12_Asia Strategy - Absolute Return in a Directionless Market

PREPARED BY NON-US BROKER-DEALER(S): BNP PARIBAS SECURITIES INDIA PVT LTD THIS MATERIAL HAS BEEN APPROVED FOR U.S DISTRIBUTION. ANALYST CERTIFICATION AND IMPORTANT DISCLOSURES CAN BE FOUND AT APPENDIX ON PAGE 15

Absolute return in a directionless market n Expensive sectors continue to outperform in a directionless market

In 2014 YTD, Asia ex-Japan has returned -3.8% and Japanese equities have returned -11.5%. In this

flat market, performance of various markets and sectors has been extremely divergent. The relatively

cheap markets China and Korea have underperformed and continue to underperform. The relatively

expensive markets India, Indonesia and Taiwan continue to outperform, because investors seem to

have better visibility on earnings in these markets. The performance trends of sectors have been

similar. Outperforming sectors technology, consumer staples and healthcare have done well despite

their premium valuations. Underperformers financials, telecom and materials are cheap (except

telecom) and have been cheap for quite a while now.

n Identifiable catalysts, if they materialise, are the key to outperformance A common thread running across the outperforming markets and sectors is the presence of catalysts

that materialized reduction in current account deficit and stabilization of currency for India and

Indonesia and earnings upgrades in Taiwan. Thats why, in our selection of absolute return stocks, we

try to find identifiable catalysts that could drive the share prices up or down in the near term. We

relatively pay less attention to valuations.

n Our Top BUY and REDUCE ideas to generate absolute returns in next three to six months Our Asia Equity Research team identified such stocks with visible catalysts (positive and negative) in

their respective sectors. The result (summarised in Exhibit 7) is a combination of stocks in Japan,

China, Thailand, India and Taiwan, from diverse sectors such as industrials, technology, transportation,

utilities and commodities. The catalysts are stock-specific quite apparent in the fact that from the

same sector (China utilities) we have both BUY and REDUCE candidates.

Top BUY and REDUCE stocks

BBG code Rec Price Target price Mkt cap Turnover ------ P/E ------ - EV/EBIDTA - ------- P/B ------

2014E 2015 2014E 2015E 2014E 2015E

(LC) (LC) (USD m) (USD m) (x) (x) (x) (x) (x) (x)

CR Gas 1193 HK REDUCE 25.00 19.79 7,167 10.3 22.2 19.6 9.3 8.3 3.4 3.0

Nikon 7731 JP REDUCE 1,645 1,350 6,379 73 20.5 20.5 6.2 5.2 1.3 1.2

Jaiprakash Associates JPA IN REDUCE 49.05 38.00 1,812 26 (11.4) (11.4) 8.8 8.6 0.9 0.6

Formosa Chem 1326 TT REDUCE 71.40 62.00 13,680 12 24.2 18.3 13.2 11.2 1.6 1.6

Angang 347 HK REDUCE 4.79 3.73 4,467 8 47.0 21.6 6.8 5.6 0.6 0.6

Thai Airways THAI TB BUY 14.20 22.00 955 6 9.2 6.5 6.2 5.8 0.5 0.5

Guodian T&E 1296 HK BUY 2.15 3.27 1,679 3 10.9 8.1 7.4 6.4 1.0 0.9

Nidec 6594 JP BUY 12,050 15,300 16,033 73 28.5 19.9 13.7 10.9 3.5 3.0

Anhui Conch 914 HK BUY 30.65 34.20 20,937 45 10.2 9.5 6.7 6.1 2.1 1.9

Disco Corp 6146 JP BUY 6,440 9,000 2,123 15 18.4 13.6 8.7 6.5 1.8 1.7

Source: BNP Paribas estimates; priced at close of business 24 March 2014

25 MARCH 2014

ASIA STRATEGY

Manishi Raychaudhuri [email protected] +91 22 3370 4346

Gautam Mehta [email protected] +91 22 6196 4357

Rajan Jain [email protected] +91 22 6176 5624

Our research is available on Thomson One, Bloomberg, TheMarkets.com, Factset and on http://eqresearch.bnpparibas.com/index. Please contact your salesperson for

authorisation. Please see the important notice on the back page.

Asia Strategy Manishi Raychaudhuri

BNP PARIBAS 25 MARCH 2014

Absolute returns in directionless times

In a directionless market like the one we are in, alpha generation is a considerable

challenge. Some stocks particularly the ones with visible catalysts have run up

sharply and seem to offer little upside with most of the positives discounted in the

share price. On the other hand fundamentally unattractive sectors and stocks are

trading at such relatively cheap valuations that finding a strong argument for selling

these stocks seem challenging.

EXHIBIT 1: Outperforming markets from January 2014 --- India, Indonesia, Thailand, Taiwan, Asia x JP

EXHIBIT 2: Underperforming markets from January 2014 ---China, Korea, HK, SGP, AxJ

Source: Bloomberg Source: Bloomberg

EXHIBIT 3: Outperforming sectors EXHIBIT 4: Underperforming sectors

Source: Bloomberg Source: Bloomberg

Such dichotomy prevails among markets as well. The relatively cheap markets

China and Korea have underperformed and continue to underperform. The

relatively expensive markets India and Taiwan continue to outperform because

investors seem to have better visibility on earnings in these markets. Indonesia and

Thailand another set of outperformers are the middle of the roaders not too

expensive but not abysmally cheap either. However, a common thread running

across the outperforming markets is the presence of catalysts which materialized

reduction in current account deficit and stabilization of currency for India and

Indonesia and earnings upgrades in Taiwan. Thailand is the only surprise

outperformer a market that has done well even in the face of political uncertainty,

earnings disappointments and large FII selling.

85

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Jan-14

Jan-14

Jan-14

Feb-14

Feb-14

Feb-14

Feb-14

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(index) India MSCI AxJ Thailand

Taiwan Indonesia

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China Singapore

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(index) Technology MSCI AxJ

Consumer Staples Healthcare

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Feb-14

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Feb-14

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Mar-14

(index) Financials Telecom

MSCI AxJ Materials

2



EXHIBIT 5: Scatterplot --- country P/BV vs ROE EXHIBIT 6: Scatterplot --- sector P/BV vs ROE

Source: Factset Source: Factset

Sector performances have followed pretty much a similar pattern. Outperforming

sectors technology, consumer staples and healthcare have done well despite

their premium valuations. Underperformers financials, telecom and materials are

cheap (except telecom) and have been cheap for quite a while now.

Valuation, therefore, is not an important criterion for selecting potential absolute

return providers. We have to be mindful of valuations no doubt, and make sure we

are not buying overvalued stocks whose performance could be negated with the

smallest disappointment. But the key criterion that we use to make our choices is the

presence of identifiable catalysts.

In our selection of absolute return stocks we try to find identifiable catalysts which

could drive the share prices up or down in the near term. We relatively pay less

attention to valuations expensive stocks can still continue to appreciate in the

presence of strong positive catalysts that materialize, and vice versa. BNPs Asian

Equity research team identified such stocks in their respective sectors. The result is a

combination of stocks in Japan, China, Thailand, India and Taiwan, from diverse

sectors like industrials, technology, transportation, utilities and commodities. The

catalysts are stock-specific quite apparent in the fact that from the same sector

(China Utilities) we have both BUY and REDUCE candidates.

EXHIBIT 7: Top BUY and REDUCE stocks

BUY Country and sector REDUCE Country and Sector

Guodian T&E China utilities China Resources Gas China utilities

Thai Airways Thailand transportation Jaiprakash Associates India capital goods/engineering

Disco Corporation Japan technology hardware and equipment Formosa Chemical and Fibre Taiwan chemicals

Nidec Corporation Japan technology hardware and equipment Angang Steel China metals and mining

Anhui Conch Cement China building materials Nikon Japan technology hardware and equipment

Source: BNP Paribas estimates

The catalysts highlighted by BNP analysts for these stocks range from regulation-

driven product price increases, earnings surprises announcement of government

policy and industry dynamics.

AxJ

PH

TH

ID

MY

TWCH

IN

KR

0.7

1.2

1.7

2.2

2.7

3.2

10.0 12.0 14.0 16.0 18.0 20.0 22.0

P/BV (x)

ROE (%)

AxJDisc

Healthcare

EnergyFinancial

Staples

Industrials

Tech

Metals

Telco

Utilities

0.8

1.3

1.8

2.3

2.8

3.3

7.0 9.0 11.0 13.0 15.0 17.0

P/BV (x)

ROE (%)

3



EXHIBIT 8: Catalysts for our top BUY/REDUCE stocks

Company BBG code Sector Country Reco Catalysts

CR Gas 1193 HK China utility & renewable

China REDUCE - City gate gas price hike and slow M&A activities by the company.

Nikon 7731 JP Precision & Imaging

Japan REDUCE - We expect FY3/15 guidance (early May) likely to be below consensus due to weaker than expected SLR and lithography biz.

Jaiprakash Associates JPA IN Industrials India REDUCE - Poor earnings performance in 4Q FY14. - Higher than expected debt levels in FY14

Formosa Chem 1326 TT Chemicals Taiwan REDUCE - PX/PTA margins falling much faster than expected. - SM demand may weaken on poor China construction.

Angang 347 HK Steel China REDUCE - Default of steel mills - Widening loss making in steel sector

Thai Airways THAI TB Transportation Thailand BUY - Tourist arrivals should improve after the government approved lifting of the emergency decree.

- To reduce the impact from the ongoing political unrest, THAI will cut its operating expense by about THB2b in 2014.

- Fourteen new aircraft are to be delivered this year, which should improve efficiency and reduce fuel consumption.

Guodian T&E 1296 HK Utility China BUY - Earnings rebound and supportive government policies in 2014. - We see Guodian as a key beneficiary of the cyclical upturn for China's wind and solar power.

- We think the company deserves a re-rating, as the market still doesnt see it as a renewable player.

Nidec 6594 JP Electronic components

Japan BUY - We think that FY3/14 result briefing will be a positive catalyst, where CEO Mr. Nagamori is due to present the growth scenario. We also think that Nidec will announce an M&A as they have done over the past several years.

Anhui Conch 914 HK Cement China BUY - Rebound in seasonal cement price. - Capacity cutting catalyst. - Urbanization policy.

Disco Corp 6146 JP Technology hardware and equipment

Japan BUY - Disco is entering a virtuous cycle boosting sales of its high-priced, high-market-share products, underpinned by advances in packaging technology.

- Another factor in its growth story is its growing clientele, extending beyond MPU/AP and memory chip makers to include companies supplying RF devices, power devices, high-end LED, wafers and TSV, categories not served by other SPE makers.

Source: BNP Paribas estimates

4

Policy winner n We continue to expect strong profit growth with limited risks

Management indicated there will be 9 new lines completed in 2014,

increasing 15mt clinker capacity to 214mt (+7.5% y-y), on which we

forecast sales volume to grow 12.5% to 256mt. We forecast

GP/tonne to increase RMB10 to RMB90 on Anhui Conchs 59% sales

volume exposure to East and Central China; would be the 2nd

highest year after 2011.

n Clear policy driven catalysts with visible timeline in 2014 We believe Anhui Conch will be the biggest beneficiary under the

three key policies of: 1) tighter emission controls, 2) capacity cuts,

and 3) cancellation of PC 32.5, as it has the most advanced emission

technology, lowest costs and lowest PC 32.5 exposure among listed

companies. Anhui Conch also has the strongest balance sheet to

pursue quality M&As.

n Attractive valuation with quality assets and clear catalysts With the improvement in macro sentiment on urbanization and the

stabilizing policies from the government, we maintain our earnings

and asset multiples based HKD34.2 TP. At EV/tonne of RMB455 and

10x 2014E PE, we see this as an attractive entry point. Risks include

lower than expected prices in East China.

Anhui Conch is trading at RMB455/t EV/t, close to three years bottom

Sources: Bloomberg consensus; BNP Paribas estimates

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1,200

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Se

p-0

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-14

HKD/t Industry average EV/t

Conch EV/t

Conch Historical average

25 MARCH 2014

NEWS FLASH

ANHUI CONCH CEMENT 914 HK CHINA / BUILDING MATERIALS

BUY TARGET PRICE HKD34.20 UP/DOWNSIDE +12.7% CLOSE HKD30.35

HOW WE DIFFER FROM CONSENSUS MARKET RECS

TARGET PRICE (%) (2.6) POSITIVE 33

EPS 2013 (%) 0.9 NEUTRAL 4

EPS 2014 (%) 11.3 NEGATIVE 0

Rachel Cheung [email protected] +852 2825 1824

KEY STOCK DATA

YE Dec (RMB m) 2012A 2013E 2014E 2015E

Revenue 45,766 54,527 62,811 65,911

Rec. net profit 6,331 9,599 12,803 13,675

Recurring EPS (RMB) 1.19 1.81 2.42 2.58

EPS growth (%) (46.5) 51.6 33.4 6.8

Recurring P/E (x) 20.3 13.4 10.0 9.4

Dividend yield (%) 0.8 1.3 1.7 1.8

EV/EBITDA (x) 11.9 8.5 6.6 6.0

Price/book (x) 2.6 2.3 2.1 1.9

Net debt/Equity (%) 30.7 21.8 13.4 5.1

ROE (%) 13.6 18.5 21.8 21.2

Share price performance 1 Month 3 Month 12 Month

Absolute (%) 7.1 2.2 15.6

Relative to country (%) 9.4 10.4 20.1

Mkt cap (USD m) 20,732

3m avg daily turnover (USD m) 53.8

Free float (%) 56

Major shareholder Anhui Conch Holdings (37%)

12m high/low (HKD) 31.50/19.52

3m historic vol. (%) 35.6

ADR ticker -

ADR closing price (USD; Date) -

Issued shares (m) 5,299


(20)

(10)

0

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20

20

25

30

Mar-13 Jun-13 Sep-13 Dec-13 Mar-14

(%)(HKD) Anhui Conch Cement Rel to MSCI China

5

High margins on an improved cycle

n April-June orders to climb as cycle improves Orders from the OSATs rebounded sharply from mid-March as

production at foundries recovered. Because of pressure to deliver

early, we think FY3/14 sales could exceed the companys JPY102.1b

(up 9% y-y) guidance. With the cycle continuing to improve, we

forecast orders of JPY30.0b (up 15% q-q) in CY2Q.

n Resolute price strategy good for profitability We draw attention to the improvement in Discos gross margins, in

contrast to other SPE makers. The reasons for this are: 1) firm sales

of high-margin consumables; 2) growing sales of high-priced, high-

margin SPE for high-end packaging; and 3) the weak JPY.

n Maintain BUY: one of the few stocks to offer a growth story We maintain our JPY9,000 TP (2.5x FY3/14E P/BV). With front-end

process migration slowing, Disco is entering a virtuous cycle boosting

sales of its high-priced, high-market-share products, underpinned by

advances in packaging technology. Another factor in its growth story

is its growing clientele, extending beyond MPU/AP and memory chip

makers to include companies supplying RF devices, power devices,

high-end LED, wafers and TSV, categories not served by other SPE

makers. Risks include lower output at foundry players because of

excessive inventory, and Yen appreciation.

Quarterly orders and share price

Sources:; Company data; BNP Paribas estimates

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Jan-16

(JPY)(JPY m)Quarterly booking (LHS) Share price (RHS)

25 MARCH 2014

NEWS FLASH

DISCO CORP 6146 JP JAPAN / TECHNOLOGY HARDWARE & EQUIPMENT

BUY TARGET PRICE JPY9,000 UP/DOWNSIDE +41.1% CLOSE JPY6,380


TARGET PRICE (%) 15.3 POSITIVE 9

EPS 2014 (%) 5.1 NEUTRAL 7

EPS 2015 (%) 19.3 NEGATIVE 1

Yoshitsugu Yamamoto [email protected] +81 3 6377 2259

KEY STOCK DATA

YE Mar (JPY b) 2014E 2014C 2015E 2016E

Revenue 103.7 102.1 114.5 125.7

Op profit 17.0 15.4 23.0 28.0

Recurring profit 17.3 15.7 23.6 28.6

Net profit 11.8 10.9 16.0 19.4

EPS (JPY) 350 322 475 576

P/E (x) 18.2 20.0 13.4 11.1

Dividend yield (%) 1.4 1.3 1.9 2.4

EV/EBITDA (x) 8.6 - 6.5 5.3

Price/book (x) 1.8 - 1.6 1.5

Net debt/equity (%) (8.7) - (14.0) (20.7)

ROE (%) 10.3 - 12.8 14.0


Absolute (%) (3.6) (6.7) 16.6




Free float (%) 70

Major shareholder Taiyo Fund Management (8%)

12m high/low (JPY) 7,610/5,240


ADR ticker -

ADR closing price (USD) -

Issued shares (b) 0.034

Sources: Bloomberg; Company estimates (C); BNP Paribas estimates

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22

3,842

4,842

5,842

6,842

7,842


(%)(JPY) Disco Corp Rel to TOPIX Index

6

Bottoming out

n Big earnings rebound forecast for 2014 We expect 67% earnings growth in 2014 driven by a sharp earnings

rebound in the renewable segment. Earnings growth visibility is high

with the 2014E backlog/bill ratio at 1.2x, 0.7x, 0.9x and 1.1x for its

wind power, solar power, deNOx and deSO2 segments, respectively.

n Favourable government policy support We expect positive government policies for both its environmental

businesses (power plant deNOx, deSO2, and municipal waste water

treatment) and renewable businesses (wind turbine sales and solar

power EPC). We see 2014 as the beginning of the next cyclical

upturn for its renewable businesses given Chinas aggressive

installation targets of 18GW for wind power and 14GW for solar

power. We expect big improvements in industry top-line growth and

profitability, and for Guodian T&E to be a key beneficiary as the No. 2

wind turbine manufacturer and No. 2 solar EPC contractor in China.

n Trading at a deep discount to peers The company currently trades at 9.7x 2014E P/E, and 0.9x P/B, a

47% discount to H-share listed environmental peers and 58%

discount to wind equipment peers (based on our estimates for Beijing

Enterprises Water and China Everbright Intnl, and Bloomberg

consensus estimates for other peers), and a 32.4% discount to its

own historical P/E. We believe its weak 2013 results should be priced

in while its growth potential in 2014E has not been reflected. The key

downside risks are changes in the governments supportive policies

and lower than expected margins.

We expect a significant earnings turnaround in 2014

Sources: Guodian T&E; BNP Paribas estimates

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2012 2013E 2014E 2015E

(y-y %)(RMB m) Net profit (LHS) Growth (RHS)

25 MARCH 2014

NEW INFORMATION 4CHINA / ELECTRIC UTILITIES

GUODIAN T&E 1296 HK

BUY UNCHANGED

TARGET PRICE HKD3.27

CLOSE HKD1.91

UP/DOWNSIDE +71.0%

PRIOR TP HKD3.27

CHANGE IN TP UNCHANGED



EPS 2013 (%) (18.2) NEUTRAL 1

EPS 2014 (%) 0.0 NEGATIVE 1

Penny Chen [email protected]

+8621 6096 9030

Daisy Zhang, CFA [email protected]

+8621 6096 9025

Yong Liang Por [email protected]

+852 28251877

KEY STOCK DATA

YE Dec (RMB m) 2012A 2013E 2014E 2015E

Revenue 21,777 23,668 30,334 34,441

Rec. net profit 724 574 958 1,284

Recurring EPS (RMB) 0.12 0.09 0.16 0.21

Prior rec. EPS (RMB) 0.12 0.09 0.16 0.21

Chg. In EPS est. (%) 0.0 0.0 0.0 0.0

EPS growth (%) (2.9) (20.8) 66.8 34.1

Recurring P/E (x) 12.8 16.1 9.7 7.2

Dividend yield (%) 1.3 0.9 1.6 2.1

EV/EBITDA (x) 7.4 9.0 7.0 6.1

Price/book (x) 1.0 0.9 0.9 0.8

Net debt/Equity (%) 95.5 87.7 84.7 81.2

ROE (%) 8.0 6.0 9.4 11.5


Absolute (%) (22.7) 0.5 (29.0)

Relative to country (%) (12.4) 20.4 (17.5)

Next results March 2014



Free float (%) 20

Major shareholder China Guodian Corporation (39%)

12m high/low (HKD) 2.82/1.45


ADR ticker -




(53)

(33)

(13)

7

1.27

1.77

2.27

2.77


(%)(HKD) Guodian T&E Rel to MSCI China

2nd Growth phase has just started

n Our Technology H&E top pick Nidec is our top pick for the following reasons: 1) we estimate total

OP will grow q-q in 4QFY3/14, on strong momentum in the

automotive, appliance, commercial and industrial (AACI) segment,

including ASI; 2) robust 4Q OP is likely to lead to strong OP in

FY3/15; and 3) the medium-to long-term profit growth prospects

driven by AACI motors is becoming increasingly realistic.

n Near term catalyst is the FY3/14 results briefing We expect the share price to perform well towards the FY3/14 results

briefing on April 23 for the following reasons: 1) we expect the

automotive, appliance, commercial and industrial (AACI) segments

4QFY3/14 OP will be quite strong, and 2) for CEO Mr. Nagamori to

present a concrete growth strategy with strong AACI products.

n Recommend buying the shares on any weakness Our PE-based TP is JPY15,300, 21x our FY3/16E EPS. Our target

P/E is based on the historical three-year average P/E + one standard

deviation. We regard Nidec as one of the few companies capable of

achieving rapid growth over the next four-to-five years, not just over

the next one-to-two years. Risks include: 1) Delays in adoption of

regulations on automotive, appliance, commercial and industrial

motors; 2) slowing volume and intensified price competition due to a

rapid slump in demand; and 3) a greater-than-forecast decline in

HDD volumes.

AACI to drive future growth

Sources: Nidec; BNP Paribas estimates

0

50

100

150

FY3/13 FY3/14 E FY3/15 E FY3/16 E FY3/17 E

(JPY b)

HDD motor Auto, Appliance, Commercial, Industrial Others

Auto,Appliance, Ind. & Com. motor to grow

25 MARCH 2014

NEWS FLASH

NIDEC CORP 6594 JP JAPAN / TECHNOLOGY HARDWARE & EQUIPMENT

BUY TARGET PRICE JPY15,300.00 UP/DOWNSIDE +27.6% CLOSE JPY11,995.00



EPS 2014 (%) 0.9 NEUTRAL 5

EPS 2015 (%) 8.2 NEGATIVE 2

Masahiro Wakasugi [email protected] +81 3 6377 2240

KEY STOCK DATA

YE Mar (JPY b) 2014E 2014C 2015E 2016E

Revenue 878.1 880.0 1,018.3 1,093.6

Op profit 86.0 85.0 115.0 137.0


Net profit 61.4 56.0 86.0 103.0

EPS (JPY) 423 386 604 724

P/E (x) 28.4 31.2 19.8 16.6

Dividend yield (%) 0.8 0.8 0.9 0.9

EV/EBITDA (x) 13.6 - 10.9 9.1

Price/book (x) 3.5 - 3.0 2.6

Net debt/equity (%) 19.6 - 9.0 (3.6)

ROE (%) 14.0 - 17.3 17.8


Absolute (%) (1.7) 22.4 113.1




Free float (%) 40

Major shareholder Shigenobu Nagamori (8%)

12m high/low (JPY) 12,740.00/5,320.00


ADR ticker NJ US

ADR closing price (USD; 24 Mar 2014) 29.51



(11)

39

89

4,836

6,836

8,836

10,836

12,836


(%)(JPY) Nidec Corp Rel to TOPIX Index

8

Dynamic strategy to recovery

n Key potential beneficiary of the lifting of the Emergency decree The removal of the Emergency decree effective 19 March will boost

Thai tourism, in our view. We believe Thai Airways (THAI) will be a

key potential beneficiary of this. THAIs share price has historically

moved ahead of changes in tourist arrivals (see exhibit below). Also,

valuations seem to be pricing in all the negatives; it now looks poised

for a re-rating. Our TP of THB22, based on a P/BV-ROE valuation,

implies 59% upside potential from current levels. Maintain BUY.

n Target is to cut expenses by THB2b in 2014 THAI has a dynamic strategy to improve operations. To reduce the

impact of the political unrest, the airline plans to cut flight frequencies

to match the decline in passenger numbers, reducing operating

expenses by about THB2b and capex by ~THB4b this year.

n New aircraft to improve efficiency THAI is scheduled to take delivery of 14 new aircraft in 2014. The

airline plans to phase out 13 old aircraft this year (vs nine under the

previous plan) in order to lower the impact of any demand-supply

imbalance. The new aircraft should improve efficiency and reduce

fuel consumption (by about 15%, compared to the old aircraft). Key

risks to our target price are a sharp drop in passenger traffic and

higher jet oil prices.

THAIs share price leads changes in tourist arrivals

Sources: Bloomberg consensus; BNP Paribas/FSSIA

(50)

0

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100

0

20

40

60

2007 2008 2009 2010 2011 2012 2013 2014

(y-y %)(THB) THAI's closed price (LHS)

Change in tourist arrivals (RHS)

Yellow shirt protest

May -Oct2008

Red shirt Mar-May 10

PDRC protest

PREPARED BY FSS INTERNATIONAL INVESTMENT ADVISORY SECURITIES CO LTD ("FSSIA"), A NON-US BROKER-DEALER. CO-DISTRIBUTED WITH BNP PARIBAS. PLEASE REFER TO FIRST PARAGRAPH OF GENERAL DISCLAIMER FOR DETAIL.

25 MARCH 2014

NEWS FLASH

THAI AIRWAYS THAI TB THAILAND / TRANSPORTATION

BUY TARGET PRICE THB22.00 UP/DOWNSIDE +59.4% CLOSE THB13.80



EPS 2014 (%) (195.1) NEUTRAL 5

EPS 2015 (%) 135.9 NEGATIVE 16

Somkij Oranchatchawan [email protected] +66 2 611 3535

KEY STOCK DATA

YE Dec (THB m) 2013A 2014E 2015E 2016E

Revenue 206,336 216,075 241,507 269,297

Rec. net profit (3,747) 3,377 4,742 5,596

Recurring EPS (THB) (1.72) 1.55 2.17 2.56

EPS growth (%) nm nm 40.4 18.0

Recurring P/E (x) neg 8.9 6.4 5.4

Dividend yield (%) 0.0 4.5 6.3 7.4

EV/EBITDA (x) 8.5 6.2 5.8 5.2

Price/book (x) 0.5 0.5 0.5 0.4

Net debt/Equity (%) 289.0 288.2 278.4 229.8

ROE (%) (6.0) 5.8 7.7 8.6


Absolute (%) 6.2 (4.2) (45.9)

Relative to country (%) 4.1 (0.3) (34.8)

Mkt cap (USD m) 928


Free float (%) 49

Major shareholder Ministry of Finance (51%)

12m high/low (THB) 33.75/12.40


ADR ticker -



Sources: Bloomberg consensus; BNP Paribas/FSSIA estimates

(51)

(31)

(11)

9

29

10

15

20

25

30

35


(%)(THB) Thai Airways Rel to MSCI Thailand

9

Liquidity and debt concerns remain

n Significant exposure to shipbuilding and manufacturing Flat products will account for more than 83% of Angangs 2014 sales

on our estimates. This gives it significant exposure to the shipbuilding

and manufacturing industries which we expect to face slow growth in

2014, given tight funding.

n Visibly difficult 2014 1Q14 results are likely to be tough as 50% of Angangs iron ore is

from its parent based on T+2 pricing; spot HRC steel price dropped

1.5% q-q. While Angang has a relatively good financial position with

net gearing of 50-60%, we expect default sentiment on private steel

mills to have a negative effect on pricing and margins.

n More room to fall on liquidity and debt concerns, REDUCE We maintain our P/BV-based TP at HKD3.73, or 0.45x 2014E. Our

target PB references the shares trough valuation over the tightest

periods of steel sector liquidity the past three years (Jun 2013, 3Q12

and Oct 2011). Funding for steel mills is likely to remain tight for the

rest of 2014 given the high risk of debt defaults. Risks include higher

than expected flat product prices.

Angang 12-mth rolling P/BV


0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

Jul-97

Jan-98

Jul-98

Jan-99

Jul-99

Jan-00

Jul-00

Jan-01

Jul-01

Jan-02

Jul-02

Jan-03

Jul-03

Jan-04

Jul-04

Jan-05

Jul-05

Jan-06

Jul-06

Jan-07

Jul-07

Jan-08

Jul-08

Jan-09

Jul-09

Jan-10

Jul-10

Jan-11

Jul-11

Jan-12

Jul-12

Jan-13

(x) PB (LHS) +1SD

Average (From 1997) -1SD

25 MARCH 2014

NEWS FLASH

ANGANG STEEL 347 HK CHINA / METALS & MINING

REDUCE TARGET PRICE HKD3.73 UP/DOWNSIDE -21.2% CLOSE HKD4.73



EPS 2013 (%) 2.1 NEUTRAL 10

EPS 2014 (%) 45.6 NEGATIVE 11

Rachel Cheung [email protected] +852 2825 1824

KEY STOCK DATA

YE Dec (RMB m) 2012A 2013E 2014E 2015E

Revenue 77,748 75,233 72,867 69,290

Rec. net profit (4,157) 772 591 1,287

Recurring EPS (RMB) (0.57) 0.11 0.08 0.18

EPS growth (%) nm nm (23.4) 117.6

Recurring P/E (x) neg 35.4 46.2 21.2

Dividend yield (%) 0.0 0.0 0.0 0.0

EV/EBITDA (x) 28.1 7.5 6.8 5.6

Price/book (x) 0.6 0.6 0.6 0.6

Net debt/Equity (%) 68.2 58.2 50.1 40.6

ROE (%) (8.5) 1.6 1.2 2.6


Absolute (%) 0.0 (15.1) 1.1

Relative to country (%) 0.2 (6.8) 5.9



Free float (%) 33

Major shareholder Anshan Iron & Steel Gorup (67%)

12m high/low (HKD) 5.92/3.67


ADR ticker -




(19)

(9)

1

11

21

3.48

4.48

5.48

6.48


(%)(HKD) Angang Steel Rel to MSCI China

10

Slower growth, lower margins

n We expect gas sales growth to continue to slow down in 2014 CR Gas gas sales volume growth slowed to 16% in 2H13, vs. 30-

40% previously. We expect gas sales growth to continue slowing, as

momentum from organic growth has receded. We also expect

external growth to cool with a drop in the companys M&As in 2013.

Contribution from its Tianjin JV is weaker than market expectations.

n Possible city gate cost hike to impact demand and hurt margins We expect city gate gas cost hikes to continue in 2014/2015, based

on our checks with the China City Gas Association. Our channel

check also shows downstream demand will be impacted with

ongoing price hikes. CR Gas may see its gas sales growth rate slow

down more the next couple of years. We also see pressure on GPM

in the gas sales business on pass-through difficulties to end-users.

n Current valuations have not factored in the negatives CR Gas currently trades at 21.8x 2014E P/E and 3.4x 2014E P/B,

which we think is excessive given its earnings CAGR of 14% in 2013-

15E, and ROE of 16.5%. Its trading at a 14% premium over peers

(based on Bloomberg conensus estimates), and 1.15 standard

deviation above its historical average. We think the risks of slower

growth and lower margins are not priced in yet. Risks come from

stronger than expected organic growth in the gas business and any

M&As.

Organic growth slowed down in 2013

Source: China Resources Gas

0

10

20

30

40

Total Organic external

(%) 2011 2012 2013

25 MARCH 2014

RESULTS FLASH

CHINA RESOURCES GAS 1193 HK CHINA / GAS UTILITIES

REDUCE TARGET PRICE HKD19.79 UP/DOWNSIDE -19.6% CLOSE HKD24.60



EPS 2014 (%) (8.1) NEUTRAL 6

EPS 2015 (%) (13.0) NEGATIVE 6

Daisy Zhang, CFA [email protected] +8621 6096 9025

Yong Liang Por [email protected] +852 28251877

KEY STOCK DATA

YE Dec (HKD m) 2013A 2014E 2015E 2016E

Revenue 22,288 28,755 33,443 35,796

Rec. net profit 2,161 2,510 2,830 2,830

Recurring EPS (HKD) 1.00 1.13 1.27 1.27

EPS growth (%) 22.0 13.4 12.7 0.0

Recurring P/E (x) 24.7 21.8 19.3 19.3

Dividend yield (%) 0.9 0.9 1.0 1.0

EV/EBITDA (x) 11.3 9.1 8.2 8.2

Price/book (x) 3.9 3.4 3.0 2.6

Net debt/Equity (%) (7.5) (5.2) (3.4) (1.1)

ROE (%) 16.7 16.5 16.3 14.4


Absolute (%) (7.0) (4.7) 16.6

Relative to country (%) (6.5) 5.9 28.3



Free float (%) 32

Major shareholder China Resources Holdings (68%)

12m high/low (HKD) 27.30/17.66


ADR ticker -




(4)

16

36

56

19

21

23

25

27

29


(%)(HKD) China Resources Gas Rel to HSCEI

11

PX downturn begins

n PX margins deteriorate significantly PX margins fell to USD210/tonne in mid-March, a sharp decline from

USD450/tonne at the beginning of the year. The decline was

triggered by significant PTA oversupply resulting in significant run

cuts and lower PX demand. The current PX margin is unprofitable for

PX producers.

n Record PX expansion ahead Over the course of 2014 we forecast global capacity additions of

7mtpa, equivalent to global capacity additions of 17%, the largest

ever capacity increase, and significantly above our estimated

demand growth of 6% pa. PX margins are therefore unlikely to

meaningfully improve from current depressed levels.

n Consensus downgrades to follow. REDUCE. We believe that further cuts to consensus estimates are the key

negative catalyst. Our TP of TWD62 is based on SOTP. We forecast

FCFC to generate the weakest recurring EPS of TWD2.95 this year

amongst the Formosa group. Upside risk stronger-than-expected

polyester demand.

PX margin trend

Sources: Bloomberg consensus; Datastream

0

200

400

600

800

Jan-13 May-13 Sep-13 Jan-14

(USD/t)

25 MARCH 2014

NEWS FLASH

FORMOSA CHEM & FIBRE 1326 TT TAIWAN / CHEMICALS

REDUCE TARGET PRICE TWD62.00 UP/DOWNSIDE -14.8% CLOSE TWD72.80



EPS 2013 (%) 0.4 NEUTRAL 12

EPS 2014 (%) (17.1) NEGATIVE 4

Yong Liang Por [email protected] +852 28251877

KEY STOCK DATA

YE Dec (TWD m) 2012A 2013E 2014E 2015E

Revenue 288,025 422,750 391,756 389,377

Rec. net profit 6,988 25,195 17,309 22,910

Recurring EPS (TWD) 1.23 4.30 2.95 3.91

EPS growth (%) (80.2) 250.1 (31.3) 32.4

Recurring P/E (x) 59.3 16.9 24.7 18.6

Dividend yield (%) 0.9 3.5 2.6 3.5

EV/EBITDA (x) 23.0 10.2 13.4 11.4

Price/book (x) 1.8 1.7 1.7 1.6

Net debt/Equity (%) 26.4 11.1 6.1 (0.6)

ROE (%) 2.9 10.5 6.8 8.7


Absolute (%) (7.0) (13.9) 2.8

Relative to country (%) (8.4) (16.5) (7.8)



Free float (%) 51

Major shareholder Wang family (35%)

12m high/low (TWD) 85.70/66.20


ADR ticker -




(14)

(4)

6

16

59

69

79

89


(%)(TWD) Formosa Chem & Fibre

12

Debt remains a key concern

n We see no value despite potential asset sales at subsidiaries Jaiprakash Associates (JPA) plans to sell its core assets. However,

we see no compelling reason to buy the holding company despite

factoring in the sale of some of its assets. For us to turn bullish on

JPA, the stand-alone balance sheet must improve meaningfully,

which may be possible if capacity utilization of its cement plants

recovers or if it sells more assets. We maintain REDUCE on JPA.

n Poor earnings and leverage will be negative catalysts We believe poor earnings quality and its financial leverage position at

the end of FY15 should be negative catalysts for the stock. We

believe consolidated net D/E should be ~3x at end-FY15 despite

asset sales. We think asset sales could result in equity value creation

at the subsidiary level, however, parent debt could only be reduced

with the macro environment turning resulting in higher capacity

utilization and a larger construction order book from external sources.

n REDUCE with a SoTP-based TP of INR38 Despite factoring in asset sales, we estimate the fair value of the

company based on SoTP is INR38. Company-specific upside risks

include positive sentiment around elections expecting an up-tick in

the cement cycle, and quicker and higher value asset sales than we

expect.

D/E ratio


-

2.0

4.0

6.0

Standalone Consolidated

FY13 FY14 FY15 FY16 FY17 FY18 FY19

25 MARCH 2014

NEWS FLASH

JAIPRAKASH ASSOCIATES JPA IN INDIA / CAPITAL GOODS

REDUCE TARGET PRICE INR38.00 UP/DOWNSIDE -22.4% CLOSE INR48.95



EPS 2014 (%) NM NEUTRAL 9

EPS 2015 (%) NM NEGATIVE 3

Vishal Sharma, CFA [email protected] +91 22 6196 4377

KEY STOCK DATA

YE Mar (INR m) 2013A 2014E 2015E 2016E

Revenue 188,164 187,875 205,854 286,142

Rec. net profit 4,537 (9,026) (6,628) 8,296

Recurring EPS (INR) 2.05 (4.29) (3.23) 4.05

EPS growth (%) (28.3) nm nm nm

Recurring P/E (x) 23.8 neg neg 12.1

Dividend yield (%) 2.0 2.0 2.0 2.0

EV/EBITDA (x) 8.8 8.8 8.6 5.9

Price/book (x) 0.8 0.9 0.6 0.6

Net debt/Equity (%) 318.4 292.0 205.9 182.5

ROE (%) 3.8 (7.2) (4.4) 4.6


Absolute (%) 19.5 (10.0) (23.0)

Relative to country (%) 12.9 (12.7) (36.8)



Free float (%) 55

Major shareholder Promoters (47%)

12m high/low (INR) 82.30/29.70


ADR ticker -




(73)

(53)

(33)

(13)

7

19

39

59

79


(%)(INR) Jaiprakash Associates Rel to MSCI India

13

ILC structural acontraction

n Reiterate REDUCE, target price JPY1,350 We cut our FY3/15 forecasts after revising our outlook for the

interchangeable-lens camera (ILC) market, and taking a more

bearish outlook on profitability improvements for IC lithography

equipment. We now estimate Nikons FY3/15 OP will fall 3% y-y to

JPY62b and EPS decline 19% to JPY102.

n FY3/15 profit growth guidance relies on 2H Nikon is likely to give OP growth guidance for FY3/15 on 13 May, but

it is very unlikely that guidance will exceed the Bloomberg consensus

estimate. We think management will forecast flat ILC shipments in

FY3/15, with negative growth in 1H and positive in 2H. We forecast

negative growth in both 2H and 1H. Also, the capex environment is

likely to be hampered by deterioration in the small-LCD market.

n Potential consensus downgrade to shift focus to ROE decline We lower our P/BV-based TP to JPY1,350 (1.0x FY3/15E) from

JPY1,500 (1.2x FY3/14E). ROE should continue to decline. If other

brokers forecast a profit decline, we think ROE/BVPS will come into

focus.

n August-September production trends are very important The Christmas season is the pivotal period for ILC sales. Production

units for the season are determined around Aug-Sep and parts

procurement in June-July, and these should indicate final demand

order inquiries.

We assume structural contraction in the ILC market

Sources: CIPA; BNP Paribas estimates

2,000 3,000 3,957 3,305 2,925 3,060

10,656 12,171

16,198 13,826

11,680 11,140

2010 2011 2012 2013 2014BNPP E

2015BNPP E

SLR & MLC (Unit k)MLC SLR

25 MARCH 2014

CHANGE IN NUMBERS 17JAPAN / TECHNOLOGY HARDWARE & EQUIPMENT

NIKON CORP 7731 JP

REDUCE UNCHANGED

TARGET PRICE JPY1,350

CLOSE JPY1,645

UP/DOWNSIDE -17.9%

PRIOR TP JPY1,500

CHANGE IN TP -10.0%



EPS 2014 (%) 3.2 NEUTRAL 12

EPS 2015 (%) (5.1) NEGATIVE 6

Kunihiko Kanno [email protected] +81 3 6377 2255

Yoshitsugu Yamamoto [email protected] +81 3 6377 2259

KEY STOCK DATA

YE Mar (JPY b) 2014E 2014C 2015E 2016E

Revenue 1,001.4 1,015.0 930.2 850.3

Op profit 64.1 65.0 62.2 61.7

Prior op profit 60.0 - 68.7 58.4


Net profit 50.1 50.0 40.4 40.1

EPS (JPY) 126 126 102 101

P/E (x) 13.0 13.0 16.1 16.3

Dividend yield (%) 1.9 1.9 1.9 1.9

EV/EBITDA (x) 6.2 - 6.3 6.4

Price/book (x) 1.2 - 1.2 1.2

Net debt/equity (%) (12.2) - (17.8) (20.8)

ROE (%) 9.9 - 7.6 7.3


Absolute (%) (11.6) (16.2) (27.0)

Relative to country (%) (7.0) (8.7) (38.9)

Next results May 2014



Free float (%) 15

Major shareholder Mitsubishi UFJ Financial (9%)

12m high/low (JPY) 2,878/1,612


ADR ticker NINOY US

ADR closing price (USD; 21 Mar 2014) 16.35



(46)

(26)

(6)

14

1,001

1,501

2,001

2,501

3,001


(%)(JPY) Nikon Corp Rel to TOPIX Index

14



Disclaimers and Disclosures APPENDIX

DISCLAIMERS AND DISCLOSURES APPLICABLE TO NON-US BROKER-DEALER(S) (BNP Paribas Securities India Pvt Ltd)

ANALYST(S) CERTIFICATION

Manishi Raychaudhuri, BNP Paribas Securities India Pvt Ltd, +91 22 6196 4346, [email protected]. Gautam Mehta, BNP Paribas Securities India Pvt Ltd, +91 22 6196 4357, [email protected]. Rajan Jain, BNP Paribas Securities India Pvt Ltd, +91 22 6176 5624, [email protected]. The analyst(s) or strategist(s) herein each referred to as analyst(s) named in this report certify(ies) that (i) all views expressed in this report accurately reflect the personal view of the analyst(s) with regard to any and all of the subject securities, companies or issuers mentioned in this report; and (ii) no part of the compensation of the analyst(s) was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed by the research analyst herein. Analysts mentioned in this disclaimer are employed by a non-US affiliate of BNP Paribas Securities Corp., and are not registered/ qualified pursuant to NYSE and/or FINRA regulations.

IMPORTANT DISCLOSURES REQUIRED IN THE UNITED STATES BY FINRA RULES AND OTHER JURISDICTIONS "BNP Paribas is the marketing name for the global banking and markets business of BNP Paribas Group. No portion of this report was prepared by BNP Paribas Securities Corp (US) personnel, and it is considered Third-Party Affiliate research under NASD Rule 2711. The following disclosures relate to relationships between companies covered in this research report and the BNP entity identified on the cover of this report, BNP Securities Corp., and other entities within the BNP Paribas Group (collectively, "BNP Paribas").

The disclosure column in the following table lists the important disclosures applicable to each company that has been rated and/or recommended in this report:

Company Ticker Disclosure (as applicable)

Angang Steel 347 HK 6

Anhui Conch Cement 914 HK 6

China Resources Gas 1193 HK 6

Nikon Corp 7731 JP 5

BNP Paribas represents that: 1. Within the past year, it has managed or co-managed a public offering for this company, for which it received fees. 2. It had an investment banking relationship with this company in the last 12 months. 3. It received compensation for investment banking services from this company in the last 12 months. 4. It expects to receive or intends to seek compensation for investment banking services from the subject company/ies in the next 3 months. 5. It beneficially owns 1% or more of any class of common equity securities of the subject company. 6. It makes a market in securities in respect of this company. 7. The analyst(s) or an individual who assisted in the preparation of this report (or a member of his/her household) has a financial interest position in

securities issued by this company. The financial interest is in the common stock of the subject company, unless otherwise noted. 8. The analyst (or a member of his/her household) is an officer, director, or advisory board member of this company or has received compensation from the

company.

IMPORTANT DISCLOSURES REQUIRED IN KOREA The disclosure column in the following table lists the important disclosures applicable to each Korea listed company that has been rated and/or recommended in this report:

Company Ticker Price (as of 25-Mar-2014 closing price) Interest

N/A N/A N/A N/A

1. The performance of obligations of the Company is directly or indirectly guaranteed by BNP Paribas Securities Korea Co. Ltd (BNPPSK) by means of payment guarantees, endorsements, and provision of collaterals and/or taking over the obligations.

2. BNPPSK owns 1/100 or more of the total outstanding shares issued by the Company. 3. The Company is an affiliate of BNPPSK as prescribed by Item 3, Article 2 of the Monopoly Regulation and Fair Trade Act. 4. BNPPSK is the financial advisory agent of the Company for the Merger and Acquisition transaction or of the Target Company whereby the size of the

transaction does not exceed 5/100 of the total asset of the Company or the total number of outstanding shares. 5. BNPPSK has taken financial advisory service regarding listing to the Company within the past 1 year. 6. With regards to the tender offer initiated by the Company based on Item 2, Article 133 of the Financial Investment Services and Capital Market Act,

BNPPSK acts in the capacity of the agent for the tender offer designated either by the Company or by the target company, provided that this provision shall apply only where tender offer has not expired.

7. the listed company which issued the stocks in question in case where 40 days has not passed since the new shares were listed from the date of entering into arrangement for public offering or underwriting-related agreement for issuance of stocks

8. The Company is recognized as having considerable interests with BNPPSK. 9. The analyst or his/her spouse owns (including delivery claims of marketable securities based on legal regulations and trading and misc. contracts) the

following securities or rights (hereinafter referred to as Securities, etc. in this Article) regardless of whose name is used in the trading. 1) Stocks, bond with stock certificate, and certificate of pre-emptive rights issued by the Company whose securities dealings are being solicited. 2) Stock options of the Company whose securities dealings are being solicited. 3) Individual stock future, stock option, and warrants that use the stocks specified in Item 1) as underlying.

GENERAL DISCLAIMER This report was produced by BNP Paribas Securities India Pvt Ltd, member company(ies) of the BNP Paribas Group. This report is for the use of intended recipients only and may not be reproduced (in whole or in part) or delivered or transmitted to any other person without our prior written consent. By accepting this report, the recipient agrees to be bound by the terms and limitations set forth herein. This report does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual clients. Customers are advised to use the information contained herein as just one of many inputs and considerations prior to engaging in any trading activity. This report does not constitute a prospectus or other offering document or an offer or solicitation to buy or sell any securities or other

15



investments. This report is not intended to provide the sole basis of any evaluation of the subject securities and companies mentioned in this report. Information and opinions contained in this report are published for reference of the recipients and are not to be relied upon as authoritative or without the recipients own independent verification, or taken in substitution for the exercise of judgment by the recipient. Additionally, the products mentioned in this report may not be available for sale in certain jurisdictions. As an investment bank with a wide range of activities, BNP Paribas may face conflicts of interest, which are resolved under applicable legal provisions and internal guidelines. You should be aware, however, that BNP Paribas may engage in transactions in a manner inconsistent with the views expressed in this document, either for its own account or for the account of its clients. Australia: This report is being distributed in Australia by BNP Paribas Sydney Branch, registered in Australia as ABN 23 000 000 117 at 60 Castlereagh Street Sydney NSW 2000. BNP Paribas Sydney Branch is licensed under the Banking Act 1959 and the holder of Australian Financial Services Licence no. 238043 and therefore subject to regulation by the Australian Securities & Investments Commission in relation to delivery of financial services. By accepting this document you agree to be bound by the foregoing limitations, and acknowledge that information and opinions in this document relate to financial products or financial services which are delivered solely to wholesale clients (in terms of the Corporations Act 2001, sections 761G and 761GA; Corporations Regulations 2001, division 2, reg. 7.1.18 & 7.1.19) and/or professional investors (as defined in section 9 of the Corporations Act 2001). Canada: The information contained herein is not, and under no circumstances is to be construed as, a prospectus, an advertisement, a public offering, an offer to sell securities described herein, or solicitation of an offer to buy securities described herein, in Canada or any province or territory thereof. Any offer or sale of the securities described herein in Canada will be made only under an exemption from the requirements to file a prospectus with the relevant Canadian securities regulators and only by a dealer properly registered under applicable securities laws or, alternatively, pursuant to an exemption from the dealer registration requirement in the relevant province or territory of Canada in which such offer or sale is made. The information contained herein is under no circumstances to be construed as investment advice in any province or territory of Canada and is not tailored to the needs of the recipient. To the extent that the information contained herein references securities of an issuer incorporated, formed or created under the laws of Canada or a province or territory of Canada, any trades in such securities must be conducted through a dealer registered in Canada. No securities commission or similar regulatory authority in Canada has reviewed or in any way passed judgment upon these materials, the information contained herein or the merits of the securities described herein, and any representation to the contrary is an offence. Hong Kong: This report is prepared for professional investors and is being distributed in Hong Kong by BNP Paribas Securities (Asia) Limited to persons whose business involves the acquisition, disposal or holding of securities, whether as principal or agent. BNP Paribas Securities (Asia) Limited, a subsidiary of BNP Paribas, is regulated by the Securities and Futures Commission for the conduct of dealing in securities, advising on securities, providing automated trading services, dealing in futures contacts and advising on corporate finance. For professional investors in Hong Kong, please contact BNP Paribas Securities (Asia) Limited for all matters and queries relating to this report. India: In India, this document is being distributed by BNP Paribas Securities India Pvt. Ltd. ("BNPPSIPL"), having its registered office at 5th floor, BNP Paribas House, 1 North Avenue, Maker Maxity, Bandra Kurla Complex, Bandra (East), Mumbai 400 051 (Tel. no. +91 22 3370 4000 / 6196 4000). BNPPSIPL is registered with the Securities and Exchange Board of India (SEBI) as a stockbroker in the Equities and the Futures & Options segments of National Stock Exchange of India Ltd. and Bombay Stock Exchange Ltd. (SEBI regn. nos. INB/INF231474835, INB/INF011474831). Indonesia: This report is being distributed by PT BNP Paribas Securities Indonesia and is delivered by licensed employee(s) to its clients. PT BNP Paribas Securities Indonesia, having its registered office at Menara BCA, 35th Floor, Grand Indonesia, Jl. M.H.Thamrin No.1, Jakarta, 10310, Indonesia, is a fully subsidiaries company of BNP Paribas SA and is licensed under Capital Market Law No. 8 of 1995 and the holder of broker-dealer and underwriter licenses issued by the Capital Market and Financial Institutions Supervisory Agency (BAPEPAM-LK). PT BNP Paribas Securities Indonesia is also a member of Indonesia Stock Exchange. Neither this research publication nor any copy hereof may be distributed in Indonesia or to any Indonesian citizens except in compliance with applicable Indonesian capital market laws and regulations. This research publication is not an offer of securities in Indonesia. Some of the securities referred to in this research publication have not been registered with the Capital Market and Financial Institutions Supervisory Agency (BAPEPAM-LK) pursuant to relevant capital market laws and regulations, and may not be offered or sold within the territory of the Republic of Indonesia or to Indonesian citizens through a public offering or in circumstance which constitute an offer within the meaning of Indonesian capital market laws and regulations. Japan: This report is being distributed to Japanese based firms by BNP Paribas Securities (Japan) Limited or by a subsidiary or affiliate of BNP Paribas not registered as a financial instruments firm in Japan, to certain financial institutions defined by article 17-3, item 1 of the Financial Instruments and Exchange Law Enforcement Order. BNP Paribas Securities (Japan) Limited is a financial instruments firm registered according to the Financial Instruments and Exchange Law of Japan and a member of the Japan Securities Dealers Association, the Financial Futures Association of Japan and the Type II Financial Instruments Firms Association. BNP Paribas Securities (Japan) Limited accepts responsibility for the content of a report prepared by another non-Japan affiliate only when distributed to Japanese based firms by BNP Paribas Securities (Japan) Limited. Some of the foreign securities stated on this report are not disclosed according to the Financial Instruments and Exchange Law of Japan. Malaysia: This report is issued and distributed by BNP Paribas Capital (Malaysia) Sdn Bhd. The views and opinions in this research report are our own as of the date hereof and are subject to change. BNP Paribas Capital (Malaysia) Sdn Bhd has no obligation to update its opinion or the information in this research report. This publication is strictly confidential and is for private circulation only to clients of BNP Paribas Capital (Malaysia) Sdn Bhd. This publication is being provided to you strictly on the basis that it will remain confidential. No part of this material may be (i) copied, photocopied, duplicated, stored or reproduced in any form by any means or (ii) redistributed or passed on, directly or indirectly, to any other person in whole or in part, for any purpose without the prior written consent of BNP Paribas Capital (Malaysia) Sdn Bhd. Philippines: This report is being distributed in the Philippines by BNP Paribas Manila Branch, an Offshore Banking Unit (OBU) of BNP Paribas whose head office is in Paris, France. BNP Paribas Manila OBU is registered as an offshore banking unit under Presidential Decree No. 1034 (PD 1034), and regulated by the Bangko Sentral ng Pilipinas. This report is being distributed in the Philippines to qualified clients of OBUs as allowed under PD 1034, and is qualified in its entirety to the products and services allowed under PD 1034. Singapore: This report is distributed in Singapore by BNP Paribas Securities (Singapore) Pte Ltd ("BNPPSSL") and may be distributed in Singapore only to an Accredited or Institutional Investor, each as defined under the Financial Advisers Regulations ("FAR") and the Securities and Futures Act (Chapter 289) of Singapore, as amended from time to time. In relation to the distribution to such categories of investors, BNPPSSL and its representatives are exempted under Regulation 35 of the FAR from the requirements in Section 36 of the Financial Advisers Act of Singapore, regarding the disclosure of certain interests in, or certain interests in the acquisition or disposal of, securities referred to in this report. For Institutional and Accredited Investors in Singapore, please contact BNP Paribas Securities (Singapore) Ptd Ltd (company registration number: 199801966C; address: 10 Collyer Quay, 34/F Ocean Financial Centre, Singapore 049315; tel: (65) 6210 1288; fax: (65) 6210 1980) for all matters and queries relating to this report. South Africa: In South Africa, BNP Paribas Cadiz Securities (Pty) Ltd and BNP Paribas Cadiz Stock Broking (Pty) Ltd (hereinafter referred to as BNPP Cadiz) are licensed members of Johannesburg Stock Exchange and are authorised Financial Services Providers and subject to regulation by the Financial Services Board. BNPP Cadiz does not expressly or by implication represent, recommend or propose that the financial products referred to in this report are appropriate to the particular investment objectives, financial situation or particular needs of the recipient. Switzerland: This report is intended solely for customers who are Qualified Investors as defined in article 10 paragraphs 3 and 4 of the Swiss Federal Act on Collective Investment Schemes of 23 June 2006 (CISA) and the relevant provisions of the Swiss Federal Ordinance on Collective Investment Schemes of 22 November 2006 (CISO). Qualified Investors includes, among others, regulated financial intermediaries such as banks, securities dealers, fund management companies and asset managers of collective investment schemes, regulated insurance companies as well as pension funds and companies with professional treasury operations. This document may not be suitable for customers who are not Qualified Investors and should only be used and passed on to Qualified Investors. For specification purposes, a Swiss Corporate Customer is a Client which is a corporate entity, incorporated and existing under the laws of Switzerland and which qualifies as Qualified Investor as defined above." BNP Paribas (Suisse) SA is authorised as bank and as securities dealer by the Swiss Federal Market Supervisory Authority FINMA. BNP Paribas (Suisse) SA is registered at the Geneva commercial register under No. CH-270-3000542-1. BNP Paribas (Suisse) SA is incorporated in Switzerland with limited liability. Registered Office: 2 place de Hollande, CH-1204 Geneva. Taiwan: Information on securities that trade in Taiwan is distributed by BNP Paribas Securities (Taiwan) Co., Ltd. Such information is for your reference only. The reader should independently evaluate the investment risks and is solely responsible for their investment decision. Information on securities that do not trade in Taiwan is for informational purposes only and is not to be construed as a recommendation or a solicitation to trade in such securities. BNP Paribas

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Securities (Taiwan) Co., Ltd. may not execute transactions for clients in these securities. This publication may not be distributed to the public media or quoted or used by the public media without the express written consent of BNP Paribas. Thailand: Research relating to Thailand and Thailand based issuers is produced pursuant to an arrangement between BNP PARIBAS (BNPP) and Finansia Syrus Securities Public Company Limited (FSS). FSS International Investment Advisory Securities Co Ltd (FSSIA) prepares and distributes research under the brand name BNP PARIBAS/FSS. BNPP is not an affiliate of FSSIA or FSS. FSS also publishes a different research product under the brand name FINANSIA SYRUS, which is prepared by research analysts who are not part of FSSIA and who may cover the same securities, issuers, or industries that are the subject of this report. The ratings, recommendations, and views expressed in this report may differ from the ratings, recommendations, and views expressed by other research analysts or research teams employed by FSS. This report is being distributed outside Thailand by members of BNP Paribas. Turkey: This report is being distributed in Turkey by TEB Investment (TEB YATIRIM MENKUL DEGERLER A.S., Teb Kampus D Blok Saray Mah. Kucuksu Cad. Sokullu Sok., No:7 34768 Umraniye, Istanbul, Turkey, Trade register number: 358354, www.tebyatirim.com.tr) and outside Turkey jointly by TEB Investment and BNP Paribas. Notice Published in accordance with Communiqu Regarding the Principles on Investment Consultancy Activities and the Investment Consultancy Institutions Series: V, No: 55 issued by the Capital Markets Board. The investment related information, commentary and recommendations contained herein do not constitute investment consultancy services. Investment consultancy services are provided in accordance with investment consultancy agreements executed between investors and brokerage companies or portfolio management companies or non-deposit accepting banks. The commentary and recommendations contained herein are based on the personal views of the persons who have made such commentary and recommendations. These views may not conform to your financial standing or to your risk and return preferences. Therefore, investment decisions based solely on the information provided herein may fail to produce results in accordance with your expectations. United States: This report may be distributed in the United States only to U.S. Persons who are major U.S. institutional investors (as such term is defined in Rule 15a-6 under the Securities Exchange Act of 1934, as amended) and is not intended for the use of any person or entity that is not a major U.S. institutional investor. U.S persons who wish to effect transactions in securities discussed herein must do so through BNP Paribas Securities Corp., a US-registered broker dealer and member of FINRA, SIPC, NFA, NYSE and other principal exchanges. Certain countries within the European Economic Area: This document may only be distributed in the United Kingdom to eligible counterparties and professional clients and is not intended for, and should not be circulated to, retail clients (as such terms are defined in the Markets in Financial Instruments Directive 2004/39/EC (MiFID)). This document will have been approved for publication and distribution in the United Kingdom by BNP Paribas London Branch, a branch of BNP Paribas SA whose head office is in Paris, France. BNP Paribas SA is incorporated in France with limited liability with its registered office at 16 boulevard des Italiens, 75009 Paris. BNP Paribas London Branch (registered office: 10 Harewood Avenue, London NW1 6AA; tel: [44 20] 7595 2000; fax: [44 20] 7595 2555) is authorised by the Autorit de Contrle Prudentiel and the Prudential Regulation Authority and subject to limited regulation by the Financial Conduct Authority and Prudential Regulation Authority. Details about the extent of our authorisation and regulation by the Prudential Regulation Authority, and regulation by the Financial Conduct Authority are available from us on request.This report has been approved for publication in France by BNP Paribas, a credit institution licensed as an investment services provider by the Autorit de Contrle Prudentiel whose head office is 16, Boulevard des Italiens 75009 Paris, France. This report is being distributed in Germany either by BNP Paribas London Branch or by BNP Paribas Niederlassung Frankfurt am Main, regulated by the Bundesanstalt fr Finanzdienstleistungsaufsicht (BaFin). Other Jurisdictions: The distribution of this report in other jurisdictions or to residents of other jurisdictions may also be restricted by law, and persons into whose possession this report comes should inform themselves about, and observe, any such restrictions. By accepting this report you agree to be bound by the foregoing instructions. This report is not directed to, or intended for distribution to or use by, any person or entity that 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. All research reports are disseminated and available to all clients simultaneously through our internal client websites. For all research available on a particular stock, please contact the relevant BNP Paribas research team or the author(s) of this report.

Additional Disclosures Target price history, stock price charts, valuation and risk details, and equity rating histories applicable to each company rated in this report is available in our most recently published reports available on our website: http://eqresearch.bnpparibas.com, or you can contact the analyst named on the front of this note or your BNP Paribas representative. All share prices are as at market close on 25 March 2014 unless otherwise stated.

RECOMMENDATION STRUCTURE

Stock Ratings Stock ratings are based on absolute upside or downside, which we define as (target price* - current price) / current price. BUY (B). The upside is 10% or more. HOLD (H). The upside or downside is less than 10%. REDUCE (R). The downside is 10% or more. Unless otherwise specified, these recommendations are set with a 12-month horizon. Thus, it is possible that future price volatility may cause a temporary mismatch between upside/downside for a stock based on market price and the formal recommendation. * In most cases, the target price will equal the analyst's assessment of the current fair value of the stock. However, if the analyst doesn't think the market will reassess the stock over the specified time horizon due to a lack of events or catalysts, then the target price may differ from fair value. In most cases, therefore, our recommendation is an assessment of the mismatch between current market price and our assessment of current fair value.

Industry Recommendations Improving (): The analyst expects the fundamental conditions of the sector to be positive over the next 12 months. Stable (previously known as Neutral) (): The analyst expects the fundamental conditions of the sector to be maintained over the next 12 months. Deteriorating (): The analyst expects the fundamental conditions of the sector to be negative over the next 12 months. Country (Strategy) Recommendations Overweight (O). Over the next 12 months, the analyst expects the market to score positively on two or more of the criteria used to determine market recommendations: index returns relative to the regional benchmark, index sharpe ratio relative to the regional benchmark and index returns relative to the market cost of equity. Neutral (N). Over the next 12 months, the analyst expects the market to score positively on one of the criteria used to determine market recommendations: index returns relative to the regional benchmark, index sharpe ratio relative to the regional benchmark and index returns relative to the market cost of equity. Underweight (U). Over the next 12 months, the analyst does not expect the market to score positively on any of the criteria used to determine market recommendations: index returns relative to the regional benchmark, index sharpe ratio relative to the regional benchmark and index returns relative to the market cost of equity.

RATING DISTRIBUTION (as at 25 March 2014)

Total BNP Paribas coverage universe Investment Banking Relationship (%)

Buy Buy 6.10

Hold Hold 1.50

Reduce Reduce 2.80

Should you require additional information concerning this report please contact the relevant BNP Paribas research team or the author(s) of this report.

2014 BNP Paribas Group

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Absolute returns in directionless timesmerged.pdf1. Anhui Conch-2503143. Guodian T&E-250314

12_Asia Strategy - Absolute Return in a Directionless Market

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