wednesday, 13 april 2011 asian daily (asia edition)img.jrjimg.cn/2011/04/20110413145648642.pdf ·...

DISCLOSURE APPENDIX CONTAINS ANALYST CERTIFICATIONS AND THE STATUS OF NON-US ANALYSTS. FOR OTHER IMPORTANT DISCLOSURES, visit www.credit-suisse.com/ researchdisclosures or call +1 (877) 291-2683. U.S. Disclosure: Credit Suisse does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.

Wednesday, 13 April 2011

Asian Daily (Asia Edition)EPS, TP and Rating changes EPS TP (% change) T+1 T+2 Chg Up/Dn Rating Sino-Ocean Land Holdings Ltd

0 (4) (5) 11 N (N)

Essar Oil 13 8 12 28 O (N) Adaro Energy (10) (3) (21) (11) U (N) PT Borneo Lumbung Energi & Metal Tbk

8 15 (9) 21 O (O)

PT Bukit Asam 9 8 (4) 21 O (O) PT Harum Energy Tbk Initiation 4 N (NA) PT Indika Energy Tbk Initiation 30 O (NA) Honam Petrochem 0 5 0 (17) N (N) Shinsegae 0 0 (12) 32 O (O)

C3: Connecting clients to corporates

Hong Kong Microport (0853.HK)

Date 18-19 April, Hong Kong Coverage Analyst Jinsong Du

UEM Land Holdings Bhd (ULHB.KL) Date 18-19 April, Hong Kong Coverage Analyst Amir Hamzah

Soundwill (0878.HK) Date 26 April, Hong Kong Coverage Analyst Cusson Leung

Anta Sports (2020.HK) Date 05 May, Hong Kong Coverage Analyst Eva Wang

Singapore K-REIT Asia (KASA.SI) Post resutls

Date 15 April, Singapore Coverage Analyst Yvonne Voon

Microport (0853.HK) Date 19-21 April, Singapore Coverage Analyst Jinsong Du

UEM Land Holdings Bhd (ULHB.KL) Date 20-21 April, Singapore Coverage Analyst Amir Hamzah

US Microport (0853.HK)

Date 11-15 April, US Coverage Analyst Jinsong Du

Boshiwa International Holding Limited (1698.HK) Date 14-17 April, US Coverage Analyst Eva Wang

Europe Shanghai Electric Group Co., Ltd.(2727.HK)

Date 11-15 April, Europe Coverage Analyst Yang Song

Industrial & Commercial Bank of China (1398.HK) Date 12-20 April, Europe Coverage Analyst Sanjay Jain

PT Lippo Karawaci Tbk (LPKR.JK) Date 13-15 April, Europe Coverage Analyst Ella Nusantoro

Others Microport (0853.HK)

Date 19-21 April, Shanghai Coverage Analyst Jinsong Du

Contact [email protected] or Your usual sales representative.

Top of the pack ...

Asia Equity Strategy Sakthi Siva (3) New report: Cyclicals outperform defensives by 82%; time to go defensive?

South East Asia Coal Sector Paworamon (Poom) Suvarnatemee, CFA (4) New report: Time for stock picking

PT Indika Energy Tbk (INDY IJ) – Initiating Coverage with O Fonny Surya (5) New report: Unlocking the hidden gem

Adaro Energy (ADRO IJ) – Downgrade to U Fonny Surya (6) Rising costs pose downside risks

Malaysia Strategy Tan Ting Min (7) New report: Malaysia is least impacted by inflation

... and the whole pack Regional Asia Equity Strategy Sakthi Siva (3) New report: Cyclicals outperform defensives by 82%; time to go defensive? Global equity strategy – OW Andrew Garthwaite (8) Autos: down to benchmark from overweight Asia Palm Oil – Maintain UW Tan Ting Min (9) Indonesian FFB output is also rebounding South East Asia Coal Sector Paworamon (Poom) Suvarnatemee, CFA (4) New report: Time for stock picking Asia Technology Strategy Manish Nigam (10) Tech underperforming: Liquidity tailwind meets negative earnings revisions

China China Department Store Sector – Maintain OW Julie Ke (11) A strong 1Q11 - good cross-board SSS growth, bankcard index jump and channel check findings China Taiping (966 HK) – Maintain N Arjan van Veen (12) Slight weakening in bancassurance regular premium growth Sino-Ocean Land Holdings Ltd (3377 HK) – Maintain N Jinsong Du (13) March sales would have dropped 46% MoM, 21% YoY without February sales restatement

India India Utilities Sector – Maintain MW Amish Shah, CFA (14) New report: SEB risk high for merchant projects


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Asian indices - performance (% change) Latest 1D 1W 3M YTD ASX300 4,912 (1.5) 0.0 2.1 3.2 CSEALL 7,575 1.6 2.8 7.9 14.2 Hang Seng 23,976 (1.3) (0.7) (1.1) 4.1 H-SHARE 13,438 (1.8) (1.1) 1.9 5.9 JCI 3,719 (0.7) 0.9 4.3 0.4 KLSE 1,526 (1.2) (1.7) (2.9) 0.5 KOSPI 2,089 (1.6) (1.9) 0.0 1.9 KSE100 11,796 (0.6) (0.9) (4.0) (1.9) NIFTY 5,786 (1.0) (2.1) (1.3) (5.7) PCOMP 4,199 (0.7) 0.8 3.2 0.0 RED CHIP 4,364 (1.0) (0.7) 2.3 4.7 SET 1,085 0.8 0.6 4.8 5.0 STI 3,138 (0.7) (0.3) (3.6) (1.6) TWSE 8,733 (1.7) 0.3 (2.7) (2.7) VNINDEX 464 0.2 1.1 (2.8) (4.2)

Thomson Financial Datastream Asian currencies (vs US$) (% change) Latest 1D 1W 3M YTD A$ 1.0 (0.7) 0.9 5.3 3.0 Bt 30.1 0.2 0.1 1.2 (0.5) D 20,910.0 0.0 0.0 (6.8) (6.8) NT$ 29.1 0.0 0.4 (0.2) 0.2 P 43.3 (0.1) (0.3) 2.2 0.8 PRs 84.5 (0.2) 0.8 1.4 1.4 Rp 8,657.0 0.0 0.0 4.7 3.7 Rs 44.4 0.5 0.1 1.7 0.7 S$ 1.3 0.1 0.2 2.6 2.0 SLRs 110.4 0.1 0.0 0.3 0.5 W 1,089.7 0.7 (0.3) 2.2 2.9

Thomson Financial Datastream Global indices (% change) Latest 1D 1W 3M YTD DJIA 12,285 (0.8) (0.9) 4.5 6.1 S&P 500 1,317 (0.6) (1.2) 2.4 4.7 NASDAQ 2,749 (0.8) (1.5) 0.4 3.6 SOX 428 (1.9) (2.5) (2.8) 3.9 EU-STOX 2,601 (1.7) (1.0) (3.4) 0.6 FTSE 5,964 (1.5) (0.7) (1.4) 1.1 DAX 7,103 (1.4) (1.0) 0.5 2.7 CAC-40 3,977 (1.5) (1.6) 0.8 4.5 NIKKEI 9,555 (1.7) (0.6) (9.8) (6.6) TOPIX 839 (1.6) (1.0) (10.6) (6.7) 10 YR LB 3.49 (2.5) 0.4 3.8 6.1 2 YR LB 0.75 (8.8) (7.8) 24.8 26.4 US$:E 1.45 0.2 1.3 10.4 8.4 US$:Y 83.8 0.6 1.7 (0.9) (2.9) BRENT 120.7 (1.9) (0.6) 24.0 28.0 GOLD 1,452.1 (0.8) (0.3) 4.6 2.2 VIX 17.0 2.7 (1.3) 4.9 (4.1)

Thomson Financial Datastream

MSCI Asian indices – valuation & perf. EPS grth. P/E (x) Performance MSCI Index 10E 11E 10E 11E 1D 1M YTD Asia F X Japan 40 13 14.9 13.2 0.0 7.7 3.4 Asia Pac F X J. 31 15 15.4 13.4 0.0 8.8 4.7 Australia 4 20 16.6 14.0 (2.2) 9.8 5.9 China 35 14 13.7 12.0 (1.6) 5.5 5.0 Hong Kong 34 2 17.5 17.2 (1.0) 3.0 1.3 India 21 22 18.6 15.3 0.0 8.2 (5.4) Indonesia 15 19 17.4 14.6 (0.9) 7.0 5.7 Korea 45 16 12.3 10.7 (2.4) 10.1 5.5 Malaysia 32 14 17.1 14.9 (1.4) 3.0 2.4 Pakistan 31 14 8.7 7.9 (0.3) (1.6) 0.9 Philippines 41 11 16.7 15.1 (1.0) 7.0 (1.7) Singapore 28 5 14.9 14.1 (1.0) 4.7 0.4 Sri Lanka 94 12 20.4 18.1 0.7 3.7 0.7 Taiwan 83 12 14.8 13.3 (2.4) 3.2 (3.0) Thailand 32 12 14.6 13.0 0.4 9.8 8.0

* IBES estimates

Essar Oil (ESOIL IN) – Upgrade to O Sanjay Mookim (15) With the upgrade close to completion, EPS and cash flow should materially improve Hindalco (HNDL IN) – Maintain O Anubhav Aggarwal (16) Novelis: Indicators suggest a strong Mar quarter

Indonesia Indonesia Market Strategy Teddy Oetomo (17) US trip key takeaways: Focus on inflation and land reform Indonesia Cement Sector – Maintain OW Ella Nusantoro (18) Positive March cement consumption Indonesia Cement Sector – Maintain OW Ella Nusantoro (19) Takeaways from the US trip Adaro Energy (ADRO IJ) – Downgrade to U Fonny Surya (6) Rising costs pose downside risks PT Borneo Lumbung Energi & Metal Tbk (BORN IJ) – Maintain O Fonny Surya (20) Benefit from strong spot prices PT Bukit Asam (PTBA IJ) – Maintain O Fonny Surya (21) On track for executing its medium-term growth plan PT Harum Energy Tbk (HRUM IJ) – Initiating Coverage with N Fonny Surya (22) Break after the rally PT Indika Energy Tbk (INDY IJ) – Initiating Coverage with O Fonny Surya (5) New report: Unlocking the hidden gem

Malaysia Malaysia Strategy Tan Ting Min (7) New report: Malaysia is least impacted by inflation

Singapore Asia Offshore & Marine Sector – Maintain OW Bhuvnesh Singh (23) Petrobras cancels 21 rig package

South Korea Korea Construction Sector – Maintain MW Minseok Sinn (24) Recent mild improvements not enough to turn around weak confidence in the housing market Honam Petrochem (011170 KS) – Maintain N A-Hyung Cho (25) Historical high oil price could limit strong upswing in chemical margins Shinsegae (004170 KS) – Maintain O Sonia Kim (26) March and 1Q11 headlines: Strong sales, but soft profitability

Taiwan Chinatrust Financial Holding (2891 TT) – Maintain O Chung Hsu, CFA (27) Preliminary 1Q11 earnings in line with our above-consensus estimate

Thailand Today is a public holiday in this market

O=Outperform N=Neutral U=Underperform R=Restricted OW= Overweight MW=Market Weight UW=Underweight Research mailing options To make any changes to your existing research mailing details, please e-mail us directly at [email protected]

Sales Contact Hong Kong 852 2101 6218 Singapore 65 6212 3052 London 44 20 7888 4367 New York 1 212 325 5955 Boston 1 617 556 5634


Asian Daily

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Top of the pack ... Asia Equity Strategy ------------------------------------------------------------------------------------------- New report: Cyclicals outperform defensives by 82%; time to go defensive? Sakthi Siva / Research Analyst / 65 6212 3027 / [email protected] Kin Nang Chik / Research Analyst / 852 2101 7482 / [email protected]

● Cyclicals have outperformed defensives by 82% from November 2008 lows. With MSCI cyclicals (Energy, Materials, Tech, Consumer Cyclicals and Industrials) outperforming defensives (Consumer Staples, Utilities and Telcos) by 82% since the November 2008 lows, the key question for investors is whether it is time to go defensive. Particularly as widely watched US leading indicators such as the US ISM appear to be rolling over. Also, net foreign buying so far in April has reached US$8.06 bn, a record.

● Most overvalued cyclicals are Indonesian coal, Chinese Metals and Cement & Palm Oil. On our price-to-book versus ROE valuation methodology, the most overvalued cyclicals are Indonesian Coal (50% premium), Chinese Cement (29% premium), Chinese Metals (27% premium, note that CS Head of Materials Research, Trina Chen, yesterday downgraded Zijin Mining to Neutral) and Singapore/ Malaysia palm oil (23% premium). But we continue to Overweight cheap cyclicals like Korean Tech and Consumer Cyclicals, Chinese Oils.

● For the full version of this note click here New report – time to go defensive? With MSCI cyclicals (Energy, Materials, Tech, Consumer Cyclicals and Industrials) outperforming defensives (Consumer Staples, Utilities and Telcos) by 82% since the November 2008 lows, the key question for investors is whether it is time to go defensive. Particularly as widely watched US leading indicators such as the US ISM appear to be rolling over. Also, net foreign buying so far in April has reached US$8.06 bn, a record.

Figure 1: MSCI Cyclicals/ Defensives relative performance vs US ISM

60

70

80

90

100

110

120

Dec-03 Dec-05 Dec-07 Dec-09

NJA

Cycli

cals

vs D

efen

sives

30

35

40

45

50

55

60

65

US IS

M

Asia ex-JP Cyclicals vs Defensives US ISM

May-04

Oct-05Mar-10 Feb-11

Apr-07

82% out-performancefrom Nov 2008 lows

Source: MSCI, ISM, Datastream, Credit Suisse estimates

Given these reasons, we believe investors may want to take profits in the overvalued cyclicals. On our price-to-book versus ROE valuation methodology, the most overvalued cyclicals are Indonesian Coal (50% premium), Chinese Cement (29% premium), Chinese Metals (27% premium, note that CS Head of Materials Research, Trina Chen, yesterday downgraded Zijin Mining to Neutral) and Singapore/ Malaysia palm oil (23% premium). Indonesian Coal’s 50% premium is estimated using current ROE of 27%. We estimate implied ROE to be 34%.

Figure 2: Indonesian Coal P/B versus ROE relative to region

-300%

-200%

-100%

0%

100%

200%

300%

Jan-00 Jan-03 Jan-06 Jan-09

Indonesian Coal 49.8% currently avg: -17.2%

49.8% premium

Source: Company data, Credit Suisse estimates

For Chinese Cement, the 29% premium uses current ROE of 14.6%. We estimate implied ROE to be 19%.

Figure 3: Chinese Metals P/ BV vs ROE relative to region

-100%

-50%

0%

50%

100%

150%


Chinese Metals 27.6% currently avg: 0.8%

27.4% premium

High 113%


But we are staying Overweight cheap cyclicals. Despite the 82% outperformance by cyclicals, we are still finding discounts on Korean Tech (43%), Korean Consumer cyclicals (24%), Chinese Oils (8%), Korean Industrials (6%) and Australian Resources (See our Cheapest 10 report of 31 March 2011)

Figure 4: Singapore/ Malaysia Palm Oil P/ BV vs ROE relative to region

-40%

-20%

0%

20%

40%

60%


Sing/ Malay Palm Oil 22.7% currently avg: 6.9%

22.7% premium


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Asian Daily

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South East Asia Coal Sector -------------------------------------------------------------------------------- New report: Time for stock picking Paworamon (Poom) Suvarnatemee, CFA / Research Analyst / 662 614 6210 / [email protected] Fonny Surya / Research Analyst / 6221 255 37976 / [email protected] Puchong Kometsopha / Research Analyst / 66 2 614 6215 / [email protected]

● With CS’s view that coal prices will be capped in a tight range this year, we expect the share prices of coal stocks to be driven by a combination of three factors: 1) cost inflation due mainly to rising oil prices, 2) ASP momentum, and 3) share price valuation.

● CS’s global mining team believes that the thermal coal market will experience supply headwinds coming from gas markets, which will cap the price upside above US$130-133/t this year. We are also witnessing near-term pushback from Chinese power utilities in the US$120-$130/t range.

● We downgrade ADRO to UNDERPERFORM. Our earnings forecast is cut by 9% and 20% below consensus. ADRO is trading at the highest P/E of 17.9x. We cut our target price to Rp2,050. (We also change other target prices. See table below.) We initiate our coverage on HRUM with a NEUTRAL rating.

● We prefer companies with strong earnings momentum or positive company-specific catalysts. We initiate coverage of Indika (INDY) with an OUTPERFORM rating and rate it as our top pick with 30% potential upside. We suggest a switch from ADRO to INDY, PTBA, ITMG, and SAR.

● For full version of the note click here. Thermal coal – gas capped CS believes that the thermal coal market will experience supply headwinds coming from gas markets, which will cap the price upside above US$130-133/t this year, although we maintain an overall bullish stance on 2011-2013 supply-demand balances, with producers to earn well above average ten-year returns. We are also witnessing near-term pushback from Chinese power utilities in the US$120-$130/t range, partly resulting from macro pressures to reduce inflation. For the Japanese market, balancing the negative and positive impacts from the earthquake, we now believe the thermal coal-fired plant situation will cancel itself out, leaving no net increase in thermal imports over the coming 12 months. We change our thermal coal price assumptions in the near term to reflect the settlement of Japanese contract prices at US$130/t. Focus to be on earnings momentum and valuation On the back of our view that coal prices will be capped in the tight range, we expect the share prices of coal stocks to be driven by a

combination of three factors: 1) cost inflation due mainly to rising oil prices which are likely to hurt companies with less efficient logistics, 2) ASP momentum, which varies for different companies depending on their pricing strategies and 3) current share price valuation. Cost inflation may lead to downside surprises to earnings, while ASP momentum should be an offsetting factor supporting earnings. Downgrade ADRO to UNDERPERFORM We set our target price for stocks under our coverage based on a P/E of 16x on FY11E, CS’s target P/E for the Indonesian stock market. We cut our earnings forecast for PT Adaro Energy Tbk (ADRO.JK, Rp2275, N, TP Rp2050) by 9.5% and our forecast is 20% below consensus. We downgrade ADRO to UNDERPERFORM with a target price of Rp2,050 (from Rp2,600), as its valuation is most expensive at a P/E of 17.9x, while earnings expectations are too high. INDY as top pick We prefer companies with strong earnings momentum or positive company-specific catalysts. We suggest a switch from ADRO to PT Indika Energy (INDY.JK, Rp3975, O, TP Rp5400) (lowest P/E at 10.4x with clear catalyst from the listing of Petrosea by June), PT Tambang Batubara Bukit Asam (PTBA.JK, Rp22050, O, TP Rp27200) (resilient earnings with positive short term ASP momentum), PT Indo Tambangraya Megah (ITMG.JK, Rp48100, O [V], TP Rp57000) (earnings recovery from low base driven by ASP and diesel hedging gains) and Straits Asia Resources (STRL.SI, S$2.66, O, TP S$3.2) (permit issuance for Northern Lease). We maintain our OUTPERFORM on PT Borneo Lumbung Energi & Metal (BORN.JK, Rp1640, O [V], TP Rp2200), but reduce our target price to Rp2,000 (from Rp2,200) to highlight its short-term volume risks in 1Q11.

We also initiate our coverage on PT Harum Energy (HRUM.JK, Rp9100, N, Rp9600) with a NEUTRAL rating as we believe that the stock is fully valued. We maintain our NEUTRAL rating on BANPU as earnings expectations remains to high and we prefer ITMG to Banpu (BANP.BK, Bt778, N, TP Bt875). Please refer to our valuation metrics table for our changes in TPs for ADRO, BANPU, ITMG, PTBA, and BORNEO.

Valuation metrics Mkt cap Rating Price Target price (lccy) Up FY11E EPS (lccy) P/E (x) CS vs Consensus Company (US$ mn) New Old (lccy) New Old side New Chg 11E 12E 11E 12E ADRO 8,409 U N 2,300 2,050 2,600 -10% 128 -9% 17.7 11.5 -20% -4% BANPU 7,029 N N 782 875 852 12% 60 0% 12.9 9.8 -11% 7% ITMG 6,281 O O 49,850 57,000 54,000 19% 0.41 6% 13.4 9.2 -8% 5% PTBA 5,871 O O 22,400 27,200 28,200 23% 1,698 9% 13.0 10.9 9% 7% BORNEO 3,353 O O 1,650 2,000 2,200 22% 127 8% 12.9 10.6 7% 0% HARUM 2,839 N n.a. 9,250 9,600 n.a. 5% 615 n.a. 15.2 10.8 -7% -1% INDY 2,392 O n.a. 4,150 5,400 n.a. 36% 401 n.a. 9.9 8.1 6% 15% SAR 2,401 O O 2.7 3.2 3.2 20% 0.15 7% 14.0 8.3 0% 5% Note: O = OUTPERFORM, N = NEUTRAL, U = UNDERPERFORM Source: Company data, Credit Suisse estimates

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PT Indika Energy Tbk----------------------------------Initiating Coverage with OUTPERFORM New report: Unlocking the hidden gem EPS: ◄► TP: ◄► Fonny Surya / Research Analyst / 6221 255 37976 / [email protected]

● Initiating coverage on Indika with OUTPERFORM. Indika owns 46% of Kideco, the third largest coal mine in Indonesia, and also 98% of Petrosea, a mining contracting and services business which it bought from Clough of Australia in 2009. Kideco contributed about 65% and Petrosea about 20% to earnings.

● Petrosea has grown its business and earnings base since its acquisition. Petrosea has grown its earnings by 65% between 2008-2010, and we expect a two-year earnings CAGR of 39% between 2010-2012E. In addition, we forecast Kideco earnings to grow by 36% on a two-year EPS target, provides steady cash flow to Indika.

● Petrosea may unlock its value through public floating. We think that despite attractive earnings, market has not put full value on Petrosea’s earnings, and floating of Petrosea by June 2011 may unlock the value and prompt rerating of the stock.

● Initiate with OUTPERFORM and a target price of Rp5,400/share. Our SOTP-based target price of Rp5,400/share for Indika implies 13.5x 2011E P/E .

● For full version of the note click here.

Petrosea has grown its business and earnings base since acquisition. Petrosea has grown its earnings by 65% between 2008-2010, and we expect a two-year earnings CAGR of 39% between 2010-2012E. Petrosea was bought for US$103 mn in 2009, and we currently estimate a fair value of ~US$770 mn for Petrosea (including 50% in the Santan coal mine). In addition, we forecast Kideco’s earnings to grow by 36% on a two-year EPS target, a relatively conservative yet attractive growth compared to its coal peers. Petrosea to unlock its value through public floating Indika is required to float at least 20% of Petrosea by June 2011. If we were to value Kideco at 14.0x, in line with its coal peers, it will put Petrosea at 5.0x 2011E P/E, about 60% below its peers. Vice versa, if we were to value Petrosea at 13.1x 2011E P/E (in line with its peers), this would imply valuation of Kideco at 9.5x, about 30% below its coal

peers. We think that despite attractive earnings, market has not put full value on Petrosea’s earnings.

Initiate with an OUTPERFORM and target price of Rp 5,400/share Our target price of Rp5,400/share (30% potential upside) is based on Indy’s SOTP valuation, where we apply 16x 2011E P/E for Kideco, 11x 2011E P/E for Petrosea and Mitra Bahtera at market value. We currently do not assign a value to its other businesses, which contribute approximately 10% to earnings. Our target price implies 13.5x 2011E P/E on Indika's earnings.

Figure 2: Sum of the parts (SOTP) valuation Earnings breakdown Net profit

(U$ mn) Multiple Market cap

(U$ mn)Rp/share

Kideco @ 46% 226 16.0 3,610 6,240Corporate -89 16.0 - 1,421 -2,455Petrosea @ 100% 70 11.0 770 1,331Tripatra 26 - 0Cirebon electric power @ 20% na - 0MBSS@51% (listed market cap) 14 12.5 171 295Market cap 70 3,130 5,411Source: Company data, Credit Suisse estimates

Risks. Indika’s major cash flow contributor comes from Kideco. Thus, Indika is exposed to volatility in coal prices as it will directly impact Kideco’s revenue. Indika is also exposed to volatility in fuel prices, given that fuel contributes to about 30-35% of Kideco’s mining costs. On Petrosea’s side, the risk of mining equipment availability and delay in the shipment of such equipment may impact Petrosea’s ability to execute its work, which will directly impact its earnings performance.

On the regulatory side, changes in regulatory framework, especially surrounding the export regulation, may impact Kideco’s ability to export coal, which may eventually impact Kideco’s sales and production growth.

Price (11 Apr 11 , Rp) 4,150.00TP (Prev. TP Rp) 5,400 (NA) Est. pot. % chg. to TP 3052-wk range (Rp) 5300 - 2400Mkt cap (Rp/US$ bn) 21,609.6/ 2.5

Bbg/RIC INDY IJ / INDY.JK Rating (prev. rating) O (NA) Shares outstanding (mn) 5,207.10 Daily trad vol - 6m avg (mn) 15.9 Daily trad val - 6m avg (US$ mn) 7.4 Free float (%) — Major shareholders —

Performance 1M 3M 12MAbsolute (%) 10.7 (9.8) 32.8Relative (%) 4.7 (16.8) 0.9

Year 12/09A 12/10A 12/11E 12/12E 12/13ERevenues (Rp bn) 2,487 3,765 4,966 5,539 5,790EBITDA (Rp bn) 191 177 972 1,070 1,224Net profit (Rp bn) 1,281 773 2,092 2,553 2,497EPS (Rp) 246 148 402 490 479- Change from prev. EPS (%) n.a. n.a. - Consensus EPS (Rp) n.a. n.a. 379 454 428EPS growth (%) 41.9 (39.7) 170.8 22.1 (2.2)P/E (x) 16.9 28.0 10.3 8.5 8.7Dividend yield (%) 1.8 2.8 1.9 2.4 2.3EV/EBITDA (x) 123.6 136.9 26.4 22.9 19.1P/B (x) 4.1 4.0 2.9 2.2 1.9ROE (%) 24.3 14.4 32.2 29.7 23.5Net debt (net cash)/equity (%) 38.6 48.2 50.1 28.2 14.3 Note1:Harum Energy is a coal mining company holding 3 different mining companies, with CCoW 3rd generation and IUP coal concessions. Its main business includes exctracting, processing and marketing/selling the coals domestically and overseas..

Figure 1: 2YR earnings CAGR 2010-2012E

3 5%

58 %

38 %

0%

1 0%

2 0%

3 0%

4 0%

5 0%

6 0%

Kide co (46 % ) P etro se a (incl S an tan ) San ta n (50 % )

Source: Company data, Credit Suisse estimates.

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Adaro Energy------------------------------------------------------ Downgrade to UNDERPERFORM Rising costs pose downside risks EPS: ▼ TP: ▼ Fonny Surya / Research Analyst / 6221 255 37976 / [email protected]

● Revised down earnings by 9.5% and 3.3%. We have revised down our costs by 3% and our ASP by 1%. As a result there is a slight decrease in earnings by 9.5% and 3.3% for 2011E and 2012E.

● Too high of market expectation. Our EBITDA of US$1.2 bn is within management’s guidance of US$1.1–1.3 bn for 2011E. Consensus’ EBITDA is currently 9% higher than the company’s guided EBITDA. We believe that market has set too an high expectation on the back of better weather, and we think there is a potential further downgrade to consensus earnings.

● Expensive and lack of short-term catalysts. We do not expect to see upsides from ASP and cost, while ADRO’s share price currently trades at 17.9x 2011E P/E, the most expensive from among our coal universe.

● We downgrade to UNDERPERFORM (from Neutral) and decrease target price to Rp2,050/share.

Revised down our earnings to be in line with management’s guidance We revised down our costs by 3% to anticipate higher cost than management’s guidance of US$37-39/t due to higher fuel price assumption. We also slightly revised down our ASP by 1% despite higher new benchmark forecast as we anticipate some carried over volume from last year on lower price. This resulted in a slight decrease in our earnings forecast: of 9.5% and 3.3% for 2011E and 2012E. Our EBITDA is within management’s guidance of US$1.1–1.3 bn for 2011E and our net profit is 18% below consensus. Market expectation too high We believe that market has set too high an expectation on the back of better weather of 2011E for ADRO. Despite improving weather, it usually takes about three to six months for a mine to fully recover from rain and flood; thus, we expect lingering impact, which will still impact ADRO’s cost in 2011. Consensus’ EBITDA’s number is currently 8% higher than the high range of the company’s guided EBITDA. We believe that there is more downside risks to consensus earnings, and

we expect further downgrade to be more in line with management’s guidance.

Figure 1: Earnings changes New est. % changes FY10A FY11E FY12E FY11E FY12EAdaro Coal production Mn t 42.2 47.0 52.7 0.0 0.0Coal sales Mn t 42.7 47.5 53.2 0.0 0.0ASP U$/t 57.0 70.1 79.5 (0.9) 0.5Strip ratio x 5.3 6.0 5.7 0.0 0.0Cash cost U$/t 40.6 47.0 50.6 2.5 2.3Cash cost (Ex. Royalties) U$/t 34.4 39.6 42.1 3.2 2.7SIS Overburden removal Mn bcm 128.1 163.1 204.0 0.0 0.0Production Mn t 16.6 21.6 28.1 0.0 0.0Revenue Rp bn 26,557 32,318 40,879 (0.9) 0.4 Coal mining and trading 24,689 29,976 38,036 (0.9) 0.5 SIS 1,283 1,700 2,126 0.0 0.0 Others 585 641 718 0.0 0.0 Gross profit Rp bn 9,742 10,326 14,309 (6.7) (2.6)Gross margin 39% 34% 38% Operating profit 8,332 9,125 12,975 (7.9) (2.9)Operating margin 34% 30% 34% EBITDA Rp bn 8,186 10,880 15,010 (6.7) (2.5)EBITDA margin 33% 36% 39% Net interest income/(expense)

(1,006) (892) (702) 0.2 0.5

Forex gain/(loss) n.a n.a n.a Other income/(expenses), net

(718) (490) (490) 0.0 0.0

Net profit Rp bn 2,207 4,102 6,324 (9.5) (3.3)Net margin 9% 14% 17% EPS Rp 69 128 198 (9.5) (3.3)Source: Company data, Credit Suisse estimates. Expensive, lack of short-term catalysts We do not expect to see upsides from ASP and costs. Most of the price (90%) will soon be locked in, while costs are more on the downside risks from fuel price. ADRO’s share price currently trades at 17.9x 2011E P/E, the most expensive among our coal universe. Downgrade to UNDERPERFORM and cut target price to Rp 2,050/sh We decrease our target multiple from 18x 2011E P/E to 16x 2011E P/E, in line with Indonesian target index—this results in a lower target price of Rp2,050/share. We still like the company for medium-term outlook given its growth, strong balance sheet, good management and potential upside from IndoMet coal. However, in the shorter term we see more of downside risks on the earnings. We downgrade our rating to UNDERPERFORM (from Neutral).

Price (11 Apr 11 , Rp) 2,300.00TP (Prev. TP Rp) 2,050 (2,600) Est. pot. % chg. to TP (11)52-wk range (Rp) 2875 - 1720Mkt cap (Rp/US$ bn) 73,567.7/ 8.5

Bbg/RIC ADRO IJ / ADRO.JK Rating (prev. rating) U (N) Shares outstanding (mn) 31,986.00 Daily trad vol - 6m avg (mn) 59.7 Daily trad val - 6m avg (US$ mn) 16.4 Free float (%) 39.4 Major shareholders Adaro Strategic Inv.

(43.9%)

Performance 1M 3M 12MAbsolute (%) (1.1) (7.1) 8.2Relative (%) (6.5) (14.3) (17.8)

Year 12/09A 12/10A 12/11E 12/12E 12/13ERevenues (Rp bn) 26,938 24,689 32,318 40,879 49,762EBITDA (Rp bn) 11,177 8,186 10,880 15,010 18,465Net profit (Rp bn) 4,267 2,207 4,102 6,324 8,176EPS (Rp) 133 69 128 198 256- Change from prev. EPS (%) n.a. n.a. (10) (3) (8)- Consensus EPS (Rp) n.a. n.a. 161 207 266EPS growth (%) 153.1 (48.3) 85.8 54.2 29.3P/E (x) 17.2 33.3 17.9 11.6 9.0Dividend yield (%) 1.3 1.1 2.0 3.0 3.9EV/EBITDA (x) 7.0 10.1 7.5 5.2 3.8P/B (x) 4.2 4.0 3.4 2.8 2.3ROE (%) 27.1 12.3 20.4 26.4 28.0Net debt (net cash)/equity (%) 27.1 48.7 36.8 14.2 (10.3) Note1:Ord/ADR=50.0000.Note2:PT Adaro is one of the largest Indonesian coal mines focusing on coal mining production and marketing. It has total proven and probable reserve of 930 mt with current production of ~ 40mtpa..


Asian Daily

- 7 of 34 -

Malaysia Strategy ----------------------------------------------------------------------------------------------- New report: Malaysia is least impacted by inflation Tan Ting Min / Research Analyst / 603 2723 2080 / [email protected]

● Malaysia is the least affected by rising inflation in Asia, as most food staples in the CPI basket are subsidised by the government. Meanwhile, high commodity prices are positive for Malaysia as the country is a net exporter of crude oil, LNG, timber, palm oil and rubber, among other commodities.

● Winners are 1) Petronas Chemicals, as its feedstock costs are relatively fixed, and 2) Banks margins should expend if rates rise. We like CIMB, RHB Cap, Alliance Finance and Public Bank.

● Losers are 1) Contractors, 2) Property companies, 3) Transportation companies and 4) Tenaga, as rising coal cost will hurt margins with electricity rates remaining unchanged given the looming general elections. YTL Power, its parent company YTL Corp and MMC will be impacted by rising interest rates as their net gearing levels are high.

● For full version of the note click here.

Malaysia is the least impacted by inflation From a top-down perspective, Malaysia is the least affected by rising inflation in Asia, as most food staples in the CPI basket are subsidised by the government. Meanwhile, high commodity prices are positive for Malaysia as the country is a net exporter of crude oil, LNG, timber, palm oil and rubber, among other commodities. Winners are PetChem and the banks ● Petronas Chemicals will benefit from rising energy prices as its

feedstock costs are relatively fixed. ● Banks will also benefit as their margins should expand if rates rise.

Among the CS coverage, we like CIMB, RHB Cap, Alliance Finance and Public Bank.

Figure 2: Earnings impact under inflation sensitivity analysis assumptions

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Source: Credit Suisse estimates Losers are construction, property, transportation and power companies 1) Contractors will be hit if wages, metal and energy prices rise

sharply. 2) Property companies will also suffer. Nevertheless, those with

stronger brand names will have better ability to pass on any increase in costs. In addition, the ability to increase selling prices of residential properties is largely dependent on consumer sentiment.

3) Transportation companies – airlines (MAS, AirAsia) and shipping (MISC, Maybulk) – will be impacted if energy costs, wages and interest rates rise significantly.

4) Tenaga’s margins will be hurt by rising coal cost while electricity tariff rates will likely remain unchanged given the looming general elections. YTL Power, its parent company YTL Corp and MMC will be impacted by rising interest rates as their net gearing levels are high.

Figure 3: Earnings impact with a 10% increase in metal cost

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SIM

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Source: Credit Suisse estimates

Figure 1: Net commodity exports

Source: Bank Negara, Credit Suisse estimates

http://doc.research-and-analytics.csfb.com/docView?language=ENG&source=ulg&format=PDF&document_id=874675791&serialid=FCHfzMm2uGIIYN1Z3dX5CESd4BxDrUEET2uYtVIqLXE%3d


Asian Daily

- 8 of 34 -

Regional Global equity strategy-------------------------------------------------------------------- OVERWEIGHT Autos: down to benchmark from overweight Andrew Garthwaite / Research Analyst / 44 20 7883 6477 / [email protected] Luca Paolini / Research Analyst / 44 20 7883 6480 / [email protected] Marina Pronina / Research Analyst / 44 20 7883 6476 / [email protected] Mark Richards / Research Analyst / 44 20 7883 6484 / [email protected] Sebastian Raedler / Research Analyst / 44 20 7888 7554 / [email protected]

● We are becoming more cautious on cyclicals, in general. Our downgrade of the auto sector is part of this move. Cyclicals peak as ISM peaks, and relative sell-side recommendations, P/B relatives and margins for cyclicals are all close to, or at, record highs.

● Why we are less positive on autos, in particular. Net buy recommendations by sell-side analysts are higher than any other sector and at any other time; autos is typically one of the worst performing sectors when the ECB starts hiking rates (underperforming 75% of the time) and one of the worst performing sectors when ISM and global PMIs roll over, as they have now done.

● Why not be underweight autos? Lead indicators of autos sales in Europe and the US are still consistent with 8-10% rises in car sales from current levels; valuations are middling (using either HOLT® or P/Es); the auto penetration rate in China is the same as it was in the US in 1914, while China’s GDP per capita is at the same level as it was in the US in 1966.

Figure 1: Sell-side analysts are more positive on autos than any other sector

Source: Thomson Reuters, Credit Suisse research We are becoming more cautious on cyclicals, in general. Our downgrade of the auto sector is part of this move. Cyclicals peak as ISM peaks, and relative sell-side recommendations, P/B relatives and margins for cyclicals are all close to, or at, record highs. We note that US cyclicals are now underperforming, while in Europe they are not – this is unusual. Why we are less positive on autos, in particular Net buy recommendations by sell-side analysts are higher than any other sector and at any other time; autos is typically one of the worst performing sectors whenthe ECB starts to hike rates (underperforming 75% of the time) and also one of the worst performing sectors when ISM and global PMIs roll over, as theyhave now done; the auto sector has performed significantly better than it should have done, given the rise in the oil price (which affects sales and sales mix); raw materials, accounting for 12% of costs, are a headwind for earnings; China’s auto sales growth has slowed significantly; our European team

believes there will be a sharp rise in capex (capex to depreciation is currently 99%). Why not be underweight autos? Lead indicators of autos sales in Europe and the US are still consistent with 8-10% rises in car sales from current levels; valuations are middling (using either HOLT® or P/Es); the auto penetration rate in China is the same as it was in the US in 1914, while China’s GDP per capita is at the same level as it was in the US in 1966; earnings momentum is the best of all sectors; the auto sector is a play on the corporate spend story (with nearly half of sales being fleet). We would prefer to be short of capital goods and retailing rather than autos. Our longs among cyclicals remain software, advertising and mining. Within autos, our analysts continue to focus on premium producers. We offset the downgrade by adding to utilities.


Asian Daily

- 9 of 34 -

Asia Palm Oil Sector ------------------------------------------------------- Maintain UNDERWEIGHT Indonesian FFB output is also rebounding Tan Ting Min / Research Analyst / 603 2723 2080 / [email protected]

● Malaysia saw a sharp 29% MoM rebound in palm oil output in March 2011. Early indications from Indonesian-based plantation companies show the same output trend.

● First Resources’ FFB output in March 2011 was up 22% MoM and 28% YoY. Meanwhile, Astra Agro’s FFB output for the month of February 2011 jumped 28% YoY.

● Palm oil production is expected to seasonally rise until Oct-Nov 2011. Concerns about a severe shortage of edible oil have abated primarily because La Nina is fading.

● We believe that palm oil supply could surprise on the upside in 2011 because of: (1) the reversal of tree stress; (2) strong planting in 2007 maturing in 2010-11; (3) ample rainfall in 2010 which should boost output in 2011 as palms are hydrophilic.

● We are UNDERWEIGHT the palm oil sector as (1) valuations look stretched and (2) we believe palm oil prices have peaked. Our key UNDERPERFORM ratings are IOI and Sime Darby.

Figure 1: Valuation comparison of agri-related companies Target P/E (x) Calendarised Price Rat. Ticker price 09 10E 11E 12ESime Darby RM 9.17 U/P SIME MK 8.60 50.0 45.3 16.1 16.8IOI Corp RM 5.50 U/P IOI MK 5.11 23.5 19.7 17.3 17.8KL Kepong RM 21.00 N KLK MK 21.70 30.2 22.4 16.5 19.6Genting Plantns RM 7.93 N GENP MK 7.80 25.5 18.6 15.2 17.9Wilmar S$ 5.23 O/P WIL SP 6.40 14.6 20.6 16.3 15.2Indofood Agri S$ 2.25 N IFAR SP 2.74 14.7 16.0 12.7 15.4Astra Agro Rp 22500 N AALI IJ 25182 21.3 17.6 14.3 21.1London Sumatra Rp 2350 N LSIP IJ 12900 22.6 15.5 13.5 16.7Sampoerna Agro Rp 3175 N SGRO IJ 3254 21.4 13.3 13.7 14.6Source: Bloomberg, Credit Suisse estimates Indonesia is also showing high production growth We saw a sharp 29% MoM rebound in Malaysian palm oil output in March 2011. Although part of the rebound is a result of February being a short month, we believe that most of the rebound is due to a reversal of tree stress. We look to Indonesia to see if FFB production is showing the same upward trend. Based on FFB production figures from Indonesian-based plantation companies and Malaysian companies with large Indonesian operations, we believe that palm oil production in Indonesia is also showing a strong recovery:

• First Resources’ FFB output in March 2011 was up 22% MoM and 28% YoY. YTD (till Mar-2011), FFB output was up 25% YoY.

• Astra Agro’s FFB output for the month of February 2011 jumped 28% YoY. YTD (till Feb-2011), FFB output was up 18% YoY.

• KL Kepong’s FFB output in March 2011 rose 19% MoM and 12% YoY. YTD (till Mar-2011), FFB output was up 6% YoY.

Palm oil production is expected to seasonally rise until Oct-Nov 2011. We believe concerns about a severe shortage have abated primarily because La Nina is fading. We believe that palm oil supply could surprise on the upside in 2011.

1. Reversal of tree stress: A period of disappointing palm oil output is usually followed by a period of strong palm oil production. We expect Malaysian palm oil output in 2011 to be strong after two consecutive years of poor output in 2009 and 2010.

2. Strong planting in 2007 will mature in 2010-11. In 2007 and early 2008, when palm oil prices were above RM3,000 tonne, new planting must have been very strong. This new acreage will mature in 2010-11.

3. Ample rainfall in 2010 should boost output in 2011. Oil palms are hydrophilic (water loving) trees, hence the wet weather in late 2010 due to La Nina will likely benefit palms 6-12 months later.

4. Ample fertilisation in 2009 will mean yields should recover in 2011.

Figure 2: AALI’s FFB output and YoY Change in FFB output

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Source: Company data

Figure 3: First Resources’ FFB output and YoY change in FFB output

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Figure 4: KL Kepong’s FFB output and YoY change in FFB output

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Source: Company data. UNDERWEIGHT Malaysia plantation sector We are UNDERWEIGHT the palm oil sector because: (1) valuations look stretched and (2) we believe palm oil prices have peaked. Our key UNDERPERFORM ratings are IOI and Sime Darby.


Asian Daily

- 10 of 34 -

Asia Technology Strategy------------------------------------------------------------------------------------ Tech underperforming: Liquidity tailwind meets negative earnings revisions Manish Nigam / Research Analyst / 852 2101 7067 / [email protected]

● A poor performance in February and March has meant that YTD tech performance is more in line with the defensives than the out-performing cyclicals, even before yesterday’s tech sell-off.

● We notice that 17 March has seen local low/hi for several assets – Asian tech, emerging markets, S&P, US-10 year yields and JPY. We believe that a ‘risk-on’ trade after the coordinated JPY-related G7 intervention is probably the primary common factor here.

● While this liquidity boost has helped valuation expansion, it hasn’t, at least in the near term, helped underlying tech fundamentals – after a brief pause, earnings cuts have restarted in tech, except for the downstream smartphones sector.

● We have held for long that the 1Q results season is likely to be ugly, driven by weak demand (PC), falling tech commodity ASPs, cost pressures and negative operational leverage. Uncertainty surrounding supplies from Japan add another layer of concern.

● Since the 17 March lows, outperformers prior to that have again largely outperformed, whereas the laggards have continued to underperform. This has made the bipolar performance in tech even starker now. We maintain our conservative view on tech.

Figure 1: MSCI NJA subsectors YTD performance* 12.1

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Figure 2: MSCI NJA tech subsectors performance*

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10.012.0

Feb-11' Mar-11' Apr-11 MTD Since 10 Mar'11 Since 17 Mar'11

Region IT Software Hardware Semis

*Prices as of 11 April 2011. Source: MSCI, Factset, Credit Suisse estimates.

Figure 3: 1-month change in 12-month fwd consensus EPS estimate (%) Nov Dec Jan Feb MarKorea IT -4.3 -2.6 0.7 -1.1 -1.0Taiwan IT -0.9 -0.7 0.8 1.0 -1.0India IT 0.0 0.1 1.6 0.3 0.2NJA IT -1.1 -1.3 0.8 0.2 -0.7NJA Software 0.6 0.0 0.6 -0.2 0.0NJA Hardware -0.6 -0.8 -0.2 -1.3 -1.2NJA Semi -2.3 -1.8 1.5 1.2 -0.5Source: I/B/E/S, Factset, Credit Suisse estimates.

Figure 4: Regional sectoral valuation and earnings comparison Sector EPS growth (%) P/E (x) P/B (x) 1m chg in 12M 2011 2012 2011 2012 trailing 12M fwd EPS (%)NJA 14.3 14.8 13.3 11.6 2.14 0.1Energy 19.1 11.2 12.2 10.9 2.68 2.3Materials 16.7 13.5 12.7 11.2 2.21 0.0Industrials 8.4 12.3 13.1 11.7 1.97 0.3Cons. Disc. 20.7 14.6 13.7 12.0 2.77 0.9Cons. Staple 4.5 15.1 17.1 14.8 3.02 -1.0Health Care 25.0 19.3 21.4 17.9 5.16 -1.4Financials 17.8 16.5 13.3 11.4 1.81 0.3Tech 10.5 18.6 13.1 11.0 2.42 -0.7Telecom 6.1 7.8 12.2 11.3 2.05 -1.2Utilities 16.0 15.1 15.2 13.2 1.62 -1.0Source: : I/B/E/S, MSCI, Factset, Credit Suisse estimates

Summary view: Constructing a portfolio amid all the polarised moves is tough and our advice is, and has been, to maintain a conservative stance. 1Q results season should see a meaningful reset to published earnings estimates, particularly for the downstream sector, and that should hopefully set a better base to build positions, in our view. However, a lack of visible catalysts here means there is no urgency to do so before the results. Tactically oriented investors may like to book profits in the smartphones space (risk-reward isn’t great given supply-chain issues), though we still like the secular story. In semis, we believe TSMC and ASE are currently in the ‘no man’s land’ after the correction since mid-Feb (near-term earnings dynamics are likely to be against them though valuations are better). We remain comfortable with memory (more NAND than DRAM) and Samsung Electronics, though the stock is likely to follow Korea’s performance as fund flows continue to drive stock prices in the coming weeks.

Figure 5: MSCI Asia ex Japan tech stock performance (%) % change since Name Ticker Rating 10-Mar-11 17-Mar-11 YTD 12MStocks up 10% since 17 March and also up YTD ASM Pacific Technology 0522HK U 13.8 23.0 7.6 40.7 Catcher Tech 2474TT O 20.8 27.4 45.5 112.7 Tripod Technology Corp 3044TT O 7.5 10.8 13.8 45.1 Largan Precision 3008TT N 8.1 14.2 18.1 92.5 HTC Corp 2498TT O 11.6 21.3 34.3 247.9 Samsung SDI 006400KS U 7.5 10.4 8.4 25.0 Foxconn Technology 2354TT N 3.6 12.2 0.7 12.6 Inotera Memories 3474TT N 4.3 17.7 9.0 (34.5)Stocks underperforming Asia by over 5% since 17 March Acer 2353TT N (21.0) (13.5) (36.6) (32.2)Asustek Computer 2357TT O (2.3) 3.2 (10.0) (28.7)Unimicron Technology 3037TT O (7.3) 2.4 (16.1) 26.9 Quanta Computer 2382TT N (4.9) 3.1 (12.4) (5.5)Compal Electronics 2324TT N (10.8) (2.3) (22.0) (18.6)Novatek Microelectrs 3034TT O (1.5) 2.4 (7.7) (13.2)Epistar Corp 2448TT O (4.4) (2.0) 0.7 7.9 Seoul Semiconductor Co 046890KS O 4.8 3.5 11.2 5.1 Motech Industries 6244TT N 7.8 (3.2) 19.5 7.9 Wistron Corp 3231TT O (8.8) (2.3) (21.8) (8.1)Siliconware Precision 2325TT N 1.6 4.6 4.3 (1.9)Source: Company data, Credit Suisse estimates.


Asian Daily

- 11 of 34 -

China China Department Store Sector------------------------------------------ Maintain OVERWEIGHT A strong 1Q11 - good cross-board SSS growth, bankcard index jump and channel check findings Julie Ke / Research Analyst / 852 2101 6323 / [email protected] Kevin Yin / Research Analyst / 852 2101 7655 / [email protected]

● Most listed China department stores reported strong SSS growth for 1Q11, all beating management guidance for FY11. It is exciting to observe that some companies’ SSS growth further accelerated in March, which was rare in the past.

● China Union Pay’s Bankcard Consumer Confidence Index jumped 0.68 points MoM and recorded a 13-month high in March (typically a low month). This indicates domestic consumption recovery.

● Our recent channel-check trips in Shenzhen and Beijing also showed healthy traffic in department stores. Most brands raised tag prices on inflationary expectations. As a result, the current slightly higher discounting level does not necessarily translate into lower margin, in our view.

● We believe the higher-than-expected 1Q11 sales performance bodes well for the remaining year, implying an upside risk in street estimation on topline. On top of sector rotation, we believe the fundamental improvement justifies China discretionary sector’s recent re-rating. We reiterate our OUTPERFORM sector rating.

Figure 1: Positive surprise in March underpinned 1Q11 SSS growth Company FY10 Jan-Feb11 Mar 11 FY11 guidanceParkson 11.4% >12% >13% >12%Golden Eagle 25.1% 26.0% >26% 20%Intime 18.2% 27.2% 27.2% 15%Maoye 21.5% 30.0% 30.0% 20%Springland * 25.5% 35.0% >25%Company Jun-Dec10 Jan-Feb11 Mar 11 Jan-Jun 11 guidanceNWDS 11.9% mid-teen 22.0% mid teen*: for department store segments. Source: Company data, Credit Suisse estimates

Figure 2: 1Q11 SSS growths beat company guidance

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Strong discretionary consumption sentiment to remain China Union Pay’s Bankcard Consumer Confidence Index climbed to a 13-month high in March 2011. It implies strong consumption sentiment in middle-to-high consumer group in both Tier 1 and Tier 2 cities. In addition, according to a 1Q11survey conducted by Financial Times in 134 cities, nearly 75% respondents (mainly urban middle class) indicated their desire to increase discretionary spending in the next six months, implying the strong momentum will remain.

Figure 3: Bankcard Consumer Confidence Index increased in March

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Source: China Union Pay Catalysts and downside risk We maintain an OUTPERFORM rating on the sector. Parkson remains our top pick in the China department store sector.

Sector catalysts include stronger-than-expected SSS growth, faster-than-expected new store ramp-up and possible acquisitions. Sector downside risks include losses by the new stores, possible delay in new store opening and fund raising due to expansion.

Figure 4: Valuation comparison on IBES consensus Name Close

price Mcap

mn Performance Trading

P/E EPS EPS growth

HK$ US$ 1M 3M 12M T+1 T+2 Est. T+1 T+2 2011 2012Parkson 11.82 4,275 9% -8% -6% 22.7 18.4 CNY 0.430 0.530 21.8% 23.3%GE 20.65 5,163 11% -1% 29% 27.2 21.7 CNY 0.633 0.793 29.4% 25.3%PCD 2.25 1,223 4% -9% -14% 18.2 14.1 CNY 0.102 0.132 29.1% 29.4%Maoye 3.72 2,468 10% 1% 41% 22.9 17.0 CNY 0.160 0.216 34.7% 35.0%Intime 12.28 3,019 9% 3% 61% 26.2 20.7 CNY 0.462 0.585 28.3% 26.6%NWDS 6.45 1,400 13% -5% -10% 16.3 14.0 HKD 0.363 0.422 6.8% 16.3%Shirble 1.71 550 16% -3% n.a. 19.5 15.1 CNY 0.115 0.149 15.2% 29.0%Springland 6.58 2,117 11% 11% n.a. 25.3 18.5 HKD 0.260 0.355 21.5% 36.5%Note: Last actual FY ended Dec10, expect NWDS which ended in Jun10. Source: IBES

Valuation metrics Company Ticker CS Price Year EPS chg(%) TP (%) Up/dn EPS EPS grth (%) P/E (x) Div. yld (%) ROE P/B Rating Local Target T T+1 T+2 Chg (%) T+1 T+2 T+1 T+2 T+1 T+2 T+1 (%) (x)Parkson 3368 HK O 11.82 15.00 12/10 0 0 0 27 0.4 0.6 22 33 22.2 16.7 2.1 25.6 5.2Golden Eagle 3308 HK O 20.65 22.00 12/10 0 0 0 7 0.6 0.8 28 33 27.5 20.6 1.1 29.7 7.3PCD Stores 331 HK O 2.25 2.70 12/10 0 0 0 20 0.1 0.1 30 27 19.0 14.9 1.6 17.0 3.0Note: O = OUTPERFORM, N = NEUTRAL, U = UNDERPERFORM Source: Company data, Credit Suisse estimates


Asian Daily

- 12 of 34 -

China Taiping------------------------------------------------------------------------- Maintain NEUTRAL Slight weakening in bancassurance regular premium growth EPS: ◄► TP: ◄► Arjan van Veen / Research Analyst / 852 2101 7508 / [email protected] Frances Feng / Research Analyst / 852 2101 6693 / [email protected]

● China Taiping’s life division (60% of FY10 profit), Mar 2011 YTD premiums of Rmb10.3 bn were down 12% on pcp. March premiums were Rmb3.7 bn, down 11% on pcp. Annual premium equivalent premiums (APE) were Rmb2.6 bn, up 25% on pcp (2010 +50%).

● Agency channel – remained strong but slowed a little with 43% growth in (APE) premiums, a little behind 2010 growth of 54%. This is despite a fall in agent numbers for China Taiping during 2010, highlighting the strong improving agency productivity.

● Bancassurance channel – APE premium growth was 9% in March (Jan/Feb 2011 +15%, 2010 +47%), affected by the regulatory change and macroeconomic drivers (increased deposit rates on bank deposits and increased RRR requirements). Regular premiums slowed down as well to +23% (2010 +48%).

● China Taiping trades on 1.8x P/EV and 14x VNB (12-month forward), which still implies high growth expectations. We maintain our NEUTRAL rating given the increasing downside risk to value of new business growth in 2011 due to regulation changes.

New bancassurance rules less restrictive

The CIRC and CBRC have jointly issued new regulations in relation to bancassurance sales, which are less restrictive than the original CBRC ruling from November 2010 (click here for full report). We deem these changes help prevent the worst case scenario in terms of bancassurance sales (and long-term positive), but changes to sales processes will have a continued near-term impact on sales volumes.

Figure 1: CBRC ruling mainly impacting single premium sales Premium breakdown (Rmb mn) and growth (%pa) Mar-11 YoY YTD 2011 YoYAgency regular 1,428 43% 3,429 43%Agency single 20 89% 30 192%Agency APE* 739 43% 3,432 43%Bancassurance regular 1,072 23% 3,186 28%Bancassurance single 1,023 -51% 3,391 -47%Bancassurance APE* 1,275 9% 3,525 13%Unit linked 86 87 280%Group 46 -71% 221 -53%Total premiums 3,240 -11% 10,344 -12%APE* 2,018 25% 6,988 25%Source: Company data, Credit Suisse estimates (*APE = RP + 10% SP)

Figure 2: APE premium up 25% on pcp (+50% in 2010) Monthly APE (Rmb mn) and growth (%pcp)

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Figure 3: Agency regular premium up 43% on pcp Monthly agency APE (Rmb mn) and growth (%pcp)

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Source for both charts: Company data, Credit Suisse estimates (*APE = RP + 10% SP)

Valuation metrics – 15 March 2010 Company Ticker CS Price TP (%) Up/dn P/E EPS EV (BV*) P/EV (P/BV*) VNB multiple EV growth VNB growthT = Dec 10 rating local target Chg (%) T+1 T+1 T+2 T+1 T+2 T+1 T+2 T+1 T+2 T+1 T+1China Life 2628.HK NTRL 30.15 30 0.00% 0% 18.1x 1.7 2 14.4 16.51 2.1x 1.8x 16.8x 12.9x 16% 16%Ping An 2318.HK RSTR 84.9 0.00% 24.1x 3.5 4.3 35.01 40.85 2.4x 2.1x 17.9x 13.2x 13% 20%China Pacific 2601.HK OPFM 34.2 41 0.00% 20% 20.3x 1.7 2.1 18.57 20.71 1.8x 1.7x 15.5x 11.1x 23% 24%China Taiping 0966.HK NTRL 22.5 25.5 0.00% 13% 27.8x 0.8 1.1 12.61 14.84 1.8x 1.5x 13.9x 8.6x 31% 25%PICC* 2328.HK UPFM 9.86 10 0.00% 1% 14.9x 0.7 0.8 3.31 4.69 3.0x 2.1x na na 26% naSource: Company data, Credit Suisse estimates, *book value for PICC as it does not disclose embedded values as it is a P&C insurer

Price (11 Apr 11 , HK$) 22.50TP (Prev. TP HK$) 25.50 (25.50) Est. pot. % chg. to TP 1352-wk range (HK$) 30.00 - 20.90Mkt cap (HK$/US$ mn) 38,338.1/ 4,934.5

Bbg/RIC 966 HK / 0966.HK Rating (prev. rating) N (N) Shares outstanding (mn) 1,703.92 Daily trad vol - 6m avg (mn) 3.0 Daily trad val - 6m avg (US$ mn) 9.6 Free float (%) 40.0 Major shareholders China Insurance

Holdings 52%, ICBC Asia (6.9%).

Performance 1M 3M 12MAbsolute (%) 2.5 (4.3) (21.6)Relative (%) (4.2) (8.2) (25.9)

Year 12/09A 12/10A 12/11E 12/12E 12/13ENet profit (HK$ mn) 826 2,245 1,378 1,805 2,433EPS (HK$) 0.53 1.32 0.81 1.06 1.43- Change from prev. EPS (%) n.a. n.a. 0 0 0- Consensus EPS (HK$) n.a. n.a. 0.95 1.22 1.47EPS growth (%) n.a. 150.4 (38.6) 31.0 34.8P/E (x) 42.7 17.1 27.8 21.2 15.7Dividend yield (%) 0 0 0 0 0P/B (x) 3.7 3.0 2.1 1.9 1.7ROE (%) 8.7 8.7 9.5 11.6 — Note 1: China Taiping Holdings is composite insurer with the following operations: Taiping Life (#7 in China with 3% market share) accounts for 60% of earnings; Taiping Re (pan-Asia reinsurance) 25% and Taiping General Insurance 15% of earnings.


Asian Daily

- 13 of 34 -

Sino-Ocean Land Holdings Ltd------------------------------------------------- Maintain NEUTRAL March sales would have dropped 46% MoM, 21% YoY without February sales restatement EPS: ▼ TP: ▼ Jinsong Du / Research Analyst / 852 2101 6589 / [email protected] Wenhan Chen / Research Analyst / 852 2101 6407 / [email protected] Ronney Cheung / Research Analyst / 852 2101 7472 / [email protected]

● Sino Ocean Land announced its March contracted sales at Rmb1.1 bn, after restating Rmb260 mn of February’s contracted sales to March. This represents a 16% MoM drop and 3% YoY increase; without the restatement, March sales would have dropped 46% MoM and 21% YoY.

● In 1Q11, the company recorded total contracted sales of Rmb5.6 bn, accounting for 18.7% of its 2011 full-year contracted sales target of Rmb30 bn. We anticipate high risk for the company to miss its FY10 contracted sales guidance.

● According to management, cold weather has delayed construction. Therefore, there were no new projects / phases launched in March, and there will not be any in April either. We believe the tightening measures, especially in Beijing, should be a key reason as well.

● We reduce our FY12E EPS by 4% due to potentially lower 2011E contracted sales, and reduce our target price from HK$5.50 to HK$5.20, based 45% discount to the forward NAV of HK$9.45. Maintain NEUTRAL.

Weak March sales confirmed Credit Suisse concerns on key cities’ market sentiment Sino Ocean Land announced its March contracted sales at Rmb1.13 bn or 75,800 sq m, contracted sales value rose 3% YoY, but dropped 16% MoM. In 1Q11, the company recorded total contracted sales of Rmb5.6 bn, accounting for 18.7% of its 2011 full-year contracted sales target of Rmb30 bn. We anticipate high risk for the company to miss its FY10 contracted sales guidance. Sino Ocean Land adjusted its Feb contracted sales number to Rmb1.34 bn from the previously reported Rmb1.6 bn, and GFA sold to 86,100 sq m from the previous 110,000 sq m, due to the recording date change of contracted sales, according to the company. Therefore, around Rmb260 mn of contracted sales were moved from February to March. Without this restatement of February sales, March sales would have dropped 46% MoM and 21% YoY. April sales are expected to be weak, too There were no new projects/phases launched in March. Major existing projects that contributed include Beijing Poetry of River, Tianjin Ocean City, Dalian Ocean Worldview and Shenyang Ocean Paradise. And there will be no new projects launched in April either – monthly sales will rely on some new batches from existing projects like Ocean Great Harmony Area, Tianjin Ocean City, Shenyang Ocean Paradise and Zhongshan Ocean City, etc. More sellable resources in 2H11E – uncertainties remain The company will commence or resume construction of more projects from April onwards. Management stated that the previous construction slowdown from Dec 2010 to March 2011 was due to the cold weather in Northern China. Therefore, available sellable resource will be relatively light in 1H11, with more project launches in 2H11. The company expects to realise around 30-40% of its full-year contracted sales target during the first half year. Figure 1: Sino Ocean Land monthly contracted sales

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Source: Company data, Credit Suisse estimates Figure 2: China developers March and 1Q 2011 contracted sales comparison Date China

Vanke Agile COLI Country

GardenCR Land Evergrande GZ R&F Greentown Kaisa KWG Shimao Sino-Ocean

Land Rmb mn Rmb mn HK$ mn Rmb mn Rmb mn Rmb mn Rmb mn Rmb mn Rmb mn Rmb mn Rmb mn Rmb mnMar-11 9,330 2,623 7,760 2,500 1,960 5,520 2,212 1,300 545 1,070 2,014 1,130MoM % chg 53% -26% 83% 19% 42% 23% 81% -46% 108% 19% 66% -16%YoY % chg 48% 31% 13% 0% 18% 50% -27% -70% -28% -47% 6% 3%1Q sales as % of full-year target

n.a. 26% 22% 22% n.a. 28% 17% 16% 8% 22% 18% 19%

2011 target n.a. 36,000 6.3 mn sqm 43,000 n.a. 70,000 37,000 55,000 15,000 15,000 36,000 30,000Source: Company data, Credit Suisse estimates.

Price (12 Apr 11 , HK$) 4.68TP (Prev. TP HK$) 5.20 (5.50) Est. pot. % chg. to TP 1152-wk range (HK$) 6.83 - 4.32Mkt cap (HK$/US$ mn) 26,388.9/ 3,396.5

Bbg/RIC 3377 HK / 3377.HK Rating (prev. rating) N (N) Shares outstanding (mn) 5,638.65 Daily trad vol - 6m avg (mn) 22.1 Daily trad val - 6m avg (US$ mn) 14.9 Free float (%) 56.0 Major shareholders China Life: 24.07%;

Nan Fung Group: 12.84%

Performance 1M 3M 12MAbsolute (%) 1.5 (10.9) (31.5)Relative (%) (5.1) (13.3) (35.8)

Year 12/09A 12/10A 12/11E 12/12E 12/13ERevenues (Rmb mn) 8,824 13,721 19,476 22,809 29,827EBITDA (Rmb mn) 2,177 3,385 5,076 4,874 5,701Net profit (Rmb mn) 1,097 1,867 2,878 3,051 3,760EPS (Rmb) 0.19 0.33 0.51 0.54 0.67- Change from prev. EPS (%) n.a. n.a. 0 (4) (1)- Consensus EPS (Rmb) n.a. n.a. 0.49 0.57 0.71EPS growth (%) (30.4) 70.3 54.2 6.0 23.2P/E (x) 20.2 11.9 7.7 7.3 5.9Dividend yield (%) 2.3 3.3 3.6 4.0 4.4EV/EBITDA (x) 11.7 10.7 8.2 7.7 6.8P/B (x) 0.8 0.9 0.8 0.7 0.7ROE (%) 5.5 7.7 11.0 10.6 11.9Net debt (net cash)/equity (%) 13.9 42.8 54.9 39.4 40.2 Note1:Sino-Ocean is a leading property developer in Beijng, Dalian and Tianjin. Besides residential, the company is also engaging in investment property development. As of end-09, Sino-Ocean has total land bank of about 14mn sqm.


Asian Daily

- 14 of 34 -

India India Utilities Sector----------------------------------------------------- Maintain MARKET WEIGHT New report: SEB risk high for merchant projects Amish Shah, CFA / Research Analyst / 9122 6777 3743 / [email protected]

● Over 90% of power in India is distributed by the SEBs. Led by the political pressures, SEBs power tariff hikes at 5.2% CAGR over FY04-09 has not kept pace with rising power purchase costs resulting in SEBs generating negative operating cash flow. Most cash needs for SEBs are met through gearing, which is over 8x now despite a 54% increase in its equity & grants over FY07-09.

● Most distribution reforms are focussed on reducing AT&C losses. But as per our analysis, even at targeted AT&C loss of 15%, SEBs would have over US$5 bn of annual loss. This implies adequate tariff hikes are a must to resolve the SEB loss issue. We estimate that despite a 5% tariff hike and a 1% AT&C loss reduction p.a. over FY09-17, SEB losses would expand to US$16.6 bn by FY17.

● However, our discussions with policy makers suggests that SEBs will not default to power generators as states would bail them. But SEBs can curtail power purchases to minimise their losses. This would mostly impact merchant projects, in our view.

● We however, see rising domestic coal deficits as a structural issue for the sector as highlighted in our Mar 2010 report, Domestic fuel deficit a structural risk. Despite the sector underperformance over last 6 months, we continue to maintain cautious sector view. Lanco, KSK & JSPL are our only OUTPERFORM rated stocks.

● For full version of the note click here. Figure 1: Inadequate tariff hikes results in negative operating cash flows

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Figure 3: …gearing over 8x now, despite continuous investments through equity and grants

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Figure 4: We estimate SEB loss to reach US$16.6bn by FY17 despite a 5% tariff hike & 1% AT&C loss reduction p.a. over FY09-17

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Valuation metrics Company Ticker CS Price Year EPS Chg(%) TP (%) Up/dn EPS EPS grth (%) P/E (x) Div. yld (%) ROE P/B Rating Local Target T T+1 T+2 Chg (%) T+1 T+2 T+1 T+2 T+1 T+2 T+1 (%) (x)Adani Power ADANI IN N 119 113 03/10 0 0 0 (5) 3.0 10.6 290 249 39.0 11.2 0 10.8 4.0JSPL JSP IN O 700 810 03/10 0 0 0 16 41.3 54.9 8 33 16.9 12.7 0 31.5 4.6KSK KSK IN O 105 175.0 03/10 0 0 0 67 3.9 6.6 (8) 70 27.2 16.0 0 5.9 1.6Lanco LANCI IN O 44 58 03/10 0 0 0 32 2.2 3.2 20 47 20.3 13.8 0 14.4 2.7NHPC NHPC IN N 25 27 03/10 0 0 0 8 1.6 1.7 5 7 15.7 14.6 2 8.1 1.2NTPC NATP IN N 184 185 03/10 0 0 0 1 10.1 11.1 (6) 11 18.2 16.5 2 12.8 2.3Reliance Power RPWR IN U 132 129 03/10 0 0 0 (2) 3.0 2.1 6 (28) 44.1 61.5 0 5.3 2.1Tata Power TPWR IN N 1,313 1,367 03/10 0 0 0 4 64.6 93.7 2 45 20.3 14.0 1 12.8 2.5Note: O = OUTPERFORM, N = NEUTRAL, U = UNDERPERFORM. Source: Company data, Credit Suisse estimates

http://doc.research-and-analytics.csfb.com/docView?language=ENG&source=ulg&format=PDF&document_id=874675501&serialid=DEzxg9pjpPl0y8c9dv5XsaQxfW1wtghJggsHMZWz7OI%3d


Asian Daily

- 15 of 34 -

Essar Oil ---------------------------------------------------------------------Upgrade to OUTPERFORM With the upgrade close to completion, EPS and cash flow should materially improve EPS: ▲ TP: ▲ Sanjay Mookim / Research Analyst / 9122 6777 3806 / [email protected] Saurabh Mishra / Research Analyst / 91 22 6777 3894 / [email protected]

● ESOIL reported 4Q FY11 EPS of Rs2.35, up 18% QoQ and 57% YoY. 4Q current price GRM was US$8.15/bbl. ESOIL has booked sales tax deferral benefits of US$2.86/bbl in 4Q, supported by high product prices. Adjusting for this, 4Q11 GRM stands at US$5.3/bbl, up $0.5/bbl QoQ.

● The refinery upgrade project (capacity to 18 MTPA and complexity to 11.8) has been delayed due to fabrication issues at some units. These have reportedly been fixed, and ESOIL now believes it will be able to complete the upgrade by 3Q/4Q FY11.

● Trail production and sales have commenced at the Raniganj CBM block (35,000 SCM/Dat $6.25/mmbtu). Commercial production is expected to commence as some pending approvals are obtained.

● We update our model for higher CS oil price forecasts, higher core GRM and higher gas costs. FY12/13E EPS increase by 8%/6% to Rs6.9/22.3, respectively. Completion of the upgrade should materially increase ESOIL EPS/cash flow. On our post upgrade FY13 EPS estimate of Rs22, ESOIL is currently 6x. Our TP increases from Rs155 to Rs174. We upgrade to OUTPERFORM.

ESOIL 4Q FY11 EPS of Rs2.35

ESOIL reported 4Q FY11 EPS of Rs2.35, up 18% QoQ and ahead of our estimates (full-year standalone EPS of Rs4.8). Inventory gains of Rs4.84 bn on account of higher crude price contributed to the earnings significantly. The company reported 4QFY11 current price GRM of US$8.15/bbl, which is up US$0.94/bbl QoQ. This includes sales tax deferral benefits of US$2.86/bbl. Adjusting for this, 4Q FY11 GRM stands at US$5.3/bbl, up US$0.5/bbl QoQ. In the same period 3-1-1-1 calculated margins went up by US$1.6/bbl. ESOIL’s lower increase in core margins might be due to the hedging losses. We understand ESOIL hedges a portion of its margins (around 15%). The sharp upward movement in cracks during the quarter implies ESOIL would have lost on its hedges. ESOIL processed 3.66 MT crude in this quarter, indicating a daily run-rate of 298,000 bbl/day, which is similar to that in 3Q. Total crude throughput at 14.76 MMT in FY11 was up 9% YoY.

Figure 1: ESOIL – 4Q FY11 summary results Rs Mn 4QFY10 3QFY11 4QFY11 YoY QoQNet sales 104,540 122,330 133,150 27.4 8.8EBITDA 5,900 7,270 8,440 43.1 16.1Depreciation 1,810 1,850 1,810 0.0 -2.2Interest 3,200 3,010 3,090 -3.4 2.7Other income 910 1000 680 -25.3 -32.0PBT 1,800 3,410 4,220 134.4 23.8PAT 1,800 2,730 3,210 78.3 17.6EPS (Rs) 1.50 2.00 2.35 56.9 17.6GRM (US$/bbl) 5.07 7.21 8.15 60.7 13.0Share count 1202 1366 1366GRM (US$/bbl) 4QFY10 3QFY11 4QFY11 YoY QoQReported GRM 5.07 7.21 8.15 60.7 13.0Throughput (MMT) 3.60 3.73 3.66 1.7 -1.9Singapore simple 3.79 2.73 4.37 15.3 60.1Singapore complex 10.54 12.67 16.78 59.2 32.4Source: Company data, Credit Suisse estimates Update model We update our model for higher CS oil price forecast, which increases sales tax benefit by US$0.1/bbl in FY12 to US$2.4/bbl. We increase base case GRM by US$1/bbl on the recent strength in global margins, effectively increasing ESOIL GRM (including sales tax benefit) to US$8.1/$12.2/bbl in FY12/13 from US$7.0/10.9/bbl. We increase natural gas (for internal consumption) cost by US$4/mmbtu to US$9/mmbtu, as availability of cheaper KG D6 gas seems unlikely near term. As a result of these changes, our FY12/13E EPS increase by 8%/6% to Rs6.9/22.3, respectively. We update FY11 for actual numbers, which effectively increases FY11 EPS by 13%. Analyst meet comments At the analyst meet, the company indicated (1) the refinery upgrade project (increase in complexity, capacity) should be completed by 3Q/4Q12) and that the units found defective at pre-inspection have been fixed and received at site, (2) that the company is in negotiations with banks to exit its Corporate Debt Restructuring obligations/constraints, (3) that the purchase of the Stanlow refinery by the parent will enable ESOIL to sell its higher-quality product into the UK, (4) that test production at Raniganj CBM has started and commercial operations should commence once a few pending approvals are received and (5) that ESOIL expects debt to peak at around Rs160 bn, as more debt is drawn near term for current expansion, another upgrade and Raniganj. Upgrade to OUTPERFORM After a series of delays, the refinery upgrade project seems close to completion. The increase in complexity (from around 6 to 11.8 on the Nelson’s scale) should lead to a significant increase in ESOIL EPS and cash flow run rates. On our post upgrade FY13 EPS estimate of Rs22, ESOIL is currently at 6x. Our target price increases from Rs155 to Rs174. We upgrade to OUTPERFORM.

Price (11 Apr 11 , Rs) 135.70TP (Prev. TP Rs) 174 (155) Est. pot. % chg. to TP 2852-wk range (Rs) 158.70 - 102.00Mkt cap (Rs/US$ bn) 185.3/ 4.2

Bbg/RIC ESOIL IN / ESRO.BO Rating (prev. rating) O (N) [V] Shares outstanding (mn) 1,365.67 Daily trad vol - 6m avg (mn) 0.8 Daily trad val - 6m avg (US$ mn) 2.6 Free float (%) 11.4 Major shareholders Essar Group

Performance 1M 3M 12MAbsolute (%) 14.6 7.1 (10.1)Relative (%) 8.1 6.7 (16.3)

Year 3/09A 3/10A 3/11E 3/12E 3/13ERevenues (Rs mn) 375,164 365,046 414,222 642,057 685,834EBITDA (Rs mn) 11,287 11,178 26,646 29,652 54,793Net profit (Rs mn) (5226) 322 6,498 9,445 30,454EPS (Rs) (4.3) 0.3 4.8 6.9 22.3- Change from prev. EPS (%) n.a. n.a. 13 8 6- Consensus EPS (Rs) n.a. n.a. 3.5 6.6 14.1EPS growth (%) n.a. n.a. 1,677.4 45.3 222.4P/E (x) NM 506.9 28.5 19.6 6.1Dividend yield (%) 0 0 0 0 0EV/EBITDA (x) 24.5 24.6 11.1 9.8 4.5P/B (x) 4.5 3.5 2.6 2.4 1.8ROE (%) (14.4) 0.8 10.9 12.7 34.0Net debt (net cash)/equity (%) 243.5 191.3 154.0 138.2 57.5 Note 1: Essar Oil Limited is an India-based company. The company is engaged in the exploration and production of oil and gas, refining of crude oil, and marketing of petroleum products. During the fiscal year ended March 31, 2010 (fiscal 2010), its Vadinar refine.


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Hindalco------------------------------------------------------------------------- Maintain OUTPERFORM Novelis: Indicators suggest a strong Mar quarter EPS: ◄► TP: ◄► Anubhav Aggarwal / Research Analyst / 9122 6777 3808 / [email protected]

● Historically, Alcoa’s flat rolled performance has been a good indicator of Novelis’ results in the US and Europe (Figures 1 & 2).

● March quarter results were very strong for Alcoa’s flat rolled division with volumes increasing 9% sequentially and Alcoa reporting its highest EBITDA/t in the past four years. The volume increase was seen across the end markets with margin increase driven by improved pricing and mix.

● We expect Novelis’ EBITDA to improve 18% sequentially to $280 mn in 4Q11 and $1,071 mn in FY11. Novelis is constrained by capacity so we factor in only a 3% sequential volume rise. The demand outlook is positive for the June quarter where Alcoa expects seasonal demand rises to translate into improved results.

● We expect strong results from both Indian operations and Novelis. Standalone EBITDA is expected to increase 26% sequentially driven by both price increases and higher volumes. Hindalco has underperformed global aluminium peers YTD and strong quarterly results should help reverse this.

Figure 1: Volumes increased 9% sequentially for Alcoa

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Alcoa: Strong March q’ter, positive guidance for June q’tr After a weak December quarter, volumes for the flat rolled segment rebounded sharply for Alcoa and were up 9% sequentially and 18% YoY (Figure 1). Alcoa mentioned that the volume increase was across the end markets. A bigger positive surprise was from margin expansion where Alcoa reported its highest EBITDA/t in the past four years (Figure 2). The margin rise was driven by improved pricing and mix. The demand outlook for the flat rolled segment is positive for the June quarter where Alcoa expects seasonal demand increases to translate into improved results.

Figure 2: Alcoa reports highest ever EBITDA/t in the past four years

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Source: Company data, Credit Suisse estimates * ATOI= After tax operating income Novelis’ March quarter expected to be equally strong A strong March quarter and positive guidance augurs well for Novelis. We expect Novelis’ volumes to improve 3% sequentially and margins to improve 14% sequentially. Unlike Alcoa, Novelis is constrained by capacity and therefore we are not building in a significant increase in volumes. Overall, Novelis should achieve EBITDA of US$280 mn (+18% QoQ and +23% YoY) in 4Q11 and US$1,071 mn in FY11. Figure 3: Novelis result expectations (US$ mn) 4Q11E 3Q11A QoQ (%) 4Q10A YoY (%)Shipment volume ('000 T) 777 751 3 756 3EBITDA/t 361 317 14 300 20EBITDA 280 238 18 227 23Source: Company data, Credit Suisse estimates Standalone results expected to be strong too Hindalco reports standalone results in May 2011. After weak December quarter results which played down on the stock, we expect strong March quarter results (Figure 4) and expect profit to increase 32% sequentially. Resolution of the outage at the Hirakud smelter and copper refinery helped volume in the March quarter.

Figure 4: Standalone quarterly expectation for March quarter (Rs mn) 4Q11E 3Q11A QoQ (%) 4Q10A YoY (%)Revenue 69,219 59,179 17 53,585 29EBITDA 8,620 6,834 26 7,894 9Pre tax income 7,761 5,785 34 6,741 15Net income 6,054 4,603 32 6,639 -9Source: Company data, Credit Suisse estimates

Price (11 Apr 11 , Rs) 207.45TP (Prev. TP Rs) 255 (255) Est. pot. % chg. to TP 2352-wk range (Rs) 250.30 - 132.50Mkt cap (Rs/US$ bn) 397.1/ 8.9

Bbg/RIC HNDL IN / HALC.BO Rating (prev. rating) O (O) [V] Shares outstanding (mn) 1,914.40 Daily trad vol - 6m avg (mn) 1.1 Daily trad val - 6m avg (US$ mn) 4.6 Free float (%) 68.0 Major shareholders Promoters- 32%

Performance 1M 3M 12MAbsolute (%) 0.7 (11.3) 15.9Relative (%) (5.0) (11.6) 7.9

Year 3/09A 3/10A 3/11E 3/12E 3/13ERevenues (Rs mn) 656,252 607,221 717,306 775,558 774,177EBITDA (Rs mn) 29,774 97,458 81,047 88,356 97,816Net profit (Rs mn) 4,853 39,255 25,981 34,216 35,549EPS (Rs) 3.3 22.1 13.5 17.8 18.5- Change from prev. EPS (%) n.a. n.a. 0 0 0- Consensus EPS (Rs) n.a. n.a. 18.2 20.5 25.1EPS growth (%) (83.5) 578.2 (38.8) 31.7 3.9P/E (x) 63.6 9.4 15.3 11.6 11.2Dividend yield (%) 0.9 0.8 0.9 0.9 0.9EV/EBITDA (x) 20.7 5.7 7.5 7.1 6.5P/B (x) 1.9 1.7 1.7 1.5 1.3ROE (%) 2.9 21.0 11.4 13.4 12.4Net debt (net cash)/equity (%) 127.6 68.3 81.5 79.2 75.5 Note1:Hindalco is the largest private sector aluminium producer in India and after the Novelis acquisition, the largest flat rolled aluminium player globally.


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Indonesia Indonesia Market Strategy ----------------------------------------------------------------------------------- US trip key takeaways: Focus on inflation and land reform Teddy Oetomo / Research Analyst / 6221 2553 7911 / [email protected] Ella Nusantoro / Research Analyst / 62 21 2553 7917 / [email protected]

● We find investors remain relatively positive with the fundamental outlook of Indonesia. The main focus has largely been on the issue of inflation and land reform.

● We believe that Indonesia’s 2011 inflation remains relatively manageable. Although we see the potential for a 75 bp increase in the policy rate, we believe that both inflation and policy rates will remain below 10% in 2011.

● The second focus has been largely on the land reform bill, required to jump-start infrastructure developments, which in turn, are imperative for capacity additions ahead. Failure to add capacity to the economy ahead may lead the country into a demand-pull inflation period, which implies that current valuations may be relatively demanding.

● However, should the government successfully deliver on infrastructure development, then we may enter a multi-year period of capacity additions, which in turn, implies that current valuations, though not at a discount, may be relatively reasonable.

Figure 1: Indonesia output gap

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Output Gap Output gap as % of Est GDP (RHS) Source: Company data, Credit Suisse estimates. Investors generally positive on fundamental outlook We held a marketing trip in the US between 4 and 8 April 2011. We find that investors are generally positive with the fundamental outlook of Indonesia. There are two main key focuses from investors, namely inflation and the land reform bill. Inflation outlook We find investors, especially on the East Coast of the US, focusing largely on the inflation outlook of Indonesia. We believe that the inflation outlook for 2011 remains relatively manageable. We also believe that in 2011, the pressure of food prices on headline inflation will subdue on the back of a better weather outlook in 2011 than 2010.

However, we are not completely writing off the risk of inflation. Indonesia’s M2 money supply has been on an uptrend given the high foreign exchange reserves held by the central bank. Thus, we still foresee the potential for a 75 bp increase in the policy rate ahead. However, the increase would bring 2011’s policy rate outlook to 7.5%,

while historically, demand destruction in Indonesia’s domestic consumption story only takes place when inflation and the policy rate hit double digits.

However, we believe that the issue of inflation may become a growing concern should the country fail to increase capacity. Indonesia’s capacity currently is in a tighter position than the pre-1998 Asian Financial crisis, implying the risk of demand-pull inflation should the government fail to deliver infrastructure development, which has been a bottleneck preventing the development of additional capacity in the economy.

We recognise that inflation and the policy rates of Indonesia may touch double digits if the Indonesian government decided to increase the subsidised fuel price. However, our base-case assumption has been that such an event may not take place in 2011, as we believe that the country’s fiscal remains robust. Even if the oil price averages US$130/barrel in 2011, Indonesia’s budget deficit will remain well below the 3% cap. In addition, we believe that the cash left from last year’s budget, combined with the CPO export tax and government coal royalty revenues are likely to cover the US$10 bn subsidy for transport fuel. Infrastructure development outlook The second-most common focus by investors is on the land reform bill, which is imperative to start up the infrastructure development of Indonesia, which in turn, is required for the economy to start seeing higher capacity growth.

The land reform bill still requires approval from the Indonesian parliament. However, we foresee limited opposition on the bill. Nonetheless, even after the parliament approves the bill, we may still see 6-8 months gap before ground breaking, as the government still needs to construct the implementation directive. Overall, we foresee the potential for groundbreaking in infrastructure projects in mid-2012. Valuations are of a potential concern While investors recognise that the current valuations of Indonesian market are no longer at discount, many believe that valuations remain reasonable if the country can jump-start the infrastructure projects. We agree with investors that Indonesia is at the crossroads. If the government fails to deliver infrastructure development, and thus, no additional capacity is forthcoming, then the risk of demand-pull inflation may arise in the future. Under this scenario, the current valuations of Indonesian market may be considered demanding.

However, if the government is able to deliver the infrastructure development, then Indonesia may move into a new phase of multi-year capacity addition period. Under this scenario, we believe that the valuations of Indonesian market remain relatively reasonable, though admittedly not at discount.


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Indonesia Cement Sector -------------------------------------------------- Maintain OVERWEIGHT Positive March cement consumption Ella Nusantoro / Research Analyst / 62 21 2553 7917 / [email protected]

● The Indonesia Cement Association reported March 2011 cement consumption grew 8% YoY (+16% MoM) to 3.9 mn tonnes on the back of 11% YoY growth (+15% MoM) in domestic consumption, while exports fell 34% YoY (despite +34% MoM). On a quarterly basis, total cement consumption reached 10.6 mn tonnes during 1Q11, growing 7% YoY (-9% QoQ). We expect a 6% increase in domestic volume growth and a 7.5% increase in ASP this year, which is in line with inflation.

● Semen Gresik continues to be the market share leader with 39.8%, slightly down from 41% in February, partly due to weaker performance in its main markets: East Java and Sulawesi. Indocement recorded a 30.9% market share, up from 30.4%, while Holcim Indonesia’s market share was 15.3% from 15% in the previous month.

● We continue to favour Semen Gresik on the back of its lower valuation as well as its ability to serve demand from outside Java, given its spread-out plant locations (Java, Sumatra, Sulawesi).

Figure 1: Indonesia cement valuation Price Mkt cap Target

price EPS P/E

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INTP.JK 16,700 6,979 17,400 14.7% 16.5 10.5 336 1.7%SMGR.JK 9,700 6,616 11,000 15.2% 14.1 8.8 303 3.2%SMCB.JK 2,125 1,860 2,400 19.0% 15.1 7.5 204 0.0%Weighted average 15.4% 15.3 9.4 306 2.1%Source: Company data, Credit Suisse estimates

Figure 2: Indonesia monthly cement consumption (in tonnes)

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Figure 3: March cement consumption Th tons Mar-09 Mar-10 Feb-11 Mar-11 MoM chg. YoY chg.Banten 131 154 182 207 13.6% 34.6%Jakarta 263 308 336 390 16.1% 26.8%West Java 366 462 476 546 14.7% 18.0%Central Java 277 329 320 381 19.0% 16.0%Yogyakarta 39 42 50 54 7.2% 28.0%East Java 338 447 391 424 8.5% -5.1%Java 1,414 1,741 1,755 2,001 14.1% 15.0%Sumatra 688 790 792 982 24.0% 24.3%Kalimantan 189 276 225 259 15.1% -6.3%Sulawesi 228 308 229 278 21.4% -9.8%Nusa Tenggara 99 181 215 178 -17.4% -2.1%East of Indonesia 50 91 64 72 12.6% -20.4% Total Indonesia 2,667 3,386 3,279 3,769 14.9% 11.3% Export 384 232 114 153 33.8% -34.2% Grand Total 3,052 3,618 3,394 3,922 15.6% 8.4%Outside Java 1,253 1,645 1,525 1,768 16.0% 7.4%Source: Indonesia Cement Association

Figure 4: Indonesia cement consumption, YTD to March Th tons 1Q09 1Q10 4Q10 1Q11 QoQ chg. YoY chg. Banten 414 473 565 587 3.9% 23.9%Jakarta 817 866 1,074 1,099 2.4% 26.9%West Java 1,132 1,290 1,602 1,564 -2.4% 21.2%Central Java 839 957 1,206 1,079 -10.5% 12.7%Yogyakarta 122 138 173 157 -9.4% 13.5%East Java 1,038 1,388 1,486 1,255 -15.5% -9.6%Java 4,363 5,113 6,105 5,740 -6.0% 12.3%Sumatra 2,080 2,286 2,717 2,598 -4.4% 13.7%Kalimantan 572 747 755 728 -3.6% -2.6%Sulawesi 660 787 873 752 -13.9% -4.4%Nusa Tenggara 412 565 592 565 -4.5% 0.0%East of Indonesia 187 241 228 192 -15.7% -20.3% Total Indonesia 8,273 9,738 11,271 10,574 -6.2% 8.6% Export 811 527 798 400 -49.9% -24.0% Grand Total 9,084 10,265 12,069 10,974 -9.1% 6.9%Outside Java 3,910 4,625 5,165 4,834 -6.4% 4.5%Source: Indonesia Cement Association

Figure 5: Domestic market share Mar-08 Mar-09 Mar-10 Feb-11 Mar-11Semen Andalas 4.2% 4.5% 4.2% 4.8% 4.3%Semen Padang 14.2% 14.6% 13.0% 11.5% 12.4%Semen Baturaja 2.8% 2.7% 2.5% 2.6% 3.2%Indocement 32.4% 31.0% 30.6% 30.4% 30.9%Holcim Indonesia 13.1% 13.2% 12.9% 15.0% 15.3%Semen Gresik 20.9% 22.1% 21.3% 21.8% 20.3%Semen Tonasa 9.7% 9.7% 9.6% 7.8% 7.2%Semen Bosowa 2.6% 2.2% 5.7% 6.0% 6.4%Semen Kupang 0.2% SGG 44.8% 46.4% 43.9% 41.0% 39.8%Source: Company data, Credit Suisse estimates


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Indonesia Cement Sector -------------------------------------------------- Maintain OVERWEIGHT Takeaways from the US trip Ella Nusantoro / Research Analyst / 62 21 2553 7917 / [email protected]

● We find investors remain relatively positive on the Indonesia cement outlook, with focus largely on price increase and land reform impact to domestic demand growth.

● We believe rising domestic price is not impossible, where YTD cement producers have increased prices by 3-5%, largely underpinned from higher coal costs. We expect ASP to rise by 7.5%, in line with inflation.

● The second focus area has been the land reform bill, required to jump start infrastructure development, which will result in higher cement demand growth. While we expected 6% domestic cement demand this year, we can see demand double with the land reform bill.

● While investors have a mixed view on preference between INTP and SMGR, we like both companies, with 31% and 43% of domestic market share in 2010, respectively. Nevertheless, we favour SMGR on the back of lower valuation versus INTP, as we assume 6% domestic volume growth, 7.5% ASP increase in 2011.

Figure 1: Indonesia cement – price mn tpa 2009 2010 2011E 2012E 2013E CAGR

04-10CAGR

11E-13EDomestic ASP* (Th Rp/t) 817 809 870 922 977 11.7% 6.0%YoY growth 15.0% -1.0% 7.5% 6.0% 6.0% Domestic ASP (US$/t) 79 89 100 108 113 11.5% 6.4%YoY growth 8.4% 13.3% 11.8% 7.9% 5.0%Source: Company data, Credit Suisse estimates Key issues: price increase and land reform impact to domestic demand growth We held a marketing trip in the US on the week of 4 April 2011 and find investors remain relatively positive on the Indonesia cement sector outlook, with the main focus largely on the issue of price increase and land reform impact to domestic demand growth.

Price increase We believe rising domestic price is not impossible, when YTD cement producers have increased prices by around 3-5%, largely underpinned by the rise in coal cost. We expect ASP to rise by 7.5%, in line with inflation. The concern of no price increase last year was overdone, in our view, given that Rupiah/USD gained 14% while 50-55% of cement cost is USD-denominated. Thus, without price increase, cement producers could still manage stable margins last year. Land reform impact to domestic demand growth The second focus area has been the land reform bill, required to jump start infrastructure development, thus pushing cement demand growth higher. While we expected 6%domestic cement demand this year (largely from the property sector), we can see demand double with the land reform bill.

Figure 2: Indonesia cement – suppy and demand mn tpa 2009 2010 2011E 2012E 2013E CAGR

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11E-13EDomestic sales 37.0 40.8 43.2 45.9 48.6 5.1% 6.1%Imports 1.4 0.0 - - -Domestic demand 38.4 40.8 43.2 45.9 48.6 5.0% 6.1%YoY growth 0.9% 6.2% 6.1% 6.1% 6.1% Export demand 4.0 2.9 2.9 2.9 2.9 -14.8% 0.0%YoY growth -18.7% -27.5% 0.0% 0.0% 0.0%Domestic + I + X 42.4 43.7 46.2 48.8 51.6 2.4% 5.7%YoY growth -1.4% 3.0% 5.7% 5.7% 5.7%Source: Indonesia Cement Association (ASI), Credit Suisse estimates Mix reviews on preference between Indocement and Semen Gresik While investors have mixed views on preferences between Indocement (INTP.JK) and Semen Gresik (SMGR.JK), we like both companies, with each accounting for 31% and 43% domestic market share in 2010. Nevertheless, we favor Semen Gresik on the back of its lower valuation compared to Indocement, as we assume 6% domestic volume growth and 7.5% ASP increase this year.

Figure 3: Valuation comparison Price YTD Perf Mkt cap TP % to TP EPS EPS (Rp) PE (x) EV/EBITDA (x) EV/t (US$) DY PB (x) (Rp) (USDm) (Rp) CAGR 11-13 11E 12E 11E 12E 11E 12E 11E 12E 11E 11E 12EINTP.JK 16,700 4.7% 6,979 17,400 4.2% 14.7% 989 1,143 16.5 14.3 10.5 8.8 336 320 1.7% 3.8 3.2SMGR.JK 9,700 2.6% 6,616 11,000 13.4% 15.2% 647 755 14.1 12.1 8.8 7.4 303 233 3.2% 3.8 3.2SMCB.JK 2,125 -5.6% 1,860 2,400 12.9% 19.0% 134 165 15.1 12.3 7.5 6.1 204 188 0.0% 2.9 2.4 15.4% 15.3 13.1 9.4 7.9 306 267 2.1% 3.7 3.1Source: Company data, Credit Suisse estimates


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PT Borneo Lumbung Energi & Metal Tbk---------------------------- Maintain OUTPERFORM Benefit from strong spot prices EPS: ▲ TP: ▼ Fonny Surya / Research Analyst / 6221 255 37976 / [email protected]

● Increase benchmark price to US$ 313/t and US$ 248/t. CS increased coking coal price forecasts on the back of tight supply. We increased price forecasts by 33% and 29% from average of U$ 235/t and US$190/t to U$ 313/t and U$ 248/t, respectively.

● Revised up earnings by 8% and 15%. We increase our ASP forecast by 13% and 12% to US$ 260/t and US$ 238/t for FY11E–12E. We also revise 2011E sales volume to 3.2 mnt from 3.5 mnt . We increased production cash cost by 7.8% and 8.5% for 2011 and 2012. Net net, we increase FY11E-12 earnings by 8%-15%.

● Concerns on volume shortfall should ease with completion of ISP. We adjust our volumes down in anticipation of potential carryover impact of delayed shipments as BORN is waiting for BHP 2Q pricing. However, we remain positive as BORN will benefit more on potential higher ASP. We also believe newly-built ISP by end-May 2011 will serve as a positive catalyst.

● We maintain OUTPERFORM and decrease target price to Rp2,000 based on 16x 2011E P/E, in-line with new target index.

Seaborne metallurgical coal – ‘tighter-for-longer’ price upgrades From CS Commodity Quarterly 11 April 2011: Coking coal premium prices recently settled 2Q11 quarterlies at all-time record highs of $330/t, following the loss of 10-15% annual supplies in 1H11 alone, primarily due to weather and strike disruptions. BMA has ‘won’ notional acceptance – because of no alternative – of its move towards monthly (spot) pricing, settling April at c.$330/t. We now expect spot prices to remain at these elevated levels well into 3Q11 and predict quarterly prices will roll over at $330/t into 3Q11. Prices are likely to back off to $280/t in 4Q, as supplies ease, but not much, relative to demand. We also upgrade our 2012-13 forecasts by c.30% and 2014 by 13% to reflect significant fresh seaborne tonnage delays, most notably from Australia. We expect Mozambique to disappoint and do not believe Mongolian increases will offer significant seaborne pricing threat, given its costly landlocked position relative to product quality. The US arbitrage tonne struggles under logistics constraints, although Chinese arbitrage demand currently remains capped at c.$260/t.

Figure 1: Coking coal price changes 1Q-11 2Q-11 3Q-11 4Q-11 2011E 1Q-12 2Q-12 3Q-12 4Q-12 2012E

New US$/t 311 330 330 280 313 260 250 240 240 248Old US$/t 250 230 225 235 235 210 190 185 185 193Chg % 24% 43% 47% 19% 33% 24% 32% 30% 30% 29%Source: Company data, Credit Suisse estimates Increased earnings by 8% and 15% We remain conservative on our ASP and increased ASP by only 13% and 12% to U$ 260/t and U$ 238/t in 2011-12, as we expect some sales to China might be priced lower. We also revise sales volume to 3.2 mnt from 3.5 mnt for 2011 in anticipation of delayed shipments given BORN is awaiting BHP 2Q pricing. We further revise up costs, primarily barging costs, impacting cash cost by 7.8% and 8.5% for 2011-12. This revise up earnings by 8% and 15% for 2011 and 2012. We increase costs, primarily barging and logistics, totalling increase in production cash cost of 4.9%-6.7% for 2011-12, respectively. Resultantly, earnings increased by 8.3%-12.5% for 2011-12.

Figure 2: Earnings changes New estimates % changes FY10A FY11E FY12E FY11E FY12EBenchmark prices (U$/t) 185.5 260.0 237.9 13.0 12.2Coal sales (mn t) 1.7 3.2 4.6 (8.6) 0.0ASP (U$/t) 186 238 215 3.4 1.6Strip ratio (x) 16.3 16.5 17.0 0.0 0.0Cash cost (U$/t) 100.2 119.9 119.5 7.8 8.5Cash cst (ex. ryt ex. mkt) (U$/t) 70.0 75.2 78.6 4.9 6.7Revenue (Rp bn) 2,752 7,488 9,849 3.4 12.2EBITDA 1,331 3,697 4,457 7.8 15.2EBITDA margin 48% 49% 45%Net profit 348 2,255 2,751 7.8 15.1Net margin 13% 30% 28%EPS 20 127 155 7.8 15.1Source: Company data, Credit Suisse estimates

Concerns on volume shortfall should ease with completion of ISP. We believe BORN’s share price is currently trading below other coal peers due to some concerns over logistics. In addition, due to the ramping-up schedule and delayed shipments, 1Q sales result might not meet investor expectation.

To mitigate volume risk, BORN is constructing 1 mnt capacity ISP, expected to be complete by end-May 2011. We believe once this ISP is ready, BORN will have more flexibility in storing inventories, reassuring both buyers and investors on its on-time delivery ability. Maintain OUTPERFORM, decrease target price to Rp2,000 from Rp2,200 based on 16x 2011E P/E. We decrease our target multiple from 18x to 16x 2011E P/E, in line with Indonesian JCI target index. Despite volume risks, we believe BORN still has more upside earnings from potential higher ASP. Maintain OUTPERFORM.

Price (11 Apr 11, Rp) 1,650.00TP (Prev. TP Rp) 2,000 (2,200) Est. pot. % chg. to TP 2152-wk range (Rp) 1810 - 1170Mkt cap (Rp/US$ bn) 29,193.5/ 3.4

Bbg/RIC BORN IJ / BORN.JK Rating (prev. rating) O (O) [V] Shares outstanding (mn) 17,693.00 Daily trad vol - 6m avg (mn) 73.1 Daily trad val - 6m avg (US$ mn) 12.5 Free float (%) — Major shareholders —

Performance 1M 3M 12MAbsolute (%) 7.1 (1.2) —Relative (%) 1.3 (8.9) —

Year 12/09A 12/10A 12/11E 12/12E 12/13ERevenues (Rp bn) 201 2,752 7,488 9,849 9,690EBITDA (Rp bn) 105 1,331 3,697 4,457 3,918Net profit (Rp bn) (100) 348 2,255 2,751 2,367EPS (Rp) (8) 20 127 155 134- Change from prev. EPS (%) n.a. n.a. 8 15 71- Consensus EPS (Rp) n.a. n.a. 120 155 172EPS growth (%) n.a. n.a. 547.0 22.0 (14.0)P/E (x) NM 83.8 12.9 10.6 12.3Dividend yield (%) 0 0 2.3 2.8 2.4EV/EBITDA (x) 307.8 20.6 7.3 5.5 6.0P/B (x) 505.3 4.4 3.3 2.7 2.3ROE (%) (244.4) 10.5 29.3 27.9 20.3Net debt (net cash)/equity (%) 6,435.3 (27.2) (24.8) (41.7) (46.0) Note 1: Harum Energy is a coal mining company holding three different mining companies, with CCoW third generation and IUP coal concessions. Its main business includes extracting, processing and marketing/selling coal domestically and overseas.


Asian Daily

- 21 of 34 -

PT Bukit Asam ---------------------------------------------------------------- Maintain OUTPERFORM On track for executing its medium-term growth plan EPS: ▲ TP: ▼ Fonny Surya / Research Analyst / 6221 255 37976 / [email protected]

● Revised up earnings by 9% and 8%. We revise export ASP by 2% to reflect revised benchmark forecast from US$120 to US$125 in 2011E. We revise down our costs ex-royalties by 5% to reflect continuing cost management improvement, resulted in earnings upgrade by 9% - 8% for FY11E-12E, respectively.

● On track for medium-term growth and cost management. We believe new US$450 mn financing line for PTKA will reduce the current railway expansion plan bottleneck. PTBA’s strong asset base with relatively low strip ratio and lower dependency on oil as fuel will help PTBA’s cost management in times of rising oil price.

● New locos and BWE set in 2H11. PTBA currently expects to add new locos and wagons by mid-2011, expanding current railway capacity by 20%. PTBA plans to add one more set of BWE to supports additional production in 2H11.

● We maintain OUTPERFORM rating and slightly increase our TP to Rp27,200/share based on 16x 2011E P/E (14.2x 2012E P/E).

On track for medium-term growth and cost management

We believe that PTBA’s medium-term growth plan is supported by expansion of current railways and improved cost management. PTKA (Not Listed) (PTBA’s railway operator) just secured a US$450 mn financing line, which will help to reduce the current railway bottleneck and support existing railway expansion. On the cost side, approximately 40% of PTBA’s production is in house, and about half of this was utilising two sets of electricity-fueled BWE (Bucket Wheel Excavator), which help PTBA to save fuel costs.

Figure 1: Earnings changes New est % changes FY10A FY11E FY12E FY10E FY11E FY12EUSD/IDR 9128 9000 9000Sales volume mn t 12.95 14.5 16.1 - - -Domestic ASP US$/t 67.1 86.3 94 - - -Export ASP US$t 65.9 97.0 103.1 - 2 -Blended ASP 66.7 90.6 97 - 1 -Cash cost US$t 45.8 52.5 56.3 (2) (2) (2)Cash cost ex royalties US$t 41.8 47.1 50.5 (4) (5) (5)Revenue Rp tn 7,909 11,842 14,104 - 1 -EBITDA Rp tn 2,368 4,971 5,934 - 10 8EBITDA margin % 30% 42% 42%Net profit Rp tn 2,009 3,911 4,660 - 9 8Net margin % 25% 33% 33%EPS Rp/share 872 1,698 2,022 - 9 8Source: Company data, Credit Suisse estimates New locos and BWE set in 2H11 PTBA currently expects to add new locos and wagons by mid-2011, expanding current railway capacity by 20%. We think PT KA’s new approved financing line of US$450 mn will help reduce the major bottleneck in railway expansion. On the cost side, PTBA plans to add one more set of BWE to support additional production in 2H11, which will further improve its cost structure.

Figure 2: PTBA production profile (mn tonnes) 08A 09A 10A 11E 12E 13E 14E 15E Railway transport 10.3 10.5 11.0 11.9 13.3 14.8 18.2 18.2N. Sumatra cns’mpn 0.5 1.1 1.1 1.1 1.1 1.5 2.1 2.1Kalimantan mine 0.0 0.0 0.7 1.0 1.2 1.2 1.2 1.2Total production 10.8 11.6 12.8 14.0 15.6 17.5 21.5 21.5 2010E 2011E 2012E 2013E 2014E 2015ERail cap YE (mn t) 12 13.6 15.6 18.5 22.7 22.7Our f’cst disc to cpcty -8% -13% -15% -20% -20% -20%Source: Company data, Credit Suisse estimates

Figure 3: Costs components YoY – flat in Rupiah terms 2009 2010 %YoY 2009 2010 %YoY Rp/t Rp/t U$/t U$/tIDR/U$ 10,396 9,128Third party services 71,999 62,483 -13% 6.93 6.85 -1%Coal railway services 106,780 113,828 7% 10.27 12.47 21%Salaries 44,848 42,478 -5% 4.31 4.65 8%Royalties 35,601 37,637 6% 3.42 4.12 20%Rental of heavy equipment 22,743 25,787 13% 2.19 2.83 29%Coal trading 20,504 20,562 0% 1.97 2.25 14%Spare parts 15,144 9,149 -40% 1.46 1.00 -31%Fuel oil & lubricant 10,688 12,570 18% 1.03 1.38 34%Others 20,977 17,813 -15% 2.02 1.95 -3%SG&A 103,746 103,939 0% 9.98 11.39 14%Inventory changes 5,891 (1,534) 0.57 (0.17)Total costs 458,922 444,713 -3% 44.14 48.72 10%Maintain OUTPERFORM, decrease target price to Rp27,200/share We maintain OUTPERFORM and decrease our target multiple from 18x to 16x 2011E P/E, in line with JCI target index multiple. As a result, we lower target price from Rp 28,200 to Rp 27,200/share.

Price (11 Apr 11, Rp) 22,400.00TP (Prev. TP Rp) 27,200 (28,200) Est. pot. % chg. to TP 2152-wk range (Rp) 24900 - 15700Mkt cap (Rp/US$ bn) 51,612.6/ 6.0

Bbg/RIC PTBA IJ / PTBA.JK Rating (prev. rating) O (O) Shares outstanding (mn) 2,304.10 Daily trad vol - 6m avg (mn) 3.5 Daily trad val - 6m avg (US$ mn) 8.4 Free float (%) 35.0 Major shareholders Government (65%)

Performance 1M 3M 12MAbsolute (%) 9.5 1.4 26.9Relative (%) 3.6 (6.5) (3.6)

Year 12/09A 12/10A 12/11E 12/12E 12/13ERevenues (Rp bn) 8,948 7,909 11,842 14,104 15,777EBITDA (Rp bn) 3,628 2,368 4,971 5,934 6,373Net profit (Rp bn) 2,728 2,009 3,911 4,660 4,990EPS (Rp) 1,184 872 1,698 2,022 2,166- Change from prev. EPS (%) n.a. n.a. 9 8 0- Consensus EPS (Rp) n.a. n.a. 1,560 1,891 2,202EPS growth (%) 59.7 (26.4) 94.7 19.1 7.1P/E (x) 18.9 25.7 13.2 11.1 10.3Dividend yield (%) 2.6 1.9 3.8 4.5 4.8EV/EBITDA (x) 13.0 19.7 9.0 7.2 6.3P/B (x) 8.8 8.1 5.5 4.3 3.5ROE (%) 55.3 32.8 49.5 43.2 37.1Net debt (net cash)/equity (%) (79.1) (78.5) (74.1) (72.2) (76.0) Note 1: Ord/ADR=5.0000. Note 2: PT Bukit Asam is the only state-owned company focusing on thermal coal mine operation and marketing. It owns and mines several coal concessions in Sumatra and Kalimantan, with total proven and probable reserve of 2 bn tn. Note 3:Per share data on fully diluted basis.


Asian Daily

- 22 of 34 -

PT Harum Energy Tbk ----------------------------------------Initiating Coverage with NEUTRAL Break after the rally EPS: ◄► TP: ◄► Fonny Surya / Research Analyst / 6221 255 37976 / [email protected]

● Initiating with NEUTRAL. Harum Energy is the eighth largest Indonesian thermal coal company, producing 7.4 mnt in 2010.

● Attractive volume growth plan but shorter mine life. HRUM’s production volume growth plan is attractive relative to peers at CAGR of 26% in 2010-13 vs peers ranged in 6-19%. We forecast attractive 2yr EPS CAGR of 68%. But, given a strong 2010, we believe that most positive story is taken into price and earnings.

● Long-term growth will depend on reserve upgrade. Growth post 2013 still depends on the progress at two HRUM mines, TBH and Santan Batubara. Santan’s current reserve has 4-5 years of mine life. To date, exploration and drilling activities focus on Santan, and HRUM plans to complete the block’s reserve study by 1H11.

● We set TP of Rp9,600/sh on target 2011E PE of 16x. HRUM’s volume and EPS growth is among the highest in its peers. We believe HRUM’s attractive growth has been mostly priced in.

Attractive volume growth plan and earnings, but priced in HRUM’s aggressive production volume growth plan is at a 26% CAGR for 2010-13 vs peers that range in 6-19%. HRUM already has most infrastructure to realise this production plan, thus, it won’t require significant capex to grow. HRUM’s shareholder, the Tanito Group, is an established coal player in Indonesia. We believe executing risk is low and stock fundamentally has an attractive medium-term outlook.

Figure 1: HRUM’s production growth plan

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Shorter mine life, potential reserve upgrade in 2H11 Harum’s growth post 2013 still depends on the progress of two of its mines, TBH and Santan Batubara as MSJ will be close to its capacity. Santan’s current reserve only has ~4 -5 years of mine life. Current exploration and drilling activities are focused on Uskap Block at Santan’s mine, and the Company expects to have reserve and resource indication by 2H11. Figure 2: Harum’s reserve and production data

Production In mn tonnes 2P Reserve (Dec 09)

M+I Resource

Inferred + nonJORC Resource 2010E 2011E 2012E

Total MSJ 95.3 332.4 12.3 5.2 7.5 9.0Total Santan 17.3 78.8 459.6 2.2 2.5 4.0TBH 11.5 33.3 3.2 0.5 1.5Total HRUM 124.1 444.5 475.1 Source: Company data, Credit Suisse estimates Change in net income might be under reported We believe current income may be underreported. HRUM will report under IFRS by 1 Jan 2012, which may bring up earnings 15-17%. We set TP of Rp9,600/sh on target 2011E PE of 16x HRUM’s volume and EPS growth is among the highest in its peers. But, such growth has accelerated HRUM share price by 77% since its October IPO. We believe growth has been priced in. We initiated HRUM with NEUTRAL at a target price of Rp 9,600/sh. Also, current Indonesian reporting might underestimate HRUM net profit.

Risks – Major risks for Harum include volatility of coal prices, permit and license for new mines, higher fuel prices, bad weather that may impact mine operations, and equipment & resources availability may impact its production and sales volume.

Figure 3: Share price relative performance Market cap Relative performance Name US$ bn 1M 3M 6M 12M YTDHARUM 2,790 2.7 (4.9) 66.6 na 2.6BUKIT ASAM 5,760 7.7 (4.1) 7.0 (4.1) (2.7)ADARO 8,263 (6.9) (16.7) 9.3 (20.6) (9.6)INDIKA 2,416 1.6 (18.4) 21.5 16.5 (12.4)BORNEO LUMBUNG 3,244 6.7 (6.8) na na 22.4INDO TAMBANGRAYA 6,127 8.4 (11.6) 8.9 (2.3) (4.6)Source: Company data, Credit Suisse estimates

Price (11 Apr 11 , Rp) 9,250.00TP (Prev. TP Rp) 9,600 (NA) Est. pot. % chg. to TP 452-wk range (Rp) 9800 - 5250Mkt cap (Rp/US$ bn) 24,975.0/ 2.9

Bbg/RIC HRUM IJ / HRUM.JK Rating (prev. rating) N (NA) [V] Shares outstanding (mn) 2,700.00 Daily trad vol - 6m avg (mn) 7.5 Daily trad val - 6m avg (US$ mn) 6.6 Free float (%) — Major shareholders —

Performance 1M 3M 12MAbsolute (%) 10.1 1.6 —Relative (%) 4.1 (6.2) —

Year 12/09A 12/10A 12/11E 12/12E 12/13ERevenues (Rp bn) 4,603 4,486 7,329 9,766 8,951EBITDA (Rp bn) 1,350 1,206 2,453 3,488 2,361Net profit (Rp bn) 768 824 1,661 2,405 1,655EPS (Rp) 305 597 840 561- Change from prev. EPS (%) n.a. n.a. - Consensus EPS (Rp) n.a. n.a. 661 898 1,150EPS growth (%) n.a. n.a. 95.8 40.6 (33.2)P/E (x) — 30.3 15.5 11.0 16.5Dividend yield (%) 0 1.2 2.3 3.4 2.3EV/EBITDA (x) 18.4 19.9 9.2 5.9 8.4P/B (x) — 10.9 7.0 4.8 4.3ROE (%) 185.1 56.3 55.7 52.5 28.0Net debt (net cash)/equity (%) (10.7) (38.4) (55.8) (64.8) (68.8) Note 1: Harum Energy is a coal mining company holding three different mining companies, with CCoW third-generation and IUP coal concessions. Its main business includes extracting, processing and marketing/ selling the coals domestically and overseas.


Asian Daily

- 23 of 34 -

Singapore Asia Offshore & Marine Sector ------------------------------------------- Maintain OVERWEIGHT Petrobras cancels 21 rig package Bhuvnesh Singh / Research Analyst / 65 6212 3006 / [email protected] Gerald Wong / Research Analyst / 65 6212 3037 / [email protected] Christopher Chang / Research Analyst / 65 6212 3024 / [email protected]

● The recent meeting of our global team with Petrobras (PBR) indicates that PBR could have cancelled their 21-rig newbuild package. This could be due to lack of local content at a reasonable price.

● However, we note that PBR still requires to source these rigs to fulfill their production goals. Recent news articles suggest that the rigs could now be sourced via a SPV funded by PBR and various other institutions. This should delay the order placement.

● It is also possible that there is some relaxation of local content requirements. This improves the positioning of Korean Yards (Samsung HI, HHI) vis-a-vis Singapore yards (Keppel, SMM) for the tender. We note that Korean yards have won all of 11 drillship orders (ex PBR) awarded in the past year.

● While the size of the order is large, we note that its impact on our fair valuation of the companies is rather low (3% of Keppel's and Sembmarine fair value). Thus, there is limited negative impact on our target prices of these companies.

● We maintain our positive view on both Singapore yards (strong resurgence in order flows) and Korean Yards (low expectations).

Figure 1: Regional offshore and marine valuation table Rating Price Target

price) PE (x) (11E)

PE (x) (12E)

PB (x) ROE (%)

Keppel O 12.50 14.00 17.2 16.3 2.9 14.5 Sembcorp Marine O 5.87 6.30 19.1 18.9 4.7 30.6 Sembcorp Industries O 5.31 6.40 14.4 13.5 2.4 18.8 COSCO Corp U 2.24 1.60 20.2 18.9 4.0 19.8 DSME O 39,600 48,000 9.0 9.4 1.8 19.6Hyundai HI O 528,000 600,000 10.4 11.1 2.9 24.8 Hyundai MIPO N 193,500 248,000 7.1 7.1 1.2 17.0 Samsung HI O 44,300 50,800 10.8 11.2 2.5 22.5 Source: Company data, Credit Suisse estimates

The Credit Suisse Global energy team met with Petrobras' (PBR) Head of Pre-Salt Activity on 12 April during our Brazil Oil and Gas field trip. There were indications that Petrobras could have cancelled their 21-rig newbuild tender. It was observed that the previous tone of management's strategy was:

● Local content ● Strategic decision for the country ● Implications were higher costs due to lack of local industry

experience However, the new tone of management:

● Still dedicated to local content, but not readily available at a reasonable price

● Production goals seem to be more of a strategic focus ● Some implications that regulators could be satisfied with 'intent' to

utilise local content PBR has so far awarded one contract for the construction of seven drillships, accepting a bid priced at $664 million per unit that was submitted by Estaleiro Atlantico Sul (EAS) shipyard.

Figure 2: Bids for seven drillship package Shipyard/Group Total (US$ bn) Per rig (US$ mn) % from lowestEAS (incl. Samsung HI). 4.65 664.3 0.0Galvao Engenharia 4.68 668.3 0.6Keppel FELS 5.17 738.8 11.2Jurong Shipyard 5.18 739.7 11.4OAS-Odebrecht-UTC Engenharia 5.31 758.7 14.2Estaleiro Eis 5.49 784.6 18.1Andrade Gutierrez 5.77 824.0 24.0Source: Upstream online Change in contract structure could lead to further delays According to Upstream Online, the rig-building programme will proceed with the order of non-chartered units to be owned by Sete Brasil, a holding company backed by Brazilian pension funds and banks with potential investment by other funds. PBR will hold a stake of between 5% and 10% in Sete Brazil.

These rigs will eventually be chartered to special purpose companies, owned 85% by Sete Brasil and 15% by PBR, but the oil company will then offer its stake, along with a service fee, to established rig operators. Improved positioning of Korean yards vis-a-vis Singapore yards Sete Brasil is expected to hold future multi-rig tenders, aimed at shipyards rather than rig charterers. It is also possible that there is some relaxation of local content requirements. That would improve the positioning of Korean Yards (Samsung, Hyundai) vis-a-vis Singapore yards (Keppel, SMM) for this tender. We note that Korean yards have won all of 11 drillship orders (ex PBR) awarded in past 12 months. However, while Singapore yards were willing to establish shipyards in Brazil to fulfill the local content requirements, Korean yards were less flexible on this. Impact on valuation of Singapore yards limited While the size of the order is large, we note that its impact on our fair valuation of the companies is rather low (3% of Keppel's and Sembmarine target price). Thus, there is limited negative impact on our target prices of these companies. Maintain OVERWEIGHT on Offshore and Marine Sector We maintain our positive view on both Singapore yards (strong resurgence in order flows) and Korean Yards (low expectations). Our top picks in the sector are OUTPERFORM rated Keppel, Sembcorp Marine, Samsung Heavy, and DSME.


Asian Daily

- 24 of 34 -

South Korea Korea Construction Sector ------------------------------------------- Maintain MARKET WEIGHT Recent mild improvements not enough to turn around weak confidence in the housing market Minseok Sinn / Research Analyst / 822 3707 8898 / [email protected] Hayoung Chung / Research Analyst / 822 3707 3795 / [email protected]

● The continuing improvements in all three key indicators (transaction volumes, prices and unsold housing inventories) in the domestic housing market in recent months imply the market has passed its bottom, which seems to have been last summer.

● We expect further mild improvements in the housing market in 2011, given: (1) the continuing surge in effective rent cost and (2) the sharp decrease in new apartment completions in 2011-13E.

● On the other hand, we think the recent improvements are still not enough to quickly turn around the weak confidence in the market currently, given: (1) the current weaker-than-historical average housing affordability level, (2) Korea’s structurally lower opportunity cost for rent than purchase and (3) a high likelihood of Bank of Korea’s further increasing the interest rate.

● From an operational perspective, we continue to prefer companies with strong overseas order momentum rather than companies with a high exposure to the housing business, despite the recent improvements and our expectation of further improvements in the domestic housing market.

Valuation metrics Company Ticker CS Price Year P/E (x) P/B rating local target T T+1 T+2 (x)Daelim Ind 000210 KS O 118,500 150,000 12/09 13.0 9.2 1.1Daewoo E&C 047040 KS U 11,450 11,000 12/09 NM 30.3 1.4GS E&C 006360 KS O 125,500 130,000 12/09 15.2 11.1 1.7Hyundai Dev 012630 KS N 30,950 36,000 12/09 21.4 6.7 1.0Hyundai E&C 000720 KS N 86,700 92,000 12/09 17.7 13.1 2.8Samsung C&T 000830 KS O 74,700 90,000 12/09 23.1 27.1 1.6Samsung Eng 028050 KS O 232,000 220,000 12/09 23.2 17.8 9.9Note: O = OUTPERFORM, N = NEUTRAL, U = UNDERPERFORM Source: Company data, Credit Suisse estimates Mild improvements continue in the housing market The domestic housing market has been mildly improving in the recent months. While monthly apartment transactions in Korea have increased from the bottom of 30,454 units in June 2010 to average 53,544 units during December 2010 to February 2011, apartment prices have continued to rebound since the bottom in last summer. Also, construction companies’ unsold housing inventories have continued to decline, although this seemed to be mostly due to the dried-up new apartment supplies.

Figure 1: Change in apartment prices in the metro Seoul area Size Mar. 10 Sep. 10 Mar. 11 Mar. 11/ Mar. 11/Region Apartment (sq m) (W mn) (W mn) (W mn) Peak (%) BottomGangnam, Daechi Eunma* 115 1,195 1,000 1,110 -21 29Seoul Gaepo Jugong 1* 49 1,028 900 920 -5 51 Jamwon Hanshin 7* 115 925 900 980 -2 46 Jamsil Jugong 5* 113 1,260 1,050 1,080 -20 33Gangbuk, Joonggye Gunyoung 105 585 520 550 -15 41Seoul Chang I-Park 109 505 450 470 -13 21 Sooyou Byuksan 105 368 330 350 -19 9New cities, Bundang Sibeom 105 648 550 620 -23 32the metro Pyungchon Sunkyung 145 740 700 740 -16 28Seoul area Sanbon Hanyang 119 420 360 380 -28 9* Reconstruction. Note: The peak was in early 2007 and the bottom was in late 2008 in most areas Source: NHN Corp, Credit Suisse estimates

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The metro Seoul area The provincial areasSource: MLTM But the improvements do not seem enough to quickly turn around the current weak confidence in the housing market We anticipate further mild improvements in the housing market in 2011, considering: (1) continuing surge in effective rent cost and (2) sharp decrease in new apartment completions in 2011-13, while the improvements in the three key market indicators (transaction volumes, prices and unsold housing inventories) imply that the market has already passed its bottom, which appears to have been last summer. On the other hand, we think the improvements are still not enough to turn around current weak confidence in the market, as seen in the latest realty broker survey (Figure 4), given: (1) the current weaker-than-historical average housing affordability level, (2) Korea’s structurally lower opportunity cost for rent than purchase and (3) a high likelihood of Bank of Korea’s further increasing interest rate. Figure 4: Portion of realty brokers that see more sellers than buyers

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Source: Kookmin Bank As of close of business on 11 April 2011, Credit Suisse Securities (Europe) Limited, Seoul Branch performs the role of liquidity provider on the warrants of which underlying assets are Daewoo E&C/ Hyundai E&C/ Samsung C&T and holds 18,740,880/ 16,087,090/ 17,219,280 of warrants concerned. These may be covered warrants that constitute part of a hedged position.


Asian Daily

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Honam Petrochem------------------------------------------------------------------ Maintain NEUTRAL Historical high oil price could limit strong upswing in chemical margins EPS: ▲ TP: ◄► A-Hyung Cho / Research Analyst / 822 3707 3735 / [email protected] Jihong Choi / Research Analyst / 82 2 3707 3796 / [email protected]

● 1Q11 MEG, butadiene, LDPE margins have tracked better than our expectations offseting weak HDPE margins. Trend since mid-February however, shows that some product margins have peaked and started slowing down.

● We believe a volatile oil price resulted in weaker demand and softer margin despite tighter supply dynamics. Recent margin trend shows that petrochemical margin is still sensitive to a spike in oil price.

● Over the long term, with the exception of some products benefiting from high commodities price, we think peak margins could be lower than previous peaks if oil price remains at a three-digit level.

● We are revising up our FY11 EPS estimates by 5% to reflect the stronger-than-expected 1Q11 MEG and butadiene margins. We maintain our target price at W310,000 based on 1.9x P/B (ROE of 19%). We think share price already reflects an upturn in PE, which is ahead of us and that near-term momentum should be neutral at best.

Margins softer despite supply disruption Most of the chemical product margins have come off the peak in February, except for SM and butadiene. As such, April is tracking below 1Q. According to industry sources, margins are slowing down because of high inventory. The company thinks that margins are ‘normalising’, as the market participants are becoming more cautious in a volatile oil price environment, but that a cyclical upturn is still ahead of us.

We agree that the dynamics have not changed; some product margins have room to improve given the limited start-ups ahead. However, the recent margins trend tell us that demand has slowed quite drastically despite disruption in supply, such as the unscheduled shutdown at Shell Singapore (which is still not back to normal), unscheduled shutdown in Japan, and the scheduled maintenance shutdown season, which has already started. Demand is weak, which is unusual in such

an environment where supply looks to be tight and where a rising oil price usually is one of the drivers for inventory restocking.

Figure 1: Product spread over naphtha - only BD and SM moving up

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Source: Datastream Historical high oil price could limit strong upswing in chemical margins We believe margins have fallen due to spiking oil. It is very difficult to generalise that high oil price is always negative to chemical margins, because there are many different drivers to the oil price and chemical margins, chemical companies’ earnings and share prices; important drivers include each product’s own supply-demand fundamentals (driven by substitute product prices, unexpected plant outages etc) and FX. Also, chemical margins go up when oil price slowly goes up, which is when end-demand improves. But in the end, demand tends to soften when oil price steeply rises.

Over the long term, with the exception of some products (that substitute natural rubber, cotton and solar panels) benefiting from high commodities price, we think that peak margins should be lower than history. With oil price at US$100/bbl or above (equivalent to naphtha price of around US$900/MT or above), we think it would be difficult to pass on historical peak margins of US$1200/MT and that U$600-700/MT margin would be a more realistic scenario.

Figure 2: Chemical margins could have limited upside on high oil price

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Source: Datasream, Credit Suisse estimates

Rating history (011170.KS) Date Old rating New rating Old TP (W) New TP (W)7-Feb-11 NEUTRAL NEUTRAL 270,000 310,000

Price (11 Apr 11 , W) 371,500.00TP (Prev. TP W) 310,000 (310,000) Est. pot. % chg. to TP (17)52-wk range (W) 404500 - 116500Mkt cap (W/US$ bn) 11,836.0/ 10.9

Bbg/RIC 011170 KS / 011170.KS Rating (prev. rating) N (N) [V] Shares outstanding (mn) 31.90 Daily trad vol - 6m avg (mn) 0.2 Daily trad val - 6m avg (US$ mn) 62.2 Free float (%) 42.7 Major shareholders Lotte Affiliates,

57.29%

Performance 1M 3M 12MAbsolute (%) 7.2 18.7 200.8Relative (%) (1.2) 16.8 144.4

Year 12/08A 12/09A 12/10E 12/11E 12/12ERevenues (W bn) 3,098 5,970 7,189 7,663 7,538EBITDA (W bn) 162 950 1,138 1,118 1,151Net profit (W bn) (45.3) 796.7 784.3 942.8 964.2EPS (W) (1421) 25,006 24,617 29,593 30,263- Change from prev. EPS (%) n.a. n.a. 0 5 0- Consensus EPS (W) n.a. n.a. 24,616 32,864 36,908EPS growth (%) n.a. n.a. (1.6) 20.2 2.3P/E (x) NM 14.9 15.1 12.6 12.3Dividend yield (%) 0.1 0.4 0.5 0.5 0.5EV/EBITDA (x) 72.5 12.0 11.0 11.1 10.5P/B (x) 4.2 3.2 2.7 2.2 1.9ROE (%) (1.6) 24.4 19.2 19.2 16.6Net debt (net cash)/equity (%) (2.2) (10.6) 15.5 10.2 3.3 Note1:Honam Petrochemical Corporation manufactures a wide range of petrochemical products such as high-density polyethylene, polypropylene, and ethylene glycol. The company's prodcuts are used for general housewares, pipes, films, fabrics, and more..


Asian Daily

- 26 of 34 -

Shinsegae ---------------------------------------------------------------------- Maintain OUTPERFORM March and 1Q11 headlines: Strong sales, but soft profitability EPS: ◄► TP: ▼ Sonia Kim / Research Analyst / 822 3707 3764 / [email protected] Hyewon Cho / Research Analyst / 82 2 3707 3737 / [email protected]

● March and 1Q11 results were generally in line with our expectation. Sales were quite strong at the department stores, but margins slipped on promotional activities, mix and new space additions in Incheon department stores. Emart’s sales were relatively soft, but margins improved gradually in 1Q11.

● The SSS of Emart was 4% in 1Q11 and 2% in March. The SSS of department stores was 17% in 1Q11 and 16% in March. The department stores market continued to see strong growth. Shinsegae was particularly stronger at Yeungdeungpo that was renovated recently, and fast growth continued at Busan Centum.

● We lower our target price to W300,000 (from W340,000), as we lower our target multiples on its retailing business from 15x to 13x. We believe the lukewarm margins on overall basis, which we expected to improve, may demand a lower multiple.

● We maintain OUTPERFORM on Shinsegae. Considering Shisnegae’s steady business model and stake in Samsung Life, its valuation appears too compelling and has underperformed excessively. It trades at 12x FY11E P/E and 10x FY11E P/E after stripping out the stake in Samsung Life.

Strong sales, but margins still soft Blended results were generally in line with our expectation. However, there were some notable points. The department stores sales were very strong, but margins were weaker than we expected. We attribute this to high promotions for the industry. As per Shinsegae, it also saw margin fall from space additions at Incheon branch, which required more marketing for its opening ceremonies. Shinsegae also stated that the mix has moved more towards luxury goods, electronics and furniture that generate lower margins. Emart sales were relatively solid despite the lower traffic, on weaker consumer sentiment and concerns of inflationary pressures. The discount stores margins appear to have slightly improved in March, but not at the rate we had expected.

Figure 1: March results summary (W bn, exc %) Mar-11 MoM gr YoY gr 1Q11 YoY gr FY11E, CS % of CS estGross sales 1,278 5.5% 14.0% 4,039 14.8% 15,365 26% Dept, off line 287 14.2% 14.6% 869 15.3% 3,664 24% Dept, on line 38 39.6% n.a. 101 n.a. n.a. n.a. Emart, off line 933 1.6% 7.2% 3,012 9.0% 11,701 26% Emart, on line 19 30.2% n.a. 56 n.a. n.a. n.a.Net sales 947 3.7% 8.4% 3,035 9.8% 13,680 22% Dept, off line 118 12.5% 11.0% 362 11.2% 1,555 23% Dept, on line 3 22.7% n.a. 8 n.a. n.a. n.a. Emart, off line 808 2.0% 5.2% 2,612 7.1% 12,124 22% Emart, on line 18 28.7% n.a. 54 n.a. n.a. n.a.Gross profit 319 6.3% 12.0% 998 11.6% 3,927 25% Dept, off line 88 13.5% 11.1% 266 12.3% 1,099 24% Dept, on line 3 22.7% n.a. 8 n.a. n.a. n.a. Emart, off line 225 3.2% 9.6% 716 9.0% 2,828 25% Emart, on line 3 57.9% n.a. 8 n.a. n.a. n.a.Operating profit 78 22.9% 4.0% 263 7.4% 1,061 25% Dept, off line 18 52.1% 2.2% 58 22.8% 275 21% Dept, on line -2 65.7% n.a. -3 n.a. n.a. n.a. Emart, off line 63 14.7% 10.3% 213 7.9% 786 27% Emart, on line -2 -33.7% n.a. -5 n.a. n.a. n.a.Margins and margin changes (based on gross sales) Gross margin 25.0% 0.2pp -0.4pp 24.7% -0.7pp 25.6% Dept, off line 30.8% -0.2pp -1pp 30.6% -0.8pp 30.0% Dept, on line 7.0% -1pp n.a. 7.7% n.a. n.a. Emart, off line 24.1% 0.4pp 0.5pp 23.8% 0pp 24.2% Emart, on line 15.5% 2.7pp n.a. Operating margin 6.1% 0.9pp -0.6pp 6.5% -0.5pp 6.9% Dept, off line 6.4% 1.6pp -0.8pp 6.7% 0.4pp 7.5% Dept, on line -4.3% -0.7pp n.a. -3.1% n.a. n.a. Emart, off line 6.7% 0.8pp 0.2pp 7.1% -0.1pp 6.7% Emart, on line -8.3% 8pp n.a. Source: Company data, Credit Suisse estimates Lower target price to W300,000 We lower our target price to W300,000 from W340,000, as we lower our target multiple on core retailing from 15x to 13x. We had applied stronger multiples than other retailing peers in the past to reflect the strong growth of the department stores and potential improvements of margins at Emart. However, the rate of improvements appear slower than expected, and we acknowledge there’s no great reason for Shinsegae to receive more premium. This may be more so as it will split into two entities in late May, which means Shinsegae will become two smaller companies. Figure 2: Valuation band (incl/excl. Samsung Life)

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Source: Company data, Credit Suisse estimates. Rating history Old rating New rating Old TP New TPApr 12, 2011 OUTPERFORM OUTPERFORM W340,000 W300,000As of close of business 11 April 2011, Credit Suisse Securities (Europe) Limited, Seoul Branch performs the role of liquidity provider on the warrants of which the underlying asset is Samsung Life and holds 19,560,300 of warrants concerned. These may be covered warrants that constitute part of a hedged position.

Price (12 Apr 11 , W) 257,500.00TP (Prev. TP W) 300,000 (340,000) Est. pot. % chg. to TP 3252-wk range (W) 314000 - 140000Mkt cap (W/US$ bn) 9,713.2/ 8.9

Bbg/RIC 004170 KS / 004170.KS Rating (prev. rating) O (O) Shares outstanding (mn) 37.70 Daily trad vol - 6m avg (mn) 0.1 Daily trad val - 6m avg (US$ mn) 25.5 Free float (%) 68.3 Major shareholders Shinsegae Family;

27.14%

Performance 1M 3M 12MAbsolute (%) (1.0) (16.8) (4.8)Relative (%) (8.7) (18.1) (22.7)

Year 12/08A 12/09A 12/10E 12/11E 12/12ERevenues (W bn) 10,851 12,736 13,750 14,524 15,154EBITDA (W bn) 1,062 1,222 1,194 1,451 1,539Net profit (W bn) 573.8 568.0 941.3 790.3 879.1EPS (W) 15,212 15,059 24,953 20,952 23,304- Change from prev. EPS (%) n.a. n.a. 0 0 0- Consensus EPS (W) n.a. n.a. 28,548 20,415 23,008EPS growth (%) 14.6 (1.0) 65.7 (16.0) 11.2P/E (x) 16.9 17.1 10.3 12.3 11.0Dividend yield (%) 0.2 0.2 0.2 0.2 0.2EV/EBITDA (x) 13.0 10.3 10.8 8.6 7.8P/B (x) 2.5 2.2 1.3 1.2 1.1ROE (%) 16.0 13.7 16.1 10.3 10.4Net debt (net cash)/equity (%) 106.1 65.4 43.7 35.0 26.5 Note 1: Shinsegae is a leading retailer in Korea, with a prevailing position in the discount store business (E-mart), and is number three in the department store market. It has been the forerunner in terms of successful structural changes to retail formats.


Asian Daily

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Taiwan Chinatrust Financial Holding--------------------------------------------- Maintain OUTPERFORM Preliminary 1Q11 earnings in line with our above-consensus estimate EPS: ◄► TP: ◄► Chung Hsu, CFA / Research Analyst / 8862 2715 6362 / [email protected] Michelle Chou, CFA / Research Analyst / 886 2 2715 6363 / [email protected]

● Chinatrust FHC reported net profit of NT$2.2 bn in March and 1Q11 net profit of NT$4.9 bn (NT$0.47/share). 1Q11 profit is 25% of our above-consensus estimate for 2011 despite a slower start in January due to the extra loan loss provision taken for SFAS 34.

● The bank’s March PPOP is significantly higher YoY and 1Q11 PPOP is about 18% higher YoY with both NII and fee income rebounding. Credit cost for 1Q11 is just NT$125 mn, or 5 bp of loan (annualised), thanks to very low NPL influx and steady consumer NPL recoveries. The bank’s asset quality has continued to improve with NPL ratio of 0.53% and coverage ratio of 225%.

● Chinatrust is one of the best capitalised banks in Taiwan with a strong tier-1 ratio of 11.6% to capitalise on the stronger loan growth ahead. The MetLife acquisition is a small deal that we estimate will cost no more than NT$8-9 bn (includes NT$3 bn for possible capital injection at a later stage) versus the NT$20 bn+ capital that will free-up from the Mega stake.

● The bank will host 1Q11 analyst meeting in about three weeks. We expect positive guidance on volume growth and will review our estimates. The stock is trading at 13x 2011E P/E.

Figure 1: Chinatrust FHC earnings by main subsidiaries

(NT$ mn) Jan-11 Feb-11 Mar-11 1Q11 CS 2011E % of CS estChinatrust Bank pre-provision profit 1,572 1,489 2,536 5,597 27,383 20%provision expense 440 (226) (89) 125 3,705 3%pretax profit 1,132 1,755 2,625 5,512 23,678 23%net profit 1,009 1,484 2,108 4,601 20,172 23%Chinatrust FHC pretax profit 1,205 1,900 2,738 5,843 23,870 24%net profit^ 1,083 1,609 2,194 4,886 19,860 25%*preliminary monthly results; ^net profit is before preferred dividends Source: Company data, Credit Suisse estimates

Figure 2: Chinatrust Commercial Bank’s provisions

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Figure 4: Chinatrust’s valuation gap to the sector is at historical average

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Figure 5: Credit Suisse key ratio forecast Year ended 31st Dec 2008A 2009E 2010E 2011E 2012ELoan growth 5.1% -1.5% 10.5% 9.6% 8.3%Fee income growth -11.1% 8.8% 13.0% 9.1% 9.0%Net interest margin (NIM) 1.98% 1.44% 1.50% 1.63% 1.76%Loan to deposit ratio (LDR) 77% 71% 74% 77% 80%Cost to income ratio (CIR) 52% 66% 58% 53% 50%NPL ratio 1.68% 1.45% 0.50% 0.59% 0.75%Coverage ratio 75% 103% 190% 183% 167%Credit cost (bps) 138 134 50 35 38Source: Company data, Credit Suisse estimates

Price (11 Apr 11 , NT$) 25.00TP (Prev. TP NT$) 26.00 (26.00) Est. pot. % chg. to TP 452-wk range (NT$) 25.0 - 15.5Mkt cap (NT$/US$ bn) 249.5/ 8.6

Bbg/RIC 2891 TT / 2891.TW Rating (prev. rating) O (O) Shares outstanding (mn) 9,979.53 Daily trad vol - 6m avg (mn) 47.3 Daily trad val - 6m avg (US$ mn) 34.6 Free float (%) 65.0 Major shareholders Koo family- 20%

Performance 1M 3M 12MAbsolute (%) 2.2 16.6 35.5Relative (%) (1.3) 17.2 23.5

Year 12/08A 12/09A 12/10E 12/11E 12/12EPre-prov Op profit (NT$ mn) 25,818 16,189 22,297 27,575 32,670Net profit (NT$ mn) 13,657 1,381 13,477 18,810 22,386EPS (NT$) 1.51 0.15 1.39 1.88 2.24- Change from prev. EPS (%) n.a. n.a. 0 0 0- Consensus EPS (NT$) n.a. n.a. 1.32 1.68 1.93EPS growth (%) 1.0 (90.1) 831.4 35.4 19.0P/E (x) 16.6 167.3 18.0 13.3 11.1Dividend yield (%) 0.7 2.5 2.7 4.0 4.7BVPS (NT$) 12.1 12.8 12.9 14.2 15.4P/B (x) 2.1 2.0 1.9 1.8 1.6ROE (%) 12.2 1.2 10.8 13.9 15.2ROA (%) 0.8 0.1 0.7 1.0 1.1Tier 1 (%) 9.1 11.0 10.7 11.1 11.5 Note 1: Chinatrust FHC is a bank centric holding company and operates one of the largest private banks in Taiwan. The bank provides a variety of banking and financial services including deposit, loan, guarantee, credit card and international banking services.


Asian Daily

- 28 of 34 -

Recently Published Research

Date Title Author(s) Tel. E-mail Tue 12 Apr Asia Equity Strategy Sakthi Siva

Kin Nang Chik 65 6212 3027 852 2101 7482

[email protected] [email protected]

Tue 12 Apr India Utilities Sector Amish Shah, CFA 9122 6777 3743 [email protected] Tue 12 Apr Malaysia Strategy Tan Ting Min

Danny Goh Foong Wai Loke Annuar Aziz Amir Hamzah

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662 614 6210 6221 255 37976 66 2 614 6215

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Anand Swaminathan 65 6212 3017 65 6212 3012


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Companies mentioned Acer Inc. (2353.TW, NT$56.70, NEUTRAL, TP NT$78.00) Adani Power Ltd (ADAN.BO, Rs118.55, NEUTRAL, TP Rs113.00) Advanced Semicon. Engr. (2311.TW, NT$31.70, NEUTRAL, TP NT$39.00) Agile Property Holdings ltd. (3383.HK, HK$12.24, NEUTRAL [V], TP HK$12.70) AirAsia (AIRA.KL, RM2.60, OUTPERFORM, TP RM4.30) Alcoa Inc. (AA, $17.92, OUTPERFORM, TP $21.00) Alliance Financial Group BHD (ALFG.KL, RM3.18, OUTPERFORM, TP RM3.70) ASM Pacific Tech. (0522.HK, HK$105.70, UNDERPERFORM [V], TP HK$83.00) Asustek Computer (2357.TW, NT$247.50, OUTPERFORM, TP NT$299.00) Axiata Group Berhad (AXIA.KL, RM4.70, OUTPERFORM, TP RM6.10) Banpu Public Co Ltd (BANP.BK, Bt778.00, NEUTRAL, TP Bt875.00) BAT Malaysia (BATO.KL, RM48.00, UNDERPERFORM, TP RM35.50) Berjaya Sports Toto (BSTB.KL, RM4.30, NEUTRAL, TP RM4.30) BMW (BMWG.F, Eu58.59, OUTPERFORM, TP Eu70.00, MARKET WEIGHT) Bursa Malaysia Bhd (BMYS.KL, RM8.10, OUTPERFORM, TP RM9.50) CapitaCommercial Trust (CACT.SI, S$1.46, OUTPERFORM, TP S$1.81) CapitaMall Trust (CMLT.SI, S$1.87, OUTPERFORM, TP S$2.22) Catcher Technology (2474.TW, NT$156.00, OUTPERFORM, TP NT$140.00) CDL Hospitality Trusts (CDLT.SI, S$2.05, OUTPERFORM, TP S$2.63) China Life (2628.HK, HK$30.15, UNDERPERFORM, TP HK$30.00) China Overseas Land & Investment (0688.HK, HK$16.60, UNDERPERFORM, TP HK$13.00) China Pacific (2601.HK, HK$34.20, OUTPERFORM, TP HK$41.00) China Resources Land Ltd (1109.HK, HK$15.06, NEUTRAL, TP HK$14.80) China Taiping (0966.HK, HK$22.50, NEUTRAL, TP HK$25.50) China Vanke Co Ltd-A (000002.SZ, Rmb8.82, OUTPERFORM [V], TP Rmb12.30) Chinatrust Financial Holding (2891.TW, NT$25.00, OUTPERFORM, TP NT$26.00) CIMB Group Holdings Bhd (CIMB.KL, RM8.25, OUTPERFORM, TP RM10.60) Clough (CLO.AX, A$.86, OUTPERFORM, TP A$1.02) Compal Electronics (2324.TW, NT$29.95, NEUTRAL, TP NT$35.00) Continental (CONG.DE, Eu62.20, OUTPERFORM [V], TP Eu72.00, MARKET WEIGHT) COSCO Corporation (Singapore) Ltd (COSC.SI, S$2.25, UNDERPERFORM, TP S$1.60) Country Gardens Holdings Co. (2007.HK, HK$3.52, NOT RATED) Daelim Industrial (000210.KS, W118,500, OUTPERFORM, TP W150,000) Daewoo E&C (047040.KS, W11,450, UNDERPERFORM, TP W11,000) Daewoo Shipbuilding & Marine Engineering (042660.KS, W39,900, OUTPERFORM [V], TP W48,000) Daimler (DAIGn.DE, Eu52.04, NEUTRAL, TP Eu65.00, MARKET WEIGHT) DiGi.Com (DSOM.KL, RM29.68, OUTPERFORM, TP RM29.60) Epistar Corporation (2448.TW, NT$106.50, OUTPERFORM, TP NT$133.00) Essar Oil (ESRO.BO, Rs135.70, OUTPERFORM [V], TP Rs174.00) Evergrande Real Estate Group Ltd (3333.HK, HK$4.78, OUTPERFORM [V], TP HK$5.30) Fiat (FIA.MI, Eu6.60, UNDERPERFORM [V], TP Eu6.50, MARKET WEIGHT) Foxconn Technology Corp (2354.TW, NT$117.00, NEUTRAL, TP NT$94.00) Frasers Centrepoint Trust (FCRT.SI, S$1.51, OUTPERFORM, TP S$1.90) Frasers Commercial Trust (FRCR.SI, S$.80) Gamuda (GAMU.KL, RM3.84, OUTPERFORM, TP RM4.74) Genting (GENT.KL, RM11.10, OUTPERFORM, TP RM13.60) Genting Malaysia Bhd (GENM.KL, RM3.74, NEUTRAL, TP RM3.30) Genting Plantations Bhd (GENP.KL, RM8.04, NEUTRAL, TP RM7.80) GKN (GKN.L, 202.40 p, NEUTRAL, TP 243.00 p, MARKET WEIGHT) Golden Eagle Retail Group Ltd. (3308.HK, HK$20.65, OUTPERFORM [V], TP HK$22.00) Greentown China Holdings Ltd (3900.HK, HK$8.26, UNDERPERFORM [V], TP HK$7.95) GS E&C (006360.KS, W125,500, OUTPERFORM, TP W130,000) Guangzhou R&F Properties Co Ltd (2777.HK, HK$11.32, NEUTRAL, TP HK$12.00) Hindalco Industries Ltd (HALC.BO, Rs207.45, OUTPERFORM [V], TP Rs255.00) Holcim Indonesia TBK PT (SMCB.JK, Rp2125.00, NEUTRAL, TP Rp2400.00) Hong Leong Bank (HLBB.KL, RM10.50, NEUTRAL, TP RM9.30) Hong Leong Financial Group Berhad (HLCB.KL, RM9.33, OUTPERFORM, TP RM10.00) HTC Corp (2498.TW, NT$1200.00, OUTPERFORM, TP NT$1300.00) Hyundai Development (012630.KS, W30,950, NEUTRAL, TP W36,000) Hyundai E&C (000720.KS, W86,700, NEUTRAL, TP W92,000) Hyundai Heavy Industries (009540.KS, W545,000, OUTPERFORM [V], TP W600,000) Hyundai Mipo Dockyard (010620.KS, W200,000, NEUTRAL [V], TP W248,000) IJM Corporation Berhad (IJMS.KL, RM6.39, OUTPERFORM, TP RM8.00) IJM Land Berhad (IJML.KL, RM2.82, OUTPERFORM, TP RM3.20) Indocement (INTP.JK, Rp16700.00, NEUTRAL, TP Rp17400.00) Inotera Memories Inc. (3474.TW, NT$15.10, NEUTRAL, TP NT$22.00) Intime (1833.HK, HK$12.28, NOT RATED)


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IOI Corporation (IOIB.KL, RM5.57, UNDERPERFORM, TP RM5.11) Jindal Steel & Power Ltd (JNSP.BO, Rs699.85, OUTPERFORM, TP Rs810.00) Kaisa Group Holdings (1638.HK, HK$2.75, OUTPERFORM, TP HK$3.50) Keppel Corporation (KPLM.SI, S$12.50, OUTPERFORM, TP S$14.00) K-REIT Asia (KASA.SI, S$1.31, OUTPERFORM, TP S$1.75) KSK Energy Ventures Ltd (KSKE.BO, Rs104.95, OUTPERFORM, TP Rs175.00) Kuala Lumpur Kepong (KLKK.KL, RM20.82, NEUTRAL, TP RM21.70) KWG Property Holding Limited (1813.HK, HK$6.12, OUTPERFORM [V], TP HK$7.40) Lanco Infratech Ltd. (LAIN.BO, Rs44.10, OUTPERFORM [V], TP Rs58.00) Largan Precision (3008.TW, NT$850.00, NEUTRAL, TP NT$830.00) Malayan Banking (MBBM.KL, RM9.19, UNDERPERFORM, TP RM7.60) Malaysia Airlines (MASM.KL, RM1.86, UNDERPERFORM, TP RM1.50) Malaysia Airports (MAHB.KL, RM6.05, OUTPERFORM, TP RM7.20) Malaysia Marine and Heavy Engineering Holdings Bhd (MHEB.KL, RM6.87, OUTPERFORM [V], TP RM7.15) Malaysian Bulk Carriers (MBCB.KL, RM2.80, UNDERPERFORM, TP RM2.15) Maoye (0848.HK, HK$3.72, NOT RATED) Mapletree Logistics Trust (MAPL.SI, S$.92, OUTPERFORM, TP S$1.13) Maxis Berhad (MXSC.KL, RM5.36, OUTPERFORM, TP RM6.10) Michelin (MICP.PA, Eu61.05, UNDERPERFORM, TP Eu52.00, MARKET WEIGHT) MISC Bhd (MISC.KL, RM7.73, NEUTRAL, TP RM8.20) Mitrabahtera Segara Sejati (MBSS.JK, Rp1670, NOT RATED) MMC Corporation Bhd (MMCB.KL, RM2.69, OUTPERFORM, TP RM3.80) Motech Industries (6244.TWO, NT$127.50, NEUTRAL [V], TP NT$115.00) Muhibbah Engineering (M) Bhd (MUHI.KL, RM1.69, UNDERPERFORM [V], TP RM.70) National Hydroelectric Power Corporation Ltd (NHPC.NS, Rs25.10, NEUTRAL, TP Rs27.00) New World Department Store (0825.HK, HK$6.45) Novatek Microelectronics Corp Ltd (3034.TW, NT$86.10, OUTPERFORM, TP NT$110.00) NTPC Ltd (NTPC.BO, Rs183.65, NEUTRAL, TP Rs185.00) Parkson Retail Group Ltd. (3368.HK, HK$11.82, OUTPERFORM, TP HK$15.00) PCD Stores (0331.HK, HK$2.25, OUTPERFORM, TP HK$2.70) Petrobras (PBR, $39.83, NEUTRAL, TP $48.00) Petronas Chemicals Group BHD (PCGB.KL, RM7.29, OUTPERFORM [V], TP RM8.50) PICC (2328.HK, HK$9.86, UNDERPERFORM, TP HK$10.00) Ping An (2318.HK, HK$84.90, RESTRICTED) Plus Expressways Bhd (PLUE.KL, RM4.43, OUTPERFORM, TP RM4.86) Porsche (PSHG_p.F, Eu45.46, RESTRICTED [V]) POS Malaysia Berhad (PSHL.KL, RM3.55, NEUTRAL, TP RM3.30) PSA Peugeot Citroen (PEUP.PA, Eu28.70, UNDERPERFORM [V], TP Eu24.00, MARKET WEIGHT) PT Adaro Energy Tbk (ADRO.JK, Rp2275.00, UNDERPERFORM, TP Rp2050.00) PT Borneo Lumbung Energi & Metal Tbk (BORN.JK, Rp1640.00, OUTPERFORM [V], TP Rp2000.00) PT Harum Energy Tbk (HRUM.JK, Rp9100.00, NEUTRAL, TP Rp9600.00) PT Indika Energy Tbk (INDY.JK, Rp4150.00, OUTPERFORM, TP Rp5400, OVERWEIGHT) PT Indo Tambangraya Megah (ITMG.JK, Rp48100.00, OUTPERFORM [V], TP Rp57000.00) PT Petrosea Tbk (PTRO.JK, Rp26500, NOT RATED) PT Tambang Batubara Bukit Asam Tbk (PTBA.JK, Rp22050.00, OUTPERFORM, TP Rp27200.00) Public Bank (PUBMe.KL, RM13.10, OUTPERFORM, TP RM17.30) Quanta Computer (2382.TW, NT$53.20, NEUTRAL, TP NT$52.00) Reliance Power Ltd (RPOL.BO, Rs131.45, UNDERPERFORM, TP Rs129.00) Renault (RENA.PA, Eu39.86, NEUTRAL, TP Eu50.00, MARKET WEIGHT) RHB Capital Berhad (RHBC.KL, RM8.70, OUTPERFORM, TP RM11.80) Samsung C&T Corporation (000830.KS, W74,700, OUTPERFORM, TP W90,000) Samsung Electronics (005930.KS, W894,000, OUTPERFORM, TP W1,100,000) Samsung Engineering Co Ltd (028050.KS, W232,000, OUTPERFORM, TP W220,000) Samsung Heavy Industries (010140.KS, W45,700, OUTPERFORM, TP W50,800) Samsung Life Insurance (032830.KS, W99,300, OUTPERFORM [V], TP W125,000) Samsung SDI (006400.KS, W174,000, UNDERPERFORM, TP W137,000) Scomi Group Berhad (SCOI.KL, RM.32, UNDERPERFORM [V], TP RM.45) Sembcorp Industries Limited (SCIL.SI, S$5.31, OUTPERFORM, TP S$6.40, MARKET WEIGHT) Sembcorp Marine Ltd. (SCMN.SI, S$5.87, OUTPERFORM, TP S$6.30) Semen Gresik (Persero) (SMGR.JK, Rp9700.00, OUTPERFORM, TP Rp11000.00) Seoul Semiconductor Co Ltd (046890.KQ, W43,200, OUTPERFORM, TP W53,000) Shimao Property Holdings Ltd (0813.HK, HK$11.86, NEUTRAL [V], TP HK$12.00) Shinsegae Co. (004170.KS, W257,500, OUTPERFORM, TP W300,000) Shirble (0312.HK, HK$1.71, NOT RATED) Siliconware Precision (2325.TW, NT$36.25, NEUTRAL, TP NT$36.00) Sime Darby (SIME.KL, RM9.26, UNDERPERFORM, TP RM8.60) Sino-Ocean Land Holdings Ltd (3377.HK, HK$4.68, NEUTRAL, TP HK$5.20) SP Setia (SETI.KL, RM6.56, NEUTRAL, TP RM5.80)


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Springland (1700.HK, HK$6.58, NOT RATED) Starhill Gbl (STHL.SI, S$.62) Straits Asia Resources Limited (STRL.SI, S$2.66, OUTPERFORM, TP S$3.20) Suntec REIT (SUNT.SI, S$1.54, NEUTRAL, TP S$1.69) Sunway Holdings Berhad (SGWM.KL, RM2.33, OUTPERFORM, TP RM2.60) Sunway REIT (SUNW.KL, RM1.06, OUTPERFORM [V], TP RM1.15) Ta Ann Holdings Bhd (TAAN.KL, RM6.40, OUTPERFORM, TP RM8.35) Taiwan Semiconductor Manufacturing (2330.TW, NT$71.10, OUTPERFORM, TP NT$87.00) Tan Chong Motor Holding (TNCS.KL, RM4.74, NEUTRAL, TP RM4.40) Tata Power Company Ltd (TTPW.BO, Rs1312.65, NEUTRAL, TP Rs1367.00) Telekom Malaysia (TLMM.KL, RM3.99, UNDERPERFORM, TP RM3.20) Tenaga Nasional (TENA.KL, RM6.05, NEUTRAL, TP RM7.20) Tripod Technology (3044.TW, NT$134.50, OUTPERFORM, TP NT$143.00) UEM Land Holdings Bhd (ULHB.KL, RM2.80, OUTPERFORM [V], TP RM3.80) Unimicron Technology Corp (3037.TW, NT$47.30, OUTPERFORM, TP NT$62.00) Wah Seong Corporation (WAHE.KL, RM2.11, UNDERPERFORM, TP RM1.65) Wistron (3231.TW, NT$46.10, OUTPERFORM, TP NT$57.00) YTL Corp (YTLS.KL, RM7.49, NEUTRAL, TP RM7.70) YTL Power (YTLP.KL, RM2.26, UNDERPERFORM, TP RM1.82) Zijin Mining Group Co., Ltd (2899.HK, HK$6.43, NEUTRAL, TP HK$7.20)

Disclosure Appendix Important Global Disclosures The analysts identified in this report each certify, with respect to the companies or securities that the individual analyzes, that (1) the views expressed in this report accurately reflect his or her personal views about all of the subject companies and securities and (2) no part of his or her compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this report. The analyst(s) responsible for preparing this research report received compensation that is based upon various factors including Credit Suisse's total revenues, a portion of which are generated by Credit Suisse's investment banking activities. Analysts’ stock ratings are defined as follows: Outperform (O): The stock’s total return is expected to outperform the relevant benchmark* by at least 10-15% (or more, depending on perceived risk) over the next 12 months. Neutral (N): The stock’s total return is expected to be in line with the relevant benchmark* (range of ±10-15%) over the next 12 months. Underperform (U): The stock’s total return is expected to underperform the relevant benchmark* by 10-15% or more over the next 12 months. *Relevant benchmark by region: As of 29th May 2009, Australia, New Zealand, U.S. and Canadian ratings are based on (1) a stock’s absolute total return potential to its current share price and (2) the relative attractiveness of a stock’s total return potential within an analyst’s coverage universe**, with Outperforms representing the most attractive, Neutrals the less attractive, and Underperforms the least attractive investment opportunities. Some U.S. and Canadian ratings may fall outside the absolute total return ranges defined above, depending on market conditions and industry factors. For Latin American, Japanese, and non-Japan Asia stocks, ratings are based on a stock’s total return relative to the average total return of the relevant country or regional benchmark; for European stocks, ratings are based on a stock’s total return relative to the analyst's coverage universe**. For Australian and New Zealand stocks a 22% and a 12% threshold replace the 10-15% level in the Outperform and Underperform stock rating definitions, respectively, subject to analysts’ perceived risk. The 22% and 12% thresholds replace the +10-15% and -10-15% levels in the Neutral stock rating definition, respectively, subject to analysts’ perceived risk. **An analyst's coverage universe consists of all companies covered by the analyst within the relevant sector. Restricted (R): In certain circumstances, Credit Suisse policy and/or applicable law and regulations preclude certain types of communications, including an investment recommendation, during the course of Credit Suisse's engagement in an investment banking transaction and in certain other circumstances. Volatility Indicator [V]: A stock is defined as volatile if the stock price has moved up or down by 20% or more in a month in at least 8 of the past 24 months or the analyst expects significant volatility going forward.

Analysts’ coverage universe weightings are distinct from analysts’ stock ratings and are based on the expected performance of an analyst’s coverage universe* versus the relevant broad market benchmark**: Overweight: Industry expected to outperform the relevant broad market benchmark over the next 12 months. Market Weight: Industry expected to perform in-line with the relevant broad market benchmark over the next 12 months. Underweight: Industry expected to underperform the relevant broad market benchmark over the next 12 months. *An analyst’s coverage universe consists of all companies covered by the analyst within the relevant sector. **The broad market benchmark is based on the expected return of the local market index (e.g., the S&P 500 in the U.S.) over the next 12 months. Credit Suisse’s distribution of stock ratings (and banking clients) is:

Global Ratings Distribution Outperform/Buy* 46% (62% banking clients) Neutral/Hold* 40% (58% banking clients)


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Underperform/Sell* 11% (51% banking clients) Restricted 2%

*For purposes of the NYSE and NASD ratings distribution disclosure requirements, our stock ratings of Outperform, Neutral, and Underperform most closely correspond to Buy, Hold, and Sell, respectively; however, the meanings are not the same, as our stock ratings are determined on a relative basis. (Please refer to definitions above.) An investor's decision to buy or sell a security should be based on investment objectives, current holdings, and other individual factors.

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