We expect Hang Seng Index to hover between 27,000 and 28,800 but the risk is on the upside. Market Overview. Hang Seng Index Performance

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1 3 October 2018 Hang Seng Index Performance Source: Bloomberg Major Market Indicators % Change Hong Kong Close 1-Day 1-Mth 6-Mth 12-Mth Hang Seng Index 27, % -2.7% -9.9% -1.6% HSCEI (H-Shares) 10, % -1.1% -10.4% -1.4% Mkt T/O ($ Mn) 90, % -15.8% -33.7% 24.0% Oversea DJIA 26, % 2.6% 12.7% 18.1% NASDAQ 8, % -0.9% 17.0% 23.3% Shanghai SE Composite 2, % 3.5% -11.0% -15.8% Shenzhen Component 8, % -0.8% -22.7% -24.2% Commodities and FX Crude Oil Futures (US$) % 8.2% 19.9% 49.3% Gold Futures (US$) 1, % -0.3% -11.1% -6.1% Baltic Dry Index 1, % -1.5% 47.4% 17.1% USD / Euro % -0.8% -6.2% -1.8% Yen / USD % -2.3% -6.8% -0.9% CNH / USD % -0.8% -8.9% -3.2% Market Overview Hang Seng Index closed down 2.4% at 27,126. HSCEI declined 2.4%. Heavily weighted Tencent (700), HSBC (5) and AIA Group (1299) cut 1.9%, 2.1% and 3.4% respectivley. Automobile, airline, cement, gaming, property and Chinese banking stocks underperformed the market. BYD Company (1211), Great Wall Motor (2333) and Guangzhou Automobile (2238) tumbled 4.7%- 7.3%. Air China (753) and Conch Cement (914) retreated 4.8%-5.0%. Galaxy Entertainment (27) and Sands China (1928) slid 3.9%-4.7%. Nine local property stocks in Hang Seng Index dropped an average 2.7% among which Link REIT (823), Sino Land (83) and Swire Pacific (19) lost 3.3%- 4.9%. Ten largest Chinese property developers fell an average 2.6% among which China Vanke (2202) and Shimao Property (813) plunged 4.2%-5.9%. Nine Chinese banks in HSCEI cut an average 2.5% among which ICBC (1398) and CCB (939) decreased 3.2%-3.3%. Securities, railway, power, oil and pharmaceutical stocks ended lower but outperformed the benchmark index. CITIC Securities (6030), China Railway Group (390), Huaneng Power (902), Sinopec (386), Sinopharm (1099) and Sino Pharm ( (1177) shrank 2.6%-3.3%. Consumption, insurance and telecom stocks lacked clear direction. WH Group (288), PICC Group (1339) and China Telcom (728) climbed 0.9%-2.0%. Ping An Insurance (2318), China Life (2628) and China Mobile (941) slumped 2.2%-2.8%. We expect Hang Seng Index to hover between 27,000 and 28,800 in October but the risk is on the upside. We expect Hang Seng Index to hover between 27,000 and 28,800 but the risk is on the upside.

2 Market in Focus China Everbright Greentech MKT Cap ($Bn) 13.9 Bloomberg Ticker 1257 HK Equity 52-week High/Low ($) Rating BUY Free Float (%) 26.4% Target Price $8.60 3M Avg Turnover ($, Mn) 20.7 China Everbright Greentech (1257): Expect EPS CAGR growth to reach +20% in next 3 years, reiterate BUY China Everbright Greentech (1257, $6.71 CEG ), listed on the Hong Kong Stock Exchange in May 2017, is a leading environmental protection service provider in China. CEG focuses on biomass treatment, hazardous waste and wind/solar power. CEG is the largest biomass power operator in East China and in top five in China in terms of designed capacity. According to Frost & Sullivan, China biomass power operating capacity is expected to reach 13,442MW in 2020, growing at a CAGR of 19% from We expect CEG revenue growth to outperform industry growth given its strong pipeline and potential project wins supported by China Everbright International (257) which holds 69.7% of CEG s stake. On August 8, the company announced a solid earnings results for the first half of For the first half of 2018, CEG s revenue surged 54.0% yoy to HKD3,152.9mn. Revenue from (i) Integrated biomass utilisation project, (ii) hazardous waste treatment project and (iii) solar energy and wind power projects and others grew approximately 47.6%, 139.3% and 18.3% yoy to HKD2,610.8mn, HKD396.8mn and HKD133.0mn respectively accounting for 82.8%, 12.6% and 4.6% of total revenue. Segment profit amounted to HKD682.4mn in 1H18, the abovementioned sectors grew approximately 36.1%, 56.8% and 26.6% respectively to HKD466.1mn, HKD142.3mn and 74.1mn. Overall net margin dropped from 22.3% in 1H17 to 20.4% in 1H18, mainly due to a 74% yoy surge on finance costs and higher contributions from hazardous waste treatment project construction which had lower margins than other segments and dragged down the overall net margins in 1H18. As at 30 June 2018, CEG s net debt amounted to HKD HKD2,259mn with approximately 24% net debt to equity ratio. We believe the relatively low gearing provides CEG sufficient rooms for future expansion. We remain our bullish views on CEG given on promising industry growth, its strong project pipeline and supports from China Everbright International (257). Fig1: 1 Year Share Price Source: Bloomberg, Mason Securities According to Bloomberg estimates, CEG s earnings are expected to reach $1.35bn in 2018 and $1.74bn in 2019 (EPS $0.66 and $0.85), up 41.9% yoy and 28.5% yoy respectively. NAV per share is expected to reach $4.78 and $5.48 in 2018 and Traded at 2018/19 P/E of 10.2x/7.9x and P/B of 1.40x/1.23x with EPS growth of more than 20% in next 3 years, we believe the current price of CEG is still attractive given the robust market growth. We maintain our BUY rating on CEG with 6- month price target of $8.6 based on 2018 P/B of 1.8x.

3 Technical Ideas Stock Code Rating / Last Closing Price Our TP / Bloomberg TP Cut Loss Lenovo Group 992 HK Equity BUY $5.76 $6.34 $5.47 $5.47 MKT Cap ($Bn) / Free Float Turnover / 30D Avg ($Mn) Turnover vs 5D & 30D Avg Forward PER / PBR Net Debt (Cash) / Equity % % 151% 16.8X 2.04X 43% Technical Indicator SMA RSI (14) 70.7 SMA BB (Upper) 5.61 SMA BB (Lower) 5.06 Stock Code Rating / Last Closing Price Our TP / Bloomberg TP Cut Loss China Unicom 762 HK Equity BUY $9.06 $9.97 $12.89 $8.61 MKT Cap ($Bn) / Free Float Turnover / 30D Avg ($Mn) Turnover vs 5D & 30D Avg Forward PER / PBR Net Debt (Cash) / Equity % % 105% 28.8X 0.76X 11% Technical Indicator SMA RSI (14) 46.6 SMA BB (Upper) 9.60 SMA BB (Lower) 8.98 Source: Bloomberg, Mason Securities

4 Recent Recommendations Date of Issue Stock Pick Recommendation Highlights Rating (TP) 13/9/2018 Anta Sports (2020) Earnings dilution from a possible acquisition of Amer Sports has been fully discounted in share price - Maintain BUY Anta Sports (2020) The sell-off is mainly due to concerns about a slowdown in revenue growth and earnings dilution from a possible acquisition of Amer Sports Corporation (ASC) We believe the potential earnings dilution effect has been fully discounted in share price SSSG for Mainland China market is likely to improve in 2Q FY19 - Maintain BUY Luk Fook (590) BUY ($42.0) 17/9/2018 Luk Fook (590) 19/9/2018 CRG (1193) 20/9/2018 Shimao Property (813) 21/9/2018 COG (581) 24/9/2018 CSCI (3311) 26/9/2018 ENN Energy (2688) 27/9/2018 Galaxy Entertainment (27) 28/9/2018 China Oilfield Services (2883) 2/10/2018 CCCC (1800) Industry data for July and August suggests that Luk Fook s SSSG in the Mainland China market may improve in 2Q FY19. Luk Fook is currently trading at FY19 P/E of 11.0x with EPS growth of 7.4% which is undervalued in our view. China Resources Gas (1193): Better-than-expected interim results, Maintain BUY We continue to take a long-term positive view on the CRG given the industry s long-term and stable growth. Traded at 2018 P/E of 17.9x and 2019 P/E 15.9x, we believe the valuation of CRG is fair. Robust contracted sales growth for 8M18 - Maintain BUY on Shimao Property (813) We believe the underperformance is mainly driven by macro factors such as renminbi depreciation and worries about a slowdown in property sales in China. However, the fundamentals of Shimao remain solid Shimao s contracted sales target of RMB140bn, up 39% yoy in 2018, is highly achievable China Oriental Group (581): Re-rating on sustainable profitability, Maintain BUY We believe COG is one of the best companies and most efficient steel producers in China in terms of profitability or execution capability We expect an upward revision on COG earnings consensus in 2018 and 2019 after its strong interim results China s infrastructure investment is likely to increase in 4Q18 Maintain BUY CSCI (3311) Chinese government will substantially increase infrastructure spending in the fourth quarter that will certainly benefit CSCI Taking into account its good track record, we believe full year new contracts value for 2018 is likely to exceed management s target ENN Energy (2688) : 1H18 core profit beat, maintain our LT bullish view on China gas operator; BUY We continue to take a positive view on China gas consumption market We believe the valuation of ENN is still reasonable long term investors Current valuation is cheap by historical average - Maintain BUY Galaxy Entertainment (27) We believe the opening of the Hong Kong-Zhuhai-Macau Bridge in the fourth quarter of 2018 will improve earnings outlook for gamings stocks in the medium-to-long term We maintain our bullish view on the gaming sector and believe any share price correction is a good buying opportunity for long-term investors Capture CNOOC s capex upcycle: BUY China Oilfield Services (2883) for short term trading purpose Capital flows into sectors which benefit from the investment theme of stagflation in China, such as oil related players COSL is a good proxy to capture the upcycle of CNOOC s capex in coming years China s infrastructure investments is likely to increase in 4Q18 Maintain BUY CCCC (1800) We believe the Chinese government will substantially increase infrastructure spending in the fourth quarter that will certainly benefit CCCC Traded at 2018 PER of 5.5x compared to 5-year average forward PER of 6.3x, CCCC is undervalued in our view BUY ($35.0) BUY ($40.9) BUY ($24.50) BUY ($9.50) BUY ($10.0) BUY ($83.0) BUY ($59.3) BUY ($9.20) BUY ($9.20)

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