KEY STORY. Update Shimao Property (813 HK/BUY/HK$15.78/Target: HK$19.23) Page 2 Lagging behind. HONG KONG

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1 PLEASE CLICK ON THE PAGE NUMBER TO MOVE TO THE RELEVANT PAGE. KEY STORY MALAYSIA Initiate Coverage JCY International (JCYH MK/BUY/RM.7/Target: RM1.8) Page 14 Initiate coverage with a BUY and target price of RM1.8. Industry consolidation, production automation, strong US$ and low raw material prices are the key catalysts. CHINA Update Shimao Property (813 HK/BUY/HK$15.78/Target: HK$19.23) Page 2 Lagging behind. HONG KONG Results Luk Fook (59 HK/BUY/HK$22.35/Target: HK$3.2) Page 5 FY15: Results beat expectations on higher gem-set sales; expect 2HFY15 sales to improve. Upgrade to BUY. Sa Sa (178 HK/SELL/HK$4.21/Target: HK$3.64) Page 8 FY15: Earnings helped by higher sublease income and lower taxes; sales deteriorate further in 1QFY16. INDONESIA Update Charoen Pokphand (CPIN IJ/BUY/Rp2,84/Target: Rp3,55) Page 11 Moderating top-line growth in line with economic slowdown. Maintain BUY with a lower target price of Rp3,55 (previously Rp4,3). MALAYSIA Initiate Coverage JCY International (JCYH MK/BUY/RM.7/Target: RM1.8) Page 14 Initiate coverage with a BUY and target price of RM1.8. Industry consolidation, production automation, strong US$ and low raw material prices are the key catalysts. SINGAPORE Sector REITs Page 17 Creating yield accretion. THAILAND Strategy Shrimp Outlook And CFRESH s Prospects Page 19 We arranged a small-cap luncheon to discuss the shrimp outlook and CFRESH s prospects. We think shrimp output has bottomed out. KEY INDICES Prev Close 1D % 1W % 1M % YTD % DJIA (.4) (1.2) (1.9).4 S&P (.3) (.9) (1.1) 2.1 FTSE (.5) 1.5 (3.2) 3.7 AS (.9) 1.8 (2.6) 4.3 CSI (3.6) (8.4) (9.5) 33.2 FSSTI (.) 1.5 (3.2) (.5) HSCEI (1.6) 1.5 (9.) 12.4 HSI (.9) 1.7 (3.9) 15. JCI 492. (.7) (.5) (7.5) (5.9) KLCI (.9) (.1) (2.7) (2.5) KOSPI (.) 2.1 (2.7) 8.8 Nikkei (.5) SET TWSE (2.) 1.8 BDI CPO (RM/mt) (1.5) 5.1 (2.4) Nymex Crude 6 (.1) (US$/bbl) Source: Bloomberg TOP PICKS Ticker CP (lcy) TP (lcy) Pot. +/- (%) BUY Beijing Capital 694 HK ICBC 1398 HK Bank BJB BJBR IJ , Maybank MAY MK DBS DBS SP SATS Ltd SATS SP Kasikornbank KBANK TB PTT PTT TB SELL UMWH Holdings UMWH MK (12.8) KEY ASSUMPTIONS GDP (% yoy) F US Euro Zone Japan Singapore Malaysia Thailand Indonesia Hong Kong China F 216F Brent (US$/bbl) CPO (US$/mt) BDI 1,11 1,3 1,4 Source: Bloomberg, UOB ETR, UOB Kay Hian CORPORATE EVENTS Venue Begin Close QL Resources Berhad Roadshow Singapore 3 Jun 3 Jun Malaysia 2H15 Outlook & Strategy Singapore 1 Jul 1 Jul Analyst Presentation Kuala Lumpur 6 Jul 7 Jul Indo Oil and Gas Sector Singapore 6 Jul 6 Jul Analyst Presentation Kuala Lumpur 7 Jul 8 Jul 1

2 COMPANY UPDATE Shimao Property (813 HK) Lagging Behind Shimao lags behind, not only in stock returns, but also in upper-tier city landbanking. The company is suffering from weaker margin recovery, due to prudent pricing adopted for destocking initiatives. On the other hand, slower growth rates are expected for 215 as Shimao is experiencing a year of restructuring and consolidation. The cheap valuations do look attractive, and stronger sales progress is the key driver. Maintain BUY. Target price: HK$ WHAT S NEW A year that will see a slowdown. Shimao has set a very prudent sales target for 215 (only up 2.6% yoy compared with the sector average of 8.8% growth for our coverage) this year. Since last year, the company has been strengthening its footprint in Fujian province which is the place where they started their property business. Shimao has launched projects in some small towns in Fujian, such as Zimaoshan, Taishan, Pingtan and Minhou, which face weak housing demand and oversupply. Thus, destocking has now become key for Shimao. Weaker landbanking in upper-tier cities. Shimao cut the land payment budget from Rmb22.b to Rmb17.5b for 215, and around Rmb7b-8b has been used for unpaid land premium. Thus, only Rmb1b is left for new landbanking. As a result, Shimao lags behind in landbanking within the upper-tier cities. Sales progress mainly driven by prudent pricing. In 5M15, Shimao achieved Rmb23.3b in contracted sales, down 2.9% yoy and locking in 32.4% of its Rmb72b fullyear target. ASP in the first five months was Rmb12,13/sqm, down 1.% yoy. In recent three months, Shimao recorded over Rmb6b per month on average, showing that its prudent pricing strategy has been well received. However, we are concerned about the weaker margin outlook. Shimao remains a laggard among large-cap property stocks, as the stock price has declined 1.6% in the last three months (COLI up 17.6%, CR Land up 21.7%). The cheap valuations do look attractive. We expect its contracted sales in June to continue to recover. Meanwhile, 2H15, especially September and October, will be the key months for new launches. Yangtze River Delta, especially Nanjing, will be the major contributor. Shimao stands a chance of catching up in stock returns and sales growth. KEY FINANCIALS Year to 31 Dec (Rmbm) F 216F 217F Net turnover 41,53. 56,8.5 66, , ,725.3 EBITDA 12, , , , ,824.4 Operating profit 11, , , , ,316.5 Net profit (rep./act.) 7, ,13.8 8, ,43.9 1,694.6 Net profit (adj.) 7,321. 7,97. 8, ,43.9 1,694.6 EPS (Fen) PE (x) P/B (x) EV/EBITDA (x) Dividend yield (%) Net margin (%) Net debt/(cash) to equity (%) Interest cover (x) ROE (%) Consensus net profit - - 8,656 9,725 1,291 UOBKH/Consensus (x) Source: Shimao Property, Bloomberg, UOB Kay Hian BUY (Maintained) Share Price Target Price HK$15.78 HK$19.23 Upside +21.9% (Previous TP HK$21.8) COMPANY DESCRIPTION Started from Fujian province, Shimao Property Holdings Limited develops real estate projects in China. As at end of 214, the company had 36m sqm of landbank across China. STOCK DATA GICS sector Financials Bloomberg ticker: 813 HK Shares issued (m): 3,472.6 Market cap (HK$m): 54,797.2 Market cap (US$m): 7, mth avg daily t'over (US$m): 32.8 Price Performance (%) 52-week high/low HK$2.35/HK$13.5 1mth 3mth 6mth 1yr YTD (9.3) (1.6) (4.7) 15.7 (9.) Major Shareholders % Wing Mau Hui FY15 RNAV/Share (HK$) 32.5 FY15 Net Debt/Share (HK$) 12.8 PRICE CHART (lcy) Volume (m) SHIMAO PROPERTY HOLDINGS LTD SHIMAO PROPERTY HOLDINGS LTD/HSI INDEX (%) 16 Jun 14 Aug 14 Oct 14 Dec 14 Feb 15 Apr 15 Jun 15 Source: Bloomberg ANALYSTS Edison Bian edison.bian@uobkayhian.com.hk David Yang ext 81 davidyang@uobkayhian.com

3 EARNINGS REVISION/RISK We cut net profit forecasts for by 9.8%, 9.7% and 16.4% respectively to reflect margin squeeze and conservative sales. Key risks include slower-than-expected sales and much weaker pricing power as a result of destocking. VALUATION/RECOMMENDATION Maintain BUY but revise down our margin and earnings forecasts for due to its discount promotions across the country. This leads to our new RNAV of HK$32.5/share. Our target discount to RNAV remains at 4% and our new target price is HK$19.23, representing a 21.9% price upside. SHARE PRICE CATALYST Potential catalysts include a continued sales growth momentum to reach a peak in Sep- Oct SELL-THROUGH TARGET RATE Districts Contracted sales target (Rmbb) Key Projects Southern and Central 7.2 Wuhan2.4b/Hefei 1.2b/Changsha 1.b Southern Fujian 6.5 Jinjiang1.4b/Zimaoshan 1.3b/Taishang 1.3b/Xiamen1.3b Nanjing 7.2 Strait City 3.b/Nanjing new bund 3.b Jiangsu and Shanghai 7. Suzhou Shihu1.5b/Zhangjiagang 1.5b/Nantong 1.b Bohai Rim 7.2 Salamance 1.7b/ Tongzhou 1.2b/Weila 1.b Zhejiang 6. Rivera 1.5b/ Huajiachi 1.5b/Zhijiang 1.b Western 3.5 Longquan 1.5b/ Xi'an 1.2b/Yinchuan.5b Northern Fujian 3.5 Pingtan 1.5b/ Minhou 1.b Northeast 2.8 Wulihe 1.b/Lvshun 1.b Southern China 2.6 Guangzhou 1.2b/ Qianhai.5b Chongqing 1. Chongqing 1.b Shanghai Shimao 17.6 Shishi 3.5b/ jinan 1.7b Source: Shimao, UOB Kay Hian HISTORICAL PE BAND (x) Dec-9 Mar-1 Jun-1 Sep-1 Dec-1 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Actual Price HKD Px = p/e of 18. Px = p/e of 14. Px = p/e of 1. Px = p/e of 6. Px = p/e of 2. Source: UOB Kay Hian HISTORICAL P/B BAND (x) Dec-8 Mar-9 Jun-9 Sep-9 Dec-9 Mar-1 Jun-1 Sep-1 Dec-1 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Actual Price HKD p/b of 2.4 p/b of 1.7 p/b of 1. p/b of.3 Source: UOB Kay Hian HISTORICAL DISCOUNT TO RNAV (%) 2. OPERATION PLAN FOR 215 (' sqm) 16, 14, 12, 1, 8, 6, 4, 2, 5, 14,7 Planned new constructon area Source: Shimao, UOB Kay Hian 13,7 4, 3, 3, Planned area under construction 1H 2H Area Completed SALEABLE AREA VS CONTRACTED AREA (' sqm) 12, 1, 8, 6, 4, 2, - 5,5 4,9 7,7 5,24 9,7 1,17 5,79 6, E Saleable Area Contracted Area Source: Shimao, UOB Kay Hian SALES PERFORMANCE (Rmb b) E Source: Shimao, UOB Kay Hian CONTRACTED SALES GROWTH (Rmb b) (%) Jan 11 Mar 11 May 11 Jul 11 Sep 11 Nov 11 Jan 12 Mar 12 May 12 Jul 12 Sep 12 Nov 12 Jan 13 Mar 13 May 13 Jul 13 Sep 13 Nov 13 Jan 14 Mar 14 May 14 Jul 14 Sep 14 Nov 14 Jan 15 Mar 15 May 15 Source: Shimao, UOB Kay Hian Contract Sales(LHS) MoM Growth(RHS). (2.) (4.) (6.) (8.) -1SD -56.8% +1SD -14.8% Mean -35.8% Source: UOB Kay Hian 215 OPERATION TARGETS Rmb m 215 Projected 214 Actual Contracted Sales 72, 7,216 Cash collection and net rental income 57,6 56,313 Payment of land premium 17,5 22,94 Payment of construction cost 25,5 24,662 Other expenses(tax,interest and operating expenses) 14,6 14,591 Net cash flow from operating activities (5,34) Source: Shimao, UOB Kay Hian 3

4 PROFIT & LOSS Year to 31 Dec (Rmbm) F 216F 217F Net turnover 56,81 66,225 75,678 8,725 EBITDA 14,863 16,484 18,636 19,824 Deprec. & amort EBIT 14,424 16,24 18,152 19,317 Total other non-operating income 1,248 (537) (614) (655) Associate contributions (175) (175) (175) (175) Net interest income/(expense) (241) (54) (56) (58) Pre-tax profit 15,256 15,258 17,38 18,429 Tax (5,769) (4,891) (5,549) (5,98) Minorities (1,384) (1,512) (1,715) (1,826) Net profit 8,14 8,854 1,44 1,695 Net profit (adj.) 7,97 8,854 1,44 1,695 BALANCE SHEET Year to 31 Dec (Rmbm) F 216F 217F Fixed assets 11,952 12,549 13,177 13,836 Other LT assets 51,696 55,629 59,895 66,153 Cash/ST investment 2,472 22,96 23,356 21,873 Other current assets 136, , , ,195 Total assets 22, , ,57 278,57 ST debt 18,725 19,661 2,644 21,676 Other current liabilities 89,217 94,32 1,823 18,292 LT debt 43,269 47,596 49,976 52,475 Other LT liabilities 4,339 4,339 4,339 4,339 Shareholders' equity 46,863 53,236 6,441 68,12 Minority interest 18,12 19,632 21,347 23,173 Total liabilities & equity 22, , ,57 278,57 CASH FLOW Year to 31 Dec (Rmbm) F 216F 217F Operating (11,735) 4,584 5,23 5,361 Pre-tax profit 15,256 15,258 17,38 18,429 Tax (3,587) (4,994) (5,657) (6,22) Deprec. & amort. 52 (522) (548) (576) Associates (4,8) (4,889) (5,134) (5,392) Working capital changes (18,994) (5,393) (6,112) (6,714) Non-cash items 66 Other operating cashflows (898) 5,125 5,373 5,634 Investing (195) (4,757) (5,13) (7,167) Capex (growth) (233) (3,76) (4,26) (6,8) Investments (1,842) (364) (383) (42) Others 1,88 (687) (721) (757) Financing 15,381 2, Dividend payments (2,73) (2,656) (3,13) (3,28) Issue of shares (1,219) Proceeds from borrowings 41,62 5,263 3,363 3,531 Loan repayment (27,511) Others/interest paid 5,239 Net cash inflow (outflow) 3,45 2, (1,483) Beginning cash & cash equivalent 17,26 2,472 22,96 23,356 Changes due to forex impact (5) Ending cash & cash equivalent 2,472 22,96 23,356 21,873 KEY METRICS Year to 31 Dec (%) F 216F 217F Profitability EBITDA margin Pre-tax margin Net margin ROA ROE Growth Turnover EBITDA Pre-tax profit Net profit Net profit (adj.) EPS Leverage Debt to total capital Debt to equity Net debt/(cash) to equity Interest cover (x)

5 COMPANY RESULTS Luk Fook (59 HK) FY15: Results Beat Expectations On Higher Gem-Set Sales; Expect 2HFY16 Sales To Improve Luk Fook s FY15 net profit was HK$1.61b, down 13.4% yoy, and 6% above our estimate. Stronger gem-set jewellery sales helped lift overall gross margin from 21.9% in FY14 to 23.8% in 1HFY15 and 24.3% in 2HFY15, alleviating the impact of a 17% yoy drop in sales. Hong Kong sales deteriorated in 4QFY15 on lower tourist arrivals and weaker local spending. While 1QFY16 sales remain weak, we expect lower rentals and a pick-up in sales in 2HFY16 to support earnings recovery. Upgrade to BUY. Target price: HK$3.2. FY15 RESULTS Year to 31 Mar (HK$m) FY15 FY14 yoy % chg Remarks Turnover 15,922 19, Absence of gold rush and weaker sentiment in 2HFY15 Gross profit 3,832 4, Better margins, thanks to higher gem-set sales Operating profit 1,976 2, Rentals remained at high levels Net profit 1,615 1, Slightly lower effective tax rate Source: Luk Fook RESULTS Above expectations. FY15 net profit declined 13.4% yoy to HK$1.61b, and is 6% above our estimate due to higher-than-expected gem-set sales. 2HFY15 sales came in at HK$8.38b, down 16.7% yoy, beating our estimate by 8%, while gross margin improved to 24.3% from 23.8% in 1FHY15, higher than our estimate of 2.1% due to stronger gem-set sales. Consequently, 2HFY15 net profit amounted to HK$84.6m, down 16.6% yoy and 13% ahead of our forecast. Gold products contributed to 6.2% of total sales, down from the 67.2% in FY14 which was distorted by the gold rush, but closer to FY13 level of 62.7%. Despite a weak operating environment. Luk Fook maintained stable gem-set jewellery sales of HK$6.1b, representing 39.8% of total sales, up from 32.8% in FY14. KEY FINANCIALS Year to 31 Mar (HK$m) F 217F 218F Net turnover 19,215 15,923 16,579 17,848 2,17 EBITDA 2,86 1,681 1,97 2,162 2,556 Operating profit 2,21 1,82 2,16 2,39 2,713 Net profit (rep./act.) 1,865 1,615 1,779 1,931 2,24 Net profit (adj.) 1,865 1,615 1,779 1,931 2,24 EPS (cent) PE (x) P/B (x) EV/EBITDA (x) Dividend yield (%) Net margin (%) Net debt/(cash) to equity (%) (16.2) (7.3) (25.1) (28.5) (3.5) Interest cover (x) n.a. n.a ROE (%) Consensus net profit - - 1,615 1,772 - UOBKH/Consensus (x) Source: Luk Fook., Bloomberg, UOB Kay Hian BUY (Upgraded) Share Price Target Price HK$22.35 HK$3.2 Upside +35.1% (Previous TP HK$26.) COMPANY DESCRIPTION The company is engaged in sourcing, designing, wholesaling and retailing of a variety of gold jewelry, gold ornaments, gem-set jewelry, jadeite, gemstones and other accessory items. STOCK DATA GICS sector Consumer Discretionary Bloomberg ticker: 59 HK Shares issued (m): Market cap (HK$m): 13,166.6 Market cap (US$m): 1, mth avg daily t'over (US$m): 4.4 Price Performance (%) 52-week high/low HK$3.65/HK$2.5 1mth 3mth 6mth 1yr YTD (1.1) 4.4 (17.2).7 (23.3) Major Shareholders % Luk Fook (Control) Ltd 39.8 FY16 NAV/Share (HK$) FY16 Net Cash/Share (HK$) 3.65 PRICE CHART (lcy) Volume (m) LUK FOOK HOLDINGS INTL LTD LUK FOOK HOLDINGS INTL LTD/HSI INDEX (%) Jun 14 Aug 14 Oct 14 Dec 14 Feb 15 Apr 15 Jun 15 Source: Bloomberg ANALYST Renee Tai renee.tai@uobkayhian.com.hk 5

6 Stronger gem-set sales in China. Gold products contributed to 6.2% of total sales, down from the 67.2% in FY14 which was distorted by the gold rush, but closer to the FY13 level of 62.7%. Despite a weak operating environment. Luk Fook maintained stable gem-set jewellery sales of HK$6.1b, representing 39.8% of total sales, up from 32.8% in FY14. Luk Fook s Hong Kong/Macau gem-set sales declined 8.9% yoy to HK$4.8b, or 36% of the segment s sales, while sales of gold products pulled back 27.8% yoy to HK$7.25b (64% of sales). But gem-set sales in China increased 16.1% yoy to HK$259m, representing 21% of total China sales, up from 13% in FY14 and 15% in FY13. However, gold product sales plunged 32.5% yoy to HK$963m. Ticket size still declined. Average ticket size continued its downward trend, averaging HK$8,4 in Hong Kong, MOP7, in Macau and Rmb3,3 in China, down 9.7%, 9.1% and flat yoy respectively. This is in line with industry trends as mainland tourists now coming to Hong Kong and Macau tend to be from lower-tier cities, hence lower purchasing power. This trend is unlikely to reverse any time soon SAME-STORE SALES Source: Luk Fook Weaker 4QFY15 despite a low base. Same-store sales (SSS) declined 28.3% yoy (FY14: +26.2%) as SSS in Hong Kong/Macau fell 29.8% (FY14: 26.2%) while China SSS declined 28.2% (FY14: 23.6%). Despite a lower base in 2HFY14, sales deteriorated yoy in 4QFY15, in line with the retail market as Hong Kong sales were impacted by the drop in mainland tourist arrivals and a dilution of sales to overseas markets due to depreciating foreign currencies. EARNINGS REVISION/RISKS We raise FY16 and FY17 net profit estimates by 8.6% and 5.1% respectively on higher assumptions for gem-set jewellery sales, resulting in higher gross margins. We also factored in easing rentals starting FY16 but because staff and selling costs are expected to remain high, net margins are expected to be relatively stable. ASSUMPTION CHANGES Year end 31 Mar (HK$m) FY16 FY16 % chg FY17 FY17 % chg New Old New Old Turnover 16,579 17, ,848 19, Gross Profit 4,114 3, ,445 4, Operating Profit 2,28 2, ,412 2, Net Profit 1,779 1, ,931 1, Source: UOB Kay Hian Key downside risks include: a) slower pick-up in gem-set sales, b) another round of gold price depreciation which could dampen consumers penchant for gold over the longer run, c) intensifying competition, and d) increased promotional activities. Key upside risks include a faster recovery in sales in Hong Kong, a faster decline in rentals and a surge in gold price. VALUATION/RECOMMENDATION Upgrade to BUY with a target price of HK$3.2 as share price weakness should have captured the challenges that the company is facing. While FY16 is off to a difficult start along with the rest of the retail market, we think easing rentals and expectations of a stronger demand in 2HFY15 should support improving earnings. We lift our target price from HK$26. to HK$3.2, pegging it at 1x FY16F PE, at a 15% discount to its historical average. Key share price catalysts include newsflow on mainland tourist arrivals and quarterly operational updates, gold price movements, and monthly Hong Kong and China retail sales numbers. 6

7 PROFIT & LOSS BALANCE SHEET Year to 31 Mar (HK$m) F 217F 218F Year to 31 Mar (HK$m) F 217F 218F Net turnover 15, , , ,17.4 Fixed assets EBITDA 1,681. 1,97.4 2, ,556.3 Other LT assets Deprec. & amort. (12.8) (135.2) (147.) (156.6) Cash/ST investment 2,9.1 3, , ,787.8 EBIT 1,81.8 2,15.6 2,39.4 2,712.9 Other current assets 7,97.2 6,2. 6,675. 7,475.1 Total other non-operating income Total assets 11, , , ,976.1 Associate contributions (21.8) (24.) (26.2) (3.6) ST debt 1,47.6 1,47.6 1,47.6 1,47.6 Net interest income/(expense) 28.4 (5.3) (5.3) (5.3) Other current liabilities 1,32.7 1,11.3 1, ,368. Pre-tax profit 1, , , ,784.5 LT debt.... Tax (362.2) (398.9) (447.8) (536.8) Other LT liabilities Minorities (5.8) (6.4) (7.) (8.2) Shareholders' equity 8, , , ,881.3 Net profit 1, , ,93.6 2,239.6 Minority interest Net profit (adj.) 1, , ,93.6 2,239.6 Total liabilities & equity 11, , , ,976.1 CASH FLOW KEY METRICS Year to 31 Mar (HK$m) F 217F 218F Year to 31 Mar (%) F 217F 218F Operating , , ,796.6 Profitability Pre-tax profit 2,4.6 2,27.9 2, ,815.1 EBITDA margin Tax (362.2) (398.9) (447.8) (536.8) Pre-tax margin Deprec. & amort Net margin Working capital changes (1,39.) 1,76.7 (378.6) (629.9) ROA Other operating cashflows 28.4 (5.3) (5.3) (5.3) ROE Investing (329.1) (33.6) (279.9) (221.8) Capex (growth) (2.) (2.) (2.) (2.) Growth Others (129.1) (13.6) (79.9) (21.8) Turnover (17.1) Financing 14.4 (1,799.2) (845.6) (1,12.4) EBITDA (19.4) Dividend payments (646.8) (712.4) (773.3) (897.) Pre-tax profit (14.6) Issue of shares.... Net profit (13.4) Proceeds from borrowings Net profit (adj.) (13.4) Others/interest paid (151.5) (1,86.8) (72.3) (115.4) EPS (13.4) Net cash inflow (outflow) , Beginning cash & cash equivalent 1,84.9 2,9.1 3, ,225.5 Leverage Changes due to forex impact.... Debt to total capital Ending cash & cash equivalent 2,9.1 3, , ,787.8 Debt to equity Net debt/(cash) to equity (7.3) (25.1) (28.5) (3.5) Interest cover (x) n.a

8 COMPANY RESULTS Sa Sa (178 HK) FY15: Earnings Helped By Higher Sublease Income And Lower Taxes; Sales Deteriorate Further In 1QFY16 Sa Sa s FY15 net profit of HK$839m (down 1.3% yoy) is 13% above our estimate due to higher sublease income and lower taxes. Sales deteriorated further in 4QFY15 on lower tourist arrivals and weaker Hong Kong spending. We have yet to see a pick-up in 1QFY16. To capture lower rentals starting 2HFY15, we raise our FY16-17 EPS estimates by 1.8% and 4.8%. Maintain SELL in view of mounting structural challenges but slightly raise our target price to HK$3.64 as we roll forward valuation to FY16. FY15 RESULTS Year to 31 Mar (HK$m) FY15 FY14 yoy % chg Remarks Turnover HK & Macau sales further deteriorated in 2H Gross profit Better 2H gross margin due to brand mix shift Operating profit Helped by higher sublease income and narrowing losses in China Net profit Lower than expected effective tax rate Source: Sa Sa, UOB Kay Hian RESULTS Better than expected due to higher sublease income and lower taxes. FY15 net profit fell 1.3% yoy to HK$839m, beating our estimate by 13% but in line with consensus. Key discrepancies include higher sublease income (+4% yoy) and a lower tax rate of 17% (vs our forecast of 2%) due to a HK$1m tax reversal. Net profit fell to just HK$451m in 2HFY15 from HK$756.7m in 2FHY14 and was 16% head of our estimate as 2HFY15 sales were 8% ahead of our forecast and taxes were lower than expected. The weaker profits were due to: a) lower mainland tourist arrivals, b) continued drop in average ticket size, and c) high rentals and staff costs. Sa Sa maintained final DPS of 9. HK cents and special DPS of 5.5 HK cents, taking full-year payout ratio to 79.7% (FY14: 71.2%). Sequential sales deterioration starting 3QFY15. Hong Kong/Macau sales grew just 3.3% yoy to HK$7.36b, driven by same-store sales (SSS) growth of 2.2% as sales slipped 1.8% yoy in 2HFY15 after increasing 9.8% yoy in 1HFY15. Sales growth slowed in 3QFY15 and deteriorated further in 4QFY15 as anti-mainlander sentiment increased and foreign currencies depreciated substantially against the US$, resulting in slower tourist arrivals. Losses narrowed in China. China sales declined 4.6% yoy to HK$347m for FY15 as 2HFY15 weakened on increasing competition. Sa Sa transformed loss-making stores into smaller boutique stores, successfully narrowing its operating loss from HK$67.8m in FY14 to HK$3.8m in FY15. KEY FINANCIALS Year to 31 Mar (HK$m) F 217F 218F Net turnover 8,756 8,993 8,722 9,318 1,116 EBITDA 1, ,33 1,131 Operating profit 1, ,33 1,131 Net profit (rep./act.) ,2 Net profit (adj.) ,2 EPS (cent) PE (x) P/B (x) EV/EBITDA (x) Dividend yield (%) Net margin (%) Net debt/(cash) to equity (%) (3.9) (21.) (31.4) (38.1) (45.9) ROE (%) Consensus net profit UOBKH/Consensus (x) Source: SaSa, Bloomberg, UOB Kay Hian SELL (Maintained) Share Price HK$4.21 Target Price HK$3.64 Upside -13.5% (Previous TP HK$3.23) COMPANY DESCRIPTION Sa Sa International Holdings retails and wholesales cosmetics. STOCK DATA GICS sector Consumer Discretionary Bloomberg ticker: 178 HK Shares issued (m): 2,844.7 Market cap (HK$m): 11,98 Market cap (US$m): 1, mth avg daily t'over (US$m): 2.6 Price Performance (%) 52-week high/low HK$6.8/HK$3.73 1mth 3mth 6mth 1yr YTD (14.6) (14.8) (22.5) Major Shareholders % Sunrise Height Inc 49.4 Green Ravine Ltd 14.3 FY15 NAV/Share (HK$).88 FY15 Net Cash/Share (HK$).36 PRICE CHART (lcy) Volume (m) SA SA INTERNATIONAL HLDGS SA SA INTERNATIONAL HLDGS/HSI INDEX (%) 13 Jun 14 Aug 14 Oct 14 Dec 14 Feb 15 Apr 15 Jun 15 Source: Bloomberg ANALYST Renee Tai renee.tai@uobkayhian.com.hk

9 STOCK IMPACT Ticket size continued to fall. The number of transactions from mainland Chinese tourists increased 17.4% yoy in FY15 but the average ticket size continued to fall by 11.3% yoy. We attribute this to the weaker mainland tourist arrivals, especially in 2HFY15, and those who came were from lower-tier cities, hence weaker purchasing power. Even the number of transactions from local consumers declined 2.4% yoy but thankfully, their average spending grew 4.3% yoy. Expect rentals to start easing in 2HFY16. As Hong Kong retail sales continue to weaken, we are finally seeing some decline in rentals, even in Causeway Bay where Chinese tourists used to frequent. Management has seen some weakness in rentals in some locations recently and should see more material reduction starting 2HFY16. Sa Sa continues to rationalise stores in tourist locations and build more stores in residential locations while modifying the size of some stores. We should see easing rental costs starting 2HFY16. Expect Sa Sa to report 1QFY16 sales data next month. Sales in 1QFY16 up to 21 June fell 7.8% yoy in Hong Kong/Macau, steeper than our expectation, driven by a 4% drop in SSS. China retail sales fall 5.9% yoy on the back of a 1% drop in SSS while Malaysia sales fell 6.8% yoy on a 15.9% drop in SSS. Taiwan and Singapore have thus far seen more moderate declines in sales Narrowing price gap between China and Hong Kong to be a long-term trend; imminent need to beef up local consumer spending. Despite the weaker performance over the past few months, mainland Chinese consumers will continue to drive growth in Hong Kong/Macau, accounting for more than 6% of total sales. In view of the recently reduced import tariffs on skincare products and Estee Lauder s decision to cut prices on a number of products in China, we expect the price gap between China and Hong Kong to narrow as more brands are expected to follow suit. To stimulate sales, Sa Sa has implemented a series of measures targeted at local residents, including lowering the bar to qualify for its VIP programme from HK$3, to HK$1,2, and other promotional activities. SAME-DAY MAINLAND VISITOR ARRIVALS Source: Hong Kong Tourism Board OVERNIGHT MAINLAND VISITOR ARRIVALS Source: Hong Kong Tourism Board EARNINGS REVISIONS/RISKS Raise FY16 and FY17 net profit estimates by 1.8% and 4.8% respectively on the back of a slower start to the year and rising challenges, we scale back our sales assumptions for FY16 and FY17. However, we now expect lower rentals to kick in in 2HFY16 as the company is shifting away from the key tourist areas to residential locations where rentals are cheaper. ASSUMPTION CHANGES FY16F FY17F Year ended 31 Mar (HK$m) Old New % chg Old New %chg Turnover 9,445 8, ,14 9, Gross profit 4,195 3, ,468 4,22-6. Operating profit ,49 1, Net profit Source: UOB Kay Hian Key risks are weaker-than-expected sales, higher-than-expected rentals and wage inflation, and lower-than-expected Chinese tourist arrivals. VALUATION/RECOMMENDATION Maintain SELL with a higher target price of HK$3.64. Sa Sa is facing structural issues which will unlikely be resolved in the near term. As more international brands will reduce their prices in China, this will affect Sa Sa s competitiveness. We lift our target price from HK$3.23 to HK$3.64 after our earnings upgrades and roll valuation to FY16, still based on 12x PE, which is the low-end of its historical valuation. Key share price catalysts include quarterly sales data and monthly Hong Kong and China retail sales figures. 9

10 PROFIT & LOSS BALANCE SHEET Year to 31 Mar (HK$m) F 217F 218F Year to 31 Mar (HK$m) F 217F 218F Net turnover 8, , , ,115.7 Fixed assets (121.5) EBITDA ,32.6 1,131.2 Other LT assets Deprec. & amort..... ST debt n.a. n.a. n.a. n.a. EBIT ,32.6 1,131.2 LT debt n.a. n.a. n.a. n.a. Net interest income/(expense) Cash/ST investment ,81.3 1,396.6 Pre-tax profit 1,9.5 1,2.9 1,6.6 1,167.4 Other current assets 2, , , ,582. Tax (17.7) (129.5) (142.1) (147.7) Total assets 3,39.1 3,56. 3, ,31. Net profit ,19.7 Other current liabilities Net profit (adj.) ,19.7 Other LT liabilities Shareholders' equity 2, , , ,42.1 Total liabilities & equity 3,39.1 3,56. 3, ,31. CASH FLOW KEY METRICS Year to 31 Mar (HK$m) F 217F 218F Year to 31 Mar (%) F 217F 218F Operating 1, , , ,345. Profitability Pre-tax profit ,9.4 EBITDA margin Deprec. & amort Pre-tax margin Working capital changes Net margin Other operating cashflows (17.7) (17.1) (19.9) (25.9) ROA Investing (492.3) (178.2) (198.4) (155.7) ROE Capex (growth) (149.9) (2.) (2.) (15.) Proceeds from sale of assets (434.9)... Growth Others (5.7) Turnover 2.7 (3.) Financing (798.9) (731.4) (799.9) (873.9) EBITDA (1.9) (.9) Dividend payments (668.2) (693.7) (725.3) (84.1) Pre-tax profit (1.3) (.6) Issue of shares.... Net profit (1.3) Proceeds from borrowings.... Net profit (adj.) (1.3) Loan repayment (13.7) (37.7) (74.6) (69.8) EPS (9.7) Others/interest paid.... Net cash inflow (outflow) (173.) Leverage Beginning cash & cash equivalent ,81.3 Debt to total capital.... Changes due to forex impact.... Debt to equity.... Ending cash & cash equivalent ,81.3 1,396.6 Net debt/(cash) to equity (21.) (31.4) (38.1) (45.9) 1

11 COMPANY UPDATE Charoen Pokphand (CPIN IJ) Moderating Top-line Growth In Line With Economic Slowdown We have factored in the slowdown in demand for poultry products and trimmed our revenue growth forecasts to 8.9% and 14.1% for 215 and 216 respectively on the back of the economic slowdown. We cut net profit forecasts by 15.6% and 17.5% respectively and estimate net profit growth at 33.9% and 28.2% yoy for Current valuation is undemanding, trading at 15.5x 216F PE, slightly below its historical average. Maintain BUY with a lower target price of Rp3,55. WHAT S NEW Moderating top-line growth in line with economic slowdown in 215. CPIN s top-line grew at 17.9% CAGR in Early this year, CPIN guided for a 1-12% yoy revenue growth in 215 (214: 13.6% yoy). Recently, CPIN stated that the demand for feed and day-old chicks (DOC) has not shown a significant growth in 215. The demand slowdown for poultry products is in line with Indonesia s economic slowdown in 215. We have factored in both lower volume and ASP assumptions and trimmed our revenue growth forecasts to 8.9% and 14.1% yoy for , from 15.6% and 15.9% yoy respectively. Expansion slowdown through a capex cut of 5% yoy in 215. CPIN will allocate about Rp1.5t for capex in 215, or a capex cut of 5% yoy, on the back of demand slowdown. In terms of production capacity, the company will be able to meet demand growth in 215. The majority of the 215 capex is allocated for maintenance, rather than expansion. Apart from the slowdown in demand growth, the other key risk for the industry is the rupiah exchange rate, which has depreciated about 6.9% ytd in 215. New beverage business segment commences with ready-to-drink tea. CPIN has commenced its new line of business in beverages by marketing a ready-to-drink (RTD) tea product called Fiesta White Tea. The product should be available in the market within 1-2 months. CPIN is co-operating with a Japanese firm to produce RTD tea, while it is building the factory in Cikande, West Java. The factory will have a capacity of 4, bottles per hour and occupy a total area of 5-6 ha. The total investment is about Rp4b. The beverage factory is expected to commence production in 216. Reducing the ratio of US dollar-denominated bank loans. CPIN has reduced its US dollar-denominated loan ratio from 55% as at Dec 14, to about 45% currently. CPIN has refinanced some of its US dollar-denominated bank loan with rupiah-denominated loan, in order to mitigate the risk of rupiah depreciation against the US dollar. In 1Q15, US dollardenominated loan increased by 6.9% compared with that in Dec 14, while rupiahdenominated loan increased by 48%. The total bank loan has increased 25.8% to Rp8.4t in 1Q15. KEY FINANCIALS Year to 31 Dec (Rpb) F 216F 217F Net turnover 25,663 29,15 31,752 36,237 41,975 EBITDA 3,91 2,84 4,228 4,953 5,695 Operating profit 3,578 2,368 3,732 4,372 5,26 Net profit (rep./act.) 2,531 1,747 2,338 2,997 3,51 Net profit (adj.) 2,531 1,747 2,338 2,997 3,51 EPS (Rp) PE (x) P/B (x) EV/EBITDA (x) Dividend yield (%) Net margin (%) Net debt/(cash) to equity (%) Interest cover (x) ROE (%) Consensus net profit - - 2,85 3,444 3,871 UOBKH/Consensus (x) Source: CPIN, Bloomberg, UOB Kay Hian BUY (Maintained) Share Price Target Price Rp2,84 Rp3,55 Upside +25.% (Previous TP Rp4,3) COMPANY DESCRIPTION Manufactures and distributes poultry feed, day-old chicks and processed chicken products. STOCK DATA GICS sector Consumer Bloomberg ticker: CPIN IJ Shares issued (m): 16,398 Market cap (Rpb): 46,57.3 Market cap (US$m): 3, mth avg daily t'over (US$m): 1.5 Price Performance (%) 52-week high/low Rp4,275/Rp2,7 1mth 3mth 6mth 1yr YTD (13.7) (19.3) (25.2) (25.7) (24.9) Major Shareholders % PT Central Agromina FY15 NAV/Share (Rp) 791 FY15 Net Debt/Share (Rp) 38 PRICE CHART (lcy) Volume (m) CHAROEN POKPHAND INDONESI PT CHAROEN POKPHAND INDONESI PT/JCI INDEX (%) 12 Jun 14 Aug 14 Oct 14 Dec 14 Feb 15 Apr 15 Jun 15 Source: Bloomberg ANALYST Franky Kumendong (62 21) frankykumendong@uobkayhian.com

12 STOCK IMPACT DOC prices continued to stabilise ytd, in line with our expectations. Our channel checks suggest that DOC prices reached an average price of about Rp4,6-4,7/chick in May 15. This follows the average DOC price of Rp4,2-4,3/chick in Apr 15. In the week of 8 Jun 15, the average DOC price reached the highest price ytd at about Rp5,4/chick. This is in line with our expectation as farmers anticipate stronger demand for broilers towards the Lebaran festive season on Jul 15. It takes about 35 days to grow a DOC until it is ready for harvesting. Based on our data, the average DOC price should be about Rp4,4-4,6/chick during Apr 15 to mid-jun 15. DOC segment likely to book an operating profit in 2Q15. In 1Q15, CPIN s operating loss in DOC segment moderated to Rp197b (3Q14: loss of Rp363b, 4Q14: loss of Rp614b). The ASP for DOC was about Rp1,8/chick in 4Q14, which then increased to about Rp3,6/chick in 1Q15. Stronger DOC prices in 215 ytd have been possible as most producers cut DOC supply by about 2%. Assuming that the ASP for DOC is about Rp4,5 in 2Q15, CPIN s DOC segment is likely to book an operating profit in 2Q15. In 1Q15, CPIN s production cost of DOC was about Rp4,35/chick. Outlook for 215. Despite the domestic economic slowdown in 215, we still expect an earnings recovery in poultry in view of: a) the feed price hike in Apr 15 could protect feed margins in 215, b) average corn and soybean meal prices (in rupiah terms) ytd are lower on a yoy basis and c) stabilisation in DOC ytd. Feed contributed 75% to CPIN s 1Q15 revenue, followed by DOC (12%), processed chicken (1%) and others (3%). EARNINGS REVISION/RISK Cut net profit by 15.6% and 17.5%. We have factored in lower volume and ASP assumptions on feed, DOC and processed chicken for We have also factored in the average rupiah exchange rate of Rp13,6 per US dollar in 216. Our revenue forecasts have decreased 5.8% and 7.2%, while our net profit forecasts have decreased 15.6% and 17.5% respectively. Key risks: a) Supply discipline in DOC market is not maintained and prices falling after Lebaran festive from 2H15 onwards, b) higher-than-expected rupiah depreciation, and c) additional costs in the beverage business from 216 onwards. ASSUMPTIONS AND FORECAST REVISION New Previous Changes (%) 215F 216F 215F 216F 215F 216F US$-Rp exchange rate (average) 13,2 13,6 13, 13, Corn price (Rpm/tonne) Soybean meal price (Rpm/tonne) (4.9).7 Feed volume (m tonnes) (3.6) (5.3) Feed ASP (Rp/kg) 6,3 6,5 6,4 6,6 (1.6) (1.5) DOC ASP (Rp/chick) 4, 4,2 4,3 4,4 (7.) (4.5) Processed chicken volume (tonnes) 93,28 17,272 1,64 118,76 (6.8) (9.1) Processed chicken ASP 34,157 35,97 35,547 37,52 (3.9) (6.4) Revenue (Rpb) 31,752 36,237 33,693 39,6 (5.8) (7.2) Operating profit (Rpb) 3,732 4,372 4,56 5,238 (8.) (16.5) Operating margin (%) Net profit (Rpb) 2,338 2,997 2,772 3,633 (15.7) (17.5) Net margin (%) EPS (Rp) (15.6) (17.5) Source: CPIN, UOB Kay Hian REVENUE MIX 1Q15 DOC 12% Processed chicken 1% Source: CPIN, UOB Kay Hian PE BAND PE (x) Others 3% +2SD: 21.1x +1SD: 18.6x Mean: 16.1x Feed 75% -1SD: 13.6x - 2SD: 11.1x Jul 1 Mar 11 Nov 11 Jul 12 Mar 13 Nov 13 Jul 14 Mar 15 Source: Bloomberg, UOB Kay Hian P/B BAND P/B (x) SD: 7.x +1SD: 6.x -1SD: 3.9x -2SD: 2.9x Mean: 4.9 X Apr Aug Dec Apr Aug Dec Apr Aug Dec Apr Aug Dec Apr Aug Source: Bloomberg, UOB Kay Hian Dec Apr VALUATION/RECOMMENDATION Maintain BUY with a lower target price of Rp3,55, derived from equal weighting of P/B and PE historical averages. Our target price implies 19.4x 216F PE. The stock currently trades at 15.5x 216F PE, slightly below its historical average. The stock trades at 3.x 216F P/B, about -2SD below its historical average. We view current valuations are undemanding and offer a 25% price upside. SHARE PRICE CATALYST Stable rupiah and decline in raw material prices (in rupiah terms). Sustainable supply discipline in DOC market and stabilisation in DOC prices. 12

13 PROFIT & LOSS BALANCE SHEET Year to 31 Dec (Rpb) F 216F 217F Year to 31 Dec (Rpb) F 216F 217F Net turnover 29,15 31,752 36,237 41,975 Fixed assets 9,58 9,891 1,992 12,41 EBITDA 2,84 4,228 4,953 5,695 Other LT assets 1,794 1,617 1,686 1,767 Deprec. & amort Cash/ST investment 885 1,9 1,838 1,561 EBIT 2,368 3,732 4,372 5,26 Other current assets 9,125 9,7 1,45 12,113 Total other non-operating. (258).. Total assets 2,862 23,18 24,966 27,482 income Net interest income/(expense) (261) (357) (376) (346) ST debt 1,874 1,872 1,672 1,472 Pre-tax profit 2,17 3,117 3,996 4,68 Other current liabilities 2,593 2,447 2,783 3,227 Tax (36) (779) (999) (1,17) LT debt 4,723 5,74 4,384 3,895 Minorities Other LT liabilities Net profit 1,747 2,338 2,997 3,51 Shareholders' equity 1,926 12,969 15,381 18,142 Net profit (adj.) 1,747 2,338 2,997 3,51 Minority interest Total liabilities & equity 2,862 23,18 24,966 27,482 CASH FLOW KEY METRICS Year to 31 Dec (Rpb) F 216F 217F Year to 31 Dec (%) F 216F 217F Operating (39) 2,292 3,94 2,879 Profitability Pre-tax profit 2,17 3,117 3,996 4,68 EBITDA margin Tax (36) (779) (999) (1,17) Pre-tax margin Deprec. & amort Net margin Working capital changes (1,137) (679) (451) (1,268) ROA Other operating cashflows (1,85) 138 (32) (32) ROE Investing (3,15) (1,328) (1,682) (1,717) Capex (growth) (3,15) (1,328) (1,682) (1,717) Growth Investments.... Turnover Proceeds from sale of assets.... EBITDA (28.3) Others.... Pre-tax profit (39.) Financing 2, (1,474) (1,439) Net profit (31.) Dividend payments (754) (295) (585) (749) Net profit (adj.) (31.) Issue of shares.... EPS (31.) Proceeds from borrowings 3, Loan repayment.. (889) (689) Leverage Others/interest paid 46 (2.3) (.3) (.3) Debt to total capital Net cash inflow (outflow) (146) 1,15 (62) (278) Debt to equity Beginning cash & cash 1, ,9 1,838 Net debt/(cash) to equity equivalent Changes due to forex impact (116)... Interest cover (x) Ending cash & cash 885 1,9 1,838 1,561 equivalent 13

14 INITIATE COVERAGE JCY International (JCYH MK) Rebounding From Hard Times Global leading HDD component maker JCY has entered an interesting growth phase, having posted strong results since FY14. As industry consolidation leads to market share gains and steadier margins, the export-oriented company is poised for margin expansion even if the ringgit does not depreciate further. JCY s ambitious production automation plan will further boost its bottom line from FY16 onwards. Initiate coverage with a BUY and target price of RM1.8. Poised for market share gains and margin improvements post industry consolidation. JCY is a key beneficiary of the ongoing consolidation wave, given its leading position in the global hard disc drive (HDD) supply chain. We expect HDD component makers to follow the footsteps of OEMs, which saw margin expansion and stabilisation and market share gains amid industry consolidation. For example, post consolidation, Western Digital s (WD) gross margin rose to 28-29% in FY12-14 from 18-24% in FY9-11. High revenue visibility as a strategic supplier for WD; potential growth in business volume with Seagate. JCY has a 2-year working relationship with WD, which contributed 9% of JCY s FY14 revenue. As the HDD industry is now an oligopoly (with WD and Seagate controlling 84% of the global market), OEMs are unlikely to engage in price wars that would eventually put pricing pressure on their suppliers. In addition, global demand for HDD remains healthy as fast-growing, higher-value cloud and enterprise storage solutions offset the impact of a decelerating PC market. Being the most integrated component maker, JCY will remain as WD s preferred supplier and continue to grow together with the latter. JCY is also expected to benefit from Seagate s investment plan for a new RM1b plant in Malaysia. Significant cost savings from production automation. Labour accounted for 27% of JCY s total costs in FY14. JCY aims to reduce its 18,-strong workforce by 28-3% through its RM2m-3m investment in production automation over the next 3-5 years. We estimate a 5% job cut would translate into RM22m net savings and a 1ppt improvement in net margin. Beneficiary of strong US$. Almost 1% of JCY s sales and 5-55% of its total costs are in US dollars. Assuming RM3.65/US$ in our FY16 forecasts, every 1% strengthening of the US dollar will enhance JCY s earnings by 3.4%. Initiate coverage with a BUY and RM1.8 target price, pegging the stock at 1x 216F PE. JCY trades at 6.9x 216 PE, below local tech stocks mid-teens valuations. It offers a prospective yield of 7.3%, the highest in the local small/mid cap space. KEY FINANCIALS Year to 3 Sep (RMm) F 216F 217F Net turnover 1,599 1,867 2,15 2,172 2,215 EBITDA Operating profit (54) Net profit (rep./act.) (62) Net profit (adj.) (76) EPS (sen) (3.7) PE (x) n.m P/B (x) EV/EBITDA (x) Dividend yield (%) Net margin (%) (3.9) Net debt/(cash) to equity (%) (11.4) (15.9) (22.2) (28.8) (34.9) Interest cover (x) ROE (%) (5.6) Consensus net profit UOBKH/Consensus (x) Source: JCY, Bloomberg, UOB Kay Hian BUY Share Price Target Price RM.7 RM1.8 Upside +54.6% COMPANY DESCRIPTION JCY is a leading integrated HDD component maker. It has decades of working relationship with Western Digital, which controls about 44% of global HDD market share. JCY s main facilities are located in Malaysia but it also operates in Thailand and China. STOCK DATA GICS sector Information Technology Bloomberg ticker: JCYH MK Shares issued (m): 2,44.5 Market cap (RMm): 1,431.1 Market cap (US$m): mth avg daily t'over (US$m):.8 Price Performance (%) 52-week high/low RM.81/RM.47 1mth 3mth 6mth 1yr YTD (3.4) (2.1) 38.6 (1.4) 28.4 Major Shareholders % YKY Investment Ltd 74.4 CIMB Bank 3. UBS AG 2.6 FY15 NAV/Share (RM).6 FY15 Net Cash/Share (RM).13 PRICE CHART (lcy) Volume (m) JCY INTERNATIONAL BHD JCY INTERNATIONAL BHD/FBMKLCI INDEX (%) 13 Jun 14 Aug 14 Oct 14 Dec 14 Feb 15 Apr 15 Jun 15 Source: Bloomberg ANALYST Yeoh Bit Kun bitkun@uobkayhian.com

15 STOCK IMPACT Outstanding among peers; achieving critical mass a key factor. A few of JCY s peers have been struggling financially or operationally due to a harsher industry environment, failed product diversification strategies and stricter quality requirements imposed by OEMs over the years. Although JCY slipped into the red in FY13, the company managed to weather the storm by achieving critical mass and focusing on its expertise. Unlike peers which produce single HDD components, JCY s integration capabilities and manufacturing facilities with a centralised material resource planning system allow it to simplify OEMs supply chains, reduce lead times and ensure better quality control across components. A potentially extended period of margin stability post industry consolidation. We expect HDD component makers to follow OEMs consolidation path, given that a few players are looking to exit the HDD business. The survivors could benefit from less vicious competition, and hence steadier margins, just as OEMs had seen margin expansion and stabilisation amid industry consolidation. Beneficiary of strong US$ and low aluminium prices. We understand JCY s clients did not request to share JCY s forex benefits. Although JCY may need to pass through some of its savings should the ringgit depreciate further, the quantum will not be huge as its clients receipts are in US dollars. Separately, JCY also benefitted from the recent plunge in aluminium prices, which is the biggest raw material cost for JCY. Global aluminium prices have dropped 11% yoy and 9% ytd, and they not expected to rebound in the near to medium term due to a global supply glut. HDD industry reducing dependency on PC market. After recording three consecutive years of HDD shipment volume decline, the industry saw an inflection point in 214 (+2.2% yoy), thanks to growth in the enterprise storage and laptop markets. Although it is widely believed that the HDD industry is contracting, the fast-growing higher-value cloud and enterprise storage could drive overall industry growth and reduce the industry s dependency on PCs over time. For example, WD derived 8% of its FY5 total revenue from PC-related sources but only 47% in FY14. JCY s management highlighted that the component prices for enterprise HDD are typically 6-7% higher than that for PCs. Healthy medium-term industry outlook despite dip in 1Q15 HDD volume sales. On the back of rising demand for cloud and enterprise storage, industry consultancy Coughlin Associates estimates HDD shipment volume would grow at a CAGR of 5% in while Gartner forecasts a milder 5-year CAGR of 3% in However, HDD shipment volume dropped 9% yoy and 11% qoq in 1Q15, according to Trendfocus, attributed to weak demand for desktops (following the completion of the Windows XP refresh cycle) and notebooks. Trendfocus expects demand for HDD to pick up in the coming quarters as some PC buyers may opt to wait for Windows 1 (launching in Sep 15) and HDD demand from gaming consoles should pick up in 2Q15, ahead of manufacturers production and sales in 2H15. VALUATION/RECOMMENDATION Initiate coverage with a BUY and target price of RM1.8, derived from 1x 216F PE. Our target price suggests 8.4x cash-adjusted FY16F PE. Deep discount to local tech stocks. JCY is trading at a deep discount to local tech stocks average FY16F PE of 14x. We opine that a 1x-PE target price fairly reflects JCY s exposure to the more mature HDD industry. CORE NET PROFIT AND EBITDA MARGIN (RMm) (%) Core Net Profit (LHS) EBITDA Margin (RHS) -4 1QFY13 1QFY14 1QFY15 Source: JCY, UOB Kay Hian DIVIDEND AND YIELD (RMsen) (%) DPS (sen) Yield (%) FY1 FY11 FY12 FY13 FY14 FY15F FY16F FY17F Source: JCY, UOB Kay Hian HDD SHIPMENT VOLUME AND ENTERPRISE SEGMENT AS % OF TOTAL (m unit) (%) Total (LHS) Enterprise Segment as % of Total (RHS) Q12 3Q12 1Q13 3Q13 1Q14 3Q14 1Q15 Source: Trendfocus KEY ASSUMPTIONS Items Assumptions Sales Growth 1-2% p.a. for FY15-17 RM/US$ Exchange Rate RM3.65 for FY15-17 % of Labour Reduction 5% in FY16 and 12% in FY17 Labour Cost Inflation 5% Capex RM6m/8m/8m in FY15/16/17 Effective Tax Rate 11% Source: JCY, UOB Kay Hian TARGET PRICE SENSITIVITY TO RM/US$ AND LABOUR CUT RM/US$ Labour Cut (%)* Note: Our base-case forecast assumes an average exchange rate of 3.65/US$ for FY15-16 and a 5% reduction in labour in FY16. * % reduction from the existing base of 18, workers. Source: UOB Kay Hian 15

16 PROFIT & LOSS Year to 3 Sep (RMm) F 216F 217F Net turnover 1,867 2,15 2,172 2,215 EBITDA Deprec. & amort EBIT Net interest income/(expense) (1) (2) (2) (2) Pre-tax profit Tax (13) (23) (25) (29) Minorities Net profit Net profit (adj.) BALANCE SHEET Year to 3 Sep (RMm) F 216F 217F Fixed assets Other LT assets Cash/ST investment Other current assets Total assets 1,529 1,662 1,77 1,898 ST debt Other current liabilities LT debt Other LT liabilities Shareholders' equity 1,122 1,229 1,334 1,455 Minority interest Total liabilities & equity 1,529 1,662 1,77 1,898 CASH FLOW Year to 3 Sep (RMm) F 216F 217F Operating Pre-tax profit Tax (23) (25) (29) Deprec. & amort Working capital changes (89) (44) (4) (7) Other operating cashflows 1 Investing (38) (6) (8) (8) Capex (growth) (38) (6) (8) (8) Investments Proceeds from sale of assets 1 Others (1) Financing (2) (91) (15) (121) Dividend payments (46) (91) (15) (121) Issue of shares Proceeds from borrowings 24 Loan repayment Others/interest paid 2 Net cash inflow (outflow) Beginning cash & cash equivalent Changes due to forex impact Ending cash & cash equivalent KEY METRICS Year to 3 Sep (%) F 216F 217F Profitability EBITDA margin Pre-tax margin Net margin ROA ROE Growth Turnover EBITDA Pre-tax profit n.a Net profit n.a Net profit (adj.) n.a EPS n.a Leverage Debt to total capital Debt to equity Net debt/(cash) to equity (15.9) (22.2) (28.8) (34.9) Interest cover (x)

17 SECTOR UPDATE REITs - Singapore Creating Yield Accretion ART s proposed acquisition of a S$298m portfolio in Australia and Japan looks to be yield accretive through the creative use of perps and debt instruments. We downgrade ART to HOLD with an unchanged target price of S$1.42 as the 2.9% accretion in DPU is offset by the raised risk profile from the relatively higher debt levels after factoring in perpetual securities (2bp increase in required rate of return). Separately, Frasers Hospitality Trust s private placement on the back of its Sydney acquisition was largely anticipated. Maintain MARKET WEIGHT. WHAT S NEW MARKET WEIGHT (Maintained) TOP PICKS Company Rec Target Share Price Price (S$) (S$) CCT SP BUY CDREIT SP BUY SGREIT SP BUY SSREIT SP BUY Source: UOB Kay Hian ART proposed acquisitions. Ascott Residence Trust (ART) announced the proposed acquisition of seven assets, comprising serviced residences and rental housing properties in Australia and Japan for a total of S$298.3m. ART will hold an EGM on 24 July. The three serviced residences are: a) Citadines on Bourke Melbourne (38 units, acquisition cost: S$167.6m). b) Citadines Shinjuko Kyoto (124 units, acquisition cost: S$9.7m). c) Citadines Shinjuku Tokyo (16 units, acquisition cost: S$2.5m). The remaining four rental housing properties (868 units) are to be acquired for S$48.8m. Frasers Hospitality Trust (FHT) plans to raise S$ m via a private placement of shares at S$ each to partially fund its Sofitel Wentworth acquisition. ACTION Ascott Residence Trust s (ART) proposed acquisition of a S$298m portfolio comprising serviced residences and rental housing properties in Australia and Japan looks to be yield accretive through the creative use of perps and debt instruments. We downgrade ART to HOLD with an unchanged target price of S$1.42 as the 2.9% accretion in DPU is offset by the raised risk profile from the relatively higher debt levels after factoring for the perpetual securities (2bp increase in required rate of return). Entry price is S$1.2. Separately, FHT s private placement on the back of its Sydney acquisition was largely anticipated. ANALYSTS Vikrant Pandey vikrant@uobkayhian.com Derek Chang derekchang@uobkayhian.com Our key REIT picks are CCT, Starhill, CDREIT and Sabana. PEER COMPARISON Price Target Upside/ Market Curr Fwd Curr Fwd Book Price/ RNAV Net Company Ticker Rec 25 Jun 15 Price (Downside) Cap. PE PE Yield Yield NAV ps Book ps ROE Gearing (S$) (S$) to TP (%) (US$m) (x) (x) (%) (%) (S$) (x) (S$) (%) (%) Ascendasreit AREIT SP HOLD , AscottREIT ART SP HOLD , CACHE CACHE SP BUY CapitaComm CCT SP BUY , CapitaMall CT SP SELL , CDL Htrust CDREIT SP BUY , FrasersCT FCT SP HOLD , Frasers HTrust FHT SP BUY Kep REIT KREIT SP BUY , MapletreeInd MINT SP HOLD , MapletreeLog MLT SP HOLD , PLife REIT PREIT SP HOLD , Sabana REIT SSREIT SP BUY Starhill Gbl SGREIT SP BUY , Suntec REIT SUN SP BUY , Source: Bloomberg, UOB Kay Hian 17

18 ESSENTIALS Ascott Residence Trust (ART SP/HOLD/Target: S$1.42) Staying in Asia Pacific for the long haul as the state of Victoria (in which Melbourne is located) saw the strongest performance in overnight visitors within Australia, averaging a 7.7% growth p.a in The Tourism Research Australia estimates overnight visitor growth in 216 to hit 6.5%. RevPAR for Melbourne grew 4.1% yoy in 214 and is expected to hit 7.3% growth in 215, as estimated by hotel tracker STR Global. Tokyo is also expected to see RevPar growth hit 4.1% in 215. We note that RevPar in Kyoto saw a remarkable growth of about 14% in 214. Issuance of perpetual securities to fund Australia acquisition. ART raised S$25m via perpetual securities on 23 June. Of these, S$15m will be used to acquire Citadines on Bourke Melbourne (S$167.6m) and S$136.9m debt will be raised to fund the remaining assets. Debt creativity led to yield accretion. Management guided for a 2.9% accretion in DPU with a blended EBITDA yield of 5.1%. As trading yield stands at 7%, the leverage effect makes it yield accretive. We estimate a hedged yield of around 5.2% for the acquired property portfolio vs ART s hedged trading yield of 6.7% pre-acquisition (unhedged trading yield 7%). Gearing approaching uncomfortable levels, factoring in perpetual securities. Headline gearing is expected to increase only 1ppt from 38.5% to 39.5% despite a 1.3% increase in aggregate leverage. This is largely due to the usage of perpetual securities that have been classified as equity. However, if we classify the S$41m perpetual securities as half debt and half equity owing to the hybrid characteristics between these two classes, it would result ina gearing of 44.2%, which is on the high side relative to peers. Downgrade to HOLD with an unchanged target price of S$1.42, based on DDM (required rate of return: 8.3%, terminal growth: 2.%). We maintain our target price as the 2.9% accretion in DPU is offset by the raised risk profile from the relatively higher debt levels after factoring in the perpetual securities (2bp increase in required rate of return). Downgrade to HOLD as we see limited upside from current share price levels. Frasers Hospitality Trust (FHT SP/BUY/Target: S$1.2) Placement to fund Sofitel Sydney Wentworth acquisition. Strategic partner TCC will subscribe for 59.3m units in line with its 39.56% stake in the REIT, with the remaining 9.7m units offered to investors at S$ per share. This is in line with the guided placement of up to 15m units announced at the time of acquisition and works out to raise S$121.5m-123m, representing half of the acquisition price, with the remaining half to be debt funded. Sofitel Sydney Wentworth is yielding 6%, similar to that of the recent Sydney Hilton Hotel purchase by Bright Ruby group for S$442m. This translates into a hedged property yield of around 5% vs a hedged trading yield of 6.8% (unhedged trading yield of 7.1%), in line with the 5%-5% debt:equity split that we were expecting to make the transaction leveraged yield-accretive. The transacted price is in line with independent valuation of A$222m by Savills and A$226m by JLL. The RevPAR of A$193.7 and occupancy of 87.6% at Sofitel compare favourably to that of Sydney s hospitality sector (RevPAR: A$168, occupancy: 83.7%) which was among the strongest performing cities in Australia in 214. Acquisition is in line with management's strategy of building a quality portfolio of properties in prime locations. The transactions extend FHT s footprint in Australia from 11.3% to 22.4% by asset value. The portfolio asset value would increase by about 14% to S$1.9b. Maintain BUY and target price of S$1.2, based on DDM (required rate of return: 8.2%, terminal growth: 2%) 18

19 STRATEGY THAILAND Shrimp Outlook And CFRESH s Prospects We hosted a luncheon meeting yesterday to discuss the shrimp industry s outlook and the prospects of CFRESH. We think shrimp output has bottomed out and the industry will recover gradually. In addition, Thailand s shrimp quality is better than competitors. CFRESH could report impressive sales growth for many years and its earnings are relatively satisfactory due to efficient cost control. Our retail research team has a BUY on CFRESH. THAI SHRIMP OUTLOOK Shrimp output from farming could rise in the future. We hosted a luncheon meeting yesterday regarding the shrimp outlook and the prospects of Seafresh Industry (CFRESH). Dr Somsak Paneetatayasai, president of the Thai Shrimp Association, was the key speaker on shrimp outlook. He viewed that shrimp output from farming could rise in the future as the volume of shrimp caught from the sea would not be enough for the growing world population. World consumption of shrimp is about 4.5m tonnes per year, and half of that is served by farmed shrimp. Thailand used to be the largest shrimp producer in the world with 53,-6, tonnes per year before 213. WORLD SHRIMP OUTPUT (THOUSAND TONNES) Country Thailand China Vietnam Indonesia India Malaysia Philippines US-central/ south Others Total 2,352 2,317 2,24 1,815 2,271 Source: Thai Shrimp Association Thailand lost position as largest shrimp producer in the world. Since 213, shrimp output from Thailand has been declining and Thailand has lost its position as the largest shrimp producer to China and India. This is due to the impact of the Early Mortality Syndrome (EMS) outbreak in Thailand which first took place in 211. Although there is no way to completely prevent EMS, shrimp output this year is estimated at 25, tonnes, increasing slightly from the 23, tonnes in 214 thanks to development of farming methods such as nursing shrimp and improving clean water circulation which should increase the survival rate of shrimp. Another factor that may impact shrimp output this year is the low selling price, as the current shrimp price at Bt13/kg for Vannamei size 1 is about the cost for shrimp farmers. The low selling price may not support shrimp farmers. In summary, the Thai Shrimp Association views that the shrimp output has bottomed out but the recovery is still slow due to a lack of attractive prices. External factors that may affect Thai shrimp business this year. Since 214, Thailand has been ranked in Tier 3 for TIP (Trafficking in Persons Report) by US authorities. Although it does not impact materially in terms of merchandise because no products have been banned, it is not good for the Thai fishery product image. In addition, this year Europe has given Thailand a yellow card due to IUU (Illegal, Unreported and Unregulated) in fishery industry and may consider revoking the card in Oct 15 if Thailand imposes stricter measures to satisfy EU standards. The Thai government is taking this issue seriously by amending the Fisheries Act such as introducing serious and deterrent sanctions, including a maximum fine of Bt3m or US$89, for IUU fishing, and requiring that all fishing vessels must have GPS in order to eradicate slave trade. The Thai Shrimp Association believes the EU is unlikely to issue a red card to Thailand in Oct 15. The EU is expected to revoke the yellow card and issue a green card. The impact on the Thai shrimp industry in the worst-case scenario would be that products may not be able to be exported to the EU as shrimp feed for farmed shrimp uses fish meal, which is a product from fishing vessels. However, in this case, there is still a way to tackle the problem by changing the ingredient in shrimp feed from fish meal to soybean meal. ANALYSTS Kowit Pongwinyoo Kowit@uobkayhian.co.th Thunya Sutavepramochanon thunya@uobkayhian.co.th EU cuts Thailand s GSP and is waiting for FTA negotiation. Shrimp export value to Europe in 214 dropped by 15% yoy to Bt8.3b due to the loss of tax privileges as EU cut Thailand s GSP (Generalised Scheme of Preferences) on processed shrimp. This resulted in tax rate increasing from 7% to 2% effective from 1 Jan 14 onwards. In addition, tax rate for frozen shrimp this year has risen from 4% to 12% due to the same reason of losing the GSP from Europe. However, Thailand could be able to pay a low 19

20 tax rate for shrimp products in future if the negotiation on FTA between Thailand and Europe is a success. CFRESH PE BAND Thai shrimp has better quality than competitors. Although the Thai shrimp industry seems to be encountering many obstacles, there are one positive - the high quality of Thai shrimp. It has been quite a long time since any antibiotic residue was found in shrimp exported from Thailand while it has been found in those exported from Vietnam, Malaysia, Indonesia, India and China. This is due to the well-managed shrimp supply chain in Thailand which carries out product traceability. SEAFRESH INDUSTRY PLC (CFRESH) CFRESH has CAGR of sales at 3%. Despite the unfavourable business environment, CFRESH which manufactures and distributes many frozen food products such as raw shrimp, cooked shrimp, breaded shrimp and sushi has been able to report sales growth every year since 28. This is due to overseas business expansion and growing sales from Thailand operations. CAGR of sales in was 3%. The underlying reason should be the combination of strength in its financial status, marketing channels and focus on doing environmental sustainability. CFRESH s products are positioned as premium grade. Note that CFRESH products are mostly exported and the main export destination is Europe. 2Q15 earnings are likely to be higher than that in 1Q15. We expect 2Q15 earnings to come in at Bt96m, up from Bt42.82m in 1Q15 which was impacted by forex losses of Bt14.33m, low selling season and high shrimp cost. The positive factors in 2Q15 should be forex gains, better selling season compared with 1Q15, and lower shrimp cost. Many awards received. CFRESH is one of the ESG 1 companies for Thaipat Institute which are recognised for their outstanding sustainability performance (environmental, social and governance). In addition, it has received an award from Global Aquaculture Alliance for achieving four-star best aquaculture practices (BAP). BUY with target price of Bt11., based on 12x 215F PE which is its 5-year mean. CFRESH management expect sales this year to be slightly lower than last year due to lower shrimp price but earnings this year may not be lower than last year thanks to effective cost control. In addition, we expect 215 dividend to come in at Bt.55 per share and thus should provide an attractive dividend yield of 6.7%. Source: UOB Kay Hian CFRESH REVENUE Source: CFRESH CFRESH REVENUE BREAKDOWN BY COUNTRY Europe 55% 66% 6% Asia 3% 23% 25% US and Canada 1% 7% 11% Australia, New Zealand 5% 4% 4% and others Source: CFRESH VALUATIONS FOR CFRESH Price Target Last Net Profit EPS PE Company Ticker Rec as of 25 Jun'15 Price Year F 216F F 216F F 216F (Bt) (Bt) End (Btm) (Btm) (Btm) (Bt) (Bt) (Bt) (x) (x) (x) Seafresh Industry CFRESH TB BUY / Source: UOB Kay Hian retail research team 2