regional materials - kim eng€¦ · regional fortnightly research | september 18, 2014 see page 16...

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September 18, 2014

SEE PAGE 16 FOR IMPORTANT DISCLOSURES AND ANALYST CERTIFICATIONS

Regional Materials Gems, Picks & Shovels Material Headlines China’s coal industry restructuring: new quality and volume

limits on imported/domestic thermal coal, and renewed consolidation push (SXCOAL). The measures should help support domestic thermal coal prices to our forecast +5% by YE (MKE).

The PBOC will provide liquidity of CNY500b (USD81b) to the five state-owned banks through year-end, equivalent to an RRR cut of 45bps, to help prevent a broader liquidity crunch. LME copper prices jumped 2% on the news from low levels. (MKE).

China’s major steel producers cut October list prices by an average of 3.5% to close the gap with market prices. Meanwhile, steel exports increased 35.4% Jan. - Aug. YoY to 56.8mt, but the average export price fell 8.3%. (Steelhome).

Vacant properties in China increased 27% YoY to 562msqm in August (NBS), which equates to about 35mt or nearly 10% of construction steel output (assuming steel intensity 60kg/sqm).

Despite the liquidity injection, metals prices are vulnerable to USD strength and lackluster data from China. Better to look for cheap/expensive stocks with up/downside catalysts or stay defensive in large cap bulks (coal, iron ore) (MKE).

Impact on Stock Recommendations We believe thermal coal prices have bottomed and look for a

moderate recovery (5% to year-end; 3% YoY in 2015 and 2016). We would buy on dips Shenhua (1088 HK; HKD22.65; BUY; TP HKD25), and China Coal (1898 HK; HKD4.64; BUY; TP 5.50).

Pair with a SELL on steel as prices fall: Angang Steel (347 HK; HKD5.24; SELL; TP HKD4.00), Posco (005490 KS; WON 353,000; Not Rated). We also rate Chalco a SELL (2600 HK; HKD 3.42; SELL; TP HKD3.20) on downside to aluminum prices in China.

Our 2015 ranking (best/worse): nickel, zinc, copper, aluminum, thermal coal, coking coal, gold, steel. Our Top Picks are VALE Indonesia (INCO IJ; IDR4,195; BUY; TP IDR4,800) and Nickel Asia (NIKL PM; PHP46.65; TP PHP51.17). For copper, we like growth play MMG (1208 HK; HKD2.90; BUY; TP HKD3.40).

Recent reports Indonesia Coal –Impact of China’s coal import ban (9/16/14)

Timah – Back to old tin cup regime? D/G to HOLD (9/15/14)

Maanshan I & S – Profit window dims; D/G to HOLD (9/15/14)

China Coal – Coal prices bottoming; U/G to BUY (9/11/14)

Atlas Mining – A tale of two mines (9/10/14)

Bumi Res. Min.– Raise TP; Maintain conservative est.’s (9/8/14)

Vale Indonesia – Continue to be positive (9/3/14)

MMG – More upside ahead; Raising TP (8/26/14)

(PLEASE REFER TO OUR VALUATION COMPS STARTING ON PAGE 5)

Contributing analysts HK/CHINA Alexander Latzer (metals, coal, steel) Regional Sector Head INDIA Anubhav Gupta (metals, steel) INDONESIA Isnaputra Iskandar, CFA (metals, coal, cement) PHILIPPINES Ramon Adviento (metals, coal) (Full materials team details on page 2) LME nickel price and inventory trends

Source: Bloomberg. Spot price shown.

LME copper price and inventory trends


LME aluminum price and inventory trends


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LME Inventory (LHS, '000 t)LME price (RHS, US$/lb)

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Inventory (LHS, '000 t)Price (RHS, USD/lb)

0.700.750.800.850.900.951.001.05

4,0004,3004,6004,9005,2005,5005,8006,100

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Inventory (LHS, '000 t)Price (RHS, USD/lb)

https://www.maybank-keresearch.com/KimEng/servlet/PDFDownloadViaEmail?rid=32175&uid=alatzer



https://www.maybank-keresearch.com/KimEng/servlet/PDFDownloadViaEmail?rid=32116&uid=syeung




https://www.maybank-keresearch.com/KimEng/servlet/PDFDownloadViaEmail?rid=31864&uid=syeung

September 18, 2014 2

Regional Materials Sector

Expectations are rising and so are headwinds Prices should moderately increase in 2015 YoY on improving global

consumption and slowing production growth.

Negatives are China’s materials intensity has peaked and credit remains tight for overcapacity sectors. Commodity financing abuses have also led to a lengthy period of inventory de-stocking.

The supply side faces the challenge of Chinese consumption 2-3x slower than the past 10 years. We forecast sustainable growth in copper consumption of 4-6%, aluminum 6-8%, coal/steel 2-4%.

Consensus forecasts for metal prices have increased. Relative to consensus for 2015 we are more positive on copper, but no longer so for nickel. We are less positive on aluminum - but agree on the uptrend – and also for gold, where we forecast a downtrend.

What’s Our View? - Soft recovery amid rising geopolitical risks We now see 55% odds for base metal prices to move moderately higher in 2015 vs 65% earlier. We see 35% odds for prices to remain volatile but lower if China is stuck in neutral (Muddle Kingdom scenario) vs 25% earlier. We see 10% odds of a strong across-the-board rally in metal prices in 2015, which is unchanged from our previous view. Risks are disappointing growth in China, a strengthening US dollar, deflation in the EU, and a broader war in the Middle East. A trade embargo on Russia would be difficult to enforce and hurt western companies.

Figure 1: Nominal metal prices indexed to 1980

Source: Bloomberg, Maybank Kim Eng.

Figure 2: Copper (USD/lb) Figure 3: Nickel (USD/lb)

Source: Bloomberg, Maybank Kim Eng Source: Bloomberg, Maybank Kim Eng

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Gold Copper Zinc Aluminum Nickel

#3

#1

#1: 55% ODDS

#2

#3: 10% ODDS #2: 35% ODDS

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2013A 2014E 2015E 2016E 2017E

Bloomberg consensus Kim EngForward curve Spot

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2013A 2014E 2015E 2016E 2017E

Bloomberg consensus Kim Eng

Forward curve Spot

Regional Materials Team HK/CHINA Alexander Latzer (metals, coal, steel) (852) 2268 0647 [email protected] INDIA Jigar Shah (cement, oil/gas) (91) 22 6623 2601 [email protected] Anubhav Gupta (metals, steel) (91) 22 6623 2605 [email protected] INDONESIA Isnaputra Iskandar, CFA (metals, coal, cement) (62) 21 2557 1129 [email protected] MALAYSIA Lee Yen Ling (steel, building materials) (603) 2297 8691 [email protected] PHILIPPINES Ramon Adviento (metals, coal) (63) 2 849 8845 [email protected] Lovell Sarreal (cement, consumer, media) (63) 2 849 8841 [email protected] SINGAPORE Yeak Chee Keong, CFA (oil/gas services, gem technology) (65) 6432 1460 [email protected] THAILAND Sutthichai Kumworachai (coal, energy, oil/gas, petrochemical) (66) 2658 6300 x 1400 [email protected] Surachai Pramualcharoenkit (steel, construction, contractors, automotive) (66) 2658 6300 x 1470 [email protected] VIETNAM Trung Thai (construction, materials, property) (84) 444 55 58 88 x 8180 [email protected]

mailto:[email protected]



China’s coal industry restructuring: new quality and volume limits on imported/domestic thermal coal, and renewed consolidation push (SXCOAL). The measures should help support domestic thermal coal prices to our forecast increase of 5% by YE (MKE).

What’s Our View?

The Chinese government has stepped up measures to support coal industry restructuring. The measures aimed at production cuts/consolidation are positive and should help put a floor under prices. However, the measures focusing on coal quality will have little impact and be difficult to enforce. Either way, without a recovery in demand there will be little chance of meaningful price increases.

We look for a moderate 5% increase in thermal coal prices in China by year-end from the current level as seasonal factors improve (winter re-stocking, lower hydro-power generation) and supply tightens due to low prices and production cuts. We also forecast regional and Chinese thermal coal prices will increase moderately the next few years by 3-4%/yr.

The NDRC is targeting a 12% cut in coal production from September to December this year by focusing on small and medium-size companies. The measures are an intensification of those at the state level exemplified in August by China’s two largest coal groups Shenhua and China Coal. The NDRC is also aiming to shutter 800-1,000 outdated and unsafe mines by year-end. In addition, it reiterated the policy of not approving mines with annual capacity of less than 300,000t, but added mines with ‘gas outbursts’ whose annual capacity is less than 900,000t.

The following measures appear to either be difficult to enforce or will have limited impact as most imported coals meet the requirements. Earlier this month all the major SOE power generation companies were instructed in a meeting with the NDRC in Beijing to reduce their coal imports by 50% for the remainder of the year. Failure to comply would result in the NDRC lowering the on-grid power generation quota for that particular power group and sanctioning officials. In addition, from the beginning of 2015, the Chinese government will implement tougher requirements on coal imports based on quality as follows:

All imports of lignite coal must have ash/sulphur contents less than 30.0%/1.5%, and non-lignite coal less than 40.0%/3.0%.

For coal hauled more than 600km from the port of entry, lignite must have a CV of above 3,946kcal/kg with ash/sulphur contents of below 20.0%/1.0%, while non-lignite must have a CV greater than 4,300kcal/kg, with ash/sulphur less than 30.0%/2.0%.

For other coals used in coastal areas and northern cities in China, those with ash/sulphur contents greater than 16.0%/1.0% will be banned for sale and use by retail and small-scale consumers.

Our Jakarta-based materials analyst, Isnaputra Iskander, has indicated that the coal quality import policy will not affect coal companies under his coverage as their ash/sulphur contents are very low:

ADRO. Ash content: 1.8-3.1%; sulphur content: 0.10-0.21%;

BUMI. Ash content: 2.5-12.0%; sulphur content: 0.20-1.40%;

ITMG. Ash content: 6.0%; sulphur content: 0.8-1.8%;

PTBA. Ash content: 4.0-8.0%; sulphur content: 0.5-1.2%.

The Chinese government has stepped up measures to support coal industry restructuring. The measures aimed at production cuts/consolidation are positive and should help put a floor under prices. However, measures focusing on coal quality will have little impact and will be difficult to enforce. Either way, without a recovery in demand there will be little chance of meaningful price increases.

The NDRC is targeting a 12% cut in coal production from Sept-Dec this year by focusing on small and medium-size companies. The measures are an intensification of those at the state level exemplified in August by China’s two largest coal groups Shenhua and China Coal.



China’s major steel producers cut October list prices by an average of 3.5% to close the gap with market prices. Meanwhile, steel exports increased 35.4% Jan. - Aug. YoY to 56.8mt, but the average price fell 8.3%. (Steelhome).

What’s Our View?

Chinese steel companies cut list prices for the first time in several months in October to help narrow the gap with market prices that have fallen 10-15% over the past two months led by hot rolled coil (Figures 4, 5). Steel production growth has considerably slowed to the low single digits YoY but remains in excess of the market demand. What is needed are sustained production cuts to support prices at small and medium-sized private mills.

We look for steel prices to trend sideways to lower through 1Q next year before resuming the downtrend in 2H in line with raw material costs (Figure 7). Steel prices in the U.S. are among the highest in the world and those in China the lowest. The main difference is a consolidated steel industry and duties on imported steel in the U.S. The Chinese steel industry operating rate is about 72% on 1.2b tonnes of capacity while the U.S. rate is about 79% on roughly 100m tonnes of capacity. As a result, Chinese steel exports have increased to record levels and countries around the world are either putting in place or reinforcing trade barriers.

Figure 4: Steel market prices in eastern China Figure 5: China company list prices vs market prices

Source: Steelhome. Source: Steelhome.

Figure 6: China crude steel production and YoY growth Figure 7: Long-term view of steel prices and input costs

Source: Steelhome. Source: Steelhome, AMM, Maybank Kim Eng forecasts.

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Rebar ψ12 Plate 20mmHRC 2.75mm CR sheet 1mmHDG 0.5mm

Rmb/t

2,5003,0003,5004,0004,5005,0005,5006,000

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Co. avg. HRC price (VAT excl.)Market price (2.75mm, VAT excl.)Rmb/t

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Monthly crude production (LHS)YoY growth (RHS)

YoY chg. mt

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400 500 600 700 800 900

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Raw materials cost ex-freight (RHS)China HRC 2.75mm, VAT excl. (LHS)US HRC price (LHS)

USD/ USD/t

Chinese steel companies cut October list prices to help narrow the gap with market prices that have fallen 10-15% the past two months led by hot rolled coil. We look for steel prices to trend sideways to lower through 1Q next year before resuming the downtrend in 2H next year in line with raw material costs.



Valuation comps. 2015: materials, coal and steel (EV/EBITDA, PBV, EBITDA margin, and ROE)

Figure 1: Materials EV/EBITDA 2015 (x) Figure 2: Materials PBV 2015 (x)

Source: Bloomberg consensus Source: Bloomberg consensus

0.2 2.6

3.5 3.6 3.8 4.2 4.7 4.8 4.8 5.1 5.2 5.5 5.7 5.8 5.8 6.0 6.0 6.3 6.7 6.7 6.8 6.9 6.9 6.9 7.3 7.3 7.3 7.4 7.5 7.6 7.7 8.2 8.7 9.2 9.2 9.6 10.1 10.6

11.9 12.2 12.7 13.1

13.9 14.8 15.2

16.7

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Sylvania PlatinumAfrican Minerals

Oz MineralsHongqiao

China Vanadium…Atlas Minerals

VedantaNickel Asia

Vale (Brazil)Sesa Sterlite

Pan AustAntofagasta

Anglo AmericanRio Tinto

Freeport McMoRanLonmin

Chinalco MiningTeck Resources

BHP BillitonFirst Quantum

PT IncoMinmetal MMG

HindalcoBarrick Gold

Glencore XstrataKorea Zinc

Fortescue MetalsNewmont

Newcrest MiningNorsk Hydro

AlcoaAmplats

Jiangxi CopperCliffs Natural Res.

Lingbao GoldIluka

Zhaojin MiningZijin Mining

Aneka TambangUnited Co RusalPaladin Energy

PhilexMolycorp

MitsubishiChina Molybdenum

Chalco

0.2 0.4 0.4 0.4

0.6 0.6 0.6 0.6 0.6 0.7 0.7 0.7 0.7 0.7 0.8 0.8 0.8 0.8 0.8 0.9 0.9 1.0 1.0 1.0 1.0 1.1 1.1 1.1 1.1 1.1 1.2 1.2 1.2

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African MineralsMolycorp

China Vanadium…Cliffs Natural Res.

Oz MineralsLingbao Gold

LynasLonmin

Minmetal MMGMitsubishiHindalco

Indophil Res.Glencore Xstrata

Teck ResourcesPaladin Energy

HongqiaoJiangxi Copper

Vale (Brazil)Aneka Tambang

BuenaventuraAnglo American

Newcrest MiningChalco

Sesa SterliteNorsk Hydro

Zhaojin MiningERA

Pan AustZijin Mining

NewmontVedanta

United Co RusalFirst Quantum

Barrick GoldAlumina

China MolybdenumKorea Zinc

Freeport McMoRanAlcoa

AntofagastaAtlas Minerals

PT IncoAmplats

PhilexIluka

Chinalco Mining



Figure 3: Materials EBITDA margin 2015 (%) Figure 4: Materials ROE 2015 (%)


1.4 2.7 3.0 3.8 5.2 6.4 7.7

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14.6 15.4 15.5 16.0 17.0 17.3 17.5

21.2 23.9 25.8 27.9 28.7 29.5 31.9 33.0 33.3 33.5 33.7 34.2 34.2 34.2 34.5 34.6 35.0 35.3 36.5 37.3 37.9

40.7 41.3 41.4 42.4 42.5 43.6 44.1

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59.1 69.4

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ERAMitsubishi

Jiangxi CopperLynas

ChalcoGlencore Xstrata

Lingbao GoldHindalco

Aneka TambangNorsk Hydro

AlcoaZijin Mining

United Co RusalMolycorp

Cliffs Natural Res.Korea Zinc

LonminAmplats

African MineralsChina Vanadium…Paladin Energy

Anglo AmericanSylvania Platinum

Teck ResourcesVedanta

Zhaojin MiningHongqiaoNewmont

Minmetal MMGSesa Sterlite

Pan AustFortescue Metals

China MolybdenumOz Minerals

IlukaBuenaventura

Newcrest MiningPhilex

Vale (Brazil)PT Inco

Freeport McMoRanRio Tinto

Barrick GoldAntofagastaBHP Billiton

Norilsk NickelFirst Quantum

Chinalco MiningAtlas Minerals

Bumi Res. Min.Nickel Asia

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ERALynas

MolycorpChalco

African MineralsLingbao Gold

Cliffs Natural Res.Indophil Res.

Paladin EnergyOz Minerals

China Vanadium TitanoLonmin

Minmetal MMGAneka TambangTeck Resources

NewmontBuenaventura

Newcrest MiningNorsk Hydro

Jiangxi CopperAlumina

Zhaojin MiningZijin Mining

Barrick GoldAlcoa

MitsubishiVedanta

Anglo AmericanPhilexIluka

NalcoHindalcoPan Aust

Chinalco MiningChina Molybdenum

AntofagastaSesa Sterlite

Glencore XstrataFirst Quantum

Vale (Brazil)Korea Zinc

United Co RusalAmplats

Freeport McMoRanPT Inco

BHP BillitonFortescue Metals

Atlas MineralsRio TintoHongqiao

Norilsk NickelNickel Asia



Figure 5: Coal EV/EBITDA 2015 (x) Figure 6: Coal PBV 2015 (x)


Figure 7: Coal EBITDA margin 2015 (%) Figure 8: Coal ROE 2015 (%)


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Shougang Fushan

Indika Energy

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Indo Tamb. Megah

Raspadskaya

Coal India

Southgobi

Bumi Resources

Peabody Energy

Consol Energy

White Haven

Banpu Pcl

Mongolian Mining

Yanzhou Coal

PT Bukit Asam

China Coal

Alpha Natural

Arch Coal

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Walter Energy

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Arch Coal

Indika Energy

Shougang Fushan

Raspadskaya

China Coal

White Haven

Yanzhou Coal

Mongolian Mining

Banpu Pcl

Tigers Realm

Peabody Energy

Shenhua

Adaro

Harum Energy

Consol Energy

Bumi Resources

Indo Tamb. Megah

PT Bukit Asam

Coal India

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Alpha Natural

Mechel

Harum Energy

Southgobi

Arch Coal

Walter Energy

Yanzhou Coal

Peabody Energy

China Coal

Raspadskaya

Bumi Resources

Indo Tamb. Megah

Banpu Pcl

PT Bukit Asam

White Haven

Indika Energy

Hidili

Mongolian Mining

Adaro

Coal India

Shenhua

Consol Energy

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-14.4

-8.0

-6.9

-3.1

-2.5

-1.3

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3.9

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6.3

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-40.0 -20.0 0.0 20.0 40.0

Alpha Natural

Arch Coal

Southgobi

Raspadskaya

Hidili

Mongolian Mining

Peabody Energy

Indika Energy

White Haven

China Coal

Yanzhou Coal

Shougang Fushan

Banpu Pcl

Consol Energy

Adaro

Bumi Resources

Harum Energy

Shenhua

Indo Tamb. Megah

PT Bukit Asam

Coal India



Figure 9: Steel EV/EBITDA 2015 (x) Figure 10: Steel PBV 2015 (x)


Figure 11: Steel EBITDA margin 2015 (%) Figure 12: Steel ROE 2015 (%)


4.9 5.3 5.3 5.3 5.4 5.8 5.8 6.0 6.0 6.1 6.1 6.4 6.5 6.8 6.9 6.9 7.1 7.5 7.8 8.1 8.1 8.4 8.5 8.8

10.9

0 3 6 9 12 15

EvrazU.S. Steel

AngangArcelor Mittal

BaosteelThyssen Krupp

JSW SteelAK Steel

Jindal Steel & PowerTata SteelKobe Steel

Steel DynamicsSteel Authority

JFE HoldingBluescope Steel

Nippon SteelHyundai Hysco

MaanshanWuhanNucor

POSCOBhushan SteelHyundai Steel

Allengheny TechnologyChina Steel

0.3 0.5 0.5 0.6 0.6 0.6 0.6 0.6 0.6 0.7 0.7 0.7 0.7 0.9 0.9 1.0 1.0 1.2 1.4 1.4 1.6 1.7 1.7

2.1 3.3

4.9

0.0 2.0 4.0 6.0

Bhushan SteelMaanshan

Arcelor MittalEvraz

BaosteelAngang

Bluescope SteelWuhan

Hyundai SteelJFE Holding

Steel AuthorityPOSCO

Jindal Steel &…Kobe Steel

Nippon SteelTata SteelSeverstalJSW Steel

China SteelU.S. Steel

Allengheny…Hyundai HyscoSteel Dynamics

NucorThyssen Krupp

AK Steel

3.5 5.3

6.7 8.0 8.4 8.5 8.9 9.3 9.3 9.8 10.2 10.8 11.0 11.0 12.0 12.2 12.2 12.7 13.5 13.6 14.0 14.1 14.7

17.6 18.5

19.7

0.0 5.0 10.0 15.0 20.0 25.0 30.0

ShougangDongkuk Steel

Thyssen KruppHyundai Hysco

MaanshanU.S. Steel

Bluescope SteelWuhan

AK SteelPOSCO

Arcelor MittalJFE Holding

AngangKobe Steel

Steel DynamicsNucor

BaosteelTata Steel

Allengheny TechnologySteel Authority

EvrazNippon Steel

Hyundai SteelChina Steel

SeverstalJSW Steel

1.9 2.9 3.1 3.2

4.1 4.3

5.4 5.5 6.2 6.3 6.9 7.0 7.4 7.9 8.2

9.8 9.9

11.7 11.8 12.2 12.2

13.5 14.8

0.0 5.0 10.0 15.0 20.0

MaanshanWuhanEvraz

AngangArcelor MittalBhushan Steel

Bluescope SteelPOSCO

Hyundai SteelChina Steel

BaosteelSteel Authority

Allengheny TechnologyJFE HoldingKobe Steel

Nippon SteelU.S. SteelSeverstal

Tata SteelJindal Steel & Power

JSW SteelNucor

Steel Dynamics



APPENDIX: Share price performance: materials, coal and steel (YTD, 3 months)

Figure 1: Asia regional materials stocks YTD Figure 2: Asia regional materials stocks past three months

Source: Bloomberg. Source: Bloomberg.

Figure 3: Asia regional coal stocks YTD Figure 4: Asia regional coal stocks past three months


-59% -52%

-31% -23% -19% -18% -12% -12%

-9% -6% -6% -5% -4% -2%

0% 0% 2% 4% 5% 5% 6% 8% 10% 11% 11% 12% 14% 14% 17% 18% 19% 25% 25% 25% 29% 31% 33% 34% 35% 39% 40% 45% 48% 50% 54% 63%

74% 89% 97% 97% 108%

206%

-150% -75% 0% 75% 150% 225%

LynasHaranga

FortescueWCC

Paladin EnergyIRC

CNBMShanshuiRio Tinto

BHP BillitonChinalco Mining

Anhui ConchJiangxi Copper

Baotou Rare EarthSterlite Inds

Taiwan CementZhaojin Mining

Aneka TambangERA

Asia CementCR Cement

Atlas MineralsPanAust

HongqiaoChina Vanadium

VedantaAmbuja Cement

SinomaHunan Nonferrous

Yunnan CopperZijin Mining

Hindustan ZincChalco

Korea ZincOZ Minerals

HindalcoNewcrest

ACCPhilex

IndophileSesa Sterlite

Ultratech CementChina Moly

AluminaVALE Indonesia

NALCOMMG

ICEMRUSAL

Shree CementBumi Res. Min.

Nickel Asia

-25% -9% -9% -9% -8% -8% -5% -5% -5% -2% -2% -1% -1% -1% -1% 0%

0% 1% 1% 2% 2% 4% 4% 5% 6% 6% 8% 8% 10% 11% 12% 13% 13% 13% 14% 15% 15% 16% 16% 18% 19% 19% 20% 22%

28% 30% 33% 35%

46% 53%

67% 78%

-40% 0% 40% 80% 120%

HarangaUltratech Cement

IRCPanAust

Ambuja CementLynas

VedantaICEM

Sesa SterliteAneka TambangHindustan Zinc

OZ MineralsHindalco

Chinalco MiningACC

Anhui ConchSterlite Inds

ERABHP Billiton

FortescueAsia Cement

Taiwan CementNewcrest

Zhaojin MiningCNBM

ShanshuiRio Tinto

Korea ZincVALE IndonesiaJiangxi Copper

NALCOHongqiao

China VanadiumCR Cement

Baotou Rare EarthAtlas Minerals

PhilexAlumina

Zijin MiningShree Cement

WCCPaladin Energy

ChalcoRUSAL

SinomaHunan Nonferrous

China MolyYunnan Copper

MMGIndophile

Nickel AsiaBumi Res. Min.

-44%

-37%

-35%

-31%

-29%

-25%

-23%

-23%

-21%

-18%

-7%

-7%

-4%

2%

7%

18%

21%

27%

35%

-60% -40% -20% 0% 20% 40%

Borneo Lumbung

Bumi Resources

Mongolia Mining

Southgobi

Shougang Fushan

Berau

Winsway

Harum Energy

Hidili

Bayan

Yanzhou Coal

Shenhua

Indo Tam. Megah

Banpu pcl

China coal

Coal India

Adaro

PT Bukit Asam

Indika Energy

-13%

-13%

-11%

-9%

-8%

-3%

-3%

2%

2%

4%

6%

7%

8%

13%

16%

18%

23%

26%

36%

-40% -20% 0% 20% 40%

Borneo Lumbung

Coal India

Harum Energy

Bayan

Southgobi

Indo Tam. Megah

Winsway

Hidili

Shenhua

Adaro

Yanzhou Coal

Banpu pcl

Bumi Resources

China coal

Shougang Fushan

Indika Energy

PT Bukit Asam

Mongolia Mining

Berau



Figure 5: Asia regional steel stocks YTD Figure 6: Asia regional steel stocks past three months


Metal prices and inventory Figure 7: Copper exchange prices and inventories Figure 8 Aluminum exchange prices and inventories

Source: Bloomberg Source: Bloomberg

Figure 9: Nickel exchange prices and inventories Figure 10: Zinc exchange prices and inventories


-72%

-41%

-19%

-17%

-16%

-14%

-14%

-9%

-8%

-3%

-2%

-1%

5%

7%

7%

10%

16%

27%

96%

-100% -60% -20% 20% 60% 100%

Bhushan

Dongkuk steel

Shougang

Nippon Steel

Jindal Steel & Power

JFE Holding

Maanshan

Hyundai Steel

Angang

BlueScope Steel

China Steel

Kobe Steel

Wuhan Steel

Posco Steel

Steel Authority

Baosteel

Tata Steel

JSW Steel

Hyundai Hysco

-67%

-32%

-20%

-8%

-7%

-7%

1%

2%

5%

6%

7%

8%

9%

10%

13%

14%

15%

22%

23%

-80% -60% -40% -20% 0% 20% 40%

Bhushan

Jindal Steel & Power

Steel Authority

Tata Steel

Dongkuk steel

Nippon Steel

Shougang

JSW Steel

BlueScope Steel

China Steel

JFE Holding

Hyundai Steel

Angang

Maanshan

Hyundai Hysco

Baosteel

Wuhan Steel

Kobe Steel

Posco Steel



Figure 11: Gold exchange prices Figure 12: Silver exchange prices


Figure 13: Platinum exchange prices Figure 14: Palladium exchange prices


0

80

160

240

320

400

-

400

800

1,200

1,600

2,000

Jan-

00Ju

l-00

Jan-

01Ju

l-01

Jan-

02Ju

l-02

Jan-

03Ju

l-03

Jan-

04Ju

l-04

Jan-

05Ju

l-05

Jan-

06Ju

l-06

Jan-

07Ju

l-07

Jan-

08Ju

l-08

Jan-

09Ju

l-09

Jan-

10Ju

l-10

Jan-

11Ju

l-11

Jan-

12Ju

l-12

Jan-

13Ju

l-13

Jan-

14Ju

l-14

Pric

e (R

mb

per

gram

)

Pric

e (U

S$ p

er o

z)

LME Spot Price (LHS)Shanghai Spot Price (RHS)

2,200

4,200

6,200

8,200

10,200

12,200

0

20

40

60

80

100

Jan-

00Ju

l-00

Jan-

01Ju

l-01

Jan-

02Ju

l-02

Jan-

03Ju

l-03

Jan-

04Ju

l-04

Jan-

05Ju

l-05

Jan-

06Ju

l-06

Jan-

07Ju

l-07

Jan-

08Ju

l-08

Jan-

09Ju

l-09

Jan-

10Ju

l-10

Jan-

11Ju

l-11

Jan-

12Ju

l-12

Jan-

13Ju

l-13

Jan-

14Ju

l-14

Pric

e (R

mb

per

gram

)

Pric

e (U

S$ p

er o

unce

)


-

80

160

240

320

400

200

600

1,000

1,400

1,800

2,200

Jan-

00Ju

l-00

Jan-

01Ju

l-01

Jan-

02Ju

l-02

Jan-

03Ju

l-03

Jan-

04Ju

l-04

Jan-

05Ju

l-05

Jan-

06Ju

l-06

Jan-

07Ju

l-07

Jan-

08Ju

l-08

Jan-

09Ju

l-09

Jan-

10Ju

l-10

Jan-

11Ju

l-11

Jan-

12Ju

l-12

Jan-

13Ju

l-13

Jan-

14Ju

l-14

Pric

e (R

mb

per

gram

)

Pric

e (U

S$ p

er o

z)


0

40

80

120

160

200

240

-

200

400

600

800

1,000

1,200

Jan-

00Ju

l-00

Jan-

01Ju

l-01

Jan-

02Ju

l-02

Jan-

03Ju

l-03

Jan-

04Ju

l-04

Jan-

05Ju

l-05

Jan-

06Ju

l-06

Jan-

07Ju

l-07

Jan-

08Ju

l-08

Jan-

09Ju

l-09

Jan-

10Ju

l-10

Jan-

11Ju

l-11

Jan-

12Ju

l-12

Jan-

13Ju

l-13

Jan-

14Ju

l-14

Pric

e (R

mb

per

gram

)

Pric

e (U

S$ p

er o

unce

) LME Spot Price (LHS)Shanghai Spot Price (RHS)



China coal inventory and prices, and power data

Figure 15: Thermal coal price Qinhuangdao vs Newcastle* Figure 16: Thermal coal prices in China and Australia*

Source: Bloomberg, McCloskey, Maybank Kim Eng estimates.*Prices are adjusted for coal calorific content and estimated transportation cost for delivery to southern China for comparison purposes.

Source: Bloomberg, McCloskey, Maybank Kim Eng estimates. *China coal price includes 17% VAT basis 5,800 kcal. Australia price is FOB basis 6,000 kcal.

Figure 17: China coal inventory at power plants and total Figure 18: China total raw coal production and YoY change

Source: Bloomberg, McCloskey, Maybank Kim Eng estimates. Source: CCTD, McCloskey.

Figure 19: Monthly power generation and pct. change Figure 20: Power generation by source and YoY change

Source: China NBS. Source: China NBS.

-40%-30%-20%-10%0%10%20%30%40%

0255075

100125150175200

Jan-

01Au

g-01

Mar

-02

Oct

-02

May

-03

Dec

-03

Jul-

04Fe

b-05

Sep-

05Ap

r-06

Nov

-06

Jun-

07Ja

n-08

Aug-

08M

ar-0

9O

ct-0

9M

ay-1

0D

ec-1

0Ju

l-11

Feb-

12Se

p-12

Apr-

13N

ov-1

3Ju

n-14

Premium (discount) (USD/t)

Qinhuangdao coal price (LHS)Newcastle coal price (LHS)Qinhuangdao premium (discount)

0255075

100125150175200

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

Jul-

13

Jan-

14

Jul-

14

Jan-

15

Jul-

15

Jan-

16

USD/t Qinhuangdao coal price Newcastle coal price

Forecast

Current prices Qinhuangdao 5,800 kcal USD84/t (incl. 17% VAT) Newcastle 6,000 kcal USD66/t (FOB)

5

10

15

20

25

30

35

40

Jan-

05Ju

l-05

Jan-

06Ju

l-06

Jan-

07Ju

l-07

Jan-

08Ju

l-08

Jan-

09Ju

l-09

Jan-

10Ju

l-10

Jan-

11Ju

l-11

Jan-

12Ju

l-12

Jan-

13Ju

l-13

Jan-

14Ju

l-14

Power plants TotalDays

(30%)(20%)(10%)0%10%20%30%40%50%

050

100150200250300350400

Jan-

03Ju

n-03

Nov

-03

Apr-

04Se

p-04

Feb-

05Ju

l-05

Dec

-05

May

-06

Oct

-06

Mar

-07

Aug-

07Ja

n-08

Jun-

08N

ov-0

8Ap

r-09

Sep-

09Fe

b-10

Jul-

10D

ec-1

0M

ay-1

1O

ct-1

1M

ar-1

2Au

g-12

Jan-

13Ju

n-13

Nov

-13

Apr-

14

mt Production (LHS)YoY Chg. (RHS)6 per. Mov. Avg. (YoY Chg. (RHS))

YoY Chg

-14-707142128

0100200300400500600

Jan&

Feb-

07M

ay-0

7Au

g-07

Nov

-07

Mar

-08

Jun-

08Se

p-08

Dec

-08

Apr-

09Ju

l-09

Oct

-09

Jan&

Feb-

10M

ay-1

0Au

g-10

Nov

-10

Mar

-11

Jun-

11Se

p-11

Dec

-11

Apr-

12Ju

l-12

Oct

-12

Jan&

Feb-

13M

ay-1

3Au

g-13

Nov

-13

Mar

-14

Jun-

14

(YoY %) (bn kWh) Monthly power generation (LHS)% YoY (RHS)% MoM (RHS)

(40)(30)(20)(10)

0102030405060

Jan&

Feb-

07M

ay-0

7Au

g-07

Nov

-07

Mar

-08

Jun-

08Se

p-08

Dec

-08

Apr-

09Ju

l-09

Oct

-09

Jan&

Feb-

10M

ay-1

0Au

g-10

Nov

-10

Mar

-11

Jun-

11Se

p-11

Dec

-11

Apr-

12Ju

l-12

Oct

-12

Jan&

Feb-

13M

ay-1

3Au

g-13

Nov

-13

Mar

-14

Jun-

14

YoY % Chg. Thermal Hydro Nuclear



China steel inventory and prices

Figure 21: Steel market prices in eastern China Figure 22: China company list prices vs market prices


Figure 23: Coking coal prices China and the region Figure 24: Comparison - imported iron ore vs domestic rebar


Figure 25: China crude steel production and YoY growth Figure 26: Long-term view of steel prices and input costs

Source: Steelhome Source: Steelhome, AMM, Maybank Kim Eng forecasts.

2,000

3,000

4,000

5,000

6,000

7,000

8,000

Jan

04Ju

n 04

Nov

04

Apr

05Se

p 05

Feb

06Ju

l 06

Dec

06

May

07

Oct

07

Mar

08

Aug

08Ja

n 09

Jun

09N

ov 0

9Ap

r 10

Sep

10Fe

b 11

Jul 1

1D

ec 1

1M

ay 1

2O

ct 1

2M

ar 1

3Au

g 13

Jan

14Ju

n 14

Rebar ψ12 Plate 20mmHRC 2.75mm CR sheet 1mmHDG 0.5mm

Rmb/t

2,5003,0003,5004,0004,5005,0005,5006,000

Jan

04Ju

n 04

Nov

04

Apr

05Se

p 05

Feb

06Ju

l 06

Dec

06

May

07

Oct

07

Mar

08

Aug

08Ja

n 09

Jun

09N

ov 0

9Ap

r 10

Sep

10Fe

b 11

Jul 1

1D

ec 1

1M

ay 1

2O

ct 1

2M

ar 1

3Au

g 13

Jan

14Ju

n 14

Co. avg. HRC price (VAT excl.)Market price (2.75mm, VAT excl.)Rmb/t

050

100150200250300350400

Jan

07M

ay 0

7Se

p 07

Jan

08M

ay 0

8Se

p 08

Jan

09M

ay 0

9Se

p 09

Jan

10M

ay 1

0Se

p 10

Jan

11M

ay 1

1Se

p 11

Jan

12M

ay 1

2Se

p 12

Jan

13M

ay 1

3Se

p 13

Jan

14M

ay 1

4Se

p 14

Shanxi premium coking coal (ex-VAT)Newcastle hard coking coal (FOB Australia)

USD/t

2,000

3,000

4,000

5,000

6,000

7,000

0

50

100

150

200

250

Jan

07M

ay 0

7Se

p 07

Jan

08M

ay 0

8Se

p 08

Jan

09M

ay 0

9Se

p 09

Jan

10M

ay 1

0Se

p 10

Jan

11M

ay 1

1Se

p 11

Jan

12M

ay 1

2Se

p 12

Jan

13M

ay 1

3Se

p 13

Jan

14M

ay 1

4Se

p 14

Iron ore (CIF China, 62%, LHS)Rebar price China (VAT incl., RHS)

USD/t CNY/t

-20%

-10%

0%

10%

20%

30%

40%

50%

10

20

30

40

50

60

70

80

Jan

06M

ay 0

6Se

p 06

Jan

07M

ay 0

7Se

p 07

Jan

08M

ay 0

8Se

p 08

Jan

09M

ay 0

9Se

p 09

Jan

10M

ay 1

0Se

p 10

Jan

11M

ay 1

1Se

p 11

Jan

12M

ay 1

2Se

p 12

Jan

13M

ay 1

3Se

p 13

Jan

14M

ay 1

4

Monthly crude production (LHS)YoY growth (RHS)

YoY chg. mt

100 150 200 250 300 350 400 450 500 550

400 500 600 700 800 900

1,000 1,100 1,200 1,300

1Q'0

63Q

'06

1Q'0

73Q

'07

1Q'0

83Q

'08

1Q'0

93Q

'09

1Q'1

03Q

'10

1Q'1

13Q

'11

1Q'1

23Q

'12

1Q'1

33Q

'13

1Q'1

43Q

'14E

1Q'1

5E3Q

'15E

Raw materials cost ex-freight (RHS)China HRC 2.75mm, VAT excl. (LHS)US HRC price (LHS)

USD/t USD/t



China metals trade watch (imports/exports in ‘000 t)

Figure 27: Refined copper trade (net imports easing) Figure 28: Copper concentrate trade (remain at high level)

Source: China Customs Data. Source: China Customs Data.

Figure 29: Alumina trade (off recent highs) Figure 30: Bauxite trade (large falloff post Indonesia ban)


Figure 31: Refined nickel trade (big jump in exports) Figure 32: Nickel ore trade (imports rising from low levels)


(400)(350)(300)(250)(200)(150)(100)(50)050

(400) (350) (300) (250) (200) (150) (100) (50) - 50

Jan-

10M

ar-1

0M

ay-1

0Ju

l-10

Sep-

10N

ov-1

0Ja

n-11

Mar

-11

May

-11

Jul-

11Se

p-11

Nov

-11

Jan-

12M

ar-1

2M

ay-1

2Ju

l-12

Sep-

12N

ov-1

2Ja

n-13

Mar

-13

May

-13

Jul-

13Se

p-13

Nov

-13

Jan-

14M

ar-1

4M

ay-1

4Ju

l-14

import export net export

(450)(400)(350)(300)(250)(200)(150)(100)(50)050

(450) (400) (350) (300) (250) (200) (150) (100) (50) - 50

Jan-

10M

ar-1

0M

ay-1

0Ju

l-10

Sep-

10N

ov-1

0Ja

n-11

Mar

-11

May

-11

Jul-

11Se

p-11

Nov

-11

Jan-

12M

ar-1

2M

ay-1

2Ju

l-12

Sep-

12N

ov-1

2Ja

n-13

Mar

-13

May

-13

Jul-

13Se

p-13

Nov

-13

Jan-

14M

ar-1

4M

ay-1

4Ju

l-14


(800)

(600)

(400)

(200)

0

200

(800)

(600)

(400)

(200)

-

200

Jan-

10M

ar-1

0M

ay-1

0Ju

l-10

Sep-

10N

ov-1

0Ja

n-11

Mar

-11

May

-11

Jul-

11Se

p-11

Nov

-11

Jan-

12M

ar-1

2M

ay-1

2Ju

l-12

Sep-

12N

ov-1

2Ja

n-13

Mar

-13

May

-13

Jul-

13Se

p-13

Nov

-13

Jan-

14M

ar-1

4M

ay-1

4Ju

l-14


(8,400)

(7,000)

(5,600)

(4,200)

(2,800)

(1,400)

0

(8,400)

(7,000)

(5,600)

(4,200)

(2,800)

(1,400)

-Ja

n-10

Mar

-10

May

-10

Jul-

10Se

p-10

Nov

-10

Jan-

11M

ar-1

1M

ay-1

1Ju

l-11

Sep-

11N

ov-1

1Ja

n-12

Mar

-12

May

-12

Jul-

12Se

p-12

Nov

-12

Jan-

13M

ar-1

3M

ay-1

3Ju

l-13

Sep-

13N

ov-1

3Ja

n-14

Mar

-14

May

-14

Jul-

14


(30)

(20)

(10)

0

10

20

(30)

(20)

(10)

-

10

20

Jan-

10M

ar-1

0M

ay-1

0Ju

l-10

Sep-

10N

ov-1

0Ja

n-11

Mar

-11

May

-11

Jul-

11Se

p-11

Nov

-11

Jan-

12M

ar-1

2M

ay-1

2Ju

l-12

Sep-

12N

ov-1

2Ja

n-13

Mar

-13

May

-13

Jul-

13Se

p-13

Nov

-13

Jan-

14M

ar-1

4M

ay-1

4Ju

l-14


(8,000)

(7,000)

(6,000)

(5,000)

(4,000)

(3,000)

(2,000)

(1,000)

0

(8,000)

(7,000)

(6,000)

(5,000)

(4,000)

(3,000)

(2,000)

(1,000)

-

Jan-

08Ap

r-08

Jul-

08O

ct-0

8Ja

n-09

Apr-

09Ju

l-09

Oct

-09

Jan-

10Ap

r-10

Jul-

10O

ct-1

0Ja

n-11

Apr-

11Ju

l-11

Oct

-11

Jan-

12Ap

r-12

Jul-

12O

ct-1

2Ja

n-13

Apr-

13Ju

l-13

Oct

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Research Offices

REGIONAL

WONG Chew Hann, CA Regional Head of Institutional Research (603) 2297 8686 [email protected]

ONG Seng Yeow Regional Head of Retail Research (65) 6432 1453 [email protected]

Alexander GARTHOFF Institutional Product Manager (852) 2268 0638 [email protected]

ECONOMICS

Suhaimi ILIAS Chief Economist Singapore | Malaysia (603) 2297 8682 [email protected]

Luz LORENZO Philippines (63) 2 849 8836 [email protected]

Tim LEELAHAPHAN Thailand (662) 658 1420 [email protected]

JUNIMAN Chief Economist, BII Indonesia (62) 21 29228888 ext 29682 [email protected]

Josua PARDEDE Economist / Industry Analyst, BII Indonesia (62) 21 29228888 ext 29695 [email protected]

MALAYSIA

WONG Chew Hann, CA Head of Research (603) 2297 8686 [email protected] • Strategy • Construction & Infrastructure

Desmond CH’NG, ACA (603) 2297 8680 [email protected] • Banking & Finance

LIAW Thong Jung (603) 2297 8688 [email protected] • Oil & Gas - Regional • Shipping

ONG Chee Ting, CA (603) 2297 8678 [email protected] • Plantations - Regional

Mohshin AZIZ (603) 2297 8692 [email protected] • Aviation - Regional • Petrochem

YIN Shao Yang, CPA (603) 2297 8916 [email protected] • Gaming – Regional • Media

TAN Chi Wei, CFA (603) 2297 8690 [email protected] • Power • Telcos

WONG Wei Sum, CFA (603) 2297 8679 [email protected] • Property & REITs

LEE Yen Ling (603) 2297 8691 [email protected] • Building Materials • Glove Producers

CHAI Li Shin (603) 2297 8684 [email protected] • Plantation • Construction & Infrastructure

Ivan YAP (603) 2297 8612 [email protected] • Automotive

LEE Cheng Hooi Regional Chartist (603) 2297 8694 [email protected]

Tee Sze Chiah Head of Retail Research (603) 2297 6858 [email protected]

HONG KONG / CHINA

Howard WONG Head of Research (852) 2268 0648 [email protected] • Oil & Gas - Regional

Alexander LATZER (852) 2268 0647 [email protected] • Metals & Mining - Regional

Jacqueline KO, CFA (852) 2268 0633 [email protected] • Consumer Staples & Durables

Ka Leong LO, CFA (852) 2268 0630 [email protected] * Consumer Discretionary & Auto

Karen KWAN (852) 2268 0640 [email protected] • Property & REITs

Osbert TANG, CFA (86) 21 5096 8370 [email protected] • Transport & Industrials

Ricky WK NG, CFA (852) 2268 0689 [email protected] • Utilities & Renewable Energy

Steven ST CHAN (852) 2268 0645 [email protected] • Banking & Financials - Regional

Warren LAU (852) 2268 0644 [email protected] • Technology – Regional

William YANG (852) 2268 0675 [email protected] • Technology – Regional

INDIA

Jigar SHAH Head of Research (91) 22 6632 2632 [email protected] • Oil & Gas • Automobile • Cement

Anubhav GUPTA (91) 22 6623 2605 [email protected] • Metal & Mining • Capital Goods • Property

Urmil SHAH (91) 22 6623 2606 [email protected] • Technology • Media

Vishal MODI (91) 22 6623 2607 [email protected] • Banking & Financials

SINGAPORE

NG Wee Siang Head of Research (65) 6432 1467 [email protected] • Banking & Finance

Gregory YAP (65) 6432 1450 [email protected] • SMID Caps – Regional • Technology & Manufacturing • Telcos

YEAK Chee Keong, CFA (65) 6432 1460 [email protected] • Offshore & Marine

Derrick HENG (65) 6432 1446 [email protected] • Transport (Land, Shipping & Aviation)

WEI Bin (65) 6432 1455 [email protected] • Commodity • Logistics • S-chips

John CHEONG (65) 6432 1461 [email protected] • Small & Mid Caps • Healthcare

TRUONG Thanh Hang (65) 6432 1451 [email protected] • Small & Mid Caps

INDONESIA

Wilianto IE Head of Research (62) 21 2557 1125 [email protected] • Strategy

Rahmi MARINA (62) 21 2557 1128 [email protected] • Banking & Finance

Aurellia SETIABUDI (62) 21 2953 0785 [email protected] • Property

Isnaputra ISKANDAR (62) 21 2557 1129 [email protected] • Metals & Mining • Cement

Pandu ANUGRAH (62) 21 2557 1137 [email protected] • Infrastructure • Construction • Transport

Janni ASMAN (62) 21 2953 0784 [email protected] • Cigarette • Healthcare • Retail

PHILIPPINES

Luz LORENZO Head of Research (63) 2 849 8836 [email protected] • Strategy • Utilities • Conglomerates • Telcos

Lovell SARREAL (63) 2 849 8841 [email protected] • Consumer • Media • Cement

Rommel RODRIGO (63) 2 849 8839 [email protected] • Conglomerates • Property • Gaming • Ports/ Logistics

Katherine TAN (63) 2 849 8843 [email protected] • Banks • Construction

Ramon ADVIENTO (63) 2 849 8845 [email protected] • Mining

THAILAND

Maria LAPIZ Head of Institutional Research Dir (66) 2257 0250 | (66) 2658 6300 ext 1399 [email protected] • Consumer / Materials

Jesada TECHAHUSDIN, CFA (66) 2658 6300 ext 1394 [email protected] • Financial Services

Kittisorn PRUITIPAT, CFA, FRM (66) 2658 6300 ext 1395 [email protected] • Real Estate

Sittichai DUANGRATTANACHAYA (66) 2658 6300 ext 1393 [email protected] • Services Sector

Sukit UDOMSIRIKUL Head of Retail Research (66) 2658 6300 ext 5090 [email protected]

Mayuree CHOWVIKRAN (66) 2658 6300 ext 1440 [email protected] • Strategy

Padon VANNARAT (66) 2658 6300 ext 1450 [email protected] • Strategy

Surachai PRAMUALCHAROENKIT (66) 2658 6300 ext 1470 [email protected] • Auto • Conmat • Contractor • Steel

Suttatip PEERASUB (66) 2658 6300 ext 1430 [email protected] • Media • Commerce

Sutthichai KUMWORACHAI (66) 2658 6300 ext 1400 [email protected] • Energy • Petrochem

Termporn TANTIVIVAT (66) 2658 6300 ext 1520 [email protected] • Property

Woraphon WIROONSRI (66) 2658 6300 ext 1560 [email protected] • Banking & Finance

Jaroonpan WATTANAWONG (66) 2658 6300 ext 1404 [email protected] • Transportation • Small cap

Chatchai JINDARAT (66) 2658 6300 ext 1401 [email protected] • Electronics VIETNAM LE Hong Lien, ACCA Head of Institutional Research (84) 8 44 555 888 x 8181 [email protected] • Strategy • Consumer • Diversified • Utilities

THAI Quang Trung, CFA, Deputy Manager, Institutional Research (84) 8 44 555 888 x 8180 [email protected] • Real Estate • Construction • Materials

Le Nguyen Nhat Chuyen (84) 8 44 555 888 x 8082 [email protected] • Oil & Gas NGUYEN Thi Ngan Tuyen, Head of Retail Research (84) 8 44 555 888 x 8081 [email protected] • Food & Beverage • Oil&Gas • Banking

TRINH Thi Ngoc Diep (84) 4 44 555 888 x 8208 [email protected] • Technology • Utilities • Construction

TRUONG Quang Binh (84) 4 44 555 888 x 8087 [email protected] • Rubber plantation • Tyres and Tubes • Oil&Gas

PHAM Nhat Bich (84) 8 44 555 888 x 8083 [email protected] • Consumer • Manufacturing • Fishery

NGUYEN Thi Sony Tra Mi (84) 8 44 555 888 x 8084 [email protected] • Port operation • Pharmaceutical • Food & Beverage



APPENDIX I: TERMS FOR PROVISION OF REPORT, DISCLAIMERS AND DISCLOSURES

DISCLAIMERS

This research report is prepared for general circulation and for information purposes only and under no circumstances should it be considered or intended as an offer to sell or a solicitation of an offer to buy the securities referred to herein. Investors should note that values of such securities, if any, may fluctuate and that each security’s price or value may rise or fall. Opinions or recommendations contained herein are in form of technical ratings and fundamental ratings. Technical ratings may differ from fundamental ratings as technical valuations apply different methodologies and are purely based on price and volume-related information extracted from the relevant jurisdiction’s stock exchange in the equity analysis. Accordingly, investors’ returns may be less than the original sum invested. Past performance is not necessarily a guide to future performance. This report is not intended to provide personal investment advice and does not take into account the specific investment objectives, the financial situation and the particular needs of persons who may receive or read this report. Investors should therefore seek financial, legal and other advice regarding the appropriateness of investing in any securities or the investment strategies discussed or recommended in this report.

The information contained herein has been obtained from sources believed to be reliable but such sources have not been independently verified by Maybank Investment Bank Berhad, its subsidiary and affiliates (collectively, “MKE”) and consequently no representation is made as to the accuracy or completeness of this report by MKE and it should not be relied upon as such. Accordingly, MKE and its officers, directors, associates, connected parties and/or employees (collectively, “Representatives”) shall not be liable for any direct, indirect or consequential losses or damages that may arise from the use or reliance of this report. Any information, opinions or recommendations contained herein are subject to change at any time, without prior notice.

This report may contain forward looking statements which are often but not always identified by the use of words such as “anticipate”, “believe”, “estimate”, “intend”, “plan”, “expect”, “forecast”, “predict” and “project” and statements that an event or result “may”, “will”, “can”, “should”, “could” or “might” occur or be achieved and other similar expressions. Such forward looking statements are based on assumptions made and information currently available to us and are subject to certain risks and uncertainties that could cause the actual results to differ materially from those expressed in any forward looking statements. Readers are cautioned not to place undue relevance on these forward-looking statements. MKE expressly disclaims any obligation to update or revise any such forward looking statements to reflect new information, events or circumstances after the date of this publication or to reflect the occurrence of unanticipated events.

MKE and its officers, directors and employees, including persons involved in the preparation or issuance of this report, may, to the extent permitted by law, from time to time participate or invest in financing transactions with the issuer(s) of the securities mentioned in this report, perform services for or solicit business from such issuers, and/or have a position or holding, or other material interest, or effect transactions, in such securities or options thereon, or other investments related thereto. In addition, it may make markets in the securities mentioned in the material presented in this report. MKE may, to the extent permitted by law, act upon or use the information presented herein, or the research or analysis on which they are based, before the material is published. One or more directors, officers and/or employees of MKE may be a director of the issuers of the securities mentioned in this report.

This report is prepared for the use of MKE’s clients and may not be reproduced, altered in any way, transmitted to, copied or distributed to any other party in whole or in part in any form or manner without the prior express written consent of MKE and MKE and its Representatives accepts no liability whatsoever for the actions of third parties in this respect.

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. This report is for distribution only under such circumstances as may be permitted by applicable law. The securities described herein may not be eligible for sale in all jurisdictions or to certain categories of investors. Without prejudice to the foregoing, the reader is to note that additional disclaimers, warnings or qualifications may apply based on geographical location of the person or entity receiving this report.

Malaysia

Opinions or recommendations contained herein are in the form of technical ratings and fundamental ratings. Technical ratings may differ from fundamental ratings as technical valuations apply different methodologies and are purely based on price and volume-related information extracted from Bursa Malaysia Securities Berhad in the equity analysis.

Singapore

This report has been produced as of the date hereof and the information herein may be subject to change. Maybank Kim Eng Research Pte. Ltd. (“Maybank KERPL”) in Singapore has no obligation to update such information for any recipient. For distribution in Singapore, recipients of this report are to contact Maybank KERPL in Singapore in respect of any matters arising from, or in connection with, this report. If the recipient of this report is not an accredited investor, expert investor or institutional investor (as defined under Section 4A of the Singapore Securities and Futures Act), Maybank KERPL shall be legally liable for the contents of this report, with such liability being limited to the extent (if any) as permitted by law.

Thailand

The disclosure of the survey result of the Thai Institute of Directors Association (“IOD”) regarding corporate governance is made pursuant to the policy of the Office of the Securities and Exchange Commission. The survey of the IOD is based on the information of a company listed on the Stock Exchange of Thailand and the market for Alternative Investment disclosed to the public and able to be accessed by a general public investor. The result, therefore, is from the perspective of a third party. It is not an evaluation of operation and is not based on inside information. The survey result is as of the date appearing in the Corporate Governance Report of Thai Listed Companies. As a result, the survey may be changed after that date. Maybank Kim Eng Securities (Thailand) Public Company Limited (“MBKET”) does not confirm nor certify the accuracy of such survey result.

Except as specifically permitted, no part of this presentation may be reproduced or distributed in any manner without the prior written permission of MBKET. MBKET accepts no liability whatsoever for the actions of third parties in this respect.

US

This research report prepared by MKE is distributed in the United States (“US”) to Major US Institutional Investors (as defined in Rule 15a-6 under the Securities Exchange Act of 1934, as amended) only by Maybank Kim Eng Securities USA Inc (“Maybank KESUSA”), a broker-dealer registered in the US (registered under Section 15 of the Securities Exchange Act of 1934, as amended). All responsibility for the distribution of this report by Maybank KESUSA in the US shall be borne by Maybank KESUSA. All resulting transactions by a US person or entity should be effected through a registered broker-dealer in the US. This report is not directed at you if MKE is prohibited or restricted by any legislation or regulation in any jurisdiction from making it available to you. You should satisfy yourself before reading it that Maybank KESUSA is permitted to provide research material concerning investments to you under relevant legislation and regulations.

UK

This document is being distributed by Maybank Kim Eng Securities (London) Ltd (“Maybank KESL”) which is authorized and regulated, by the Financial Services Authority and is for Informational Purposes only. This document is not intended for distribution to anyone defined as a Retail Client under the Financial Services and Markets Act 2000 within the UK. Any inclusion of a third party link is for the recipients convenience only, and that the firm does not take any responsibility for its comments or accuracy, and that access to such links is at the individuals own risk. Nothing in this report should be considered as constituting legal, accounting or tax advice, and that for accurate guidance recipients should consult with their own independent tax advisers.



Disclosure of Interest Malaysia: MKE and its Representatives may from time to time have positions or be materially interested in the securities referred to herein and may further act as market maker or may have assumed an underwriting commitment or deal with such securities and may also perform or seek to perform investment banking services, advisory and other services for or relating to those companies.

Singapore: As of 18 September 2014, Maybank KERPL and the covering analyst do not have any interest in any companies recommended in this research report.

Thailand: MBKET may have a business relationship with or may possibly be an issuer of derivative warrants on the securities /companies mentioned in the research report. Therefore, Investors should exercise their own judgment before making any investment decisions. MBKET, its associates, directors, connected parties and/or employees may from time to time have interests and/or underwriting commitments in the securities mentioned in this report.

Hong Kong: KESHK may have financial interests in relation to an issuer or a new listing applicant referred to as defined by the requirements under Paragraph 16.5(a) of the Hong Kong Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission.

As of 18 September 2014, KESHK and the authoring analyst do not have any interest in any companies recommended in this research report.

MKE may have, within the last three years, served as manager or co-manager of a public offering of securities for, or currently may make a primary market in issues of, any or all of the entities mentioned in this report or may be providing, or have provided within the previous 12 months, significant advice or investment services in relation to the investment concerned or a related investment and may receive compensation for the services provided from the companies covered in this report.

OTHERS Analyst Certification of Independence The views expressed in this research report accurately reflect the analyst’s personal views about any and all of the subject securities or issuers; and no part of the research analyst’s compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in the report.

Reminder Structured securities are complex instruments, typically involve a high degree of risk and are intended for sale only to sophisticated investors who are capable of understanding and assuming the risks involved. The market value of any structured security may be affected by changes in economic, financial and political factors (including, but not limited to, spot and forward interest and exchange rates), time to maturity, market conditions and volatility and the credit quality of any issuer or reference issuer. Any investor interested in purchasing a structured product should conduct its own analysis of the product and consult with its own professional advisers as to the risks involved in making such a purchase.

No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior consent of MKE.

Definition of Ratings

Maybank Kim Eng Research uses the following rating system BUY Return is expected to be above 10% in the next 12 months (excluding dividends) HOLD Return is expected to be between - 10% to +10% in the next 12 months (excluding dividends) SELL Return is expected to be below -10% in the next 12 months (excluding dividends)

Applicability of Ratings

The respective analyst maintains a coverage universe of stocks, the list of which may be adjusted according to needs. Investment ratings are only applicable to the stocks which form part of the coverage universe. Reports on companies which are not part of the coverage do not carry investment ratings as we do not actively follow developments in these companies.

DISCLOSURES Legal Entities Disclosures Malaysia: This report is issued and distributed in Malaysia by Maybank Investment Bank Berhad (15938-H) which is a Participating Organization of Bursa Malaysia Berhad and a holder of Capital Markets and Services License issued by the Securities Commission in Malaysia. Singapore: This material is issued and distributed in Singapore by Maybank KERPL (Co. Reg No 197201256N) which is regulated by the Monetary Authority of Singapore. Indonesia: PT Kim Eng Securities (“PTKES”) (Reg. No. KEP-251/PM/1992) is a member of the Indonesia Stock Exchange and is regulated by the BAPEPAM LK. Thailand: MBKET (Reg. No.0107545000314) is a member of the Stock Exchange of Thailand and is regulated by the Ministry of Finance and the Securities and Exchange Commission. Philippines: Maybank ATRKES (Reg. No.01-2004-00019) is a member of the Philippines Stock Exchange and is regulated by the Securities and Exchange Commission. Vietnam: Maybank Kim Eng Securities JSC (License Number: 71/UBCK-GP) is licensed under the State Securities Commission of Vietnam.Hong Kong: KESHK (Central Entity No AAD284) is regulated by the Securities and Futures Commission. India: Kim Eng Securities India Private Limited (“KESI”) is a participant of the National Stock Exchange of India Limited (Reg No: INF/INB 231452435) and the Bombay Stock Exchange (Reg. No. INF/INB 011452431) and is regulated by Securities and Exchange Board of India. KESI is also registered with SEBI as Category 1 Merchant Banker (Reg. No. INM 000011708) US: Maybank KESUSA is a member of/ and is authorized and regulated by the FINRA – Broker ID 27861. UK: Maybank KESL (Reg No 2377538) is authorized and regulated by the Financial Services Authority.



Malaysia Maybank Investment Bank Berhad (A Participating Organisation of Bursa Malaysia Securities Berhad) 33rd Floor, Menara Maybank, 100 Jalan Tun Perak, 50050 Kuala Lumpur Tel: (603) 2059 1888; Fax: (603) 2078 4194

Singapore Maybank Kim Eng Securities Pte Ltd Maybank Kim Eng Research Pte Ltd 9 Temasek Boulevard #39-00 Suntec Tower 2 Singapore 038989 Tel: (65) 6336 9090 Fax: (65) 6339 6003

London Maybank Kim Eng Securities (London) Ltd 5th Floor, Aldermary House 10-15 Queen Street London EC4N 1TX, UK Tel: (44) 20 7332 0221 Fax: (44) 20 7332 0302

New York Maybank Kim Eng Securities USA Inc 777 Third Avenue, 21st Floor New York, NY 10017, U.S.A. Tel: (212) 688 8886 Fax: (212) 688 3500

Stockbroking Business: Level 8, Tower C, Dataran Maybank, No.1, Jalan Maarof 59000 Kuala Lumpur Tel: (603) 2297 8888 Fax: (603) 2282 5136

Hong Kong Kim Eng Securities (HK) Ltd Level 30, Three Pacific Place, 1 Queen’s Road East, Hong Kong Tel: (852) 2268 0800 Fax: (852) 2877 0104

Indonesia PT Maybank Kim Eng Securities Plaza Bapindo Citibank Tower 17th Floor Jl Jend. Sudirman Kav. 54-55 Jakarta 12190, Indonesia Tel: (62) 21 2557 1188 Fax: (62) 21 2557 1189

India Kim Eng Securities India Pvt Ltd 2nd Floor, The International 16, Maharishi Karve Road, Churchgate Station, Mumbai City - 400 020, India Tel: (91) 22 6623 2600 Fax: (91) 22 6623 2604

Philippines Maybank ATR Kim Eng Securities Inc. 17/F, Tower One & Exchange Plaza Ayala Triangle, Ayala Avenue Makati City, Philippines 1200 Tel: (63) 2 849 8888 Fax: (63) 2 848 5738

Thailand Maybank Kim Eng Securities (Thailand) Public Company Limited 999/9 The Offices at Central World, 20th - 21st Floor, Rama 1 Road Pathumwan, Bangkok 10330, Thailand Tel: (66) 2 658 6817 (sales) Tel: (66) 2 658 6801 (research)

Vietnam Maybank Kim Eng Securities Limited 4A-15+16 Floor Vincom Center Dong Khoi, 72 Le Thanh Ton St. District 1 Ho Chi Minh City, Vietnam Tel : (84) 844 555 888 Fax : (84) 8 38 271 030

Saudi Arabia In association with Anfaal Capital Villa 47, Tujjar Jeddah Prince Mohammed bin Abdulaziz Street P.O. Box 126575 Jeddah 21352 Tel: (966) 2 6068686 Fax: (966) 26068787

South Asia Sales Trading Kevin Foy Regional Head Sales Trading [email protected] Tel: (65) 6336-5157 US Toll Free: 1-866-406-7447

North Asia Sales Trading Alex Tsun [email protected] Tel: (852) 2268 0228 US Toll Free: 1 877 837 7635

Malaysia

Rommel Jacob [email protected] Tel: (603) 2717 5152

Thailand Tanasak Krishnasreni [email protected] Tel: (66)2 658 6820

Indonesia

Harianto Liong [email protected] Tel: (62) 21 2557 1177

London Simon Lovekin [email protected] Tel: (44)-207-626-2828

New York

Andrew Dacey [email protected] Tel: (212) 688 2956

India Manish Modi [email protected] Tel: (91)-22-6623-2601

Vietnam

Tien Nguyen [email protected] Tel: (84) 44 555 888 x8079

Philippines Keith Roy [email protected] Tel: (63) 2 848-5288

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