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China
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China

Recent Reports

ZHONGPIN – INELASTIC TO ECONOMY, GROWS RAPIDLY – BUY 12/15/2008
Zhongpin (Nasdaq: HOGS) is a pork processing company, which processes 220,000 metric tons of pork and has an capacity of 391,000 metric tons annually.
SHANDA – UPWARD TREND IN Q3, ECONOMIC SLOWDOWN WILL NOT IMPACT, FAIRLY VALUED – HOLD 12/1/2008
We note that in China employees at EU and US companies generally do not work overtime during these end-of-the-year months in Q4, which leaves them more time for entertainment.
GIANT – WORSE THAN EXPECTED, SET TARGET AT BOOK VALUE –DOWNGRADE TO SELL FROM HOLD 11/14/2008
We believe GA is at least worth its book value, USD3.20, which is 46% lower than the market price.  We lowered the rating to HOLD in our last report and now we are continuing to downgrade to SELL.
TENCENT – FILED LAWSUIT AGAINST FORMER EMPLOYEES FOR BREACH OF ANTI-COMPETITION AGREEMENT, HEALTHY B 11/14/2008
At a time of worldwide layoffs, Tencent sues ex-employees for breach of the anti-competition agreement – in contrast to a harsh “China Internet winter” prediction.
SINA – WILL SLOWDOWN IN Q4 AFTER OLYMPICS, BUT CAN GROW RAPIDLY IN 2009 – UPGRADE TO BUY 11/13/2008
We believe ad revenue will decline QOQ in 4Q08, because we assume the YOY growth will be back to the level in 2006 and 2007, about 40%, after the Olympic Games.
FOCUS MEDIA – PROBLEMS IN Q3 AND Q4, SIGNIFICANTLY OVERSOLD – BUY 11/12/2008
We set the target price at USD11.90, 48% higher than the market price, which is based on peer companies’ PEG.  BUY.
NINE DRAGONS PAPER (1689.HK) – FORECAST MUCH LOWER BUT VALUATION HAS OVER-CORRECTED – BUY 11/8/2008
Nine Dragons (ND Paper) reported FH2’08 and F2008 results last week.  Earnings were well below consensus and even below our expectations (which were well below consensus).  EPS came in 32% below our forecast.
AIRMEDIA – OLYMPICS IMPACTED Q3, BUT WILL GROW RAPIDLY HEREAFTER – BUY 11/7/2008
AMCN’s revenue increased 13% QOQ in 3Q08, lower than 38% QOQ in 2Q08 due to the Olympic Games, during which AMCN could not broadcast non-Olympic sponsors’ ads in the Beijing Airport.
CHINA MERCHANTS BANK (3968.HK) – REASONABLE 3Q08 NET PROFIT GROWTH – BUY 11/6/2008
China Merchants Bank (CMB) reported a strong 90.6% and 49.5% YOY growth in net profit for the first three quarter and 3Q08. Nevertheless, 3Q08 QOQ net profit declined by 16.7% mainly due to higher interest cost and a decline in net fees in commission in 3Q08.
CHINA UNICOM – WEAK OPERATING DATA IN 3Q08 – SELL 11/4/2008
The market price reached our target in the last note, in which we downgraded CHU from HOLD to SELL.
SOHU – REVENUES WILL BE FLAT IN Q4, FAIRLY VALUED – HOLD 11/2/2008
We set the target price at USD46, about 8% higher than the market price, based on the peer P/E ratios in 2009.  HOLD.
VISIONCHINA – STILL STRONG, BUT FAIRLY VALUED – HOLD 10/31/2008
Media industry has not slowed down with the economy in China – both TV stations and new media raised rate cards.
BAIDU – REVENUE GROWTH WILL SLOW DOWN – HOLD 10/23/2008
Baidu’s revenue grew 14% QOQ and 85% YOY in 3Q08, but we find slowdown signals embedded in the operating data.
CHINA MOBILE – 1-3Q08 RESULTS SAY GROWTH – BUY 10/23/2008
‘Slowdown’ is the term most frequently mentioned when talking about the economy in China. However, we believe real GDP growth of 9.9% YOY in 1-3Q08 is much better than most other countries.
CHINA TELECOM – PHONE SUBSCRIBERS CONTINUE DECLINE, NEGATIVE IMPACT CONTINUES – HOLD 10/21/2008
CHA is going to spend more CAPEX on the newly acquired CDMA (Code Division Multiple Accesses) network in 2009, therefore, the free cash flow will decline.
CHINA ERATAT SPORTS FASHION – GROWTH STOCK PRICED NEAR CASH/SHARE OF S$0.08 – BUY 10/20/2008
China Eratat Sports Fashion Ltd (CESF) is a small but fast-growing sportswear company in China.
CHINA MOBILE – HIGH QUALITY GROWTH STOCK AT LOW VALUATIONS – BUY 10/13/2008
Time-series and cross-sectional P/E comparisons along with the free cash flow model suggest significant upside. Shares could double over 2-3 years.
BEIJING AIRPORT – HIGH RENTAL EXPENSES ACQUISITION IS COMPLETE – DOWNGRADE TO HOLD 10/8/2008
Revenue growth slowed down in 1H08 due to the changes in allocation of payments.
CHINA MOBILE – A VALUE PLAY ON HIGH-GROWTH CHINESE CELLULAR – BUY 10/1/2008
In 1H08, CHL experienced a blizzard in South China, an earthquake in Sichuan Province, and the roaming fee cut policy, but the Company’s revenue increased 18% YOY.
AIR CHINA – FUNDAMENTALLY STRONG, UNDER-VALUED – BUY 9/26/2008
Air China is one of the three major airlines in China. The Company has the most extensive international route network among Chinese airlines, with 54% revenue generated from international and 46% from domestic market.
CHINA EASTERN AIRLINE – LOW PROFITABILITY, HIGH LEVERAGE – SELL 9/25/2008
China Eastern Airline is one of the three largest air carriers in China and is the primary air carrier serving Shanghai, China’s eastern gateway and largest city. At current stock price of USD18.78 per share, we believe the Company overvalued. We recommend SELL.

AJISEN – MARGIN DOWN, BUT OVERSOLD – BUY 9/24/2008
Gross margin declined 1.2 percentage point YOY only, which means Ajisen can pass most raw material cost rises to consumers.
SINOTRANS – REVENUE GROWTH SLOWED DOWN, MARGIN DELCINED – DOWNGRADE TO SELL 9/22/2008
Revenue growth will slow down to 13% and 11% in 2008 and 2009 due to a pessimistic outlook on the Economy.
CHINA SOUTHERN AIRLINE – IMPROVED BUT RISKY – HOLD 9/22/2008
China Southern Airline provides commercial airline services throughout China, Hong Kong and Macau regions, Southeast Asia and other parts of the world. At current stock price of USD16.81 per share, the stock does not provide safe purchase margin. We recommend HOLD.

CHINA RAILWAY CONSTRUCTION – MARGIN IMPROVED AT PRICE OF NEGATIVE OPERATING CASH FLOW – HOLD 9/9/2008
We believe revenue will grow 10% YOY in 1H09, since new contract amount doubled, while backlog increased 20% during 1H08.
CHINA MERCHANTS BANK (3968.HK) – EXCELLENT1H08 RESULTS – BUY 9/5/2008
Currently trading at 15.6x 2008 P/E and 4.3x P/BV, our target price represents upside potential of 35.4%.
SHANDA – STABLE GROWTH, BUT WITH MARGIN PRESSURE – HOLD 9/3/2008
Revenue will increase as Shanda announced it will pipeline 11 MMORPG (Massive Multi-player Online Role Playing Games) and 6 Casual games.
CHINA MOBILE – STILL STRONG AFTER SNOW, EARTHQUAKE, AND FEE CHANGES – UPGRADE TO BUY 9/2/2008
CHL experienced a blizzard in South China, an earthquake in Sichuan Province, and a roaming fee cut, however, CHL’s revenue increased rapidly by 18% YOY in 1H08.
GIANT – CONTINGENCY IN ZT ONLINE CLASSIC EDITION – DOWNGRADE TO HOLD 8/28/2008
Based on peers’ P/E in 2009, we set the target price at USD10.53, about 9% higher than the market price. Downgrade to HOLD.
CHINA CONSTRUCTION BANK (939.HK) – SOLID 1H08 RESULTS – BUY 8/25/2008
Our target price represents upside potential of 38.7%. Currently CCB is trading at 13.8x 2008 P/E and 3.0x P/BV, respectively against sector average 15.0x and 3.1x.
CHINA UNICOM – 1H08 DATA NOT ENCOURAGING – SELL 8/25/2008
P/E 2009 suggests a downside of 21% and a target price of USD14. Downgrade to SELL.
FOCUS MEDIA – GOOD Q2, MARGIN WILL IMPROVE – BUY 8/18/2008
FMCN made a profit of USD36 in 2Q08, compared to a loss of USD54 in 1Q08. Peer P/E ratios in 2009 suggest an upside of 65% and a target price of USD43.  
AIRMEDIA – ACCUMULATE BEFORE OLYMPIC GAMES CLOSES – BUY 8/12/2008
AIRMEDIA – ACCUMULATE BEFORE OLYMPIC GAMES CLOSES – BUY
VISION CHINA – INSIDER SALE MEANS FAIRLY VALUED, PEG SUGGESTS LIMITED UPSIDE – DOWNGRADE TO HOLD 8/8/2008
VISION CHINA – INSIDER SALE MEANS FAIRLY VALUED, PEG SUGGESTS LIMITED UPSIDE – DOWNGRADE TO HOLD
SINA – ACCELERATED TO GROW IN Q2, FAIRLY VALUED – HOLD 8/7/2008
SINA – ACCELERATED TO GROW IN Q2, FAIRLY VALUED – HOLD
SHANDA – SALARY RISE PRESSES MARGIN, FAIRLY VALUED – DOWNGRADE TO HOLD 8/4/2008
SHANDA – SALARY RISE PRESSES MARGIN, FAIRLY VALUED – DOWNGRADE TO HOLD
AIRMEDIA – WILL GROW RAPIDLY, UNDERVALUED – BUY 8/1/2008
AIRMEDIA – WILL GROW RAPIDLY, UNDERVALUED – BUY
SOHU – GOOD Q2, BUT FAIRLY VALUED – HOLD 7/29/2008
SOHU – GOOD Q2, BUT FAIRLY VALUED – HOLD
VISIONCHINA – WILL ACCELERATE TO GROW IN 3Q08 – BUY 7/25/2008
VISIONCHINA – WILL ACCELERATE TO GROW IN 3Q08 – BUY
BAIDU – GREW RAPIDLY IN 2Q08 – BUY 7/24/2008
BAIDU – GREW RAPIDLY IN 2Q08 – BUY
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Coverage

Air China (0753.HK) Add to my Watch List
AIRMEDIA (AMCN) Add to my Watch List
Ajisen Holdings (0538.HK) Add to my Watch List
Aluminum Corporation of China (2600.HK) Add to my Watch List
Angang Steel Company Ltd. (0347.HK) Add to my Watch List
Anhui Conch Cement (0914.HK) Add to my Watch List
Anhui Expressway (0995.HK) Add to my Watch List
Asia Water Treatment (ASWT.SI) Add to my Watch List
Asiainfo (ASIA.O) Add to my Watch List
AsiaPharm (ASPH.SI) Add to my Watch List
Baidu.com (BIDU.O) Add to my Watch List
Baoshan Iron & Steel Co., Ltd. (600019.SH) Add to my Watch List
Baoye Group (2355.HK) Add to my Watch List
Beauty China Holdings (BCHI.SI) Add to my Watch List
Beijing Airport (0694.HK) Add to my Watch List
Best World (BWL.SP) Add to my Watch List
Bio-Treat (BIOT.SI) Add to my Watch List
CDC Corporation (CHINA) Add to my Watch List
Celestial Nutrifoods (CELE.SI) Add to my Watch List
Chaoda Modern Agriculture (0682.hk) Add to my Watch List
Cheung Kong Infrastructure Holdings Limited (1038) Add to my Watch List
China Automotive Sys (CAAS.O) Add to my Watch List
China Coal Energy (CCE) Add to my Watch List
China Construction Bank (939.HK) Add to my Watch List
China Dairy (CHDA.SI) Add to my Watch List
China Eastern Airlines (CEA) Add to my Watch List
China Eratat Sports Fashion Ltd (CESF.SI) Add to my Watch List
China Essence (CEGL.SI) Add to my Watch List
China Farm Equipment Ltd (CFE SP) Add to my Watch List
China Flexible Packaging (CHFL.SI) Add to my Watch List
China Life Insurance (2628.HK) Add to my Watch List
China Mengniu (MENGNIU) Add to my Watch List
China Merchants Bank (3968.HK) Add to my Watch List
China Milk Products (CHNM.SI) Add to my Watch List
China Mobile (HKG) Ltd (CHL) Add to my Watch List
China National Building Material Co. Ltd (3323.hk) Add to my Watch List
China Netcom (0906.HK) Add to my Watch List
China Oilfield Services Limited (COSL) Add to my Watch List
China Railway Construction (1186.HK) Add to my Watch List
China Shenhua Energy (1088.HK) Add to my Watch List
China Sky (CSKY) Add to my Watch List
China Southern Airlines (ZNH) Add to my Watch List
China Sun (CSUN.SI) Add to my Watch List
China Techfaith (CNTF.O) Add to my Watch List
China Telecom (0728.HK) Add to my Watch List
China Unicom (0762.HK) Add to my Watch List
China Yuchai International (CYD.N) Add to my Watch List
China Yurun Food (YURUN) Add to my Watch List
China.com (8006.HK) Add to my Watch List
CIFH (0183.HK) Add to my Watch List
CNOOC Limited (0883.HK) Add to my Watch List
Comba Telecom System Holdings (2342.HK) Add to my Watch List
CTrip (CTRP.O) Add to my Watch List
CWT Limited (CWT.SP) Add to my Watch List
Deswell Industries (DSWL.O) Add to my Watch List
Dynasty Fine Wine (0828.HK) Add to my Watch List
eLong (LONG.O) Add to my Watch List
Fibrechem (FIBR) Add to my Watch List
First Natural Food (1076.HK) Add to my Watch List
First Tractor Company Limited (0038.HK) Add to my Watch List
Focus Media (FMCN) Add to my Watch List
Food Empire Holdings (FEMP.SI) Add to my Watch List
Fu Ji Food (1175.hk) Add to my Watch List
Fung Choi Printing and Packaging (FUNG.SI) Add to my Watch List
Giant Interactive (GA) Add to my Watch List
Guangshen Railway Company (0525.HK) Add to my Watch List
Hana Tour Service Inc. (039130 KS) Add to my Watch List
Honam Petrochemical (011170.KS) Add to my Watch List
Hong Kong Exchange (0388.HK) Add to my Watch List
Hongguo Intl Holdings (HGUO.SI) Add to my Watch List
Huaneng Power (0902.HK) Add to my Watch List
Hung Hing Printing (450) Add to my Watch List
Hurray! Holding Co. Ltd (HRAY) Add to my Watch List
Hyflux (HYFL.SI) Add to my Watch List
ICBC (Asia) (0349.HK) Add to my Watch List
Jiangxi Copper Company Ltd (0358.HK) Add to my Watch List
Jianxi Ganyue Expressway (600269.SS) Add to my Watch List
Jilin Chemical Corp (00420.S7) Add to my Watch List
Jobs 51 (JOBS.O) Add to my Watch List
Kongzhong Corp (KONG.O) Add to my Watch List
Korean Custom Work (Korea) Add to my Watch List
Lenovo Group Limited (0993.HK) Add to my Watch List
Li Heng (LIHENG) Add to my Watch List
Linktone (LTON.O) Add to my Watch List
Longcheer Holdings (LOHO.SI) Add to my Watch List
Lotte Confectionery Co. (LOTTE) Add to my Watch List
Luzhou Bio-Chem Technology Ltd (LUZH.SI) Add to my Watch List
Maanshan Iron & Steel (0323.HK) Add to my Watch List
Macau Gaming (Macau Gaming) Add to my Watch List
Man Wah Holdings Ltd. (MANW.SI) Add to my Watch List
Nam Tai Electronics Inc (NTE) Add to my Watch List
Netease.com (NTES) Add to my Watch List
New Dragon Asia Corp (NWD) Add to my Watch List
Nine Dragons Paper (2689:HK) Add to my Watch List
Ninetowns Digital World Trade Holdings Ltd. (NINE) Add to my Watch List
Pine Agritech Ltd (PINE.SI) Add to my Watch List
Radica Games (RADA) Add to my Watch List
Road King Infrastructure (1098.HK) Add to my Watch List
SCUD Group (1399) Add to my Watch List
Semiconductor Manufacturing International (SMI) Add to my Watch List
Shanda Interactive Ltd. (SNDA) Add to my Watch List
Shenzhen Expressway (600548) Add to my Watch List
SIM Technology (1855.hk) Add to my Watch List
SINA Corp (SINA) Add to my Watch List
Singapore Exchange Ltd (SGX) Add to my Watch List
SinoMem Technology (Sino) Add to my Watch List
Sinopipe Holdings (SPIP.SI) Add to my Watch List
SinoTrans (0598.HK) Add to my Watch List
SOHU (SOHU) Add to my Watch List
SP Chemicals (SPC) Add to my Watch List
Surface Mount Technology (SMT) Add to my Watch List
Synear Food Holdings (SYFH.SI) Add to my Watch List
Tencent Inc. (HKSE: 700) Add to my Watch List
Tiangong International (0826.HK) Add to my Watch List
Time Watch Investments (TWH) Add to my Watch List
Tom Online (TOMO) Add to my Watch List
United Envirotech Ltd (UEL) Add to my Watch List
UTStarcom (UTSI) Add to my Watch List
VisionChina Media Inc. (VISN) Add to my Watch List
Weichai Power (2338.hk) Add to my Watch List
Wuhan Iron and Steel Company (WUHAN IS) Add to my Watch List
Yanzhou Coal (YZC) Add to my Watch List
Yunnan Copper (000878.SZ) Add to my Watch List
Zhongpin (HOGS) Add to my Watch List