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The Most Influential RENCASIA Constituents

Ticker Company Influence, pts Leading Movers HSBK LI Equity Halyk Savings Bank of Kazakhstan JSC +3.68 KMG LI Equity KazMunaiGas Exploration Production JSC +3.02 1878 HK Equity SouthGobi Resources Ltd +1.11 MXP LN Equity Max Petroleum PLC +0.77 KYS LN Equity Kryso Resources PLC +0.54 Lagging Movers ENRC LN Equity Eurasian Natural Resources Corp PLC -0.54 TPL CN Equity Tethys Petroleum Ltd -1.39 KAZ LN Equity Kazakhmys PLC -2.22 UUU CN Equity Uranium One Inc -6.82

Index Movers

Composition of RENCASIA
Number	Ticker	Company	Industry	MktCap, $mn	Weight in Index
1	1878 HK Equity	SouthGobi Resources Ltd	Metals & Mining	1,069.52	2.46
2	CG CN Equity	Centerra Gold Inc	Metals & Mining	2,163.56	6.82
3	DGO LN Equity	Dragon Oil PLC	Oil & Gas	4,150.78	16.98
4	ENRC LN Equity	Eurasian Natural Resources Corp PLC	Metals & Mining	9,887.31	12.44
5	HSBK LI Equity	Halyk Savings Bank of Kazakhstan JSC	Banking	1,959.35	4.13
6	KAZ LN Equity	Kazakhmys PLC	Metals & Mining	6,065.03	13.29
7	KMG LI Equity	KazMunaiGas Exploration Production JSC	Oil & Gas	7,933.57	19.77
8	KYS LN Equity	Kryso Resources PLC	Basic Materials	119.16	0.68
9	KZTK KZ Equity	Kazakhtelecom JSC	Telecoms	737.87	1.84
10	MXP LN Equity	Max Petroleum PLC	Oil & Gas	177.25	0.67
11	SATC KZ Equity	SAT & Co	Basic Materials	317.10	0.38
12	TPL CN Equity	Tethys Petroleum Ltd	Oil & Gas	190.90	1.90
13	UUU CN Equity	Uranium One Inc	Metals & Mining	2,425.42	13.01
14	ZKM LI Equity	Zhaikmunai LP	Oil & Gas	1,572.50	5.63

Recently Reports

May 15, 2012 Mongolia: SouthGobi Resources - Stripping down	10 Pages PDF file 928 KB
Strip ratio and cash costs down. SouthGobi reported EBITDA of USD13.1mn and net profit of USD3.1mn in MarQ12, better than our respective forecasts of negative USD1.8mn and negative USD5.7mn. Mine operating expense excluding depreciation fell 31% QoQ to USD16/t, as the strip ratio fell significantly QoQ to well below the life-of-mine (LoM) average. Material movements also fell substantially QoQ to 2.2mn bcm in MarQ12 from 4.6mn bcm, which the company did not explain other than to say it was part of the mine plan. MarQ12 cash costs (incl. royalties and SG&A) were USD41/t, but we expect them to increase in JunQ12 as strip ratios normalise. Sales were 0.84mnt, above our forecast 0.63mnt, at an average price of USD56.79/t, up 2.3% QoQ. Pleasingly, SouthGobi’s royalty rate will fall as Mongolia has started assessing royalties using a suitable reference price.
May 9, 2012 Central Asia: Spices of the Silk Road – A robust recovery…but can it last?	19 Pages PDF file 589 KB
One would have made out nicely investing in Central Asian equities YtD. Both RENCASIA and RENKAZ have remained among the top performers YtD (13.1% and 22%, respectively), despite investors taking money off the table in March and April. On the flipside, the cost of such returns remains high volatility. We expect a much weaker showing by Central Asian stocks in 2Q12.
May 8, 2012 Kazakhstan: KazMunaiGas E&P - Production outlook improved, waiting for clarity on cash	8 Pages PDF file 273 KB
We lift our target price by 10% to $23/GDR, but maintain our HOLD rating. We recently hosted KMG E&P on an investor trip in Asia. Following the trip, we make the following updates.
May 3, 2012 Mongolia: Mongolian coal sector - Mongolia’s limitations	7 Pages PDF file 684 KB
Foreign ownership limits in Mongolia? The Financial Times has reported Mongolia is considering limiting foreign ownership of large companies in strategic sectors (including mining) to 49% as well as instituting a formal review process for foreign investment in the wake of Chalco’s proposed proportional takeover offer for SouthGobi. The article notes that the legislation is far from final, and we believe any proposed legislation is impossible to analyse without critical details surrounding provisions for retrospectivity, review criteria and divestment timetables. Moreover, we are sceptical that foreign investment restrictions are a viable option for Mongolia which, unlike Indonesia, has a small pool of domestic capital available to fund the large mine and infrastructure development projects necessary to monetise the country’s mineral wealth.
April 30, 2012 Mongolia: SouthGobi Resources – Plenty of upside potential	8 Pages PDF file 720 KB
79.5% (annualised) upside potential. SouthGobi is an interesting acquisition arbitrage opportunity, in our opinion, with up to 18.0% upside potential to Chalco’s CAD8.48/share (HKD66.69/share) proposed cash, proportional takeover offer for up to 60% of the company (from the current share price of HKD53.35/share). This represents a 79.5% potential annualised return, assuming a takeover offer on or before 5 July 2012 and take up by Chalco of deposited shares by 10 August 2012, that 72% of tendered shares are accepted and that shares trade flat at HKD53.35/share following the close of the offer.
April 23, 2012 Global: Coking coal market outlook - Gerard McCloskey comments	13 Pages PDF file 380 KB
Coking coal market tightens. In early April Gerard McCloskey expected hard coking coal prices to fall below USD200/t in SepQ12, from USD206-210/t in JunQ12, and not to breach USD200/t again until well into 2013. One caveat, however, was the risk of ongoing strike action at the BHP Billiton-Mitsubishi Alliance (BMA) mines. As strikes continue and following the closure of BHP Billiton’s 3-4mn tpa Norwich Park mine, McCloskey now believes SepQ12 settlement prices of at least USD220/t are likely, particularly if strikes continue into May and beyond.
April 17, 2012 Central Asia: KazMunaiGaz EP - Deep value or value trap?	1 Pages PDF file 140 KB
Weak 1Q12 operating update as expected. Yesterday (16 April), KMG E&P provided a weak 1Q12 operating update, with production at core fields (Uzen & Emba) at 156 kb/d being 7% behind the company’s original plan and 9% lower YoY. Total production including associates declined 5% YoY to 249 kb/d. Production decline during 1Q12 had already been flagged on 2 March, when the company reported FY11 results, citing severe weather conditions and power cuts. KMG EP also reported a 3% decline in 2P reserves at its core assets to 1,661Mbls and just a 21% reserve replacement ratio (RRR). Given that KMG’s reserves life is still 29 years, we do not think adding reserves represents a major issue for the company. Moreover, we treat the 21% RRR as a temporary problem caused primarily by lost production as a result of strikes in Zhanaozen and little exploration progress in 2011 (which we anticipate is likely to reverse this year).
April 16, 2012 Mongolia: SouthGobi Resources - Ovoot Tolgoi licence suspension	7 Pages PDF file 278 KB
Government troubles. The Mineral Resources Authority of Mongolia (MRAM) requested SouthGobi suspend mining activities at Ovoot Tolgoi during a press conference held today, although an official notification is yet to be made. SouthGobi believes that MRAM’s actions are due to the Mongolian government’s desire to review the proposed proportional takeover of SouthGobi by Chalco and has asked Ivanhoe Mines, its controlling shareholder, and Chalco to consult with the Mongolian government regarding the change of control.
April 13, 2012 Kazakhstan: Halyk Bank - Now Kazakhstan’s largest bank	22 Pages PDF file 939 KB
Halyk is now officially Kazakhstan’s largest bank by both assets and deposits (18.6% and 21.2% market shares, respectively, at end-February 2012). We think it is likely in the number-two spot in lending on a net basis.
April 12, 2012 Kazakhstan: Kazakh banks - Faster economy, slower banking	32 Pages PDF file 1.70 MB
The Kazakh economy continues to outperform...Kazakhstan’s economy expanded 7.5% YoY in 2011, well above our expectations, driven by a record-high harvest and growing commodity prices. With 2012 GDP growth of 5.5% (our estimate; the government expects 6%), Kazakhstan is set to remain one of the region’s fastest -growing economies, in our view.

All Reports

Renaissance Capital Central Asia Equity Index performances
RENCASIA value statistics 2007 2008 2009 Open 930.00 1,000.00 334.43 Close 1,000.00 334.43 677.44 Average 1,062.00 851.12 482.83	RENCASIA return 2007 2008 2009 Capital gain return 7.50 -66.56 102.57 Dividend yield 1.10 6.41 2.43 Total return 8.60 -60.15 0.00
Indexed stocks Market capitalization, $mn 2007 2008 2009 Open 42,838.00 69,178.00 21,794.00 Close 47,643.00 21,794.00 53,989.89 Average 48,669.00 58,898.66 41,946.86	RENCASIA income 2007 2008 2009 P/B 1.98 0.66 1.13 ROE 20.32 20.98 18.31 ROA 4.19 5.29 4.84 P/E 9.74 3.15 6.15 Net income, $mn 1,204.00 1,669.80 1,853.92 Net income growth, % 49.00 35.00 11.03

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