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Asia-PacificAfternoonSummaryFebruary1,2012Forfurtherproductinformation,contact:Asia-PacificInvestmentResearch+852-2978-1000Analystsemployedbynon-USaffiliatesarenotregistered/qualifiedasresearchanalystswithFINRAintheU.
S.
GlobalInvestmentResearchGoldmanSachsdoesandseekstodobusinesswithcompaniescoveredinitsresearchreports.
Asaresult,investorsshouldbeawarethatthefirmmayhaveaconflictofinterestthatcouldaffecttheobjectivityofthisreport.
Investorsshouldconsiderthisreportasonlyasinglefactorinmakingtheirinvestmentdecision.
ForRegACcertificationandotherimportantdisclosures,seetheDisclosureAppendix,orgotowww.
gs.
com/research/hedge.
html.
TheGoldmanSachsGroup,Inc.
Thisdocumentcontainscommentsrelatedtothefollowingstocks:AdityaBirlaMinerals(ABY.
AX)ANZBankingGroupLimited(ANZ.
AX)APNNews&Media(APN.
AX)AutomotiveHoldingsGroup(AHE.
AX)AWELimited(AWE.
AX)BankCentralAsia(BBCA.
JK)BankMandiri(BMRI.
JK)BankofQueenslandLimited(BOQ.
AX)BendigoandAdelaideBankLimited(BEN.
AX)BHPBilliton(BHP.
AX)BrevilleGroupLtd(BRG.
AX)Carsales.
Com(CRZ.
AX)CommonwealthBankofAustralia(CBA.
AX)Ctrip.
comInternational(CTRP)EnergyResourcesOfAustraliaLtd.
(ERA.
AX)FairfaxMedia(FXJ.
AX)FarEasternDepartmentStores(2903.
TW)GuangzhouAutomobileGroupCo(2238.
HK)GuilinTourismCo.
Ltd.
(000978.
SZ)HankookTire(000240.
KS)HavellsIndia(HVEL.
BO)HindustanZinc(HZNC.
BO)HutchisonTelecommunicationsAustralia(HTA.
AX)HyundaiDepartmentStore(069960.
KS)ICICIBank(ICBK.
BO)IndependenceGroup(IGO.
AX)KingsgateConsolidated(KCN.
AX)LGChem(051910.
KS)Lock&LockCo.
(115390.
KS)Lynas(LYC.
AX)MapletreeCommercialTrust(MACT.
SI)NationalAustraliaBank(NAB.
AX)FocusItemsChina:PortfolioStrategyResearch:MXCNearnings:morecutstocome,butworstappearsbehindus1KeyDataChangesRatingandpricetargetchangesRating/CoverageviewPriceTargetEstimatesCompanyTickerNewOldNewOld%chgCurrentYearNextYearFiscaly/eAutomotiveHoldingsGroupAHE.
AXN/Nunch↑A$2.
05A$1.
7020.
6%A$0.
23A$0.
26JunBendigoandAdelaideBankLimitedBEN.
AXS/Nunch↓A$7.
90A$8.
00(1.
2%)A$0.
80A$0.
84JunBHPBillitonBHP.
AXB/Aunch↑A$51.
22A$50.
810.
8%US$3.
61US$4.
05JunBrevilleGroupLtdBRG.
AXN/Nunch↑A$3.
30A$3.
0010.
0%A$0.
32A$0.
35JunCommonwealthBankofAustraliaCBA.
AXS/Nunch↓A$49.
50A$50.
00(1.
0%)A$4.
22A$4.
35JunGuilinTourismCo.
Ltd.
000978.
SZS/Aunch↓Rmb7.
60Rmb7.
90(3.
8%)Rmb0.
20Rmb0.
33DecHankookTire000240.
KSN/Nunch↑W49,000W45,9006.
8%W2,342W4,639DecHavellsIndiaHVEL.
BON/Nunch↑Rs487.
00Rs480.
001.
5%Rs30.
40Rs36.
22MarHutchisonTelecommunicationsAustraliaHTA.
AXN/Nunch↓A$0.
06A$0.
08(27.
6%)(A$0.
01)(A$0.
01)DecHyundaiDepartmentStore069960.
KSN/Nunch↑W174,000W173,0000.
6%W15,282W15,125DecICICIBankICBK.
BOB/Nunch↑Rs1,040.
00Rs950.
009.
5%Rs54.
58Rs60.
99MarIndependenceGroupIGO.
AXS/Aunch↓A$3.
30A$3.
50(5.
7%)A$0.
03A$0.
05JunKingsgateConsolidatedKCN.
AXB/Aunch↓A$10.
50A$11.
15(5.
8%)A$0.
88A$1.
68JunKoreanRe003690.
KSN/Nunch↓W15,000W16,200(7.
4%)W1,184W1,984MarLock&LockCo.
115390.
KSB/Nunch↓W45,000W48,000(6.
3%)W946W1,693DecNavitasLtdNVT.
AXS/Nunch↓A$3.
15A$3.
41(7.
6%)A$0.
20A$0.
23JunNexusEnergyNXS.
AXN/Nunch↓A$0.
31A$0.
33(6.
1%)(A$0.
00)A$0.
00JunPunjabNationalBankPNBK.
BOB/Nunch↓Rs1,110.
00Rs1,130.
00(1.
8%)Rs151.
55Rs165.
13MarS1012750.
KSN/Nunch↑W62,000W59,0005.
1%W3,454W3,998DecSamsungFire&MarineInsurance000810.
KSB/Nunch↓W298,000W305,000(2.
3%)W16,205W20,608MarTapOilTAP.
AXN/Nunch↑A$0.
82A$0.
759.
3%A$0.
01(A$0.
04)DecTerangaGoldTGZ.
AXB/Aunch↓A$3.
20A$3.
25(1.
5%)(US$0.
04)US$0.
22DecTPGTelecomTPM.
AXN/Nunch↓A$1.
64A$1.
79(8.
4%)A$0.
14A$0.
17JulNavitasLtd(NVT.
AX)NewZealandOil&Gas(NZO.
NZ)NewsCorporation(NWS.
AX)NexusEnergy(NXS.
AX)OriginEnergy(ORG.
AX)PrimeMediaGroup(PRT.
AX)PunjabNationalBank(PNBK.
BO)REAGroup(REA.
AX)RioTinto(RIO.
AX)S1(012750.
KS)SamsungFire&MarineInsurance(000810.
KS)SamsungSDICo.
(006400.
KS)SandsChina(1928.
HK)SEEK(SEK.
AX)SevenWestMedia(SWM.
AX)TapOil(TAP.
AX)TelstraCorp.
(TLS.
AX)TenNetworkHoldings(TEN.
AX)TerangaGold(TGZ.
AX)TitanIndustries(TITN.
BO)TPGTelecom(TPM.
AX)WestpacBankingCorp.
(WBC.
AX)Woolworths(WOW.
AX)WoolworthsWOW.
AXN/Nunch↓A$28.
35A$29.
64(4.
4%)A$1.
80A$1.
95JunEstimatechangesCurrentYearNextYearCompanyTickerRating/CoverageviewNewOld%chgNewOld%chgFiscaly/eAdityaBirlaMineralsABY.
AXS/A↑A$0.
12A$0.
119.
2%A$0.
20unch--MarANZBankingGroupLimitedANZ.
AXN/N↓A$2.
20A$2.
24(1.
6%)↓A$2.
45A$2.
49(1.
6%)SepAWELimitedAWE.
AXN/N↓A$0.
04A$0.
06(19.
8%)A$0.
10unch--JunBankofQueenslandLimitedBOQ.
AXB/N↓A$0.
98A$1.
00(2.
6%)↓A$1.
13A$1.
17(3.
3%)AugBendigoandAdelaideBankLimitedBEN.
AXS/N↓A$0.
80A$0.
82(1.
9%)↓A$0.
84A$0.
88(3.
9%)JunBHPBillitonBHP.
AXB/A↑US$3.
61US$3.
580.
8%↓US$4.
05US$4.
06(0.
3%)JunBrevilleGroupLtdBRG.
AXN/N↑A$0.
32A$0.
2911.
1%↑A$0.
35A$0.
329.
3%JunCommonwealthBankofAustraliaCBA.
AXS/N↓A$4.
22A$4.
35(2.
8%)↓A$4.
35A$4.
54(4.
1%)JunDongbuInsuranceCo.
005830.
KSN/N↑W6,180W6,0831.
6%↑W6,652W6,5950.
9%MarFarEasternDepartmentStores2903.
TWN/NNT$1.
85unch--↑NT$1.
92NT$1.
900.
9%DecGuilinTourismCo.
Ltd.
000978.
SZS/A↓Rmb0.
20Rmb0.
34(42.
0%)↓Rmb0.
33Rmb0.
36(7.
6%)DecHankookTire000240.
KSN/N↓W2,342W2,625(10.
8%)↑W4,639W4,18111.
0%DecHavellsIndiaHVEL.
BON/N↑Rs30.
40Rs29.
612.
7%↑Rs36.
22Rs35.
541.
9%MarHindustanZincHZNC.
BON/N↓Rs13.
22Rs13.
42(1.
5%)↓Rs15.
00Rs15.
45(2.
9%)MarHutchisonTelecommunicationsAustraliaHTA.
AXN/N(A$0.
01)unch--↓(A$0.
01)(A$0.
00)(262.
3%)DecHyundaiDepartmentStore069960.
KSN/N↓W15,282W15,851(3.
6%)↓W15,125W15,528(2.
6%)DecHyundaiMarine&FireInsuranceCo.
001450.
KSB/N↓W4,623W4,623--↑W5,002W4,9790.
5%MarICICIBankICBK.
BOB/N↑Rs54.
58Rs52.
424.
1%↑Rs60.
99Rs58.
454.
3%MarIndependenceGroupIGO.
AXS/A↑A$0.
03(A$0.
04)NM↓A$0.
05A$0.
08(39.
0%)JunKingsgateConsolidatedKCN.
AXB/A↓A$0.
88A$0.
96(7.
9%)↓A$1.
68A$1.
95(13.
8%)JunKoreanRe003690.
KSN/N↓W1,184W1,816(34.
8%)↓W1,984W2,082(4.
7%)MarLGChem051910.
KSN/C↓W34,713W36,875(5.
9%)↓W38,377W40,672(5.
6%)DecLIGInsuranceCo.
002550.
KSS/N↑W3,581W3,5710.
3%↑W4,008W3,9870.
5%MarLock&LockCo.
115390.
KSB/N↓W946W1,121(15.
6%)↓W1,693W1,842(8.
1%)DecNationalAustraliaBankNAB.
AXB/N↓A$2.
78A$2.
81(0.
9%)↓A$2.
93A$2.
97(1.
3%)SepNavitasLtdNVT.
AXS/N↓A$0.
20A$0.
22(7.
4%)↓A$0.
23A$0.
25(6.
7%)JunPunjabNationalBankPNBK.
BOB/N↑Rs151.
55Rs151.
040.
3%↓Rs165.
13Rs172.
36(4.
2%)MarRioTintoRIO.
AXB/A↑US$7.
96US$7.
614.
7%↑US$7.
51US$7.
401.
5%DecS1012750.
KSN/N↑W3,454W3,3094.
4%↑W3,998W3,8055.
1%DecSamsungFire&MarineInsurance000810.
KSB/N↓W16,205W18,746(13.
6%)↓W20,608W21,271(3.
1%)MarSamsungSDICo.
006400.
KSN/A↑W8,479W8,0944.
8%↑W8,656W8,3463.
7%DecTelstraCorp.
TLS.
AXNR↑A$0.
28A$0.
271.
7%A$0.
29unch--JunTerangaGoldTGZ.
AXB/A↑(US$0.
04)(US$0.
05)14.
3%↓US$0.
22US$0.
24(11.
0%)DecTitanIndustriesTITN.
BOB/NRs6.
78unch--↓Rs8.
49Rs8.
50(0.
1%)MarWestpacBankingCorp.
WBC.
AXN/N↓A$2.
04A$2.
11(3.
1%)↓A$2.
14A$2.
21(3.
2%)SepOtherHeadlinesBasicMaterialsLynas(LYC.
AX):2QFY12productionreport2IndependenceGroup(IGO.
AX):2QFY12productionreport:Productionbetter;loweringFY13EEPS3KingsgateConsolidated(KCN.
AX):2QFY12productionresultunderpinsconfidenceinFY12EPSgrowth4AdityaBirlaMinerals(ABY.
AX):3QFY12productionreport:Productioninline;saleshigher5TerangaGold(TGZ.
AX):4QFY11productionresult:Highergrade=lowercosts6LGChem(051910.
KS):Belowexpectations:expectbetter2012E,butvaluationfull7BHPBilliton(BHP.
AX):Earningsestimateupdate8HindustanZinc(HZNC.
BO):Minorestimaterevisions9RioTinto(RIO.
AX):Updatingearningsestimates10ConsumerCyclicalsGuilinTourismCo.
Ltd.
(000978.
SZ):2011netprofitpre-announcementbelowexpectations,stillSell11S1(012750.
KS):Aboveexpectations,but2012guidancelooksaggressive12HankookTire(000240.
KS):Belowexpectation,yetOPguidancelooksconservative13TitanIndustries(TITN.
BO):Belowexpectations:Jewellerysalesmiss,marginsaboveestimates14HyundaiDepartmentStore(069960.
KS):Belowexpectations;Stillseedownsiderisktoconsensus15FarEasternDepartmentStores(2903.
TW):CNYsalesupdate;dragonyearbabyboomimpactlimited;Neutral16AutomotiveHoldingsGroup(AHE.
AX):JeffWignallGroupacquisition17Australia:Media:MediaSectorOutlook201218GuangzhouAutomobileGroupCo(2238.
HK):MergerplanwithGACChangfengapprovedbyCSRC;Neutral19BrevilleGroupLtd(BRG.
AX):Strongtradingupdate20NavitasLtd(NVT.
AX):Weak1H12resultonan'unsound'SAEperformance21ConsumerStaplesWoolworths(WOW.
AX):2Q12salesinline;divestingDickSmithbusiness22Lock&LockCo.
(115390.
KS):Currentsharepriceimplieszerogrowthbeyond2012E;keepBuy23EnergyNexusEnergy(NXS.
AX):2Qdisappoints,LongtomreservesreviewexpectedMarch24NewZealandOil&Gas(NZO.
NZ):2Qreport:Buildinguptodebutinternationaltest25AWELimited(AWE.
AX):2Q-Stillontrack-IndonesianandWAshalewellsthenextfocus26TapOil(TAP.
AX):4Qinline-High-impactTallaganda-1welldrillingsoon27OriginEnergy(ORG.
AX):Disappointing2Qreport-Otwayissuesweakenproduction28EnergyResourcesOfAustraliaLtd.
(ERA.
AX):FirstTake:ERAfullyearresult-inlinebutmorewarnings29FinancialServicesSouthKorea:Insurance:Property&Casualty:3QFY3/12non-liferesults:Hitsbyone-offs,butsolidcoreoperations30ICICIBank(ICBK.
BO):AboveexpectationsonsolidNII,costcontrols;ReiterateBuy31Indonesia:Banks:Areastowatchin2012:NIMsustainability&loangrowthpotential32MapletreeCommercialTrust(MACT.
SI):Inlinewithexpectationsonsolidexecution;strong33visibilityPunjabNationalBank(PNBK.
BO):Inlinewithexpectations,assetqualityanoverhang;retainBuy34Australia:Banks:Revenuepressuresevident,butloanrepricingtopartiallyoffset35IndustrialsSandsChina(1928.
HK):HK$0.
58interimDPS.
NotrulingoutpossibilityofafinalDPS36HavellsIndia(HVEL.
BO):Inlinewithexpectationsonrevenue+strongoverseasmargins37TechnologySamsungSDICo.
(006400.
KS):Belowexpectations;limitedbatterymarginrecoverytocapupside38Ctrip.
comInternational(CTRP):Hotelcouponpricepromotionssuggestintensifiedcompetition39TelecomServicesAustralia:TelecomServices:Telecomsectoroutlook201240OtherEquityStrategy:Assessingearningsriskheadingintoreportingseason41MonthlyMarketReview:Australiamarketreview:January201242NewZealand:IntroducingtheNewZealandFocusList43NewZealand:Monthlywrap:NZSX50startstheyearup0.
7%44Asia-PacificAfternoonSummaryFebruary1,2012GoldmanSachsGlobalInvestmentResearchFocusItemsChina:PortfolioStrategyResearch:MXCNearnings:morecutstocome,butworstappearsbehindus1HelenZhu(HongKong):helen.
zhu@gs.
com,+852-2978-0048GoldmanSachs(Asia)L.
L.
C.
TimothyMoe,CFA(HongKong):timothy.
moe@gs.
com,+852-2978-1328GoldmanSachs(Asia)L.
L.
C.
HanfengWang,Ph.
D,CFA(Beijing):hanfeng.
wang@ghsl.
cn,+86(10)6627-3318BeijingGaoHuaSecuritiesCompanyLimitedBenBei(HongKong):ben.
bei@gs.
com,+852-2978-1220GoldmanSachs(Asia)L.
L.
C.
ChenjieLiu(Beijing):chenjie.
liu@ghsl.
cn,+86(10)6627-3324BeijingGaoHuaSecuritiesCompanyLimitedRamasubramanianDharmaraj(Bangalore):ramasubramanian.
d@gs.
com,(212)934-9678GoldmanSachsIndiaSPLKetakiGarg(Bangalore):ketaki.
garg@gs.
com,(212)934-6319GoldmanSachsIndiaSPLEarningsinthespotlightforthenextfewmonthsMXCNindexearningshavebeencontinuouslytrimmedsince2Q11,andweforeseemorecutsforanotherquarterortwo(I/B/E/Sconsensus2012EEPSgrowthis12%vsGStop-downof8%).
Wethinktheworstisalreadybehindus,however:indexearningssentimenttroughedin4Q11,cutsaredecelerating(I/B/E/S2012Ehasbeencutby6ppalready),andtheearningsoutlookformostlargecapsectorsisstable.
Leadingindicatorslookreasonablefor4Q11,although1Q12maybringabitmorepressure.
MoreresponsivecyclicalpolicymaylimitGDP/earningsdownsideSomemacrofine-tuninghascommenced,anddesireforcyclicalstabilityaheadof4Q12leadershiprotationmayprotectonthedownsideintermsofGDP/earnings.
ThesefactorssupportChina'srelativereturnpotential,whileabsolutereturnshingeonvaluationre-rating(drivenbyglobalfactorsandpaceofChina'sstructuralreforms)offthecurrentlowbase.
Butbewaresomelandmines:industrials,materialsandpropertyWefeelcapitalgoods,shipping,property,materialsandselectconsumersectors(durables,staples)stillposeearningsdownsidesurpriserisksandthusshouldbeavoidedduringresultsseason.
WemaintainOWinbanksandoil(lowearningsrisks;upsidepotentialfromregulation)andunder-ownedconsumerwithmorebalancedearningsoutlook(suchasautos).
Asia-PacificAfternoonSummaryFebruary1,2012GoldmanSachsGlobalInvestmentResearchOtherHeadlinesBasicMaterialsLynas(LYC.
AX):2QFY12productionreport2LYC.
AX,A$1.
33MarketcapUS$2,400mnTargetpriceA$1.
90Fiscaly/eJun2012E2013ENetinc.
(A$)(49.
3mn)445.
1mnEPS(A$)(0.
03)0.
24EPSgrowth5.
0%916.
5%P/E--5.
6XDividendyield--8.
3%InvestmentListsAustralia/NZBuyListCoverageviewAttractiveIanPreston(Melbourne):ian.
preston@gs.
com,+61(3)9679-1453GoldmanSachsAustraliaPtyLtdPaulHissey(Melbourne):paul.
hissey@gs.
com,+61(3)9679-1779GoldmanSachsAustraliaPtyLtdBrettCottrell(Melbourne):brett.
cottrell@gs.
com,+61(3)9679-1565GoldmanSachsAustraliaPtyLtdWhat'schangedPre-operatingLicense:LYCadvisesthattheMalaysianauthoritieshaveallthedocumentationrequiredandexpectsarecommendationtobemadeforconsiderationbytheMalaysiancabinetinFebruary.
MtWeld:theconcentratorplantcontinuestooperateaheadofexpectationforbothfinalgradeandrecoveryandhasbeentestedattherequiredrunratependingthecompletionoftheLynasAdvancedMaterialsPlant(LAMP)inMalaysia.
LAMP:LYCnowexpectsconstructioncompletionearly4QFY12Eandpendingtheformalissuingofthepre-operatinglicenseforLAMP,1stconcentratecouldbetreatedinApril2012.
Corporate:NetdebtA$5.
7mn(A$0.
6mn).
Postquarterend,LYCinitiatedaconvertiblebondissueofUS$225mnofwhichUS$50mnhasbeenreceivedwithUS$175msubjecttotechnicalduediligenceinFebruary2012.
ImplicationsLYChassufficientfundingavailabletobringtheLAMPintoproductionandthekeyissueremainingisthegrantingofthepre-operatinglicensewhichwillallowcommissioningandtheramp-upoftheplanttocommence.
ValuationWehaveupdatedourestimatesfortheactualcashpositionasattheendofDecember2011.
Wecurrentlyestimate1stproductioninApril2012whichissubjecttoLYCreceivingthepre-operatinglicenseinFebruary.
Wehavenochangetoour12monthtargetpriceof$1.
90whichisacombinationofPERandDCF.
KeyrisksThegrantingofthepre-operatinglicense.
Furtherdelaysbeyondmid2012wouldimpactthecashpositionandpotentiallyrequireadditionalfunds.
IndependenceGroup(IGO.
AX):2QFY12productionreport:Productionbetter;loweringFY13EEPS3IGO.
AX,A$3.
95MarketcapUS$970.
9mnTargetpriceA$3.
30Fiscaly/eJun2012E2013ENetinc.
(A$)7.
3mn12.
0mnEPS(A$)0.
030.
05EPSgrowth(80.
5%)56.
1%P/E119.
9X76.
8XDividendyield0.
3%--InvestmentListsAustralia/NZSellListCoverageviewAttractiveIanPreston(Melbourne):ian.
preston@gs.
com,+61(3)9679-1453GoldmanSachsAustraliaPtyLtdPaulHissey(Melbourne):paul.
hissey@gs.
com,+61(3)9679-1779GoldmanSachsAustraliaPtyLtdBrettCottrell(Melbourne):brett.
cottrell@gs.
com,+61(3)9679-1565GoldmanSachsAustraliaPtyLtdWhat'schangedLongnickelmine:2,498tonnesNiatA$4.
69/lbNipayableagainstourforecastof2,300tonnesNiatA$4.
53/lbNimetalpayable.
Jaguaroperations:2,088tCuand3,134tZnatanaveragecashcostofA$0.
44/lbpayablezincmetalagainstourforecastof1,560tCuand3,730tZnatanaveragecostofA$0.
16/lbpayablezincmetal.
ImplicationsIncorporatingtheactualproductiondatafor2QFY12,aswellasslightlylowerproductionandhigherproductionatJaguargoingforward,resultsinchangestoourforecasts.
AsaresultofhigherNiandCuproduction,andtimingofsales,thecompanyrealisedbetterrevenuesfor2QFY12thanweforecast.
Thisleadstoanupgrade(albeitoffalowbase)toourEPSestimatesfortheAsia-PacificAfternoonSummaryFebruary1,2012GoldmanSachsGlobalInvestmentResearchremainderofFY12E.
ThedowngradestoourFY13/14EPSestimates(materialinFY13andminorinFY14)arisefromourupwardlyrevisedcostprojections(fromJaguar)andlowergradesthroughouttheperiod.
ValuationWethereforeretainourSellratingandlowerour12-monthP/EandDCF-basedtargetpricetoA$3.
30(wasA$3.
50)asaresultofthemateriallylowerearningswenowforecastforFY13E.
KeyrisksThekeyrisktoournegativeviewforIGOisbettermetalpricesdrivinghigherearningsand/orasignificantnewexplorationdiscovery.
KingsgateConsolidated(KCN.
AX):2QFY12productionresultunderpinsconfidenceinFY12EPSgrowth4KCN.
AX,A$7.
65MarketcapUS$1,139mnTargetpriceA$10.
50Fiscaly/eJun2012E2013ENetinc.
(A$)123.
6mn237.
1mnEPS(A$)0.
881.
68EPSgrowth182.
3%90.
2%P/E8.
6X4.
5XDividendyield5.
8%11.
0%InvestmentListsAustralia/NZBuyListCoverageviewAttractivePaulHissey(Melbourne):paul.
hissey@gs.
com,+61(3)9679-1779GoldmanSachsAustraliaPtyLtdIanPreston(Melbourne):ian.
preston@gs.
com,+61(3)9679-1453GoldmanSachsAustraliaPtyLtdBrettCottrell(Melbourne):brett.
cottrell@gs.
com,+61(3)9679-1565GoldmanSachsAustraliaPtyLtdWhat'schangedKCNhasreportedastrong2QFY12EproductionreportlargelyduetohigherthroughputatChatreeandarecoveryingradeatChallengermines.
Groupproduction:53.
3kozAu@US$608/ozvs.
ourestimateof42.
0kozAu@US$704/oz(incl.
royalties).
ImplicationsThestrongproductionresultunderpinsthepotentialforKCN's1HFY12EEPStoalmostequalFY11andachieveourforecast+182%FY12EEPSgrowth.
ValuationIncorporatingtheresultandloweringtheplannedmininggradefromChatreependingaccesstotheChatreeNorthArea,posttherain-affecteddelays,resultsina7.
9%EPSdowngradetoFY12E.
WehavetakenamoreconservativeviewonthelikelygradeprofileatChatreeoverthenextfewyears,whichlowersFY13EEPSby13.
8%andourvaluationtoA$7.
82(A$8.
38).
GivenlowerearningsoffsetbyincreasedconfidenceintheChatreeexpansion,welowerour12monthtargetprice,whichisderivedfromacombinationofPERandDCF,toA$10.
50(previouslyA$11.
15).
KeyrisksThenear-termproductionrisksassociatedwithlowergradesandorlowerthroughputateitherChallengerorChatreeposethegreatestrisktoourpositiveviewforKCN.
Asia-PacificAfternoonSummaryFebruary1,2012GoldmanSachsGlobalInvestmentResearchAdityaBirlaMinerals(ABY.
AX):3QFY12productionreport:Productioninline;saleshigher5ABY.
AX,A$0.
89MarketcapUS$294.
8mnTargetpriceA$0.
80Fiscaly/eMar2012E2013ENetinc.
(A$)37.
1mn61.
5mnEPS(A$)0.
120.
20EPSgrowth(35.
4%)65.
9%P/E7.
5X4.
5XDividendyield6.
7%11.
2%InvestmentListsAustralia/NZSellListCoverageviewAttractiveIanPreston(Melbourne):ian.
preston@gs.
com,+61(3)9679-1453GoldmanSachsAustraliaPtyLtdPaulHissey(Melbourne):paul.
hissey@gs.
com,+61(3)9679-1779GoldmanSachsAustraliaPtyLtdBrettCottrell(Melbourne):brett.
cottrell@gs.
com,+61(3)9679-1565GoldmanSachsAustraliaPtyLtdWhat'schangedThecompanyhasreleasedits3QFY12productionreport,whichoutlinesthefollowingproductionoutcomes:Nifty:11.
6ktCu@A$2.
59/lbCuvs.
ourforecastof12.
6ktCu@A$2.
34/lbCu.
NiftyOxideremainsundercareandmaintenance.
MtGordon:3.
8ktCuvs.
ourforecastof2.
8ktCu(C1cashcostsnotexplicitlyreported).
ABYsoldmorecopperthanitproducedduringthequarter,implyingsomedrawdownofinventory.
DrillingalsocontinuedattheMaroochydoreResource,whichcurrentlycontains41.
4mt@0.
8%Cu.
ImplicationsIncorporatingtheseactualsintoourmodelresultsina9.
2%increaseinourFY12EEPS–drivensolelybythehighersalesvolume.
ValuationThereisaslightpositiveimpact(+0.
9%)onourbaseNPV,whichrisestoA$0.
98/share.
Giventhelackofdataaroundinventorymovements(whichdrivetheearningschange)wehavenotmadeanyadditionalchangestoourNPVandP/E-based12-monthtargetpriceofA$0.
80.
KeyrisksThekeyrisktoourviewonthestockisobviouslyariseincopperprices,particularlygiventheinherentleverageofthestock.
TerangaGold(TGZ.
AX):4QFY11productionresult:Highergrade=lowercosts6TGZ.
AX,A$2.
29MarketcapUS$594.
6mnTargetpriceA$3.
20Fiscaly/eDec2011E2012ENetinc.
(US$)(10.
3mn)53.
1mnEPS(US$)(0.
04)0.
22EPSgrowth(1,803.
5%)616.
4%P/E--11.
2XDividendyield----InvestmentListsAustralia/NZBuyListCoverageviewAttractiveIanPreston(Melbourne):ian.
preston@gs.
com,+61(3)9679-1453GoldmanSachsAustraliaPtyLtdPaulHissey(Melbourne):paul.
hissey@gs.
com,+61(3)9679-1779GoldmanSachsAustraliaPtyLtdBrettCottrell(Melbourne):brett.
cottrell@gs.
com,+61(3)9679-1565GoldmanSachsAustraliaPtyLtdWhat'schangedThecompanyhasreleasedits4QFY11productionresult,whichwasaheadofourexpectationsduetoahighergradeachievedatSabodala.
Productiondetailsinclude:Milled:0.
6mt@2.
10g/tAufor36.
7koz(againstourestimatesof0.
6mt@1.
95g/tAufor35.
0koz).
Cashcosts:US$902/ozagainstourestimateofUS$988/oz.
Thelowercostswereduetothehighergradeachieved.
ImplicationsIncorporatingtheresultintoourmodelresultsinasmallincreasetoearningsinFY11E(+US0.
7toUS-4.
2pershare,andanearningsdowngradeinFY12Easaresultofourdownwardrevisedproductionoutlook(wearenowatthebottomofguidance).
ValuationOurDCFvaluationfallsbyA$0.
03followingourchanges,andwelowerour12-monthP/EandDCF-basedtargetpricetoA$3.
20fromA$3.
25asaresultofthedecreaseinourFY12Eearningsforecast.
ThestockremainsrelativelyinexpensivewhenobservingthecurrentFY13EP/Eof8.
5XandP/FCFof4.
7X.
KeyrisksThekeyrisktoourBuyratingisthefactthatTGZisasinglemineoperation,andthusoperationalriskwilldirectlyimpactthefinancialperformanceofthecompany.
Asia-PacificAfternoonSummaryFebruary1,2012GoldmanSachsGlobalInvestmentResearchLGChem(051910.
KS):Belowexpectations:expectbetter2012E,butvaluationfull7051910.
KS,W374,000MarketcapUS$21,987mnTargetpriceW380,000Fiscaly/eDec2012E2013ENetinc.
(W)2,300bn2,543bnEPS(W)34,71338,377EPSgrowth6.
9%10.
6%P/E10.
8X9.
7XDividendyield1.
2%1.
3%InvestmentListsNeutralCoverageviewCautiousSeanChoi(Seoul):sean.
choi@gs.
com,+82(2)3788-1791GoldmanSachs(Asia)L.
L.
C.
,SeoulBranchWhatsurprisedusAftermarketcloseonJan31,LGChem(LGC)reportedpreliminary4Q11resultsthatunderperformedbothourandconsensusestimates.
Revenue,EBIT,andnetprofitcameinat6.
4%,18.
2%,and18.
2%belowourestimates,respectively.
Theweaknessrelativetoourestimateswaslargelydrivenbyweaknessinitschemicalsbusiness.
Accordingtomanagement,theweaknesswasdrivenbyweakchemicalproductpricesandmarginsnegativelyaffectingprofitboththroughsalesandinventorywrite-down.
Managementguidedforabetter2012,citing(1)potentialforbetterchemicalproductmarginsasChinesedemandgraduallyrecoversamidstthininventorysituation;and(2)improvingdemandforITproductsincludingsmartphones,tabletPCs,and3DTVs.
AlthoughLGCdidnotgivespecificfigures,theynotedthatLCDglasssubstrateproductionyieldwasimprovingandthattheyplantostartmassproductioninmid-2012.
WhattodowiththestockBasedontheresultwecut2012E/2013EEPSby5.
9%/5.
6%withBPSdownby1.
6%/1.
4%aswelowerchemicalproductpriceandmarginassumptions.
WemaintainNeutralandour2012EP/B-based(2.
4X)12mTPofW380,000.
Althoughweexpect2012EtobeabetteryearforLGC,withEPSgrowing6.
9%yoy(upfrom1.
1%in2011),wedonotfinditscurrentvaluationcompellingwithpotentialsharepriceupsideofonly1.
6%.
Keyriskstoourviewincludecyclicalityofthepetrochemicalindustry,end-marketdemandinkeyEMmarkets(downside);prematuremarketfocusonthelong-termoutlookofautoLi-ionbatteriesandLCDglasssubstrate(upside)anddepreciationoftheKRWagainsttheJPY(upside).
BHPBilliton(BHP.
AX):Earningsestimateupdate8BHP.
AX,A$37.
48MarketcapUS$212,203mnTargetpriceA$51.
22Fiscaly/eJun2012E2013ENetinc.
(US$)19,350mn21,684mnEPS(US$)3.
614.
05EPSgrowth(7.
7%)12.
1%P/E11.
0X9.
8XDividendyield2.
9%3.
1%InvestmentListsAustralia/NZBuyListCoverageviewAttractiveNeilGoodwill(Melbourne):neil.
goodwill@gs.
com,+61(3)9679-1778GoldmanSachsAustraliaPtyLtdOwenBirrell(Melbourne):owen.
birrell@gs.
com,+61(3)9679-1020GoldmanSachsAustraliaPtyLtdBrettCottrell(Melbourne):brett.
cottrell@gs.
com,+61(3)9679-1565GoldmanSachsAustraliaPtyLtdChangesandImplicationsWehaveupdatedourestimatestoreflectupdatedcommoditypricesandpremiums(particularlymanganese),laggingprices/costsandreviewedsomeunitcostestimatesandtax.
Wedonotviewthesechangesasmaterial,andthereisnochangetoourinvestmentthesis,ratingorpricetarget.
ValuationWehaveraisedour12-monthNPV-basedtargetprice(withadjustmentsforcommoditypriceandearningsestimatedirectionalchanges)0.
8%toA$51.
22.
Riskstothetargetpriceincludecommoditypriceassumptions,productionandsalesvolumesandcurrencycostpressures.
Asia-PacificAfternoonSummaryFebruary1,2012GoldmanSachsGlobalInvestmentResearchHindustanZinc(HZNC.
BO):Minorestimaterevisions9HZNC.
BO,Rs135.
50MarketcapUS$11,498mnTargetpriceRs132.
00Fiscaly/eMar2012E2013ENetinc.
(Rs)55,842mn63,361mnEPS(Rs)13.
2215.
00EPSgrowth14.
0%13.
5%P/E10.
3X9.
0XDividendyield0.
7%0.
7%InvestmentListsNeutralCoverageviewNeutralPriteshVinay(Mumbai):pritesh.
vinay@gs.
com,+91(22)6616-9038GoldmanSachsIndiaSPLKunalSingh,CFA(Bangalore):kunal.
singh@gs.
com,+91(80)6637-8724GoldmanSachsIndiaSPLChangesandImplicationsWehaveupdatedourestimates.
Wedonotviewthesechangesasmaterial,andthereisnochangetoourinvestmentthesis,ratingorpricetarget.
RioTinto(RIO.
AX):Updatingearningsestimates10RIO.
AX,A$69.
16MarketcapUS$138,974mnTargetpriceA$86.
16Fiscaly/eDec2011E2012ENetinc.
(US$)15,256mn13,823mnEPS(US$)7.
967.
51EPSgrowth13.
5%(5.
7%)P/E9.
2X9.
7XDividendyield1.
7%1.
8%InvestmentListsAustralia/NZBuyListCoverageviewAttractiveNeilGoodwill(Melbourne):neil.
goodwill@gs.
com,+61(3)9679-1778GoldmanSachsAustraliaPtyLtdOwenBirrell(Melbourne):owen.
birrell@gs.
com,+61(3)9679-1020GoldmanSachsAustraliaPtyLtdBrettCottrell(Melbourne):brett.
cottrell@gs.
com,+61(3)9679-1565GoldmanSachsAustraliaPtyLtdChangesandImplicationsWehaveupdatedourestimates.
ThechangesmainlyreflecttheremovalofexplorationexpenditurewhichwehadincludedatthegrouplinefollowingguidanceatRIO'sseminarinNovemberbutweunderstandisaccountedforattheDivisionallevelandwasalreadyincludedinourestimates.
Wealsoupdatedourestimateofthenumberofsharesonissuefollowingthecontinuationofthebuyback.
InadditionwehaveincludedanestimateforanassetwritedowninAluminiumDivisionof$5Billionbutthisisnotpartofourunderlyingearningsestimate.
Wedonotviewchangestotheunderlyingearningsasmaterial,andthereisnochangetoourinvestmentthesis,ratingorpricetarget.
ValuationOur12-monthpricetargetofA$86.
16hasnotchangedandisbasedonDCFwithadjustmentsforneartermfactorsincludingearningsrevisionsandcommodityrevisiondirection.
Keyrisksincludecommoditypriceoutcomes,productionrisksandoperatingcurrencymovements.
ConsumerCyclicalsGuilinTourismCo.
Ltd.
(000978.
SZ):2011netprofitpre-announcementbelowexpectations,stillSell11XufaLiao,CFA(Shanghai):xufa.
liao@ghsl.
cn,+86(21)2401-8902BeijingGaoHuaSecuritiesCompanyLimitedZhijingLiu(Shanghai):zhijing.
liu@ghsl.
cn,+86(21)2401-8943BeijingGaoHuaSecuritiesCompanyLimitedWhat'schangedOnJan31,Guilinpre-announced2011earnings,with2011netprofitinarangeof-10%yoyto+5%.
ThisAsia-PacificAfternoonSummaryFebruary1,2012GoldmanSachsGlobalInvestmentResearchmeansthat2011netprofitwasinarangeofRmb63.
4mntoRmb74.
0mn,muchlowerthanourexpectedlevelofRmb124mn.
ImplicationsThemainreasonfortheshortfallisthatthecompanyonlysold40aresoflandforitsrealestatebusiness,muchlowerthanitsguidedlevelof210ares.
ThuslandsalescontributedonlynetprofitsofRmb11mn,78%lessthanourexpectedRmb49mn.
Asidefromthis,netprofitexcludinglandsaleswasRmb52mntoRmb63mn,still16%-30%lowerthanourexpectedRmb75mn.
ThisispartlybecauseoftheRmb11mnprofitcontributionfromJinggangshanTourism,lowerthanourexpectedRmb16mn.
Thecompanydidnotdiscloseotherdetails.
Wecutourprofitestimatestoreflect2011ErealestatebusinessandJinggangshanTourism.
Wemaintainourlandsalesforecastin2012,andexpectthecompanytocompletelandsalesofremaining168aresin2013.
Wethuschangeour2011-13EEPStoRmb0.
2/0.
33/0.
33,-42%/-8%/+46%versuspreviousestimates.
Thechangein2012EEPSwasmainlybecauseoftheowerprofitbaseofJinggangshanTourismin2011E.
ValuationWelowerour12-monthtargetpriceby4%toRmb7.
60,mainlyreflectinglowerearningsestimatein2012E.
Webelievethedeferringoflandsalesisanon-recurringevent,anddonotthinkitwillmateriallyimpactcompanyvalue.
WereiterateourSellrating.
KeyrisksGreater-than-expectedtouristgrowth.
S1(012750.
KS):Aboveexpectations,but2012guidancelooksaggressive12012750.
KS,W57,000MarketcapUS$1,921mnTargetpriceW62,000Fiscaly/eDec2011E2012ENetinc.
(W)131bn152bnEPS(W)3,4543,998EPSgrowth17.
6%15.
8%P/E16.
5X14.
3XDividendyield1.
9%2.
0%InvestmentListsNeutralCoverageviewNeutralPaulHwang(Seoul):paul.
hwang@gs.
com,+82(2)3788-1176GoldmanSachs(Asia)L.
L.
C.
,SeoulBranchHJMoon(Seoul):hj.
moon@gs.
com,+82(2)3788-1728GoldmanSachs(Asia)L.
L.
C.
,SeoulBranchWhatsurprisedusS1released4Q11resultswherenetprofitwas15%/11%aboveBloombergconsensus/ourestimatewhileoperatingprofitwasinlinewithmarketconsensus/ourestimate.
Weattributehigher-than-expectednetprofittostronger-than-expectedequitymethodgainfromsubsidiaries,includingSecui.
com.
Whilesaleswere6%aboveourestimatethankstocontinuousstrongsalesatnon-alarmbusiness,OPMwasbelowourestimateduetopoorsalesmix,i.
e.
,lower-than-expectedsalesportionfromlucrativealarmsecuritybusiness.
Apartfrom4Q11results,S1roughlyguidedat+20%/+20%yoysales/OPgrowthinFY12E,alongwithabout50knetsubscriberincrease(vs.
29knetsubscriberincreaseinFY11).
Wethink20%yoysalesgrowthtargetwouldbesomewhataggressive,given:1)wearelikelytoseesmalldeclineinARPUasS1aimstogenerate50%ofnetsubscriberincreaseduring2012EthroughlowerARPUproduct,SecomHomz;and2)weneedtoseeabout+40%yoyincreaseinsalesfromnon-alarmbusiness(vs.
+31%yoyinFY11)evenifweassumeS1achieves50knetsubscriberincreasewithoutARPUdeclinefromitsalarmsecuritybusinessasalarmsecuritystillaccountsfor70%ofrevenue.
WhattodowiththestockWethinkS1'sratheraggressivesales/newsubscriberincreasetargetcouldsparkconcernonpaceofmarginexpansionoutlookandwemaintainNeutralrating.
AfterrevisingFY11E-13EEPSestimatesby4-5%(reflectinghigherequitymethodgain),weraiseour12-mP/E-basedTPtoW62,000(W59,000previously),whichimpliesFY12EP/Eof16X(sameasbefore).
Risksarefaster/slower-than-expectednetsubscribergrowthandhigher/lower-than-expectedprofitabilityfromnon-alarmbusiness.
Asia-PacificAfternoonSummaryFebruary1,2012GoldmanSachsGlobalInvestmentResearchHankookTire(000240.
KS):Belowexpectation,yetOPguidancelooksconservative13000240.
KS,W44,850MarketcapUS$6,055mnTargetpriceW49,000Fiscaly/eDec2011E2012ENetinc.
(W)356bn706bnEPS(W)2,3424,639EPSgrowth(18.
6%)98.
1%P/E19.
1X9.
7XDividendyield0.
8%0.
8%InvestmentListsNeutralCoverageviewNeutralPaulHwang(Seoul):paul.
hwang@gs.
com,+82(2)3788-1176GoldmanSachs(Asia)L.
L.
C.
,SeoulBranchHJMoon(Seoul):hj.
moon@gs.
com,+82(2)3788-1728GoldmanSachs(Asia)L.
L.
C.
,SeoulBranchWhatsurprisedusHankookTirereportedmoredetailed4Q11resultswhereadjustedoperatingprofit(excludingforex-relatedgain/loss)/recurringprofitwere10%/38%belowBloombergconsensus,or1%/37%belowourestimates.
Whileadjustedoperatingprofitwereinlinewithourestimate,lower-than-expectedrecurringprofitmainlycamefromW24bnforex-relatedlossduetoweakenedHungariancurrency(givenEuro-denominatedborrowingscarriedbyHungarianarm).
Apartfrom4Q11results,HankookTireguidedW7.
2trsales(+12%yoy)andW818bnOP(+44%yoy)forFY12E.
Whilewethinkthesalestargetcouldbechallenging(givenrecentweaker-than-expecteddemand,especiallyinEurope,whichwouldmakeitdifficultforHankookTiretoimplementadditionalpricehike),wethinkOPMguidancemaybetooconservative(givenHankookTireassumedN/RandS/Rpriceof$4,339/tonand$4,117/tonfor2012E,notablyabovecurrentspotprices).
WhattodowiththestockDespiteweaker-than-consensus4Q11results,wedonotexpecttoseenotablesharepricepullback,givenakeyareaofthemissstemmedfromforex-relatedloss,wheresomeofthosecouldberecoupedinFY12Eassumingnomajorincrementalcredit/economicshockinEuropefromhere.
WhilewelowerFY11EEPStoreflecthigher-than-expectedforex-relatedloss,weraiseFY12E-13EEPSby4-11%toreflectlarger-than-expectedproductioncapacityramp-upandlowerrawmaterialinputcostsandraiseour12-mTPtoW49,000(fromW45,900),applyingtargetP/Bof1.
9X(onthebackof20%FY12EROE)toFY12EBVPS(prior1.
8X,18%).
RetainNeutral.
Risksarehigher-/lower-than-expectedASPhikesandhigher-/lower-than-expectedrawmaterialprices.
TitanIndustries(TITN.
BO):Belowexpectations:Jewellerysalesmiss,marginsaboveestimates14TITN.
BO,Rs202.
30MarketcapUS$3,607mnTargetpriceRs221.
00Fiscaly/eMar2012E2013ENetinc.
(Rs)6,017mn7,539mnEPS(Rs)6.
788.
49EPSgrowth39.
8%25.
3%P/E29.
8X23.
8XDividendyield0.
9%1.
1%InvestmentListsAsiaPacificBuyListCoverageviewNeutralPuneetJain(Mumbai):puneet.
jain@gs.
com,+91(22)6616-9046GoldmanSachsIndiaSPLAdityaSoman(Mumbai):aditya.
soman@gs.
com,+91(22)6616-9345GoldmanSachsIndiaSPLWhatsurprisedusTitanreported3QFY12salesofRs24.
4bn(3%belowGSe)largelyonaccountoflower-than-expectedrevenuegrowthinthejewellerybusiness.
Wesummarizeperformanceofthevariousbusinesses:Jewellery:Lower-than-expectedrevenuegrowthat25%wasprimarilyonaccountofdispatcheslaggingcustomersalesgrowthof33%.
EBITmarginswere30bpaboveourestimates,resultinginsegmentalEBITinlinewithestimates.
Watches:Titanreportedlower-than-expectedmarginsasfullbenefitofpriceincreasewouldbereflectedin4QFY12.
Others:Revenuegrowthof70%wassignificantlyaheadofourestimateswithdivisionturningprofitablewithmarginof6.
5%(vs.
ourexpectationofflatmargins).
Keyhighlightsofcall:(1)Storeexpansionremainsonschedulewithtotalareaunderoperationsexceeding1mnsq.
ft,(2)Volatilegoldpricesremainachallengeforpursuinghighergrowth,(3)CashbalancesofRs10+bnandcustomeradvancesatRs8bn,(4)dividendpolicytoremaininlinewithrecentpast.
WhattodowiththestockWeretainourBuyonTitanwith12mTPofRs221.
WebelieveTitansharesareattractivegiven:(1)India'srisingincomeanddemographics,(2)consumptionshiftfromunbrandedtobranded,and(3)demandforgoldpurchasesinIndia.
WehavemademinortweakstoourFY13E-14EEPSestimates.
WeexpectearningsEPSCAGRof29%forFY11-14E,thehighestofourcoveragegroup.
OurTPisbasedon26XFY13EEPS,inlinewithourDirector'sCutanalysisand5-year12-monthfwdP/Eaverage.
TitanhasthehighestCROCIvs.
itsglobalpeers.
Weseelonger-termupsideriskatanimpliedFY14EbasedvaluationofRs273(35%variancefromcurrentprice),onEPSgrowthof23%inFY14E.
Risks:1)Weakercustomerdemand,and2)increasedcompetition.
Asia-PacificAfternoonSummaryFebruary1,2012GoldmanSachsGlobalInvestmentResearchHyundaiDepartmentStore(069960.
KS):Belowexpectations;Stillseedownsiderisktoconsensus15069960.
KS,W183,000MarketcapUS$3,686mnTargetpriceW174,000Fiscaly/eDec2011E2012ENetinc.
(W)358bn354bnEPS(W)15,28215,125EPSgrowth19.
0%(1.
0%)P/E12.
0X12.
1XDividendyield0.
3%0.
3%InvestmentListsNeutralCoverageviewNeutralPaulHwang(Seoul):paul.
hwang@gs.
com,+82(2)3788-1176GoldmanSachs(Asia)L.
L.
C.
,SeoulBranchHJMoon(Seoul):hj.
moon@gs.
com,+82(2)3788-1728GoldmanSachs(Asia)L.
L.
C.
,SeoulBranchWhatsurprisedusHyundaiDepartmentStore(HDS)reported4Q11resultswhereOP/RP/NPwere5%/17%/22EbelowBloombergconsensus,or-3%/+4%/-16%againstourestimates.
Whilegrosssaleswere5%belowourestimateduetoweakenedconsumersentimentfrom4Q11,OPMwasslightlyhigherthanourestimatewhichweattributetobetter-than-expectedrampupatnewlyopenedstores.
Netprofitwasbelowourestimateduetohighereffectivetaxratio.
WhattodowiththestockWemaintainourNeutralratingaswecontinuetoseenotabledownsiderisktoconsensusFY12ENPestimate(-17%yoy)aswethinkthestreetistoooptimisticonSSSGassumptionandpaceofprofitabilityexpansionatbothexistingstoresandnewlyopenedstores.
WhilewereviseFY11E-13EEPSestimatesby2-4%(asweassumeahighereffectivetaxratio),weadjustour12-mSOTP-basedTPtoW174,000(fromW173,000),derivedbyapplying11XmultipletoHDS'sFY12EcoreearningsandaddingHDS'sassetvalueinHyundaiHomeShopping(057050.
KS,NC)andHyundaiHCN(126560.
KS,NC).
WepreferShinsegae(004170.
KS,CL-Buy,W276,000)/E-Mart(139480.
KS,Buy,W271,500)/CJOShopping(035760.
KQ,Buy,W277,400)overHDS.
RisksareStronger-/weaker-than-expectedconsumptionandbetter-/worse-than-expectedexecutiononnewstoreopenings.
FarEasternDepartmentStores(2903.
TW):CNYsalesupdate;dragonyearbabyboomimpactlimited;Neutral162903.
TW,NT$39.
90MarketcapUS$1,767mnTargetpriceNT$39.
00Fiscaly/eDec2011E2012ENetinc.
(NT$)2,370mn2,528mnEPS(NT$)1.
851.
92EPSgrowth(5.
0%)3.
6%P/E21.
5X20.
8XDividendyield2.
0%2.
5%InvestmentListsNeutralCoverageviewNeutralRoxanHsu(Taipei):roxan.
hsu@gs.
com,+886(2)2730-4184GoldmanSachs(Asia)L.
L.
C.
,TaipeiBranchNicholasHuang(Taipei):nicholas.
huang@gs.
com,+886(2)2730-4192GoldmanSachs(Asia)L.
L.
C.
,TaipeiBranchWhat'schangedTheEconomicDaily(Jan31)pointedoutthatFEDS's8oldstoresreportedstronggrowthof6.
5%yoyduringtheChineseNewYearholidays,especiallyfortheHualian,Kaohsiung,andTainanstores.
WhilesalesatthenewPanchiaoandTaichungstoresremainedstrongatNT$70-80mnperday,Sogosaleswere7-8%belowmanagement'sexpectationduetolacklustertraffic.
Separately,theCommercialTimes(Jan5)notedthatthenumberofnewbornscouldreach200kin2012,thedragonyear,evenhigherthanin2011whichexperienced18%yoygrowth.
Thiscouldliftsalesofbabyproducts.
ImplicationsWeexpectFEDSoldstores'strongsalesduringChineseNewYeartobeoffsetbySogo'sweakperformance.
SogohasastrongerfootprintinnorthernTaiwan,especiallyintheTaipeiarea.
Itunderperformedpeersascustomerswentoutoftownforthelongholiday.
WebelievethehighbirthrateinthedragonyearshouldhavelimitedearningsimpactonFEDSsincebabyitemsonlyaccountfor5%ofFEDS'sales.
Evenifweassume16%yoysalesgrowth(thesameasthesalesgrowthinpreviousdragonyear),theadditionalprofitgeneratedfrombabyproducts(frombothFEDSTWandSogoTW)wouldonlyequal3.
9%ofour2012Epre-taxincome.
ValuationWeraiseour2012E/13Enetincomeforecastsby1%toreflectthecompany'sperformanceduringChineseNewYear.
WemaintainourtargetDirector'sCutvalratioat0.
95X(30%discounttoHK-listedpeers)and12-monthTPofNT$39(20.
3X2012EEPS).
WeremainNeutral.
KeyrisksUpside:Better-thanexpectednewstoreperformance;downside:negativenewsflowregardingitsmanagementrightsinSogoTW.
Asia-PacificAfternoonSummaryFebruary1,2012GoldmanSachsGlobalInvestmentResearchAutomotiveHoldingsGroup(AHE.
AX):JeffWignallGroupacquisition17AHE.
AX,A$1.
95MarketcapUS$537.
1mnTargetpriceA$2.
05Fiscaly/eJun2012E2013ENetinc.
(A$)59.
1mn67.
2mnEPS(A$)0.
230.
26EPSgrowth0.
2%13.
8%P/E8.
6X7.
5XDividendyield8.
7%10.
0%InvestmentListsNeutralCoverageviewNeutralGeorgeBatsakis(Melbourne):george.
batsakis@gs.
com,+61(3)9679-1245GoldmanSachsAustraliaPtyLtdWillCharlston(Melbourne):will.
charlston@gs.
com,+61(3)9679-1813GoldmanSachsAustraliaPtyLtdWhat'schangedAutomotiveHoldingsGroup(AHE)hasacquiredJeffWignallGroupinVictoriaforA$14mn.
JeffWignallgeneratesA$100mninrevenuethrough9dealershipsinVictoria(4Ford,1Mitsubishi,and4Kia).
AHEexpectssettlementinMarch2012andtheacquisitiontobeimmediatelyearningsaccretive.
ImplicationsTheacquisitionisrelativelysmallonagroupbasis(i.
e.
JeffWignallrevenueofA$100mnrepresents2.
7%ofourforecastAHEFY12revenueofA$3.
7bn).
However,webelievethisisapositiveacquisitionforthegroupandbuildsitsscaleintheVictorianmarket.
AHEcurrentlygeneratesc.
3%ofgroupautomotiverevenueinthestatethrough3dealershipsdespiteVictoriarepresenting27%ofthenewcarmarketinAustralia.
Also,theacquisitionisconsistentwiththecompany'sstrategyofincreasingmarketsharethroughacquisition.
TheacquisitionprovidesuswithadditionalcomfortthatthecompanywillbeabletoachieveourEPSgrowthforecastsforFY12-FY14despitetheweakconsumer/economicenvironment.
WeexpectAutomotiveEBITDAtoincreasefromA$95mninFY11toA$99mninFY12andA$101mninFY13.
ValuationWeincreasedourPER-basedtargetpriceforAHEtoA$2.
05(wasA$1.
70).
WereducedthePERdiscountweusetocalculatethecompany'stargetpricegivengreaterconfidenceinourFY12-FY14EPSestimates.
AHEmaybenefitfromimprovedinventoryfollowingsupplydisruptioncausedbytheJapaneseearthquake/tsunamiandThailandfloodsin2011.
KeyrisksUpside:RecentacquisitionsandcapexdrivelongtermEPSgrowth.
Downside:Softerconsumerspendingandweakernewcarmarket.
Australia:Media:MediaSectorOutlook201218ChristianGuerra(Melbourne):christian.
guerra@gs.
com,+61(3)9679-1302GoldmanSachsAustraliaPtyLtdAdamAlexander(Melbourne):adam.
alexander@gs.
com,+61(3)9679-1451GoldmanSachsAustraliaPtyLtdRaymondTong(Melbourne):raymond.
tong@gs.
com,+61(3)9679-1359GoldmanSachsAustraliaPtyLtdJacquelineThai(Melbourne):jacqueline.
thai@gs.
com,+61(3)9679-1217GoldmanSachsAustraliaPtyLtdMediaSectorOutlook2012:CautiouscoverageviewWepresentour2012outlookfortheCommunications,MediaandEntertainmentsectorsinathreepartseries.
(1)SubduedconsumptionoutlookinAustraliaandNewZealandOuradmarketoutlookfor2012iscastagainstthebackdropofsubduedconsumptiongrowth.
Oureconomistsexpectslowinghouseholdincomegrowthanddeclininghouseholdwealthtoencouragelowerconsumption.
(2)Flattishadmarketgrowthin2012Weexpecttheadmarkettogrow1.
7%in2012,betterthan2011's0.
6%declinebutbelowtrendgrowth.
TheLondonOlympicGamesislikelytoprovideamodestbumptoadmarketgrowthin2HCY12.
(3)Structuralchangewillaccelerate;morepainforthelosersStructuralwinnerswillcontinuegainingadmarketshare.
Structuralloserswillcontinuecedingshare,given:(1)advancementsintechnology;(2)fragmentation;and(3)structuralchangeacceleratesindifficultadclimates.
Asia-PacificAfternoonSummaryFebruary1,2012GoldmanSachsGlobalInvestmentResearch(4)SocialmediasettojoinaverycrowdedpartySocialmediawilltakeshare–drivingmorefragmentation–asadvertisersseektoconnectwithcustomersandassocialimprovesitsinsight/analysis.
(5)TraditionalmediapursuingnewrevenuestreamswithvigourPublishersarechangingtheirfocusfromcostreductionstonewdigitalrevenuestreams.
Theyfaceanumberofissuesexecutingthisstrategy.
(6)Balancesheetpositionscritical,particularlyforstructurallosersThetoughadenvironmentcombinedwithstructuralpressureswillseeintensefocusonthebalancesheetsofstructurallychallengedstocks.
NWS/REA/CRZBuy,APNSellWepreferstructuralwinners–stockswithstrongfranchises/businessmodels,differentiatedandsustainablecompetitiveadvantage,etc.
Whenadmarketconditionsimprovewewillalsochasethosestocksofferingbestadmarketleverage.
Werecommendinvestorsavoidthosestocksfacingmountingstructuralheadwinds,despitetheperceived'value'onoffer.
GuangzhouAutomobileGroupCo(2238.
HK):MergerplanwithGACChangfengapprovedbyCSRC;Neutral19YipengYang(Beijing):yipeng.
yang@ghsl.
cn,+86(10)6627-3189BeijingGaoHuaSecuritiesCompanyLimitedNewsIntheeveningofJan31,2012,GACChangfeng(600991.
SS,NotCovered)announcedthatthemergerplanwithGuangzhouAutoreceivedwrittenapprovalfromtheChinaSecuritiesRegulatoryCommission(CSRC)withthefollowingdetails:1)GACwillissuenewA-sharesandexchangefortheoutstandingGACChangfengsharesataratioof1.
6:1;2)TheexistingshareholdersofGACChangfenghaveanoptiontochoosecashatRmb12.
65pershare,andcurrentlytheNo.
2and3biggestshareholdersofGACChangfeng(ChangfengMotorandMitsubishiMotor)willoptforcash;3)Twopromoters:ChinaNationalMachineryIndustryCorp.
(SinoMack)andGuangdongFinanceInvestmentHoldingCo.
(GFIH)areintroducedtohelpprovidecashfinancing;4)Oncethedealcloses,GACwillpayatotalofRmb2.
4bnincashandissue287mnnewA-shares(4.
7%ofthecurrentoutstandingshares)aspartofthemergerwithGACChangfeng.
AnalysisWemaintainourNeutralratingonGACandourtargetprice,implying3.
5%downsidebasedonJan31close.
ImplicationsOur12-monthtargetpriceofHK$8.
12isbasedonPB-ROEmethodology.
MaintainNeutralrating.
Risks:Higher/lowervolofnewbrands/models.
Asia-PacificAfternoonSummaryFebruary1,2012GoldmanSachsGlobalInvestmentResearchBrevilleGroupLtd(BRG.
AX):Strongtradingupdate20BRG.
AX,A$2.
95MarketcapUS$405.
7mnTargetpriceA$3.
30Fiscaly/eJun2012E2013ENetinc.
(A$)41.
2mn45.
9mnEPS(A$)0.
320.
35EPSgrowth16.
9%11.
4%P/E9.
3X8.
3XDividendyield6.
4%7.
2%InvestmentListsNeutralCoverageviewNeutralGeorgeBatsakis(Melbourne):george.
batsakis@gs.
com,+61(3)9679-1245GoldmanSachsAustraliaPtyLtdWillCharlston(Melbourne):will.
charlston@gs.
com,+61(3)9679-1813GoldmanSachsAustraliaPtyLtdWhat'schangedBrevilleGroup(BRG)expects1H12EBITDAtoincrease16%toA$45mnandFY12EBITDAtoincrease13%-17%toA$65mn-A$67mn.
Thisisaboveourestimates(beforetoday'supgrades)ofA$40mnandA$59.
6mn,respectively.
Thefirsthalfresultwillbereleasedon23February2012.
ImplicationsInourview,thisisaverystrongtradingupdateinadifficultenvironmentandiswellaboveourestimates.
NorthAmerica(includingKeurigdistribution)wasthekeydriverofthestrength(i.
e.
,weestimate1H12EBITDA+60%to$20m).
However,weestimate1H12profitfellforboththeAustralianandInternationaldivisionsgivenatougheconomicenvironment.
BRG'sfullyearFY12guidanceassumes2H12EBITDAgrowthof8%to19%(comparedtopcp).
WeexpectcontinuedstronggrowthfromNorthAmericagivenhighermarketshare(i.
e.
,expandedproductrangeandstorepenetration).
WebelievetradinginAustraliaandInternationalwillremainchallengingintheneartermgiventheweakeconomicenvironment.
WeincreasedourEPSestimatesforFY12E-FY14Eby9%-11%followingtoday'stradingupdate.
ThereisnochangetoourNeutralrating.
Inourview,BRG'svaluationremainattractive(FY12PER9.
5xvsGSSmallIndustrialsPERof11.
9x)andtheNorthAmericangrowthoutlookremainspositive.
However,ourkeyconcernistheimpactofdifficulttradingconditionsinAustraliaandEurope.
ValuationFollowingupgradetoourestimateswehaveincreasedour12-monthP/E-basedtargetpricetoA$3.
30(wasA$3.
00).
KeyrisksUpside:AccelerationinNorthAmericatrading.
Downside:weakerEuropeimpactingInternationaldivision,continueddifficulttradinginAustralia.
NavitasLtd(NVT.
AX):Weak1H12resultonan'unsound'SAEperformance21NVT.
AX,A$2.
88MarketcapUS$1,143mnTargetpriceA$3.
15Fiscaly/eJun2012E2013ENetinc.
(A$)75.
4mn87.
9mnEPS(A$)0.
200.
23EPSgrowth(6.
9%)16.
6%P/E14.
3X12.
3XDividendyield6.
8%8.
0%InvestmentListsAustralia/NZSellListCoverageviewNeutralMikeYounger(Melbourne):mike.
younger@gs.
com,+61(3)9679-1812GoldmanSachsAustraliaPtyLtdAnthonyLongo(Melbourne):anthony.
longo@gs.
com,+61(3)9679-1834GoldmanSachsAustraliaPtyLtdWhat'schangedNVT's1H12resultwas11%belowourEBITDAforecastswhilealowtaxratehelpedcoreNPATandEPStoa7%missversusourestimates.
WhileEBITDArose16%,thiswasentirelydrivenbytheacquisitionofSAEwhichmateriallymissedearningsexpectationswithEBITDAofA$11.
9mnagainstourforecastofA$17.
3mnand2H11EBITDAofA$17.
2mn.
Despitesomeone-offfactorssuchasadverseFXmoves(A$0.
8mn),lostearningsfromthesaleofSAEDubai(A$0.
5mn)andfurtheracquisition-relatedcosts(A$1.
1mn),thiswasstilladisappointingoutcome.
OrganicEBITDAfell8%,duelargelytoweakenrolmentsintheUniversityProgramsdivision(-8%)andfurtherpoorEnglishdivisionresultsfromthetransitionofGovernmentAMEPcontractsandastillsoftELICOSmarket.
ImplicationsThepoorSAEresultaddstothehighlevelofinvestorskepticismatthetimeofitsacquisitiongivenitslimitedfinancialhistory,lessdefensivecourseofferinganditsEVA-dilution.
Assuch,weexpectthestocktode-rateuntilasustainableearningsbaseemergesandretainourSellrating.
OurEBITDAforecastshavebeencutby7%-11%paoverFY12-FY14,witharoundhalfofthisappliedtoSAEandtheotherhalfappliedtotheUniversityProgramsandEnglishsegments.
AlowerforecastongoingtaxratereducesthemagnitudeofthesecutsattheEPSlevelto6%-7%pa.
Asia-PacificAfternoonSummaryFebruary1,2012GoldmanSachsGlobalInvestmentResearchValuationOur12-monthpricetarget(relativeEV/EBIT)falls8%toA$3.
15(fromA$3.
41)andreflectsa33%premiumtotheSmallIndustrialsFY13EEV/EBITDAmultiple.
OurDCFvaluationfalls5%toA$4.
36(fromc.
A$4.
60).
KeyrisksUpside:Australianstudentvisareformsboostenrolmentsearlierthanexpected;furthernewcampusroll-out.
ConsumerStaplesWoolworths(WOW.
AX):2Q12salesinline;divestingDickSmithbusiness22WOW.
AX,A$24.
79MarketcapUS$32,150mnTargetpriceA$28.
35Fiscaly/eJun2012E2013ENetinc.
(A$)2,200mn2,396mnEPS(A$)1.
801.
95EPSgrowth3.
5%8.
7%P/E13.
8X12.
7XDividendyield5.
3%5.
9%InvestmentListsNeutralCoverageviewNeutralPhillipKimber(Melbourne):phillip.
kimber@gs.
com,+61(3)9679-1128GoldmanSachsAustraliaPtyLtdWhat'schanged2Q12Grouptotalsalesrose5.
1%(GoldmanSachs+5.
3%).
WOWreleasedtheoutcomeofthestrategicreviewofitsConsumerelectronicsbusiness.
AustralianFood&Liquor–2Q12comparablestoresalesgrowthmoderatedto+1.
1%(GoldmanSachs+1.
8%).
NotwithstandingstrongstoregrowthWOWhasgrownslightlybelowmarket(ABS'Food'Category)forthepast2quarters.
Read-throughfordiscretionaryretail–SalesgrowthatBigWandConsumerElectronicsAustraliawerestrongerthanweanticipatedandshowedanimprovingtrend.
2Q12comparablestoresalesatBigWdeclined1.
7%(GoldmanSachs-4.
0%)andWOWstatedthattradingimprovedduringDecemberandintoJanuary.
ConsumerElectronicsreview–WOWwillcloseupto100storeswithinthenext2yearsandseektodivesttheremainingc.
280stores.
AA$300mn(pre-tax)restructuringprovisionwillbeincurredin1H12.
Theannouncementisapositiveforsentimenttowardstheconsumerelectronicssectorbutitisnotyetclearthatitwillsignificantlychangeindustrydynamics.
ImplicationsSalesmomentumatthekeyAustralianFood&Liquorbusinesscontinuestoslow.
This,combinedwithstart-upbusinesslosses,isdrivingmodestEPSgrowthinFY12.
ThereisnochangetoourNeutralrating.
ValuationThereisnochangetoourearningsestimates.
Our12-monthpricetarget,basedona1-year-forwardP/E,hasfallenby4%toA$28.
35.
KeyrisksUpside:ImprovementintheAustralianFood&Liquorbusiness,capitalmanagement.
Downside:Higherindustrycompetition.
Asia-PacificAfternoonSummaryFebruary1,2012GoldmanSachsGlobalInvestmentResearchLock&LockCo.
(115390.
KS):Currentsharepriceimplieszerogrowthbeyond2012E;keepBuy23115390.
KS,W32,900MarketcapUS$1,507mnTargetpriceW45,000Fiscaly/eDec2011E2012ENetinc.
(W)49bn93bnEPS(W)9461,693EPSgrowth(29.
2%)78.
9%P/E34.
8X19.
4XDividendyield0.
5%0.
5%InvestmentListsAsiaPacificBuyListCoverageviewNeutralJeehyeSong(Seoul):jeehye.
song@gs.
com,+82(2)3788-1773GoldmanSachs(Asia)L.
L.
C.
,SeoulBranchPaulHwang(Seoul):paul.
hwang@gs.
com,+82(2)3788-1176GoldmanSachs(Asia)L.
L.
C.
,SeoulBranchWhat'schangedWetrim2011E-2013EEPSby8-16%toreflectweaker-than-expectedytdsalestrendandW6.
1bnone-offexpensesrelatedtoinventorywrite-down(W2bn),liquidationofanoverseassubsidiary(W2.
5bn),andtaxforfeit(W1.
6bn)in4Q11.
ImplicationsStillforecast28%2012Esalesgrowth.
Despitethedownwardearningsrevision,weforecastLock&Lockshoulddeliver2012Esalesgrowthof28%,drivenby(1)productdiversificationdomestically(e.
g.
,cookingware,small-sizedelectronics),(2)growinghomeshoppinginfrastructureinChina(i.
e.
CJOShoppinginitiated24hourbroadcastinginGuangzhoufromOct2011),and(3)productdiversificationinChina'sdiscountstore(e.
g.
,introductionofthermosproducts).
Bearcasescenariosuggests26%EPSdownside:Evenifsalesgrowthslowsto18%(vs.
2008-11EsalesCAGRof33%)andvaluationmultiplecontractsto20X(onestandarddeviationbelowitsaveragesinceIPO,againstestimated55%EPSgrowth)underourbearcasescenario,estimatedfairvaluecomesatW29,000,implying11%downside.
Currentsharepriceimplieszerogrowthbeyond2012E:DCFvaluation,assumingzerogrowthfrom2013E,suggestsfairvalueofaroundW32,000/share,whichimpliesmere4%downsidefromthecurrentprice.
Webelievesuchlong-termassumptionasimpliedbythecurrentsharepriceistoopessimistic,givenlikelyincreasingrefrigeratorpenetrationinChinaandthecompany'sproductdiversificationandregionalexpansionefforts.
ValuationReflectingdownwardearningsrevision,weslightlycutourSOTP-based12-monthtargetpricetoW45,000(fromW48,000).
KeyrisksWeaker-than-expectedmacro&stronger-than-expectedrawmaterialprice.
EnergyNexusEnergy(NXS.
AX):2Qdisappoints,LongtomreservesreviewexpectedMarch24NXS.
AX,A$0.
21MarketcapUS$294.
5mnTargetpriceA$0.
31Fiscaly/eJun2012E2013ENetinc.
(A$)(5.
5mn)0.
0mnEPS(A$)(0.
00)0.
00EPSgrowth(156.
8%)100.
5%P/E----Dividendyield----InvestmentListsNeutralCoverageviewNeutralMarkWiseman(Sydney):mark.
wiseman@gs.
com,+61(2)9321-8938GoldmanSachsAustraliaPtyLtdAnthonyTa(Sydney):anthony.
ta@gs.
com,+61(2)9321-8812GoldmanSachsAustraliaPtyLtdWhat'schangedNexusEnergyreporteditsDecemberquarterresults:2QProduction:Gas:5.
5PJ(GSest6.
3PJ)Condensate:46.
9kbbl(GSest53kbbl)2QRevenue:A$24.
7mn(GSestA$28.
8mn)Cashbalance:A$48.
7mn(A$13.
9lowerthan1QduetorepaymentsoftheLongtomseniordebtfacility,Longtomoffshoreworkexpenditure,andCruxlongleaditemcommitments).
ImplicationsNexus's2QproductionwasbelowourexpectationsduetoalowerlevelofSantosgasnominationsundertheLongtomgassalesagreement.
Webelievethenear-termfocusfornowwillremainfinalizingNexus'dealwithShelltopursueaShell-operatedintegratedgasandliquidsdevelopment(setforApril2012).
WeexpectNexustoexerciseits2%selldown(forA$75mncash–thisisalreadyfactoredintoourestimates).
Asia-PacificAfternoonSummaryFebruary1,2012GoldmanSachsGlobalInvestmentResearchValuationOurvaluationand12-monthpricetarget(sum-of-the-parts)havedeclinedbyA$0.
02toA$0.
31,onaLongtomvaluationreview(wehaveassumedaslightlylowerrawgaspricebasedonongoingrevenuerealizationdata).
KeyrisksUpsiderisks:(1)ProgressionofShellPrelude-CruxHOAtobinding,(2)ExplorationupsidewithinthegreaterCruxarea.
Downsiderisks:(1)FailuretoreachcompletionontheShellHOA,followedbydilutiveequityraising,(2)Longtomreservereview(andfurtherdrillingrequirements).
NewZealandOil&Gas(NZO.
NZ):2Qreport:Buildinguptodebutinternationaltest25NZO.
NZ,NZ$0.
73MarketcapUS$232.
5mnTargetpriceNZ$0.
75Fiscaly/eJun2012E2013ENetinc.
(NZ$)27.
1mn33.
4mnEPS(NZ$)0.
070.
09EPSgrowth(17.
8%)23.
4%P/E10.
5X8.
5XDividendyield4.
1%4.
1%InvestmentListsNeutralCoverageviewNeutralMatthewHenry(Auckland):matthew.
henry@gs.
com,+64(9)357-3203GoldmanSachsNewZealandLimitedWhat'schangedNewZealandOil(NZO)delivered2QrevenueofNZ$24mn,+50%yoy,on0.
24mmboe,-6%yoy.
Revenuegrowthwasprincipallydrivenbyastrongeroilprice,DatedBrent+27%yoy.
NZO'sproductionguidanceforFY12isunchanged.
NZOcontinuestofocusongrowingitspresenceinTunisiaandIndonesia:Tunisia:AfinalinvestmentdecisionontheUS$100mnCosmosConcession(NZO's40%share)isdueinCY12.
Indonesia:InDecemberNZOacquireda22.
5%stakeintheKisaranPermitincentralSumatra,whichcomprisessixprospectswithmeanprospectiveresourcesof>140mmbbls(un-risked).
Anexplorationwellistobedrilledduring2HFY12ona>40mmbblprospect.
NZOhasalsosecuredasecondJointStudyAgreementforasixmonthstudyinsouthernSumatra.
NewZealand:NZO'sNZfocusremainsonseekingadditionalpartnersontheKakapo(NZO90%)andBarque(40%)prospects.
ImplicationsNZO's2QandretainedproductionguidanceisconsistentwithourFY12Eforecasts.
ValuationNZOistradingata26%discounttoourNZ$0.
99SOTPvaluation,towardthelowerendoftheAustralasianoilandgassectormedianof31%acrossourcoverageuniverse.
GiventhestructuralchallengeofahighlycompetitiveenvironmentfornewresourcesandNZO'sunprovengrowthstrategy,wedonotanticipatematerialvaluationgapclosure.
OurdiscountedSOTP-based12-monthtargetpriceisunchangedatNZ$0.
75.
MaintainNeutral.
KeyrisksUpside/downsiderisksincludeamaterialchangeinthepriceofoil,NZD/USDexchangerate,andNZO'sreserveestimates.
Asia-PacificAfternoonSummaryFebruary1,2012GoldmanSachsGlobalInvestmentResearchAWELimited(AWE.
AX):2Q-Stillontrack-IndonesianandWAshalewellsthenextfocus26AWE.
AX,A$1.
50MarketcapUS$827.
5mnTargetpriceA$1.
75Fiscaly/eJun2012E2013ENetinc.
(A$)23.
0mn54.
4mnEPS(A$)0.
040.
10EPSgrowth243.
1%136.
1%P/E34.
0X14.
4XDividendyield3.
3%--InvestmentListsNeutralCoverageviewNeutralMarkWiseman(Sydney):mark.
wiseman@gs.
com,+61(2)9321-8938GoldmanSachsAustraliaPtyLtdAnthonyTa(Sydney):anthony.
ta@gs.
com,+61(2)9321-8812GoldmanSachsAustraliaPtyLtdWhat'schangedAWEreporteditsDecemberquarterresults:2QProduction:1.
35mmboe(29%aboveGSest.
1.
05mmboe)2QRevenue:A$72mn(4%belowGSest.
A$75mn)FY2012productionandrevenueguidancereiteratedat5.
0-5.
5mmboe(GS5.
0mmboe)andA$270-300mn(GSA$312mn)respectively.
ImplicationsThehigherproductionoutcomewasdrivenbyBassGasconstructionactivitycommencinglaterthanweexpected.
Revenuewasbroadlyinlinewithourexpectations(despitethehigherBassGasproduction),dueprimarilytothetimingofoilliftingsfromTui.
WeexpectTuirevenuestobeboostedin3Q(AWEnotedalargeoilliftingoccurredinJanuary,of187,000bblsnettoAWE).
WemaintainourNeturalratinggivenrecentsharepricestrength.
ValuationOurvaluationhasdecreasedslightlyby1%toA$2.
00/share.
Weretainour12-monthpricetargetofA$1.
75(basedonariskedSOTP).
KeyrisksKeyupsiderisks:oilprice,introductionofaqualitypartnertoPerthBasinshale,progresstowardIndonesiaoildevelopmentFID.
Keydownsiderisks:oilprice,explorationoutcomes,furtherWAfraccingapprovaldelays.
TapOil(TAP.
AX):4Qinline-High-impactTallaganda-1welldrillingsoon27TAP.
AX,A$0.
78MarketcapUS$198.
7mnTargetpriceA$0.
82Fiscaly/eDec2011E2012ENetinc.
(A$)1.
6mn(10.
5mn)EPS(A$)0.
01(0.
04)EPSgrowth(62.
1%)(772.
1%)P/E120.
3X--Dividendyield----InvestmentListsNeutralCoverageviewNeutralMarkWiseman(Sydney):mark.
wiseman@gs.
com,+61(2)9321-8938GoldmanSachsAustraliaPtyLtdAnthonyTa(Sydney):anthony.
ta@gs.
com,+61(2)9321-8812GoldmanSachsAustraliaPtyLtdWhat'schangedTapOilreporteditsDecemberquarterresults:4QProduction:117kboe(inlinewithGSestimates)4QRevenue:A$11.
2mn(3%belowGSest.
A$11.
5mn)ImminentexplorationinWA-351-P:TapexpectstheBHP-operatedTallaganda-1welltospudFeb2012,targetingupto1.
3Tcf(P10).
ImplicationsQuarterlyproductionandrevenueresultwasinlinewithourexpectations.
WehaverevisitedourDD&Aestimates,resultinginsomelargeupwardearningschanges(non-cash).
TallagandadrillingsuccesscouldbeamaterialsharepricecatalystforTap.
TheCarnarvonBasinremainsahot-spotforgasprospectivity(HessandChevron/Shellhavehadsuccess)andLNGplantsintheregionprovideapotentialavenueforcommercialisation.
MaintainNeutralrating.
WhileTap'ssharesareattractivefromavalueperspective,theoutstandingBurrupFertiliserslitigationoverthefutureinabilityoftheHJVtomeetgascontractdeliverytermsduetolackofgasremainsakeyissuepreventingusfrombecomingmorepositive.
ValuationValuationraised5%to$1.
29/share.
12-monthpricetarget(riskedSOTP)raised9%to$0.
82toreflecttheimminentdrillingcatalystswithTallagandaandtotakeintoaccountrecentmarketmovements.
KeyrisksUpsideRisks:Oilprice,Tallaganadrilling,Ghanafarmout,ManoraFID,Zolaassetsale.
DownsideRisks:BurrupFertiliserslitigationoutcome(forfailuretosupplygasasperGSA),Oilprice,Disappointingexplorationoutcomes.
Asia-PacificAfternoonSummaryFebruary1,2012GoldmanSachsGlobalInvestmentResearchOriginEnergy(ORG.
AX):Disappointing2Qreport-Otwayissuesweakenproduction28ORG.
AX,A$13.
76MarketcapUS$15,798mnTargetpriceA$15.
85Fiscaly/eJun2012E2013ENetinc.
(A$)873.
5mn1,064mnEPS(A$)0.
810.
96EPSgrowth13.
8%18.
3%P/E17.
0X14.
4XDividendyield3.
6%4.
1%InvestmentListsNeutralCoverageviewNeutralMarkWiseman(Sydney):mark.
wiseman@gs.
com,+61(2)9321-8938GoldmanSachsAustraliaPtyLtdAnthonyTa(Sydney):anthony.
ta@gs.
com,+61(2)9321-8812GoldmanSachsAustraliaPtyLtdWhat'schangedOriginEnergyreporteditsDecemberquarterresults:2QProduction:28.
5PJ(11%belowGSest.
32.
1PJ)2QRevenue:A$197.
8mn(2%belowGSest.
A$201.
8mn)NomajornewsonAPLNG:DevelopmentactivitiescontinuedwithAPLNGparticipatingin105wellsduringthequarter.
Anadditional9fracswerecompleted,targetingtheWalloons.
ImplicationsAdisappointingproductionquarterprimarilyduetogreaterOtwaybasinmaintenancedowntimethanwehadexpectedandcurtailedproductionfromthefacilityafterrestartduetoplantstabilityissues.
Revenuewasslightlybelowourexpectationsduetothelowerproduction,butwaspartiallyoffsetbyhigherrealisedoilprices.
MaintainourNeutralrating.
OriginisourpreferredintegratedUtility–itsdominantscale,flexiblegenerationportfolioandsignificantgasexposureseeitwellplacedtomanageriskandprofitfromchangingmarketconditions.
However,despitetheattractivenessoftheUtilitiesbusiness,ORG'ssubstantialCSG-LNGdevelopmentexposurewilllikelycontinuetoseeittradeasanEnergystock(i.
e.
morevolatility).
Inthisspace,westillpreferWoodside(WPL.
AX,A$34.
21,Buy)andOilSearch(OSH.
AX,A$6.
60,Buy).
ValuationOurvaluationhasdecreasedby0.
8%toA$18.
59/share.
Weretainour12-monthpricetargetofA$15.
85(basedonariskedsum-of-the-parts).
KeyrisksUpsiderisks:Oilprice,Explorationoutcomes,Domesticgascontracts.
Downsiderisks:CSG-LNGsectorregulation/progress/costpressure,retailcustomerretentioninrecentlypurchasedNSWoperations.
EnergyResourcesOfAustraliaLtd.
(ERA.
AX):FirstTake:ERAfullyearresult-inlinebutmorewarnings29ERA.
AX,A$1.
54MarketcapUS$715.
5mnTargetpriceA$1.
29Fiscaly/eDec2011E2012ENetinc.
(A$)(60.
7mn)(137.
0mn)EPS(A$)(0.
23)(0.
26)EPSgrowth(184.
7%)(13.
0%)P/E----Dividendyield----InvestmentListsAustralia/NZSellListCoverageviewAttractiveNeilGoodwill(Melbourne):neil.
goodwill@gs.
com,+61(3)9679-1778GoldmanSachsAustraliaPtyLtdOwenBirrell(Melbourne):owen.
birrell@gs.
com,+61(3)9679-1020GoldmanSachsAustraliaPtyLtdBrettCottrell(Melbourne):brett.
cottrell@gs.
com,+61(3)9679-1565GoldmanSachsAustraliaPtyLtdNewsEnergyResourcesofAustralia(ERA)hasannounceditspreliminaryfullyearresultsfortheyearending31December2011,including:NPAT(Reported):A$153.
6mloss(vs.
ourforecastA$160.
1mloss);NPAT(Adj):A$54.
2mloss(GSA$60.
7mloss)afteradjustingfora$99.
4minventorywritedownin1H11.
Revenue:A$649.
2m(GSA$554.
6m)EPS(Adj):A17.
1cpsloss(GSA23.
4cpsloss)Dividend:Nofinaldividend(nodividendforecast)AnalysisTheresultwasbroadlyinlinewithourforecastsbutERAhasgivenguidanceof3000-3700tforproductionin2012whichcomparestoourforecastof4100t.
ERAcommentsthatrecordrainfellinDecemberandthatproductionremainshighlydependentontherainfallinthecurrentwetseason.
TheimpactoftherecordDecemberrainisstillbeingevaluated.
ImplicationsEarningsestimatesand12monthpricetargetareunderreviewtoincorporatetheestimatedimpactofrainfall.
Asia-PacificAfternoonSummaryFebruary1,2012GoldmanSachsGlobalInvestmentResearchFinancialServicesSouthKorea:Insurance:Property&Casualty:3QFY3/12non-liferesults:Hitsbyone-offs,butsolidcoreoperations30StanLee(Seoul):stan.
lee@gs.
com,+82(2)3788-1778GoldmanSachs(Asia)L.
L.
C.
,SeoulBranchPhilippaRogers,CFA(HongKong):philippa.
rogers@gs.
com,+852-2978-0457GoldmanSachs(Asia)L.
L.
C.
JoonPark(Seoul):joon.
park@gs.
com,+82(2)3788-1723GoldmanSachs(Asia)L.
L.
C.
,SeoulBranchBottomlinehitbyone-offs,butcoreoperationremainedsolidSamsungF&M(SFM),HyundaiM&F(HMF),DongbuIns.
(DBI),LIGIns.
(LIG),andKoreaRe(KR)allreported3QFY3/12resultson31stJan.
Combined3Qresults(W307bn)fell8.
0%yoy,mainlyduetoone-offlossesrelatedtoThailandfloods(W123bn,SFMandKR)andextrataxcosts(W71bn)duetocancellationofacorporatetaxcut.
Withouttheseone-offs,combined3Qearningswouldhaverecorded50%yoygrowthonautolossandexpenseratioimprovement:KRandSFMresultswouldhavebeeninlinewithexpectations,andDBI,LIG,andHMFresultsabove.
WepreferbankstoinsurersinKoreafinancialsspaceWhileweexpectnon-lifeinsurersyoyearningsmomentumtoremainstronginto4QFY3/12,wepreferbanksoverinsurerswithintheKoreafinancialsspaceas:1)bankstradeclosertotroughvaluationsthaninsurers;and2)thepotentialriseinautolossratio(upavg.
1.
4pptyoyinFY3/13)forinsurershasnotbeenfullypricedinyet,inourview.
Withintheinsurancesector,wecontinuetopreferSFMandHMF,whichwebelievearemorelikelytoshowbettercontrolofautolossratios.
Aboveexpectations:HMF(001450.
KS),DBI(005830.
KS),LIG(002550.
KS)3QNPatHMF(W88bn,up132.
7%),DBI(W101bn,up37.
6%),andLIG(W46bn,turnedtoprofityoy)wereaboveourexpectationsandconsensusexcludingextrataxcosts(W9-10bnpercompany).
Strongyoyearningsmomentumwasdrivenmostlybyautolossratioimprovement,andbetter-than-expectedOPwasdrivenbylowerexpenseratio.
Wemaintainourratingsand12MTPsonHMF(Buy,W41,400),DBI(Neutral,W51,600),andLIG(Sell,W23,200),afterminorEPSrevisions.
Inlinewithexpectations:SFM(000810.
KS),KR(003690.
KS)2QNPatSFM(W86bn,down54.
8%yoy)andKR(-W15bn,turnedtolossyoy)wouldhavebeenlargelyinlinewithourexpectationsandconsensusexcludingextrataxcosts(W31bnforSFM,W12bnforKR)andlossesrelatedtoThaiflooding(W92bnforSFM,W70bnforKR).
WemaintainourratingonSFM(Buy,ConvictionList)andKR(Neutral)butrevisedownFY3/12E-FY14EEPSforSFM(down3-14%)andKR(down5-35%),and12MTPs(SFMfromW305,000toW298,000,KRfromW16,200toW15,000)toreflecttheabovefactors.
Asia-PacificAfternoonSummaryFebruary1,2012GoldmanSachsGlobalInvestmentResearchICICIBank(ICBK.
BO):AboveexpectationsonsolidNII,costcontrols;ReiterateBuy31ICBK.
BO,Rs902.
00MarketcapUS$20,195mnTargetpriceRs1,040.
00Fiscaly/eMar2012E2013ENetinc.
(Rs)62,910mn70,302mnEPS(Rs)54.
5860.
99EPSgrowth21.
1%11.
8%P/E16.
5X14.
8XDividendyield1.
9%2.
1%InvestmentListsAsiaPacificBuyListCoverageviewNeutralTabassumInamdar,CFA(Mumbai):tabassum.
inamdar@gs.
com,+91(22)6616-9052GoldmanSachsIndiaSPLRahulJain(Mumbai):rahul.
m.
jain@gs.
com,+91(22)6616-9161GoldmanSachsIndiaSPLShyamSrinivasan,CFA(Mumbai):shyam.
srinivasan@gs.
com,+91(22)6616-9346GoldmanSachsIndiaSPLVenkatSurapaneni(Bangalore):venkat.
surapaneni@gs.
com,+91(80)6637-8668GoldmanSachsIndiaSPLNIMssurpriseaidedbyhigherCASA;CostsundercontrolICBKreported3QFY12PATofRs17.
3bn(up20%yoy),13%aheadofGseand9%aheadofBloombergconsensus.
Keyhighlights:(1)NIIgrew17%yoy(7%aheadofGSe)asadvancesgrowthof19%yoywassupplementedbyNIMsexpansionof10bpsqoqto2.
7%onCASAimprovement(+150bpsqoq),andinternationalNIMsthatincreasedto1.
4%from1.
1%in2Q.
Weexpectmarginstoimprove20bpsbyFY14,asdomesticbookexpands,andCASAremainshigh.
(2)AdvancesgrowthwasledbyCorporates(+23%yoy,+13%qoq)andInternationalbookthatgrew38%yoy(+16%yoyadjustedforcurrency).
Managementindicatedthatitwouldincreasefocusonretailtobalanceportfolioasassetqualityremainedgood.
(3)OtherincomecameinlinewithGSeasICICILifepaidoutRs1.
5bnindividendtoICBKthatoffsetlowerfeeincome(+5%yoy,-4%vs.
Gse).
(4)Costscame4%belowonloweremployeecosts(-9%vs.
Gse)asheadcountdeclined.
(5)Provisionswere14%belowGSeat0.
6%ofloansasassetqualityremainedstable:Gross/NetNPLsdeclined3%/6%respectively,butrestructuredloansjumped23%qoqtoRs31bn(addedRs8.
8bninthequarter).
ICBKalsoguidedthattheCDRpipeline,includingGTLand3iInfotech,remainedhighatRs13bn,whileKingfisherwasaperformingloan.
Attractivevaluations,improvingreturnprofile;ReiterateBuyWeraiseFY12E-FY14EEPSby3%-4%tofactorinhigherNIIandlowercosts,andraiseour12mSOTP-basedtargetpricetoRs1,040(fromRs950)aswealsorollforwardBVPStoDec-2012.
WeretainourBuyratingonICICIBankgiventhehighRoAof1.
5%andearningsgrowthof22%inFY2012Eand12%inFY2013E,whilethestocktradesatFY13Evaluationsof1.
2XP/Band11XP/E(standalone).
Risks:Bulkborrowing,higherslippages.
Indonesia:Banks:Areastowatchin2012:NIMsustainability&loangrowthpotential32VincentChang(HongKong):vincent.
chang@gs.
com,+852-2978-6681GoldmanSachs(Asia)L.
L.
C.
JustinChen(Taipei):justin.
chen@gs.
com,+886(2)2730-4190GoldmanSachs(Asia)L.
L.
C.
,TaipeiBranchKeytakeawaysfrombanks'11M2011preliminaryresultBankIndonesia(BI)releasedNovember2011non-consolidatedandun-auditedfinancialfiguresforallbanksunderourcoveragewithaveragenetearningsrising34%yoy.
Keytakeaways:(1)BBRI/BBTN/BTPN's11M11netprofitsalreadyreached95%/101%/96%ofGSFY11e,implyingpotentialupsidetoour4Q11earningsforecasts,whichweattributetoimprovingassetqualityandfastdeposit-repricingonBI's75bpratecutin4Q11;(2)BI'spolicytolinkRRRwithLDRappearstobeeffective,asthosewithlowerLDR(e.
g.
,BBCA/BMRI/BBNI)sawanaverage6.
3p.
ptLDRincreaseyoy(otherbanks:unchanged);(3)BDMNreportedweakestnetearningsgrowth,despitestrongvehiclefinance,reflectingnegativeimpactfromincreasingcompetitioninitsmicrofinancebusiness.
MutedsharepriceperformancedespitepositivenewsflowHowever,despitetheencouragingsectorwideearnings,Moody'ssovereigncreditupgrade,andthelong-awaitedpassageofthelandacquisitionbill,Indonesiabanks'sharepriceremainedflatytd(vs.
China+11%,India+19%).
Inourview,thismeansinvestorshaveprobablyalreadyover-weightedthesectorwithhighbanks'earningsexpectation(IBES-basedconsensus:+18%/20%EPSgrowthin2012/13);itisalsotheonlybankingsectorintheregionwithP/PPOPmultipleabovemid-cyclevaluation.
Areastowatchin2012:NIMsustainability&loangrowthpotentialAsia-PacificAfternoonSummaryFebruary1,2012GoldmanSachsGlobalInvestmentResearchInourview,keyareastowatchin2012are:(1)NIMsustainability.
Webelievecorporatebankswithstrongdepositfranchise(e.
g.
,BCA,Mandiri)cansustain/strengthenNIMtoraiseROA,byleveragingfundingadvantagesandriskmanagementexpertisetoexpandintohigher-marginareas.
Incontrast,consumer-focusedbanksarelikelytoseemorevulnerableNIMtrendinthefaceofintensifyingcompetitionsonboththeirhigh-yieldloanbookandweakerfundingbase;(2)loangrowthpotential.
Thenewly-passedlandacquisitionbill,ifwellexecuted,mightaccelerateinfrastructureprojectbuild-up,whichprimarilybenefitsstate-ownedbanksthathandlegovernmentbudgetdisbursement.
Thosewithgreatercapitalstrength,higherROE,andlowerLDRwouldstillhavemorecapacitytooutgrowpeers.
OurtoppicksremainMandiriandBCA.
MapletreeCommercialTrust(MACT.
SI):Inlinewithexpectationsonsolidexecution;strongvisibility33MACT.
SI,S$0.
87MarketcapUS$1,278mnTargetpriceS$1.
02Fiscaly/eMar2011E2012ENetinc.
(S$)91.
3mn102.
3mnEPS(S$)0.
050.
05EPSgrowth13.
6%11.
5%P/E17.
7X15.
8XDividendyield6.
2%6.
9%InvestmentListsAsiaPacificBuyListCoverageviewNeutralPaulLian(Singapore):paul.
lian@gs.
com,+65-6889-2464GoldmanSachs(Singapore)PteJuneZhu(Singapore):june.
zhu@gs.
com,+65-6889-2466GoldmanSachs(Singapore)PteWhatsurprisedusMCTreportedDPUof1.
43centsin3QFY11(+7.
1%qoq)and3.
72centsYTDFY11;annualizedDPUisbroadlyinlinewithGSe(3%above).
Strongrentalreversions,variableGTOrentsandabetterhandleoncost(vs.
peers)droveNPIgrowthof6.
4%qoq,inlinewithGSe,withitsbottomlineedgingaheadonlowerinterestcost.
Highlights:(1)portfoliooccupancyfirmed,onsamestorebasis,Retailmaintainedat99.
9%andOfficeroseto96.
8%vs.
95.
2%in2Q,whileitsnewlycompletedPSABenhancementsawcommitmentsriseto55%;(2)soliddeliveryatVivoCity(69%ofassets)saw+25%rentalupliftasanchortenantsrenewed,raisingpassingrentstoS$10.
40psf(vs.
S$10.
10psfin2Q);(3)underlyingretailscenehealthywithshoppertrafficat+14.
8%yoyandtenantturnover(GTO)+9.
3%yoyYTDFY11,withDecaclearstandout;(4)Officerenewalsalsostoodoutat+8.
6%overprecedingrents;(5)gearingimprovedto37.
7%withNAVrevalued+3.
9%.
WhattodowiththestockMaintainBuy;MCTisinanearlygrowthphasewithassetsstillevolving.
WebelieveMCTrepresentsamongstthebestorganicgrowthintheSREITsspace,+7.
6%2-yrfwdDPUCAGR,withanchorassetVivoCitystillata15-20%rentaldiscounttocomparablemalls,whilenowsettlingintoamorestabilizedtradingpatternwithconsistentfootfall/spendgains.
MCThasmadesubstantialprogressinleasing,withallleasesexpiringFY11(Mar-12)renewed,withfocusfirmlyonthe32.
8%(byRev)ofleasesdueFY12,mainlyspecialtystoressignedatlowratesin2009.
DespitemarketconcernsinOffice,weseeMCT'sfringeOfficeportfolio(31%ofassets)wellpositionedtoridethedownturnwithitslongerleasesandinbuiltescalationsdesignedforstablecashflows.
WeraiseFY11/12/13EDPUby1.
4%/1.
0%/1.
0%onlowerinterestcost;12mDCFTPofS$1.
02unchanged.
MCToffers6.
2%/6.
9%FY11E/12Edivyields.
Risk:weakerretailspend.
Asia-PacificAfternoonSummaryFebruary1,2012GoldmanSachsGlobalInvestmentResearchPunjabNationalBank(PNBK.
BO):Inlinewithexpectations,assetqualityanoverhang;retainBuy34PNBK.
BO,Rs940.
30MarketcapUS$5,982mnTargetpriceRs1,110.
00Fiscaly/eMar2012E2013ENetinc.
(Rs)48,013mn52,316mnEPS(Rs)151.
55165.
13EPSgrowth7.
8%9.
0%P/E6.
2X5.
7XDividendyield2.
4%2.
6%InvestmentListsAsiaPacificBuyListCoverageviewNeutralTabassumInamdar,CFA(Mumbai):tabassum.
inamdar@gs.
com,+91(22)6616-9052GoldmanSachsIndiaSPLRahulJain(Mumbai):rahul.
m.
jain@gs.
com,+91(22)6616-9161GoldmanSachsIndiaSPLShyamSrinivasan,CFA(Mumbai):shyam.
srinivasan@gs.
com,+91(22)6616-9346GoldmanSachsIndiaSPLVenkatSurapaneni(Bangalore):venkat.
surapaneni@gs.
com,+91(80)6637-8668GoldmanSachsIndiaSPLNIIgrowthinline,butassetqualityconcernsremainPNBreported3QFY12PATofRs11.
5bn(up6%yoy),inlinewithGSeand8%belowBloombergconsensus.
Keyhighlights:(1)NIIwasRs35.
4bn(+10%yoy,inlinewithGSe)reflecting19%yoygrowthinadvances(int'lbookgrew83%yoy,domestic15.
6%yoy)andNIMdeclineof7bpsqoq,25bpsyoyto3.
88%onhigherdepositscosts(+22bpsqoq).
(2)Non-interestincomewas26%aheadofGSe,asfeesgrew23%yoy(21%aboveGSe)whiletradingprofitsremainedflatyoy.
(3)Operatingexpensesincreased6%yoy,asgrowthinemployeecostswasmutedat3%withC/Iratioat40.
4%(41.
8%in2Q12).
(4)Assetqualitydeterioratedwithslippagesat3%(2Q12:1.
88%)includingKingfisher(excludingwhichslippageswere1.
7%).
Consequently,GrossNPLsjumped25%qoqtoRs64.
4bn(2.
4%ofloans)andnetNPLincreasedto1.
1%from0.
9%in2Q.
NPLprovisionsatRs7.
5bncamein28%aheadofGSebutPCRdeclined5ppqoqto70%.
Restructuredassetsincreased13%qoqtoRs169bn(6.
4%ofloansandincludec.
Rs10bnloanstoGTL).
GiventhemacroenvironmentandPNB'sexposuretoSEBs,restructuredloansandNPLswilllikelyincreaseoverthenext2/3qtrs.
CapitalinfusionofRs12.
8bnviapref.
shareallotmentwillboostTier1ratiocurrentlyat7.
85%.
TierIat9.
15%includingprofitsiscomfortable.
RetainBuyonreasonablevaluationWelowerourFY13E-14EEPSbyc.
4%toreflecthigherprovisions/slippagesandlowerour12-mCAMELOTbasedTPtoRs1110(fromRs1130)aswealsorollforwardBVPStoDec-2012.
Whilewearedisappointedwiththedeteriorationinassetquality,weretainourBuyratingonPNB,giventhevaluationof1.
0XPBRand5.
7XPERFY13vs.
RoAof1.
2%andRoEof20%forFY12E-FY14E,whichfactorinthehigherloanlossprovisions.
Keyrisks:Higherslippagesandmargincompression.
Australia:Banks:Revenuepressuresevident,butloanrepricingtopartiallyoffset35BenKoo(Sydney):ben.
koo@gs.
com,+61(2)9321-8543GoldmanSachsAustraliaPtyLtdElizabethRogers(Sydney):elizabeth.
rogers@gs.
com,+61(2)9321-8560GoldmanSachsAustraliaPtyLtdJenniferLowry(Sydney):jennifer.
lowry@gs.
com,+61(2)9321-8999GoldmanSachsAustraliaPtyLtdFactoringintheRisk:-1%to-3%impacttoFY12EearningsAshighlightedinourrecentnote("AustralianFinancials:Revenuepressurestodrivefurtherloanrepricingandcost-out"January12,2012)weseedownsideearningsriskforthesectorfromfurthermarginpressure(liability-led)andlacklustremarketsandtreasuryearnings.
GivenJanuaryhasshownnosignsofimprovementwithconditionsremainingchallengingacrossthedeposit,debtandtreasury/marketsincomewehavedowngradedourcashEPSexpectationsby1%to3%inFY12E,by1%to4%inFY13Eandby1%to4%inFY14E.
Risk1:FundingpressurespartiallyoffsetbyloanrepricingMarginscontinuetofacedownwardpressurefromrisingdepositcompetitionplusexpensiveandvolatilewholesalefundingmarketsandreducedbenefitsonfreefunds(givenlowercashrate).
Whilstwewouldexpectthisimpacttobepartiallyoffsetthroughloanrepricing,weexpectbankstowearsomeofthehigherfundingcost.
Assuch,wehaveslightlyreducedourmargins(by2bp)inFY12EandFY13E.
Risk2:Softmarkets/treasuryincomeAsia-PacificAfternoonSummaryFebruary1,2012GoldmanSachsGlobalInvestmentResearchPreviouslyweexpectedamoresolidreboundinmarketsandtreasuryincomeinFY12E,howevertradingconditionshavesofarremainedmorechallengingand,assuch,wehavetemperedourrecoveryexpectations.
SectorratingremainsunchangedDespiteearningsdowngrades,ourNeutralcoverageratingremainsunchanged.
Ourmajorbanksectorpreferencesremain:NAB,ANZ,WBC,thenCBA.
WithintheregionalbankswepreferBOQoverBENforitsBDDnormalizationplusQLDturnaroundstory.
InadditionwehaveadjustedourCBAandBEN12monthPriceTargetsto$49.
50forCBA(previously$50.
00)and$7.
90forBEN(previously$8.
00).
ThesePriceTargetchangesreflectvaluationimplicationsfromthehighlightedearningschanges.
IndustrialsSandsChina(1928.
HK):HK$0.
58interimDPS.
NotrulingoutpossibilityofafinalDPS361928.
HK,HK$26.
85MarketcapUS$27,858mnTargetpriceHK$28.
30Fiscaly/eDec2011E2012ENetinc.
(US$)1,131mn1,223mnEPS(US$)0.
140.
15EPSgrowth69.
7%8.
1%P/E24.
6X22.
8XDividendyield----InvestmentListsAsiaPacificBuyListAsiaPacificConvictionBuyListCoverageviewNeutralSimonCheung,CFA(HongKong):simon.
cheung@gs.
com,+852-2978-6102GoldmanSachs(Asia)L.
L.
C.
JanetLu(HongKong):janet.
lu@gs.
com,+852-2978-1642GoldmanSachs(Asia)L.
L.
C.
NewsSandsChinaannouncedthattheBoardofDirectorshasresolvedtodeclareaninterimdividendofHK$0.
58pershare,orHK$4.
7bnintotal,payableonFeb28.
Theex-dateisFeb13.
Thisisthefirstdividendthecompanyhasdeclaredsinceitslistinginlate-2009.
AtthecurrentsharepriceofHK$26.
25,theinterimdividendwouldimply2.
2%dividendyield.
AnalysisThisdoesnotcomeasasurprisetothemarket,asthecompanyhasannouncedonJan13thatitwillconsiderdeclaringaninterimDPSattheBoardMeetingonJan31.
TheannouncementstatesthattheBoardhasrevieweditsearnings,generalfinancialcondition,capitalrequirementgoingforward,anddeterminedthatithassufficientreservestofinanceitsoperationsandexpansionofitsbusiness,includingthedevelopmentofadditionalintegratedresortsinMacau.
AsdiscussedinourJan30sectorreport"Dividenddistributionpotentialastheemergingsectortheme",althoughSandsChinahasnotcommittedanydividendpayout,webelieveithasthefinancialcapabilitytodistributemoredividendoverthecomingyearsanddonotruleoutthepossibilityofafinalDPSatitsAGMinJun-2012.
Inspecific,weestimateSandsChinahadUS$2.
3bnnetdebtatend-2011E.
SubtractingthisfromitscumulativeFCFofUS$8.
4bnin2012-15EwouldleaveUS$6.
1bnnetcashatend-2015E,wellsufficienttofundtheconstructionofParcel3(whichweestimatemaycostUS$2bn)andtosupportdividendpayoutat48%ofrecurringearnings(Exhibit1).
ImplicationsThecompany'sdecisiontodistributeaninterimdividendreflectsitsconfidenceinitscashflowgenerationcapability.
CoupledwiththeopeningofSandsCotaiCentralscheduledin1H12whichweexpecttounderpin31%EBITDACAGRin2011-13E,SandsChina'sshareoffersacombinationofyieldandgrowth,inourview.
WemaintainourBuyrating(onCL)andourtargetprice/estimatesareunchanged.
Asia-PacificAfternoonSummaryFebruary1,2012GoldmanSachsGlobalInvestmentResearchHavellsIndia(HVEL.
BO):Inlinewithexpectationsonrevenue+strongoverseasmargins37HVEL.
BO,Rs480.
00MarketcapUS$1,203mnTargetpriceRs487.
00Fiscaly/eMar2012E2013ENetinc.
(Rs)3,793mn4,520mnEPS(Rs)30.
4036.
22EPSgrowth24.
9%19.
2%P/E15.
8X13.
3XDividendyield0.
7%0.
8%InvestmentListsNeutralCoverageviewNeutralPulkitPatni(Mumbai):pulkit.
patni@gs.
com,+91(22)6616-9044GoldmanSachsIndiaSPLIshanSethi(Mumbai):ishan.
sethi@gs.
com,+91(22)6616-9048GoldmanSachsIndiaSPLMukulGarg(Bangalore):mukul.
garg@gs.
com,+91(80)6637-8622GoldmanSachsIndiaSPLWhatsurprisedusHavellsreported3QFY12revenueofRs16.
6bn,up16%yoyandin-linewithGS/Bloombergconsensusestimates.
EBITDAinthequarteratRs1.
8bn(up38%yoy)was7-8%aboveourandStreetexpectationsduetostrongmargininitsSylvaniasubsidiary.
Growthinthedomesticbusinessandmarginimprovementintheoverseasoperationswerethekeytothisquarter'sperformance.
WhattodowiththestockHavellscontinuedtodeliverstrongperformanceinthequarter,withthecompany'sdomesticoperationsseeinggrowthinallsegments,morethancompensatingfortherevenueweaknessintheoverseasoperations.
Atthesametime,marginimprovementintheforeignbusinessstrengthensourbeliefinstabilizationofoperationsatSylvania.
Inspiteofstrongoperationalperformancefromthecompany,weremainNeutralonthestock,drivenbycontinuedconcernongrowthintheEuropeanbusinesscoupledwithvolatilityinmarginsfortheLatAmbusinessandourviewthatthestockisfairlyvalued.
Wefine-tunenumbersonthebackoftheseresultsandconsequentlychangeourEPSby+1%to3%forFY12E-14E.
Asaresult,wechangeourSOTPbasedTPtoRs487(fromRs480earlier).
Thestockcurrentlytradesat12-mfwdP/Eof14Xvs.
5-yearmedianmultipleof12.
6X–justifiedgiventheimprovingreturnsandgrowthprofileforthecompany.
Keyrisks:Downside:Significantslowdowninoverseasbusiness;Upside:bettercostmanagementinSylvania,marketsharegainsinelectricalconsumerdurableproducts.
TechnologySamsungSDICo.
(006400.
KS):Belowexpectations;limitedbatterymarginrecoverytocapupside38006400.
KS,W139,500MarketcapUS$5,838mnTargetpriceW130,000Fiscaly/eDec2012E2013ENetinc.
(W)400bn408bnEPS(W)8,4798,656EPSgrowth25.
0%2.
1%P/E16.
5X16.
1XDividendyield0.
7%0.
9%InvestmentListsNeutralCoverageviewAttractiveMarcusShin(Seoul):marcus.
shin@gs.
com,+82(2)3788-1154GoldmanSachs(Asia)L.
L.
C.
,SeoulBranchHyunwooNam(Seoul):hyunwoo.
nam@gs.
com,+82(2)3788-1704GoldmanSachs(Asia)L.
L.
C.
,SeoulBranchWhatsurprisedusSamsungSDI(SDI)recordedoperatingprofitofW11bnin4Q11(-25%yoyand-74%qoq),whichis46%and69%lowerthanourestimatesandBloombergconsensus,respectively.
Theshortfallinoperatingprofitmainlystemmedfromone-offexpensesofaroundW10bnlargelyrelatedtoincreaseinprovisionforPS(profitsharing)incentives.
WhattodowiththestockBatteryshipmenttoreboundfrom1Q12:Asaresultofaggressiveinventorycontrolatmajorcustomers,SDIwitnessedsuddenandsubstantialdeclineinbatteryshipments(-15%qoq)in4Q11,leadingtosharperosioninprofitability.
Inlightofrestockingordersfromcustomers,weexpectSDIwillbeabletoenhancebatteryshipmentsfrom1Q12,resultinginsequentialearningsrecovery,butfromaverylowbasein4Q11.
Batterymarginerosionremainskeyconcern:Despite:(1)substantialtop-linegrowthof20%yoy,and(2)enhancingproduct-mixwithincreasingpolymerportion,SDI'sbatterymargindeclinedto9%in2011from11%in2010.
Wecontinuetoexpectthattheincreasingpolymerportionwillnottranslateintomarginexpansion,mainlydueto:(1)cannibalizationofcylindricalbatteries,and(2)lowerproductivityinpolymermanufacturing.
WeseelimitedupsidetosharepricewithmutedROEexpansion:Asaresultofhigherbatteryshipmentsandlowersolarrevenueestimates,wechangeourFY11E/12E/13E/14EEPSby-8%/+5%/+4%/+1%,respectively,whileDirector'sCut12-mTPofW130,000remainsunchanged.
WeremainNeutralrated.
KeyAsia-PacificAfternoonSummaryFebruary1,2012GoldmanSachsGlobalInvestmentResearchrisks:Weaker-/stronger-than-expectedbatterydemandandfaster-/slower-than-expectedramp-upinESS/SBL.
Ctrip.
comInternational(CTRP):Hotelcouponpricepromotionssuggestintensifiedcompetition39CTRP,US$25.
92MarketcapUS$3,655mnTargetpriceUS$21.
00Fiscaly/eDec2011E2012ENetinc.
(US$)218.
0mn221.
2mnEPS(US$)1.
461.
43EPSgrowth12.
5%(2.
6%)P/E17.
7X18.
2XDividendyield----InvestmentListsAsiaPacificSellListCoverageviewNeutralCatherineLeung(HongKong):catherine.
leung@gs.
com,+852-2978-1291GoldmanSachs(Asia)L.
L.
C.
FeiFang(HongKong):fei.
fang@gs.
com,+852-2978-1466GoldmanSachs(Asia)L.
L.
C.
What'schangedSinceCtriplauncheditshotelcouponprogramlastOctober,offeringcashrebatestotravelersforhotelbookings,thecompanyhasaddedtwomainpromotions–uppingcoupon/rebateamounts(Dec16-Mar31)andRmb30rebatesformajorbudgethotelsnationwide(Feb1-Mar1).
Implications1)Weviewthesepromotionsasindicativeofintensifiedpricecompetition,withkeycompetitoreLongalsoofferingsimilarpromotions.
WebelieveeLong'senduringappetiteforlossesandstrategyofprioritizingrevenuegrowthinthegrowingonlinetravelmarketcouldinhibitrationalization.
2)Weestimatehotelrebates,whicharetreatedascontra-revenue,tohaveamorepronouncedimpactonrevenuegrowththanongrossmargins.
Howeverslowerrevenuegrowthalsonegativelyimpactsoperatingmargins,especiallygivenrapidlyrisingmarketingcosts.
Weforecast16%revenuegrowthin2012E(versus20%in3Q11and16%in4Q11E),belowBloombergconsensus'25%,asweexpectamoderateaccelerationintraveldemandgrowthtobepartlyoffsetbyloweryields.
Weforecastoperatingmarginstodeclinefrom40.
3%in2011Eto34.
8%in2012Eand34.
0%in2013E.
Oursamplingsuggestsrebatescouldrepresent30%-90%ofanyroom'scommissionrevenue,althoughtheultimaterevenueimpactwillalsobedeterminedbyredemptionratiosandhotelmix.
3)Ourcautiousthesisisnotsolelypredicatedonthecouponpromotions,thoughweviewtheseasatellingsymptomofamorecompetitivetravelintermediarymarketresultingfromrisingonlineandleisurepenetration.
ValuationWemaintainourSellratingand12-mtargetpriceof$21,basedon1.
0XPEG(implying15X2012EP/Ewith2012E-2015EearningsCAGRof15%).
KeyrisksStrongerrecoveryintraveldemand;bettercostcontrol.
ImpactonrelatedsecuritiesTelecomServicesAustralia:TelecomServices:Telecomsectoroutlook201240ChristianGuerra(Melbourne):christian.
guerra@gs.
com,+61(3)9679-1302GoldmanSachsAustraliaPtyLtdRaymondTong(Melbourne):raymond.
tong@gs.
com,+61(3)9679-1359GoldmanSachsAustraliaPtyLtdAdrianAllbon(Auckland):adrian.
allbon@gs.
com,+64(9)357-3296GoldmanSachsNewZealandLimitedAdamAlexander(Melbourne):adam.
alexander@gs.
com,+61(3)9679-1451GoldmanSachsAustraliaPtyLtdJacquelineThai(Melbourne):jacqueline.
thai@gs.
com,+61(3)9679-1217GoldmanSachsAustraliaPtyLtdTelecomsectoroutlook2012:NeutralcoverageviewWepresentour2012outlookfortheCommunications,MediaandEntertainmentsectorsinathree-partseries.
(1)NBNtobecomerealityatlastAsia-PacificAfternoonSummaryFebruary1,2012GoldmanSachsGlobalInvestmentResearchWeexpectthefocustoshiftfromregulationtonetworkdeploymentin2012.
Assuch,2012willbeimportantfortheNBN'scredibility.
WeestimatetheNBNdealwillbe1%-5%EPSaccretivetoTLSinFY13E-FY14E.
(2)Wirelessspectrum;thenextindustrycapexcycleUpcomingwirelessspectruminvestmentcouldcosttheindustryc.
A$3.
1bn(TLS$1.
4bn).
ThisislikelytooccurinFY13(DigitalDividendspectrumauctionsinlate2012,800MHz/1800MHzspectrumrenewalsinJune2013).
(3)Wirelesstoslowfurther;competitiontoremainrationalWeexpectwirelessindustryrevenuegrowthtomoderatefurtherin2012given:(1)slowingsubgrowth;(2)MTRcuts(c.
A$550mnheadwind).
Competitionislikelytoremainrational,withprofitabilityakeyfocus.
WeexpectTLSwillextendmarketsharegainsdrivenbyrisingcompetitor'subsatrisk'andcontinuedtechnologyleadership.
WeraiseourTLSFY12subnetaddsforecastto1.
405mnupfrom1.
247mn.
(4)VHAfacesanotherchallengingyearKeychallenges:(1)stabilizingacontractingsubbase;(2)limitedfinancialflexibility,withweakfinancials(FY11EEBITDAdownc.
35%onpcp),significantcapitalrequirements,andhighgearing(i.
e.
c.
4.
5Xdebt/EBITDA).
(5)Fixedlinetofaceheadwindsfollowingsolid2011Keyissues:(1)heightenedriskofwirelesssubstitution,withLTEthefirsttruewirelessalternativetofixed;(2)weakeconomycouldacceleratePSTNdecline;and(3)wholesaleDSLdeclarationtoraisefixedcompetition.
(6)Capitalallocation;useofFCFandbalancesheetcapacityWeexpectTEL/TLSwillannouncecapitalmanagementinitiativesin2012.
TEL/CNU/IINBuy;TLSNotRatedOurpreferencesareTEL,CNU,andIIN.
WeremainNotRatedonTLS.
OtherEquityStrategy:Assessingearningsriskheadingintoreportingseason41HamishTadgell(Melbourne):hamish.
tadgell@gs.
com,+61(3)9679-1124GoldmanSachsAustraliaPtyLtdChrisPidcock(Melbourne):chris.
pidcock@gs.
com,+61(3)9679-1862GoldmanSachsAustraliaPtyLtdJienGoh(Melbourne):jien.
goh@gs.
com,+61(3)9679-1855GoldmanSachsAustraliaPtyLtdTakingtheanalysts'pulseWiththeFebruaryreportingseasonabouttocommencewehavesurveyedouranalyststoreviewearningsrisk(toconsensus)forcompaniesundercoverage.
Earningsskewedtothedownside.
.
Againstthebackdropofslowinggrowthmomentum,modestinflationandrisksoffurtherunemployment,thenumberofcompaniesprovidingguidancehasdeclinedandanalystshavebecomemorecautious.
Ouranalystsbelieve28%ofstocksundercoveragehavedownsideearningsrisk,whileonly9%haveupsiderisk.
Thisisthemostdownsideriskwehaveseenacrossouranalystssince2009.
StocksthathavebothdownsideearningsriskandaSellratingonthemare:AWC,BEN,CBA,COH,CSR,DJS,HVNandTSE.
StocksthathavebothupsideearningsriskandaBuyratingonthemare:CWN,GMG,ILU,ORI,SGPandWRT.
.
.
butsignificantearningsriskispricedinWebelieveourbottom-upheadlineIndustrialsEPSgrowthforecasts(+8%)willtrendlowerfromcurrentlevelstobemoreinlinewithourtop-downforecastforFY12(0%).
However,themarketappearstobediscountingasignificantlevelofearningsriskwiththeprospectiveIndustrialsPEof11.
5x(1stddev.
belowhistoricalaverages).
Theassumptionthatthemarketshouldtradeonalowmultipleondepressedearningshashistoricallyprovidedvalueforlongterminvestors.
PortfolioconstructionWeremainconstructiveonequitiesandbelievevaluationsarecurrentlydiscountingfurtherearningsrisk.
Ourportfolioretainsamodestlycyclicalbias;keyinvestmentthemes(andrecommendedstocks)withourstrongestviewsare:Asia-PacificAfternoonSummaryFebruary1,2012GoldmanSachsGlobalInvestmentResearchSolidEPSprofile:AMC,BXB,WES,NWS,CPU,SGPMininginvestment/Chinastimulus:BHP,RIO,SGM,ORI,AIO,UGL,WPL,OSHDeepvalueplays:QAN,LLC,SUN,OSTMonthlyMarketReview:Australiamarketreview:January201242ChrisPidcock(Melbourne):chris.
pidcock@gs.
com,+61(3)9679-1862GoldmanSachsAustraliaPtyLtdHamishTadgell(Melbourne):hamish.
tadgell@gs.
com,+61(3)9679-1124GoldmanSachsAustraliaPtyLtdJienGoh(Melbourne):jien.
goh@gs.
com,+61(3)9679-1855GoldmanSachsAustraliaPtyLtdCyclicalrallytostarttheyearTheNewYearusheredinacyclicalrallyonthebackofbetterthanexpectedeconomicsurveydataacrossmostregions,apartialunwindingofthesystematicEuropeansovereignandbankingriskthatgrippedthemarketinthelastcoupleofmonthsof2011andaneasinginconcernsaroundChinatightening.
EconomicfundamentalsremainmixedEuropolicymakersandpoliticiansstillfaceanumberofhurdlesoverthenextfewmonths.
Thedomesticmacroeconomicnewsflowwasmixed:marketexpectationsareforfurtherratecutsinearly2012,reflectingtheslowingmomentuminthedomesticeconomy.
TheAUDUSDmirroredtheshiftinriskaversion,rallyingsignificantlyfromalowofUS$1.
015toahighofUS$1.
069beforefinishingthemonthatUS$1.
0630(+4.
1).
Equitiesfinishedup,favouringresourcenamesTheAustralianequitymarket(ASX200)finishedJanuaryup5.
1%.
Afterlaggingoffshoremarketsearlier,theASX200pickedupthroughthesecondhalfofthemonthasinvestorsreturnedfromtheirsummerbreakandimprovedsentimentaroundChinaandresourcessawsomeincreasedappetiteforrisk.
InvestorsfavouredcyclicalnameswiththeMaterials,EnergyandIndustrialsectorsoutperformingwhiletheHealthcare,Telecoms,StaplesandUtilitiessectorslagged.
WeretainamodestcyclicalbiasDespitesomeappetiteforadditionalrisk,webelieveinvestorsentimentremainsoverallcautious.
Weretainamodestcyclicalbiasinourmodelportfolio,reflectingthesignificantrecoverypotentialofstocksleveragedtotheglobaleconomy.
Ourportfolioconstructalsoremainsleveragedto:keydomesticgrowththemes(mininginvestment/volumes);moreaccommodativepolicysettingsinEM/China;andstockswithresilientoperatingmodelsandearningsdrivers.
OurmodelportfolioisoverweightMaterials,CommercialServices,Transport,MediaandEnergy.
ThefivelargestoverweightpositionsinourmodelportfolioareNAB,WES,NWS,ANZandORI.
Thefivelargestunderweightpositionsare:WBC,TLS,WOW,NCMandWDC.
NewZealand:IntroducingtheNewZealandFocusList43MarcusCurley(Auckland):marcus.
curley@gs.
com,+64(9)363-1916GoldmanSachsNewZealandLimitedAdrianAllbon(Auckland):adrian.
allbon@gs.
com,+64(9)357-3296GoldmanSachsNewZealandLimitedBuffyGill(Auckland):buffy.
gill@gs.
com,+64(9)357-3253GoldmanSachsNewZealandLimitedMatthewHenry(Auckland):matthew.
henry@gs.
com,+64(9)357-3203GoldmanSachsNewZealandLimitedBestideasinNZcoverageuniverseWeareestablishingaNewZealandFocusListwhichincludeswhatweconsidertobeourstrongestinvestmentideas,eitherBuyorSell,withinourNewZealand(NZ)coverageuniverse.
Thetargetnumberofstocksis4to5,representingaround10%ofourcoverageuniverse.
InvestmentprocessPotentialcandidatesareidentifiedbyseniorresearchanalystsandreviewedbyourregionalinvestmentAsia-PacificAfternoonSummaryFebruary1,2012GoldmanSachsGlobalInvestmentResearchreviewcommittee(IRC).
Wehavetheflexibilitytoaddandremovestocksfromthelistonanyday,subjecttoIRCapproval.
BenchmarkandperformanceWewillmeasuretheperformanceofourNZFocusListagainstNZSX50Index.
Performancewillbecalculatedonanequallyweightedbasiswithdailyrebalancingatclosingprices,andwillexcludetransactioncosts.
Attimes,aNotRateddesignationisimposedonastock.
ThestockisthenexcludedfromourBuy/Selllist,andisautomaticallyexcludedfromourNZFocusList.
PerformanceofsimilarlistThisproductreplacesourpreviousNZconvictionlist.
Thepreviousproductwasconstructedinasimilarwaytothatdescribedabove.
InitialconstituentsandthemesWelaunchtheNZFocusListwithfivestocks,beingChorus(Buy),Freightways(Buy),SkyCityEntertainment(Buy),TelecomNZ(Buy)andTheWarehouse(Sell).
Ingeneral,theseideasincorporateourpreferenceforNZstockswhichofferreliableearningsgrowth,especiallyinanenvironmentwheremultipleexpansionwillbedifficult.
NewZealand:Monthlywrap:NZSX50startstheyearup0.
7%44MarcusCurley(Auckland):marcus.
curley@gs.
com,+64(9)363-1916GoldmanSachsNewZealandLimitedRohanKoreman-Smit(Auckland):rohan.
koreman-smit@gs.
co.
nz,+64(9)363-1910GoldmanSachsNewZealandLimitedCorporatenewsflow2012hasstartedsomewhatnegatively;withNewZealandRefining(NZR)issuingitssecondprofitdowngradeinfiveweeks,Sanford(SAN)highlightingflat1QrevenueatitsAGM,andNewZealandOil(NZO)impairingitsoutstandingPikeRiverCoalloans.
MacronewsJanuarynewsflowwasconsistentwithaslowdownineconomicmomentumtowardstheendof2011.
Bothheadlineandunderlyingmeasuresof4Q11inflationweresoft,Novemberbuildingconsentsedgedlower,Decemberelectroniccardtransactionscontinuedapost-RugbyWorldCup(RWC)slide,andbusinessconfidenceshiftedfromnetoptimismtonetpessimism.
However,higherhousepricesandaDecembertradesurplusprovidedsomepositivedata.
MarketupdateNewZealandequitiesstartedtheyearpositively,rising0.
7%inJanuarybuoyedbypositiveinternationalsentimentoverthesecondhalfofthemonth.
However,returnsunderperformedglobalequities(MSCIWorldIndexup4.
3%forthemonth,withonedaytorun).
Asia-PacificAfternoonSummaryFebruary1,2012GoldmanSachsGlobalInvestmentResearchDisclosureAppendixRegACEachequity,creditandstrategyresearchreportexcerptedhereinwascertifiedunderRegACbytheanalystprimarilyresponsibleforsuchreportasfollows:I,NameofAnalyst,herebycertifythatalloftheviewsexpressedinthisreportaccuratelyreflectmypersonalviewsaboutthesubjectcompanyorcompaniesanditsortheirsecurities.
Ialsocertifythatnopartofmycompensationwas,is,orwillbe,directlyorindirectly,relatedtothespecificrecommendationsorviewsexpressedinthisreport.
InvestmentProfileTheGoldmanSachsInvestmentProfileprovidesinvestmentcontextforasecuritybycomparingkeyattributesofthatsecuritytoitspeergroupandmarket.
Thefourkeyattributesdepictedare:growth,returns,multipleandvolatility.
Growth,returnsandmultipleareindexedbasedoncompositesofseveralmethodologiestodeterminethestockspercentilerankingwithintheregion'scoverageuniverse.
Theprecisecalculationofeachmetricmayvarydependingonthefiscalyear,industryandregionbutthestandardapproachisasfollows:Growthisacompositeofnextyear'sestimateovercurrentyear'sestimate,e.
g.
EPS,EBITDA,Revenue.
Returnisayearoneprospectiveaggregateofvariousreturnoncapitalmeasures,e.
g.
CROCI,ROACE,andROE.
Multipleisacompositeofone-yearforwardvaluationratios,e.
g.
P/E,dividendyield,EV/FCF,EV/EBITDA,EV/DACF,Price/Book.
Volatilityismeasuredastrailingtwelve-monthvolatilityadjustedfordividends.
QuantumQuantumisGoldmanSachs'proprietarydatabaseprovidingaccesstodetailedfinancialstatementhistories,forecastsandratios.
Itcanbeusedforin-depthanalysisofasinglecompany,ortomakecomparisonsbetweencompaniesindifferentsectorsandmarkets.
GSSUSTAINGSSUSTAINisaglobalinvestmentstrategyaimedatlong-term,long-onlyperformancewithalowturnoverofideas.
TheGSSUSTAINfocuslistincludesleadersouranalysisshowstobewellpositionedtodeliverlongtermoutperformancethroughsustainedcompetitiveadvantageandsuperiorreturnsoncapitalrelativetotheirglobalindustrypeers.
Leadersareidentifiedbasedonquantifiableanalysisofthreeaspectsofcorporateperformance:cashreturnoncashinvested,industrypositioningandmanagementquality(theeffectivenessofcompanies'managementoftheenvironmental,socialandgovernanceissuesfacingtheirindustry).
DisclosuresCoveragegroup(s)ofstocksbyprimaryanalyst(s)Compendiumreport:pleaseseedisclosuresathttp://www.
gs.
com/research/hedge.
html.
Disclosuresapplicabletothecompaniesincludedinthiscompendiumcanbefoundinthelatestrelevantpublishedresearch.
Company-specificregulatorydisclosuresCompendiumreport:pleaseseedisclosuresathttp://www.
gs.
com/research/hedge.
html.
Disclosuresapplicabletothecompaniesincludedinthiscompendiumcanbefoundinthelatestrelevantpublishedresearch.
Distributionofratings/investmentbankingrelationshipsGoldmanSachsInvestmentResearchglobalcoverageuniverseRatingDistributionInvestmentBankingRelationshipsBuyHoldSellBuyHoldSellGlobal30%55%15%47%42%34%AsofJanuary16,2012,GoldmanSachsGlobalInvestmentResearchhadinvestmentratingson3,593equitysecurities.
GoldmanSachsassignsstocksasBuysandSellsonvariousregionalInvestmentLists;stocksnotsoassignedaredeemedNeutral.
SuchassignmentsequatetoBuy,HoldandSellforthepurposesoftheabovedisclosurerequiredbyNASD/NYSErules.
See'Ratings,Coveragegroupsandviewsandrelateddefinitions'below.
Pricetargetandratinghistorychart(s)Compendiumreport:pleaseseedisclosuresathttp://www.
gs.
com/research/hedge.
html.
Disclosuresapplicabletothecompaniesincludedinthiscompendiumcanbefoundinthelatestrelevantpublishedresearch.
RegulatorydisclosuresDisclosuresrequiredbyUnitedStateslawsandregulationsSeecompany-specificregulatorydisclosuresaboveforanyofthefollowingdisclosuresrequiredastocompaniesreferredtointhisreport:managerorco-managerinapendingtransaction;1%orotherownership;compensationforcertainservices;typesofclientrelationships;managed/co-managedpublicofferingsinpriorperiods;directorships;forequitysecurities,marketmakingand/orspecialistrole.
GoldmanSachsusuallymakesamarketinfixedincomesecuritiesofissuersdiscussedinthisreportandusuallydealsasaprincipalinthesesecurities.
Thefollowingareadditionalrequireddisclosures:Ownershipandmaterialconflictsofinterest:GoldmanSachspolicyprohibitsitsanalysts,professionalsreportingtoanalystsandmembersoftheirhouseholdsfromowningsecuritiesofanycompanyintheanalyst'sareaofcoverage.
AnalystAsia-PacificAfternoonSummaryFebruary1,2012GoldmanSachsGlobalInvestmentResearchcompensation:AnalystsarepaidinpartbasedontheprofitabilityofGoldmanSachs,whichincludesinvestmentbankingrevenues.
Analystasofficerordirector:GoldmanSachspolicyprohibitsitsanalysts,personsreportingtoanalystsormembersoftheirhouseholdsfromservingasanofficer,director,advisoryboardmemberoremployeeofanycompanyintheanalyst'sareaofcoverage.
Non-U.
S.
Analysts:Non-U.
S.
analystsmaynotbeassociatedpersonsofGoldman,Sachs&Co.
andthereforemaynotbesubjecttoNASDRule2711/NYSERules472restrictionsoncommunicationswithsubjectcompany,publicappearancesandtradingsecuritiesheldbytheanalysts.
Distributionofratings:Seethedistributionofratingsdisclosureabove.
Pricechart:Seethepricechart,withchangesofratingsandpricetargetsinpriorperiods,above,or,ifelectronicformatorifwithrespecttomultiplecompanieswhicharethesubjectofthisreport,ontheGoldmanSachswebsiteathttp://www.
gs.
com/research/hedge.
html.
AdditionaldisclosuresrequiredunderthelawsandregulationsofjurisdictionsotherthantheUnitedStatesThefollowingdisclosuresarethoserequiredbythejurisdictionindicated,excepttotheextentalreadymadeabovepursuanttoUnitedStateslawsandregulations.
Australia:GoldmanSachsAustraliaPtyLtdanditsaffiliatesarenotauthoriseddeposit-takinginstitutions(asthattermisdefinedintheBankingAct1959(Cth))inAustraliaanddonotprovidebankingservices,norcarryonabankingbusiness,inAustralia.
Thisresearch,andanyaccesstoit,isintendedonlyfor"wholesaleclients"withinthemeaningoftheAustralianCorporationsAct,unlessotherwiseagreedbyGoldmanSachs.
Brazil:DisclosureinformationinrelationtoCVMInstruction483isavailableathttp://www.
gs.
com/worldwide/brazil/area/gir/index.
html.
Whereapplicable,theBrazil-registeredanalystprimarilyresponsibleforthecontentofthisresearchreport,asdefinedinArticle16ofCVMInstruction483,isthefirstauthornamedatthebeginningofthisreport,unlessindicatedotherwiseattheendofthetext.
Canada:Goldman,Sachs&Co.
hasapprovedof,andagreedtotakeresponsibilityfor,thisresearchinCanadaifandtotheextentitrelatestoequitysecuritiesofCanadianissuers.
Analystsmayconductsitevisitsbutareprohibitedfromacceptingpaymentorreimbursementbythecompanyoftravelexpensesforsuchvisits.
HongKong:FurtherinformationonthesecuritiesofcoveredcompaniesreferredtointhisresearchmaybeobtainedonrequestfromGoldmanSachs(Asia)L.
L.
C.
India:FurtherinformationonthesubjectcompanyorcompaniesreferredtointhisresearchmaybeobtainedfromGoldmanSachs(India)SecuritiesPrivateLimited;Japan:Seebelow.
Korea:FurtherinformationonthesubjectcompanyorcompaniesreferredtointhisresearchmaybeobtainedfromGoldmanSachs(Asia)L.
L.
C.
,SeoulBranch.
Russia:ResearchreportsdistributedintheRussianFederationarenotadvertisingasdefinedintheRussianlegislation,butareinformationandanalysisnothavingproductpromotionastheirmainpurposeanddonotprovideappraisalwithinthemeaningoftheRussianlegislationonappraisalactivity.
Singapore:FurtherinformationonthecoveredcompaniesreferredtointhisresearchmaybeobtainedfromGoldmanSachs(Singapore)Pte.
(CompanyNumber:198602165W).
Taiwan:Thismaterialisforreferenceonlyandmustnotbereprintedwithoutpermission.
Investorsshouldcarefullyconsidertheirowninvestmentrisk.
Investmentresultsaretheresponsibilityoftheindividualinvestor.
UnitedKingdom:PersonswhowouldbecategorizedasretailclientsintheUnitedKingdom,assuchtermisdefinedintherulesoftheFinancialServicesAuthority,shouldreadthisresearchinconjunctionwithpriorGoldmanSachsresearchonthecoveredcompaniesreferredtohereinandshouldrefertotheriskwarningsthathavebeensenttothembyGoldmanSachsInternational.
Acopyoftheseriskswarnings,andaglossaryofcertainfinancialtermsusedinthisreport,areavailablefromGoldmanSachsInternationalonrequest.
EuropeanUnion:DisclosureinformationinrelationtoArticle4(1)(d)andArticle6(2)oftheEuropeanCommissionDirective2003/126/ECisavailableathttp://www.
gs.
com/disclosures/europeanpolicy.
htmlwhichstatestheEuropeanPolicyforManagingConflictsofInterestinConnectionwithInvestmentResearch.
Japan:GoldmanSachsJapanCo.
,Ltd.
isaFinancialInstrumentDealerundertheFinancialInstrumentandExchangeLaw,registeredwiththeKantoFinancialBureau(RegistrationNo.
69),andisamemberofJapanSecuritiesDealersAssociation(JSDA)andFinancialFuturesAssociationofJapan(FFAJ).
Salesandpurchaseofequitiesaresubjecttocommissionpre-determinedwithclientsplusconsumptiontax.
Seecompany-specificdisclosuresastoanyapplicabledisclosuresrequiredbyJapanesestockexchanges,theJapaneseSecuritiesDealersAssociationortheJapaneseSecuritiesFinanceCompany.
Ratings,coveragegroupsandviewsandrelateddefinitionsBuy(B),Neutral(N),Sell(S)-AnalystsrecommendstocksasBuysorSellsforinclusiononvariousregionalInvestmentLists.
BeingassignedaBuyorSellonanInvestmentListisdeterminedbyastock'sreturnpotentialrelativetoitscoveragegroupasdescribedbelow.
AnystocknotassignedasaBuyoraSellonanInvestmentListisdeemedNeutral.
EachregionalInvestmentReviewCommitteemanagesvariousregionalInvestmentListstoaglobalguidelineof25%-35%ofstocksasBuyand10%-15%ofstocksasSell;however,thedistributionofBuysandSellsinanyparticularcoveragegroupmayvaryasdeterminedbytheregionalInvestmentReviewCommittee.
RegionalConvictionBuyandSelllistsrepresentinvestmentrecommendationsfocusedoneitherthesizeofthepotentialreturnorthelikelihoodoftherealizationofthereturn.
Returnpotentialrepresentsthepricedifferentialbetweenthecurrentsharepriceandthepricetargetexpectedduringthetimehorizonassociatedwiththepricetarget.
Pricetargetsarerequiredforallcoveredstocks.
Thereturnpotential,pricetargetandassociatedtimehorizonarestatedineachreportaddingorreiteratinganInvestmentListmembership.
Coveragegroupsandviews:Alistofallstocksineachcoveragegroupisavailablebyprimaryanalyst,stockandcoveragegroupathttp://www.
gs.
com/research/hedge.
html.
Theanalystassignsoneofthefollowingcoverageviewswhichrepresentstheanalyst'sinvestmentoutlookonthecoveragegrouprelativetothegroup'shistoricalfundamentalsand/orvaluation.
Attractive(A).
Theinvestmentoutlookoverthefollowing12monthsisfavorablerelativetothecoveragegroup'shistoricalfundamentalsand/orvaluation.
Neutral(N).
Theinvestmentoutlookoverthefollowing12monthsisneutralrelativetothecoveragegroup'shistoricalfundamentalsand/orvaluation.
Cautious(C).
Theinvestmentoutlookoverthefollowing12monthsisunfavorablerelativetothecoveragegroup'shistoricalfundamentalsand/orvaluation.
NotRated(NR).
TheinvestmentratingandtargetpricehavebeenremovedpursuanttoGoldmanSachspolicywhenGoldmanSachsisactinginanadvisorycapacityinamergerorstrategictransactioninvolvingthiscompanyandincertainothercircumstances.
RatingSuspended(RS).
GoldmanSachsResearchhassuspendedtheinvestmentratingandpricetargetforthisstock,becausethereisnotasufficientfundamentalbasisfordetermining,ortherearelegal,regulatoryorpolicyconstraintsaroundpublishing,aninvestmentratingortarget.
Thepreviousinvestmentratingandpricetarget,ifany,arenolongerineffectforthisstockandshouldnotbereliedupon.
CoverageSuspended(CS).
GoldmanSachshassuspendedcoverageofthiscompany.
NotCovered(NC).
GoldmanSachsdoesnotcoverthiscompany.
NotAvailableorNotApplicable(NA).
Theinformationisnotavailablefordisplayorisnotapplicable.
NotMeaningful(NM).
Theinformationisnotmeaningfulandisthereforeexcluded.
Globalproduct;distributingentitiesTheGlobalInvestmentResearchDivisionofGoldmanSachsproducesanddistributesresearchproductsforclientsofGoldmanSachsonaglobalbasis.
AnalystsbasedinGoldmanSachsofficesaroundtheworldproduceequityresearchonindustriesandcompanies,andresearchonmacroeconomics,currencies,commoditiesandportfoliostrategy.
ThisresearchisdisseminatedinAustraliabyGoldmanSachsAustraliaPtyLtd(ABN21006797897);inBrazilAsia-PacificAfternoonSummaryFebruary1,2012GoldmanSachsGlobalInvestmentResearchbyGoldmanSachsdoBrasilBancoMúltiploS.
A.
;inCanadabyGoldman,Sachs&Co.
regardingCanadianequitiesandbyGoldman,Sachs&Co.
(allotherresearch);inHongKongbyGoldmanSachs(Asia)L.
L.
C.
;inIndiabyGoldmanSachs(India)SecuritiesPrivateLtd.
;inJapanbyGoldmanSachsJapanCo.
,Ltd.
;intheRepublicofKoreabyGoldmanSachs(Asia)L.
L.
C.
,SeoulBranch;inNewZealandbyGoldmanSachsNewZealandLimited;inRussiabyOOOGoldmanSachs;inSingaporebyGoldmanSachs(Singapore)Pte.
(CompanyNumber:198602165W);andintheUnitedStatesofAmericabyGoldman,Sachs&Co.
GoldmanSachsInternationalhasapprovedthisresearchinconnectionwithitsdistributionintheUnitedKingdomandEuropeanUnion.
EuropeanUnion:GoldmanSachsInternational,authorizedandregulatedbytheFinancialServicesAuthority,hasapprovedthisresearchinconnectionwithitsdistributionintheEuropeanUnionandUnitedKingdom;GoldmanSachsAG,regulatedbytheBundesanstaltfürFinanzdienstleistungsaufsicht,mayalsodistributeresearchinGermany.
GeneraldisclosuresThisresearchisforourclientsonly.
OtherthandisclosuresrelatingtoGoldmanSachs,thisresearchisbasedoncurrentpublicinformationthatweconsiderreliable,butwedonotrepresentitisaccurateorcomplete,anditshouldnotbereliedonassuch.
Weseektoupdateourresearchasappropriate,butvariousregulationsmaypreventusfromdoingso.
Otherthancertainindustryreportspublishedonaperiodicbasis,thelargemajorityofreportsarepublishedatirregularintervalsasappropriateintheanalyst'sjudgment.
GoldmanSachsconductsaglobalfull-service,integratedinvestmentbanking,investmentmanagement,andbrokeragebusiness.
WehaveinvestmentbankingandotherbusinessrelationshipswithasubstantialpercentageofthecompaniescoveredbyourGlobalInvestmentResearchDivision.
Goldman,Sachs&Co.
,theUnitedStatesbrokerdealer,isamemberofSIPC(http://www.
sipc.
org).
Oursalespeople,traders,andotherprofessionalsmayprovideoralorwrittenmarketcommentaryortradingstrategiestoourclientsandourproprietarytradingdesksthatreflectopinionsthatarecontrarytotheopinionsexpressedinthisresearch.
Ourassetmanagementarea,ourproprietarytradingdesksandinvestingbusinessesmaymakeinvestmentdecisionsthatareinconsistentwiththerecommendationsorviewsexpressedinthisresearch.
Theanalystsnamedinthisreportmayhavefromtimetotimediscussedwithourclients,includingGoldmanSachssalespersonsandtraders,ormaydiscussinthisreport,tradingstrategiesthatreferencecatalystsoreventsthatmayhaveanear-termimpactonthemarketpriceoftheequitysecuritiesdiscussedinthisreport,whichimpactmaybedirectionallycountertotheanalysts'publishedpricetargetexpectationsforsuchstocks.
Anysuchtradingstrategiesaredistinctfromanddonotaffecttheanalysts'fundamentalequityratingforsuchstocks,whichratingreflectsastock'sreturnpotentialrelativetoitscoveragegroupasdescribedherein.
Weandouraffiliates,officers,directors,andemployees,excludingequityandcreditanalysts,willfromtimetotimehavelongorshortpositionsin,actasprincipalin,andbuyorsell,thesecuritiesorderivatives,ifany,referredtointhisresearch.
Thisresearchisnotanoffertosellorthesolicitationofanoffertobuyanysecurityinanyjurisdictionwheresuchanofferorsolicitationwouldbeillegal.
Itdoesnotconstituteapersonalrecommendationortakeintoaccounttheparticularinvestmentobjectives,financialsituations,orneedsofindividualclients.
Clientsshouldconsiderwhetheranyadviceorrecommendationinthisresearchissuitablefortheirparticularcircumstancesand,ifappropriate,seekprofessionaladvice,includingtaxadvice.
Thepriceandvalueofinvestmentsreferredtointhisresearchandtheincomefromthemmayfluctuate.
Pastperformanceisnotaguidetofutureperformance,futurereturnsarenotguaranteed,andalossoforiginalcapitalmayoccur.
Fluctuationsinexchangeratescouldhaveadverseeffectsonthevalueorpriceof,orincomederivedfrom,certaininvestments.
Certaintransactions,includingthoseinvolvingfutures,options,andotherderivatives,giverisetosubstantialriskandarenotsuitableforallinvestors.
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Transactioncostsmaybesignificantinoptionstrategiescallingformultiplepurchaseandsalesofoptionssuchasspreads.
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