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Asia Pacific Equity Research
30 January 2015
Top Stories
AFL Samsung Electronics (005930.KS, OW – W1,360,000), South Korea (JJ Park)
Watch GS6 and System LSI: Expect the stock to break-through its historical high
Despite macro headwinds, all the divisions (except CE) fared better than our
expectations, and notably smartphone performance surprised on the upside on the
back of ASP hike thanks to increased sales of high-end products and efficient expense
management. SEC boosted its year-end dividend to W19,500/share.
China Everbright International (0257.HK, OW – HK$11.46), China (Elaine Wu)
Water M&A is the key catalyst in 2015
China Everbright Int'l is likely looking for water acquisition targets, in our view, after its
water subsidiary announced a share placement last week. We see potential 10%
upside to CEI’s earnings if Everbright Water geared up its balance sheet for M&A.
Water acquisitions will likely be the key catalyst for CEI in 2015 as we believe awards
of new waste-to-energy projects will slow this year after a record year in 2014.
Indonesia 101 (Aditya Srinath, CFA)
Equity Investors' Guide to ASEAN's Largest Economy
Herein, we present a detailed guide for equity investors interested in Indonesia. High
equity returns: 16% 10-year USD CAGR (20% Rp). High economic growth: 6%oya 10
year average GDP growth.
init Taiwan Paiho Limited (9938.TW, OW – NT$49.70),Asia Pacific (Andre Chang,
CFA)
Hidden champion of sports-leisure growth; initiate at OW with PT of NT$65
We initiate coverage on Taiwan Paiho (Paiho) with an OW rating and a Dec-15 PT of
NT$65, implying 31% potential upside. Paiho is the largest touch-fastener ODM
manufacturer in the world, and also a leading producer of shoelaces/webbings,
supplying all the major sportswear brands and their OEM/ODM producers. Trading at
13x 2015E P/E with a 20% EPS CAGR in 2014-16E, and a 3-4% dividend yield, the
stock looks undervalued vs. other Taiwan sportswear stocks (17x-23x P/E). Paiho is
also a beneficiary of US dollar strength, lower petrochemical prices, and the potential of
Vietnam entering TPP.
TSC Auto ID Technology (3611.TW, OW – NT$257.50), Taiwan (William Chen)
Geared for market share gain; raise PT to NT$370
TSC is the No.6 barcode printer maker globally, competing with Zebra and Sato. We
expect the upcoming market reshuffle to benefit Taiwan plays (as we have seen
before). We expect TSC to deliver 20% Y/Y earnings growth in 2015-16 on market
share gain and better product mix. TSC is now trading at 14x 1-year forward PER, with
ROE of 33-34% and dividend yield of 4%+.
Send me your feedback!
Click below for the:
J.P. Morgan Daily Valuations
GLOBAL Stock Guide
Daily Global Economic Briefing
Link to Other FTMs page
Link to J.P. Morgan Markets page
Key Rating, Price Target & EPS Changes
Markets at a glance
AM perspective
Adrian Mowat, Chief Equity Strategist
Philippines: Bumper 4Q14 GDP
Easing inflation and low domestic interest rates
Source: BSP and Philippine Statistics Agency.
The Philippines economy grew at a solid
6.9%oya (consensus 6.0%oya) in 4Q14. The
tailwind from declining oil prices and easing
inflation provide substantial room for monetary
easing. Our economists forecast a 25bps RRP
and SDA rate cut in 2H15. For more, please see
Philippines: Bumper 4Q14 GDP sets tone for
positive 2015 – oil provides material policy flex,
penciling in 2H15 cut, Ong, et. al, 29 January
2015.
▼Pidilite Industries (PIDI.NS, N – Rs575.90), India (Gunjan Prithyani)
Growth remains slow, and crude fall benefit priced in; downgrade to Neutral
PIDI’s 3Q EPS of Rs2.4 was below estimates primarily due to lower-than-expected
revenues. Volume growth of 8% Y/Y was the lowest in recent history, pointing to a
sluggish demand environment. Comments from other building product companies
corroborate this view. Margin tailwinds exist, though, given the sharp fall in crude price.
However, we think the extent of the benefit from this will be lower than what the market
seems to be pricing in. We factor in the benefit of lower RM prices and raise our
earnings estimates by 14-16% for FY16/17. While we see PIDI as a high-quality
company with monopolistic market share in its consumer business, valuations look
demanding.Downgrade to Neutral with a new Mar-16 PT of Rs550.
*J.P. Morgan Live Conference Call Series: Key Sectors, Markets & Themes - New
- Sean Wu/ MW Kim - Asia Healthcare and Insurance*
See end pages for analyst certification. For important disclosures, please refer to the disclosure section at the end of the
individual linked notes.
J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may
have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their
investment decision.
Recommendation Changes
Results and Company Views, continued
▼Pidilite Industries (PIDI.NS – Neutral), India
KLCC Property Holdings (KLCC.KL – Neutral), Malaysia
(Simone Yeoh)
Analyst briefing takeaways: Retail sales outperform peers;
Potential office oversupply should not be a concern
(Gunjan Prithyani)
Growth remains slow, and crude fall benefit priced in; downgrade to
Neutral
init Taiwan Paiho Limited (9938.TW – Overweight), Asia Pacific
(Andre Chang, CFA)
Hidden champion of sports-leisure growth; initiate at OW with PT of
NT$65
Price Target and Estimate Changes
Adani Power (ADAN.BO – Underweight), India
(Sumit Kishore)
Not out of the woods yet: Maintain UW
AU Optronics (2409.TW – Underweight), Taiwan
(Narci Chang)
Confirmation of another capacity expansion plan; Reiterate UW
CapitaRetail China Trust (CRCT.SI – Overweight), Singapore
(Brandon Lee)
Another quarter of sterling tenant sales growth
Dr. Reddy's Laboratories Limited (REDY.BO – Overweight),
India
(Neha Manpuria)
Strong results despite concerns on Russia; progress on Form 483s
at API facility key for approvals
Hyundai Steel Company (004020.KS – Overweight), South
Korea
(Daniel Kang)
4Q14 results - Beat, margins continue to expand on merger
benefits, construction sector picking up
I.T Ltd. (0999.HK – Neutral), Hong Kong
(Shen Li, CFA)
3Q15 Update - Weak Sales Offset by Better than Expected Gross
Margins
Korea Aerospace Industries (047810.KS – Overweight), South
Korea
(Wan Sun Park)
4Q14 results in-line - differentiated earnings growth continues with
high visibility
AFL LG Electronics (066570.KS – Overweight), South Korea
(JJ Park)
Relative weak 4Q results and muted 1Q15 guidance
Naver (035420.KS – Overweight), South Korea
(Stanley Yang)
LINE's robust monetization intact but disappointing MAU growth
PTT Exploration & Production (PTTE.BK – Neutral), Thailand
(Scott L Darling)
Higher than expected impairment; Dividend disappoints
PTT Exploration & Production (PTTE.BK – Neutral), Thailand
(Scott L Darling)
Potential net loss; impairment risks and dividend cut
Samsung Electro-Mechanics (009150.KS – Overweight),
South Korea
(Masashi Itaya)
4Q Results: Good Impression from Swing to Profit, Buyback
Announcement
Samsung Engineering (028050.KS – Underweight), South
Korea
(Sokje Lee)
4Q14 results: In line, but contraction continues
Samsung Heavy Industries (010140.KS – Neutral), South
Korea
(Sokje Lee)
4Q14 results: Harsh test of its offshore bias
LG Display (034220.KS – Overweight), South Korea
(JJ Park)
Sizable FCF along with prudent capex should translate into higher
shareholder returns
Sands China (1928.HK – Overweight), Hong Kong
(DS Kim)
Unexiciting 4Q, as expected
MakeMyTrip Ltd. (MMYT – Overweight), India
(Viju K George)
Muted quarter due to one-off miss in H&P; structural growth story
intact; stay OW
Sesa Sterlite (SESA.NS – Overweight), India
(Pinakin Parekh, CFA)
Strong results driven by Ally and Cu Tc/Rc; Ally prod guidance
sharply higher and implies upside risk to FY16
AFL NTT Docomo (9437) (9437.T – Underweight), Japan
(James R. Sullivan, CFA)
3Q expenses present 5% downside to FY15E EBITDA
Sumitomo Mitsui Trust Holdings (8309) (8309.T –
Overweight), Japan
(Makoto Kuroda)
3Q Results: Buybacks Announced, Writebacks & Fees Continue
to Support
Pidilite Industries (PIDI.NS – Neutral), India
(Gunjan Prithyani)
Growth remains slow, and crude fall benefit priced in; downgrade to
Neutral
Wijaya Karya (WIKA.JK – Underweight), Indonesia, Thailand
(Felicia Tandiyono)
Analyst meeting takeaways
Strategy
POSCO (005490.KS – Neutral), South Korea
(Daniel Kang)
FY14 results - Miss, FY15 OP guidance at risk of downgrade
PTT Exploration & Production (PTTE.BK – Neutral), Thailand
(Scott L Darling)
Cost reduction - a challenge
AFL Samsung Electronics (005930.KS – Overweight), South
Korea
(JJ Park)
Watch GS6 and System LSI: Expect the stock to break-through its
historical high
Emerging Markets Strategy Dashboards, , Global Emerging
Markets
(Adrian Mowat)
Identifying change and providing perspective on key economic
and equity market data of global emerging markets
Indonesia 101, Asia Pacific
(Aditya Srinath, CFA)
Equity Investors' Guide to ASEAN's Largest Economy
Philippine Strategy Flash
(Jeanette Yutan)
2014 GDP growth surprise sets tone for better 2015E growth
Economics
SK Telecom (017670.KS – Overweight), South Korea
(Stanley Yang)
2015 catalysts: Significant earnings growth, soft dividend hike,
share buyback, SK Planet
Autos drive December production; 4Q GDP set for
manufacturing lift, Thailand
(Benjamin Shatil)
TSC Auto ID Technology (3611.TW – Overweight), Taiwan
(William Chen)
Geared for market share gain; raise PT to NT$370
Bumper 4Q14 GDP sets tone for positive 2015 – oil provides
material policy flex, penciling in 2H15 cut, Philippines
(Sin Beng Ong)
Results and Company Views
FKI business sentiment improved modestly in January,
South Korea
(Jiwon Lim)
Advanced Info Services (ADVA.BK – Underweight), Thailand
(Princy Singh)
2015 Outlook: Higher Capex and tepid growth. Time to shift the
debate from regulation to data economics
January inflation eases further; trade balance in small deficit
— watching oil impact on fiscal revenues, Vietnam
(Benjamin Shatil)
Asian Paints Limited (ASPN.NS – Neutral), India
(Latika Chopra, CFA)
Q3FY15 First cut : Earnings disappoint on sales miss
Bank Negara Indonesia Persero (BBNI.JK – Overweight),
Indonesia
(Harsh Wardhan Modi)
Solid beat across the board; accumulate while the Street worries
about management changes
Bank of China (BOCHK) (2388.HK – Overweight), Hong Kong
(Jemmy S Huang)
Considering the sale of NCB?
Bursa Malaysia Bhd (BMYS.KL – Neutral), Malaysia
(Harsh Wardhan Modi)
Good 4Q, but limited upside
China Everbright International (0257.HK – Overweight), China
(Elaine Wu)
Water M&A is the key catalyst in 2015
AFL Genting Singapore (GENS.SI – Underweight), Singapore
(Daisy Lu)
Implication from MBS 4Q result
HDFC (Housing Development Finance Corporation) (HDFC.BO
– Overweight), India
(Seshadri K Sen, CFA)
3Q15: strong retail loan growth; spreads improve
Hotel Shilla (008770.KS – Neutral), South Korea
(Youna Kim)
Weak headline disguises strong details
What to expect for CNY?, China
(Haibin Zhu)
Sector Research
China City Gas Distributors, China, Hong Kong
(Boris Kan)
News of potential gas cost cut a positive
China SMID Ideas, China, Hong Kong
(Leon Chik, CFA)
Feedback from China SMID Caps 1X1 Forum
China Steel Sector, China
(Daniel Kang)
Mid-January CISA output falls ahead of CNY
Dry Bulk Shipping, Asia Pacific
(Corrine Png)
Capesize earnings rose, mainly driven by higher iron ore shipping
demand to China; port congestion fell
Macau gaming, Asia Pacific
(DS Kim)
Full-smoking ban on the horizon? Our quick-and-dirty impact
analysis
Thai banks, Thailand
(Anne Jirajariyavech, CFA)
Solid liquidity; funding cost to stay low for longer with further
downside possible
IDFC (IDFC.BO – Overweight), India
(Seshadri K Sen, CFA)
3Q15: NPLs stable; loan book contracts; loan spreads stable
Appendix
Key Rating, Price Target & EPS Changes
Rating Changes
J.P. Morgan EPS Estimate Changes
Company
Decreases
Pidilite Industries
New Rating
Old Rating
N
OW
Initiations
Company
Taiwan Paiho Limited
Rating
OW
Price Target
65.00
Price Target Changes
Company
Increases
Samsung Electronics
TSC Auto ID Technology
CapitaRetail China Trust
Pidilite Industries
Decreases
POSCO
I.T Ltd.
Adani Power
Source: J.P. Morgan estimates.
Rating
OW
OW
OW
N
N
N
UW
Price Target
New
Old
KRW 1,700,000 KRW 1,500,000
NT$370.00
NT$340.00
1.80
1.75
INR550.0
INR440.0
KRW 300,000
HK$2.50
INR40.0
KRW 330,000
HK$2.70
INR46.0
Company
Increases
Dr. Reddy's Laboratories Limited
LG Display
Pidilite Industries
Samsung Electronics
Decreases
Adani Power
AU Optronics
Bank of Baroda
CapitaRetail China Trust
POSCO
Revisions
I.T Ltd.
SK Telecom
TSC Auto ID Technology
Current FY
Next FY
+8.1%
+13.1%
+3.2%
+13.9%
+0.4%
+6.1%
+14.0%
+9.0%
-1141.4%
-5.6%
-80.0%
-3.3%
-52.7%
-197.9%
-4.9%
-80.0%
-2.6%
-9.0%
+5.3%
+5.4%
-1.1%
-3.0%
-5.4%
+4.1%
J.P. Morgan DPS Estimate Changes
Company
Increases
Dr. Reddy's Laboratories Limited
Pidilite Industries
Samsung Electronics
Decreases
Bank of Baroda
CapitaRetail China Trust
Revisions
AU Optronics
TSC Auto ID Technology
Current FY
Next FY
+8.1%
+3.2%
+29.1%
+0.4%
+14.0%
+54.9%
-80.0%
-3.4%
-80.0%
-2.7%
-5.6%
-1.1%
Markets at a glance
China
SHASHR Index
Chg from previous day
T/O value (CNYmn / US$MM)
Chg from previous day
Exchange rate
O/N interbank (%)
Market cap (CNYBn)
Market cap (US$ Bn)
FY1E Market P/E
FY2E Market P/E
Hong Kong
3,418.43
-1.32%
297,020 / 47,548
-13.24%
CNY6.2 / US$1
2.78
24,887.4
3,984
18.0
15.6
Indonesia
JCI Index
Chg from previous day
T/O value (Rp bn / US$MM)
Chg from previous day
Exchange rate
O/N interbank (%)
Market cap (US$Bn)
Market cap (Rp bn)
FY1E Market P/E
FY2E Market P/E
3,419.05
0.00%
656 / 485
-28.79%
SGD1.35 / US$1
1.35
574.7
777
22.3
18.5
Source: Bloomberg, J.P. Morgan estimates.
KOSPI Index
Chg from previous day
T/O value (KRW bn / US$MM)
Chg from previous day
Exchange rate
O/N interbank (%)
Market cap (KRW Bn)
Market cap (US$ Bn)
FY1E Market P/E
FY2E Market P/E
1,586.40
-0.40%
54 / 1,641
-3.62%
Bt32.76 / US$1
1.90
450.5
14,758
16.4
15.1
TPX Index
Chg from previous day
T/O value (JPY bn / US$bn)
Chg from previous day
Exchange rate
O/N interbank (%)
Market cap (US$ bn)
Market cap (JPY bn)
FY1E Market P/E
FY2E Market P/E
SX5E Index
Chg from previous day
T/O value (Euro bn / US$bn)
Chg from previous day
Exchange rate
O/N interbank (%)
Market cap (US$ bn)
Market cap (Euro bn)
FY1E Market P/E
FY2E Market P/E
29,681.77
0.41%
635 / 10,261
7.13%
INR61.9 / US$1
7.75
1687.6
104,415
26.8
21.3
PSE Index
Chg from previous day
T/O value (Php MM / US$MM)
Chg from previous day
Exchange rate
O/N interbank (%)
Market cap (US$ bn)
Market cap (Php bn)
FY1E Market P/E
FY2E Market P/E
7,617.30
-0.57%
13,054 / 296
24.82%
Php44.09 / US$1
4.00
198.8
8,762
20.7
18.1
Taiwan
1,951.02
-0.54%
5,172 / 4,728
27.6%
KRW1093.94 / US$1
2.00
1,347,709
1,232
15.1
12.5
TWSE Index
DoD Change
52-Week Range
T/O value (NT$ mn / US$MM)
Chg from previous day
Exchange rate
O/N interbank (%)
10 Year Gov Bond Yield (%)
Market cap (NT$Bn)
Market cap (US$ Bn)
FY1E Market P/E
FY2E Market P/E
9,426.90
-0.88%
9,594 / 8,230
100,125 / 3,178
-2.26%
TWD31.5 / US$1
0.39
1.49
27,147.9
999
18.3
13.6
Australia
1,413.58
-1.14%
2,453 / 21
7.09%
JPY117.98 / US$1
0.13
4396.2
518,659
18.5
17.4
Euro Stoxx
6,825.94
0.21%
4.70 / 7.12
-0.63%
US$1.51 / GBP1
0.47
2825.1
1,866
15.1
13.5
Sensex Index
Chg from previous day
T/O value (INR bn / US$MM)
Chg from previous day
Exchange rate
O/N interbank (%)
Market cap (US$Bn)
Market cap (INR Bn)
FY1E Market P/E
FY2E Market P/E
Philippines
1,782.18
-0.76%
2,230 / 615
-3.56%
MYR3.63 / US$1
3.25
278.2
1,010
20.1
18.3
Japan
UK
UKX Index
Chg from previous day
T/O value (GBP Bn / US$bn)
Chg from previous day
Exchange rate
O/N interbank (%)
Market cap (US$ bn)
Market cap (GBP bn)
FY1E Market P/E
FY2E Market P/E
KLCI Index
Chg from previous day
T/O value (MYR MM / US$MM)
Chg from previous day
Exchange rate
O/N interbank (%)
Market cap (US$ bn)
Market cap (MYR bn)
FY1E Market P/E
FY2E Market P/E
South Korea
Thailand
SET Index
Chg from previous day
T/O value (Bt bn / US$MM)
Chg from previous day
Exchange rate
O/N interbank (%)
Market cap (US$Bn)
Market cap (Bt bn)
FY1E Market P/E
FY2E Market P/E
24,595.85
-1.07%
80,388 / 10,369
0.01%
HKD7.75 / US$1
0.04
33,635.4
4,338
15.0
13.9
Malaysia
5,262.72
-0.12%
4,304 / 342
4.67%
Rp12,582 / US$1
6.51
418.2
5,261,914
20.3
17.9
Singapore
STI Index
Chg from previous day
T/O value (SGD MM / US$MM)
Chg from previous day
Exchange rate
O/N interbank (%)
Market cap (US$ bn)
Market cap (SGD bn)
FY1E Market P/E
FY2E Market P/E
HSI Index
Chg from previous day
T/O value (HK$ mn / US$MM)
Chg from previous day
Exchange rate
O/N interbank (%)
Market cap (HK$Bn)
Market cap (US$ Bn)
FY1E Market P/E
FY2E Market P/E
India
ASX200 Index
Chg from previous day
T/O value (AUD MM / US$MM)
Chg from previous day
Exchange rate
O/N interbank (%)
Market cap (AUD$ bn)
Market cap (US$ bn)
FY1E Market P/E
FY2E Market P/E
5,569.49
0.30%
3,938 / 5,063
12.86%
AUD0.78 / US$1
2.50
1550.1
1,206
18.6
18.0
US
3,358.96
-0.40%
12.19 / 13.76
4.82%
US$1.13 / EURO1
3.21
2937.5
2,603
14.3
12.8
S&P Index
Chg from previous day
T/O value (US$ bn)
Chg from previous day
O/N interbank (%)
Market cap (US$ bn)
FY1E Market P/E
FY2E Market P/E
2,002.16
-1.35%
38.44
17.73%
0.12
18357.1
16.7
14.8
Asia Analyst Focus List
Open Trades (as of January 29, 2015 close)
Country
India
Indonesia
Malaysia
OW
UW
Sector
OW
Tenaga
PT Ace Hardware Indonesia,
Tbk
Petronas Chemicals Group
Berhad
Globe Telecom
Consumer
PT Ace Hardware
Indonesia, Tbk
Lite-On Technology
Corporation
Beijing Capital International Airport Daelim Industrial
Oil and Natural Gas
Corporation
China Coal Energy - H
Shanghai Electric Group
Company Limited
Quality Houses
TAL Education Group
Wowprime
Samsung Electronics
ASUSTek Computer
Bharti Infratel Ltd.
Maxis Berhad
Air China – H
Hanjin Shipping Co Ltd
ICICI Bank
Philippines
Singapore
Taiwan
Sheng Siong Group
TSMC
Thailand
Siam Commercial Bank
Genting Singapore
Formosa Chemicals and Fibre
Corp
Autos
Financials
UW
Great Wall Motor Company Limited Daihatsu Motor (7262)
Bank of China - H
AMMB Holdings
Emerging Technology
Infrastructure and Industrials
Oil/Gas - Energy
Basic Materials
Power Utilities
Real Estate
SMID Caps
Technology
Telecommunications and Media
Transportation
Source: J.P. Morgan
Country relative performance in US$ (MSCI AC Asia Pacific ex JP)
Sector relative performance in US$ (MSCI AC Asia Pacific ex JP)
Source: J.P. Morgan, Bloomberg.
Source: J.P. Morgan, Bloomberg.
Last Four Weeks’ Additions
Company Name
Wowprime
BBG Ticker
2727 TT
Analyst Name
Leon Chik
Rating
UW
Add Date
12-Jan-15
Analyst Name
Leon Chik, CFA
Alex Yao
Scott YH Seo
Bharat Iyer
Alex Yao
Alvin Kwock
Aditya Srinath, CFA
Anne Jirajariyavech, CFA
Ebru Sener Kurumlu
Rating
UW
OW
OW
UW
UW
OW
OW
UW
OW
Removal Date
5-Jan-15
7-Jan-15
7-Jan-15
9-Jan-15
14-Jan-15
19-Jan-15
22-Jan-15
23-Jan-15
27-Jan-15
Add Price
290.50
Current Price
287.00
Price Target
246.00
Removal Date Price
111.2
220.18
117000
375
13.74
79.40
22800.00
28.50
9.91
Price Target
80.00
266.00
168000
325
15.00
105.00
30500
23
12
Source: J.P. Morgan, Bloomberg. Priced at Jan 29, 2015
Last Four Weeks’ Deletions
Company Name
VTech Holdings
Baidu.com
Hyundai Department Store
Coal India
Forgame Holdings Ltd
Chroma ATE
Indocement Tunggal Prakarsa
CH. Karnchang
Chow Tai Fook Jewellery Company Ltd.
Source: J.P. Morgan, Bloomberg.
BBG Ticker
303 HK
BIDU US
069960 KS
COAL IN
484 HK
2360 TT
INTP IJ
CK TB
1929 HK
Add Price
105.99
249.70
133500
356
16.66
81.40
24200
27
11
Japan stocks are not included at the Country Team level. Japan stocks may continue to appear in Sector Team selections. For details on selection process please see Asia AFL methodology.
AFL – Country team stocks
All stock and market returns shown in local currency (LC) terms, and reflect performance since date added to the AFL. All aggregates include cumulative returns since inception of the AFL on September 2,
2013. Country AFL total aggregate returns are shown in US$ terms. Aggregate US$ return spread uses the MSCI AC Asia Pacific ex JP Index as the benchmark.
Country/Company Name
ICICI Bank
Aggregate India performance
PT Ace Hardware Indonesia, Tbk
Aggregate Indonesia performance
Tenaga
Petronas Chemicals Group Berhad
Aggregate Malaysia performance
Globe Telecom
Aggregate Philippines performance
Sheng Siong Group
Genting Singapore
Aggregate Singapore performance
TSMC
Formosa Chemicals and Fibre Corp
Aggregate Taiwan performance
Siam Commercial Bank
CH. Karnchang
Aggregate Thailand performance
Add
Price
338
Current
Price
380
BBG Ticker Analyst Name
ICICIBC IN Seshadri K Sen, CFA
Country
India
Rating1 Add Date
OW
14-Nov-14
ACES IJ
Indonesia
UW
14-Nov-14
795
745
TNB MK
Ajay Mirchandani
PCHEM MK Samuel Lee, CFA
Malaysia
Malaysia
OW
UW
14-Nov-14
14-Nov-14
13.52
5.45
14.56
5.13
GLO PM
Princy Singh
Philippines UW
14-Nov-14
1690
1740
SSG SP
GENS SP
Princy Singh
Daisy Lu
Singapore OW
Singapore UW
14-Nov-14
14-Nov-14
0.64
1.05
0.74
1.08
2330 TT
1326 TT
Gokul Hariharan
Samuel Lee, CFA
Taiwan
Taiwan
OW
UW
14-Nov-14 135.00
14-Nov-14 68.50
143.50
69.60
SCB TB
CK TB
Anne Jirajariyavech, CFA
Felicia Tandiyono
Thailand
Thailand
OW
14-Nov-14 186.00
183.00
Princy Singh
Asia Pacific ex JP
Asia Pacific ex JP
Asia Pacific ex JP
1 - Rating and price targets reflect J.P. Morgan's fundamental long-term views.
2 – Spread over MSCI country indices except for Shanghai listed A-Shares which are spread over SHASHR.
3 - Spread over MSCI country index incorporates the impact of currency movements
Source: Bloomberg, J.P. Morgan. Priced at Jan 29, 2015 (prices and price-related data based on current day's close)
Price Abs. Perf Spread Over
Price Target End Since Add MSCI Country
Target1
Date
Date (%)
Index (%)2
440
9/30/15
12.4
7.9
68.3
68.7
520
12/31/15
-6.3
-10.7
28.1
27.6
21.00
2/29/16
7.7
8.9
4.00
12/31/15
-5.9
-4.7
33.4
39.4
1570.00
6/30/15
3.0
-2.6
-1.6
3.7
0.78
12/31/15
14.8
12.5
1.00
12/31/15
2.9
0.5
5.4
3.6
160.00
12/31/15
6.3
1.9
52.00
12/31/15
1.6
-2.8
33.6
34.2
228.00
12/31/15
-1.6
0.1
-28.8
5.7
2.3
3.3
-29.3
5.7
2.4
3.4
AFL – Sector team stocks
All returns shown in US$ terms, and reflect performance since date added to the AFL. All aggregates include cumulative returns since inception of the AFL on September 2, 2013. Aggregate US$ return spread
uses the MSCI AC Asia Pacific ex JP Index as the benchmark.
Company Name
Great Wall Motor Company Limited
Daihatsu Motor (7262)
Aggregate Autos performance
PT Ace Hardware Indonesia, Tbk
Aggregate Consumer performance
Lite-On Technology Corporation
Aggregate Emerging Technology performance
Bank of China - H
AMMB Holdings
Aggregate Financials performance
Beijing Capital International Airport
Daelim Industrial
Aggregate Infrastructure performance
China Coal Energy - H
Aggregate Basic Materials performance
Oil and Natural Gas Corporation
Aggregate Oil and Gas performance
TAL Education Group
Wowprime
Aggregate SMID-Caps performance
Samsung Electronics
ASUSTek Computer
Aggregate Technology performance
Bharti Infratel Ltd.
Maxis Berhad
Aggregate Telecom performance
Air China – H
Hanjin Shipping Co Ltd
Aggregate Transportation performance
Quality Houses
Aggregate Real Estate performance
Shanghai Electric Group Company Limited
Aggregate Utilities & Power Equipment performance
Average Sector OW (US$)
Average Sector UW (US$)
Aggregate Sector Performance
Add Current
Price
Price
36.8
44.0
1609
1584
Abs.
Perf
Since
Add
Date
(%)
19.6
-2.9
28.5
-9.5
-2.3
-0.3
20.7
13.0
-10.6
48.6
25.3
Sprea
d
Over
MSCI
Sector
Index
(%)2
19.5
-3.1
28.8
-12.4
-2.2
-11.1
21.7
7.4
-16.2
48.8
24.4
53000 12/31/15 -22.0
-22.8
53.0
4.00 12/31/15 -13.8
-18.1
300.00 3/31/16 -10.8
-47.6
38.00 12/31/15 -2.7
246.00 12/31/15 -0.2
42.6
1500000 12/31/15 14.5
275.00 12/31/15
1.5
12.4
330.00 12/31/15 24.6
5.10 12/31/15 -5.1
14.4
8.30 12/31/15 29.6
3800 12/31/15 -2.5
-3.3
4.00 12/31/15 -3.7
52.6
-14.4
-18.3
-6.1
-47.8
0.6
-2.9
42.7
8.0
-5.0
12.7
21.5
-8.2
14.4
21.3
-10.9
-2.9
-10.3
12.7
4.1
12.3
4.6
6.3
4.5
1.5
2.9
6.3
4.5
1.6
3.0
Price
Target
Price
End
Target1
Date
50.0 6/30/15
1270 12/31/15
BBG
Ticker
2333 HK
7262 JT
Analyst Name
Nick Lai
Akira Kishimoto
MSCI Sector Indices Rating1
Autos
OW
Autos
UW
Add Date
14-Nov-14
14-Nov-14
ACES IJ
Princy Singh
Consumer
UW
14-Nov-14
795
745
520 12/31/15
2301 TT
William Chen
Emerging Technology UW
14-Nov-14
38.10
39.00
38.00 6/30/15
3988 HK Katherine Lei
Financials
AMM MK Harsh Wardhan Modi Financials
OW
UW
14-Nov-14
14-Nov-14
3.85
6.52
4.35
6.30
4.30 12/31/15
6.00 12/31/15
694 HK
Infrastructure and
Industrials
Infrastructure and
Industrials
OW
14-Nov-14
6.05
7.58
13.10 12/31/15
UW
14-Nov-14
71200
55300
Metals & Mining
UW
14-Nov-14
4.92
4.24
ONGC IN Scott L Darling
Oil and Gas
UW
14-Nov-14
393.25
351.90
XRS US
2727 TT
SMID-Caps
SMID-Caps
OW
UW
14-Nov-14
12-Jan-15
32.06
290.50
31.18
287.00
005930 KS JJ Park
2357 TT Gokul Hariharan
Technology
Technology
OW
UW
14-Nov-14 1194000 1360000
14-Nov-14 321.00 334.50
BHIN IN Viju K George
MAXIS MK Princy Singh
Telecommunications
Telecommunications
OW
UW
14-Nov-14
14-Nov-14
298.95
6.92
373.60
7.10
753 HK
Corrine Png
117930 KS Corrine Png
Transportation
Transportation
OW
UW
14-Nov-14
14-Nov-14
5.47
6020
7.09
5840
Karen Li, CFA
000210 KS Sokje Lee
1898 HK
Daniel Kang
Leon Chik, CFA
Andre Chang, CFA
QH TB
Anne Jirajariyavech, Real Estate
CFA
UW
14-Nov-14
4.10
3.94
2727 HK
Boris Kan
UW
14-Nov-14
4.65
4.84
Utilities & Power
Equipment
2.80 6/30/15
1 - Rating and price targets reflect J.P. Morgan's fundamental long-term views.
2 – Spread over MSCI sector indices except for Shanghai listed A-Shares which are spread over SHASHR.
Source: Bloomberg, J.P. Morgan. Priced at Jan 28, 2015 (prices and price-related data based on previous day's close)
J.P Morgan’s Asia Analyst Focus List (AFL) is a selection of high-conviction stocks collaboratively chosen by each Country and Sector research team across
Asia-Pacific. The AFL includes Overweight- and Underweight-rated stocks, Overweight having superior outperformance prospects in a team’s universe over
the horizon of rating (6-12 months), and Underweight stocks having among the poorer relative performance prospects over the horizon of rating (6-12 months).
The aim is to have one Overweight and one Underweight idea from each Research team in the AFL. Analysts can add or delete recommendations at any time
and changes will be published, with the analyst’s rationale, on J.P. Morgan Markets. Please check J.P. Morgan Markets https://www.jpmorganmarkets.com for
the most up-to- date AFL at any time, or contact your J.P. Morgan representative.
The Analyst Focus List is not a model portfolio. Please refer to specific company research for the fundamental investment thesis for each stock included in this
list as well as the analysts’ complete views. If a stock is placed under research restriction, J.P. Morgan may remove the stock from the AFL pursuant to
applicable law and/or J.P. Morgan policy without any further notice. Important disclosures, including price charts for all companies under coverage for at least
one year, are available through the search function on J.P. Morgan's website https://jpmm.com/research/disclosures. Total returns exclude commissions. Past
results are not indicative of future performance.
Additional information available upon request.
Japanese stocks included in the Asia AFL are chosen according to the Asia AFL methodology above, independent of the Japanese Analyst Focus List (Japan
AFL). Japan stocks are not included at the Country Team level, but may appear in Sector Team selections. To view the Japan AFL and its methodology, click
here: Japan Analyst Focus List (Japan AFL)
Asia Pacific Equity Research
30 January 2015
Samsung Electronics
Watch GS6 and System LSI: Expect the stock to
break-through its historical high
Despite macro headwinds, all the divisions (except CE) fared better than our
expectations, and notably smartphone performance surprised on the upside on
the back of ASP hike thanks to increased sales of high-end products and
efficient expense management. SEC boosted its year-end dividend to
W19,500/share which implies its shareholder return reaches to W5.4 trillion
including share buyback and interim dividend.
 GS6 and System LSI are two key points to watch: We expect GS6 sellthrough to be much better than market expectations given lack of new
products from other handset vendors and full model changes at H/W in the
last two years. In addition, SEC will significantly increase its internal AP
and modem solutions, which we think will help a turnaround in System LSI
business. Of note, System LSI will be the single largest OP improvement in
2015. Refer to Figure 7 & 8 on page 14 for details.
 Sensitivity analysis to GS6 shipments: Our base case (50 million units)
suggests that GS6 will account for 55% of IM OP and 24% of total OP in
2015. If SEC could ship 60 million units, we estimate this would add W3
trillion OP and generate additional profit in relevant components. In this
scenario, we think IM division could see Y/Y earnings growth vis-à-vis our
current forecast of a 16% decline in IM division OP in 2015.
 Ongoing market share gain in memory operation: With Line 17 ramps
along with tech migration, we expect SEC to meaningfully outgrow overall
DRAM industry again. As a first mover in 3D NAND (V-NAND), SEC
should gain share in NAND market as well. Hence, memory division should
continue to generate sustainable earnings and support earnings growth even
in worst case scenario for smartphone business.
Overweight
005930.KS, 005930 KS
Price: W1,360,000
▲ Price Target: W1,700,000
Previous: W1,500,000
South Korea
Technology - Semiconductors
JJ Park
AC
(822) 758-5717
jj.park@jpmorgan.com
Bloomberg JPMA PARK <GO>
J.P. Morgan Securities (Far East) Ltd, Seoul
Branch
Jay Kwon
(82-2) 758-5725
jay.h.kwon@jpmorgan.com
J.P. Morgan Securities (Far East) Ltd, Seoul
Branch
Varun Rajwanshi
(91-22) 6157-3277
varun.rajwanshi@jpmorgan.com
J.P. Morgan India Private Limited
Price Performance
1,450,000
1,350,000
W
1,250,000
1,150,000
1,050,000
Jan-14 Apr-14
Jul-14 Oct-14 Jan-15
005930.KS share price (W)
KOSPI (rebased)
Abs
Rel
YTD
2.5%
0.7%
1m
2.3%
1.1%
3m
20.4%
20.9%
12m
6.2%
5.7%
 Street-high earnings estimates and PT: With meaningful upward
revisions to our earnings estimates, we raise our Dec.-15 PT to W1.7
million from previous W1.5 million. We believe GS6 and a turnaround in
System LSI will be key drivers for the share price.
Bloomberg 005930 KS, Reuters 005930.KS
(YE Dec, W bn)
FY13
FY14 FY15E FY16E
FY13 FY14 FY15E FY16E Date of Price
29 Jan 15
Sales
228,693
206,206 224,589 239,907 Sales growth
13.7% (9.8%) 8.9% 6.8% 52-Week range
W$1,495,000-1,078,000
Operating Profit
36,785
25,027 28,351 30,631 OP growth
26.6% (32.0%) 13.3% 8.0% Market Cap
W200,327BN
EBITDA
53,230
43,156 47,936 51,738 NP growth
28.6%
NM 7.1% 8.5% Market Cap
US$184,728MN
Net profit
29,821
23,054 24,696 26,799 Quarterly EPS (W)
1Q
2Q
3Q
4Q Share Out. (Com)
147MN
EPS
202,453
156,515 169,274 183,996 EPS (14)
50,813 41,932 28,055 35,716 Free float
72.5%
BPS (W)
1,018,443 1,126,312 1,284,856 1,444,795 EPS (15) E
33,389 44,581 47,369 43,995 Avg daily val
W335.0B
P/E (x)
6.7
8.7
8.0
7.4 EPS (16) E
38,727 46,551 51,560 47,158 Avg daily val (US$)
308.9MM
P/BV (x)
1.3
1.2
1.1
0.9 Price Target
1,700,000
Avg daily vol.
0.3MM shares
ROE (%)
22.0
14.6
14.0
13.5 Consensus PT
1,521,934
Dividend yield (%)
1.8
Net Debt
-43,335
-52,818 -66,120 -67,001 Difference (%)
11.7
Exchange Rate
1,084.45
Price Target End Date 31-Dec-15
Source: Company data, Bloomberg, J.P. Morgan estimates.
See page 24 for analyst certification and important disclosures, including non-US analyst disclosures.
J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that
the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a
single factor in making their investment decision.
www.jpmorganmarkets.com
Asia Pacific Equity Research
29 January 2015
Overweight
China Everbright International
0257.HK, 257 HK
Price: HK$11.46
Water M&A is the key catalyst in 2015
Price Target: HK$13.00
China Everbright Int'l is likely looking for water acquisition targets, in our
view, after its water subsidiary announced a share placement last week.
We see potential 10% upside to CEI’s earnings if Everbright Water geared
up its balance sheet for M&A. Water acquisitions will likely be the key
catalyst for CEI in 2015 as we believe awards of new waste-to-energy
projects will slow this year after a record year in 2014. Maintain OW
ahead of results announcement and potential acquisitions.
 Water M&A likely after CEW’s placement: China Everbright Water
(CEWL SP, not covered) has said it plans to raise US$85MM from
issuing 4.8% of new shares in a private placement at SGD0.94 per share.
After the placement, CEW’s net gearing will decline to 8% from 20%
and CEI’s shareholding in CEW will decline to 74% from 78%, on our
estimates. The strong balance sheet will allow CEW to add >1.5MM
tons (or 40%) of new sewage capacity, on our estimates, resulting in
potential 10% EPS upside for CEI. See our scenario analysis on page 4.
 2015 will likely be a slower WTE project win year: Typically, local
governments do not award many new waste-to-energy projects in the
last year of a Five Year Plan because it’s too late for them to meet the
year-end target. In 2010, for example, CEI only won one WTE project.
We believe 2015 will be a similar case. (YTD, CEI has won a 600-ton
WTE project in Sichuan). We assume CEI will add ~3,000 tons of new
WTE capacity this year, vs a record ~12,000 tons in 2014.
China
Utilities
Elaine Wu
AC
(852) 2800-8575
elaine.wu@jpmorgan.com
Bloomberg JPMA EWU <GO>
Boris Kan
(852) 2800-8573
boris.cw.kan@jpmorgan.com
J.P. Morgan Securities (Asia Pacific) Limited
Price Performance
12.5
11.5
HK$ 10.5
9.5
8.5
Jan-14
Apr-14
Jul-14
Oct-14
Jan-15
0257.HK share price (HK$)
HSCEI (rebased)
Abs
Rel
YTD
-0.9%
1.4%
1m
2.0%
-1.5%
3m
5.9%
-7.5%
12m
16.1%
-6.4%
 FY14 results to be inline: We expect CEI to report inline results on 31
March. Consensus is estimating 2014 EPS of 41 HK cents, which implies
a 25% yoy growth. At the results announcement, we will look for
management’s guidance on capex and capacity growth.
 Maintain OW. CEI is transforming into a diverse environmental play
with a listed subsidiary in water operations. Future spinoffs of other
assets may be possible when other segments scale up, in our view.
China Everbright International (Reuters: 0257.HK, Bloomberg: 257 HK)
HK$ in mn, year-end Dec
FY12A
FY13A
FY14E
FY15E
Revenue (HK$ mn)
3,410
5,320
7,180
9,830
Net Profit (HK$ mn)
881
1,325
1,874
2,561
EPS (HK$)
0.23
0.33
0.42
0.57
DPS (HK$)
0.06
0.09
0.12
0.16
Revenue growth (%)
(2.2%)
56.0%
35.0%
36.9%
EPS growth (%)
15.7%
40.1%
28.2%
36.6%
ROCE
8.9%
9.2%
9.8%
11.6%
ROE
12.3%
12.2%
13.3%
16.4%
P/E (x)
49.3
35.2
27.4
20.1
P/BV (x)
5.2
3.5
3.5
3.1
EV/EBITDA (x)
23.2
15.5
12.3
9.8
Dividend Yield
0.6%
0.8%
1.0%
1.4%
FY16E
11,066
3,100
0.69
0.19
12.6%
21.1%
12.0%
17.5%
16.6
2.7
8.8
1.7%
Company Data
Shares O/S (mn)
Market Cap (HK$ mn)
Market Cap ($ mn)
Price (HK$)
Date Of Price
Free Float(%)
3M - Avg daily vol (mn)
3M - Avg daily val (HK$ mn)
3M - Avg daily val ($ mn)
HSCEI
Exchange Rate
Price Target End Date
4,484
51,383
6,628
11.46
28 Jan 15
50.0%
7.86
89.28
11.5
1,2030.38
7.75
30-Jun-15
Source: Company data, Bloomberg, J.P. Morgan estimates.
See page 10 for analyst certification and important disclosures, including non-US analyst disclosures.
J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that
the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single
factor in making their investment decision.
www.jpmorganmarkets.com
Asia Pacific Equity Research
29 January 2015
Indonesia 101
EM 101
Equity Investors' Guide to ASEAN's Largest Economy
Head of ASEAN Strategy &
Indonesian Research
Banda Aceh
Aditya Srinath, CFA
Aceh
Medan
KALIMANTAN
North Sumatera
Riau
Pekanbaru
Padang
West Sumatera
SUMATERA
Riau Islands
Tanjungpinang
North Sulawesi
Manado
Gorontalo
East Kalimantan
Pontianak West Kalimantan
Jambi
Tanjung Selor
North Kalimantan
Bangka
Jambi Belitung Islands
Pangkalpinang
Palembang
Bengkulu
Bengkulu South Sumatera
DKI Jakarta
Lampung
Jakarta
Bandar Lampung Serang
Banten
Central Kalimantan
West
Palu
Sulawesi Central Sulawesi
Mamuju
Banjarmasin
South Sulawesi
South Kalimantan
Central Java
Ujungpandang
Bloomberg JPMA SRINATH <GO>
Sofifi
Samarinda
Palangkaraya
(62-21) 5291-8573
aditya.s.srinath@jpmorgan.com
North Maluku
Gorontalo
Manokwari
MALUKU
Maluku
Kendari
Southeast Sulawesi
Ambon
West Papua
PT J.P. Morgan Securities Indonesia
PAPUA
Jayapura
Papua
SULAWESI
Semarang
Surabaya
JAVA
Bali
Mataram
Denpasar
Bandung
East Nusa Tenggara
West Nusa Tenggara Kupang
BALI & NUSA TENGGARA
Yogyakarta
D.I. Yogyakarta
(62-21) 5291-8575
indra.cahya@jpmorgan.com
PT J.P. Morgan Securities Indonesia
Emerging Markets Equity Strategy
AC
(852) 2800-8599
adrian.mowat@jpmorgan.com
Bloomberg JPMA MOWAT <GO>
J.P. Morgan Securities (Asia Pacific) Limited
Rajiv Batra
AC
(91-22) 6157-3568
rajiv.j.batra@jpmorgan.com
Legend
ISLAND NAMES
Province names
Province capital cities
West Regions
Central Regions
East Regions
Indra Cahya
Adrian Mowat
West Java
East Java
AC
Bloomberg JPMA BATRA <GO>
J.P. Morgan India Private Limited
Kevyn H Kadakia
(91-22) 6157-3250
kevyn.h.kadakia@jpmorgan.com
:








High equity returns: 16% 10-year USD CAGR (20% Rp)
High economic growth: 6%oya 10 year average GDP growth
Jokowi (President) / Jusuf Kalla (VP): 2014 to 2019 term
Fourth most populous country in the world: 249 million
Third-largest democracy: 190 million voters
Jakarta is the world’s second-largest conurbation after Tokyo – c.27 million
Sixteenth-largest economy (GDP US$900billion) – member of G20
GDP has now grown by over 4%oya for 50 consecutive quarters since 1QFY02
 Rapid growth in working age population; 16% or 30million by 2030.
 Resource-rich (crude oil, gas, coal, tin, nickel, copper, gold and bauxite)
 Second highest level of biodiversity (Conservation International)
 The largest Muslim population, 300 distinctive ethnic groups, official language
is Bahasa Indonesia but has 742 different languages and dialects
Source: CIA World Fact Book, UNICEF, OECD, Conservation International, J.P. Morgan
J.P. Morgan India Private Limited
Sudarshan Ravi
(91-22) 6157-3276
sudarshan.ravi@jpmorgan.com
J.P. Morgan India Private Limited
Indonesia Economist
Sin Beng Ong
(65) 6882-1623
sinbeng.ong@jpmorgan.com
JPMorgan Chase Bank, N.A., Singapore
Branch
FY15e
population
(million)
145.14
55.27
18.72
15.34
FY13
GDP/capita
(IDR ‘000)
30,762
36,133
21,043
38,750
Islands
Java
Sumatera
Sulawesi
Kalimantan
Bali and Nusa
14.11
17,965
Tenggara
Papua
4.02
7,644
Maluku
2.85
36,927
Source: Central Bureau of Statistics
See page 53 for analyst certification and important disclosures, including non-US analyst disclosures.
J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the
firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in
making their investment decision.
www.jpmorganmarkets.com
Asia Pacific Equity Research
29 January 2015
Initiation
Overweight
Taiwan Paiho Limited
9938.TW, 9938 TT
Price: NT$49.70
Hidden champion of sports-leisure growth; initiate at
OW with PT of NT$65
Price Target: NT$65.00
We initiate coverage on Taiwan Paiho (Paiho) with an OW rating and a Dec15 PT of NT$65, implying 31% potential upside. Paiho is the largest touchfastener ODM manufacturer in the world, and also a leading producer of
shoelaces/webbings, supplying all the major sportswear brands and their
OEM/ODM producers. Trading at 13x 2015E P/E with a 20% EPS CAGR in
2014-16E, and a 3-4% dividend yield, the stock looks undervalued vs. other
Taiwan sportswear stocks (17x-23x P/E). Paiho is also a beneficiary of US dollar
strength, lower petrochemical prices, and the potential of Vietnam entering
TPP. The stock has risen over 20% in a month (vs. Taiex +3%) on management’s
positive guidance and sportswear peers’ re-rating, so there is risk of a pullback
during the seasonally weak 1Q15; we recommend buying on any weakness.
 Discounted valuation vs peers should be reversed. Our Dec-15 PT of NT$65
is based on 17x 2015E P/E, slightly above the high end of its five-year trading
range but at the low end of other major Taiwan sportswear stocks’ range.
Paiho’s growth is in line with many peers’, while profitability (gross margin of
34%-35% and OP margin of 17%-19% in 2014-16E) is the highest. We believe
its valuation discount to peers is due to its smaller market cap and failure in new
businesses. But as bigger peers’ valuations have become stretched and Paiho
has re-focused on its core businesses, we believe Paiho will re-rate.
 Stable growth from global sportswear demand with upside from new
products. We forecast Paiho’s sales to grow by 15%/14% in 2015/2016, due to
the solid 2015 sales outlook of major global sportswear brands such as Nike
(+11%), Addidas (+6%), and UnderArmour (+28%). Yet Paiho may surprise
the market if its new products – one-piece and four-way stretchable materials
for shoes – outpace our forecast of only 3% of total sales in 2015E.
Taiwan
Consumer, Cyclical and Property
Andre Chang, CFA
AC
(886-2) 2725-9872
andre.ch.chang@jpmorgan.com
J.P. Morgan Securities (Taiwan) Limited
Alvin Kwock
(852) 2800-8533
alvin.yl.kwock@jpmorgan.com
J.P. Morgan Securities (Asia Pacific) Limited
Leon Chik, CFA
(852) 2800-8590
leon.hk.chik@jpmorgan.com
J.P. Morgan Securities (Asia Pacific) Limited
Price Performance
50
45
NT$ 40
35
30
Feb-14
May-14
Aug-14
Nov-14
9938.TW share price (NT$)
TSE (rebased)
Abs
Rel
YTD
16.1%
13.9%
1m
20.0%
17.6%
3m
19.9%
11.5%
12m
58.8%
43.7%
 Sustainable, strong profitability in a seemingly mature sector. Even though
many people view the sports accessory market as mature and competitive, Paiho
has continued to invest 2.5% of its revenue in R&D p.a. to develop new
products with better profitability (e.g. molded hooks instead of touch-fasteners).
It has also cut back on 3C sales with less than a 20% gross margin so it can
refocus on the more profitable core products. We forecast its gross margin to
expand from 30.8% in 2013 to 33.7%/34.3%/35.2% in 2014/15/16.
Taiwan Paiho Limited (Reuters: 9938.TW, Bloomberg: 9938 TT)
NT$ in mn, year-end Dec
FY12A
FY13A
FY14E
Revenue (NT$ mn)
6,981
8,107
9,106
Net Profit (NT$ mn)
454
705
945
EPS (NT$)
1.58
2.37
3.17
DPS (NT$)
1.00
1.50
1.59
Revenue growth (%)
(14.4%)
16.1%
12.3%
EPS growth (%)
(20.6%)
49.7%
34.0%
ROCE
5.8%
8.1%
10.3%
ROE
6.8%
10.2%
12.1%
P/E (x)
31.4
21.0
15.7
P/BV (x)
2.3
2.1
1.8
EV/EBITDA (x)
4.1
6.2
5.6
Dividend Yield
2.0%
3.0%
3.2%
FY15E
10,470
1,131
3.80
1.90
15.0%
19.7%
11.2%
12.9%
13.1
1.6
5.3
3.8%
FY16E
11,884
1,350
4.53
2.26
13.5%
19.3%
12.5%
14.2%
11.0
1.5
4.4
4.6%
Company Data
Shares O/S (mn)
Market Cap (NT$ mn)
Market Cap ($ mn)
Price (NT$)
Date Of Price
Free Float(%)
3M - Avg daily vol (mn)
3M - Avg daily val (NT$ mn)
3M - Avg daily val ($ mn)
TSE
Exchange Rate
Price Target End Date
298
14,811
473
49.70
28 Jan 15
2.83
124.20
4.0
9510.92
31.29
31-Dec-15
Source: Company data, Bloomberg, J.P. Morgan estimates.
See page 25 for analyst certification and important disclosures, including non-US analyst disclosures.
J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that
the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single
factor in making their investment decision.
www.jpmorganmarkets.com
Asia Pacific Equity Research
29 January 2015
Overweight
TSC Auto ID Technology
3611.TW, 3611 TT
Price: NT$257.50
Geared for market share gain; raise PT to NT$370
▲ Price Target: NT$370.00
Previous: NT$340.00
TSC is the No.6 barcode printer maker globally, competing with Zebra and
Sato. We expect the upcoming market reshuffle to benefit Taiwan plays (as
we have seen before). We expect TSC to deliver 20% Y/Y earnings growth in
2015-16 on market share gain and better product mix. TSC is now trading at
14x 1-year forward PER, with ROE of 33-34% and dividend yield of 4%+.
Our new PT of NT$370 implies 40% potential upside.
 Huge market reshuffle: Honeywell Scanning & Mobility (HSM) will close
its acquisition of Datamax-O'Neil this quarter. After the acquisition,
Honeywell will become second largest player in the global barcode printer
market with around 11% market share, next only to Zebra (32%) (Fig 2).
There was another big industry structure change in 2014 after Zebra’s
acquisition of Motorola Solutions. Competition between Zebra and
Honeywell could be worth watching, as they are now the top two in the
ADC (automated data capture) market with comprehensive data input and
output solutions (Table 2). We expect SATO and Toshiba TEC to face more
pressure than smaller peers, given highly overlapping markets and lack of
end-to-end products.
 We see upside to Taiwanese players: Barcode printing has been a highly
fragmented market. It is easier for late-comers to penetrate into the existing
supply chain if there is any change. Therefore, HMS’s two acquisitions are
likely to add 10% addressable market to TSC/Godex. Notably, TSC market
share grew to ~5% in 2014 from ~3% in 2011, when Sato acquired Taiwanbased Argox to expand its mid- to low-end product lines. In addition, an
increasing outsourcing portion from tier one plays such as Toshiba TEC
could also add upside.
Taiwan
Technology - Hardware
William Chen
AC
(886-2) 2725-9871
william.chen@jpmorgan.com
Bloomberg JPMA WCHEN <GO>
J.P. Morgan Securities (Taiwan) Limited
James Wang
AC
(886-2) 2725-9875
james.p.wang@jpmorgan.com
J.P. Morgan Securities (Taiwan) Limited
Alvin Kwock
(852) 2800-8533
alvin.yl.kwock@jpmorgan.com
J.P. Morgan Securities (Asia Pacific) Limited
Price Performance
300
NT$
260
220
180
Feb-14
May-14
Aug-14
Nov-14
3611.TW share price (NT$)
TSE (rebased)
Abs
Rel
YTD
-0.2%
-1.8%
1m
1.0%
-0.5%
3m
19.5%
13.6%
12m
8.0%
-6.1%
 Revising up earnings forecast and PT to NT$370: We revised up 2015/16
earnings by 4/8% respectively to factor in market share gain and better
operating leverage. We expect TSC to report strong 4Q14 results with robust
top-line momentum (up 28% Y/Y and beat JPMe by 13%) and decent
margin (partially thanks to favorable forex trend). We believe 1Q15 sales
will retain double digit Y/Y growth thanks to TSC’s push into new markets
(SE Asia, SE China, India etc).
Bloomberg 3611 TT, Reuters 3611.TW
(Year-end Dec, NT$ mn)
Sales
Operating Profit
EBITDA
Pretax Profit
Adj. Net Profit (New TW GAAP)
New TW GAAP EPS (NT$)
Net Debt / Equity
Y/E BPS (NT$)
FY13 FY14E FY15E FY16E
2,104 2,441 2,831 3,173 New TW GAAP P/E
549
637
762
888 P/BV (x)
583
671
796
921 ROE(%)
586
645
766
896 Cash Div (NT$)
446
491
585
690 Quarterly EPS (NT$)
12.94 14.25 16.97 20.02 EPS (13)
(49.5%) (43.6%) (50.2%) (56.4%) EPS (14) E
40.34 46.20 52.91 60.71 EPS (15) E
FY13 FY14E FY15E FY16E Target Price (NT$)
19.7 18.1 15.2 12.9 Price Target End Date
6.4
5.6
4.9
4.2 Share Outstanding
35.7 32.9 34.3 35.2 Free float
6.4
9.3 10.3 12.2 Avg daily volume
1Q
2Q
3Q
4Q Avg daily val (USD)
3.37 3.46 3.42 2.80 Dividend Yield (2014)
3.29 3.56 3.60 3.80 QFII Holding (%)
3.55 4.34 4.59 4.50 Market Cap(USD)
370
30-Jun-15
34mn
25.0%
0.11mn
0.9mn
3.6%
281mn
Source: Company data, Bloomberg, J. P. Morgan estimates. Note: In Net Debt/Equity, NM means company has net cash
See page 9 for analyst certification and important disclosures, including non-US analyst disclosures.
J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that
the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a
single factor in making their investment decision.
www.jpmorganmarkets.com
Asia Pacific Equity Research
30 January 2015
▼ Neutral
Pidilite Industries
Previous: Overweight
Growth remains slow, and crude fall benefit priced in;
downgrade to Neutral
Price: Rs575.90
PIDI.NS, PIDI IN
▲ Price Target: Rs550.00
Previous: Rs440.00
PIDI’s 3Q EPS of Rs2.4 (+28% Y/Y) was below estimates primarily due to lowerthan-expected revenues. Volume growth of 8% Y/Y in 3Q was the lowest in
recent history, pointing to a sluggish demand environment. Comments from other
building product companies corroborate this view. Margin tailwinds exist, though,
given the sharp fall in crude price. However, we think the extent of the benefit
from this will be lower than what the market seems to be pricing in (the stock has
risen 60% in the past six months vs. the Sensex’s +14%). We factor in the benefit
of lower RM prices and raise our earnings estimates by 14-16% for FY16/17.
While we see PIDI as a high-quality company with monopolistic market share in
its consumer business, valuations at 38x FY16E P/E look demanding but the
scope for earnings disappointment looks limited. Downgrade to Neutral with a
new Mar-16 PT of Rs550.
 Demand recovery likely to take some time: PIDI’s volume growth
disappointed at 8% Y/Y in the Dec-Q (revenue growth was 12% Y/Y). This is
not at odds with the experience of other building product companies, which
have also pointed to weak demand trends in 3Q and a cautious outlook in the
near term. We think an improved macro sentiment is yet to translate into
increased spending and a demand recovery. We model revenue growth of 1517% in FY16/17 (9M FY15: 15%) factoring in some improvement in consumer
demand and pick-up in industrial activity from 2H FY16 onwards. Any
meaningful price cuts on the back of RM deflation, however, pose a risk to our
revenue growth forecasts.
 Margin expansion to follow with a lag: Over 50% of PIDI’s RMs are crude
oil derivatives, but price declines in these RMs (due to the fall in crude prices)
come with a lag and do not mirror the crude oil price fall given their respective
demand-supply dynamics. PIDI’s RM basket has seen a much lower correction
than has crude. Its key RM VAM has fallen by 25% from the peak last year and
the price outlook is stable. We expect the benefit of favorable input costs to flow
through in FY16/17 (350-400bp GM expansion). The 3Q gross margin fell 70bp
Y/Y on high-cost VAM inventory which will last until February.
India
Building Materials
Gunjan Prithyani
AC
(91-22) 6157-3593
gunjan.x.prithyani@jpmorgan.com
Bloomberg JPMA PRITHYANI <GO>
J.P. Morgan India Private Limited
Saurabh Kumar
(91-22) 6157-3590
saurabh.s.kumar@jpmorgan.com
J.P. Morgan India Private Limited
Leon Chik, CFA
(852) 2800-8590
leon.hk.chik@jpmorgan.com
J.P. Morgan Securities (Asia Pacific) Limited
Price Performance
550
Rs
450
350
250
Jan-14
Apr-14
Jul-14
Oct-14
Jan-15
PIDI.NS share price (Rs)
NIFTY (rebased)
Abs
YTD
4.9%
1m
10.6%
3m
39.4%
Rel
-3.2%
2.0%
28.7%
12m
101.9
%
55.6%
 Valuations: PIDI trades at 38x FY16E P/E, 2SD above the mean of the last
three years, despite growth moderation in the last two years. While valuations
have moved up across the entire building product space, PIDI’s looks expensive.
Pidilite Industries (Reuters: PIDI.NS, Bloomberg: PIDI IN)
Rs in mn, year-end Mar
FY13A
FY14A
FY15E
Revenue (Rs mn)
36,579
42,606
49,007
Revenue growth (%)
17.6%
16.5%
15.0%
EBITDA (Rs mn)
5,933
6,715
8,322
EBITDA Margin
16.2%
15.8%
17.0%
Net Profit (Rs mn)
4,223
4,563
5,519
EPS (Rs)
8.24
8.90
10.77
DPS (Rs)
2.60
2.70
3.77
P/E(x)
69.9
64.7
53.5
EV/EBITDA (x)
33.6
29.5
23.6
Source: Company data, Bloomberg, J.P. Morgan estimates.
FY16E
56,382
15.0%
11,554
20.5%
7,804
15.22
5.33
37.8
16.8
FY17E
65,639
16.4%
13,805
21.0%
9,320
18.18
6.36
31.7
13.8
Company Data
Shares O/S (mn)
Market Cap (Rs mn)
Market Cap ($ mn)
Price (Rs)
Date Of Price
3M - Avg daily vol (mn)
3M - Avg daily val (Rs mn)
3M - Avg daily val ($ mn)
NIFTY
Exchange Rate
Price Target End Date
508
292,355
4,761
575.90
29 Jan 15
0.53
263.58
4.3
8952.35
61.40
31-Mar-16
See page 9 for analyst certification and important disclosures, including non-US analyst disclosures.
J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that
the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single
factor in making their investment decision.
www.jpmorganmarkets.com
Asia Pacific Equity Research
29 January 2015
Underweight
Adani Power
ADAN.BO, ADANI IN
Price: Rs51.60
Not out of the woods yet: Maintain UW
▼ Price Target: Rs40.00
Previous: Rs46.00
Adani Power reported a December quarter net loss of Rs4.3bn in its maiden
quarter of operations at rated capacity of 9.24GW, at a reasonably high PLF of
79%. This was after the company accounted for Rs5.7bn of compensatory tariffs
(CT) across its projects during the quarter. Aggregate CT of Rs36.5bn has been
booked in the P&L so far and is a growing receivable in the balance sheet with no
cash receipt. CT is ~70% of company's current net worth. In our calculations,
FY16 operating cash flow will prove insufficient to cover interest and debt
repayment liability unless fresh CT bookings are backed by cash receipts, a partial
liquidation of past CT happens and/or the debt repayment schedule is pushed
back. Hearings on the CT matter in APTEL for the Mundra project are currently
suspended, creating uncertainty around the timeline for resolution of the legal
hurdle. The stock has underperformed Sensex by 23% over the last six months.
We maintain our UW with a Mar-16 PT of Rs40 (Rs46 earlier).
 Talking numbers. We arrive at EBITDA of Rs67.5bn in FY16, +12% YoY
(including CT), after assuming a 10% YoY increase in net generation and 11%
lower fuel cost/kWh and factoring in a sale of the transmission business to the
parent by end-FY15. After factoring in interest cost of Rs49bn (down 9% YoY)
and assuming EBITDA equals cash, the company would be left with ~Rs19bn
to meet debt repayment liabilities on gross debt of ~Rs440bn (as of Mar-15).
This is insufficient if one assumes a debt repayment tenure of 12 years
(implying Rs37bn in repayments/year). We estimate an out-of-consensus net
loss of Rs8.2bn in FY16 (consensus +Rs0.4bn), an improvement over FY15
(loss estimate of Rs20.2bn), but a reduction in the interest burden is a precondition to generating meaningful positive RoE.
 Breakdown of aggregate CT of Rs36.5bn. (a) Rs25bn pertaining to Mundra,
the Supreme Court is to judge whether the matter can be pursued under the
“change of law” and force majeure clauses; meanwhile, hearings in APTEL are
suspended; (b) Rs5.4bn pertaining to two units of Tiroda (1320MW) affected by
the non-availability of coal from the Lohara block; matter against Maharashtra
SEB in APTEL; and (c) Rs4.5bn CT due to a domestic coal shortage pursuant to
MERC/RERC orders.
 Upside risks. Even lower landed coal cost, INR appreciation, lower interest cost
sensitivities to risks discussed inside the report.
Adani Power (Reuters: ADAN.BO, Bloomberg: ADANI IN)
Rs in mn, year-end Mar
FY13A
FY14A
FY15E
Revenue (Rs mn)
67,794
149,383
199,282
Revenue growth (%)
65.8%
120.4%
33.4%
Adjusted Profit (Rs mn)
(21,542)
(18,617)
(20,156)
Adjusted profit growth (%)
2230.8%
(13.6%)
8.3%
Adjusted EPS (Rs)
(9.42)
(7.07)
(7.02)
BV per share (Rs)
17.94
22.78
16.39
ROE
(41.7%)
(34.4%)
(35.8%)
Adjusted P/E
NM
NM
NM
P/BV (x)
2.9
2.3
3.1
EV/EBITDA (x)
50.9
13.9
9.4
Source: Company data, Bloomberg, J.P. Morgan estimates.
FY16E
204,085
2.4%
(8,169)
(59.5%)
(2.84)
13.54
(19.0%)
NM
3.8
7.9
FY17E
205,674
0.8%
691
(108.5%)
0.24
13.78
1.8%
214.6
3.7
6.9
India
Electric Utilities
Sumit Kishore
AC
(91-22) 6157-3581
sumit.x.kishore@jpmorgan.com
Bloomberg JPMA KISHORE <GO>
J.P. Morgan India Private Limited
Deepika Mundra
(91-22) 6157-3582
deepika.mundra@jpmorgan.com
J.P. Morgan India Private Limited
Boris Kan
(852) 2800-8573
boris.cw.kan@jpmorgan.com
J.P. Morgan Securities (Asia Pacific) Limited
Price Performance
70
60
Rs 50
40
30
Jan-14
Apr-14
Jul-14
Oct-14
Jan-15
ADAN.BO share price (Rs)
BSE30 (rebased)
Abs
Rel
YTD
16.7%
8.8%
1m
19.9%
11.6%
Company Data
Shares O/S (mn)
Market Cap (Rs mn)
Market Cap ($ mn)
Price (Rs)
Date Of Price
Free Float(%)
3M - Avg daily vol (mn)
3M - Avg daily val (Rs mn)
3M - Avg daily val ($ mn)
BSE30
Exchange Rate
Price Target End Date
3m
12.1%
2.6%
12m
55.9%
12.1%
2,872
148,191
2,413
51.60
29 Jan 15
30.0%
4.83
221.76
3.6
2,9559.18
61.40
31-Mar-16
See page 9 for analyst certification and important disclosures, including non-US analyst disclosures.
J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that
the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single
factor in making their investment decision.
www.jpmorganmarkets.com
Asia Pacific Equity Research
29 January 2015
Underweight
AU Optronics
2409.TW, 2409 TT
Price: NT$18.20
Confirmation of another capacity expansion plan;
Reiterate UW
Price Target: NT$13.0
As we previewed on January 23, 2015, AUO rendered solid 4Q14 GP/OP
capturing consensus estimates, thanks to the strong TV panel pricing trend
and FX impact. Nevertheless, excluding the F/X factor, gross profit would
have been down Q/Q due to weak NB/tablet panel prices and lower UTR.
NP was also weaker than expected (first negative surprise since 1Q14) due
to higher tax expense associated with subsidiary investments. 1Q15
guidance appears mixed. Contrary to LGD, AUO raised 2015/2016 capex
meaningfully (more than doubled) and plans to expand capacity at its Gen
8 fabs. We believe OPM already peaked out in 4Q14; revenue/EBITDA
will decline in 2015. Reiterate UW.
 1Q15 guidance is mixed: AUO guided for large panel ASP to stay flat
due to product mix but expects shipment to decline by 5-15% Q/Q, this
decline appears larger than expected. On the other hand, S&M panel
shipment will decline by 5-10% Q/Q, which is slightly better than
expected. Although the market is generally positive about the “balanced”
supply/demand in 2015, the launch of three Gen 8 fabs from China in
2Q15 will make it difficult to raise panel prices like 2014, in our view.
 New capacity at Gen 8: Following the Gen 6 expansion, AUO
announced to raise Gen 8 capacity by 25K-30K/month at Gen 8 fabs in
Houli, Taiwan. Full-ramp is scheduled to be completed by 2Q16. AUO’s
total capacity will grow by 5% by 2016. Annual capex will rise
substantially from NT$17bn in 2014 to NT$40bn in 2015 and 2016 each.
The capacity expansion might add NT$6-7bn depreciation expense
annually starting from 2016, by our calculations.
 Maintain UW: We lower our earnings estimates to reflect the slightly
weaker than expected 1Q15 shipment guidance, and our revised forecasts
still point to a Y/Y decline in revenue/EBITDA. OPM peaked in 4Q14, by
our estimate. We maintain our Dec-15 price target at NT$13, based on
0.6x 2015E P/BV (one standard deviation below mid-cycle P/B). We
recommend investors sell into strength ahead of 2Q15.
Taiwan
Technology - Semiconductors
Narci Chang
AC
(886-2) 2725-9899
narci.h.chang@jpmorgan.com
Bloomberg JPMA NCHANG <GO>
J.P. Morgan Securities (Taiwan) Limited
Price Performance
20
16
NT$
12
8
Feb-14
May-14
Aug-14
Nov-14
2409.TW share price (NT$)
TSE (rebased)
Abs
YTD
12.3%
1m
10.3%
3m
37.9%
Rel
10.1%
7.9%
29.5%
12m
106.8
%
91.7%
Bloomberg 2409 TT, Reuters 2409.TW
(Year-end Dec, NT$ bn)
Sales
Operating Profit
EBITDA
Net profit
EPS
BPS (NT$)
P/E (x)
P/BV (x)
ROE (%)
Net Debt
FY13 FY14E FY15E FY16E
416.4 408.2 405.3 351.6 Sales growth
8.3
22.2 25.8 12.5 OP growth
71.1
78.4 75.8 55.0 NP growth
4.2
17.6 20.5
9.4 Quarterly EPS (NT$)
0.4
1.8
2.1
1.0 EPS (13)
17.1
18.8 20.1 20.3 EPS (14) E
40.7
9.9
8.6 18.6 EPS (15) E
1.1
1.0
0.9
0.9 Difference (%)
2.7
10.2 10.9
4.8 Price Target
108.3
60.7 24.4 23.8 Consensus PT
Price Target End Date
FY13
10.0%
(121.9%)
(107.7%)
1Q
-0.4
0.0
0.4
-27.4
13
18
31-Dec-15
FY14E
(2.0%)
167.3%
321.7%
2Q
0.4
0.4
0.6
FY15E
(0.7%)
16.5%
16.2%
3Q
0.3
0.8
0.6
FY16E
(13.3%)
(51.7%)
(54.1%)
4Q
0.1
0.6
0.5
Date of Price
52-Week range
Market Cap
Market Cap
Share Out. (Com)
Free float
Avg daily val
Avg daily val (US$)
Avg daily vol.
Dividend yield (%)
Exchange Rate
28 Jan 15
NT$19.15-8.71
NT$175,161MM
US$5,604MM
9,624MM
85.0%
NT$1.4B
45.8MM
89.9MM shares
0.0
31.26
Source: Company data, Bloomberg, J.P. Morgan estimates.
See page 12 for analyst certification and important disclosures, including non-US analyst disclosures.
J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that
the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a
single factor in making their investment decision.
www.jpmorganmarkets.com
Asia Pacific Equity Research
29 January 2015
Overweight
CapitaRetail China Trust
CRCT.SI, CRCT SP
Price: S$1.73
Another quarter of sterling tenant sales growth
▲ Price Target: S$1.80
Previous: S$1.75
CRCT’s FY14 results in-line, driven by Grand Canyon. Tenant sales
surpassed national average, on top of strong rent reversion. Aside from
continued rental growth and acquisitions, the stock is proxy to RMB
appreciation. Maintain OW with a higher PT (+3%) as we roll-over
estimates.
 Results in-line. CapitaRetail China Trust posted a 12.7% YoY rise
(+5.5% QoQ) in 4Q14 DPU to 2.48 S cts, bringing full-year DPU to
9.82 S cts (+8.9% YoY) and within our estimated 10.18 S cts. Full-year
contribution from CapitaMall Grand Canyon underpinned FY14 NPI
increase of 26% to RMB 643m, with a lower +9% on same-store basis.
 Tenant sales rose across all trade sectors, with 4Q14 YoY growth of
21% exceeding the preceding quarter’s +16%, which translates to fullyear increase of 16% (vs. +9% in FY13). Rent reversion for the quarter
continued to be strong at +20.6%, led by CapitaMall Wangjing
(+35.3%) and CapitaMall Saihan (+16.7%).
 Occupancy fell 1.7%pts QoQ to 95.9%, due to tenant mixing at
CapitaMall Wuhu (-13.5%pts to 73.9%) and closure of Zhongshan
Avenue leading to poorer accessibility to CapitaMall Minzhongleyuan (13.0%pts to 73.9%). We see further downside pressures at
Minzhongleyuan, but it comprises only 5% of our full-year projections.
 Ample debt headroom of RMB 1.1b for acquisitions based on our
estimates, assuming optimal gearing of 35% (from current 28.5%).
Aside from a rising pool of third-party vendors who have generally
lowered their asking prices, we expect CRCT to tap its sponsor pipeline.
 Valuation, key risks. CRCT is one of our top REIT picks, given its
strong DPU growth and P/B of 1.06x (vs. 1.32x mean). Key risks:
weakness in China economy. DPU estimates -3% on larger share base.
CapitaRetail China Trust (Reuters: CRCT.SI, Bloomberg: CRCT SP)
S$ in mn, year-end Dec
FY13A
FY14A
FY15E
Revenue (S$ mn)
160
203
214
Net property income (S$ mn)
103
132
146
Distributable Profit (S$ mn)
70
81
88
EPU (S$)
0.08
0.08
0.10
DPU (S$)
0.09
0.10
0.11
BVPU (S$)
1.48
1.63
1.62
Revenue growth (%)
4.9%
27.0%
5.2%
DPU growth (%)
(5.5%)
8.9%
8.1%
P/E (x)
22.5
20.7
17.4
P/BV (x)
1.2
1.1
1.1
Dividend Yield
5.2%
5.7%
6.2%
Gearing
32.6%
28.5%
28.7%
RNAV/Share
1.72
FY16E
221
151
93
0.10
0.11
1.61
3.4%
4.3%
16.6
1.1
6.4%
29.0%
-
FY17E
226
155
96
0.11
0.11
1.61
2.4%
2.8%
16.2
1.1
6.6%
29.3%
-
Singapore
REITs
Brandon Lee
AC
(65) 6882-7073
brandon.lee@jpmorgan.com
J.P. Morgan Securities Singapore Private
Limited
Cusson Leung
(852) 2800-8526
cusson.leung@jpmorgan.com
J.P. Morgan Securities (Asia Pacific) Limited
Terence M Khi
(65) 6882-1518
terence.ml.khi@jpmorgan.com
J.P. Morgan Securities Singapore Private
Limited
Price Performance
1.6
S$
1.4
1.2
Jan-14
Apr-14
Jul-14
Oct-14
Jan-15
CRCT.SI share price (S$)
FTSTI (rebased)
Abs
Rel
YTD
6.2%
4.8%
1m
7.8%
5.8%
Company Data
Shares O/S (mn)
Market Cap (S$ mn)
Market Cap ($ mn)
Price (S$)
Date Of Price
Free Float(%)
3M - Avg daily vol (mn)
3M - Avg daily val (S$ mn)
3M - Avg daily val ($ mn)
FTSTI
Exchange Rate
Price Target End Date
3m
7.1%
0.6%
12m
33.2%
21.6%
828
1,429
1,056
1.73
28 Jan 15
0.87
1.40
1.0
3419.15
1.35
31-Dec-15
Source: Company data, Bloomberg, J.P. Morgan estimates.
See page 7 for analyst certification and important disclosures, including non-US analyst disclosures.
J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that
the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single
factor in making their investment decision.
www.jpmorganmarkets.com
Asia Pacific Equity Research
30 January 2015
Dr. Reddy's Laboratories Limited
Price Target: Rs3,600.00
Dr Reddy’s (DRRD) reported results well ahead of our and Street expectations
primarily driven by growth in the US despite the high base of last year and
currency impact on Russia/CIS growth. Outlook on Russia and the observations in
the API facility were the key focus areas on the call. On the proprietary filing,
DRRD expects two filings in the next few months. We remain OW with a Mar-16
PT of Rs3600 with upside from monetization of its R&D investment in
proprietary filing over the next two years.
 3QFY15 results overview: 3QFY15 revenue at Rs38.4bn (+9% YoY) was
higher than consensus at Rs36.3bn, with positive growth in the US (+4% YoY
and 17% QoQ aided by new launches/market share momentum) offsetting the
decline in Russia/CIS (-10% YoY). EBITDA for the quarter at Rs9.8bn (25.5%
margin) was well ahead of consensus due to favorable impact of EM currency
movement on SG&A. PAT at Rs5.7bn was impacted by a higher tax rate but
aided by FX gain (Rs604Mn).
 US growth better than expected but focus on observations in API facility.
While we had expected US revenue to recover QoQ (highest ever sales at
$271Mn vs. $235Mn in 2Q), the 17% QoQ growth was driven by strong launch
performance and forward buying during the holiday season. Shipments of the
recently acquired Halbitrol ($60Mn revenue pa) started recently and should
contribute to revenue going forward. However, the delay in approvals due to
Form 483s at the Srikakulam API facility could be a near-term overhang given
key filings (Nexium, Diovan) from the facility. DRRD has provided a
comprehensive response on the observations to the agency in December and
will be providing updates. The company is also working on an alternate plan
(i.e., site switch, which took some time).
 Russia – Uncertainty due to currency. Management highlighted 27% growth
in local currency in Russia primarily driven by volumes aided by forward
buying given economic uncertainty. While DRRD did point to price
adjustments on some products, we could see these increases being reflected in
the current quarter (depending on currency movement). Currently, hedges are
RUB945Mn (@1.50 for FY15). We believe sustainability of underlying volume
growth would be key, given the volatile currency and expect flat growth in
Russia in FY15 (vs. -1% for 9MFY15). Management reiterated its focus on
emerging markets.
Source: Company data, Bloomberg, J.P. Morgan estimates.
REDY.BO, DRRD IN
Price: Rs3,363.30
Strong results despite concerns on Russia; progress
on Form 483s at API facility key for approvals
Dr. Reddy's Laboratories Limited (Reuters: REDY.BO, Bloomberg: DRRD IN)
Rs in mn, year-end Mar
FY13A
FY14A
FY15E
FY16E
Revenue (Rs mn)
116,266
132,170
147,915
165,250
Net Profit (Rs mn)
16,777
21,515
23,718
26,842
EPS (Rs)
98.44
126.04
138.95
157.25
Core EPS (Rs)
74.56
96.76
99.51
123.81
DPS (Rs)
14.95
17.94
19.78
22.38
Revenue growth (%)
20.1%
13.7%
11.9%
11.7%
EPS growth (%)
17.2%
28.0%
10.2%
13.2%
ROCE
15.9%
16.8%
15.6%
16.7%
ROE
19.5%
20.2%
16.9%
17.4%
Core P/E (x)
45.1
34.8
33.8
27.2
EV/EBITDA (x)
17.8
14.6
13.0
11.0
Dividend Yield
0.4%
0.5%
0.6%
0.7%
Overweight
FY17E
187,782
32,871
192.57
170.15
27.41
13.6%
22.5%
18.6%
19.8%
19.8
8.7
0.8%
India
Pharmaceuticals & Healthcare
Services
Neha Manpuria
AC
(91-22) 6157-3589
neha.x.manpuria@jpmorgan.com
Bloomberg JPMA MANPURIA <GO>
J.P. Morgan India Private Limited
Pinakin Parekh, CFA
(91-22) 6157-3588
pinakin.m.parekh@jpmorgan.com
J.P. Morgan India Private Limited
Sean Wu
(852) 2800-8538
sean.wu@jpmorgan.com
J.P. Morgan Securities (Asia Pacific) Limited
Price Performance
3,800
3,400
Rs
3,000
2,600
2,200
Jan-14
Apr-14
Jul-14
Oct-14
Jan-15
REDY.BO share price (Rs)
BSE30 (rebased)
Abs
Rel
YTD
4.8%
-3.1%
1m
7.1%
-1.2%
Company Data
Shares O/S (mn)
Market Cap (Rs mn)
Market Cap ($ mn)
Price (Rs)
Date Of Price
Free Float(%)
3M - Avg daily vol (mn)
3M - Avg daily val (Rs mn)
3M - Avg daily val ($ mn)
BSE30
Exchange Rate
Price Target End Date
Price Target (Rs)
3m
10.4%
0.9%
12m
26.7%
-17.1%
170
572,360
9,321
3,363.30
29 Jan 15
65.4%
0.36
1,171.72
19.1
2,9681.77
61.40
31-Mar-16
3,600.00
See page 9 for analyst certification and important disclosures, including non-US analyst disclosures.
J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that
the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single
factor in making their investment decision.
www.jpmorganmarkets.com
Asia Pacific Equity Research
30 January 2015
Overweight
Hyundai Steel Company
004020.KS, 004020 KS
Price: W65,300
4Q14 results - Beat, margins continue to expand on
merger benefits, construction sector picking up
▲ Price Target: W85,000
Previous: W80,000
Hyundai Steel’s (HSC) 4Q14 results beat our and Street estimates, ending FY14
with a strong sequential lift to its highest OP margins since 2008.At this point of
the cycle, we view HSC as strategically well positioned, with zero exposure to
falling raw material costs and captive domestic customers. With capex peaking,
we expect to see positive FCF and meaningful deleveraging. We reiterate our OW
rating.
 Strong 4Q14 OP, underlying NP impressive. Hyundai Steel reported 4Q14
OP of W486B, beating our and Street estimates (JPMe W417B). ASP remained
stable (-1% q/q) while shipments seasonally rose by 8% q/q. Mix improvement
to flat steel, lower RM costs and merger integration benefits led to an
unexpected surge in OPM to 11.4% in 4Q14 (9.4% in 3Q14, 6.9% in 4Q13),
posting three consecutive quarters of margin improvement. An FX loss of
W107B (parent basis) and still high interest expense dragged the bottom line
NP to W217B, still above Street expectations (W207B). Excluding the FX loss,
we estimate an impressive underlying NP of W293B. Positive FCF enabled net
gearing to decline further to 82% from 85% in 3Q14 (parent level).
 2015 guidance: +2% volume, improving product mix. HSC guided FY15
shipment target of 19.7MT (+1.5%), with flat steel at 12.8MT (+1.2%) and long
steel 6.9MT (+1.8%). At the briefing, management was upbeat on construction
demand (+3.4%) based on increased orders and government stimulus, and
expects its long steel sales guidance to be met mostly from domestic sales. Auto
demand is expected to rise 1.8% while shipbuilding should be flat. Meanwhile,
the company plans to shut down two of its plants in Pohang and Incheon, due to
lack of feasibility. HSC plans to compensate the lost capacity (340KT) by
increasing production in other plants. Meanwhile, the company is spending a
total of W974B to add 1mt specialty steel capacity (bar 600kt, wire rod 400kt)
and 500kt CRC capacity, targeting for commercial production in 2016. We
view this volume growth as value-added product backed by captive demand.
Given the underlying beat, we raise EPS forecasts by 15%/16% for 2015/16.
 Maintain OW, lift Dec-15 PT to W85,000. On the back of our upgraded
forecasts, we raise our PT to W85,000 (was W80,000) based on 0.7x P/B. We
expect HSC to deliver strong OP on the back of: 1) cost synergies post its
acquisition of Hyundai Hysco’s CRC business, and 2) an increase in high valueadded product shipment from its recent acquisition of Dongbu Special Steel. 3)
low raw material costs will likely continue to act as a tailwind. Stay OW rated.
Hyundai Steel Company (Reuters: 004020.KS, Bloomberg: 004020 KS)
FY12A
FY13A
FY14E
FY15E
Revenue (W bn)
14,893
13,533
16,762
15,654
Operating Profit (W bn)
889
763
1,491
1,465
Net Profit (W bn)
796
692
765
950
EPS (W)
9,335
5,937
6,562
8,147
BVPS (W)
115,232
113,168
119,230
126,876
P/E (x)
7.0
11.0
10.0
8.0
P/BV (x)
0.6
0.6
0.5
0.5
EV/EBITDA (x)
10.6
13.4
7.3
7.1
ROE
8.4%
6.0%
5.6%
6.6%
FY16E
16,372
1,589
1,035
8,880
135,256
7.4
0.5
6.6
6.8%
South Korea
Asia Metals and Mining
Daniel Kang
AC
(852) 2800 8570
daniel.kang@jpmorgan.com
Bloomberg JPMA KANG <GO>
J.P. Morgan Securities (Asia Pacific) Limited
Sangmyeong Kim
(82-2) 758 5710
sangmyeong.kim@jpmorgan.com
J.P. Morgan Securities (Far East) Ltd, Seoul
Branch
Waiyin Karen Li, CFA
(852) 2800-8561
waiyin.karen.li@jpmorgan.com
J.P. Morgan Securities (Asia Pacific) Limited
Price Performance
85,000
80,000
W
75,000
70,000
65,000
60,000
Jan-14
Apr-14
Jul-14
Oct-14
Jan-15
004020.KS share price (W)
KOSPI (rebased)
Company Data
Price (W)
Date Of Price
Market Cap (W bn)
Shares O/S (mn)
52-week Range (W)
KOSPI
Price Target (W)
Price Target End Date
65,300
29 Jan 15
7,611
117
81,200-61,100
1951.02
85,000
31-Dec-15
Source: Company data, Bloomberg, J.P. Morgan estimates.
See page 9 for analyst certification and important disclosures, including non-US analyst disclosures.
J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that
the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single
factor in making their investment decision.
www.jpmorganmarkets.com
Asia Pacific Equity Research
29 January 2015
Neutral
I.T Ltd.
0999.HK, 999 HK
Price: HK$2.02
3Q15 Update - Weak Sales Offset by Better than
Expected Gross Margins
▼ Price Target: HK$2.50
Previous: HK$2.70
IT reported a mixed 3Q15 update. SSSG was weaker than expected. However, we
increase our FY15 forecasts by ~5% due to higher than expected gross margin
expansion (~340bps in 3Q15 v JPMf ~14bps contraction). We remain cautious on
IT and see limited catalysts in the short term.
 Weaker than expected 3Q15 sales. 3Q15 SSSG for HK was -4.5% (v JPMf
2H15 +0.4%). SSSG for Mainland China was -0.2% (v JPMf 2H15 +3.4%).
SSSG for Japan was +13.5% (v JPMf 2H15 +14.1%). The company noted prodemocracy demonstrations negatively impacted SSSG in HK, while the
company continues to be negatively impacted by weakening spending
momentum.
 Better than expected gross margins in 3Q15. Group gross margins expanded
~340bps in 3Q15 (v JPMf 2H15 ~14bps contraction). The driver of the beat was
better than expected gross margin expansion in Mainland China (~670bps v
JPMf 2H15 ~50bps expansion) and Japan (~910bps v JPMf 2H15 ~100bps
contraction). The company attributed the gross margin uplift to reduction in
price discounting campaigns.
 Higher inventory turnover days a negative leading indicator. The company
disclosed that inventory turnover days at Nov-14 trended above that at Nov-13
due to lower than expected sales. We worry this may negatively impact
sales/gross margins going forward as the company will likely need to reduce
inventory in 4Q15.
 Retain Neutral. We change our earnings forecasts by +5%/-3%/-2% for
FY15/FY16/FY17 following this release. We continue to see limited share price
catalysts for I.T in the short term for the following reasons: (1) limited sales
growth catalysts near-term; (2) likelihood of greater difficulty generating gross
margin expansion, despite the better than expected gross margin expansion in
3Q15; and (3) ongoing operating cost pressure, particularly in HK.
I.T Ltd. (Reuters: 0999.HK, Bloomberg: 999 HK)
HK$ in mn, year-end Feb
FY13A
FY14A
Revenue (HK$ mn)
6,543
6,747
Net Profit (HK$ mn)
384
280
Diluted EPS (HK$)
0.30
0.22
Recurring EPS (HK$)
0.31
0.23
DPS (HK$)
0.03
0.10
Revenue growth (%)
14.0%
3.1%
Net Profit growth (%)
(18.6%)
(27.1%)
Recurring profit growth
(18.6%)
(27.1%)
EPS growth (%)
(18.8%)
(26.6%)
ROE
15.9%
10.5%
ROA
9.1%
5.4%
P/E (x)
6.7
9.1
P/BV (x)
1.0
0.9
EV/EBITDA (x)
4.8
4.4
Dividend Yield
1.5%
5.0%
FY15E
7,008
304
0.24
0.25
0.10
3.9%
8.7%
8.7%
8.9%
10.6%
5.2%
8.3
0.8
3.4
5.0%
FY16E
7,554
357
0.28
0.29
0.12
7.8%
17.4%
17.4%
17.4%
11.7%
5.9%
7.1
0.8
3.3
5.9%
FY17E
8,226
417
0.33
0.34
0.14
8.9%
16.8%
16.8%
16.8%
12.7%
6.6%
6.1
0.7
2.8
6.9%
Hong Kong
Consumer
Shen Li, CFA
AC
(852) 2800 8523
shen.w.li@jpmorgan.com
Bloomberg JPMA SHLI <GO>
Ebru Sener Kurumlu
(852) 2800-8521
ebru.sener@jpmorgan.com
George Hsu
(852) 2800-8559
george.hsu@jpmorgan.com
Dylan Chu
(852) 2800-8537
dylan.chu@jpmorgan.com
J.P. Morgan Securities (Asia Pacific) Limited
Price Performance
2.6
HK$
2.2
1.8
Jan-14
Apr-14
Jul-14
Oct-14
Jan-15
0999.HK share price (HK$)
HSI (rebased)
Abs
Rel
YTD
-9.8%
-14.0%
1m
-9.0%
-15.5%
Company Data
Shares O/S (mn)
Market Cap (HK$ mn)
Market Cap ($ mn)
Price (HK$)
Date Of Price
Free Float(%)
3M - Avg daily vol (mn)
3M - Avg daily val (HK$ mn)
3M - Avg daily val ($ mn)
HSI
Exchange Rate
Price Target End Date
Price Target (HK$)
3m
-18.5%
-24.2%
12m
1.0%
-11.3%
1,221
2,466
318
2.02
29 Jan 15
0.57
1.32
0.2
24,595.85
7.75
28-Feb-16
2.50
Source: Company data, Bloomberg, J.P. Morgan estimates.
See page 7 for analyst certification and important disclosures, including non-US analyst disclosures.
J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that
the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single
factor in making their investment decision.
www.jpmorganmarkets.com
Asia Pacific Equity Research
29 January 2015
Overweight
LG Display
034220.KS, 034220 KS
Price: W36,050
Sizable FCF along with prudent capex should
translate into higher shareholder returns
Price Target: W45,000
LGD reported robust 4Q OP of W626 billion (OPM: 8%), which is the
highest level since 2Q10 and very strong revenue of W8.3 trillion, well
above our and consensus numbers. This was attributable to strong mobile
display business, favorable FX and robust large-size panel prices. The
company announced a dividend payment of W500/share (1.4% dividend
yield), the first time since 2011.
 Optimistic guidance for 1Q15: Despite seasonal pullback in demand,
management delivered optimistic 1Q15 guidance, pointing to stable
large-size panel prices and well above normal seasonality. Also, ongoing
size migration in TV could provide upside risk to overall LCD TV area
growth, which is in line with our view.
 Meaningful increase in FCF along with prudent capex: LGD ended
up spending capex of W3.0 trillion, which is lower than its previous plan
in 2014 and guided to spend less than W3 trillion this year. Most capex
will be allocated to new technology (i.e., OLED). Hence, we expect its
FCF to significantly increase throughout our forecasting periods. Given
its favorable shareholder return policy, we cautiously expect LGD to
continue to increase dividend payments.
 Ongoing product mix improvement: We think LGD deserves a
premium over its peers given its value-added products such as 55” and
above TVs (UHD), OLED, IPS monitor, and No. 1 position to all Apple
products. We also expect LGD to start producing p-OLED for Apple
Watch from 1Q15, which will contribute to top-line and earnings
improvement. Nevertheless, LGD has significantly underperformed its
peers YTD.
 25% upside potential: With upward revisions to our earnings estimates
for FY15 and FY16, we maintain our high-end consensus earnings
estimates and PT. Given announcement of a dividend payment and
strong FCF outlook, we think the stock should gradually move up.
Bloomberg 034220 KS, Reuters 034220.KS
(YE Dec, W bn)
FY13
FY14
Sales
27,033
26,456
Operating Profit
1,163
1,357
EBITDA
4,998
4,850
Net profit
419
917
EPS
1,171
2,564
BPS (W)
30,176
32,426
P/E (x)
30.8
14.1
P/BV (x)
1.2
1.1
ROE (%)
4.0
8.2
Net Debt
1,579
1,817
FY15E
29,385
2,052
5,549
1,495
4,178
36,104
8.6
1.0
12.2
-71
FY16E
31,254 Sales growth
2,266 OP growth
5,626 NP growth
1,668 Quarterly EPS (W)
4,661 EPS (14)
40,265 EPS (15) E
7.7 EPS (16) E
0.9 Price Target
12.2 Consensus PT
-1,450 Difference (%)
Price Target End Date
Source: Company data, Bloomberg, J.P. Morgan estimates.
South Korea
Technology - Semiconductors
JJ Park
AC
(822) 758-5717
jj.park@jpmorgan.com
Bloomberg JPMA PARK <GO>
J.P. Morgan Securities (Far East) Ltd, Seoul
Branch
Jay Kwon
(82-2) 758-5725
jay.h.kwon@jpmorgan.com
J.P. Morgan Securities (Far East) Ltd, Seoul
Branch
Narci Chang
(886-2) 2725-9899
narci.h.chang@jpmorgan.com
J.P. Morgan Securities (Taiwan) Limited
Varun Rajwanshi
(91-22) 6157-3277
varun.rajwanshi@jpmorgan.com
J.P. Morgan India Private Limited
Price Performance
38,000
34,000
W 30,000
26,000
22,000
Jan-14
Apr-14
Jul-14
Oct-14
Jan-15
034220.KS share price (W)
KOSPI (rebased)
Abs
Rel
YTD
11.8%
10.0%
1m
6.2%
4.5%
FY13 FY14 FY15E FY16E Date of Price
NM
NM 11.1% 6.4% 52-Week range
27.5% 16.7% 51.2% 10.4% Market Cap
77.3% 119.0% 63.0% 11.6% Market Cap
1Q
2Q
3Q
4Q Share Out. (Com)
-229
716
990 1,088 Free float
797
912 1,315 1,153 Avg daily val
757 1,068 1,436 1,400 Avg daily val (US$)
45,000
Avg daily vol.
42,117
Dividend yield (%)
6.8
Exchange Rate
31-Dec-15
3m
11.8%
9.9%
12m
42.5%
40.2%
28 Jan 15
W$37,150-22,850
W12,899BN
US$11,947MN
358MN
56.0%
W33.6B
31.1MM
1.0MM shares
1.4
1,079.75
See page 16 for analyst certification and important disclosures, including non-US analyst disclosures.
J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that
the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a
single factor in making their investment decision.
www.jpmorganmarkets.com
Asia Pacific Equity Research
30 January 2015
Overweight
MakeMyTrip Ltd.
MMYT, MMYT US
Price: $26.88
Muted quarter due to one-off miss in H&P; structural
growth story intact; stay OW
▼ Price Target: $35.00
Previous: $37.00
MakeMyTrip (MMYT) reported a muted quarter with USD revenue growth
of 22.9% Y/Y primarily due to lower-than-estimated Hotels & Packages
(H&P) revenues. Management suggests that the weakness in H&P transaction
growth is primarily because of cancellations forced by financial issues faced by
SpiceJet and floods in Kashmir. These are one-time disruptions, which are
unlikely to sustain in the coming quarters, as per MMYT. We expect H&P
business to sustain its strong growth. Air Ticketing business continues to be strong
- MMYT increased its market share considerably from 13% to 15%, impressive in
our view. MMYT is making investments in its mobile platform, user interface &
building larger portfolio of listed hotels to cement its leadership in both (air
ticketing and H&P) segments, which is encouraging. We believe MMYT is a
structural growth story backed by expected improvement in macro
environment in India, favorable demographic profile, increasing
internet/smartphone penetration and rising disposable income. MMYT’s
leadership position places it well to gain disproportionately from online travel
booking market growth. However, quarterly aberrations cannot be ruled out due to
various disruptions. We stay OW on MMYT.
 3QFY15 revenues of USD 35.1 million modestly missed the consensus
estimate of USD36.3 million, but internals look good. The revenue (less
service cost) miss is solely driven by lower-than-estimated H&P transactions
growth due to the one-offs. Air Ticketing revenues came broadly in line with
expectations. MMYT registered its highest-ever quarterly market share gain in
Air Ticketing business in 3QFY15. The increase in capacity driven by Vistara,
Air Asia and Indigo should also boost revenue growth for MMYT. H&P
margins improved 100 bps Q/Q due to improved mix. Also, mgmt increased
constant-currency guidance modestly to 30-31% (from 28-30% prev). All these
factors suggest that there is no lasting change in MMYT’s growth profile.
 MMYT is making necessary investments to cement its leadership. The
company is making a number of changes to its user interface (particularly on
mobile) such as making mobile payment easier, providing Hindi interface,
allowing it to prioritize airlines, build customized packages (to drive the shift
from offshore to online). A solid mobile platform can prove instrumental in
gaining market share. Also, MMYT has materially increased its domestic
properties portfolio from 15,500 in Sep-14 to 20,000 properties in Dec-14. All
these initiatives should help MMYT maintain its leadership in both its target
markets.
 Loss of pricing power remains key risk. However, it is the risk for air
ticketing business primarily, which constitutes a diminishing proportion of total
revenues. Hotels business is unlikely to see pricing pressures given low
occupancy ratio, low concentration & high operating leverage for hotel owners.
India
Technology, Software & IT
services
AC
Viju K George
(91-22) 6157-3597
viju.k.george@jpmorgan.com
Bloomberg JPMA VGEORGE <GO>
Amit Sharma
(91-22) 6157 3598
amit.d.sharma@jpmorgan.com
J.P. Morgan India Private Limited
Price Performance
34
30
$
26
22
18
Jan-14
Apr-14
Jul-14
Oct-14
Jan-15
MMYT share price ($)
CCMP (rebased)
Abs
Rel
YTD
3.4%
5.5%
1m
2.6%
6.1%
3m
-4.0%
-5.6%
12m
21.9%
8.7%
Bloomberg MMYT US, Reuters MMYT
(Year-end Mar, USD mn)
Revenue
Operating Profit
EBITDA
Net profit (Reported)
EPS
P/E (x)
EV/EBITDA (x)
Cash
Equity
FY13
88,165
(18,062)
(14,309)
(27,589)
(0.74)
NM
12.6
36,501
101,300
FY14
106,429
(16,600)
(10,908)
(20,906)
(0.55)
NM
NM
38,012
161,585
FY15E FY16E
FY13
138,719 175,545 ROE(%)
-25.1
(12,758)
366 CORE ROIC(%)
(5,075)
7,756 Quarterly EPS ($)
1Q
(14,989) (1,300) EPS (15) E
(0.10)
(0.36)
(0.03) EPS (16) E
(0.02)
NM
NM Local
1M
NM
NM Abs. Perf.(%)
0.4%
62,066 77,937 Rel. Perf.(%)
3.9%
158,033 169,880 Target Price (31-Dec-15)
FY14 FY15E FY16E
-15.9 -09.4 -00.8 52-Week range
- Share Out. (Com)
2Q
3Q
4Q Market Cap(US)
(0.11) (0.09) (0.06) Free float
(0.03) (0.00)
0.02 Avg daily val ($)
3M
12M
Dividend Yield
(4.0%) 21.9%
Index
(5.6%) 8.7%
$ 35.00
36.12-19.06
42MN
US$1,125MN
60.6%
6.72MN
4637.99
Source: Company data, Bloomberg, J.P. Morgan estimates.
See page 9 for analyst certification and important disclosures, including non-US analyst disclosures.
J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that
the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a
www.jpmorganmarkets.com
single factor in making their investment decision.
Asia Pacific Equity Research
30 January 2015
Clients should contact representatives and execute transactions through a J.P. Morgan subsidiary or affiliate in their home
jurisdiction unless governing law permits otherwise.
Underweight
NTT Docomo (9437)
3Q expenses present 5% downside to FY15E EBITDA
We remain UW on NTT Docomo given 1) its core network quality issues, 2)
slowing industry revenue growth, 3) loss of quality share continuing to hit
margins at the CNE level (28.9% of voice revenue vs. 19.7% in 3Q13), and 4)
margin dilutive impact of fiber wholesale. We reduce our 2015/16 EBITDA
and net income numbers by 8%/16% despite growing top line on account of
higher communication and network charges and potential marketing expenses
off the new bundled plans. Our numbers imply that continued revisions will
weigh on the stock with 16% downside to FY15 earnings and 5% downside to
EBITDA.
 3Q operating weakness continues. The top line was in line with our
estimate of Street expectations (using 1/2Q actuals plus 3Q Street forecasts)
but EBITDA missed by 2% on higher CNE charges, SG&A and cost of
equipment. Communication Network charges continued to rise higher from
27.1% of voice sales in 2Q14 to 28.9% in 3Q14 (see Figure 1). The beat
came from operating income, which rose on account of lower depreciation,
which the company attributed to ‘a scrutinization of the write off of network
equipment’. 9M operating income fell by 14.7% yoy and came in at ¥587bn,
compared to the Nikkei’s estimate of ¥560bn and our estimate of street
expectations at ¥558bn. 93%/91% of FY14 guidance/ consensus operating
income and 91%/90% of FY14 guidance/ consensus net income have
already been achieved in 9M14 (see Table 1).
 2015 view. We expect higher top-line growth to be clogged by growing
CNE charges as a percentage of voice revenue and potential promotional
expenses related to the new bundles. Our revised numbers illustrate 16%
downside for FY15 earnings and 5% downside for EBITDA. We expect
EBITDA margin to drop to 30%/29% for FY14/FY15 from 34% in 2013.
 Remain UW. We stay negative on the stock owing to: (1) The impact of
fiber wholesale that is expected to be margin dilutive. DoCoMo will
compete on a variable cost basis vs. KDDI operating on a fixed cost basis,
putting DCM at a cost disadvantage, in our view. (2) Consistent market
share loss due to a lack of 3/4G network quality leadership. (3) The highest
valuation in the space, despite negative sales/EBITDA/net profit revisions.
NTT Docomo (Reuters: 9437.T, Bloomberg: 9437 JT)
2012/3
2013/3
Sales (¥ mn)
4,240,003
4,470,122
Operating Profit (¥ mn)
874,460
837,180
Pretax Profit (¥ mn)
876,958
841,658
Net Profit (¥ mn)
463,912
495,633
EPS (¥)
111.9
119.5
P/E (x)
17.7
16.5
P/BV (x)
1.6
1.5
EV/EBITDA (x)
5.4
5.5
Source: Company data, Bloomberg, J.P. Morgan estimates.
2014/3
4,461,203
819,199
833,049
464,729
112.1
17.6
1.5
5.4
2015/3 E
4,446,785
641,479
647,061
389,442
98.5
20.1
1.4
6.3
2016/3 E
4,520,681
620,850
625,779
376,354
95.2
20.8
1.4
6.3
9437.T, 9437 JT
Price: ¥1,977
Price Target: ¥1,650
Japan
Wireless Services
James R. Sullivan, CFA
AC
(65) 6882-2374
james.r.sullivan@jpmorgan.com
Bloomberg JPMA SULLIVAN <GO>
J.P. Morgan Securities Singapore Private
Limited
Jesper J Koll
(81-3) 6736-8600
jesper.j.koll@jpmorgan.com
JPMorgan Securities Japan Co., Ltd.
Namita Mitla
(91-22) 6157-3301
namita.mitla@jpmorgan.com
J.P. Morgan India Private Limited
Price Performance
2,000
¥
1,800
1,600
1,400
Jan-14
Apr-14
Jul-14
Oct-14
Jan-15
9437.T share price (¥)
TOPIX (rebased)
Abs
Rel
YTD
11.8%
11.4%
1m
11.0%
11.8%
Company Data
Price (¥)
Date Of Price
Market Cap (¥ bn)
Shares O/S (mn)
52-week Range (¥)
TOPIX
DPS (¥)
Dividend Yield
ROE
Price Target (¥)
Price Target End Date
3m
11.1%
-0.1%
12m
19.7%
7.2%
1,977
29 Jan 15
8,629.61
4,365
2,020-1,515
1,413.58
54.18
2.7%
7.0%
1,650
31-Dec-15
See page 10 for analyst certification and important disclosures, including non-US analyst disclosures.
J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that
the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single
factor in making their investment decision.
www.jpmorganmarkets.com
Asia Pacific Equity Research
29 January 2015
Neutral
POSCO
005490.KS, 005490 KS
Price: W273,500
FY14 results - Miss, FY15 OP guidance at risk of
downgrade
▼ Price Target: W300,000
Previous: W330,000
POSCO FY14 results disappointed. Hit by additional tax payments, FX
and equity losses, the FY14 NP more than halved. 4Q14 OP surprised us
by sequentially falling during the traditional strong 4Q season. At an
annualized W3.0T, we believe POSCO’s FY15 OP target of W4.0T will
likely be cut. Given likely Street downgrades and weak steel markets, we
see further downside pressure on POSCO shares in the near term.
 FY14 NP miss, OP disappoints. POSCO announced preliminary FY14
reported NP of W626B (consensus W1.38T, JPM W1.32T), -55% y/y.
This implied a 4Q14 loss of W193B. Full result details will be released
next week on February 5, but we believe the bottom line was hit by: a)
an additional tax payment following government investigation
(Yonhap), b) losses from equity investments, and c) foreign exchange
losses on USD loans. FY14 OP of W3.2T (Street W3.36T), +7.3% y/y,
on Sales of W65.1T (guidance W65.5T), +5.2%, suggests OPM held
broadly flat at 4.9% (4.8% 2013). The implied 4Q OP of W765B
(consensus W922B, JPM W902B) was disappointing given that 4Q is
seasonally a stronger quarter than 3Q. Pleasingly, final DPS were
maintained at W6k/share.
 FY15 OP guidance at risk. We suspect strong Chinese steel exports in
4Q14 both into Korea (4Q14 +3% q/q) and overall (4Q14 +17% q/q)
primarily into the Asian region, negatively impacted POSCO’s OP
margins (4.6% in 4Q14 versus 5.4% 3Q14). Of greater concern,
POSCO’s 4Q14 OP implies an annualized OP of W3.1T and with 1Q15
cash spreads contracting, lower oil prices that should reduce Myanmar’s
gas contributions, we believe POSCO will cut its current FY15 OP
guidance of W4.0T. Its mid-term 2016 target of W5.0T will also be at
risk. Following the weaker-than-expected result, we trim EPS by 9% and
8% in 2015E and 2016E and expect Street downgrades to follow.
 Shares to face near-term downside pressure. POSCO shares have
already corrected sharply in recent months but given the disappointing
FY14 results, we expect its shares to remain under downside pressure in
the near term. Given our earnings cuts and ahead of its results briefing
next week (5 Feb 2015), we cut our PT to W300,000 (was W330,000).
POSCO (Reuters: 005490.KS, Bloomberg: 005490 KS)
FY12A
FY13A
Revenue (W bn)
63,604
61,865
Operating Profit (W bn)
3,653
2,996
Net Profit (W bn)
2,462
1,376
EPS (W)
28,239
15,787
BVPS (W)
452,523
482,251
P/E (x)
9.7
17.3
P/BV (x)
0.6
0.6
EV/EBITDA (x)
8.7
ROE
6.1%
3.4%
FY14E
65,098
3,213
626
7,181
482,112
38.1
0.6
7.1
1.5%
FY15E
65,491
3,381
1,735
19,894
494,685
13.7
0.6
6.6
4.1%
FY16E
67,031
3,651
2,014
23,105
510,469
11.8
0.5
6.0
4.6%
South Korea
Asia Metals and Mining
Daniel Kang
AC
(852) 2800 8570
daniel.kang@jpmorgan.com
Bloomberg JPMA KANG <GO>
J.P. Morgan Securities (Asia Pacific) Limited
Sangmyeong Kim
(82-2) 758 5710
sangmyeong.kim@jpmorgan.com
J.P. Morgan Securities (Far East) Ltd, Seoul
Branch
Waiyin Karen Li, CFA
(852) 2800-8561
waiyin.karen.li@jpmorgan.com
J.P. Morgan Securities (Asia Pacific) Limited
Price Performance
380,000
340,000
W
300,000
260,000
Jan-14 Apr-14
Jul-14
Oct-14
Jan-15
005490.KS share price (W)
KOSPI (rebased)
Company Data
Price (W)
Date Of Price
Market Cap (W bn)
Shares O/S (mn)
52-week Range (W)
KOSPI
Price Target (W)
Price Target End Date
273,500
29 Jan 15
23,846
87
363,500263,000
1951.02
300,000
31-Dec-15
Source: Company data, Bloomberg, J.P. Morgan estimates.
See page 8 for analyst certification and important disclosures, including non-US analyst disclosures.
J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that
the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single
factor in making their investment decision.
www.jpmorganmarkets.com
Asia Pacific Equity Research
30 January 2015
Neutral
PTT Exploration & Production
PTTE.BK, PTTEP TB
Price: Bt113.00
Cost reduction - a challenge
Price Target: Bt100.00
PTTEP's management update post FY14 earnings did little to re-assure us that
the company is able to lower cost partly owing to high cost fields from legacy
deals. Impairment risk on Mozambique looks limited for now, but there was
no visibility on FID timing. We think PTTEP looks unlikely to reach its
600kb/d production target by 2020 and will do its best to sustain the current
dividend level. While the shares seems to price in low oil prices and the
balance sheet remains unconstrained, we see further downside risks should oil
prices fall below US$40/bl and remain Neutral.
 Limited potential for cost and capex reduction due to legacy deals.
DD&A costs for Montara still remain high at US$65-70/bbl despite
impairment. Given full-year operations for Zawtika and recently bought
Hess assets, DD&A is likely to remain elevated in 2015-16. Management is
cautious on benefits from cost-reduction drive and has not guided for
potential savings yet. Scope for capex reduction for 2015 remains limited as
most of the capex is likely to be spent to maintain production profile and the
flexible portion of the 5-year capex budget of US$24bn, provisioned for
development projects, is rather back-loaded in 2017-19. Given 1P reserve
life of only c6 years and declining output, management may be compelled
to invest in development projects and acquire producing assets, despite
potentially lower hurdle rates.
 Mozambique assets not impaired yet. Management noted that
Mozambique assets (cUS$2.5bn on book) impairment triggers would
mainly be oil price outlook and change in production profile. The FID is
expected in late-2015 or early-2016 with two 5MMTPA trains in 2020-21.
Montara and Mariana Oil Sand projects may be subjected to further
impairment depending on oil price outlook and change in production profile
respectively. As PTTEP already held interest in Hess Thai assets bought in
Apr-14, management sees limited scope for impairment.
 Maintain Neutral with Dec-15 PT of Bt100/sh, based on our DCF
valuation. Downside risks are value-destructive M&As and potential
impairment for Mozambique assets. Key upside risks include a surge in oil
prices and better-than-expected production output.
PTT Exploration & Production (Reuters: PTTE.BK, Bloomberg: PTTEP TB)
Bt in mn, year-end Dec
FY12A
FY13A
FY14A
FY15E
Revenue (Bt mn)
212,681
225,163
247,929
187,944
Net Profit (Bt mn)
57,316
55,967
21,490
28,112
EPS (Bt)
14.44
14.10
5.41
7.08
DPS (Bt)
5.70
6.00
4.50
3.00
Revenue growth (%)
25.3%
5.9%
10.1%
(24.2%)
EPS growth (%)
7.1%
(2.4%)
(61.6%)
30.8%
ROCE
16.6%
12.6%
10.1%
5.2%
ROE
24.1%
16.7%
13.8%
6.7%
P/E (x)
7.8
8.0
20.9
16.0
P/BV (x)
1.4
1.2
1.1
1.0
EV/EBITDA (x)
3.3
3.2
2.7
3.8
Dividend Yield
5.0%
5.3%
4.0%
2.7%
FY16E
181,542
27,092
6.82
3.00
(3.4%)
(3.6%)
4.9%
6.2%
16.6
1.0
4.1
2.7%
Thailand
Exploration & Production
Scott L Darling
AC
(852) 2800 8578
scott.darling@jpmorgan.com
Bloomberg JPMA DARLING <GO>
J.P. Morgan Securities (Asia Pacific) Limited
Sumedh Samant
(66-2) 684 2682
sumedh.y.samant@jpmorgan.com
JPMorgan Securities (Thailand) Limited
Anne Jirajariyavech, CFA
(66-2) 684-2684
anne.x.jirajariyavech@jpmorgan.com
JPMorgan Securities (Thailand) Limited
Price Performance
200
180
Bt
160
140
120
100
Jan-14
Apr-14
Jul-14
Oct-14
Jan-15
PTTE.BK share price (Bt)
SET (rebased)
Abs
Rel
YTD
5.6%
-1.4%
1m
-1.7%
-7.6%
Company Data
Shares O/S (mn)
Market Cap (Bt mn)
Market Cap ($ mn)
Price (Bt)
Date Of Price
Free Float(%)
3M - Avg daily vol (mn)
3M - Avg daily val (Bt mn)
3M - Avg daily val ($ mn)
SET
Exchange Rate
Price Target End Date
3m
-21.3%
-22.8%
12m
-28.0%
-52.8%
3,970
448,608
13,774
113.00
29 Jan 15
8.52
1,043.26
32.0
1586.40
32.57
31-Dec-15
Source: Company data, Bloomberg, J.P. Morgan estimates.
See page 7 for analyst certification and important disclosures, including non-US analyst disclosures.
J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that
the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single
factor in making their investment decision.
www.jpmorganmarkets.com
Asia Pacific Equity Research
30 January 2015
Overweight
SK Telecom
017670.KS, 017670 KS
Price: W284,000
2015 catalysts: Significant earnings growth, soft
dividend hike, share buyback, SK Planet
Price Target: W340,000
SKT posted in-line 4Q results. Management provided upbeat ARPU
growth guidance of 4-5% and indicated potential dividend upside. We
believe SKT is well positioned to post robust earnings growth (+21% OP
growth) in 2015. We also expect dividend per share to rise from W9,400 in
2014 to W10,000 in 2015, equivalent the superior 2015E dividend yield of
3.5% among Korea telcos. We maintain our OW rating and SoTP-based
PT of W340,000, with slight downward earnings adjustments offset by
FCF increases after 2016E.
South Korea
Wireless Services
Stanley Yang
AC
(82-2) 758-5712
stanley.yang@jpmorgan.com
Bloomberg JPMA YANG <GO>
J.P. Morgan Securities (Far East) Ltd, Seoul
Branch
Sally Yoo
 4Q in line. SKT’s consolidated OP of W490B was in line with our
expectation. We note tighter-than-expected marketing costs control (-1.9%
q/q) relative to competitors in 4Q.
(82-2) 758-5383
sally.yoo@jpmorgan.com
 Significant earnings growth momentum in 2015. With our earnings
forecasts fine-tuned, we forecast 21% OP growth in 2015 based on 3%
ARPU growth and the decline of the marketing costs to sales ratio from
26% in 2014 to 24% in 2015.
James R. Sullivan, CFA
 Potential dividend hike and share buyback. Management commented
that it will consider potential dividend upside and share buybacks. The
possibility of these two shareholder-friendly strategies is high, in our
view. We expect dividend per share to rise from W9,400 to W10,000 in
2015. The dividend to be paid from SK Hynix will likely transfer to
SKT shareholders, in our view.
Price Performance
 SK Planet remains a “call option value,” maintain OW. We continue
to be positive on the stock thanks to enhancing earnings visibility in the
future and dividend upside. The value-enhancing strategy of 100%owned subsidiary SK Planet remains a potential share price catalyst, in
our view.
SK Telecom (Reuters: 017670.KS, Bloomberg: 017670 KS)
Year-end Dec
FY13A
FY14E
Revenue (W bn)
16,602
17,164
Operating Pofit (W bn)
2,017
1,825
Net Profit (W bn)
1,610
1,799
EPS (W)
22,690
25,365
Revenue Growth
2.9%
3.4%
Operating profit growth
16.6%
(9.5%)
EPS growth
41.7%
11.8%
ROE
8.8%
7.7%
P/E (x)
12.5
11.2
P/BV (x)
1.6
1.5
EV/EBITDA (x)
5.7
5.8
DPS (W)
9,400
9,400
Dividend Yield
3.3%
3.3%
Source: Company data, Bloomberg, J.P. Morgan estimates.
FY15E
17,615
2,208
2,105
29,669
2.6%
21.0%
17.0%
9.0%
9.6
1.4
5.2
10,000
3.5%
FY16E
17,993
2,352
2,231
31,451
2.1%
6.5%
6.0%
8.9%
9.0
1.3
5.0
10,500
3.7%
J.P. Morgan Securities (Far East) Ltd, Seoul
Branch
(65) 6882-2374
james.r.sullivan@jpmorgan.com
J.P. Morgan Securities Singapore Private
Limited
300,000
260,000
W
220,000
180,000
Jan-14
Apr-14
Jul-14
Oct-14
Jan-15
017670.KS share price (W)
KOSPI (rebased)
Abs
Rel
YTD
6.0%
4.2%
1m
4.4%
3.2%
Company Data
52-week Range (W)
Market Cap (W bn)
Market Cap ($ mn)
Shares O/S (mn)
Fiscal Year End
Price (W)
Date Of Price
Free Float(%)
3M - Avg daily vol (th)
3M - Avg daily val (W bn)
3M - Avg daily val ($ mn)
KOSPI
Exchange Rate (W/$)
Price Target (W)
Price Target End Date
3m
5.4%
5.9%
12m
31.2%
30.7%
303,000192,000
22,932
21,146
81
Dec
284,000
29 Jan 15
55.3%
142.0
39.4
36.3
1,951
1,084
340,000
30-Dec-15
See page 9 for analyst certification and important disclosures, including non-US analyst disclosures.
J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that
the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single
factor in making their investment decision.
www.jpmorganmarkets.com
Asia Pacific Equity Research
Advanced Info Services (ADVANC
TB)
2015 Outlook: Higher Capex and tepid growth. Time to
shift the debate from regulation to data economics
29 January 2015
Underweight
Price: Bt251.00
29 Jan 2015
Price Target: Bt198.00
PT End Date: 30 Jun 2015
AIS management hosted an “AIS Vision 2015” event this afternoon, where they provided an overview of the
business plan for 2015. Capex guidance of minimum THB40B v/s consensus estimates of THB30B does not
come as a surprise to us. While lack of more spectrum has some role to play, rapidly rising data usage (over
200% YoY) is the key driver. Revenue growth expectations for the industry seem tepid, with management
expecting 3%-4% in 2015. Spectrum auctions in July this year now seem a consensus view, so any potential
delays could lead to negative surprises. Going forward, we see data economics to set the tone for earnings and
stock price, especially post the spectrum auction event. Current rates of data usage growth point to further
increase in capex intensity, which will also have implications for network opex. We remain cautious and
maintain our UW rating on AIS.

Time to shift the debate from regulatory environment to data economics: Investor focus over the last
12-18 months has been centered around the regulatory environment and timing of spectrum auctions.
Consensus seems to be baking in a July-15 auction scenario. We believe post auctions, the debate will move
to economics of data. Data usage in Thailand is rising rapidly, as 3G network is rolled out and smart-phone
adoption increases. However, data revenue growth is significantly lagging usage growth (~200% to 400%
y/y as noted by AIS), implying compression in data unit pricing. This is likely to drive capex higher and
rising competitive intensity (potentially led by True Corp) could keep data pricing under check. CAPEX
guidance of >Bt 40bn for 2015, is already significantly higher than current consensus estimates of Bt 30bn.
AIS has laid out this capex to expand wireless network, fixed broadband service and digital services.

Growth outlook for 2015 looks tepid: AIS expects wireless industry revenues to grow ~3-4%, device sales
to increase by 10% and fixed broadband revenues to rise 15% in 2015. Street is looking at a recovery in
service revenues for the industry in 2015, post a tepid 2014. A 3%-4% growth scenario indicted continued
tepid industry growth environment, though it is in-line with current consensus estimates, which bake in 4%
revenue growth in 2015

Seeking transformation into a digital services provider, but monetisation strategy not clear yet: AIS is
looking to shift away from being a pure-play wireless provider to become an integrated provider of mobile,
fixed broadband and digital content. AIS views itself as “an enabler of the development of content” for
various industries, for instance in streaming music (20mn songs downloaded per year), browsing books
(>2million e-book views per month), news content (20mn newscast delivered per year), and financial
transactions (>400 subscribers every month uses their mobile payment services). AIS believe its strong
foundation in engineering and relationships with regulators, and content service providers should help
enable the transformation. While the desire to shift away from being a 'dumb pipe' is well articulated,
management are yet to detail a monetization strategy.

Spectrum Auctions in mid 2015? AIS played a video of the NBTC Chairman stating NBTC’s main plan in
2015 was to launch auction for 900mHZ and 1800Mhz spectrum auction to support 4G roll out. While
timing of spectrum auctions being scheduled towards the middle of 2015 is now a consensus view, we
believe there are other regulatory issues that need resolution particularly the base pricing of the auctions and
nature of network deals between operators and CAT and TOT.

Maintain UW. We maintain our Underweight rating with a PT of THB198 based on 14x Jun 2016E P/E.
Asia Pacific Equity Research
29 January 2015
Asian Paints Limited (APNT IN)
Q3FY15 First cut : Earnings disappoint on sales miss
Neutral
Price: Rs910.25
28 Jan 2015
Price Target: Rs710.00
PT End Date: 30 Sep 2015
Asian Paints Q3FY15 operating performance was below our and street expectations. Company registered Net
Sales, EBITDA and PAT growth of 6%, 9% and 12% respectively for Q3FY15. Single digit volume growth for
the decorative segment was a key negative. Gross margin expansion was healthy at ~300bp y/y.

Sales growth moderated to 6% y/y led by low single digit volume growth in the decorative segment due to
sluggish demand trends. Growth was also affected by the early festival season this year. The automotive
coatings JV witnessed good growth in general industrial and auto refinish segment, though auto OEM
segment saw subdued demand.

Gross margin gains surprise; subdued sales growth leads to lower EBITDA margin expansion.
Benefits of lower RM inflation have started to reflect in improved gross margin performance (+290bp y/y)
as overall COGS rose just 1% y/y. However, negative operating leverage restricted EBITDA margin
expansion to 40bp y/y. Staff costs and other expenses rose 18% and 16% y/y respectively in Q3. For
standalone operations, gross margin and EBITDA margin expanded 340bp and 110bp y/y. This implies that
profitability of international and industrial business suffered during the quarter.

Home improvement business registered operating loss of Rs52mn in Q3 vs near breakeven in Q2.
Management noted that ramp up of home improvement business has been slower than expected.
Table 1: Summary of 3QFY15 Results: Consolidated
Rs millions
Net Sales
Other operating income
Total revenue
COGS
Gross Profit
Gross Margin
Employee cost
Other expenses
EBITDA
EBITDA Margin
Other income
Depreciation
Interest
PBT
Total tax
PAT
Minority Interest
Net Profit
% of sales
COGS
Employee Cost
Other Expenses
Source: Company reports.
Q3 FY14
34,126
393
34,519
20,379
14,140
41.0%
1,969
6,798
5,373
15.6%
301
633
100
4,941
1,540
3,401
107
3,294
Q2 FY15
35,868
462
36,330
20,469
15,861
43.7%
2,335
8,163
5,362
14.8%
480
669
70
5,103
1,541
3,563
90
3,473
Q3 FY15
36,028
498
36,526
20,517
16,009
43.8%
2,319
7,855
5,835
16.0%
321
673
98
5,384
1,667
3,717
35
3,682
59.0%
5.7%
19.7%
56.3%
6.4%
22.5%
56.2%
6.3%
21.5%
YoY
6%
27%
6%
1%
13%
QoQ
0%
8%
1%
0%
1%
18%
16%
9%
-1%
-4%
9%
7%
6%
-2%
9%
8%
9%
-67%
12%
-33%
1%
40%
6%
8%
4%
-61%
6%
Asia Pacific Equity Research
Bank Negara Indonesia Persero
(BBNI IJ)
Solid beat across the board; accumulate while the
Street worries about management changes
30 January 2015
Overweight
Price: Rp6,150
29 Jan 2015
Price Target: Rp6,700
PT End Date: 31 Dec 2015
BNI (BBNI IJ) reported 4Q14 net profit of Rp3.2tn, up 26% q/q, 26% y/y and 21%/24% above our and Street
estimates respectively. This led to FY14 net profit of Rp10.8tn, up 19% y/y. Exact numbers will be known
tomorrow after detailed financials are out. The primary reason for the beat was 1) lower credit costs (49bp vs.
172bp avg. in 9M14), 2) higher non-interest income (+46% q/q), and 3) slightly lower effective tax rate (19.2%
vs. 20.3% in 9M14). This was partly offset by seasonally higher operating costs (+30% q/q) and non-operating
loss. Lower credit costs came in as a positive surprise, as management had previously guided for lack of
seasonality in asset quality in 4Q. Over the last four years, NPLs have improved q/q in 4Q due to a combination
of write-off and seasonal improvement in cash flows, and 4Q14 was no exception with NPL improving 24bp q/q
to 1.96%. We expect non-II and credit cost-led positive earnings revisions by the Street post today’s result. We
reiterate BNI as one of our top picks in the sector (the other being Rakyat).

Net interest income came in at Rp6.0tn, up 6% q/q and in line with our estimate. Loan yields improved
70bp y/y to 10.9%, partly offset by an 80bp y/y increase in deposit costs to 3.2%. LDR increased by 264bp
y/y to 88.4%, leading to 9bp of margin expansion.

Non-interest income came in at Rp3.4tn, up 46% q/q and 26% above JPMe, per our calculations. This was
primarily driven by an increase in recurring fees (+18% q/q) viz. account maintenance, credit card, trade
finance and also higher insurance premiums (+28% q/q). FX gains increased 61% q/q as the bank held a
long USD position (in overseas branches). We expect non-II to remain resilient in the near term, as: 1)
10YR government bond yields are down 82bp in the last three weeks, which should lead to MTM gains; and
(2) FX hedging has been made mandatory starting this year, which should lead to higher treasury crossselling which would be reflected in the fee income.

Operating costs stood at Rp4.9tn, up 30% q/q and 11% above JPMe, per our calculations. Costs are
seasonally higher in 4Q (~38% on avg in past four years) with avg. 4Q CIR of 59%, but thereafter
sequentially improve in 1Q (~27% on avg.). Hence we are not worried by the spike and expect costs to
normalize in 1Q15. We also note that despite seasonally higher costs, PPOP was up 7% q/q and 4% above
our estimates.

Asset quality improved during the quarter. NPL ratio declined 24bp q/q to 1.96% and special mention loans
declined by a sharp 100bp q/q to 2.62%. These came in as a positive surprise, as management had
previously guided for a lack of seasonality in asset quality in 4Q. Asset quality improvement was across the
board with small and consumer bad loans improving by 18bp and 32bp respectively after rising in 3Q.
Despite significantly lower provisions during the quarter, coverage ratio improved 591bp q/q to 130%
which, combined with trends in special mention loans, gives us more comfort on write-offs / recoveries
going forward.

Change in management: This is the last full year under the current management. There will be a substantial
change in management (only 4 out of 10 directors can be reappointed) at the next AGM (17th March).
Hence, the investment case will evolve based on the incoming management’s strategy. Details of the
management changes are as below:
Asia Pacific Equity Research
Bank of China (BOCHK) (2388 HK)
Considering the sale of NCB?
29 January 2015
Overweight
Price: HK$26.90
28 Jan 2015
Price Target: HK$30.00
PT End Date: 31 Dec 2015
Reuters reported this afternoon that BOCHK is considering selling Nanyang Commercial Bank (NCB) at
US$6bn while China Cinda Asset Management (1359 HK) is the potential buyer. There is no official comment
from BOCHK yet but we think the share price is likely to react positively if the deal potentially takes place at
the reported valuation.

Incentive for divestment? The report has attributed the potential divestment to the overlapping of onshore
Mainland businesses between BOC and NCB (China) although we think both the scale and client base are
very much different. Meanwhile, we believe deteriorating asset quality condition (NPL ratio of 1.6% in
1H14 vs. 0.6% in 2H13 at NCB (China)) and an uncertain outlook could also be likely factors if
management considering any potential strategic moves, despite the fact that NCB accounts for a small
proportion of the group (NCB (China) only accounts for 6.3% of group total loans).

Implied valuation is attractive. US$6bn (as mentioned in the news report) would imply 1.4x P/BV based
on 1H14 equity of HK$33.4bn at NCB, which is attractive in our view given ROE at NCB in the past 4-5
years is only 8-10%. Such valuation could also result in one-time divestment gains of around HK$13bn, or
54% of our current FY14E earnings.

Capital accretive & ROE dilutive. NCB portfolio comprises 21% of RWA at BOCHK as of 1H14 and thus
the divestment, if it happens, could help to improve the capital position; based on our estimates, CET1 ratio
will increase to 16.4% from 11.8% if taking into account the potential divestment gains aforementioned. On
the other hand, earnings contribution from NCB is 11-13% of annual profits at BOCHK and thus proforma
ROE could be lowered by 1.5ppt post divestments.

Sentiment should be in favor of the divestment. From a business perspective, the potential divestment of
NCB, if it happens, should not have a detrimental impact on BOCHK’s cross-border businesses but might
help to reduce asset quality concerns/uncertainties, not to mention the reported valuation is very attractive.
Therefore, the share price could react positively if there is further progress regarding the potential deal in the
near future. Our preferred pick among HK banks remains Hang Seng Bank.
Asia Pacific Equity Research
Bursa Malaysia Bhd (BURSA MK)
Good 4Q, but limited upside
30 January 2015
Neutral
Price: M$8.22
29 Jan 2015
Price Target: M$8.50
PT End Date: 31 Dec 2015
Bursa (Bursa MK) reported net income of M$53.1mn in 4Q14, flat q/q, up 57% y/y and 15% above JPM and
Street estimates. This brought FY14 net income to M$198mn, up 15% y/y. The beat was across the board and
was primarily driven by: 1) Higher-than-expected derivatives revenue (7% above JPMe), 2) Higher listing and
market data fees (+16% q/q and +10% q/q, respectively), 3) Lower-than-expected operating costs (3% below
JPMe), and 4) Lower effective tax rate (21.4% vs. 25.8% in the previous quarter). The exchange declared 18
sen/share of final dividends, bringing full-year DPS to 58 sen, implying a payout ratio of 145% and FY14
dividend yield of 6.6%. We expect the stock to react positively in the near term on the back of this result.
However, the stock is currently trading at implied ADT of M$2.1bn, 3% below our FY15 ADT assumption of
M$2.2bn, limiting meaningful upside. Maintain Neutral.

Securities ADT came in at M$2.0bn, down 13% q/q, 14% y/y and 8% below our estimate. However,
securities clearing revenue came in at M$58.5mn, down 8% q/q and only 3% below JPMe; indicating
higher-than-expected securities clearing fees of 3.72bps, per our calculation.

Derivatives average daily volume came in at 54,537 contracts, up 1% q/q, up 31% y/y and 6% above our
estimates. Consequently, derivatives revenue came in at M$19.0mn, up 3% q/q and 7% above JPMe. F&O
volumes were mainly driven by higher FCPO volume and improved FKLI volumes with Dec-14 OI being
196,413 contracts. FY2014 DDAV increased 16% y/y to 50,654 contracts, mainly driven by higher FCPO
volumes (+27% y/y) due to uncertainty of CPO prices.

Other operating income was M$51.0mn, up 10% q/q and 6% above JPMe. Sequential improvement in
income can be attributed to higher listing fees (+16% q/q), market data fees (+10% q/q) and trading revenue
from BSAS (+35% q/q). Increase in listing and issuer services fees was due to higher perusal and processing
fees earned from higher number of corporate exercises and a higher number of new structured warrant
listings. Higher trading revenue from BSAS was due to increase in ADV (M$9.9bn vs. M$7.2bn in 3Q14) as
a result of increase in sukuk issuance that trade through BSAS trading platform.

Operating costs came in at M$59.1mn, up 7% q/q, but down 10% y/y and 3% below JPMe. While costs are
seasonally higher in 4Q due to staff costs (+12% q/q in 4Q), there was good cost management observed for
other expenses. We note that operating costs increased only 1% y/y to M$232mn, driven by lower
depreciation and amortization expenses (down 28% y/y) since implementation of a more cost efficient new
trading system (BTS2) at end of 2013. Consequently, operating margins improved by 224bps y/y to 54%.

Final dividends of 18 sen/share was declared, bringing full-year DPS to 58 sen, implying a payout ratio of
145% and FY14 dividend yield of 6.7%. Bursa is now one of the highest dividend-yielding stocks amongst
FBMKLCI constituents. The entitlement and payment dates for the final dividend are 3 April 2015 and 16
April 2015, respectively.

Initiatives taken and products launched in 2014: To increase the retail participation, the exchange
launched an online portal called Bursa Marketplace and held 9 investor conferences and 5 educational
programs. It widened its derivative products offerings with the launch of US$-denominated FPOL, the
enhanced FMG5, MyETF MSCI Malaysia Islamic Dividend and 3rd Government Guaranteed DINB ETBS.
However, we think that it will take some time before such products start making meaningful contribution to
revenues. Moreover, we think that to counter increasing regional competition, exchange will have to address
its structural problem of lower velocity vis-à-vis its peers (32% vs. 50% at SGX and 70% at HKEx).
Asia Pacific Equity Research
Genting Singapore (GENS SP)
Implication from MBS 4Q result
29 January 2015
Underweight
Price: S$1.06
28 Jan 2015
Price Target: S$1.00
PT End Date: 31 Dec 2015

Thoughts on MBS 4Q14 result: Las Vegas Sands (LVS US, OW, covered by Joseph Greff) reported 4Q14
results this morning. Marina Bay Sands (MBS) reported adjusted EBITDA of US428mn (excluding oneoff), up 22% qoq mainly due to favorable win rate (3.58% vs. 3Q 2.64% vs. normal 2.85%). Adjusted for
luck and one-off items, EBITDA would have been USD371mn, up 1% qoq and right in-line with JPMe
USD371mn. Key operating matrix: 1) Favorable VIP luck factor and robust and stable mass
performance: VIP rolling volume totaled USD10.0bn, up 10% qoq from a low base in 3Q but still well
below the volume level before 2Q, down 27% yoy. Mass segment has held up well post the strong
improvement last quarter, with revenue up 0.7% qoq or 5.4% yoy, benefiting from regional premium mass.
Slot revenue was down by 2.1% qoq or 2.1% yoy. 2) Accounts receivable balance: 4Q14 gross A/R
increased by 2% qoq to USD1,001mn (vs 3Q14: USD984mn) and A/R reserved was at 40% (vs. 41.9% for
3Q and 37.2% for FY13). A/R turnover days increased to 185 days from 173 days in 3Q. We do not see
signs of credit collection improvement for the Singapore market. 3) Margins: EBITDA margin improved to
54.9% from 47.8% in 3Q, mainly due to a favorable luck this quarter. Luck and bad debt adj. EBITDA
margin increased slightly to 48% (3Q: 47%).

Conference call highlights. 1) Strong mass performance benefiting from regional premium mass.
Regional premium mass initiatives have been successfully attracting customers from Indonesia, Malaysia,
etc. and supported mass revenue growth. Mass revenue has delivered continued growth since MBS opening,
and we believe management will continue to focus on developing high-margin and stable mass and nongaming business to remain competitive and increase profits. 2) 90mn one-off boosted 4Q EBITDA. The
reported record high 4Q total EBITDA of USD518.5mn is boosted by USD90mn property tax refund
received during the quarter. Adjusting for this one-off and luck factor, the 4Q result is in-line. 3) Japan:
Management remains focused on potential development opportunities in Japan. We do not expect Japan
gaming legalization to materialize near term.

Impact to GENS – slightly negative. As MBS continues to deliver robust mass performance, we expect
competition for regional premium mass customers as well as local Singaporean customers to be more
intense between the two Singapore operators, which is unfavorable for GENS. The credit situation for the
Singapore VIP market still sees no signs of recovery, due to the softer economy growth in China and some
South East Asian countries in 4Q. We currently expect GENS 4Q EBITDA to be SGD328mn, factoring in
2% qoq VIP rolling volume growth, normal luck factor, and a 1% qoq decline in mass and slot revenue.
Asia Pacific Equity Research
30 January 2015
Overweight
HDFC (Housing Development
Finance Corporation) (HDFC IN)
Price: Rs1,315.55
29 Jan 2015
Price Target: Rs1,400.00
PT End Date: 30 Sep 2015
3Q15: strong retail loan growth; spreads improve
HDFC reported in-line PAT of Rs14.25bn, up 12% y/y. Key highlights of the results 1) AUM growth of 16%
y/y was mainly driven by retail loans, 2) Spreads improved- led by non-retail loans, 3) Asset quality remained
stable, 4) Fee growth remained muted due to lower growth in non-retail loans.
Table 1: 3Q15 result table
P&L (Rs m)
NII
Non interest income
Opex
Op. profit
Inv profit
PBT
Tax
PAT
3Q14
18,383
782
1,684
17,481
346
17,577
4,800
12,777
2Q15
19,827
1,114
1,803
19,138
1,027
19,815
6,240
13,575
3Q15
21,193
629
1,853
19,969
1,126
20,645
6,390
14,255
YoY
15%
-20%
10%
14%
225%
17%
33%
12%
QoQ
7%
-44%
3%
4%
10%
4%
2%
5%
Key Parameters
Spreads
Borrowings
Term Loans
Bonds
Deposits
Loans (on-book)
Retail
Wholesale
AUM
Retail AUM
2.25%
1,770
246
973
551
1,923
1,309
614
2,085
1,471
2.29%
1,953
245
1,094
614
2,123
1,453
670
2,331
1,661
2.31%
2,008
224
1,133
650
2,200
1,522
678
2,411
1,733
0.06%
13%
-9%
16%
18%
14%
16%
10%
16%
18%
0.02%
3%
-9%
4%
6%
4%
5%
1%
3%
4%
Fee growth was muted due to lower non retail loan growth
Investment profits contributed 8% to the overall PAT v/s 3% in 3Q14
Spreads improved due to higher spread in non retail loans
Lower rates led to substituting bank loans with bonds
Deposit growth was strong despite cut in retail deposit rates in 3Q15
Management is witnessing early signs of recovery in non retail loans
Source: J.P. Morgan estimates, Company data.

AUM growth of 16% was mainly driven by retail loans (+18% y/y). Retail now constitutes 72% of total
loans vs 70.8% in 3Q14. Mumbai region witnessed some traction in loan book in the December month after
remaining subdued in the previous quarters. There are some early signs of pick-up in demand of nonretail loans - continued momentum should drive stronger revenue growth in FY16E.

Spreads. Overall spreads improved to 2.31% vs. 2.25% in 3Q14 - mainly driven by improvement in
spreads from non-retail loans, up 21bp y/y. Funding costs were soft and should continue to fall,
driven by: 1) recent deposit rate cut in 3Q15, 2) possible base rate cuts in 1HCY15, 3) further
substitution of bank loans with bonds. The translation to spreads, however, will be muted by falling
lending yields and a compression of the back book-front book differentials. The main tailwind for
spreads is an improved share of wholesale lending, likely from 1QFY16E.

Asset quality remained stable with Gross NPLs at 0.69%. There was a slight uptick in credit costs due
to higher GPs in the quarter. HDFC's PCR continues to be very comfortable at 100% and total
provisions are now 0.9% of loans.

Non interest income growth was subdued: a) Muted growth in wholesale loans compressed fees
b) Investment profits grew 10% q/q and was 8% of overall PAT - given the strong markets - this
can expand further in the coming quarters.
Asia Pacific Equity Research
29 January 2015
Neutral
Hotel Shilla
008770.KS, 008770 KS
Price: W103,500
Weak headline disguises strong details
Price Target: W94,000
Hotel Shilla reported weaker-than-expected 4Q14 headline results (big miss
on both OP and NP), mainly due to 1) larger-than-expected losses from hotels
and its overseas new DFS at Singapore Changi International Airport, and 2) an
effective tax rate increase on a consolidated basis, mostly due to losses from
its Singapore subsidiary. However, the weak headline disguises the strong
details, in our view. Its core business, domestic DFS, had better-than-expected
margins, with Incheon International Airport (IIA) DFS finally starting to make
a meaningful margin improvement. IIA DFS sales finally have reached a level
at which the company can enjoy operating leverage from fixed rent. DFS sales
were in line with our estimate, but better-than-expected OPM from IIA poses
upside risks to our earnings estimates. We are reviewing our estimates.
 Solid domestic DFS results with record-high OPM: Domestic DFS sales
growth was largely in line with our estimate, and both city and airport sales
were strong, growing by 39%y/y and 13%y/y respectively. Operating
leverage from IIA DFS could push the domestic DFS margin higher than
our expectation, while city DFS OPM continues to expand from the
economies of scale.
 Outlook for Changi International Airport: We estimate Changi’s
operating loss at W30bn in 4Q14, and expect this to be smaller in 1Q15, as
half of the floor space currently under construction is slated to become
operational in February 2015. We expect Changi to make about W500bn in
sales and a W5bn operating loss in 2015. Since its rent is linked to sales, its
profitability should improve in 2H15, once the operation stabilizes.
 Hotel business likely to continue to be loss-making, but to a lesser
extent than in 2014. Although occupancy ratio at the company’s Seoul
hotel was higher in 4Q14 than in 3Q14, the operating loss was larger due to
the lower-than-expected earnings contribution from the Jeju hotel, as 4Q14
is the low season for Jeju. We expect continued operating losses from the
company’s hotels, unless we see a meaningful improvement in the
occupancy rate of the Seoul hotel.
HOTEL SHILLA CO LTD (Reuters: 008770.KS, Bloomberg: 008770 KS)
Year-end Dec
FY13A
FY14E
FY15E
Revenue (W bn)
2,297
2,896
4,000
Net Profit (W bn)
11
95
185
EPS (W)
269
2,423
4,712
DPS (W)
300
300
300
Revenue growth
3.5%
26.1%
38.1%
Net Profit growth
(89.3%)
782.1%
94.2%
EPS growth
(89.5%)
802.2%
94.4%
ROE
1.5%
13.3%
22.0%
P/E (x)
385.4
42.7
22.0
P/BV (x)
5.9
5.3
4.3
EV/EBITDA (x)
20.4
17.4
10.7
Dividend Yield
0.3%
0.3%
0.3%
Source: Company data, Bloomberg, J.P. Morgan estimates.
FY16E
4,504
211
5,381
300
12.6%
14.2%
14.2%
20.6%
19.2
3.5
9.0
0.3%
South Korea
Specialty Retailing
Youna Kim
AC
(82-2) 758-5715
youna.kim@jpmorgan.com
Bloomberg JPMA YKIM <GO>
J.P. Morgan Securities (Far East) Ltd, Seoul
Branch
Sally Yoo
(82-2) 758-5383
sally.yoo@jpmorgan.com
J.P. Morgan Securities (Far East) Ltd, Seoul
Branch
Ebru Sener Kurumlu
(852) 2800-8521
ebru.sener@jpmorgan.com
J.P. Morgan Securities (Asia Pacific) Limited
Price Performance
130,000
W
110,000
90,000
70,000
Jan-14 Apr-14
Jul-14
Oct-14
Jan-15
008770.KS share price (W)
KOSPI (rebased)
Abs
Rel
YTD
13.2%
11.4%
1m
13.2%
12.0%
Company Data
52-week Range (W)
Market Cap (W bn)
Market Cap ($ mn)
Shares O/S (mn)
Fiscal Year End
Price (W)
Date Of Price
Free Float(%)
3M - Avg daily vol (th)
3M - Avg daily val (W bn)
3M - Avg daily val ($ mn)
KOSPI
Exchange Rate
Price Target End Date
Price Target (W)
3m
-4.2%
-3.7%
12m
32.7%
32.2%
135,500-77,300
3,996
3,685
39
Dec
103,500
29 Jan 15
82.4%
395.6
38.1
35.1
1,951.0
1,084.4
30-Dec-15
94,000
See page 7 for analyst certification and important disclosures, including non-US analyst disclosures.
J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that
the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single
factor in making their investment decision.
www.jpmorganmarkets.com
Asia Pacific Equity Research
30 January 2015
Overweight
IDFC (IDFC IN)
Price: Rs170.60
29 Jan 2015
Price Target: Rs190.00
PT End Date: 30 Sep 2015
3Q15: NPLs stable; loan book contracts; loan spreads
stable
IDFC reported PAT of Rs4.23bn (down 15% y/y, 4% < JPMe). Key takeaways: (1) Asset quality remained
stable, though provisioning continues to go up. (2) The loan book continues to contract, in line with
our expectations. (3) The impact of the bank transition was visible with elevated opex and an
expansion in treasury assets. This compressed spreads, though loan spreads remained stable. We
expect more details after the conference call tomorrow (10.35am, +91 22 39381071).
Table 1: 3Q15 results table
Rs in millions, Year-end March
NII
Loans
Treasury
Non-interest income
Miscellaneous income
Op. income
Opex
PPOP
Provisions and losses
PBT
Tax
PAT
Key Parameters
Spreads (12-month-rolling)
Cost/income
Loans (Rs in millions)
GNPA
NNPA
3Q14
6,640
6,100
540
1,870
10
8,520
1,290
7,230
370
6,860
1,860
5,000
2Q15
6,490
5,590
900
4,490
40
11,020
1,970
9,050
2,810
6,240
2,010
4,230
3Q15
6,620
5,670
950
3,170
40
9,830
1,980
7,850
1,530
6,320
2,090
4,230
YoY
0%
-7%
76%
70%
300%
15%
53%
9%
314%
-8%
12%
-15%
QoQ
2%
1%
6%
-29%
0%
-11%
1%
-13%
-46%
1%
4%
0%
2.30
15.1%
535,650
0.60%
0.50%
2.10
17.9%
530,380
0.60%
0.40%
2.00
20.1%
520,060
0.70%
0.50%
-0.30
5.0%
-3%
0.1%
0.0%
-0.10
2.3%
-2%
0.1%
0.1%
Source: J.P. Morgan, Company data.

Asset quality. Asset quality (stock) remained stable, with gross NPLs at 0.7% and gross restructured
loans at 6.1%. PCR continues to rise with incremental provisioning, though credit costs declined to
1.4% vs. 2% in the previous quarter. We expect provisioning to continue in the run up to the bank
transition, as management would like to start the bank off with a clean slate.

Loan book. Loan book declined 2% q/q for two broad reasons: (1) continued weakness in demand,
given the tardy progress in infra projects; and (2) the book size will need to be optimized in the run
up to the bank transition (expected in Oct-15) to deal with the reserve requirements on the NBFC
backbook.

Non interest income and opex. (1) Gains from the principal book remained subdued despite strong
markets - this tends to be lumpy, and we don’t read much into a single quarter. (2) Asset
management reported strong numbers - the Indian MF industry is seeing strong flows, and IDFC is
benefiting from that. (3) IB revenues were down 46% q/q - while the operating environment is
strong, revenues tend to be lumpy. (4) Strong treasury income on the back of the bond market rally
- this could continue, given the expansion of the book and the continued rally in yields. (5) Soft
loan-related fees, a victim of weak loan origination.
Asia Pacific Equity Research
KLCC Property Holdings (KLCCSS
MK)
Analyst briefing takeaways: Retail sales outperform
peers; Potential office oversupply should not be a
concern
29 January 2015
Neutral
Price: M$6.80
23 Jan 2015
Price Target: M$6.20
PT End Date: 30 Jun 2015
KLCC held a post-FY14 results briefing. The main takeaways were: 1) Tenant sales at Suria KLCC rose more
than 5%Y/Y, the strongest among the main malls, allowing KLCC to achieve rental reversions of 12%Y/Y
despite the more cautious consumer environment. 2) While we see a risk of oversupply in the office segment
over the next two years, with industry checks revealing an incoming supply to the Klang Valley of about 15% of
existing stock, we feel the risk to KLCC is mitigated by its long-term contracts with tenants, and asset branding
to international standards. We believe KLCC is well-priced at an FY15E/16E net yield of 5.0%/5.2%, slightly
below the sector average, and lacking DPU growth (FY15E/16E: 4.8%/4.4%). Within the REIT space, we prefer
exposure to Sunway REIT (OW) for its 17%Y/Y DPU step-up in FY16E, and our top pick is IGB REIT (OW)
for exposure to organic growth.
Brief recap of FY14 results:

FY14 net DPU of 31.7 sen broadly in-line, coming in 4% below our full-year forecast for 33.0 sen and 1%
above consensus, after including M$33MM in one-off finance and tax expenses. The results were strong in
the first full year following the restructuring into a stapled security in May-2013, with FY14 operating profit
up 5%Y/Y versus our forecast for 3%Y/Y growth. Key drivers were 1) 21%Y/Y growth in hotel revenues on
the reopening of the ballroom at the Mandarin Oriental post-refurbishment works, and 2) 5%Y/Y growth in
retail revenues on the back of a 12%Y/Y rise in rental rates in 2013.

Retail robust. Tenant sales at Suria KLCC rose more than 5%Y/Y, the strongest among the main malls,
allowing KLCC to continue to achieve rental reversions of 12%Y/Y despite the more cautious consumer
environment. This supports our view that pockets of more defensive spending could remain at the larger,
integrated assets that can draw in higher footfall and in our view will outperform their smaller and
standalone peers. In the recent results, the larger, integrated assets like Mid Valley Mall (IGB REIT) and
Sunway Pyramid Mall (Sunway REIT) recorded retail sales of about 4%-5% versus flattish growth at
Pavilion Mall (Pavilion REIT) and for the CMMT portfolio.

Office as usual, occupancy risk low. Revenue contribution was stable, but PBT affected by a one-off cost
relating to the refinancing of existing debt at lower rates, bringing average cost of debt from 4.7% to 4.5%.
While we see a risk of oversupply in the segment over the next two years, with industry checks revealing an
incoming supply to the Klang Valley of about 15% of existing stock, we feel the risk for KLCC is mitigated
by its long-term contracts with tenants, and asset branding to international standards. The office segment
contributed 44% to group revenue and 49% to group PBT, with three of its four assets on single-tenant, 15
year triple net leases to Petronas, pushing occupancy risk from external tenants back to its parent, while
Menara ExxonMobil (8% of group NLA and 6.5% of revenue), which houses the regional headquarters of
Exxon Mobil Corp, is on a single long-term lease that expires in Feb-2017.

Hotel boosted by F&B. The reopening of the ballroom at the Mandarin Oriental resulted in a 23%Y/Y rise
in F&B revenue, which contributes about 40% of segment revenues. Refurbishment works have now moved
to the meeting rooms and hotel facilities and are expected to take about three months to complete during the
current low season.
Asia Pacific Equity Research
29 January 2015
Overweight
Korea Aerospace Industries
047810.KS, 047810 KS
Price: W43,650
4Q14 results in-line - differentiated earnings growth
continues with high visibility
Price Target: W50,000
 4Q14 revenue/OP in-line, 2014 guidance fully met: KAI’s revenue/OP came
in at W696B/W47B, in line with our expectations. Revenue was flat y/y,
challenged by high 4Q13 base which was driven by faster-than-expected KUH
revenue recognition. 4Q14 NP came in at W33B, better than our expectation,
due to FX gains from USD receivables. The company ended 2014 with W2.3T
revenue and W161B OP, fully achieving its annual guidance.
 Further strong growth guided for 2015: For 2015, management guided W3T
revenue (+30% y-y) and W231 OP (+43% y-y, 7.7% OPM), in line with our
forecasts. Given the historical track record, we are confident that KAI will
continue to deliver its revenue guidance with high earnings visibility. The
company plans to spend W268B on R&D and capex in 2015 (vs. W117B in
2014). The sharp increase in investment is mainly due to roll-over of previous
year’s investment plans, as some of the major orders have been delayed to 2015.
 Delayed major orders will be met in 2015: KAI received W2.4T worth of
new orders in 2014 (target W7.7T), due mainly to the delayed KFX (estimated
W5T) and LAH/LCH development (estimated W600B) orders. However,
management expressed strong confidence in receiving these orders this year,
and suggested a W10T order target for 2015 (Defense W7.0T, Export W1.1T,
Civil W1.9T). We expect KAI to receive the long-waited KFX order in 3Q15
and LCH/LAH order in 1H15.
 Maintain OW and RIV-based Jun-15 PT of W50,000: The stock trades at
29x 2015E EPS vs. 16x for global peers. We believe the premium is due to its
1) higher growth, 2) unique monopoly position, 3) strong replacement cycle in
Korea, and 4) rising M/S within the global industry. These positive drivers
remain intact, in our view, and we expect KAI to offer 35% EPS CAGR over
the next three years vs. low-teen growth for global peers. In the near term, we
expect: 1) stronger earnings visibility within the Korea machinery sector, and 2)
new orders to support the share price. Key risks are volatility in new orders (-);
cost overruns on existing projects (-); R&D cost increase (-); successful aircraft
exports to the US (+) and new business opportunities (+).
Korea Aerospace Industries (Reuters: 047810.KS, Bloomberg: 047810 KS)
Year-end Dec
FY12A
FY13A
FY14E
FY15E
Revenue (W bn)
1,535
2,016
2,305
3,108
Operating Profit (W bn)
126
125
163
231
Net Profit (W bn)
74
90
103
149
EPS (W)
761
924
1,056
1,527
Revenue growth
19.3%
31.4%
14.3%
34.9%
EPS growth
(5.0%)
21.4%
14.3%
44.5%
ROE
8.6%
9.7%
10.3%
13.4%
P/E (x)
57.3
47.2
41.3
28.6
P/BV (x)
4.8
4.4
4.1
3.6
EV/EBITDA (x)
24.2
23.2
19.7
14.4
EBIT Growth
20.3%
(1.0%)
30.5%
42.3%
ROA
4.1%
4.7%
4.8%
5.9%
Dividend Yield
0.4%
0.4%
0.5%
0.5%
Source: Company data, Bloomberg, J.P. Morgan estimates.
FY16E
3,583
276
186
1,913
15.3%
25.3%
14.8%
22.8
3.2
12.1
19.2%
6.3%
0.5%
South Korea
Aerospace
Wan Sun Park
AC
(82-2) 758-5722
wansun.c.park@jpmorgan.com
Bloomberg JPMA WPARK <GO>
Scott YH Seo
AC
(82-2) 758 5759
scott.seo@jpmorgan.com
Bloomberg JPMA SEO <GO>
Sangmyeong Kim
(82-2) 758 5710
sangmyeong.kim@jpmorgan.com
J.P. Morgan Securities (Far East) Ltd, Seoul
Branch
Price Performance
44,000
40,000
W 36,000
32,000
28,000
Jan-14
Apr-14
Jul-14
Oct-14
Jan-15
047810.KS share price (W)
KOSPI (rebased)
Abs
Rel
YTD
9.7%
7.9%
1m
11.2%
10.0%
Company Data
52-week Range (W)
Market Cap (W bn)
Market Cap ($ mn)
Shares O/S (mn)
Fiscal Year End
Price (W)
Date Of Price
Free Float(%)
3M - Avg daily vol (mn)
3M - Avg daily val (W bn)
3M - Avg daily val ($ mn)
KOSPI
Exchange Rate
Price Target End Date
Price Target (W)
3m
5.9%
6.4%
12m
36.4%
35.9%
44,900-28,600
4,255
3,923
97
Dec
43,650
29 Jan 15
37.2%
0.28
11.26
10.4
1951.02
1,084.45
30-Jun-15
50,000
See page 7 for analyst certification and important disclosures, including non-US analyst disclosures.
J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that
the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single
factor in making their investment decision.
www.jpmorganmarkets.com
Asia Pacific Equity Research
29 January 2015
Overweight
LG Electronics (066570 KS)
Price: W62,600
29 Jan 2015
Price Target: W85,000
PT End Date: 31 Dec 2015
Relative weak 4Q results and muted 1Q15 guidance
LGE reported relatively weak 4Q14 results mainly due to emerging currency depreciation, weak domestic
smartphone market, and intensifying price competition in the TV business. Its NP turned to negative territory
due to the loss (W164 billion) from discontinued operation (PDP). On the other hand, its MC (Mobile
Communication) division managed to post a profit in three consecutive quarters despite shipment decline (-7%
Q/Q) and depressed domestic smartphone market in 4Q14.

Lackluster 1Q15 outlook: Management delivered a relatively cautious outlook (mid-single digit % top-line
growth but OP decline on Y/Y) for 1Q15 pointing to EM currency weakness, which negatively impacts HE
(TV) business that accounted for almost 50% of total OP in 1Q14. For MC, management guided both sales
and OP will improve on Y/Y basis and expects profitability to meaningfully improve in 2Q15 along with
new product launch.

All about EM currencies: During an analyst meeting, management blamed EM currency weakness many
times for most operations and its key products (especially, TV and Appliance) continue to see headwinds
given that LGE has relatively high exposure to EM (i.e. Russia, Brazil etc.). Hence, we see limited visibility
for its earnings outlook in 2015 and sustainability of the smartphone business is still a question mark. On the
other hand, current share price is close to the bottom from a valuation standpoint given that the stock is
trading at 0.8x FY15E book.

Lack of near-term catalyst: We will review our estimates once we have more detail data. Meanwhile, we
do not expect any near-term catalysts that could drive the stock higher given the lack of earnings visibility
and new product launch in the smartphone business to be slated for 2Q15 at the earliest. Hence, we
recommend investors wait for a better entry point.
Table 1: LG Electronics – 4Q14 earnings review
W in bn, YE-Dec.
Revenue
HE
MC
HA
AE
Innotek
Others
OP
HE
MC
HA
AE
Innotek
Others
PBT
NP
Shipment (mn)
Smartphone
LCD TV
4Q13
14,556
5,431
3,592
2,839
720
1,174
802
214
153
(43)
83
7
30
(16)
20
(63)
3Q14
14,713
4,507
4,247
2,912
926
1,230
892
465
134
167
52
(3)
103
12
271
203
4Q14
15,272
5,427
3,783
2,880
781
1,455
946
275
2
67
85
4
61
56
57
(206)
JPMe
15,312
5,715
3,714
2,913
758
1,317
895
366
115
76
88
10
73
3
360
259
Difference (%)
0%
-5%
2%
-1%
3%
10%
6%
-25%
-99%
-11%
-4%
-63%
-17%
1773%
-84%
n.a.
Y/Y (%)
5%
0%
5%
1%
9%
24%
18%
28%
-99%
n.a.
2%
-51%
101%
n.a.
187%
n.a.
Q/Q (%)
4%
20%
-11%
-1%
-16%
18%
6%
-41%
-99%
-60%
64%
n.a.
-40%
384%
-79%
n.a.
13.2
8.6
16.8
7.1
15.6
9.0
16.0
9.0
-3%
0%
18%
5%
-7%
27%
Source: Company data, J.P. Morgan estimates. *Note: J.P. Morgan estimate is as of Oct-30-2014 published forecast
Asia Pacific Equity Research
29 January 2015
Overweight
Naver
035420.KS, 035420 KS
Price: W736,000
LINE's robust monetization intact but disappointing
MAU growth
Price Target: W900,000
Naver reported weaker-than-expected 4Q results, with OP coming in 15%
below our expectation. LINE’s gross revenue posted robust growth of 17%
q/q and 80% y/y, in line with our expectation while LINE's net revenue
growth came in softer than expected. LINE added 11mn MAU (total 181mn)
in 4Q (vs. our expectation of +21mn MAU net addition). Overall, LINE’s
monetization trend remained robust despite disappointing MAU growth
momentum in 4Q. Management does not provide any detailed
guidance/strategy for 2015 LINE. We are keeping our estimates pending
further review.
 4Q OP +27% y/y, sequentially below market expectations. Naver
reported +17%y/y top-line growth in 4Q. We believe labor and marketing
costs were well controlled in 4Q but OP missed 10%/15% of Street/JPM’s
forecast, consolidated OP margin edged down to 26.1% in 4Q.
 LINE monetization growth momentum remains intact but lackluster
MAU growth in 4Q. LINE gross revenue grew +17%q/q and +80%y/y to
W384B in 4Q, in line with our expectation. Especially, strong LINE ad rev
growth momentum (+43% q/q, +147% y/y) surprised on the upside,
indicating that LINE is successfully positioning itself as a strong ad
platform without monetizing Timeline traffic. Nevertheless, slower-thanexpected MAU growth in 4Q was a major disappointment.
 Lack of 2015 business guidance. Management does not provide much
detailed guideline/strategy for LINE in 2015. The key points to watch for
LINE include: (1) non-Japan user engagement growth trend beyond Tier 1
countries (Taiwan/Thailand/Indonesia), (2) new business development
(LINE Music/Pay/etc), (3) potential investment to further drive LINE’s
growth, (4) potential alliance with global Internet companies, (5) the
resurgence of LINE IPO issue. We are keeping our estimates pending further
review.
Naver (Reuters: 035420.KS, Bloomberg: 035420 KS)
Year-end Dec
FY13A
FY14E
Revenue (W bn)
2,312
2,839
Operating Profit (W bn)
524
801
Net Profit (W bn)
326
468
Revenue growth
28.5%
22.8%
Operating Profit growth
0.6%
52.8%
EPS (net treasury) growth
(40.2%)
43.6%
ROE
19.3%
27.4%
P/E (net treasury, x)
67.4
46.9
P/BV (x)
14.9
11.3
EV/EBITDA (x)
32.5
22.0
DPS (W)
813
664
Dividend Yield
0.1%
0.1%
EPS (net treasury) (W)
10,927
15,690
Source: Company data, Bloomberg, J.P. Morgan estimates.
FY15E
3,664
1,257
893
29.1%
57.0%
90.9%
37.4%
24.6
7.7
14.2
710
0.1%
29,948
FY16E
4,663
1,891
1,298
27.3%
50.5%
45.4%
37.3%
16.9
5.3
10.6
1,355
0.2%
43,543
South Korea
Internet
Stanley Yang
AC
(82-2) 758-5712
stanley.yang@jpmorgan.com
Bloomberg JPMA YANG <GO>
Sally Yoo
(82-2) 758-5383
sally.yoo@jpmorgan.com
J.P. Morgan Securities (Far East) Ltd, Seoul
Branch
Price Performance
900,000
850,000
W
800,000
750,000
700,000
650,000
Jan-14
Apr-14
Jul-14
Oct-14
Jan-15
035420.KS share price (W)
KOSPI (rebased)
Abs
Rel
YTD
3.4%
1.6%
1m
1.8%
0.6%
Company Data
52-week Range (W)
Market Cap (W bn)
Market Cap ($ mn)
Shares O/S (mn)
Fiscal Year End
Price (W)
Date Of Price
Free Float(%)
3M - Avg daily vol (th)
3M - Avg daily val (W bn)
3M - Avg daily val ($ mn)
KOSPI
Exchange Rate (W/$)
Price Target End Date
Price Target (W)
3m
-5.4%
-4.9%
12m
9.0%
8.5%
880,000658,000
21,946
20,237
30
Dec
736,000
29 Jan 15
71.5%
85.3
64.1
59.1
1,951
1,084
30-Jun-15
900,000
See page 8 for analyst certification and important disclosures, including non-US analyst disclosures.
J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that
the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single
factor in making their investment decision.
www.jpmorganmarkets.com
Asia Pacific Equity Research
29 January 2015
Neutral
PTT Exploration & Production
(PTTEP TB)
Price: Bt111.00
28 Jan 2015
Price Target: Bt100.00
PT End Date: 31 Dec 2015
Higher than expected impairment; Dividend
disappoints
We expect PTTEP’s 4Q14 results to be taken negatively by the market with core earnings down c40%q/q,
driven by high DD&A, exploration and finance costs and lower output costs. FY14 core earnings of Bt55bn are
essentially in line with JPMe and consensus (Bloomberg) expectation. However, the company has disclosed an
impairment loss of US$1bn for Montara and Mariana Oil Sand project, which was higher than expected with its
legacy Cove Energy acquisition still not included in the impairment. PTTEP has also cut its dividend to Bt1.5/sh
vs our estimate of Bt2.5/sh which implies a payout of 23% in 2H14 vs 41% in 1H14 and 41% in 2013 based on
core net profit. Management will provide a business update later in the evening at 5:30PM.
Table 1: PTTEP: 4Q14 earnings review
Bt million (unless otherwise indicated)
Production (kboe/day)
Avg. Dubai ($/bbl)
Petroleum sales
EBITDA
EBIT
Profit before tax
Tax, core business
Core profit
FX loss/gain
Impairment loss
Non-core tax
Net profit
Core EPS (Bt)
Core tax rate
4Q13
300
$107
3Q14
325
$101
4Q14
347
$75
Y/Y
16%
-30%
Q/Q
7%
-26%
4Q14E
345
$75
Y/Y
1%
0%
57,611
38,873
24,288
23,737
(14,678)
9,059
(2,095)
(378)
654
7,240
2.28
62%
62,823
45,211
23,855
24,945
(8,601)
16,344
(1,060)
0
212
15,496
4.12
34%
59,082
39,632
14,124
17,244
(8,170)
9,074
(695)
(32,794)
79
(24,336)
2.29
47%
3%
2%
-42%
-27%
-44%
0%
N/A
N/A
N/A
-436%
0%
-6%
-12%
-41%
-31%
-5%
-44%
N/A
N/A
N/A
-257%
-44%
59,152
41,239
16,714
19,099
(9,424)
9,675
(1,598)
(24,998)
5,319
(11,602)
2.44
49%
0%
-4%
-15%
-10%
-13%
-6%
N/A
N/A
N/A
N/A
-6%
Source: Company data, J.P. Morgan estimates % change is relative to 4Q14.
Investment Thesis
PTTEP is Thailand's second biggest upstream petroleum producer. The company is gas-focused with liquids (crude oil and
condensate) accounting for less than 30% of total output. PTTEP is focused on oil and gas production in Thailand and
nearby Myanmar. However, in recent years, the company has ventured into other prospective countries including Vietnam,
Algeria, Canada and Australia. PTTEP’s current production capacity is ~340kBPD.
With PTTEP’s upstream bias, we see now more near-term downside risks not only from lower oil prices, but a reassessment of legacy deals which are likely to drag on profitability, high-cost fields such as Montara and potential
impairment risks for its stake in Mozambique post Cove Energy transaction.
Valuation
We have a Neutral rating on PTTEP with a Dec-15 price target of Bt100, based on our DCF valuation (WACC of 8.0%,
long-term oil price of US$90/bbl).
Summary value (US$MM)
Proved reserves
Pipeline net assets, at book
13,914
100
Asia Pacific Equity Research
29 January 2015
Neutral
PTT Exploration & Production
(PTTEP TB)
Price: Bt111.00
28 Jan 2015
Price Target: Bt100.00
PT End Date: 31 Dec 2015
Potential net loss; impairment risks and dividend cut
PTTEP is expected to report 4Q14/FY14 this evening (29 Jan), and we forecast a net loss, given lower output
prices and potential impairment losses for Montara and Mariana Oil Sand projects. With PTTEP’s upstream
bias, we see now more near-term downside risk not only from lower oil prices, but a re-assessment of legacy
deals, which are likely to be a drag on profitability, high-cost fields such as Montara and potential impairment
risks for its stake in Mozambique post the Cove Energy transaction. We maintain Neutral with Dec-15 PT of
Bt100/sh (refer to our regional update).

Record production in 4Q14; high DD&A continues: We forecast PTTEP 4Q14 core earnings down c40%
q/q at Bt10 bn due to sharply weaker oil prices, exploration write-offs, higher DD&A due to higher sales
from Montara and a higher effective tax rate. PTTEP reported record high production of c345 kboe in 4Q14,
due to c315 mmscfd output from Zawtika and higher sales from Montara. However, Montara is expected to
be a drag on opex and DD&A in 4Q. PTTEP may write-off c10 exploration wells worth cUS$100 mn in 4Q.
PTTEP continued its 3-4 month forward hedging strategy and hedged c8mn liquids output at cUS$9095/bbl, which is likely to partially offset downside from lower ASPs. PTTEP may also report a higher
effective tax rate due to THB depreciation. We expect PTTEP to cut 2H14 dividend to Bt2.5/sh from Bt3/sh
in 2H13 (consensus estimates range from Bt1-3/sh).

Potential US$800-900 mn impairment losses: PTTEP is likely to report severe impairment losses for high
cost fields like Montara (US$1.7 bn book value) and Mariana Oil Sand (US$2bn book value) in 4Q, given a
deteriorated LT oil price outlook and delayed production in the case of Mariana. We estimate overall
impairment at cUS$800-900 mn. We do not rule out potential impairment for Mozambique assets and
further adjustments for Montara / Mariana, should oil prices decline substantially from current levels.
Table 1: PTTEP: 4Q14 earnings forecast
Bt million (unless otherwise indicated)
Production (kboe/day)
Avg. Dubai ($/bbl)
Petroleum sales
EBITDA
EBIT
Profit before tax
Tax, core business
Core profit
FX loss/gain
Impairment loss
Non-core tax
Net profit
Core EPS (Bt)
Core tax rate
4Q13
300
$107
3Q14
325
$101
4Q14E
345
$75
Y/Y
15%
-30%
Q/Q
6%
-26%
FY13
293
$106
FY14E
322
$96
Y/Y
10%
-9%
57,611
38,873
24,288
23,737
(14,678)
9,059
(2,095)
(378)
654
7,240
2.28
62%
62,823
45,211
23,855
24,945
(8,601)
16,344
(1,060)
0
212
15,496
4.12
34%
59,152
41,239
16,714
19,099
(9,424)
9,675
(1,598)
(24,998)
5,319
(11,602)
2.44
49%
3%
6%
-31%
-20%
-36%
7%
N/A
N/A
N/A
-261%
7%
-6%
-9%
-30%
-23%
10%
-41%
N/A
N/A
N/A
-176%
-41%
220,337
158,895
108,544
105,950
(47,366)
58,584
(2,893)
(378)
654
55,967
14.76
45%
243,413
173,749
91,518
91,975
(36,790)
55,185
(2,500)
(23,701)
5,240
34,225
13.90
40%
10%
9%
-16%
-13%
-22%
-6%
N/A
N/A
N/A
-39%
-6%
Source: Company data, J.P. Morgan estimates % change is relative to 4Q14.
Asia Pacific Equity Research
29 January 2015
Overweight
Samsung Electro-Mechanics (009150
KS)
Price: W64,400
29 Jan 2015
Price Target: W72,000
PT End Date: 31 Dec 2015
4Q Results: Good Impression from Swing to Profit,
Buyback Announcement
SEMCO swung to profit at the operating level in 4Q, also avoiding a red-ink result for 2014 as a whole. We continue to
expect sharp profit rebound in 2015 as earnings should continue to recover in 1Q with support from the quicker-thanexpected uptake of Galaxy S6 components and the likelihood that the new plant in Vietnam will begin fully contributing
from 2H. SEMCO also announced a share buyback with the results release. The buyback will encompass two million shares
(2.7% of shares outstanding) and KRW127.8 billion, with execution scheduled for January 30 to April 29).

4Q results: Operating profit totaled KRW34 billion, a strong swing to the black from 3Q’s KRW69 billion loss. As we
expected, SEMCO managed to avoid a loss for 2014 as a whole, recording profit of KRW1.7 billion (our forecast was
profit of KRW10 billion; the Bloomberg consensus was a loss of KRW45 billion). In addition to the Korean won
weakening versus the dollar, earnings benefited from new smartphones such as the Galaxy Note 4 and the iPhone 6. In
terms of products, the earnings rebound was apparently driven by camera modules with optical image stabilization,
high value-added flip-chip chip-scale packages, and MLCCs.

BPS rose sharply: Net profit in FY2014 totaled KRW502.7 billion, bolstered by the swing to profit at the operating
level and the sale of Samsung SDS shares. End-December 2014 shareholders’ equity rose to KRW4,642.8 billion as a
result, a 15% increase versus end-2013. Meanwhile, we estimate that the announced buyback of two million shares will
boost BPS to about KRW64,000, roughly on par with the current share price. That said, in our view the current share
price does not adequately reflect SEMCO’s prospects for earnings recovery from FY2015 onward.

A results briefing for analysts is scheduled for January 30, 16:00 Korea time.
Figure 1: Quarterly Earnings Results and Outlook
Won bn
SEMCO
Sales
FY2014E
1Q
2Q
3Q
4Q Actual
4QE
FY2015E
FY2016E
1,729
1,861
1,711
1,833
1,857
7,150
7,700
8,100
ACI
398
397
411
423
429
1,635
1,770
1,880
LCR
465
465
474
479
487
1,890
1,950
2,040
OMS
488
574
504
576
584
2,150
2,370
2,520
CDS
375
416
322
340
357
1,470
1,590
1,650
15
21
-69
34
42
10
240
320
Profit Before Taxes
8
29
-82
684
-
1,040
370
320
Net Profit
2
14
-71
558
-
770
265
230
Operating Profit
Source: Company data and J.P. Morgan estimates
Asia Pacific Equity Research
29 January 2015
Underweight
Samsung Engineering
028050.KS, 028050 KS
Price: W35,350
4Q14 results: In line, but contraction continues
Price Target: W31,000
Samsung Engineering (SEG)’s 4Q14 results were largely in line with our
expectations, but its low-margin trends remained unchanged (OP margin at
1.0%). We see a continued contraction of its business as seen from its staff
restructuring, project completion delays, and decreased 2015 revenue
target. Coupled with the sluggish order environment affected by low oil
prices, we hardly expect a sharp rebound in the company’s operations in
the near term. We maintain our Underweight rating on the stock.
 In-line results, but weak bottom line. Sales came in at W2.3tn (-15%
y/y) with OP of W22bn (OPM of 1.0%), which was largely in line with
our estimates. Overseas GP margin fell to -2.9% (vs. 4.1% in 3Q14),
mainly on the back of additional provisions from Saudi Shaybah project
(W35bn). One-off impairment loss of W41bn (POSCO Plantec shares)
pressured the company’s bottom line, resulting in a net loss of W8bn.
 Contraction continues. SEG guided its 2015 sales at W8.0tn, down 10%
y/y from W8.9tn in 2014. The negative sales growth is mainly on the
back of decreased orderbook (W13tn in 4Q14 vs. W16tn in 2013) and
completion delays of overseas projects. Such contraction may seem
disappointing in the near term, but we believe this can be a long-term
positive driver, as it implies SEG’s focus has changed from growth to
earnings maintenance.
 Conservative 2015 guidance. Among the company’s W7tn order target,
SEG commented that around half of the orders are secured (including
W2tn of Samsung group orders). However, we think lowered oil prices
will increase uncertainties to its order achievements, as seen from the
recent project delays/cancellations (i.e., Qatar, Saudi Arabia). Meanwhile,
the company also targeted LNG plant orders (Texas LNG, Canada
Petronas LNG), which could become a new opportunity for SEG.
 Maintain UW with PT of W31,000. The key priority of SEG will be the
stability of its bottom line, due to the continued uncertainty of overseas
operations. We reiterate our cautious view on SEG.
Samsung Engineering Co. Ltd (Reuters: 028050.KS, Bloomberg: 028050 KS)
Year-end Dec
FY13A
FY14E
FY15E
Revenue (W bn)
9,806
8,639
8,163
Operating Profit (W bn)
(1,028)
166
241
Net Profit (W bn)
(707)
79
136
EPS (W)
-17,677
1,971
3,402
BVPS (W)
22,663
24,456
27,449
Revenue growth
(14.3%)
(11.9%)
(5.5%)
EPS growth
(235.0%)
(111.2%)
72.6%
ROE
(53.4%)
8.4%
13.1%
P/E (x)
NM
17.9
10.4
P/BV (x)
1.6
1.4
1.3
EV/EBITDA (x)
NM
10.6
7.6
Dividend Yield
0.0%
0.8%
1.1%
ROA
(12.2%)
1.4%
2.5%
FY16E
8,460
307
191
4,781
31,729
3.6%
40.6%
16.2%
7.4
1.1
5.6
1.4%
3.5%
South Korea
Construction
Sokje Lee
AC
(82-2) 758-5729
sokje.lee@jpmorgan.com
Bloomberg JPMA SOKJELEE <GO>
Minsung Lee
(822) 758-5728
minsung.lee@jpmorgan.com
J.P. Morgan Securities (Far East) Ltd, Seoul
Branch
Price Performance
80,000
W
60,000
40,000
20,000
Jan-14
Apr-14
Jul-14
Oct-14
Jan-15
028050.KS share price (W)
KOSPI (rebased)
Abs
Rel
YTD
-6.7%
-8.5%
1m
-7.1%
-8.3%
Company Data
Shares O/S (mn)
Market Cap (W bn)
Market Cap ($ mn)
Price (W)
Date Of Price
Free Float(%)
3M - Avg daily vol (mn)
3M - Avg daily val (W bn)
3M - Avg daily val ($ mn)
KOSPI
Exchange Rate
Price Target End Date
Price Target (W)
3m
-42.1%
-41.6%
12m
-50.7%
-51.2%
40
1,414
1,304
35,350
29 Jan 15
65.4%
0.51
20.73
19.1
1951.02
1,084.45
31-Dec-14
31,000
Source: Company, Bloomberg, J.P. Morgan estimates. NP, EPS, ROE based on owners' NP; BPS based on owners' parent equity.
See page 8 for analyst certification and important disclosures, including non-US analyst disclosures.
J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that
the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single
factor in making their investment decision.
www.jpmorganmarkets.com
Asia Pacific Equity Research
29 January 2015
Neutral
Samsung Heavy Industries
010140.KS, 010140 KS
Price: W18,800
4Q14 results: Harsh test of its offshore bias
Price Target: W26,000
Samsung Heavy Industries (SHI) reported worse-than-expected results,
mainly from its offshore business. Delays in drillship delivery and low
margins of its Egina and Ichthys projects resulted in a revenue decline. We
believe a renewed focus on commercial ships will be the only solution, but
it will take time for SHI to solve the bottleneck issues in offshore
structures. We reiterate our Neutral rating with a Dec-15 PT of W26,000.
 Worse-than-expected results. 2014 revenue declined 13% YoY, with
an 80% fall in operating profit (1.4% OP margin vs. 6.2% in 2013).
Despite the major write-off in 1Q14, SHI failed to show a notable
improvement in 4Q14. Management said the falling margin came from 1)
a weaker sales contribution from drillships vs. rising revenue recognition
of Egina & Ichthys projects, and 2) delays in drillship delivery.
 All started with its offshore bias. SHI has been focusing on its
offshore business for years, but the key burden has been a lack of skilled
engineers and designers. Offshore projects require a 2-3 times greater
number of designers than commercial ships to generate the same
revenue. Securing such resources within 2-3 years was tough, and
shifting resources from commercial ship division was not enough.
 Return to commercial ships the only solution. We have been arguing
that a commercial ship focus is the only solution for SHI. Furthermore,
the tanker market is booming and SHI can find enough margin
opportunity. A commercial ship focus would give SHI better margins
than offshore structures together with proper utilization of its facilities.
But it will take some time as SHI is burdened with the higher cost base
from its offshore bias, and it will have to wait for shipbuilding designers
to return after they complete offshore projects.
 Maintain Neutral with Dec-15 PT of W26,000. We maintain our
Neutral rating, as we believe SHI’s slower operations as a result of
offshore projects will continue in the near term.
Samsung Heavy Industries (Reuters: 010140.KS, Bloomberg: 010140 KS)
Year-end Dec
FY13A
FY14E
FY15E
Revenue (W bn)
14,835
14,043
14,079
Operating Profit (W bn)
914
191
568
Net Profit (W bn)
632
121
361
EPS (W)
2,737
523
1,564
BVPS (W)
25,308
25,494
26,588
Revenue growth
2.4%
(5.3%)
0.3%
EPS growth
(20.6%)
(80.9%)
199.2%
ROE
11.4%
2.1%
6.0%
P/E (x)
6.9
36.0
12.0
P/BV (x)
0.7
0.7
0.7
EV/EBITDA (x)
6.0
15.7
8.4
Dividend Yield
2.7%
1.6%
2.7%
ROA
3.7%
0.7%
2.2%
FY16E
14,529
759
551
2,384
28,503
3.2%
52.4%
8.7%
7.9
0.7
6.5
2.7%
3.3%
South Korea
Ship Building & Repairs
Sokje Lee
AC
(82-2) 758-5729
sokje.lee@jpmorgan.com
Bloomberg JPMA SOKJELEE <GO>
Minsung Lee
(822) 758-5728
minsung.lee@jpmorgan.com
J.P. Morgan Securities (Far East) Ltd, Seoul
Branch
Price Performance
40,000
35,000
W
30,000
25,000
20,000
15,000
Jan-14
Apr-14
Jul-14
Oct-14
Jan-15
010140.KS share price (W)
KOSPI (rebased)
Abs
Rel
YTD
-5.8%
-7.6%
1m
-6.9%
-8.1%
Company Data
Shares O/S (mn)
Market Cap (W bn)
Market Cap ($ mn)
Price (W)
Date Of Price
Free Float(%)
3M - Avg daily vol (mn)
3M - Avg daily val (W bn)
3M - Avg daily val ($ mn)
KOSPI
Exchange Rate
Price Target End Date
Price Target (W)
3m
-27.0%
-26.5%
12m
-44.2%
-44.7%
231
4,343
4,004
18,800
29 Jan 15
71.1%
1.82
40.73
37.6
1951.02
1,084.45
31-Dec-15
26,000
Source: Company data, Bloomberg, J.P. Morgan estimates.
See page 8 for analyst certification and important disclosures, including non-US analyst disclosures.
J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that
the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single
factor in making their investment decision.
www.jpmorganmarkets.com
Asia Pacific Equity Research
Sands China (1928 HK)
Unexiciting 4Q, as expected
29 January 2015
Overweight
Price: HK$39.65
28 Jan 2015
Price Target: HK$52.50
PT End Date: 31 Dec 2015
Adjusted EBITDA fell 12% qoq and 15% yoy to US$713m in 4Q. This is 1/2% below JPMe/consensus, slight
miss but expected. Regarding dividend, Sands China, like its parent LVS, is now committed to increasing its
regular dividend each year (absolute term, not payout, in our view), which it believes is more reliable than
special dividends. Overall, there was no surprise from the result. See Table 1-3 for our detailed analysis on
operating metric.

The Good: (1) Mass outperformance: Group-wide mass GGR fell 9% qoq in 4Q, better than the peers’
c.11% decline (on like-for-like basis); (2) A record non-gaming: Non-gaming revenues grew 10% qoq and
6% yoy to a record US$427m, accounting for 17% of its gross revenues (vs. 13% a year ago); we estimate
this high-margin business has generated c.25% of the group’s EBITDA in 4Q, nearly double the size of VIP
profits; and (3) Regular DPS will keep rising. A commitment to “grow” regular dividend every year (5.0%
yield for CY15E, based on last closing price) could provide more predictable cash returns to shareholders
going forward, potentially reducing volatility in shares to a degree.

The bad: (1) A slight miss vs. expectations, albeit somewhat expected; (2) Weaker margin (especially at
Venetian): adjusted EBITDA margin edged down to 28.0% (based on gross revenues) from a record 28.7%
in 3Q. Favourable mix impact (mass/non-gaming was 67% of sales, vs. 64% in 3Q) was offset by negative
operating leverage and increased competition in prem mass; (3) Weak prem mass: prem mass GGR fell
18% yoy, significantly weaker than 2% decline in its base mass GGR, despite having 27% more tables. As a
result, Sands’ prem mass table yield edged down further to US$15.5k/day in 4Q, 40% below its peak
US$26.0k in 1Q14 (or, 12% qoq drop from US$17.6k in 3Q) (Table 1); (4) Even weaker VIP: Sands’ VIP
GGR dropped 18% qoq in 4Q (vs. the industry’s -7%) and its VIP table yield fell 20% qoq to only
US$24.0/day; and (5) Parisian now slated for “sometime in 2016”, vs. March 2016 for its previous fullopening guidance; we view the delay was caused from construction permit issue (now fully resolved) and is
not a commitment issue. Also, the new target is in-line with JPMe (3Q16E).

Other takeaways from the call: (1) Executive search. Sands China is conducting a search for its president
and COO, while the CEO position will remain with Mr. Sheldon Adelson; (2) Table constraints?
Management believes gaming table is not a constraint anymore (at least at this stage) given soft demand; (3)
Smoking ban. The Macau government appears to be making its final decision on a smoking ban, according
to management.

The bottom line: Obviously unexciting – to say the least – quarter, but we think most negatives were well
highlighted in advance, hence not a surprise. Going into 2015, we note two new (and arguably better)
properties are opening in its neighborhood, which will likely increase competition on Cotai, which has been
so far a stronghold of Sands. Sands trades at 18x 2015E P/E (based on Bloomberg’s 28-day consensus).
Asia Pacific Equity Research
29 January 2015
Overweight
Sesa Sterlite
SESA.NS, SSLT IN
Price: Rs201.45
Strong results driven by Ally and Cu Tc/Rc; Ally prod
guidance sharply higher and implies upside risk to
FY16
Price Target: Rs265.00
SSLT reported EBITDA (Rs61.5bn v/s Rs58.5bn consensus) and PAT (Rs15.9bn
v/s Rs14.1bn consensus) beat driven by strong results at the copper smelting and
aluminum segments (which saw costs decline sharply q/q). Operational news flow
continues to improve as iron ore mining leases got renewed in Goa, and Karnataka
(forest clearance also received), while in power the consent to operate for
1200MW was received and hence Unit 1 (commercial) is under commissioning
while Unit II (captive) would be commissioned in Q1, allowing for further ramp
up ally production. From here, while the commodity price environment is a
headwind, the regulatory environment is improving. SSLT at the parent entity for
the last two quarters has EBITDA/Interest at 1.3x/1.7x and this should only
improve as iron ore, power and ally segments improve. We remain OW on SSLT.
 Sharp improvement in copper and ally drive EBITDA beat: Copper
reported another record EBITDA at Rs5.3bn (+15% q/q) driven by higher
product realizations and continued strong Tc-Rc. Ally segment reported +86%
y/y higher EBITDA at Rs8bn v/s JPMe Rs5.1bn driven by lower costs, mainly
coal. Zinc and oil were broadly in line, while power segment continued to suffer
from evacuation and demand issues with PLF only at 41%. The TSPL 1980MW
power plant saw the first unit being capitalized in the December quarter. Iron
ore segment was EBITDA positive with only pig iron operating.
 Regulatory news flow continues to improve: Iron ore leases have been
renewed in Goa and Karnataka and the receipt of forest approvals allows for
2.3MT annual mining at Karnataka to start (and thus EBITDA increase). We
expect Goa mining to also start in 2HFY16 once the export tax on lower grade
ores is removed. As per SSLT, at current iron ore prices, post all the duties,
levies, and grade discount, ASP would be $25/t and CoP pre ban was $25/t and
hence export duties need to be removed. The ramp up of the power plant at
Korba should allow higher ally production. SSLT remains a key beneficiary of
any potential improvement in the coal availability post the coal block auctions
as the ~$100/t q/q reduction in Ally CoP shows.
 Materially higher Aluminum production growth forecast implies upside
earnings risk for FY16: SSLT expects to exit FY16 with the 325Kt smelter at
BALCO fully ramped up. More importantly, SSLT guided that 2 lines of 4 lines
(1.25MT ally capacity) would be ramped up in FY16. We see material upside
risk for our FY16/17 total ally prod of 1.05/1.27MT post the company’s
comments today.
Sesa Sterlite (Reuters: SESA.NS, Bloomberg: SSLT IN)
Rs in mn, year-end Mar
FY13A
FY14A
FY15E
Net Sales (Rs mn)
757,632
661,524
728,764
Net Profit (Rs mn)
148,606
62,985
58,555
EPS (Rs)
50.12
21.24
19.75
Net Profit growth (%)
141.9%
(57.6%)
(7.0%)
ROE
22.8%
8.8%
7.8%
P/E (x)
4.0
9.5
10.2
P/BV (x)
0.9
0.8
0.8
EV/EBITDA (x)
4.7
7.8
5.8
Source: Company data, Bloomberg, J.P. Morgan estimates.
FY16E
788,603
70,629
23.82
20.6%
8.8%
8.5
0.7
5.1
FY17E
875,583
90,325
30.46
27.9%
10.3%
6.6
0.7
4.1
India
Metals & Mining
Pinakin Parekh, CFA
AC
(91-22) 6157-3588
pinakin.m.parekh@jpmorgan.com
Bloomberg JPMA PAREKH <GO>
J.P. Morgan India Private Limited
Dinesh S. Harchandani, CFA
(91-22) 6157-3583
dinesh.x.harchandani@jpmorgan.com
J.P. Morgan India Private Limited
Neha Manpuria
(91-22) 6157-3589
neha.x.manpuria@jpmorgan.com
J.P. Morgan India Private Limited
Daniel Kang
(852) 2800 8570
daniel.kang@jpmorgan.com
J.P. Morgan Securities (Asia Pacific) Limited
Price Performance
320
280
Rs 240
200
160
Jan-14
Apr-14
Jul-14
Oct-14
Jan-15
SESA.NS share price (Rs)
BSE30 (rebased)
Abs
Rel
YTD
-8.1%
-16.0%
1m
-6.4%
-14.7%
Company Data
52-week Range (Rs)
Market Cap (Rs mn)
Market Cap ($ mn)
Price (Rs)
Date Of Price
3M - Avg daily vol (mn)
3M - Avg daily val ($ mn)
BSE30
Price Target End Date
Price Target (Rs)
3m
-21.1%
-30.6%
12m
4.1%
-39.7%
318.40-168.85
597,299
9,727
201.45
29 Jan 15
5.09
18.4
2,9559.18
31-Mar-16
265.00
See page 17 for analyst certification and important disclosures, including non-US analyst disclosures.
J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that
the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single
factor in making their investment decision.
www.jpmorganmarkets.com
Clients should contact representatives and execute transactions through a J.P. Morgan subsidiary or affiliate in their home jurisdiction unless
governing law permits otherwise.
Asia Pacific Equity Research
Sumitomo Mitsui Trust Holdings
(8309) (8309 JT)
3Q Results: Buybacks Announced, Writebacks & Fees
Continue to Support
29 January 2015
Overweight
Price: ¥411
29 Jan 2015
Price Target: ¥580
PT End Date: 30 Dec 2015
SMTH reported Apr-Dec net income of ¥126.5bn (vs. cons ¥125.8bn) or 84% progress on FY CoE ¥150bn, and became the
second major bank to announce share buyback (¥20bn, 1% of shares or 10bp of capital, Jan to June 2015). We think this
is a forward move considering their target CET1 ratio of 10% is not yet in the bag (we estimate ~8.7% fully-phased at Dec14, unch’d from Sep-14 due to buyback of pref shares on Oct 1), although the shift to A-IRB will fill most of the gap at Mar15. More importantly, the buyback reflects the bank’s willingness to improve shareholder return and shows the bank’s
confidence in its business & earnings. Key supports to be aware of going into 4Q are: 1) ¥9bn Q/Q improvement as system
costs from 3Q fall off, 2) FY-end seasonality for a rise in corporate real estate transactions which has been a weak area
this year and 3) ¥16bn cushion in credit costs with ¥21bn writeback YTD vs. ¥5bn CoE. The business is not immune to
macro headwinds of low yields & sluggish demand, but the bank has been able to defend its NIM relatively well (-1bp
Q/Q) due to a fall in deposit yield, and ultimately impact from NIM decline is offset by fees from IT sales which is still
going strong at +10% Y/Y driven by wrap funds & insurance.

Fee income was in line with expectations overall, but details were mixed. About 60% of domestic fees are from IT &
insurance sales, and this is also the portion that continues to grow fast at +12% Y/Y, or 78% of progress to FY plans.
On the other hand, the factors behind a soft real estate brokerage in 1H continued to be present in 3Q, with some
corporates seeming to delay sale of property on expectation of real estate price rise & improving earnings. Although
real estate fees are up +¥0.5bn 3Q/3Q, plans were a more aggressive +¥5.7bn Y/Y, so some upside from IT &
insurance sales will offset this. Another offsetting strength is market gains with the bank taking ¥29bn bond gains in
3Q, having now taken profit on almost half their UST portfolio YTD.

Loan growth was a little disappointing in 3Q after a strong 1H, with overseas loans at +4.8% Q/Q despite 10% yen
depreciation over that time. Part of this was a strong base (1H +15% with just 1/3 from FX), another part was seasonal
with Japanese corporate demand tending to focus in 2Q and 4Q, but another part seems to be repayments from nonJapanese corporates. A silver lining is that NPL ratio improved sharply from 0.86% Sep-14 to 0.70% Dec-14, with
Substandard and Doubtful loans decreasing by about a fifth, which ties into the ¥6bn net writeback in Oct-Dec that will
be an earnings cushion into 4Q.

Finally, commodity exposure was ¥270bn or just 4% of overseas portfolio (¥190bn non-Japanese / ¥80bn Japanese),
most of which has ECA guarantee or sponsor support, and there was no Russia or peripheral European exposure except
¥6bn in Spain. Overall SMTH remains one of the highest quality retail & corporate portfolios around, and we expect
credit costs to come in well within CoE, supporting earnings & capital into 4Q, justifying today’s buyback.
Asia Pacific Equity Research
29 January 2015
Underweight
Wijaya Karya (WIKA IJ)
Price: Rp3,675
28 Jan 2015
Price Target: Rp2,500
PT End Date: 31 Dec 2015
Analyst meeting takeaways
WIKA analyst meeting takeaways and our views:

Orderbook and new contract forecasts are inline. Management’s forecast guidance on orderbook and
new contracts are in line with our estimates. 52% of the new contracts this year are expected from the
government. WIKA is optimistic that the signing of the government contracts will start in April FY15; and
the current e-catalogue to build and design system has proved to successfully bypass the bureaucracy.

Asset investments to continue. We believe that asset investment is adding pressure to WIKA’s balance
sheet at a time when the balance sheet needs to cope with strong contracts growth outlook. WIKA intends to
participate in equity for infrastructure assets to grow recurring income. The requirement for the investment
is minimum IRR of 5% above WACC and a payback period between 7 and 10 years. So far, investment in
power plant projects has been successful but tollroads investment performance has been poor.

Multiple corporate actions. WIKA’s cash flow from operations will turn negative for the first time since
the equity listing of its subsidiary WIKA Realty (85% owned by WIKA and 15% owned by employees’ coops) is scheduled in August 2015. Equity listing of subsidiary WIKA Gedung (99% owned by WIKA) is
planned in FY16. Equity rights issuance for WIKA is planned in FY17 pending government approval.

Reiterate UW, PT Rp2,500. We are concerned about the heightened competition landscape in Indonesia
E&C. We note the higher participation of foreign E&Cs in the tendering for infrastructure projects. Weak
energy prices might provide temporary support for profitability; however, there is an increased execution
risk for oil and gas contracts. We prefer pure E&C, i.e. STEC in Thailand, within ASEAN.
Table 1: WIKA's management guidance versus JPM estimates
Company guidance
30.6
54.5
16.4
0.77
FY15E (Rp trn)
New contract
Orderbook ex. JV
Revenue ex. JV
Net income
JPM estimates
30
55
16.5
0.68
Source: J.P. Morgan estimates, Company data.
Figure 1: ASEAN E&C P/Orderbook multiples convergence
0.9
0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
FY08
FY09
FY10
WIKA
Source: J.P. Morgan estimates.
FY11
FY12
CK
FY13
STEC
FY14E
FY15E
difference
2%
-1%
-1%
12%
Emerging Markets Equity Research
29 January 2015
Emerging Markets Strategy Dashboards
Emerging Markets Equity Strategy Team
Recommendations
Adrian MowatAC
Pedro Martins Junior
David Aserkoff
Rajiv Batra
Sanaya Tavaria
Emerging Markets
LatAm
CEEMEA
Emerging Markets
Emerging Markets
adrian.mowat@jpmorgan.com
pedro.x.martins@jpmorgan.com
david.aserkoff@jpmorgan.com
rajiv.j.batra@jpmorgan.com
sanaya.x.tavaria@jpmorgan.com
(852) 2800 - 8599
(55-11) 4950-4121
(44-20) 7134-5887
(91-22) 6157-3568
(1-212) 622-5469
J.P. Morgan Securities (Asia Pacific) Limited
Banco J.P. Morgan S.A.
J.P. Morgan Securities plc
J.P. Morgan India Private Limited
J.P. Morgan Securities LLC
Luis Oganes
Global Emerging Markets
luis.oganes@jpmorgan.com
(1-212) 834-4326
J.P. Morgan Securities LLC
Global Emerging Markets Research
OW: China, India, Thailand, Indonesia, The Philippines, Turkey
UW: Brazil, Chile, Russia, CE3, Malaysia, UAE and Qatar
KEY TRADES: Divided asset class
QE with Chinese characteristics (OW China)
Oil slick or surge(OW India, Thailand, Turkey-UW Russia, Brazil
and Malaysia)
Winners needing growth (India, Indonesia, Thailand, Turkey)
For full list of J.P. Morgan equity strategists please see the directory on the back page
Key Changes
Market performance to 28 January 2015
• Year to date: MSCI Emerging Markets 3% outperforming MSCI World by 3.7%
• Year to date: MSCI EM Asia 4.4% outperforming MSCI Emerging Markets by 1.5%
• Top three markets YTD in US$: India, Egypt and Philippines
• Bottom three markets YTD in US$: Poland, Colombia and Peru
J.P. Morgan's revisions to 2015 GDP forecasts
• Negative: Developed Markets 2.3%[2.4%]
J.P. Morgan's revisions to central bank policy rate forecasts
• Turkey: Current 7.75%[8.25%], Last change 20 Jan 15 -50 bp [17 Jul 14 50bp] Forecast Next change Feb 15 -25bp [Feb 15 -50bp] Mar 15 7.50%,
Jun 15 7.50%, Sep 15 7.50%, Dec 15 7.50%
Liquidity Monitor
• Top three markets by increase in ADTV (1 wk Avg. vs 3MMA): Egypt (US$0.2bn, up
100%), Malaysia (US$0.8bn, up 60%) and Philippines (US$0.3bn, up 50%)
• Top three markets by increase in Daily Velocity Ratio (1 wk Avg. vs 3MMA): Egypt,
Malaysia, and Indonesia
Sector performance
• Year to date: MSCI EM Information Technology 7.6% outperforming MSCI Emerging
Markets by 4.7%
• Year to date: MSCI EM Utilities -1% underperforming MSCI Emerging Markets by 4%
• Top three key market sectors YTD in US$: China Information Technology, India
Financials and China Telecommunication Services
• Bottom three key market sectors YTD in US$: Brazil Materials, Brazil Energy and
Mexico Materials
Table of Contents
Page #
Regional Summary
Market Performance
Liquidity Monitor
Monitoring Inflation
Market Drivers
Cross-section Earnings Growth
Earnings Revisions
Sector-Country PE Matrix
Valuation Distribution
Demand Classification
Equities relative to Bonds
Economic Momentum
Policy Rates Forecast
Currency Forecasts
Credit Risk
Emerging Market Balance
Sheets
Emerging Market in Perspective
Emerging Capital Market
Index Weightings
2
3
4
5
6
7
8,9,10
11
12
13
14
15
16
17,18
19
20
21
22
23
Please see Key Trades and Risks: Emerging
Markets Equity Strategy, Mowat et al, 13
January 2015, for our latest emerging markets
equity strategy.
Demand classification sector performance
• YTD: Global Capex 4.8%, Global Consumer 4.6%, Domestic Demand 4.1% and
Global Price Takers 3.6%
See page 24 for analyst certification and important disclosures, including non-US analyst disclosures.
J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of
this report. Investors should consider this report as only a single factor in making their investment decision.
www.jpmorganmarkets.com
Asia Pacific Equity Research
29 January 2015
Philippine Strategy Flash
2014 GDP growth surprise sets tone for better 2015E growth
The upward revision of 2015E GDP growth forecasts following the better-than-expected 4Q14 GDP growth
print and the material monetary policy flexibility amid easing inflation and softness in oil prices reinforces the
positive macro story of the Philippines; we expect this to continue supporting the strong performance of the
equity market. We reiterate our OW call on the Philippines with preference for consumer, gaming, and
consumer-focused property names.

2014 GDP growth surprises on the upside, paves the way for 2015E GDP growth upgrades. A recovery
in gov’t spending (+9.8% oya), above 5% oya in private consumption, and a strong 8.1% oya investments
growth led to the better-than-expected 6.9% oya GDP growth in 4Q14. This lifted full year growth to 6.1%
oya, the second fastest growth rate in Asia (JPMe: 5.2% oya, consensus: 6.0% oya). The JPM Economics
Team revised their 2015E GDP growth estimate from 5.4% oya to 6.4% oya. Please see Sin Beng Ong’s
Philippines: Bumper 4Q14 GDP sets tone for positive 2015 – oil provides material policy flex,
penciling in 2H15 cut for more details. Bangko Sentral ng Pilipinas (BSP), on the other hand, stated that “it
will refresh its forecasts to include the impact of the strong 2014 GDP growth, oil price expectations, shifts
in interest differential, and global investment sentiment.”.
Table 1: Philippines Quarterly GDP Breakdown
Source: J.P. Morgan Economics Research.

Recovery of gov’t spending is a welcome development. In our view, the key highlight of the GDP print
was the recovery of gov’t spending in 4Q14 which assuages concerns regarding the potential pull factor
from the gov’t infra spending bottlenecks. The government has explicitly committed that it has already taken
concrete measures to accelerate spending this year and is guiding that it will perform better over the next
twelve months. We remain confident on growth over the next few quarters as consumption remains robust
and the government is expected to accelerate spending ahead of the 6-month moratorium on project
approvals prior to the May 2016 national elections.
Asia Pacific Equity Research
30 January 2015
China City Gas Distributors
News of potential gas cost cut a positive
 Gas cost cut in 1Q2015? As reported by Bloomberg, Chi Guojing, Secretary
General at China Gas Association, China may reduce prices for incremental
natural gas supplies in 1Q2015 in light of the narrowing price gap between
natural gas and other competing fuels (e.g., LPG and fuel oil). This follows
recent news (Bloomberg, Jan 9) where another industry expert (Bai Jun, Vice
Chairman of China Natural Gas Industry Association) also expected a price cut
on incremental gas supplies (Rmb0.15/m3, or 5-6%), while prices for existing
gas supplies will increase by Rmb0.3/m3 (~10%) to align with incremental gas
supplies.
 Background: The NDRC raised city gate natural gas prices in July 2013 where
prices for incremental gas supplies were set at a level equal to 85% of the cost
of alternative fuels in (60% fuel oil /40% LPG mix) in 2H2012. No price
changes were made on incremental gas supplies since then.
 What if we “mark to market”? Our calculations suggest that, if we roll
forward price levels of alternative fuels (based on actual imported prices into
China) from Aug 2012 to Aug 2014, incremental natural gas prices will decrease
by 6% (see table on next page); If prices were to be further adjusted down to
crude oil price equivalents of US$50/bbl to US$90/bbl, incremental natural gas
prices would decrease by 19% to 55%, respectively. Assuming (1) no price
changes on existing gas supplies and (2) incremental gas supplies account for
~20% of the nation’s total gas supplies, weighted average natural gas city gate
prices will be adjusted to 4-11% based on a crude oil price of US$50 – 90 / bbl.
 Relief to stagnant gas demand: It remains to be seen if a gas cost cut will
eventually materialize. But in the event of a gas cost cut, it will be a relief to city
gas distributors given the weakening gas demand growth after the gas cost hike
in Aug 2014. As a reference, gas supply growth (proxy for demand) in China
slowed to 9% Y/Y in Sep to Dec 2014.
 Operation update: We believe most listed city gas distributors only suffered a
mild slowdown (vs. 1H2014 levels) after the gas cost hikes in 2H2014.
 Gas cost cut a positive: Share prices of listed city gas distributors have
underperformed by 12-50% since July 2014 amidst gas cost hikes and falling oil
prices. A potential gas cost hike will be a positive to the market, especially for
operators which already suffered weak demand growth in 1H2014 (CR Gas).
China city gas
Boris Kan
AC
(852) 2800-8573
boris.cw.kan@jpmorgan.com
Bloomberg JPMA KAN <GO>
Elaine Wu
(852) 2800-8575
elaine.wu@jpmorgan.com
J.P. Morgan Securities (Asia Pacific) Limited
Figure 1: Share price performance since
Jul 2014 (%)
Kunlun -36%
Ch. Gas
-24%
CR Gas
-22%
BJE
-19%
TGC
1%
Xinao
2%
HSCEI
14%
-40%
-30%
-20%
-10%
0%
10%
20%
Source: Bloomberg.
Figure 2: 1H2014 gas sales vol growth
(% Y/Y)
Xinao
33%
Ch. Gas
18%
TGC
13%
CR Gas
9%
Kunlun
0%
BJE
0%
0%
5%
10%
15%
20%
25%
30%
35%
Source: Company data
Table 1: Scenario analysis: Incremental gas prices vs. crude oil prices
Aug-12
Aug-13
Aug-14
Crude @ US$ 100 / bbl
Crude @ US$ 90 / bbl
Crude @ US$ 80 / bbl
Crude @ US$ 70 / bbl
Crude @ US$ 60 / bbl
Crude @ US$ 50 / bbl
Fuel Oil
Import Cost
(60%)
(US$/bl)
103.9
96.9
93.1
92.7
83.4
74.1
64.9
55.6
46.3
LPG Import
Cost (40%)
(US$/bl)
74.6
76.5
79.6
67.7
60.9
54.1
47.4
40.6
33.8
Crude
Import Cost
(US$/bl)
112.1
106.3
106.2
100.0
90.0
80.0
70.0
60.0
50.0
"Deemed" Nat
Gas Price based
on incl. VAT
(Rmb/m3)
3.4
3.3
3.2
3.1
2.8
2.5
2.2
1.8
1.5
% chg vs.
Aug 2012
levels
N/A
-5%
-6%
-10%
-19%
-28%
-37%
-46%
-55%
Incre gas a
% of total
supplies
N/A
20%
20%
20%
20%
20%
20%
20%
20%
Wt avg. gas
cost chg %
N/A
-1%
-1%
-2%
-4%
-6%
-7%
-9%
-11%
Source: J.P. Morgan Oil and Gas Team.
See page 3 for analyst certification and important disclosures, including non-US analyst disclosures.
J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the
firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in
making their investment decision.
www.jpmorganmarkets.com
Asia Pacific Equity Research
29 January 2015
China SMID Ideas
Feedback from China SMID Caps 1X1 Forum
Stick with high quality names going into results season
SMID-Caps
AC
 Our discussions with over 20 SMID Caps over the past two weeks
suggest that there is plenty of value in defensive SMID Caps and it’s too
early to jump into cyclical ones that might miss earnings. Profit alerts of
60-80% FY14 earnings growth by Xinyi Solar and PAX Global are
encouraging whereas many heavy industrial SMIDs saw disappointing
sales and inventory write-downs in 2HFY14.
Leon Chik, CFA
Most important SMID news
J.P. Morgan Securities (Asia Pacific) Limited
 Euro no problem. The sharp drop in the Euro has caused some
concerns over exporters. What we see amongst leading SMID exporters
is that they are good at hedging Euro risks through natural and financial
hedges but hedges on Renminbi and commodities tend to be more
complex or costly and therefore relatively unhedged. Both falling raw
material and depreciating Renminbi might help boost margins of SMID
exporters considerably in 1H15. Top exporter picks TTI, Johnson
Electric and Shenzhou.
Rajiv Batra
Bloomberg JPMA CHIK <GO>
J.P. Morgan Securities (Asia Pacific) Limited
Liwen Yin
(852) 2800-8528
liwen.yin@jpmorgan.com
(91-22) 6157-3568
rajiv.j.batra@jpmorgan.com
J.P. Morgan India Private Limited
China: China Small caps vs Market
MSCN
60%
MSCN SC
40%
20%
0%
-20%
Jul-12
Sep-12
Nov-12
Jan-13
Mar-13
May-13
Jul-13
Sep-13
Nov-13
Jan-14
Mar-14
May-14
Jul-14
Sep-14
Nov-14
Jan-15
 Pre-earnings season jitters – warnings and alerts are coming fast and
we prefer to avoid cyclical stocks because the drop in oil and metals
prices could cause a leg down on inventory adjustments in 2014 before
the benefits flow to 2015 P/L.
(852) 2800-8590
leon.hk.chik@jpmorgan.com
Source: Bloomberg
Top Picks
TAL Education
XRS US (OW)
Xinyi Solar
968 HK (OW)
SMID Cap updates
Techtronic Ind
669 HK (OW)
 TAL Education remains our AFL top pick despite the 3Q earnings miss
on higher spending to develop online services. Enrollment and sales
growth continue to surprise on the upside.
PAX Global
327 HK (OW)
CSC
3311 HK (OW)
New Oriental
EDU US (OW)
 Xinyi Solar, in our view, is a good play in a volatile solar sector with the
signing of its largest EPC contract to build Rmb750m in rooftop solar
panels in Anhui.
Skyworth Digital
751 HK (OW)
Kingboard Lam
1888 HK (OW)
Kingboard Chem
148 HK (OW)
Xinyi Solar
968 HK (OW)
 PAX Global announced a profit alert suggesting that demand for
innovative electronic payment terminals remains strong despite higher
domestic competition amongst the key customers for these machines.
Shenzhou Int;'l
2313 HK (OW)
PAX Global
327 HK (OW)
Johnson Electric
179 HK (OW)
China Lesso
3238 HK (OW)
Nord Anglia Edu
NORD US (OW)
Haitian Int’l
1882 HK (OW)
Texhong
2678 HK (N)
China Travel
208 HK (N)
Jiangnan
1366 HK (NC)
Dongpeng
3386 HK (NC)
Sanjing
2198 HK (NC)
Idea of the week

We seeing growing appreciation for Skyworth’s brand and network as
the largest TV brand in China sees its share price approach a 12-month
high. New refrigerator, air-con, air purifiers and third party logistics
will all likely add to sales growth and operating leverage is high as
network and branding are sunk costs.
Other stocks mentioned
See page 26 for analyst certification and important disclosures, including non-US analyst disclosures.
J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the
firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in
making their investment decision.
www.jpmorganmarkets.com
Asia Pacific Equity Research
30 January 2015
China Steel Sector
Mid-January CISA output falls ahead of CNY
 Mid-Jan CISA output down 5.1% ahead of CNY. According to CISA, daily
crude steel output from large and mid-sized mills (CISA’s 92 members) fell
5.1% to 1.69Mtpd in mid-Jan, or 618Mtpa (versus 651Mpta in early Jan). This
came as some mills had already sent workers off ahead of CNY amid soft
demand. Assuming non-CISA mills account for c28% of total output (as in
Dec), we estimate that national output may have fallen 5.1% to 857Mtpa in midJan (CISA’s Dec output of 872mt). This leaves China’s steel output in Jan at
74.8Mt (+14.2% y/y) at current run rates.
 Steel inventory restocking while ports’ iron ore stockpiles fall. In mid-Jan,
both producer and trader stocks jumped by 8.3% to 14.8 Mt (early Jan: 13.6Mt)
and by 6.2% to 10.7Mt (early Jan: 10.1Mt), respectively. Taken together, we
estimate CISA mills and traders now hold 13.5 days (early Jan: 13.2 days) of
steel inventories, above trend level of 14.2 days. On the raw materials side, midJan iron ore stocks at mills climbed to 22.4 days (early Jan: 21.8 days), above
the historical level of 27 days. Nonetheless, stocks at Chinese ports continue to
fall, now at 99.8Mt (34 days, historically 32 days), down from 100.2 Mt in early
Jan. We estimate seaborne iron ore prices are 17% cheaper (late Dec: 14%) than
domestic market. We note that utilization rate at domestic iron ore mines drifted
lower to 53% in mid-Jan (early Jan: 54%), well below 1H14 average of c80%.
Coking coal mines’ utilization rate fell to 83% (early Jan: 84%) in mid-Jan.
 Cash spreads keep sliding as steel prices fall. Sentiment amongst steel mills
and traders improved somewhat. That said, lower steel prices pushed cash
spreads for HRC and rebar lower to Rmb1,425/t (Rmb1,493/t in early Jan) and
Rmb1,303/t (Rmb1,353/t in early Jan) respectively. With slow construction in
1Q and weak cash spreads, we remain cautious on the sector but see better riskreward for Maanshan.
Angang Steel H
Angang Steel A
Baosteel
Maanshan H
Maanshan A
China average
Ticker
Rating
347 HK
000898 CH
600019 CH
323 HK
600808 CH
N
N
N
OW
OW
Price
(LC)
5.70
5.43
6.05
2.09
3.59
Daniel Kang
AC
(852) 2800 8570
daniel.kang@jpmorgan.com
Bloomberg JPMA KANG <GO>
Waiyin Karen Li, CFA
(852) 2800-8561
waiyin.karen.li@jpmorgan.com
Parsley Rui Hua Ong
(852) 2800-8509
parsley.rh.ong@jpmorgan.com
J.P. Morgan Securities (Asia Pacific) Limited
Figure 1: CISA steel members’ output falls
(Mt)
675
650
625
600
575
550
525
Source: Note: Figures in Million tonnes on an annualized basis
Source: Mysteel, CISA, J.P. Morgan
Figure 2: China steel prices soften (Rmb/t)
4500
4100
3700
3300
2900
2500
Jan-12
Jan-13
Rebar
Jan-14
Jan-15
HRC
Source: Bloomberg, J.P. Morgan
China steel sector valuation comparison
Company
Steel
Mar-12
Apr-12
May-12
Jun-12
Jul-12
Aug-12
Sep-12
Oct-12
Nov-12
Dec-12
Jan-13
Feb-13
Mar-13
Apr-13
May-13
Jun-13
Jul-13
Aug-13
Sep-13
Oct-13
Nov-13
Dec-13
Jan-14
Feb-14
Mar-14
Apr-14
May-14
Jun-14
Jul-14
Aug-14
Sep-14
Oct-14
Nov-14
Dec-14
Jan-15
China’s steel output from large and mid-sized mills (CISA members) fell 5.1% to
618Mtpa in mid-Jan (from 651Mtpa in early Jan) as output begins to slow ahead
of Chinese New Year (CNY) and mills respond to weak demand conditions. Near
term, the recent removal of boron-added steel export rebates and weak macro
readings will keep domestic steel markets under pressure with cash spreads
trending lower in the seasonally slower 1Q period. We recently turned more
cautious on the sector, but see some support from likely macro stimulus and
tighter environmental policies.
Perf.
YTD (%)
-14%
-12%
-14%
-10%
-10%
-13%
P/E (x)
15E
16E
26.6
25.0
31.8
29.8
15.8
14.0
12.5
10.8
26.8
23.3
20.8
18.8
P/BV (x)
15E
16E
0.7
0.7
0.8
0.8
0.8
0.8
0.5
0.5
1.1
1.1
0.9
0.8
EV/EBITDA (x)
15E
16E
8.3
8.1
8.3
8.1
7.0
5.9
6.1
5.4
6.1
5.4
7.1
6.4
ROE (%)
15E
16E
2.6
2.7
2.6
2.7
5.4
5.9
4.3
4.8
4.3
4.8
4.6
5.0
Div Yield (%)
15E
16E
0.8
0.8
0.9
1.0
3.2
3.6
1.9
1.9
1.4
1.4
2.4
2.6
Source: Bloomberg, J.P. Morgan estimates. Note: Share prices and valuations are as of 29 January 2015
See page 8 for analyst certification and important disclosures, including non-US analyst disclosures.
J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the
firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in
making their investment decision.
www.jpmorganmarkets.com
Asia Pacific Equity Research
29 January 2015
Dry Bulk Shipping
Capesize earnings rose, mainly driven by higher iron
ore shipping demand to China; port congestion fell







The BDI fell 3% w/w as higher Capesize freight rates were more than
offset by lower rates across vessel segments: Capesize earnings surged
49% w/w to $9.9K/day for the week ending Jan 23, mainly driven by
increased activity in the Pacific. However, Panamax earnings fell 12% w/w
to $5.2K/day. The Supramax/Handysize index fell 9% w/w. No period
fixture was done last week versus two period fixture done at $12.5/day for
11-14 months in the previous week. The one-year Capesize time-charter
rate fell 2% w/w to $11.5K/day (source: Clarksons).
Forward curve points to higher rates from 2Q15: FFA indications for
Capesize time-charter are at $8.5K/day in 2Q15 (current: $7.7K/day), $10.4K in
3Q15 and $14.4K in 4Q15. FFA for Panamax TC are at $7.4K/day for 2Q15
(current: $5.6K/day), $7.3K in 3Q15, $8.3K/day in 4Q15. FFA for Supramax
TC are at $7.9K/day for 2Q15 (current: $6.9K/day), $7.9K in 3Q15, $8.8K/day
in 4Q15. FFA for Handysize TC are at $6.0K/day for 1Q15 (current:
$6.0K/day), $7.1K in 2Q15, $7.4K/day for CY2016 (source: Clarksons, SSY).
Capesize ship chartering activity held fairly steady w/w at 39 vessels during
the week but were 11% higher y/y. 82% will carry iron ore (vs 46% a week ago),
18% coal (49%) and 0% unknown (5%). Jan-Dec 2014 split: 76% iron ore (vs
69% in 2013), coal 18% (23%), others 6% (8%).
Iron ore shipping demand to China rose while coal shipping demand fell:
64% of the Capesize vessels were chartered to carry cargo to China (vs 59% a
week ago), 92% carrying iron ore (from 70%) and 8% coal (30%). Europe’s
share of shipping demand fell to 21% (from 26%) while Rest of Asia’s share
rose to 15% (from 13%) and Others’ fell to 0% (3%). In Jan-Dec 2014, the
split was China 71% (vs 70% in 2013), rest of Asia 14% (16%), Europe 14%
(13%), other 1% (1%).
Ship chartering activity rose in the Handysize segment but fell in the
other vessel segments: In the Panamax spot market, the number of ships
chartered fell 20% w/w to 44 vessels with coal/grain shipping demand driving
36%/27% of the ships chartered. The number of ships chartered fell 29% w/w
in the Handymax segment but rose 100% in the Handysize segment.
Global ports congestion fell w/w: 155 Capesizes were at anchorage, 12%
lower w/w or c.9% of the global Capesize fleet. Details: 1) Australia’s main
coal/ore ports – 125 (from 133) vessels plus 191 (from 187) vessels arriving in
the next 14 days. 2) Brazil – 20 (from 26) vessels at anchorage. 3) China’s
major ore & coal berths – 40 (49) vessels at anchorage plus 64 (from 54)
vessels arriving in the next 14 days (source: Global ports as at Jan 29).
Global bulk shipping capacity rose 0.1% m/m to 756.2MM dwt as at Jan 1.
This is the 30th month of a ≤1% m/m rise, resulting in a 4.8% growth in full year
2014, in line with our forecast and well below the 10% growth implied by the
vessel order book at the start of this year. Scrapping removed 305 ships and
15.9MM dwt in 2014 (or c.2.1% of global capacity). The dry bulk shipping sector
recovery could be delayed till late 2015 or early 2016 but we see opportunities to
accumulate oversold stocks ahead of any pick-up in demand. Top picks: Mitsui
OSK (0.7x P/B, 67% below historical average valuation), Pacific Basin (0.6x P/B,
49% below), Precious Shipping (1.0x P/B, 42% below).
Shipping
Corrine Png
AC
(65) 6882-1514
corrine.ht.png@jpmorgan.com
Bloomberg JPMA PNG <GO>
J.P. Morgan Securities Singapore Private
Limited
Baltic Dry Index
13,500
12,000
10,500
9,000
7,500
6,000
4,500
3,000
1,500
0
02 03 04 05 06 07 08 09 10 11 12 13 14 15
Source: Bloomberg
Baltic Freight Indices – Summary
Baltic Dry
Baltic Handysize
Baltic Supramax
Baltic Panamax
Baltic Capesize*
Baltic Dirty Tanker
Baltic Clean Tanker
Index
720
380
650
685
887
917
705
W/W
-2.8%
-9.1%
-9.2%
-9.7%
43.1%
-3.5%
-4.7%
Y/Y
-43.4%
-46.9%
-42.0%
-53.3%
-50.0%
-26.2%
16.5%
Source: Bloomberg, as of Friday 23 Jan close. *The Baltic
Exchange introduced a new Capesize Index on 6th May 2014.
See page 7 for analyst certification and important disclosures, including non-US analyst disclosures.
J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the
firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in
making their investment decision.
www.jpmorganmarkets.com
Asia Pacific Equity Research
30 January 2015
Macau gaming
Full-smoking ban on the horizon? Our quick-and-dirty impact analysis

What’s happened? Macau’s Secretary for Social Affairs and Culture (a.k.a. Health Bureau), Alexis Tam, said
yesterday that government may submit a bill for full smoking ban inside casinos during 1H15, which would include
VIP rooms. He also noted that the bill is unlikely to pass during this legislative year, even if it were submitted in 1H15,
considering likely long debate on the bill. Of note, next legislative session runs during October 2015 to August 2016.

It was just a matter of time, we (& the market) think. During his press interview in December, Mr. Tam already
discussed a possibility of new and “tighter” smoking ban from March 2015; since then, we believe it has been a
consensus in the market as well as the industry that full smoking ban is inevitable and just a matter of timing.

How bad would it be?: In any case, full smoking ban, if enacted, would hurt gaming demand; this is also just a matter
of how bad it’s going to be and how long the impact would last. It’s impossible to accurately predict the potential
impact, we admit. Still, our two cents below:
(1) Case study. Impact from smoking ban has varied substantially across jurisdictions, depending on cultural
background, availability of alternative jurisdiction, propensity to gamble vs. smoke, etc. That said, smoking ban
has generally reduced gaming revenues by c.10~20% for the first full year, if we look at the cases in the U.S.
and Australia (e.g. Colorado, Illinois, Delaware, Victoria, etc). This however appears to have been followed by a
gradual recovery, as the players adapt and adjust to new rule.
(2) Not all gamblers are created equal. But, we argue the impact for Macau should be smaller than above, taking
into account that Macau casinos are “destination casinos” and have no other alternative, not to mention the
mainlanders’ high propensity to gamble. For instance, we estimate Macau’s recent smoking ban on mass segment
has negatively impacted mass table revenues by less than 10%, based on our conversations with operators.
(3) Our best guesstimates on potential impact. We believe potential full smoking ban could have similar ~10%
impact on VIP and “reclassified” premium mass revenues. Therefore, considering these two segments collectively
generated 62% of total gaming revenues in recent month (Exhibit 1), potential full-smoking ban could hurt
gaming demand by 5~6%, based on our back-of-the-envelope calculation (c.60% x ~10%). Impact on operators’
profits however should be smaller, given relatively lower margin for those segments (vs. grind mass or nongaming) and a potential return of some junket VIP players (as junkets would lose its competitive edge in smoking
tables).
(4) Impact for six operators. If full smoking ban happens, we think potential impact should be the smallest for
Sands China by big margin, as it generated only 39% of GGR (& much smaller profits) from smoking-enabled
tables in December (Chart below). On the other hands, we note MPEL and MGM are most exposed to such
segments.
Asia Pacific Equity Research
29 January 2015
Thai banks
Solid liquidity; funding cost to stay low for longer with
further downside possible
 We forecast stable NIM for FY15 but see upside potential. The amount
of excess liquidity is at a record high. This suggests very low pressure
on funding costs. No cut in benchmark rates means no pressure on asset
yield. This is positive for NIM outlook. Loan expansion, esp. into SME
and housing, should differentiate the NIM trend for each individual
bank. Among the major banks, KTB and BBL have lower LDRs
implying better NIM outlook vs SCB and KBANK. However, for BBL
with its corporate lending focus, NIM is not expected to move much.
Banks, Real Estate & Strategy
AC
Anne Jirajariyavech, CFA
(66-2) 684-2684
anne.x.jirajariyavech@jpmorgan.com
Bloomberg JPMA JIRAJARIYAVECH <GO>
JPMorgan Securities (Thailand) Limited
Josh Klaczek
(852) 2800-8534
josh.klaczek@jpmorgan.com
 The Bank of Thailand decided to hold the policy rate steady at 2.0% at
yesterday’s meeting, given the view that the domestic economy is
recovering and public spending/investment will accelerate through the
year. Also, the MPC cited lower oil prices bringing inflation down
below its target and increasing policy flexibility. We believe monetary
direction will remain in ‘easing’ mode with 1) lower oil price & inflation
2) concerns on growth 3) debt burden of low-income households.
 We saw funding costs at a lower level during the pre-GFC period. A few
comparisons between then and now: 1) LDR (plus) is similar to then, 2)
funding cost is also similar, 3) the oil price is lower, 4) US QE is ending,
but EU, Japan and China are seeing monetary expansion, and 5) the
absence of aggressive competition from SFI. This makes us believe there
is potential upside on NIM for banks, especially for ones that expand
loans in non-corporate areas. SME and housing loans are two major areas
of growth we see for the year.
J.P. Morgan Securities (Asia Pacific) Limited
ASEAN countries' real interest rate
4
ASEAN: Real Rate
3
2
1
(1)
(2)
(3)
ID
MY
PH
SG
TH
VN
Source: CEIC
 SCB is a leading player for housing loans. KBANK is key SME player.
KTB should benefit from expanding private sector lending; it secured
significant funding last year that is now ready to deploy.
Valuation summary
Current
price
BAY
(Bt)
76.00
BBL
KBANK
KTB
SCB
P/PPOP
2014E
P/E
2015E
(x )
12.3
11.0
193.00
6.8
6.2
230.00
7.1
6.4
23.00
184.50
6.0
7.5
5.5
6.9
TMB
3.16
8.8
TCAP
33.75
2.3
KKP
40.25
TISCO
Sector
47.00
2014E
(x)
27.8
Div
2015E
yield
P/BV
2014E
ROE
2015E
2014E
PPOP Growth
2015E
(% )
2014E
Net profit growth
2015E
2014E
(% )
19
YT D
2015E
stock
15
perf.
70%
24.1
(% )
1.1
(x)
3.5
3.2
13.0
13.8
(% )
14
12
9.4
8.5
3.6
1.2
1.1
12.8
12.9
11
10
9
10
-1%
11.6
10.4
1.3
2.1
1.8
19.8
18.9
14
11
14
12
0%
10.1
11.2
9.2
10.2
3.8
2.7
1.4
2.2
1.3
1.9
14.8
21.1
14.8
20.3
4
12
9
10
(6)
11
9
10
1%
1%
8.3
17.7
15.6
1.0
2.0
1.9
12.0
12.5
8
6
35
14
8%
2.4
8.4
7.9
4.4
0.8
0.8
10.4
10.3
4
(2)
(45)
7
6%
4.9
5.0
12.9
10.5
6.6
0.9
0.9
7.4
8.8
4
(3)
(40)
22
2%
4.0
7.2
4.1
6.7
8.9
12.3
8.5
11.1
5.0
2.4
1.5
1.8
1.3
1.7
17.4
15.8
16.3
15.8
3
10
(3)
9
0
6
4
11
11%
11%
Source: Bloomberg and J.P. Morgan
See page 5 for analyst certification and important disclosures, including non-US analyst disclosures.
J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the
firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in
making their investment decision.
www.jpmorganmarkets.com
James R. Sullivan, CFA
(65) 6882-2374
james.r.sullivan@jpmorgan.com
Asia Pacific Equity Research
30 January 2015
Disclosures
Analyst Certification: The research analyst(s) denoted by an “AC” on the cover of this report certifies (or, where multiple research analysts are primarily
responsible for this report, the research analyst denoted by an “AC” on the cover or within the document individually certifies, with respect to each security
or issuer that the research analyst covers in this research) that: (1) all of the views expressed in this report accurately reflect his or her personal views about
any and all of the subject securities or issuers; and (2) no part of any of the research analyst's compensation was, is, or will be directly or indirectly related to
the specific recommendations or views expressed by the research analyst(s) in this report. For all Korea-based research analysts listed on the front cover, they
also certify, as per KOFIA requirements, that their analysis was made in good faith and that the views reflect their own opinion, without undue influence or
intervention.
Research excerpts: This note includes excerpts from previously published research. For access to the full reports, including analyst certification and
important disclosures, investment thesis, valuation methodology, and risks to rating and price targets, please contact your salesperson or the covering
analyst’s team or visit www.jpmorganmarkets.com.
Important Disclosures
•
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Volkswagen Prefs..
• Lead or Co-manager: J.P. Morgan acted as lead or co-manager in a public offering of equity and/or debt securities for Beijing Enterprises Holdings
Limited, MakeMyTrip Ltd., Maanshan Iron & Steel - H, Bank Rakyat Indonesia, IDFC, Sesa Sterlite, POSCO, adidas Group, Under Armour, Inc.,
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•
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Corporation), IDFC, Hotel Shilla, Sesa Sterlite, Cairn India Limited, Adani Power, Samsung Engineering, POSCO, Sumitomo Mitsui Trust Holdings (8309),
Samsung Electro-Mechanics, Samsung Heavy Industries, Advanced Info Services, Shinsei Bank (8303), Bank of China (BOCHK), Hang Seng Bank, LG
Electronics, Pacific Basin Shipping, Mitsui O.S.K. Lines (9104), CapitaRetail China Trust, Asian Paints Limited, Wijaya Karya, NIKE, Inc., adidas Group,
Under Armour, Inc., Mazda Motor (7261), Toyota Motor (7203), Volkswagen Prefs., Siam Commercial Bank, KASIKORNBANK, Krung Thai Bank,
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•
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•
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Heavy Industries, Shinsei Bank (8303), Bank of China (BOCHK), Hang Seng Bank, LG Electronics, Pacific Basin Shipping, Mitsui O.S.K. Lines (9104),
NIKE, Inc., adidas Group, Under Armour, Inc., Toyota Motor (7203), Volkswagen Prefs., Siam Commercial Bank, KASIKORNBANK, Krung Thai Bank,
Bangkok Bank, PTT Exploration & Production, LG Display.
•
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provided were non-securities-related: NTT Docomo (9437), Dr. Reddy's Laboratories Limited, Samsung Electronics, HDFC (Housing Development Finance
Corporation), Sesa Sterlite, Cairn India Limited, POSCO, Sumitomo Mitsui Trust Holdings (8309), Bank of China (BOCHK), Hang Seng Bank, LG
Electronics, NIKE, Inc., adidas Group, Under Armour, Inc., Toyota Motor (7203), Volkswagen Prefs., KASIKORNBANK, Krung Thai Bank, PTT
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•
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Beijing Enterprises Holdings Limited, MakeMyTrip Ltd., Maanshan Iron & Steel - H, Bank Rakyat Indonesia, Samsung Electronics, IDFC, Sesa Sterlite,
Cairn India Limited, Adani Power, POSCO, Sumitomo Mitsui Trust Holdings (8309), Bank of China (BOCHK), Hang Seng Bank, adidas Group, Under
Armour, Inc., Toyota Motor (7203), Volkswagen Prefs., PTT Exploration & Production.
• Investment Banking (next 3 months): J.P. Morgan expects to receive, or intends to seek, compensation for investment banking services in the next three
months from NTT Docomo (9437), Beijing Enterprises Holdings Limited, MakeMyTrip Ltd., Maanshan Iron & Steel - H, Bank Rakyat Indonesia, Dr.
Reddy's Laboratories Limited, Samsung Electronics, IDFC, Sesa Sterlite, Cairn India Limited, Adani Power, POSCO, Sumitomo Mitsui Trust Holdings
James R. Sullivan, CFA
(65) 6882-2374
james.r.sullivan@jpmorgan.com
Asia Pacific Equity Research
30 January 2015
(8309), Bank of China (BOCHK), Hang Seng Bank, LG Electronics, adidas Group, Under Armour, Inc., Mazda Motor (7261), Toyota Motor (7203),
Volkswagen Prefs., PTT Exploration & Production.
• Non-Investment Banking Compensation: J.P. Morgan has received compensation in the past 12 months for products or services other than investment
banking from NTT Docomo (9437), Hyundai Steel Company, Bank Negara Indonesia Persero, Bank Rakyat Indonesia, Dr. Reddy's Laboratories Limited,
Samsung Electronics, Samsung SDI, HDFC (Housing Development Finance Corporation), IDFC, Sesa Sterlite, Cairn India Limited, Adani Power, Samsung
Engineering, POSCO, Sumitomo Mitsui Trust Holdings (8309), Samsung Heavy Industries, Shinsei Bank (8303), Bank of China (BOCHK), Hang Seng
Bank, LG Electronics, Pacific Basin Shipping, Mitsui O.S.K. Lines (9104), NIKE, Inc., adidas Group, Under Armour, Inc., Toyota Motor (7203),
Volkswagen Prefs., Siam Commercial Bank, KASIKORNBANK, Krung Thai Bank, Bangkok Bank, PTT Exploration & Production, LG Display.
•
•
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•
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Explanation of Equity Research Ratings, Designations and Analyst(s) Coverage Universe:
J.P. Morgan uses the following rating system: Overweight [Over the next six to twelve months, we expect this stock will outperform the average total return
of the stocks in the analyst’s (or the analyst’s team’s) coverage universe.] Neutral [Over the next six to twelve months, we expect this stock will perform in
line with the average total return of the stocks in the analyst’s (or the analyst’s team’s) coverage universe.] Underweight [Over the next six to twelve months,
we expect this stock will underperform the average total return of the stocks in the analyst’s (or the analyst’s team’s) coverage universe.] Not Rated (NR):
J.P. Morgan has removed the rating and, if applicable, the price target, for this stock because of either a lack of a sufficient fundamental basis or for legal,
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James R. Sullivan, CFA
(65) 6882-2374
james.r.sullivan@jpmorgan.com
Asia Pacific Equity Research
30 January 2015
J.P. Morgan Equity Research Ratings Distribution, as of January 1, 2015
J.P. Morgan Global Equity Research Coverage
IB clients*
JPMS Equity Research Coverage
IB clients*
Overweight
(buy)
45%
56%
45%
75%
Neutral
(hold)
43%
49%
48%
67%
Underweight
(sell)
12%
33%
7%
52%
*Percentage of investment banking clients in each rating category.
For purposes only of FINRA/NYSE ratings distribution rules, our Overweight rating falls into a buy rating category; our Neutral rating falls into a hold rating category; and
our Underweight rating falls into a sell rating category. Please note that stocks with an NR designation are not included in the table above.
Equity Valuation and Risks: For valuation methodology and risks associated with covered companies or price targets for covered companies, please see the
most recent company-specific research report at http://www.jpmorganmarkets.com, contact the primary analyst or your J.P. Morgan representative, or email
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James R. Sullivan, CFA
(65) 6882-2374
james.r.sullivan@jpmorgan.com
Asia Pacific Equity Research
30 January 2015
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