UOBKayHian

Regional Morning Notes

Thursday, February 19, 2009

KEY STORY Key Indices

Key Indices Prev Close 1D % 1W % 1M % YTD %
China
DJIA 7555.6 0.0 (4.2) (8.8) (13.9)
Oil & Gas Page 2 FTSE 100 4006.8 (0.7) (5.4) (3.4) (9.6)
Sino-Russia 20-year oil supply contract positive for China; widening H- vs AS30 3366.9 (1.3) (1.5) (4.6) (8.0)
CSI 300 2275.8 (4.6) (2.4) 13.1 25.2
A-share discount presents buying opportunity. Maintain OVERWEIGHT. FSSTI 1651.1 0.8 (4.1) (5.5) (6.3)
HSI 13016.0 0.5 (3.9) (2.4) (9.5)
Singapore JCI 1330.6 1.0 0.4 (1.5) (1.8)
KLCI 895.2 (0.4) (0.2) 0.6 2.1
Oversea-Chinese Banking Corp (HOLD/S$4.89/Fair: S$5.27) Page 10 KOSPI 1113.2 (1.2) (6.5) (3.3) (1.0)
Nikkei 225 7534.4 (1.5) (5.2) (8.7) (15.0)
4Q08: Disappointing results with spike in specific allowances due to SET 439.6 0.3 (1.0) 0.9 (2.3)
new NPLs in overseas operations and manufacturing sector. TWSE 4498.4 0.1 (1.7) 3.0 (2.0)
BDI 1986 4.8 (3.4) 125.4 156.6
CPO (RM/mt) 1935.5 (3.0) 0.0 6.5 18.7
Nymex Crude
CHINA (US$/bbl) 34.6 (0.9) (7.8) (5.2) (22.4)

Sector Source: Bloomberg

Oil & Gas Page 2

Sino-Russia 20-year oil supply contract positive for China; widening H- vs Top BUYs/SELLs
A-share discount presents buying opportunity. Maintain OVERWEIGHT. Current Target Pot. +/-
Price Price (%)
Power Page 3 Ticker (lcy) (lcy)
Coal import only has marginal impact on both IPPs and coal miners. Top BUYs
Maintain MARKET WEIGHT. China Life 2628 HK 22.45 30.50 35.9
China Mobile 941 HK 71.50 90.00 25.9
China Petroleum 386 HK 4.23 6.93 63.8
Update China Railway 390 HK 4.68 5.90 26.1
China Shenhua 1088 HK 16.82 23.00 36.7
Ping An Insurance (BUY/HK$34.75/Target: HK$47.75) Page 4 Maanshan Iron 323 HK 2.88 3.70 28.5
Bumi Resources BUMI IJ 740.00 1,010.00 36.5
January premiums up 23% yoy, reflecting an excellent start to the year. Public Bank PBK MK 9.10 10.90 19.8
DBS Group DBS SP 8.10 10.55 30.2
HONG KONG Indofood Agri IFAR SP 0.56 0.80 42.9
SingTel ST SP 2.47 2.95 19.4
Advanced Info ADVANC TB 77.00 101.00 31.2
Sector Quality Houses QH TB 0.86 1.49 73.3

Property Page 6 Top SELLs

Aluminum Corp 2600 HK 4.07 3.00 (26.3)
We double-check our price targets and assumptions, which are still among Parkson Retail 3368 HK 6.53 4.89 (25.1)
the most bearish in the market, and find they are not at all far-fetched. Wharf Hldg 4 HK 16.72 14.60 (12.7)
S’pore Airlines SIA SP 10.22 9.70 (5.1)
S’pore Exchange SGX SP 4.90 3.00 (38.8)
MALAYSIA Amata Corp AMATA TB 3.60 2.52 (30.0)

Results
Key Assumptions
Lafarge Malayan Cement (SELL/RM3.86/Fair: RM3.50) Page 8
FY08: Net profit of RM367.7m (+27.6% yoy) due to higher average selling GDP (% yoy) 2008 2009F 2010F

prices and demand. Results were above our and market expectations. US* 1.3 (1.9) 1.8
Euro Zone* 0.7 (1.8) 0.8
Japan* (0.7) (2.9) n.a.
SINGAPORE Singapore 1.2 (4.0) 4.0
Malaysia 5.1 0.9 4.0
Thailand 4.2 0.5 4.3
Results Indonesia 6.0 3.6 6.3
Oversea-Chinese Banking Corp (HOLD/S$4.89/Fair: S$5.27) Page 10 Hong Kong 2.2 (0.8) 1.5
China 9.0 7.1 8.0
4Q08: Disappointing results with spike in specific allowances due to new
Brent Crude Oil (US$/bbl) 100 55 65
NPLs in overseas operations and manufacturing sector. Aluminium * (US$/MT) 2,623 1,763 2,090
Copper * (US$/MT) 6,884 3,834 4,578
THAILAND Gold Price London * (US$/ounce) 873 942 981
Iron Ore * (USc/dmtu) 153 107 99
CPO (US$/MT) 818 520 685
Results BDI 6,338 2,500 1,500
Advanced Info Service (BUY/Bt77.00/Target: Bt101.76) Page 12 * Bloomberg
4Q08: Operating results in line with expectation. Expect performance to Source: UOB, UOB Kay Hian

be soft in 1H09 before picking up in 2H09.

Update Corporate Events
Dynasty Ceramic (NOT RATED/Bt11.80) Page 14 Venue Type Beg Close

Tile manufacturer offers impressive growth and high dividend yield. China/Commodities-Energy Malaysia AP 18-Feb 19-Feb
China/Commodities-Energy Hong Kong AP 20-Feb 20-Feb

* AP: analyst presentation

Please see important notice on last page Page 1 of 16

 Regional Morning Notes
Thursday, February 19, 2009

Oil & Gas

Sino-Russia oil deal and widening H-A gap present buying CHINA
opportunities Oil & Gas
The just-concluded Sino-Russia loan-for-oil deal carries an implied oil price OVERWEIGHT
of US$22/bbl, a positive for China. Widening H- vs A-share discount
suggests further upside for H-shares. Maintain OVERWEIGHT for sector. PetroChina (857 HK)
Sector Events
BUY
China, Russia sign 20-year deal swapping oil for loans. China signed a Current Price: HK$5.92
US$25b energy deal that will secure oil supplies from Russia for the next 20 Target Price: HK$8.82
years in return for loans. As part of the broad energy supply deal, China will
lend US$15b to Rosneft, Russia's state-owned oil major, and US$10b to Sinopec (386 HK)
Transneft. In return, Russia promised to guarantee annual oil supply of 15
million tons, or 300,000 barrels per day, for 20 years to China. BUY
Current Price: HK$4.23
Sector Impact Target Price: HK$6.93
Positive for China’s energy safety. The interest rate embedded in the deal
is believed to be about 6%. If it is the case, the implied oil purchase price for Sinopec’s H-A Discount
China will be approximately US$22/bbl, which is very reasonable given the 65%

current spot price of US$40/bbl and long-term consensus of US$75/bbl. 60%

Furthermore, 15 million tons is a significant supply, amounting to some 8% of 55%

China’s oil imports in 2008 and 4% of China’s total consumption. 50%

45%
Still too early to pin down impact on oil majors. Our bet is that
40%
PetroChina and Sinopec will likely share this contracted oil supply. But due to
35%
the limited information available at this point, there is no indication of how this
30%
supply will be split between the 2 oil majors or even the oil price at which they 25%
will be charged. However, given Sinopec’s refining capacity is 40% greater Nov-07 Jan-08 Mar-08 May-08 Jul-08 Sep-08 Nov-08 Jan-09

than PetroChina’s, it is likely that Sinopec will be allocated more oil from this
deal. Source: Bloomberg, UOB Kay Hian

Earning Revision
Sinopec recently announced that its net profit in FY08 will drop more than PetroChina’s H-A Discount
50% yoy due to a) big refining losses in 1H08 and b) drop in price and 70%

demand for its chemical products. For these reasons, we slash our net profit 65%

forecast for 2008 to Rmb26.3b, or Rmb0.30/share. We leave our forecast for 60%

2009 unchanged. 55%

50%

Recommendation 45%

40%
After the recent 30% rebound in the A-share market, the H- vs A-share 35%

discount has been widening for both Sinopec and PetroChina. Sinopec’s 30%

57% H- vs A-share discount has been close to the historical high. This implies 25%
Nov-07 Jan-08 Mar-08 May-08 Jul-08 Sep-08 Nov-08 Jan-09
a good buying opportunity for its H-shares.
At this juncture, we maintain our BUY ratings on Sinopec and PetroChina. Source: Bloomberg, UOB Kay Hian

Our target prices for Sinopec and PetroChina are HK$6.93 and HK$8.82,
which correspond to 1.6x and 1.8x 2009 P/B respectively Analyst
Aochao Wang
 (86 21) 54047225 ext. 802
wang.aochao@uobkayhian.com

Price Net Profit EPS PE ROE Market Yield

Stock Rec. 18 Feb 09 2007 2008F 2009F 2007 2008F 2009F 2007 2008F 2009F 2007 Cap 2007
(HK$) (Rmbm) (Rmbm) (Rmbm) (Rmb) (Rmb) (Rmb) (x) (x) (x) (%) (HK$b) (%)
PetroChina BUY 5.92 145,625 140,188 108,926 0.80 0.77 0.60 6.5 6.8 8.7 22.5 124.9 6.8

Sinopec BUY 4.23 56,533 26,279 81,510 0.65 0.30 0.94 5.6 12.0 3.9 19.8 70.9 4.5

Please see important notice on last page Page 2 of 16

 Regional Morning Notes
Thursday, February 19, 2009

Power
Coal import only has marginal impact CHINA

Local press reported that dominant IPPs and China Resources will import
Power
coal, amid the deadlocked coal price negotiation. Given the limited import MARKET WEIGHT
volume, industry impact will likely be marginal. Maintain MARKET WEIGHT.
Sector Events CR Power (836 HK)
IPPs will import more coal this year. According to local press, the five BUY
major power groups, including Huaneng Group, Huadian Group, Datang Current Price: HK$14.08
Group, Guodian Group and China Power Investment Group, together with Target Price: HK$17.70
China Resources Group, have teamed up to import coal from overseas
suppliers to satisfy their own demand. In the meantime, the contract
negotiations for thermal coal are still deadlocked. Datang Power (991 HK)
Sector Impact BUY
Current Price: HK$3.60
Marginal impact for both IPPs and coal miners. We think coal imports will Target Price: HK$4.90
merely serve as a strategic warning to coal miners under the current
deadlocked coal price negotiation. In fact, the volume of imported coal will
only account for less then 5% of the total coal demand for Independent
Power Producers (IPPs). Even if IPPs are able import more coal, imported Huaneng Power (902 HK)
coal can only be used in coastal cities given transportation problems. From SELL
the business perspective, importing coal is actually not a good choice for Current Price: HK$5.17
IPPs as international coal price and supply are usually more volatile, even Fair Price: HK$4.70
though prices may now be cheaper. Therefore, we expect coal imports to
have only a marginal impact on the domestic coal prices. On the other hand, Huadian Power (1071 HK)
we think it will support international coal price and narrow the price gap SELL
between China and overseas coal due to higher demand. Current Price: HK$1.65
IPPs’ coal cost will depend on domestic demand/supply dynamics. Fair Price: HK$1.50
There has been much news or speculation concerning the thermal coal price
negotiation. However, we think investors should be focussing more on the
current coal demand/supply dynamics and spot price, as both parties can China Power (2380 HK)
default if there is price divergence. HOLD
Current Price: HK$1.43
Recommendation
Fair Price: HK$1.70
Maintain MARKET WEIGHT for the power sector given the uncertain coal
price negotiation and coal price trend. Currently, we continue to prefer well-
diversified IPPs, including CR Power and Datang Power, given their lower
coal cost risk in the longer term and better earnings visibility. Maintain BUY Analyst
for both companies with a DCF-based target prices of HK$17.70 Yan Shi
(WACC=9.6%, g=3%) and HK$4.90 ((WACC=8.5%, g=3%) respectively.  (8621) 54047225-804
yan.shi@uobkayhian.com

Sector Comparison
Price Net Profit EPS PE ROE Market Yield
Company Ticker Rec. 18 Feb 09 2007 2008F 2009F 2007 2008F 2009F 2007 2008F 2009F 2007 Cap 2007
(HK$) (Rmbm) (Rmbm) (Rmbm) (Rmb) (Rmb) (Rmb) (x) (x) (x) (%) (HK$m) (%)
Datang
Power 991 HK BUY 3.60 3,406 510 3,169 0.29 0.04 0.27 11.9 79.5 12.8 13 11,632 4.2
CR
Power 836 HK BUY 14.08 3,161 563 4,132 0.80 0.14 1.01 17.6 102.7 14.0 17 18,493 1.8
Huaneng
Power 902 HK SELL 5.17 6,161 (3,979) 2,281 0.51 (0.33) 0.19 9.1 n/a 24.6 12 15,796 6.4
Huadian
Power 1071 HK SELL 1.65 1,197 (1,362) 116 0.20 (0.23) 0.02 7.5 n/a 77.3 6 2,361 4.2
China
Power 2380 HK HOLD 1.43 592 (782) 403 0.16 (0.22) 0.11 8.0 n/a 15.2 6 2,855 5.1

CR Power’s financials are in HK$

Source: Company data, UOB Kay Hian

Please see important notice on last page Page 3 of 16

 Regional Morning Notes
Thursday, February 19, 2009

Ping An Insurance
January premiums up 23% yoy, reflecting excellent start to the year
January premiums up 23% yoy, better than consensus estimates. Earnings CHINA
recovery expected this year as key negatives have been mostly factored into
earnings. Maintain BUY. Ping An Insurance (2318 HK)
Corporate Events BUY
Ping An announced January premiums of Rmb13.3b, up 23% yoy, which Current Price: HK$34.75
exceeded consensus expectations. Property and casualty (P&C) premiums Target Price: HK$47.75
came in at Rmb3.6b, up 12.7% yoy.
Sector Insurance
Stock Impact 52-Wk Avg Daily Vol. (m) 21.8

Like China Life, Ping An is off to an excellent start to the year in terms of Market Cap (HK$m) 264,147
premium growth. Premium growth is particularly impressive, given that (US$m) 33,865
January was a shortened working month due to the Chinese New Year and
Major Shareholders (%)
the very strong loan growth experienced in Jan 08.
HSBC 16.80
We believe Ping An’s premium growth was further helped by Ping An
maintaining its universal life credit rate, which remained unchanged at 5.25% Book NTA per Share (Rmb) 13.36
ROE (%) 24.3
for a 138bp spread above the five-year benchmark deposit rate.
P&C premiums were also slightly better than expected given the shortened Results Due
Interim August
month of January. Going forward, P&C premium growth will be challenged by Final April
slowing auto sales. However, China Insurance Regulatory Commission’s
(CIRC) enforcement of insurer solvency and strict regulation of commissions
may help Ping An break even in terms of underwriting this year. Price Chart
(HK$)
Earnings Risk
82.00
A-share market volatility and prolonged period of low interest rates. 72.00
62.00
Recommendation 52.00
42.00
We maintain our BUY recommendation on Ping An as we believe the majority 32.00
of the headwinds it faced in 2008 have been fully priced in. Earnings of 22.00
12.00
Chinese life insurers will also likely recover this year. With the A-share 2.00
market being the top performing market in the world year-to-date, the Feb-08 May -08 Aug-08 Nov -08
investment outlook has also improved substantially from last year. Our target
Source: Bloomberg
price remains HK$47.75, reflecting 2.5x P/EV and 25x NBV. However, China
Life remains our top pick for the insurance sector due to its simple business
structure, dominance in the rural business and absence of loss-making
foreign investments. Analyst
Nan Sheng
 (8621) 5404 7225 ext.809
nan.sheng@uobkayhian.com

Net Earned Net EPS

Year to Premium EBITDA Profit EPS Growth PE P/EV DPS Yield
31 Dec (Rmbm) (Rmbm) (Rmbm) (Rmbm) (%) (x) (x) (Rmb) (%)
2006 63,013 8,548 7,838 1.05 53.8 29.8 3.0 0.34 0.88
2007 73,606 22,004 18,688 2.50 138.4 12.5 1.5 0.50 1.30
2008F 92,297 2,068 437 0.06 -97.7 535.4 2.1 0.01 0.03
2009F 108,560 16,700 13,848 1.85 3069.9 16.9 1.8 0.37 0.96
2010F 131,647 21,169 18,316 2.45 32.3 12.8 1.6 0.47 1.22
Consensus Net Profit – FY08: Rmb3,552m
– FY09: Rmb14,897m

Please see important notice on last page Page 4 of 16

 Regional Morning Notes
Thursday, February 19, 2009
Monthly Life Premiums
Rmbm
14,000 60%
12,000 50%

10,000 40%
30%
8,000
20%
6,000
10%
4,000
0%
2,000 -10%
0 -20%
ec 06

Jac-0 7

ec 08
M b-07

A ul- 7

M b-08

A ul- 8

09
A r- 7
M pr- 07

A r- 8
M pr- 08
O p- 07
N t- 0 7
O p- 06
N t- 0 6

Fen-06

Fen-07

O p- 08
N t- 0 8

n- 8
ay 07
n 7

S g- 07

ay 08
n 8
ug 08
S g- 06

Dov- 6

Dov- 7

Dov- 8
e 0

S -0
J -0

J -0
u 0

u 0
Ju -0

Ju -0
Ja -0

Ja -0
A ul-

a
c

c
e

e
e
J

Premiums Growth

Source: Ping An, UOB Kay Hian

Monthly P&C Premiums

Rmbm
4,000 120.0%
3,500 100.0%
3,000
80.0%
2,500
60.0%
2,000
40.0%
1,500
20.0%
1,000
500 0.0%
0 -20.0%
ec 8
ec 7
ec 6

09
M b-08

A ul- 8
A ul- 7
M b-07

A r- 8
M pr- 08
A r-07
M pr- 7

O p-08
N t-0 8

n- 8
Fen-07
N t-0 7
Fen-06

O p-07
O p-06
N t-0 6

ay 08
n 8
ug 08
ay 07
n 7
ug 07

D v-08
D v-07
D v-06

S -0
S -0
S g-0

Ju -0
J -0
Ju -0
J -0

Ja -0
Ja -0
Ja -0

a
a

c
c
c

o
o
o

e
e
u
e
A

Premiums Growth

Source: Ping An, UOB Kay Hian

Universal Life Credit Rate

7.00%
Five-year deposit
6.00% rate

5.00%
Ping An
4.00% Universal Life
3.00% Credit Rate

2.00%

1.00%

0.00%
7

8
07

08

09
7

07

08

8
-0

-0
l-0

l-0
-0

-0

-0

-0
p-

p-
n-

n-

n-
ov

ov
ay

ay
ar

ar
Ju

Ju
Ja

Ja

Ja
Se

Se
M

M
N

N
M

Source: Ping An, UOB Kay Hian

Profit & Loss

Year to 31 Dec (Rmbm) 2006 2007 2008F 2009F 2010F
Net earned premiums 63,013 73,606 92,297 108,560 131,647
Net Investment income 12,198 15,257 17,373 20,279 27,265
Net profit 7,838 18,688 437 13,848 18,316
EPS 1.27 2.54 0.06 1.85 2.45

Balance Sheet
Year to 31 Dec (Rmbm) 2006 2007 2008F 2009F 2010F
Investment Assets 341,557 511,825 488,286 536,718 635,331
Total Assets 493,539 691,298 730,993 815,870 924,191
Total Liabilities 446,559 577,447 613,917 689,661 785,795
Equity 46,375 113,851 114,202 125,328 139,477

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 Regional Morning Notes
Thursday, February 19, 2009

Property
We are not overly pessimistic
Our price targets, which are based on another 25% fall in residential prices this HONG KONG
year, are still among the most bearish in the market. We double-check our
assumptions and are satisfied that they are not far-fetched at all. Property
Sector Events
UNDERWEIGHT
We differ. Overall, the market was shocked by the surge in unemployment to
4.6% in January (released on Tuesday). While that has effectively removed the
last thread of hope that anyone might still be holding on property prices remaining Analyst
stable, many commentators are only expecting residential prices to fall 10-15% this
Sylvia Wong
year, much smaller than our 25%. One reason we are more pessimistic than
 (852) 2236 6793
others is because unemployment could reach 7% by year-end, against the sylvia.wong@uobkayhian.com.hk
market’s typical 6%.
Utmost task to preserve employment. Unemployment rose 16,400 in January,
triple that of the 4,900 in December, even before the massive closure of
businesses expected to take place after the Lunar New Year. The government’s
prime aim now is to ease pressure on the job market. The Budget, to be released
next Wednesday (25 February), will focus on this area. In order to hold up the fast-
eroding confidence, the government has recently announced these plans:
a) To create 55,000 construction jobs in fiscal year 2009-10 by accelerating
infrastructure and minor works projects,
b) To recruit 7,700 civil servants and create 4,000 temporary openings in the next
14 months,
c) Over 20 statutory bodies will recruit some 6,000 employees and create about
2,000 temporary jobs or internship opportunities this year, and
d) The Labour Department will continue to organise larger-scale job fairs in
shopping malls and community centres.
Question on implementation. For a start, we are sceptical on how fast these
planned government jobs can actually materialise, particularly in view of the large
number involved. In the private sector, there are already reports that companies
are pulling out of the job fairs as expansion plans are halted.
Even if successfully implemented, unemployment could still top 7%. Here is
a rough calculation: 14,300 jobs were lost in January. Assuming an average of
14,000 jobs will be gone in each of the next 11 months, a further 154,000 positions
will be lost by December. Assuming all the proposed government jobs will be
created this year, 74,700 new positions will be added, reducing the net loss in jobs
to 79,300. Adding 38,500 new headcounts (based on the 10-year average) to the
labour force, such as graduates and school-leavers, unemployment could rise from
157,700 at present to 275,500, or over 7%, by year-end.
Unemployment vs Residential Price Index
(%)
9 120
8
Unemploy ment at 7% 100
7
6 80
5
60
4
3 Residential 40
prices af ter
2
f alling 40% 20
1 f rom peak

0 0
94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09
Unemployment rate
Residential price index (RHS)

Source: HKSAR, Centaline

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 Regional Morning Notes
Thursday, February 19, 2009
40% drop in residential prices from peak not that remote. For some time,
we have been holding the view that residential prices will have to fall 40%
from peak before bottoming. This will bring prices back to levels last seen in
1Q04. Many find this retrenchment hard to comprehend. But if we are
indeed facing a financial crisis that only takes place once in a hundred years,
it follows that perhaps none of us is in a position to comprehend the likely
outcome.
We saw that in the past. Moreover, the Unemployment vs Residential Price
Index chart shows unemployment hit 7% twice in the last seven years. The last
time was in May 04, and at the time residential prices were hovering on levels
equivalent to a 36% fall from the 2008 peak. In Mar 02, prices were even lower,
equivalent to some 46% below the 2008 peak. Thus, our 40% base-case decline
is not that far-fetched. One might argue new supply is much tighter now, but at
the same time, the local or the global economy was not under as much stress
then.
Downward spiral on prices. Suffice to say, the lack of job security will
significantly undermine any desire to buy a new home. Moreover, without any
salary increase (let alone the possibility of pay cuts), upgrading demand will also
dissipate. We expect developers to start cutting prices more notably, especially
on unsold inventories. This will only prompt the few that are still looking to buy a
flat at this stage to wait for lower prices, drying up transaction volume further,
which will put more pressure on prices. A downward spiral has been formed.
Residential prices fell 20% in 2H08, thus we expect another 25% drop this year.
Potential Price Cuts On Unsold Inventories
Avg Current Potentia
Original No. of Units Units launch price in l price
launch date Project Location Developer units sold unsold price area cut
HK$psf HK$psf %
Jan 09 The Sail at Victoria Western District Hongkong Land 95 2 93 10,000 7,000 (30)
Jan 09 Vista Sham Shui Po Sino Land 173 106 67 5,200 4,400 (15)
Dec 08 Le Billionaire Kowloon City Chinachem 488 92 396 6,000 5,000 (17)
Dec 08 Cite 33 Prince Edwards Henderson Land 107 47 60 6,300 5,000 (21)
Nov 08 Peak One Shatin SHKP 519 200 319 7,300 5,800 (21)
Noc 08 La Grove Yuen Long SHKP 543 400 143 3,200 3,000 (6)
Oct 08 The Dynasty Tsuen Wan Sino Land 256 90 166 6,200 4,800 (23)
Aug 08 One Madison Cheung Sha Wan Sino Land 126 60 66 6,000 5,000 (17)
Jun 08 York Place Wanchai Chinese Estates 94 35 59 15,000 10,000 (33)
Jun 08 Beacon Lodge Cheung Sha Wan SHKP 166 60 106 7,000 5,000 (29)
May 08 Celestial Heights Homantin Cheung Kong 939 490 449 10,000 7,000 (30)
Dec 07 Harbour Place Hunghom SHKP/New World 2,470 1,530 940 7,000 5,200 (26)
Nov 07 Island Lodge North Point Swire 184 98 86 10,000 7,000 (30)
Oct 07 Long Beach Tai Kok Tsui Hang Lung Prop. 1,829 605 1,224 7,200 5,300 (26)
Source: UOB KayHian

Stock Recommendation
We are not overly bearish. Our target prices are among the most bearish in the
market for two reasons: a) our base-case assumption of a 40% fall in residential
prices from the peak is still among the most pessimistic, and b) they are based
on trough discount to NAV during past crises. By definition, the trough discount
represents an overshooting situation and thus would appear aggressive. Share
prices could rebound swiftly after hitting the trough levels.
Target Price Based On Trough Discount to NAV
Avg trough Target based
Share price Discount to End- discount to NAV on past trough Downside
Ticker Rating 18 Feb 09 End-09 NAV 09 NAV during past crises discount to target
(HK$) (HK$) (%) (%) (HK$) %
Cheung Kong 1 HK SELL 66.70 77.31 (13.7) (33) 51.80 (22)
Hang Lung Prop 101 HK SELL 14.28 15.75 (9.3) (38) 9.71 (32)
Henderson Land 12 HK HOLD 25.30 45.15 (44.0) (42) 26.18 3
Kerry Properties 683 HK SELL 14.70 41.68 (64.7) (70) 12.50 (15)
New World Dev 17 HK SELL 7.34 16.54 (55.6) (65) 5.79 (21)
Sino Land 83 HK SELL 6.32 10.65 (40.7) (63) 3.91 (38)
SHK Properties 16 HK SELL 62.25 81.60 (22.9) (38) 50.32 (20)
Source: UOB Kay Hian

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 Regional Morning Notes
Thursday, February 19, 2009

Lafarge Malayan Cement

FY08: Results above expectation
FY08 net profit of RM367.7m (+27.6% yoy) was above our and consensus MALAYSIA
estimates due to higher average selling prices (ASP) and a slight increase
in demand. Going forward, demand growth is expected to weaken.
Lafarge Malayan Cement
FY08 Results
(LMC MK)
yoy
(RMm) FY08 FY07 % chg Remarks
SELL
Revenue 2530.8 2173.5 16.4 Current Price: RM3.86
- Cement & & Boosted by higher ASPs and higher Fair Price: RM3.50
clinker 1964.1 1645.6 19.3 export volume
(Previous: RM3.60)
- Others 754.0 715.9 5.3
EBIT 412.0 310.0 32.5 Sector Cement
- Cement & Improvement in plant performance, 52-Wk Avg Daily Vol. ('000) 590.5
clinker 389.1 309.5 25.7 higher ASPs and sales volume Market Cap (S$m) 3,279.8
Others 22.9 1.4 (US$m) 896.9
Includes non-recurring gain on sale of
Net Profit 367.7 288.1 27.6 CERs (Certified Emission Reductions) Major Shareholders (%)
Lafarge S.A 61.2
EBIT Margin (%) 14.3 16.3

Source:Lafarge, UOB Kay Hian Book NTA per Share (RM) 2.15
ROE (%) 12.4
Results Net Debt per Share 0.38

FY08 net profit of RM367.7m, +27.6% yoy, was above our and consensus
Results Due
estimates on the back of higher ASPs and sales volume. There was also a
1Q: May 2Q: Aug
non-recurring gain of RM29.6m on the sale of CERs (Certified Emission 3Q: Nov Final: Feb
Reductions). A dividend of 15 sen was declared, bringing the total dividend
for FY08 to 30 sen/share (yield: 7.8%)
Price Chart
Stock Impact
(RM)
ASPs are expected to be adjusted downwards by 2-5% in 2Q09. With the 6.50
recent 5% reduction in electricity tariff effective 1 Mar 09 and the pullback in 6.00
5.50
coal and fuel prices (from US$195/tonne and US$147/tonne to US$80/tonne 5.00
and US$35/tonne respectively), we think manufacturers will pass on the cost 4.50
savings (approximately RM20-30/tonne) to end users via a 2-5% reduction in 4.00
3.50
ASPs. We think there will another round of price adjustment should domestic 3.00
demand continue to shrink. 2.50
2.00
Earnings Revision Feb 08 Apr 08 Jun 08 Aug 08 Sep 08 Nov 08 Jan 09

We revise downward our net profit forecasts for FY09F and FY10F by 6.6% Source: Bloomberg

(from RM321.7m to RM300.4m) and 12% (from RM361.2m to RM318.1m)

respectively on the back of a 5% downward adjustment to ASPs.
Analyst
Valuation/Recommendation Malaysia Research Team
 (603) 2143 1180
Maintain SELL as its share price has exceeded our revised fair price of
research@uobkayhian.com
RM3.50, based on DCF discounted at cost of equity of 17% to incorporate the
gloomy outlook in 1H09 as well as uncertainty over 2H09.
Lafarge is currently trading at 10.9x FY09F PE and 10.3x FY10F PE. Based
on our fair price of RM3.50, we see trading opportunities for the stock should
share price decline to RM3.10.

Please see important notice on last page Page 8 of 16

 Regional Morning Notes
Thursday, February 19, 2009
Profit & Loss
Year to 31 Dec (RM m) 2007 2008 2009F 2010F 2011F
Turnover 2173.5 2530.8 2545.1 2547.8 2574.5
EBIT 310.9 412.0 388.1 407.5 401.5
Pre-tax Profit 318.1 397.8 380.1 402.2 396.4
Net Profit 288.1 367.7 300.4 318.1 313.4
EPS (sen) 33.9 43.3 35.4 37.4 36.9

Balance Sheet
Year to 31 Dec (RM m) 2007 2008 2009F 2010F 2011F
Current Assets 920.7 981.7 940.6 981.2 960.2
Total Assets 4,255.3 4,303.0 4,201.0 4,230.7 4,263.1
Current Liabilities 1,014.4 573.5 435.9 436.3 440.6
Long-Term Loans 7.2 359.0 359.0 359.0 359.0
Shareholders' Funds 2,909.0 3,032.0 3,152.2 3,279.4 3,404.8
Total Equity & Liabilities 4,255.3 4,303.0 4,201.0 4,230.7 4,263.1

Cash Flow
Year to 31 Dec (RM m) 2007 2008 2009F 2010F 2011F
Operating 497.3 551.9 464.2 491.3 476.6
Investing (59.5) (122.3) (100.0) (150.0) (200.0)
Financing (430.7) (450.5) (374.9) (297.8) (308.4)
Net Cash In/out flow) 7.1 (21.0) (10.6) 43.5 (31.8)
Begin Cash & Cash Equiv. 155.0 162.1 141.2 130.5 174.1
End’g Cash & Cash Equiv. 162.2 142.9 130.5 174.1 142.2

Please see important notice on last page Page 9 of 16

 Regional Morning Notes
Thursday, February 19, 2009

Oversea-Chinese Banking Corp

4Q08: Credit costs starting to bite
Disappointing results with spike in specific allowances due to new NPLs in SINGAPORE
overseas operations and manufacturing sector. NPL related to smaller
developers could surface in 2009 and 2010. Downgrade to HOLD. OCBC (OCBC SP)
Results DOWNGRADE TO HOLD
Net profit of S$301m in 4Q08 (down 29.5% yoy) was below consensus Current Price: S$4.89
estimate of S$389m even though the results included tax refunds and write- Fair Price: S$5.27
backs of S$51m. (Previous: S$5.85)
Financial Performance Sector Banking
Year to 31 Dec 4Q07 1Q08 2Q08 3Q08 4Q08
52-Wk Avg Daily Vol. ('000) 7,676
Net Interest Income (S$m) 613 639 679 684 783 Market Cap (S$m) 15,226.4
yoy % chg 25.1 25.8 21.7 20.8 27.7 (US$m) 9,963.3
Fees & Commissions (S$m) 202 212 202 199 159
yoy % chg 25.5 19.1 -6.9 -5.7 -21.3 Major Shareholders (%)
Insurance (S$m) 197.0 24.0 62.0 177.0 145.0 Lee Foundation 19.2
yoy % chg 38.7 -79.1 -55.1 43.9 -26.4
Net Profit (S$m) 427 623 426 402 301 Book NAV per Share (S$) 4.51
Cost/Income Ratio (%) 45.0 41.8 45.4 43.6 44.4 ROE (%) 9.9
Source: OCBC Net Debt per Share (S$) n.a.
Loans & Advances
Results Due
Year and 31 Dec 4Q07 1Q08 2Q08 3Q08 4Q08
1Q: May 2Q: Aug
Customer Loans (S$m) 71,316 73,977 76,989 79,925 79,808
3Q: Nov Final: Feb
yoy % chg 20.2 20.2 20.9 20.2 11.9
Customer Deposits (S$m) 88,788 92,867 92,371 94,678 94,078
yoy % chg 18.2 19.1 12.3 10.5 6.0 Price Chart
Loans/Deposits Ratio (%) 80.3 79.7 83.3 84.4 84.8
(S$ )
Net Interest Margin (%) 2.14 2.17 2.24 2.18 2.47
9.00
Source: OCBC
8.00
Impressive margin expansion. Loans were flat on a sequential basis with
7.00
growth in Building & Construction (+4.3% qoq) offset by contraction in
6.00
Manufacturing (+5.8% qoq) and General Commerce (+12.0% qoq). Deposits
were also relatively unchanged with customers shifting funds from fixed 5.00

deposits to lower-cost savings deposits and current accounts. Loan-deposit 4.00

ratio was maintained at 84.8%. Feb A pr Jun A ug Oct Dec
08 08 08 08 08 08
Net interest margin expanded from 2.18% in 3Q08 to an impressive 2.47% in Source : Bloomberg
4Q08 due to improved credit spread and lower funding costs. OCBC also
benefitted from gapping opportunities due to the steep yield curve. Net
interest income increased 27.7% yoy and 14.5% qoq to S$783m. Analyst
Wealth management suffered. Fees & commissions fell 21.3% yoy and Jonathan Koh
20.1% qoq to S$159m due to a severe 51.4% qoq decline in contribution from  (65) 6539 1026
jonathankoh@uobkayhian.com
wealth management. Profit from life insurance dropped 36.1% yoy and
20.7% qoq to S$115m. Great Eastern’s non-participating fund was affected
by corrections in the equity market and increases in insurance contract
liabilities (decrease in applicable interest rate to discount liabilities). It
nevertheless expanded market share for weighted premium products in
Singapore from 22.5% to 29% in 2008.
Total Net EPS Div
Year to Income PPOP Profit EPS Growth PE DPS Yield
31 Dec (S$m) (S$m) (S$m) (S ¢) (%) (x) (¢) (%)
2007 4,281 2,555 2,071 65.9 3.9 7.4 28.0 5.7
2008 4,427 2,526 1,752 54.7 (17.0) 8.9 28.0 5.7
2009F 4,609 2,671 1,220 36.9 (32.6) 13.3 28.0 5.7
2010F 4,909 2,849 1,586 48.5 31.7 10.1 28.0 5.7
2011F 5,133 2,980 1,905 58.8 21.1 8.3 28.0 5.7
Consensus Net Profit - FY09: S$1478.3m
- FY10: S$1602.9m

Please see important notice on last page Page 10 of 16

 Regional Morning Notes
Thursday, February 19, 2009
Negative impact from trading losses. OCBC was affected by trading losses of
S$64m (S$17m from foreign exchange and S$47m from derivatives and
securities) and losses of S$24m from investment securities.
Asset Quality
4Q07 1Q08 2Q08 3Q08 4Q08
NPL Ratio (%) 1.7 1.6 1.4 1.3 1.5
Coverage Ratio (%) 116.1 115.3 121.9 127.8 125.0
Tier-1 CAR (%) 11.5 12.8 12.3 14.4 14.9
Total CAR (%) 12.4 13.5 13.6 14.7 15.1
Source: OCBC

OCBC received repayment of S$100m for one collateralised debt obligation

(CDO) at maturity and sold another CDO for S$56m (loss of S$14m to close the
position). Exposure to CDOs was thus reduced by 26.3% qoq to S$453m.
Spike in specific allowance. Non-performing loans (NPL) increased 12.8% qoq
to S$1,182m while NPL ratio rose from 1.3% to 1.5%. New NPL came mainly
from overseas operations (Malaysia, Indonesia and Greater China) and the
manufacturing sector. Specific allowances for a loan spiked up to S$159m in
4Q08 (80bp), compared with S$30m in 3Q08. NPL coverage remains
unchanged at 125.0%.
Stock Impact
Tier-1 capital adequacy ratio (CAR) improved from 14.4% to 14.9%, mainly due
to a 2.0% reduction in risk-weighted assets. OCBC is unlikely to require equity
fund-raising at this stage but plans to replenish its tier-2 capital.
OCBC maintained final dividend at 14 cents. It has reactivated its scrip dividend
scheme, where shareholders can opt to receive the final dividend in shares at
10% discount to market price. OCBC is likely to be able to maintain its existing
dividend due to strong capital base.
Earnings Revision
Large exposure to developers. OCBC has large exposure to property
developers with Building & Construction accounting for 21.1% of its loan book
(DBS: 14.0%, UOB: 12.1%). While large, listed developers are well positioned,
having pre-sold many high-end residential projects, small developers who
jumped onto the bandwagon are not as fortunate. Management stressed that the
bulk of exposure is to large developers with longstanding relationships but we
believe OCBC has exposure to smaller developers as well.
We assume NPL ratio will hit 6% by end-2010 (previous: 5%). Our earnings
model has imputed allowances for credit losses of 135bp in 2009 (previous:
90bp) and 95bp in 2010 (previous: 40bp).
Valuation/Recommendation
The stock has gained 6.3% since we upgraded our recommendation in Nov 08.
Downgrade to HOLD due to limited upside potential of only 7.8%. We cut our fair
price by 9.9% to S$5.27 (previous:S$5.85) based on P/B ratio of 1.02x derived
from the Gordon Growth Model (ROE: 11.0%, payout ratio: 45%, required return:
8.0% and constant growth: 3.0%).
Profit & Loss
Year to 31 Dec (S$m) 2007 2008 2009F 2010F 2011F
Net Interest Income 2,244 2,785 3,029 3,157 3,306
Non Interest Income 2,036 1,642 1,580 1,753 1,827
Net Profit 2,071 1,752 1,220 1,586 1,905
EPS (cents) 66 55 37 49 59

Balance Sheet
Year to 31 Dec (S$m) 2007 2008 2009F 2010F 2011F
Loans & Advances 71,316 79,808 83,049 87,107 92,452
Total Assets 174,607 181,385 187,080 195,220 205,314
Customers’ Deposits 88,788 94,078 97,898 102,682 108,983
Borrowings 4,970 6,010 5,000 5,000 5,000
Shareholders' Funds 15,677 15,874 16,151 16,794 17,756
Total Equity & Liabilities 174,608 181,385 187,080 195,220 205,314

Please see important notice on last page Page 11 of 16

 Regional Morning Notes
Thursday, February 19, 2009

Advanced Info Service

4Q08: Net profit lower due to goodwill provision
Given the prospects of a recovery and a new 3G licence in 2H09, AIS remains THAILAND
our top pick. We also see limited downside as share price trades near the
lowest PE band and sits on a high Z-score. Maintain BUY Advanced Info Service
2008 Consolidated Results (ADVANC TB)
Consolidated
Year to 31 Dec
4Q08
(Btm)
yoy
% chg
2008
(Btm)
yoy
% chg
Remarks BUY
Sales 26,271 (34.1) 110,792 2.2 Closure of airports and slow
Current Price: Bt77.00
economy led to a weak 4Q08. Target Price: Bt101.76
Gross profit 9,104 (18.1) 38,752 2.8
EBITDA 10,668 (16.5) 46,503 5.9 Sector Telecom
Pre-tax Profit 5,482 (26.6) 26,586 11.4 52-Wk Avg Daily Vol. ('000) 4,771.2
Tax (1,683) (27.8) (8,381) 10.8
Market Cap (Btb) 228.1
Net Profit 419 (91.8) 16,409 0.7 Bt3.6b provision of DPC’s GW
Net Profit (Ex EI) 3,783 (26.7) 18,149 11.0 (US$b) 6.5

EPS (Bt) 0.14 (91.9) 5.54 0.5 Major Shareholders (%)

Shin Corporation 42.7
Gross margin (%) 34.7 35.0 Declining maintenance costs.
EBITDA margin (%) 40.6 42.0 Fall in bad debt and mkt. exp Singtel Strategic Investment 19.2
Net margin (%) 1.6 14.8

Source: UOB Kay Hian Book NTA per Share (Bt) 24.8
ROE (%) 22.0
Results Net Debt per Share (Bt) 7.9

Operating results are in line with our expectation. Sales slowed down in 4Q08
Results Due
but still grew on a yoy basis, backed by subscribers expanding to 27m as at end-
1Q: May 2Q: Aug
08. Margins remained healthy both in 4Q08 and FY08 due to positive net
3Q: Nov Final: Feb
interconnection charge (IC: Bt347m in 4Q08 and Bt737m in 2008), reduction in
maintenance costs, lower bad debts provision and a drop in marketing expenses.
Although pre-tax profit in 2008 is in line with forecast, net profit was 38% lower Price Chart
due to the provision of DPC’s goodwill and tax expenses related to the provision. (Bt)
120
Stock Impact
100
As we move into a sluggish economy in 2009, we expect AIS’ sales to remain 80
weak in 1H09 but will gradually increase in 2H09 as the government stimulus 60
packages kick in. The company’s focus will be on quality customers rather than 40
quantity. Provincial markets remain its growth area via a strong distributionship 20
among its dealers. We therefore expect AIS to add 2.5m net new subscribers 0
this year. Promotions on on-net call will keep net IC positive and reduce Feb- Apr- Jun- Aug- Oct- Dec- Feb-
congestion on its network. So its capex may be kept at Bt13b-15b (excluding 3G 08 08 08 08 08 08 09
expansion). EBITDA margin in 2009 is likely to remain strong at 43%. Overall,
we maintain our 2009 forecasts- sales to grow 2% and net profit to increase 14% Source: Bloomberg

(excluding further provision on DPC’s goodwill.

AIS’ catalyst is the new 3G licence to be issued by the NTC. The new licence Analyst
may halve AIS’ operating cost. This would create a new era for the Thai mobile Kowit Pongwinyoo
landscape. We expect the new licence to be issued in 2H09. However, the  (662) 659-8304
commercial roll-out may have to wait until mid-10. kowit@uobkayhian.co.th

Earnings Revision/Risk Net EPS EV/

Year to Turnover EBITDA Profit EPS Growth PE EBITDA DPS Yield
As313Q08
Dec
results(Btm)
are in line (Btm)
with our expectation,
(Btm)
we(Bt)
maintain our
(%)
sales and
(x) (x) (Bt) (%)
earnings
2007 forecasts for this year.
108,453 43,898No change
16,290 in our FY09-10
5.5 forecasts
0.1 as we
14.0 5.6 6.3 8.2
have
2008factored in110,792
the slowdown in the economy
46,503 16,409* in our 5.5
model. 0.6 13.9 5.3 6.3 8.2
2009F 113,357 49,515 18,640 6.3 13.6 12.2 4.7 6.3 8.2
2010F 119,125 52,453 20,761 7.0 11.4 11.0 4.2 7.2 9.3
2011F 123,117 55,138 23,837 8.0 14.8 9.6 3.8 8.4 11.0
Consensus Net Profit – FY09:18,023m * Include extraordinary gain and loss
– FY09:19,254m

Please see important notice on last page Page 12 of 16

 Regional Morning Notes
Thursday, February 19, 2009
Valuation/Recommendation
The poor market sentiment has driven down the share price of AIS for the Quarterly Subscribers
wrong reason. We continue to see good value in AIS and maintain our BUY
with a target price of Bt101.76 based on DCF model at a discount rate of 8%. (m) (m)
26.0 26.8 27.3 30
The downside risk for AIS is limited as it trades near its lowest PE band and 2
21.1 22.7
23.2 24.1 25.1
25
sits on a high Altman Z-score of 5.19. Maintain BUY 1.5
20
1 0.81 15
0.54
Subscribers continued to grow 0.5
10
5
0 0
In 4Q08, AIS added 536,000 subscribers, bringing its total subscriber base to

07

07

07

07

08

08

08

08
27.3m. ARPU continued to decline due to more marginal subscribers from

1Q

2Q

3Q

4Q

1Q

2Q

3Q

4Q
the provinces. MOU fell but at a slower rate due to promotions to utilise Quarterly Total
spare capacity during off-peak hours, and that helped to raise RPM.
Source: AIS
Profit & Loss
Quarterly ARPU
Year to 31 Dec (Btm) 2007 2008 2009F 2010F 2011F
Turnover 108,453 110,792 113,357 119,125 123,117 (Bt)
900
EBIT 25,581 28,211 28,169 31,046 35,136 800
809 742
698
743 756 742 709
695
700
Pre-tax Profit 23,860 26,586 26,956 30,029 34,487 600
Net Profit 16,290 16,409 18,640 20,761 23,837 500
400
249 234 222 227 231 218
300 206 193
200
100
0
Balance Sheet 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08
Postpaid Prepaid
Year to 31 Dec (Btm) 2007 2008 2009F 2010F 2011F
Current Assets 20,586 26,958 26,113 37,491 34,904
Source: AIS
Total Assets 128,942 128,081 115,240 117,759 107,373
Current Liabilities 28,157 24,860 19,602 33,391 20,407 Quarterly MOU
Long-Term Liabilities 24,929 29,774 22,211 8,892 8,832
Shareholder Funds 75,461 73,436 73,418 75,468 78,127 (minute)
700 580 589
Total Equity & Liabilities 128,942 128,081 115,240 117,759 107,373 600 501 507
568 570 548 544

500
400
239 260 266 262 242
300 228 218 224
Cash Flow 200
100
Year to 31 Dec (Btm) 2007 2008 2009F 2010F 2011F 0
1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08
Operating 31,800 37,900 43,773 42,534 44,174
Investing (14,982) (8,880) (13,833) (12,927) (12,594) Postpaid Prepaid

Financing (21,238) (11,956) (33,186) (18,753) (34,511)

Net Cash In/(Out) Flow (4,420) 17,064 (3,246) 10,854 (2,932) Source: AIS
Begin Cash & Cash Equiv. 12,860 8,440 16,527 13,281 24,134
End'g Cash & Cash Equiv. 8,440 25,504 13,281 24,134 21,203 Valuation
Method Results (Bt) Remarks
Z-score test 5.19 Score is in safe
position
Source: UOB Kay Hian

Share Price Trading Near Lowest PE

Band

(Bt)

145
PE 19.5x
125
PE 16.0x
105
85 PE 12.5x

65 PE 9.0x
45
25
5
Jan- 02 Oct- 03 Jul- 05 Apr- 07 Oct- 08

Source: UOB Kay Hian

Please see important notice on last page Page 13 of 16

 Regional Morning Notes
Thursday, February 19, 2009

Dynasty Ceramic
Impressive growth and high dividend yield.
DCC is still generating growth amid the economic slump. With earning THAILAND
growth of 26% and offering a yield of 12%, DCC looks interesting, indeed.
Events
Dynasty Ceramic (DCC TB)
As sales volume continued to grow from end 08 to Jan 09 (+5%), and the NOT RATED
trend is expected to continue into Feb 09 (exceeding 10%), management is Current Price: Bt11.80
confident that a 10% growth target this year is achievable. The decreasing
trend of gas prices, which accounts for 30% of its production costs, may Sector Construction.
Materials
increase its gross margin to 40% in 2009. Dynasty Ceramic (DCC) also 52-Wk Avg Daily Vol. ('000) 189.9
expects to raise its dividend payout ratio from 70% to 80% for 2009. Market Cap (Btb) 4.8
Stock Impact (US$m) 136.4

After achieving a 14% sales growth last year, DCC’s sales remained strong at Major Shareholders (%)
the beginning of 2009. Management credits its nationwide network of factory Saengsattra family 34.3
outlets for the company’s success. Other tile manufactures have lost market Watcharasurung family 9.5
shares as they focus mainly on sales agents. Apart from the low cost nature,
these factory outlets are accessible to locals. The reasonable prices of Book NTA per Share (Bt) 6.0
ROE (%) 28.2
agricultural product have also supported the high demand of tiles among
Net Debt per Share (Bt) 1.9
locals. We believe part of the company’s success is due to the widespread
use of DCC’s products for the construction of chapels and schools across the
Results Due
country. There are approximately 12,950 temples and 8,750 schools all over
1Q: May 2Q: Aug
Thailand. 3Q: Nov Final: Feb
With the declining trend of the world oil prices, its energy cost (mainly natural
gas) is also expected to be lower than last year. As the gas expense account
Price Chart
for 30% of its total production cost, the lower price of gas will improve its
margins. DCC expects its margin this year to reach 40% from 39% last year. (Bt)
21
If that is the case, we may see its net profit grow by 26% in 2009.
18
With a 70% payout ratio, DCC could pay Bt1.44/share as dividend this year, 15
equivalent to a dividend yield of 12%. Currently, DCC has Bt816m of short 12
term loans or a 0.3 net debt-to-equity ratio. The company intends to pay 9
most of this debt by end 2009 so that the payout ratio could be raised to 80%. 6
If that is the case, we may look for a yield of 14% next year. 3
0
Risks
Feb- Apr- Jun- Aug- Oct- Dec- Feb-
There is risk of DCC missing its payout target should a prolonged drought 08 08 08 08 08 08 08
affect many parts of the country. However, this is a rare phenomenon in
Source: Bloomberg
Thailand.
Recommendation
Analyst
Amid the economic slump, DCC has emerged as one of a few companies that Kowit Pongwinyoo
still deliver satisfactory growth. It also offers an attractive dividend yield of up  (662) 659-8304
to 12% for 2009, increasing to 14% for 2010. kowit@uobkayhian.co.th

Net EPS EV/

Year to Turnover EBITDA Profit EPS* Growth PE EBITDA DPS Yield
31 Dec (Btm) (Btm) (Btm) (Bt) (%) (x) (x) (Bt) (%)
2004 3,739 1,178 675 1.7 35.0 7.1 4.9 1.2 10.0
2005 4,255 1,346 749 1.8 10.8 6.4 4.6 1.3 11.0
2006 4,452 1,259 567 1.4 (24.5) 8.5 5.0 1.0 8.2
2007 4,458 1,243 543 1.3 (4.2) 8.9 4.7 1.0 8.5
2008 5,089 1,376 666 1.6 22.7 7.2 4.0 1.2 10.6

Please see important notice on last page Page 14 of 16

 Regional Morning Notes
Thursday, February 19, 2009
Company Background. Dynasty Ceramic (DCC) is a manufacturer of wall
and floor tiles under the DYNASTY, TILE TOP, NAVAR and JAJUAR brand
names. The company has a 35% market share and its customers are low
income earners in the provinces. In 2005, the company took over three
ceramic distributors, allowing the company to implement its factory outlet
strategy and lessen its dependence on sales agents. In contrast, other tile
producers still largely rely on sales agents. For DCC, this strategy has
produced positive results and it is the main driver of the company’s growth,
Profit & Loss
Year to 31 Dec (Btm) 2004 2005 2006 2007 2008
Turnover 3,739 4,255 4,452 4,458 5,089
EBIT 949 1,075 884 898 988
Pre-tax Profit 968 1,067 797 842 959
Net Profit 675 749 567 543 666

Balance Sheet
Year to 31 Dec (Btm) 2004 2005 2006 2007 2008
Current Assets 1,275 1,492 1,687 1,598 1,647
Total Assets 3,303 4,144 4,350 4,054 3,893
Current Liabilities 1,592 2,230 2,247 1,730 1,397
Long-Term Liabilities 0 0 15 2 0
Shareholder Funds 1,670 1,871 2,044 2,277 2,450
Total Equity & Liabilities 3,303 4,144 4,350 4,054 3,893

Cash Flow
Year to 31 Dec (Btm) 2004 2005 2006 2007 2008
Operating 855 930 649 994 1,042
Investing (244) (953) (378) (62) (250)
Financing (601) 41 (266) (932) (785)
Net Cash In/(Out) Flow 10 18 5 (0) 7
Begin Cash & Cash Equiv. 10 20 38 43 43
End'g Cash & Cash Equiv. 20 38 43 43 50

Please see important notice on last page Page 15 of 16

 Regional Morning Notes
Thursday, February 19, 2009

We have based this document on information obtained from sources we believe to be reliable, but we do not make any
representation or warranty nor accept any responsibility or liability as to its accuracy, completeness or correctness.
Expressions of opinion contained herein are those of UOB Kay Hian Research Pte Ltd only and are subject to change
without notice. Any recommendation contained in this document does not have regard to the specific investment
objectives, financial situation and the particular needs of any specific addressee. This document is for the information of
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MICA (P) 229/04/2008

RCB Regn. No. 198700235E

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