We expect to see a technical rebound in Hang Seng Index in near term. Hang Seng Index Performance

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1 4 July 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 28, % -7.9% -7.1% 12.4% HSCEI (H-Shares) 10, % -11.2% -10.9% 5.5% Mkt T/O ($ Mn) 133, % 10.2% 1.7% 77.1% Oversea DJIA 24, % -2.6% -3.6% 12.5% NASDAQ 7, % -1.4% 6.0% 22.8% Shanghai SE Composite 2, % -9.8% -17.7% -12.4% Shenzhen Component 9, % -9.6% -18.7% -12.0% Commodities and FX Crude Oil Futures (US$) % 15.2% 20.2% 58.4% Gold Futures (US$) 1, % -3.1% -4.9% 3.1% Baltic Dry Index 1, % 19.2% 6.0% 63.3% USD / Euro % -0.2% -3.4% 2.7% Yen / USD % -0.7% 2.1% 2.5% CNH / USD % -3.9% -2.7% 2.1% Market Overview Hang Seng Index closed down 1.4% at 28,545. HSCEI declined 1.8%. Market turnover increased to $133.0 billion. Heavily weighted Tencent (700), HSBC (5) and AIA Group (1299) tumbled 0.8%, 1.7% and 1.8% respectively. Power stocks ended higher. China Resources Power (836) and Huaneng Power (902) advanced 3.8%-4.8%. HK property and HK banking stocks showed mixed performance. Swire Pacific (19) surged 3.7%. Hang Lung Properties (101) and Sino Land (83) slid 1.1%-1.4%. Bank of East Asia (23) climbed 0.8% while BOC Hong Kong (2388) retreated 0.8%. Oil and Chinese banking shares moved in line with the market. Three largest oil companies cut 1.5%-1.6%. Nine Chinese banks in HSCEI fell an average 1.3% among which ABC (1288) slumped 2.5%. Gaming, consumption, telecom, automobile, pharmaceutical, airline, cement, insurance and securities stocks underperformed the market. Sands China (1928) and Galaxy Entertainment (27) lost 6.2%-6.5% due to lower-than-expected Macau s gaming revenue in June. Want Want China (151), Hengan (1044) and Shenzhou (2313) plunged 2.4%-3.2%. China Mobile (941) and China Unicom (762) decreased 2.0%-2.1% as U.S. may restrict China Mobile s access to the U.S. market. Sinopharm (1099) and CSPC Pharmaceutical (1093) fell 1.9%-2.3%. Guangzhou Automobile (2238) and Great Wall Motor (2333) cut 6.6% and 2.3% respectively. Insurance and securities stocks in HSCEI dropped an average 2.2% and 1.7% respectively among which New China Life (1336), CPIC (2601) and Zhongan Online (6060) shrank 2.6%-3.0%. CITIC Securities (6030) and Huatai Securities (6886) declined 2.4%-2.7%. Air China (753) and Anhui Conch (914) decreased 4.0%-4.7%. We expect to see a technical rebound in Hang Seng Index in near term. We expect to see a technical rebound in Hang Seng Index in near term

2 Market in Focus Tianli Education International (1773): Good industry prospects with strong cornerstone investors; Subscribe for short term trading purpose Tianli Education International (1773, Tianli Education) is a leading private education service provider in Western China which primarily offer K-12 educational services, tutoring services for K-12 students and pre-kindergarten children. In terms of student enrolment in 2017, Tianli Education is the second largest private K-12 school operator in Western China according to the Frost & Sullivan Report, with approximately 20,924 students enrolled in the K-12 schools in its school network as of the end of the 2017 fall semester. Currently, the school network consisted of 13 K-12 schools in operation, which administered four high school programs, six middle school programs, eight elementary school programs and six kindergarten programs, 11 tutorial centers and four early childhood education centers across eight cites in China. In 2015, 2016 and 2017, approximately 88.2%, 95.2% and 95.6%, respectively, of the graduating high school students of Tianli s schools who participated in the Gaokao in the cities were admitted to universities in China, and approximately 51.4%, 62.9% and 71.6%, respectively, were admitted to first tier universities in China. As of the end of the 2015/2016 and 2016/2017 school years and the 2017 fall semester, Tianli Education had in aggregate approximately 12,764, 16,710 and 20,924 students enrolled in the K-12 schools in the school network, among whom approximately 11,214, 15,138 and 19,380 students were enrolled in self-owned K-12 schools. Tianli Education opened two new K-12 schools in 2015, 2016 and 2017, and they are actively exploring opportunities in other secondand third-tier cities for the future expansion. As of the latest practicable date, Tianli Education had entered into agreements to open six K-12 schools in 2018 and five K-12 schools in Due to the deep understanding of the K-12 education market in secondand third-tier cities in Sichuan Province, support for private K-12 education from the local governments, excellent position as a market leader and the potential of target markets, we believe the abovementioned factors are highly favourable for Tianli s continued successful expansion in and outside of Sichuan Province. Revenue grew at a 2-year CAGR of 46.5% from RMB218.0mn in 2015 to RMB468.0mn in Net profit grew at a 2-year CAGR of 181.4% from RMB16.6mn in 2015 to RMB131.2mn in 2017, mainly due to higher tutorial fee and high operating leverage. The IPO of Tianli (1773) involves the issue of 500mn new shares (equivalent to 25.0% of the enlarged issued share capital) at $ per share to raise gross proceeds of $1,130-1,330mn. Approximately 60% of net proceeds will be used for expansion of school network within Sichuan Province and into other attractive markets in China and 30% for repaying the bank loans. Three cornerstone investors including Greenwoods Asset Management, City Legend International and Value Partners will subscribe 204.2mn shares or approximately 40.8% of total number of offer shares. The IPO price implies valuation of Tianli Education (1749) current P/B of x or 2017 P/E of x. We think the valuation is still fair and recommend investors to subscribe for short term trading purpose.

3 Technical Ideas Name Stock Code Rating / Last Closing Price Our TP / Bloomberg TP Cut Loss China Water Affairs 855 HK Equity BUY $8.86 $9.75 $10.85 $8.42 MKT Cap ($Bn) / Free Float Turnover / 30D Avg ($Mn) Turnover vs 5D & 30D Avg Forward PER / PBR Net Debt (Cash) / Equity % % 585% 11.7X 1.89X 71% Technical Indicator SMA RSI (14) 58.9 SMA BB (Upper) 8.23 SMA BB (Lower) 7.65 Name Stock Code Rating / Last Closing Price Our TP / Bloomberg TP Cut Loss Vitasoy International 345 HK Equity BUY $26.05 $28.66 $26.39 $24.75 MKT Cap ($Bn) / Free Float Turnover / 30D Avg ($Mn) Turnover vs 5D & 30D Avg Forward PER / PBR Net Debt (Cash) / Equity % % 244% 39.9X 8.84X -30% Technical Indicator SMA RSI (14) 58.3 SMA BB (Upper) SMA BB (Lower) Source: Bloomberg, Mason Securities

4 Recent Recommendations Date of Issue Stock Pick Recommendation Highlights Rating (TP) 15/6/2018 Skyworth Digital (751) 19/6/2018 Luk Fook (590) 20/6/2018 Mengniu Dairy (2319) 21/6/2018 Shimao Property (813) 22/6/2018 CEG (1257) 25/6/2018 A-Living Services (3319) 26/6/2018 Kingsoft (3888) Lower ASP assumption, Downgrade Skyworth Digital (751) to HOLD The high base effect on sales volume started to fade out this year, Skyworth s year-to-april sales volume in China returned to positive growth, growing 2.5% vs -21.4% in Although we expect Skyworth s profitability will normalize in FY19, the valuation is not attractive at current level given fierce competition and limited upsides on products ASP FY18 earnings are likely to beat market expectation - Maintain BUY Luk Fook (590) Recent underperformance was mainly triggered by lower-than-expected earnings for Chow Tai Fook (1929). However, Luk Fook has good track record in cost control compared with its peers Overall SSSG increased from 1% yoy in 3QFY18 to 16% yoy in 4QFY18.We believe Luk Fook will continue to achieve strong SSSG for 1QFY19 Mengniu Dairy (2319) - Recent share price weakness offers a buying opportunity, Upgrade to BUY In short-term, we believe Mengniu s fundamental still remains strong and expect it to deliver solid revenue and net profit growth in upcoming interim results Reallocation of capital flow to consumer staples sector which did not suffer from trade war between China and U.S. may provide support to share price in the near term Maintain BUY on Shimao Property (813) due to strong contracted sales in the first five months of 2018 Second-tier players such as Shimao Property (813) is expected to achieve outstanding contracted sales this year Acceleration in contracted sales and relatively low valuation will be key share price drivers China Everbright Greentech (1257): Bullish on the industry growth, Maintain BUY China biomass power operating capacity is expected to reach 13,442MW in 2020, growing at a CAGR of 19% from We expect CEG to outperform the market growth given its strong pipeline and potential project wins supported by China Everbright International (257) which holds 69.7% of CEG s stake A-Living Services (3319) is no longer undervalued after a strong run Downgrade to HOLD Outperformance driven by (i) a promising industry outlook, (ii) continuous market share expansion through M&A and (iii) high earnings growth visibility The pace of M&A will be key earnings risk for the second half of the year Three potential catalysts to drive up share price, maintain BUY on Kingsoft (3888) 1) new games are scheduled to launch in June and Sep. 2) Spinning off the WPS business in A- share market this year and 3) upcoming IPO of Xiaomi in July HOLD ($4.00) BUY ($40.0) BUY ($30.2) BUY ($27.0) BUY ($9.60) HOLD($16.30) BUY ($30.8) 28/6/2018 Luk Fook (590) 29/6/2018 CR Gas (1193) 3/7/2018 Galaxy Entertainment (27) FY18 earnings beat market expectation - Maintain BUY Luk Fook (590) Luk Fook is likely to achieve strong SSSG for the first quarter of FY19. We believe Luk Fook will continue to focus its expansion in Mainland China especially the sub second-tier cities Based on our earnings forecast of $1,471mn in FY19, Luk Fook is currently trading at a forward PER of 12.0x with an EPS growth of 7.4% which is still undervalued in our view CR Gas (1193): Long-term growth story remains intact, reiterate BUY on undemanding valuation According to NDRC, natural gas consumption growth in China remained strong in May, growing 17.8% yoy vs 19.2% yoy in April and 17.4% yoy in1q18 Reallocation of capital flow to defensive players which did not suffer from trade war between China and U.S. We continue to take a positive view on the gas operator Macau s gaming revenue growth has stabilised in June - Maintain BUY Galaxy Entertainment (27) Macau s gaming revenue growth has stabilised at 12.5% yoy in June that should help restore market confidence Opening of the HK-Zhuhai-Macau Bridge in 2H18 will boost Macau s tourism and gaming industry BUY ($35.0) BUY ($33.9) BUY ($72.0)

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HOLD Based on a current 12-month view of total shareholder return, we expect the return to range between +10% to -10%. SELL Based on a current 12-month view of total shareholder return we expect a negative return of over 10%. Research Team Contact Research Team, Mason Securities Limited, Portion 1, 12/F, The Center, 99 Queen s Road Central, Hong Kong Tel: (+852) research@masonhk.com

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