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Documenti di Professioni
Documenti di Cultura
20 February 2006
Joanne Goh
(65) 6882-2450 joanne.sc.goh@jpmorgan.com
Jan-04
Jan-05
Jan-06
See page 14 for analyst certification and important disclosures, including investment banking relationships. JPMorgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. Customers of JPMorgan in the United States can receive independent, third-party research on the company or companies covered in this report, at no cost to them, where such research is available. Customers can access this independent research at www.morganmarkets.com or can call 1-800-477-0406 toll free to request a copy of this research.
India Ho ng Ko ng A ustralia Singapo re A P ex Japan M alaysia China Taiwan P hilippines Thailand Indo nesia Ko rea
9.0
Source: MSCI, IBES
12.0
15.0
18.0
5.
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
Expensive
Source: Election Commission of India Note Kerala and West Bengal elections would see INC in direct confrontation with its UPA alliance.
See Table 11: Indian Valuations and Composite Valuation Indicator Calculation page 17 for details of all time highs and lows in MSCI India valuations.
Table 3: India may get less of the flows - BRIC Relative Valuations
12 M Fwd PE Brazil Russia China India 7.9 11.2 13.1 17.1 2006 Div Yld (%) 5.6 1.4 2.4 1.4 2006 RoE (%) 27.9 14.3 16.7 22.0 2003-2006 EPS growth (%) 20.8 14.0 20.2 19.1
High Valuations
India is the most expensive market in Asia ex Japan based on either 12 month forward PE or dividend yield. Our composite valuation indicators are one standard deviation expensive. Bears on India have been incorrectly selling the market based on valuations for some time. Our base case is that the market will re-rate and we have therefore held our nerve while the quant signals have indicated that it is time to sell.
Source: DataStream, JPMorgan calculations BRIC = Brazil, Russia, India and China
Source: DataStream, JPMorgan economics. JPMorgan forecast of 47.5 Rupees /US$ for end of 2006
Investors should watch foreign exchange reserves, local interest rates and market momentum. Domestic monetary conditions are tightening with banks now net borrowers from the Reserve Bank of India. The further deterioration in any of these three indicators is a potential sell signal in our view.
823
Bharat (India, Local) Shift from bonds to equities Currency revaluation Tax change Initial public offering and investor base More local institutions
Jan-01
Jan-02
Jan-03
Jan-04
Jan-05
Our new Index targets for MSCI India and the Sensex are 445 and 11000 respectively. An index targets indicates our expectation for the direction of the market and magnitude of returns. We expect volatility to increase relative to returns in 2006. The quantitative checks on our index targets illustrate the re-rating that we think the markets will sustain and the risk of today's high valuations. If we use our composite valuation indicators to calculate an MSCI index based on median valuation the result is 352, 21% below our new target. Based on Indias three year average forward PE the end 2006 index target would be 342. Our target is based on the assumption that the current forward valuation of the MSCI India is sustained at 17 times, resulting in a target of 445.
Source: NSDL.co.in Demat accounts facilitate direct holding of securities in electronic format.
Figure 6: Cumulative net purchases of FII and mutual fund over 2005
US$ mn 12,000 10,000 8,000 6,000 4,000 2,000 0 Jan-05
Source: SEBI, AMFI
FII Flow s
Equity Fund Net Sunscription Mar-05 May -05 Jul-05 Sep-05 Nov -05
Debt schemes have suffered net redemptions of US$4.2 billion in last two years compared to US$6.8 billion net subscriptions for equity schemes. The slow but continuous rise of bond yield is good for relative attractiveness of equities.
end of to agricultural power subsidies. To achieve the three objectives of boosting rural incomes, lowering subsidies and low consumer prices requires the reform of agricultural production and distribution to reduce waste and boost efficiency. This is beginning to happen with corporate investment in agricultural business providing capital and knowledge. If political obstacles can be overcome agricultural reform could add a further leg to India's growth story.
2005
2002
2003
% FY 06
Economic momentum
Indias economic vulnerability is low relative to its history. The drivers of economic growth have broadened and the dependency on the monsoon declined. Large foreign exchange reserves provide a cushion against a reversal in balance of payment flows. Domestic consumption and investments momentum continues to surprise on the upside. The current fiscal year (FY06) consensus GDP growth expectation has moved up from 6.9% to 7.8%. If current momentum is maintained FY07 growth forecast will need to be revised higher. The monsoon continues to be a risk and therefore economist will be unlikely to revise forecasts higher until after the monsoon season. Past reform is contributing to economic momentum. With the removal of regulatory constraints and availability of capital investment in new sectors, such as retail, real estate, airline, and BPO, is growing rapidly. The job creation by these investments further helps support strong consumption growth. Sustainable long term growth in India requires that the benefits are shared. The electoral defeat of the BJP led government in 2004 surprised the investment community who where focusing India's strong industrial and service sector performance rather than poor income growth in rural area. 60% of India's workforce is employed in agriculture. Political success requires rural income growth. The flexibility for price increases or further subsidies is limited. India's finance ministers main concern is keeping inflation low. It is estimated that 55% of household income is spent on food; therefore a general increase in agricultural prices would be unacceptable. Agricultural subsidies including subsidies power exceed US$12 billion. Power sector reform requires the eventual
7.2 7.0 6.8 6.6 Apr-05 Jun-05 Aug-05 Oct-05 Dec-05 Feb-06
FY 07
2005 (%) 13.1 3.8 16.5 14.8 15.4 2.9 4.2 30.8 8.6 (28.9) 5.1
2006 (%) 16.8 18.2 16.4 9.3 24.2 42.8 22.5 29.6 5.2 (11.9) 1.3
Earnings growth
Strong domestic demand and the strategic advantage of India IT sector has supported index earnings growth CAGR of 23.5% over last three years. Consensus expectation is earnings growth of 17% for FY07.
Figure 12: Rising earnings expectations IBES EPS trend
25.0 24.0 23.0 22.0 21.0 20.0 May -05 Jul-05 Sep-05 Nov -05 Jan-06 CY 05 EPS CY 06 EPS
Consumer Discretionary Consumer Staples Energy Financials Health Care Industrials Information Technology Materials Telecommunication Services Utilities
Source: MSCI, DataStream, IBES
It is interesting to note that inflation has remained rather moderate with fast growth of broad money supply. (Figure 13). Normally higher inflation has negative impact on corporate profitability and PE multiple. IBES estimates show relatively better operating margin in 2006, for each of the sectors except Telecom.
Figure 13: Money supply (M3) and Inflation
25 20 15 10 Aug-93 Feb-95 Aug-96 Feb-98 Aug-99 Feb-01 Aug-02 Feb-04 Aug-05 M3 Grow th (%YoY) (L) WPI (% YoY) 15 12 9 6 3 0
The global economic growth outlook for 2006 continues to remain healthy and this is expected to support IT sector earnings growth outlook. Increased proportion of offshore execution should provide support to operating margin outlook. We remain positive on Indian consumers and demand outlook. Metal and mining stocks have already derated and pose limited risk to index performance. We are witnessing early phase of corporate capex cycle. The economic environment gives us confidence in better pricing power and demand outlook in short to medium term and we would not be excessively worried about the adverse impact on return on equities at this juncture.
The trajectory of short term interest rate would important parameter to watch. Our current expectation is another 25 bps increase before December 2006. Higher interest cost for the current quarter could cause negative surprise for the highly leveraged small and mid cap companies.
Conclusion
Figure 14: Relative performance of mid-cap versus large cap
Our base case is that economic and profit growth remains robust in India. This supports current valuations. Local investors confidence continues to build sustaining the secular shift from cash and bonds into equities. This drives Indian equities higher. Our new Sensex target is 11000. The Indian market is expensive. Based on the MSCI India the forward PE at of our end 2006 target would be 17 times. This plus a widening current account make the market vulnerable to a reversal in risk appetite. We are managing the risks of investing in this market by recommending a neutral weighting relative to both Asia Pacific ex Japan and global emerging market. Also we recommend investors focus on large cap blue chip stocks. The valuation discounts of small and mid cap companies are not high enough to compensate for the lower liquidity in our view. There is anecdotal evidence that interest costs for small to medium size companies is rising generating the risk of earnings disappointments. See page 8 for our Indian model portfolio.
CNX Midcap
Nifty
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
20.0
12.0
Source JPMorgan estimates, DataStream, MSCI, IBES data used for non rated stocks
Table 10: JPMorgan India Coverage Universe Note that for companies with a December year end we use prior year i.e. FY06 is December 05
Price as of Feb 17, 2006 Auto & Auto Parts Bajaj Auto Hero Honda Mahindra & Mahindra Maruti Udyog Tata Motors Consumer Goods HLL ITC Tata Tea Limited Cement ACC Grasim Gujarat Ambuja Cements Ultratech Cemco Financial Services Bank of Baroda Canara Bank Ltd Centurion Bank of Punjab HDFC HDFC Bank ICICI Bank IDFC Punjab National Bank Ltd State Bank of India Union Bank of India Healthcare Aurobindo Pharma Ltd Cadila Healthcare Cipla Dr. Reddy's laboratories Glenmark Matrix Laboratories Ranbaxy Laboratories Ltd. Sun Pharmaceutical Wockhardt Machinery & Engineering BHEL L&T Media & Entertainment Zee Telefilms Software & IT Services
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JPM Reco OW OW OW OW OW N OW OW OW N OW UW N UW OW OW OW OW N UW OW UW OW OW OW OW N N UW N UW OW N OW
Market Cap. (US$MM) 5466 3996 3183 4949 6554 11467 13650 1167 2364 3333 2602 1517 1870 2436 758 7293 5217 11735 1804 3024 10155 1228 655 732 3570 2215 854 875 3685 3163 1180 10259 6991 1626
Avg. Daily Turnover (US$MM) 2.7 2.3 3.5 8.1 9.9 4.4 5.9 1.3 3.4 2.4 3.3 0.5 1.5 1.9 0.6 6.8 1.9 8.2 2.7 2.3 23.9 0.7 1.7 0.2 2.8 5.7 0.7 1.5 4.9 1.1 0.8 2.8 6.6 1.6
FY05
EPS FY06E
FY07E
EPS Growth FY07E (%) 26.1 17.7 16.4 14.3 12.9 19.3 13.9 11.0 23.1 16.5 -2.9 51.9 7.1 7.9 113.3 21.2 73.3 14.2 7.7 18.2 4.5 1751.5 43.1 17.8 151.6 44.9 53.5 118.7 20.0 17.7 33.8 28.0 29.1
P/E FY06E (X) 22.4 18.1 9.8 20.6 18.4 39.8 26.4 16.9 21.2 14.8 3.1 38.8 5.9 6.0 67.1 23.0 26.7 18.8 8.3 9.2 3.7 416.6 22.6 29.3 75.2 68.4 33.6 63.0 28.3 21.7 30.2 33.7 20.0 FY07E (X) 17.8 15.4 8.4 18.0 16.3 33.4 23.2 15.2 17.2 12.7 3.2 25.5 5.5 5.6 31.5 19.0 15.4 16.4 7.7 7.7 3.6 22.5 15.8 24.9 29.9 47.2 21.9 28.8 23.6 18.4 22.6 26.3 15.5 FY06E (x) 5.0 9.6 3.1 4.1 5.3 24.9 6.6 3.1 5.6 1.5 0.6 5.3 1.1 1.5 4.9 6.2 4.5 3.1 1.2 1.6 1.0 4.3 4.8 8.3 4.8 7.2 3.3 6.2 10.1 7.1 6.4 8.2 2.5
P/BV FY07E (x) 4.2 7.7 2.8 3.4 4.6 23.2 5.6 2.8 4.7 1.3 0.6 4.5 0.9 1.3 4.2 5.1 3.1 2.7 1.1 1.4 0.8 3.7 3.9 6.8 4.0 6.8 3.0 5.6 7.6 5.5 5.2 7.0 2.2 FY06E (%) 22.5 51.3 30.4 20.0 27.9 60.7 24.3 17.9 26.2 9.9 20.0 13.5 19.0 26.4 7.4 28.5 17.6 17.2 15.7 18.8 29.1 1.0 20.7 27.9 6.3 10.2 9.5 9.9 34.9 31.8 20.9 23.8 12.9
ROE FY07E (%) 23.9 48.2 32.1 19.0 27.0 67.7 23.5 17.7 27.0 9.7 17.6 17.6 17.7 23.6 14.1 28.8 21.6 17.3 14.9 18.9 24.5 16.4 24.2 26.9 13.5 14.1 13.5 19.8 31.5 28.8 23.0 26.0 14.6
Foreign Holding (%) 21.1 26.0 32.1 70.2 39.9 14.7 16.9
05E Divi. Yield (%) 1.5 3.0 1.9 0.6 2.2 2.1 NA 1.8 NA NA 1.4 NA 2.6 3.0 NA 1.5 0.6 1.4 NA 2.1 1.3 4.6
81.31 40.58 53.66 29.50 38.61 5.38 4.90 45.47 21.14 96.56 22.95 0.28 22.98 33.11 -0.29 46.48 22.38 27.19 55.36 81.84 22.81 -2.08 19.35 13.66 2.08 2.75 10.38 18.78 19.13 17.90 38.95 58.21 7.81
107.10 49.19 60.95 37.00 42.08 5.82 6.12 54.66 27.39 109.16 27.88 13.97 38.99 43.89 0.39 56.47 27.84 31.24 51.64 93.64 31.96 1.38 22.94 18.05 17.09 4.67 7.72 6.98 26.81 22.08 61.60 67.92 8.75
135.11 57.89 70.98 42.29 47.51 6.94 6.97 60.67 33.73 127.17 27.08 21.23 41.77 47.35 0.84 68.44 48.24 35.67 55.59 110.73 33.39 25.47 32.83 21.27 43.00 6.77 11.85 15.26 32.18 25.99 82.44 86.94 11.30
42.4
24.7 10.9 21.0 46.1 16.1 0.5 32.3 14.6 6.8 22.8 0.2 41.6
0.0 1.5 0.9 0.6 0.3 0.3 1.0 0.7 0.9 0.6 0.9 0.6
Price as of Feb 17, 2006 HCL Infosystems HCL Technologies Hexaware Technologies I-Flex Solutions Infosys Tech Mphasis BFL NIIT NIIT Technologies Patni Computer Polaris Software Labs Satyam Computers Tata Consultancy Services Wipro Technology - Hardware Moser Baer India Telecom Services Bharti Tele-Ventures MTNL VSNL Transportation Jet Airways (India) Ltd Utilities CESC Ltd NTPC Reliance energy Tata Power
JPM Reco OW OW UW UW OW UW UW OW OW UW OW OW OW UW OW UW N UW UW N UW OW
Market Cap. (US$MM) 975 4411 352 1852 17206 635 119 159 1499 245 5389 17543 15920 540 15448 2081 2416 1920 484 22557 2744 2171
Avg. Daily Turnover (US$MM) 0.7 1.7 1.5 1.8 15.7 0.8 0.2 0.2 0.9 0.8 15.5 5.3 4.1 0.3 2.5 3.5 9.2 2.3 0.6 2.0 3.6 2.0
2004 13.72 21.27 5.47 27.16 68.14 8.18 10.66 15.16 21.47 7.59 22.37 47.13 11.46 5.24 5.89 12.69 14.92 52.23 15.37 7.04 28.82 20.71
EPS FY06E 17.21 25.85 7.40 22.58 90.83 9.83 14.03 17.59 21.41 4.27 30.50 59.75 14.30 15.39 11.75 7.76 14.97 63.98 14.54 6.36 27.19 22.74
FY07E 22.76 33.56 9.49 37.13 119.49 12.38 18.37 23.53 28.59 8.63 40.64 82.10 19.50 27.53 17.51 8.33 16.60 63.36 16.07 7.04 26.17 24.69
EPS Growth FY07E (%) 32.2 29.8 28.2 64.5 31.6 26.0 30.9 33.8 33.5 102.1 33.3 37.4 36.4 78.9 48.9 7.3 10.9 -1.0 10.5 10.7 -3.7 8.6
P/E FY06E (X) 15.0 23.6 17.8 47.9 30.7 17.9 19.5 10.4 22.6 26.0 24.3 27.2 34.9 14.0 30.9 18.9 25.2 15.4 18.0 19.1 22.2 21.4 FY07E (X) 11.3 18.2 13.9 29.1 23.3 14.2 14.9 7.8 16.9 12.9 18.2 19.8 25.6 7.8 20.7 17.6 22.7 15.6 16.3 17.3 23.1 19.8 FY06E (x) 6.6 4.5 4.6 6.6 9.9 3.7 2.0 2.5 3.0 2.0 5.6 14.7 9.0 1.0 9.3 0.8 1.8 3.3 1.4 2.3 1.7 2.0
P/BV FY07E (x) 5.4 4.0 3.7 5.6 7.4 3.4 1.7 2.0 2.8 1.8 4.6 9.3 6.7 0.9 6.7 0.8 1.7 2.7 1.4 2.1 1.7 2.0 FY06E (%) 43.8 19.2 24.5 13.8 32.5 20.4 10.1 24.3 13.4 7.6 22.9 54.0 26.4 7.0 30.2 4.1 7.0 21.4 7.8 11.7 7.7 9.3
ROE FY07E (%) 47.5 22.3 25.3 19.3 31.8 23.9 11.2 26.2 16.8 13.8 25.4 46.8 26.5 11.1 32.1 4.3 7.4 17.5 8.2 12.1 7.4 9.7
Foreign Holding (%) 19.1 18.0 23.2 52.5 25.5 33.3 42.6 5.7 67.9 6.2 6.3 73.9 48.5 21.5 13.8
05E Divi. Yield (%) 4.3 2.6 0.7 0.6 0.5 2.0 1.8 3.1 0.6 1.6 0.9 0.7 NA 0.5 NA 3.0 1.3 NA
4.9 0.1
**Figures for HLL, Patni Computer & Ranbaxy Laboratories Ltd are on a Calendar year-end basis as opposed to other stocks which are on a financial year-end basis.
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Companies Recommended in This Report (as of COB 16 February 2006) Associated Cement Companies Ltd (ACC.BO/Rs586.75/Overweight), Bajaj Auto (BJAT.BO/Rs2,372.75/Overweight), Bharat Heavy Electricals (BHEL) (BHEL.BO/Rs1,873.15/Overweight), Bharti Tele-Ventures (BRTI.BO/Rs362.55/Overweight), Cipla Limited (CIPL.BO/Rs540.75/Overweight), Gujarat Ambuja Cements (GACM.BO/Rs85.55/Overweight), HDFC (Housing Development Finance Corporation) (HDFC.BO/Rs1,338.50/Overweight), ICICI Bank (ICBK.BO/Rs598.00/Overweight), Infosys Technologies (INFY.BO/Rs2,780.60/Overweight), ITC Limited (ITC.BO/Rs166.70/Overweight), Larsen & Toubro (LART.BO/Rs2,344.90/Neutral), Patni Computer (PTNI.BO/Rs474.10/Overweight), Satyam Computers (SATY.BO/Rs742.20/Overweight), Tata Motors (TAMO.BO/Rs800.10/Overweight), Tata Power (TTPW.BO/Rs500.70/Overweight) Analyst Certification The research analyst who is primarily responsible for this research and whose name is listed first on the front cover certifies (or in a case where multiple research analysts are primarily responsible for this research, the research analyst named first in each group on the front cover or named within the document individually certifies, with respect to each security or issuer that the research analyst covered in this research) that: (1) all of the views expressed in this research accurately reflect his or her personal views about any and all of the subject securities or issuers; and (2) no part of any of the research analyst's compensation was, is, or will be directly or indirectly related to the specific recommendations or views expressed by the research analyst in this research. Important Disclosures: Market Maker: JPMSI makes a market in the stock of Infosys Technologies. Liquidity Provider: JPMSI and/or one of its affiliates normally provides liquidity in the stock of Associated Cement Companies Ltd, Bajaj Auto, Bharat Heavy Electricals (BHEL), Bharti Tele-Ventures, Cipla Limited, Gujarat Ambuja Cements, HDFC (Housing Development Finance Corporation), ICICI Bank, ITC Limited, Larsen & Toubro, Patni Computer, Satyam Computers, Tata Motors, Tata Power. Lead or Co-manager: JPMSI or its affiliates acted as lead or co-manager in a public offering of equity and/or debt securities for HDFC (Housing Development Finance Corporation), Satyam Computers, Tata Power within the past 12 months. Analyst Position: The covering analyst, research associate, or member(s) of their respective household(s) have a long position in the securities of ICICI Bank. Beneficial Ownership (1% or more): JPMSI or its affiliates beneficially own 1% or more of a class of common equity securities of ICICI Bank, Infosys Technologies, Tata Motors. Client of the Firm: Associated Cement Companies Ltd is or was in the past 12 months a client of JPMSI. Bajaj Auto is or was in the past 12 months a client of JPMSI. Bharti Tele-Ventures is or was in the past 12 months a client of JPMSI. Gujarat Ambuja Cements is or was in the past 12 months a client of JPMSI. HDFC (Housing Development Finance Corporation) is or was in the past 12 months a client of JPMSI; during the past 12 months, JPMSI provided to the company non-investment banking securities-related service. ICICI Bank is or was in the past 12 months a client of JPMSI; during the past 12 months, JPMSI provided to the company noninvestment banking securities-related service and non-securities-related services. Infosys Technologies is or was in the past 12 months a client of JPMSI. Larsen & Toubro is or was in the past 12 months a client of JPMSI; during the past 12 months, JPMSI provided to the company non-investment banking securities-related service and non-securities-related services. Patni Computer is or was in the past 12 months a client of JPMSI. Satyam Computers is or was in the past 12 months a client of JPMSI; during the past 12 months, JPMSI provided to the company investment banking services. Tata Motors is or was in the past 12 months a client of JPMSI. Tata Power is or was in the past 12 months a client of JPMSI; during the past 12 months, JPMSI provided to the company investment banking services and non-securities-related services. Investment Banking (past 12 months): JPMSI or its affiliates received in the past 12 months compensation for investment banking services from Satyam Computers, Tata Power. Investment Banking (next 3 months): JPMSI or its affiliates expect to receive, or intend to seek, compensation for investment banking services in the next three months from Larsen & Toubro, Satyam Computers, Tata Motors, Tata Power.
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Non-Investment Banking Compensation: JPMSI has received compensation in the past 12 months for products or services other than investment banking from HDFC (Housing Development Finance Corporation), ICICI Bank, Larsen & Toubro. An affiliate of JPMSI has received compensation in the past 12 months for products or services other than investment banking from ICICI Bank, Tata Power.
Price Charts for Compendium Reports: Price charts are available for all companies under coverage for at least one year through the search function on JPMorgan's website https://mm.jpmorgan.com/disclosures/company or by calling this toll free number (1-800-477-0406). Explanation of Ratings and Analyst(s) Coverage Universe: JPMorgan uses the following rating system: Overweight [Over the next six to twelve months, we expect this stock will outperform the average total return of the stocks in the analysts (or the analysts teams) coverage universe.] Neutral [Over the next six to twelve months, we expect this stock will perform in line with the average total return of the stocks in the analysts (or the analysts teams) coverage universe.] Underweight [Over the next six to twelve months, we expect this stock will underperform the average total return of the stocks in the analysts (or the analysts teams) coverage universe.] The analyst or analysts teams coverage universe is the sector and/or country shown on the cover of each publication. See below for the specific stocks in the certifying analyst(s) coverage universe.
JPMorgan Equity Research Ratings Distribution, as of January 3, 2006 Overweight (buy) 41% 46% 35% 63% Neutral (hold) 42% 45% 49% 55% Underweight (sell) 17% 38% 17% 43%
JPM Global Equity Research Coverage IB clients* JPMSI Equity Research Coverage IB clients*
*Percentage of investment banking clients in each rating category. For purposes only of NASD/NYSE ratings distribution rules, our Overweight rating falls into a buy rating category, our Neutral rating falls into a hold rating category, and our Underweight rating falls into a sell rating category.
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Options related research: If the information contained herein regards options related research, such information is available only to persons who have received the proper option risk disclosure documents. For a copy of the Option Clearing Corporations Characteristics and Risks of Standardized Options, please contact your JPMorgan Representative or visit the OCCs website at http://www.optionsclearing.com/publications/risks/riskstoc.pdf. General: Information has been obtained from sources believed to be reliable but JPMorgan Chase & Co. or its affiliates and/or subsidiaries (collectively JPMorgan) do not warrant its completeness or accuracy except with respect to any disclosures relative to JPMSI and/or its affiliates and the analysts involvement with the issuer. Opinions and estimates constitute our judgement as of the date of this material and are subject to change without notice. Past performance is not indicative of future results. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. Securities, financial instruments or strategies mentioned herein may not be suitable for all investors. The opinions and recommendations herein do not take into account individual client circumstances, objectives, or needs and are not intended as recommendations of particular securities, financial instruments or strategies to particular clients. The recipient of this report must make its own independent decisions regarding any securities or financial instruments mentioned herein. JPMSI distributes in the U.S. research published by non-U.S. affiliates and accepts responsibility for its contents. Clients should contact analysts and execute transactions through a JPMorgan subsidiary or affiliate in their home jurisdiction unless governing law permits otherwise. Planned Frequency of Updates: JPMorgan provides periodic updates on companies/industries based on company-specific developments or announcements, market conditions or any other publicly available information. U.K. and European Economic Area (EEA): Issued and approved for distribution in the U.K. and the EEA by JPMSL. Investment research issued by JPMSL has been prepared in accordance with JPMSLs Policies for Managing Conflicts of Interest in Connection with Investment Research which can be found at http://www.jpmorgan.com/pdfdoc/research/ConflictManagementPolicy.pdf. All research issued to private clients in the U.K. is subject to the following: the investments and strategies discussed here may not be suitable for all investors; if you have any doubts you should consult your investment advisor. The investments discussed may fluctuate in price or value. Investors may get back less than they invested. Changes in rates of exchange may have an adverse effect on the value of investments. Germany: This material is distributed in Germany by J.P. Morgan Securities Ltd. Frankfurt Branch and JPMorgan Chase Bank, N.A., Frankfurt Branch who are regulated by the Bundesanstalt fr Finanzdienstleistungsaufsicht. Australia: This material is issued and distributed by JPMSAL in Australia to wholesale clients only. JPMSAL does not issue or distribute this material to retail clients. The recipient of this material must not distribute it to any third party or outside Australia without the prior written consent of JPMSAL. For the purposes of this paragraph the terms wholesale client and retail client have the meanings given to them in section 761G of the Corporations Act 2001. Hong Kong: The 1% ownership disclosure as of the previous month end satisfies the requirements under Paragraph 16.5(a) of the Hong Kong Code of Conduct for persons licensed by or registered with the Securities and Futures Commission. (For research published within the first ten days of the month, the disclosure may be based on the month end data from two months prior.) J.P. Morgan Broking (Hong Kong) Limited is the liquidity provider for derivative warrants issued by J.P. Morgan International Derivatives Ltd and listed on The Stock Exchange of Hong Kong Limited. An updated list can be found on HKEx website: http://www.hkex.com.hk/prod/dw/Lp.htm. Korea: This report may have been edited or contributed to from time to time by affiliates of J.P. Morgan Securities (Far East) Ltd, Seoul branch. Singapore: JPMSI and/or its affiliates may have a holding in any of the securities discussed in this report; for securities where the holding is 1% or greater, the specific holding is disclosed in the Legal Disclosures section above. India: FOR PRIVATE CIRCULATION ONLY NOT FOR SALE. Revised January 3, 2006.
THIS MATERIAL IS DISTRIBUTED IN JAPAN BY J.P. MORGAN SECURITIES ASIA PTE LIMITED. THIS MATERIAL IS ISSUED AND DISTRIBUTED IN SINGAPORE BY J.P. MORGAN SECURITIES SINGAPORE PRIVATE LIMITED [MICA (P) 235/09/2005]. THIS MATERIAL IS ISSUED AND DISTRIBUTED IN MALAYSIA BY JPMORGAN SECURITIES (MALAYSIA) SDN. BHD. (18146-X) (FORMERLY KNOWN AS J.P. MORGAN MALAYSIA SDN BHD). Copyright 2006 JPMorgan Chase & Co. All rights reserved. Additional information available upon request.
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Source: DataStream, JPMorgan calculations, compose score is the number of standard deviation from average