January 5, 2010 Greater China Consumer Team Consumer/Retail Weekly Greater China Consumer/Retail Valuation Latest Developments Sportswear • Pou Sheng (3813.HK)– Mr. Lu Ning will resign as executive director for personal reasons, effective Jan. 31 2010. Mr Lu is a general manager overseeing the retail operation of certain subsidiaries of the Group. Household & Personal Care • BaWang (1338.HK) – Introduced BaWang Men’s series at the end of Dec 09. This has three product categories – shampoo, other hair care (hair essence oil, conditioner), and shower gel. This is a high-end line under BaWang with a higher price point and gross margin. Jackie Chan serves as the brand ambassador and the new Men’s series will be marketed along with Jackie Chan’s new movie. We feel that while the new Men’s line may cannibalize part the sales of the existing BaWang products as it takes away some male customers with higher purchasing power, it could also help support the sales growth of BaWang brand by winning more higher end customers. International Retail News • German Apparel Sales – According to TextilWirtschaft, total apparel sales in Germany fell 9% YoY in the week December 20 - 26. The sales were quite weak as comparison last year was not difficult; total apparel sales growth was -6% in the same week last year. The four-week moving average sales growth was flat YoY (compared with -2% and flat in the previous two weeks). * Implications for Esprit (0330.HK) – The retail environment remains relatively volatile and management indicated that the wholesale order book is still weak going into Jan-Feb 2010, as wholesalers continue to order very cautiously. However, there have been some re-orders recently as wholesale customers’ inventories are very low. Comparison for the wholesale business should become easier in F4Q10 (C2Q10) when EU wholesale revenue dipped by 29% in LCU. With efforts to better differentiate each line, the new product lines are doing well. Morgan Stanley Asia Limited+ Angela Moh Team Leader [email protected]+852 2848 5405 Dennis Tao Sports/Footwear/Textiles [email protected]+852 2848 7136 Lillian Lou Food/Agri [email protected]+852 2848 6502 Robert Lin Department Stores [email protected]+852 2848 5835 -20% -15% -10% -5% 0% 5% 10% 15% 20% 25% 30% 5-Jan-08 5-Feb-08 5-Mar-08 5-Apr-08 5-May-08 5-Jun-08 5-Jul-08 5-Aug-08 5-Sep-08 5-Oct-08 5-Nov-08 5-Dec-08 5-Jan-09 5-Feb-09 5-Mar-09 5-Apr-09 5-May-09 5-Jun-09 5-Jul-09 5-Aug-09 5-Sep-09 5-Oct-09 5-Nov-09 5-Dec-09 5-Jan-10 Weekly Total Sales 1m Mov Avg Germany Weekly Apparel Sales Source: TextilWirtschaft, Morgan Stanley Research Morgan Stanley does and seeks to do business with companies covered in Morgan Stanley Research. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of Morgan Stanley Research. Investors should consider Morgan Stanley Research as only a single factor in making their investment decision. For analyst certification and other important disclosures, refer to the Disclosure Section, located at the end of this report. += Analysts employed by non-U.S. affiliates are not registered with FINRA, may not be associated persons of the member and may not be subject to NASD/NYSE restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account.
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Morgan Stanley Greater China Consumer Retail Valuation (1)
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January 5, 2010Greater China Consumer Team
Consumer/Retail WeeklyGreater China Consumer/Retail ValuationLatest DevelopmentsSportswear• Pou Sheng (3813.HK)– Mr. Lu Ning will resign as executive director for personal reasons, effective Jan. 31 2010. Mr Lu is a
general manager overseeing the retail operation of certain subsidiaries of the Group.
Household & Personal Care
• BaWang (1338.HK) – Introduced BaWang Men’s series at the end of Dec 09. This has three product categories – shampoo, other hair care (hair essence oil, conditioner), and shower gel. This is a high-end line under BaWang with a higher price point and gross margin. Jackie Chan serves as the brand ambassador and the new Men’s series will be marketed along with Jackie Chan’s new movie. We feel that while the new Men’s line may cannibalize part the sales of the existing BaWang products as it takes away some male customers with higher purchasing power, it could also help support the sales growth of BaWang brand by winning more higher end customers.
International Retail News
• German Apparel Sales – According to TextilWirtschaft, total apparel sales in Germany fell 9% YoY in the week December 20 -26. The sales were quite weak as comparison last year was not difficult; total apparel sales growth was -6% in the same week last year. The four-week moving average sales growth was flat YoY (compared with -2% and flat in the previous two weeks). * Implications for Esprit (0330.HK) – The retail environment remains relatively volatile and management indicated that the wholesale order book is still weak going into Jan-Feb 2010, as wholesalers continue to order very cautiously. However, there have been some re-orders recently as wholesale customers’ inventories are very low. Comparison for the wholesale business should become easier in F4Q10 (C2Q10) when EU wholesale revenue dipped by 29% in LCU. With efforts to better differentiate each line, the new product lines are doing well.
Morgan Stanley does and seeks to do business with companies covered in Morgan Stanley Research. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of Morgan Stanley Research. Investors should consider Morgan Stanley Research as only a single factor in making their investment decision. For analyst certification and other important disclosures, refer to the Disclosure Section, located at the end of this report.+= Analysts employed by non-U.S. affiliates are not registered with FINRA, may not be associated persons of the member and may not be subject to NASD/NYSE restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account.
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January 5, 2010Greater China Consumer Team
Table of Contents
Page
• China Department Store SSS Performance 3
• China Sportswear & Footwear SSS Performance 6
• Sector and Stock PerformanceSector Performance Indices 7Ranking by Share Performance 8Stock Price Performance Table 9
• Sector and Stock ValuationSector Valuation 10Valuation Table 11Ranking by P/E 152010E P/E vs. Historical Forward P/E Range 162011E P/E vs. Historical Forward P/E Range 172010E P/E vs. 2009-11E EPS Growth 182010E EV/ Sales vs. 2009-2011 Sales Growth 192010E EV/Sales vs. 2010E EBIT Margin 20
Suning (002024.SZ) NC Dec 1Q: -11.98% 1H: -4.12% 3Q: 4.82%
Wumart (8277.HK) NC Dec 1Q: 2.4% 1H: 3.5%
9M: 4.6%3Q: 7.2%
Jingkelong (0814.HK) NC Dec 1Q: -4.3% 1H: -3.4%
Lianhua (0980.HK) NC Dec 1Q: -3% 1H: -1.7%
2Mo: ~10%In-Line w/ 10% F09
Guidance
2Mo: 14% July + Aug: 18%
S: M-singleSW: H-single
2Mo: 11%
Source: Company Guidance, Morgan Stanley Research Data updated As of 11/27/09.Note: F = Fiscal; 1H, 2H, 1Q, 2Q, 3Q, 4Q are all fiscal period endNote: BJ = Beijing; SHA = Shanghai; CD = Chengdu; CQ = Chongqing; SZ = Shenzhen; SW = South West RegionNote: OW = Overweight; EW = Equal-weight; UW = Underweight; NC = not covered
Note: Unless otherwise noted figures are monthly SSS guided by companyMS = Morgan Stanley Estimates; L = Low; M = Mid; H = High; single = single-digit growth; GWk=Golden Week; 5/1 = May Holiday
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January 5, 2010Greater China Consumer Team
Multi-Line Retailers Store SSS Performance 2008
Department Store Rating FYE Mar-08 Apr-08 May-08 Jun-08 Jul-08 Aug-08 Sep-08 Oct-08 Nov-08 Dec-08
Parkson(3368.HK) OW Dec 1Q: 15.4% M-teens 13%
1H: 14.4%2Q: M-teens
H-teens H-teens M-teens9M: M-teens
M-teens 13% 11~12%F08: 12.1%
4Q: 7~8%
Golden Eagle(3308.HK) OW Dec 1Q: 25% 25% 20%
1H: 28%25% 25% 18% 21%
15% GWk: 35% 20%
F08: 21.4%14%
Intime(1833.HK) OW Dec
1H: 12.6%Wulin: -1%
ex-Flag: 25% 10% 8%3Q: 11%
~15% 8~9% 19%F08: 11.5%
9~10%
NWDS (HK$)(825.HK) EW Jun F3Q: 27% 20~21% <15% 20~21% F1Q: 20%
Note: Unless otherwise noted figures are monthly SSS guided by companyMS = Morgan Stanley Estimates; L = Low; M = Mid; H = High; single = single-digit growth; GWk=Golden Week
Source: Company Guidance, Morgan Stanley ResearchNote: F = Fiscal; 1H, 2H, 1Q, 2Q, 3Q, 4Q are all fiscal period endNote: BJ = Beijing; SHA = Shanghai; CD = Chengdu; CQ = Chongqing; SZ = Shenzhen; SW = South West RegionNote: OW = Overweight; EW = Equal-weight; UW = Underweight; NC = not covered
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January 5, 2010Greater China Consumer Team
SSS Definitions for the Multi-line Retailers
Source: Company Guidance, Morgan Stanley Research Data updated as of 9/21/09Note: F = Fiscal; 1H, 2H, 1Q, 2Q, 3Q, 4Q are all fiscal period endNote: BJ = Beijing; SHA = Shanghai; CD = Chengdu; CQ = Chongqing; SZ = Shenzhen; SW = South West Region
Note: Unless otherwise noted figures are monthly SSS guided by company
# Years Opened For What Are Included?Existing Stores
Acq'd Stores
Merch Sales
Rental Income
Mgt Fees
Other Op Income Others
Parkson >2yrs >2yrsInclude 100% JCE Sales. 2009 JCE stores include Xinjiang and Yangzhou. Closed stores excluded.
NWDS >2yrs >2yrsReported SSS based on HKD; Prior to FY08, SSS growth calculation based on existing stores >3yrs old
Golden Eagle >2yrs Exclude SSS growth calculation using Gross Sales including VAT
Intime >2yrs >2yrs
Maoye >13 Mo Exclude
Same Store Sales Definition
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January 5, 2010Greater China Consumer Team
Retail SSS for Sportswear and Footwear
Source: Company Guidance, Morgan Stanley Research Data updated as of 11/27/09
- Daphne 8.2% 3.5% 5.3% Full year 09 =0-5% 16.3% 0.9% 1.0% 0.0% 1.0% 0.0% 0.0% 0.0%
- Shoebox 22.6% 15.4% 13.1% Full year 09=10-15% 29.1% 16.6% 15.0% 15.0% 15.0% 15.0% 10-15%high single digit
growth
Apparel
Ports Design 18.9%Expect 2H09 to be better than 1H09 (13%) 30.0% 24.0% 13.0% n/a n/a
low teens growth
low teens growth
higher than 13%
Sportswear Brands
Anta 22-25% 9.2% 11.0% Full year 09 =high single digit growth 29.5% 20-22% high-single digit growth 27.0% 16-18% 8-9% high single
digit growthmid single
digit growth
China Dongxiang 16.0% -1.0% 5.7% Full year =flat 20.0% 14.0% 4.0% 18.0% 10.0% 6.0% 2.0% -11.0%
Li Ning 26.0% 3.3% 7.0%Expects 4Q09 to turn back to positive growth 26.0% 26.0% 0.0% 30.7% 20.0% n/a n/a -8.2%
Xtep~20% na na Expect 4Q09 =~10%; 2010 = low
double digitna na 5.0% na na 2.0% 5.0% 6.0%
361 degree na 23.0% na na na na na na na na na 15-18%
Hongxing na na na na na na na na na na 4-5% -15.0%
Peak ~20% na na Full year double digit growth 20.0% ~20% ~20% 20.0% 20.0% 15.0%
Sportswear Distributors
Pou Sheng16.0% na 7.9%
N/A 11.0% 3-4% 16.0% 4% 5-6% 0-1%
down high single digit up
to Aug
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January 5, 2010Greater China Consumer Team
Sector Price Performance
Note: Staple Index includes: Tingyi, Mengniu, Uni President, Want Want, China Food, Hengan, Huiyuan, Tsingtao, China Resource, Yurun; Discretionary Index includes: Anta, Dongxiang, Golden Eagle, Gome, Intime, Lining, New World, Parkson, Ports, Pou Sheng, Xinyu Hengdeli, Daphne; Export Play Index includes: Li&Fung, Pacific Textile, Texwinca, Yue Yuen. Source: Factset, Datastream, Morgan Stanley Research
Yili rel. perf. vs. Shanghai Composite Index. Shuanghui vs. Shenzhen Composite Index, Hongxing vs. Singapore Straits Times Index, President Chain vs. Taiwan SE Weighted Index, Li & Fung, Stella, Fountain Set, Lifestyle, Glorious Sun, Yue Yuen, Samson, Texwinca, Giordano, Pacific Textile, Trinity vs. Hang Seng Index, Others vs. Hang Seng China Enterprises IndexSource: Factset. Morgan Stanley Research. Past performance is no guarantee of future results. Results shown do not include transaction costs.
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January 5, 2010Greater China Consumer Team
Stock Performance Table
Source: Factset, Datastream, Morgan Stanley Research Note: Past performance is no guarantee of future results. Results shown do not include transaction costs.* Listed in 2009
Relative Price PerformanceAbsolute Price PerformanceRank By YTD Abs Perf.
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January 5, 2010Greater China Consumer Team
Sector Valuation – 12M Forward P/E
Source: Factset. Morgan Stanley Research.
Note: Staple Index includes: Tingyi, Mengniu, Uni President, Want Want, China Food, Hengan, Huiyuan, Tsingtao, China Resources, Yurun; Discretionary Index includes: Anta, Dongxiang, Gome, Lining, Ports, Pou Sheng, Daphne, Xinyu Hengdeli; New World, Parkson, Intime, Golden Eagle, Export Play Index includes: Li&Fung, Pacific Textile, Texwinca, Yue Yuen. Source: Factset, Morgan Stanley Research
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45Ja
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Oct
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Discretionary-Valuation
Staple-valuation
Export plays
Staple-valuation (ex-Mengniu)
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January 5, 2010Greater China Consumer Team
Sector Valuation Table – Hong Kong-Listed
RIC Company Name Rating Target Currency Last Mkt Cap Avg Trading Calendarised P/E 09-11 EPS PEG Hist Div Yield EV/EBITDA
Price Code Price (US$ mn) Vol (US$m) 2008 2009E 2010E 2011E Growth 10E P/B 2008 2009E 2008 2009EHONG KONG LISTED COMPANIESConsumer Staples0341.HK Cafe De Coral NC NA HKD 17.74 1,276 1.4 22.6 20.1 17.7 15.6 13.4 1.3 4.2 2.9% 3.6% 12.7 11.38052.HK Convenience Retail Asia NC NA HKD 2.00 188 0.1 16.4 NA NA NA NA NA 1.9 3.6% NA 5.5 NA0345.HK Vitasoy Intl. NC NA HKD 5.44 714 0.6 28.0 21.3 18.2 16.0 15.3 1.2 4.3 4.0% 4.7% 12.4 11.3
Average 726 0.7 22.3 20.7 17.9 15.8 14.4 1.3 3.5 3.5% 4.1% 10.2 11.3 Consumer DiscretionaryDepartment Stores0984.HK Aeon Stores (HK) NC NA HKD 12.80 429 0.1 12.6 16.9 13.8 12.2 17.9 0.8 3.1 2.3% 2.6% 3.6 3.51212.HK Lifestyle Intl. NC NA HKD 14.50 3,131 2.4 20.5 25.3 22.5 19.9 12.5 1.8 4.7 1.7% 1.6% 16.1 17.90289.HK Wing On Company Intl NC NA HKD 10.84 413 0.1 1.9 NA NA NA NA NA 0.5 4.8% NA NM NA
Average 1,324 0.9 11.7 21.1 18.2 16.1 15.2 1.3 2.8 2.9% 2.1% 9.9 10.7 Apparel & Footwear Branded/ Retailers0483.HK Bauhaus NC NA HKD 1.50 70 0.1 8.1 NA NA NA NA NA 1.4 8.8% NA 4.0 NA0592.HK Bossini NC NA HKD 0.42 85 0.2 NA NA NA NA NA NA 1.0 NA NA NA NA0113.HK Dickson Concepts NC NA HKD 4.26 205 0.3 7.2 NA NA NA NA NA 0.9 7.9% NA 3.2 NA1388.HK Embry Holdings NC NA HKD 4.02 208 0.2 13.9 14.0 9.9 NA NA NA 2.0 1.7% 2.9% 10.8 NA0330.HK Esprit Holdings* E 60.00 HKD 51.75 8,320 34.3 11.5 13.3 11.9 10.2 14.1 0.8 4.0 8.1% 5.5% 7.8 8.80709.HK Giordano Intl.* E 1.65 HKD 2.30 443 0.4 11.0 24.8 12.8 10.1 56.5 0.2 1.8 4.1% 1.5% 6.5 10.20999.HK I.T NC NA HKD 1.51 225 0.6 13.4 10.7 8.4 7.0 NA 0.4 1.4 2.8% 2.9% NA NA0130.HK Moiselle NC NA HKD 0.95 35 0.1 5.4 NA NA NA NA NA 0.7 6.8% NA 3.0 NA0333.HK Top Form Intl. NC NA HKD 0.52 72 0.2 NA NA NA NA NA NA 1.0 NA NA NA NA0891.HK Trinity NC NA HKD 3.19 620 9.2 49.0 38.0 22.0 19.0 41.3 0.5 2.6 0.0% 0.0% 22.3 NA0375.HK YGM Trading NC NA HKD 6.52 129 0.0 7.3 NA NA NA NA NA 1.3 6.1% NA 6.0 NA
Average 947 4.1 14.1 20.2 13.0 11.6 37.3 0.5 1.7 5.2% 2.5% 7.9 9.5 Export Plays0494.HK Li & Fung* O 38.50 HKD 32.25 15,708 31.9 42.3 29.9 22.7 19.3 24.5 0.9 9.1 1.7% 2.7% 13.9 11.50311.HK Luen Thai Holdings NC NA HKD 0.78 100 0.1 7.5 NA NA 4.0 NA NA 0.1 3.0% NA 1.5 NA1382.HK Pacific Textiles* O 5.63 HKD 5.19 960 1.0 19.4 12.9 10.8 9.8 14.8 0.7 2.4 2.8% 2.9% 9.5 6.50531.HK Samson Holdings* E 1.55 HKD 1.20 472 0.2 NM 11.6 8.9 8.9 14.3 0.6 0.1 4.8% 4.0% 8.0 6.71836.HK Stella International Holdings NC NA HKD 14.08 1,638 0.6 9.9 13.0 11.7 10.4 11.6 1.0 0.3 5.3% 5.3% 7.3 7.81223.HK Symphony Holdings NC NA HKD 0.43 96 0.2 NM NA NA NA NA NA 0.6 3.8% NA NM NA0321.HK Texwinca Holdings* E 7.30 HKD 7.25 1,242 3.0 11.0 10.7 9.6 8.3 13.3 0.7 2.3 5.9% 5.5% 6.7 6.40551.HK Yue Yuen* E 22.70 HKD 22.50 4,787 5.7 13.0 11.0 10.9 9.7 6.5 1.7 0.2 3.9% 4.6% 8.9 8.0
Average 3,125 5.3 17.2 14.9 12.4 10.1 14.2 0.9 1.9 3.9% 4.2% 8.0 7.8 Other Branded Specialty Stores0590.HK Luk Fook Holdings NC NA HKD 6.70 426 0.4 11.1 11.8 10.9 9.5 11.7 0.9 2.6 2.8% 2.1% 8.7 9.10178.HK Sa Sa Intl. NC NA HKD 5.14 919 1.4 26.7 20.9 17.2 14.5 20.1 0.9 6.3 4.1% 5.1% 14.7 13.6
Average 672 0.9 18.9 16.3 14.0 12.0 15.9 0.9 4.5 3.4% 3.6% 11.7 11.3 Wholesale Distributors2387.HK Integrated Dist. Service NC NA HKD 11.28 466 0.4 14.7 16.2 16.7 NA NA NA 3.5 3.5% 4.0% 8.2 7.6
Note: * Morgan Stanley coverage. NC = not covered. Last price = Dec 31, 2009Source: FactSet, Morgan Stanley Research E = Morgan Stanley Research estimates, except FactSet consensus estimates for NC companies.
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January 5, 2010Greater China Consumer Team
Sector Valuation Table – Hong Kong-listed China Plays – Consumer Staples
RIC Company Name Rating Target Currency Last Mkt Cap Avg Trading Calendarised P/E 09-11 EPS PEG Hist Div Yield EV/EBITDA
Note: * MS coverage. NC = Not covered; NA = not applicable Last price = Dec 31, 2009Source: FactSet, Morgan Stanley Research E = Morgan Stanley Research estimates, except FactSet consensus estimates for NC companies.
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January 5, 2010Greater China Consumer Team
Sector Valuation Table – Hong Kong-listed China Plays – Consumer Discretionary
Note: * MS coverage. NC = not covered; NA = not applicable Last price = Dec 31, 2009Source: FactSet, Morgan Stanley Research E = Morgan Stanley Research estimates, except FactSet consensus estimates for NC companies.
RIC Company Name Rating Target Currency Last Mkt Cap Avg Trading Calendarised P/E 09-11 EPS PEG Hist Div Yield EV/EBITDA
Hong Kong Export Plays3398.HK China Ting NC NA HKD 1.25 338 0.1 6.3 9.8 7.6 6.5 23.0 0.3 1.3 7.8% NA 4.6 NA0393.HK Glorious Sun NC NA HKD 2.89 395 0.7 5.8 11.2 10.8 NA NA NA 1.7 9.2% 5.3% 5.1 3.72313.HK Shenzhou Intl. NC NA HKD 10.18 1,635 2.8 16.2 9.2 7.7 7.0 14.6 0.5 3.9 1.9% 4.3% 11.3 6.72698.HK Weiqiao Textile NC NA HKD 5.32 820 1.2 3.8 6.7 7.2 NA NA NA 0.4 5.2% 4.4% 3.7 NA
SINGAPOREConsumer StaplesFood & BeverageCHDA.SI China Dairy NC NA SGD 0.20 63 0.0 8.2 NA NA NA NA NA 1.0 0.8% NA NM NACLFB.SI China Lifestyle NC NA SGD 0.17 62 0.1 4.8 NA NA 5.1 NA NA 0.8 1.2% NA 3.0 NACHNM.SI China Milk NC NA SGD 0.34 181 2.2 2.5 0.1 0.1 0.3 -31.3 0.0 0.6 1.7% 1.5% -3.0 NADAIR.SI Dairy Farm NC NA USD 5.99 8,072 1.0 25.8 21.0 18.1 16.9 11.6 1.6 3.1 1.9% 7.3% 15.1 13.9PPFH.SI Peoples Food NC NA SGD 0.63 508 0.5 5.3 NA NA NA NA NA 0.7 5.4% 4.6% 2.2 NASYFH.SI Synear Food NC NA SGD 0.32 312 1.7 7.6 12.0 10.0 8.6 18.3 0.5 0.7 1.2% 0.0% 4.3 6.2
Average 7,231 42.4 52.6 38.7 30.8 24.6 25.2 1.3 11.4 0.6% 0.8% 29.0 24.5 USADY.DF American Dairy NC NA USD 21.87 475 9.0 NM 10.3 7.9 5.6 36.0 0.2 4.1 0.0% NA 12.3 12.2SYUT.N Synutra International NC NA USD 14.19 766 0.4 NM NM 21.3 NA NA NA 10.0 0.0% NA -11.6 NA
Average 621 4.7 NM 10.3 14.6 5.6 36.0 NA 7.0 0.0% NA 0.4 12.2
Note: * MS coverage. NC = not covered Last price = Dec 31, 2009Source: FactSet, Morgan Stanley Research E = Morgan Stanley Research estimates, except FactSet consensus estimates for NC companies.
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January 5, 2010Greater China Consumer Team
Stock Valuation
C2010E P/E: Key Greater China Consumer Plays
0 5 10 15 20 25 30 35 40 45
Chaoda Modern Agri.Global Bio-Chem
China Ting Texwinca Holdings*
HongxingPou Sheng*
Pacific Textiles*Glorious Sun
Yue Yuen*Esprit Holdings*
XtepBosideng*
Giordano Intl.*China Agri*
Daphne*President Chain*Xinyu Hengdeli
Dynasty Fine WinesAnta*
Dongxiang*New World*
Little Sheep*Ajisen*
China ResourcesPorts Design
UPC*Belle*Gome
LifestyleChina Foods*
Li & Fung*China Yurun Food*
Lianhua SupermarketWant Want*
Li Ning *Intime*
Yili*Mengniu*Parkson*
Hengan Intl. Golden Eagle*
Tingyi* Bawang*
Tsingtao BreweryShuanghui*
Huiyuan
x
F2010E P/E, P/E ex-Cash
*Companies covered by Morgan Stanley Research; Other companies’ valuation based on Factset consensus estimates; Last price = Dec 31, 2009Source: Factset, Morgan Stanley Research E = Morgan Stanley Research estimates
0 10 20 30 40
TexwincaYue Yuen
Pacific TextilesPou Sheng
GiordanoBosideng
China Agri Esprit
DaphnePresident Chain
ANTADongxiang
AjisenPorts Design
New WorldBelle
Uni-President ChinaLittle SheepChina Food
Li & FungChina Yurun
Li NingIntime
YiliMengniuParkson
Golden EagleShuanghui
TingyiWant Want
Bawang
x
10E PE ex Cash10E PE
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January 5, 2010Greater China Consumer Team
2010E P/E at Current Price vs. Historical Range
*Companies covered by Morgan Stanley Research; Other companies’ valuation based on Factset consensus estimates•Daphne: P/E range excludes Dec.99-Oct. 01, Dec 97- Jun 06; Tingyi: P/E range excludes Apr 97- Aug. 99;as data are not meaningful. •Mengniu and Yili: P/E range excludes Jan-07 to Sep08, as data are not meaningful.Source: Factset, Morgan Stanley Research E = Morgan Stanley Research estimates
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17
January 5, 2010Greater China Consumer Team
2011E P/E at Current Price vs. Historical Range
*Companies covered by Morgan Stanley Research; Other companies’ valuation based on Factset consensus estimates•Daphne: P/E range excludes Dec.99-Oct. 01, Dec 97- Jun 06; Tingyi: P/E range excludes Apr 97- Aug. 99;as data are not meaningful. •Mengniu and Yili: P/E range excludes Jan-07 to Sep 08, as data are not meaningful.•Source: Factset, Datastream, Morgan Stanley Research E = Morgan Stanley Research estimates
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t Wan
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elle
*Yi
li*M
engn
iu*
Park
son*
Lini
ng*
Gol
den
Eagl
e*H
enga
nSh
uang
hui*
Chi
na R
esou
rces
Ting
yi*
Tsin
gtao
Baw
ang*
Hui
yuan
HiLo11E PE
11E P/E vs Jan96-Dec09 Historical FWD PE Range
18
January 5, 2010Greater China Consumer Team
2010E PE vs. 2009-11 EPS Growth
Names in red = retailers; blue = staples; black = export plays09-11 data are estimates, closing price as of Dec 31, 2009. Pou Sheng, Huiyuan and Giordano are not on the chart. Pou Sheng: 09- 11 EPS CAGR of 70.8% and 10E PE of 10.5x; Giordano: 09-11 EPS CAGR of 56.6%, 10E P/E of 12.4x. Note: Morgan Stanley Research estimates for Esprit, Giordano, China Mengniu, Tingyi, President Chain Store, Uni-President China, Anta, Li Ning, Intime, Daphne, Bosideng, Pacific Textiles, Texwinca, Yue Yuen, and Li & Fung, Shuanghui, Yili, Pou Sheng, China Agri, Dongxiang, Little Sheep, Ajisen, Want Want, New World, Parkson, Golden Eagle, Bawang, Yurun, Ports Design; Consensus FactSet estimates for all others.Source: Morgan Stanley Research Estimates, FactSet
Dongxiang
CRELittle Sheep
Ajisen
Xtep
Shuanghui
Want Want Yili
UPC
Bosideng
Ports
President Chain
Belle
Golden Eagle
Xinyu Hengdeli
Tingyi
Hengan
Texwinca
Esprit
Yurun
Daphne
Lianhua
China Foods Lifestyle
YY
China Ting
TsingtaoMengniu
Li Ning
Parkson
Chaoda
IntimeGome
Li & Fung
Pacific Textiles
China Agri
New World
Bawang
0
5
10
15
20
25
30
35
40
45
0 5 10 15 20 25 30 35 40 4509-11 EPS CAGR
10 P
E
AntaDynasty
19
January 5, 2010Greater China Consumer Team
2010E EV/ Sales vs. 2009-11 Sales Growth
Names in red = retailers; blue = staples; black = export plays09-11 data are estimates, closing price as of Dec 31, 2009. Note: Morgan Stanley Research estimates for Esprit, Giordano, China Mengniu, Tingyi, President Chain Store, Uni-President China, Anta, Li Ning, Intime, Daphne, Bosideng, Pacific Textiles, Texwinca, Yue Yuen, Li & Fung, Shuanghui, Yili, Pou Sheng, China Agri, Dongxiang, Little Sheep, Ajisen, Want Want, New World, Parkson, Golden Eagle, Bawang, Yurun, Ports Design; Consensus FactSet estimates for all others.Source: Morgan Stanley Research Estimates, FactSet
Bawang
New WorldChina Agri
Pacific TextilesLi & Fung
Gome
Intime
ChaodaParkson
Li Ning
Mengniu
Tsingtao
YYChina Foods
Lianhua
Hongxing
DaphneEsprit
Texwinca Giordano
Hengan
TingyiXinyu Hengdeli
Golden Eagle Belle
President Chain
Ports
BosidengUPC
Yili
Want Want
Shuanghui
Pou Sheng
Xtep AjisenLittle Sheep
Huiyuan
CRE
Dongxiang
0
1
2
3
4
5
6
0% 5% 10% 15% 20% 25% 30% 35%09-11 Sales CAGR
10 E
V/ S
ales
Anta
Dynasty
Bio-Chem
20
January 5, 2010Greater China Consumer Team
2010E EV/ Sales vs. 2010E EBIT Margin
Names in red = retailers; blue = staples; black = export plays2010 data are estimates, closing price as of Dec 31, 2009. Note: Morgan Stanley Research estimates for Esprit, Giordano, China Mengniu, Tingyi, President Chain Store, Uni-President China, Anta, Li Ning, Intime, Daphne, Bosideng, Pacific Textiles, Texwinca, Yue Yuen, Li & Fung, Shuanghui, Yili, Pou Sheng, China Agri, Dongxiang, Little Sheep, Ajisen, Want Want, New World, Parkson, Golden Eagle, Bawang, Yurun, Ports Design; Consensus FactSet estimates for all others.Source: Morgan Stanley Research Estimates, FactSet
Bawang
New WorldChina Agri
Pacific Textiles
Li & Fung
Gome
Intime
Parkson
Li Ning
Mengniu
Tsingtao
YYChina Foods
Lianhua
Hongxing
Glorious Sun
Daphne
Yurun
Esprit
Texwinca
Giordano
Hengan
Tingyi
Xinyu Hengdeli
Golden Eagle
Belle
President Chain
Ports
BosidengUPC
Yili
Want Want
Shuanghui
Pou Sheng
XtepAjisenLittle Sheep
Huiyuan
CRE
Dongxiang
0
1
2
3
4
5
6
0% 5% 10% 15% 20% 25% 30% 35% 40%10E EBIT Margin
10 E
V/ S
ales
Anta
Dynasty
Bio-Chem
21
January 5, 2010Greater China Consumer Team
Calendar of Events (January)
JanuarySUN MON TUE WED THU FRI SAT
1 2
3 6 7 8 9
Yue Yuen / Pou Sheng Dec. Sales*President Chain Dec. Sales*
10 11 12 13 14 15 16
H&M Dec. Sales
17 18 19 20 21 22 23
HK CPI for Dec 09
24 25 26 27 28 29 30/31
H&M 2009 Annual Result
* Approximate Date
Source: Company data, HK Census and Statistics Department, Morgan Stanley Research
22
January 5, 2010Greater China Consumer Team
The information and opinions in Morgan Stanley Research were prepared or are disseminated by Morgan Stanley Asia Limited (which accepts the responsibility for its contents) and/or Morgan Stanley Asia (Singapore) Pte. (Registration number 199206298Z, regulated by the Monetary Authority of Singapore, which accepts the responsibility for its contents), and/or Morgan Stanley Asia (Singapore) Securities Pte Ltd (Registration number 200008434H, regulated by the Monetary Authority of Singapore, which accepts the responsibility for its contents), and/or Morgan Stanley Taiwan Limited and/or Morgan Stanley & Co International plc, Seoul Branch, and/or Morgan Stanley Australia Limited (A.B.N. 67 003 734 576, holder of Australian financial services license No. 233742, which accepts responsibility for its contents), and/or Morgan Stanley Smith Barney Australia Pty Ltd (A.B.N. 19 009 145 555, holder of Australian financial services license No. 240813, which accepts responsibility for its contents), and/or Morgan Stanley India Company Private Limited and their affiliates (collectively, "Morgan Stanley").For important disclosures, stock price charts and equity rating histories regarding companies that are the subject of this report, please see the Morgan Stanley Research Disclosure Website at www.morganstanley.com/researchdisclosures, or contact your investment representative or Morgan Stanley Research at 1585 Broadway, (Attention: Research Management), New York, NY, 10036 USA.
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Important US Regulatory Disclosures on Subject CompaniesThe equity research analysts or strategists principally responsible for the preparation of Morgan Stanley Research have received compensation based upon various factors, including quality of research, investor client feedback, stock picking, competitive factors, firm revenues and overall investment banking revenues.The fixed income research analysts or strategists principally responsible for the preparation of Morgan Stanley Research have received compensation based upon various factors, including quality, accuracy and value of research, firm profitability or revenues (which include fixed income trading and capital markets profitability or revenues), client feedback and competitive factors. Fixed Income Research analysts' or strategists' compensation is not linked to investment banking or capital markets transactions performed by Morgan Stanley or the profitability or revenues of particular trading desks.Morgan Stanley and its affiliates do business that relates to companies/instruments covered in Morgan Stanley Research, including market making, providing liquidity and specialized trading, risk arbitrage and other proprietary trading, fund management, commercial banking, extension of credit, investment services and investment banking. Morgan Stanley sells to and buys from customers the securities/instruments of companies covered in Morgan Stanley Research on a principal basis. Morgan Stanley may have a position in the debt of the Company or instruments discussed in this report.Certain disclosures listed above are also for compliance with applicable regulations in non-US jurisdictions.
Disclosures Section
Morgan Stanley ModelWare is a proprietary analytic framework that helps clients uncover value, adjusting for distortions and ambiguities created by local accounting regulations. For example, ModelWare EPS adjusts for one-time events, capitalizes operating leases (where their use is significant), and converts inventory from LIFO costing to a FIFO basis. ModelWare also emphasizes the separation of operating performance of a company from its financing for a more complete view of how a company generates earnings.
23
January 5, 2010Greater China Consumer Team
Disclosures (cont.)
As of November 30, 2009, Morgan Stanley beneficially owned 1% or more of a class of common equity securities of the following companies covered in Morgan Stanley Research: Belle International, China Dongxiang Group Co. Ltd, Esprit Holdings, Li & Fung Ltd.As of November 30, 2009, Morgan Stanley held a net long or short position of US$1 million or more of the debt securities of the following issuers covered in Morgan Stanley Research (including where guarantor of the securities): Far Eastern Department Store, Li & Fung Ltd, Parkson Retail Group Limited.Within the last 12 months, Morgan Stanley managed or co-managed a public offering (or 144A offering) of securities of ANTA Sports Products, BaWang International Holdings, Belle International, China Dongxiang Group Co. Ltd, China Yurun Food Group Ltd., Yue Yuen Industrial.Within the last 12 months, Morgan Stanley has received compensation for investment banking services from ANTA Sports Products, BaWang International Holdings, China Agri-Industries, China Yurun Food Group Ltd., Pou Sheng International Holdings.In the next 3 months, Morgan Stanley expects to receive or intends to seek compensation for investment banking services from Belle International, China Foods Limited, IntimeDepartment Store (Group), Li & Fung Ltd, Pacific Textiles Holdings Limited, Parkson Retail Group Limited, Samson Holding Ltd., Tingyi (Cayman Islands), Uni-President China, Yue Yuen Industrial.Within the last 12 months, Morgan Stanley & Co. Incorporated has received compensation for products and services other than investment banking services from Uni-President China.Within the last 12 months, Morgan Stanley has provided or is providing investment banking services to, or has an investment banking client relationship with, the following company: ANTA Sports Products, BaWang International Holdings, Belle International, China Agri-Industries, China Foods Limited, China Yurun Food Group Ltd., Intime Department Store (Group), Li & Fung Ltd, Pacific Textiles Holdings Limited, Parkson Retail Group Limited, Pou Sheng International Holdings, Samson Holding Ltd., Tingyi (Cayman Islands), Uni-President China, YueYuen Industrial.Within the last 12 months, Morgan Stanley has either provided or is providing non-investment banking, securities-related services to and/or in the past has entered into an agreement to provide services or has a client relationship with the following company: Belle International, Bosideng International Holdings Limited, China Dongxiang Group Co. Ltd, China Foods Limited, Golden Eagle Retail Group Limited, Intime Department Store (Group), Samson Holding Ltd., Uni-President China, Yue Yuen Industrial.Within the last 12 months, Morgan Stanley has either provided or is providing non-securities related services to and/or in the past has entered into an agreement to provide services or has a client relationship with the following company: China Dongxiang Group Co. Ltd, Samson Holding Ltd., Uni-President China.Within the last 12 months, an affiliate of Morgan Stanley & Co. Incorporated has received compensation for products and services other than investment banking services from China Dongxiang Group Co. Ltd, Samson Holding Ltd., Uni-President China.An employee, director or consultant of Morgan Stanley is a director of Belle International, China Dongxiang Group Co. Ltd.The equity research analysts or strategists principally responsible for the preparation of Morgan Stanley Research have received compensation based upon various factors, including quality of research, investor client feedback, stock picking, competitive factors, firm revenues and overall investment banking revenues.The fixed income research analysts or strategists principally responsible for the preparation of Morgan Stanley Research have received compensation based upon various factors, including quality, accuracy and value of research, firm profitability or revenues (which include fixed income trading and capital markets profitability or revenues), client feedback and competitive factors. Fixed Income Research analysts' or strategists' compensation is not linked to investment banking or capital markets transactions performed by Morgan Stanley or the profitability or revenues of particular trading desks.Morgan Stanley and its affiliates do business that relates to companies/instruments covered in Morgan Stanley Research, including market making, providing liquidity and specialized trading, risk arbitrage and other proprietary trading, fund management, commercial banking, extension of credit, investment services and investment banking. Morgan Stanley sells to and buys from customers the securities/instruments of companies covered in Morgan Stanley Research on a principal basis. Morgan Stanley may have a position in the debt of the Company or instruments discussed in this report.Certain disclosures listed above are also for compliance with applicable regulations in non-US jurisdictions.
24
January 5, 2010Greater China Consumer Team
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Global Stock Ratings Distribution(as of December 31, 2009)For disclosure purposes only (in accordance with NASD and NYSE requirements), we include the category headings of Buy, Hold, and Sell alongside our ratings of Overweight, Equal-weight, Not-Rated and Underweight. Morgan Stanley does not assign ratings of Buy, Hold or Sell to the stocks we cover. Overweight, Equal-weight, Not-Rated and Underweight are not the equivalent of buy, hold, and sell but represent recommended relative weightings (see definitions below). To satisfy regulatory requirements, we correspond Overweight, our most positive stock rating, with a buy recommendation; we correspond Equal-weight and Not-Rated to hold and Underweight to sell recommendations, respectively..
Disclosures (cont.)
Data include common stock and ADRs currently assigned ratings. An investor's decision to buy or sell a stock should depend on individual circumstances (such as the investor's existing holdings) and other considerations. Investment Banking Clients are companies from whom Morgan Stanley or an affiliate received investment banking compensation in the last 12 months..
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26
January 5, 2010Greater China Consumer Team
Disclosures (cont.)
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