DBSV - Asian Consumer Digest

Regional Industry Focus
Asian Consumer Digest

DBS Group Research . Equity 29 April 2010
Cyclical Plays & Currency Winners STI : 3,002.62

• In our inaugural Asian Consumer Digest, we scan HSI : 21,587.06
through and feature 7 sub-sectors ranging from KLCI : 1,340.07
consumer goods (food, autos, personal/ household) to SET : 764.34
services (media, healthcare, retail). JCI : 2,944.71
KOSPI : 1752.20
• Asian consumers will have stronger purchasing power
as currencies appreciate. We also look for stocks that
SUB-SECTOR PICKS
will outperform on company specific or event driven
Mkt Price Mkt Cap Tgt Price Upside
catalysts. LCY US$m LCY Rating %
• Top picks – Kia Motors, Dongfeng, Gome, Beijing Auto

Kia Motors KR 26,400 9,295 33,000 Buy 25%
Jingkelong, Hengan, HTL Int’l, China Foods, Wilmar, Dongfeng Motor* HK 11.76 4,326 14.9 Buy 27%
Faber Grp, Pico.
Retailers
Cyclical Plays. In our inaugural issue of the Asian Consumer Gome Elec
HK 2.69 5,218 3.66 Buy 36%
Digest, we survey the landscape and highlight the sub-sectors Appliances
which will benefit from improved consumer sentiment on the Beijing Jingkelong* HK 9.16 487 10.34 Buy 13%
back of robust Asian economic growth. Household/Pers Gds
Currency winners? Strong Asia currencies will benefit some Hengan HK 55.80 8,764 72.00 Buy 29%
HTL International SG 0.845 256 1.09 Buy 29%
companies more than the rest. Winners tend to be those
companies that have high domestic revenue content, source F&B
its materials in foreign currencies (such as USD), and/or with China Foods HK 6.23 2,241 7.90 Buy 27%
reporting currency in USD. Our top Buys on this theme are Up/Midstream Food
Wilmar and Hengan. Wilmar
SG 6.90 32,127 8.33 Buy 21%
Picks across universe. Within auto, we expect Kia Motor International
and Dongfeng to benefit from heightened demand and to
Healthcare
outperform peers. HTL In’tl is in turnaround mode and is less Faber Group MK 2.31 262 3.55 Buy 54%
vulnerable to USD currency strength than commonly
assumed. Our media pick is Pico Far East which will benefit Media
from the Shanghai World Expo, and increased brand building Pico Far East HK 1.58 244 2.00 Buy 27%
activities in the longer term. We like Beijing Jingkelong as a
*H-shares mkt cap
food retail play and Gome as it is projected to benefit from Source: DBS Vickers
increased demand in home appliances in China. In the F&B
space, we expect beverage players such as China Food to be
in key focus with the summer peak season coming. Faber
Group is our pick in the Healthcare space, with catalysts from
GLC restructuring in Malaysia.
“In Singapore, this research report or research analyses may only be distributed
to Institutional Investors, Expert Investors or Accredited Investors as defined in the
Securities and Futures Act, Chapter 289 of Singapore.”
www.dbsvickers.com
Refer to important disclosures at the end of this report
sa: TW
Andy SIM +65 6398 7969

Table of Contents
andysim@dbsvickers.com
Stock Picks Key Data 3
Ben SANTOSO +65 6398 7976 Investment Summary 4
bensantoso@dbsvickers.com Sector performance review 6
Mavis HUI +852 2863 8879 Theme #1: Currency Winners 8

mavis_hui@hk.dbsvickers.com Theme #2: Cyclical Plays 11
Jay KIM +852 2971 1921
jay_kim@hk.dbsvickers.com Regional Indices 14
Patricia YEUNG +852 2863 8908 Rolling Fwd PE and Standard deviations 15
patricia_yeung@hk.dbsvickers.com
Rolling forward PB trading band 16
Titus WU +852 2820 4611
titus_wu@hk.dbsvickers.com Sub-sector
Automobiles & Parts 17
Food & Beverages 25
Healthcare 33
“Recipients of this report, received from DBS Vickers Research
Media 39
(Singapore) Pte Ltd (“DBSVR”), are to contact DBSVR at +65
Personal HouseholdGoods 46
Retailers 51
6398 7954 in respect of any matters arising from or in
Up/Midstream Food Producers 65
connection with this report.”
Company Profiles
Auto
Kia Motors 72
Dongfeng Motor 76
F&B
China Foods 80
Want Want 84
Healthcare
Faber Group 88
Household Goods
Hengan 92
HTL International 96
Retailers
Gome Electric 100
Beijing Jingkelong 104
Media
Pico 108
Upstream Food
Wilmar 112
Prices as of 22 Apr 2010
MICA (P) 043/10/2009
Page 2
STOCK PICKS
Key Data
Target 6mths Avg PE P/B Div Yield
Price (LCY) Upside Mkt Cap
Company Exch Sub-Sector Price Daily T/O (x) (x) (%)
22 Apr 2010 (%) (US$m)
(LCY) US$m 10F 10F 10F
Kia Motors KR Auto 26,400 33,000 25 9,295 83.1 6.1 1.1 0.9
Dongfeng Motor* HK Auto 11.76 14.90 27 4,326 37.0 12.6 2.7 0.8
Gome Elec Appliances HK Retailers 2.69 3.66 36 5,218 27.2 22.1 2.6 1.1
Beijing Jingkelong* HK Retailers 9.16 10.34 13 487 0.6 18.7 2.7 2.2
Hengan HK Household/Pers Gds 55.80 72.00 29 8,764 16.4 28.4 6.8 2.3
HTL International SP Household/Pers Gds 0.845 1.09 29 256 0.7 6.2 1.3 4.8
China Foods HK F&B 6.23 7.90 27 2,242 3.6 22.6 2.8 1.6
Wilmar International SP Up/Midstream Food 6.90 8.30 20 32,127 31.1 16.1 2.6 1.2
Producers
Faber Group MK Healthcare 2.31 3.55 54 262 0.9 9.7 1.8 2.0
Pico Far East HK Media 1.58 2.00 27 244 0.3 10.6 1.8 4.7
* H-shares mkt cap

Source: DBS Vickers
Page 3
Investment Summary For direct consumption picks, our focus is on China-related

plays. Amongst retailers, Gome [493 HK] is projected to benefit
Asian consumer companies to benefit from currency from increased demand in home appliances. Beijing Jingkelong
appreciation. We see consumer companies benefiting as [814 HK] stand poised to post growth and narrow its valuation
purchasing power of the Asian consumers improves along with gap against its major peers. HTL International [HWA SP] is one
local currency appreciation. of our pick as a proxy for improved demand in the US and
Europe. With the summer peak season coming, we see China
Who are the winners… Winners tend to be those companies Food [506 HK] being the main beneficiary as a key beverage
that have high domestic revenue content, source its materials player. Want Want [151 HK] is also our preferred pick as it has
in foreign currencies (such as USD), and/or with reporting successfully expanded its presence in the beverage segment as
currency in USD. Examples are Hengan, Wilmar, China Foods, a niche player.
Tingyi, SPH, etc. Our top Buys on this are Wilmar and Hengan.
Also focus on RMB revaluation candidates. As highlighted
…and losers? The reverse is true for losers. They are the net above, RMB revaluation, when it happens, will be positive for
exporters, whose cost base are in local currencies, such as Hengan and Wilmar. Hengan [1044 HK], a leading player for
autos, plantation and manufactured goods exporters tend to personal hygiene products in the PRC, will benefit as its costs
lose more. Examples are Kia Motor, Hyundai Motor, Yue Yuen, are in US$ while revenue in RMB. Wilmar [WIL SP] should also
etc. benefit, as its processing margins would expand further from
RMB strengthening, on top of cheaper imported feedstock
Firm economic recovery bodes well for Airlines, Healthcare, prices. Wilmar, as a processor, is also expected to see margins
Personal Goods and Autos. As the economic recovery in the expand arising from the disparity between international and
region continues to firm, we saw focus shift towards late China-domestic soybean prices.
cyclical consumer sectors. The sub-sector outperformance in
the last 3 months came from airlines, healthcare services, and Key highlights for the various sub-sectors:
household/personal goods, beating DBSV consumer coverage
benchmark return by 10.8% 8.8% and 8.0%. Autos. We expect regional growth of auto demand to slow
from 2Q from last year’s high base, returning to more rational
GDP growth translates into better consumer sentiment, lower but still solid growth rates of 11-16% for the full year. We
unemployment. We are seeing strong GDP growth coming out believe earnings growth trend for automakers will start to
from regional economies. Countries are revising up their 2010 diverge. While we expect 1H earnings to shape future share
forecasts. Singapore, for instance, revised up its official price performances for the sector, we seek out attractive value
forecasts to 7%-9%, from 4.5%-6.5% previously, after a very plays with near term earnings heading beyond pre-crisis levels.
strong 1Q10 growth of 13.1%. Consumer sentiment, Our picks are Kia Motors and Dongfeng Motor.
especially for those countries affected more by the downturn,
is trending up. Unemployment, on the other hand, is trending F&B. We focus on China in the F&B space as the summer peak
down. season draws near; and soaring beverage sales will be growth
propellers for the sector. Intense competition is expected to
Focus on selected companies riding on stronger economies, help enlarge the total beverage market size. We continue to
and China. We like companies that will continue to benefit favour China Foods for its Coke beverage business. Leveraging
from continued spending and those that will outperform peers on its leading share and extensive market presence, it would be
operationally. We see Kia Motor [000270 KS] benefiting from a key beneficiary of the soaring demand in China.
heightened demand, outperforming peers. YTD utilization is at
a high of 96% (vs 82% in 2007-08). The recession has also Retail. This year, a macro recovery and improving purchasing
shifted consumer preference to economy cars. In the PRC, power should hold up overall consumption in the region.
Dongfeng Motor [489 HK] will continue to ride on the positive Department stores and discretionary retailers have already
stimulus policy by government to promote auto consumption recorded strong year-to-date performance in same-store sales
in the country. (SSS). Severe promotion that was seen in 1H09 has also
gradually normalizes to a more reasonable level. Outlook for
the sector should stay positive in 2010. Gome is our pick for
department stores and discretionary retailers. For food retailers,
Page 4
we like Beijing Jingkelong for its undemanding valuation vs Healthcare. Healthcare performed well YTD on Fortis
peers, addition growth through M&A and potential for Healthcare taking a substantial stake in Parkway Holdings at a
earnings upside surprise as margins expand on rising inflation 14% premium to the prior closing price, which spur interest in
for food items. the healthcare sector in Singapore. Coupled with a strong set
of operating results in 4Q09, this garnered interest for this sub-
Up/Midstream Food Producers. Our key pick is Wilmar. This sector. On the other hand, Bumrungrad Hospital took some
year, declining soybean price trends would create temporary beating in the past few weeks with the political unrest in
gains for processors such as Wilmar, as lower feedstock prices Thailand, as over 50% of its patients are from overseas. Our
would have lagged impact on end product prices. The key pick is Faber Group, which is an underappreciated, well-
domestic price situation is more resilient in China, as domestic managed GLC. It trades at CY11F PE of 7.6x (ex-cash) on the
soybean prices are already priced higher than imported ones. back of 10.6% 3-year EPS CAGR in spite of a regulated
Rising global soybean supplies mean rising disparity between concession business, 1.3x FY11F BV, with ROEs of c.19-20%
domestic and imported bean prices. and strong balance sheet (net cash 34.5 sen per share).
Personal and Household Goods. We believe domestic

household / personal goods manufacturers will continue to
benefit from supportive government policy in boosting
domestic consumption as well as accelerating urbanization.
This, coupled with robust domestic economic growth, will
enhance overall living standards, leading to stronger demand
on household / personal goods. Hengan is our key pick for
household / personal goods sector which is a market leader in
personal care products (including sanitary napkins, diapers and
tissue). We also like HTL International as it rides on recovery in
global spending.
Media. Media is expected to trend up with growth in GDP. We

expect media spending to pick up steam in the different
countries in ensuing quarters. For Singapore, it is backed by a
stronger GDP, as well as more media-worthy activities such as
opening of the second integrated resort (Marina Bay Sands),
Great Singapore Sale, Youth Olympics, additional retail space,
property launches etc. Adspend in Hong Kong is also expected
to post a solid rebound, growing by double-digit y-o-y rate in
1H10 along with economic recovery on a low base. Pico Far
East is our preferred pick as it benefits from events such
Shanghai World Expo, new integrated resort facilities in
Singapore and other mega events.
Page 5
Sector performance review

As the economic recovery in the region continues to firm, we prior closing price. This spurred interest in the healthcare
saw focus shift towards late cyclical consumer sectors. The sub- sector in Singapore and coupled with a strong set of
sector outperformance in the last 3 months came from airlines, operating results in 4Q09 for Raffles Medical, it garnered
healthcare services and household & personal goods beating interest for this sub-sector.
DBSV consumer coverage benchmark return by 10.8%, 8.8%
and 8.0%. Household & Personal Goods fared well. The strong
performance largely came from Li & Fung which signed an
Airlines was the star. Airlines have generally done well, agreement to supply clothing and other consumer goods to
outperforming our Consumer coverage by 10.8%, as demand Walmart. Autos outperformed by 7.1% as sales were robust
across the board have showed solid signs of recovery, and being closely correlated with the economic cycle. Within
carriers reported higher carriage, better load factors as well as this, Kia Motors was the significant outperformer due to its
stronger yields. Hence, earnings have also turned around and high utilization rate of 95% (vs 82% during 2007-08).
many airlines have reported moving back firmly into the black.
As a late cyclical, airlines should continue benefitting as the Gaming the biggest loser. Gaming performance was down -
economic recovery continues. 10% on an absolute 3-month performance, largely coming
from Genting Singapore and Genting Berhad as the opening
Healthcare services (outperformed by 8.8% in the last 3 of Resorts World Sentosa did not meet expectations,
months) thanks to Parkway, which saw Fortis Healthcare taking coupled with stricter than expectation junket rules in
a substantial stake in the former at a 14% premium to the Singapore.
Sub-sectors YTD performance (since 1 Jan 2010)
125
120
115
110
105
100
95
90
85
80
Mar-10
Mar-10
Mar-10
Mar-10
Jan-10
Jan-10
Jan-10
Jan-10
Jan-10
Feb-10
Feb-10
Feb-10
Feb-10
Apr-10
Apr-10
Airlines Automonbiles & Parts F arming & F ishing

F ood & Bev erages Healthcare Household/Personal Goods
Media Retailers
Source: Bloomberg, DBS Vickers
Page 6
Sub-sector performance
# of Market Return Excess Return Target Return

Companies Cap Weight 1M 3M 6M 12M 1M 3M 6M 12M BETA % Change
Automobiles & Parts 12 68,975 19.4 6.2 18.3 15.6 94.1 2.7 7.1 2.0 21.3 1.0 19.3
Food Beverages 14 49,182 13.9 3.7 11.1 26.4 99.3 0.2 -0.1 12.8 26.6 0.7 3.6
Healthcare Equipment & Svs 4 4,202 1.2 -2.6 20.0 28.7 122.8 -6.1 8.8 15.1 50.0 1.1 (1.3)
Household / Personal Goods 11 40,146 11.3 3.8 19.2 17.8 88.1 0.2 8.0 4.1 15.4 1.0 28.4
Media 9 12,420 3.5 4.8 12.5 11.4 44.5 1.3 1.3 -2.3 -28.2 0.9 9.4
Airlines 9 35,332 10.0 3.8 22.1 24.3 65.7 0.3 10.8 10.7 -7.1 1.1 (4.4)
Gambling 4 22,503 6.3 -2.3 -10.0 -11.8 27.8 -5.8 -21.3 -25.5 -44.9 1.0 28.1
Retail 21 43,790 12.3 1.2 11.0 15.7 70.7 -2.3 -0.2 2.1 -2.0 0.8 6.1
Up/ Midstream Food Producers 13 78,419 22.1 4.1 4.6 6.6 60.4 0.6 -6.6 -7.0 -12.3 1.2 12.0
Consumers 97 354,969 100.0 3.5 11.2 13.6 72.7 0.9 12.5
*Note: Excess returns measures the out/underperformance of individual sub-sectors vs DBSV consumer coverage
Sub-sector Valuations
PE EPS Growth P/B ROE EV/EBITDA Dividend Yield

2010F 2011F 2010F 2011F 2010F 2011F 2010F 2011F 2010F 2011F 2010F 2011F
(x) (%) (x) (%) (x) (%)
Automobiles & Parts 9.1 7.8 12.2 15.4 1.4 1.2 16.1 16.0 4.1 3.4 1.1 1.3
Food Beverages 21.9 18.4 20.4 19.1 4.3 3.8 21.1 21.9 11.8 9.8 2.2 2.6
Healthcare Equipment & Svs 20.1 14.7 21.0 37.1 2.5 2.2 12.9 15.9 12.7 9.7 2.5 3.5
Household / Personal Goods 21.3 17.1 20.6 24.7 4.0 3.6 19.7 22.1 14.8 11.9 2.8 3.6
Media 15.7 16.3 19.8 -3.3 3.2 3.1 20.9 19.4 8.9 9.0 4.9 5.0
Airlines 28.3 14.6 47.1 93.2 1.6 1.5 5.9 10.7 7.4 7.0 0.9 1.7
Gambling 22.3 16.7 12.7 33.3 1.9 1.7 8.9 10.7 8.8 6.9 1.1 1.3
Retail 19.3 16.3 16.7 18.4 3.9 3.5 21.6 22.9 9.2 7.5 3.6 4.1
Up/ Midstream Food Producers 17.2 15.6 23.1 10.2 2.5 2.3 15.7 15.2 11.5 10.2 1.9 1.9
Consumers 16.3 13.5 18.4 20.6 2.3 2.0 15.1 16.1 8.2 7.1 2.0 2.4
Amongst the subsectors under our coverage, Autos offer the lowest PE and EV/EBITDA multiples at 9.1x and 4.1x.
DBSV Sub-sector target return (%)
30
25
20
15
10
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Source: DBSVickers
Page 7
Theme #1: Currency Winners other hand, Chinese and Malaysian auto players are
Asian currency appreciation: Winners vs Losers relatively less affected as exports are relatively
Asia consumer to benefit from stronger purchasing power insignificant. Companies with high revenue content for
export will stand to lose, such as Yue Yuen and Ming Fai,
Stronger currencies augurs well for the purchasing power given its production are largely based in China, while
of the Asian consumer. Asian currencies are widely goods are exported.
expected to continue strengthening. This is largely the
consensus view, though the view on magnitude and …and upstream food producers (plantation) counters.
timeframe varies. We see consumer companies benefiting Planters are losers if local currencies (i.e. Malaysian Ringgit
from this trend as purchasing power of the Asian and Indonesian Rupiah) strengthen against the USD, as
consumers improves along with local currency their ASP in local currency terms and revenues would be
appreciation. booked lower.
How to position on this long term trend? We look to Focus on RMB appreciation and interest rate hikes. Our
sectors that have high domestic revenue content and China economist, Chris Leung, indicates that expectation
source its materials in foreign currencies (such as USD). of rate hikes and currency appreciation will continue to
Net exporters, whose cost base are in local currencies, remain despite growth in sequential terms will trend
such as autos, plantation and manufactured goods lower. He expects a mild rate hike in the magnitude of
exporters tend to lose more. Our picks are Wilmar and 27bps in each quarter (2Q, 3Q and 4Q).
Hengan.
As our bank’s currency strategist, Philip Wee wrote, in
Winners – F&B, Retailers, Media; Losers – Autos, 2Q10 Economics Market Strategy (11 Mar 2010), the key
Plantation. Broadly, the sub-sector beneficiaries are food question on China letting CNY appreciate is “not if, but
and beverages producers, retailers, media (to a certain when”. Our house view is that we “do not discount a
extend), while losers tend to be net exporters like autos, move in 2Q10, though we think the odds are higher for
plantation companies. appreciation in 3Q10”. We are forecasting a gradual
appreciation of CNY against USD to reach CNY6.68/USD
Winners benefit from low raw material costs and by 4Q10.
translation impact. For F&B producers such as Tingyi and
Want Want, the positives are two-folds. First, such F&B USD/CNY forecast
manufacturers are likely to benefit from lower raw USD/CNY forecast, eop
material prices which are usually priced in USD (such as Close 6.83
palm oil, milk powder, PET and other packaging 2Q10f 6.81
materials), while revenues are recognized in RMB. 3Q10f 6.74
Secondly, as profits are translated into reporting 4Q10f 6.68
currencies such as USD or HKD, the appreciation of RMB 1Q11f 6.60
against those currencies will flow through. Source: DBS (Economics Market Strategy 2Q10, 11 Mar 2010)
Traditional media companies like SPH will also benefit Hengan is one of our top picks for its strong sales growth
partly from lower newsprint, which is priced in USD. (>25%), ability to protect margins, and its strong balance
Newsprint charge-out in local currency term will decline sheet. At end-FY09, Hengan had over HK$2bn net cash,
along currency appreciation against USD, assuming prices the bulk in RMB. It will benefit from an interest rate hike
stay constant. We estimate that every 5% depreciation in and RMB appreciation as its revenue stream is in RMB but
USD against SGD improve SPH’s bottomline by 1%, all purchases are in US$.
else remain constant.
Wilmar We like it for its unique business model with high
Losers are export oriented companies such Autos and entry barriers. Inclusion of rice and flourmills and lower
household manufacturers. Exports at Korean car prospective international soybean prices should boost
manufacturers, like Hyunda Motor and Kia Motor, Wilmar’s earnings prospects. A potential RMB revaluation
account for 75%-80% of global unit sales. As such, would expand processing margins even further.
appreciation of KRW will affect the exporters’ bottomline
arising from changes in export ASPS, and income. On the
Page 8
Sub-sectors Winners & Losers from local currency appreciation

Sub-sector Positive/ Neutral/ Comments
Negative
Automobiles and Parts Mixed The Korean car makers are exporters par excellence - at Hyundai and Kia, exports make up
C.75-80% of global unit sales, respectively. Currency swings affect car exporters' bottom
lines by changing export ASPs and equity-method income. Forex counts as much here as
anywhere. Meanwhile Chinese and Malaysian auto manufacturers are better positioned as
their general exposure to export is relatively insignificant. In fact, many Chinese and
Malaysian auto companies are JPY dependent.
Up/Midstream Food Producers Negative Planters (upstream food producers) are losers if local currencies (i.e. Malaysian Ringgit and
Indonesian Rupiah) strengthen against the USD, as their ASP in local currency terms and
revenues would be booked lower.
Food & Beverage (Downstream Positive Though most of the sales of F&B companies are from Chinese market, appreciated RMB
Food Producers) would reduce a certain part of their costs of material imported from overseas market;
meanwhile there would be an elevation of their net profit denominated in currencies other
than RMB
Gaming Neutral Revenue and cost substantially in local currency, so minimal impact from USD depreciation.
Healthcare Neutral Depreciation in USD will make Asian healthcare more costly to US patients seeking
treatment in Asia and may impact medical tourism. At this point, the difference is treatment
cost is still very huge, hence depreciation of USD impact is negligible.
Household and Personal Goods Mixed Impact of this sector is mixed, depending on where the products are made and sold. Those
that target at domestic market with RMB revenue stream will win but exports oriented
companies usually will loss on higher procurement costs. Impact is also more substantial on
thin margin operations, such as trading business.
Media Neutral - Mildly The impact on media industry should be negligible as cost and revenue are in similar
positive currencies. Publishing houses such as SPH should see slight positive impact since newsprint
are priced in USD .
Retailers Positive All China-based companies that are

listed outside of China (e.g. in Hong Kong) could see a positive impact on valuation terms,
as the gradual appreciation in RMB would translate into a stronger EPS on non-RMB
currency basis. Besides, retailers with
certain profitable operations in China could also be beneficiaries as positive earnings impacts
could be seen along with the rise in RMB.
Source: DBS Vickers
Page 9
Earnings sensitivity from currency appreciation vs USD (ceterus paribus) For Individual Companies
Assuming a 10% appreciation in LCY vs USD over the next 3 years, applied to FY11F earnings as a baseline
Company Positive/ (Negative) as % of net profit Comments

(FY11F)
SPH 2.50% Newsprint cost will become cheaper for SPH as it is priced in USD, assuming
price do not rise in tandem with fall in USD
Pico Far East 3.0% Over 30% revenue from China, and will likely benefit as profits gets translated
back into HKD, and if it remains pegged to USD.
China Foods 2% in RMB earnings + 10% in Some of the raw materials like cocoa, grape juice, orange juice are purchased
reported HK$ earnings=12% from overseas suppliers
Want Want 1% in RMB earnings + 10% in Want Want purchase a certain amount of milk power and packaging materials
reported US$ earnings=11% from overseas market
Tingyi 3% in RMB earnings + 10% in Benefit from the lower prices of PET and palm oil denominated in RMB
reported US$ earnings=13%
Yurun 10% in reported HK$ earnings Most of sales and material sourcing are in China
Hyundai Motor Co. -9.2% Assuming 20% appreciation of LCY against USD, in our estimates, for every
KRW1% change in KRW/USD rate, this will shave off Hyundai's FY11F earnings
by 0.9%
Kia Motors -13.8% Assuming 20% appreciation of LCY against USD, in our estimates, for every
KRW1% change in KRW/USD rate, this will shave off Kia's FY11F earnings by
1.4%
Geeley Auto nm Geely's exports accounted for about 6% of total sales last year, hit by the
global financial crisis. We project it will rise to 15% of total sales by FY11 and
maximum impact on net earnings is 3%. The focus is more on JPY fluctuations.
Beijing Jingkelong 10% in reported HK$ earnings 100% earnings from China
Lianhua 10% in reported HK$ earnings 100% earnings from China
Wumart 10% in reported HK$ earnings 100% earnings from China
Parkson (3368.HK) 10% in reported HK$ earnings 100% earnings from China
Parkson Holdings 8% in reported RM earnings c.80% earnings from China

(PKS.MK)
Golden Eagle 10% in reported HK$ earnings 100% earnings from China
New World Dept Store 10% in reported HK$ earnings 100% earnings from China
Gome 10% in reported HK$ earnings 100% earnings from China
Glorious Sun 6.0% Estimated to capture c.60% earnings from China.

Yue Yuen -8.9% c.70% revenue from exports. Higher revenue from China offset negative
impact from higher production cost in China from stronger RMB
Hengan 17.1% Gain from lower raw materials costs and FX

Ming Fai -6.0% Higher revenue from China offset negative impact from higher production cost
Pelikan International -17.0% 95% of Pelikan's revenue and costs are denominated/quoted in USD and EURO
as its manufacuring facilities are based in Germany and EU countries. The effect
is largely unrealised translation losses at Group level.
Source: DBS Vickers
Page 10
Theme #2: Asian Cyclical Plays

Strong GDP reinforces consumer confidence and consumption within Asia
GDP forecasts
GDP growth, % YOY

2008 2009 2010F 2011F 1Q10F 2Q10F 3Q10F 4Q10F
US 0.4 -2.4 3.3 2.8 2.8 3.7 3.9 3.1

Eurozone 0.5 -4.0 1.1 1.5 0.7 1.2 1.1 1.4
Indonesia 6.0 4.5 5.5 5.5 5.8 5.9 5.5 5.0

Malaysia 4.6 -1.7 5.7 5.5 9.2 6.7 4.6 2.4
Singapore 1.4 -2.0 9.0 5.5 13.1 8.1 6.2 8.7
Thailand 2.5 -2.3 6.0 4.9 7.9 6.6 6.0 3.8
China 9.6 8.7 9.5 9.0 11.9 9.5 8.8 8.5
Hong Kong 2.1 -2.7 5.5 4.5 6.5 6.0 5.0 4.5
Source: DBS
GDP growth strong. We are seeing strong GDP growth Retail sales growth is picking up. As can be seen in the
coming out from regional economies. Singapore reported chart below, retail sales across the region rebounded in
an above expectations 1Q10 GDP growth of 13.1%, while early 2010. For an open economy like Singapore, retail
China 1Q10 numbers advanced 11.9% YoY in 1Q10, sales registered 4.8% in Feb. We believe this suggest that
slightly higher than consensus estimate of 11.7%. Of consumer are on the mend, especially for the matured
course, this was a result of a low base effect last year at the markets which were more affected by the financial crisis.
height of the financial crisis. But, it speaks volumes that
recovery is indeed strong. Retail sales growth
%
Translating into better consumer sentiment. Consumer
40
sentiment in China has sustained at a sound level
35
throughout the financial crisis amid strong economic
30
stimuli and favourable government policies. This probably 25
explains why China’s domestic demand continued to be 20
strong. For more matured economies like HK and Malaysia, 15
consumer confidence is normalizing from the trough. 10
5
Consumer confidence index – China, HK, Malaysia 0
Singapore*
Vietnam
Malaysia**
China
Hong
Kong
140
120
100
Source: CEIC, DBSVickers
80
60
China domestic consumption has been strong. Our
40
economist estimates that China has put in US$180 bn of
20 domestic demand over the past 4 quarters, twice more
0 than US$91bn from the US (David Carbon, “China: Two
Sep-08
Mar-08
Mar-09
Sep-09
Dec-09
Dec-08
Feb-10
Jun-08
Jun-09
growth myths with one stone”, 14 April 2010). In

addition, China’s trade surplus has fallen by 90% over the
China - Consumer confidence past year, and with an estimated GDP growth of 11.5%
Hong Kong - Consumer confidence over four quarters, he highlights the fact that China’s
Malay sia - Consumer sentiment growth is driven by domestic demand.
Source: CEIC
Page 11
China domestic demand vs US Unemployment

%
Domestic demand creation over past 4 quarters 6
USD bn, sa, real terms, 2009P
5
200
180 4
180
3
160
2
140
1
120
100 91 0
Mar-08
Mar-09
Sep-08
Sep-09
Dec-08
Dec-09
Jun-08
Jun-09
80
60
China Hong Kong
40 Singapore Malaysia
20
Source: DBS
0
China US
Source: DBS
China – exports and imports
China – exports and imports

US$b/month, sa Surplus vanishes
due to China's
140 stro ng do mestic
demand and weak
130 demand in the G7
120
Exports
110
100
90
Imports
80
70
60
50
Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10
Source: DBS
Unemployment rate declining. The Chinese employment

market stayed resilient throughout the global financial
crisis, seeing unemployment rate sustaining at c.4%
throughout. Other Asian markets saw rising unemployment
rate right after the crisis in 4Q08, while Malaysia started to
see improvement in 2Q09, and Hong Kong and Singapore
saw improving employment since 4Q09.
Page 12
Amongst the sub-sectors, our focus is on (i) those with …and demand for personal goods. We believe domestic
potential operational outpeformance or surge in earnings; household / personal goods manufacturers will continue to
(ii) names which will continue to benefit from China’s benefit from supportive government policy in boosting
domestic consumption; (iii) along with beneficiary of domestic consumption as well as accelerating urbanization.
commodity price movements. This, coupled with robust domestic economic growth, will
enhance overall living standards, leading to stronger
1) Go for beneficiaries of stronger economy, sentiment. demand on household / personal goods. Such view is
Against the backdrop that the regional economy has echoed with the continuous uptrend in retail sales of daily
bounced back up (except for China which was largely use goods. In fact, retail sales growth of daily use goods
unscathed), we advocate counters that can ride on stronger has always been stronger than the overall retail sales
economy and sentiment. growth in China. Hengan is our key pick for household /
personal goods sector which is a market leader in personal
Amongst this, we like Kia Motors. The recession has caused care products (including sanitary napkins, diapers and
consumers to increasingly prefer value-focused Korean car tissue).
brands. Kia’s YTD utilization rate of 96% (vs. 82% in 2007-
08) indicates that demand for its cars has reached 3) Beneficiaries of commodity price movements
unprecedented heights. We recommend investors to
accumulate Kia shares as we believe its 1H earnings will Wilmar to benefit from lower soybean price. This year, we
beat consensus estimate by a considerable amount. expect that declining soybean price trends would create
Dongfeng will continue to ride on the positive stimulus temporary gains for processors such as Wilmar, as lower
policy by government to promote auto consumption in the feedstock prices would have lagged impact on end product
country. prices. The domestic price situation is expected to be more
resilient in China, as domestic soybean prices are already
We like Gome for its solid recovery from the trough as well priced higher than imported ones. Rising global soybean
as direct benefits from government subsidy programs. supplies will mean even greater disparity between domestic
These include (i) “go rural” policy, which has recently and imported bean prices.
increased price caps for various product categories (from
25% to a double), as well as (ii) “exchange old for new” Impact from potentially stronger RMB. In the event of RMB
program that has been launched in Aug09 and will revaluation, Wilmar should benefit even more. Any efforts
contribute to a full-year impact in 2010. Additionally, with by the Chinese government to protect its soybean farmers
c.70% of properties sold in China during 2H09 to be mean that domestically produced soybean prices would
delivered by 2H10, their demand for home appliances remain steady. On the other hand, cheaper imported
should likely see a strong support throughout this year. feedstock prices should expand Wilmar’s processing
margins. Already highly efficient with large economies of
2) Continue to ride China consumption. This year, a macro scale, this would make Wilmar more competitive in the
recovery and improving purchasing power should hold up Chinese vegetable oil market.
overall consumption in the region. Chinese operators could
see even better prospects amid sustainable household
income growth, as the government’s economic stimulus
packages support employment, while an upward
adjustment of 10% or more in minimum wage for various
provinces will be seen this year.
Leverage on summer peak season in China. We would still

go for staple consumer companies with focus in China. We
believe China’s promising beverage market should remain
the focus of most investors, and with the summer peak
season drawing near, the expect beverage sales to soar,
which will benefit counters like China Foods (506 HK).
Beijing Jingkelong (814 HK) is also expected to benefit
through expansion of margins arising from food inflation.
Page 13
Regional Indices
Singapore Thailand
250
200
180
200
160
140
150
120
100
100
80
60
50
40
2005 2006 2007 2008 2009 2010
2005 2005 2006 2007 2008 2009 2010
SETCNSP Index SETCOM Index

F STCG Index F STCS Index
STI Index F STAS Index
Hong Kong Indonesia

250 350
210 300
250
170
200
130
150
90 100
50 50
2005 2005 2006 2007 2008 2009 2010 2005 2006 2007 2008 2009 2010
HSCIC Index HSCISV Index HSCI Index J AKCONS Index J CI Index
Malaysia South Korea

260 120
220
100
180
80
140
100 60
60 40
2005 2006 2007 2008 2009 2010 2007 2008 2008 2009 2009 2010
KOSPI Index KRXCONS Index

KLCSU Index F BMKLCI Index
Source: Bloomberg, DBS Vickers Source: Bloomberg, DBS Vickers
Page 14
Rolling Fwd PE and Standard deviations

Airlines Healthcare
80 30
70
+2sd 25 +2sd
60
50 +1sd +1sd
20
40
Av g
Av g
30
15
20 -1sd -1sd
10 -2sd 10
-2sd
0
J un-09 Aug-09 Oct-09 Dec-09 F eb-10 5
2006 2007 2008 2009 2010
Automobiles & Parts Household/ Personal Goods

12 70
+2sd 60 +2sd
10
50
+1sd +1sd
8 40
Av g
30 Av g
6
-1sd 20
-1sd
4
10
-2sd
-2sd
0
2
2006 2007 2008 2009 2010 2006 2007 2008 2009 2010
Up/Midstream Food Producers Media

26
35
+2sd
24
+2sd
30 22
+1sd
25 20
+1sd
18 Av g
20
16
15 Av g -1sd
14
10 12
-1sd
5 10 -2sd
0 -2sd 8
2006 2007 2008 2009 2010 2006 2007 2008 2009 2010
Food & Beverages Retailers

30 35
28 +2sd
+2sd
26 30
24 +1sd
22 +1sd
25
20
Av g
18 Av g 20
16
14 -1sd
-1sd 15
12
10 10 -2sd
8 -2sd
6 5
2006 2007 2008 2009 2010 2006 2007 2008 2009 2010

Page 15
Rolling forward PB trading band

Airlines Healthcare
200
270 2.8x
240
175 1.8x 2.4x
210
150 1.6x 2.0x
180
1.6x
1.3x
125 150
1.1x 120
100 1.2x
0.8x 90
75
60
50 30
2006 2007 2008 2009 2010
2006 2007 2008 2009 2010
Automobiles & Parts Household/ Personal Goods

170
4.2x
280
1.1x
145 250 3.6x
220
0.9x 3.0x
120 190
0.7x
160 2.4x
95
0.5x 130 1.8x
100
70
0.3x 70
45 40
10
20 2006 2007 2008 2009 2010F
2010
2006 2007 2008 2009 2010
Up/Midstream Food Producers Media
1,200 120
3.4x
110 4.2x
3.0x
900 2.6x
100
3.7x
2.2x
90
600 1.8x 3.2x
80
2.7x
300 70
60 2.2x
0
50
2006 2007 2008 2009 2010
2006 2007 2008 2009 2010
Food & Beverages Retailers

320 7.6x
480 4.2x
420 260 6.3x

3.6x
360
3.0x 5.0x
200
300 2.4x
3.7x
240 140
1.8x
180 2.4x
80
120
60 20
2006 2007 2008 2009 2010 2006 2007 2008 2009 2010F
2010

Page 16
Auto
SUB SECTOR - AUTO
Page 17
Auto
AUTOS region to maintain double-digit growth of 14% for 2010,

implying total sales of 20.5m vehicles.
Jay Kim, jay_kim@hk.dbsvickers.com
Rachel Mui, rachel_miu@hk.dbsvickers.com Going into 2Q, we believe sales volume growth to start
Malaysia Research Team trending down as momentum eases from the last year’s
high base effect. Also, we note that the strong growth in
• We expect regional growth of auto demand to slow the first three months of this year was in part due to
from 2Q, returning to more rational but still solid spillover effect from orders made late last year. And a
growth rates of 11-16% for the full year. tighter monetary policy will drive up lending rates and
restrain growth to some extent. Meanwhile, on a q-o-q
• As industry demand enters into a slower but more basis, we expect the absolute demand for the region to
rational growth stage, we believe earnings growth edge up 9%, and this is mainly due to strong seasonal
trends for automakers will start to diverge. 1H10 demand coupled with continued recovery in consumer
earnings results (particularly on 2Q10) would be the spending.
first informant on how each company’s earnings will be
affected and differentiated from each other in Against the backdrop of slower growth from 2Q and
subsequent periods. expectation of a more rational growth of 11 – 16% for the
• While we expect 1H earnings to shape future share full year, we advocate a more selective investment approach
price performances for the sector, we seek out for the sector. History indicates that some competitive car
attractive value plays with near term earnings heading manufacturers had successfully taken advantage of previous
beyond pre-crisis levels. economic downturns to strengthen their business
• Our top picks: Kia Motors & Dongfeng Motor framework (i.e. improve market share, successful
introduction of cost control measures, and effective
adjustment of product offerings to meet new consumer
Performance review: demands) and eventually reaped superior returns when the
The share prices of Chinese, Korean, and Malaysian auto economy recovers. With the comeback of rational growth
stocks under our coverage, on weighted average basis, have stage, we believe earnings growth trends for automakers
outperformed their respective indices (Hang Seng, KOSPI, will start to diverge and a few real winners from the last
and KLCI Index) by 15%, 3%, and 10%, respectively, in 1Q. recession will differently be awarded.
We believe the outperformance was largely due to the
industry’s intrinsic characteristic that correlates closely with We believe 1H10 earnings results (particularly on 2Q10)
economic cycle. Across the region, we saw either the expiry would be the first informant on how each company’s
or reduction of government incentives for car buyers. earnings will be affected and differentiated from each other
Despite less support from stimulus packages, regional auto as the regional industry demand comes to a slower but
demand remained robust. For Asian Pacific region ex Japan more rational growth stage. While we expect 1H earnings
& Australia, we estimate total quarterly car sales at 5.9 m results to shape future share price performances for the
units in 1Q10, up 63% from last year. We believe this sector, we seek out attractive value plays with near term
strong growth resulted from a combined effect of 1) low earnings heading beyond pre-crisis levels.
comparative base from last year, 2) particularly aggressive
new model releases, and 3) continued motorization growth.
Industry outlook:
Like 2009, we believe emerging markets, especially the Asia
Pacific region, will remain the main growth engine for the
global auto industry. The low levels of car ownership, rising
household disposable income and growing middle class
population should continue to provide a rapid growth
platform for carmakers. In fact, auto stocks under our
coverage have either sole or the largest sales exposure to
the region. Accordingly, we believe these companies are
predominantly well positioned to benefit from the region’s
continued motorization process and relatively higher rates of
economic growth for this year. We expect Asia-pacific
Page 18
Auto
Action/ Key Pick: Kia Motors Action/ Key Pick: Dong Feng Motor
Kia’s y-t-d global utilization rate of 96% (vs. 82% during Dongfeng Motor is our top pick in the Chinese auto market.
2007-08) indicates that demand for its cars has reached The company will continue to ride on the positive stimulus
unprecedented heights. In fact, we expect Kia’s policy by government to promote auto consumption in the
consolidated sales volume growth to expand by 26% y-o-y country. Due to a low vehicle penetration rate in China, the
to 1.9 m cars for this year, much higher than our projected mid-term prospect is positive, hence benefitting strong
growth of 14% for the region. The growing demand for vehicle manufacturers like Dongfeng Motor. The company
Kia cars is due to a paradigm shift of consumer preference has three foreign joint ventures with a wide product range
towards cost effective Korean car brands as a result of the and launched its own brand, Fengshen recently to capture
recession. Consumers’ growing demand for models that are the growing interest for Chinese brand automobiles. The
low-cost and fuel-efficient leading them towards brands consistent release of new models is an important strategy
associated with practicality. We believe this trend has helped for the Chinese auto industry as consumers have a growing
Kia Motors to remarkably widen scope of market appetite for new cars in the market. Since Dongfeng
penetration. Motor’s products spread across a wide spectrum of
displacements, the company will benefit from the mass
On the back of a stronger won, it appears that the market market and high-end demand, underpinned by rising
still has ongoing concerns over the carmakers’ earnings disposal income trend.
prospects for this year. However, we believe the rise in
demand is the most decisive factor in determining the Catalyst: New model releases to capture sales
carmakers’ earnings prospects and intrinsic value. On the The 1Q strong orders should be positive on 1H earnings
earnings front, alongside with continued cost saving performance, despite normalization of sales momentum in
measures, we expect Kia’s FY10 net profit to grow by a 2Q, while 1Q has a low base effect. The company has 10
strong 15% y-o-y to a record high KRW1.7tn this year. new models in the pipeline for this year new launches, all
(More details is discussed in stock profile section). under its three foreign JVs. The turnaround of its Dongfeng
Peugeot-Citroen JV is another plus factor, as this company
We expect Kia Motors to be re-rated upward, in view of its was slow in the past to bring new models into the market.
(1) solid earnings prospects ahead, (2) improving balance A change in strategy has improved its performance last year.
sheet, (3) fast turnaround at its Georgia plant and (4)
attractive valuations. For FY10, net profit is estimated to grow by 13%, after a
high base effect in FY09. In terms of PE valuation, Dongfeng
Catalyst: Strong 1H earnings growth Motor shares are trading in line with the HK listed auto
As discussed earlier, we expect 1H earnings release to shape companies’ average at around 13x FY10 EPS. However,
share price performance for the sector. Accordingly, we being one of the top three auto groups in China, we believe
strongly recommend investors to accumulate Kia shares as DFG should command a premium to its pees (as it was the
we believe Kia’s 1H10 earnings are on track to surge 86% case in the past). We priced DFG at 16x forward PE,
vs. a year earlier and to beat consensus estimates by a translating into TP of HK$14.9. We maintain BUY rating on
considerable amount. the counter.
While we believe that the market will gradually realize that

demand growth is a more decisive factor in determining the
carmaker’s earnings than any potential impact from the
appreciation of the local currency, we think the full impact
of the rise in demand has not been fully reflected in the
share price. In fact, our forecast net profit of KRW826bn in
1H10 is 12% higher than consensus of KRW738 for now.
We expect consensus estimates to move higher over the
coming periods, a key positive stimulus for its share price.
Page 19
Auto
Earnings Valuation
Market Cap (US$m): 68,975
Operating OP Chng Pre-tax Net Profit EPS Chng

Sales YoY Profit YoY (1Q) Profit YoY Bef EI EPS YoY (1Q)
(US$ m) (%) (US$ m) (%) (%) (US$ m) (%) (US$ m) (US$) (%) (%)
2006A 64,796 - 2,535 - - 3,883 - 2,695 0.04 - -
2007A 68,793 6.2 3,265 28.8 - 4,296 10.6 2,887 0.04 7.1 -
2008A 73,211 6.4 4,538 39.0 - 3,883 -9.6 3,387 0.05 17.3 -
2009E 80,073 9.4 6,225 37.2 - 8,846 127.8 6,787 0.10 100.4 -
2010F 87,442 9.2 7,006 12.6 -7.9 10,872 22.9 7,617 0.11 12.2 0.4
2011F 94,337 7.9 7,860 12.2 -6.7 12,398 14.0 8,794 0.13 15.4 -1.7
OP Interest Net Debt / Dividend

EBITDA Margin ROE Cover Equity FCF BPS Yield PE P/B EV/EBITDA
(US$ m) (%) (%) (x) (x) (US$ m) (US$) (%) (x) (x) (x)
2006A 6,530 3.9 - -237.8 -0.1 130 1.2 1.16 25.6 2.3 10.3
2007A 7,034 4.7 9.1 -74.9 0.0 1,557 1.3 0.96 23.9 2.1 9.6
2008A 7,682 6.2 9.6 -305.6 0.0 2,765 1.4 0.94 20.4 1.9 8.8
2009E 12,978 7.8 16.7 57.1 -0.2 10,106 1.7 1.01 10.2 1.6 4.7
2010F 13,684 8.0 16.1 211.9 -0.3 8,766 2.0 1.09 9.1 1.4 4.1
2011F 15,224 8.3 16.0 -115.1 -0.3 8,034 2.3 1.25 7.8 1.2 3.4
Stock Performance
Market Return Excess Return
Cap Weight 1M 3M 6M 12M 1M 3M 6M 12M BETA
(US$)
Auto Parts
APM Automotive 281 0.4 12.9 42.5 93.1 154.9 6.7 24.2 77.5 60.8 0.7
Denway Motors 4,272 6.2 7.4 0.7 17.5 43.3 1.2 -17.7 1.9 -50.8 1.0
Hyundai Mobis 14,494 21.0 9.0 17.4 3.4 78.5 2.8 -1.0 -12.3 -15.6 0.8
UMW Hldgs 2,282 3.3 1.9 1.9 1.9 15.7 -4.3 -16.4 -13.7 -78.4 0.8
Tires
Hankook Tire 3,090 4.5 4.0 13.8 -6.6 57.4 -2.2 -4.5 -22.2 -36.7 0.9
Automobiles
Brilliance China 1,609 2.3 6.7 12.7 114.3 281.0 0.4 -5.7 98.7 186.9 1.1
Dongfeng Motor Group - H 4,327 6.3 -13.2 13.3 11.5 106.3 -19.4 -5.0 -4.1 12.3 1.2
Geely Automobile 3,336 4.8 -12.7 2.0 29.2 272.9 -18.9 -16.3 13.6 178.8 1.1
Hyundai Motor 24,947 36.2 13.4 21.2 15.4 97.2 7.1 2.9 -0.3 3.1 1.0
Kia Motors 9,295 13.5 4.6 41.7 41.3 157.1 -1.7 23.3 25.7 63.0 1.2
MBM Resources 217 0.3 4.1 4.9 13.3 19.6 -2.2 -13.5 -2.3 -74.5 0.6
Proton 825 1.2 6.0 21.8 18.2 56.9 -0.3 3.5 2.6 -37.2 1.3
Automobiles & Parts 68,975 100.0 6.2 18.3 15.6 94.1 1.0
Financial Ratios
2010F 2011F 2010F 2011F 2010F 2011F 2010F 2011F 2010F 2011F 2010F 2011F
(x) (%) (x) (%) (x) (%)
Auto Parts
APM Automotive 11.3 10.7 15.9 6.0 1.3 1.2 11.8 11.5 4.6 4.1 2.3 2.3
Denway Motors 12.5 11.3 10.4 10.5 1.8 1.6 15.2 14.8 9.7 8.2 1.3 1.3
Hyundai Mobis 8.8 7.7 12.2 14.2 1.8 1.4 21.6 20.6 5.9 5.2 0.7 0.8
UMW Hldgs 16.3 14.3 10.2 13.9 1.8 1.7 11.5 12.4 6.0 5.4 3.5 3.5
Tires
Hankook Tire 10.6 9.4 -1.8 12.9 1.6 1.4 15.3 15.8 5.4 4.6 0.6 0.6
Automobiles
Brilliance China 15.4 12.8 -32.7 20.5 1.9 1.7 13.2 13.9 6.8 5.9 0.0 0.0
Dongfeng Motor Group - H 12.6 11.1 13.3 13.4 2.7 2.2 23.3 21.6 5.0 4.2 0.8 0.9
Geely Automobile 14.9 13.0 23.3 14.4 3.1 2.6 23.1 21.9 9.0 8.0 1.4 1.6
Hyundai Motor 8.6 7.5 10.7 13.9 1.1 0.9 13.5 13.3 3.2 2.5 0.9 1.2
Kia Motors 6.1 5.6 14.6 9.7 1.1 0.9 20.3 18.3 4.2 4.4 0.9 0.9
MBM Resources 8.7 8.0 19.8 10.0 0.7 0.7 8.5 8.7 5.2 4.7 2.7 0.0
Proton 11.6 9.7 nm 19.5 0.5 0.5 4.3 5.0 2.7 2.2 1.0 1.0
Automobiles & Parts 9.1 7.8 12.2 15.4 1.4 1.2 16.1 16.0 4.1 3.4 1.1 1.3
Source: DBS Vickers
Page 20
Auto
Section B
Chart 1: Region – SAAR monthly vehicle sales
1Q10 sales volume for the region, at one point, was headed to reach
3,000,000 S AAR Auto S ales nearly over 2.5 m cars, on a seasonally adjusted annual rate (SAAR).
2,500,000 We believe it is important to remember that the first quarter of this
year was largely influenced by the spillover effect from orders made
2,000,000
late last year. Thus, it’s been different from the other traditionally slow
1,500,000 first quarters.
1,000,000
We expect regional growth of auto demand to slow from 2Q
500,000 returning to more rational but still solid growth rate of 11-16% for
the full year.
0
8
9
4
7
-0
-0
-0
-0
-0
-0
ct
ct
ct
ct
ct
ct
O
O
O
3-month Moving avg. S eas onally Adjus ted
Chart 2: China - monthly vehicle sales in (PV & CV)
'000 units From Jan to Mar09, total vehicle sales reached c.4.61m units, up from
1,800 c.2.67m units in 1Q09, an increase of c.73% y-o-y. The dip in Feb10
1,600 was due to the Chinese New Year effect. Total car sales accounted for
1,400 3.52m units, up c.77% from previous quarter. The main driver came
1,200 from small capacity vehicles, which are enjoying lower purchase tax
1,000 benefits.
800
600 Last year, China achieved 13.6 m units of vehicle sales under a
400 favorable tax environment (cut from 10% to 5%) and the government
200 has extended that policy to this year, albeit at a slightly higher tax rate
0 of 7.5%.
Oct
J ul
J an
F eb
J un
Mar
S ep
May
Nov
Dec
Aug
Apr
We forecast vehicle sales to reach 15.2 m units (up 12% y-o-y) this
2005 2006 2007 2008
2009 2010 year, which we believe is achievable with the y-t-d vehicle sales at
4.61m units.
Chart 3: China - Sedan sales by country mix
'000 units The policies to encourage small-capacity vehicle sales are benefiting
350 domestic auto manufacturers. The home-grown brands are usually
300 low-priced small capacity vehicles which target the broad consumer
market.
250
200
In 2010, self-developed brands will continue to lead sales volume,
150 despite the reduction of government incentives.
100
50
0
J un-08
Oc t-08
Dec -08
J un-09
Oc t-09
F eb-09
Dec -09
F eb-10
Apr-08
Aug-08
Apr-09
Aug-09
S elfbrand Japanes e Brands

German Brands Americ an Brands
Korean Brands Frenc h Brands
Page 21
Auto
Chart 4: China – domestic made PV’s sales breakdown by displace’m
100% Small capacity cars of 1.6L and below have continued to be the
mainstream vehicles for China market. The segment used to account
80% for about 60% of total PV sales volume, but had surged to 71% in
2009. Coming into 2010, it climbed further up to 73%.
60%
40%
20%
0%
2005 2006 2007 2008 2009 2M10
<=1L 1<-<=1.6L 1.6<-<=2L 2<-<=2.5L

2.5<-<=3L 3<-<=4L >4L
Chart 5: China - domestic made automobile price index
Jan 2004 = 100 The mass-market cars, mainly the small and mid-size capacity are very
105 affordable as competition in this market is more intense. Hence,
100
automobile manufacturers are keeping prices low to maintain their
95
90 market shares.
85
80 However, in the luxury segment, the price index has been trending
75
upward as this segment faces less competitions and automakers have
70
more flexibility for premium price strategy.
65
60
J an-04
May-05
J an-06
May-07
J an-08
May-09
J an-10
Sep-04
Sep-06
Sep-08
PV Mini
S mall Medium c las s
High c las s Luxury
Page 22
Auto
Chart 6: Korean brands – global utilization rates
% Korean car brands’ y-t-d global utilization rate of +90% indicated that
100 demand for its cars has reached unprecedented heights. In our view,
the growing demand for Korean cars is due to a paradigm shift of
95
consumer preference towards cost efficient brands as a result of the
90 recession. Consumers’ growing tendency is now for models that are
low-cost and fuel-efficient leading them towards brands associated
85
with practicality. We believe this trend has helped Korean automakers
80 to remarkably widen scope of market penetration. And this has been
75
translated into record high utilization rates.
70
1H07 2H07 1H08 2H08 1H09 2H09 1Q
HMC Kia
Chart 7: Korea – unit export price
US $ Despite a stronger won, Korean auto export prices in the US$ terms
Korea's unit export pric e
have continued to climb well since the 5-year low in 2009. We believe
16,000
Korean brands’ aggressive product launch has been the key factor in
15,000
14,000 driving their export prices. Indeed, we estimate over 65% of the
Unit export pric e
13,000 export ASP hike (forex unadjusted) came from price hikes associated
12,000 with the launch of new or redesigned models. In addition, the
11,000 recovery of SUV demand also led to a better product mix.
10,000
9,000
8,000
7,000
6,000
5,000
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
S KAMA
Chart 8: Korea – SAAR monthly vehicle sales
Total domestic car sales rose 39% y-o-y to 357K units in 1Q10.
160,000 S AAR Auto S ales Despite the expiry of government incentives for car buyers, we see
140,000 domestic demand remaining strong for Korea. Other than the spillover
120,000 effect from orders made late last year, industry sales also benefited
from new model effects. In fact, during 1Q10, new model sales
100,000
accounted for 33% and 28% for HMC and Kia Motors, respectively.
80,000 Considering that new launches accounted for nearly one third of total
60,000 sales volume for both companies, this indicates the new model effect
is much stronger than what market has previously anticipated.
40,000
20,000 Also, replacement demand in Korea appears to be kicking in and

0 should grow through this year. Although government had actively
07 08 09 10 provided incentives to scrap old cars in 2009, we notice the number of
3-month Moving avg. S eas onally Adjus ted cars that are at least 10 years old has increased by 6% y-o-y or 4,769
K units.
Page 23
Auto
Chart 9: Kia Motors – global utilization rates vs. OP
% Bn KRW On the back of a stronger won, investors are still concerned over
120 500 Korean car exporters’ earnings prospects for this year. While
uncertainties persist, we believe that market will gradually realize the
100 400
growth in demand is a more decisive factor in determining Kia’s
300
80 earnings, than any potential impact from the appreciation of the local
200 currency.
60
100
40 As seen from the chart, tracking Kia’s OP on a quarterly basis against
0
20 (100) the utilization rates, it is clear that the two rise and fall almost hand in
hand. In fact, the weakening KRW has been a primary gauge of Kia’s
0 (200)
earnings over the years, a driver of auto stock prices in South Korea.
1Q07
2Q07
3Q07
4Q07
1Q08
2Q08
3Q08
4Q08
1Q09
2Q09
3Q09
4Q09
Utilization(LHS )
Operating inc ome(RHS )
Chart 10: Malaysia – SAAR monthly vehicle sales

DBS bank is projecting 5% GDP growth for Malaysia in 2010 vs. 2.8%
70,000 S AAR Auto S ales contraction in 2009. This augurs well for consumer spending, and
60,000 Malaysian auto companies are likely beneficiaries.
50,000
40,000 However, TIV (total industry vehicle) had already rebounded since
2Q09, and had set a higher base in 2009, for 2010. After the strong
30,000
sales volume growth of more than C.15% in 1Q10, we expect growth
20,000 to slow from 2Q10. For the full year, we estimate a conservative TIV
10,000 growth of 2.4%, bringing total vehicle sales to 533K.
0
07
05
06
08
09
10
n-
n-
n-
n-
n-
n-
Ja
Ja
Ja
Ja
Ja
Ja
3-month Moving avg. S eas onally Adjus ted
Page 24
Food & Beverage
SUB SECTOR - FOOD & BEVERAGE
Page 25
Food & Beverage
FOOD & BEVERAGE In terms of concerns on material prices, we do not expect

Titus Wu, titus_wu@hk.dbsvickers.com substantial cost pressures in 2010. Given sufficient supply
Alice Hui, alice_hui@hk.dbsvickers.com from Brazil, concerns on sugar price increase should ease.
Nalyne Viriyasathien, nalynev@th.dbsvickers.com As prices of PET and aluminum are likely to stay stable,
increase in packaging material costs would also be limited.
• As the peak season draws near, we expect soaring Hence, we think that the possibility of margin squeeze from
beverage sales to be growth propellers for the F&B higher material costs should be low for most F&B players in
sector 1H10.
• Intense competition helps to expand the market size for
beverages Top picks:
• We like market leaders and niche-players in China China Foods (506 HK) and Want Want (151 HK)
• Top picks: China Foods (506 HK, TP HK$7.9); Want We believe China’s promising beverage market should
Want (151 HK, TP HK$6.5). remain the focus of most investors. Our preference is for the
leaders or niche-players among beverage operators. We
Peformance review: continue to favour China Foods for its Coke beverage
Look out for peak season beverage sales in Q2 business. Leveraging on its leading share and extensive
In the latest result season, most F&B companies posted market presence, it would be a key beneficiary of soaring
decent FY09 performances for both topline growth and demand in China. Its established capacity and brand
margin improvements. However, share price performances awareness would also provide stronger bargaining power
were relatively lackluster in recent months as valuations with suppliers and customers, which should help to
were thought to be rich. Nevertheless, as the peak season maintain margins.
for beverage sales in Q2 draws near, the booming beverage
market, especially the China market, would be in focus. We like Want Want for its smart niche-positioning in the
Meanwhile, the beverage businesses are already sustainable beverage market and expect its distinctive pocket-sized
key growth drivers for certain leading F&B players like Tingyi drinks products to further drive market share. More
(322 HK), China Foods (506 HK) and Want Want (151 HK). importantly, Want Want should continue to enjoy a higher
profitability against peers attributable to its more effective
Industry outlook-Competition helps enlarge the pie marketing spending (c.3% A&P/sales compared to c.10-
We expect the beverage players to deliver strong topline 15% of others). Hence, our top picks are China Foods and
growth in 1H10 given swelling market demand as well as Want Want, with BUY ratings and target prices of HK$7.90
relatively low base in 1H09. Meanwhile, competition is and HK$6.50 respectively.
intensifying stemming from rising budgets on advertising &
promotions and distribution network expansion of major Catalyst:
players for market share in Asia. Drought in China might help beverage sales
Additionally, it’s noticed that more F&B players are With a lower exposure in terms of manufacturing facilities in
expanding their product lines, and competing more Southwestern China, the production of major F&B players
extensively across various sub-segments of the beverage should seldom be affected by the drought in that region. On
market. For example, Coke launched the “Pulpy Super the other hand, the worsening drought affecting 60m
Milky” products, targeting the prosperous dairy juice market people there could possibly drive market demand for
in China, currently dominated by Wahaha. Huiyuan (1886 beverages, hence providing more room for growth among
HK) also launched a hybrid sparkling juice product in an F&B players. Despite sympathy for the disaster, the beverage
effort to expand its market share in China’s juice drink market could be a beneficiary in Q2 2010.
market. More players and products help to accelerate
market size expansion, which should benefit all players.
Page 26
Asian Consumer Report
Food & Beverage
Earnings Valuation

(US$ m) (%) (US$ m) (%) (%) (US$ m) (%) (US$ m) (US$) (%) (%)
2006A 16,251 - 1,101 - - 1,200 - 823 0.02 - -
2007A 20,130 23.9 1,426 29.5 - 1,449 20.7 1,032 0.02 25.4 -
2008A 25,163 25.0 1,485 4.1 - 1,448 -0.1 1,000 0.02 -3.1 -
2009E 27,397 8.9 2,580 73.8 - 2,636 82.1 1,862 0.04 86.1 -
2010F 31,695 15.7 3,101 20.2 -2.9 3,128 18.7 2,241 0.05 20.4 -2.0
2011F 36,530 15.3 3,710 19.6 -3.1 3,789 21.1 2,670 0.06 19.1 9.2

(US$ m) (%) (%) (x) (x) (US$ m) (US$) (%) (x) (x) (x)
2006A 1,815 6.8 - 10.5 0.3 -35 0.1 1.00 59.8 7.4 28.3
2007A 2,205 7.1 15.0 12.2 0.2 249 0.1 3.40 47.7 6.9 23.0
2008A 2,319 5.9 13.3 10.1 0.2 540 0.2 1.65 49.2 6.2 22.0
2009E 3,510 9.4 20.9 19.2 0.0 2,093 0.2 1.95 26.4 5.0 14.0
2010F 4,115 9.8 21.1 24.6 -0.1 1,497 0.2 2.16 21.9 4.3 11.8
2011F 4,780 10.2 21.9 44.0 -0.2 2,792 0.3 2.64 18.4 3.8 9.8
Stock Performance
Brewers
Kingway Brewery 375 0.8 6.9 8.9 30.5 83.9 3.1 -2.2 4.1 -15.4 0.7
Tsingtao Brewery - H 3,435 7.0 4.1 10.6 30.4 124.2 0.3 -0.5 4.0 24.9 0.7
Food Products
Charoen Pokphand Foods 3,447 7.0 2.0 28.0 65.9 363.2 -1.7 16.8 39.5 263.9 0.7
China Food 2,242 4.6 -10.4 -9.3 5.0 65.6 -14.2 -20.4 -21.4 -33.7 0.8
China Green 1,139 2.3 7.1 7.7 48.9 64.4 3.4 -3.4 22.4 -34.9 0.7
China Yurun 5,088 10.3 1.5 12.5 53.0 142.5 -2.3 1.4 26.6 43.2 0.7
Minor International 957 5.4 -12.4 -12.4 -14.0 41.5 -16.1 -23.5 -40.4 -57.8 1.1
Petra Foods 415 0.8 -19.7 1.9 19.1 112.0 -23.4 -9.2 -7.3 12.7 0.6
Thai Union Frozen Products 1,039 2.1 7.0 15.0 31.9 91.3 3.3 3.9 5.5 -8.0 0.6
Thai Vegetable Oil 367 0.7 -4.6 -2.4 2.5 40.7 -8.3 -13.5 -24.0 -58.6 1.0
Tingyi Holding 14,152 28.8 4.3 10.6 12.7 114.1 0.6 -0.5 -13.8 14.8 0.6
Want Want China 10,111 20.6 9.0 14.4 37.3 60.1 5.3 3.3 10.9 -39.2 0.5
Soft Drinks
China Mengniu 5,607 11.4 8.5 13.2 24.2 87.4 4.7 2.0 -2.3 -11.9 0.9
Vitasoy 808 1.6 -1.4 15.5 28.6 75.1 -5.2 4.3 2.1 -24.2 0.6
Food Beverages 49,182 100.0 3.7 11.1 26.4 99.3 0.7
Financial Ratios
2010F 2011F 2010F 2011F 2010F 2011F 2010F 2011F 2010F 2011F 2010F 2011F
(x) (%) (x) (%) (x) (%)
Brewers
Kingway Brewery 42.0 30.5 124.2 37.7 0.9 0.9 2.3 3.1 9.0 7.5 0.0 0.0
Tsingtao Brewery - H 33.6 30.0 11.7 12.3 5.1 4.5 16.3 15.9 7.3 6.2 0.5 0.6
Food Products
Charoen Pokphand Foods 10.5 9.6 11.2 9.0 1.9 1.7 19.3 18.8 7.4 6.5 5.2 5.7
China Food 22.6 15.8 35.4 43.3 2.8 2.5 13.2 16.8 12.4 8.7 1.6 2.4
China Green 14.5 12.2 18.1 18.8 2.6 2.3 19.4 19.9 9.2 7.4 1.8 2.1
China Yurun 20.6 16.9 9.7 22.1 4.0 3.4 21.1 22.0 15.2 12.1 1.3 1.6
Minor International 15.3 13.3 43.7 15.2 2.2 1.9 16.2 15.5 8.7 8.2 2.0 2.3
Petra Foods 17.0 15.1 13.9 12.3 2.0 1.9 12.2 12.9 8.8 7.8 3.2 3.2
Thai Union Frozen Products 8.6 7.8 29.6 10.6 1.6 1.4 20.5 19.1 6.6 5.5 5.7 6.4
Thai Vegetable Oil 7.2 5.9 78.1 22.3 2.1 1.8 31.4 33.4 5.4 4.4 7.3 8.9
Tingyi Holding 31.1 26.4 18.8 18.0 8.2 7.0 28.5 28.5 14.1 11.9 1.6 1.9
Want Want China 26.0 20.7 24.2 26.0 8.6 7.6 35.8 38.9 19.1 14.9 3.2 4.1
Soft Drinks
China Mengniu 23.5 19.6 22.3 19.8 3.7 3.2 17.1 17.7 12.2 9.8 0.8 1.0
Vitasoy 22.4 19.9 28.7 12.6 4.7 4.4 21.3 22.9 11.9 10.6 4.0 4.2
Food Beverages 21.9 18.4 20.4 19.1 4.3 3.8 21.1 21.9 11.8 9.8 2.2 2.6
Source: DBS Vickers
Page 27
Food & Beverage
Section B: Macro radar

Chart 01: F&B Sales Above Designated Size Enterprise* in China
RMB mn Yoy growth Positive expectations on sales growth in 1H10. Growth for F&B
80,000 60% retail sales grew solidly by 18.4% in Q110 in China. We expect a
70,000 50% decent sales y-o-y growth in 1H10 partly due to the lower base in
60,000 40% 1H09.
50,000 30%
40,000 20%
30,000 10%
20,000 0%
10,000 -10%
0 -20%
Mar-07
Sep-07
Mar-08
Sep-08
Mar-09
Sep-09
Mar-10
Dec-07
Dec-08
Dec-09
Jun-07
Jun-08
Jun-09
F &B y -o-y Growth
Source: National Bureau of Statistics of China

*Note: Refers to enterprises with sales revenue of >RMB5m.
Chart 02: Beverage sales Above Designated Size Enterprise in China
RMB mn Yoy growth Growth momentum intact. Beverage sales growth remained
strong in FY09, and expected to be sustainable in coming years.
7,000 70%
6,000 60%
50%
5,000
40%
4,000 30%
3,000 20%
10%
2,000
0%
1,000 -10%
0 -20%
Feb-07
May-07
Feb-08
May-08
Feb-09
May-09
Feb-10
Aug-07
Nov-07
Aug-08
Nov-08
Aug-09
Nov-09
Bev erage y -o-y Growth

Chart 03: CPI of Food Items in China
Index 5.1% increase in 1Q10. CPI for food continued to post higher y-
o-y growth than the other categories in 1Q10, partly driven by
140
abnormal weather this year.
120
100
80
60
40
20
0
Mar-07
Sep-07
Mar-08
Sep-08
Mar-09
Sep-09
Mar-10
Dec-07
Dec-08
Dec-09
Jun-07
Jun-08
Jun-09
Page 28
Food & Beverage
Chart 04: Food Items sales in HK
HKD mn Yoy 16% surge in Jan-Feb10. Food retail sales increased by 16% y-o-y
3,000 50% in Jan-Feb10, which could be a positive indication of improving
40% consumer sentiment in Hong Kong
2,500
30%
2,000
20%
1,500
10%
1,000
0%
500 -10%
0 -20%
Feb-07
May-07
Feb-08
May-08
Feb-09
May-09
Feb-10
Nov-07
Nov-08
Nov-09
Aug-07
Aug-08
Aug-09
F ood, Alcoholic Drinks and Tobacco

y -o-y Growth
Source: Census & Statistics Dept, HKSAR

Chart 05: Soda beverage sales in Thailand
m liter y -o-y growth Stagnant sales trend. Soda beverage sales in Thailand were
250 20% relatively flat YTD.
15%
200
10%
150 5%
0%
100 -5%
-10%
50
-15%
0 -20%
Dec-07
Dec-08
Dec-09
Feb-07
Apr-07
Oct-07
Feb-08
Apr-08
Oct-08
Feb-09
Apr-09
Oct-09
Feb-10
Jun-07
Jun-08
Jun-09
Aug-07
Aug-08
Aug-09
Sales v olume growth
Source: Ministry of Commerce and Department of Internal Trade of

Thailand
Chart 06: Food & Beverage sales index in Singapore
Index Decline in Jan due to high base from Chinese New Year in 2009.
200 F&B sales index in Singapore declined by 33% yoy in Jan. This
180 occurred as Chinese New Year fell in mid-Feb in 2010. We believe
160 F&B sales index should deliver a strong yoy surge like back in
140 2007 in subsequent months, which was proven by the 72% surge
120 in Feb10. Looking forward, we expect to see growth resulting
100 from better economic outlook, higher tourist arrivals and a low
80 base last year.
60
40
20
0
Feb-06
May-06
Feb-07
May-07
Feb-08
May-08
Feb-09
May-09
Feb-10
Aug-06
Nov-06
Aug-07
Nov-07
Aug-08
Nov-08
Aug-09
Nov-09
Source: CEIC
Page 29
Food & Beverage
Section C: Raw Materials prices

Chart 07: Sugar (ZCE)
RMB/ton 10% drop since its peak. Sugar price dropped by over 10% from
its peak in Feb10 due to increasing production in Brazil. Thus the
6,500
impact of drought in Southwestern China should be offset by
6,000
sufficient global supply. Going forward, we expect limited upside
5,500
for sugar prices.
5,000
4,500
4,000
3,500
3,000
2,500
Mar-07
Sep-07
Mar-08
Sep-08
Mar-09
Sep-09
Mar-10
Jan-07
May-07
Jan-08
May-08
Jan-09
May-09
Jan-10
Nov-06
Jul-07
Nov-07
Jul-08
Nov-08
Jul-09
Nov-09
Source: CEIC
Chart 08: Crude Palm oil ( KLCE )
Remained stable. The price of crude palm oil remained largely
MYR/ton
4,800 stable since 1H09. Give still sufficient supply, we expect the price
to stay around 2400 MYR/ton in FY10, which would benefit
4,200
instant noodle players like Tingyi.
3,600
3,000
2,400
1,800
1,200
600
Mar-07
Sep-07
Mar-08
Sep-08
Mar-09
Sep-09
Mar-10
Jan-07
May-07
Jan-08
May-08
Jan-09
May-09
Jan-10
Nov-06
Jul-07
Nov-07
Jul-08
Nov-08
Jul-09
Nov-09
Source: CEIC
Chart09: Orange Juice ( NYCE )
USD/ton Still tight supply. Price of orange juice had more than doubled
5,000 since the beginning of FY09, due to the decreased production in

US and Brazil. Given still tight supply this year, the price of
4,500
orange juice might continue to climb up in FY10, affecting juice
4,000
producers like Huiyuan, Tingyi and China Foods.
3,500
3,000
2,500
2,000
1,500
1,000
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10
Jul-05
Jul-06
Jul-07
Jul-08
Jul-09
Source: CEIC
Page 30
Food & Beverage
Chart 10: Consumer-pack Rice in China
RMB/KG Mild incline trend. Price of rice has been climbing up mildly in the
4.8 past several years. Given a relatively stable and sufficient domestic
supply, the uptrend is largely due to Government’s intention to raise
the income of farmers, and is anticipated to continue to rise in the
4.6
coming years, affecting some snack players like Want Want.
However, as the absolute leader in rice cracker market, Want Want
4.4 is expected to be able to pass on the cost to consumers.
4.2
4.0
Mar-07
Sep-07
Mar-08
Sep-08
Mar-09
Sep-09
Mar-10
Jan-07
May-07
Jan-08
May-08
Jan-09
May-09
Jan-10
Jul-07
Nov-07
Jul-08
Nov-08
Jul-09
Nov-09
Source: CEIC
Chart 11: Wheat in China ( ZCE)
RMB/ton Similar uptrend to that of rice. We believe it is almost the same case
for wheat prices to that of rice in China and we expect the mild
2,400
uptrend to sustain in coming years and affecting bakery producers
2,200 like Tingyi. However, given the small portion of bakery to its
2,000 business portfolio (3%), we believe the impact on Tingyi would be
minimal.
1,800
1,600
1,400
1,200
1,000
Sep-05
Mar-06
Sep-06
Mar-07
Sep-07
Mar-08
Sep-08
Mar-09
Sep-09
Mar-10
Dec-05
Dec-06
Dec-07
Dec-08
Dec-09
Jun-06
Jun-07
Jun-08
Jun-09
Source: CEIC
Chart 12: Pork in China
RMB/KG Relatively stable pork price. The pork price in China remained largely
30 stable since mid-09. Given healthy livestock levels nationwide, we
do not expect a substantial surge in pork prices in FY10. In fact, the
25 pork price declined by more than 15% since the beginning of this
year, and the government has just decided to purchase 50k tons of
20 frozen pork from the market to help stabilize the pork price. Thus,
the relative stable to lower price of pork this year should be positive
15 for meat processors like Yurun (1068 HK).
10
5
Dec-07
Dec-08
Dec-09
Feb-07
Apr-07
Oct-07
Feb-08
Apr-08
Oct-08
Feb-09
Apr-09
Oct-09
Feb-10
Apr-10
Jun-07
Aug-07
Jun-08
Aug-08
Jun-09
Aug-09
Source: Ministry of Commerce of China
Page 31
Food & Beverage
Chart 13: PET & Crude Oil
US cents/LB US/B PET prices remained stable. PET prices move largely in tandem with
100 160 the trend of crude oil. As we expect crude oil price to stay around 80
95 US$/barrel in FY10, PET prices would remain largely stable this year.
140
90
85 120
80 100
75
70 80
65 60
60
40
55
50 20
Jan-06
Apr-06
Oct-06
Jan-07
Apr-07
Oct-07
Jan-08
Apr-08
Oct-08
Jan-09
Apr-09
Oct-09
Jan-10
Jul-06
Jul-07
Jul-08
Jul-09
PET & Intermediates DOM SBM DEL C/LB

Crude Oil-Brent Cur. Month F OB U$/BBL
Source: CEIC
Section D: Regional Comparisons
Chart 14:: F&B sales growth in China, HK, and Singapore
80% Strong growth momentum for all markets. China, HK, and
Singapore all posted strong growth of F&B sales in Jan-Feb10.
60%
However, the trend clearly shows that growth in China has
40% superseded more mature markets like Singapore and HK in the past
several years.
20%
0%
-20%
-40%
Jan-08
Apr-08
Oct-08
Jan-09
Apr-09
Oct-09
Jan-10
Jul-08
Jul-09
China HK Singapore
Chart 15:: CPI of food in China, HK, Thailand and Singapore
125 Soaring CPI in China. Since mid-09, CPI of food in China posted the
120 strongest growth amongst major markets in Asia partly due to
extremely abnormal weather conditions during that period. For
115
Singapore, the CPI should creep up to follow the other countries
110
given that it imports most of its food items. CPI of food in Thailand
105
is rising led by the meat products price hike due to supply cut and
100 recovering consumption.
95
90
Jan-08
Apr-08
Oct-08
Jan-09
Apr-09
Oct-09
Jan-10
Jul-08
Jul-09
HK Singapore
Thailand China
Source: CEIC
Page 32
Healthcare
SUB SECTOR - HEALTHCARE
Page 33
Healthcare
HEALTHCARE drawn foreign patients back. We expect strong earning

growth from Bumrungrad in 1Q10 as patient volumes is
Andy Sim, andysim@dbsvickers.com expected to grow 5% y-o-y, while revenue per head increased
Juliana Ramli, juliana@hwangdbsvickers.com.my 6% y-o-y in 1Q10, led by higher intensity treatments (+4%)
Nalyne Viriyasathien, nalynev@th.dbsvickers.com and an increase in average price (+2%) since the beginning of
the year. However, we expect 2Q10 to contract due to rising
• Singapore counters outperformed on Fortis
political uncertainties in Thailand, but the degree would
Healthcare’s premium valuation paid for 23.8%
depend on how long the demonstration lasts.
stake in Parkway
• Operations should continue to pick up on rising
Action/ Key Pick:
visitor arrivals, economic recovery
Faber Group is our key pick. Faber is an underappreciated,
• Positives priced in with Singapore counters trading well-managed GLC which is 34%-owned by Khazanah
near or above average valuations Nasional. It trades at CY11F PE of 7.6x (ex-cash) on the back
• Key pick – Faber Group (TP: RM$3.55) of 10.6% 3-year EPS CAGR in spite of a regulated concession
business, 1.3x FY11F BV, with ROEs of c.19-20% and strong
Performance review: balance sheet (net cash 34.5 sen per share). It is also a proxy
Boosted by new substantial shareholder paying premium to the resilient healthcare industry where the renewal of its
valuations for Parkway. Singapore Healthcare players concession in Oct 2011 will give another 15 years of solid
posted strong share price gains, with Fortis Healthcare’s earnings visibility, in our view. Meanwhile, its strong franchise
(FHG) acquisition of Texas Pacific Group’s (TPG) 23.8% locally has enabled it to export its expertise overseas to two
stake in Parkway at S$3.56/share or 14% premium to last key markets – Middle East and India.
closing price before the announcement. This lifted
optimism on other healthcare players, such as Raffles Maintain FV on Parkway on premium valuations. Valuation
Medical, which together with its strong 4Q09 results rose gap has widened on optimism of Singapore counters with
c.25% in Mar. We had upgraded Raffles Medical to Buy FHG’s investment in Parkway. On the other hand, political
with a TP of S$1.75 on 2 Mar. Share price of Bumrungrad concerns in Thailand continue to cap gains for Thai players.
Hospital, on the hand, stayed relatively flat versus its We believe valuations for Parkway have priced in its positives,
Singapore peers due to political concerns arising from along with strong response to the sale of its medical suites.
rally by the “red shirts”. We maintain our Fully Valued call and TP at S$2.. FHG has
increased its stake in Parkway to 24.8%, from 23.8%, from
Industry outlook: open market purchase. We believed this could be the support
Admissions expected to trend up, but within estimates. for Parkway’s share price in recent weeks. At this point, a
Private hospital admissions in Singapore saw a strong move towards a general offer looks remote in our view.
surge in Jan with a 10.7% yoy growth, which seems to be
backed by the recovering economy as well as a low base Catalyst:
effect in Jan’09. Lunar New Year occurred in Jan last year. In 2Q, we should see lots of market talk on the strong take up
Traditionally, locals shun hospitals during the festive of Parkway’s medical suites and the expected launch of
season. Operationally, we expect to see continued uptick subsequent phases. We have assumed an ASP of S$4,000 psf
in hospital admissions along with firmer signs of the for the whole project. The market is generally expecting a
economic recovery. price of about S$3,800 psf, which we believe has been priced
in. However, if this exceeds expectations by a wide margin (ie
Earnings growth in 2Q but do not expect significant
north of S$4,000 psf), we will be proven wrong and will be a
upward earnings forecast revision, if any. We expect to
positive catalyst to the share price.
see earnings growth for Parkway Holdings and Raffles
Medical, especially in 1Q10 results. But, we believe it
Rising political tension in Thailand remains the key risk for
should fall within our expectations. We expect newsflow
Bumrungrad Hospital as over 50% of its top line contribution
on strong sales of Parkway’s Novena medical suites, but
is from foreign patients. Local patients volume is also
we believe this has been largely priced in.
impacted, as the red shirts demonstration in central of
Bangkok is where the Bumrungrad hospital is located, causing
1Q10 patient volume in Thailand remains strong, but
local patients to seek treatment at other hospitals. Entering
2Q10 should weaken. Patient volume has been improving
Apr10, patient volume is starting to soften with a slight
during Jan-Mar10 due to recovering economy and easing
negative y-o-y growth.
political uncertainties at the beginning of the year have
Page 34
Healthcare
Earnings Valuation

(US$ m) (%) (US$ m) (%) (%) (US$ m) (%) (US$ m) (US$) (%) (%)
2006A 1,162 - 197 - - 173 - 119 0.03 - -
2007A 1,233 6.1 208 5.6 - 375 116.8 170 0.04 43.4 -
2008A 1,298 5.3 202 -3.1 - 173 -53.9 150 0.04 -11.7 -
2009E 1,415 9.0 225 11.7 - 243 40.7 173 0.04 14.8 -
2010F 1,584 12.0 272 20.6 16.8 280 15.3 209 0.05 21.0 -8.3
2011F 1,880 18.6 369 35.8 -11.2 378 34.8 286 0.07 37.1 -14.1

(US$ m) (%) (%) (x) (x) (US$ m) (US$) (%) (x) (x) (x)
2006A 269 17.0 - 10.8 0.5 108 0.2 2.97 35.4 7.3 16.6
2007A 304 16.9 24.7 11.3 0.1 456 0.3 3.99 24.7 5.3 14.0
2008A 274 15.5 14.0 18.0 0.4 -849 0.5 1.22 27.9 3.1 17.1
2009E 312 15.9 11.9 44.4 0.3 169 0.6 1.10 24.3 2.7 14.7
2010F 360 17.1 12.9 52.9 0.2 68 0.6 2.47 20.1 2.5 12.7
2011F 462 19.6 15.9 73.0 0.2 181 0.7 3.50 14.7 2.2 9.7
Stock Performance
(US$)
Bumrungrad Hospital 677 16.1 -3.2 3.4 7.1 24.5 -0.6 -16.5 -21.6 -98.3 0.8
Faber Group 262 6.2 0.4 42.3 125.2 139.2 3.0 22.3 96.5 16.4 1.7
Parkway 2,636 62.7 -3.5 21.9 31.0 195.6 -0.9 1.9 2.3 72.8 1.2
Raffles Medical 627 14.9 0.6 25.2 24.3 83.7 3.2 5.2 -4.4 -39.1 0.6
Healthcare Equipment & Svs 4,202 100.0 -2.6 20.0 28.7 122.8 1.1
Financial Ratios
2010F 2011F 2010F 2011F 2010F 2011F 2010F 2011F 2010F 2011F 2010F 2011F
(x) (%) (x) (%) (x) (%)
Bumrungrad Hospital 15.6 15.0 17.2 4.0 3.5 3.1 23.9 22.1 8.7 8.2 3.3 3.5
Faber Group 9.7 8.8 14.2 9.9 1.8 1.6 20.3 19.0 4.3 3.6 2.0 2.2
Parkway 25.1 15.4 24.9 62.5 2.3 2.1 9.4 14.0 17.3 11.8 2.3 3.7
Raffles Medical 18.9 15.5 20.0 21.9 3.1 2.7 17.2 18.6 12.3 9.6 2.0 2.3
Healthcare Equipment & Svs 20.1 14.7 21.0 37.1 2.5 2.2 12.9 15.9 12.7 9.7 2.5 3.5
Source: DBS Vickers
Page 35
Healthcare
Section B: Charts
Chart 1: Share price performance YTD
Faber the star, up >40% YTD. The market has started to realize
70%
Faber's potential following its sterling 4Q09 results, which was driven
60%
by the overseas business. This had led in share price to jump by 41%
50% YTD. However, we think it is still early days. It still trades at
40% compelling CY11F PE of 7.3x (ex-cash) and 1.3x FY11F BV. The
announcement of Fortis Healthcare Group as a new substantial
30%
shareholder at S$3.55/share on 12 Mar provided catalyst for the
20%
Parkway and Singapore healthcare players. Bumrungrad has under-
10% performed, in part due to political uncertainty, which is expected to
0% affect foreign patient admissions. Recently, we noticed more interest
J an-10 F eb-10 Mar-10 Apr-10 in smaller hospital players such as Raffles Medical given its robust
-10%
growth profile, and as investors look for alternatives to Parkway due
-20%
to its high valuations.
Parkway Raffles Medical Bumrungrad Faber
Source: Bloomberg
Chart 2: Singapore Private Hospital Admission & yoy growth (%)

10.7% growth in Jan on low base. Private hospital admissions in
Singapore Priv ate Hospital Admission & y oy growth (%)
Adm (000's) y oy gth (%) Singapore surged by 10.7% in Jan on recovering outlook, coupled
10 15%
with a low-base effect last year. The Lunar New Year fell in Jan in
10%
2009, but was in Feb in 2010. Traditionally, locals avoid hospital
9 admissions during the festive season. Going forward, we expect to see
5% some moderation in Feb, but upside trend is expected to continue. In
recent discussions with local healthcare operators, they continue to
8 0%
remain optimistic and believed the worst is over .
-5%
7
-10%
6 -15%
J an-05 J an-06 J an-07 J an-08 J an-09 J an-10
Pte Sector Hospital Adm (000's)
Source: Singstats Pte Hos Adm y oy gth (%) [RHS]
Chart 3: Singapore & Thailand Visitor Arrivals
V isitor arriv als (000s) y oy gth (%) Strong growth in Jan, but could see moderation in Thailand in 1Q’10.
1,800 60% Visitor arrivals are picking up from the low achieved in May’09. Based
1,600 50% on Jan’10 figures, visitor arrivals continued its uptrend. We believe the
1,400 40%
strong surge in Singapore’s visitor arrivals resulted partly from the
1,200 30%
1,000 20%
opening of the Resorts World Sentosa (RWS). In Thailand, visitor
800 10% arrivals started to turnaround since Sep 09 along with pick up in travel
600 0% demand amid economic recovery and also resulting from a low base
400 -10% effect in 4Q08 where there were yellow shirts rally and forced airport
200 -20%
closure. Feb10 visitor arrivals continued to improve, jumping 41% y-o-
0 -30%
y to 1.6m. But, with the red shirts rally now ongoing again, we expect
06
Ja 7
08
09
M 9
10
06
M 7
M 8
6
9
0
0
a moderation of visitor arrivals into Thailand at least in Apr-May10,

-0
-0
-0
-0
p-
p-
p-
p-
n-
n-
n-
n-
n-
ay
ay
ay
ay
Se
Se
Se
Se
Ja
Ja
Ja
Ja
M
SGP visitor arrivals (000's) TH visitor arrivals (000's) which may impact international patient admissions in 2Q10.
SGP visitor arrivals y oy gth (%) TH visitor arrivals yoy gth (%)
Source: CEIC, Bank of Thailand, STB, DBSV ickers
Page 36
Healthcare
Chart 4: Quarterly revenue growth

Gth y oy (%) Rev enue growth y oy (%) Revenue growth picking up on sequential basis. We are witnessing
35%
yoy revenue growth for the companies picking up speed since 4Q09,
30%
as a result of further signs of economic recovery and due to low base
25%
effect in 4Q08 (during the onset of the financial crisis). Noteworthy is
20%
the pick up in revenue growth by Raffles Medical and Bumrungrad,
15%
which registered a 4Q growth of above 10%, as a result of a pick up
10%
in their respective domestic markets. Parkway’s revenue also grew by
5%
c.9% in 4Q, led by its international operations and Singapore
0%
healthcare division.
-5%
07
07
07
07
08
08
08
08
09
09
09
09
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
-10%
-15%
-20%
Raffles Medical Parkway Bumrungrad Hospital
Source: Companies, DBSV ickers
Chart 5: PBIT trends, 4qtrs moving average

PBIT margin (%) PBIT margin (%) Mov ing Av erage (4qtrs) Margins show stable or upward trend, with Raffles Medical
25.0
outperforming others. The moving average operating margins trend
shows divergence in margin trend, particularly between Parkway and
20.0
Raffles Medical. Raffles Medical continued their upward moving
15.0 average trend in 4Q09 as operations grew and the Group registered a
robust 4Q topline growth of 13%. Parkway’s margins, on the other
10.0 hand, dipped slightly with stronger contributions from its international
hospital and Singapore healthcare operations, which have lower
5.0 margins vis-à-vis its Singapore hospital operations.
0.0
05
05
06
06
07
07
08
08
09
09
1Q
3Q
1Q
3Q
1Q
3Q
1Q
3Q
1Q
3Q
Raffles Medical Parkway Bumrungrad Hospital
Source: Companies, DBSV ickers
Chart 6: Parkway Revenue per Adjusted Patient Day

Net rev enue PAPD (S$) Parkway’s PAPD relatively stable yoy. In 4Q09, Parkway’s revenue per
2,000 adjusted patient day (PAPD) in Singapore dipped marginally by 5% on
a qoq basis to S$1,811, but registered a marginal increment of 0.6%
1,500 on a yoy basis. The qoq drop probably reflects the seasonality where
doctors scale back on higher revenue intensity surgeries during the
1,000
year-end holiday season. Going forward, we believed PAPD should
show some upward trend as the economy recovers.
500
0
07
07
07
07
08
08
08
08
09
09
09
09
4Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q
SGP Net Rev enue PAPD (S$)

SEA Net Rev enue PAPD (S$)
South Asia Net Rev enue PAPD (S$)
Source: Company, DBSV ickers PAPD = Per Adjusted Patient Day
Page 37
Healthcare
Chart 7: Parkway SGP Admissions, Day cases, Avg Occupancy
Cases Occupancy (%) Inpatient admissions offset partially by day cases. Occupancy for
13,000 68% Parkway’s Singapore hospitals reached c.58% in 4Q09. This arose
12,000 66% from seasonality, as doctors, and patients alike, scaled back on non-
11,000 64%
urgent surgeries in view of the holiday season. This was however
62%
10,000 partially offset by higher day surgeries performed.
60%
9,000
58%
8,000 56%
7,000 54%
6,000 52%
07
07
07
07
08
08
08
08
09
09
09
09
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
Parkway SGP admissions No. of day cases

Av g Occupancy (%) [RHS]
Source: Company, DBSV ickers
Chart 8: Bumrungrad Hospital Inpatient & Outpatient Admissions

Higher international patient volume. International patient volumes
'000 patients '000
had been falling y-o-y since the start of 2009 amid the global
140,000 4,000 downturn and political tension in Thailand. But it grew y-o-y for the
120,000 3,500 first time in 4Q09 following six consecutive quarters of declines.
100,000 3,000 Foreign outpatient volume jumped 10% y-o-y and 5% q-o-q to
2,500
80,000 101,820 patients, while inpatient volume jumped 13% and 12% q-
2,000 o-q to 3,346 patients, in 4Q09. This was attributed to easing
60,000
1,500 political tension in Thailand, while the global economic recovery also
40,000 1,000 triggered a recovery in the number of patients. However, Thai
20,000 500 patient volume remained flat in 4Q09. But we expect volume of Thai
0 0 patients to improve gradually following BH’s ongoing marketing
1Q06
2Q06
3Q06
4Q06
1Q07
2Q07
3Q07
4Q07
1Q08
2Q08
3Q08
4Q08
1Q09
2Q09
3Q09
4Q09
campaign and exhibitions, and the success of its ‘Healthy Living

Club’ customer loyalty program.
OPD IPD (RHS)
Chart 9: Bumrungrad Hospital Revenue per patient head
'000 patients '000 Growing revenue per patient. Revenue per head at Bumrungrad
grew 8% y-o-y for Outpatient and 9% for Inpatient in 4Q09, led by
46,000 5,400
higher intensity treatments (+6%) and an increase in average price
44,000 5,200 (+2%) since the beginning of the year (Medical service fee is set to
42,000 5,000 increase 2% p.a.).
40,000 4,800
38,000 4,600
36,000 4,400
34,000 4,200
1Q08
2Q08
3Q08
4Q08
1Q09
2Q09
3Q09
4Q09
Inpatient Outpatient (RHS)
Page 38
Media
SUB SECTOR - MEDIA
Page 39
Media
MEDIA Adspend in Hong Kong is expected to post a solid rebound,

Andy Sim, andysim@dbsvickers.com growing double-digit y-o-y in 1H10 along with economic
Mavis Hu, mavis_hui@hk.dbsvickers.com recovery from a low base. However, operating environment
Chirasit Vuttigrai, chirasit@th.dbsvickers.com
for the print sector could stay competitive, amid
more players from free newspaper operations since a few
• General expectation is for advertising revenue to pick up years back as well as the rise of successful free dailies such
further during the year on the back of economic recovery as "Headline Daily" operated by Sing Tao [1105 HK].
• Events such as the World Cup, World Expo and Integrated
Resort opening in Singapore should fuel spending China has seen relatively more resilient performance in the
media sector, with adspend rising c.13.5% y-o-y in 2009
• Escalation of political tension in Thailand could weigh
and continues to grow at a double-digit rate YTD, amid
down on consumer sentiment there
government stimulus packages to sustain domestic
• Pico Far East is our top pick for its earnings rebound and consumption, thus prompting advertisements.
potential re-rating
Action/ Key Pick:
Performance review: Our top pick is Pico Far East on the back of its earnings
Astro outperformed on privatization offer. Share price of the rebound and potential re-rating opportunity. We believe the
regional media counters under coverage were generally flat market has yet to fully price in its strong earnings growth.
YTD. The significant outperformance was from Astro, which We expect to see a 44% jump in earnings in FY10F after a
received a privatization offer at RM4.30/share from its major 27% decline in FY09. The impending World Expo in
shareholders and parties acting-in-concert. Shanghai, new integrated resort facilities in Singapore and
numerous mega events should spur growth. Over the years,
Industry outlook. Pico’s share price has peaked at >20x forward rolling PE and
In Singapore, we expect media spending to pick up steam in c.4x P/B. Currently, the stock is trading at c.11x PE and
ensuing quarters. This is on the back of further recovery in offers a 5% yield underpinned by its c.HK$500m net cash
the economy, coupled with more media-worthy activities position, and see ample room for re-rating of our TP of
ahead. In particular, we have the opening of the second HK$1.97.
integrated resort (Marina Bay Sands), Great Singapore Sale,
Youth Olympics, additional retail space, property launches Catalyst: Tension in Thailand, World Expo in Shanghai
etc. The upward revision of Singapore Ministry of Trade & The political tension in Thailand could weigh as a negative
Industry’s (MTI) official GDP forecast to 7%-9%, following a catalyst. A prolonged tension in the current episode could
strong 1Q10 growth, should spur consumer sentiment and weigh down further on sentiment, and in turn, affect media
further add to media spend. spend in 2Q, which is traditionally a high season.
Following the economic recovery, Thailand’s overall monthly Impending Expo event in China, which last for 6 full months
ad spending growth has turned positive since Aug 2009. from May to Oct 2010, should drive adspend growth
The y-o-y growth accelerated in 4Q09 due to a low base in Shanghai and peripheral areas this year. On the other
effect. The momentum remained strong with ad spending hand, the situation was a replicate of 2008 Beijing Olympics,
growth of 9% in 2M10. This is pretty much in line with our whereby selective outdoor media such as billboard and LED
forecast of 8-10% in 2010, after a contraction of 1.9% in advertisements have been cleared and banned from
2008 and 0.7% in 2009. In our view, the market focus is operations as the government cleans up the streets of
now on companies which are likely to report strong 1Q10F clutter in Shanghai.
results. MCOT’s 1Q10F earnings should be outstanding.
Page 40
Media
Earnings Valuation

(US$ m) (%) (US$ m) (%) (%) (US$ m) (%) (US$ m) (US$) (%) (%)
2006A 3,124 - 816 - - 907 - 695 0.06 - -
2007A 3,385 8.3 913 11.9 - 994 9.6 823 0.07 18.4 -
2008A 3,739 10.5 985 7.9 - 907 -8.7 810 0.07 -1.5 -
2009E 3,744 0.1 944 -4.2 - 650 -28.3 659 0.05 -18.7 -
2010F 4,000 6.8 1,077 14.1 13.9 1,033 59.0 790 0.06 19.8 0.0
2011F 4,165 4.1 1,068 -0.8 11.7 994 -3.8 764 0.06 -3.3 11.7

(US$ m) (%) (%) (x) (x) (US$ m) (US$) (%) (x) (x) (x)
2006A 1,015 26.1 - -16.1 -0.2 646 0.3 5.49 17.9 3.3 11.5
2007A 1,132 27.0 21.1 -8.0 -0.3 802 0.4 5.39 15.1 3.1 9.9
2008A 1,224 26.3 20.3 -22.3 -0.2 728 0.3 5.57 15.3 3.1 9.5
2009E 1,206 25.2 17.3 16.4 -0.1 460 0.3 4.66 18.9 3.4 10.0
2010F 1,377 26.9 20.9 231.9 -0.1 618 0.3 4.92 15.7 3.2 8.9
2011F 1,357 25.6 19.4 43.2 -0.1 799 0.4 5.04 16.3 3.1 9.0
Sto ck Perfo rm an ce
M a rk e t R e tu rn E xc e ss R e tu rn
Cap W e ig h t 1M 3M 6M 12M 1M 3M 6M 12M BETA
(U S $ )
B ro a d ca stin g & E n te rta in m e n t
A stro 2,592 20.9 -0.2 30.9 24.0 61.8 -5.1 18.4 12.6 17.3 1.1
TV B 2,176 17.5 3.3 5.3 1.6 31.7 -1.6 -7.2 -9.7 -12.8 0.6
BEC W orld 1,418 11.4 -2.5 -1.3 10.3 24.3 -7.3 -13.8 -1.0 -20.2 0.9
M COT 487 3.9 -1.7 -2.6 0.4 64.0 -6.6 -15.1 -10.9 19.5 1.0
M ajor C ineplex 234 1.9 -5.0 -7.1 12.6 33.9 -9.9 -19.6 1.2 -10.7 1.1
M e d ia A g e n c ie s
Pico Far East 244 2.0 13.4 -1.2 5.2 93.0 8.6 -13.7 -6.1 48.5 1.1
W orkpoint Ente rtainm ent 41 0.3 -2.2 -2.2 0.8 33.0 -7.0 -14.7 -10.6 -11.5 0.8
P u b lish in g
N e xt M edia 435 3.5 34.8 39.8 46.6 39.8 29.9 27.3 35.2 -4.7 0.9
SPH 4,793 38.6 9.7 13.8 9.5 46.5 4.8 1.3 -1.9 2.0 0.6
M e d ia 1 2 ,4 2 0 1 0 0 .0 4 .8 1 2 .5 1 1 .4 4 4 .5 0 .9
Fin an cial R atio s

PE E P S G ro w th P /B ROE E V /E B IT D A D ivid e n d Y ie ld
2010F 2011F 2010F 2011F 2010F 2011F 2010F 2011F 2010F 2011F 2010F 2011F
(x) (% ) (x) (% ) (x) (% )
B ro a d ca stin g & E n te rta in m e n t
A stro 29.3 32.3 78.0 -9.2 9.3 8.9 33.3 28.1 11.1 11.8 2.4 2.6
TV B 16.8 14.8 11.8 13.1 2.7 2.5 16.8 17.7 8.8 7.8 3.7 4.2
BEC W orld 14.9 13.4 11.6 11.3 6.5 6.3 43.2 47.8 6.7 6.2 5.9 7.3
M COT 11.1 10.4 8.0 6.3 2.0 2.0 18.6 19.2 5.0 4.5 9.3 8.1
M ajor C ineplex 16.5 11.6 94.9 41.5 1.4 1.4 8.7 12.2 5.4 4.6 5.5 7.8
M e d ia A g e n c ie s
Pico Far East 10.6 8.6 44.4 23.1 1.8 1.6 17.8 19.9 4.7 3.6 4.8 5.9
W orkpoint Ente rtainm ent 11.5 10.5 58.1 9.3 1.3 1.2 11.5 12.0 4.0 3.4 5.8 6.4
P u b lish in g
N e xt M edia 12.5 11.9 4.7 5.3 1.0 0.9 8.3 8.0 6.3 5.0 0.0 0.0
SPH 13.4 16.2 15.6 -17.3 3.1 3.1 23.2 18.9 10.4 12.5 6.5 6.0
M e d ia 1 5 .7 1 6 .3 1 9 .8 -3 .3 3 .2 3 .1 2 0 .9 1 9 .4 8 .9 9 .0 4 .9 5 .0
Source: DBS Vickers
Page 41
Media
Section B: Charts
Chart 1: GDP yoy growth
Positive GDP growth a key proxy for media spending. After
15.0
registering negative yoy growth for most part of 2009, all the
CN countries shown are expected to revert back to positive growth. This
10.0
reflects an improving economy and growing consumer sentiment.
5.0 ID We expect the media industry to benefit from this trend as
TH
MY HK companies will look to increase their marketing budget in line with
0.0 the growing optimism. Going forward, we expect confirmation of
the sustainability of the recovery to further fuel media spending.
08
09
10
08
09
10
8
0
08
09
10
-0
-0
-1
p-
p-
p-
c-
c-
c-
-5.0
n-
n-
n-
ar
ar
ar
Se
Se
Se
De
De
De
Ju
Ju
Ju
M
CN
-10.0 SG
-15.0
CN HK ID MY SG TH
Source: DBS
Chart 2: SGP - Newspaper Ad Spend chg (%) & GDP chg (%)
y-o-y chg (%) Expect further rises in newspaper ad spend. With the strong GDP
30 growth in 1Q10 and the government’s full year revision on growth,
Adex
we expect newspaper ad revenue to pick up further from 1Q and
20
register a high-teen yoy growth in 2Q before normalizing back
10
nearer in 4Q.
GDP
0
1Q 8
1Q 0 9
1Q 3
1Q 4
1Q 5
1Q 6
1Q 7
1Q 3
1Q 4
1Q 5
96
1Q 7
98
1Q 9
00
1Q 1
1Q 2
f
10
0
0
0
0
0
0
9
9
9
0
0
1Q
1Q
1Q
1Q
(10)
(20)
(30)
Adex yoy growth (%) GDP yoy growth
Source: Singstats, Nielsen Media Research, DBS, DBSV ickers
Chart 3: SGP - Ad Spend by media types
S$m Total Ad spend in Singapore should pick up. While total ad spend on
250 all media types seems to be in state of decline after crossing S$200m
mark in Nov’09, this is largely due to seasonality effects – companies
200
tend to pace their marketing spend during the earlier parts of the
150 calendar year. As expected, total ad spend grew by 17% yoy in Mar.
100
50
0
J an- Apr- J ul- Oct- J an- Apr- J ul- Oct- J an-
08 08 08 08 09 09 09 09 10
Newspapers TV Radio Magazines
Posters Bus/Taxi Cinema Internet
Source: Nielsen Media Research, DBSV ickers
Page 42
Media
Chart 4: SGP - Nielsen Media Display & Classified AdEx (excl.

Today)
Display classifieds AdEx continue to register growth, in line with
70 23% yoy
F Y10 GDP. Singapore’s newspaper ad expenditure (AdEx) for display and
65 growth for Mar
classifieds for SPH papers in Mar'10 amounted to S$65m, a 23%
60 increase yoy. The dip in Feb after the strong 26% yoy growth in Jan,
55 was due to the Chinese New Year seasonality. Traditionally, ads do
AdEx (S$m) .
F Y09 taper off during the CNY week. CNY fell on 14 Feb this year, while it
50
45
occurred on 26 Jan in 2009. YTD (Sep-Mar period), AdEx registered
F Y99 (Trough) a 8.9% growth. Seasonality aside, we expect to see sequential
40
growth in AdEx in the ensuing months on the back of media
35
activities (IR), Youth Olympic Games, property launches, and pick up
30 in employment.
Sep Oct Nov Dec J an F eb Mar Apr May J un J ul Aug
Month
F Y99 F Y09 F Y10
Chart 5: SPH and FOEX newsprint costs
US$/mt Newsprint creeping up towards US$600/mt. Newsprint spot price is

1000 1000
rising from the low under US$500/mt towards US$580/mt due to
900 900 rise in pulp price. This is, however, nowhere near the US$800/mt
800 800 levels we saw back in late 2008. Newsprint accounts for c.16% of
SPH’s total cost. Based on our model, a US$50 change in newsprint
700 700
costs (all other assumptions constant) will impact SPH's bottomline
600 600 in FY10F/11F by c.1.6%. We have assumed newsprint price of
500 500 US$580/mt for FY10F and US$600/mt for FY11F. Note that SPH
400 400 does 3-6 month forward purchase for its newsprint.
300 300
J an-06 J an-07 J an-08 J an-09 J an-10
SPH newsprint charge out rate (US$/mt)
FOEX Newsprint Spot Index (US$/mt)
Source: Bloomberg, Company
Chart 6: HK - Share of Ad Spend by Media types
Magazine Outdoor Steady ad spend growth in HK in 2010. Total adspend in Hong Kong
15% 11% went up 5.9% y-o-y to US$26.5bn in 2009. HK4As forecasted that
Radio media agencies would slowly increase their rate cards in 2010 and
5% give less discounts after this year’s economic bounce. The
association believes that 1H10 could see a double-digit adspend
increase on a low base, while a steady growth could be seen for the
full year of 2010.
Newspapers
30%
Television
35%
Digital
4%
Source: Association of Accredited Advertising Agencies (HK4As)
Page 43
Media
Chart 7: HK - 2009 Ad revenue growth by media types
%y-o-y Outdoor adspend registered strong 32% growth due to lower cost
35 (in absolute terms) of advertising. In 2009, outdoor and radio
30 adspend saw the best growth, up 32.4% and 27.0% respectively,
25
followed by television (up 7%) and digital (up 7%). All figures
20
include discounts offered by media agencies. The growth in outdoor
15
10 and radio adspend was mainly attributable to budget cuts of
5 marketers due to the high cost of other media including television.
0
-5
-10
e
l
io
on
or
ita
in
er
ad
do
si
ig
az
ap
vi
R
D
ut
ag
le
sp
O
Te
M
ew
N
Source: Association of Accredited Advertising Agencies (HK4As)
Chart 8: Thailand Consumer Confidence Index

Thailand’s Consumer Confidence Index (CCI) dropped from 79.3 in
120
Jan 2010 to 78.4 in Feb, and further to 77.3 in Mar due to a
110 concern on (i) political tension, (ii) high oil price and (iii) perceived
100 high cost of living.
90 In our view, the consumer confidence should soften further in Apr
due to the escalated political tension.
80
70
60 CCI of Overall economy
CCI of future employment
50
CCI of future income
40
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Chart 9: Thailand Monthly Ad Spending
Btbn Ad spending % Thailand’s overall monthly ad spending continued to rise in Jan 2010
9 Growth y-o-y (RHS) 15 (5.7%) and Feb (10.7%). The overall ad spending growth of 9% in
2M10 is pretty much in line with our forecast of 8-10% in 2010.
10 Although the ad spending would soften in Apr 2010 due to the
8
escalated political tension, following the demonstration, we believe
5 the growth y-o-y would remain in positive territory due to the low
7 base effect.
0
6
-5
5 -10
Jan-07
Apr-07
Oct-07
Jan-08
Apr-08
Oct-08
Jan-09
Apr-09
Oct-09
Jan-10
Jul-07
Jul-08
Jul-09
Page 44
Media
Chart 10: Thailand Ad spend market share by Channels
100% In line with the audience market share figures, the ad spending
market share of BEC’s Ch3 improved in Jan and Feb 2010, while Ch7’s
80% ad spending share softened during the same period. Also in line with
the audience share numbers, ad spending market share of MCOT’s
60% TPBS Ch9 softened slightly in Jan and Feb 2010.
NBT
40% Ch9
Ch7
20% Ch5
Ch3
0%
Sep-07
Sep-08
Sep-09
May-07
May-08
May-09
Jan-07
Jan-08
Jan-09
Jan-10
Source: Nielsen Media Research, DBSVickers
Chart 11: Thailand Audience Market Share by Channels
100% BEC’s Ch3 gained audience market share in Jan and Feb to 32.2%
and 30.0%, respectively. This was at the expense of Ch 7. Audience
80% market share of MCOT’s Ch9 slightly softened in Jan (9.9%) and Feb
TPBS (9.8%) 2010.
60% NBT
Ch9
40% Ch7
Ch5
20% Ch3
0%
S e p-07
S e p-08
S e p-09
M a y-07
M a y-08
M a y-09
Ja n-07
Ja n-08
Ja n-09
Ja n-10
Source: Nielsen Media Research, DBSVickers
Page 45
Personal/Household Goods
SUB SECTOR –
PERSONAL/ HOUSEHOLD GOODS
Page 46
PERSONAL/ HOUSEHOLD GOODS to improvement in store performance. More effort is

Patricia Yeung, patricia_yeung@hk.dbsvickers.com expected to be put in building brand equity, market
Alice Hui, alice_hui@hk.dbsvickers.com positioning / differentiation and distribution network
Patrick Xu, patrickxu@dbsvickers.com
management.
• Urbanization and rising living standards will boost

Business outlook for the broader export oriented household
demand for high quality products with strong brand
/ personal goods manufacturers will hinge on various
names
factors, including consumer sentiment in the US, economic
• Market leaders should be able to sustain margins on
recovery in the EU, raw material prices and appreciation of
better cost control measures and bargaining power
RMB.
• Prefer stocks with high cash levels in RMB and RMB
revenue streams to benefit from interest rate hikes and
Action/ Key Pick:
RMB appreciation
Our key pick for household / personal goods sector is
• Action: BUY Hengan for its leading market position,
Hengan, a market leader in personal care products
strong balance sheet and sustainable profitability; HTL
(including sanitary napkins, diapers and tissues). Despite
is another key pick.
over 40% jump in wood pulp prices in the past year,
Hengan was able to capitalize on its strong balance sheet
Performance review:
and has stockpiled low cost inventory for production for at
Share price performance of household / personal goods
least 5 months. To further alleviate margin pressure from
companies under our universe was a mixed bag in the past
hike in raw material prices, sales promotion and discount
quarter. Most of the counters were driven by results, such as
activities will be reduced. In the light of rising living
Li & Fung (up 18.4%), Li Ning (+27% from the trough) and
standards and disposable incomes in China, Hengan is
Yue Yuen (up 20%). Texwinca also performed well with
launching more high end products to enrich its product
18.2% gain on expectation of strong upcoming results after
portfolio and enhance its earnings quality.
stronger-than-expected results from Giordano. On the other
hand, worse-than-expected results from China Hongxing
We also like HTL International for its exposure to the global
and China Sports International triggered selling pressure,
recovery of consumer spending, especially in Europe and the
pushing down their share prices by 43.7% and 45.8%
US. With high correlation to housing starts, we expect sofa
respectively from recent peaks.
sales in Europe and the US to have bottomed out and are
now on an upward trend, underpinning the company's
Industry outlook. We believe domestic household / personal
earnings growth going forward. We appreciate the
goods manufacturers will continue to benefit from
management's rich experience in the business, as evidenced
supportive government policy in boosting domestic
by their nimble restructuring during the downturn, where
consumption as well as accelerating rate of urbanization.
less efficient operations were timely disposed of and
These, coupled with robust domestic economic growth, will
business segments were vertically integrated. The counter is
enhance overall living standards, leading to stronger
trading at 6x current P/E, whilst offering a decent yield of
demand for household / personal goods. This view is
5%.
enforced through the continuous uptrend in retail sales of
daily use goods. In fact, retail sales growth of daily use
Catalysts:
goods has always been stronger than the overall retail sales
In 2Q, we expect market attention will shift to interest rate
growth in China. While rising raw material prices and labour
hikes in China and RMB appreciation. Investors may look for
costs are possible concerns, we believe market leaders with
cash rich companies with upside from the RMB
stronger bargaining power are in a better position to adjust
appreciation. Hengan is certainly on this list. It had net cash
selling prices.
of over HK$2bn, a large part in RMB as at end-FY09. In
addition, procurement of wood pulp is settled in US$.
For sportswear brands in China, the market’s focus will likely
Hence, Hengan is a beneficiary of RMB appreciation.
be on the pace in which inventory within the distribution
Hengan has underperformed the market by 10.2% in the
channels are cleared. This build up in inventory was the key
past quarter. We believe it will catch up in 2Q given its solid
problem for the slower growth by brand owners last year.
fundamentals.
After aggressive discounts, Nike is understood to have
solved most of this problem, but Adidas is apparently still
sitting on relatively high inventory. As for local players,
market attention has now shifted from network expansion
Page 47
Earnings Valuation

(US$ m) (%) (US$ m) (%) (%) (US$ m) (%) (US$ m) (US$) (%) (%)
2006A 15,679 - 1,042 - - 1,086 - 963 0.06 - -
2007A 20,134 28.4 1,346 29.2 - 1,352 24.6 1,135 0.08 17.8 -
2008A 24,332 20.9 1,470 9.2 - 1,497 10.7 1,227 0.08 8.1 -
2009E 24,028 -1.2 1,753 19.3 - 1,725 15.2 1,560 0.10 27.1 -
2010F 28,790 19.8 2,159 23.1 -0.8 2,144 24.3 1,881 0.12 20.6 5.0
2011F 34,299 19.1 2,701 25.1 -5.6 2,708 26.3 2,347 0.16 24.7 5.6

(US$ m) (%) (%) (x) (x) (US$ m) (US$) (%) (x) (x) (x)
2006A 1,367 6.6 - 18.6 0.1 -76 0.2 1.38 41.7 8.4 29.7
2007A 1,659 6.7 20.3 13.7 0.1 -204 0.2 1.75 35.4 6.3 24.6
2008A 1,906 6.0 17.6 12.2 0.1 -184 0.2 1.80 32.7 5.3 21.6
2009E 2,253 7.3 18.7 19.2 0.0 1,754 0.2 2.22 25.7 4.4 17.7
2010F 2,686 7.5 19.7 19.6 -0.1 1,180 0.3 2.80 21.3 4.0 14.8
2011F 3,281 7.9 22.1 25.4 -0.1 1,720 0.3 3.56 17.1 3.6 11.9
Stock Performance
Clothing & Accessories

Li & Fung 18,578 46.3 4.8 25.4 14.7 94.8 1.1 6.2 -3.0 6.6 0.8
Texwinca 1,467 3.7 1.9 29.3 17.3 87.8 -1.8 10.1 -0.4 -0.3 0.7
Durable Household Products
HTL International 256 0.6 -0.6 90.9 100.0 441.9 -4.4 71.7 82.2 353.8 1.0
Neo-Neon 657 1.6 -2.9 -11.2 6.2 197.8 -6.7 -30.4 -11.6 109.6 1.2
Footwear
China Hongxing 316 0.8 0.0 -28.2 -30.0 3.7 -3.8 -47.4 -47.8 -84.4 1.5
China Sports International 89 0.2 3.7 -24.3 -22.2 45.8 -0.1 -43.6 -40.0 -42.3 1.3
Li Ning 3,911 9.7 8.0 29.0 37.8 97.7 4.2 9.8 20.1 9.5 0.9
Yue Yuen 5,694 14.2 0.9 8.0 25.5 58.5 -2.9 -11.2 7.8 -29.6 0.6
Non-durable Household Products
Hengan 8,764 21.8 2.0 14.0 14.1 90.1 -1.8 -5.3 -3.7 1.9 0.6
Ming Fai 209 0.5 62.9 103.4 150.4 209.2 59.1 84.1 132.7 121.0 0.8
Pelikan International 205 0.5 -1.5 2.3 4.2 51.8 -5.3 -16.9 -13.6 -36.3 1.7
Household / Personal Goods 40,146 100.0 3.8 19.2 17.8 88.1 1.0
Financial Ratios
2010F 2011F 2010F 2011F 2010F 2011F 2010F 2011F 2010F 2011F 2010F 2011F
(x) (%) (x) (%) (x) (%)
Clothing & Accessories
Li & Fung 28.5 20.5 45.6 38.9 7.5 6.6 27.3 34.3 23.3 17.3 2.8 3.8
Texwinca 11.7 10.2 13.5 14.1 2.5 2.2 22.4 23.1 7.3 6.3 5.7 6.5
Durable Household Products
HTL International 6.2 5.4 14.9 15.3 1.3 1.1 21.9 22.0 4.5 3.9 4.9 5.7
Neo-Neon 25.5 14.4 43.0 77.1 1.5 1.4 6.0 10.0 13.0 9.2 1.0 1.8
Footwear
China Hongxing 18.2 13.3 -9.4 36.4 0.5 0.5 2.8 3.7 -3.9 -3.1 1.8 2.5
China Sports International 4.5 4.1 10.0 8.9 0.5 0.5 12.7 11.7 -0.6 -0.9 0.0 0.0
Li Ning 23.2 18.9 21.7 22.6 7.3 5.8 35.3 34.2 13.9 11.2 1.6 2.0
Yue Yuen 11.7 10.8 2.0 8.6 1.7 1.6 15.3 15.1 8.0 7.1 3.8 4.2
Non-durable Household Products
Hengan 28.4 23.1 11.2 22.7 6.8 6.0 25.2 27.6 19.5 15.6 2.2 2.7
Ming Fai 16.5 12.9 16.1 28.0 1.9 1.8 12.0 14.3 8.3 6.5 2.1 2.7
Pelikan International 9.2 7.3 104.6 25.3 0.8 0.7 10.3 10.4 7.5 6.3 1.8 2.2
Household / Personal Goods 21.3 17.1 20.6 24.7 4.0 3.6 19.7 22.1 14.8 11.9 2.8 3.6
Source: DBS Vickers
Page 48
Section B: Charts
Chart 1: China retail sales for enterprises above designated size* - Daily
Use Goods
RMB mn Yoy growth Sales growth of daily use goods remained strong at 36.7% in
Feb10, compared with overall retail sales growth of just 22.1%.
18,000 50%
16,000 45% To eliminate the impact from CNY, retail sales of daily use goods
14,000 40% of Jan-Feb registered a decent growth of 20%. We expect the
12,000 35%
sales uptrend to continue going forward.
30%
10,000
25%
8,000
20%
6,000 15%
4,000 10%
2,000 5%
0 0%
Feb-10
Feb-07
May-07
Feb-08
May-08
Feb-09
May-09
Aug-09
Aug-07
Aug-08
Nov-09
Nov-07
Nov-08
Daily Use Goods y -o-y Growth
*Note: Refers to enterprises with sales revenue of >RMB5m.
Chart 2: China retail sales of footwear (top 200 enterprises)
RMB m % Retails sales of footwear in China dropped 12.2% in Jan 10 due

4,500 100 to a high base last year and distortion from CNY sales. We expect
4,000 80 a stronger growth in Feb sales figure. Going forward, World Cup
3,500 in this summer may also stimulate footwear sales, particularly
60
3,000 athletic shoes.
2,500 40
2,000 20
1,500
0
1,000
500 (20)
0 (40)
Jan-07
Apr-07
Oct-07
Jan-08
Apr-08
Oct-08
Jan-09
Apr-09
Oct-09
Jan-10
Jul-07
Jul-08
Jul-09
China Retail Sales: F ootwear (LHS)

Yoy growth (RHS)
Chart 3: China retail sales of sports and recreation articles (top 200
enterprises)
RMB m % The retail sales trend of sports and recreational articles is not as
700 60 apparent as that of daily use goods. We reckon that it is more
600 50 sensitive to economic growth as it showed a slight slowdown
40 during 2008. We believe sales trend should look positive in 2010
500
30 amid strong GDP growth in China and Asian Games in
400 20
10 Guangzhou.
300
0
200
(10)
100 (20)
0 (30)
Jan-07
Apr-07
Oct-07
Jan-08
Apr-08
Oct-08
Jan-09
Apr-09
Oct-09
Jan-10
Jul-07
Jul-08
Jul-09
China Retail Sales: Sports and Recreation Articles (LHS)

Yoy growth (RHS)
Page 49
Chart 4: Sportswear brand order book growth
35% Decent growth has been recorded for most major sports brands in
China during the Q2/10 trade fair, indicating the worst should be
30% over for the industry. As the base effect wanes, further
25% acceleration in order book growth is likely in 2H10. In fact, initial
indications for the Q3/10 order book for major players have
20% appeared to confirm our view.
15%
10%
5%
0%
Q209 Q309 Q409 Q110 Q210
Li Ning Anta Dongxiang Xtep
Chart 5: Wood pulp prices
USD/ton After hitting the bottom in Q12009, wood pulp prices rebounded
substantially along with the economic recovery. The earthquake in
1,000
Chile also pushed up prices further. Despite this, tissue paper
900
manufacturers, such as Hengan and Vinda, have accumulated
800 some inventory when prices were low. This should help these
700 manufacturers to partly alleviate margin pressure.
600
500
400
300
Feb-07
May-07
Feb-08
May-08
Feb-09
May-09
Feb-10
Aug-06
Nov-06
Aug-07
Nov-07
Aug-08
Nov-08
Aug-09
Nov-09
NBSK ( Long fiber ) BHKP ( Short fiber )
Page 50
Retailers
SUB SECTOR – RETAILERS
Page 51
Retailers
FOOD RETAILERS solid plans for sales network expansion, leading Chinese food
Mavis Hui, mavis_hui@hk.dbsvickers.com retailers should see good earnings this year. Their earlier
efforts on store renovation and supply chain enhancement
• An inflationary environment strengthens pricing power should also start paying off, allowing further room to lift
for potential margin enhancement. overall operating efficiency.
• The worsening drought in China could provide further
room for retailers to justify price hikes. Key Pick: Beijing Jingkelong for value and growth
• Major players also likely to boost growth via Despite the recent share price rally across the region, we
acquisitions as industry consolidates further. continue to like the food retail sector for its strong growth
• We like Beijing Jingkelong (814.HK) for its attractive catalysts. We prefer Beijing Jingkelong for its valuation
valuation vs peers discount versus close peers. Given the significant portion of
revenue coming from its wholesale operations, we believe the
Performance review: China plays outperformed company is in a better position versus pure retailers to take
Share prices of grocery retailers saw a good rally in 1Q10 advantage of rising food prices by stocking up for sale at
along with an upward pricing trend across various food higher prices later on.
items. Broadly speaking, major retailers in China
outperformed the region amid their swift recovery and Catalyst: potentially repeating 1H08’s sound growth
strong outlook, with share prices of Wumart (8277.HK), We continue to see ample room for food retailers to grow in
Beijing Jingkelong (814.HK) and Lianhua Supermarket China underpinned by robust domestic consumption and low
(980.HK) rising by 30-40% for the quarter. Selective market penetration of food retailers. In 2Q10, we expect food
operators in other regions also saw decent share price retailers to report a good set of 1Q results due to an improving
performance, which included CP ALL (CPALL.TB, up 14%) operating environment and strengthening pricing power.
and Big C Supercenter (BIGC.TB, up 18%). Regional
players like Dairy Farm (DFI.SP) saw a mild performance, Rising food prices in coming months should help to boost top-
rising 11% in 1Q10. Overall, share prices of major food line growth and profitability, as food retailers & wholesalers
retailers in the region outperformed the 2.6% average operating on cost-plus strategies could largely pass on
increase across regional indices for Hong Kong, additional costs to end-customers. This happened during 1H08
Singapore, Malaysia, Thailand and Vietnam. and the situation could repeat itself, although not as severe, as
price increase for certain items such as oil and pork have been
relatively gradual vis-à-vis the surge experienced in early 2008.
Industry outlook: better growth momentum for 2Q10
We remain positive on the food retail industry as regional
The upcoming Expo in Shanghai in May will last six full months
economic recovery continues to phase in. Recent results
up to Oct 2010. Official estimates have projected the event to
have already revealed solid pick-up of various operators
boost overall tourist spending in Shanghai by c.50% this year.
since 4Q09, with management guiding for a broadly
The expected boom in consumption in the city could
optimistic outlook for 2010. The uptrend in food prices
potentially trigger investors’ focus on Shanghai based
should also prompt operators to stock up for sale at
operators. From this perspective, Lianhua Supermarket could
higher prices later on, potentially locking in better
likely see positive share price performance in near-term.
margins for the rest of the year.
Industry consolidation could continue to accelerate, as modern

Specifically, favourable government policies to drive
chain store operators become increasingly competitive, thus
consumption and a relatively lower penetration rate of
gradually phasing out smaller players. Leading food retailers in
leading food retailers in China should underpin growth
China have also placed merger & acquisitions as high priorities
momentum of major Chinese operators. We currently
to boost growth. These might trigger some positive inflexion
expect their same-store sales growth to reach 5-10% in
points should favourable terms on acquisitions be realized.
2010, partly driven by higher food prices. Coupled with
Page 52
Retailers
DEPARTMENT STORES & DISCRETIONARY employment, where an upward adjustment of 10% or more in
RETAILERS minimum wages in various provinces will be seen this year.
Mavis Hui, mavis_hui@hk.dbsvickers.com Mega events in China, including the Shanghai Expo &
Kok Chiew Sia, chiewsia@hwangdbsvickers.com.my Guangzhou Asian Games, should also help to boost
consumption. Additionally, industry specific subsidy programs
• Regional economic recovery should support a gradual will continue to drive consumer spending.
pick-up in overall consumer sentiment.
• In China, rising affordability and events such as In 2010, total retail sales in China is well poised for a 17.5%
Shanghai Expo 2010 should stimulate tourist spending expansion this year. Major department stores and discretionary
and further support discretionary consumption. retail players should achieve 10-20% y-o-y SSS growth on
• Government subsidy programs for selective product average, benefiting from their first-mover advantage to lock
categories will stimulate growth. up prime locations allowing a better grip on rising domestic
• We like Gome for its positive growth prospects from consumption and tourist spending.
favourable policies & strong demand in the sector.
Key Pick: Gome as a direct policy beneficiary
Performance review: performance upswing from low-base We like Gome for its strong recovery and as a direct
Overall, share prices of selective discretionary retailers beneficiary from the government subsidy programs. These
have outperformed in 1Q10, as demand for the respective include (i) “go rural” policy, which has recently increased price
merchandise continues to pick up from a low base. caps for various electrical applicances (from 25% to double
that of the previous price caps), as well as (ii) “exchange old
Automobile retailers such as Dah Chong Hong (1828.HK) for new” program that was launched in Aug09, and will
and SMC Motors (SMC.TB) saw their share prices surging contribute a full-year impact in 2010.
59% and 71%, respectively. Recent IPOs and valuation
laggards in the wearing apparel sector also performed Given that c.70% of properties sold in China during 2H09 will
well, with share prices up 86% for Trinity (891.HK), 42% be delivered by 2H10, demand for home appliances should be
for Peak Sports (1968.HK), 42% for Bossini (592.HK), and strong throughout this year. In addition, the low penetration
37% for Giordano (709.HK). Furniture retailers such as of home appliances in China versus more developed countries
Home Product Centre (HMPRO.TB) saw a 31% price should also mean ample growth potential for dominant
surge. Tourist plays and watch / jewellery retailers also retailers in the sector over the medium-term.
saw decent share price performance, including Sa Sa
(178.HK, up 20%), Hengdeli (3389.HK, up 18%), Oriental Catalyst: Prospects in China to stay rosy in Q2
Watch (398.HK, up 17%), Hour Glass (HG.SP, up 18%) Traditionally, Q2 is a low season for most Asian markets,
and Jubilee (JUBILE.TB, up 21%). except for China, which should do better in view of its Labour
Day Holiday in May. This year is especially so given that the
Industry outlook: macro recovery drives growth World Expo will be launched in Shanghai this May. As tourist
This year, macro recovery and improving purchasing spending mounts, discretionary retailers, department stores
power should hold up overall consumption in the region. and tourist plays should continue to be in the spotlight.
Department stores and discretionary retailers have already
recorded strong year-to-date performance in same-store In view of the satisfactory year-to-date performances of most
sales (SSS). Severe price discounting that was seen in operators in the sector, we expect the sector to deliver strong
1H09 is also gradually normalizing to a more reasonable results during 2Q10, which should help to sustain interest.
level. Outlook for the sector should stay positive in 2010. While valuation for the sector remains fairly reasonable given
the sound pick-up in business operations, players with strong
Chinese operators could see even better prospects amid fundamentals could be re-rated further in the coming months.
sustainable household income growth, as the We remain broadly positive on the sector.
government’s economic stimulus packages to support
Page 53
Retailers
Earnings Valuation

(US$ m) (%) (US$ m) (%) (%) (US$ m) (%) (US$ m) (US$) (%) (%)
2006A 20,365 - 1,551 - - 1,651 - 1,172 0.03 - -
2007A 25,816 26.8 2,174 40.1 - 2,262 37.0 1,667 0.04 42.2 -
2008A 29,664 14.9 2,712 24.8 - 2,855 26.2 2,030 0.05 21.8 -
2009E 29,789 0.4 2,698 -0.5 - 2,847 -0.3 1,949 0.05 -4.0 -
2010F 33,380 12.1 3,159 17.1 3.2 3,312 16.3 2,274 0.05 16.7 -2.8
2011F 36,483 9.3 3,732 18.1 3.4 3,945 19.1 2,693 0.06 18.4 -1.4

(US$ m) (%) (%) (x) (x) (US$ m) (US$) (%) (x) (x) (x)
2006A 2,096 7.6 - -52.6 -0.5 900 0.2 2.26 37.3 8.0 10.0
2007A 2,832 8.4 25.9 -66.9 -0.5 1,975 0.2 2.87 26.3 5.9 14.1
2008A 3,431 9.1 25.1 -85.9 -0.4 1,971 0.2 3.56 21.6 5.0 11.7
2009E 3,514 9.1 20.8 -189.9 -0.5 1,945 0.2 3.26 22.5 4.4 11.1
2010F 4,087 9.5 21.6 -83.9 -0.6 2,602 0.3 3.59 19.3 3.9 9.2
2011F 4,774 10.2 22.9 -48.8 -0.7 3,181 0.3 4.06 16.3 3.5 7.5
Source: DBS Vickers
Page 54
Retailers
Earnings Valuation
Stock Performance
Department Stores
Aeon Stores 422 1.0 -4.9 -5.6 -7.0 24.6 -6.1 -16.6 -22.8 -46.1 0.6
Esprit Holdings 10,066 23.0 -3.7 12.4 10.6 31.7 -4.9 1.4 -5.1 -39.0 0.8
Lifestyle 3,100 7.1 5.0 12.6 15.6 94.1 3.8 1.6 -0.2 23.4 1.1
New World Dept Stores 1,477 3.4 -7.3 -2.0 -3.2 52.1 -8.5 -13.0 -19.0 -18.6 1.1
Parkson 4,718 10.8 -4.1 -1.5 3.0 35.8 -5.4 -12.5 -12.7 -34.9 1.0
Parkson Holdings 1,877 4.3 -0.7 3.1 10.5 29.2 -1.9 -7.9 -5.2 -41.5 1.1
Ajisen China 1,167 2.7 10.4 20.0 25.1 111.8 9.2 9.0 9.4 41.0 0.8
Discretionary Retailers
Giordano 669 1.5 28.8 60.2 78.3 126.3 27.6 49.2 62.6 55.5 0.8
Glorious Sun 420 1.0 17.8 16.1 28.0 59.3 16.5 5.1 12.2 -11.4 0.6
Golden Eagle 3,793 8.7 5.7 14.0 11.0 148.1 4.5 3.0 -4.8 77.4 0.8
Oriental Watch 92 0.2 -0.5 17.0 22.2 79.9 -1.7 6.0 6.4 9.2 1.0
Sa Sa 1,113 2.5 6.4 30.5 72.2 157.3 5.2 19.5 56.5 86.6 1.0
Food Retailers & Wholesalers
Beijing Jingkelong - H 215 0.5 13.6 30.6 49.7 157.4 12.3 19.6 34.0 86.7 0.9
Big C Supercenter 1,135 2.6 -9.5 6.4 8.3 11.0 -10.7 -4.6 -7.4 -59.7 0.7
Café de Coral 1,343 3.1 -0.6 9.6 6.7 24.2 -1.8 -1.4 -9.1 -46.5 0.5
CP ALL 3,896 8.9 4.6 20.8 55.7 139.5 3.4 9.8 40.0 68.8 0.8
Lianhua Supermarket - H 777 1.8 13.9 35.9 81.2 228.6 12.7 24.9 65.5 157.9 0.7
Little Sheep 556 1.3 -3.7 8.5 -4.1 35.9 -4.9 -2.5 -19.8 -34.8 0.6
Wumart - H 1,067 2.4 15.6 32.5 24.7 179.9 14.4 21.5 8.9 109.2 0.7
Home Products Center 666 1.5 6.4 36.7 33.0 148.1 5.2 25.7 17.2 77.4 0.7
Home Improvement Retailers
Gome Elec Appliances 5,218 11.9 3.8 2.3 11.1 168.8 2.6 -8.7 -4.7 98.1 0.9
General Retailers 43,790 100.0 1.2 11.0 15.7 70.7 0.8
Financial Ratios
2010F 2011F 2010F 2011F 2010F 2011F 2010F 2011F 2010F 2011F 2010F 2011F
(x) (%) (x) (%) (x) (%)
Department Stores
Aeon Stores 15.6 na 10.6 na 2.9 na 20.0 na 2.4 na 2.8 na
Esprit Holdings 15.6 13.5 5.6 15.2 4.9 4.4 33.1 34.3 10.1 8.6 4.8 5.6
Lifestyle 21.2 18.4 17.8 15.5 3.5 3.1 17.5 18.1 12.9 10.2 1.8 2.1
New World Dept Stores 19.7 16.0 15.8 23.2 2.3 2.1 12.5 13.8 8.9 6.7 1.5 1.9
Parkson 28.4 22.0 24.5 29.2 7.1 6.0 26.8 29.6 16.4 12.4 1.6 2.1
Parkson Holdings 19.7 16.0 15.0 22.7 3.1 2.7 16.4 18.0 5.8 4.2 2.1 2.5
Ajisen China 24.0 18.2 20.0 31.6 3.4 3.1 14.9 17.7 11.3 8.4 1.9 2.5
Discretionary Retailers
Giordano 15.9 14.5 13.1 10.3 2.4 2.3 15.4 16.3 8.6 7.5 4.9 5.4
Glorious Sun 11.2 10.0 12.2 12.0 1.5 1.4 13.7 14.6 3.7 3.3 5.8 6.5
Golden Eagle 27.6 21.5 31.6 28.5 7.2 5.7 28.7 29.6 16.8 12.9 1.0 1.3
Oriental Watch 7.4 5.6 -2.8 31.1 0.5 0.5 7.6 9.2 6.9 6.0 2.2 2.9
Sa Sa 23.0 19.2 18.7 20.3 7.4 7.2 32.9 38.1 15.6 13.1 3.8 4.6
Food Retailers & Wholesalers
Beijing Jingkelong - H 18.7 19.2 20.0 -2.2 2.7 2.5 12.7 13.5 9.0 9.2 2.2 2.6
Big C Supercenter 11.2 10.3 13.7 8.6 1.8 1.6 16.5 16.4 4.6 4.1 4.5 4.9
Café de Coral 20.6 17.7 14.3 16.5 4.0 3.8 20.4 22.0 12.0 10.3 3.9 4.5
CP ALL 20.1 17.8 24.9 13.0 5.9 5.2 31.1 31.1 8.9 7.7 3.5 4.0
Lianhua Supermarket - H 25.4 21.3 23.9 19.1 5.5 4.7 23.5 24.0 0.1 -1.3 1.3 1.6
Little Sheep 18.1 13.6 34.9 33.3 3.2 2.8 19.0 22.0 10.0 7.2 2.2 2.9
Wumart - H 33.1 26.2 22.0 26.3 5.2 4.6 19.0 18.6 5.6 3.9 1.2 1.5
Home Products Center 16.8 14.9 11.9 12.5 3.5 3.3 22.6 22.7 7.8 7.0 4.1 4.7
Home Improvement Retailers
Gome Elec Appliances 22.1 17.0 30.3 29.8 2.6 2.3 15.5 17.5 7.6 5.0 1.2 1.5
General Retailers 19.3 16.3 16.7 18.4 3.9 3.5 21.6 22.9 9.2 7.5 3.6 4.1
Source: DBS Vickers
Page 55
Retailers
Macro radar
Retail Sales Growth for Jan-Mar 10
% Retail sales growth across the region rebounded in early 2010. Less
40 matured markets such as China and Vietnam saw y-o-y growth rates
35 of 18% and 36% respectively during 1Q10, while more matured
30 markets like Hong Kong, Singapore and Malaysia saw a recovery from
25 a low base.
20
15
10
5
0
Singapore*
Vietnam
Malaysia**
China
Kong*
Hong
* Jan-Feb 10 yoy growth

** 4Q09 yoy growth (latest available)
Consumer Confidence / Sentiment Index
140 Consumer confidence in China was resilient throughout the global

financial crisis amid strong economic stimuli and favourable
120
government policies to support domestic consumption. Smaller
100
markets such as Hong Kong and Malaysia also saw their consumer
80 confidence normalizing from the trough.
60
40
20
0
Mar-08
Sep-08
Mar-09
Sep-09
Dec-08
Dec-09
Jan-10
Feb-10
Jun-08
Jun-09
China - Consumer confidence

Hong Kong - Consumer confidence
Malay sia - Consumer sentiment
CPI for Feb-10
% An Inflationary environment started to kick-in again in the region. In

10 Feb10, most markets saw a mild CPI inflation in the range of 1-3%
9 (this also applied to China for Mar10), while Vietnam’s inflation
8 problem had been much more severe, seeing CPI up significantly by
7 9.5% in Mar10.
6
5
4
3
2
1
0
China*
Vietnam*
Hong
Malay s ia
Kong
S ingapore
*Mar-10 figure
Page 56
Retailers
Household Income Growth for Dec-09
% Unlike most parts of the world where household income was affected
12 by the global financial crisis, income growth in China sustained a solid
y-o-y expansion of >10% up to Mar10 amid massive economic stimuli
10
launched by the government to indirectly support overall income
8
growth. Plans for a 10% or higher increase in minimum wage levels
6 across various provinces of China this year should sustain household
4 income growth further in 2010.
2
0
(2)
(4)
(6)
China* Hong Kong Singapore
* Mar-10 figure
Unemployment Rate
% The Chinese employment market stayed resilient throughout the

6 global financial crisis, seeing unemployment rate sustaining at c.4%
throughout. Other Asian markets saw rising unemployment rate right
5
after the crisis in 4Q08, while Malaysia started to see improvement in
4 2Q09, and Hong Kong and Singapore saw employment improving
3 from 4Q09.
2
1
0
Mar-08
Sep-08
Mar-09
Sep-09
Mar-10
Dec-08
Dec-09
Jun-08
Jun-09
China Hong Kong

Singapore Malay sia
Page 57
Retailers
Sector performance - China

i) Food retailers
China Retail Sales – Food & Beverage
RMB mn Y oy grow th Growth for F&B retail sales accelerated from 15.1% y-o-y growth in
Jan-Feb10 to 19.3% growth in Mar10.
80,000 60%
70,000 50%
60,000 40%
50,000 30%
40,000 20%
30,000 10%
20,000 0%
10,000 -10%
0 -20%
Mar-07
J un-07
Dec -07
Mar-08
J un-08
Dec -08
Mar-09
J un-09
Dec -09
Mar-10
S ep-07
S ep-08
S ep-09
F &B y -o-y Grow th
China Retail Sales - Daily Use Goods
RMB mn Y oy grow th Sales growth of daily use goods accelerated from 20.1% y-o-y growth
in Jan-Feb10 to 32.8% growth in Mar10.
18,000 40%
16,000 35%
14,000 30%
12,000 25%
10,000
20%
8,000
6,000 15%
4,000 10%
2,000 5%
0 0%
Mar-07
Mar-08
Mar-09
Mar-10
J un-07
Dec -07
J un-08
Dec -08
J un-09
Dec -09
S ep-07
S ep-08
S ep-09
Daily Us e Goods y -o-y Grow th
China CPI for food
Index Food prices, which accounts for about a third of the CPI in China,
130 gained 5.1% y-o-y in Mar10 and is expected to post an upward trend.
120
110
100
90
80
Mar-08
Sep-08
Mar-09
Sep-09
Mar-10
Jan-08
May-08
Jan-09
May-09
Jan-10
Jul-08
Nov-08
Jul-09
Nov-09
Page 58
Retailers
ii) Department stores & discretionary retailers

China Retail Sales – Clothing
RMB mn Y oy grow th Retail sales growth for clothing reached 27.4% y-o-y in Jan-Feb10 and
25.8% in Mar10.
60,000 70%
60%
50,000
50%
40,000 40%
30,000 30%
20,000 20%
10%
10,000
0%
0 -10%
Mar-07
J un-07
Dec -07
Mar-08
J un-08
Dec -08
Mar-09
J un-09
Dec -09
Mar-10
S ep-07
S ep-08
S ep-09
Clothing y -o-y Grow th
China Retail Sales – Cosmetics
RMB mn Y oy grow th Cosmetics sales grew by 20.7% y-o-y in Jan-Feb10, and accelerated to
23.7% in Mar10.
8,000 40%
7,000 35%
6,000 30%
5,000 25%
4,000 20%
3,000 15%
2,000 10%
1,000 5%
0 0%
Mar-07
Mar-08
Mar-09
Mar-10
J un-07
Dec -07
J un-08
Dec -08
J un-09
Dec -09
S ep-07
S ep-08
S ep-09
Cos metic s y -o-y Grow th
China Retail Sales – Gold, Silver and Jewellery
RMB mn Y oy grow th Sales growth of luxury items such as jewellery skyrocketed by 43.4%
y-o-y in Jan-Feb10 and picked up even stronger by 55.2% in Mar10,
14,000 80%
indicating sustained recovery in the overall consumer sentiment of
12,000 70%
China.
10,000 60%
50%
8,000
40%
6,000
30%
4,000 20%
2,000 10%
0 0%
Mar-07
Mar-08
Mar-09
Mar-10
J un-07
Dec -07
J un-08
Dec -08
J un-09
Dec -09
S ep-07
S ep-08
S ep-09
Gold, S ilv er and J ew elry y -o-y Grow th
Page 59
Retailers
China Retail Sales – Electric Appliance
RMB mn Y oy grow th Sales of electric appliances grew 28% y-o-y in Jan-Feb10 and 19.2%
in Mar10, maintaining a decent momentum given benefits from
40,000 50%
supportive government policies for the segment.
35,000 40%
30,000 30%
25,000
20%
20,000
10%
15,000
10,000 0%
5,000 -10%
0 -20%
Mar-07
Mar-08
Mar-09
Mar-10
J un-07
Dec -07
J un-08
Dec -08
J un-09
Dec -09
S ep-07
S ep-08
S ep-09
Elec tric Applianc e y -o-y Grow th
China CPI by Category for Mar 10
Yoy , % In Mar10, CPI for cosmetics edged up slightly while other discretionary
0.4 items such as clothing continued to see a mild decline in prices.
0.2 According to the historic trend, it is expected that discretionary broad-
0.0 base items should likely see a more moderate increase in their prices
(0.2) versus other products, such as food items.
(0.4)
(0.6)
(0.8)
(1.0)
(1.2)
and educational
Cosmetics
Transportation
communication
Household
Clothing
Recreational
facility
and
Prime retail rental
RMB psm Retail rentals in first-tier cities such as Beijing and Shanghai remained
largely stable in 4Q09, but stayed at relatively high levels.
1,600
1,400
1,200
1,000
800
600
4Q06
2Q07
4Q07
2Q08
4Q08
2Q09
4Q09
Beijing Shanghai
Page 60
Retailers
Sector performance – Hong Kong

Hong Kong Retail Sales Growth by Segment
50% Sales growth of all consumer goods rebounded strongly to the positive
45% territory in Feb10, mainly attributable to the seasonality impact from
40% Chinese New Year holidays.
35%
30%
25%
20%
15%
10%
5%
0%
Consumer
Consumer
Footwear
and Allied
Products
Clothing,
Alcoholic
Durable
Drinks
Goods
Goods
Other
Food,
and
F eb10 y -o-y growth
Hong Kong Rental Index
120 Retail rentals continued to surge in Feb10, boosted by the strong

property market of Hong Kong.
110
100
90
80
O c t-00
Mar-07
May -01
Dec -01
J ul-02
F eb-03
Nov -04
J un-05
J an-06
O c t-07
May -08
Dec -08
J ul-09
F eb-10
S ep-03
Apr-04
Aug-06
Property Rental Index of Retail Premis e
Hong Kong Tourist Arrivals
Pers ons Y oy grow th Tourist arrivals grew strongly by >30% y-o-y in Feb10, mainly due to
3,500,000 40% seasonality impact from the “Spring Move” of Mainland tourists.
3,000,000 30%
2,500,000
20%
2,000,000
10%
1,500,000
0%
1,000,000
500,000 -10%
0 -20%
F eb-07
J un-07
O c t-07
Dec -07
F eb-08
J un-08
O c t-08
Dec -08
F eb-09
J un-09
O c t-09
Dec -09
F eb-10
Apr-07
Apr-08
Apr-09
Aug-07
Aug-08
Aug-09
V is itor Arriv als : Inc V ia Mac au

V is itor Arriv als Grow th
Page 61
Retailers
Sector performance – Singapore

Singapore Retail Sales Growth by Segment for Feb-10
Yoy , % Retail sales across various categories of merchandise picked up

80 healthily in Feb10 amid the New Year holiday and a low base.
70 Nonetheless, this could also be a sign of consumption pick-up in
60 Singapore.
50
40
30
20
10
0
Supermarkets
Beverages
Dept Stores
Apparel &
Watches &
Footwear
Wearing
Jewellery
Food &
Singapore Property Rental Index – Shop
4Q98=100 Average shop rentals in Singapore peaked in 2Q08 and fell sharply
130 thereafter amid negative impacts from the global financial crisis. In
recent months, shop rentals picked up gradually but still remained far
120 below the peak level in 2008. (Note that latest rental data for 2010 is
yet to be available.)
110
100
90
80
70
Mar-00
Mar-01
Mar-02
Mar-03
Mar-04
Mar-05
Mar-06
Mar-07
Mar-08
Mar-09
Singapore Tourist Arrivals
m persons % Tourist arrivals in Singapore surged substantially by c.25% y-o-y in

1.2 30 Feb10 amid seasonality impact from the Chinese New Year and a
25 gradual economic recovery in the region. This could also partly be
1.0 20 buoyed by the opening of Resorts World Sentosa (RWS). The
0.8 15 Singapore Tourism Board has projected tourist arrivals in Singapore for
10
2010 could be between 11.5m-12.5m. A further boost in the arrival
0.6 5
0 numbers could also be expected following the opening of Marina Bay
0.4 (5) Sands in late Apr this year.
0.2 (10)
(15)
0.0 (20)
Sep-08
Sep-09
Mar-08
Mar-09
Dec-08
Dec-09
Jan-10
Feb-10
Jan-08
Feb-08
Apr-08
May-08
Oct-08
Jan-09
Feb-09
Apr-09
May-09
Oct-09
Nov-09
Jun-08
Nov-08
Jun-09
Jul-08
Aug-08
Jul-09
Aug-09
V isitor arrivals (LHS) Yoy growth (RHS)
Page 62
Retailers
Sector performance – Malaysia

Malaysia Retail Sales – Non-Specialised Stores
RM bn Yoy Sales of non-specialised stores, which included department stores,

9.0 120% supermarkets, provision shops and others stayed resilient, with
8.0 quarterly sales growth maintained at a high-double digit rate in 2009.
100%
7.0 Sales in 1Q10 are expected to show a healthy growth trend led by
6.0 80% holidays and festivities. Going forward, we expect lower double-digit
5.0 growth rate on the back of a growing consumption base.
60%
4.0
3.0 40%
2.0
20%
1.0
0.0 0%
Mar-06
Sep-06
Mar-07
Sep-07
Mar-08
Sep-08
Mar-09
Sep-09
Dec-06
Dec-07
Dec-08
Dec-09
Jun-06
Jun-07
Jun-08
Jun-09
Retail Sales: Non-Specialised Stores % chg y oy
Malaysia CPI
Index Prices for personal effect products (e.g. jewelleries and watches) was
180.0 the only category that showed an uptrend since 2007 among three
CPI indices in the chart, whereas prices of clothing & footwear and
160.0
household appliances were relatively more stable. The rising CPI index
140.0 of personal effect products may suggest growing wealth of the
120.0 population and hence demand for higher value discretionary goods.
This should poise well for middle to higher end retailers such as
100.0
Parkson, Metro Jaya, Robinson, Isetan, and Debenham in Malaysia.
80.0
Sep-07
Sep-08
Sep-09
Jan-07
May-07
Jan-08
May-08
Jan-09
May-09
Jan-10
CPI: Clothing and F ootwear

CPI: F H: Household Appliances
CPI: MG: Personal Effects nec
Malaysia Tourist Arrivals
in billion Visitor arrivals in Malaysia had been quite stable with average monthly
2.5 35% visitor numbers of 1m people. However, visitor flow tends to be higher
30% in conjunction with the ‘Visit Malaysia Programme’ organised by the
2.0 25% Ministry of Culture, Arts and Tourism. For example, total visitor arrivals
20% surged 19.5% y-o-y to 21m people in 2007 due to the Visit Malaysia
1.5 15% Year 2007. The Malaysian government is targeting 24m visitor arrivals
1.0 10% in 2010, implying 1.7% y-o-y growth. However, the slower growth in
5%
visitor arrivals should not pose significant impact on retailers in
0.5 0%
Malaysia as sales have mainly been dominated by domestic
-5%
0.0 -10% consumption.
Jan-07
Jan-08
Jan-09
Apr-07
Oct-07
Apr-08
Oct-08
Apr-09
Oct-09
Jan-10
Jul-07
Jul-08
Jul-09
Tourist Arriv al % chg y oy
Page 63
Retailers
Sector performance – Vietnam

Vietnam Retail Sales – Domestic Sector: Private & Household
V ND trillion Demand for private labels and household products were on the rise,
120 45% buoyed by improved sentiment on economic outlook since 4Q09.
40% Sales growth in Feb10 surged to 41.8%, partly due to a low base
100
35% effect. If excluding the seasonality effect, sales would have grown by
80 30% c.33%. Sales growth in Mar10 remained buoyant at 30.5%. The Feb
25%
60 sustainable growth trend showed that demand is on recovery towards
20%
40 15% the pre-crisis level. Going forward, such momentum is expected to
10% hold up well.
20
5%
0 0%
Jan-07
Apr-07
Oct-07
Jan-08
Apr-08
Oct-08
Jan-09
Apr-09
Oct-09
Jan-10
Jul-07
Jul-08
Jul-09
Retail sales: Domestic: Priv ate & Household

% chg y oy
Vietnam CPI
Index Inflation indices for consumer discretionary products continue to trend
140.0 upwards on a gradual basis. This suggests sustainability of prices and

should support well for demand going forward.
130.0
120.0
110.0
100.0
90.0
80.0
Sep-06
Sep-07
Sep-08
Sep-09
May-06
Jan-07
May-07
Jan-08
May-08
Jan-09
May-09
Jan-10
CPI: Garment, Hats and Footwear

CPI: Household Equipments and Appliances
Vietnam Tourist Arrivals
million The number of visitors going into Vietnam dropped 11.3% y-o-y in
0.6 80% 2009. However, the number marched up strongly in 1Q10 (+36.2% y-
60% o-y). More visitors are expected to drop by this year, both for vacation
0.5
and business trips as more people are exploring opportunities in the
40%
0.4 country which is still under-developed.
20%
0.3
0%
0.2
-20%
0.1 -40%
0.0 -60%
Jan-07
Apr-07
Oct-07
Jan-08
Apr-08
Oct-08
Jan-09
Apr-09
Oct-09
Jan-10
Jul-07
Jul-08
Jul-09
V isitor Arrival % chg y oy
Page 64
Up/Midstream Food Producers
SUB SECTOR –
UP/MIDSTREAM FOOD PRODUCERS
Page 65
UP/MIDSTREAM FOOD PRODUCERS processing margins. Already highly efficient with large
Ben Santoso , bensantoso@dbsvickers.com economies of scale, this would make Wilmar more competitive
in the Chinese vegetable oil market.
• 1QCY10 planters’ earnings to seasonally weaken, as Focus on volume growths of upstream planters. Over the next
11-13% stronger prices is offset by c.6-50% volume few years, we expect a relatively flatter rise in palm oil prices
drops compared to previous forecasts. Our key selection criterion for
• CPO prices forecast to hover US$750-850 (FOB upstream planters remains their ability to grow volumes faster
Malaysia) over the long run than peers (i.e. own FFB volume CAGR over the next 5 years,
• Stronger MYR, IDR to negatively impact planters’ derived from plantable reserves and aggressive planting
earnings. Potentially stronger RMB may benefit Wilmar targets).
• We prefer China processors and volume plays: Wilmar, Our recommended list
First R, IndoAgri, and Sampoerna A. 1. First Resources: Lowest cost producer and simple
upstream business model. Aggressive planting relative
Performance review to its size and large plantable reserve should fuel 15.8%
In the quarter ending 31 March 2010, CPO prices (FOB earnings CAGR between 2009 and 2014F.
Malaysia) averaged US$760/MT – up by 12.7% q-o-q 2. IndoAgri: Sugar prices in Indonesia have skyrocketed
and 43.3% y-o-y (low-base effect). We expect and are expected to remain elevated going forward.
Malaysian planters to book weaker 1QCY10 earnings as This, and jump in rubber prices have not yet been
higher prices would not be enough to offset c.20% q- factored in current share prices.
o-q volume drop nationwide. Indonesian planters 3. Sampoerna Agro: Strong yield recovery story and
should book even lower earnings q-o-q, given aggressive planting make this stock an undervalued
expectations of c.28-50%% q-o-q volume drop. small-cap upstream player. Ability to produce high yield
seeds and large plantable reserves are a plus in an
Industry outlook industry running out of land suitable for planting.
Price expectations. Rather than a near-term drop, we 4. Wilmar International: Unique business model with high
expect palm oil prices to trade sideways for the remainder entry barrier. Inclusion of rice and flour mills and lower
of the year on lower global inventory y-o-y. Recent trade prospective international soybean prices should boost
spat between China and Argentina over soybean oil Wilmar’s earnings prospects. A potential RMB
imports may temporarily boost China’s soybean crushing revaluation would expand processing margins even
and palm oil demand, until domestic soybean inventory further.
levels recede. Longer term, we expect palm oil prices (FOB
Malaysia) to remain range-bound between US$750- Catalyst
850/MT on relatively flat stock/usage ratios. We should see earnings pick up in 2QCY10 onwards, as prices
should continue to trade sideways; while volumes seasonally
Impact from declining soybean prices. This year, declining pick up. Our key selection criterion for upstream planters
soybean price trends would create temporary gains for remains their ability to grow volumes faster than peers (i.e.
processors such as Wilmar, as lower feedstock prices own FFB volume CAGR over the next 5 years, derived from
would have lagged impact on end product prices. We plantable reserves and aggressive planting targets).
view the domestic price situation is more resilient in
China, as domestic soybean prices are already priced We prefer processors such as Wilmar over upstream planters.
higher than imported ones. Rising global soybean supplies If exposure to upstream planters is a must, we recommend
mean rising disparity between domestic and imported volume plays such as First Resources, Sampoerna Agro and
bean prices. IndoAgri. Our top pick is Wilmar.
Impact from potentially stronger RMB. In the event of

RMB revaluation, Wilmar should benefit even more. Any
efforts by the Chinese government to protect its soybean
farmers mean that domestically produced soybean prices
would remain steady. On the other hand, cheaper
imported feedstock prices should expand Wilmar’s
Page 66
Earnings Valuation

(US$ m) (%) (US$ m) (%) (%) (US$ m) (%) (US$ m) (US$) (%) (%)
2006A 15,300 - 1,418 - - 1,370 - 946 0.01 - -
2007A 36,548 138.9 3,852 171.7 - 3,672 168.1 2,475 0.03 161.5 -
2008A 56,752 55.3 6,208 61.1 - 1,370 -62.7 4,379 0.06 76.9 -
2009E 50,143 -11.6 5,284 -14.9 - 5,138 275.1 3,709 0.05 -15.3 -
2010F 58,643 17.0 6,202 17.4 28.0 6,096 18.6 4,564 0.06 23.1 -2.0
2011F 66,041 12.6 6,964 12.3 27.9 6,658 9.2 5,030 0.06 10.2 9.2

(US$ m) (%) (%) (x) (x) (US$ m) (US$) (%) (x) (x) (x)
2006A 1,833 9.3 - 6.0 0.4 -457 0.2 0.47 82.9 12.8 44.3
2007A 4,635 10.5 18.5 9.2 0.3 -6,531 0.6 1.02 31.7 3.8 18.3
2008A 7,091 10.9 19.3 10.7 0.2 2,697 0.8 2.32 17.9 3.2 11.8
2009E 6,189 10.5 14.3 11.7 0.3 -994 0.9 1.52 21.1 2.9 14.1
2010F 7,338 10.6 15.7 16.6 0.2 3,470 1.0 1.86 17.2 2.5 11.5
2011F 8,211 10.5 15.2 13.5 0.1 2,565 1.1 1.91 15.6 2.3 10.2
Stock Performance
(US$)
China Fishery Group 1,405 1.8 10.1 19.8 71.7 217.6 6.0 15.1 65.0 157.2 1.3
First Resources 1,198 1.5 1.8 8.4 23.4 139.2 -2.3 3.8 16.8 78.7 1.4
Genting Plantations 1,641 2.1 -4.0 8.4 6.7 36.0 -8.1 3.8 0.1 -24.4 1.4
IJM Plantation 637 0.8 -0.8 3.7 -7.1 6.5 -4.9 -0.9 -13.7 -53.9 1.2
Indofood Agri 2,489 3.2 14.7 25.8 39.9 164.9 10.7 21.1 33.3 104.5 1.4
IOI Corporation 11,445 14.6 1.5 1.1 3.2 28.1 -2.6 -3.5 -3.4 -32.3 1.5
Kencana Agri 236 0.3 13.8 20.0 17.9 32.0 9.7 15.4 11.2 -28.4 1.0
KL Kepong 5,638 7.2 3.4 1.9 11.2 46.8 -0.7 -2.7 4.6 -13.7 -
Olam International 3,795 4.8 1.5 11.3 -4.6 63.8 -2.6 6.6 -11.3 3.4 1.1
Pacific Andes 817 1.0 14.5 19.7 49.1 164.4 10.4 15.1 42.4 104.0 1.1
Sime Darby 16,733 21.3 1.4 0.1 -2.8 32.3 -2.7 -4.5 -9.4 -28.1 1.0
TSH Resources 258 0.3 -1.5 -5.2 7.0 18.5 -5.6 -9.9 0.4 -42.0 1.3
Wilmar 32,127 41.0 6.4 5.6 9.2 91.8 2.3 0.9 2.6 31.4 1.0
Up/ Midstream Food Producers 78,419 100.0 4.1 4.6 6.6 60.4 1.2
Financial Ratios
2010F 2011F 2010F 2011F 2010F 2011F 2010F 2011F 2010F 2011F 2010F 2011F
(x) (%) (x) (%) (x) (%)
China Fishery Group 9.0 8.3 65.0 9.4 2.6 2.1 32.5 28.0 6.0 5.7 3.0 3.3
First Resources 10.8 9.6 -14.4 12.7 1.7 1.5 17.2 16.6 6.5 5.8 2.0 2.4
Genting Plantations 19.3 19.1 16.5 1.0 1.9 1.8 10.2 9.6 13.2 12.8 1.2 1.2
IJM Plantation 24.4 18.3 -32.6 33.7 1.7 1.5 8.2 8.8 12.8 10.6 1.2 1.1
Indofood Agri 17.0 14.2 -13.5 19.3 2.1 1.8 13.1 13.6 8.3 6.9 0.0 0.0
IOI Corporation 19.2 17.5 93.2 9.8 3.4 3.1 20.0 18.5 12.5 11.4 2.7 2.3
Kencana Agri 19.6 12.0 -27.7 62.6 1.5 1.4 8.1 12.0 11.1 8.3 0.0 0.0
KL Kepong 20.6 19.2 30.6 7.7 3.0 2.8 14.9 15.1 12.5 11.6 2.5 2.7
Olam International 23.3 18.2 29.9 28.0 3.0 2.7 16.1 15.6 15.9 12.9 1.8 1.3
Pacific Andes 6.1 5.4 42.5 11.9 0.9 0.8 16.5 16.0 2.8 2.7 2.1 2.4
Sime Darby 19.8 17.5 17.9 13.0 2.3 2.2 12.1 12.8 11.2 10.1 2.5 2.9
TSH Resources 12.1 11.0 20.9 10.1 1.1 1.0 9.0 9.2 10.1 9.6 1.8 1.7
Wilmar 16.1 15.1 16.3 6.9 2.6 2.3 17.0 15.9 12.6 10.9 1.2 1.3
Up/ Midstream Food Producers 17.2 15.6 23.1 10.2 2.5 2.3 15.7 15.2 11.5 10.2 1.9 1.9
Source: DBS Vickers
Page 67
Section B: Charts
Chart 1: CPO price and stock/usage ratio forecasts
US$/MT (CIF) Palm oil prices to remain resilient. Drop in yields in the first two
1,000 35.0%
months of this year had prompted us to cut our Malaysian production
900 Stock/usage ratio forecast by 250k MT to 17.7m MT. On top of lower yields, in
(RHS) 30.0%
800 CPO price Indonesia we also adjusted our oil extraction rate (OER) slightly to
(LHS)
700 25.0% 20.2% from 20.3% to account for dilution from newly matured trees.
600
These changes reduced combined production forecast from Indonesia
20.0%
and Malaysia to 39.7m MT from 40.0m MT.
500
15.0%
We expect both countries to account for 84.5% of global supply this
400
year, as production from Thailand, Colombia and Nigeria are expected
300 10.0% to increase by 0.18m MT (Oil World). Rather than a significant near-
200 term drop in palm oil prices, we now expect palm oil prices continue
5.0%
100 to trade sideways (with some negative drag from soybean prices) for
0 0.0% the remainder of CY10F
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
2015
2017
2019
Source: Oil World, DBS Vickers estimates
Chart 2: Soybean price and stock/usage ratio forecasts
US$/MT (FOB)
Soybean prices still have more downside. In their recent reports, Oil
35.0% 500
World and USDA expect global soybean supply to reach 255 – 257m
450
30.0% Soybean price
MT in current season, as harvests coming from all three main
(RHS) 400 producing countries (US, Brazil and Argentina) have jumped since last
25.0% 350 season. Soybean demand, according to Oil World and USDA, are now
Stock/usage ratio 300 forecast to reach between 234m MT and 236m MT. In turn, Oil World
20.0%
(LHS)
250
now expect global soybean inventory to jump to 68m MT by end of
15.0% 09/10F season. We currently expect global soybean supply to reach
200
256m MT in CY10F and to 248m MT in CY11F. Consumption is
10.0% 150
forecast at 235m MT for CY10F and 245m MT for CY11F.
100
5.0%
50
0.0% -
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
2016
2018
2020
Source: Oil World, USDA, DBSV estimates
Chart 3: Malaysian palm oil stock/usage ratio

Seasonally increasing supply. Earlier this year dry spell from the El
14.0%
2010
Nino has caused yields in Malaysia to drop in Jan-Feb10, prompting
13.0%
renewed supply concerns. Both National Oceanic and Atmospheric
12.0% Administration (NOAA) and Australian Bureau of Meteorology
2008
(BOM) recently indicated that transition to neutral conditions should
11.0%
happen by May-July 2010. While Sabah “dry” season should take
10.0%
2006
place during May-Sep, we understand occasional rains are still
9.0% expected during this period. The stock/usage ratio for Malaysian
2007
palm oil on the left shows rising trend for the remainder of this year,
8.0%
2009
in line with seasonal trend.
7.0%
6.0%
April
March
December
February
May
July
June
August
September
November
October
January
Page 68
Chart 4: Soybean oil price vs. palm olein (cooking oil) price
Palm oil discount has narrowed. Palm oil and soybean oil prices have
1,600
historically moved parallel to each other, as they are mostly
1,500
1,400
substitutable. While palm oil is now the world’s largest vegetable oil, it
1,300 is traded at a discount to soybean oil, because palm oil is substitute for
Soybean oil price
1,200 (US$/MT) native oils in China (soybean oil), India (soybean oil) and Europe
1,100 (rapeseed oil). The difference in price between palm oil and soybean
1,000
oil also relates to palm’s cheaper cost of production; but mostly
900
importantly, due to their substitution, the differential is principally
800
700 explained by stock/usage ratio between the two competing oils.
600 Historically, palm oil prices may be priced at a premium to soybean oil,
Palm olein price
500 (US$/MT) but these instances are normally short-lived (i.e. unsustainable) due to
400 substitution.
Nov-07
Jan-08
Mar-08
May-08
Jul-08
Sep-08
Nov-08
Jan-09
Mar-09
May-09
Jul-09
Sep-09
Nov-09
Jan-10
Mar-10
Source: Bloomberg
Chart 5: Spot soybean crushing and palm oil processing margins

Spot processing margins still trending down. Our estimates based on
US$/MT
120.0 Spot processing margins, 3-month daily spot prices showed that soybean crushing margins in the quarter
moving average
ending 31 March 2010 have come down to US$39/MT from
100.0
Soybean spot
US$52/MT and palm oil refining margin to US$19/MT from
80.0 Palm oil spot
crushing margin US$21/MT. Given seasonally lower palm oil production and steady
processing margin
soybean volumes q-o-q, we expect Wilmar’s Merchandising and
60.0
Processing (M&P) pretax profit to come down q-o-q.
40.0
20.0
0.0
Mar-08
May-08
Jul-08
Sep-08
Nov-08
Jan-09
Mar-09
May-09
Jul-09
Sep-09
Nov-09
Jan-10
Mar-10
Source: Bloomberg, DBSV estimates
Chart 6: Global palm and soybean oil supplies forecasts
'000 MT Palm oil is increasingly dominant. Over the years, palm oil has grown
90,000
exponentially, thanks to lower borrowing costs (it normally takes three
80,000
years for oil palm trees to start to bear fruit from planting) as well as
70,000
Global palm
improvements in research and infrastructure to boost yields. This trend
60,000
oil supply
will continue and we expect palm oil price discount to soybean oil
50,000
would remain narrow in the foreseeable future due to palm oil’s
increasing share in world’s vegetable oil supplies and consumption.
40,000
Implied soybean oil
supply (all crushed)
30,000
20,000
10,000
-
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
2016
2018
2020
Source: Oil World, USDA, DBSV estimates
Page 69
This page is left intentionally blank
Page 70
STOCK PROFILES
“Recipients of this report, received from DBS Vickers Research (Singapore) Pte Ltd Page 71
(“DBSVR”), are to contact DBSVR at +65 6398 7954 in respect of any matters arising
from or in connection with this report.”
Kia Motors
Bloomberg: 000270 KS | Reuters: 000270.KS
BUY KRW26,400 KOSPI : 1,740 Revving up growth

Price Target : 12-Month KRW 33,000 • The recession has caused consumers to increasingly
Potential Catalyst: (i) strong earnings growth despite stronger won, prefer value-focused Korean car brands
(ii)expanding market share in key markets of Korea, China, US and
• Expect stronger earnings for Kia given
(iii)improvement of balance sheet.
unprecedented rise in demand
Analyst • Maintain Buy; KRW33,000 TP offers 28% upside
Jay Kim +852 2971 1921
jay_kim@hk.dbsvickers.com potential
Investment points. Kia’s YTD utilization rate of 96% (vs.

82% in 2007-08) indicates that demand for its cars has
Price Relative
KRW Relative Index
reached unprecedented heights. Despite market concerns
211
about a strong won, we believe the rising demand is more
25,265 191
171
crucial in determining the carmaker’s earnings prospects.
20,265 151
131
Given persistent uncertainty about Korean car exporters’
15,265 111
91
earnings, we expect 1H results to shape share price
10,265 71 performance in the sector. We recommend investors to
51
5,265 31 accumulate Kia shares as we believe its 1H earnings will beat
2006 2007 2008 2009 2010
consensus estimate by a considerable amount. We forecast
Kia Motors (LHS) Relative KOSPI INDEX (RHS)
1H FY10 net profit of KRW826bn (vs. Bloomberg consensus
estimate of KRW738bn).
Forecasts and Valuation
Expect record high KRW1.7tn net profit this year. We
FY Dec (KRW bn) 2009A 2010F 2011F 2012F expect Kia to register strong earnings growth this year, led
by (i) volume expansion; (ii) higher ASP and cost savings
Turnover 18,416 20,300 21,827 23,035 associated with higher sales contribution from new model
EBITDA 1,827 2,002 2,104 2,339
Pre-tax Profit 1,700 2,078 2,385 2,650
launches; (iii) lower marketing costs; and (iv) stronger equity
Net Profit 1,450 1,662 1,824 2,027 income.
Net Pft (Pre Ex.) 1,450 1,662 1,824 2,027
Diluted EPS (KRW) 3,578 4,102 4,501 5,001
Re-rating ahead. We recently raised net profit by 36% to
EPS Gth (%) 990.4 14.6 9.7 11.1 KRW1,662bn for FY10F, and by 35% to KRW1,824bn for
DPS (KRW) 250 250 250 250 FY11F, after imputing higher sales volume and blended ASP
BV Per Share (KRW) 18,200 22,291 26,881 31,771 assumptions on the back of improving product mix; and
PE (X) 7.4 6.1 5.6 5.0
P/Cash Flow (X) 4.3 6.0 7.4 6.7 faster than expected turnaround at Kia’s Georgia plant.
EV/EBITDA (X) 4.4 4.2 4.4 4.4 Consequently, we raised target price to KRW33,000.
Net Div Yield (%) 0.9 0.9 0.9 0.9 Looking ahead, we expect positive news flow regarding its
P/Book Value (X) 1.5 1.1 0.9 0.8 growth prospects with the release of 1HFY10 result, and
Net debt (2,632) (1,717) (1,007) 38
ROAE (%) 22.1 20.3 18.3 17.1
continued re-rating led by the aforementioned factors and its
attractive valuation.
Earnings Rev (%) Nil Nil Nil
Consensus EPS (KRW) 3,606 3,971 4,184
At A Glance
Issued Capital (m shrs) 390
Mkt. Cap (KRWm/US$m) 10,306,753 / 9,295
ICB Industry: Consumer Goods Major Shareholders
ICB Sector: Automobiles & Parts Hyundai Motor (%) 34.4
Principal Business: Auto manufacturing Free Float (%) 100.0
Avg. Daily Vol.(‘000) 4,483
Source of all data: Company, DBSV, Bloomberg, HKEX
Page 72
www.dbsvickers.com
ed-GC / sa- AH GL
Kia Motors
Company Background Sales Trend

(KRW bn) Yoy ,%
Having claimed 26% of the domestic market in the past five 25,000 14
years, Kia is the second largest carmaker in Korea with an 12
20,000
annual global capacity of xx m units, and is a major part of 10
15,000 8
the Hyundai Automotive Group. It is known for its global
10,000 6
competence in the small capacity, affordable passenger
4
vehicle market, and it has been a leading SUV manufacturer 5,000
2
in the domestic market. 0 0
2008A 2009A 2010F 2011F 2012F
Earnings Drivers & Risks
Rev enue (LHS) Rev enue growth (RHS)
Bolstered by heightened demand, we expect Kia’s FY10 net Asset Trend

profit to grow by a strong 15% y-o-y to a record high KRWbn
KRW1.7tn this year. Growth would be led by (i) 13% volume 14,000
expansion (parent); (ii) higher ASP and cost savings associated 12,000
with higher sales contribution from new model launches; (iii) 10,000
lower marketing costs; and (iv) stronger equity income. 8,000
6,000
Among its four main earnings drivers, the one that bodes 4,000
particularly well for Kia, compared to regional peers under 2,000
0
our coverage, is its cost saving ability. Kia sees potential for
2008A 2009A 2010F 2011F 2012F
substantial cost cutting measures in the near term with
further integration of its manufacturing platforms, which Net F ixed Assets (Tangible) Total Current Assets
should offer higher degree of modularization and lower Profitability Trend
component count. This means new models will not only help KRWbn
to lift ASP, but also help to keep costs in check. 3,000
2,500
With a more integrated platforms, Kia has made significant
2,000
progress in this area. This has helped to cap input costs as
sales per platform rise, and more vehicles use common 1,500
components. In other words, not only will higher unit 1,000
shipment per platform generate cost savings from lower fixed 500
costs (i.e. spreading R&D and re-tooling costs over a larger 0
sales base), but further cost innovations should accrue from 2008A 2009A 2010F 2011F 2012F
enhanced component commonality between platforms. EBIT Pre tax profit Net Profit
Margin Trends (%)
Outlook
%
12
Its Georgia plant may offer a positive surprise. We believe this 10
year’s earnings for the plant could beat market expectations, 8
and the facility might reach break-even as early as end-2010. 6
4
Although Hyundai Motor’s previous facility in Alabama, US,
2
took 6 operational quarters to meet breakeven, we believe 0
Kia’s Georgia plant may diverge from Hyundai’s precedent.
2008A
2009A
2010F
2011F
2012F
Unlike Hyundai’s first set up, the Georgia plant has not had
major problems securing key suppliers for its production as EBITDA margin EBIT margin
Net income margin
the plant uses many in-house suppliers from Hyundai’s US
Page 73
Kia Motors
Leverage & Asset Turnover (x) base, and is also using most of its external suppliers. In fact,
Kia’s initial production ramp-up for the Sorento R (mid-size
KRW bn x SUV) was better than Hyundai’s Alabama experience.
25,000 1.20
Production went smoothly without any supply bottleneck. Also,
20,000 1.18
unlike Hyundai’s Alabama plant, Kia’s Georgia facility does not
15,000 1.16 produce car engines, which reduces the plant’s break even
10,000 1.14 revenue and utilization levels compared to Hyundai’s.
5,000 1.12
In addition, the first product launched by the Georgia plant
0 1.10
was one of the most highly priced models based on the
2008A 2009A 2010F 2011F 2012F
company’s portfolio. With Sorrento R’s ASP in the market
Total Assets (LHS) Total Equity (LHS)
being 30% higher than Kia’s average export ASP, it estimates
Asset Turnover (RHS)
sales of 130K vehicles will enable it to breakeven.
ROE (%)
In fact, sales of Sorrento R in the US market have been
% impressive enough to draw strong attention from the media.
25 Sales of its redesigned SUV vehicle reached 24.8K units, far
20
exceeding Kia’s monthly sales target of 6,000. Assuming
Sorento R continues to rack up robust sales this year, we
15 believe Kia’s goal for its US production unit to breakeven in the
10 first year of full operation is within reach. And if this happens,
it could accelerate its balance sheet restructuring.
5
0 Financials and Valuation
2008A
2009A
2010F
2011F
2012F
We recently raised net profit by 36% to KRW1,662bn for

PE (x)
FY10F, and by 35% to KRW1,824bn for FY11F, after imputing
255.0 higher sales volume and blended ASP assumptions on the back
of improving product mix; and faster than expected
205.0
turnaround at Kia’s Georgia plant. Accordingly, we raised
155.0 target price from KRW21,000 to KRW33,000, based on 8x
105.0 FY10F P/E (average of 2000-05 high P/E mutiples during its
normal earnings cycle).
55.0
5.0 The counter is currently traidng at 6.1x FY10F and 5.6x FY11F
2006 2007 2008 2009
P/E, which are discounts of 62% and 50% to global peers’
averages, and 41% and 42% to Korean companies in the
KOSPI200. We believe the counter is substantially undervalued
P/Book Value (x) given that its fundamentals are turning around and its solid
1.3 earnings growth prospects. Looking ahead, we expect positive
1.2
1.1 newsflow regarding its growth prospects with the release of
1.0 1HFY10 result, and continued re-rating led by the
0.9
0.8 aforementioned factors and its attractive valuation.
0.7
0.6
0.5
0.4
0.3
2006 2007 2008 2009
Page 74
Kia Motors
Income Statement (KRW bn) Balance Sheet (KRW bn)
FY Dec 2009A 2010F 2011F 2012F FY Dec 2009A 2010F 2011F 2012F
Turnover 18,416 20,300 21,827 23,035 Total Fixed Assets 12,633 12,641 13,107 13,734
Cost of Goods Sold (13,824) (15,374) (16,555) (17,369) Invts 4,948 4,871 5,255 5,931
Gross Profit 4,591 4,926 5,273 5,666 Other LT Assets 7,685 7,770 7,852 7,803
Other Opg (Exp)/Inc (3,447) (3,625) (3,908) (4,102) Cash & ST Invts 1,912 2,294 2,684 2,980
Operating Profit 1,144 1,301 1,364 1,563 Other Current Assets 2,397 2,684 3,308 3,940
Other Non Opg (Exp)/Inc (46) 99 115 69 Total Assets 16,942 17,620 19,099 20,654
Associates & JV Inc 813 805 988 1,086
Net Interest (Exp)/Inc (212) (127) (83) (69) ST Debt 1,816 1,420 1,350 900
Exceptional Gain/(Loss) 0 0 0 0 Other Current Liab 4,030 3,758 3,766 3,764
Pre-tax Profit 1,700 2,078 2,385 2,650 LT Debt 2,728 2,592 2,342 2,042
Tax (249) (416) (560) (623) Other LT Liabilities 991 953 1,016 1,071
Shareholder's Equity 7,376 9,034 10,895 12,877
Minority Interest 0 0 0 0
Minority Interests - - - -
Preference Dividend 0 0 0 0
Total Cap. & Liab. 16,942 17,757 19,368 20,653
Net Profit 1,450 1,662 1,824 2,027
Net Profit before Except. 1,450 1,662 1,824 2,027
Chg. in Wkg. Cap 925 (245) (679) (689)
Net Debt (2,632) (1,717) (1,007) 38
EBITDA 1,827 2,002 2,104 2,339
Sales Gth (%) 12.4 10.2 7.5 5.5
EBITDA Gth (%) 78.7 9.6 5.1 11.2
Opg Profit Gth (%) 270.9 13.7 4.9 14.6
Effective Tax Rate (%) 14.7 20.0 23.5 23.5
Cash Flow Statement (KRW bn) Rates & Ratios
FY Dec 2009A 2010F 2011F 2012F
FY Dec 2009A 2010F 2011F 2012F
Gross Margin (%) 24.9 24.3 24.2 24.6
Pre-Tax Profit 1,700 2,078 2,385 2,650
Opg Profit Margin (%) 6.2 6.4 6.3 6.8
Dep. & Amort. 682 701 740 776
Net Profit M argin (%) 7.9 8.2 8.4 8.8
Tax Paid (249) (416) (560) (623)
ROAE (%) 22.1 20.3 18.3 17.1
Assoc. & JV Inc (813) (805) (988) (1,086)
ROA (%) 9.0 9.6 9.9 10.2
Chg. in Wkg. Cap 925 (245) (679) (689)
ROCE (%) 7.7 7.7 7.1 7.4
Other Operating CF 254 465 484 499
Div Payout Ratio (%) 0.0 0.0 0.0 0.0
Net Operating CF 2,499 1,778 1,381 1,527
Interest Cover (x) 5.4 10.2 16.4 22.6
Capital Exp. (net) (313) (345) (345) (345)
Asset Turnover (x) 1.1 1.2 1.2 1.2
Investments (269) 77 (384) (676)
Debtors Turn (days) 23.6 23.2 24.7 28.3
Other Investing CF (647) (503) (436) (351)
Creditors Turn (days) 76.0 75.9 70.9 66.9
Net Investing CF (1,229) (771) (1,165) (1,372)
Inventory Turn (days) 24.1 20.7 21.9 24.5
Div Paid - (97) (97) (97)
Current Ratio (x) 0.7 1.0 1.2 1.5
Chg in Gross Debt (1,009) (533) (320) (750)
Quick Ratio (x) 0.6 0.8 1.0 1.2
Capital Issues 250 - - -
Net Debt/Equity (X) 0.4 0.2 0.1 Cash
Other Financing CF 19 (0) - -
Capex to Debt (%) (0.1) (0.1) (0.1) (0.1)
Net Financing CF (740) (630) (417) (847)
Net Cashflow 530 378 (201) (692)
Opg CFPS (KRW) 6,166 4,387 3,407 3,767
Beginning cash 809 1,340 1,717 1,516
Free CFPS (KRW) 5,393 3,536 2,556 2,916
End Cash 1,340 1,717 1,516 824
Source: Company, DBS Vickers
Page 75
Dongfeng Motor
Bloomberg: 489 HK | Reuters: 0489.HK
BUY HK$11.76 HSI : 21,455 Sustainable growth ahead

Price Target : 12-month HK$ 14.90 • Launching new models to sustain business growth.
Potential Catalyst: Positive sales volume growth with new model Self-brand to complement existing brand portfolio
launches
• Solutions to industry challenges in place: prudent
Analyst capacity expansion, inventory monitoring and
Rachel Miu +852 2863 8843
rachel_miu@hk.dbsvickers.com
better cost control to mitigate rising material costs
• Maintain BUY, TP of HK$14.9
Staying competitive to maintain market position.

Price Relative Dongfeng Motor Group (DFG) is staying competitive by
HK$ Relative Index
leveraging on its operating efficiency with a flexible product
296 mix strategy. DFG will focus on launching more products
13.20
11.20
246 under its own and the foreign joint ventures’ brands. DFG
9.20 196 plans to have 8 new PV and 2 CV models this year, including
7.20
5.20
146 enhancing its Fengshen self-brand product range. Last year,
3.20
96 its overall market share in China was 10.5%.
1.20 46
2006 2007 2008 2009 2010 Prudent approach to ensure steady growth. DFG is
Dongfeng Motor (LHS) Relative HSI INDEX (RHS) monitoring three key issues closely; capacity expansion,
inventory levels and steel prices. Given its roadmap on new
Forecasts and Valuation models in the coming years, DFG will raise capacity by
19.5% to 1.7m units by end Dec10. DFG has always
FY Dec (RMB m) 2008A 2009A 2010F 2011F adopted a prudent approach to expand capacity. Currently,
Turnover 70,569 91,758 108,179 120,516
its inventory level at the distribution channels is within the
EBITDA 7,477 12,470 12,583 14,220 healthy range of 1-1.5 months. The higher steel prices will
Pre-tax Profit 4,807 8,409 9,642 11,216 impact 2H more as DFG is still consuming some low price
Net Profit 3,955 6,250 7,084 8,032 steel inventory. During the previous metal price peak cycle in
Net Pft (Pre Ex.) 3,955 6,250 7,084 8,032
EPS (RMB) 0.46 0.73 0.82 0.93 2007-08, DFG managed to keep a stable GP margin of 17%.
EPS (HK$) 0.52 0.82 0.93 1.06
EPS Gth (%) 4.9 58.0 13.3 13.4
Consistent strong performance, our top pick. DFG’s
Diluted EPS (HK$) 0.52 0.82 0.93 1.06 strong management quality and proactive business strategy
DPS (HK$) 0.05 0.10 0.09 0.11 are key to its consistent strong performance. DFG is trading
BV Per Share (HK$) 2.91 3.60 4.43 5.40 on FY10PE of 13x. Being a strong market player, we believe
PE (X) 22.5 14.3 12.6 11.1
P/Cash Flow (X) 14.5 9.0 9.5 8.7 DFG’s earnings prospect will remain robust this year. In our
EV/EBITDA (X) 11.6 5.6 5.0 4.2 opinion, the market has factored in the concerns and there is
Net Div Yield (%) 0.4 0.9 0.8 0.9 upside in valuation. Maintain BUY rating.
P/Book Value (X) 4.0 3.3 2.7 2.2
Net Debt/Equity (X) CASH CASH CASH CASH
ROAE (%) 19.9 25.3 23.3 21.6 At A Glance
Issued Capital - H shares (m shs) 2,856
Earnings Rev (%): - - - Non H shrs (m shs) 5,760
Consensus EPS (HK$): 0.97 1.08 H shs as a % of Total 33
H Mkt. Cap (HK$m/US$m) 33,583 / 4,326
Major Shareholders
Dongfeng Motor Corp. (%) 66.9
ICB Industry: Consumer Goods Major H Shareholders (%)
ICB Sector: Automobiles & Parts JPMorgan Chase & Co. (%) 6.0
Principal Business: A leading automaker with strong foreign UBS AG (%) 5.1
partnerships in the passenger and commercial vehicle segment H Shares-Free Float (%) 88.9
Source of all data: Company, DBSV, Bloomberg, HKEX Avg. Daily Vol.(‘000) 23,867
Page 76
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ed-SGC / sa- DC
Dongfeng Motor

RMB m
120,000
30.8%
Dongfeng Motor Group (DFG) assembles passenger and 100,000
commercial vehicles in China. It has three foreign ventures 80,000 25.8%
with Nissan, Honda and Peugeot-Citroen. The group is based 60,000

20.8%
in Wuhan, Hubei Province. Currently, DFG has about 1.42m 40,000
units of production capacity spread across Hubei, Guangxi, 20,000

15.8%
Guangdong and Henan for its vehicle assembly operation. 0 10.8%

DFG plans to raise capacity to 1.7m units by end Dec10 to 2007A 2008A 2009A 2010F 2011F
Total Revenue Revenue Growth (%) (YoY)
meet future growth
Industry Overview, Earnings Drivers & Risks Asset Trend

RMB m
The auto industry posted record level of vehicle sales of 100,000
13.6m units, rising 45% y-o-y, under a favourable purchase 80,000
tax policy to stimulate demand. The government continued 60,000
this policy on 1.6L and below displacement vehicles to 40,000
encourage more domestic consumption. We have projected 20,000
total vehicle sales to grow 12% to 15.2m this year. For 1Q10,
2007A 2008A 2009A 2010F 2011F
total vehicle sales were 4.6m units, about 30% of our full
year forecast. Net Fixed Assets (Tangible) Total Current Assets
DFG launched its own brand, Fengshen recently to capture

the growing interest for Chinese brand automobiles. The Profitability Trend
RMB m
consistent release of new models is an important strategy for 10,770
the Chinese auto industry as consumers have a growing 9,770
appetite for new cars. Since Dongfeng Motor has a wide 8,770
range of products, the company benefits from the mass 7,770
market and high-end demand, underpinned by rising disposal 6,770
incomes. 5,770
4,770
DFG sold 1.43m vehicles last year, c.35% increase from 3,770
2007A 2008A 2009A 2010F 2011F
2008. DFG is targeting to sell about 1.7m units of vehicles Operating EBIT Pre tax Profit Net Profit
this year, a growth of 19%, supported by 8 new PV and 2 CV

model launches.
Margin Trends (%)
There are three areas of emphasis for DFG; prudent capacity 20%
18%
expansion, close monitoring of inventory, and tight cost 16%
control in view of rising steel prices. 14%

12%
10%
The company is adopting a prudent approach in expanding 8%
6%
its production capacity to ensure high utilisation rate. It plans 4%
to raise capacity by about 20% to meet the new model 2%

0%
launches. 2007A 2008A 2009A 2010F 2011F
EBITDA Margin % EBIT Margin % Net Income Margin %
Auto makers enjoyed rather stable margins last year due to

low raw material and component costs. This year, it is
anticipated there could be some increase in costs, but
management is confident of keeping GP margins steady.
Page 77
Dongfeng Motor
Leverage & Asset Turnover (x) The potential earnings risks are a sharp retraction in vehicle
demand and sharp increases in cost of materials and
1.3
0.5 1.3
components.
1.3
0.4 1.2
1.2 Outlook
0.3
1.2
1.2
0.2
1.2 The sales target for FY10 is about 1.7m units, up 19% yoy.
1.1
0.1
1.1 DFG sold about 472K units of vehicles in 1Q10, 28% of the
0.0 1.1 full year forecast. Revenue is expected to increase c.18% to
2007A 2008A 2009A 2010F 2011F
Financial Leverage (LHS) Asset Turnover (RHS) c.RMB108.2bn. However, due to a change in product mix, GP
margin is projected to hold around the 19% range. For FY10,
net profit is estimated to grow by 13%, after a high base
ROE (%)
effect in FY09.
40.0%
The turnaround of its Dongfeng Peugeot-Citroen JV is another
35.0%
plus factor, as this company was slow in the past to bring new
30.0%
models into the market. A change in strategy has improved its
25.0%
performance last year.
20.0%
15.0%
Financials and Valuation
10.0%
2007A 2008A 2009A 2010F 2011F
DFG is our top pick in the Chinese auto market. The company
will continue to ride on the positive stimulus policy by
PE (x) government to promote auto consumption in the country. Due
18.0 to a low vehicle penetration rate in China, the medium term
16.0 prospects are positive, hence benefitting strong vehicle
14.0
manufacturers like DFG. The strong management team and
12.0
10.0
solid business strategy are factors we consider very favorable.
8.0
6.0 DFG is trading on 13x FY10 earnings. Being one of the top
4.0 three auto groups in China, we believe DFG should command
2.0
2006 2007 2008 2009
a premium to its peers listed in HK.
We priced DFG at 16x forward PE, translating into TP of
HK$14.9. We maintain BUY rating on the counter.
P/Book Value (x)
3.4
2.9
2.4
1.9
1.4
0.9
0.4
2006 2007 2008 2009
Page 78
Dongfeng Motor
Income Statement (RMB m) Balance Sheet (RMB m)
FY Dec 2008A 2009A 2010F 2011F FY Dec 2008A 2009A 2010F 2011F
Turnover 70,569 91,758 108,179 120,516 Net Fixed Assets 18,390 18,703 21,951 27,695
Cost of Goods Sold (58,688) (74,274) (88,054) (97,501) Invts in Assocs & JVs 787 896 1,130 1,411
Operating Profit 5,105 8,459 9,815 11,401 Inventory 9,356 8,741 9,615 10,577
Other Non Opg (Exp)/Inc 0 0 0 0 Debtors 12,389 17,001 17,771 20,907
Associates & JV Inc 95 195 234 281 Other Current Assets 421 592 592 592
Net Interest (Exp)/Inc (393) (245) (407) (466) Total Assets 60,449 85,689 98,112 112,518
Exceptional Gain/(Loss) 0 0 0 0
Pre-tax Profit 4,807 8,409 9,642 11,216 ST Debt 6,919 7,217 7,217 7,217
Tax (647) (1,671) (2,025) (2,580) Other Current Liab 26,538 43,219 48,801 55,279
Minority Interest (205) (488) (533) (605) LT Debt 1,781 4,424 4,424 4,424
Preference Dividend 0 0 0 0 Other LT Liabilities 319 274 274 274
Net Profit 3,955 6,250 7,084 8,032 Shareholder’s Equity 22,055 27,284 33,592 40,915
Net profit before Except. 3,955 6,250 7,084 8,032 Minority Interests 2,837 3,271 3,804 4,409
Total Cap. & Liab. 60,449 85,689 98,112 112,518
EBITDA 7,477 12,470 12,583 14,220
Sales Gth (%) 19.0 30.0 17.9 11.4 Non-Cash Wkg. Cap (4,372) (16,885) (20,822) (23,204)
EBITDA Gth (%) 20.1 66.8 0.9 13.0 Net Cash/(Debt) 5,434 22,270 29,848 34,415
Opg Profit Gth (%) 23.6 65.7 16.0 16.2
Cash Flow Statement (RMB m) Rates & Ratios
FY Dec 2008A 2009E 2010F 2011F FY Dec 2008A 2009A 2010F 2011F
Pre-Tax Profit 4,807 8,409 9,642 11,216 Gross Margin (%) 16.8 19.1 18.6 19.1
Dep. & Amort. 2,277 2,409 2,534 2,538 Opg Profit Margin (%) 7.2 9.2 9.1 9.5
Tax Paid (693) (647) (1,671) (2,025) Net Profit Margin (%) 5.6 6.8 6.5 6.7
(Pft)/ Loss on disposal of FAs 92 (109) (33) (89) ROAE (%) 19.9 25.3 23.3 21.6
Assoc. & JV Inc/(loss) (95) (195) (234) (281) ROA (%) 7.0 8.6 7.7 7.6
Non-Cash Wkg.Cap. 1,546 11,608 3,584 1,826 ROCE (%) 14.1 17.7 16.9 16.5
Other Operating CF 219 0 0 0 Div Payout Ratio (%) 9.8 12.4 10.0 10.0
Net Operating CF 8,153 21,475 13,821 13,186 Interest Cover (x) 13.0 34.5 24.1 24.5
Capital Exp.(net) (4,364) (5,000) (5,500) (8,000) Asset Turnover (x) 1.3 1.3 1.2 1.1
Other Invts.(net) (9) 0 0 0 Debtors Turn (days) 65.5 58.5 58.7 58.6
Invts in Assoc. & JV 14 (797) 0 0 Creditors Turn (days) 151.5 168.5 182.7 186.0
Div from Assoc & JV 0 0 0 0 Inventory Turn (days) 54.8 46.9 39.2 38.8
Other Investing CF (3,421) 354 441 554 Current Ratio (x) 1.1 1.2 1.2 1.3
Net Investing CF (7,780) (5,443) (5,059) (7,446) Quick Ratio (x) 0.8 1.0 1.1 1.1
Div Paid (485) (388) (776) (708) Net Debt/Equity (X) CASH CASH CASH CASH
Chg in Gross Debt 570 0 0 0 Capex to Debt (%) 50.2 43.0 47.2 68.7
Capital Issues 0 0 0 0 Z-Score (X) 2.2 2.2 3.3 3.3
Other Financing CF 2,431 1,304 (407) (466) N.Cash/(Debt)PS (RMB) 0.7 2.9 3.9 4.5
Net Financing CF 2,516 916 (1,183) (1,174) Opg CFPS (RMB) 0.87 1.30 1.35 1.50
Net Cashflow 2,889 16,948 7,578 4,566 Free CFPS (RMB) 0.50 2.17 1.10 0.68
Interim Income Statement (RMB m) Segmental Breakdown (RMB m) / Key Assumptions
FY Dec 1H2008 2H2008 1H2009 2H2009 FY Dec 2008A 2009A 2010F 2011F
Turnover 37,896 32,673 39,046 52,712 Revenues
Cost of Goods Sold (31,357) (27,331) (32,071) (42,203) Commercial vehicles 20,980 21,982 24,331 26,506
Gross Profit 6,539 5,342 6,975 10,509 Passenger vehicles 48,660 68,864 82,845 92,906
Other Oper. (Exp)/Inc (3,361) (3,415) (3,451) (5,574) Corporate and others 929 912 1,003 1,104
Operating Profit 3,178 1,927 3,524 4,935 Total 70,569 91,758 108,179 120,516
Other Non Opg (Exp)/Inc 0 0 0 0
Associates & JV Inc 33 62 77 118
Net Interest (Exp)/Inc (210) (183) (143) (102) Key Assumptions
Exceptional Gain/(Loss) 0 0 0 0 Vol sales - CV (units) 330,530 371,900 427,685 453,346
Pre-tax Profit 3,001 1,806 3,458 4,951 Vol sales - PV (units) 727,392 1,058,800 1,270,560 1,410,322
Tax (363) (284) (643) (1,028) GP margin - CV (%) 11.5 14.2 11.5 11.5
Minority Interest (166) (39) (209) (279) GP margin - PV (%) 18.2 20.7 19.0 18.5
Net Profit 2,472 1,483 2,606 3,644
Net profit bef Except. 2,472 1,483 2,606 3,644
EBITDA 3,211 1,989 3,601 5,053
Sales Gth (%) 31.5 7.1 3.0 61.3

EBITDA Gth (%) 38.8 5.5 12.1 154.0
Opg Profit Gth 39.6 3.9 10.9 156.1
Net Profit Gth (%) 27.1 (18.7) 5.4 145.7
Gross Margins (%) 17.3 16.3 17.9 19.9
Opg Profit Margins (%) 8.4 5.9 9.0 9.4
Net Profit Margins (%) 6.5 4.5 6.7 6.9
Page 79
China Foods
BUY HK$6.23 HSI : 21,455 BUY for potential

Price Target : 12 months HK$ 7.90 • We like China Foods for the potential of its
Potential Catalyst: M&A and asset injections branded F&B products
Analyst • Beverage and wine segments continue to act as
Titus Wu +852 2820 4611 the key growth engines
titus_wu@hk.dbsvickers.com
• Positive, in our view, to dispose the volatile
Alice Hui CFA, +852 2971 1960 edible oil business
alice_hui@hk.dbsvickers.com
• Maintain BUY, TP HK$7.90
Beverages the star performer. We expect China Foods

Price Relative to continue to enjoy the fruits of a booming beverage
HK$
8.40
Relative Index
219
market in China, especially still beverages. The 44%
7.40 199 volume growth of “Minute Maid” juice in FY09 further
6.40
179
159
strengthens our confidence on its beverage business in
FY10.Coupled with further capacity expansion, sales
5.40
139
4.40
119
3.40 99 growth should remain robust at 28% CAGR in FY09-11,
2.40
1.40
79
59
underpinned by brand leadership and more intense
2006 2007 2008 2009 2010
marketing efforts of Coca-Cola.
China Foods (LHS) Relative HSI INDEX (RHS)
Quality-focus wine to win. China Foods’ branded
“Greatwall” wine adopts a quality-focused strategy by
utilizing high quality vineyards in West China, and
overseas like Chile. We believe this is a more solid
FY Dec (HK$ m) 2008A 2009A 2010F 2011F cornerstone for the equity of a wine brand compared
Turnover 14,240 16,823 20,379 25,462 with Changyu’s emphasis on its brand history as Chinese
EBITDA 858 1,222 1,465 2,065
wine market is on the way to turning mature.
Pre-tax Profit 756 950 1,242 1,808
Net Profit 483 568 769 1,102 BUY for potential. We still like China Foods as we
EPS (HK$) 0.17 0.20 0.28 0.39
EPS Gth (%) (38.9) 17.5 35.4 43.3
believe its wine, beverage and confectionery businesses
Diluted EPS (HK$) 0.17 0.20 0.28 0.39 are among the segments that hold the most potential in
DPS (HK$) 0.06 0.07 0.10 0.15 the F&B market. We maintain BUY rating and target
BV Per Share (HK$) 1.82 1.96 2.20 2.50 price of HK$7.90 (22% upside to current counter),
PE (X) 36.0 30.6 22.6 15.8
P/Cash Flow (X) 30.5 21.6 17.6 12.8 translating into 0.5X PEG11F, towards the lower end
EV/EBITDA (X) 20.2 14.4 12.4 8.7 among HK listed peers. Our valuation points to a 20X
Net Div Yield (%) 1.0 1.2 1.6 2.4 PE11F, still at around 20% discount to leading players
P/Book Value (X) 3.4 3.2 2.8 2.5
like Tingyi (322 HK).
ROAE (%) 10.0 10.7 13.2 16.8
Earnings Rev (%): -10% -2% At A Glance

Consensus EPS (HK$): 0.27 0.34 Issued Capital (m shrs) 2,792
Mkt. Cap (HK$m/US$m) 17,397 / 2,241
Major Shareholders
COFCO Corporation (%) 74.3
ICB Industry: Consumer Goods Free Float (%) 25.8
ICB Sector: Food Producers Avg. Daily Vol.(‘000) 3,787
Principal Business: F&B branch of COFCO Group
Page 80
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China Foods

HK$ m
25,000
52.2%
A basket of leading F&B brands. We still like China Foods for 20,000 47.2%
its basket of leading F&B brands in four high growth potential 42.2%
15,000
divisions - wine, beverage, kitchen food and confectionery, 37.2%
most of which are still in early expansion or fast growing 10,000 32.2%
27.2%
stage in China. 5,000
22.2%
0 17.2%
Industry Overview, Earnings Drivers & Risks 2007A 2008A 2009A 2010F 2011F
Catfish effect in wine market. The rising popularity of

imported wines would continue to threaten domestic Asset Trend
wineries, but also help to accelerate the growth of the HK$ m
12,000
market and ultimately benefit all players. We believe the wine
10,000
market in China is stepping into the take-off stage. Rising
8,000
income levels will underpin consumers’ affordability and 6,000
generate interest in wines. Their increasingly enriched 4,000
knowledge and improving palate for wines should boost the 2,000
popularity of high quality wines.

2007A 2008A 2009A 2010F 2011F
Booming beverage market. As one of the top 10 bottlers of Net Fixed Assets (Tangible) Total Current Assets
Coca-Cola globally, China Foods will continue to enjoy the

fruit of the booming soft drink market in China. While
demand for sparkling beverage is still expected to grow Profitability Trend
HK$ m
steadily, still beverages should be the key growth engine 1,683
ahead.
1,483
1,283
Outlook
1,083
883
Quality-focused Greatwall wines. China Foods’ branded

683
“Greatwall” wine has been making considerable progress
recently with a more refined product portfolio and a more
483
2007A 2008A 2009A 2010F 2011F
Operating EBIT Pre tax Profit Net Profit
integrated distribution platform. More importantly, Greatwall
adopts a quality-focused strategy by utilizing high quality
vineyards in West China, and overseas like Chile. We believe Margin Trends (%)
this is a more solid cornerstone for the equity of a wine brand 20%
compared with Changyu’s emphasis on its brand history as 18%
16%
Chinese wine market is on the way to turning mature. 14%
12%
Capacity expansion + Backup from Coca-Cola. The beverage 10%

8%
business will be driven by on-going capacity expansion for 6%
4%
sparkling beverages. Meanwhile, the expected 2%
commencement of still beverage production should improve 0%
2007A 2008A 2009A 2010F 2011F
China Foods’ margins led by cost savings in logistics. EBITDA Margin % EBIT Margin % Net Income Margin %
Additionally, the brand leadership of Coca-Cola as well as
greater marketing efforts expected should drive growth
further.
Page 81
China Foods
Leverage & Asset Turnover (x)

Strong turnaround in Confectionery. The management team
had been making efforts in product innovation, brand
0.3
1.8
marketing, inventory management, as well as a restructuring
0.2 1.6
of its distribution strategy, and generated 43% sales growth in
0.2 1.4
FY09. However, we do not expect the business to be profitable
1.2
until 2H10-1H11, given that material prices, A&P spending, as
0.1
1.0
well as competition from foreign brands remain high.
0.1
0.8
Positive to dispose oil business. The disposal of edible oil
0.0 0.6
2007A 2008A 2009A 2010F 2011F business seems to be up on the cards especially considering the
Financial Leverage (LHS) Asset Turnover (RHS)
comments from CEO of China Agri (606 HK)-the sister
company of China Foods. Despite the high sales contribution
ROE (%) (36% in FY09), the oil business is quite volatile and is even loss
making in certain years. Hence we believe it is positive for
20.0% China Foods to dispose this segment and focus more on
18.0%
16.0% discretionary F&B products which hold higher potential.
14.0%
12.0%
10.0% Asset injection. If the disposal of oil business comes true, we
8.0%
6.0%
believe more F&B assets could be injected into China Foods,
4.0% which is the only listed platform for branded F&B products of
2.0%
0.0% COFCO. The potential candidates are”Wugudaochang” instant
2007A 2008A 2009A 2010F 2011F
noodle as well as “Lohas” juice, which may take place in one
or two years
PE (x)
38.0
33.0
Investing for the future. Though there are rising concerns on
28.0
increasing material prices for F&B companies, we don’t expect
23.0
too much pressure on China Foods’ gross margin, as most of
18.0
its products are discretionary products with leading market
13.0
presence, hence, less-price sensitive. Meanwhile its relatively
8.0
low EBITDA margin (7.3% in FY09) was largely due to heavy
2006 2007 2008 2009
marketing and distribution spending, which we believe was
necessary for the company to gain more market share in the
fast-growing wine and beverage market.
P/Book Value (x)
4.1 More confidence on beverages. The 44% volume growth of
3.6 “Minute Maid” juice in FY09 further strengthens our
3.1 confidence on its beverage business in FY10. In early10, the
2.6 company also started a vineyard expansion plan of 30k mu (2k
2.1
h.a.) in Xinjiang, as a part of COFCO’s “Complete Industrial
1.6
Chain” strategy. We firmly believe this strategy would drive
1.1
China Foods into a highly-competitive top F&B player in future.
0.6
2006 2007 2008 2009
BUY for potential. We still like China Foods as we believe its
wine, beverage and confectionery businesses are among the
segments that hold the most potential in the F&B market. We
maintain BUY rating and target price of HK$7.90 (22% upside
to current counter), translating into 0.5X PEG11F, towards the
lower end among HK listed peers. Our target price points to a
20X PE11F, still at around 20% discount to Tingyi (322 HK).
Page 82
China Foods
Income Statement (HK$ m) Balance Sheet (HK$ m)
Cost of Goods Sold (10,742) (12,122) (14,585) (18,129) Invts in Assocs & JVs 412 447 447 447
Operating Profit 646 926 1,187 1,748 Inventory 2,629 2,846 3,397 4,073
Pre-tax Profit 756 950 1,242 1,808 ST Debt 248 303 450 450
Tax (136) (229) (273) (416) Other Current Liab 3,763 4,626 4,364 4,897
Minority Interest (137) (152) (199) (290) LT Debt 0 500 500 500
Net Profit 483 568 769 1,102 Shareholder’s Equity 5,092 5,483 6,156 6,981
Minority Interests 1,233 1,402 1,402 1,402
Total Cap. & Liab. 10,448 12,496 13,002 14,361
EBITDA 858 1,222 1,465 2,065
Sales Gth (%) 46.2 18.1 21.1 24.9 Non-Cash Wkg. Cap 245 (24) 1,276 1,797
EBITDA Gth (%) (16.3) 42.3 19.9 41.0 Net Cash/(Debt) 1,311 1,186 623 741
Opg Profit Gth (%) (26.0) 43.3 28.2 47.3
Cash Flow Statement (HK$ m) Rates & Ratios
Pre-Tax Profit 756 950 1,242 1,808 Gross Margin (%) 24.6 27.9 28.4 28.8
Dep. & Amort. 212 296 278 317 Opg Profit Margin (%) 4.5 5.5 5.8 6.9
Tax Paid (168) (136) (229) (273) Net Profit Margin (%) 3.4 3.4 3.8 4.3
(Pft)/ Loss on disposal of FAs 0 0 0 1 ROAE (%) 10.0 10.7 13.2 16.8
Assoc. & JV Inc/(loss) 0 0 0 0 ROA (%) 5.0 5.0 6.0 8.1
Non-Cash Wkg.Cap. (371) (222) (1,344) (664) ROCE (%) 8.3 9.6 11.2 14.9
Other Operating CF 446 172 0 (1) Div Payout Ratio (%) 36.0 36.0 36.0 38.0
Net Operating CF 876 1,060 (54) 1,188 Interest Cover (x) 43.6 25.3 237.3 349.6
Capital Exp.(net) (459) (874) (367) (500) Asset Turnover (x) 1.5 1.5 1.6 1.9
Other Invts.(net) (47) (430) 254 (3) Debtors Turn (days) 24.1 21.3 22.2 22.5
Invts in Assoc. & JV (188) 513 (50) 0 Creditors Turn (days) 57.0 53.5 52.9 56.1
Other Investing CF 40 19 0 0 Current Ratio (x) 1.4 1.3 1.5 1.6
Net Investing CF (557) (772) (163) (503) Quick Ratio (x) 0.7 0.8 0.8 0.8
Chg in Gross Debt (172) 555 147 0 Capex to Debt (%) 185.2 108.8 38.6 52.6
Capital Issues 0 38 0 0 Z-Score (X) CASH CASH CASH CASH
Other Financing CF 234 (118) (52) 0 N.Cash/(Debt)PS (HK$) 0.5 0.4 0.2 0.3
Net Financing CF (168) 108 (200) (567) Opg CFPS (HK$) 0.45 0.46 0.46 0.66
Net Cashflow 150 396 (417) 119 Free CFPS (HK$) 0.15 0.07 (0.15) 0.25
Interim Income Statement (HK$ m) Segmental Breakdown (HK$ m)
Cost of Goods Sold (6,479) (4,262) (5,853) (6,269) Kitchen food 6,512 6,008 7,062 8,606
Gross Profit 1,676 1,822 2,338 2,363 Wine 2,790 3,197 3,750 4,480
Other Oper. (Exp)/Inc (1,322) (1,530) (1,862) (1,914) Confectionery 365 520 624 748
Operating Profit 354 292 476 450 Beverages 4,574 7,098 8,944 11,627
Associates & JV Inc 62 63 67 (6) Total 14,240 16,823 20,379 25,462
Net Interest (Exp)/Inc (7) (8) (38) 1 Gross Profit
Exceptional Gain/(Loss) 0 0 0 0 Kitchen food 514 583 791 1,033
Pre-tax Profit 408 348 505 445 Wine 1,599 1,854 2,194 2,643
Tax (83) (53) (111) (119) Confectionery 139 254 305 367
Minority Interest (84) (53) (93) (59) Beverages 1,247 2,010 2,504 3,291
Net Profit 242 242 301 267
Total 3,498 4,701 5,794 7,333
EBITDA 463 395 608 609 Gross Profit Margins
Kitchen food 7.9 9.7 11.2 12.0
Sales Gth (%) 89.9 11.7 0.4 41.9 Wine 57.3 58.0 58.5 59.0
EBITDA Gth (%) 6.6 (41.4) 31.4 54.1 Confectionery 38.0 48.9 48.9 49.0
Opg Profit Gth 25.1 (50.5) 34.6 53.8 Beverages 27.3 28.3 28.0 28.3
Net Profit Gth (%) (36.0) (41.6) 24.5 10.5
Gross Margins (%) 20.6 29.9 28.5 27.4 Total 24.6 27.9 28.4 28.8
Page 83
Want Want China
BUY HK$5.94 HSI : 21,455 Play niche

Price Target : 12 months HK$ 6.5 (Prev HK$6.0)
• “Big year” for rice crackers.
Potential Catalyst: Better-than-expected growth of rice crackers
• Successful niche play in beverage market.
Analyst
Titus Wu +852 2820 4611 • Improving supply chain management.
titus_wu@hk.dbsvickers.com
• Better earnings outlook; Maintain BUY, TP
Alice Hui CFA, +852 2971 1960 raised to HK$6.5.
alice_hui@hk.dbsvickers.com
“Big year” for rice crackers. We expect Rice crackers

to resume growth in FY10, on the back of its dominant
Price Relative
HK$ Relative Index
market position, restructured and more efficient
6.30
distribution network, strong track record in launching
successful products and effective marketing strategy.
219
5.80
5.30
4.80
169
With well-diversified product portfolio, Want Want
4.30
3.80
119
would continue to explore new market opportunities and
3.30
2.80
69 outperform in the F&B market.
2.30
Mar-08 Sep-08 Mar-09 Sep-09 Mar-10
19
Beverage as key growth engine. Want Want has
Want Want China (LHS) Relative HSI INDEX (RHS) successfully expanded its presence in the beverage
segment as a niche player. Its pocket drink has been
Forecasts and Valuation gaining popularity since its launch in 2009, and has
already contributed 8.1% of its total beverage sales in
2009. We believe Want Want would continue to gain
FY Dec (US$ m) 2008A 2009A 2010F 2011F
share in the beverage share given its effective and
Turnover 1,554 1,711 2,282 2,975
EBITDA 352 408 512 654 innovative production and strong brand awareness.
Pre-tax Profit 310 360 460 598
Maintain BUY. Cash position remained strong
Net Profit 263 313 388 489
EPS (US$) 0.02 0.02 0.03 0.04 (US$348m net cash) with sustainable payout at a high
EPS (HK$) 0.16 0.18 0.23 0.29 89% in FY09. We expect its robust beverage sales to
EPS Gth (%) 45.5 18.3 24.3 26.0 further drive growth ahead. With improving outlook and
Diluted EPS (HK$) 0.16 0.18 0.23 0.29
DPS (HK$) 0.15 0.16 0.19 0.24
projected FY09-11 core earnings CAGR of 30%, we
BV Per Share (HK$) 0.55 0.58 0.69 0.79 expect the valuation gap with F&B leaders like Tingyi to
PE (X) 38.3 32.3 26.0 20.6 narrow. Premised on 21x FY11 PE, or c.0.9x PEG, we
P/Cash Flow (X) 32.7 27.8 22.9 18.4
raised TP to HK$6.5. Maintain BUY.
EV/EBITDA (X) 28.2 23.9 19.1 14.9
Net Div Yield (%) 2.6 2.7 3.3 4.1
P/Book Value (X) 10.9 10.2 8.6 7.5
ROAE (%) 32.4 32.6 35.8 38.9 At A Glance
Issued Capital (m shrs) 13,211
Earnings Rev (%): - 2% 78,492 / 10,111
Mkt. Cap (HK$m/US$m)
Consensus EPS (HK$): 0.23 0.27
Major Shareholders
Tsai Eng-Meng (%) 48.8
Free Float (%) 51.2
ICB Industry: Consumer Goods Avg. Daily Vol.(‘000) 12,029
ICB Sector: Food Producers
Principal Business: Major snack food company in China
Page 84
www.dbsvickers.com
ed-GC / sa- AH GL
Want Want China

US$ m
3,000
44.6%
Market leader in the rice crackers, flavored milk and soft 2,500 39.6%
candies segments. This puts Want Want well ahead of its 2,000 34.6%
competitors, especially in rice crackers. Its strong brand and 1,500

29.6%
competitive advantages provide a natural entry barrier amid 1,000

24.6%
19.6%
heightened food safety concerns in China. 500 14.6%
0 9.6%
Successful product rollout, innovative marketing. Strong 2007A 2008A 2009A 2010F 2011F
brand reputation aside, we believe Want Want’s success was Total Revenue Revenue Growth (%) (YoY)
attributed to its strong product offerings, both in terms of

varieties and in terms of innovation, as well as its effective
Asset Trend
marketing strategy. The company has over the years US$ m
developed a well-diversified product portfolio, with revenue 2,000
spread evenly across rice crackers, beverages and snack food.

1,500
1,000
Industry Overview, Earnings Drivers & Risks
500
Stable growth for rice crackers and snacks. We expect rice

crackers and snack food market to sustain solid growth. It 2007A 2008A 2009A 2010F 2011F
was noted that the company’s sales have been leaning Net Fixed Assets (Tangible) Total Current Assets
increasingly towards core brands and gift packs, indicating a

shift to higher-margin product categories in the past several
years. We expect the consumption upgrade to continue to Profitability Trend
US$ m
drive rice crackers market ahead. 576
526
Booming beverage market. While the bulk of Want Want’s 476
beverage revenue comes from flavored milk, contributions 426
from other beverages have been increasing over the past few
376
326
years. On the back of rising non-dairy beverage sales, Want 276
Want achieved solid beverage sales CAGR of 43% in FY04- 226
FY09. 176
2007A 2008A 2009A 2010F 2011F
Outlook
Margin Trends (%)

Beverage as key engine. Want Want has successfully 30%
expanded its presence into the beverage as a niche player,
making it the key growth engine. Its pocket drink has been 25%
gaining popularity since its launch in 2009, and has already

20%
contributed 8.1% of total beverage sales in 2009. We
believe Want Want would continue to gain market share in 15%
beverage sales through its effective and innovative
production and strong brand awareness. 10%
2007A 2008A 2009A 2010F 2011F
“Big year” for Rice cracker. Following the disappointing
performance in FY09, we expect rice crackers to resume
growth in FY10 as inventory normalizes and restructuring in
Page 85
Want Want China
Leverage & Asset Turnover (x) distribution channel starts to take effect. Seasonality should
also be more favourable this year with the CNY falling in
0.5 1.6
0.4
February (instead of January in FY09 where sales were pushed
0.4
1.5
forward to previous year hence creating higher base). All-in,
0.3 1.4
we expect rice crackers to resume a strong double-digit growth
0.3
0.2
1.3 in FY10 (vs 18% expected decline in FY09).
0.2 1.2
0.1
1.1 Expansion into noodle – limited impact. Want Want plans to
0.1
0.0 1.0 expand into rice-based instant noodle market this year. While it
2007A 2008A 2009A 2010F 2011F is too early to gauge the impact, we believe risk should be
limited considering its relatively small initial investment
(c.US$20m).
ROE (%)

60.0%
55.0%
50.0%
45.0% Limited pressures from materials. We don’t expect too much
40.0%
35.0%
pressure from price increase of raw materials for Want Want as
30.0% its business is more discretionary. Leveraging on its strong
25.0%
20.0% market position, the company is anticipated to increase its ASP
15.0%
10.0%
in 1H10 to pass on the cost hike of certain materials like rice
2007A 2008A 2009A 2010F 2011F and sugar.
Effective A&P spending. Want Want is arguably the most

PE (x) effective in its A&P efforts among all F&B players, with its A&P
31.0
of sales being relatively stable around 3% in the past five
29.0
years. Looking forward, the company would inch up that ratio
27.0 to 3.2-3.3% as competition in beverage market intensifies.
25.0 Again, beverage sales are expected to remain strong for Want
23.0 Want and higher sales from newer products should benefit
21.0 margins as a whole.
19.0
17.0
Mar-08 Sep-08 Mar-09 Sep-09 Mar-10
Improving supply chain management. Following the rice
crackers hiccup in 2008-2009, the company has restructured
its distribution network to enhance the efficiencies and control
on channels. The incorporation of SAP system would also help
P/Book Value (x) improve the supply chain management. Hence we expect the
9.5 improvement on cash conversion cycle to sustain in the coming
years (92 days in FY08 to 85 days in FY09).
8.5
7.5
Valuations. Cash position remained strong (US$348m net cash)
6.5 with payout maintained at a high 89% in FY09, which should
5.5
be sustainable in the future. We expect its robust beverage
sales to further drive growth ahead. With improving outlook
4.5
Mar-08 Sep-08 Mar-09 Sep-09 Mar-10 and projected FY09-11 core earnings CAGR of 30%, we
expect the valuation gap with F&B leaders like Tingyi to
narrow. Premised on 23x FY11 PE, or c.0.9x PEG, we raised TP
to HK$6.5. Maintain BUY.
Page 86
Want Want China
Income Statement (US$ m) Balance Sheet (US$ m)
Turnover 1,554 1,711 2,282 2,975 Net Fixed Assets 555 624 670 727
Cost of Goods Sold (957) (1,019) (1,368) (1,790) Invts in Assocs & JVs 2 3 3 3
Gross Profit 597 692 915 1,185 Other LT Assets 50 56 57 60
Other Opg (Exp)/Inc (290) (336) (456) (591) Cash & ST Invts 284 705 562 515
Operating Profit 307 356 459 594 Inventory 346 223 397 519
Other Non Opg (Exp)/Inc 0 0 0 0 Debtors 181 147 186 234
Net Interest (Exp)/Inc 2 4 2 4 Total Assets 1,425 1,758 1,876 2,057
Pre-tax Profit 310 360 460 598 ST Debt 2 217 30 20
Tax (47) (47) (71) (108) Other Current Liab 323 408 462 543
Minority Interest 0 (1) (1) (1) LT Debt 165 140 200 150
Net Profit 263 313 388 489 Shareholder’s Equity 931 988 1,179 1,338
Minority Interests 4 5 5 6
Total Cap. & Liab. 1,425 1,758 1,876 2,057
EBITDA 352 408 512 654
Sales Gth (%) 42.0 10.1 33.4 30.4 Non-Cash Wkg. Cap 211 (38) 122 210
EBITDA Gth (%) 26.1 15.9 25.5 27.8 Net Cash/(Debt) 118 348 332 345
Opg Profit Gth (%) 34.7 16.1 28.8 29.5
Cash Flow Statement (US$ m) Rates & Ratios
Pre-Tax Profit 310 360 460 598 Gross Margin (%) 38.4 40.5 40.1 39.8
Assoc. & JV Inc/(loss) (1) 0 0 0 ROA (%) 20.5 19.6 21.4 24.9
Non-Cash Wkg.Cap. (131) 236 (176) (124) ROCE (%) 26.3 25.3 28.0 33.3
Other Operating CF (2) 0 0 0 Div Payout Ratio (%) 98.7 88.7 85.0 85.0
Net Operating CF 182 600 291 462 Interest Cover (x) N/A N/A N/A N/A
Other Invts.(net) (20) (2) (2) (4) Debtors Turn (days) 19.5 18.3 13.6 13.8
Invts in Assoc. & JV 0 0 0 0 Creditors Turn (days) 31.8 35.2 34.0 34.3
Other Investing CF 0 17 (8) 0 Current Ratio (x) 2.5 1.7 2.3 2.3
Chg in Gross Debt (18) 190 (127) (60) Capex to Debt (%) 42.4 35.6 42.8 68.1
Other Financing CF 9 (38) 0 0 N.Cash/(Debt)PS (US$) 0.1 0.2 0.2 0.2
Net Financing CF (77) (68) (325) (390) Opg CFPS (US$) 0.19 0.21 0.27 0.35
Net Cashflow 14 421 (143) (47) Free CFPS (US$) 0.07 0.28 0.11 0.20
Interim Income Statement (US$ m) Segmental Breakdown (US$ m)
Turnover 594 709 844 798 Revenues
Cost of Goods Sold (353) (445) (512) (490) Rice crackers 561 468 566 663
Gross Profit 241 264 333 308 Dairy products and 536 798 1,140 1,554
Other Oper. (Exp)/Inc (109) (114) (176) (170) beverages
Operating Profit 132 150 157 138 Snack foods 448 435 557 683
Other Non Opg (Exp)/Inc 0 0 0 0 Others 9 10 20 76
Associates & JV Inc 0 0 1 0
Net Interest (Exp)/Inc 0 (1) 3 1 Total 1,554 1,711 2,282 2,975
Exceptional Gain/(Loss) (16) 0 0 0 Gross Profit
Pre-tax Profit 116 149 161 139 Rice crackers 223 206 250 292
Tax (14) (20) (27) (18) Dairy products and 177 287 415 566
Minority Interest (1) 0 0 0 beverages
Net Profit 101 129 134 121 Snack foods 195 198 247 306
Others 2 1 3 21
EBITDA 160 176 176 163
Total 597 692 915 1,185
Sales Gth (%) N/A 41.8 42.1 12.5 Gross Profit Margins
EBITDA Gth (%) N/A 47.7 10.0 (7.6) Rice crackers 39.7 44.1 44.1 44.1
Opg Profit Gth N/A 57.2 18.5 (8.0) Dairy products and 33.0 36.0 36.4 36.4
Net Profit Gth (%) N/A 71.2 31.8 (6.4) beverages
Gross Margins (%) 40.6 37.2 39.4 38.6 Snack foods 43.6 45.5 44.4 44.8
Opg Profit Margins (%) 22.3 21.1 18.6 17.3 Others 17.7 5.8 15.0 28.0
Total 38.4 40.5 40.1 39.8
Page 87
Faber Group
Bloomberg: FAB MK EQUITY | Reuters: FBMS.KL
BUY RM2.31 KLCI : 1,337.01 Underappreciated GLC

• Underappreciated, well-managed GLC trading at CY11F
Price Target : 12-Month RM 3.55 PE of 7.6x (ex-cash) with a cash-rich balance sheet. Also
Potential Catalyst: More contracts secured from overseas, upward an excellent play on our anchor market theme – relisting
revision of concession rates of GLCs
• Proxy to resilient healthcare industry where local
Analyst facilities management (FM) concession is cash cow
Chong Tjen-san, CFA +603 2711 2222
juliana@hwangdbsvickers.com.my • Overseas expansion and potential JVs with other GLC
developers will provide incremental growth
Juliana Ramli +603 2711 2222
juliana@hwangdbsvickers.com.my • Reiterate Buy and RM3.55 SOP-derived TP.
Faber is an underappreciated, well-managed GLC which is
34%-owned by Khazanah Nasional. It’s core business is providing
Price Relative FM services to the local healthcare industry. It trades at CY11F PE
RM Relative Index of 7.6x (ex-cash) on the back of 10.6% 3-year EPS CAGR in spite
440 of a regulated concession business, 1.3x FY11F BV, with ROEs of
2.40
390 c.19-20% and has a cash-rich balance sheet (net cash 34.5 sen
1.90 340
290
per share). It is also a proxy to the resilient healthcare industry
1.40 240 where the renewal of its concession in Oct 2011 will give another
0.90
190
15 years of solid earnings visibility, in our view. Kicker will be a
140
0.40 90
potential tariff increase which will be margin and ROE accretive,
2006 2007 2008 2009 2010
where a 10% increase in the total concession revenue will raise
Faber Group (LHS) Relative KLCI INDEX (RHS)
our DCF valuation by 5% and SOP by 15 sen.
Overseas expansion to drive growth. Faber’s strong franchise
Forecasts and Valuation locally (consistently ranked no. 1) has enabled it to export its
expertise overseas to two key markets – Middle East and India. It
FY Dec (RM m) 2009A 2010F 2011F 2012F
has c.RM216m p.a. (25% of FY10F revenue) and c.RM20m p.a.
Turnover 805 890 952 1,002 contracts in the Middle East and India respectively. Size of the FM
EBITDA 163 173 189 202
industry in UAE is estimated to be worth US$704bn while pre-tax
Net Profit 83 86 95 102 margins are higher at c.24%. We estimate every RM50m increase
Net Pft (Pre Ex.) 75 86 95 102 in contract value p.a. from UAE will lift FY10F-11F EPS by 7-8%.
EPS (sen) 22.8 23.7 26.1 28.0
EPS Pre Ex. (sen) 20.8 23.7 26.1 28.0
Reiterate Buy call and RM3.55 SOP-derived TP, implying 13.6x
EPS Gth Pre Ex (%) 24 14 10 7 CY11F EPS and 2.4x CY11F BV. We believe the stock is grossly
Diluted EPS (sen) 22.8 23.7 26.1 28.0 undervalued considering its good earnings visibility from the long-
Net DPS (sen) 4.5 4.7 5.2 5.5 term cash-generating FM concession, potential growth coming
BV Per Share (sen) 107.2 126.5 147.9 170.7 from the overseas expansion particularly UAE, and strong balance
PE (X) 10.1 9.7 8.8 8.3 sheet. Faber is an excellent play on our anchor market theme –
PE Pre Ex. (X) 11.1 9.7 8.8 8.3
P/Cash Flow (X) 8.1 7.6 6.9 6.4 relisting of GLCs. In our view, Khazanah will use Faber as the listed
EV/EBITDA (X) 4.8 4.3 3.6 3.0 vehicle to monetise the embedded value of Pantai's concession
Net Div Yield (%) 1.9 2.0 2.2 2.4 whilst also giving the listed entity immediate enlargement in
P/Book Value (X) 2.2 1.8 1.6 1.4 market capitalisation, scale and market penetration.
ROAE (%) 23.4 20.3 19.0 17.6
At A Glance
Earnings Rev (%): - - -
Consensus EPS (sen): 27.2 28.8 28.0 Issued Capital (m shrs) 363
Mkt. Cap (RMm/US$m) 839 / 262
ICB Industry : Health Care Major Shareholders
ICB Sector: Health Care Equipment & Servic Khazanah Nasional (%) 34.3
Principal Business: An integrated facilities management service Universal Trustee (Malay) (%) 23.4
provider and a property developer Free Float (%) 42.3
Source of all data: Company, DBS Vickers, Bloomberg Avg. Daily Vol.(‘000) 1,429
Page 88
www.dbsvickers.com
sa: WMT
Faber Group

RM m
A key player in Facilities Management. Faber Group was 1,000 19.8%

incorporated in May 1963, when Merlin Hotels Malaysia was 800
first incorporated. It merged with Faber Union Sdn Bhd to 600
14.8%
form Faber Merlin Malaysia Bhd and then changed its name 9.8%
400
to Faber Group Bhd in Nov 1990 with core businesses in 4.8%
200
hospitality and property. Faber then expanded its portfolio
0 -0.2%
after being awarded a 15-year concession in Oct 1996 for 2008A 2009A 2010F 2011F 2012F
hospital support services to government hospitals in the Total Revenue Revenue Growth (%) (YoY)
northern states of Peninsular Malaysia and in East Malaysia.

Faber had undergone a series of restructuring exercises since
2000 after it was hit by the Asian Financial Crisis in 1997-98. Asset Trend
It was then re-listed on the Main Board of Bursa Malaysia in RM m
Nov 2004 and exited the hotel sector in 2008. It is currently 1,000
34.3%-owned by Khazanah via UEM Group. 800
600
Outlook, Earnings Drivers & Risks 400
200
Renewal of the concession is a given. The current 15-year

2008A 2009A 2010F 2011F 2012F
hospital support service concession is due to expire in Oct
Net Fixed Assets (Tangible) Total Current Assets
2011. We believe that the renewal of the concession is not an
issue considering Faber is a GLC and has the largest market
share of 50%. Faber is also ranked no.1 by the Ministry of
Profitability Trend
Health for overall service performance compared to the other RM m
202
two concessionaires, Pantai Medivest Sdn Bhd and Radicare
(M) Sdn Bhd. Kicker will be a potential tariff increase, in 182
which a 10% increase in the concession revenue will raise our 162
TP by 15 sen. The concession alone contributed c.64% to 142
group revenue and c.53% to PBT in FY09. 122
102
Growth from overseas expansion. Faber’s strong franchise 82
locally has enabled it to export its expertise overseas i.e. the

2008A 2009A 2010F 2011F 2012F
Middle East and India. It has c.RM216m p.a. (25% of FY10F

revenue) and c.RM20m p.a. contracts in the Middle East and
India respectively. We expect FY10F-12F earnings growth to Margin Trends (%)
be mainly driven by the overseas FM business in UAE. The FM 30%
industry is growing rapidly in the Middle East as the number 25%
of completed buildings increases following the construction 20%

boom over past few years. FM industry in UAE alone is 15%
estimated to be worth US$704bn over 25 years. We project
10%
revenue from UAE to grow by 60% in FY10F and 17% in
5%
FY11F assuming 91% and 86% of the total contracts secured
0%
are recognized respectively. We have also assumed additional 2008A 2009A 2010F 2011F 2012F
new c.RM50m p.a. contract in FY11 and expect a portion of EBITDA Margin % EBIT Margin % Net Income Margin %
this to be recognized during the year.
Committed to expand property business. Faber remains Source: Company, DBS Vickers
committed to expanding its property business (15% of FY10F
Page 89
Faber Group
Leverage & Asset Turnover (x) revenue and 21% of FY10F pre-tax profit) with land bank of
just 43 acres, where its strong cash in its kitty will enable it to
1.0
0.6 1.0
acquire more land bank. We also do not discount potential JVs
0.5 1.0 with other Khazanah-owned developers. At the moment, we
0.9
0.4 0.9 expect that the property business to perform better this year
0.3
0.9 with total GDV of RM495m for the projects to be launched.
0.9
0.2 0.9
0.1
0.8
0.8
An excellent play on one of our anchor market theme –
0.0 0.8 relisting of GLCs. The wildcard for Faber is potential M&As
2008A 2009A 2010F 2011F 2012F
where the most obvious candidate is another FM
concessionaire, Pantai Medivest Sdn Bhd (Pantai Holding’s
subsidiary), given the common shareholding in Khazanah.
ROE (%) While we acknowledge management’s view that more players
are healthy for competition, the appeared willingness of
40.0%
Pantai’s shareholders to exit the business (believed to be in its
35.0%
effort to focus on growing its hospital business) may prove to
30.0%
be an ideal fit for Faber. In our view, Khazanah will use Faber
25.0%
as the listed vehicle to monetise the embedded value of
20.0%
Pantai's concession whilst also giving the listed entity
15.0%
immediate enlargement in market capitalisation, scale and
10.0%
2008A 2009A 2010F 2011F 2012F market penetration to other states.
Key risks to our forecasts and views include failure to renew

PE (x) concession, which we believe is highly unlikely, and changes in
concession rates. Slower progress billings and failure to renew
11.0
contracts in UAE could also affect earnings.
9.0
7.0 Financials and Valuation

5.0
Overseas business to drive growth. We project earnings to
3.0
grow by 14% to RM86.2m in FY10F and 10% to RM94.8m in
1.0
2006 2007 2008 2009 2010
FY11F, driven by overseas business particularly in UAE. We
expect FM overseas share of pre-tax contribution to expand to
34-36% in FY10F-11F (from 25% in FY09) as more contracts
are recognized going forward. Nonetheless, FM concession will
P/Book Value (x) still remain the key contributor to earnings.
2.2
2.0
1.8 We have a Buy call and RM3.55 SOP-derived TP, implying
1.6 13.6x FY11F EPS and 2.4x FY11F BV. We believe the stock is
1.4
1.2
grossly undervalued considering its long-term cash-rich FM
1.0 concession and potential growth from the overseas expansion.
0.8
The stock is only trading (ex-cash) at 7.6x FY11F EPS and 1.3x
0.6
0.4
FY11F BV. We value the FM business based on DCF method
2006 2007 2008 2009 2010 (WACC: 11.6%; terminal growth: 1.0%) given the long-term
earnings visibility. Meanwhile, the property segment is valued
based in 10x CY11F EPS, consistent with the average small-mid
cap property peers’ valuation.
Page 90
Faber Group
Income Statement (RM m) Balance Sheet (RM m)

Turnover 805 890 952 1,002 Net Fixed Assets 146 172 195 215
Cost of Goods Sold (561) (625) (661) (689) Invts in Associates & JVs 0 0 0 0
Gross Profit 245 265 291 313 Other LT Assets 44 43 41 40
Other Opng (Exp)/Inc (102) (117) (129) (141) Cash & ST Invts 305 381 469 378
Net Interest (Exp)/Inc (1) (1) 0 2 Total Assets 891 1,029 1,167 1,115
Net Profit 83 86 95 102 Shareholder’s Equity 389 459 537 620
Net Profit before Except. 75 86 95 102 Minority Interests 67 92 119 147
EBITDA 163 173 189 202 Total Cap. & Liab. 891 1,029 1,167 1,115
Sales Gth (%) 20.5 10.5 7.0 5.2 Non-Cash Wkg. Capital 117 128 140 150
EBITDA Gth (%) 25.8 5.6 9.5 7.0 Net Cash/(Debt) 125 195 276 370
Opg Profit Gth (%) 33.7 4.4 9.0 6.3
Net Profit Gth (%) (46.9) 4.3 9.9 7.2
Cash Flow Statement (RM m) Rates & Ratio
Pre-Tax Profit 141 148 162 174 Gross Margins (%) 30.4 29.8 30.6 31.2
Assoc. & JV Inc/(loss) 0 0 0 0 ROAE (%) 23.4 20.3 19.0 17.6
Chg in Wkg.Cap. (71) (10) (12) (10) ROA (%) 10.0 9.0 8.6 8.9
Other Operating CF 9 7 7 7 ROCE (%) 17.6 16.0 14.9 15.3
Net Operating CF 64 131 144 158 Div Payout Ratio (%) 19.8 19.8 19.8 19.8
Capital Exp.(net) (36) (50) (50) (50) Net Interest Cover (x) 124.9 142.4 NM NM
Other Invts.(net) 0 0 0 0 Asset Turnover (x) 1.0 0.9 0.9 0.9
Invts in Assoc. & JV 0 0 0 0 Debtors Turn (avg days) 127.1 152.6 155.0 156.3
Div from Assoc & JV 0 0 0 0 Creditors Turn (avg days) 141.2 154.4 158.7 160.3
Other Investing CF 5 5 5 5 Inventory Turn (avg days) 6.8 2.7 2.8 2.8
Net Investing CF (30) (45) (45) (45) Current Ratio (x) 2.8 2.9 3.2 2.8
Div Paid (29) (16) (17) (19) Quick Ratio (x) 2.6 2.8 3.0 2.7
Chg in Gross Debt (10) 7 7 (186) Net Debt/Equity (X) CASH CASH CASH CASH
Capital Issues 0 0 0 0 Net Debt/Equity ex MI (X) (0.3) (0.4) (0.5) (0.6)
Other Financing CF (2) 0 0 0 Capex to Debt (%) 19.9 26.9 25.9 676.8
Net Financing CF (41) (10) (10) (204) Z-Score (X) NA NA NA NA
Net Cashflow (7) 76 88 (92) N. Cash/(Debt)PS (sen) 34.5 53.7 76.1 102.0
Opg CFPS (sen) 37.2 38.9 42.9 46.2
Free CFPS (sen) 7.7 22.3 25.8 29.7
Quarterly / Interim Income Statement (RM m) Segmental Breakdown / Key Assumptions
FY Dec 1Q2009 2Q2009 3Q2009 4Q2009 FY Dec 2009A 2010F 2011F 2012F
Turnover 141 170 198 304 Revenues (RM m)

Cost of Goods Sold (101) (119) (138) (208) Facilities Mgmt 667 755 804 839
Gross Profit 40 52 60 96 Properties 122 135 148 163
Other Oper. (Exp)/Inc (25) (24) (24) (29) Others 16 0 0 0
Operating Profit 16 28 36 68 Total 805 890 952 1,002
Associates & JV Inc 0 0 0 0 Pre-tax profit (RM m)
Net Interest (Exp)/Inc (2) (2) (2) (2) Facilities Mgmt 114 131 141 148
Exceptional Gain/(Loss) 0 0 0 1 Properties 28 31 34 37
Pre-tax Profit 14 26 34 66 Others (2) (14) (13) (12)
Tax (5) (8) (9) (13) Total 141 148 162 174
Minority Interest (2) (4) (6) (10)
Net Profit 7 14 19 43 Pre-tax profit Margins (%)
Net profit bef Except. 7 14 19 42 Facilities Mgmt 17.2 17.3 17.6 17.7
EBITDA 21 33 41 73 Properties 22.9 23.0 23.0 23.0
Others (10.0) N/A N/A N/A
Sales Gth (%) (6.2) 21.0 16.0 53.7 Total 17.5 16.6 17.0 17.4
EBITDA Gth (%) (43.1) 58.6 25.0 78.1
Opg Profit Gth (%) (48.9) 79.4 27.6 89.1 Key Assumptions
Net Profit Gth (%) (59.3) 90.6 37.2 124.1 FM-concession revenue 0.0 3.0 3.0 3.0
Gross Margins (%) 28.6 30.2 30.3 31.7 % of UAE contracts 57.0 91.1 86.5 93.4
Opg Profit Margins (%) 11.1 16.5 18.1 22.3 Property operating margin 22.9 23.0 23.0 23.0
Page 91
Hengan International
BUY HK$55.80 HSI : 21,455 Sustainable profitability

Price Target : 12m HK$ 72.00 • Inventory cost of wood pulp at below market
Potential Catalyst: Lower raw material prices price will alleviate margin pressure
Analyst • Strong product development in high-end
Patricia Yeung +(852) 2863 8908 sanitary napkins and diapers segments will
patricia_yeung@hk.dbsvickers.com sustain margins and sales growth
• Strong balance sheet will enable Hengan to
benefit from interest rate hike and RMB
appreciation
Price Relative
HK$ Relative Index
• Maintain Buy and HK$72.00 TP
382
60.10
50.10
332
282
Stock of low cost inventory. Although wood pulp
40.10
232
prices have risen by over 40% from the trough, Hengan
30.10
182 has accumulated 193,000 tons of wood pulp at more
20.10 132
than 20% discount to current market prices. The
10.10
2006 2007 2008 2009
82
2010 inventory would be sufficient for production until August
Hengan International (LHS) Relative HSI INDEX (RHS) this year. Margin pressure may be further alleviated by
cutting marketing expenses and promotional activities.
Enhanced product mix. Positive market response to its
super absorbent series of baby diapers is a reflection of
FY Dec (HK$ m) 2008A 2009A 2010F 2011F
Hengan’s success in product development. It plans to
Turnover 8,002 10,834 13,238 16,462
EBITDA 1,817 2,943 3,428 4,246
introduce more high-end disposable diapers and sanitary
Pre-tax Profit 1,511 2,583 2,965 3,682 napkins in FY10. We expect these new products to help
Net Profit 1,341 2,118 2,399 2,944 Hengan to achieve 25-30% sales growth, as well as
Net Pft (Pre Ex.) 1,341 2,118 2,399 2,944 offset the negative impact of climbing costs of
EPS (HK$) 1.17 1.77 1.97 2.41
EPS (HK$) 1.17 1.77 1.97 2.41 petrochemical-related raw materials.
EPS Gth (%) 27.1 51.0 11.2 22.7
Diluted EPS (HK$) 1.17 1.77 1.97 2.41 Maintain Buy, HK$72 target price. With the bulk of its
DPS (HK$) 0.72 1.10 1.28 1.57
BV Per Share (HK$) 5.64 7.40 8.25 9.27
revenue generated in China and given high cash level of
PE (X) 47.6 31.5 28.4 23.1 over HK$2bn (mostly RMB), Hengan will benefit from a
P/Cash Flow (X) 39.2 27.1 23.9 19.4 stronger RMB or interest rate hike. Despite weaker gross
EV/EBITDA (X) 35.4 22.2 19.6 15.7 margin (due to a rebound in wood pulp prices), it is
Net Div Yield (%) 1.3 2.0 2.3 2.8
P/Book Value (X) 9.9 7.5 6.8 6.0 expected to register decent net profit growth of 13% in
Net Debt/Equity (X) 0.0 CASH CASH CASH FY10F, followed by over 20% in FY11F. Our HK$72
ROAE (%) 20.7 27.3 25.2 27.6 target price is based on 30x FY11F PE for its leading
Earnings Rev (%): - -
market position, comprehensive product portfolio, and
Consensus EPS (HK$): 2.07 2.48 high earnings quality.
At A Glance
ICB Industry: Consumer Goods
ICB Sector: Personal Goods Mkt. Cap (HK$m/US$m) 68,038 / 8,764
Principal Business: Manufacturer of sanitary napkins, disposable Major Shareholders
diapers and tissue Sze Man Bok (%) 19.8
Source of all data: Company, DBSV, Bloomberg, HKEX Hui Lin Chit (%) 19.7
Free Float (%) 60.6
Page 92
www.dbsvickers.com
ed-SGC / sa- DC

HK$ m
16,000
Fast moving consumer goods manufacturer with strong 14,000 41.1%
brands. Hengan mainly manufactures, distributes, and sells 12,000

36.1%
10,000
personal hygiene products in the PRC. Its three main product 8,000
31.1%
lines are tissue, sanitary napkins, and disposable diapers (for 6,000
both babies and adults). Its brands, including “Anerle”, 4,000 26.1%
2,000
“Anle” and “Hearttex”, are either China Top Brands or China 0 21.1%
Renowned Brands. In late 2008, it stepped into the fast 2007A 2008A 2009A 2010F 2011F
moving consumer goods segment by acquiring 51% stake in
Qin Qin Group, a reputable confectionery manufacturer in
China with its own brands, “QinQin” and “Xianggeli”. Both Asset Trend
brands are recognized as Famous Chinese Food. HK$ m
14,000
12,000
Industry Overview, Earnings Drivers & Risks 10,000
8,000
Tissue market – rising demand. According to data from China 6,000

4,000
Paper Association, sales of household paper amounted to 5m 2,000
tons in 2008 (up 5.7% from last year). We estimate that
2007A 2008A 2009A 2010F 2011F
tissue sales volume reached 4.3m tons in 2008, up 9.3%
from last year. Such up trend has been very consistent with Net Fixed Assets (Tangible) Total Current Assets
China’s strong GDP growth. With increasing living standard,

volume growth momentum in tissue production is expected
to continue. China National Household Paper Industry Profitability Trend
HK$ m
Association (CNHPIA) estimated that top 15 players in the 3,505
household paper market accounted for 35.7% of market 3,005
share by volume and 44.8% by revenue, up 5.8ppt from last

year. Ranked the first by revenue with about 9% market
2,505
share, Hengan is also gaining market share. 2,005
1,505
Sanitary napkin market – relatively mature. With sales volume
of 77bn pieces in 2008, the annual growth rate of the 1,005
2007A 2008A 2009A 2010F 2011F
sanitary napkins and panty liners market was 10.3% in the Operating EBIT Pre tax Profit Net Profit
year. But given the relatively mature market, volume growth

is expected to slow to high single digit. However, higher
Margin Trends (%)
living standards have given rise to stronger demand for 30%
higher quality products. The sanitary napkins and panty liners
market is less fragmented than the tissue market, as the top 25%
15 players account for over 60% market share, according to

CNHPIA. Again, Hengan is ranked 1st by revenue with an 20%
estimated market share of 11%. 15%
Baby diapers market – low penetration rate. About 10.3bn 10%
pieces of baby diapers were sold in 2008, a growth of 23.7% 2007A 2008A 2009A 2010F 2011F
y-o-y. Penetration rate has also climbed to 21.1% from
17.3% in 2007. However, this is still low compared to 44%
globally and 96% in the US in 2004. The rising penetration
rate is expected to be a major growth driver for the market.
With an estimated market share of 23.4%, Hengan was
Page 93
Leverage & Asset Turnover (x) ranked 2nd by revenue in 2008.
0.5 1.1
0.4
Outlook
0.4 1.0
0.3
0.3
0.9 High inventory level to preserve margin. Following the over
0.2
0.8
40% rebound in wood pulp prices, there is growing concern
0.2
about gross margins of the tissue division. Hengan’s 193,000
0.1 0.7
0.1 tons of wood pulp inventory that was secured at relatively low
0.0 0.6 costs (estimates at 20-25% discount to current market prices)
2007A 2008A 2009A 2010F 2011F
Financial Leverage (LHS) Asset Turnover (RHS) is sufficient for production until Aug10, which should partly
alleviate margin pressure for the tissue segment this year. In
addition, it will cut promotional activities and sales discounts.
ROE (%)
We believe the ratio of marketing, advertising and promotion
40.0%
expenses to sales will drop by 0.3-0.5ppt.
35.0%
More new products. Prices of petrochemical-related and other
30.0%
raw materials only climbed by single digits from 2009. Hence,
25.0%
gross margins for sanitary napkins and disposal diapers may be
20.0%
easily maintained through enhanced product mix and new
15.0%
product development. In particular, following the success of its
10.0%
2007A 2008A 2009A 2010F 2011F super absorbent series, a new high-end disposable diaper
product will be introduced to boost sales growth to 25%. We
expect sanitary napkin sales growth to stay strong at 31%
PE (x) amid the market consolidation and enhanced product mix.
37.0 Expanding tissue capacity. For tissue products, 120,000 tons

and 60,000 tons of new capacity will be added in FY10F and
32.0
FY11F, respectively, bringing total capacity to 540,000 tons.
27.0 With the bulk of its tissue sales being high end products (such
22.0
as box tissue and packet handkerchief), we estimate these new
capacities will keep tissue sales growth at 23-26% for these
17.0 two years.
2006 2007 2008 2009
P/Book Value (x)

8.2
Solid balance sheet. At end-FY09, Hengan had over HK$2bn
7.7 net cash, the bulk in RMB. It will benefit from an interest rate
7.2
6.7
hike and RMB appreciation as its revenue stream is in RMB but
6.2 purchases are in US$.
5.7
5.2
4.7 Maintain Buy, HK$72 target price. We have conservatively
4.2
assumed a 4ppt drop in gross margin for the tissue division for
3.7
3.2 FY10F. Despite this, overall gross margin is expected to drop
2006 2007 2008 2009
only 1.4ppt and earnings growth will remain decent at 13.3%,
and accelerate to 22.7% in FY11F as margins normalize. Our
HK$72 target price is based on 30x FY11F PE. We like the
counter for its leading market position, comprehensive product
portfolio. and good earnings quality. Maintain BUY.
Page 94
Other Non Opg (Exp)/Inc 0 0 0 0 Debtors 989 1,153 1,476 1,835
Net Interest (Exp)/Inc (20) (18) (18) 0 Total Assets 10,049 14,148 15,323 16,092
Pre-tax Profit 1,511 2,583 2,965 3,682 ST Debt 297 2,175 1,675 875
Minority Interest (4) (50) (59) (71) LT Debt 1,511 555 983 755
Net profit before Except. 1,341 2,118 2,399 2,944 Minority Interests 232 280 339 411
Total Cap. & Liab. 10,049 14,148 15,323 16,092
EBITDA 1,817 2,943 3,428 4,246
Sales Gth (%) 40.7 35.4 22.2 24.4 Non-Cash Wkg. Cap 1,673 1,353 2,408 3,033
EBITDA Gth (%) 24.2 62.0 16.5 23.9 Net Cash/(Debt) (197) 1,720 1,313 1,667
Opg Profit Gth (%) 21.9 69.9 14.7 23.4
FY Dec 2008A 2009E 2010F 2011F FY Dec 2008A 2009A 2010F 2011F
Non-Cash Wkg.Cap. (348) (137) (1,055) (625) ROCE (%) 15.9 21.0 19.5 22.6
Other Operating CF 41 17 39 21 Div Payout Ratio (%) 61.6 63.3 65.0 65.0
Net Operating CF 1,324 2,516 1,867 2,954 Interest Cover (x) 75.0 146.1 167.3 N/A
Capital Exp.(net) (1,490) (951) (900) (900) Asset Turnover (x) 0.8 0.9 0.9 1.0
Other Invts.(net) 0 0 0 0 Debtors Turn (days) 45.1 36.1 36.2 36.7
Other Investing CF 321 (367) 0 0 Current Ratio (x) 2.7 1.9 2.2 2.6
Net Investing CF (1,169) (1,318) (900) (900) Quick Ratio (x) 1.5 1.3 1.4 1.5
Div Paid (732) (1,096) (1,355) (1,701) Net Debt/Equity (X) 0.0 CASH CASH CASH
Chg in Gross Debt (12) 2,387 (72) (1,028) Capex to Debt (%) 82.4 34.8 33.9 55.2
Other Financing CF 39 350 (18) 0 N.Cash/(Debt)PS (HK$) (0.2) 1.4 1.1 1.4
Net Financing CF (705) 1,641 (1,445) (2,729) Opg CFPS (HK$) 1.46 2.22 2.40 2.94
Net Cashflow (549) 2,839 (478) (675) Free CFPS (HK$) (0.15) 1.31 0.79 1.68
Interim Income Statement (HK$ m) Segmental Breakdown (HK$ m) / Key Assumptions
Cost of Goods Sold (2,284) (2,515) (2,811) (3,043) Tissue 3,875 4,456 5,506 6,946
Gross Profit 1,472 1,731 2,302 2,679 Sanitary napkins 2,016 2,546 3,350 4,127
Other Oper. (Exp)/Inc (736) (935) (1,090) (1,290) Disposable diapers 1,874 2,160 2,700 3,629
Operating Profit 735 796 1,212 1,389 Food & snack 63 863 1,036 1,243
Associates & JV Inc 0 0 0 0 Total 8,002 10,834 13,238 16,462
Net Interest (Exp)/Inc (18) (3) (28) 10 Segment profit
Exceptional Gain/(Loss) 0 0 0 0 Tissue 404 951 922 1,150
Pre-tax Profit 718 793 1,184 1,399 Sanitary napkins 683 921 1,236 1,531
Tax (89) (78) (191) (225) Disposable diapers 298 421 556 769
Minority Interest (2) (2) (27) (23) Food & snack 81 192 172 138
Net Profit 628 713 967 1,151 Others N/A N/A N/A N/A
Net profit bef Except. 628 713 967 1,151 Total 1,466 2,486 2,887 3,588
EBITDA 875 942 1,383 1,560 Segment profit Margins
Tissue 10.4 21.4 16.8 16.6
Sales Gth (%) 36.9 44.3 36.1 34.8 Sanitary napkins 33.9 36.2 36.9 37.1
EBITDA Gth (%) 22.5 25.7 58.1 65.6 Disposable diapers 15.9 19.5 20.6 21.2
Opg Profit Gth 18.5 25.3 64.8 74.5 Food & snack 129.0 22.3 16.6 11.1
Net Profit Gth (%) 33.4 33.2 54.1 61.3 Others 0.0 0.0 0.0 0.0
Page 95
HTL International
Bloomberg: HWA SP | Reuters: HTLH.SI
BUY S$0.845 STI : 2,980.69 Gaining market share

• HTL has restructured and refocused its business to
Price Target : 12-Month S$ 1.09
capture growth
Potential Catalyst: Demand growth
• Earnings to grow by c. 15% p.a. over FY09-FY12,
Analyst driven by market share gains and demand rebound
Patrick XU +65 6398 7957
patrickxu@dbsvickers.com • BUY, TP S$1.09
Firm turnaround in 2009, aided by restructuring. After
slipping into losses in FY08, HTL has rebounded strongly
into the black with net profit of S$48m for FY09. This
turnaround was achieved through the closing down of
Price Relative
S$
inefficient or non-performing units and a refocus on
customers and higher margin business.
R e la tiv e In d e x
1 .5 0 207
1 .3 0
1 .1 0 157
Earnings prospects bright and projected to grow
0 .9 0 further. We project revenue to grow by 11% in FY10 and
107
0 .7 0
by 12% in FY11, driven by market share gains initially and a
rebound in demand from Europe and the US later on. With
0 .5 0
57
0 .3 0
0 .1 0
2006 2007 2008 2009 2010
7 the home furnishings business looking to at least break-
even this year and with improving operating leverage, we
H T L In t e r n a t io n a l (L H S ) R e la t iv e S T I IN D E X (R H S )
also project net margins to improve, driving earnings to
grow by 16% in FY10 and 15% in FY11.
Capacity expansion to capture growth. Capacity
FY Dec (S$ m) 2008A 2009A 2010F 2011F utilization averaged c. 83% in 2009, with utilization hitting
Turnover 646 605 672 751 above 90% during the peak season. To prepare for an
EBITDA 4 74 86 97 upturn in demand, HTL has secured new land & buildings
Pre-tax Profit (16) 57 67 77 for a new plant in China, with preferential terms granted by
Net Profit (20) 48 56 65
Net Pft (Pre Ex.) (20) 48 56 65 local government, such as waiver of rental & income tax for
EPS (S cts) (4.9) 11.8 13.6 15.6 the initial period.
EPS Pre Ex. (S cts) (4.9) 11.8 13.6 15.6
EPS Gth Pre Ex (%) (299) (343) 15 15 Currency risks well managed. The company hedges up
Diluted EPS (S cts) (4.9) 11.5 13.5 15.5 to 80% of its foreign currency sales and purchases to its
Net DPS (S cts) 0.0 6.0 4.1 4.7 operating currency – USD on a twelve months rolling basis,
BV Per Share (S cts) 51.3 59.4 65.3 76.9 thus minimizing foreign exchange risks. Additionally, a
PE (X) nm 7.2 6.2 5.4
PE Pre Ex. (X) nm 7.2 6.2 5.4
significant percentage of its COGS and Opex are
P/Cash Flow (X) nm 5.7 5.0 4.4 denominated in USD and Euro.
EV/EBITDA (X) 110.0 5.1 4.5 3.8
Net Div Yield (%) 0.0 7.1 4.8 5.6
BUY, TP S$1.09 (7x FY11 PER), which is based on its
P/Book Value (X) 1.6 1.4 1.3 1.1 historical normalized current PE trading range. The stock
Net Debt/Equity (X) 0.2 0.1 0.1 0.1 could further re-rate towards 9x-10x PE as HTL delivers on
ROAE (%) (9.2) 21.1 21.9 22.0 earnings and sentiment on the export sector improves.
Earnings Rev (%): - - At A Glance
Consensus EPS (S cts): 8.2 9.4 Issued Capital (m shrs) 417
Mkt. Cap (S$m/US$m) 352 / 256
ICB Industry : Consumer Goods
Major Shareholders
ICB Sector: Household Goods
Bem Holdings (%) 46.6
Principal Business: Leading Original Design sofa-upholstery
manufacturer and leather tanner in Asia. Fidelity Management (%) 7.1
Brandes Inv Partner (%) 4.8
Source of all data: Company, DBS Vickers, Bloomberg Free Float (%) 41.5
Page 96
www.dbsvickers.com
ed: JS / sa: JC
HTL International

S$ m
Founded in 1976 and listed on SGX since 1993, HTL Int’l is 800 12.3%
700
engaged in manufacture of upholstered furniture, leather 600 7.3%
tanning and finishing, and provision of home furnishing and 500
design solutions. With its production facilities located in the 400 2.3%
300
Yangtze River Delta (YRD) in east China, its products are 200 -2.7%
marketed to over 40 countries, through distributors and 100
retailers. 0
2007A 2008A 2009A 2010F 2011F
-7.7%
Core business –sofas

Capacity. HTL has sofa manufacturing plants in Kunshan and
Asset Trend
Changshu, in east China’s YRD, with total production S$ m
capacity of c. 2,000 containers per month currently. Each 500
container is loaded with c. 18 sets of sofas on average, and 400
each set usually consists of 6 seats. Most of the sofas 300
produced are exported to Europe, North America, Australia & 200
New Zealand, and other countries in Asia. 100
Capacity utilization averaged c. 83% in 2009, with 2007A 2008A 2009A 2010F 2011F
utilization hitting above 90% during the peak season. To N e t F ix e d A s s e t s (T a n g ib le ) T o ta l C u rre n t A sse ts
prepare for an upturn in demand, HTL has secured new

land & buildings for a new plant in Huai’an, with
preferential terms granted by local government, such as Profitability Trend
waiver of rental & income tax for the initial period. 79
S$ m
Main costs & expenses. Raw leather hide is the primary raw 59
material in sofa, accounting for >50% of the costs, which is 39
mostly imported from Australia, the US and Brazil. Freight

19
rates have substantial impact on the company’s distribution
expenses when it sells on CIF, DDU or CFR terms, as HTL relies (1)
2007A 2008A 2009A 2010F 2011F
on shipping companies to ship its products from its plants in (21)
China to its customers around the globe. Operating EBIT Pre tax Profit Net Profit
Home Furnishing Business Unit

Margin Trends (%)
This BU, which was acquired in 2005, is primarily engaged in 20 %
the global franchising of the luxury home furniture brand – 18 %
16 %
Domicil. In Germany, Domicil sells home furniture in the form 14 %
of creative and customized solutions to furnishings and 12 %

10 %
indoor décor, a similar business model as IKEA. Outside 8%
Germany, Domicil franchisees sell HTL’s upholstered furniture 6%

4%
in more than 200 retail points of shop-in-shop stores in 2%
Europe, Asia and Australia, as of end 2009. 0%

2007A 2008A 2009A 2010F 2 01 1 F
E B IT D A M a rg in % E B IT M a rg in % N e t In co m e M a rg in %
HTL well poised for growth
HTL poised to ride on the recovering demand. As Europe,
North America and Asia (excl Greater China) together
account for >85% of the company’s sales revenue, we expect
HTL’s top line to return to growth in 2010 after reporting
Page 97
HTL International
Leverage & Asset Turnover (x) declines since 2007, benefiting from the recovering demand in
the key markets.
1.7
0 .6
0 .5 1.6 Winning over market share. As some competitors, for instance

0 .4 1.5
those in south China, went bust or substantially cut their
0 .3 capacity during the crisis, HTL emerged as a reliable supplier
1.4
0 .2 and successfully took over the market share lost by its
0 .1
1.3 competitors, especially in Europe. This is evidenced by the
0 .0 1.2 resilience in its sales to Europe, which dipped by only 1.5% in
2007A 20 0 8 A 20 0 9 A 2010F 2011F
2008 yet rebounded by 2% to a new high of S$348m in 2009,
Fin a n cia l Le ve ra g e (LH S) A sse t T u rn o ve r (R H S)
while the whole industry was still in a downtrend.
ROE (%) Expanding customer base. HTL has >1,500 customers in

Europe and is also seeking to expand its customer base in the
40.0%
US after the crisis. The stable increase in its customer bases in
35.0%
30.0% the key markets during the downturn should lay a solid
25.0% foundation for HTL’s revenue growth in FY10 and more
20.0%
sustainable revenue growth in FY11 and beyond from organic
15.0%
10.0% increases in same-customer sales.
5.0%
0.0%
2007A 2008A 2009A 2010F 2011F Capacity expansion underway. HTL is setting up another sofa
plant in Huai An, in east China’s YRD as well, which would
expand the company’s total capacity to 2,600 containers per
month by mid 2010. The production capacity of the company’s
PE (x)
leather tanneries precisely matches its capacity of the sofa
2 4 87 .0
plants, i.e. can support the production of maximum 2,600
1 4 87 .0
containers of sofas per month, and hence should be able to
4 87 .0
fully satisfy HTL’s demand for leather hides.
-5 13 .02 0 0 6 2007 2008 2009
-1 5 13 .0
80% currency exposure hedged. The company hedges up to
-2 5 13 .0
80% of foreign currency sales and purchase to its operating
-3 5 13 .0
currency – USD by forex forwards on a twelve months rolling
-4 5 13 .0
basis, thus minimizing its foreign exchange risk. About 55% of
COGS and 77% of opex expenses are denominated in USD,
whilst 25% of COGS is in Euro.
P/Book Value (x)
2 .6
FY09-12 earnings CAGR of 15%, driven by growing external
2 .1 demand and internal synergies. We are expecting 11% and
12% growth of revenue in FY10 and FY11 respectively,
1 .6
underpinned by revival of sales to the US as well as recovery in
1 .1
other markets. Higher synergies between leather tannery and
0 .6 sofa plants are expected to improve HTL’s net margin % from
8.0% in FY09 to 8.3% in FY10 and eventually to 8.6% in FY11.
0 .1
2006 2007 2008 20 0 9
Valuation & Recommendation

Buy, TP at S$1.09, based on 7x FY11 earnings, in line with the
Source: Company, DBS Vickers counter’s historical trading average. Valuations are still
attractive, with 15% FY09-12 earnings CAGR and backed by
5% yield.
Page 98
HTL International
Income Statement (S$ m) Balance Sheet (S$ m)

Turnover 646 605 672 751 Net Fixed Assets 76 66 67 66

Cost of Goods Sold (442) (382) (404) (449) Invts in Associates & JVs 0 0 0 0
Other Opng (Exp)/Inc (213) (162) (196) (220) Cash & ST Invts 75 94 95 106
Operating Profit (9) 62 73 83 Inventory 198 196 208 231
Other Non Opg (Exp)/Inc (1) 0 0 0 Debtors 59 87 96 108
Net Interest (Exp)/Inc (7) (5) (6) (6) Total Assets 447 487 506 547
Pre-tax Profit (16) 57 67 77 ST Debt 113 95 95 95
Minority Interest 0 0 0 0 LT Debt 9 34 34 34
Net Profit (20) 48 56 65 Shareholder’s Equity 214 243 271 318
Net Profit before Except. (20) 48 56 65 Minority Interests 0 0 0 0
EBITDA 4 74 86 97 Total Cap. & Liab. 447 487 506 547
Sales Gth (%) (7.0) (6.3) 11.0 11.7 Non-Cash Wkg. Capital 156 183 211 253
EBITDA Gth (%) (88.5) 1,954.5 15.6 12.8 Net Cash/(Debt) (46) (35) (34) (23)
Opg Profit Gth (%) (141.0) (823.9) 17.3 14.1
Net Profit Gth (%) (298.6) (338.4) 16.2 15.3
Effective Tax Rate (%) N/A 15.2 16.0 16.0
Cash Flow Statement (S$ m) Rates & Ratio
Pre-Tax Profit (16) 57 67 77 Gross Margins (%) 31.6 37.0 40.0 40.3
Dep. & Amort. 13 13 13 14 Opg Profit Margin (%) (1.3) 10.2 10.8 11.0
Tax Paid (4) (9) (5) (11) Net Profit Margin (%) (3.1) 8.0 8.3 8.6
Assoc. & JV Inc/(loss) 0 0 0 0 ROAE (%) (9.2) 21.1 21.9 22.0
Chg in Wkg.Cap. (5) (22) (34) (43) ROA (%) (4.6) 10.3 11.3 12.3
Other Operating CF 22 (15) 0 0 ROCE (%) (2.7) 14.9 15.8 16.4
Net Operating CF 10 25 41 37 Div Payout Ratio (%) N/A 51.1 30.0 30.0
Capital Exp.(net) (9) (3) (11) (10) Net Interest Cover (x) (1.2) 13.6 12.5 14.3
Other Investing CF 0 0 0 0 Inventory Turn (avg days) 167.2 195.0 188.9 184.2
Net Investing CF (9) (3) (11) (10) Current Ratio (x) 1.5 1.9 2.1 2.4
Div Paid 0 (8) (25) (17) Quick Ratio (x) 0.6 0.9 0.9 1.1
Chg in Gross Debt 38 8 0 0 Net Debt/Equity (X) 0.2 0.1 0.1 0.1
Capital Issues 0 (3) (4) 0 Net Debt/Equity ex MI (X) 0.2 0.1 0.1 0.1
Other Financing CF 0 0 0 0 Capex to Debt (%) 7.2 2.1 8.5 7.8
Net Financing CF 38 (3) (29) (17) Z-Score (X) 2.5 2.5 3.0 0.0
Net Cashflow 39 19 1 11 N. Cash/(Debt)PS (S cts) (11.1) (8.5) (8.1) (5.6)
Opg CFPS (S cts) 3.4 11.4 18.2 19.4
Free CFPS (S cts) 0.2 5.3 7.2 6.6
Quarterly / Interim Income Statement (S$ m) Segmental Breakdown / Assumptions
FY Dec 1Q2009 2Q2009 3Q2009 4Q2009 FY Dec 2008A 2009A 2010F 2011F
Turnover 126 160 149 170 Revenues (S$ m)

Cost of Goods Sold (84) (105) (92) (101) Sofa 550 531 571 629
Gross Profit 42 55 57 70 Leather 39 14 0 0
Other Oper. (Exp)/Inc (25) (47) (44) (46) Cut n Sew 0 0 0 0
Operating Profit 17 8 13 24 Home Furnishing 57 60 102 122
Other Non Opg (Exp)/Inc 0 0 0 0 Others N/A N/A N/A N/A
Associates & JV Inc 0 0 0 0 Total 646 605 672 751
Net Interest (Exp)/Inc (1) (2) (2) (1) EBIT (S$ m)
Exceptional Gain/(Loss) 0 0 0 0 Sofa (14) 42 77 85
Pre-tax Profit 16 7 11 23 Leather 9 26 0 0
Tax (1) (2) (2) (3) Cut n Sew 0 0 0 0
Minority Interest 0 0 0 0 Home Furnishing (3) (1) 1 4
Net Profit 15 5 8 21 Others (1) (5) (5) (6)
Net profit bef Except. 15 5 8 21 Total (9) 62 73 83
EBITDA 20 12 16 27 EBIT Margins (%)
Sofa (2.6) 7.9 13.5 13.5
Sales Gth (%) (23.4) 26.8 (6.8) 14.4 Leather 24.5 181.6 N/A N/A
EBITDA Gth (%) (315.0) (41.5) 35.2 72.6 Cut n Sew N/A N/A N/A N/A
Opg Profit Gth (%) (233.3) (49.6) 47.6 92.4 Home Furnishing (5.7) (2.0) 1.0 3.0
Net Profit Gth (%) (193.9) (68.6) 73.6 155.4 Others N/A N/A N/A N/A
Gross Margins (%) 33.2 34.5 38.2 41.0 Total (1.3) 10.2 10.8 11.0
Opg Profit Margins (%) 13.3 5.3 8.4 14.1 Key Assumptions
Net Profit Margins (%) 11.8 2.9 5.4 12.1 Rev growth - Asia ex G.C. (0.1) 0.0 0.1 0.1
Rev growth - Greater China 0.1 (0.3) 0.1 0.1
Rev growth - Europe 0.0 0.0 0.1 0.1
Rev growth - US (0.3) (0.3) 0.3 0.2
Rev growth - ANZ 0.0 0.0 0.0 0.1
Page 99
Gome Elec Appliances
BUY HK$2.69 HSI : 21,455 Multiple growth drivers

Price Target : 12-Month HK$ 3.66 • Robust sales momentum for 1Q10 on a lower base.
Potential Catalyst: Full-year benefits from “exchange old for new
• Government’s subsidy programs, strong property
program” of the government and potential M&As.
deliveries, a low penetration of home appliances
and gradual macro recovery should all fuel growth.
Analyst
Mavis Hui +852 2863 8879
• Trading at 0.7x PEG and 27% discount to our target
mavis_hui@hk.dbsvickers.com price of HK$3.66, maintain BUY.
Sound recovery trend. Following gradual macro recovery
from the trough in 2H08 and Gome’s successful streamlining
Price Relative of its retail network, the company rides on satisfactory sales
HK$ Relative Index momentum in 1Q10, recording double-digit same-store sales
4.90
4.40
204 growth from a low base. It also stays well on track to sustain
a healthy expansion and decent margin enhancement. Gome
184
3.90
164
3.40
2.90
144
124
plans to add 80 stores this year, with special focus on
2.40
1.90
104
84
network expansion in high-growth 2nd-tier cities.
1.40
Favourable growth drivers. China’s various subsidy
64
0.90 44
programs to prompt sales of the home appliance sector,

2006 2007 2008 2009 2010
including the “go rural” policy and “exchange old for new”
Gome Elec Appliances (LHS) Relative HSI INDEX (RHS)
program should continue to support Gome’s performance.

Forecasts and Valuation Sales of home appliances could continue to see further
support as c.70% of properties sold in 2H09 are expected to
FY Dec (RMB m) 2008A 2009A 2010F 2011F deliver by 2H10. Rising disposable income and stronger
Turnover 45,889 42,668 47,461 54,082 demand for better quality of living should also propel overall
EBITDA 2,250 2,282 2,749 3,392 consumer spending for home appliances.
Pre-tax Profit 1,534 1,833 2,554 3,310
Net Profit 1,048 1,409 1,968 2,554 Better times ahead. Management stays confident for a
Net Pft (Pre Ex.) 1,687 1,496 1,968 2,554 better performance in FY10F. More efforts on optimizing its
EPS (RMB) 0.08 0.10 0.13 0.17
EPS (HK$) 0.09 0.12 0.15 0.20 network structure and suppliers’ relationship should help to
EPS Gth (%) (7.3) 25.5 30.3 29.8 lift overall profitability. Trading at 22.1x prospective PE, 0.7x
Diluted EPS (HK$) 0.09 0.09 0.12 0.16 PEG and 27% discount to our target price of HK$3.66, we
DPS (HK$) 0.03 0.00 0.03 0.04
BV Per Share (HK$) 0.76 0.91 1.05 1.21
maintain BUY.
Fully Diluted PE (X) 31.3 30.9 22.1 17.0
P/Cash Flow (X) 22.4 18.4 15.2 12.0
EV/EBITDA (X) 11.7 10.2 7.6 5.0 At A Glance
Net Div Yield (%) 1.1 0.0 1.1 1.5 Issued Capital (m shrs) 15,055
P/Book Value (X) 3.5 2.9 2.6 2.2 Mkt. Cap (HK$m/US$m) 40,512 / 5,218
Net Debt/Equity (X) CASH CASH CASH CASH Major Shareholders
ROAE (%) 11.1 13.8 15.5 17.5 Mr. Wong Kwong Yu (%) 35.6
Bain Capital Investors, LLC (%) 10.8
Earnings Rev (%): - - JPMorgan Chase & Co. (%) 9.0
Consensus EPS (HK$): 0.13 0.17
Morgan Stanley (%) 7.0
Free Float (%) 37.6
Avg. Daily Vol.(‘000) 79,050
ICB Industry: Consumer Services
ICB Sector: General Retailers
Principal Business: Among the leading home appliance retailers in
China.
Page 100
www.dbsvickers.com
ed-GC / sa- DC

RMB m
50,000 72.3%
Among the leaders in China. Gome is among the leading 62.3%
40,000
home appliance retailers in China. As of Dec09, it runs a total 52.3%
42.3%
of 726 stores across 198 cities, including 76 flagship stores, 30,000
32.3%
625 standard stores and 25 specialized stores. For FY09, its 20,000 22.3%
revenue breakdown include 14% from Shanghai, 11% from 10,000

12.3%
2.3%
Beijing, 10% from Guangzhou and Shenzhen respectively, 0 -7.7%
6% from Tianjin and Chengdu respectively, 4% from Fuzhou, 2007A 2008A 2009A 2010F 2011F
and the remaining from other cities.
Industry Overview, Earnings Drivers & Risks Asset Trend

RMB m
Decent macro trend. During 2002-08, sales CAGR of 35,000

30,000
household appliances for urban and rural areas reached 17% 25,000
and 28%, respectively. Rising disposable income, 20,000
strengthening Renminbi, stronger demand for better quality 15,000

10,000
of living and recovering consumer sentiment in China should 5,000
all lure consumers to spend, especially on the home appliance
2007A 2008A 2009A 2010F 2011F
merchandise given it lower penetration rate in China versus
more developed countries. Net Fixed Assets (Tangible) Total Current Assets
Supportive industry policies. Since 2007, China has

introduced in a roll the “go rural” policy and “exchange old Profitability Trend
RMB m
for new” program, aiming to boost consumption in the home
3,048
appliance sector. Both programs have already channelled
sales that contributed >10% of Gome’s FY09 revenue. These 2,548
favourable programs should likely continue to fuel decent

growth in the medium-term.
2,048
Further room for margin enhancement. Gome plans to 1,548
enhance growth and profitability through expanding and 1,048
refining its product offerings, upgrading shop environment of 2007A 2008A

Operating EBIT
2009A
Pre tax Profit
2010F
Net Profit
2011F
existing stores, strengthening overall operational efficiency

and reinforcing suppliers’ relationship. Besides, Government
subsidies derived from sales that channel through both “go Margin Trends (%)
rural” policy and “exchange old for new” program should 10%
9%
also help to lift overall margins. 8%
7%
Risks and concerns. The home appliance retail sector of 6%

5%
China remains fragmented and competitive. Potential 4%
execution risks could also be incurred upon Gome’s 3%

2%
expansion into 2nd and 3rd-tier cities that it has yet to 1%
commence operations. 0%
2007A 2008A 2009A 2010F 2011F
Page 101
Leverage & Asset Turnover (x) Outlook
1.7
0.5 Positive business prospects. Gome currently targets to lift
0.4
1.6 overall profitability by improving individual store efficiency and
1.5 implementation of new ERP system this year. Favourable
0.3
government policies, including the extended “exchange old for
1.4
0.2
new” program to cover more cities starting from May 10
0.1 1.3
should also help to drive its growth over the medium-term.
0.0 1.2
2007A 2008A 2009A 2010F 2011F
Looking ahead, Gome will focus more on network expansion,
especially in high-growth 2nd-tier cities including Greater
Shanghai, Shandong, Tianjin, Greater Sichuan and
ROE (%) Guangdong. Its gross margin should also sustain an improving
trend amid rising economies of scale and positive impact from
20.0%
18.0%
refined suppliers’ contracts.
16.0%
14.0%
12.0%
All in all, the company’s five-year blueprint include i)
10.0% establishing regional dominance, ii) improving overall operating
8.0%
6.0% efficiency, iii) improving consumer & vendor relationships, iv)
4.0%
2.0% strengthening infrastructure, and v) developing new business
0.0% including its e-commence platform. Management stays
2007A 2008A 2009A 2010F 2011F
confident on the overall business outlook of Gome.
PE (x) Financials and Valuation

50.0
45.0 Gome’s operating cashflow for FY09 turned into a small
40.0 negative number of RMB0.2m (FY08: RMB3.6bn inflow). Apart
35.0
from its inventory stock-up towards the end of 2009 in the
30.0
25.0
lead to strong sales momentum for 2M10, the company raised
20.0 its pledged deposit ratio by usage of guaranteed letter of credit
15.0
as a method of bill payables to deploy excess off-shore cash in
10.0
2006 2007 2008 2009 Hong Kong. Should impact from the latter be excluded,
operating cashflow would be a positive inflow of RMB62m for
FY09. Given its improving business prospects, we expect
operating cashflow to stay at a healthy level ahead
P/Book Value (x)
The counter is currently trading at merely 0.7x PEG and 22%
6.2
discount to our target price of HK$3.66. We maintain BUY.
5.2
4.2
3.2
2.2
1.2
2006 2007 2008 2009
Page 102
Associates & JV Inc 0 0 0 0 Other Current Assets 5,117 1,913 202 196
Net Interest (Exp)/Inc 229 (8) 129 258 Total Assets 27,495 35,763 39,510 44,382
Exceptional Gain/(Loss) (639) (87) 0 0
Pre-tax Profit 1,534 1,833 2,554 3,310 ST Debt 170 2,530 2,530 2,530
Net profit before Except. 1,687 1,496 1,968 2,554 Minority Interests 140 0 0 0
Total Cap. & Liab. 27,495 35,763 39,510 44,382
EBITDA 2,250 2,282 2,749 3,392
Sales Gth (%) 8.0 (7.0) 11.2 14.0 Non-Cash Wkg. Cap (4,386) (9,706) (12,689) (14,465)
EBITDA Gth (%) 8.8 1.4 20.5 23.4 Net Cash/(Debt) 4,152 9,122 13,819 17,717
Opg Profit Gth (%) 7.8 (0.8) 25.8 25.9
Non-Cash Wkg.Cap. 154 1,811 2,910 1,684 ROCE (%) 10.5 10.0 10.2 11.6
Other Operating CF 1,784 (3,607) (1,006) (1,487) Div Payout Ratio (%) 32.9 0.0 20.0 20.0
Net Operating CF 3,610 167 4,510 3,537 Interest Cover (x) N/A 248.4 N/A N/A
Capital Exp.(net) (1,165) (200) (355) (325) Asset Turnover (x) 1.6 1.3 1.3 1.3
Other Invts.(net) (661) 0 0 0 Debtors Turn (days) N/A N/A N/A N/A
Other Investing CF (2,689) 0 0 0 Current Ratio (x) 1.2 1.1 1.2 1.3
Net Investing CF (4,515) (200) (355) (325) Quick Ratio (x) 0.5 0.7 0.9 0.9
Div Paid 0 0 (394) (511) Net Debt/Equity (X) CASH CASH CASH CASH
Chg in Gross Debt (130) 4,388 0 0 Capex to Debt (%) 31.1 3.5 6.2 5.7
Capital Issues 0 1,670 0 0 Z-Score (X) 2.8 2.8 3.3 3.5
Other Financing CF (2,185) (3,047) (26) (142) N.Cash/(Debt)PS (RMB) 0.4 0.7 1.1 1.4
Net Financing CF (2,315) 3,011 (419) (653) Opg CFPS (RMB) 0.31 (0.14) 0.12 0.14
Net Cashflow (3,219) 2,978 3,736 2,559 Free CFPS (RMB) 0.22 0.00 0.32 0.25
Interim Income Statement (RMB m) Segmental Breakdown (RMB m)
Cost of Goods Sold (22,499) (18,882) (18,456) (19,952) Traditional Stores 45,316 42,134 42,560 48,299
Gross Profit 2,375 2,133 2,008 2,252 Mega Stores 135 96 7 9
Other Oper. (Exp)/Inc (1,030) (1,534) (1,235) (1,097) Digital Stores 438 437 4,894 5,773
Operating Profit 1,345 599 772 1,155 China Paradise 0 0 0 0
Net Interest (Exp)/Inc 160 69 56 (63)
Exceptional Gain/(Loss) (84) (554) (78) (9)
Pre-tax Profit 1,420 113 750 1,082
Tax (233) (202) (165) (241)
Net Profit 1,150 (102) 580 829
Net profit bef Except. 1,234 453 658 838
Sales Gth (%) N/A N/A (17.7) 5.7

Opg Profit Gth N/A N/A (42.6) 92.8
Net Profit Gth (%) N/A N/A (49.5) (916.0)
Gross Margins (%) 9.5 10.2 9.8 10.1
Net Profit Margins (%) 4.6 (0.5) 2.8 3.7
Page 103
Beijing Jingkelong
BUY HK$9.16 HSI : 21,455 Still a bargain

• Beijing Jingkelong (BJKL) continues to ride on an
Price Target : 12-Month HK$10.34 (Prev HK$8.84)
inflationary environment for decent growth ahead.
Potential Catalyst: Accelerated expansion & potential M&As
• We estimate its potential acquisition of Shoulian to boost
Analyst
Mavis Hui +852 2863 8879 sales by another c.10%.
mavis_hui@hk.dbsvickers.com
• Target price upgraded to HK$10.34 to close valuation gap
versus peers. At 18.7x prospective PE, maintain BUY.
Decent growth momentum. BJKL remains on track to

Price Relative
HK$ Relative Index
achieve c.5% increase in same-store sales (SSS) for 2010. Rising
9.50
219 inflation should boost SSS growth slightly further this year. The
8.50
169
company also stays well in line to achieve c.20% sales increase
7.50
6.50 for its wholesale division given sound recovery in 2010.
119
5.50
4.50
3.50 69
Potential acceleration in expansion. Apart from a sound
2.50 organic expansion, BJKL continues to seek suitable acquisition
1.50 19
2006 2007 2008 2009 opportunities to potentially boost growth further. This would
Beijing Jingkelong (LHS) Relative HSI INDEX (RHS) include its possible acquisition of Shoulian retail chain by end-
2010. The company will also seek shareholders' approval for its
Forecasts and Valuation A-share listing proposal (i.e. to issue <120m A shares) on 4 May
10, and potentially submit its application to relevant authorities
by Jun 2010. We currently expect BJKL to target at raising
FY Dec (RMB m) 2008A 2009A 2010F 2011F
RMB800-RMB1bn from its proposed A-share listing to
Turnover 6,684 6,691 7,715 8,874
EBITDA 474 453 529 600 accelerate expansion in China.
Upgrade target to HK$10.34. We currently expect BJKL to
Net Profit 157 148 190 224
Net Pft (Pre Ex.) 157 161 190 224 post an 18% CAGR on recurring earnings for 2009-11. FY10F
EPS (RMB) 0.38 0.36 0.43 0.42 earnings might also surprise on the upside should rising
EPS Gth (%) 19.3 (5.7) 20.0 (2.2) inflation on food items pick up a faster pace ahead, amid
Diluted EPS (HK$)* 0.43 0.41 0.49 0.48
DPS (HK$) 0.24 0.20 0.20 0.24 further room for margin enhancement. Following a good run of
BV Per Share (HK$) 3.66 3.83 3.43 3.66 the Chinese food retail sector, its major peers including Lianhua
PE (X) 21.2 22.5 18.7 19.2 (980.HK) and Wumart (8277.HK) now trade at an average of
P/Cash Flow (X) 11.8 11.5 10.2 10.7
1.2x PEG. We upgrade our target price to HK$10.34 for BJKL,
EV/EBITDA (X) 9.1 10.1 9.0 9.2
Net Div Yield (%) 2.6 2.2 2.2 2.6 based on 21x FY11 fully-diluted PE* (previous: 18x PE) to close
P/Book Value (X) 2.5 2.4 2.7 2.5 the valuation gap by normalizing its PEG versus peers. Trading
Net Debt/Equity (X) 0.5 0.7 0.6 0.6 at 18.7x prospective PE, maintain BUY.
ROAE (%) 12.2 10.9 12.7 13.5
At A Glance
Earnings Rev (%): - -
Consensus EPS (HK$): 0.28 0.57 Issued Capital - H shares (m shs) 182
(* Assume successful A-share listing by 2011.) - Non H shrs (m shs) 230
H shs as a % of Total 44
Total Mkt. Cap (HK$m/US$m) 3,777 / 487
ICB Industry: Consumer Services Major Shareholders
ICB Sector: Food & Drug Retailers Chaoyang Auxillary (%) 40.6
Principal Business: One of the leading retailer and distributor of Other domestic shareholders (%) 15.2
daily consumer products in the Greater Beijing Region, operating a Major H Shareholders (%)
chain of supermarkets, hypermarkets and convenience stores. JPMorgan Chase & Co. (%) 15.2
Source of all data: Company, DBSV, Bloomberg, HKEX Value Partners Limited (%) 11.3
Genesis Asset Managers (%) 7.0
H Shares-Free Float (%) 66.6
Avg. Daily Vol.(‘000) 585
Page 104
www.dbsvickers.com
ed-GC / sa- DC
Beijing Jingkelong

RMB m
A strong regional play. BJKL, a state-owned enterprise, is one 25.1%

8,000
of the leading retailers and distributors of daily consumer 7,000
20.1%
products in the Greater Beijing Area. The company operates 6,000
5,000 15.1%
the second largest supermarket chain in Beijing and ranks 36th 4,000
amongst top retail-chain operators in China. As of December 3,000

10.1%
2,000
2009, BJKL operates a total of 246 outlets in Beijing, 1,000
5.1%
including two department stores, nine hypermarkets, 72 0 0.1%

2007A 2008A 2009A 2010F 2011F
supermarkets and 163 convenience stores, the majority of Total Revenue Revenue Growth (%) (YoY)
which are located in Beijing’s central business district.

Solid track record. BJKL has delivered a healthy performance
in the past few years. Revenue and core earnings recorded Asset Trend
RMB m
13% and 27% CAGR respectively in 2003-09. Core margins
5,000
also improved significantly, as seen in the 1.1ppt
4,000
improvement in recurring net margin, from 1.3% in 2003 to
3,000
2.4% in 2009. On the back of a positive macro outlook and
2,000
its solid expansion plans, BJKL should post a healthy growth
1,000
ahead.
2007A 2008A 2009A 2010F 2011F
Net Fixed Assets (Tangible) Total Current Assets
Ample room to expand. Retail sales in China grew 18% y-o-y
in 1Q10. We believe swift income growth in both urban &
rural areas should continue to support overall domestic
Profitability Trend
consumption in China. Specifically, the on-going RMB m
424
establishment of new residential districts in the Greater 374
Beijing Area along with improving living standards should

324
also translate into rising demand for modern retail chains,
providing ample room for major food retailers to expand sales 274
network in the region. 224
Sound organic growth. BJKL is on track to open 20 self- 174
operated stores and 22 franchised stores in each of 2010 and 124

2007A 2008A 2009A 2010F 2011F
2011. As the company leverages on its well-equiped logistic Operating EBIT Pre tax Profit Net Profit
facilities to accelerate retail expansion, we believe it will

continue to stay among the best regional players to grow at
Margin Trends (%)
the expense of smaller, traditional operators to strengthen its
10%
market share. 9%
8%
M&A potentials. BJKL currently stays on schedule to 7%
potentially acquire 100% stake of Shoulian retail chain by the 6%

5%
end of 2010, with a minimal cash outlay. Management also 4%
remains open-minded to seek suitable M&A opportunities to 3%

2%
boost expansion further. 1%
0%
Potential risks. Growing competition in the Chinese retail 2007A 2008A 2009A 2010F 2011F
industry could lay pressure on BJKL’s operating costs. Its long- EBITDA Margin % EBIT Margin % Net Income Margin %
term leases (mostly >15 years) for directly-operated stores

could help mitigate potential costs impact. Other concerns
include execution risks for longer-term expansion outside of Greater Beijing Area.
Page 105
Beijing Jingkelong
1.7
1.0
Unique business structure. BJKL is unique among its retail
1.7
competitors in having both sizeable wholesale and retail
0.8 1.6 operations. These two divisions complement each other by
0.6 1.6 ensuring stable product supplies, extensive product selection,
0.4 1.5
competitive pricing, and a lower stock-out likelihood, which
are all crucial for a smooth on-going performance and better
0.2 1.5
brand image. Additionally, as a state-owned enterprise, BJKL is
0.0 1.4 well positioned to secure strategic locations in Beijing on
2007A 2008A 2009A 2010F 2011F
potentially more favourable terms.
ROE (%) Exceptionally strong regional market. Beijing is among the

major cities of China with highest growth in both retail sales
20.0% and annual disposable incomes. Last year, retail sales in Beijing
18.0%
16.0% sustained sound y-o-y grow of 16%. Together with sizeable
14.0%
12.0%
infrastructural projects including the Beijing-Shanghai High-
10.0% speed Railway to further stimulate economic growth,
8.0%
6.0% consumption in Beijing is expected to remain robust. BJKL’s
4.0%
2.0%
strong presence in Chaoyang District of Beijing, the most
0.0% affluent district in the city, also places the company in a good
2007A 2008A 2009A 2010F 2011F
position to benefit from the rosy consumer environment in
Beijing.

33.0
28.0 Still a bargain versus peers. Chinese chain store food

23.0 retailers have broadly been attracting better valuations in
18.0 recent months, given their advantage to benefit from an
13.0
inflationary environment in China. Recent droughts and
8.0
abnormal weather in the region also exert potential
pressure on further price hikes for food items. Following a
3.0
2006 2007 2008 2009 good run of the sector, its major peers including Lianhua
(980.HK) and Wumart (8277.HK) currently trades at an
average of 1.2x PEG. We upgrade target price of BJKL to
HK$10.34 on 21x FY11 fully-diluted PE to run in line with
P/Book Value (x)
its close peers. Trading at 18.7x prospective PE, it is a BUY.
2.9
2.4
1.9
1.4
0.9
0.4
2006 2007 2008 2009
Page 106
Beijing Jingkelong
Gross Profit 924 932 1,082 1,247 Other LT Assets 152 164 172 176
Other Non Opg (Exp)/Inc 0 0 0 0 Debtors 970 1,198 1,218 1,401
Pre-tax Profit 280 254 316 367 ST Debt 1,379 1,576 1,576 1,576
Net Profit 157 148 190 224 Shareholder’s Equity 1,325 1,388 1,603 1,715
Minority Interests 164 148 163 180
Total Cap. & Liab. 4,314 4,769 5,081 5,505
EBITDA 474 453 529 600
Sales Gth (%) 18.5 0.1 15.3 15.0 Non-Cash Wkg. Cap 633 837 809 863
EBITDA Gth (%) 36.2 (4.4) 16.8 13.4 Net Cash/(Debt) (811) (1,116) (1,011) (1,065)
Opg Profit Gth (%) 27.6 (10.4) 18.6 14.2
Non-Cash Wkg.Cap. (363) (176) 23 (60) ROCE (%) 9.4 7.6 8.5 9.2
Other Operating CF (6) (7) 0 0 Div Payout Ratio (%) 55.2 50.2 50.2 50.2
Net Operating CF (28) 155 430 404 Interest Cover (x) 5.1 5.3 6.8 7.6
Other Investing CF 120 26 34 36 Current Ratio (x) 1.0 0.9 0.9 0.9
Div Paid (99) (104) (129) (149) Net Debt/Equity (X) 0.5 0.7 0.6 0.6
Chg in Gross Debt 387 73 70 (46) Capex to Debt (%) 24.8 17.7 19.0 19.0
Other Financing CF 29 0 0 0 N.Cash/(Debt)PS (RMB) (2.2) (3.1) (2.2) (2.3)
Net Financing CF 316 (31) (59) (194) Opg CFPS (RMB) 0.93 0.91 1.04 0.99
Net Cashflow 41 (129) 105 (54) Free CFPS (RMB) (1.06) (0.34) 0.33 0.22
Interim Income Statement (RMB m) Segmental Breakdown (RMB m)
Cost of Goods Sold (2,889) (2,871) (2,797) (2,963) Retail - Hypermarket 1,004 1,000 1,123 1,480
Gross Profit 468 456 453 479 Retail - Supermarket 1,813 1,837 2,046 2,351
Other Oper. (Exp)/Inc (284) (269) (289) (291) Retail - Convenience 249 250 278 319
Operating Profit 184 187 164 188 Retail - Dept Store 18 23 213 266
Other Non Opg (Exp)/Inc 0 0 0 0 Others 3,600 3,581 4,055 4,457
Net Interest (Exp)/Inc (44) (47) (44) (41)
Exceptional Gain/(Loss) 0 0 0 (13)
Tax (42) (34) (32) (33)
Net Profit 76 80 70 77
Sales Gth (%) 30.5 8.4 (3.2) 3.4

Opg Profit Gth 53.9 14.8 (11.3) 0.5
Net Profit Gth (%) 34.4 18.6 (7.9) (3.7)
Gross Margins (%) 13.9 13.7 13.9 13.9
Page 107
Pico Far East
BUY HK$1.58 HSI : 21,455 Incredible growth in FY10F

Price Target : 12-Month HK$2.00 (Previous: HK$1.97) • Pico continues to stay well poised for a substantial
Potential Catalyst: Economic recovery, growing demand for exhibition earnings rebound this year. We estimate its net
and brand building, mega events in Asia. profit to rise 44% in FY10F.
• The impending World Expo in Shanghai as well as
Analyst sizeable volume of forthcoming events will boost
Mavis Hui +852 2863 8879 growth and reinforce its leading position in Asia.
mavis_hui@hk.dbsvickers.com
• Trading at merely 8x ex-cash FY10F PE, Pico sees an
ample room for re-rating. Reiterate BUY.
Price Relative
HK$ Relative Index
218
Operations bottomed out. Pico continues to see a
2.80
stabilizing operating environment in recent months. Coupled
2.30 168
with its dominant market share in Asia, the company’s
1.80
118 operations should be well positioned for a strong
performance as the region’s economy continues to recover.
1.30
68
0.80
0.30 18
Specifically, Pico’s core exhibition division has leveraged on
2006 2007 2008 2009 2010
economic booms to achieve stellar performance in the past.
Pico Far East (LHS) Relative HSI INDEX (RHS) Its operations should resume a robust momentum as key
markets prosper ahead.
Abundant growth drivers. Numerous mega projects for the
2008A 2009A 2010F 2011F year, including the World Expo in Shanghai, new integrated-
FY Oct (HK$ m)
Turnover 2,631 2,226 2,590 2,942
resort facilities in Singapore, the Asian Games in Guangzhou,
EBITDA 261 207 279 335 etc. should all boost growth of Pico. Coupled with rising trade
Pre-tax Profit 231 168 239 293 fair space across Asia, increasing demand for brand building,
Net Profit 170 124 179 220
Net Pft (Pre Ex.) 170 124 179 220
and further expansion into strong markets like China and
EPS (HK$) 0.14 0.10 0.15 0.18 newer markets like India and Vietnam, Pico should benefit
EPS (HK$) 0.14 0.10 0.15 0.18 from multiple growth drivers further on. We expect the
EPS Gth (%) 16.4 (27.0) 44.4 23.1 company to post a strong earnings rebound to see net profit
Diluted EPS (HK$) 0.14 0.10 0.15 0.18
DPS (HK$) 0.07 0.04 0.07 0.09 growing 44% in FY10F. Management also targets to double
BV Per Share (HK$) 0.73 0.80 0.88 0.97 revenue in 5 years.
PE (X) 11.1 15.3 10.6 8.6
P/Cash Flow (X) 9.8 11.5 8.6 7.1
Attractive valuation, BUY. Over the last 10 years, Pico’s
EV/EBITDA (X) 5.5 6.7 4.7 3.6
Net Div Yield (%) 4.4 2.8 4.7 5.8 share price had peaked at >20x 12-month rolling PE and c.4x
P/Book Value (X) 2.2 2.0 1.8 1.6 rolling PB. Sitting on >HK$500m net cash and currently
Net Debt/Equity (X) CASH CASH CASH CASH trading at 10.6x PE, 8x ex-cash PE, 4.7% yield and just 0.2x
ROAE (%) 20.6 13.5 17.8 19.9
PEG based on FY10F numbers, we foresee ample room for
Earnings Rev (%): - - further re-rating. BUY
Consensus EPS (HK$): - - At A Glance
Mkt. Cap (HK$m/US$m) 1,891 / 244
Major Shareholders
ICB Industry: Consumer Services
ICB Sector: Media Pine Asset Management (%) 38.7
Principal Business: A leading event marketing company in Asia DJE Investment S.A. (%) 9.4
engaging in exhibition, sign advertising and commercial interior Deutsche Bank (%) 5.6
solutions. Free Float (%) 46.3
Page 108
www.dbsvickers.com
ed-GC / sa- DC
Pico Far East

HK$ m
3,000
23.0%
Strong expertise. Founded in 1969, Pico is currently a leading 2,500 18.0%
global operator of exhibition-related business. The company 2,000

13.0%
8.0%
has an international network of 33 offices and some 2,400 1,500 3.0%
staff worldwide, with key markets in Greater China, 1,000 -2.0%
Singapore and Malaysia. 500

-7.0%
-12.0%
0 -17.0%
One-stop shop. Over the years, Pico has branched out to 2007A 2008A 2009A 2010F 2011F
event marketing, conference organisation, sign advertising Total Revenue Revenue Growth (%) (YoY)
and commercial interior solutions for museums and

permanent exhibits. It has a diversified client base comprising
Asset Trend
leading global names such as Motorola, Disney, McDonalds HK$ m
and Shell. 2,000
1,500
1,000
Natural entry barrier. The global exhibition industry remains 500
fragmented with a low entry barrier. Small operators have

been competing aggressively on price at the low-end 2007A 2008A 2009A 2010F 2011F
segment, particularly in China and some third-world Net Fixed Assets (Tangible) Total Current Assets
countries. Pico differentiates itself well with its excellent track

record, long-established brand name, extensive sales
network, quality production and strong cash position. These Profitability Trend
HK$ m
form a natural competitive edge against its rivals. With a 283
60% market share in Asia in the top 20% exhibition 263
businesses, Pico sustains a dominant position in Asia. 243
223
Multiple growth drivers. Riding on the recovering Asian

203
183
economies, growing trade fair space, and increasing demand 163
for brand awareness, Pico should see successive double-digit 143
revenue growth in the coming 3-5 years. Further penetration 123

2007A 2008A 2009A 2010F 2011F
into fast growing markets including China and India, and a Operating EBIT Pre tax Profit Net Profit
gradual diversification into strong growth segments (e.g. sign

advertising) also support revenue expansion. Together with a
Margin Trends (%)
series of impending mega events and rising economies of
20%
scale, Pico is well poised to achieve better performance 18%
ahead, particularly in FY10F. 16%
14%
12%
Risks. Pico’s operations are strongly linked to the economic 10%
well-being of its key markets. Yet, by expanding into 8%

6%
relatively stable businesses (e.g. exhibition hall management), 4%
focusing more on cost-efficient operations, and maintaining a 2%

0%
strong liquidity position, Pico has demonstrated better 2007A 2008A 2009A 2010F 2011F
resilience during the latest global financial crisis. EBITDA Margin % EBIT Margin % Net Income Margin %
Page 109
Pico Far East
Leverage & Asset Turnover (x)

Outlook
1.5
0.1
1.5 Improving macros. Pico is focusing on operations in the
0.1
0.1
1.4 Greater China, Singapore and Malaysia, which together
1.4
0.1
generate c.80% of its revenue. We believe the impending
1.3
0.1 1.3
strong recovery in these countries should allow Pico to emerge
0.0 1.2 stronger and strengthen its foothold in the industry.
0.0 1.2
0.0 1.1
Wider channels. Trade fair space in Asia grew at 15% CAGR in
2007A 2008A 2009A 2010F 2011F 2004-08 to a total area of 14.3m sm. We expect the trend to
continue as more Asian MICE facilities are built, including the
upcoming Marina Bay project in Singapore. This should provide
ROE (%) additional opportunities for Pico to capture more exhibition
business ahead.
40.0%
35.0% Large amount of mega events for 2010. Leveraging on

30.0% abundant experience with the Olympics and other mega
25.0% events, as well as its wide international sales network with 17
20.0% in-house production facilities, Pico is in a good position to
15.0% secure more projects. Specifically, 2010 will offer a particularly
10.0% strong volume of major events versus the past years. These
2007A 2008A 2009A 2010F 2011F
include the Singapore Air Show, Shanghai World Expo, South
Africa World Cup, “ITMA”+”CITME” textile machinery shows
in Shanghai, Singapore F1 Grand Prix, Delhi Commonwealth
PE (x)
Games, and Guangzhou Asian Games. All these could help to
22.0 boost Pico’s growth momentum in FY10F.
17.0
12.0
7.0 Healthy liquidity. Pico currently sits on >HK$500m net cash,

equivalent to >HK$0.45 per share. Additionally, it is expected
2.0
2006 2007 2008 2009 2010
to generate c.HK$200m operating cashflow per year under a
normal economic environment, adequately financing its annual
capex requirement of c.HK$50m on average.
P/Book Value (x) Attractive valuation. In view of an improving operating

4.4
environment and a strong outlook for Pico, the stock could re-
3.9
3.4
rate as the market gradually normalises. Trading at 10.6x
2.9 FY10F PE, 8x ex-cash PE, and 21% discount to our target price
2.4 of HK$2.00 (based on 12x 12-month rolling PE), we reiterate a
1.9 Buy.
1.4
0.9
0.4
2006 2007 2008 2009 2010
Page 110
Pico Far East
FY Oct 2008A 2009A 2010F 2011F FY Oct 2008A 2009A 2010F 2011F
Turnover 2,631 2,226 2,590 2,942 Net Fixed Assets 299 331 338 342
Other Non Opg (Exp)/Inc 1 12 (9) 1 Debtors 673 647 753 856
Net Interest (Exp)/Inc 6 2 3 4 Total Assets 1,907 1,951 2,165 2,397
Tax (44) (36) (51) (63) Other Current Liab 902 806 938 1,065
Net Profit 170 124 179 220 Shareholder’s Equity 871 962 1,052 1,162
Net profit before Except. 170 124 179 220 Minority Interests 68 69 74 79
Total Cap. & Liab. 1,907 1,951 2,165 2,397
EBITDA 261 207 279 335
Sales Gth (%) 22.4 (15.4) 16.4 13.6 Non-Cash Wkg. Cap (131) (87) (107) (126)
EBITDA Gth (%) 20.3 (20.8) 35.2 20.0 Net Cash/(Debt) 534 569 656 758
Opg Profit Gth (%) 26.4 (27.5) 59.2 17.8
FY Oct 2008A 2009A 2010F 2011F FY Oct 2008A 2009A 2010F 2011F
(Pft)/ Loss on disposal of FAs (3) (13) 0 0 ROAE (%) 20.6 13.5 17.8 19.9
Assoc. & JV Inc/(loss) (12) (1) (1) (1) ROA (%) 9.6 6.4 8.7 9.7
Non-Cash Wkg.Cap. 60 (53) 19 18 ROCE (%) 17.9 11.2 16.1 17.6
Other Operating CF (2) (9) (5) (6) Div Payout Ratio (%) 49.4 43.5 50.0 50.0
Net Operating CF 267 108 263 314 Interest Cover (x) N/A N/A N/A N/A
Invts in Assoc. & JV (32) (2) 0 0 Creditors Turn (days) 119.4 155.5 138.4 139.7
Other Investing CF 28 (18) 5 6 Current Ratio (x) 1.4 1.6 1.6 1.6
Chg in Gross Debt (9) 42 (15) (13) Capex to Debt (%) 182.8 115.0 105.8 124.4
Other Financing CF 10 28 (53) (71) N.Cash/(Debt)PS (HK$) 0.4 0.5 0.5 0.6
Net Financing CF (98) 11 (163) (199) Opg CFPS (HK$) 0.17 0.13 0.20 0.25
Net Cashflow 88 60 79 96 Free CFPS (HK$) 0.16 0.04 0.18 0.22
Interim Income Statement (HK$ m) Segmental Breakdown (HK$ m)
FY Oct 1H2008 2H2008 1H2009 2H2009 FY Oct 2008A 2009A 2010F 2011F
Cost of Goods Sold (816) (962) (695) (792) Exhibitions & event 2,195 1,828 2,082 2,305
Gross Profit 386 467 354 384 Museums, theme 197 145 185 226
Other Oper. (Exp)/Inc (283) (350) (268) (312) Sign advertising 188 201 261 340
Operating Profit 103 117 86 72 Conferences and 51 51 62 71
Net Interest (Exp)/Inc (1) (1) (1) (2)
Tax (20) (24) (15) (21)
Minority Interest (11) (6) (9) 1
Net Profit 81 88 60 63
Net profit bef Except. 81 88 60 63
Sales Gth (%) 10.5 34.7 (12.7) (17.7)

Opg Profit Gth 4.9 51.7 (16.2) (38.8)
Net Profit Gth (%) 1.1 35.6 (25.6) (28.3)
Gross Margins (%) 32.1 32.7 33.8 32.7
Page 111
Wilmar International
Bloomberg: WIL SP | Reuters: WLIL.SI
BUYS$6.90 STI : 2,980.69 Top Agribusiness Pick

Price Target : 12 months S$ 8.30 • Rice and flour mills now included - more upside to
Potential Catalyst: Stronger earnings growth from 2QFY10 earnings
Analyst • RMB revaluation may expand Wilmar’s bottom line

Ben SANTOSO +65 6398 7976 and boost competitiveness
bensantoso@dbsvickers.com
• Still 20% more upside to DCF-based TP of S$8.30.
• BUY call reiterated on strong positioning in China

Price Relative
S$ R e la tiv e In d e x Factoring in rice and flour mills. We recently raised our
7 .8 0
345 forecasts to include stronger growth in the group’s rice and
6 .8 0
5 .8 0
295 flour milling business through 2013F. We believe Wilmar is
4 .8 0
245
capable of expanding capacities by 4m MT p.a. (based on 5
195
3 .8 0
2 .8 0 145
plants of 400k MT capacity p.a., each for rice and flour). As
1 .8 0 95 at end June 07, its rice and flour milling capacity was 890k
0 .8 0
2006 2007 2008 2009 2010
45
MT. The group has US$5b cash hoard and plans to spend
W ilm a r In t e r n a t io n a l (L H S ) R e la t iv e S T I IN D E X (R H S )
roughly half of its US$1b capex in China this year. Combined
with consumer distribution, we estimate this division to
contribute additional pretax of US$350m by 2013F.
FY Dec (US$ m) 2009A 2010F 2011F 2012F Beneficiary of RMB revaluation. Chinese soybeans are
Turnover 23,885 29,892 34,365 39,715 priced c.40% higher than US soybeans in international
EBITDA 2,423 2,774 3,162 3,599 markets (Brazilian and Argentine beans are also similarly
Pre-tax Profit 2,294 2,497 2,709 2,994 priced). Even after taking into account 13% VAT and 3%
Net Profit 1,882 1,994 2,132 2,312
Net Pft (Pre Ex.) 1,715 1,994 2,132 2,312 import tariff, imported soybeans are still cheaper. Hence, if
Net Pft (ex. BA gains) N/A N/A N/A N/A RMB is revalued, end product prices may not drop to protect
EPS (S cts) 40.3 42.7 45.6 49.5 crushers with domestic feedstock. This would benefit
EPS Pre Ex. (S cts) 36.7 42.7 45.6 49.5
crushers employing imported beans (which would be even
EPS Gth Pre Ex (%) 12 16 7 8
Diluted EPS (S cts) 40.3 42.7 45.6 49.5 cheaper). China cannot ban soybean imports, as it produces
Net DPS (S cts) 7.9 8.5 9.1 9.9 only a third of its requirements and the gap is growing.
BV Per Share (S cts) 233.9 268.4 305.3 345.3
PE (X) 17.1 16.1 15.1 13.9
PE Pre Ex. (X) 18.7 16.1 15.1 13.9 BUY for 20% upside. Our TP is S$8.30 (based on DCF:
P/Cash Flow (X) 15.4 14.3 13.2 12.1 WACC:9.1%, Rf:3.5%, ERP:7%, B:1.0, TG: 3%) with the
EV/EBITDA (X) 15.2 12.8 11.1 9.7 imputation of having imputed additional contribution from
Net Div Yield (%) 1.1 1.2 1.3 1.4
rice & flour mills (including dilution in oilseeds and grains
P/Book Value (X) 2.9 2.6 2.3 2.0
Net Debt/Equity (X) 0.4 0.2 0.2 0.1 M&P pretax margins), and changes in ASP, fertilser and FX
ROAE (%) 18.3 17.0 15.9 15.2 rates.
Earnings Rev (%): - - - At A Glance
Consensus EPS (S cts): 38.1 42.7 49.1 Issued Capital (m shrs) 6,392
Mkt. Cap (S$m/US$m) 43,921 / 32,127
ICB Industry : Consumer Goods
ICB Sector: Food Producers Major Shareholders
Principal Business: Wilmar is an integrated agribusiness group with Wilmar Holdings Pte Ltd (%) 29.3
one of the largest oil palm plantation land bank in the world, PPB Group Bhd (%) 18.4
significant share in China’s consumer edible oil market and large Global Cocoa Holding (%) 5.6
merchandising and processing capacities in Asia’s expanding Free Float (%) 46.7
economies. Avg. Daily Vol.(‘000) 5,925
Source of all data: Company, DBS Vickers, Bloomberg
Page 112
www.dbsvickers.com
ed: MY / sa: JC

U S$ m
An integrated agribusiness player. Founded in 1991, Wilmar 3 5 ,0 0 0

8 0 .1 %
International is a leading integrated agribusiness group in 3 0 ,0 0 0 6 0 .1 %
Asia, with operations capturing the entire value chain of the 2 5 ,0 0 0

4 0 .1 %
palm oil, oilseeds, grains, as well as fertiliser, shipping and 2 0 ,0 0 0
1 5 ,0 0 0 2 0 .1 %
biodiesel businesses. After the merger with Kuok Group and 1 0 ,0 0 0
acquisition of its holding company’s related businesses, 5 ,0 0 0
0 .1 %
Wilmar now has a solid management, strong presence in key 0 -1 9 .9 %

2008A 2009A 2010F 2011F 2012F
producing and consuming countries, enhanced global market T o ta l R e v e n u e R e v e n u e G ro w th (% ) (Y o Y )
intelligence; as well as having four of the top five consumer

edible oil brands in China.
Asset Trend
Merchandising and processing forms the bulk of the group’s U S$ m
earnings. Wilmar’s merchandising and refinery segment is the 2 0 ,0 0 0
biggest contributor the Group EBIT, which we expect to 1 5 ,0 0 0
account for US$1,646.1m or 68% of group’s FY10F EBIT. 1 0 ,0 0 0

Revenue from this segment is derived from sales of palm and
5 ,0 0 0
laurics refined products, as well as soybean meal, crude
soybean oil, rice, flour and other grains. 2008A 2009A 2010F 2011F 2012F
N e t F ix e d A s s e t s (T a n g ib le ) T o ta l C u rre n t A sse ts
Plantation land bank of 573,401 hectares. We estimate that
Wilmar holds land rights to 573,401 hectares of combined oil
palm plantation land bank in Indonesia and Malaysia – of
Profitability Trend
which we estimate 255,800 hectares would have been U S$ m
planted by end of 2010 (excluding plasma scheme of 34,800 2 ,9 3 0
hectares). 2 ,7 3 0
2 ,5 3 0
Industry Overview, Earnings Drivers & Risks 2 ,3 3 0
2 ,1 3 0
Higher domestic soybean prices in China. When we 1 ,9 3 0
compare soybean prices in Dalian and Chicago exchange, 1 ,7 3 0
we found that current Chinese soybean prices are already 1 ,5 3 0

2008A 2009A 2010F 2011F 2012F
40% higher than US prices. Even with 3% import tariff and O p e r a t in g E B IT P r e t a x P r o f it N e t P r o f it
13% VAT, imported soybeans are still cheaper. Hence, a

much stronger RMB would render Chinese farmers
Margin Trends (%)
vulnerable to yet cheaper imports.
20 %
18 %
High domestic soybean prices in China and declining 16 %
14 %
prospective international palm oil and soybean prices (in USD; 12 %
even more in RMB) should lower Wilmar imported feedstock 10 %
8%
costs, expand its margins and strengthen its competitiveness 6%
against domestic players. Within our universe, the prospects 4%

2%
of RMB revaluation would hence tilt the balance towards 0%
processors such as Wilmar from upstream players. 2008A 2009A 2 0 1 0F 2011F 2 01 2 F

E B IT D A M a rg in % E B IT M a rg in % N e t In co m e M a rg in %
Page 113
1.8 Strategic growth plans. Wilmar had secured licenses to expand

0 .9
0 .8 1.7 its capacities in the oilseeds crushing divisions, prior to
0 .7 1.6 restrictions imposed on foreign ownerships in this space since
0 .6
0 .5
1.5 December 2007. Hence, having completed such expansions
0 .4 1.4
last year, we expect the group’s oilseeds and grains M&P
0 .3
0 .2
1.3
volume to grow by 6.2% in CY11F and 4.5% in CY12F
1.2
0 .1 (excluding rice and flour milling). The M&P unit should provide
0 .0 1.1
2008A 20 0 9 A 2010F 2011F 2012F Wilmar with a stable earnings stream (contributing 66-68% of
Fin a n cia l Le ve ra g e (LH S) A sse t T u rn o ve r (R H S) EBIT), while the Group’s plantation unit is expected to maintain
its EBIT contribution at 19-20% over the next three years.
ROE (%) Wilmar’s consumer products, while only contributing to 11%
of EBIT this year, could expand to 13% by 2013F with
2 0 .0 % additional contribution from packaged rice and flour.
1 9 .0 %
1 8 .0 %
1 7 .0 % Expanding cooking oil in India. Given India’s huge market and
1 6 .0 %
1 5 .0 % palm oil’s price discount to soybean oil, we expect Wilmar to
1 4 .0 %
1 3 .0 %
expand its market share in India. With close to 20% market
1 2 .0 % share, the highest in the consumer-pack cooking oil (Fortune
1 1 .0 %
1 0 .0 % brand), we expect Wilmar to replicate its Chinese business
2008A 2009A 2010F 2011F 2012F
model of integrated complexes in India with its JV partner,
Adani Group.

4 0 .0
3 5 .0
Expect lower 1QFY10 earnings Our estimates based on daily
3 0 .0 spot prices showed that soybean crushing margins in the
2 5 .0 quarter ending 31 March 2010 have come down q-o-q to
2 0 .0 US$39.0/MT from US$52.4/MT and palm oil refining margin to
1 5 .0 US$19.3/MT from US$20.8/MT. Hence, given seasonally lower
1 0 .0 palm oil production and steady soybean volumes q-o-q, we
5 .0
2006 2 00 7 2008 2009
expect Wilmar’s M&P pretax profit to come down q-o-q. The
group’s plantation division should also book c.20% lower
volumes q-o-q, partially offset by 13.3% increase in spot palm
oil prices. While still growing we do not expect the group’s rice
P/Book Value (x) and flour volumes to bear any significant impact in 1QFY10,
4 .3
although we do anticipate consumer volumes to increase q-o-q
3 .8 (in line with Chinese New Year).
3 .3
2 .8 Our top pick. Wilmar’s leading position is China is our key

2 .3
investment thesis. Second, the group’s large economies of
1 .8
scale and global market intelligence provide a support for low
1 .3
0 .8
cost origination and processing. Third, continued expansion in
2006 2007 2008 20 0 9 Asia (particularly India, Indonesia and Africa) would provide
further growth beyond China and current business segments.
Finally, a strong management team makes Wilmar’s business
model impossible to replicate.
Page 114
Income Statement (US$ m) Balance Sheet (US$ m)

Cost of Goods Sold (20,882) (26,307) (30,230) (34,945) Invts in Associates & JVs 1,082 1,142 1,204 1,271
Other Opng (Exp)/Inc (878) (1,182) (1,390) (1,642) Cash & ST Invts 5,440 5,202 5,223 5,269
Net Interest (Exp)/Inc (43) 33 (98) (200) Total Assets 23,449 24,078 26,009 28,243
Pre-tax Profit 2,294 2,497 2,709 2,994 ST Debt 8,374 6,699 6,364 6,046
Net Profit before Except. 1,715 1,994 2,132 2,312 Minority Interests 481 599 759 981
Net Pft (ex. BA gains) N/A N/A N/A N/A Total Cap. & Liab. 23,449 24,078 26,009 28,243
EBITDA 2,423 2,774 3,162 3,599
Sales Gth (%) (18.0) 25.1 15.0 15.6 Non-Cash Wkg. Capital 5,436 5,098 5,833 6,712
EBITDA Gth (%) 7.6 14.5 14.0 13.8 Net Cash/(Debt) (4,140) (2,703) (2,347) (1,983)
Opg Profit Gth (%) 10.0 13.1 14.2 13.9
Net Profit Gth (%) 22.9 5.9 6.9 8.4
Cash Flow Statement (US$ m) Rates & Ratio
Pre-Tax Profit 2,294 2,497 2,709 2,994 Gross Margins (%) 12.6 12.0 12.0 12.0
Assoc. & JV Inc/(loss) (46) (60) (62) (66) ROAE (%) 18.3 17.0 15.9 15.2
Chg in Wkg.Cap. (2,584) 275 (749) (898) ROA (%) 9.1 8.4 8.5 8.5
Other Operating CF (58) 281 10 14 ROCE (%) 9.8 9.5 10.4 11.0
Net Operating CF (465) 2,919 1,845 1,988 Div Payout Ratio (%) 19.5 20.0 20.0 20.0
Capital Exp.(net) (1,073) (983) (1,095) (1,201) Net Interest Cover (x) 48.9 NM 27.9 15.6
Other Investing CF (359) (24) (25) (26) Inventory Turn (avg days) 56.7 56.0 53.0 52.8
Net Investing CF (1,310) (1,007) (1,120) (1,227) Current Ratio (x) 1.2 1.4 1.5 1.6
Div Paid (328) (379) (409) (439) Quick Ratio (x) 0.8 0.9 1.0 1.0
Chg in Gross Debt 4,296 (1,675) (335) (318) Net Debt/Equity (X) 0.4 0.2 0.2 0.1
Capital Issues 12 0 0 0 Net Debt/Equity ex MI (X) 0.4 0.2 0.2 0.1
Other Financing CF 37 (112) 24 26 Capex to Debt (%) 11.2 12.4 14.5 16.6
Net Financing CF 4,017 (2,165) (719) (732) Z-Score (X) 3.9 3.4 3.7 3.8
Net Cashflow 2,242 (253) 5 29 N. Cash/(Debt)PS (US cts.) (64.8) (42.3) (36.7) (31.0)
Opg CFPS (US cts.) 33.2 41.4 40.6 45.2
Free CFPS (US cts.) (24.1) 30.3 11.7 12.3
Quarterly / Interim Income Statement (US$ m) Segmental Breakdown / Assumptions
FY Dec 1Q2009 2Q2009 3Q2009 4Q2009 FY Dec 2009A 2010F 2011F 2012F
Turnover 4,958 5,712 6,299 6,916 Revenues (US$ m)

Cost of Goods Sold (4,141) (5,008) (5,576) (6,156) M&P 20,783 26,048 29,411 33,562
Gross Profit 817 704 723 759 Plantations 1,119 1,404 1,532 1,710
Other Oper. (Exp)/Inc N/A N/A N/A N/A Consumer products 3,898 4,559 5,732 7,018
Operating Profit 562 539 688 502 Others 1,434 1,059 1,124 1,194
Other Non Opg (Exp)/Inc N/A N/A N/A N/A Elimination (3,349) (3,178) (3,434) (3,769)
Net Interest (Exp)/Inc (56) (17) 29 1 EBIT (US$ m)
Exceptional Gain/(Loss) N/A N/A N/A N/A M&P 1,399 1,646 1,852 2,066
Pre-tax Profit 519 524 735 517 Plantations 395 465 522 611
Tax (110) (85) (76) (53) Consumer products 227 254 332 411
Minority Interest (29) (31) (6) (22) Others 71 74 78 82
Net Profit 380 407 653 442 Unallocated costs (32) (36) (39) (42)
Net profit bef Except. 380 407 653 442 Total 2,058 2,404 2,745 3,128
EBITDA 635 602 769 585 EBIT Margins (%)
M&P 6.7 6.3 6.3 6.2
Sales Gth (%) (14.9) 15.2 10.3 9.8 Plantations 35.3 33.1 34.1 35.7
EBITDA Gth (%) 39.6 (5.2) 27.8 (23.9) Consumer products 5.8 5.6 5.8 5.9
Opg Profit Gth (%) 55.6 (4.2) 27.8 (27.0) Others 4.9 7.0 6.9 6.9
Net Profit Gth (%) 1.7 7.2 60.4 (32.3)
Opg Profit Margins (%) 11.3 9.4 10.9 7.3 Key Assumptions
Net Profit Margins (%) 7.7 7.1 10.4 6.4 CPO price (RM/MT) 2,261.3 2,460.0 2,470.0 2,530.0
Oilseeds & grains pretax 38.9 35.6 36.3 37.2
Palm & lauric pretax 36.3 38.6 38.9 39.8
Consumer products vol. 3,191.0 3,615.3 4,720.4 5,860.0
Oil palm planted area (Ha) 235,799 255,799 275,799 295,799
Page 115
Research Team Directory

Analyst Sector E-mail
Regional
Timothy Wong Head, Group Research timothywongkc@dbsvickers.com
Joanne Goh Regional Equity Strategist joannegohsc@dbs.com
Paul Yong, CFA Singapore & China Industrial & Transport paulyong@dbsvickers.com
Ben Santoso Regional Plantation bensantoso@dbsvickers.com
Sachin Mittal Regional Telecom sachin@dbsvickers.com
Lim Sue Lin Singapore, Malaysia and Indonesia Banking suelin@hwangdbsvickers.com.my
June Ng China and Malaysia Power june@hwangdbsvickers.com.my
Hong Kong / China

Derek Cheung Head of Research, Strategy derek_cheung@hk.dbsvickers.com
Alice Hui CFA Deputy HOR, Consumer alice_hui@hk.dbsvickers.com
Gideon Lo CFA Deputy HOR, Oil & Petrochemicals, gideon_lo@hk.dbsvickers.com
Pharmaceuticals, Shipping
Carol Wu China Property carol_wu@hk.dbsvickers.com
Danielle Wang China Property danielle_wang@hk.dbsvickers.com
Dennis Lam Electronics & Technology dennis_lam@hk.dbsvickers.com
Jasmine Lai Banking & Finance jasmine_lai@hk.dbsvickers.com
Jeff Yau CFA Hong Kong Property jeff_yau@hk.dbsvickers.com
Mavis Hui Media & General Retail mavis_hui@hk.dbsvickers.com
Patricia Yeung Industrials patricia_yeung@hk.dbsvickers.com
Paul Yong Consumer Services, Transportation – Toll Roads paulyong@dbsvickers.com
Rachel Miu Infrastructure, Machinery, Agriculture rachel_miu@hk.dbsvickers.com
Steven Liu CFA Software & Telecom steven_liu@hk.dbsvickers.com
Titus Wu Consumer Services titus_wu@hk.dbsvickers.com
Indonesia
Research Team Strategy, Conglomerate/Automotive, Cement research@id.dbsvickers.com
Ariyanto Kurniawan Basic Materials, Oil, Gas & Energy Ariyanto.kurniawan@id.dbsvickers.com
Research Team Consumer, Construction
Malaysia
Wong Ming Tek Head of Research, Strategy mingtek@hwangdbsvickers.com.my
Goh Yin Foo, CFA Retail/ Technical Product yinfoo@hwangdbsvickers.com.my
June Ng Power, Oil & Gas, Conglomerates, REITs june@hwangdbsvickers.com.my
Lim Sue Lin Financial Services suelin@hwangdbsvickers.com.my
Yee Mei Hui Gaming, Property meihui@hwangdbsvickers.com.my
Juliana Ramli Aviation, Transport, Plantation juliana@hwang.dbsvickers.com.my
Chong Tjen-San, CFA Construction, Infrastructure tjensan@hwangdbsvickers.com.my
Kok Chiew Sia Consumer chiewsia@hwangdbsvickers.com.my
Lee Wee Keat Oil & Gas, IPO weekeat@hwangdbsvickers.com.my
Research Team Small-Mid Caps general@hwangdbsvickers.com.my
Telecommunications, Motor, Steel, Manufacturing
Other Financial Services, Building materials
Singapore
Janice Chua Head of Research, Strategy, Industrials janicechua@dbsvickers.com
Ho Pei Hwa Industrials peihwa@dbsvickers.com
Lock Mun Yee Property, Reits mumyee@dbsvickers.com
Adrian Chua Property adrianchua@dbsvickers.com
Derek Tan Reits derektan@dbsvickers.com
Jeremy Thia Industrials, Property jeremythia@dbsvickers.com
Andy Sim, CFA Consumer andysim@dbsvickers.com
Patrick Xu Consumer patrickxu@dbsvickers.com
Tan Ai Teng Electronics aiteng@dbsvickers.com
Suvro Sarkar Electronics, Industrials survo@dbsvickers.com
Thailand
Chanpen Sirithanarattanakul Head of Research chanpens@th.dbsvickers.com
Strategy, Property, REITs, Transportation
Chirasit Vuttigrai Strategy, Telecom, Media chirasitv@th.dbsvickers.com
Sugittra Kongkhajornkidsuk Banks, Securities sugittrak@th.dbsvickers.com
Nalyne Viriyasathien Construction Materials, Food and Beverage, nalynev@th.dbsvickers.com
Healthcare, Hotel
Research Team Automotive, Commerce, Electronics
Research Team Building Materials, Energy, Utilities,
Petrochemicals, Chemicals
Korea
Lee Eun Young Basic Materials, Utilities eunyoung@dbsvickers.com
Jung Sung Hoon Consumer sunghoon@dbsvickers.com
Jay (Jaehak) Kim Automotive Jay_kim@hk.dbsvickers.com
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Page 116
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DBSV - Asian Consumer Digest

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Regional Industry Focus

Asian Consumer Digest

Cyclical Plays & Currency Winners STI : 3,002.62

• Top picks – Kia Motors, Dongfeng, Gome, Beijing Auto

Andy SIM +65 6398 7969

Mavis HUI +852 2863 8879 Theme #1: Currency Winners 8

Prices as of 22 Apr 2010

MICA (P) 043/10/2009

* H-shares mkt cap

Investment Summary For direct consumption picks, our focus is on China-related

Personal and Household Goods. We believe domestic

Media. Media is expected to trend up with growth in GDP. We

Sector performance review

Sub-sectors YTD performance (since 1 Jan 2010)

Airlines Automonbiles & Parts F arming & F ishing

Source: Bloomberg, DBS Vickers

# of Market Return Excess Return Target Return

Consumers 97 354,969 100.0 3.5 11.2 13.6 72.7 0.9 12.5

PE EPS Growth P/B ROE EV/EBITDA Dividend Yield

DBSV Sub-sector target return (%)

Sub-sectors Winners & Losers from local currency appreciation

Retailers Positive All China-based companies that are

Source: DBS Vickers

Company Positive/ (Negative) as % of net profit Comments

Lianhua 10% in reported HK$ earnings 100% earnings from China

Wumart 10% in reported HK$ earnings 100% earnings from China

Parkson Holdings 8% in reported RM earnings c.80% earnings from China

Gome 10% in reported HK$ earnings 100% earnings from China

Glorious Sun 6.0% Estimated to capture c.60% earnings from China.

Hengan 17.1% Gain from lower raw materials costs and FX

Source: DBS Vickers

Theme #2: Asian Cyclical Plays

GDP growth, % YOY

US 0.4 -2.4 3.3 2.8 2.8 3.7 3.9 3.1

Indonesia 6.0 4.5 5.5 5.5 5.8 5.9 5.5 5.0

growth myths with one stone”, 14 April 2010). In

China domestic demand vs US Unemployment

China – exports and imports

China – exports and imports

Unemployment rate declining. The Chinese employment

Leverage on summer peak season in China. We would still

SETCNSP Index SETCOM Index

Hong Kong Indonesia

HSCIC Index HSCISV Index HSCI Index J AKCONS Index J CI Index

Malaysia South Korea

KOSPI Index KRXCONS Index

Source: Bloomberg, DBS Vickers Source: Bloomberg, DBS Vickers

Rolling Fwd PE and Standard deviations

Automobiles & Parts Household/ Personal Goods

Up/Midstream Food Producers Media

Food & Beverages Retailers

Source: Bloomberg, DBS Vickers

Rolling forward PB trading band

Automobiles & Parts Household/ Personal Goods

Up/Midstream Food Producers Media

Food & Beverages Retailers

420 260 6.3x

Source: Bloomberg, DBS Vickers

SUB SECTOR - AUTO

AUTOS region to maintain double-digit growth of 14% for 2010,

While we believe that the market will gradually realize that

Market Cap (US$m): 68,975