BNP Daily 20140806

PREPARED BY NON-US BROKER-DEALER(S): BNP PARIBAS SECURITIES (ASIA) CO LTD
THIS MATERIAL HAS BEEN APPROVED FOR U.S DISTRIBUTION. ANALYST CERTIFICATION AND IMPORTANT DISCLOSURES CAN BE FOUND AT APPENDIX
ON PAGE 26
6 August 2014

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DOWNGRADE
Taiwan:
Uni-President: Steady growth but fairly valued (Jenny Tsai)
1216 TT; D/g to HOLD from Buy; CP: TWD56.90; TP: TWD62.00 (from TWD60.80)
Downgrade to HOLD with a TP of TWD62
2014E: P/E 24.2x, P/B 3.4x, Yield 2.5%
Click here for full story PAGE 4
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SECTOR RESEARCH / THEMATIC RESEARCH
India Banks: RBI in wait and watch mode (Avneesh Sukhija)
Key benchmark rates unchanged, commentary slightly hawkish
RBI acknowledges risk to inflation; rate cut unlikely in near future
Other announcements: SLR requirement/HTM ceiling cut by 50bps
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MACRO-ECONOMICS & EQUITY STRATEGY
Asian Instant Insights
Indonesia: GDP - Q2 2014 (Philip McNicholas)
Philippines: CPI - Jul 2014 (Philip McNicholas)
India: RBI Bi-Monthly Policy Decision (Mole Hau)
Australia: RBA Decision - August 2014 (Mark Walton)
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COMPANY RESEARCH (N. ASIA, ASEAN, JAPAN, INDIA)
HK/China:
HKT: Question marks remain over mobile (Zoe Zhu)
6823 HK; HOLD (unchanged); CP: HKD9.02; TP: HKD8.30
CSL consolidated; DPU after rights issue unchanged y-y
2014E: P/E 24.1x, P/B 1.8x, Yield 5.3%
.
Taiwan:
CTBC FHC: Expecting a stronger 2H (Frank Yuen)
2891 TT; BUY (unchanged); CP: TWD20.25; TP: TWD23.60
In line results excluding one-off distortions
2014E: P/E 11.2x, P/B 1.3x, Yield 2.0%

BNP Paribas Events
CONFERENCE / CORPORATE DAY
Energy & Commodities Experts &
Corporate Day
2 Sep 14
Korea Healthcare Corporate Day 22-23 Sep 14
COMPANY ROADSHOWS (By Location)
HK/China
Yangzijiang Shipbuilding
(YZJSGD SP)
8 Aug 14
Wharf (4 HK) 12 Aug 14
Citic Telecom (1883 HK) 12-13 Aug 14
Wheelock (20 HK) 14 Aug 14
China Longyuan Power (916 HK) 21 Aug 14
Matahari Department Store
(LPPF IJ)
15-16 Sep 14
Korea
BASF (BAS GR) 7-8 Oct 14
Singapore
Yangzijiang Shipbuilding
(YZJSGD SP)
6-7 Aug 14
Europe
Summit Ascent (102 HK) 29 Aug -2 Sep 14
China Telecom (728 HK) 29 Aug - 4 Sep 14
TCL Communication Technology
(2618 HK)
1-4 Sep 14
Sino Land (83 HK) 1-4 Sep 14
Petronas Chemicals (PCHEM
MK)
2-5 Sep 14
Huadian Power (1071 HK) 4-10 Sep 14
Matahari Department Store
(LPPF IJ)
8-12 Sep 14
Shimao Property Holdings
(813 HK)
23-26 Sep 14
US
Samsung Electronics (005930 KS) 4-8 Aug 14
AirAsia X (AAX MK) 25-26 Aug 14
SMIC (981 HK) 25-28 Aug 14
Delta (2308 TT) 8-12 Sep 14
Far EastTone (4904 TT) 22-26 Sep 14
Lite-On Tech (2301 TT) 29 Sep - 3 Oct 14
Others
SMIC (981 HK) 4 Sep 14
SPOTLIGHT ON ASIA 6 AUGUST 2014

BNP PARIBAS

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.
**************************************************************************************
COMPANY RESEARCH (N. ASIA, ASEAN, JAPAN, INDIA) (CONTD)
PCSC: Tepid growth in the near term (Jenny Tsai)
2912 TT; HOLD (unchanged); CP: TWD240.00; TP: TWD230.00 (from TWD208.00)
Stronger 2014E EPS growth on Muji disposal
2014E: P/E 28.3x, P/B 9.2x, Yield 2.5%
.
Korea:
Daewoo Shipbuilding: Defining moment for DSME in 2Q14 (H James Yoon)
042660 KS; BUY (unchanged); CP: KRW25,200; TP: KRW32,300 (from KRW38,000)
Provisions remain biggest risk to 2Q14 earnings
2014E: P/E 16.7x, P/B 0.9x, Yield 1.2%
.
Japan:
Chiba Bank: Adjusted NP at pre-Lehman level (Toyoki Sameshima)
8331 JP; BUY (unchanged); CP: JPY730.00; TP: JPY850.00
1Q NP sharply ahead of BNPPe and consensus
2015E: P/E 11.3x, P/B 0.8x, Yield 1.8%
Dainippon Screen: 2Q orders to grow; a good start (Yoshitsugu Yamamoto)
7735 JP; BUY (unchanged); CP: JPY475; TP: JPY600
1Q OP - JPY2.2b; 1H guidance raised above current consensus
2015E: P/E 12.5x, P/B 1.2x, Yield 0.6%
Daikin Industries: Short-term reversal likely (Christopher Cintavey)
6367 JP; HOLD (unchanged); CP: JPY7,034; TP: JPY6,800
1Q FY3/15 results reported post-market
2015E: P/E 19.8x, P/B 2.3x, Yield 1.3%
Kubota Corp: Balancing act (Christopher Cintavey)
6326 JP; REDUCE (unchanged); CP: JPY1,292; TP: JPY1,150
Reported better-than-expected 1Q FY3/15 results post-market
2015E: P/E 14.5x, P/B 1.6x, Yield 2.1%
Toyota Motor: FY3/15 1Q: strong start to the year (Clive Wiggins)
7203 JP; BUY (unchanged); CP: JPY6,042; TP: JPY7,300
All-round strength
2015E: P/E 9.5x, P/B 1.2x, Yield 3.0%
.
Malaysia:
Airasia: Conservative pax capacity growth (Arnaud Bouchet)
AIRA MK; BUY (unchanged); CP: MYR2.43; TP: MYR3.29
Change in ASK/RPK computation methodology
2014E: P/E 9.7x, P/B 1.2x, Yield 2.6%
.

BNP Paribas Events
COMPANY ROADSHOWS (By Date)
4-8 Aug 14
Samsung Electronics (005930 KS) US
6-7 Aug 14
Yangzijiang Shipbuilding (YZJSGD SP) SG
8 Aug 14
Yangzijiang Shipbuilding (YZJSGD SP) HK
12 Aug 14
Wharf (4 HK) HK
12-13 Aug 14
Citic Telecom (1883 HK) HK
14 Aug 14
Wheelock (20 HK) HK
21 Aug 14
China Longyuan Power (916 HK) HK
25-26 Aug 14
AirAsia X (AAX MK) US
25-28 Aug 14
SMIC (981 HK) US
29 Aug 2 Sep 14
Summit Ascent (102 HK) EU
29 Aug 4 Sep 14
China Telecom (728 HK) EU
1-4 Sep 14
TCL Communication Technology
(2618 HK)
EU
1-4 Sep 14
Sino Land (83 HK) EU
4 Sep 14
SMIC (981 HK) Others
2-5 Sep 14
Petronas Chemicals (PCHEM MK) EU
4-10 Sep 14
Huadian Power (1071 HK) EU
8-12 Sep 14
Delta (2308 TT) US
Matahari Department Store (LPPF IJ) EU
15-16 Sep 14
Matahari Department Store (LPPF IJ) HK
22-26 Sep 14
Far EastTone (4904 TT) US
23-26 Sep 14
Shimao Property Holdings (813 HK) EU
29 Sep 3 Oct 14
Lite-On Tech (2301 TT) US
7-8 Oct 14
BASF (BAS GR) KR
2

BNP PARIBAS

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.
**************************************************************************************
COMPANY RESEARCH (N. ASIA, ASEAN, JAPAN, INDIA) (CONTD)
Singapore:
Capitaland: Optimizing its portfolio (Chong Kang Ho)
CAPL SP; BUY (unchanged); CP: SGD3.44; TP: SGD3.77
1H14 results operating PATMI up 30% y-y
2014E: P/E 18.9x, P/B 0.9x, Yield 1.7%
Far East Hospitality Trust: Challenging outlook ahead (Chong Kang Ho)
FEHT SP; HOLD (unchanged); CP: SGD0.87; TP: SGD0.91
1H14 results tracking lower
2014E: P/E 14.9x, P/B 0.9x, Yield 6.7%
Global Logistic Prop: A surge in development starts (Chong Kang Ho)
GLP SP; BUY (unchanged); CP: SGD2.80; TP: SGD3.22
1QFY15 tracking ahead
2015E: P/E 39.4x, P/B 1.2x, Yield 1.1%
.
Philippines:
PLDT: Sales in line; margin disappoints (Kunal Vora)
TEL PM; BUY (unchanged); CP: PHP3,136.00; TP: PHP3,150.00
Mobile business disappoints; weak SMS and rising costs
2014E: P/E 17.0x, P/B 5.0x, Yield 5.5%
.
India:
Cummins India: Guidance increase in-line (Girish Nair)
KKC IN; HOLD (unchanged); CP: INR626.65; TP: INR652.00 (from INR610.00)
1QF15 earnings disappoint on weak domestic sales
2015E: P/E 24.8x, P/B 6.1x, Yield 2.5%
Hero Motocorp: Margin concerns continue (Vijay Chugh)
HMCL IN; BUY (unchanged); CP: INR2,583.30; TP: INR3,000.00 (from INR2,775.00)
1QFY15 margin missed expectations because of duty anomalies
2015E: P/E 17.7x, P/B 7.4x, Yield 2.9%

3
Steady growth but fairly valued
Downgrade to HOLD with a TP of TWD62
We forecast reported EPS of TWD2.50 for 2014 and TWD2.96 for
2015. We see earnings growth in 2014-15, attributable to recovery in
the F&B business and cost control. Net income contributions with
modest growth should continue from PCSC, Ton Yi Industrial and
Taiwan ScinoPharm. The upside risk is F&B operating margin
recovering to more than 4% in 2014 vs our current forecast of 2.8%.
2Q14 seasonally slow for F&B, but margins should improve
Preliminary 2Q14 sales came in at TWD106bn, down 2% q-q and
flattish y-y. We expect a q-q decline in net profit on smaller disposal
gains. We forecast gross margin of 31.5% and operating margin of
5.2% for 2Q. Although we expect a higher utilities bill, F&B operating
margin should still recover on the continued streamlining of stock-
keeping units (SKUs).
Beverage sales should be strong in 3Q14 on a seasonal peak
Summer is the peak season for the beverage business. Sales of both
UPE and Ton Yi Industrial saw a rebound in June. Thus, we expect
hot weather to lead to stronger q-q sales in 3Q14.
We roll forward to a 2015E valuation; SOTP-based TP of TWD62
Our target price implies a 20.9x 2015E P/E which compares to the
regional F&B peers average of 20.5x (Bloomberg consensus). Thus,
we believe UPEs valuation is fair and already reflects the companys
earnings stability supported by its portfolio diversification. UPE is due
to host its 2Q14 analyst meeting on 12 August 2014.
2014E net earnings split
Source: BNP Paribas estimates
TW & SE Asia
F&B
10.0%
UPC
16.5%
Other China
F&B
5.4%
PCSC
31.6%
Ton Yi
9.1%
ScinoPharm
4.4%
Disposal
9.8%
Others
13.2%
6 AUGUST 2014
CHANGE IN RECOMMENDATION 10
TAIWAN / FOOD BEVERAGE & TOBACCO
UNI-PRESIDENT 1216 TT
HOLD
FROM BUY
TARGET PRICE TWD62.00
CLOSE TWD56.90
UP/DOWNSIDE +9.0%
PRIOR TP TWD60.80
CHANGE IN TP +2.0%
HOW WE DIFFER FROM CONSENSUS MARKET RECS
TARGET PRICE (%) 6.5 POSITIVE 11
EPS 2014 (%) (6.0) NEUTRAL 9
EPS 2015 (%) (0.0) NEGATIVE 1
Jenny Tsai
jenny.tsai@asia.bnpparibas.com
+8862 8729 7054
Patricia Lee
patricia.h.lee@asia.bnpparibas.com
+886 2 87297063
KEY STOCK DATA
YE Dec (TWD m) 2013A 2014E 2015E 2016E
Revenue 423,056 443,578 479,167 520,180
Rec. net profit 11,064 12,846 16,467 17,416
Recurring EPS (TWD) 2.15 2.35 3.01 3.19
Prior rec. EPS (TWD) 2.37 2.73 3.06 -
Chg. In EPS est. (%) (9.3) (14.0) (1.6) nm
EPS growth (%) (14.5) 9.5 28.2 5.8
Recurring P/E (x) 26.5 24.2 18.9 17.8
Dividend yield (%) 2.3 2.5 2.4 2.9
EV/EBITDA (x) 9.8 9.3 8.6 8.0
Price/book (x) 3.4 3.4 3.1 2.9
Net debt/Equity (%) 43.9 55.2 56.9 55.0
ROE (%) 13.1 14.4 17.1 16.6
Share price performance 1 Month 3 Month 12 Month
Absolute (%) 2.0 10.5 (8.4)
Relative to country (%) 4.4 4.2 (26.0)
Next results August 2014
Mkt cap (USD m) 10,359
3m avg daily turnover (USD m) 12.7
Free float (%) 75
Major shareholder Board of director (20%)
12m high/low (TWD) 63.20/47.60
3m historic vol. (%) 14.2
ADR ticker -
ADR closing price (USD) -
Issued shares (m) 5,463
Sources: Bloomberg consensus; BNP Paribas estimates
(59)
(39)
(19)
1
28.00
38.00
48.00
58.00
68.00
Jul-13 Oct-13 Jan-14 Apr-14 Jul-14
(%) (TWD) Uni-President Rel to MSCI Taiwan
4
RBI in wait and watch mode
Key benchmark rates unchanged, commentary slightly hawkish
The Reserve Bank of India (RBI) in its monetary policy review today maintained the
status quo on policy rates: repo rate of 8% (the key benchmark rate) and reverse
repo and MSF rates at 7% and 9% respectively. The RBI kept its inflation target at
8% for January 2015 and 6% for January 2016, but sees upside risks.
RBI acknowledges risk to inflation; rate cut unlikely in near future
RBIs tone in todays monetary policy seemed somewhat hawkish, as it closely took
note of the risks to inflation, such as a deficient monsoon, impact of geo-political
tensions on crude oil prices although it does not seem very concerned about
these yet. The RBI said that it is also cognizant of the supply side inflation that can
get triggered once growth starts to recover. BNPP economist Mole Hau sees the
possibility of a rate hike if monsoon or the quality of fiscal tightening disappoints.
Other announcements: SLR requirement/HTM ceiling cut by 50bps
Statutory liquidity ratio cut by 50bps: the RBI reduced the SLR by 50bps to
22%, as most public-sector banks hold SLR reserves well in excess of the
minimum requirement. Hence, the cost of funds for banks is unlikely to change.
From a policy point of view, the liquidity coverage ratio (LCR) requirement under
BASEL III norms is due to be implemented in phased manner, starting at 60%, from
January 2015, and the investment in bonds required will likely be above the SLR
requirement at that point in time. Therefore, we see the possibility of further SLR
reduction. We believe todays cut is a pragmatic step by the RBI to avoid
unnecessary regulatory burden on banks.
Held-to-maturity limit at 24% (i.e., cut by 50 bps): currently, banks cannot hold
more than 24.5% of their SLR reserves as held-to-maturity (HTM) securities. Today,
the RBI reduced this ceiling by 50bps to 24%. This implies that banks will have to
transfer SLR securities earlier recognized as HTM into the available-for-sale (AFS)
or held-for-trading category (HFT) categories, after which these securities will have
to be sold in the secondary debt market. We believe this step of the RBI is aimed at
improving liquidity and creating depth in the government debt market.
What to do after the RBI policy review?
We do not expect any significant policy easing in the near term. Thus, we continue
to prefer banks with a strong retail franchise (that are not overly dependent on a
significant uptick in GDP/the infrastructure sector). We reiterate BUY on HDFC
Bank (HDFCB IN, CP INR813.00) IndusInd Bank (IIB IN, CP INR554.80) and ICICI
(ICICIBC IN, CP INR1,491.40).
6 AUGUST 2014
EQUITIES RESEARCH
INDIA BANKS
Avneesh Sukhija
avneesh.sukhija@asia.bnpparibas.com
+91 22 6196 4352
Chetan Ganatra
chetan.ganatra@asia.bnpparibas.com
+91 22 6176 5619
5
Market Economics
6 August 2014
Asian Instant Insight
Indonesia: GDP (Q2 2014)

Key Facts
Q2 GDP growth was weaker than expected
at 5.1% y/y, down from 5.2% y/y in Q1.
In q/q terms, GDP was up an estimated
4.9% annualised, up from 4.0% in Q1.
Final domestic demand softened as
investment remained weak.
Net trade boosted the headline as import
volumes fell faster than exports.
Indonesian growth momentum improved in Q2 despite
a slight drop in the annual rate of expansion. The
improvement, however, was largely a function of
continued import compression. Domestic demand
softened further, with domestic final sales experiencing
a broad-based dip in momentum. Meanwhile, exports
continued to struggle with a drop in external demand
and ongoing terms of trade shock. Going forward, while
signs of recovery are emerging, a less flattering
statistical base suggests y/y growth rates remain under
pressure. Thus, we retain our 2014 full-year GDP
growth forecast of 5.2%.
Indonesias economy expanded 5.1% y/y in Q2, down from
5.2% y/y in Q1. The outcome was below consensus
expectations for GDP growth of 5.2% y/y but above our forecast
of 5.0% y/y. On a sequential basis, however, the data suggest a
nascent recovery in economic momentum. We estimate GDP
expanded at a 4.9% q/q saar clip, up from 4.0% q/q saar in Q1.
Dissecting the data, we find the improvement was driven largely
by net exports, which contributed 1.4pp to the headline reading,
up from 0.1pp in Q1. Moreover, the uplift to net exports
continues to be led by import compression, as incoming
shipment volumes fell at a 12% q/q saar clip, translating to a
5% y/y drop. This gave a 1.9pp lift to headline GDP and more
than offset the 1.1% q/q saar dip in export volumes in Q2.
Private consumption remained resilient, registering growth of
5.6% y/y and accounting for 3.5pp of the 4.7% y/y gain in final
domestic sales. Beyond this the domestic economy provided
few positives. We estimate sequential momentum in domestic
final sales slipped to 4.1% q/q saar from 5.5% q/q saar in Q2.
Moreover, the dip was broad-based with all major components
experiencing a slowdown. This was most evident in government
consumption, which shrank 0.7% y/y (-6.6% q/q saar).
However, investment spending momentum also ebbed, growing
an estimated 3.9% q/q saar after growing 5.2% q/q saar in Q2,
thanks to sluggish capital goods spending by foreign investors.
On a sector level, a modest sequential pick up in manufacturing
output and construction activity allowed output growth among
goods producing industries to remain unchanged at 4.1% y/y in
Q2. Unfortunately, persisting weakness in the mining-linked
activity, especially for oil & gas, indicates downward pressure
on annual gains will intensify in H2. This is particularly
meaningful for fiscal balances and the current account deficit as
it implies further deterioration in the oil & gas balance if
politicians continue to avoid fuel subsidy rationalisation.
Meanwhile, service sector growth momentum ebbed to 5.6%
q/q saar in Q2 from 6.6% q/q saar in Q1, translating to a gain of
6.2% y/y. While still relatively robust, this expansion was
roughly half a standard deviation below the average pace of
service sector growth since 2000. Softer transport activity, likely
reflecting weaker import demand, and a contraction in
government service provision, resulting from fiscal cutbacks
needed to sustain subsidy spending, caused the slowdown in
services. This was offset by gains in wholesale & retail trade as
well as financial and business service activity.
Although less than stellar, as the outcome is broadly in line with
our expectations and shows nascent signs of recovery in key
sectors, we leave our 2014 and 2015 full year GDP growth
forecasts unchanged at 5.2% and 5.6%, respectively. We would
caution, however, that base effects are more challenging in H2,
especially in Q4 where we currently expect GDP growth will slip
below 5.0% y/y for the first time since Q3 2009.
On a more positive note, this was the fourth consecutive
quarter of double-digit nominal growth. This, coupled with
relative IDR stability, suggests the Q2 current account deficit,
which we estimate at USD8.5bn, will be equal to 4% of GDP,
keeping the H1 cumulative current account deficit around 3% of
GDP. Given Bank Indonesias (BI) focus on the current account
deficit as the intermediate target for monetary policy, concern
surrounding the full-year target should ease and with it any
impetus for further policy tightening. That said, data also shows
the ongoing terms of trade shock is still taking a toll on external
balances. Based on the national accounts data, we estimate
goods exports shrank at a 2.7% q/q saar pace, while imports
were flat. The implied deterioration clearly suggests headwinds
to sustained current account improvement persist, constraining
BIs ability for a more accommodative policy bias.
Philip McNicholas 852 2108 5077
philip.mcnicholas@asia.bnpparibas.com
Key Chart: Some signs of recovery
Source: CEIC, BNP Paribas
Key Chart: but domestic economy still weak

6
Market Economics
6 August 2014
Philippines: CPI (Jul 2014)

Key Facts
Headline CPI rose 4.9% y/y in July, up
from 4.4% y/y in June.
Food prices rose 8.8% y/y in July, up from
a 7.8% y/y gain in June.
Non-food prices rose 2.5% y/y in July,
down from 2.3% y/y in June.
Core inflation rose to 3.0% y/y in July,
from 2.8% y/y in June.
July CPI was stronger than expected due to
typhoon-linked supply shocks. Government policy
efforts to address food supply constraints have yet
to have an effect, heightening risk of inflation
expectations becoming untethered. In response, we
expect BSP to hike the OBR a further 25bp, taking it
to 4.00% in September, before pausing. Yet, the
move is unlikely to affect economy-wide borrowing
costs. Thus far, BSP continues to drain funds via
the SDA. However, as 2015 CPI may breach BSPs
target range, a further 25bp hike in the SDA rate
taking it to 2.50%, is likely in Q4.
Typhoon-linked supply shocks caused Philippines CPI to
rise to 4.9% y/y in J uly, up from 4.4% y/y in J une. The print
was stronger than the 4.6% y/y gain both consensus and
ourselves had expected. The surprise gain lifted CPI
momentum to a 4.6% 3m/3m saar pace from 3.0% 3m/3m
saar in J une. In light of this, we raise our forecast for 2015
average CPI to 4.0% y/y from 3.8% y/y previously.
Core CPI rose 3.0% y/y, slightly above consensus
expectations of a 2.9% y/y gain but softer than the 3.1%
y/y rise we had forecast. On a sequential basis, we
estimate core CPI rose at an annualised pace of 2.1%
3m/3m sa. On a forward-looking basis, this suggests
demand-pull price pressures are contained for the
moment. However, given the Philippines low income level,
inflationary expectations are very closely tied to
developments in food prices. On that front, developments
are far less helpful.
While non-food CPI ticked up to 2.5% y/y from 2.3% y/y in
J une, food prices continued surge, rising 8.7% y/y up from
7.8% y/y. Rice prices, which alone account for 8.9% of the
CPI basket, rose 1.8% m/m and translated to a 14.4% y/y
gain. By our estimates, rice price momentum picked up to
13.2% 3m/3m saar from 11.5% 3m/3m saar in J une. This
was the 11
th
consecutive month rice prices rose at a
double-digit annualised pace. Garlic prices are also a
cause for concern among policy makers as garlic supply
shortages have attributed to a 16.5% y/y rise in vegetable
prices.
Media reports suggest price pressures have started to
ease in vegetable markets as the government has
increased imports to address supply shortages. Similar
efforts are starting for rice with President Aquino
highlighting a substantial increase in imports in last weeks
State of the Nation Address (SoNA).
As Indian policy makers have found, inflation breakouts
among key consumer staples are the most difficult to
address given their limited responsiveness to monetary
policy. This is especially the case in the Philippines where
the banking system is small and financial literacy is low.
Effectively tackling the breakout will require the
government to continue importing fresh rice supplies until
onshore prices are again moving in tandem with Asian
benchmarks. In tandem with this, Bangko Sentral ng
Pilipinas (BSP) will hope to keep inflation expectations
anchored and curb potential second round effects through
another 25bp hike in the Overnight Borrowing Rate (OBR)
to 4.00% in September before pausing for the rest of 2014.
Yet, with 3-month treasury bills yielding a paltry 1.37% p.a.,
reflecting ample onshore liquidity and limited bond supply,
economy-wide borrowing costs are likely to be unaffected
by this. Hikes in Special Deposit Account (SDA) rate
(currently 2.25%), which has become the de facto policy
rate, are likely to be more meaningful. Thus far, weekly
data indicates BSP is luring funds back to the SDA, easing
excess liquidity concerns. That said, as we now see BSP
struggling to keep 2015 CPI within its target range of 2.0-
4.0%, at least one more hike in the SDA appears likely in
2014, though not at the September review.
Philip McNicholas 852 2108 5077
philip.mcnicholas@asia.bnpparibas.com
Key Chart: Problematic rice breakout
Key Data Table
% Mar Apr May Jun Jul
CPI (m/m) -0.1 0.4 0.5 0.4 0.6
CPI (y/y) 3.9 4.1 4.5 4.4 4.9
Core (y/y)
2006=100
2.8 2.9 3.1 2.8 3.0
Food (y/y) 6.0 6.5 7.1 7.8 8.8
7
Market Economics
6 August 2014
India: RBI Bi-Monthly Policy Decision

Key Facts
RBI leaves the key policy rate the repo rate
unchanged at 8% as expected.
SLR was cut further to 22%, but largel y
symbolic given banks excess holdings.
Junes mention of headroom for an easing
of the policy stance was removed.
New mention of upside risks to 2016 CPI
target signals limited scope for easing.
As expected, RBI left its key policy rate unchanged at
its first bi-monthly policy review since the budget was
announced. RBI looked more confident than two
months ago that its 8% CPI target by early 2015 will be
met. Yet, inclusion of new language acknowledging
upside risks to its 6% target by early 2016 and removal
of mention of scope for policy easing shifted the policy
statement in a slightly more hawkish direction as RBI
was probably underwhelmed by the budget, where
tough decisions on subsidy control were once again
skirted. Like RBI, we still regard inflation risks as
skewed to the upside, with the crystallisation of those
risks largely determined by the progress of this years
monsoon and the quality of fiscal tightening. If either
disappoint, upside risks are likely to become real and
rate hikes could come back onto the agenda in 2015.
As expected, Reserve Bank of India (RBI) left its key policy
rate unchanged at its first bi-monthly policy review since the
budget was announced. Changes to the language and tone
shifted the accompanying policy statement in a slightly more
hawkish direction relative to two months ago. This move
can probably best be seen as a reflection of RBI Governor
Rajan being left underwhelmed by the maiden budget
delivered by the Finance Ministry of the Modi administration
last month.
The statement explicitly acknowledged the recently better
than expected inflation data, as headline CPI inflation in
J une, at 7.3% y/y, substantially undershot RBIs projections
(even outside the 90% confidence interval) as suggested by
its fan-chart in the last policy statement published in early
J une. The benign inflation data also led RBI to sound more
confident than two months ago that inflation at around 8
per cent in early 2015 seems likely, noting that overall
risks are more balanced than in June.
The key change to the policy statement, however, was the
inclusion of new language acknowledging that the risks for
RBIs target of 6% by early 2016 are to the upside while
J unes mention of headroom for an easing of the policy
stance was dropped. INRs recent movement and
strengthening activity were added to the list of upside
inflation risks uncertainty over monsoon conditions, geo-
political tensions and uncertainty over administered prices
from two months ago. The prospect of better fiscal
consolidation, previously cited as one of the potential
disinflationary factors, was absent in todays statement.
The tweaks in the language of the policy statement were
probably a reflection of RBI being underwhelmed by the
Finance Minister Arun J aitleys budget. The admittedly-
dovish tone of the J une statement was more of an attempt
by RBI Governor Rajan to extend a welcome hand to the
ruling NDA government ahead of its maiden budget in our
view. The budget ambitiously aimed to stick to the 4.1% of
GDP target for FY2015 set out by the previous government,
but merely by betting once again on dubious expectations
for subsidy control and tax-base buoyancy. With Mr. J aitley
eschewing the opportunity to come clean on subsidies, the
budget does little to help RBI in regaining inflation control.
While necessarily stopping short of formally adopting
inflation targeting, RBI in todays statement reiterated the
guidance issued in J une that it remains committed to
keeping the economy on a disinflationary course, taking CPI
inflation to 8% by January 2015 and 6% by January 2016.
The rapid pace of improvement in the monsoon over the
past few weeks is good news, but only to the point that it
has helped narrow the rainfall deficiency. Still 21% deficient
to date, below par monsoon rains still threaten to leave the
country on course for the worst drought since 2009 and see
food price inflation back up to double-digit territory.
While this is unlikely to be sufficient to blow CPI inflation
decisively off its target of 8% by early-2015, another fresh
bout of inflation in food items, which comprise over 45% of
the CPI basket and hence play an outsized role in
households inflation perceptions, will almost certainly
impede the re-anchoring of inflation expectations. That will
add to the challenge in lowering core inflation, with
aggregate demand also seen by the central bank as on
course to strengthen.
Tight monetary policy that re-anchors household inflation
expectations is critical to RBIs disinflationary strategy.
Pulling inflation expectations down from their existing
double-digit territory is slow progress given their tendency to
only respond adaptively to current inflation. As RBI remains
committed to bringing down CPI inflation down to 6% by
early 2016, further policy tightening may be required in 2015.
Mole Hau 852 2108 5620
mole.hau@asia.bnpparibas.com
Key Chart: Monsoon Risks
Source: BNP Paribas, IMD
8
Market Economics
6 August 2014
Australia: RBA Decision (August 2014)

Key Facts
The RBA maintains the cash rate at 2.5%,
as widely expected.
Its assessment of the broad growth
drivers remains unchanged.
A period of stability in interest rates is
still the most likely outcome.
The RBA also maintained its view that the
exchange rate remains high.
The RBA has made a habit of delivering boring
monetary policy statements this year, and this
mornings was no exception. As well as leaving the
policy rate unchanged at 2.5%, the Board also opted to
carry over nearly all of the phrasing from a month ago
in its media release. The key signal of intent the
most prudent course is likely to be a period of stability
in interest rates was retained. Consistent with this,
our core view remains that rates will be on hold until
2016. The RBA also continued to limit its public
discomfort about the level of the exchange rate to it
remaining high by historical standards . The stock
standard nature of the media release suggests Fridays
Statement of Monetary Policy could also be a ho hum
affair, though we see some risk the RBA will be more
overt about lower inflation in coming quarters.
The only notable addition in the media release was the
inclusion of a sentence acknowledging the Q2 CPI data,
which showed an increase in inflation, with both headline
and underlying measures affected by the decline in the
exchange rate last year. In a statement devoid of any other
significant changes in language, it was likely this mention of
higher inflation that provoked a minor rally in AUD
immediately following the announcement.
There are no other signs that the RBA has any concerns on
the inflation front, however. Indeed, the above sentence is
followed immediately by a re-iteration of the RBAs long-
promulgated argument that wage growth has declined, is
expected to remain modest for some time and should keep
inflation consistent with the target.
Moreover, the RBAs description of its growth outlook was all-
but lifted verbatim from last months policy decision. Exports
growth is slowing after being boosted by new mining capacity
earlier in the year, resource sector investment is falling in line
with the sharp correction in iron ore and coal prices, and
public spending is scheduled to be subdued. Consumer
demand growth is simply moderate, with the only clear
tailwind for GDP growth being a strong expansion in housing
construction. Overall the RBA remains hopeful that
accommodative monetary policy settings will engender an
upswing in growth, but over the medium term the Bank still
expects growth to be a little below trend over the year ahead.
The RBAs expectation of below trend growth further cements
the view that disinflationary forces are likely to dominate over
coming quarters.
In contrast to the impression given by the further increase in
the measures of headline and underlying inflation in the most
recent, Q2, CPI data, other indicators strongly suggest that
inflation has peaked. TD Securities monthly gauge provides
perhaps the clearest signal, having been a relatively accurate
leading indicator of swings in official headline inflation over
the past decade, dropping to 2.6% y/y in J uly, and
representing the biggest decline since mid-2013. From the
most recent data, movements in the retail sales implicit price
deflator, producer price indices, house prices and commodity
prices all point to lower inflation in coming quarters. Adding to
this disinflationary impetus, the impact of the decline in the
exchange rate last year, to which the RBA is careful to
attribute the rise in Q2 CPI inflation, is likely to counter
imported inflation as AUD moves into positive year-on-year
territory. Overall, we see a high chance of headline inflation
dropping back to the middle of the 2-3% target band in Q3.
Todays relatively dull media release suggests that more of
the same could be on offer in Fridays Statement of Monetary
Policy. That said, with forward inflationary indicators now
pointing downwards, contrary to the upward move in the most
recent CPI print, we wonder whether the RBA may take the
opportunity to lower its inflation profile a notch.
Mark Walton 852 2108 5105
mark.walton@asia.bnpparibas.com

Key Chart: AUD helped pushed CPI higher...
-3
-2
-1
0
1
2
3
4
5
6
7
02 03 04 05 06 07 08 09 10 11 12 13 14
Australia CPI inflation, % y/y
Tradables
Non-tradables
Total
RBA target band
Source: BNP Paribas, Reuters EcoWin Pro
Key Chart: but disinflation already at work
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
5.5
04 05 06 07 08 09 10 11 12 13 14
Australia CPI inflation, % y/y
TD Securities monthly inflation gauge
Official headline
Source: BNP Paribas, Reuters EcoWin Pro
9
Question marks remain over mobile
CSL consolidated; DPU after rights issue unchanged y-y
HKT reported 1H14 interim results today, the first reporting since CSL
consolidation in May. TSS remained stable with revenue +4% y-y and
EBITDA +2% y-y; the mobile business, with CSL included from May,
now makes up 23% of group revenue and 22% of group EBITDA and
the contribution should increase to one third on a full year basis. Due
to the CSL consolidation and reclassification of handset sales into
mobile from TSS previously, the y-y mobile performance in 1H is
unclear. On an enlarged basis after the rights issue, AFF per Share
Stapled Unit was down 9% y-y; interim DPU is kept the same as last
year at HKD0.21.
Some early wins from CSL integration
HKT expects to realise more synergies in the next 18-24 months as
the CSL integration continues, with savings from spectrum and cell
sites rationing, mobile plans and brand simplification, etc. It guided a
10-15% saving in mobile opex previously, which we expect to be
realised gradually as the integration progresses. According to the
company, mobile integration has gone fairly smoothly, with low staff
turnover and fewer customer complaints.
Question marks remain over mobile
HKT indicated some future mobile tariff increases in the briefing
today, citing the cost pressures operators faced. We are of the view
that operators have always been seeking ways to pass cost
pressures onto consumers, regardless of market consolidation,
hence the tariff hike in Sep 2013, even before the CSL deal. We think
the real question is how repeatable (given the ceiling of the mobile
bill consumers are willing to bear out of disposable income) any tariff
increase can be, and whether it can be reinforced given the instability
in market segments among the operators in order to offset the mid-
to high-single-digit growth of mobile opex in general for a data centric
market like HK. HOLD with TP of HKD8.30.
6 AUGUST 2014
RESULTS FLASH
HKT 6823 HK
HONG KONG / DIVERSIFIED TELECOMMUNICATION
HOLD
TARGET PRICE HKD8.30
UP/DOWNSIDE -8.0%
CLOSE HKD9.02
TARGET PRICE (%) (5.7) POSITIVE 7
EPS 2014 (%) 10.8 NEUTRAL 9
EPS 2015 (%) 8.0 NEGATIVE 1
Zoe Zhu
zoe.zhu@asia.bnpparibas.com
+852 2825 1120
Alen Lin
alen.lin@asia.bnpparibas.com
+8862 8729 7061
KEY STOCK DATA
YE Dec (HKD m) 2013A 2014E 2015E 2016E
Revenue 22,832 30,362 36,579 39,263
Rec. net profit 2,376 2,837 3,435 3,976
Recurring EPS (HKD) 0.37 0.37 0.45 0.53
EPS growth (%) 49.2 1.2 21.1 15.7
Recurring P/E (x) 24.4 24.1 19.9 17.2
Dividend yield (%) 5.0 5.3 6.0 6.5
EV/EBITDA (x) 10.0 8.3 7.4 6.8
Price/book (x) 1.9 1.8 1.8 1.7
Net debt/Equity (%) 71.1 80.9 78.8 75.1
ROE (%) 7.7 8.2 8.9 10.2
Absolute (%) 3.3 11.5 15.5
Relative to country (%) (1.4) (0.7) 4.6
Free float (%) 32
Major shareholder PCCW (63%)
12m high/low (HKD) 9.30/6.22
ADR ticker -
(48)
(28)
(8)
12
3.00
8.00
13.00
18.00
23.00
28.00
(%) (HKD) HKT Rel to Hang Seng Index
10
Expecting a stronger 2H
In line results excluding one-off distortions
CTBC held its 1H14 results briefing today. Excluding a one-off gain
from negative goodwill (NTD14.7b), 1H14 NP was NTD13.5b or 51%
of our full-year forecast. The bright spot was strong FCY corporate
loan growth of 31% y-y in 1H14, outpacing NTD loan growth of 5.3%
y-y and driven by strong credit demand in overseas branches (+7.2%
q-q) in SG and the US and, to a lesser extent, by its offshore banking
unit (-5.2% q-q). CTBCs tier 1 ratio rose back to 10.1%, within our
expectation. Its credit cost stayed low at 5bp with the corporate NPL
ratio falling further to 18bp (-7bp q-q). The group NPL ratio rose to
1.1% with the addition of Tokyo Star Bank (TSB).
Softer growth momentum in 2Q along with the sector
CTBCs wealth management fee income growth softened from the
peak in 1Q14 due to stop-selling effects. Its TMU quarterly revenue
was one of its weakest in the past two to three years. CTBCs bank
NIM contracted by 5bp to 1.54% (2bp on higher FCY funding cost
and 3bp on the consolidation of TSB). CTBC attributed the higher
funding cost to its overseas subsidiaries in the US and Indonesia that
actually strengthens its funding base, rather than from deposit
competition in the domestic market.
Expecting a stronger 2H on multiple fronts
We expect stronger earnings growth in 2H14 given an increased
contribution from TSB (its ROA improved from 19bp in 2012 to 41bp
in 2013). Management is confident it can lower TSBs funding cost
and is guiding for an annual contribution of JPY12b to represent
c17% of group earnings. CTBC is also expecting TMU momentum to
recover in 4Q14 as volumes have started to normalize since the end
of 2Q14. The shares are trading at 1.3x 12-month forward P/B and
have strong FYC growth potential. We have a BUY rating and CTBC
is our top-pick among the TW bank-centric financials.
6 AUGUST 2014
RESULTS FLASH
CTBC FHC 2891 TT
TAIWAN / BANKS
BUY
UP/DOWNSIDE +16.5%
CLOSE TWD20.25
EPS 2014 (%) (13.2) NEUTRAL 2
EPS 2015 (%) (2.2) NEGATIVE 1
Frank Yuen, CFA
frank.yuen@asia.bnpparibas.com
+852 2825 1863
Leif Chang
leif.chang@asia.bnpparibas.com
+8862 8729 7057
KEY STOCK DATA
YE Dec (TWD m) 2013A 2014E 2015E 2016E
Operating Profit 21,552 31,238 33,893 36,425
Rec. net profit 21,503 26,585 28,525 30,641
EPS growth (%) (13.5) 14.0 7.3 7.4
Recurring P/E (x) 12.8 11.2 10.4 9.7
Dividend yield (%) 1.9 2.0 3.2 3.3
Price/book (x) 1.5 1.3 1.1 1.0
ROE (%) 11.8 12.3 11.3 10.9
ROA (%) 0.95 0.88 0.75 0.73
Absolute (%) 1.5 11.9 10.0
Free float (%) 85
Major shareholder Nan Shan Life (5%)
12m high/low (TWD) 21.70/17.71
ADR ticker -
ADR closing price (USD; Date) -
(24)
(14)
(4)
6
16
10.00
15.00
20.00
25.00
(%) (TWD) CTBC FHC Rel to MSCI Taiwan
11
Tepid growth in the near term
Stronger 2014E EPS growth on Muji disposal
We forecast reported EPS of TWD9.15 for 2014E and TWD9.3 for
2015E. In 2014E, stronger reported EPS growth of 18% y-y is due to
the one-off disposal gain of TWD1/share pre-tax from the Muji
investment in 1Q. We expect TW 7-Eleven PSD (per store daily
sales) to see low single-digit growth in 2014 and overall sales growth
of 4.5% y-y, rising to 7.7% y-y in 2015E due to rapid store expansion.
Modest growth outlook in the near term; long-term positive
We are positive on PCSCs subsidiaries, such as Taiwan/Shanghai
Starbucks, 7-Eleven Philippines and Cosmed, for their L/T earnings
growth prospects. In the near term, we think margin recovery is likely
with continuing SKU adjustments, although this recovery may be
slower due to increased CVS IT expenses on store expansion.
Missing near-term catalyst to justify current high valuation
The 2Q14 preliminary sales came in at TWD51.65b, up 3.75% q-q
and 4.25% y-y. Year-to-date, PCSCs sales have risen 3.6% y-y.
However, we do not expect a strong margin recovery in 2014/2015
and subsequent improvement in recurring earnings that could justify
the current high valuation.
Maintain HOLD with TWD230 target price (24.7x 2015E P/E)
Our DCF-based TWD230 target price implies 24.7x reported 2015E
P/E vs regional peers on 22.8x (Bloomberg). Though we like PCSCs
leading position, solid execution, long-term strategies and growing
list of subsidiaries, we find its current valuation unattractive
1Q14 earnings breakdown large disposal gain from Muji investment
Source: PCSC
7-Eleven
Taiwan
39.1%
Starbucks
Shanghai
4.0%
President
Pharmaceu-
tical
3.5%
7-Eleven
Philippines
1.2%
Cosmed
1.8%
Disposal gains
34.7%
Others
15.7%
6 AUGUST 2014
CHANGE IN NUMBERS 13
TAIWAN / FOOD & STAPLES RETAILING
PCSC 2912 TT
HOLD
UNCHANGED
CLOSE TWD240.00
UP/DOWNSIDE -4.2%
PRIOR TP TWD208.00
CHANGE IN TP
+10.6

EPS 2014 (%) (1.2) NEUTRAL 6
EPS 2015 (%) (4.9) NEGATIVE 1
Jenny Tsai
jenny.tsai@asia.bnpparibas.com
+8862 8729 7054
Patricia Lee
patricia.h.lee@asia.bnpparibas.com
+886 2 87297063
KEY STOCK DATA
YE Dec (TWD m) 2013A 2014E 2015E 2016E
Revenue 200,611 209,646 225,744 244,127
Rec. net profit 8,224 8,806 9,822 10,864
Prior rec. EPS (TWD) 7.91 8.65 9.58 10.52
Chg. In EPS est. (%) 0.0 (2.0) (1.4) (0.7)
EPS growth (%) 18.2 7.1 11.5 10.6
Recurring P/E (x) 30.3 28.3 25.4 23.0
Dividend yield (%) 2.0 2.5 3.0 3.0
EV/EBITDA (x) 14.3 13.2 11.8 10.6
Price/book (x) 10.5 9.2 8.5 7.7
Net debt/Equity (%) (87.4) (84.7) (86.4) (89.9)
ROE (%) 35.3 34.7 34.9 35.2
Absolute (%) 0.8 6.0 9.1
Relative to country (%) 3.2 (0.4) (8.6)
Free float (%) 54
Major shareholder Uni-President (1216 TT) (45.4%)
12m high/low (TWD) 248.00/181.50
ADR ticker -
(39)
(29)
(19)
(9)
1
11
108.00
158.00
208.00
258.00
(%) (TWD) PCSC Rel to MSCI Taiwan
12
Defining moment for DSME in 2Q14
Provisions remain biggest risk to 2Q14 earnings
We remain cautious on DSMEs ability to increase its OPM through a
reduction in provisions, as it has undertaken various offshore projects
that could require further provisions. Interpretation of perceived risks
should be the determining factor.
How much provisioning is enough?
Provisions for doubtful accounts receivable rose by KRW76b y-y in
2012, KRW111b in 2013 and another KRW12b in 1Q14. While the
total amount of bad debt provisioning taken in 2013 remains unclear,
DSME gradually recognised bad debt provisioning each quarter to
total KRW256b in 2011 and KRW446b in 2012.
Order target may be difficult to attain in 2014
DSME has surpassed management targets in the past couple of
years, but we see a risk of not attaining the target this year, as only
36% (USD5.281b) of the 2014 new order target of USD14.5b has
been fulfilled YTD. However, there have been no offshore orders.
Maintain BUY, but with a more conservative TP of KRW32,300
We reduce our TP by 15% to KRW32,300 based on a lower target
P/B of 1.2x (previously 1.4x) as we believe the shares should trade at
a discount to our sector top pick SHI due to more uncertainty in both
earnings and order trends.
DSME P/BV discount to SHI P/BV
Source: Bloomberg
(60)
(40)
(20)
0
20
Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14
(%) DSME - SHI Average (since 2009)
6 AUGUST 2014
EARNINGS PREVIEW 10
KOREA / SHIPBUILDING
DAEWOO SHIPBUILDING 042660 KS
BUY
UNCHANGED
TARGET PRICE KRW32,300
CLOSE KRW25,200
UP/DOWNSIDE +28.2%
PRIOR TP KRW38,000
CHANGE IN TP -15.0%
EPS 2014 (%) (18.3) NEUTRAL 5
EPS 2015 (%) (18.5) NEGATIVE 1
H James Yoon
james.h.yoon@asia.bnpparibas.com
+822 2125 0533
KEY STOCK DATA
YE Dec (KRW b) 2013A 2014E 2015E 2016E
Revenue 15,305 15,998 16,028 16,129
Rec. net profit 314 289 397 395
Recurring EPS (KRW) 1,641 1,512 2,072 2,064
Prior rec. EPS (KRW) 1,641 1,512 2,072 2,064
Chg. In EPS est. (%) 0.0 0.0 0.0 0.0
EPS growth (%) (10.9) (7.8) 37.0 (0.4)
Recurring P/E (x) 15.4 16.7 12.2 12.2
Dividend yield (%) 1.2 1.2 1.2 1.2
EV/EBITDA (x) 17.2 16.9 13.3 12.6
Price/book (x) 1.0 0.9 0.9 0.8
Net debt/Equity (%) 135.6 127.4 106.9 90.1
ROE (%) 6.5 5.7 7.5 7.0
Absolute (%) (5.8) (11.4) (12.2)
Relative to country (%) (8.4) (16.4) (19.8)
Free float (%) 50
Major shareholder KDB (31%)
12m high/low (KRW) 38,400/23,950
ADR ticker -
Issued shares (b) 191.3
(52)
(32)
(12)
8
14,370.00
24,370.00
34,370.00
44,370.00
(%) (KRW) Daewoo Shipbuilding Rel to MSCI Korea
13
Adjusted NP at pre-Lehman level
1Q NP sharply ahead of BNPPe and consensus
Chiba Bank reported 1Q NP of JPY23b, to significantly eclipse
BNPPe (JPY19.2b) and the IFIS consensus (JPY19.9b). 1Q included
a JPY7b profit due to negative goodwill through consolidation of
subsidiaries, but after adjustment, NP totalled JPY16b, roughly the
same as its FY3/08 level of JPY15.8b. Chiba Bank achieved a 42.5%
run rate versus the full-year guidance of JPY54b, and even after
stripping out the negative goodwill, the run rate was 34%.
Int. on securities, credit costs, gains on equity sales contribute
Revenue totalled JPY42b in 1Q, on a par with the BNPPe
(JPY41.4b). Net interest income (JPY32.5b) beat the BNPPe thanks
to interest on securities, which totalled JPY6.8b vs. the BNPPe of
JPY5.6b. NIM was 1.16% in 1Q compared to the BNPPe of 1.13%.
The difference largely reflects a JPY100m credit-cost reversal vs. our
forecast of JPY800m credit costs. We were impressed by JPY1.1b
capital gains on sale of cross-shareholding equities rather than the
likes of ETF sales. According to the bank, the domestic loan yield
likely fell 8bp y-y, which would be a concern if this continues in 2Q.
If shares weaken, opportunity to buy on dips
Management left NP guidance unchanged (1H JPY33b, full-year
JPY54b). The share price has corrected 4% after hitting JPY760 on
22 July. Therefore, we expect a positive reaction to the results.
However, if the shares soften, this would be a good opportunity to
accumulate.
6 AUGUST 2014
RESULTS FLASH
CHIBA BANK 8331 JP
JAPAN / BANKS
BUY
TARGET PRICE JPY850.00
UP/DOWNSIDE +16.4%
CLOSE JPY730.00
EPS 2015 (%) 1.8 NEUTRAL 5
Toyoki Sameshima
toyoki.sameshima@japan.bnpparibas.com
+81 3 6377 2250
KEY STOCK DATA
YE Mar (JPY m) 2014A 2015E 2016E 2017E
Operating Profit 70,578 71,059 76,145 83,960
NPAT 46,438 54,629 50,724 55,814
EPS (JPY) 54.89 64.57 59.95 65.97
EPS growth (%) 6.9 17.6 (7.1) 10.0
P/E (x) 13.3 11.3 12.2 11.1
Dividend yield (%) 1.7 1.8 1.8 1.9
Price/book (x) 0.8 0.8 0.7 0.7
ROE (%) 6.3 7.0 6.2 6.5
ROA (%) 0.41 0.46 0.41 0.45
Absolute (%) (1.6) 12.7 1.1
Free float (%) 86
Major shareholder Mitsubishi UFJ Financial Group (7%)
12m high/low (JPY) 760.00/604.00
ADR ticker -
Issued shares (m) 846
(35)
(25)
(15)
(5)
5
362.00
462.00
562.00
662.00
762.00
862.00
(%) (JPY) Chiba Bank Rel to TOPIX Index
14
* Correction: Please note amended last sentence on front page
2Q orders to grow; a good start
1Q OP: JPY2.2b; 1H guidance raised above current consensus
1QFY3/15 OP of JPY2.2b beat the JPY1.4b Bloomberg consensus
helped by a reversal gain from inventory loss provisioning and fixed
cost reductions. SPE orders at JPY36.6b (+4% q-q) were in line with
initial guidance of JPY35b. 1H OP guidance was raised to JPY4.7b
from JPY3.5b (Bloomberg consensus: JPY3.9b).
SPE orders to trend up in 2Q and 3Q
Management guided for 2Q SPE orders of JPY38b-40b with NAND
demand rising, and foundry demand falling in the US but rising in
Taiwan. Management expects 3Q demand to be stronger depending
on foundry orders in Taiwan.
Two positives: OP outperformance and order recovery
Our JPY600 TP is based on 1.5x FY3/15E P/B. Near-term share
price performance tends to correlate closely with SPE orders. We
think investors are likely to feel positive about company guidance for
2Q and 3Q.
6 AUGUST 2014
RESULTS FLASH
DAINIPPON SCREEN 7735 JP
JAPAN / SEMICONDUCTORS
BUY
TARGET PRICE JPY600
UP/DOWNSIDE +26.3%
CLOSE JPY475
EPS 2015 (%) 5.7 NEUTRAL 7
Yoshitsugu Yamamoto
yoshitsugu.yamamoto@japan.bnpparibas.com
+813 6377 2259
KEY STOCK DATA
YE Mar (JPY b) 2015E 2015C 2016E 2017E
Revenue 242.0 241.0 239.6 230.2
Op profit 12.5 11.2 13.0 11.2
Recurring profit 11.5 10.5 12.0 10.2
Net profit 9.0 8.3 9.5 7.7
EPS (JPY) 38 35 40 32
P/E (x) 12.5 13.6 11.9 14.6
Dividend yield (%) 0.6 1.1 0.6 0.6
EV/EBITDA (x) 6.7 - 6.2 6.4
Price/book (x) 1.2 - 1.1 1.0
Net debt/equity (%) 1.4 - (6.4) (12.5)
ROE (%) 9.9 - 9.5 7.2
Absolute (%) (6.9) 5.1 (12.7)
Free float (%) 81
Major shareholder Master Trust Bank of Japan (10%)
12m high/low (JPY) 613/420
ADR ticker -
Sources: Bloomberg; Company estimates (C); BNP Paribas
estimates
(55)
(45)
(35)
(25)
(15)
(5)
252.00
352.00
452.00
552.00
652.00
(%) (JPY) Dainippon Screen Rel to TOPIX Index
15
Short-term reversal likely
1Q FY3/15 results reported post-market
1Q sales were JPY489b (+5% y-y, +9% q-q, BNPPe: JPY501b), OP
was JPY54b (+28% y-y, +50% q-q, BNPPe: JPY50b) and net income
was JPY36b (+29% y-y, +99% q-q). 1Q fixed costs were lower than
we had expected, partially due cost appropriation between 1Q and
2Q on our estimates. Domestic and European HVAC sales were
slightly lower than we had expected.
Costs are key to an FY3/15 beat (as in FY3/14)
We assume fixed labour costs grow JPY25b in FY3/15, which
appears conservative given these results. In FY3/14, costs were the
story behind rising market expectations for Daikins earnings. The
same could be true in FY3/15. We suspect Daikin, in addition to its
usual cost control programme, could pull in more synergies from the
Goodman Global deal than either we or inventors currently assume.
Priced in for now, could rally later in the year
Daikins shares fell steadily today (and could fall further in the short
term), implying these results and the outlook for 2Q FY3/15 and
beyond are priced in for now. We expect Kubota (6326 JP, REDUCE,
CP JPY1,291.5) to reverse its recent relative under-performance
versus Daikin on the back of the two companies results today. If
earnings expectations for Daikin rise and given our relatively
conservative 9x FY3/15E target EV/EBITDA, the shares could rally in
4Q CY14.
Daikin/Kubota relative share price
Source: Bloomberg
65
115
165
215
2007 2008 2009 2010 2011 2012 2013 2014
(%)
(Jan 2007=100)
6 AUGUST 2014
RESULTS FLASH
DAIKIN INDUSTRIES 6367 JP
JAPAN / CAPITAL GOODS
HOLD
TARGET PRICE JPY6,800
UP/DOWNSIDE -3.3%
CLOSE JPY7,034
EPS 2015 (%) (0.6) NEUTRAL 11
EPS 2016 (%) (5.5) NEGATIVE 0
Christopher Cintavey
christopher.cintavey@japan.bnpparibas.com
+81 3 6377 2258
KEY STOCK DATA
YE Mar (JPY b) 2015E 2015C 2016E 2017E
Revenue 1,941.4 1980.0 2,031.2 2,115.2
Op profit 184.5 170.0 193.7 196.9
Net profit 103.3 98.0 109.4 111.8
EPS (JPY) 354 336 375 384
P/E (x) 19.8 - 18.7 18.3
Dividend yield (%) 1.3 - 1.3 1.4
EV/EBITDA (x) 9.5 - 8.9 8.3
Price/book (x) 2.3 - 2.1 2.0
Net debt/equity (%) 16.0 - 2.7 (8.2)
ROE (%) 12.3 - 11.9 11.1
Absolute (%) 2.4 16.6 63.6
Relative to country (%) 4.1 9.7 56.9
Free float (%) 84
Major shareholder Nomura Asset Management (4%)
12m high/low (JPY) 7,253/4,300
ADR ticker -
estimates
0
20
40
60
2,403.00
4,403.00
6,403.00
8,403.00
(%) (JPY) Daikin Industries Rel to TOPIX Index
16
Balancing act
Reported better-than-expected 1Q FY3/15 results post-market
For 1Q FY3/15, Kubota reported sales of JPY361b (flat y-y/-15% q-q)
vs our JPY336b estimate and OP of JPY52b (+11% y-y/-10% q-q) vs
our JPY41b estimate. Net income was JPY33b (+8% y-y/-6% q-q).
Kubotas European and North American (new model releases)
machinery & engine sales were better than we had expected; fixed
costs were in-line with expectations. Asian sales were JPY69b (-21%
y-y/+1% q-q), led by Thailand. Domestic machinery & engine sales
were JPY74b (-18% y-y). However, Kubotas European and North
American significantly outperformed apparent organic market growth
to allow machinery & engine sales to be flat y-y at JPY300b.
Company-specific growth continues while the regions shift
Kubotas 1Q FY3/15 fundamental performance was in keeping with
its history of using company-specific sales well above the end-market
trend in one or more regions to cover for weakness elsewhere.
Weaker y-y JPY benefits come off from 2Q FY3/15, but we believe
fighting local FX sales expansion in Europe and North America
should remain a losing battle in 2Q FY3/15 and beyond.
Short term, we expect the stock to be a relative outperformer
We expect Kubotas share price to react positively to the result
tomorrow, followed by relative outperformance versus the broader
Japan machinery sector and peer Daikin (6367 JP; HOLD; CP:
JPY7034, TP: JPY6,800), which also reported 1Q FY3/15 earnings
today. In our opinion, investors looking to FY3/16 and beyond are
unlikely to be shaken from their holding on the back of these results,
pointing to Kubotas continued ability to engender company-specific
sales growth above market while limiting relative damage in
obviously weak end-markets.
6 AUGUST 2014
RESULTS FLASH
KUBOTA CORP 6326 JP
JAPAN / CAPITAL GOODS
REDUCE
UP/DOWNSIDE -11.0%
CLOSE JPY1,292
EPS 2015 (%) (13.3) NEUTRAL 11
EPS 2016 (%) (11.4) NEGATIVE 2
Christopher Cintavey
christopher.cintavey@japan.bnpparibas.com
+81 3 6377 2258

KEY STOCK DATA
YE Mar (JPY b) 2015E 2015C 2016E 2017E
Revenue 1,468.4 1,550 1,518.6 1,523.0
Op profit 181.5 200.0 203.1 193.5
Net profit 111.6 130.0 124.9 119.3
EPS (JPY) 89 104 100 95
P/E (x) 14.5 - 12.9 13.5
EV/EBITDA (x) 6.7 - 5.9 5.8
Price/book (x) 1.6 - 1.5 1.4
Net debt/equity (%) (22.9) - (25.4) (28.3)
ROE (%) 11.5 - 11.8 10.4
Absolute (%) (10.5) (3.4) (13.1)
Free float (%) 95
Major shareholder Capital World Investors (4%)
12m high/low (JPY) 1,821/1,282
ADR ticker KUBTY US
ADR closing price (USD; 04 Aug 2014) 64.49
estimates
(41)
(31)
(21)
(11)
(1)
9
769.00
1,269.00
1,769.00
(%) (JPY) Kubota Corp Rel to TOPIX Index
17
FY3/15 1Q: strong start to the year
All-round strength
1Q earnings were reassuringly strong, with group OPM reaching
10.8% (10.6% excluding above-line valuation gains). Prior to the
announcement, we had regarded the Asian slowdown and weak cost
control as the greatest risks to 1Q margins, but our fears were not
realized. In line with usual management practice at the 1Q stage,
headline guidance numbers were unchanged.
Margin sustainability is key
Key metrics are shown in the table overleaf. By geography, a firm
North America and Middle East offset weak Japan (but not as bad as
we initially feared) and Asean. Margin delivery of the core business
appears to be basically sustainable: fixed costs were in line with
seasonal levels (although management did forecast a rising 2Q-4Q
burden); one-time valuation gains (JPY16b) were a relatively small
part of the upside surprise; normalized financial services OPM of
22% was broadly as we expected. Reflecting Toyotas broad reach,
Asia volumes were down a modest 2% y-y despite the fact that
Thailand retail units were down as much as 28%. Below-line, slightly
better-than-expected net financial income, associate income and
exceptionals offset a higher-than-expected tax rate (34%, vs 32%).
Headline guidance numbers were unchanged, within which
developed market volumes were raised and EM volumes lowered;
among OP drivers: volume/mix/marketing -JPY10b, cost reduction
+JPY10b, FX +JPY55b, others (including rounding) -JPY55b.
Managing the cycle
Amid weak Japan and Asean markets, 1Q reminded us of Toyotas
ability to manage the cycle well. We expect the ebb and flow of
markets as well as slightly higher costs including TNGA-related up-
front investment to cause the OPM to ease during the rest of
FY3/15. These areas will remain the focus of our future analysis and
questions to the company. That said, todays result reaffirms our
sense that market expectations are too low, and that Toyota is the
most attractive fundamental stock among Japans automakers at
9.5x and 8.4x our unadjusted FY3/15 and FY3/16 EPS, respectively.
6 AUGUST 2014
RESULTS FLASH
TOYOTA MOTOR 7203 JP
JAPAN / AUTOMOBILES & COMPONENTS
BUY
UP/DOWNSIDE +20.8%
CLOSE JPY6,042
EPS 2015 (%) 3.4 NEUTRAL 7
Clive Wiggins
clive.wiggins@japan.bnpparibas.com
+813 6377 2253
KEY STOCK DATA
YE Mar (JPY b) 2015E 2015C 2016E 2017E
Revenue 26,587.5 25,700 28,515.5 30,028.7
Op profit 2,588.3 2,300 2,845.5 3,016.5
Recurring profit 3,035.5 2,390 3,315.2 3,510.5
Net profit 1,997.9 1,780 2,215.0 2,346.9
EPS (JPY) 638 562 719 775
P/E (x) 9.5 - 8.4 7.8
EV/EBITDA (x) 2.7 - 2.3 1.9
Price/book (x) 1.2 - 1.2 1.1
Net debt/equity (%) (63.1) - (62.6) (62.2)
ROE (%) 13.5 - 14.1 14.1
Absolute (%) (2.6) 7.3 (5.0)
Relative to country (%) (0.9) 0.4 (11.7)
Free float (%) 78
Major shareholder Japan Trustee Service (10%)
12m high/low (JPY) 6,510/5,314
ADR ticker TM US
estimates
(24)
(14)
(4)
6
16
3,188.00
4,188.00
5,188.00
6,188.00
7,188.00
(%) (JPY) Toyota Motor Rel to TOPIX Index
18
Conservative pax capacity growth
Change in ASK/RPK computation methodology
In 2Q14, AirAsia changed its ASK/RPK computation methodology by
using the actual number of kilometres flown vs. the theoretical
number of kilometres flown (previously flight distance for each route
flown was set and did not take into account the actual flight data).
This led to ASK/RPK y-y growth of 3%/2% in 2Q14, vs.7.8%/7.3% y-y
growth on a like-for-like basis. We believe the methodology change
will positively impact the operating cost/ASK metric as ASK has
mechanically increased. But, revenue per ASK should be negatively
impacted. So, the overall impact should be neutral for AirAsia.
A conservative approach towards seat growth
The number of passengers in 2Q14 grew only 1% y-y, in line with the
increase of seats offered (+1% y-y). The growth was much lower
than historical numbers as the average quarterly passenger capacity
growth was around 9% for the past three years. This suggests more
capacity control by Malaysia AirAsia and it should theoretically
positively impact yields, RASK and eventually profitability.
Passengers growth in Malaysia seems to have slowed
In 2Q14, Malaysia Airports Holdings (MAHB, Not rated) passenger
numbers increased 5.6% y-y, vs. the 18.3% y-y growth reported in
2Q13. This decrease was mainly due to lower seat capacity growth,
given the more conservative growth strategy by market players.
Seats traffic/capacity
Sources: AirAsia; BNP Paribas
0
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6 AUGUST 2014
NEWS FLASH
AIRASIA AIRA MK
MALAYSIA / TRANSPORTATION
BUY
TARGET PRICE MYR3.29
UP/DOWNSIDE +35.3%
CLOSE MYR2.43
EPS 2014 (%) 8.70 NEUTRAL 7
EPS 2015 (%) 14.8 NEGATIVE 3
Arnaud Bouchet
arnaud.bouchet@asia.bnpparibas.com
+65 6210 1957
KEY STOCK DATA
YE Dec (MYR m) 2013A 2014E 2015E 2016E
Revenue 4,523 5,127 5,759 6,510
Rec. net profit 561 701 871 1,151
Recurring EPS (MYR) 0.20 0.25 0.31 0.41
EPS growth (%) (14.7) 24.8 24.4 32.1
Recurring P/E (x) 12.0 9.7 7.8 5.9
Dividend yield (%) 1.7 2.6 3.4 4.5
EV/EBITDA (x) 8.1 7.3 6.4 5.5
Price/book (x) 1.4 1.2 1.1 0.9
Net debt/Equity (%) 175.5 162.8 151.1 138.0
ROE (%) 10.8 13.2 14.7 17.0
Absolute (%) 6.6 10.5 (23.1)
Free float (%) 54
Major shareholder Tune Air Sdn Bhd (13%)
12m high/low (MYR) 3.18/2.20
ADR ticker -
ADR closing price (USD; Date) -
(70)
(50)
(30)
(10)
1.00
3.00
5.00
7.00
9.00
(%) (MYR) AirAsia Rel to MSCI Malaysia
19
Optimizing its portfolio
1H14 results operating PATMI up 30% y-y
1H sales fell to SGD1.5b, -9% y-y, due to lower revenue from
development projects in China and Singapore, but partially mitigated
by higher rentals from malls and serviced residences. 1H operating
PATMI, on the other hand, rose to SGD292m, +30% y-y, due to lower
finance costs, higher development profits from associates and higher
rental contributions from malls.
Greater mix in recurring income
Post-CMA transaction, CAPL now has a resilient and stable income
stream. About 75% of its total assets are investment properties (ie
retail malls, serviced residences, etc) that generate recurring income,
and about 25% are residential development properties. We think this
could mitigate residential market headwinds in Singapore and China.
On track for targeted ROE of 8-12%
CAPL continues to target an ROE of 8-12% in the next three to five
years, especially with more development projects being completed.
While interest cover improved from 5.7x at end-FY13 to 6.1x, we
note that net gearing has risen from 0.39x to 0.58x due to CAPL
having less cash and reduced minority interests. Singapore and
China remained the biggest contributors to EBIT (48.5% and 30.1%).
Discount to RNAV
Source: Company data, BNP Paribas
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(SGD)
(%)
% premium/(discount) to RNAV (LHS)
Home price (RHS)
+1 SD = -15.2%
Mean = -33.1%
-0.5 SD = -42.1%
-1 SD = -51.1%
6 AUGUST 2014
RESULTS FLASH
CAPITALAND CAPL SP
SINGAPORE / REAL ESTATE
BUY
TARGET PRICE SGD3.77
UP/DOWNSIDE +9.6%
CLOSE SGD3.44
EPS 2014 (%) 11.2 NEUTRAL 3
Chong Kang Ho, CFA
kangho.chong@asia.bnpparibas.com
+65 6210 1956
KEY STOCK DATA
YE Dec (SGD m) 2013A 2014E 2015E 2016E
Revenue 3,977 3,939 5,023 4,101
Rec. net profit 850 781 816 795
Recurring EPS (SGD) 0.20 0.18 0.19 0.19
EPS growth (%) 9.6 (8.1) 4.5 (2.5)
Recurring P/E (x) 17.3 18.9 18.1 18.5
Dividend yield (%) 1.7 1.7 1.7 1.7
EV/EBITDA (x) 14.5 17.6 17.6 17.6
Price/book (x) 0.9 0.9 0.9 0.8
Net debt/Equity (%) 34.4 50.0 41.0 38.8
ROE (%) 5.5 4.8 4.9 4.6
Absolute (%) 8.2 11.0 4.9
Free float (%) 60
Major shareholder Temasek Holdings (41%)
12m high/low (SGD) 3.45/2.72
ADR ticker CLLDY US
(26)
(16)
(6)
4
1.00
3.00
5.00
7.00
9.00
11.00
(%) (SGD) CapitaLand Rel to Straits Times Index
20
Challenging outlook ahead
1H14 results tracking lower
2Q14 revenue rose 1% y-y to SGD29.6m, partly due to the
contribution from Rendezvous Hotel (acquired in Aug-13), which was
offset by falling occupancy rates and weaker room rates. DPU fell
13.3% y-y to SGD0.0124, due to higher property expenses and a
larger share base. Annualized DPU works out to SGD0.0508, about
10% below our and Bloomberg consensus FY14 forecasts.
Hotels remain the weak link
The hotel occupancy rate continued to decline to 80.1%, from 87.7%
in 2Q13, while the average daily rate reached SGD188, i.e., lower by
2% y-y. Overall, RevPAR was SGD150, down 10.5%. For the
serviced residences too, the occupancy rate fell to 87.2%, from
92.6%, although the average daily rate was maintained at SGD249.
Net-net, RevPAU reached SGD218, down 5.5%.
2H14 outlook remains challenging; HOLD
The weak 1H14 operational data was partly driven by slower tourist
arrivals, especially from China, given recent airline mishaps. On the
2H14 outlook, the management expects hotel operations to remain
weak, but is guiding for more stable serviced residences, as these
cater to corporate travellers. A key downside risk is the outbreak of a
disease, which would impact occupancy rates.
P/BV band
Sources: Bloomberg consensus; Far East Hospitality Trust; BNP Paribas estimates
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-1 SD = 0.9x
12M Sibor(RHS)
6 AUGUST 2014
RESULTS FLASH
FAR EAST HOSPITALITY TRUST FEHT SP
HOLD
UP/DOWNSIDE +5.7%
CLOSE SGD0.87
DPS 2014 (%) 1.0 NEUTRAL 5
DPS 2015 (%) 1.7 NEGATIVE 3
Chong Kang Ho, CFA
+65 6210 1956
KEY STOCK DATA
YE Dec (SGD m) 2013A 2014E 2015E 2016E
Revenue 122 135 139 141
Rec. net profit 41 103 106 108
Recurring EPS (SGD) 0.02 0.06 0.06 0.06
EPS growth (%) 56.5 151.5 3.2 2.0
Recurring P/E (x) 37.4 14.9 14.4 14.1
Dividend yield (%) 6.5 6.7 6.9 7.1
EV/EBITDA (x) 21.5 21.0 20.9 20.8
Price/book (x) 0.9 0.9 1.0 1.0
Net debt/Equity (%) 43.2 50.8 53.5 56.2
ROE (%) 2.5 6.1 6.6 6.9
Absolute (%) (1.7) (2.3) (7.0)
Free float (%) 48
Major shareholder Far East Org (52%)
12m high/low (SGD) 0.95/0.76
ADR ticker -
(28)
(18)
(8)
2
0.70
0.80
0.90
1.00
(%) (SGD) Far East Hospitality Trust Rel to Straits Times Index
21
A surge in development starts
1QFY15 tracking ahead
1QFY15 sales reached USD169m, up 18% y-y, driven by higher
rents and continuing lease-up of projects in China. Japan revenue
was up 9% y-y, driven by fund management fees. PATMI (ex-
revaluation) reached USD61m, up 27% y-y, adjusted for the
investment of 24.4% in GLP China by an investor consortium, and
sales of assets to J-REITs. Annualised, it is 7% ahead of our FY15E.
Strong development-starts, up 127% y-y
In 1QFY15, the groups development starts were up 127% y-y to
USD883m (we estimate about 32% of the companys FY15 target).
We believe this rise was driven by the Chinese and Brazilian
markets. Notably, in China, GLP started a record USD643m of
development projects, which represent about 39% of its FY15 target
for the country. GLP maintained its FY15 guidance for the group,
although we believe there is upside risk.
Rationale for forming strategic partnership with CMSTD
On 4 August 2014, with the support of the Chinese investor
consortium, GLP took a 15.3% stake in China Materials Storage and
Transportation Development Company (CMSTD, 600787 CH),
Chinas largest state-owned warehouse logistics provider. GLP also
formed a 49:51 JV with CMSTD, where GLP will be the exclusive
developer of modern logistic facilities on CMSTDs land resources of
more than 9m sqm. In our view, this is part of GLPs strategy to
secure land for future development, amid land constraints in China.
GLP 12-month forward P/BV
Sources: Bloomberg consensus; Global Logistic Prop; BNP Paribas estimates
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+1 SD = 1.2x
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-1 SD = 0.8x
6 AUGUST 2014
RESULTS FLASH
GLOBAL LOGISTIC PROP GLP SP
BUY
UP/DOWNSIDE +15.1%
CLOSE SGD2.80
TARGET PRICE (%) 0 POSITIVE 14
EPS 2015 (%) 2.3 NEUTRAL 3
Chong Kang Ho, CFA
+65 6210 1956
KEY STOCK DATA
YE Mar (USD m) 2014A 2015E 2016E 2017E
Revenue 598 719 871 1,063
Rec. net profit 277 276 318 357
Recurring EPS (USD) 0.06 0.06 0.07 0.07
EPS growth (%) (26.2) (4.0) 15.2 12.4
Recurring P/E (x) 37.8 39.4 34.2 30.4
Dividend yield (%) 1.4 1.1 1.2 1.2
EV/EBITDA (x) 24.3 21.4 18.2 15.9
Price/book (x) 1.2 1.2 1.1 1.1
Net debt/Equity (%) 11.1 11.8 12.4 13.9
ROE (%) 3.2 3.1 3.4 3.6
Absolute (%) 3.7 (0.4) (2.4)
Relative to country (%) 2.3 (2.4) (4.4)
Free float (%) 61
Major shareholder GIC Private Limited (36%)
12m high/low (SGD) 3.13/2.56
ADR ticker GBTZY US
ADR closing price (USD; 28 Jul 2014) 22.30
(23)
(13)
(3)
7
17
27
1.00
3.00
5.00
7.00
9.00
(%) (SGD) Global Logistic Prop Rel to Straits Times Index
22
Sales in line; margin disappoints
Mobile business disappoints; weak SMS and rising costs
PLDTs 1H revenue came in at 49.5% of our FY14 estimate, EBITDA
48.3% and PAT 50.1%. Mobile revenue and EBITDA declined by
1.3% and 5.7%, due to pressure on SMS and higher costs. SMS
revenue fell 12% y-y compared with -1.6% y-y at Globe (GLO PM;
BUY). Management mentioned it is looking to rationalise costs. The
mobile subscriber base declined q-q following a clean-up of inactive
subscribers (measured by VLR) but this increased ARPU.
Fixed line business doing well, driven by data growth
Fixed-line revenue increased 4.9% y-y, driven by data growth of
9.5% y-y. EBITDA growth was 8% y-y. PLDTs strong fixed-line
revenue is offsetting the weakness in mobile. In the fixed-line
segment, ILD/NLD revenue is under pressure, and broadband DSL
and international leased lines have been the growth drivers.
Muted growth but attractive dividend yield
Management re-iterated its net income and capex guidance, and
acknowledged there has been some shift in volumes from PLDT to
Globe on the back of Globes free Facebook offer. PLDT is looking
for a strategic acquisition in the internet space and hopes to close a
transaction shortly. PLDT is on track for its FY14 annual core net
income guidance of PHP39.5b and will continue paying out its
dividend; we forecast an attractive dividend yield of 5.5% in FY14
and like PLDT despite its muted growth prospects.
Mobile margins under pressure; lowest in 10 quarters
Source: PLDT
20
25
30
35
40
45
50
55
1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14
(%) Mobile Fixedline Blended
6 AUGUST 2014
RESULTS FLASH
PLDT TEL PM
PHILIPPINES / DIVERSIFIED TELECOMMUNICATION
BUY
TARGET PRICE PHP3,150.00
UP/DOWNSIDE +0.4%
CLOSE PHP3,136.00
EPS 2014 (%) 1.0 NEUTRAL 9
EPS 2015 (%) (2.3) NEGATIVE 0
Kunal Vora, CFA
kunal.d.vora@asia.bnpparibas.com
+91 22 6196 4384
KEY STOCK DATA
YE Dec (PHP m) 2013A 2014E 2015E 2016E
Revenue 168,331 171,050 175,765 180,920
Rec. net profit 38,717 39,957 40,229 41,639
Recurring EPS (PHP) 179 185 186 193
EPS growth (%) 2.8 3.2 0.7 3.5
Recurring P/E (x) 17.5 17.0 16.8 16.3
Dividend yield (%) 5.7 5.5 5.9 6.1
EV/EBITDA (x) 9.5 9.2 9.0 8.7
Price/book (x) 5.0 5.0 5.0 5.0
Net debt/Equity (%) 52.6 52.0 50.0 47.7
ROE (%) 27.1 29.1 29.3 30.3
Absolute (%) 4.0 8.6 2.0
Free float (%) 58
Major shareholder First Pacific (26%)
12m high/low (PHP) 3,136.00/2,582.00
ADR ticker PHI US
(23)
(13)
(3)
7
17
27
1,549.00
2,049.00
2,549.00
3,049.00
3,549.00
(%) (PHP) PLDT Rel to MSCI Philippines
23
Guidance increase in-line
1QF15 earnings disappoint on weak domestic sales
KKCs 1QFY15 sales missed our estimates by 9.8% on weaker than
expected domestic sales offsetting higher than expected exports.
EBITDA missed our estimates by 14.3% while Recurring PAT missed
by 19.3% on higher depreciation and lower other income which offset
lower taxes.
FY15 guidance raised in-line with our expectations
FY15 guidance was raised to 10-15% y-y growth from 0-5% on y-y
growth of 30% in exports and 5-10% in domestic sales. This was in-
line with our view that previous guidance was too conservative as it
did not factor a recovery in the domestic market, which we had.
CPCB II norms may not lead to a near-term margin increase
Costs and prices for power gensets rated above 750kVA will rise 15-
20% to comply with tighter emission norms from 1st July 2014. As
per management, higher prices may not dent demand. Also margins
would not go up in the near term due to teething troubles expected in
the new gensets. Long term, margins can improve on these gensets.
Raise TP to INR652; Maintain HOLD
We raise our TP 6.9% as we roll-over our valuation base from Jun-16
to Sep-16 . We continue to value KKC using its 10-year mean one-
year forward PE of 17.3x. We believe our earnings estimates price in
a recovery; we project earnings to grow 24.6% over FY14-17 and
believe the stock is fairly valued at c19x FY16 PE.
P/E band
Sources: Bloomberg; BNP Paribas estimates
0
5
10
15
20
25
30
M
a
y
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0
4
O
c
t
-
0
4
F
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J
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A
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S
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J
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7
J
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O
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3
A
p
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-
1
4
(x)
+1 SD
Avg
-1 SD
6 AUGUST 2014
CHANGE IN NUMBERS 8 INDIA
INDIA / CAPITAL GOODS
CUMMINS INDIA KKC IN
HOLD
UNCHANGED
TARGET PRICE INR652.00
CLOSE INR626.65
UP/DOWNSIDE +4.0%
PRIOR TP INR610.00
CHANGE IN TP +6.9%
TARGET PRICE (%) 2 POSITIVE 23
EPS 2015 (%) 9 NEUTRAL 10
EPS 2016 (%) 18 NEGATIVE 9
Girish Nair
girish.nair@asia.bnpparibas.com
+91 22 6196 4380

KEY STOCK DATA
YE Mar (INR m) 2014A 2015E 2016E 2017E
Revenue 39,767 45,568 55,897 67,305
Rec. net profit 6,000 6,996 9,298 11,611
Recurring EPS (INR) 21.65 25.24 33.54 41.89
Prior rec. EPS (INR) 21.65 26.09 33.34 41.07
Chg. In EPS est. (%) 0.0 (3.3) 0.6 2.0
EPS growth (%) (14.6) 16.6 32.9 24.9
Recurring P/E (x) 29.0 24.8 18.7 15.0
Dividend yield (%) 2.1 2.5 2.6 3.2
EV/EBITDA (x) 19.6 17.5 13.6 10.8
Price/book (x) 6.8 6.1 5.3 4.6
Net debt/Equity (%) (3.4) (6.3) 0.4 (6.9)
ROE (%) 24.2 25.8 30.5 33.1
Absolute (%) (6.9) 19.5 57.1
Relative to country (%) (8.6) (2.2) 20.8
Next results October 2014
Free float (%) 49
Major shareholder Cummins Inc (51%)
12m high/low (INR) 687.45/373.10
ADR ticker -
(26)
(6)
14
34
223.00
423.00
623.00
823.00
(%) (INR) Cummins India Rel to MSCI India
24
Margin concerns continue
1QFY15 margin missed expectations because of duty anomalies
Although top-line growth was largely in line with our expectation for
the quarter, the operating margin missed by120bp. A large part of this
miss was caused by differing excise duty rates on raw materials and
sales, as well as some higher advertising spending, which may
moderate in the coming quarters.
Competitiveness maintained over the past six months
Despite a slew of launches by competitors such as Honda and TVS
(TVSL IN; NR), the company managed to maintain its motorcycle
market share at 54% and overall market share at 42%. Its export
business has also seen the worst of the challenges, and should see
an improvement in Latin American and Asian markets in 2HCY15E.
Product launches and cost savings remain potential catalysts
Several new launches in both the motorcycle and scooter segments
are on the slate for 2HFY15, and we expect growth rates, which have
improved in the past few months, to enjoy further upside. Cost saving
efforts remain on track, and should see a further saving of 25% from
current levels.
Maintain our BUY stance with revised target price of INR3,000
Given the above factors and promising market outlook, we largely
maintain our FY15-16 estimates and introduce our FY17 estimates.
We have revised our target price to INR3,000 (from INR2,775) as we
roll forward our investment timeframe to September 2015E.
EBITDA and margin trend
Sources: Hero MotoCorp; BNP Paribas
12.0
12.5
13.0
13.5
14.0
14.5
15.0
15.5
16.0
0
2,000
4,000
6,000
8,000
10,000
J
u
n
-
1
1
S
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p
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1
1
D
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1
M
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S
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2
D
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1
2
M
a
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3
J
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3
S
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1
3
D
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-
1
3
M
a
r
-
1
4
J
u
n
-
1
4
(%) (INR m) Adjusted EBITDA Adjusted EBITDA margin (RHS)
6 AUGUST 2014
CHANGE IN NUMBERS 6 INDIA INDIA
INDIA / AUTOMOBILES & COMPONENTS
HERO MOTOCORP HMCL IN
BUY
UNCHANGED
TARGET PRICE INR3,000.00
CLOSE INR2,583.30
UP/DOWNSIDE +16.1%
PRIOR TP INR2,775.00
CHANGE IN TP +8.1%
EPS 2015 (%) 4.4 NEUTRAL 16
Vijay Chugh
vijay.chugh@asia.bnpparibas.com
+91 22 6196 4383
Tapan Joshi
tapan.joshi@asia.bnpparibas.com
+91 22 6176 5625
KEY STOCK DATA
YE Mar (INR m) 2014A 2015E 2016E 2017E
Revenue 251,249 290,850 332,724 390,750
Rec. net profit 21,091 29,172 36,754 43,473
Recurring EPS (INR) 106 146 184 218
Prior rec. EPS (INR) 103 147 185 -
Chg. In EPS est. (%) 2.3 (0.5) (0.5) nm
EPS growth (%) (0.4) 38.3 26.0 18.3
Recurring P/E (x) 24.5 17.7 14.0 11.9
Dividend yield (%) 2.5 2.9 3.1 3.5
EV/EBITDA (x) 13.6 11.5 9.3 7.5
Price/book (x) 9.2 7.4 5.8 4.5
Net debt/Equity (%) (60.6) (63.8) (67.4) (73.6)
ROE (%) 39.8 46.3 46.2 42.8
Absolute (%) 0.0 17.0 39.3
Next results October 2014
Free float (%) 48
Major shareholder Hero Group (52%)
12m high/low (INR) 2,724.20/1,834.65
ADR ticker -
(6)
(1)
4
9
14
1,081.00
1,581.00
2,081.00
2,581.00
3,081.00
(%) (INR) Hero MotoCorp Rel to MSCI India
25

BNP PARIBAS

Disclaimers and Disclosures
APPENDIX
DISCLAIMERS AND DISCLOSURES APPLICABLE TO NON-US BROKER-DEALER(S) (BNP Paribas Securities (Asia) Ltd)
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)
N/A N/A N/A
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:
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 that has signed a nominated advisor contract with BNPPSK as defined in Item 2 of Article 8 of the KONEX Market Listing Regulation.
9. The Company is recognized as having considerable interests with BNPPSK in relation to No.1 to No. 8.
10. 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 (Asia) 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
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.

26

BNP PARIBAS

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
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Paribas, is regulated by the Securities and Futures Commission for the conduct of dealing in securities, advising on securities, providing automated trading
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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
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Jakarta 10310, Indonesia, is a subsidiary company of BNP Paribas SA and licensed under Capital Market Law no. 8 year 1995, a holder of broker-dealer and
underwriter licenses issued by the Capital Market and Financial Institution Supervisory Agency (now Otoritas Jasa Keuangan/OJK). PT BNP Paribas Securities
Indonesia is also a member of Indonesia Stock Exchange and supervised by Otoritas Jasa Keuangan (OJK). 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 Otoritas Jasa Keuangan (OJK) 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 constitutes 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
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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 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
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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
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
27

BNP PARIBAS

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.
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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 5 August 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 5 August 2014)
Total BNP Paribas coverage universe 668 Investment Banking Relationship (%)
Buy 353 Buy 5.7
Hold 219 Hold 4.1
Reduce 96 Reduce 2.1
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
28

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