Yadea (1585.HK) BMI Funds Management Limited. Equity Research PING AN FINANCE EXPRESS. Buy. A Top Player in an Electric Two-Wheeled Vehicle Market

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1 Member of BM Intelligence Group Two-Wheeled Electric Vehicle PING AN FINANCE EXPRESS Automobile Sector Yadea (1585.HK) A Top Player in an Electric Two-Wheeled Vehicle Market Investment Highlights Excellent 1H16 Results Driven By Gross Profit Expansion And Stable Sales Volume Due To High-End Products. Gross profit rose from 18.6% in 1H15 to 21.5% in 2H16 due to higher selling prices of the upgraded and high-end models of electric scooters and electric bicycles. Improved Top Line / Bottom Line And Core Earning Growth. In 1H16, Yadea experienced revenue and net profit YoY growth of 6.7% and 23.4% to RMB 2,937 million and RMB 177 million. Excluding listing expense and financial assets fair value gains, core earnings grew by 37%yoy to RMB 183 million. Buy Research Analyst Michelle Cheng 17 August, 2016 Last price : HK$1.71 Target price:hk$2.55 Upside Potential:49% Top China Market Leader In The Electric Two-Wheeled Vehicle Market With Superior Brand Name And Strong R&D capability. In FY15, Yadea accounted for 10.5% of total industry in terms of sales while Yadea accounted for 24% of total industry in terms of net profit due to superior brand name and high-end products. Acquisition of Lightening Motors enables Yadea to enhance its battery efficiency and recharging technology. Stock Data Number of shares outstanding: 3,000 million Mkt cap: HK$5,130 million FY16E PE Is Lower Than The Average FY16E PE For Four-Wheeled Automobile Manufacturers. Yadea FY16PE is derived at 10.7x, lower than the four-wheeled automobile manufacturers of average PE of 13x. As a green energy vehicle producer, financial ratio for Yadea is much better than BYD(1211) in terms of PE, PB, ROE and gearing ratio. Strong Balance Sheet And Free Cash Flow Due To Strong Bargaining Power Over Suppliers and Distributors. Gearing Ratio improved to 0.7% in 1H16 to 1.7% in FY15 Recommend To Buy With Target Price of HK$2.55. Target price of HK$2.55 is derived by discounted cash flow model, representing FY16E PE of 10.7x and offering 49% upside potential. Financial Summary Year-End (Source: Company, BMIF Estimates) FY13A FY14A FY15A FY16E FY17E Sales (RMB: Million) 5,059 5,824 6,429 7,295 8,286 Growth - 15% 10% 13% 14% Net Profit (RMB: Million) Growth - 28% 68% 9% 37% EPS (RMB) Growth % 37% PE(x) PB(x)

2 Company Background Yadea is the largest electric two-wheeled vehicle producers in China with superior high end brand and strong R&D ability, accounting for 24% of market share in terms of net profit in FY15. According to Frost & Sullivan, Yadea accounted for 11.2% and 9.2% of electric scooters and electric bicycle market, ranking first and second respectively in FY15. Yadea has large domestic distribution network of 1,742 distributors in China in 1H16, selling products over 50 countries. Excellent IH16 Result Improved Gross Profit Margin driven by Product Enhancement And Higher Average Selling Price. As Yadea introduced 18 new models of electric scooters and electric bicycles and upgraded the existing electric two-wheeled vehicles in 1H16, the superior and high-end model are able to pass the cost to customers and charge higher average selling price. Besides, Yadea enhanced its product mix with selling more on high-end products and less on low-end products. Average selling price (ASP) of electric scooters and electric bicycle rose from RMB1,707 and RMB1,158 in 1H15 to RMB1,789 and RMB1,203 in 1H16 respectively. Improved Top Line Growth and Excellent Core Earning Growth. Sales grew by 6.7%yoy to RMB 2,937million driven by higher average selling price and stable sales volumes. Net profit rose by 23.4%yoy to RMB 177million. Excluding listing expense and financial asset fair value gains, core earnings gained by 37%yoy to RMB 183million. Management mentioned that all listing expense already booked in 1H16 and no listing expense will be recorded in 2H16. Selling and distribution expense only gained by 12%yoy, mainly from R&D and marketing expense. Electric Scooters Experienced Higher Sales Volume And Average Selling Price Growth Than Electric Bicycle. Amid better performance and high end electric scooter, electric scooter has sales volume and ASP growth of 4.1%yoy and 9.1%yoy to units and RMB 1,640 respectively, much higher than sales volume and ASP YoY growth of electric bicycle of 2.1% and 6.1% to units and RMB respectively. Increasing Holdings of Lightening Motors To 17.4% Enables Yadea To Produce High End Products. Lightening Motors specialized in R&D of advanced electric two-wheeled vehicles and was famous for electric motors and battery system managaement. Yadea strategically cooperated with Lightening Motor and increased holdings to 17.4% in 1H16. Yadea thus enhanced its battery efficiency and battery recharging technology with no harm on battery. Thus, with the quality and battery efficiency enhancement, Yadea is able to adjust higher average selling price upwards. The Only Firm In The Sector Awarded Financial Subsidy For Energy-Efficient Motors. Yadea received government grants of RMB12million. Management indicated to receive more government grants and will bebooked in P&L soon. Yadea also benefits from the policy support for green-energy product. Operating Efficiency With The YoY decreases In Inventory Turnover Days. Supported by inventory control, inventory turnover days decreased from 14.9 days in 1H15 to 14.2 days in 1H16 while inventory turnover days in FY15 was 10.5 days. Yadea set out monthly min and max inventory targets for each raw material based on historical sales and future production plans. Its production cycle is only six days for electric two-wheeled vehicles. The HoH increases were due to the hoarding inventory of battery set. Yadea Has Strong Bargaining Power Over Suppliers And Distributors. Yadea received payment from their distributors in advance while it paid supplier later via bank acceptance bills. Yadea made payment to suppliers for 15 to 90 days and it can also use bank acceptance bills to make payment to suppliers for the payment period of 180 days. Yadea received full payment from distributors for a large percentage of sales before the delivery of the products. Strong Balance Sheet and Cash Flow. As strong bargaining power over suppliers and distributors, Yadea has healthy balance sheet. Net cash position improved from RMB 1,553 million in FY15 to RMB 2,649 million in 1H16. Gearing ratio improved to 0.7% in 1H16 to 1.7% in FY15. Cash accounted for 53% of total assets in 1H16. 1H16 net cash accounted for 51% of its market cap. (Share price: HK$1.71) 2

3 RMB (Million) (Source: Company) FY15E 1H16 Interest-bearing bank borrowings Pledged bank deposits Cash and cash equivalents 787 1,961 Net Debt 1,553 2,650 Interest-bearing bank borrowings Equtiy 782 1,927 Gearing Ratio 1.7% 0.7% Stable Industry Growth Electric Two-Wheeled Vehicle Industry Experienced Stable Growth. According to Frost & Sullivan, retail sales volume and ASP for electric scooters industry experienced CAGR of 7.5% and 3.1% to 28.1 million units and RMB 3,157 during E respectively. Retail sales volume and ASP for electric bicycle industry experienced CAGR of 2% and 2.3% to 15.8 million units and RMB 2,265 during High End Positioning Business Model Yadea High End Pricing Strategy. In contrast to peers using low price strategy to grab market share, Yadea adopts a high-end positioning strategy to establish its premium brand. Yadea enhances its design capability to launch new series of two-wheeled vehicle with higher quality to match the high-end customers taste. For example, LANG-COOL-Platinum is equipped with GTR motor system, self healing tires and HD meter. Z3 is a high-end smart e-scooter with GTR-2 motor and kingong controller which supply more efficient power. Z3 adopt lithium battery, which is purchased from Panasonic. Those batteries are more safe and higher efficient. Although lithium battery is more expansive than lead-acid batteries, Yadea is able to charge higher average selling price to customers. Yadea also enhances brand image through improving product displays, store renovation and seting up riding paths to enhance the consumer experience by allowing consumers to test and drive their products like BMW 4S stores. The comprehensive improvements help Yadea s high-end brand image rooting deeply in people s heart. Financial Valuation Discounted Free Cash Flow Model. We adopt DCF model to derive our valuation. Our DCF-based FY16E target base is HK$2.55, implying 49% potential share price upside. We estimate Yadea s net profit will grow 9%yoy/37%yoy/18%yoy to RMB409million /561million/660million in 2016E/2017E/2018E, based on following assumptions: (1) Revenue grew at based on a CAGR of 12.1% to RMB 11.3 billion from FY15 to FY20E amid stable sales volume growth and higher average selling price. (2) As a top player, gross profit margin for electric scooter and electric bicycle are expected to be higher from 26.8% and 20% in FY16 to 27.4% and 20.8% in FY20E amid superior brand name and R&D capabiltiy. (3) Although stronger bargaining power over suppliers and distributors, receivable turnover days are expected to reverse and be longer from 10.1 days in FY16 to 13.5 days in FY20E. Trade and bills payable turnover days are expected to reverse and be shorter from days in FY16 to 134 days in FY20E. Amid good inventory control, inventory turnover days are expected to shorter from 10.5 days in FY16E to 10 days in FY20E. (4) Amid good cost control management, selling and distribution expense is expected to be roughly stable from 7.3% in FY16E to 8% in FY20E. Administrative expense is expected to be stable from 7% in FY16E to 6% in FY20E. (5) Terminal value is expected to grow at 2%. We use capital asset pricing model to deprive cost of equity of 13.5%, based on a 2.66% risk-free rate (10 year China treasury yield), 1.13 equity beta, 12.35% expected market return (recent expected China market return) and 1.6% cost of debt. 3

4 Yadea Continues To Gain Market Share. Electric two-wheeled vehicle market experienced integration and consolidation. The market has consolidated from 2,500 electric two-wheeled vehicle producers in FY10 to 250 manufacturers in FY15. We expect Yadea electric scooter and electric bicycle market share to gain from 11.2%-14.8% and 12.9% during E respectively due to strong R&D and high quality product. We expect Yadea two-wheeled vehicle market share gained from 10.5% in FY15 to 13.5% in FY20E. We Expect Yadea Sales Volume And ASP To Grow Faster Than Industry During 2016E-2020E. Amid the increasing China disposal income, superior brand names and strong R&D capabiltiy, we expect 4.17% and 2.71% CAGR of ASP for electric scooter and electric bicycle respectively during E. As a major beneficiary of industry consolidation, we expect sales volume for electric scooter and electric bicycles have CAGR of 12.5% and 1.6% repectively during E. Yadea Electric Two-Wheeled Vehicle Forecast: RMB (Excluding batteries and charges) (Million:Units) E 2017E 2018E 2019E 2020E CAGR Sales volume of electric two-wheeled vehicles % Sales volume of electric scooters % Sales volume of electric bicycles % ASP of electric scooters (excluding batteries and charges) 1,635 1,736 1,704 1,804 1,876 1,951 2,010 2, % ASP of electric bicycles(excluding batteries and charges) 1,102 1,231 1,140 1,230 1,255 1,277 1,290 1, % Sales for electric scooters and bicycles (RMB: Million) (excluding batteries and charges) 3,860 4,650 4,939 5,701 6,613 7,680 8,649 9, % Sales for electric scooters 2,607 3,245 3,484 4,180 5,016 6,019 6,922 7, % Sales for electric bicycles 1,253 1,405 1,455 1,521 1,597 1,661 1,727 1, % Sales for electric scooters and bicycles (YoY) Sales for electric scooters (YoY) 24.5% 7.4% 20.0% 20.0% 20.0% 15.0% 11.3% Sales for electric bicycles (YoY) 12.1% 3.5% 4.5% 5.0% 4.0% 4.0% 4.0% Source: Company, BMIF Estimates FY16E Sales Value Is Expected To Grow At 13%yoy And Gross Profit Margin Maintain At 20.64%. Higher sales usually occur in Summer and at year end as Yadea has promotion and marketing activities at that time. Sales in second half year are usually higher than the first half year. Management indicated that sales in the first half year usually accounted for 35%-40% of the annual sales. Thus, we forecast 2H16 sales account for 60% of the annual sales, representing a YoY FY16 growth of 13% to RMB 7,295 million. FY16 gross Profit margin for electric scooter and electric bicycle are expected to be higher at 26.8% and 20% as the acquisition of Lightening Motors leads to the superior quality and higher selling price and higher sales volume as a result of industry consolidation. Recommend To Buy With Target Price Of HK$2.55. We set Yadea target price at HK$2.55 based on free cash flow model, representing FY16E of 10.7x and offers 49% upside potential. 4

5 FCFF (RMB: Million) E 2017E 2018E 2019E 2020E Income before tax ,099 NCC In*(1-Tax) WCInv FCInv Income tax paid FCFF Terminal growth 2% WACC 13.50% Cost of equity 13.61% Risk free rate 2.66% Beta 1.13 Expected market return 12.35% Cost of debt 1.60% Equity to Total Capital 98.40% Net proceeds (RMB: Million) 1,074 Market value of debt (RMB:Million) Shares (million) 3,000 Terminal value/total estiamted value 64% Target Price (HK$/Per Share) 2.55 Source: Company, BMIF Estimates Peer Comparison Process Higher Profitability Than Sunra. Yadea is the only listed-company of electric two-wheeled producers. It has stronger profitability compared with Sunra. Yadea had a net income CAGR of 46.9% to RMB 375 million, compared with Sunra net income CAGR of -42% to RMB 42 million from FY13 to FY15. Sunra s FY15 earnings was dragged down by investment income. Gross profit margin and net profit margin for Yadea in 2014 were 16.6% and 3.8%, higher that Sunra of 17.8% and 1.6%. China Two-Wheel Electric Vehicles Manufacturers Usually Have Strong Bargaining Power Over Suppliers And Distributors. Strong bargaining power can be observed from receivable turnover days and trade payable days for Yadea and Sunra. Yadea receive payment from their distributors in advance while it paid supplier later via bank acceptance bills. Yadea made payment to suppliers for 15 to 90 days and it can also use bank acceptance bills to make payment to suppliers for the payment period of 180 days. Yadea received full payment from distributors for a large percentage of sales before the delivery of the products. Process Stronger Operating Efficiency And Cash Conversion Cycle Compared With Sunra. Due to Yadea s high end brand and strong bargaining power, it had longer trade and bills payable turnover days than that of Sunra in FY14. (Yadea: 139 days / Sunra: 92 days) Amid improved inventory management control, Yadea s inventory turnover days in FY14 was 19.6 days, much shorter than Sunra of 31 days. Yadea s receivable turnover days in FY14 was 5.2 days, much shorter than Sunra of 11 days. 5

6 FY15E Market Share By Revenue Electric Scooter Market Share By Revenue Electric Bicycle Market Share By Revenue Production Capacity Yadea 10.50% 11.18% 9.17% 5.0 million units Aima 8.75% 6.62% 12.93% 5.9 million units Luyuan 4.95% 5.27% 4.33% 1.9 million units Sunra 4.76% 4.43% 5.40% 3.5 million units Tailg 4.33% 4.24% 4.52% 2.0 milion units Source: Company FY15E Market share Overall market share of revenue Electric Scooter market share by sales Electric Bicycle market share by sales Yadea 雅迪 10.50% 11.18% 12.93% Aima 愛瑪 8.75% 6.62% 9.17% Luyuan 綠源 4.95% 5.27% 5.40% Sunra 新日 4.76% 4.43% 4.52% Tailg 台鈴 4.33% 4.24% 4.33% Others 66.71% 68.26% 63.65% Source: Company Source: Company 6

7 Listed-Company Comparison. As Yadea is the only listed two wheeled electric vehicles producers and other main competitors are private companies, it is not easy to access information to compare firm valuation. Although it is not an apple-to-apple comparison, we compare with two wheeled electric vehicle producers and Hong Kong-listed automobile producers / battery manufacturers. Yadea valuation is between two industry sectors. Yadea FY16PE is derived of 10.7x, lower than four-wheeled automobile manufacturers of average PE of 13x but higher than battery manufacturers of average PE of 8.1x. Yadea FY16E ROE is derived of 26.1%, higher than the average ROE of four-wheeled automobile manufacturers and battery manufacturers of 15% and 18.6% respectively. As a green energy product supported by government grants, financial ratio for Yadea is much better than BYD(1211) in term of FY16PE, PB, ROE and gearing ratio. Thus, valuation for Yadea is much attractive compare to peers. Peers Comparison Name Price Market cap (HK$m) PE FY16E PB FY16E ROE (%) FY16E Automobile Manufacturers 175 HK Equity GEELY AUTOMOBILE , HK Equity BRILLIANCE CHINA , HK Equity BYD CO LTD-H , HK Equity BAIC MOTOR-H , HK Equity GUANGZHOU AUTO-H , HK Equity GREAT WALL MOT-H 8 101, Average Battery Manufacturers 819 HK Equity TIANNENG POWER , HK Equity CHAOWEI POWER , Average Electric Two Wheeled Vehicle Manufacturers 1585 HK Equity Yadea , Source: Bloomberg, BMIF Estimates Risk Factor Rely Substantially On Third Party Distributors and sub-distributors. Yadea is unable to control the product sold to distributors. Some distributors altered and sold non-conforming vehicles based on requirements specified by customer without Yadea s approval. Policy Risk. Five cities, Guangzhou, Dongguan, Zhuhai, Shenzhen and Xiamen imposed prohibitions on the use of electric bicycles. There may be additional cities to adopt policies to restrict the use of any electric bicycles. 7

8 Financial Summary Key ratios Key Ratio FY13 FY14 FY15 FY16E FY17E FY18E FY19E FY20E Gross Margin 12.9% 16.6% 18.9% 20.6% 21.0% 21.8% 22.2% 22.7% Operating Margin 4.2% 5.2% 7.6% 7.3% 8.9% 9.2% 8.7% 9.7% Profit Margin 3.4% 3.8% 5.8% 5.6% 6.8% 7.0% 6.7% 7.4% Inventory Turnover Days Receivables Turnover Days Trade/Bills Payables Turnover Days Cash Conversion Days Return on Equity 32.2% 39.1% 57.8% 26.1% 21.3% 20.3% 17.8% 17.9% Return on Assets 8.0% 8.1% 10.9% 9.3% 10.2% 10.1% 9.5% 10.1% Interest Coverage , , , , , ,115.2 Current Ratio Gearing Ratio 1.6% 0.0% 1.7% 0.6% 0.4% 0.4% 0.3% 0.3% *Gearing ratio=borrowings/equity Source: Company, BMIF estimates 8

9 Income Statement For 1H16 RMB ( 000) (Source: Company, BMIF Estimate) 1H15A 2H15A 1H16A 1H15 Margin 2H15 Margin 1H16 Margin 1H16YoY Sales 2,752,890 3,676,297 2,937, % 100% 100.0% 6.7% Electric scooters 1,471,148 2,012,066 1,604,763 53% 55% 54.6% 9.1% Electric bicycles 625, , ,080 23% 23% 22.6% 6.1% Specialty vehicles % 0% 0.0% 0.0% Batteries and charges 623, , ,855 23% 22% 21.5% 1.1% Electric two-wheeled vehicle parts 31,923 30,720 37,988 2% 1% 1.3% 19.0% COGS -2,241,735-2,970,259-2,307,494-81% -81% -78.5% 2.9% Electric scooters -1,104,832-1,501,552-1,185,919-75% -75% -73.9% 7.3% Electric bicycles -508, , ,576-81% -82% -80.8% 5.6% Specialty vehicles Batteries and charges -628, , ,997-96% -94% -87.5% -6.9% Electric two-wheeled vehicle parts Gross profit 511, , ,192 19% 19% 21.5% 23.3% Electric scooters 366, , ,843 25% 25% 26.1% 14.3% Electric bicycles 117, , ,503 19% 18% 19.2% 8.3% Specialty vehicles 0% 0% 0.0% Batteries and charges 27,157 48,877 83,845 0% 0% 0.0% 208.7% Electric two-wheeled vehicle parts 0% 0% 0.0% Other income and gains 30,287 55,483 38,305 1% 2% 1.3% 26.5% Bank interest income 9,972 9,208 7, % 0.25% 0.2% -29.2% Government grants 2,583 11,555 12,344 0% 0% 0.4% 377.9% Dividend income from available-for-sale investments Gains from financial assets at fair value through profit or loss Gain on disposal of available-for-sale investments % 0% 0.0% 0.0% 14,079 28,572 16,415 1% 1% 0.6% 16.6% 1,294-1, % 0% 0.0% % Net gain/(loss) on disposal of PPE % 0% 0.0% 206.2% Others 2,070 6,743 1,603 0% 0% 0.1% -22.6% Selling and distribution expenses -213, , ,437-7% -7% -8.1% 11.7% Adminstrative expenses -141, , ,570-6% -6% -6.9% 42.6% Operating profit 186, , , % 8.3% 7.8% 22.4% Finance cost % 0% 0.0% 0.0% Shares of JV % 0% 0.0% 0.0% PBT 186, , ,356 7% 8% 7.8% 22.3% Tax income expense -42,812-72,588-50,855-2% -2% -1.7% 18.8% Profit 143, , ,501 5% 6% 6.0% 23.4% Profit to equity owners 143, , , % 6.3% 6.0% 23.4% 9

10 Income Statement RMB ( 000) E 2017E 2018E 2019E 2020E Sales 5,059,200 5,824,142 6,429,187 7,295,036 8,286,102 9,436,121 10,491,782 11,397,341 Electric scooters 2,607,007 3,244,385 3,483,214 4,179,856 5,015,828 6,018,993 6,921,842 7,704,032 Electric bicycles 1,253,472 1,405,911 1,455,416 1,520,909 1,596,955 1,660,833 1,727,266 1,796,095 Specialty vehicles 75,331 18, Batteries and charges 1,027,624 1,109,598 1,427,914 1,527,867 1,604,261 1,684,474 1,768,698 1,821,759 Electric two-wheeled vehicle parts 95,766 45,819 62,643 66,401 69,057 71,819 73,974 75,454 COGS -4,404,654-4,855,684-5,211,994-5,789,282-6,549,300-7,382,736-8,158,837-8,815,779 Gross profit 654, ,458 1,217,193 1,505,753 1,736,802 2,053,385 2,332,944 2,581,562 Electric scooters 459, , ,829 1,120,201 1,344,241 1,625,128 1,882,741 2,110,905 Electric bicycles 152, , , , , , , ,587 Specialty vehicles 23,194 1, Batteries and charges 8,101 34,149 62,176 68,754 59,357 75,801 79,591 81,979 Electric two-wheeled vehicle parts 11,170 3,222 13,859 12,616 13,811 13,645 14,794 15,090 Other income and gains 27,184 81,280 85,770 72,950 99,433 66, , ,973 Selling and distribution expenses -275, , , , , , , ,787 Adminstrative expenses -192, , , , , , , ,840 Operating profit 213, , , , , , ,553 1,099,908 Finance cost Shares of JV 12,178 1, PBT 225, , , , , , ,033 1,099,388 Tax income expense -51,382-83, , , , , , ,459 Profit 174, , , , , , , ,928 Profit to equity owners 174, , , , , , , ,928 Source: BMIF Estimates, Company 10

11 Balance Sheet RMB E 2017E 2018E 2019E 2020E Property, plant and equipment 447, , , , ,709 1,008,706 1,017,784 1,026,944 Prepaid land lease payments 184, , , , , , , ,322 Intangible assets 11,262 12,408 14,162 12,138 10,404 8,918 7,644 6,552 Investment in an associate 139, Available-for-sale investments 75, ,223 8,233 8,243 8,253 8,263 8,273 Prepayments 4,008 3,041 84,600 4,000 4,000 4,000 4,000 4,000 Deferred tax assets 13,963 13,768 18,202 18,874 25,872 30,465 15,074 20,676 Total non-current assets 876, ,363 1,025,508 1,008,183 1,258,140 1,265,006 1,252,249 1,260,769 Inventories 361, , , , , , , ,954 Net trade and bills receivables 55, , , , , , , ,872 Prepayments, deposits other receivables 119,529 90, , , , , , ,274 Prepayment 550 2,089 7,794 Due from related parties 40, Financial assets at fair value 345, , , , , , ,300 1,043,320 Pledged bank deposits 504, , , Cash and cash equivalents 283, , ,691 2,372,881 3,231,600 4,000,869 4,659,911 5,582,667 Total current assets 1,709,334 2,077,948 2,964,260 3,845,953 4,885,397 5,710,067 6,523,412 7,599,088 Trade and bills payables 1,614,800 2,106,220 2,880,431 2,198,276 2,825,844 3,039,891 3,129,531 3,343,424 Other payables and accruals 190, , , , , , , ,846 Interest-bearing bank borrowings 10, ,997 13,259 13,000 13,000 13,000 13,000 Due to a related party 49, Due to the Controlling Shareholders 73, Tax payable 20,866 29,070 35,603 40,266 55,193 64,992 68,913 82,707 Total current liabilities 1,958,355 2,400,738 3,185,771 2,471,861 3,200,079 3,370,802 3,470,710 3,713,977 Other payables 22,160 22,160 22,160 22,160 22,160 22,160 Total non current liabilities 22,160 22,160 22,160 22,160 22,160 22,160 Total liabilities 1,958,355 2,400,738 3,207,931 2,494,021 3,222,239 3,392,962 3,492,870 3,736,137 Total equity 627, , ,837 2,360,114 2,921,298 3,582,111 4,282,791 5,123,719 Source: Company, BMIF Estimates 11

12 Important Disclaimer BMI Securities Limited (BMIS) and BMI Funds Management Limited (BMIF) are two licensed c orporations regulated by the Securities and Futures Commission in Hong Kong, both within BM Intelligence Group (the Group). The prices of securities may fluctuate up or down. It may become valueless. It is as likely that losses will be incurred rather than profit made as a result of buying and selling securities. This report is based on information available to the public that we consider reliable, however, the authentic ity, accuracy or completeness of such information is not guaranteed by BMI Funds Management Limited. This report do es not take into account the pa rticular investment objectives, financial situation or needs of individual clients and does not constitute a personal investment recom mendation to anyone. Clients are wholly respons ible for any investment decision based on this report. Clients are advise d to consider whether any advice or recommendation contained in this report is suitable for their p articular circumstances. This r eport is not intended to be an offer to buy or sell or a solicitation of an offer to buy or sell the securities mentioned. Investors are advised to consult their own profes sional and financial advisors covered in this report. BM Intelligence Group or BMI Funds Management Limited, its affiliates and its related companies may do and seek to do business with the companies covered in this report and may from time to time act as market maker or have assumed an underwriting commitmen t in securities of such companies, may sell them to or buy them from customers on a principal basis and may also perform or seek to perform investment banking, advisory, underwriting, financing or other services for or relating to such companies and solici t such investment, advisory, financing or other services from any entity mentioned in this report. In reviewing this report, an investor should be aware that any or all the foregoing, among other things, may give rise to real or potential conflicts of inte rest. Investment Rating System Stock Rating (1 2 mont hs ) Buy Hold Sell S p e c u l a t i v e B u y S p e c u l a t i v e S e l l S e c t o r Rating Remark Stocks with potential positive return exceeding 15% over the next 12 months Stocks with potential return of between -15% to +15% over the next 12 months Stocks with potential negative return exceeding -15% over the next 12 months Stocks with potential positive return exceeding 20% over the next 6 months, with high volatility Stocks with potential negative return exceeding -20% over the next 6 months, with high volatility Remark O v e r weight Relative performance over Hang Seng Index 10% Neutral Relative performance within Hang Seng Index -10% to +10% Underwe i g h t Relative performance below Hang Seng Index -10% Address: Suites , 9/F, Shui On Center, 6-8 Harbour Road, Wanchai, Hong Kong Telephone: (852) hkcs@bmifm.com