We expect Hang Seng Index to move within the range of 29,000 and 31,000 in near term. Hang Seng Index Performance

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1 11 May 2018 Hang Seng Index Performance Source: Bloomberg Major Market Indicators % Cha nge Hong Kong Close 1- Da y 1- Mth 6 - Mth 12 - Mth Hang Seng Index 30, % - 0.3% 5.8% 22.6% HSCEI (H- Shares) 12, % - 0.7% 4.2% 19.3% Mkt T/O ($ Mn) 93, % % % - 0.5% Ove rse a DJIA 24, % 2.3% 5.6% 18.3% NASDAQ 7, % 4.8% 9.7% 21.1% Shanghai SE Composite 3, % - 1.0% - 7.5% 3.7% Shenzhen Component 10, % - 0.7% - 7.9% 9.8% Commoditie s a nd FX Crude Oil Futures (US$) % 7.0% 26.0% 49.5% Gold Futures (US$) 1, % - 2.8% 3.7% 7.9% Baltic Dry Index 1, % 49.6% 0.1% 44.8% USD / Euro % - 3.7% 2.2% 9.7% Yen / USD % - 2.4% 3.7% 3.9% CNH / USD % - 1.1% 5.1% 9.0% Market Overview Hang Seng Index closed up 0.9% at 30,809. HSCEI added 0.4%. Heavily weighted Tencent (700), AIA Group (1299) and HSBC (5) soared 2.9%, 2.0% and 1.4% respectively. Energy and technology stocks outperformed the market. China Shenhua Energy (1088) jumped 3.5%, making it the best performing stock in HSI. Three largest oil companies surged 1.7%-2.8%. Sunny Optical (2382) and AAC Technologies (2018) advanced 0.9%-1.7%. Power stocks ended higher. Huaneng Power Intl (902) soared 2.3%. Gaming stocks like Sands China (1928) and Galaxy Entertainment (27) were in line with the market, up 0.8%-1.0%. Railway stocks ended higher but underperformed the market. CRRC (1766) and China Railway Group (390) added 0.6%-0.8%. Property, banking, insurance, consumption and railway related stocks lacked clear direction. Guangzhou R&F (2777) surged 1.9% while Sunac China (1918) dropped 2.3%. Wharf REIC (1997) elevated 1.6% while Swire (19) slid 0.5%. CMB (3968) increased 1.5% while Bank of Communications (3328) lost 1.0%. PICC (1339) rose 0.8% while New China Life (1336) tumbled 1.7%. Guangzhou Automobile (2238) lifted 1.5% while Geely Automobile (175) lost 0.7%. Pharmaceutical, securities, telecom, airline and cement stocks ended lower. Sinopharm Group (1099) and CSPC Pharmaceutical (1093) dropped 0.7%-1.2%. CITIC Securities (6030) and HTSC (6886) shrank 0.7%-1.0%. Three largest telecom operators, Air China (753) and Anhui Conch (914) declined 0.1%-0.7%. We expect Hang Seng Index to move within the range of 29,000 and 31,000 in near term. We expect Hang Seng Index to move within the range of 29,000 and 31,000 in near term.

2 Market in Focus CCCC MKT Cap ($Bn) 48.5 Bloomberg Ticker 3311 HK Equity 52-week High/Low ($) Rating Buy Free Float (%) 35.1% Target Price $ M Avg Turnover ($, Mn) 76.2 New contract growth for 4M18 remains satisfactory Maintain BUY China State Construction (3311) Since our BUY commentary dated Apr 24, China State Construction International (3311, CSCI, $9.60) has dropped 2.9% compared with a 1.8% gain for Hang Seng Index over the same period. However, we see no fundamental change of the company while new contract growth remains satisfactory. CSCI is a leading construction contractor in Hong Kong and actively participates in China s infrastructure investment. New contract value surged 19.5% in 2016 and 23.1% in 2017 to $83.8bn and $103.1bn respectively. Management s target for new contracts to be awarded in 2018 is no less than $115.0bn representing an increase of at least 11.5% yoy. Value of new contracts rose 20.4% yoy to $42.09bn in the first four months of Taking into account its good track record, we believe full year new contracts value is likely to exceed management s target. As at 30 Apr 2018, unfinished contract value grew 23.3% yoy to $213.6bn or equivalent to 4.2x revenue for 2017 that will guarantee top line growth in coming two to three years. Fig1: 1 Year Share Price Source: Bloomberg, Mason Securities For the year ended 31 Dec 2017, the company s revenue including share of revenue of joint ventures increased by 11.7% to $54.8bn. Gross margin improved from 12.9% to 15.2%. Net profit grew only 7.0% to $5.49bn whilst EPS cut 0.6% to $1.19 due to dilution from the rights issue in Oct Excluding gains on fair value changes of investment properties, impairment loss on concession operating rights and loss on disposal of a subsidiary, core profit surged 22.1% to $5.07bn. In 1Q18, revenue including share of revenue of joint ventures grew 10.0% yoy to $12.0bn while corresponding operating profit increased 16.2% yoy to $1,685mn. According to Bloomberg estimates, CSCI s earnings are expected to reach $6.47bn in 2018 and $7.74n in 2019, up 18% and 20% yoy respectively. EPS growth will be diluted to 12% in 2018 and 19% in Traded at 2018 P/E of 7.2x with EPS growth of 12%, CSCI looks cheap compared with its historical valuation at 5-year average forward P/E of 11.2x. We therefore maintain our BUY rating on CSCI with an unchanged 6-month price target of $12.0 based on 2018 P/E of 9.0x.

3 Technical Ideas Stock Code Rating / Last Closing Price Our TP / Bloomberg TP Cut Loss IMAX China 1970 HK Equity BUY $29.00 $31.90 $27.40 $27.55 MKT Cap ($Bn) / Free Float Turnover / 30D Avg ($Mn) Turnover vs 5D & 30D Avg Forward PER / PBR Net Debt (Cash) / Equity % % 246% 26.3X 4.58X -48% Technical Indicator SMA RSI (14) 53.5 SMA BB (Upper) SMA BB (Lower) Stock Code Rating / Last Closing Price Our TP / Bloomberg TP Cut Loss SMIC 981 HK Equity BUY $10.78 $11.86 $9.39 $10.24 MKT Cap ($Bn) / Free Float Turnover / 30D Avg ($Mn) Turnover vs 5D & 30D Avg Forward PER / PBR Net Debt (Cash) / Equity % 1, % 245% 72.3X 1.33X 12% Technical Indicator SMA RSI (14) 48.3 SMA BB (Upper) SMA BB (Lower) 9.58 Source: Bloomberg, Mason Securities

4 Recent Recommendations Date of Issue Stock Pick Recommendation Highlights Rating (TP) Promising earnings outlook for gaming and cloud businesses - Initiated Buy on Kingsoft (3888) 25/4/2018 Kingsoft (3888) 26/4/2018 Skyworth Digital (751) 27/4/2018 CCCC (1800) 30/4/2018 China Maple Leaf (1317) 3/5/2018 HKEx (388) 4/5/2018 CR Gas (1193) 7/5/2018 Galaxy Entertainment (27) 8/5/2018 Angang Steel (347) 9/5/2018 A-Living Services (3319) 10/5/2018 COSL (2883) We are bullish on company s revenue outlook for 2018 due to the launch of new mobile games, fast growing demand for cloud service and sustainable improvement of the office software business Traded at 2018 P/E of 18.9x and 19% discount to its fair value, Kingsoft is undervalued in our view Skyworth Digital (751): Recovery on track, initiate BUY TV panel price has already peaked out since June 2017 and remained softening, translating into better margins for Skyworth in 2H FY2018 High base effect on sales volume started to fade out this year, Skyworth s year-to-march sales volume returned to positive growth Cheap valuation and less vulnerable to trade war Maintain BUY CCCC (1800) Strong growth in new contracts value and continued diversification into overseas markets will ensure CCCC to achieve earnings growth in coming years Traded at 2018 PER of 5.6x compared to 5-year average, valuation is undervalued Strong growth in interim earnings and student enrolment - Maintain BUY China Maple Leaf (1317) For the six months ended 28 February 2018, revenue grew 30.7% yoy to RMB632mn fueled by a 35.2% yoy increase in the average number of student enrolment Remain optimistic about the private education industry in China as demand for high quality education service will grow along with the increase of household income and wealth Anticipation of strong quarterly earnings and recovery of the IPO acitivities Maintain BUY HKEx (388) New listing rules is expected to stimulate IPO activities for the rest of the year We believe the listing rules reform will fundamentally change the earnings prospects of HKEx in the long term China Resources Gas (1193): Long-term Story Remain Intact, reiterate BUY on undemanding valuation The government has targeted to raise gas usage to 10% by 2020 and 15% by 2030 We maintain our bullish view on China gas operator Maintain BUY Galaxy Entertainment (27) on strong quarterly results We believe the opening of the Hong Kong-Zhuhai-Macau Bridge in the second half of 2018 will further boost Macau s tourism and gaming industry Traded at 17.5x 2018 EV/EBITDA, valuation of GEG is still attractive in our view Maintain BUY Angang Steel (347): Steel products gross margin enters an upcycle in coming months Chinese government is likely to maintain its tight control on the supply side to achieve the unshakable environmental protection goal which in turn will help Chinese steel mills to keep utilization rate and profitability at relatively high levels Steel products gross margin has already started to enter an upcycle due to ASP bottoming out (downstream demand recovery) and lower iron ore and coking coal cost Strong parent support and high earnings growth visibility Maintain BUY A-Living Services (3319) Together with net proceeds of RMB3.2bn from the IPO, ALS is expected to have net cash of approximately RMB4.0bn at present that will allow it to expand aggressively this year through M&A. Traded at forward P/E of 17.1x in 2018 and 11.2x in 2019 with a 2-year EPS CAGR of 51%, valuation of ALS is undervalued in our view. Capture the upcycle of CNOOC s capex: BUY China Oilfield Services (2883) Higher margins over the next three quarters given the increase of CNOOC's capex in E&P A good proxy to capture the upcycle of CNOOC s capex in coming years BUY ($30.0) BUY ($4.40) BUY ($10.4) BUY ($12.3) BUY ($291.0) BUY ($33.6) BUY ($78.0) BUY ($9.8) BUY ($15.0) BUY ($9.90)

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