morgan stanley greater china consumer retail valuation (1)

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 Asia Limited+

Angela Moh Team [email protected]+852 2848 5405

Dennis Tao Sports/Footwear/[email protected] +852 2848 7136

Lillian Lou Food/[email protected]+852 2848 6502

Robert Lin Department [email protected]+852 2848 5835

German Weekly Apparel Sales

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

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5-Ju

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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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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

• Calendar of Events 21

3


Multi-Line Retailers SSS Performance 2009

Rating FYE Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09Oct. Golden Week

Comparison PeriodMS Est.

F09Co Est.

F09

Parkson(3368.HK) OW Dec

1Q: 9%M-single M-single 5/1: >15%

1H: 6.7%2Q: 4.6% N/A N/A

9M: 7.1%3Q: 7.5%

N/AN/A

F09 GWk: slightly >10%

7 Days Comp10/1-10/7/2009

vs 9/28-10/4/2008 8% 8~9%

Golden Eagle(3308.HK) OW Dec

1Q: 13%9.4% 15%

20%5/1: >25%

1H: 14.9%2Q:17.7%

14%3Q: 16.5%

13~14%

26%F09 GWk: ~20%

F08 GWk: 35%

8 Days Comp 10/1/-10/8/2009

vs 9/14 + 9/29-10/5/2008 [9/14/08 = Mid-Autumn] 16% 16%

Intime(1833.HK) OW Dec

1Q: ~10%6~7% 10~11%

20%5/1: ~20%

1H: 13%M-teens

0% (incl DM)16% (ex DM)

2.5% (incl DM)22% (ex DM)

3Q: 17~18%2.5% (incl DM)6~7% (ex DM)

24.4% (incl. DM)13.8% (Sept-Oct / excl. DM)15.7% (Sept-Oct / incl. DM)F09 GWk: 3~4% (excl. DM)

F08 GWk: 30%

7 Days Comp10/1-10/7/2009

vs 9/28-10/4/2008 13% L-teen

NWDS (HK$)(825.HK) EW Jun Flat Flat

F3Q09: FlatFlat Flat

10~11%5/1: M-teens

L-single (>1Q09) Flat to single >July SSS

F1Q10: FlatNeg

FlatF09 GWk: H-single

F08 GWk: 20%

8 Days Comp10/1/-10/8/2009

vs 9/28-10/5/2008 5% M-single

Lifestyle(1212.HK) NC Dec

1H: Flat (HK$)

HK: NegSHA: M-single

HK: +singleSHA: H-single

3Q HK: L-single3Q SHA: H-single

HK: M-H singleSHA: H-single

C'way: H-teensTST: L-teens

SHA: M-teens

Maoye(848.HK) NC Dec 1Q: ~Flat 1H: 0.6%

3Q: S + SW: H-singleS + SW: H-single

F09 GWk S: H-singleF09 GWk SW: >20%

8 Days Comp10/1-10/8/2009

vs 9/29-10/6/2008

Gome (493.HK) NC Dec 1Q: -20.75%1H: -10.08%2Q: -8.28% 3Q: 2.05% F09 GWk: gross sales +25%

13 Days Comp9/26-10/8 Both Years

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

4


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%

H-singleGWk: 20% L-teens

F1H: 10.9%single

Lifestyle(1212.HK) NC Dec 1H: 19.5%

F08: 13.2%2H: 7.9%

Maoye(848.HK) NC Dec 1H: 12.2%

F08: 4.2%2H: neg

Gome (493.HK) NC Dec 1Q: 3.17% 1H: 0.49% 9M: 3.18%F08: -8.99%

4Q: -36%

Suning (002024.SZ) NC Dec 1Q: 2% 1H: 0.02% 9M: 3.25% F08: -5.72%

Wumart (8277.HK) NC Dec 1Q: 14.1% 1H: 13.9% 9M: 7.9% F08: 8.1%

Jingkelong (0814.HK) NC Dec 1Q: 8.1% 1H: 9.5% 9M: 9.3% F08: 7.2%

Lianhua (0980.HK) NC Dec 1H: 13.1% F08: 8.3%

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

5


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

6


Retail SSS for Sportswear and Footwear

Source: Company Guidance, Morgan Stanley Research Data updated as of 11/27/09

2008 2009E 2010E Mgt Guidance 1H08 2H08 1H09 3Q08 4Q08 1Q09 2Q09 3Q09

Specialty RetailFootwearDaphne

- 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

7


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

Unweighted Market Cap Weighted

50

100

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Jan-

09

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-09

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-09

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Staple-UWI

Discretionary-UWI

Export Plays

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Discretionary-MVWIStaple-MVWIExport plays

8


Stock Price Performance

YTD Absolute Stock Price Performance YTD Relative Stock Price Performance

-80% -30% 20% 70% 120% 170% 220% 270% 320% 370% 420%

HuiyuanPresident Chain Store

HongxingPeak

ShuanghuiEsprit

GiordanoSamson

China Lilang*Pou Sheng

China Flavor & FragrancesGlobal Bio-Chem

ParksonYue Yuen

Ausnutria DairyGlorious Sun

New World Want Want

Chaoda Modern AgriFu Ji Food & Catering

LifestyleWeiqiao Textile

Trinity*China Resources

WumartTingyi

DynastyBawangHengan

Texwinca LtdChina Ting

StellaBosideng

China FoodsLianhuaLi Ning

XtepYurun

Ports DesignLi & Fung

China AgriTsingtao

BelleMengniu

GomeUni-President China

Golden EagleYili

DongxiangANTA Intime

Xinyu HengdeliFountain Set

DaphnePacific Textiles

-60% 40% 140% 240% 340% 440% 540% 640%

HuiyuanHongxing

PeakPresident Chain

EspritGiordano

SamsonChina Lilang*

Pou ShengChina Flavor &

Yue YuenGlorious Sun

ShuanghuiGlobal Bio-Chem

ParksonAusnutria Dairy

Chaoda Modern AgriNew World Want Want

Fu Ji Food &Lifestyle

Trinity*Weiqiao Textile

China ResourcesWumart

TingyiDynasty

Texwinca LtdStella

BawangHengan

China TingBosideng

China FoodsLi & Fung

LianhuaLi Ning

XtepYurun

Ports DesignChina Agri

TsingtaoBelle

MengniuGome

Uni-President ChinaGolden Eagle

DongxiangANTA

YiliIntime

Xinyu HengdeliFountain Set

DaphnePacific Textiles

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.

9


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

PriceCompany Ticker 12/31/2009 YTD Abs 1W Abs 1M Abs 3M Abs YTD Rel 1W Rel 1M Rel 3M Rel

7 ANTA 2020.HK 11.52 226.3% 2% -2% 20% 101% 1% 0% 11%39 Ausnutria Dairy* 1717.HK 6.43 60.8% 7% NA NA -1% 6% NA NA26 Bawang* 1338.HK 5.40 126.9% -14% 29% NA 40% -15% 30% NA13 Belle 1880.HK 9.06 166.5% 0% -3% 14% 64% -1% -2% 5%23 Bosideng 3998.HK 1.74 138.4% 9% 5% 39% 47% 8% 7% 29%38 Chaoda Modern Agri 0682.HK 8.30 67.7% -2% 17% 77% 10% -3% 19% 64%15 China Agri 0606.HK 10.20 164.9% 0% 2% 41% 63% -1% 3% 31%45 China Flavor & Fragrances 3318.HK 1.65 42.2% 4% 7% 23% -12% 3% 9% 14%22 China Foods 0506.HK 6.96 140.8% -1% 9% 30% 49% -3% 8% 25%47 China Lilang* 1234.HK 5.40 38.5% 4% 41% NA -15% 3% 43% NA32 China Resources 291.HK 28.35 109.7% 5% 15% 26% 29% 4% 16% 17%24 China Ting 3398.HK 1.25 135.8% -1% 3% 9% 45% -2% 5% 1%2 Daphne 0210.HK 6.25 396.0% -3% -2% 11% 206% -4% -1% 3%8 Dongxiang 3818.HK 6.00 219.1% 1% 4% 16% 97% 0% 5% 8%29 Dynasty 0828.HK 2.52 117.2% 4% 6% 52% 34% 3% 8% 41%50 Esprit 0330.HK 51.75 17.9% -1% -1% 2% -22% -3% -1% -2%3 Fountain Set 0420.HK 1.23 310.0% 1% -4% 26% 170% 0% -3% 16%49 Giordano 0709.HK 2.30 17.9% 4% -2% 19% -22% 2% -2% 14%41 Global Bio-Chem 0809.HK 1.91 54.0% 6% 3% -3% -5% 5% 5% -10%43 Glorious Sun 0393.HK 2.89 51.3% 3% 16% 18% 0% 2% 17% 9%9 Golden Eagle 3308.HK 15.84 191.2% 8% -6% 22% 80% 7% -4% 13%11 Gome 0493.HK 2.82 179.8% 3% -6% 36% 73% 2% -4% 26%25 Hengan 1044.HK 57.60 131.3% 1% -4% 23% 43% 0% -3% 14%53 Hongxing CHHS.SI 0.19 2.7% 3% 6% -10% -38% 1% 0% -17%54 Huiyuan 1886.HK 5.52 -43.0% 4% 15% 12% -65% 3% 17% 3%5 Intime 1833.HK 7.18 243.5% 0% 11% 37% 112% -1% 13% 27%21 Li & Fung 0494.HK 32.25 142.8% 0% 3% 3% 60% -2% 3% -1%19 Li Ning 2331.HK 29.50 143.8% 10% 14% 24% 50% 9% 16% 15%20 Lianhua 0980.HK 23.40 143.2% 4% 23% 36% 50% 3% 24% 26%35 Lifestyle 1212.HK 14.50 84.7% 7% 7% 24% 22% 6% 7% 18%12 Mengniu 2319.HK 27.75 175.3% 2% 16% 40% 70% 0% 16% 36%37 New World 825.HK 7.11 67.7% 0% -9% 14% 3% -1% -8% 6%1 Pacific Textiles 1382.HK 5.19 663.2% 2% 32% 92% 402% 0% 32% 84%40 Parkson 3368.HK 13.68 55.5% 1% 1% 19% -4% 0% 3% 10%52 Peak* 1968.HK 4.30 4.9% 6% 12% NA -35% 5% NA NA16 Ports Design 0589.HK 24.10 156.4% 0% 12% 24% 58% -1% 14% 15%46 Pou Sheng 3813.HK 1.16 39.8% -1% -3% -5% -14% -2% -2% -12%51 President Chain Store 2912.TW 76.10 10.3% 1% 1% -3% -38% -2% -7% -11%48 Samson 0531.HK 1.20 20.0% 4% -4% -25% -21% 3% -4% -30%42 Shuanghui 000895.SZ 53.10 54.0% 2% 7% 27% -29% -1% 6% 0%27 Stella 1836.HK 14.08 123.5% -3% -4% 8% 47% -4% -4% 4%28 Texwinca Ltd 0321.HK 7.25 119.7% -4% 2% 18% 45% -5% 4% 10%30 Tingyi 0322.HK 19.20 113.8% 2% 0% 20% 32% 1% 1% 11%34 Trinity* 0891.HK 3.19 93.3% NA NA NA 27% NA NA NA14 Tsingtao 0168.HK 43.00 165.8% 3% 10% 47% 64% 2% 12% 36%10 Uni-President China 0220.HK 5.71 184.1% 4% 9% 26% 75% 3% 10% 17%36 Want Want 151.HK 5.44 69.5% 1% -3% 19% 5% 0% -1% 11%33 Weiqiao Textile 2698.HK 5.32 98.5% 2% 1% 11% 22% 1% 2% 3%31 Wumart 8277.HK 12.28 113.2% -4% -2% 6% 32% -5% -1% -1%4 Xinyu Hengdeli 3389.HK 2.94 267.5% 0% 0% 37% 127% -1% 1% 27%18 Xtep 1368.HK 4.37 144.1% 1% 1% 17% 51% 0% 3% 8%6 Yili 600887.SS 26.48 231.0% 0% -6% 35% 84% -4% -9% 14%44 Yue Yuen 0551.HK 22.50 46.9% 3% 3% 5% -3% 1% 3% 0%17 Yurun 1068.HK 23.00 152.5% 11% 20% 38% 56% 10% 22% 28%

Relative Price PerformanceAbsolute Price PerformanceRank By YTD Abs Perf.

10


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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-06

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Apr

-07

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Discretionary-Valuation

Staple-valuation

Export plays

Staple-valuation (ex-Mengniu)

11


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.

12


Sector Valuation Table – Hong Kong-listed China Plays – Consumer Staples


Price Code Price (US$ mn) Vol (US$m) 2008 2009E 2010E 2011E Growth 10E P/B 2008 2009E 2008 2009E

HONG KONG LISTED CHINA PLAYSConsumer StaplesFood & Beverage1717.HK Ausnutria Dairy NC NA HKD 6.43 830 13.6 81.4 31.5 21.8 NA NA NA 6.5 0.0% NA 68.1 NA0682.HK Chaoda Modern Agri. NC NA HKD 8.30 3,256 11.8 7.7 6.1 5.5 4.6 15.5 0.4 1.8 0.4% 0.9% 5.1 4.4 0606.HK China Agri-Industries* O 10.80 HKD 10.20 5,077 11.9 14.0 17.8 13.3 10.6 29.9 0.4 2.9 1.8% 1.7% 10.9 10.6 3318.HK China Flavor & Fragrances NC NA HKD 1.65 103 0.2 7.1 5.2 NA NA NA NA 1.0 1.3% NA 12.3 NA0506.HK China Foods* O 7.30 HKD 6.96 2,507 3.7 40.2 30.5 22.5 18.4 28.7 0.8 3.8 0.9% 1.2% 20.7 15.6 1886.HK China Huiyuan Juice NC NA HKD 5.52 1,046 3.7 12.3 NM 41.1 30.6 NM NA 1.6 0.8% 0.4% 20.6 50.0 2319.HK China Mengniu Dairy* O 32.00 HKD 27.75 6,215 18.8 NM 29.0 26.9 22.0 14.8 1.8 8.4 0.0% 0.7% NM 15.2 0291.HK China Res. Enterp. NC NA HKD 28.35 8,762 15.6 25.1 28.3 19.7 25.4 5.4 3.6 2.7 1.5% 1.4% 12.3 12.4 1068.HK China Yurun Food* E 18.04 HKD 23.00 4,965 14.1 31.0 27.1 22.8 20.2 15.7 1.5 7.4 0.8% 0.8% 30.1 21.4 0828.HK Dynasty Fine Wines NC NA HKD 2.52 405 0.5 21.5 20.5 17.8 14.8 17.6 1.0 1.8 2.0% 2.3% 8.1 8.5 0809.HK Global Bio-Chem NC NA HKD 1.91 571 1.4 3.4 23.9 7.3 6.5 91.3 0.1 0.6 1.6% 0.4% 5.6 8.6 0336.HK Huabao NC NA HKD 8.37 3,358 11.4 27.6 21.5 17.6 14.7 21.1 0.8 9.2 1.3% 1.7% 21.1 16.8 0124.HK Kingway Brewery NC NA HKD 1.80 397 0.3 NM NM NA NA NA NA 1.0 0.0% NA 18.1 NA0322.HK Tingyi* E 19.00 HKD 19.20 13,840 11.8 52.8 36.1 30.5 25.1 20.0 1.5 1.5 0.9% 1.4% 24.1 17.2 0168.HK Tsingtao Brewery NC NA HKD 43.00 7,258 7.1 98.9 40.2 33.1 28.1 19.7 1.7 8.1 0.6% 1.1% 27.4 20.1 0220.HK Uni-President China* O 5.60 HKD 5.71 2,652 2.5 53.3 21.4 19.9 17.0 12.3 1.6 3.2 0.9% 1.4% 20.9 11.0 0151.HK Want Want* E 5.50 HKD 5.44 9,270 9.8 34.9 29.1 24.0 20.0 20.6 1.2 1.5 1.3% 2.8% 23.5 21.9

Average 4,355 7.8 30.7 24.1 21.6 18.4 24.0 1.3 3.5 1.0% 1.3% 17.4 16.7 Food Retailers0814.HK Jingkelong NC NA HKD 6.32 336 0.6 17.5 14.8 12.7 10.9 16.4 0.8 1.7 3.6% 3.9% 6.1 6.4 0980.HK Lianhua Supermarket NC NA HKD 23.40 1,878 1.0 41.8 29.0 23.4 18.6 24.8 0.9 5.1 0.7% 1.4% 7.1 8.3 1832.HK Times NC NA HKD 5.55 626 1.3 35.3 30.6 25.7 NA NA NA 3.0 0.9% 0.9% 14.9 14.6 8277.HK Wumart Stores NC NA HKD 12.28 1,970 3.0 30.8 30.9 25.1 20.3 23.5 1.1 5.5 1.3% 1.2% 13.7 12.7

Average 1,202 1.5 31.3 26.3 21.7 16.6 21.6 0.9 3.8 1.6% 1.9% 10.4 10.5 Household & Personal Goods1338.HK Bawang* O 3.56 HKD 5.40 2,024 5.5 35.9 35.3 32.0 30.2 16.5 1.9 5.7 1.4% 0.7% 39.4 27.4 1044.HK Hengan Intl. NC NA HKD 57.60 9,062 16.5 55.6 34.3 28.2 24.3 18.9 1.5 10.9 1.2% 1.8% 37.8 24.8 3331.HK Vinda NC NA HKD 5.51 643 3.0 48.1 13.3 12.2 11.0 10.2 1.2 3.3 0.8% 2.0% 16.3 8.8

Average 4,852 8.4 46.5 27.7 24.2 21.8 15.2 1.5 6.6 1.2% 1.5% 31.2 20.3

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.

13


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.


Price Code Price (US$ mn) Vol (US$m) 2008 2009E 2010E 2011E Growth 10E P/B 2008 2009E 2008 2009E

HONG KONG LISTED CHINA PLAYSConsumer DiscretionaryRestaurants0538.HK Ajisen* E 6.40 HKD 6.64 915 0.9 32.3 22.7 19.5 17.4 14.1 1.4 3.7 0.9% 1.3% 12.8 8.50968.HK Little Sheep* E 3.50 HKD 4.30 570 0.6 27.6 24.2 18.9 18.3 15.3 1.2 3.6 1.7% 1.8% 19.2 13.4

Average 742 0.7 30.0 23.5 19.2 17.8 14.7 1.3 3.7 1.3% 1.6% 16.0 11.0 Department Stores3308.HK Golden Eagle* O 12.20 HKD 15.84 3,714 6.8 52.5 38.6 28.7 22.5 30.9 0.9 15.0 2.1% 0.5% 26.6 27.01833.HK Intime Department Store* O 5.70 HKD 7.18 1,621 2.0 41.2 37.7 25.2 19.7 38.4 0.7 3.4 1.0% 2.4% 18.3 17.00825.HK New World Department Store E 6.60 HKD 7.11 1,530 1.8 24.0 22.0 18.7 14.6 22.6 0.8 3.3 1.3% 2.0% 10.7 9.13368.HK Parkson Group* O 14.20 HKD 13.68 4,953 9.9 40.4 35.2 27.5 22.1 26.4 1.0 9.8 1.2% 1.4% 24.5 21.20848.HK Maoye NC NA HKD 2.14 1,611 3.9 17.6 17.8 13.0 10.1 32.6 0.4 3.4 0.0% 2.8% 11.4 11.11212.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 17.9

Average 2,760 4.5 32.7 29.4 22.6 18.2 27.2 0.9 6.6 1.2% 1.8% 17.9 17.2 Apparel & Footwear Branded/ Retailers1361.HK 361 Degrees NC NA HKD 4.56 1,221 5.0 NM 10.5 8.8 NA NA NA 3.3 0.0% 3.5% 8.2 5.02020.HK ANTA Sports Limited* O 13.20 HKD 11.52 3,702 14.69 28.6 21.5 17.8 15.2 18.7 1.0 5.6 2.4% 2.1% 20.0 13.71880.HK Belle* O 10.00 HKD 9.06 9,859 20.8 33.9 27.3 21.3 20.7 14.8 1.4 5.0 0.8% 1.1% 22.6 18.23998.HK Bosideng* O 1.88 HKD 1.74 1,745 4.4 10.8 15.4 12.7 11.4 16.1 0.8 1.8 6.2% 6.9% 8.8 8.03818.HK China Dongxiang* O 6.30 HKD 6.00 4,387 17.5 22.2 21.4 17.9 15.9 16.1 1.1 4.5 2.4% 2.8% 13.6 11.51234.HK China Lilang NC NA HKD 5.40 836 4.8 37.5 20.5 15.9 12.4 28.9 0.6 10.8 0.0% 1.9% 32.4 14.90210.HK Daphne* O 6.70 HKD 6.25 1,321 2.4 20.8 17.9 14.4 12.1 21.7 0.7 5.5 0.9% 1.1% 12.7 9.92331.HK Li Ning * E 23.30 HKD 29.50 3,982 11.4 37.8 30.1 25.1 22.1 16.7 1.5 12.6 1.9% 1.2% 22.7 16.11968.HK Peak NC NA HKD 4.30 1,165 5.7 21.4 11.1 10.2 7.7 20.0 0.5 6.1 0.0% 2.0% 18.0 11.20589.HK Ports Design* O 28.50 HKD 24.10 1,748 3.6 28.5 24.4 19.8 17.1 19.4 1.0 9.4 1.0% 3.6% 23.7 18.63813.HK Pou Sheng* E 1.33 HKD 1.16 642 0.4 9.4 22.8 10.5 7.8 70.8 0.1 1.0 0.0% 0.0% 8.7 21.51368.HK Xtep International NC NA HKD 4.37 1,226 1.9 16.3 14.2 12.1 10.0 19.2 0.6 2.8 1.1% 4.2% 10.6 9.4

Average 2,653 7.7 24.3 19.8 15.5 13.9 23.9 0.8 5.7 1.4% 2.5% 16.9 13.2 Electronics & Watch Retailers3389.HK Xinyu Hengdeli NC NA HKD 2.94 1,544 4.5 14.0 20.3 17.0 14.0 20.2 0.8 4.4 1.4% 1.4% 15.5 14.60493.HK Gome NC NA HKD 2.82 5,478 31.7 30.6 27.8 21.4 17.6 25.6 0.8 4.4 1.4% 0.6% 16.4 17.5

Average 3,511 18.1 22.3 24.1 19.2 15.8 22.9 0.8 4.4 1.4% 1.0% 16.0 16.1

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

Average 797 1.2 8.0 9.3 8.3 6.8 18.8 0.4 1.8 6.0% 4.7% 6.2 5.2

14


Sector Valuation Table – Taiwan-, Singapore-, China-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 2009ETAIWANConsumer StaplesFood & Beverage1216.TW Uni President NC NA TWD 39.45 4,761 16.2 14.0 18.5 16.6 51.2 -39.8 -0.4 2.7 2.1% 2.1% 9.7 NA1201.TW Wei Chuan NC NA TWD 43.60 683 12.6 49.0 20.2 21.8 NM NM NA 4.5 0.0% NA 19.1 NA

Average 2,722 14.4 31.5 19.4 19.2 51.2 -39.8 -0.4 3.6 1.0% 2.1% 14.4 NA

Food Retailers5903.TW Family Mart NC NA TWD 60.00 415 0.0 21.2 17.5 15.8 NA NA NA 3.6 4.1% 14.0% 4.8 NA2912.TW President Chain Store* E 77.46 TWD 76.10 2,450 5.3 19.8 14.2 14.6 13.0 4.5 3.2 4.8 2.7% 3.7% 13.8 12.1

Average 1,432 2.6 20.5 15.8 15.2 13.0 4.5 3.2 4.2 3.4% 8.9% 9.3 12.1

Food Packaging9939.TW Taiwan Hon Chuan NC NA TWD 53.00 386 6.4 14.6 12.2 10.2 11.1 4.6 2.2 2.5 3.2% NA 6.5 NA

Consumer DiscretionaryDepartment Store2903.TW Far Eastern Department* E 32.50 TWD 36.70 1,378 7.4 129.0 37.3 27.7 23.6 25.7 1.1 2.2 0.8% 2.3% 10.6 9.6

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 1,533 0.9 9.0 11.1 9.4 7.7 -0.5 0.7 1.2 2.0% 3.3% 4.3 10.1 Consumer DiscretionaryApparel & Footwear Branded/ RetailersCHHS.SI China Hongxing Sports NC NA SGD 0.19 383 1.7 6.3 13.7 10.0 7.7 33.8 0.3 0.7 4.1% 1.3% 1.6 4.5HGUO.SI Hongguo NC NA SGD 0.32 91 0.2 5.8 7.5 6.1 5.4 17.8 0.3 1.0 0.8% 0.0% 3.5 NA

Average 237 1.0 6.1 10.6 8.1 6.5 25.8 0.3 0.9 2.4% 0.6% 2.6 4.5

China A Share & B Share000895.SZ Shuanghui * O 57.40 CNY 53.10 4,713 16.3 48.1 39.3 33.2 24.5 26.7 1.2 13.5 0.9% 1.0% 26.1 21.3600467.SS Homey Aquatic* E 7.00 CNY 9.87 916 19.9 50.2 40.4 26.2 20.5 40.3 0.7 5.2 0.0% 0.0% 26.8 25.2002069.SZ Zhangzidao Fishery* U 13.40 CNY 37.55 1,244 14.1 67.3 59.6 51.3 34.2 32.0 1.6 6.8 0.4% 0.9% 33.6 36.3600519.SS Kweichow Moutai * O 226.00 CNY 169.82 23,475 70.7 42.2 32.7 25.2 21.1 24.6 1.0 14.3 0.5% 0.7% 27.9 21.9000858.SZ Wuliangye * E 32.00 CNY 31.66 17,602 166.2 66.4 40.6 30.4 25.9 25.2 1.2 10.6 0.0% 0.2% 42.4 25.3000568.SZ Luzhou Lao Jiao Co. Ltd* O 45.00 CNY 39.04 7,972 88.2 43.0 34.5 28.8 23.6 20.8 1.4 15.6 0.9% 1.5% 34.0 29.5000869.SZ Yantai Changyu A* E 66.05 CNY 76.02 5,871 7.2 44.8 35.8 30.0 25.3 19.0 1.6 15.8 1.4% 1.6% 32.0 25.1200869.SZ Yantai Changyu B* O 65.00 HKD 68.97 4,692 1.8 35.8 28.5 24.0 20.2 19.0 1.3 12.6 1.8% 2.0% 25.3 19.8600887.SS Yili Industrial* E 31.00 CNY 26.48 3,100 26.2 NM 32.7 26.3 21.9 22.4 1.2 7.6 0.0% 0.0% 8.8 19.1600809.SS Shanxi Xinghuacun Fen Win E 41.00 CNY 42.93 2,722 13.7 75.8 42.6 32.8 28.5 22.2 1.5 12.7 0.4% 0.3% 33.5 21.4

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.

15


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

16


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


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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HiLo11E PE

11E P/E vs Jan96-Dec09 Historical FWD PE Range

18


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


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


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


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


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.

Analyst CertificationThe following analysts hereby certify that their views about the companies and the securities discussed in this report are accurately expressed and that they have not received and will not receive direct or indirect compensation in exchange for expressing specific recommendations or views in the report: Angela Moh, Dennis Tao, Lillian Lou, Robert LinTUnless otherwise stated, the individuals listed on the cover page of this report are research analysts.

Global Research Conflict Management PolicyMorgan Stanley Research has been published in accordance with our conflict management policy, which is available at www.morganstanley.com/institutional/research/conflictpolicies.

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


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


STOCK RATINGSMorgan Stanley uses a relative rating system using terms such as Overweight, Equal-weight, Not-Rated or Underweight (see definitions below). 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. Investors should carefully read the definitions of all ratings used in Morgan Stanley Research. In addition, since Morgan Stanley Research contains more complete information concerning the analyst's views, investors should carefully read Morgan Stanley Research, in its entirety, and not infer the contents from the rating alone. In any case, ratings (or research) should not be used or relied upon as investment advice. 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.

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..

Analyst Stock RatingsOverweight (O or Over) - The stock's total return is expected to exceed the total return of the relevant country MSCI Index, on a risk-adjusted basis over the next 12-18 months.Equal-weight (E or Equal) - The stock's total return is expected to be in line with the total return of the relevant country MSCI Index, on a risk-adjusted basis over the next 12-18 months.Not-Rated (NR) - Currently the analyst does not have adequate conviction about the stock's total return relative to the relevant country MSCI Index on a risk-adjusted basis, over the next 12-18 months.Underweight (U or Under) - The stock's total return is expected to be below the total return of the relevant country MSCI Index, on a risk-adjusted basis, over the next 12-18 months.Unless otherwise specified, the time frame for price targets included in Morgan Stanley Research is 12 to 18 months.Analyst Industry ViewsAttractive (A): The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be attractive vs. the relevant broad market benchmark, as indicated below.In-Line (I): The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be in line with the relevant broad market benchmark, as indicated below.Cautious (C): The analyst views the performance of his or her industry coverage universe over the next 12-18 months with caution vs. the relevant broad market benchmark, as indicated below.Benchmarks for each region are as follows: North America - S&P 500; Latin America - relevant MSCI country index or MSCI Latin America Index; Europe - MSCI Europe; Japan - TOPIX; Asia -relevant MSCI country index.

6932,445Total22%12%8215%376Underweight/Sell13%0%31%23Not-Rated/Hold29%46%32245%1093Equal-weight/Hold30%41%28639%953Overweight/Buy

% of Rating Category

% of Total IBC

Count% of TotalCountStock Rating Category

Investment Banking Clients (IBC)Coverage Universe

25


Disclosures (cont.)

Important Disclosures for Morgan Stanley Smith Barney LLC CustomersCiti Investment Research & Analysis (CIRA) research reports may be available about the companies or topics that are the subject of Morgan Stanley Research. Ask your Financial Advisor or use Research Center to view any available CIRA research reports in addition to Morgan Stanley research reports.Important disclosures regarding the relationship between the companies that are the subject of Morgan Stanley Research and Morgan Stanley Smith Barney LLC, Morgan Stanley and Citigroup Global Markets Inc. or any of their affiliates, are available on the Morgan Stanley Smith Barney disclosure website at www.morganstanleysmithbarney.com/researchdisclosures.For Morgan Stanley and Citigroup Global Markets, Inc. specific disclosures, you may refer to www.morganstanley.com/researchdisclosures and https://www.citigroupgeo.com/geopublic/Disclosures/index_a.html.Each Morgan Stanley Equity Research report is reviewed and approved on behalf of Morgan Stanley Smith Barney LLC. This review and approval is conducted by the same person who reviews the Equity Research report on behalf of Morgan Stanley. This could create a conflict of interest.

Other Important DisclosuresMorgan Stanley produces an equity research product called a "Tactical Idea." Views contained in a "Tactical Idea" on a particular stock may be contrary to the recommendations or views expressed in research on the same stock. This may be the result of differing time horizons, methodologies, market events, or other factors. For all research available on a particular stock, please contact your sales representative or go to Client Link at www.morganstanley.com.For a discussion, if applicable, of the valuation methods and the risks related to any price targets, please refer to the latest relevant published research on these stocks.Morgan Stanley Research does not provide individually tailored investment advice. Morgan Stanley Research has been prepared without regard to the individual financial circumstances and objectives of persons who receive it. Morgan Stanley recommends that investors independently evaluate particular investments and strategies, and encourages investors to seek the advice of a financial adviser. The appropriateness of a particular investment or strategy will depend on an investor's individual circumstances and objectives. The securities, instruments, or strategies discussed in Morgan Stanley Research may not be suitable for all investors, and certain investors may not be eligible to purchase or participate in some or all of them.Morgan Stanley Research is not an offer to buy or sell or the solicitation of an offer to buy or sell any security/instrument or to participate in any particular trading strategy. The "Important US Regulatory Disclosures on Subject Companies" section in Morgan Stanley Research lists all companies mentioned where Morgan Stanley owns 1% or more of a class of common equity securities of the companies. For all other companies mentioned in Morgan Stanley Research, Morgan Stanley may have an investment of less than 1% in securities/instruments or derivatives of securities/instruments of companies and may trade them in ways different from those discussed in Morgan Stanley Research. Employees of Morgan Stanley not involved in the preparation of Morgan Stanley Research may have investments in securities/instruments or derivatives of securities/instruments of companies mentioned and may trade them in ways different from those discussed in Morgan Stanley Research. Derivatives may be issued by Morgan Stanley or associated personsWith the exception of information regarding Morgan Stanley, Morgan Stanley Research is based on public information. Morgan Stanley makes every effort to use reliable, comprehensive information, but we make no representation that it is accurate or complete. We have no obligation to tell you when opinions or information in Morgan Stanley Research change apart from when we intend to discontinue equity research coverage of a subject company. Facts and views presented in Morgan Stanley Research have not been reviewed by, and may not reflect information known to, professionals in other Morgan Stanley business areas, including investment banking personnel.Morgan Stanley Research personnel conduct site visits from time to time but are prohibited from accepting payment or reimbursement by the company of travel expenses for such visits.The value of and income from your investments may vary because of changes in interest rates, foreign exchange rates, default rates, prepayment rates, securities/instruments prices, market indexes, operational or financial conditions of companies or other factors. There may be time limitations on the exercise of options or other rights in securities/instruments transactions. Past performance is not necessarily a guide to future performance. Estimates of future performance are based on assumptions that may not be realized. If provided, and unless otherwise stated, the closing price on the cover page is that of the primary exchange for the subject company's securities/instruments.Morgan Stanley may make investment decisions or take proprietary positions that are inconsistent with the recommendations or views in this report.To our readers in Taiwan: Information on securities/instruments that trade in Taiwan is distributed by Morgan Stanley Taiwan Limited ("MSTL"). Such information is for your reference only. 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26


Disclosures (cont.)

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27


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morgan stanley greater china consumer retail valuation (1)

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