Further upside for Hang Seng Index is limited given relatively high P/E valuation and weakness in A share markets. Market Outlook.

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1 28 th Apr, 2017 Hang Seng Index Performance Index Performance Abs chg % Change Hong Kong Close 1-Day 1-Day 1-Mth 3-Mth Hang Seng Index 24, HSCI 3, HSCCI (Red Chips) 3, HSCEI (H-Shares) 10, Mkt T/O ($ Mn) 76, , Oversea DJIA 20, NASDAQ 6, Shanghai SE Composite 3, Crude Oil Futures (US$) Gold Futures (US$) 1, Baltic Dry Index 1, USD / Euro Yen / USD Source: Bloomberg Market Outlook Eric Yuen - ericyuen@masonhk.com Hang Seng Index closed up 0.5% at 24,698. Market turnover decreased to $76.3 billion. Heavily weighted AIA Group (1299) surged 6.2% on strong operating data for the first quarter. HSBC (5) and Tencent (700) climbed 1.2% and 0.5% respectively. China Mobile (941) was almost flat. Consumption stocks such as China Mengniu Dairy (2319), Want Want China (151) and Hengan Int l (1044) soared 0.8%-1.3%. Local banking and property stocks lacked clear direction. BOC Hong Kong (2388) and SHK Properties (16) added 0.3%. Hang Seng Bank (11) and Link REIT (823) slid 0.7%-0.9%. Gaming, oil and Chinese property stocks ended lower. Eight largest Chinese property developers cut an average 2.6% among which China Evergrande (3333) and Country Garden (2007) lost 4.2%-5.5%. PetroChina (857), Sinopec (386), CNOOC (883) and Kunlun Energy (135) plunged 0.3%-1.4%. Gaming operator Sands China (1928) and Galaxy Entertainment (27) were the worst performers in Hang Seng Index, down 2.6%-3.5% on profit taking. HSCEI declined 0.6% led by cement, pharmaceutical and banking shares. Anhui Conch (914) and Sinopharm (1099) tumbled 3.8% and 2.0% respectively. Chinese banks in HSCEI cut an average 1.1% among which China Merchants Bank (3968) shrank 2.6%. Automobile, railway and securities stocks also ended lower. CCCC (1800), China Railway Construction (1186) and Great Wall Motor (2333) decreased 1.3%-2.2%. Insurance and power counters were mixed. Ping An Insurance (2318) increased 1.0% whilst New China Life (1336) fell 0.8%. China Longyuan (916) retreated 1.0%. Huaneng Power (902) grew 1.9%, the most in HSCEI. Further upside for Hang Seng Index is limited given relatively high P/E valuation and weakness in A share markets. HSCEI HSI 20-Day MA 10, , Day MA 10, , Day RSI Further upside for Hang Seng Index is limited given relatively high P/E valuation and weakness in A share markets.

2 Industry / Corporate News Eric Yuen - ericyuen@masonhk.com Wisdom Education (6068) released stronger than expected interim results Maintain Maintain Risk Level: High Time Horizon: N/A Interim revenue and earnings were higher than expected Robust growth in interim revenue from ancillary services is a big surprise Valuation remains cheap at FY17 PER of 16.6x with a 3-year earnings CAGR of 26% Since our latest commentary dated April 11, the share price of Wisdom Education (6068, $2.37) has increased by 17.9% versus a gain of 1.8% for Hang Seng Index. The outperformance was mainly driven by the release of stronger-than-expected interim results on Wednesday. For the six months ended 28 February 2017, revenue and net profit reached RMB498.1mn and RMB107.3mn, up 41% and 25% yoy respectively. Core earnings grew 30% yoy to RMB120.7mn. Net cash amounted to RMB445mn. Company declared an interim dividend of RMB0.024 per share implying a payout ratio of 35%. Revenue from tuition and boarding fees expanded by 22% yoy to RMB335.7mn (67% of total) thanks to a 15% increase in total student enrolment and 6% rise in average tuition and boarding fees per student. Revenue from ancillary services surprisingly increased by 104% yoy to RMB162.3mn (33% of total) due to the provision of additional services to the students. The company was the largest private education group in South China and operated six premium private schools (3 in Dongguan, 1 in Huizhou, 1 in Panjin, Lianoing province and 1 in Weifang, Shandong province) with a total student enrolment of 31,788 students as at 1st September All these schools focus on providing PRC curriculum programmes for primary and secondary school students. Looking ahead, the company will continue to grow through the expansion of existing schools, acquisition of schools and development of new schools. Guang an school in Sichuan and Yunfu school in Guandong, with a target capacity of 7,860 and 7,000 students, are expected to commence operation in September 2017 and 2018 respectively. The company has a long operating history with a successful track record in replicating its profitable business model. The number of student enrolment increased at a 3-year CAGR of 18.0% from FY13 to FY16 and is expected to grow at a 3-year CAGR of 21.1% from FY16 to FY19 base on our forecast. According to the Frost & Sullivan, the total revenue of China s private fundamental education expenditure is expected to increase at a CAGR of 12.1% from 2015 to 2020 driven by the fast-growing middle class and rising demand for quality education service. Leveraging on its established reputation and school network, the company is likely to deliver solid earnings growth in next few years. Taking into consideration a stronger than expected revenue and earnings during the interim period, we now forecast revenue to grow 42% in FY17, 13% in FY18 and 27% in FY19 to RMB996mn, RMB1,127mn and RMB1,430mn respectively. Core earnings (excluding listing expenses) are estimated at RMB237mn in FY17, RMB293mn in FY18 and RMB359mn in FY19 representing a yoy increase of 32%, 24% and 23% respectively and 3-year CAGR of 26%. Traded at FY17 PER of 16.6x, valuation of Wisdom Education remains undervalued in our view. We therefore maintain our rating and raise 6-month price target from $2.40 to $2.60 based on FY17 PER of 18x.

3 Recent Recommendations Stock Pick Rating Recommendation Highlights Target Price Sunny Optical (2382) Geely Auto (175) Pou Sheng (3813) Xinyi Glass (868) Longfor Properties (960) Reiterate on strong 1Q17 shipment growth 1Q17 shipment for HLS, HCM and VLS showed a robust increase of 79%, 94% and 42% yoy Increased penetration rate of dual camera features bode well for company's ASP and gross margin A valuation premium is justified in view of an EPS CAGR of 44% from Company reported in-line sales volume for March Maintain Achieved in-line sales volume for March and 27.9% of the company's annual sales target for 2017 Young product line-up alongside with a strong model cycle in 2017 and 2018 Valuation looks attractive after the recent retreat in share price Posted higher-than-expected revenue growth of 14.6% in 1Q17 - Maintain Net operating revenue grew 14.6% yoy in 1Q17, faster than the growth rate for 2016 Attractive valuation at 2017 PER of 10.2x with EPS growth of 37% Favorable government policies on sports industry Reiterate as glass product price remains resilient year-to-date Float glass price up 1% year-to-date despite wide-spreading property purchasing controls in China Management increasing stake could be viewed as a vote of confidence on business outlook Strongest contracted sales growth in 1Q17 Recommend Gross margin improved to 29.1% in 2016, the second highest among peers Contracted sales grew 62% yoy in 2016 and 218% yoy in 1Q17, the highest among peers $66.2 $13.62 $1.95 $1.95 $15.3 Tongda Group (698) SMIC (981) Techtronic Industries (669) Lai Sun Development (488) Galaxy Entertainment (27) Accumulate ahead of the upcoming release of its 1Q17 business update Upcoming release of 1Q17 sales figures could be a near-term catalyst for the stock Gross margin improvement in 2017 amid higher sales ratio from metal casings and waterproof products Expect re-rating to continue amid multiple new products ahead such as 2.5/3D glass casings, metal mid-frame and automotive interior decorative products Valuation turns attraction again after a deep correction Upgrade to Valuation is no longer expensive compared to peers after a deep correction of 26% from the peak Management guidance for 2Q17 could be a positive surprise due to low market expectations Long term growth prospects remain promising on the back of capacity expansion Accumulate stock ahead of Home Depot s upcoming 1Q17 results Home Depot's upcoming 1Q17 results could be a positive catalyst for TTI Demand to be driven by solid US housing market and recovery of US infrastructure spending Continuous shift of product mix to industrial power tool market bodes well for gross margin Underlying earnings over $1.0bn in FY18 - Maintain Attributable pre-tax property development profit of $1.0bn in FY18 A beneficiary from recovery of tourism industry Reiterate amid strong growth of VIP revenue in Macau during 1Q17 Macau's VIP revenue saw a 17% yoy growth in 1Q17, outpacing 9% growth for mass segment Improved junket liquidity and return of high-end patrons will support the robust VIP momentum $15.3 $11.0 $37.2 $0.29 $50.9

4 Technical Ideas Samsonite (1910, $30.60) TP: $33.66 Risk: Medium Time Horizon: Short Samsonite designs, manufactures, and distributes luggage. The company's products include suitcases, garment bags, casual bags, business cases, clothing, shoes, and accessories. Samsonite also licenses their trademarks for use on products such as travel accessories, leather goods, handbags, clothing, and furniture. Counter rose 4.1% yesterday, surpassing its resistance at $29.77 and reached its new 52-week high, indicating the counter s strong uptrend momentum ahead.. Short-term target at $ Cut loss at $ Source: Bloomberg, Mason Securities Consensus 2017 PER: 20.8x Consensus target price: $30.47 Li Ning (2331, $5.08) TP: $5.59 Risk: Medium Time Horizon: Short Li Ning researches, designs, manufactures, distributes, and retails sports footwear, apparel and accessories for sport and leisure use. Counter surged 5.0% yesterday with exceptional turnover, surpassing its critical resistance at $4.96, SMA50 and SMA100, indicating the counter s further upside potential ahead,. Short-term target at $5.59. Cut loss at $4.73. Consensus 2017 PER: 20.2x Consensus target price: $5.63 Source: Bloomberg, Mason Securities

5 Disclosures Investment Rating System Mason Securities Limited s investment rating system is divided into investment ratings, risk rating and investment time horizon. The rating scale is subject to change upon periodic review of market by research department. Assigned ratings are based on company and sector historical performance and analysts intrinsic valuation of the stock Investment Ratings Risk Ratings Investment Time Horizon Ratings Description Buy Expected positive return of > 10 % Hold Expected return range of ~ ±10 % Sell Expected negative return > 10% High (H) 90-day volatility of > 50% Medium (M) 90-day volatility of > 30-50% Low (L) 90-day volatility of < 30% Long (L) 6 12 Months Medium (M) 3 6 Months Short (S) Less than 1 Month Note: 90-day volatility is measured from the security s standard deviation of day to day logarithmic historical price changes. The 90-day price volatility equals the annualized standard deviation of the relative price change for the 90 most recent trading days closing price, expressed as a percentage This report is for information only and is not to be construed as investment advice or as an offer to buy or sell securities or financial instruments. Your investment decision should be based upon your personal investment objectives and should be made only after evaluating the stock s expected performance and risk. While the report is compiled using sources believed to be reliable, no assurance or guarantee is given regarding its accuracy or completeness. Neither Mason Securities Limited nor any of its affiliates, nor any employees or other persons connected with any of them, accepts any responsibility or liability arising from any use of this report. To the extent permitted under applicable law, the above-mentioned companies or individuals may have used the research materials before publication. Mason Securities Limited (or any of its affiliates) and their respective officers, directors, analysts, or employees may or may not have a position in or with respect to the securities or financial instruments covered herein, and may, as principal or agent, buy and sell such securities or financial instruments. However, it is hereby declared that the writer, at the time of writing, does not have any interest in any of the securities or financial instruments covered in this report. An employee, analyst, officer, or a director of Mason Securities Limited (or any of its affiliates), may serve as a director for companies covered in this report. Mason Securities Limited (or any of its affiliates) may from time to time perform investment banking or other services or solicit investment banking or other business for any companies covered in this report. Mason Securities Limited (CE Number: AAC086) is licensed by the Securities and Futures Commission to carry on Types 1, 4, 6 and 9 regulated activities in Hong Kong. Mason Futures Limited (CE Number: AAG007) is licensed by the Securities and Futures Commission to carry on Type 2 regulated activity in Hong Kong.