20 Nov. 2009 Stock Guide 20 Nov. 2009 Stock Guide provides a clear and structured profile of some of the companies we have HSI 19,95422,643 been monitoring recently. It is a one-stop collection of company profiles that puts HSCEI 11,26013,470 comprehensive information at your fingertips for quick and easy reference. Performance (%) 1m 3m 12m For further information, each profile is cross-referenced against our recent in-depth Performance (%) 1m 3m 12m company reports and other research. HSI 6.12.0 13.713.5 (2.6)76.7 HSCEI 1.04.0 11.819.6 107.65.1 Stocks will be added to Stock Guide on a regular basis. HSI Performance HSI Performance (HK$bn) (HK$bn) Contents 35,000 250 35,00030,000 250 200 61 Degrees (1361.HK) 2 30,000 3 25,000 200 AMVIG (2300.HK) 8 25,00020,000 150 20,000 150 Anta (2020.HK) 14 15,000 100 China Foods (506.HK) 19 15,00010,000 100 50 10,0005,000 China Green (904.HK) 24 50 China High Speed Transmission (658.HK) 30 5,0000 0 0Jan 07 Jul 07 Jan 08 Jul 08 Jan 09 0 China Mengniu (2319.HK) 36 Oct 07 Apr 08 Oct 08 Apr 09 Oct 09 China Singyes Solar Technologies Holdings Limited (750.HK) 42 Turnover HSI China WindPower Group Ltd. (182.HK) 48 Turnover HSI China Yurun (1068.HK) 54 Closing 12,960 Clear Media (100.HK) 60 Closing 21,264 52W high/low Comba (2342.HK) 66 26,387/10,676 Sources:52W high/low Bloomberg and Sun Hung Kai22 Financial,620/11 ,344 Coslight Technology Limited (1043.HK) 72 Dachan Food (3999.HK) 78 Dongxiang (3818.HK) 84 HSCEI Performance Dynamic Energy (578.HK) 90 Dynasty Fine Wines Group (828.HK) 96 Eagle Nice (2368.HK) 102 (HK$bn) 250 Fujikon (927.HK) 108 20,000 Fushan International Energy Group (639.HK) 114 200 15,000 Genesis Energy (702.HK) 121 150 Hopefluent (733.HK) 127 10,000 Huabao International Holdings (336.HK) 133 100 Inspur International (596.HK) 139 5,000 50 Jinheng Automotive (872.HK) 147 0 0 Johnson Electric (179.HK) 152 Oct 07 Apr 08 Oct 08 Apr 09 Oct 09 Ju Teng (3336.HK) 157 Turnover HSCEI Kenford (464.HK) 163 Kingboard Laminates (1888.HK) 169 Closing Lee & Man Paper (2314.HK) 175 12,466 Li Ning (2331.HK) 180 52W high/low 13,325/5,565 Little Sheep (968.HK) 185 Meadville (3313.HK) 190 Natural Beauty (157.HK) 195 NewOcean Energy Holdings (342.HK) 201 NWDS (825.HK) 207 Parkson (3368.HK) 213 Solargiga Energy Holding (757.HK) 219 SCUD (1399.HK) 225 Varitronix Int’l (710.HK) 231 Vinda International (3331.HK) 237 VST Holdings (856.HK) 242 Want Want (151.HK) 249 Wasion (3393.HK) 256 Xingda International (1899.HK) 262 All reports are available at: Xinhua Winshare (811.HK) 268 http://www.SHKfg.com Xiwang Sugar (2088.HK) 274 http://www.im.knowledge.reuter.com http://www.tfibcm.com Xtep (1368.HK) 280 http://www.securities.com Yip’sChemical (408.HK) 285 Bloomberg Code: <shkr> Disclaimer This report / note has been prepared by Sun Hung Kai Investment Services Limited (“SHKIS”), and together with its associates and subsidiaries “Sun Hung Kai Financial” or “SHKF”). SHKF does and seeks to do business with companies covered in its research reports / notes. At a result, investors should be aware that SHKF may have a conflict of interest that could affect the objectivity of this report / note. Investors should consider this report / note as only a single factor in making their investment decisions. For analyst certification Sun Hungand Kaiother Financial disclosures, refer to the Disclosure Section at the end of the report / note. 1 20 Nov. 2009 361 Degrees (1361.HK) Retail Sector 20 Nov. 2009 Company background HSI 22,643 HSCEI 13,470 361 Degrees is a leading PRC sportswear enterprise founded in 2003. Products include athletic footwear, apparel and accessories. Over 99% of revenue is from the Performance (%) 1m 3m 12m mid-range to low-end 361 Degrees brand. In 2008, it accounted for a 4.2% market HSI 2.0 13.5 76.7 share by revenue. The stock listed in Hong Kong on 30 June 2009. HSCEI 4.0 19.6 107.6 The firm has 16 footwear production lines in Jinjiang city, Fujian province. It has no 361 Degrees– Price vs. HSI, Share Data production facilities for apparel or accessories, which has to be outsourced, accounting for 69.8% of FY09 COGS, up from 37.8% in FY08. (HK$) (HK$m) 5.0 1,600 1,400 4.0 The group shifted its business model in 2008. Under the new model, its products are 1,200 sold exclusively to distributors, which in turn sell to authorized retailers. The new 3.0 1,000 800 model improves distribution efficiency, as the company needs to manage a smaller 2.0 600 400 number of customers. As at 30 June 2009, the network comprised 30 distributors and 1.0 3,277 authorized retailers, all of which were independent third parties. These 200 0.0 0 authorized retailers owned and managed 6,055 retail outlets. 361 Degrees is the third Jun 09 Oct 09 largest sportswear brand by number of retail outlets. Turnover Price HSI The company introduces new products and receives orders from distributors at sales Price – HK$ 4.38 fairs, which helps it plan production around its purchase volumes, and better 52W high/low (HK$) 4.72/3.03 coordinate raw-material supplies and inventory levels. Shares in issue – millions 2,065.41 Market cap – HK$m 8,963.89 361 Degrees launched a series of influential marketing campaigns in 2008 through 3M avg. turnover – HK$m 45.02 multi-year sponsorships of leading sporting events and top athletes as brand Major shareholders – % spokespersons. Selling and distribution expenses accounted for 10.8% of FY09 Wuhao Ding 18.16 revenue, but helped net profit surge 250% yoy to RMB632m with a 430-bps rise in Source: Bloomberg and Sun Hung Kai Financial net margin to 18.3%. Turnover increased 162% to RMB3,447m.. Figure 1: Earnings Summary Year ended 30 June FY07 FY08 FY09 FY10E Net profit – RMB m 22.9 179.0 632.1 812.3 Recent Reports Date Investment Daily Note Net-profit growth – % 108.2 681.2 253.2 28.5 6 Oct. 2009 EPS – RMB fen 1.5 11.9 42.1 38.7 EPS growth – % 114.3 693.3 253.8 (8.1) P/E – X 257.3 32.4 9.2 10.0 This document is solely based on DPS – RMB fen 0.0 0.0 6.5 7.7 publicly available information. This report is intended as information Dividend yield – % 0.0 0.0 1.7 2.0 only and not as a recommendation BVPS – RMB N/A N/A 1.3 N/A for any stock. Sun Hung Kai P/B – X N/A N/A 3.1 N/A Financial does not provide research Oper cash flow/share – RMB fen N/A N/A 36.0 3,862.0 coverage or ratings for this Net debt (net cash) to share price – % N/A N/A (18.1) N/A company in this report. Sources: Bloomberg and Sun Hung Kai Financial Note: Estimates based on Bloomberg consensus Holly Hou + (852) 2203 9588 [email protected] All reports are available at: http://www.SHKfg.com http://www.im.knowledge.reuter.com http://www.tfibcm.com http://www.securities.com Bloomberg Code: <shkr> Disclaimer This report / note has been prepared by Sun Hung Kai Investment Services Limited (“SHKIS”), and together with its associates and subsidiaries “Sun Hung Kai Financial” or Sun Hung“SHKF”). Kai Financial SHKF does and seeks to do business with companies covered in its research repor2ts / notes. At a result, investors should be aware that SHKF may have a conflict of interest that could affect the objectivity of this report / note. Investors should consider this report / note as only a single factor in making their investment decisions. For analyst certification and other disclosures, refer to the Disclosure Section at the end of the report / note. 20 Nov. 2009 Figure 2: 361 Degrees – Investment Highlights Key investment positives Key investment negatives Benefits from growing PRC sportswear industry. Rapid Chinese Rising account-receivables turnover. 361 Degrees has extended economic growth raises disposable incomes, which in turn the credit terms it grants to distributors, to help improve their increases per capita retail spending. liquidity and encourage them to expand their retail networks. This caused account receivables to more than double from RMB673m Rapid expansion of retail network. The number of authorized in FY08 to RMB1,591m for FY09. 361 Degrees outlets has more than quadrupled from 1,391 as at end-June 2006 to 6,055 as at end-June 2009. Heavy reliance on distributors. The group relies heavily on its 30 distributors to oversee the operations of its authorized retailers. If Diversifying product range. 361 Degrees introduced apparel they fail to do so, this could significantly hurt the operations of items in February 2005 and accessories in September 2007. It is authorized retailers in an entire area, as well as affect the brand developing new lines for children’s footwear and apparel. image and prospects. Extensive brand promotion. The 361 Degrees brand is well Fiercely competitive sportswear market. Brand equity is the recognized in the PRC. It uses traditional mass media advertising, decisive factor in sportswear, so tight competition may lead to a plus integrated media and special events.