bloomberg JPMA MOWAT <GO>
J.P. Morgan Securities (Asia Pacific) Limited

Model portfolio: Our Singapore Analyst Recommendation Portfolio (based


on published recommendations) has outperformed MXSG by 14.9ppts since
Jan-12. Past performance is not indicative of future performance.

Rajiv Batra

1) Navigation charts: Our Aggregate Macro Forecast Index has fallen back
to negative ground, mainly on account of soft tech spending, after seeing
positive movements last month.

Aditya Srinath, CFA

(91-22) 6157-3568
rajiv.j.batra@jpmorgan.com
J.P. Morgan India Private Limited
(62-21) 5291-8573
aditya.s.srinath@jpmorgan.com
Bloomberg JPMA SRINATH <GO>
PT J.P. Morgan Securities Indonesia

2) Weather forecast Whats working in Singapore: Large-cap (+30%),


high-yielding (+27%) names with positive earnings revision momentum
(+24%) have done well through the year. Both 30D vol and 90D vol
delivered the lowest returns of -11% and -14%, respectively.

Namita Mitla
(91-22) 6157-3301
namita.mitla@jpmorgan.com
J.P. Morgan India Private Limited

3) Tide tables Forecasts rising/falling: Thirty-day earnings revisions


were mainly on the downside, especially for the Shipping/Infra and Airline
sectors, with key negative revisions from SIE, GGR, VARD and NOL.
Sector ranking on relative attractiveness (smaller numbers are better)
Banks
Real Estate
Telecom
Financials
Industrials
Consumer Discretionary
Consumer Staples
0.0

0.5

1.0

1.5

2.0

2.5

3.0

Source: J.P. Morgan, Bloomberg.

See page 57 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.
www.jpmorganmarkets.com

Asia Pacific Equity Research


08 December 2014

China Auto Dealers


Distress share prices but now worth a revisit
Auto dealers share prices have largely corrected by ~15-20% in the past
three months triggered by widening price discounts across most premium
and mass-market brands as underlying auto sales slowed along with piling
inventory. Fundamentally, we believe auto dealers in China is an avoid
space at this stage of the business cycle when OEMs are still striving to
expand their networks, meaning dealers wont be in the position to pay
much dividends like those in developed markets. Competition also implies
longer payback for new 4S stores. Nevertheless, everything has a price.
Dealers share price correction lately leads us to believe they are worth
revisiting and some could be oversold. We would buy Zhengtong Auto
and accumulate Baoxin Auto on any further weakness.
Why look at auto dealers now? China's auto dealers largely derive their
profit from two main sources at this stage - new car sales and aftermarket
(AM) businesses. Compared with new car sales business full of volatility
and uncertainty, AM is relatively predictable and resilient. Our analysis
suggests that AM business alone is worth round HK$3.5-4.0/shr for
Zhengtong Auto, HK$4.5-5.0/shr for Baoxin and HK$6-6.5/shr for
Zhongsheng depending on the discount rate or terminal growth
assumptions in our DCF models. Our analysis implies the market is
paying little or no value for Zhengtong and Baoxins new car sales or
other non-AM businesses despite the fact that they should be worth
something, e.g., inventory, dealer authorization and land value in some
cases. Investors buying selective dealers at this level should see
favorable risk-reward in 6-9 months in our view.
Why did share prices correct in the first place? Since 3Q14, price
discounts (between MSRP and retail price) for premium and mid-end
brands have been on the rise, by ~150-300bps. Such burden would be
born mostly by dealers, especially at the time of inventory piling. At
current discounts, we believe dealers only make little profit selling cars
but our channel checks suggest OEMs should likely offer rebates toward
year end to make up for dealers losses or ensure new car sales margin
are comparable with 1H14.
Earnings revisions: We trim Baoxin and Zhongsheng Autos FY14/15
estimates by ~5-7% to reflect intense competition while maintaining
Zhengtong's forecasts as we expect no surprise.
View: We encourage investors to accumulate selective dealers:
Zhengtong Auto (OW) and Baoxin (N) on any further weakness.

China
Head of Asia Auto Research
Nick Lai

AC

(852) 2800 8543


nick.yc.lai@jpmorgan.com
Bloomberg JPMA LAI <GO>

Rebecca Y Wen
(852) 2800-8505
rebecca.y.wen@jpmorgan.com
J.P. Morgan Securities (Asia Pacific) Limited

Relative share price performance of


China auto companies (as of 8-Dec)
Company
(rating)
Brilliance
China (OW)
Dongfeng
(OW)
GAC (UW)

1M

3M

YTD

6%

-4%

1%

3%

-12%

-7%

3%

-10%

-16%

Geely (OW)

-19%

3%

-23%

Great Wall
(OW)
Baoxin (N)

13%

28%

-6%

-10%

-14%

-38%

-11%

-16%

-28%

2%

-11%

-33%

6%

1%

-4%

0%

6%

-5%

-7%

0%

46%

-6%

-1%

-15%

-23%

Zheng Tong
(OW)
Zhongsheng
(UW)
Minth (N)
Sinotruk
(UW)
Nexteer
(NR)
Sunfonda
(UW)
BYD (OW)

6%

Source: Bloomberg.
Note: 1) Relative performance to Hang Seng Index. 2)
BYD is co- covered by Alvin Kwock and Nick Lai

Equity Ratings and Price Targets


Company
Baoxin Auto Group Limited
Zhongsheng Group Holdings
China ZhengTong Auto Service Holding Limited

Ticker
1293 HK
881 HK
1728 HK

Mkt Cap
(HK$ mn)
12,505.25
14,313.61
8,265.22

Rating
Price (HK$)
4.89
7.50
3.74

Cur
N
UW
OW

Prev
n/c
n/c
n/c

Price Target
Cur
Prev
5.60
6.00
7.00
8.00
5.20
n/c

Source: Company data, Bloomberg, J.P. Morgan estimates. n/c = no change. All prices as of 08 Dec 14.

See page 17 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.
www.jpmorganmarkets.com

Asia Pacific Equity Research


08 December 2014

Fortune Real Estate Investment


Trust

Overweight
FORT.SI, FRT SP
Price: HK$7.44

Staying positive on DPU accretive potential acquisition

Price Target: HK$8.60


Previous: HK$8.30

We view the proposed acquisition of Laguna Plaza as positive as we


estimate the acquisition is DPU accretive and there is potential synergy
with Centre de Laguna in the existing portfolio. Our PT is revised up to
HK$8.6 on higher FY15E and FY16E DPU estimates.
Acquisition cost looks reasonable: Fortune REIT announced the
potential acquisition of Laguna Plaza in Kwun Tong at a consideration of
HK$1,918.5 mn, a 7.8% discount to the valuers valuation of HK$2,080 mn.
The estimated net property yield (NPI) is about 4.3% on valuation and
4.7% on consideration. The NPI yield for this potential acquisition is
higher than 3.8% for Fortune Kingswood acquired in 2013 and 4.5% for
Belvedere Square and Provident Square acquired in 2012. The higher
yield may imply there is relatively less asset enhancement opportunity for
Laguna Plaza shortly after acquisition.
Enhancing DPU by 4.6% in FY15E: Monthly rental of Laguna Plaza
is about HK$7.5 mn on 72.7% occupancy as at 31 Oct 2014. At the
current committed occupancy of 96.7%, we estimate the potential
acquisition will enhance FY15E NPI by about HK$100 mn or NPI yield
of 5.2% on acquisition cost. Our FY15E and FY16E DPU estimates are
adjusted up by 4.6% and 3.7%, respectively. As the mall is located close
to Centre de Laguna in the existing portfolio, the proposed acquisition
could provide flexibility in tenants mix rebranding.
Acquisition fully funded by debt: While the proposed acquisition will
enhance DPU on our estimates, the higher gearing after acquisition may
also raise investor concerns. The valuation of the existing portfolio is
revised up by 4.5% from HK$30.9 bn at Jun-14 to HK$32.3 bn at Oct-14.
Based on the new valuation, the gearing ratio of Fortune will be increased
from 29.9% to about 33.9% post acquisition. At Jun-14 valuation, we
estimate that post acquisition gearing will be close to 35% which is the
regulatory limit.
Fortune Real Estate Investment Trust (Reuters: FORT.SI, Bloomberg: FRT SP)
HK$ in mn, year-end Dec
FY12A
FY13A
FY14E
FY15E
Revenue (HK$ mn)
1,114
1,317
1,541
1,774
Net Property Income (HK$
788
928
1,135
1,311
mn)
Core Profit (HK$ mn)
441
439
660
706
Distributable Profit (HK$ mn)
549
642
789
847
EPU (HK$)
0.26
0.25
0.35
0.37
DPU (HK$)
0.32
0.36
0.42
0.45
Revenue growth (%)
22.5%
18.3%
17.0%
15.1%
Distribution growth
24.2%
16.9%
22.8%
7.3%
Dividend Yield
4.3%
4.8%
5.7%
6.0%
NPV per Share (HK$)
8.66
Source: Company data, Bloomberg, J.P. Morgan estimates.

FY16E
1,845
1,371
731
875
0.38
0.46
4.0%
3.3%
6.2%
-

Singapore
REITs
Amy Luk, CFA

AC

(852) 2800 8524


amy.kp.luk@jpmorgan.com
Bloomberg JPMA LUK <GO>
J.P. Morgan Securities (Asia Pacific) Limited

Leo Ng
(852) 2800-8522
leo.ng@jpmorgan.com
J.P. Morgan Securities (Asia Pacific) Limited

James R. Sullivan, CFA


(65) 6882-2374
james.r.sullivan@jpmorgan.com
J.P. Morgan Securities Singapore Private
Limited
Price Performance
8.0
7.5
HK$

7.0
6.5
6.0
5.5
Dec-13

Mar-14

Jun-14

Sep-14

Dec-14

FORT.SI share price (HK$)


FTSTI (rebased)

Abs
Rel

YTD
19.2%
15.1%

1m
2.9%
3.0%

Company Data
Shares O/S (mn)
Market Cap (HK$ mn)
Market Cap ($ mn)
Price (HK$)
Date Of Price
Free Float(%)
3M - Avg daily vol (mn)
3M - Avg daily val (HK$ mn)
3M - Avg daily val ($ mn)
FTSTI
Exchange Rate
Price Target End Date
Price Target (HK$)

3m
3.3%
4.4%

12m
20.6%
14.7%

1,873
13,935
1,798
7.44
08 Dec 14
68.7%
0.60
4.25
0.5
3297.84
7.75
31-Dec-15
8.60

See page 6 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.
www.jpmorganmarkets.com

Asia Pacific Equity Research


08 December 2014

Neutral

Hotel Shilla

008770.KS, 008770 KS
Price: W88,200

Valuation has gotten cheaper, operation risks linger

Price Target: W94,000


Previous: W113,000

Hotel Shillas share price is down 27% since the end of August, mainly due to
ongoing concerns about a potential rise in competition for its city DFS with
additional license issuance and risks related to Incheon International Airport
DFS bidding process. Recent news flow suggests both positive developments
and downside risks to Hotel Shilla. We remain cautious on the stock until we
have more visibility on how the competitive landscape pans out, depending on
the governments additional license issuance.
Positives: Regarding IIA DFS, company guided that the operating space
will increase, and be allocated to SMEs. This implies that available
operating space for conglomerate-run DFS would remain flat. In terms of
product offering, Lotte DFS is currently the sole operator with a license to
sell tobacco and alcohol, but this license is likely to expire once the new
contract begins. This is good news for Hotel Shilla, as it would be able to
bid for a license for all product categories (cosmetics & perfume, tobacco &
alcohol, and fashion).
Negatives. Uncertainties regarding additional DFS operators in Seoul
remain. Additional city DFS licenses could 1) dilute the number of visitors
to Hotel Shilla Seoul DFS among Chinese tourists, although the location of
the new DFS is a critical factor, and 2) increase marketing cost. Although
rent for IIA DFS is already high enough to deteriorate leading players
OPM, we do not expect the actual rent rise to be substantially higher than
what we are penciling now. We will need to watch carefully for more
details on bids and the bidding process (level of competition etc).

Maintain Neutral. We adjust our earnings estimates for FY14-16. We also


reduce our target valuation multiple further to 20x from 25x, following 1)
ongoing concerns about competition (both in the city and IIA DFS), and 2)
the de-rating of other China tourism plays. Our Dec-15 PT thus falls to
W94,000 from W113,000. We would stay away from the stock until we
have more clarity on the governments stance on issuing additional city DFS
licenses and IIA DFS bidding.
HOTEL SHILLA CO LTD (Reuters: 008770.KS, Bloomberg: 008770 KS)
Year-end Dec
FY13A
FY14E
FY15E
Revenue (W bn)
2,297
2,896
4,000
Net Profit (W bn)
11
95
185
EPS (W)
269
2,423
4,712
DPS (W)
300
300
300
Revenue growth
3.5%
26.1%
38.1%
Net Profit growth
(89.3%)
782.1%
94.2%
EPS growth
(89.5%)
802.2%
94.4%
ROE
1.5%
13.3%
22.0%
P/E (x)
328.4
36.4
18.7
P/BV (x)
5.0
4.5
3.7
EV/EBITDA (x)
20.4
17.4
10.7
Dividend Yield
0.3%
0.3%
0.3%
Source: Company data, Bloomberg, J.P. Morgan estimates.

FY16E
4,504
211
5,381
300
12.6%
14.2%
14.2%
20.6%
16.4
3.0
9.0
0.3%

South Korea
Specialty Retailing
Youna Kim

AC

(82-2) 758-5715
youna.kim@jpmorgan.com
Bloomberg JPMA YKIM <GO>
J.P. Morgan Securities (Far East) Ltd, Seoul
Branch

Sally Yoo
(82-2) 758-5383
sally.yoo@jpmorgan.com
J.P. Morgan Securities (Far East) Ltd, Seoul
Branch

Ebru Sener Kurumlu


(852) 2800-8521
ebru.sener@jpmorgan.com
J.P. Morgan Securities (Asia Pacific) Limited
Price Performance
140,000
120,000
W 100,000
80,000
60,000
Dec-13

Mar-14

Jun-14

Sep-14 Dec-14

008770.KS share price (W)


KOSPI (rebased)

Abs
Rel

YTD
34.7%
34.1%

1m
-5.2%
-6.3%

Company Data
52-week Range (W)
Market Cap (W bn)
Market Cap ($ mn)
Shares O/S (mn)
Fiscal Year End
Price (W)
Date Of Price
Free Float(%)
3M - Avg daily vol (th)
3M - Avg daily val (W bn)
3M - Avg daily val ($ mn)
KOSPI
Exchange Rate
Price Target End Date
Price Target (W)

3m
-16.4%
-13.7%

12m
26.7%
27.8%

135,500-55,500
3,405
3,057
39
Dec
88,200
08 Dec 14
82.4%
465.1
47.4
42.6
1,979.0
1,114.0
30-Dec-15
94,000

See page 8 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.
www.jpmorganmarkets.com

Asia Pacific Equity Research


09 December 2014

Overweight

A-REIT

Previous: Not Rated

Vacancy concerns overplayed; assuming coverage


with OW rating

Price: S$2.32

We assume coverage of AREIT with an OW rating and Dec-15 PT of S$2.50


(OW rating and Dec-14 PT of S$2.40 prior to NR designation). AREIT's
sizeable exposure to business/science parks and hi-tech buildings make it a
direct proxy to the Singapore governments continued push for higher valueadded and knowledge-based industries. Sponsor Ascendas has a robust
pipeline of S$2.5b, which should benefit AREIT as third-party acquisitions
become more challenging. AREIT has underperformed its peers YTD. At
current P/B of 1.12x, stock looks cheap to us vs. 1.32x mean.
Direct proxy to high value-added space. Business parks, science parks
and hi-tech buildings account for a collective 63% of AREITs RNAV and
65% of NPI. As the government continues its push for higher value-added
and knowledge-based industries, we think AREIT is well-positioned for the
future growth of Singapore. Pre-commitment of business parks is also the
strongest in the industrial space.
Untapped sizeable sponsor pipeline. Sponsor Ascendas Group has a
robust pipeline of S$2.5b, which comprises largely business parks and
science parks. Historically, AREIT has made circa S$400-500m of
acquisitions per year. In view of new sites having shorter land tenures of 30
years and sellers continued high asking prices, we expect AREIT to tap
more actively into Ascendas robust pipeline going forward.

AEMN.SI, AREIT SP
Price Target: S$2.50

Singapore
Property
Brandon Lee

(65) 6882-7073
brandon.lee@jpmorgan.com
J.P. Morgan Securities Singapore Private
Limited

Cusson Leung
(852) 2800-8526
cusson.leung@jpmorgan.com
J.P. Morgan Securities (Asia Pacific) Limited

James R. Sullivan, CFA


(65) 6882-2374
james.r.sullivan@jpmorgan.com
J.P. Morgan Securities Singapore Private
Limited
Price Performance
2.5
2.4
S$

2.3
2.2
2.1
2.0
Dec-13

Key catalysts. An improvement in portfolio occupancy rate, as well as


withdrawal or tweaking of government measures on the industrial sector.
Valuation and risks. Our Dec-15 PT of S$2.50 is based on the average of
our DDM and RNAV valuation estimates. Our Dec-15 target price implies
FY15E/FY16E dividend yield of 6.0%/6.3%, 1.24x FY15E book value and
0.2% discount to our 1-yr forward DDM valuation. AREIT trades at a
historical P/B of 1.32x, compared to current 1.12x. Key risks to our PT and
view are a sustained period of subdued leasing environment and more new
government policies.
Ascendas Real Estate Investment Trust (Reuters: AEMN.SI, Bloomberg: AREIT SP)
S$ in mn, year-end Mar
FY13A
FY14A
FY15E
FY16E
FY17E
Revenue (S$ mn)
576
614
655
679
692
Net property income (S$ mn)
409
436
463
480
489
Distributable Profit (S$ mn)
306
342
361
377
386
EPU (S$)
0.12
0.14
0.15
0.15
0.16
DPU (S$)
0.14
0.14
0.15
0.16
0.16
BVPU (S$)
1.94
2.02
2.01
2.01
2.01
Revenue growth (%)
14.4%
6.6%
6.7%
3.8%
1.8%
DPU growth (%)
1.3%
3.6%
5.4%
4.3%
2.2%
P/E (x)
19.5
16.6
15.9
15.2
14.9
P/BV (x)
1.2
1.1
1.2
1.2
1.2
Dividend Yield
5.9%
6.1%
6.5%
6.7%
6.9%
Gearing
28.4%
29.6%
32.9%
32.9%
32.9%
RNAV/Share
2.49
-

AC

Mar-14

Jun-14

Sep-14

Dec-14

AEMN.SI share price (S$)


FTSTI (rebased)

Abs
Rel

YTD
5.5%
0.5%

1m
4.0%
2.9%

Company Data
Shares O/S (mn)
Market Cap (S$ mn)
Market Cap ($ mn)
Price (S$)
Date Of Price
Free Float(%)
3M - Avg daily vol (mn)
3M - Avg daily val (S$ mn)
3M - Avg daily val ($ mn)
FTSTI
Exchange Rate
Price Target End Date

3m
-1.7%
-1.2%

12m
6.9%
0.5%

2,404
5,577
4,217
2.32
05 Dec 14
7.65
17.35
13.1
3324.39
1.32
31-Dec-15

Source: Company data, Bloomberg, J.P. Morgan estimates.

See page 14 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.
www.jpmorganmarkets.com

Asia Pacific Equity Research


09 December 2014

Overweight

Ascott Residence Trust

Previous: Not Rated

Underappreciated earnings stability and visible


inorganic growth; assuming coverage with OW rating

Price: S$1.27

ASRT.SI, ART SP
Price Target: S$1.40

We assume coverage of Ascott Residence Trust (ART) with an Overweight


rating and a Dec-15 PT of S$1.40 (N rating and Dec-14 PT of S$1.38 prior to
NR designation). ART offers earnings stability via a mix of fixed-rental
agreements and long-staying clients in Asia, as well as a visible and growing
pipeline via its sponsor, The Ascott Limited. While currency fluctuation is a
risk, net impact has been minimal historically, with positive surprises coming
from a weaker SGD. FY15E DPU growth of 8% is another positive.
Underappreciated earnings stability. ARTs average apartment rental
income by length of stay is four months, with 50% of contracts being
medium to long term. As Europe accounts for 33% and 43% of its asset
value and gross profit, respectively, there are concerns over potential
negative impact from the ongoing macroeconomic slowdown. However, we
believe the risks are overplayed as Europes rental income is structured with
high fixed rental agreements (long-term master leases or management
contracts with minimum guaranteed income).
Visible inorganic growth from sponsor. ART has tapped both its sponsor
(TAL) and the third-party market for acquisitions, with an average of
S$300-600m per annum from 2012-14. On our estimates, TAL has a
portfolio worth S$1.3b, which comprises 39 wholly/partially owned
serviced properties with a total of 6,136 rooms. Current gearing of 39.2%
implies debt headroom of S$58-419m, assuming an optimal level of 4045%. The continued access to TALs growing pipeline should ensure a
sustainable inorganic growth path, we believe.
Key catalysts. Acquisitions, better-than-expected RevPAR growth in Asia.
Valuation and risks. Our Dec-15 PT of S$1.40 is based on the average of
our DDM and RNAV valuation estimates. Our Dec-15 target price implies
FY15E/FY16E dividend yield of 6.1%/6.2%, 0.99x FY15E book value and a
4.9% premium to our one-year forward DDM valuation. Key risks to our PT
and view are weakening of currencies in countries in which it operates.

Ascott Residence Trust (Reuters: ASRT.SI, Bloomberg: ART SP)


S$ in mn, year-end Dec
FY12A
FY13A
FY14E
Revenue (S$ mn)
304
317
358
Net property income (S$ mn)
159
161
184
Distributable Profit (S$ mn)
100
115
122
EPU (S$)
0.06
0.05
0.06
DPU (S$)
0.09
0.08
0.08
BVPU (S$)
1.44
1.44
1.42
Revenue growth (%)
5.3%
4.2%
13.2%
DPU growth (%)
2.7%
(4.1%)
(5.5%)
P/E (x)
21.6
26.0
20.6
P/BV (x)
0.9
0.9
0.9
Dividend Yield
6.9%
6.6%
6.3%
Gearing
39.0%
33.4%
40.0%
RNAV/Share
-

FY15E
407
209
133
0.07
0.09
1.41
13.7%
7.7%
18.2
0.9
6.8%
40.1%
1.42

FY16E
413
213
135
0.07
0.09
1.39
1.5%
1.1%
17.9
0.9
6.8%
40.4%
-

Singapore
Property
Brandon Lee

AC

(65) 6882-7073
brandon.lee@jpmorgan.com
J.P. Morgan Securities Singapore Private
Limited

Cusson Leung
(852) 2800-8526
cusson.leung@jpmorgan.com
J.P. Morgan Securities (Asia Pacific) Limited

James R. Sullivan, CFA


(65) 6882-2374
james.r.sullivan@jpmorgan.com
J.P. Morgan Securities Singapore Private
Limited
Price Performance

1.25
S$ 1.20
1.15
1.10
Dec-13

Mar-14

Jun-14

Sep-14

Dec-14

ASRT.SI share price (S$)


FTSTI (rebased)

Abs
Rel

YTD
5.0%
0.0%

1m
2.8%
1.7%

Company Data
Shares O/S (mn)
Market Cap (S$ mn)
Market Cap ($ mn)
Price (S$)
Date Of Price
Free Float(%)
3M - Avg daily vol (mn)
3M - Avg daily val (S$ mn)
3M - Avg daily val ($ mn)
FTSTI
Exchange Rate
Price Target End Date

3m
2.8%
3.3%

12m
7.7%
1.3%

1,535
1,942
1,468
1.27
05 Dec 14
1.09
1.35
1.0
3324.39
1.32
31-Dec-15

Source: Company data, Bloomberg, J.P. Morgan estimates.

See page 13 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.
www.jpmorganmarkets.com

Asia Pacific Equity Research


09 December 2014

Neutral

CapitaCommercial Trust

Previous: Not Rated

Pastures only greener upon CapitaGreens improved


take-up; assuming coverage with Neutral rating

Price: S$1.67

CACT.SI, CCT SP
Price Target: S$1.70

We assume coverage of CapitaCommercial Trust (CCT) with a Neutral rating and


a Dec-15 PT of S$1.70 (OW rating and Dec-14 PT of S$1.70 prior to NR
designation). CCT offers sizeable CBD office exposure, with portfolio rents
expected to continue rising in 2015 in view of limited supply. CapitaGreen is also
on track for 50% pre-commitment by year-end, with demand from diverse tenants.
However, we think the positive office supply-demand dynamics have been priced
in post the strong outperformance YTD.
Sizeable CBD office exposure. CCT is a key beneficiary of Singapores office
recovery story, given that this segment contributes 77% to its RNAV and 66% to
income. Since bottoming in 2Q12 at S$7.39 psf/mth, CCTs portfolio rent has
risen 14% to S$8.42 psf as of 3Q14 (in line with the markets 15% recovery). In
view of limited supply in 2015, we expect Grade A rents to rise a further 5% in
2015, which should benefit CCTs under-rented portfolio as it forward renews the
18% of expiring space in 2015, where average rents are S$7.34 psf.
CapitaGreen on track. CCTs 40%-owned CapitaGreens pre-commitment
improved to 40% in 3Q14 (vs. 23% in 2Q14). The group is also in advanced
stages of negotiation for another 75,000 sqf of space, which suggests its targeted
50% pre-commitment by end-2014 will be attained. The limited Grade A CBD
supply in 2015 should help CCTs leasing efforts for the buildings remaining
350,000 sqf of space. Should pre-commitment improve at a quicker-thanexpected pace, we think CCT could exercise the option at the earlier part of 201517 to acquire the remaining 60% stake which we value at S$1.2b. Current gearing
allows sufficient debt headroom.
Key catalysts. Positive office rent reversions and acquisitions.
Valuation and risks. Our Dec-15 PT of S$1.70 is based on the average of our
DDM and RNAV valuation estimates. Our Dec-15 PT implies an FY15E/FY16E
dividend yield of 5.0%/5.4%, 1.0x FY15E book value and 3.6% premium to our
one-year forward DDM valuation. CCT trades at a historical P/B of 0.88,
compared to current 0.99x. Key risks to our PT and rating are landlords reducing
rents to boost occupancies ahead of sizeable 2016-17 completions.
CapitaCommercial Trust (Reuters: CACT.SI, Bloomberg: CCT SP)
S$ in mn, year-end Dec
FY12A
FY13A
FY14E
Revenue (S$ mn)
376
387
254
Net property income (S$ mn)
296
297
198
Distributable Profit (S$ mn)
229
234
239
EPU (S$)
0.07
0.07
0.08
DPU (S$)
0.08
0.08
0.08
BVPU (S$)
1.66
1.71
1.71
Revenue growth (%)
4.0%
3.0%
(34.4%)
DPU growth (%)
7.0%
1.2%
1.9%
P/E (x)
23.6
22.5
22.2
P/BV (x)
1.0
1.0
1.0
Dividend Yield
4.8%
4.9%
5.0%
Gearing
29.6%
28.6%
29.3%
RNAV/Share
-

FY15E
253
198
245
0.08
0.08
1.70
(0.2%)
2.1%
21.7
1.0
5.1%
29.9%
1.78

FY16E
249
194
265
0.08
0.09
1.69
(1.9%)
8.1%
20.2
1.0
5.5%
30.5%
-

Singapore
Property
Brandon Lee

AC

(65) 6882-7073
brandon.lee@jpmorgan.com
J.P. Morgan Securities Singapore Private
Limited

Cusson Leung
(852) 2800-8526
cusson.leung@jpmorgan.com
J.P. Morgan Securities (Asia Pacific) Limited

James R. Sullivan, CFA


(65) 6882-2374
james.r.sullivan@jpmorgan.com
J.P. Morgan Securities Singapore Private
Limited
Price Performance

1.65
S$ 1.55
1.45
1.35
Dec-13

Mar-14

Jun-14

Sep-14

Dec-14

CACT.SI share price (S$)


FTSTI (rebased)

Abs
Rel

YTD
15.2%
10.2%

1m
-0.6%
-1.7%

Company Data
Shares O/S (mn)
Market Cap (S$ mn)
Market Cap ($ mn)
Price (S$)
Date Of Price
Free Float(%)
3M - Avg daily vol (mn)
3M - Avg daily val (S$ mn)
3M - Avg daily val ($ mn)
FTSTI
Exchange Rate
Price Target End Date

3m
-1.8%
-1.3%

12m
16.8%
10.4%

2,945
4,918
3,718
1.67
05 Dec 14
7.24
11.87
9.0
3324.39
1.32
31-Dec-15

Source: Company data, Bloomberg, J.P. Morgan estimates.

See page 14 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.
www.jpmorganmarkets.com

Asia Pacific Equity Research


09 December 2014

Overweight

CapitaLand

Previous: Not Rated

Change is good; assuming coverage with OW rating

Price: S$3.26

CATL.SI, CAPL SP
Price Target: S$3.80

We assume coverage of CapitaLand (CAPL) with an Overweight rating and a


Dec-15 PT of S$3.80 (OW rating and Dec-14 PT of S$3.90 prior to NR
designation). After Australands divestment and CMAs privatization, we
believe the groups complexity discount deserves to narrow further. We
expect the group to expedite its capital recycling efforts going forward, with
proceeds being redeployed to higher-yielding integrated projects in Singapore
and China. CAPL is trading at GFC levels, which we believe is unjustified
given its proven retail franchise and improved RoE.
The push for integrated projects. Having accomplished its broad goal of
simplification, CAPL is likely to focus on its core competency integrated
projects. With existing developments well on track for completion over the
next three years, we believe the group will now explore new acquisition
opportunities in China and Singapore. While CAPL already has ample
financial capacity, the current gearing of 60% suggests more capital
recycling activity could be underway, which will benefit its four listed
REITs, in our view.
Unfazed by subdued residential markets. A sizeable 80% of its China
residential land bank is located in Tier 2/3 cities, which should benefit from
the ongoing relaxation of HPR and recent rate cut. As the group typically
targets owner-occupiers and upgraders, it should be less affected by any
further deterioration in the physical market. In Singapore (only 6% of
CAPLs GAV), the inventory cycle is reasonable at two years, so the group
will not need to rush to replenish its land bank. CAPLs land costs are low,
implying little possibility of any writedowns.
Key potential catalysts. Capital recycling activities, acquisitions, and more
HPR relaxations.
Valuation and risks. Our Dec-15 PT of S$3.80 is based on a 35% discount
to our forward RNAV estimate of S$5.83. Key risks to our PT and view are
a sustained macroeconomic slowdown in China, which could affect CAPLs
retail portfolio and residential launches.
CapitaLand (Reuters: CATL.SI, Bloomberg: CAPL SP)
S$ in mn, year-end Dec
FY12A
FY13A
Revenue (S$ mn)
3,301
3,977
Net Profit (S$ mn)
930
850
EPS (S$)
0.22
0.20
Core EPS (S$)
0.09
0.12
DPS (S$)
0.07
0.08
Revenue growth (%)
9.3%
20.5%
EPS growth (%)
(11.8%)
(8.8%)
ROCE
7.1%
6.2%
ROE
2.5%
3.4%
P/E (x)
14.9
16.3
Core P/E (x)
37.5
26.3
P/BV (x)
0.9
0.9
EV/EBITDA (x)
11.3
10.9
Dividend Yield
2.1%
2.5%
RNAV/Share
4.86
5.53

FY14E
2,731
1,242
0.29
0.14
0.08
(31.3%)
46.3%
6.8%
3.7%
11.2
22.9
0.8
11.3
2.5%
5.62

FY15E
3,298
1,460
0.34
0.18
0.08
20.7%
17.5%
7.3%
4.4%
9.5
18.4
0.8
10.1
2.5%
5.83

FY16E
3,095
1,878
0.44
0.24
0.08
(6.2%)
28.7%
8.5%
5.5%
7.4
13.8
0.7
8.4
2.5%
-

Singapore
Property
Brandon Lee

AC

(65) 6882-7073
brandon.lee@jpmorgan.com
J.P. Morgan Securities Singapore Private
Limited

Cusson Leung
(852) 2800-8526
cusson.leung@jpmorgan.com
J.P. Morgan Securities (Asia Pacific) Limited

James R. Sullivan, CFA


(65) 6882-2374
james.r.sullivan@jpmorgan.com
J.P. Morgan Securities Singapore Private
Limited
Price Performance

3.3
S$ 3.1
2.9
2.7
Dec-13

Mar-14

Jun-14

Sep-14

Dec-14

CATL.SI share price (S$)


FTSTI (rebased)

Abs
Rel

YTD
7.6%
3.5%

1m
2.2%
2.3%

Company Data
Shares O/S (mn)
Market Cap (S$ mn)
Market Cap ($ mn)
Price (S$)
Date Of Price
Free Float(%)
3M - Avg daily vol (mn)
3M - Avg daily val (S$ mn)
3M - Avg daily val ($ mn)
FTSTI
Exchange Rate
Price Target End Date

3m
-2.1%
-1.0%

12m
8.3%
2.4%

4,259
13,883
10,496
3.26
05-Dec-14
8.77
27.83
21.0
3297.84
1.32
31-Dec-15

Source: Company data, Bloomberg, J.P. Morgan estimates.

See page 30 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.
www.jpmorganmarkets.com

Asia Pacific Equity Research


09 December 2014

Overweight

CapitaMall Trust

Previous: Not Rated

Innate capability undervalued; assuming coverage


with OW rating

Price: S$1.98

CMLT.SI, CT SP
Price Target: S$2.15

We assume coverage of CapitaMall Trust with an Overweight rating and a Dec-15


PT of S$2.15 (OW rating and Dec-14 PT of S$2.15 prior to NR designation). We
think CT offers a direct proxy to the Singapore retail sector given that sectors
80+% contribution to NPI and RNAV. The more resilient necessity shopping
contributes 74% of its income, while occupancies have historically been high,
with DPU growth underpinned by both AEIs and acquisitions. While CT is not
immune to the sectors ongoing headwinds, valuations look undemanding to us,
current P/B of 1.10x comparing favorably with mean of 1.27x.
Direct proxy to Singapore retail. CTs retail properties account for over 80%
of its RNAV and NPI, which are equally split between suburban malls in
populous residential estates outside the central region and destination malls in
prime downtown core locations. Necessity shopping contributes a significant
74% of the groups gross revenue and asset value, hence the malls are wellcushioned from any economic downturn. This is best evidenced from CTs
strong average portfolio occupancy rate of 95-99% over the past 10 years.
Sponsor pipeline complements AEIs. Since IPO in 2002, CT has tapped both
its sponsor and third-party market for acquisitions, with an average of 1-2 new
properties p.a. from 2003-11. While more single-asset owners are likely to put
up their properties for sale should the retail environment turn more challenging,
we believe sponsor CMA will be more proactive given its focus on capital
recycling. Based on our estimates, CMAs existing pipeline of four retail
properties is worth S$3.1b, of which we think Bedok Mall and Westgate (70%
stake) are most ready for injection given healthier trading performances.
Key catalysts. Better-than-expected positive office rent reversions and
acquisitions.
Valuation and risks. Our Dec-15 PT of S$2.15 is based on the average of our
DDM and RNAV valuation estimates. Our Dec-15 target price implies
FY15E/FY16E div yield of 5.2%/5.4%, 1.23x FY15E book value and 1.9%
premium to our 1-yr forward DDM valuation. CT currently trades at P/B of
1.10x which compares favorably with mean of 1.27x. Key risks to our PT and
view are sustained period of slowing tenant sales and labour constraints.

CapitaMall Trust (Reuters: CMLT.SI, Bloomberg: CT SP)


S$ in mn, year-end Dec
FY12A
FY13A
FY14E
Revenue (S$ mn)
662
729
669
Net property income (S$ mn)
445
503
462
Distributable Profit (S$ mn)
317
356
380
EPU (S$)
0.09
0.10
0.11
DPU (S$)
0.09
0.10
0.11
BVPU (S$)
1.65
1.74
1.74
Revenue growth (%)
4.9%
10.2%
(8.2%)
DPU growth (%)
1.0%
8.6%
6.9%
P/E (x)
23.0
18.8
17.5
P/BV (x)
1.2
1.1
1.1
Dividend Yield
4.8%
5.2%
5.6%
Gearing
36.1%
34.4%
34.9%
RNAV/Share
-

FY15E
699
482
390
0.12
0.11
1.74
4.4%
2.6%
16.9
1.1
5.7%
35.1%
2.17

FY16E
724
499
405
0.12
0.12
1.75
3.6%
3.6%
16.2
1.1
5.9%
35.4%
-

Singapore
Property
Brandon Lee

AC

(65) 6882-7073
brandon.lee@jpmorgan.com
J.P. Morgan Securities Singapore Private
Limited

Cusson Leung
(852) 2800-8526
cusson.leung@jpmorgan.com
J.P. Morgan Securities (Asia Pacific) Limited

James R. Sullivan, CFA


(65) 6882-2374
james.r.sullivan@jpmorgan.com
J.P. Morgan Securities Singapore Private
Limited
Price Performance
2.05
S$

1.95
1.85
1.75
Dec-13

Mar-14

Jun-14

Sep-14

Dec-14

CMLT.SI share price (S$)


FTSTI (rebased)

Abs
Rel

YTD
3.7%
-1.3%

1m
1.0%
-0.1%

Company Data
Shares O/S (mn)
Market Cap (S$ mn)
Market Cap ($ mn)
Price (S$)
Date Of Price
Free Float(%)
3M - Avg daily vol (mn)
3M - Avg daily val (S$ mn)
3M - Avg daily val ($ mn)
FTSTI
Exchange Rate
Price Target End Date

3m
-0.8%
-0.3%

12m
5.1%
-1.3%

3,462
6,838
5,170
1.98
05 Dec 14
7.71
15.07
11.4
3324.39
1.32
31-Dec-15

Source: Company data, Bloomberg, J.P. Morgan estimates.

See page 14 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.
www.jpmorganmarkets.com

Asia Pacific Equity Research


09 December 2014

Overweight

CapitaRetail China Trust

Previous: Not Rated

A cut above the rest; assuming coverage with OW

Price: S$1.60

CRCT.SI, CRCT SP
Price Target: S$1.75

We assume coverage of CRCT with an Overweight rating and a Dec-15 PT of


S$1.75 (N rating and Dec-14 PT of S$1.55 prior to NR designation). CRCT has
continued to outperform in terms of tenant sales growth and rent reversion,
helped by its sizeable exposure to Beijing. With a visible and growing pipeline
via its sponsor, CMA, we believe current P/B of 1.07x is undemanding
compared to the historical mean. FY15E DPU growth of 8% is another positive.
Beijing leads tenant sales growth outperformance. CRCTs 3Q14 tenant
sales growth (+16.1%) surpassed Chinas retail sales growth (+11.9%) for
the third consecutive quarter. In light of the slower pace in retail sales
growth amid Chinas macroeconomic slowdown, we view this as a credible
performance, which is underpinned by managements proactive asset
management efforts and the groups sizeable exposure to the more resilient
Beijing market. Rent reversion remained strong at +22.6% YoY, with
shopper traffic up 3.8% in 3Q14.
CMA provides strong pipeline. CRCT has completed four acquisitions
worth S$805m since its IPO in Nov-06, the majority from its sponsor, CMA
or related entities. The group has rights of first refusal to purchase
properties either directly held by CMA or parked under CMA-sponsored
private funds. On our estimates, the entire completed pipeline is worth
S$4.3b. CRCTs gearing stands at 30.8%, which implies debt headroom of
S$141m assuming an optimal level of 35%, hence we think a mix of debt
and equity would be issued to fund future acquisitions.
Key catalysts. Acquisitions and better-than-expected positive rent reversion.
Valuation and risks. Our Dec-15 PT of S$1.75 is based on the average of
our DDM and RNAV valuation estimates. Our Dec-15 target price implies
FY15E/FY16E dividend yield of 6.3%/6.5%, 1.16x FY15E book value and
3.2% premium to our 1-yr forward DDM valuation. Key risks to our PT and
view are weakening of RMB currency and retail sales slowdown.

CapitaRetail China Trust (Reuters: CRCT.SI, Bloomberg: CRCT SP)


S$ in mn, year-end Dec
FY11A
FY12A
FY13A
Revenue (S$ mn)
132
153
160
Net property income (S$ mn)
86
100
103
Distributable Profit (S$ mn)
57
67
70
EPU (S$)
0.08
0.08
0.08
DPU (S$)
0.09
0.10
0.09
BVPU (S$)
1.35
1.34
1.51
Revenue growth (%)
10.8%
15.7%
4.9%
DPU growth (%)
4.1%
9.7%
(5.5%)
P/E (x)
21.1
20.2
20.8
P/BV (x)
1.2
1.2
1.1
Dividend Yield
5.5%
6.0%
5.7%
Gearing
28.2%
28.2%
32.6%
RNAV/Share
-

FY14E
206
140
82
0.10
0.10
1.51
28.9%
12.8%
16.8
1.1
6.4%
34.2%

FY15E
218
149
89
0.10
0.11
1.50
5.7%
7.9%
15.5
1.1
6.9%
35.5%
1.78

Singapore
Property
Brandon Lee

AC

(65) 6882-7073
brandon.lee@jpmorgan.com
J.P. Morgan Securities Singapore Private
Limited

Cusson Leung
(852) 2800-8526
cusson.leung@jpmorgan.com
J.P. Morgan Securities (Asia Pacific) Limited

James R. Sullivan, CFA


(65) 6882-2374
james.r.sullivan@jpmorgan.com
J.P. Morgan Securities Singapore Private
Limited
Price Performance

1.6
S$
1.4
1.2
Dec-13

Mar-14

Jun-14

Sep-14

Dec-14

CRCT.SI share price (S$)


FTSTI (rebased)

Abs
Rel

YTD
19.9%
14.9%

1m
-0.3%
-1.4%

Company Data
Shares O/S (mn)
Market Cap (S$ mn)
Market Cap ($ mn)
Price (S$)
Date Of Price
Free Float(%)
3M - Avg daily vol (mn)
3M - Avg daily val (S$ mn)
3M - Avg daily val ($ mn)
FTSTI
Exchange Rate
Price Target End Date

3m
-0.9%
-0.4%

12m
16.4%
10.0%

828
1,321
999
1.60
05 Dec 14
0.99
1.58
1.2
3324.39
1.32
31-Dec-15

Source: Company data, Bloomberg, J.P. Morgan estimates.

See page 15 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.
www.jpmorganmarkets.com

Asia Pacific Equity Research


09 December 2014

Underweight

CDL Hospitality Trusts

Previous: Not Rated

Hospitality headwinds yet to bottom; assuming


coverage with Underweight rating

Price: S$1.74

CDLT.SI, CDREIT SP
Price Target: S$1.65

We assume coverage of CDL Hospitality Trust (CDREIT) with an Underweight


and a Dec-15 PT of S$1.65 (N rating and Dec-14 PT of S$1.60 prior to NR
designation). CDREIT offers sizeable exposure to the Singapore tourism sector,
with its Australian properties providing stability. While its P/B of 1.09x is
below the mean, we see no catalysts ahead for the stock, as hoteliers will likely
continue to face competitive pressures beyond the near term we believe.
Sizeable exposure to Singapore tourism. Singapore contributes over 70%
to CDREITs NPI and RNAV; hence it is well-placed to benefit from the
sustained number of tourists who visit Singapore as a result of intra-Asia
travel. The groups Australian portfolio (10% of NPI and RNAV) adds
earnings stability as the properties are leased to Accor under a favorable
master lease structure until Apr-21, after which there is significant reversion
upside potential. The recent acquisitions of Angsana Velavaru and Jumeirah
Dhevanafushi, as well as two business hotels in Tokyo, also enable
CDREIT to benefit from continued tourist arrivals to Maldives and Japan.
Overseas acquisitions more likely. CDREIT has largely depended on
third-party acquisitions for external growth despite a sizeable portfolio of
hotels owned by its sponsor given its non asset-light strategy. We do not
think this strategy will change in the short term, which suggests CDREIT
will have to continue looking at third-party purchases. However, the
challenging hospitality environment could trigger more potential sales. The
group also likes Japan and Australia.

Singapore
Property
Brandon Lee

(65) 6882-7073
brandon.lee@jpmorgan.com
J.P. Morgan Securities Singapore Private
Limited

Cusson Leung
(852) 2800-8526
cusson.leung@jpmorgan.com
J.P. Morgan Securities (Asia Pacific) Limited

James R. Sullivan, CFA


(65) 6882-2374
james.r.sullivan@jpmorgan.com
J.P. Morgan Securities Singapore Private
Limited
Price Performance

1.75
S$ 1.65
1.55
1.45
Dec-13

CDL Hospitality Trusts (Reuters: CDLT.SI, Bloomberg: CDREIT SP)


S$ in mn, year-end Dec
FY12A
FY13A
FY14E
Revenue (S$ mn)
150
149
152
Net property income (S$ mn)
139
137
142
Distributable Profit (S$ mn)
109
104
101
EPU (S$)
0.11
0.11
0.11
DPU (S$)
0.11
0.11
0.11
BVPU (S$)
1.61
1.63
1.63
Revenue growth (%)
6.0%
(0.5%)
2.3%
DPU growth (%)
2.4%
(3.1%)
0.3%
P/E (x)
15.7
16.3
16.1
P/BV (x)
1.1
1.1
1.1
Dividend Yield
6.5%
6.3%
6.3%
Gearing
25.9%
32.3%
31.8%
RNAV/Share
1.78

FY15E
164
148
107
0.11
0.11
1.63
7.9%
3.2%
15.7
1.1
6.5%
31.2%
-

FY16E
166
149
0.11
0.11
1.62
1.0%
0.3%
15.6
1.1
6.5%
-

Mar-14

Jun-14

Sep-14

Dec-14

CDLT.SI share price (S$)


FTSTI (rebased)

Key catalysts. Sector-wide recovery in RevPAR and acquisitions.


Valuation and risks. Our Dec-15 PT of S$1.65 is based on the average of
our DDM and RNAV valuation estimates. Our Dec-15 target price implies
FY15E/FY16E dividend yield of 6.9%/6.9%, 1.01x FY15E book value and a
5.6% premium to our one-year forward DDM valuation. CDREIT trades at a
historical P/B of 1.2x vs. current 1.09x. Key risks to our PT and view are a
sustained period of declining Chinese tourist arrivals and competitive
pressures.

AC

Abs
Rel

YTD
6.1%
1.1%

1m
3.6%
2.5%

Company Data
Shares O/S (mn)
Market Cap (S$ mn)
Market Cap ($ mn)
Price (S$)
Date Of Price
Free Float(%)
3M - Avg daily vol (mn)
3M - Avg daily val (S$ mn)
3M - Avg daily val ($ mn)
FTSTI
Exchange Rate
Price Target End Date

3m
3.9%
4.4%

12m
10.1%
3.7%

980
1,706
1,290
1.74
05 Dec 14
1.19
2.00
1.5
3324.39
1.32
31-Dec-15

Source: Company data, Bloomberg, J.P. Morgan estimates.

See page 14 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.
www.jpmorganmarkets.com

Asia Pacific Equity Research


09 December 2014

Neutral

City Developments

Previous: Not Rated

Limited near-term catalysts unless measures are


withdrawn; assuming coverage with Neutral rating

Price: S$9.86

CTDM.SI, CIT SP
Price Target: S$10.05

We assume coverage of City Developments (CIT) with a Neutral rating and a


Dec-15 PT of S$10.05 (N rating and Dec-14 PT of S$11.00 prior to NR
designation). While CIT continues to do well in the current property
downcycle, it is not immune to a subdued price and volume outlook. South
Beach Towers increased pre-commitment is encouraging, though more asset
recycling could take place to fund its overseas expansion. With limited nearterm catalysts, we think the stock will trade sideways unless signs emerge on
any possible withdrawal or tweaking of existing cooling measures.
Not immune to subdued residential outlook. City Developments has
performed well in the current property downcycle, evidenced by a credible
market share of 19% in 10M14. However, it is not immune to the subdued
price and volume outlook. Along with increased competition for land amid
declining margin expectations among competitors, inventory cycle could
continue to slide; hence, implying limited RNAV accretion.
Overlooked office exposure; more non-core asset recycling. Singapore
office contributes 33% to RNAV, which should benefit from the office rent
recovery. CIT has successfully unlocked shareholders value by divesting
non-core properties in 2010-13, which could continue given its overseas
expansion. Potential divestments could include its industrial portfolio,
strata-titled units in KSC and Fuji Xerox Towers, which are worth S$1b.

Valuation and risks. Our Dec-15 PT of S$10.05 is derived by pegging a


20% discount to our forward RNAV of S$12.54. Key risks to our PT and
view are continued decline in residential prices and volumes, as well as
RevPAR declines in Europe and Singapore.
Bloomberg: CIT SP)
FY13A
FY14E
3,162
3,513
529
614
0.57
0.66
0.57
0.66
0.16
0.16
(5.7%)
11.1%
(4.9%)
16.4%
5.3%
6.1%
6.8%
7.3%
17.4
14.9
17.4
14.9
1.1
1.1
14.9
10.9
1.6%
1.6%
13.64
14.38

FY15E
3,446
640
0.69
0.69
0.16
(1.9%)
4.3%
6.0%
7.1%
14.3
14.3
1.0
10.4
1.6%
12.54

Brandon Lee

AC

(65) 6882-7073
brandon.lee@jpmorgan.com
J.P. Morgan Securities Singapore Private
Limited

Cusson Leung
(852) 2800-8526
cusson.leung@jpmorgan.com
J.P. Morgan Securities (Asia Pacific) Limited

James R. Sullivan, CFA


(65) 6882-2374
james.r.sullivan@jpmorgan.com
J.P. Morgan Securities Singapore Private
Limited
Price Performance
11.5
10.5
S$
9.5
8.5
Dec-13

Mar-14

Jun-14

Sep-14

Dec-14

CTDM.SI share price (S$)


FTSTI (rebased)

Key catalysts. Withdrawal/tweaking of cooling measures and overseas


acquisitions at competitive cost.

City Developments Ltd (Reuters: CTDM.SI,


S$ in mn, year-end Dec
FY12A
Revenue (S$ mn)
3,354
Net Profit (S$ mn)
556
EPS (S$)
0.60
Core EPS (S$)
0.60
DPS (S$)
0.13
Revenue growth (%)
2.2%
EPS growth (%)
(10.6%)
ROCE
6.1%
ROE
7.7%
P/E (x)
16.5
Core P/E (x)
16.5
P/BV (x)
1.2
EV/EBITDA (x)
14.2
Dividend Yield
1.3%
RNAV/Share
13.63

Singapore
Property

FY16E
4,141
664
0.72
0.72
0.16
20.2%
3.9%
6.3%
6.8%
13.8
13.8
0.9
9.5
1.6%
11.88

Abs
Rel

YTD
2.7%
-2.3%

1m
4.8%
3.7%

Company Data
Shares O/S (mn)
Market Cap (S$ mn)
Market Cap ($ mn)
Price (S$)
Date Of Price
Free Float(%)
3M - Avg daily vol (mn)
3M - Avg daily val (S$ mn)
3M - Avg daily val ($ mn)
FTSTI
Exchange Rate
Price Target End Date

3m
-0.1%
0.4%

12m
0.3%
-6.1%

909
8,966
6,778
9.86
05 Dec 14
0.85
8.17
6.2
3324.39
1.32
31-Dec-15

Source: Company data, Bloomberg, J.P. Morgan estimates.

See page 17 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.
www.jpmorganmarkets.com

Asia Pacific Equity Research


08 December 2014

Neutral

Daum Kakao

035720.KQ, 035720 KQ
Price: W134,800

Lower expectations for Kakao business momentum

Price Target: W112,000


Previous: W120,000

We recommend investors stay cautious on Daum Kakao, given: (1) the softerthan-expected monetization trend of Kakao ad; (2) Kakao Pays weaker
traction due to a lack of merchant partnerships; (3) potential downside risk to
Kakao game in the wake of some Korean developers bypass Kakao game
center strategy; (4) a lack of post-merger search synergy strategy.
Maintaining our N rating, we cut our PT by 7%, to W112,000 (implying 18%
downside), with a downward revision to our earnings forecasts mainly to
reflect Kakaos softer-than-expected ad/pay business momentum. Our PT is
based on an SOTP valuation composed of Kakao (W5.7T) and Daum portal
(W1.1T). Daum Kakao currently trades at a demanding 32.9x 2015E P/E.
Softer-than-expected Kakao ad growth momentum. We believe Kakaos
structural robust ad growth momentum is largely intact long-term, but that
the Street expectation remains overly bullish. In particular, KakaoStorys
mobile ad revenue growth should pick up strongly in 4Q on a base effect,
but will likely miss the Streets bullish expectation (double to triple q/q
growth). We estimate KakaoStory ad revenue at one-third of KPMGs (the
auditor of the Daum Kakao merger) original forecast of W22B from July.
Disappointing traction of Kakao Pay. We think Kakao Pays user growth
momentum is far weaker than expected (2mn users as of early December,
according to News1) due to a lack of merchants. Kakao Pay has not
penetrated any major marketplace/social shopping e-tailers, allowing other
online payment gateway incumbents to catch up with their own easy mobile
pay solutions (e.g., KG Inicis K-pay).

South Korea
Internet
Stanley Yang

AC

(82-2) 758-5712
stanley.yang@jpmorgan.com
Bloomberg JPMA YANG <GO>

Sally Yoo
(82-2) 758-5383
sally.yoo@jpmorgan.com
J.P. Morgan Securities (Far East) Ltd, Seoul
Branch
Price Performance
180,000
140,000
W
100,000
60,000
Dec-13

Mar-14

Jun-14

Sep-14 Dec-14

035720.KQ share price (W)


KOSPI (rebased)

Abs
Rel

YTD
58.6%
58.0%

1m
-3.2%
-4.3%

3m
-13.1%
-10.4%

12m
57.3%
58.4%

Some game developers bypassing Kakao game center. We are


concerned that this trend is increasingly evident due to Kakaos lack of
overseas market exposure, as opposed to that of LINE.
Lack of post-merger search synergy strategy. We believe search synergy
strategies are under construction, but Daums search market share shows
declining trends both in PC and mobile.
Daum Kakao (Reuters: 035720.KQ, Bloomberg: 035720 KQ)
Year-end Dec
FY13A
FY14E
Revenue (W bn)
742
895
Operating Profit (W bn)
148
211
Net Profit (W bn)
128
142
Revenue growth
63.6%
20.7%
Operating Profit growth
45.1%
42.9%
EPS growth
(63.4%)
11.5%
ROE
20.4%
17.8%
P/E (x)
64.6
57.9
P/BV (x)
11.3
9.5
EV/EBITDA (x)
41.9
30.7
DPS (W)
265
234
Dividend Yield
0.2%
0.2%
EPS (W)
2,088
2,327
Source: Company data, Bloomberg, J.P. Morgan estimates.

FY15E
1,092
326
251
22.0%
54.4%
76.3%
25.3%
32.9
7.4
20.6
12
0.0%
4,103

FY16E
1,264
411
312
15.8%
26.0%
24.4%
24.5%
26.4
5.8
16.2
211
0.2%
5,106

Company Data
52-week Range (W)
Market Cap (W bn)
Market Cap ($ mn)
Shares O/S (mn)
Fiscal Year End
Price (W)
Date Of Price
Free Float(%)
3M - Avg daily vol (th)
3M - Avg daily val (W bn)
3M - Avg daily val ($ mn)
KOSPI
Exchange Rate (W/$)
Price Target (W)
Price Target End Date

183,100-68,400
8,233
7,391
61
Dec
134,800
08 Dec 14
45.0%
672.4
98.5
88.4
1,979
1,114
112,000
30-Dec-15

See page 11 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.
www.jpmorganmarkets.com

Asia Pacific Equity Research


09 December 2014

Underweight

Frasers Centrepoint Trust

Previous: Not Rated

Near-term catalysts lacking; assuming coverage with


Underweight rating

Price: S$1.92

FCRT.SI, FCT SP
Price Target: S$1.85

We assume coverage of FCT with a UW and a Dec-15 PT of S$1.85 (N rating


and Dec-14 PT of S$1.85 prior to NR designation). FCT's suburban retail
portfolio offers pure exposure to the resilient non-discretionary spending
segment, which is relatively well-cushioned from economic downturns. While
sponsor FCL has a healthy asset pipeline of S$2.4b, we think injections will
occur in 2016 at the earliest. Coupled with an expected slowdown in rent
reversion, we think FCT is expensively priced at a current P/B of 1.08.
Pure suburban retail play. FCT's portfolio of six highly-accessible
suburban malls provides a direct proxy to the resilient non-discretionary
spending patterns of populous residential estates outside the central region.
Performance of these assets has traditionally been well-cushioned from
economic downturns, as can be seen from its strong average portfolio
occupancy rate of 95% over the past five years.
Sponsor pipeline complements AEIs. Since IPO, FCT has acquired four
retail malls from its sponsor FCL. As third-party mall owners continue to
have high asking prices, we expect FCL to continue supporting FCTs
inorganic growth momentum. We estimate FCLs existing pipeline of six
retail properties is worth S$2.4b, although Waterway Point and its latest
Yishun Central project are likely to be completed in 2015 and 2016-17,
respectively. FCT has successfully completed a few asset enhancement
initiatives over the past few years at reasonable RoIs of 10-14%, and we
think Anchorpoint and YewTee Point are next.
Key catalysts. Acquisitions, better-than-expected positive rent reversions.
Valuation and risks. Our Dec-15 PT of S$1.85 is based on the average of
our DDM and RNAV valuations. Our Dec-15 target price implies
FY15E/FY16E dividend yield of 6.3%/6.3%, 1.00x FY15E book value and
is on par with our 1-yr forward DDM valuation. FCT trades at a historical
P/B of 1.10x, compared to current 1.04x. Key risks to our PT and view are
sustained periods of labour shortage and retail rent declines.

Frasers Centrepoint Trust (Reuters: FCRT.SI, Bloomberg: FCT SP)


S$ in mn, year-end Sep
FY13A
FY14A
FY15E
Revenue (S$ mn)
158
169
188
Distributable Profit (S$ mn)
90
95
106
EPU (S$)
0.10
0.11
0.11
DPU (S$)
0.11
0.11
0.12
BVPU (S$)
1.77
1.85
1.85
Revenue growth (%)
7.3%
6.8%
11.6%
DPU growth (%)
9.3%
2.4%
3.7%
P/E (x)
18.4
18.2
16.9
P/BV (x)
1.1
1.0
1.0
Dividend Yield
5.7%
5.8%
6.1%
Gearing
27.6%
29.3%
29.2%
RNAV/Share
1.87
Net property income (S$ mn)
112
118
133

FY16E
190
108
0.11
0.12
1.85
1.0%
1.1%
16.7
1.0
6.1%
29.2%
134

FY17E
191
108
0.11
0.12
1.84
0.1%
0.3%
16.8
1.0
6.1%
29.2%
135

Singapore
Property
Brandon Lee

AC

(65) 6882-7073
brandon.lee@jpmorgan.com
J.P. Morgan Securities Singapore Private
Limited

Cusson Leung
(852) 2800-8526
cusson.leung@jpmorgan.com
J.P. Morgan Securities (Asia Pacific) Limited

James R. Sullivan, CFA


(65) 6882-2374
james.r.sullivan@jpmorgan.com
J.P. Morgan Securities Singapore Private
Limited
Price Performance
1.95
S$

1.85
1.75
1.65
Dec-13

Mar-14

Jun-14

Sep-14

Dec-14

FCRT.SI share price (S$)


FTSTI (rebased)

Abs
Rel

YTD
8.8%
3.8%

1m
-1.5%
-2.6%

Company Data
Shares O/S (mn)
Market Cap (S$ mn)
Market Cap ($ mn)
Price (S$)
Date Of Price
Free Float(%)
3M - Avg daily vol (mn)
3M - Avg daily val (S$ mn)
3M - Avg daily val ($ mn)
FTSTI
Exchange Rate
Price Target End Date
Price Target (S$)

3m
-2.0%
-1.5%

12m
7.0%
0.6%

916
1,754
1,326
1.92
05 Dec 14
0.96
1.84
1.4
3324.39
1.32
31-Dec-15
1.85

Source: Company data, Bloomberg, J.P. Morgan estimates.

See page 15 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.
www.jpmorganmarkets.com

Asia Pacific Equity Research


09 December 2014

Overweight

Global Logistic Properties Ltd

Previous: Not Rated

Execution should soon contradict naysayers;


assuming coverage with OW rating

Price: S$2.63

GLPL.SI, GLP SP
Price Target: S$3.30

We assume coverage of GLP with an Overweight rating and a Dec-15 PT


of S$3.30 (OW rating and Dec-14 PT of S$3.20 prior to NR designation).
GLP remains the most direct proxy to Chinas resilient consumption story
and burgeoning e-commerce space. Despite its track record of land
sourcing and new strategic alliances, the market continues to ascribe a
discount to its book value, which we believe is unjustified.

Singapore
Property
Brandon Lee

AC

(65) 6882-7073
brandon.lee@jpmorgan.com
J.P. Morgan Securities Singapore Private
Limited

Direct proxy to China consumption and e-commerce. Over 80% of


GLPs leased area in China is attributable to domestic consumption,
which is likely to be the main driver of the countrys medium-to-longterm economic growth trajectory. We expect Chinas under-developed
offline retail infrastructure, low internet penetration rate, and rising
emergence of B2C to lead to a five-year CAGR of 29% in online retail
GMV. This should result in further expansion in demand from ecommerce tenants, which currently contributes 25% to its portfolio.

Cusson Leung

Asset origination not priced in. GLP has entered into strategic
alliances with several notable SOEs, which should expand its landsourcing capabilities and enhance leasing momentum. While near-term
land-bank accretion is not significant, we believe GLPs efforts will bear
fruit in the medium to long term as the acquisition of industrial land
becomes more challenging. Even after factoring in an asset origination
premium of S$0.43, the implied P/BV of 1.31x is below peers 1.51x.

Price Performance

Key potential catalysts. Capital recycling activity, new fund set-ups,


and land-bank acquisitions in China.

(852) 2800-8526
cusson.leung@jpmorgan.com
J.P. Morgan Securities (Asia Pacific) Limited

James R. Sullivan, CFA


(65) 6882-2374
james.r.sullivan@jpmorgan.com
J.P. Morgan Securities Singapore Private
Limited

3.1
2.9
S$
2.7
2.5
Dec-13

Mar-14

Jun-14

Sep-14

Dec-14

GLPL.SI share price (S$)


FTSTI (rebased)

Abs
Rel

YTD
-9.0%
-14.0%

1m
-2.2%
-3.3%

3m
-9.6%
-9.1%

12m
-8.0%
-14.4%

Valuation and risks. Our Dec-15 PT of S$3.30 is based on our SOTP


valuation. Key risks to our PT and view are a sustained macroeconomic
slowdown in China, as well as currency depreciation in Japan and Brazil.
Global Logistic Properties Ltd (Reuters: GLPL.SI, Bloomberg: GLP SP)
$ in mn, year-end Mar
FY13A
FY14A
FY15E
FY16E
Revenue ($ mn)
642
598
741
862
Net Profit ($ mn)
684
685
624
693
EPS ($)
0.15
0.14
0.13
0.14
Core EPS ($)
0.08
0.05
0.06
0.06
DPS ($)
0.03
0.04
0.03
0.03
Revenue growth (%)
13.5%
(6.8%)
23.9%
16.3%
EPS growth (%)
24.9%
(2.0%)
(9.6%)
10.2%
ROCE
3.1%
2.7%
3.6%
3.7%
ROE
4.3%
2.9%
3.0%
3.1%
P/E (x)
13.5
13.8
15.3
13.9
Core P/E (x)
26.5
37.9
34.9
32.3
P/BV (x)
1.1
1.1
1.0
1.0
EV/EBITDA (x)
31.9
39.5
31.0
29.6
Dividend Yield
1.6%
1.8%
1.6%
1.6%
RNAV/Share
3.30

FY17E
1,042
675
0.14
0.07
0.03
20.8%
(2.6%)
4.0%
3.4%
14.2
28.1
0.9
27.0
1.6%

Company Data
Shares O/S (mn)
Market Cap ($ mn)
Market Cap ($ mn)
Price (S$)
Date Of Price
Free Float(%)
3M - Avg daily vol (mn)
3M - Avg daily val (S$ mn)
3M - Avg daily val ($ mn)
FTSTI
Exchange Rate
Price Target End Date
Price Target (S$)

4,840
9,623
9,623
2.63
05 Dec 14
11.51
30.84
23.3
3324.39
1.32
31-Dec-15
3.30

Source: Company data, Bloomberg, J.P. Morgan estimates.

See page 33 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.
www.jpmorganmarkets.com

Asia Pacific Equity Research


09 December 2014

Neutral

Keppel Land

Previous: Not Rated

Fruits not fully borne via ongoing portfolio fine-tuning;


assuming coverage with a Neutral rating

Price: S$3.35

KLAN.SI, KPLD SP
Price Target: S$3.50

We assume coverage of KPLD with a Neutral rating and Dec-15 PT of S$3.50


(Neutral rating and Dec-14 PT of S$4.20 prior to NR designation). The group
has actively redeployed capital to its core markets in 2014, and we expect this
to continue into 2015, given its low gearing of 37%. But with the majority of
its offices divested, KPLD has increased exposure to the more volatile
residential segment, where demand is modest at best in Singapore and China.
Active portfolio fine-tuning in the works. KPLD has been very active in
its capital recycling strategy in 2014, as evidenced by S$1.9b of asset
divestments that translate into net proceeds of S$1.1b. Part of these
proceeds will be redeployed to Jakarta and Ho Chi Minh, in line with the
groups strategy of focusing on Singapore, China, Indonesia and Vietnam.
While the group has minority stakes in three more offices within the
HarbourFront Precinct, the Singapore office segment now accounts for only
15% of GAV vs. 20-30% over the past five years.
Sizeable residential exposure. Fifty percent of GAV is attributed to the
China residential segment, though a majority of its unsold landbank
(including townships) is located in Tier 2/3 cities, which should benefit
from the ongoing relaxation of HPR and the latest interest rate cut. As the
group targets genuine homebuyers, it should be less impacted by further
deterioration in the physical market. The inventory cycle in Singapore (12%
of GAV) is reasonable, at four years, though a majority belongs to the highend segment, where buying sentiments remain subdued.
Key catalysts. Capital recycling activities, acquisitions and more HPR
relaxations.

Singapore
Property
Brandon Lee

AC

(65) 6882-7073
brandon.lee@jpmorgan.com
J.P. Morgan Securities Singapore Private
Limited

Cusson Leung
(852) 2800-8526
cusson.leung@jpmorgan.com
J.P. Morgan Securities (Asia Pacific) Limited

James R. Sullivan, CFA


(65) 6882-2374
james.r.sullivan@jpmorgan.com
J.P. Morgan Securities Singapore Private
Limited
Price Performance
3.7
S$

3.5
3.3
3.1
Dec-13

Mar-14

Jun-14

Sep-14

Dec-14

KLAN.SI share price (S$)


FTSTI (rebased)

Abs
Rel

YTD
0.3%
-3.8%

1m
1.2%
1.3%

3m
-3.2%
-2.1%

12m
-3.2%
-9.1%

Valuation and risks. Our Dec-15 PT of S$3.50 is derived via a 40%


discount to our forward RNAV estimate of S$5.86. Key risks include a
sustained period of macroeconomic slowdown in China, which could impact
KPLDs residential launches.
Keppel Land Ltd (Reuters: KLAN.SI, Bloomberg: KPLD SP)
S$ in mn, year-end Dec
FY12A
FY13A
FY14E
Revenue (S$ mn)
939
1,461
1,341
Net Profit (S$ mn)
838
886
795
EPS (S$)
0.56
0.57
0.51
Core EPS (S$)
0.29
0.24
0.26
DPS (S$)
0.12
0.13
0.13
Revenue growth (%)
(1.1%)
55.6%
(8.2%)
EPS growth (%)
(40.4%)
3.2%
(10.3%)
ROCE
2.0%
2.0%
2.5%
ROE
7.3%
5.4%
5.2%
P/E (x)
6.0
5.8
6.5
Core P/E (x)
11.5
14.1
13.1
P/BV (x)
0.8
0.7
0.7
EV/EBITDA (x)
31.5
31.8
26.4
Dividend Yield
3.6%
3.9%
3.9%
RNAV/Share
5.58
5.64
6.05

FY15E
1,732
816
0.53
0.27
0.13
29.2%
2.5%
3.0%
5.1%
6.4
12.5
0.6
20.3
3.9%
5.86

FY16E
2,855
930
0.60
0.34
0.13
64.8%
13.9%
4.0%
6.0%
5.6
9.8
0.6
12.3
3.9%
-

Company Data
Shares O/S (mn)
Market Cap (S$ mn)
Market Cap ($ mn)
Price (S$)
Date Of Price
Free Float(%)
3M - Avg daily vol (mn)
3M - Avg daily val (S$ mn)
3M - Avg daily val ($ mn)
FTSTI
Exchange Rate
Price Target End Date
Price Target (S$)

1,545
5,176
3,913
3.35
08 Dec 14
2.01
6.72
5.1
3324.39
1.32
31-Dec-15
3.50

Source: Company data, Bloomberg, J.P. Morgan estimates.

See page 14 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.
www.jpmorganmarkets.com

Asia Pacific Equity Research


09 December 2014

Neutral

Keppel REIT

Previous: Not Rated

Pure Grade A exposure priced in; assuming coverage


with a Neutral rating

Price: S$1.22

KASA.SI, KREIT SP
Price Target: S$1.25

We assume coverage of KREIT with a Neutral rating and a Dec-15 PT of


S$1.25 (Neutral rating and Dec-14 PT of S$1.25 prior to NR designation).
KREIT offers the purest Grade A office play among peers following the
MBFC Tower 3 acquisition. With passing rent still below spot, positive rent
reversion should continue in 2014-15, in our view. However, with DPU set to
decline in FY14E-15E, we think the stock is fairly priced at current levels.
Purest Grade A office play. KREIT is a key beneficiary of Singapores
office recovery story, given that this segment contributes 90% to its RNAV
and 80% to NPI. The acquisition of Marina Bay Financial Centre Tower 3
has strengthened the groups position as the leading Grade A office landlord
in the prime business and financial districts of Raffles Place and Marina
Bay. Based on our estimates, KREITs portfolio passing rent equates to
S$9+ psf, which is below 3Q14 Grade A rent of S$10.95. Therefore, we
expect healthy rent reversions for the 6.6% and 18.2% of space expiring in
2015 and 2016, respectively.
AUD provides income stability. KREIT currently owns five buildings in
Australia with a total asset value of S$0.9b. In view of their relatively long
lease periods of 5-25 years, income is very stable. While KREIT is not
immune to changes in AUD, the impact is minimal, as DPU would decline
only 1.3-1.5% for every 5% depreciation in AUD. In the medium to long
term, we believe the group could explore divestments of some of its AUD
properties to finance acquisitions.
Key catalysts. Positive office rent reversions and acquisitions.
Valuation and risks. Our Dec-15 PT of S$1.25 is based on the average of
our DDM and RNAV valuation estimates and implies FY15E/FY16E
dividend yields of 5.7%/5.7%, 0.93x FY15E BV and a 5.8% premium to our
one-year forward DDM valuation. KREIT trades at a historical P/B of 0.82x,
compared to current 0.87x. Key risks include landlords reducing rents to
boost occupancies ahead of sizeable 2016-17 completions.

Keppel REIT (Reuters: KASA.SI, Bloomberg: KREIT SP)


S$ in mn, year-end Dec
FY12A
FY13A
FY14E
Revenue (S$ mn)
157
174
189
Distributable Profit (S$ mn)
202
214
218
EPU (S$)
0.04
0.05
0.04
DPU (S$)
0.08
0.08
0.08
BVPU (S$)
1.32
1.40
1.37
Revenue growth (%)
101.2%
10.9%
8.6%
DPU growth (%)
74.2%
1.4%
(3.4%)
P/E (x)
28.0
22.8
31.2
P/BV (x)
0.9
0.9
0.9
Dividend Yield
6.4%
6.5%
6.2%
Gearing
39.5%
39.6%
36.2%
RNAV/Share
Net property income (S$ mn)
125
138
148

FY15E
179
226
0.04
0.07
1.35
(5.1%)
(7.1%)
28.9
0.9
5.8%
37.7%
1.34
141

FY16E
185
230
0.04
0.07
1.33
3.2%
0.8%
27.2
0.9
5.8%
39.0%
145

Singapore
REITs
Brandon Lee

AC

(65) 6882-7073
brandon.lee@jpmorgan.com
J.P. Morgan Securities Singapore Private
Limited

Cusson Leung
(852) 2800-8526
cusson.leung@jpmorgan.com
J.P. Morgan Securities (Asia Pacific) Limited

James R. Sullivan, CFA


(65) 6882-2374
james.r.sullivan@jpmorgan.com
J.P. Morgan Securities Singapore Private
Limited
Price Performance
1.35
1.30
S$

1.25
1.20
1.15
1.10
Dec-13

Mar-14

Jun-14

Sep-14

Dec-14

KASA.SI share price (S$)


FTSTI (rebased)

Abs
Rel

YTD
3.0%
-2.0%

1m
1.2%
0.1%

Company Data
Shares O/S (mn)
Market Cap (S$ mn)
Market Cap ($ mn)
Price (S$)
Date Of Price
Free Float(%)
3M - Avg daily vol (mn)
3M - Avg daily val (S$ mn)
3M - Avg daily val ($ mn)
FTSTI
Exchange Rate
Price Target End Date
Price Target (S$)

3m
-1.6%
-1.1%

12m
4.7%
-1.7%

3,008
3,670
2,775
1.22
05 Dec 14
5.25
6.35
4.8
3324.39
1.32
31-Dec-15
1.25

Source: Company data, Bloomberg, J.P. Morgan estimates.

See page 14 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.
www.jpmorganmarkets.com

Asia Pacific Equity Research


09 December 2014

Underweight

Mapletree Commercial Trust

Previous: Not Rated

VivoCity premium priced in; assuming coverage with


UW rating

Price: S$1.45

MACT.SI, MCT SP
Price Target: S$1.40

We assume coverage of MCT with an UW and a Dec-15 PT of S$1.40


(OW rating and Dec-14 PT of S$1.40 prior to NR designation). Underrented VivoCity should continue to enjoy positive rent reversion, albeit at
a more modest pace. While sponsor MIPL has a large asset pipeline of
S$3.7b, injections will likely happen in 2016 at the earliest. In view of
slower growth prospects and YTD outperformance, we think current P/B
of 1.25 looks expensive vs 1.11x mean.
Pure suburban retail play. VivoCity, which accounts for over 60% of
MCTs RNAV and NPI, continues to be its top performer. Since its Oct06 opening, Singapores largest retail mall has enjoyed strong
occupancies of 98+%. While 1HFY15 positive rent reversions have
moderated to 16.5% from 25-38% over the past few years, we estimate
existing passing rents of S$13.50-14.00 psf/mth remain under-rented vs.
suburban/destination malls of $15.00-16.00 psf.
Sponsor pipeline to support inorganic growth. Aside from Mapletree
Anson in Feb-13, MCT has relied mostly on growth via the organic
route. Based on our estimates, MIPL has S$3.7b worth of injectable
assets into MCT. While Mapletree Business City (mixed-use building
with total NLA of 1.7m sqf and valued at S$1.1b) is already 100%
occupied and the majority of its retail/office leases should be in the
second leasing cycle, any potential divestment should only occur in 2016
at the earliest post the completion of adjoining The Comtech
redevelopment.
Key catalysts. Acquisitions, better-than-expected positive rent reversions.
Valuation and risks. Our Dec-15 PT of S$1.40 is based on the average of
our DDM and RNAV valuation estimates. Our Dec-15 target price implies
FY15E/FY16E dividend yield of 5.6%/5.7%, 1.21x FY15E book value
and 5.8% discount to our 1-yr forward DDM valuation. MCT trades at a
historical P/B of 1.11x, compared to current 1.25x. Key risks to our PT
and view are a sustained period of labour shortage and tenant sales decline.
Mapletree Commercial Trust (Reuters: MACT.SI, Bloomberg: MCT SP)
S$ in mn, year-end Mar
FY13A
FY14A
FY15E
FY16E
Revenue (S$ mn)
219
267
284
295
Distributable Profit (S$ mn)
124
153
164
167
EPU (S$)
0.06
0.07
0.07
0.07
DPU (S$)
0.06
0.07
0.08
0.08
BVPU (S$)
1.06
1.16
1.16
1.16
Revenue growth (%)
23.8%
21.7%
6.3%
3.7%
DPU growth (%)
23.2%
13.7%
6.6%
1.1%
P/E (x)
24.1
21.2
19.6
19.3
P/BV (x)
1.4
1.2
1.2
1.3
Dividend Yield
4.5%
5.1%
5.4%
5.5%
Gearing
40.8%
38.6%
38.4%
38.4%
RNAV/Share
1.34
Net property income (S$ mn)
156
195
211
212

FY17E
304
173
0.08
0.08
1.15
3.2%
3.6%
18.6
1.3
5.7%
38.3%
219

Singapore
Conglomerates and Property
Brandon Lee

AC

(65) 6882-7073
brandon.lee@jpmorgan.com
J.P. Morgan Securities Singapore Private
Limited

Cusson Leung
(852) 2800-8526
cusson.leung@jpmorgan.com
J.P. Morgan Securities (Asia Pacific) Limited

James R. Sullivan, CFA


(65) 6882-2374
james.r.sullivan@jpmorgan.com
J.P. Morgan Securities Singapore Private
Limited
Price Performance

1.40
S$ 1.30
1.20
1.10
Dec-13

Mar-14

Jun-14

Sep-14

Dec-14

MACT.SI share price (S$)


FTSTI (rebased)

Abs
Rel

YTD
21.4%
16.4%

1m
2.5%
1.4%

Company Data
Shares O/S (mn)
Market Cap (S$ mn)
Market Cap ($ mn)
Price (S$)
Date Of Price
Free Float(%)
3M - Avg daily vol (mn)
3M - Avg daily val (S$ mn)
3M - Avg daily val ($ mn)
FTSTI
Exchange Rate
Price Target End Date
Price Target (S$)

3m
-3.3%
-2.8%

12m
21.9%
15.5%

2,104
3,040
2,298
1.45
05 Dec 14
2.22
3.17
2.4
3324.39
1.32
31-Dec-15
1.40

Source: Company data, Bloomberg, J.P. Morgan estimates.

See page 15 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.
www.jpmorganmarkets.com

Asia Pacific Equity Research


09 December 2014

Neutral

Mapletree Industrial Trust

Previous: Not Rated

Resilient but reasonably priced; assuming coverage


with Neutral rating

Price: S$1.49

MAPI.SI, MINT SP
Price Target: S$1.55

We assume coverage of MINT with a Neutral rating and a Dec-15 PT of S$1.55


(N rating and Dec-14 PT of S$1.45 prior to NR designation). MINTs flatted
factories should continue to exhibit resilience in terms of income and retention
rates, though we expect rental growth will moderate as the gap between passing
rents and spot rents narrows. The group has successfully expanded its hi-tech
segment to ride on the governments push for high valued-added industries. At
current P/B of 1.24x, the stock looks fairly priced to us.
Resilient flatted factories. Flatted factories are MINTs largest asset
composition, contributing half of NPI and RNAV. Despite its manufacturingoriented clients, income has historically been resilient. This is helped by a
sizeable base of over 1,800 tenants across 59 properties, where occupancy has
never fallen below 90%. Its flatted factories are under-rented vs. strata-titled
factories. They are also not subject to the government's revised subletting
policy.
Expanding hi-tech footprint. In line with the Singapore governments
push for higher value-added industries, MINT has successfully converted 2
flatted factories into hi-tech buildings and won the tender for 3 build-to-suit
(BTS) projects with leading global companies. Hi-tech space and business
parks therefore now account for 42% of RNAV now. Further, FY18 DPU is
expected to post strong YoY growth of 9% after full-year contributions
from these initiatives.
Key catalysts. Acquisitions and better-than-expected positive rent
reversion, as well as withdrawal or tweaking of government measures on
the industrial sector.
Valuation and risks. Our Dec-15 PT of S$1.55 is based on the average of
our DDM and RNAV valuations. Our Dec-15 target price implies
FY15E/FY16E dividend yield of 6.6%/6.8%, 1.29x FY15E book value and
2.1% discount to our 1-yr forward DDM valuation. MINT trades at a
historical P/B of 1.23x, in line with current values. Key risks to our PT and
view are a sustained period of subdued leasing environment and more new
government policies.
Mapletree Industrial Trust (Reuters: MAPI.SI, Bloomberg: MINT SP)
S$ in mn, year-end Mar
FY13A
FY14A
FY15E
Revenue (S$ mn)
276
299
319
Distributable Profit (S$ mn)
151
166
174
EPU (S$)
0.09
0.10
0.10
DPU (S$)
0.09
0.10
0.10
BVPU (S$)
1.10
1.20
1.20
Revenue growth (%)
12.2%
8.3%
6.5%
DPU growth (%)
10.0%
7.9%
2.9%
P/E (x)
16.8
15.1
14.7
P/BV (x)
1.4
1.2
1.2
Dividend Yield
6.2%
6.7%
6.9%
Gearing
34.8%
34.4%
35.1%
RNAV/Share
1.47
Net property income (S$ mn)
195
215
227

FY16E
328
178
0.10
0.11
1.20
2.9%
2.2%
14.4
1.2
7.0%
37.0%
234

FY17E
334
180
0.10
0.11
1.20
2.0%
1.2%
14.2
1.2
7.1%
38.6%
239

Singapore
Property
Brandon Lee

AC

(65) 6882-7073
brandon.lee@jpmorgan.com
J.P. Morgan Securities Singapore Private
Limited

Cusson Leung
(852) 2800-8526
cusson.leung@jpmorgan.com
J.P. Morgan Securities (Asia Pacific) Limited

James R. Sullivan, CFA


(65) 6882-2374
james.r.sullivan@jpmorgan.com
J.P. Morgan Securities Singapore Private
Limited
Price Performance
1.50
S$

1.40
1.30
1.20
Dec-13

Mar-14

Jun-14

Sep-14

Dec-14

MAPI.SI share price (S$)


FTSTI (rebased)

Abs
Rel

YTD
11.6%
6.6%

1m
1.0%
-0.1%

Company Data
Shares O/S (mn)
Market Cap (S$ mn)
Market Cap ($ mn)
Price (S$)
Date Of Price
Free Float(%)
3M - Avg daily vol (mn)
3M - Avg daily val (S$ mn)
3M - Avg daily val ($ mn)
FTSTI
Exchange Rate
Price Target End Date
Price Target (S$)

3m
2.8%
3.3%

12m
14.2%
7.8%

1,732
2,581
1,951
1.49
05 Dec 14
2.82
4.24
3.2
3324.39
1.32
31-Dec-15
1.55

Source: Company data, Bloomberg, J.P. Morgan estimates.

See page 15 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.
www.jpmorganmarkets.com

Asia Pacific Equity Research


09 December 2014

Underweight

Overseas Union Enterprise Ltd

Previous: Not Rated

Waiting for the next catalyst; assuming coverage with


an UW rating

Price: S$2.03

OVES.SI, OUE SP
Price Target: S$2.10

We assume coverage of OUE with an UW rating and Dec-15 PT of S$2.10


(Neutral rating and Dec-14 PT of S$2.45 prior to NR designation). While
OUEs office exposure should benefit from the continued rent recovery story,
its hospitality portfolio is not immune to rising headwinds from sizeable hotel
room completions over the next two years. With a majority of the groups
wholly owned quality assets already injected into its two listed REITs,
acquisitions of undervalued properties will likely be key share price catalysts.
Mix of domestic and offshore office exposure. Office contributes about
60% of OUEs GAV, the majority of which is attributable to its Singapore
portfolio, which should benefit from the rent recovery story. Nonetheless,
OUE Bayfront has already been injected into its office REIT, while OUE
Downtown's integrated serviced apartment and retail components are in the
midst of major asset enhancement plans. As for US Bank Tower, we expect
the group to explore a potential divestment as office rents recover in line
with the U.S. economy.
Asset injections more medium-term. OUE has built up a fund
management platform of S$3.6b in AUM in less than two years by injecting
a majority of its own assets into two REITs. However, following the recent
divestment of Crowne Plaza Changi Airport, we think any upcoming asset
injections will be more medium-term, as OUE Downtown/Downtown
Gallery will be completed only in 2016. We think One Raffles Place is less
likely in view of its associate stake.

Singapore
Property
Brandon Lee

(65) 6882-7073
brandon.lee@jpmorgan.com
J.P. Morgan Securities Singapore Private
Limited

Cusson Leung
(852) 2800-8526
cusson.leung@jpmorgan.com
J.P. Morgan Securities (Asia Pacific) Limited

James R. Sullivan, CFA


(65) 6882-2374
james.r.sullivan@jpmorgan.com
J.P. Morgan Securities Singapore Private
Limited
Price Performance
2.8
2.6
S$ 2.4
2.2
2.0
Dec-13

Mar-14

Jun-14

Sep-14

Dec-14

OVES.SI share price (S$)


FTSTI (rebased)

Abs
Rel

Key catalysts. Capital recycling activities and acquisitions.

AC

YTD
-18.8%
-22.9%

1m
-4.7%
-4.6%

3m
-11.7%
-10.6%

12m
-19.1%
-25.0%

Valuation and risks. Our Dec-15 PT of S$2.10 is derived via a 50%


discount to our forward RNAV estimate of S$4.25. Key risks include office
leasing efforts impacted by sizeable office completions in 2016-17 and
sustained competitive headwinds within Singapores hotel subsector.
Overseas Union Enterprise Ltd (Reuters: OVES.SI, Bloomberg: OUE SP)
S$ in mn, year-end Dec
FY12A
FY13A
FY14E
FY15E
Revenue (S$ mn)
418
437
235
265
Net Profit (S$ mn)
90
(37)
981
64
EPS (S$)
0.10
(0.04)
1.08
0.07
Core EPS (S$)
0.11
0.05
0.05
0.06
DPS (S$)
0.11
0.23
0.05
0.05
Revenue growth (%)
25.7%
4.5%
(46.2%)
12.8%
EPS growth (%)
(71.3%)
(140.6%)
(2782.6%)
(93.5%)
ROCE
3.0%
1.3%
1.7%
1.8%
ROE
3.2%
1.4%
1.4%
1.4%
P/E (x)
20.5
NM
1.9
29.0
Core P/E (x)
18.8
42.5
41.0
35.8
P/BV (x)
0.6
0.5
0.5
0.5
EV/EBITDA (x)
14.9
23.2
27.7
21.6
Dividend Yield
5.4%
11.3%
2.5%
2.5%
RNAV/Share
-

FY16E
300
236
0.26
0.07
0.05
13.3%
270.5%
2.0%
1.8%
7.8
28.1
0.4
18.3
2.5%
-

Company Data
Shares O/S (mn)
Market Cap (S$ mn)
Market Cap ($ mn)
Price (S$)
Date Of Price
Free Float(%)
3M - Avg daily vol (mn)
3M - Avg daily val (S$ mn)
3M - Avg daily val ($ mn)
FTSTI
Exchange Rate
Price Target End Date

910
1,847
1,396
2.03
08 Dec 14
38.4%
0.49
1.03
0.8
3324.39
1.32
31-Dec-15

Source: Company data, Bloomberg, J.P. Morgan estimates.

See page 11 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.
www.jpmorganmarkets.com

Asia Pacific Equity Research


09 December 2014

Overweight

Suntec REIT

Previous: Not Rated

Re-rated by retail rejuvenation; assuming coverage


with OW

Price: S$1.90

SUNT.SI, SUN SP
Price Target: S$2.10

We assume coverage of Suntec REIT (SUN) with an Overweight and a Dec15 PT of S$2.10 (OW rating and Dec-14 PT of S$1.75 prior to NR
designation). SUN provides a direct proxy to the office rent recovery story,
with passing rents remaining below spot. Historically, management has
exhibited a strong track record in leasing. Full completion of Suntec City AEI
translates to an impressive FY15E DPU growth of 11%. The stock is one of
our top SREIT picks, alongside AREIT and CT.
Direct office play. SUN is a direct proxy to Singapores office recovery
story, given that this segment contributes 70% to its RNAV and NPI. Suntec
City Office Towers has traditionally enjoyed a strong occupancy rate
(presently 100%) and even during the 2009 GFC, vacancy rate was only
7.5%. The latest leases were contracted at S$8.50-9.00 psf/mth, which
remains below spot rentals in the Marina area of S$9.94 psf. Passing rents
of both ORQ and MBFC remained at the S$9.50-10.50 psf, which is below
3Q14 Grade A rent of S$10.95.
Retail AEI boosts FY15E DPU. Since its Oct-11 announcement, Suntec
City Malls long-anticipated AEI has progressed well, in our view. Both
Phases 1 and 2 attained close to 100% pre-commitment rates prior to their
official openings. While leasing momentum has slowed for Phase 3, we
think current pre-commitment of 60% represents an achievement in view of
the weak retail environment. We expect Phase 3 to hit 70-80% upon
completion in 4Q14-1Q15, which translates to FY15E DPU growth of 11%.
Key catalysts. Positive office rent reversions and higher pre-commitment
for Suntec City Mall Phase 3 AEI.

Singapore
Property
Brandon Lee

AC

(65) 6882-7073
brandon.lee@jpmorgan.com
J.P. Morgan Securities Singapore Private
Limited

Cusson Leung
(852) 2800-8526
cusson.leung@jpmorgan.com
J.P. Morgan Securities (Asia Pacific) Limited

James R. Sullivan, CFA


(65) 6882-2374
james.r.sullivan@jpmorgan.com
J.P. Morgan Securities Singapore Private
Limited
Price Performance

1.8
S$
1.6
1.4
Dec-13

Mar-14

Jun-14

Sep-14

Dec-14

SUNT.SI share price (S$)


FTSTI (rebased)

Abs
Rel

YTD
23.1%
18.1%

1m
5.9%
4.8%

3m
4.4%
4.9%

12m
25.5%
19.1%

Valuation and risks. Our Dec-15 PT of S$2.10 is based on the average of


our DDM and RNAV valuation estimates. Our Dec-15 target price implies
FY15E/FY16E dividend yield of 4.9%/4.9%, 1.02x FY15E book value and
1.5% discount to our one-year forward DDM valuation. SUN trades at a
historical P/B of 0.8x, compared to current 0.92x. Key risk to our PT and
view is Phase 3 AEI unable to lease out remaining space.
Suntec REIT (Reuters: SUNT.SI, Bloomberg: SUN SP)
S$ in mn, year-end Dec
FY12A
FY13A
Revenue (S$ mn)
262
234
Distributable Profit (S$ mn)
213
211
EPU (S$)
0.07
0.05
DPU (S$)
0.09
0.09
BVPU (S$)
2.12
2.19
Revenue growth (%)
(3.1%)
(10.6%)
DPU growth (%)
(4.5%)
(2.2%)
P/E (x)
29.0
41.7
P/BV (x)
0.9
0.9
Dividend Yield
5.0%
4.9%
Gearing
36.7%
38.0%
RNAV/Share
Net property income (S$ mn)
163
149

FY14E
287
228
0.06
0.09
2.10
22.5%
(0.2%)
30.3
0.9
4.9%
35.4%
199

FY15E
343
260
0.08
0.10
2.07
19.6%
10.8%
24.4
0.9
5.4%
37.7%
2.04
235

FY16E
357
265
0.08
0.10
2.05
4.1%
1.0%
22.8
0.9
5.5%
38.1%
269

Company Data
Shares O/S (mn)
Market Cap (S$ mn)
Market Cap ($ mn)
Price (S$)
Date Of Price
Free Float(%)
3M - Avg daily vol (mn)
3M - Avg daily val (S$ mn)
3M - Avg daily val ($ mn)
FTSTI
Exchange Rate
Price Target End Date
Price Target (S$)

2,502
4,742
3,585
1.90
05 Dec 14
11.40
21.26
16.1
3324.39
1.32
31-Dec-15
2.10

Source: Company data, Bloomberg, J.P. Morgan estimates.

See page 14 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.
www.jpmorganmarkets.com

Asia Pacific Equity Research

Crompton Greaves Limited (CRG IN)


Management meeting: Slow overseas turnaround;
non-core asset sale; three-year lock-in post-consumer
business listing

08 December 2014

Neutral
Price: Rs183.95
08 Dec 2014
Price Target: Rs222.00
PT End Date: 31 Dec 2015

We met CG management during our Industrials & Machinery tour. Our impression was that the pace of the
overseas power segment margin turnaround could be muted. Following the sale of 8 acres of land for Rs3bn at
Kanjurmarg in the previous quarter, the sale of another 16 acres could pan out partially in the balance of this
fiscal year or FY16. Finally, CG will have to comply with a three-year lock-in regarding its 25% shareholding in
the consumer business upon listing in about Nov-15. We discuss the potential implications in this note.

Impact of a slow overseas margin turnaround. Management commentary implied that the margin
turnaround of loss-making businesses in Hungary, Canada and Saudi Arabia is directionally positive;
however, the pace of the margin recovery could be muted. The overseas segment is expected to be EBIT
breakeven in the next two quarters (vs. the -0.8% overseas power segment EBIT margin in 1HFY15) and is
headed toward reporting positive EBIT margin from FY15 on. Our estimates factor in a 1.5% EBIT margin
for the overseas power segment in FY15 (implying an ask of 3.5% in 2H) and 4.5% in FY16. In a scenario
where the overseas power segment EBIT margin in FY15/FY16 is 0%/2%, our consolidated EPS estimates
(FY15E: Rs7.35, FY16E: Rs12.36) would be cut by 12%/15%. Earnings sensitivity to a largely uncertain
event remains quite high.

If land sale proceeds are used to retire debt, the interest cost savings could boost EPS. Assuming that
another 16 acres are sold at Kanjurmarg for similar pricing as the first tranche, total proceeds from land sale
would be about Rs9bn (for 24 acres). Consolidated FY14-end debt was about Rs22bn, and interest cost was
Rs967mn. If land sale proceeds are used to retire debt (mainly in overseas subsidiaries) on a
proportionate basis, it could result in an interest cost reduction of about Rs0.4bn for the fiscal year.

A three-year lock-in adds to the illiquidity of the 25% minority holding in the future listed consumer
business. The lock-in condition lays to rest our hope of CGs early exit from the remaining 25% stake in the
consumer business post-listing. In our assessment, the consumer business demerger unlocks value, as the
pure-play listed peer (HAVL IN) trades at a significant valuation premium. However, the likelihood of
applying a holding company discount while valuing a minority stake in the consumer business also goes up
due to the three-year lock in.

Investment Thesis
Crompton Greaves (CG) is part of the US$4 billion Avantha Group. The company has grown inorganically in the power
segment with the acquisition of Belgium-based Pauwels in 2005, followed by Ganz, Microsol, other small companies and
ZIV in Spain two years back. Besides power systems, the company has two more business segments industrial and
consumer products. The company holds a minority stake in group company Avantha Power (APIL), which it now plans to
divest. APIL has 1200MW under advanced stages of commissioning.
The expectation of a cyclical recovery in the industry segment has gained currency post-elections. Timing an overseas
turnaround is difficult, but recent quarterly trends have shown consolidation, and we believe the worst is behind the
company. We believe CG is a decent hold for investors with a medium-term investment horizon.
Valuation
We maintain our Dec-15 SOP-based PT of Rs222, implying ~15% upside. For the DCF valuation (Avantha Power stake
valued at around Rs5/share), we maintain a terminal year of FY24, medium- to long-term revenue growth of 12%, EBIT
margin of 8.3%, 6% terminal growth and a WACC of 12.2%.

Asia Pacific Equity Research


09 December 2014

Underweight

Far East Hospitality Trust

Previous: Not Rated

Hospitality headwinds ongoing; assuming coverage


with an UW rating

Price: S$0.83

FAEH.SI, FEHT SP
Price Target: S$0.80

We assume coverage of FEHT with an UW rating and Dec-15 PT of S$0.80


(UW rating and Dec-14 PT of S$0.80 prior to NR designation). FEHT offers
pure exposure to the Singapore tourism sector with its portfolio of 10 hotels
and serviced residences. While the sponsor has a growing pipeline to ensure a
sustainable inorganic growth trajectory, hoteliers face competitive pressures
that we expect to continue beyond the near term. While FEHTs P/B of 0.84x
is below the mean, we see no catalysts ahead.
Pure exposure to tourism. As the only hospitality REIT with all its
properties in Singapore, FEHT is well placed to benefit from the sustained
number of tourists who visit Singapore as a result of intra-Asia travel, in our
view. Asia contributes 61% of FEHTs total room nights. The groups
serviced residence (SR) portfolio adds earnings stability, as 84% of rooms
are leased on a corporate basis at a relatively longer average length of stay
(29 days) than hotels (3 days).
Growing sponsor pipeline. FEHT has a ROFR toward its sponsor FEOs
pipeline of eight hospitality assets, which includes four hotels (703 rooms)
and four SRs (599 rooms). Based on our estimates, the total valuation is
S$1.4b. Should the full pipeline be injected, FEHTs portfolio would
expand by 50-60% in terms of assets and room count. The competitive
acquisition cost (S$0.5m per key vs. spot S$0.8-0.9m per key) of two
recently acquired Sentosa hotels from FEO is testament to the value
preposition a strong sponsor brings to FEHT.

Singapore
REITs
Brandon Lee

(65) 6882-7073
brandon.lee@jpmorgan.com
J.P. Morgan Securities Singapore Private
Limited

Cusson Leung
(852) 2800-8526
cusson.leung@jpmorgan.com
J.P. Morgan Securities (Asia Pacific) Limited

James R. Sullivan, CFA


(65) 6882-2374
james.r.sullivan@jpmorgan.com
J.P. Morgan Securities Singapore Private
Limited
Price Performance
0.92
0.88
S$ 0.84
0.80
0.76
Dec-13

Far East Hospitality Trust (Reuters: FAEH.SI, Bloomberg: FEHT SP)


S$ in mn, year-end Dec
FY12A
FY13A
FY14E
Revenue (S$ mn)
42
122
129
Distributable Profit (S$ mn)
34
95
97
EPU (S$)
0.01
0.05
0.05
DPU (S$)
0.02
0.06
0.05
BVPU (S$)
0.97
0.98
0.98
Revenue growth (%)
190.1%
5.2%
DPU growth (%)
169.9%
(3.6%)
P/E (x)
73.2
16.3
16.9
P/BV (x)
0.9
0.8
0.8
Dividend Yield
2.5%
6.8%
6.6%
Gearing
29.2%
30.8%
30.9%
RNAV/Share
Net property income (S$ mn)
39
112
117

FY15E
128
93
0.05
0.05
0.97
(0.7%)
(4.8%)
17.8
0.9
6.3%
31.0%
0.89
116

FY16E
132
96
0.05
0.05
0.96
3.0%
3.5%
17.2
0.9
6.5%
31.2%
120

Mar-14

Jun-14

Sep-14

Dec-14

FAEH.SI share price (S$)


FTSTI (rebased)

Key catalysts. Sectorwide recovery in RevPAR and sponsor injections.

Valuation and risks. Our Dec-15 PT of S$0.80 is based on the average of


our DDM and RNAV valuation estimates and implies FY15E/FY16E
dividend yields of 6.5%/6.7%, 0.82x FY15E BV and a 16.6% premium to
our one-year forward DDM valuation. FEHT trades at a historical P/B of
0.95x, above current values. Key risks include a sustained period of
declining Chinese tourist arrivals and competitive pressures.

AC

Abs
Rel

YTD
-1.8%
-6.8%

1m
-2.4%
-3.5%

Company Data
Shares O/S (mn)
Market Cap (S$ mn)
Market Cap ($ mn)
Price (S$)
Date Of Price
Free Float(%)
3M - Avg daily vol (mn)
3M - Avg daily val (S$ mn)
3M - Avg daily val ($ mn)
FTSTI
Exchange Rate
Price Target End Date
Price Target (S$)

3m
-2.9%
-2.4%

12m
-2.4%
-8.8%

1,775
1,464
1,107
0.83
05 Dec 14
0.68
0.56
0.4
3324.39
1.32
31-Dec-15
0.80

Source: Company data, Bloomberg, J.P. Morgan estimates.

See page 14 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.
www.jpmorganmarkets.com

Asia Pacific Equity Research

Infosys (INFO IN)


Infosys 2014 Analyst Meet- Much more than a strategy
summit giving concrete glimpses into the happenings
inside; stay OW

08 December 2014

Overweight
Price: Rs2,070.30
05 Dec 2014
Price Target: Rs4,200.00
PT End Date: 31 Dec 2015

Infosyss 2014 Analyst meet was a timely event. Management did not just chart a high-level strategy but also
spelled out some actions to execute the strategy (which included discussion of select case studies to serve the
purpose of bridging the strategy-to-execution comprehension gap). Overall, we believe that the new
management has started out well in positioning its story. We present our views on the event below together with
our investment case:

RENEW the old/existing while Building the NEW. The CEO (Dr. Vishal Sikka) made this the refrain of
his address. He sees renewal of the core using extreme automation such as Artificial Intelligence to make an
impact. At the same time, Dr Sikka persuasively presented the case for building the NEW (which includes
incorporating design thinking methodologies, building open source-based platforms and addressing new
parts of the technology stack in the digital age). To be sure, this message is not new or original. In our
reports, we (JPM) consistently have called this duality as protecting & strengthening the core while
investing and building for the future. Infosyss peers such as TCS/Cognizant have hammered away at this
message in the past using different expressions. Cognizant calls it run better, run different while TCS
calls it optimize and transform. Where Infosys provided some comfort to us is in providing some details
of this dual journey. Over the medium-to-long term, success of Infosyss strategy should reflect in higher per
capita revenues (currently at USD 53,000 per employee as of Sep-14 quarter annualized).

Artificial Intelligence (AI), Open Source, Design Thinking has the time come for these concepts to
take root in todays age? Infosys believes so. Computing power is virtually limitless today allowing rapid
processing of enormous data sets using AI. New software techniques such as Natural Language Processing
(NLP), voice recognition and rule processing have become much more efficient making use of AI
compelling. Infosys believes that AI will revolutionalise automation and that the automation seen in the
Indian IT Services industry so far is largely rule-based automation with little cognitive intelligence or AI
built in. Likewise, Infosys also advocates the use of open source in its platform strategy rather than use of
proprietary software. It envisages creating open source assemblies fortified with its own/partner IP with
downstream system integration opportunities. Given Dr Sikkas prior background as CTO of SAP, it is
especially interesting for us to see him espouse open source rather than proprietary technologies (embodied
by the likes of SAP/Oracle). This might entail a re-orientation of Infosyss existing platform suite
(EdgeVerve). Finally, on design thinking, Infosys believes that rapid prototyping using AGILE development
methodologies gets a boost in the digital age using design-thinking.

The scale of training underway to embrace the new concepts is impressive but the effectiveness of this
massive embrace will be known only with time. Infosys has trained over 8,300 employees on design
thinking. Senior management, a significant proportion of Infosyss sales, account managers and consultants
have undergone this training (developed in conjunction with Stanford University). It is too early for us to
assess the effectiveness of this large-scale intervention. Infosys will likely devise and monitor measures of
training effectiveness. Similarly, Infosys has a three-week machine learning program and a 2-week AI
training program our earlier view that concepts of AI/machine learning are not easily grasped by the larger
workforce still stands. That said, it is probably sufficient to only target a narrower, more appropriately
qualified segment of the employee base (such as computer science graduates from Top-50 engineering

Asia Pacific Equity Research

08 December 2014

Overweight

Skyworth Digital Holdings (751 HK)

Price: HK$4.35
08 Dec 2014
Price Target: HK$6.30
PT End Date: 31 Dec 2015

November stats - start of easy comps for ASPs


Skyworth Digital released November TV sales statistics on 08 Dec.

http://www.hkexnews.hk/listedco/listconews/SEHK/2014/1208/LTN20141208536.pdf
Skyworth is the largest branded TV maker in the domestic market (unit sales) with a large rural customer base.
The November unit sales show mild unit sales growth (up 3% in Nov Y/Y down from 10% in October). The
key positive is that ASP in Oct 14 dropped 11% Y/Y compared with down 20% in Oct 14 and the best month
since May 14 (lowest drop in ASP YY in since May 14). The key reason for the slower sales decline is that the
previous years ASP started falling from Nov 2013 making for easier comparables. Our current estimate
assumes a 14% Y/Y decline in ASPs for the remainder of FY15.

LED TV exports surged 113% Y/Y to 411k units and the company has achieved 80% of our FY15
export target in eight months. Normally export GPM is lower than domestic margins but the surge in
volumes should lead to more scale benefits compared to the previous year.
For Skyworth, the drop in ASP of 11% is positive given it is an improvement from the past six months as well
as better than our expectations of down 14%. However, the recent 1HFY15 (Apr to Sept 14) results released late
Nov showed that a sharp drop in ASP during this period did not result in a drop in GPM. The biggest concern
that lower ASP would lead to lower GPM has reduced dramatically following the 1HFY15 results.
Overall, the slightly better Oct domestic unit sales and ASP plus a surge in export unit sales should be a positive
for sentiment on Skyworths TV business. Our sum-of-the-parts analysis suggests almost no value built into the
current share price of Skyworth for the TV operations.
Skyworth trades at 7.5x CY15E P/E (excluding property gains). Our PT (Dec-15, DCF-derived; WACC: 12%;
terminal growth of 3%) of HK$6.3 implies a forward P/BV of 1.2x and forward P/E of 11.2x CY16E). Key risks
to our PT are: the timing of the commencement of government incentive /subsidy schemes for TVs, and a higher
cost of components cutting into margins
Detailed Statistics for August
Unit sales (000)
Domestic
Flat TV
Y/Y domestic LCD
M/M total gth
Y/Y flat panel
Domestic ASP change
Cloud
4K
4K + Cloud
3D + Cloud / Total
Exports
Total Flat TV
Flat TV (Y/Y growth)
Source: Company reports.

14-May

14-Jun

14-Jul

14-Aug

15-Sep

15-Oct

15-Nov

510
-38%
-25%
-38%
-6%
212
63
275
54%
249

639
90%
25%
90%
-29%
274
71
345
54%
249

664
18%
4%
18%
-22%
225
79
304
46%
292

838
8%
26%
8%
-17%
274
112
386
46%
287

1,001
8%
19%
8%
-11%
338
148
486
49%
344

713
10%
-29%
10%
-20%
238
95
333
47%
513

912
3%
28%
3%
-11%
261
130
391
43%
411

759
-22%

888
52%

956
23%

1,125
20%

1,345
15%

1,226
53%

1,323
18%

Asia Pacific Equity Research

Taishin Financial Holdings (2887 TT)


Impairment losses are now a real risk, but this could
be the first step to lifting overhang

08 December 2014

Neutral
Price: NT$14.20
08 Dec 2014
Price Target: NT$15.80
PT End Date: 31 Dec 2015

According to the CHB (2801 TT) announcement, the Ministry of Finance has secured six board seats (including
two independent directors) out of a total of nine seats from the board re-election on Monday afternoon,
suggesting Taishin has lost the board control on CHB and thus rising risks of impairment losses as a result.

Difficult for Taishin to consolidate CHB going forward. According to the Financial Holding Company
Act, Taishin FHC could consolidate CHB as one of its subsidiaries only if it holds at least 25% stake OR it
could directly or indirectly designate the majority of the board directors. Given Taishin only holds 22.55%
stake and controls three (including one independent director) out of the nine seats now, it is very likely that
CHB is no longer qualified as the subsidiary of Taishin FHC going forward unless FSC is willing to provide
some regulatory forbearance for such a special case.

Potential impairment losses of NT$13.8bn. In the case that Taishin is not allowed to consolidate CHB, its
22.55% stake will become a pure long-term investment under the equity method (i.e., Taishin could still
recognize CHB earnings on a pro rata basis) but is subject to impairment tests. Given the CHB stake is
carried at NT$25.8 per share on Taishins balance sheet vs. current market price of NT$18.0, potential
impairment losses could be NT$13.8bn, or 95% of FY14 earnings; pro forma BVPS will be NT$11.7 and
NT$13.1 for FY14E and FY15E, respectively, compared to our current forecasts of NT$13.0 and NT$14.4.

But limited impacts on capital position. Group capital position should only be marginally affected by the
potential impairment losses. Based on our analysis, FHC CAR will decline from 132.6% to 130.3%, while
double-leverage ratio (DLR) and debt/equity ratio will increase from 107.3% and 25% to 108.2% and 28.2%
on a pro forma basis as of 2Q14. Both FHC CAR and DLR are still comfortably above the regulatory floor
of 100% and ceiling of 125% respectively. Debt/equity ratio may appear high (vs. regulatory ceiling of 30%)
but we note the ratio is much lower at only 19.6% (or 22% if taking into account impairment losses) as of
3Q14 enhanced by superior underlying earnings.

Material pullback could result in bargain-hunting opportunities. It remains unclear how Taishin is
going to deal with the CHB stake going forward but we believe the impairment losses, if they happen, will
remove a majority of the long-standing uncertainties. Current share price is implying 1.0x FY15E P/BV or
1.1x if including the potential impairment losses, which is not demanding compared to 13% ROE outlook as
we think the market has been discounting such overhang to the fair value for some time. Therefore, we see
good bargain hunting opportunities if the share price pulls back to NT$13 or below on todays re-election
results.

Asia Pacific Equity Research

Tata Power (TPWR IN)


Management meeting- Two tracks on Mundra hearing;
Maithon profitability to improve; Trombay Unit 8 under
recovery stops

08 December 2014

Overweight
Price: Rs89.30
05 Dec 2014
Price Target: Rs111.00
PT End Date: 30 Sep 2015

We met Tata Power management during our Industrials & Machinery tour. The Mar-15 timeline for closure of
the Arutmin deal remains intact. On the legal standoff around Mundra UMPP tariff, our sense was that a
resolution is still 6 months away, but a favorable Supreme Court decision on admitting force majeure/change in
law as grounds for hearing by APTEL could prove to be a silver lining. Relative to 1HFY15 performance, P&L
in the balance fiscal is likely to get a boost from favorable regulatory developments for coal based Maithon and
Trombay project in the Mumbai License Area. We maintain OW on Tata Power.

Two tracks on hearing related to Mundra UMPP tariff. Tata Power currently awaits the Supreme Court
verdict on their petition regarding the restoration of their right to pursue the case under the change of law
and force majeure clauses. Pending this verdict the hearing on compensatory tariff in APTEL has been in
abeyance. In the event of a favorable SC decision, APTEL will hear the case in two tracks - (1) On the
quantum of compensatory tariff to be allowed following the Feb-14 CERC order; (2) whether any
consideration should be given to Mundra UMPP on grounds of change of law/force majeure, previously
rejected by CERC. In our base case SOP PT of Rs111, we attribute only Rs1 to Mundra UMPP (~USD3bn
investment).

Maithon profitability to improve. On 19th Nov-14 CERC approved the capital cost and tariff for Maithon
(2x525MW) from CoD till Mar-2014. 1HFY15 Maithon PAT of Rs470mn implies only ~6% return on
invested equity. As per management the latest CERC order affords RoE of up to 15% on regulated capacity.
Tata Power has commenced billing as per new order from 19th Nov. In our assessment, Tata Power would
also be entitled to charge past under recovery as a one-off income in coming quarterly results.

Trombay Unit 8 (250MW) under recovery stops. In Jan-14, the fire at 250MW unit of Trombay
(1.58GW) had resulted in forced outage of this unit. As per management the consequent under recovery in
revenue (and PAT) was ~Rs500mn per quarter. In mid-Nov, Tata Powers appeal to recover fixed charges
on Unit-8 was approved. The positive bottom-line impact shall be seen in part of Dec-q (as compared to
2QFY15).

Investment Thesis
TPWR is Indias largest private sector power utility, with an installed capacity of ~8.5GW. TPWR also distributes
electricity to 265,000+ customers in Mumbai, as well as to 1+ mn customers in North Delhi through its subsidiary TPDDL.
Through its Powerlinks JV, TPWR built Indias first private sector inter-state transmission project on a BOOT basis.
TPWR also has a 30% stake in the KPC and Arutmin coal mines of Indonesia-based Bumi Plc.
Implementation of the compensatory tariff order for Mundra UMPP will ease the cash flow burden. In the current business
model, Mundra UMPP and illiquid investments are destined to generate low and zero RoE, respectively. Indo coal mine
profitability is at the mercy of a recovery in coal prices, and upside surprise is limited for regulated assets.
The stake sale announcement in Bumi mines now has an established and attractive valuation benchmark from the Arutmin
deal. We think debt reduction from the coal mine deal and recovery of Delhi distribution receivables would provide further
upside to earnings estimates and recovery. We maintain our OW on the stock.

Asia Pacific Equity Research


09 December 2014

Vingroup
Investor Trip - Company Visit Note
VIC hosted its Annual Investor Trip, touring its key projects in HCMC,
Phu Quoc, Hanoi and Nha Trang last weekend. During the trip, they
conducted a two-hour meeting for both sell- and buy-side analysts. There
were a lot of questions about Vinhomes Central Park and Phu Quoc
project, and managements future capex plans. Below are key takeaways
from the meeting:
Vinhomes Central Park (or Tan Cang) (43ha, 64.43% stake), broke
ground in July this year with a total planned cost of VND30,000bn
(US$1.4bn), it will launch the first batch of 600 apartment units (out of
10,000 designed units) and 76 villas (out of 100 designed units) this
month. Management plans to complete construction works and begin
handing over the apartments in 3Q16, while the villas will be completed
one year earlier, in 3Q15. Meanwhile, blended in the project, an
international-standard hospital, Vinmec, will be inaugurated in August
2015, followed by the opening of Vinschool, which offers a K-12
program, to primarily serve the needs of people residing in Vinhomes
Central Park. Management said they will not disclose selling prices of
Central Park at this stage despite the fact that there are a few sales agents
currently quoting the price between VND38-44m per sqm (US$1,7702,050 per sqm or US$165-191 per sq.ft), seemingly lower than the offer
price of City Garden, a nearby project, at US$2,200 per sqm.

Head of ASEAN Strategy &


Indonesian Research
Aditya Srinath, CFA

AC

(62-21) 5291-8573
aditya.s.srinath@jpmorgan.com
Bloomberg JPMA SRINATH <GO>
PT J.P. Morgan Securities Indonesia

VIC VM, Not Covered


VND48,900, Dec. 08, 2014
2Y Share price performance
VIC VN
VNIndex re-based

70
60
50
40
30

Source: Bloomberg.

Vinpearl Phu Quoc (304ha, 99.26% stake). VIC inaugurated Phase I


of Vinpearl Resort Phu Quoc a month ago, in November, after 11 months
of construction and spending US$200m.
2015 planned capex: VIC estimates to spend around US$350-410m
capex in 2015, including US$60-80m for NCT, US$230-250m for
Vinhomes Central Park, US$20-40m for VinMart and US$40m for
Vinpearl Phu Quoc Phase 2.

One-year price performance

NOTE: THIS DOCUMENT IS INTENDED AS INFORMATION ONLY AND NOT AS A


RECOMMENDATION FOR ANY STOCK. IT CONTAINS FACTUAL INFORMATION,
OBTAINED BY THE ANALYST DURING MEETINGS WITH MANAGEMENT. JPMORGAN
DOES NOT COVER THIS COMPANY AND HAS NO RATING ON THE STOCK. NO PART
OF THIS RESEARCH MAY BE REPRODUCED OR DISTRIBUTED INTO VIETNAM BY
ANY MEANS WHATSOEVER. FAILURE TO COMPLY WITH THIS RESTRICTION MAY
CONSTITUTE A VIOLATION OF LAW.
VND in billions, year-end December
FY11A
FY12A
FY13A
Sales
2,314
7,904
18,378
Net income
821
1,571
6,780
EPS (VND)
845
1,153
5,310
DPS (VND)
2,249
60
220
Net debt/ equity (%)
135.4
191.5
137.2
Sales growth (%)
-40.3
241.6
132.5
Net profit growth (%)
-64.4
91.3
331.5
EPS growth (%)
-67.1
36.5
360.4
ROE (%)
12.3
18.4
54.2
P/E (x)
46.9
35.2
35.2
P/B (x)
6.0
5.3
5.3
Dividend yield (%)
5.9
3.0
3.0

52week range (VND)


Mkt cap. (VNDB)
Mkt cap. (US$MM)
Shares O/S (MM)
Free float (%)
Daily volume (mil shares)
Daily liquidity (US$MM)
Exchange rate (VND/US$)
Index: VNI
Year-end

Absolute (%)
Relative (%)

1M
0.4
6.7

3M
(12.3)
(5.1)

12M
4.8
(8.4)

Source: Bloomberg.

Company data
40,686-60,000
71,128
3,333
1,454.6
49.6
1.1
2.5
21,340
572
December

Source: Bloomberg.

Source: Company reports, Bloomberg.

See page 11 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
www.jpmorganmarkets.com
making their investment decision.

Asia Pacific Equity Research


8 December 2014

Asia Pacific Strategy Dashboards


Asia Pacific Strategy Team

Country Recommendation

Adrian MowatAC

Asian and Emerging Markets Equity Strategist

adrian.mowat@jpmorgan.com

(852) 2800 - 8599

J.P. Morgan Securities (Asia Pacific ) Limited

Robert Smith
Jahangir Aziz
Bert Gochet
Rajiv Batra
Kevyn Kadakia

Quantitative Strategist
Economic and Policy Research
Emerging Asia, Rates and Forex Strategy
Asian and Emerging Markets Equity Strategy
Asian and Emerging Markets Equity Strategy

robert.z.smith@jpmorgan.com
jahangir.x.aziz@jpmorgan.com
bert.j.gochet@jpmorgan.com
rajiv.j.batra@jpmorgan.com
kevyn.h.kadakia@jpmorgan.com

(852) 2800 8569


(1-202) 585 -1254
(852) 2800 - 8325
(91-22) 6157-3568
(91-22) 6157-3250

J.P. Morgan Securities (Asia Pacific ) Limited


J.P. Morgan Securities LLC
J.P. Morgan Securities (Asia Pacific ) Limited
J.P. Morgan India Private Limited
J.P. Morgan India Private Limited

Overweight
China, India, Philippines, Thailand, Indonesia
Underweight
Australia, Malaysia, Hong Kong and Singapore

Key Changes
Market performance to 5 December 2014
Week: MSCI Asia Pacific ex Japan -1% underperformed MSCI World by 0.8%
Top three markets during the week: China 0.9%, Indonesia 0.7% and Australia 0.5%
Bottom three markets during the week: Malaysia -3.9%, Hong Kong -1.5% and India 1.3%
YTD Performance: MSCI Asia Pacific ex Japan 1.1% underperformed MSCI World by
2.8%

Headline inflation data published since the last publication:


Taiwan: CPI 0.9%oya (J.P. Morgan 1.30% Consensus 1.20%)
Philippines: CPI 3.7 %oya (J.P Morgan 3.8% Consensus 4.0%)
Korea: CPI 1.0 %oya ( Consensus 1.1%)

Market Performance

Liquidity Monitor

J.P. Morgan's revisions to 2014 GDP forecasts

Monitoring Inflation

Negative: Australia 2.7%[3.0%], Philippines 5.5%[6.2%]

Market Drivers
Earnings Revisions

YTD Bottom three markets in US$: Malaysia, Korea and Australia

J.P. Morgan's revisions to 2015 GDP forecasts

Sector performance

Positive: Australia 2.9%[2.8%]


Negative: Philippines 5.4%[6.1%]]

Week: MSCI APxJ Financials 0% outperformed MSCI APxJ by 1%


Top three key sectors during the week in US$: China Financials 4.7%, Korea
Consumer Discretionary 1.6% and Australia Industrials 0.9%
Bottom three key sectors during the week in US$: Hong Kong Consumer
Discretionary -8%, Australia Energy -7% and Singapore Industrials -4.7%

Page #

Regional Summary

YTD Top three markets in US$: India, Indonesia and Philippines

Week: MSCI APxJ Utilities -2.2% underperformed MSCI APxJ by 1.1%

Table of Contents

J.P. Morgan's revisions to central bank policy rate forecasts


Australia: Current 2.50%, Last change 6 Aug 13 -25bp,
Forecast Next change 4Q 15 +25bp[3Q 15 +25bp] Dec 14 2.50%
Mar 15 2.50%, Jun 15 2.50%, Sep 15 2.50%[2.75%], Dec 15
2.75%[3.00%]

YTD Top three key sectors in US$: India Financials 47.6%, Taiwan Information
Technology 20.4% and India Information Technology 18.2%
YTD Bottom three key sectors in US$: Hong Kong Consumer Discretionary -28.6%,
Korea Materials -25.1% and Australia Energy -24.1%

6
7,8

Cross-section Earnings Growth

Market Implied Growth Rates

10

Sector-Country PE Matrix

11

Valuation Distribution

12

Demand Classification

13

Currency Forecasts

14

Economic Momentum

15

Interest Rate Trend

16

Asia in Perspective

17

Asian Balance Sheets

18

Index Weightings

19

Demand classification sector performance


YTD: Domestic Demand 7.4%, Global Capex 1.2%, Global Consumer 0.1% and
Global Price Takers -7.1%

Please see Asian Year Ahead 2015:


Stock Ideas for the Year of the Goat
Mowat et al, 17 November 2014, for our
latest Asian equity strategy

See page 20 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.

www.jpmorganmarkets.com

Global Equity Research


8 December 2014

Global Developed Markets Strategy Dashboards


J.P. Morgan Equity Strategy
Adrian MowatAC
Mislav Matejka

Global Emerging Markets and Asian Strategy


Global and European Equity Strategy

Key Calls (see page 3 for details)


adrian.mowat@jpmorgan.com

(852) 2800-8599

mislav.matejka@jpmorgan.com

(44-20) 7325-5242

J.P. Morgan Securities (Asia Pacific) Limited

Regional Calls
US UW, Japan OW,
Eurozone OW, UK UW, Others Neutral

J.P. Morgan Securities plc

Paul Brunker

Australia Equity Strategy

paul.m.brunker@jpmorgan.com

(61-2) 9003-8641

J.P. Morgan Securities Australia Limited

Jesper J Koll

Japan Equity Strategy

jesper.j.koll@jpmorgan.com

(81-3) 6736-8600

JPMorgan Securities Japan Co., Ltd.

Rajiv Batra

Asia and Emerging Markets Equity Strategy

rajiv.j.batra@jpmorgan.com

(91-22) 6157-3568

J.P. Morgan India Private Limited

EM OW

Key Changes
Table of Contents
Market performance to 5 December, 2014
YTD Performance: Developed World up 4.7%, outperforming EM by
6.4%

J.P. Morgan's revisions to 2014 growth forecasts


Negative: Australia 2.7% [3.0%], Italy -0.4% [-0.3%]

Page #

Market Drivers

Key Calls

Earnings Revisions

4,5

J.P. Morgan's revisions to 2015 growth forecasts

Sector Revisions

6,7

Sector Performance: Healthcare (up 20.5%) and IT (up 16.2%) are


the best performing sectors YTD, while Materials ( down 4.5%) and
Energy (down 12.6%) are the worst

Positive: Australia 2.9% [2.8%]

Macro Earnings Growth Driver

Negative: Norway 1.8% [2.4%]

Cross-sector Earnings Growth

Style Performance: Developed World Growth up 6.3%, Value up 3.0%

J.P. Morgan's revisions to central bank policy rate


forecasts

Regional Performance: United States the best performing region (up


14.5% YTD), Portugal the worst performing region (down 25.0%)

Developed World Large Caps have marginally outperformed Mid


Caps& significantly outperformed Small Caps YTD

Australia: Current 2.50%, Last change 6 Aug 13 -25bp,


Forecast Next change 4Q15 +25bp [3Q15 +25bp]. Dec 14
2.50%, Mar 15 2.50%, Jun 15 2.50%

Regional Valuation

10,11

Sector-Country Valuation Matrix

12

Policy Rates Forecast

13

Yield Curve & Liquidity

14

Regional Monetary Condition Index

15

Economic Momentum

16

Currency Forecasts

17

Performance: Equities relative to Bonds

18

Performance: Sector & Industry

19,20

Balance Sheets

21

Index Weightings

22

See page 23 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.

www.jpmorganmarkets.com

Global Emerging Markets Equity


Research
08 December 2014

GEMs Model Portfolio


Emerging Markets Equity Strategy
The GEM model portfolio illustrates how to implement our strategy views. It
is published monthly in Key Trades and Risks.
The model portfolio reflects asset allocation changes and ideas from the
Emerging Equity Markets Year Ahead 2015 including thematic stock
baskets (see Table 2). Specifically the upgrade of China, Turkey and the
Philippines to OW, Korea and Peru to neutral, and the downgrade of
Taiwan and Greece to neutral (see Table 6). For more details on our asset
allocation changes please see Emerging Equity Markets Year Ahead: Stock
ideas for 2015', Mowat et al, 21 November 2014.
The GEMS model portfolio outperformed MSCI EM by 1.2% in the past
one month. Positive country allocation returns from Malaysia, Indonesia,
India and Thailand.

Asian Equity Strategy & Emerging


Market Equity Strategy
Adrian Mowat

AC

(852) 2800-8599
adrian.mowat@jpmorgan.com
Bloomberg JPMA MOWAT <GO>
J.P. Morgan Securities (Asia Pacific) Limited

Pedro Martins Junior, CFA


(55-11) 4950-4121
pedro.x.martins@jpmorgan.com
Banco J.P. Morgan S.A.

David Aserkoff, CFA


(44-20) 7134-5887
david.aserkoff@jpmorgan.com

Country allocation, stock selection and currency contributed positively to


portfolio outperformance in last one month. Our country allocation embeds
a view on the FX. Country allocation, including currency added 0.9% to
portfolio outperformance (see Table 5). The highest stock selection returns
were in Brazil and China, offset by poor stock selection returns in Mexico
and Taiwan. China Galaxy Securities (+42%), State Bank of India (+18%)
and LG Display (+8%) were the top performing stocks, while Mexichem (14%) CCR (-12%) and Coca Cola Femsa (-11%) were the laggards in last
one month.

J.P. Morgan Securities plc

To track the portfolio stocks we monitor performance, absolute and relative


momentum, valuations, EPS revisions and Q-scores (see Table 9 to Table
11).

(91-22) 6157-3250
kevyn.h.kadakia@jpmorgan.com

Key asset allocation calls:


OW: China (upgrade), India, Indonesia, Thailand, Mexico, Philippines
(upgrade) and Turkey (upgrade)
UW: Malaysia, Russia, South Africa, Poland and Chile

Robert Smith, PhD

Rajiv Batra
(91-22) 6157-3568
rajiv.j.batra@jpmorgan.com
J.P. Morgan India Private Limited

Sanaya Tavaria
(1-212) 622-5469
sanaya.x.tavaria@jpmorgan.com
J.P. Morgan Securities LLC

Kevyn H Kadakia

J.P. Morgan India Private Limited

Global Quantitative Strategy


AC

(852) 2800 8569


robert.z.smith@jpmorgan.com
Bloomberg JPMA RSMITH <GO>
J.P. Morgan Securities (Asia Pacific) Limited

Table 1: GEMS Model Portfolio Changes


Purchases
Bank of China-H, Ping An Insurance Group-H,
Largan Precision, Ayala Land, Siam Comm Bk,
Suzano, Naspers, Lukoil, Akbank

Sales
Kasikornbank, China Gas Holdings, Quanta
Computer, National Bank of Greece, Tatneft, Catcher
Tech, Energy Development Corp, MTN Group, Copel

Source: J.P. Morgan

Figure 1: MSCI EM relative performance


160

rel World

140

rel US

120

Table 2: Portfolio overlap with thematic stock baskets in Emerging Equity Markets Year Ahead

100

Thematic Stock Baskets


OW China
IIT Markets

% of Portfolio Weight
16.0
17.9

No. of stocks(Total 48 Stocks)


6
9

Inexpensive Top Picks

28.3

12

40

Downgrade Dogs

13.3

20

Year ahead top picks

68.9

33

Source: J.P. Morgan

80
60

96 98 00 02 04 06 08 10 12 14
Source: Bloomberg, 2 December 2014

See page 12 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.
www.jpmorganmarkets.com

Asia Pacific Equity Research

08 December 2014

Indian Equities
Multi-baggers Heat Map, Year-end Charateristics and the Risk Drive

Growth, inflation and rates outlook remain supportive for equities; Large cap indices were
unchanged, mid-caps outperformed last week

RBIs signal on likely change in policy stance a key support for equities; Financials outperformance
continues

Leading banks announce cuts in deposit rates; 10-year treasury yields falls to a 17-month low

Government hikes excise duty on petro products for the second time; Consumption boost gets shared
with fiscal comfort

Lead indicators, credit spreads dynamics and acceleration in core sector growth are favorable for
cyclical sectors performance

FII buying mixed across key emerging markets; preference for India continues

Private sector promoters, FII and domestic retail investors have seen equity holding gains of ~US$190
bn, 100bn and 70bn respectively YTD

Supportive internals. Last week, the macro headlines were mostly unchanged but the underlying dynamics
were discreetly favorable. Firstly, the central bank left key rates unchanged but the signal on change in policy
stance was a major boost for investor sentiment. Subsequently, we also saw some of the leading banks*
announcing cuts in deposit rates last week. Secondly, parliamentary proceedings were not satisfactory. But the
news flows on Defense and Railways ministries were supportive for directly impacted sectors and more. Growth
indicators were mostly encouraging. Thirdly, the broad sentiment for emerging markets was cautious but within
the EM pack, rate hike in Brazil (50 bps) and continued concerns on Russia helped Indias relative edge. The net
impact was that the Nifty remained largely unchanged but CNX Mid caps index gained.
Figure 1: MSCI India One Month sectoral performance (%)
Consumer Staples
Financials
Materials
MSCI INDIA
Consumer Discretionary
Information Technology
Industrials
Health care
Energy
(4)
Utilities
(4)
Telecom (5)
(6)

8
6
2
1
0
0
(1)
(1)
%
(4)

(2)

10

Source: Bloomberg

December characteristics. The last month of year has seasonally been the best month of equity returns in India
(also for MSCI EM). Monthly returns have averaged 5% since 1996. Sectorally - Financials, Utilities and
Materials - tend to outperform. The performance tends to be well supported by FII flows. Since 2001, there has
been only one year of FII selling in equities over the month. Domestic developments based on the Winter

Asia Pacific Equity Research

08 December 2014

Malaysia Strategy Flash


Reiterating our bearish near-term view on oil, and implications
In our Malaysia Asian Year Ahead 2015: Stock Ideas for the Year of the Goat, and Malaysia Strategy:
Follow up to Year Ahead: Sector positioning for 2015 explained notes, we turned less positive on the Oil &
Gas sector. Risk of oil price weakness skews our preference towards downstream O&G capex players; and our
negative view on petrochemicals. We downgraded Oil & Gas to N from OW on our more negative view on
crude oil prices, plus some risk to Petronas capex. We stayed UW on petrochemicals on lower spreads led by
potentially lower crude oil prices. Our EM Strategist Adrian Mowats UW call on Malaysia is based among
other things on the premise of net O&G exporter Malaysia being a net loser amidst lower oil prices; together
with a market structure that is skewed by underperforming banks and telcos.

J.P. Morgan Commodities Research team reiterates bearish near term view on Brent
J.P. Morgan Commodities Research teams recent 2015 outlook conference call re-iterated our bearish near-term
view on Brent. We assume a 60% chance that OPEC will eventually reach an agreement on a production cut in
1Q15. However, on no agreement and/or limited implementation of any OPEC cuts we see significant downside
to Brent, which could potentially drop to US$60/bl in 2015.
No OPEC cuts, Brent may average US$60/bl in 2015

Source: J.P. Morgan

J.P. Morgan Economics earlier cut GDP, current account balance and inflation forecast
Following the plunge in Brent crude oil prices to around US$70/bbl from US$105 in June, J.P. Morgan
Economics had earlier materially revised 2015 forecasts for Malaysias current account balance, growth, and
inflation. GDP growth was revised to 4.7% Y/Y from 5.1%, CPI up to 4.3% Y/Y from 4.0%, and the current
account surplus to 1.5% of GDP from 2.8%. These revisions reflect the impact of lower natural gas (NG) prices,
which in Asia is priced off a crude oil benchmark. NG accounts for an estimated US$20B (6% of GDP) in net
exports. Oil- and gas-related proceeds account for 25% of the 19.8% of GDP in fiscal revenues. To increase
fiscal leeway, Malaysia floated its fuel subsidies to market price in mid-November from a fixed per liter subsidy
system, which should save around MYR10-15B in expenditures against a J.P. Morgan forecast revenue loss of
MYR18-22B, leaving a gap of around MYR8B (0.7% of GDP) to fill. The J.P. Morgan forecast assumes that the
budget gap will be closed mainly by reducing government consumption and the exemptions from the goods and
services tax that will be introduced in April next year. This view explains our slightly higher inflation and lower
consumption forecast for 2015. Another government option would be to trim capital outlays of governmentrelated companies in the oil and gas sector, which would trim investment and also bolster the current account
surplus, but this seems unlikely at this juncture. See Malaysia Data Watch 1205: Deflating oil prices bring
macro revisions.

Asia Pacific Equity Research


09 December 2014

Singapore Monthly Wrap


Nov 14: What to buy for Christmas...
Welcome to the last Trading Port of 2014: Weve previously opined on the
investment opportunities in Singapore for the upcoming Year of the Goat
(please see our detailed Year Ahead report here), but wanted to provide
additional backdrop to the likely investment climate in 2015.

Singapore Macro Strategy


James R. Sullivan, CFA

AC

(65) 6882-2374
james.r.sullivan@jpmorgan.com
Bloomberg JPMA SULLIVAN <GO>

The Relative Attractiveness Quotient: We ranked sectors on: (1) earnings


revision momentum; (2) changes in analyst recommendations; and (3) index
weight changes, having assigned equal weights to each, to yield the Relative
Attractiveness Quotient. Banks, Real Estate and Telecom rank high, whereas
Industrials and Consumer rank low. DBS (OW, recent equity report here,
recent credit report here) remains our favored play on Fed rate hikes across
ASEAN and our top pick within Singapore banks. GLP is our top property pick
(OW, recent report here), while M1 remains our top pick in telecoms (OW,
recent report here). We are most cautious on GENS (UW, recent report here), as
we believe weak growth in the Singapore market and increasing expenses will
continue to plague the stock.

J.P. Morgan Securities Singapore Private


Limited

FSSTI chart (rebased)


3,500
3,300
3,100
2,900

Economic review: October output rose 2.6%m/m, sa, leaving IP softer, at


2.6%oya. Singapores headline CPI fell 0.4%m/m sa in October, leaving overyear-ago inflation at 0.1%. Singapores October non-oil domestic exports
(NODX) fell 3.4%m/m sa in US$ terms, leaving the headline at -3.9%oya.
September retail sales volumes turned up 1.2%m/m sa, suggesting that overall
private consumption continued to stabilize through the end of 3Q. Singapores
economy grew 3.1%q/q, saar in 3Q compared to the 1.2% estimate in the
advance GDP release last month. This left 3Q growth up 2.8%oya (from
2.4%oya in the advance release).

2,700
2,500
Dec 13

Mar 14

Jun 14

Sep 14

Dec 14

Source: Bloomberg

MSCI SG relative to MSCI APxJ and PxJ


110
rel to PxJ

105
100
95

Company news: The SCFI fell 1% w/w for the week ending Nov 14. Ezion
Holdings has entered into a subscription agreement with Triyards Holdings
pursuant to which Triyards will issue 29,500,000 non-listed warrants to the
company, for a total consideration of S$1.00 in cash. Assuming the exercise of
the warrant (subject to exercise condition of US$150 million of shipbuilding
orders to Triyards), this would translate to an 8.33% stake. Results announced
for STE, SIA, SIE, POSH, DMHL, PACRA, VARD, SMM, COS, ST and STH.

rel to APxJ

90
85
Dec 13

Mar 14

Jun 14

Sep 14

Dec 14

Source: Bloomberg, J.P. Morgan

Sector and stock returns


%
One month
Consumer Disc.
Financials
Telecom
Consumer staples
Industrials

Ranked sector returns (%)


Three months
3.4
Financials
2.6
Telecom
2.5
Consumer Disc.
-2.8
Consumer staples
-5.1
Industrials

3.9
-0.6
-3.7
-4.2
-11.3

Top and Bottom five FSSTI stocks (%)


One month
Three months
Singapore Airlines Ltd.
8.7
Singapore Airlines Ltd.
Jardine Cycle & Carriage Ltd
6.2
DBS Group Holdings Ltd
City Developments Ltd
5.5
United Overseas Bank Ltd
Singapore Exchange Ltd
5.0
OCBC Bank Ltd
Genting Singapore PLC
4.8
ComfortDelGro Corp Ltd
Sembcorp Marine Ltd
Keppel Corp Ltd
Golden Agri-Resources Ltd
Sembcorp Industries Ltd
SIA Engineering Co Ltd

-18.9
-12.9
-11.8
-8.8
-7.9

Sembcorp Marine Ltd


Keppel Corp Ltd
Olam International Ltd
Sembcorp Industries Ltd
Noble Group Ltd

8.7
6.9
6.5
4.9
3.2
-25.6
-24.1
-21.8
-19.6
-16.4

Source: Bloomberg. Pricing as of 08 December 2014.

See page 10 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.
www.jpmorganmarkets.com

Asia Pacific Equity Research


09 December 2014

Vietnam Vista
Bi-weekly (24 Nov - 08 Dec 2014): Stock market hits
six-month low, dragged by oil & gas sector
Key market drivers: VN index was sent to a six-month low. The fall in
equity in the past two weeks was primarily dragged by the sharp decline
of oil & gas stocks (e.g., PVD, GAS and PVS) and continued FII selling.
Utilities and Energies continued to be among the worst-performing
sectors by the impact of a sharp drop in crude oil. Brent crude oil
reached a four-year low post OPECs decision to not cut production.
Local developments were mixed. The last week of November ended
with concerns over parliamentary proceedings and uncertainties over
SBV's circular 36. The circular will take effect from February 1, 2015.
While this is intentionally made to promote bank restructuring and
ensure sustained equity markets, short-term shocks are inevitable.
Key economic events: We look for a steadily improving macro
backdrop in 2015. We expect GDP growth of around 5% next year,
similar to what we estimate for 2014, which is low by historical
standards. However, alongside slower growth, macroeconomic stability
has persisted, translating into more solid external balances, and lower
inflation. It also has allowed SBV to maintain lower policy rates,
implying a lower debt-service burden for borrowers, which, in turn, has
supported a further recovery in banking sector activity. Indeed, after the
SBVs recent decision to lower interest rates for dong and foreigncurrency deposits, we think any further easing measures will be modest
in 2015. This should keep the currency well supported, and we look for a
period of stability in the VND next year.

Head of ASEAN Strategy &


Indonesian Research
Aditya Srinath, CFA

AC

(62-21) 5291-8573
aditya.s.srinath@jpmorgan.com
Bloomberg JPMA SRINATH <GO>
PT J.P. Morgan Securities Indonesia

Benjamin Shatil
(65) 6882-2311
benjamin.shatil@jpmorgan.com
JPMorgan Chase Bank, N.A., Singapore
Branch

Ho Chi Minh City Stock Exchange:


VNINDEX vs. trading volume
Index
Volume (mil. sh) (R)
VN Index (L)

800

200

600

150

400

100

200

50

09

10

11

12

13

14

Source: Bloomberg.

Hanoi Stock Trading Center:


VHINDEX vs. trading volume
Index

We highlight Vingroup this week. VIC hosted its Annual Investor Trip,
touring its key projects in HCMC, Phu Quoc, Hanoi and Nha Trang last
weekend. During the trip, they conducted a two-hour meeting for both
sell- and buy-side analysts. There were a lot of questions about
Vinhomes Central Park and Phu Quoc project, and managements future
capex plans. Included inside are key takeaways from the meeting.

Volume (mil. sh) (R)


VH Index (L)

300
200

Vietnam: Markets at a glancePercentage change over the past two weeks


Index
Daily T/O (US$MM)
Market cap (US$B)
Number of stocks
2014 Market P/E
Foreign Net Buy/(Sell), (US$MM)
Foreign TO as % of Market
Exchange rate (VND/US$)
O/N interbank (%)

HSX
571.7 (-1.9%)
99.3 (-16.2%)
48.9
305
12.6
-21.5
10.8

HNX
87.2 (-1.0%)
40.2 (-22.8%)
6.8
363
14.5
+1.2
2.9
21,340
3.7

600
400

100

200

09

NO PART OF THIS RESEARCH MAY BE REPRODUCED OR DISTRIBUTED INTO


VIETNAM BY ANY MEANS WHATSOEVER. FAILURE TO COMPLY WITH THIS
RESTRICTION MAY CONSTITUTE A VIOLATION OF LAW.

800

10

11

12

13

14

Source: Bloomberg.

VND rates
%
Government bond
1Year
4.6
2Year
4.7
3Year
5.1
5Year
5.9
10Year
7.1
15Year
7.6

VND deposit
O/N
1Week
1Month
3Month
6Month
12Month

3.7
3.8
3.8
4.1
4.6
5.3

Source: Bloomberg.

Source: Bloomberg.

See page 18 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.
www.jpmorganmarkets.com

Asia Pacific Equity Research

08 December 2014

CCL index set new all-time high again


Views on the Estate: HK/China property monitor
Hong Kong / China Property team:
Cusson Leung (+852 2800 8526) / Amy Luk (+852 2800 8524) / Ryan Li (+852 2800 8529)

CCL index set new all-time high again; secondary weekend volume
stayed above 20: The latest reading of CCL Index hit a new all-time high
again at 130.46, up 0.23% W/W. Centaline believes the consecutive
increase for the past two weeks confirmed that the secondary market has
walked out of the impact of the pro-democracy protests. The price gain
was mainly driven by large-sized units (+1.7% W/W) whereas HK
Island also showed price growth of 0.85% W/W. On the contrary, small
and medium-sized units and New Territories showed softening. Centaline
expects CCL to rise to 136 by Chinese New Year, up by another 4%
from current level.
On the volume side, Centaline 10 estate weekend volume index stayed
flat W/W at 21 transactions. Mass-end units continued to dominate the
market. (Source: HKET)
JPM view: Even though secondary home prices continue to chase higher,
we expect them to soften going into next year as slowing retail sales
start impacting the economy and employment. We maintain our forecast
of a 5-10% decline in secondary home price.
MOHURD is planning to adjust HPF measure: It was reported by
Guandian that MOHURD is planning to adjust the existing HPF
Management Ordinance to expand the deposit scope, ease the
withdrawal condition, and facilitate the management mechanism.
Market participants said the HPF management center should improve the
coordination level from city-base to provincial-base in order to utilize
HPF management efficiency. However, market participants also think
this could be a burden to mid-low end workers due to the expansion of
the deposit scope as they cant afford to buy housing. Guangzhou HPF
Management Center has lowered 25bps for both HPF deposit and lending
rate from November 22, 2014. The adjusted lending rate for <5 years and
>5 years will be at 3.75% (from 4%) and 4.25% (from 4.5%)
respectively. The deposit rate will be lowered to 2.35% (from 2.6%).
(Source: Guandian)
JPM view: In line with our expectation, the new adjustment on HPF
measures or the easing on HPF downpayments should be positive for
market sentiment and be another leg to drive volume up.

Daily performance of HK property


Link REIT
Sino Land
SHKP
Hysan
HK Land
Property Developers
Cheung Kong
Hang Seng Property
Kerry Properties
Hang Seng Index
Henderson
Fortune REIT
Property Investors
Wharf
K Wah
NWD
Swire Pacific
-0.1%
Great Eagle
-0.2%
Kowloon Dev
-0.2%
Hang Lung Properties
-0.2%
Hang Lung Group
-0.3%
Champion REIT
-0.3%
Swire Properties
-0.4%
Hopewell Holdings -1.1%
Wheelock & Co -1.4%
-2%

-1%

2.9%
2.2%
2.0%
1.6%
1.5%
1.4%
1.4%
0.8%
0.7%
0.7%
0.6%
0.5%
0.4%
0.4%
0.2%
0.1%

0%

1%

2%

3%

4%

Daily performance of China property


Kaisa
Shui On
HSCEI
SUNAC
Longfor
HSI
Vanke
Greentown
Beijing Capital Land
Yanlord
SOHO China
Yuexiu REIT
Evergrande
R&F
Shimao
Hopson
Hui Xian REIT
China SCE
China developers
CR Land
COLI
Sino Ocean Land
Franshion
Agile
NWCL
Country Garden
COGO
C C Land
KWG Property
Poly Prop

1.7%
1.1%
1.0%
0.9%
0.8%
0.7%
0.7%
0.1%
0.0%
0.0%
0.0%
0.0%
-0.3%
-0.5%
-0.5%
-0.5%
-0.6%
-0.7%
-0.7%
-0.7%
-1.0%
-1.7%
-1.8%
-1.8%
-1.9%
-1.9%
-2.1%
-2.6%
-2.7%
-2.7%
-3% -3% -2% -2% -1% -1% 0% 1% 1% 2% 2%

Source: Bloomberg.

HK/China Property Top Picks


Stock
HK
Kerry
Wheelock
HKL
China
Vanke
Shimao
R&F

Rating

PT
(HK$)

Price
(HK$)

OW
OW
OW

33.00
48.00
7.90

27.85
38.40
6.80

OW
OW
OW

17.50
20.50
11.50

17.02
18.80
9.56

Source: Bloomberg, J.P. Morgan estimates.

Asia Pacific Equity Research


08 December 2014

China Metals & Mining


November Trade Copper imports and steel exports
climb, iron ore imports fall
Chinas preliminary commodities trade data were mixed in November,
following a weak October. November imports of iron ore eased while base
metals and coal imports climbed higher. Steel exports continued the uptrend,
hitting a new record high for the third consecutive month. Overall, the picture
for commodities was relatively better than the broader trade numbers which
revealed a wide trade surplus driven by weak exports and a large fall in
imports. With the domestic economy slowing, further easing looks likely and
given undemanding valuations, we recommend selective exposures Zijin
Mining and Yanzhou Coal are our preferred names.
Copper imports edge higher, aluminum product exports rebound. Total
copper (and product) imports in November improved to 420kt (+6% m/m,
-4% y/y), likely due to more attractive arbitrage between the SHFE and LME
markets (+8% m/m) and we suspect SRB stockpiling. For 11M14, copper
product imports totaled 4.4Mt (+7% y/y). Meanwhile, copper concentrate
imports rebounded strongly to 1,150kt (+20% m/m, +25% y/y). We estimate
bonded and SHFE warehouses together now hold 19.8 days of copper (Oct-14
of 20 days), below trend levels of 26 days. On aluminum, exports of
aluminum products climbed to 0.39Mt, +3% m/m nearing its three-year high
in September. No scrap data for copper and aluminum were released.
Bulks Iron ore imports fall again. November iron ore imports fell to
67.4Mt (-15% m/m, -13% y/y). For 11M14, iron ore imports totaled 846Mt,
+13% y/y. Elsewhere, November coal imports (including lignite) edged
higher to 21.0Mt (+4% m/m, -26 y/y) with 11M14 imports totaling 264Mt
(-9% y/y). Given recent import measures (6% import tax, an effective import
quota on IPPs), Chinese coal imports are unlikely to strengthen near term.

Steel November exports hit a new record high, again. After setting its
second record high in October, net finished steel exports climbed even
further in November to set another record high of 8.59Mt (+15% m/m,
+129% y/y). Finished steel exports edged higher to a new record high of
9.7Mt (+14% m/m, +94% y/y) or 118mtpa, while imports climbed to 1.1Mt
(+4% m/m, -10 y/y). However, with China's latest Steel PMI revealing a
contraction print (<50) for export orders, first in four months, steel exports
will fall this month (December).

Asia Metals and Mining


Daniel Kang

AC

(852) 2800 8570


daniel.kang@jpmorgan.com
Bloomberg JPMA KANG <GO>

Waiyin Karen Li, CFA


(852) 2800-8561
waiyin.karen.li@jpmorgan.com
J.P. Morgan Securities (Asia Pacific) Limited

Figure 1: China iron ore imports fall


90
70
50
30
Nov-10

Nov-11

Nov-12

Nov-13

Nov-14

Iron ore imports

Source: China Customs, J.P. Morgan

Figure 2: China steel imports, exports


and net trade trend(Mt)
2.0
0.0
-2.0
-4.0
-6.0
-8.0
-10.0
Nov-10

Nov-11
Imports

Nov-12
Export

Nov-13

Nov-14

Net trade

Source: China Customs, J.P. Morgan

Risk reward remains attractive for selective sector exposures. While


improved copper imports were encouraging, perhaps due to SRB
stockpiling, we believe falling iron ore imports and rising steel exports
reveal an overall sluggish domestic economy. However, with Beijing
policies now signaling an easing bias with targeted pro-growth policies
(New Silk Road infrastructure and accelerated domestic infrastructure
approvals) and looser monetary policy, we see attractive risk-reward in
selective sector names our preferred sector exposures are Zijin Mining
(2899 HK) and Yanzhou Coal (1171 HK).
See page 7 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.
www.jpmorganmarkets.com

Asia Pacific Equity Research


08 December 2014

China Property Weekly


Property sales for the week ending Dec 7, 2014
Sales declined due to slow season at year-end: Average daily sales volume
for the past week in the eight cities we track was 2,852 units, down 24% W/W,
up 1% Y/Y and 22% higher than YTD average. It was mainly driven by the
sales decline in Beijing, Shanghai, and Tianjin, down 46%, 27%, and 27%
respectively. The sales volumes in these cities have rebounded significantly
since September and reversed gradually to YTD average. We believe
developers will continue with their launch plan toward end-2014, but at a
slower pace. Sequentially, December is a slower month for sales and the
weakness may last till Chinese New Year in February. We think the coming two
months will also be weak.
MOHURD planning to adjust HPF measure: According to Guandian,
MOHURD is planning to adjust the existing HPF Management Ordinance to
expand the deposit scope, ease the withdrawal conditions, and facilitate the
management mechanism and in order to utilize HPF management efficiency.
Guangzhou HPF Management Center has lowered 25bps for both HPF deposit
and lending rate from November 22, 2014. The adjusted lending rate for <5
years and >5 years will be at 3.75% (from 4%) and 4.25% (from 4.5%)
respectively. The deposit rate will be lowered to 2.35% (from 2.6%). The new
adjustment on HPF measures or the easing on HPF downpayments should be
positive for market sentiment and be another leg to drive volume up in our view.
Immovable property unified registration might be announced soon: It was
reported by Guandian that The State Council has signed the temporary
immovable property unified registration ordinance and it could be announced
soon this December and implemented on March 1, 2015. Compared to the
previous draft, some terms have been revised, including property registration
classification and other stipulations. We think the set up of the Real/Immovable
Property Registration System is the first step of the implementation of a
nationwide RET. With the set up of the legislation system in progress, we
believe there will not be any expansion of the pilot programme of RET before
full implementation, otherwise it may cause confusion in the market.
New deed tax subsidy measure in Guilin Guangxi: Guilin Government
announced on Dec 2, 2014, that it has approved a new deed tax measure to
subsidize 100% of deed tax for buyers when they purchase a commodity
housing in the six districts of Guilin during December 2014, and subsidize 50%
of the deed tax amount for buyers when they purchase during January and
February 2015. Buyers may apply for the subsidy at the respective district
housing bureaus. After HPR relaxation and mortgage/HPF loosening, local
governments have also released the preferential tax measures to stimulate the
property market. We think this deed tax subsidy by the local government might
be applied to other cities, especially in the lower tier-2 cities and tier-3 cities
with high inventory levels.

China Property
Ryan Li, CFA

AC

(852) 2800-8529
ryan.lh.li@jpmorgan.com
Bloomberg JPMA RLI <GO>

Wendy Chia
(852) 2800-8513
wendy.cw.chia@jpmorgan.com
J.P. Morgan Securities (Asia Pacific) Limited

China developers share price index


Jan 2009=100
350
300
250
200
150
100
50
0
Jan-04

Mar-06

May-08

Jul-10

Sep-12

Dec-14

Source: Bloomberg, J.P. Morgan.

Weekly share price performance


Vanke
HSCEI
COGO
Greentown
Evergrande
CR Land
SUNAC
CIFI Property
Sino Ocean Land
Shimao
Franshion
Poly Prop
Yuexiu Property
HSI
Beijing Capital Land
SOHO China
COLI
KWG Property
R&F
China developer price index
Longfor
Hopson
Hui Xian REIT
Country Garden
Yanlord
Shui On
Yuexiu REIT
Agile
China SCE
C C Land
COFCO Land
China South City
NWCL
Kaisa

-14%
-20%

-5%
-5%
-6%
-10%

10%
9%
8%
6%
6%
5%
5%
4%
4%
4%
4%
3%
3%
3%
3%
3%
2%
2%
2%
1%
1%
0%

0%
0%
-1%
-1%
-1%
-1%
-1%

0%

10%

16%

20%

Dec 8, 2014 vs Dec 1, 2014 close


Source: Bloomberg, J.P. Morgan.

Industry report
China Property : Kaisa share sales and
blockage of sales in Shenzhen

Table 1: Major new launches


Project name City
Nanjing
Beijing

District
Gulou
Changping

ASP (Rmb psm) Developer(s) Date of launch Details


17,000
Shimao
7-Dec-14 Launched 672 units with size from 100sqm-140sqm. 510 units sold
32,000
Beijing Capital
6-Dec-14 Launched 251 units with size 87sqm, 95sqm and 127sqm. 90% sold

Source: Soufun.

See page 9 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.
www.jpmorganmarkets.com

Asia Pacific Equity Research


08 December 2014

Container Shipping
Spot freight rates continue to fall on long-haul routes;
aggressive rate hikes planned from mid-Dec

Congestion surcharges on Asia-US WC routes postponed to early next year:


Major liners had planned to implement congestion charges of $1,000/FEU on
Asia-US WC routes, which has been postponed to early next year. The US
Federal Maritime Commission will provide an opportunity to pursue greater
transparency as to the timing and the need for future surcharges.
Recent news: 1) OOIL plans to raise Asia-N Europe/Med/Black Sea rates by
$850/TEU from Dec 15. 2) Maersk plans to raise Far East-Med rates by
$825/TEU from Dec 15. 3) MOL plans to raise Transatlantic rates by $300/TEU
from Jan 1. 4) China Cosco plans to implement port congestion surcharge of
$100/FEU on Europe/Med-New York/New Jersey port from Jan 1. 5) CSAV
plans to raise Asia-Latin America rates by $750/TEU from Dec 15. 6) CMA
CGM plans to raise Asia-Middle East rates by $100/TEU and Asia-Red Sea
rates by $200/TEU from Jan 1. 7) Hapag Lloyd and CSAV completed their
merger and will become the fourth largest carrier globally with a total combined
fleet of 200 ships and a capacity of 1MM TEUs. 8) The G6 Alliance will skip
eastbound calls at the Port of Los Angeles on one service for four straight weeks
effective Jan 1. 9) The 2M alliance revealed their final East-West network
which will include 23 strings - six on Asia-Europe routes, five on Asia-Med, six
on Transpacific, four on Europe-N America and two on Med-N America routes.
10) CKYHE alliance received FMC approval to integrate Evergreen on
Transpacific and Transatlantic routes. 11) Contex charter rates were steady
w/w, m/m and rose 2% y/y. (source: Bloomberg, Alphaliner, JOC).

Corrine Png

AC

(65) 6882-1514
corrine.ht.png@jpmorgan.com
Bloomberg JPMA PNG <GO>
J.P. Morgan Securities Singapore Private
Limited

Figure 1: SCFI Composite Index


Y/Y change (%)

1,700

Composite Index

1,400

800

Oct-09
Dec-09
Feb-10
Apr-10
Jun-10
Aug-10
Oct-10
Dec-10
Feb-11
Apr-11
Jun-11
Aug-11
Oct-11
Dec-11
Feb-12
Apr-12
Jun-12
Aug-12
Oct-12
Dec-12
Feb-13
Apr-13
Jun-13
Aug-13
Oct-13
Dec-13
Feb-14
Apr-14
Jun-14
Aug-14
Oct-14

1,100

50%
40%
30%
20%
10%
0%
-10%
-20%
-30%
-40%

Source: Shanghai Shipping Exchange.

Table 1: SCFI Summary


SCFI Index
Europe
Med
US WC
US EC
SE Asia
Australia

Route
919
719
915
1,825
4,020
234
685

W/W
-3.2%
-2.7%
-3.9%
-4.2%
-1.4%
0.4%
-8.3%

Y/Y
-5.3%
-27.2%
-15.0%
6.3%
36.1%
5.9%
-19.2%

Source: Shanghai Shipping Exchange.


(Week ending Dec 5, 2014).

Figure 2: China-Europe Spot Freight Rates


2,400
1,900
1,400
900
400

Jun-12
Aug-12
Oct-12
Dec-12
Feb-13
Ap r-13
Jun-13
Aug-13
Oct-13
Dec-13
Feb-14
Ap r-14
Jun-14
Aug-14
Oct-14
Dec-14

Spot freight rates fell again w/w: The Shanghai Export Container Freight
Index (SCFI) fell 3% w/w for the week ending Dec 5 (fifth consecutive w/w
decline). Spot rates fell 3% w/w on China-Europe routes to US$719/TEU
(implying only 2-3% success versus planned rate hike of $775-$900/TEU). Spot
rates also fell 4% w/w on China-Med routes. Spot rates were also 4%/1%
lower w/w on China-US West Coast and US East Coast routes at $1,825/FEU
and $4,020/FEU (implying no success on China-US WC routes and only 13%
success on China-US EC routes vs their planned rate hike of $600/FEU). IntraAsia spot rates were mostly stable. Spot rates were steady w/w on ChinaTaiwan/HK/Korea/SE Asia/E Japan routes but fell 1% w/w on China-W Japan
routes. For longer trades, spot rates fell 1%/2%/6%/8%/17% w/w on ChinaE/W Africa/S Africa/Persian Gulf & Red Sea/Aus & NZ/S America routes.
Bunker fuel prices fell 6% w/w.
Spot rates were also 5% lower y/y: China-Europe/Med rates fell 27%/15%
while China-US WC and US EC rates rose 6%/36%. In Intra-Asia, rates fell
2%/4%/25%/40%/57% on China-Taiwan/Korea/HK/E Japan/W Japan routes but
rose 6% y/y on China-SE Asia routes. For longer trades, rates fell 8%/19%/36%
y/y on China-E/W Africa/Aus & NZ/S America routes but rose 13%/42% on
China-S Africa/Persian Gulf & Red Sea routes. Bunker fuel prices fell 7% m/m,
31% y/y.

Shipping

200%
150%
100%
50%
0%
-50%
-100%

Y/Y change (%)


Shanghai-Europe avg freight rate (US$/TEU)

Source: Shanghai Shipping Exchange.

Fig 3: China-US West Coast Spot Freight Rates


2,900
2,700
2,500
2,300
2,100
1,900
1,700
1,500

Jun-12
Aug-12
Oct-12
Dec-12
Feb-13
Apr-13
Jun-13
Aug-13
Oct-13
Dec-13
Feb-14
Apr-14
Jun-14
Aug-14
Oct-14
Dec-14

Asian liners with the largest capacity exposure to FE-Europe trade are Hanjin
(c.36%), K-Line (c.34%) and HMM (c.34%). Asian liners with the largest
capacity exposure to FE-US trade are NOL (c.42%), K-Line (c.41%), Hanjin
(c.35%). Top OW: OOIL, K-Line. Top UW: CSCL, Hanjin.

100%
80%
60%
40%
20%
0%
-20%
-40%

Y/Y change (%)


Shanghai-US WC avg freight rate (US$/FEU)

Source: Shanghai Shipping Exchange.

See page 8 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.
www.jpmorganmarkets.com

Asia Pacific Equity Research


08 December 2014

Eye on China Consumers - MNC


View Series 50
YOOX Black Friday China sales increase fourfold;
Guess China comps continue to be negative in 3Q
Guess China comps continue to be negative in 3Q: In its 3Q15 (Qtr
ended Sept) results, Guess Inc (Not Covered) reported that Asia sales in
3Q declined 2% on a currency adjusted basis (-5% on a constant
currency basis) driven by negative comps in Greater China mainly
driven by overall macroeconomic environment.
YOOX Black Friday China sales increased fourfold: As per
company announcement, YOOX (covered by JPM analyst Chiara
Battistini) Asia sales on Black Friday were fuelled by China, where
sales increased by nearly fourfold and Hong Kong more than doubling
last years purchases.
Wal-Mart China restructuring business amidst sluggish sales:
According to a WSJ article, Wal-mart plans to cut 250 employees from
its China division, as the retailer moves to restructure its business,
contain costs and improve sluggish sales in the country. The company
plans to open nine new stores and one new distribution center in China
by 2014-end and also plans to invest Rmb600 million (US$97.5 million)
to build a shopping mall, the first of its kind for Wal-Mart anywhere, that
will open in 2016 in the southern city of Zhuhai.
Starbucks plans to double store count in China and focus on
capturing RTD market: In its recent analyst meeting, Starbucks
(covered by JPM analyst John Ivankoe) mentioned it more than tripled
its store counts in the last 3 years in China, and plans to double its store
count in China to over 3,000 stores by 2019. China store economics
continue to remain strong (China has among the highest returns from
new stores globally and it has delivered ~5% comp for 22 consecutive
quarters) and the company will continue to invest in partner development
(it has c25k partners across 84 cities, serving more than 3 million
customers a week in China). Company continues to rank high on brand
health tracking in China (brand being visited more often both by new
and returning customers) which has given it the confidence to increase its
store footprint. The company plans to capture the RTD market in China
and will continue to build flagships in China with a focus on innovation
and diversifying its product portfolio. See next page for details.

Consumer
Ebru Sener Kurumlu

AC

(852) 2800-8521
ebru.sener@jpmorgan.com
Bloomberg JPMA KURUMLU <GO>

Shen Li, CFA


(852) 2800 8523
shen.w.li@jpmorgan.com

Henry Tan
(852) 2800-8559
henry.wd.tan@jpmorgan.com
J.P. Morgan Securities (Asia Pacific) Limited

Key consumer reports in the past


week
Prada S.P.A: Weak 3Q results but
some improvement in 4Q sales dated 7
Dec-14
Anta Sports Products Ltd.: Issues
further clarification announcement
dated 4 Dec-14
China Consumer: Initiating coverage on
sector A shares dated 3 Dec-14
Eye on China Consumers - MNC View
Series 49: Carrefour to open its first
convenient store in China; McDonalds
Warcraft marketing campaign helped
quadruple sales dated 2 Dec-14

See page 4 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.
www.jpmorganmarkets.com

Asia Pacific Equity Research


08 December 2014

Food for Thought


A closer look at Raw Material/Crude trends and impact
on staples
Moderating raw material price trends. Prices of key input commodities
(crude, PFAD, copra, titanium dioxide) have declined by 5-30% over past three
months. We believe there is a twin impact on earnings growth for FMCG
companies: a) Deflationary trends pose upside risk to gross margin expansion,
b) Lower food/fuel inflation could lead to improvement in spends on consumer
products and uptrading in certain product categories, which would be reflected
in better vol/mix growth.
Impact on earnings. We try to assess the earnings sensitivity of consumer
companies to decline in key commodities like PFAD, crude/edible oil
derivatives, copra, sugar, wheat and milk. Assuming there is no change in
volumes and product realizations, a 1% decline in raw materials mentioned
above could impact companies earnings by ~0.2-1.3% (Refer Table 1 for
details). Most companies engage in some kind of hedging practices, which will
likely influence the impact and timing to some extent. Companies more sensitive
to decline in crude prices are Asian Paints, HUL, GCPL and Dabur. Companies
more sensitive to decline in PFAD/copra prices are HUL, GCPL, Marico and
Nestle India.
Gross margin expansion ahead supported by moderate RM inflation outlook.
GM expansion potential is highest in case of soaps (palm oil led) and detergents
(LAB/crude led) categories. Personal care categories too benefit as packaging
costs are largely linked to crude derivatives (HDPE). Our discussions with
industry players indicate that quantum of gains will be determined by
sustainability of RM/crude levels, extent of pass through for crude derivatives
(prices are more a function of demand /supply dynamics and not necessarily
linked to crude directly) and incremental pricing decisions. Also gains will
likely be realized with a lag (from Q4FY15 we estimate).

Consumer, Retail, Media


Latika Chopra, CFA

AC

(91-22) 6157-3584
latika.chopra@jpmorgan.com
Bloomberg JPMA CHOPRA <GO>
J.P. Morgan India Private Limited

Ebru Sener Kurumlu


(852) 2800-8521
ebru.sener@jpmorgan.com
J.P. Morgan Securities (Asia Pacific) Limited

Figure 1: Price change for key


commodities
Commodity
Crude Oil US$/bbl
PFAD US$/MT
Copra
Wheat
Sugar
LAB
Tea
Coffee Robusta
Coffee Arabica
Titanium Dioxide
Source: Bloomberg

1 mnth
-17%
-2%
-14%
0%
-4%
-2%
2%
0%
2%
-3%

3 mnth
-31%
-9%
-22%
2%
-9%
-8%
2%
-4%
2%
-5%

Much of the gross margin gains will likely be utilised for higher brand
investments and promotions. In an environment where volume growth has
been difficult to come by, we would expect companies to spend more on
marketing and promotions. Most HPC players have seen moderate growth in
A&P spends over 1HFY15 and we would expect this trend to reverse offsetting
some gross margin gains. A lot will also depend on the pricing power of the
companies. Categories like soaps & laundry would likely witness more of the
RM benefits being passed on to consumers; however, segments like skin care,
paints and some packaged foods could hold on to pricing better. We note that
the soaps category is far more consolidated now amongst organized brands.
Detergents segment (a more fragmented category) has the highest risk of price
competition, though P&G (with its focus on enhancing profitability) could be
more restrained unlike 2009.
Lower freight costs. Falling crude/fuel prices would imply lower freight
charges aiding margin growth further. For most consumer companies freight
costs account for 3-5% of sales and there could be marginal benefits as a result.

See page 7 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.
www.jpmorganmarkets.com

Asia Pacific Equity Research

08 December 2014

India Materials
Takeaways from New Delhi - Coal block auction rules are evolving; Aggressive road
targets but interesting bottlenecks
We recently met with NHAI (National Highway Authority of India), and the Coal Secretary. The feedback was
interesting and highlights the massive task ahead of the Government in order to get things moving.
Coal Secretary
Auction rules continue to evolve: While the exact rules are yet to be firmed, we do sense that the rules of
auction are continuously evolving and the focus of the government seems to be on trying to make sure that
power tariffs do not see a big increase. The thinking is to have 2 buckets of coal blocks, one for the regulated
power companies, where there would be a reverse auction with the lower coal prices (v/s current Coal India
prices) being passed on to power tariffs; and the other bucket would be on a competitive basis with possibly
higher reserve prices.
Expectations of surge in coal production from initial 74 blocks: The 42 producing coal blocks that are
currently producing ~39MT coal have the approvals to take production up to 90MT, which implies ~50MT
increase coming next year (theoretically). The other 32 coal blocks have approvals to produce ~120MT, and
this can be ramped up in next 18 months, so theoretically, the 74 coal blocks can produce ~210MT v/s
~39MT currently over the next 2 years. Admittedly, the government has allowed multi-plant use of coal
blocks and also allowed a swap of coal blocks, and this does open up the potential of steep increase in coal
production from these coal blocks.
NHAI
Land acquisition costs very high: Interestingly, the NHAI highlighted that current land acquisition costs have
become very high. For a normal 2 lane road, 1.5 hectares of land needs to be acquired per kilometer, and the
current average cost/per hectare stands at Rs200mn, and this is 5 times higher than what it was a few years back.
For a 4 lane road, the land requirement is 3 hectares. While there is wide variation in the land acquisition costs
(North India sharply higher than Eastern India). For a 2 lane highway, total land cost/per km is Rs300mn and for
4 lane highway it is now Rs600mn.
Cement tenders - Interesting feedback: As per NHAI, some companies have shown interest, and while no
tender has been called so far, preliminary response from the cement companies is positive to supply cement even
at low prices.

Asia Pacific Equity Research

08 December 2014

India Power Sector


Takeaways from meeting with Ministry of Coal and IPPs in the run up to coal block
auctions
We met the Coal Secretary, Ministry of Coal (MoC) and IPPs (JSPL, Reliance Power, Tata Power, NTPC &
JSW Energy) recently. Our impression was that the Ministry is committed to concluding award of 92 blocks
ahead of the Mar-15 deadline. The objective of the ministry is to rein in electricity tariffs and ensure that the
blocks produce coal to their (high) potential output. IPPs are awaiting the final auction guidelines (before RFP
finalization target of 22nd Dec) to firm up their strategy, but broad expectation seems to be that bidding in the
power sector may not be aggressive and rational commercial considerations should drive competition.

Potential for significant medium-term increase in coal production from blocks to be awarded this
fiscal. Of the 92 captive blocks to be awarded in the first round before end of FY15, the 42 operating blocks
will be able to produce 90MTPA, as per MoC. The 32 coal blocks, which are at an advanced stage of
development, will take at most a year to start production and will have 120MTPA capacity. The remaining
18 blocks may take 18 months to get ready for mining and have a capacity of 130-140MTPA. Hence in all
the 92 blocks are capable of adding ~340MTPA of coal production over the next 2 years.

Sectoral breakup of 92 blocks. Of the 92 blocks, 57 will be allocated to power plants with PPAs while the
remaining 35 blocks are to be allocated to aluminum, steel, cement sectors. In our assessment, merchant
power plants would also be assigned to the second category. As per MoC the price of coal for merchant
power plants would be at a premium to power plant capacity tied up in PPAs. Of the 57 blocks, 34 will be
allocated (to state and central government utilities including NTPC), while the balance 23 will be auctioned.

Discouraging under/non utilization of mines. As per MoC, the bid criteria that the end use plant should be
at least 60-80% ready should ensure that the mines are utilized and not bid for by squatters. Even for the
blocks that will be allocated to NTPC and state power utilities, the end use plant would have to be present
else even those could be auctioned to the private sector. Also if two partners form a JV to bid for a block,
both would have to have end use plants. In addition, there will be performance guarantees in the bid
document ensuring that a minimum production level is achieved, e.g. the 42 producing blocks are expected
to produce 90MTPA vs. current production level of 40-50MTPA.

Auctions rules will be geared to prevent escalation in electricity prices: As per MoC the auction rules
will ensure that the cost of electricity does not see escalation. There will be a ceiling on the coal price that
will be allowed as a pass through in tariff (could be the Coal India notified price). If the bid is below the
ceiling price, the benefit will be passed on to the consumer and if higher the difference would have to be
borne by the IPP.

Who can bid? While imported coal based power plants can also bid for the coal blocks, the Ministry had
not yet decided on imported coal based UMPPs (i.e. TPWRs Mundra and RPWRs Krishnapatnam) since
the PPA was determined based on the already selected fuel source. Plants with current linkages from Coal
India would have to surrender the same if the coal quantity from the block is sufficient to meet their fuel
requirements. There will be no cap on the number of mines that a group or company can be allocated
provided the end use plants meet the eligibility criteria.

Ramping up CIL production a key priority: The Secretary cited two priorities of Ministry of Coal- the
successful completion of the coal auction process and improving productivity at CIL (covered by JPM
analyst Pinakin Parekh). The Ministrys target for Coal India is to ramp up production to 1BMT (from
460MMT currently) over the next 5 years.

Asia Pacific Equity Research

08 December 2014

India Property
Pick up in land sales shows confidence coming back in Mumbai / NCR

Land sales in the market have started to increase. Over the last two weeks, a number of high value deals have
been concluded in Mumbai and Delhi totaling above Rs 30B. These, we believe, are early signs of confidence
returning in the market given the improvement seen in overall macros. Developers are increasingly gaining
confidence on executing high value buyouts from peers, who in some cases have financial distress. What is also
interesting is that financing for providing such high value buyouts are readily available from various PE/ RE
funds, which again seem to be becoming active.

Implications for the sector: Property developers are generally asset rich (huge land banks) but cash poor.
As liquidity returns in land markets, balance sheet repair should start happening as existing land banks get
taken out by other developers thus infusing equity cash flows. Given land values in general are at multi-year
highs, it may well make sense to sell land to raise equity vs. any other mean.

Valuations show no discount and are generally inline with market rates: We note that valuations on
most of the land transactions are inline with market rates and there appears to be no discount to factor in 1.
Higher size / quantum of such a deal; and 2. Financial distress of the selling developers; or 3. Capability of
buying party to execute the transaction. Clearly clean titled property does seem to hold up in value.

Buying developers too arent cash rich but funding is available- We note that in some cases buying
developers are not companies that are sitting on excess cash. However, with confidence now returning into
the market, many are willing to now take opportunistic leveraged chances to execute large transactions.
Financing too it seems now is opening up with a number of RE funds willing to purchase such buyouts for
20-25% IRRs.
Key land transactions
Key Land Transactions
Buyer

Seller

Indiabulls
Sahara
Essel
Kanakia

Voltas
M3M
Marathon
Patel

Source: Newsreports (ET, Business Standard)

Deal Value (Rs B)


2.4
12.1
6.0
3.0

Clients should contact representatives and execute transactions through a J.P. Morgan subsidiary or affiliate in their home jurisdiction unless
governing law permits otherwise.

Asia Pacific Equity Research

08 December 2014

MVNO risks to the Japanese telco market


Japan Communications Inc. (9424 JP, Not Covered, please see our Company Visit Note here) introduced new
data package pricing on 8 December that represents a 65% pricing discount to current equivalent offerings from
DoCoMo, KDDI and Softbank and, critically, do not throttle download speeds after 7GB of usage (a common
term across incumbent plans; see Figure 1 below). JCIs new 3GB plan sits at a 75% discount on a per-GB basis
to the equivalent plan from DoCoMo.

MVNOs are a risk in Japan due to a differentiated business model from global peers. Our September
2014 initiation note on the Japanese telco sector (the full report in its 238 pages of glory can be found here)
included a section on the specific nature of MVNOs in Japan, as their structure is quite different from those
of global and Asian peers. MVNOs ability to buy capacity on a consolidated basis (effectively buying bulk
capacity that they can slice and dice into different package structures at will vs. just buying per-subscriber
capacity) is very different than in other markets, as is the methodology for setting MVNO interconnect
(called wholesale in many markets) pricing. MVNO interconnect in Japan is set by the MIC on a return on
asset basis specific to the particular operator. The current MVNO interconnect applied to DoCoMo is based
on its asset base, which is inflated due to its blanket geographic coverage strategy. Softbank and,
increasingly, KDDI employ a far more asset-efficient model based on limited geographic builds, effectively
in the belief that being #1-#2 where one does have coverage is more important than having coverage
everywhere. This asset-efficient model implies that a constant return on asset calculation would drive
significant lower MVNO interconnect pricing for KDDI and Softbank (on our numbers, DoCoMos current
1.25mn/10 meg MVNO wholesale implies the same return on assets as a 430K/10 meg charge for KDDI,
a 66% reduction vs. DCMs current pricing). We included notes on both JCI (here) and Internet Initiative
Japan (here) in our coverage initiation due to our view that the MIC will likely impose much lower MVNO
interconnect rates to KDDI and Softbank moving forward, which will trigger greater cost competitiveness
for the MVNOs, and higher market share for MVNOs than the Street currently forecasts.

Sticking with KDDI. KDDI has been our top pick in Japan since our September 2014 initiation (please see
our full KDDI report here). KDDI has outperformed since September in terms of share price (see Figure 3
below), but remains our top pick in the sector despite this outperformance. The firm continues to deliver
operationally (please see our full review of 2Q14 results here), and we suggest will continue to take market
share from DoCoMo, as we believe the latter does not have an iPhone problem, nor a bundling problem, but
a network quality problem (please see our original DoCoMo note here, and our updated Asia network
quality statistics report here). KDDI continues to show the strongest positive revisions (Figures 4-5 below),
yet still trades at a valuation discount to DoCoMo (Figure 6 below). We remain OW KDDI vs. UW
DoCoMo. We are warming up to NTT (N), per our 2Q14 review note referenced above, as our forecast
guidance cut (and the subsequent share price underperformance) have now occurred, but we remain N, as
earnings have not yet been cut enough to hit current J.P. Morgan forecasts (Street earnings for the current
year have been cut by 27% since July, but still sit 14% above J.P. Morgan numbers; see Figure 7 below).

Figure 1: Select data package pricing


Operator
KDDI
DCM
DCM
SB
JCI
JCI

Monthly fee ()
5,700
4,700
5,700
5,700
1,980
1,180

Source: J.P. Morgan estimates, Company data.

GB allowance
7
3
7
7
Unlimited
3

Speed post allowance


128kbps
128kbps
128kbps
128kbps
n.a.
n.a.

per GB
814
1,567
814
814
393

Asia Pacific Equity Research


08 December 2014

Shipyards & Oil Services


Sete Brasil misses yards monthly pay; BAB's CEO
resigns; Maersk targeted in PBR probe
Singapore/Malaysia Offshore & Marine News
SapuraKencana Petroleum Bhd has awarded eight contracts collectively
worth RM1.58 billion(~US$459 million). Three contracts are within the
FHUC division worth US$206mn (includes an EPCC of Baronia and Tukau
wellhead platforms offshore Sarawak, provision of brownfield works, PCC of
the Angsi compression module). Three contracts are within the OCSS division
worth US$151mn (includes provision of T&I for Tembikais CPP, provision of
buoyancy tanks and EPCIC of a wellhead platform and lower compression
platform in Myanmar). Two contracts are within the Drilling division worth
US$102mn (includes the provision of SKD Alliance and extension of West
Esperanza semi-tender assist drilling rigs). (SAKP, Dec 05)

Shipyards & Oil Services


Ajay Mirchandani

AC

(65) 6882-2419
ajay.mirchandani@jpmorgan.com
Bloomberg JPMA MIRCHANDANI <GO>
J.P. Morgan Securities Singapore Private
Limited

Bumi Armada has announced that its Chief Executive Officer and
Executive Director of the company, Hassan Basma, has resigned from his
position due to family reasons. He will relinquish his positions as CEO and
Executive Director of the company, with effect from January 1, 2015. Basma
requested an early release of his contract of employment due to family reasons.
Board has announced that Chan Chee Beng, a member of the Board since 2003,
has been re-designated as Executive Director and Acting CEO, with effect from
January 1, 2015. Hassan Assad Basma has sold the remainder of his stake in the
company on the open market. Based on a filing with Bursa Malaysia today,
Hassan sold one million Bumi Armada shares at RM1.02 and another block of
1.74 million shares at RM1.03 on Dec 4. (Offshore Energy, Dec 05)
Australian-Malaysian joint venture Ophir Production has still not awarded
the platform and floating storage and offloading vessel contracts for its
Ophir oilfield off Malaysia to preferred contractor SapuraKencana. The
delay is blamed on the current low oil price and Petronas reluctance to proceed
with projects. Delivery of the floater is scheduled for 10 months after contract
award and the FSO was originally scheduled to arrive on location in August
2015. (Upstream, Dec 05)
At least four local contractors are competing to supply a mobile production
unit for Petronas Carigalis D-18 oilfield off Malaysia. MISC, Bumi
Armada, Sapura-Kencana and one Malaysia-based newcomer have offered
jack-up and ship-shaped solutions. Meanwhile, the state-owned operator has
issued a market survey for a lightweight 2000-tonne platform to be engineered,
built and installed on the Greater D-18 oilfield. Fabricators, including SapuraKencana, Malaysia Marine & Heavy Engineering and TT Heavy
Engineering, have received the enquiry for the platform, which is targeted for
installation in September 2015. (Upstream, Dec 05)

See page 6 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.
www.jpmorganmarkets.com

Asia Pacific Equity Research

08 December 2014

Taiwan Contact Lens Sector


Weak sales continued in November; Drivers still in 2015
Both Ginko and St. Shine posted another lackluster yoy sales performance in November (+8%/-5%), but on the
positive side, both have shown improvement mom (+7%/4%). We maintain our view that their weak sales will
only show more meaningful improvement into 1H15, and still forecast better profit in 2015 vs 2014. We still
prefer Ginko/Formosa Optical.

Ginko (8406 TT, OW): +8% yoy/+7% mom. Ginko reported November sales of NT$479m, up 7.7% yoy
(vs +11% yoy in October) and 7% mom after a 15% mom decline in October. October-November sales
reached only 56% of our 4Q14 sales estimate. The weak number was more or less expected as the company
had already guided only 10-15% yoy sales growth in 4Q14 or even 1Q15. The share price has rebounded
23% in less than a month from the trough, so we expect some but very short-term pressure on the stock from
the sales numbers. We still focus on the growth after 1Q15 when the impact from China FDAs crackdown
comes to an end and the company showed improvement in its cash flow management in 4Q14 results to be
released next March.

St. Shine (1565 TT, N): -5% yoy/+4% mom. St. Shine reported November sales of NT$453m, down 5%
yoy (yoy decline for four consecutive months), but the number has recovered 4% mom to the highest level
since May. October-November sales hit 67% of our 4Q14 sales forecast. We also expect St. Shines sales
performance wont show meaningful improvement until late 1Q15 at the earliest, but we maintain a more
cautious view on St. Shine vs Ginko, given the continuous depreciation of JPY still poses risks to its export
ASP/margins into 2015.

Formosa Optical (5312 TT, OW): +4% yoy/ -11% mom. Formosa Opticals November sales hit
NT$188m, up 3.8% yoy though down 10.9% mom, due mainly to seasonality. October-November sales
reached 65% of our estimated 4Q14 sales. We still believe that the stock provides good valuation arbitrage
for exposure to Ginko, although its performance will have to rely on Ginkos share price, but at least it
should have more downside support, in our view.

Consumer, Cyclical and Property


Andre Chang, CFA AC
(886-2) 2725-9872
andre.ch.chang@jpmorgan.com
J.P. Morgan Securities (Taiwan) Limited

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

Leon Chik, CFA


(852) 2800-8590
leon.hk.chik@jpmorgan.com
J.P. Morgan Securities (Asia Pacific) Limited

www.jpmorganmarkets.com

Asia Pacific Equity Research


08 December 2014

The Lodestone
Iron ore, steel and scrap remains steady; Spot Japan
aluminum premiums fall ~5%
Iron ore prices hold at ~$71/t: Spot iron ore prices (and with it steel scrap,
HRC export prices) remained broadly steady at last week's levels. Importantly,
Chinese HRC export prices have remained steady over the last few weeks. As
per JPM China analyst Daniel Kang, Chinas steel PMI contracted to 43.3 in
November (46.0 in October), its lowest since Mar-14 and seventh consecutive
monthly print below 50. New orders less inventories, a key lead indicator, fell
further, indicating the sector may have entered a slow season. Iron ore port
inventories in China remain near ~100MT, levels it has been since Oct.
India - Steel price weakness continues as demand remains very weak:
Domestic flat and long product prices have been cut in India consistently since
October. Normally, post rains, from October steel prices increase in India, as
the busy construction season starts, but this year demand has been very weak,
and even with supply disruption from RINL, long product prices have seen a
fall. We estimate, flat product price cuts of ~Rs1500/t (~3-4%), while long
products have been slightly higher (~5%). While investors find this surprising,
given the decline in Chinese HRC export prices, the HRC price fall in local
markets has been lower given the supply issues; and more importantly,
construction demand has been very weak which has impacted long steel prices.
We would highlight that costs are falling and should fall further post the fuel
price cuts. From here, the key driver for Indian steel prices remains local
demand, and whether we see any recovery from current levels of ~0% growth.
India - Iron ore mines remain shut, but first mine renewal decision for the
private sector, as TATAs chromite mine renewal approved: Iron ore
production in Odisha and Jharkhand remains shut as mine renewals have not
taken place. However, we view the Odisha state government's formal decision to
renew TATA's chromite mine as very positive given it is effectively the first
mine renewal decision in the private sector in many years and does point to an
improving situation though the pace is very slow.
LME aluminum prices pull back ~$100/t from end Nov levels, Japanese
aluminum premiums fall ~5% in last 1 month: LME aluminum prices have
pulled back ~4% (~$100/t in the last 2 weeks), while other base metal prices
have been broadly flat. Aluminum stocks like HNDL have broadly tracked
LME, and in the recent ~4% fall, HNDLs stock has fallen ~9% in the same time
period. However, spot premiums in Japan, have fallen ~5% in the last one
month, while 1Q contract negotiations are on. US mid west premiums
continue to reach new highs. Over the last 1 year, both LME aluminum and
premiums have been strong, supporting aluminum equities. From here, the
direction of premiums would be as important as the LME prices.
Iron ore- cutting price forecast: JPMs Global iron ore team has cut price
forecasts for iron ore. The team highlights with the low cost producers
continuing to bring on more capacity (we estimate an additional 17% of supply
to come on between now and 2020), and demand growth moderating, we believe
the market will remain under pressure. As a result, we have lowered our price
forecasts to US$67/t in CY2015 (-24%), US$65/t in CY2016 (-23%) and
US$69/t in CY2017 (-16%). Further, while we assume the scrap ratio in China
grows to 25% by 2030, some market participants expect it could grow more
rapidly, which would offset iron ore demand requirement.

Metals & Mining


AC

Pinakin Parekh, CFA

(91-22) 6157-3588
pinakin.m.parekh@jpmorgan.com
Bloomberg JPMA PAREKH <GO>
J.P. Morgan India Private Limited

Dinesh S. Harchandani, CFA


(91-22) 6157-3583
dinesh.x.harchandani@jpmorgan.com
J.P. Morgan India Private Limited

Neha Manpuria
(91-22) 6157-3589
neha.x.manpuria@jpmorgan.com
J.P. Morgan India Private Limited

Daniel Kang
(852) 2800 8570
daniel.kang@jpmorgan.com
J.P. Morgan Securities (Asia Pacific) Limited

J.P. Morgan Metal Index


450%
400%
350%
300%
250%
200%
150%
100%
50%
0%
Jan-08

Jan-10

Jan-12

Jan-14

Source: Bloomberg. Prices as of December 08, 2014.

Summary of Metal Coverage


Rs/share
Tata Steel
Sesa Sterlite
NMDC
NALCO
JSW Steel
Hindalco
Coal India

Rating
OW
OW
N
N
OW
OW
UW

TP
630
320
170
62
1380
205
325

Price
463
239
140
57
1162
164
361

Source: Bloomberg. Prices as of December 08, 2014.

See page 20 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.
www.jpmorganmarkets.com

Sunil Garg
(852) 2800-8518
sunil.garg@jpmorgan.com

Asia Pacific Equity Research


09 December 2014

Analyst Certification: The research analyst(s) denoted by an AC on the cover of this report certifies (or, where multiple research analysts are primarily
responsible for this report, the research analyst denoted by an AC on the cover or within the document individually certifies, with respect to each security
or issuer that the research analyst covers in this research) that: (1) all of the views expressed in this report accurately reflect his or her personal views about
any and all of the subject securities or issuers; and (2) no part of any of the research analyst's compensation was, is, or will be directly or indirectly related to
the specific recommendations or views expressed by the research analyst(s) in this report. For all Korea-based research analysts listed on the front cover, they
also certify, as per KOFIA requirements, that their analysis was made in good faith and that the views reflect their own opinion, without undue influence or
intervention.
Research excerpts: This note includes excerpts from previously published research. For access to the full reports, including analyst certification and
important disclosures, investment thesis, valuation methodology, and risks to rating and price targets, please contact your salesperson or the covering
analysts team or visit www.jpmorganmarkets.com.

Important Disclosures

Market Maker/ Liquidity Provider: J.P. Morgan Securities plc and/or an affiliate is a market maker and/or liquidity provider in National Bank of
Greece, Tatneft, MTN Group Limited, Aspen, Naspers Ltd, Lukoil, Moscow Exchange, Sabanci Holding, Akbank.

Lead or Co-manager: J.P. Morgan acted as lead or co-manager in a public offering of equity and/or debt securities for OCBC Bank, Noble Group Ltd,
Olam International Limited, Sheng Siong Group, Wilmar International Limited, Neptune Orient Lines (NOL), Ascendas India Trust, DBS Bank, Ascott
Residence Trust, CapitaLand, Zhongsheng Group Holdings, Ginko International, Petronas Chemicals Group Berhad, Malaysia Airports Holdings Berhad,
MTN Group Limited, Shinhan Financial Group, Lukoil, Moscow Exchange, Akbank within the past 12 months.

Analyst Position: The following analysts (and/or their associates or household members) own a long position in the shares of Global Logistic Properties
Ltd: Adrian Mowat.

Beneficial Ownership (1% or more): J.P. Morgan beneficially owns 1% or more of a class of common equity securities of Noble Group Ltd, Crompton
Greaves Limited, National Bank of Greece, Samsung Electronics.
Client: J.P. Morgan currently has, or had within the past 12 months, the following company(ies) as clients: Singapore Airlines, SIA Engineering
Company, OCBC Bank, Singapore Exchange, United Overseas Bank (UOB), Keppel Corporation, ST Engineering, Jardine Matheson Holdings Ltd, Jardine
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Company Ltd., Sheng Siong Group, First Resources Limited, Wilmar International Limited, COSCO Corporation, Ezra Holdings Ltd, Sembcorp Marine,
Yangzijiang Shipbuilding Holdings Ltd., PACC Offshore Services Holdings Ltd, Neptune Orient Lines (NOL), Hongkong Land, Ascendas India Trust,
Singapore Telecom, StarHub, Genting Singapore, DBS Group Holdings, DBS Bank, Ascott Residence Trust, CapitaCommercial Trust, CapitaLand,
CapitaMall Trust, Global Logistic Properties Ltd, Keppel Land, Keppel REIT, Overseas Union Enterprise Ltd, Suntec REIT, CapitaRetail China Trust, Hotel
Shilla, Baoxin Auto Group Limited, Zhongsheng Group Holdings, China ZhengTong Auto Service Holding Limited, Crompton Greaves Limited, KDDI
Corp (9433), Nippon Telegraph & Telephone (9432), NTT Docomo (9437), Skyworth Digital Holdings, Taishin Financial Holdings, Ginko International,
Gamuda, Petronas Chemicals Group Berhad, Dialog Group Bhd, Malaysia Marine and Heavy Engineering Holdings Bhd, Astro Malaysia Holdings Bhd,
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Bank of Greece, Tatneft, Catcher Technology, Energy Development (EDC) Corporation, MTN Group Limited, Copel, Shinhan Financial Group, Samsung
Electronics, KB Financial Group, SK hynix, LG Display, Aspen, Naspers Ltd, Lukoil, Moscow Exchange, Sabanci Holding, Akbank, Tata Power, Orient
Overseas Int'l Ltd, Kawasaki Kisen (9107), China Shipping Container Lines - H, Hanjin Shipping Co Ltd, Infosys.
Client/Investment Banking: J.P. Morgan currently has, or had within the past 12 months, the following company(ies) as investment banking clients:
Singapore Airlines, OCBC Bank, United Overseas Bank (UOB), ST Engineering, Jardine Matheson Holdings Ltd, Jardine Cycle & Carriage Ltd, Jardine
Strategic Holdings Ltd, Noble Group Ltd, Olam International Limited, Sheng Siong Group, Wilmar International Limited, Neptune Orient Lines (NOL),
Hongkong Land, Ascendas India Trust, Singapore Telecom, DBS Group Holdings, DBS Bank, Ascott Residence Trust, CapitaLand, Global Logistic
Properties Ltd, Overseas Union Enterprise Ltd, Baoxin Auto Group Limited, Zhongsheng Group Holdings, KDDI Corp (9433), Nippon Telegraph &
Telephone (9432), NTT Docomo (9437), Ginko International, Petronas Chemicals Group Berhad, Malaysia Airports Holdings Berhad, MTN Group Limited,
Shinhan Financial Group, Samsung Electronics, KB Financial Group, Naspers Ltd, Lukoil, Moscow Exchange, Akbank.

Client/Non-Investment Banking, Securities-Related: J.P. Morgan currently has, or had within the past 12 months, the following company(ies) as
clients, and the services provided were non-investment-banking, securities-related: Singapore Airlines, SIA Engineering Company, OCBC Bank, Singapore
Exchange, United Overseas Bank (UOB), Keppel Corporation, ST Engineering, Jardine Matheson Holdings Ltd, Jardine Cycle & Carriage Ltd, Jardine
Strategic Holdings Ltd, Noble Group Ltd, Olam International Limited, First Resources Limited, Wilmar International Limited, COSCO Corporation,
Sembcorp Marine, Yangzijiang Shipbuilding Holdings Ltd., PACC Offshore Services Holdings Ltd, Neptune Orient Lines (NOL), Hongkong Land,
Ascendas India Trust, Singapore Telecom, DBS Group Holdings, DBS Bank, Ascott Residence Trust, Global Logistic Properties Ltd, Keppel Land, Keppel
REIT, KDDI Corp (9433), Nippon Telegraph & Telephone (9432), NTT Docomo (9437), Taishin Financial Holdings, Petronas Chemicals Group Berhad,
Dialog Group Bhd, Tenaga, AMMB Holdings, KASIKORNBANK, Quanta Computer Inc., National Bank of Greece, Shinhan Financial Group, Samsung
Electronics, KB Financial Group, LG Display, Naspers Ltd, Moscow Exchange, Sabanci Holding, Akbank, Orient Overseas Int'l Ltd, Kawasaki Kisen
(9107).

Client/Non-Securities-Related: J.P. Morgan currently has, or had within the past 12 months, the following company(ies) as clients, and the services
provided were non-securities-related: Singapore Airlines, OCBC Bank, United Overseas Bank (UOB), ST Engineering, Jardine Matheson Holdings Ltd,
Jardine Cycle & Carriage Ltd, Jardine Strategic Holdings Ltd, Noble Group Ltd, Olam International Limited, First Resources Limited, Wilmar International
Limited, COSCO Corporation, Neptune Orient Lines (NOL), Hongkong Land, Singapore Telecom, DBS Group Holdings, DBS Bank, China ZhengTong

Sunil Garg
(852) 2800-8518
sunil.garg@jpmorgan.com

Asia Pacific Equity Research


09 December 2014

Auto Service Holding Limited, KASIKORNBANK, Quanta Computer Inc., MTN Group Limited, Shinhan Financial Group, Samsung Electronics, Naspers
Ltd, Sabanci Holding, Akbank, Tata Power.

Investment Banking (past 12 months): J.P. Morgan received in the past 12 months compensation from investment banking Singapore Airlines, OCBC
Bank, United Overseas Bank (UOB), ST Engineering, Jardine Matheson Holdings Ltd, Jardine Cycle & Carriage Ltd, Jardine Strategic Holdings Ltd, Noble
Group Ltd, Olam International Limited, Sheng Siong Group, Wilmar International Limited, Neptune Orient Lines (NOL), Hongkong Land, Ascendas India
Trust, Singapore Telecom, DBS Group Holdings, DBS Bank, Ascott Residence Trust, CapitaLand, Global Logistic Properties Ltd, Overseas Union
Enterprise Ltd, Baoxin Auto Group Limited, Zhongsheng Group Holdings, KDDI Corp (9433), Nippon Telegraph & Telephone (9432), NTT Docomo
(9437), Ginko International, Petronas Chemicals Group Berhad, Malaysia Airports Holdings Berhad, MTN Group Limited, Shinhan Financial Group,
Samsung Electronics, KB Financial Group, Naspers Ltd, Lukoil, Moscow Exchange, Akbank.
Investment Banking (next 3 months): J.P. Morgan expects to receive, or intends to seek, compensation for investment banking services in the next three
months from Singapore Airlines, OCBC Bank, United Overseas Bank (UOB), ST Engineering, Jardine Matheson Holdings Ltd, Jardine Cycle & Carriage
Ltd, Jardine Strategic Holdings Ltd, Noble Group Ltd, Olam International Limited, Sheng Siong Group, Wilmar International Limited, COSCO Corporation,
Neptune Orient Lines (NOL), Hongkong Land, Ascendas India Trust, Singapore Telecom, DBS Group Holdings, DBS Bank, Ascott Residence Trust,
CapitaLand, Global Logistic Properties Ltd, Overseas Union Enterprise Ltd, Baoxin Auto Group Limited, Zhongsheng Group Holdings, KDDI Corp (9433),
Nippon Telegraph & Telephone (9432), NTT Docomo (9437), Ginko International, Petronas Chemicals Group Berhad, Malaysia Airports Holdings Berhad,
National Bank of Greece, MTN Group Limited, Shinhan Financial Group, Samsung Electronics, KB Financial Group, Naspers Ltd, Lukoil, Moscow
Exchange, Sabanci Holding, Akbank.
Non-Investment Banking Compensation: J.P. Morgan has received compensation in the past 12 months for products or services other than investment
banking from Singapore Airlines, SIA Engineering Company, OCBC Bank, Singapore Exchange, United Overseas Bank (UOB), Keppel Corporation, ST
Engineering, Jardine Matheson Holdings Ltd, Jardine Cycle & Carriage Ltd, Jardine Strategic Holdings Ltd, Noble Group Ltd, Olam International Limited,
First Resources Limited, Wilmar International Limited, COSCO Corporation, Sembcorp Marine, Yangzijiang Shipbuilding Holdings Ltd., PACC Offshore
Services Holdings Ltd, Neptune Orient Lines (NOL), Hongkong Land, Ascendas India Trust, Singapore Telecom, DBS Group Holdings, DBS Bank, Ascott
Residence Trust, Global Logistic Properties Ltd, Keppel Land, Keppel REIT, KDDI Corp (9433), Nippon Telegraph & Telephone (9432), NTT Docomo
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Broker: J.P. Morgan Securities plc acts as Corporate Broker to Jardine Matheson Holdings Ltd, Jardine Cycle & Carriage Ltd, Jardine Strategic Holdings
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Sunil Garg
(852) 2800-8518
sunil.garg@jpmorgan.com

Asia Pacific Equity Research


09 December 2014

Holdings Bhd or its affiliates, and receive fees, commissions or other compensation in such capacities. This research report and the information herein is not
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J.P. Morgan Equity Research Ratings Distribution, as of September 30, 2014

J.P. Morgan Global Equity Research Coverage


IB clients*
JPMS Equity Research Coverage
IB clients*

Overweight
(buy)
46%
57%
46%
76%

Neutral
(hold)
42%
49%
48%
67%

Underweight
(sell)
12%
34%
7%
51%

*Percentage of investment banking clients in each rating category.


For purposes only of FINRA/NYSE ratings distribution rules, our Overweight rating falls into a buy rating category; our Neutral rating falls into a hold rating category; and
our Underweight rating falls into a sell rating category. Please note that stocks with an NR designation are not included in the table above.

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Sunil Garg
(852) 2800-8518
sunil.garg@jpmorgan.com

Asia Pacific Equity Research


09 December 2014

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Sunil Garg
(852) 2800-8518
sunil.garg@jpmorgan.com

Asia Pacific Equity Research


09 December 2014

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"Other Disclosures" last revised November 29, 2014.

Copyright 2014 JPMorgan Chase & Co. All rights reserved. This report or any portion hereof may not be reprinted, sold or redistributed without
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