090219 - Uobkh - Regional Morning Notes

Regional Morning Notes

UOBKayHian Thursday, February 19, 2009

KEY STORY

Key Indices

China Oil & Gas Page 2 Sino-Russia 20-year oil supply contract positive for China; widening H- vs A-share discount presents buying opportunity. Maintain OVERWEIGHT.

Key Indices Prev Close

Singapore Page 10 Oversea-Chinese Banking Corp (HOLD/S$4.89/Fair: S$5.27) 4Q08: Disappointing results with spike in specific allowances due to new NPLs in overseas operations and manufacturing sector.

CHINA Sector Oil & Gas Page 2 Sino-Russia 20-year oil supply contract positive for China; widening H- vs A-share discount presents buying opportunity. Maintain OVERWEIGHT. Power Page 3 Coal import only has marginal impact on both IPPs and coal miners. Maintain MARKET WEIGHT. Update Page 4 Ping An Insurance (BUY/HK$34.75/Target: HK$47.75) January premiums up 23% yoy, reflecting an excellent start to the year.

HONG KONG Sector Property Page 6 We double-check our price targets and assumptions, which are still among the most bearish in the market, and find they are not at all far-fetched.

MALAYSIA Results Page 8 Lafarge Malayan Cement (SELL/RM3.86/Fair: RM3.50) FY08: Net profit of RM367.7m (+27.6% yoy) due to higher average selling prices and demand. Results were above our and market expectations.

SINGAPORE Results Page 10 Oversea-Chinese Banking Corp (HOLD/S$4.89/Fair: S$5.27) 4Q08: Disappointing results with spike in specific allowances due to new NPLs in overseas operations and manufacturing sector.

THAILAND Results Page 12 Advanced Info Service (BUY/Bt77.00/Target: Bt101.76) 4Q08: Operating results in line with expectation. Expect performance to be soft in 1H09 before picking up in 2H09. Update Dynasty Ceramic (NOT RATED/Bt11.80) Page 14 Tile manufacturer offers impressive growth and high dividend yield.

DJIA FTSE 100 AS30 CSI 300 FSSTI HSI JCI KLCI KOSPI Nikkei 225 SET TWSE BDI CPO (RM/mt) Nymex Crude (US$/bbl)

1D %

1W %

7555.6 4006.8 3366.9 2275.8 1651.1 13016.0 1330.6 895.2 1113.2 7534.4 439.6 4498.4

0.0 (0.7) (1.3) (4.6) 0.8 0.5 1.0 (0.4) (1.2) (1.5) 0.3 0.1

(4.2) (5.4) (1.5) (2.4) (4.1) (3.9) 0.4 (0.2) (6.5) (5.2) (1.0) (1.7)

1M % YTD % (8.8) (3.4) (4.6) 13.1 (5.5) (2.4) (1.5) 0.6 (3.3) (8.7) 0.9 3.0

(13.9) (9.6) (8.0) 25.2 (6.3) (9.5) (1.8) 2.1 (1.0) (15.0) (2.3) (2.0)

1986 1935.5

4.8 (3.0)

(3.4) 0.0

125.4 6.5

156.6 18.7

34.6

(0.9)

(7.8)

(5.2)

(22.4)

Source: Bloomberg

Top BUYs/SELLs Current Price (lcy)

Ticker

Target Pot. +/Price (%) (lcy)

Top BUYs China Life China Mobile China Petroleum China Railway China Shenhua Maanshan Iron Bumi Resources Public Bank DBS Group Indofood Agri SingTel Advanced Info Quality Houses

2628 HK 22.45 30.50 941 HK 71.50 90.00 386 HK 4.23 6.93 390 HK 4.68 5.90 1088 HK 16.82 23.00 323 HK 2.88 3.70 BUMI IJ 740.00 1,010.00 PBK MK 9.10 10.90 DBS SP 8.10 10.55 IFAR SP 0.56 0.80 ST SP 2.47 2.95 ADVANC TB 77.00 101.00 QH TB 0.86 1.49

Top SELLs Aluminum Corp Parkson Retail Wharf Hldg S’pore Airlines S’pore Exchange Amata Corp

2600 HK 3368 HK 4 HK SIA SP SGX SP AMATA TB

4.07 6.53 16.72 10.22 4.90 3.60

3.00 4.89 14.60 9.70 3.00 2.52

35.9 25.9 63.8 26.1 36.7 28.5 36.5 19.8 30.2 42.9 19.4 31.2 73.3

(26.3) (25.1) (12.7) (5.1) (38.8) (30.0)

Key Assumptions GDP (% yoy)

2008

2009F

2010F

US* Euro Zone* Japan* Singapore Malaysia Thailand Indonesia Hong Kong China

1.3 0.7 (0.7) 1.2 5.1 4.2 6.0 2.2 9.0

(1.9) (1.8) (2.9) (4.0) 0.9 0.5 3.6 (0.8) 7.1

1.8 0.8 n.a. 4.0 4.0 4.3 6.3 1.5 8.0

100 2,623 6,884 873 153 818 6,338

55 1,763 3,834 942 107 520 2,500

65 2,090 4,578 981 99 685 1,500

Brent Crude Oil Aluminium * Copper * Gold Price London * Iron Ore * CPO BDI

(US$/bbl) (US$/MT) (US$/MT) (US$/ounce) (USc/dmtu) (US$/MT)

* Bloomberg Source: UOB, UOB Kay Hian

Corporate Events Venue China/Commodities-Energy China/Commodities-Energy

Malaysia Hong Kong

Type

Beg

Close

AP 18-Feb 19-Feb AP 20-Feb 20-Feb

* AP: analyst presentation

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Page 1 of 16

Regional Morning Notes Thursday, February 19, 2009

Oil & Gas Sino-Russia oil deal and widening H-A gap present buying opportunities

CHINA

The just-concluded Sino-Russia loan-for-oil deal carries an implied oil price of US$22/bbl, a positive for China. Widening H- vs A-share discount suggests further upside for H-shares. Maintain OVERWEIGHT for sector.

OVERWEIGHT

Sector Events

BUY

China, Russia sign 20-year deal swapping oil for loans. China signed a US$25b energy deal that will secure oil supplies from Russia for the next 20 years in return for loans. As part of the broad energy supply deal, China will lend US$15b to Rosneft, Russia's state-owned oil major, and US$10b to Transneft. In return, Russia promised to guarantee annual oil supply of 15 million tons, or 300,000 barrels per day, for 20 years to China.

Current Price: HK$5.92 Target Price: HK$8.82

Oil & Gas

PetroChina (857 HK)

Sector Impact Positive for China’s energy safety. The interest rate embedded in the deal is believed to be about 6%. If it is the case, the implied oil purchase price for China will be approximately US$22/bbl, which is very reasonable given the current spot price of US$40/bbl and long-term consensus of US$75/bbl. Furthermore, 15 million tons is a significant supply, amounting to some 8% of China’s oil imports in 2008 and 4% of China’s total consumption. Still too early to pin down impact on oil majors. Our bet is that PetroChina and Sinopec will likely share this contracted oil supply. But due to the limited information available at this point, there is no indication of how this supply will be split between the 2 oil majors or even the oil price at which they will be charged. However, given Sinopec’s refining capacity is 40% greater than PetroChina’s, it is likely that Sinopec will be allocated more oil from this deal.

Sinopec (386 HK)

BUY Current Price: HK$4.23 Target Price: HK$6.93

Sinopec’s H-A Discount 65% 60% 55% 50% 45% 40% 35% 30% 25% Nov-07

Jan-08

Mar-08

May-08

Jul-08

Sep-08

Nov-08

Jan-09

Nov-08

Jan-09

Source: Bloomberg, UOB Kay Hian

Earning Revision Sinopec recently announced that its net profit in FY08 will drop more than 50% yoy due to a) big refining losses in 1H08 and b) drop in price and demand for its chemical products. For these reasons, we slash our net profit forecast for 2008 to Rmb26.3b, or Rmb0.30/share. We leave our forecast for 2009 unchanged.

PetroChina’s H-A Discount 70% 65% 60% 55% 50%

Recommendation

45%

After the recent 30% rebound in the A-share market, the H- vs A-share discount has been widening for both Sinopec and PetroChina. Sinopec’s 57% H- vs A-share discount has been close to the historical high. This implies a good buying opportunity for its H-shares. At this juncture, we maintain our BUY ratings on Sinopec and PetroChina. Our target prices for Sinopec and PetroChina are HK$6.93 and HK$8.82, which correspond to 1.6x and 1.8x 2009 P/B respectively

40% 35% 30% 25% Nov-07

Jan-08

Mar-08

May-08

Jul-08

Sep-08

Source: Bloomberg, UOB Kay Hian

Analyst Aochao Wang  (86 21) 54047225 ext. 802 [email protected]

Price Stock

Rec.

ROE

Market

Yield

18 Feb 09

2007

Net Profit 2008F

2009F

2007

2008F

EPS 2009F

2007

2008F

PE 2009F

2007

Cap

2007

(HK$)

(Rmbm)

(Rmbm)

(Rmbm)

(Rmb)

(Rmb)

(Rmb)

(x)

(x)

(x)

(%)

(HK$b)

(%)

6.8

8.7

22.5

124.9

6.8

12.0

3.9

19.8

70.9

4.5

PetroChina BUY

5.92

145,625

140,188

108,926

0.80

0.77

0.60

6.5

Sinopec

4.23

56,533

26,279

81,510

0.65

0.30

0.94

5.6

BUY

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Page 2 of 16

Regional Morning Notes Thursday, February 19, 2009

Power CHINA

Coal import only has marginal impact Local press reported that dominant IPPs and China Resources will import coal, amid the deadlocked coal price negotiation. Given the limited import volume, industry impact will likely be marginal. Maintain MARKET WEIGHT. Sector Events IPPs will import more coal this year. According to local press, the five major power groups, including Huaneng Group, Huadian Group, Datang Group, Guodian Group and China Power Investment Group, together with China Resources Group, have teamed up to import coal from overseas suppliers to satisfy their own demand. In the meantime, the contract negotiations for thermal coal are still deadlocked.

Power

MARKET WEIGHT CR Power (836 HK) BUY Current Price: HK$14.08 Target Price: HK$17.70

Datang Power (991 HK) BUY

Sector Impact Marginal impact for both IPPs and coal miners. We think coal imports will merely serve as a strategic warning to coal miners under the current deadlocked coal price negotiation. In fact, the volume of imported coal will only account for less then 5% of the total coal demand for Independent Power Producers (IPPs). Even if IPPs are able import more coal, imported coal can only be used in coastal cities given transportation problems. From the business perspective, importing coal is actually not a good choice for IPPs as international coal price and supply are usually more volatile, even though prices may now be cheaper. Therefore, we expect coal imports to have only a marginal impact on the domestic coal prices. On the other hand, we think it will support international coal price and narrow the price gap between China and overseas coal due to higher demand. IPPs’ coal cost will depend on domestic demand/supply dynamics. There has been much news or speculation concerning the thermal coal price negotiation. However, we think investors should be focussing more on the current coal demand/supply dynamics and spot price, as both parties can default if there is price divergence.

Current Price: HK$3.60 Target Price: HK$4.90

Huaneng Power (902 HK) SELL Current Price: HK$5.17 Fair Price: HK$4.70

Huadian Power (1071 HK) SELL Current Price: HK$1.65 Fair Price: HK$1.50

China Power (2380 HK) HOLD

Recommendation

Current Price: HK$1.43 Fair Price: HK$1.70

Maintain MARKET WEIGHT for the power sector given the uncertain coal price negotiation and coal price trend. Currently, we continue to prefer welldiversified IPPs, including CR Power and Datang Power, given their lower coal cost risk in the longer term and better earnings visibility. Maintain BUY for both companies with a DCF-based target prices of HK$17.70 (WACC=9.6%, g=3%) and HK$4.90 ((WACC=8.5%, g=3%) respectively.

Analyst Yan Shi  (8621) 54047225-804 [email protected]

Sector Comparison Price Company

Ticker

Rec.

18 Feb 09 (HK$)

Datang Power CR Power Huaneng Power Huadian Power China Power

Net Profit 2007

2008F

(Rmbm) (Rmbm)

ROE

Market

Yield

2009F

2007

2008F

EPS 2009F

2007

2008F

PE 2009F

2007

Cap

2007

(Rmbm)

(Rmb)

(Rmb)

(Rmb)

(x)

(x)

(x)

(%)

(HK$m)

(%)

991 HK

BUY

3.60

3,406

510

3,169

0.29

0.04

0.27

11.9

79.5

12.8

13

11,632

4.2

836 HK

BUY

14.08

3,161

563

4,132

0.80

0.14

1.01

17.6

102.7

14.0

17

18,493

1.8

902 HK

SELL

5.17

6,161

(3,979)

2,281

0.51

(0.33)

0.19

9.1

n/a

24.6

12

15,796

6.4

1071 HK

SELL

1.65

1,197

(1,362)

116

0.20

(0.23)

0.02

7.5

n/a

77.3

6

2,361

4.2

2380 HK HOLD

1.43

592

(782)

403

0.16

(0.22)

0.11

8.0

n/a

15.2

6

2,855

5.1

CR Power’s financials are in HK$ Source: Company data, UOB Kay Hian

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Page 3 of 16

Regional Morning Notes Thursday, February 19, 2009

Ping An Insurance January premiums up 23% yoy, reflecting excellent start to the year January premiums up 23% yoy, better than consensus estimates. Earnings recovery expected this year as key negatives have been mostly factored into earnings. Maintain BUY.

CHINA

Corporate Events

BUY

Ping An announced January premiums of Rmb13.3b, up 23% yoy, which exceeded consensus expectations. Property and casualty (P&C) premiums came in at Rmb3.6b, up 12.7% yoy.

Current Price: HK$34.75 Target Price: HK$47.75

Stock Impact Like China Life, Ping An is off to an excellent start to the year in terms of premium growth. Premium growth is particularly impressive, given that January was a shortened working month due to the Chinese New Year and the very strong loan growth experienced in Jan 08. We believe Ping An’s premium growth was further helped by Ping An maintaining its universal life credit rate, which remained unchanged at 5.25% for a 138bp spread above the five-year benchmark deposit rate. P&C premiums were also slightly better than expected given the shortened month of January. Going forward, P&C premium growth will be challenged by slowing auto sales. However, China Insurance Regulatory Commission’s (CIRC) enforcement of insurer solvency and strict regulation of commissions may help Ping An break even in terms of underwriting this year.

Ping An Insurance (2318 HK)

Sector 52-Wk Avg Daily Vol. (m)

Insurance 21.8

Market Cap (HK$m) (US$m)

264,147 33,865

Major Shareholders (%)

HSBC

16.80

Book NTA per Share (Rmb) ROE (%)

13.36 24.3

Results Due Interim Final

August April

Price Chart (HK$)

Earnings Risk A-share market volatility and prolonged period of low interest rates.

82.00 72.00

Recommendation

62.00 52.00

We maintain our BUY recommendation on Ping An as we believe the majority of the headwinds it faced in 2008 have been fully priced in. Earnings of Chinese life insurers will also likely recover this year. With the A-share market being the top performing market in the world year-to-date, the investment outlook has also improved substantially from last year. Our target price remains HK$47.75, reflecting 2.5x P/EV and 25x NBV. However, China Life remains our top pick for the insurance sector due to its simple business structure, dominance in the rural business and absence of loss-making foreign investments.

42.00 32.00 22.00 12.00 2.00 Feb-08

May -08

Aug-08

Nov -08

Source: Bloomberg

Analyst Nan Sheng  (8621) 5404 7225 ext.809 [email protected]

Year to 31 Dec 2006 2007 2008F 2009F 2010F

Net Earned Premium (Rmbm) 63,013 73,606 92,297 108,560 131,647

Consensus Net Profit

EBITDA (Rmbm) 8,548 22,004 2,068 16,700 21,169

Net Profit (Rmbm) 7,838 18,688 437 13,848 18,316

EPS (Rmbm) 1.05 2.50 0.06 1.85 2.45

EPS Growth (%) 53.8 138.4 -97.7 3069.9 32.3

PE (x) 29.8 12.5 535.4 16.9 12.8

P/EV (x) 3.0 1.5 2.1 1.8 1.6

DPS (Rmb) 0.34 0.50 0.01 0.37 0.47

Yield (%) 0.88 1.30 0.03 0.96 1.22

– FY08: Rmb3,552m – FY09: Rmb14,897m

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Page 4 of 16

Regional Morning Notes Thursday, February 19, 2009 Monthly Life Premiums Rmbm 14,000

60%

12,000

50%

10,000

40% 30%

8,000

20%

6,000

10%

4,000

0% -10%

0

-20%

J A ulu 0 S g- 06 e O p- 06 c N t- 0 6 Dov- 6 ec 06 Ja -0 Fen-06 M b-07 a A r- 7 M pr- 07 ay 07 Ju -0 n 7 J -0 A ul- 7 u 0 S g- 07 e O p- 07 c N t- 0 7 Dov- 7 e 0 Jac-0 7 Fen-07 M b-08 a A r- 8 M pr- 08 ay 08 Ju -0 n 8 J -0 A ul- 8 ug 08 S -0 e O p- 08 c N t- 0 8 Dov- 8 ec 08 Ja -0 n- 8 09

2,000

Premiums

Growth

Source: Ping An, UOB Kay Hian

Monthly P&C Premiums Rmbm 4,000

120.0%

3,500

100.0%

3,000

80.0%

2,500

60.0%

2,000 40.0%

1,500

20.0%

1,000

0.0%

500 0

A u S g-0 e O p-06 c N t-0 6 o D v-06 ec 6 Ja -0 Fen-06 M b-07 a A r-07 M pr- 7 ay 07 Ju -0 n 7 J -0 A ul- 7 ug 07 S -0 e O p-07 c N t-0 7 o D v-07 ec 7 Ja -0 Fen-07 M b-08 a A r- 8 M pr- 08 ay 08 Ju -0 n 8 J -0 A ul- 8 ug 08 S -0 e O p-08 c N t-0 8 o D v-08 ec 8 Ja -0 n- 8 09

-20.0%

Premiums

Growth

Source: Ping An, UOB Kay Hian

Universal Life Credit Rate 7.00%

Five-year deposit rate

6.00% 5.00%

Ping An Universal Life Credit Rate

4.00% 3.00% 2.00% 1.00%

Ju l-0 7 Se p07 N ov -0 7 Ja n08 M ar -0 8 M ay -0 8 Ju l-0 8 Se p08 N ov -0 8 Ja n09

Ja n07 M ar -0 7 M ay -0 7

0.00%

Source: Ping An, UOB Kay Hian

Profit & Loss Year to 31 Dec (Rmbm) Net earned premiums Net Investment income Net profit EPS

2006 63,013 12,198 7,838 1.27

2007 73,606 15,257 18,688 2.54

2008F 92,297 17,373 437 0.06

2009F 108,560 20,279 13,848 1.85

2010F 131,647 27,265 18,316 2.45

2006 341,557 493,539 446,559 46,375

2007 511,825 691,298 577,447 113,851

2008F 488,286 730,993 613,917 114,202

2009F 536,718 815,870 689,661 125,328

2010F 635,331 924,191 785,795 139,477

Balance Sheet Year to 31 Dec (Rmbm) Investment Assets Total Assets Total Liabilities Equity

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Page 5 of 16

Regional Morning Notes Thursday, February 19, 2009

Property We are not overly pessimistic Our price targets, which are based on another 25% fall in residential prices this year, are still among the most bearish in the market. We double-check our assumptions and are satisfied that they are not far-fetched at all.

HONG KONG

Sector Events

UNDERWEIGHT

We differ. Overall, the market was shocked by the surge in unemployment to 4.6% in January (released on Tuesday). While that has effectively removed the last thread of hope that anyone might still be holding on property prices remaining stable, many commentators are only expecting residential prices to fall 10-15% this year, much smaller than our 25%. One reason we are more pessimistic than others is because unemployment could reach 7% by year-end, against the market’s typical 6%.

Property

Analyst Sylvia Wong  (852) 2236 6793 [email protected]

Utmost task to preserve employment. Unemployment rose 16,400 in January, triple that of the 4,900 in December, even before the massive closure of businesses expected to take place after the Lunar New Year. The government’s prime aim now is to ease pressure on the job market. The Budget, to be released next Wednesday (25 February), will focus on this area. In order to hold up the fasteroding confidence, the government has recently announced these plans: a) To create 55,000 construction jobs in fiscal year 2009-10 by accelerating infrastructure and minor works projects, b) To recruit 7,700 civil servants and create 4,000 temporary openings in the next 14 months, c) Over 20 statutory bodies will recruit some 6,000 employees and create about 2,000 temporary jobs or internship opportunities this year, and d) The Labour Department will continue to organise larger-scale job fairs in shopping malls and community centres. Question on implementation. For a start, we are sceptical on how fast these planned government jobs can actually materialise, particularly in view of the large number involved. In the private sector, there are already reports that companies are pulling out of the job fairs as expansion plans are halted. Even if successfully implemented, unemployment could still top 7%. Here is a rough calculation: 14,300 jobs were lost in January. Assuming an average of 14,000 jobs will be gone in each of the next 11 months, a further 154,000 positions will be lost by December. Assuming all the proposed government jobs will be created this year, 74,700 new positions will be added, reducing the net loss in jobs to 79,300. Adding 38,500 new headcounts (based on the 10-year average) to the labour force, such as graduates and school-leavers, unemployment could rise from 157,700 at present to 275,500, or over 7%, by year-end. Unemployment vs Residential Price Index (%) 9

120

8

100

Unemploy ment at 7%

7 6

80

5

60

4 3

40

Residential prices af ter f alling 40% f rom peak

2 1

20

0

0 94

95

96

97

98

99 00 01 02 03 04 05 06 Unemployment rate Residential price index (RHS)

07

08

09

Source: HKSAR, Centaline

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Page 6 of 16

Regional Morning Notes Thursday, February 19, 2009 40% drop in residential prices from peak not that remote. For some time, we have been holding the view that residential prices will have to fall 40% from peak before bottoming. This will bring prices back to levels last seen in 1Q04. Many find this retrenchment hard to comprehend. But if we are indeed facing a financial crisis that only takes place once in a hundred years, it follows that perhaps none of us is in a position to comprehend the likely outcome. We saw that in the past. Moreover, the Unemployment vs Residential Price Index chart shows unemployment hit 7% twice in the last seven years. The last time was in May 04, and at the time residential prices were hovering on levels equivalent to a 36% fall from the 2008 peak. In Mar 02, prices were even lower, equivalent to some 46% below the 2008 peak. Thus, our 40% base-case decline is not that far-fetched. One might argue new supply is much tighter now, but at the same time, the local or the global economy was not under as much stress then. Downward spiral on prices. Suffice to say, the lack of job security will significantly undermine any desire to buy a new home. Moreover, without any salary increase (let alone the possibility of pay cuts), upgrading demand will also dissipate. We expect developers to start cutting prices more notably, especially on unsold inventories. This will only prompt the few that are still looking to buy a flat at this stage to wait for lower prices, drying up transaction volume further, which will put more pressure on prices. A downward spiral has been formed. Residential prices fell 20% in 2H08, thus we expect another 25% drop this year. Potential Price Cuts On Unsold Inventories Original launch date Jan 09 Jan 09 Dec 08 Dec 08 Nov 08 Noc 08 Oct 08 Aug 08 Jun 08 Jun 08 May 08 Dec 07 Nov 07 Oct 07

Project

Location

Developer

No. of units

The Sail at Victoria Vista Le Billionaire Cite 33 Peak One La Grove The Dynasty One Madison York Place Beacon Lodge Celestial Heights Harbour Place Island Lodge Long Beach

Western District Sham Shui Po Kowloon City Prince Edwards Shatin Yuen Long Tsuen Wan Cheung Sha Wan Wanchai Cheung Sha Wan Homantin Hunghom North Point Tai Kok Tsui

Hongkong Land Sino Land Chinachem Henderson Land SHKP SHKP Sino Land Sino Land Chinese Estates SHKP Cheung Kong SHKP/New World Swire Hang Lung Prop.

95 173 488 107 519 543 256 126 94 166 939 2,470 184 1,829

Units sold

Units unsold

2 106 92 47 200 400 90 60 35 60 490 1,530 98 605

93 67 396 60 319 143 166 66 59 106 449 940 86 1,224

Avg launch price HK$psf 10,000 5,200 6,000 6,300 7,300 3,200 6,200 6,000 15,000 7,000 10,000 7,000 10,000 7,200

Current price in area HK$psf 7,000 4,400 5,000 5,000 5,800 3,000 4,800 5,000 10,000 5,000 7,000 5,200 7,000 5,300

Potentia l price cut % (30) (15) (17) (21) (21) (6) (23) (17) (33) (29) (30) (26) (30) (26)

Source: UOB KayHian

Stock Recommendation We are not overly bearish. Our target prices are among the most bearish in the market for two reasons: a) our base-case assumption of a 40% fall in residential prices from the peak is still among the most pessimistic, and b) they are based on trough discount to NAV during past crises. By definition, the trough discount represents an overshooting situation and thus would appear aggressive. Share prices could rebound swiftly after hitting the trough levels. Target Price Based On Trough Discount to NAV Ticker

Rating

Cheung Kong 1 HK Hang Lung Prop 101 HK Henderson Land 12 HK Kerry Properties 683 HK New World Dev 17 HK Sino Land 83 HK SHK Properties 16 HK Source: UOB Kay Hian

SELL SELL HOLD SELL SELL SELL SELL

Share price 18 Feb 09 (HK$) 66.70 14.28 25.30 14.70 7.34 6.32 62.25

Please see important notice on last page

End-09 NAV (HK$) 77.31 15.75 45.15 41.68 16.54 10.65 81.60

Discount to End09 NAV (%) (13.7) (9.3) (44.0) (64.7) (55.6) (40.7) (22.9)

Avg trough discount to NAV during past crises (%) (33) (38) (42) (70) (65) (63) (38)

Target based on past trough discount (HK$) 51.80 9.71 26.18 12.50 5.79 3.91 50.32

Downside to target % (22) (32) 3 (15) (21) (38) (20)

Page 7 of 16

Regional Morning Notes Thursday, February 19, 2009

Lafarge Malayan Cement FY08: Results above expectation FY08 net profit of RM367.7m (+27.6% yoy) was above our and consensus estimates due to higher average selling prices (ASP) and a slight increase in demand. Going forward, demand growth is expected to weaken. FY08 Results FY08

FY07

yoy % chg

Revenue

2530.8

2173.5

16.4

- Cement & & clinker

1964.1

1645.6

19.3

- Others

754.0

715.9

5.3

EBIT

412.0

310.0

32.5

- Cement & clinker

389.1

309.5

Others

22.9

1.4

Net Profit

367.7

288.1

EBIT Margin (%)

14.3

16.3

(RMm)

MALAYSIA Lafarge Malayan Cement (LMC MK)

Remarks

SELL

Boosted by higher ASPs and higher export volume

Current Price: RM3.86 Fair Price: RM3.50 (Previous: RM3.60)

25.7

Improvement in plant performance, higher ASPs and sales volume

Sector 52-Wk Avg Daily Vol. ('000) Market Cap (S$m) (US$m)

27.6

Includes non-recurring gain on sale of CERs (Certified Emission Reductions)

Source:Lafarge, UOB Kay Hian

Results FY08 net profit of RM367.7m, +27.6% yoy, was above our and consensus estimates on the back of higher ASPs and sales volume. There was also a non-recurring gain of RM29.6m on the sale of CERs (Certified Emission Reductions). A dividend of 15 sen was declared, bringing the total dividend for FY08 to 30 sen/share (yield: 7.8%) Stock Impact ASPs are expected to be adjusted downwards by 2-5% in 2Q09. With the recent 5% reduction in electricity tariff effective 1 Mar 09 and the pullback in coal and fuel prices (from US$195/tonne and US$147/tonne to US$80/tonne and US$35/tonne respectively), we think manufacturers will pass on the cost savings (approximately RM20-30/tonne) to end users via a 2-5% reduction in ASPs. We think there will another round of price adjustment should domestic demand continue to shrink. Earnings Revision We revise downward our net profit forecasts for FY09F and FY10F by 6.6% (from RM321.7m to RM300.4m) and 12% (from RM361.2m to RM318.1m) respectively on the back of a 5% downward adjustment to ASPs. Valuation/Recommendation Maintain SELL as its share price has exceeded our revised fair price of RM3.50, based on DCF discounted at cost of equity of 17% to incorporate the gloomy outlook in 1H09 as well as uncertainty over 2H09.

Cement 590.5 3,279.8 896.9

Major Shareholders (%) Lafarge S.A

61.2

Book NTA per Share (RM) ROE (%) Net Debt per Share

2.15 12.4 0.38

Results Due 1Q: May 3Q: Nov

2Q: Aug Final: Feb

Price Chart (RM) 6.50 6.00 5.50 5.00 4.50 4.00 3.50 3.00 2.50 2.00 Feb 08 Apr 08 Jun 08 Aug 08 Sep 08 Nov 08 Jan 09

Source: Bloomberg

Analyst Malaysia Research Team  (603) 2143 1180 [email protected]

Lafarge is currently trading at 10.9x FY09F PE and 10.3x FY10F PE. Based on our fair price of RM3.50, we see trading opportunities for the stock should share price decline to RM3.10.

Please see important notice on last page

Page 8 of 16

Regional Morning Notes Thursday, February 19, 2009 Profit & Loss Year to 31 Dec (RM m) Turnover EBIT Pre-tax Profit Net Profit EPS (sen)

2007 2173.5 310.9 318.1 288.1 33.9

2008 2530.8 412.0 397.8 367.7 43.3

2009F 2545.1 388.1 380.1 300.4 35.4

2010F 2547.8 407.5 402.2 318.1 37.4

2011F 2574.5 401.5 396.4 313.4 36.9

2007 920.7 4,255.3 1,014.4 7.2 2,909.0 4,255.3

2008 981.7 4,303.0 573.5 359.0 3,032.0 4,303.0

2009F 940.6 4,201.0 435.9 359.0 3,152.2 4,201.0

2010F 981.2 4,230.7 436.3 359.0 3,279.4 4,230.7

2011F 960.2 4,263.1 440.6 359.0 3,404.8 4,263.1

Balance Sheet Year to 31 Dec (RM m) Current Assets Total Assets Current Liabilities Long-Term Loans Shareholders' Funds Total Equity & Liabilities

Cash Flow Year to 31 Dec (RM m) Operating Investing Financing Net Cash In/out flow) Begin Cash & Cash Equiv. End’g Cash & Cash Equiv.

2007 497.3 (59.5) (430.7) 7.1 155.0 162.2

2008 551.9 (122.3) (450.5) (21.0) 162.1 142.9

Please see important notice on last page

2009F 464.2 (100.0) (374.9) (10.6) 141.2 130.5

2010F 491.3 (150.0) (297.8) 43.5 130.5 174.1

2011F 476.6 (200.0) (308.4) (31.8) 174.1 142.2

Page 9 of 16

Regional Morning Notes Thursday, February 19, 2009

Oversea-Chinese Banking Corp 4Q08: Credit costs starting to bite Disappointing results with spike in specific allowances due to new NPLs in overseas operations and manufacturing sector. NPL related to smaller developers could surface in 2009 and 2010. Downgrade to HOLD.

SINGAPORE OCBC (OCBC SP)

Results

DOWNGRADE TO HOLD

Net profit of S$301m in 4Q08 (down 29.5% yoy) was below consensus estimate of S$389m even though the results included tax refunds and writebacks of S$51m.

Current Price: S$4.89 Fair Price: S$5.27 (Previous: S$5.85)

Financial Performance Year to 31 Dec

4Q07

1Q08

2Q08

3Q08

4Q08

Net Interest Income (S$m) yoy % chg

613 25.1

639 25.8

679 21.7

684 20.8

783 27.7

Fees & Commissions (S$m) yoy % chg

202 25.5

212 19.1

202 -6.9

199 -5.7

159 -21.3

Insurance (S$m) yoy % chg

197.0 38.7

24.0 -79.1

62.0 -55.1

177.0 43.9

145.0 -26.4

Net Profit (S$m) Cost/Income Ratio (%)

427 45.0

623 41.8

426 45.4

402 43.6

301 44.4

4Q07

1Q08

2Q08

3Q08

4Q08

Customer Loans (S$m) yoy % chg

71,316 20.2

73,977 20.2

76,989 20.9

79,925 20.2

79,808 11.9

Customer Deposits (S$m) yoy % chg

88,788 18.2

92,867 19.1

92,371 12.3

94,678 10.5

94,078 6.0

Loans/Deposits Ratio (%) Net Interest Margin (%)

80.3 2.14

79.7 2.17

83.3 2.24

84.4 2.18

84.8 2.47

Source: OCBC

Loans & Advances Year and 31 Dec

Banking 7,676 15,226.4 9,963.3

Major Shareholders (%) Lee Foundation

19.2

Book NAV per Share (S$) ROE (%) Net Debt per Share (S$)

4.51 9.9 n.a.

Results Due 1Q: May 3Q: Nov

2Q: Aug Final: Feb

Price Chart (S$ ) 9.00

Source: OCBC

Impressive margin expansion. Loans were flat on a sequential basis with growth in Building & Construction (+4.3% qoq) offset by contraction in Manufacturing (+5.8% qoq) and General Commerce (+12.0% qoq). Deposits were also relatively unchanged with customers shifting funds from fixed deposits to lower-cost savings deposits and current accounts. Loan-deposit ratio was maintained at 84.8%. Net interest margin expanded from 2.18% in 3Q08 to an impressive 2.47% in 4Q08 due to improved credit spread and lower funding costs. OCBC also benefitted from gapping opportunities due to the steep yield curve. Net interest income increased 27.7% yoy and 14.5% qoq to S$783m. Wealth management suffered. Fees & commissions fell 21.3% yoy and 20.1% qoq to S$159m due to a severe 51.4% qoq decline in contribution from wealth management. Profit from life insurance dropped 36.1% yoy and 20.7% qoq to S$115m. Great Eastern’s non-participating fund was affected by corrections in the equity market and increases in insurance contract liabilities (decrease in applicable interest rate to discount liabilities). It nevertheless expanded market share for weighted premium products in Singapore from 22.5% to 29% in 2008. Year to 31 Dec 2007 2008 2009F 2010F 2011F

Sector 52-Wk Avg Daily Vol. ('000) Market Cap (S$m) (US$m)

Total Income (S$m) 4,281 4,427 4,609 4,909 5,133

PPOP (S$m) 2,555 2,526 2,671 2,849 2,980

Net Profit (S$m) 2,071 1,752 1,220 1,586 1,905

EPS (S ¢) 65.9 54.7 36.9 48.5 58.8

EPS Growth (%) 3.9 (17.0) (32.6) 31.7 21.1

8.00 7.00 6.00 5.00 4.00 Feb 08

A pr 08

Jun 08

A ug 08

Oct 08

Dec 08

Source : Bloomberg

Analyst Jonathan Koh  (65) 6539 1026 [email protected]

PE (x) 7.4 8.9 13.3 10.1 8.3

DPS (¢) 28.0 28.0 28.0 28.0 28.0

Div Yield (%) 5.7 5.7 5.7 5.7 5.7

Consensus Net Profit - FY09: S$1478.3m - FY10: S$1602.9m

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Page 10 of 16

Regional Morning Notes Thursday, February 19, 2009 Negative impact from trading losses. OCBC was affected by trading losses of S$64m (S$17m from foreign exchange and S$47m from derivatives and securities) and losses of S$24m from investment securities. Asset Quality NPL Ratio (%) Coverage Ratio (%) Tier-1 CAR (%) Total CAR (%)

4Q07 1.7 116.1 11.5 12.4

1Q08 1.6 115.3 12.8 13.5

2Q08 1.4 121.9 12.3 13.6

3Q08 1.3 127.8 14.4 14.7

4Q08 1.5 125.0 14.9 15.1

Source: OCBC

OCBC received repayment of S$100m for one collateralised debt obligation (CDO) at maturity and sold another CDO for S$56m (loss of S$14m to close the position). Exposure to CDOs was thus reduced by 26.3% qoq to S$453m. Spike in specific allowance. Non-performing loans (NPL) increased 12.8% qoq to S$1,182m while NPL ratio rose from 1.3% to 1.5%. New NPL came mainly from overseas operations (Malaysia, Indonesia and Greater China) and the manufacturing sector. Specific allowances for a loan spiked up to S$159m in 4Q08 (80bp), compared with S$30m in 3Q08. NPL coverage remains unchanged at 125.0%. Stock Impact Tier-1 capital adequacy ratio (CAR) improved from 14.4% to 14.9%, mainly due to a 2.0% reduction in risk-weighted assets. OCBC is unlikely to require equity fund-raising at this stage but plans to replenish its tier-2 capital. OCBC maintained final dividend at 14 cents. It has reactivated its scrip dividend scheme, where shareholders can opt to receive the final dividend in shares at 10% discount to market price. OCBC is likely to be able to maintain its existing dividend due to strong capital base. Earnings Revision Large exposure to developers. OCBC has large exposure to property developers with Building & Construction accounting for 21.1% of its loan book (DBS: 14.0%, UOB: 12.1%). While large, listed developers are well positioned, having pre-sold many high-end residential projects, small developers who jumped onto the bandwagon are not as fortunate. Management stressed that the bulk of exposure is to large developers with longstanding relationships but we believe OCBC has exposure to smaller developers as well. We assume NPL ratio will hit 6% by end-2010 (previous: 5%). Our earnings model has imputed allowances for credit losses of 135bp in 2009 (previous: 90bp) and 95bp in 2010 (previous: 40bp). Valuation/Recommendation The stock has gained 6.3% since we upgraded our recommendation in Nov 08. Downgrade to HOLD due to limited upside potential of only 7.8%. We cut our fair price by 9.9% to S$5.27 (previous:S$5.85) based on P/B ratio of 1.02x derived from the Gordon Growth Model (ROE: 11.0%, payout ratio: 45%, required return: 8.0% and constant growth: 3.0%). Profit & Loss Year to 31 Dec (S$m) Net Interest Income Non Interest Income Net Profit EPS (cents)

2007 2,244 2,036 2,071 66

2008 2,785 1,642 1,752 55

2009F 3,029 1,580 1,220 37

2010F 3,157 1,753 1,586 49

2011F 3,306 1,827 1,905 59

2007 71,316 174,607 88,788 4,970 15,677 174,608

2008 79,808 181,385 94,078 6,010 15,874 181,385

2009F 83,049 187,080 97,898 5,000 16,151 187,080

2010F 87,107 195,220 102,682 5,000 16,794 195,220

2011F 92,452 205,314 108,983 5,000 17,756 205,314

Balance Sheet Year to 31 Dec (S$m) Loans & Advances Total Assets Customers’ Deposits Borrowings Shareholders' Funds Total Equity & Liabilities

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Page 11 of 16

Regional Morning Notes Thursday, February 19, 2009

Advanced Info Service 4Q08: Net profit lower due to goodwill provision Given the prospects of a recovery and a new 3G licence in 2H09, AIS remains our top pick. We also see limited downside as share price trades near the lowest PE band and sits on a high Z-score. Maintain BUY 2008 Consolidated Results Consolidated Year to 31 Dec Sales

4Q08 (Btm) 26,271

yoy 2008 % chg (Btm) (34.1) 110,792

Gross profit EBITDA Pre-tax Profit Tax Net Profit Net Profit (Ex EI)

9,104 10,668 5,482 (1,683) 419 3,783

(18.1) (16.5) (26.6) (27.8) (91.8) (26.7)

38,752 46,503 26,586 (8,381) 16,409 18,149

2.8 5.9 11.4 10.8 0.7 11.0

EPS (Bt)

0.14

(91.9)

5.54

0.5

Gross margin (%) EBITDA margin (%) Net margin (%)

34.7 40.6 1.6

35.0 42.0 14.8

yoy % chg 2.2

BUY

Closure of airports and slow economy led to a weak 4Q08.

Current Price: Bt77.00 Target Price: Bt101.76

Bt3.6b provision of DPC’s GW

Declining maintenance costs. Fall in bad debt and mkt. exp

Results Operating results are in line with our expectation. Sales slowed down in 4Q08 but still grew on a yoy basis, backed by subscribers expanding to 27m as at end08. Margins remained healthy both in 4Q08 and FY08 due to positive net interconnection charge (IC: Bt347m in 4Q08 and Bt737m in 2008), reduction in maintenance costs, lower bad debts provision and a drop in marketing expenses. Although pre-tax profit in 2008 is in line with forecast, net profit was 38% lower due to the provision of DPC’s goodwill and tax expenses related to the provision. Stock Impact

Sector 52-Wk Avg Daily Vol. ('000) Market Cap (Btb) (US$b)

Telecom 4,771.2 228.1 6.5

Major Shareholders (%) Shin Corporation Singtel Strategic Investment

42.7 19.2

Book NTA per Share (Bt) ROE (%) Net Debt per Share (Bt)

24.8 22.0 7.9

Results Due 1Q: May 3Q: Nov

2Q: Aug Final: Feb

Price Chart (Bt) 120 100

As we move into a sluggish economy in 2009, we expect AIS’ sales to remain weak in 1H09 but will gradually increase in 2H09 as the government stimulus packages kick in. The company’s focus will be on quality customers rather than quantity. Provincial markets remain its growth area via a strong distributionship among its dealers. We therefore expect AIS to add 2.5m net new subscribers this year. Promotions on on-net call will keep net IC positive and reduce congestion on its network. So its capex may be kept at Bt13b-15b (excluding 3G expansion). EBITDA margin in 2009 is likely to remain strong at 43%. Overall, we maintain our 2009 forecasts- sales to grow 2% and net profit to increase 14% (excluding further provision on DPC’s goodwill. AIS’ catalyst is the new 3G licence to be issued by the NTC. The new licence may halve AIS’ operating cost. This would create a new era for the Thai mobile landscape. We expect the new licence to be issued in 2H09. However, the commercial roll-out may have to wait until mid-10.

Earnings Revision/Risk

Net EPS Year to Turnover EBITDA Profit EPS Growth PE As313Q08 results(Btm) are in line (Btm) with our expectation, we(Bt) maintain our sales and Dec (Btm) (%) (x) earnings forecasts for this year. forecasts as we 2007 108,453 43,898No change 16,290 in our FY09-10 5.5 0.1 14.0 have the slowdown in the economy model. 2008factored in110,792 46,503 16,409* in our 5.5 0.6 13.9 2009F 113,357 49,515 18,640 6.3 13.6 12.2 2010F 119,125 52,453 20,761 7.0 11.4 11.0 2011F 123,117 55,138 23,837 8.0 14.8 9.6

Please see important notice on last page

Advanced Info Service (ADVANC TB)

Remarks

Source: UOB Kay Hian

Consensus Net Profit – FY09:18,023m – FY09:19,254m

THAILAND

80 60 40 20 0 Feb- Apr- Jun- Aug- Oct- Dec- Feb08 08 08 08 08 08 09 Source: Bloomberg

Analyst Kowit Pongwinyoo  (662) 659-8304 [email protected]

EV/ EBITDA (x) 5.6 5.3 4.7 4.2 3.8

DPS (Bt) 6.3 6.3 6.3 7.2 8.4

Yield (%) 8.2 8.2 8.2 9.3 11.0

* Include extraordinary gain and loss

Page 12 of 16

Regional Morning Notes Thursday, February 19, 2009 Valuation/Recommendation

Profit & Loss Year to 31 Dec (Btm) Turnover EBIT Pre-tax Profit Net Profit

2007 108,453 25,581 23,860 16,290

2008 110,792 28,211 26,586 16,409

2009F 113,357 28,169 26,956 18,640

2010F 119,125 31,046 30,029 20,761

2011F 123,117 35,136 34,487 23,837

2007 20,586 128,942 28,157 24,929 75,461 128,942

2008 26,958 128,081 24,860 29,774 73,436 128,081

2009F 26,113 115,240 19,602 22,211 73,418 115,240

2010F 37,491 117,759 33,391 8,892 75,468 117,759

2011F 34,904 107,373 20,407 8,832 78,127 107,373

Balance Sheet Year to 31 Dec (Btm) Current Assets Total Assets Current Liabilities Long-Term Liabilities Shareholder Funds Total Equity & Liabilities

Cash Flow Year to 31 Dec (Btm) Operating Investing Financing Net Cash In/(Out) Flow Begin Cash & Cash Equiv. End'g Cash & Cash Equiv.

2007 31,800 (14,982) (21,238) (4,420) 12,860 8,440

2008 37,900 (8,880) (11,956) 17,064 8,440 25,504

2009F 43,773 (13,833) (33,186) (3,246) 16,527 13,281

2010F 42,534 (12,927) (18,753) 10,854 13,281 24,134

2011F 44,174 (12,594) (34,511) (2,932) 24,134 21,203

Quarterly

4Q 08

3Q 08

2Q 08

1Q 08

4Q 07

3Q 07

In 4Q08, AIS added 536,000 subscribers, bringing its total subscriber base to 27.3m. ARPU continued to decline due to more marginal subscribers from the provinces. MOU fell but at a slower rate due to promotions to utilise spare capacity during off-peak hours, and that helped to raise RPM.

(m) (m) 26.0 26.8 27.3 30 2 23.2 24.1 25.1 21.1 22.7 25 1.5 20 0.81 1 15 0.54 10 0.5 5 0 0

2Q 07

Subscribers continued to grow

Quarterly Subscribers

1Q 07

The poor market sentiment has driven down the share price of AIS for the wrong reason. We continue to see good value in AIS and maintain our BUY with a target price of Bt101.76 based on DCF model at a discount rate of 8%. The downside risk for AIS is limited as it trades near its lowest PE band and sits on a high Altman Z-score of 5.19. Maintain BUY

Total

Source: AIS

Quarterly ARPU (Bt) 900 809 742 743 756 742 709 800 698 695 700 600 500 400 249 234 222 227 231 218 206 193 300 200 100 0 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08

Postpaid

Prepaid

Source: AIS

Quarterly MOU (minute) 700 580 600 500 400 300 228 200 100 0

501

507

218

224

568

589

570

548

544

239

260

266

262

242

1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08

Postpaid

Prepaid

Source: AIS

Valuation Method Results (Bt) Remarks Z-score test 5.19 Score is in position Source: UOB Kay Hian

safe

Share Price Trading Near Lowest PE Band (Bt) 145 PE 19.5x

125

PE 16.0x

105 85

PE 12.5x

65

PE 9.0x

45 25 5 Jan- 02

Oct- 03

Jul- 05

Apr- 07

Oct- 08

Source: UOB Kay Hian

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Page 13 of 16

Regional Morning Notes Thursday, February 19, 2009

Dynasty Ceramic Impressive growth and high dividend yield. DCC is still generating growth amid the economic slump. With earning growth of 26% and offering a yield of 12%, DCC looks interesting, indeed.

Dynasty Ceramic (DCC TB)

Events As sales volume continued to grow from end 08 to Jan 09 (+5%), and the trend is expected to continue into Feb 09 (exceeding 10%), management is confident that a 10% growth target this year is achievable. The decreasing trend of gas prices, which accounts for 30% of its production costs, may increase its gross margin to 40% in 2009. Dynasty Ceramic (DCC) also expects to raise its dividend payout ratio from 70% to 80% for 2009. Stock Impact After achieving a 14% sales growth last year, DCC’s sales remained strong at the beginning of 2009. Management credits its nationwide network of factory outlets for the company’s success. Other tile manufactures have lost market shares as they focus mainly on sales agents. Apart from the low cost nature, these factory outlets are accessible to locals. The reasonable prices of agricultural product have also supported the high demand of tiles among locals. We believe part of the company’s success is due to the widespread use of DCC’s products for the construction of chapels and schools across the country. There are approximately 12,950 temples and 8,750 schools all over Thailand. With the declining trend of the world oil prices, its energy cost (mainly natural gas) is also expected to be lower than last year. As the gas expense account for 30% of its total production cost, the lower price of gas will improve its margins. DCC expects its margin this year to reach 40% from 39% last year. If that is the case, we may see its net profit grow by 26% in 2009. With a 70% payout ratio, DCC could pay Bt1.44/share as dividend this year, equivalent to a dividend yield of 12%. Currently, DCC has Bt816m of short term loans or a 0.3 net debt-to-equity ratio. The company intends to pay most of this debt by end 2009 so that the payout ratio could be raised to 80%. If that is the case, we may look for a yield of 14% next year. Risks There is risk of DCC missing its payout target should a prolonged drought affect many parts of the country. However, this is a rare phenomenon in Thailand. Recommendation

Turnover (Btm) 3,739 4,255 4,452 4,458 5,089

NOT RATED Current Price: Bt11.80 Sector

Construction. Materials 189.9 4.8 136.4

52-Wk Avg Daily Vol. ('000) Market Cap (Btb) (US$m) Major Shareholders (%) Saengsattra family Watcharasurung family

34.3 9.5

Book NTA per Share (Bt) ROE (%) Net Debt per Share (Bt)

6.0 28.2 1.9

Results Due 1Q: May 3Q: Nov

2Q: Aug Final: Feb

Price Chart (Bt) 21 18 15 12 9 6 3 0 Feb08

Apr08

Jun08

Aug08

Oct08

Dec- Feb08 08

Source: Bloomberg

Analyst

Amid the economic slump, DCC has emerged as one of a few companies that still deliver satisfactory growth. It also offers an attractive dividend yield of up to 12% for 2009, increasing to 14% for 2010.

Year to 31 Dec 2004 2005 2006 2007 2008

THAILAND

EBITDA (Btm) 1,178 1,346 1,259 1,243 1,376

Net Profit (Btm) 675 749 567 543 666

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EPS* (Bt) 1.7 1.8 1.4 1.3 1.6

EPS Growth (%) 35.0 10.8 (24.5) (4.2) 22.7

PE (x) 7.1 6.4 8.5 8.9 7.2

Kowit Pongwinyoo  (662) 659-8304 [email protected]

EV/ EBITDA (x) 4.9 4.6 5.0 4.7 4.0

DPS (Bt) 1.2 1.3 1.0 1.0 1.2

Yield (%) 10.0 11.0 8.2 8.5 10.6

Page 14 of 16

Regional Morning Notes Thursday, February 19, 2009 Company Background. Dynasty Ceramic (DCC) is a manufacturer of wall and floor tiles under the DYNASTY, TILE TOP, NAVAR and JAJUAR brand names. The company has a 35% market share and its customers are low income earners in the provinces. In 2005, the company took over three ceramic distributors, allowing the company to implement its factory outlet strategy and lessen its dependence on sales agents. In contrast, other tile producers still largely rely on sales agents. For DCC, this strategy has produced positive results and it is the main driver of the company’s growth, Profit & Loss Year to 31 Dec (Btm) Turnover EBIT Pre-tax Profit Net Profit

2004 3,739 949 968 675

2005 4,255 1,075 1,067 749

2006 4,452 884 797 567

2007 4,458 898 842 543

2008 5,089 988 959 666

2004 1,275 3,303 1,592 0 1,670 3,303

2005 1,492 4,144 2,230 0 1,871 4,144

2006 1,687 4,350 2,247 15 2,044 4,350

2007 1,598 4,054 1,730 2 2,277 4,054

2008 1,647 3,893 1,397 0 2,450 3,893

2004 855 (244) (601) 10 10 20

2005 930 (953) 41 18 20 38

2006 649 (378) (266) 5 38 43

2007 994 (62) (932) (0) 43 43

2008 1,042 (250) (785) 7 43 50

Balance Sheet Year to 31 Dec (Btm) Current Assets Total Assets Current Liabilities Long-Term Liabilities Shareholder Funds Total Equity & Liabilities

Cash Flow Year to 31 Dec (Btm) Operating Investing Financing Net Cash In/(Out) Flow Begin Cash & Cash Equiv. End'g Cash & Cash Equiv.

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Page 15 of 16

Regional Morning Notes Thursday, February 19, 2009

We have based this document on information obtained from sources we believe to be reliable, but we do not make any representation or warranty nor accept any responsibility or liability as to its accuracy, completeness or correctness. Expressions of opinion contained herein are those of UOB Kay Hian Research Pte Ltd only and are subject to change without notice. Any recommendation contained in this document does not have regard to the specific investment objectives, financial situation and the particular needs of any specific addressee. This document is for the information of the addressee only and is not to be taken as substitution for the exercise of judgement by the addressee. This document is not and should not be construed as an offer or a solicitation of an offer to purchase or subscribe or sell any securities. UOB Kay Hian and its affiliates, their Directors, officers and/or employees may own or have positions in any securities mentioned herein or any securities related thereto and may from time to time add to or dispose of any such securities. UOB Kay Hian and its affiliates may act as market maker or have assumed an underwriting position in the securities of companies discussed herein (or investments related thereto) and may sell them to or buy them from customers on a principal basis and may also perform or seek to perform investment banking or underwriting services for or relating to those companies. UOB Kay Hian (U.K.) Limited, a UOB Kay Hian subsidiary which distributes UOB Kay Hian research for only institutional clients, is an authorised person in the meaning of the Financial Services and Markets Act 2000 and is regulated by Financial Services Authority (FSA). In the United States of America, this research report is being distributed by UOB Kay Hian (U.S.) Inc (“UOBKHUS”) which accepts responsibility for the contents. UOBKHUS is a broker-dealer registered with the U.S. Securities and Exchange Commission and is an affiliate company of UOBKH. Any U.S. person receiving this report who wishes to effect transactions in any securities referred to herein should contact UOBKHUS, not its affiliate. The information herein has been obtained from, and any opinions herein are based upon sources believed reliable, but we do not represent that it is accurate or complete and it should not be relied upon as such. All opinions and estimates herein reflect our judgement on the date of this report and are subject to change without notice. This report is not intended to be an offer, or the solicitation of any offer, to buy or sell the securities referred to herein. From time to time, the firm preparing this report or its affiliates or the principals or employees of such firm or its affiliates may have a position in the securities referred to herein or hold options, warrants or rights with respect thereto or other securities of such issuers and may make a market or otherwise act as principal In transactions in any of these securities. Any such non-U.S. persons may have purchased securities referred to herein for their own account in advance of release of this report. Further information on the securities referred to herein may be obtained from UOBKHUS upon request. http://research.uobkayhian.com MICA (P) 229/04/2008 RCB Regn. No. 198700235E

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