Jiutian affected by snowstorm

Snowstorm hits China. China has experienced snowstorm since 10 Jan, which
affected 78m people in certain parts of 14 provinces (Anhui, Jiangxi,
Henan, Hubei, Hunan, Guangxi, Chongqing, Sichuan, Guizhou, Yunnan, Shaanxi,
Qinghai, Gansu, Xinjiang). It is reported that the northern China and
northeastern China are generally out of the disaster, while Xinhua News
reported that the snowstorm might only start to slowly fades away after 3
February.

Transportation and energy cuts are main problems caused by the snowstorm.
Xinhua News reported that certain production materials, coal, and goods may
have difficulties reaching the designated places, and there is also
electricity usage cuts in certain places. The affected products are mainly
agricultural products like vegetables, and sugarcane, while non-winter
crops like soybean, corn and cotton are not affected.

Snowstorm in China generally has negligible impact on S-Chips' earnings.
Our analysis of various S-Chips under coverage shows that the impact of the
ongoing snowstorm in China has negligible impact on their results in 1Q
2008. This is due to: 1) typical plant shutdown in the Lunar New Year
period, 2) enough inventories to cover possible delays in shipment of
products to customers, 3) main production plants are not located in the
affected areas, and 4) any possible temporary production delay can be
covered by subsequent production ramp-up.

Jiutian is the only S-Chip stock whose earnings are likely to be affected
by the snowstorm. Jiutian is shutting down its new 120k DMF plant for a
month, attributed to recent snowstorm that causes plants shutdown for some
of its PU customers. Whilst the new plant would only resume operations in
mid February, the old 30k tpa plant will however be running as per normal.

Coupled with our assumption of a possible slower ramp up of the new plant
upon resumption of production, we have cut our FY08 output estimates by
21.5k tonnes to 118k tonnes. We have also factored in an overhead expense
of RMB3m for the month of February, and our FY08 earnings is revised
downwards by 14.5% to RM136.1m. Following the earnings cut, our TP is
adjusted down to S$0.37 accordingly, still pegged to 12x FY08/09 PER.