Regional Morning Pack
Refer to important disclosures at the end of each report
REGIONAL MORNING PACK 12 Sep 2018
Top idea of the day Upcoming Events
Malaysia Telecom MAPLETREE Corporate Day Date: 20 Sep Facing regulatory snags Location: Thailand Bangkok
TOH Woo Kim
• Mobile stable with some signs of stabilisation seen in prepaid segment • Fixed-line broadband is undergoing repricing in line with government's agenda for cheaper broadband • 6% SST on prepaid reloads is resolved; 700MHz spectrum auction will be next • We are Neutral on the sector; Axiata is our only BUY Read more...
Summary
The Big Pictures DBS Economics & Strategy: China chart book - CNY has stabilised, for now
Industry Focus Regional Steel: Prices set to fall as China eases winter production cuts
Stocks
Singapore OUE Commercial REIT: Proposed acquisition of OUE Downtown
Thailand The Erawan Group: Look beyond the low tide
Korea Pearl Abyss: Long-term growth story returns POSCO: A closer look at POSCO’s KRW45tr investment plan
Regional Morning Pack
The Big Picture
DBS Economics & Strategy China chart book - CNY has stabilised, for now Nathan CHOW • To keep the economy afloat, monetary policy has started tilting toward loosening. • The effect is best evident by the PBOC’s liquidity provision (i.e. RRR cuts, MLF) and trends in interbank interest rates. • The easing backdrop has resulted yuan weakness. Onshore exchange rate depreciated more than 9% since April. • In a bid to stabilise the CNY exchange rate, PBOC reintroduced the countercyclical factor and the reserve requirement on FX forward transaction. Capital flow through the free trade accounting unit was also tightened. Read more...
Industry Focus
Regional Steel Prices set to fall as China eases winter production cuts LEE Eun Young / Yi Seul SHIN • China to allow northern provinces to decide for themselves the degree of winter output cuts • Steel, raw material prices fall; stock market reacts negatively • However, policy intention and measures are yet to be confirmed • Outlook and fundamentals of steel sector to moderate Read more...
Regional Morning Pack
Stocks to watch
Singapore OUE Commercial REIT (OUECT SP): HOLD Market Cap: US$747m | Average Daily Value: US$0.09m Last Traded Price: S$0.665; Price Target: S$0.67 (Upside 0.6%) Mervin SONG / Derek TAN Proposed acquisition of OUE Downtown • To acquire the office component of OUE Downtown for S$908m or NPI yield of 5.0% (including income support) • Valuation of S$1,713 psf is at a discount to recent office transactions in Singapore after adjusting for land tenure • Near term DPU dilution from rights issue but transaction to boost medium organic growth profile thereafter • Maintain HOLD, TP of S$0.67 Read more...
Thailand The Erawan Group (ERW TB): BUY Market Cap: US$592m | Average Daily Value: US$2.61m Last Traded Price: Bt7.75; Price Target: Bt10.50 (Upside 35.5%)
Namida ARTISPONG
Look beyond the low tide • Expect another quarter of y-o-y earnings contraction in 3Q18F • Hotel RevPar declined slightly y-o-y during July and August • Healthy earnings growth to resume from 4Q18F onwards Read more…
Regional Morning Pack
Korea Pearl Abyss (263750 KS): BUY Market Cap: US$ 2,781m Last Traded Price: KRW242,800; Price Target: KRW340,000 (prev. KRW300,000)
Regional Research Team
Long-term growth story returns • Acquisition of Icelandic game studio CCP Games to revitalise new game momentum and dissipate risk of reliance on a single IP for Pearl Abyss • More attractive valuations likely once CCP’s earnings are included in Pearl Abyss’s statements • Retain BUY, TP raised to KRW340,000 Read more...
POSCO (005490 KS): BUY Market Cap: US$22,650m | Average Daily Value: US$63.80m Last Traded Price: KRW292,000; Price Target: KRW480,000 (Upside 64.4%)
LEE Eun Young
A closer look at POSCO’s KRW45tr investment plan • POSCO announced a KRW45tr investment plan for 2019-2023, sending its shares lower on concerns • Actual investment would likely be lower and within its means • With steel remaining as a core business, battery materials could be an additional growth driver for POSCO, going forward • Maintain BUY and TP of KRW480,000 Read more...
Regional Morning Pack
Market Data Key Indices
Earnings Gth (%) PE (x) Closed % chg 18F 19F 18F 19F as of Vs YTD QTD MTD Singapore 13.2 6.0 13.6 12.8 Indices 11 Sep 18 Previous (%) (%) (%) HK HSI 12.4 11.3 10.8 9.7 Asia HK HSCCI (Red) 36.8 14.3 10.1 8.8 KLCI 1,799 0.0 0.1 6.4 (1.1) BSE Sensex 37,413 (1.3) 9.9 5.6 (3.2) HK HSCEI (H) 5.7 11.2 7.7 6.9 SET 1,672 (1.1) (4.6) 4.8 (2.9) CSI300 19.9 15.4 11.0 9.5 PCOMP 7,518 (1.0) (12.2 4.5 (4.3) SH Comp 27.1 13.6 10.7 9.4 Nikkei 225 22,665 1.3 (0.4)) 1.6 (0.9) SZ Comp 47.9 21.8 16.0 13.1 JCI Index 5,831 (0.3) (8.3) 0.5 (3.1) Thailand 10.0 8.0 15.7 14.5 Taiex 10,752 0.2 1.0 (0.8) (2.8) Indonesia* 10.2 12.7 14.9 13.2 KOSPI 2,283 (0.2) (7.5) (1.8) (1.7) HSCCI Index 4,177 (0.9) (5.6) (4.6) (3.2) * FY17A / FY18F STI 3,110 (0.4) (8.6) (4.9) (3.2) Source: DBS Bank, DBS Vickers, Bloomberg Finance L.P. Shanghai A 2,665 (0.2) (19.4 (6.4) (2.2) HSCEI Index 10,333 (1.0) (11.8) (6.7) (5.0) MXFEJ index 592 (0.5) (11.9) (6.8) (5.1) Hang Seng 26,423 (0.7) (11.7) (8.7) (5.3) ) U.S./Others Dow Jones 25,971 0.4 5.1 7.0 0.0 S&P 2,888 0.4 8.0 6.2 (0.5) NASDAQ 7,972 0.6 15.5 6.2 (1.7) FTSE 100 7,274 (0.1) (5.4) (4.8) (2.1) DAX Index 11,970 (0.1) (7.3) (2.7) (3.2)
Commodity Indicators Commodities Latest Previous YTD % chng Closing Closing -4.4% Nickel Spot 12.6% Coal Spot Nickel Spot USD/mt 12,143 12,324 -4.9% Tin Coal Spot USD/mt 117 114 -0.9% Steel (weekly) Tin USD/mt 19,045 19,005 Copper Steel (weekly) RMB/mt 580 - -8.1% Gold Spot Copper USD/lb 5,859 5,910 -14.3% Soybean Oil Spot -15.5% Gold Spot USD/t. oz 1,198 1,199 Soybean Spot Sugar #11 Soybean Oil Spot USD/pound 28 28 -7.2% Rice Soybean Spot USD/bushel 8 8 15.0% Wheat Spot Sugar #11 USD/lb 11 11 TSL Crude Palm Oil Rice USD/cwt 11 11 -7.3% Palm Oil Spot (FOB Msia) Wheat Spot USD/bushel 5 5 18.4% Crude Oil Brent Spot TSL Crude Palm Oil USD/mt 564 573 -2.2% Corn Spot -6.4% TSR20 Rubber Forward Palm Oil Spot (FOB Msia) RM/mt 2,217 2,223 -18% -8% 2% 12% 22% Crude Oil Brent Spot USD/barrel 79 77 Corn Spot USD/bushel 3 3 YTD % chng TSR20 Rubber Forward EUR/kg 117 116 20% US IG CDS Credit Spreads US Junk Bond 323 327 -8% US Junk Bond
US IG CDS 13 14 -10% -5% 0% 5% 10% 15% 20% 25%
Source: Bloomberg Finance L.P., DBS Bank
Regional High Conviction Picks
Refer to important disclosures at the end of this report DBS Group Research . Equity 12 Sep 2018
High Conviction Stock Picks
12-mth Price Target % Chg 3mths Total since Date of Avg 11 Sep 18 Price Return % Chg Entry Entry Mcap Daily T/O Company Exch Sector (LCY) (LCY) (%) -1w Date to List US$m US$m
Big Caps (>US$2bn) Genting Spore GENS SP SG Consumer Services 1.020 1.55 53 (8.1) 17 3-Jan-17 8,920 27.9 SATS Ltd SATS SP SG Industrials 4.960 5.65 17 (2.2) -3 13-Jul-18 4,022 6.1 Singapore Airlines SIA SP SG Consumer Services 9.610 12.40 31 (2.1) 1 24-Aug-18 8,258 13.1 ST Engineering STE SP SG Industrials 3.290 4.10 29 (0.9) -2 22-Jun-18 7,451 8.8 AIA Group Ltd 1299 HK HK Financials 62.000 87.00 40 (8.8) -8 15-Jan-18 95,387 167.1 Anhui Conch Cement 914 HK HK Industrials 41.750 57.26 38 (13.4) 27 27-Oct-17 28,186 80.3 China Resources Cement 1313 HK HK Industrials 8.440 9.67 15 (8.6) 118 23-Jun-17 7,508 48.1 China Resources Land Ltd 1109 HK HK Real Estate 24.950 34.50 40 (8.4) -9 5-Mar-18 22,030 44.5 China Traditional Chinese Medicine Holdings 570 HK HK Health Care 5.060 8.00 58 (9.2) -20 20-Apr-18 3,246 13.3 Tencent Holdings 700 HK HK Technology 308.000 428.00 39 (9.0) 58 6-Jan-17 373,653 1,118.7 Yangtze Optical Fibre and Cable 6869 HK HK Technology 25.000 48.70 95 (10.4) -31 29-Mar-18 2,414 10.0 Axiata Group AXIATA MY Telecommunications 4.530 5.05 15 (5.6) 4 17-Aug-18 9,910 5.5 Genting Bhd GENTMK MK MY Consumer Services 8.200 12.15 49 (4.9) -8 1-Jun-18 7,612 8.0 Hong Leong Bank HLBK MK MY Financials 20.460 23.50 17 (0.5) 10 12-Mar-18 10,095 4.5 Public Bank PBK MK MY Financials 25.000 28.20 15 (0.5) 0 28-May-18 23,409 32.9 Airports of Thailand AOT TB TH Consumer Services 62.000 75.00 22 (5.3) -13 11-Apr-18 26,978 52.9 CP ALL CPALL TB TH Consumer Services 65.250 89.00 37 (2.6) -25 11-Apr-18 17,853 72.1 Indorama Ventures IVL TB TH Basic Material 56.500 82.00 46 (3.0) 1 11-Apr-18 9,662 36.2 Minor International MINT TB TH Consumer Services 38.000 46.00 22 (1.9) 8 8-Jun-18 5,346 15.6 Hana Financial Group 086790 KS KR Financials 42,200 67,000 63 (1.7) -7 21-May-18 11,259 31.3 Kumho Petrochemical 011780 KS KR Basic Material 101,500 145,000 44 5.3 -9 21-May-18 2,748 13.7 LS Industrial Systems 010120 KS KR Industrials 77,900 90,000 17 5.7 0 21-May-18 2,077 7.2 Samsung Electronics 005930 KS KR Technology 45,050 65,000 47 (5.5) -12 16-Mar-18 256,985 426.2
Source: Bloomberg Finance L.P, DBS Bank, DBS Vickers
Company Big Caps (>US$2bn) Reasons for Picks / Potential Catalysts
Genting Singapore • VIP volumes still soft but win rate was better than expected • With bad debts under control, GENS guiding that is now focused on selectively growing its VIP business
SATS • Changi’s air and passenger traffic growth of +5% y-o-y YTD, and cargo growth of 4% y-oy YTD will see continued support for earnings growth in FY19F • Positive drivers stem from 1) passenger and air traffic growth at Changi Terminal 4; 2) automation and staff productivity driving modest cost increase and better margins in the next few years; 3) the development of a flight kitchen in Turkey; and 4) the opening of Terminal 5 • Stock offers dividend yield of 3.5%
Singapore Airlines • Decline was a surprise as passenger carriage and loa factors were strong during the quarter • Sequential earnings should improve as airlines globally try to push through higher fares and surcharges to offset rising fuel costs, and yields improve
ST Engineering • STE should be back on growth trajectory in FY18; orderbook remains at near peak level at S$13.4bn • Aerospace segment rebounding, with margins improving this year on stronger engine MRO demand • Potential near-term catalysts from award of some large contracts in the US that STE is vying for • Improved long-term visibility from STE’s target to more than double smart city revenues by 2022 and grow other segment revenues at 2-3x the global GDP growth rate
AIA Group • Potential to accelerate dividend payout hike from strong free surplus generation • Strong ROEV improvement supporting its premium valuation • Foreign ownership relaxation in China can be a game changer
Anhui Conch Cement • Upbeat 4Q17 and 1Q18 cement profitability • East and Central China cement markets are still in restocking cycle
Regional High Conviction Pick
Company Big Caps (>US$2bn) Reasons for Picks / Potential Catalysts
China Resources • Expected hikes in cement and clinker prices in September as strong seasonality kicks off in South China. Cement • Stronger 2H for Guangxi as the construction phase of infrastructure is expected to pick up after the rainy season is over in 2Q17.
China Resources Land • Valuable IP portfolio with high appreciation potential makes current stock valuation attractive. • Potential to speed up land banking and presales growth with high profitability after passing high initial investment period for IP. • The company has Rmb152.4bn of unbooked sales as at mid-2017, which is expected to be recognised in 2H17 and 2018 onwards.
China Traditional • Estimated EPS CAGR of 17% during FY18F-20F with potential to accelerate from co-operation with Ping An, who acquired a 12% stake in Chinese Medicine CTCM in Mar. It is the largest shareholder in Tsumura (4540 JP, Ping An’s stake: 10%), the largest CCMG producer in Japan with >80% market Holdings share. • CTCM will increase the number of TCM decoction centers from 6 to 30 this year. This will boost sales in FY19F.
Tencent • Large sticky user base and traffic are not only making it the largest mobile game developer in China, but also allowing it to embrace the potential for significantly higher ad monetisation. • WeChat starts to pilot keyword-based ads to monetise Mini Programs. • We expect Tencent’s online advertising revenue to deliver a CAGR of 52.0% during FY16-19F, with its market share going up from 9.3% in FY16 to 15.0% in FY19F. • Already an oligopoly with Alipay (支付寶), we expect Tenpay’s (財付通) revenue to grow by 135.8% in FY17F
Yangtze Optical Fibre • Leading Chinese optical fibre cable (cable) manufacturer with a global market share of c.10%. and Cable Joint Stock • We believe YOFC will benefit from the anti-dumping ruling by China against imported preform and rising demand for telecom network build- outs. • We expect CM’s cable demand. to be 200m fkm in 2018, which is c50% higher than the tender size in 2017.
Axiata Group • A strong turnaround in Celcom and XL’s performance will be the key catalysts for the stock to re-rate. • Potential disposal of stakes in associates (Idea-Vodafone) could also help to pare down Axiata’s gearing level and proceeds can be re-deployed for other purposes. • The IPO of its tower arm, edotco, should also boost the sentiment for the stock and provide price discovery for the business unit..
Genting Bhd • Genting Bhd (GENT) is expected to re-rate going forward, supported by the progressive launches of key developments in Genting Integrated Tourism Plan (GITP) (where the indoor and outdoor theme parks are slated to open by 3Q2018 and end-2018, respectively) and expected earnings recovery at Genting Singapore (GENS). • As the parent company of GENS and Genting Malaysia (GENM), we believe that GENT offers a cheaper exposure to both these subsidiaries. Its valuation is more attractive compared to GENS and GENM. • We keep our BUY recommendation for GENT with a target price of RM11.95, based on SOP valuation.
Hong Leong Bank • HLB is conservative yet solid bank, carrying financial metric next to best after Public Bank. Apart from being able to maintain NIM trends amid challenging loan growth, HLB’s asset quality and capital indicators are robust. • HLB’s additional strength vs peers lies in its low loan-to-deposit ratio (albeit a naive indicator), but it implies that should the bank decide to loosen its grip on this liquidity stance, there would be further ample upside to NIM, earnings and ROE. • It’s associate company, Bank of Chengdu (BOCD) has finally listed its shares on the Shanghai Stock Exchange. Post-IPO, HLB’s stake in BOCD was marginally diluted. We continue to expect positive prospects on BOCD’s contribution to HLB’s pre-tax profit. Separately, HLB and BOCD will be divesting it’s stake in a joint-venture company (Sichuan Jincheng Consumer Finance Ltd Co). The sale is expected to be completed by Jun-2018. Proceeds from this divestment would be recognised as a one-off gain in FYJun18.
Public Bank • Solid as a rock. We believe PBK will continue to deliver stellar earnings in 2018 with a possible NIM surprise. Loan growth may lag until auto loans pick up in 2H18. • Stellar asset quality and efficiency. PBK’s ability to maintain solid asset quality indicators (even post-MFRS9), and its best-in-class cost-to- income ratio coupled with efficient capital management should keep valuations ahead of peers. • Maintain BUY, outperformance to sustain. Our RM26.90 TP is based on the Gordon Growth Model (15% ROE, 9% cost of equity, 4% long term growth) equivalent to 2.5x FY18 BV.
Airports of Thailand • AOT is a direct play for Thailand’s tourism industry. • Passenger traffic growth is expected to accelerate. International tourist arrivals in 2M18 have been strong, growing by 15%. • More positive catalysts are awaiting such as upcoming new biddings of duty-free concessions, the emergence of managing additional airports, and earnings upside potential from airport city projects.
CP ALL • CPALL will benefit from the recovery of domestic consumption and rising purchasing power as it sells mainly consumer products. • This would further support SSSG in both CVS and cash-and-carry businesses. • CPALL still targets to open at least 700 7-Eleven stores p.a. • Despite its plans to add new stores, the spotlight remains on lifting margins by increasing the mix of high-margin products (health and beauty) and controlling expenses. • FY18F profit is projected to rise 18.1% y-o-y to Bt23bn.
Indorama Ventures • Strong earnings growth of 30% in 2018F to be driven by sales volume growth from its acquisition and higher contribution from HVA products • Increase in EBITDA/ton in 2018 and beyond, thanks to the wider spread of PET given the global PET industry rebalancing, antidumping investigation of PET imports in the US and Canada and import ban on waste plastic in China effective from Jan 2018 • Several acquisitions of HVA products in 2016 to date, which has enhanced its market positioning in specialty chemical markets would be the key factor in stabilising IVL's core EBITDA/ton in the longer term given its steady margins • Maintain BUY with TP of Bt71, pegged to 17.5x FY18F PE
Minor International • Concern of a capital call risk from additional investment in NH Hotel has now been eased. Current share price provides an opportunity to buy. • We believe the acquisition of NH Hotel would be a net accretion for MINT as income from NH Hotel Group should exceed the interest expense as cost of borrowing is very low. • Earnings growth momentum to gain traction from 2Q18F onwards, led by robust hotel operations, time-share business, and the sales of residential units. The sluggish earnings growth in 1Q18 should be temporary due to the high base of residential unit sales last year.
Regional High Conviction Picks
Company Big Caps (>US$2bn) Reasons for Picks / Potential Catalysts
Hana Financial Group • Until the 2Q18 earnings release, what dictates banking stock prices will be whether the rate hike will drive the top line. • Hana Financial Group has a high share of loans linked to financial bonds, thus delivering the sharpest rise in net interest margin (NIM) among banks. Negative impacts from SG&A expenses and one-off credit losses are also limited • The bank is also attractively valued, trading at P/BV of 0.53x (ROE 9.0%)
Kumho Petrochemical • Regular maintenances for phenol facilities are scheduled for 2Q18 in China, Taiwan, Saudi Arabia, etc. • Supply-demand conditions for phenol derivatives are likely to be solid
LS Industrial Systems • Order momentum for renewable energy (offshore PV farms, etc.) should become clearer towards 2H18 • Expectations for North-South Korean economic cooperation remain valid until the US-North Korea summit on 12 June. Also, the 8th plan for long-term power transmission/transformation facilities is projected to be announced by mid-June
Samsung Electronics • Upbeat industry conditions are expected for 2H18, with supply-demand dynamics for semiconductors remaining tight. Considering the company's stable earnings, we expect further shareholder-friendly policies
Regional High Conviction Pick
Price % Chg 3mths 12-mth Total since Date of Avg 11 Sep 18 Target Price Return % Chg Entry Entry Mcap Daily T/O Company Exch Sector (LCY) (LCY) (%) -1w Date to List US$m US$m
Small & Mid Caps ( Source: Bloomberg Finance L.P, DBS Bank, DBS Vickers Company Small & Mid Caps ( Television Broadcasts Ltd • Content co-production with Tencent and iQiyi helps improve programme quality and saves production costs • Relaxation of regulations on TV product placement poses new business opportunities and revenue stream to the company • Hong Kong advertising spending increased by c.4% y-o-y in 8M17, recovering from 12% decline in 2016 Hibiscus Petroleum • Enhancement works on Anasuria Cluster in North Sea to increase daily production • Earnings accretion from North Sabah EOR PSC to double earnings from FY19 (FYE Jun) • Best Malaysian proxy to rising oil prices as the only pure oil & gas exploration and production company Aeon Thana Sinsap (Thailand) • AEONTS is one of the largest non-bank players in Thailand and commands the largest share of the personal loan market. More than half of its revenues are derived from personal loans, followed by credit cards. Improving consumer confidence, on the back of the promising economic growth outlook, should translate into stronger retail spending, which is in turn the key driver for retail loan demand and AEONTS’s operating performance • After a few years of ROE contraction, AEONTS has returned to ROE expansion mode in FY2017, supported by personal loan expansion and improving asset quality. We expect its ROE to expand further in FY2018, assuming strong loan growth, albeit lower yield, and lower cost-to-income ratio. In 2019, with the one-time adjustment on equity at the first adoption of IFRS9, ROE is likely to expand further, but this has yet to be reflected in our forecasts • AEONTS is trading at undemanding valuations of 12.4x FY18F PE and 2.3x FY18F P/BV, with a dividend yield of 2.2%. We rate AEONTS a BUY with a TP of Bt202, based on the Gordon Growth Model, implying 2.9x FY18F P/BV, 15.8x FY18F PE, and 1.0x PEG (2- year CAGR (FY2016-18) of 15.4%) Aapico Hitech • AH is a leading auto parts manufacturer and distributor in Thailand with a presence in China. The group also operates car dealership businesses in Thailand and Malaysia as well as sells car navigation systems in Thailand • We expect AH to register a healthy sales growth of 7% y-o-y in 2018, outpacing Thailand’s automotive industry due to the launch of improvement and full model change models of its main customers, including Isuzu and Nissan. For example, the full model change of Nissan Almera and improvement model of Isuzu D-max and MU-X • There should be an improvement in its profitability, given its cost control programme and yields from economies of scale. We conservatively forecast an FY18F GPM of 6.4% (vs FY17 GPM of 6.3%) • An investment in Sakthi Global Auto Holdings Limited (SGAH) should lead to not only US$10m additional interest tied to SGAH and long-term expanding customer base in India, Portugal, the US and China • We rate stock a BUY rating with a TP of Bt41.8, based on 10.5x FY18F PE Foosung • Expect to more than double its materials production capacity, in line with its customer's capacity addition schedule. The company will secure mid- to long-term earnings momentum, on the back of capacity expansion for secondary-cell materials and semiconductor materials in 2018F. Regional Morning Pack DBS Bank Ltd recommendations are based an Absolute Total Return* Rating system, defined as follows: STRONG BUY (>20% total return over the next 3 months, with identifiable share price catalysts within this time frame) BUY (>15% total return over the next 12 months for small caps, >10% for large caps) HOLD (-10% to +15% total return over the next 12 months for small caps, -10% to +10% for large caps) FULLY VALUED (negative total return i.e. > -10% over the next 12 months) SELL (negative total return of > -20% over the next 3 months, with identifiable catalysts within this time frame) Share price appreciation + dividends Completed Date: 12 Sep 2018 08:28:54 (SGT) Dissemination Date: 12 Sep 2018 08:45:21 (SGT) Sources for all charts and tables are DBS Bank unless otherwise specified GENERAL DISCLOSURE/DISCLAIMER This report is prepared by DBS Bank. This report is solely intended for the clients of DBS Bank Ltd, its respective connected and associated corporations and affiliates only and no part of this document may be (i) copied, photocopied or duplicated in any form or by any means or (ii) redistributed without the prior written consent of DBS Bank. The research set out in this report is based on information obtained from sources believed to be reliable, but we (which collectively refers to DBS Bank Ltd, its respective connected and associated corporations, affiliates and their respective directors, officers, employees and agents (collectively, the “DBS Group”) have not conducted due diligence on any of the companies, verified any information or sources or taken into account any other factors which we may consider to be relevant or appropriate in preparing the research. Accordingly, we do not make any representation or warranty as to the accuracy, completeness or correctness of the research set out in this report. Opinions expressed are subject to change without notice. This research is prepared for general circulation. Any recommendation contained in this document does not have regard to the specific investment objectives, financial situation and the particular needs of any specific addressee. This document is for the information of addressees only and is not to be taken in substitution for the exercise of judgement by addressees, who should obtain separate independent legal or financial advice. The DBS Group accepts no liability whatsoever for any direct, indirect and/or consequential loss (including any claims for loss of profit) arising from any use of and/or reliance upon this document and/or further communication given in relation to this document. This document is not to be construed as an offer or a solicitation of an offer to buy or sell any securities. The DBS Group, along with its affiliates and/or persons associated with any of them may from time to time have interests in the securities mentioned in this document. The DBS Group, may have positions in, and may effect transactions in securities mentioned herein and may also perform or seek to perform broking, investment banking and other banking services for these companies. Any valuations, opinions, estimates, forecasts, ratings or risk assessments herein constitutes a judgment as of the date of this report, and there can be no assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk assessments. The information in this document is subject to change without notice, its accuracy is not guaranteed, it may be incomplete or condensed, it may not contain all material information concerning the company (or companies) referred to in this report and the DBS Group is under no obligation to update the information in this report. This publication has not been reviewed or authorized by any regulatory authority in Singapore, Hong Kong or elsewhere. There is no planned schedule or frequency for updating research publication relating to any issuer. The valuations, opinions, estimates, forecasts, ratings or risk assessments described in this report were based upon a number of estimates and assumptions and are inherently subject to significant uncertainties and contingencies. It can be expected that one or more of the estimates on which the valuations, opinions, estimates, forecasts, ratings or risk assessments were based will not materialize or will vary significantly from actual results. Therefore, the inclusion of the valuations, opinions, estimates, forecasts, ratings or risk assessments described herein IS NOT TO BE RELIED UPON as a representation and/or warranty by the DBS Group (and/or any persons associated with the aforesaid entities), that: (a) such valuations, opinions, estimates, forecasts, ratings or risk assessments or their underlying assumptions will be achieved, and (b) there is any assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk assessments stated therein. Please contact the primary analyst for valuation methodologies and assumptions associated with the covered companies or price targets. Regional Morning Pack Any assumptions made in this report that refers to commodities, are for the purposes of making forecasts for the company (or companies) mentioned herein. They are not to be construed as recommendations to trade in the physical commodity or in the futures contract relating to the commodity referred to in this report. DBSVUSA, a US-registered broker-dealer, does not have its own investment banking or research department, has not participated in any public offering of securities as a manager or co-manager or in any other investment banking transaction in the past twelve months and does not engage in market-making. ANALYST CERTIFICATION The research analyst(s) primarily responsible for the content of this research report, in part or in whole, certifies that the views about the companies and their securities expressed in this report accurately reflect his/her personal views. The analyst(s) also certifies that no part of his/her compensation was, is, or will be, directly or indirectly, related to specific recommendations or views expressed in the report. The research analyst 1 (s) primarily responsible for the content of this research report, in part or in whole, certifies that he or his associate 0F does not serve as an officer of the issuer or the new listing applicant (which includes in the case of a real estate investment trust, an officer of the management company of the real estate investment trust; and in the case of any other entity, an officer or its equivalent counterparty of the entity who is responsible for the management of the issuer or the new listing applicant) and the research analyst(s) primarily responsible for the content of this research report 2 or his associate does not have financial interests1F in relation to an issuer or a new listing applicant that the analyst reviews. DBS Group has procedures in place to eliminate, avoid and manage any potential conflicts of interests that may arise in connection with the production of research reports. The research analyst(s) responsible for this report operates as part of a separate and independent team to the investment banking function of the DBS Group and procedures are in place to ensure that confidential information held by either the research or investment banking function is handled appropriately. There is no direct link of DBS Group's compensation to any specific investment banking function of the DBS Group. COMPANY-SPECIFIC / REGULATORY DISCLOSURES 1. DBS Bank Ltd, DBS HK, DBS Vickers Securities (Singapore) Pte Ltd (“DBSVS”) or their subsidiaries and/or other affiliates have proprietary positions in Genting Singapore, SATS, Singapore Airlines, ST Engineering, AIA Group, Anhui Conch Cement, China Resources Cement, China Resources Land, Tencent, Airports of Thailand, CP ALL, Indorama Ventures, Minor International, recommended in this report as of 31 Aug 2018. 2. Neither DBS Bank Ltd nor DBS HK market makes in equity securities of the issuer(s) or company(ies) mentioned in this Research Report. Compensation for investment banking services: 3. DBS Bank Ltd, DBS HK, DBSVS, their subsidiaries and/or other affiliates of DBSVUSA have received compensation, within the past 12 months for investment banking services from Singapore Airlines, Cityneon Holdings, as of 31 Aug 2018. 4. DBS Bank Ltd, DBS HK, DBSVS, their subsidiaries and/or other affiliates of DBSVUSA have managed or co-managed a public offering of securities for Singapore Airlines, in the past 12 months, as of 31 Aug 2018. 5. DBSVUSA does not have its own investment banking or research department, nor has it participated in any public offering of securities as a manager or co-manager or in any other investment banking transaction in the past twelve months. Any US persons wishing to obtain further information, including any clarification on disclosures in this disclaimer, or to effect a transaction in any security discussed in this document should contact DBSVUSA exclusively. 1 An associate is defined as (i) the spouse, or any minor child (natural or adopted) or minor step-child, of the analyst; (ii) the trustee of a trust of which the analyst, his spouse, minor child (natural or adopted) or minor step-child, is a beneficiary or discretionary object; or (iii) another person accustomed or obliged to act in accordance with the directions or instructions of the analyst. 2 Financial interest is defined as interests that are commonly known financial interest, such as investment in the securities in respect of an issuer or a new listing applicant, or financial accommodation arrangement between the issuer or the new listing applicant and the firm or analysis. This term does not include commercial lending conducted at arm's length, or investments in any collective investment scheme other than an issuer or new listing applicant notwithstanding the fact that the scheme has investments in securities in respect of an issuer or a new listing applicant. Regional Morning Pack Disclosure of previous investment recommendation produced: 6. DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd (''DBSVS''), their subsidiaries and/or other affiliates may have published other investment recommendations in respect of the same securities / instruments recommended in this research report during the preceding 12 months. Please contact the primary analyst listed in the first page of this report to view previous investment recommendations published by DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd (''DBSVS''), their subsidiaries and/or other affiliates in the preceding 12 months. Directorship/trustee interests: 7. Euleen Goh Yiu Kiang, a member of DBS Group Holdings Board of Directors, is a Non-Exec Director / Chairman of SATS as of 30 Jun 2018. 8. Peter Seah Lim Huat, Chairman & Director of DBS Group Holdings, is a Director / Chairman of Singapore Airlines Limited as of 30 Jun 2018. 9. Lim Sim Seng, a member of DBS Group Executive Committee, is a Independent non-executive director of ST Engineering as of 01 Sep 2018. RESTRICTIONS ON DISTRIBUTION General This report is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation. Australia This report is being distributed in Australia by DBS Bank Ltd. (“DBS”) or DBS Vickers Securities (Singapore) Pte Ltd (“DBSVS”). DBS holds Australian Financial Services Licence no. 475946. DBSVS is exempted from the requirement to hold an Australian Financial Services Licence under the Corporation Act 2001 (“CA”) in respect of financial services provided to the recipients. DBSVS is regulated by the Monetary Authority of Singapore under the laws of Singapore, which differ from Australian laws. Distribution of this report is intended only for “wholesale investors” within the meaning of the CA. Hong Kong This report has been prepared by a person(s) who is not licensed by the Hong Kong Securities and Futures Commission to carry on the regulated activity of advising on securities in Hong Kong pursuant to the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong). This report is being distributed in Hong Kong and is attributable to DBS Bank (Hong Kong) Limited, a registered institution registered with the Hong Kong Securities and Futures Commission to carry on the regulated activity of advising on securities pursuant to the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong). For any query regarding the materials herein, please contact Carol Wu (Reg No. 8283) at [email protected]. Indonesia This report is being distributed in Indonesia by PT DBS Vickers Sekuritas Indonesia. Malaysia This report is distributed in Malaysia by AllianceDBS Research Sdn Bhd ("ADBSR"). Recipients of this report, received from ADBSR are to contact the undersigned at 603-2604 3333 in respect of any matters arising from or in connection with this report. In addition to the General Disclosure/Disclaimer found at the preceding page, recipients of this report are advised that ADBSR (the preparer of this report), its holding company Alliance Investment Bank Berhad, their respective connected and associated corporations, affiliates, their directors, officers, employees, agents and parties related or associated with any of them may have positions in, and may effect transactions in the securities mentioned herein and may also perform or seek to perform broking, investment banking/corporate advisory and other services for the subject companies. They may also have received compensation and/or seek to obtain compensation for broking, investment banking/corporate advisory and other services from the subject companies. Wong Ming Tek, Executive Director, ADBSR Singapore This report is distributed in Singapore by DBS Bank Ltd (Company Regn. 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It does not constitute a personal recommendation or take into account the particular investment objectives, financial situation, or needs of individual clients. You should contact your relationship manager or investment adviser if you need advice on the merits of buying, selling or holding a particular investment. You should note that the information in this report may be out of date and it is not represented or warranted to be accurate, timely or complete. This report or any portion thereof may not be reprinted, sold or redistributed without our written consent. United States This report was prepared by DBS Bank Ltd. DBSVUSA did not participate in its preparation. The research analyst(s) named on this report are not registered as research analysts with FINRA and are not associated persons of DBSVUSA. The research analyst(s) are not subject to FINRA Rule 2241 restrictions on analyst compensation, communications with a subject company, public appearances and trading securities held by a research analyst. This report is being distributed in the United States by DBSVUSA, which accepts responsibility for its contents. This report may only be distributed to Major U.S. Institutional Investors (as defined in SEC Rule 15a-6) and to such other institutional investors and qualified persons as DBSVUSA may authorize. Any U.S. person receiving this report who wishes to effect transactions in any securities referred to herein should contact DBSVUSA directly and not its affiliate. Other In any other jurisdictions, except if otherwise restricted by laws or regulations, this report is intended only for qualified, jurisdictions professional, institutional or sophisticated investors as defined in the laws and regulations of such jurisdictions. DBS Regional Research Offices HONG KONG MALAYSIA SINGAPORE DBS Bank (Hong Kong) Limited AllianceDBS Research Sdn Bhd DBS Bank Ltd Contact: Carol Wu Contact: Wong Ming Tek (128540 U) Contact: Janice Chua 18th Floor Man Yee Building 19th Floor, Menara Multi-Purpose, 12 Marina Boulevard, 68 Des Voeux Road Central Capital Square, Marina Bay Financial Centre Tower 3 Central, Hong Kong 8 Jalan Munshi Abdullah 50100 Singapore 018982 Tel: 65 6878 8888 Kuala Lumpur, Malaysia. Tel: 65 6878 8888 Fax: 65 65353 418 Tel.: 603 2604 3333 Fax: 65 65353 418 e-mail: [email protected] Fax: 603 2604 3921 e-mail: [email protected] Participant of the Stock Exchange of Hong Kong e-mail: [email protected] Company Regn. No. 196800306E INDONESIA THAILAND PT DBS Vickers Sekuritas (Indonesia) DBS Vickers Securities (Thailand) Co Ltd Contact: Maynard Priajaya Arif Contact: Chanpen Sirithanarattanakul DBS Bank Tower 989 Siam Piwat Tower Building, Ciputra World 1, 32/F 9th, 14th-15th Floor Jl. Prof. Dr. Satrio Kav. 3-5 Rama 1 Road, Pathumwan, Jakarta 12940, Indonesia Bangkok Thailand 10330 Tel: 62 21 3003 4900 Tel. 66 2 857 7831 Fax: 6221 3003 4943 Fax: 66 2 658 1269 e-mail: [email protected] e-mail: [email protected] Company Regn. No 0105539127012 Securities and Exchange Commission, Thailand