Retail Research

Singapore

10 January 2012

CIMB TraderAM
Jonathan Ng +(65) 6210-8650 - jonathan.ng@cimb.com

Whats Relevant
Corporate News
CSE Globals business diversification, quality management and strong focus on ROE and FCFF
have shone through. We find it opportune to take some profits. Downgrade to Neutral (from Outperform) on the back of its recent outperformance. No changes to our earnings estimates though we raise our TP to S$0.88, now based on 7x CY13P/E, one SD below its 5-year mean to reflect its resilience (previously 6x, average during the last crisis). Keppel Corp has secured US$150m contract from Diamond Offshore to build and upgrade a moored semi-sub rig. The job will be performed on a cold stack rig hull of Diamond's Ocean Voyager (built in 1973, last upgraded in 1995). The delivery of the rig is expected in 3Q2013. We keep our NEUTRAL recommendation with S$8.90 TP. Share price could remain ranged bound in anticipation of more Petrobras newsflows. Ezra AMC has been awarded two contracts from Statoil for mooring chain and riser replacements in the North Sea. The combined contract is approx NOK425 (US$70m) or NOK600m (US$100m) if options are exercised. Engineering work will start immediately with the offshore operations to be performed in 3Q2012. Any negative surprises could send share price down to previous trough of 0.5x P/BV. We keep our Underperform call with S$0.93 TP. KSH Holdings has secured a S$110m condominium contract, raising its construction business order book to above S$467m. The 30-month contract was awarded by a JV between Far East Organization and Frasers Centrepoint.

Selected Statistics
Indices Straits Times Index FSTC ST China Index Dow Jones S&P 500 Index CSI 300 Index Hang Seng Index Crude Oil (US$/barrel) Gold Spot (US$/oz) Baltic Dry Index CPO (US$/MT) Top volume Scintronix Corp Ltd Singx press Land Ltd Noble Group Ltd Golden Agri-Resources Ltd Genting Singapore Plc Gmg Global Ltd Top gainers Centillion Env & Recy cling China Titanium Ltd Carriernet Global Ltd Mfs Technology Ltd Changtian Plastic & Chemic Action Asia Ltd Top losers Lifebrandz Ltd Ultro Technologies Ltd Vashion Group Ltd China Auto Electronics Grp Friv en & Co Ltd Compact Metal Industries L Level 2,691.28 227.93 12,392.69 1,280.70 2,368.57 18,865.72 101.34 1,609.33 1,308.00 1,075.00 Last price SGD 0.023 SGD 0.011 SGD 1.090 SGD 0.730 SGD 1.530 SGD 0.119 Last price SGD 0.003 SGD 0.004 SGD 0.006 SGD 0.083 SGD 0.080 SGD 0.160 Last price SGD 0.004 SGD 0.011 SGD 0.005 SGD 0.050 SGD 0.018 SGD 0.003 % chg -0.9% -0.6% +0.3% +0.2% +3.4% +1.5% +0.0% -0.1% -2.9% +0.5% % chg -4.2% +10.0% -3.5% -0.7% -2.2% -0.8% % chg +50.0% +33.3% +20.0% +16.9% +15.9% +14.3% % chg -50.0% -42.1% -28.6% -28.6% -28.0% -25.0% Ytd % chg +2% +3% +1% +2% +1% +2% +3% +3% -25% +3% Vol (m) 142.6 84.9 82.9 77.3 42.9 41.3 Vol (m) 13.21 0.40 11.29 0.05 0.01 0.10 Vol (m) 0.00 0.00 0.00 0.38 0.16 0.01

Markets
US stocks squeezed out small gains Monday, adding to the previous week's robust rally, as
investors turned their focus to fourth-quarter earnings season. The Dow tacked on 32.77 points, or 0.27%, to close at 12,392.69 In Europe, Sarkozy and Merkel said they want EU states to complete their negotiations on a planned new treaty in the coming days so it could be signed on March 1. Asian shares were mixed with Chinese and Hong Kong stocks surged on hopes Beijing will soon relax its monetary policies, but many other markets in the region slipped on euro-zone concerns; the Shanghai Composite Index jumped 2.9% after Premier Wen Jiabaos pledge at the weekend that the government will boost stock market confidence and "perfect market systems" over the next five years. Hang Seng was climbed 1.5%. Singapore - After sinking to a low of 2,683 in early trading for a 32-point drop, the benchmark STI attempted to claw back some of its losses, boosted by a strong positive swing of 570 points in Hong Kong. But a second bout of late selling saw the index end the day at 2,691 for a 24.31 points loss. Australian shares already opened higher this morning, tracking a modest rise on Wall Street. But concerns over Europe's funding woes kept a lid on gains. There need to be positive news to restore confidence and spur investor interest back in stocks, in our opinion. Otherwise, a directional market would instill thin volume again in the market today.

Trades for the Day

Fundamentally:
China Merchant Holdings (Pacific) (CMH SP; S$0.64; BUY) - Initiate with BUY, TP S$0.98 based
on sector CY12 average P/BV of 1.1x. Trading below book, CMH is an attractive dividend yield stock driven by toll collection. Improved trading liquidity would reap better valuation as the liquidity premium dissipates.

STI Chart & Summary

The STI ended marginally below its 30-day SMA yesterday. However, the uptrend channel from its midDecember low is still holding nicely. Going forward, the candles will need to push back above its 30-day and 50-day SMAs, now at 2,692 and 2,733 respectively, to keep the bullish momentum going. Otherwise, we expect the current sideways consolidation trend to prolong. If the 2,733 level is taken out, the benchmark would then charge towards the 2,800 level. Prices need to climb above this level to confirm that the downtrend has reversed. On the downside, support is at 2,646 and 2,606.

Please read carefully the important disclosures at the end of this publication.

SINGAPORE

INITIATION REPORT 10 January 2012

China Merchant Hldgs (Pacific) Ltd

Where will this road lead you?
CMH SP CIMB Research Pte Ltd +(65)-6225-1228

Recommendation: Price / Tgt. Price: Mkt. Cap: Board / Sector:

BUY SS$0.64/ S$0.98 S$459.4m Main / Infrastructure

Stable dividend play. Given the nature of its toll road assets, China Merchants
Holdings (Pacific) Limited (CMHP) has been generating good cash flow and has been a generous dividend paymaster for the past few years. Historical dividend yields ranged from 7.0% in FY09 to 6.3% in FY10. Going forward, with the Yongtaiwen acquisition and a management that does not believe in hoarding cash unnecessarily, we believe dividend yields could exceed 9.0% over FY12-FY13 at the current share price. Yongtaiwen is just the beginning. We believe that Yongtaiwen is just a beginning. Management is likely to be looking at more acquisitions to grow its profit base and thus raise dividend level. To achieve this objective, management should consider raising funds via new share placement. Given its tight liquidity, a new share issue will serve three purposes; 1) improve liquidity; 2) make the Company investable to more funds and 3) raise cash fro debt repayment or further acquisitions. Any new share placement should also be at more than book value and there is no need for CMHP to rush into any fund raising. Will corporate actions improve valuations? Given that the shares are trading below book, there will inevitably be suggestions of dual listing or a delisting from the SGX and re-list on another market where the Company could be valued higher. While these possibilities remain, we sense that management is focusing on growing the business and raising its profile to the investment community in Singapore. Initiate with BUY and target price S$0.98, based on 1.1x CY12 P/BV. Revenue and net profit will post double digit growth in FY11 due to the consolidation of its 51% stake in Yongtaiwen. We expect at least a 50% payout ratio over FY11-FY13, leading to more than 9.0% dividend yields for FY12-FY13
Financial summary
FYE Dec Revenue (S$ m) Reported net profit (S$ m) Fully diluted reported EPS (S cts) Reported EPS growth FD P/E (x) DPS (S cts) Dividend Yield EV/EBITDA (x) P/CF (x) Net Gearing (%) P/BV (x) ROE
Source: Company, CIMB estimates

2009 38.2 36.5 4.3 (37.2) 15.0 4.5 7.0 12.6 14.9 net cash 0.8 5.3

2010 21.6 45.9 5.4 25.6 11.9 4.0 6.3 9.2 11.9 net cash 0.8 7.0

2011F 129.7 70.1 8.2 52.7 7.8 4.9 7.6 3.2 5.9 63.0 0.8 9.7

2012F 220.3 85.5 10.0 22.0 6.4 5.9 9.3 2.0 4.2 51.8 0.7 11.2

2013F 233.0 89.0 10.4 4.1 6.1 6.2 9.7 1.9 4.1 36.1 0.7 11.0

Market capitalisation & share price info

Market cap 12-mth price range 3-mth avg daily volume # of shares (m) Est. free float (%) Wrts/ICULS o/s (m) Conv. price (S$)
Source: Bloomberg, Company

S$459.4m S$0.46/S$0.75 S$0.03m 717.8 17 None None

Share price perf. (%) Relative Absolute Major shareholders China Merchants Mackenzie Financials

1M 7.0 6.7

3M 10.4 12.3

Background
CMHP took its present form as a toll road player when it acquired five toll roads in China from parent China Merchants Group in 2004. The company was previously listed on the Mainboard of the Singapore Exchange since 1981 under various names; the more recent names being; China Everbright Pacific Limited and its current name, China Merchants Holdings (Pacific) Limited. China Merchant Holdings (Pacific) Limited currently operates four toll roads, spanning 412 kilometres in, the Guangxi Zhuang Autonomous Region, Guizhou province and Zhejiang province in the Peoples Republic of China (PRC). The Group is also involved in the property development business in New Zealand, under its subsidiaries China Merchants Pacific (NZ) and Universal Homes Limited.
Figure 1: Corporate Structure

Source: Company

Figure 2: Profit before Tax (HK$ m)

Toll Road Operations Property Development & Others Non-reccuring items

Source: Company

2010 258.78 -19.05 41.31 281.05

2009 381.34 -10.13 -168.01 203.21

Segments
CMHP derives the majority of its profits through the operation of its toll roads in the PRC. The Group has entered joint-venture agreements with various Sino-entities for control and operation of toll roads. These agreements allow the Group to receive a pre-agreed portion of the toll receipts for a period of twenty five to thirty years from the dates of commencement, after which the rights to these ventures will revert wholly back, without compensation, to the partners. The Groups toll road joint-venture assets are located on major transportation routes in the GuangxiZhuang, and Guilin. As of July 2011, China Merchant Holdings (Pacific) has bought a 51% interest Yongtaiwen Expressway, from parent China Merchant Group, expanding its footprint to Fujian to Zhejiang province. The Groups property development arm in New Zealand; China Merchants Pacific (NZ) and its operating subsidiary, Universal homes Limited, is a residential developer which builds houses in the Greater Auckland region. These homes are pitched at the middle class as a target group. The property development business is a legacy business. Given the Groups focus on its toll road business, we do not expect CMHP to grow its property development business. Management has indicated that the Group will look to dispose this business when conditions are more favourable.

Toll Roads
Figure 3: Yongtaiwen Expressway
1200 1000 800 600 400 200 0 2006
Source: Company

Rev enue (RMB m)

Traffic Volume (m) -RHS

10 8 6 4 2 0

2007

2008

2009

2010

Cumul.3Q11

Yongtaiwen Expressway is a 138 kilometres expressway stretch, comprising of a East section (63.3 kilometers) and West section (74.9 kilometers), connecting Wenzhou, Taizhou and Fujian Province. The joint venture ends in September 2030, and the Groups share of profits is 51%.
Figure 4: Guiliu Expressway

500 400 300 200 100 0

Rev enue (RMB m)

Traffic Volume (m) -RHS

5 4 3 2 1 0

2006
Source: Company

2007

2008

2009

2010

Cumul.3Q11

Guiliu Expressway is a dual direction expressway spanning 139 kilometres in the Guangxi Region, totaling four lanes, running from Guilin to Liuzhou. This Groups share of operating profit till the end of the joint venture, ending in December 2024, is 40%. The share ratio was 90% previously, until the end of 2009.
Figure 5: Guihuang Highway

250 200 150 100 50 0 2006

Source: Company

Rev enue (RMB m)

Traffic Volume (m) -RHS

25 20 15 10 5 0

2007

2008

2009

2010

Cumul.3Q11

Guihuang Highway is a 39 kilometres dual direction expressway, running from Guiyang to Qingzhen, located in Guizhou, The operating concession runs till 15 April 2027.The profit share ratio is currently 100% until end December 2014, after which the Groups share will decline to 60% till the end of the agreement.

Figure 6: Yuyao Highway

140 120 100 80 60 40 20 0 2006

Source: Company

Rev enue (RMB m)

Traffic Volume (m) -RHS

20 15 10 5 0

2007

2008

2009

2010

Cumul.3Q11

Yuyao highway is a 96 kilometres dual direction expressway stretch, comprising of 3 highways, connecting Hangzhou city Cixi, Shangyu and Ningbo, in Zhejiang Province, The joint venture agreement expires on 12 March 2024.The Groups share of profit is currently 50% till the end of 2015, before stepping up to 60% till the end of the joint venture agreement.

Competitors
There are 21 listed expressway/toll-road companies operating in China. Notable competitors are Jiangsu Expressway, Zhejiang Expresway, Anhui Expressway, China Communications Construction, Shenzhen Expressway and Henan Zhongyuan Expressway. Unlike competitors whom concentrate in a specific region, China Merchant Holdings (Pacific) has the benefit of a diversified portfolio of assets with roads along the developed coastal-east spanning Fujian to Zhejiang (Yongtaiwen), but also in the lesser developed, rapidly growing regions of Guangxi and Guizhou. The Group also boasts the backing of parent company, state-owned China Merchants Group, a large diversified conglomerate whom has synergistic interests in toll roads, transportation and logistics amongst their business holdings.

Industry outlook
Driven by economic growth. China continues its drive to connect the vast country, building roads and railways. The governments road building is not only in response to growing demand for roads, but also to stimulate growth and provide the necessary infrastructure for growth to occur; this is more apparent in the less developed regions in central and western China, in line with the governments policy to spur development in the lesser developed Chinese hinterland, connecting the far ends of the Chinese republic; Kunming in the south, Sichuan, Tibet and Xinjiang in the west. Infrastructure projects have benefitted from the largesse of the RMB 4t stimulus package in 20082009; with RMB1.5t going to public infrastructure projects; including the development and construction of roads, railways, air transportation. The length of highways currently stands at 4b kilometres, growing at a 3-year CAGR of 3%. Too much of a good thing? Chinas massive road building endeavour is not without cost. Much of the funding for construction comes from banks loans to provincial governments, covered by the subsequent tolls levied. In order to recoup the construction costs, there has to be a critical mass of traffic utilizing the roads to generate sufficient revenue. Aggressive construction of roads have left provincial governments burdened by debt, as they have been hit by the tightening of liquidity, and higher interest rates, due to tougher economic conditions, while the roads, when fully constructed may not fully utilized, resulting in revenue shortfall. The silver lining for CMHP is that cash-strapped provincial governments might be more flexible when it comes to negotiations on the sale of toll roads. Vehicle numbers and freight are rising. Toll concessions are the primary means of financing the building of roads on such a large scale. Revenue from toll roads is dependant on the frequency of road use; this is in turn dependent on Chinas growth. Chinas GDP has been consistently growing above 8% annually, the number of motor vehicles have grown at a 3-year CAGR of 21% from 43m (2007) to 78m (2010). Demand for passenger cars is positively co-related with the wealth of Chinese citizens; as a means of transport, and as a status symbol. Disposable income and consumption per capita has grown above 8% consistently. In absolute terms, disposable income currently stands at RMB 7,000 per capita in the more developed coastal regions and RMB 4,500 per capita in the inland regions, while consumption per capita is at RMB 4,200 and RMB3,100 respectively. We expect car ownership to continue to post positive growth as the Chinese population grows more affluent Road use by commercial vehicles, primarily for the transportation of goods, continues to grow. The total freight carried has grown at a 3- year CAGR of 12%, with total tonnage year to date, till Oct 2011, stands at 28.7 bn tons. Based on the figures from the Ministry of Transport, we find that in the increase in freight numbers are mostly attributed to transportation by road, with transportation by rail accounting for only 10% of total tonnage hauled, though growing on average by 3% for the last 3 years.
Figure 7: GDP and Vehicle growth
17 15 13 11 9 7 5 1Q06
Source: CEIC

GDP y oy (%)

Number of motor v ehicles (m) -RHS

100 80 60 40 20 0

1Q07

1Q08

1Q09

1Q10

1Q11

Figure 8: Length of Highways and Railways

4.1 4.0 3.9 3.8 3.7 3.6 3.5 3.4 3.3 3.2 3.1 2006
Source: CEIC

Freight Transported
95 90 85 80 75 70
3500 3000 2500 2000 1500 1000 500 0 J an/2006 J an/2007 J an/2008 J an/2009 J an/2010 J an/2011 Cargo Carried: Railway (m Tons) Freight Carried: Highways(m Tons) Freight Carried (m Tons)

Length of Highways (bn km)

Length of Railways ('000 km)- RHS

2007

2008

2009

2010

Figure 9: Disposable Income per capita (Rmb)

Disposable Income per capita (%yoy)

7,500 7,000 6,500 6,000 5,500 5,000 4,500 4,000 3,500 3,000 2,500

18

Coastal Inland

16 14 12 10 8 6

Coastal Inland

1Q07 3Q07 1Q08 3Q08 1Q09 3Q09 1Q10

Source: CEIC, CIMB Research

3Q10

1Q11

1Q08

3Q08

1Q09

3Q09

1Q10

3Q10

1Q11

Figure 10: Consumption per capita (Rmb)

Consumption per capita (%yoy)

4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 1Q02 1Q03 1Q04 1Q05 1Q06 1Q07 1Q08 1Q09 1Q10 1Q11
Source: CEIC, CIMB Research

Coastal Inland

24 20 16 12 8 4 0 -4 -8 -12 1Q04 1Q05 1Q06 1Q07 1Q08

Coastal Inland

1Q09

1Q10

1Q11

Company outlook
One down, possibly more to come? CMHP completed its acquisition of a 51% equity stake in Yongtaiwen Expressway, from parent China Merchant Group, for RMB2.23bn; HK$1.4bn from external bank borrowings and the balance coming from internal cash reserves. Prior to the acquisition of Yongtaiwen, CMHP was in a net cash position. Post-acquisition, the gearing ratio is 40%, but is offset by the strong earnings potential of Yongtaiwen. According to Mr Jiang, the CEO, he feels it is safe for CMHP to increase its gearing to 60% and is currently negotiating for five to six projects, with potentially one or two more acquisitions the following year. Benefits from a prized asset. The acquisition of Yongtaiwen Expressway, with FY2010 revenue of RMB 1,112m and profit of RMB 430m, will significantly add to CMHPs bottom line and cash flow from 2H 2011 onwards. This was exemplified in the Groups 3QFY11 results where the Group posted a 141%yoy jump in net profits on the back of a 778%yoy increase in revenue, due the inaugural inclusion of Yongtaiwens figures. Distinguished parentage helps. CMHP can leverage on parent CMG assets and expertise to acquire assets from CMG itself or from third parties. CMG has investments in 25 toll roads, bridges and tunnels, spanning 4,537 kilometres in 18 provinces, and has stakes in 12 listed toll road companies. The acquisition of the 51% stake in Yongtaiwen, from CMG was done at a relatively fair valuation of 1.02x NAV. This deal was also facilitated by CMG, as CMG did an asset swop for the majority stake in Yongtaiwen, before divesting it to CMHP. We expect CMHP to continue to benefit from the support of a strong parent for future negotiations and acquisitions. Property development could turn. The property development business in New Zealand has been challenging for the Group. Following the aftermath of the Economic crisis in 2009, prices for homes have almost reached 2007 highs, as inventory days and mortgage rates decline. Nevertheless, contributions from the property development segment to the Groups bottom line, remains relatively minor.
Figure 11: Residential Sales and Median prices (Auckland)
No. of Sales - LHS 3,000 2,500 2,000 1,500 1,000 500 0 Nov 2009 Sep 2009 Nov 2010 Sep 2010 M ay 2010 M ay 2011 M ay 2009 Sep 2011 Jan 2011 M ar 2009 M ar 2010 M ar 2011 Jan 2009 Jan 2010 Jul 2009 Jul 2010 Jul 2011 Median Sale Price ('000) - RHS 490 480 470 460 450 440 430 420 410 400 390

Mortgage interest rates and Median days of inventory (NZ)

8 7 6 5 4 3 2 1 0 S e p -0 9 S e p -1 0 M a y -0 9 M a y -1 0 M a y -1 1 S e p -1 1 N o v -0 9 N o v -1 0 J a n -0 9 M a r-0 9 J a n -1 0 M a r-1 0 J a n -1 1 M a r-1 1 J u l-0 9 J u l-1 0 J u l-1 1 Floating rate (%) 2 year fixed rate (%) Median Days -RHS 60 50 40 30 20 10 0

Source: Real Estate Institute of New Zealand

Source: Reserve bank of New Zealand

Figure 12: SWOT analysis

Strong backing from parent China Merchants Group Driven by growth in China Diversified road portfolio Lower gearing compared to peers Loss-making legacy business Relatively small, compared to peers
Weaknesses

Strengths

New acquisitions Increasing urbanization and vehicle ownership

Opportunities

Slowdown in Chinese growth Foreign exchange risks Overcapacity and duplication of expressways. Rise of alternative transportation modes and routes Toll rates are dictated by provincial governments

Threats

Source: CIMB Research

Risks
Slowdown in Chinese growth. China is seeing a moderation of growth as the country develops. Externally, a global slowdown will have negative spill-over effects, dampening global demand, affecting Chinese exports and consequently, impacting Chinese growth. The impact is mitigated somewhat, as China can rely on burgeoning domestic demand. A decrease in economic growth, is likely to impact the toll road business, due to a decrease in the growth of passenger cars (due to reduced consumer incomes), and freight transportation (due to lower demand for goods). Rise of alternative transportation modes and routes. The Chinese government has also been developing the railroad network to complement its road-building initiatives, in its drive to improve the transportation infrastructure. The total length of the rail network is around 91,000 kilometres; according to the Chinese Ministry of Railways. The country-wide network operates in all provinces, linking all provincial capital cities in Mainland China. China has also been focusing on the glamour segment; high speed rail, in recent years. High-speed rail track length is approximately 8,500 kilometres as of end-2010, the target for end-2011 is 13,000 kilometres. A growing train network could pose stiff competition for roads, especially if the area or route was previously accessible by road only. At this juncture, however, we feel that a rise in train transportation does not yet pose a big threat to roads, as the market for transportation sector in China is still growing strongly and transportation by train has its own disadvantages vis--vis by roads. No changes to toll rate for the moment. There is currently no national oversight on toll rates, with provincial governments given almost complete autonomy. The majority of the ClassA roads are subject to tolls, though rates, however, are not standardized, nor integrated with the wider road infrastructure network, resulting in road users incurring high cumulative tolls. High toll rates increase the logistical costs to Chinese companies and possibly to their end customers, as approximately 80 percent of freight is done by road. Thus, there has been public outcry over what some view as excessively high toll rates, as tolls continue to be levied long after the initial investment of constructing the roads has been recouped. The toll road industry is under increasing scrutiny from the Ministry of Transport, which may lead to regulation on a national level and would likely result in a lowering tariff rates, affecting the Groups bottom line. At the moment, no decisions have been taken and consulting continues.

Financials
Yongtaiwen, game changer. The Yongtaiwen acquisition was a game changer as the Group took a 51% stake leading to a significant jump in revenue and profit going forward.
Figure 13: Revenue (S$ mil) growth trend
250.0 200.0 150.0 100.0 50.0 0.0 2009 2010 2011F 2012F 2013F 38.2 (2.3) 71.1 21.6 (43.5) 5.8 501.5 221.8 234.6 600.0 500.0 400.0 129.7 300.0 200.0 100.0 0.0 (100.0)
100.0 90.0 80.0 70.0 60.0 50.0 40.0 30.0 20.0 10.0 0.0 2009 2010 2011F 2012F 2013F (37.2) 36.5 45.9 25.6 70.1 22.8 4.1 52.7 86.1 89.6 60.0 50.0 40.0 30.0 20.0 10.0 0.0 (10.0) (20.0) (30.0) (40.0) (50.0)

Figure 14: Net profit (S$ mil) and net margin trend

Source: Company, CIMB Research

Dividend payout to continue. Management has been paying out more than 50% of profits as dividends in the past few years. Management does not believe in hoarding cash and will continue to pay out dividends unless the cash accumulated is large enough for the purchase of additional toll road assets. We believe a 50% payout target could continue to be pursued over our forecast period of FY11-FY13.
Figure 15: Payout ratio (%) trend
90 80 70 60 50 40 30 20 10 0 2008 2009 2010 2011F 2012F 2013F 55 79 67 50 50 50

Figure 16: Attractive dividend yields

12.0 10.0 8.0 6.0 4.0 2.0 0.0 2008 2009 2010 2011F 2012F 2013F 7.8 7.0 7.6 6.3 9.3 9.7

Source: Company, CIMB Research

Valuation and recommendation

We initiate coverage on CMHP with a BUY recommendation and target price of S$0.98. This is derived based on 1.1x CY12 P/BV, in line with the toll road sector average P/BV of 1.1x. With the Yongtaiwen acquisition, CMHP has turned from a net cash Company into a geared Company. We believe CMHP will be interested in placing new shares at above book value to increase liquidity and therefore make it easier for funds to invest into the Company. A secondary objective would be using the proceeds to reduce its gearing. Separately, on the possibility of a dual listing, delisting and re-listing in Hong Kong, we believe these alternatives may have landed on the CEOs table. However, based on our interaction with the management, we sense that the priority remains on getting more interest in the Company and growing the Company. Any corporate actions regarding de-listing/dual listings are likely to be considered only at a later stage or if the market continues to ignore the Company.
Figure 17: Peer comparisons
Target Bloomberg ticker Recom. Anhui Expressway Co Hopewell Highway Infrastructur Jiangsu Expressway Co Ltd Road King Infrastructure Ltd Sichuan Expressway Co Ltd Yue Da Mining Holdings Ltd Yuexiu Transport Infrastructur Zhejiang Expressway Co Ltd Beijing Capital Co Ltd Chongqing Road & Bridge Co Dongguan Development Holdings Fujian Expressway Development Guangdong Provincial Expresswa Guangxi Wuzhou Communications Hainan Expressway Co Ltd Hubei Chutian Expressway Co Lt Jiangxi Ganyue Expressway Co L Shandong Expressway Co Ltd Shenzhen Expressway Co Ltd Xiandai Investment Co Ltd Simple average
Source: Bloomberg, Company, CIMB Research

Core Mkt cap (US$ m) 1,026.1 1,483.4 4,520.5 418.4 1,505.0 53.1 728.2 2,868.8 1,733.8 511.4 715.6 1,033.6 561.8 453.0 474.1 477.7 1,400.7 2,550.6 1,198.1 754.9 P/E (x) CY2012 6.0 12.3 10.1 3.2 5.8 2.9 6.9 9.5 17.5 21.6 8.1 9.3 6.7 6.2 9.8 6.6 7.1 6.5 8.7 6.7 8.6 CY2013 5.8 11.7 9.7 2.9 6.1 2.5 6.2 9.7 16.0 20.3 6.9 9.5 na 5.7 8.4 5.4 6.5 7.0 8.0 na 8.2

3-yr EPS CAGR (%) 7.7 1.5 5.5 21.3 2.9 51.9 11.4 0.0 12.2 5.9 23.0 9.1 na 33.8 44.6 11.7 2.8 8.6 12.8 na 14.8

P/BV (x) CY2012 0.8 1.3 1.6 na 0.7 na 0.5 1.2 2.1 na na na na 0.9 na na 0.8 na 0.9 na 1.1

ROE (%) CY2012 14.5 10.8 15.7 9.1 13.5 na 7.8 12.2 12.4 na na na na 14.3 na na 10.6 10.8 9.4 na 11.8

Div yield (%) CY2012 7.2 8.1 7.0 12.3 5.4 na 8.3 7.6 5.4 na na 3.8 na na na na 2.4 5.4 5.1 na 6.5

Price (Local) 4.28 3.89 6.97 4.38 3.05 0.60 3.38 5.13 4.96 7.12 4.35 2.38 2.30 5.15 3.03 3.24 3.79 3.35 3.92 11.95

price (Local) NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA

995 HK 737 HK 177 HK 1098 HK 107 HK 629 HK 1052 HK 576 HK 600008 CH 600106 CH 000828 CH 600033 CH 200429 CH 600368 CH 000886 CH 600035 CH 600269 CH 600350 CH 600548 CH 000900 CH

NR NR NR NR NR NR NR NR NR NR NR NR NR NR NR NR NR NR NR NR

Board of Directors
Mr Dong Xue Bo Chairman Mr Dong was appointed Chairman of the Board in February 2009. He is the Assistant to the President of China Merchants Group Limited, Executive Vice Chairman and Chief Executive Officer of Huajian Transportation Economic Development Center, a wholly-owned subsidiary of China Merchants Group Limited. Mr Dong has extensive experience in Chinas national expressway network planning and management. He successively served as Deputy Section Director, Section Director, Deputy Director and Director in the Strategic Planning Department of the Ministry of Transportation in the PRC before taking up his current appointment in the China Merchants Group. He was also previously a vice-mayor of Luoyang City in Henan Province. In the last few years, he was actively involved in Chinas development of a long-term framework for its highways and waterways transportation system. Mr Dong graduated from Liaoning University in the PRC with a Bachelors Degree in Economics and holds an MBA from China Europe International Business School. He is currently the Vice Chairman of China Highway Society, Chairman of the Operation and Management Sub-society of the China Highway Society, Deputy President of the National Defence Transportation Society, standing member of China Young Entrepreneur Society as well as an adjunct professor at Nankai University and Dalian Maritime University. Mr Zheng Hai Jun Vice Chairman Mr Zheng was appointed Vice Chairman of the Board In February 2011. Mr Zheng joined the China Merchants Group in 1998 and is currently the General Manager of Huajian Transportation Economic Development Center, a wholly-owned subsidiary of China Merchants Group Limited. Mr Zheng has been actively involved in transportation management in the PRC since the 1990s. He brings with him an extensive knowledge and skills in infrastructure management having held senior project and corporate management roles in several of Chinas infrastructure projects including expressways and ports. Mr Zheng is the Chairman of Huabei Expressway Co., Ltd, a company listed on Shenzhen Stock Exchange. He is also the Vice Chairmen of two other companies listed on Shanghai Stock Exchange. Mr Zheng holds a Masters Degree in Investment Management from the Graduate School of China Academy of Social Science and an MBA from the University of South Australia International Graduate School of Management. He is a senior economist and a standing member of China Highway Society Mr Jiang Yan Fei Vice Chairman & Chief Executive Officer Mr Jiang was appointed Director and Chief Executive officer of the Company in December 2004 and further assumed the position of Vice Chairman in February 2011. He also assumed the concurrent position of Executive Deputy General Manager of Huajian Transportation Economic Development Centre. Mr Jiang joined China Merchants Holdings (International) Company Limited (CMHI) in 2001 as a Deputy General Manager, whose main area of responsibility was the toll road business. Prior to joining CMHI, he was the Deputy General Manager of China Merchants Shekou Holdings Co. Ltd. He has extensive experience in the development of toll roads and transportation systems including investment management, technology and communications in the PRC and was a senior manager of the Shandong Provincial Transport Development and Investment Company. Mr Jiang is a telecommunication engineer and a senior economist and a standing member of the Operation and Management Sub-society of the China Highway Society. He holds an MBA from Murdoch University, Australia, and graduated from Chongqing Communication College in the PRC.

Board of Directors
Mr Wu Xin Hua Executive Director & Chief Operating Officer Mr Wu joined the Company as an Executive Director and Chief Operating Officer in February 2011. He is concurrently a Deputy General Manager of Huajian Transportation Economic Development Center where he is responsible for developing Huajians business through new acquisitions and overseeing the integration of Huajians various businesses. Mr Wu has extensive experience in corporate finance, specialising in asset restructuring and equity and debt financing. He has held senior management positions at financial institutions including CITIC Securities Co., Ltd, Shandong Securities Co., Ltd and China Merchants Securities Co., Ltd with responsibilities in the areas of general management and investment banking. Prior to joining Huajian, Mr Wu was the General Manager of the Investment Banking Department of China Merchants Securities Co., Ltd. Mr Wu graduated from Renmin University of China with a Bachelors Degree in Economics. He is currently the Vice Chairman of the Operation and Management Sub-society of the China Highway Society Dr Lim Heng Kow Independent Director Dr Lim was appointed to the Board in July 1996. Dr Lim has more than 30 years experience in the hotel, property development and retail industries as well as consultancy businesses. He has served as managing/executive directors and/or senior consultants to many listed and non-listed companies in Singapore, Malaysia and China over the past 30 years. In the early part of his career, he was an academic, having lectured in the universities of Malaysia and Singapore, and then worked briefly as a journalist. Dr Lim holds a PhD from the University of London, a Masters Degree in Arts from University of Ibadan (formerly London University, Ibadan College), Nigeria and a Bachelors Degree in Arts from the Nanyang University of Singapore. Dr Hong Hai Independent Director Dr Hong joined the Board in May 2005. He is a Professorial Fellow at the Nanyang Technological University. Prior to joining the academia, he was President and CEO of Haw Par Corporation Limited, a leading public listed group in Singapore, from 1990 to 2003. He was also previously a Member of Parliament. Dr Hong serves as an honorary council member of the Singapore Chinese Chamber of Commerce & Industry and a council member of the Nanyang Academy of Fine Arts. Dr Hong obtained a Bachelor of Electrical Engineering Degree from the University of Canterbury, New Zealand. He also holds a Masters Degree in Public Administration from Harvard University, a PhD in Economics from Carnegie Melon University, USA and a Masters Degree in Chinese Language and Literature from Beijing Normal University.

Retail Research

Singapore

10 January 2012

Insider Transactions
Updated: 31/12/2011
Shareholding Stock Buy Li Heng Chem Fibre Tech CMZ Hldgs Ltd CMZ Hldgs Ltd Sim Lian Grp Ltd Oxley Hldgs Ltd Qingmei Grp Hldgs Pacific Shipping Trust Pacific Shipping Trust Pacific Shipping Trust Pacific Shipping Trust Swing Media Tech Grp Swing Media Tech Grp Tai Sin Electric Ltd Tai Sin Electric Ltd Tai Sin Electric Ltd Tai Sin Electric Ltd Tai Sin Electric Ltd Tai Sin Electric Ltd Tai Sin Electric Ltd 29-Dec-11 29-Dec-11 29-Dec-11 28-Dec-11 23-Dec-11 22-Dec-11 22-Dec-11 22-Dec-11 22-Dec-11 22-Dec-11 21-Dec-11 21-Dec-11 21-Dec-11 21-Dec-11 21-Dec-11 21-Dec-11 21-Dec-11 21-Dec-11 21-Dec-11 Pan Zhungzhi Value Harmony Ltd Shao Kesheng Lim Ah Kie Ching Chiat Kwong High Crown Ltd SPIH YCCS Y C Chang PIL Hui Yan Moon Ip Ming Yan Lim Boon Chin Benjamin Chan Kum Lin Lim Chai Lai Pang Yoke Chun Lim Boon Hock B Goh Soo Luan Lim Chye Huat * * Buy Buy Buy Buy Buy Buy Buy Buy Buy Buy Buy Buy Buy Buy Buy Buy Buy Buy Buy 95,200 1,516 1,516 8,702 312 35,016 6,190 6,190 6,190 6,190 1,000 1,000 1,693 472 900 2,569 2,569 1,319 1,878 0.12 n.a. 0.19 n.a. 0.34 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 0.16 n.a. 0.16 9.8 74.8 10.0 41.6 60.4 88.1 88.1 88.1 88.1 2.4 26.6 6.8 1.9 3.6 10.3 10.3 5.3 7.5 5.60 10.35 75.33 10.13 41.60 62.02 89.14 89.14 89.14 89.14 2.64 26.91 6.96 1.94 3.70 10.56 10.56 5.42 7.72 Transacted Date Substantial Shareholder/Director Buy/Sell/ Conv No of Shs ('000) Price Per Share $ % Before Change % After Change

* * *

Source: The Business Times ST: Shares transfer, IP: Investment purposes, PL: Placement, ST: Shares transfer, IP: Investment purposes, PL: Placement, B/R: Bonus/ Rights, OE: Options Exercise, SA: Share Allotment, *: Deemed Interests

Please read carefully the important disclosures at the end of this publication.

Retail Research

Singapore

10 January 2012

Insider Transactions
Updated: 31/12/2011
Shareholding Stock Sell PSL Hldgs Ltd Li Heng Chem Fibre Tech Van Der Horst Energy Eucon Hldg Ltd Sarin Tech Ltd Sarin Tech Ltd Asia-Pacific Strategic Ascendas India Trust Others S Chance Prop Ltd S Chance Prop Ltd Karin Tech Hldgs Sim Lian Grp Ltd Healthway Med Corp Metal Comp Engg Scintronix Corp Ltd Scintronix Corp Ltd GMG Global Ltd GMG Global Ltd GMG Global Ltd GMG Global Ltd GMG Global Ltd GMG Global Ltd GMG Global Ltd China New Town Devt China New Town Devt China New Town Devt China New Town Devt China New Town Devt Qingmei Grp Hldgs 29-Dec-11 29-Dec-11 28-Dec-11 27-Dec-11 27-Dec-11 27-Dec-11 27-Dec-11 23-Dec-11 Tan Ong Huat Dee William Kwan Chee Seng Chen Ming Hsing Interhightech (1982) Ltd Daniel Benjamin Glinert The Nassim Fund The Cap Grp Co Inc * * Sell Sell Sell Sell Sell Sell Sell Sell 60,000 95,200 116,000 33,723 600 500 2,726 8,131 n.a. n.a. 0.21 n.a. n.a. 0.81 n.a. n.a. 19.4 5.6 29.5 5.9 17.0 17.4 6.9 5.8 4.45 16.76 17.21 2.30 4.79 Transacted Date Substantial Shareholder/Director Buy/Sell/ Conv No of Shs ('000) Price Per Share $ % Before Change % After Change

* * * *

29-Dec-11 29-Dec-11 28-Dec-11 28-Dec-11 27-Dec-11 27-Dec-11 23-Dec-11 23-Dec-11 22-Dec-11 22-Dec-11 22-Dec-11 22-Dec-11 22-Dec-11 22-Dec-11 22-Dec-11 22-Dec-11 22-Dec-11 22-Dec-11 22-Dec-11 22-Dec-11 22-Dec-11

Mohamed Hasan Marican Mohamed Salleh Lee Yiu Chung Kuik Ah Han Jong Hee Sen Tan Soo Yong Long Lian Leng J Tan Kee Liang Joseph Gondobintoro Mieke Bintati G Yudson Gondobintoro Jeffrey Gondobintoro GMG Hldg (HK) Ltd Tau Puan Siong Ong Kian Min Yang Yonggang Yue Wai Leung Stan Li Yao Min Mao Yiping Gu Biya Su Qingyuan

B/R B/R OE SA ST ST B/R B/R B/R B/R B/R B/R B/R B/R B/R OE OE OE OE OE SA

524 26,170 500 814 12,000 2,550 2,000 326,825 232,208 4,604 6,604 1,000 220,000 2,000 2,000 1,275 1,482 1,481 619 750 1,155

0.32 n.a. 0.13 0.47 n.a. n.a. 0.03 0.03 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a.

1.0 49.3 1.5 0.9 0.8 0.4 0.7 13.8 18.3 0.1 0.2 0.2 14.6 0.1 0.1 0.1 0.1 0.1 0.0 0.0 0.9

1.04 50.21 1.67 0.95 0.19 1.82 0.98 59.62 12.18 0.12 0.2 0.1 10.2 0.1 0.1 0.1 0.1 0.1 0.0 0.1 1.1

Source: The Business Times ST: Shares transfer, IP: Investment purposes, PL: Placement, ST: Shares transfer, IP: Investment purposes, PL: Placement, B/R: Bonus/ Rights, OE: Options Exercise, SA: Share Allotment, *: Deemed Interest

Please read carefully the important disclosures at the end of this publication.

evt4

Retail Research

Singapore
10 January 2012

Important Dates
January 2012
SUN 1 MON 2 TUE 3 4Q11 Advance GDP Estimate* WED 4 Dec11 Electronics Sector Index Dec11 Purchasing Managers Index 11 THU 5 FRI 6 SAT 7

9 Dec11 Foreign Reserves

10 Result: SPH

12

13 Nov11 Retail Sales Index

14

15

16 Result: M1, SGX

17 Dec11 Trade Performance Result: K-REIT

18 Result: Cache, CMT, Keppel T&T

19 Result: Keppel Land

20

21

22

23

24

25 Dec11 Consumer Price Index

26 Dec11 Industrial Production Result: KepCorp, Mapletree Industrial

27 28 4Q11Real Estate Info Dec11 Producer & Intl Trade Price 31

29

30

31 Dec11 Money & Banking Dec11 Public Finance Data 4Q11 Unemployment Rate 41Q11 Business Expectations
* Not later than

Source: Company, Bloomberg, SGX

February 2012
SUN MON TUE WED 1 THU 2 Result: StarHub FRI 3 SAT 4

7 Jan12 Foreign Reserves

10 Result: DBS Group

11

12

13

14

15 Dec11 Retail Sales Index

16

17 Jan12 Trade Performance

18

19

20

21 4Q11 Wholesale Trade Index

22

23 Jan12 Consumer Price Index Result: SembCorp Marine

24 4Q11 GDP Final* 4Q11 Balance of Payments* 4Q11 Wages Data* Jan12 Industrial Production Result: VMS

25

26

27 4Q11 Business Receipt Index Result: SembCorp Industries

28

29 Jan12 Public Finance Data Jan12 Producer & Intl Trade Price
* Not later than

Source: Company, Bloomberg, SGX

Please read carefully the important disclosures at the end of this publication.

Retail Research

Singapore

10 January 2012

Corporate Actions
Company Name Particulars Expiry Date Record Date Date Paid/ Payable

POPULAR HOLDINGS LIMITED HISAKA HOLDINGS LTD. WBL CORPORATION LIMITED ASIA PACIFIC BREWERIES LTD ASIA PACIFIC BREWERIES LTD ETIKA INTERNATIONAL HLDGS LTD BEYONICSTECHNOLOGY LIMITED GOODLAND GROUP LIMITED FRASER AND NEAVE, LIMITED PNE INDUSTRIES LTD THAI VILLAGE HOLDINGS LTD NY01100F 160901 NY03100A 180901 NY05100N 200901 NY07100X 220901 NY09100H 240901 NZ07100S 270301 NZ10100F 300901 EASTGATE TECHNOLOGY LTD COSMOSTEEL HOLDINGS LIMITED N507100A 120401 N507101E 121001 N508100V 130401 N509100N 141001 N511100W 160401 N710100Z 170401 NX09100W 190601 NX11100X 210601 N708100S 150701 NX02100S 120701 NX03100Z 130701 NX04100F 140701 NY01100F 160901 NY03100A 180901 NY05100N 200901 NY07100X 220901 NY09100H 240901 NZ07100S 270301 NZ10100F 300901 N507101E 121001 N508100V 130401 N509100N 141001 N511100W 160401 N710100Z 170401 NX09100W 190601 NX11100X 210601

DIVIDEND:SGD 0.005 ONE-TIER TAX DIVIDEND:SGD 0.005 ONE-TIER TAX DIVIDEND:SGD 0.05 ONE-TIER TAX DIVIDEND:SGD 0.155 ONE-TIER TAX DIVIDEND:SGD 0.63 ONE-TIER TAX DIVIDEND:SGD 0.007 ONE-TIER TAX ENTITL.:SCHEME SGD 0.26 DIVIDEND:SGD 0.01 TAX EXEMPT DIVIDEND:SGD 0.12 ONE-TIER TAX DIVIDEND:SGD 0.003 ONE-TIER TAX DIVIDEND:SGD 0.008 ONE-TIER TAX INTEREST:0.0375 INTEREST:0.04 INTEREST:0.0325 INTEREST:0.03125 INTEREST:0.03 INTEREST:0.035 INTEREST:0.02875 DIVIDEND:SGD 0.001 ONE-TIER TAX DIVIDEND:SGD 0.01 TAX EXEMPT INTEREST:0.02625 INTEREST:0.025 INTEREST:0.01625 INTEREST:0.01375 INTEREST:0.01125 INTEREST:0.02375 INTEREST:0.025 INTEREST:0.0225 INTEREST:0.02875 INTEREST:0.035 INTEREST:0.0225 INTEREST:0.03625 INTEREST:0.0375 INTEREST:0.04 INTEREST:0.0325 INTEREST:0.03125 INTEREST:0.03 INTEREST:0.035 INTEREST:0.02875 INTEREST:0.025 INTEREST:0.01625 INTEREST:0.01375 INTEREST:0.01125 INTEREST:0.02375 INTEREST:0.025 INTEREST:0.0225

10-Jan-12 11-Jan-12 17-Jan-12 25-Jan-12 25-Jan-12 27-Jan-12 27-Jan-12 30-Jan-12 31-Jan-12 1-Feb-12 3-Feb-12 21-Feb-12 21-Feb-12 21-Feb-12 21-Feb-12 21-Feb-12 21-Feb-12 21-Feb-12 23-Feb-12 27-Feb-12 22-Mar-12 22-Mar-12 22-Mar-12 22-Mar-12 22-Mar-12 22-Mar-12 23-May-12 23-May-12 21-Jun-12 21-Jun-12 21-Jun-12 21-Jun-12 23-Aug-12 23-Aug-12 23-Aug-12 23-Aug-12 23-Aug-12 23-Aug-12 23-Aug-12 20-Sep-12 20-Sep-12 20-Sep-12 20-Sep-12 20-Sep-12 22-Nov-12 22-Nov-12

12-Jan-12 13-Jan-12 19-Jan-12 27-Jan-12 27-Jan-12 31-Jan-12 31-Jan-12 1-Feb-12 2-Feb-12 3-Feb-12 7-Feb-12 23-Feb-12 23-Feb-12 23-Feb-12 23-Feb-12 23-Feb-12 23-Feb-12 23-Feb-12 27-Feb-12 29-Feb-12 26-Mar-12 26-Mar-12 26-Mar-12 26-Mar-12 26-Mar-12 26-Mar-12 25-May-12 25-May-12 25-Jun-12 25-Jun-12 25-Jun-12 25-Jun-12 27-Aug-12 27-Aug-12 27-Aug-12 27-Aug-12 27-Aug-12 27-Aug-12 27-Aug-12 24-Sep-12 24-Sep-12 24-Sep-12 24-Sep-12 24-Sep-12 26-Nov-12 26-Nov-12

31-Jan-12 27-Jan-12 13-Feb-12 13-Feb-12 13-Feb-12 20-Feb-12 12-Feb-12 10-Feb-12 17-Feb-12 28-Feb-12 22-Feb-12 1-Mar-12 1-Mar-12 1-Mar-12 1-Mar-12 1-Mar-12 1-Mar-12 1-Mar-12 15-Mar-12 14-Mar-12 2-Apr-12 2-Apr-12 2-Apr-12 2-Apr-12 2-Apr-12 2-Apr-12 1-Jun-12 1-Jun-12 2-Jul-12 2-Jul-12 2-Jul-12 2-Jul-12 3-Sep-12 3-Sep-12 3-Sep-12 3-Sep-12 3-Sep-12 3-Sep-12 3-Sep-12 1-Oct-12 1-Oct-12 1-Oct-12 1-Oct-12 1-Oct-12 3-Dec-12 3-Dec-12

Source: SGX - Corporate Actions By Ex-Date

Please read carefully the important disclosures at the end of this publication.

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RETAIL RESEARCH RECOMMENDATION FRAMEWORK STOCK RECOMMENDATIONS

BUY: The stock's total return is expected to be +15% or better over the next three months. HOLD: The stock's total return is expected to range between +15% and -15% over the next three months.

SECTOR RECOMMENDATIONS
OVERWEIGHT: The industry, as defined by the analyst's coverage universe, has a high number of stocks that are expected to have total returns of +15% or better over the next three months. NEUTRAL: The industry, as defined by the analyst's coverage universe, has either (i) an equal number of stocks that are expected to have total returns of +15% (or better) or -15% (or worse), or (ii) stocks that are predominantly expected to have total returns that will range from +15% to -15%; both over the next three months. UNDERWEIGHT: The industry, as defined by the analyst's coverage universe, has a high number of stocks that are expected to have total returns of -15% or worse over the next three months.

SELL: The stock's total return is expected to be -15% or worse over the next three months. CIMB Research Pte Ltd (Co. Reg. No. 198701620M)