www.dbsvickers.com Refer to important disclosures at the end of this report ed: JS / sa: JC

BUY S$0.72 STI : 3,067.74 Price Target : 12-Month S$ 1.09 (Prev S$ 1.12) Reason for Report : Acquisition of another toll road and results Potential Catalyst: Earnings execution and delivery DBSV vs Consensus: We were the first broker to cover the stock. Analyst Paul YONG CFA +65 6398 7951 paulyong@dbsvickers.com

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C h in a M e r c h a n t H ld g s ( P a c i f i c ) ( L H S ) R e la t iv e S T I IN D E X ( R H S ) Forecasts and Valuation FY Dec (HK$ m) 2010A 2011A 2012F 2013F

Revenue 131 847 1,548 2,040 EBITDA 245 736 1,298 1,627 Pre-tax Profit 281 538 1,158 973 Net Profit 261 314 719 521 Net Pft (Pre Ex.) 220 314 450 521 EPS (S cts) 5.8 7.0 16.0 11.6 EPS Pre Ex. (S cts) 4.9 7.0 10.0 11.6 EPS Gth (%) 15 20 129 (28) EPS Gth Pre Ex (%) (49) 43 43 16 Diluted EPS (S cts) 4.2 6.0 8.5 9.9 Net DPS (S cts) 3.9 5.5 5.5 6.0 BV Per Share (S cts) 74.0 78.2 87.1 92.3 PE (X) 12.4 10.3 4.5 6.2 PE Pre Ex. (X) 14.7 10.3 7.2 6.2 P/Cash Flow (X) nm 8.4 8.0 3.3 EV/EBITDA (X) 8.2 10.1 7.4 5.5 Net Div Yield (%) 5.5 7.6 7.6 8.3 P/Book Value (X) 1.0 0.9 0.8 0.8 Net Debt/Equity (X) CASH 0.3 0.5 0.4 ROAE (%) 6.7 7.7 16.3 10.9 Earnings Rev (%): (4.9) 1.9 Consensus EPS (S cts): 9.6 9.8 Other Broker Recs: B: 1 S: 0 H: 0 ICB Industry : Industrials ICB Sector: Industrial Transportation Principal Business: Owns and operates toll roads in various provinces in China.

Source of all data: Company, DBS Vickers, Bloomberg

At A Glance Issued Capital (m shrs) 718 Mkt. Cap (S$m/US$m) 517 / 416 Major Shareholders China Merchants Group (%) 82.6 Free Float (%) 17.4 Avg. Daily Vol.(‘000) 46

DBS Group Research . Equity 8 Aug 2012

Singapore Company Focus

China Merchant Hldgs (Pacific) Bloomberg: CMH SP | Reuters: CAEP.SI

Another solid acquisition Acquires 51km Ningbo-Beilun Port Expressway in

Zhejiang province for Rmb890m

Potential FY13 EPS accretion of 10% if the deal is funded by debt; company remains committed to payout of 5.5Scts per annum

2Q12 earnings grew by 52% y-o-y to HK$109m, interim dividend of 2.75Scts proposed

Maintain BUY with DCF-based TP of S$1.09 Acquires Ningbo-Beilun Port E’way for Rmb890m. CMHP announced that it is acquiring Ningbo-Beilun Port Expressway, located in Zhejiang province, for Rmb890m, which also includes taking on c. Rmb1.2bn debt. This 51km expressway reported net earnings of c. Rmb88m in 2011 and its concession runs until 2023. The acquisition price represents a PE of 10x, which is fair in our opinion, given the concession length. Based on the independent valuation reports, the IRR is >13%. EPS accretion of 9.6% if deal is 100% debt funded. Assuming the acquisition is fully funded by debt, EPS will be boosted by 9.6%, but would raise Group net debt to equity ratio to 56%. If CMHP does raise new equity, the EPS accretion would be less but leaves the Group with more debt-funded headroom for potentially more acquisitions (see inside for discussion). Firm 2Q12 results; 2.75Scts dividend proposed. Boosted by contribution from Yongtaiwen, CMHP’s net earnings rose by 54% y-o-y in 2Q12 to HK$110m and underlined its commitment to its plan to pay at least 5.5Scts dividend per year by declaring an interim DPS of 2.75Scts. Maintain BUY, TP S$1.09. Our TP has been adjusted to take into account the recently announced waiver of toll fees during public holidays in China and this acquisition. The stock is trading at an attractive dividend yield of 7.5%, and just over 7x core FY12F earnings.

Company Focus

China Merchant Hldgs (Pacific)

Page 2

Details of the acquisition

CMHP announced that it will be buying the concession rights of 51km Ningbo-Beilun Port Expressway (Daqi-Xiwu section), located in Zhejiang province, for a consideration of Rmb890m; the price is subject to change depending on the final expiry date of the concession, which still requires approval from the relevant Zhejiang government authorities. The seller is China Ping An Life Insurance (Holdings). An EGM will need to be convened and completion is expected in 4Q12. The price of Rmb890m is based on the concession expiring on 31 Dec 2023, and either a refund or top-up will be required depending on the final approved concession expiry date, which could be up to 2027. The amount to be refunded (by the seller to CMHP if the expiry date is before 2023) or topped up (paid by CMHP to the seller) if the expiry date is after 31 Dec 2023, is Rmb100m per annum (pro-rated fractionally on number of days based on difference with 31 Dec 2023). If the expiry date is before 31 Dec 2019, the seller will refund Rmb400m to CMH. Ningbo-Beilun Port Expressway

Source: Company Presentation This expressway is a dual-2 lane expressway and comprises of 2 sections: a) Beilun Port Toll Station to Dazhujia (30.4km) and b) Ningbo East Toll Station to Jiangshan Toll Station (21km).

Ningbo-Beilun Port E’way financials at a glance

Rmb m 2011

Revenue 347.9 Gross Profit 188.9 PBT 115.6 Net Profit 87.8 NAV 314.7

Traffic Volume 20.8m vehicles

Source: Company Announcement Based on Ningbo-Beilun Port Expressway’s 2011 financials, the acquisition price paid by CMHP represents 10.1x PE, 8.1x EV/EBITDA and 2.8x P/NAV. Whilst the remaining concession period of 11 years or so is rather short, the road is already fairly mature and profitable (with a high cash yield), hence we see the acquisition price as fair. Based on the traffic and revenue forecast study (THI Asia Consultants) and valuation report (Savills), both of which are independent, the estimated acquisition IRR of this asset is over 13%. (The appraised value of the project is RMB920m based on a discount rate of 13%). Revenue and earnings impact

Earnings accretion assuming 100% debt funding

RMB m 2013F

Net Profit before adjustments 88.0 Less: Adjustments Interest Cost 22.3 Concession rights amortisation 28.7 Accretion to CMHP net profit 37.1

Source: DBS Vickers Estimates Besides adding some Rmb350m to the Group’s topline, we estimate that this transaction will add about 9.6% to CMHP’s net earnings in 2013. This is assuming that the deal consideration of Rmb890m is entirely funded by debt. There is also an additional adjustment for the amortisation (over the life of the asset) of the premium paid over the NAV of the asset (as concession rights using units of usage methodology). This additional concession rights amortisation adjustment is a non-cash item, and it is also non tax-deductible.

Company Focus

China Merchant Hldgs (Pacific)

Page 3

Balance Sheet impact and funding options

CMHP has stated that it intends to finance the acquisition using a combination of internal cash resources and external financing, including external bank borrowings and/or the issuance of new shares. For our forecast, we have assumed that the RMB890m consideration is entirely funded by debt, which will take the Group’s 2012F net debt to equity ratio to 56% (assuming the deal is completed by end 2012) from our previous projection of 17%. Without this acquisition, CMHP’s estimated net profit for 2013 is HK$481.6m and fully diluted EPS of HK$0.564 (after we lower our estimates to factor in the recently announced waiver of toll fees during major public holidays).

Although we see potential equity fund raising as independent of this acquisition, we illustrate in the table below the impact on EPS and the Group’s balance sheet assuming different levels of equity fund raising for this transaction. The scenario analysis is based on an acquisition price of Rmb890m for the asset, debt cost of 2.5% (short-term loans) and a new share issue price of S$0.84 (just above the Group’s NAV per share as at end 1Q12). EPS calculations are fully diluted, and include the outstanding 135.8m RCPS. Net gearing is calculated based on net debt over total shareholders’ equity (including minority interest).

Funding scenario analysis – impact on earnings and balance sheet

2013F PATMI HK$m % Chg FD EPS (HK$) % Chg Net Gearing

100% Debt 527.6 9.6% 0.618 9.6% 55.7% 75% Debt 25% Equity 534.4 11.0% 0.589 4.5% 50.0% 50% Debt 50% Equity 541.2 12.4% 0.564 0.0% 44.7% 25% Debt 75% Equity 548.0 13.8% 0.541 -4.1% 39.8% 100% Equity 554.8 15.2% 0.520 -7.7% 35.2%

Source: DBS Vickers

Dividends and payout ratio

We believe this acquisition does not impact the Group’s commitment to pay annual dividends of at least 5.5Scts. Even if all the outstanding RCPS were converted and this transaction was entirely funded by the issuance of 211m new shares, CMHP’s payout ratio in 2013 based on DPS of 5.5Scts works out to be 65%, which is very manageable for CMHP. In fact, one can argue that there is room for CMHP to pay more than 5.5Scts dividends (we project 6Scts dividend in 2013). Dividend Payout Ratio

FY13 - 5.5Scts dividend Payout Ratio

Basic Shares (718.4m) 46.4%

If all RCPS converted (135.8m) 55.2%

Plus 211m new shares 65.5%

Source: Company

Company Focus

China Merchant Hldgs (Pacific)

Page 4

Valuation

Taking into account the waiver of toll fees for major public holidays, our TP for CMHP reduces to S$1.05 (from S$1.12 previously). The Ningbo-Beilun Port Expressway acquisition adds about 4Scts to our target price, hence our TP for CMHP is S$1.09. This is based on DCF methodology with a WACC of 9.7%. Our TP of S$1.09 translates to FY13 PE of 9.3x and dividend yield of 5.5%.

Besides offering an attractive acquisition story, the stock is trading at undemanding valuations of 7.3x FY12 PE, declining to 6.3x FY13 PE, with an attractive prospective dividend yield of 7.6%, which is the highest amongst HK-listed peers (with the exception of Hopewell Highway, which is paying out 100% of earnings but is also facing an earnings decline in 2013).

China Toll Roads Peer Valuations (Based on 6th August Closing Prices)

Mkt Net Yield P/B ROE FY12

Price Cap FYE PE (x) (%) (x) (%) Payout

Company Name Lcl $ US$m 12F 13F 12F 13F 12F 13F 12F 13F %

Jiangsu Expressway 7.10 4,177 Dec 12.2 11.4 5.5 5.9 1.68 1.61 13.5 14.3 75%

Zhejiang Expressway 5.48 3,058 Dec 11.1 12.3 6.1 5.5 1.26 1.24 11.5 10.1 75%

Sichuan Expressway 2.32 1,425 Dec 4.8 5.4 4.0 3.5 0.57 0.52 12.4 10.1 21%

Hopewell Highway 3.71 1,432 Dec 11.2 14.6 8.6 6.6 1.25 1.25 11.1 8.6 96%

Shenzhen Expressway 2.80 1,073 Dec 6.7 6.2 5.4 5.8 0.52 0.50 8.0 8.2 40%

Anhui Expressway 3.49 945 Dec 6.3 6.3 5.9 5.9 0.70 0.66 11.5 10.8 41%

Yuexiu Transport 3.69 796 Dec 9.3 8.3 6.0 6.8 0.62 0.60 6.8 7.4 59%

CMHP 0.725 419 Dec 7.3 6.3 7.6 8.3 0.83 0.79 10.5 10.7 54% Source: Bloomberg, DBS Vickers CMHP’s Toll Road Portfolio at a glance

Length Equity Concession 2011 (Rmb m)

Road Portfolio (km) Interest Ends Revenue PAT Comments

Yongtaiwen E'way 138 51% Sep-30 1136 380.0 PAT at company level

Guiliu Expressway 139 40% 2025 471 80.4 Contribution to CMHP

Guihuang Highway 39 60% 2027 218 110.2 Contribution to CMHP

Ningbo-Beilun Port E'way 51 100% 2023 348 88.0 PAT at company level Source: Company, DBS Vickers

Company Focus

China Merchant Hldgs (Pacific)

Page 5

2Q12 Results Commentary

CMHP’s 2Q12 earnings were largely in line with our expectations, except for lower than expected contribution from Guihuang Highway, due to the diversion of some traffic on the complete opening of a competing parallel road. Otherwise maiden contribution by Yongtaiwen Expressway during the quarter helped boost net earnings growth by 54% y-o-y to HK$110m. As at halftime, the Group’s net earnings are up by 91% y-o-y to HK$222m.

The Group’s balance sheet remains firm and indeed, CMHP has already started paying down its loans (used to finance the acquisition of Yongtaiwen Expressway) and its net gearing has improved from 0.25x as at the end of 2011 to just 0.14x as at the end of 1H12.

Results Summary FYE Dec (HK$ m) 1Q11 2Q11 1Q12 2Q12 y-o-y 1H11 1H12 y-o-y Comments

Revenue 14.1 18.4 370.1 393.7 2044% 32.5 763.8 2252% Consolidation of Yongtaiwen Cost of Sales (13.0) (14.5) (152.8) (170.2) 1077% (27.5) (323.0) 1076%

Gross Profit 1.1 3.9 217.3 223.5 5632% 5.0 440.8 8690% Distribution Expenses (1.2) (1.4) (1.9) (2.7) 98% (2.6) (4.7) 79% Administrative Expenses (9.0) (9.0) (16.4) (16.4) 81% (18.0) (32.8) 82% Other Operating Expenses (0.0) (0.8) (0.0) 0.0 NM (0.8) (0.0) -94% Other Operating Income 4.2 0.0 5.7 6.0 NM 4.2 11.7 182%

Operating Profit (5.0) (7.3) 204.6 210.4 -

2982% (12.3) 415.0 -

3486%

Finance Costs (1.0) (0.4) (35.8) (31.8) 7132% (1.5) (67.6) 4521% Higher debt from

Yongtaiwen Subsidy Income 4.3 4.3 4.4 4.3 1% 8.6 8.7 1%

Share of results of JVs 49.3 79.0 55.1 52.1 -34% 128.3 107.2 -16% Lower contribution from

Guihuang E’way Exceptional Gains/(Losses) 0.0 0.0 0.0 0.0 NM 0.0 0.0 NM

Profit Before Tax 47.6 75.6 228.3 235.0 211% 123.2 463.4 276% Tax (2.7) (4.1) (48.8) (52.3) 1176% (6.8) (101.1) 1387%

Profit After Tax 44.9 71.5 179.5 182.73 156% 116.4 362.2 211%

MI 0.0 0.0 (67.3) (72.5) NM 0.0 (139.9) NM 49% non controlling

interests in Yongtaiwen

PATMI 44.9 71.5 112.2 110.2 54% 116.4 222.4 91% Largely in line

Net Profit by Toll Road (HK$m) Guiliu Expressway 18.4 28.3 28.0 26.1 -8% 46.7 54.1 16%

Guihuang Highway 30.1 47.3 31.5 30.4 -36% 77.4 61.8 -20%

Lower revenue from lower traffic due to diversion on

opening of parallel road Yuyaho Highway 5.1 7.7 NM 12.8 0.0 NM Slated for sale

Yongtaiwen Expressway 70.1 75.5 NM 0.0 145.6 NM Acquisition completed on 6th

July 2011 Other expenses (6.3) (8.2) (5.9) (6.6) -19% (14.5) (12.5) -14%

Total 47.3 75.1 123.6 125.3 67% 122.4 249.0 103% Source: Company, DBS Vickers

Company Focus

China Merchant Hldgs (Pacific)

Page 6

Income Statement (HK$ m) FY Dec 2009A 2010A 2011A 2012F 2013F

Revenue 211 131 847 1,548 2,040 Cost of Goods Sold (174) (114) (464) (676) (946) Gross Profit 37 17 383 872 1,094 Other Opng (Exp)/Inc (19) (25) (53) (81) (110) Operating Profit 18 (8) 331 792 984 Other Non Opg (Exp)/Inc 68 16 17 17 19 Associates & JV Inc 290 236 252 220 227 Net Interest (Exp)/Inc (4) (4) (62) (141) (257) Exceptional Gain/(Loss) (168) 41 0 270 0 Pre-tax Profit 203 281 538 1,158 973 Tax (8) (14) (97) (169) (174) Minority Interest 0 0 (122) (263) (271) Preference Dividend (11) (6) (6) (6) (6) Net Profit 184 261 314 719 521 Net Profit before Except. 352 220 314 450 521 EBITDA 377 245 736 1,298 1,627 Growth Revenue Gth (%) (0.5) (38.0) 548.9 82.7 31.7 EBITDA Gth (%) 19.3 (34.9) 200.1 76.3 25.3 Opg Profit Gth (%) 13.9 (143.0) (4,454.8) 139.4 24.3 Net Profit Gth (%) (35.4) 41.9 20.0 129.3 (27.5) Margins & Ratio Gross Margins (%) 17.4 13.0 45.3 56.3 53.6 Opg Profit Margin (%) 8.4 (5.8) 39.0 51.1 48.2 Net Profit Margin (%) 87.4 200.1 37.0 46.4 25.6 ROAE (%) 4.9 6.7 7.7 16.3 10.9 ROA (%) 4.7 6.5 4.0 5.7 3.7 ROCE (%) 0.4 (0.2) 3.8 5.7 6.0 Div Payout Ratio (%) 87.5 67.7 78.1 34.1 51.3 Net Interest Cover (x) 4.1 (1.7) 5.3 5.6 3.8 Source: Company, DBS Vickers

Margins Trend

-7.0%

43.0%

93.0%

143.0%

193.0%

2009A 2010A 2011A 2012F 2013F

Operating Margin % Net Income Margin %

Yongtaiwen E’way revenue contribution from 2H11 onwards. Ningbo-Beilun Port E’way revenue from 2013 onwards.

FY12: Estimated gain from of Yuyao Highway

49% non controlling interests in Yongtaiwen E’way

Company Focus

China Merchant Hldgs (Pacific)

Page 7

Balance Sheet (HK$ m)

FY Dec 2009A 2010A 2011A 2012F 2013F

Net Fixed Assets 14 14 176 168 161 Invts in Associates & JVs 2,438 2,366 2,165 1,882 1,882 Other LT Assets 14 13 7,081 9,449 9,062 Cash & ST Invts 1,012 1,282 1,505 1,976 2,401 Inventory 0 0 0 0 0 Debtors 73 22 211 30 38 Other Current Assets 454 396 389 389 389 Total Assets 4,006 4,093 11,528 13,895 13,932 ST Debt 28 66 664 2,136 1,886 Other Current Liab 139 69 1,320 504 514 LT Debt 0 0 2,519 3,757 3,757 Other LT Liabilities 22 12 365 365 365 Shareholder’s Equity 3,817 3,946 4,171 4,646 4,922 Minority Interests 0 0 2,488 2,488 2,488 Total Cap. & Liab. 4,006 4,093 11,528 13,895 13,932 Non-Cash Wkg. Capital 388 350 (719) (85) (88) Net Cash/(Debt) 984 1,216 (1,678) (3,917) (3,242) Debtors Turn (avg days) 147.1 133.4 50.2 28.4 6.0 Creditors Turn (avg days) 210.4 275.5 506.2 403.9 31.5 Inventory Turn (avg days) N/A N/A N/A N/A N/A Asset Turnover (x) 0.1 0.0 0.1 0.1 0.1 Current Ratio (x) 9.2 12.6 1.1 0.9 1.2 Quick Ratio (x) 6.5 9.7 0.9 0.8 1.0 Net Debt/Equity (X) CASH CASH 0.3 0.5 0.4 Net Debt/Equity ex MI (X) (0.3) (0.3) 0.0 0.8 0.7 Capex to Debt (%) 0.0 1.3 0.3 0.0 0.0 Z-Score (X) NA 8.0 0.7 1.2 1.3 Cash Flow Statement (HK$ m) FY Dec 2009A 2010A 2011A 2012F 2013F

Pre-Tax Profit 203 281 538 1,158 973 Dep. & Amort. 1 1 136 269 398 Tax Paid (14) 0 (14) (169) (174) Assoc. & JV Inc/(loss) (290) (236) (252) (220) (227) Chg in Wkg.Cap. 39 (35) (22) (635) 3 Other Operating CF 146 (33) 0 0 0 Net Operating CF 85 (21) 386 403 972 Capital Exp.(net) 0 (1) (9) (2) (2) Other Invts.(net) 106 133 (1,567) (1,086) 0 Invts in Assoc. & JV 0 0 107 282 0 Div from Assoc & JV 221 285 275 220 227 Other Investing CF 0 0 0 0 0 Net Investing CF 327 418 (1,193) (586) 225 Div Paid (152) (177) (318) (515) (522) Chg in Gross Debt (26) 32 1,317 1,086 (250) Capital Issues 0 0 0 0 0 Other Financing CF 0 0 0 0 0 Net Financing CF (178) (145) 1,000 571 (772) Currency Adjustments 3 19 30 0 0 Chg in Cash 238 270 223 389 425 Opg CFPS (HK cts) 7.9 1.9 56.8 144.5 134.9 Free CFPS (HK cts) 14.6 (3.1) 52.5 55.9 135.1

Source: Company, DBS Vickers

Asset Breakdown (2011)

Net Fixed Assets -4.3%

Assocs'/JVs 53.4%Bank, Cash

and Liquid Assets -37.1%

Debtors -5.2%

Capital Expenditure

0

1

2

3

4

5

6

7

8

9

10

2010A 2011A 2012F 2013F

Capital Expenditure (-)

More debt taken on at both company levels of Yongtaiwen and Ningbo-Beilun Port E’ways, as well as at holding company level to fund the acquisitions of these companies.

Dividends from JV companies Guiliu E’way and Guihuang Highway

Company Focus

China Merchant Hldgs (Pacific)

Page 8

DBSV recommendations are based an Absolute Total Return* Rating system, defined as follows:

STRONG BUY (>20% total return over the next 3 months, with identifiable share price catalysts within this time frame)

BUY (>15% total return over the next 12 months for small caps, >10% for large caps)

HOLD (-10% to +15% total return over the next 12 months for small caps, -10% to +10% for large caps)

FULLY VALUED (negative total return i.e. > -10% over the next 12 months)

SELL (negative total return of > -20% over the next 3 months, with identifiable catalysts within this time frame)

Share price appreciation + dividends DBS Vickers Research is available on the following electronic platforms: DBS Vickers (www.dbsvresearch.com); Thomson (www.thomson.com/financial); Factset (www.factset.com); Reuters (www.rbr.reuters.com); Capital IQ (www.capitaliq.com) and Bloomberg (DBSR GO). For access, please contact your DBSV salesperson. GENERAL DISCLOSURE/DISCLAIMER This report is prepared by DBS Vickers Research (Singapore) Pte Ltd ("DBSVR"), a direct wholly-owned subsidiary of DBS Vickers Securities (Singapore) Pte Ltd ("DBSVS") and an indirect wholly-owned subsidiary of DBS Vickers Securities Holdings Pte Ltd ("DBSVH"). This report is intended for clients of DBSV Group only and no part of this document may be (i) copied, photocopied or duplicated in any form or by any means or (ii) redistributed without the prior written consent of DBSVR. It is being distributed in the United States by DBSV US, which accepts responsibility for its contents. Any U.S. person receiving this report who wishes to effect transactions in any securities referred to herein should contact DBS Vickers Securities (USA) Inc (“DBSVUSA”) directly and not its affiliate. The research set out in this report is based on information obtained from sources believed to be reliable, but we (which collectively refers to DBSVR, DBSVS, and/or DBSVH) do not make any representation or warranty as to its accuracy, completeness or correctness. Opinions expressed are subject to change without notice. This document is prepared for general circulation. Any recommendation contained in this document does not have regard to the specific investment objectives, financial situation and the particular needs of any specific addressee. This document is for the information of addressees only and is not to be taken in substitution for the exercise of judgement by addressees, who should obtain separate independent legal or financial advice. DBSVR accepts no liability whatsoever for any direct, indirect and/or consequential loss (including any claims for loss of profit) arising from any use of and/or reliance upon this document and/or further communication given in relation to this document. This document is not to be construed as an offer or a solicitation of an offer to buy or sell any securities. DBSVH is a wholly-owned subsidiary of DBS Bank Ltd. DBS Bank Ltd along with its affiliates and/or persons associated with any of them may from time to time have interests in the securities mentioned in this document. DBSVR, DBSVS, DBS Bank Ltd and their associates, their directors, and/or employees may have positions in, and may effect transactions in securities mentioned herein and may also perform or seek to perform broking, investment banking and other banking services for these companies. Any valuations, opinions, estimates, forecasts, ratings or risk assessments herein constitutes a judgment as of the date of this report, and there can be no assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk assessments. The information in this document is subject to change without notice, its accuracy is not guaranteed, it may be incomplete or condensed and it may not contain all material information concerning the company (or companies) referred to in this report. The valuations, opinions, estimates, forecasts, ratings or risk assessments described in this report were based upon a number of estimates and assumptions and are inherently subject to significant uncertainties and contingencies. It can be expected that one or more of the estimates on which the valuations, opinions, estimates, forecasts, ratings or risk assessments were based will not materialize or will vary significantly from actual results. Therefore, the inclusion of the valuations, opinions, estimates, forecasts, ratings or risk assessments described herein IS NOT TO BE RELIED UPON as a representation and/or warranty by DBSVR, DBSVS and/or DBSVH (and/or any persons associated with the aforesaid entities), that: (a) such valuations, opinions, estimates, forecasts, ratings or risk assessments or their underlying assumptions will be achieved, and (b) there is any assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk

assessments stated therein. Any assumptions made in this report that refers to commodities, are for the purposes of making forecasts for the company (or companies) mentioned herein. They are not to be construed as recommendations to trade in the physical commodity or in the futures contract relating to the commodity referred to in this report. DBS Vickers Securities (USA) Inc ("DBSVUSA")"), a U.S.-registered broker-dealer, does not have its own investment banking or research department, nor has it participated in any investment banking transaction as a manager or co-manager in the past twelve months. Any US persons wishing to obtain further information, including any clarification on disclosures in this disclaimer, or to effect a transaction in any security discussed in this document should contact DBSVUSA exclusively. ANALYST CERTIFICATION The research analyst primarily responsible for the content of this research report, in part or in whole, certifies that the views about the companies and their securities expressed in this report accurately reflect his/her personal views. The analyst also certifies that no part of his/her compensation was, is, or will be, directly, or indirectly, related to specific recommendations or views expressed in this report. As of 8 Aug 2012, the analyst and his / her spouse and/or relatives who are financially dependent on the analyst, do not hold interests in the securities recommended in this report (“interest” includes direct or indirect ownership of securities, directorships and trustee positions).

Company Focus

China Merchant Hldgs (Pacific)

Page 9

COMPANY-SPECIFIC / REGULATORY DISCLOSURES

1. DBS Vickers Securities (Singapore) Pte Ltd and its subsidiaries do not have a proprietary position in the company mentioned as of 06-Aug-2012

2. DBSVR, DBSVS, DBS Bank Ltd and/or other affiliates of DBS Vickers Securities (USA) Inc ("DBSVUSA"), a U.S.-registered broker-dealer, may beneficially own a total of 1% or more of any class of common equity securities of the company mentioned as of 8 Aug 2012.

3. Compensation for investment banking services:

i. DBSVR, DBSVS, DBS Bank Ltd and/or other affiliates of DBSVUSA may have received compensation, within the past 12 months, and within the next 3 months receive or intends to seek compensation for investment banking services from the company mentioned.

ii. DBSVUSA does not have its own investment banking or research department, nor has it participated in any investment banking transaction as a manager or co-manager in the past twelve months. Any US persons wishing to obtain further information, including any clarification on disclosures in this disclaimer, or to effect a transaction in any security discussed in this document should contact DBSVUSA exclusively.

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