Singapore Company Focus

China Merchant Hldgs (Pacific) Bloomberg: CMH SP | Reuters: CAEP.SI

DBS Group Research . Equity

2 Jan 2013

BUY S$0.76 STI : 3,167.08

Buys Jiurui Expressway; exits NZ property business

Price Target : 12-Month S$ 1.20 (Prev S$ 1.09) Reason for Report : Acquisition of toll road Potential Catalyst: Earnings execution DBSV vs Consensus: We were the first broker to cover this stock Analyst Paul YONG CFA +65 6398 7951 [email protected]

•

Buying 48.1km Jiurui E’way for Rmb675m

•

Consideration includes disposal of NZ property business and issue of 72.7m new shares at S$0.84 to the sellers of Jiurui E’way

•

Transaction will a) lengthen CMHP’s average concession period b) streamline its focus to expressways only and c) improve liquidity

•

Maintain BUY, TP raised to S$1.20

Price Relative S$

Relative Index

0.8 0.8

207

0.7

187

0.7

167

0.6

147

0.6

127

0.5

107

0.5

87

0.4

67

0.4 0.3 Jan-09

Jan-10

Jan-11

China Merchant Hldgs (Pacific) (LHS)

47 Jan-13

Jan-12

Relative STI INDEX (RHS)

Forecasts and Valuation FY Dec (HK$ m)

2011A

2012F

2013F

2014F

Revenue EBITDA Pre-tax Profit Net Profit Net Pft (Pre Ex.) EPS (S cts) EPS Pre Ex. (S cts)* EPS Gth (%) EPS Gth Pre Ex (%) Diluted EPS (S cts) Net DPS (S cts) BV Per Share (S cts) PE (X) PE Pre Ex. (X) P/Cash Flow (X) EV/EBITDA (X) Net Div Yield (%) P/Book Value (X) Net Debt/Equity (X) ROAE (%)

847 736 538 314 314 6.9 6.9 20 43 5.9 5.4 77.0 11.0 11.0 8.9 10.3 7.1 1.0 0.3 7.7

1,548 1,298 1,158 722 453 15.8 9.9 130 44 8.5 5.5 85.8 4.8 7.6 8.4 7.6 7.3 0.9 0.5 16.4

1,984 1,664 1,035 579 501 11.5 10.0 (27) 1 9.4 5.5 98.9 6.5 7.6 2.8 6.9 7.3 0.8 0.7 11.6

2,129 1,789 1,032 574 574 11.4 11.4 (1) 14 10.7 6.0 104.4 6.6 6.6 3.5 6.0 7.9 0.7 0.5 10.4

0.5 5.0 B: 1

11.2 5.3 S: 0

8.8 H: 0

PATMI Rev – (%): Consensus EPS (S cts): Other Broker Recs:

*FY13 forecast lowered due to issuance of new shares

ICB Industry : Industrials ICB Sector: Industrial Transportation Principal Business: Owns and operates toll roads in various provinces in China.

Source of all data: Company, DBS Vickers, Bloomberg

www.dbsvickers.com Refer to important disclosures at the end of this report ed: JS / sa: JC

Buying Jiurui E’way – a new road with potential. Part of the Hangzhou – Ruili Expressway (G56), Jiurui E’way is a key route in Jiangxi province and was newly opened to traffic in Jan 2011, and has a remaining concession period of c. 22 years. This will lengthen the Group’s average remaining concession period by 11% to over 15 years. CMP is looking to restructure its debt i.e. borrow at a lower cost than the current 6.55% to help this road achieve breakeven by 2013. This road should contribute positively from 2014 onwards. Deal structure is positive in many ways. The consideration of Rmb675m is to be satisfied through a) the transfer of CMP (NZ) i.e. the property development business valued at Rmb290m, b) issue of 72.66m new shares at S$0.84 each valued at RMB310m and c) cash payment of Rmb75m to the sellers of Jiurui E’way. We see this payment structure as positive for shareholders as it would allow CMP to exit its non-core New Zealand property business at a fair price (close to NAV), issue new shares at a premium of >10% to its trading price, which could also help alleviate its illiquidity issue. Maintain BUY with raised TP of S$1.20. Factoring in this acquisition, we raise our DCF-based TP to S$1.20, adjusted to S$1.13 if all the convertible bonds were converted to new shares in the company. At A Glance Issued Capital (m shrs) Mkt. Cap (S$m/US$m) Major Shareholders China Merchants (%) Free Float (%) Avg. Daily Vol.(‘000)

718 542 / 444 82.5 17.5 123

Company Focus China Merchant Hldgs (Pacific)

Proposed acquisition of Jiurui Expressway for Rmb675m

An EGM will be convened to seek shareholders’ approval for this transaction.

China Merchant Holdings (Pacific), or CMP, announced on 12 General location of Jiurui Expressway Dec 2012 that it was looking to buy the operating rights of the 48.1km Jiurui Expressway, located in Jiangxi Province, for a total consideration of Rmb675m. The consideration is to be satisfied through:1) 2)

3)

The transfer of CMP (NZ), CMP’s New Zealand property development business, valued at Rmb290m The issue of 72,661,473 new ordinary shares in the capital of CMP at an issue price of S$0.84 per share, valued at Rmb310m and; Cash payment in HK$ equivalent to Rmb75m

to the sellers Liu Qiang and Gong Xiaoping (or their nominee Hongda International Investment Limited). Jiurui Expressway is part of the Hangzhou-Ruili Expressway (G56), and is a four-lane carriageway (Dual-2) located at the Source: Google Maps, DBS Vickers Research east-western area of Jiujiang Municipality, in western Jiangxi Province, connecting with Ruichang Municipality. The 48.1km Specific location of Jiurui Expressway Jiurui Expressway was opened to traffic on 1 January 2011, and its concession lasts until 30 November 2033. Additional consideration payable if concession is extended. If within one year from the completion date of this transaction, the sellers are able to obtain the approval of the relevant government authorities for an extension of Jiurui Expressway’s concession period beyond 30 Nov 2033 and subject to its toll rates not being reduced, CMP shall pay the sellers Rmb50m for each year of the toll period extension (pro-rated for periods of less than one year) up to a maximum of Rmb250m. This additional consideration is to be satisfied by CMP issuing new shares at a price equal to CMP’s NAV per share as at the end of the month proceeding the month in which the toll period extension is obtained. Source: Google Maps, DBS Vickers Research If the sellers obtain an extension period beyond 5 years, an independent 3rd party will be appointed by both CMP and the sellers to determine the monetary value of the additional benefit, to be shared equally between the sellers and CMP. In the event an extension is not procured but compensation is received e.g. financial subsidies, CMP and the sellers will negotiate and agree on the additional consideration payable by CMP to the sellers.

Page 2

Company Focus China Merchant Hldgs (Pacific)

We believe this deal is highly positive for shareholders Acquisition of a young road at a good price. The acquisition of Jiurui E’way complements the Group’s recent purchase of a mature road in Ningbo-Beilun Port E’way, which had only about 11 years of concession remaining. Buying Jiurui E’way will lengthen CMP’s average remaining concession period to over 15 years. Also, the enterprise value paid of Rmb2,175m for the road translates to just Rmb45.2m per km, which is likely below the cost of construction for this road. Jiurui E’way is also likely to see good traffic growth as an important link between Jiujiang and Ruichang (see maps on previous page and monthly toll revenue numbers below).

Payment structure is also positive. CMP will pay for Jiurui E’way using just Rmb75m in cash, with the remainder via the transfer of its non-core New Zealand property business and issuance of 72.66m new shares to the sellers of Jiurui E’way. Finally, the legacy New Zealand property business will be disposed off – and at close to book value. CMP’s New Zealand property business was there before toll road assets were first injected into the company in 2004, and has been loss-making in recent years. The transfer of this business to the sellers at Rmb290m, or close to its book value, will allow CMP and its management to fully focus on the toll road business. It will transform the Group to a pure toll road play. CMP is expected to book a small gain of HK$9.95m upon the disposal of this business.

Jiurui could soon break even if its cost of debt is lowered Issuance of new shares is at NAV per share but at a premium to the current share price. As part of the consideration, 72.66m new shares would be issued to the sellers of Jiurui E’way at the price of S$0.84 per share, representing the NAV per share of CMP. Besides being at a premium of >15% (before the acquisition was announced) to CMP’s current share price, the issuance of new shares would enlarge the free float of CMP’s shares, and perhaps help alleviate the stock’s poor trading liquidity in time.

14,000,000 Breakeven for cost of debt at 6.55%

M onthly Toll Revenue ( RMB)

12,000,000 10,000,000 8,000,000

Breakeven for cost of debt at 3.5%

6,000,000

Impact on EPS, Gearing and Dividends 4,000,000 2,000,000

Jiurui E'way

Nov-12

Jul-12

Sep-12

Mar-12

May-12

Jan-12

Nov-11

Jul-11

Sep-11

Mar-11

May-11

Jan-11

0

Source: DBS Vickers Research

Debt restructuring could see Jiurui E’way breakeven in its third year of operations, which is pretty remarkable. Jiurui E’way was loss-making (to the tune of >HK$160m) in 2011, but note that it only opened to traffic in Jan 2011 and most of the losses can be attributed to its heavy debt burden, with interest costs of over HK$150m. On the revenue side, Jiurui’s monthly toll revenue has been growing rapidly, reaching over Rmb8m in November 2012, compared with just Rmb0.4m when it first opened. If CMP can restructure the debt of Jiurui (by tapping on offshore loans), we believe Jiurui can breakeven in 2013 and start to show a profit as soon as 2014, in just its 4th year of operations.

FY13 core EPS (diluted for RCPS) is mildly diluted due to new shares issuance and little early contribution from Jiurui E’way. Based on our revised estimates, CMP’s FY13 core EPS declines from 9.9Scts to S 8.8Scts as Jiurui E’way will just about break even in 2013 while new shares will be issued as part of the acquisition consideration. If we include the exceptional gains (negative goodwill and gain on disposal of NZ property business), CMP’s core EPS (diluted for RCPS) in FY13 would be 10Scts. Net gearing in FY13 goes up to 67% - still comfortable. Factoring the enlarged share capital as well as the taking on of additional c. Rmb1.5bn in debt for Jiurui Expressway, CMP’s FY13 net gearing would rise from 45% in our previous forecast to c. 67%. 5.5Scts annual dividend intact even if all the RCPS and convertible bonds were converted. In the event that all of the outstanding RCPS (135.8m) and convertible bonds (218.5m) were converted into shares, CMP would still be able to keep its targeted 5.5Scts annual dividend intact, representing c. 80% payout (of core earnings) in FY13.

Page 3

Company Focus China Merchant Hldgs (Pacific)

Segmental Forecasts and Assumptions (Toll Road business only, excluding preference dividends) FYE Dec (HK$m)

2012E

2013F

2014F

2015F

1428.3

1456.8

1500.5

1545.5

0.0

434.0

468.7

506.2

Revenue Yongtaiwen E'way Ningbo-Beilun Port E'way Jiurui E'way

0.0

93.4

159.7

252.6

1428.3

1984.2

2128.9

2304.3

760.0

775.2

802.3

830.3

Ningbo-Beilun Port E'way

0.0

177.8

197.9

219.7

Jiurui E'way

0.0

52.7

93.8

160.7

Total EBIT

760.0

1005.7

1094.0

1210.8

Other Operating Costs

(20.0)

(20.0)

(20.0)

(20.0)

Subsidy Income

17.3

18.5

18.5

0.0

Guiliu E'way

101.7

105.1

109.5

114.2

Guihuang E'way

118.2

121.8

126.8

79.2

Total Revenue EBIT Yongtaiwen E'way

Contribution from JVs (net of tax)

Interest Income

7.5

9.5

11.1

12.8

Finance Costs

(140.7)

(283.6)

(308.2)

(308.3)

Exceptional Items

269.6

78.1

0.0

0.0

Pretax Profit

1113.5

1035.1

1031.8

1088.7

Income Tax

(162.7)

(177.9)

(170.9)

(197.0)

Minority Interest

(266.0)

(271.3)

(280.8)

(290.6)

PATMI

684.8

585.9

580.1

601.1

Annual Traffic ('000 vehicles) Yongtaiwen E'way (138km)

9,808.3

10,004.5

10,304.6

10,613.8

Ningbo-Beilun Port E'way (51.4km)

19,932.5

21,527.1

23,249.2

25,109.2

Jiurui E'way (48.1km)

1,626.8

3,032.8

3,889.4

6,152.8

Guiliu E'way (139km)

4,679.8

4,773.4

4,916.6

5,064.1

Guihuang E'way (39km)

23,156.9

23,620.0

24,328.6

25,058.5

Source: Company, DBS Vickers

Page 4

Company Focus China Merchant Hldgs (Pacific)

Income Statement (HK$ m) FY Dec

2010A

2011A

2012F

2013F

2014F

Revenue Cost of Goods Sold Gross Profit Other Opng (Exp)/Inc Operating Profit Other Non Opg (Exp)/Inc Associates & JV Inc Net Interest (Exp)/Inc Exceptional Gain/(Loss) Pre-tax Profit Tax Minority Interest Preference Dividend Net Profit Net Profit before Except. EBITDA Growth Revenue Gth (%) EBITDA Gth (%) Opg Profit Gth (%) Net Profit Gth (%) Margins & Ratio Gross Margins (%) Opg Profit Margin (%) Net Profit Margin (%) ROAE (%) ROA (%) ROCE (%) Div Payout Ratio (%) Net Interest Cover (x)

131 (114) 17 (25) (8) 16 236 (4) 41 281 (14) 0 (6) 261 220 245

847 (464) 383 (53) 331 17 252 (62) 0 538 (97) (122) (6) 314 314 736

1,548 (671) 877 (85) 792 17 220 (141) 270 1,158 (163) (266) (6) 722 453 1,298

1,984 (934) 1,051 (56) 995 19 227 (284) 78 1,035 (178) (271) (6) 579 501 1,664

2,129 (987) 1,142 (57) 1,085 19 236 (308) 0 1,032 (171) (281) (6) 574 574 1,789

(38.0) (34.9) (143.0) 41.9

548.9 200.1 (4,454.8) 20.0

82.7 76.3 139.4 130.4

28.1 28.2 25.7 (19.8)

7.3 7.5 9.0 (1.0)

13.0 (5.8) 200.1 6.7 6.5 (0.2) 67.7 (1.7)

45.3 39.0 37.0 7.7 4.0 3.8 78.1 5.3

56.6 51.1 46.7 16.4 5.7 5.8 34.6 5.6

53.0 50.2 29.2 11.6 3.9 5.7 47.5 3.5

53.6 51.0 26.9 10.4 3.6 5.8 52.4 3.5

Source: Company, DBS Vickers

NZ property business to cease contribution in FY13, Ningbo-Beilun Port and Jiurui E’way to start contribution in FY13

FY12: Gain from disposal of Yuyao Highway FY13: Negative goodwill from Jiurui E’way acquisition and gain on disposal of CMP (NZ)

Margins Trend 193.0%

143.0%

93.0%

43.0%

-7.0%

2010A

2011A

Operating Margin %

2012F

2013F

2014F

Net Income Margin %

Page 5

Company Focus China Merchant Hldgs (Pacific)

Revenue Trend

Quarterly / Interim Income Statement (HK$ m) 3Q2011

4Q2011

1Q2012

2Q2012

3Q2012

450

390 (169) 221 7 228 4 66 (25)

425 (268) 157 (43) 115 4 58 (35)

370 (153) 217 (13) 205 4 55 (36)

394 (170) 224 (13) 210 4 52 (32)

419 (206) 213 (28) 185 4 61 (30)

350

274 (53) (71) 150 150 274

142 (37) (51) 54 54 142

228 (49) (67) 112 112 228

235 (52) (73) 110 110 235

220 (56) (64) 100 100 220

2,024.0 262.2 (3,226.1) 109.8

9.0 (48.3) (49.8) (64.3)

(12.9) 61.2 78.5 109.4

6.4 2.9 2.8 (1.8)

6.3 (6.2) (12.2) (9.2)

56.7 58.5 38.5

37.0 27.0 12.6

58.7 55.3 30.3

56.8 53.4 28.0

50.8 44.1 23.9

FY Dec

2500%

400 2000% 1500%

300 250

1000% 200 150

500%

100 0% 50

Revenue

Pre-tax Profit Tax Minority Interest Net Profit Net profit bef Except. EBITDA Growth Revenue Gth (%) EBITDA Gth (%) Opg Profit Gth (%) Net Profit Gth (%) Margins Gross Margins (%) Opg Profit Margins (%) Net Profit Margins (%)

Source: Company, DBS Vickers

Page 6

Revenue Growth % (QoQ)

Representing 49% noncontrolling interest in Yongtaiwen Expressway

3Q2012

2Q2012

4Q2011

1Q2012

3Q2011

2Q2011

1Q2011

4Q2010

-500% 3Q2010

0 2Q2010

Revenue Cost of Goods Sold Gross Profit Other Oper. (Exp)/Inc Operating Profit Other Non Opg (Exp)/Inc Associates & JV Inc Net Interest (Exp)/Inc

Company Focus China Merchant Hldgs (Pacific) Balance Sheet (HK$ m) FY Dec

Asset Breakdown (2012) 2010A

2011A

2012F

2013F

2014F

Net Fixed Assets Invts in Associates & JVs Toll Concession Rights Cash & ST Invts Inventory Debtors Other Current Assets Total Assets

14 2,366 13 1,282 0 22 396 4,093

176 2,165 7,081 1,505 0 211 389 11,528

168 1,882 9,449 1,979 0 30 389 13,899

312 1,882 11,636 2,296 0 0 0 16,127

294 1,882 11,209 2,639 0 0 0 16,025

ST Debt Other Current Liab LT Debt Other LT Liabilities Shareholder’s Equity Minority Interests Total Cap. & Liab.

66 69 0 12 3,946 0 4,093

664 1,320 2,519 365 4,171 2,488 11,528

2,136 504 3,757 365 4,649 2,488 13,899

1,844 462 5,607 365 5,360 2,488 16,127

1,744 462 5,307 365 5,659 2,488 16,025

Non-Cash Wkg. Capital Net Cash/(Debt) Debtors Turn (avg days) Creditors Turn (avg days) Inventory Turn (avg days) Asset Turnover (x) Current Ratio (x) Quick Ratio (x) Net Debt/Equity (X) Net Debt/Equity ex MI (X) Capex to Debt (%) Z-Score (X)

350 1,216 133.4 275.5 N/A 0.0 12.6 9.7 CASH CASH 1.3 8.0

(719) (1,678) 50.2 506.2 N/A 0.1 1.1 0.9 0.3 0.4 0.3 0.7

(85) (3,913) 28.4 408.4 N/A 0.1 0.9 0.8 0.5 0.8 0.0 0.8

(462) (5,155) 2.8 15.0 N/A 0.1 1.0 1.0 0.7 1.0 0.1 0.9

(462) (4,412) N/A N/A N/A 0.1 1.2 1.2 0.5 0.8 0.1 1.0

Debtors 0.8%

Net Fixed Assets 4.2%

Assocs'/JVs 47.3% Inventory 0.0% Bank, Cash and Liquid Assets 47.7%

No more development properties once CMP (NZ) is hived off

Capital Expenditure

Cash Flow Statement (HK$ m) FY Dec

2010A

2011A

2012F

2013F

2014F

Pre-Tax Profit Dep. & Amort. Tax Paid Assoc. & JV Inc/(loss) Chg in Wkg.Cap. Other Operating CF Net Operating CF Capital Exp.(net) Other Invts.(net) Invts in Assoc. & JV Div from Assoc & JV Other Investing CF Net Investing CF Div Paid Chg in Gross Debt Capital Issues Other Financing CF Net Financing CF Currency Adjustments Chg in Cash Opg CFPS (HK cts) Free CFPS (HK cts)

281 1 0 (236) (35) (33) (21) (1) 133 0 285 0 418 (177) 32 0 0 (145) 19 270 1.9 (3.1)

538 136 (14) (252) (22) 0 386 (9) (1,567) 107 275 0 (1,193) (318) 1,317 0 0 1,000 30 223 56.8 52.5

1,158 269 (163) (220) (635) 0 410 (2) (1,086) 282 220 0 (586) (517) 1,086 0 0 568 0 392 145.4 56.7

1,035 424 (178) (227) 310 0 1,364 (4) (832) 0 227 0 (610) (528) (292) 382 0 (437) 0 317 133.3 171.9

1,032 449 (171) (236) 0 0 1,074 (4) 0 0 236 0 232 (563) (400) 0 0 (963) 0 343 135.7 135.2

10 9 8 7 6 5 4 3 2 1 0 2010A

2011A

2012F

2013F

2014F

Capital Expenditure (-)

Issuance of 72.66m new shares as part of the consideration to acquire Jiurui E’way

Source: Company, DBS Vickers

Page 7

Company Focus China Merchant Hldgs (Pacific)

Spitzer Chart 0.78

S$

1: 2:

Cl o s i n Ta rg e t g Pri c e Pri c e 20 Jan 12 0.67 1.10 03 Feb 12 0.69 1.10

3:

27 Feb 12

0.70

1.12

Buy

4:

30 Apr 12

0.72

1.12

Buy

5:

08 Aug 12

0.73

1.09

Buy

S.No .

0.73

5

4 0.68

2

3

1

Da te

R a ti n g Buy Buy

0.63

0.58 Jan-12

Mar-12

May-12

Jul-12

Sep-12

Nov-12

Not e : Share price and Target price are adjusted for corporate actions.

Source: DBS Vickers DBSV recommendations are based an Absolute Total Return* Rating system, defined as follows: STRONG BUY (>20% total return over the next 3 months, with identifiable share price catalysts within this time frame) BUY (>15% total return over the next 12 months for small caps, >10% for large caps) HOLD (-10% to +15% total return over the next 12 months for small caps, -10% to +10% for large caps) FULLY VALUED (negative total return i.e. > -10% over the next 12 months) SELL (negative total return of > -20% over the next 3 months, with identifiable catalysts within this time frame)

Share price appreciation + dividends DBS Vickers Research is available on the following electronic platforms: DBS Vickers (www.dbsvresearch.com); Thomson (www.thomson.com/financial); Factset (www.factset.com); Reuters (www.rbr.reuters.com); Capital IQ (www.capitaliq.com) and Bloomberg (DBSR GO). For access, please contact your DBSV salesperson. GENERAL DISCLOSURE/DISCLAIMER This report is prepared by DBS Vickers Research (Singapore) Pte Ltd ("DBSVR"), a direct wholly-owned subsidiary of DBS Vickers Securities (Singapore) Pte Ltd ("DBSVS") and an indirect wholly-owned subsidiary of DBS Vickers Securities Holdings Pte Ltd ("DBSVH"). This report is intended for clients of DBSV Group only and no part of this document may be (i) copied, photocopied or duplicated in any form or by any means or (ii) redistributed without the prior written consent of DBSVR. It is being distributed in the United States by DBSV US, which accepts responsibility for its contents. Any U.S. person receiving this report who wishes to effect transactions in any securities referred to herein should contact DBS Vickers Securities (USA) Inc (“DBSVUSA”) directly and not its affiliate. The research set out in this report is based on information obtained from sources believed to be reliable, but we (which collectively refers to DBSVR, DBSVS, and/or DBSVH) do not make any representation or warranty as to its accuracy, completeness or correctness. Opinions expressed are subject to change without notice. This document is prepared for general circulation. Any recommendation contained in this document does not have regard to the specific investment objectives, financial situation and the particular needs of any specific addressee. This document is for the information of addressees only and is not to be taken in substitution for the exercise of judgement by addressees, who should obtain separate independent legal or financial advice. DBSVR accepts no liability whatsoever for any direct, indirect and/or consequential loss (including any claims for loss of profit) arising from any use of and/or reliance upon this document and/or further communication given in relation to this document. This document is not to be construed as an offer or a solicitation of an offer to buy or sell any securities. DBSVH is a wholly-owned subsidiary of DBS Bank Ltd. DBS Bank Ltd along with its affiliates and/or persons associated with any of them may from time to time have interests in the securities mentioned in this document. DBSVR, DBSVS, DBS Bank Ltd and their associates, their directors, and/or employees may have positions in, and may effect transactions in securities mentioned herein and may also perform or seek to perform broking, investment banking and other banking services for these companies. Any valuations, opinions, estimates, forecasts, ratings or risk assessments herein constitutes a judgment as of the date of this report, and there can be no assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk assessments. The information in this document is subject to change without notice, its accuracy is not guaranteed, it may be incomplete or condensed and it may not contain all material information concerning the company (or companies) referred to in this report.

Page 8

Company Focus China Merchant Hldgs (Pacific) The valuations, opinions, estimates, forecasts, ratings or risk assessments described in this report were based upon a number of estimates and assumptions and are inherently subject to significant uncertainties and contingencies. It can be expected that one or more of the estimates on which the valuations, opinions, estimates, forecasts, ratings or risk assessments were based will not materialize or will vary significantly from actual results. Therefore, the inclusion of the valuations, opinions, estimates, forecasts, ratings or risk assessments described herein IS NOT TO BE RELIED UPON as a representation and/or warranty by DBSVR, DBSVS and/or DBSVH (and/or any persons associated with the aforesaid entities), that: (a) such valuations, opinions, estimates, forecasts, ratings or risk assessments or their underlying assumptions will be achieved, and (b) there is any assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk assessments stated therein. Any assumptions made in this report that refers to commodities, are for the purposes of making forecasts for the company (or companies) mentioned herein. They are not to be construed as recommendations to trade in the physical commodity or in the futures contract relating to the commodity referred to in this report. DBS Vickers Securities (USA) Inc ("DBSVUSA")"), a U.S.-registered broker-dealer, does not have its own investment banking or research department, nor has it participated in any investment banking transaction as a manager or co-manager in the past twelve months. Any US persons wishing to obtain further information, including any clarification on disclosures in this disclaimer, or to effect a transaction in any security discussed in this document should contact DBSVUSA exclusively. ANALYST CERTIFICATION The research analyst primarily responsible for the content of this research report, in part or in whole, certifies that the views about the companies and their securities expressed in this report accurately reflect his/her personal views. The analyst also certifies that no part of his/her compensation was, is, or will be, directly, or indirectly, related to specific recommendations or views expressed in this report. As of 2 Jan 2013, the analyst and his / her spouse and/or relatives who are financially dependent on the analyst, do not hold interests in the securities recommended in this report (“interest” includes direct or indirect ownership of securities, directorships and trustee positions). COMPANY-SPECIFIC / REGULATORY DISCLOSURES DBS Vickers Securities (Singapore) Pte Ltd and its subsidiaries do not have a proprietary position in the company mentioned as 1. of 28 Dec 2012. DBSVR, DBSVS, DBS Bank Ltd and/or other affiliates of DBS Vickers Securities (USA) Inc ("DBSVUSA"), a U.S.-registered brokerdealer, may beneficially own a total of 1% or more of any class of common equity securities of the company mentioned as of 2 Jan 2013.

2.

3.

Compensation for investment banking services: i.

DBSVR, DBSVS, DBS Bank Ltd and/or other affiliates of DBSVUSA have received compensation, within the past 12 months, and within the next 3 months receive or intends to seek compensation for investment banking services from China Merchant Holdings.

ii.

DBSVUSA does not have its own investment banking or research department, nor has it participated in any investment banking transaction as a manager or co-manager in the past twelve months. Any US persons wishing to obtain further information, including any clarification on disclosures in this disclaimer, or to effect a transaction in any security discussed in this document should contact DBSVUSA exclusively.

RESTRICTIONS ON DISTRIBUTION General This report is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation. Australia

This report is being distributed in Australia by DBSVR and DBSVS, which are exempted from the requirement to hold an Australian financial services licence under the Corporation Act 2001 [“CA] in respect of financial services provided to the recipients. DBSVR and DBSVS are regulated by the Monetary Authority of Singapore [“MAS”] under the laws of Singapore, which differ from Australian laws. Distribution of this report is intended only for “wholesale investors” within the meaning of the CA.

Hong Kong

This report is being distributed in Hong Kong by DBS Vickers (Hong Kong) Limited which is licensed and regulated by the Hong Kong Securities and Futures Commission.

Singapore

This report is being distributed in Singapore by DBSVR, which holds a Financial Adviser’s licence and is regulated by the MAS. This report may additionally be distributed in Singapore by DBSVS (Company Regn. No. 198600294G), which is an Exempt Financial Adviser as defined under the Financial Advisers Act. Any research report produced by a foreign DBS Vickers entity, analyst or affiliate is distributed in Singapore only to “Institutional Investors”, “Expert Investors” or “Accredited Investors” as defined in the Securities and Futures Act, Chap. 289 of Singapore. Any distribution of research reports published by a foreign-related corporation of DBSVR/DBSVS to “Accredited Investors” is provided pursuant to the approval by MAS of research distribution arrangements under Paragraph 11 of the First Schedule to the FAA.

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Company Focus China Merchant Hldgs (Pacific)

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This report is being distributed in the UK by DBS Vickers Securities (UK) Ltd, who is an authorised person in the meaning of the Financial Services and Markets Act and is regulated by The Financial Services Authority. Research distributed in the UK is intended only for institutional clients.

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This report is being distributed in Dubai/United Arab Emirates by DBS Bank Ltd, Dubai (PO Box 506538, 3 Floor, Building 3, Gate Precinct, DIFC, Dubai, United Arab Emirates) and is intended only for clients who meet the DFSA regulatory criteria to be a Professional Client. It should not be relied upon by or distributed to Retail Clients. DBS Bank Ltd, Dubai is regulated by the Dubai Financial Services Authority.

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rd

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