Asia Pacific Equity Research
 27 April 2005




 Pusan Bank                                                               ...
Scott YH Seo                                         Asia Pacific Equity Research
(82-2) 758 5759                         ...
Scott YH Seo                           Asia Pacific Equity Research
(82-2) 758 5759                        27 April 2005
s...
Scott YH Seo                                   Asia Pacific Equity Research
(82-2) 758 5759                               ...
Scott YH Seo                                     Asia Pacific Equity Research
(82-2) 758 5759                             ...
Scott YH Seo                                             Asia Pacific Equity Research
(82-2) 758 5759                     ...
Scott YH Seo                                                   Asia Pacific Equity Research
(82-2) 758 5759               ...
Scott YH Seo                                      Asia Pacific Equity Research
(82-2) 758 5759                            ...
Scott YH Seo                                      Asia Pacific Equity Research
(82-2) 758 5759                            ...
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  1. 1. Asia Pacific Equity Research 27 April 2005 Pusan Bank Overweight 1Q FY05 results review: Earnings surprise driven by W7,860 robust loan growth and well controlled overheads 26 April 2005 Price Target: W9,900 • Pusan Bank’s (PSB) 1Q FY05 results conveyed an earnings Banks surprise, surpassing our estimates for pre-provision OP (PPOP) and Scott YH Seo NP by 23% and 51%, respectively. The main drivers include: (82-2) 758 5759 (1) sizable loan growth of 14% Y/Y offsetting the negative impact scott.seo@jpmorgan.com of falling NIM, (2) well controlled overheads (8% Y/Y decrease), Gil Kim and (3) 80% Y/Y drop in provisions on the back of stabilized (82-2) 758-5900 gil.h.kim@jpmorgan.com delinquency trends. PSB: One-year relative performance to • Based on sizably better-than-expected 1Q results, we are raising our Kospi PPOP and NP estimates for FY05 by 11% and 13%, respectively. Apr 26, 2004 = 100 120 • We reiterate our Overweight rating in the belief that the bank’s valuation discount (around 30%) to mega-sized banks will narrow. 110 We believe a re-rating of PSB would be based on the following: (1) greater than 30% Y/Y growth in FY05E earnings, (2) net interest 100 income to grow from the bottom level of 1Q FY05 by virtue of aggressive balance sheet repositioning (i.e., growing loans, but 90 reducing fixed-income assets), (3) offering a very attractive dividend Apr-04 Jun-04 Aug-04 Oct-04 Dec-04 Feb-05 Apr-05 yield at the current price level with PSB’s strong commitment on Source: Datastream. “around 33%” payouts. Our new 12-month price target of W9,900 implies 8.1x FY05E EPS and 1.3x FY05E BV. Reuters005280.KS; Bloomberg: 005280 KS Won in billions, year-end December FY04 FY05E FY06E FY07E ADR Net profit 133 179 201 212 52-week range W8,960-5,600 Reuters NA Basic EPS—rep'd (W) 905 1,219 1,367 1,446 Market cap W1,153B Bloomberg NA Cash adj. EPS (W) 765 1,056 1,194 1,255 Market cap US$1,154MM 52-wk range NA DPS (W) 300 400 450 480 Shares outstanding 147MM Ratio NA Basic EPS growth (%) 9.4 34.7 12.2 5.7 Free float 85.9% Avg. daily volume NA Cash adj. EPS growth (%) 6.2 38.0 13.0 5.1 Avg. daily value W3.9B Current prem. (%) NA ROE (%) 13.5 16.9 17.3 16.2 Avg. daily value US$3.9MM 13-wk avg. disc (%) NA Cash adj. ROE (%) 11.4 14.6 15.1 14.1 Avg. daily volume 0.5 MM shares 52-wk avg. disc (%) NA P/E—Basic (x) 8.7 6.4 5.7 5.4 KOSPI 944.46 P/E—Cash adjusted (x) 10.3 7.4 6.6 6.3 Exchange rate W 999/US$1 BVPS (W) 6,993 7,451 8,370 9,443 Tangible NAV (W) 6,993 7,451 8,370 9,443 Performance 1 mth 3 mths 12 mths P/B (x) 1.1 1.1 0.9 0.8 Absolute (%) -2.8 3.4 5.6 Dividend yield (%) 3.8 5.1 5.7 6.1 Relative (%) -0.7 1.5 2.9 Source: Company, Bloomberg, JPMorgan estimates. See page 7 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.
  2. 2. Scott YH Seo Asia Pacific Equity Research (82-2) 758 5759 27 April 2005 scott.seo@jpmorgan.com 1Q FY05 results review Earnings surprise in 1Q FY05 Pusan Bank (PSB) announced its 1Q FY05 results on April 26 and held an analyst meeting to brief its results. The bank’s pre-provision OP and NP for 1Q FY05 were 23% and 51% higher than our estimates, respectively. Also, the bank’s 1Q FY05 NP exceeded consensus by 51%. The key summaries of PSB’s 1Q FY05 results are as follows. • Operating revenue was in line with our estimate. PSB’s NIM fell by 10 bps to 304 bps in 1Q from a quarter ago. However, the bank’s efforts to grow loans almost offset the negative impact from falling NIM, posting only a 1% Q/Q decrease in net interest income. • Operating expenses was 18% lower than our estimate. PSB’s well controlled cost management led to 8% Y/Y decrease in operating expenses. • Provisions were 64% lower than our estimates due to more stabilized delinquency trends across all segments. Credit-related expenses As we can see from Figure 1 and Figure 2, pre-charge off delinquency trends at PSB showed meaningful improvements in two consecutive quarters in a row, suggesting that the economic environment of the Pusan area (where PSB operates) is better than expected. PSB’s provisions dropped by 80% Y/Y (or 55% Q/Q) in 1Q FY05 by virtue of considerable decrease in newly created NPLs. During the quarter, the bank only wrote off W15.2 billion (versus W28 billion of write-offs and W24.7 billion of NPL sales in 4Q FY04), but PSB kept its over-100% NPL coverage ratio policy. Figure 1: PSB—Delinquency ratio trends in SME loans Figure 2: PSB—Delinquency ratio trends in household loans % % 2.0 2.5 1.8 2.0 1.6 1.5 1.4 1.2 1.0 1.0 0.5 4Q03 1Q04 2Q04 3Q04 4Q04 1Q05 4Q03 1Q04 2Q04 3Q04 4Q04 1Q05 Reported delinquency ratio Pre-charge off delinquency ratio Reported delinquency ratio Pre-charge off delinquency ratio Source: Company. Source: Company. 2
  3. 3. Scott YH Seo Asia Pacific Equity Research (82-2) 758 5759 27 April 2005 scott.seo@jpmorgan.com Table 1: PSB—1Q FY05 results W in billions, year-end December FY03 FY04 FY04 FY05 % Y/Y % Q/Q 1Q 1Q 4Q 1Q Income statement Net interest income 111 125 127 125 0 -1 Net interest income 99 116 121 120 4 -1 Interest income on cash advance 12 9 6 5 -42 -12 Non-interest income (net) 25 27 28 28 3 -2 Dealing/valuation -1 1 1 2 42 56 Commission income 26 26 27 26 1 -4 Total operating revenue 136 151 155 153 1 -1 Operating expenses 70 75 83 69 -8 -17 Goodwill amortization 0 0 0 0 n.a. n.a. Pre-provision operating profit 66 77 72 84 9 17 Loan loss provisions 47 45 19 9 -80 -55 Post-provision operating profit 19 32 52 75 134 44 Other (non-op) income -6 5 0 -3 n.a. n.a. Net equity-method valuation gain -2 -1 0 0 n.a. n.a. Securities-related gain -2 8 8 4 -54 -57 Profit before taxes 13 36 52 72 97 39 Income taxes 0 11 16 19 84 18 Net profits 13 26 36 53 103 48 Dividends 0 0 -44 0 n.a. n.a. EPS (Won, annualized) 359 717 961 1,456 103 52 DPS (Won) 0 0 270 0 n.a. n.a. Period-end common shares (MM) 147 147 147 147 0 0 Wtd avg common shares (MM) 147 147 147 147 0 0 Balance sheet Assets 15,457 15,938 17,134 17,509 10 2 Gross loans 8,842 9,945 11,234 11,350 14 1 Deposits 11,709 12,255 12,804 12,633 3 -1 Equity 821 921 1,026 1,026 11 0 Book value (Won) 5,595 6,278 6,993 6,993 11 0 Ratios (%) ROA 0.4 0.6 0.8 1.2 ROE 6.4 11.2 13.9 20.8 Net interest margin 3.25 3.29 3.14 3.04 Cost/income 54.1 52.3 56.6 45.1 Loans/deposits 75.5 81.2 87.7 89.8 NPLs/loans 2.62 1.92 1.30 1.34 Tier-1 ratio 9.02 9.45 8.99 9.32 Total CAR 11.01 11.40 10.84 10.74 Source: Company, JPMorgan estimates. Change in forecast and price target 13% increase for FY05E NP forecast Based on sizably better-than-expected 1Q FY05 results, we are raising our PPOP and NP forecasts for FY05 by 11% and 13%, respectively. • We assume 11% (versus industry loan growth estimate of 7%) and 9% (versus 7.5%) loan growths for FY05 and FY06, respectively. • We expect PSB’s NIM to fall by 6bps and 10bps in FY05 and FY06, respectively. • We assume that the bank’s cost-to-income will fall below 50% from FY06. 3
  4. 4. Scott YH Seo Asia Pacific Equity Research (82-2) 758 5759 27 April 2005 scott.seo@jpmorgan.com • We assume that the bank will maintain around a 33% dividend payout ratio going forward. • We expect the bank’s tier-1 CAR to exceed 10% from FY06. Table 2: PSB—Change in forecast W in billions, Won, %, year-end December Pre-provision Op Provisions Net profit EPS New Old Chg. New Old Chg. New Old Chg. New Old Chg. FY03 311.8 311.8 0.0 -175.6 -175.6 0.0 121.3 121.3 0.0 827 827 0.0 FY04 306.2 306.2 0.0 -126.0 -126.0 0.0 132.7 132.7 0.0 905 905 0.0 FY05E 331.8 298.5 11.2 -79.2 -98.1 -19.3 178.8 158.6 12.7 1,219 1,081 12.7 FY06E 376.9 358.4 5.1 -101.5 -111.8 -9.2 200.6 193.3 3.8 1,367 1,318 3.8 Source: Company, JPMorgan estimates. Reiterating Overweight on PSB We reiterate our Overweight rating in the belief that the bank’s valuation (around 30%) discount to mega-sized banks will narrow. We believe a re-rating of PSB will be based on the following: (1) greater than 30% Y/Y growth in FY05E earnings, (2) net interest income to grow from the bottom level of 1Q FY05 by virtue of aggressive balance sheet repositioning (i.e., growing loans, but reducing fixed- income assets), (3) offering a very attractive dividend yield, given PSB’s strong commitment to “around 33%” payouts. The dividend discount model remains our primary valuation tool for Korean banks, including PSB. We have assumed PSB’s normalized ROE at 14.0%. Together with our cost of equity assumption of 11.4%, we get a fair price-to-book multiple of 1.3x. Based on the end-FY05E BV, we derive the 12-month price target of W9,900 on the counter. Our new target price of W9,900 implies 8.1x FY05E EPS. Figure 3: PSB—12-month forward P/BV Won 10,000 1.25x 8,000 1.00x 0.75x 6,000 4,000 0.50x 2,000 - Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05 Source: Company, JPMorgan estimates. Risks to target price • Unforeseen regulation changes could negatively affect our view on the company. • Unforeseen corporate bankruptcies could negatively affect our view and earnings forecast on the company. • If the domestic economy deteriorates more than our estimates, our forecast for provisions and earnings could be negatively affected. 4
  5. 5. Scott YH Seo Asia Pacific Equity Research (82-2) 758 5759 27 April 2005 scott.seo@jpmorgan.com Table 3: PSB—Balance sheet W in billions, year-end December FY99 FY00 FY01 FY02 FY03 FY04 FY05E FY06E FY07E Assets Cash (non-int. bearing) 504 460 474 671 718 859 706 762 823 Cash and deposits 926 649 365 369 204 181 532 574 620 Securities, investments 2,585 3,708 4,393 4,226 4,630 4,018 3,817 4,269 4,611 Gross loans (est) 5,006 5,911 7,092 8,594 9,817 11,234 12,466 13,587 14,674 (Loan-loss reserves) 136 138 132 156 142 158 154 177 202 (General reserves) 32 31 47 77 81 0 0 0 0 (Specific reserves) 105 108 85 79 61 158 154 177 202 Accrued interest 0 0 0 0 0 0 0 0 0 Fixed assets 327 325 329 328 334 343 293 219 133 Goodwill 0 0 0 0 0 0 0 0 0 Other intangible assets 0 0 0 0 0 0 0 0 0 Other assets 123 132 248 140 505 299 445 466 483 Total assets 10,048 11,881 13,062 14,537 16,355 17,134 18,430 20,077 21,569 Estimated risk-weighted assets 5,322 5,717 6,733 8,610 9,403 10,673 11,426 12,215 13,193 Non-performing loans 420 413 263 193 160 146 168 185 195 as % of loans 8.4 7.0 3.7 2.2 1.6 1.3 1.3 1.4 1.3 Liabilities Deposits 7,473 9,027 10,076 11,067 12,309 12,174 13,640 14,731 15,910 Borrowings 1,632 1,858 2,002 2,132 2,617 2,673 2,457 2,773 2,816 Other liabilities 543 590 539 522 491 1,262 1,241 1,345 1,459 Total liabilities 9,647 11,475 12,618 13,721 15,418 16,109 17,337 18,849 20,184 Preferred shares 0 0 0 0 0 0 0 0 0 Common shareholders’ equity (incl. minorities) 401 407 444 816 937 1,026 1,093 1,228 1,385 Book value per share (Won) 4,221 4,278 4,671 5,562 6,387 6,993 7,451 8,370 9,443 Tangible NAV (Won) 4,221 4,278 4,671 5,562 6,387 6,993 7,451 8,370 9,443 Source: Company, JPMorgan estimates. 5
  6. 6. Scott YH Seo Asia Pacific Equity Research (82-2) 758 5759 27 April 2005 scott.seo@jpmorgan.com Table 4: PSB—Income statement W in billions, year-end December FY99 FY00 FY01 FY02 FY03 FY04 FY05E FY06E FY07E Income Statement Interest income 808 863 908 906 915 913 931 1,001 1,078 Interest expense 563 599 595 470 437 415 407 446 488 Net interest income 246 264 313 436 478 498 524 555 591 Non-interest income 113 107 152 150 134 142 149 182 198 Total fees 165 118 151 153 133 140 139 183 198 Dealing profits / valuation gain -51 -11 1 -3 1 2 9 -1 -1 Operating income 359 370 465 586 612 640 673 737 788 Operating expenses 192 253 262 267 300 334 341 360 388 Staff 114 134 130 159 173 195 193 202 223 Premises 19 22 26 27 30 34 34 33 29 Goodwill 0 0 0 0 0 0 0 0 0 Operating profit 167 117 203 318 312 306 332 377 400 Loan loss provision 95 101 126 118 176 126 79 101 110 General provision -26 -1 16 31 4 12 -79 5 5 Specific provision 122 102 110 87 172 114 158 96 105 Other (non-op) inc -38 -6 -25 -53 -10 10 -7 1 2 Profits/losses on asset and inv'ment sec sales 2 7 17 -11 16 24 29 30 33 Associate profits/losses -40 -13 -42 -42 -26 -14 -35 -29 -32 Income taxes 0 0 0 0 5 57 67 76 80 Minority interests 0 0 0 0 0 0 0 0 0 Reported net profit 34 10 52 148 121 133 179 201 212 Preferred Dividend and other 'below-the-line' interest 0 0 0 0 0 0 0 0 0 Net income attributable to ordinary shareholders 34 10 52 148 121 133 179 201 212 Cash net income 34 10 52 148 121 133 179 201 212 Credit-related expenses 89 99 126 121 173 137 79 101 110 Loan loss provisions 95 101 126 118 176 126 79 101 110 Net losses on selling NPLs -7 -2 0 3 -2 11 0 0 0 Dividends 0 0 0 44 40 44 59 66 70 EPS Fully diluted EPS (Won) 306 66 337 981 827 905 1,219 1,367 1,446 Cash EPS (Won) 289 22 225 1,052 720 765 1,056 1,194 1,255 DPS (Won) 0 0 0 300 270 300 400 450 480 Year-end actual ordinary shares issued (MM shares) 95 95 95 147 147 147 147 147 147 Year-end actual ordinary shares (MM shares) 95 95 95 147 147 147 147 147 147 Year-end treasury shares (MM shares) 0 0 0 0 0 0 0 0 0 Wtd avg ordinary shares (MM shares) 111 155 155 151 147 147 147 147 147 Source: Company, JPMorgan estimates. Pusan Bank: Rating and target price changes as of April 26, 2005 Target Price/Fair Value Company Ticker Date Rating Price Basis Pusan Bank 005280 KS April 29 2003 O/W 7,745 12-month July 29 2003 O/W 7,745 12-month October 22 2003 O/W 7,745 12-month November 14 2003 O/W 7,745 12-month February 05 2004 O/W 7,745 12-month May 03 2004 O/W 9,200 12-month July 27 2004 O/W 9,200 12-month Sep 15, 2004 O/W 9,200 12-month October 27, 2004 O/W 9,200 12-month January 25, 2005 O/W 9,200 12-month February 1, 2005 O/W 9,200 12-month Source: Bloomberg, JPMorgan. Legal entity for Scott Seo and Gil Kim: J.P. Morgan Securities (Far East) Limited, Seoul Branch. 6
  7. 7. Scott YH Seo Asia Pacific Equity Research (82-2) 758 5759 27 April 2005 scott.seo@jpmorgan.com Companies Recommended in This Report Pusan Bank (005280.KS/W7,860.00/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 analysts are primarily responsible for this research, the 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 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: • Client of the Firm: Pusan Bank 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. • Non-Investment Banking Compensation: JPMSI has received compensation in the past 12 months for products or services other than investment banking from Pusan Bank. An affiliate of JPMSI has received compensation in the past 12 months for products or services other than investment banking from Pusan Bank. Pusan Bank (005280.KS) Price Chart 15,040 13,160 11,280 9,400 OW W7,745 OW W9,200 Price(W) 7,520 5,640 3,760 1,880 0 Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr 02 02 02 03 03 03 03 04 04 04 04 05 05 Source: Reuters and JPMorgan; price data adjusted for stock splits and dividends. Initiated coverage Feb 07, 2003. This chart shows JPMorgan's continuing coverage of this stock; the current analyst may or may not have covered it over the entire period. As of Aug. 30, 2002, the firm discontinued price targets in all markets where they were used. They were reinstated at JPMSI as of May 19th, 2003, for Focus List (FL) and selected Latin stocks. For non-JPMSI covered stocks, price targets are required for regional FL stocks and may be set for other stocks at analysts' discretion. JPMorgan ratings: OW = Overweight, N = Neutral, UW = Underweight. Ratings prior to Sept. 25, 2002: B = Buy, LTB = Long-Term Buy, MP = Market Performer, MU = Market Underperformer. Explanation of Ratings: 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 analyst’s (or the analyst’s team’s) 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 analyst’s (or the analyst’s team’s) 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 analyst’s (or the analyst’s team’s) coverage universe.] The analyst or analyst’s team’s coverage universe is the sector and/or country shown on the cover of each publication. Each analyst’s coverage list, showing full coverage universe, is available on the analyst’s page under the Research option on JPMorgan’s website www.morganmarkets.com, accessible to JPMorgan’s clients via password, or in the case of hard copy research or if no access to MorganMarkets, by calling this toll free number (1-800- 477-0406). Prior to September 25, 2002, our rating system was: Buy — we expect the stock to outperform the market by a minimum of 5% within an investment horizon of one year; Long-Term Buy — we believe the stock will outperform the market over the long run, but we lack the visibility of a catalyst for outperformance within a one-year investment horizon; Market Performer — the stock is expected to perform in line with the market; Market Underperformer — we expect the stock to underperform the market by a minimum of 5% within an investment horizon of one year. 7
  8. 8. Scott YH Seo Asia Pacific Equity Research (82-2) 758 5759 27 April 2005 scott.seo@jpmorgan.com JPMorgan Equity Research Ratings Distribution, as of March 31, 2005 Overweight Neutral Underweight (buy) (hold) (sell) JPM Global Equity Research Coverage 39% 42% 18% IB clients* 47% 47% 37% JPMSI Equity Research Coverage 34% 48% 18% IB clients* 66% 59% 45% *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. Valuation and Risks: Company notes and reports include a discussion of valuation methods used, including methods used to determine a price target (if any), and a discussion of risks to the price target. Analysts’ Compensation: The equity research analysts responsible for the preparation of this report receive compensation based upon various factors, including the quality and accuracy of research, client feedback, competitive factors, and overall firm revenues, which include revenues from, among other business units, Institutional Equities and Investment Banking. Other Disclosures: Legal Entities: JPMorgan is the marketing name used on global equity research issued by JPMSI and/or its affiliates worldwide. JPMSI is a member of NYSE, NASD and SIPC. The analysts who write global equity research are employees of JPMSI or its affiliated companies worldwide, including the following companies. J.P. Morgan Securities Ltd. (JPMSL) is a member of the London Stock Exchange and is authorised and regulated by the Financial Services Authority. J.P. Morgan Equities Limited is a member of the Johannesburg Securities Exchange and is regulated by the FSB. J.P. Morgan Securities Asia Private Limited (Co. Reg. No.: 197300590K) is regulated by the Monetary Authority of Singapore (MAS) and the Japan Financial Services Agency (FSA). J.P. Morgan Securities (Asia Pacific) Limited (CE number AAJ321) and J.P. Morgan Securities (Far East) Limited (CE number AAB026) are regulated by the Hong Kong Monetary Authority and the Securities and Futures Commission in Hong Kong respectively. J.P. Morgan Securities Singapore Private Limited (Co. Reg. No.: 199405335R) is a member of Singapore Exchange Securities Trading Limited and is regulated by the MAS. J.P. Morgan Malaysia Sdn. Bhd. (18146-X) is licensed as an investment advisor by the Securities Commission in Malaysia. J.P. Morgan Australia Limited (ABN 52 002 888 011/AFS Licence No: 238188) and J.P. Morgan Securities Australia Limited (ABN 61 003 245 234/AFS Licence No: 238066, a Market Participant with the ASX) (JPMSAL) are licensed securities dealers. J.P. Morgan Securities New Zealand Limited is a New Zealand Exchange Limited Market Participant. J.P.Morgan Securities (Taiwan) Limited is a participant of the Taiwan Stock Exchange (company-type) and regulated by the Taiwan Securities and Futures Commission. J.P. Morgan India Private Limited is a member of the National Stock Exchange of India Limited and The Stock Exchange, Mumbai and is regulated by the Securities and Exchange Board of India. J.P. Morgan Securities (Thailand) Limited is a member of the Stock Exchange of Thailand and is regulated by the Ministry of Finance and the Securities and Exchange Commission PT. J.P. Morgan Securities Indonesia is a member of the Jakarta Stock Exchange and Surabaya Stock Exchange and is regulated by the BAPEPAM. This report is distributed in the Philippines by J.P. Morgan Securities Philippines, Inc. Banco J.P. Morgan S.A. is regulated by the Comissao de Valores Mobiliarios (CVM) and by the Central Bank of Brazil. 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 analyst’s 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. 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Investors may get back less than they invested. Changes in rates of exchange may have an adverse effect on the value of investments. 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 8
  9. 9. Scott YH Seo Asia Pacific Equity Research (82-2) 758 5759 27 April 2005 scott.seo@jpmorgan.com 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 March 31, 2005. 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 [MITA (P) NO. 183/05/2004]. THIS MATERIAL IS ISSUED AND DISTRIBUTED IN MALAYSIA BY J.P. MORGAN MALAYSIA SDN. BHD. (18146-X). Copyright 2005 JPMorgan Chase & Co. All rights reserved. Additional information available upon request. 9

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