0054 GMT [Dow Jones] Singapore's STI may rise modestly, tracking gains in most regional markets. "We'll probably be seeing some sort of caution coming in. We're already pretty close to the recent high," says Carey Wong, an analyst at OCBC. He notes Monday's 3039.35 intraday high stopped just short of the 3039.77 year-to-date high. "The market is rightfully a little more cautious. The bigger results are coming out soon, with DBS (D05.SG) on Friday. People are still adopting a kind of wait-and-see." He says 3040 will be the index's first test. The STI ended Monday up 1.1%, or 34.31 points, at 3032.80. Among stocks likely in focus, Sakari (AJ1.SG) reported 2Q12 net profit rose 66% on-year to US$23.9 million as revenue increased 26% to US$238.0 million. SingPost (S08.SG) reported fiscal 1Q13 net profit slipped 2.9% on-year to S$38.1 million
 
 

DJ MARKET TALK: Sakari Likely In Focus After 2Q12 Net Profit +66%
 

0054 GMT [Dow Jones] Sakari Resources (AJ1.SG) may track market winds after 2Q12 net profit rose 66% on-year to US$23.9 million as revenue increased 26% to US$238.0 million, broadly in-line with Credit Suisse's lowered expectation for US$24.2 million net profit on US$226.2 million sales; but it noted its forecasts were below consensus. 2Q12 average-selling-price was $94.50/ton vs Credit Suisse's $87.00/ton forecast. Carey Wong, an analyst at OCBC, notes, "they did show improvement. The ASPs held up pretty well, much better than we expected." He says the topline was in-line with expectations, while the bottom-line was a bit above, but "it's a very cyclical stock. (Its performance) will have to depend on the overall market. If the direction is not too hot, the high beta works against them." OCBC rates Sakari Hold with a S$1.45 fair value. Credit Suisse rates it Neutral with a S$1.45 target. It ended Monday up 4.1% at S$1.27; last week's S$1.21 low likely offers support, while the S$1.355 50-day moving average might offer resistance
 
 

DJ UPDATE: Singapore's Sovereign Wealth Fund GIC Cuts Exposure to Bonds, Equities
--Singapore's sovereign wealth fund GIC reduces exposure in developed markets
--Singapore's GIC reduces holdings in equities and bonds, accumulates cash
--Singapore's GIC expects low investment returns till global economy returns to balanced and sustainable growth 
 
 

CHARTPOINT: STATS

S$0.37-STAT.SI

 Stock is trying to “stay above water”, 37 cents being

the post-crisis low first reached more than a month

ago.

 The sequential improvement in profit in Q2

(announced last Thursday) probably helps, but more

may be needed for confidence that this will be the

bottom.

 At 37 cents, market cap is $814.8 mln (2202.22 mln

shares), giving a price / book of 46 US cents / 57.4

Singapore cents of 0.64x.

 There is no meaningful PE given loss of US$16.3

mln in the 12 months to June ’12, including “costs”

relating to the floods in Thailand last year: US$55.5

mln / US$4.6 mln in Q4 ’11 and US$4.6 mln in Q1 ’12.

 Even so, profit (excluding flood-related costs) has been

on a declining trend for 4 straight quarters (from

US$19.2 mln in Q2 ’11 to US$18 mln to US$7.38 mln

in Q1 ’12) before the increase in Q2 ’12 to US$8.92

mln.

 Temasek owns 83.8% of STATS.

 Our last call was a HOLD.

Daily Review, 31 July 2012 Page 2 of 5

SGX-ST Member, SGX-DT (CNCM)

ASCENDAS HOSPITALITY

S$0.88-ARIT.SI

 Nomura commenced stabilization action

yesterday, with the purchase of 7.851 mln units at 87-

88 cents.

 Total that Nomura can buy under the overallotment

agreement = 73.403 mln, and within a

one-month period from listing.

 We had advised against subscribing for the IPO priced

at 88 cents.

This message was edited by stand up n wake up on 31-Jul-2012 @ 9:54 AM

Daily Review, 31 July 2012 Page 3 of 5

SGX-ST Member, SGX-DT (CNCM)

MIDAS

S$0.355-MIDS.SI

 China’s Ministry of Railways has for the second time

in July ’12 raised its 2012 budget to Rmb470 billion

(first time was raised 9% on 6 July ’12 to Rmb448

billion), thereby surpassing last year’s spending of

Rmb461 billion. (Rmb 470 billion is still a far cry from

2010’s record Rmb 700 billion as well as 2009’s Rmb

600 billion)

 Having spent Rmb149 billion in 1H 2012, the new

budget suggests 2H 2012 spending of Rmb321 billion.

 The above is in line with Midas’ recent bullish outlook

for the railway industry in 2H 2012.

 Midas’ share price has benefitted from new contract

wins announced early this month as well as upgrade

of the railway budget announced on 6 July ’12 with

the stock having risen close to 30%.

 In contrast, Midas’ key customers and peers listed in

Hong Kong and China have fallen between 8-14% over

the same period and Midas’ valuations have caught up

with the sector.

 While new contract wins and positive industry newsflow

could support Midas’ share price, we believe its

out-performance relative to the sector suggest the

share price could consolidate.

 We maintain HOLD.

Daily Review, 31 July 2012 Page 4 of 5

SGX-ST Member, SGX-DT (CNCM)

CHEUNG WOH

S$0.17-CHWO.SI

 Cheung Woh’s founder, Chairman and major

shareholder KY Law bought 5,591,040 shares from

DBS Bank pursuant to a sale and purchase agreement

dated 19 July ’12 (price on this date was 18 cents),

increasing his stake from 60.2% to 62.03%.

Tuesday, 31 July 2012

Top Quant Alphas

CHINA MINSHENG BKG.CRL. (1988 HK)

BANK OF CHINA LTD. (3988 HK)

THE LINK RL.EST.INV.TST. (823 HK)

POWER ASSETS HDG.LTD. (6 HK)

CHINA MOBILE LTD. (941 HK)

Bottom Quant Alphas

GCL-POLY ENERGY HDG.LTD. (3800 HK)

BAYAN RESOURCES TERBUKA (BYAN ID)

FORMOSA PETROCH.CORP. (6505 TW)

Source: Macquarie Research.

Data as at 26/07/2012.

Screening for all stocks in Asia with Market Cap over

US$2bn.

Siam Cement (Outperform) 3

Lifting our estimates for 2H12 David Gambrill

While we are cutting our FY12 net profit estimate for Siam Cement by 9% as we incorporate the very weak

2Q12 performance – this masks the upward revisions we are making to our estimates for 2H12. We raise

our 3Q12 net profit estimate by 7% to Bt8.4bn and 4Q12 by 8% to Bt8.7bn.

China Online Gaming 4

Web and mobile take centre stage at Chinajoy Jiong Shao

Though MMORPGs still dominated the largest showcases at Chinajoy 2012, there was a clear shift in

gamer and operator interest towards open-platform web and mobile games. From our checks, developers

of the most successful web-games typically offer their games across dozens or even hundreds of

platforms, and hit mobile games are largely distributed through the iTunes platform as it is the only mobile

channel with an established payment system.

CapitaMalls Asia (Outperform) 5

More acquisitions Tuck Yin Soong

On 29 July, Sunday night, CapitaMalls Asia (CMA) announced the acquisitions of Olinas Mall in Tokyo for

S$378m and a development site in Qingdao with a total development cost of S$295m. These latest

acquisitions bring CMA's portfolio to 100 malls across Asia.

Kingdee International Software Group (Outperform) 6

Weak SME demand to weigh on 1H12 results; lowering

estimates

Steve Zhang

We are lowering our FY12 and FY13 EPS estimates by 89% and 55% respectively, as we believe 2Q12

demand was likely weaker than our previous expectations. However, we believe the stock's sell-off already

reflects downside to consensus estimates, and we believe the stock could rebound to its historical

valuation range if there are signs of demand recovery in 2H12.

Delta Electronics (Thailand) (Outperform) 7

Attractive value despite slower growth Chak Reungsinpinya

We maintain an Outperform rating on DELTA and our TP of Bt26. We expect margin improvement will help

drive earnings growth despite slower sales growth going forward. With the stock's PER discount to its

parent at over 1 std dev above its historical average, we see the stock as attractive value while offering

high dividend yields (6% in 2012–13E).

Bank of Baroda (Underperform) 8

Capcom (Outperform) 9

Catcher Technology (Downgrade to Underperform) 10

Crompton Greaves India (Underperform) 11

GAIL India (Outperform) 12

Godrej Properties (Outperform) 13

Hang Seng Bank (Underperform) 14

Hitachi (Outperform) 15

Indomobil Sukses Int. (Outperform) 16

Mahindra Finance (Underperform) 17

Marubeni (Outperform) 18

PT Telkom (Underperform) 19

Security Bank (Outperform) 20

Sumitomo Mitsui Financial (Outperform) 21

Tokyo Electron (Outperform) 22

Fujifilm HD (Neutral) 23

Please refer to the important disclosures and analyst certification on inside back cover of this document, or on our website www.macquarie.com.au/research/disclosures.

Fujitsu (Outperform) 24

Grasim Industries (Upgrade to Outperform) 25

Konica Minolta (Neutral) 26

Maruti Suzuki India (Downgrade to Neutral) 27

Resource Alam Indonesia (Outperform) 28

The Erawan Group (Outperform) 29

United Spirits (Underperform) 30

China Diviner 31

Crystal Ball 32

Director’s Cut 33

Japan: Industrial Production 34

Macro Mantra 35

Asia Oil & Gas 36

China property 37

China oil & gas 38

Hong Kong property 39

Oil & Gas Atlas 40

SREITs results review 41

Macquarie Agri-view 42

2

Please refer to the important disclosures and analyst certification on inside back cover of this document, or on our

website www.macquarie.com.au/disclosures.

THAILAND

SCC TB Outperform

Price (at 05:31, 27 Jul 2012 GMT) Bt318

12-month target Bt 420

Upside/Downside % 32.1

Valuation Bt 420

- DCF (WACC 10.5%)

GICS sector Materials

Market cap Btm 381,600

30-day avg turnover US$m 19.2

Market cap US$m 12,070

Number shares on issue m 1,200

Investment fundamentals

Year end 31 Dec 2011A 2012E 2013E 2014E

Revenue bn 368.6 411.6 438.1 462.0

EBIT bn 19.6 23.9 42.0 57.6

EBIT growth % -15.0 21.8 75.8 37.0

Reported profit bn 27.3 27.3 45.4 60.7

Adjusted profit bn 27.3 27.3 45.4 60.7

EPS rep Bt 22.73 22.79 37.79 50.57

EPS rep growth % -27.0 0.2 65.9 33.8

EPS adj Bt 22.73 22.79 37.79 50.57

EPS adj growth % -0.5 0.2 65.9 33.8

PER rep x 14.0 14.0 8.4 6.3

PER adj x 14.0 14.0 8.4 6.3

Total DPS Bt 12.50 14.00 18.00 21.00

Total div yield % 3.9 4.4 5.7 6.6

ROA % 5.3 6.3 10.8 14.1

ROE % 20.0 18.7 27.5 30.9

EV/EBITDA x 13.1 12.5 7.9 6.1

Net debt/equity % 85.7 88.8 68.4 46.2

P/BV x 2.7 2.5 2.1 1.8

SCC TB rel SET performance, & rec

history

Note: Recommendation timeline - if not a continuous line, then there was no

Macquarie coverage at the time or there was an embargo period.

Source: FactSet, Macquarie Research, July 2012

(all figures in THB unless noted)

Analyst(s)

David Gambrill

+66 2 694 7753 [email protected]

30 July 2012

Macquarie Securities (Thailand) Limited

Siam Cement

Lifting our estimates for 2H12

Event

 While we are cutting our FY12 net profit estimate for Siam Cement by 9% as

we incorporate the very weak 2Q12 performance – this masks the upward

revisions we are making to our estimates for 2H12. We raise our 3Q12 net

profit estimate by 7% to Bt8.4bn and 4Q12 by 8% to Bt8.7bn.

 At the end of May, we highlighted the risks to Siam Cement‟s earlier

outperformance given a deteriorating picture for 2Q earnings. Even adjusting

for the non-cash inventory write-downs, Siam Cement‟s underlying 2Q12

earnings performance held disappointments. And for the last eight weeks,

Siam Cement‟s share price has lagged the broader market – falling 7%

against a 3% rise in the SET Index.

 Spreads hold the key for future outperformance. If key product spreads

maintain their current ranges (US$450-500 for HDPE- Naphtha and US$500-

550 for PP-Naphtha), this would confirm a tightening of the market from the

lows seen in 1Q12 – and points toward potential for equity markets to start

more aggressively pricing in expectations of an up-cycle in petrochemicals.

Impact

 Another poor quarter… Siam Cement announced a 2Q12 net profit of

Bt4.2bn, driven by a Bt1bn loss for the petrochemicals division, which

includes Bt2bn in inventory write-downs. This was Siam Cement‟s third

consecutive quarter of sub-par performance.

 …but write-downs to benefit 3Q. The write-down of inventory values to

reflect the sharp fall in feedstock prices has lowered the cost of sales for the

current quarter. Combined with an improvement in spreads, this will support a

dramatic turnaround in 2H12 profitability for the chemicals division.

 Cement looks strong. Cement demand was up 10% YoY in 2Q12 driven by

recoveries in public sector activity and continued strength in commercial,

industrial and residential construction. We expect this positive momentum to

be maintained through 2H12 and into 2013.

Earnings and target price revision

 We are cutting our 2012 NP estimate by 9%, 2013 by 5% and 2014 by 4%.

Our DCF-based 12-month target price is maintained at Bt420.

Price catalyst

 12-month price target: Bt420 based on a DCF methodology.

 Catalyst: Stable spreads and improving petrochemical volumes

Action and recommendation

 We maintain a positive multi-year view for both the cement and

petrochemicals divisions, and keep our Outperform rating on Siam Cement

with a 12-month target price of Bt420.

3

Please refer to the important disclosures and analyst certification on inside back cover of this document, or on our

website www.macquarie.com.au/disclosures.

CHINA

Online Gaming Companies Coverage

Source: Bloomberg, Macquarie Research, Share prices as

at 27 July 2012

Analyst(s)

Jiong Shao, CFA, CMT

+852 3922 3566 [email protected]

Steve Zhang, CFA

+852 3922 3578 [email protected]

George Meng

+852 3922 4128 [email protected]

Jose Pun

+852 3922 3593 [email protected]

30 July 2012

Macquarie Capital Securities Limited

China Online Gaming

Web and mobile take centre stage at

Chinajoy

Event

 Though MMORPGs still dominated the largest showcases at Chinajoy 2012,

there was a clear shift in gamer and operator interest towards open-platform

web and mobile games. From our checks, developers of the most successful

web-games typically offer their games across dozens or even hundreds of

platforms, and hit mobile games are largely distributed through the iTunes

platform as it is the only mobile channel with an established payment system.

We believe these trends will likely erode Tencent’s dominance as a platform

operator going forward, though likely benefit developers NetEase and Giant

that have solid game development capabilities.

Impact

 Open platform proliferation likely to erode Tencent’s gaming dominance.

The increasing number of new open platforms such as Qihoo, Baidu,

Gamewave and Kunlun has forced Tencent to open its previously closed

platforms to attract hit games and developers. With increased competition,

Tencent is finding it more difficult to gain exclusive operating rights and

increase its revenue-sharing amount to developers to match other platforms.

We believe the transition to open platforms will shift the economic benefits of

the gaming sector from operators to developers, with Tencent, as the

dominant gaming platform, the most likely to be negatively impacted.

 Mobile market too still too unruly to be lucrative. Due to the blocking of

the Google Play app marketplace in China, the Android app market in China

remains disorganized and difficult to monetize, as a number of unregulated

third-party app stores often offer illegal free versions of popular games.

Therefore, the iOS app store has become the only viable channel of mobile

games monetization. Given the iOS platform continues to be a closed platform

controlled by Apple, we believe it will be difficult for other platform players to

monetize users in this market.

 The next big driver for web games is likely MMORPGs and advanced

casual games going to the browser. Currently, the web-games market

continues to be dominated by casual and simulation games. As browser

technology has improved, MMORPG players such as Giant and Shanda

Games have began rolling out web versions of their flagship MMORPGs. We

believe this trend will likely be the next growth driver of the MMORPG and

web-game industries by making MMORPGs more accessible to a wider user

base. We believe the recent announcement between Giant Interactive and

Qihoo that they would launch a web version of Giant’s new flagship game ZT2

affirms this trend, and expect other MMORPG players to follow going forward.

Outlook

 We believe the move towards open platform will shift the economics of the

gaming industry from operators such as Tencent (700 HK, HK$229.00,

Underperform, TP: HK$150.00) to game developers, and believe monetisation

in mobile games will be difficult in the near to medium term.

Stock code Company

Mkt price

(Local$)

Rating TP (Local$)

700 HK Tencent 229.0 UP 150.0

NTES US Netease 53.4 OP 65.0

CYOU US Changyou 18.1 OP 34.0

GA US Giant Interactive 4.5 OP 6.0

3888 HK Kingsoft 3.1 N 3.5

PWRD US Perfect World 9.7 N 10.0

GAME US Shanda Games 3.2 OP 4.5

4

Please refer to the important disclosures and analyst certification on inside back cover of this document, or on our

website www.macquarie.com.au/disclosures.

SINGAPORE

CMA SP Outperform

Price (at CLOSE#, 27 Jul 2012) S$1.62

12-month target S$ 2.10

Upside/Downside % 29.6

Valuation S$ 2.10

- DCF

GICS sector Real Estate

Market cap S$m 6,299

30-day avg turnover US$m 8.1

Market cap US$m 5,047

Number shares on issue m 3,888

Investment fundamentals

Year end 31 Dec 2011A 2012E 2013E 2014E

Revenue m 246.2 251.8 409.5 433.4

EBIT m 252.9 243.7 182.9 211.2

EBIT growth % 98.3 -3.6 -24.9 15.5

Reported profit m 456.0 442.0 295.5 312.0

Adjusted profit m 135.7 217.3 295.5 312.0

EPS rep ¢ 11.7 11.4 7.6 8.0

EPS rep growth % -15.8 -3.1 -33.1 5.6

EPS adj ¢ 3.5 5.6 7.6 8.0

EPS adj growth % -74.0 60.1 36.1 5.6

PER rep x 13.8 14.2 21.3 20.2

PER adj x 46.4 29.0 21.3 20.2

Total DPS ¢ 3.0 3.0 3.0 3.0

Total DPS growth % 50.0 0.0 0.0 0.0

Total div yield % 1.9 1.9 1.9 1.9

ROA % 3.4 2.8 1.9 2.0

ROE % 2.3 3.5 4.6 4.7

EV/EBITDA x 13.3 14.0 18.1 16.5

Net debt/equity % 3.9 31.6 43.0 52.3

P/BV x 1.0 1.0 1.0 0.9

CMA SP rel SNGPORI performance, &

rec history

Note: Recommendation timeline - if not a continuous line, then there was no

Macquarie coverage at the time or there was an embargo period.

Source: FactSet, Macquarie Research, July 2012

(all figures in SGD unless noted)

Analyst(s)

Tuck Yin Soong

+65 6601 0838 [email protected]

Brandon Lee

+65 6601 0024 [email protected]

30 July 2012

Macquarie Capital Securities

(Singapore) Pte. Limited

CapitaMalls Asia

More acquisitions

Event

 On 29 July, Sunday night, CapitaMalls Asia (CMA) announced the

acquisitions of Olinas Mall in Tokyo for S$378m and a development site in

Qingdao with a total development cost of S$295m. These latest acquisitions

bring CMA’s portfolio to 100 malls across Asia.

Impact

 Olinas Mall. This mall was completed in 2006 and acquired from a special

purpose vehicle managed by Invesco Global Real Estate Asia Pacific, Inc.

The mall is 100% occupied, with GFA of 583,000 sq ft, is located near two

train stations in Kinshicho in the Sumida Ward of Tokyo. The net property

income yield is above 6% on the acquisition price of S$378m. CMA expects

that the yield could be enhanced through tenancy remix and proactive mall

management, especially in the F&B sector (only 6% of GFA currently). This

will take time, as most leases are due only in 2015 and 2016. Meanwhile,

CMA expects net profits of circa S$15m p.a. from Olinas Mall, on a 50/55%

LTV and 15% tax structure.

 Qingdao site. The 23,700 sqm site is acquired from China Vanke and a local

enterprise. Including construction and other costs, the total development cost

of S$295m works out to be Rmb16,235 per sqm GFA. The mall will be the

retail component of Vanke City, a mixed development in the New Urban

Centre in the centre of Qingdao. When completed in 2015, CMA expects a

first year yield on cost of 4-5% with mid-teens IRR, and up to 8-9% yield on

cost after the first leasing cycle. This mall is likely to be offered to the recentlycreated

US$1bn China Development Fund II, where CMA owns 50%. Our

preliminary estimates suggest a first year yield on cost of 4.7% and an IRR of

13.9%.

 Look-through gearing. CMA’s gearing was 24.9% as at June 2012. We

estimate that its “look-through” gearing post these two acquisitions will rise

marginally to circa 37.3%.

Earnings and target price revision

 FY12E and FY13E core EPS raised by 2.6% and 1.3%, respectively to

account for Olinas Mall’s acquisition, but FY14E -3.9% due to higher interest

expenses from increased debt on higher capex requirements.

Price catalyst

 12-month price target: S$2.10 based on a Sum of Parts methodology.

 Catalyst: Improvement in yields across its China portfolio in 2H12.

Action and recommendation

 We expect strong core earnings growth at 60% this year and 36% in FY13.

We expect a potential upside of 30% to our sum-of-parts valuation of S$2.10.

Outperform maintained.

5

Please refer to the important disclosures and analyst certification on inside back cover of this document, or on our

website www.macquarie.com.au/disclosures.

HONG KONG

268 HK Outperform

Price (at CLOSE#, 27 Jul 2012) HK$0.89

12-month target HK$ 1.20

Upside/Downside % 34.8

Valuation HK$ 1.20

- PER

GICS sector Software &

Services

Market cap HK$m 2,239

30-day avg turnover US$m 1.6

Market cap US$m 289

Number shares on issue m 2,516

Investment fundamentals

Year end 31 Dec 2011A 2012E 2013E 2014E

Revenue m 2,022.5 2,099.5 2,520.1 3,000.2

EBIT m 54.6 -75.6 149.7 264.7

EBIT growth % -76.5 nmf nmf 76.9

Reported profit m 145.0 35.5 164.8 250.3

Adjusted profit m 145.0 35.5 164.8 250.3

EPS rep Rmb 0.05 0.01 0.05 0.08

EPS rep growth % -47.4 -76.8 333.8 42.5

EPS adj Rmb 0.05 0.01 0.05 0.08

EPS adj growth % -47.0 -81.7 439.1 43.0

PER rep x 13.5 58.3 13.4 9.4

PER adj x 13.5 73.6 13.7 9.5

Total DPS Rmb 0.00 0.00 0.00 0.00

Total div yield % 0.0 0.0 0.0 0.0

ROA % 2.1 -2.5 4.6 7.3

ROE % 9.2 2.2 9.5 12.9

EV/EBITDA x 15.5 567.7 9.1 6.3

Net debt/equity % -1.0 13.1 15.7 10.3

P/BV x 1.2 1.3 1.2 1.2

268 HK rel HSI performance, & rec

history

Note: Recommendation timeline - if not a continuous line, then there was no

Macquarie coverage at the time or there was an embargo period.

Source: FactSet, Macquarie Research, July 2012

(all figures in Rmb unless noted)

Analyst(s)

Steve Zhang, CFA

+852 3922 3578 [email protected]

Jiong Shao, CFA, CMT

+852 3922 3566 [email protected]

Jose Pun

+852 3922 3593 [email protected]

30 July 2012

Macquarie Capital Securities Limited

Kingdee International

Software Group

Weak SME demand to weigh on 1H12

results; lowering estimates

Event

 We are lowering our FY12 and FY13 EPS estimates by 89% and 55%

respectively, as we believe 2Q12 demand was likely weaker than our previous

expectations.

 However, we believe the stock’s sell-off already reflects downside to

consensus estimates, and we believe the stock could rebound to its historical

valuation range if there are signs of demand recovery in 2H12.

Impact

 Previous revenue growth target likely at risk. Though Kingdee China,

Kingdee’s main business unit, reported a relatively healthy YoY revenue

growth in high single digits in 1Q12, the company’s 1H profit warning last

week indicated demand deterioration in 2Q. We believe given the continued

macro headwinds, a significant demand recovery in the 3Q12 is unlikely, and

Kingdee’s previous FY12 revenue growth target of 25% YoY will likely have to

be revised downwards.

 Cost reduction to show results in 2H12. We believe 1H12 opex will likely

have been influenced by one-time costs related to reduction of 2,000 staff

(~18% of total workforce) over the past 12 months due to corporate

restructuring. However, we believe cost savings of the restructuring will

become more visible in 2H12, which we believe will have lower YoY opex

growth compared to 1H12, and meaningful margin expansion could occur in

FY13.

 Stock already pricing in downside to consensus. We note the recent selloff

in the stock has put valuation at ~10x EV/our new FY13 EBITDA estimate,

which we believe is conservative. We believe Kingdee’s market position and

fundamentals continue to be strong and the stock could rerate in 2H12,

should there be signs of recovery in SME demand.

Earnings and target price revision

 We are lowering our FY12 and FY13 EPS estimates by 89% and 55%

respectively. We lower our PT from HK$2.50 to $1.20 based on 13x FY13E

EV/EBIDTA, in-line with historical average.

Price catalyst

 12-month price target: HK$1.20 based on a PER methodology.

 Catalyst: 1H:12 results

Action and recommendation

 Though we believe Kingdee’s turnaround could take longer than previously

expected, we continue to believe the competitive positioning and long-term

fundamentals of the company remain solid.

6

Please refer to the important disclosures and analyst certification on inside back cover of this document, or on our

website www.macquarie.com.au/disclosures.

THAILAND

DELTA TB Outperform

Price (at CLOSE#, 27 Jul 2012) Bt23.30

12-month target Bt 26.00

Upside/Downside % 11.6

Valuation Bt 26.00

- PER

GICS sector

Technology Hardware & Equipment

Market cap Btm 29,064

30-day avg turnover US$m 0.9

Market cap US$m 922

Number shares on issue m 1,247

Investment fundamentals

Year end 31 Dec 2011A 2012E 2013E 2014E

Revenue m 38,434 39,029 40,425 42,446

EBIT m 2,593 3,039 3,431 3,608

EBIT growth % -34.4 17.2 12.9 5.2

Reported profit m 2,864 3,116 3,435 3,616

Adjusted profit m 2,780 3,116 3,435 3,616

EPS rep Bt 2.30 2.50 2.75 2.90

EPS rep growth % -31.0 8.8 10.2 5.3

EPS adj Bt 2.23 2.50 2.75 2.90

EPS adj growth % -31.4 12.1 10.2 5.3

PER rep x 10.1 9.3 8.5 8.0

PER adj x 10.5 9.3 8.5 8.0

Total DPS Bt 1.20 1.35 1.45 1.55

Total div yield % 5.2 5.8 6.2 6.7

ROA % 8.7 10.1 11.0 10.8

ROE % 14.2 15.7 16.7 16.3

EV/EBITDA x 5.8 5.1 4.5 4.3

Net debt/equity % -42.8 -37.7 -39.8 -39.3

P/BV x 1.5 1.5 1.4 1.3

DELTA TB rel SET performance, & rec

history

Note: Recommendation timeline - if not a continuous line, then there was no

Macquarie coverage at the time or there was an embargo period.

Source: FactSet, Macquarie Research, July 2012

(all figures in THB unless noted)

Analyst(s)

Chak Reungsinpinya

+66 2 694 7982 [email protected]

30 July 2012

Macquarie Securities (Thailand) Limited

Delta Electronics (Thailand)

Attractive value despite slower growth

Event

 We maintain an Outperform rating on DELTA and our TP of Bt26. We expect

margin improvement will help drive earnings growth despite slower sales

growth going forward. With the stock’s PER discount to its parent at over 1 std

dev above its historical average, we see the stock as attractive value while

offering high dividend yields (6% in 2012–13E).

Impact

 Muted growth: We lower our US$ revenue forecasts to flat growth in 2012-

13E from 9% and 10%, respectively. While the company guides for 5% growth

this year, we take a less sanguine view, given the company’s heavy reliance

on sales in Europe. In Thai baht terms, however, we believe sales will grow

modestly, given the weaker local currency: USD/THB averaged 31.1 in 1H12

compared to 30.4 in 1H11.

 Improved margin outlook: We believe the key earnings drivers for DELTA

over the next 12–18 months will be improved gross margin and better cost

control. GPM has rebounded to over 25% in 1Q12 from 23.5% in 2011 and

we believe it will be sustained in the 25–26% range in the medium term. Our

view is based on a favourable product mix, weaker THB against USD, and

absence of any write-downs associated with slow-moving inventory. The

company has also committed to better cost control with SG&A plus R&D set

to fall to 17% of sales by the end of this year from 18.4% in 1Q12.

 EPS downgrades: We have downgraded our earnings estimates for 2012–14E

by 3%, 2% and 7%, respectively. These downgrades were driven mainly by

lower sales forecasts and partially offset by better margins. Our estimates are

now in line with consensus for 2012–13E and slightly below consensus for

2014E.

 Relative value and yield: Despite a less optimistic outlook, we continue to

see value in DELTA. The stock trades at a discount to regional peers. More

importantly, its discount on forward PER to parent Delta Electronics (2308 TT)

has widened to over 1 std dev compared to the historical average despite

comparable growth and ROE. DELTA also offers attractive dividend yield of

6%, which is supported by a high net cash balance and strong core operation

in power supplies.

Earnings and target price revision

 We downgrade our 2012–14E EPS by 3%, 2% and 7% in 2012-14E,

respectively. We maintain our TP at Bt26.

Price catalyst

 12-month price target: Bt26.00 based on a PER methodology.

 Catalyst: Improved sales growth, gross margins; better cost control.

Action and recommendation

 Despite our more bearish view on growth, we believe DELTA remains

attractive given its strong core operation in power supplies and relative value

it now offers. Maintain Outperform, TP Bt26.

7

Please refer to the important disclosures and analyst certification on inside back cover of this document, or on our

website www.macquarie.com.au/disclosures.

INDIA

BOB IN Underperform

Price (at CLOSE#, 27 Jul 2012) Rs649.60

12-month target Rs 705.00

Upside/Downside % 8.5

Valuation Rs 705.00

- Gordon Growth

GICS sector Banks

Market cap Rsm 267,066

Market cap US$m 4,826

Number shares on issue m 411.1

Investment fundamentals

Year end 31 Mar 2012A 2013E 2014E 2015E

Net interest Inc bn 103.2 114.9 135.4 157.2

Non interest Inc bn 34.2 37.5 41.3 46.0

PBT bn 60.2 77.1 87.4 99.4

PBT growth % 6.6 28.0 13.3 13.7

Reported profit bn 50.1 51.7 58.6 66.6

EPS rep Rs 121.39 125.31 129.11 146.75

EPS rep growth % 12.4 3.2 3.0 13.7

PER rep x 5.4 5.2 5.0 4.4

Total DPS Rs 30.00 30.00 30.00 30.00

Total div yield % 4.6 4.6 4.6 4.6

ROA % 1.2 1.1 1.0 1.0

ROE % 20.7 17.5 16.4 15.7

Equity to assets % 6.1 6.0 6.4 6.3

P/BV x 1.0 0.8 0.7 0.7

BOB IN rel BSE Sensex performance, &

rec history

Note: Recommendation timeline - if not a continuous line, then there was no

Macquarie coverage at the time or there was an embargo period.

Source: FactSet, Macquarie Research, July 2012

(all figures in INR unless noted)

Analyst(s)

Suresh Ganapathy, CFA

+91 22 6720 4078 [email protected]

Parag Jariwala

+91 22 6720 4083 [email protected]

30 July 2012

Macquarie Capital Securities India (Pvt)

Ltd

Bank of Baroda

Slippages still high

Event

 Bank of Baroda’s 1Q13 net profit of Rs11.4bn was in line with our estimate.

Although the addition to restructured assets was lower during the quarter,

slippages are still high. We maintain our Underperform.

Impact

 Slippages still high; Restructured assets at ~6% of the loans: The bank

restructured close to Rs7.7bn this quarter, taking the outstanding restructured

book to Rs180bn (~6% of the loan book; break-up: Domestic - Rs150bn and

international - Rs30bn). Slippages during the quarter were at Rs12.5bn,

translating into an annualised slippage ratio of 1.7% which is still high in our

view, particularly in light of past ten quarters’ average run-rate of 1-1.2%.

Agriculture and SME contributed to the majority of slippages for the quarter

and are likely to remain a major area of concern going forward.

 Domestic business slowing down, overall business growth buoyed by INR

depreciation: Though on a reported basis loan growth and deposit growth were

healthy at around 23% YoY, a large part of it was contributed by INR depreciation

in the international business. The domestic business advances and deposit

growth is consistently slowing down and was around 17% YoY.

 Healthy capital position and NPL coverage ratio – the key positive: The

tier-1 ratio stands at 10%+, which is very healthy compared to most of the

other PSU banks. Hence growth is not an issue for want of capital and BOB

remains adequately capitalised to possibly leverage any pickup in economic

growth. The NPL coverage ratio at 79% is also the best amongst large PSUs.

 Analyst meeting takeaways: 1) The management guided that going ahead the

pace of restructuring is likely to be lower. 2) Management’s target is to keep the

NPL coverage ratio near 80%. 3) The bank targets to grow ~200bps higher than

the system. 4) NIM declined by 24bps QoQ. 4Q12 NIM was higher due to

interest on income tax refund. A decline in core margin was 8bps QoQ.

Management indicated that global NIMs will likely be 2.75% in FY13.

 Management change makes us more cautious: BOB has done extremely

well under the current CMD Mr. Mallya (since FY09) in terms franchise creation

and business growth with one of the best asset qualities among peers. This has

led BOB to trade at a premium to the entire basket of comparable PSU banks.

We would remain cautious of a management change as they tend to be quite

disruptive in PSU banks. Mr. Mallya retires in Nov-2012.

Earnings and target price revision

 No change.

Price catalyst

 12-month price target: Rs705.00 based on a Gordon Growth methodology.

 Catalyst: Increase in NPL and restructured assets

Action and recommendation

 Maintain Underperform.

8

Please refer to the important disclosures and analyst certification on inside back cover of this document, or on our

website www.macquarie.com.au/disclosures.

JAPAN

9697 JP Outperform

Price (at CLOSE#, 27 Jul 2012) ¥1,510

12-month target ¥ 2,250

Upside/Downside % 49.0

Valuation ¥ 2,250

- PER

GICS sector Software &

Services

Market cap ¥m 102,262

30-day avg turnover US$m 9.2

Market cap US$m 1,301

Foreign ownership % 22.25

Number shares on issue m 67.72

Investment fundamentals

Year end 31 Mar 2012A 13CoE 2013E 2014E

Revenue bn 82.1 105.0 101.1 108.0

EBIT bn 12.3 15.8 17.0 20.8

EBIT growth % -13.8 28.3 38.3 22.3

Recurring profit bn 11.8 15.7 17.4 21.2

Reported profit bn 6.7 9.8 10.4 13.0

EPS rep ¥ 99.3 170.2 153.9 192.3

EPS rep growth % -13.7 46.6 55.0 24.9

PER rep x 15.2 10.9 9.8 7.9

Total DPS ¥ 40.0 40 45.0 50.0

Total div yield % 2.6 2.5 3.0 3.3

ROA % 13.1 na 16.1 17.5

ROE % 11.8 na 17.1 18.4

EV/EBITDA x 5.9 na 4.5 3.8

Net debt/equity % -19.1 na -17.9 -45.0

P/BV x 1.7 na 1.5 1.3

9697 JP vs TOPIX, & rec history

Note: Recommendation timeline - if not a continuous line, then there was no

Macquarie coverage at the time or there was an embargo period.

Source: FactSet, Macquarie Research, July 2012

(all figures in JPY unless noted)

Analyst(s)

David Gibson, CFA

+81 3 3512 7880 [email protected]

30 July 2012

Macquarie Capital Securities (Japan)

Limited

Capcom

Digital 80% of OP shows upside

Conclusion

 Capcom reported 1Q OP of ¥2.67bn, which compared to our forecast of

¥2.4bn, however the beat was mainly in low quality amusement equipment.

Capcom confirmed digital revenues/OP ahead of plans and indicated further

QoQ growth in 2Q suggesting upside to our forecasts. Guidance was left

unchanged as expected. We estimate that 80% of 1Q OP was digital

(because of low packaged OP) which again highlights the company’s

exposure to a growing sector. Remains our top pick.

Impact

 Mobile did 142% YoY while guidance 90%: Mobile sales were ¥2.9bn

versus our estimate of ¥2.6bn which was up 142% YoY, indicating the

company’s plan to grow mobile by 90% is on track to being beaten. As

indicated in our last note, we think the strong performance is coming mainly

from Minna to Monhan Card Master (Monster Hunter) on Mobage and to

some degree Sengoku Basara Card Heroes (Mobage). We think this domestic

SNS success more than offsets a soft Shrek launch and highlights how

developers with brands are gaining share domestically. Note Capcom expects

Beeline (Smurfs/Snoopy/Shrek on iOS/Android) and domestic SNS revenues

to be up QoQ in 2Q while currently we assume flat at ¥2.9bn.

 Digital 80% of OP: We estimate digital (mobile, DLC, PC/other) was over

80% of OP in 1Q because of low profits from packaged with unit volumes of

2.4m inline with our forecasts but we think the Dragon’s Dogma 1m units

performance came with little profit. While overall Digital OP was ¥2.4bn

versus our ¥2.6bn we think this miss is mainly in packaged which more than

offset the mobile beat. Capcom confirmed that total digital in 1Q was ahead of

plans and it expected 2Q digital to be up QoQ.

 Amusement beat: Amusement Equipment OP in 1Q was ¥0.7bn versus our

¥0.2bn which we think is a low quality beat which was driven by repeat sales

of Monster Hunter pachislo machine from last FY. Guidance of around ¥1bn

OP for FY3/13 now looks easily achievable. Other segments were inline with

our forecasts.

Earnings and target price revision

 No change.

Price catalyst

 12-month price target: ¥2,250 based on a PER methodology.

 Catalyst: Ongoing SNS performance

Action and recommendation

 Stock remains our top pick in the sector for its shift into digital games and

investors not appreciating Digital is over 50% of OP and growing at 20% pa.

We think strength of its brands will mean rising market share in the domestic

SNS market. We remain concerned that Beeline had a soft Shrek launch

following soft Snoopy and hence iOS is proving more difficult than expected.

9

Please refer to the important disclosures and analyst certification on inside back cover of this document, or on our

website www.macquarie.com.au/disclosures.

TAIWAN

2474 TT Underperform

Price (at 05:30, 30 Jul 2012 GMT) NT$155.50

12-month target NT$ 130.00

Upside/Downside % -16.4

Valuation NT$ 130.00

- PER

GICS sector

Technology Hardware & Equipment

Market cap NT$m 116,734

30-day avg turnover US$m 94.9

Market cap US$m 3,879

Number shares on issue m 750.7

Investment fundamentals

Year end 31 Dec 2011A 2012E 2013E 2014E

Revenue m 35,913 38,476 40,446 44,768

Reported profit m 10,677 9,548 10,081 10,477

Profit bonus exp m 10,677 9,548 10,081 10,477

EPS rep NT$ 14.22 12.72 13.43 13.96

EPS rep growth % 113.5 -10.6 5.6 3.9

EPS bonus exp NT$ 14.22 12.72 13.43 13.96

EPS bonus growth % 113.5 -10.6 5.6 3.9

PER rep x 10.9 12.2 11.6 11.1

PER bonus exp x 10.9 12.2 11.6 11.1

Total DPS NT$ 4.99 4.45 4.70 4.89

Total div yield % 3.2 2.9 3.0 3.1

ROA % 17.9 14.0 13.2 12.6

ROE % 24.0 16.2 15.5 14.5

EV/EBITDA x 6.7 6.5 6.3 6.0

Net debt/equity % -30.7 -20.7 -25.4 -31.3

P/BV x 2.1 1.9 1.7 1.5

2474 TT rel TAIEX performance, & rec

history

Note: Recommendation timeline - if not a continuous line, then there was no

Macquarie coverage at the time or there was an embargo period.

Source: FactSet, Macquarie Research, July 2012

(all figures in NT$ unless noted)

Analyst(s)

Daniel Chang

+886 2 2734 7516 [email protected]

Tammy Lai

+886 2 2734 7525 [email protected]

Judy Lin

+886 2 2734 7523 [email protected]

30 July 2012

Macquarie Capital Securities Limited,

Taiwan Branch

Catcher Technology

Subdued bottoming

Event

 While the stock has fallen 20-25% in the past month and suffered various

downgrades in recent days, we remain cautious. We reduce Catcher to

Underperform from Neutral and cut our TP to NT$130 from NT$208.

Impact

 Facing L-T structural issues: As noted in, Resetting expectation, July 6,

2012, we are concerned about Catcher's product and customer exposure.

Although we believe Catcher will supply casing for the speculated iPad mini

through Pegatron, we see competitive risks both from Hon Hai and from

Pegatron’s rising in-house production. Apart from the iPad mini, Catcher’s

exposure to ultrabook and smartphone customers also faces significant risk.

Only 40-45% of its Macbook revenue is likely to see growth in 2013 while

competition from Foxconn Technology remains a key risk.

 3Q guidance lowered: Two weeks ago, Catcher guided 3Q12 sales growth

of 10%, but has now lowered this to “flat at best” due to NB customers'

downward revisions in recent days while smartphone customers continue to

weaken. This underlines our concern that without more solid customers or

products, the probability of Catcher surprising on the downside is high.

 Margin likely to face some pressure: Catcher cut its 2H12 new CNC

machines target to 2,000 from 3,000, implying slower growth. However, its

utilisation rate is 85-90% but with this new capacity, 2H12 could see some

pressure from slowing demand. Longer term, we see limited new products

adopting unibody casing while competitors continue to add to capacity, which

may increase pricing pressure if the demand/supply balance deteriorates.

 4Q12: Catcher will add one new NB customer from Sept while tablet (iPad

mini) orders are expected to start in Sept. Hence, we think 4Q should grow

10% from a low base. However, the company notes that it is new to this tablet

area so allocation should not be significant. We believe Catcher’s iPad mini

orders will not be as high as many assume due to Pegatron’s in-house

production while Hon Hai could share some allocation.

 Tax rate higher than expected. Catcher guides its annual tax rate to rise to

30% from 25% as it repatriates foreign income to help fund its Taiwan

operation.

Earnings and target price revision

 We cut our 2012/13E EPS by 19% and 15% due to slowing demand

Price catalyst

 12-month price target: NT$130.00 based on a PER methodology.

 Catalyst: Weaker-than-expected earnings outlook.

Action and recommendation

 We see Catcher facing multiple headwinds. We previously saw a short-term

share price bottom below NT$170, but now due to sharper EPS revision and

lower ROE, we expect a bigger discount to its multiple. Our TP of NT$130 is

based on 10x average 2012/13E EPS.

10

Please refer to the important disclosures and analyst certification on inside back cover of this document, or on our

website www.macquarie.com.au/disclosures.

INDIA

CRG IN Underperform

Price (at 13:16, 30 Jul 2012 GMT) Rs117.25

12-month target Rs 103.00

Upside/Downside % -12.2

Valuation Rs 103.00

- PER

GICS sector Capital Goods

Market cap Rsm 75,228

30-day avg turnover US$m 1.5

Market cap US$m 1,359

Number shares on issue m 641.6

Investment fundamentals

Year end 31 Mar 2012A 2013E 2014E 2015E

Revenue bn 112.5 131.5 150.1 168.1

EBIT bn 5.4 8.0 10.6 12.9

EBIT growth % -52.7 46.7 33.1 21.8

Adjusted profit bn 3.6 5.5 7.1 8.5

EPS adj Rs 5.68 8.58 11.13 13.27

EPS adj growth % -62.4 51.0 29.8 19.2

PER adj x 20.6 13.7 10.5 8.8

Total DPS Rs 0.99 1.50 1.95 2.32

Total div yield % 0.8 1.3 1.7 2.0

ROA % 6.9 8.4 9.7 10.6

ROE % 10.6 14.3 16.4 17.0

EV/EBITDA x 10.2 7.5 5.9 5.0

Net debt/equity % 13.3 33.2 22.8 13.3

P/BV x 2.1 1.9 1.6 1.4

CRG IN rel BSE Sensex performance, &

rec history

Note: Recommendation timeline - if not a continuous line, then there was no

Macquarie coverage at the time or there was an embargo period.

Source: FactSet, Macquarie Research, July 2012

(all figures in INR unless noted)

Analyst(s)

Inderjeetsingh Bhatia

+91 22 6720 4087 [email protected]

Amit Sinha

+91 22 6720 4085 [email protected]

Abhishek Bhandari

+91 22 6720 4088 [email protected]

30 July 2012

Macquarie Capital Securities India (Pvt)

Ltd

Crompton Greaves India

The Spanish tango

Event

 Over the weekend, CRG acquired ZIV Technologies for €150mn. ZIV

(headquartered in Spain) is primarily engaged in grid automation and

metering solutions. We incorporate the financials of ZIV in our model and

increase our FY13-14E earnings by 1.6-1.8%. We increase our TP by 2% to

Rs103 but maintain our Underperform rating on the stock.

Impact

 What is the acquisition all about? CRG has acquired ZIV, which is engaged

in grid automation and metering solutions for €150mn (it’s CRG’s largest

acquisition ever). ZIV is present in 50 countries with large operations in Brazil,

India, Spain and the US. CRG expects to complete its product offering in

power systems with ZIV in a space with €90bn. The market for these products

in India could be big but they are still 2-3 years away from now.

 Deal is earnings accretive from FY13: The new company will be

consolidated over a 7-month period for CRG in FY13. CRG is guiding for a

sharp increase in CY12 revenue at €85mn (from €52mn in CY11) with a 20-

21% margin. The company is funding the acquisition with internal accruals

and debt (1:1), which will partly offset the earnings accretion from the deal.

CRG has paid €68mn (45% of the acquisition price) and its net leverage will

increase to 0.36x in FY13 (0.15x in FY12). We expect ZIV to increase EPS for

FY13-14E by 1.6-1.8%.

 Customer concentration and macro environment in Europe remain a key

risk to the deal: ZIV’s large reliance on a single customer – Iberdola (a

Spanish utility) poses substantial risk. European macro-economic conditions

remain weak, as evidenced in CRG’s overseas subsidiaries which have been

struggling for 5 quarters now.

 Recent acquisition track record is not inspiring: CRG’s acquisition

strategy over the last 1-2 years has not been great with QEI and Emotron

facing impairment write-downs on goodwill still.

Earnings and target price revision

 Increasing our FY13-14E EPS by 1.6%-1.8% to factor in the latest acquisition.

Increase our target price to Rs103 (from Rs101 earlier).

Price catalyst

 12-month price target: Rs103.00 based on a PER methodology.

 Catalyst: slow pickup in overseas business and continued problems in

domestic power

Action and recommendation

 Too early to cheer the acquisition: The ZIV acquisition will be a positive for

CRG from a medium-term perspective. However, near-term benefits are likely

to remain extremely limited, in our view. Tough macro-economic conditions

and continued problems in overseas subsidiaries continue to remain a big

overhang. We maintain our Underperform rating with a revised target price of

Rs103 (from Rs101 earlier).

11

Please refer to the important disclosures and analyst certification on inside back cover of this document, or on our

website www.macquarie.com.au/disclosures.

INDIA

GAIL IN Outperform

Price (at 12:37, 30 Jul 2012 GMT) Rs358.50

12-month target Rs 430.00

Upside/Downside % 19.9

Valuation Rs 430.00

- Sum of Parts

GICS sector Utilities

Market cap Rsm 454,578

30-day avg turnover US$m 4.2

Market cap US$m 8,214

Number shares on issue m 1,268

Investment fundamentals

Year end 31 Mar 2012A 2013E 2014E 2015E

Revenue bn 441.8 443.7 651.1 831.6

EBITDA bn 72.8 81.6 94.3 110.2

Reported profit bn 44.4 45.9 51.0 60.2

EPS rep Rs 35.03 36.18 40.18 47.43

EPS rep growth % 10.5 3.3 11.1 18.0

PER rep x 10.2 9.9 8.9 7.6

Total DPS Rs 10.18 10.85 12.05 14.23

Total div yield % 2.8 3.0 3.4 4.0

ROE % 19.3 17.3 17.0 17.8

EV/EBITDA x 7.6 6.8 5.9 5.0

P/BV x 1.8 1.6 1.4 1.3

GAIL IN rel BSE Sensex performance, &

rec history

Note: Recommendation timeline - if not a continuous line, then there was no

Macquarie coverage at the time or there was an embargo period.

Source: FactSet, Macquarie Research, July 2012

(all figures in INR unless noted)

Trading margins jumped 3x QoQ

Source: Macquarie Research, July 2012

Analyst(s)

Jal Irani

+91 22 6720 4080 [email protected]

Abhishek Agarwal

+91 22 6720 4079

[email protected]

30 July 2012

Macquarie Capital Securities India (Pvt)

Ltd

GAIL India

Margin driven super quarter

Event

 GAIL announced a Q1FY13 PAT of Rs11.3bn (up 15% YoY, 135% QoQ),

which was 27% above consensus expectations. A quadrupling in gas trading

margin and a sharply higher LPG margin more than offset a slump in gas

transmission and petrochemical volumes. We expect a mild volume revival

towards year-end FY13, and maintain our Outperform with a TP of Rs430.

Impact

 Tripled gas trading margins from US$0.11/mmbtu to US$ 0.34/mmbtu. We

believe this follows the recent High Court ruling that GAIL is free to determine

margins as they are not regulated. Trading profits now account for as much as

28% of GAIL’s EBIT, and in fact, about half of gas transmission margins. While

these could be sustainable, they may likely be very volatile as they depend on the

availability of spot and short-term cargos at reasonable prices.

 LPG margins rocket, while petchem volumes slump: A sharp 7% QoQ

INR depreciation enabled a 38% rise in LPG operational EBIT margins. A

Rs2bn lower-than-expected oil subsidy burden also helped net LPG margins.

While upstream subsidy sharing details are not available yet, we estimate that

GAIL has shared 4-5% of the Q1FY13 upstream burden of ~ Rs157bn.

Petrochem production fell 23% QoQ; sales were even lower creating an

inventory build-up.

 Transmission volumes slump 5% QoQ to 110mmscmd; poised to revive

year end: KGD6 output continued to fall (cuts to even priority sectors). GAIL

expects volumes to resurrect to 120mmscmd by end-FY13 due to 2-

3mmscmd ONGC gas, a mild increase in Dahej spot cargoes, and spot LNG

from Dabhol. GAIL transmitted three spot cargos until now in FY13 (3-4

mmscmd on a regular basis).

 Petchem doubling medium-term positive, TAPI/shale of long-term help:

During the medium term, GAIL expects the doubling of petchem capacity at

Pata (45% done), & BCPL cracker (75% done) to be commissioned by end-

CY13. Most pipeline projects are on track, and some have resorted to phased

implementation to synchronize capex with gas availability. The TAPI pipeline

could yield 38mmmscmd and US shale gas imports 13mmscmd by 2016-17.

Earnings and target price revision

 No change.

Price catalyst

 12-month price target: Rs430.00 based on a Sum of Parts methodology.

 Catalyst: Ramp-up from domestic gas sources.

Action and recommendation

 While the natural gas transmission business volumes are not expected to rise

in the near term, we expect gas from ONGC’s domestic marginal fields to

prevent any further significant decline. GAIL is a low-beta defensive stock,

with upcoming volume growth in petrochemicals.

0.00

0.25

0.50

Q109

Q309

Q110

Q310

Q111

Q311

Q112

Q312

Q113

US$/

mmBtu

Blended natgas tariffs

Natgas trading margins

12

Please refer to the important disclosures and analyst certification on inside back cover of this document, or on our

website www.macquarie.com.au/disclosures.

INDIA

GPL IN Outperform

Price (at CLOSE#, 27 Jul 2012) Rs507.40

12-month target Rs 751.00

Upside/Downside % 48.0

Valuation Rs 834.50

- DCF (WACC 15.0%)

GICS sector Real Estate

Market cap Rsm 39,600

30-day avg turnover US$m 0.5

Market cap US$m 716

Number shares on issue m 78.05

Investment fundamentals

Year end 31 Mar 2011A 2012E 2013E 2014E

Revenue m 4,515 6,255 9,186 12,739

EBITDA m 1,051 1,694 2,441 4,082

EBITDA growth % 487.8 61.2 44.1 67.2

Adjusted profit m 1,310 1,105 1,639 2,822

EPS adj Rs 18.76 14.16 21.01 36.16

EPS adj growth % 6.5 -24.5 48.3 72.1

PER adj x 27.0 35.8 24.2 14.0

Total DPS Rs 0.00 0.00 0.00 0.00

Total DPS growth % 0.0 0.0 0.0 0.0

Total div yield % 0.0 0.0 0.0 0.0

ROA % 5.1 5.4 6.1 9.6

ROE % 15.2 9.2 10.4 15.7

EV/EBITDA x 47.3 31.8 22.1 13.2

Net debt/equity % 84.4 94.4 84.9 68.5

P/BV x 3.9 2.7 2.4 2.0

GPL IN rel BSE Sensex performance, &

rec history

Note: Recommendation timeline - if not a continuous line, then there was no

Macquarie coverage at the time or there was an embargo period.

Source: FactSet, Macquarie Research, July 2012

(all figures in INR unless noted)

Analyst(s)

Unmesh Sharma, CFA

+91 22 6720 4092 [email protected]

Kumar Saurabh

+91 22 6720 4091 [email protected]

30 July 2012

Macquarie Capital Securities India (Pvt)

Ltd

Godrej Properties

Mixed results; positive outlook

Event

 Godrej Properties (GPL) reported mixed results. Reported PAT came in below

our estimates primarily due to increase in raw material cost and one-off items.

However, GPL managed to show strong on-the-ground performance. Robust

launch pipeline for FY13 provides comfort regarding future sales. Formation of

residential development fund with global investors during the quarter provides

additional comfort on balance sheet. We maintain our Outperform rating on

GPL with target price of Rs751.

Impact

 Mixed 1Q FY13 results. GPL reported strong top-line (over 30% above our

estimates) due to higher-than-expected sales realization. However, EBITDA

margin and PAT was negatively impacted by increase in raw material costs

and one off items.

 Balance sheet concerns allayed. GPL has managed to alleviate balance

sheet concerns in the last six months. The share issuance (US$90mn) in

March 2012 was the first major step towards this. This brought down gearing

from ~200% at the end of December 2011 to ~120% at the end of June 2012.

In June 2012, GPL announced the creation of a US$140mn residential

development platform with a consortium of global investors. This fund-raising

provide additional comfort in a tight funding scenario.

 Strong on-the-ground performance – Lower sales momentum during FY12

remained a key investor concern. GPL has had a good start to FY13. During

1Q FY13, it managed to sell 0.83m sqf (vs 0.59m sqf in 1Q FY12) of

development units with booking value of Rs5.3bn (vs Rs2.4bn in 1Q FY12).

Excluding JV partner sales, GPL managed to sell ~0.75m sqf, which is over

30% above 1Q FY12 sales. Kolkata-based Godrej Prakriti and Ahmadabadbased

Garden City project accounted for ~40% of total sales volume. This

strong sales momentum enhances cash flow visibility and provides comfort

regarding GPL’s deleveraging plan.

 Robust launch pipeline - Sales momentum could be weak in 2Q FY13E due

to monsoon-related seasonality effect. However, we expect this to pick up in

2H FY13 on the back of strong launch pipeline during the festive season. GPL

plans to launch around 15 new projects/ phases across 8 cities in the coming

3 quarters of FY13.

Earnings and target price revision

 No change.

Price catalyst

 12-month price target: Rs751.00 based on a DCF methodology.

 Catalyst: Policy rates, progress on new projects, fund raising, sales trends

Action and recommendation

 We retain our Outperform rating on GPL with TP of Rs751.

13

Please refer to the important disclosures and analyst certification on inside back cover of this document, or on our

website www.macquarie.com.au/disclosures.

HONG KONG

11 HK Underperform

Price (at CLOSE#, 27 Jul 2012) HK$106.90

12-month target HK$ 90.00

Upside/Downside % -15.8

Valuation HK$ 100.00

- Gordon Growth

GICS sector Banks

Market cap HK$m 204,376

30-day avg turnover US$m 16.0

Market cap US$m 26,347

Number shares on issue m 1,912

Investment fundamentals

Year end 31 Dec 2011A 2012E 2013E 2014E

Net interest Inc m 15,736 16,166 16,890 17,277

Non interest Inc m 6,843 6,639 6,798 7,104

Underlying profit m 14,800 14,490 14,746 14,682

PBT m 19,212 18,053 18,817 18,827

PBT growth % 10.8 -6.0 4.2 0.1

Reported profit m 16,679 15,854 16,908 17,170

EPS rep HK$ 8.72 8.29 8.84 8.98

EPS rep growth % 11.8 -4.9 6.6 1.6

PER rep x 12.3 12.9 12.1 11.9

Total DPS HK$ 5.20 5.20 5.20 5.20

Total div yield % 4.9 4.9 4.9 4.9

ROA % 1.8 1.6 1.6 1.5

ROE % 22.5 19.4 19.2 18.0

Equity to assets % 8.1 8.2 8.3 8.3

P/BV x 2.6 2.4 2.2 2.1

11 HK vs HSI performance

Note: Recommendation timeline - if not a continuous line, then there was no

Macquarie coverage at the time or there was an embargo period.

Source: FactSet, Macquarie Research, July 2012

(all figures in HKD unless noted)

Analyst(s)

Ismael Pili

+852 3922 4774 [email protected]

Grace Dai

+86 21 2412 9069 [email protected]

30 July 2012

Macquarie Capital Securities Limited

Hang Seng Bank

A good 1H may not portend to 2H

Event

 HSB reported 1H12 net profit of HK$9.3bn that came in above our and

consensus expectations that we attribute to stronger contribution from non

interest income and associate income. The operating trends were generally

positive, though not wildly beyond our expectations. Though we see scope to

raise our estimates based on 1H12, we retain our earnings estimates and

Underperform recommendation pending a fuller review. We think the

operational improvement in 1H12 may not portend to the second half.

Impact

 Net interest margins improved 5bp HoH to 1.85%, in line with earlier bank

guidance of a better loan and deposit pricing environment in the first half.

Going forward, we don’t think margins will necessarily improve from current

levels, with the risk that stiffer competition re-emerges that applies pressure

on pricing.

 Loans grew 5.0% HoH led by loans for use in HK (+4.0%) and loans for use

outside HK (+19.6%), with trade finance weakening as expected. HSB said it

gained market share in the mortgage, credit card, and corporate loan sectors.

Looking ahead, we can not ascertain that growth can be sustained, as the

bank likewise had a similar lending surge in the first half last year only to see

a sharp second half contraction.

 Non interest income rose a strong 40% HoH on the back of improved trading

related income and insurance. However, there seems to be seasonality with

insurance income (pre claims), with the second half typically coming in

weaker over the past few years. Trading income remains a sway factor.

 Pre provision profit grew 13% HoH on the back of the performance of non

interest income. Provisions fell HoH to an annualised 10bp with the impaired

loan ratio holding at 0.33% from the YE11 level. Meanwhile, associate

income grew 9% HoH. For the second half, we think provisions could rise

largely as part of the normalisation process, while associate income could

continue to post solid growth led by HSB’s stake in Industrial Bank.

Earnings and target price revision

 No change, pending a fuller review.

Price catalyst

 12-month price target: HK$90.00 based on a Gordon Growth methodology.

 Catalyst: stronger pick up in margins, faster loan growth.

Action and recommendation

 It was a good half for HSB, although largely in line with our expectations as

formed from our earlier company visits. Looking ahead, we see risk that the

second half has limited growth or comes in lower relative to 1H12. As such,

any HoH net profit beat in 2H12 may be driven more by trading income and/or

associate contribution. Underperform maintained.

14

Please refer to the important disclosures and analyst certification on inside back cover of this document, or on our

website www.macquarie.com.au/disclosures.

JAPAN

6501 JP Outperform

Price (at 06:21, 30 Jul 2012 GMT) ¥456

12-month target ¥ 640

Upside/Downside % 40.4

Valuation ¥ 640

- Price To Book

GICS sector

Technology Hardware & Equipment

Market cap ¥bn 2,115

30-day avg turnover US$m 115.9

Market cap US$m 26,897

Number shares on issue m 4,638

Investment fundamentals

Year end 31 Mar 2012A 2013E 2014E 2015E

Revenue bn 9,666 9,413 9,885 10,369

EBIT bn 412 505 577 636

EBIT growth % -7.3 22.4 14.5 10.1

Recurring profit bn 558 507 585 644

Reported profit bn 347 261 326 360

EPS rep ¥ 71.9 54.0 67.4 74.5

EPS rep growth % 45.6 -24.9 24.9 10.5

PER rep x 6.3 8.4 6.8 6.1

Total DPS ¥ 8.0 10.0 14.0 16.0

Total div yield % 1.8 2.2 3.1 3.5

ROA % 4.4 5.3 6.1 6.5

ROE % 29.0 21.4 22.8 21.5

EV/EBITDA x 4.4 4.0 3.6 3.3

Net debt/equity % 62.5 49.2 36.3 25.1

P/BV x 1.2 1.2 1.0 0.9

6501 JP vs TOPIX, & rec history

Note: Recommendation timeline - if not a continuous line, then there was no

Macquarie coverage at the time or there was an embargo period.

Source: FactSet, Macquarie Research, July 2012

(all figures in JPY unless noted)

Analyst(s)

Damian Thong, CFA

+81 3 3512 7877 [email protected]

Claudio Aritomi

+81 3 3512 7858 [email protected]

31 July 2012

Macquarie Capital Securities (Japan)

Limited

Hitachi

Delivering profit growth despite macro headwinds

Conclusion

The FY1Q results were good (above Hitachi's targets) and FY guidance was

maintained. We believe investors will appreciate the YoY profit growth, the

resilience of FY guidance, and the announcement of new managerial

assignments (including Chief Procurement Officer posts) aimed at

institutionalising the Smart Transformation Project. The market reaction should

be broadly favourable. We rate Hitachi at Outperform with a TP of ¥640.

Unsurprisingly, the tone of the meeting was somewhat muted by management's

acknowledgement of macro headwinds and their limited ability to illuminate the

outlook further. We think the market will conclude that the FY OP guidance is

achievable, but will not assume smooth sailing all the way. Hitachi's misstep in

IT services (cost overruns) was a small negative surprise, offset by a lift to the

Storage Solutions FY guidance.

Impact

 Management indicated that FY1Q OP beat internal goals by ~¥20bn.

FY1Q revenues of ¥2.12tr dipped 1.4% YoY but OP rose 21% (+¥11.2bn) to

¥63.6bn (MRE: ¥60-70bn). This comparison includes the effect of the disposal

of the HDD and LCD panel businesses. Excluding this, we believe revenues

would have increased ~6% YoY while OP would have risen ~30% YoY.

 ¥6.4bn in YoY OP growth came from Automotive Systems (rebound in auto

production from the earthquake disruptions), ¥5.7bn from Power Systems

(absence of last year's welding issue remediation costs in the thermal power

business), ¥3bn from Construction Machinery and ¥2.3bn from Electronic

Systems & Equipment (notably Hitachi High Technologies).

 On the other hand, Information & Telecom Systems OP declined ¥3.5bn (cost

overruns), Digital Media and Consumer Products OP decreased ¥3.2bn

(lower profitability of air conditioners and other white goods), and Social and

Industrial Systems OP dipped ¥3bn (lower industrial equipment demand).

 Hitachi acknowledged weaker-than-projected results in the Information &

Telecommunications Systems segment due to cost overruns on a number of

IT projects, which the firm aims to remediate by FY-end. The FY1H segment

OP goal was accordingly cut by Hitachi to ¥30bn from ¥33bn, though the FY

projection was kept at ¥120bn. A positive offset is a stronger expectation for

Storage Solutions, where the FY sales goal was lifted to ¥360bn from ¥355bn.

 No change to headline guidance figures: Hitachi maintained FY revenue and

OP guidance of ¥9.1tr and OP of ¥480n (MRE: ¥9.4tr and OP of ¥505bn). At

the segment level, Hitachi trimmed Construction Machinery revenue guidance

by ¥50bn and High Functional Materials by ¥10bn, taking OP guidance down by

¥7bn and ¥3bn respectively (to ¥75bn and ¥95bn). This was offset by tapping

"buffers" in the corporate costs and eliminations lines. Hitachi may fine-tune

projections further by FY1H but we think the FY guidance is broadly reasonable.

Earnings and target price revision

 No changes. We plan on reviewing our estimates after meeting the company.

Price catalyst

 12-month price target: ¥640 based on a Price to Book methodology.

 Catalyst: Macro factors may be key near-term.

Action and recommendation

 We continue to view Hitachi as a core holding for Japan.

15