FY16 in-line; offshore drilling continues to disappoint in 2H16

Transcription

1 Deutsche Bank Markets Research Rating Sell Asia China Energy Company China Oilfield Services Reuters Bloomberg Exchange Ticker 2883.HK 2883 HK HSI 2883 ADR Ticker CHOLY ISIN US FY16 in-line; offshore drilling continues to disappoint in 2H16 2H16 day rates and utilization rates worse than expected COSL reported FY16 net profit of -RMB11.5bn or EPS of -RMB2.4/share, in line with the profit warning announced in January 17. Core 16 NP of -RMB3.2bn and EPS of -RMB.67/sh was also in line, but profitability continued to deteriorate on HoH basis (2H core EPS of -RMB.64/sh vs. -RMB.3/sh in 1H). In 2H16, the day rates of JUs/Semi-subs further collapsed (21%/36% HoH), contrary to our expectations. However, the overall utilization rate inched up by 4% HoH mainly due to seasonality. Despite the record loss by COSL, it declared a final dividend of RMB.5/sh for FY16. Headwinds to persist in 17 To offset the slowdown in day rates, COSL has done an admirable job of cost cutting in 16. Raw material costs are down 1% YoY, lease expenses down 22% YoY and subcontracting down 32% YoY, but we see limited scope for cost cutting with the rising costs of raw materials (steel and diesel, etc). Key operating metrics were still weaker than expected with the day rates of JU/SS down by 28%/38% YoY and utilization rates reaching 56%/4% in FY16 (vs. 74%/62% in FY15). Based on IHS data for 2M17, day rates for JU globally have improved by 3% QoQ from a 12-year low in 4Q16, but day rates for SS have still declined by another % QoQ; meanwhile, global rig utilization rates have continued to hover near historical lows at 58% for JUs and 5% for SS. These signs show the offshore market is close to trough; however, this does not mean recovery is in sight. During COSL s strategy day in January 17, it revealed to investors that contracts with CNOOC should be all signed in 1Q17. If one assumes that 2H16 day rates were used, it is highly unlikely that COSL will be able to achieve its breakeven target in 17. Outlook: no respite in the near term, COSL s valuation expensive In the offshore rig market, we believe that consolidation is much needed for supply rationalization, and such consolidation should allow large players to high-grade their fleets rather than bringing in additional competition. We believe the industry needs to be more proactive in scrapping old rigs as the market is unlikely to tighten materially at the current retirement rate, which could leave day rates depressed for years. Transocean s recent order for five new-build Jack-ups, however, signals the likelihood of further deterioration in the already oversupplied market. According to IHS, oversupply in the offshore drilling market will worsen till end-18 with 1+ rigs set for delivery by the end of 18. Hence, we believe 17 could be another tough year for COSL profitability should improve (vs. 16) but marginally. Going into 18, the recovery will likely be muted given the massive oversupply. COSL s valuation remains expensive as it is trading at 18E PB of 1.x, while the normalized ROE for 18E is expected to be just 1.%. We value COSL based on DCF with WACC of 8.1% and terminal growth rate of 1%, which we believe is a reasonable assumption of COSL's volume growth in the coming years.. Risks: Higher-than-expected oil prices, unexpected major contract wins, and higherthan-expected capex by CNOOC. Date Forecast Change Price at 21 Mar 17 (HKD) 7.8 Price target - 12mth (HKD) week range (HKD) HANG SENG INDEX 24,52 Johnson Wan Research Analyst (+852 ) johnson.wan@db.com Key changes Vitus Leung Research Analyst (+852 ) vitus.leung@db.com Price target 5.44 to % Sales (FYE) 18,119 to 17, % Op prof margin (FYE) Net profit (FYE) Source: Deutsche Bank Price/price relative to % -1,141.6 to - 1, /15 9/15 3/16 9/16 China Oilfield Servi HANG SENG INDEX (Rebased) 4.4% Performance (%) 1m 3m 12m Absolute HANG SENG INDEX Source: Deutsche Bank DBe vs. consensus DBe Consensus % diff 17E nm 18E % 19E % Source:Bloomberg, Deutsche Bank Distributed on: 21/3/17 21:6:34 GMT Deutsche Bank does and seeks to do business with companies covered in its research reports. Thus, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. DISCLOSURES AND ANALYST CERTIFICATIONS ARE LOCATED IN APPENDIX 1. MCI (P) 57/4/16.

2 Model updated:21 March 17 Running the numbers Asia China Reuters: 2883.HK Sell Bloomberg: 2883 HK Price (21 Mar 17) HKD 7.8 Target Price HKD Week range HKD Market Cap (m) HKDm 37,218 Company Profile USDm 4,793 Limited provides drilling services, well services, marine support and transportation services, and geophysical services to the oil field industry in the offshore China market. Price Performance Mar 15Jun 15Sep 15Dec 15Mar 16Jun 16Sep 16Dec 16 Margin Trends HANG SENG INDEX (Rebased) E 18E 19E EBITDA Margin Growth & Profitability Solvency EBIT Margin E 18E 19E Sales growth (LHS) ROE (RHS) E 18E 19E Fiscal year end 31-Dec E 18E 19E Financial Summary DB EPS (CNY) Reported EPS (CNY) DPS (CNY) BVPS (CNY) Weighted average shares (m) 4,76 4,772 4,772 4,772 4,772 4,772 Average market cap (CNYm) 71,818 43,121 26,172 33,97 33,97 33,97 Enterprise value (CNYm) 91,474 65,46 52, 61,321 6,347 61,344 Valuation Metrics P/E (DB) (x) nm nm P/E (Reported) (x) nm nm P/BV (x) FCF Yield (%) nm 4.8 nm Dividend Yield (%) EV/Sales (x) EV/EBITDA (x) EV/EBIT (x) nm nm Income Statement (CNYm) Sales revenue 33,217 23,417 15,239 17,332 22,315 26,181 Gross profit 27,262 18,847 11,122 12,999 16,737 21,337 EBITDA 12,57 7, ,722 4,853 6,349 Depreciation 3,77 4,213 4,5 4,163 4,37 3,984 Amortisation EBIT 8,8 2,835-4, ,365 Net interest income(expense) Associates/affiliates Exceptionals/extraordinaries ,875 Other pre-tax income/(expense) Profit before tax 8,522 2,3-11,87-1, ,923 Income tax expense 1, Minorities Other post-tax income/(expense) Net profit 7,492 1,997-11,456-1, ,664 DB adjustments (including dilution) ,875 DB Net profit 7,872 2,189-4,581-1, ,664 Cash Flow (CNYm) Cash flow from operations 1,16 6,556 2,741 1,235 3,993 3,995 Net Capex -7,717-5,15-2,5-2,4-4,1 Free cash flow 2,443 1,451 2,741-1,265 1, Equity raised/(bought back) 4,573 Dividends paid -2,52-2, Net inc/(dec) in borrowings -3, , Other investing/financing cash flows -5,31 1, Net cash flow -4,169 1,72 3,97-5, Change in working capital -1, , ,47 Balance Sheet (CNYm) Cash and other liquid assets 5,432 12,574 6,71 1,6 1,652 1,495 Tangible fixed assets 55,338 6,388 57,457 55,848 54,158 54,227 Goodwill/intangible assets 4,57 3, Associates/investments 2, Other assets 19,5 15,786 15,965 17,85 19,983 21,434 Total assets 86,874 93,525 8,544 75,669 76,866 78,287 Interest bearing debt 27,137 35,325 32,633 29,741 29,433 3,333 Other liabilities 12,415 11,371 12,614 11,968 13,349 12,753 Total liabilities 39,552 46,696 45,248 41,79 42,781 43,86 Shareholders' equity 47,273 46,741 35,6 33,836 33,97 35,135 Minorities Total shareholders' equity 47,322 46,829 35,296 33,96 34,85 35,1 Net debt 21,75 22,751 26,562 28,736 27,781 28,838 Key Company Metrics Sales growth (%) DB EPS growth (%) na 74. na EBITDA Margin (%) EBIT Margin (%) Payout ratio (%) nm nm ROE (%) Capex/sales (%) Capex/depreciation (x) Net debt/equity (%) Net interest cover (x) nm nm Source: Company data, Deutsche Bank estimates Net debt/equity (LHS) Net interest cover (RHS) Johnson Wan johnson.wan@db.com Page 2

3 FY16 results snapshot Figure 1: FY16 results at a glance RMB mn 2H15 1H16 2H16 HoH % YoY% FY15 FY16 YoY% Comment Revenue 11,298 6,98 8,259 18% -27% 23,417 15,239-35% Dragged by a lower utlilization & day rates Operating expenses (1,715) (7,978) (11,485) 44% 7% (,582) (19,463) -5% Cosumption of supplies, materials, fuel, services (2,338) (1,685) (2,431) 44% 4% (4,569) (4,116) -1% Employee costs (1,748) (1,847) (2,43) 11% 17% (3,792) (3,89) 3% Operating leases expenses (732) (587) (619) 5% -15% (1,548) (1,6) -22% Tightened cost controls Subcontracting expenses (1,83) (918) (1,447) 58% -21% (3,475) (2,365) -32% Tightened cost controls Depreciation and amortization (2,226) (2,217) (2,33) 4% 3% (4,213) (4,5) 7% Others (1,841) (723) (2,642) -265% -44% (2,984) (3,365) 13% Incl. RMB582mn increase in impairment of accounts receivable EBIT 583 (998) (3,226) nm -653% 2,835 (4,224) -249% EBIT margin 5% -14% -39% -25% -44% 12% -28% -4% EBITDA 2,89 1,219 (923) -176% -133% 7, % EBITDA margin 25% 17% -11% -29% -36% 3% 2% -28% Interest expenses (net) (362) (428) (489) 14% 35% (595) (917) 54% Driven by new RMB1bn LT notes & higher bank loan interest % Impairments (Assets + Goodwill) (213) (7,144) -1% -1% (1,3) (7,144) 494% Impairment of goodwill (RMB3.46bn) & fixed assets (RMB3.69bn) Exchange gains/ (losses) % 136% % Investment income/ JV % -74% % Pre-tax Profit 21 (8,364) (3,443) nm nm 1,396 (11,87) nm Income tax expense (23) (35) 383 nm nm (288) 348 nm Tax credits incurred from the recognition of deferred tax assets. Effective tax rate 11% % nm nm nm 21% 3% nm Profit after tax 187 (8,4) (3,6) nm nm 1,19 (11,459) nm Less: MI (8) (4) 7 nm nm (35) 3 nm Net attributable profit (reported) 179 (8,43) (3,53) nm nm 1,74 (11,456) nm EPS (Reported, RMB/sh).4 (1.76) (.64) nm nm.23 (2.4) -1167% EPS (excl. one-off items, RMB/sh). (.3) (.64) nm -418%.6 (.67) -212% DPS (RMB/sh) % ROE (excl. one-off items) 4% -1% -17% -16% -21% 6% -8% -14% Net gearings 48% 65% 75% 1% 27% 48% 75% 27% Net debts excluded RMB694mn loan from related parties Net cashflow from operating activities 5, ,436 7% -52% 6,556 2,741-58% Segment revenue Drilling Services 5,481 3,52 2,997-14% -45% 12,4 6,499-46% Well Services 3,614 2,135 3,434 61% -5% 6,913 5,568-19% Marine Transport 1, ,89 27% -11% 2,73 1,949-28% Geopphysics & Surveying % -22% 1,518 1,7-3% All 4 segments were hit by a lower operation volume & service prices. Contribution from international operations fell by 1.3%-pt yoy to 31.9%; particularly, North Sea mix declined by 4.4%-pt yoy to 9.2% in 16. Segment EBIT Drilling Services 7 (46) (9,673) nm nm 967 (1,8) nm Well Services 16 (15) (235) nm nm 514 (385) nm Marine Transport 17 (149) (179) nm nm 314 (327) nm Geopphysics & Surveying 66 (265) (295) nm nm 7 (559) nm Segments EBIT margin Drilling Services 4% -12% -323% -311% -327% 8% -155% -163% Well Services 4% -7% -7% % -11% 7% -7% -14% Marine Transport 9% -17% -16% 1% -25% 12% -17% -28% Geopphysics & Surveying 9% -57% -49% 8% -57% % -52% -53% Source: Company data, Deutsche Bank Page 3

4 Jan-2 Jan-3 Jan-4 Jan-5 Jan-6 Jan-7 Jan-8 Jan-9 Jan-1 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-2 Jan-3 Jan-4 Jan-5 Jan-6 Jan-7 Jan-8 Jan-9 Jan-1 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Figure 2: Operational data Operating data 4Q15 3Q16 4Q16 QoQ YoY 1H15 2H15 1H16 2H16 HoH YoY FY15 FY16 YoY Drilling services Operating days 2,298 2,17 2,291 9% % 6,245 4,931 3,972 4,398 11% -11% 11,176 8,37-25% - Jack ups 1,815 1,654 1,755 6% -3% 4,893 3,99 3,336 3,49 2% -13% 8,82 6,745-23% - Semi-subs % 11% 1,352 1, % -3% 2,374 1,625-32% Utilization rate (calender days) 8% 62% 5% 54% 4% -8% 71% 52% -19% - Jack ups 62% 53% 59% 6% -3% 82% 65% 56% 56% % -1% 74% 56% -18% - Semi-subs 5% 45% 53% 8% 4% 74% 51% 32% 49% 17% -2% 62% 4% -21% Avg. daily income (k USD/day) - Jack ups % -27% % - Semi-subs % -47% % Marine Support Operating days 6,48 6,116 6,271 3% -2% 11,892 12,82 11,525 12,387 7% 3% 23,974 23,912 % Vessel Utilization (calender days) 87% 8% 81% 1% -6% 91% 84% 77% 81% 5% -4% 87% 79% -9% Geophysical and Surverying 2D Seismic Data - Data Collection (km) 4,48 2,471 nm nm 1,859 13,37 9,419 2,471-74% -81% 24,166 11,89-51% - Data Processing (km) 9,756 2,69 nm -79% 9,32 9,756 3,518 2,69-41% -79% 18,788 5,587-7% 3D Seismic Data - Data Collection (Sq. km) 1,232 7,47 1,571-79% 28% 8,258 6,323 7,825 9,41 16% 43% 14,581 16,866 16% - Data Processing (Sq. km) 6,82 3,12 6,192 16% 2% 7,565 12,61 7,329 9,4 26% -27%,166 16,533-18% Source: Company data, Deutsche Bank Global utilization and day rates Figure 3: Global utilization vs. day rates: Jack-ups Figure 4: Global utilization vs. day rates: Semi-subs USD '/d 95% 9% 85% 8% 75% 7% 65% 6% 55% 5% USD '/d 1% 9% 8% 7% 6% 5% 4% WW JUs avg. day rates (k $/d) WW JUs Utilizations (%) - RHS WW Semi avg. day rates (k $/d) WW Semi Utilizations (%) - RHS Source: IHS Petrodata, Deutsche Bank Source: IHS Petrodata, Deutsche Bank Page 4

5 Mar-7 Aug-7 Jan-8 Jun-8 Nov-8 Apr-9 Sep-9 Feb-1 Jul-1 Dec-1 May-11 Oct-11 Mar-12 Aug-12 Jan-13 Jun-13 Nov-13 Apr-14 Sep-14 Feb-15 Jul-15 Dec-15 May-16 Oct-16 Mar-17 Mar-7 Aug-7 Jan-8 Jun-8 Nov-8 Apr-9 Sep-9 Feb-1 Jul-1 Dec-1 May-11 Oct-11 Mar-12 Aug-12 Jan-13 Jun-13 Nov-13 Apr-14 Sep-14 Feb-15 Jul-15 Dec-15 May-16 Oct-16 Mar-17 Valuation Figure 5: COSL valuation Weighted Average Cost of Capital Cost of Equity Cost of Debt Gross Debt/Total Capital 47% Risk-free Rate of Return (b) 3.9% Pre-tax Cost of Debt (a) 3.1% Market Equity/Total Capital 53.3% Equity Risk Premium (c) 5.6% Tax Rate 16.% WACC (f) 8.1% Company Beta (d) 1.61 After-tax Cost of Debt 2.6% Terminal growth 1.% Cost of Equity (e) 12.9% DCF Unit EBIT RMBmn (441) 816 2,365 3,313 5,192 6,916 7,862 9,519 1,4 11,757 Tax RMBmn (62) (38) (457) (758) (1,35) (1,188) (1,456) (1,65) (1,823) Tax-Effected EBIT RMBmn (441) 754 2,57 2,856 4,435 5,881 6,674 8,63 8,815 9,934 + Depreciation RMBmn 4,163 4,37 3,984 4,3 4,125 4,247 4,396 4,57 4,766 4,983 - Capital Expenditure RMBmn (2,5) (2,4) (4,1) (5,1) (5,6) (6,1) (6,6) (7,1) (7,6) (8,1) - Working capital RMBmn (2,487) (797) (2,47) (619) (644) (957) (682) (738) (95) (1,113) Free Cash Flow RMBmn (1,265) 1,593 (15) 1,167 2,315 3,72 3,788 4,794 5,76 5,73 Number of Share mn 4,772 Price target valuation NPV for CashFlow RMBmn 14,333 PV of Terminal value RMBmn 36,992 Net (debt) / cash RMBmn (28,712) Minority interest RMBmn (125) Equity value RMBmn 22,488 Outstanding shares mn 4,772 Price target HKD 5.9 (a) Based on Deutsche Bank estimates (b) Based on Deutsche Bank estim (c) Based on Deutsche Bank estimates (d) Bloomberg (5 years adjusted beta against Shenzhen A-share I(e) As per CAPM, the cost of equity equals: Risk-free Rate + (beta*equity risk premium). (f) Weighted average cost of capital equals: (cost of debt*debt/total capital) + (cost of equity*equity/total capital). Source: Deutsche Bank estimates Figure 6: Forward PB Fwd PB ROE % 4. % % SD,2.2x Average,1.5x 1% 5% 1.5 % SD,.9x -5%. -1% Figure 7: Forward EV/EBITDA Fwd EV/EBITDA SD,33.3x Average,13.6x Forward PB Average Average +1SD Average -1SD ROE Forward EV/EBITDA Average Average +1SD Average -1SD Source: Bloomberg Finance LP, Company data, Deutsche Bank Source: Bloomberg Finance LP, Company data, Deutsche Bank Page 5

6 Summary of changes Figure 8: Key assumptions For year ended Dec 31 14A 15A 16A 17E 18E 19E Revenue (RMB mn) 33,217 23,417 15,239 17,332 22,315 26,181 Drilling services 17,389 12,4 6,499 7,884 1,996 12,87 Well services 9,533 6,913 5,568 6,181 7,586 9,13 Marine support and transportation services 3,469 2,73 1,949 2,46 2,291 2,566 Geophysical services 2,62 1,518 1,7 1,61 1,273 1,464 Others Operating Profit 8,8 2,835 (4,224) (441) 816 2,365 Drilling services 6, (1,8) (79) 33 1,3 Well services 1, (385) (39) Marine support and transportation services (327) 69 5 Geophysical services (559) (53) 38 2 Operating profit margin 26% 12% -28% -3% 4% 9% Drilling services 38% 8% -155% -1% 3% 8% Well services 17% 7% -7% -5% 5% 1% Marine support and transportation services 9% 12% -17% % 3% 8% Geophysical services 9% % -52% -5% 3% 15% EBITDA 12,57 7, ,722 4,853 6,349 EBITDA margin 38% 3% 2% 21% 22% 24% Net Profit 7,492 1,74 (11,456) (1,192) 336 1,664 EPS (Reported, RMB/sh) (2.4) (.25).7.35 EPS (excl. one-off items, RMB/sh) (.67) (.25).7.35 DPS (RMB/sh) Major drivers Jack-ups Calender Utilization 9% 74% 56% 7% 78% 85% Day rates (k USD/day) yoy% in day rates 9% -26% -28% % 8% 8% Semi-subs Calender Utilization 96% 62% 4% 6% 72% 74% Day rates (k USD/day) yoy% in day rates % -8% -38% % 1% 1% Source: Company data, Deutsche Bank estimates Figure 9: Summary of changes New Old % chg For year ended Dec 31 16A 17E 18E 19E 17E 18E 19E 17E 18E 19E Revenue 15,239 17,332 22,315 26,181 18,119 23,51 na -4% -5% na Cost of sales (8,637) (8,496) (9,615) (8,828) (8,64) (9,835) na -1% -2% na Gross Profit 6,62 8,836 12,7 17,353 9,516 13,666 na -7% -7% na Other Operating Expenses (1,826) (9,277) (11,884) (14,988) (1,13) (13,222) na -8% -1% na EBITDA 296 3,722 4,853 6,349 3,487 4,44 na 7% 1% na Depreciation and Amortization (4,5) (4,163) (4,37) (3,984) (4,74) (3,96) na 2% 2% na EBIT (4,224) (441) 816 2,365 (587) 444 na -25% 84% na Net interest (917) (932) (745) (762) (798) (623) na 17% 19% na Pre-tax profit (11,87) (1,157) 389 1,923 (1,56) 27 na 1% 44% na Income tax 348 (62) (38) (53) (54) na -1% 15% na Minority interests (3.3) 34.7 (9.8) (48.5) 33.3 (6.5) na 4% 51% na Net Profit (11,456) (1,192) 336 1,664 (1,142) 223 na NM 51% na EPS (reported) (2.4) (.25).7.35 (.24).5 na NM 51% na EPS (DBe) (.67) (.25).7.35 (.24).5 na NM 51% na Source: Company data, Deutsche Bank estimates Page 6

7 Appendix 1 Important Disclosures *Other information available upon request Disclosure checklist Company Ticker Recent price* Disclosure 2883.HK 7.8 (HKD) 21 Mar Prices are current as of the end of the previous trading session unless otherwise indicated and are sourced from local exchanges via Reuters, Bloomberg and other vendors. Other information is sourced from Deutsche Bank, subject companies, and other sources. For disclosures pertaining to recommendations or estimates made on securities other than the primary subject of this research, please see the most recently published company report or visit our global disclosure look-up page on our website at Aside from within this report, important conflict disclosures can also be found at under the "Disclosures Lookup" and "Legal" tabs. Investors are strongly encouraged to review this information before investing. Important Disclosures Required by Non-U.S. Regulators Please also refer to disclosures in the Important Disclosures Required by US Regulators and the Explanatory Notes. 13. As of the end of the preceding week, Deutsche Bank and/or its affiliate(s) owns one percent or more of a class of common equity securities of this company. For disclosures pertaining to recommendations or estimates made on securities other than the primary subject of this research, please see the most recently published company report or visit our global disclosure look-up page on our website at Analyst Certification The views expressed in this report accurately reflect the personal views of the undersigned lead analyst(s) about the subject issuer and the securities of the issuer. In addition, the undersigned lead analyst(s) has not and will not receive any compensation for providing a specific recommendation or view in this report. Johnson Wan Page 7

8 Security Price Historical recommendations and target price: (2883.HK) (as of 3/21/17) Mar 15 Jun 15 Sep 15 Dec 15 Mar 16 Date Jun 16 Sep 16 Dec Previous Recommendations Strong Buy Buy Market Perform Underperform Not Rated Suspended Rating Current Recommendations Buy Hold Sell Not Rated Suspended Rating *New Recommendation Structure as of September 9,2 **Analyst is no longer at Deutsche Bank 1. 31/3/15: Hold, Target Price Change HKD /1/16: Sell, Target Price Change HKD3.65 Johnson Wan 2. 28/4/15: Hold, Target Price Change HKD /4/16: Sell, Target Price Change HKD5.35 Johnson Wan 3. 3/5/15: Hold, Target Price Change HKD /6/16: Upgrade to Hold, Target Price Change HKD5.55 Johnson Wan 4. 12/7/15: Hold, Target Price Change HKD /8/16: Hold, Target Price Change HKD5.25 Johnson Wan 5. 23/9/15: Hold, Target Price Change HKD /1/16: Downgrade to Sell, Target Price Change HKD5.5 Johnson Wan 6. 23/1/15: No Recommendation, Target Price Change HKD. Michael Tong, CFA 7. 4/12/15: Upgrade to Sell, Target Price Change HKD5.67 Johnson Wan 13. 1/2/17: Sell, Target Price Change HKD5.44 Johnson Wan Equity rating key Buy: Based on a current 12- month view of total share-holder return (TSR = percentage change in share price from current price to projected target price plus pro-jected dividend yield ), we recommend that investors buy the stock. Sell: Based on a current 12-month view of total shareholder return, we recommend that investors sell the stock Hold: We take a neutral view on the stock 12-months out and, based on this time horizon, do not recommend either a Buy or Sell. Newly issued research recommendations and target prices supersede previously published research. Equity rating dispersion and banking relationships % 17 % 36 % 1 % 16 % % Buy Hold Sell Companies Covered Cos. w/ Banking Relationship Asia-Pacific Universe Page 8

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