We believe Hang Seng Index may test 27,000 this month in the worst scenario. Hang Seng Index Performance

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1 9 July 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 28, % - 8.5% - 8.7% 11.7% HSCEI (H- Shares) 10, % % % 3.6% Mkt T/O ($ Mn) 98, % 1.2% % 26.2% Ove rse a DJIA 24, % - 3.4% - 3.7% 14.2% NASDAQ 7, % 0.6% 7.3% 25.0% Shanghai SE Composite 2, % % % % Shenzhen Component 8, % % % % Commoditie s a nd FX Crude Oil Futures (US$) % 12.4% 17.3% 67.0% Gold Futures (US$) 1, % - 3.5% - 4.3% 3.9% Baltic Dry Index 1, % 16.6% 16.3% 97.3% USD / Euro % - 0.3% - 1.4% 3.1% Yen / USD % - 0.4% 1.9% 3.3% CNH / USD % - 3.9% - 1.9% 2.2% Market Overview Hang Seng Index closed up 0.5% at 28,316. HSCEI rose 0.1%. Heavily weighted Tencent (700) and HSBC (5) surged 0.1%-0.3%. AIA Group (1299) added 1.0%. Sunny Optical (2382) climbed 3.0%, making it the best performing stock in HSI. Consumption, gaming, China IPP, pharmaceutical and cement stocks outperformed the market. Mengniu Dairy(2319) and Want Want China (151) climbed 2.1% and 1.0% respectively. Galaxy Entertainment (27) and Sands China (1928) added 1.0%-2.8%. CR Power (836) and Huaneng Power Int (902) rose 1.0%-1.1%. CSPC Pharm (1093) added 2.3%. Conch cement (914) increased 1.9%. Railway, insurance and securities stocks underperformed the market. China Railway (390) and CCCC (1800) slid 0.9%-2.7%, CCCC was the worst performing stock in HSCEI. Seven insurance and five securities stocks in HSCEI dropped an average 0.1% and 0.4% among which China Life Insurance (2628) and People s Insurance (1339) dropped 0.4%-0.6% respectively and Huatai Securities (6886) fell 2.0%. HK property, tech and HK utilities stocks performance were in line with the market. We believe Hang Seng Index may test 27,000 this month in the worst scenario. Chinese property, Chinese bank, telecom, automobile, energy stocks lacked clear direction. China Resources Land (1109), Longfor (960) and Logan (3380) added 1.0% while Country Garden (2007), China Evergrande (3333) and Wanke (2202) slid 0.4%-0.7%. CITIC Bank (998) rose 0.6% while ABC (1288), BOCOM (3328) and PSBC (1658) dropped 0.3%-0.4%. China Mobile (941 climbed 0.7% while China Telecom (728) dropped 0.8%. Geely (175) increased 1.7% while Guangzhou Auto (2238) slid 2.0%. Sinopec (384) added 1.0% while PetroChina (857) lost 0.5%. We believe Hang Seng Index may test 27,000 this month in the worst scenario.

2 Market in Focus Name China Maple Leaf Educational MKT Cap ($Bn) 19.3 Bloomberg Ticker 1317 HK Equity 52-week High/Low ($) Rating BUY Free Float (%) 49.1% Target Price $7.10 3M Avg Turnover ($, Mn) Share subdivision will improve liquidity of shares Upgrade China Maple Leaf (1317) to BUY Since our downgrade on June 8, the share price of China Maple Leaf Educational Systems (1317, MLES, $6.49) has declined 7.7% compared with a 10.1% drop for Hang Seng Index over the same period. We believe the outperformance is driven by its good earnings track record and continued expansion through acquisition. The proposed 1-into-2 share subdivision has been approved by shareholders at the EGM and effective today which is expected to improve liquidity of the shares and widen the company s shareholder base. MLES is one of the leading international school operators in China and targets mainly Chinese students from middle class families in China who intend to study at overseas universities. 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 to 27,205 and a 4.8% drop in the average tuition fee per student to RMB19,700. Interim net profit surged 30.9% yoy to RMB236.5mn. Financial position was sound with a net cash of RMB1.60bn as at 28 February Fig1: 1 Year Share Price Source: Bloomberg, Mason Securities As of 31 March 2018, total enrolments at Maple Leaf schools numbered 29,991 students representing an increase of 32.2% yoy. On 25 January 2018, MLES announced the acquisition of three boarding schools providing elementary and secondary school services, a kindergarten and a youth service center in Haikou City in Hainan Province for a total consideration of RMB150mn. Taking into account of more than 3,000 students at these schools, the total student enrolment would have exceeded 33,000 students by the end of the current financial year representing an increase of 26.5% yoy. According to Bloomberg estimates, MLES s earnings are expected to grow 29% in FY18 and 26% in FY19 to RMB529mn and RMB665mn respectively, translating into PER of 29.7x in FY18 and 23.8x in FY19. We are optimistic about the private education industry in China and believe current valuation of MLES is attractive to long term investors. We therefore upgrade MLES to BUY with a 6-month price target of $7.10 based on FY19 PER of 26.0x.

3 Technical Ideas Name Stock Code Rating / Last Closing Price Our TP / Bloomberg TP Cut Loss Luye Pharma 2186 HK Equity BUY $8.07 $8.88 $9.72 $7.67 MKT Cap ($Bn) / Free Float Turnover / 30D Avg ($Mn) Turnover vs 5D & 30D Avg Forward PER / PBR Net Debt (Cash) / Equity % % 74% 19.2X 2.72X -14% Technical Indicator SMA RSI (14) 39.6 SMA BB (Upper) 8.92 SMA BB (Lower) 7.56 Name Stock Code Rating / Last Closing Price Our TP / Bloomberg TP Cut Loss Guotai Junan Int 1788 HK Equity BUY $1.77 $1.95 $3.35 $1.68 MKT Cap ($Bn) / Free Float Turnover / 30D Avg ($Mn) Turnover vs 5D & 30D Avg Forward PER / PBR Net Debt (Cash) / Equity % % 228% 8.2X 1.16X 311% Technical Indicator SMA RSI (14) 29.9 SMA BB (Upper) 2.20 SMA BB (Lower) 1.52 Source: Bloomberg, Mason Securities

4 Recent Recommendations Date of Issue Stock Pick Recommendation Highlights Rating (TP) 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) 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 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) 5/7/2018 Colour Life Services (1778) 6/7/2018 Suntian Green Energy (1778) 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 Valuation remains cheap compared to peers Maintain BUY Colour Life Services (1778) Organic growth in existing business and maiden contribution from WXM will ensure strong earnings growth for 2018 Maintain our bullish view on property management service industry and believe current valuation of CLS is attractive for long term investors given strong earnings growth for 2018 fueled by M&A Recent share price weakness offers a buying opportunity Maintain Buy on Suntian Green Energy (956) Market concerns over the negative impact on wind power operators during interest rate upcycle Valuation has already priced in the earnings risks given its solid earnings growth in 2018 and 2019 and undemanding valuation BUY ($35.0) BUY ($33.9) BUY ($72.0) BUY ($9.00) BUY ($2.50)

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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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