2016Feng Shui Index

2 3

CONTENTS Monkeys tale Famous chimps

The two bazi in the chart - literally eight (Chinese) characters, which change position on a 60-year cycle - guide predictions for the year.

The Chinese monkey is an ambivalent figure. Close to man and yet

uncontrollable. Loved for his human-like antics and disliked for his

lack of social grace and unpredictability. The embodiment of this years

zodiac, and the year ahead, is the character Sun Wukong, or Monkey

King, from the Ming Dynasty saga, Journey to the West.

The Monkeys character is so dominant that the novel is often referred

to as his story. But its worth recalling that, after being punished for

a long list of impish wrongdoings and consequently caged by the

Buddha, the Monkey is entrusted to assist the monk, Xuan Zang, to

retrieve scriptures from India for the good of humanity. And thats how

we see the year ahead. One of impish, apeful, baboonery, but overall,

not too bad, with many opportunities for fast movers.

As our starting point, we look at the eight-character Bazi for the Monkey

and compare it to the eight-character birth chart of the Earth Rooster,

the Hang Seng Index. This is a Fire Monkey year, and in the chart Fire sits

atop Metal, which has capacity for bringing about conflict. However,

the Fire is relatively benign, and there is enough Water hidden in the

Earth Roosters chart to withstand a scorching. Our forecast chart (page

26) takes a unique turn from recent years, with a decent start after a bad

end to the Goats reign, a big dip in the middle followed by a recovery.

In the 60-year Stems and Branches, or fiddlesticks as we call them,

this is a year to set things up for a stronger future. Thats good news

for China as it sets about shoring up its One Belt, One Road strategy

with wealth and security two guiding motives for the countrys modern

Journey to the West. We also take a look at the fortunes of the Zodiac,

some celebrities and offer guidance for deflecting negative energies.

H aving pegged the Goat, how will we fare with the primate?

We picked the Goat-path

trajectory last year with

eerie facility. Rising from

February through June,

we fingered 8 July as the

inauspicious day when

the Hang Seng fell nearly

6%. From there we had the

market dropping through

October until the Goat found his footing and began to climb again. Alas, the influence of the

impish ape arrived early, and our Billy was bumped off his intended path, which was to end the

year higher than it started. See page 4 where we also compare our previous Feng Shui forecasts

for the Monkey years of 1992 and 2004 with actual index performance.

Monkey business

A volatile ride as the Hang Seng goes ape OVERVIEW ................................................................... 3

PREVIOus MONKEY YEaRs ........................................ 4

sEctOR hIghlIghts .................................................. 6

afflIctION dEflEctION .......................................... 8

ZOdIac sIgN guIdE .................................................. 9

faMOus facEs ......................................................... 21

PROPERtY OutlOOK ............................................... 24

clsa fENg shuI INdEx 2016 ................................... 26

Heavenly stems

}

Rooster

You

Yin Metal

YEARPILLAR

Ji

Yin Earth

Yin Water

Pig

Hai

Yin Wood

MONTHPILLAR

Yi

Rabbit

Mao

Yin Wood

Gui

Yin Water

DAYPILLAR

Yang Metal

Monkey

Shen

HOURPILLAR

Geng

Yang Metal

Hang Seng Earth Rooster

Earth

ly br

anch

es }

Bazi - Interplay determines our forecasts

OVERVIEW

FaMouS cHiMPS

Our cover is a representation of one of Chinas most famous monkeys, Sun Wukong from the Ming

Dynasty (16th Century AD) novel, Journey to The West.

2016Feng Shui Index

the clsa feng shui Index for the Year of the goat 2015

GOAT

2015Feng Shui Index

EAR o e

Y

24,485

2 feb19,88811 Jan

Childrens favourite

curious George

HanumanHindu deity, and also revered in Balinese and Thai culture

Sanbiki No SaruJapanese three wise monkeys

BubblesMichael Jacksons pet chimp

Sun Wukong as performed in Chinese opera

Sun Wukong

The MonkeesAmerican rock band

Monkey

Shen

Yang Metal

YEARPILLAR

Bing

Yang Fire

Yang Wood

Tiger

Yin

Yang Metal

MONTHPILLAR

Geng

Dragon

chen

Yang Earth

Bing

Yang Fire

DAYPILLAR

Fire Monkey

Yin Metal

Rooster

You

HOURPILLAR

Ding

Yin Fire

4 5

The Wood Monkey lost his hold in the treetops early and by mid-May had fallen so far from the perch that the only way from there was up. It was clearly a year for paying peanuts and get-ting your moneys worth. Even if hed tried to ape anyone else, by year-end, hed only managed to change into the proboscis mon-key and finish a nose in front

of where hed started, making monkeys of us all.

Our Feng Shui Index forecast missed the early fall, but found the bananas by year-end.

CLS

A F

eng

Shui

Inde

x 20

04

Our Feng Shui Index forecast was a little extreme, but still tracked key market moves.

The Water Monkey spent the first two months as the bathing

ape, floundering around as if the

world were a barrel of monkeys. Finally he got that off his back and changed into the grease monkey, got down to work and showed us his white tail tuft for two months. From June through November, he perfected the quadrupedal knuckle walking trick and went nowhere fast. He then lost that monkey grip in a nasty fall before finishing the year

slightly higher than he began.

The Metal Monkey skidded in through the savannah and spent the first month poking

ants nests on the ground. From April through December, he lost his tail and became the climbing chimp on the monkey bars. Resting at the top, there he turned into a blue monkey and got down about things for a month or so before finishing

the year as the alpha male of the powder monkey troop.

The Earth Monkey Dow slipped early in the year then found his nuts and rose, gibbon it was a different day and age, to heady heights not seen before in the world of man. From May through September, the sleeping monkey did not fall off the branch, and on waking headed for the canopy to enjoy the fruits of his liking from November on. But on the way up, he left his wrench somewhere and the following two years saw the Dow lose nearly half its value.

27 Feb: Stella Leibeck spills McDonalds coffee; awarded US$2.86m.9 Mar: PRC ratifies the Nuclear Non-Proliferation Treaty.20 Apr: Seville Expo 92 opens.23 May: Italian judge Giovanni Falcone is murdered by mafia bomb. 20 Jun: Estonia gets its own currency, ending the rule of the ruble.22 Jul: Pablo Escobar escapes from his luxury prison.3 Aug: Wang Hongwen from the Gang of Four dies.8 Sep: Japan sends troops abroad for the first time since WWII.18 Dec: Kim Young-sam wins the South Korean election.20 Jan: Bill Clinton is sworn in as the 42nd President of the USA.

30 Jan: North Vietnam launch the Tet Offensive.16 Mar: The My Lai Massacre.29 Apr: The musical Hair opens on Broadway.29 May: De Gaulle flees Paris after the demonstrations against him.8 Jun: Chiang Kai-shek calls the CCP the origin of disasters in East Asia.27 Jul: End of Red-Guard power over the army in Cultural Revolution.21 Aug: Soviet tanks enter Prague.11 Oct: The first manned Apollo mission blasts off.9 Dec: The first demonstration of the computer mouse.20 Jan: Richard Nixon inaugurated as the 37th President of the USA.

13,727

22 Jan

950

16 Feb

4,711

4 Feb

860

30 Jan

13,8468 Feb

1,6514 Feb

5,91422 Jan

94516 Feb

Hang Seng Index

Hang Seng Index

Dow Jones IndexHang Seng Index

PREVIOUS YEARSPrevious years

1992 Water Monkey

1980 Metal Monkey

1968 earth Monkey

2004 Wood Monkey

4 Feb: Facebook is launched.19 Mar: Shooting of Chen Shui-bian in Tainan.1 Apr: Google launches Gmail.28 Jul: The Chinese establish the Yellow River site in the Arctic.13 Aug: Opening of the Summer Olympics in Athens.21 Sep: Construction begins on the Burj Khalifa.27 Oct: Discovery of the remains of Homo Floresiensis in Indonesia.21 Nov: Crash of China Eastern Airlines flight MU5210.

25 Feb: A military coup takes place in Suriname.4 Mar: Robert Mugabe elected Prime Minister of Zimbabwe.22 May: Pac-Man game is released in Japan.25 Jul: AC/DC release Back in Black.13 Aug: The base monthly wage in Taiwan rises to NT$12,365.10 Sep: Zhao Ziyang becomes the third Premier of the PRC.23 Oct: HK ends the Touch Base policy for illegal mainland immigrants.20 Nov: Gang of Four trial begins in the PRC.8 Dec: John Lennon shot dead.20 Jan: The hostages from the US embassy in Tehran are finally freed.

1

DESTROY CYCLE

NURTURECYCLE

METAL

This year is going to get better. Shipping, banking, gambling

and retail will all make good ground. We happily announce that philosophy and arcane

studies belong to water and that their tide is rising - good for all of us, even if these stocks are not listed.

WATER

WOOD

From wood come the paper and lumber industries as well as timepieces, hairdressers and ingredients for

medicine and the like. This year may not be as good

as the last, but there are still some good

trees in this forest.

EARTH

From our planet there is nothing

to go ape over. From earth come construction,

both buildings and capital, livestock rearing and real estate, all of which may not go baboon but should fare well. Leather and hotels are well indicated so expect some activity from right-wing politicians as they indulge in their primate sensibilities.

China strategy

Property

Resources

Renewables

Healthcare/Pharma

Retail

It is not only gold and silver that

should thrive this year - think autos and machinery

(good for monkey-bar makers); lawyers (always monkeying around);

martial arts (the drunken monkey form anyone?); and public servants (nah,

cant think of any monkey-associated terms for them).

Financials

Autos/Machinery

Its a fire year, but other elements are going to weigh it down.

Nonetheless, no-one should lemur as there is much to look forward to. Telecoms and computing

should not be making monkeys out of their supporters. Cosmetics, glasses and advertising may well come trooping in.

Gaming

Transport

Oil & Gas

Utilities

Telcos/Internet

Technology

China pps

Great transition 2 Switch to services softens freefall

Special report

September 2015

The chains that

bind

Prospects for C

hina in 2016

Special report

December 2015

Chinapps

CKI and Po

wer Assets

Sector out

look

PAH/CKI t

rading his

tory over p

ast five ye

ars

Source: CL

SA

Find CLSA r

esearch on

Bloomberg,

Thomson R

euters, Fac

tset and Ca

pitalIQ - an

d profit fro

m our eval

u@tor prop

rietary data

base at cls

a.com

For importa

nt disclosu

res please

refer to pa

ge 32.

1.0

1.1

1.2

1.3

1.4

1.5

1.6

Oct-

10

Jan-

11

Apr-

11

Jul-1

1

Oct-

11

Jan-

12

Apr-

12

Jul-1

2

Oct-

12

Jan-

13

Apr-

13

Jul-1

3

Oct-

13

Jan-

14

Apr-

14

Jul-1

4

Oct-

14

Jan-

15

Apr-

15

Jul-1

5

(x) Power Ass

ets px / C

KI pxRatio

offered

5-yr aver

age

Rajesh

Panjwani,

CFA

Head

of Power R

esearch

rajesh.panjw

ani@clsa.co

m

+852

2600 8271

Shantn

u Phutela

+852

2600 8483

26 Oc

tober 2015

Hong Ko

ng

Power

Powe

r Assets

6 HK

Rec

U-PF

Market cap

US$20.8bn

Price HK$7

6.30

Target

HK$72.00

Up/downsid

e -5.6%

Dividend yie

ld 3.8%

CKI

1038 HK

Rec

SELL

Market cap

US$23.0bn

Price HK$7

1.50

Target

HK$61.00

Up/downsid

e -14.7

%

Dividend yie

ld 3.1%

Merg

er and sha

re-price ra

tios

Proposed m

erger ratio (

revised):

1.066

CLSAs view

of likely mer

ger ratio:

1.15-1.20

Base-case r

atio assumpt

ion for our

target prices

: 1.18

Current sha

re-price rat

io: 1.067

www

.clsa.com

Dont argu

e with Mr

Market

Analysing

the argum

ents justif

ying 1.066

merger ra

tio

The key ju

stification

for the 1.0

66 merger

ratio is th

at it is ba

sed on

market pri

ces, which

are hard to

argue aga

inst, and t

hat no pre

mium is

warranted

given sign

ificant sha

red assets

and cash.

However,

it is also

hard to ju

stify a larg

e deviation

(from 1.3

to 1.066) i

n fair valu

e over

January-Se

ptember 2

015 with no

major trig

gers. Othe

r analyses

provided

also have

shortcomin

gs. If the

deal fails

Power Ass

ets Holding

s (PAH)

should fall

less and o

utperform

Cheung Ko

ng Infra (C

KI) if the

ratio is

raised. We

believe CKI

is a discip

lined but s

mart dealm

aker and w

ill do

what is ne

eded, with

in limits, to

get the de

al done. Pre

fer PAH ove

r CKI.

You cant a

rgue with

market pr

ices

CKIs core a

rgument se

ems to be

that the me

rger ratio is

based on

market pric

es

which are m

ore objecti

ve than an

alyst targe

t prices an

d that it w

ould be diff

icult

to justify a

premium w

hen both co

mpanies ha

ve substan

tial common

assets an

d

cash. It is

also difficul

t, however,

to argue tha

t the marke

t has been

wrong for fi

ve

years (1.3

avg ratio) a

nd arrived

at the righ

t fair value

in the 30

days prece

ding

8 Septembe

r. There we

re no majo

r events to

explain c.

25% chang

e in relativ

e

value from

January to

Septembe

r 2015, esp

ecially given

shared as

sets and ca

sh

form a larg

e part of v

alue. CKI c

ould take

a leaf out

of the CSR-

CNR merg

er -

mentioned

by the indep

endent finan

cial adviso

r (IFA) in th

e circular -

and justify

a

higher ratio

than one b

ased on th

e past aver

age.

Contributio

n and com

parative a

nalyses ov

erlook som

e core issu

es

The IFAs a

nalyses of

contributio

n and co

mparable c

ompanies

result in lo

w

merger ratio

s because th

e valuation

methods eit

her do not

give any va

lue to PAH

s

cash stash

or use 15x

PE for PAH

s UK busin

ess while u

sing 20.4x f

or CKIs or

end

up effective

ly valuing c

ash on PAH

s balance s

heet at 1x b

ut debt at a

s high as 3x

.

The IFA hi

ghlights CK

Is higher e

arnings (tho

ugh EPS w

ould have

been a bet

ter

measure) a

nd dividen

d growth a

s a reason

for the de

cline in sha

re-price ra

tios.

While this

argument h

olds some

water it do

es not just

ify such a

sharp mov

e in

2015. Som

e factors th

at favoured

CKIs high

er growth (

lower earn

ings base, l

ow

debt) and h

indered PAH

s growth (d

rag from H

KEs flat pro

fit) are no l

onger valid

.

Life with or

without t

he deal

CKIs pro-fo

rma net de

bt/equity is

lower than

our estim

ate but du

e to US$6.1

bn

goodwill cre

ation from

asset revalu

ation. The

deal would

be at high

risk if ISS

advises aga

inst it. We b

elieve the r

atio could b

e revised u

p in that eve

nt. If the de

al

fails both C

KI and PAH

(and even

CKH) stock

s may fall a

nd investors

with may b

e

better off s

elling both.

On a relativ

e basis, we

prefer PAH

given low

er ex-cash

valuations,

stronger bal

ance sheet

and continu

ed expecta

tion of a sp

ecial dividen

d.

Connecting

friends

Tencen

t vs Fac

ebook

Special re

port

April 2015

Lenovo

HK$13.16

- BUY

Financials

Year to 31

March

13A 14A

15CL

16CL

17CL

Revenue (U

S$m)

33,873

38,707

46,821

56,404

62,651

Rev forecas

t change (%

)

- -

(0.2) (8.3)

(4.9)

Net profit (

US$m)

635 817

920 1,225

1,802

NP forecas

t change (%

)

- -

34.5 63.1

56.1

EPS (US)

6.1 7.8

8.5 11.1

16.3

CL/consens

us (32) (EP

S%) -

- 110

123 136

EPS growth

(% YoY)

32.8 27.3

9.6 30.0

47.1

PE (x)

27.7 21.8

19.9 15.3

10.4

Dividend yie

ld (%)

1.4 1.8

1.3 1.9

3.0

ROE (%)

25.3 28.8

26.0 28.3

36.0

PB (x)

6.6 5.9

4.5 4.1

3.4

Source: CL

SA

Find CLSA r

esearch on

Bloomberg,

Thomson R

euters, Fac

tset and Ca

pitalIQ - and

profit from

our evalu@

tor propriet

ary databas

e at clsa.co

m

For importa

nt disclosu

res please

refer to pa

ge 44.

Nicolas

Baratte

nicola

s.baratte@c

lsa.com

+852

2600 8325

Cher C

hen

+852

2600 8631

7 Ma

y 2015

Hong Ko

ng

Techn

ology

Reute

rs 0992.

HK

Bloom

berg 992 H

K

Price

d on 6 Ma

y 2015

HK HS

I @ 27,640

.9

12M

hi/lo HK$

13.56/8.34

12M

price targe

t HK$17.7

5

% p

otential

+35%

Share

s in issue

10.2m

Free

float (est.)

58.5%

Mark

et cap

US$18,860

m

3M a

verage dai

ly volume

HK$5

28.8m

(US$68.2m)

Forei

gn s'holdi

ng 65.0%

Majo

r sharehol

ders

Legen

d Holding Li

mited 30.6

%

Stock

performan

ce (%)

1M 3M

12M

Absol

ute 17.5

14.4 50.7

Relati

ve 7.4

2.2 19.9

Abs (

US$) 17.5

14.5 50.8

Sourc

e: Bloombe

rg

www

.clsa.com

90100

110120

130140

150160

170180

7

8

9

10

11

12

13

14

15

May 13

Jan 14

Sep 14

May 15

Lenovo (LH

S)

Rel to HSI

(HK$)

(%)

Firing on th

ree

Three grow

th engines

are better

than one

We see Len

ovos grow

th drivers e

volving from

PCs to Ser

vers, and f

urther

ahead, Mob

ile. We exp

ect Lenovo

s PC divis

ion to drive

growth in

FY16

but for this

to be repla

ced by the

Enterprise

Server se

gment, wh

ich will

become the

primary d

river in FY

17-18, and

have low

expectation

s of the

Mobile bus

iness until

FY18. We

revise up fo

recasts as

these three

drivers

compound

overall gr

owth warr

anting an

upgrade to

BUY from

U-PF and

an increase

in target f

rom HK$11

.48 to HK$1

7.75, imply

ing 35% u

pside.

PC consoli

dation to c

ontinue bu

t less marg

ins upside

We expect

that the

PC market

will continu

e to contra

ct slowly (

-3% Cagr

2014-17) a

nd to cons

olidate till

HP and Len

ovo comma

nd 25% ma

rket share

each. This

will drive f

urther mar

gin expans

ion but the

low-hangi

ng fruit are

behind us;

we expec

t Lenovos

PC operatin

g margins

to plateau

at 4.8%

(FY18). As

market shar

e gains and

margin exp

ansion slow

down, we f

orecast

the PC will d

rive the bu

lk of profit g

rowth in FY

16 (79%) b

ut not beyo

nd.

LenoIBM E

nterprise g

old mine

We do not e

xpect a tur

naround of

the Enterpr

ise (IBM x8

6 Server) d

ivision in

FY16 as en

terprise qua

lifications a

re lengthy.

We believe t

hat LenoIBM

can regain

most lost m

arket share

(IBM had

12% share

in FY11,

now 5.4%)

and that

margin reco

very potenti

al is undere

stimated by

the market.

We forecast

LenoIBM

market shar

e to double

over the n

ext 4 year

s to 10% in

FY18 and

operating

margins to

reach 8.5

% (FY18).

As a result

, we expec

t Enterprise

to be the

largest cont

ributor to Le

novos profit

growth fro

m FY17-18

at 47%.

LenoMoto

Mobile no

t material

to earning

s till FY18

We believe

Lenovo bou

ght Motorol

a as an insu

rance policy

against Con

sumer PC

decline con

tinuing. The

acquisition

is also ackn

owledgeme

nt that mos

t PC brands

have failed

to become s

martphone

brands. We

think that

LenoMotos s

trategy will

remain pro

fitless in th

e low ASP m

ass-market

until consoli

dation start

s, possibly

from 2017-1

8. We forec

ast Mobile p

rofit from F

Y17 and 1.3

% OPM in F

Y18.

BUY for str

ong growth

outlook

Lenovo will

report end o

f May a we

ak March-15

quarter tha

t we expect

to be the

trough of e

arnings. We

do not ex

pect a rap

id recovery

in June q

uarter as

integration

costs usuall

y linger for

longer than

expected.

Besides, the

re is no

quick fix for

the loss-ma

king Enterpr

ise and Mob

ile divisions

. Beyond a t

urbulent

2-3 quarter

s, we forec

ast EPS to

increase by

30% in FY

16, 47% in

FY17 and

23% in FY1

8. We base

our HK$17.

75 price tar

get on 14x F

Y17CL Non-

GAAP EPS,

equivalent to

4.2x price/

book for a 3

6% ROE.

Global automak

ers

Sector outlook

We forecast 8.2

% passenger-v

ehicle shipmen

t growth for 20

15

Source: CLSA, C

AAM

Find CLSA resear

ch on Bloomberg

, Thomson Reut

ers, Factset and

CapitalIQ - and

profit from our e

valu@tor proprie

tary database a

t clsa.com

For important d

isclosures pleas

e refer to page

95.

(20)

(10)

0

10

20

30

40

50

60

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

2007 2008 2009

2010 2011 2012

2013 2014 15C

L 16CL17CL 18

CL

PV (LHS)

CV (LHS)

PV - YoYCV - YoY

(%)

(k units)

Alexious Le

e

alexious.lee

@clsa.com

+852 2600

8722

Geoff Boyd

+65 6416 7

853

Ben Xu, CFA

+86 21 202

0 5807

6 May 20

15

Global

Autos

China in

itiations

Dongfeng Moto

r 489 HK

Rec

BUY

Market cap

US$14.4bn

Price HK$12.9

4

Target HK$19.5

9

Up/downside

+51%

Great W

all Motor 2333

HK

Rec

U-PF

Market cap

US$24.9bn

Price HK$59.1

5

Target HK$59.6

0

Up/downside

+1%

Guangz

hou Auto 223

8 HK

Rec

SELL

Market cap

US$11.0bn

Price HK$8.45

Target HK$7.99

Up/downside

-5%

Global p

layers

Ford Motor

F US

Rec

O-PF

Target US$18.0

0

Genera

l Motors GM

US

Rec

O-PF

Target US$40.0

0

Hyunda

i Motor 005380

KS

Rec

BUY

Target 211,000

won

Honda M

otor 7267 JP

Rec

BUY

Target 4,900

Nissan

Motor 7201 JP

Rec

BUY

Target 1,600

Toyota

Motor 7203 JP

Rec

O-PF

Target 9,200

www.clsa.c

om

New roadmap

Policy risk is lo

w, but competit

ion is high

We are positive

on Chinas auto

sector, forecas

ting a 7.2% un

it-shipment

Cagr over 2015

-17. While pollu

tion and conges

tion are concern

s, the risk of

government polic

y to curb sales is

low. Chinas eco

nomy is slowing

but cars

are more affor

dable due to n

ew payment te

rms and more

entry-level

models. SUVs w

ill be the main g

rowth drivers, a

s this segment i

s relatively

immune to mac

ro uncertainty.

We reinitiate co

verage on Dong

feng with a

BUY, Great Wal

l with an Underp

erform and Guan

gzhou Auto with

a SELL.

SUVs - Protect

ed drivers help

Dongfeng

SUVs should con

tinue to outperf

orm in the pass

enger-vehicle (PV

) segment.

Their larger size

and better driv

er vision appeal

to new drivers,

as well as

second-time buye

rs upgrading from

sedans. SUV pe

netration should p

ass 30% in

the next five yea

rs, similar to Ko

rea in 2003. Do

ngfeng Motor (DF

G) is likely to

be the biggest be

neficiary due to i

ts new product c

ycle in 2H15 and

2016.

Domestic brand

s winning mor

e share

We expect dome

stic brands to co

ntinue their turn

around as a new

subsidy of

Rmb3,000/unit

for environment

ally friendly PV

s (engines unde

r 1.6L) helps

lift market share

, especially in p

rice-sensitive re

gions. Japanese

brands will

continue to strug

gle in FY15/16 a

nd this could dra

g on Guangzhou

Automobile

(GAC) as 80% o

f its shipments c

ome from relate

d JVs with Japan

ese brands.

No light at the

end of the tun

nel for GAC

The Chinese ar

e buying more

PVs in the entr

y-level small-cl

ass segment

(1L to 1.6L) as

incremental dem

and shifts to po

orer western pr

ovinces and

government sub

sidies make the

se models more

affordable. GAC

downscale

strategy (from B

to A class) is no

t working out as

it continues to lo

se share. If

the situation per

sists, we believe

consensus will c

ut EPS forecasts

due to price

and margin dete

rioration.

Top pick speed

s ahead

We reinitiate on

the sector with

DFG as our top

pick because w

e expect its

pipeline to benef

it from SUV trend

s. Great Wall is

profitable but fa

ces market-

share and mar

gin pressure a

mid stiff comp

etition, despite

its upscale

strategy. We are

most negative o

n GAC due to its

downscale strat

egy and see

risk to consens

us EPS forecast

s. We base ou

r HK$19.59, H

K$59.6 and

HK$7.99 target p

rices for the thre

e stocks on 9.0x

, 10.5x and 9.0x

16CL PE.

Three-part

Global automak

ers

report package

Phoenix Healthcare

HK$12.00 - BUY

Financials

Year to 31 December

13A 14A 15

CL 16CL 17CL

Revenue (Rmbm)

887 1,206 1,43

1 1,869 2,216

Net profit (Rmbm)

90 230 25

4 372 443

Adjusted EPS (fen)

24.1 22.5 3

0.0 44.3 53.

1

Adj EPS growth (% YoY)

34.7 (6.7) 3

3.2 47.9 19.

8

CL/consensus (7) (EPS%)

- - 94

108 104

PE (x) 39.4

42.2 31.7 21

.5 17.9

PB (x) 3.4

4.9 4.3 3.

7 3.2

Dividend yield (%)

0.6 0.4 0.

6 0.9 1.1

FCF yield (%)

2.7 3.0 3

.8 4.9 5.

7

ROE (%) 8.6 1

4.2 14.7 18.

8 19.2

Source: CLSA

Find CLSA research on Blo

omberg, Thomson Reuter

s, Factset and CapitalIQ -

and profit from our evalu@

tor proprietary database a

t clsa.com

For important disclosures

please refer to page 38.

Serena Shao

serena.shao@clsa.co

m

+852 2600 8278

Sisi Liu +852 2

600 8212

30 July 2015

China Healthca

re

Reuters 1

515.HK

Bloomberg 1

515 HK

Priced on 28 July 2

015

HS CEI @ 11,173.0

12M hi/lo HK$16.

50/10.72

12M price target

HK$16.44

% potential

+37%

Shares in issue

830.9m

Free float (est.)

60.3%

Market cap US

$1,291m

3M av

erage daily volume

HK$60.2m (

US$7.8m)

Major

shareholders

Speed Key 30.0%

Stock performance

(%)

1M 3M

12M

Absolute (20.0

) (24.2) 3.8

Relative (6.3

) (0.2) 2.9

Abs (US$) (20.0

) (24.3) 3.8

Source: Bloom

berg

www.clsa.com

0

50

100

150

200

250

300

789

1011121314151617

Nov 13 Jun 14 Jan

15 Jul 15

Phoenix Healthcare

Rel to CEI (RHS)

(HK$)(%)

We appreciate your suppo

rt in the Asiamoney Brok

ers Poll.

Please click here to view o

ur voting matrix for this ye

ar.

Sound prognosis

Leading healthcare refor

mer amid industry reorg

anisation

Phoenix Healthcare (PHG

) is Chinas largest private

-hospital group, with a

first-mover advantage in

capitalising on new oppor

tunities in the sector

amid government reform

s which welcome capital

inflows. It is a pioneer

of invest-operate-transfe

r agreements in the ind

ustry and one of Asia

Pacifics few listed comp

anies in the space. We in

itiate coverage on the

stock with a BUY and HK$

16.44 target which implie

s 37% upside.

A key reform target

Chinas healthcare sector is

undergoing tremendous re

form, particularly in the

services segment, which we

expect to grow at 23% pe

r annum over 2014-20,

outperforming mid-teens

expansion for the overall

industry. In 2009, the

central government re

leased policies that s

upport private-hospital

development, welcoming

investor capital into the

public sector to enhance

medical services, thus pro

viding PHG with further de

velopment opportunities.

Policy-backed reforms

Based in Beijing, PHG is C

hinas largest private-hosp

ital group by number of

beds, with 11 hospitals a

nd 28 community clinics

under management. We

expect the group to bene

fit from its established ne

twork by sharing doctors

and centralising procurem

ent among its facilities as

it further expands in the

Beijing-Tianjin-Hebei area

. The region has a large

population and rapidly-

growing demand for health

care services.

Scarcity value

Asia-Pacific hospital and h

ealthcare-services groups

are trading at an average

premium of 100% to globa

l peers in developed coun

tries. This is mainly due

to the regions limited me

dical resources relative to

its ageing population and

also strong demand. Ther

e are only a few such liste

d companies operating in

Hong Kong and China. We

expect this trend to conti

nue for at least the next

five years, given the lengt

hy timeframe required to c

onstruct hospitals.

BUY for sustainable grow

th

We initiate coverage on PH

G with a BUY rating and H

K$16.44 target, using an

average EV/Ebitda of 1

8.6x 16CL of listed As

ia-Pacific hospital and

healthcare-services groups

, which equates to 28x 1

6CL PE. The valuation is

justifiable, given near-term

profit growth of 34%/48%

(adjusted) in 15/16CL,

sustainable long-term expa

nsion and our DCF analysi

s of 9.1% WACC and 4%

perpetual growth rate.

Haier Electronics HK$22.40 - BUY

Financials Year to 31 December 13A

14A 15CL

16CL 17CL

Revenue (Rmbm) 62,263 67,134 73,174 80,286 90,404

Net profit (Rmbm) 2,037

2,447 2,854

3,264 3,783

CL/consensus (9) (NP%) -

- 100

97 95

EPS (Rmb)

0.72 0.86

0.99 1.13

1.31

EPS growth (% YoY) 20.2

20.1 14.7

14.3 15.9

PE (x)

24.7 20.6

17.9 15.7

13.5

Dividend yield (%)

0.4 0.5

0.6 0.7

0.8

FCF yield (%)

3.2 4.1

3.3 4.8

5.2

PB (x)

6.5 4.4

3.4 2.9

2.3

ROE (%)

30.7 25.5

21.6 19.9

18.8

Net cash per share (HK$) 2.9

4.0 3.9

4.9 6.4

Source: CLSA

Find CLSA research on Bloomberg, Thomson Reuters, Factset and CapitalIQ - and profit from our evalu@tor proprietary database at clsa.com

For important disclosures please refer to page 50.

Dawei Feng, CFA dawei.feng@clsa.com +852 2600 8172 Xiaopo Wei, CFA

+852 2600 8639

19 May 2015 China Consumer Reuters 1169.HK

Bloomberg 1169 HK

Priced on 15 May 2015 HS CEI @ 14,009.8

12M hi/lo HK$25.75/18.00

12M price target HK$27.80

% potential +24%

Shares in issue 2,835.0m

Free float (est.) 54.4%

Market cap

US$8,073m

3M average daily volume

HK$182.4m (US$23.5m)

Major shareholders

Qingdao Haier 45.6%

Stock performance (%)

1M 3M 12M

Absolute (2.4) 8.7 21.6

Relative 1.3 (6.9) (13.6)

Abs (US$) (2.4) 8.9 21.6

Source: Bloomberg www.clsa.com

90

110

130

150

170

190

210

10

12

14

16

18

20

22

24

26

28

May 13 Jan 14 Sep 14 May 15

Haier ElectronicsRel to CEI (RHS)

(HK$)

(%)

Home-run hit Logistics and rural expansion back sustainable growth

Strong brand equity, leading logistics services and an expansive rural

distribution network are the key drivers for Haiers long-term sustainable

growth. A clear leader in Chinas bulky-item logistics space, the

potential recovery in the countrys property market and soft input costs

could also be near-term catalysts. We forecast a 15% three-year Ebit

Cagr over 2015-17. Our HK$27.80 SOTP-based target implies the

company can deliver a 25% return and we initiate coverage with a BUY.

Logistics powerhouse Haier is the leader in Chinas bulky-item logistics segment with unmatched scale

and top-notch service. This category differs from parcel delivery as it requires

special handling and meticulous planning, including warehousing, transport and

last-mile operations. Replicating Haiers advantages would not be easy and

these core competencies will support the expansion of its integrated channel

services (ICS) business and allow it to profit from the e-commerce boom.

Rural expansion Haier is among the few operators with a deep, yet tightly managed, distribution

network. This differentiates it from peers such as Midea or Gree, which heavily

rely on distributors for fulfilment. We see upside to rural consumption, given it

is about 10 years behind urban levels. Under Haiers partnership with Alibaba,

we see more innovation and cooperation in its rural expansion.

Cash cow We expect manufacturing to remain the cash cow supporting long-term

growth in logistics expansion and rural penetration. We assign tremendous

value to the Haier brand and favour its relatively stable competitive

landscape. In addition, Euromonitor data suggest that retail prices for white

goods in China are still low, even compared with emerging markets like Brazil

and the Philippines, implying premiumisation upsides.

Initiate with a BUY In the near term, the potential recovery of Chinas residential property market

and the soft input costs are positive for earnings. We value the manufacturing

and ICS units at 12x and 16x EV/Ebit against 11% and 20% Ebit Cagrs during

2015-17. Our sum-of-the-parts-based (SOTP) target price of HK$27.80

implies 19x 16CL fully-diluted EPS. Our DCF valuation of HK$31.60 supports

this target and we initiate coverage with a BUY.

CGN Power HK$3.20 - UNDERPERFORM

Financials Year to 31 December 12A 13A 14CL 15CL 16CL

Revenue (Rmbm) 17,325 17,110 20,125 20,867 28,101

Net profit (Rmbm) 4,145 4,195 5,504 6,048 7,502

EPS (Rmb) 0.17 0.15 0.12 0.13 0.17

CL/consensus (5) (EPS%) - - 100 95 97

EPS growth (% YoY) (42.7) (7.2) (21.0) 9.9 24.0

PE (x) 20.9 19.0 15.4

Dividend yield (%) 1.7 2.1

FCF yield (%) (6.5) (8.4) (4.7) (11.0) (7.3)

PB (x) 2.9 2.2 2.2 2.1 1.9

ROE (%) 24.6 21.3 14.7 11.3 12.9

Net debt/equity (%) 304.3 229.4 91.9 161.1 162.0

Source: CLSA Find CLSA research on Bloomberg, Thomson Reuters, Factset and CapitalIQ - and profit from our evalu@tor proprietary database at clsa.com

Rajesh Panjwani rajesh.panjwani@clsa.com +852 2600 8271 Johnny Lau +852 2600 8175

16 January 2015

China Power Reuters 1816.HK Bloomberg 1816 HK Priced on 15 January 2015 HS CEI @ 12,190.5

12M hi/lo HK$3.62/2.78 12M price target HK$3.25 % potential +2%

Shares in issue 11,163.6m Free float (est.) 22.0% Market cap US$18,756m 3M average daily volume HK$1,160.7m (US$149.7m)

Foreign s'holding 22.0% Major shareholders CGNPC 64.2% Hengjian Investment 7.5%

Stock performance (%) 1M 3M 12M Absolute (10.1) 0.0 0.0 Relative (17.3) 0.0 0.0 Abs (US$) (10.1) 0.0 0.0

Source: Bloomberg

www.clsa.com

95

100

105

110

115

120

125

130

135

2.82.93.03.13.23.33.43.53.63.73.8

9 Dec 14 27 Dec 14 14 Jan 15

CGN Power (LHS)Rel to CEI

(HK$)(%)

Growth at a price Earnings stability and expansion already priced in Nuclear-power operator CGN offers something few companies in China do - earnings stability, a long-term growth theme and an antipollution angle.

However, the stock seems to have already priced these in. Chinas rapid

nuclear-capacity expansion amid slowing power demand puts CGNs

utilisation hours at risk. Earnings could also fall if there are further delays

in its Taishan project or if tariffs are insufficient. We initiate with an

Underperform rating and a HK$3.25 target. Earnings stability and growth Fluctuations in uranium prices (c.6% of tariffs) have little impact on CGN

Powers earnings. It also does not face big swings in utilisation hours like wind

or hydro. Over 20GW of nuclear capacity that started construction in 2008-10

will be commissioned in 2014-16. CGNs attributable capacity will rise from

6.2GW in 2013 to 13GW in 2016, driving an 18% EPS Cagr over 14-17CL. Risk of lower utilisation hours Chinas nuclear capacity is likely to rise by 150% during 2013-17, but its

power-demand growth is at a multiyear low. Thus, despite priority of

dispatch, nuclear plants utilisation hours will probably come under pressure.

New plants in Fujian and Liaoning will have much lower utilisation. We expect

utilisation of consolidated plants to decline from 89% to 84% over the next

few years. Each 1ppt decline in CGNs utilisation hours reduces EPS by c.3%. Taishan overhang; slow growth from 2017 Taishans cost/MW is 70% higher than CGNs other projects. We assume a

Rmb0.5/kWh tariff for Taishan, versus Rmb0.43 for other plants in Guangdong;

however, there is no guarantee that CGN will get a higher tariff. Given their

larger size, Taishans EPR reactors may also get lower dispatch. While CGN will

add 3.3-5.6GW of gross capacity annually in 2014-16, additions fall to 1.1GW

per annum over 2017-19. Any new construction starts will be commissioned

only after 2021, implying much slower earnings growth after 2017. Positives priced in CGN is one of the most expensive power utilities in Asia and seems to have

priced in the earnings stability and growth potential. Lower utilisation hours

and delays or lower tariffs for Taishan pose a risk to earnings and valuations.

We initiate with an Underperform rating as our HK$3.25 DCF-based target

price, using 7% WACC and a 3% terminal growth rate, implies little upside.

Novem

ber 2

01

5

Ch

ina on

-dem

and

- O2

O d

igitisin

g th

e service ind

ustry

China on-demand O2O digitising the service industry Special report

November 2015

5 M

ay 2

01

5

Ch

ina b

an

ks - N

ot to

o b

ig to

fail

China banks

Sector outlook

- Overweight

Find CLSA rese

arch on Bloomb

erg, Thomson R

euters, Factset

and CapitalIQ -

and profit from

our evalu@tor

proprietary data

base at clsa.co

m

For important

disclosures pl

ease refer to p

age 84.

Patricia Ch

eng

Head of

China Financia

l Res

patricia.ch

eng@clsa.com

+852 260

0 8683

Marco Yau

+852 260

0 8555

5 May 20

15

China

Financial se

rvices

Top BU

Ys

CCB 939.HK

Price HK$7.55

Target HK$10.0

0

TSR 38%

ICBC

1398.HK

Price HK$6.74

Target HK$8.70

TSR 34%

BOC

3988.HK

Price HK$5.33

Target HK$6.30

TSR 23%

Stocks

to SELL

Minsheng

1988.HK

Price HK$11.3

8

Target HK$10.1

0

TSR (9%)

CMB

3968.HK

Price HK$23.4

5

Target HK$22.3

0

TSR (1%)

Underp

erform

ABC 1288.HK

Price HK$4.38

Target HK$4.70

TSR 13%

Bocom

3328.HK

Price HK$7.97

Target HK$8.30

TSR 8%

www.clsa.com

Not too big to

fail

Escalating risk

s in the bond m

arket

CHINAS PLANS FOR REGIONAL INTEGRATION

SILK BELT SEA ROAD

AND

H SHARES AND REGIONAL STOCKS

ONE BELT ONE ROAD

OBOR

Produced by CLSA in cooperation with CITIC Securities

15

Sep

temb

er 20

15

Ch

ina b

anks - M

imic an

d g

imm

ick

China banks

Sector outlook -

Underweight

Find CLSA resear

ch on Bloomberg

, Thomson Reut

ers, Factset and

CapitalIQ - and

profit from our e

valu@tor proprie

tary database a

t clsa.com

For important d

isclosures pleas

e refer to page

84.

Patricia Che

ng

Head of Ch

ina Financial Re

s

patricia.cheng@

clsa.com

+852 2600

8683

Marco Yau

+852 2600

8555

Lloyd Xu

+852 2600

8401

15 Septem

ber 2015

China

Financial se

rvices

CCB

939 HK

Rec BUY

Market cap U

S$176.1bn

Price HK$5.41

Target HK$6.70

Up/downside

+24%

ICBC

1398 HK

Rec BUY

Market cap U

S$240.0bn

Price HK$4.70

Target HK$5.40

Up/downside

+15%

ABC

1288 HK

Rec U-PF

Market cap U

S$156.9bn

Price HK$3.04

Target HK$3.10

Up/downside

+2%

Bank of

China 3988 HK

Rec U-PF

Market cap U

S$168.5bn

Price HK$3.57

Target HK$3.60

Up/downside

+1%

Bocom

3328 HK

Rec SELL

Market cap

US$63.6bn

Price HK$5.54

Target HK$4.90

Up/downside

-12%

CMB

3968 HK

Rec SELL

Market cap

US$66.6bn

Price HK$18.8

4

Target HK$14.1

0

Up/downside

-25%

Minshen

g 1988 HK

Rec SELL

Market cap

US$46.4bn

Price HK$7.30

Target HK$6.00

Up/downside

-18%

www.clsa.c

om

Mimic and gimm

ick

Muted response

to internet fin

ance

15

September 2

01

5

Ch

inese ph

arma - W

eighin

g the gain

s

Chinese pharma Sector outlook - Overweight

Find CLSA research on Bloomberg, Thomson Reuters, Factset and CapitalIQ - and profit from our evalu@tor proprietary database at clsa.com

For important disclosures please refer to page 120.

Serena Shao

serena.shao@clsa.com

+852 2600 8278 Sisi Liu +852 2600 8212

15 September 2015

China Healthcare

Top picks

Fosun Pharma 2196 HK

Rec

BUY

Market cap US$8,351m

Price

HK$23.25

Target HK$28.40

Up/downside +22%

Luye Pharma

2186 HK

Rec

BUY

Market cap US$3,103m

Price

HK$7.24

Target HK$9.32

Up/downside +29%

Others

CSPC

1093 HK

Rec

BUY

Market cap US$5,070m

Price

HK$6.65

Target

HK$8.22

Up/downside +24%

Sino Biopharm 1177 HK

Rec

O-PF

Market cap US$5,988m

Price

HK$9.39

Target HK$11.04

Up/downside +18%

www.clsa.com

Weighing the gains

R&D spending and experience pay

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compiled by Taiwan analyst(s)).

Key to CLSA/CAST investment rankings: BUY: Total stock

return (including dividends) expected to exceed 20%; O-PF

: Total expected return

below 20% but exceeding market return; U-PF: Total expected

return positive but below market return; SELL: Total expected

return to be negative.

For relative performance, we benchmark the 12-month total f

orecast return (including dividends) for the stock against the

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(including dividends) for the market on which the stock trade

s. We define as Double Baggers stocks we expect to yield

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ber 2

01

4

Ch

ino

rmo

us: E

-com

merce

- New

them

es a

nd

develo

pm

en

ts

Chinormous E-commerce - New th

emes and developments

Special report

October 2014

Meet the Boss Sector outlook

Find CLSA research on Bloomberg, Thomson Reuters, Factset and CapitalIQ - and profit from our evalu@tor proprietary database at clsa.com

For important disclosures please refer to page 3.

Nicole Wongnicole.wong@clsa.com+852 2600 8207

10 December 2015ChinaProperty

www.clsa.com

China State Construction

Rethinking housing market destocking

China State Construction Chairman Zhou Yong was the second speaker at

our Meet the Boss luncheon 2015. From the eyes of a property analyst,

the most interesting takeaway from the event was that Mr. Zhou was the

second speaker to question the markets current understanding of the

rate of housing market destocking. But it is not all gloom and doom for

the China economy, as FAI may be supported by urban infra projects

which are accelerating.Rethink on destocking

q One key area of interest during the lunch was whether the China housing market

destocking can happen quickly through government buyout for social housing

purposes, or by handing cash to residents that need to be resettled due to urban

redevelopment. q Mr. Zhou cautioned that this thought may be over-simplifying the issue, as excess

housing stock does not always exist in cities with population/economic growth with

redevelopment needs, or local government with a strong balance sheet.

q And even when a local government does have the balance sheet for redevelopment

and need for housing for resettlement, the private housing stock may not fit if they

are built too big (which we note is quite common) or to an overly luxurious

standard, and this will cause fairness issues.

q To dole out cash directly to families who need resettlement is difficult too as the

negotiation of a fair price may lengthen the process.

Non-housing FAI to pick up

q But while the real estate FAI may not reaccelerate soon, it is not all gloom and

doom.q The Central government, through reallocation of local government debt, and

funding platforms, such as the public private partnership scheme, is aiming to

accelerate a category of FAI that can be described as urban infrastructure

investment, which include: 1) city redevelopment, 2) underground railway

construction, 3) other mid-sized public facility projects such as hospitals, schools,

water treatment plants and electricity plants.

q This would probably cushion the social housing portion of the real estate FAI, which

may not grow at the breakneck rate of 2009-12, but should remain steady, as

much of the social housing is built for resettlement purposes.

q Indeed the company is now getting two visits per week from local governments

who are interested to commence a new project, up from less than one visit per

week earlier this year.Funding the currency mismatch

q The company currently has about 60% of its debt in foreign currency.

q RMB depreciation risk is a reason to further adjust the ratio.

q The good news is, funding via the domestic bond market is getting significantly

easier and significantly cheaper.

q And it is now possible to channel domestically raised funding to repay offshore

debt. In fact some RMB1.4bn of offshore debt was repaid this way.

Hong Kong construction Severe labour shortage

q The company expects steady growth in Hong Kong and Macau construction in the

next 5 years due to infrastructure project commencement. This will keep Hong

Kong construction labour cost high as importing labour is difficult for HK.

q A professional cement stirrer is earning HK$80-120k per month for example. But is

still difficult to hire.q From the eye of a property analyst this means continuing cost pressure for HK

developers.

Blue Books Experts views for expert investors

Find CLSA U products and event listings on www.clsau.com or email clsau@clsa.com. CLSA U - Experts views for expert investors

Global Power

18 March 2015

Charles Yonts Head of Sustainable Research

charles.yonts@clsa.com

+852 2600 8539 Guest author Chet Lyons Founder and Principal, Energy Strategies Group

www.clsau.com

Battery ram Storage set to shake things up

Watch Charles on CLSA TV

China property

Sector outlook

Find CLSA research

on Bloomberg, Tho

mson Reuters, Cap

IQ and themarkets

.com - and profit fr

om our evalu@tor

proprietary databa

se at clsa.com

Nicole Wong

Head of Property

Research

nicole.wong@clsa.

com

+852 2600 8207

Jackson Hui

+852 2600 8723

Susanna Leung

+852 2600 8597

5 May 2014

China

Property

Coli

688 HK

Rec BUY

Market cap US$

20.16bn

Price HK$18.66

Target HK$25.50

Up/downside

+37%

CR Land

1109 HK

Rec BUY

Market cap US$

11.93bn

Price HK$15.56

Target HK$23.00

Up/downside

+48%

Longfor

960 HK

Rec BUY

Market cap US

$7.31bn

Price HK$10.22

Target HK$13.10

Up/downside

+28%

Shimao

813 HK

Rec BUY

Market cap US

$7.17bn

Price HK$15.42

Target HK$20.20

Up/downside

+31%

Vanke

200002 CH

Rec BUY

Market cap US$

14.47bn

Price HK$12.62

Target HK$17.40

Up/downside

+38%

www.clsa.co

m

Lively ghost cities

Busting the vaca

ncy myth

Includes our in-d

epth

study on housing

vacancy rates

China cleantech

Sector outlook

Find CLSA research

on Bloomberg, Tho

mson Reuters, Fact

set and CapitalIQ -

and profit from ou

r evalu@tor propr

ietary database at

clsa.com

For important dis

closures please r

efer to page 104.

Charles Yont

s

Head of Su

stainable Re

search

charles.yonts@cls

a.com

+852 2600 8

539

Johnny Lau

+852 2600 8

175

16 Septemb

er 2015

China

Power

Winners

Solar ma

nufacturers

Xinyi Solar

968.HK

Battery m

akers

LG Chem 0

51910.KS

Samsung SDI 0

06400.KS

Renewab

le operators

Longyuan

916.HK

Huadian Fuxin

816.HK

Huaneng Ren

958.HK

Losers

Power-eq

uipment names

Shanghai Ele

ctric 2727.HK

Dongfang Elec

tric 1072.HK

IPPs

Huaneng

902.HK

Huadian

1073.HK

Datang 991.HK

www.clsa.co

m

Andrew Driscoll

Charles Yonts

Nicole Wong

Francis Cheung

Patricia Cheng

Alexious Lee

Nicolas Baratte

Rajesh Panjwani

Elinor Leung

Nelson Wang

Aaron Fischer

Serena Shao

Dawei Feng

BHP Billiton A$31.11 - BUY

Financials Year to 30 June

13A 14A 15CL 16CL 17CL

Revenue (US$m) 65,848 67,206 56,175 60,373 63,481

Net profit (US$m) 12,655 13,446 7,720 8,878 9,678

EPS (US) 229.6 244.0 140.1 161.1 175.6

CL/consensus (20) (EPS%) - - 88 105 92

EPS growth (% YoY) (32.6) 6.3 (42.6) 15.0 9.0

PE (x) 13.9 11.5 17.2 14.7 13.3

Dividend yield (%) 3.6 4.3 5.1 5.3 5.3

FCF yield (%) (2.0) 4.9 2.3 4.6 5.0

PB (x)

2.4 1.8 1.5 1.4 1.4

Net debt/equity (%) 41.2 30.3 33.2 33.1 32.2

EV/Ebitda (x) 7.1 5.5 6.5 6.2 5.7

Source: CLSA Find CLSA research on Bloomberg, Thomson Reuters, Factset and CapitalIQ - and profit from our evalu@tor proprietary database at clsa.com

For important disclosures please refer to page 50.

Andrew Driscoll, CFA Head of Resources Research andrew.driscoll@clsa.com +852 2600 8528 Dylan Kelly +61 2 8571 4263 Dave Thompson +61 2 8571 4267

27 March 2015 Australia Materials

Reuters BHP.AX Bloomberg BHP AU Priced on 25 March 2015 ASX200 @ 5,973.3 12M hi/lo A$39.68/26.90 12M price target A$36.00 % potential +16%

Shares in issue 5,564.4m Free float (est.) 100.0%

Market cap US$128,658m

3M average daily volume A$278.8m (US$220.1m) Major shareholders BlackRock 7.1%

Stock performance (%) 1M 3M 12M Absolute (7.1) 7.4 (13.4) Relative (7.6) (3.0) (22.6) Abs (US$) (6.6) 4.3 (25.3)

Source: Bloomberg

www.clsa.com

75

80

85

90

95

100

105

110

115

25

27

29

31

33

35

37

39

41

Mar 13 Nov 13 Jul 14 Mar 15

BHP Billiton (LHS)Rel to ASX200

(A$)(%)

Souths silver lining Opportunities and threats for Cannington In the second of our series of reports on South32s assets, we review BHPs Cannington mine, which generated 14% of 1HFY15 underlying

Ebitda. We see opportunities for cost out, particularly labour costs, and

potential for mine-life extension on underground ore additions, an open-

cut opportunity and tailings processing. The key challenge is combating

the declining grade profile, which could see production fall by one-third.

We expect the South32 demerger to create value and rate BHP a BUY. Earnings contributor The Cannington mine is one of 10 assets that BHP will spin off to form

South32. It is one of three first-quartile industry cost mining assets, and

contributed 14% and 19% to South32 assets underlying Ebitda and Ebit in

1HFY15. This was behind only the GEMCO and Hillside operations. Cannington

represents about 9% of our preliminary NPV for South32 of US$15.5bn.

High-grade silver-lead mine We commissioned industry expert Louis Louwrens to review the Cannington

operations. The asset is located in Queensland, Australia and comprises an

underground mining and processing facility, as well as rail-loading and port

infrastructure. It is one of the worlds largest and lowest-cost silver-lead mines,

which produced about 187kt of lead, 58kt of zinc and 25Moz of silver in FY14.

Opportunities and threats The key opportunity appears to be higher labour productivity and costs savings,

as labour has doubled in the past 14 years and we estimate now represents 24%

of total costs. There is potential for more staff cuts than tabled in the

Independent Competent Persons Report. We believe the open-cut development

will be reviewed again and see potential for reclaiming tailings (waste material)

to add mine life. The key challenge is the declining grade profile, which will weigh

on costs and could result in production falling by a third over the next six years.

Demerger to unlock value The demerger is progressing, with the shareholder vote on 6 May, ahead of

South32s listing in early June. This should create value by simplifying BHPs

portfolio to enable greater productivity benefits, and by providing a more

appropriate capital structure and operating model for South32s assets. BHPs

valuations are attractive at 0.8x P/NPV and 6.2x 16CL EV/Ebitda, while the 5%

dividend yield provides support. We rate BHP a High-Conviction BUY.

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.

2015 CL

SA Limited and/or

Credit Agricole Secu

rities Taiwan Co., Lt

d.

Key to CLSA/CLSA

Americas/CA Taiwa

n investment rankin

gs: BUY: Total stock

return (including div

idends) expected to e

xceed 20%; O-PF:

Total expected return

below 20% but excee

ding market return; U

-PF: Total expected r

eturn positive but bel

ow market return; SE

LL: Total expected

return to be negative

. For relative perform

ance, we benchmark

the 12-month total fo

recast return (includin

g dividends) for the s

tock against the 12-

month forecast return

(including dividends

) for the market on w

hich the stock trades

. For example, in the

case of US stock, the

recommendation is

relative to the expe

cted return for S&P

of 10%. Exception

s may be made de

pending upon preva

iling market conditio

ns. We define as

Double

Baggers stocks we e

xpect to yield 100%

or more (including d

ividends) within three

years. "High Convic

tion" Ideas are not n

ecessarily stocks with

the most upside/down

side but those where

the Research Head/S

trategist believes the

re is the highest like

lihood of positive/neg

ative returns. The lis

t

for each market is mo

nitored weekly.

16/04/2015

CLSA is certified ISO1

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Please recycle.

-DG3

15

Jun

e 20

15

Blu

e Books - G

uin

ea gold

Blue Books

Experts views for e

xpert investors

Find CLSA U produ

cts and event listing

s on www.clsau.com

or email clsau@cls

a.com. CLSA U

- Experts views fo

r expert investors

For important disclo

sures please refer to

page 92.

Global

Materials

15 June 2015

Andrew Driscoll, CF

A

Head of Resources

Research

andrew.driscoll@clsa.

com

+852 2600 8528

Guest author

Michael Komesarof

f

Principal,

Urandaline Investm

ents

www.clsau.com

Guinea gold

Awaiting the next m

ining boom

Social pressures

Chinese tourists k

eep exploring

Special report

January 2015

Special report January 2016 FIRE

Sinopec

HK$4.48 -

BUY

Financials

Year to 31

December

13A 14A

15CL

16CL

17CL

Revenue (R

mbm)

2,880,311

2,825,914

2,079,073

2,160,354

2,293,726

Net profit (

Rmbm)

66,132

46,466

42,838

54,705

68,646

EPS (fen)

54.6 38.4

35.4 45.2

56.7

CL/consens

us (28) (EP

S%)

- -

101 103

109

EPS growth

(% YoY)

3.5 (29.7

) (7.8)

27.7

25.5

PE (x)

6.5 9.3

10.5 8.2

6.5

Dividend yie

ld (%)

6.8 5.6

4.9 4.9

6.1

FCF yield (

%)

(7.7)

(1.5)

1.6 7.6

12.8

PB (x)

0.8 0.7

0.6 0.6

0.6

ROE (%)

12.2 8.0

6.6 7.6

9.1

Net debt/e

quity (%)

47.4 49.5

29.4 26.4

21.4

Source: CL

SA

Find CLSA r

esearch on

Bloomberg,

Thomson R

euters, Fac

tset and Ca

pitalIQ - an

d profit fro

m our eva

lu@tor prop

rietary dat

abase at cls

a.com

For importa

nt disclosu

res please

refer to pa

ge 69.

Nelson

Wang

nelso

n.wang@cls

a.com

+852

2600 8589

Irina B

evza

+852

2600 8462

2 Oct

ober 2015

China

Petro/

Chems

Reute

rs 0386.

HK

Bloom

berg 386 H

K

ADR

SNP.N

Price

d on 29 Se

ptember 2

015

HS CE

I @ 9,230.

5

12M

hi/lo HK$

7.63/4.46

12M

price targ

et HK$6.0

0

% p

otential

+34%

Share

s in issue

121,071.2m

Free

float (est.)

26.0%

Mark

et cap

US$88,371

m

3M a

verage dai

ly volume

HK$5

96.9m

(US$77.0m

)

Forei

gn s'holdi

ng 15.0%

Majo

r sharehol

ders

Sinop

ec Group 7

4.0%

Stock

performa

nce (%)

1M 3M

12M

Absol

ute (13.5

) (31.4)

(34.7)

Relati

ve (8.6)

(5.6) (26.1

)

Abs (

US$) (13.5

) (31.4)

(34.6)

Source: Blo

omberg

www

.clsa.com

75

85

95

105

115

125

135

4.04.5

5.05.5

6.06.5

7.07.5

8.08.5

Oct 13

Jun 14

Jan 15

Sep 15Sinop

ec (LHS)

Rel to CEI

(HK$)

(%)

Beyond pe

troleum

Non-fuel b

usiness to

drive grow

th

Sinopecs n

on-fuel bu

siness is s

et for 25-f

old sales gr

owth over

the next

decade. Th

e flagship

Easy Joy c

onvenience

stores are

transition

ing from

kiosk-like

stores to

being inte

grated on

e-stop ser

vice provi

ders. The

online-to-

offline bus

iness, in p

artnership

with e-co

mmerce h

eavyweight

s,

will provid

e much-ne

eded traffi

c for the c

ompany to

monetise

its 30,000

fuel station

s nationwi

de, the big

gest retail

network in

China. Th

e IPO of

Sinopecs m

arketing ar

m next year

should be

attractively

priced. BU

Y.

Sweet spo

t from low

oil prices

Being a do

wnstream

player, Sin

opec is mu

ch better p

ositioned t

han domes

tic

rivals Petro

China and

CNOOC am

id a low-oi

l-price env

ironment, w

hich looks

to be the

new norm

for the in

dustry. Ro

bust and s

ustainable

downstream

earnings co

uld offset

upstream

weakness.

With our

Brent assu

mption fall

ing

in the rang

e of US$5

4-65/bbl in

this and t

he next tw

o years, th

e company

has a swee

t spot to m

aximise pro

fits.

Non-fuel b

usiness se

t for rapid

growth

With multip

le strategic

investors o

n board, w

e expect th

e company

s non-fuel

revenue to

enjoy a 33

% Cagr an

d gross pro

fit a 30% C

agr over 2

015-25. Th

e

non-fuel b

usiness is

moving tow

ards being

an integr

ated one-s

top service

provider wi

th auto an

d catering

services, d

iversified f

inancial se

rvices, the

internet of

vehicles se

rvices, etc.

All this sh

ould under

pin fast gro

wth in the

next decad

e with marg

in expansio

n due to hi

gh operatin

g leverage.

From onlin

e to 30,000

+ offline o

utlets

With over

30,000 fue

l stations

in China a

s potential

offline ou

tlets, the

company i

s seeking

to ramp up

the online-

to-offline b

usiness in

partnership

with leadin

g e-comme

rce players

such as A

libaba, Tenc

ent and Yih

aodian. We

are positiv

e on this m

ove as it w

ill add tra

ffic to the

Easy Joy s

tores and

significantl

y improve t

he fuel to

non-fuel cu

stomer conv

ersion ratio

.

Marketing

IPO to un

lock value

We expect

Sinopecs

marketing

business IP

O to take

place mid-

2016. It wa

s

slightly de

layed due

to the c

hange in

chairman. T

he public

listing is

irreversible

as it is pa

rt of the b

roader stat

e-owned-en

terprise re

form that

Beijing init

iated. We

expect the

deal to g

o ahead at

18x PE, v

aluing the

business a

t US$86bn

. The IPO

will unloc

k significa

nt value f

or Sinopec

shareholde

rs. We rem

ain BUYers

. We have

adjusted o

ur target

price from

HK$7.0 to

HK$6.0, im

plying upsid

e of 34%.

Part of ou

r China

Oil & Gas

package

Rajani Khetan

China TransportSector outlook

PMI of new export orders vs Chinese exports

Source: WIND, CLSA Find CLSA research on Bloomberg, Thomson Reuters, Factset and CapitalIQ - and profit from our evalu@tor proprietary database at clsa.com

For important disclosures please refer to page 7.

30

35

40

45

50

55

60

65

70

(40)

(30)

(20)

(10)

0

10

20

30

40

07 08 09 10 11 12 13 14 15

(index)

(%)Export YoY (LHS) PMI - new export orders

Daniel Mengdaniel.meng@clsa.com+852 2600 8355

Rajani Khetan+852 2600 8137

9 December 2015

ChinaTransport

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Ports: Sliding into 2016Expect throughput to fall. Downgrade China Merchants to SELLWe lower our expectation for Chinese container throughput in 2016 from 2% growth to a 1% decline. The PMI for export orders has been fallingand is below 50; container throughput in the Pearl River Delta fell at a sharp 5% YoY in the past two months and we expect PRD to lead in the volume decline, as it did in late 2008. We downgrade China Merchants to SELL from O-PF, as we expect consensus downgrades and a de-rating; our target price on the stock has fallen to HK$22.00 from HK$30.00.We expect container throughput to fall in 2016q The PMI index for new export orders has been falling in the past 14 months and has remained below 50, which should lead to a continuous weakening in exports and,hence, soft container throughput at Chinese ports. q We lower our forecast for Chinese container throughput in 2016 from 2% growth to a 1% decline, on weak demand from Europe and Asia. q We also lower our expectation of container handling ASP from low-single-digit growth to a low-single-digit decline. Pearl River Delta again leading in volume declineq Throughput at ports in Pearl River Delta (PRD) fell at a sharp ~5% YoY in the past

two months and we expect it to lead the volume decline, as it did in late 2008.q Processing trades, which change faster than normal trades, account for a larger

proportion of exports from the PRD. q Throughput at other regions lagged the PRD by about four months in 2008. Downgrade China Merchants to SELLq We downgrade our recommendation on China Merchants from O-PF to SELL.q We expect its share price to be under pressure, with earnings downgrades and a

likely de-rating. q We factor in lower volume and container handling ASP assumptions for 2016-17 which leads to an 11% decrease in our earnings forecast for both years.

q Our SOTP-based target falls from HK$30.00 to HK$22.00, implying a 12.6x 16CL PE, which is equal to its five-year average.

Qingdao Port stands out among single-port operatorsq Among the single-port operators (all not rated by us), Qingdao Port and Xiamen

Port look better positioned given their larger exposures to logistics services, as the

companies are taking market share from traditional logistics companies. q On consensus valuations, Qingdao Port is also the cheapest, at a 7.3x 2015 PE.

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China/HK Airlines Sector outlook - Underweight

Find CLSA research on Bloomberg, Thomson Reuters, Factset and CapitalIQ - and profit from our evalu@tor proprietary database at clsa.com

For important disclosures please refer to page 75.

Rajani Khetan rajani.khetan@clsa.com +852 2600 8137

14 January 2016 Hong Kong Transport Air China

753 HK Rec SELL Market cap US$12,840m Price

HK$5.08 Target HK$4.90 TSR

-2% China Eastern 670 HK Rec

SELL Market cap US$11,863m Price HK$3.77 Target HK$3.30 TSR

-10% China Southern 1055 HK Rec

SELL Market cap US$10,333m Price HK$4.87 Target HK$4.00 TSR

-16% Cathay Pacific 293 HK Rec

U-PF Market cap US$6,546m Price HK$12.76 Target HK$12.90 TSR +6%

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Not a good high Currency drags on oil gains

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From 2013 through 2015, the elements stayed in relatively similar positions. Not so this year, metal and water - which have not been so strong for the past few years - make inroads. They completely dominate the beginning of the year, and both finish strongly. Earth is still quite decent and has a strong late period. While it is the Fire-Monkey year, that element flares through the middle of the year but otherwise is not as strong as it was. Wood runs to around the same level as water, but the fire is scorching some of it.

Elementary analysisSector selection based on five phases

SECTOR HIGHLIGHTS

Generating cycle

Overcoming cycle

Great: Bananas

Good: Coconuts

Not so bad: Peanuts

Avoid: Toadstool

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Its your year, so time to don your red socks and smalls. But youve got the Tai Sui and some other nasties crowding in. Youll want to watch out for squabbles in the branches about you at work and the patterns on the ground - if the contract says five bananas for free, check the fine print. At

some point youll be back brooding in a cave, but a weekly audit of your candles and rations will see you through.

Health February and August would be a good time not to monkey around with your cell phone while driving. Lots of liquid will keep the gremlins and Tai Sui at bay: brush your teeth, shower once a month and juice those bananas. The Jianfeng star is also threatening, so those who work in timber mills may want to avoid the bandsaw.

Wealth You know those nuts you put away for a rainy day? Dont make any big jungle calls or you might find yourself huddled in a cave nibbling

your final stash - peanuts in, peanuts out is your motto for the year. If

youre t