Asia Pacific Equity Research

22 February 2011

Top Stories Market Strategy, India FY12 Union Budget potentially positive for Energy, Financials, Infrastructure (Bharat Iyer) Indian equities are going into the FY2012E Union Budget, due on February 28, with limited expectations. There is a need to tighten fiscal policy to tame surging inflation, but the issue would have to be handled tactfully, given political compulsions. We expect the Budget to be negative for Auto, Materials, and Consumer Staples.

Wipro Ltd (OW), India Upgrade to OW, PT Rs540; below-peer growth expectation in the price (Viju K George) The new CEO and the reorganized management structure have identified most of the structural issues that in the recent past have held Wipro’s growth back. As substantial action has already been taken on some of them, we are optimistic. Wipro’s valuation is at 17% discount to Infosys, an all-time high.

Anta Sports Products Ltd (OW), China Another solid set of results – we stay OW but trim our PT to HK$15.80 (Elsa Yang) The decent results reinforce our view that Anta will be the consolidator of the mass sportswear market, on the back of its clear market positioning, superior working capital and proven cost control. Nevertheless, the rapidly worsening competitive landscape is likely to limit margin upside in future.

SMID Caps, Hong Kong/China Where to find winners in the upcoming earnings season (Leon Chik, CFA) Our favourites are those that are operating under a short supply situation with pricing power, such as Xinyi, KB Chemical, and ND Paper, where the share price reflects an upcoming oversupply situation that may not materialize. We expect Skyworth (high-conviction call) to benefit from strong rural demand and rising margins in 2H FY11.

Genting Berhad (OW), Malaysia Genting Malaysia , Genting Singapore A global gaming giant in the making – we raise our PT to M$14.60 (May Yee Soh) GB is our top pick within the MAL/SIN space. Investors buying GB today not only get its unlisted assets for free but also enjoy a 10% discount off its listed subsidiaries and associates. GB is our preferred pick within the group, but we also expect G. Malaysia (OW, PT raised to M$4.10) to shine. We are N on G. Singapore.

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Sunil Garg (852) 2800-8518 sunil.garg@jpmorgan.com Send me your feedback! AM perspective Adrian Mowat, Chief Equity Strategist Are EM fundamentals still strong?

Source: J.P. Morgan economics

Are EMs fundamentally attractive? Structurally yes. EM’s potential nominal GDP growth at 12% is four times DM’s 3%. If the potential growth rates are sustained, our projections suggest that EM economies will account for 45% of the global GDP in the next 10 years. The potential real GDP growth gap is also high. EM consumption is forecast to be 37% of global consumption in 2011. Unlike DM, EM sovereign balance sheets are healthy. Gross public debt as a percentage of GDP is c.100% in the developed world and is expected to increase this year. In contrast, emerging economies’ public debt to GDP is at 31%, and is expected to moderate. For more, please see Key Trades and Risks: Emerging Markets Equity Strategy, Mowat et al, February 15, 2011. Click below for the: J.P. Morgan Daily Valuations Latest Weekly AP Banks Analyzer (.xls) Daily Global Economic Briefing Link to Other FTMs page Link to Morgan Markets page

See the end pages of each individual note 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.

Recommendation and Forecast Changes • Anta Sports Products Ltd. (Overweight), China (Elsa

Yang) Solid 2010 results

• Bangkok Bank (Neutral), TIP Markets (Anne Jirajariyavech)

Thai banks: Sweet spot; Prefer SCB & BAY • Bank of Ayudhya (Overweight), TIP Markets (Anne

Jirajariyavech) Thai banks: Sweet spot; Prefer SCB & BAY

• Champion REIT (Neutral), Hong Kong (Amy Luk, CFA) FY10 results review: bottoming out

• Coal India (Neutral), India (Pinakin Parekh, CFA) Cutting FY12E on lower volumes; Differential pricing key as wage agreement, inflation loom over the horizon

• Genting Berhad (Overweight), Malaysia (May Yee Soh) A global gaming giant in the making

• Genting Malaysia (Overweight), Malaysia (May Yee Soh)

Time to shine?

• Genting Singapore (Neutral), Singapore (May Yee Soh) Taking a breather

• Hyflux Limited (Neutral), Singapore (Ying-Jian Chan)

Libya unrest may see further contract delay in MENA • KASIKORNBANK (Overweight), TIP Markets (Anne

Jirajariyavech) Thai banks: Sweet spot; Prefer SCB & BAY

• Kiatnakin Bank (Underweight), TIP Markets (Anne Jirajariyavech) Thai banks: Sweet spot; Prefer SCB & BAY

• Krung Thai Bank (Overweight), TIP Markets (Anne Jirajariyavech) Thai banks: Sweet spot; Prefer SCB & BAY

• Nestlé India Limited (Neutral), India (Latika Chopra, CFA)

Q4CY10 - Strong performance; gross margin expansion a key positive

• Parkson Retail Group Ltd (Neutral), China (Ebru Sener Kurumlu) 2010 results disappoint, but store expansion likely to accelerate

• Pruksa Real Estate Pcl (Overweight), TIP Markets (Anne Jirajariyavech) Profit below expectation on high opex

• Siam Commercial Bank (Overweight), TIP Markets (Anne Jirajariyavech) Thai banks: Sweet spot; Prefer SCB & BAY

• Thanachart Capital (Neutral), TIP Markets (Anne Jirajariyavech) Thai banks: Sweet spot; Prefer SCB & BAY

• Economy, TIP Markets (Sin Beng Ong) Thailand: 4Q10 GDP firms, outlook remains positive

Results and Company Views • Alibaba.com Limited (Neutral), China (Dick Wei)

Aggressively addressing customers & sales-staff fraud issue - could company emerge better in longer-term?

• Alibaba.com Limited (Neutral), China (Dick Wei) Alibaba CEO resigns citing moral responsibility for fraudulent customers' sales staff activities - ALERT

• AMMB Holdings (Neutral), Malaysia (Harsh Wardhan Modi) 3QFY11: Q/Q NIM decline continues - ALERT

• Hau Giang Pharmaceutical Joint Stock Company (Not Covered), TIPV Markets (Sriyan Pietersz) Company Visit Note

• HDFC Bank (Overweight), India (Seshadri K Sen, CFA)

Relatively safe haven; maintain Overweight • HSBC Holdings plc (Overweight), Hong Kong (Sunil

Garg) Dividend guidance critical on 28th

• Hyflux Limited (Overweight), Singapore (Ying-Jian Chan)

Libya unrest to be share price dampener - ALERT

• Indofood (Neutral), TIP Markets (Stevanus Juanda) Potential listing of Salim Ivomas Pratama

• Indofood Agri Resources Ltd (Neutral), Singapore (Ying-Jian Chan) Exploring listing of 90%-owned PT SIMP - ALERT

• International Container Terminal Services, Inc. (Overweight), TIP Markets (Jeanette Yutan) Postcard from Manila - ALERT

• Maybank (Malayan Banking) (Neutral), Malaysia (Harsh Wardhan Modi) 1H11 meets expectations, share price gains appear unsustainable - ALERT

• Metro Pacific Investments Corp. (Overweight), TIP Markets (Jeanette Yutan) Postcard from Manila - ALERT

• Oil and Natural Gas Corporation (Neutral), India (Pradeep Mirchandani, CFA) Reserves update - no significant changes - ALERT

• Reliance Industries Ltd (Overweight), India (Pradeep Mirchandani, CFA) BP deal validates E&P value - Reiterate OW

• Samsung Life Insurance (Overweight), South Korea (MW Kim) Top management reaffirms our positive view

• Sun Hung Kai Properties (Overweight), Hong Kong (Lucia Kwong, CFA) FY11 interim results preview

• Tisco Financial Group Pcl. (Neutral), TIP Markets (Anne

Jirajariyavech) Thai banks: Sweet spot; Prefer SCB & BAY

• TMB Bank Public Company Limited (Underweight), TIP Markets (Anne Jirajariyavech) Thai banks: Sweet spot; Prefer SCB & BAY

• Wipro Ltd. (Overweight), India (Viju K George) Below-peer growth expectation is in the current price, upgrade to OW on new management promise and visibly stronger orientation towards higher growth

Strategy • Market Strategy, Asia Pacific (Adrian Mowat)

Asia Pacific Strategy Dashboards

• Market Strategy, Global (Adrian Mowat) Global Developed Markets Strategy Dashboards

• Market Strategy, Taiwan (Nick Lai) The first step after ECFA: Strait talk: Taiwan equity strategy

• Market Strategy, TIPV Markets (Sriyan Pietersz) Vietnam Vista: Bi-Weekly Market Update (7-18/02/2011)

Economics • Economy, Hong Kong (Lu Jiang)

Unemployment rate 3.8%, the lowest level since November ’08

• Economy, India (Sajjid Z Chinoy) Government releases new, all-India CPI series

• Economy, Taiwan (Grace Ng) Steady gain in January export orders, US demand picking up momentum

• United Tractors (Overweight), TIP Markets (Aditya Srinath, CFA) January volume surge probably unsustainable, but does open up upside risks on volumes

Sector Research • Alternative Carriers/Emerging Wireline, Broadband,

Wireless Services, Wireline Services/Incumbents, Asia Pacific (James R. Sullivan, CFA) JPM Asia Telco Back Testing Analysis: Investing our recommendations

• Banks, Hong Kong (Joseph Leung) Hang Seng focuses on Prime-based mortgages

• Internet, Asia Pacific (Dick Wei) Regional Internet Newsflow - Week Ending Feb 18: Groupon see challenges in China, Starcraft II approved by Ministry of Culture, Alibaba invests in Sinosoft, Baidu launches Media Player

• Property, China (Ryan Li) China Property Weekly: Property sales for the week ending Feb 20, 2011

• Property, Hong Kong (Amy Luk, CFA) Hong Kong Property Update: Weekly primary sales: 37 units

• Wireless Services, Wireline Services/Incumbents, China (Lucy Liu) China Telecoms Services: Robust Jan subs across the board due to strong seasonality; Unicom posted best 3G adds momentum

Asia Analyst Focus List Company Name / Country of Listing Ticker Analyst Rating

Mkt. Cap (MM)

Mkt. Cap (US$ MM)

Focus List Add Date

Focus List Add Price

Close 02/21/11

Target Price

Date Target Price Set

Australia Campbell Brothers Limited (A$) CPB AU Alexander Mees, ACA OW 2835 2867 9-Sep-09 24.33 42.00 39.18 30-Nov-10 Credit Corp Limited (A$) CCP AU Alexander Mees, ACA OW 229 232 15-Feb-11 4.99 5.12 6.28 15-Feb-11 iiNet (A$) IIN AU Laurent Horrut OW 394 398 2-Aug-10 2.78 2.59 3.33 2-Aug-10 ING Office Fund (A$) IOF AU Michael Scott OW 1665 1683 7-Feb-11 0.61 0.61 0.69 7-Sep-10 Mirvac Group (A$) MGR AU Richard Jones, CFA OW 4321 4369 4-Feb-11 1.26 1.27 1.48 25-Jan-11 China Baoshan Iron & Steel – A (Rmb) 600019 CH Nathan M. Zibilich, CFA OW 127312 19386 12-Oct-10 7.11 7.27 10.00 12-Oct-10 China Agri-Industries (HK$) 606 HK Ying-Jian Chan OW 33276 4275 25-Jan-11 7.81 8.24 10.30 25-Jan-11 China Cosco Holdings, Ltd. (HK$) 1919 HK Corrine Png OW 122191 15697 11-Jan-11 8.63 8.42 11.80 29-Oct-10 China Minsheng Banking - A (Rmb) 600016 CH Samuel Chen OW 141516 21549 27-Nov-10 5.13 5.18 7.50 10-Jan-11 China Minsheng Banking - H (HK$) 1988 HK Samuel Chen OW 167740 21549 27-Nov-10 6.90 7.04 9.20 10-Jan-11 Industrial and Commercial Bank of China - A (Rmb) 601398 CH Samuel Chen OW 1561789 237817 30-Oct-09 4.95 4.30 6.70 27-Nov-10 Hong Kong AAC Acoustic (HK$) 2018 HK Charles Guo OW 23037 2960 8-Sep-09 6.91 18.76 22.00 2-Nov-10 China Unicom (Hong Kong) Limited (HK$) 762 HK Lucy Liu OW 316204 40622 2-Aug-10 10.22 13.42 15.90 20-Feb-11 Cosco Pacific (HK$) 1199 HK Karen Li OW 41651 5351 26-Aug-08 10.64 15.36 17.50 15-Jan-11 HSBC Holdings plc (HK$) 5 HK Sunil Garg OW 1604178 206083 24-May-10 71.65 90.60 115.00 22-Apr-10 K Wah International Holdings (HK$) 173 HK Amy Luk, CFA OW 9234 1186 13-Apr-10 2.98 3.62 3.80 25-Aug-10 Longfor Properties Co. Ltd. (HK$) 960 HK Ryan Li OW 54334 6980 18-Nov-10 9.44 10.54 13.50 18-Nov-10 Mongolian Mining Corporation (HK$) 975 HK Nathan M. Zibilich, CFA OW 36235 4655 15-Nov-10 8.68 9.78 11.45 9-Jan-11 Pacific Basin Shipping (HK$) 2343 HK Corrine Png OW 9756 1253 11-Jan-11 5.01 5.05 7.00 3-Aug-10 Shenzhen Expressway H Share (HK$) 548 HK Karen Li, CFA OW 12618 1621 8-Sep-10 3.90 4.88 8.70 2-Dec-10 The United Laboratories (HK$) 3933 HK Leon Chik, CFA OW 16451 2113 5-Nov-10 15.52 12.64 24.00 7-Jan-11 Wheelock & Company Ltd (HK$) 20 HK Benjamin Lo, CFA OW 58517 7517 19-Nov-10 28.85 28.80 38.10 19-Nov-10 Zhejiang Expressway (HK$) 576 HK Karen Li, CFA OW 30793 3956 20-Apr-10 6.83 7.09 9.10 21-Nov-10 India Apollo Hospitals Enterprise Ltd. (Rs) APHS IN Princy Singh OW 57916 1287 5-Oct-10 463.15 464.40 575.00 5-Oct-10 Ballarpur Industries Ltd (Rs) BILT IN Princy Singh OW 19352 430 20-Oct-10 35.20 29.45 50.00 20-Oct-10 IndusInd Bank (Rs) IIB IN Seshadri K Sen, CFA OW 106909 2377 19-Nov-10 265.15 229.55 350.00 11-Oct-10 Sintex Industries Limited (Rs) SINT IN Princy Singh OW 41276 918 13-Jan-11 167.30 151.20 243.00 13-Jan-11 Spicejet Ltd (Rs) SJET IN Princy Singh OW 18888 420 2-Dec-10 82.15 46.65 115.00 2-Dec-10 Japan Canon (¥) 7751 JT Hisashi Moriyama OW 5468430 65746 14-Jan-11 4240.00 4100.00 5000.00 14-Jan-11 Dainippon Screen Mfg. (¥) 7735 JT Hisashi Moriyama OW 196068 2357 22-Jun-10 478.00 772.00 1000.00 17-Jan-11 FUJIFILM Holdings (¥) 4901 JT Hisashi Moriyama OW 1549024 18624 26-Jan-10 2942.00 3010.00 4500.00 28-May-10 Hitachi (¥) 6501 JT Yoshiharu Izumi OW 2245622 26999 29-Jul-09 293.00 497.00 590.00 23-Apr-10 Honda Motor (¥) 7267 JT Kohei Takahashi OW 6666057 80145 19-Jan-10 3370.00 3680.00 4300.00 13-Jan-11 Inpex Corporation (¥) 1605 JT Brynjar Eirik Bustnes OW 2182518 26240 1-Sep-10 389000.00 597000.00 630000.00 31-Aug-10 Nikon (¥) 7731 JT Hisashi Moriyama OW 773295 9297 4-Jan-11 1747.00 1929.00 2500.00 4-Jan-11 Malaysia RHB Capital (M$) RHBC MK Harsh Wardhan Modi OW 17658 5814 18-Nov-10 7.80 8.20 10.60 16-Nov-10 Philippines International Container Terminal Services, Inc. (Php) ICT PM Jeanette Yutan OW 81304 1871 8-Sep-10 35.20 42.00 49.00 20-Oct-10 Philippine Stock Exchange Inc (Php) PSE PM Harsh Wardhan Modi OW 11049 254 9-Oct-07 407.50 360.00 605.00 4-Oct-10 Singapore CapitaMalls Asia (S$) CMA SP Joy Wang OW 7224 5661 21-Jan-11 1.91 1.86 2.75 21-Jan-11 DBS Group (S$) DBS SP Harsh Wardhan Modi OW 33433 26198 8-Aug-08 14.36 14.48 24.00 19-Jan-11 Global Logistic Properties Ltd (S$) GLP SP Christopher Gee OW 8778 6878 18-Nov-10 2.18 1.91 2.90 18-Nov-10 Noble Group Ltd (S$) NOBL SP Ajay Mirchandani OW 12911 10117 12-Nov-09 1.83 2.14 2.50 10-Nov-10 Olam International (S$) OLAM SP Ajay Mirchandani OW 6167 4832 2-Oct-08 1.80 2.90 3.70 10-Aug-09 Singapore Airlines (S$) SIA SP Corrine Png OW 17166 13452 23-May-10 14.60 14.34 20.00 10-Nov-10 South Korea CJO Shopping (W) 035760 KS Jinah Lee OW 1419231 1268 11-Jan-11 250500.00 233500.00 277000.00 11-Jan-11 Hyundai E&C (W) 000720 KS Jinmook Kim OW 8919597 7967 6-Feb-11 86200.00 80100.00 101000.00 6-Feb-11 LG Chem Ltd (W) 051910 KS Samuel Lee, CFA OW 26110810 23323 14-Oct-10 327000.00 394000.00 430000.00 14-Oct-10 LG Display (W) 034220 KS JJ Park OW 13203400 11793 15-Mar-10 35900.00 36900.00 52000.00 12-Jan-11 LG Electronics (W) 066570.KS JJ Park OW 17430060 15569 15-Jan-11 114000.00 120500.00 150000.00 15-Jan-11 LG Innotek (W) 011070 KS Hyunjoon Roh OW 2707952 2419 23-Mar-10 115000.00 134500.00 240000.00 15-Jul-10 Samsung Engineering (W) 028050 KS Jinmook Kim OW 7520000 6717 6-Feb-11 206000.00 188000.00 250000.00 6-Feb-11 SK Innovation (W) 096770 KS Brynjar Eirik Bustnes OW 16967430 15156 5-Oct-07 147500.00 183500.00 165000.00 13-Sep-10 Taiwan First Financial Holding Co Ltd (NT$) 2892 TT Dexter Hsu OW 158682 5403 3-Sep-10 18.45 24.50 33.00 8-Jan-11 Formosa Chemicals and Fibre Corp (NT$) 1326 TT Samuel Lee, CFA OW 611726 20828 9-Dec-10 93.20 107.50 109.00 9-Dec-10 Novatek Microelectronics Corp (NT$) 3034 TT Cynthia Chou OW 56006 1907 3-Dec-10 98.50 94.00 120.00 3-Dec-10 Pegatron Corp (NT$) 4938 TT Gokul Hariharan OW 82696 2816 24-Aug-10 40.15 36.65 52.00 24-Aug-10 Powertech Technology Inc (NT$) 6239 TT Cynthia Chou OW 77617 2643 2-Aug-10 101.50 108.50 130.00 3-Aug-10 Quanta Computer Inc. (NT$) 2382 TT Alvin Kwock OW 216172 7360 13-Oct-10 48.05 56.40 68.00 29-Oct-10 SPIL (Siliconware Precision Industries) (NT$) 2325 TT Rick Hsu OW 125434 4271 15-Feb-11 38.55 40.25 48.00 15-Feb-11 Teco Electric & Machinery (NT$) 1504 TT Nick Lai OW 31965 1088 16-Feb-11 16.55 17.50 22.00 16-Feb-11 Thailand Banpu Public (Bt) BANPU TB Sukit Chawalitakul OW 208702 6837 15-Oct-10 724.00 768.00 906.00 15-Dec-10

LPN Development(Bt) LPN TB Anne Jirajariyavech OW 13429 440 18-Jan-11 8.15 9.10 10.50 17-Feb-11 PTT Public Company (Bt) PTT TB Sukit Chawalitakul OW 943033 30894 23-Mar-10 256.00 331.00 437.00 9-Feb-11 United States Focus Media (US$) FMCN Dick Wei OW 3824 3824 3-Jun-10 15.44 26.71 28.00 29-Sep-10 Source: Bloomberg, J.P. Morgan estimates. Under applicable law and/or J.P. Morgan Chase & Co policy, companies which are placed under restriction will be removed automatically from the Analyst Focus List without separate notice.

For details on the AFL methodology, please see the Asia Cash Equities page on mm.jpmorgan.com or contact your J.P. Morgan salesperson/the covering analyst.

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Asia Pacific Equity Research 21 February 2011

India Equity Strategy

FY12 (E) Union Budget Preview

India

Bharat IyerAC

(91-22) 6157-3600 bharat.x.iyer@jpmorgan.com

Bijay Kumar, CFA (91-22) 6157-3586 bijay.kumar@jpmorgan.com

Gunjan Prithyani (91-22) 6157-3593 gunjan.x.prithyani@jpmorgan.com

J.P. Morgan India Private Limited

Sensex performance – One month pre and post budget announcement

(%) Pre budget Post budget FY02 (2) (9) FY03 7 (7) FY04 0 (6) FY05 (2) 5 FY06 9 (3) FY07 7 10 FY08 (9) (5) FY09 (3) (12) FY10 (6) 8 FY11 (2) 9

Average 0 (1)

Source: Bloomberg

• Muted expectations. Indian equities are going into the FY2012E Union Budget, scheduled for February 28th, with limited expectations.

• No major changes in taxation expected. Fiscal compulsions should rule out any substantial tax concessions. There is also a need to tighten fiscal policy to tame surging inflation. But the issue would have to be handled tactfully, given political compulsions - elections in 5 states are scheduled for 2Q CY2011. Also a more comprehensive review of tax rates is scheduled for next year. The Direct Tax Code (DTC) and Goods and Services Tax (GST) are scheduled to be implemented in FY2013E. On balance, we could see a reduction of income tax rates for lower income groups and an increase of 200 bps in excise duties.

• Focus on fiscal consolidation. As per the Fiscal Responsibility Act roadmap, over FY2012E the deficit is to be cut to 4.8% of GDP. A challenging target, as the one off revenues from the telecom auction will not be available for the next fiscal year and subsidies on energy, fertilizer and food are mounting. In this backdrop, the assumptions behind the deficit targeted, particularly on growth and any exceptional revenue streams will be under substantial scrutiny.

• Policy initiatives to the fore? There is limited flexibility on the Budget math. And business confidence needs to be revived. In this backdrop, we believe the Government could use the forum to articulate policy initiatives related to 1) Financial sector reforms (pension sector reforms, insurance sector reforms, corporate and infrastructure bond market, etc) 2) Initiatives to kick start the investment cycle 3) Enhancing private sector participation in education, health and food storage and distribution. 4) Tightening the tax net and getting back ‘black money’ for productive economic use.

• Substantive agenda in Budget session of Parliament. Besides the FY2012E Budget, the Government proposes to introduce 32 Bills in the current session of Parliament. Significant among these, from an equity market’s perspective, are the Land Acquisition (Amendment) Bill, Mines and Minerals (Development and Regulation) Bill, Companies (Amendment) Bill. Passage of these will clarify Government policy on a number of grey areas and boost business confidence.

Union Budget expectations and potential sectoral impact Positive Negative

Energy, Financials, Infrastructure Automobile , Materials, Consumer Staples Source: J.P. Morgan

Asia Pacific Equity Research 21 February 2011

Wipro Ltd. ▲ Overweight

Previous: Neutral

WIPR.BO, WPRO IN

Below-peer growth expectation is in the current price, upgrade to OW on new management promise and visibly stronger orientation towards higher growth

▲ Price: Rs432.70

Price Target: Rs540.00 Previous: Rs470.00

India eBusiness/IT Services

Viju K GeorgeAC

(91-22) 6157-3597 viju.k.george@jpmorgan.com

J.P. Morgan India Private Limited

360

420

480Rs

Feb-10 May-10 Aug-10 Nov-10 Feb-11

Pr ice Per fo rman ce

W IPR.BO share price (Rs)NIFTY (rebased)

YTD 1m 3m 12m Abs -11.9% -9.6% 3.4% 8.0% Rel -0.6% -5.0% 12.4% -3.7%

• The Wipro stock has been a major laggard in the past 12 months. This underperformance is pronounced in the last month as concerns on senior management change, potential attrition of senior staff and continued doubts on ability to keep pace with peers have weighed on the stock. The organizational changes announced have a clear mandate to deliver higher growth than achieved in the recent past. Valuation at 14.8x FY13E P/E stands at ~17% discount to Infosys’s FY13E P/E, an all-time high, (except for the brief period post Lehman when we saw flight-to-safety towards Infosys). Additionally, we believe the current reasonable valuations for FY12/13E factor in the expectation that Wipro’s revenue growth would continue to lag behind that of TCS/Infosys by 3-5% for the next two years (FY12/FY13).

• In our view, the company and its new CEO TK Kurien have identified the structural issues that have held Wipro’s growth back in the recent past. We see substantial action has already taken on some of them and so, we are optimistic.

• We think Wipro is more a FY13 story than a FY12 story. We believe that the course of corrective actions that the new management has embarked on is comprehensive. With a company of Wipro’s size, it takes time to see the fruit of these executions. Our report discusses this in detail. As the company refocuses its areas of investments and adopts a more customer-centric structure, near-term margins of IT-Services may not necessarily paint a good picture of the likely revenue/margin profile for FY13. We believe investors need to look beyond margins over the next 2-3 quarters (provided they remain in a narrow range of 22% EBIT, which we believe will be the case).

• We upgrade Wipro to OW, roll over price target to Mar-12 and establish a Mar-12 price target of Rs540 (from Sep-11 price target of Rs470). We construct two scenarios: (a) the company does not deliver – status quo is maintained; (b) the company delivers on the higher growth agenda by FY13 and revenue growth matches peers (TCS/Infosys). Our PT (giving 25% upside from the current levels) corresponds to our base-case of ‘company-will-not-deliver-by-FY13’ scenario. In the ‘company-will-deliver-higher-growth-by-FY13’ scenario, the share price upside could be higher by another 10% points, potentially returning 35% upside from the current levels. TCS (OW) has been our top pick hitherto. However, under our base-case (risk-adjusted) scenario, Wipro should provide sector-leading investor returns of ~25% over 12 months. Wipro (OW) now becomes our key pick in the sector, together with TCS (OW).

Reuters: WIPR.BO/WIPR.US, Bloomberg: WPRO IN/WIT US Rs B, YE Mar. FY10 FY11E FY12E FY13E FY10E FY11E FY12E FY13E 52-Week range Rs321-500 Sales 271.2 311.3 369.6 436.2 Y/E BPS (Rs) 80.3 90.5 106.3 127.0 Shares Outstg 2,453Mn Operating Profit 51.5 60.4 73.3 88.3 ROE (%) 26.3 25.1 24.5 25.0 Date of price 2/18/2011 EBITDA 58.4 68.5 82.2 98.2 ROIC (%) 30.2 31.3 31.4 31.5 Avg daily volume 1.6Mn Pre Tax Profit 55.3 63.9 76.1 91.7 2Q 3Q 4Q 4Q Index (Sensex) 20,278 Net profit 45.6 52.6 59.2 71.4 EPS (FY09) A 4.1 4.1 4.1 4.1 Free float 18% EPS (Rs) 18.7 21.5 24.2 29.2 EPS (FY10) A 4.7 5.0 4.8 4.8 Avg daily value ($) 15.1 Mn P/E (x) 23.2 20.1 17.9 14.8 EPS (FY11) E 5.2 5.4 5.7 5.7 Mkt Cap (US$ bn) US$ 23.8 Bn EV/EBITDA (x) 17.6 15.0 12.5 10.5 Abs. Per.(1M, 3M, 12M) -4.9 1.6 8.6 ADR US$ 13.7 P/BV (x) 5.4 4.8 4.1 3.4 Rel. Per.(1M, 3M, 12M) 0.3 7.6 -4.6 PT (3/2012) 540 Source: Company data, Bloomberg, J.P. Morgan estimates.

Asia Pacific Equity Research 22 February 2011

Anta Sports Products Ltd.

Overweight 2020.HK, 2020 HK

Solid 2010 results ▼

Price: HK$12.26

Price Target: HK$15.80 Previous: HK$17.50

China Apparel, Footwear

Elsa YangAC

(852) 2800-8523 elsa.hy.yang@jpmorgan.com

Ebru Sener Kurumlu (852) 2800-8521 ebru.sener@jpmorgan.com

J.P. Morgan Securities (Asia Pacific) Limited

10

14

18

HK$

Feb-10 May-10 Aug-10 Nov-10 Feb-11

Pr ice Per fo rman ce

2020.HK share price (HK$)MSCI-Cnx (rebased)

YTD 1m 3m 12m Abs -0.6% -3.6% -15.8% 13.5% Rel 1.0% -0.8% -12.9% 3.2%

Anta Sports Products Ltd. (Reuters: 2020.HK, Bloomberg: 2020 HK) Rmb in mn, year-end Dec FY09A FY10A FY11E FY12E FY13E Revenue (Rmb mn) 5,875 7,408 9,057 10,874 12,809 Net Profit (Rmb mn) 1,251 1,551 1,810 2,095 2,565 EPS (Rmb) 0.50 0.62 0.73 0.84 1.03 Recurring EPS (Rmb) 0.50 0.62 0.73 0.84 1.03 DPS (Rmb) 0.31 0.39 0.45 0.52 0.64 Revenue growth (%) 27.0% 26.1% 22.3% 20.1% 17.8% Net profit growth (%) 39.8% 24.0% 16.7% 15.7% 22.5% Recurring profit growth (%) 39.8% 24.0% 16.7% 15.7% 22.5% EPS growth (%) 39.8% 23.9% 16.7% 15.7% 22.5% ROCE 28.6% 31.5% 34.7% 35.2% 38.9% ROE 26.2% 28.8% 29.8% 30.4% 32.4% P/E (x) 20.6 16.6 14.3 12.3 10.1 P/BV (x) 5.1 4.5 4.0 3.5 3.0 EV/EBITDA (x) 15.3 12.1 9.2 7.7 5.7 Dividend Yield 3.0% 3.7% 4.4% 5.0% 6.2%

Shares O/S (mn) 2,494 Market cap (Rmb mn) 25,823 Market cap ($ mn) 3,927 Price (HK$) 12.26 Date Of Price 21 Feb 11 Free float (%) 30.7% 3mth Avg daily volume 7,402,571.00 3M - Average daily Value (HK$ mn) 97.40 Average 3m Daily Turnover ($ mn) 12.51 MSCI-Cnx 6,749 Exchange Rate 7.78 Fiscal Year End Dec

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

• Another solid set of results. Anta results once again beat both our and the consensus forecasts with 24% y/y increase in earnings to RMB1,551m in 2010. Majority of the positive surprise was the lower than expected effective tax rate. Nevertheless, both top line and operating profits comfortably met our expectations with 26% and 25% y/y growth respectively. Working capital overall remained sound, reflecting the company’s consistent quality growth. We also believe this will be another set of above-the-industry -norm results.

• Positive takeaways from the analyst briefing. 1)2010 full year SSS growth stood at high single digit; 2) Q3 2011 trade fair order recorded 20% y/y increase, on the back of double digit ASP increase. Together with Q1's 23% and Q2's 21%, the run rate of c.21% for the first nine months is on track to meet our revised 2011 sales growth; 3) Management expects retail ASP to increase around 10% y/y in 2011 and therefore maintain stable gross margins outlook; 4) A&P expenses ratio remained at the low end of 13-15% guidance range in 2011.

• Negative share price reaction likely overdone. Anta’s share price dropped near 5% post result announcement. We think this could be a knee-jerk reaction to the 60bps y/y decline in 2H 2010 gross margin and Q3 2011 trade fair volume growth slowdown on the accelerating price increase. In our view, the price hike is in line with the industry average, Anta’s value for money position should be well sustained especially on the back of incessant brand building; we therefore expect volume growth to accelerate on pent-up demand. Separately, the 2H gross margin was affected by temporary in-house production constraints. The read-across for other companies is that industry-wide cost inflation together with intensified competition will limit or even deteriorate the industry’s margins in coming years.

• OW with revised PT of HK$15.8. The decent results reinforce our view that Anta will be the consolidator of the mass sportswear market, on the back of its clear market positioning, superior working capital and proven cost control. Nevertheless the rapidly weakened industry competition landscape will unavoidably limit margin upside in the coming future. Therefore we lower our targeted PEG to 1x (from 1.2x). Meanwhile, we raise 2011 earnings by 5%, mainly reflecting lower guidance on A&P expenses ratio and effective tax rate, leading to a 19% earnings CAGR over 2011-13E. We roll over our PT to Dec-11 and set it at HK$15.8. The stock trades at 14.3x 2011, below its long term average of 16x. Maintain OW.

Asia Pacific Equity Research 21 February 2011

SMID Cap Ideas

Where to find winners in the upcoming earnings season

SMID Caps

Leon Chik, CFAAC

(852) 2800-8590 leon.hk.chik@jpmorgan.com

Andrew Hsu (852) 2800-8572 andrew.tj.hsu@jpmorgan.com

J.P. Morgan Securities (Asia Pacific) Limited

One year small cap performance

-10%

0%10%

20%30%

40%

2/18

/10

5/18

/10

8/18

/10

11/1

8/10

2/18

/11

MSCI APxJ APxJ Small Source: Bloomberg

3 month small cap performance

-4%

-2%

0%2%

4%

6%

11/1

9/10

12/4

/10

12/1

9/10

1/3/

11

1/18

/11

2/2/

11

2/17

/11

MSCI APxJ APxJ Small Source: Bloomberg

• Changes and News: Overall SMID-Caps have been sluggish over the past 3 months (0% change in share price on averge) after a strong 2010. We believe the market is focused on stocks that can beat earnings estimate in the upcoming FY10 results season and would be quite unforgiving to those that come below the street. Our favourite SMID Caps are those that are operating under a short supply situation with pricing power such as Xinyi Glass, KB Chemical and ND Paper where the share price reflects an upcoming over supply situation that may not materialize.

• High conviction ideas: Skyworth still remains our high conviction call. The company reported January flat panel TV units sales of +3% Y/Y against our estimate of minus 6%. Furthermore AVC reported flat panel sales in China for the 2 weeks before and one week after Chinese New Year and was up 28% Y/Y. We expect Skyworth to benefit from the strong rural demand and rising margins in its 2HFY11.

• Company visits and updates: Ahead of the earnings results season, we summarize the upcoming results and expectations and highlight key things to watch for in these 10 companies.

1. Nine Dragon Paper Manufacturing (2689 HK; OW) 2. Mindray (MR US; OW) 3. Xinyi Glass (868 HK; OW) 4. Dah Chong Hong (1828 HK; OW) 5. Kingboard Chemical (148 HK; OW) 6. China Liansu (2128 HK; N) 7. China State Construction (3311 HK; OW) 8. Techtronics Industries (669 HK; OW) 9. United Laboratories (3933 HK; OW) 10. Sinopharm (3933 HK; OW)

Regional SMID Cap Highlights of the week

Company Name Code Price (TP) MCAP US$m

Vol US$m 1W Chg 3M Chg

10e PE (x)

11e PE (x)

10e EV/ EBITDA

10e ROE (%)

P/B (x)

10e Yld (%)

ND/E (%)

ND PAPER (OW)* 2689 HK 10.38 (19) 6,215 16.2 0.8 (11.7) 14.4 10.3 10.8 13.1 2.0 0.6 72.6 KBC (OW)* 148 HK 41.5 (65) 4,520 6.9 (0.7) 1.8 8.8 7.8 5.3 17.5 1.4 2.9 24.8 XINYI GLASS HOLD (OW)* 868 HK 6.87 (8.8) 3,098 7.5 8.0 12.8 15.6 9.6 11.1 26.7 3.8 3.3 16.5 CHINA STATE CONS (OW)* 3311 HK 7.1 (11) 2,718 8.8 (4.7) 8.6 21.6 13.7 14.5 21.8 4.3 1.8 19.9 CHINA LIANSU (N)* 2128 HK 6.82 (5.4) 2,623 39.1 (9.8) 49.2 13.1 10.9 11.2 49.6 5.0 2.2 (32.3) TECHTRONIC INDS (OW)* 669 HK 10 (15) 2,060 5.9 1.3 26.4 18.2 9.3 8.6 10.7 1.9 1.6 24.1 DCH (OW)* 1828 HK 8.33 (12) 1,940 5.3 2.5 (8.9) 11.3 11.2 8.7 22.1 2.3 1.7 10.6 SKYWORTH (OW)* 751 HK 5.1 (7) 1,695 13.4 6.0 20.3 11.9 9.1 7.3 24.6 1.9 1.7 78.5 JOHNSON (OW)* 179 HK 5.17 (6.7) 1,484 2.6 (3.5) 7.9 16.5 12.3 9.9 7.3 2.2 0.0 (28.2) TCL MULTIMEDIA (N)* 1070 HK 3.02 (3.2) 421 1.2 (1.3) (4.4) (6.3) 10.9 na (14.3) 1.1 0.0 29.5 SINOPHARM (OW)* 1099 HK 27.8 (32) 8,085 9.2 4.7 (5.3) 40.1 27.5 18.4 11.6 4.7 0.7 (25.9) MINDRAY (OW)* MR US 26.8 (44) 3,056 21.1 (4.8) (3.7) 19.9 15.9 15.3 21.7 3.7 1.0 (12.6) UNITED LAB (OW)* 3933 HK 12.58 (24) 2,099 10.8 (2.5) (21.0) 17.2 13.1 11.5 18.5 2.6 2.5 (1.0) Source: Bloomberg; * J.P. Morgan estimates for stocks under coverage. (Prices as of 21 Feb 2011 intraday).

Asia Pacific Equity Research 22 February 2011

Genting Berhad

Overweight GENT.KL, GENT MK

A global gaming giant in the making Price: M$10.34

Price Target: M$14.60

Malaysia Gaming

May Yee SohAC

(60-3) 2270 4725 mayyee.soh@jpmorgan.com

JPMorgan Securities (Malaysia) Sdn. Bhd. (18146-X)

Kenneth Fong , CFA (852) 2800-8597 kenneth.kc.fong@jpmorgan.com

J.P. Morgan Securities (Asia Pacific) Limited

6

9

12

M$

Feb-10 May-10 Aug-10 Nov-10 Feb-11

Pr ice Per fo rman ce

GENT.KL share price (M$)FBMKLCI (rebased)

YTD 1m 3m 12m Abs -6.0% -7.0% 3.9% 66.0% Rel -6.5% -5.6% 2.6% 45.5%

Genting Berhad (Reuters: GENT.KL, Bloomberg: GENT MK) M$ in mn, year-end Dec FY08A FY09A FY10E FY11E FY12E Revenue 9,083 8,894 15,469 17,559 20,620 Core Net Profit 1,129 1,157 2,360 2,873 3,135 Core EPS (M$) 0.30 0.31 0.64 0.77 0.85 DPS (M$) 0.07 0.07 0.07 0.07 0.07 Revenue growth (%) 7.1% -2.1% 73.9% 13.5% 17.4% Core EPS growth (%) -13.0% 2.5% 103.9% 21.8% 9.1% ROCE 15.8% 11.0% 17.6% 18.5% 20.6% ROE 9.1% 8.8% 15.8% 16.6% 15.6% P/BV 3.1 2.8 2.4 2.1 1.8 Adjusted P/E 33.96 33.13 16.25 13.34 12.23 EV/EBITDA 10.2 12.1 5.9 4.1 2.9 Dividend Yield 0.7% 0.7% 0.7% 0.7% 0.7%

52-week Range (M$) 11.98 - 6.20 Mkt Cap (M$ mn) 38,398.7 Mkt Cap ($ bn) 12.7 Shares O/S (mn) 3,714 Price (M$) 10.34 Date Of Price 18 Feb 11 Free float (%) 59.0% 3mth Avg daily volume 5,704,455.00 3M - Average daily Value (M$ mn) 54.20 Average 3m Daily Turnover ($ mn) 17.86 FBMKLCI 1,526 Exchange Rate 3.03 Fiscal Year End Dec

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

• Assume coverage on Genting Bhd (GB) with OW rating; top pick within MAL/SIN space. We stay positive on GB as we see potential re-rating catalysts of 1) Genting Malaysia-led (GENM) M&A ventures, 2) more value-unlocking initiatives and 3) lesser-than-expected cannibalization. The stock is still trading below its 5-year historical mean P/E and a 30% discount to our revised sum-of-the-parts valuation – unwarranted, in our view, given its global transformation story and gaming-centric earnings. In our view, investors buying GB today not only get its unlisted assets for free but also enjoy a 10% discount off its listed subsidiaries and associate. GB is our preferred pick within the group.

• GENM in the spotlight; GB decoupling from GENS. We believe that 2011 will see the spotlight shifting to GENM after Genting Singapore’s (GENS) dominance over the past 1+ years on the back of GENM’s higher-than-historical FY11E-12E core EPS growth and emerging catalysts of 1) stronger-than-expected Aqueduct earnings, 2) successful bids for new UK casinos and 3) more geographical expansions. Meanwhile, the share prices of GB and GENS have started decoupling of late as the market becomes cautious on GENS’s near-term prospects. We are still bullish on Singapore’s gaming prospects over the medium- to long-term and see GB as a value play on GENS as investors are getting GENS at S$1.20/share via its parent, assuming all things equal.

• More gaming assets + non-core divestments = narrowed SOP discount. Despite >80% of its earnings being gaming-centric, the stock is still trading at a 30% discount to its SOP (vs. a 2-year average of 25%). We see re-rating closer to our SOP value as the market better appreciates GB as a pure casino play with more additions of gaming assets and/or divestments of non-core assets.

• Raising FY10E-12E earnings by 22-32% to reflect the recent upgrades at its listed subsidiaries and cuts in MI and taxes. No change to our power earnings but we take cue from YTD trends to cut oil & gas margins. After updating our SOP valuation with the Dec-11 PTs for all its listed subsidiaries and rolling over our valuation horizon to Dec-11, our PT is raised from M$11.50 to M$14.60. Key risks: 1) execution risks for new ventures, 2) prolonged cannibalization, and 3) exogenous factors such as health scares and an economic slowdown.

Asia Pacific Equity Research 22 February 2011

Genting Malaysia

Overweight GENM.KL, GENM MK

Time to shine? ▲

Price: M$3.34

Price Target: M$4.10 Previous: M$3.70

Malaysia Gaming

May Yee SohAC

(60-3) 2270 4725 mayyee.soh@jpmorgan.com

JPMorgan Securities (Malaysia) Sdn. Bhd. (18146-X)

Kenneth Fong , CFA (852) 2800-8597 kenneth.kc.fong@jpmorgan.com

J.P. Morgan Securities (Asia Pacific) Limited

2.4

3.0

3.6

M$

Feb-10 May-10 Aug-10 Nov-10 Feb-11

Pr ice Per fo rman ce

GENM.KL share price (M$)FBMKLCI (rebased)

YTD 1m 3m 12m Abs -4.8% -4.8% -3.5% 22.8% Rel -3.8% -1.5% -4.9% 2.3%

Genting Malaysia (Reuters: GENM.KL, Bloomberg: GENM MK) M$ in mn, year-end Dec FY08A FY09A FY10E FY11E FY12E Revenue 4,887 4,992 5,046 6,308 7,670 Core Net Profit 1,416 1,405 1,364 1,404 1,764 Core EPS (M$) 0.24 0.24 0.23 0.24 0.30 DPS (M$) 0.05 0.05 0.05 0.05 0.05 Revenue growth (%) 12.3% 2.2% 1.1% 25.0% 21.6% Core EPS growth (%) 21.6% -0.8% -2.9% 1.9% 25.6% ROCE 13.5% 19.1% 15.7% 14.8% 17.8% ROE 17.1% 15.2% 12.9% 12.1% 13.7% P/BV 2.4 1.9 1.8 1.6 1.5 Adjusted P/E 13.82 14.78 14.34 14.08 11.20 EV/EBITDA 8.8 5.7 6.9 5.5 3.8 Dividend Yield 1.6% 1.6% 1.6% 1.6% 1.6%

52-week Range (M$) 3.72 - 2.46 Mkt Cap (M$ mn) 19,760.0 Mkt Cap ($ bn) 6.5 Shares O/S (mn) 5,916 Price (M$) 3.34 Date Of Price 18 Feb 11 Free float (%) 49.2% 3mth Avg daily volume 5,298,244.00 3M - Average daily Value (M$ mn) 16.30 Average 3m Daily Turnover ($ mn) 5.37 FBMKLCI 1,518 Exchange Rate 3.03 Fiscal Year End Dec

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

• We assume coverage on Genting Malaysia (GENM) with an OW rating and Dec-11 PT of M$4.10. After underperforming its Genting counterparts and the broader market by 14-29% in 2010, we believe that GENM will shine in 2011. Beyond a higher-than-historical FY11E-12E core earnings growth, we see potential re-rating catalysts from 1) stronger-than-expected contributions from Aqueduct, 2) successful bids for new UK ventures and 3) more geographical expansions. Valuations are at a steep 32-53% discount to its regional peers despite its transformation into a global gaming play.

• Spotlight on Aqueduct. Although GENM’s Aqueduct debut could be delayed to mid-summer instead of spring, we are not overly concerned and see upside potential to our estimates with 1) the potential inclusion of table games, or at least ETGs for a start, and 2) subsiding competitive risks after the federal government rejected the proposed neighboring Catskills casino.

• Not forgetting UK either. While we do not expect Genting UK’s ops to turn around materially over the near term, there could be positive newsflow from the UK as it has placed bids for two of the potential eight new large casino sites earmarked under the new 2005 Gambling Act. After a slow start, Hull has started the ball rolling by awarding a provisional casino licence to Apollo Leisure (GENM's partner for the Newham site).

• Upping FY10E-12E EPS forecasts by 4-8% due to moderation of cannibalization to RWG’s gaming volumes and new earnings stream from Aqueduct and Genting UK. Post 1) the earnings upgrade, 2) the addition of its new overseas ventures and 3) rolling over our PT to Dec-11, our sum-of-the-parts PT is raised from M$3.70 to M$4.10. Our FY12E projections, which are 11% ahead of consensus, merely reflect full-year, yet modest, contributions from Aqueduct and a marginal turnaround in the UK. Key risks are: (1) more related-party transactions, (2) unexpected regulatory changes, (3) larger-than-expected cannibalization, (4) execution risks for its new ventures.

Asia Pacific Equity Research 22 February 2011

Genting Singapore

Neutral GENS.SI, GENS SP

Taking a breather ▲

Price: S$2.00

Price Target: S$2.15 Previous: S$2.00

Singapore Gaming

May Yee SohAC

(60-3) 2270 4725 mayyee.soh@jpmorgan.com

JPMorgan Securities (Malaysia) Sdn. Bhd. (18146-X)

Kenneth Fong , CFA (852) 2800-8597 kenneth.kc.fong@jpmorgan.com

J.P. Morgan Securities (Asia Pacific) Limited

Christopher Gee, CFA (65) 6882-2345 christopher.ka.gee@jpmorgan.com

J.P. Morgan Securities Singapore Private Limited

0.8

1.4

2.0S$

Feb-10 May-10 Aug-10 Nov-10 Feb-11

Pr ice Per fo rman ce

GENS.SI share price (S$)FTSTI (rebased)

YTD 1m 3m 12m Abs -8.7% -7.0% -2.0% 106.2% Rel -5.0% -3.4% 2.0% 94.8%

Genting Singapore (Reuters: GENS.SI, Bloomberg: GENS SP) S$ in mn, year-end Dec FY08A FY09A FY10E FY11E FY12E Revenue 644 495 3,299 3,608 4,303 Core Net Profit -56 -167 887 1,102 1,297 Core EPS (S$) -0.01 -0.01 0.07 0.09 0.11 DPS (S$) 0.00 0.00 0.00 0.00 0.00 Revenue growth (%) -14.1% -23.2% 567.1% 9.4% 19.3% Core EPS growth (%) -701% 153% -595% 24% 18% ROCE -0.7% -1.6% 13.8% 17.1% 17.1% ROE -1.8% -4.9% 19.9% 20.7% 19.9% P/BV 7.0 5.5 5.1 4.1 3.4 Adjusted P/E -267.99 -89.95 27.47 22.10 18.79 EV/EBITDA 2,068.2 -511.9 22.0 16.3 13.4 Dividend Yield 0.0% 0.0% 0.0% 0.0% 0.0%

52-week Range (S$) 2.35 - 0.83 Mkt Cap (S$ mn) 24,361.4 Mkt Cap ($ bn) 19.1 Shares O/S (mn) 12,181 Price (S$) 2.00 Date Of Price 21 Feb 11 Free float (%) 48.3% 3mth Avg daily volume 85,918,780.00 3M - Average daily Value (S$ mn) 179.68 Average 3m Daily Turnover ($ mn) 141.07 FTSTI 3,071 Exchange Rate 1.27 Fiscal Year End Dec

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

• We assume coverage on Genting Singapore (GENS) with a Neutral rating and Dec-11 PT of S$2.15. After solid outperformance in 2010, we are turning more cautious on the stock in the absence of strong near-term re-rating catalysts.

• Lacks near-term catalysts. We do not expect positive surprises from its 4Q results, which will be released on 22 Feb. Beyond that, junket licensing, if it happens, is likely a 2H story while M&A opportunities beyond Singapore (specifically Japan) will likely take place over the medium-term. We see ramp-up as a key focus for RWS in 1H and this is unlikely to spark strong re-rating potential. In our view, GENS’s 3-14% premium valuation largely reflects Singapore's stable duopoly market and its superior earnings quality.

• Raising earnings and PT but staying Neutral. Our FY10E-12E core earnings are raised by up to 6% to reflect a ~1%pt increase in gaming margins, a S$27MM-145MM increase in non-gaming EBITDA and savings form the recent loan refinancing. Our sum-of-the-parts Dec-11 PT goes up from S$2.00 to S$2.15 after 1) the earnings upgrade and 2) moving our valuation horizon to FY12E. We are using an unchanged 25% premium to its Macau peers’ 9-11x FY12E EBITDA multiple to reflect Singapore's duopoly structure and GENS’s better earnings quality. We are staying Neutral in the absence of strong near-term re-rating catalysts. Within the Genting Group, our top pick is its parent, Genting Bhd (GENT MK, OW).

• Key risks: Downside risks: 1) Potential price competition between MBS and GENS, 2) regulatory risks to prevent social problems from gaming, 3) potential credit risks from direct VIP and 4) slower-than-expected junket approval. Upside risks: 1) stronger-than-expected growth in the Singapore gaming market, 2) positive operating leverage from new areas as the IR ramps up further, 3) quicker-than-expected materialization of M&As.

Asia Pacific Equity Research 21 February 2011

Thai banks

Sweet spot; Prefer SCB & BAY

Thailand Banks

Anne JirajariyavechAC (66-2) 684-2684 anne.x.jirajariyavech@jpmorgan.com

JPMorgan Securities (Thailand) Limited

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

J.P. Morgan Securities (Asia Pacific) Limited

Equity Ratings and Price Targets Mkt Cap Rating Price Target Company Symbol (Bt mn) Price(Bt) Cur Prev Cur Prev Bank of Ayudhya BAY.BK 151,854 25.00 OW n/c 30.00 n/c Bangkok Bank BBLf.BK 303,506 159.00 N n/c 175.00 165.00 KASIKORNBANK KBANf.BK 282,405 118.00 OW n/c 143.00 137.00 Krung Thai Bank KTB.BK 188,938 16.90 OW n/c 21.00 n/c Siam Commercial Bank SCB.BK 344,362 101.50 OW n/c 140.00 125.00 TMB Bank Public Company Limite TMB.BK 95,763 2.20 UW n/c 1.10 n/c Thanachart Capital TCAP.BK 41,327 31.00 N n/c 35.00 40.00 Tisco Financial Group Pcl. TISCO.BK 25,840 35.50 N n/c 40.00 n/c Kiatnakin Bank KK.BK 20,933 33.00 UW n/c 30.00 28.00 Source: Company data, Bloomberg, J.P. Morgan estimates. n/c = no change. All prices as of 17 Feb 11.

Thai banking sector's 12-month forward PB band

1.47x 1.33x

0.87x

1.10x

1.57x

1.80x

50

100

150

200

250

300

350

400

Jan-02

Jan-03

Jan-04

Jan-05

Jan-06

Jan-07

Jan-08

Jan-09

Jan-10

Jan-11

Source: J.P. Morgan.

• We reiterate our positive view on the Thai banking sector, expect 16% NP growth this year supported by positive credit environment, NIM expansion, and continuing non-NII growth.

• Corporate & high-yield consumer loans are key drivers. Private investment and solid employment conditions underpinning the growth.

• Key financials: We estimate loan growth of 11%, NIM +18bp Y/Y to 3.47%, non-NII growth 18%, op. revenue growth 16%, cost growth 11%, PPOP growth 22%, credit cost -6bp to 63bp, net profit growth 16%, and ROE 13.6%

• We upgrade earnings and PT of three big banks supported by higher-than-expected loan growth at the end of last year. o Raise BBL’s PT to Bt175 from Bt165 as we increase our FY11E and

FY12E NP by 4% and 7%, respectively. o Raise KBANK’s PT to Bt143 from Bt137 and adjust FY11E and

FY12E NP up by 3% and 4%, respectively. o Raise SCB’s PT to Bt140 from Bt125 and revise up FY11-12E NP by

9% and 8%, respectively. o We lower our FY12E NP for TCAP by 14% (maintaining FY11E) as

we believe the integration process could take longer than expected. We lower our PT to Bt35 from Bt40, accordingly.

• M&A possibilities. We believe this will remain one of the key themes for the year. MOF is keen to sell its remaining stake in TMB. Also, FIDF is considering how to manage its 55% holding in KTB before the institution is closed down (in FY12) (Source: (Khao Hoon).

• Risks are 1) high market expectation on earnings; 2) inflation and too tight monetary policy which could derail loan growth, asset quality; and 3) stock valuation – PB discount to regional has narrowed to 5% from 30% in the past.

• SCB and BAY are our sector top picks given the banks’ exposure in corporate & high-yield consumer lending. We our OW on KBANK and KTB given their strong earnings growth outlook. We are N on BBL on relatively low ROE. We are UW on TMB on valuation basis.

Asia Pacific Equity Research 22 February 2011

Champion REIT

Neutral 2778.HK, 2778 HK

FY10 results review: bottoming out ▲

Price: HK$4.68

Price Target: HK$4.30 Previous: HK$4.10

Hong Kong REITs

Amy Luk, CFAAC

(852) 2800 8524 amy.kp.luk@jpmorgan.com

J.P. Morgan Securities (Asia Pacific) Limited

3.0

4.0

5.0

HK$

Feb-10 May-10 Aug-10 Nov-10 Feb-11

Pr ice Per fo rman ce

2778.HK share price (HK$)HSI (rebased)

YTD 1m 3m 12m Abs 2.0% -2.9% 2.4% 39.3% Rel 0.0% -1.3% 2.9% 24.0%

Champion REIT (Reuters: 2778.HK, Bloomberg: 2778 HK) HK$ in mn, year-end Dec FY08A FY09A FY10A FY11E FY12E Revenue 1,614 2,035 1,876 2,078 2,248 Net Property Income 1,334 1,709 1,509 1,696 1,893 Core Profit 492 648 496 683 774 Distributable Profit 1,408 1,312 1,084 1,130 1,175 EPU (HK$) 0.111 0.137 0.102 0.138 0.156 DPU (HK$) 0.318 0.261 0.216 0.216 0.223 Revenue growth 92.4% 26.1% -7.8% 10.8% 8.2% Distribution growth 103.5% -6.8% -17.4% 4.2% 4.0% Total Debt/Total Asset 35.8% 33.9% 32.3% 28.7% 27.4% Distribution Yield 6.8% 5.6% 4.6% 4.6% 4.8% Core Earnings Yield 2.4% 2.9% 2.2% 3.0% 3.3% NPV (HK$) 4.20 4.27

Shares O/S (mn) 4,931 Market cap (HK$ mn) 23,075 Market cap ($ mn) 2,964 Price (HK$) 4.68 Date Of Price 21 Feb 11 Free float (%) 40.9% 3M - Average daily volume (mn) 10.10 3M - Average daily Value (HK$ mn) 47.56 Average 3m Daily Turnover ($ mn) 6.11 HSI 23,485 Exchange Rate (HK$/US$) 7.78 Fiscal Year End Dec

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

• FY10 results in line with expectation: Champion REIT reported FY10 distributable income of HK$1,084 million, down 17.4% Y/Y, broadly in line with our expectation. While average retail passing rent of Langham Place recorded decent growth of 10% from HK$88.61 psf in Dec 09 to HK$97.48 psf in Dec 10, the increase was not sufficient to compensate for the drop in rental income from Citibank Plaza due to negative rental reversion. Management has adopted a rent over occupancy strategy during the office down cycle.

• The worst is over: Including committed leases, vacancy of Citibank Plaza would have dropped to 7.7% instead of 18.5% at the end of Dec 10. Spot rents growth was encouraging, increasing from HK$75 psf to HK$100 psf in 2010. The faster than expected recovery was partly due to major tenant BoA Merrill Lynch renewing their space. As there is limited office supply in Central and Champion managed to fill up incremental floor area of 3.5% net of spaces vacated by Barclays, we believe the worst for Citibank Plaza is over. The investment properties were valued up by 13.5% on flat cap rate, raising book value to HK$6.36 per share.

• Revising up earnings forecast: In view of better than expected rental growth in Citibank Plaza and improving retail sales in Langham Place, we revise up our FY11E and FY12E DPU by 5% each to HK$0.216 and HK$0.223 respectively. However, Citibank Plaza still needs to fill the space of the former Bear Stearns lease expiring in May 2011 (4% of floor area). Hence we estimate average occupancy of the building to be at high 80s in 2011.

• Raising PT to HK$4.3, maintain Neutral: We raise our Dec-11 PT from HK$4.1 to HK$4.3 which is par to our Dec-11 NPV, where a discount rate of 6.8% is adopted. Upside risks to our PT include higher than expected occupancy rates, better than expected rental growth and sudden resumption of 100% payout ratio. Downside risks include interest rate hike. Our new PT implies 5% yield for FY11E. Maintain Neutral.

Asia Pacific Equity Research 21 February 2011

Coal India

Neutral COAL.BO, COAL IN

Cutting FY12E on lower volumes; Differential pricing key as wage agreement, inflation loom over the horizon

▼ Price: Rs301.85

Price Target: Rs300.00 Previous: Rs320.00

India India Mining

Pinakin Parekh, CFAAC

(91-22) 6157-3588 pinakin.m.parekh@jpmorgan.com

Neha Manpuria (91-22) 6157-3589 neha.x.manpuria@jpmorgan.com

J.P. Morgan India Private Limited

240

300

360

Rs

Feb-10 May-10 Aug-10 Nov-10 Feb-11

Pr ice Per fo rman ce

COAL.BO share price (Rs)BSE30 (rebased)

YTD 1m 3m 12m Abs -4.1% -3.9% -9.4% 23.2% Rel 6.2% -0.9% -3.5% 9.6%

Coal India (Reuters: COAL.BO, Bloomberg: COAL IN) Rs in mn, year-end Mar FY10A FY11E FY12E FY13E Net Sales 446,153 492,405 537,687 581,605 Net Profit 96,224.5 103,585.9 124,170.2 141,418.9 EPS (Rs) 15.23 16.40 19.66 22.39 Net profit growth (%) 364.1% 7.7% 19.9% 13.9% ROE 42.9% 34.9% 32.5% 29.4% P/E (x) 19.8 18.4 15.4 13.5 P/BV (x) 7.4 5.7 4.4 3.6 EV/EBITDA (x) 14.7 11.4 9.2 7.6

52-week Range (Rs) 357.60 - 245.00 Market cap (Rs mn) 1,906,594 Market cap ($ mn) 42,172 Price (Rs) 301.85 Date Of Price 21 Feb 11 3-mth trading volume (mn) 3-mth trading value ($ mn) Shares O/S (mn) 6,316 BSE30 18,438

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

• Cutting FY12-13E estimate on lower volumes; FY12E to be a choppy year: We build in lower off-take for FY12-13E (~2% lower compared to earlier estimates) and hence cut our EPS estimates by ~3% for FY12-13E (we are 2/7% lower than consensus). We lower our March-12 PT (based on 7.5x FY13E EV/EBITDA, we are not changing our target multiple) to Rs300 (Rs320 earlier). We believe FY12E is likely to be a choppy year for COAL, given a) high inflation which could make notified coal price increases difficult and b) wage revision which is due in June. While any final hike would take months of negotiations, COAL would start providing in P&L, and hence would require an off-setting notified coal price hike concurrently. We are building in volume off take growth of 5.5/6% in FY12/13E.

• What is not in our forecasts: Any sharp increase in wagon availability or potential leeway for COAL to invest in logistics infrastructure should lead to higher off take growth going forward. We have not build in large differential pricing for COAL from current levels (25% of sales value on market linked coal prices), though we believe this could be one of the key levers for increasing coal prices (essentially all customers with non regulated end product pricing across various sectors pay quasi market linked pricing for coal). Any sharp increase in dividend payout (we estimate at ~21%) would be another positive given the net cash balance (FY13E at $13bn), though for this we would need to see the largest shareholder (Govt) ask for higher dividends (please see our report on this titled-‘ State Owned Miners: The problem of excess cash - Higher payout ratios a possibility, even as acquisitions 'talked up', dated 23rd Nov 2010)

• If the worst in terms of volume miss is in the price, is it time to buy? Not so soon: At 15x FY12E P/E, we believe the key risk from here is essentially COAL's inability to raise notified coal price hikes. While admittedly downside is limited given the structural growth story, COAL could very much remain at the current level for the next few months as buyers wait for clarity on price increases before stepping in.

Asia Pacific Equity Research 21 February 2011

Hyflux Limited ▼ Neutral

Previous: Overweight

HYFL.SI, HYF SP

Libya unrest may see further contract delay in MENA ▼

Price: S$2.10

Price Target: S$1.90 Previous: S$2.33

Singapore Water

Ying-Jian ChanAC

(65) 6882-2378 ying.jian.yj.chan@jpmorgan.com

J.P. Morgan Securities Singapore Private Limited

1.6

2.2

2.8

S$

Feb-10 May-10 Aug-10 Nov-10 Feb-11

Pr ice Per fo rman ce

HYFL.SI share price (S$)FTSTI (rebased)

YTD 1m 3m 12m Abs -6.5% -5.7% -2.0% -6.7% Rel -1.9% -0.7% 2.0% -18.6%

Hyflux Limited (Reuters: HYFL.SI, Bloomberg: HYF SP) S$ in , year-end Dec FY08A FY09A FY10E FY11E FY12E Revenue (S$ mn) 554 525 658 639 563 Net Profit (S$ mn) 59.0 75.0 79.3 84.8 88.5 EPS 0.11 0.14 0.09 0.10 0.10 EPS (Recurring) 0.11 0.14 0.09 0.10 0.10 DPS 0.03 0.05 0.03 0.03 0.04 Revenue growth (%) 187.5% -5.3% 25.3% -2.9% -11.8% EPS growth (%) 76.4% 27.1% -34.0% 7.0% 4.4% EPS (Recurring) Growth 162.4% 27.6% (34.2%) 7.0% 4.4% ROE 21.3% 21.4% 18.9% 17.9% 16.7% P/E (x) 19.1 15.0 22.8 21.3 20.4 P/BV (x) 3.8 3.1 4.3 3.8 3.4 Dividend Yield 1.6% 2.4% 1.5% 1.6% 1.7%

52-week Range (S$) 3.13 - 1.79 Mkt Cap (S$ mn) 1,805.95 Mkt Cap ($ mn) 1,417.88 Price (S$) 2.10 Date Of Price 21 Feb 11 Free float (%) 68.6% 3-mth trading volume (mn) 1.48 3-mth trading value (S$ mn) 3.35 3-mth trading value ($ mn) 2.63 FTSTI 3,087 Exchange Rate 1.27 Fiscal Year End Dec

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

• MENA may look less attractive in the near term, downgrade to Neutral: Inspired by uprisings in neighboring Tunisia, Egypt and Bahrain, protesters in Libya are demanding an end to President Muammar Gaddafi's 41-year rule, which has seen violence break out in parts of the country. We believe the Libya protests may have an impact on Hyflux's operations in Libya. Hyflux has significant exposure in Libya and Algeria, and continues to look for opportunities for water projects in the MENA region. We downgrade the stock to Neutral as we think the current unrest is likely to see investors assign a higher risk premium to Hyflux's MENA operations.

• What’s at stake in Libya?: Hyflux (1) is still in exclusive negotiations with the government on 2 mega-sized seawater desalination plant in Tripoli (500,000m3/day) and Benghazi (400,000m3/day), estimated to potentially add c.US$1 billion to its orderbook; and (2) has been awarded a US$100 million EPC contract for a seawater desalination plant at Tobruk (40,000m3/day), awaiting Notice to Proceed (with the construction). We see risks that these contracts might not be honored if there is a change in government given these projects are co-owned with the existing government. If there is no change in government, we would still expect further delays for these contracts before work can begin.

• Tuas desalination plant seeing delay though we remain optimistic: The tender for the 318,500m3/day Singapore DBOO desalination plant closed in Oct 2010 with Hyflux putting in the lowest first-year tariff bid of S$0.45. We believe Hyflux remains a strong bidder for this project given the proximity of this plant to its existing SingSpring plant. We estimate current group net orderbook to be c.S$430 million.

• Dec-11 SOTP PT of S$1.90 (adj. for bonus-issue): In our reduced PT, we now value Libya based on 50% probability of the three existing projects materializing with no new contract wins. We reduce FY12E earnings by 9%, factoring in no earnings contribution from Libya for FY11E/FY12E due to likely delays. Including Algeria, the MENA region now accounts for 55% of Hyflux’s SOTP and 50%/22% of JPM FY11E/FY12E earnings.

Asia Pacific Equity Research 21 February 2011

Nestlé India Limited

Neutral NEST.BO, NEST IN

Q4CY10 - Strong performance; gross margin expansion a key positive ▲

Price: Rs3,450.55

Price Target: Rs3,520.00 Previous: Rs3,470.00

India Food & Food Manufacture

Latika Chopra, CFAAC

(91-22) 6157-3584 latika.chopra@jpmorgan.com

J.P. Morgan India Private Limited

2,400

3,200

4,000

Rs

Feb-10 May-10 Aug-10 Nov-10 Feb-11

Pr ice Per fo rman ce

NEST.BO share price (Rs)NIFTY (rebased)

YTD 1m 3m 12m Abs -9.5% -5.4% -8.3% 30.1% Rel 1.8% -0.8% 0.7% 18.4%

Nestlé India Limited (Reuters: NEST.BO, Bloomberg: NEST IN) Rs in mn, year-end Dec FY09A FY10E FY11E FY12E Revenue 51,294 62,547 76,524 92,831 Net Profit 6,976.4 8,370.6 10,261.7 12,459.5 EPS (Rs) 72.36 86.82 106.43 129.23 DPS (Rs) 48.50 48.50 58.54 71.07 Revenue growth (%) 18.6% 21.9% 22.3% 21.3% EPS growth (%) 23.5% 20.0% 22.6% 21.4% ROCE 179.4% 158.9% 126.3% 107.7% ROE 132.3% 116.5% 98.8% 86.3% P/E (x) 47.7 39.7 32.4 26.7 P/BV (x) 57.2 47.3 38.9 EV/EBITDA (x) 23.5 19.6 15.7 12.7 Dividend Yield 1.4% 1.4% 1.7% 2.1%

Shares O/S (mn) 96 Market cap (Rs mn) 332,688 Market cap ($ mn) 7,359 Price (Rs) 3,450.55 Date Of Price 18 Feb 11 Free float (%) 37.2% 3mth Avg daily volume 36,069.00 3M - Average daily Value (Rs mn) 127.75 Average 3m Daily Turnover ($ mn) 2.83 NIFTY 5,459 Exchange Rate 45.21 Fiscal Year End Dec

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

• Robust earnings performance. Nestle India reported net sales, EBITDA and adjusted PAT of Rs16.7bn (+24% y/y), Rs3.3bn (+66% y/y) and Rs2.2bn (+66% y/y) for Q4CY10. While revenue growth was inline with our estimates, EBITDA and PAT came in 5% ahead of our expectations.

• Strong domestic sales growth at 27% y/y supported by healthy volume growth and price increases (more towards 2HCY10 in our view). Export sales registered 17% y/y decline, which could possibly be due to diversion of capacity to domestic demand as was the case in Q3CY10.

• Gross margin expansion of 60bp y/y was a key positive. After four quarters of gross margin decline (on account of stiff commodity inflation), Nestle posted 60bp increase in gross margins supported by aggressive price hikes (in 2HCY10) and better product mix. EBITDA margins expanded sharply from 14.7% in Q4CY09 to 19.7% in Q4CY10. However these are not strictly comparable as Q4CY09 results were impacted by higher employee costs due to one time actuarial losses. While raw material inflation remains a significant challenge, we believe price increases and better SG&A leverage will help mitigate cost pressures going forward.

• Stepping up capex investments. Nestle India is looking to invest considerably in brownfield and greenfield expansion over the next 2-3 years. Robust demand trends for its product portfolio and current high capacity utilization rates for existing plants are driving this aggressive expansion at their end. In order to fund these investments, the company’s board has proposed an increase in borrowing limits upto Rs25bn (US$550mn) and has in principle received RBI approval for availing External Commercial Borrowings of upto US$450mn from the foreign equity holders. Also dividend payout came down from 71% in CY09 to 57% in CY10 with DPS remaining flat y/y at Rs48.5/share.

• We remain positive on the company's growth outlook and believe it is amongst the best plays on fast-growing high potential processed foods segment in India. We estimate 22% sales and EPS CAGR over CY10-12E. Stock currently trades at 33x CY11E and 27x CY12E P/E. Neutral.

Asia Pacific Equity Research 22 February 2011

Parkson Retail Group Ltd

Neutral 3368.HK, 3368 HK

2010 results disappoint, but store expansion likely to accelerate ▼

Price: HK$11.96

Price Target: HK$10.50 Previous: HK$12.20

China Broadlines/Department Stores

Ebru Sener KurumluAC

(852) 2800-8521 ebru.sener@jpmorgan.com

J.P. Morgan Securities (Asia Pacific) Limited

10

12

14

HK$

Feb-10 May-10 Aug-10 Nov-10 Feb-11

Pr ice Per fo rman ce

3368.HK share price (HK$)MSCI-Cnx (rebased)

YTD 1m 3m 12m Abs -0.2% -7.6% -12.3% 7.0% Rel 1.4% -4.8% -9.4% -3.3%

Parkson Retail Group Ltd (Reuters: 3368.HK, Bloomberg: 3368 HK) Rmb in mn, year-end Dec FY10A FY11E FY12E FY13E Revenue (Rmb mn) 4,400 5,186 6,150 7,227 Net Profit (Rmb mn) 992 1,149 1,359 1,619 EPS (Rmb) 0.35 0.41 0.48 0.58 Recurring EPS (Rmb) 0.35 0.41 0.48 0.58 DPS (Rmb) 0.16 0.20 0.24 0.29 Revenue growth (%) 12.6% 17.9% 18.6% 17.5% Net profit growth (%) 8.9% 15.9% 18.3% 19.2% Recurring profit growth (%) 8.9% 15.9% 18.3% 19.2% EPS growth (%) 8.7% 15.9% 18.3% 19.2% ROCE 18.2% 18.9% 20.5% 22.1% ROE 23.5% 23.9% 25.0% 26.2% P/E (x) 28.6 24.7 20.9 17.5 P/BV (x) 6.3 5.6 4.9 4.3 EV/EBITDA (x) 18.3 15.5 12.9 10.8 Dividend Yield 1.6% 2.0% 2.4% 2.9%

Shares O/S (mn) 2,810 Market cap (Rmb mn) 28,389 Market cap ($ mn) 4,318 Price (HK$) 11.96 Date Of Price 21 Feb 11 Free float (%) 48.5% 3mth Avg daily volume 5,558,310.00 3M - Average daily Value (HK$ mn) 70.94 Average 3m Daily Turnover ($ mn) 9.11 MSCI-Cnx 6,749 Exchange Rate 7.78 Fiscal Year End Dec

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

• Weak 2010 results: Parkson announced Rmb992MM in net profit, up 9% y/y (or 13.5% y/y excluding stock option expenses) and 9% below our estimate. While revenue was only 1% below our estimate, the main reasons for the miss were a lower-than-expected operating margin and higher-than-expected financial costs.

• Highlight from results: 1) FY10 SSSG rate was around 11.4%, similar to in 1H10. 2) In 2010 Parkson opened four new stores (one planned opening delayed to Jan-11 from Dec-10). Parkson maintained the merchandise gross margin at 19% despite the new store openings. However, the operating margin fell to 10.4% from 10.8% in 2009.

• 2011 guidance: 1) The major change in company guidance was accelerating store expansion from around five stores p.a. to eight stores, which points to a c20% addition to GFA p.a for the next three years. 2) For 2011, management expects 11-12% SSSG.

• Changes to our estimates: We lower our 2011 earnings estimate by 13%, mainly as a result of the 9% earnings miss of 2010, and as we expect slight margin erosion on the back of new store openings. Following management’s new guidance on store openings we are now looking for 16% earnings growth in 2011 and c19% from 2011-13 as we expect the stores to start driving earnings growth.

• Maintain Neutral: We maintain our Neutral rating as we believe accelerating store expansion is likely to help Parkson improve its earnings growth over the mid term. However we expect the share price to remain lackluster in 2011 as earnings growth lags behind peers. We cut our PT by 14% to HK$10.5 largely due to our earnings cut. Our Dec-11 PT is based on a 1.2 PEG ratio. The main risk on the upside is better-than-expected margins and on the downside execution risk at new stores.

Asia Pacific Equity Research 21 February 2011

Pruksa Real Estate Pcl

Overweight PS.BK, PS TB

Profit below expectation on high opex ▼

Price: Bt17.50

Price Target: Bt25.00 Previous: Bt28.00

Thailand Property

Anne JirajariyavechAC (66-2) 684-2684 anne.x.jirajariyavech@jpmorgan.com

JPMorgan Securities (Thailand) Limited

Christopher Gee, CFA (65) 6882-2345 christopher.ka.gee@jpmorgan.com

J.P. Morgan Securities Singapore Private Limited

14

20

26

Bt

Feb-10 May-10 Aug-10 Nov-10 Feb-11

Pr ice Per fo rman ce

PS.BK share price (Bt)SET (rebased)

YTD 1m 3m 12m Abs -5.4% -4.4% -6.9% 13.6% Rel -1.8% -1.7% -7.4% -29.1%

Company data 52 Wk Range 14.0-25.5 Market cap (Bt mn) 38,619 Market cap (USD MM) 1,264 Share O/S (MM) 2,207 Free Float (%) 26.0 Ave. daily volume (MM) 5.97 Ave. daily Value (Bt MM) 113 Exchange rate 30.55 Index 996 Year-end Dec Source: Bloomberg. Price date17 February 2011

• PS’s 4Q10 NP came in below expectation due to higher opex. Revenue was in-line and gross profit margin was above expectation. However, aggressive marketing campaigns have lowered net profit margin.

• 4Q10 revenue at Bt7.0 billion was in-line with our expectation and was up strongly 85% Q/Q as PS transferred more condo and as the company resolved its construction issue in the last quarter.

• GPM improved to 38.7% from 38.1% in the prior quarter. We believe the transferred condo was the key driver for better gross profit margin.

• Negatives are high opex and increasing gearing. SG&A/Sales was very high at 19.3%. Despite being lower from 25.9% in the prior quarter, this was significantly above our expectation at 13.7%. PS has been aggressive in promoting its condo projects and there is an accounting mismatch in condo revenue and marketing expenses. Net D/E continued to increase from 9.6% a year ago to 59% in the prior quarter and 76.4% this quarter.

• PS plans to launch 78 new projects this year (72 projects worth Bt29 billion were launched last year). PS target revenue of Bt32 billion (+37% growth) for this year with 40% from condo (7 projects). Current backlog (to be realized this year) is Bt18 billion which suggest 56% of the revenue target is secured.

• We cut our FY11-12E NP forecast by 12-14%. Our revenue target is Bt31.7 billion (+36% growth) and that is maintained. Gross profit margin is expected to decline from last year at 37.5% to 37.0% this year. We raised our SG&A forecast to 19% of sales from 16.5% previously expected (last year was 18.2%).

• We cut our Dec11 PT to Bt25 (from Bt28) following earnings changes. The PT is at 13.0x FY11E EPS. Risks are higher D/E, lower than expected gross profit margin, rising competition in low-end housing market, as well as the risks on new businesses (upcountry & overseas).

Pruksa Real Estate earnings results summary (Bloomberg: PS TB Reuters:PS.BK) Earnings revision and valuation Bt millions (per sh. data in Bt) 4Q10 4Q09 Y/Y 3Q10 Q/Q 2011E 2012E Residential sales 6,974 7,734 -10% 3,761 85% Old EPS (Bt) 2.16 2.60 Gross profit margin 38.7% 41.0% 38.1% New EPS (Bt) 1.90 2.24 SGA/Sales 19.3% 12.9% 25.9% % change -12% -14% Net profit 1,059 1,644 -36% 359 195% P/E (x) 9.2 7.8 Inventories 27,801 13,202 111% 23,158 20% ROE (%) 25.3 25.2 Net D/E 76.4% 9.6% 59.1% P/B (x) 2.1 1.8 EPS 0.48 0.75 -36% 0.16 200% Dec11 PT 25 Source: Company reports and J.P. Morgan estimates.

Asia Pacific Equity Research 21 February 2011

Asia Pacific Strategy Dashboards

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.

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 Overweight

Steve Malin Quantitative Strategist steven.j.malin@jpmorgan.com (852) 2800 - 8568 J.P. Morgan Securities (Asia Pacific ) Limited Taiwan, Thailand, Philippines, Malaysia and Hong Kong

David Fernandez Economic and Policy Research david.g.fernandez@jpmorgan.com (65) 6882 - 2461 JPMorgan Chase Bank, N.A., Singapore Branch Yen Ping Ho Asian Currency Strategist yenping.ho@jpmorgan.com (65) 6882 - 2216 JPMorgan Chase Bank, N.A., Singapore Branch Underweight Rajiv Batra Asian and Emerging Markets Equity Strategy rajiv.j.batra@jpmorgan.com (91-22) 6157-3568 J.P. Morgan India Private Limited China, Korea and Australia

Key Changes

Table of Contents Page #

Regional Summary 2 Market Performance 3 Liquidity Monitor 4 Monitoring Inflation 5 Market Drivers 6 Earnings Revisions 7,8 Cross-section Earnings Growth 9 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

Market performance to 18 February 2011 • Week: MSCI Asia Pacific ex Japan 1.3% underperformed MSCI World by 0.1%

• Top three markets during the week: Thailand 4.2%, Indonesia 3% and Philippines 1.9%

• Bottom three markets during the week: Singapore -0.8%, Korea -0.1% and Australia -0.1%

• YTD Performance: MSCI Asia Pacific ex Japan -0.9% underperformed MSCI World by 6.1%

• YTD Top three markets in US$: Australia, Malaysia and China

• YTD Bottom three markets in US$: India, Philippines and Thailand

Sector performance • Week: MSCI APxJ Energy 2.3% outperformed MSCI APxJ by 1%

• Week: MSCI APxJ Healthcare -0.9% underperformed MSCI APxJ by 2.1%

• Top three key sectors during the week in US$: Taiwan Materials 3.4%, China Energy 3.2% and Hong Kong Consumer Discretionary 2.9%

• Bottom three key sectors during the week in US$: Korea Financials -0.8%, Singapore Financials -0.6% and Korea Industrials -0.4%

• YTD Top three key sectors in US$: Hong Kong Industrials 9.7%, Taiwan Materials 6.4% and Hong Kong Consumer Discretionary 5.9%

• YTD Bottom three key sectors in US$: India Financials -12.9%, India Energy -12.3% and India Information Technology -10.1%

Demand classification sector performance • YTD: Global Price Takers -1.5%, Domestic Demand -3.5%, Global Consumer -7.5% and Global Capex -7.7%

This edition contains latest Core CPI data (see page 5) Headline inflation data published this week • India: January WPI 8.2%oya [consensus 8.1%]

• China: January CPI 4.9%oya [J.P. Morgan 5.3%, Consensus 5.4%]

J.P. Morgan's revisions to 2010 Real GDP growth • Positive: Asia ex Japan 9.1% [9.0%], Malaysia 7.2% [6.8%], Taiwan 10.8% [10.5%] • Negative: Japan 4.0% [4.3%], Singapore 14.5% [14.7%] J.P. Morgan's revisions to 2011 Real GDP growth forecast • Negative: Japan 1.7% [1.9%]

Please see "Cyclical Headwinds Persist: Perspectives and Portfolios", Mowat et al, 31 Jan 2011, for our latest

Asian equity strategy

Global Equity Research 21 February 2011

Global Developed Markets Strategy Dashboards

See page 24 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.

J.P. Morgan Equity Strategy Key Calls (see page 4 for details) Adrian MowatAC Global Emerging Markets and Asian Strategy adrian.mowat@jpmorgan.com (852) 2800 - 8599 J.P.Morgan Securities (Asia Pacific ) Limited Regional Calls

Thomas Lee US Equity Strategy thomas.lee@jpmorgan.com (1-212) 622 - 6505 J.P. Morgan Securities LLC OW Core EMU vs Periphery

Mislav Matejka European Equity Strategy mislav.matejka@jpmorgan.com (44-20) 7325 - 5242 J.P. Morgan Securities Ltd. Sector Calls

Hajime Kitano Japan Equity Strategy hajime.x.kitano@jpmorgan.com (81-3) 6736 - 8655 J.P. Morgan Securities Japan Co., Ltd.

Paul Brunker Australia Equity Strategy paul.m.brunker@jpmorgan.com (61-2) 9220 - 7841 J.P. Morgan Securities Australia Limited OW Cyclicals vs Defensives

Key Changes

Table of Contents Page #

Market Drivers 2

Index Targets 3

Key Calls 4

Earnings Revisions 5,6

Sector Revisions 7,8

Macro Earnings Growth Driver 9

Cross-sector Earnings Growth 10

Regional Valuation 11,12

Sector-Country Valuation Matrix 13

Policy Rates Forecast 14

Yield Curve & Liquidity 15

Regional Monetary Condition Index 16

Economic Momentum 17

Currency Forecasts 18

Performance: Equities relative to Bonds 19

Performance: Sector & Industry 20,21

Balance Sheets 22

Index Weightings 23

Market performance to February 18 2011

• YTD Performance : Developed World up 6.4%, outperforming EM by 9.0%.

• Regional Performance : EMU the best performing region (up 10.1% YTD ), Japan the worst performing region (up 5.4%).

• Sector Performance : Energy (up 10.9%) and Financials (up 9.5%) are the best performing sectors YTD, while Consumer Staples (up 0.6%) and Materials (up 2.6%) are the worst.

• Style Performance : Developed World Growth up 5.0%, Value up 7.9%.

• Developed World Large Caps have marginally Outperformed Mid & Small Caps YTD.

Source: J.P. Morgan Economics, 17 February 2011

-40

-30

-20

-10

0

10

20

30

Feb-10 Apr-10 Jun-10 Aug-10 Oct-10 Dec-10 Feb-11

J.P. Morgan's revisions to real 2010 GDP growth

• Positive : Norway 2.2% [2.0%], Italy 1.1% [1.0%]

• Negative : Global 3.8% [3.9%], Developed Markets 2.5% [2.6%], Japan 4.0% [4.3%]

J.P. Morgan's revisions to real 2011 GDP growth forecasts

• Negative : Developed markets 2.6% [2.7%], Germany 3.4% [3.5%], France 2.4% [2.5%], Norway 3.0% [3.4%], Japan 1.7% [1.9%]

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

• Sweden : Current 1.50%, Last Change 15 Feb 11 (+25bp), Forecast Next Change Apr 11 (+25bp), Mar 11 1.50%, Jun 11 1.75%, Sep 11 2.25%

Asia Pacific Equity Research 21 February 2011

The first step after ECFA

Strait talk: Taiwan equity strategy

Taiwan

Nick LaiAC

(886-2) 2725-9864 nick.yc.lai@jpmorgan.com

J.P. Morgan Securities (Taiwan) Limited.

Caren Huang (886-2) 2725-9872 caren.huang@jpmorgan.com

J.P. Morgan Securities (Taiwan) Limited.

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

J.P. Morgan Securities (Asia Pacific) Limited

Table 1: Our top picks in 2011:

1) Tech: TSMC (2330, OW), SPIL (2325, OW), Mediatek (OW), Quanta (OW), Chroma (OW)

2) Financial: First FHC (OW), China Trust (2891, OW), KGI (6008, OW), Mega (2886, OW)

3) Non-tech: Nan Ya Plastic (1303, OW), Yulon Motor (2201, OW), Teco (1504, OW), TSRC (2103, OW)

• Official platform to kick off 2nd stage of ECFA negotiation: Taiwan and China will officially establish "Cross-strait Economic Cooperation Committee” on Feb 22. The Committee will be in charge of 2nd stage negotiations of four agendas under ECFA (Economic Cooperation Framework Agreement) signed in June 2010, including 1) cross strait investment protection, 2) mechanism to settle trade dispute, 3) tariff reduction scheme for various merchandise products, 4) market access for service industry. In the first stage negotiation in Jun-10, Early Harvest List together with ECFA was signed where 539 items in Taiwan benefited from the reduction of import tariff into China. Implication and expectation of the second round negotiation in our view include:

1. A major political development, not just an economic one: The Committee and future ECFA negotiation will be led by Deputy Minister of Economic Affairs in Taiwan and Vice Minister of Commerce in China. We see this an encouraging and significant political development. Previously, all the 6 cross-strait talks since 2H08 were headed by quasi-government agents, e.g. Strait Exchange Foundation in Taiwan. The Committee now effectively brings minister level officials to the negotiation table, which can be a positive experimental exercise for both sides when it comes to the unavoidable politically sensitive issues in future.

2. The 7th strait talks in late 1H11 is expected to conclude two of the four agendas—investment protection and settlement for trade dispute on the back of the Committee commencing negotiation from March, in our view.

3. Be patient on the other two agendas: We believe both sides will take more than one year to conclude tariff reduction scheme for over 4,000 merchandise products and market access in service industry, although we should see positive news flow on incremental achievement throughout 2011.

• Recommendations: We believe cross-strait related sectors will benefit from positive sentiment and development of ECFA negotiation in the near term, such as industrials. Relaxation of individual Chinese tourist scheme before end-1H11 is another near term event catalyst. We maintain our year-end index target of 9,800 on 14x forward earnings vs. the historical average of 15x since 2003. In our model portfolio, we are neutral tech with relative preference on upstream than downstream. We are bullish on financials and expect a multi-year reflation theme. Our preference within financials is for (state-owned) banks over brokers and we avoid insurance stocks. Our top picks are highlighted on Table 1.

Asia Pacific Equity Research 22 February 2011

Vietnam Vista

Bi-Weekly Market Update (7-18/02/2011)

Vietnam

Sriyan PieterszAC

(662) 684 2670 sriyan.pietersz@jpmorgan.com

JPMorgan Securities (Thailand) Limited

Ho Chi Minh City Stock Exchange: VNINDEX vs. trading volume

100

300

500

700

Jan-10 Apr-10 Jul-10 Oct-10 Feb-11

Millions of shares (RHS)

0

50

100

150

Source: Bloomberg.

Hanoi Stock Trading Center: VHINDEX vs. trading volume

50

150

250

Jan-10 Apr-10 Jul-10 Oct-10 Feb-11

Millions of shares (RHS)

0

50

10

15

Source: Bloomberg.

VND rates % Government bond VND deposit 1Year 10.6 O/N 10.0 2Year 10.9 1 Week 11.0 3Year 11.1 1 Month 12.2 5Year 11.5 2 Month 13.5 7Year 11.7 3 Month 13.5 10Year 11.8 6 Month 13.5

Source: Bloomberg.

• Stock market round-up: The local market was sluggish over 7-18 February driven by concerns about rising inflationary pressure and interest expense following the 7% VND devaluation on February 11, the proposed 15.3% power tariff rise from March 1, a potential 17% petrol price rise and a likely rise in interest rates due to the rise in SBV’s refinancing rate to 11% on February 17. VNINDEX declined by 3.2% to 503.92 and VHINDEX dipped by 5% to 102.31. The daily trading value improved by 88% to US$79MM on the HOSE and was up by 113% to US$40MM on the HNX. Foreign investors continued to be net buyers with net purchases on the HOSE/HNX of US$15MM/US$7.3MM.

• Economy: HCMC’s February CPI was up by 1.61% M/M, while Hanoi’s February CPI was up by 1.98% M/M on higher food/foodstuff prices during Lunar New Year holidays. Vietnam’s central bank raised the refinancing rate by 200bp to 11% to curb the double-digit inflation rate after the bank devalued the dong by 7% on February 11. Bank loans rose by 0.43% M/M in January, dong lending slipped by 0.09% M/M, and dollar loans rose by 2.37% M/M as businesses sought dollar loans and sold dong to gain from the dong-dollar rate gap, according to SBV.

• Strategy perspectives: Local stock market sentiment has been weak, waiting for a clearer schedule on major price rises, including power tariffs, gasoline prices and the government’s tightening moves. Moreover, despite the announcement about the new leadership in January, the local market continues to wait for more government appointments, to be announced in the upcoming National Assembly meeting in June. While the macro stability backdrop is undeniably weak, we believe the market is focusing on macro and policy developments as a (positive) inflection point. We would look at catalysts for entry into the stock market, including: (1) a peak in inflation, which would benefit from more favorable base comparisons in Mar-Apr 2011; and (2) more overt and concerted policy signals on a shift towards stability (such as further interest rate increases). Within Vietnam, we favor externally oriented sectors such as seafood, rubber and IT. Sectors we would avoid are banks, property, construction materials, and those linked with interest rate and forex risks.

• We highlight Hau Giang Pharma (DHG VM) this week. 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. Vietnam: Markets at a glance—Percentage change over the past two weeks HOSE* HASTC* Index 503.92 (-3.2%) 102.31 (-5%) Daily T/O (US$MM) 79.1 (+88%) 39.7 (+113%) Market cap (US$B) 24.5 5.6 Number of stocks 280 376 2010 Market P/E 11.2 6.6 Foreign Net Buy/(Sell), US$MM) 15.0 7.3 Foreign TO as % of Market 0.8 0.3 Exchange rate (VND/US$) 20,885 O/N interbank (%) 10.0 Source: HOSE, HNX, Bloomberg. % change for the period 08-18/02/2011 as the local markets resumed trading on February 8, 2011.

Asia Pacific Equity Research 22 February 2011

Alibaba.com Limited

Neutral 1688.HK, 1688 HK

Aggressively addressing customers & sales-staff fraud issue - could company emerge better in longer-term?

Price: HK$16.68

Price Target: HK$16.00

China China Internet

Dick WeiAC

(852) 2800-8535 dick.x.wei@jpmorgan.com

J.P. Morgan Securities (Asia Pacific) Limited

Ritesh Gupta (91-22) 6157 3307 ritesh.z.gupta@jpmorgan.com

J.P. Morgan India Private Limited

12

16

20

HK$

Feb-10 May-10 Aug-10 Nov-10 Feb-11

Pr ice Per fo rman ce

1688.HK share price (HK$)MSCI-Cnx (rebased)

YTD 1m 3m 12m Abs 19.7% -1.1% 20.7% -3.4% Rel 21.3% 1.7% 23.6% -13.7%

• Yesterday, Alibaba announced the resignation of CEO David Wei and COO Elvis Lee as the preliminary internal investigation completes. The investigation relates to the termination of ~1,200 fraudulent customers, as the company disclosed during its 3Q10 earnings call in November 2010. We are attaching summary transcript of analyst call last night. Conference call replay number +852 3018 0000. Passcode: 6583265.

• Looking back: In late 2008, Alibaba increased its Gold Supplier customer add-nets through (1) lowering of annual subscription fee and (2) change of sales structure – e.g. having a separate “hunter” and a “farmer” for the same customer, and giving out higher commissions to the hunter. While the structure encourages sales staff to more aggressively increase new customer acquisitions, this could also lead to incentives for fraudulent customers to sign up on platform. In 4Q10, Alibaba switched back to the model of single sales staff that service a customer for more than a year. In addition, the company now has put in place a new fraud detection system. Were Mr Wei and Mr Lee the ones to blame for what has been shown to be a less-than-ideal strategy?

• Looking forward: New CEO Jonathan Lu could actually be positive for Alibaba.com. Jonathan Lu brings more than 10 years’ experience in Alibaba Group, and he held various top positions in Alipay and Taobao, the last as CEO of Taobao. We think Mr Lu brings to Alibaba.com solid “Alibaba Culture”, execution experience, and potentially closer ties with Taobao, which would be positive to the company in longer term. However, we believe there could be potential conflict of interests and management capability issues that Alibaba Group needs to address, given Mr Lu is CEO for both Alibaba.com and Taobao.

• Stock implications: We do not expect meaningful financial impact in the near-term. With changes in corporate structure already in place since 4Q10, and a conservative outlook in 2011 (provided in 3Q10 results), we are not revising our forecasts. We maintain N with PT of HK$16. If there is significant pull back in the stock, we would advise investors to accumulate.

Reuters: 1688.HK; Bloomberg: 1688 HK Rmb in millions, year-end December

FY09 FY10E FY11E FY12E FY09 FY10E FY11E FY12E Net sales 3,875 5,452 6,761 8,302 ROE (%) 20.3 23.2 22.8 21.8 52-week range HK$12.3-18.1 Operating profit 1,073 1,561 2,124 2,674 ROIC (%) 18.0 20.9 20.5 19.6 Shares outstg 5,039Mn EBITDA 1,280 2,002 2,602 3,269 GAAP dil. EPS (RMB) 1Q 2Q 3Q 4Q Avg daily volume 12.7Mn Pre-tax profit 1,176 1,732 2,365 2,989 EPS FY09 0.05 0.05 0.05 0.06 Avg daily value US$25.3Mn Net profit 1,013 1,423 1,933 2,444 EPS FY10E 0.06 0.07 0.07 0.07 Index (HSI) 23,595 Diluted EPS (Rmb) 0.20 0.28 0.37 0.46 EPS FY11E 0.08 0.09 0.10 0.10 Free float 19% P/E (x) 74.4 53.4 40.6 32.6 1M 3M 12M Dividend yld 0% Adjusted EPS (Rmb) 0.24 0.34 0.43 0.53 Absolute perf. (%) -1.1 20.7 -3.4 Market cap US$10.2Bn Adjusted P/E (x) 62.1 43.9 34.5 27.9 Relative perf. (%) 1.7 23.6 -13.7 Price target HK$16 EV/EBITDA 54.6 34.9 26.9 21.4 Cash (Rmb M) 7,216 10,770 14,376 18,349 Date of price Feb 21, 2010 P/B (x) 15.1 10.6 8.0 6.1 Equity (Rmb M) 5,018 7,253 9,696 12,728 Y/E BPS (Rmb) 0.98 1.41 1.86 2.42 Source: Company, Bloomberg and J.P. Morgan estimates. * Note: Adj. EPS excludes share-based compensation expense.

Asia Pacific Equity Research 21 February 2011

Alibaba.com Limited

Neutral 1688.HK, 1688 HK

Alibaba CEO resigns citing moral responsibility for fraudulent customers' sales staff activities - ALERT

Price: HK$16.68

21 February 2011

Internet

Dick WeiAC

(852) 2800-8535 dick.x.wei@jpmorgan.com

J.P. Morgan Securities (Asia Pacific) Limited

• Alibaba CEO David Wei and COO Elvis Lee has resigned as the preliminary internal investigation completes. The investigation relates to the termination of ~1,200 fraudulent customers, as the company disclosed during its 3Q10 earnings call in November 2010. Buyers using Alibaba site suffered a loss from trading with these fraudulent sellers (Alibaba customers). While none of the senior management team has been directly held responsible for the fraudulent sales activities, they have resigned on moral grounds because of the fraud. The board has accepted both resignations. According to Jack Ma, Chairman and Non-executive Director, the resignations send a strong message that it is unacceptable to compromise the company’s culture and values.

• Appointment of Jonathan Lu as new CEO: Jonathon has been working with Alibaba Group since 2000. He is also the CEO of Taobao. Mr Lu has had many leadership positions in Alibaba group in Alibaba.com, Alipay, and Taobao. He also holds an MBA from China Europe International Business School.

• JPM View: We view Alibaba as a young internet company that might lack proper internal control in some areas. The company’s actions demonstrate to us its adherence to high standards of integrity. The situation also reminds us of Baidu’s lack of internal control over salesforce back in 2008. Baidu eventually put proper checks-and-balances in place, and continues to enjoy solid growth. While financial impacts are likely to be small, stock sentiment will likely impacted. We see a buying opportunity on Alibaba if the shares pull back.

• Detection of customer fraud: Alibaba determined that 1,219 of its Company’s China Gold Supplier customers who signed up in 2009 and 1,107 China Gold Suppliers who signed up in 2010 were engaged in fraud against its buyers. 100 sales personnel (out of a total of 5,000) and some sales supervisors have also been found to be negligent in or intentionally allowing fraud in the company’s authentication and verification measures, and as a result, this led to fraudulent storefronts in the international marketplace.

• The company’s investigation is still under way, and it is in the process of taking action to identify deficiencies in policies and procedures in order to prevent a recurrence.

• Conference call at 8pm HK/7am NY time: Dial-in - HK: 800 901 587/ NY: +1-866 839 8029/China: 4001 935 569. Confirmation Code: 6583265.

Asia Pacific Equity Research 21 February 2011

AMMB Holdings

Neutral AMMB.KL, AMM MK

3QFY11: Q/Q NIM decline continues - ALERT

Price: M$6.30

21 February 2011

Malaysia Banks

Harsh Wardhan ModiAC

(65) 6882- 2450 harsh.w.modi@jpmorgan.com

J.P. Morgan Securities Singapore Private Limited

Hoy Kit Mak (60-3) 2270-4728 hoykit.mak@jpmorgan.com

JPMorgan Securities (Malaysia) Sdn. Bhd. (18146-X)

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

J.P. Morgan Securities (Asia Pacific) Limited

• AmBank reported 3QFY11 net profits of M$325mn, down 2% q/q, and in-line with our expectations (76% of our full year estimates, results table on page 2). Key highlight was consistent decline in NIMs. As per our calculations on page 2, NIM declined 8bps q/q to 2.92% in 3Q, after a similar 7bps decline in 2QFY11 as well. The bank is facing pricing pressure on both sides of balance sheet due to lagged re-pricing of deposits (85% of total deposits are time deposits), as well as on loans. We maintain our Neutral rating on the stock as we believe earnings will remain lackluster for next few quarters.

• Bank’s PPOP declined a significant 6% q/q as revenues declined 2% q/q, while costs increased 4% q/q. Most of the PPOP weakness was driven by lower NII, while costs continued to move up. CIR for the bank came in at 41% for the quarter. We expect further weakness in efficiency ratio as bank continues to invest in its transformation to a liability led franchise, while continuing its quest for higher non-interest income.

• Non interest income at the bank has moved up to M$460-470mn range per quarter over this financial year, up 10% from last year’s run-rate. Further improvement though will require higher outlay in systems and processes in our view.

• Provisions increased 59% q/q as a large loan was under restructuring and bank guided for possibility of write-back in coming quarters as recoveries come in. Even accounting for one-off nature of this charge, earnings quality was not up to our expectations. Q/Q numbers benefited from write-back of financial investment impairment, as compared to a impairment charge in last quarter. Overall, we believe these earnings will not merit a multiple and hence we expect stock price performance to remain capped in near future.

• Loan growth was up 2% q/q and 7% y/y, while deposits were up by almost similar magnitude. LDR for the bank remains very close to 100%, which we believe is one of the key reasons for increasing funding costs as well as slower than industry loan growth.

• While we believe that structural turnaround of AmBank will deliver further RoE improvements, current valuations fully price in that outcome, hence the stock offers a balanced risk-return trade-off as of now. Maintain Neutral rating on the stock. Key risks to our view include an earlier move to 15% RoE by the bank on the upside, while more severe margin pressure is the main downside risk to our view.

Asia Pacific Equity Research 22 February 2011

Company Visit Note

Hau Giang Pharmaceutical Joint Stock Company

Vietnam Pharmaceuticals

Sriyan PieterszAC

(662) 684 2670 sriyan.pietersz@jpmorgan.com

JPMorgan Securities (Thailand) Limited

DHG VM, Not Covered VND115,000, February 21, 2011 Share price performance VND

100,000

110,000

120,000

130,000

Aug-10 Oct-10 Dec-10 Feb-11

DHGVNI-Rebased

Source: Bloomberg.

One-year price performance

1M 3M 12M Absolute (%) - 6.4 (4.4) Relative (%) 4.7 (7.8) (3.6)

Source: Bloomberg.

Company data 52–week range (VND) 128,000-104,000 Mkt cap. (VNDB) 3,094 Mkt cap. (US$MM) 148.5 Shares O/S (MM) 26.9 Free float (%) 55.8 Daily liquidity (US$MM) 0.02 Daily volume (MM) 0.1 Exchange rate (VND/US$) 20,835 Index: VNI 483.68 Year-end December Source: Bloomberg.

Hau Giang Pharmaceutical Joint Stock Company (DHG) is one of the leading pharmaceutical companies in Vietnam, with a 10% market share, in terms of revenue, among the local generic-drug manufacturers in 2010.

Key takeaways from the meeting • Growth outlook solid, supported by resilient demand: DHG meets

almost 100% of the demand for cold medicines and vitamins and 80% of the demand for antibiotics in the local market. In FY10, DHG recorded a sales growth of 17% Y/Y and an earnings growth of 6%, thanks mostly to the volume growth, which was supported by the resilient demand for pharmaceutical products during the year.

• A closed-end business model: DHG has upgraded five of its branches and agents into its own distribution companies and will continue such a strategy to further enhance its nationwide network. DHG has also invested in its own raw material processing and packaging companies to form a closed-end business model and help provide better quality control.

• Running at full capacity and looking to double capacity by 2013: DHG is running at almost full capacity for an annual output of 3 billion units pa. It has started constructing a new plant at Tan Phu Thanh Industrial Park. With the new factory, DHG’s management expects to increase the capacity to 6 billion units.

• Valuation: The company trades at an FY10 P/E of 8x, which is at a discount to the HOSE. DHG has outperformed the market by 4.7% over the past month, but unchanged in absolute terms.

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. J.P.MORGAN 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.

Reuters: DHG.HM; Bloomberg: DHG VM VND in millions, year-end December FY08A FY09A FY10A Sales 1,485,464 1,746,022 2,035,749 Net income 128,862 357,070 379,014 EPS (VND) 4,834 13,392 14,180 DPS (VND) 2,500 2,500 2,500 Net debt (cash)/equity (%) Net cash Net cash Net cash Sales growth (%) 17.0 17.5 16.6 Net profit growth (%) 0.4 177.1 6.1 EPS growth (%) -49.6 177.1 5.9 ROE (%) 19.1 41.7 33.0 P/E (x) 23.8 8.6 8.1 P/B (x) 4.4 3.0 2.4 Dividend yield (%) 2.4 2.4 2.4 Source: Company reports and Bloomberg.

Asia Pacific Equity Research 21 February 2011

HDFC Bank

Overweight HDBK.BO, HDFCB IN

Relatively safe haven; maintain Overweight

Price: Rs2,201.70

Price Target: Rs2,900.00

India Banks

Seshadri K Sen, CFAAC

(91-22) 6157-3575 seshadri.k.sen@jpmorgan.com

J.P. Morgan India Private Limited

Adarsh Parasrampuria (91-22) 6157-3576 adarsh.x.parasrampuria@jpmorgan.com

J.P. Morgan India Private Limited

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

J.P. Morgan Securities (Asia Pacific) Limited

1,600

2,000

2,400

Rs

Feb-10 May-10 Aug-10 Nov-10 Feb-11

Pr ice Per fo rman ce

HDBK.BO share price (Rs)NIFTY (rebased)

YTD 1m 3m 12m Abs -7.9% 5.1% -4.4% 29.8% Rel 2.5% 8.2% 1.9% 16.2%

HDFC Bank (Reuters: HDBK.BO, Bloomberg: HDFCB IN) Year-end Mar (Rs in mn) FY09A FY10A FY11E FY12E FY13E

Operating Profit 47,922 60,806 77,235 97,375 118,541 Net Profit 22,448 29,493 39,258 51,322 63,268 Cash EPS (Rs) 52.77 64.43 85.76 112.12 138.22 Fully Diluted EPS (Rs) 43.68 56.80 82.49 106.66 131.66 DPS (Rs) 10.00 13.14 17.49 22.86 28.18 EPS growth (%) 17.6% 22.1% 33.1% 30.7% 23.3% ROE 16.9% 16.1% 17.1% 19.4% 20.5% P/E 41.7 34.2 25.7 19.6 15.9 BVPS (Rs) 353.86 470.22 535.52 620.89 726.14 P/BV 6.2 4.7 4.1 3.5 3.0 Div. Yield 0.5% 0.6% 0.8% 1.0% 1.3%

52-wk range (Rs) 2,539.90 - 1,628.85

Market cap (Rs mn) 1,023,225 Market cap ($ mn) 22,633 Shares outstanding (mn) 465 Fiscal Year End Mar Price (Rs) 2,201.70 Date Of Price 21 Feb 11 Avg daily value (Rs mn) 984.3 Avg daily value ($ mn) 21.8 Avg daily vol (mn) 0.2 NIFTY 5,519 Exchange Rate 45.21

ADR Price ($) 153.31 52-wk range ($) 191.43 -

119.11 Ratio 1.0 to 2 Avg daily volume (mn) 0.3 ADR Premium 57.4%

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

• Our meeting with HDFCB management indicated no significantly heightened stress for the bank, despite a slightly difficult operating environment. We see the bank as a clear safe haven, given the prevailing uncertainty, and maintain OW.

• Loan demand selectively strong: There has been some softness in retail offtake, but it’s too early to divine a trend. Working capital demand remains strong, while the capex environment is uncertain. Infrastructure opportunities have not totally dried up. Management targets a wide band of 25-30% loan growth, depending on the demand and pricing environment. Systemic loan growth is 18-20% for FY12E.

• Margins resilient: The cost of funds pressures do exist, although the CASA ratio does not appear to be threatened. Despite the largely fixed-rate book, HDFCB has held on to margins and management sees enough levers to be able to limit damage to NIMs without factoring in any significant liquidity easing in the near term.

• Asset quality robust: No incremental stresses have been discernible in the last few months. Microfinance remains an area of concern – HDFCB’s exposure to telecom is very limited. Credit costs should stabilize around 3Q11 levels (1.1%), quarterly fluctuations notwithstanding.

• Relatively safe haven; maintain Overweight: HDFCB trades at 3.5x P/BV (FY12E), in line with its long-term average. Very few other banks display HDFCB’s stability in this uncertain environment. We thus see it as a safe haven, despite the premium valuations – it’s one of our top picks among Indian banks. A slowdown in retail loan growth due to high rates is a key risk to our Overweight recommendation.

Asia Pacific Equity Research 21 February 2011

HSBC Holdings plc

Overweight 0005.HK, 5 HK

Dividend guidance critical on 28th

Price: HK$90.60

Price Target: HK$115.00

Hong Kong Banks

Sunil GargAC

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

J.P. Morgan Securities (Asia Pacific) Limited

Joseph Leung (852) 2800-8517 joseph.mj.leung@jpmorgan.com

J.P. Morgan Securities (Asia Pacific) Limited

Kian Abouhossein (44-20) 7325-1523 kian.abouhossein@jpmorgan.com

J.P. Morgan Securities Ltd.

65

80

95HK$

Feb-10 May-10 Aug-10 Nov-10 Feb-11

Pr ice Per fo rman ce

0005.HK share price (HK$)HSI (rebased)

YTD 1m 3m 12m Abs 13.7% 4.9% 9.4% 8.3% Rel 11.7% 6.5% 9.9% -7.0%

HSBC Holdings plc (Reuters: 0005.HK, Bloomberg: 5 HK) Year-end Dec ($ in mn) FY08A FY09A FY10E FY11E FY12E Operating Profit ($ mn) 34,877 38,033 32,194 35,530 38,610 Net Profit ($ mn) 5,546 5,565 14,118 19,742 24,546 Cash EPS ($) 1.18 0.34 0.80 1.09 1.32 Fully Diluted EPS ($) 0.69 0.72 0.73 1.09 1.32 DPS ($) 0.64 0.34 0.34 0.38 0.42 EPS growth (%) (75.2%) (16.4%) 134.6% 36.7% 21.5% ROE 5.1% 5.2% 10.7% 13.4% 15.0% P/E 28.4 34.0 14.5 10.6 8.7 BVPS ($) 7.44 7.17 7.86 8.56 9.26 P/BV 1.6 1.6 1.5 1.4 1.3 Div. Yield 5.5% 2.9% 2.9% 3.3% 3.6%

52-wk range (HK$) 91.90 - 68.95 Market cap ($ mn) 206,065 Market cap ($ mn) 206,065 Shares outstanding (mn) 17,706 Fiscal Year End Dec Price (HK$) 90.60 Date Of Price 21 Feb 11 Avg daily value (HK$ mn) 2,848.5 Avg daily value ($ mn) 365.9 Avg daily vol (mn) 7.0 HSI 23,485 Exchange Rate 7.78

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

Investor attention has returned to the stock ahead of 2010 earnings (due 28th Feb). Our expected attributable income of US$14.1bn (+154%y/y; ROE from 5% to 11%) and EPS of 80cents is aligned with a closely bunched consensus, which has however been moving up. Investor optimism appears centered on (1) dividend uplift, (2) lower US credit charges, and (3) expectations of higher rates. While our optimism on this name is not contingent on near-term dividend guidance, the recent outperformance is reminiscent of the run-up a year ago - any miss on the dividend expectation is likely to erase recent gains. As such, from a trading perspective, locking in recent gains ahead of earnings (and re-entering post reporting) may provide a better risk-reward balance.

• Investor optimism based on: (1) Dividends – expectations built up for uplift in 4Q dividend (PY 10c) + increase in quarterly guidance (PY 8c/qtr); (2) US Credit Charges – Further improvements in sync with US peers; and (3) Rate Increases – While not an immediate expectation, there is substantial investor focus on HSBC’s leverage to rising interest rates. Interestingly there has been less focus on HSBC’s near-term revenue growth (reason for under-performance in 2010).

• Our estimates: (1) 2010E – earnings consensus aligned but conservative on dividends; and (2) 2011E – earnings 10% ahead but dividend lower at 38c vs. consensus 44c.

• Key metrics for consensus revisions: Upside: (1) US asset quality; (2) HK NIM stabilization; (3) rate increases; (4) higher fees; and (5) dividends. Downside: (a) costs; and (b) dealing income.

• Why we are OW – The estimated 30% upside to our Dec-11 PT of HK$115 is premised on valuing the bank on a sustainable 15-16% ROE which should be delivered from 2012E. With a liabilities-biased business, increasingly aligned to faster growing markets (Asia/EM), HSBC is one of the cheapest (1.3x 2011E P/BV) plays on growth with exceptional ROEs for a global bank.

Asia Pacific Equity Research 21 February 2011

Hyflux Limited

Overweight HYFL.SI, HYF SP

Libya unrest to be share price dampener - ALERT

Price: S$2.21

18 February 2011

Water

Ying-Jian ChanAC

(65) 6882-2378 ying.jian.yj.chan@jpmorgan.com

J.P. Morgan Securities Singapore Private Limited

• Libya protests inspired by recent unrest in Tunisia, Egypt and Bahrain: From news over the weekend, protesters, inspired by uprisings in neighboring Tunisia, Egypt and Bahrain, are demanding an end to the 41-year rule of President Muammar Gaddafi. We believe this has significant impact on Hyflux's exposure to Libya as well as the whole MENA region.

• What's at stake? Hyflux currently has significant operations in Algeria and Libya. At stake from the Libya unrest are: (1) c.>US$1 billion worth of desalination projects of 2 plants in Tripoli and Benghazi which are still under exclusive negotiation, and (2) a US$100 million desalination project in Tobruk which has been awarded but waiting for Notice to Proceed. We see a risk that these contracts might not be honored if there is a change in government given that these projects are co-owned with the existing government.

• MENA contribution: In total, MENA (including mainly Algeria) accounts for about 51% of FY11 earnings. The Algeria Magtaa desalination plant is expected to be completed by end-2011 with no other outstanding projects so we would believe that the risk to Hyflux's Algeria earnings would be less impacted.

• Libya accounts for 2%/36% of FY11/FY12 Hyflux's PAT based on our estimates and 26% of our current SOTP. The likelihood of delay/cancellation of projects could put this at risk. The stock currently trades at 22x/21x FY11/FY12 P/E based on our estimates. Share price may see weakness amidst the ongoing political uncertainty.

• We will provide more details after management reverts with a clearer picture on the ground.

Asia Pacific Equity Research 22 February 2011

Indofood

Neutral INDF.JK, INDF IJ

Potential listing of Salim Ivomas Pratama

Price: Rp4,825

Price Target: Rp5,000

Indonesia Food & Food Manufacture

Stevanus JuandaAC

(62-21) 5291 8574 stevanus.x.juanda@jpmorgan.com

PT J.P. Morgan Securities Indonesia

3,000

4,500

6,000

Rp

Feb-10 May-10 Aug-10 Nov-10 Feb-11

Pr ice Per fo rman ce

INDF.JK share price (Rp)JCI (rebased)

YTD 1m 3m 12m Abs -2.5% 6.6% -2.0% 24.5% Rel 3.7% 3.1% 4.1% -11.9%

Indofood Sukses Makmur Tbk (Reuters: INDF.JK, Bloomberg: INDF IJ) Rp in bn, year-end Dec FY07A FY08A FY09A FY10E FY11E FY12E Revenue 27,858 38,799 37,099 39,874 48,966 52,184 Net Profit 980 1,034 2,053 2,817 3,995 4,392 EPS (Rp) 114.95 119.76 237.74 326.26 462.77 508.66 DPS (Rp) 31 45 47 93 131 185 Revenue growth (%) 27.0% 39.3% -4.4% 7.5% 22.8% 6.6% EPS growth (%) 48.2% 4.2% 98.5% 37.2% 41.8% 9.9% ROCE 18.0% 18.5% 18.2% 22.6% 29.4% 30.9% ROE 16.0% 13.1% 21.9% 26.2% 31.2% 28.1% P/E 42.0 40.3 20.3 14.8 10.4 9.5 P/BV 5.7 4.9 4.1 3.7 2.9 2.4 EV/EBITDA 13.7 11.7 10.6 7.2 5.4 4.8 Dividend Yield 0.6% 0.9% 1.0% 1.9% 2.7% 3.8%

Shares O/S (mn) 8,780 Market Cap (Rp bn) 42,366 Market Cap ($ mn) 4,776 Price (Rp) 4,825 Date Of Price 21 Feb 11 Free float (%) 48.5% 3-mth trading value (Rp mn) 97,899.17 3-mth trading value ($ mn) 11.04 3-mth trading volume (mn) 103.37 JCI 3,498 Exchange Rate 8,870 Fiscal Year End Dec

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

• Potential listing of Salim Ivomas Pratama: In a filing to the Singapore Exchange (SGX), IndoAgri (IFAR) disclosed its plan to list Salim Ivomas Pratama (SIMP). SIMP is IndoAgri’s (IFAR’s) edible-oil division, including 60% ownership of the sugar division, Laju Perdana Indah (LPI), and 59.5% of London Sumatra (LSIP). SIMP would be listed on the Indonesia Stock Exchange, but it will need the regulators’ approvals before proceeding with the listing. According to INDF, the IPO proceeds will be used to further invest in the agriculture business.

• Potential catalyst for INDF’s share price: Similar to the listings of IFAR and Indofood Consumer Branded Product (ICBP), the SIMP listing could act as a strong catalyst for INDF’s share price. However, despite our positive view on this listing, we believe it is too early to be bullish on INDF. In the document filed with the SGX, it is clearly stated that there is no assurance of the SIMP listing. The potential long-term negative aspect of this listing is that INDF will still control LSIP and LPI, despite further dilution in its ownership, which is already below 51% effectively in both.

• Operations still unclear: INDF said that the effect of the recent price increases is still unclear. As future movements in wheat prices and CPO are unclear, the FY11 results of its operations are also unclear at this point. With Bogasari yet to raise flour prices to ICBP, we see the likelihood of margin compression at Bogasari, which might not bode well for the overall profitability of INDF.

• Maintain Neutral and Dec-11 PT of Rp5,000: At this point, we are monitoring developments, and could turn more bullish when we see signs of stronger potential materialization (assets transfer, tax incentives, more comprehensive filings, etc) from the SIMP listing. Meanwhile, we maintain our Neutral rating and our SOTP-based Dec-11 price target of Rp5,000 on INDF. Upside and downsis risks to our PT include: (1) The listing of SIMP; (2) changes in CPO prices.

Asia Pacific Equity Research 21 February 2011

Indofood Agri Resources Ltd

Neutral IFAR.SI, IFAR SP

Exploring listing of 90%-owned PT SIMP - ALERT

Price: S$2.46

18 February 2011

Plantations

Ying-Jian ChanAC

(65) 6882-2378 ying.jian.yj.chan@jpmorgan.com

J.P. Morgan Securities Singapore Private Limited

Aditya Srinath, CFA (62-21) 5291-8573 aditya.s.srinath@jpmorgan.com

PT J.P. Morgan Securities Indonesia

• IndoAgri may list PT SIMP in Indonesia: IndoAgri has announced that its 90% owned subsidiary, PT SIMP, is exploring a listing on the Indonesia Stock Exchange. The company has not said what percentage of PT SIMP it plans to spin off, although IndoAgri highlighted in its announcement that it intends to retain PT SIMP as a subsidiary, i.e. 50% + 1 share. According to an announcement made on Hong Kong Exchange by First Pacific, the parent of IndoAgri, cash proceeds from the proposed listing will be utilized to support IndoAgri's business. No valuation range or timeline has been provided by management so far as it is still in the exploratory stage.

Figure 1: Shareholding structure of Salim Group

PT Indofood SuksesMakmur Tbk

Indofood Singapore Holdings Pte Ltd Others

IndoAgri

Indofood Oil & Fats Pte Ltd

PT SIMP

London Sumatra

31%

83.8%

69%

100%

90%

8.4%

59.5%

First Pacific Co. (142 HK)

50.05%

PLDT (TEL PM)

26.5%

Metro Pacific Inv Corp (MPI PM)

56%

Philex (PX PM)31.4%

Salim Group

44%

PT Indofood SuksesMakmur Tbk

Indofood Singapore Holdings Pte Ltd Others

IndoAgri

Indofood Oil & Fats Pte Ltd

PT SIMP

London Sumatra

31%

83.8%

69%

100%

90%

8.4%

59.5%

PT Indofood SuksesMakmur Tbk

Indofood Singapore Holdings Pte Ltd Others

IndoAgri

Indofood Oil & Fats Pte Ltd

PT SIMP

London Sumatra

31%

83.8%

69%

100%

90%

8.4%

59.5%

First Pacific Co. (142 HK)

50.05%

PLDT (TEL PM)

26.5%

Metro Pacific Inv Corp (MPI PM)

56%

Philex (PX PM)31.4%

Salim Group

44%

Source: Company data.

• Background on PT SIMP: Per the diagram above, PT SIMP is the primary holding vehicle for all of IndoAgri’s businesses in Indonesia, including its indirect stake in London Sumatra (LSIP IJ).

• JPM view: IndoAgri current trades at 13.9x/11.3x FY11E/FY12E P/E. In the last 1 year, IndoAgri has in fact already been trading at a premium to Indonesia peers – Astra Agri and London Sumatra. We continue to stay Neutral on the stock as we believe CPO price has reached its peak with impending production pick-up in the months ahead to improve the supply picture once again.

Asia Pacific Equity Research 21 February 2011

International Container Terminal Services, Inc.

Overweight ICT.PS, ICT PM

Postcard from Manila - ALERT

Price: Php42.00

18 February 2011

Logistics & Freight

Jeanette YutanAC

(63-2) 878-1131 jeanette.g.yutan@jpmorgan.com

J.P. Morgan Securities Philippines, Inc.

• We hosted ICTSI on 18 February for our Philippine Conference 2011 in Manila. Here are the key takeaways from the meeting:

• 2011 growth guidance. ICTSI management guided that overall throughput growth is likely to hit between 6-10% Y/Y with revenue expansion of 10-12%. It expects EBITDA to grow between 12-15% and operating leverage to push net profit higher by 15-18% Y/Y.

• ICT takes over Portland Terminal. ICT announced that it has officially taken over the operations of the Port of Portland's Terminal 6 last February 12, bringing its total portfolio to 21 terminals in 15 different countries.

• Update on the three greenfield projects. ICT indicated that it is seeing progress on the three greenfield terminals being built in Colombia, Mexico, and Argentina. The latter is expected to be the first one to begin operations by latter part of 2012 or early 2013. The three ports are expected to add an initial incremental capacity of 1.35m TEU, and possibly up to 3.7m TEU upon completion of all the phases in the projects.

• Still seeing red in the smaller ports. Management said that there are still a few terminals/ports in its portfolio that are still loss-making such as the Subic Bay port in the Philippines, Tartous port in Syria, and Batumi port in Georgia. ICT guided that Georgia, which saw GDP fall by 10% in 2009 due to the negative impact of the Georgia-Russia crisis, is expected to get back in black within this year. On the other hand, Syria might see profits flow in next year. Management admitted that the Tartous terminal concession was obtained with the Iraq rebuilding in mind but the rebuilding efforts never came through. Note that the aforementioned ports account for less than 3% of total volumes.

• Privatization opportunities abound. ICT indicated that there are about 160 ports with annual capacity of 500k TEU or below that are still being run by government. This means that there are still ample privatization opportunities that ICT can take advantage of.

• Acquisition strategy. ICT's acquisition strategy primarily focuses on terminals or ports that are 500k TEU or below as this size brings less strain on the company's balance sheet and fits into ICT's extensive experience in running small to mid-size ports. ICT has four business development offices across the globe that looks for new opportunities; the offices are located in Hong Kong, Philippines, Miami (USA), and Dubai.

Asia Pacific Equity Research 21 February 2011

Maybank (Malayan Banking)

Neutral MBBM.KL, MAY MK

1H11 meets expectations, share price gains appear unsustainable - ALERT

Price: M$8.59

18 February 2011

Malaysia Banks

Harsh Wardhan ModiAC

(65) 6882- 2450 harsh.w.modi@jpmorgan.com

J.P. Morgan Securities Singapore Private Limited

Hoy Kit Mak (60-3) 2270-4728 hoykit.mak@jpmorgan.com

JPMorgan Securities (Malaysia) Sdn. Bhd. (18146-X)

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

J.P. Morgan Securities (Asia Pacific) Limited

• Maybank announced 1H11 net profits of M$2.2bn, exactly 50% of our and street full year estimates. 2QFY11 profits were up 9.4% q/q solely due to lower provisions as PPOP was flat (-0.2%) q/q. Results tables are on page 2. The stock is up 3% intra-day on back of these results; this price performance is unsustainable in our view. Increasing margin pressure, capital injection at subsidiaries and modest loan growth should lead to muted earnings growth going forward and hence we think will limit further upside for the stock. Maintain Neutral.

• Bright spots in the results included 1bp q/q increase in margins to 2.70% amidst serious competition on both sides of balance sheet, 5.7% q/q loan growth led by overseas operations and 50bps q/q decline in gross NPL ratio to 4.2%. We expect all three of these line items to face challenges in the rest of the year: 1) Margins have likely peaked, due to intense loan price competition, unless OPR hikes come in earlier, 2) Overseas loan growth was led by trade finance (Singapore), where competition is largely price led, and 3) Asset quality improvement was as much due to write-off as due to improving economic circumstances. Moreover, asset quality improvement is an industry-wide phenomenon and we do not expect this to be a differentiating factor for the bank.

• Cost growth for 2Q and 1H were both higher than revenue growth, leading to negative jaws. CIR came in at 49.8% and 48.7%, respectively for 2Q and 1H FY11, which are the key reasons for lower RoE at the bank in our view. CIR at BII came in at 65.4% for full year 2010, due to continued investment phase.

• Non-interest income growth was slower due to lower insurance income, net of claims. This is an area where we remain optimistic, with Islamic Banking and Insurance being the key growth drivers, where the bank has built up significant competitive barriers. Islamic financing now comprises 26.1% of domestic loans and should remain an important growth driver for the bank.

• Overall, we maintain our Neutral call on the stock as we believe risk-return trade-off for the stock remains balanced. The key upside risks include earlier than expect OPR hikes, ETP impact showing up on bottom-line before 2012 and positive outcome on BII stake sale. The downside risks come from continued capital injection at BII, integration costs/risks at Kim Eng and sharper than expected margin decline.

Asia Pacific Equity Research 21 February 2011

Metro Pacific Investments Corp.

Overweight MPI.PS, MPI PM

Postcard from Manila - ALERT

Price: Php3.57

21 February 2011

Conglomerates & Multi-industry

Jeanette YutanAC

(63-2) 878-1131 jeanette.g.yutan@jpmorgan.com

J.P. Morgan Securities Philippines, Inc.

• We hosted Metro Pacific Investments on 18 February for our Philippine Conference 2011 in Manila. Here are the key takeaways from the meeting:

• Meralco to spend US$900m for new power generation capacity: MPI estimates that Meralco needs US$900m of investment to come out with 900MW of power generation capacity by 2014. Meralco is near to closing a 50:50 joint venture deal for an existing 2x300MW coal-fired power plant which has room to accommodate further capacity expansion, and serve as a base load plant. Meralco also plans to set up a 150MW jet engine-powered plant by 2Q11 that will be used for peak load. According to MPI, Meralco can use its internally generated cash flow to fund the projects.

• MRT-3 acquisition remains in the drawing board. MPI said that its proposal to acquire MRT-3 from the existing consortium of owners is still being studied by the government. According to the management, the Finance Department is receptive to the idea while the Transportation and Communication Department is yet to revert with its feedback to the company. MPI estimates that an initial US$300m investment is required for the MRT-3 acquisition proposal.

• Maynilad: More room for organic growth. Maynilad is on track to bring its non revenue water (NRW) from 51% as of end-2010 to 40% by end of 2012. Management guided that billed water volume growth this year will range between 8-10% driven by an expected 8% increase in service connection; MPI pointed that there is still 2.1m population in the concession that has no water connection. Maynilad also expects a Php2.14/cu.m (+7.6%) increase in tariffs within February 2011 which is equivalent to Php2.2m additional revenue per day based on the 2010 average daily billed volume.

• Tollroads: Upcoming new projects. Metro Pacific Tollways is expected to start the construction of the 2.4km Segment 9 of North Luzon Expressway by 4Q11. The Php17bn 13.5km North Luzon and South Luzon Link Highway, on the other hand, is expected to have its Swiss auction by 3Q or 4Q of this year. Other greenfield projects eyed by the company are: (a) 27.5km road extending the Manila-Cavite Coastal Expressway (MCEE) expected to cost Php11.8bn; bidding will start by December 2011, and (b) Php10.6bn 4.9km NAIA Expressway linking Skyway with MCEE; bidding expected to start by May 2011.

Asia Pacific Equity Research 21 February 2011

Oil and Natural Gas Corporation

Neutral ONGC.BO, ONGC IN

Reserves update - no significant changes - ALERT

Price: Rs268.40

18 February 2011

Exploration & Production

Pradeep Mirchandani, CFAAC

(91-22) 6157-3591 pradeep.a.mirchandani@jpmorgan.com

Neil Gupte (91-22) 6157 3592 neil.x.gupte@jpmorgan.com

J.P. Morgan India Private Limited

• ONGC updates reserves estimates: ONGC carried out an independent reserves audit, raising 3P estimates by 18% over Mar '10, while 2P reserves remained flat, with 1P reserves coming down 12%.

• Shift of reserves from 1P to 3P: The auditors have effectively shifted reserves from 1P to 3P, mainly due to a delay in implementation of planned field development activities.

• Differences in domestic reserves: ONGC’s estimates of domestic reserves vary from auditors on 2 counts (1) Mumbai High – the auditor (GCA) considered a more aggressive water injection and other field enhancement plans, arriving at a higher estimate and (2) The auditor (D&M) took into account the delay in implementation of field enhancement and development plans in Assam, shifting reserves to 3P.

• Overseas estimates vary: ONGC’s own estimates of overseas reserves vary from those of the auditors, primarily due to differences over Sakhalin estimates – the auditors have higher 3P reserves, as they adhered to SPE benchmarks, while the consortium uses Russian standards. The auditors also did not consider potential future sales contracts.

• Subsidy issues still remain – focus will remain on production growth: We expect the market to continue to focus on near/medium term production growth as against reserves - we build in a 9% production growth over FY11-13E. Crude has remained elevated, with Brent averaging over $100/bbl in February. As such, subsidies are likely to be higher than earlier anticipated, and we believe any change in the 33% upstream share subsidy formula could negatively impact earnings. Maintain our Neutral rating.

Table 1: ONGC reserve position (including OVL) Reserves (mn bbls) % change ONGC 31 Mar 10 ONGC Current Auditor estimates ONGC Current Auditor estimates

1P 7,062 6,793 6,218 -4% -12% 2P 10,046 9,689 9,978 -4% -1% 3P 11,872 11,402 14,048 -4% 18% Source: Company reports. Note: Reserve numbers include domestic JV fields, which were not audited, along with a portion of as yet uncertified reserves.

Asia Pacific Equity Research 21 February 2011

Reliance Industries Ltd

Overweight RELI.BO, RIL IN

BP deal validates E&P value - Reiterate OW

Price: Rs956.35

Price Target: Rs1,240.00

India Integrated Oils

Pradeep Mirchandani, CFAAC

(91-22) 6157-3591 pradeep.a.mirchandani@jpmorgan.com

Neil Gupte (91-22) 6157 3592 neil.x.gupte@jpmorgan.com

J.P. Morgan India Private Limited

850

1,050

1,250

Rs

Feb-10 May-10 Aug-10 Nov-10 Feb-11

Pr ice Per fo rman ce

RELI.BO share price (Rs)BSE30 (rebased)

YTD 1m 3m 12m Abs -9.4% -3.1% -4.0% -2.2% Rel 0.9% -0.1% 1.9% -15.8%

Reliance Industries Ltd (Reuters: RELI.BO, Bloomberg: RIL IN) Rs in mn, year-end Mar FY09A FY10A FY11E FY12E FY13E Revenue 1,512,245 2,037,400 2,491,283 2,559,133 2,681,169 Net Profit 152,492.6 158,180.0 207,197.2 243,852.9 313,301.5 EPS (Rs) 48.46 48.14 63.06 74.22 95.36 DPS (Rs) 6.03 7.00 10.00 10.00 11.00 Revenue growth (%) 13.3% 34.7% 22.3% 2.7% 4.8% EPS growth (%) -7.7% -0.6% 31.0% 17.7% 28.5% ROCE 13.3% 11.3% 13.4% 14.7% 16.7% ROE 18.9% 14.6% 16.2% 16.6% 18.4% P/E (x) 19.7 19.9 15.2 12.9 10.0 P/BV (x) 3.1 2.6 2.3 2.0 EV/EBITDA (x) 13.5 10.8 8.4 6.8 5.4 Dividend Yield 0.6% 0.7% 1.0% 1.0% 1.2%

Shares O/S (mn) 3,273 Market cap (Rs mn) 3,130,185 Market cap ($ mn) 69,237 Price (Rs) 956.35 Date Of Price 21 Feb 11 Free float (%) 50.2% 3mth Avg daily volume 5,699,396.00 3M - Average daily Value (Rs mn) 5,639.42 Average 3m Daily Turnover ($ mn) 124.74 BSE30 18,438 Exchange Rate 45.21 Fiscal Year End Mar

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

• BP to take 30% stake in E&P assets: RIL announced that BP would take a 30% stake in 23 oil & gas fields, including KG-D6, for a total consideration of $7.2B. Further payments of up to $1.8B would be made if exploratory successes lead to commercial production. After regulatory approval, RIL will receive staggered payments over FY12.

• JV for sourcing and marketing: RIL and BP will form a 50:50 JV for the sourcing, receiving and marketing of natural gas in India. The JV will build infrastructure to receive and distribute gas; we expect this would involve the creation of LNG assets and potential involvement in CGD business.

• Deal validates value of E&P business: The deal values RIL's E&P business at US$24-30B – this validates our estimate value for RIL’s quantified east coast assets (US$19B) and also builds value for the unquantified discoveries off the east coast.

• What BP brings to the table: RIL is a relatively young player in E&P, and through this deal would be able to leverage BP’s expertise in deepwater exploration and production. BP’s involvement will also validate development spending and internationalize the gas pricing issue.

• Cash overhang to remain: The deal will boost RIL’s already large cash balance (~US$7.1B). Uncertainty on the use of this cash will remain an overhang on the stock, in our view.

• Reiterate OW: We take a positive view of the deal, as it validates the value of RIL's E&P portfolio and should be a catalyst for stock performance. The partnership with BP will address concerns on potential production ramp-up/reservoir quality issues. We reiterate our Overweight rating on the stock, and maintain our Dec-11 price target of Rs1,240 (based on 12.5x adjusted earnings, slightly higher than the historical average due to improving earnings mix).

Asia Pacific Equity Research 22 February 2011

Samsung Life Insurance

Overweight 032830.KS, 032830 KS

Top management reaffirms our positive view

Price: W110,000

Price Target: W130,000

South Korea Insurance

MW KimAC

(82-2) 758 5724 mw.kim@jpmorgan.com

J.P. Morgan Securities (Far East) Ltd, Seoul Branch

Scott YH Seo (82-2) 758 5759 scott.seo@jpmorgan.com

J.P. Morgan Securities (Far East) Ltd, Seoul Branch

Bao Ling Chan (852) 2800-8592 baoling.chan@jpmorgan.com

J.P. Morgan Securities (Asia Pacific) Limited

90,000

120,000

150,000

W

Feb-10 May-10 Aug-10 Nov-10 Feb-11

Pr ice Per fo rman ce

032830.KS share price (W )KOSPI (rebased)

YTD 1m 3m 12m Abs 5.8% 1.9% 9.5% 0.0% Rel 8.9% 5.0% 6.4% -23.2%

Samsung Life Insurance (Reuters: 032830.KS, Bloomberg: 032830 KS) W in bn, year-end 3 FY09A FY10E FY11E FY12E Net Profit 906 1,506 1,319 1,422 New Net Profit growth (% ) 701.7% 66.2% -12.4% 7.8% EPS (W) 4,530 7,531 6,595 7,109 P/E (x) 24.3 14.6 16.7 15.5 BVPS (W) 61,108 64,190 69,486 75,195 P/BV (x) 1.8 1.7 1.6 1.5 ROE 1.3% 9.2% 12.0% 9.9% ROA 0.7% 1.1% 0.9% 0.9% DPS (W) 1,125 1,500 1,300 1,300 Dividend Yield 1.0% 1.4% 1.2% 1.2% EV per share (W) 87,995 98,009 109,684 123,010 P/EV 1.3 1.1 1.0 0.9

Shares O/S (mn) 200 Market cap (W bn) 22,000 Market cap ($ mn) 19,782 Price (W) 110,000 Date Of Price 21 Feb 18 Free float (% ) 40.8% 3mth Avg daily volume 468,371 3M - Average daily Value (W bn) 49 Average 3m Daily Turnover ($ mn) 44 KOSPI 2,005 Exchange Rate 1,112.10 Fiscal Year End Mar

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

Bloomberg JPMA MKIM<GO>

• J.P. Morgan hosted an investor meeting with Samsung Life Insurance’s (SLI) CFO, Mr. Young Bin Lim, on February 17, 2011, and came away with a positive impression: New management’s key initiatives, and its growth strategies in the pension, high-net-worth-individual (HNWI), and overseas markets were addressed.

• Key takeaway #1): Maximize NBV based on annualized premium equivalent (APE) growth over GDP growth rate: New management aims to maximize NBV through growth in the: (1) retirement market (>15 million people are expected to retire in next 10 years); (2) HNWI market (about 150,000 Koreans have more than US$1MM of financial assets individually); and (3) overseas expansion.

• Key takeaway #2): Manage RoEV target of 13% to 15% until Mar-15: SLI’s RoEV target is a combination of growth in NBV of 6-7%; stable earnings from in-force policies of 4%-5%, and adjusted net worth (ANW) of 3%. To achieve over 6% NBV growth, SLI plans to: (1) attain its target level of absolute NBV growth, which is expected to be in line with the GDP growth rate in the protection-type insurance market; and (2) achieve an above-average growth rate in the annuity market.

• Reiterate our positive view: There appears to be no solid consensus on the upside from current valuations. We believe the current valuation implies a deep discount to SLI’s intrinsic value. The growth drivers supporting SLI’s NBV growth were well addressed by the CFO in the conference; we thus maintain our OW rating and 1.2x FY11 P/EV-based Dec-11 price target of W130,000 (13.3% RoEV, 3.8x NBV multiple in FY11E). Key risks to our price target are: (1) prolonged low interest rates; (2) less-agile channel dynamics; and (3) the implementation of IFRS II. SLI and Samsung Fire & Marine (000810 KS, OW) are our top picks in our Korean insurance coverage universe.

Asia Pacific Equity Research 21 February 2011

Sun Hung Kai Properties

Overweight 0016.HK, 16 HK

FY11 interim results preview

Price: HK$124.80

Price Target: HK$155.00

Hong Kong Property

Lucia Kwong, CFAAC

(852) 2800-8526 lucia.yk.kwong@jpmorgan.com

J.P. Morgan Securities (Asia Pacific) Limited

90

120

150

HK$

Feb-10 May-10 Aug-10 Nov-10 Feb-11

Pr ice Per fo rman ce

0016.HK share price (HK$)HSI (rebased)

YTD 1m 3m 12m Abs -5.0% -10.1% -7.9% 21.3% Rel -5.7% -7.8% -7.7% 5.8%

Sun Hung Kai Properties (Reuters: 0016.HK, Bloomberg: 16 HK) HK$ in mn, year-end Jun FY08A FY09A FY10E FY11E FY12E Revenue 24,471.4 34,234.0 33,211.2 46,315.1 56,145.4 Net Profit 12,186 12,415 13,883 16,917 20,460 Core Profit 11,130 12,099 13,220 16,917 20,459 EPS (HK$) 4.80 4.84 5.40 6.58 7.96 Core EPS (HK$) 4.38 4.72 5.14 6.58 7.96 Core EPS growth (%) -4.7% 7.7% 9.0% 28.0% 20.9% DPS (HK$) 2.50 2.50 2.69 2.90 3.10 ROE 5.1% 5.4% 5.4% 6.4% 7.1% P/E (Core) 28.5 26.5 24.3 19.0 15.7 P/BV (x) 1.4 1.4 1.3 1.2 1.1 BVPS (HK$) 86.31 86.68 95.36 102.10 112.02 RNAV/Share 179.69 Dividend Yield 2.0% 2.0% 2.2% 2.3% 2.5%

Shares O/S (mn) 2,570 Market cap (HK$ mn) 320,741 Market cap ($ mn) 41,201 Price (HK$) 124.80 Date Of Price 18 Feb 11 Free float (%) 58.0% 3M - Average daily volume (mn) 4.83 3M - Average daily Value (HK$ mn) 628.25 Average 3m Daily Turnover ($ mn) 80.70 HSI 23,595 Exchange Rate (HK$/US$) 7.78 Fiscal Year End Jun

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

• Expect strong Y/Y net profit growth: SHKP will announce FY11 interim results on February 28 (Monday). We expect core net profit of HK$9.9 billion (EPS: HK$3.86), up 61% Y/Y; this could set the record 1H earnings for the company. The strong growth would be underpinned mainly by the recognition of development profits of The Latitude (95% sold), Aria (83% sold by Dec-10) and inventory sales of YOHO Midtown, from which we expect consolidated development profits of HK$4.05B. Added to this is the booking of Larvotto (94% sold by Dec-10), Scotts Residences in Singapore and some China development projects. We expect the interim DPS to be raised by 5.9% to HK$0.9. This represents a payout of 23%.

• Most businesses should see decent growth in addition to property development: Apart from property development profits, we expect SHKP to report strong retail rental income growth, thanks to resilient retail sales growth in HK and SHKP’s strong execution, although rental reversion of other properties may be flat. We expect other operations (hotel and telecom in particular) to see improvements as well.

• Things to watch for: 1) We estimate book value to have considerable growth due to revaluation of its investment property portfolio and possible early adoption of revised IFRS (deferred tax charged on earlier revaluation gains can be released); 2) progress of farmland conversion and 3) gearing position.

• Our Dec-11 PT of HK$155 is based on its long-term average of 14% discount to Dec-11 NAV, which is the long-term average, and translates into 1.34x FY11E P/B. Our estimated FY11 adjusted book value is HK$114/share, excluding revaluation gain potentials. The stock is currently trading at a 32% discount to Dec-11 NAV. Key risks to our price target are earlier-than-expected interest rates hikes and further policy measures on the HK housing sector.

Asia Pacific Equity Research 21 February 2011

United Tractors

Overweight UNTR.JK, UNTR IJ

January volume surge probably unsustainable, but does open up upside risks on volumes

Price: Rp23,450

Price Target: Rp25,000

Indonesia Heavy Trucks

Aditya Srinath, CFAAC

(62-21) 5291-8573 aditya.s.srinath@jpmorgan.com

PT J.P. Morgan Securities Indonesia

16,000

20,000

24,000

Rp

Feb-10 May-10 Aug-10 Nov-10 Feb-11

Pr ice Per fo rman ce

UNTR.JK share price (Rp)JCI (rebased)

YTD 1m 3m 12m Abs -3.5% 14.7% -8.6% 38.3% Rel 2.7% 11.2% -2.5% 1.9%

PT United Tractors tbk (Reuters: UNTR.JK, Bloomberg: UNTR IJ) Rp in mn, year-end Dec FY07A FY08A FY09A FY10E FY11E FY12E Revenue (Rp bn) 18,166 27,903 27,506 37,730 42,177 48,137 Net Profit (Rp bn) 1,410 3,631 3,817 3,895 4,623 6,130 EPS (Rp) 473.16 1,183.77 1,147.33 1,170.74 1,389.61 1,842.69 DPS (Rp) 201 347 459 473 556 737 Revenue growth (%) 32.4% 53.6% -1.4% 37.2% 11.8% 14.1% EPS growth (%) 51.6% 150.2% -3.1% 2.0% 18.7% 32.6% ROCE 24.3% 40.5% 30.6% 26.7% 28.2% 33.2% ROE 27.3% 43.1% 30.6% 25.9% 26.3% 29.4% P/E 49.6 19.8 20.4 20.0 16.9 12.7 P/BV 12.2 6.5 5.6 4.8 4.1 3.4 EV/EBITDA 0.8 0.3 0.2 0.4 0.2 0.0 Dividend Yield 0.9% 1.5% 2.0% 2.0% 2.4% 3.1%

Shares O/S (mn) 3,327 Market Cap (Rp mn) 78,015,266 Market Cap ($ mn) 8,795 Price (Rp) 23,450 Date Of Price 21 Feb 11 Free float (%) 40.5% Avg Daily Volume (mn) 22.90 Avg Daily Value (Rp mn) 71,272.51 Avg Daily Value ($ mn) 8.04 JCI 3,498 Exchange Rate 8,870 Fiscal Year End Dec

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

• January volumes surges – much better than expected: UNTR’s Komatsu deliveries surged in January, to an all-time record level of 731 units (up over 100% m/m & y/y). While we anticipated a rebound from the weak December, the data (released after market) appears much better than expected and should drive the stock higher.

We see two reasons for the January delivery level to be unsustainable:

• Seasonality: UNTR's volumes typically dip in December and jump in January (detailed in our note dated 25 January 2011), before settling into a normal trend. We estimate that this could have accounted for about 200 units in January.

• Beating a price hike? UNTR raised Komatsu prices in early February (by 2-3%), and we think customers may have tried to advance deliveries to obtain better rates. Management agreed this was a possibility but said it was difficult to quantify.

• Even if unsustainable, does open up some upside risks: Mining sector deliveries were particularly strong (+180% m/m) to 514 units. Management said that it did not see a shift in the mix between large and smaller equipment deliveries in January. At this time management is maintaining guidance for FY11 at 6,000 units (JPME 5,550). Even if January’s level of 731 units proves unsustainably high as we expect, it does open up some upside risk to volumes and hence earnings estimates.

• Maintain our OW rating and Rp25,000 DCF-derived Dec-11 PT: We like UNTR as high quality exposure to the secular growth of coal output in Indonesia. UNTR reports FY10 results at the end of the week; we expect profits to be slightly weaker than consensus, which is a risk to our PT along with the threat of a rising rupiah eroding margins.

Asia Pacific Equity Research 21 February 2011

JPM Asia Telco Back Testing Analysis

Investing our recommendations

Alternative Carriers/Emerging Wireline, Broadband, Wireless Services, Wireline Services/Incumbents

James R. Sullivan, CFAAC

(65) 6882-2374 james.r.sullivan@jpmorgan.com

Vishesh Gupta (65) 6882 2367 vishesh.x.gupta@jpmorgan.com

J.P. Morgan Securities Singapore Private Limited

• This report updates current statistics for our JPM Asia Telco Back Testing Analysis, first discussed in our report What's Working in Asian Telcos: Telcos trade differently.

• The back-testing analysis 1) Owns any stock rated OW, has no position in N stocks, and is short any UW stocks. 2) All positions are USD10mn, or 2x ADTO, whichever is smaller. 3) All trades are assumed executed on day of publication of the initiation / recommendation change. Current positions are shown in Table 1.

• The FTSE Asia Telecoms Index (FTSETEL) is used as a benchmark.

• .We maintain an updated live version of this back testing analysis using Bloomberg's Portfolio tool - please contact us if you would like access.

• This report contains analysis of risk statistics, VAR, Tracking error, among others. Please contact us to discuss in more detail.

JPM Asia Telco Analyst Back testing Analysis - Since inception

Source: Bloomberg.

JPM Asia Telco Analyst Back testing Analysis – YTD 2011

Source: Bloomberg.

Asia Pacific Equity Research 21 February 2011

Hong Kong Banks

Hang Seng focuses on Prime-based mortgages

Hong Kong Banks

Joseph LeungAC

(852) 2800-8517 joseph.mj.leung@jpmorgan.com

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

J.P. Morgan Securities (Asia Pacific) Limited

HIBOR mortgages no more? Hang Seng Bank reported (Bloomberg, 19 Feb 2011) that it would like to focus on Prime-based mortgages, and HIBOR-based mortgages will be offered depending on the customer relationship. Our base case is that other banks will remain competitive and the impact to Hong Kong banks and mortgages market should be minimal. Currently, half of the outstanding mortgages is HIBOR-based.

• Base case: We believe HSB's move aims at protecting its margin after its failed attempt to raise the HIBOR mortgages rate in Nov 2010, and market dynamics remain similar to Nov 2010: HSBC and Chinese banks should remain competitive, and the commoditized nature of mortgages would imply that HIBOR mortgages should continue to exist in the near future.

• Alternative scenario: If HIBOR mortgages ceased to exist, margin pressure from mortgages book should stop, but improvement is likely to surface very slowly over the next few years, as borrowers should keep their mortgages loans as long as possible with an interest rate below the market pricing.

• Interest rate impact: Prime-based mortgages priced at 2.25%, vs. HIBOR 0.94% (HIBOR +80bp, HIBOR 1-month 14bp). Assuming the impact would surface over 5 years, we estimate that 131bp improvement in mortgages yield will translate into 5bp increase in NIM and 3% EPS uplift. Therefore, interest rate impact appears to be a small positive.

• Loan growth impact: Our current mortgages growth forecast is 5% for FY11E. If we assume 0% mortgages growth, our total loan growth forecast would have been dropped to 17% (from 18%). Loan growth impact should be minimal and we expect loan growth to be driven by China-related lending and SME.

• Installment impact: We estimate that for every 100bp hike in interest rate, monthly mortgages installment will increase by 10%. Given the current affordability ratio of 45-50%, the impact appears to be mild.

Table 2: HK banks valuation 18-Feb-11 Bloomberg Price Mkt cap P/E P/BV ROE Div Yld Rating Perf Code HK$ US$ mn 11E 12E 11E 12E 11E 12E 11E 12E -1m -3m YTD BOCHK 2388 HK 24.20 32,655 15.6 12.5 2.23 2.10 14.7 17.4 4.2 5.2 OW BOCHK -12% -12% -9% HSB 11 HK 124.00 30,495 15.8 13.9 3.51 3.20 23.0 24.1 4.3 4.4 N HSB -7% -3% -3% BEA 23 HK 32.85 8,654 17.4 13.5 1.46 1.39 8.9 10.9 3.0 3.8 OW BEA -6% -3% 1% WHB 302 HK 99.40 3,715 17.0 14.6 1.96 1.82 12.1 13.0 1.8 2.8 OW WHB -14% -2% -8% DSF 440 HK 52.15 1,963 11.0 9.0 0.98 0.90 9.3 10.4 4.5 5.7 N DSF -8% -10% 3% DSBG 2356 HK 13.70 2,139 12.2 9.6 1.15 1.07 9.9 11.6 4.1 5.2 N DSBG -5% -7% 4% CHB 1111 HK 21.00 1,165 20.2 16.2 1.38 1.33 7.0 8.4 2.5 3.1 N CHB -12% -2% -2% PFH 626 HK 5.17 719 12.0 9.6 0.89 0.84 7.6 9.0 4.2 5.2 OW PFH -13% -8% -8% Wgt avg TOTAL-HK 81,504 15.6 13.0 2.22 2.08 14.2 16.0 4.0 4.6 HSI -2% 0% 2% Source: Company reports and J.P. Morgan estimates.

Asia Pacific Equity Research 21 February 2011

Regional Internet Newsflow - Week Ending Feb 18

Groupon see challenges in China, Starcraft II approved by Ministry of Culture, Alibaba invests in Sinosoft, Baidu launches Media Player

Head of Internet and New Media

Dick WeiAC

(852) 2800-8535 dick.x.wei@jpmorgan.com

J.P. Morgan Securities (Asia Pacific) Limited

Ritesh Gupta (91-22) 6157 3307 ritesh.z.gupta@jpmorgan.com

J.P. Morgan India Private Limited

Japan Internet Hiroshi Kamide (81-3) 6736 8602 hiroshi.kamide@jpmorgan.com

JPMorgan Securities Japan Co., Ltd.

Korea Internet Sungmin Chang, CFA (82-2) 758-5719 sungmin.chang@jpmorgan.com

J.P. Morgan Securities (Far East) Ltd, Seoul Branch

Telecom, Internet, and New Media Strategist James R. Sullivan, CFA (65) 6882-2374 james.r.sullivan@jpmorgan.com

J.P. Morgan Securities Singapore Private Limited

• Groupon’s China launch seems to face challenges. Various news media report that the Groupon’s aggressive expansion strategy (in hiring, launch dates) caused its China partner Tencent – known for its conservative expansion strategy – concerns. Separately, Groupon Japan lost business contacts data.

• Baidu launches beta testing for its media player. Baidu’s media player allows users to better view and manage media files. We expect Baidu to continue to increase its user loyalty with more tailored software offerings.

• Alibaba invests in Sinosoft: Alibaba acquired 25% stake in Sinosoft Technology for Rmb170M last week. We believe this is a strategic investment and should benefit both companies to capture more market share in the Chinese SMEs software market.

• The top three performers last week were Youku, NcSoft, and Netdragon. The top three decliners last week were Ctrip, Sina, and Bitauto.

Table 3: Price Performance - China Internet Stocks

Company Name Price (LC) Price Change 18-Feb-2011 1 Wk Chng 1 Mth Cng YTD Youku 34.50 16.8% 1.2% -1.5% NcSoft 227,000 16.7% -4.4% 51.8% Netdragon 4.19 14.5% 30.1% 27.0% Giant Interactive 7.83 11.9% 8.1% 10.0% Alibaba 17.28 9.4% 0.5% 24.0% Daum Communication 88,500 8.6% 18.8% 25.9% Sofun 20.63 7.7% -0.5% 15.4% KongZhong 7.49 6.5% 7.3% 5.6% Mecox Lane 5.74 5.5% -17.1% -22.5% Focus Media 26.71 4.0% 11.9% 21.8% Dang Dang 26.16 3.0% -15.7% -3.4% CRIC 7.25 2.8% -16.0% -24.5% Shanda Games 6.07 2.0% -7.6% -5.6% Netease 44.48 1.4% 13.7% 23.0% VisionChina 4.53 0.4% -3.0% -2.4% Perfect World 21.42 0.1% -4.2% -9.4% Changyou 36.83 0.0% 19.7% 29.2% Tencent 208.20 -0.1% 3.6% 23.3% The9 7.84 -0.3% 0.1% 12.6% Linktone 1.46 -0.7% -8.8% -8.2% NHN 193,500 -1.8% -2.0% 0.8% Baidu 126.80 -2.1% 17.2% 31.4% AirMedia 6.99 -2.6% -1.7% 1.5% Shanda Interactive 43.46 -2.9% 8.2% 9.6% Kingsoft 4.31 -2.9% -0.5% 11.4% Sohu 83.84 -5.7% 18.5% 32.1% Ctrip 39.49 -8.1% -8.2% -2.4% Sina 85.52 -8.2% -1.8% 24.3% Bitauto 10.00 -9.2% 6.8% 13.1% Source: Bloomberg. 1 week close is based on Feb 11, 2011 closing price. 1 Month change is based on Jan 18, 2011 closing price.

Asia Pacific Equity Research 21 February 2011

China Property Weekly

Property sales for the week ending Feb 20, 2011

China Property

Ryan LiAC

(852) 2800-8529 ryan.lh.li@jpmorgan.com

Lucia Kwong, CFA (852) 2800-8526 lucia.yk.kwong@jpmorgan.com

Suzy Tian (852) 2800 8552 suzy.t.tian@jpmorgan.com

J.P. Morgan Securities (Asia Pacific) Limited

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.

China developers’ share price index1994=100

0

50

100

150

200

250

300

350

400

Jan-04 Aug-05 Apr-07 Nov-08 Jul-10

Source: Bloomberg, J.P. Morgan.

• Primary sales up on front-running demand: Sales volumes in the 8 key cities we track were 1,867 units for the week ending Feb 20, 2011, up 35% W/W and 24% lower than the 2008-10 average. Increase in sales volume was mainly due to front-running demand (esp. Guangzhou) for fear of upcoming local-level measures. After local-level measures were announced in Beijing and Chengdu, sales volumes were down 81% to 98% compared to before the announcement. We believe volumes should stay low in the following weeks and may not recover until the National People’s Congress is over.

• HPR tightened/introduced in eleven cities, more to come: Over the last week, Beijing, Ningbo, Nanjing, Chengdu, Nanning, Taiyuan, Guiyang and Harbin announced the local version of the “8-point measures”, which included the tightened version of the Home-Purchase-Restriction (HPR). The tightened HPR differs from the previous: (1) local residents owning two or more homes are disallowed to purchase additional homes, and (2) people with no tax-proof (ranging from one year to five years, depending on cities) are disallowed to purchase homes in the city; previously residents and non-residents were allowed to buy one additional home regardless of their existing home ownership status. Guangzhou’s local version is scheduled to be announced on Feb 23, and in addition to the above two points, Zengcheng and Conghua will also be covered by the HPR. In the coming few weeks, HPR is likely to be extended to more second tier cities. We believe there would be no developers which are immune to such policy. Volumes in the short term should be hit heavily, but again, the actual effectiveness of such a policy in the longer term depends on execution at the local level. We expect even lower incentive for second tier cities' governments to strictly adhere to the HPR in the longer term given that the housing market is not as overheated in these cities, and the local governments may be more dependent on land sales for their government revenue.

• Initial observations after new round of policies: After the announcement of the “8-point measures” on Jan 26, Real Estate Tax on Jan 27 and a series of local level measures in the weeks that follow, we make the following observations in the affected cities: (1) Volumes significantly increased in cities where people expected HPR to be implemented or tightened soon; (2) Residential rents in first tier cities (Shenzhen, Shanghai, Beijing) have increased as people who wanted to move out are not allowed to purchase new homes under the new rules, according to local property agencies; (3) Developers have delayed launch plans to March/April and (4) Volumes more than halved after the implementation of local level measures.

• There were no major new launches in the past week.

Asia Pacific Equity Research 21 February 2011

Hong Kong Property Update

Weekly primary sales: 37 units

Property

Amy Luk, CFAAC

(852) 2800 8524 amy.kp.luk@jpmorgan.com

Lucia Kwong, CFA (852) 2800-8526 lucia.yk.kwong@jpmorgan.com

Suzy Tian (852) 2800 8552 suzy.t.tian@jpmorgan.com

J.P. Morgan Securities (Asia Pacific) Limited

• Primary volume continued to remain low: We recorded 37 units sold in the primary market last week, compared with 42 units sold in the week before. The volume continued to stay low on lack of new launches. Major sales of the week came from Festival City Phase 2 of Cheung Kong (13 units), Harbour One of Emperor (4 units), ARIA of SHKP (4 units) and Island Crest of Kerry (4 units). Secondary market prices continued to edge up, increasing 2.1% W/W for the week ended 13 February. Centaline index now stands at 93.41, 9% below peak.

• Government received 8 tenders for Yuen Long site: According to Hong Kong Economic Times (HKET), the government received 8 tenders for a site in Yuen Long (YLTL518). Developers submitted tender include SHKP, New World, Sino Land, COLI, Cheung Kong, Tai Kong, Wing Tai, K Wah and Nan Fung. The site has GFA of 664,139 sq ft and this is the first project to limit the number of units (at least 960 units) and sizes of units (not exceeding 646 sq ft net). The market expects the transaction price to be HK$1.73 to 2.25 bn or HK$2,605 - 3,388 psf. We believe developers should have considered the 10% GFA inflation cap when submitting the tenders.

• Budget Speech on Wednesday: The Financial Secretary will present the 2011-12 Budget Speech this Wednesday (23 February). The new application list for land sale will be announced afterwards. According to HKET, the government might include over 10 sites for government-initiated land sale which would turn out to be regular monthly land auction. Potential sites to be included in the new list include Ex-Lok On Pak Desalting Plant in Tuen Mun, Area 66 and 68, Tseung Kwan O, Area 54 and 55B, Tung Chung, Ex-Ho Man Tin Estate and Ex-North Point Estate.

• Mainland buyers accounting for 13.7% in 2H10: According to Centaline, the proportion of individual mainland buyers increased to 13.7% in 2H10 in terms of overall residential transaction amount, from 11% in 1H10. For luxury residential with transaction amount over HK$12mn, the proportion is even higher at 28.8%. Popular estates in the secondary market include Bel-Air, Harbourside, Cullinan, Arch and One Silver Sea.

Table 4: Weekly property sales/presales Developers Location Sold Achieved ASP

(HK$psf) Units Left Comparables ASP (HK$psf)

Park Nara SHKP / LHT Yuen Long 2 4,600 - 5,100 173 27 2,700 - 3,200 Festival City Ph 2 Cheung Kong / MTRC Shatin 13 7,300 - 11,500 1,368 1,084 5,500 - 8,500 YOHO Midtown SHKP Yuen Long 1 4,600 - 6,700 1,890 117 4,000 - 5,000 ARIA SHKP East Kowloon 4 7,000 - 11,800 723 101 4,000 - 5,000 Harbour One Emperor West HK 6 14,000 - 15,000 103 27 8,500 - 11,000 GreenView SHKP Tuen Mun 2 3,800 - 4,600 32 18 2,500 - 2,800 Serenade Hong Kong Land Tai Hang 1 19,000 94 55 9,000 - 12,000 Island Crest Kerry Western District 4 11,000 - 20,500 488 99 6,500 - 8,000 Others Other 4 Total 37

Sources: Hong Kong Economic Journal, Hong Kong Economic Times, Sing Tao Daily, Mingpao.

Asia Pacific Equity Research 21 February 2011

China Telecoms Services

Robust Jan subs across the board due to strong seasonality; Unicom posted best 3G adds momentum

China Wireless Services, Wireline Services/Incumbents

Lucy LiuAC

(852) 2800-8566 lucy.y.liu@jpmorgan.com

J.P. Morgan Securities (Asia Pacific) Limited

Michelle Wei (852) 2800-8562 michelle.z.wei@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

• A robust debut of the year thanks to strong seasonality. All three telcos have posted a decent set of January subscriber data, with the combined mobile subs increasing by 26% mom and 12% yoy. Despite the usual softness in February (28 calendar days plus spring festival impact), 1Q is normally a strong season and contributes 26%-27% of full year's net adds based on past years’ track record.

• Unicom posted better sequential improvement of 3G adds than peers, while 2G/fixed-line/broadband adds recovered decently across the board. We learned that Unicom’s 3G adds increase was mainly driven by – 1) decent data card sales, which was attributable to the new datacard plans launched in end 2010 (6 month inclusive plan of Rmb 300 for 3GB data usage, and one-year inclusive plan of Rmb 600 for 6GB data usage). We feel comfortable with Unicom’s subs composition (9% of 3G subs is datacard user) given the reasonably low network utilization (< 30%). (2) Improved iPhone sales to an estimated 280K in Jan from 205K in Dec thanks to better iPhone supply. (3) More adds of ‘C plan’ to offset a slight decline in A and B plan subs.

• Maintain OW rating on Unicom and Telecom. We believe the market will remain topline driven in 2011, and the acceleration of 3G demand will be the key driver to the subscriber growth. We expect China Unicom and China Telecom to continue to benefit from this long lasting trend driven by the increase of smartphone penetration, content improvement, distribution channel improvement and more contract customer sales. We forecast 25mn and 13mn 3G subs adds for China Unicom and China Telecom respectively in 2011. China Telecom is on track to reach 100mn CDMA subs by end 1Q 2011.

• At current valuation, China Mobile appears compelling in 2-3 years horizon, though the upside is limited in next 6-12 months. We appreciate CM’s solid fundamentals and would be re-rated with the TD-LTE launch in 2012/13E. We believe valuation appears compelling for long term investors holding 2-3 years horizon. However, we maintain Neutral rating for the next 6-12 months in light of its limited visibility of a payout increase and lack of near term catalysts.

Valuation summary of Chinese telcos Company Stock Rating Price (HK$) PT % to P/B (x) ROE (%) EBITDA CARG

code Index Level (HK$) Target 2011E 2012E 2011E 2012E 2011E 2012E 2011E 2011E 2010-2012EChina Mobile 941 HK N 73.80 84.0 14% 3.6 3.0 9.9 9.4 4.2% 4.6% 1.9 19.5 4.8%Chine Telecom 728 HK OW 4.51 5.20 15% 4.3 3.8 17.7 15.2 1.7% 1.7% 1.3 7.2 3.6%China Unicom 762 HK OW 13.42 15.9 18% 4.8 3.9 52.6 25.7 0.8% 1.7% 1.3 2.5 14.5%MSCI China MXCN N/A 66.52 N/A N/A 6.1 5.1 10.0 9.4 3.4% 3.5% 1.7 N/A 14.6%HSI H S I N/A 23,485 N/A N/A 7.9 6.9 11.0 10.6 3.8% 4.0% 1.6 N/A 8.4%

EV/EBITDA (x) P/E (x) Dividend Yield (%)

Source: Bloomberg, company data and J.P. Morgan estimates. Note: Share prices and valuations are as of 21 February 2011.

47

Asia Pacific Equity Research 22 February 2011

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

Analyst Certification: The research analyst who is primarily responsible for this research and whose name is listed first on the front cover certifies (or in a case where multiple research analysts are primarily responsible for this research, the research analyst named first in each group on the front cover or named within the document individually certifies, with respect to each security or issuer that the research analyst covered in this research) that: (1) all of the views expressed in this research 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 in this research.

Important Disclosures

• Market Maker: JPMS makes a market in the stock of SPIL (Siliconware Precision Industries). • Market Maker/ Liquidity Provider: J.P. Morgan Securities Ltd. is a market maker and/or liquidity provider in HSBC Holdings plc. • Lead or Co-manager: J.P. Morgan acted as lead or co-manager in a public offering of equity and/or debt securities for Genting

Berhad, Genting Singapore, Honda Motor (7267), HSBC Holdings plc, Hyflux Limited, Inpex Corporation, International Container Terminal Services, Inc., Nestlé India Limited, Parkson Retail Group Ltd, TSMC 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 Anta Sports Products Ltd.: Adrian Mowat. The following analysts (and/or their associates or household members) own a long position in the shares of HDFC Bank: Bijay Kumar. The following analysts (and/or their associates or household members) own a long position in the shares of Sun Hung Kai Properties: Amy Luk.

• Beneficial Ownership (1% or more): J.P. Morgan beneficially owns 1% or more of a class of common equity securities of HSBC Holdings plc, Nestlé India Limited, Nikon (7731), TMB Bank Public Company Limited.

• Client of the Firm: AMMB Holdings is or was in the past 12 months a client of JPM; during the past 12 months, JPM provided to the company non-investment banking securities-related service and non-securities-related services. Bangkok Bank is or was in the past 12 months a client of JPM; during the past 12 months, JPM provided to the company non-investment banking securities-related service and non-securities-related services. Bank of Ayudhya is or was in the past 12 months a client of JPM; during the past 12 months, JPM provided to the company non-investment banking securities-related service and non-securities-related services. Canon (7751) is or was in the past 12 months a client of JPM; during the past 12 months, JPM provided to the company non-investment banking securities-related service and non-securities-related services. China Mobile Limited is or was in the past 12 months a client of JPM. China Telecom Corporation Limited is or was in the past 12 months a client of JPM. China Unicom (Hong Kong) Limited is or was in the past 12 months a client of JPM. Chinatrust Financial Holdings is or was in the past 12 months a client of JPM; during the past 12 months, JPM provided to the company non-investment banking securities-related service and non-securities-related services. Coal India is or was in the past 12 months a client of JPM. First Financial Holding Co Ltd is or was in the past 12 months a client of JPM; during the past 12 months, JPM provided to the company non-investment banking securities-related service and non-securities-related services. FUJIFILM Holdings (4901) is or was in the past 12 months a client of JPM; during the past 12 months, JPM provided to the company non-investment banking securities-related service and non-securities-related services. Genting Berhad is or was in the past 12 months a client of JPM; during the past 12 months, JPM provided to the company investment banking services, non-investment banking securities-related service and non-securities-related services. Genting Malaysia is or was in the past 12 months a client of JPM. Genting Singapore is or was in the past 12 months a client of JPM; during the past 12 months, JPM provided to the company investment banking services. HDFC Bank is or was in the past 12 months a client of JPM; during the past 12 months, JPM provided to the company non-investment banking securities-related service and non-securities-related services. Hitachi (6501) is or was in the past 12 months a client of JPM; during the past 12 months, JPM provided to the company investment banking services, non-investment banking securities-related service and non-securities-related services. Honda Motor (7267) is or was in the past 12 months a client of JPM; during the past 12 months, JPM provided to the company investment banking services, non-investment banking securities-related service and non-securities-related services. HSBC Holdings plc is or was in the past 12 months a client of JPM; during the past 12 months, JPM provided to the company investment banking services, non-investment banking securities-related service and non-securities-related services. Hyflux Limited is or was in the past 12 months a client of JPM; during the past 12 months, JPM provided to the company investment banking services. Hyundai E&C is or was in the past 12 months a client of JPM. Indofood is or was in the past 12 months a client of JPM. Inpex Corporation is or was in the past 12 months a client of JPM; during the past 12 months, JPM provided to the company investment banking services and non-investment banking securities-related service. International Container Terminal Services, Inc. is or was in the past 12 months a client of JPM; during the past 12 months, JPM provided to the company investment banking services and non-investment banking securities-related service. KASIKORNBANK is or was in the past 12 months a client of JPM; during the past 12 months, JPM provided to the company non-investment banking securities-related service and non-securities-related services. KGI Securities is or was in the past 12 months a client of JPM; during the past 12 months, JPM provided to the company non-investment banking securities-related service and non-securities-related services. Kiatnakin Bank is or was in the past 12 months a client of JPM; during the past 12 months, JPM provided to the company non-investment banking securities-related service. Krung Thai Bank is or was in the past 12 months a client of JPM; during the past 12 months, JPM provided to the company non-investment banking securities-related service and non-securities-related services. LG Chem Ltd is or was in the past 12 months a client of JPM. LG Display is or was in the past 12 months a client of JPM; during the past 12 months, JPM provided to the company investment banking services and non-investment banking securities-related service. LG Electronics is or was in the past 12 months a client of JPM; during the past 12 months, JPM provided to the

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company investment banking services, non-investment banking securities-related service and non-securities-related services. Maybank (Malayan Banking) is or was in the past 12 months a client of JPM; during the past 12 months, JPM provided to the company non-investment banking securities-related service and non-securities-related services. MediaTek Inc. is or was in the past 12 months a client of JPM; during the past 12 months, JPM provided to the company non-securities-related services. Mega Holdings is or was in the past 12 months a client of JPM; during the past 12 months, JPM provided to the company non-investment banking securities-related service and non-securities-related services. Nestlé India Limited is or was in the past 12 months a client of JPM; during the past 12 months, JPM provided to the company investment banking services. Nikon (7731) is or was in the past 12 months a client of JPM; during the past 12 months, JPM provided to the company investment banking services and non-investment banking securities-related service. Oil and Natural Gas Corporation is or was in the past 12 months a client of JPM. Parkson Retail Group Ltd is or was in the past 12 months a client of JPM; during the past 12 months, JPM provided to the company investment banking services, non-investment banking securities-related service and non-securities-related services. Quanta Computer Inc. is or was in the past 12 months a client of JPM; during the past 12 months, JPM provided to the company non-investment banking securities-related service. Reliance Industries Ltd is or was in the past 12 months a client of JPM; during the past 12 months, JPM provided to the company non-investment banking securities-related service and non-securities-related services. Samsung Engineering is or was in the past 12 months a client of JPM; during the past 12 months, JPM provided to the company non-investment banking securities-related service. Samsung Fire & Marine Insurance is or was in the past 12 months a client of JPM; during the past 12 months, JPM provided to the company non-investment banking securities-related service and non-securities-related services. Samsung Life Insurance is or was in the past 12 months a client of JPM; during the past 12 months, JPM provided to the company non-investment banking securities-related service and non-securities-related services. Siam Commercial Bank is or was in the past 12 months a client of JPM; during the past 12 months, JPM provided to the company non-investment banking securities-related service and non-securities-related services. SK Innovation Co Ltd is or was in the past 12 months a client of JPM; during the past 12 months, JPM provided to the company non-investment banking securities-related service and non-securities-related services. SPIL (Siliconware Precision Industries) is or was in the past 12 months a client of JPM. Sun Hung Kai Properties is or was in the past 12 months a client of JPM. Tata Consultancy Services is or was in the past 12 months a client of JPM; during the past 12 months, JPM provided to the company non-investment banking securities-related service and non-securities-related services. Teco Electric & Machinery is or was in the past 12 months a client of JPM; during the past 12 months, JPM provided to the company non-investment banking securities-related service and non-securities-related services. Thanachart Capital is or was in the past 12 months a client of JPM; during the past 12 months, JPM provided to the company non-investment banking securities-related service. TMB Bank Public Company Limited is or was in the past 12 months a client of JPM; during the past 12 months, JPM provided to the company investment banking services, non-investment banking securities-related service and non-securities-related services. TSMC is or was in the past 12 months a client of JPM; during the past 12 months, JPM provided to the company investment banking services, non-investment banking securities-related service and non-securities-related services. United Tractors is or was in the past 12 months a client of JPM. Wipro Ltd. is or was in the past 12 months a client of JPM; during the past 12 months, JPM provided to the company non-investment banking securities-related service. Yulon Motor Co., Ltd. is or was in the past 12 months a client of JPM.

• Investment Banking (past 12 months): J.P. Morgan received, in the past 12 months, compensation for investment banking services from Genting Berhad, Genting Singapore, Hitachi (6501), Honda Motor (7267), HSBC Holdings plc, Hyflux Limited, Inpex Corporation, International Container Terminal Services, Inc., LG Display, LG Electronics, Nestlé India Limited, Nikon (7731), Parkson Retail Group Ltd, TMB Bank Public Company Limited, TSMC.

• 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 First Financial Holding Co Ltd, Genting Berhad, Genting Singapore, Hitachi (6501), Honda Motor (7267), HSBC Holdings plc, Hyflux Limited, Inpex Corporation, International Container Terminal Services, Inc., LG Display, LG Electronics, Maybank (Malayan Banking), MediaTek Inc., Nestlé India Limited, Nikon (7731), Parkson Retail Group Ltd, Siam Commercial Bank, Tata Consultancy Services, TMB Bank Public Company Limited, TSMC.

• Non-Investment Banking Compensation: JPMS has received compensation in the past 12 months for products or services other than investment banking from AMMB Holdings, Bangkok Bank, Bank of Ayudhya, Canon (7751), Chinatrust Financial Holdings, First Financial Holding Co Ltd, FUJIFILM Holdings (4901), Genting Berhad, HDFC Bank, Hitachi (6501), Honda Motor (7267), HSBC Holdings plc, Inpex Corporation, International Container Terminal Services, Inc., KASIKORNBANK, KGI Securities, Kiatnakin Bank, Krung Thai Bank, LG Display, LG Electronics, Maybank (Malayan Banking), Mega Holdings, Nikon (7731), Parkson Retail Group Ltd, Quanta Computer Inc., Reliance Industries Ltd, Samsung Engineering, Samsung Fire & Marine Insurance, Samsung Life Insurance, Siam Commercial Bank, SK Innovation Co Ltd, Tata Consultancy Services, Teco Electric & Machinery, Thanachart Capital, TMB Bank Public Company Limited, TSMC, Wipro Ltd.. An affiliate of JPMS has received compensation in the past 12 months for products or services other than investment banking from AMMB Holdings, Bangkok Bank, Bank of Ayudhya, Canon (7751), Chinatrust Financial Holdings, First Financial Holding Co Ltd, FUJIFILM Holdings (4901), Genting Berhad, HDFC Bank, Hitachi (6501), Honda Motor (7267), HSBC Holdings plc, Inpex Corporation, International Container Terminal Services, Inc., KASIKORNBANK, KGI Securities, Krung Thai Bank, LG Chem Ltd, LG Display, LG Electronics, Maybank (Malayan Banking), MediaTek Inc., Mega Holdings, Nikon (7731), Oil and Natural Gas Corporation, Parkson Retail Group Ltd, Quanta Computer Inc., Reliance Industries Ltd, Samsung Fire & Marine Insurance, Samsung Life Insurance, Siam Commercial Bank, SK Innovation Co Ltd, Sun Hung Kai Properties, Teco Electric & Machinery, Thanachart Capital, TMB Bank Public Company Limited, TSMC, Wipro Ltd..

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• JPMorgan Securities (Malaysia) Sdn. Bhd. ("J.P. Morgan") has been engaged to provide a valuation, to the non-interested members of the board of directors of Genting Malaysia Berhad, on certain of the UK gaming operations owned by Genting Singapore PLC and which will be sold to a wholly-owned subsidiary of Genting Malaysia Berhad, as announced on 1 July, 2010. J.P. Morgan will receive a fee for its services. This research report has been prepared by analysts of J.P. Morgan who are not engaged in the abovementioned transaction, based on publicly available information, and the information herein is not intended to provide voting advice, serve as an endorsement of the above-mentioned proposed transaction or result in the procurement, withholding or revocation of a proxy or any other action by a shareholder.

• JPMorgan Securities (Malaysia) Sdn. Bhd. ("J.P. Morgan") has been engaged to provide a valuation, to the non-interested members of the board of directors of Genting Malaysia Berhad, on certain of the UK gaming operations owned by Genting Singapore PLC and which will be sold to a wholly-owned subsidiary of Genting Malaysia Berhad, as announced on 1 July, 2010. J.P. Morgan will receive a fee for its services. This research report has been prepared by analysts of J.P. Morgan who are not engaged in the abovementioned transaction, based on publicly available information, and the information herein is not intended to provide voting advice, serve as an endorsement of the above-mentioned proposed transaction or result in the procurement, withholding or revocation of a proxy or any other action by a shareholder.

• An affiliate of JPMS owns a significant stake in HDFC Securities Limited, a privately held subsidiary of HDFC. • J.P. Morgan Securities (Far East) Ltd, Seoul branch is acting as a Market Maker (Liquidity Provider) for the Equity Linked Warrants

of Hyundai Engineering & Construction and owns 10,563,760 as of 21-Feb-11. • J.P. Morgan Securities (Far East) Ltd, Seoul branch is acting as a Market Maker (Liquidity Provider) for the Equity Linked Warrants

of LG Chem Ltd and owns 17,418,840 as of 21-Feb-11. • J.P. Morgan Securities (Far East) Ltd, Seoul branch is acting as a Market Maker (Liquidity Provider) for the Equity Linked Warrants

of LG Display and owns 22,850,260 as of 21-Feb-11. • J.P. Morgan Securities (Far East) Ltd, Seoul branch is acting as a Market Maker (Liquidity Provider) for the Equity Linked Warrants

of LG Electronics and owns 17,289,300 as of 21-Feb-11. • J.P. Morgan Securities (Far East) Ltd, Seoul branch is acting as a Market Maker (Liquidity Provider) for the Equity Linked Warrants

of Samsung Fire & Marine Insurance and owns 14,062,210 as of 21-Feb-11. • J.P. Morgan Securities (Far East) Ltd, Seoul branch is acting as a Market Maker (Liquidity Provider) for the Equity Linked Warrants

of Samsung Life Insurance and owns 8,913,660 as of 21-Feb-11. • J.P. Morgan Securities (Far East) Ltd, Seoul branch is acting as a Market Maker (Liquidity Provider) for the Equity Linked Warrants

of SK Innovation Co Ltd and owns 17,636,860 as of 21-Feb-11. • MSCI: The MSCI sourced information is the exclusive property of Morgan Stanley Capital International Inc. (MSCI). Without prior

written permission of MSCI, this information and any other MSCI intellectual property may not be reproduced, redisseminated or used to create any financial products, including any indices. This information is provided on an 'as is' basis. The user assumes the entire risk of any use made of this information. MSCI, its affiliates and any third party involved in, or related to, computing or compiling the information hereby expressly disclaim all warranties of originality, accuracy, completeness, merchantability or fitness for a particular purpose with respect to any of this information. Without limiting any of the foregoing, in no event shall MSCI, any of its affiliates or any third party involved in, or related to, computing or compiling the information have any liability for any damages of any kind. MSCI, Morgan Stanley Capital International and the MSCI indexes are services marks of MSCI and its affiliates.

Important Disclosures for Equity Research Compendium Reports: Important disclosures, including price charts for all companies under coverage for at least one year, are available through the search function on J.P. Morgan’s website https://mm.jpmorgan.com/disclosures/company or by calling this U.S. toll-free number (1-800-477-0406)

Explanation of Equity Research Ratings and Analyst(s) Coverage Universe: J.P. Morgan uses the following rating system: Overweight [Over the next six to twelve months, we expect this stock will outperform the average total return of the stocks in the analyst’s (or the analyst’s team’s) coverage universe.] Neutral [Over the next six to twelve months, we expect this stock will perform in line with the average total return of the stocks in the analyst’s (or the analyst’s team’s) coverage universe.] Underweight [Over the next six to twelve months, we expect this stock will underperform the average total return of the stocks in the analyst’s (or the analyst’s team’s) coverage universe.] J.P. Morgan Cazenove’s UK Small/Mid-Cap dedicated research analysts use the same rating categories; however, each stock’s expected total return is compared to the expected total return of the FTSE All Share Index, not to those analysts’ coverage universe. A list of these analysts is available on request. The analyst or analyst’s team’s coverage universe is the sector and/or country shown on the cover of each publication. See below for the specific stocks in the certifying analyst(s) coverage universe.

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J.P. Morgan Equity Research Ratings Distribution, as of December 31, 2010

Overweight (buy)

Neutral (hold)

Underweight (sell)

J.P. Morgan Global Equity Research Coverage 46% 42% 12% IB clients* 53% 50% 38% JPMS Equity Research Coverage 43% 49% 8% IB clients* 71% 63% 59%

*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.

Valuation and Risks: Please see the most recent company-specific research report for an analysis of valuation methodology and risks on any securities recommended herein. Research is available at http://www.morganmarkets.com , or you can contact the analyst named on the front of this note or your J.P. Morgan representative.

Analysts’ Compensation: The equity research analysts responsible for the preparation of this report receive compensation based upon various factors, including the quality and accuracy of research, client feedback, competitive factors, and overall firm revenues, which include revenues from, among other business units, Institutional Equities and Investment Banking.

Registration of non-US Analysts: Unless otherwise noted, the non-US analysts listed on the front of this report are employees of non-US affiliates of JPMS, are not registered/qualified as research analysts under FINRA/NYSE rules, may not be associated persons of JPMS, and may not be subject to FINRA Rule 2711 and NYSE Rule 472 restrictions on communications with covered companies, public appearances, and trading securities held by a research analyst account.

Other Disclosures

J.P. Morgan ("JPM") is the global brand name for J.P. Morgan Securities LLC ("JPMS") and its affiliates worldwide. J.P. Morgan Cazenove is a marketing name for the U.K. investment banking businesses and EMEA cash equities and equity research businesses of JPMorgan Chase & Co. and its subsidiaries.

Options related research: If the information contained herein regards options related research, such information is available only to persons who have received the proper option risk disclosure documents. For a copy of the Option Clearing Corporation’s Characteristics and Risks of Standardized Options, please contact your J.P. Morgan Representative or visit the OCC’s website at http://www.optionsclearing.com/publications/risks/riskstoc.pdf.

Legal Entities Disclosures U.S.: JPMS is a member of NYSE, FINRA and SIPC. J.P. Morgan Futures Inc. is a member of the NFA. JPMorgan Chase Bank, N.A. is a member of FDIC and is authorized and regulated in the UK by the Financial Services Authority. U.K.: J.P. Morgan Securities Ltd. (JPMSL) is a member of the London Stock Exchange and is authorized and regulated by the Financial Services Authority. Registered in England & Wales No. 2711006. Registered Office 125 London Wall, London EC2Y 5AJ. South Africa: J.P. Morgan Equities Limited is a member of the Johannesburg Securities Exchange and is regulated by the FSB. Hong Kong: J.P. Morgan Securities (Asia Pacific) Limited (CE number AAJ321) is regulated by the Hong Kong Monetary Authority and the Securities and Futures Commission in Hong Kong. Korea: J.P. Morgan Securities (Far East) Ltd, Seoul Branch, is regulated by the Korea Financial Supervisory Service. Australia: J.P. Morgan Australia Limited (ABN 52 002 888 011/AFS Licence No: 238188) is regulated by ASIC and J.P. Morgan Securities Australia Limited (ABN 61 003 245 234/AFS Licence No: 238066) is a Market Participant with the ASX and regulated by ASIC. Taiwan: J.P.Morgan Securities (Taiwan) Limited is a participant of the Taiwan Stock Exchange (company-type) and regulated by the Taiwan Securities and Futures Bureau. India: J.P. Morgan India Private Limited, having its registered office at J.P. Morgan Tower, Off. C.S.T. Road, Kalina, Santacruz East, Mumbai - 400098, is a member of the National Stock Exchange of India Limited (SEBI Registration Number - INB 230675231/INF 230675231/INE 230675231) and Bombay Stock Exchange Limited (SEBI Registration Number - INB010675237/INB010675237) and is regulated by Securities and Exchange Board of India. Thailand: JPMorgan Securities (Thailand) Limited is a member of the Stock Exchange of Thailand and is regulated by the Ministry of Finance and the Securities and Exchange Commission. Indonesia: PT J.P. Morgan Securities Indonesia is a member of the Indonesia Stock Exchange and is regulated by the BAPEPAM LK. Philippines: J.P. Morgan Securities Philippines Inc. is a member of the Philippine Stock Exchange and is regulated by the Securities and Exchange Commission. Brazil: Banco J.P. Morgan S.A. is regulated by the Comissao de Valores Mobiliarios (CVM) and by the Central Bank of Brazil. Mexico: J.P. Morgan Casa de Bolsa, S.A. de C.V., J.P. Morgan Grupo Financiero is a member of the Mexican Stock Exchange and authorized to act as a broker dealer by the National Banking and Securities Exchange Commission. Singapore: This material is issued and distributed in Singapore by J.P. Morgan Securities Singapore Private Limited (JPMSS) [MICA (P) 025/01/2011 and Co. Reg. No.: 199405335R] which is a member of the Singapore Exchange Securities Trading Limited and is regulated by the Monetary Authority of Singapore (MAS) and/or JPMorgan Chase Bank, N.A., Singapore branch (JPMCB Singapore) which is regulated by the MAS. Malaysia: This material is issued and distributed in Malaysia by JPMorgan Securities (Malaysia) Sdn Bhd (18146-X) which is a Participating Organization of Bursa Malaysia Berhad and a holder of Capital Markets Services License issued by the Securities Commission in Malaysia. Pakistan: J. P. Morgan Pakistan Broking (Pvt.) Ltd is a member of the Karachi Stock Exchange and regulated by the Securities and Exchange Commission of Pakistan.

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Saudi Arabia: J.P. Morgan Saudi Arabia Ltd. is authorized by the Capital Market Authority of the Kingdom of Saudi Arabia (CMA) to carry out dealing as an agent, arranging, advising and custody, with respect to securities business under licence number 35-07079 and its registered address is at 8th Floor, Al-Faisaliyah Tower, King Fahad Road, P.O. Box 51907, Riyadh 11553, Kingdom of Saudi Arabia. Dubai: JPMorgan Chase Bank, N.A., Dubai Branch is regulated by the Dubai Financial Services Authority (DFSA) and its registered address is Dubai International Financial Centre - Building 3, Level 7, PO Box 506551, Dubai, UAE.

Country and Region Specific Disclosures U.K. and European Economic Area (EEA): Unless specified to the contrary, issued and approved for distribution in the U.K. and the EEA by JPMSL. Investment research issued by JPMSL has been prepared in accordance with JPMSL's policies for managing conflicts of interest arising as a result of publication and distribution of investment research. Many European regulators require a firm to establish, implement and maintain such a policy. This report has been issued in the U.K. only to persons of a kind described in Article 19 (5), 38, 47 and 49 of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (all such persons being referred to as "relevant persons"). This document must not be acted on or relied on by persons who are not relevant persons. Any investment or investment activity to which this document relates is only available to relevant persons and will be engaged in only with relevant persons. In other EEA countries, the report has been issued to persons regarded as professional investors (or equivalent) in their home jurisdiction. Australia: This material is issued and distributed by JPMSAL in Australia to “wholesale clients” only. JPMSAL does not issue or distribute this material to “retail clients.” The recipient of this material must not distribute it to any third party or outside Australia without the prior written consent of JPMSAL. For the purposes of this paragraph the terms “wholesale client” and “retail client” have the meanings given to them in section 761G of the Corporations Act 2001. Germany: This material is distributed in Germany by J.P. Morgan Securities Ltd., Frankfurt Branch and J.P.Morgan Chase Bank, N.A., Frankfurt Branch which are regulated by the Bundesanstalt für Finanzdienstleistungsaufsicht. Hong Kong: The 1% ownership disclosure as of the previous month end satisfies the requirements under Paragraph 16.5(a) of the Hong Kong Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission. (For research published within the first ten days of the month, the disclosure may be based on the month end data from two months’ prior.) J.P. Morgan Broking (Hong Kong) Limited is the liquidity provider/market maker for derivative warrants, callable bull bear contracts and stock options listed on the Stock Exchange of Hong Kong Limited. An updated list can be found on HKEx website: http://www.hkex.com.hk. Japan: There is a risk that a loss may occur due to a change in the price of the shares in the case of share trading, and that a loss may occur due to the exchange rate in the case of foreign share trading. In the case of share trading, JPMorgan Securities Japan Co., Ltd., will be receiving a brokerage fee and consumption tax (shouhizei) calculated by multiplying the executed price by the commission rate which was individually agreed between JPMorgan Securities Japan Co., Ltd., and the customer in advance. Financial Instruments Firms: JPMorgan Securities Japan Co., Ltd., Kanto Local Finance Bureau (kinsho) No. 82 Participating Association / Japan Securities Dealers Association, The Financial Futures Association of Japan. Korea: This report may have been edited or contributed to from time to time by affiliates of J.P. Morgan Securities (Far East) Ltd, Seoul Branch. Singapore: JPMSS and/or its affiliates may have a holding in any of the securities discussed in this report; for securities where the holding is 1% or greater, the specific holding is disclosed in the Important Disclosures section above. India: For private circulation only, not for sale. Pakistan: For private circulation only, not for sale. New Zealand: This material is issued and distributed by JPMSAL in New Zealand only to persons whose principal business is the investment of money or who, in the course of and for the purposes of their business, habitually invest money. JPMSAL does not issue or distribute this material to members of "the public" as determined in accordance with section 3 of the Securities Act 1978. The recipient of this material must not distribute it to any third party or outside New Zealand without the prior written consent of JPMSAL. Canada: The information contained herein is not, and under no circumstances is to be construed as, a prospectus, an advertisement, a public offering, an offer to sell securities described herein, or solicitation of an offer to buy securities described herein, in Canada or any province or territory thereof. Any offer or sale of the securities described herein in Canada will be made only under an exemption from the requirements to file a prospectus with the relevant Canadian securities regulators and only by a dealer properly registered under applicable securities laws or, alternatively, pursuant to an exemption from the dealer registration requirement in the relevant province or territory of Canada in which such offer or sale is made. The information contained herein is under no circumstances to be construed as investment advice in any province or territory of Canada and is not tailored to the needs of the recipient. To the extent that the information contained herein references securities of an issuer incorporated, formed or created under the laws of Canada or a province or territory of Canada, any trades in such securities must be conducted through a dealer registered in Canada. No securities commission or similar regulatory authority in Canada has reviewed or in any way passed judgment upon these materials, the information contained herein or the merits of the securities described herein, and any representation to the contrary is an offence. Dubai: This report has been issued to persons regarded as professional clients as defined under the DFSA rules.

General: Additional information is available upon request. Information has been obtained from sources believed to be reliable but JPMorgan Chase & Co. or its affiliates and/or subsidiaries (collectively J.P. Morgan) do not warrant its completeness or accuracy except with respect to any disclosures relative to JPMS and/or its affiliates and the analyst’s involvement with the issuer that is the subject of the research. All pricing is as of the close of market for the securities discussed, unless otherwise stated. Opinions and estimates constitute our judgment as of the date of this material and are subject to change without notice. Past performance is not indicative of future results. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The opinions and recommendations herein do not take into account individual client circumstances, objectives, or needs and are not intended as recommendations of particular securities, financial instruments or strategies to particular clients. The recipient of this report must make its own independent decisions regarding any securities or financial instruments mentioned herein. JPMS distributes in the U.S. research published by non-U.S. affiliates and accepts responsibility for its contents. Periodic updates may be provided on companies/industries based on company specific developments or announcements, market conditions or any other publicly available information. Clients should contact analysts and execute transactions through a J.P. Morgan subsidiary or affiliate in their home jurisdiction unless governing law permits otherwise.

“Other Disclosures” last revised January 8, 2011.

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Copyright 2011 JPMorgan Chase & Co. All rights reserved. This report or any portion hereof may not be reprinted, sold or redistributed without the written consent of J.P. Morgan.#$J&098$#*P