Morning Express 09 January 2015 Focus of the Day Indices Chow Tai Fook (1929.HK) Neutral Disappointing 3Q; forecast and TP pared Phoebe WONG Last Closing: HK$11.0 [email protected] Downside: 13% LT BUY BUY SELL Stock Target Price: HK$9.6↓ Chow Tai Fook (CTF) reported a 10% revenue decrease with 18% SSS decline in 3Q15, worse than our and the market’s expectations, mainly due to the disappointing performance in both HK and China markets. For HK & Macau, revenue decreased 16% (2Q -20%) with SSS -21% (2Q -29%). While the sector-wide slowdown of traffic dragged by over 2 months of HK protests was a key attributing factor, we believe the adverse impact of CTF’s store cannibalization amid its rich network also took a bigger toll. For China, revenue decline widened once again in 3Q, to 6% (2Q -2%), with SSS -15% (2Q -12%). Another surprise was the negative sales mix, with 3Q gem-set jewelry SSS down 12%, a sharp reversal from its improvement trend as seen in the previous few quarters, mainly affected by the weakness of the HK & Macau market prolonged into the Christmas season (particularly higher-priced jewelry). Looking ahead, despite the removal of the HK traffic overhang and easier comps, we believe CTF’s recovery pace will continue to lag behind peers amid the sustained bigger store cannibalization impact and cost base both for its HK and China markets. Management made its second downward revision for the full-year FY15E revenue guidance (in less than 2 months) to a double-digit decline from previously single-digit decline, which further echoes our cautious view. We cut our net profit forecasts by 7%/8% in FY15/ 16E due to our lower SSS assumption (now putting us 6/10% below consensus), prompting us to pare our TP from HK$10 to HK$9.6 (based on 13.4x FY16E PE, continuing at a 10% premium to consumer peers). Reiterate Neutral. We continue to favor Luk Fook (590HK, Buy), our 2015E retail sector top pick, in view of its better scope for growth, in terms of both margins and China market expansion. Download our reports from Bloomberg: BOCM〈enter〉 Close HSI 23,836 H Shares 12,024 SH A 3,451 SH B 293 SZ A 1,516 SZ B 1,062 DJIA 17,908 S&P 500 2,062 Nasdaq 4,736 FTSE 6,570 CAC 4,260 DAX 9,838 Source: Bloomberg 1d % 0.65 0.27 -2.39 -0.58 -0.44 0.12 1.84 1.79 1.84 2.34 3.59 3.36 Ytd % 0.98 0.33 1.82 0.84 2.54 3.26 0.48 0.16 0.00 0.06 -0.29 0.33 Close 50.96 1,207.88 16.37 6,115.00 119.79 1.51 1.18 3m % -44.23 -1.34 -5.75 -8.32 -9.98 -6.40 -7.08 Ytd % -11.11 1.94 4.22 -2.94 -0.01 -3.15 -2.52 bps change HIBOR 0.38 US 10 yield 2.02 Source: Bloomberg 3m 0.01 -0.30 6m 0.01 -0.53 Indicators Brent Gold Silver Copper JPY GBP EURO HSI Technical HSI 50 d MA 200 d MA 14 d RSI Short Sell (HK$m) Source: Bloomberg 23,836 23,606 23,459 56 9,475 Morning Express 09 January 2015 Hang Seng Index (1 year) 26,000 Transportation Sector 25,000 Weekly transportation news wrap Geoffrey CHENG, CFA 24,000 23,000 [email protected] Weekly 22,000 21,000 In terms of sector, we highlight some notable updates for the transportation industry this week as follows: Source: Company data, Bloomberg Global dry bulk market: The Baltic Dry Bulk Index (BDI) remained on a downward trend, reaching its lowest point in five months. HS China Enterprise Index (1 year) 13,000 12,000 Logistics: China LPI recorded steady growth in December. 11,000 Transportation: NDRC announced the removal of price control on 24 commodities and services, including the prices of railway bulk cargo, parcels, domestic air cargo, and port service charges. Logistics: China’s express delivery volume reached 14 billion in 2014, ranking first worldwide. 10,000 9,000 8,000 Source: Company data, Bloomberg Shanghai A-shares (1 year) 3,500 Geely Auto (175.HK) Neutral Principal business improving, but uncertainties loom over exchange loss Wei YAO Last Closing: HK$2.72 [email protected] Upside: +16.5% 3,000 LT BUY 2,500 BUY SELL 2,000 Stock Target Price: HK$3.17→ 1) Geely Auto sold 54,900 cars in Dec, up 23.4% MoM but down 9.7% YoY. A total of 418,000 cars were sold from Jan to Dec, down YoY 24%, and accomplishing 97.1% of its yearly target. Car sales saw a strong rebound in Dec as compared with Nov, mainly driven by the sales growth of new products ‘‘Xindihao’’ and ‘‘New Vision’’; 2) Product structure and utilization rate improved in 2H; 3) The sales target set for 2015 is conservative; 4) There are still uncertainties looming over the exchange issue; 5) The renewable energy JV is a new long-term bright spot; 6) We maintain Neutral. In general, we believe that the data in Dec show that the company’s sales are still recovering, with strong demand from the domestic market, and its principal businesses are improving. In light of the current development trend, we are of the opinion that the sales target of the company looks conservative. We estimate FY15/16 sales volume to be 542,000 cars/591,000 cars. We expect EPS of FY2014/15/16 to be RMB0.15/0.28/0.32. Though the principal business is thriving, the company will still face uncertainties over exchange loss as the prospect of the ruble remains uncertain. We keep our Neutral rating and TP unchanged. Download our reports from Bloomberg: BOCM〈enter〉 Source: Company data, Bloomberg Shenzhen A-shares (1 year) 1,800 1,700 1,600 1,500 1,400 1,300 1,200 1,100 1,000 900 800 Source: Company data, Bloomberg 09 January 2015 Last Closing: HK$11.0 Downside: 13% Target Price: HK$9.6↓ Consumer Discretionary Sector Chow Tai Fook (1929.HK) UP MP OP Disappointing 3Q; forecast and TP pared Financial Highlights March year ended FY12 FY13 FY14 FY15E FY16E Revenue (HK$m) 56,571 Revenue growth (%) 61 Net profit (HK$m) 6,341 EPS (HK$) 0.685 vs Consensus (+/-%) na EPS growth (%) na PER (x) 16.1 DPS (HK$) 0.100 Yield (%) 0.9 Source: Company data, BOCOM Int’l estimates 57,434 2 5,505 0.551 na -20 20.0 0.220 2.0 77,407 35 7,272 0.727 na 32 15.1 0.360 3.3 67,373 -13 6,380 0.638 -6 -12 17.2 0.316 2.9 75,026 11 7,173 0.717 -10 12 15.3 0.355 3.2 Chow Tai Fook (CTF) reported a 10% revenue decrease with 18% SSS decline in 3Q15, worse than our and the market’s expectations, mainly due to the disappointing performance in both HK and China markets. For HK & Macau, revenue decreased 16% (2Q -20%) with SSS -21% (2Q -29%). While the sector-wide slowdown of traffic dragged by over 2 months of HK protests was a key attributing factor, we believe the adverse impact of CTF’s store cannibalization amid its rich network also took a bigger toll. For China, revenue decline widened once again in 3Q, to 6% (2Q -2%), with SSS -15% (2Q -12%). Another surprise was the negative sales mix, with 3Q gem-set jewelry SSS down 12%, a sharp reversal from its improvement trend as seen in the previous few quarters, mainly affected by the weakness of the HK & Macau market prolonged into the Christmas season (particularly higher-priced jewelry). Looking ahead, despite the removal of the HK traffic Neutral LT BUY BUY SELL Stock Stock data 52w High 14.48 52w Low 9.50 Market cap (HK$m) 110,000 Issued shares (m) 10,000 Avg daily vol (m) 6.1 1-mth change(%) 6.8 YTD change(%) 5.8 50d MA 10.5 200d MA 11.0 14-day RSI 61.8 Source: Company data, Bloomberg Performance chart HSI 20% 1929.HK 10% 0% overhang and easier comps, we believe CTF’s recovery pace will continue to lag behind peers amid the sustained bigger store cannibalization impact and cost base both for its HK -10% -20% -30% and China markets. Management made its second downward revision for the full-year FY15E revenue guidance (in less than 2 months) to a double-digit decline from previously -40% Jan-14 Apr-14 Jul-14 single-digit decline, which further echoes our cautious view. We cut our net profit forecasts by 7%/8% in FY15/ 16E due to our lower SSS assumption (now putting us 6/10% below consensus), prompting us to pare our TP from HK$10 to HK$9.6 (based on 13.4x FY16E PE, continuing at a 10% premium to consumer peers). Reiterate Neutral. We continue to favor Luk Fook (590HK, Buy), our 2015E retail sector top pick, in view of its better scope for growth, in terms of both margins and China market expansion. Store expansion in line with our expectation. The group opened 52 new stores (net) in 3Q15. This brought the number of new stores (net) to 166 for 9M15 (83% of our full-year estimate of 200), an 8% increase from FY14. As of end-Dec 14, the group had a total of 2,243 stores. Download our reports from Bloomberg: BOCM〈enter〉 Oct-14 Source: Company data, Bloomberg Phoebe Wong [email protected] Tel: (852) 2977 9391 Jan-15 09 January 2015 Transportation Weekly Transportation Transportation Sector Weekly transportation news wrap The global dry bulk market reached its lowest point in five months. The downward trend of global dry bulk market demand continued, with the Baltic Dry Bulk Index th (BDI) continuing to fall. As of 7 January 2015, the BDI plunged by 5.6% WoW and 60.3% YoY to 744, with the China Import Dry Bulk Freight Index (CDFI) down 4.7% WoW, largely as a result of the weak freight rate performance of Capesize and Panamax vessels, in our view. The Baltic Capesize Index (BCI) declined by 15.9% WoW to 397. The Baltic Panamax Index (BPI) fell by 10.6% WoW and 53.9% YoY to 780. The Baltic Supramax Index (BSI) reached 843, representing a decrease of 6.0% WoW and 30.0% YoY. 1-Year Sector Performance In December, China LPI continued its upward trend, suggesting an acceleration in the growth of logistics activities. In December, China LPI reached 57.5%, up 1.8% MoM, according to China Federation of Logistics & Purchasing, indicating the robust development of the logistics industry. The Total Business Volume index increased from 56.5% in November to 57.5%. Other indexes, including New Orders, Inventory Turnover, and Equipment Utilization Rate stayed in the expansionary zone, compared with the same period last year. However, the New Orders index dropped from 54.5% in the previous month to 53.7%, but was 1.2 ppts higher than that of the same period last year, indicating moderate new demand for logistics services. The Equipment Utilization Rate index stayed at the same level as the previous month, and recorded an increase of 6.4 ppts on a YoY basis. Geoffrey Cheng, CFA NDRC has lifted price control on railway bulk cargo, parcels, domestic air cargo, and port service charges. China’s National Development and Reform Commission (NDRC) announced the removal of price control on 24 commodities and services. In order to encourage private investment and invigorate the market, price control on the 24 commodities and services, including the prices of railway bulk cargo, parcels, domestic air cargo, passenger transport on short-haul routes, and port service fees, will be removed. The move is notably aimed at attracting private investors’ participation in railway construction, and to facilitate the new round of price reform, according to the media reports. Meanwhile, the lifting of price control on domestic air cargo and passenger transport on short-haul routes enables flexible price adjustment and enhanced competition among airlines, especially for the nascent low cost carriers. China’s express delivery volume reached 14 billion in 2014, ranking first worldwide. In 2014, China’s express delivery volume reached 14 billion, representing an increase of 52% YoY, according to the State Post Bureau of China. However, the rapid growth of express delivery can still hardly satisfy the market demand, according to the government report, as express delivery services are not available in some rural areas and cold chain delivery services are only available in 20 cities. According to the State Post Bureau, the forecasted express delivery volume will increase 40% YoY in 2015. Download our reports from Bloomberg: BOCM〈enter〉 20% Sector performance HSI Index performance 15% 10% 5% 0% -5% -10% -15% Jan-14 Apr-14 Jun-14 Sep-14 Source: Bloomberg [email protected] Tel: (852)2977 9380 Fay Zhou [email protected] Tel: (852) 2977 9381 Dec-14 Morning Express 09 January 2015 Market Review Hong Kong stocks rose on Thursday. The Hang Seng Index gained 154 points, or 0.65%, to finish at 23,845. Lenovo (992.HK) jumped 4% as the best blue-chip performer. China Mobile (941.HK) added 2%. Tencent (700.HK) rose 2.3%, extending winning streak to the fifth straight session. Wind power operators rallied. Longyuan (916.HK) jumped 6.7%. Huaneng Renewables (958.HK) leapt 7%. Mainland developers fell. CR Land (1109.HK) and COLI (688.HK) were the worst blue-chip performers, down 2.7% and 2.6%, respectively. US stocks posted strong gains on Thursday, as investors welcomed dovish comments by a Federal Reserve member, while ignoring a slightly weaker-than-expected jobless claim report. The S&P 500 gained 36.26 points, or 1.8%, to 2,062.14. The DJIA rose 323.35 points, or 1.8%, to 17,907.87. European stocks surged. The Stoxx Europe 600 jumped 2.7% to 342.10. News Reaction NDRC: to guide the investment of social capital in national construction projects instead of stimulating financial investment. According to Luo Guosan, deputy director of the NDRC’s Department of the Investment Office, the government’s policy direction of national key construction now is to introduce innovative financing mechanisms to allure social capital investment, rather than increasing fiscal investment to stimulate investors or stabilize the economy through such measure. Shenzhen Stock Exchange and Shanghai Stock Exchange narrowed the scope of criteria for investors of private bonds and standardized the regulations on credit growth guarantee. Since the introduction of China’s private bonds in 2012, the scale has expanded steadily but there has been various risk incidents. Both exchanges also issued relevant documents relating to the strengthening of risk control of private bond placement by small and medium-sized enterprises so as to reinforce the management of qualified investors and credit growth guarantee. Shanghai’s free trade zone is the first to commence pilot development of parallel import of cars but does not permit the import of old cars. Shanghai Commerce Committee, China (中國上海市商務委員會), Shanghai Free Trade Zone Administration Committee and other committees jointly issued an announcement on Wednesday, pursuant to which Shanghai’s free trade zone is permitted to commence pilot development of parallel import of cars. Hereafter, car distributors registered with Shanghai’s free trade zone will be permitted to engage in the business of imported foreign cars upon approval of MOF but will also be prohibited from importing old cars or illegally modified cars. Lenovo (992.HK) anticipates Motorola to boost the proportion of mobile sales to more than 40%. As reported, Liu Jun, the President of the Mobile Business Group under Lenovo group stated that with Motorola’s yet another attempt to penetrate China and other markets, the smart phones of the brand will account for more than 40% of Lenovo’s output volume of smart photo in the next fiscal year. Xiaomi attempts to establish its presence in outlets in India, in a bid to stimulate its mobile sales. Xiaomi, China’s smart phone manufacturer stated that if the outlet of Bharti Download our reports from Bloomberg: BOCM〈enter〉 Morning Express 09 January 2015 Airtel Ltd, an operator, can sell an adequate number of Hongmi Note 4G mobiles, it can then sell other types of mobile in the outlets of India. Xiaomi mainly fosters the sales strategy of online purchase. Download our reports from Bloomberg: BOCM〈enter〉 Morning Express 09 January 2015 Economic releases for this week - USA Date Time 6-Jan 7-Jan 7-Jan 8-Jan 9-Jan 9-Jan 9-Jan 9-Jan Source: Bloomberg Event Factory orders MBA mortgage applications Trade balance (US$ bn) Initial jobless claims (k) Consumer Credit(US$ bn) Change in Non-farm payrolls(k) Change in Private payrolls(k) Unemployment rate Economic releases for this week - China Survey -0.4% -42.0 290.0 15.00 243.0 230.0 5.7% Prior -0.7% 0.9% -43.4 298.0 13.23 321.0 314.0 5.8% Date Time 8-Jan 9-Jan 9-Jan Event Trade balance (US$ bn) CPI (YoY) PPI (YoY) Survey 46.0 1.4% -3.1% Prior 54.5 1.4% -2.7% Source: Bloomberg BOCOM Research Latest Reports Data 07 Jan 2015 06 Jan 2015 02 Jan 2015 31 Dec 2014 30 Dec 2014 30 Dec 2014 30 Dec 2014 24 Dec 2014 23 Dec 2014 22 Dec 2014 19 Dec 2014 19 Dec 2014 17 Dec 2014 17 Dec 2014 17 Dec 2014 17 Dec 2014 17 Dec 2014 17 Dec 2014 17 Dec 2014 17 Dec 2014 17 Dec 2014 Report Energy Sector – Bocom Energy Weekly Container Shipping Sector - Weekly container shipping commentary Transportation Sector - Weekly transportation news wrap SITC (1308.HK) – Company update – management positive on 2015 outlook Container Shipping Sector – Weekly container shipping commentary Insurance Sector – Sector re-rating has started; add to undervalued insurance stocks Golden Eagle (3308.HK) – Acquisition of property project in Suzhou; maintain Neutral China Market Strategy – China: 5 Surprises in 2015 Container Shipping Sector - Weekly container shipping commentary AAC Technologies (2018.HK) - Takeaways from plant visit in Changzhou Alibaba (BABA.US) - “Double 12”, Alipay expands to offline payment Transportation Sector - Weekly transportation news wrap 2015 Outlook - Introducing 2015 Top Picks; A Bright New Beginning HK Property Sector - Downgrade to Market Perform; both prices and rents have overshot Hysan (14.HK) - More opportunities than challenges in 2015 New World Development (17.HK) - High earnings visibility Hang Lung Properties (101.HK) - Record profit in 2014E Kerry Properties (683.HK) - Expanding its recurring income base Auto (Outperform): Finding bright spots amid modest sector outlook Transportation (Container Shipping: Market Perform); (Aviation: Outperform); (Logistics: Outperform): Still challenging for container shipping; airlines to benefit from lower jet fuel prices Telecom & Small/Mid Cap (Market Perform): Opportunities from the expansion of Shanghai-Hong Kong Stock Connect Source: Company data, BOCOM International Download our reports from Bloomberg: BOCM〈enter〉 Analyst Fei Wu, Tony Liu Geoffrey Cheng, CFA Geoffrey Cheng, CFA, Fay Zhou Geoffrey Cheng, CFA Geoffrey Cheng, CFA Li Wenbing Anita Chu Hao Hong, CFA Geoffrey Cheng, CFA Miles XIE Ma Yuan (Martina), Ph.D , Gu Xinyu (Connie), CPA Geoffrey Cheng, CFA Raymond Cheng, CFA, CPA, CA Alfred Lau, CFA, FRM Alfred Lau, CFA, FRM Alfred Lau, CFA, FRM Alfred Lau, CFA, FRM Alfred Lau, CFA, FRM Yao Wei Geoffrey Cheng, CFA Zhiwu LI Morning Express 09 January 2015 Hang Seng Index Constituents Company name Cheung Kong Hang Lung Proper Hengan Intl China Shenhua-H Hang Seng Bk China Res Land Cosco Pac Ltd Henderson Land D Aia Group Ltd Hutchison Whampo Kunlun Energy Co Ind & Comm Bk-H China Merchant Want Want China Sun Hung Kai Pro New World Dev Belle Internatio China Coal Ene-H Swire Pacific-A Sands China Ltd Clp Hldgs Ltd Bank East Asia Ping An Insura-H Boc Hong Kong Ho China Life Ins-H Citic Pacific China Res Enterp Cathay Pac Air Hong Kg China Gs Tingyi Hldg Co Esprit Hldgs Bank Of Commun-H China Petroleu-H Hong Kong Exchng Bank Of China-H Wharf Hldg Li & Fung Ltd Hsbc Hldgs Plc Power Assets Hol Mtr Corp China Overseas Tencent Holdings China Unicom Hon Sino Land Co China Res Power Petrochina Co-H Cnooc Ltd China Const Ba-H China Mobile Lenovo Group Ltd Hang Seng Index BBG code 1 HK 101 HK 1044 HK 1088 HK 11 HK 1109 HK 1199 HK 12 HK 1299 HK 13 HK 135 HK 1398 HK 144 HK 151 HK 16 HK 17 HK 1880 HK 1898 HK 19 HK 1928 HK 2 HK 23 HK 2318 HK 2388 HK 2628 HK 267 HK 291 HK 293 HK 3 HK 322 HK 330 HK 3328 HK 386 HK 388 HK 3988 HK 4 HK 494 HK 5 HK 6 HK 66 HK 688 HK 700 HK 762 HK 83 HK 836 HK 857 HK 883 HK 939 HK 941 HK 992 HK Share price (HK$) 125.60 21.30 79.00 23.25 126.90 21.90 11.18 53.20 42.70 86.60 7.58 5.72 26.30 10.06 118.50 9.07 8.82 4.97 99.75 37.15 66.10 31.05 81.90 25.65 29.95 13.68 15.96 17.18 17.74 17.98 9.06 6.84 6.27 177.80 4.43 58.20 7.26 71.20 75.45 32.25 24.15 127.30 10.64 12.34 19.98 8.78 10.46 6.45 93.60 10.84 Mkt cap (HK$m) 290,910 95,537 96,726 539,423 242,613 127,704 32,874 159,618 514,327 369,208 61,189 2,104,135 67,398 132,752 334,548 80,663 74,390 105,390 145,623 299,715 166,998 72,870 763,468 271,192 1,053,976 340,677 38,645 67,583 186,484 100,755 17,602 559,363 953,039 207,688 1,478,855 176,353 60,696 1,368,201 161,030 187,847 197,402 1,192,581 254,796 74,830 95,851 2,652,703 467,012 1,626,722 1,908,988 120,418 5d chg (%) -3.6 -2.1 -2.5 1.3 -1.8 7.1 1.5 -2.0 -1.0 -3.0 3.4 1.1 0.8 -1.6 0.2 1.7 1.1 2.3 -1.2 -2.6 -1.7 -0.6 3.5 -1.2 -1.6 3.5 -1.7 1.7 -0.1 1.5 -2.4 -5.5 0.3 3.6 1.4 3.9 0.0 -3.8 0.3 1.4 4.8 13.2 2.3 -1.4 -0.1 2.1 0.2 1.3 3.4 6.3 Ytd chg (%) -3.6 -2.1 -2.5 1.3 -1.8 7.1 1.5 -2.0 -1.0 -3.0 3.4 1.1 0.8 -1.6 0.2 1.7 1.1 2.3 -1.2 -2.6 -1.7 -0.6 3.5 -1.2 -1.6 3.5 -1.7 1.7 -0.1 1.5 -2.4 -5.5 0.3 3.6 1.4 3.9 0.0 -3.8 0.3 1.4 4.8 13.2 2.3 -1.4 -0.1 2.1 0.2 1.3 3.4 6.3 23,835.5 14,714,497 1.0 1.0 Source: Bloomberg Download our reports from Bloomberg: BOCM〈enter〉 –––– 52-week –––– Hi Lo (HK$) (HK$) 152.00 105.95 26.45 19.80 91.10 74.05 24.40 19.12 133.00 117.60 23.60 13.62 11.92 9.40 56.40 36.46 45.65 34.65 108.50 85.90 14.18 6.88 5.90 4.33 28.60 22.75 13.10 9.32 120.20 90.35 10.48 7.15 10.00 7.00 5.44 3.72 108.00 80.55 68.00 34.50 68.35 56.00 34.45 28.50 84.40 55.60 27.95 21.50 31.50 19.72 16.88 9.35 25.40 15.12 18.00 13.56 18.90 13.91 23.25 16.02 16.60 8.60 7.36 4.53 8.23 5.73 189.00 112.80 4.50 3.03 63.45 46.35 10.70 7.06 86.40 70.45 76.50 57.85 32.40 26.55 26.70 17.52 134.90 93.00 14.22 9.03 14.16 9.83 24.90 17.10 11.70 7.31 15.88 9.72 6.62 4.89 102.20 63.65 12.70 7.62 25,363.0 21,137.6 –––––––––– PE ––––––––––– 2014A 2015E 2016E (X) (X) (X) 6.7 8.2 8.5 12.5 13.8 15.2 26.7 25.6 21.3 8.6 9.4 9.3 14.6 14.4 13.0 8.4 11.4 9.7 14.4 12.6 11.4 8.9 17.1 16.7 27.0 20.8 18.4 7.8 10.9 10.7 9.6 9.7 9.1 5.8 5.8 5.5 15.2 15.6 14.2 24.6 24.5 20.9 9.5 15.1 14.2 6.8 10.6 10.0 N/A 13.1 12.5 38.3 62.2 34.9 11.4 14.3 13.3 14.6 14.7 14.7 18.5 15.8 15.5 10.5 11.2 10.9 16.4 14.0 12.8 11.7 11.0 10.0 25.3 19.8 17.0 9.7 9.7 8.2 21.0 81.0 45.6 23.0 19.7 12.0 26.8 25.3 23.5 31.1 28.3 23.0 82.9 51.5 27.3 6.3 6.3 6.0 8.6 9.1 10.1 44.2 40.6 30.2 5.9 6.0 5.5 7.4 14.9 13.1 9.3 14.9 12.8 11.5 10.5 9.9 2.6 17.9 18.1 12.6 18.1 16.7 7.9 8.6 7.4 43.0 39.6 30.0 16.2 15.7 13.7 8.3 14.0 13.6 8.2 7.9 7.3 9.8 10.5 11.4 6.7 7.2 8.9 5.7 5.6 5.3 13.0 13.8 13.6 16.1 17.3 14.9 10.1 10.7 9.8 Yield P/B (%) 2.8 3.5 2.3 4.9 4.3 2.1 2.7 1.9 1.0 2.7 3.0 N/A 2.9 2.7 2.8 4.6 N/A 2.0 3.6 4.7 3.9 3.6 1.1 3.9 1.3 1.9 1.6 1.5 1.9 1.6 0.8 N/A 4.8 2.0 5.5 3.0 6.5 5.3 3.4 2.9 2.0 0.2 1.9 4.1 3.8 4.5 5.4 5.8 3.3 2.2 (X) 0.8 0.8 5.9 1.3 2.2 1.5 0.9 0.6 2.4 0.9 1.2 1.1 1.0 9.1 0.8 0.5 2.3 0.6 0.7 7.4 1.8 1.1 2.5 1.6 2.8 0.6 0.8 1.1 3.7 4.3 1.0 0.9 1.0 10.1 1.0 0.6 1.6 0.9 1.3 1.2 1.7 12.8 0.9 0.7 1.4 1.1 1.0 1.1 1.8 4.7 3.7 1.3 Morning Express 09 January 2015 China Ent Index Constituents Company name Shandong Weig-H China Shenhua-H Sinopharm-H China Shipping-H Zoomlion Heavy-H Yanzhou Coal-H Agricultural-H New China Life-H Ind & Comm Bk-H Tsingtao Brew-H China Com Cons-H China Coal Ene-H China Minsheng-H Guangzhou Auto-H Ping An Insura-H Picc Property & Great Wall Mot-H Weichai Power-H Aluminum Corp-H China Pacific-H China Life Ins-H China Oilfield-H Zijin Mining-H China Natl Bdg-H Bank Of Commun-H Jiangxi Copper-H China Petroleu-H China Rail Gr-H China Merch Bk-H Bank Of China-H Dongfeng Motor-H Citic Securiti-H Haitong Securi-H China Telecom-H Air China Ltd-H Petrochina Co-H Huaneng Power-H Anhui Conch-H China Longyuan-H China Const Ba-H China Citic Bk-H Hang Seng China Ent Indx BBG code 1066 HK 1088 HK 1099 HK 1138 HK 1157 HK 1171 HK 1288 HK 1336 HK 1398 HK 168 HK 1800 HK 1898 HK 1988 HK 2238 HK 2318 HK 2328 HK 2333 HK 2338 HK 2600 HK 2601 HK 2628 HK 2883 HK 2899 HK 3323 HK 3328 HK 358 HK 386 HK 390 HK 3968 HK 3988 HK 489 HK 6030 HK 6837 HK 728 HK 753 HK 857 HK 902 HK 914 HK 916 HK 939 HK 998 HK Share price (HK$) Mkt cap (HK$m) 5d chg (%) Ytd chg (%) 5.95 23.25 28.40 5.77 6.14 7.07 4.03 39.80 5.72 53.35 9.82 4.97 9.86 7.10 81.90 14.88 41.65 32.15 4.10 38.10 29.95 13.48 2.45 7.91 6.84 14.08 6.27 6.21 18.12 4.43 11.04 29.30 19.34 4.43 6.97 8.78 10.52 28.90 8.70 6.45 5.95 26,634.41 539,423.43 78,585.50 32,761.53 62,041.96 70,921.10 1,492,756.89 159,164.11 2,104,135.19 71,373.91 238,175.88 105,390.04 414,868.94 62,659.99 763,467.72 220,648.23 149,730.71 70,246.06 89,943.98 341,355.29 1,053,976.36 101,782.49 89,263.19 42,706.30 559,363.11 68,874.96 953,038.76 209,157.14 484,047.37 1,478,854.83 95,121.97 467,356.60 264,482.82 358,530.41 125,397.41 2,652,702.53 154,726.41 147,427.43 69,916.58 1,626,721.77 388,782.75 -5.0 1.3 3.5 8.5 3.9 7.6 2.8 1.7 1.1 1.4 5.3 2.3 -3.3 0.6 3.5 -1.3 -5.6 -1.7 14.2 -3.3 -1.6 0.1 11.4 4.9 -5.5 5.9 0.3 -2.7 -6.9 1.4 0.5 0.3 -0.9 -2.4 11.2 2.1 0.4 -0.5 7.8 1.3 -4.3 -5.0 1.3 3.5 8.5 3.9 7.6 2.8 1.7 1.1 1.4 5.3 2.3 -3.3 0.6 3.5 -1.3 -5.6 -1.7 14.2 -3.3 -1.6 0.1 11.4 4.9 -5.5 5.9 0.3 -2.7 -6.9 1.4 0.5 0.3 -0.9 -2.4 11.2 2.1 0.4 -0.5 7.8 1.3 -4.3 10.5 24.4 34.5 6.0 7.1 7.3 4.1 42.3 5.9 64.8 10.1 5.4 10.7 9.9 84.4 16.2 44.9 34.9 4.3 40.9 31.5 24.4 2.5 8.4 7.4 15.2 8.2 6.7 20.0 4.5 15.2 34.0 23.2 5.2 7.0 11.7 11.6 35.7 10.3 6.6 6.3 12,024 4,924,973 0.3 0.3 12,400.4 Source: Bloomberg Download our reports from Bloomberg: BOCM〈enter〉 –––– 52-week –––– Hi Lo (HK$) (HK$) ––––––––––– PE ––––––––––– 2014A 2015E 2016E Yield P/B (X) (X) (X) (%) (X) 5.8 19.1 19.7 4.0 3.5 4.9 3.0 21.1 4.3 50.4 4.9 3.7 5.9 6.7 55.6 9.4 26.1 25.8 2.5 23.6 19.7 11.7 1.6 6.7 4.5 11.6 5.7 3.0 12.1 3.0 9.6 13.7 9.5 3.1 4.2 7.3 6.1 24.0 7.1 4.9 3.6 69.7 8.6 22.8 N/A 20.5 7.6 5.8 16.6 5.8 29.1 9.9 38.3 6.0 11.6 16.4 15.3 12.5 9.8 N/A 25.9 25.3 6.3 20.0 5.5 6.3 11.0 8.6 10.7 6.3 5.9 5.6 32.5 35.2 15.4 26.1 9.8 10.3 10.1 28.7 5.7 5.5 21.4 9.4 20.6 58.5 23.4 17.8 5.7 14.0 5.8 27.9 9.4 62.2 5.7 10.5 14.0 13.1 12.4 10.6 N/A 23.5 19.8 6.5 17.4 6.0 6.3 13.4 9.1 10.1 6.3 6.0 6.0 29.9 22.8 15.7 20.7 10.5 9.5 10.5 22.4 5.6 5.5 17.7 9.3 17.3 16.3 17.8 18.8 5.3 12.5 5.5 24.6 8.6 34.9 5.4 8.2 12.8 12.1 9.5 11.0 N/A 19.4 17.0 6.9 17.5 5.6 6.0 13.8 10.1 9.1 5.7 5.5 5.6 24.1 17.9 14.2 12.9 11.4 9.0 9.7 15.7 5.3 5.1 1.3 4.9 1.1 0.0 3.0 0.4 N/A 0.5 N/A N/A 2.4 2.0 2.0 3.2 1.1 1.9 2.5 1.0 N/A 1.3 1.3 4.0 N/A 2.5 N/A 4.4 4.8 1.3 4.3 5.5 2.0 N/A 0.8 2.7 0.8 4.5 4.5 1.5 0.7 5.8 N/A 2.3 1.3 2.7 0.7 0.9 0.7 1.1 2.3 1.1 3.7 1.3 0.6 1.2 1.1 2.5 2.5 3.4 1.6 1.1 2.6 2.8 1.2 1.6 0.9 0.9 0.9 1.0 1.2 1.3 1.0 1.1 2.8 2.3 1.0 1.4 1.1 1.8 2.1 1.8 1.1 0.9 9,159.8 8.4 7.9 7.2 4.1 1.3 Morning Express 09 January 2015 BOCOM International 11/F, Man Yee Building, 68 Des Voeux Road, Central, Hong Kong Main: + 852 3710 3328 Fax: + 852 3798 0133 Rating System Company Rating www.bocomgroup.com Sector Rating Buy: Expect more than 20% upside in 12 months LT Buy: Expect more than 20% upside but longer than 12 months Neutral: Expect low volatility Sell: Expect more than 20% downside in 12 months Outperform (“OP”): Expect more than 10% upside in 12 months Market perform (“MP”): Expect low volatility Underperform (“UP”): Expect more than 10% downside in 12 months Research Team Head of Research @bocomgroup.com (852) 2977 9393 raymond.cheng (852) 2977 9384 hao.hong (852) 2977 9212 yangqingli Shanshan LI, CFA (86) 10 8800 9788 - 8058 lishanshan Li WAN, CFA (86) 10 8800 9788 - 8051 Wanli Raymond CHENG, CFA, CPA, CA Strategy Economics Hao HONG, CFA Banks/Network Financials Qingli YANG miaoxian.li Fei WU (852) 2977 9392 fei.wu Tony LIU (852) 2977 9390 xutong.liu Property Phoebe WONG (852) 2977 9391 phoebe.wong Anita CHU (852) 2977 9205 anita.chu Summer WANG (852) 2977 9221 summer.wang Shawn WU (852) 2977 9386 shawn.wu (852) 2977 9387 milo.liu (852) 2977 9389 liwenbing Consumer Staples Alfred LAU, CFA, FRM (852) 2977 9235 alfred.lau Luella GUO (852) 2977 9211 luella.guo (86) 21 6065 3606 louis.sun (852) 2977 9209 lizhiwu (852) 2977 9216 miles.xie Geoffrey CHENG, CFA (852) 2977 9380 geoffrey.cheng Fay ZHOU (852) 2977 9381 fay.zhou (86) 21 6065 3675 wei.yao Renewable Energy Healthcare Louis SUN Telecom & Small/ Mid-Caps Milo LIU Insurance & Brokerage Zhiwu LI Technology Internet Miles XIE Transportation & Industrial Yuan MA, PhD (86) 10 8800 9788 - 8039 yuan.ma Connie GU, CPA (86) 10 8800 9788 - 8045 conniegu (852) 2977 9243 jovi.li Metals & Mining Jovi LI (86) 10 8800 9788 - 8043 Miaoxian LI Oil & Gas/ Gas Utilities Consumer Discretionary Jerry LI @bocomgroup.com Automobile Download our reports from Bloomberg: BOCM〈enter〉 Wei YAO 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