2010 12 17 (cimb) my strategy 2011 mal-nav-2011-171210

The S.E.A. Navigator – Malaysia 2011 [ 1 ]


Contents

Liquidity-fuelled pre-election rally................................................................................ 3 Review of 2010........................................................................................................... 4

V-shaped recovery so far ...................................................................................... 4 Key drivers for 2011.................................................................................................... 7

Foreign funds boost .............................................................................................. 7 Elections, elections, elections ............................................................................... 9

Economic outlook ..................................................................................................... 12 Key risks for 2011 ..................................................................................................... 16 Valuation and recommendation ................................................................................ 17

Maintain OVERWEIGHT on Malaysia ................................................................. 17 Sectors to overweight.......................................................................................... 19

CIMB picks in 2011................................................................................................... 23 Sector Briefs….......................................................................................................... 25 Company Briefs…..................................................................................................... 45 Appendices… ......................................................................................................... 206

Please read carefully the important disclosures at the end of this publication.


Liquidity-fuelled pre-election rally OVERWEIGHT

2011 Tgt. Index: 1,700 • Significant trading catalysts. The KLCI confounded sceptics in 2010 when it

scaled new all-time highs, capping two years of a V-shaped recovery. 2011 looks set to be another good year, driven by foreign funds which have strayed from the beaten path in search of higher returns in emerging markets and also election fever as elections are generally positive for the market. Malaysia remains underowned by foreign funds, whose holdings are still worth 30% less than before the global crisis. While we think it is too early to call for general elections, we note that Sarawak must hold state elections by Jul 2011. Umno party elections should be held shortly after general elections. We continue to rate Malaysia an OVERWEIGHT and raise our end-11 KLCI target from 1,610 to 1,700pts as we halve the discount to the 3-year moving average P/E to 5%. Accordingly, we have raised the target prices for 32 stocks under our coverage.

• 2010 was another strong year. After rebounding 43% in 2009, the KLCI gained 18% YTD, in the process breaking many records including the previous high for the KLCI. Domestic factors that stoked the market include the government’s transformation efforts such as the Economic Transformation Programme, the New Economic Model and the 10th Malaysia Plan. The market ran into headwinds towards mid-year as investor fret over a double-dip in Europe and the US. But foreign funds turned sizeable net buyers in 2H following the waning of double-dip fears and rising awareness of the stronger growth potential of emerging markets.

• Very underowned. Foreign investors have been making a beeline for Malaysia, visiting companies and touring Iskandar Malaysia. The renewed interest is the result of myriad factors including Bursa Malaysia’s perceived defensive qualities, the Najib administration’s transformation programmes and severe underownership of the local stockmarket due to the massive selldown after the 2008 general elections. Foreign funds remain extremely underweighted in Malaysia and a return to neutral weightings would have a very significant impact on the market.

• Elections good for the market. The 2011 Budget announced in Oct appeared to us as a populist pre-election budget. The question is which election – general elections or Sarawak state elections? We believe it is the latter though we think it does not matter as either election augurs well for the market since the period leading up to elections is typically investor-friendly. This is particularly true for Umno party elections where the KLCI has historically rallied 30% in the 1-year period before polling. For 2011, we expect pump-priming efforts to intensify, negative policies to be kept to a minimum and speculative activities to pick up steam.

• Prefer cyclicals and GLCs. 2011 is likely to turn out to be a good trading year for the market. Although risks remain relatively high, returns should be high and quick too. We expect continued volatility but with an upward bias as liquidity fuels the market. Our preferred sectors are those in the cyclical space including banking, construction, property, oil & gas and auto which stand to benefit from renewed investor confidence and higher risk appetite. GLCs should also gain prominence as investors speculate on those that will gain from pre-election government largesse.

Terence WONG, CFA +60 (3) 2084-9689 – [email protected]

Figure 1: Top picks Target Core 3-yr EPS P/BV ROE Div Bloomberg Price price Mkt cap P/E (x) CAGR (x) (%) yield (%) ticker Recom. (Local) (Local) (US$ m) CY2011 CY2012 (%) CY2011 CY2011 CY2011 Affin AHB MK O 3.20 4.04 1,520 8.8 8.0 17.1 0.9 10.2 3.8 Axiata AXIATA MK O 4.67 5.90 12,533 12.8 11.9 35.8 1.8 14.5 2.4 Gamuda GAM MK O 3.76 5.00 2,443 19.6 15.2 33.8 3.6 19.2 3.2 Kencana KEPB MK O 2.01 2.60 1,060 14.1 12.2 18.6 10.2 78.6 1.5 MAS MAS MK O 2.07 3.00 2,199 11.9 4.0 178.5 1.6 18.4 0.0 MRCB MRC MK TB 2.01 2.53 882 41.3 34.1 15.6 3.3 8.3 0.5 RHB Cap RHBC MK O 8.59 10.50 5,878 10.9 9.5 17.6 1.7 16.6 3.7 SapuraCrest SCRES MK O 2.82 3.30 1,144 13.4 12.4 19.5 3.8 28.9 3.2 Sime Darby SIME MK TB 8.74 10.78 16,691 16.3 14.6 8.7 2.2 13.9 4.1 WCT WCT MK O 3.00 4.34 750 13.0 12.5 10.8 1.8 15.0 3.3 O = Outperform, N = Neutral, U = Underperform, TB = Trading Buy and TS = Trading Sell Source: Company, CIMB Research


Review of 2010 V-shaped recovery so far

2010 has been another good year

Similar to 2009, 2010 confounded the naysayers although there were hiccups along the way as global markets pulled back in 2Q10 on worries that Europe and the US may slip back into recession. But quantitative easing by the US propped up markets and emerging markets decoupled somewhat from the developed markets as investors strayed from the beaten track in their hunt for better returns. Malaysia has surged 18% YTD but its performance pales in comparison with the region’s star performers, the TIP markets. Thailand, Indonesia and the Philippines are up a massive 38-47% despite gaining 63-87% in 2009. This brings their 2-year gains to an astounding 126-175%. Many markets including Malaysia hit new all-time highs in 2010. Compared with their end-07 closings, Indonesia is the best performer, with Thailand in second place and the Philippines in the third spot.

Figure 2: YTD, 2-year and 3-year performance of various indices 31 Dec 07 31 Dec 08 31 Dec 09 6 Dec 10 YTD From end-08 From end-07

JCI Index 2,745.8 1,355.4 2,534.4 3,722.3 46.9% 174.6% 35.6%SET Index 858.1 450.0 734.5 1,034.1 40.8% 129.8% 20.5%PCOMP Index 3,621.6 1,872.9 3,052.7 4,223.1 38.3% 125.5% 16.6%FBMKLCI Index 1,445.0 876.8 1,272.8 1,501.7 18.0% 71.3% 3.9%SENSEX Index 20,287.0 9,647.3 17,464.8 19,981.3 14.4% 107.1% -1.5%FSSTI Index 3,465.6 1,761.6 2,897.6 3,181.4 9.8% 80.6% -8.2%INDU Index 13,264.8 8,776.4 10,428.1 11,382.1 9.1% 29.7% -14.2%UKX Index 6,456.9 4,434.2 5,412.9 5,754.7 6.3% 29.8% -10.9%HSI Index 27,812.7 14,387.5 21,872.5 23,237.7 6.2% 61.5% -16.4%NKY Index 15,307.8 8,859.6 10,546.4 10,167.2 -3.6% 14.8% -33.6%SHCOMP Index 5,261.6 1,820.8 3,277.1 2,857.2 -12.8% 56.9% -45.7%

Source: Bloomberg, CIMB Research

Regional markets, particularly TIPs, performed well in 2010

The reasons for the strong performance by regional markets are manifold, including 1) receding fears of a double dip in the developed countries, 2) global funds’ reallocation of funds to emerging markets, 3) stronger-than-expected economic growth in Asia, and 4) continued earnings upgrades by equity analysts. Malaysia’s respectable performance in 2010 got a helping hand from domestic factors such as the government’s numerous transformation efforts including the Economic Transformation Programme (ETP), the New Economic Model (NEM) and the 10th Malaysia Plan (10MP). We started the year with a KLCI target of 1,450 points, which we raised to 1,500 points after the 2Q results season in Aug. It appears that the KLCI is likely to again beat our revised target. Foreign funds turned significant net buyers of Malaysia in Jun. Jul’s inflow of US$308m was, in fact, the highest since Sep 07.

Figure 3: Monthly cross-border net buying/(selling) of Malaysian equities (US$ m)

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Source: EPFR, CIMB Research


Heavyweights lifted the KLCI higher in 1H

Although EPS forecasts were revised higher throughout the year, they were driven by big-cap sectors such as banks and gaming. Smaller-cap stocks started to lose momentum even for 4Q09 results, leading to a fall in the revision ratio to around 1x. A ratio of 1x basically means that the number of companies that beat expectations is roughly balanced by the number of companies that disappointed. The big-cap banking and gaming sectors as well as selected heavyweights such as Axiata and PLUS Expressways pushed the market higher in 1H. 2H was when stocks from the plantations, construction and property sectors were re-rated. This then led to rotational play on second- and third-liner stocks.

Figure 4: Qoq change in our KLCI universe’s earnings estimates post results seasons

1.8%2.1%

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CY10 CY11

Source: CIMB estimates

Figure 5: Revisions up/revisions down (x)

0.000.200.400.600.801.001.201.401.601.802.00

3Q03 1Q04 3Q04 1Q05 3Q05 1Q06 3Q06 1Q07 3Q07 1Q08 3Q08 1Q09 3Q09 1Q10 3Q10

Negative momentum for market

Positive momentum for market


Figure 6: Performance of indices in 2010

31 Dec 08 31 Dec 09 % change 06 Dec 10 % change KLTIN Index 231.01 291.81 26.3% 571.46 95.8% FBM70 Index 5,442.06 8,269.22 52.0% 10,561.60 27.7% KLPRP Index 515.61 781.71 51.6% 988.77 26.5% KLCON Index 164.18 224.29 36.6% 279.67 24.7% KLPLN Index 4,142.80 6,362.91 53.6% 7,870.14 23.7% KLFIN Index 6,791.71 11,053.40 62.7% 13,622.41 23.2% KLCSU Index 282.03 372.39 32.0% 451.14 21.1% FBM100 Index 5,613.94 8,308.89 48.0% 9,960.57 19.9% FBMEMAS Index 5,726.46 8,507.61 48.6% 10,189.70 19.8% FBMSC Index 6,552.82 10,165.81 55.1% 12,098.33 19.0% FBMKLCI Index 876.75 1,272.78 46.7% 1,501.74 18.0% KLSER Index 117.91 160.94 46.7% 188.09 16.9% FBMS Index 5,949.63 8,509.52 43.0% 9,916.55 16.5% FBMFL Index 5,420.98 7,421.81 36.9% 8,511.95 14.7% FBMHS Index 6,640.04 9,312.02 40.2% 10,377.91 11.4% KLIND Index 2,063.85 2,654.51 28.6% 2,848.73 7.3% KLTEC Index 13.69 18.14 32.5% 17.69 -2.5% FBMMES Index 3,333.59 4,299.58 29.0% 4,143.75 -3.6% Average 42.8% 21.1%

Source: CIMB estimates, Bloomberg


Laggard sectors played catch-up in 2H

Plantation stocks enjoyed a re-rating in Oct, thanks to higher commodity prices including CPO. Construction stocks were re-rated on the back of Gamuda’s strong gains and reappearance in the KLCI. Also, the government’s commitment to pump-priming was reaffirmed many times, for instance, during the release of the 10MP in Jun, the soft launch of the ETP in Sep and the 2011 Budget in Oct. Property stocks crept up unsuspectingly as investors shrugged off concerns over a cap on the loans-to-value ratio and gave weight to the earnings impact of record sales in 2010. Newsflow on potential landbanking and M&As by the big developers also helped in re-rating the sector.

Figure 7: Four pillars of national transformation Three anchors for 1Malaysia

Source: NEM For Malaysia Part 1

Figure 8: KLCI and various events in 2010

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20/01-Obama To Propose New Limits On Banks

26/01-Obama To Propose 3 Year Spending Freeze On Many Programs

04/02- Greece Crisis

18/02-Fed raises discount rate from 0.50% to 0.75%

30/03-New Economic Model (NEM) announcement

05/05-Europe’s debt crisis

13/05 -BNM raised the OPR by 25bps to 2.5% .

19/05 -Germany prohibits naked short selling on Government bonds and some shares.

10/06-PM announced 10th M'sian Plan

21/06 -China loosens currency grip

08/07 -BNM raised the OPR by 25bps to 2.75% .

21/09 -Economic Transformation Programme Open Day

23/09 -FTSE Ups Status To Advanced Emerging Market From Secondary Emerging Market

15/10 -Budget 2011

19/10-23/10 -61st UMNO General assembly

22/11 -Ireland fiscal crisis

23/11 -Korea tension

Source: Bloomberg, CIMB Research


Key drivers for 2011 Foreign funds boost

Foreigners coming back in a big way?

In 2H10, foreign investors made a beeline for Malaysia as they visited companies and toured Iskandar Malaysia. The reasons for the renewed interest include Bursa Malaysia’s perceived defensive qualities, the new administration’s various transformation programmes and severe underownership of the local stock market. Foreign funds remain extremely underweighted in Malaysia and the stockmarket has been disproportionately sold down since the 2008 general elections. Malaysia’s weighting in EM Asia is still around 2.5%, a fraction of its pre-Asian crisis levels and still low compared to even the 4% level before the global financial crisis. Statistics from Bursa Malaysia confirm this – foreign ownership in Malaysia is 22%, still below the pre-global crisis level of around 27%. A return to neutral weightings by foreign funds would have a very significant impact on the market.

Figure 9: Aggregate EM Asia weightings in Malaysia

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Figure 10: Month-end aggregate holdings by country (US$ m)

Hong Kong Singapore Malaysia Indonesia Thailand Others EM Asia Feb 08 31,398 14,973 9,865 7,267 9,555 177,379 250,437 Weightings in EM Asia 12.5% 6.0% 3.9% 2.9% 3.8% 70.8% 100.0% September 27,697 14,301 7,526 10,797 12,387 211,123 283,830 Weightings in EM Asia 9.8% 5.0% 2.7% 3.8% 4.4% 74.4% 100.0% 31-mth aggregate chg -12% -4% -24% 49% 30% 19% 13% 31-mth weighting chg -22% -16% -33% 31% 14% 5% 0%

31-month net sell (4,205) (3,418) (3,370) (252) (195) 11,556 115 Net sell/Feb 08 -13% -23% -34% -3% -2% 7% 0%


Figure 11: Foreign ownership in Malaysia

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Jan 07 May 07 Sep 07 Jan 08 May 08 Sep 08 Jan 09 May 09 Sep 09 Jan 10 May 10 Sep 10

Source: Bursa, CIMB Research


Foreign funds prefer familiar, big-cap and liquid stocks

Foreign shareholding has risen substantially for stocks that are favourites of foreigners such as AirAsia, CIMB, E&O and Public Bank. Well-managed foreign-owned companies such as BAT and Guinness also saw a big increase in foreign ownership. What is surprising is that foreign funds have not limited their purchases to only big-cap blue chips or even just liquid stocks. Smaller-cap stocks with relatively low liquidity such as Mudajaya, CI Holdings, Daibochi, Latexx, Mah Sing and MCIL have also seen a sizeable increase in foreign ownership. The interest in these stocks, however, could have been stoked by our positive reports on the companies. The selldown by foreign shareholders was most pronounced for Alliance Financial, Gamuda, IOI Corp, Media Prima, Petra Perdana, SP Setia and WCT. We are also not too surprised by the selldown of some names such as Gamuda, WCT, IOI Corp and SP Setia which were laggards for most of the year and only started to ourperform significantly in 2H. Should foreign funds return to Malaysia in a big way, we expect the companies that are familiar to them to be the biggest winners.

Figure 12: Foreign shareholdings

Mid-09 (%) Mid-10 (%) % pt change Mid-09 (%) Mid-10 (%) % pt change Adventa 10.3 10.0 (0.3) MAHB N/A 9.0 N/A Affin Holdings Bhd 25.9 26.5 0.6 Mah Sing 14.5 16.0 1.6 AirAsia Bhd 37.0 48.1 11.1 Malayan Banking Bhd 11.0 13.2 2.3 Alam Maritim 2.0 <1.0 (1.0) Malaysian Airline System Bhd 3.9 4.6 0.7 Alliance Financial Group 44.0 39.7 (4.3) Malaysian Bulk Carriers Bhd 2.4 2.2 (1.0) AMMB Holdings Bhd 52.6 51.3 (1.3) Malaysian Pacific Industries Bhd 9.7 8.7 (1.0) Ann Joo Resources 4.7 5.0 0.3 Maxis N/A 9.0 N/A Asia File 10.0 10.0 - Media Chinese International 20.0 24.0 4.0 Genting Plantation 7.0 6.0 (1.0) Media Prima Bhd 40.0 28.0 (12.0) CIMB 34.9 42.1 7.2 MISC Bhd 4.9 4.7 (0.2) Berjaya Sports Toto Bhd 18.0 18.0 - MRCB 19.4 13.0 (6.4) Bintulu Port Holdings Bhd 2.9 1.4 (1.5) MTD ACPI Engineering 3.0 3.0 - British American Tobacco Bhd 68.7 74.5 5.8 Mudajaya 5.6 16.0 10.4 Bursa Malaysia Bhd 17.3 14.3 (3.0) Nestle (Malaysia) Berhad 72.6 73.0 0.4 Carlsberg Brewery (M) Bhd 64.0 63.3 (0.7) Pelikan International Corp Bhd 20.0 21.0 1.0 CI Holdings 5.6 5.6 Petra Perdana 7.0 4.0 (3.0) Cocoaland Holdings 1.0 2.0 1.0 Petronas Dagangan Bhd <5.0 4.0 (0.6) Daibochi 1.0 3.0 2.0 PLUS Expressways Bhd 9.1 9.0 (0.1) Dialog Group Bhd <5.0 10.0 5.0 Proton Holdings Bhd 5.6 10.0 4.4 DiGi.com Bhd 11.0 8.5 (2.5) Public Bank Bhd 24.9 26.6 5.0 RGB International Bhd 8.2 10.0 1.8 Puncak Niaga Holdings Bhd 17.0 17.0 - Ekovest 8.0 8.0 - QSR Brands 3.8 4.5 0.7 Eksons Corporation Bhd 5.0 5.0 - Genting Malaysia 32.0 33.0 1.0 EON Capital Bhd 41.8 44.0 2.2 RHB Capital Bhd 6.0 32.1 26.1 E&O Bhd 9.0 25.0 16.0 SapuraCrest 31.0 30.3 (0.8) Fraser & Neave Holdings Bhd 61.1 58.0 (3.1) Sime Darby Bhd 13.7 13.0 (0.7) Gamuda Bhd 45.0 33.0 (12.0) SP Setia Bhd 27.0 19.0 (8.0) Genting Bhd 36.0 37.0 1.0 Star Publications Bhd 6.0 6.0 - Guinness Anchor Bhd 66.2 71.8 5.6 Suria Capital 11.5 5.5 (6.0) Hap Seng Plantation 3.0 3.0 - Supermax Corp Bhd 1.6 12.0 10.4 Hartalega 5.0 5.0 - Tan Chong Motor Holdings Bhd 14.3 19.0 4.7 Hong Leong Bank Bhd 7.2 7.3 0.1 Telekom Malaysia Bhd 10.5 10.9 0.4 Hunza Properties Bhd 5.9 4.6 (1.3) Axiata 8.5 11.5 3.0 IJM Corp Bhd 32.0 38.0 6.0 Tenaga Nasional Bhd 10.3 11.0 0.7 IOI Corporation Bhd 26.0 20.0 (6.0) Tomypak Holdings 1.0 2.0 1.0 JobStreet Corp Bhd 39.0 50.0 11.0 Top Glove Holdings Bhd 34.0 35.0 1.0 JT International Bhd 62.3 61.9 (0.4) Uchi Technologies Bhd 37.0 38.0 1.0 Kencana Petroleum Bhd 6.5 6.0 (0.5) UM Land 54.5 54.5 - KLCC Property Holdings Bhd 14.7 13.4 (1.3) UMW Holdings Bhd 5.5 6.2 0.7 Kossan Rubber Industries Bhd 9.8 9.0 (0.8) Unisem (M) Berhad 10.0 13.0 3.0 Kuala Lumpur Kepong Bhd 14.0 17.0 3.0 Wah Seong Corp Bhd 11.6 11.8 0.2 Kurnia Asia Bhd 4.3 3.8 (0.5) WCT Engineering 17.0 12.0 (5.0) Lafarge Malayan Cement Bhd 16.5 15.4 (1.1) Wellcall Holdings Bhd 6.0 5.0 (1.0) Latexx 1.4 3.4 2.0 YTL Power International 5.0 5.0 -

Source: Company, CIMB Research


Elections, elections, elections

Preparations for elections gathering pace

The 2011 Budget announced on 15 Oct appeared to us to be a feel-good populist budget that will pave the way for elections. Toll rates on PLUS’s highways were left alone for the next five years, the dreaded sin taxes and real property gains tax did not feature in the budget and construction projects were aplenty. The question that must be asked is whether this heralds general elections or Sarawak state elections. We believe it is the latter as Sarawak state elections have to be held by Jul 2011 but the general elections do not have to be called until 2Q13, which is more than two years away. We observe that the National Front has won only five of the 13 by-elections held since the Mar 08 general elections compared to eight by the Opposition. However, it won the two most recent by-elections, which came after the people-friendly 2011 Budget.

Figure 13: By-elections since Mar 2008 Of the 13 by-elections, BN has won five, PKR four, PAS three and DAP one

BN PAS PKR DAP Permatang Pauh (Aug 08) win Kuala Terengganu (Jan 09) win Bukit Selambau (Mar 09) win Bukit Gantang (Mar 09) win Batang Ai (Apr 09) win Penanti (May 09) win Manek Urai (Jul 09) win Permatang Pasir (Aug 09) win Bagan Pinang (Oct 09) win Hulu Selangor (Apr 10) win Sibu (May 10) win Galas (Nov 10) win Batu Sapi (Nov 10) win

Source: NST, CIMB Research

Pre-elections period is normally good for the market

Besides Sarawak and general elections, Umno party elections were originally slated to be in 2011. However, party elections have been delayed by up to 18 months and will be held shortly after general elections. Regardless of the type of election, they augurwell for the stockmarket as the period leading up to elections is typically investor-friendly. We expect pump-priming efforts to ratchet up in 2011, negative policies to be kept to a minimum and speculative activities to pick up steam. In the previouselections, the KLCI gained 5% in the 12 months before the elections were held and surged 17% thereafter. The impact of Umno party elections on the market is even more significant. In the past nine occasions, the market rallied an average of 30% during the 12 months leading up to Umno party elections. On the other hand, the KLCI fell an average of 7% in the 12 months after party elections. The clear signal from the market’s performance pre and post Umno party elections is to buy ahead of the elections and sell shortly after it. For general elections, the results must be favourable to the incumbent for the market to rally after the polling date. In the case of the 2008 elections, the KLCI plunged 100 points the first trading day after elections and circuit breakers kicked in for the first time ever.

Figure 14: General and Umno party elections since 1990

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1/2/1990 1/2/1992 1/2/1994 1/2/1996 1/2/1998 1/2/2000 1/2/2002 1/2/2004 1/2/2006 1/2/2008 1/2/2010

General Election21-Oct-90

General Election25-Apr-95

General Election29-Nov -99

General Election21-Mar-04

UMNO23-Sep-04

UMNO11-May -00

UMNO9-Oct-96

UMNO4-Nov -93



UMNO26-Mar-09

Source: www.UMNO-online.com, www.spr.gov.my, CIMB Research


Figure 15: KLCI performance before and after general elections 12 m ths 9 m ths 6 m ths 3 m ths 3 m ths 6 m ths 9 m ths 12 m ths

before GE before GE before GE before GE after GE after GE after GE after GE1982 -34.3% -33.1% 2.8% -11.4% -18.3% -12.3% -4.7% 15.0%1986 -25.7% -26.8% 1.6% 23.4% 28.6% 32.8% 71.5% 114.1%1990 2.0% -17.0% -13.4% -24.4% 2.2% 24.9% 23.6% 8.3%1995 -5.9% -3.2% -13.0% 10.5% 8.6% -1.9% 8.1% 19.9%1999 48.5% 35.8% -1.6% -2.9% 34.4% 20.5% 7.2% -4.3%2004 44.0% 32.7% 21.5% 17.5% -8.7% -4.3% 0.2% -2.1%2008 9.2% -4.1% -0.7% -9.6% -3.7% -17.0% -35.3% -33.8%Average 5.4% -2.3% -0.4% 0.4% 6.2% 6.1% 10.1% 16.7%Avg excluding 2008 4.8% -1.9% -0.3% 2.1% 7.8% 10.0% 17.7% 25.2%

Source: Bloomberg and CIMB estimates

Figure 16: KLCI performance before and after Umno party elections 12 m ths 9 m ths 6 m ths 3 m ths 3 m ths 6 m ths 9 m ths 12 m ths

before UE before UE before UE before UE after UE after UE after UE after UE1981 90.9% 61.1% 46.7% 20.0% -37.7% -29.7% -42.8% -46.4%1984 1.1% -8.0% 2.1% -6.7% -8.5% -20.7% -21.1% -21.0%1987 105.4% 77.0% 43.0% 32.7% 22.7% -15.9% -21.7% -14.7%1990 -8.6% -23.0% -20.1% -12.4% 21.0% 36.6% 17.4% 14.5%1993 49.6% 52.8% 36.2% 26.6% 17.7% 6.6% 10.4% 9.1%1996 16.0% 8.2% 0.6% 1.0% 8.6% 1.9% -7.3% -26.7%2000 30.4% 34.7% 26.3% -7.7% -12.2% -18.3% -21.3% -37.7%2004 15.5% 10.0% -6.2% 4.2% 5.9% 3.0% 5.9% 8.2%2009 -28.0% -26.8% -13.6% 1.8% 21.3% 37.5% 42.7% 48.2%Average 30.3% 20.7% 12.8% 6.6% 4.3% 0.1% -4.2% -7.4%Avg excluding 2009 37.5% 26.6% 16.1% 7.2% 2.2% -4.5% -10.0% -14.3%

Source: www.UMNO-online.com, www.spr.gov.my, CIMB Research

Figure 17: Companies perceived to have strong political ties

Bloomberg Business Price Market cap Hist. P/E Hist. P/B Hist. div yld code activity (RM) (RM m) (x) (x) (%) AFFIN HOLDINGS BERHAD AHB Banks 3.20 4,783 10.7 0.9 2.7 BERNAS PNL Food Producers 2.14 1,007 5.7 1.0 16.8 BOUSTEAD BOUS Support Services 5.63 5,293 11.0 1.3 5.8 DRB-HICOM BHD DRB Industrial Engineering 1.53 2,958 4.5 0.6 2.6 CMS CMS Construction & Materials 2.60 857 9.9 0.7 1.9 EQUINE CAPITAL BHD EQC Real Estate 0.45 102 N/A 0.5 N/A JAKS RESOURCES BHD JAK Industrial Metals & Mining 0.72 313 N/A 0.7 N/A KENCANA KEPB Oil Equipment, Services & Dist 2.01 3,335 21.6 4.4 0.1 KUB MALAYSIA BHD KUBM General Industrials 0.50 278 8.3 0.8 4.8 KULIM KUL Food Producers 12.36 3,939 15.6 1.1 1.4 LEBAR DAUN BHD LDB Construction & Materials 0.83 113 58.5 1.1 N/A MMC CORP BHD MMC Gas, Water & Multiutilities 2.75 8,374 24.1 1.3 1.1 MEDIA PRIMA BHD MPR Media 2.34 2,345 6.1 2.0 6.0 MALAYSIAN RESOURCES CORP BHD MRC Construction & Materials 2.01 2,776 59.8 2.3 0.5 MALTON MALT Construction & Materials 0.73 253 12.0 0.6 N/A MASTERSKILL MASEG Support Services 2.14 877 9.0 3.0 3.3 NAIM CORPORATION NHB Construction & Materials 3.49 873 8.8 1.2 2.9 OPCOM HOLDINGS BHD OHB Technology Hardware & Equipment 0.74 95 9.9 1.3 6.1 RHB CAPITAL BHD RHBC Banks 8.59 18,498 13.5 1.9 2.6 SAPURACREST PETROLEUM BHD SCRES Oil Equipment, Services & Dist 2.82 3,600 18.3 3.4 2.5 SARAWAK PLANTATIONS SPLB Food Producers 2.47 692 13.0 1.4 3.8 STAR PUBLICATIONS STAR Media 3.39 2,504 13.1 2.0 21.7 TIME ENGINEERING BHD TIM Software & Computer Services 0.39 302 35.8 1.4 3.4 TIME DOTCOM BHD TDC Fixed Line Telecommunications 0.66 1,658 17.6 1.4 N/A TRADEWINDS CORP TWC Travel & Leisure 0.92 1,012 174.8 0.5 N/A UEM LAND ULHB Real Estate 2.29 8,341 44.8 3.3 N/A UTUSAN MELAYU (MALAYSIA) BHD UTUS Media 0.79 87 N/A 0.3 N/A

Source: Bloomberg, CIMB estimates


The market has historically viewed continuity positively

While the outcome of the next general elections is important in determining the direction of the market after elections, it is extremely difficult to predict given the shocking results of the last elections in Mar 2008. Recall that the 2008 elections were unprecedented in that the National Front lost its two-thirds majority in parliament for the first time since the 1969 elections. Its share of the popular vote also fell to its lowest in nearly 40 years. Unlike the situation in 1969, however, the National Front did not regain its majority in parliament by including new parties into the coalition and the opposition parties grouped together to form Pakatan Rakyat. A convincing win for the incumbent has historically been positive for the market.

Figure 18: Parliamentary elections

Year 59 64 69 74 78 82 86 90 95 99 04 08 Alliance/BN 74 89 74 135 130 132 148 127 162 148 199 140 PAS* 13 9 12 - 5 5 1 7 7 27 6 23 Keadilan - - - - - - - - - 5 1 31 DAP - - 13 9 16 9 24 20 9 10 12 28 Others 14 6 44 10 1 - - 22 14 3 - - Independent 3 - 1 - 2 8 4 4 - - 1 - Total 104 104 144 154 154 154 177 180 192 193 219 222

Alliance/BN 71.2% 85.6% 51.4% 87.7% 84.4% 85.7% 83.6% 70.6% 84.4% 76.7% 90.9% 63.1% PAS 12.5% 8.7% 8.3% 0.0% 3.2% 3.2% 0.6% 3.9% 3.6% 14.0% 2.7% 10.4% Keadilan 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 2.6% 0.5% 14.0% DAP 0.0% 0.0% 9.0% 5.8% 10.4% 5.8% 13.6% 11.1% 4.7% 5.2% 5.5% 12.6% Others 13.5% 5.8% 30.6% 6.5% 0.6% 0.0% 0.0% 12.2% 7.3% 1.6% 0.0% 0.0% Independent 2.9% 0.0% 0.7% 0.0% 1.3% 5.2% 2.3% 2.2% 0.0% 0.0% 0.5% 0.0% Total 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%

* Was part of BN in 1974 Source: Press reports, CIMB estimates

Figure 19: Votes for ruling coalition in parliamentary elections

6391

7784

7184

8684

8851

8671

50.464

5765

5357

6157

6145

5952

0 10 20 30 40 50 60 70 80 90 100

080499959086827874696459

% popular v otes w on% seats w on

Year

Source: Press reports, Election Commission, CIMB Research

Figure 20: Voter turnout in parliamentary elections

0

2

4

6

8

10

12

59 64 69 74 78 82 86 90 95 99 04 08

68.0

70.0

72.0

74.0

76.0

78.0

80.0Total v otes polled (m) Eligible v oters (m)Voter turnout (%) (RHS)

Year (%)

Source: Press reports, Election Commission, CIMB Research


Economic outlook Back on growth track After being mired in a recession in 2009 for the first time since 1998, the Malaysian

economy rebounded 9.4% yoy in 1H10 with the help of stronger-than-expected exports and domestic demand resurgence. However, GDP growth slowed to a more sustainable pace of 5.3% in 3Q10 as export growth cooled down from 21.7% in 2Q10to 10.4% in 3Q10. Households contributed strongly to the recovery, with consumer spending picking up in 2Q09 and sustaining the pace in 2010. Indications are that private consumption will remain a key growth driver. Private investment also made a comeback as business confidence returned, underpinned by higher corporate earnings.

The Malaysian economy is firmly on the recovery path. After a spectacular rebound in 2010, the economy will move a notch down to a more sustainable growth pace. We are looking at GDP growth of 5.5% for 2011 and 6.5% for 2012 compared to an estimated 7.0% for 2010. Growth in 2011 will come from the continued expansion of domestic demand amid export headwinds. Private investment, which staged a meaningful recovery in 2010, remains a wild card.

Figure 21: The economy is back on the growth track

-4

-2

0

2

4

6

8

-6

-3

0

3

6

9

12

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010E 2011F 2012F

% yoy% pt contribution Domestic demand Net exportsChange in stock Real GDP growth (RHS)

Source: BNM, CIMB Research

Figure 22: Malaysia’s leading index points to growth, albeit at a more moderate pace

-10

-5

0

5

10

15

20

25

Jan-01 Nov-01 Sep-02 Jul-03 May-04 Mar-05 Jan-06 Nov-06 Sep-07 Jul-08 May-09 Mar-10

% Annualised real GDP growth Leading index - 6-mth smoothed growth rate

Source: BNM, Department of Statistics (DOS)

No double dip for global economy

We continue to expect a two-tiered global recovery and do not believe that the world economy is heading for a double-dip recession. Major advanced economies continue to face headwinds given the multi-year deleveraging process. Although growth of developing Asia is moderating, the growth prospects are still good. Global lead indicators continue to head south, adding to the evidence that global growth has lost momentum though the pace of deceleration differs between mature economies and developing ones. Taking no chances on the risk of a faltering recovery, the Fed and Bank of Japan have activated asset purchases or quantitative easing programmes to bolster their anaemic economic recovery.


Domestic demand will drive growth

There is much to suggest that domestic demand will remain a key growth driver as exports take a backseat. Domestic conditions remain supportive of domestic demand, which is projected to rise 5.4% in 2011 (estimated 6.5% in 2010). Consumer spending has already gained traction in 2010, thanks to improved labour market conditions andsustained income growth. Firm commodity prices, especially for crude palm oil (our in-house CPO price estimate is RM2,800/tonne for 2011-12) and rubber also bode well for rural household spending. As such, we estimate private consumption to grow 6.0% in 2011 compared to an estimated 6.7% in 2010.

Figure 23: Private sector spending to underpin growth

2009 2010E 2011F 2012F 2009 2010E 2011F 2012F 2009 2010E 2011F 2012F

Real GDP -1.7 7.0 5.5 6.5 -1.7 7.0 5.5 6.5 100.0 100.0 100.0 100.0

Private consumption 0.7 6.7 6.0 6.8 0.4 3.6 3.2 3.6 53.5 53.3 53.6 53.7

Public consumption 3.1 0.5 4.6 2.3 0.4 0.1 0.6 0.3 14.3 13.5 13.3 12.8

Private investment -17.2 11.6 9.0 10.5 -2.1 1.2 0.9 1.1 10.1 10.5 10.8 11.3

Public investment 8.0 8.7 0.6 3.3 0.8 1.0 0.1 0.4 11.2 11.4 10.9 10.5

Exports -10.4 11.3 6.9 8.5 -12.3 12.2 7.8 9.6 107.4 111.7 113.2 115.4

Imports -12.3 17.0 7.2 7.6 -12.9 15.9 7.4 8.0 93.8 102.5 104.1 105.2

% yoy % pt contribution % share

Note: The sum of percentage point contribution and percent share may not equal to the overall number due to the change in stock. Source: BNM, CIMB Research

Gradual fiscal rollback to avoid choking off the recovery

As external risks persist, fiscal rollback will be gradual to avoid choking off the recovery. As such, total expenditure is budgeted to rise 2.8% to RM212.0bn in 2011 (RM206.2bn in 2010), with the increase coming entirely from operating expenditure (+7.0% to RM162.8bn). Development expenditure is set to decline 9.0% to RM49.2bn in 2011 (RM54.0bn in 2010), reflecting the lapsing of the fiscal stimulus package. This will translate into a marginal rise of 0.6% in public investment compared with an estimated 8.7% in 2010. The federal government’s budget deficit is expected to bereduced marginally to 5.4% of GDP for 2011 from 5.6% of GDP in 2010.

To realise government initiatives, substantial amounts of money will be provided, namely RM9.5bn under the National Key Result Areas (NKRA), RM6.0bn for the 12 National Key Economic Areas (NKEA), RM22.0bn for the completion of 9MP projects and RM12.4bn for new projects under the Tenth Malaysia Plan (10MP). After a sharp contraction of 17.2% in 2009, private investment rebounded by an estimated 11.6% in 2010 and is projected to rise 9.0% in 2011 as business sentiment turns positive on the back of improved prospects for global and domestic economies. Recent data points and leading indicators also hint at this recovery trend. Imports of capital goods climbed 18.4% higher in Jan-Oct 2010 and approved manufacturing investments were higher at RM21.1bn in Jan-Sep 2010.

Figure 24: Private investment to drive growth

-30

-15

0

15

30

45

60

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010E 2011F 2012F

% yoy Private investment Public investment

Source: BNM, CIMB Research


Shifting growth engine to private sector

The government aims to change the country’s growth model to one that is more driven by private investment and less by public investment. The Economic Transformation Programme (ETP) has identified 131 entry point projects (EPP) and 60 business opportunities (BO) to draw in both domestic and foreign investments. The implementation of ETP projects requires total funding of US$444bn in 2011-2020, of which 92% or US$410bn will come from the private sector and 8% or US$34bn from the public sector.

A total of 53 EPPs with a total investment value of US$97bn (RM300bn) or nearly 45% of the total targeted amount are now at various stages of discussion. As at Nov 2010, 18 EPPs worth more than RM50bn mark the initial results of the ETP. The 18 EPPs cover electronics and electrical services, retail and hotels, airport, oil & gas and energy, commercial property development, tourism and education sectors. The government indicated that it will announce more investments from time to time.

We see enormous social-economic impact as well as positive economic spillover if the proposed EPPs are comprehensively and expeditiously implemented. That said, promising reforms and initiatives in the GTP and ETP must be executed to unleash Malaysia’s growth potential. The stalling of reform momentum could drive down growth and investment prospects. In order for the private sector to have the confidence needed to pour funds into the economy, certainty and clarity in policy actions are imperative.

All economic sectors are projected to register positive growth rates. The challenge is to sustain private sector demand as the export engine may stall given the ongoing headwinds in the major economies. The services sector is envisaged to grow 6.0% in 2011 (6.5% in 2010), supported by the continuing expansion of domestic consumption and trade-related activities. The manufacturing sector is projected to expand 6.0% (11.4% in 2010), in line with the moderating pace of export growth. Growth of the construction sector is estimated to kick up a notch to 5.6% in 2011 (4.6% in 2010), supported by the acceleration of ongoing projects such as KLIA 2, the second Penang Bridge, SKVE (Package 3), highways, power plant, and the LRT extensions.

Figure 25: Private investment to drive growth

2009 2010E 2011F 2012F 2009 2010E 2011F 2012F 2009 2010E 2011F 2012F

Real GDP -1.7 7.0 5.5 6.5 -1.7 7.0 5.5 6.5 100.0 100.0 100.0 100.0

Agriculture 0.4 3.7 4.0 4.0 0.0 0.3 0.3 0.3 7.7 7.4 7.3 7.2

Mining -3.8 0.5 2.5 2.5 -0.3 0.0 0.2 0.2 7.7 7.3 7.0 6.8

Construction 5.8 4.6 5.6 7.0 0.2 0.2 0.2 0.2 3.3 3.2 3.3 3.3

Manufacturing -9.4 11.4 6.0 7.0 -2.7 3.0 1.7 1.9 26.6 27.7 27.8 28.0

Services 2.6 6.5 6.0 7.2 1.4 3.8 3.4 4.1 57.6 57.3 57.6 58.0

% yoy % pt contribution % share

Note: The sum of percentage point contribution and percent share may not equal to the overall number due to the FISIM and import duties. Source: BNM, CIMB Research

No interest rate hike until 2H11

After three interest rate increases since Mar 2010, Bank Negara Malaysia (BNM) kept its overnight policy rate (OPR) at 2.75% during two consecutive policy meetings as it considers the current monetary policy stance to be appropriate in ensuring sustained economic recovery. We think BNM is choosing to err on the side of boosting growth rather than aggressively managing inflation expectations given the increasing downside risks to growth. External headwinds have already caused a pullback in exports and industrial output in recent months. Inflationary pressures are likely to persist but are not a threat due to sustained domestic demand, firm commodity prices and high food prices. Continued rationalisation of subsidies could add to the inflationupside. We estimate inflation to rise modestly to 3.0% in 2011 from an estimated 1.7% in 2010. As such, we expect the central bank to start normalising interest rates in 2H11 and we project a policy rate of 3.25% by end-2011 (2.75% in 2010).

We concur with BNM’s view that hefty capital inflows into emerging markets are the key challenge. We expect the central bank to stay on guard against volatile short-term capital flows to ensure that the flows do not pose a systemic risk to macroeconomic and financial stability. On this note, we think BNM will be ready to act if volatile capital flows threaten to destabilise the financial system. If the liquidity build-up leads to the risk of fuelling excessive credit growth, BNM may raise the statutory reserve requirement (SRR) ratio of 1% currently to curtail credit creation.


The risks to our forecasts come mostly from external sources including (1) slow and uneven growth in G-3 economies, which would lead to an anaemic recovery for exports, (2) growing asset bubbles in Asia, and (3) destabilising speculative capital flows. The main domestic risks are (1) failure of private sector demand to pick up strongly and assume the mantle of the engine of growth as the government gradually withdraws its fiscal support, and (2) the delay in the implementation of the ETP.

Figure 26: No change in interest rates in 1H11

1.0

1.5

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3.5

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-6

-3

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3

6

9

12

Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10

% p.a.% yoy Inflation OPR (RHS)

Source: Source: BNM, DOS, CIMB Research

LEE Heng Guie +60 (3) 2084-9667 – [email protected]


Key risks for 2011

Risk of a double dip 30% risk of a double dip in Europe and US

Although our economics team believes that the risk of a double dip of the Malaysian economy is extremely low, double-dip risks are still high for the western developed economies. Double-dip risk appears highest in Europe and the US at 30%. Although equity markets appear to be decoupling, this could unravel if Wall Street fall into a tailspin, as it did in 2008.

Political risks 2008 general election has changed the political landscape

Political noise may have subsided this year but could easily rachet up should snap general elections be called. Elections in Malaysia are typically hotly contested and the stakes have never been higher. Sarawak state elections have to be called by Jul 2011 while general elections are not due till 2Q13. We note that the Opposition won eight out of the last 13 by-elections.

Policy risks Policy flip-flops Although the Najib administration has promised to avoid the policy flip-flops that

marred the Abdullah Badawi administration, imposition of unpopular policies would draw similar reactions. The 2010 Budget re-imposition of the real property gains tax of just 5% met with hue and cry. Likewise, the award of the sports betting licence in 2010 and its subsequent cancellation caused confusion and reinforced the perception that there is still a tendency for policy flip-flops.

Execution risks Execution in Malaysia has been wanting

Malaysia is well known for coming out with strong proposals and positive policy measures. However, it is also well known for its poor execution and implementation skills. The question repeatedly asked in relation to the ETP is the authorities’ ability to deliver what they promise. We are comforted that the various transformation proposals have step-by-step procedures that will greatly assist in implementation. KPI targets are also being tracked closely.

Corporate earnings risks Have expectations run too far ahead?

Corporate earnings expectations and actual results are very important in determining the direction of the stockmarket. But analysts’ expectations may have run ahead of fundamentals. In the last four quarters, the number of companies that beat expectations was nearly the same as those that disappointed, which contrasts with the massive positive surprises in 2009. That said, market EPS is still on the uptrend as big-cap stocks from the banking and gaming sectors outperformed significantly and lifted market earnings higher.

Foreign funds flow How long will foreign funds remain net buyers?

Foreign funds were net sellers of Malaysia for a long time after the Mar 2008 general elections. They only turned net buyers in 2009 when global markets rebounded and again in 2H10 on renewed interest in emerging markets. A reversal of that trend would be negative though the risk is mitigated by Malaysia’s large pension funds which can cushion selldowns. Also, foreign funds’ weightings in Malaysia remain at depressed levels compared with the pre-global financial crisis levels.

Volatility here to stay? Markets to remain volatile Volatility is likely to remain a feature of markets in 2011. Adverse news from Europe,

the US or China could send shockwaves through global markets. But as long as the major markets do not go into a vicious downward spiral that triggers deterioration in fundamentals, the selldowns should be viewed as buying opportunities.


Valuation and recommendation

Maintain OVERWEIGHT on Malaysia

KLCI target raised to 1,700 points

Although we are still wary of the less favourable risk-to-reward ratio for the market after the V-shaped rebound, momentum seems to favour the bulls as 1) the various transformation programmes will continue to reap low-lying fruits, 2) foreign funds continue to view emerging markets and Malaysia favourably given their undemanding valuations, and 3) election fever is heating up and the pre-election period is very favourable for equities. In view of the upbeat outlook and big catalysts for the market, we maintain our OVERWEIGHT weighting on Malaysia while raising our end-11 KLCI target from 1,610 points to 1,700 points. Instead of a 10% discount, we now apply a 5% discount to the market’s 3-year moving average P/E, which raises our P/E target from 13.8x to 14.5x. We note the possibility of further upside to our target if the re-rating persists for the entire region. Should we remove the discount altogether, our KLCI target would rise to around 1,800 points while a slight premium of 5% would push it up to a mind-boggling 1,884 points.

Figure 27: FBM KLCI’s 12M forward core P/E (x) and standard deviation

6.0

8.0

10.0

12.0

14.0

16.0

18.0

20.0

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Nov-03 Jul-04 Mar-05 Nov-05 Jul-06 Mar-07 Nov-07 Jul-08 Mar-09 Nov-09 Jul-10

P/E

(x)

+1 S.D.

-1 S.D.-2 S.D.

+2 S.D.

3-year moving avg = 15.3x

FBMKLCI's actual PER, now at 14.4x 12M forward+3 S.D.

-3 S.D.


Figure 28: KLCI targets 3 year m oving avg P/E end-2011 Target basis

KLCI target P/E (x)20 discount 1,436 12.2 15% discount 1,525 13.0 10% discount 1,615 13.8 5% discount 1,705 14.5 Zero discount 1,795 15.3 5% premium 1,884 16.1 10% premium 1,974 16.8 15% premium 2,064 17.6 20% premium 2,154 18.4 Note: End-2011 target based o n 2012 EPS integer o f 117.3 sen

Source: CIMB Research

KLCI target basis is not aggressive

We could also apply the 3-year moving average P/E of 15x, which is where the mid-cycle P/E is. This is not an aggressive target as valuations could stretch to as high as 18-19x towards the later part of the market cycle. On a P/BV basis, however, valuations are slightly above the mid-cycle P/BV of 2.2x though still below the late-stage peak of around 2.8x. Should EPS be revised upwards over the course of 2011 as it was throughout 2010, P/E valuations would be even more attractive, providing further upside to the KLCI target.


Figure 29: FBM KLCI’s 12M forward core P/E (x)

10111213141516171819

1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 53 55 57 59Month of upcycle

12M

forw

ard

core

P/E

Mid-cycle


Figure 30: FBM KLCI’s P/BV

1.51.7

1.92.1

2.32.52.7

2.9

1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 53 55 57 59Months of upcycle

Curre

nt P

/BV

Mid-cycle


Malaysia’s bull run still has legs

Bull markets in Malaysia lasted on average 26 months. This bull market started in earnest in Apr 09, i.e. 20 months ago. Assuming it peaks in the 26th month, that means that 1H11 will be robust and the time to take profits will be mid-year. However, bull markets can last much longer than 26 months. The longest was double that at 52 months. The average bull market enjoyed gains of 133%. So far, this bull market is up less than 100% from its trough. Given that the trough was hit during unusual circumstances, i.e. the global financial crisis, the rebound should be stronger. Recall that during the Asian financial crisis, the KLCI surged 235% from trough to peak.

Figure 31: Bull markets in Malaysia Bull m arkets Months Trough Peak Index chg

Feb 77 to Jun 81 52.0 90.77 225.51 148.4%May 86 to Mar 90 27.0 169.83 606.94 257.4%Sep 92 to Dec 93 15.0 567.66 1,275.32 124.7%Nov 95 to Feb 97 15.0 888.91 1,270.69 42.9%Aug 98 to Feb 00 18.0 302.91 1,013.27 234.5%May 03 to May 06 36.0 627.26 966.05 54.0%Jun 06 to Jan 08 19.0 913.63 1,516.22 66.0%Average 26.0 132.6%


Malaysia’s premiums have narrowed

Malaysia’s valuations remain at a premium over its regional peers. But the premium has narrowed in view of Thailand’s and Indonesia’s massive rallies this year. The P/E premium used to range between 15% and 20% but has narrowed to 10-12%. Malaysia’s dividend yield is one of the most attractive in the region at around 5%. We forecast ROEs to remain above 15% and net gearing to decline to 4% by 2012. This is a vast improvement on 2003 when net gearing was 65%.


Figure 32: Regional comparisons

2010 2011 2012 2010 2011 2012HK ( CIMB coverage) 12.3 10.8 9.5 27.2% 14.1% 13.4%JCI (ID) 17.7 14.8 12.8 26.9% 20.1% 15.6%KLCI (MY) 16.4 14.4 12.7 26.6% 13.9% 13.2%FSSTI (SG) 15.8 14.2 12.8 22.3% 11.5% 10.9%SET (TH) 14.0 12.0 10.3 33.8% 16.2% 16.5%Simple Region x KL avg 15.0 13.0 11.4 27.6% 15.5% 14.1%KLCI P/E premium vs region 9.7% 11.2% 11.9%

Core EPS growth Core P/E (x)

Source: CIMB

Figure 33: KLCI Index data

FBMKLCI Index CY2003 CY2004 CY2005 CY2006 CY2007 CY2008 CY2009 CY2010 CY2011 CY2012 P/E (x, pre-EI) 14.8 15.5 14.7 15.8 17.7 11.7 19.0 16.1 14.3 12.7 P/E (x, after EI) 14.7 14.6 14.0 15.1 16.8 13.2 18.8 16.4 14.1 12.6 P/E (x, core) 14.6 15.4 15.1 16.8 18.3 11.1 17.6 16.4 14.4 12.7 Core EPS growth (%) 16.7% 8.0% 1.5% 9.1% 21.3% 0.2% -8.6% 26.6% 13.9% 13.2% P/BV (x) 1.9 2.1 2.0 2.3 2.9 1.7 2.1 2.4 2.2 2.0 Dividend yield (%) 4.6% 6.3% 5.9% 5.7% 4.6% 6.1% 5.4% 4.7% 4.7% 5.1% EV/EBITDA (x) 8.6 8.4 8.2 8.6 10.2 6.5 9.1 8.8 7.8 7.0 P/FCF (x, equity) 20.8 17.0 33.9 19.5 18.4 14.7 20.7 17.5 13.8 14.8 P/FCF (x, firm) 27.0 14.6 12.8 17.3 14.8 (449.3) 31.1 16.9 12.4 11.8 Net gearing (%) 65.5% 55.0% 39.7% 40.6% 23.9% 30.5% 26.3% 19.7% 12.0% 3.5% ROE (%, recurring) 14.2% 14.2% 13.9% 15.6% 17.4% 15.8% 12.8% 15.0% 15.8% 16.5% FBMKLCI Index 794 907 900 1,096 1,445 877 1,273 1,502 1,502 1,502 CIMB/consensus (x) 1.14 1.02 1.02


Sectors to overweight

Buy cyclical sectors and GLCs

In view of the improving economic outlook, imminent call to the polls, ETP, 10MP and 2011 Budget, cyclical sectors are likely to benefit most from a more buoyant environment. The potential approval of the RM36bn-40bn, RM10bn-12bn high-speed rail, numerous new highways and transformation of Greater Kuala Lumpur/Klang Valley into an outstanding global city will be hugely positive for contractors and developers, particularly those in the Klang Valley. Banks will also gain from new bonds issuance and corporate loans for these projects. Other cyclical sectors that we favour include oil & gas service providers as steadily rising commodity prices facilitate the development of the sector. The auto sector should register another record year in 2011 as consumer confidence feeds the propensity to spend. Last but not least, the GLCs are an important category to invest in as they should benefit from the various transformation programmes or at least there is the perception that they will benefit from government largesse.

Figure 34: Private investors’ level of commitment or interest in ETP projects

Source: Pemudah


Figure 35: Sector weightings

Overweight Neutral Underweight Airlines Brewery Food & beverage Automotive Cement Insurance Banking Technology Shipping Construction Tobacco Gaming Media Oil & gas Plantations Property Rubber Gloves Semiconductor Steel Telecommunications Utilities


Automotive Loke Wei Wern

Strengthening consumer sentiment to boost auto sales

Propelled by new model launches, favourable credit conditions, and rising income levels, 2011 looks set to be another good year for the auto industry. In addition, consumer sentiment, which is arguably the most important driver of big-ticket items such as cars, is holding up well. We are projecting vehicle sales growth of 5% for 2011, pushing vehicle sales past the 600,000 mark to 619,070 units, from an estimated 590,955 units in 2010. Our TIV growth projection implies an auto sales to real GDP growth multiplier of only 0.9x, which is still below the historical range of 1.2-3.0x. We remain OVERWEIGHT on the auto sector. Factors that could catalyse it include 1) strong vehicle sales, 2) a firming ringgit, and 3) more accommodative auto policies such as the lowering of excise duties. Tan Chong is our top pick in the sector.

Banking Winson Ng Gia Yann

Banking sector to chart 16% EPS growth in 2011

The banking sector remains an OVERWEIGHT, underpinned by the favourable earnings outlook for 2011. We are projecting solid net earnings growth of 16.3% in 2011, driven by (1) healthy loan growth of 8-9%, (2) stable credit costs in anticipation of stable or even improved asset quality, and (3) improved fee income from the investment banking and SME segments. The potential re-rating catalysts for the sector include (1) strong earnings growth, (2) sustained activities in capital markets to fuel investment banking income, (3) better traction for overseas operations, (4) potential GP write-backs, and (5) upside potential to dividend forecasts given the less-stringent-than-expected Basel III capital requirements. RHB Capital is our top pick for the sector.

Construction Sharizan Rosely

ETP pump-priming should start in 2011

We remain positive on the contruction sector in 2011 and are encouraged by the progress of the RM36bn-40bn KL MRT, RM7bn LRT extension/upgrade and other outstanding jobs under 10MP which are at various stages of tender/proposal evaluations. This suggests that project awards are likely to dominate newsflow in the next 6-9 months, backed by the deliverables of the Economic Transformation Plan. The potential approval of the RM10bn-12bn high-speed rail project is another boon to the sector. We remain OVERWEIGHT on the construction sector which remains anchored by the public transportation upgrade theme. Gamuda and WCT remain our top picks and MRCB makes a re-entry as one of our GLC/construction plays.


Oil & Gas Norziana Mohd Inon

A slew of new incentives from Petronas

Petronas is expected to announce more incentives for the oil & gas sector as the government sets the stage for Malaysia to become a regional hub for oilfield services and attract more foreign investments. This follows the launch of Schlumberger's financial hub in Nov, which marked the first step in the ETP's goal to draw MNCs intosetting up regional headquarters in the country. Also, the government is working closely with Petronas to outline plans for industry players to optimise the country's oil output, providing a boost to the sector by developing greater skills and creating employment in value-added activities. We expect the service providers to benefit from the incentives and the availability of more international expertise in the country. Already the proposed development of marginal fields has generated buzz among the service providers as Petronas is bringing the focus back on domestic fields. Weremain OVERWEIGHT on the sector and SapuraCrest stays as our top pick.

Property Terence Wong

Strong sales, M&A and landbanking to re-rate sector

With IFRIC 15 and the loan-to-value ratio cap out of the way, we do not foresee any more regulatory concerns for the sector until perhaps the general elections are held. Many developers have chalked up record sales in 2010 and continued buoyant demand should keep earnings growth strong over the next 2-3 years. Affordability is close to its best-ever level and the various infrastructure projects including MRT and high-speed rail bode well for the sector. The pick-up in M&A activity could also boost interest in property stocks, particularly after the groundbreaking proposal to merge UEM Land and Sunrise. Newsflow is likely to remain strong as landbanking activities are also gaining traction. The sector remains an OVERWEIGHT, with Outperform calls for all property developers. SP Setia remains our top pick.

GLCs Terence Wong

GLCs are mostly large and liquid and popular with foreign funds

Being relatively large and liquid, most GLCs sit well with foreign investors. There are numerous GLCs spread across many sectors. In the banking sector, our GLC picks include RHB Cap, Maybank and Affin. In the construction and property space, MRCB straddles both with significant exposure to infrastructure, construction and property development. UEM Land’s (ULHB MK; Not Rated) proposed merger with Sunrise (SUN MK; Not Rated) will enhance the group’s credibility and may make it too big to ignore. In the auto sector, we like UMW and Proton while in the oil & gas sector, we like Petronas Dagangan. For other cyclical sectors, our picks include Sime Darby for plantations, MAS for airlines and Star for media. In the stable mature sectors, we like Axiata and TM for telcos, Malaysia Airports for transport infrastructure and Tenaga for utilities.


Figure 36: Government-linked companies Target Core 3-yr EPS P/BV ROE Div Bloomberg Price price Mkt cap P/E (x) CAGR (x) (%) yield (%) ticker Recom. (Local) (Local) (US$ m) CY2011 CY2012 (%) CY2011 CY2011 CY2011 Affin AHB MK O 3.20 4.04 1,520 8.8 8.0 17.1 0.9 10.2 3.8 Axiata AXIATA MK O 4.67 5.90 12,533 12.8 11.9 35.8 1.8 14.5 2.4 Bursa Malaysia BURSA MK N 7.96 8.64 1,344 27.4 24.9 13.0 4.8 17.6 4.4 KLCC Property KLCC MK U 3.53 3.03 1,048 11.9 10.5 10.1 0.6 5.0 4.2 Malayan Banking MAY MK O 8.41 9.50 18,916 12.4 11.0 14.5 2.0 16.4 7.5 MAS MAS MK O 2.07 3.00 2,199 11.9 4.0 178.5 1.6 18.4 0.0 MRCB MRC MK TB 2.01 2.53 882 41.3 34.1 15.6 3.3 8.3 0.5 Media Prima MPR MK N 2.34 2.78 745 12.6 11.0 (7.5) 4.6 41.7 4.0 MISC MISC MK U 8.75 7.00 12,412 25.4 22.6 19.4 1.7 6.5 5.3 Petronas Dagangan PETD MK O 11.70 15.40 3,694 12.2 11.1 12.8 1.7 14.3 7.3 Proton PROH MK TB 4.84 5.95 845 6.8 6.4 23.4 0.4 6.8 2.1 QSR QSR MK N 5.63 6.50 520 12.9 12.1 13.6 3.5 27.2 2.7 RHB Cap RHBC MK O 8.59 10.50 5,878 10.9 9.5 17.6 1.7 16.6 3.7 Sime Darby SIME MK TB 8.74 9.84 16,691 16.3 14.6 8.7 2.2 13.9 4.1 Star Publications STAR MK O 3.39 4.31 796 12.9 10.9 16.8 2.2 17.6 6.2 Telekom Malaysia T MK TB 3.41 4.04 3,877 46.6 34.0 (16.1) 1.9 9.2 7.6 Tenaga Nasional TNB MK TB 8.44 10.55 11,694 13.0 11.8 6.1 1.2 9.9 2.8 UMW UMWH MK O 6.91 8.85 2,530 10.5 10.0 25.8 1.7 17.2 6.4

17.0 14.4 22.5 2.1 15.1 4.2 O = Outperform, N = Neutral, U = Underperform, TB = Trading Buy and TS = Trading Sell Source: Company, CIMB Research


CIMB picks in 2011 Cheapest Malaysian bank

Affin Holdings is an Outperform as we have witnessed strong traction in its earnings growth in the past seven quarters and the trend is expected to continue. We are particularly positive on its robust loan growth of 11-17% since Jun 09 compared with low-to mid-single digits previously. Affin's loan growth has been consistently above the industry's pace since Jun 09, reflecting the group's ability to gain market share despite being one of the smallest banks in Malaysia. The potential share price triggers in the near term are (1) above-industry loan growth, (2) better-than-expected net interest margin, and (3) undemanding valuations. The acquisition of Bank Ina Perdana will provide Affin a foothold in the underpenetrated and fast-growing Indonesian market and this will help to support the group's longer-term earnings growth.

Axiata is our top regional telco pick

Axiata is an Outperform on the back of its modest EPS growth, rising FCFE yield and strengthening balance sheet. We expect its units in the Indian subcontinent to take over the reins of growth as its assets in Malaysia and Indonesia mature. There is room for dividends to surprise given its strong FCFE and rapidly falling gearing. We maintain our SOP-based target price of RM5.90 and continue to rate Axiata as our top pick for exposure to the regional telcos. Likely re-rating catalysts are positive earnings and dividend surprises.

Gamuda is a direct beneficiary of the MRT project

Gamuda – We are encouraged by the progress of the proposed KL MRT, which is now slated to start work in Jul 2011. This suggests that project approval, tender process and project awards are likely to come through within the next 2-6 months. A major milestone would be Cabinet approval which should occur by end-2010. This is positive for Gamuda as it has a good chance of bagging the RM12bn-14bn tunnelling works. We estimate a 6-10% enhancement to FY11-12 earnings and 3-9% boost to our target price if the group succeeds in clinching the job. We maintain our Outperform call and RNAV-based target price of RM4.96. The main re-rating catalyst is progress and award of the MRT project. Gamuda is one of our top construction picks.

Kencana is an O&G stock with strong newsflow

Kencana benefited from a steady flow of projects in Malaysia, Vietnam, India and Australia in 2010, landing 13 jobs worth RM1bn which took its order book to RM2.1bn. Being one of the bigger, most efficient fabricators, Kencana is poised to secure more contracts. We expect the company to continue to clinch new projects over the next few months and stay a contract headliner as it is vying for works worth RM5.2bn in Malaysia and at least US$300m in India. It is also gunning for contracts to develop the Sepat and Berantai marginal fields, which could transform the company into an oilfield developer and producer.

MAS is top airline pick in Malaysia

MAS – We continue to rate MAS an Outperform as it is turning into a more aggressive growth-oriented company. Over the next three years, the airline will be taking delivery of the majority of the 56 aircraft it has ordered. They include new-generation narrow-and wide-body planes like the B737-800, A330 and A380 that will fundamentally lower its structural costs and increase the attractiveness of its cabin offerings to passengers. After years of an incoherent response to the low-cost threat, MAS recently started a separately managed low-cost business under Firefly with the intention of regainingsome of the 50%+ market share lost to its low-cost rival over the past seven years. Also, MAS’s extremely expensive fuel hedges carried over from pre-crisis days will finally expire at the end of 2011, potentially leading to a substantial earnings uplift in 2012.

MRCB is a dual construction and property GLC play

MRCB makes an entry as one of our top picks for 2011 for a construction, property and GLC play. We think that newsflow is likely to pick in 2011 on the much talked-about 3,300-acre Sg Buloh Land as the government rolls out the ETP. MRCB is likely to emerge as one of the key beneficiaries and participate both as a turnkey contractor and a developer. Newsflow on details of the merger with IJM Land is another re-rating catalyst for the stock. We reiterate our TRADING BUY recommendation and target price of RM2.76, which is based on an unchanged 10% RNAV discount.

RHB is top banking sector pick

RHB Capital is an Outperform and our top pick for the banking sector with a target price of RM10.50. We see numerous catalysts for the group including (1) robust investment banking income supported by robust deal flow, (2) brisk loan growth in the mid-teens, driven primarily by consumer loans and lending to public sector, and (3) network expansion via its innovative EASY outlets and tie-ups with big corporates for faster new customer acquisition. We project net earnings growth of 15-17% for FY11-12. The acquisition of Bank Mestika, which will be completed by 1Q11, will help the group to establish a foothold in the underpenetrated and fast-growing market in Indonesia.


SapCrest is top O&G sector pick

SapuraCrest – Armed with a RM13bn order book which is the highest in the sector, SapuraCrest continues to eye deals in Malaysia and overseas. The company is keen to explore opportunities in the development of marginal fields and appears to have a good chance of securing at least four of the remaining deepwater projects at the Malikai, Pisangan, Ubah Crest and Kamunsu fields. Meanwhile, in the Timor Sea off Australia, SapuraCrest is believed to be the frontrunner for a project that will require the decommissioning of the Montara platform. Overseas revenue contribution has risen from 18% of group revenue in FY1/07 to 30% in FY10 and is expected to hit 40-50% in three years’ time.

Sime is Malaysia’s largest planter

Sime Darby – We like Sime Darby as it is a liquid and cheap proxy for rising CPO prices. In 2011, we expect the new CEO’s efforts to turn around the group and rising CPO price to prevail over worries about the huge losses at its energy & utilities division in the previous year. There is potential for recovery of some of the provisions if the group is successful in claiming part of the cost overruns and divesting its groundwater project. Sale of non-core assets could lead to earnings upside for Sime from potential gains on the sale and reduced overheads though we do not expect it to be substantial. Its foreign shareholding level has fallen close to its all-time low of 13% from a high of 21%. Factors that could catalyse the stock include higher CPO price, favourable newsflow on key management changes, sale of non-core assets and the potential listing of individual business divisions.

WCT is Malaysia’s top subcontractor

WCT’s latest RM1.4bn project win in Qatar and the integrated complex concession at the new LCCT raised the group's profile as the biggest beneficiary of mega jobs in the Middle East and open tender jobs locally. The group still has a strong chance of bagging more projects in the next six months, with potential contract awards in 2011 matching the RM2bn secured in 2010. WCT’s share price performance has lagged behind IJM’s and Gamuda’s, creating a buying opportunity. The stock remains an Outperform with an unchanged target price of RM4.21, pegged to a 10% discount to its RNAV. WCT is one of our top picks for the construction sector.


SECTOR BRIEFS…


CIMB Research Report 2011 OUTLOOK

OVERWEIGHT Maintained Autos

A good cyclical play

MA

LAYS

IA

Loke Wei Wern +60 (3) 2084 9946 - [email protected]

Key drivers Key risks

• Propelled by new model launches, favourable credit conditions and rising income levels, 2011 looks set to be another good year for the auto industry. In addition, consumer sentiment, which is arguably the most important driver of big-ticket items such as cars, is holding up well. We maintain our OVERWEIGHT call on the sector and keep Tan Chong as our top pick.

• We are projecting a 4% rise in the total industry volume (TIV) from an estimated 600,500 units in 2010 to a record 626,890 units in 2011.

• Tan Chong is our top pick in the sector with an Outperform recommendation. Backed by its expansion plans and stronger industry fundamentals, Tan Chong boasts impressive earnings growth potential over the next three years, which should support our EPS CAGR projection of 46%.

• The margins of carmakers are vulnerable to exchange rate volatility. While we do not expect the US$ and yen exchange rate to rise above the levels seen in 2009, there is always a risk of exchange rates turning against the carmaker’s favour, thereby putting pressure on operating margins.

• A gradual rise in fuel prices is another major dampener on vehicle demand. Apart from encouraging the usage of public transport, the rise in fuel prices could prompt a shift from petrol guzzlers to fuel-sipping cars.

• There were three rounds of hire purchase (HP) rate hikes in 2010, all of which were induced by a rise in the overnight policy rate (OPR). Further hikes of the OPR in 2011 could trigger a corresponding increase in HP rates. Higher borrowing costs are generally negative for car buyers as it increases the loan servicing burden for buyers.

Figure 1: Total industry volume (units) Figure 2: Market share (Jan-Oct 2010)

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Perodua31.1%

Proton26.4%

Toy ota15.0%

Honda7.5%

Nissan5.8%

Hy undai1.6% Others

12.9%

Source: MAA, CIMB Research

Sector comparisons Target Core 3-yr EPS P/BV ROE Div Bloomberg Price price Mkt cap P/E (x) CAGR (x) (%) yield (%) ticker Recom. (Local) (Local) (US$ m) CY2011 CY2012 (%) CY2011 CY2011 CY2011 Proton PROH MK TB 4.84 5.95 845 6.8 6.4 23.4 0.4 6.8 2.1 Tan Chong TCM MK O 5.44 9.15 1,162 10.7 7.7 45.9 1.8 18.4 2.4 UMW UMWH MK O 6.91 8.85 2,530 10.5 10.0 25.8 1.7 17.2 6.4 Simple average 9.3 8.0 31.7 1.3 14.1 3.6 O = Outperform, N = Neutral, U = Underperform, TB = Trading Buy, TS = Trading Sell and NR = Not Rated Source: Company, CIMB Research



OVERWEIGHT Maintained Banks

Slower but healthy growth

MA

LAYS

IA

Winson Ng Gia Yann, CFA +60(3) 2084 9686 - [email protected]


• We remain OVERWEIGHT on the banking sector given the healthy projected net profit growth of 16.3% for 2011. RHB Capital is kept as our top pick, underpinned by our projected net profit CAGR of 17.7% for FY10-12. The sweet spots are (1) consumer loan growth supported by network expansion, and (2) growth of investment banking due to active capital markets. The acquisition of Bank Mestika will provide the group with a foothold in the fast-growing market in Indonesia.

• For the banking sector, growth of non-interest income should remain strong in 2011, driven by higher investment banking income from the sustained deal flow and business loan-related income amidst the favourable economic environment.

• Robust loan approval processes and a favourable operating environment will enable banks to maintain, if not improve their asset quality in 2011. As such, we do not expect any spike in credit costs.

• Several banks will see higher overseas contributions – Maybank from BII, Public Bank from its HK/China operations and RHB Capital from the completion of its purchase of Bank Mestika in 1Q11.

• Rate competition has been reignited, especially in the residential mortgage segment, putting pressure on banks’ lending margin. We, therefore, expect banks’ net interest margin to contract 10-20bp in 2011.

• Business loan growth is set to moderate in 2011 as corporates continue to switch to capital markets for fundraising activities and SME loan growth eases in line with the trend in GDP growth.

• The imposition of a maximum loan-to-value ratio of 70% for third and subsequent home purchases will crimp the growth of residential mortgages. But the impact will be small as such loans make up less than 3-5% of the loan base.

• Competition from foreign banks will increase as Bank Negara awarded five new banking licences to overseas banks in Jun 10. However, the impact will not be significant in the medium term as the new players need time to build up their operations.

• Alliance remains an Underperform due to the lack of catalysts. ROE and loan growth will be slower than the industry’s. Margins will be compressed as it needs to offer better deposit rates to support loan growth.

Figure 1: Banking system’s loan base and yoy growth Figure 2: Banking system’s NPL ratio & loan loss coverage

Source: Bank Negara Malaysia

Sector comparisons Target Core 3-yr EPS P/BV ROE Div Bloomberg Price price Mkt cap P/E (x) CAGR (x) (%) yield (%) ticker Recom. (Local) (Local) (US$ m) CY2011 CY2012 (%) CY2011 CY2011 CY2011 Affin AHB MK O 3.20 4.04 1,520 8.8 8.0 17.1 0.9 10.2 3.8 Alliance AFG MK U 3.08 3.11 1,515 10.5 9.4 20.2 1.4 13.8 4.2 AMMB Hldgs AMM MK O 6.26 8.20 5,996 11.2 9.8 24.9 1.6 15.0 4.2 Malayan Banking MAY MK O 8.41 10.50 18,916 12.4 11.0 14.5 2.0 16.4 7.5 Public Bank PBK MK O 12.80 16.10 14,367 12.8 10.9 19.3 3.0 25.1 5.7 RHB Cap RHBC MK O 8.59 10.50 5,878 10.9 9.5 17.6 1.7 16.6 3.7 Simple average 11.3 10.1 22.1 1.9 17.1 4.6 O = Outperform, N = Neutral, U = Underperform, TB = Trading Buy, TS = Trading Sell and NR = Not Rated Source: Company, CIMB Research



NEUTRAL Maintained Brewers

Not the choice brew

MA

LAYS

IA



• The excise duty hike reprieve for the brewery sector under Budget 2011 is good news for industry volumes. As it is, sales volume is already on a recovery path, thanks to the absence of duty hikes for the past four consecutive years. We maintain our NEUTRAL call on the sector.

• The firming of the ringgit against the US$ bodes well for brewery companies as the import of raw materials such as malt and hops is largely denominated in the US currency.

• On a more macro level, the improving economy should help support consumer confidence. Our economics team is projecting GDP growth of 5.5% for 2011.Consumer companies such as the brewers stand to benefit from higher consumer spending.

• We have a Neutral recommendation on both Carlsberg Brewery (CAB MK; Neutral) and Guinness Anchor (GUIN MK; Neutral). Carlsberg Brewery’s acquisition of Carlsberg Singapore has opened up a whole new market for it to tap into. As for Guinness Anchor which is exposed largely to the Malaysian market, we think that it should have little difficulty retaining its pole position in Malaysia due to its extensive product portfolio and marketing prowess.

• The brewery sector was spared an excise duty hike in the recent Budget 2011. But there is no guarantee that the industry will be let off indefinitely. We remain wary of the possibility of increases in duties given the negative repercussions that they have for legal sales volume.

• Guinness Anchor and Carlsberg Brewery continue to dominate the local malt liquor industry. A third brewer, Napex Corp, which produces lower-priced beer has a negligible share of the local malt liquor market. However, it could prove to be a bigger threat than expected if the authorities allow its production capacity and distribution network to extend beyond the current limits.

• The domestic malt liquor market is arguably saturated. With only two major brewers, competition is intense as the growth of one company will most likely come at the expense of another. Margins could be weighed down by stiff competition and potential price war as brewers try to undercut each other in order to gain a larger slice of the market.

Figure 1: Total industry volume (‘000 hectolitre) Figure 2: Duty structure and trend

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Sector comparisons Target Core 3-yr EPS P/BV ROE Div Bloomberg Price price Mkt cap P/E (x) CAGR (x) (%) yield (%) ticker Recom. (Local) (Local) (US$ m) CY2011 CY2012 (%) CY2011 CY2011 CY2011 Carlsberg Brewery CAB MK N 6.05 6.70 592 13.0 12.1 25.9 3.0 23.9 6.1 Guinness Anchor GUIN MK N 9.96 10.45 956 17.3 16.7 6.2 5.9 35.1 6.6 Simple average 15.2 14.4 16.1 4.5 29.5 6.4 O = Outperform, N = Neutral, U = Underperform, TB = Trading Buy, TS = Trading Sell and NR = Not Rated Source: Company, CIMB Research



NEUTRAL Maintained Building Materials

If you build it, they will come

MA

LAYS

IA

Terence Wong CFA +60(3) 20849689 - [email protected]


• The sector is a NEUTRAL as we believe that the earlier positive newsflow on mega projects and potential pickup in construction activities have already largely been priced in for Malaysia’s largest cement player, Lafarge Malayan Cement. However, we believe prospects for the sector are bright as we expect announcements on mega projects under the 10th MP and Budget 2011 such as the KL MRT, LRT, new LCCT and high-speed rail project to boost construction activities and reinvigorate demand for building materials. We note that awards for RM1.6bn out of the RM7bn LRT extension have already been announced. We expect more announcements in the year ahead. Our top pick is Ann Joo.

• International steel prices should recover in 2011 given the ongoing urbanisation in China and lower steel supply as China races to meet energy consumption targets by decommissioning obsolete plants.

• In May 2010, a RM25/mt cement price hike to RM300/mt was implemented. Further price hikes would be positive for the sector.

• While progress on mega infrastructure projects is currently on track, successful execution of these projects is subject to a variety of factors such as economic activity. However, our economics team is positive on the growth outlook for the Malaysian economy and forecast GDP growth of 5.5% for 2011.

• Policies implemented by China will also have an impact on global steel prices. On a positive note, steel supply is expected to tighten on the back of lower steel production in China as the country decommissions obsolete plants and restricts power supply to meet its energy consumption targets.

• The Malaysia Steel Association (MSA) has proposed several initiatives that are positive for upstream steel players such as Ann Joo. These include favourable electricity tariffs, import duties on finished goods as well as export duties on raw materials. Failure to legislate these proposals would be negative for the steel sector.

Figure 1: Malaysia cement production (‘000 mt) Figure 2: East Asia import steel prices, CFR (US$ / mt)

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Source: Company, CIMB Research, CEIC, Malaysian Department of Statistics, Companies

Sector comparisons Target Core 3-yr EPS P/BV ROE Div Bloomberg Price price Mkt cap P/E (x) CAGR (x) (%) yield (%) ticker Recom. (Local) (Local) (US$ m) CY2011 CY2012 (%) CY2011 CY2011 CY2011 Ann Joo AJR MK TB 2.94 3.74 490 9.7 6.8 92.2 1.4 15.3 5.8 Lafarge M Cement LMC MK U 7.40 6.37 2,004 14.4 13.7 3.5 1.9 13.3 5.7 Tasek TC MK O 7.59 9.00 299 9.6 9.2 31.4 1.0 14.3 1.6 Simple average 11.2 9.9 42.4 1.4 14.3 4.4 O = Outperform, N = Neutral, U = Underperform, TB = Trading Buy, TS = Trading Sell and NR = Not Rated Source: Company, CIMB Research



OVERWEIGHT Maintained Construction

Mega jobs make tracks

MA

LAYS

IA

Sharizan Rosely +60 (3) 2084 9864 - [email protected]


• We maintain an OVERWEIGHT on the construction sector as 2011 is likely to be a stronger year for execution, backed by the government’s Economic Transformation Programme (ETP). The RM36b-40bn KL MRT, RM7bn LRT extension/upgrade and other key jobs under the 10th Malaysia Plan (10MP) are making good progress towards tenders and awards. Positive newsflow is likely to pick up in the next 6-9 months, leading to further re-rating of the sector. Gamuda and WCT remain our top picks.

• Recent developments for the KL MRT and LRT projects are positive. For the KL MRT, the RM13bn-14bn tunnelling works will be the first package to be dished out. Going by the Jul 2011 timeline for the groundbreaking, we expect the award of the first MRT package to be in 1H2011, along with the rollout of the LRT Package B worth at least RM1.5bn-2bn.

• We maintain our Outperforms on Gamuda for its MRT exposure and WCT for its strength in open tenders and in the Middle East. IJM Corp is also an Outperform with an added merger angle while MRCB is a Trading Buy for its GLC advantage. Muhibbah is an attractive recovery story. We also like Mudajaya.

• Potential challenges from opposition parties due to the high absolute cost of the MRT could delay the project. The RM36bn cost for the construction of the MRT alone makes it the most expensive mega project in the nation’s history, surpassing the RM20bn development cost for Putrajaya, RM10bn for KLIA and Gamuda-MMC’s RM12.5bn northern double tracking project.

• Implementation of a large public sector funded project amidst sustained budget deficits could raise funding concerns too. But relief will come from an expected decline of the budget deficit. One option is the gradual phasing out of subsidies on petrol, food items and services, which has already started with the recent subsidy cuts for petrol, diesel, LNG and sugar.

• The land acquisition process for the KL MRT could take longer than expected. The proposal calls for the building of 90+ stations along 156km of tracks. 22 stations will be along 50km underground with an average depth of 30m. This may require an amendment to the Land Act.

• Our only Underperform call is the loss-making MTD-ACPI, which is facing a depleting order book.

Figure 1: Construction sector’s real GDP growth (%) Figure 2: Major 10MP projects

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Key projects Value Status (RM bn)

KL MRT 36-40 Appointed project managerLRT Ex tension/upgrade Klang Valle 7 Aw arded Phase 1Sev en new highw ay s 19 Approv ed in 10MPHigh Speed Rail (HSR) 10-12 Feasibility studyTotal 74.0


Sector comparisons Target Core 3-yr EPS P/BV ROE Div Bloomberg Price price Mkt cap P/E (x) CAGR (x) (%) yield (%) ticker Recom. (Local) (Local) (US$ m) CY2011 CY2012 (%) CY2011 CY2011 CY2011 IJM Corp IJM MK O 6.14 6.95 2,644 21.3 20.2 32.6 3.5 16.4 1.7 Gamuda GAM MK O 3.76 5.00 2,451 19.6 15.2 33.8 3.6 19.2 3.2 MRCB MRC MK TB 2.01 2.53 885 41.3 34.1 15.6 3.3 8.3 0.5 Muhibbah MUHI MK TB 1.36 2.06 173 10.3 9.0 59.0 0.9 8.8 2.2 MTD ACPI ACP MK U 0.51 0.32 38 30.5 11.5 181.4 0.7 2.4 1.8 WCT WCT MK O 3.00 4.34 752 13.0 12.5 10.8 1.8 15.0 3.3 Mudajaya MDJ MK O 3.94 7.94 523 5.6 5.1 67.1 1.8 36.7 1.5 Simple average 20.2 15.4 57.2 2.2 15.3 2.0 O = Outperform, N = Neutral, U = Underperform, TB = Trading Buy, TS = Trading Sell and NR = Not Rated Source: Company, CIMB Research



UNDERWEIGHT Maintained Food & Beverages

Not that tantalising

MA

LAYS

IA

Norziana Mohd Inon +60(3) 2084 9645 - [email protected]


• We continue to hold the view that the F&B sector provides a refuge with its defensive earnings and generous dividends. Having said that, stiff competitionand heightened raw material prices (Figure 1) may dilute producers’ margins. Given this outlook, we remain UNDERWEIGHT on the sector. CI Holdings is our top pick.

• Our economics research team estimates a 7% GDP growth in 2010 before slowing down to 5.5% in 2011. Consumers generally are likely to remain careful in their spending, giving priority to essential items rather than discretionary and luxury goods.

• In early Dec, as part of the subsidy rationalisation plan and to promote a healthy lifestyle, the government raised the price of sugar by 20 sen to RM2.10/kg, the second price increase since Jul. There have been no price revisions by the beverage producers. For 2011, there are no plans for price adjustments so far. The producers’ main worry is supply rather than pricing.

• We maintain a Buy on CI Holdings, the exclusive franchise holder for Pepsi in Malaysia. Tropicana Twister is the bestselling chilled orange juice brand with 40% market share. We remain Neutral on QSR and Cocoaland.

• The price volatility of raw materials, especially milk solid, wheat flour and coffee, is the main concern for F&B producers. Adverse weather conditions have in the past adversely affected the crop, leading to a shortage of supply. Most of the raw materials other than palm oil and cocoa are imported. Milk solid is typically imported from Australia and the Netherlands.

• While the subsidy cut for sugar is unlikely to dent beverage producers, it may spell bad news for condensed milk producers given the product’s high sugar content.

• Health scares may also dampen sales, as the SARS outbreak did to poultry sales in 2003. A more recent example is the widespread melamine concern which spoiled milk sales in 2008.

• The hypermarkets have been aggressive in pushing their house brands. Price-sensitive consumers are spoilt for choice as they are offered cheaper alternatives to selected products such as chocolate malt beverages and carbonated drinks.

• We continue to rate Nestle and F&N as Underperforms. They are among Malaysia’s oldest and venerable companies but their valuations are way expensive relative to their peers.

Figure 1: Milk solid price (US$ / pound) Figure 2: CPI for food & non-alcoholic beverage (% yoy)

0.00

0.05

0.10

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Jan-08 Aug-08 Mar-09 Oct-09 May -10 Dec-10

0.0

0.5

1.0

1.5

2.0

2.5

Jan-10 Apr-10 Jul-10 Oct-10

Source: Bloomberg, Department of Statistics

Sector comparisons Target Core 3-yr EPS P/BV ROE Div Bloomberg Price price Mkt cap P/E (x) CAGR (x) (%) yield (%) ticker Recom. (Local) (Local) (US$ m) CY2011 CY2012 (%) CY2011 CY2011 CY2011 CI Hldgs CIH MK B 3.68 5.15 166 12.2 10.9 11.5 4.4 36.3 3.3 Cocoaland COLA MK N 2.34 3.26 128 9.7 9.1 17.2 2.1 23.2 5.1 F&N Hldgs FNH MK U 16.26 11.05 1,859 21.5 20.9 (1.1) 5.1 22.4 3.3 Nestle (M) NESZ MK U 43.50 38.85 3,252 22.3 21.3 10.8 11.8 57.3 4.7 QSR QSR MK N 5.63 6.50 521 12.9 12.1 13.6 3.5 27.2 2.7 Simple average 15.7 14.9 10.4 5.4 33.3 3.8 O = Outperform, B = Buy, N = Neutral, U = Underperform, TB = Trading Buy, TS = Trading Sell and NR = Not Rated Source: Company, CIMB Research



OVERWEIGHT Maintained Gaming

Win some, lose some

MA

LAYS

IA

Ivy Ng Lee Fang CFA +60(3) 2084 9697 – [email protected]


• We remain OVERWEIGHT on the Malaysian gaming sector, with Genting Bhd staying as our top pick given the potential share price catalysts of i) less-than-expected cannibalisation, ii) new M&A ventures and iii) value-unlocking efforts via disposal of non-core assets.

• We expect domestic gaming revenue to remain flattish (+1%) in 2011 on the back of a potential loss of punters to Singapore’s two IRs. But over the medium term, Resorts World Genting (RWG) could still hold appeal as it remains one of the region’s cheapest holiday destinations.

• We expect Genting Malaysia (GM) to continue focusing on yields in 2011 as it proactively minimises the migration of punters to Singapore’s two new IRs. 2011 will also see GM spreading its wings to nurture its maiden project in US while also turning around its newly acquired UK assets.

• Given the increasing dominance of its gaming-related takings, we believe Genting Bhd could explore the disposal of its non-core assets, especially the non-performing ones.

• We expect the NFO segment to remain sturdy, thanks to the small ticket and habitual nature of NFO bets. Despite its mature state, we are projecting industry growth to come in at about 2%, driven mainly by Magnum’s 4D Jackpot game.

• Genting Malaysia could face a bigger-than-expected and lasting degree of cannibalisation from Singapore’s two IRs given the close proximity.

• For Genting Bhd’s Singapore unit, key risks include i) regulatory risks which could heighten in the run-up to the general election and ii) the slower-than-expected licensing of junket operators which could lead to a smaller-than-expected VIP gaming market.

• Risk management is a primary focus for all gaming operators given the exposure to fluctuations in luck factors. Having said that, the net win percentage usually evens out over the longer term.

• Force majeure and disease outbreaks are potential risks for any tourism related activity.

• Although GM’s casino licence is renewed quarterly and NFO licences are renewed annually, we do not view this as a major risk factor given that all gaming operators will adhere to the strict guidelines. Gaming licences are a premium in Malaysia and the licensing will exist as long as operations are ongoing.

• Given that GM’s casino tax is among the highest in the region, the likelihood of tax hikes is small. But the NFO players were recently slapped with a 2% pt hike in betting duties. Unsuccessful attempts to lobby for a reduction in prize monies will compress margins and sentiment on the NFO subsector.

Figure 1: Quarterly casino revenue trend (RM m) Figure 2: Quarterly NFO revenue trend (RM m)

800900

1,0001,100

1,2001,300

1,400

1Q08

2Q08

3Q08

4Q08

1Q09

2Q09

3Q09

4Q09

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2Q10

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-15%-10%-5%0%5%10%15%20%25%

Casino (LHS) grow th (%)

1,8001,9002,0002,1002,2002,3002,400

Mar-08

Jun-08

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Dec-08

Mar-09

Jun-09

Sep-09

Dec-09

Mar-10

Jun-10

-10%

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15%NFO (LHS) grow th (%)


Sector comparisons Target Core 3-yr EPS P/BV ROE Div Bloomberg Price price Mkt cap P/E (x) CAGR (x) (%) yield (%) ticker Recom. (Local) (Local) (US$ m) CY2011 CY2012 (%) CY2011 CY2011 CY2011 B Toto BST MK N 4.25 4.67 1,830 15.9 15.3 (0.6) 8.9 60.3 6.8 Genting GENT MK O 10.70 15.20 12,665 13.3 11.5 36.5 2.1 17.2 0.7 Genting Malaysia GENM MK N 3.34 3.90 6,298 14.1 12.9 3.4 1.6 11.9 2.4 RGB RGB MK U 0.06 0.06 22 13.5 7.9 162.1 0.7 5.5 0.0 Simple average 14.2 11.9 50.4 3.3 23.7 2.5 O = Outperform, N = Neutral, U = Underperform, TB = Trading Buy, TS = Trading Sell and NR = Not Rated Source: Company, CIMB Research



OVERWEIGHT Maintained Media

Sticking to papers

MA

LAYS

IA



• We maintain our OVERWEIGHT call on the media sector in view of the sustained recovery of industry advertising volume, backed by favourable macro factors. Adex stats for Jan-Sep 10 point to a firmer recovery for all media segments in 2011. A potential boost from election-driven adex spending is a plus, especially for the print companies. Our top picks are Star Publications and Media Chinese International.

• We continue to favour the newsprint players as they should continue to stage an earnings recovery, driven by margin expansion and a turnaround in advertisers’ sentiment that is likely to last throughout 2011. The sequentially strong margins reported in the last three quarters of 2010 are likely to continue, underpinned by cheaper newsprint inventory cost and a firmer ringgit.

• Despite the sustained ad volume momentum of the FTA TV segment, we remain Neutral on Media Prima as the share price already largely reflects the positives from the consolidation of NSTP.

• We maintain our Outperform on Star Publications as the group is the key beneficiary of the continued recovery of the English newspaper adex, backed by its dominant market share of 70%. Also an Outperform is Media Chinese International, which continues to reap merger synergies. Both companies also boast attractive dividend yields of 6%.

• A gradual pickup of ad volume will not necessarily have a big impact on the earnings of media companies. This is mainly due to the difference in ad volume measured at the gross level and actual advertising revenue which is net of discounts.

• Although gross adex growth for the FTA TV segment should continue to outperform other media segments, the effective discounts given to advertisers are likely to remain high compared to discounts given by newspaper companies. For Media Prima, this means lower net earnings from the TV business which makes up more than 70% of group revenue. Effective discounts for the TV segment are about 65% compared to 20-25% for the newspaper segment.

• From a low of US$511/tonne in Jan-10, newsprint spot price has crept up 22% to around US$654/tonne currently. The uptrend could continue in the medium term given the rise in global demand. This scenario is mitigated by newspaper players’ newsprint inventory which was bought for US$650-680/tonne and can last another 9-12 months. Further strengthening of the ringgit is another plus. Newsprint makes up 30-40% of newspaper publishers’ operating costs.

• A separate concern for pay TV operators is the rise in content costs which is likely to put pressure on margins.

Figure 1: Annual adex trends Figure 2: Newsprint spot prices (US$/tonne)

-20%

-10%

0%

10%

20%

30%

1997

1999

2001

2003

2005

2007

2009

Adex growth GDP growth

400

500

600

700

800

Jan-08 Jun-08 Nov-08 Apr-09 Sep-09 Feb-10

Source: NMR, Bloomberg

Sector comparisons Target Core 3-yr EPS P/BV ROE Div Bloomberg Price price Mkt cap P/E (x) CAGR (x) (%) yield (%) ticker Recom. (Local) (Local) (US$ m) CY2011 CY2012 (%) CY2011 CY2011 CY2011 Media Prima MPR MK N 2.34 2.78 748 12.6 11.0 (7.5) 4.6 41.7 4.0 MCI MCIL MK O 0.88 1.52 472 9.1 8.5 10.7 1.1 12.2 5.7 Star Publications STAR MK O 3.39 4.52 798 12.9 10.9 16.8 2.2 17.6 6.2 Simple average 11.5 10.1 6.7 2.6 23.8 5.3 O = Outperform, N = Neutral, U = Underperform, TB = Trading Buy, TS = Trading Sell and NR = Not Rated Source: Company, CIMB Research



OVERWEIGHT Maintained Oil and Gas

Oiling growth

MA

LAYS

IA

Norziana Mohd Inon +60(3) 2084 9645 - [email protected]


• The sector remains an OVERWEIGHT. High oil prices are a boon to both the upstream and downstream segments. The sector, however, benefits not directly from the high oil price but from an improvement in demand and supply. SapuraCrest stays our top pick.

• The steady rise of the oil price has prompted producers to step up production to meet increasing market demand, thereby benefiting service providers. As at 1 Jan 10, Malaysia produced 657,700 barrels of oil & condensates per day, up 138% since 1980 (Figure 1).

• Oil & gas is one of the 12 National Key Economic Areas under the 10th Malaysia Plan. To boost the country’s reserves (Figure 2), the government recently announced two incentives aimed at improving the commercial viability of marginal field development 1) reduction of tax rate from 38% to 25%, and 2) waiver of export duty on oil produced and exported from marginal fields.

• We maintain our Outperform calls on SapuraCrest, Kencana and Petronas Dagangan while Petra Perdana stays as a Trading buy. We remain Neutral on Wah Seong.

• Higher prices of raw materials, especially steel, are putting fabricators’ margins at risk. In some cases, the additional costs cannot be passed on to consumers, resulting in cost overruns. Pricey raw materials also adversely affect smallish contractors, which already have to put up with modest margins.

• The sector has underinvested in equipment needed for new projects. The equipment includes platforms, rigs and vessels, which require high capital outlay. However, in the era of strategic partnerships, companies can draw comfort in the sharing of financial obligations and risks with partners.

• Labour cost remains high. The quickening pace of industry activities has absorbed all available capacity while the lack of adequate recruitment and capacity building has resulted in a severe shortage of experienced manpower. The problem is compounded by the approaching retirement of many of the well-qualified people in the industry.

• While we like Dialog’s defensive income from the Kertih facility, we retain our Underperform call on the stock given its demanding valuations relative to its peers.

• •

Figure 1: Oil production vs. consumption (‘000 bpd) Figure 2: Oil & gas reserves (m barrels of oil equivalent)

100

200

300

400500

600

700

800

1980 1984 1988 1992 1996 2000 2004 2008

Net production

0

5

10

15

20

25

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Crude oil & condensate Natural gas

Source: Petronas

Sector comparisons Target Core 3-yr EPS P/BV ROE Div Bloomberg Price price Mkt cap P/E (x) CAGR (x) (%) yield (%) ticker Recom. (Local) (Local) (US$ m) CY2011 CY2012 (%) CY2011 CY2011 CY2011 Dialog DLG MK U 1.60 1.15 1,014 22.6 20.1 12.4 4.2 20.0 2.5 Kencana KEPB MK O 2.01 2.40 1,063 14.1 12.2 18.6 10.2 78.6 1.5 Petra Perdana PETR MK TB 0.77 0.98 110 12.9 9.4 8.4 0.6 5.3 2.6 Petronas Dagangan PETD MK O 11.70 15.40 3,705 12.2 11.1 12.8 1.7 14.3 7.3 SapuraCrest SCRES MK O 2.82 3.30 1,148 13.4 12.4 19.5 3.8 28.9 3.2 Wah Seong WSC MK N 2.00 2.36 462 12.7 11.7 4.3 3.3 27.4 2.8 Simple average 14.7 13.0 12.7 4.0 29.1 3.3 O = Outperform, N = Neutral, U = Underperform, TB = Trading Buy, TS = Trading Sell and NR = Not Rated Source: Company, CIMB Research



TRADING BUY Maintained Plantations

Another year of strong harvest

MA

LAYS

IA

Ivy Ng Lee Fang CFA +60(3) 2084 9697 - [email protected]


• We continue to rate the Malaysian plantation sector a TRADING BUY due to our bullish view on CPO price. KL Kepong, Sime Darby and Hap Seng Plants remain our top picks given the potential share price triggers of higher-than-expected CPO price and M&A.

• Oil palm players are set to post higher earnings in 2011, helped by higher FFB output and CPO price. Operating costs are expected to be manageable.

• CPO prices look set to rally in 1Q11 on the back of supply worries and a pickup in demand during Chinese New Year, strong economic growth from emerging markets and increased biodiesel mandates in Brazil and new biodiesel mandates in Malaysia. Overall, we project CPO prices to rise 18% to average RM2,630 per tonne in 2010. For 2011, we forecast an average price of RM2,800 per tonne.

• Weather experts are predicting the La Nina to be around till 1Q11. This could prolong the unusually low rainfall in the key soybean planting regions, which will affect soybean harvests in 2011.

• The government’s ETP talked about accelerating the replanting of oil trees in Malaysia. This could result in slower palm oil output growth. Also, labour shortage remains a concern for the industry.

• Should there be sharp contractions in global liquidity or US$ strength, it may lead to a steep correction for CPO price. However, our economists do not expect a significant tightening of monetary policy in 2011 given the still-uneven global economic recovery.

• Higher crude oil price and rising biodiesel mandates in South America and Malaysia are expected to drive up demand for biodiesel. There is concern that if mineral oil prices drop sharply, it may crimp biodiesel demand. We believe this is unlikely given rising mandates for biodiesel and the increasing efforts by governments to address climate change.

• The market expects Malaysia to implement its B5 biodiesel mandate in stages by June 11. But there is a risk of delay as the government has not decided on the subsidy scheme though this could be offset by a potential new replanting subsidy scheme.

• The threat of higher edible oil import duties by India is low as its government wants to contain inflation.

• China’s price control guidelines may lead to lower prices in the short term. But we think that the price weakness is temporary as it will only result in processors delaying the import of edible oils and oilseeds.

Figure 1: Historical CPO prices Figure 2: 8 Oils & fats stock/usage ratio projected to decline

1,000

1,500

2,000

2,500

3,000

3,500

4,000

1-Jan-09 18-Jun-09 24-Nov -09 24-Mar-10 22-Jul-10 19-Nov -10

RM per tonne Oct/Set 10/11F 09/10 08/09 07/08 06/07Op stocks 16.4 16.1 15.1 14.0 14.0Production 143.2 138.0 131.6 127.8 120.8Imports 61.1 59.4 58.7 54.8 51.5Ex ports 61.0 59.4 58.1 55.0 51.8Consumption 143.9 137.7 131.3 126.5 120.5Ending stocks 15.8 16.4 16.1 15.1 14.0Stock/Usage ratio 11.0% 11.9% 12.2% 11.9% 11.6%

Source: Oil World, CIMB Research, Bloomberg

Sector comparisons Target Core 3-yr EPS P/BV ROE Div Bloomberg Price price Mkt cap P/E (x) CAGR (x) (%) yield (%) ticker Recom. (Local) (Local) (US$ m) CY2011 CY2012 (%) CY2011 CY2011 CY2011 Sime Darby SIME MK TB 8.74 10.78 16,743 16.3 14.6 8.7 2.2 13.9 4.1 IOI Corp IOI MK N 5.78 6.54 12,336 17.8 15.9 15.2 2.9 18.0 3.8 KLK KLK MK TB 21.58 25.00 7,344 19.6 18.1 8.6 3.4 18.1 4.1 Genting Plantations GENP MK N 8.68 9.84 2,100 17.4 16.5 19.0 2.1 12.6 1.0 Hap Seng Plant HAPL MK TB 3.15 3.73 803 13.5 13.5 22.8 1.4 10.8 5.9 Simple average 16.9 15.7 14.9 2.4 14.7 3.8 O = Outperform, N = Neutral, U = Underperform, TB = Trading Buy, TS = Trading Sell and NR = Not Rated Source: Company, CIMB Research



OVERWEIGHT Maintained Power

A year of reforms?

MA

LAYS

IA

Ivy Ng Lee Fang CFA +60(3) 2084 9697 – [email protected]


• We remain OVERWEIGHT on the power sector as we expect subsidies to be in the spotlight in 2011, paving the way for sector reforms involving i) tariff review and ii) PPA renegotiations. Other themes include i) concrete plans for the country’s supply plant-up and ii) more details on the country’s energy policy.

• Over the short term, our preference lies with national utility company, Tenaga, as we see potential re-rating catalysts for this heavyweight laggard in the form of i) newsflow on gas subsidy rollback and a corresponding tariff hike, ii) revival of foreign interest and iii) stronger-than-expected demand with the rollout of major construction projects.

• Electricity demand growth is expected to improve yoy, albeit at a more moderate pace. But there could be upside to our 3-5% power demand growth estimate for FY11-13 given the string of projects announced by thegovernment under Budget 2011 and its Economic Transformation Programme.

• As M&A opportunities at home are expected to be limited, expansion activities will be largely on overseas ground. Both Tenaga and YTL Power remain on the lookout for assets to add to their portfolios.

• For YTL Power, potential upside could also come from stronger-than-expected PowerSeraya earnings and a positive response to its recently launched WiMAX network.

• Sentiment on Tenaga could suffer if the government decides to postpone its tariff review yet again. Tenaga’s tariff was last cut by 3.7% in Mar 09.

• Tenaga’s bottomline remains vulnerable to fluctuations in international coal prices. We estimate that every US$10/MT increase in average coal prices could lead to a 17-18% cut in our core net earnings estimate.

• The government is expected to lead the next round of PPA renegotiations with an intention to conclude talks within a 6-12 months timeframe. This could hit short-term sentiment on first-generation IPPs, though it would be positive over the long run given i) lower fixed capacity payments for Tenaga and ii) certainty of power supply beyond 2015. YTL Power’s Paka and Pasir Gudang plants fall into this category.

• YTL Power’s WiMAX venture could face challenges, leading to larger-than-expected start-up losses. Over the longer term, our telco analyst still has reservations about the viability of WiMAX with the key shortcoming being the lack of supporting handsets and equipment vendors.

• Overseas expansion plans carry higher risks and may not generate returns on par with their existing projects.

Figure 1: Industry generation mix (FY8/10) Figure 2: Electricity demand by sector (Sep 08 – present) (Gwh)

Gas - Tenaga22.4%

Gas - IPP32.0%

Coal - Tenaga 19.6%

Coal -IPP20.6%

Hy dro5.1%

Oil & Distil.0.4%

1,000

1,500

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4,000

Sep-08 Jan-09 May -09 Sep-09 Jan-10 May -10 Sep-10

Gwh Industrial Commercial Domestic


Sector comparisons Target Core 3-yr EPS P/BV ROE Div Bloomberg Price price Mkt cap P/E (x) CAGR (x) (%) yield (%) ticker Recom. (Local) (Local) (US$ m) CY2011 CY2012 (%) CY2011 CY2011 CY2011 Tenaga Nasional TNB MK TB 8.44 10.55 11,731 13.0 11.8 6.1 1.2 9.9 2.8 YTL Power YTLP MK O 2.44 2.97 5,652 13.8 13.1 13.1 2.3 17.1 7.2 Simple average 13.4 12.5 9.6 1.8 13.5 5.0 O = Outperform, N = Neutral, U = Underperform, TB = Trading Buy, TS = Trading Sell and NR = Not Rated Source: Company, CIMB Research



OVERWEIGHT Maintained Property

Piling on the newsflow

MA

LAYS

IA



• We continue to rate the sector an OVERWEIGHT as the key catalysts – the economic and stockmarket outlook – remain positive. Record sales achieved in 2010 by aggressive developers should continue in 2011. We view the recently imposed 70% cap on the loan-to-value (LVR) ratio for the third property purchased as a healthy move that will curb excessive speculation while maintaining affordability for first-time house buyers and second-home upgraders.

• We have Outperform recommendations on all the property developers under coverage as record sales in 2010 will translate into strong earnings growth. With IFRIC 15 and LVR concerns out of the way, we believe investors will focus on M&A and developers’ landbanking activities. The merger of UEM Land and Sunrise should boost interest in the sector and the potential inclusion of the merged group in the KLCI would make it too big to ignore.

• The affordability index for mass housing remains near its best ever as mortgage rates are still low and banks continue to offer very attractive packages. Also, concerns over an uptick in inflation due to moves to reduce subsidies could help properties as they are viewed as an inflation hedge.

• Massive overbuilding of upscale condos in the KLCC area led to 20-40% price drops in the past 2-3 years, with the global financial crisis not helping matters. Occupancy and rental rates in the city remain depressed. Developers have had to change their product mix to smaller and more affordable units to push sales.

• Many companies that opted for REIT listings in the early years were looking to cash out rather than aggressively enlarging and enhancing their portfolio of assets. The recently listed large REITs such as Sunway REIT and CMMT are more professionally run and have ambitious acquisition strategies. The other Malaysian REIT that we are more comfortable with is Axis REIT (AXRB MK; Not Rated).

• KLCC Property remains our only Underperform in the property sector as it is a property investment company and not a developer. There is risk of EPS dilution from preference share conversion. Its dividend yield is also not attractive and much lower than REITs. The listings of the large new REITs in 2010 provide investors a good alternative to KLCC Prop and those seeking steady yields.

Figure 1: Affordability index (mortgage payments/income) Figure 2: Price indices

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0.4500

1980 1984 1988 1992 1996 2000 2004 2008

0.050.0

100.0150.0200.0250.0300.0350.0400.0450.0500.0

1988 1991 1994 1997 2000 2003 2006 2009

Malaysia house price indexPer Capita Income IndexConsumer Price Index

Source: BNM, PMR, CIMB Research

Sector comparisons Target Core 3-yr EPS P/BV ROE Div Bloomberg Price price Mkt cap P/E (x) RNAV CAGR (x) (%) yield (%) ticker Recom. (Local) (Local) (US$ m) CY2012 (Local) (%) CY2011 CY2011 CY2011 E&O EAST MK O 1.14 1.63 300 11.6 2.71 11.8 0.8 5.9 3.5 KLCC Property KLCC MK U 3.53 3.03 1,048 10.5 5.05 10.1 0.6 5.0 4.2 SP Setia SPSB MK O 5.24 6.88 1,694 14.6 5.73 25.1 2.2 13.0 4.5 Simple average 12.2 15.3 1.2 7.9 4.1 O = Outperform, N = Neutral, U = Underperform, TB = Trading Buy, TS = Trading Sell and NR = Not Rated Source: Company, CIMB Research



OVERWEIGHT Maintained Rubber Gloves

Nitrile has the upper hand

MA

LAYS

IA



• We maintain our OVERWEIGHT rating as we expect glove demand to grow 8-10% p.a. and utilisation rates to remain a healthy 70-90%. Potential re-ratingcatalysts include 1) the eventual moderation of rubber latex prices, 2) more newsflow on MNCs’ outsourcing of glove production, and 3) frequent price revisions which will allow ASPs to catch up with raw material prices.

• All stocks are Outperforms and Hartalega is our top pick. Hartalega is Malaysia’s largest manufacturer of nitrile gloves, which make up 80% of its sales. This insulates its earnings from rubber latex price volatility. If the price of natural rubber remains high, we believe more end users will switch to nitrile. This trend is already beginning to emerge as some grades of nitrile powder-free gloves are cheaper than natural rubber powder-free gloves.

• If operating headwinds persist, we believe some glove companies will explore consolidation options to optimise costs and build scale. In our view, this would stir corporate interest in smaller-cap glovemakers such as Latexx and Adventa which have nitrile capacity.

• Rubber and nitrile latex make up 55-60% of total production costs and dramatic changes in prices would have a negative effect on earnings. Although most of this cost can be passed on as the glovemakers use the previous month’s price when quoting customers, drastic and quick price changes can hurt margins. Glovemakers mitigate unusual price fluctuations by repricing their products two to four times per month.

• 95% of glovemakers’ sales are exported, with transactions priced in either US$ or euros. The depreciation of the US$ and euro against the ringgit has been a concern and has contributed to margin contraction. However, nitrile glovemakers are less impacted as they buy all of their nitrile requirements in US$, which acts as a natural currency hedge.

• Glovemakers rely heavily on labour in areas such as stripping gloves, QC and packing. This exposes companies to shortages in foreign labour. However, more automation will reduce their reliance on manpower and improve operating efficiency.

Figure 1: Nitrile and natural rubber price (RM/kg) Figure 2: Rubber and nitrile latex cost comparison (RM)

5.06.07.08.09.0

10.011.012.013.014.015.0

Jan-

07M

ar-0

7M

ay-0

7Ju

l-07

Sep-

07No

v-07

Jan-

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ay-0

8Ju

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Rubber latex Nitrile latex

Rubbervs. Nitrile

Average glove weight (kg) 5.00 3.50 -30%Latex / nitrile content 73% 93% 20%

3.63 3.24 -11%

Total solid content 60% 44%Weight of latex / nitrile (kg) 6.04 7.36 22%

Latex / nitrile price (RM/kg) 9.13 5.74 -37%

Total production cost 55.16 42.23 -23%

Rubber latex Nitrile latex(For 1,000 gloves)

Source: Company, CIMB Research, Bloomberg, Companies

Sector comparisons Target Core 3-yr EPS P/BV ROE Div Bloomberg Price price Mkt cap P/E (x) CAGR (x) (%) yield (%) ticker Recom. (Local) (Local) (US$ m) CY2011 CY2012 (%) CY2011 CY2011 CY2011 Adventa ADV MK O 2.13 3.79 104 7.1 5.7 26.9 1.0 15.0 3.0 Hartalega HART MK O 5.39 8.43 625 9.4 8.3 18.4 3.2 38.9 3.7 Kossan KRI MK O 3.34 5.41 340 7.4 6.3 12.5 1.8 27.6 3.0 Latexx LTX MK O 2.67 3.85 186 6.1 5.6 26.6 1.8 33.0 4.1 Supermax SUCB MK O 4.38 8.22 475 7.1 6.2 22.5 1.6 24.7 2.5 Top Glove TOPG MK O 5.55 7.27 1,094 12.0 11.1 9.7 2.5 22.4 3.4 Simple average 8.2 7.2 19.4 2.0 26.9 3.3 O = Outperform, N = Neutral, U = Underperform, TB = Trading Buy, TS = Trading Sell and NR = Not Rated Source: Company, CIMB Research



OVERWEIGHT Maintained Semiconductor

Less chipper

MA

LAYS

IA



• We continue to rate the sector an OVERWEIGHT as the handset segment is still seeing rapid growth and the corporate refresh cycle should provide some support. We have Outperform ratings on both MPI and Unisem. The potential catalysts for Unisem include earnings surprises, more tier 1 qualification and revival of demand. As for MPI, it should benefit from any turnaround in the computing segment and demand pickup.

• Worldwide mobile phone sales rose 35% on a yoy basis in 3Q10, making it the third straight quarter of double-digit sales growth and indicating healthy consumer demand. The growth has in part been fuelled by the fast-growing sales of smartphones.

• The corporate refresh cycle will provide some support to the sector. However, Intel noted that this time around, the cycle will be more gradual. Similarly, Gartner has forecast a modest growth rate of 3% in 2011 for enterprise IT spending, after an expected 2% rise in 2010 led by growth in emerging economies.

• After a stellar 2010, chip sales are still set to register growth in 2011 though the growth will be moderating. The SIA expects modest growth of 6% for 2011 and 3% for 2012 as the economy recovers and consumer confidence is restored. Other market researchers have pegged 2011 growth at 5-9%.

• The PC market has seen softness as consumer PC demand has weakened in what is a seasonally strong 3Q and has also been affected by strong media tablet sales. This prompted Gartner to reduce its PC unit shipment forecast from 17.9% to 14% for 2010 andfrom 18.1% to 16% for 2011. The PC market makes up about 21% of Unisem’s revenue and 30% of MPI’s topline.

• The other key risk is how the economy fares. Our economic research team believes that the growth prospects for developing Asia are still good for 2011 though the growth for advanced economies remains subdued. The possibility of a double-dip recession is not totally out of the picture and our team thinks that there is a 30% chance of it occurring. While there is still a high degree of coupling between developed and the developing economies, the pace of deceleration of exports will be gradual and fears of a hard landing can be put to rest. Visibility for the semicon sector remains low as it is no more than a few months ahead.

• With their revenue denominated entirely in US$, the semicon players have been hit by the falling US$ although that is starting to reverse now. Soaring gold prices and other raw material costs will hit margins as there is a time lag before costs can be passed on.

Figure 1: Quarterly handphone sales (m units) Figure 2: Quarterly PC sales (m units)

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Sector comparisons Target Core 3-yr EPS P/BV ROE Div Bloomberg Price price Mkt cap P/E (x) CAGR (x) (%) yield (%) ticker Recom. (Local) (Local) (US$ m) CY2011 CY2012 (%) CY2011 CY2011 CY2011 Unisem UNI MK O 1.96 2.82 421 6.5 5.7 41.3 1.1 18.0 6.8 MPI MPI MK O 5.45 6.90 365 9.8 7.4 16.1 1.3 14.1 6.7 Simple average 8.2 6.6 28.7 1.2 16.1 6.8 O = Outperform, N = Neutral, U = Underperform, TB = Trading Buy, TS = Trading Sell and NR = Not Rated Source: Company, CIMB Research



OVERWEIGHT Upgraded Telecommunications

Busy signals for 2011

MA

LAYS

IA

Kelvin Goh CFA +60(3) 2084 9699 - [email protected]


• We upgrade the telco sector from Neutral to OVERWEIGHT on the back of likely catalysts from capital management and earnings surprise. Our top pick remains Axiata.

• TM may declare a special dividend as its cash has been bolstered by the sale of its stake in Measat and its shares in Axiata are worth RM0.25/TM share. Dividend yields for DiGi and Maxis should stay above-market. Axiata will begin paying dividends in 2011, thanks to a surge in FCF and falling gearing.

• Small and large screen data revenue should be the key revenue drivers, thanks to pent-up demand, the rapid take-up of social networking and accessing of Internet and emails on the go.

• Celcom and DiGi are teaming up to share infrastructure in 1) operations and maintenance, 2) transmission and site sharing, and 3) radio access network. We estimate that this could bolster their EBITDA margins by 2-3% pts in the coming years.

• Axiata remains an Outperform (SOP-based target price of RM5.90), with the likely catalyst being positive earnings and dividend surprises. Unlike its Malaysian peers, Axiata derives about 40% of its earnings from faster-growing overseas markets. TM is a Trading Buy (TP: RM4.04) as we think it may undertake a capital management with its rising cash levels.

• Competition is intensifying with the entry of YTL Communications, revival of U Mobile and SK Telecom’s entry into Packet One. While we think YTLC will have little impact in mobile voice, it could be disruptive in broadband, making it a challenger to TM. A restructured Time dotCom is eyeing a bigger share in fixed broadband, data and wholesale, and upping the heat on TM.

• Average voice revenue per minute will continue to be under pressure due to competition for migrant workers and youths (Figure 1).

• Instead of an earlier plan to auction refarmed spectrum, the regulator has asked telcos to come to an amicable solution and give up some of their 2G spectrum. Termination rates are due to be revised in Jul 2011, in place of the current interim rate. The regulator-imposed reduction in roaming rates between Malaysia and Singapore remains outstanding and should be introduced in 2011. This is likely to be negative for Maxis which earns the most from roaming.

• We remain Neutral on DiGi (TP: RM27.00) and Maxis (TP: RM5.60) as their steep valuations are offset by fairly attractive dividends. We prefer Axiata for its higher growth and more attractive valuations.

Figure 1: Voice revenue per minute Figure 2: Projection of revenue market share

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Sector comparisons Target Core 3-yr EPS P/BV ROE Div Bloomberg Price price Mkt cap P/E (x) CAGR (x) (%) yield (%) ticker Recom. (Local) (Local) (US$ m) CY2011 CY2012 (%) CY2011 CY2011 CY2011 Axiata AXIATA MK O 4.67 5.90 12,572 12.8 11.9 35.8 1.8 14.5 2.4 DiGi.com DIGI MK N 24.80 27.00 6,147 14.8 13.3 13.2 16.9 114.1 6.7 Maxis MAXIS MK N 5.36 5.60 12,815 15.8 14.5 6.4 5.0 30.7 10.0 Telekom Malaysia T MK TB 3.41 4.04 3,889 46.6 34.0 (16.1) 1.9 9.2 7.6 Simple average 22.5 18.4 9.8 6.4 42.1 6.7 O = Outperform, N = Neutral, U = Underperform, TB = Trading Buy, TS = Trading Sell and NR = Not Rated Source: Company, CIMB Research



UNDERWEIGHT Maintained Tobacco

It's getting tougher to smoke

MA

LAYS

IA



• We have an UNDERWEIGHT call on the tobacco sector on the back of the tough operating environment and unexciting earnings growth prospects. The tobacco sector’s strong operating cashflows and subsequently high dividends are still the sector’s key attraction. British American Tobacco (BAT) has consistently adopted a 90% net dividend payout policy. JT International (JTI) has reverted to its traditional 30 sen gross dividend in 2010. But the company’s net cash position is growing and we do not rule out the possibility of special dividends in the future.

• Our GDP growth projection of 5.5% for 2011 should be good news for consumption. While there is no clear correlation between GDP growth and cigarette consumption, we expect the improving macro conditions to help lift consumer sentiment, which should be generally positive for consumer spending.

• With the Afta in place, the requirement for 70:30 local-to-foreign tobacco leaves has been lifted. Tobacco players now have the flexibility to increase their import of Asean leaves which are generally cheaper than local leaves.

• We have a Neutral call on JTI. The company’s comeback in terms of market share is encouraging. But we think that earnings growth prospects will be weighed down by the tough industry fundamentals.

• In early Oct 10, the government hiked excise duty by 3 sen per stick to 22 sen. As a result, cigarette prices were raised by about 8-9%, taking the selling prices for premium packs of 20s to the psychological level of RM10. We expect these price increases to have negative repercussions for legal volumes.

• The government has banned the sale of small packs (<20 sticks) from 1 Jun 10. The tobacco players face a challenging year for as 2011 will see the full-year impact of the ban on tobacco players’ margins.

• Taking into account the government’s strong stance against smoking, we flag the possibility of further regulatory constraints such as the extension of non-smoking zones and unrelenting excise duty increases.

• Now that Afta has been implemented, there is risk of an influx of foreign cigarettes into the country, which will pose a threat to the existing brands. While these cigarettes are expected to come in at the lower end of the market at the initial stage, competition will nonetheless intensify in the future.

• We have an Underperform call on BAT given the potential de-rating catalysts of 1) more regulatory negatives, 2) growth in illicit trade, and 3) market share loss to its rival JTI. BAT will be most affected by the ban on small packs given its larger exposure to small packs.

Figure 1: Tobacco industry volume (‘bn sticks) Figure 2: Level of illicit trade (% market share)

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2007

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11F

('bn sticks)

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27.5%

37.5% 39.7%

0%5%

10%15%20%25%30%35%40%45%50%

2004 2005 2006 2007 2008 2009 2010(Mar-May )

Source: Companies, CIMB Research

Sector comparisons Target Core 3-yr EPS P/BV ROE Div Bloomberg Price price Mkt cap P/E (x) CAGR (x) (%) yield (%) ticker Recom. (Local) (Local) (US$ m) CY2011 CY2012 (%) CY2011 CY2011 CY2011 British American ROTH MK U 45.48 44.00 4,127 17.3 16.9 0.9 22.5 136.3 7.1 JTI RJR MK N 6.03 6.35 501 12.8 12.3 5.7 3.6 30.5 5.0 Simple average 15.1 14.6 3.3 13.1 83.4 6.1 O = Outperform, N = Neutral, U = Underperform, TB = Trading Buy, TS = Trading Sell and NR = Not Rated Source: Company, CIMB Research



NEUTRAL Maintained Transport

Aviation to outperform shipping

MA

LAYS

IA

Raymond Yap CFA +603 2084 9769 - [email protected]


• We are bullish on aviation prospects for 2011 as Southeast Asian airlines remain cautious on capacity redeployment and continue to focus on yield recovery. The problems besetting the A380 and B787 will also constrain global supply. Continued regional and global economic growth should keep demand healthy. We have Outperform calls on both MAS and AirAsia.

• Crude oil shipping demand has recovered in the first 10 months of 2010 from 2009 levels, driven by a 1% yoy rise in US oil imports and a massive 19% jump Chinese imports. The outlook for crude oil supply looks positive, with Iraq starting its drilling programme and Brazil developing its deepwater offshore fields. These factors should support long-term shipping demand.

• China’s impact on the dry bulk market has been substantial over the past seven years because of its rapid industrialisation and massive infrastructure building programme. China now comprises more than 70% of global iron ore imports and a substantial portion of the growth in thermal and coking coal imports. Additionally, the growth in imports of minor bulks has been material. India is another growth driver, with rising demand for thermal coal powering its new generation plants.

• The aviation and shipping sectors are very susceptible to a global downturn in GDP growth. As can be seen during the 2008-09 global financial crisis, yields and rates can fall dramatically as airlines and shipping companies struggle to rein in capacity in the face of a steep and sudden collapse in demand. However, our economists rate the chance of a double-dip recession as fairly remote under present circumstances.

• The crude tanker and chemical tanker shipping markets have suffered very low rates as excessive newbuilding deliveries overwhelm the demand recovery. While the container shipping sector has been strong, MISC’s liner business continues to be structurally unprofitable. This explains our Underperform rating for MISC.

• Dry bulk shipping rates in 2011 could suffer in the face of aggressive newbuilding deliveries and China’s property sector crackdown. China’s determined efforts to dampen demand for properties could have a negative effect on demand for steel and consequently, iron ore. Furthermore, the newbuilding order book is a substantial 55% of the current fleet, keeping delivery growth higher than demand growth for the next two years. We rate Maybulk an Underperform.

Figure 1: Core net profit (RM m) Figure 2: Baltic Dirty Tanker Index

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Baltic Dirty Tanker Index

Source: Baltic Exchange, Companies, CIMB Research

Sector comparisons Target Core 3-yr EPS P/BV ROE Div Bloomberg Price price Mkt cap P/E (x) CAGR (x) (%) yield (%) ticker Recom. (Local) (Local) (US$ m) CY2011 CY2012 (%) CY2011 CY2011 CY2011 MAS MAS MK O 2.07 3.00 2,205 11.9 4.0 178.5 1.6 18.4 0.0 AirAsia AIRA MK O 2.61 3.85 2,306 7.4 5.4 38.4 1.3 17.7 0.0 MISC MISC MK U 8.75 7.00 12,451 25.4 22.6 19.4 1.7 6.5 5.3 Maybulk MBC MK U 2.97 2.80 947 13.9 9.3 19.8 1.5 11.2 5.5 Simple average 14.7 10.3 64.0 1.5 13.5 2.7

O = Outperform, N = Neutral, U = Underperform, TB = Trading Buy, TS = Trading Sell and NR = Not Rated Source: Company, CIMB Research



NEUTRAL Downgraded Water

On a slow boat to consolidation

MA

LAYS

IA



• We downgrade the water sector from Trading Buy to NEUTRAL due to the disappointing progress of the takeover of water assets in Selangor. We will monitor the developments and review our call if there are signs of a resolution to the impasse.

• Although the takeover of water assets in Selangor made little headway in 2010, we expect it to advance in 2011, with the push factor being the risk that the concessionaires (PNSB, Syabas, Abass and Splash) will default on their bond redemptions. Splash’s bonds, for example, are due in Jul 2011.

• However, unless (i) the payment issues between the water players are dealt with, (ii) consideration is given to Syabas’s outstanding compensation, and (iii) the state government pushes for a resolution to all the issues, we think the takeover is likely to be protracted.

• Although the federal government recently stated that it is looking at a likely solution by end-2010, we remain Neutral on Puncak Niaga for now. There has been no progress since Splash’s revised proposal in Mar 10 which implied an effective takeover price of RM4.54 for Puncak Niaga.

• For alternative and indirect exposure to the water sector, we recommend Gamuda (GAM MK, Outperform) for its 40% share in Splash and IJM Corp for exposure to water infrastructure/IWTS.

• Further delays in the progress of both the takeover plans in Selangor and the awards of the outstanding mega water infrastructure projects are the main risks for the sector. However, we think the risk of delays on the water infrastructure side is minimal in 2011 as the tunnelling, intake pumping station, and dual pipeline of the IWTS has been awarded and it is just a matter of time before the implementation of the remaining jobs kicks off.

• Water concessionaires in Selangor recently filed legal actions against each other for Syabas’s failure to meet its capacity payments to water treatment suppliers. This could cause further hold-ups for the takeover. Also, the risk of bond defaults as a result of payment issues and the absence of the tariff hike for Syabas are likely to weigh down sentiment on water stocks.

• Unattractive takeover offers by PAAB for water assets in Selangor could lead to a prolonged acquisition process. This would further delay the state’s consolidation plan which has already been side-tracked by the Selangor state government’s unsuccessful takeover offer for Puncak Niaga.

• Higher operating costs continue to compress water operators’ margins. Cost components such as chemicals, bitumen and electricity are some of the major items that are denting water operators’ earnings, both on the water distribution and water treatment side.

Figure 1: Demand and supply of water in Peninsular Malaysia Figure 2: Key water infrastructure projects (RM m) 2000 2020 2050

Domestic 5,558 10,582 16,176 Industrial 3,985 9,756 15,452 Irrigation 20,139 17,857 16,802 Total demand (mld) 29,682 38,195 48,430 Total supply (mld) 11,917 20,300 n/a

ValueKelau Dam & related w orks 2,500.0 Langat 2 w ater treatment plant & related w orks 5,000.0 Sabah w ater supply project 2,000.0 Mengkuang Dam (Penang) 1,200.0 Total 10,700.0


Sector comparisons Target Core 3-yr EPS P/BV ROE Div Bloomberg Price price Mkt cap P/E (x) CAGR (x) (%) yield (%) ticker Recom. (Local) (Local) (US$ m) CY2011 CY2012 (%) CY2011 CY2011 CY2011 Gamuda GAM MK O 3.76 5.00 2,451 19.6 15.2 33.8 3.6 19.2 3.2 IJM Corp IJM MK O 6.14 6.95 2,644 21.3 20.2 32.6 3.5 16.4 1.7 Puncak Niaga PNH MK N 2.54 2.89 333 4.2 3.2 32.3 0.5 12.7 5.3 Simple average 15.0 17.7 32.9 2.5 16.1 3.4 O = Outperform, N = Neutral, U = Underperform, TB = Trading Buy, TS = Trading Sell and NR = Not Rated Source: Company, CIMB Research


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COMPANY BRIEFS…



Syariah-compliant stock

OUTPERFORM Maintained Adventa Bhd RM2.13 @07/12/10 Surgical glove specialist Target: RM3.79

Rubber Gloves

MA

LAYS

IA

ADV MK / ADVE.KL Terence Wong CFA +60(3) 20849689 – [email protected]

• Maintain OUTPERFORM. We continue to rate Adventa an OUTPERFORM after upping our target price from RM3.62 to RM3.79 because of an increase in Top Glove’s CY11 target P/E from 13.8x to 14.5x. Our target basis remains a 30% discount to Top Glove and our earnings forecasts remain unchanged. Potential re-rating catalysts for the sector’s surgical glove specialist include 1) higher OBM glove sales, 2) establishment of own distribution channels, and 3) better product mix from its new nitrile manufacturing facility.

• New plant in Kluang coming onstream. With utilisation running at 85%, demand for Adventa’s surgical and examination gloves is robust. We expect Adventa’s new glove facility in Kluang to come onstream in 2H11, adding capacity of 1.5bn pieces of gloves. These gloves will be nitrile, which in our view will help the company diversify its product mix and fulfil customer demand.

• Transforming into an integrated healthcare company. Currently, 54% of Adventa’s gloves are sold under its own brands. We expect OBM to make up 70% of sales over the next few years. Adventa also continues to establish its distribution of dialysis machines and is targeting RM150m-200m in revenues by FY16 from this division to complement its core rubber and nitrile glove manufacturing arm.

Financial summary

Stock Information Market cap: RM325m/US$104m 12-m price range: RM4.21 RM2.10 3-m avg daily vol: 0.3m No. of shrs (m): 153 Est. free float (%): 49.8 Conv. secs (m): None Major shareholders (%): - Low Chin Guan 39.7 - Koon Mei Wong 5.6 - Lembaga Tabung Haji 4.9

FYE Oct 2008 2009 2010F 2011F 2012F Revenue (RM m) 185.9 282.7 353.5 460.2 554.0 EBITDA (RM m) 23.0 45.0 52.0 62.8 77.4 EBITDA margins (%) 12.3% 15.9% 14.7% 13.7% 14.0% Pretax profit (RM m) 13.5 18.6 36.9 47.0 61.7 Net profit (RM m) 13.8 17.2 34.0 43.3 56.8 EPS (sen) 9.0 11.2 22.3 28.3 37.2 EPS growth (%) (32.5%) 24.3% 98.3% 27.2% 31.3% P/E (x) 23.6 19.0 9.6 7.5 5.7 Core EPS (sen) 9.0 18.2 22.3 28.3 37.2 Core EPS growth (%) (32.5%) 101.4% 22.4% 27.2% 31.3% Core P/E (x) 23.6 11.7 9.6 7.5 5.7 Gross DPS (sen) 0.0 6.8 4.0 6.0 8.0 Dividend yield (%) 0.0% 3.2% 1.9% 2.8% 3.8% P/BV (x) 1.9 1.8 1.3 1.0 0.8 ROE (%) 8.2% 9.3% 13.4% 13.3% 13.8% Net gearing (%) 45.3% 41.6% 35.7% 31.6% 24.3% P/FCFE (x) 33.9 140.3 (21.5) (59.8) 19.1 EV/EBITDA (x) 17.6 9.0 8.0 6.9 5.5 % change in EPS estimates N/A N/A N/A CIMB/Consensus (x) 0.92 0.87 0.91

Source: Company, CIMB Research, Bloomberg

Price chart Corporate profile

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Volume 10m (R.H.Scale) Adventa Bhd Source: Bloomberg

Adventa started its operations in 1988 with a single production line for examination gloves. Soon after that, it obtained US FDA approval to start exporting to the US. Today, Adventa is principally involved in the manufacture and trading of gloves and medical supplies. The group now has the capacity to produce 500m surgical and 4.4bn pieces of examination & dental gloves p.a. 30% of Adventa’s examination and dental gloves are nitrile. Headquartered in Kota Bharu, Kelantan, the group has manufacturing facilities in Kota Bharu, Kluang in Johor and Montevideo in Uruguay.


Financial tables PROFIT & LOSS KEY RATIOS

(RM m, FYE Oct) 2008 2009 2010F 2011F 2012F (FYE Oct) 2008 2009 2010F 2011F 2012F Revenue 186 283 354 460 554 Revenue growth (%) (17.4) 52.1 25.0 30.2 20.4 Operating expenses (163) (238) (302) (397) (477) EBITDA growth (%) (21.7) 95.9 15.5 21.0 23.2 EBITDA 23 45 52 63 77 Pretax margins (%) 7.3 6.6 10.4 10.2 11.1 Depreciation & amortisation (7) (10) (12) (13) (14) Net profit margins (%) 7.4 6.1 9.6 9.4 10.3 EBIT 16 35 40 50 63 Interest cover (x) 4.6 6.3 9.4 10.6 12.3 Net interest & invt income (3) (5) (3) (3) (1) Effective tax rates (%) N/A 8.2 8.0 8.0 8.0 Associates’ contribution 0 0 0 0 0 Net dividend payout (%) 0.0 45.6 13.5 15.9 16.1 Exceptional items 0 (12) 0 0 0 Debtors turnover (days) 101.8 61.5 62.1 62.1 62.1 Others 0 0 0 0 0 Stock turnover (days) 92.1 67.6 69.4 69.4 69.4 Pretax profit 13 19 37 47 62 Creditors turnover (days) 46.3 37.7 34.1 29.6 27.8 Tax 0 (2) (3) (4) (5) Minority interests 0 0 0 0 0 Net profit 14 17 34 43 57 Adj. wt. shares (m) 153 153 153 153 153 Unadj. year-end shares (m) 139 141 153 153 153 BALANCE SHEET KEY DRIVERS (RM m, end Oct) 2008 2009 2010F 2011F 2012F (FYE Oct) 2009 2010F 2011F 2012FFixed assets 156 163 222 269 317 Production capacity (m pcs p.a) 3,300 3,800 5,300 6,800 Intangible assets 3 3 3 3 3 Capacity utilisation (%) 80.0% 75.0% 75.0% 75.0% Other long-term assets 19 20 19 19 18 ASP (US$) per 1,000 pieces 20.00 22.00 21.00 20.00 Total non-current assets 178 186 245 291 339 Exchange rate (RM to US$) 3.55 3.17 3.11 3.15 Cash and equivalents 38 39 36 36 54 Natural rubber price (RM /kilogram) 4.23 7.00 6.50 6.00 Stocks 47 52 67 87 105 Nitrile latex prices (US$/mt) 1,100 1,350 1,368 1,483 Trade debtors 52 48 60 78 94 Other current assets 8 21 21 28 33 Total current assets 144 159 185 230 286 Trade creditors 24 29 33 37 42 Short-term borrowings 53 57 63 69 76 Other current liabilities 10 8 8 8 7 Total current liabilities 86 95 104 114 126 Long-term borrowings 62 58 64 71 78 Other long-term liabilities 5 6 7 8 9 Total long-term liabilities 67 65 71 79 86 Shareholders’ funds 168 184 253 327 412 Minority interests 1 1 1 1 1 NTA/share (RM) 1.08 1.18 1.63 2.12 2.67 CASH FLOW 12M - FORWARD FD CORE P/E (X) (RM m, FYE Oct) 2008 2009 2010F 2011F 2012FPretax profit 13 19 37 47 62Depreciation & non–cash adj. 7 10 12 13 14Working capital changes (4) (7) (24) (41) (35)Cash tax paid 0 0 (2) (3) (4)Others 0 7 0 0 0Cash flow from operations 16 28 23 16 38Capex (26) (29) (50) (35) (35)Net investments & sale of FA 0 1 0 0 0Others 1 0 0 0 0Cash flow from investing (26) (27) (50) (35) (35)Debt raised/(repaid) 19 2 12 13 14Equity raised/(repaid) 0 6 0 0 0Dividends paid (6) (4) (3) (5) (7)Cash interest & others (3) (3) 16 10 8Cash flow from financing 10 1 25 18 15Change in cash 0 1 (2) 0 18Change in net cash/(debt) (19) 0 (14) (13) 4Ending net cash/(debt) (77) (77) (91) (104) (100)

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OUTPERFORM Maintained Affin Holdings Bhd RM3.20 @07/12/10 Small bank gaining ground Target: RM4.04

Banks

MA

LAYS

IA

AHB MK / AFIN.KL Winson Ng Gia Yann CFA +60(3) 2084 9686 – [email protected]

• Reaffirm OUTPERFORM. Affin remains an OUTPERFORM in our books, premised on the potential re-rating catalysts of (1) robust loan growth, (2) better-than-expected net interest margin, and (3) appealing valuations. We maintain our EPS forecasts and DDM-based target price of RM4.04. Our DDM parameters remain intact, including a cost of equity of 11.6% and dividend growth rates of 13.6% for the interim growth phase and 4% for the long-term growth phase.

• Healthy earnings growth. Affin’s net profit is projected to grow at a healthy 15.2% to RM546.2m in FY11, largely driven by a 10.5% rise in net interest income on the back of strong loan growth. FY11 loan loss provisioning should be relatively stable at RM95.2m while the credit charge-off rate is expected to improve from 37bp in FY10 to 33bp in FY11. As we expect the 9.2% growth in topline to outpace the 5.6% expansion of overheads, the cost-to-income ratio is expected to drop from 47% in 2010 to 45.4% in 2011.

• Speedy loan growth. Despite being one of the smallest banks in Malaysia, Affin continued to turn in above-industry loan growth of 14-18% in Jan-Sep 10 vs. 9-13% for the industry. We are projecting solid loan growth of 11.4% for Affin in 2011, fuelled by growth of about 11% for non-residential mortgages and auto loans and 15% for working capital loans. Although the growth momentum of residential mortgages is likely to ease from a projected 11.2% for 2010, the rate should remain healthy at 8.7% in 2011.

Financial summary

Stock Information Market cap: RM4,783m/US$1,520m 12-m price range: RM3.26 RM2.29 3-m avg daily vol: 0.8m No. of shrs (m): 1,495 Est. free float (%): 23.0 Conv. secs (m): None Major shareholders (%): - LTAT 35.7 - Bank of East Asia 21.2 - Boustead 20.7

FYE Dec 2008 2009 2010F 2011F 2012F Net interest income (RM m) 724.2 818.3 875.3 967.5 1,048.9 Non-interest income (RM m) 313.3 378.7 398.4 425.6 464.7 Total income (RM m) 1,137.8 1,299.1 1,370.9 1,497.6 1,619.7 Loan loss provisions (RM m) (100.5) (185.1) (93.3) (95.2) (90.7) Pretax profit (RM m) 404.2 497.2 623.5 717.8 785.8 Net profit (RM m) 292.8 371.9 474.3 546.2 598.0 EPS (sen) 19.6 24.9 31.7 36.6 40.0 EPS growth (%) 16% 27% 28% 15% 9% P/E (x) 16.3 12.9 10.1 8.8 8.0 Gross DPS (sen) 5.0 8.5 10.6 12.3 13.4 Dividend yield (%) 1.6% 2.7% 3.3% 3.8% 4.2% P/BV (x) 1.1 1.0 0.9 0.9 0.8 ROE (%) 6.8% 8.1% 9.6% 10.2% 10.3% % change in EPS estimates - - - CIMB/Consensus (x) 1.00 1.03 1.04



0.000.100.200.300.400.500.600.700.800.901.00

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Volume 10m (R.H.Scale) Affin Holdings Bhd Source: Bloomberg

Affin Holdings is the eighth largest local bank in Malaysia with assets totalling RM45bn. It was incorporated in 1975 under the name Perwira Habib Bank. Its ultimate shareholder is the armed forces retirement fund, LTAT. Its wholly-owned Affin Bank commenced operations in Jan 01 following a merger of Perwira Affin Bank and BSN Commercial in Aug 00. In Jun 05, the bank was merged with Affin-ACF Finance. Hong Kong-based Bank of East Asia subscribed to 193.2m new shares in Affin in Oct 07, making it a strategic partner with a 20% stake. Consumer loans account for 43% of Affin’s loan base, followed by 26.8% for SME loans and 22% for corporate loans.



(RM m, FYE Dec) 2008 2009 2010F 2011F 2012F (FYE Dec) 2008 2009 2010F 2011F 2012F Net interest income 724 818 875 968 1,049 Total income growth (%) (0.3) 14.2 5.5 9.2 8.1 Non-interest income 313 379 398 426 465 Pre-provision profit growth (%) (2.0) 26.2 4.5 12.5 10.4 Other income 100 102 97 104 106 Pretax growth (%) 14.5 23.0 25.4 15.1 9.5 Total income 1,138 1,299 1,371 1,498 1,620 Net interest margin (%) 2.17 2.30 2.29 2.41 2.45 Overhead expenses (588) (605) (645) (680) (718) Cost-income ratio (%) 51.6 46.5 47.0 45.4 44.3 Pre-provision profit 550 695 726 817 902 Effective tax rates (%) 27.6 25.2 23.9 23.9 23.9 Loan loss provisions (101) (185) (93) (95) (91) Net dividend payout (%) 18.9 25.6 25.2 25.2 25.2 Associates’ contribution (5) 12 14 16 17 Exceptional items 0 0 0 0 0 Others (41) (25) (23) (20) (43) Pretax profit 404 497 623 718 786 Tax (111) (125) (149) (172) (188) Minority interests 0 0 0 0 0 Net profit 293 372 474 546 598 Adj. wt. shares (m) 1,494 1,494 1,494 1,494 1,494 Unadj. year-end shares (m) 1,494 1,494 1,494 1,494 1,494 BALANCE SHEET KEY DRIVERS (RM m, end Dec) 2008 2009 2010F 2011F 2012F (FYE Dec) 2008 2009 2010F 2011F 2012F Cash & deposits with FIs 6,852 6,225 6,911 6,922 7,161 Loan growth (%) 15.3 12.9 16.0 11.1 9.9 Marketable securities 6,300 8,317 5,388 5,115 4,761 Deposit growth (%) 5.4 6.2 6.1 6.5 6.4 Total current assets 13,152 14,542 12,299 12,037 11,923 Loan-deposit ratio (%) 74.0 78.7 85.9 89.7 92.6 Net loans & advances 19,928 22,497 26,091 28,983 31,844 Gross NPL (%) 5.8 3.7 3.9 4.1 4.1 Long-term investments 603 518 395 371 338 Net NPL (%) 3.2 2.2 2.1 2.0 1.9 Fixed assets 291 243 254 255 259 Loan loss reserve (%) 71.6 81.5 84.2 86.9 89.6 Intangible assets 1,038 1,023 1,023 1,023 1,023 GP ratio (%) 1.5 1.5 1.4 1.5 1.5 Other long-term assets 1,817 1,131 1,196 1,214 1,224 RWCR (%) 13.9 13.8 14.2 13.8 13.3 Total long-term assets 23,676 25,412 28,960 31,847 34,688 Total assets 36,828 39,954 41,259 43,883 46,611 Customer deposits 26,935 28,599 30,356 32,315 34,387 Deposits of other FIs 3,889 5,147 3,827 4,060 4,194 Subordinated debts 700 300 300 300 300 Other long-term liabilities 893 1,173 1,652 1,643 1,682 Total liabilities 32,417 35,219 36,136 38,318 40,562 Shareholders’ funds 4,411 4,735 5,123 5,565 6,048 Minority interests 0 0 0 0 0 BV/share (RM) 2.95 3.17 3.43 3.72 4.05 CURRENT P/BV (X) 12M - FORWARD FD CORE P/E (X)

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Dec-07 Apr-08 Aug-08 Dec-08 Apr-09 Aug-09 Dec-09 Apr-10 Aug-10 Dec-10Source: Company, CIMB Research, Bloomberg




OUTPERFORM Maintained AirAsia Bhd RM2.61 @07/12/10 Risks dissipating, business booming Target: RM3.85

Airlines

MA

LAYS

IA

AIRA MK / AIRA.KL Raymond Yap CFA +603 2084 9769 – [email protected]

• Maintain OUTPERFORM. AirAsia’s LCC business continues to gain scale and profitability as its route network expands and the older routes become mature. Under relatively benign oil price conditions, we expect AirAsia to post significant gains in profits over the next three years. Our target price of RM3.85 remains pegged to 8x P/E multiple, at the top end of its past two years’ trading band, but at the lower end of the 8-12x peer range as its business is less mature compared to Southwest or Ryanair. We reiterate our OUTPERFORM rating which is based on the potential catalysts of yield appreciation from maturing routes, strong regional travel demand and repayment of associate balances.

• Record associate profitability. The two 49%-owned associates were “problem children” in the past but appear to have grown up. Thai AirAsia and Indonesia AirAsia earned strong profits in recent quarters, and appear to have gained a sound footing. This will ensure their successful listings which are targeted for 2011-12.

• Dissipating risks. The associates required huge cashflow support from AirAsia in the past but this is reversing. Balances owed by the associates to AirAsia have declined a cumulative RM188m since end-2009, or 23% to RM635m. AirAsia expects to convert a part of these balances to equity upon listing of the associates to maintain its 49% stakes. The remaining sums will be fully settled in two years. Meanwhile, AirAsia has deferred the deliveries of its A320 aircraft and its more manageable pace of growth will allow net gearing to fall gradually.

Financial summary

Stock Information Market cap: RM7,235m/US$2,306m 12-m price range: RM2.65 RM1.11 3-m avg daily vol: 7.8m No. of shrs (m): 2,772 Est. free float (%): 70.0 Conv. secs (m): None Major shareholders (%): - Tune Air 25.9

FYE Dec 2008 2009 2010F 2011F 2012F Revenue (RM m) 2,851.8 3,178.9 3,944.4 4,514.0 5,187.9 EBITDA (RM m) 525.7 1,193.7 1,585.8 1,877.4 2,299.9 EBITDA margins (%) 18.4% 37.6% 40.2% 41.6% 44.3% Pretax profit (RM m) (869.2) 639.6 1,860.4 896.3 1,353.3 Net profit (RM m) (496.6) 549.2 1,914.2 887.5 1,339.5 EPS (sen) (20.9) 22.2 69.3 32.0 48.3 EPS growth (%) (170.8%) 206.3% 211.5% (53.8%) 50.9% P/E (x) nm 11.7 3.8 8.2 5.4 Core EPS (sen) 2.8 18.2 27.5 35.1 48.3 Core EPS growth (%) (70.7%) 546.5% 50.8% 27.7% 37.8% Core P/E (x) 92.7 14.3 9.5 7.4 5.4 Gross DPS (sen) 0.0 0.0 0.0 0.0 0.0 Dividend yield (%) 0.0% 0.0% 0.0% 0.0% 0.0% P/BV (x) 3.9 2.7 1.6 1.3 1.1 ROE (%) (26.8%) 25.7% 52.9% 17.7% 21.8% Net gearing (%) 407.2% 257.0% 137.2% 104.4% 74.6% P/FCFE (x) (22.8) 75.9 4.4 9.6 6.2 EV/EBITDA (x) 24.2 11.1 8.5 6.9 5.4 % change in EPS estimates N/A N/A N/A CIMB/Consensus (x) 0.96 1.13 1.36



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Volume 10m (R.H.S ca le ) AirAs ia Bhd Source: Bloomberg

AirAsia is Southeast Asia’s largest and arguably most successful low-cost carrier. It operates a fleet of 52 aircraft in Malaysia, as well as 18 planes in Thailand and 15 in Indonesia. It has 225 Airbus A320s on order, with 76 delivered to date. Over the past year, AirAsia expanded its flights from Malaysia to India, after its foray into HK and south China. AirAsia also owns 16% of AirAsia X, its long-haul low-cost associate that flies to Australia, China, Japan, South Korea, north India and the UK. It also owns 49% stakes in Thai AirAsia and Indonesia AirAsia. Both associates and AirAsia X are targeted to be listed in 2011-12.



(RM m, FYE Dec) 2008 2009 2010F 2011F 2012F (FYE Dec) 2008 2009 2010F 2011F 2012F Revenue 2,852 3,179 3,944 4,514 5,188 Revenue growth (%) 48.3 11.5 24.1 14.4 14.9 Operating expenses (2,326) (1,985) (2,359) (2,637) (2,888) EBITDA growth (%) 1.3 127.1 32.8 18.4 22.5 EBITDA 526 1,194 1,586 1,877 2,300 Pretax margins (%) (30.5) 20.1 47.2 19.9 26.1 Depreciation & amortisation (279) (425) (504) (565) (614) Net profit margins (%) (17.4) 17.3 48.5 19.7 25.8 EBIT 247 769 1,082 1,312 1,686 Interest cover (x) 1.0 2.1 2.8 3.1 3.8 Net interest & invt income (224) (367) (367) (380) (382) Effective tax rates (%) N/A 14.1 N/A 1.0 1.0 Associates’ contribution 0 0 0 0 0 Net dividend payout (%) N/A 0.0 0.0 0.0 0.0 Exceptional items (940) 192 1,096 (86) 0 Debtors turnover (days) 4.0 4.7 3.8 3.9 3.9 Others 48 46 50 50 50 Stock turnover (days) 2.5 2.4 1.9 1.7 1.5 Pretax profit (869) 640 1,860 896 1,353 Creditors turnover (days) 107.6 120.6 105.2 105.7 101.8 Tax 373 (90) 54 (9) (14) Minority interests 0 0 0 0 0 Net profit (497) 549 1,914 888 1,339 Adj. wt. shares (m) 2,374 2,469 2,763 2,772 2,772 Unadj. year-end shares (m) 2,374 2,754 2,772 2,772 2,772 BALANCE SHEET KEY DRIVERS (RM m, end Dec) 2008 2009 2010F 2011F 2012F (FYE Dec) 2009 2010F 2011F 2012FFixed assets 6,594 7,937 9,415 9,862 10,698 Passenger fleet size (# of planes) 46 50 54 59 Intangible assets 856 773 833 835 836 Av. seat km (ASK, yoy chg %) 17.8% 11.4% 8.9% 8.7% Other long-term assets 139 164 164 164 164 Rev. psg km (RPK, yoy chg %) 16.8% 14.4% 8.9% 8.7% Total non-current assets 7,589 8,874 10,412 10,862 11,698 Load factor (%) 75.0% 77.0% 77.0% 77.0% Cash and equivalents 154 748 2,404 3,159 4,321 Passenger yield per RPK (sen) 17.02 18.88 19.91 21.10 Stocks 21 21 21 21 21 Jet fuel price (US$/barrel) 70.33 95.00 100.00 105.00 Trade debtors 46 36 45 51 59 Fuel cost per ASK (sen) 4.23 5.24 5.19 5.48 Other current assets 1,711 1,618 1,618 1,618 1,618 Non-fuel cost per ASK (sen) 7.93 7.51 7.83 7.52 Total current assets 1,932 2,422 4,087 4,849 6,019 Trade creditors 1,061 1,039 1,235 1,380 1,512 Short-term borrowings 544 496 496 496 496 Other current liabilities 164 0 0 0 0 Total current liabilities 1,769 1,535 1,731 1,876 2,008 Long-term borrowings 6,147 7,097 8,191 8,369 8,904 Other long-term liabilities 0 0 0 0 0 Total long-term liabilities 6,147 7,097 8,191 8,369 8,904 Shareholders’ funds 1,606 2,664 4,578 5,466 6,805 Minority interests 0 0 0 0 0 NTA/share (RM) 0.32 0.69 1.35 1.67 2.15 CASH FLOW 12M - FORWARD FD CORE P/E (X) (RM m, FYE Dec) 2008 2009 2010F 2011F 2012FPretax profit (869) 640 1,860 896 1,353Depreciation & non–cash adj. 279 425 504 565 614Working capital changes (124) (82) 187 139 124Cash tax paid (3) (4) (6) (11) (15)Others 207 297 (779) 330 332Cash flow from operations (511) 1,275 1,766 1,919 2,409Capex (2,621) (1,919) (1,982) (1,013) (1,450)Net investments & sale of FA 100 183 0 0 0Others (34) (35) 0 0 0Cash flow from investing (2,555) (1,771) (1,982) (1,013) (1,450)Debt raised/(repaid) 2,993 902 2,189 178 535Equity raised/(repaid) 0 509 0 0 0Dividends paid 0 0 0 0 0Cash interest & others (199) (321) (317) (330) (332)Cash flow from financing 2,794 1,090 1,872 (151) 203Change in cash (272) 594 1,656 755 1,162Change in net cash/(debt) (3,265) (308) (533) 577 627Ending net cash/(debt) (6,538) (6,846) (6,283) (5,706) (5,079)

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UNDERPERFORM Maintained Alliance Financial Group RM3.08 @07/12/10 Continued headwinds for the topline Target: RM3.11

Banks

MA

LAYS

IA

AFG MK / ALFG.KL Winson Ng Gia Yann CFA +60(3) 2084 9686 – [email protected]

• Maintain UNDERPERFORM. We reiterate our UNDERPERFORM rating on Alliance in light of the potential downside triggers of (1) sequential contraction in interest margin, (2) still-weak non-interest income, and (3) slower-than-expected recovery in loan growth. We retain our EPS forecasts and target price of RM3.11, still pegged to its DDM value (cost of equity of 12.2% and dividend growth rates of 13.9% for the interim growth phase and 4% for the long-term growth phase.

• Slowdown in FY12 earnings growth. We are forecasting a slowdown in net earnings growth from 38.2% in FY3/11 to 12.2% in FY12, partly because of the expected increases of 8% in loan loss provisioning and 6% in overheads. On the other hand, growth will be supported by a (1) 10.7% increase in net interest income, on the back of 10.4% loan growth, and (2) 10% rise in non-interest income, primarily from the retail and business banking units.

• Concerns persist. We still see concerns in a few areas, which may continue to affect the group’s earnings in the next few quarters. These include (1) slow loan growth of 6.2% yoy in Sep 10 vs. the industry’s 11.9%, (2) tepid non-interest income growth of 6.4% yoy in 1HFY3/11, leading us to project a pace of 3-7% in FY11-12, and (3) sequential erosion of net interest margin due to the upward re-pricing of fixed deposit rates and reduction of lending rates to rejuvenate loan growth.

Financial summary

Stock Information Market cap: RM4,768m/US$1,520m 12-m price range: RM3.30 RM2.41 3-m avg daily vol: 1.9m No. of shrs (m): 1,548 Est. free float (%): 65.0 Conv. secs (m): None Major shareholders (%): - Duxton Investment 14.5 - Langkah Bahagia 14.5 - EPF 15.7

FYE Mar 2009 2010 2011F 2012F 2013F Net interest income (RM m) 654.6 616.9 679.0 751.3 813.4 Non-interest income (RM m) 365.4 391.3 429.9 468.3 516.0 Total income (RM m) 1,054.7 1,064.5 1,185.4 1,292.2 1,401.6 Loan loss provisions (RM m) (115.1) 31.9 (61.5) (66.3) (75.6) Pretax profit (RM m) 303.3 408.9 555.5 623.5 698.0 Net profit (RM m) 229.1 301.4 416.6 467.5 523.4 EPS (sen) 14.8 19.5 26.9 30.2 33.8 EPS growth (%) (46%) 32% 38% 12% 12% P/E (x) 20.8 15.8 11.4 10.2 9.1 Gross DPS (sen) 8.3 8.5 11.8 13.3 14.4 Dividend yield (%) 2.7% 2.8% 3.8% 4.3% 4.7% P/BV (x) 1.7 1.6 1.5 1.4 1.2 ROE (%) 8.6% 10.6% 13.5% 13.9% 14.2% % change in EPS estimates - - - CIMB/Consensus (x) 1.04 1.04 1.01



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Volume 10m (R.H.S ca le ) Allia nce Fina ncia l Group Source: Bloomberg

Alliance was incorporated on 7 Apr 66 and was listed on Bursa Malaysia on 6 Jul 79. The bank is the smallest among the nine local banking groups, with total assets of RM35.8bn. It was formed from the mergers of seven financial institutions, namely Multi-Purpose Bank, International Bank Malaysia, Bolton Finance, Bumiputra Merchant Bankers, Sabah Bank, Sabah Finance and Amanah Merchant Bank in 2001. In 2005, Temasek bought an effective stake of 15% in Alliance and appointed a new management team headed by Datuk Bridget Lai who was replaced by Mr. Sng Seow Wah in Jul 10. On 31 Dec 04, Alliance acquired 100% of Kuala Lumpur City Securities (KLCS) to strengthen its investment banking business.



(RM m, FYE Mar) 2009 2010 2011F 2012F 2013F (FYE Mar) 2009 2010 2011F 2012F 2013F Net interest income 655 617 679 751 813 Total income growth (%) 3.7 0.9 11.4 9.0 8.5 Non-interest income 365 391 430 468 516 Pre-provision profit growth (%) (9.5) 2.9 21.4 11.8 12.1 Other income 35 56 77 73 72 Pretax growth (%) (39.6) 34.8 35.8 12.2 12.0 Total income 1,055 1,065 1,185 1,292 1,402 Net interest margin (%) 2.73 2.53 2.48 2.47 2.39 Overhead expenses (559) (555) (566) (600) (626) Cost-income ratio (%) 53.0 52.1 47.8 46.5 44.7 Pre-provision profit 495 510 619 692 776 Effective tax rates (%) 24.5 26.3 25.0 25.0 25.0 Loan loss provisions (115) 32 (61) (66) (76) Net dividend payout (%) 41.9 32.9 33.0 33.0 32.0 Associates’ contribution 0 0 0 0 0 Exceptional items 0 0 0 0 0 Others (77) (133) (2) (2) (2) Pretax profit 303 409 556 623 698 Tax (74) (107) (139) (156) (175) Minority interests 0 0 0 0 0 Net profit 229 301 417 467 523 Adj. wt. shares (m) 1,548 1,548 1,548 1,548 1,548 Unadj. year-end shares (m) 1,548 1,548 1,548 1,548 1,548 BALANCE SHEET KEY DRIVERS (RM m, end Mar) 2009 2010 2011F 2012F 2013F (FYE Mar) 2009 2010 2011F 2012F 2013F Cash & deposits with FIs 5,189 3,715 4,604 5,136 6,229 Loan growth (%) 19.8 10.3 10.4 10.9 9.6 Marketable securities 46 0 19 11 20 Deposit growth (%) 19.8 (7.6) 9.5 14.3 13.4 Total current assets 5,235 3,715 4,623 5,147 6,249 Loan-deposit ratio (%) 73.2 87.4 88.1 85.5 82.7 Net loans & advances 18,718 20,648 22,795 25,279 27,718 Gross NPL (%) 4.5 3.8 3.2 2.9 3.0 Long-term investments 6,635 6,086 5,938 7,202 8,332 Net NPL (%) 1.8 1.8 1.6 1.7 2.0 Fixed assets 178 163 126 125 122 Loan loss reserve (%) 99.7 94.4 97.5 92.6 82.9 Intangible assets 369 362 363 363 363 GP ratio (%) 1.8 1.5 1.5 1.5 1.5 Other long-term assets 712 690 755 789 820 RWCR (%) 14.8 15.7 15.9 16.0 16.3 Total long-term assets 26,611 27,949 29,976 33,758 37,355 Total assets 31,846 31,664 34,599 38,905 43,604 Customer deposits 25,576 23,628 25,876 29,564 33,516 Deposits of other FIs 1,183 2,290 2,519 2,771 3,048 Subordinated debts 600 600 600 600 600 Other long-term liabilities 1,721 2,194 2,387 2,452 2,578 Total liabilities 29,080 28,712 31,382 35,386 39,742 Shareholders’ funds 2,762 2,947 3,213 3,514 3,858 Minority interests 5 5 5 5 5 BV/share (RM) 1.78 1.90 2.08 2.27 2.49 CURRENT P/BV (X) 12M - FORWARD FD CORE P/E (X)

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OUTPERFORM Maintained AMMB Holdings Bhd RM6.26 @07/12/10 Riding on ANZ momentum Target: RM8.20

Banks

MA

LAYS

IA

AMM MK / AMMB.KL Winson Ng Gia Yann CFA +60(3) 2084 9686 – [email protected]

• Maintain OUTPERFORM. We reiterate our OUTPERFORM rating on AMMB, which is premised on the potential re-rating catalysts of (1) further value-add from ANZ, (2) benefits from the group revamp, (3) improved investment banking deal flow, and (4) new growth avenue in the treasury business. We are keeping our EPS forecasts and target price basis of 10% premium over its DDM value (cost of equity of 12% and dividend growth rates of 13.8% for the interim growth phase and 5% for the long-term growth phase). This gives us an unchanged target price of RM8.20.

• Brisk earnings growth. After a projected spectacular 39.1% jump in FY3/11, AMMB’s net profit is set to increase 26.1% in FY12. The earnings drivers are expected to be a (1) 14.3% rise in net interest income, on the back of 9.5% loan growth and a 5bp expansion of net interest margin to 2.16%, (2) 14.7% uptick in non-interest income, primarily from investment banking and treasury operations, and (3) a 7% drop in loan loss provisioning.

• Continuous emphasis on transformation. Aided by ANZ, AMMB will push ahead with its transformation programme, which will yield more positive results in the coming years. The focus of the revamp will be (1) expansion of branch and ATM networks to capture more market share, (2) further development of the treasury business, (3) expansion of deposits, especially low-cost deposits.

Financial summary

Stock Information Market cap: RM18,869m/US$6,015m 12-m price range: RM6.35 RM4.61 3-m avg daily vol: 3.7m No. of shrs (m): 3,014 Est. free float (%): 60.0 Conv. secs (m): None Major shareholders (%): - ANZ 23.8 - Amcorp 16.7 - EPF 12.4

FYE Mar 2009 2010 2011F 2012F 2013F Net interest income (RM m) 1,776.3 1,886.6 2,272.4 2,615.3 2,903.3 Non-interest income (RM m) 1,160.5 1,671.2 1,888.8 2,152.8 2,362.6 Total income (RM m) 2,927.6 3,577.8 4,174.6 4,799.6 5,286.0 Loan loss provisions (RM m) (344.2) (568.9) (583.1) (620.1) (716.7) Pretax profit (RM m) 1,217.5 1,376.7 1,945.0 2,447.5 2,724.3 Net profit (RM m) 860.8 1,008.6 1,403.3 1,770.0 1,967.5 EPS (sen) 31.6 35.2 46.6 58.7 65.3 EPS growth (%) 15% 11% 32% 26% 11% P/E (x) 19.8 17.8 13.4 10.7 9.6 Gross DPS (sen) 8.0 12.5 21.7 27.4 30.5 Dividend yield (%) 1.3% 2.0% 3.5% 4.4% 4.9% P/BV (x) 2.2 2.0 1.7 1.5 1.4 ROE (%) 11.6% 11.6% 13.7% 15.4% 15.2% % change in EPS estimates - - - CIMB/Consensus (x) 1.07 1.17 1.12



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Volume 10m (R.H.S ca le ) AMMB Holding s Bhd Source: Bloomberg

AMMB is Malaysia’s 5th largest domestic bank by assets. It is a full-fledged banking group with the second largest market share in auto financing which accounts for a substantial 33.8% of its loan book. In 2005, the group underwent a restructuring exercise whereby it took its finance arm private and listed its investment bank, AmInvestment Group. However, AmInvest was privatised in early 2008. ANZ emerged as a significant shareholder in AMMB in early 2007 with a 14.1% direct stake, which was increased to 23.8% after conversion of its 163.9m preference shares and RM575m convertible bonds in the group.



(RM m, FYE Mar) 2009 2010 2011F 2012F 2013F (FYE Mar) 2009 2010 2011F 2012F 2013F Net interest income 1,776 1,887 2,272 2,615 2,903 Total income growth (%) (12.7) 22.2 16.7 15.0 10.1 Non-interest income 1,161 1,671 1,889 2,153 2,363 Pre-provision profit growth (%) (8.6) 25.2 24.3 20.4 12.3 Other income (9) 20 13 31 20 Pretax growth (%) 1.9 13.1 41.3 25.8 11.3 Total income 2,928 3,578 4,175 4,800 5,286 Net interest margin (%) 2.25 2.19 2.41 2.49 2.48 Overhead expenses (1,269) (1,501) (1,593) (1,693) (1,798) Cost-income ratio (%) 43.3 42.0 38.2 35.3 34.0 Pre-provision profit 1,659 2,076 2,581 3,107 3,488 Effective tax rates (%) 27.9 24.3 26.3 26.2 26.3 Loan loss provisions (344) (569) (583) (620) (717) Net dividend payout (%) 19.0 26.7 35.0 35.0 35.0 Associates’ contribution 0 (1) 0 0 0 Exceptional items 0 0 0 0 0 Others (97) (130) (53) (39) (47) Pretax profit 1,218 1,377 1,945 2,448 2,724 Tax (339) (334) (512) (641) (716) Minority interests (17) (34) (29) (37) (41) Net profit 861 1,009 1,403 1,770 1,968 Adj. wt. shares (m) 2,723 2,869 3,014 3,014 3,014 Unadj. year-end shares (m) 2,723 3,014 3,014 3,014 3,014 BALANCE SHEET KEY DRIVERS (RM m, end Mar) 2009 2010 2011F 2012F 2013F (FYE Mar) 2009 2010 2011F 2012F 2013F Cash & deposits with FIs 17,011 13,476 17,268 19,297 23,079 Loan growth (%) 8.3 13.1 11.4 9.4 8.9 Marketable securities 8,026 10,807 9,517 12,434 13,411 Deposit growth (%) 15.0 7.4 13.1 12.3 11.2 Total current assets 25,037 24,283 26,785 31,731 36,490 Loan-deposit ratio (%) 88.8 93.5 92.1 89.8 87.9 Net loans & advances 56,948 64,426 71,794 78,561 85,525 Gross NPL (%) 4.1 2.8 3.4 3.4 3.4 Long-term investments 780 563 662 823 994 Net NPL (%) 2.6 1.5 2.2 2.2 2.2 Fixed assets 228 230 256 244 240 Loan loss reserve (%) 75.1 99.5 80.7 80.9 81.8 Intangible assets 1,808 1,826 1,826 1,826 1,826 GP ratio (%) 1.6 1.5 1.5 1.6 1.6 Other long-term assets 5,091 5,153 5,535 5,668 5,915 RWCR (%) 15.2 15.8 18.0 17.7 17.7 Total long-term assets 64,855 72,197 80,072 87,120 94,499 Total assets 89,893 96,480 106,857 118,852 130,989 Customer deposits 64,132 68,874 77,930 87,495 97,305 Deposits of other FIs 8,256 5,715 6,173 6,659 7,168 Subordinated debts 4,206 5,649 5,133 5,305 5,247 Other long-term liabilities 5,389 6,398 6,580 6,992 7,430 Total liabilities 81,981 86,636 95,816 106,451 117,150 Shareholders’ funds 7,736 9,638 10,835 12,195 13,632 Minority interests 175 206 206 206 206 BV/share (RM) 2.84 3.20 3.59 4.05 4.52 CURRENT P/BV (X) 12M - FORWARD FD CORE P/E (X)

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TRADING BUY Maintained Ann Joo Resources RM2.94 @07/12/10 Pedal to the metal Target: RM3.74

Steel

MA

LAYS

IA

AJR MK / ANNJ.KL Terence Wong CFA +60(3) 20849689 – [email protected]

• Maintain TRADING BUY. Ann Joo’s TRADING BUY call and EPS forecasts are intact. Although we continue to value the stock at a 10% discount to our target market P/E, our target price increases from RM3.60 to RM3.74 because of a revision in our target market P/E from 13.8x to 14.5x. Potential re-rating catalysts are 1) new LCCT and LRT construction starts, 2) commissioning of Ann Joo’s 0.68m-1.1m mt blast furnace within 1H11, and 3) legislation of the MSA’s proposals such as favourable energy tariffs and import duties. Ann Joo’s FY11 5.8% dividend yield is also the highest in the sector.

• Mega construction jobs. The 10th MP and Budget 2011 revealed big projects such as the KL MRT, LRT, new LCCT and high-speed rail project, which will boost construction activities and reinvigorate steel demand. Awards for RM1.6bn out of the RM7bn LRT extension have already been announced and we expect more announcements in 2011. This is positive as elevated projects tend to use more steel relative to other materials.

• Export steel prices to recover in 2011. We expect international steel prices to recover in 2011 due to 1) US$50bn in government spending to urbanise Chinese rural areas and 2) lower global steel supply as China races to meet energy consumption targets by decommissioning obsolete plants. As at Sep, 35m mt of iron- and 9m mt of steel-making capacity have already been eliminated.

Financial summary

Stock Information Market cap: RM1,537m/US$490m 12-m price range: RM3.35 RM2.25 3-m avg daily vol: 0.5m No. of shrs (m): 523 Est. free float (%): 37.8 Conv. secs (m): 261.4 Major shareholders (%): - Ann Joo Corporation 62.2 - Lembaga Tabung Haji 5.1 - Seng Lim Chee 1.1

FYE Dec 2008 2009 2010F 2011F 2012F Revenue (RM m) 2,222.1 1,303.0 1,900.3 2,045.8 2,293.2 EBITDA (RM m) 153.6 103.7 245.9 280.5 370.1 EBITDA margins (%) 6.9% 8.0% 12.9% 13.7% 16.1% Pretax profit (RM m) 119.5 36.3 179.9 215.9 308.3 Net profit (RM m) 139.4 31.6 132.1 157.7 224.9 EPS (sen) 26.7 6.0 25.3 30.2 43.0 EPS growth (%) (21.7%) (77.3%) 317.8% 19.4% 42.6% P/E (x) 11.0 48.6 11.6 9.7 6.8 Core EPS (sen) 23.9 6.0 25.3 30.2 43.0 Core EPS growth (%) (21.7%) (74.7%) 317.8% 19.4% 42.6% Core P/E (x) 12.3 48.6 11.6 9.7 6.8 FD core EPS (sen) 15.9 4.0 16.8 20.1 28.7 FD core P/E (x) 18.4 72.9 17.5 14.6 10.3 Gross DPS (sen) 12.0 6.0 14.0 17.0 23.0 Dividend yield (%) 4.1% 2.0% 4.8% 5.8% 7.8% P/BV (x) 1.7 1.7 1.6 1.4 1.3 ROE (%) 16.3% 3.5% 14.0% 15.3% 19.7% Net gearing (%) 109.0% 93.5% 81.7% 68.5% 50.9% P/FCFE (x) 30.1 598.0 8.6 151.8 16.0 EV/EBITDA (x) 16.7 23.3 9.6 8.2 5.9 % change in EPS estimates N/A N/A N/A CIMB/Consensus (x) 0.89 0.89 1.12



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Volume 1m (R.H.Scale) Ann Joo Resources Source: Bloomberg

Ann Joo Resources started out as a scrap metal dealer in 1946. It was listed on the Main Board in Nov 1996. The group is primarily engaged in the manufacturing and trading of steel and steel-related products and is now one of Malaysia’s largest steel manufacturers, stockists and traders of steel products. It also operates service centres. Its plant in Prai, Penang has a total annual rated steel manufacturing capacity of 680,000 mt and a total annual rated steel rolling capacity of 630,000 mt of steel bars and wire rods. The group’s products are primarily used in construction.



(RM m, FYE Dec) 2008 2009 2010F 2011F 2012F (FYE Dec) 2008 2009 2010F 2011F 2012F Revenue 2,222 1,303 1,900 2,046 2,293 Revenue growth (%) 14.1 (41.4) 45.8 7.7 12.1 Operating expenses (2,068) (1,199) (1,654) (1,765) (1,923) EBITDA growth (%) (42.1) (32.5) 137.1 14.1 31.9 EBITDA 154 104 246 281 370 Pretax margins (%) 5.4 2.8 9.5 10.6 13.4 Depreciation & amortisation (26) (50) (59) (64) (63) Net profit margins (%) 6.3 2.4 7.0 7.7 9.8 EBIT 127 53 187 216 307 Interest cover (x) 5.1 2.2 9.9 11.4 18.0 Net interest & invt income (22) (17) (7) (1) 1 Effective tax rates (%) N/A 15.2 25.0 25.0 25.0 Associates’ contribution 0 0 0 0 0 Net dividend payout (%) 33.3 74.4 41.5 42.3 40.1 Exceptional items 14 0 0 0 0 Debtors turnover (days) 29.7 38.8 31.6 36.1 35.4 Others 0 0 0 0 0 Stock turnover (days) 145.3 262.9 157.7 131.7 120.9 Pretax profit 120 36 180 216 308 Creditors turnover (days) 17.2 31.7 30.4 34.8 34.1 Tax 29 (6) (45) (54) (77) Minority interests (9) 1 (3) (4) (6) Net profit 139 32 132 158 225 Adj. wt. shares (m) 523 523 523 523 523 Unadj. year-end shares (m) 523 523 523 523 523 BALANCE SHEET KEY DRIVERS (RM m, end Dec) 2008 2009 2010F 2011F 2012F (FYE Dec) 2009 2010F 2011F 2012FFixed assets 718 823 983 969 955 Sales volume ('000 tonnes) 732 804 846 919 Intangible assets 10 9 9 9 9 Average price/tonne (RM ) 2,000 2,125 2,200 2,300 Other long-term assets 87 80 78 176 124 Exchange rate (RM to US$) 3.51 3.02 3.05 3.05 Total non-current assets 815 912 1,070 1,153 1,088 Cash and equivalents 41 35 180 147 179 Stocks 995 882 760 716 803 Trade debtors 143 134 195 210 235 Other current assets 80 8 6 6 6 Total current assets 1,260 1,059 1,141 1,079 1,223 Trade creditors 97 129 188 202 227 Short-term borrowings 828 896 938 844 760 Other current liabilities 0 1 2 13 16 Total current liabilities 926 1,026 1,127 1,060 1,002 Long-term borrowings 211 0 60 54 49 Other long-term liabilities 23 23 23 22 22 Total long-term liabilities 234 23 83 76 71 Shareholders’ funds 886 907 984 1,075 1,210 Minority interests 30 14 17 21 28 NTA/share (RM) 1.68 1.72 1.86 2.04 2.30 CASH FLOW 12M - FORWARD FD CORE P/E (X) (RM m, FYE Dec) 2008 2009 2010F 2011F 2012FPretax profit 120 36 180 216 308Depreciation & non–cash adj. 26 50 59 64 63Working capital changes (162) 155 120 44 (88)Cash tax paid (94) 64 (6) (45) (54)Others 27 (21) (52) (123) 16Cash flow from operations (82) 284 301 156 246Capex (286) (131) (220) (50) (50)Net investments & sale of FA 20 12 0 0 0Others 0 0 4 5 (11)Cash flow from investing (265) (119) (216) (45) (61)Debt raised/(repaid) 421 (145) 101 (100) (90)Equity raised/(repaid) (25) (14) 0 0 0Dividends paid (77) (12) (32) (43) (64)Cash interest & others (28) (3) (10) (1) 1Cash flow from financing 291 (174) 59 (143) (153)Change in cash (57) (9) 144 (33) 32Change in net cash/(debt) (478) 136 43 67 121Ending net cash/(debt) (997) (861) (818) (751) (630)

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OUTPERFORM Maintained Asia File Corporation RM4.45 @07/12/10 File is at the right location Target: RM6.36

Retail

MA

LAYS

IA

AF MK / AFCB.KL Nigel Foo +60(3) 2084 9293 – [email protected]

• Maintain OUTPERFORM. Asia File remains an OUTPERFORM, with an unchanged target price of RM6.36 as we continue to value it at a 30% discount to our regional sector P/E target of 13x. Potential share price triggers include i) more orders from US and EU customers, ii) signs of economic recovery in Europe and iii) its attractive gross dividend yield of about 7%.

• Europe remains largest market. Europe remains Asia File’s main market, contributing around 60-70% of its revenue. In FY10, it was 63%. Europe became its dominant market for Asia File after the company acquired Plastoreg in 2008. Most of Plastoreg’s business was from Europe when Asia File acquired this company.

• Change in business model in Europe. Plastroreg has changed the group’s business model in Europe, from that of an exporter to a major distributor in Europe. Europe is now reachable in just two days by truck from Plastoreg’s operations and warehouse in west and east Germany.

• World’s largest OEM producer of dividers. With Plastoreg under its umbrella, Asia File is the world’s largest OEM producer of dividers and indices. This dominance has helped the company make headway with major stationery suppliers in the US and Europe over the past few years as customers seek larger established suppliers with extensive distribution networks. In addition, Asia File is able to offer quality products at competitive prices in view of its low cost base in Asia.

• Strong balance sheet offers opportunities. Asia File’s balance sheet remains strong with RM39m (RM0.34/share) net cash. This will give the group the capacity to acquire financially troubled stationery companies with strong distribution networks in the US and Europe if the opportunity arises.

Financial summary

Stock Information Market cap: RM514m/US$164m 12-m price range: RM5.26 RM4.23 3-m avg daily vol: 0.0m No. of shrs (m): 115 Est. free float (%): 40.0 Conv. secs (m): None Major shareholders (%): - Prestige Elegance S/B 45.5 - PNB 13.5 - ASB 13.2

FYE Mar 2009 2010 2011F 2012F 2013F Revenue (RM m) 298.4 267.5 296.7 326.3 359.0 EBITDA (RM m) 52.9 63.1 74.9 84.8 91.4 EBITDA margins (%) 17.7% 23.6% 25.2% 26.0% 25.5% Pretax profit (RM m) 76.4 66.0 80.7 91.1 97.7 Net profit (RM m) 72.8 57.7 66.1 75.1 80.1 EPS (sen) 64.5 51.2 58.6 66.6 71.0 EPS growth (%) 78.9% (20.7%) 14.6% 13.6% 6.6% P/E (x) 6.9 8.7 7.6 6.7 6.3 Gross DPS (sen) 25.3 27.8 32.7 32.7 32.7 Dividend yield (%) 5.7% 6.2% 7.4% 7.4% 7.4% P/BV (x) 1.8 1.6 1.4 1.2 1.1 ROE (%) 29.1% 19.4% 19.5% 19.7% 18.5% Net cash per share (RM) 0.01 0.22 0.44 0.85 1.18 P/FCFE (x) (28.8) 11.0 14.0 7.0 7.9 EV/EBITDA (x) 9.5 7.6 6.0 4.8 4.0 % change in EPS estimates - - - CIMB/Consensus (x) 0.99 0.99 1.00



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Volume 100k (R.H.S c a le ) As ia File Corpora tion Source: Bloomberg

Asia File Corp is Malaysia's largest integrated stationery and office supplies manufacturer and distributor, selling under the "ABBA" brand. Its HQ and manufacturing base is in Penang, Malaysia. It also operates major warehouses in Puchong, the Klang Valley and Basingstoke, UK. The US and UK are its largest export markets, taking up more than 70% of its sales. Acquisition of Plastoreg, Europe's largest OEM producer of dividers and indices, has transformed Asia File into the world’s largest OEM producer of indices and dividers. It also makes Asia File a major stationery distributor in Europe and not just an export player.



(RM m, FYE Mar) 2009 2010 2011F 2012F 2013F (FYE Mar) 2009 2010 2011F 2012F 2013F Revenue 298 268 297 326 359 Revenue growth (%) 43.2 (10.4) 10.9 10.0 10.0 Operating expenses (246) (204) (222) (242) (268) EBITDA growth (%) (0.4) 19.3 18.6 13.3 7.7 EBITDA 53 63 75 85 91 Pretax margins (%) 25.6 24.7 27.2 27.9 27.2 Depreciation & amortisation (6) (7) (7) (7) (7) Net profit margins (%) 24.4 21.6 22.3 23.0 22.3 EBIT 47 56 68 78 84 Interest cover (x) N/A N/A N/A N/A N/A Net interest & invt income 2 (1) 2 1 1 Effective tax rates (%) 4.7 12.6 18.0 17.5 18.0 Associates’ contribution (1) 10 11 13 13 Net dividend payout (%) 27.9 38.6 39.6 34.9 32.7 Exceptional items 28 0 0 0 0 Debtors turnover (days) 60.4 65.1 65.4 65.4 65.4 Others 0 0 0 0 0 Stock turnover (days) 78.0 77.3 77.1 64.2 52.1 Pretax profit 76 66 81 91 98 Creditors turnover (days) 46.4 49.2 48.7 52.0 48.8 Tax (4) (8) (15) (16) (18) Minority interests 0 0 0 0 0 Net profit 73 58 66 75 80 Adj. wt. shares (m) 113 113 113 113 113 Unadj. year-end shares (m) 113 113 113 113 113 BALANCE SHEET KEY DRIVERS (RM m, end Mar) 2009 2010 2011F 2012F 2013F (FYE Mar) 2010 2011F 2012F 2013FFixed assets 104 98 112 128 144 Exchange rate (Euro/USD) 1.40 1.35 1.35 1.35 Intangible assets 30 30 30 30 30 Raw materials as % of op costs 70.0% 70.0% 70.0% 70.0% Other long-term assets 95 105 105 105 105 Total sales growth (% yoy) -10.0% 11.0% 10.0%

10.0%

Total non-current assets 230 233 247 263 279 Cash and equivalents 48 66 50 95 133 Stocks 54 59 66 49 54 Trade debtors 45 51 56 61 67 Other current assets 2 2 2 2 2 Total current assets 148 177 173 207 256 Trade creditors 38 34 45 48 48 Short-term borrowings 15 24 0 0 0 Other current liabilities 10 11 11 11 11 Total current liabilities 62 70 56 59 59 Long-term borrowings 32 16 0 0 0 Other long-term liabilities 7 6 6 6 17 Total long-term liabilities 39 22 6 6 17 Shareholders’ funds 277 318 358 405 459 Minority interests 0 0 0 0 0 NTA/share (RM) 2.18 2.55 2.91 3.32 3.80 CASH FLOW 12M - FORWARD FD CORE P/E (X) (RM m, FYE Mar) 2009 2010 2011F 2012F 2013FPretax profit 76 66 81 91 98Depreciation & non–cash adj. 6 7 7 7 7Working capital changes (17) (15) (1) 15 0Cash tax paid (4) (8) (15) (16) (18)Others 11 (3) (11) (15) (13)Cash flow from operations 73 46 61 82 74Capex (44) (1) (10) (10) (10)Net investments & sale of FA 0 0 0 0 0Others (31) 0 0 0 0Cash flow from investing (75) (1) (10) (10) (10)Debt raised/(repaid) (15) 0 (15) 0 0Equity raised/(repaid) 0 0 0 0 0Dividends paid (20) (21) (26) (26) (26)Cash interest & others (1) 0 0 0 0Cash flow from financing (37) (21) (41) (26) (26)Change in cash (39) 24 10 46 38Change in net cash/(debt) (24) 24 25 46 38Ending net cash/(debt) 1 25 50 96 133

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OUTPERFORM Maintained Axiata Group Berhad RM4.67 @07/12/10 A one-stop Asian telco shop Target: RM5.90

Telecommunications - Mobile

MA

LAYS

IA

AXIATA MK / AXIA.KL Kelvin Goh CFA +60(3) 2084 9699 – [email protected]

• Still an OUTPERFORM. Axiata remains an OUTPERFORM on the back of its modest EPS growth, rising FCFE yield and strengthening balance sheet. We expect its units in the Indian-subcontinent to take over the reins of growth as its assets in Malaysia and Indonesia mature. Celcom’s and XL’s earnings should also be lifted by operating leverage. We maintain our SOP-based target price of RM5.90 and continue to rate Axiata as our top pick for exposure to the regional telcos. Likely re-rating catalysts are positive earnings and dividend surprises.

• Tilting towards growth. With margin reaching its highest ever, Axiata has shifted its focus from margin expansion towards growth. The telco is looking to be more aggressive to cement longer-term revenue growth even at the expense of margins.

• More cost efficiency. Celcom’s proposed network sharing with DiGi should deliver opex savings of RM100m-150m p.a. and enhance FY12 group earnings by 2-3%. Celcom expects savings to kick in from FY12.

• Dividend upside. While we understand that Axiata plans to have a “conservative” balance sheet to be prepared for any potential M&A, we believe there is upside to its 30% dividend payout after FY11 because of very strong FCF generation. XL and Dialog have joined Celcom and M1 in the positive FCFE camp.

• Key concerns. Our main concerns are 1) rising competition in Malaysia from YTL Communications, especially in the large screen data segment, 2) regulatory risks, especially in India, and 3) potential selldown by Khazanah and Telekom Malaysia.

Financial summary

Stock Information Market cap: RM39,439m/US$12,572m 12-m price range: RM4.74 RM3.01 3-m avg daily vol: 14.8m No. of shrs (m): 8,445 Est. free float (%): 38.2 Conv. secs (m): None Major shareholders (%): - Khazanah 44.5 - Employees Provident Fund 9.4 - Amanah Saham Bumi 7.9

FYE Dec 2008 2009 2010F 2011F 2012F Revenue (RM m) 11,347.7 13,105.5 15,744.0 17,174.5 18,426.8 EBITDA (RM m) 4,541.8 5,156.7 7,165.5 7,812.8 8,349.2 EBITDA margins (%) 40.0% 39.3% 45.5% 45.5% 45.3% Pretax profit (RM m) 905.8 2,666.2 4,181.2 4,836.1 5,287.6 Net profit (RM m) 444.2 1,652.7 2,745.4 3,075.5 3,303.7 EPS (sen) 8.1 22.9 32.5 36.4 39.1 EPS growth (%) (76.2%) 183.9% 42.1% 12.0% 7.4% P/E (x) 57.9 20.4 14.4 12.8 11.9 Core EPS (sen) 19.7 15.6 32.5 36.4 39.1 Core EPS growth (%) (33.8%) (20.8%) 108.5% 12.0% 7.4% Core P/E (x) 23.7 30.0 14.4 12.8 11.9 Gross DPS (sen) 0.0 0.0 10.0 11.0 12.0 Dividend yield (%) 0.0% 0.0% 2.1% 2.4% 2.6% P/BV (x) 2.3 2.2 2.0 1.8 1.6 ROE (%) 4.2% 11.2% 14.3% 14.5% 14.1% Net gearing (%) 142.7% 54.6% 26.3% 10.7% N/A Net cash per share (RM) N/A N/A N/A N/A 0.09 P/FCFE (x) 22.3 (5.1) 12.0 10.2 9.3 EV/EBITDA (x) 9.4 8.7 6.4 5.6 4.9 % change in EPS estimates - - - CIMB/Consensus (x) 0.98 0.99 0.93



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Volume 100m (R.H.S ca le ) Axia ta Group Be rha d Source: Bloomberg

A spin-off of Telekom Malaysia's domestic mobile and foreign assets, Axiata Group has stakes in mobile operators in some of the largest, fastest-growing countries in Asia – 100% of Malaysia’s Celcom, 66.5% of Indonesia’s XL Axiata, 84.7% of Sri Lanka’s Dialog, 70% of Bangladesh’s Robi, 100% of Cambodia’s Hello, 19.3% of India’s Idea Cellular and 29.7% of Singapore’s M1. Axiata's units have a strong foothold in these markets, mostly ranking in the top 3. It plans to dispose of its non-mobile assets. Axiata was formerly known as TM International.



(RM m, FYE Dec) 2008 2009 2010F 2011F 2012F (FYE Dec) 2008 2009 2010F 2011F 2012F Revenue 11,348 13,106 15,744 17,174 18,427 Revenue growth (%) 13.5 15.5 20.1 9.1 7.3 Operating expenses (6,806) (7,949) (8,579) (9,362) (10,078) EBITDA growth (%) 11.4 13.5 39.0 9.0 6.9 EBITDA 4,542 5,157 7,165 7,813 8,349 Pretax margins (%) 8.0 20.3 26.6 28.2 28.7 Depreciation & amortisation (2,338) (2,860) (3,160) (3,270) (3,346) Net profit margins (%) 3.9 12.6 17.4 17.9 17.9 EBIT 2,203 2,296 4,006 4,543 5,003 Interest cover (x) 2.5 2.6 5.6 6.9 7.6 Net interest & invt income (598) (319) (89) (6) (93) Effective tax rates (%) 48.0 34.1 25.9 25.8 26.0 Associates’ contribution (59) 101 264 299 377 Net dividend payout (%) 0.0 0.0 30.0 30.0 30.0 Exceptional items (640) 587 0 0 0 Debtors turnover (days) 39.3 43.2 39.8 41.6 41.9 Others 0 0 0 0 0 Stock turnover (days) 2.4 1.6 0.9 0.9 1.0 Pretax profit 906 2,666 4,181 4,836 5,288 Creditors turnover (days) 136.5 122.6 102.7 102.2 103.3 Tax (435) (910) (1,083) (1,247) (1,377) Minority interests (27) (103) (353) (514) (607) Net profit 444 1,653 2,745 3,075 3,304 Adj. wt. shares (m) 5,511 7,223 8,445 8,445 8,445 Unadj. year-end shares (m) 5,511 8,445 8,445 8,445 8,445 BALANCE SHEET KEY DRIVERS (RM m, end Dec) 2008 2009 2010F 2011F 2012F (FYE Dec) 2009 2010F 2011F 2012FFixed assets 14,960 15,815 16,183 16,164 16,054 Mobile subscribers (m) - Malaysia 10.15 10.75 11.23 11.71 Intangible assets 8,326 8,563 8,563 8,563 8,563 Blended mobile ARPU (RM) 54.3 51.9 51.2 49.7 Other long-term assets 8,990 9,068 7,068 7,068 7,068 Prepaid ARPU (local currency) 43.0 40.9 38.8 37.6 Total non-current assets 32,275 33,447 31,815 31,796 31,686 Postpaid ARPU (local currency) 98.0 93.1 91.2 88.5 Cash and equivalents 3,331 2,006 5,303 8,334 11,663 Mobile subscribers (m) - Indonesia 31.4 37.6 42.5 47.4 Stocks 77 35 42 46 50 Postpaid ARPU (Rp'000) 167.0 158.7 150.7 146.2 Trade debtors 1,540 1,559 1,873 2,043 2,192 Prepaid ARPU (Rp'000) 34.0 33.3 32.0 31.0 Other current assets 129 97 97 97 97 Total current assets 5,077 3,698 7,316 10,520 14,002 Trade creditors 4,538 4,263 4,601 5,021 5,405 Short-term borrowings 9,477 2,149 2,149 2,149 2,149 Other current liabilities 195 221 1,045 1,144 1,212 Total current liabilities 14,211 6,634 7,795 8,314 8,767 Long-term borrowings 10,546 10,173 8,723 8,723 8,723 Other long-term liabilities 898 1,457 1,457 1,457 1,457 Total long-term liabilities 11,444 11,630 10,180 10,180 10,180 Shareholders’ funds 11,217 18,184 20,106 22,259 24,571 Minority interests 481 696 1,049 1,563 2,170 NTA/share (RM) 0.52 1.14 1.37 1.62 1.90 CASH FLOW 12M - FORWARD FD CORE P/E (X) (RM m, FYE Dec) 2008 2009 2010F 2011F 2012FPretax profit 906 2,666 4,181 4,836 5,288Depreciation & non–cash adj. 2,338 2,860 3,160 3,270 3,346Working capital changes (48) (253) 17 246 232Cash tax paid (435) (910) (1,083) (1,247) (1,377)Others (374) 273 89 6 93Cash flow from operations 2,388 4,636 6,364 7,111 7,581Capex (5,324) (3,290) (3,528) (3,251) (3,236)Net investments & sale of FA 0 0 2,000 0 0Others (6,238) 97 0 0 0Cash flow from investing (11,562) (3,193) (1,528) (3,251) (3,236)Debt raised/(repaid) 10,928 (7,700) (1,450) 0 0Equity raised/(repaid) 0 5,345 0 0 0Dividends paid 0 90 0 (824) (923)Cash interest & others (598) (319) (89) (6) (93)Cash flow from financing 10,330 (2,584) (1,539) (829) (1,016)Change in cash 1,156 (1,140) 3,297 3,030 3,329Change in net cash/(debt) (9,772) 6,560 4,747 3,030 3,329Ending net cash/(debt) (16,692) (10,317) (5,570) (2,539) 790

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NEUTRAL Maintained Berjaya Sports Toto Bhd RM4.25 @07/12/10 Betting on yields Target: RM4.67

Gaming

MA

LAYS

IA

BST MK / BSTB.KL Ivy Ng Lee Fang CFA +60(3) 2084 9697 – [email protected]

• Staying NEUTRAL on B-Toto. B-Toto is a NEUTRAL in our books given i) the limited re-rating catalysts, ii) competitive threat from Magnum’s 4D Jackpot game and iii) expectations of a relatively muted net earnings impact even if the authorities approve the lowering of prize payouts after Jul 10’s betting duty hike. However, its gross dividend yields of 6-7% should appeal to investors who want a defensive play. We retain our end-CY11 DDM-based target price of RM4.67.

• Leadership being whittled down. Although we expect B-Toto to retain its market leadership in 2011 due to decent punting interest in its flagship 4D game and the recent addition of the 6/58 Power Toto lotto variant with a minimum RM8.88m jackpot, we expect its market leadership to be reduced given the strength of interest in Magnum’s 4D Jackpot game. Because of this and the maturity of the NFO market, we see some downside risk to our flat to +3% annual topline growth projections for B-Toto for FY11-13.

• Lower prize payout offers relief. That said, we take comfort in the recent approval of a cut in prize monies for the 4D big game from RM200 to RM180 per RM1 bet effective 15 Dec 10. A cut in prize money should help preserve B-Toto’s profit margins following the 2% pt hike in pool betting duty on 1 Jun 10.

• But still an attractive dividend play. These negatives are cushioned by the stock’s dividend yield in excess of 6%, which is supported by its minimum 75% formal dividend payout policy. Within the Berjaya group of companies, B-Toto still stands out as a key cash cow with probably the best dividend prospects.

Financial summary

Stock Information Market cap: RM5,742m/US$1,830m 12-m price range: RM4.64 RM4.07 3-m avg daily vol: 1.4m No. of shrs (m): 1,351 Est. free float (%): 35.0 Conv. secs (m): None Major shareholders (%): - Berjaya Land 43.5 - Bank Sarasin-Rabo (Asia) 3.1 - AIA Bhd 1.9

FYE Apr 2009 2010 2011F 2012F 2013F Revenue (RM m) 3,695.7 3,392.3 3,503.7 3,578.0 3,578.0 EBITDA (RM m) 613.0 578.1 521.8 556.1 557.3 EBITDA margins (%) 16.6% 17.0% 14.9% 15.5% 15.6% Pretax profit (RM m) 585.5 546.2 474.5 524.4 527.0 Net profit (RM m) 413.6 381.7 332.2 372.9 374.8 EPS (sen) 30.6 28.3 24.6 27.6 27.7 EPS growth (%) 18.6% (7.7%) (13.0%) 12.2% 0.5% P/E (x) 13.9 15.0 17.3 15.4 15.3 Gross DPS (sen) 33.6 34.1 28.4 29.2 30.1 Dividend yield (%) 7.9% 8.0% 6.7% 6.9% 7.1% P/BV (x) 11.9 12.9 9.7 8.5 7.7 ROE (%) 102.0% 82.4% 63.9% 58.9% 53.0% Net gearing (%) 5.2% 40.5% 9.4% N/A N/A Net cash per share (RM) N/A N/A N/A 0.02 0.08 P/FCFE (x) 16.3 11.3 8.7 17.0 16.5 EV/EBITDA (x) 9.4 10.3 11.1 10.3 10.1 % change in EPS estimates - - - CIMB/Consensus (x) 0.88 0.94 0.91



3.8

4.0

4.2

4.4

4.6

4.8


0.00

0.20

0.40

0.60

0.80

1.00

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1.40

1.60

1.80

Volume 10m (R.H.S ca le ) Be rja ya S ports Toto Bhd Source: Bloomberg

Berjaya Sports Toto (B-Toto) is part of the Berjaya Group which is owned by Tan Sri Dato’ Seri Vincent Tan. B-Toto has stamped its presence in number forecast operations (NFO) by offering the highest number of games among its legal peers –three NFO games (4D, 5D, 6D) and three lotto games (6/52 Mega Jackpot, 6/55 Power Toto and 6/58 Supreme Toto). Supreme Toto is a new game which recently replaced the Toto 6/49 lotto variant. B-Toto remains the leading NFO player in Malaysia with an estimated 40% share of the legal NFO market.



(RM m, FYE Apr) 2009 2010 2011F 2012F 2013F (FYE Apr) 2009 2010 2011F 2012F 2013F Revenue 3,696 3,392 3,504 3,578 3,578 Revenue growth (%) 12.7 (8.2) 3.3 2.1 0.0 Operating expenses (3,083) (2,814) (2,982) (3,022) (3,021) EBITDA growth (%) 15.6 (5.7) (9.7) 6.6 0.2 EBITDA 613 578 522 556 557 Pretax margins (%) 15.8 16.1 13.5 14.7 14.7 Depreciation & amortisation (15) (16) (17) (18) (20) Net profit margins (%) 11.2 11.3 9.5 10.4 10.5 EBIT 598 562 505 538 538 Interest cover (x) 37.1 22.1 17.3 19.4 20.4 Net interest & invt income (13) (16) (23) (13) (11) Effective tax rates (%) 27.9 29.2 29.0 28.0 28.0 Associates’ contribution 0 0 0 0 0 Net dividend payout (%) 82.4 90.5 86.5 79.2 81.2 Exceptional items 0 0 (8) 0 0 Debtors turnover (days) 6.7 8.2 10.4 10.5 11.2 Others 0 0 0 0 0 Stock turnover (days) 0.8 0.9 0.9 0.9 0.9 Pretax profit 586 546 475 524 527 Creditors turnover (days) 22.9 24.8 25.5 25.6 25.9 Tax (164) (160) (138) (147) (148) Minority interests (8) (5) (5) (5) (5) Net profit 414 382 332 373 375 Adj. wt. shares (m) 1,351 1,351 1,351 1,351 1,351 Unadj. year-end shares (m) 1,351 1,351 1,351 1,351 1,351 BALANCE SHEET KEY DRIVERS (RM m, end Apr) 2009 2010 2011F 2012F 2013F (FYE Apr) 2010 2011F 2012F 2013FFixed assets 98 98 96 95 93 Revenue growth (%) -8.3% 3.3% 2.1% 0.0% Intangible assets 618 644 644 644 644 Revenue per draw day (RM m) 19.17 20.50 20.94 20.94 Other long-term assets 95 111 101 91 81 Prize payout ratio (%) 64.0% 64.0% 63.4% 63.4% Total non-current assets 812 852 841 830 818 No. of outlets 680 680 680 680 Cash and equivalents 237 263 570 620 672 Stocks 7 9 9 9 9 Trade debtors 49 104 96 109 109 Other current assets 15 6 6 6 6 Total current assets 308 381 682 745 797 Trade creditors 219 241 249 254 254 Short-term borrowings 138 145 138 131 124 Other current liabilities 102 34 34 34 34 Total current liabilities 460 420 421 419 413 Long-term borrowings 124 305 490 465 442 Other long-term liabilities 40 42 2 2 2 Total long-term liabilities 164 347 492 467 444 Shareholders’ funds 481 446 594 672 742 Minority interests 15 16 16 16 16 NTA/share (RM) (0.10) (0.15) (0.04) 0.02 0.07 CASH FLOW CURRENT P/BV(X) (RM m, FYE Apr) 2009 2010 2011F 2012F 2013FPretax profit 586 546 475 524 527Depreciation & non–cash adj. 15 16 17 18 20Working capital changes 13 (35) 12 (14) 1Cash tax paid (144) (160) (160) (138) (147)Others 27 78 170 (3) (5)Cash flow from operations 496 446 514 389 396Capex (24) (15) (16) (17) (18)Net investments & sale of FA (12) 1 10 10 10Others 0 (93) 0 0 0Cash flow from investing (36) (108) (6) (7) (8)Debt raised/(repaid) (97) 187 178 (31) (30)Equity raised/(repaid) 0 (35) 0 0 0Dividends paid (241) (433) (361) (287) (295)Cash interest & others (12) (33) (17) (13) (10)Cash flow from financing (350) (313) (200) (332) (335)Change in cash 111 26 308 50 53Change in net cash/(debt) 208 (161) 130 81 83Ending net cash/(debt) (26) (187) (57) 24 106

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20.40






NEUTRAL Maintained Bintulu Port Holdings Bhd RM6.60 @07/12/10 A dividend play Target: RM6.95

Ports

MA

LAYS

IA

BPH MK / BPOT.KL Loke Wei Wern +60 (3) 2084 9946 – [email protected]

• Maintain NEUTRAL. Bintulu Port’s key appeal lies in its relatively stable income stream which helps support its attractive gross yields of 7-8%. On a more macro level, the continued economic growth and newsflow on the rollout of new projects within the Sarawak Corridor of Renewable Energy (Score) should provide some excitement to the stock. But Bintulu Port is trading at premium valuations of 17.6x forward P/E and 3.2x P/BV. Low liquidity is another dampener. We remain NEUTRAL on the stock with an unchanged DCF-based target price of RM6.95. We prefer Malaysia Airports (MAHB MK, Outperform) for exposure to the transport infrastructure sector.

• Economic growth bodes well for port activities. Our economics team is projecting GDP growth of 5.5% for 2011, which bodes well for port activities. While liquefied natural gas (LNG) cargo should remain relatively stable due to the long-term nature of the contracts, potential upside could come from non-LNG cargo as internal and external demand increases on the back of a pickup in economic activities.

• Still very much a dividend play. While new projects under Score could provide a kicker to Bintulu Port’s earnings, we do not expect contribution from this corridor to be significant yet. But in the longer run, Bintulu Port stands to gain from the import and export requirements of the new industries. For now, earnings should remain largely stable, underpinned by the LNG cargo. The stock’s key appeal lies in its attractive gross yields of 7-8% which should provide support to its share price.

Financial summary

Stock Information Market cap: RM2,640m/US$839m 12-m price range: RM7.00 RM6.18 3-m avg daily vol: 0.0m No. of shrs (m): 400 Est. free float (%): 21.6 Conv. secs (m): None Major shareholders (%): - Petroliam Nasional Bhd 32.8 - State Financial Secretary 30.7 - KWAP 9.5

FYE Dec 2008 2009 2010F 2011F 2012F Revenue (RM m) 448.8 439.0 472.9 501.8 517.9 EBITDA (RM m) 213.9 187.2 215.4 234.0 245.4 EBITDA margins (%) 47.7% 42.6% 45.5% 46.6% 47.4% Pretax profit (RM m) 205.9 173.5 190.7 200.2 209.5 Net profit (RM m) 150.6 128.8 143.0 150.2 157.1 EPS (sen) 37.7 32.2 35.8 37.5 39.3 EPS growth (%) 11.0% (14.5%) 11.1% 5.0% 4.6% P/E (x) 17.5 20.5 18.5 17.6 16.8 Gross DPS (sen) 55.0 50.0 55.0 55.0 55.0 Dividend yield (%) 8.3% 7.6% 8.3% 8.3% 8.3% P/BV (x) 3.0 3.1 3.2 3.2 3.3 ROE (%) 17.0% 14.9% 17.1% 18.3% 19.4% Net cash per share (RM) 1.15 0.78 0.57 0.45 0.45 P/FCFE (x) 17.4 156.7 39.3 25.0 17.2 EV/EBITDA (x) 10.2 12.4 11.2 10.5 10.0 % change in EPS estimates - - - CIMB/Consensus (x) 0.97 0.98 0.95



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7.2

7.4

De c-09 May-10 Oct-10

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10.00

Volume 100k (R.H.S ca le ) Bintulu Port Holding s Bhd Source: Bloomberg

Bintulu Port Holdings, through Bintulu Port Sdn Bhd, has been the operator for Bintulu Port since 1993. Besides being the sole export gateway for liquefied natural gas in Malaysia and a leading container hub in East Malaysia, the port is also equipped to handle other types of cargo including dry, liquid and break bulk cargo. Strategically located in the BIMP-EAGA region, it is well-positioned to serve Malaysia’s major LNG exports, the resource-rich Sarawak hinterland as well as the increasing activity in that region. Bintulu Port’s subsidiary, Biport Bulkers Sdn Bhd, provides bulking installation facilities for palm oil, edible oil, vegetable oil and its by-products.



(RM m, FYE Dec) 2008 2009 2010F 2011F 2012F (FYE Dec) 2008 2009 2010F 2011F 2012F Revenue 449 439 473 502 518 Revenue growth (%) 7.6 (2.2) 7.7 6.1 3.2 Operating expenses (235) (252) (258) (268) (272) EBITDA growth (%) 9.8 (12.5) 15.0 8.6 4.9 EBITDA 214 187 215 234 245 Pretax margins (%) 45.9 39.5 40.3 39.9 40.4 Depreciation & amortisation (28) (31) (37) (43) (44) Net profit margins (%) 33.6 29.3 30.2 29.9 30.3 EBIT 185 156 179 191 202 Interest cover (x) N/A N/A N/A N/A N/A Net interest & invt income 20 18 12 9 8 Effective tax rates (%) 26.8 25.8 25.0 25.0 25.0 Associates’ contribution 0 0 0 0 0 Net dividend payout (%) 108.1 114.9 113.8 108.4 103.6 Exceptional items 0 0 0 0 0 Debtors turnover (days) 25.6 32.6 31.7 31.9 32.3 Others 0 0 0 0 0 Stock turnover (days) 0.0 0.0 0.0 0.0 0.0 Pretax profit 206 174 191 200 209 Creditors turnover (days) 95.5 103.5 85.3 82.9 82.6 Tax (55) (45) (48) (50) (52) Minority interests 0 0 0 0 0 Net profit 151 129 143 150 157 Adj. wt. shares (m) 400 400 400 400 400 Unadj. year-end shares (m) 400 400 400 400 400 BALANCE SHEET KEY DRIVERS (RM m, end Dec) 2008 2009 2010F 2011F 2012F (FYE Dec) 2009 2010F 2011F 2012FFixed assets 516 617 683 721 719 LNG throughput (m'tonnes) 22.8 23.7 23.9 23.9 Intangible assets 15 13 12 10 8 Avg tariff/LNG vessel call (RM'000) 720.7 720.7 720.7 720.7 Other long-term assets 1 1 1 1 1 Containers handled (TEUs) 261,150 308,510 323,935 340,132 Total non-current assets 532 632 695 732 728 Cash and equivalents 462 314 230 182 181 Stocks 0 0 0 0 0 Trade debtors 39 40 43 45 47 Other current assets 49 44 44 44 44 Total current assets 550 397 317 271 272 Trade creditors 140 109 112 116 118 Short-term borrowings 0 0 0 0 0 Other current liabilities 9 4 4 4 4 Total current liabilities 149 113 116 120 122 Long-term borrowings 0 0 0 0 0 Other long-term liabilities 51 71 71 71 71 Total long-term liabilities 51 71 71 71 71 Shareholders’ funds 881 845 825 813 807 Minority interests 0 0 0 0 0 NTA/share (RM) 2.17 2.08 2.03 2.01 2.00 CASH FLOW 12M - FORWARD FD CORE P/E (X) (RM m, FYE Dec) 2008 2009 2010F 2011F 2012FPretax profit 206 174 191 200 209Depreciation & non–cash adj. 28 31 37 43 44Working capital changes 30 (31) (1) 2 1Cash tax paid (46) (40) (48) (50) (52)Others (38) (27) (12) (9) (8)Cash flow from operations 180 106 167 186 194Capex (51) (131) (100) (80) (40)Net investments & sale of FA 0 0 0 0 0Others 23 41 0 0 0Cash flow from investing (28) (90) (100) (80) (40)Debt raised/(repaid) 0 0 0 0 0Equity raised/(repaid) 0 0 0 0 0Dividends paid (163) (148) (163) (163) (163)Cash interest & others 0 (14) 12 9 8Cash flow from financing (163) (162) (151) (154) (155)Change in cash (11) (145) (84) (48) (1)Change in net cash/(debt) (11) (145) (84) (48) (1)Ending net cash/(debt) 462 314 230 182 181

15.0

15.5

16.0

16.5

17.0

17.5

18.0

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UNDERPERFORM Maintained British American Tobacco Bhd RM45.48 @07/12/10 Feeling the drag Target: RM44.00

Tobacco

MA

LAYS

IA

ROTH MK / BATO.KL Loke Wei Wern +60 (3) 2084 9946 – [email protected]

• Maintain UNDERPERFORM. In 2011, British American Tobacco (BAT) will have to grapple with the margin erosion from the ban on small packs, the high level of illicit trade, and a potential decline in demand due to the hefty price hike of 8-9% in October. Given the challenging operating terrain and unexciting growth prospects, we see little room for share price appreciation. This explains our decision to keep the stock as an UNDERPERFORM. Potential de-rating catalysts are 1) more regulatory negatives, 2) growth in illicit trade, and 3) market share loss to rival JT International (RJR MK, Neutral).

• Full-year impact of ban on small packs. The biggest hurdle for BAT is the potential loss of margins due to the ban on small packs. Although it has quite successfully migrated smokers of its packs of 14 to the 20s pack, margins should still be under pressure as small packs have a higher per stick pricing. But this should be partially compensated by cost savings arising from the company’s blend optimisation initiatives.

• Still No. 2 in the value segment. Pall Mall’s market share loss has relegated BAT to the second spot in the value-for-money (VFM) segment. Although it will continue investing in brand promotional activities to claw back market share and it recently relaunched Peter Stuyvesant as a VFM brand, competition from rival brand Winston is unlikely to dissipate anytime soon.

Financial summary

Stock Information Market cap: RM12,986m/US$4,127m 12-m price range: RM49.94 RM41.60 3-m avg daily vol: 0.1m No. of shrs (m): 286 Est. free float (%): 30.0 Conv. secs (m): None Major shareholders (%): - BAT BV 50.0 - PNB 6.1 - Lazard Asset Management 2.5

FYE Dec 2008 2009 2010F 2011F 2012F Revenue (RM m) 4,135.2 3,923.4 3,951.2 4,095.7 4,142.3 EBITDA (RM m) 1,182.3 1,108.9 1,080.8 1,110.2 1,132.8 EBITDA margins (%) 28.6% 28.3% 27.4% 27.1% 27.3% Pretax profit (RM m) 1,081.2 1,005.3 973.2 999.2 1,021.8 Net profit (RM m) 811.8 746.8 729.9 749.4 766.3 EPS (sen) 284.3 261.5 255.6 262.5 268.4 EPS growth (%) 10.9% (8.0%) (2.3%) 2.7% 2.3% P/E (x) 16.0 17.4 17.8 17.3 16.9 Gross DPS (sen) 361.0 314.7 315.0 325.0 330.0 Dividend yield (%) 7.9% 6.9% 6.9% 7.1% 7.3% P/BV (x) 31.9 29.6 24.8 22.5 20.4 ROE (%) 215.7% 176.5% 151.7% 136.3% 126.4% Net gearing (%) 145.2% 109.6% 90.3% 68.6% 47.5% P/FCFE (x) 17.6 15.7 15.2 17.3 16.2 EV/EBITDA (x) 11.5 12.1 12.5 12.1 11.7 % change in EPS estimates - - - CIMB/Consensus (x) 1.01 1.03 1.04



39.5

41.5

43.5

45.5

47.5

49.5

51.5

De c -09 May-10 Oct-10

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Volume 100k (R.H.S ca le ) Britis h Ame rica n Toba cco Bhd Source: Bloomberg

50% owned by British American Tobacco BV, British American Tobacco (BAT) manufactures and markets tobacco products in Malaysia. It is the result of the merger of Rothmans of Pall Mall and Malaysia Tobacco Company (MTC) in 1999. With about 63% market share, BAT is the clear leader in the industry, followed by JT International and Philip Morris. Its portfolio includes Dunhill, Pall Mall, Peter Stuyvesant and Benson and Hedges. Dunhill is the dominant brand in the premium cigarette segment and accounts for close to an estimated 72% of BAT’s total sales. In the value-for-money (VFM) space, BAT is the No. 2 player after JT International.



(RM m, FYE Dec) 2008 2009 2010F 2011F 2012F (FYE Dec) 2008 2009 2010F 2011F 2012F Revenue 4,135 3,923 3,951 4,096 4,142 Revenue growth (%) 7.9 (5.1) 0.7 3.7 1.1 Operating expenses (2,953) (2,815) (2,870) (2,986) (3,009) EBITDA growth (%) 5.6 (6.2) (2.5) 2.7 2.0 EBITDA 1,182 1,109 1,081 1,110 1,133 Pretax margins (%) 26.1 25.6 24.6 24.4 24.7 Depreciation & amortisation (81) (81) (86) (90) (94) Net profit margins (%) 19.6 19.0 18.5 18.3 18.5 EBIT 1,102 1,028 994 1,020 1,039 Interest cover (x) 39.2 36.9 34.0 34.9 35.5 Net interest & invt income (21) (22) (21) (21) (17) Effective tax rates (%) 24.9 25.7 25.0 25.0 25.0 Associates’ contribution 0 0 0 0 0 Net dividend payout (%) 94.0 90.2 92.4 92.9 92.2 Exceptional items 0 0 0 0 0 Debtors turnover (days) 19.6 19.7 16.5 17.5 17.7 Others 0 0 0 0 0 Stock turnover (days) 20.7 20.4 21.5 22.8 23.1 Pretax profit 1,081 1,005 973 999 1,022 Creditors turnover (days) 22.8 23.5 21.1 21.6 21.9 Tax (269) (259) (243) (250) (255) Minority interests 0 0 0 0 0 Net profit 812 747 730 749 766 Adj. wt. shares (m) 286 286 286 286 286 Unadj. year-end shares (m) 286 286 286 286 286 BALANCE SHEET KEY DRIVERS (RM m, end Dec) 2008 2009 2010F 2011F 2012F (FYE Dec) 2009 2010F 2011F 2012FFixed assets 459 431 477 447 413 Industry volume growth (% growth) -11.5% -3.0% -5.0% 0.0% Intangible assets 412 412 412 412 412 Excise duties (RM per kg) 190.00 220.00 220.00 220.00 Other long-term assets 20 47 47 47 47 Sales tax (%) 5.0% 5.0% 5.0% 5.0% Total non-current assets 891 890 936 906 872 Cash and equivalents 59 169 177 254 348 Stocks 225 214 252 261 264 Trade debtors 258 165 192 199 202 Other current assets 54 4 4 4 4 Total current assets 596 552 626 719 818 Trade creditors 286 219 238 247 250 Short-term borrowings 250 0 0 0 0 Other current liabilities 97 81 97 100 102 Total current liabilities 632 300 336 347 352 Long-term borrowings 400 650 650 650 650 Other long-term liabilities 48 53 53 53 53 Total long-term liabilities 448 703 703 703 703 Shareholders’ funds 407 439 523 577 636 Minority interests 0 0 0 0 0 NTA/share (RM) (0.02) 0.10 0.39 0.58 0.79 CASH FLOW 12M - FORWARD FD CORE P/E (X) (RM m, FYE Dec) 2008 2009 2010F 2011F 2012FPretax profit 1,081 1,005 973 999 1,022Depreciation & non–cash adj. 81 81 86 90 94Working capital changes 2 37 (46) (8) (2)Cash tax paid (251) (269) (259) (243) (250)Others 42 70 177 (11) 9Cash flow from operations 955 924 932 827 872Capex (102) (107) (60) (60) (60)Net investments & sale of FA 7 28 0 0 0Others 8 5 5 5 5Cash flow from investing (87) (74) (55) (55) (55)Debt raised/(repaid) (100) 0 0 0 0Equity raised/(repaid) 0 0 0 0 0Dividends paid (751) (714) (847) (675) (707)Cash interest & others (28) (24) (21) (21) (17)Cash flow from financing (879) (738) (868) (695) (724)Change in cash (11) 113 9 77 93Change in net cash/(debt) 89 113 9 77 93Ending net cash/(debt) (591) (481) (473) (396) (302)

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NEUTRAL Maintained Bursa Malaysia Bhd RM7.96 @07/12/10 Taking stock of the swift growth Target: RM8.64

Stockbroking & Exchanges

MA

LAYS

IA

BURSA MK / BMYS.KL Winson Ng Gia Yann CFA +60(3) 2084 9686 – [email protected]

• Retain NEUTRAL. With our EPS forecasts and target price of RM8.64 unchanged, we maintain our NEUTRAL call on Bursa as the anticipated strong earnings growth in FY11 has been priced in given the high FY12 P/E of 24.9x. Although we expect velocity to pick up to 35% in 2011, it will still be lower than the average of 40% registered in 2007-09. For exposure to equity market, we prefer AMMB Holdings which derives about 3% of its revenue from brokerage income, the highest percentage among the banking groups.

• Equity-driven earnings growth. We envisage a 28.6% jump in FY11 EPS, primarily driven by higher equity income due to the continuing inflow of foreign funds. Equity income is projected to surge 33.5% to RM178.7m in FY11 as a result of an assumed 10% rise in market capitalisation and an increase in velocity from 32% in 2010 to 35% in 2011.

• Improving derivative income. Derivative income should be on the rise as Bursa’s tie-up with Chicago Mercantile Exchange (CME) to promote its derivative products in the international market will start to bear fruit. We are forecasting a 20.1% jump in derivative income to RM63.7m in FY11.

• Retain earnings forecasts and target price. We retain our earnings forecasts and target price of RM8.64, pegged to an unchanged 27x target P/E or a 10% discount to the stock’s 3-year historical average.

Financial summary

Stock Information Market cap: RM4,230m/US$1,344m 12-m price range: RM8.63 RM6.78 3-m avg daily vol: 1.2m No. of shrs (m): 531 Est. free float (%): 60.0 Conv. secs (m): None Major shareholders (%): - Ministry of Finance Inc. 18.9 - Capital Market Development 18.9 - Newton Investment 5.7

FYE Dec 2008 2009 2010F 2011F 2012F Revenue (RM m) 302.3 297.6 301.9 357.6 391.0 EBITDA (RM m) 137.5 153.9 147.9 196.7 219.7 EBITDA margins (%) 45.5% 51.7% 49.0% 55.0% 56.2% Pretax profit (RM m) 145.6 219.2 155.2 199.7 220.2 Net profit (RM m) 104.4 177.6 118.1 151.8 167.3 EPS (sen) 20.0 34.0 22.6 29.0 32.0 EPS growth (%) (56.7%) 70.1% (33.5%) 28.6% 10.2% P/E (x) 39.9 23.4 35.3 27.4 24.9 Core EPS (sen) 20.0 22.2 22.6 29.0 32.0 Core EPS growth (%) (56.7%) 11.1% 1.8% 28.6% 10.2% Core P/E (x) 39.9 35.9 35.3 27.4 24.9 Gross DPS (sen) 24.3 40.8 27.1 34.8 38.4 Dividend yield (%) 3.1% 5.1% 3.4% 4.4% 4.8% P/BV (x) 5.7 5.0 4.9 4.8 4.7 ROE (%) 13.8% 22.6% 13.9% 17.6% 19.0% Net cash per share (RM) 2.19 2.20 2.12 2.05 1.98 P/FCFE (x) 36.8 30.9 42.3 50.3 34.0 EV/EBITDA (x) 22.0 19.6 20.7 15.8 14.3 % change in EPS estimates - - - CIMB/Consensus (x) 0.91 1.00 0.97



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Volume 1m (R.H.Scale) Bursa Malaysia Bhd Source: Bloomberg

Bursa Malaysia completed its demutualisation exercise on 5 Jan 2004 and was converted from a non-profit entity limited by the guarantee of its members to a public company limited by shares. It operates a fully integrated exchange, offering a full suite of exchange-related services, organised under several business units (1) exchanges, (2) clearing, settlement and depository and (3) information services. It currently operates in a monopolistic environment with two different equity markets – Main and ACE markets – and a derivative market. On 17 Sep 09, Bursa entered into a tie-up with CME to promote its derivative products (including CPO futures contracts) in the international market.



(RM m, FYE Dec) 2008 2009 2010F 2011F 2012F (FYE Dec) 2008 2009 2010F 2011F 2012F Revenue 302 298 302 358 391 Revenue growth (%) (31.8) (1.6) 1.5 18.4 9.4 Operating expenses (165) (144) (154) (161) (171) EBITDA growth (%) (51.8) 11.9 (3.9) 33.0 11.7 EBITDA 138 154 148 197 220 Pretax margins (%) 48.2 73.7 51.4 55.9 56.3 Depreciation & amortisation (21) (39) (43) (48) (52) Net profit margins (%) 34.5 59.7 39.1 42.4 42.8 EBIT 117 115 105 149 167 Interest cover (x) 167.1 191.7 N/A N/A N/A Net interest & invt income 29 28 51 51 53 Effective tax rates (%) 28.3 18.9 23.8 23.9 24.0 Associates’ contribution 0 0 0 0 0 Net dividend payout (%) 91.3 90.0 90.0 90.0 90.0 Exceptional items 0 76 0 0 0 Debtors turnover (days) 53.7 56.7 56.0 52.0 52.3 Others 0 0 0 0 0 Stock turnover (days) 0.0 0.0 0.0 0.0 0.0 Pretax profit 146 219 155 200 220 Creditors turnover (days) 803.5 987.3 921.8 739.5 642.4 Tax (41) (42) (37) (48) (53) Minority interests 0 0 0 0 0 Net profit 104 178 118 152 167 Adj. wt. shares (m) 523 523 523 523 523 Unadj. year-end shares (m) 523 523 523 523 523 BALANCE SHEET KEY DRIVERS (RM m, end Dec) 2008 2009 2010F 2011F 2012F (FYE Dec) 2009 2010F 2011F 2012FFixed assets 254 243 248 253 258 Average daily value traded (RMm) 1,221 1,517 1,826 2,008 Intangible assets 45 43 43 43 43 Derivatives contract traded ('000) 25 28 34 41 Other long-term assets 166 242 250 258 267 Effective clearing rate (%) 3.4% 3.0% 3.4% 3.4% Total non-current assets 464 528 541 554 568 Velocity (%) 34.0% 32.0% 35.0% 35.0% Cash and equivalents 1,144 1,151 1,109 1,072 1,036 Total exchange market cap (RMbn) 999.0 1,138.1 1,251.9 1,377.1 Stocks 0 0 0 0 0 Price per unit of trade (RM) 1.36 1.33 1.35 1.34 Trade debtors 48 44 49 53 59 Other current assets 73 63 69 76 84 Total current assets 1,266 1,258 1,227 1,201 1,179 Trade creditors 828 782 743 706 671 Short-term borrowings 0 0 0 0 0 Other current liabilities 119 104 109 114 120 Total current liabilities 947 886 852 820 790 Long-term borrowings 0 0 0 0 0 Other long-term liabilities 51 52 53 55 56 Total long-term liabilities 51 52 53 55 56 Shareholders’ funds 732 840 854 872 891 Minority interests 0 9 9 9 9 NTA/share (RM) 1.31 1.52 1.55 1.59 1.62 CASH FLOW 12M - FORWARD FD CORE P/E (X) (RM m, FYE Dec) 2008 2009 2010F 2011F 2012FPretax profit 146 219 155 200 220Depreciation & non–cash adj. 21 39 43 48 52Working capital changes 10 (13) 61 21 36Cash tax paid (41) (42) (37) (48) (53)Others (50) (74) (84) (91) (90)Cash flow from operations 85 130 138 130 166Capex (36) (30) (90) (90) (90)Net investments & sale of FA 33 6 20 13 16Others 31 29 30 29 30Cash flow from investing 28 5 (40) (47) (44)Debt raised/(repaid) 0 0 0 0 0Equity raised/(repaid) 5 8 0 0 0Dividends paid (161) (77) (106) (137) (151)Cash interest & others 10 0 (65) 25 (13)Cash flow from financing (146) (70) (171) (112) (164)Change in cash (33) 65 (73) (29) (42)Change in net cash/(debt) (33) 65 (73) (29) (42)Ending net cash/(debt) 1,144 1,151 1,109 1,072 1,036

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NEUTRAL Maintained Carlsberg Brewery (M) Bhd RM6.05 @07/12/10 Fizz from down south Target: RM6.70

Brewers

MA

LAYS

IA

CAB MK / CBMS.KL Loke Wei Wern +60 (3) 2084 9946 – [email protected]

• Carlsberg Brewery remains a NEUTRAL. Carlsberg Brewery now has an alternative channel to grow its earnings, i.e. via Carlsberg Singapore. While Carlsberg Singapore’s commendable performance and the fairly strong volume growth in Singapore’s malt liquor market (MLM) are encouraging, we think that the benefits of the acquisition are mostly reflected in the share price, which has risen 43% relative to 29% for the KLCI since news of the acquisition broke. We, therefore, maintain our NEUTRAL stance. However, our DDM-based target price is raised from RM6.10 to RM6.70 after we lower our cost of equity from 9% to 8% for a lower beta assumption of 0.6x (0.7x previously). Our FY10-12 earnings projections are intact.

• Carlsberg Singapore to open up new growth channels. We have seen a jump in Carlsberg Brewery’s earnings in 2010 following the completion of the acquisition of Carlsberg Singapore. Given the increasingly saturated domestic market and the dominance of its rival Guinness Anchor (GUIN MK; Neutral) in the local MLM, Carlsberg Brewery’s access to the Singapore market will play an instrumental role in the company’s growth, in our opinion.

• Improving growth prospects; decent dividend yields. The reprieve from an excise duty hike in the latest Budget should pave the way for further volume growth. Besides the company’s improving earnings growth prospects on the back of a more favourable operating terrain, Carlsberg Brewery’s other key appeal is its decent gross yield of 6%. In the absence of any major capex plans, the company should have little difficulty keeping to its unofficial 50-70% net dividend payout this year.

Financial summary

Stock Information Market cap: RM1,864m/US$594m 12-m price range: RM6.05 RM4.43 3-m avg daily vol: 0.1m No. of shrs (m): 308 Est. free float (%): 30.0 Conv. secs (m): None Major shareholders (%): - Carlsberg Breweries A/S 51.0 - Kim Keow Chan 5.9 - State Street Corp 0.7

FYE Dec 2008 2009 2010F 2011F 2012F Revenue (RM m) 960.2 1,045.5 1,358.4 1,387.9 1,415.1 EBITDA (RM m) 114.9 117.6 196.5 202.7 215.8 EBITDA margins (%) 12.0% 11.2% 14.5% 14.6% 15.3% Pretax profit (RM m) 101.3 102.6 169.5 182.6 197.1 Net profit (RM m) 76.1 76.1 131.2 141.2 152.2 EPS (sen) 24.9 24.9 42.9 46.2 49.8 EPS growth (%) (3.0%) 0.0% 72.3% 7.6% 7.8% P/E (x) 24.3 24.3 14.1 13.1 12.2 Gross DPS (sen) 12.5 20.5 35.0 37.0 39.0 Dividend yield (%) 2.1% 3.4% 5.8% 6.1% 6.4% P/BV (x) 3.9 3.6 3.3 3.0 2.7 ROE (%) 16.2% 15.4% 24.2% 23.7% 23.2% Net cash per share (RM) 0.72 0.36 N/A 0.10 0.33 P/FCFE (x) 20.9 (23.3) (19.1) 13.0 12.1 EV/EBITDA (x) 14.1 14.6 9.5 8.9 8.0 % change in EPS estimates - - - CIMB/Consensus (x) 1.06 1.08 1.21



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Volume 1m (R.H.S ca le ) Ca rls be rg Bre we ry (M) Bhd Source: Bloomberg

Carlsberg Brewery is Carlsberg Asia Pte Ltd’s 51%-owned subsidiary. It engages in the production, marketing and distribution of beer, stout, shandy and non-alcoholic beverages in Malaysia. Carlsberg holds an estimated 43% of the malt liquor market with a range of products that include Carlsberg Green Label, Carlsberg Special Brew, Skol and Tuborg Green. Although a dominant player in the beer segment, it remains a distant second in the stout segment. In 2009, Carlsberg Brewery acquired Carlsberg Singapore from parent Carlsberg A/S, thereby making the latter its wholly-owned subsidiary.



(RM m, FYE Dec) 2008 2009 2010F 2011F 2012F (FYE Dec) 2008 2009 2010F 2011F 2012F Revenue 960 1,045 1,358 1,388 1,415 Revenue growth (%) 7.0 8.9 29.9 2.2 2.0 Operating expenses (845) (928) (1,162) (1,185) (1,199) EBITDA growth (%) (0.2) 2.4 67.1 3.1 6.5 EBITDA 115 118 197 203 216 Pretax margins (%) 10.5 9.8 12.5 13.2 13.9 Depreciation & amortisation (21) (20) (20) (22) (22) Net profit margins (%) 7.9 7.3 9.7 10.2 10.8 EBIT 94 97 176 181 194 Interest cover (x) N/A N/A N/A N/A N/A Net interest & invt income 7 3 (9) (1) 1 Effective tax rates (%) 24.9 25.2 22.2 22.4 22.5 Associates’ contribution 0 2 2 2 2 Net dividend payout (%) 37.1 61.7 61.2 60.1 58.7 Exceptional items 0 0 0 0 0 Debtors turnover (days) 52.5 55.6 54.9 61.3 61.4 Others 0 0 0 0 0 Stock turnover (days) 20.5 21.8 18.1 20.2 20.3 Pretax profit 101 103 169 183 197 Creditors turnover (days) 30.2 36.7 38.1 42.6 42.7 Tax (25) (26) (38) (41) (44) Minority interests 0 (1) (1) (1) (1) Net profit 76 76 131 141 152 Adj. wt. shares (m) 306 306 306 306 306 Unadj. year-end shares (m) 306 306 306 306 306 BALANCE SHEET KEY DRIVERS (RM m, end Dec) 2008 2009 2010F 2011F 2012F (FYE Dec) 2009 2010F 2011F 2012FFixed assets 140 130 122 114 105 Excise duties (RM per litre) 7.40 7.40 7.40 7.40 Intangible assets 8 383 406 406 406 Sales tax (%) 5.0% 5.0% 5.0% 5.0% Other long-term assets 23 32 32 32 32 Unit sales ('000 Hli) 642 660 670 686 Total non-current assets 170 546 561 552 544 Cash and equivalents 227 119 (24) 39 109 Stocks 66 59 76 78 79 Trade debtors 141 178 231 236 240 Other current assets 23 44 52 53 54 Total current assets 457 399 335 406 483 Trade creditors 86 123 160 164 167 Short-term borrowings 6 9 9 8 8 Other current liabilities 48 224 87 90 93 Total current liabilities 141 356 256 262 268 Long-term borrowings 0 0 0 0 0 Other long-term liabilities 17 72 72 72 72 Total long-term liabilities 17 72 72 72 72 Shareholders’ funds 469 517 568 624 687 Minority interests 0 0 0 0 0 NTA/share (RM) 1.51 0.44 0.53 0.71 0.92 CASH FLOW 12M - FORWARD FD CORE P/E (X) (RM m, FYE Dec) 2008 2009 2010F 2011F 2012FPretax profit 101 103 169 183 197Depreciation & non–cash adj. 21 20 20 22 22Working capital changes 15 25 (195) (3) (3)Cash tax paid (23) (34) (26) (38) (41)Others (9) (6) 142 (8) (10)Cash flow from operations 105 107 111 156 166Capex (12) (12) (12) (13) (13)Net investments & sale of FA (11) (171) (199) 0 0Others 4 (6) 0 0 0Cash flow from investing (19) (188) (211) (13) (13)Debt raised/(repaid) 2 2 0 0 0Equity raised/(repaid) 1 0 0 0 0Dividends paid (79) (29) (46) (78) (83)Cash interest & others 0 0 3 (1) 1Cash flow from financing (77) (27) (43) (79) (82)Change in cash 10 (108) (143) 63 70Change in net cash/(debt) 9 (110) (143) 64 70Ending net cash/(debt) 221 110 (33) 31 102

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OUTPERFORM Maintained Daibochi Plastic & Packaging RM2.45 @07/12/10 Stretching its client base Target: RM3.92

Packaging

MA

LAYS

IA

DPP MK / DPPM.KL Nigel Foo +60(3) 2084 9293 – [email protected]

• Reiterate OUTPERFORM with higher target price. We continue to rate Daibochi an OUTPERFORM while upping our target price from RM3.72 to RM3.92 in line with the revision in our CY12 target market P/E from 13.8x to 14.5x. We maintain our valuation basis of 30% discount to the target market P/E. Factors that could trigger a re-rating of the stock include a decline in raw material costs and new contracts from major non-F&B companies. The share price is backed by the attractive gross dividend yield of 9% for FY11.

• Defensiveness arises from F&B exposure. More than 90% of Daibochi’s revenue is derived from the food & beverage sector, both domestic and export. Revenue from this sector is stable, even in recessionary times. MNCs are the group’s main customers and Nestle is its largest customer.

• Quarterly price revisions help sustain margins. Daibochi and its MNC customers review the selling prices every quarter for changes in raw materials and forex fluctuations. This enables Daibochi to pass on raw material cost increases to its customers, allowing management to focus on its operations.

• Expand customer base. The company is looking to expand its customer base to the non-F&B sector including electronics, healthcare and cigarette packaging. Packaging for the electronics industry offers huge long-term growth potential. Daibochi launched its electrostatic discharge (ESD) product called Tribosafe at the Taiwan semiconductor exhibition last Sep. The product was co-developed with US-based Lubizrol. Initial feedback has been positive and Daibochi recently secured its first commercial sale to one of the world’s largest IC packing and testing companies. The order was small but could be a major breakthrough for Tribosafe.

Financial summary

Stock Information Market cap: RM186m/US$59m 12-m price range: RM3.85 RM2.05 3-m avg daily vol: 0.1m No. of shrs (m): 76 Est. free float (%): 50.0 Conv. secs (m): None Major shareholders (%): - Low Chan Tian 11.7 - Datuk Wong Soon Lim 6.5

FYE Dec 2008 2009 2010F 2011F 2012F Revenue (RM m) 217.2 221.8 245.8 282.8 311.1 EBITDA (RM m) 16.7 33.1 32.4 41.6 47.2 EBITDA margins (%) 7.7% 14.9% 13.2% 14.7% 15.2% Pretax profit (RM m) 9.0 27.1 24.2 33.2 38.7 Net profit (RM m) 8.1 22.7 18.4 25.3 29.3 EPS (sen) 10.7 29.9 24.3 33.3 38.6 EPS growth (%) (6.9%) 180.2% (18.8%) 37.1% 16.0% P/E (x) 23.0 8.2 10.1 7.4 6.3 Gross DPS (sen) 8.2 21.2 16.6 22.8 26.4 Dividend yield (%) 3.4% 8.7% 6.8% 9.3% 10.8% P/BV (x) 1.6 1.5 1.3 1.2 1.1 ROE (%) 7.1% 18.4% 13.9% 17.1% 18.2% Net gearing (%) 23.8% 11.8% 3.4% N/A N/A Net cash per share (RM) N/A N/A N/A 0.01 0.25 P/FCFE (x) 929.8 7.7 9.8 9.7 5.7 EV/EBITDA (x) 12.8 6.1 5.9 4.5 3.6 % change in EPS estimates - - - CIMB/Consensus (x) 0.87 0.98 1.04



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Volume 1m (R.H.S ca le ) Da ibochi P la s tic & Pa c ka g ing Bhd Source: Bloomberg

Daibochi Plastic is the country’s largest flexible packaging producer with an estimated 30% share of the domestic market. More than 90% of its customers are from the food and beverage sector. This sector is generally resilient even during poor economic conditions. 70% of the group’s revenue comes from MNCs and 40% of revenue comes from export markets. Daibochi’s plants are located on 14 acres of industrial land in Ayer Keroh, Melaka. Management and direction of the group is driven by its Managing Director Thomas Lim.



(RM m, FYE Dec) 2008 2009 2010F 2011F 2012F (FYE Dec) 2008 2009 2010F 2011F 2012F Revenue 217 222 246 283 311 Revenue growth (%) 7.3 2.1 10.8 15.1 10.0 Operating expenses (201) (189) (213) (241) (264) EBITDA growth (%) (4.6) 98.2 (2.1) 28.4 13.5 EBITDA 17 33 32 42 47 Pretax margins (%) 4.1 12.2 9.8 11.7 12.4 Depreciation & amortisation (8) (8) (8) (9) (9) Net profit margins (%) 3.7 10.2 7.5 8.9 9.4 EBIT 9 25 24 33 38 Interest cover (x) N/A N/A N/A N/A N/A Net interest & invt income 1 2 1 1 1 Effective tax rates (%) 7.8 14.8 23.0 23.0 23.0 Associates’ contribution (1) 0 0 0 0 Net dividend payout (%) 56.2 51.8 50.0 50.0 50.0 Exceptional items 0 0 0 0 0 Debtors turnover (days) 69.6 76.5 67.4 61.4 62.7 Others 0 0 0 0 0 Stock turnover (days) 69.1 60.7 56.6 56.3 56.1 Pretax profit 9 27 24 33 39 Creditors turnover (days) 56.3 57.1 53.1 51.2 52.3 Tax (1) (4) (6) (8) (9) Minority interests 0 0 0 0 (1) Net profit 8 23 18 25 29 Adj. wt. shares (m) 76 76 76 76 76 Unadj. year-end shares (m) 76 76 76 76 76 BALANCE SHEET KEY DRIVERS (RM m, end Dec) 2008 2009 2010F 2011F 2012F (FYE Dec) 2009 2010F 2011F 2012FFixed assets 55 54 56 53 50 Capacity (tonnes p.a.) 20,000 20,800 22,000 22,000 Intangible assets 0 0 0 0 0 Capacity utilisation (%) 65.0% 66.0% 66.0% 72.0% Other long-term assets 41 29 38 38 38 Total non-current assets 96 83 94 91 88 Cash and equivalents 10 6 35 41 59 Stocks 41 37 39 48 48 Trade debtors 41 47 44 51 56 Other current assets 4 15 15 15 15 Total current assets 97 104 134 155 178 Trade creditors 34 35 37 42 47 Short-term borrowings 32 17 35 35 35 Other current liabilities 0 1 1 1 1 Total current liabilities 66 53 72 78 83 Long-term borrowings 6 4 6 6 6 Other long-term liabilities 7 7 7 7 7 Total long-term liabilities 13 11 12 12 12 Shareholders’ funds 114 123 141 154 169 Minority interests 1 1 2 2 2 NTA/share (RM) 1.50 1.62 1.86 2.03 2.22 CASH FLOW 12M - FORWARD FD CORE P/E (X) (RM m, FYE Dec) 2008 2009 2010F 2011F 2012FPretax profit 9 27 24 33 39Depreciation & non–cash adj. 8 8 8 9 9Working capital changes 4 0 2 (10) 0Cash tax paid (1) (4) (6) (8) (9)Others (2) (5) (1) 0 0Cash flow from operations 17 27 28 25 39Capex (19) (5) (10) (6) (6)Net investments & sale of FA 0 0 0 0 0Others 0 0 0 0 (1)Cash flow from investing (19) (5) (10) (6) (7)Debt raised/(repaid) 2 0 0 0 0Equity raised/(repaid) 0 0 0 0 0Dividends paid (5) (11) (9) (13) (15)Cash interest & others 1 2 1 0 1Cash flow from financing (2) (9) (9) (12) (14)Change in cash (4) 13 10 6 18Change in net cash/(debt) (6) 13 10 6 18Ending net cash/(debt) (27) (15) (5) 1 19

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UNDERPERFORM Maintained Dialog Group Bhd RM1.60 @07/12/10 Tanking up in Pengerang Target: RM1.15

Oil & Gas - Equipment & Svs

MA

LAYS

IA

DLG MK / DIAL.KL Norziana Mohd Inon +60(3) 2084 9645 – [email protected]

• Maintain UNDERPERFORM. While we like certain aspects of Dialog, i.e. defensive income from the 30%-owned Kertih facility and prudent management, valuations are demanding, making Dialog the most expensive stock in our oil & gas portfolio. We maintain our forecasts but raise our target price from RM1.10 to RM1.15, pegged to our revised target market P/E of 14.5x (13.8x previously). Dialog remains an UNDERPERFORM, with the potential downside triggers being 1) a slowdown in engineering & construction (E&C) order book replenishment, and 2) delay in the Pengerang project. Our top oil & gas pick is SapuraCrest.

• New capacity in Tanjung Langsat. Terminal 1 of the Tanjung Langsat terminal (TLT) started its Phase 1 operations in Sep 09 with a capacity of 130,000m³. The 270,000m³ capacity in Phase 2 has been utilised since Apr 10. Dialog has started work on the RM80m construction of Terminal 1’s Phase 3 (capacity: 80,000m³) and RM180m construction of Terminal 2 (capacity: 180,000m³). The construction is expected to be completed by end-CY11. Dutch trader Trafigura is both a partner and a client, ensuring long-term commitment and consistent utilisation.

• Pengerang progress. In Jun 09, Dialog and the Johor state government signed an MOU to set up an independent deepwater petroleum terminal in Pengerang. In Oct 10, the state government awarded Dialog exclusive rights to develop the terminal for a 60-year period. We have yet to include its potential contribution in our forecasts. Using the Kertih facility as guidance, we estimate that pretax contribution from Pengerang may be no less than RM30m p.a. Dialog is now working on the environmental assessment, which is slated to finish by early CY11.

Financial summary

Stock Information Market cap: RM3,181m/US$1,014m 12-m price range: RM1.60 RM0.90 3-m avg daily vol: 6.4m No. of shrs (m): 1,988 Est. free float (%): 58.8 Conv. secs (m): None Major shareholders (%): - Ngau Boon Keat 26.8 - EPF 14.4

FYE Jun 2009 2010 2011F 2012F 2013F Revenue (RM m) 1,104.3 1,139.1 2,027.6 2,558.5 2,822.0 EBITDA (RM m) 105.5 130.7 148.3 170.1 185.0 EBITDA margins (%) 9.6% 11.5% 7.3% 6.7% 6.6% Pretax profit (RM m) 123.5 151.0 174.4 200.5 219.9 Net profit (RM m) 92.2 116.1 130.6 150.2 164.7 EPS (sen) 4.7 5.9 6.6 7.6 8.3 EPS growth (%) 17.6% 26.0% 12.5% 15.0% 9.7% P/E (x) 34.4 27.3 24.3 21.1 19.2 Gross DPS (sen) 3.6 3.1 4.0 4.0 4.0 Dividend yield (%) 2.3% 1.9% 2.5% 2.5% 2.5% P/BV (x) 6.5 5.2 4.6 3.9 3.4 ROE (%) 19.7% 21.1% 20.1% 20.0% 19.0% Net cash per share (RM) 0.09 0.11 0.14 0.18 0.21 P/FCFE (x) 51.4 36.3 30.1 26.4 22.6 EV/EBITDA (x) 26.2 20.7 17.8 15.0 13.3 % change in EPS estimates - - - CIMB/Consensus (x) 0.96 0.93 0.97



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Volume 10m (R.H.S ca le ) Dia log Group Bhd Source: Bloomberg

Dialog has business interest in the upstream and downstream segments of the oil & gas sector, locally and regionally. Its upstream activities include the provision of base oil, a crucial element in drilling mud. Dialog is the sole supplier of Shell Sarapar base oil in Malaysia and selected countries in the region including Thailand, Vietnam and India. In the downstream segment, the group performs plant maintenance services, runs four petrol stations and has a string of E&C projects. Above all, Dialog enjoys relatively comfortable contributions from the Kertih facility, which is now in the 11th

year of a 20-year concession, and early contributions from TLT, which is on a 30-year concession.



(RM m, FYE Jun) 2009 2010 2011F 2012F 2013F (FYE Jun) 2009 2010 2011F 2012F 2013F Revenue 1,104 1,139 2,028 2,559 2,822 Revenue growth (%) 38.5 3.2 78.0 26.2 10.3 Operating expenses (999) (1,008) (1,879) (2,388) (2,637) EBITDA growth (%) 40.5 23.9 13.5 14.7 8.8 EBITDA 106 131 148 170 185 Pretax margins (%) 11.2 13.3 8.6 7.8 7.8 Depreciation & amortisation (16) (18) (8) (8) (8) Net profit margins (%) 8.3 10.2 6.4 5.9 5.8 EBIT 89 113 140 162 177 Interest cover (x) 83.6 51.7 1,872.6 1,296.9 1,010.6 Net interest & invt income 7 4 11 15 20 Effective tax rates (%) 17.9 18.9 25.0 25.0 25.0 Associates’ contribution 28 34 23 23 23 Net dividend payout (%) 57.2 39.1 44.9 39.0 35.6 Exceptional items 0 0 0 0 0 Debtors turnover (days) 47.1 73.0 58.3 57.1 60.7 Others 0 0 0 0 0 Stock turnover (days) 9.1 13.1 10.2 10.0 10.6 Pretax profit 123 151 174 201 220 Creditors turnover (days) 49.3 76.1 60.7 59.4 63.1 Tax (22) (29) (44) (50) (55) Minority interests (9) (6) 0 0 0 Net profit 92 116 131 150 165 Adj. wt. shares (m) 1,980 1,980 1,980 1,980 1,980 Unadj. year-end shares (m) 1,980 1,980 1,980 1,980 1,980 BALANCE SHEET KEY DRIVERS (RM m, end Jun) 2009 2010 2011F 2012F 2013F (FYE Jun) 2010 2011F 2012F 2013FFixed assets 275 294 313 332 352 Overseas rev contribution (%) 35.0% 35.0% 35.0% 35.0% Intangible assets 2 2 2 2 2 Downstream contribution to rev (%) 43.0% 43.0% 43.0% 43.0% Other long-term assets 479 536 593 610 628 Upstream contribution to rev (%) 57.0% 57.0% 57.0% 57.0% Total non-current assets 756 832 908 945 982 Construction margins (%) 9.0% 9.0% 9.0% 9.0% Cash and equivalents 174 217 278 354 422 Stocks 30 52 62 78 86 Trade debtors 162 294 354 447 491 Other current assets 5 5 5 6 7 Total current assets 371 568 699 885 1,005 Trade creditors 169 306 368 465 511 Short-term borrowings 0 1 1 2 2 Other current liabilities 467 478 541 543 547 Total current liabilities 636 784 910 1,009 1,060 Long-term borrowings 1 1 2 2 3 Other long-term liabilities 0 0 0 0 0 Total long-term liabilities 1 1 2 2 3 Shareholders’ funds 488 610 688 814 921 Minority interests 3 3 4 4 4 NTA/share (RM) 0.25 0.31 0.35 0.41 0.46 CASH FLOW 12M - FORWARD FD CORE P/E (X) (RM m, FYE Jun) 2009 2010 2011F 2012F 2013FPretax profit 123 151 174 201 220Depreciation & non–cash adj. 16 18 8 8 8Working capital changes (4) (16) (8) (13) (6)Cash tax paid (7) (10) (10) (12) (13)Others (41) (32) (33) (36) (44)Cash flow from operations 87 111 131 148 164Capex (10) (10) (10) (10) (10)Net investments & sale of FA 0 0 1 2 3Others 3 3 3 4 5Cash flow from investing (7) (7) (6) (4) (2)Debt raised/(repaid) 0 1 1 1 1Equity raised/(repaid) 0 0 0 0 0Dividends paid (44) (44) (44) (44) (73)Cash interest & others (19) (18) (21) (25) (23)Cash flow from financing (63) (61) (64) (68) (95)Change in cash 17 43 61 76 68Change in net cash/(debt) 17 42 60 75 67Ending net cash/(debt) 174 216 276 350 417

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NEUTRAL Maintained DiGi.com Bhd RM24.80 @07/12/10 Squeezing out more cost efficiencies Target: RM27.00


MA

LAYS

IA

DIGI MK / DSOM.KL Kelvin Goh CFA +60(3) 2084 9699 – [email protected]

• Reiterate NEUTRAL. Despite its modest earnings growth, we remain NEUTRAL on DiGi as its price upside may be dampened by lower future dividend payouts and high valuations. Earnings will be driven by data revenues and more cost efficiencies. We expect DiGi’s dividend payout ratio to decline from >120% in the last 5 years to 100% in FY11 as its gearing should reach its targeted level. We are not overly concerned about YTL Communications’ entry given its lack of variety in handheld devices. Our DCF-based target price is RM27.00 (WACC 11.6%).

• Data key to future growth. DiGi plans to develop its small and large screen data revenue, aided by the expansion of its 3G network from about 45% in end-2010 to 65% in 2011. With only 5% of its users on smartphones and 20% on 3G handsets, there is plenty of room for growth.

• Network sharing with Celcom. DiGi aims to improve operating efficiency through its MOU with Celcom to share infrastructure in 1) operations and maintenance, 2) transmission and site sharing, and 3) radio access network. We estimate that this could bolster EBITDA margin by 2-3% pts in the coming years.

• Key concerns. Our main concern with DiGi is the rising competition in the large screen data segment from WiMAX operators, Packet One and YTL Communications. We are less concerned about competition in small screen data given the lack of WiMAX handheld devices.

Financial summary

Stock Information Market cap: RM19,282m/US$6,147m 12-m price range: RM25.60 RM21.00 3-m avg daily vol: 0.3m No. of shrs (m): 778 Est. free float (%): 47.5 Conv. secs (m): None Major shareholders (%): - Telenor 49.0 - EPF 16.0 - Time dotCom 3.5

FYE Dec 2008 2009 2010F 2011F 2012F Revenue (RM m) 4,814.5 4,909.6 5,338.3 5,737.7 6,063.5 EBITDA (RM m) 2,158.7 2,115.1 2,348.9 2,581.9 2,789.2 EBITDA margins (%) 44.8% 43.1% 44.0% 45.0% 46.0% Pretax profit (RM m) 1,546.9 1,366.5 1,545.2 1,732.2 1,934.2 Net profit (RM m) 1,140.7 1,000.5 1,158.9 1,299.2 1,450.7 EPS (sen) 146.7 128.7 149.1 167.1 186.6 EPS growth (%) 3.6% (12.3%) 15.8% 12.1% 11.7% P/E (x) 16.9 19.3 16.6 14.8 13.3 Core EPS (sen) 146.7 128.7 149.1 167.1 186.6 Core EPS growth (%) 3.6% (12.3%) 15.8% 12.1% 11.7% Core P/E (x) 16.9 19.3 16.6 14.8 13.3 Gross DPS (sen) 184.7 178.0 198.2 167.1 205.2 Dividend yield (%) 7.4% 7.2% 8.0% 6.7% 8.3% P/BV (x) 10.2 12.7 16.9 16.9 19.4 ROE (%) 65.7% 58.5% 87.1% 114.1% 136.0% Net gearing (%) 3.0% 31.6% 60.9% 57.8% 43.1% P/FCFE (x) 15.3 13.1 10.5 13.0 11.7 EV/EBITDA (x) 9.0 9.3 8.5 7.7 7.1 % change in EPS estimates - - - CIMB/Consensus (x) 1.03 1.09 1.15



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Volume 1m (R.H.S ca le ) DiGi.com Bhd Source: Bloomberg

DiGi is the smallest cellco in Malaysia but one of the most innovative in terms of products and services. After capturing among the highest net adds in 2007, DiGi’s momentum slowed down as it focused on migrating its prepaid customers to postpaid. As a result, its subscriber market share slipped from 28% at its peak in mid-07 to 26% currently while its share of industry revenue remained unchanged yoy at 26%. At end-07, DiGi acquired 3G spectrum by issuing 27.5m or 3.7% new DiGi shares to Time dotCom. Telenor pared its stake in Digi to 49% to comply with the regulatory limit. Digi was established in 1995 as Mutiara Telecom.



(RM m, FYE Dec) 2008 2009 2010F 2011F 2012F (FYE Dec) 2008 2009 2010F 2011F 2012F Revenue 4,814 4,910 5,338 5,738 6,064 Revenue growth (%) 10.4 2.0 8.7 7.5 5.7 Operating expenses (2,656) (2,794) (2,989) (3,156) (3,274) EBITDA growth (%) 2.3 (2.0) 11.1 9.9 8.0 EBITDA 2,159 2,115 2,349 2,582 2,789 Pretax margins (%) 32.1 27.8 28.9 30.2 31.9 Depreciation & amortisation (636) (731) (782) (809) (818) Net profit margins (%) 23.7 20.4 21.7 22.6 23.9 EBIT 1,523 1,384 1,567 1,773 1,971 Interest cover (x) 123.2 34.1 30.8 23.3 25.9 Net interest & invt income 24 (18) (22) (41) (37) Effective tax rates (%) 26.3 26.8 25.0 25.0 25.0 Associates’ contribution 0 0 0 0 0 Net dividend payout (%) 125.9 138.3 133.0 100.0 110.0 Exceptional items 0 0 0 0 0 Debtors turnover (days) 29.3 31.3 30.0 30.2 30.4 Others 0 0 0 0 0 Stock turnover (days) 1.0 1.1 1.1 1.2 1.3 Pretax profit 1,547 1,366 1,545 1,732 1,934 Creditors turnover (days) 12.7 13.8 13.5 13.3 13.2 Tax (406) (366) (386) (433) (484) Minority interests 0 0 0 0 0 Net profit 1,141 1,000 1,159 1,299 1,451 Adj. wt. shares (m) 778 778 778 778 778 Unadj. year-end shares (m) 778 778 778 778 778 BALANCE SHEET KEY DRIVERS (RM m, end Dec) 2008 2009 2010F 2011F 2012F (FYE Dec) 2009 2010F 2011F 2012FFixed assets 2,870 2,896 2,834 2,745 2,647 No of mobile subscribers (m) 7.72 8.56 9.28 9.88 Intangible assets 994 950 881 811 742 No of postpaid mobile subs (m) 1.24 1.36 1.47 1.56 Other long-term assets 12 12 12 12 12 No of prepaid mobile subs (m) 6.49 7.20 7.81 8.32 Total non-current assets 3,876 3,858 3,727 3,569 3,401 Postpaid ARPU (local currency) 83.8 82.5 81.7 80.9 Cash and equivalents 342 441 828 864 1,094 Prepaid ARPU (local currency) 49.0 47.5 46.6 45.6 Stocks 17 13 19 20 21 Blended mobile ARPU (RM) 54.5 53.7 52.1 51.2 Trade debtors 421 420 457 491 519 Other current assets 0 0 0 0 0 Total current assets 779 874 1,304 1,375 1,634 Trade creditors 180 191 204 215 223 Short-term borrowings 298 150 150 150 150 Other current liabilities 1,789 1,685 1,780 1,634 1,812 Total current liabilities 2,267 2,026 2,134 2,000 2,186 Long-term borrowings 100 772 1,372 1,372 1,372 Other long-term liabilities 392 413 386 433 484 Total long-term liabilities 492 1,185 1,758 1,805 1,856 Shareholders’ funds 1,897 1,521 1,139 1,139 994 Minority interests 0 0 0 0 0 NTA/share (RM) 1.16 0.73 0.33 0.42 0.32 CASH FLOW 12M - FORWARD FD CORE P/E (X) (RM m, FYE Dec) 2008 2009 2010F 2011F 2012FPretax profit 1,547 1,366 1,545 1,732 1,934Depreciation & non–cash adj. 636 731 782 809 818Working capital changes (51) 15 (29) (24) (21)Cash tax paid (374) (392) (413) (386) (433)Others 260 (48) 91 110 106Cash flow from operations 2,018 1,673 1,976 2,241 2,405Capex (888) (717) (720) (720) (720)Net investments & sale of FA 10 0 0 0 0Others 0 14 0 0 0Cash flow from investing (878) (704) (720) (720) (720)Debt raised/(repaid) 98 524 600 0 0Equity raised/(repaid) 3 0 0 0 0Dividends paid (1,501) (1,376) (1,447) (1,444) (1,418)Cash interest & others 24 (18) (22) (41) (37)Cash flow from financing (1,376) (870) (869) (1,485) (1,455)Change in cash (236) 99 387 36 230Change in net cash/(debt) (333) (425) (213) 36 230Ending net cash/(debt) (56) (481) (694) (658) (428)

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OUTPERFORM Maintained Eastern & Oriental Bhd RM1.14 @07/12/10 Takeover candiate? Target: RM1.63

Property Devt & Invt

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LAYS

IA

EAST MK / ENOB.KL Terence Wong CFA +60(3) 20849689 – [email protected]

• Maintain OVERWEIGHT. E&O provides investors with exposure to the upmarket condo market in Kuala Lumpur and Penang island. It is a key beneficiary of any boom in the Malaysian property market due to its prime landbank in those two areas. The company also fits the profile of candidates for takeover due to its fragmented shareholding and high free float. We reiterate our OUTPERFORM recommendation in view of its compelling valuations. Applying an unchanged 40% discount to its FD RNAV of RM2.72, we get an unchanged target price of RM1.63. Factors that could catalyse the stock include 1) a sales pickup for the Penang condo project, and 2) successful launch of new projects in Kuala Lumpur and 3) rising M&A interest in property stocks.

• Takeover candidate? The recent spate of mergers including that of Sunrise (SUN MK; Not Rated) and UEM Land (ULHB MK; Not Rated) begs the question of which company is next in line. We view E&O as a potential candidate as it has a premium brand name, prime landbank in strategic locations and strong expertise in marketing and project management. It also has expertise in condo and township development. Moreover, the stock is trading at a huge discount to RNAV.

Financial summary

Stock Information Market cap: RM940m/US$300m 12-m price range: RM1.25 RM0.86 3-m avg daily vol: 3.6m No. of shrs (m): 825 Est. free float (%): 67.1 Conv. secs (m): 326.1 Major shareholders (%): - Dato' Terry Tham Ka Hon 16.8 - G.K. Goh Holdings Limited 16.1 - Halfmoon Bay Capital 10.4

FYE Mar 2009 2010 2011F 2012F 2013F Revenue (RM m) 302.6 352.4 395.0 526.1 656.8 EBITDA (RM m) 27.2 72.2 73.1 98.3 134.4 EBITDA margins (%) 9.0% 20.5% 18.5% 18.7% 20.5% Pretax profit (RM m) (38.1) 93.7 68.8 101.9 117.0 Net profit (RM m) (37.7) 70.9 45.0 70.2 80.6 EPS (sen) (6.4) 9.3 5.7 8.8 10.1 EPS growth (%) (124.7%) 246.2% (39.3%) 56.0% 14.8% P/E (x) nm 12.2 20.2 12.9 11.3 Core EPS (sen) (1.0) 6.4 5.7 8.8 10.1 Core EPS growth (%) (143.9%) 730.2% (11.1%) 56.0% 14.8% Core P/E (x) nm 17.9 20.2 12.9 11.3 FD core EPS (sen) 1.0 6.4 5.7 8.0 8.9 FD core P/E (x) 118.9 17.9 20.0 14.3 12.8 Gross DPS (sen) 0.0 3.8 3.8 4.0 5.0 Dividend yield (%) 0.0% 3.3% 3.3% 3.5% 4.4% P/BV (x) 0.8 0.8 0.9 0.8 0.8 ROE (%) (4.9%) 7.6% 4.3% 6.5% 7.1% Net gearing (%) 80.5% 36.2% 50.1% 59.8% 58.0% P/FCFE (x) (2.7) 5.1 (25.1) (19.3) (136.6) EV/EBITDA (x) 50.2 17.8 20.4 16.6 12.3 % change in EPS estimates N/A N/A N/A CIMB/Consensus (x) 0.99 1.00 0.87



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Volume 10m (R.H.S ca le ) Ea s te rn & Orie nta l Bhd Source: Bloomberg

E&O is a product of numerous restructuring exercises including divestments and mergers. The now streamlined group has three core businesses, i.e. property development, hospitality & lifestyle and property investment. E&O has over 1,400acres of landbank in Kuala Lumpur and Penang Island. This includes 740 acres of land to be reclaimed under Phase 2 of the Seri Tanjung Pinang project in Penang. The group owns the heritage Eastern & Oriental Hotel and Lone Pine Hotel in Penang. E&O also has numerous small parcels of very prime landbank in the centre of Kuala Lumpur.



(RM m, FYE Mar) 2009 2010 2011F 2012F 2013F (FYE Mar) 2009 2010 2011F 2012F 2013F Revenue 303 352 395 526 657 Revenue growth (%) (41.4) 16.5 12.1 33.2 24.8 Operating expenses (275) (280) (322) (428) (522) EBITDA growth (%) (74.1) 165.0 1.3 34.4 36.7 EBITDA 27 72 73 98 134 Pretax margins (%) (12.6) 26.6 17.4 19.4 17.8 Depreciation & amortisation (12) (16) (19) (20) (20) Net profit margins (%) (12.5) 20.1 11.4 13.3 12.3 EBIT 15 56 54 79 115 Interest cover (x) 0.5 2.4 1.8 2.3 3.2 Net interest & invt income (19) 2 (17) (21) (23) Effective tax rates (%) N/A 19.9 27.0 25.0 25.0 Associates’ contribution (3) 8 32 44 26 Net dividend payout (%) N/A 30.6 50.4 34.0 37.0 Exceptional items (32) 28 0 0 0 Debtors turnover (days) 169.2 92.2 71.7 66.4 68.3 Others 0 0 0 0 0 Stock turnover (days) 74.0 78.0 48.5 32.8 23.6 Pretax profit (38) 94 69 102 117 Creditors turnover (days) 85.6 48.5 18.6 17.2 17.7 Tax 6 (19) (19) (25) (29) Minority interests (5) (4) (5) (6) (7) Net profit (38) 71 45 70 81 Adj. wt. shares (m) 592 762 796 796 796 Unadj. year-end shares (m) 592 762 796 796 796 BALANCE SHEET KEY DRIVERS (RM m, end Mar) 2009 2010 2011F 2012F 2013F (FYE Mar) 2010 2011F 2012F 2013FFixed assets 341 395 380 366 351 Undeveloped landbank (acres) 1,463 1,443 1,423 1,403 Intangible assets 0 0 0 0 0 Company's targeted sales (RMm) 1,000 585 700 850 Other long-term assets 758 755 922 1,091 1,128 Margin - Property development (%) 40.0% 23.7% 22.4% 23.5% Total non-current assets 1,099 1,150 1,302 1,456 1,479 Gross Margin (%) 20.5% 18.5% 18.7% 20.5% Cash and equivalents 246 559 531 504 494 Stocks 95 55 50 45 40 Trade debtors 105 73 82 109 136 Other current assets 426 342 376 415 458 Total current assets 872 1,029 1,039 1,074 1,129 Trade creditors 75 19 21 28 35 Short-term borrowings 395 382 401 421 442 Other current liabilities 95 98 98 100 101 Total current liabilities 565 499 520 549 578 Long-term borrowings 524 564 679 769 750 Other long-term liabilities 47 47 47 64 73 Total long-term liabilities 571 611 726 833 824 Shareholders’ funds 814 1,042 1,064 1,110 1,161 Minority interests 22 26 32 38 45 NTA/share (RM) 1.37 1.37 1.34 1.39 1.46 CASH FLOW CURRENT P/BV(X) (RM m, FYE Mar) 2009 2010 2011F 2012F 2013FPretax profit (38) 94 69 102 117Depreciation & non–cash adj. 12 16 19 20 20Working capital changes (111) 100 (35) (54) (59)Cash tax paid (23) (16) (19) (6) (19)Others 22 (10) (15) (23) (2)Cash flow from operations (138) 184 19 38 57Capex (104) (70) (5) (5) (5)Net investments & sale of FA 216 3 (167) (169) (38)Others (265) 22 0 0 0Cash flow from investing (153) (45) (172) (174) (43)Debt raised/(repaid) 57 28 134 110 2Equity raised/(repaid) 387 157 0 0 0Dividends paid 0 (22) (23) (24) (30)Cash interest & others (361) 11 15 23 2Cash flow from financing 83 174 126 110 (25)Change in cash (208) 313 (27) (27) (11)Change in net cash/(debt) (265) 285 (161) (137) (13)Ending net cash/(debt) (672) (387) (548) (685) (698)

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OUTPERFORM Maintained Eksons Corporation Bhd RM1.00 @07/12/10 Property is a new plank for earnings Target: RM1.26

Timber

MA

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IA

EKSON MK / EKSN.KL Nigel Foo +60(3) 2084 9293 – [email protected]

• Reiterate OUTPERFORM. Eksons remains an OUTPERFORM. We retain our valuation basis of 0.6x P/NTA, which is its 3-year average. This gives us an unchanged target price of RM1.26. Potential share price triggers are i) higher sales for its property project, ii) a further pickup in plywood prices and iii) its attractive valuations of 0.5x P/BV and 4x CY11 P/E.

• Middle East is main market for timber. Demand for the group’s thin plywood remains strong in its main export markets, the Middle East and Africa. The US used to be its main export market but is unlikely to see a recovery anytime soon as its housing market is still in the doldrums. Eksons does not supply plywood to Japan.

• Prices picking up. Average plywood price has risen from US$425-430/m3 last year to around US$450/m3 currently. With industry supply remaining tight and demand showing signs of picking up in 2011, we believe that the average plywood price should stabilise around US$450-460/m3 over the next few quarters.

• Property to start contributing this year. The property division should provide some earnings stability amid volatile timber earnings. In mid-09, Eksons launched its maiden property project, “The Atmosphere”, an RM850m commercial project in Seri Kembangan, Selangor. The project has secured close to RM230m bookings since its launch in Aug 09 and the average take-up rate is 90%.Assuming 25% net profit margin from current sales, property could contribute around RM55m-60m net profit over the next three years. We are projecting RM11m-12m EBIT contribution from the division for FY11 and around RM20m for FY12.

• Strong balance sheet. Eksons’s balance sheet is strong with RM21m net cash (RM0.13/share), which is equivalent to 13% of its share price. This gives the company the capacity to acquire assets, particularly property landbank.

Financial summary

Stock Information Market cap: RM163m/US$52m 12-m price range: RM1.13 RM0.78 3-m avg daily vol: 0.1m No. of shrs (m): 164 Est. free float (%): 30.0 Conv. secs (m): None Major shareholders (%): - Tay Hua Sin 46.9 - Faizal bin Abdul Aziz 12.3 - EPF 1.8

FYE Mar 2009 2010 2011F 2012F 2013F Revenue (RM m) 291.1 279.1 348.7 367.8 382.3 EBITDA (RM m) 33.3 27.0 53.6 61.8 76.4 EBITDA margins (%) 11.4% 9.7% 15.4% 16.8% 20.0% Pretax profit (RM m) 20.7 13.9 39.6 47.3 61.4 Net profit (RM m) 26.0 17.4 34.9 42.1 54.2 EPS (sen) 15.8 10.6 21.3 25.6 33.0 EPS growth (%) (38.1%) (33.1%) 100.7% 20.5% 28.8% P/E (x) 6.3 9.4 4.7 3.9 3.0 Gross DPS (sen) 2.7 4.1 5.9 7.1 9.2 Dividend yield (%) 2.7% 4.2% 5.9% 7.1% 9.2% P/BV (x) 0.5 0.5 0.4 0.4 0.4 ROE (%) 8.6% 5.3% 9.8% 10.9% 12.7% Net cash per share (RM) 0.32 0.09 0.31 0.57 0.89 P/FCFE (x) 14.1 (5.9) 6.3 3.3 2.5 EV/EBITDA (x) 3.9 6.3 2.5 1.5 0.5 % change in EPS estimates - - - CIMB/Consensus (x) 1.01 0.99 1.00



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Volume 1m (R.H.S ca le ) Eks ons Corpora tion Bhd Source: Bloomberg

Eksons is one of the region's major producers of thin plywood, focusing on plywood of 2.5mm and 2.7mm thickness. Thin plywood is mainly used in interior design and furniture. The company has two plants in East Malaysia, Tawau and Sibu, with a combined annual capacity of 285,000 cu metres. Products are sold under the “Panda” brand. Its largest export markets are currently the Middle East, Asia and Africa. Its maiden property project, a commercial development in Seri Kembangan, named “The Atmosphere” will start contributing to Eksons’s bottomline in FY11.



(RM m, FYE Mar) 2009 2010 2011F 2012F 2013F (FYE Mar) 2009 2010 2011F 2012F 2013F Revenue 291 279 349 368 382 Revenue growth (%) (19.6) (4.1) 25.0 5.5 4.0 Operating expenses (258) (252) (295) (306) (306) EBITDA growth (%) (34.6) (18.9) 98.5 15.3 23.6 EBITDA 33 27 54 62 76 Pretax margins (%) 7.1 5.0 11.4 12.9 16.1 Depreciation & amortisation (13) (13) (14) (15) (15) Net profit margins (%) 8.9 6.2 10.0 11.4 14.2 EBIT 20 14 40 47 61 Interest cover (x) N/A N/A N/A N/A N/A Net interest & invt income 0 0 0 0 0 Effective tax rates (%) N/A N/A 11.5 10.8 11.5 Associates’ contribution 0 0 0 0 0 Net dividend payout (%) 12.3 28.2 20.0 20.0 20.0 Exceptional items 0 0 0 0 0 Debtors turnover (days) 31.1 35.3 36.1 33.7 32.5 Others 0 0 0 0 0 Stock turnover (days) 81.8 102.2 88.6 80.9 74.0 Pretax profit 21 14 40 47 61 Creditors turnover (days) 23.7 31.1 32.8 31.8 30.6 Tax 5 5 (5) (5) (7) Minority interests 0 (1) 0 0 0 Net profit 26 17 35 42 54 Adj. wt. shares (m) 164 164 164 164 164 Unadj. year-end shares (m) 164 164 164 164 164 BALANCE SHEET KEY DRIVERS (RM m, end Mar) 2009 2010 2011F 2012F 2013F (FYE Mar) 2010 2011F 2012F 2013FFixed assets 202 178 174 170 165 Average plywood price (US$/cu m) 425 450 450 450 Intangible assets 15 27 27 27 27 Annual prodn capacity (cu m) 285,000 285,000 285,000 285,000 Other long-term assets 0 9 9 9 9 Production (cu m p.a.) 185,250 203,000 228,000 228,000 Total non-current assets 217 214 210 206 201 Average log price (US$/cu m) 145 165 165 165 Cash and equivalents 67 54 73 114 168 Stocks 70 86 83 80 75 Trade debtors 19 35 34 34 34 Other current assets 85 51 51 51 51 Total current assets 242 226 241 279 328 Trade creditors 17 31 32 32 32 Short-term borrowings 15 40 21 21 21 Other current liabilities 5 4 4 4 4 Total current liabilities 37 75 57 57 57 Long-term borrowings 0 0 0 0 0 Other long-term liabilities 84 3 3 3 3 Total long-term liabilities 84 3 3 3 3 Shareholders’ funds 318 343 371 404 448 Minority interests 19 20 20 20 20 NTA/share (RM) 1.84 1.93 2.10 2.30 2.56 CASH FLOW 12M - FORWARD FD CORE P/E (X) (RM m, FYE Mar) 2009 2010 2011F 2012F 2013FPretax profit 21 14 40 47 61Depreciation & non–cash adj. 13 13 14 15 15Working capital changes (1) (4) 6 3 5Cash tax paid 5 0 (5) (5) (7)Others 0 11 0 0 0Cash flow from operations 38 35 55 60 74Capex (24) (70) (10) (10) (10)Net investments & sale of FA 0 0 0 0 0Others (3) 0 0 0 0Cash flow from investing (26) (70) (10) (10) (10)Debt raised/(repaid) 0 8 (19) 0 0Equity raised/(repaid) 13 0 0 0 0Dividends paid (4) (5) (7) (8) (11)Cash interest & others 0 2 0 0 0Cash flow from financing 9 4 (26) (8) (11)Change in cash 20 (31) 19 41 53Change in net cash/(debt) 20 (39) 38 41 53Ending net cash/(debt) 53 14 52 93 146

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UNDERPERFORM Maintained Fraser & Neave Holdings Bhd RM16.26 @07/12/10 Growth is fizzling out Target: RM11.05

Food & Beverages

MA

LAYS

IA

FNH MK / FRAS.KL Norziana Mohd Inon +60(3) 2084 9645 – [email protected]

• Maintain UNDERPERFORM. We maintain our EPS forecasts and DCF-based target price of RM11.05 (WACC of 7.3%). F&N remains an UNDERPERFORM, with the potential downside triggers being 1) margin pressure from price discounting, and 2) core EPS contraction in FY11 and marginal growth in FY9/12-13. Our top F&B pick is CI Holdings.

• Tricky Thai market. In preparation for the expiry of the agreement with The Coca-Cola Company (TCCC) in Sep 11, F&N will launch more soft drink products/variants and strengthen its distribution. The company is also exploring the possibility of exporting its soft drinks to Brunei and Thailand. Thailand is a familiar market for F&N given the dairy business. However, soft drinks are price-controlled items in Thailand, making price adjustments difficult and potentially putting pressure on margins.

• New plant in Pulau Indah. The Rojana plant serves as a blueprint for F&N’s new 37.4-acre, RM350m plant at the Pulau Indah halal hub. Currently, dairy production in Malaysia is carried out at the Petaling Jaya facility which is facing capacity constraints after 30 years of operations. The Pulau Indah plant is expected to beready next year. In Malaysia, F&N has over 60% market share for sweetened condensed milk and about 80% market share for evaporated milk.

• Red Bull charges ahead. In Feb 10, F&N signed a 5-year agreement giving it exclusive distribution rights for Red Bull energy drinks in Malaysia. The beverages were launched in Apr and have shown encouraging growth. FY11 will see the first full-year contribution by Red Bull.

Financial summary

Stock Information Market cap: RM5,832m/US$1,859m 12-m price range: RM16.26 RM10.34 3-m avg daily vol: 0.1m No. of shrs (m): 359 Est. free float (%): 21.3 Conv. secs (m): None Major shareholders (%): - Fraser and Neave Ltd 57.2 - Skim ASB 21.5 - EPF 5.2

FYE Sep 2009 2010 2011F 2012F 2013F Revenue (RM m) 3,737.1 3,637.7 4,929.9 5,040.8 5,093.9 EBITDA (RM m) 453.0 519.4 454.7 465.2 481.2 EBITDA margins (%) 12.1% 14.3% 9.2% 9.2% 9.4% Pretax profit (RM m) 299.8 776.1 362.7 373.0 384.4 Net profit (RM m) 224.4 695.3 267.2 274.8 283.2 EPS (sen) 63.0 195.1 74.9 77.1 79.4 EPS growth (%) 34.5% 209.8% (61.6%) 2.8% 3.1% P/E (x) 25.8 8.3 21.7 21.1 20.5 Gross DPS (sen) 53.4 182.7 53.4 53.4 53.4 Dividend yield (%) 3.3% 11.2% 3.3% 3.3% 3.3% P/BV (x) 5.8 4.4 5.1 5.1 5.1 ROE (%) 21.9% 60.0% 21.8% 24.2% 24.8% Net cash per share (RM) 0.18 1.13 0.96 1.23 1.51 P/FCFE (x) 38.7 9.3 21.6 25.4 24.8 EV/EBITDA (x) 13.0 10.7 12.4 11.9 11.3 % change in EPS estimates - - - CIMB/Consensus (x) 0.93 0.94 0.99



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Volume 1m (R.H.S ca le ) Fra s e r & Ne a ve Holdings Bhd Source: Bloomberg

F&N’s core divisions are soft drinks, dairy and property. Coca-Cola has been the F&N’s flagship product for decades but the non-renewal of agreements with TCCC has prompted the company to accelerate the rollout of other products, especially isotonic and Asian drinks, which have gained traction. Meanwhile, the dairy division continues to enjoy the lion’s share of the local sweetened condensed milk marketafter the RM310m acquisition of Nestle’s business in Feb 07. The Fraser Business Park Phase 2 property development is nearing completion. In FY10, F&N disposed of its glass business.



(RM m, FYE Sep) 2009 2010 2011F 2012F 2013F (FYE Sep) 2009 2010 2011F 2012F 2013F Revenue 3,737 3,638 4,930 5,041 5,094 Revenue growth (%) 4.1 (2.7) 35.5 2.2 1.1 Operating expenses (3,284) (3,118) (4,475) (4,576) (4,613) EBITDA growth (%) 22.3 14.6 (12.5) 2.3 3.4 EBITDA 453 519 455 465 481 Pretax margins (%) 8.0 21.3 7.4 7.4 7.5 Depreciation & amortisation (139) (145) (89) (93) (98) Net profit margins (%) 6.0 19.1 5.4 5.5 5.6 EBIT 314 374 365 372 383 Interest cover (x) 17.8 52.2 32.6 35.2 38.3 Net interest & invt income (14) 0 (3) 1 1 Effective tax rates (%) 19.0 10.6 23.0 23.0 23.0 Associates’ contribution 0 0 0 0 0 Net dividend payout (%) 61.1 67.4 51.3 49.9 48.4 Exceptional items 0 402 0 0 0 Debtors turnover (days) 73.3 87.9 69.1 67.5 68.0 Others 0 0 0 0 0 Stock turnover (days) 52.6 63.1 49.6 48.5 48.8 Pretax profit 300 776 363 373 384 Creditors turnover (days) 65.2 78.3 61.6 60.1 60.5 Tax (57) (82) (83) (86) (88) Minority interests (18) 1 (12) (12) (13) Net profit 224 695 267 275 283 Adj. wt. shares (m) 356 356 356 356 356 Unadj. year-end shares (m) 356 356 356 356 356 BALANCE SHEET KEY DRIVERS (RM m, end Sep) 2009 2010 2011F 2012F 2013F (FYE Sep) 2010 2011F 2012F 2013FFixed assets 532 388 299 207 110 Manufacturing overhead growth (%) 6.0% 6.0% 6.0% 6.0% Intangible assets 0 0 0 0 0 Capacity utilisation (%) 95.0% 95.0% 95.0% 95.0% Other long-term assets 3 3 3 3 3 Raw material price growth (%) 12.0% 12.0% 12.0% 12.0% Total non-current assets 534 390 302 210 113 SKU 422 423 424 425 Cash and equivalents 243 572 503 590 682 Stocks 578 680 661 678 685 Trade debtors 806 947 921 944 955 Other current assets 0 0 0 0 0 Total current assets 1,627 2,199 2,085 2,211 2,322 Trade creditors 717 843 820 840 850 Short-term borrowings 21 19 17 15 14 Other current liabilities 15 15 15 15 15 Total current liabilities 753 877 852 870 879 Long-term borrowings 159 151 143 136 129 Other long-term liabilities 86 86 86 87 87 Total long-term liabilities 245 237 230 224 216 Shareholders’ funds 1,005 1,313 1,132 1,142 1,141 Minority interests 159 162 174 186 199 NTA/share (RM) 2.82 3.68 3.18 3.20 3.20 CASH FLOW 12M - FORWARD FD CORE P/E (X) (RM m, FYE Sep) 2009 2010 2011F 2012F 2013FPretax profit 300 776 363 373 384Depreciation & non–cash adj. 139 145 89 93 98Working capital changes (92) (117) 22 (19) (9)Cash tax paid (60) (72) (85) (83) (86)Others (42) (107) 0 2 2Cash flow from operations 245 625 389 366 390Capex (84) (97) (112) (128) (148)Net investments & sale of FA 0 103 0 0 0Others 0 0 0 0 0Cash flow from investing (84) 6 (112) (128) (148)Debt raised/(repaid) (11) (10) (9) (9) (8)Equity raised/(repaid) 0 0 0 0 0Dividends paid (141) (294) (337) (143) (143)Cash interest & others 1 1 1 1 1Cash flow from financing (151) (303) (346) (151) (150)Change in cash 10 328 (68) 87 92Change in net cash/(debt) 21 339 (59) 96 100Ending net cash/(debt) 63 402 343 439 539

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OUTPERFORM Maintained Gamuda Bhd RM3.76 @07/12/10 Riding on the MRT Target: RM5.00

Construction

MA

LAYS

IA

GAM MK / GAMU.KL Sharizan Rosely +60 (3) 2084 9864 – [email protected]

• Maintain OUTPERFORM. We are encouraged by the progress of the proposed KL MRT, which is slated to start work in Jul 2011. This suggests that project approval, tender process and project awards are likely to come through within the next six months. A major milestone would be Cabinet approval which should occur by end-2010. This is positive for Gamuda as it has a good chance of bagging the RM13bn-14bn tunnelling works. We maintain our OUTPERFORM rating but nudge upwards our RNAV-based target price from RM4.96 to RM5.00 as we apply our higher target market P/E of 14.5x (prev. 13.8x) to the construction component. The main re-rating catalyst is progress and award of the MRT project. Gamuda remains one of our top picks for the construction sector.

• Open tender with some advantages as a chariot master. We continue to believe that even though the entire RM36bn-40bn MRT project will be up for open tender, Gamuda-MMC will have an advantage in bidding for the job. The JV is still interested in undertaking the RM13bn-14bn tunnelling job and its odds of clinching this portion are good given its track record and expertise in handling large-scale infrastructure works such as the SMART tunnel and the northern double-tracking project. The tunnelling works will be the first package to be dished out. Going by the Jul 2011 timeline for the groundbreaking, we expect the award of the first MRT package to occur in 1H2011.

Financial summary

Stock Information Market cap: RM7,687m/US$2,443m 12-m price range: RM3.98 RM2.58 3-m avg daily vol: 8.5m No. of shrs (m): 2,045 Est. free float (%): 79.4 Conv. secs (m): 252.3 Major shareholders (%): - EPF 8.3 - Amanah Raya Trustees 7.2 - Platinum 5.2

FYE Jul 2009 2010 2011F 2012F 2013F Revenue (RM m) 2,727.3 2,455.1 3,106.7 4,107.8 4,587.9 EBITDA (RM m) 303.4 236.6 233.7 327.2 417.9 EBITDA margins (%) 11.1% 9.6% 7.5% 8.0% 9.1% Pretax profit (RM m) 282.2 370.1 479.2 646.1 780.8 Net profit (RM m) 193.7 280.7 335.0 458.5 558.2 EPS (sen) 9.6 13.9 16.6 22.7 27.7 EPS growth (%) (33.8%) 44.9% 19.3% 36.9% 21.7% P/E (x) 39.1 27.0 22.6 16.5 13.6 FD core EPS (sen) 9.6 13.7 16.3 22.1 32.9 FD core P/E (x) 39.1 27.4 23.1 17.0 11.4 Gross DPS (sen) 7.9 12.0 12.0 12.0 12.0 Dividend yield (%) 2.1% 3.2% 3.2% 3.2% 3.2% P/BV (x) 3.7 4.1 3.7 3.6 3.4 ROE (%) 8.2% 14.4% 17.2% 21.9% 25.6% Net gearing (%) 41.1% 60.9% 51.4% 47.4% 43.7% P/FCFE (x) 30.0 109.4 225.9 (201.0) (151.5) EV/EBITDA (x) 28.5 37.9 38.2 27.2 21.3 % change in EPS estimates - - - CIMB/Consensus (x) 0.89 1.01 1.09



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Volume 10m (R.H.S ca le ) Ga muda Bhd Source: Bloomberg

Since its inception as a pure construction player in 1976, Gamuda has gradually evolved through ventures into toll highways and property. It has diversified into water treatment as well as overseas via Indian highway projects, among others. Today, Gamuda is Malaysia’s premier infrastructure specialist with its scope of expertise covering highways, bridges, tunnels, dams and hydropower, hydraulic engineering and water treatment, railways and mass-rapid transit systems. It has also expanded to overseas markets including Vietnam.



(RM m, FYE Jul) 2009 2010 2011F 2012F 2013F (FYE Jul) 2009 2010 2011F 2012F 2013F Revenue 2,727 2,455 3,107 4,108 4,588 Revenue growth (%) 13.5 (10.0) 26.5 32.2 11.7 Operating expenses (2,424) (2,219) (2,873) (3,781) (4,170) EBITDA growth (%) 20.6 (22.0) (1.2) 40.0 27.7 EBITDA 303 237 234 327 418 Pretax margins (%) 10.3 15.1 15.4 15.7 17.0 Depreciation & amortisation (18) (19) (19) (20) (20) Net profit margins (%) 7.1 11.4 10.8 11.2 12.2 EBIT 285 218 214 307 398 Interest cover (x) 1.6 5.0 4.8 7.3 9.9 Net interest & invt income (146) (2) (22) (20) (20) Effective tax rates (%) 27.6 21.8 26.0 26.0 26.0 Associates’ contribution 143 154 286 359 403 Net dividend payout (%) 59.5 62.1 52.0 38.0 31.2 Exceptional items 0 0 0 0 0 Debtors turnover (days) 240.7 265.1 222.9 179.8 180.1 Others 0 0 0 0 0 Stock turnover (days) 5.8 7.3 7.6 6.9 7.4 Pretax profit 282 370 479 646 781 Creditors turnover (days) 19.9 24.9 26.0 23.5 25.3 Tax (78) (81) (125) (168) (203) Minority interests (11) (9) (20) (20) (20) Net profit 194 281 335 459 558 Adj. wt. shares (m) 2,016 2,016 2,016 2,016 2,017 Unadj. year-end shares (m) 2,016 2,016 2,016 2,017 2,017 BALANCE SHEET KEY DRIVERS (RM m, end Jul) 2009 2010 2011F 2012F 2013F (FYE Jul) 2010 2011F 2012F 2013FFixed assets 79 62 43 24 5 Construction margins (%) 5.0% 9.0% 9.0% 9.0% Intangible assets 19 19 18 18 18 Orderbook replenishment (RM m) 500 500 1,000 1,000 Other long-term assets 1,644 1,814 1,963 1,958 1,952 Outstanding orderbook (RM m) 8,500 9,200 10,600 12,000 Total non-current assets 1,742 1,895 2,024 2,000 1,975 Cash and equivalents 751 714 678 644 612 Stocks 35 63 66 88 98 Trade debtors 1,665 1,900 1,894 2,154 2,373 Other current assets 231 265 298 299 300 Total current assets 2,682 2,942 2,936 3,185 3,382 Trade creditors 120 215 228 301 335 Short-term borrowings 626 501 401 320 256 Other current liabilities 388 564 593 729 803 Total current liabilities 1,133 1,280 1,221 1,350 1,394 Long-term borrowings 1,037 1,437 1,437 1,437 1,437 Other long-term liabilities 38 112 46 50 55 Total long-term liabilities 1,074 1,549 1,482 1,487 1,492 Shareholders’ funds 2,061 1,833 2,061 2,131 2,237 Minority interests 157 176 196 215 235 NTA/share (RM) 1.01 0.90 1.01 1.05 1.10 CASH FLOW 12M - FORWARD FD CORE P/E (X) (RM m, FYE Jul) 2009 2010 2011F 2012F 2013FPretax profit 282 370 479 646 781Depreciation & non–cash adj. 18 19 19 20 20Working capital changes 164 (376) 70 (55) (103)Cash tax paid (80) (104) (120) (156) (192)Others 249 95 (16) (89) (133)Cash flow from operations 634 4 433 366 373Capex (14) (14) (14) (14) (14)Net investments & sale of FA (212) (234) (256) (308) (340)Others 0 0 0 0 0Cash flow from investing (225) (247) (270) (322) (353)Debt raised/(repaid) (156) 312 (130) (82) (70)Equity raised/(repaid) 0 0 0 0 0Dividends paid (86) (86) (86) (86) (86)Cash interest & others (261) 27 (14) 90 99Cash flow from financing (504) 253 (231) (78) (57)Change in cash (95) 10 (67) (34) (38)Change in net cash/(debt) 62 (302) 63 48 32Ending net cash/(debt) (910) (1,224) (1,161) (1,113) (1,082)

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OUTPERFORM Maintained Genting Bhd RM10.70 @07/12/10 Top gaming pick Target: RM15.20

Gaming

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GENT MK / GENT.KL Ivy Ng Lee Fang CFA +60(3) 2084 9697 – [email protected]

• Reiterate OUTPERFORM. Genting Bhd remains firmly an OUTPERFORM and our top pick within the group, with the potential share price triggers of i) less-than-expected cannibalisation, ii) new M&A ventures and iii) value-unlocking efforts via disposal of non-core assets. Our SOP-based target price stays at RM15.20. Genting Bhd also provides indirect exposure to the high-growth Singapore gaming market as more than half of its SOP value comes from Genting Singapore.

• A global gaming play. With its monopoly in Malaysia and market leadership in Singapore, Genting Bhd is well-positioned to capitalise on the positive outlook for gaming in Asia as the favourable economic climate will propel demand from a captive target market with a naturally higher propensity to gamble. For 2011, we expect RWS to maintain its market leadership, albeit marginally. There is also upside to the size of Singapore’s gaming pie with the expected licensing of junkets. Meanwhile, GM’s focus will be on its maiden project in the US and its newly acquired UK assets. We expect RWG to keep its focus on yields to protect its turf.

• Plantation – the only non-core gem. The plantation arm is set for a better 2011 on the back of higher CPO prices and production. But power earnings could come under pressure as coal prices start heading north again. We also do not expect material contributions from the oil and gas division given the increasing dominance of the core gaming contributions. Non-core asset disposals, especially the non-performing ones, could be a focus in 2011.

Financial summary

Stock Information Market cap: RM39,729m/US$12,665m 12-m price range: RM10.80 RM6.22 3-m avg daily vol: 6.6m No. of shrs (m): 3,713 Est. free float (%): 50.0 Conv. secs (m): None Major shareholders (%): - Lim family 39.6

FYE Dec 2008 2009 2010F 2011F 2012F Revenue (RM m) 9,082.5 8,893.6 14,850.2 18,002.3 20,039.7 EBITDA (RM m) 3,470.1 3,776.3 6,508.2 7,958.6 8,595.2 EBITDA margins (%) 38.2% 42.5% 43.8% 44.2% 42.9% Pretax profit (RM m) 1,733.1 2,528.4 4,301.6 5,893.2 6,564.9 Net profit (RM m) 567.6 1,044.3 2,229.5 2,974.1 3,458.6 EPS (sen) 15.3 28.2 60.2 80.3 93.4 EPS growth (%) (71.5%) 84.0% 113.5% 33.4% 16.3% P/E (x) 69.8 38.0 17.8 13.3 11.5 Core EPS (sen) 45.9 36.7 65.7 80.3 93.4 Core EPS growth (%) 6.4% (20.2%) 79.3% 22.2% 16.3% Core P/E (x) 23.3 29.2 16.3 13.3 11.5 Gross DPS (sen) 7.0 7.2 7.5 7.5 7.9 Dividend yield (%) 0.7% 0.7% 0.7% 0.7% 0.7% P/BV (x) 3.2 2.9 2.5 2.1 1.8 ROE (%) 4.6% 7.9% 15.0% 17.2% 17.0% Net cash per share (RM) 0.97 0.32 0.38 1.95 3.58 P/FCFE (x) 69.2 6.9 11.2 4.9 7.2 EV/EBITDA (x) 12.8 13.1 7.8 5.8 4.9 % change in EPS estimates - - - CIMB/Consensus (x) 1.39 1.08 1.13



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Volume 10m (R.H.S c a le ) Ge nting Bhd Source: Bloomberg

The Genting group is owned by the family of the late Tan Sri Lim Goh Tong. Its prized asset is Resorts World Genting (RWG), held by 49%-owned Genting Malaysia (GM), which also owns 18% of Genting Hong Kong. The huge success of Resorts World Sentosa (RWS), which opened doors in Singapore earlier this year, has strengthened the group’s gaming earnings. Its 55%-subsidiary Genting Plantations is among the larger plantation operators with a 66,000ha landbank. The group holds a 58.6% interest in Genting Sanyen Power with associate interests in China and India power assets. The oil & gas operations include several producing wells in China and exploration in Indonesia.



(RM m, FYE Dec) 2008 2009 2010F 2011F 2012F (FYE Dec) 2008 2009 2010F 2011F 2012F Revenue 9,083 8,894 14,850 18,002 20,040 Revenue growth (%) 7.1 (2.1) 67.0 21.2 11.3 Operating expenses (5,612) (5,117) (8,342) (10,044) (11,444) EBITDA growth (%) (6.6) 8.8 72.3 22.3 8.0 EBITDA 3,470 3,776 6,508 7,959 8,595 Pretax margins (%) 19.1 28.4 29.0 32.7 32.8 Depreciation & amortisation (625) (687) (1,228) (1,884) (1,952) Net profit margins (%) 6.2 11.7 15.0 16.5 17.3 EBIT 2,846 3,089 5,280 6,075 6,644 Interest cover (x) 10.6 11.8 13.1 12.9 13.8 Net interest & invt income (54) (136) (183) (202) (99) Effective tax rates (%) 43.4 29.5 21.9 22.9 21.3 Associates’ contribution 74 20 20 20 20 Net dividend payout (%) 32.9 18.4 9.0 6.7 6.1 Exceptional items (1,133) (445) (815) 0 0 Debtors turnover (days) 38.6 44.9 36.0 41.1 42.7 Others 0 0 0 0 0 Stock turnover (days) 13.8 15.7 12.7 14.5 15.1 Pretax profit 1,733 2,528 4,302 5,893 6,565 Creditors turnover (days) 57.9 79.9 78.2 89.2 92.8 Tax (751) (746) (944) (1,349) (1,396) Minority interests (414) (739) (1,128) (1,570) (1,710) Net profit 568 1,044 2,230 2,974 3,459 Adj. wt. shares (m) 3,704 3,704 3,705 3,705 3,705 Unadj. year-end shares (m) 3,704 3,705 3,705 3,705 3,705 BALANCE SHEET KEY DRIVERS (RM m, end Dec) 2008 2009 2010F 2011F 2012F (FYE Dec) 2009 2010F 2011F 2012FFixed assets 10,692 16,450 20,510 19,626 18,674 Number of tables 420 420 420 420 Intangible assets 3,523 3,914 3,914 3,914 3,914 Number of slots 3,500 3,500 3,500 3,500 Other long-term assets 5,103 6,590 6,512 6,528 6,543 Net win per table p.a. (RM m) 8.546 8.525 8.649 8.908 Total non-current assets 19,317 26,955 30,936 30,068 29,131 Net win per slot p.a. (RM m) 0.289 0.289 0.293 0.302 Cash and equivalents 9,467 14,707 17,834 25,559 30,668 Average occupancy rate (%) 75.0% 95.0% 85.0% Stocks 376 387 646 784 872 Number of rooms - Total 1,350 1,350 1,500 Trade debtors 1,090 1,097 1,831 2,220 2,471 Universal Studios visitor (m) 4.1 4.6 5.6 Other current assets 201 356 594 721 802 Net win per table (S$ m) 10 11 11 Total current assets 11,133 16,547 20,906 29,283 34,814 Trade creditors 1,512 2,382 3,977 4,822 5,367 Short-term borrowings 442 853 767 691 621 Other current liabilities 251 202 883 1,289 1,340 Total current liabilities 2,206 3,436 5,628 6,801 7,329 Long-term borrowings 5,414 12,659 15,659 17,659 16,776 Other long-term liabilities 1,417 1,693 1,693 1,693 1,693 Total long-term liabilities 6,832 14,352 17,352 19,352 18,469 Shareholders’ funds 12,442 13,887 15,908 18,674 21,913 Minority interests 8,971 11,825 12,953 14,523 16,233 NTA/share (RM) 2.41 2.69 3.24 3.98 4.86 CASH FLOW 12M - FORWARD FD CORE P/E (X) (RM m, FYE Dec) 2008 2009 2010F 2011F 2012FPretax profit 1,733 2,528 4,302 5,893 6,565Depreciation & non–cash adj. 625 687 1,228 1,884 1,952Working capital changes (180) 852 602 318 206Cash tax paid (886) (863) (746) (944) (1,349)Others 1,646 326 808 361 296Cash flow from operations 2,938 3,531 6,194 7,512 7,669Capex (2,500) (5,205) (5,288) (1,000) (1,000)Net investments & sale of FA (345) (100) (100) (100) (100)Others 0 0 0 0 0Cash flow from investing (2,846) (5,305) (5,388) (1,100) (1,100)Debt raised/(repaid) 535 7,655 2,915 1,923 (952)Equity raised/(repaid) (174) 0 0 0 0Dividends paid (524) (504) (408) (408) (408)Cash interest & others (54) (136) (183) (202) (99)Cash flow from financing (217) 7,014 2,323 1,313 (1,460)Change in cash (125) 5,240 3,128 7,725 5,109Change in net cash/(debt) (660) (2,415) 214 5,802 6,061Ending net cash/(debt) 3,608 1,193 1,407 7,209 13,270

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NEUTRAL Maintained Genting Malaysia Bhd RM3.34 @07/12/10 A dicey bet Target: RM3.90

Gaming

MA

LAYS

IA

GENM MK / GENM.KL Ivy Ng Lee Fang CFA +60(3) 2084 9697 – [email protected]

• Reiterate NEUTRAL. We are staying NEUTRAL on Genting Malaysia (GM) as we see limited re-rating catalysts for the stock over the near term. The minimal near-term earnings enhancement from its global expansion drive is largely offset by lingering corporate governance and newfound competitive concerns. Our end-CY11 SOP-based target price stays at RM3.90 (10% discount intact).

• RWG on auto-cruise mode. We expect GM to continue focusing on yields in 2011 as it proactively minimises punting migration to Singapore’s two new IRs. In the past, the emphasis on yield has been a rewarding one, with GM successfully sustaining patronage even during the worst of economic times and the peak of A(H1N1) worries.

• Realising global ambition. 2011 will also see GM spreading its wings to nurture its maiden project in US while also turning around its newly acquired UK assets. Phase 1 of its Aqueduct project is expected to be unveiled by mid-year with some 1,600 video lottery terminals. Meanwhile, GM will be banking on its powerful membership database and gradually revamping its provincial casinos to drive patronage of its UK casinos.

• Still sitting on RM2bn+ cash pile. We estimate that even after the UK and US additions, GM is still sitting on a healthy cash balance in excess of RM2bn. Because of this, we do not discount the possibility of more unpopular RPTs ahead.

Financial summary

Stock Information Market cap: RM19,756m/US$6,298m 12-m price range: RM3.64 RM2.51 3-m avg daily vol: 7.4m No. of shrs (m): 5,915 Est. free float (%): 50.0 Conv. secs (m): None Major shareholders (%): - Genting Berhad 47.3 - First Eagle Investment 3.6

FYE Dec 2008 2009 2010F 2011F 2012F Revenue (RM m) 4,886.7 4,991.8 5,134.4 7,003.3 7,688.1 EBITDA (RM m) 2,034.5 2,038.7 1,932.5 2,165.7 2,309.1 EBITDA margins (%) 41.6% 40.8% 37.6% 30.9% 30.0% Pretax profit (RM m) 1,125.3 1,764.5 1,617.3 1,941.0 2,081.5 Net profit (RM m) 632.7 1,323.6 1,229.6 1,403.1 1,530.7 EPS (sen) 10.8 22.4 20.8 23.8 25.9 EPS growth (%) (60.8%) 107.9% (7.1%) 14.1% 9.1% P/E (x) 31.0 14.9 16.0 14.1 12.9 Core EPS (sen) 23.8 23.5 22.7 23.8 25.9 Core EPS growth (%) 18.1% (1.3%) (3.3%) 4.7% 9.1% Core P/E (x) 14.1 14.2 14.7 14.1 12.9 Gross DPS (sen) 7.0 7.3 7.9 7.9 8.2 Dividend yield (%) 2.1% 2.2% 2.4% 2.4% 2.5% P/BV (x) 2.4 1.9 1.8 1.6 1.5 ROE (%) 7.7% 14.3% 11.5% 11.9% 11.9% Net gearing (%) N/A N/A N/A N/A N/A Net cash per share (RM) 0.77 0.89 1.08 1.28 1.47 P/FCFE (x) 10.8 18.3 13.6 13.0 12.9 EV/EBITDA (x) 7.4 7.1 6.9 5.6 4.8 % change in EPS estimates - - - CIMB/Consensus (x) 1.01 0.97 0.97



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Volume 10m (R.H.S ca le ) Ge nting Ma la ys ia Bhd Source: Bloomberg

Genting Malaysia (GM), previously Resorts World, is a 47%-owned subsidiary of Genting Bhd. Its principal business is the operation of Resorts World Genting, an integrated resort and casino located 45mins from Kuala Lumpur. The resort consists of six hotels and two apartment blocks, offering a total of over 10,000 rooms. The Genting casino has over 400 gaming tables and 3,500 slot machines. It recently completed the acquisition of Genting Singapore’s UK casino assets and is in the midst of rolling out its maiden venture in Aqueduct in US. GM also holds just under 20% interest in Genting Hong Kong, the third largest cruise operator in the world and the joint operator of the newly opened Resorts World Manila in the Philippines.



(RM m, FYE Dec) 2008 2009 2010F 2011F 2012F (FYE Dec) 2008 2009 2010F 2011F 2012F Revenue 4,887 4,992 5,134 7,003 7,688 Revenue growth (%) 12.3 2.1 2.9 36.4 9.8 Operating expenses (2,852) (2,953) (3,202) (4,838) (5,379) EBITDA growth (%) 15.6 0.2 (5.2) 12.1 6.6 EBITDA 2,035 2,039 1,933 2,166 2,309 Pretax margins (%) 23.0 35.3 31.5 27.7 27.1 Depreciation & amortisation (262) (270) (276) (332) (358) Net profit margins (%) 12.9 26.5 23.9 20.0 19.9 EBIT 1,773 1,769 1,657 1,834 1,951 Interest cover (x) 1,077.6 N/A N/A N/A N/A Net interest & invt income 114 78 106 107 131 Effective tax rates (%) 43.8 25.0 24.0 27.7 26.5 Associates’ contribution 1 0 0 0 0 Net dividend payout (%) 47.0 23.4 27.3 23.9 22.8 Exceptional items (762) (81) (145) 0 0 Debtors turnover (days) 14.0 13.6 13.4 11.8 13.0 Others 0 0 0 0 0 Stock turnover (days) 4.5 4.5 4.5 3.9 4.3 Pretax profit 1,125 1,765 1,617 1,941 2,081 Creditors turnover (days) 38.6 43.0 45.8 40.3 44.4 Tax (493) (441) (388) (538) (551) Minority interests 0 0 0 0 0 Net profit 633 1,324 1,230 1,403 1,531 Adj. wt. shares (m) 5,866 5,903 5,905 5,905 5,905 Unadj. year-end shares (m) 5,902 5,905 5,905 5,905 5,905 BALANCE SHEET KEY DRIVERS (RM m, end Dec) 2008 2009 2010F 2011F 2012F (FYE Dec) 2009 2010F 2011F 2012FFixed assets 3,638 3,482 3,587 3,675 3,752 Number of tables 420 420 420 420 Intangible assets 0 0 0 0 0 Number of slots 3,500 3,500 3,500 3,500 Other long-term assets 963 2,318 2,318 2,318 2,318 Net win per table p.a. (RM m) 8.546 8.525 8.649 8.908 Total non-current assets 4,602 5,800 5,904 5,993 6,070 Net win per slot p.a. (RM m) 0.289 0.289 0.293 0.302 Cash and equivalents 4,555 5,272 6,381 7,548 8,705 Revenue growth (%) 2.9% 2.1% 36.6% 9.8% Stocks 60 62 64 87 96 Trade debtors 186 186 191 261 286 Other current assets 20 18 19 25 28 Total current assets 4,821 5,538 6,655 7,922 9,115 Trade creditors 541 635 653 891 978 Short-term borrowings 0 0 0 0 0 Other current liabilities 238 200 264 329 345 Total current liabilities 779 835 918 1,220 1,323 Long-term borrowings 0 0 0 0 0 Other long-term liabilities 319 367 367 367 367 Total long-term liabilities 319 367 367 367 367 Shareholders’ funds 8,318 10,137 11,268 12,322 13,489 Minority interests 7 7 7 6 6 NTA/share (RM) 1.41 1.72 1.91 2.09 2.28 CASH FLOW 12M - FORWARD FD CORE P/E (X) (RM m, FYE Dec) 2008 2009 2010F 2011F 2012FPretax profit 1,125 1,765 1,617 1,941 2,081Depreciation & non–cash adj. 262 270 276 332 358Working capital changes 50 92 11 145 53Cash tax paid (416) (469) (441) (388) (538)Others 735 (127) 287 (241) (177)Cash flow from operations 1,756 1,531 1,750 1,789 1,777Capex (518) (130) (400) (400) (404)Net investments & sale of FA 639 (402) 0 0 0Others 0 0 0 0 0Cash flow from investing 121 (532) (400) (400) (404)Debt raised/(repaid) (175) 0 0 0 0Equity raised/(repaid) 0 (74) 0 0 0Dividends paid (288) (300) (350) (350) (368)Cash interest & others 105 78 106 128 151Cash flow from financing (358) (296) (244) (222) (217)Change in cash 1,519 703 1,105 1,167 1,157Change in net cash/(debt) 1,694 703 1,105 1,167 1,157Ending net cash/(debt) 4,573 5,276 6,381 7,548 8,705

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NEUTRAL Maintained Genting Plantations Bhd RM8.68 @07/12/10 Planting roots in Indonesia Target: RM9.84

Palm Oil & Rubber

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GENP MK / GENP.KL Ivy Ng Lee Fang CFA +60(3) 2084 9697 – [email protected]

• Retain NEUTRAL rating. We continue to rate Genting Plantations a NEUTRAL as our bullish take on CPO price in 2011 is already reflected in the group’s valuations. Also unchanged are our earnings forecasts and our target price basis of 10% discount to SOP. However, we increase our target price from RM9.37 to RM9.84 as we raise our target P/E for the plantation division from 16x to 17x, based on a 15% premium over our revised target market P/E of 14.5x.

• Rising CPO price and production to boost earnings. We project the group’s FY11 earnings to rise 16% due mainly to higher selling prices and production. Asiatic’s strategy of selling almost all of its CPO production on spot basis means that the group will benefit in a rising CPO price environment. We estimate that every RM100 per tonne change in CPO price would have a 6% impact on our FY11 net profit forecast. We expect the group to achieve a higher average CPO price and better production in 2011 as more Indonesian estates will reach maturity in 2011. On top of that, Genting Plantations should book higher property earnings from more sales of industrial land.

• Making good progress in Indonesia. Thanks to favourable weather, the pace of new planting in Indonesia has picked up. The group planted 9,478ha in 9M10,bringing its total planted area in Indonesia to 27,147ha. It hopes to plant a further 2,000ha by the end of 2010. Overall, we expect the group to plant around 11,500ha in 2010. This will raise Indonesia’s share of the group’s planted estates to 33%.

Financial summary

Stock Information Market cap: RM6,587m/US$2,100m 12-m price range: RM8.95 RM6.00 3-m avg daily vol: 0.9m No. of shrs (m): 759 Est. free float (%): 32.4 Conv. secs (m): None Major shareholders (%): - Genting 53.8 - Employees Provident Fund 13.8

FYE Dec 2008 2009 2010F 2011F 2012F Revenue (RM m) 1,036.0 755.6 932.5 1,043.7 1,126.3 EBITDA (RM m) 488.1 312.5 456.3 523.1 549.2 EBITDA margins (%) 47.1% 41.4% 48.9% 50.1% 48.8% Pretax profit (RM m) 482.9 301.9 446.3 503.0 529.9 Net profit (RM m) 373.3 235.7 326.0 377.3 397.4 EPS (sen) 49.3 31.1 43.1 49.9 52.5 EPS growth (%) 8.4% (36.9%) 38.3% 15.7% 5.3% P/E (x) 17.6 27.9 20.1 17.4 16.5 Gross DPS (sen) 10.0 9.0 9.0 9.0 16.0 Dividend yield (%) 1.2% 1.0% 1.0% 1.0% 1.8% P/BV (x) 2.8 2.6 2.3 2.1 1.9 ROE (%) 17.0% 9.7% 12.1% 12.6% 12.0% Net cash per share (RM) 0.66 0.61 0.74 0.94 1.25 P/FCFE (x) 49.4 31.7 43.3 32.6 20.7 EV/EBITDA (x) 12.5 19.7 13.3 11.3 10.3 % change in EPS estimates - - - CIMB/Consensus (x) 0.98 1.02 0.97



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Volume 1m (R.H.S c a le ) Ge nting P la nta tions Bhd Source: Bloomberg

Formerly Asiatic Development, Genting Plantations is the plantation arm of Genting Berhad and one of the top Malaysian plantation companies by market cap. The company was incorporated on 29 Sep 1977 to spearhead Genting's plantation business. It was listed on Bursa Malaysia on 30 Aug 1982. This midsized plantation company has 87,147ha of planted oil palm estates located in Malaysia (69%) and Indonesia (31%). It also has property development projects in Johor, Kedah and Melaka. The group also owns Asiatic Centre for Genome Technology (ACGT) which focuses on R&D in genome sequencing and biomarker discovery that will lead to innovations for enhancing the productivity and sustainability of palm oil production.



(RM m, FYE Dec) 2008 2009 2010F 2011F 2012F (FYE Dec) 2008 2009 2010F 2011F 2012F Revenue 1,036 756 933 1,044 1,126 Revenue growth (%) 14.3 (27.1) 23.4 11.9 7.9 Operating expenses (548) (443) (476) (521) (577) EBITDA growth (%) 5.7 (36.0) 46.0 14.6 5.0 EBITDA 488 313 456 523 549 Pretax margins (%) 46.6 40.0 47.9 48.2 47.0 Depreciation & amortisation (22) (26) (31) (34) (37) Net profit margins (%) 36.0 31.2 35.0 36.1 35.3 EBIT 467 286 426 490 513 Interest cover (x) N/A N/A N/A N/A N/A Net interest & invt income 12 10 6 8 12 Effective tax rates (%) 21.9 21.2 26.5 25.0 25.0 Associates’ contribution 4 5 5 5 5 Net dividend payout (%) 15.0 21.4 15.5 13.4 22.5 Exceptional items 0 0 10 0 0 Debtors turnover (days) 41.0 69.2 52.8 42.1 42.7 Others 0 0 0 0 0 Stock turnover (days) 45.7 70.5 61.9 58.9 56.8 Pretax profit 483 302 446 503 530 Creditors turnover (days) 15.9 29.7 23.1 16.1 16.4 Tax (106) (64) (118) (126) (132) Minority interests (4) (2) (2) (2) (2) Net profit 373 236 326 377 397 Adj. wt. shares (m) 757 757 757 757 757 Unadj. year-end shares (m) 755 757 757 757 757 BALANCE SHEET KEY DRIVERS (RM m, end Dec) 2008 2009 2010F 2011F 2012F (FYE Dec) 2009 2010F 2011F 2012FFixed assets 437 493 663 829 893 CPO price per tonne (RM) 2,240 2,620 2,720 2,720 Intangible assets 0 0 0 0 0 FFB output (000' tonnes) 1,148 1,220 1,324 1,435 Other long-term assets 1,253 1,485 1,484 1,484 1,484 FFB yield per ha (tonnes) 21 22 22 22 Total non-current assets 1,690 1,978 2,147 2,313 2,377 Mature area (ha) 54,982 56,982 61,721 71,721 Cash and equivalents 521 526 629 781 1,009 FFB growth (%) -6.9% 6.3% 8.5% 8.4% Stocks 140 152 164 172 178 Trade debtors 131 156 114 126 137 Other current assets 69 56 63 69 76 Total current assets 861 889 971 1,149 1,401 Trade creditors 48 75 43 49 52 Short-term borrowings 19 2 0 0 0 Other current liabilities 64 59 65 76 79 Total current liabilities 131 135 108 124 131 Long-term borrowings 1 66 66 66 66 Other long-term liabilities 55 53 53 53 53 Total long-term liabilities 56 119 119 119 119 Shareholders’ funds 2,332 2,548 2,824 3,151 3,458 Minority interests 33 67 69 71 73 NTA/share (RM) 3.09 3.37 3.73 4.16 4.57 CASH FLOW 12M - FORWARD FD CORE P/E (X) (RM m, FYE Dec) 2008 2009 2010F 2011F 2012FPretax profit 483 302 446 503 530Depreciation & non–cash adj. 22 26 31 34 37Working capital changes (44) (19) (6) (10) (17)Cash tax paid (157) (64) (118) (126) (132)Others (16) (15) (10) (12) (17)Cash flow from operations 287 231 343 388 400Capex (111) (86) (200) (200) (100)Net investments & sale of FA (85) 0 0 0 0Others 5 5 5 5 5Cash flow from investing (192) (82) (195) (195) (95)Debt raised/(repaid) 18 48 (2) 0 0Equity raised/(repaid) 0 1 1 1 1Dividends paid (88) (56) (50) (50) (50)Cash interest & others (1) (137) 6 8 (27)Cash flow from financing (71) (144) (46) (41) (76)Change in cash 25 5 102 152 229Change in net cash/(debt) 6 (43) 104 152 229Ending net cash/(debt) 501 458 562 714 943

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NEUTRAL Maintained Guinness Anchor Bhd RM9.96 @07/12/10 More reason for cheer Target: RM10.45

Brewers

MA

LAYS

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GUIN MK / GUMS.KL Loke Wei Wern +60 (3) 2084 9946 – [email protected]

• Maintain NEUTRAL. As a leader in the Malaysian malt liquor industry with a solid product portfolio and marketing prowess, GAB is well-positioned to ride on the improving industry fundamentals. Its valuations are arguably not cheap as its 17.0x FY12 P/E stands at a 33% premium over its 3-year historical average of 12.8x. But investors should be compensated by an attractive gross yield of 6-7%. We remain NEUTRAL on the stock despite a higher DDM-based target price of RM10.45 (RM8.85 previously) after lowering our cost of equity from 8% to 7% for a cut in the beta assumption from 0.6x to 0.4x. Our FY10-12 earnings projections are intact.

• To remain the market leader in 2011? We think that brand investments will continue to be one of GAB’s key strategies for retaining its leadership position in the Malaysian malt liquor market (MLM) in 2011. Given its solid brand portfolio which includes Tiger, Heineken, Guinness and Anchor, and its marketing prowess, keeping its market dominance should not be a problem. But competition will undeniably heighten, especially in the imported beer segment. Sales of premium beer imported by its rival Carlsberg Brewery (CAB MK; Neutral) via Luen Heng Agency are picking up, posing a threat to GAB’s premium beer brands such as Heineken.

• Improving growth prospects and attractive dividends. The reprieve from an excise duty hike in the latest Budget should pave the way for further volume growth. Besides improving earnings growth prospects, GAB’s other key appeal remains its high gross yield of 6-7%, which should lend support to the share price.

Financial summary

Stock Information Market cap: RM3,009m/US$956m 12-m price range: RM9.96 RM6.60 3-m avg daily vol: 0.1m No. of shrs (m): 302 Est. free float (%): 30.0 Conv. secs (m): None Major shareholders (%): - GAPL Pte Ltd 51.0 - Aberdeen Asset Mgmt 6.0 - Vontobel Asset Mgmt 1.5

FYE Jun 2009 2010 2011F 2012F 2013F Revenue (RM m) 1,285.4 1,341.7 1,390.1 1,432.2 1,475.7 EBITDA (RM m) 217.4 234.5 256.6 264.7 272.9 EBITDA margins (%) 16.9% 17.5% 18.5% 18.5% 18.5% Pretax profit (RM m) 191.2 205.0 227.6 236.0 244.2 Net profit (RM m) 142.0 152.7 170.7 177.0 183.2 EPS (sen) 47.0 50.5 56.5 58.6 60.6 EPS growth (%) 12.8% 7.5% 11.8% 3.7% 3.5% P/E (x) 21.2 19.7 17.6 17.0 16.4 Gross DPS (sen) 54.5 60.0 64.5 67.0 69.0 Dividend yield (%) 5.5% 6.0% 6.5% 6.7% 6.9% P/BV (x) 6.8 6.4 6.1 5.8 5.5 ROE (%) 33.3% 33.4% 35.3% 34.8% 34.3% Net cash per share (RM) 0.54 0.50 0.57 0.64 0.70 P/FCFE (x) 32.9 27.3 18.7 18.2 17.4 EV/EBITDA (x) 13.1 12.2 11.1 10.6 10.2 % change in EPS estimates - - - CIMB/Consensus (x) 1.04 1.03 1.01



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Volume 100k (R.H.S c a le ) Guinne s s Anchor Bhd Source: Bloomberg

Guinness Anchor (GAB) was incorporated on 24 January 1964 under the name of Guinness Malaysia Limited. Listed on the Main Board of Bursa Malaysia in 1965, it is 51% owned by GAPL Pte Ltd, a unit of Asia Pacific Breweries. Its market share has been gradually increasing in recent years to around 57% currently. Anchoring this market share expansion is the growth of its blond beers, led by Tiger, Heineken and Anchor. GAB remains the market leader by far in the stout market via its flagship Guinness Stout. It also carries other imported brands such as Strongbow, Paulaner and Sol.



(RM m, FYE Jun) 2009 2010 2011F 2012F 2013F (FYE Jun) 2009 2010 2011F 2012F 2013F Revenue 1,285 1,342 1,390 1,432 1,476 Revenue growth (%) 7.6 4.4 3.6 3.0 3.0 Operating expenses (1,068) (1,107) (1,133) (1,168) (1,203) EBITDA growth (%) 12.5 7.8 9.5 3.1 3.1 EBITDA 217 234 257 265 273 Pretax margins (%) 14.9 15.3 16.4 16.5 16.6 Depreciation & amortisation (29) (31) (31) (31) (32) Net profit margins (%) 11.0 11.4 12.3 12.4 12.4 EBIT 189 203 225 233 241 Interest cover (x) 257.2 589.4 652.9 675.9 698.9 Net interest & invt income 2 2 2 3 3 Effective tax rates (%) 25.7 25.5 25.0 25.0 25.0 Associates’ contribution 0 0 0 0 0 Net dividend payout (%) 87.0 89.0 85.6 85.8 85.3 Exceptional items 0 0 0 0 0 Debtors turnover (days) 33.4 33.9 34.1 34.2 34.2 Others 0 0 0 0 0 Stock turnover (days) 19.1 19.7 20.2 20.3 20.3 Pretax profit 191 205 228 236 244 Creditors turnover (days) 25.5 25.9 26.0 26.1 26.1 Tax (49) (52) (57) (59) (61) Minority interests 0 0 0 0 0 Net profit 142 153 171 177 183 Adj. wt. shares (m) 302 302 302 302 302 Unadj. year-end shares (m) 302 302 302 302 302 BALANCE SHEET KEY DRIVERS (RM m, end Jun) 2009 2010 2011F 2012F 2013F (FYE Jun) 2010 2011F 2012F 2013FFixed assets 236 240 240 242 245 Excise duties (RM per litre) 7.40 7.40 7.40 7.40 Intangible assets 0 0 0 0 0 Sales tax (%) 5.0% 5.0% 5.0% 5.0% Other long-term assets 0 0 0 0 0 Unit sales ('000 Hli) 849 870 888 914 Total non-current assets 236 240 240 242 245 Cash and equivalents 164 150 172 192 212 Stocks 69 76 78 81 83 Trade debtors 122 127 132 136 140 Other current assets 55 70 71 73 76 Total current assets 410 423 454 482 511 Trade creditors 93 97 101 104 107 Short-term borrowings 0 0 0 0 0 Other current liabilities 80 63 66 68 70 Total current liabilities 173 160 166 171 177 Long-term borrowings 0 0 0 0 0 Other long-term liabilities 31 32 32 32 32 Total long-term liabilities 31 32 32 32 32 Shareholders’ funds 442 471 495 521 548 Minority interests 0 0 0 0 0 NTA/share (RM) 1.46 1.56 1.64 1.72 1.81 CASH FLOW 12M - FORWARD FD CORE P/E (X) (RM m, FYE Jun) 2009 2010 2011F 2012F 2013FPretax profit 191 205 228 236 244Depreciation & non–cash adj. 29 31 31 31 32Working capital changes (47) (34) (4) (4) (4)Cash tax paid (48) (49) (52) (57) (59)Others (4) (10) (13) (13) (10)Cash flow from operations 121 143 189 194 203Capex (29) (30) (31) (33) (35)Net investments & sale of FA 1 1 1 1 1Others (2) (5) 0 0 0Cash flow from investing (30) (33) (30) (32) (34)Debt raised/(repaid) 0 0 0 0 0Equity raised/(repaid) 0 0 0 0 0Dividends paid (111) (124) (139) (145) (153)Cash interest & others 0 0 2 3 3Cash flow from financing (111) (124) (136) (142) (150)Change in cash (20) (14) 23 20 20Change in net cash/(debt) (20) (14) 23 20 20Ending net cash/(debt) 164 150 172 192 212

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TRADING BUY Maintained Hap Seng Plantations Holdings RM3.15 @07/12/10 Richest dividend pickings among planters Target: RM3.73

Palm Oil & Rubber

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HAPL MK / HAPP.KL Ivy Ng Lee Fang CFA +60(3) 2084 9697 – [email protected]

• Maintain TRADING BUY and target price of RM3.50. We continue to rate Hap Seng Plant (HSP) a TRADING BUY due to its attractive P/E valuations and strong dividend yields. Recent purchases of its shares by its major shareholder are a vote of confidence in the company. We are leaving our EPS forecasts untouched but are raising our target price from RM3.50 to RM3.73 as we impute a higher target P/E of 16x instead of 15x in view of the more bullish outlook. The target P/E is still at a slight discount to the target P/Es of 17-18x accorded to the large-cap planters, in view of HSP’s lower liquidity.

• A stronger year beckons. We expect stronger FFB production and higher selling prices to boost 2011 results. We project a 15% improvement in HSP’s 2011 net profit, coming from higher selling prices, increased production and lower operating costs per tonne. Production should pick up in 2011 when the impact of poor weather in the previous year wears off. However, the group will have to contend with the issue of shortage of foreign estate workers though it does have a slight advantage over its peers due to its more comprehensive facilities for its workers.

• Major shareholder increasing stake. Hap Seng Consolidated (HAP MK; Not Rated) has been raising its stake in HSP, which is positive news as it suggests that the major shareholder sees value in HSP at this level. We estimate that it bought 7.856m shares between 2 and 19 November 2010, raising its stake in HSP by around 1% to 52.53%.

Financial summary

Stock Information Market cap: RM2,520m/US$803m 12-m price range: RM3.15 RM2.04 3-m avg daily vol: 1.0m No. of shrs (m): 800 Est. free float (%): 34.2 Conv. secs (m): None Major shareholders (%): - Hap Seng Consolidated 52.5 - Innoprise 15.0

FYE Dec 2009 2010F 2011F 2012F Revenue (RM m) 373.1 432.4 473.4 482.8 EBITDA (RM m) 160.5 242.5 275.7 276.9 EBITDA margins (%) 43.0% 56.1% 58.2% 57.4% Pretax profit (RM m) 135.1 217.5 249.4 248.8 Net profit (RM m) 100.7 163.1 187.1 186.6 EPS (sen) 12.6 20.4 23.4 23.3 EPS growth (%) (29.5%) 62.0% 14.7% (0.2%) P/E (x) 25.0 15.4 13.5 13.5 Gross DPS (sen) 12.6 16.3 18.7 18.7 Dividend yield (%) 4.0% 5.2% 5.9% 5.9% P/BV (x) 1.5 1.5 1.4 1.4 ROE (%) 6.1% 9.7% 10.8% 10.3% Net gearing (%) 1.5% 0.0% N/A N/A Net cash per share (RM) N/A N/A 0.02 0.09 P/FCFE (x) 11.2 15.6 17.2 18.8 EV/EBITDA (x) 15.9 10.4 9.1 8.8 % change in EPS estimates - -- - CIMB/Consensus (x) 1.02 0.92 0.88



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Volume 1m (R.H.S ca le ) Ha p S e ng P la nta tions Holdings Source: Bloomberg

Hap Seng Plantations is a pure oil palm player, with activities spanning estate operations and milling activities. The group has no exposure to downstream palm oil operations. As at 31 December 2009, it owned 34,467ha of planted oil palm estates in Sabah, East Malaysia. Its estates are mostly located in Kinabatangan, which we believe is one of the most fertile regions for oil palm in Sabah. On top of that, 96% of its estates are located in one contiguous block, allowing the group to achieve better economies of scale. Approx. 87% of its total landbank of 39,803ha is planted with oil palms and 8.8% is reserved for infrastructure and nurseries.



(RM m, FYE Dec) 2009 2010F 2011F 2012F (FYE Dec) 2009 2010F 2011F 2012F Revenue 373 432 473 483 Revenue growth (%) (13.1) 15.9 9.5 2.0 Operating expenses (213) (190) (198) (206) EBITDA growth (%) (19.6) 51.1 13.7 0.4 EBITDA 161 242 276 277 Pretax margins (%) 36.2 50.3 52.7 51.5 Depreciation & amortisation (24) (27) (29) (31) Net profit margins (%) 27.0 37.7 39.5 38.7 EBIT 136 216 247 246 Interest cover (x) 51.2 108.0 308.8 N/A Net interest & invt income (1) 2 2 3 Effective tax rates (%) 25.5 25.0 25.0 25.0 Associates’ contribution 0 0 0 0 Net dividend payout (%) 75.0 60.0 60.0 60.0 Exceptional items 0 0 0 0 Debtors turnover (days) 18.6 19.4 18.0 19.5 Others 0 0 0 0 Stock turnover (days) 33.0 29.7 26.7 29.5 Pretax profit 135 218 249 249 Creditors turnover (days) 49.9 59.9 55.1 55.1 Tax (34) (54) (62) (62) Minority interests 0 0 0 0 Net profit 101 163 187 187 Adj. wt. shares (m) 800 800 800 800 Unadj. year-end shares (m) 800 800 800 800 BALANCE SHEET KEY DRIVERS (RM m, end Dec) 2009 2010F 2011F 2012F (FYE Dec) 2009 2010F 2011F 2012FFixed assets 241 269 297 325 CPO price per tonne (RM) 2,303 2,500 2,750 2,750 Intangible assets 0 0 0 0 FFB output (000' tonnes) 667 705 705 716 Other long-term assets 1,645 1,645 1,645 1,645 FFB yield per ha (tonnes) 21 22 22 22 Total non-current assets 1,886 1,914 1,942 1,970 Immature area (ha) 1,712 1,912 2,112 1,612 Cash and equivalents 122 130 119 106 Mature area (ha) 32,532 32,332 32,332 32,832 Stocks 38 32 37 41 Planted area (ha) 34,244 34,244 34,444 34,444 Trade debtors 24 22 25 27 CPO extraction rate (%) 21.8% 21.8% 21.8% 21.8% Other current assets 11 13 14 15 FFB growth (%) -15.0% 5.7% 0.0% 1.5% Total current assets 196 196 195 188 Trade creditors 68 74 69 77 Short-term borrowings 80 80 80 35 Other current liabilities 6 6 6 6 Total current liabilities 154 160 155 118 Long-term borrowings 67 50 20 0 Other long-term liabilities 196 196 196 196 Total long-term liabilities 263 246 216 196 Shareholders’ funds 1,665 1,705 1,770 1,845 Minority interests 0 0 0 0 NTA/share (RM) 2.08 2.13 2.21 2.31 CASH FLOW 12M - FORWARD FD CORE P/E (X) (RM m, FYE Dec) 2009 2010F 2011F 2012FPretax profit 249 218 249 249Depreciation & non–cash adj. 24 27 29 31Working capital changes (18) 13 (14) 1Cash tax paid (53) (34) (54) (62)Others 1 (2) (2) (3)Cash flow from operations 203 221 207 215Capex (28) (28) (28) (28)Net investments & sale of FA (42) 0 0 0Others 0 0 0 0Cash flow from investing (70) (28) (28) (28)Debt raised/(repaid) 90 (30) (30) (50)Equity raised/(repaid) 0 0 0 0Dividends paid (95) (60) (98) (112)Cash interest & others (15) (108) (62) (23)Cash flow from financing (20) (199) (190) (186)Change in cash 113 (5) (10) 1Change in net cash/(debt) 23 25 20 51Ending net cash/(debt) (25) 0 19 71

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OUTPERFORM Maintained Hartalega Holdings RM5.39 @07/12/10 Hands down the best Target: RM8.43

Rubber Gloves

MA

LAYS

IA

HART MK / HTHB.KL Terence Wong CFA +60(3) 20849689 – [email protected]

• Still an OUTPERFORM. In view of volatile natural rubber latex prices and customer preference for protein-free synthetic nitrile gloves, Hartalega remains our top pick as Malaysia’s largest nitrile glovemaker. We retain our EPS forecasts. Although we also retain our valuation basis of 10% discount to our target market P/E, our target price rises from RM8.03 to RM8.43 because of an upgrade of our target market P/E from 13.8x to 14.5x. Potential re-rating catalysts include 1) better operating efficiency, 2) higher output from refurbished lines, and 3) higher ASPs from selling higher quality gloves.

• The reliable and efficient glovemaker. With 80% of sales coming from nitrile gloves, Hartalega avoids the vagaries of the rubber latex market, which is highly unpredictable due to weather and speculative financial flows. Furthermore, Hartalega’s high level of automation and innovative culture lead us to believe that it will maintain its 35% EBITDA margin over our FY11-13 forecast period.

• Large valuation gap. Hartalega trades at a single-digit P/E of 8.1x, which, in our view, is unjustified given its 32% ROE and 18% 3-year EPS CAGR. We believe the gap between Hartalega’s 8.1x multiple and our 14.5x target P/E will reduce as investors increasingly appreciate its growth potential and sound fundamentals.

Financial summary

Stock Information Market cap: RM1,959m/US$625m 12-m price range: RM5.63 RM3.84 3-m avg daily vol: 0.5m No. of shrs (m): 363 Est. free float (%): 37.7 Conv. secs (m): None Major shareholders (%): - Hartalega Industries Sdn 50.4 - Budi Tenggara Sdn Bhd 7.4 - Kelana Citra Sdn Bhd 4.5

FYE Mar 2009 2010 2011F 2012F 2013F Revenue (RM m) 443.2 571.9 711.5 821.7 899.4 EBITDA (RM m) 107.9 202.7 254.2 295.1 329.1 EBITDA margins (%) 24.3% 35.4% 35.7% 35.9% 36.6% Pretax profit (RM m) 95.5 177.8 231.1 269.8 301.7 Net profit (RM m) 84.5 142.9 184.7 215.7 241.1 EPS (sen) 23.3 39.3 50.8 59.3 66.3 EPS growth (%) 21.5% 69.1% 29.3% 16.8% 11.8% P/E (x) 23.2 13.7 10.6 9.1 8.1 Core EPS (sen) 21.9 40.0 50.8 59.3 66.3 Core EPS growth (%) 14.7% 82.2% 27.1% 16.8% 11.8% Core P/E (x) 24.6 13.5 10.6 9.1 8.1 Gross DPS (sen) 8.0 13.3 17.3 20.7 24.0 Dividend yield (%) 1.5% 2.5% 3.2% 3.8% 4.5% P/BV (x) 7.7 5.5 4.0 3.0 2.4 ROE (%) 39.0% 47.0% 43.7% 37.8% 32.6% Net gearing (%) 7.7% N/A N/A N/A N/A Net cash per share (RM) N/A 0.09 0.30 0.65 0.91 P/FCFE (x) 52.8 23.7 21.1 11.7 14.1 EV/EBITDA (x) 18.3 9.5 7.3 5.8 5.0 % change in EPS estimates N/A N/A N/A CIMB/Consensus (x) 1.02 1.06 1.02



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Volume 1m (R.H.Scale) Hartalega Holdings Source: Bloomberg

Hartalega is a leading global producer of nitrile gloves with a capacity of almost 9bn gloves. The group began its manufacturing operations in 1988 and in the same year, made its foray into the overseas market by exporting to the US. Since inception, Hartalega has been focusing on R&D on automation systems to improve the production efficiency and effectiveness of the group’s glove manufacturing operations. It currently owns five manufacturing plants on a 25-acre site in Batang Berjuntai, Selangor, which offers room for expansion.



(RM m, FYE Mar) 2009 2010 2011F 2012F 2013F (FYE Mar) 2009 2010 2011F 2012F 2013F Revenue 443 572 712 822 899 Revenue growth (%) 72.1 29.0 24.4 15.5 9.5 Operating expenses (335) (369) (457) (527) (570) EBITDA growth (%) 25.8 87.9 25.4 16.1 11.5 EBITDA 108 203 254 295 329 Pretax margins (%) 21.5 31.1 32.5 32.8 33.5 Depreciation & amortisation (16) (20) (23) (26) (30) Net profit margins (%) 19.1 25.0 26.0 26.2 26.8 EBIT 92 183 232 269 300 Interest cover (x) 38.0 54.2 109.5 203.9 470.2 Net interest & invt income (2) (2) 0 1 2 Effective tax rates (%) 11.5 19.5 20.0 20.0 20.0 Associates’ contribution 0 0 0 0 0 Net dividend payout (%) 25.5 25.4 25.6 26.1 27.1 Exceptional items 5 (3) 0 0 0 Debtors turnover (days) 37.3 43.4 38.4 34.1 34.9 Others 0 0 0 0 0 Stock turnover (days) 19.2 16.8 16.3 17.0 17.5 Pretax profit 95 178 231 270 302 Creditors turnover (days) 12.3 13.3 15.2 17.0 17.5 Tax (11) (35) (46) (54) (60) Minority interests 0 0 0 0 0 Net profit 85 143 185 216 241 Adj. wt. shares (m) 363 363 363 363 363 Unadj. year-end shares (m) 242 242 363 363 363 BALANCE SHEET KEY DRIVERS (RM m, end Mar) 2009 2010 2011F 2012F 2013F (FYE Mar) 2010 2011F 2012F 2013FFixed assets 246 284 362 384 462 Production capacity (m pcs p.a) 7,000 8,800 9,562 10,562 Intangible assets 0 0 0 0 0 Capacity utilisation (%) 75.7% 85.0% 85.0% 85.0% Other long-term assets 0 9 0 0 0 ASP (US$) per 1,000 pieces 32.66 35.00 34.65 34.48 Total non-current assets 246 293 362 385 462 Exchange rate (RM to US$) 3.46 3.15 3.04 3.05 Cash and equivalents 38 75 136 252 335 Natural rubber price (RM /kilogram) 5.26 8.15 7.89 7.54 Stocks 25 28 36 41 45 Nitrile latex prices (US$/mt) 1,014 1,320 1,412 1,556 Trade debtors 58 78 71 82 90 Other current assets 8 5 7 8 9 Total current assets 128 186 250 383 479 Trade creditors 18 24 36 41 45 Short-term borrowings 15 14 12 10 0 Other current liabilities 20 31 28 29 30 Total current liabilities 53 69 75 80 76 Long-term borrowings 43 28 15 5 5 Other long-term liabilities 25 28 29 31 32 Total long-term liabilities 67 55 45 36 37 Shareholders’ funds 254 354 492 651 828 Minority interests 0 0 0 0 0 NTA/share (RM) 0.70 0.97 1.35 1.79 2.28 CASH FLOW 12M - FORWARD FD CORE P/E (X) (RM m, FYE Mar) 2009 2010 2011F 2012F 2013FPretax profit 95 178 231 270 302Depreciation & non–cash adj. 16 20 23 26 30Working capital changes (23) (15) 6 (9) (7)Cash tax paid (4) (22) (35) (46) (54)Others 0 4 (19) 39 (21)Cash flow from operations 84 164 206 280 249Capex (61) (67) (100) (100) (100)Net investments & sale of FA 0 0 0 0 0Others 0 0 0 0 0Cash flow from investing (61) (67) (100) (100) (100)Debt raised/(repaid) 14 (15) (14) (12) (10)Equity raised/(repaid) 0 0 0 0 0Dividends paid (8) (45) (31) (53) (58)Cash interest & others (1) 0 (1) 1 2Cash flow from financing 4 (59) (45) (64) (66)Change in cash 27 38 61 116 83Change in net cash/(debt) 13 53 75 128 93Ending net cash/(debt) (19) 33 108 236 330

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Apr-08 Aug-08 Dec-08 Apr-09 Aug-09 Dec-09 Apr-10 Aug-10 Dec-10





OUTPERFORM Maintained IJM Corp Bhd RM6.14 @07/12/10 Stoked by a merger play Target: RM6.95

Construction

MA

LAYS

IA

IJM MK / IJMS.KL Sharizan Rosely +60 (3) 2084 9864 – [email protected]

• Maintain OUTPERFORM. Apart from the positive construction outlook backed by the implementation of 10MP and the government’s execution of the Economic Transformation Programme (ETP), another growth catalyst for IJM is the impending merger between IJM Land and MRCB in which IJM Corp is likely to emerge with the largest stake. This move would enhance its RNAV by at least 40 sen to RM7.35/share. We maintain our OUTPERFORM call but raise our RNAV-based target price from RM6.95 to RM6.95 as we apply our revised target market P/E of 14.5x (13.8x before) to the construction component. Potential re-rating catalysts include (i) contract awards, and (ii) positives from the merger.

• IJM emerges as a merger play. We view the proposed merger as overall positive and value enhancing for IJM Corp. We estimate RNAV accretion of at least 40 sen from RM6.85 to RM7.35, with more upside if MRCB’s other businesses, i.e. the toll concessions, are rationalised and absorbed into IJM Corp. We make no changes to our FY11-13 EPS forecasts pending finalisation of the deal which is expected no earlier than end-2Q11.

• RM3.6bn order book with more upside. The top-up prospects for its order book continue to be good as the group is vying for projects totalling as much as RM10bn.

Financial summary

Stock Information Market cap: RM8,295m/US$2,636m 12-m price range: RM6.14 RM4.30 3-m avg daily vol: 4.2m No. of shrs (m): 1,351 Est. free float (%): 67.2 Conv. secs (m): 159 Major shareholders (%): - EPF 16.2 - Zelan 5.3

FYE Mar 2009 2010 2011F 2012F 2013F Revenue (RM m) 4,601.3 4,013.5 4,961.1 5,354.0 5,656.1 EBITDA (RM m) 618.8 567.5 747.7 775.2 814.1 EBITDA margins (%) 13.4% 14.1% 15.1% 14.5% 14.4% Pretax profit (RM m) 528.7 578.0 516.1 540.9 572.9 Net profit (RM m) 290.2 332.6 377.8 393.4 417.0 EPS (sen) 22.0 24.6 27.9 29.1 30.8 EPS growth (%) 147.9% 11.7% 13.6% 4.1% 6.0% P/E (x) 27.9 25.0 22.0 21.1 19.9 Core EPS (sen) 22.0 21.5 27.9 29.1 30.8 Core EPS growth (%) 9.8% (2.4%) 30.0% 4.1% 6.0% Core P/E (x) 27.9 28.6 22.0 21.1 19.9 FD core EPS (sen) 20.4 20.0 25.9 27.0 46.6 FD core P/E (x) 30.1 30.8 23.7 22.8 13.2 Gross DPS (sen) 24.9 10.7 10.7 10.7 10.7 Dividend yield (%) 4.1% 1.7% 1.7% 1.7% 1.7% P/BV (x) 3.4 3.6 3.5 3.5 3.7 ROE (%) 12.4% 14.2% 16.1% 16.6% 18.0% Net gearing (%) 80.6% 91.1% 82.3% 86.8% 91.1% P/FCFE (x) 44.6 40.5 34.6 33.4 31.7 EV/EBITDA (x) 16.9 19.1 14.4 14.0 13.4 % change in EPS estimates - - - CIMB/Consensus (x) 0.93 0.82 0.76



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Volume 10m (R.H.S ca le ) IJ M Corp Bhd Source: Bloomberg

IJM Corp has its beginnings in three construction companies which were merged in order to compete more effectively with the foreign contractors that entered the local market in the late 1970s. Over the years, IJM has made its presence felt, both domestically and internationally, specifically in China, India, Argentina, Vietnam and the UAE. Diversification has led the group into property and plantations while its 2007 acquisition of Road Builder enriched its portfolio with recurring income and property ventures. The local construction sector continues to provide growth opportunities for the group while India’s robust infrastructure spending presents another key growth area on the regional front.



(RM m, FYE Mar) 2009 2010 2011F 2012F 2013F (FYE Mar) 2009 2010 2011F 2012F 2013F Revenue 4,601 4,014 4,961 5,354 5,656 Revenue growth (%) 26.0 (12.8) 23.6 7.9 5.6 Operating expenses (3,983) (3,446) (4,213) (4,579) (4,842) EBITDA growth (%) 96.9 (8.3) 31.8 3.7 5.0 EBITDA 619 568 748 775 814 Pretax margins (%) 11.5 14.4 10.4 10.1 10.1 Depreciation & amortisation (81) (85) (88) (89) (90) Net profit margins (%) 6.3 8.3 7.6 7.3 7.4 EBIT 538 482 660 686 724 Interest cover (x) 2.8 2.4 3.1 3.2 3.3 Net interest & invt income (32) 8 (176) (180) (190) Effective tax rates (%) 24.0 26.8 25.2 25.3 25.3 Associates’ contribution 22 31 32 35 39 Net dividend payout (%) 81.6 31.4 27.6 26.5 25.0 Exceptional items 0 58 0 0 0 Debtors turnover (days) 197.7 263.3 228.5 220.8 223.1 Others 0 0 0 0 0 Stock turnover (days) 35.0 46.6 40.5 39.1 39.5 Pretax profit 529 578 516 541 573 Creditors turnover (days) 140.0 186.4 161.9 156.4 158.0 Tax (127) (155) (130) (137) (145) Minority interests (112) (91) (8) (11) (11) Net profit 290 333 378 393 417 Adj. wt. shares (m) 1,319 1,353 1,353 1,353 1,353 Unadj. year-end shares (m) 1,319 1,353 1,353 1,353 1,353 BALANCE SHEET KEY DRIVERS (RM m, end Mar) 2009 2010 2011F 2012F 2013F (FYE Mar) 2010 2011F 2012F 2013FFixed assets 168 83 129 41 (47) Construction margins (%) 7.2% 8.1% 8.1% 8.1% Intangible assets 61 61 61 61 61 Orderbook replenishment (RM m) 1,000 1,000 1,000 1,000 Other long-term assets 1,721 1,721 1,722 1,723 1,724 Outstanding orderbook (RM m) 4,000 4,800 4,500 4,900 Total non-current assets 1,950 1,864 1,912 1,825 1,737 Cash and equivalents 231 218 212 210 213 Stocks 477 549 552 596 629 Trade debtors 2,692 3,097 3,116 3,362 3,552 Other current assets 2,394 1,619 1,657 1,657 1,657 Total current assets 5,795 5,483 5,536 5,825 6,051 Trade creditors 1,907 2,193 2,207 2,381 2,516 Short-term borrowings 196 196 196 196 196 Other current liabilities 844 44 179 179 179 Total current liabilities 2,947 2,434 2,581 2,756 2,890 Long-term borrowings 2,143 2,334 2,205 2,279 2,340 Other long-term liabilities 39 39 1 3 6 Total long-term liabilities 2,182 2,374 2,206 2,282 2,347 Shareholders’ funds 2,377 2,294 2,407 2,347 2,276 Minority interests 238 245 253 264 275 NTA/share (RM) 1.76 1.65 1.73 1.69 1.64 CASH FLOW 12M - FORWARD FD CORE P/E (X) (RM m, FYE Mar) 2009 2010 2011F 2012F 2013FPretax profit 529 578 516 541 573Depreciation & non–cash adj. 81 85 88 89 90Working capital changes (320) (348) (199) (344) (363)Cash tax paid (97) (107) (114) (132) (139)Others 46 (2) 182 184 191Cash flow from operations 239 207 473 337 351Capex (51) (56) (56) (56) (56)Net investments & sale of FA (205) (137) (47) (106) (97)Others 0 0 0 0 0Cash flow from investing (256) (193) (103) (163) (153)Debt raised/(repaid) 199 192 (130) 74 61Equity raised/(repaid) 0 0 0 0 0Dividends paid (52) (52) (52) (52) (52)Cash interest & others (149) (185) (174) (198) (196)Cash flow from financing (3) (45) (355) (176) (186)Change in cash (20) (31) 15 (1) 12Change in net cash/(debt) (218) (223) 145 (75) (49)Ending net cash/(debt) (2,108) (2,312) (2,189) (2,265) (2,324)

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NEUTRAL Maintained IOI Corporation Bhd RM5.78 @07/12/10 Less fruitful than peers Target: RM6.54

Palm Oil & Rubber

MA

LAYS

IA

IOI MK / IOIB.KL Ivy Ng Lee Fang CFA +60(3) 2084 9697 – [email protected]

• Maintain NEUTRAL with a higher target price of RM6.54. We continue to rate IOI Corp a NEUTRAL as the earnings upside from our more upbeat view on CPO price is offset by the stock’s rich valuations and slower output growth relative to its peers. Our earnings forecasts remain intact. However, we are raising our target price from RM6.05 to RM6.54 as we up our target forward P/E from 17x to 18x, in line with our upward revision of our target market P/E. Our new target price is based on a 25% premium over our target market P/E of 14.5x in view of the strong liquidity of its shares. For exposure to the sector, we prefer KL Kepong.

• Higher CPO price to drive 2011 earnings. We expect FY11 core earnings to jump 17%, thanks to higher CPO selling prices, stronger FFB production as the weather normalises and better earnings contribution from its Singapore property projects. There could be more upside to our earnings numbers if the group scoops up earnings-accretive acquisitions.

• Beneficiary of recovering CPO price. We are more upbeat on 2011 CPO price in view of the potential tightness in CPO supplies and strengthening of the ongoing LaNina event, which may crimp soybean harvests from South America. Approximately 62% of IOI Corp’s earnings come from its upstream plantation division, which will benefit from the recovering CPO price. Our sensitivity analysis suggests a 4% earnings impact from every RM100/tonne change in CPO price.

Financial summary

Stock Information Market cap: RM38,698m/US$12,336m 12-m price range: RM5.97 RM4.69 3-m avg daily vol: 8.0m No. of shrs (m): 6,695 Est. free float (%): 58.8 Conv. secs (m): 253.5 Major shareholders (%): - Progressive Holdings Sdn 41.8 - Employees Provident Fund 13.8

FYE Jun 2009 2010 2011F 2012F 2013F Revenue (RM m) 14,600.4 12,543.0 16,369.6 17,519.7 18,475.7 EBITDA (RM m) 1,954.3 2,879.7 3,024.3 3,300.2 3,436.8 EBITDA margins (%) 13.4% 23.0% 18.5% 18.8% 18.6% Pretax profit (RM m) 1,550.5 2,550.6 2,757.8 3,108.6 3,327.9 Net profit (RM m) 983.9 2,035.7 2,090.8 2,345.8 2,511.2 EPS (sen) 15.1 31.3 31.3 35.1 37.6 EPS growth (%) (55.9%) 107.2% 0.0% 12.2% 7.1% P/E (x) 38.3 18.5 18.5 16.5 15.4 Core EPS (sen) 22.2 24.3 29.9 35.1 37.6 Core EPS growth (%) (26.5%) 9.7% 23.1% 17.2% 7.1% Core P/E (x) 26.1 23.8 19.3 16.5 15.4 FD core EPS (sen) 21.8 24.0 29.4 34.3 36.7 FD core P/E (x) 26.5 24.1 19.7 16.8 15.7 Gross DPS (sen) 9.1 20.8 20.0 23.4 25.0 Dividend yield (%) 1.6% 3.6% 3.5% 4.0% 4.3% P/BV (x) 4.4 3.5 3.1 2.8 2.4 ROE (%) 11.8% 21.3% 18.1% 17.9% 16.9% Net gearing (%) 35.3% 8.0% N/A N/A N/A Net cash per share (RM) N/A N/A 0.11 0.26 0.44 P/FCFE (x) (172.5) 17.3 8.1 20.2 22.1 EV/EBITDA (x) 20.1 12.7 12.2 10.8 9.9 % change in EPS estimates - - - CIMB/Consensus (x) 0.96 1.02 1.00



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Volume 10m (R.H.S ca le ) IOI Corpora tion Bhd Source: Bloomberg

Incorporated in 1969 and listed in 1980, IOI Corp is an integrated plantation group. Its palm oil business comprises plantation and downstream resource-based manufacturing (oleochemical and speciality fats). The group is also the largest palm oil owner in East Malaysia. It owned 154,709ha of planted oil palm estates as at 30 June 2010. Approximately 66% of palm oil estates are located in Sabah, 30% are in Peninsular Malaysia and the remaining 4% in Indonesia. Downstream activities are held under 100%-owned Loders Croklaan and IOI Oleochemical while property development is carried out by its property arm, IOI Properties.



(RM m, FYE Jun) 2009 2010 2011F 2012F 2013F (FYE Jun) 2009 2010 2011F 2012F 2013F Revenue 14,600 12,543 16,370 17,520 18,476 Revenue growth (%) (0.4) (14.1) 30.5 7.0 5.5 Operating expenses (12,646) (9,663) (13,345) (14,220) (15,039) EBITDA growth (%) (42.4) 47.3 5.0 9.1 4.1 EBITDA 1,954 2,880 3,024 3,300 3,437 Pretax margins (%) 10.6 20.3 16.8 17.7 18.0 Depreciation & amortisation (243) (244) (250) (256) (264) Net profit margins (%) 6.7 16.2 12.8 13.4 13.6 EBIT 1,711 2,635 2,773 3,042 3,171 Interest cover (x) 7.4 11.9 13.8 15.2 15.8 Net interest & invt income (171) (174) (149) (143) (138) Effective tax rates (%) 31.4 19.0 22.3 23.0 23.0 Associates’ contribution 10 89 133 210 295 Net dividend payout (%) 44.1 50.0 47.9 50.0 50.0 Exceptional items 0 0 0 0 0 Debtors turnover (days) 30.2 26.2 26.9 33.7 33.9 Others 0 0 0 0 0 Stock turnover (days) 51.2 46.9 38.6 40.6 39.8 Pretax profit 1,551 2,551 2,758 3,109 3,328 Creditors turnover (days) 10.6 8.1 10.9 13.8 13.8 Tax (487) (486) (614) (715) (765) Minority interests (80) (29) (53) (48) (51) Net profit 984 2,036 2,091 2,346 2,511 Adj. wt. shares (m) 6,522 6,512 6,685 6,685 6,685 Unadj. year-end shares (m) 6,327 6,512 6,685 6,685 6,685 BALANCE SHEET KEY DRIVERS (RM m, end Jun) 2009 2010 2011F 2012F 2013F (FYE Jun) 2010 2011F 2012F 2013FFixed assets 4,570 4,604 6,019 6,519 6,755 Mature area (ha) 139,500 142,500 145,500 148,500 Intangible assets 513 514 514 514 514 CPO price per tonne (RM) 2,372 2,710 2,800 2,800 Other long-term assets 4,868 5,035 4,926 5,136 5,431 FFB output (000' tonnes) 3,409 3,534 3,710 3,861 Total non-current assets 9,951 10,153 11,459 12,170 12,700 FFB yield per ha (tonnes) 24 25 26 26 Cash and equivalents 2,459 3,877 6,760 7,743 8,768 CPO extraction rate (%) 21.4% 21.4% 21.4% 21.4% Stocks 1,647 1,575 1,884 2,016 2,016 Trade debtors 951 853 1,561 1,671 1,762 Other current assets 950 855 1,001 1,039 1,121 Total current assets 6,007 7,160 11,205 12,468 13,667 Trade creditors 223 336 642 681 721 Short-term borrowings 199 409 1,088 1,088 1,088 Other current liabilities 854 687 1,956 2,164 2,215 Total current liabilities 1,276 1,433 3,686 3,932 4,024 Long-term borrowings 5,355 4,348 4,936 4,936 4,736 Other long-term liabilities 577 493 628 628 628 Total long-term liabilities 5,932 4,841 5,563 5,563 5,363 Shareholders’ funds 8,346 10,780 12,272 13,952 15,797 Minority interests 426 289 1,143 1,191 1,191 NTA/share (RM) 1.24 1.58 1.76 2.01 2.29 CASH FLOW 12M - FORWARD FD CORE P/E (X) (RM m, FYE Jun) 2009 2010 2011F 2012F 2013FPretax profit 1,551 2,551 2,758 3,109 3,328Depreciation & non–cash adj. 243 244 250 256 264Working capital changes (967) 632 1,770 (34) (82)Cash tax paid (561) (544) (614) (715) (765)Others 803 (231) 16 (65) (155)Cash flow from operations 1,069 2,652 4,180 2,552 2,589Capex (422) (427) (500) (500) (500)Net investments & sale of FA (294) 917 0 0 0Others 0 0 0 0 0Cash flow from investing (717) 489 (500) (500) (500)Debt raised/(repaid) (401) (797) 1,266 0 (200)Equity raised/(repaid) 11 1,200 (10) 2 2Dividends paid (434) (1,018) (1,001) (1,173) (1,256)Cash interest & others 34 (1,108) (1,053) 103 389Cash flow from financing (789) (1,723) (798) (1,068) (1,064)Change in cash (437) 1,418 2,883 983 1,025Change in net cash/(debt) (36) 2,215 1,617 983 1,225Ending net cash/(debt) (3,095) (880) 737 1,720 2,945

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UNDERPERFORM Maintained JCY International RM0.80 @07/12/10 A dislocated disk Target: RM0.92

Technology Components

MA

LAYS

IA

JCYH MK / JCYI.KL Terence Wong CFA +60(3) 20849689 – [email protected]

• Maintain UNDERPERFORM with target price of RM0.92. We believe near-term earnings will remain hindered by the current soft HDD demand as JCY derives all of its business from the HDD sector. Without the Christmas cheer and given the seasonally weaker 1H, we think the market will only start turning positive in 2H11. Other negative factors that could weigh on the bottomline include the weakening of the US$ and wage pressure in Malaysia. Our target price of RM0.92 pegs JCY at 8x CY12 P/E, in line with the industry peers. We prefer SGX-listed Broadway (BWAY SP, S$1.03, Outperform) for HDD play at this moment.

• Stronger ringgit and rising labour costs are two key negatives. Although JCY intends to accelerate the relocation of labour-intensive processes from Malaysia to China, the process may take time to complete and the potential positive benefits are not likely to be felt in the near term. Also, wages in China are rising rapidly. The other concern we have is execution risk as China is relatively new for the group, especially in Guangzhou.

• Longer-term beneficiary of industry consolidation. We think that major component suppliers like JCY are in a good position to benefit from further market consolidation in the HDD supply chain. HDD OEMs will prefer to work with “bigger” suppliers that are able to offer multiple components, better pricing and the financial power to grow with them. This is evident from JCY’s recent success in securing new customers for base plates.

Financial summary

Stock Information Market cap: RM1,636m/US$521m 12-m price range: RM1.95 RM0.78 3-m avg daily vol: 7.2m No. of shrs (m): 2,045 Est. free float (%): 24.0 Conv. secs (m): None Major shareholders (%): - Yong Yoon Kiong 76.0

FYE Sep 2009 2010 2011F 2012F 2013F Revenue (RM m) 1,758.0 2,044.6 2,112.3 2,439.7 2,701.9 EBITDA (RM m) 287.5 296.9 280.2 354.2 413.2 EBITDA margins (%) 16.4% 14.5% 13.3% 14.5% 15.3% Pretax profit (RM m) 205.9 184.3 169.5 225.6 267.8 Net profit (RM m) 207.3 176.4 168.8 224.7 266.8 EPS (sen) 10.1 8.6 8.3 11.0 13.0 EPS growth (%) 2.2% (14.9%) (4.3%) 33.1% 18.7% P/E (x) 7.9 9.3 9.7 7.3 6.1 Core EPS (sen) 10.1 9.3 8.3 11.0 13.0 Core EPS growth (%) 2.2% (8.0%) (11.4%) 33.1% 18.7% Core P/E (x) 7.9 8.6 9.7 7.3 6.1 Gross DPS (sen) 5.1 3.9 4.1 5.5 6.5 Dividend yield (%) 6.3% 4.9% 5.2% 6.9% 8.2% P/BV (x) 2.0 1.9 1.7 1.5 1.4 ROE (%) 25.5% 21.0% 18.3% 22.0% 23.3% Net gearing (%) N/A 24.5% 21.5% 16.9% 10.6% Net cash per share (RM) 0.03 N/A N/A N/A N/A P/FCFE (x) 10.4 (58.0) 70.6 11.9 8.7 EV/EBITDA (x) 5.5 6.2 6.6 5.1 4.3 % change in EPS estimates N/A N/A N/A CIMB/Consensus (x) 0.65 0.71 0.77



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Volume 10m (R.H.S ca le ) J CY Inte rna tiona l Bhd Source: Bloomberg

JCY International Bhd is a precision engineering manufacturer of hard disk drive (HDD) mechanical components, with manufacturing facilities in Malaysia, Thailand and China. Its principal activities include the manufacturing of base plates, top cover assembly, actuator pivot flex assembly (APFA) and antidiscs, which are key components of HDDs. JCY typically develops these components jointly with its HDD customers.



(RM m, FYE Sep) 2009 2010 2011F 2012F 2013F (FYE Sep) 2009 2010 2011F 2012F 2013F Revenue 1,758 2,045 2,112 2,440 2,702 Revenue growth (%) (4.2) 16.3 3.3 15.5 10.7 Operating expenses (1,471) (1,748) (1,832) (2,086) (2,289) EBITDA growth (%) 4.7 3.3 (5.6) 26.4 16.7 EBITDA 287 297 280 354 413 Pretax margins (%) 11.7 9.0 8.0 9.2 9.9 Depreciation & amortisation (82) (94) (110) (128) (145) Net profit margins (%) 11.8 8.6 8.0 9.2 9.9 EBIT 206 203 171 227 268 Interest cover (x) 27.8 19.4 34.9 46.4 54.8 Net interest & invt income (5) (8) (3) (4) (3) Effective tax rates (%) N/A 4.3 0.4 0.4 0.4 Associates’ contribution 0 0 0 0 0 Net dividend payout (%) 41.0 37.1 41.0 41.0 41.0 Exceptional items 0 0 0 0 0 Debtors turnover (days) 70.2 63.6 66.3 62.8 63.1 Others 5 (11) 2 3 3 Stock turnover (days) 39.1 35.2 37.9 36.0 36.1 Pretax profit 206 184 170 226 268 Creditors turnover (days) 60.9 47.6 43.6 41.3 41.6 Tax 1 (8) (1) (1) (1) Minority interests 0 0 0 0 0 Net profit 207 176 169 225 267 Adj. wt. shares (m) 2,045 2,045 2,045 2,045 2,045 Unadj. year-end shares (m) 2,045 2,045 2,045 2,045 2,045 BALANCE SHEET KEY DRIVERS (RM m, end Sep) 2009 2010 2011F 2012F 2013F (FYE Sep) 2010 2011F 2012F 2013FFixed assets 643 754 799 850 880 Unit sales (million units) Baseplate 214 229 263 288 Intangible assets 0 0 0 0 0 Unit sales (million units) Top cover 126 144 174 196 Other long-term assets 48 19 19 19 19 Unit sales ( mn units) Actuator arm 80 84 97 109 Total non-current assets 692 774 818 870 900 Cash and equivalents 239 125 71 96 150 Stocks 185 209 230 252 282 Trade debtors 345 367 401 439 496 Other current assets 0 0 0 0 0 Total current assets 769 701 701 787 928 Trade creditors 292 241 264 289 326 Short-term borrowings 186 263 163 163 163 Other current liabilities 175 1 1 1 1 Total current liabilities 653 505 427 453 490 Long-term borrowings 0 77 115 115 115 Other long-term liabilities 6 13 13 13 13 Total long-term liabilities 6 90 128 128 128 Shareholders’ funds 803 880 964 1,076 1,210 Minority interests 0 0 0 0 0 NTA/share (RM) 0.39 0.43 0.47 0.53 0.59 CASH FLOW 12M - FORWARD FD CORE P/E (X) (RM m, FYE Sep) 2009 2010 2011F 2012F 2013FPretax profit 206 184 170 226 268Depreciation & non–cash adj. 82 94 110 128 145Working capital changes (12) (89) (32) (36) (50)Cash tax paid 0 (7) (8) (1) (1)Others (1) (170) (1) (1) (2)Cash flow from operations 275 13 238 316 361Capex (141) (226) (154) (179) (175)Net investments & sale of FA (2) 29 0 0 0Others 3 2 1 1 2Cash flow from investing (141) (195) (153) (178) (173)Debt raised/(repaid) 23 154 (62) 0 0Equity raised/(repaid) 0 0 0 0 0Dividends paid (60) (80) 0 (84) (112)Cash interest & others (3) (6) (77) (28) (21)Cash flow from financing (40) 68 (140) (112) (133)Change in cash 94 (114) (54) 25 54Change in net cash/(debt) 71 (268) 8 25 54Ending net cash/(debt) 53 (215) (207) (182) (128)

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Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10





OUTPERFORM Maintained JobStreet Corp Bhd RM2.88 @07/12/10 Doing a better job through more marketing Target: RM3.73

Technology - Others

MA

LAYS

IA

JOBS MK / JOBT.KL Terence Wong CFA +60(3) 20849689 – [email protected]

• Maintain OUTPERFORM. We retain our OUTPERFORM call on Jobstreet and expect the re-rating catalysts to be further market share gains and earnings surprises. There are no changes to our EPS forecasts or target price of RM3.73, which we continue to peg to a 20% discount to its peers or 22.6x P/E.

• Spending to grow market share. Jobstreet raised its marketing spend in 2010 to capture more market share, especially in its weakest core market, Singapore. Its efforts have paid off as it has closed the gap down south and is no longer seeing a job posting deficit of 4-5K per month. Job posting volumes are also rising in its other two core markets where its lead over its rivals has not been eroded.

• Still positive outlook for 4Q. While there was a slightly more downbeat feel to Jobstreet’s 4Q10 job outlook compared to 3Q, most respondents were still generally positive about the job outlook. The expectations for job growth remain fairly high and growth in jobs for the next 12 months is expected to improve. But employers appear to be less optimistic about hiring activities than a quarter ago.

Financial summary

Stock Information Market cap: RM916m/US$292m 12-m price range: RM3.00 RM1.41 3-m avg daily vol: 0.1m No. of shrs (m): 318 Est. free float (%): 15.5 Conv. secs (m): None Major shareholders (%): - Seek 22.4 - Fidelity 12.0 - Mark Chang 10.7

FYE Dec 2008 2009 2010F 2011F 2012F Revenue (RM m) 102.3 92.3 111.5 125.9 140.0 EBITDA (RM m) 47.2 36.9 47.3 54.5 61.0 EBITDA margins (%) 46.2% 40.0% 42.4% 43.3% 43.6% Pretax profit (RM m) 39.9 35.6 50.6 61.9 69.6 Net profit (RM m) 32.8 26.7 37.5 46.5 51.9 EPS (sen) 10.6 8.6 11.9 14.8 16.5 EPS growth (%) 12.6% (18.7%) 38.7% 23.8% 11.8% P/E (x) 27.2 33.4 24.1 19.5 17.4 Core EPS (sen) 12.5 8.6 11.9 14.8 16.5 Core EPS growth (%) 30.6% (31.0%) 38.7% 23.8% 11.8% Core P/E (x) 23.1 33.4 24.1 19.5 17.4 Gross DPS (sen) 4.7 4.0 7.8 9.6 10.8 Dividend yield (%) 1.6% 1.4% 2.7% 3.3% 3.7% P/BV (x) 8.2 7.1 6.2 5.4 4.7 ROE (%) 33.8% 22.6% 27.7% 29.7% 28.7% Net cash per share (RM) 0.16 0.17 0.19 0.26 0.34 P/FCFE (x) 134.5 77.7 33.5 19.6 17.8 EV/EBITDA (x) 17.8 22.8 18.0 15.2 13.2 % change in EPS estimates N/A N/A N/A CIMB/Consensus (x) 1.02 1.03 1.00



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Volume 1m (R.H.S ca le ) J obS tre e t Corp Bhd Source: Bloomberg

Jobstreet is Malaysia’s premier online recruitment, with operations in the Philippines (market leader), Singapore (#2 spot), India (#3 spot), Indonesia (#3 spot), Japan, Thailand (new entrant) and Hong Kong. It was first to market in Malaysia and has focused on building its brand over the past 12 years. The company provides staff recruitment services and payroll management for corporations in addition to online recruitment services. It listed on the Mesdaq market (now Ace Market) in 2004 and transferred to the Main Board at end-07. About 63% of Jobstreet’s 9M10 revenue was derived from Malaysia, 19% from Singapore, 14% from the Philippines and the balance from its other markets.



(RM m, FYE Dec) 2008 2009 2010F 2011F 2012F (FYE Dec) 2008 2009 2010F 2011F 2012F Revenue 102 92 111 126 140 Revenue growth (%) 23.2 (9.8) 20.7 12.9 11.2 Operating expenses (55) (55) (64) (71) (79) EBITDA growth (%) 43.7 (21.8) 28.1 15.2 12.0 EBITDA 47 37 47 55 61 Pretax margins (%) 39.0 38.6 45.4 49.2 49.8 Depreciation & amortisation (1) (1) (1) (2) (2) Net profit margins (%) 32.1 28.9 33.7 36.9 37.1 EBIT 46 36 46 53 59 Interest cover (x) N/A N/A N/A N/A N/A Net interest & invt income 1 1 1 2 2 Effective tax rates (%) 12.4 20.7 23.4 21.9 22.0 Associates’ contribution (1) (1) 3 7 9 Net dividend payout (%) 32.7 34.5 48.9 48.9 48.9 Exceptional items (7) 0 0 0 0 Debtors turnover (days) 34.0 32.1 24.0 19.9 16.0 Others 0 0 0 0 0 Stock turnover (days) 0.0 0.0 0.0 0.0 0.0 Pretax profit 40 36 51 62 70 Creditors turnover (days) 40.1 29.9 24.0 24.1 24.0 Tax (5) (7) (12) (14) (15) Minority interests (2) (2) (1) (2) (2) Net profit 33 27 38 46 52 Adj. wt. shares (m) 310 310 314 314 314 Unadj. year-end shares (m) 310 310 314 314 314 BALANCE SHEET KEY DRIVERS (RM m, end Dec) 2008 2009 2010F 2011F 2012F (FYE Dec) 2009 2010F 2011F 2012FFixed assets 14 14 14 14 14 Paid job postings (number) 316,132 363,552 436,262 527,877 Intangible assets 3 3 3 3 3 Active customer accounts 59,501 65,452 71,997 79,916 Other long-term assets 41 69 84 89 95 Total non-current assets 58 85 101 106 112 Cash and equivalents 51 53 61 84 109 Stocks 0 0 0 0 0 Trade debtors 9 7 7 7 6 Other current assets 21 10 10 10 10 Total current assets 81 70 78 100 124 Trade creditors 8 7 8 9 10 Short-term borrowings 0 0 0 0 0 Other current liabilities 19 19 21 22 22 Total current liabilities 27 26 29 31 32 Long-term borrowings 1 1 1 1 1 Other long-term liabilities 0 0 0 0 0 Total long-term liabilities 1 1 1 1 1 Shareholders’ funds 109 126 145 168 194 Minority interests 2 3 4 6 9 NTA/share (RM) 0.34 0.40 0.45 0.53 0.61 CASH FLOW 12M - FORWARD FD CORE P/E (X) (RM m, FYE Dec) 2008 2009 2010F 2011F 2012FPretax profit 40 36 51 62 70Depreciation & non–cash adj. 1 1 1 2 2Working capital changes (4) 0 1 2 2Cash tax paid (5) (7) (12) (14) (15)Others 15 3 (1) (5) (6)Cash flow from operations 47 32 41 47 51Capex (1) (1) (2) (2) (2)Net investments & sale of FA (32) (21) (14) 0 0Others 0 0 0 0 0Cash flow from investing (33) (22) (15) (2) (2)Debt raised/(repaid) 0 0 0 0 0Equity raised/(repaid) 0 0 0 0 0Dividends paid (11) (9) (19) (23) (26)Cash interest & others (7) 0 1 2 3Cash flow from financing (17) (9) (17) (22) (23)Change in cash (4) 2 8 23 26Change in net cash/(debt) (4) 2 8 23 26Ending net cash/(debt) 50 52 60 83 108

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NEUTRAL Maintained JT International Bhd RM6.03 @07/12/10 Keeping the fire alive Target: RM6.35

Tobacco

MA

LAYS

IA

RJR MK / JTIN.KL Loke Wei Wern +60 (3) 2084 9946 – [email protected]

• Maintain NEUTRAL. JT International (JTI)’s comeback in terms of market share is encouraging. But prospects are likely to be weighed down by the tough industry fundamentals. In 2011, JTI will have to grapple with the high level of illicit trade and the potential decline in demand due to the hefty 8-9% price hike in October. We, therefore, remain NEUTRAL on the stock with an unchanged DDM-based target price of RM6.35 (COE 7.7%, LTG 1.5%). The stock should be supported by its decent dividend yield of 5%.

• Continued brand investments to sustain growth. JTI has finally regained its footing after coming under intense competitive pressure over the past few years. Winston and Mild Seven are faring well and should sustain their growth momentum given JTI’s continuous investments in the two brands. But the recent repositioning of British American Tobacco (ROTH MK; Underperform)’s Peter Stuyvesant as a value-for-money (VFM) brand will inevitably raise the bar in the VFM segment. Now that Peter Stuyvesant has joined the fray, BAT has two brands in the VFM segment, which is JTI’s mainstay.

• JTI unlikely to mimic brand repositioning strategy. Despite the intensifying competition, we think JTI is unlikely to mimic its rivals’ move of repositioning its existing brands. Beginning July 2010, tobacco manufacturers need the Ministry of Health’s approval for any changes in their cigarette prices. This makes brand repositioning more difficult as tobacco manufacturers will have to ensure that there is a substantial change in the product to justify a price change.

Financial summary

Stock Information Market cap: RM1,577m/US$501m 12-m price range: RM6.15 RM4.78 3-m avg daily vol: 0.0m No. of shrs (m): 262 Est. free float (%): 30.0 Conv. secs (m): None Major shareholders (%): - JT International BV 60.4 - EPF 7.4 - PNB 5.1

FYE Dec 2008 2009 2010F 2011F 2012F Revenue (RM m) 1,038.5 1,158.2 1,223.5 1,297.3 1,317.4 EBITDA (RM m) 147.7 163.7 173.1 183.8 188.6 EBITDA margins (%) 14.2% 14.1% 14.2% 14.2% 14.3% Pretax profit (RM m) 134.1 143.6 154.8 166.5 172.7 Net profit (RM m) 98.2 108.3 114.6 123.2 127.8 EPS (sen) 37.5 41.4 43.8 47.1 48.9 EPS growth (%) 21.1% 10.3% 5.8% 7.5% 3.7% P/E (x) 16.1 14.6 13.8 12.8 12.3 Gross DPS (sen) 67.8 30.0 30.0 30.0 35.0 Dividend yield (%) 11.3% 5.0% 5.0% 5.0% 5.8% P/BV (x) 3.4 5.0 4.2 3.6 3.2 ROE (%) 20.5% 27.8% 33.4% 30.5% 27.5% Net cash per share (RM) 1.02 0.48 0.65 0.88 1.10 P/FCFE (x) 13.8 14.0 15.1 13.3 13.6 EV/EBITDA (x) 8.9 8.9 8.1 7.3 6.8 % change in EPS estimates - - - CIMB/Consensus (x) 0.94 0.96 0.96



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Volume 100k (R.H.S ca le ) J T Inte rna tiona l Bhd Source: Bloomberg

JT International (JTI) is 60.4% owned by JT International Holding BV. It is involved in the manufacturing, marketing and sale of tobacco products primarily in Malaysia. Previously known as RJ Reynolds until the takeover of RJR’s global brands by JTI, it is the second biggest player in the Malaysian tobacco industry, which is dominated by British American Tobacco (BAT). JTI’s portfolio of brands includes Winston, Mild Seven, Salem, Camel, More and Mine. While BAT is ahead of JTI in terms of total market share, JTI dominates the value-for-money (VFM) segment via its Winston brand.



(RM m, FYE Dec) 2008 2009 2010F 2011F 2012F (FYE Dec) 2008 2009 2010F 2011F 2012F Revenue 1,039 1,158 1,223 1,297 1,317 Revenue growth (%) 20.1 11.5 5.6 6.0 1.5 Operating expenses (891) (994) (1,050) (1,114) (1,129) EBITDA growth (%) 13.3 10.9 5.8 6.1 2.6 EBITDA 148 164 173 184 189 Pretax margins (%) 12.9 12.4 12.7 12.8 13.1 Depreciation & amortisation (21) (22) (23) (23) (23) Net profit margins (%) 9.5 9.3 9.4 9.5 9.7 EBIT 126 141 151 161 166 Interest cover (x) N/A N/A N/A N/A N/A Net interest & invt income 8 2 4 6 7 Effective tax rates (%) 26.8 24.6 26.0 26.0 26.0 Associates’ contribution 0 0 0 0 0 Net dividend payout (%) 133.7 54.4 51.4 47.8 53.7 Exceptional items 0 0 0 0 0 Debtors turnover (days) 23.7 20.0 17.9 17.9 18.3 Others 0 0 0 0 0 Stock turnover (days) 33.6 25.8 23.2 23.1 23.6 Pretax profit 134 144 155 166 173 Creditors turnover (days) 16.5 17.2 17.0 16.9 17.3 Tax (36) (35) (40) (43) (45) Minority interests 0 0 0 0 0 Net profit 98 108 115 123 128 Adj. wt. shares (m) 262 262 262 262 262 Unadj. year-end shares (m) 262 262 262 262 262 BALANCE SHEET KEY DRIVERS (RM m, end Dec) 2008 2009 2010F 2011F 2012F (FYE Dec) 2009 2010F 2011F 2012FFixed assets 102 121 121 122 124 Industry volume growth (% growth) -11.7% -3.0% -5.0% 0.0% Intangible assets 0 0 0 0 0 Sales tax (%) 5.0% 5.0% 5.0% 5.0% Other long-term assets 5 5 5 5 5 Excise duties (RM per kg) 190.00 220.00 220.00 220.00 Total non-current assets 107 126 126 128 129 Cash and equivalents 267 125 171 230 287 Stocks 88 76 80 85 86 Trade debtors 68 58 62 66 67 Other current assets 14 27 26 24 23 Total current assets 438 286 338 405 463 Trade creditors 54 55 58 62 63 Short-term borrowings 0 0 0 0 0 Other current liabilities 12 19 13 13 13 Total current liabilities 66 75 72 75 76 Long-term borrowings 0 0 0 0 0 Other long-term liabilities 17 21 21 21 21 Total long-term liabilities 17 21 21 21 21 Shareholders’ funds 462 316 371 436 495 Minority interests 0 0 0 0 0 NTA/share (RM) 1.77 1.21 1.42 1.67 1.89 CASH FLOW 12M - FORWARD FD CORE P/E (X) (RM m, FYE Dec) 2008 2009 2010F 2011F 2012FPretax profit 134 144 155 166 173Depreciation & non–cash adj. 21 22 23 23 23Working capital changes 27 24 (4) (5) (1)Cash tax paid (41) (36) (35) (40) (43)Others (16) (12) (14) (7) (18)Cash flow from operations 126 141 123 137 133Capex (20) (22) (23) (24) (24)Net investments & sale of FA 1 (18) 0 0 0Others 8 2 0 0 0Cash flow from investing (12) (38) (23) (24) (24)Debt raised/(repaid) 0 0 0 0 0Equity raised/(repaid) 0 (196) 0 0 0Dividends paid (131) (59) (59) (59) (59)Cash interest & others 0 10 4 6 7Cash flow from financing (131) (245) (55) (53) (52)Change in cash (17) (142) 46 59 57Change in net cash/(debt) (17) (142) 46 59 57Ending net cash/(debt) 267 125 171 230 287

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OUTPERFORM Maintained Kencana Petroleum Bhd RM2.01 @07/12/10 Drilling for more growth Target: RM2.60


MA

LAYS

IA

KEPB MK / KENP.KL Norziana Mohd Inon +60(3) 2084 9645 – [email protected]

• Maintain OUTPERFORM. We maintain our forecasts but raise our target price from RM2.28 to RM2.60, pegged to a revised target market P/E of 14.5x (13.8x previously). Kencana remains an OUTPERFORM, with the potential re-rating triggers being 1) active order book replenishment, 2) a new JV partner and 3) M&A.

• RM2.1bn order book and rising. Management has been consistently delivering its promise to expand the order book. YTD, Kencana has secured 13 new contracts, worth a collective RM1bn, taking its outstanding order book to RM2.1bn. The all-time high is RM2.8bn recorded in Oct-Dec 08. The company is eyeing sizeable deals worth a collective RM5.2bn in Malaysia and at least US$300m in India.

• KM1 extends Kencana’s expertise. Drilling rig KM1 is on a 5-year, RM729m Petronas Carigali drilling contract which accounts for 34% of Kencana’s current orders. The contract commenced on 2 Sep 10 and the rig started drilling in the final week of Sep at a daily charter rate of US$130,000/day, higher than the average global rate of US$115,628/day. Kencana is the first Malaysian company to build, own and operate a drilling rig. KM1 could be the start of more rigs to come.

• A JV partner in McDermott? We understand that McDermott may surface as a JV partner of Kencana. Kencana could be interested in working with McDermott to build a pipeline installation business after its attempt with US-based Global failed. Following the breakdown of the JV with Global in May, Kencana has maintained its interest in owning and operating pipelay barges, either by going it alone or by roping in a partner.

Financial summary

Stock Information Market cap: RM3,335m/US$1,063m 12-m price range: RM2.10 RM1.27 3-m avg daily vol: 8.6m No. of shrs (m): 1,659 Est. free float (%): 53.0 Conv. secs (m): None Major shareholders (%): - Khasera Baru Sdn Bhd 38.6 - EPF 8.4

FYE Jul 2009 2010 2011F 2012F 2013F Revenue (RM m) 1,140.8 1,089.7 1,702.5 2,686.0 3,146.0 EBITDA (RM m) 174.9 196.7 310.5 373.1 396.1 EBITDA margins (%) 15.3% 18.1% 18.2% 13.9% 12.6% Pretax profit (RM m) 153.1 171.3 302.4 364.4 387.9 Net profit (RM m) 118.5 135.8 213.2 270.8 279.3 EPS (sen) 13.1 10.1 12.9 16.3 16.8 EPS growth (%) 39.0% (23.1%) 27.4% 27.0% 3.1% P/E (x) 15.3 19.9 15.6 12.3 11.9 Gross DPS (sen) 1.5 1.5 2.5 3.5 4.5 Dividend yield (%) 0.7% 0.7% 1.2% 1.7% 2.2% P/BV (x) 8.0 10.7 10.6 9.7 9.1 ROE (%) 51.2% 56.5% 75.3% 82.6% 78.8% Net gearing (%) 7.9% 3.8% N/A N/A N/A Net cash per share (RM) N/A N/A 0.00 0.01 0.01 P/FCFE (x) 80.5 89.9 63.7 47.6 38.4 EV/EBITDA (x) 10.5 13.8 10.7 8.9 8.4 % change in EPS estimates - - - CIMB/Consensus (x) 1.02 1.07 1.02



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Volume 10m (R.H.S ca le ) Ke nca na Pe trole um Bhd Source: Bloomberg

Kencana is involved in fabrication, drilling and marine support activities. It is one of seven Petronas-licensed fabricators of offshore structures. This essentially allows it to bid for fabrication contracts tendered by production-sharing contractors in Malaysia. At present, the company’s yard in Lumut spans 169 acres with capacity of 60,000 tonnes p.a. Its covered yard space of 30,000 sq m allows the welders to work 24/7 in all weather conditions. In CY08, Kencana started the fabrication of its first drilling rig KM1. The company also owns two AHTS vessels, namely 67%-owned 5,500HP KPV Kapas and wholly-owned 8,080HP KPV Gemia.



(RM m, FYE Jul) 2009 2010 2011F 2012F 2013F (FYE Jul) 2009 2010 2011F 2012F 2013F Revenue 1,141 1,090 1,703 2,686 3,146 Revenue growth (%) (21.4) (4.5) 56.2 57.8 17.1 Operating expenses (966) (893) (1,392) (2,313) (2,750) EBITDA growth (%) 30.1 12.5 57.8 20.2 6.1 EBITDA 175 197 310 373 396 Pretax margins (%) 13.4 15.7 17.8 13.6 12.3 Depreciation & amortisation (16) (18) (8) (9) (9) Net profit margins (%) 10.4 12.5 12.5 10.1 8.9 EBIT 159 179 302 364 387 Interest cover (x) 15.2 15.6 42.2 42.8 39.2 Net interest & invt income (6) (6) 0 0 0 Effective tax rates (%) 22.6 20.8 29.5 25.7 28.0 Associates’ contribution 0 (1) 1 1 1 Net dividend payout (%) 8.2 10.7 14.0 15.4 19.2 Exceptional items 0 0 0 0 0 Debtors turnover (days) 100.7 116.0 81.7 56.9 53.5 Others 0 0 0 0 0 Stock turnover (days) 8.1 9.3 6.5 4.6 4.3 Pretax profit 153 171 302 364 388 Creditors turnover (days) 87.9 101.3 71.3 49.7 46.7 Tax (35) (36) (89) (94) (109) Minority interests 0 0 0 0 0 Net profit 118 136 213 271 279 Adj. wt. shares (m) 903 1,346 1,658 1,658 1,658 Unadj. year-end shares (m) 903 1,346 1,658 1,658 1,658 BALANCE SHEET KEY DRIVERS (RM m, end Jul) 2009 2010 2011F 2012F 2013F (FYE Jul) 2010 2011F 2012F 2013FFixed assets 147 153 192 200 199 Overseas rev contribution (%) 55.0% 55.0% 55.0% 55.0% Intangible assets 1 1 1 1 1 Order book (RM m) 2,500 2,500 2,500 2,500 Other long-term assets 4 5 5 6 6 Size of fabrication yard (acres) 169 169 169 169 Total non-current assets 152 159 198 207 207 Yard annual capacity (tonnes) 60,000 60,000 60,000 60,000 Cash and equivalents 99 109 120 132 145 Yard utilisation rate (%) 80.0% 80.0% 80.0% 80.0% Stocks 26 29 32 35 39 Trade debtors 330 363 399 439 483 Other current assets 37 41 45 49 54 Total current assets 492 541 595 655 720 Trade creditors 288 317 348 383 422 Short-term borrowings 73 75 76 77 78 Other current liabilities 3 3 4 5 6 Total current liabilities 363 394 427 464 505 Long-term borrowings 44 44 44 45 46 Other long-term liabilities 9 9 9 10 11 Total long-term liabilities 53 53 53 55 57 Shareholders’ funds 228 253 313 343 366 Minority interests 0 0 0 0 0 NTA/share (RM) 0.25 0.19 0.19 0.21 0.22 CASH FLOW 12M - FORWARD FD CORE P/E (X) (RM m, FYE Jul) 2009 2010 2011F 2012F 2013FPretax profit 153 171 302 364 388Depreciation & non–cash adj. 16 18 8 9 9Working capital changes (6) (7) (7) (8) (9)Cash tax paid (32) (44) (55) (89) (94)Others 183 187 182 181 181Cash flow from operations 314 326 430 457 475Capex (35) (35) (34) (33) (32)Net investments & sale of FA 0 0 0 0 0Others 0 4 7 11 13Cash flow from investing (35) (31) (27) (22) (19)Debt raised/(repaid) (3) 2 1 2 2Equity raised/(repaid) 0 0 0 0 1Dividends paid (14) (20) (41) (58) (75)Cash interest & others (254) (266) (351) (366) (371)Cash flow from financing (271) (285) (392) (422) (442)Change in cash 9 10 11 12 13Change in net cash/(debt) 12 8 10 10 11Ending net cash/(debt) (18) (10) 0 10 21

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UNDERPERFORM Maintained KLCC Property Holdings Bhd RM3.53 @07/12/10 Switch to REITs or developers Target: RM3.03

Property Investment

MA

LAYS

IA

KLCC MK / KCCP.KL Terence Wong CFA +60(3) 20849689 – [email protected]

• Maintain UNDERPERFORM. We continue to prefer property developers to property investment companies as developers will benefit from the record sales achieved in 2010. We make no changes to our EPS forecasts or RM3.03 target price, which we continue to base on a 40% discount to its fully diluted RNAV of RM5.05. The stock remains an UNDERPERFORM in light of the potential de-rating catalysts of 1) investor preference for property developers, and 2) shift in interest to large-cap REITs with much higher yields. Investors seeking stable rental income, higher yields and accretive acquisitions should plump for Axis REIT (AXRB MK; Not Rated).

• Higher yields from REITs. We maintain our preference for property developers over property investment companies as developers will benefit from the record sales achieved in 2010. Also, some developers are merging into very large property companies that are more investable. Moreover, the oversupply of office space and hotel rooms will limit upside to rental income from the group’s investment properties. For investors seeking stable yields, Malaysian REITs provide far better returns than KLCC Prop. The listing of large REITs such as Sunway REIT (SREIT MK; Not Rated) and CapitaMalls Malaysia (CMMT MK; Not Rated) also provides investors with an alternative to KLCC Prop.

Financial summary

Stock Information Market cap: RM3,297m/US$1,051m 12-m price range: RM3.54 RM2.75 3-m avg daily vol: 0.4m No. of shrs (m): 934 Est. free float (%): 47.4 Conv. secs (m): 358 Major shareholders (%): - Petroliam Nasional Berhad 52.6 - Employees Provident Fund 12.3 - Valuecap Sdn Bhd 3.7

FYE Mar 2009 2010 2011F 2012F 2013F Revenue (RM m) 861.2 881.3 917.8 1,003.2 1,148.0 EBITDA (RM m) 661.0 683.0 739.3 777.2 833.2 EBITDA margins (%) 76.7% 77.5% 80.6% 77.5% 72.6% Pretax profit (RM m) 1,032.2 1,291.5 576.1 618.5 686.7 Net profit (RM m) 646.8 896.6 259.1 281.9 323.7 EPS (sen) 69.2 96.0 27.7 30.2 34.7 EPS growth (%) 16.2% 38.6% (71.1%) 8.8% 14.8% P/E (x) 5.1 3.7 12.7 11.7 10.2 Core EPS (sen) 25.1 25.7 27.7 30.2 34.7 Core EPS growth (%) 6.7% 2.4% 7.8% 8.8% 14.8% Core P/E (x) 14.1 13.7 12.7 11.7 10.2 FD core EPS (sen) 18.6 19.1 20.4 22.2 25.4 FD core P/E (x) 19.0 18.5 17.3 15.9 13.9 Gross DPS (sen) 14.0 14.7 15.0 15.0 15.0 Dividend yield (%) 4.0% 4.2% 4.2% 4.2% 4.2% P/BV (x) 0.7 0.6 0.6 0.6 0.6 ROE (%) 14.2% 17.8% 4.8% 5.1% 5.6% Net gearing (%) 19.8% 16.2% 16.1% 15.9% 15.7% P/FCFE (x) (24.4) (13.1) 42.1 11.7 10.4 EV/EBITDA (x) 11.1 11.1 10.5 10.2 9.7 % change in EPS estimates N/A N/A N/A CIMB/Consensus (x) 0.82 1.08 1.04



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Volume 1m (R.H.S c a le ) KLCC Prope rty Holding s Bhd Source: Bloomberg

KLCC Prop was incorporated in Feb 04 and acquired from its holding company interests in numerous buildings and two vacant plots of land in the 100-acre KLCC Development. It owns only selected properties within KLCC Development and not the entire project, which includes other development activities. The only building owned by KLCC Prop that is not part of KLCC Development is Kompleks Dayabumi. KLCC Prop’s assets include 50.5% of Petronas Twin Towers, 60% of Suria KLCC, 33% of Menara Maxis, 100% of Menara ExxonMobil, 75% of Mandarin Oriental Hotel and 100% of Lot C and Lot D1 development land.



(RM m, FYE Mar) 2009 2010 2011F 2012F 2013F (FYE Mar) 2009 2010 2011F 2012F 2013F Revenue 861 881 918 1,003 1,148 Revenue growth (%) 2.2 2.3 4.1 9.3 14.4 Operating expenses (200) (198) (179) (226) (315) EBITDA growth (%) 0.5 3.3 8.2 5.1 7.2 EBITDA 661 683 739 777 833 Pretax margins (%) 119.9 146.5 62.8 61.7 59.8 Depreciation & amortisation (34) (36) (42) (44) (46) Net profit margins (%) 75.1 101.7 28.2 28.1 28.2 EBIT 627 647 697 733 787 Interest cover (x) 4.0 4.6 4.5 4.8 5.5 Net interest & invt income (140) (130) (135) (129) (115) Effective tax rates (%) 18.9 13.4 25.0 25.0 25.0 Associates’ contribution 36 16 14 14 15 Net dividend payout (%) 15.2 11.5 40.6 37.3 32.5 Exceptional items 508 758 0 0 0 Debtors turnover (days) 16.6 18.6 13.7 10.1 9.9 Others 0 0 0 0 0 Stock turnover (days) 0.2 0.3 0.3 0.2 0.2 Pretax profit 1,032 1,291 576 619 687 Creditors turnover (days) 14.3 22.2 16.1 8.2 8.0 Tax (195) (173) (144) (155) (172) Minority interests (190) (222) (173) (182) (191) Net profit 647 897 259 282 324 Adj. wt. shares (m) 934 934 934 934 934 Unadj. year-end shares (m) 934 934 934 934 934 BALANCE SHEET KEY DRIVERS (RM m, end Mar) 2009 2010 2011F 2012F 2013F (FYE Mar) 2010 2011F 2012F 2013FFixed assets 885 1,021 1,039 1,055 1,070 Mandarin Oriental occupancy (%) 55.0% 57.0% 59.0% 61.0% Intangible assets 0 0 0 0 0 Mandarin Oriental room rate (RM) 635.00 654.05 673.67 693.88 Other long-term assets 9,107 9,864 10,091 10,102 10,334 Suria KLCC occupancy rates (%) 100.0% 100.0% 100.0% 100.0% Total non-current assets 9,992 10,885 11,130 11,157 11,404 Suria KLCC rental (RMpsf/month) 22.27 23.16 24.08 25.05 Cash and equivalents 579 601 541 487 438 Twin Towers rental (RMpsf/month) 8.52 8.75 8.98 9.22 Stocks 1 1 0 0 1 Trade debtors 48 42 27 29 33 Other current assets 21 21 22 225 466 Total current assets 648 665 590 742 937 Trade creditors 48 59 22 24 27 Short-term borrowings 194 216 194 175 158 Other current liabilities 136 144 147 161 184 Total current liabilities 378 420 363 359 368 Long-term borrowings 1,875 1,754 1,754 1,754 1,754 Other long-term liabilities 878 903 854 733 813 Total long-term liabilities 2,752 2,656 2,607 2,486 2,567 Shareholders’ funds 4,763 5,312 5,466 5,643 5,862 Minority interests 2,747 3,162 3,283 3,410 3,544 NTA/share (RM) 5.10 5.69 5.85 6.04 6.28 CASH FLOW CURRENT P/BV(X) (RM m, FYE Mar) 2009 2010 2011F 2012F 2013FPretax profit 1,032 1,291 576 619 687Depreciation & non–cash adj. 34 36 42 44 46Working capital changes 11 17 (22) (1) (1)Cash tax paid (119) (141) (285) (103) (90)Others 104 113 121 115 101Cash flow from operations 1,061 1,317 432 673 743Capex (78) (172) (60) (60) (60)Net investments & sale of FA (527) (757) (227) (11) (232)Others (317) (409) 0 0 0Cash flow from investing (922) (1,338) (287) (72) (292)Debt raised/(repaid) (134) (101) 68 (191) (18)Equity raised/(repaid) 312 414 0 0 0Dividends paid (98) (103) (105) (105) (105)Cash interest & others (253) (171) (78) (532) (376)Cash flow from financing (173) 39 (115) (828) (499)Change in cash (34) 18 30 (226) (48)Change in net cash/(debt) 100 119 (38) (35) (31)Ending net cash/(debt) (1,488) (1,369) (1,407) (1,442) (1,473)

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OUTPERFORM Maintained Kossan Rubber Industries Bhd RM3.34 @07/12/10 Handled with care Target: RM5.41

Rubber Gloves

MA

LAYS

IA

KRI MK / KRIB.KL Terence Wong CFA +60(3) 20849689 – [email protected]

• Maintain OUTPERFORM. Kossan remains an OUTPERFORM despite a tweaking of our target price from RM5.44 to RM5.41 following 4-6% cuts in our FY10-13 EPS for higher cost assumptions. Our valuation basis is 10.2x, still based on a 30% discount to Top Glove’s CY11 target P/E which we have raised from 13.8x to 14.5x. Potential re-rating catalysts include 1) new orders from Japanese and US original glove brands, 2) high utilisation rates, and 3) margin improvement from higher nitrile sales and productivity gains.

• Trusted and proven. MNCs account for 80% of Kossan’s sales, giving Kossan one of the highest MNC exposures in the sector. We view this positively as large MNCs require detailed and thorough audits on their contract manufacturers. Kossan’s relationships with some well-established MNC clients date back more than 10 years, putting the company on a good footing to benefit from outsourcing trends.

• Good handling of headwinds. Kossan maintained EBITDA margins at 17.8% during 3Q10 despite a firmer ringgit and a 20% rise in rubber latex prices. We attribute the stable margins to management’s ability to manage customers’ price expectations and accurately hedge its forex exposure. We expect EBITDA margins to improve 1-2% p.a. on the back of a better product mix.

Financial summary

Stock Information Market cap: RM1,068m/US$340m 12-m price range: RM4.25 RM2.46 3-m avg daily vol: 0.8m No. of shrs (m): 320 Est. free float (%): 36.3 Conv. secs (m): None Major shareholders (%): - Kossan Holdings Sdn Bhd 51.8 - Kumpulan Wang Persaraan 7.0 - Asian Small Companies 4.9

FYE Dec 2008 2009 2010F 2011F 2012F Revenue (RM m) 897.2 842.1 1,209.5 1,343.9 1,489.9 EBITDA (RM m) 107.9 128.5 198.7 242.8 287.8 EBITDA margins (%) 12.0% 15.3% 16.4% 18.1% 19.3% Pretax profit (RM m) 72.9 85.8 153.0 189.2 225.7 Net profit (RM m) 58.6 66.7 118.5 144.7 170.4 EPS (sen) 18.3 20.9 37.1 45.3 53.3 EPS growth (%) 6.5% 13.7% 77.8% 22.1% 17.7% P/E (x) 18.2 16.0 9.0 7.4 6.3 Core EPS (sen) 18.3 37.4 37.1 45.3 53.3 Core EPS growth (%) 8.8% 104.1% (0.9%) 22.1% 17.7% Core P/E (x) 18.2 8.9 9.0 7.4 6.3 Gross DPS (sen) 3.0 4.5 8.0 10.0 12.0 Dividend yield (%) 0.9% 1.3% 2.4% 3.0% 3.6% P/BV (x) 3.6 3.0 2.3 1.8 1.4 ROE (%) 21.3% 20.3% 29.0% 27.6% 25.7% Net gearing (%) 70.1% 50.8% 26.8% 5.4% N/A Net cash per share (RM) N/A N/A N/A N/A 0.26 P/FCFE (x) (22.0) (252.1) 16.6 9.9 7.9 EV/EBITDA (x) 11.9 9.7 6.0 4.5 3.4 % change in EPS estimates (3.6%) (5.9%) (5.4%) CIMB/Consensus (x) 1.01 1.13 1.21



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Volume 1m (R.H.Scale) Kossan Rubber Industries Bhd Source: Bloomberg

Kossan Rubber Industries was established in 1979 when the company offered a range of cutless bearings that were often used in the marine industry. The company diversified into rubber glove manufacturing in 1988. It listed on the Main Board of Bursa Malaysia in 1996 and today has 124 glove production lines producing 12.5bn pieces per annum. The company has a diversified mix of natural rubber and nitrile glove products, representing 40% and 60% of capacity, respectively. Kossan also manufactures high technical input rubber products for a wide range of applications including the automotive and marine sectors.



(RM m, FYE Dec) 2008 2009 2010F 2011F 2012F (FYE Dec) 2008 2009 2010F 2011F 2012F Revenue 897 842 1,210 1,344 1,490 Revenue growth (%) 27.7 (6.1) 43.6 11.1 10.9 Operating expenses (789) (714) (1,011) (1,101) (1,202) EBITDA growth (%) 19.2 19.2 54.6 22.2 18.6 EBITDA 108 129 199 243 288 Pretax margins (%) 8.1 10.2 12.6 14.1 15.1 Depreciation & amortisation (26) (34) (36) (44) (53) Net profit margins (%) 6.5 7.9 9.8 10.8 11.4 EBIT 82 95 163 199 235 Interest cover (x) 7.8 10.4 15.6 18.5 21.2 Net interest & invt income (9) (9) (10) (10) (10) Effective tax rates (%) 18.8 21.5 22.0 23.0 24.0 Associates’ contribution 0 0 0 0 0 Net dividend payout (%) 12.1 16.2 16.2 16.6 16.9 Exceptional items 0 0 0 0 0 Debtors turnover (days) 60.6 76.8 63.9 65.9 66.0 Others 0 0 0 0 0 Stock turnover (days) 40.4 48.1 40.3 45.1 45.1 Pretax profit 73 86 153 189 226 Creditors turnover (days) 42.2 46.0 36.6 41.6 41.7 Tax (14) (18) (34) (44) (54) Minority interests (1) (1) (1) (1) (1) Net profit 59 67 119 145 170 Adj. wt. shares (m) 320 320 320 320 320 Unadj. year-end shares (m) 160 160 320 320 320 BALANCE SHEET KEY DRIVERS (RM m, end Dec) 2008 2009 2010F 2011F 2012F (FYE Dec) 2009 2010F 2011F 2012FFixed assets 361 359 386 410 426 Production capacity (m pcs p.a) 11,000 12,500 14,000 15,500 Intangible assets 1 1 1 1 1 Capacity utilisation (%) 77.3% 90.0% 90.0% 90.0% Other long-term assets 2 1 1 0 0 ASP (US$) per 1,000 pieces 30.46 35.00 34.30 34.30 Total non-current assets 364 361 387 411 427 Exchange rate (RM to US$) 3.43 3.02 3.05 3.05 Cash and equivalents 17 25 88 187 308 Natural rubber price (RM /kilogram) 5.25 8.20 8.00 7.55 Stocks 112 110 157 175 194 Nitrile latex prices (US$/mt) 1,362 1,300 1,381 1,503 Trade debtors 161 193 230 255 283 Other current assets 0 0 0 0 0 Total current assets 290 328 475 617 785 Trade creditors 115 97 145 161 179 Short-term borrowings 173 159 167 176 185 Other current liabilities 1 4 18 34 44 Total current liabilities 289 261 331 371 407 Long-term borrowings 54 47 45 43 41 Other long-term liabilities 11 21 22 23 25 Total long-term liabilities 65 69 67 66 65 Shareholders’ funds 299 357 462 588 737 Minority interests 1 2 2 3 4 NTA/share (RM) 0.93 1.12 1.44 1.84 2.30 CASH FLOW 12M - FORWARD FD CORE P/E (X) (RM m, FYE Dec) 2008 2009 2010F 2011F 2012FPretax profit 73 86 153 189 226Depreciation & non–cash adj. 26 34 36 44 53Working capital changes 0 0 0 0 0Cash tax paid (14) (18) (34) (44) (54)Others (60) (28) (26) (18) (25)Cash flow from operations 25 73 129 172 199Capex (66) (41) (60) (60) (60)Net investments & sale of FA 0 0 0 0 0Others 0 4 0 0 0Cash flow from investing (66) (36) (60) (60) (60)Debt raised/(repaid) 2 (32) 6 6 7Equity raised/(repaid) 0 0 0 0 0Dividends paid (11) (8) (11) (19) (24)Cash interest & others 0 0 0 0 0Cash flow from financing (10) (40) (5) (13) (17)Change in cash (51) (4) 64 99 121Change in net cash/(debt) (52) 28 58 93 115Ending net cash/(debt) (210) (182) (124) (32) 83

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TRADING BUY Maintained Kuala Lumpur Kepong Bhd RM21.58 @07/12/10 Tapping into higher rubber and CPO prices Target: RM25.00

Palm Oil & Rubber

MA

LAYS

IA

KLK MK / KLKK.KL Ivy Ng Lee Fang CFA +60(3) 2084 9697 – [email protected]

• Maintain TRADING BUY with higher target price of RM25.00. KL Kepong remains a TRADING BUY as it is a prime beneficiary of rising CPO and rubber prices and should see strong FFB output growth in 2011. Our earnings forecasts are unchanged but our SOP-based target price is increased from RM22.84 to RM25.00 as we now value its plantation division at 18x P/E (16x prev), a 24% premium over our revised target market P/E, in view of our more bullish outlook for CPO price. KL Kepong remains our pick of the crop in Malaysia.

• Upbeat earnings prospects for 2011. We expect the group to record earnings growth of 13% in 2011, driven by (1) increased FFB output due to higher yields from its young estates and new mature areas, (2) stronger earnings from its manufacturing division as a result of higher capacity and improved demand for oleochemical products, and (3) higher earnings contribution from its retail division following successful restructuring efforts.

• Projecting 14% growth in FFB production. In view of the young age profile for its estates, the group is expected to post 14% growth in FFB output in FY9/11, fuelled mainly by new mature areas as well as rising yields. The oleochemical division is expected to benefit from the acquisition of Uniqema in Germany which was completed in 4QFY10. We are also positive on its retail unit, which turned around in FY10 following a successful restructuring. Property sales are expected to pick up when the group launches new property projects in the coming financial year.

Financial summary

Stock Information Market cap: RM23,037m/US$7,344m 12-m price range: RM21.58 RM15.56 3-m avg daily vol: 1.1m No. of shrs (m): 1,068 Est. free float (%): 42.3 Conv. secs (m): None Major shareholders (%): - Batu Kawan 45.7 - Employees Provident Fund 16.1

FYE Sep 2009 2010 2011F 2012F 2013F Revenue (RM m) 6,658.3 7,490.6 8,972.6 9,565.0 10,158.0 EBITDA (RM m) 1,102.7 1,637.9 1,861.0 2,042.0 2,094.4 EBITDA margins (%) 16.6% 21.9% 20.7% 21.3% 20.6% Pretax profit (RM m) 887.4 1,382.8 1,585.5 1,755.1 1,798.0 Net profit (RM m) 612.5 1,012.3 1,143.0 1,265.2 1,296.1 EPS (sen) 57.4 94.8 107.1 118.5 121.4 EPS growth (%) (41.1%) 65.3% 12.9% 10.7% 2.4% P/E (x) 37.6 22.8 20.2 18.2 17.8 Gross DPS (sen) 53.2 79.8 86.5 93.1 97.1 Dividend yield (%) 2.5% 3.7% 4.0% 4.3% 4.5% P/BV (x) 4.1 3.8 3.5 3.2 3.0 ROE (%) 11.0% 17.4% 18.0% 18.2% 17.2% Net gearing (%) 7.7% 6.8% 9.1% 5.4% 2.4% P/FCFE (x) 39.4 54.5 125.1 22.9 22.4 EV/EBITDA (x) 21.4 14.4 12.8 11.6 11.2 % change in EPS estimates - - - CIMB/Consensus (x) 0.94 0.95 0.92



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Volume 10m (R.H.S ca le ) Kua la Lumpur Ke pong Bhd Source: Bloomberg

KL Kepong is one of the top plantation companies in Malaysia. It was listed on the Main Board of Bursa in Feb 1974. Although plantations remain its core business, it has expanded downstream into resource-based manufacturing, in particular, oleochemicals, cocoa processing and rubber processing. It is also involved in property development as well as retailing (100%-owned Crabtree & Evelyn). The group has an 18% stake in Yule Catto, which is listed on the London Stock Exchange. KLK owns 170,071ha of planted oil palm and rubber estates, which are located in Peninsular Malaysia (41%), East Malaysia (26%) and Indonesia (33%).



(RM m, FYE Sep) 2009 2010 2011F 2012F 2013F (FYE Sep) 2009 2010 2011F 2012F 2013F Revenue 6,658 7,491 8,973 9,565 10,158 Revenue growth (%) (15.2) 12.5 19.8 6.6 6.2 Operating expenses (5,556) (5,853) (7,112) (7,523) (8,064) EBITDA growth (%) (32.6) 48.5 13.6 9.7 2.6 EBITDA 1,103 1,638 1,861 2,042 2,094 Pretax margins (%) 13.3 18.5 17.7 18.3 17.7 Depreciation & amortisation (218) (234) (257) (276) (295) Net profit margins (%) 9.2 13.5 12.7 13.2 12.8 EBIT 885 1,404 1,604 1,765 1,798 Interest cover (x) 12.9 24.1 26.7 32.1 36.0 Net interest & invt income (32) (58) (60) (55) (50) Effective tax rates (%) 27.6 22.8 24.0 24.0 24.0 Associates’ contribution 35 37 41 45 50 Net dividend payout (%) 69.5 63.1 60.6 58.9 60.0 Exceptional items 0 0 0 0 0 Debtors turnover (days) 34.3 23.3 21.3 28.2 28.3 Others 0 0 0 0 0 Stock turnover (days) 57.6 52.9 57.0 59.7 59.9 Pretax profit 887 1,383 1,586 1,755 1,798 Creditors turnover (days) 15.2 14.6 14.1 14.9 14.9 Tax (245) (316) (381) (421) (432) Minority interests (30) (55) (62) (69) (70) Net profit 613 1,012 1,143 1,265 1,296 Adj. wt. shares (m) 1,068 1,068 1,068 1,068 1,068 Unadj. year-end shares (m) 1,068 1,068 1,068 1,068 1,068 BALANCE SHEET KEY DRIVERS (RM m, end Sep) 2009 2010 2011F 2012F 2013F (FYE Sep) 2010 2011F 2012F 2013FFixed assets 2,488 2,569 3,037 3,280 3,503 CPO price per tonne (RM) 2,402 2,620 2,737 2,737 Intangible assets 328 322 329 329 329 FFB output (000' tonnes) 3,178 3,636 4,025 4,253 Other long-term assets 2,600 2,877 2,677 2,723 2,772 FFB yield per ha (tonnes) 23 22 23 23 Total non-current assets 5,415 5,768 6,043 6,331 6,604 Mature area (ha) 157,041 169,041 184,041 194,041 Cash and equivalents 1,292 1,255 756 979 1,201 CPO extraction rate (%) 21.0% 21.5% 21.5% 21.5% Stocks 882 1,288 1,515 1,616 1,716 FFB growth (%) 11.1% 14.4% 10.7% 5.7% Trade debtors 628 328 718 762 811 Other current assets 386 524 657 699 735 Total current assets 3,189 3,395 3,645 4,057 4,462 Trade creditors 281 316 377 403 428 Short-term borrowings 1,123 580 800 800 800 Other current liabilities 336 374 515 545 576 Total current liabilities 1,741 1,270 1,692 1,748 1,804 Long-term borrowings 627 1,107 600 600 600 Other long-term liabilities 295 461 295 295 295 Total long-term liabilities 923 1,568 895 895 895 Shareholders’ funds 5,634 6,005 6,675 7,250 7,803 Minority interests 309 320 426 494 565 NTA/share (RM) 4.97 5.32 5.95 6.48 7.00 CASH FLOW 12M - FORWARD FD CORE P/E (X) (RM m, FYE Sep) 2009 2010 2011F 2012F 2013FPretax profit 887 1,383 1,586 1,755 1,798Depreciation & non–cash adj. 218 234 257 276 295Working capital changes 134 (356) (548) (132) (128)Cash tax paid (356) (296) (316) (381) (421)Others 31 (181) 52 44 35Cash flow from operations 914 784 1,031 1,563 1,579Capex (371) (333) (500) (500) (500)Net investments & sale of FA 112 69 0 0 0Others 0 0 0 0 0Cash flow from investing (259) (264) (500) (500) (500)Debt raised/(repaid) (39) (39) (287) 0 0Equity raised/(repaid) 0 0 0 0 0Dividends paid (572) (479) (692) (745) (777)Cash interest & others 79 (15) (54) (92) (79)Cash flow from financing (532) (533) (1,033) (837) (856)Change in cash 124 (13) (502) 226 222Change in net cash/(debt) 162 26 (215) 226 222Ending net cash/(debt) (458) (432) (647) (421) (199)

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UNDERPERFORM Maintained Kurnia Asia Bhd RM0.35 @07/12/10 Murky earnings outlook Target: RM0.20

Insurance - General

MA

LAYS

IA

KUAB MK / KURN.KL Winson Ng Gia Yann CFA +60(3) 2084 9686 – [email protected]

• Maintain UNDERPERFORM. In view of the murky earnings outlook, we maintain our UNDERPERFORM call on Kurnia, with the potential de-rating catalysts being (1) its still-high claims ratio, (2) slowdown in premium growth, and (3) high FY12 P/E of 14.1x against an ROE of 9.7%. We retain our EPS forecasts and target price of RM0.20, pegged to an unchanged target CY12 P/E of 8x. For exposure to the insurance sector, we prefer Maybank and AMMB.

• Volatile earnings trend. Despite the strong investment income of RM20m-30m, earnings have been volatile for the past three quarters, with net profit of RM23.8m in 1Q10 and RM3.2m in 2Q10 and a net loss of RM3.7m in 3Q10. This reflects the tough operating environment, which will continue to dilute the positive impact of the company’s transformation programme.

• Key risk from high claims ratio. Kurnia enjoyed a 19.2% yoy jump in 3Q10 gross premium but this may not translate into a similar growth at the bottomline if the claims ratio remains high. The claims ratio had been volatile, rising from 66-68% in 1-2Q10 to 81.5% in 3Q10. This leads us to forecast a high claims ratio of 73% forFY11-12. For this reason, we are projecting only RM36m-37m net profit in FY11-12, compared to the RM112.2m recorded in CY09 when the claims ratio was only 67%.

Financial summary

Stock Information Market cap: RM525m/US$167m 12-m price range: RM0.76 RM0.35 3-m avg daily vol: 0.6m No. of shrs (m): 1,500 Est. free float (%): 37.6 Conv. secs (m): None Major shareholders (%): - Tan Sri Kua Sian Kooi 51.7 - Datuk Kua Chung Sen 4.9

FYE Dec 2008 2009 2010F 2011F 2012F Gross premium (RM m) 1,121.8 977.7 1,023.8 1,095.5 1,161.2 Investment & other income (RM m) 81.3 85.2 90.0 91.8 93.6 Revenue (RM m) 1,011.2 854.3 901.0 964.1 1,021.9 Operating profit (RM m) (314.4) 102.4 47.6 47.8 49.8 Pretax profit (RM m) (314.4) 102.4 47.6 47.8 49.8 Net profit (RM m) (301.8) 112.2 32.4 35.8 37.3 EPS (sen) (20.1) 7.5 2.2 2.4 2.5 EPS growth (%) (12,174% 137% (71%) 11% 4% P/E (x) nm 4.7 16.2 14.7 14.1 Gross DPS (sen) 0.0 0.0 0.0 0.0 0.4 Dividend yield (%) 0.0% 0.0% 0.0% 0.0% 1.1% P/BV (x) 3.5 1.7 1.6 1.4 1.3 ROE (%) (97.8%) 49.6% 10.2% 10.2% 9.7% % change in EPS estimates - - - CIMB/Consensus (x) 0.90 0.61 0.58



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Volume 10m (R.H.Scale) Kurnia Asia Bhd Source: Bloomberg

Kurnia Asia was incorporated on 16 Feb 01. On 21 Nov 02, it was converted to a public limited company with the present name. Its key subsidiary, Kurnia Insurans (Malaysia) Berhad is one of the largest general insurance companies in Malaysia with gross premium of more than RM1bn, of which about 80%+ is generated from the auto insurance segment. Kurnia has been pushing for regional expansion with the following moves (1) acquisition of 80% of Kurnia Insurans Indonesia in 2007, and (2) acquisition of a 26.3% stake in Kurnia Insurance (Thailand). In Jul 07, the group embarked on a transformation programme to revamp its underwriting portfolio and achieve greater operating efficiency.



(RM m, FYE Dec) 2008 2009 2010F 2011F 2012F (FYE Dec) 2008 2009 2010F 2011F 2012FGross premium 1,122 978 1,024 1,095 1,161 Gross premium growth (%) 1.0 (12.8) 4.7 7.0 6.0 Reinsurance (111) (123) (123) (131) (139) Net premium growth (%) (1.1) (15.5) 5.5 7.0 6.0 Net premium 1,011 854 901 964 1,022 Operating profit growth (%) (2,464.

2) 132.6 (53.5) 0.3 4.3

(Inc)/Dec in UPR (5) 59 (81) (87) (92) Pretax margins (%) (31.2) 11.2 5.8 5.4 5.4 Net commissions (98) (97) (82) (88) (93) Net profit margins (%) (30.0) 12.3 3.9 4.1 4.0 Net claims incurred (1,082) (612) (598) (640) (679) Effective tax rates (%) N/A N/A 32.0 25.0 25.0 Management expenses (235) (192) (172) (183) (194) Net dividend payout (%) N/A 0.0 0.0 0.0 12.0 Investment income 81 85 90 92 94 Others 13 4 (10) (10) (8) Operating profit (314) 102 48 48 50 Associates’ contribution 0 0 0 0 0 Exceptional items 0 0 0 0 0 Others 0 0 0 0 0 Pretax profit (314) 102 48 48 50 Tax 13 10 (15) (12) (12) Minority interests 0 0 0 0 0 Net profit (302) 112 32 36 37 Adj. wt. shares (m) 1,500 1,500 1,500 1,500 1,500 Unadj. year-end shares (m) 1,500 1,500 1,500 1,500 1,500 BALANCE SHEET KEY DRIVERS (RM m, end Dec) 2008 2009 2010F 2011F 2012F (FYE Dec) 2008 2009 2010F 2011F 2012F Fixed assets 202 182 245 236 227 Net claims ratio (%) 106.7 67.0 73.0 73.0 73.0 Intangible assets 11 5 5 5 5 Net commission ratio (%) 9.7 10.6 10.0 10.0 10.0 Other long-term assets 0 0 0 0 0 Management expenses ratio (%) 23.2 20.6 20.0 20.0 20.0 Total non-current assets 213 187 250 241 232 Retention ratio (%) 90.1 87.4 88.0 88.0 88.0 Cash and equivalents 96 58 58 121 197 Combined ratio (%) 140.5 100.8 101.1 101.1 101.0 Investments 1,625 1,786 1,928 2,063 2,187 Underwriting margin (%) (40.6) 1.4 (3.9) (3.9) (3.8) Trade debtors 94 78 87 93 98 Investment return (%) 4.8 4.7 4.8 4.6 4.4 Other current assets 88 93 101 109 117 Total current assets 1,902 2,015 2,174 2,386 2,599 Trade creditors 64 78 89 95 101 Provision for claims 1,433 1,031 1,113 1,191 1,263 Other current liabilities 18 424 439 436 436 Total current liabilities 1,515 1,533 1,642 1,722 1,800 Unearned premium reserves 448 369 450 536 628 Other long-term liabilities 0 0 0 0 0 Total long term liabilities 448 369 450 536 628 Shareholders’ funds 152 300 332 368 403 Minority interests 0 0 0 0 0 BV/share (RM) 0.10 0.20 0.22 0.25 0.27 CURRENT P/BV (X) 12M - FORWARD FD CORE P/E (X)

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Dec-07 Apr-08 Aug-08 Dec-08 Apr-09 Aug-09 Dec-09 Apr-10 Aug-10 Dec-10-42.0

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Dec-07 Apr-08 Aug-08 Dec-08 Apr-09 Aug-09 Dec-09 Apr-10 Aug-10 Dec-10 Source: Company, CIMB Research, Bloomberg




UNDERPERFORM Maintained Lafarge Malayan Cement Bhd RM7.42 @04/12/10 The cement giant Target: RM6.37

Cement

MA

LAYS

IA

LMC MK / LMCE.KL Terence Wong CFA +60(3) 20849689 – [email protected]

• Maintain UNDERPERFORM. Lafarge remains an UNDERPERFORM as we believe that newsflow on construction activities has been largely priced in. Lafarge’s share price has risen 11% since March and now trades 21.2x FY10 P/E compared to 12.7x for the FBM KLCI. Our EPS forecasts are unchanged. Although we maintain our valuation basis of a blend of P/E and the stock’s 1.2x 5-year P/BV, our target price rises from RM6.18 to RM6.37 as our target market P/E increases from 13.8x to 14.5x. Potential de-rating catalysts are 1) raw material cost inflation, and 2) Lafarge’s high P/E despite a 3-year EPS CAGR of only 3.5%. For exposure to cement, we recommend Tasek Corp (TC MK, Outperform).

• No end yet to cement rebates. Earnings improved in 2010 due to the RM25/mt price hike to RM300/mt for bulk cement in May. However, cement companies continue to give RM20-30/mt rebates in order to attract buyers.

• Margin contraction. Margins will remain under pressure if there are further price increases for coal and electricity, which account for 45% of Lafarge’s total costs. World coal prices usually increase during the winter months because of higher heating needs in China. Further hikes in domestic electricity rates would dampen profitability. We also expect Lafarge to incur higher maintenance costs in FY11 as it will be repairing a kiln that was damaged during 3Q10.

Financial summary

Stock Information Market cap: RM6,305m/US$2,002m 12-m price range: RM8.10 RM6.06 3-m avg daily vol: 0.9m No. of shrs (m): 850 Est. free float (%): 30.5 Conv. secs (m): None Major shareholders (%): - Lafarge Cement UK Plc 53.8 - Associated International 8.4 - Employees Provident Fund 7.3

FYE Dec 2008 2009 2010F 2011F 2012F Revenue (RM m) 2,530.8 2,483.1 2,470.7 2,624.5 2,680.5 EBITDA (RM m) 544.6 602.6 510.1 666.9 691.2 EBITDA margins (%) 21.5% 24.3% 20.6% 25.4% 25.8% Pretax profit (RM m) 397.8 441.9 360.6 526.2 552.9 Net profit (RM m) 367.7 412.2 297.8 435.3 457.4 EPS (sen) 43.3 48.5 35.0 51.2 53.8 EPS growth (%) 31.1% 12.1% (27.8%) 46.2% 5.1% P/E (x) 17.1 15.3 21.2 14.5 13.8 Core EPS (sen) 40.0 48.5 35.0 51.2 53.8 Core EPS growth (%) 21.3% 21.1% (27.8%) 46.2% 5.1% Core P/E (x) 18.5 15.3 21.2 14.5 13.8 Gross DPS (sen) 30.0 38.0 34.0 42.0 45.0 Dividend yield (%) 4.0% 5.1% 4.6% 5.7% 6.1% P/BV (x) 2.1 2.0 2.0 1.9 1.8 ROE (%) 12.4% 13.2% 9.3% 13.3% 13.4% Net gearing (%) 10.8% N/A N/A N/A N/A Net cash per share (RM) N/A 0.06 0.16 0.40 0.68 P/FCFE (x) 30.1 12.1 25.9 12.7 11.8 EV/EBITDA (x) 12.2 10.4 12.1 9.0 8.3 % change in EPS estimates N/A N/A N/A CIMB/Consensus (x) 0.88 1.00 0.98



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Volume 1m (R.H.Scale) Lafarge Malayan Cement Bhd Source: Bloomberg

Lafarge Malayan Cement (LMC) is 53.8% owned by the Lafarge Group, a world leader in building material solutions with operations in 78 countries. The group’s earnings are mainly from the manufacturing and distribution of cement, ready mixed concrete, and other related building materials. LMC was the first cement company in Malaysia, building its first cement plant in Rawang in 1953. Today, LMC employs some 1,200 people and is Malaysia’s largest cement player with a market share of about 43%. While the bulk of LMC’s cement is sold locally in Malaysia, the company has a presence in Singapore where it imports, sells, and trades building materials.



(RM m, FYE Dec) 2008 2009 2010F 2011F 2012F (FYE Dec) 2008 2009 2010F 2011F 2012F Revenue 2,531 2,483 2,471 2,624 2,681 Revenue growth (%) 16.4 (1.9) (0.5) 6.2 2.1 Operating expenses (1,986) (1,881) (1,961) (1,958) (1,989) EBITDA growth (%) 14.4 10.6 (15.3) 30.8 3.6 EBITDA 545 603 510 667 691 Pretax margins (%) 15.7 17.8 14.6 20.1 20.6 Depreciation & amortisation (168) (154) (155) (159) (162) Net profit margins (%) 14.5 16.6 12.1 16.6 17.1 EBIT 376 449 355 508 529 Interest cover (x) 14.2 25.8 66.9 97.0 102.1 Net interest & invt income (17) (6) 3 5 9 Effective tax rates (%) 7.4 8.1 17.0 17.0 17.0 Associates’ contribution 9 (2) 3 13 15 Net dividend payout (%) 51.3 58.7 72.8 61.5 62.7 Exceptional items 30 0 0 0 0 Debtors turnover (days) 48.8 46.8 43.6 42.2 43.1 Others 0 0 0 0 0 Stock turnover (days) 56.8 54.7 45.6 44.1 45.0 Pretax profit 398 442 361 526 553 Creditors turnover (days) 42.6 43.6 39.8 38.6 39.3 Tax (30) (36) (61) (89) (94) Minority interests (1) 6 (2) (2) (2) Net profit 368 412 298 435 457 Adj. wt. shares (m) 850 850 850 850 850 Unadj. year-end shares (m) 850 850 850 850 850 BALANCE SHEET KEY DRIVERS (RM m, end Dec) 2008 2009 2010F 2011F 2012F (FYE Dec) 2009 2010F 2011F 2012FFixed assets 1,946 1,845 1,770 1,691 1,608 Cement ASP - domestic (RM/tonne) 270 275 275 275 Intangible assets 1,209 1,209 1,209 1,209 1,209 Export ASP (US$/t) 40.9 41.6 42.8 42.8 Other long-term assets 166 152 143 135 128 Thermal coal price (US$/tonne) 70 92 92 92 Total non-current assets 3,321 3,205 3,122 3,035 2,945 Exchange rate (RM to US$) 3.50 3.17 3.11 3.15 Cash and equivalents 143 414 365 560 795 Stocks 435 309 308 327 334 Trade debtors 341 296 295 313 320 Other current assets 63 62 62 66 67 Total current assets 982 1,081 1,029 1,266 1,516 Trade creditors 324 270 269 286 292 Short-term borrowings 116 146 14 16 17 Other current liabilities 134 110 111 118 121 Total current liabilities 573 527 394 419 430 Long-term borrowings 359 216 211 207 203 Other long-term liabilities 312 329 321 314 307 Total long-term liabilities 671 545 533 521 510 Shareholders’ funds 3,032 3,194 3,202 3,336 3,492 Minority interests 27 21 22 25 29 NTA/share (RM) 2.15 2.34 2.35 2.50 2.69 CASH FLOW 12M - FORWARD FD CORE P/E (X) (RM m, FYE Dec) 2008 2009 2010F 2011F 2012FPretax profit 398 442 361 526 553Depreciation & non–cash adj. 168 154 155 159 162Working capital changes (20) 95 (1) (18) (7)Cash tax paid (23) (18) (66) (94) (99)Others (9) 2 0 0 1Cash flow from operations 515 674 448 572 611Capex (98) (60) (80) (80) (80)Net investments & sale of FA (33) 6 8 8 7Others 0 0 0 0 0Cash flow from investing (130) (54) (72) (72) (73)Debt raised/(repaid) (175) (100) (134) (3) (3)Equity raised/(repaid) 0 0 0 0 0Dividends paid (253) (255) (289) (302) (302)Cash interest & others 13 12 0 0 (1)Cash flow from financing (415) (343) (423) (305) (305)Change in cash (31) 278 (46) 196 234Change in net cash/(debt) 144 378 87 199 236Ending net cash/(debt) (332) 51 139 337 575

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OUTPERFORM Maintained Latexx Partners RM2.67 @07/12/10 Good things come in small packages Target: RM3.85

Rubber Gloves

MA

LAYS

IA

LTX MK / LATX.KL Terence Wong CFA +60(3) 20849689 – [email protected]

• Maintain OUTPERFORM. Latexx remains an OUTPERFORM. We retain our earnings forecasts and valuation basis of 30% discount to our target P/E for Top Glove. However, our target price rises from RM3.66 to RM3.85 (9.4x CY12 P/E) as we are upping Top Glove’s target P/E from 13.8x to 14.5x, in line with our revised target market P/E. Potential re-rating catalysts are 1) a better product mix, 2) demand for ultra-thin rubber gloves, and 3) resumption of its delayed capacity expansion programme.

• Access to China. Latexx derives 80% of its sales from MNCs, which gives it one of the highest exposures to MNCs in the sector. We expect the company to benefit from Cardinal Health Inc’s (CAH US, Not Rated) recent acquisition of Yong Yu, China’s largest importer of medical supplies, as 20% of Latexx’s revenues come from Cardinal and the companies have a relationship going back more than 15 years.

• Its first OBM product. Total Glove, Latexx’s 50.01:49.9% JV with Dutch R&D company Budev B.V. has been established for almost a year. We believe the collaboration to commercialise low-protein gloves will begin to bear fruit when latex prices eventually moderate. This will give Latexx a rubber glove product that can be sold alongside its nitrile gloves.

Financial summary

Stock Information Market cap: RM584m/US$186m 12-m price range: RM4.83 RM2.40 3-m avg daily vol: 1.4m No. of shrs (m): 219 Est. free float (%): 64.5 Conv. secs (m): 56.0 Major shareholders (%): - BT Capital Sdn Bhd 23.6 - Lembaga Tabung Haji 6.1 - Best Time Ventures 5.9

FYE Dec 2008 2009 2010F 2011F 2012F Revenue (RM m) 223.3 328.5 437.4 531.8 537.6 EBITDA (RM m) 24.1 66.7 118.8 140.2 154.4 EBITDA margins (%) 10.8% 20.3% 27.2% 26.4% 28.7% Pretax profit (RM m) 15.2 51.8 101.6 119.6 130.3 Net profit (RM m) 15.2 51.3 81.3 95.7 104.2 EPS (sen) 6.9 23.5 37.1 43.7 47.6 EPS growth (%) 212.6% 237.8% 58.4% 17.8% 8.9% P/E (x) 38.5 11.4 7.2 6.1 5.6 FD core EPS (sen) 5.5 18.7 29.6 34.8 37.9 FD core P/E (x) 48.3 14.3 9.0 7.7 7.0 Gross DPS (sen) 0.0 2.0 7.5 11.0 14.0 Dividend yield (%) 0.0% 0.7% 2.8% 4.1% 5.2% P/BV (x) 4.8 3.4 2.4 1.8 1.4 ROE (%) 13.4% 35.3% 38.9% 33.0% 27.8% Net gearing (%) 47.0% 43.0% 12.5% N/A N/A Net cash per share (RM) N/A N/A N/A 0.02 0.25 P/FCFE (x) 115.5 42.5 10.9 9.6 6.7 EV/EBITDA (x) 26.6 9.9 5.2 4.1 3.4 % change in EPS estimates N/A N/A N/A CIMB/Consensus (x) 1.00 1.02 0.89



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Volume 10m (R.H.Scale) Latexx Partners Source: Bloomberg

Latexx Partners was incorporated in 1988 and was listed on Bursa Malaysia in 1996. Its office and manufacturing facilities are located in Kamunting Industrial Estate in Kamunting, Perak. The company currently owns six manufacturing plants located on a 40-acre plot that has space for expansion. With its current annual production capacity of 8.0bn pieces of gloves, Latexx ranks as the fifth largest glove manufacturer in Malaysia with 4% global market share. The company focuses on higher-quality powder-free natural rubber (NR) gloves and nitrile gloves. It is planning a staggered capacity expansion to keep pace with growing market demand.



(RM m, FYE Dec) 2008 2009 2010F 2011F 2012F (FYE Dec) 2008 2009 2010F 2011F 2012F Revenue 223 328 437 532 538 Revenue growth (%) 48.1 47.1 33.2 21.6 1.1 Operating expenses (199) (262) (319) (392) (383) EBITDA growth (%) 130.4 176.9 78.2 18.0 10.1 EBITDA 24 67 119 140 154 Pretax margins (%) 6.8 15.8 23.2 22.5 24.2 Depreciation & amortisation (6) (8) (11) (15) (18) Net profit margins (%) 6.8 15.6 18.6 18.0 19.4 EBIT 18 58 107 126 136 Interest cover (x) 5.6 8.8 17.2 18.4 18.2 Net interest & invt income (3) (7) (6) (6) (6) Effective tax rates (%) 0.1 0.9 20.0 20.0 20.0 Associates’ contribution 0 0 0 0 0 Net dividend payout (%) 0.0 6.4 15.1 18.9 22.0 Exceptional items 0 0 0 0 0 Debtors turnover (days) 65.1 57.1 55.5 56.5 61.7 Others 0 0 0 0 0 Stock turnover (days) 52.3 41.4 37.9 39.9 43.6 Pretax profit 15 52 102 120 130 Creditors turnover (days) 81.8 64.3 64.9 66.5 72.6 Tax 0 0 (20) (24) (26) Minority interests 0 0 0 0 0 Net profit 15 51 81 96 104 Adj. wt. shares (m) 219 219 219 219 219 Unadj. year-end shares (m) 195 198 219 219 219 BALANCE SHEET KEY DRIVERS (RM m, end Dec) 2008 2009 2010F 2011F 2012F (FYE Dec) 2009 2010F 2011F 2012FFixed assets 119 173 215 254 289 Production capacity (m pcs p.a) 4,500 8,000 9,000 9,000 Intangible assets 20 20 20 20 20 Capacity utilisation (%) 84.8% 70.0% 70.0% 70.0% Other long-term assets 7 21 6 6 6 ASP (US$) per 1,000 pieces 24.50 31.00 29.45 27.98 Total non-current assets 146 215 242 280 315 Exchange rate (RM to US$) 3.43 3.02 3.05 3.05 Cash and equivalents 10 19 69 114 177 Natural rubber price (RM /kilogram) 4.50 8.20 8.00 7.55 Stocks 36 38 52 64 65 Nitrile latex prices (US$/mt) 1,014 1,300 1,381 1,503 Trade debtors 44 59 74 90 91 Other current assets 0 0 0 0 0 Total current assets 90 116 196 268 333 Trade creditors 48 68 87 106 108 Short-term borrowings 37 43 43 43 44 Other current liabilities 0 0 0 0 0 Total current liabilities 85 111 130 149 151 Long-term borrowings 30 50 57 67 77 Other long-term liabilities 1 1 1 1 2 Total long-term liabilities 31 51 59 68 79 Shareholders’ funds 121 170 249 331 418 Minority interests 0 0 0 0 0 NTA/share (RM) 0.46 0.68 1.04 1.42 1.82 CASH FLOW 12M - FORWARD FD CORE P/E (X) (RM m, FYE Dec) 2008 2009 2010F 2011F 2012FPretax profit 15 52 102 120 130Depreciation & non–cash adj. 6 8 12 15 18Working capital changes (23) 1 (10) (8) (1)Cash tax paid 0 0 0 20 24Others 2 2 (8) (45) (46)Cash flow from operations (1) 63 95 101 126Capex (23) (48) (50) (50) (50)Net investments & sale of FA 0 1 0 0 0Others 0 0 0 0 0Cash flow from investing (23) (47) (50) (50) (50)Debt raised/(repaid) 29 (2) 8 10 12Equity raised/(repaid) 0 2 0 0 0Dividends paid 0 (4) (8) (12) (20)Cash interest & others (21) (30) 5 (4) (5)Cash flow from financing 8 (35) 4 (6) (13)Change in cash (16) (18) 50 45 63Change in net cash/(debt) (44) (16) 42 35 51Ending net cash/(debt) (57) (73) (31) 4 56

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OUTPERFORM Maintained Malayan Banking Bhd RM8.41 @07/12/10 Recharging BII Target: RM10.50

Banks

MA

LAYS

IA

MAY MK / MBBM.KL Winson Ng Gia Yann CFA +60(3) 2084 9686 – [email protected]

• Maintain OUTPERFORM. We reiterate our OUTPERFORM rating on Maybank, premised on the potential re-rating catalysts of (1) strong overseas growth, especially in Indonesia, (2) an expected rebound of loan growth in Malaysia and Singapore, (3) reversal in treasury income, and (4) a pickup in investment banking income. Another plus is its attractive dividend yield of about 7%. Our earnings forecasts are intact, along with our target price of RM10.50. We continue to apply a 10% premium to its DDM value. There are no changes to the key DDM parameters, including a cost of equity of 11.3% and dividend growth rates of 7.3% in the interim growth phase and 5% in the long-term growth phase.

• Projecting net earnings growth of 12-19% in FY11-12. We are projecting an 18.7% rise in Maybank’s FY6/11 net earnings to RM4.53bn, fuelled by a 16.7% increase in net interest income on the back of 11.6% loan growth and higher net interest margin. The growth in FY12 is still expected to be a healthy 12.2%, supported by a 9-10% expansion in net and non-interest income and an 18% drop in credit costs.

• Continuous transformation of BII. The key focus in 2011 will be the continuous transformation of Bank Internasional Indonesia (BII) through the (1) strengthening of relationships with customers, (2) expansion of the distribution network, and (3) enhancing of product development capabilities. Going by its loan growth of 34-38% yoy in Jun-Sep 10, BII is beginning to see the early fruits of the revamp.

Financial summary

Stock Information Market cap: RM59,526m/US$18,975m 12-m price range: RM9.29 RM6.71 3-m avg daily vol: 9.2m No. of shrs (m): 7,078 Est. free float (%): 51.0 Conv. secs (m): None Major shareholders (%): - Skim Amanah Saham 44.7 - Employees Provident Fund 10.9 - Permodalan Nasional Berhad

5.9

FYE Jun 2009 2010 2011F 2012F 2013F Net interest income (RM m) 5,919.5 6,770.9 7,670.2 8,401.6 9,211.7 Non-interest income (RM m) 4,599.5 6,100.8 4,710.2 4,847.0 5,288.3 Total income (RM m) 10,519.0 12,871.7 14,117.6 15,132.5 16,541.3 Loan loss provisions (RM m) (1,698.8) (1,188.0) (1,393.5) (1,136.9) (1,100.1) Pretax profit (RM m) 1,674.3 5,370.4 6,166.7 6,917.4 7,795.1 Net profit (RM m) 691.9 3,818.2 4,532.5 5,084.3 5,729.4 EPS (sen) 11.1 53.8 63.9 71.7 80.8 EPS growth (%) (80%) 387% 19% 12% 13% P/E (x) 76.0 15.6 13.2 11.7 10.4 Core EPS (sen) 34.9 53.8 63.9 71.7 80.8 Core EPS growth (%) (42%) 54% 19% 12% 13% Core P/E (x) 24.1 15.6 13.2 11.7 10.4 Gross DPS (sen) 8.0 55.0 59.6 66.9 75.4 Dividend yield (%) 1.0% 6.5% 7.1% 8.0% 9.0% P/BV (x) 2.4 2.1 2.1 1.9 1.8 ROE (%) 3.1% 14.5% 15.9% 16.8% 17.6% % change in EPS estimates - - - CIMB/Consensus (x) 1.05 1.05 1.08



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Volume 10m (R.H.S ca le ) Ma la ya n Ba nking Bhd Source: Bloomberg

Maybank is the largest banking group in Malaysia, with assets totalling RM347bn. In 2000, it acquired Pacific Bank and Phileo Allied Bank. The group’s lending is mostly channelled to the consumer segment, which accounts for almost half of its local loan portfolio. Maybank also has sizeable exposure to foreign markets, with foreign loans, mainly in Singapore and Indonesia, making up 33% of its total loan base. In early 2008, it embarked on an aggressive overseas expansion programme. It acquired 20% of Pakistan’s MCB Bank, 15% of Vietnam’s An Binh Bank and 97.5% of Bank Internasional Indonesia (BII) in 2008.



(RM m, FYE Jun) 2009 2010 2011F 2012F 2013F (FYE Jun) 2009 2010 2011F 2012F 2013F Net interest income 5,920 6,771 7,670 8,402 9,212 Total income growth (%) 10.0 22.4 9.7 7.2 9.3 Non-interest income 4,600 6,101 4,710 4,847 5,288 Pre-provision profit growth (%) (6.7) 30.2 15.3 6.5 10.4 Other income 0 0 1,737 1,884 2,041 Pretax growth (%) (59.0) 220.8 14.8 12.2 12.7 Total income 10,519 12,872 14,118 15,133 16,541 Net interest margin (%) 2.31 2.36 2.47 2.53 2.60 Overhead expenses (5,559) (6,412) (6,668) (7,202) (7,785) Cost-income ratio (%) 52.8 49.8 47.2 47.6 47.1 Pre-provision profit 4,960 6,460 7,450 7,930 8,756 Effective tax rates (%) 55.2 26.1 25.0 25.0 25.0 Loan loss provisions (1,699) (1,188) (1,393) (1,137) (1,100) Net dividend payout (%) 54.2 76.6 70.0 70.0 70.0 Associates’ contribution 100 99 111 124 139 Exceptional items (1,686) 0 0 0 0 Others 0 0 0 0 0 Pretax profit 1,674 5,370 6,167 6,917 7,795 Tax (924) (1,402) (1,542) (1,729) (1,949) Minority interests (59) (150) (93) (104) (117) Net profit 692 3,818 4,533 5,084 5,729 Adj. wt. shares (m) 6,255 7,093 7,093 7,093 7,093 Unadj. year-end shares (m) 7,093 7,093 7,093 7,093 7,093 BALANCE SHEET KEY DRIVERS (RM m, end Jun) 2009 2010 2011F 2012F 2013F (FYE Jun) 2009 2010 2011F 2012F 2013F Cash & deposits with FIs 30,254 37,995 37,859 39,374 39,120 Loan growth (%) 12.9 10.6 11.5 10.8 9.9 Marketable securities 50,340 46,534 48,098 44,621 42,113 Deposit growth (%) 13.6 11.4 3.6 6.9 6.3 Total current assets 80,594 84,529 85,957 83,995 81,233 Loan-deposit ratio (%) 87.4 86.8 93.4 96.9 100.1 Net loans & advances 185,783 205,555 229,257 254,086 279,169 Gross NPL (%) 3.5 2.9 2.9 2.9 2.9 Long-term investments 8,361 8,943 6,504 5,311 5,342 Net NPL (%) 1.5 1.1 1.1 1.2 1.2 Fixed assets 1,422 1,405 1,489 1,522 1,546 Loan loss reserve (%) 112.9 124.5 124.5 120.5 118.9 Intangible assets 4,374 4,481 4,481 4,481 4,481 GP ratio (%) 2.0 1.8 1.8 1.8 1.8 Other long-term assets 30,205 31,787 33,447 35,965 38,159 RWCR (%) 15.0 15.2 15.2 15.5 15.8 Total long-term assets 230,145 252,171 275,179 301,365 328,696 Total assets 310,739 336,700 361,135 385,361 409,929 Customer deposits 212,599 236,910 245,433 262,268 278,821 Deposits of other FIs 30,241 24,604 35,441 38,412 41,706 Subordinated debts 16,232 16,873 16,873 16,873 16,873 Other long-term liabilities 25,899 29,648 33,474 35,587 37,730 Total liabilities 284,971 308,035 331,220 353,140 375,129 Shareholders’ funds 24,899 27,877 29,088 31,353 33,889 Minority interests 869 788 827 868 912 BV/share (RM) 3.51 3.93 4.10 4.42 4.78 CURRENT P/BV (X) 12M - FORWARD FD CORE P/E (X)

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OUTPERFORM Maintained Malaysia Airports Holdings Bhd RM6.27 @07/12/10 Still on a high plane Target: RM7.50

Airports

MA

LAYS

IA

MAHB MK / MAHB.KL Loke Wei Wern +60 (3) 2084 9946 – [email protected]

• Maintain OUTPERFORM. Thanks to its monopoly of the operations of all of Malaysia’s airports except Senai Airport, Malaysia Airports (MAHB) is poised to ride on the back of robust passenger growth, carriers’ expansion plans and the gradual liberalisation of air transport. We maintain our OUTPERFORM call but raise our DCF-based target price from RM7.05 to RM7.50 after lowering our WACC from 8.2% to 7.9% for a lower beta assumption of 0.8 (0.9 previously). Potential re-rating catalysts for the stock include 1) stronger-than-expected passenger growth, 2) continuous expansion of airlines, and 3) industry liberalisation.

• 10% growth for 2011. Our economics team is projecting GDP growth of 5.5% for 2011, which bodes well for consumer sentiment and the demand for air travel and retail spending. We are projecting 10% earnings growth for 2011, largely driven by an 8% growth in passenger movements and higher contribution from its non-aeronautical segment, particularly the retail operations. We think that MAHB will focus on growing its non-aeronautical revenue by optimising its retail operations.

• Sabiha Gokcen to stay in the red in 2011. We expect MAHB’s 20%-owned Sabiha Gokcen (SGIA) to remain in the red in 2011. Given the typical airport gestation period of 4-5 years, management expects SGIA to break even operationally in 2014-2015. We see MAHB’s investment in SGIA as a strategic move to gain exposure to the huge tourism potential in Turkey. We gather that the airport yields an attractive EBITDA margin of 55%, which surpasses MAHB’s 39-40% margins. The current losses are mainly due to interest and depreciation costs.

Financial summary

Stock Information Market cap: RM6,897m/US$2,192m 12-m price range: RM6.27 RM3.75 3-m avg daily vol: 0.6m No. of shrs (m): 1,100 Est. free float (%): 30.0 Conv. secs (m): None Major shareholders (%): - Khazanah Nasional 54.0 - Employees Provident Fund 11.9 - T Rowe Price 1.7

FYE Dec 2008 2009 2010F 2011F 2012F Revenue (RM m) 1,435.0 1,637.1 1,824.2 1,917.0 2,187.8 EBITDA (RM m) 534.6 603.2 711.3 761.4 857.2 EBITDA margins (%) 37.3% 36.8% 39.0% 39.7% 39.2% Pretax profit (RM m) 422.2 480.1 507.9 553.3 520.3 Net profit (RM m) 298.3 379.3 375.2 414.3 389.6 EPS (sen) 27.1 34.5 34.1 37.7 35.4 EPS growth (%) 2.8% 27.1% (1.1%) 10.4% (6.0%) P/E (x) 23.1 18.2 18.4 16.6 17.7 Core EPS (sen) 24.5 31.7 34.1 37.7 35.4 Core EPS growth (%) (7.0%) 29.2% 7.7% 10.4% (6.0%) Gross DPS (sen) 18.6 22.9 22.9 25.1 25.1 Dividend yield (%) 3.0% 3.7% 3.7% 4.0% 4.0% P/BV (x) 2.2 2.0 2.0 1.9 1.8 ROE (%) 9.7% 11.6% 11.0% 11.6% 10.3% Net gearing (%) N/A 7.1% 35.6% 72.4% 72.4% Net cash per share (RM) 0.61 N/A N/A N/A N/A P/FCFE (x) 50.4 (29.3) 24.0 4,333.9 22.9 EV/EBITDA (x) 11.5 11.6 11.3 12.4 11.2 % change in EPS estimates - - - CIMB/Consensus (x) 1.04 0.97 0.95



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Volume 1m (R.H.S ca le ) Ma la ys ia Airports Holdings Bhd Source: Bloomberg

Malaysia Airports Holdings Bhd was incorporated in 1991 with a core focus on the operations, management, maintenance, as well as the development of airports. MAHB is 54% owned by Khazanah Nasional. It operates and manages 39 airports in Malaysia comprising international, domestic and short take-off and landing ports. Apart from its local operations, MAHB also has four international airports under its portfolio, namely Delhi International Airport and Hyderabad International Airport in India, Sabiha Gokcen International Airport in Turkey and the Maldives International Airport in Maldives.



(RM m, FYE Dec) 2008 2009 2010F 2011F 2012F (FYE Dec) 2008 2009 2010F 2011F 2012F Revenue 1,435 1,637 1,824 1,917 2,188 Revenue growth (%) 4.0 14.1 11.4 5.1 14.1 Operating expenses (900) (1,034) (1,113) (1,156) (1,331) EBITDA growth (%) (2.5) 12.8 17.9 7.0 12.6 EBITDA 535 603 711 761 857 Pretax margins (%) 29.4 29.3 27.8 28.9 23.8 Depreciation & amortisation (155) (150) (159) (170) (226) Net profit margins (%) 20.8 23.2 20.6 21.6 17.8 EBIT 380 453 553 592 631 Interest cover (x) 1,346.2 31.9 22.3 25.1 6.2 Net interest & invt income 0 (14) (25) (24) (101) Effective tax rates (%) 29.2 20.9 26.0 25.0 25.0 Associates’ contribution 2 3 (20) (15) (10) Net dividend payout (%) 49.9 49.1 50.4 50.0 53.2 Exceptional items 40 39 0 0 0 Debtors turnover (days) 131.9 145.2 134.2 138.0 132.7 Others 0 0 0 0 0 Stock turnover (days) 14.6 13.2 37.4 61.2 58.9 Pretax profit 422 480 508 553 520 Creditors turnover (days) 78.6 127.2 134.9 138.8 133.4 Tax (123) (100) (132) (138) (130) Minority interests (1) (1) (1) (1) (1) Net profit 298 379 375 414 390 Adj. wt. shares (m) 1,100 1,100 1,100 1,100 1,100 Unadj. year-end shares (m) 1,100 1,100 1,100 1,100 1,100 BALANCE SHEET KEY DRIVERS (RM m, end Dec) 2008 2009 2010F 2011F 2012F (FYE Dec) 2009 2010F 2011F 2012FFixed assets 1,911 1,951 2,832 4,509 4,824 Int'l passenger traffic growth (%) 9.6% 10.2% 8.0% 6.0% Intangible assets 1,188 1,758 1,715 1,672 1,628 Domestic pax traffic grwth (%) 7.1% 9.9% 8.0% 6.0% Other long-term assets 486 547 547 547 547 Int'l pax service charge (RM) 51 51 51 51 Total non-current assets 3,585 4,256 5,094 6,727 6,999 Dom pax serv charge (RM) 9 9 9 9 Cash and equivalents 677 268 244 38 133 Stocks 58 60 314 330 376 Trade debtors 668 634 707 743 848 Other current assets 4 0 1 1 1 Total current assets 1,407 964 1,265 1,111 1,357 Trade creditors 503 638 711 747 853 Short-term borrowings 3 0 0 0 0 Other current liabilities 869 47 30 40 42 Total current liabilities 1,375 685 741 787 895 Long-term borrowings 0 508 1,482 2,708 2,935 Other long-term liabilities 434 653 653 653 653 Total long-term liabilities 435 1,161 2,136 3,361 3,589 Shareholders’ funds 3,179 3,370 3,477 3,684 3,866 Minority interests 4 5 5 6 7 NTA/share (RM) 1.81 1.46 1.60 1.83 2.03 CASH FLOW 12M - FORWARD FD CORE P/E (X) (RM m, FYE Dec) 2008 2009 2010F 2011F 2012FPretax profit 422 480 508 553 520Depreciation & non–cash adj. 155 150 159 170 226Working capital changes 45 (296) (253) (16) (46)Cash tax paid (128) (97) (100) (132) (138)Others (53) (544) (26) (76) (15)Cash flow from operations 442 (306) 288 499 547Capex (282) (326) (950) (1,700) (450)Net investments & sale of FA (206) 5 0 0 0Others 4 (99) 0 0 0Cash flow from investing (485) (420) (950) (1,700) (450)Debt raised/(repaid) 180 505 975 1,226 227Equity raised/(repaid) 0 0 0 0 0Dividends paid (145) (186) (312) (207) (207)Cash interest & others 0 (14) (25) (24) (22)Cash flow from financing 35 305 638 995 (2)Change in cash (8) (421) (24) (206) 94Change in net cash/(debt) (188) (926) (999) (1,431) (133)Ending net cash/(debt) 674 (240) (1,239) (2,670) (2,803)

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OUTPERFORM Maintained Malaysian Airline System Bhd RM2.07 @07/12/10 Radical transformation on the cards Target: RM3.00

Airlines

MA

LAYS

IA

MAS MK / MASM.KL Raymond Yap CFA +603 2084 9769 – [email protected]

• Maintain OUTPERFORM. MAS is en route to a radical transformation of its structural costs as 56 passenger aircraft will be delivered from Boeing and Airbus over the next four years and it has 30 more options that has not yet been exercised. A one-for-one replacement with its present aged fleet will halve the average fleet age to just six years by 2013. This process will significantly improve fuel efficiency, reduce maintenance costs, improve the product to world-class standards, justify an increase in fares and yield intangible benefits like greater pilot and crew work satisfaction and improved staff morale. The reduction in structural costs that could permanently lift MAS’s profitability range underpins our OUTPERFORM call. Our target price stays at RM3, based on 6x CY12 EPS.

• Process will take time. MAS will take delivery of three new planes in 2010, followed by eight in 2011, 13 in 2012 and 17 in 2013, 13 in 2014 and two in 2015. This fleet replacement process will take several years and the benefits will be more visible only in 2012-13. Over the past year, MAS’s yield recovery has lagged behind its peers in Singapore or HK as it is less leveraged to a business travel recovery. As a result, MAS’s share price has not re-rated as much as SIA (Outperform, TP: S$20.50) or AirAsia (Outperform, TP: RM3.85).

Financial summary

Stock Information Market cap: RM6,918m/US$2,205m 12-m price range: RM2.59 RM1.80 3-m avg daily vol: 2.2m No. of shrs (m): 3,342 Est. free float (%): 15.0 Conv. secs (m): 134.3 Major shareholders (%): - Penerbangan Malaysia 70.0 - EPF 10.0

FYE Dec 2008 2009 2010F 2011F 2012F Revenue (RM m) 15,034.2 11,309.8 12,633.7 13,827.6 15,561.4 EBITDA (RM m) 344.0 (375.9) 242.0 1,386.1 2,526.9 EBITDA margins (%) 2.3% (3.3%) 1.9% 10.0% 16.2% Pretax profit (RM m) 302.7 462.0 106.3 722.9 1,751.8 Net profit (RM m) 244.4 490.2 92.5 708.8 1,734.1 EPS (sen) 11.9 23.9 3.0 21.2 51.9 EPS growth (%) (74.9%) 100.6% (87.6%) 617.3% 144.7% P/E (x) 17.4 8.7 70.0 9.8 4.0 Core EPS (sen) 6.8 (111.8) (29.0) 17.3 51.9 Core EPS growth (%) (86.0%) (1,739.1%) 74.1% 159.8% 199.2% Core P/E (x) 30.4 nm nm 11.9 4.0 FD core EPS (sen) 7.0 (104.1) (27.3) 17.1 50.3 FD core P/E (x) 29.7 nm nm 12.1 4.1 Gross DPS (sen) 0.0 0.0 0.0 0.0 0.0 Dividend yield (%) 0.0% 0.0% 0.0% 0.0% 0.0% P/BV (x) 1.0 5.8 2.0 1.6 1.2 ROE (%) 6.0% 19.9% 4.4% 18.4% 34.2% Net gearing (%) N/A N/A 27.4% 37.1% 14.0% Net cash per share (RM) 1.56 0.31 N/A N/A N/A P/FCFE (x) (7.2) (2.6) (2.3) 22.1 4.4 EV/EBITDA (x) 3.1 (9.7) 30.8 6.1 3.1 % change in EPS estimates N/A N/A N/A CIMB/Consensus (x) (4.43) 1.53 2.26



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Volume 10m (R.H.S ca le ) Ma la ys ia n Airline S ys te m Bhd Source: Bloomberg

Malaysian Airline System will operate a fleet of around 105 aircraft, including seven dedicated freighters and 20 ATR-72 turboprops. It went through a significant financial restructuring exercise, known as widespread asset unbundling in 2002, and comprehensive operational restructuring under its ex-managing director Dato’ Sri Idris Jala from 2007. Tengku Dato’ Azmil Zahruddin took over as managing director in 2008 and has continued with the reforms. Over 2010-15, MAS is expected to receive new aircraft that will completely transform the aged fleet including 35 B737-800 planes with 20 options, six A380s, and 15 A330-300s with 20 options.



(RM m, FYE Dec) 2008 2009 2010F 2011F 2012F (FYE Dec) 2008 2009 2010F 2011F 2012F Revenue 15,034 11,310 12,634 13,828 15,561 Revenue growth (%) 0.3 (24.8) 11.7 9.4 12.5 Operating expenses (14,690) (11,686) (12,392) (12,441) (13,035) EBITDA growth (%) (70.7) (209.3) 164.4 472.8 82.3 EBITDA 344 (376) 242 1,386 2,527 Pretax margins (%) 2.0 4.1 0.8 5.2 11.3 Depreciation & amortisation (328) (316) (366) (542) (613) Net profit margins (%) 1.6 4.3 0.7 5.1 11.1 EBIT 16 (692) (124) 844 1,913 Interest cover (x) 0.3 (8.3) (0.9) 4.4 8.3 Net interest & invt income 162 (25) (94) (146) (172) Effective tax rates (%) 18.8 N/A 10.2 1.5 0.8 Associates’ contribution 20 12 10 10 10 Net dividend payout (%) 0.0 0.0 0.0 0.0 0.0 Exceptional items 104 1,167 314 15 0 Debtors turnover (days) 36.0 54.5 44.3 44.7 44.1 Others 0 0 0 0 0 Stock turnover (days) 9.0 12.3 11.5 10.8 9.8 Pretax profit 303 462 106 723 1,752 Creditors turnover (days) 52.3 75.0 66.6 62.7 57.2 Tax (57) 31 (11) (11) (15) Minority interests (1) (3) (3) (3) (3) Net profit 244 490 92 709 1,734 Adj. wt. shares (m) 2,053 2,053 3,127 3,342 3,342 Unadj. year-end shares (m) 2,054 2,053 3,342 3,342 3,342 BALANCE SHEET KEY DRIVERS (RM m, end Dec) 2008 2009 2010F 2011F 2012F (FYE Dec) 2009 2010F 2011F 2012FFixed assets 2,465 3,044 6,710 7,745 8,612 Passenger fleet size (# of planes) 86 84 84 79 Intangible assets 108 144 144 144 144 Av. seat km (ASK, yoy chg %) -9.5% 3.3% 5.0% 5.0% Other long-term assets 571 545 555 565 575 Rev. psg km (RPK, yoy chg %) -8.3% 14.3% 2.5% 5.0% Total non-current assets 3,144 3,733 7,409 8,454 9,331 Load factor (%) 68.8% 76.1% 74.4% 74.4% Cash and equivalents 4,617 2,952 2,817 3,131 4,710 Passenger yield per RPK (sen) 25.79 25.03 27.26 29.66 Stocks 380 385 408 410 429 Jet fuel price (US$/barrel) 106.06 107.00 102.64 105.00 Trade debtors 1,932 1,447 1,617 1,770 1,992 Fuel cost per ASK (sen) 7.31 8.85 8.33 8.35 Other current assets 0 0 0 0 0 Non-fuel cost per ASK (sen) 17.12 16.23 15.65 15.58 Total current assets 6,928 4,785 4,842 5,310 7,131 Trade creditors 2,409 2,236 2,372 2,381 2,495 Short-term borrowings 433 319 319 319 319 Other current liabilities 2,045 3,214 2,584 2,455 2,455 Total current liabilities 4,887 5,769 5,274 5,154 5,268 Long-term borrowings 986 2,001 3,461 4,381 5,229 Other long-term liabilities 2 0 0 0 0 Total long-term liabilities 987 2,001 3,461 4,381 5,229 Shareholders’ funds 4,186 736 3,502 4,211 5,945 Minority interests 11 12 15 18 21 NTA/share (RM) 1.99 0.29 1.00 1.22 1.74 CASH FLOW 12M - FORWARD FD CORE P/E (X) (RM m, FYE Dec) 2008 2009 2010F 2011F 2012FPretax profit 303 462 106 723 1,752Depreciation & non–cash adj. 328 316 366 542 613Working capital changes (1,213) 307 (58) (145) (128)Cash tax paid (15) (5) (11) (11) (15)Others (27) (2,677) (503) 52 221Cash flow from operations (624) (1,597) (99) 1,161 2,443Capex (764) (914) (4,032) (1,576) (1,480)Net investments & sale of FA 41 (22) 0 0 0Others 214 54 0 0 0Cash flow from investing (509) (882) (4,032) (1,576) (1,480)Debt raised/(repaid) 559 901 1,460 920 848Equity raised/(repaid) 0 0 2,674 0 0Dividends paid (56) (2) 0 0 0Cash interest & others (14) (83) (137) (191) (231)Cash flow from financing 490 815 3,996 729 617Change in cash (643) (1,664) (135) 313 1,580Change in net cash/(debt) (1,202) (2,565) (1,595) (607) 732Ending net cash/(debt) 3,197 633 (962) (1,569) (837)

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UNDERPERFORM Maintained Malaysian Bulk Carriers Bhd RM2.97 @07/12/10 Avoid the bulk and tanker space Target: RM2.80

Dry Bulk Shipping

MA

LAYS

IA

MBC MK / MBCB.KL Raymond Yap CFA +603 2084 9769 – [email protected]

• Maintain UNDERPERFORM. Maybulk is exposed to the shipping and offshore sectors which are unlikely to do well in 2011. As a result, we expect its share price performance to remain lacklustre. Our SOP target price is unchanged at RM2.80, based on the estimated secondhand market price of its fleet. We continue to rate the stock an UNDERPERFORM. The main potential de-rating catalyst is the weak outlook for bulk, tanker and offshore markets in 2011.

• Disturbing signs of weakness. Spot bulk shipping rates continue to weaken and MR tanker rates are near all-time lows. We are negative on the prospects for both segments in 2011. There is also no sign of recovery in the offshore service space. Earnings from its 22% associate POSH sank 74% yoy in 9M10.

• Selective and patient acquisition strategy. Although Maybulk has been looking for ships to purchase, it executed only two secondhand bulker deals in 2009 and one tanker deal in 2010 as asset values may have moved up too quickly over the past year. The current freight market decline could create opportunities to buy but Maybulk is likely to remain very patient and selective. We have assumed two purchases this year, followed by three each in 2011-12. Separately, Maybulk recently entered in a 50% JV with Mexican partners to participate in two 32,500 dwt handysize newbuildings to service the US Gulf/Mexico markets for delivery in May and August 2011.

Financial summary

Stock Information Market cap: RM2,970m/US$947m 12-m price range: RM3.25 RM2.81 3-m avg daily vol: 0.3m No. of shrs (m): 1,000 Est. free float (%): 31.0 Conv. secs (m): None Major shareholders (%): - Pacific Carriers Ltd. 34.5 - Bank Pembangunan 18.4 - PPB Group Bhd 14.0

FYE Dec 2008 2009 2010F 2011F 2012F Revenue (RM m) 721.1 303.7 427.3 436.2 604.5 EBITDA (RM m) 341.9 105.3 222.9 221.1 330.8 EBITDA margins (%) 47.4% 34.7% 52.2% 50.7% 54.7% Pretax profit (RM m) 525.8 260.1 220.4 220.6 326.7 Net profit (RM m) 460.9 255.7 212.8 214.3 317.7 EPS (sen) 46.1 25.6 21.3 21.4 31.8 EPS growth (%) (15.4%) (44.5%) (16.8%) 0.7% 48.3% P/E (x) 6.4 11.6 14.0 13.9 9.3 Core EPS (sen) 27.9 18.5 21.3 21.4 31.8 Core EPS growth (%) (21.5%) (33.8%) 15.2% 0.7% 48.3% Core P/E (x) 10.7 16.1 14.0 13.9 9.3 Gross DPS (sen) 51.4 20.3 13.5 16.2 27.0 Dividend yield (%) 17.3% 6.8% 4.6% 5.5% 9.1% P/BV (x) 1.6 1.7 1.6 1.5 1.4 ROE (%) 25.8% 13.9% 11.7% 11.2% 15.4% Net gearing (%) N/A N/A N/A 1.2% 1.8% Net cash per share (RM) 0.44 0.11 0.08 N/A N/A P/FCFE (x) 18.0 166.9 16.4 (416.4) 28.6 EV/EBITDA (x) 5.3 18.6 8.8 9.2 6.1 % change in EPS estimates N/A N/A N/A CIMB/Consensus (x) 1.01 0.94 1.20



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Volume 1m (R.H.S c a le ) Ma la ys ia n Bulk Ca rrie rs Bhd Source: Bloomberg

Malaysian Bulk Carriers operates a fleet of 11 bulk carriers and four product tankers. The company is managed by the Kuok group’s Pacific Carriers Ltd. Maybulk’s philosophy in the past has been to treat its ships as assets available for sale, rather than purely as fixed assets that trade for freight income. During 2007 and 2008, it sold eight ships and paid handsome dividends from the proceeds. Since the market turned in late 2008, Maybulk has sold only two ships, This, together with the downturn in earnings, means that future dividends are unlikely to return to previous highs. With the fall in asset prices, Maybulk has now shifted its attention to rebuilding its fleet.



(RM m, FYE Dec) 2008 2009 2010F 2011F 2012F (FYE Dec) 2008 2009 2010F 2011F 2012F Revenue 721 304 427 436 605 Revenue growth (%) 18.6 (57.9) 40.7 2.1 38.6 Operating expenses (379) (198) (204) (215) (274) EBITDA growth (%) (12.6) (69.2) 111.6 (0.8) 49.6 EBITDA 342 105 223 221 331 Pretax margins (%) 72.9 85.6 51.6 50.6 54.0 Depreciation & amortisation (30) (32) (33) (39) (48) Net profit margins (%) 63.9 84.2 49.8 49.1 52.6 EBIT 312 73 190 183 283 Interest cover (x) 11.5 5.2 25.0 22.3 34.6 Net interest & invt income 9 7 (8) (4) (4) Effective tax rates (%) 0.8 0.2 0.0 0.0 0.0 Associates’ contribution 21 97 38 42 48 Net dividend payout (%) 82.6 58.7 47.0 56.0 62.9 Exceptional items 184 71 0 0 0 Debtors turnover (days) 17.4 33.0 29.7 34.4 29.9 Others 0 12 0 0 0 Stock turnover (days) 3.4 8.2 5.9 6.0 5.1 Pretax profit 526 260 220 221 327 Creditors turnover (days) 38.2 103.2 70.7 72.1 60.6 Tax (4) (1) 0 0 0 Minority interests (61) (4) (8) (6) (9) Net profit 461 256 213 214 318 Adj. wt. shares (m) 1,000 1,000 1,000 1,000 1,000 Unadj. year-end shares (m) 1,000 1,000 1,000 1,000 1,000 BALANCE SHEET KEY DRIVERS (RM m, end Dec) 2008 2009 2010F 2011F 2012F (FYE Dec) 2009 2010F 2011F 2012FFixed assets 600 628 676 865 1,046 Fleet size (number of vessels) 15 17 20 24 Intangible assets 0 0 0 0 0 Baltic Dry Index (yoy change %) -59.0% 7.6% -17.9% -13.0% Other long-term assets 859 974 1,012 1,054 1,102 Bulk rates (US$/day) 19,076 26,706 25,371 29,177 Total non-current assets 1,459 1,602 1,688 1,919 2,148 Clean tanker TCE rates (US$/day) 15,975 12,780 13,419 14,761 Cash and equivalents 806 460 492 385 368 Stocks 7 7 7 7 9 Trade debtors 26 29 41 42 58 Other current assets 186 199 199 199 199 Total current assets 1,025 695 738 632 634 Trade creditors 90 82 84 88 112 Short-term borrowings 7 8 8 8 8 Other current liabilities 4 1 1 1 1 Total current liabilities 101 90 93 97 121 Long-term borrowings 357 345 401 401 401 Other long-term liabilities 0 0 0 0 0 Total long-term liabilities 357 345 401 401 401 Shareholders’ funds 1,884 1,787 1,850 1,964 2,162 Minority interests 142 74 82 88 97 NTA/share (RM) 1.88 1.79 1.85 1.96 2.16 CASH FLOW 12M - FORWARD FD CORE P/E (X) (RM m, FYE Dec) 2008 2009 2010F 2011F 2012FPretax profit 526 260 220 221 327Depreciation & non–cash adj. 30 32 33 39 48Working capital changes 46 (12) (9) 3 6Cash tax paid (4) (1) 0 0 0Others (161) (155) (30) (38) (44)Cash flow from operations 437 125 213 224 337Capex (40) (83) (81) (228) (229)Net investments & sale of FA (243) 14 0 0 0Others 41 (18) 0 0 0Cash flow from investing (241) (87) (81) (228) (229)Debt raised/(repaid) 15 (11) 56 0 0Equity raised/(repaid) 0 0 0 0 0Dividends paid (386) (363) (150) (100) (120)Cash interest & others (45) (9) (8) (4) (4)Cash flow from financing (417) (383) (101) (104) (124)Change in cash (221) (345) 31 (107) (16)Change in net cash/(debt) (236) (334) (25) (107) (16)Ending net cash/(debt) 442 108 83 (24) (41)

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OUTPERFORM Maintained Malaysian Pacific Industries Bhd RM5.45 @07/12/10 A more muted outlook Target: RM6.90

Semiconductor

MA

LAYS

IA

MPI MK / MPIM.KL Terence Wong CFA +60(3) 20849689 – [email protected]

• Maintain OUTPERFORM. MPI remains an OUTPERFORM given the potential catalysts of a turnaround of the computing segment and a demand pick-up. Our earnings forecasts are intact, along with our target price of RM6.90, which we continue to base on a 20% discount to its 5-year historical adjusted average of P/BV of 0.7x.

• Muted outlook. MPI is expecting a mid-single-digit qoq revenue contraction for 4QCY10 due to inventory correction and weakness in computing. Based on the fairly limited visibility right now, the company is expecting flattish revenue for 1QCY11 due to seasonality. However, 2QCY11 should see a snapback.

• China to grow fast. China’s growth is outpacing MPI’s local operations due to the strong growth of its MLP and the preference of its customers in expanding there. As a result, it will be expanding its capacity by 4x the current floor space over the next 12 months. Over the medium term, MPI hopes to have a more balanced spread between its Ipoh and China operations for Carsem compared to the 15-20% contribution from its China operations currently.

• Copper conversion is gradual. The take-up of copper wires has been more gradual because the products manufactured by MPI have low pin counts and lower wire lengths. It does, however, expect more conversion over the next 12 months.

Financial summary

Stock Information Market cap: RM1,144m/US$365m 12-m price range: RM7.50 RM5.20 3-m avg daily vol: 0.1m No. of shrs (m): 210 Est. free float (%): 21.0 Conv. secs (m): None Major shareholders (%): - Hong Leong Industries 67.1 - ASB 4.7 - Great Eastern 2.2

FYE Jun 2009 2010 2011F 2012F 2013F Revenue (RM m) 1,150.6 1,386.2 1,441.7 1,614.6 1,776.1 EBITDA (RM m) 258.1 355.1 338.8 387.5 435.1 EBITDA margins (%) 22.4% 25.6% 23.5% 24.0% 24.5% Pretax profit (RM m) (61.7) 85.0 123.1 165.3 220.7 Net profit (RM m) (39.9) 105.4 94.2 123.5 164.9 EPS (sen) (20.5) 54.1 48.3 63.3 84.6 EPS growth (%) (135.6%) 364.2% (10.7%) 31.1% 33.6% P/E (x) nm 10.1 11.3 8.6 6.4 Core EPS (sen) 16.0 54.0 48.3 63.3 84.6 Core EPS growth (%) (74.6%) 238.8% (10.6%) 31.1% 33.6% Core P/E (x) 34.2 10.1 11.3 8.6 6.4 Gross DPS (sen) 26.7 33.3 33.3 40.0 50.0 Dividend yield (%) 4.9% 6.1% 6.1% 7.3% 9.2% P/BV (x) 1.5 1.4 1.4 1.3 1.2 ROE (%) (5.4%) 14.7% 12.5% 15.6% 19.4% Net gearing (%) 20.6% 9.1% 12.1% 7.9% 2.5% P/FCFE (x) 55.2 8.5 20.4 7.5 5.7 EV/EBITDA (x) 5.7 3.9 4.2 3.6 3.2 % change in EPS estimates N/A N/A N/A CIMB/Consensus (x) 0.89 1.11 1.52



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Volume 1m (R.H.S ca le ) Ma la ys ia n P a cific Indus trie s Bhd Source: Bloomberg

MPI is principally an investment holding company with subsidiaries (70%-owned Carsem, 100% owned Dynacraft) involved in designing, manufacturing, assembling, testing and sale of integrated circuits, semiconductor devices, electronic components and leadframes to customers worldwide. It is also currently one of the top 10 global players in the semiconductor test and assembly services (SATS) space. It is listed on the Main Board of Bursa Malaysia. About 87% of its 3QCY10 revenue is from Carsem while the balance is from Dynacraft. For 3QCY10, 46% of its revenue is from Asia, 25% from the US and 30% from Europe.



(RM m, FYE Jun) 2009 2010 2011F 2012F 2013F (FYE Jun) 2009 2010 2011F 2012F 2013F Revenue 1,151 1,386 1,442 1,615 1,776 Revenue growth (%) (25.2) 20.5 4.0 12.0 10.0 Operating expenses (893) (1,031) (1,103) (1,227) (1,341) EBITDA growth (%) (38.0) 37.6 (4.6) 14.4 12.3 EBITDA 258 355 339 388 435 Pretax margins (%) (5.4) 6.1 8.5 10.2 12.4 Depreciation & amortisation (241) (214) (208) (217) (209) Net profit margins (%) (3.5) 7.6 6.5 7.6 9.3 EBIT 18 141 131 171 226 Interest cover (x) N/A N/A N/A N/A N/A Net interest & invt income (8) (5) (8) (6) (5) Effective tax rates (%) N/A N/A 10.0 10.0 10.0 Associates’ contribution 0 0 0 0 0 Net dividend payout (%) N/A 46.2 51.8 47.4 44.3 Exceptional items (71) (52) 0 0 0 Debtors turnover (days) 62.2 52.0 59.0 56.9 57.4 Others 0 0 0 0 0 Stock turnover (days) 28.1 21.0 23.0 22.4 22.5 Pretax profit (62) 85 123 165 221 Creditors turnover (days) 55.6 51.4 63.1 61.5 61.6 Tax (4) 41 (12) (17) (22) Minority interests 26 (20) (17) (25) (34) Net profit (40) 105 94 123 165 Adj. wt. shares (m) 195 195 195 195 195 Unadj. year-end shares (m) 195 195 195 195 195 BALANCE SHEET KEY DRIVERS (RM m, end Jun) 2009 2010 2011F 2012F 2013F (FYE Jun) 2010 2011F 2012F 2013FFixed assets 1,051 962 1,054 1,087 1,128 Global semicon sales (US$bn) 265 310 325 342 Intangible assets 12 12 12 12 12 EBITDA Margin (%) 25.6% 23.5% 24.0% 24.5% Other long-term assets 20 20 20 20 20 Total non-current assets 1,084 994 1,086 1,120 1,160 Cash and equivalents 77 129 94 131 186 Stocks 72 88 94 104 114 Trade debtors 166 228 238 266 293 Other current assets 0 0 0 0 0 Total current assets 316 445 426 502 593 Trade creditors 149 241 258 287 313 Short-term borrowings 193 130 130 130 130 Other current liabilities 0 4 4 7 9 Total current liabilities 343 375 392 424 452 Long-term borrowings 74 86 86 86 86 Other long-term liabilities 63 16 25 32 35 Total long-term liabilities 137 101 111 118 120 Shareholders’ funds 699 740 769 814 882 Minority interests 221 223 239 265 298 NTA/share (RM) 3.52 3.73 3.88 4.11 4.46 CASH FLOW 12M - FORWARD FD CORE P/E (X) (RM m, FYE Jun) 2009 2010 2011F 2012F 2013FPretax profit (62) 85 123 165 221Depreciation & non–cash adj. 241 214 208 217 209Working capital changes 41 13 2 (10) (10)Cash tax paid (4) 41 (12) (17) (22)Others 16 0 40 41 42Cash flow from operations 232 353 360 396 440Capex (124) (189) (300) (250) (250)Net investments & sale of FA 0 0 0 0 0Others 0 0 0 0 0Cash flow from investing (124) (189) (300) (250) (250)Debt raised/(repaid) (82) (44) 0 0 0Equity raised/(repaid) 0 0 0 0 0Dividends paid (52) (67) (87) (104) (130)Cash interest & others (8) 6 (8) (6) (5)Cash flow from financing (142) (105) (95) (110) (135)Change in cash (33) 58 (35) 37 55Change in net cash/(debt) 48 102 (35) 37 55Ending net cash/(debt) (190) (87) (122) (85) (30)

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TRADING BUY Maintained Malaysian Resources Corp Bhd RM2.01 @07/12/10 The urge to merge Target: RM2.53

Construction

MA

LAYS

IA

MRC MK / MYRS.KL Sharizan Rosely +60 (3) 2084 9864 – [email protected]

• Maintain TRADING BUY. Newsflow on the much-talked-about 3,300-acre Sg Buloh land is likely to pick up in 2011 as the government rolls out its Economic Transformation Programme (ETP). MRCB is likely to emerge as one of the key beneficiaries and participate both as a turnkey contractor and a developer. A more attractive valuation for the merged IJM Land-MRCB entity is a potential re-rating catalyst for MRCB, along with progress on the Sg. Buloh land. We maintain our TRADING BUY recommendation and target price of RM2.53, pegged to an unchanged 20% RNAV discount.

• Positive on the proposed merger. Although we are overall positive on the proposed merger, the RM2.30 swap price for MRCB was a slight negative. However, investors are not likely to be worse off as the combined listed entity will provide investors with exposure to a larger, more credible and liquid property stock, with probably more attractive upside.

• To merge by end-2Q11. The deal is expected to be completed at end-2Q11 at the earliest. The combined listed entity is expected to be more liquid and have a good mix of institutional and retail investors.

Financial summary

Stock Information Market cap: RM2,776m/US$882m 12-m price range: RM2.25 RM1.24 3-m avg daily vol: 6.0m No. of shrs (m): 1,381 Est. free float (%): 58.1 Conv. secs (m): None Major shareholders (%): - EPF 41.9

FYE Dec 2008 2009 2010F 2011F 2012F Revenue (RM m) 788.6 921.6 1,065.6 1,182.2 1,313.0 EBITDA (RM m) 3.8 45.3 121.8 140.5 156.3 EBITDA margins (%) 0.5% 4.9% 11.4% 11.9% 11.9% Pretax profit (RM m) (42.1) 46.5 68.4 88.4 107.0 Net profit (RM m) (56.6) 34.6 51.3 66.4 80.4 EPS (sen) (6.2) 3.8 3.8 4.9 5.9 EPS growth (%) (191.6%) 161.1% (1.3%) 29.4% 21.0% P/E (x) nm 52.7 53.4 41.3 34.1 Core EPS (sen) (3.4) 3.8 3.8 4.9 5.9 Core EPS growth (%) (149.5%) 213.0% (1.3%) 29.4% 21.0% Core P/E (x) nm 52.7 53.4 41.3 34.1 Gross DPS (sen) 0.0 1.0 1.0 1.0 1.0 Dividend yield (%) 0.0% 0.5% 0.5% 0.5% 0.5% P/BV (x) 2.7 2.6 3.6 3.3 3.0 ROE (%) (8.2%) 5.0% 6.9% 8.3% 9.2% Net gearing (%) 39.3% 37.0% 26.6% 14.8% 2.3% P/FCFE (x) 14.9 199.5 19.4 16.2 14.1 EV/EBITDA (x) 504.9 42.3 22.7 19.0 16.4 % change in EPS estimates - - - CIMB/Consensus (x) 0.96 0.89 0.98



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Volume 10m (R.H.S ca le ) Ma la ys ia n Re s ource s Corp Bhd Source: Bloomberg

MRCB is a diversified GLC with businesses in four key areas – engineering & construction, property, infrastructure & concessions and building services. The company is a leading premier property developer and a major construction player. It specialises in civil and energy infrastructure development and has built transmission networks, colleges, transportation facilities, hospitals and roads all over the country. The group is the nation’s biggest developer of high-voltage transmission networks. On the property front, its flagship development is the 72-acre KL Sentral which remains the group’s crown jewel.



(RM m, FYE Dec) 2008 2009 2010F 2011F 2012F (FYE Dec) 2008 2009 2010F 2011F 2012F Revenue 789 922 1,066 1,182 1,313 Revenue growth (%) (8.7) 16.9 15.6 10.9 11.1 Operating expenses (785) (876) (944) (1,042) (1,157) EBITDA growth (%) (97.6) 1,089.9 168.9 15.4 11.2 EBITDA 4 45 122 141 156 Pretax margins (%) (5.3) 5.0 6.4 7.5 8.1 Depreciation & amortisation (8) (9) (10) (11) (12) Net profit margins (%) (7.2) 3.8 4.8 5.6 6.1 EBIT (4) 36 112 130 145 Interest cover (x) (0.1) 0.9 1.1 1.3 1.5 Net interest & invt income 3 27 (64) (63) (60) Effective tax rates (%) N/A 19.4 24.0 24.0 24.0 Associates’ contribution (15) (16) 21 21 22 Net dividend payout (%) N/A 20.8 20.3 16.6 13.9 Exceptional items (26) 0 0 0 0 Debtors turnover (days) 228.5 209.8 197.2 194.0 193.9 Others 0 0 0 0 0 Stock turnover (days) 6.7 5.8 5.0 4.5 4.0 Pretax profit (42) 46 68 88 107 Creditors turnover (days) 362.1 344.7 314.4 308.5 307.5 Tax (20) (9) (16) (21) (26) Minority interests 5 (3) (1) (1) (1) Net profit (57) 35 51 66 80 Adj. wt. shares (m) 908 908 1,364 1,364 1,365 Unadj. year-end shares (m) 908 908 1,364 1,365 1,365 BALANCE SHEET KEY DRIVERS (RM m, end Dec) 2008 2009 2010F 2011F 2012F (FYE Dec) 2009 2010F 2011F 2012FFixed assets 28 28 27 27 26 Orderbook depletion (RM' m) 500 400 600 600 Intangible assets 10 10 10 10 10 Orderbook replenishment (RM m) 500 500 500 500 Other long-term assets 1,389 1,389 1,389 1,389 1,389 Outstanding orderbook (RM m) 2,000 2,100 2,000 1,900 Total non-current assets 1,427 1,427 1,426 1,426 1,425 Cash and equivalents 587 592 662 754 868 Stocks 15 15 15 15 15 Trade debtors 504 555 596 661 734 Other current assets 205 211 217 226 235 Total current assets 1,310 1,373 1,490 1,655 1,852 Trade creditors 855 886 950 1,048 1,164 Short-term borrowings 177 177 177 177 177 Other current liabilities 204 204 204 204 204 Total current liabilities 1,236 1,267 1,331 1,430 1,546 Long-term borrowings 714 714 714 714 714 Other long-term liabilities 12 12 12 12 12 Total long-term liabilities 726 726 726 726 726 Shareholders’ funds 681 713 765 831 911 Minority interests 94 94 94 94 94 NTA/share (RM) 0.74 0.77 0.55 0.60 0.66 CASH FLOW 12M - FORWARD FD CORE P/E (X) (RM m, FYE Dec) 2008 2009 2010F 2011F 2012FPretax profit (42) 46 68 88 107Depreciation & non–cash adj. 8 9 10 11 12Working capital changes 124 (20) 24 33 43Cash tax paid 30 (16) (5) (5) (4)Others 12 (10) 44 42 38Cash flow from operations 132 9 141 169 195Capex (8) 0 0 0 0Net investments & sale of FA (1) 0 1 1 0Others 0 0 0 0 0Cash flow from investing (9) 0 1 1 0Debt raised/(repaid) 0 0 0 0 0Equity raised/(repaid) 0 0 0 0 0Dividends paid 0 (6) (10) (13) (57)Cash interest & others (27) 2 (61) (65) (24)Cash flow from financing (27) (4) (71) (78) (81)Change in cash 96 5 70 92 114Change in net cash/(debt) 96 5 70 92 114Ending net cash/(debt) (304) (299) (229) (137) (23)

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OUTPERFORM Maintained Masterskill Education Group RM2.14 @06/12/10 Making the grade for long-term investment Target: RM4.48

Education

MA

LAYS

IA

MASEG MK / MAED.KL Sharizan Rosely +60 (3) 2084 9864 – [email protected]

• Maintain OUTPERFORM. Although uncertainty over the status of the PTPTN loan scheme may overhang Masterskill’s share price in the near term, we maintain our OUTPERFORM stance as the stock scores on long-term fundamentals and defensiveness. Applying a 10% discount to our revised target market P/E of 14.5x (previously on par with 13.8x) to reflect risks relating to the PTPTN loan scheme, our target price goes down from RM4.73 to RM4.48. The stock could be catalysed by (ii) a favourable decision on the PTPTN appeal, (ii) better-than-expected student growth, and (iii) recovery in investor sentiment. Valuations are attractive at 6-7x CY11-12 P/E.

• Fundamentally still attractive. We still regard Masterskill’s (i) leading position in the industry with the highest market share in its segment, (ii) EBITDA margin of over 40% which is higher than local education companies’ 15-20%, and (iii) exposure to the growth prospects of both the healthcare and education sectors as key factors that will ensure strong fundamentals over the long term.

• More of a margin impact from new PTPTN scheme. The potential new loan scheme will affect Masterskill’s margins more than its student population or enrolment. Also, it will hit only the Kuching campus as (i) this campus is new, and (ii) it offers two new diploma courses. We estimate only a 1-2% dent on group earnings. Management stressed that it will not affect the bottomline immediately as diploma programmes span three years. Though the timing of a decision on the appeal is unclear, we continue to believe that it will be in the group’s favour.

Financial summary

Stock Information Market cap: RM877m/US$279m 12-m price range: RM4.25 RM2.06 3-m avg daily vol: 1.8m No. of shrs (m): 410 Est. free float (%): 40.9 Conv. secs (m): None Major shareholders (%): - Dato' Seri Edmund Santhara 22.1 - Masterskill Holding Ltd 21.5 - Fidelity 9.6

FYE Dec 2008 2009 2010F 2011F 2012F Revenue (RM m) 202.9 273.4 326.4 363.0 410.0 EBITDA (RM m) 90.1 123.5 139.5 159.0 182.4 EBITDA margins (%) 44.4% 45.2% 42.7% 43.8% 44.5% Pretax profit (RM m) 80.1 112.3 127.1 149.2 176.8 Net profit (RM m) 72.1 97.4 103.7 118.9 140.5 EPS (sen) 17.6 23.8 25.3 29.0 34.3 EPS growth (%) 40.2% 35.1% 6.5% 14.7% 18.2% P/E (x) 12.2 9.0 8.5 7.4 6.2 Gross DPS (sen) 0.0 0.0 12.6 14.5 17.1 Dividend yield (%) 0.0% 0.0% 5.9% 6.8% 8.0% P/BV (x) 5.5 3.1 2.2 1.7 1.3 ROE (%) 60.7% 43.8% 30.6% 26.4% 24.2% Net cash per share (RM) 0.02 0.17 0.49 0.75 1.07 P/FCFE (x) 227.3 20.0 6.9 6.2 6.9 EV/EBITDA (x) 9.6 6.5 4.8 3.6 2.4 % change in EPS estimates - - - CIMB/Consensus (x) 0.98 0.95 0.94



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Volume 10m (R.H.S ca le ) Ma s te rs kill Educa tion Group Source: Bloomberg

Masterskill provides education programmes that develop skilled professionals in the areas of nursing and allied health. It is the largest nursing and allied health education provider in Malaysia. Masterskill is the leading brand in healthcare education and has significant scale compared to its competitors. Based on student enrolment, the group had 22% market share of nursing education among private higher education institutions in 2010. Masterskill offers diploma and degree programmes targeted primarily at Malaysian secondary school leavers and will soon venture into medical and masters degree programmes as it moves up the value chain.



(RM m, FYE Dec) 2008 2009 2010F 2011F 2012F (FYE Dec) 2008 2009 2010F 2011F 2012F Revenue 203 273 326 363 410 Revenue growth (%) 60.4 34.7 19.4 11.2 13.0 Operating expenses (113) (150) (187) (204) (228) EBITDA growth (%) 40.3 37.2 12.9 14.0 14.7 EBITDA 90 124 140 159 182 Pretax margins (%) 39.5 41.1 38.9 41.1 43.1 Depreciation & amortisation (9) (11) (12) (14) (14) Net profit margins (%) 35.5 35.6 31.8 32.8 34.3 EBIT 81 113 128 145 169 Interest cover (x) 40.8 86.9 34.7 26.6 28.0 Net interest & invt income (1) 0 (1) 4 8 Effective tax rates (%) 10.0 13.3 18.4 20.3 20.5 Associates’ contribution 0 0 0 0 0 Net dividend payout (%) 0.0 0.0 38.0 38.0 38.0 Exceptional items 0 0 0 0 0 Debtors turnover (days) 128.6 146.0 154.5 155.2 154.0 Others 0 0 0 0 0 Stock turnover (days) 0.0 0.0 0.0 0.0 0.0 Pretax profit 80 112 127 149 177 Creditors turnover (days) 3.6 4.0 5.3 6.1 6.1 Tax (8) (15) (23) (30) (36) Minority interests 0 0 0 0 0 Net profit 72 97 104 119 141 Adj. wt. shares (m) 410 410 410 410 410 Unadj. year-end shares (m) 410 410 410 410 410 BALANCE SHEET KEY DRIVERS (RM m, end Dec) 2008 2009 2010F 2011F 2012F (FYE Dec) 2009 2010F 2011F 2012FFixed assets 97 140 144 148 154 Number of students 17,402 19,594 21,831 23,989 Intangible assets 0 0 0 0 0 Average school fees (RM/student) 48,500 48,500 48,500 49,955 Other long-term assets 0 0 0 0 0 Campus utilisation rates (%) 43 55 58 60 Total non-current assets 97 140 144 148 154 Cash and equivalents 39 104 307 466 611 Stocks 0 0 0 0 0 Trade debtors 89 130 146 162 184 Other current assets 23 34 38 43 48 Total current assets 151 269 492 672 843 Trade creditors 2 4 6 6 7 Short-term borrowings 0 0 0 0 0 Other current liabilities 56 82 133 146 165 Total current liabilities 58 86 138 153 172 Long-term borrowings 30 35 105 156 172 Other long-term liabilities 2 2 2 2 2 Total long-term liabilities 32 37 107 158 174 Shareholders’ funds 158 287 390 509 650 Minority interests 0 0 0 0 0 NTA/share (RM) 0.39 0.70 0.95 1.24 1.59 CASH FLOW 12M - FORWARD FD CORE P/E (X) (RM m, FYE Dec) 2008 2009 2010F 2011F 2012FPretax profit 80 112 127 149 177Depreciation & non–cash adj. 9 11 12 14 14Working capital changes (12) (8) (14) (16) (21)Cash tax paid (7) (14) (23) (30) (36)Others (1) 0 33 (10) (15)Cash flow from operations 69 101 135 106 119Capex (46) (67) (16) (17) (19)Net investments & sale of FA 0 0 0 0 0Others 0 15 0 0 0Cash flow from investing (47) (52) (16) (17) (19)Debt raised/(repaid) (21) (4) 70 51 16Equity raised/(repaid) 2 0 0 0 0Dividends paid 0 0 (52) (59) (70)Cash interest & others 13 11 65 78 100Cash flow from financing (6) 7 84 69 46Change in cash 16 56 203 158 145Change in net cash/(debt) 37 60 133 107 129Ending net cash/(debt) 9 69 202 309 438

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NEUTRAL Maintained Maxis Berhad RM5.36 @07/12/10 Not maxed out Target: RM5.60


MA

LAYS

IA

MAXIS MK / MXSC.KL Kelvin Goh CFA +60(3) 2084 9699 – [email protected]

• Maxis is a NEUTRAL as its fairly attractive dividends make up for the lack of price catalysts and low earnings growth. Voice revenue is coming under pressure due to falling tariffs and dwindling price elasticity but is compensated by rising data revenue. Our DCF-based target price remains intact at RM5.60 (WACC 10.8%).

• Data-driven revenue. Maxis expects its FY11 revenue growth to accelerate to mid-single digit from an expected 3% in FY10 and also a slight rise in EBITDA margin, which is consistent with our view. This is lower than Celcom’s and DiGi’s expectation of high-single digit growth given its larger base. Maxis believes thatdata revenue will continue compensating for the decline in voice, where price elasticity has been maximised. FY11 capex should remain at the FY10 level of RM1.4bn though this figure is likely to fall if it inks an agreement to use Telekom Malaysia’s HSBB network. The telco indicated that it is close to signing an agreement, after being delayed for a few months.

• Quad play ambitions. Maxis is investing RM200m in fibre to the home. It is engaging TM on a pricing and service level agreement to access TM’s highspeed broadband network.

• Will Maxis deliver 40-50 sen net DPS? Maxis is vague over whether it will deliver the 40-50 sen net DPS that its major shareholder indicated during its IPO. We assume that it will declare a net DPS of 38 sen, implying a final special dividend of 6 sen on top of a quarterly DPS of 8 sen.

Financial summary

Stock Information Market cap: RM40,200m/US$12,815m 12-m price range: RM5.52 RM5.12 3-m avg daily vol: 5.2m No. of shrs (m): 7,500 Est. free float (%): 30.0 Conv. secs (m): None Major shareholders (%): - Maxis Communications 70.0

FYE Dec 2008 2009 2010F 2011F 2012F Revenue (RM m) 8,449.8 8,611.0 8,899.8 9,405.0 9,980.0 EBITDA (RM m) 4,402.0 4,318.0 4,426.1 4,790.2 5,093.1 EBITDA margins (%) 52.1% 50.1% 49.7% 50.9% 51.0% Pretax profit (RM m) 3,227.7 3,007.0 3,165.6 3,472.4 3,790.8 Net profit (RM m) 2,394.7 2,232.0 2,320.4 2,545.3 2,778.7 EPS (sen) 31.9 29.8 30.9 33.9 37.0 EPS growth (%) 20.9% (6.8%) 4.0% 9.7% 9.2% P/E (x) 16.8 18.0 17.3 15.8 14.5 Core EPS (sen) 31.9 30.8 30.9 33.9 37.0 Core EPS growth (%) 1.7% (3.6%) 0.5% 9.7% 9.2% Core P/E (x) 16.8 17.4 17.3 15.8 14.5 Gross DPS (sen) 0.0 73.0 50.7 53.3 57.3 Dividend yield (%) 0.0% 13.6% 9.5% 10.0% 10.7% P/BV (x) 9.4 4.5 4.7 5.0 5.2 ROE (%) 69.5% 33.7% 26.6% 30.7% 35.2% Net gearing (%) N/A 42.8% 57.0% 64.1% 71.3% P/FCFE (x) 17.7 5.8 10.7 15.6 13.8 EV/EBITDA (x) 9.0 10.2 10.2 9.5 9.0 % change in EPS estimates - - - CIMB/Consensus (x) 1.00 1.03 1.07



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Volume 10m (R.H.S ca le ) Ma xis Be rha d Source: Bloomberg

Maxis is Malaysia’s largest mobile phone operator with 40% subscriber market share and 42% share of revenue. It has dominated the mobile scene with its strong branding and good customer service. Mobile contributes 93% of group revenues, with 5% from international gateway and 2% from fixed line/Internet. Maxis began commercial operations in Aug 1995 and was listed on Bursa Malaysia in Jul 02 as Maxis Communications Bhd. It acquired Aircel in Mar 06 and Natrindo Telepon Selular in April 07. Maxis was delisted in Jul 07 but relisted in Nov 09 as Maxis Bhd with only the Malaysian operations.



(RM m, FYE Dec) 2008 2009 2010F 2011F 2012F (FYE Dec) 2008 2009 2010F 2011F 2012F Revenue 8,450 8,611 8,900 9,405 9,980 Revenue growth (%) 9.9 1.9 3.4 5.7 6.1 Operating expenses (4,048) (4,293) (4,474) (4,615) (4,887) EBITDA growth (%) 22.6 (1.9) 2.5 8.2 6.3 EBITDA 4,402 4,318 4,426 4,790 5,093 Pretax margins (%) 38.2 34.9 35.6 36.9 38.0 Depreciation & amortisation (1,192) (1,165) (1,054) (1,076) (1,067) Net profit margins (%) 28.3 25.9 26.1 27.1 27.8 EBIT 3,210 3,153 3,372 3,714 4,026 Interest cover (x) 82.5 40.9 14.3 13.5 14.6 Net interest & invt income 18 (43) (206) (242) (235) Effective tax rates (%) 25.8 25.8 26.7 26.7 26.7 Associates’ contribution 0 0 0 0 0 Net dividend payout (%) 0.0 245.3 122.8 117.9 116.1 Exceptional items 0 (103) 0 0 0 Debtors turnover (days) 31.0 32.5 31.3 28.8 27.8 Others 0 0 0 0 0 Stock turnover (days) 3.5 5.1 4.2 2.9 2.9 Pretax profit 3,228 3,007 3,166 3,472 3,791 Creditors turnover (days) 92.6 94.8 96.0 86.2 84.9 Tax (833) (775) (845) (927) (1,012) Minority interests 0 0 0 0 0 Net profit 2,395 2,232 2,320 2,545 2,779 Adj. wt. shares (m) 7,500 7,500 7,500 7,500 7,500 Unadj. year-end shares (m) 7,500 7,500 7,500 7,500 7,500 BALANCE SHEET KEY DRIVERS (RM m, end Dec) 2008 2009 2010F 2011F 2012F (FYE Dec) 2009 2010F 2011F 2012FFixed assets 4,456 4,555 4,901 4,924 4,905 Blended mobile ARPU (RM) 61.7 63.9 55.2 49.5 Intangible assets 90 11,019 11,019 11,019 11,019 Postpaid ARPU (local currency) 104.0 103.0 103.0 99.9 Other long-term assets 284 92 92 92 92 Prepaid ARPU (local currency) 41.0 34.9 33.1 31.5 Total non-current assets 4,830 15,666 16,012 16,035 16,016 Broadband ARPU (RM) 97.0 63.1 56.7 51.1 Cash and equivalents 1,692 1,192 2,157 1,800 1,512 No of mobile subscribers (m) 12.03 12.99 13.53 14.07 Stocks 108 134 73 77 82 No of postpaid mobile subs (m) 2.71 2.65 2.71 2.77 Trade debtors 744 790 735 751 770 No of prepaid mobile subs (m) 9.32 10.34 10.82 11.30 Other current assets 1,065 16 16 16 16 No. of broadband subscribers (m) 0.25 0.70 1.20 1.70 Total current assets 3,609 2,132 2,981 2,644 2,379 Trade creditors 1,978 2,496 2,186 2,255 2,387 Short-term borrowings 930 31 0 0 0 Other current liabilities 655 784 784 784 784 Total current liabilities 3,563 3,311 2,970 3,039 3,171 Long-term borrowings 73 4,992 6,992 6,992 6,992 Other long-term liabilities 519 550 550 550 550 Total long-term liabilities 591 5,542 7,542 7,542 7,542 Shareholders’ funds 4,284 8,945 8,481 8,099 7,682 Minority interests 1 0 0 0 0 NTA/share (RM) 0.56 (0.28) (0.34) (0.39) (0.44) CASH FLOW 12M - FORWARD FD CORE P/E (X) (RM m, FYE Dec) 2008 2009 2010F 2011F 2012FPretax profit 3,228 3,007 3,166 3,472 3,791Depreciation & non–cash adj. 1,192 1,165 1,054 1,076 1,067Working capital changes (853) 447 (195) 49 110Cash tax paid (789) (775) (845) (927) (1,012)Others 443 (719) 206 242 235Cash flow from operations 3,222 3,125 3,386 3,912 4,191Capex (796) (1,222) (1,400) (1,100) (1,048)Net investments & sale of FA 1 0 0 0 0Others (8) 1,010 0 0 0Cash flow from investing (803) (212) (1,400) (1,100) (1,048)Debt raised/(repaid) (167) 4,020 1,969 0 0Equity raised/(repaid) 1 0 0 0 0Dividends paid (720) (5,441) (2,784) (2,927) (3,195)Cash interest & others (568) (1,992) (206) (242) (235)Cash flow from financing (1,454) (3,413) (1,022) (3,169) (3,431)Change in cash 965 (500) 965 (357) (288)Change in net cash/(debt) 1,132 (4,520) (1,004) (357) (288)Ending net cash/(debt) 690 (3,830) (4,834) (5,191) (5,479)

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OUTPERFORM Maintained Media Chinese International Ltd RM0.88 @06/12/10 A clearer print Target: RM1.52

Media - Integrated

MA

LAYS

IA

MCIL MK / MDCH.KL Sharizan Rosely +60 (3) 2084 9864 – [email protected]

• Maintain OUTPERFORM. We continue to like MCIL for its dominance of the recovering Chinese newspaper segment and continuing reaping of merger synergies. We maintain our EPS forecasts but increase our target price from RM1.45 to RM1.52 as we apply our revised CY12 target market P/E of 14.5x (13.8x previously) to the stock. The stock remains an OUTPERFORM in light of the potential re-rating catalysts of (i) positive earnings surprises, and (ii) the continued recovery of Chinese newspaper adex. MCIL remains one of our top picks for the sector, backed by its attractive dividend yield of 6%.

• Ad rate hike shows pricing power. Although 2HFY3/11 is likely to be subdued, profitability in the next two years will be underpinned by merger synergies, superior operating efficiency for its Malaysian operations and better cost management. The 3-7% increase in ad rates for Sin Chew and China Press for 2011 is good news and signals the group’s optimism on adex trends for FY11.

• Jewel is still its Malaysian operations. The group’s Malaysian operations through Sin Chew and Nanyang remain the main earnings driver (60% of pretax profit) and should continue to cushion the potential downside to earnings in the coming quarters. The broad-based recovery of newspaper adex (+15% yoy in Jan-Sep 10) is positive for the group’s Malaysian operations as it controls more than 80% of Chinese newspaper adex.

Financial summary

Stock Information Market cap: RM1,482m/US$471m 12-m price range: RM0.92 RM0.53 3-m avg daily vol: 0.9m No. of shrs (m): 1,684 Est. free float (%): 50.0 Conv. secs (m): None Major shareholders (%): - Tan Sri Datuk Tiong Hiew King

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FYE Mar 2009 2010 2011F 2012F 2013F Revenue (RM m) 1,437.8 1,226.7 1,636.5 1,698.5 1,822.4 EBITDA (RM m) 119.7 176.4 206.8 227.6 245.3 EBITDA margins (%) 8.3% 14.4% 12.6% 13.4% 13.5% Pretax profit (RM m) 113.2 179.8 196.6 216.4 232.5 Net profit (RM m) 61.2 134.2 151.4 166.6 178.8 EPS (sen) 3.6 8.0 9.0 9.9 10.6 EPS growth (%) (40.6%) 119.2% 12.8% 10.0% 7.3% P/E (x) 24.2 11.1 9.8 8.9 8.3 Core EPS (sen) 4.1 7.8 9.0 9.9 10.6 Core EPS growth (%) (32.8%) 90.5% 14.9% 10.0% 7.3% Core P/E (x) 21.5 11.3 9.8 8.9 8.3 Gross DPS (sen) 2.9 4.2 5.0 5.0 5.0 Dividend yield (%) 3.2% 4.8% 5.7% 5.7% 5.6% P/BV (x) 1.3 1.2 1.1 1.0 1.0 ROE (%) 5.6% 11.5% 12.1% 12.2% 12.1% Net cash per share (RM) 0.18 0.22 0.26 0.32 0.36 P/FCFE (x) 38.2 11.7 12.0 10.2 11.3 EV/EBITDA (x) 9.8 6.3 5.0 4.2 3.5 % change in EPS estimates N/A N/A N/A CIMB/Consensus (x) 2.99 3.09 3.21



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Volume 1m (R.H.S ca le ) Me dia Chine s e Inte rna tiona l Ltd Source: Bloomberg

Media Chinese International Ltd (MCIL) is the product of a merger of Sin Chew Media Corporation, Nanyang Press and Ming Pao Enterprise Corp (Hong Kong). The enlarged group is the largest print publisher in Malaysia as well as the region and controls 77% of the Chinese print segment in Malaysia. MCIL’s earnings are anchored by the Malaysian operations which contribute 80% of group pretax profit. Over the long run, the group’s exposure to Hong Kong, San Francisco, Vancouver, Toronto and New York will provide a global dimension to earnings.



(RM m, FYE Mar) 2009 2010 2011F 2012F 2013F (FYE Mar) 2009 2010 2011F 2012F 2013F Revenue 1,438 1,227 1,637 1,699 1,822 Revenue growth (%) 2.2 (14.7) 33.4 3.8 7.3 Operating expenses (1,318) (1,050) (1,430) (1,471) (1,577) EBITDA growth (%) (15.6) 47.3 17.2 10.1 7.8 EBITDA 120 176 207 228 245 Pretax margins (%) 7.9 14.7 12.0 12.7 12.8 Depreciation & amortisation (11) (12) (12) (12) (13) Net profit margins (%) 4.3 10.9 9.3 9.8 9.8 EBIT 109 165 195 215 233 Interest cover (x) 23.1 67.0 N/A N/A N/A Net interest & invt income 19 14 2 1 0 Effective tax rates (%) 44.1 24.8 23.0 23.0 23.1 Associates’ contribution 0 0 0 0 0 Net dividend payout (%) 56.6 27.0 30.0 30.0 30.2 Exceptional items (14) 1 0 0 0 Debtors turnover (days) 71.0 87.3 68.1 68.7 67.6 Others 0 0 0 0 0 Stock turnover (days) 119.2 146.1 112.6 111.9 109.5 Pretax profit 113 180 197 216 233 Creditors turnover (days) 47.4 55.7 43.0 44.5 43.6 Tax (50) (45) (45) (50) (54) Minority interests (2) (1) 0 0 0 Net profit 61 134 151 167 179 Adj. wt. shares (m) 1,686 1,686 1,686 1,686 1,686 Unadj. year-end shares (m) 1,686 1,686 1,686 1,686 1,686 BALANCE SHEET KEY DRIVERS (RM m, end Mar) 2009 2010 2011F 2012F 2013F (FYE Mar) 2010 2011F 2012F 2013FFixed assets 184 186 188 189 191 Adex revenue growth (%) -3.0% 6.0% 3.0% 8.0% Intangible assets 46 46 46 46 46 Market share of adex (%) 85.0% 86.0% 87.0% 87.0% Other long-term assets 17 17 17 17 17 Total non-current assets 247 249 251 252 254 Cash and equivalents 445 498 576 670 748 Stocks 485 497 513 528 566 Trade debtors 289 297 314 326 350 Other current assets 0 0 0 0 0 Total current assets 1,219 1,293 1,403 1,524 1,664 Trade creditors 193 181 204 210 225 Short-term borrowings 91 91 91 91 91 Other current liabilities 2 18 2 2 2 Total current liabilities 286 290 297 303 318 Long-term borrowings 43 43 43 43 43 Other long-term liabilities 11 11 11 11 11 Total long-term liabilities 54 54 54 54 54 Shareholders’ funds 1,126 1,201 1,302 1,419 1,545 Minority interests 0 0 0 0 0 NTA/share (RM) 0.64 0.69 0.75 0.81 0.89 CASH FLOW 12M - FORWARD FD CORE P/E (X) (RM m, FYE Mar) 2009 2010 2011F 2012F 2013FPretax profit 113 180 197 216 233Depreciation & non–cash adj. 11 12 12 12 13Working capital changes (38) (15) (26) (21) (46)Cash tax paid (34) (36) (45) (50) (54)Others (3) (2) (2) (1) 0Cash flow from operations 49 138 135 157 145Capex (13) (13) (14) (14) (14)Net investments & sale of FA 0 0 0 0 0Others 0 0 0 0 0Cash flow from investing (13) (13) (14) (14) (14)Debt raised/(repaid) 0 0 0 0 0Equity raised/(repaid) 0 0 0 0 0Dividends paid (35) (36) (45) (50) (54)Cash interest & others 35 (35) 3 3 2Cash flow from financing 1 (71) (43) (47) (52)Change in cash 37 54 79 96 79Change in net cash/(debt) 37 54 79 96 79Ending net cash/(debt) 311 364 442 536 614

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NEUTRAL Maintained Media Prima Bhd RM2.34 @06/12/10 Fruits of consolidation Target: RM2.78

Media - Integrated

MA

LAYS

IA

MPR MK / MPRM.KL Sharizan Rosely +60 (3) 2084 9864 – [email protected]

• Staying NEUTRAL. Despite the sustained ad volume momentum for the FTA TV segment, we remain NEUTRAL on Media Prima as we believe its share price already reflects the positives from the consolidation of NSTP. However, we raise our FY10-12 EPS forecasts by 2-8% for stronger ad volume assumptions, partly because of an expected pre-election adex boost, especially for NSTP. This, coupled with an increase in our CY12 target market P/E from 13.8x to 14.5x, raises our target price from RM2.46 to RM2.78. For exposure to the media sector, we prefer Star Publications and Media Chinese International given their higher upside and dividend yields.

• Still driven by TV. Due to the inclusion of NSTP, Media Prima’s revenue from TV notched up 22% yoy growth in 9M10, which was also in line with the ad volume momentum in the TV segment. A lower effective rate discount of 67% compared to 68% in 2009 signals a sustained recovery of TV ad volume. But viewership has come off from 50% in 2009 to 46%, which is a slight concern.

• Cushioned by NSTP. Media Prima currently controls 98% of NSTP. NSTP, which contributes 44% of group revenue, is benefiting from lower newsprint cost and growth of Malay newspaper ad volume. This should offset potential downside to Media Prima’s earnings.

Financial summary

Stock Information Market cap: RM2,345m/US$745m 12-m price range: RM2.40 RM1.60 3-m avg daily vol: 0.9m No. of shrs (m): 1,002 Est. free float (%): 41.6 Conv. secs (m): 150 Major shareholders (%): - EPF 25.3 - Gabungan Kesturi 14.4 - KWAP 4.9

FYE Dec 2008 2009 2010F 2011F 2012F Revenue (RM m) 781.3 744.1 1,418.9 1,500.3 1,593.5 EBITDA (RM m) 190.1 146.7 309.7 340.2 375.3 EBITDA margins (%) 24.3% 19.7% 21.8% 22.7% 23.6% Pretax profit (RM m) 159.3 275.8 199.5 225.4 255.8 Net profit (RM m) 117.7 251.8 158.2 181.7 207.4 EPS (sen) 12.0 25.8 16.2 18.6 21.2 EPS growth (%) 0.2% 114.0% (37.2%) 14.9% 14.2% P/E (x) 19.4 9.1 14.5 12.6 11.0 Core EPS (sen) 12.3 27.4 16.2 18.6 21.2 Core EPS growth (%) 4.1% 123.1% (40.8%) 14.9% 14.2% Core P/E (x) 19.1 8.6 14.5 12.6 11.0 FD core EPS (sen) 10.9 24.3 14.7 16.9 19.2 FD core P/E (x) 21.5 9.6 15.9 13.9 12.2 Gross DPS (sen) 5.8 12.0 8.1 9.3 10.8 Dividend yield (%) 2.5% 5.1% 3.5% 4.0% 4.6% P/BV (x) 9.5 8.0 6.0 4.6 3.7 ROE (%) 58.0% 96.0% 47.6% 41.7% 37.1% Net gearing (%) 93.1% 44.4% 15.9% 0.0% N/A Net cash per share (RM) N/A N/A N/A N/A 0.08 P/FCFE (x) 16.0 7.8 18.1 17.6 14.6 EV/EBITDA (x) 13.2 16.5 7.6 6.8 5.9 % change in EPS estimates 1.5% 3.0% 8.2% CIMB/Consensus (x) 0.95 1.07 1.08



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Volume 10m (R.H.S c a le ) Me dia Prima Bhd Source: Bloomberg

Media Prima became a media entity after the restructuring of Malaysian Resources Corporation (MRCB) which resulted in it owning TV3 and print media company NSTP. Today, Media Prima is the dominant free-to-air (FTA) TV company in Malaysia. With control of all private TV stations, the group also generates revenue streams from the print, radio and outdoor platforms. This diversification allows the group to capture a substantial portion of the advertising spending in Malaysia. The well-defined target audience of its four key TV channels exposes the company to minimal competitive risks. The successful privatisation of NSTP will be long-term positive for the group.



(RM m, FYE Dec) 2008 2009 2010F 2011F 2012F (FYE Dec) 2008 2009 2010F 2011F 2012F Revenue 781 744 1,419 1,500 1,593 Revenue growth (%) 13.0 (4.8) 90.7 5.7 6.2 Operating expenses (591) (597) (1,109) (1,160) (1,218) EBITDA growth (%) 17.7 (22.8) 111.1 9.8 10.3 EBITDA 190 147 310 340 375 Pretax margins (%) 20.4 37.1 14.1 15.0 16.1 Depreciation & amortisation (47) (50) (93) (96) (100) Net profit margins (%) 15.1 33.8 11.1 12.1 13.0 EBIT 143 96 217 244 275 Interest cover (x) 84.3 3.9 12.4 13.3 14.2 Net interest & invt income (2) (15) (18) (18) (19) Effective tax rates (%) 26.1 8.7 18.0 16.8 17.7 Associates’ contribution 21 17 0 0 0 Net dividend payout (%) 36.7 10.3 37.5 37.5 38.3 Exceptional items (3) 178 0 0 0 Debtors turnover (days) 147.8 160.8 119.6 152.5 152.2 Others 0 0 0 0 0 Stock turnover (days) 1.1 1.1 0.6 0.6 0.5 Pretax profit 159 276 200 225 256 Creditors turnover (days) 159.2 177.7 133.7 167.8 165.6 Tax (42) (24) (36) (38) (45) Minority interests 0 0 (5) (6) (3) Net profit 118 252 158 182 207 Adj. wt. shares (m) 977 977 977 977 977 Unadj. year-end shares (m) 977 977 977 977 977 BALANCE SHEET KEY DRIVERS (RM m, end Dec) 2008 2009 2010F 2011F 2012F (FYE Dec) 2009 2010F 2011F 2012FFixed assets 182 154 212 265 314 Market share of adex (%) 30.0% 30.0% 30.0% 30.0% Intangible assets 35 35 35 35 35 Market share of viewers (%) 50.0% 50.0% 50.0% 50.0% Other long-term assets 324 324 324 324 324 Programming costs (% of op costs) 25.0% 25.0% 25.0% 25.0% Total non-current assets 541 514 571 625 673 Programming costs (RM' million) 150 277 290 305 Cash and equivalents 231 328 394 456 534 Stocks 2 2 2 2 2 Trade debtors 336 320 609 645 685 Other current assets 0 0 0 0 0 Total current assets 569 650 1,006 1,103 1,220 Trade creditors 359 365 674 705 741 Short-term borrowings 49 49 49 49 49 Other current liabilities 22 22 22 22 22 Total current liabilities 431 436 746 777 812 Long-term borrowings 407 407 407 407 407 Other long-term liabilities 31 31 31 31 31 Total long-term liabilities 438 438 438 438 438 Shareholders’ funds 240 285 380 492 625 Minority interests 2 5 10 16 19 NTA/share (RM) 0.21 0.26 0.35 0.47 0.60 CASH FLOW 12M - FORWARD FD CORE P/E (X) (RM m, FYE Dec) 2008 2009 2010F 2011F 2012FPretax profit 159 276 200 225 256Depreciation & non–cash adj. 47 50 93 96 100Working capital changes 11 124 20 (4) (5)Cash tax paid (42) (37) (36) (38) (45)Others (16) 2 5 18 18Cash flow from operations 160 415 281 297 324Capex (20) (19) (150) (150) (149)Net investments & sale of FA (13) (103) 0 0 0Others 0 0 0 0 0Cash flow from investing (33) (122) (150) (150) (149)Debt raised/(repaid) 0 0 0 0 0Equity raised/(repaid) 0 0 0 0 0Dividends paid (43) (26) (59) (68) (79)Cash interest & others 16 (171) (5) (17) (18)Cash flow from financing (27) (197) (65) (86) (98)Change in cash 100 96 67 62 77Change in net cash/(debt) 100 96 67 62 77Ending net cash/(debt) (225) (129) (62) 0 77

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UNDERPERFORM Maintained MISC Bhd RM8.75 @07/12/10 Battling cyclical and structural negatives Target: RM7.00

Tanker Shipping

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MISC MK / MISC.KL Raymond Yap CFA +603 2084 9769 – [email protected]

• Maintain UNDERPERFORM. MISC is battling unfavourable fundamentals in the crude tanker and chemical shipping markets. We retain our UNDERPERFORM call and target price of RM7 based on 18x CY12 EPS or a 25% premium over our target market P/E. MISC is also trading at a premium over its US-listed tanker peers. The premium over the KLCI is counterintuitive given MISC’s relatively poor prospects. This may be due to MISC’s low free float of only 17% and low foreign interest in the stock with just 5% holdings.

• Shipping rates to remain weak. Rates for crude tanker and chemical are expected to remain weak for at least another year. In addition, MISC’s liner shipping division is still making large losses even though the industry enjoyed record profitability during Jul-Sep 10. While its offshore and heavy engineering businesses continue to grow and earn higher profits, we think that investors in MISC are focused on the prospects of its shipping earnings, especially since investors can gain direct access to its heavy engineering business (MMHE MK, Not Rated) that was recently listed.

• Baffling liner losses. Despite securing very cheap chartered-in ships, MISC’s liner division recorded a negative EBIT margin of 16.3% in Jul-Sep 10 against APL’s 14% and probably even higher margins at OOCL and CSCL. The business appears to be structurally unsound and will continue to be a millstone around MISC’s neck.

Financial summary

Stock Information Market cap: RM39,058m/US$12,451m 12-m price range: RM9.00 RM7.80 3-m avg daily vol: 1.3m No. of shrs (m): 4,464 Est. free float (%): 17.0 Conv. secs (m): None Major shareholders (%): - Petronas 62.7 - EPF 11.0

FYE Mar 2009 2010 2011F 2012F 2013F Revenue (RM m) 15,783.4 13,775.0 14,056.7 14,350.7 15,319.7 EBITDA (RM m) 4,943.9 2,514.4 3,332.8 3,643.5 3,805.8 EBITDA margins (%) 31.3% 18.3% 23.7% 25.4% 24.8% Pretax profit (RM m) 3,271.4 911.8 1,624.3 2,013.9 2,208.6 Net profit (RM m) 3,081.0 681.9 1,330.5 1,603.2 1,771.6 EPS (sen) 79.9 17.4 29.8 35.9 39.7 EPS growth (%) 26.8% (78.2%) 71.1% 20.5% 10.5% P/E (x) 10.9 50.2 29.4 24.4 22.0 Core EPS (sen) 79.9 23.3 29.8 35.9 39.7 Core EPS growth (%) 39.1% (70.8%) 27.8% 20.5% 10.5% Core P/E (x) 10.9 37.5 29.4 24.4 22.0 Gross DPS (sen) 46.7 50.1 46.7 46.7 46.7 Dividend yield (%) 5.3% 5.7% 5.3% 5.3% 5.3% P/BV (x) 1.6 1.7 1.7 1.7 1.6 ROE (%) 15.6% 3.1% 5.6% 6.8% 7.5% Net gearing (%) 38.2% 20.5% 27.1% 25.4% 24.4% P/FCFE (x) 10.8 104.5 (279.8) 21.0 23.1 EV/EBITDA (x) 8.5 15.7 13.9 12.7 12.2 % change in EPS estimates N/A N/A N/A CIMB/Consensus (x) 0.74 0.75 0.76



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Volume 10m (R.H.S ca le ) MIS C Bhd Source: Bloomberg

MISC is Malaysia’s premier shipping company, engaged primarily in energy-related shipping of LNG and crude petroleum. Other divisions include container shipping, chemical shipping, offshore oil and gas solutions (FPSO/FSO) and heavy engineering (shipbuilding and repair). A significant proportion of MISC’s earnings, i.e. from the LNG and offshore businesses, are stable due to the long-term nature of its contracts. However, earnings from the petroleum, chemical and liner divisions do fluctuate with changes in spot freight rates. MISC is leveraged to Petronas’s expansion and will benefit from its development of offshore oil and gas fields in Malaysia and abroad.



(RM m, FYE Mar) 2009 2010 2011F 2012F 2013F (FYE Mar) 2009 2010 2011F 2012F 2013F Revenue 15,783 13,775 14,057 14,351 15,320 Revenue growth (%) 21.8 (12.7) 2.0 2.1 6.8 Operating expenses (10,840) (11,261) (10,724) (10,707) (11,514) EBITDA growth (%) 31.4 (49.1) 32.5 9.3 4.5 EBITDA 4,944 2,514 3,333 3,643 3,806 Pretax margins (%) 20.7 6.6 11.6 14.0 14.4 Depreciation & amortisation (1,676) (1,288) (1,688) (1,677) (1,681) Net profit margins (%) 19.5 5.0 9.5 11.2 11.6 EBIT 3,268 1,226 1,645 1,966 2,124 Interest cover (x) 8.1 3.3 3.8 4.5 4.9 Net interest & invt income (356) (316) (293) (306) (302) Effective tax rates (%) 2.1 9.8 4.0 4.0 4.0 Associates’ contribution 37 33 118 199 231 Net dividend payout (%) 43.8 215.7 117.4 97.4 88.2 Exceptional items 0 (231) 0 0 0 Debtors turnover (days) 58.7 64.1 52.3 52.3 51.2 Others 324 199 155 155 155 Stock turnover (days) 9.7 10.4 8.7 8.3 8.1 Pretax profit 3,271 912 1,624 2,014 2,209 Creditors turnover (days) 69.6 97.2 100.4 95.8 93.1 Tax (68) (90) (65) (81) (88) Minority interests (123) (140) (229) (330) (349) Net profit 3,081 682 1,331 1,603 1,772 Adj. wt. shares (m) 3,854 3,915 4,464 4,464 4,464 Unadj. year-end shares (m) 3,720 4,464 4,464 4,464 4,464 BALANCE SHEET KEY DRIVERS (RM m, end Mar) 2009 2010 2011F 2012F 2013F (FYE Mar) 2010 2011F 2012F 2013FFixed assets 27,385 28,229 28,041 27,864 28,182 Fleet size (number of vessels) 174 191 194 194 Intangible assets 1,028 963 963 963 963 No of LNG tankers 29 29 29 29 Other long-term assets 961 1,642 3,316 3,515 3,746 No of petroleum tankers 75 84 87 87 Total non-current assets 29,373 30,834 32,320 32,342 32,892 No of chemical tankers 24 32 32 32 Cash and equivalents 3,725 7,849 6,239 6,540 6,666 No of container shipped 35 35 35 35 Stocks 442 345 328 328 352 No of offshore vessels 7 7 7 7 Trade debtors 2,844 1,994 2,035 2,077 2,217 Petroleum TCE rate (yoy chg %) -31.1% 10.0% -5.0% -5.0% Other current assets 373 39 39 39 39 Chemical TCE rate (yoy chg %) -12.3% -5.0% 10.0% 10.0% Total current assets 7,384 10,226 8,640 8,983 9,275 Liner rates (yoy change %) -30.0% 0.0% 10.0% 10.0% Trade creditors 3,380 3,959 3,771 3,765 4,048 Short-term borrowings 3,104 3,577 3,577 3,577 3,577 Other current liabilities 102 78 78 78 78 Total current liabilities 6,586 7,614 7,426 7,420 7,703 Long-term borrowings 8,748 9,194 9,194 9,194 9,194 Other long-term liabilities 129 215 215 215 215 Total long-term liabilities 8,877 9,410 9,410 9,410 9,410 Shareholders’ funds 20,953 23,662 23,522 23,563 23,772 Minority interests 341 374 603 933 1,282 NTA/share (RM) 5.17 5.09 5.05 5.06 5.11 CASH FLOW 12M - FORWARD FD CORE P/E (X) (RM m, FYE Mar) 2009 2010 2011F 2012F 2013FPretax profit 3,271 912 1,624 2,014 2,209Depreciation & non–cash adj. 1,676 1,288 1,688 1,677 1,681Working capital changes 85 1,527 (213) (48) 119Cash tax paid (68) (90) (65) (81) (88)Others (1,556) (119) 20 (48) (84)Cash flow from operations 3,409 3,518 3,055 3,515 3,836Capex (4,011) (4,696) (1,500) (1,500) (2,000)Net investments & sale of FA 0 0 (1,556) 0 0Others 81 (26) 0 0 0Cash flow from investing (3,930) (4,722) (3,056) (1,500) (2,000)Debt raised/(repaid) 4,324 920 0 0 0Equity raised/(repaid) 0 5,203 0 0 0Dividends paid (1,349) (1,408) (1,471) (1,562) (1,562)Cash interest & others (693) 612 (138) (151) (147)Cash flow from financing 2,282 5,327 (1,609) (1,714) (1,710)Change in cash 1,761 4,124 (1,610) 301 127Change in net cash/(debt) (2,563) 3,204 (1,610) 301 127Ending net cash/(debt) (8,127) (4,923) (6,533) (6,232) (6,105)

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UNDERPERFORM Maintained MTD ACPI Engineering RM0.51 @07/12/10 Down and out for now Target: RM0.32

Construction

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ACP MK / MTDA.KL Nigel Foo +60(3) 2084 9293 – [email protected]

• Maintain UNDERPERFORM. MTD-ACPI remains an UNDERPERFORM. We maintain our target price of RM0.32, which is based on an unchanged 30% discount to the stock’s average 12-month P/BV of 0.6x. Continuous quarterly losses and depleting order book are potential de-rating catalysts. We continue to rate MTD-ACPI an UNDERPERFORM and prefer Muhibbah Engineering (MUHI MK, Outperform) for a mid-cap construction play.

• Dwindling order book a major concern. The group’s outstanding order book of only RM900m can sustain it for just another year or so. This continues to be a major concern. Over the past year, it has not secured any construction jobs, whether overseas or locally. Its largest construction job is the East Coast Expressway 2, (Package 10), which is expected to be fully completed by FY12.

• Potential loss from Bakun? Furthermore, MTD-ACPI could still be liable for losses relating to Bakun as it has a 7.7% equity stake in the consortium involved in the Bakun dam. There are still no details on the potential provisions for the project. In the worst-case scenario, MTD-ACPI may have to bear RM100m loss for Bakun though we believe this is unlikely.

• Selling part of its precast business. The company is talking to a few parties on selling some of its manufacturing precast concrete assets. Negotiations, however, are at a preliminary stage. We estimate the total book value for its precast concrete business to be around RM180m. But given that the assets are loss-making and are not showing any signs of a major turnaround, any asset sale would probably be at a deep discount to the book value. Furthermore, sale of the assets could dampen the group’s long-term earnings growth prospects.

Financial summary

Stock Information Market cap: RM118m/US$38m 12-m price range: RM0.69 RM0.37 3-m avg daily vol: 1.3m No. of shrs (m): 232 Est. free float (%): 25.0 Conv. secs (m): None Major shareholders (%): - MTD Capital 38.1 - Metacorp 11.8 - EPF 10.6

FYE Mar 2009 2010 2011F 2012F 2013F Revenue (RM m) 966.4 642.1 677.0 701.8 601.8 EBITDA (RM m) 28.0 5.0 4.4 35.5 34.0 EBITDA margins (%) 2.9% 0.8% 0.6% 5.1% 5.7% Pretax profit (RM m) (4.0) (11.7) (14.0) 20.5 19.0 Net profit (RM m) (12.8) (18.5) (18.4) 11.3 10.0 EPS (sen) (5.8) (8.0) (7.9) 4.9 4.3 EPS growth (%) (455.6%) (38.3%) 0.5% 161.2% (11.4%) P/E (x) nm nm nm 10.5 11.9 Gross DPS (sen) 0.0 0.9 0.9 0.9 0.9 Dividend yield (%) 0.0% 1.8% 1.8% 1.8% 1.8% P/BV (x) 0.5 0.7 0.7 0.7 0.7 ROE (%) (5.3%) (9.5%) (10.9%) 6.9% 5.8% Net gearing (%) 3.9% 2.5% 2.8% N/A N/A Net cash per share (RM) N/A N/A N/A 0.13 0.23 P/FCFE (x) 4.0 24.7 107.6 3.3 5.0 EV/EBITDA (x) 4.7 26.4 30.6 2.9 2.5 % change in EPS estimates - - - CIMB/Consensus (x) 1.00 0.99 1.00



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Volume 1m (R.H.S ca le ) MTD ACPI Engine e ring Source: Bloomberg

MTD-ACPI is MTD Capital’s construction and building material arm. Its outstanding construction order book is currently around RM900m. The company should benefit from the implementation of the major infrastructure projects as it is the country’s biggest precast concrete producer, supplying a third of the products needed for domestic infrastructure construction. It has 11 plants located across Peninsular Malaysia with 1.5m tonnes of annual production capacity. MTD-ACPI has a niche inhigher-margin specialised precast concrete products like segmental box girders (SBG), precast tunnel lining segment and concrete railway sleepers.



(RM m, FYE Mar) 2009 2010 2011F 2012F 2013F (FYE Mar) 2009 2010 2011F 2012F 2013F Revenue 966 642 677 702 602 Revenue growth (%) 10.9 (33.6) 5.4 3.7 (14.3) Operating expenses (938) (637) (673) (666) (568) EBITDA growth (%) (26.5) (82.1) (12.3) 709.8 (4.2) EBITDA 28 5 4 36 34 Pretax margins (%) (0.4) (1.8) (2.1) 2.9 3.2 Depreciation & amortisation (19) (19) (19) (19) (19) Net profit margins (%) (1.3) (2.9) (2.7) 1.6 1.7 EBIT 10 (14) (14) 17 16 Interest cover (x) 0.6 N/A (36.8) N/A N/A Net interest & invt income (16) 4 0 3 3 Effective tax rates (%) N/A N/A N/A 28.0 28.0 Associates’ contribution 3 (2) 1 1 1 Net dividend payout (%) N/A N/A N/A 14.2 16.0 Exceptional items 0 0 0 0 0 Debtors turnover (days) 108.1 135.6 136.1 135.0 157.7 Others 0 0 0 0 0 Stock turnover (days) 25.4 31.3 32.4 38.1 44.0 Pretax profit (4) (12) (14) 21 19 Creditors turnover (days) 138.0 209.5 206.5 212.5 247.8 Tax (14) (5) (2) (6) (5) Minority interests 5 (2) (2) (4) (4) Net profit (13) (19) (18) 11 10 Adj. wt. shares (m) 222 232 232 232 232 Unadj. year-end shares (m) 222 232 232 232 232 BALANCE SHEET KEY DRIVERS (RM m, end Mar) 2009 2010 2011F 2012F 2013F (FYE Mar) 2010 2011F 2012F 2013FFixed assets 149 138 130 121 113 Construction margins (%) 1.0% -3.0% 3.0% 3.0% Intangible assets 60 57 57 57 57 Production capacity (million tonnes) 1.5 1.5 1.5 1.5 Other long-term assets 31 27 27 27 32 Utilisation rate (%) 50.0% 55.0% 60.0% 65.0% Total non-current assets 240 222 213 205 201 Cash and equivalents 128 61 33 132 154 Stocks 67 44 77 70 75 Trade debtors 232 246 259 260 260 Other current assets 80 52 52 52 52 Total current assets 506 403 421 514 542 Trade creditors 380 357 409 409 409 Short-term borrowings 133 57 34 98 98 Other current liabilities 1 1 1 1 1 Total current liabilities 513 415 443 507 507 Long-term borrowings 4 9 4 4 4 Other long-term liabilities 11 12 17 25 38 Total long-term liabilities 15 21 21 29 42 Shareholders’ funds 209 180 159 168 176 Minority interests 9 9 11 14 18 NTA/share (RM) 0.67 0.53 0.44 0.48 0.51 CASH FLOW 12M - FORWARD FD CORE P/E (X) (RM m, FYE Mar) 2009 2010 2011F 2012F 2013FPretax profit (4) (12) (14) 21 19Depreciation & non–cash adj. 19 19 19 19 19Working capital changes (26) (30) 5 6 (5)Cash tax paid (2) 0 1 0 0Others 67 3 (1) (4) (4)Cash flow from operations 54 (21) 9 40 29Capex (10) (10) (10) (10) (10)Net investments & sale of FA 2 17 2 2 2Others (2) 14 0 0 0Cash flow from investing (10) 21 (8) (8) (8)Debt raised/(repaid) 0 0 0 0 0Equity raised/(repaid) 0 0 0 0 0Dividends paid 0 (2) (2) (2) (2)Cash interest & others 83 5 0 4 4Cash flow from financing 83 3 (1) 2 2Change in cash 127 4 0 34 23Change in net cash/(debt) 127 4 0 34 23Ending net cash/(debt) (9) (5) (5) 30 52

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TRADING BUY Maintained Muhibbah Engineering RM1.36 @06/12/10 Dig in Target: RM2.06

Construction

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MUHI MK / MUHI.KL Sharizan Rosely +60 (3) 2084 9864 – [email protected]

• Maintain TRADING BUY. We continue to like this midsized contractor for its earnings and recovery story. Muhibbah’s share price is down more than 70% from the historical high of RM4.24 reached in Jul 07. We reiterate our TRADING BUY call with a higher RNAV-based target price of RM2.06 (RM2.00 previously) as we apply our revised target market P/E of 14.5x (13.8x before) CY12 to our construction and shipping net profit forecast. We continue to value the stock at a 20% discount to its RNAV. Factors that could catalyse the stock include (i) a resolution to the APH project, (ii) contract wins, and (iii) a recovery of investor sentiment on the stock.

• Diversified earnings. Though infrastructure construction remains the majorcontributor at 65% of revenue, Muhibbah has a fairly diversified business model that provides exposure to oil & gas and airport/road maintenance concessions. The group’s outstanding order book of RM3bn is good for another three years and has more room for upside as it is actively bidding for jobs, both locally and overseas.

• APH resolution is a major catalyst. We continue to believe that there is a strong chance of a resolution to the APH project. We do not discount the possibility of a shareholding restructuring that could bring in additional funds to revive the project. This should be positive for the recovery in investor sentiment and is the main premise of our Trading Buy stance. The stock is trading at attractive CY11-12 P/Es of 9-10x. Share price weakness presents a buying opportunity.

Financial summary

Stock Information Market cap: RM542m/US$172m 12-m price range: RM1.39 RM0.84 3-m avg daily vol: 5.0m No. of shrs (m): 398 Est. free float (%): 73.0 Conv. secs (m): None Major shareholders (%): - Mac Ngan Boon 17.3 - Lembaga Tabung Haji 9.9

FYE Dec 2008 2009 2010F 2011F 2012F Revenue (RM m) 2,033.5 2,252.0 1,756.6 1,931.9 2,028.4 EBITDA (RM m) 55.2 76.2 86.7 130.5 146.6 EBITDA margins (%) 2.7% 3.4% 4.9% 6.8% 7.2% Pretax profit (RM m) 44.9 68.2 65.5 95.6 107.0 Net profit (RM m) 21.8 12.7 31.6 52.7 60.3 EPS (sen) 5.5 3.2 7.9 13.3 15.1 EPS growth (%) (68.9%) (41.8%) 149.0% 67.0% 14.3% P/E (x) 24.8 42.7 17.1 10.3 9.0 Core EPS (sen) 2.5 3.8 7.9 13.3 15.1 Core EPS growth (%) (85.9%) 51.7% 111.0% 67.0% 14.3% Core P/E (x) 54.9 36.2 17.1 10.3 9.0 Gross DPS (sen) 4.7 3.0 2.5 3.0 3.5 Dividend yield (%) 3.4% 2.2% 1.8% 2.2% 2.6% P/BV (x) 1.2 1.2 0.9 0.9 0.9 ROE (%) 5.3% 2.8% 6.0% 8.8% 10.1% Net gearing (%) 6.9% 10.7% 45.8% 55.5% 65.5% P/FCFE (x) 6.7 10.5 4.9 4.1 3.7 EV/EBITDA (x) 12.1 9.2 11.4 8.3 8.1 % change in EPS estimates - - - CIMB/Consensus (x) 0.72 1.00 1.04



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Volume 10m (R.H.S ca le ) Muhibba h Engine e ring Source: Bloomberg

Set up in 1972 as a marine and civil engineering construction company, MuhibbahEngineering was listed on the Main Board of Bursa Malaysia in 1994. Over the years, it expanded into infrastructure construction, cranes, shipyard and airports as well as road maintenance concessions. Through its construction, cranes and shipbuilding businesses, it offers exposure to the oil and gas segment. This, plus its concessions, gives it a diversified business model. The group’s earnings are also diversified geographically as it has exposure to 14 countries – the US, UK, Denmark, Germany, Syria, Sudan, Bahrain, Qatar, UAE, Yemen, Cambodia, Malaysia, Singapore and Australia.



(RM m, FYE Dec) 2008 2009 2010F 2011F 2012F (FYE Dec) 2008 2009 2010F 2011F 2012F Revenue 2,034 2,252 1,757 1,932 2,028 Revenue growth (%) 44.1 10.7 (22.0) 10.0 5.0 Operating expenses (1,978) (2,176) (1,670) (1,801) (1,882) EBITDA growth (%) (48.0) 38.0 13.9 50.5 12.3 EBITDA 55 76 87 131 147 Pretax margins (%) 2.2 3.0 3.7 4.9 5.3 Depreciation & amortisation (30) (25) (40) (43) (46) Net profit margins (%) 1.1 0.6 1.8 2.7 3.0 EBIT 25 51 46 87 100 Interest cover (x) 2.5 5.7 4.7 3.7 3.4 Net interest & invt income (7) (6) (7) (20) (25) Effective tax rates (%) 22.4 57.6 27.0 27.0 27.0 Associates’ contribution 27 23 26 29 32 Net dividend payout (%) 62.9 70.5 23.3 16.8 17.1 Exceptional items 0 0 0 0 0 Debtors turnover (days) 100.4 136.0 211.1 223.1 247.0 Others 0 0 0 0 0 Stock turnover (days) 34.3 34.4 48.2 56.9 70.3 Pretax profit 45 68 65 96 107 Creditors turnover (days) 109.4 128.6 157.1 147.0 166.1 Tax (10) (39) (18) (26) (29) Minority interests (13) (16) (16) (17) (18) Net profit 22 13 32 53 60 Adj. wt. shares (m) 398 398 398 398 398 Unadj. year-end shares (m) 398 398 398 398 398 BALANCE SHEET KEY DRIVERS (RM m, end Dec) 2008 2009 2010F 2011F 2012F (FYE Dec) 2009 2010F 2011F 2012FFixed assets 481 515 463 485 503 Outstanding orderbook (RM m) 3,118 2,946 3,346 3,746 Intangible assets 24 22 22 22 22 Construction margins (%) 2.0% 5.0% 6.0% 7.0% Other long-term assets 170 190 187 183 177 Total non-current assets 675 727 672 689 702 Cash and equivalents 213 197 257 334 434 Stocks 223 202 262 340 442 Trade debtors 739 940 1,092 1,270 1,475 Other current assets 742 411 485 576 687 Total current assets 1,916 1,750 2,097 2,520 3,038 Trade creditors 784 803 709 846 1,000 Short-term borrowings 135 86 355 423 500 Other current liabilities 1,002 829 709 846 1,000 Total current liabilities 1,921 1,717 1,773 2,116 2,499 Long-term borrowings 115 171 232 315 427 Other long-term liabilities 25 36 42 50 60 Total long-term liabilities 141 207 274 365 487 Shareholders’ funds 441 451 603 594 600 Minority interests 88 102 118 135 153 NTA/share (RM) 1.05 1.08 1.46 1.44 1.45 CASH FLOW 12M - FORWARD FD CORE P/E (X) (RM m, FYE Dec) 2008 2009 2010F 2011F 2012FPretax profit 45 68 65 96 107Depreciation & non–cash adj. 30 25 40 43 46Working capital changes (132) 224 (9) (2) 3Cash tax paid (19) (11) (7) (7) (8)Others (20) (17) (19) (8) (7)Cash flow from operations (96) 289 71 121 141Capex (138) (67) (70) (69) (68)Net investments & sale of FA (3) 9 36 (15) (52)Others 20 24 34 50 74Cash flow from investing (121) (34) 0 (34) (46)Debt raised/(repaid) 298 (203) 39 45 50Equity raised/(repaid) 5 3 4 4 4Dividends paid (19) (12) (10) (12) (14)Cash interest & others 233 (268) (335) (154) (175)Cash flow from financing 518 (481) (303) (117) (135)Change in cash 301 (226) (232) (29) (40)Change in net cash/(debt) 3 (23) (270) (75) (89)Ending net cash/(debt) (37) (59) (330) (404) (494)

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UNDERPERFORM Maintained Nestle (Malaysia) Berhad RM43.50 @07/12/10 No sugar rush Target: RM38.85

Food & Beverages

MA

LAYS

IA

NESZ MK / NESM.KL Norziana Mohd Inon +60(3) 2084 9645 – [email protected]

• Maintain UNDERPERFORM. Our earnings forecasts and DCF-based target price of RM38.85 (8.2% WACC) are intact. Given its demanding valuations, Nestle remains an UNDERPERFORM. The potential de-rating catalysts are 1) a further upturn in commodity prices, and 2) deceleration of export growth. We advise investors to switch to our top F&B pick CI Holdings.

• Record export sales. Nestle’s export sales are going from strength to strength. Thanks to investment in major production lines for Nescafe and Coffee-mate in the past three years, exports chipped in 23.9% of group revenue in 3Q10, its highest ever. Nescafe is Nestle’s largest brand after Milo and Maggi. Nestle’s biggest export market is Asean which is gobbling up Nestle’s additional capacity, aided by economic growth and rising demand for halal products.

• No price increase planned. Although prices of raw materials such as robusta and Arabica coffee beans, crude palm oil and wheat flour remain high, a selling price hike is not in the cards for 2011. Increasing selling prices is Nestle’s last resort as the company wants to make its products affordable to the masses while protecting its market share. The last price adjustment was made in 1Q10 when the prices of Milo powder and 3-in-1 mixes were raised by 9%.

• Halal tax incentives. Nestle has the distinction of being the Nestle group’s global halal hub. Because of this status, the company enjoyed a low effective tax rate of around 16% in FY10-12 due to halal tax incentives and reinvestment allowances. Nestle is likely to continue benefiting from the low tax structure during our forecast period. We impute an effective tax rate assumption of 16% p.a. in our FY10-12 forecasts.

Financial summary

Stock Information Market cap: RM10,201m/US$3,252m 12-m price range: RM44.60 RM32.50 3-m avg daily vol: 0.0m No. of shrs (m): 235 Est. free float (%): 19.8 Conv. secs (m): None Major shareholders (%): - Nestle S.A. 72.5 - EPF 7.7

FYE Dec 2008 2009 2010F 2011F 2012F Revenue (RM m) 3,877.1 3,744.2 3,837.2 3,952.3 4,070.8 EBITDA (RM m) 538.9 548.9 610.8 634.9 659.9 EBITDA margins (%) 13.9% 14.7% 15.9% 16.1% 16.2% Pretax profit (RM m) 441.4 440.3 518.9 544.3 570.5 Net profit (RM m) 340.9 351.8 435.9 457.2 479.1 EPS (sen) 145.4 150.0 185.9 195.0 204.3 EPS growth (%) 16.7% 3.2% 23.9% 4.9% 4.8% P/E (x) 29.9 29.0 23.4 22.3 21.3 Gross DPS (sen) 258.4 202.7 202.7 202.7 202.7 Dividend yield (%) 5.9% 4.7% 4.7% 4.7% 4.7% P/BV (x) 24.8 20.9 14.0 11.8 9.9 ROE (%) 60.6% 78.2% 71.6% 57.3% 50.7% Net gearing (%) 51.3% 61.8% 15.5% 8.6% 3.6% P/FCFE (x) 37.3 35.1 20.1 28.3 28.1 EV/EBITDA (x) 19.3 19.1 16.9 16.2 15.5 % change in EPS estimates - - - CIMB/Consensus (x) 1.00 1.00 0.99



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Volume 100k (R.H.S c a le ) Ne s tle (Ma la ys ia ) Be rha d Source: Bloomberg

Nestle is Malaysia’s largest F&B company, boasting household brands such as Nescafe, Milo, Maggi and Kit Kat. The bulk of sales are generated domestically although the company has been steadily expanding its export business, with Asean, Europe and Oceania being its main focus. Nestle became the regional production centre for Milo and baby cereals after completion of the group’s rationalisation programme in 2003. It is also the global halal hub for the Nestle group. Its management is renowned for good corporate governance and astute marketing capabilities.



(RM m, FYE Dec) 2008 2009 2010F 2011F 2012F (FYE Dec) 2008 2009 2010F 2011F 2012F Revenue 3,877 3,744 3,837 3,952 4,071 Revenue growth (%) 16.9 (3.4) 2.5 3.0 3.0 Operating expenses (3,338) (3,195) (3,226) (3,317) (3,411) EBITDA growth (%) 10.9 1.9 11.3 4.0 3.9 EBITDA 539 549 611 635 660 Pretax margins (%) 11.4 11.8 13.5 13.8 14.0 Depreciation & amortisation (74) (88) (84) (84) (85) Net profit margins (%) 8.8 9.4 11.4 11.6 11.8 EBIT 465 461 527 551 575 Interest cover (x) N/A 21.8 75.1 88.3 102.9 Net interest & invt income (23) (21) (9) (7) (4) Effective tax rates (%) 22.8 20.1 16.0 16.0 16.0 Associates’ contribution 0 0 1 1 0 Net dividend payout (%) 131.5 100.0 80.7 76.9 73.4 Exceptional items 0 0 0 0 0 Debtors turnover (days) 35.8 38.6 39.7 40.1 40.0 Others 0 0 0 0 0 Stock turnover (days) 28.1 30.4 31.5 31.9 31.9 Pretax profit 441 440 519 544 571 Creditors turnover (days) 25.4 27.5 28.4 28.8 28.8 Tax (100) (88) (83) (87) (91) Minority interests 0 0 0 0 0 Net profit 341 352 436 457 479 Adj. wt. shares (m) 235 235 235 235 235 Unadj. year-end shares (m) 235 235 235 235 235 BALANCE SHEET KEY DRIVERS (RM m, end Dec) 2008 2009 2010F 2011F 2012F (FYE Dec) 2009 2010F 2011F 2012FFixed assets 520 703 513 682 1,123 Manufacturing overhead growth (%) 10.0% 10.0% 10.0% 10.0% Intangible assets 64 59 55 51 47 Capacity utilisation (%) 96.0% 96.0% 96.0% 96.0% Other long-term assets 6 6 7 8 9 SKU 580 609 640 700 Total non-current assets 589 768 574 740 1,178 Cash and equivalents 30 (90) 74 93 114 Stocks 303 321 340 351 361 Trade debtors 385 406 428 440 452 Other current assets 64 64 65 66 67 Total current assets 782 701 908 950 994 Trade creditors 273 290 307 316 326 Short-term borrowings 129 122 116 110 105 Other current liabilities 336 368 147 228 556 Total current liabilities 738 780 570 654 987 Long-term borrowings 112 90 72 57 46 Other long-term liabilities 111 111 112 113 114 Total long-term liabilities 223 200 183 170 160 Shareholders’ funds 411 489 729 865 1,026 Minority interests 0 0 0 0 0 NTA/share (RM) 1.48 1.83 2.88 3.47 4.17 CASH FLOW 12M - FORWARD FD CORE P/E (X) (RM m, FYE Dec) 2008 2009 2010F 2011F 2012FPretax profit 441 440 519 544 571Depreciation & non–cash adj. 74 88 84 84 85Working capital changes (11) (23) (24) (13) (13)Cash tax paid (111) (112) (113) (83) (87)Others (10) 1 141 (75) (97)Cash flow from operations 383 395 607 458 458Capex (82) (83) (84) (85) (86)Net investments & sale of FA 8 8 8 8 8Others 0 0 0 0 0Cash flow from investing (74) (75) (76) (77) (78)Debt raised/(repaid) (35) (29) (24) (20) (17)Equity raised/(repaid) 0 0 0 0 0Dividends paid (434) (411) (342) (342) (342)Cash interest & others 0 0 0 0 0Cash flow from financing (468) (440) (366) (362) (359)Change in cash (160) (120) 165 19 21Change in net cash/(debt) (125) (91) 189 39 38Ending net cash/(debt) (211) (302) (113) (75) (37)

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NEUTRAL Maintained Pelikan International Corp Bhd RM1.21 @07/12/10 Flying low in Europe Target: RM1.40

Retail

MA

LAYS

IA

PELI MK / PELK.KL Nigel Foo +60(3) 2084 9293 – [email protected]

• Reiterate NEUTRAL. Pelikan continues to be a NEUTRAL. We maintain our target basis of 7.2x P/E, a 45% discount to the regional sector target P/E of 13x, which pegs the stock at RM1.40. Until we see strong signs of demand recovery in Europe, we prefer Asia File which offers an attractive dividend yield of 7% and has been gaining market share in the US and Europe.

• Focus on merging both operations. Management’s focus in 2011 is to merge Pelikan’s and Herlitz’s operations, leading to cost savings and economies of scale. Herlitz, which was acquired in 2010, is one of Europe’s largest and oldest stationery players. It has a strong distribution network in east Europe and complements Pelikan as 80% of its product range does not overlap with Pelikan’s.

• But synergies to take time. While there could be strong synergies and cost savings in areas such as distribution, logistics, production and branding with Herlitz, we believe it will take time, possibly 1-2 years, and a lot of effort to extract economies of scale and synergies. One of the initial initiatives is the consolidation of the logistic and distribution centre in Falkensee, near Berlin, Germany. Cost savings from this move are as much as €5m (RM20m) annually.

• Market conditions in Europe remain sluggish. Market conditions in Europe remain sluggish despite the rebound of the global economy over the past year. This is a concern for Pelikan as more than 70% of the group’s revenue comes from Europe.

Financial summary

Stock Information Market cap: RM620m/US$198m 12-m price range: RM1.37 RM1.02 3-m avg daily vol: 0.5m No. of shrs (m): 513 Est. free float (%): 35.0 Conv. secs (m): None Major shareholders (%): - Lembaga Tabung Haji 30.3 - Loo Hooi Keat 24.3 - Pembinaan Redzai S/B 5.9

FYE Dec 2008 2009 2010F 2011F 2012F Revenue (RM m) 1,286.6 1,153.8 1,798.0 2,013.8 2,315.8 EBITDA (RM m) 108.3 115.6 152.1 155.6 172.1 EBITDA margins (%) 8.4% 10.0% 8.5% 7.7% 7.4% Pretax profit (RM m) 53.7 58.7 79.4 90.8 115.2 Net profit (RM m) 40.5 43.1 65.0 76.2 100.4 EPS (sen) 7.9 8.4 12.7 14.9 19.6 EPS growth (%) (56.5%) 6.3% 51.0% 17.2% 31.7% P/E (x) 15.3 14.4 9.5 8.1 6.2 Gross DPS (sen) 1.8 1.8 1.8 1.8 1.8 Dividend yield (%) 1.5% 1.5% 1.5% 1.5% 1.5% P/BV (x) 0.8 0.7 0.7 0.7 0.6 ROE (%) 7.9% 7.7% 9.0% 8.5% 10.2% Net gearing (%) 47.8% 54.3% 45.2% 32.6% 21.0% P/FCFE (x) (55.9) (33.3) (2.4) 6.8 6.4 EV/EBITDA (x) 8.4 8.4 7.0 6.3 5.2 % change in EPS estimates - - - CIMB/Consensus (x) 1.03 0.97 1.03



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Volume 1m (R.H.S ca le ) Pe lika n Inte rna tiona l Corp Bhd Source: Bloomberg

Pelikan International Corporation owns a global stationery brand, Pelikan, which is recognised for fine writing instruments, painting and printer consumables. Products can be broken down into three segments: office, writing instruments and hobby/craft, with roughly equal contributions to group sales. More than 80% of revenue comes from Europe. The group has manufacturing plants in Germany, Mexico and Malaysia. In 2010, Pelikan acquired Herlitz, one of Europe’s largest and oldest stationery players. The acquisition almost doubled the group’s revenue and should generate strong synergies and economies of scale for the group.



(RM m, FYE Dec) 2008 2009 2010F 2011F 2012F (FYE Dec) 2008 2009 2010F 2011F 2012F Revenue 1,287 1,154 1,798 2,014 2,316 Revenue growth (%) 7.7 (10.3) 55.8 12.0 15.0 Operating expenses (1,178) (1,038) (1,646) (1,858) (2,144) EBITDA growth (%) (30.7) 6.7 31.6 2.3 10.6 EBITDA 108 116 152 156 172 Pretax margins (%) 4.2 5.1 4.4 4.5 5.0 Depreciation & amortisation (27) (33) (40) (41) (41) Net profit margins (%) 3.1 3.7 3.6 3.8 4.3 EBIT 82 83 112 114 131 Interest cover (x) 2.6 3.0 3.3 4.2 6.8 Net interest & invt income (32) (28) (35) (27) (19) Effective tax rates (%) 22.5 14.1 8.8 7.9 6.4 Associates’ contribution 4 4 2 4 4 Net dividend payout (%) 17.0 16.0 10.6 9.0 6.9 Exceptional items 0 0 0 0 0 Debtors turnover (days) 89.9 98.3 92.1 108.2 94.2 Others 0 0 0 0 0 Stock turnover (days) 90.0 95.2 81.7 93.7 83.1 Pretax profit 54 59 79 91 115 Creditors turnover (days) 78.3 72.2 68.1 84.3 74.8 Tax (12) (8) (7) (7) (7) Minority interests (1) (7) (7) (7) (7) Net profit 41 43 65 76 100 Adj. wt. shares (m) 513 513 513 513 513 Unadj. year-end shares (m) 342 342 513 513 513 BALANCE SHEET KEY DRIVERS (RM m, end Dec) 2008 2009 2010F 2011F 2012F (FYE Dec) 2009 2010F 2011F 2012FFixed assets 364 360 579 567 556 Revenue growth-Germany (%) -10.0% -5.0% -3.0% 6.0% Intangible assets 119 122 119 119 119 Exchange rate (Euro/USD) 1.40 1.35 1.35 1.35 Other long-term assets 285 317 285 285 285 Rev growth-Latin America, Asia (%) 5.0% 5.0% 5.0% 0.0% Total non-current assets 768 799 983 971 960 Cash and equivalents 77 63 102 120 213 Stocks 312 290 515 518 537 Trade debtors 311 311 596 598 598 Other current assets 31 34 31 31 49 Total current assets 731 697 1,245 1,267 1,396 Trade creditors 249 207 464 466 483 Short-term borrowings 165 235 369 299 299 Other current liabilities 28 21 28 28 28 Total current liabilities 442 463 860 794 810 Long-term borrowings 182 153 139 139 139 Other long-term liabilities 313 280 329 330 330 Total long-term liabilities 494 433 468 469 469 Shareholders’ funds 543 573 864 934 1,027 Minority interests 20 27 34 42 49 NTA/share (RM) 1.24 1.32 1.45 1.59 1.77 CASH FLOW 12M - FORWARD FD CORE P/E (X) (RM m, FYE Dec) 2008 2009 2010F 2011F 2012FPretax profit 54 59 79 91 115Depreciation & non–cash adj. 27 33 40 41 41Working capital changes (44) (21) (95) (4) (23)Cash tax paid (11) (18) (8) (8) (8)Others 29 26 8 29 21Cash flow from operations 55 78 24 149 146Capex (34) (43) (250) (30) (30)Net investments & sale of FA 11 8 0 0 0Others (12) (68) 0 0 (1)Cash flow from investing (35) (102) (250) (30) (31)Debt raised/(repaid) 1 33 0 0 0Equity raised/(repaid) 0 0 185 0 0Dividends paid (7) (7) (7) (7) (7)Cash interest & others (52) (25) (35) (24) (16)Cash flow from financing (57) 2 143 (30) (22)Change in cash (38) (22) (83) 89 93Change in net cash/(debt) (39) (55) (83) 89 93Ending net cash/(debt) (269) (324) (407) (319) (225)

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TRADING BUY Maintained Petra Perdana RM0.77 @07/12/10 In calmer waters Target: RM0.98


MA

LAYS

IA

PETR MK / PTRD.KL Norziana Mohd Inon +60(3) 2084 9645 – [email protected]

• Maintain TRADING BUY. We maintain our forecasts and RNAV-based target price of RM0.98. Petra Perdana remains a TRADING BUY, premised on the expectations of 1) an earnings recovery, and 2) contract wins by 29.6%-owned Petra Energy (PENB MK, Not Rated) by year-end. Also, the departure of Tengku Datuk Ibrahim Petra has eliminated the risk of another fight for control.

• Putting its house back in order. The boardroom tussle, which was a major drag on operations, finally ended when management received the support of the majority at an EGM on 20 Jul. The close of this disruptive episode has allowed management to rebuild after 10 months of less-than-optimal running of the business. Consequently, vessel utilisation rate improved to 60% in 3Q from around 50% in 2Q.

• Hope floats. Petra Perdana could break even in 4Q, thanks to further improvement in the vessel utilisation rate, which is now more than 60%. Currently, only two vessels are without contracts, an improvement on five idle vessels in 2Q. Meanwhile, associate company Petra Energy is bidding for a sizeable topside maintenance contract after winning a RM400m Petronas Carigali hook-up and commissioning (HUC) job on 5 Dec. In addition to an associate contribution, Petra Perdana could also benefit from the HUC contract by chartering its vessels to Petra Energy, which will need extra capacity to execute the new contract.

Financial summary

Stock Information Market cap: RM347m/US$110m 12-m price range: RM1.55 RM0.75 3-m avg daily vol: 3.1m No. of shrs (m): 450 Est. free float (%): 60.8 Conv. secs (m): None Major shareholders (%): - PNB 18.2 - Shamsul & Kho brothers 11.8 - Lembaga Tabung Haji 9.2

FYE Dec 2008 2009 2010F 2011F 2012F Revenue (RM m) 669.6 605.7 448.7 501.2 536.2 EBITDA (RM m) 163.8 85.3 19.5 84.3 99.3 EBITDA margins (%) 24.5% 14.1% 4.3% 16.8% 18.5% Pretax profit (RM m) 119.3 48.7 (36.7) 37.9 48.2 Net profit (RM m) 84.9 29.3 (40.3) 31.6 41.9 EPS (sen) 28.5 9.9 (12.0) 7.0 9.3 EPS growth (%) (45.5%) (65.5%) (222.1%) 158.4% 32.5% P/E (x) 2.7 7.8 nm 11.0 8.3 Core EPS (sen) 21.0 5.7 (9.3) 6.0 8.2 Core EPS growth (%) (19.5%) (72.9%) (264.1%) 163.9% 38.3% Core P/E (x) 3.7 13.6 nm 12.9 9.4 FD core EPS (sen) 21.0 5.7 (7.9) 5.2 7.2 FD core P/E (x) 3.7 13.6 nm 14.7 10.6 Gross DPS (sen) 2.8 2.0 2.0 2.0 2.0 Dividend yield (%) 3.6% 2.6% 2.6% 2.6% 2.6% P/BV (x) 0.5 0.4 0.4 0.6 0.6 ROE (%) 19.0% 5.8% (6.9%) 5.3% 7.1% Net gearing (%) 35.2% 26.6% 25.1% 24.8% 24.5% P/FCFE (x) 32.0 38.4 4.9 42.0 41.7 EV/EBITDA (x) 2.8 5.7 26.4 7.2 6.1 % change in EPS estimates - - - CIMB/Consensus (x) 1.19 0.71 0.82



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Volume 10m (R.H.S ca le ) Pe tra Pe rda na Source: Bloomberg

Petra Perdana started out in 1995 as an oil & gas engineering and maintenance player. Without abandoning its engineering roots, the company widened its scope of operations and made a move into marine support in early FY04, taking advantage of what appeared to be a potent combination for marine support success at that time –high crude oil price and shortage of local vessels. With the move into marine support, Petra now has a presence along the entire oil & gas upstream chain. In Jul 07, the engineering arm, Petra Energy, was spun off and listed on Bursa Malaysia. Currently, Petra Perdana owns 29.6% of Petra Energy.



(RM m, FYE Dec) 2008 2009 2010F 2011F 2012F (FYE Dec) 2008 2009 2010F 2011F 2012F Revenue 670 606 449 501 536 Revenue growth (%) 0.7 (9.5) (25.9) 11.7 7.0 Operating expenses (506) (520) (429) (417) (437) EBITDA growth (%) 1.4 (47.9) (77.1) 332.5 17.7 EBITDA 164 85 20 84 99 Pretax margins (%) 17.8 8.0 (8.2) 7.6 9.0 Depreciation & amortisation (42) (49) (36) (40) (45) Net profit margins (%) 12.7 4.8 (9.0) 6.3 7.8 EBIT 121 36 (16) 44 55 Interest cover (x) 3.7 1.1 (1.3) 3.6 4.4 Net interest & invt income (25) 0 (12) (12) (12) Effective tax rates (%) 14.8 25.4 N/A 2.9 2.3 Associates’ contribution 0 0 0 0 0 Net dividend payout (%) 7.3 15.0 N/A 21.1 15.9 Exceptional items 23 12 (9) 5 5 Debtors turnover (days) 114.7 129.3 178.0 162.6 155.0 Others 0 0 0 0 0 Stock turnover (days) 19.3 21.5 29.4 26.6 25.1 Pretax profit 119 49 (37) 38 48 Creditors turnover (days) 28.0 32.4 45.2 43.1 42.7 Tax (18) (12) (1) (1) (1) Minority interests (17) (7) (3) (5) (5) Net profit 85 29 (40) 32 42 Adj. wt. shares (m) 298 298 335 450 450 Unadj. year-end shares (m) 298 298 335 450 450 BALANCE SHEET KEY DRIVERS (RM m, end Dec) 2008 2009 2010F 2011F 2012F (FYE Dec) 2009 2010F 2011F 2012FFixed assets 444 492 493 493 493 Charter rate (US$ per horse power) 2.30 2.50 2.70 2.80 Intangible assets 0 0 0 0 0 Number of vessels 20 29 29 29 Other long-term assets 0 0 0 0 0 Order book (RM m) 1,500 1,500 1,500 1,500 Total non-current assets 444 492 493 493 493 Overseas rev contribution (%) 16.0% 16.0% 16.0% 16.0% Cash and equivalents 56 58 59 61 63 Vessel utilisation rate (%) 55.0% 60.0% 65.0% 70.0% Stocks 36 36 36 37 37 Trade debtors 212 217 221 225 230 Other current assets 110 151 174 174 174 Total current assets 414 461 490 497 503 Trade creditors 53 54 57 61 64 Short-term borrowings 230 230 230 230 230 Other current liabilities 66 6 0 1 1 Total current liabilities 349 290 287 292 295 Long-term borrowings 1 1 1 1 1 Other long-term liabilities 10 10 11 12 13 Total long-term liabilities 11 11 12 13 14 Shareholders’ funds 439 570 599 594 591 Minority interests 59 82 85 90 95 NTA/share (RM) 1.47 1.91 1.79 1.32 1.31 CASH FLOW 12M - FORWARD FD CORE P/E (X) (RM m, FYE Dec) 2008 2009 2010F 2011F 2012FPretax profit 119 49 (37) 38 48Depreciation & non–cash adj. 42 49 36 40 45Working capital changes (1) (4) (2) (1) (2)Cash tax paid (18) (18) (16) 0 (1)Others 313 487 714 618 605Cash flow from operations 456 563 695 696 695Capex (451) (678) (678) (678) (678)Net investments & sale of FA 1 130 1 2 3Others 3 3 0 0 0Cash flow from investing (448) (545) (677) (676) (675)Debt raised/(repaid) 10 0 46 0 0Equity raised/(repaid) 0 0 0 0 0Dividends paid (6) (4) (5) (6) (6)Cash interest & others (12) (12) (12) (12) (12)Cash flow from financing (8) (16) 30 (18) (18)Change in cash 1 2 48 2 2Change in net cash/(debt) (9) 2 2 2 2Ending net cash/(debt) (175) (173) (172) (170) (168)

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OUTPERFORM Maintained Petronas Dagangan Bhd RM11.70 @07/12/10 Refuel for dividends here Target: RM15.40

Oil & Gas - Retail

MA

LAYS

IA

PETD MK / PETR.KL Norziana Mohd Inon +60(3) 2084 9645 – [email protected]

• Maintain OUTPERFORM. We maintain our forecasts for Petronas Dagangan (PetDag) but raise our target price from RM14.70 to RM15.40, pegged to a revised target market P/E of 14.5x (13.8x previously). PetDag remains an OUTPERFORM,with the potential share price triggers being 1) leadership of the retail and lubricant segments, and 2) M&As.

• Aiming for leadership positions all around. PetDag is Malaysia’s No. 1 petroleum retailer. It is also the leader in the commercial and liquefied petroleum gas (LPG) businesses. But PetDag trails behind Shell in the retail and lubricant businesses. To boost retail income, PetDag is aggressively pushing for sales at the pumps and Mesra convenience stores, and is hopeful that it will overtake Shell in 2-3 years’ time. Meanwhile, the low-revenue, high-margin lubricant business is expected to benefit from tie-ups and improved distribution. Management targets the lubricant business to be in the top position in five years’ time.

• Attractive growth and dividend plays. PetDag’s 3-year EPS CAGR of 12.8% is expected to outpace that of selected upstream players. Furthermore, cash-rich PetDag makes a reliable dividend play despite a regulated operating environment and high capital requirements. For FY11-13, we forecast capex of RM500m and generous DPS of 85 sen p.a. PetDag tops the dividend list among local oil & gas stocks with a 7.3% yield for CY11. The company does not have a dividend policy and does not intend to have one. We believe management prefers to have the flexibility to undertake an M&A exercise should the opportunity arise.

Financial summary

Stock Information Market cap: RM11,623m/US$3,705m 12-m price range: RM11.80 RM8.55 3-m avg daily vol: 0.2m No. of shrs (m): 993 Est. free float (%): 24.2 Conv. secs (m): None Major shareholders (%): - Petronas 69.9 - EPF 6.0 - Valuecap 3.3

FYE Mar 2009 2010 2011F 2012F 2013F Revenue (RM m) 24,367.6 20,687.0 25,395.6 27,932.3 30,782.3 EBITDA (RM m) 1,039.0 1,280.4 1,460.2 1,592.1 1,753.6 EBITDA margins (%) 4.3% 6.2% 5.8% 5.7% 5.7% Pretax profit (RM m) 810.3 1,046.0 1,220.2 1,341.7 1,492.3 Net profit (RM m) 578.7 752.9 883.8 972.5 1,082.1 EPS (sen) 58.2 75.8 89.0 97.9 108.9 EPS growth (%) (12.5%) 30.1% 17.4% 10.0% 11.3% P/E (x) 20.1 15.4 13.2 12.0 10.7 Gross DPS (sen) 45.0 60.0 85.0 85.0 85.0 Dividend yield (%) 3.8% 5.1% 7.3% 7.3% 7.3% P/BV (x) 2.2 1.9 1.8 1.6 1.5 ROE (%) 11.7% 13.2% 14.1% 14.3% 14.4% Net cash per share (RM) 0.62 0.69 0.76 0.83 0.91 P/FCFE (x) 23.1 17.7 12.7 12.6 12.5 EV/EBITDA (x) 10.6 8.6 7.5 6.8 6.1 % change in EPS estimates - - - CIMB/Consensus (x) 1.13 1.17 1.21



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Volume 1m (R.H.S ca le ) Pe trona s Da g a ng a n Bhd Source: Bloomberg

PetDag undertakes the retail business of Petronas, Malaysia’s sole representative in the Fortune 500 list. However, the retailer is mandated to operate only in the local market as Petronas’s overseas retail operations are handled by the holding company itself. PetDag is the biggest local oil & gas company by market capitalisation, commanding some 25% of the sector’s total market capitalisation. It is also Malaysia’s biggest petroleum retailer after replacing Shell in 2002. Furthermore, the company is the only pure oil & gas retailer that is listed on Bursa Malaysia. As at end-Sep 10, it operated 938 Petronas stations nationwide.



(RM m, FYE Mar) 2009 2010 2011F 2012F 2013F (FYE Mar) 2009 2010 2011F 2012F 2013F Revenue 24,368 20,687 25,396 27,932 30,782 Revenue growth (%) 9.3 (15.1) 22.8 10.0 10.2 Operating expenses (23,329) (19,407) (23,935) (26,340) (29,029) EBITDA growth (%) (7.0) 23.2 14.0 9.0 10.1 EBITDA 1,039 1,280 1,460 1,592 1,754 Pretax margins (%) 3.3 5.1 4.8 4.8 4.8 Depreciation & amortisation (235) (246) (258) (270) (284) Net profit margins (%) 2.4 3.6 3.5 3.5 3.5 EBIT 804 1,034 1,202 1,322 1,470 Interest cover (x) 365.6 304.2 1,997.7 2,196.0 2,442.3 Net interest & invt income 6 11 17 19 21 Effective tax rates (%) 28.2 27.6 27.0 27.0 27.0 Associates’ contribution 0 0 1 1 1 Net dividend payout (%) 57.2 58.6 70.7 64.3 57.7 Exceptional items 0 0 0 0 0 Debtors turnover (days) 39.3 49.5 44.2 45.6 46.6 Others 0 0 0 0 0 Stock turnover (days) 13.6 18.0 16.7 17.7 18.6 Pretax profit 810 1,046 1,220 1,342 1,492 Creditors turnover (days) 48.0 59.1 51.4 51.5 51.5 Tax (229) (288) (329) (362) (403) Minority interests (3) (5) (7) (7) (7) Net profit 579 753 884 972 1,082 Adj. wt. shares (m) 993 993 993 993 993 Unadj. year-end shares (m) 993 993 993 993 993 BALANCE SHEET KEY DRIVERS (RM m, end Mar) 2009 2010 2011F 2012F 2013F (FYE Mar) 2010 2011F 2012F 2013FFixed assets 4,446 5,201 5,437 5,737 6,125 No. of petrol stations 936 966 996 1,026 Intangible assets 0 0 0 0 0 Capex (RMm) 371 500 500 500 Other long-term assets 487 576 670 769 872 Market share (%) 43.5% 44.0% 44.0% 44.0% Total non-current assets 4,933 5,777 6,107 6,505 6,998 Sales volume (bn litres) 15.4 17.1 18.7 20.6 Cash and equivalents 620 682 751 826 908 Stocks 971 1,067 1,252 1,454 1,687 Trade debtors 2,746 2,870 3,278 3,695 4,163 Other current assets 0 0 0 0 0 Total current assets 4,337 4,619 5,281 5,974 6,758 Trade creditors 3,315 3,390 3,757 4,132 4,554 Short-term borrowings 0 0 0 0 0 Other current liabilities 525 775 1,052 1,086 1,128 Total current liabilities 3,840 4,165 4,809 5,218 5,682 Long-term borrowings 0 0 0 0 0 Other long-term liabilities 90 90 90 91 92 Total long-term liabilities 90 90 90 91 92 Shareholders’ funds 5,290 6,091 6,439 7,120 7,932 Minority interests 50 50 50 50 50 NTA/share (RM) 5.33 6.13 6.48 7.17 7.98 CASH FLOW 12M - FORWARD FD CORE P/E (X) (RM m, FYE Mar) 2009 2010 2011F 2012F 2013FPretax profit 810 1,046 1,220 1,342 1,492Depreciation & non–cash adj. 235 246 258 270 284Working capital changes (142) (145) (226) (243) (280)Cash tax paid (200) (301) (329) (362) (403)Others 0 68 256 257 259Cash flow from operations 703 915 1,179 1,264 1,353Capex (500) (500) (500) (500) (500)Net investments & sale of FA 0 0 0 0 0Others (65) (68) (75) (78) (81)Cash flow from investing (565) (568) (575) (578) (581)Debt raised/(repaid) 0 0 0 0 0Equity raised/(repaid) 0 0 0 0 0Dividends paid (447) (596) (844) (844) (844)Cash interest & others 366 312 309 234 155Cash flow from financing (81) (284) (535) (610) (689)Change in cash 56 62 68 75 83Change in net cash/(debt) 56 62 68 75 83Ending net cash/(debt) 620 682 751 826 908

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TRADING BUY Maintained Proton Holdings Bhd RM4.84 @06/12/10 Steering a restructuring course Target: RM5.95

Autos

MA

LAYS

IA

PROH MK / PROT.KL Loke Wei Wern +60 (3) 2084 9946 – [email protected]

• Maintain TRADING BUY. We are encouraged by management’s ongoing efforts to restructure Proton. Apart from the recent management restructuring of Lotus and the current push for its turnaround, Proton is also pursuing initiatives which could address its overcapacity, i.e. a push for exports and a study on plant consolidation. Proton’s improving financials are also encouraging. We maintain our TRADING BUY call in view of the emergence of potential near-term catalysts such as 1) ongoing restructuring of its internal operations, 2) more inroads into export markets, and 3) renewed consolidation talks. We also retain our target price of RM5.95 as we continue to value it at a 20% premium over its 5-year historical P/BV of 0.5x.

• Consolidation talks to dominate in 2011? Now that partnership talks with Volkswagen AG (VW) have ended, discussions on consolidation of the local auto players are likely to dominate in 2011. From Proton’s point of view, there are merits in collaboration as Proton’s Achilles heel is the negative perception of the quality of its cars. With Perodua on board, Proton might be able to leverage Toyota’s support which should help it gain mileage in its export aspirations, among others.

• Tackling the overcapacity. Proton’s two manufacturing plants in Shah Alam, Selangor and Tanjung Malim, Perak have a combined installed capacity of 380,000 units, which is only about half utilised currently. The Tanjung Malim plant alone has a designed capacity of 1m cars p.a. We gather that feasibility studies on Proton’s plant consolidation are ongoing. A decision on the plant consolidation could be made as early as the beginning of 2011, in our opinion.

Financial summary

Stock Information Market cap: RM2,658m/US$845m 12-m price range: RM5.00 RM3.81 3-m avg daily vol: 0.6m No. of shrs (m): 549 Est. free float (%): 33.5 Conv. secs (m): None Major shareholders (%): - Khazanah Nasional Bhd 42.7 - Employees Provident Fund 12.4 - Petroliam Nasional Bhd 7.9

FYE Mar 2009 2010 2011F 2012F 2013F Revenue (RM m) 6,518.8 8,226.9 9,001.6 9,531.6 10,012.7 EBITDA (RM m) 347.0 667.2 838.2 915.3 964.0 EBITDA margins (%) 5.3% 8.1% 9.3% 9.6% 9.6% Pretax profit (RM m) (319.2) 260.9 414.5 458.1 489.6 Net profit (RM m) (301.8) 218.9 360.6 398.5 426.0 EPS (sen) (55.0) 39.9 65.7 72.6 77.6 EPS growth (%) (263.5%) 172.5% 64.7% 10.5% 6.9% P/E (x) nm 12.1 7.4 6.7 6.2 Core EPS (sen) (4.3) 41.2 65.7 72.6 77.6 Core EPS growth (%) (154.4%) 1,064.4% 59.2% 10.5% 6.9% Core P/E (x) nm 11.7 7.4 6.7 6.2 Gross DPS (sen) 5.0 20.0 10.0 10.0 10.0 Dividend yield (%) 1.0% 4.1% 2.1% 2.1% 2.1% P/BV (x) 0.5 0.5 0.5 0.4 0.4 ROE (%) (5.7%) 4.2% 6.6% 6.8% 6.9% Net cash per share (RM) 1.01 2.69 2.10 2.76 3.52 P/FCFE (x) (13.6) 3.7 (6.8) 6.8 6.0 EV/EBITDA (x) 5.6 1.5 1.6 1.1 0.6 % change in EPS estimates - - - CIMB/Consensus (x) 1.13 1.14 1.15



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Volume 1m (R.H.S ca le ) Proton Holding s Bhd Source: Bloomberg

Founded in 1983, Proton Holdings is Malaysia’s first car manufacturer. It is headquartered in Shah Alam, Selangor and has a manufacturing plant in Tanjung Malim, Perak. Formerly the top player in Malaysia, Proton has lost ground over the years due partly to tepid response to its products and keener competition, especially from Perodua. However, it managed to claw back some market share recently through the successful launches of the Persona, Saga and Exora. But it remains the number two player with a market share of about 26% vs. 31% for Perodua.



(RM m, FYE Mar) 2009 2010 2011F 2012F 2013F (FYE Mar) 2009 2010 2011F 2012F 2013F Revenue 6,519 8,227 9,002 9,532 10,013 Revenue growth (%) 16.0 26.2 9.4 5.9 5.0 Operating expenses (6,172) (7,560) (8,163) (8,616) (9,049) EBITDA growth (%) 16.5 92.3 25.6 9.2 5.3 EBITDA 347 667 838 915 964 Pretax margins (%) (4.9) 3.2 4.6 4.8 4.9 Depreciation & amortisation (450) (433) (458) (483) (508) Net profit margins (%) (4.6) 2.7 4.0 4.2 4.3 EBIT (103) 235 380 432 456 Interest cover (x) (7.2) 19.5 51.2 64.7 75.8 Net interest & invt income 28 16 28 20 27 Effective tax rates (%) N/A 16.1 13.0 13.0 13.0 Associates’ contribution 20 6 6 6 6 Net dividend payout (%) N/A 37.6 11.4 10.3 9.7 Exceptional items (278) (9) 0 0 0 Debtors turnover (days) 52.1 40.2 39.1 39.7 39.9 Others 15 13 0 0 0 Stock turnover (days) 69.9 58.2 52.1 52.9 53.1 Pretax profit (319) 261 414 458 490 Creditors turnover (days) 70.4 64.5 69.2 70.3 70.6 Tax 17 (42) (54) (60) (64) Minority interests 0 0 0 0 0 Net profit (302) 219 361 399 426 Adj. wt. shares (m) 549 549 549 549 549 Unadj. year-end shares (m) 549 549 549 549 549 BALANCE SHEET KEY DRIVERS (RM m, end Mar) 2009 2010 2011F 2012F 2013F (FYE Mar) 2010 2011F 2012F 2013FFixed assets 2,827 2,633 3,253 3,238 3,197 Production capacity (units) 380,000 380,000 380,000 380,000 Intangible assets 461 593 593 593 593 Car sales (units) 156,653 170,885 178,005 186,577 Other long-term assets 407 407 403 398 393 Market share (%) 26.9% 27.0% 27.0% 27.8% Total non-current assets 3,694 3,634 4,248 4,228 4,184 Cash and equivalents 914 1,652 1,308 1,657 2,061 Stocks 1,395 1,227 1,343 1,422 1,494 Trade debtors 890 920 1,007 1,066 1,120 Other current assets 206 81 81 81 81 Total current assets 3,405 3,881 3,738 4,226 4,755 Trade creditors 1,278 1,630 1,784 1,889 1,984 Short-term borrowings 306 142 128 115 104 Other current liabilities 300 300 326 346 363 Total current liabilities 1,884 2,073 2,238 2,350 2,451 Long-term borrowings 55 32 29 26 23 Other long-term liabilities 59 67 67 67 67 Total long-term liabilities 114 99 96 93 91 Shareholders’ funds 5,102 5,333 5,652 6,010 6,395 Minority interests 0 0 0 0 0 NTA/share (RM) 8.45 8.63 9.21 9.86 10.56 CASH FLOW 12M - FORWARD FD CORE P/E (X) (RM m, FYE Mar) 2009 2010 2011F 2012F 2013FPretax profit (319) 261 414 458 490Depreciation & non–cash adj. 450 433 458 483 508Working capital changes (234) 609 (49) (33) (30)Cash tax paid 40 17 (42) (54) (60)Others 365 (30) (684) 33 24Cash flow from operations 302 1,290 98 886 932Capex (500) (500) (500) (500) (500)Net investments & sale of FA 0 0 0 0 0Others (142) 108 0 0 0Cash flow from investing (642) (392) (500) (500) (500)Debt raised/(repaid) 117 (186) (17) (16) (14)Equity raised/(repaid) 0 0 0 0 0Dividends paid (21) 0 (82) (41) (41)Cash interest & others (68) 27 157 20 27Cash flow from financing 28 (160) 58 (37) (28)Change in cash (312) 738 (344) 349 404Change in net cash/(debt) (429) 925 (327) 365 418Ending net cash/(debt) 553 1,478 1,151 1,516 1,933

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OUTPERFORM Maintained Public Bank Bhd RM12.80 @07/12/10 Banking on its tradition of consistency Target: RM16.10

Banks

MA

LAYS

IA

PBK MK / PUBM.KL Winson Ng Gia Yann CFA +60(3) 2084 9686 – [email protected]

• Reaffirm OUTPERFORM. Public remains an OUTPERFORM and our top pick among the big-cap Malaysian banks. Potential share price triggers include (1) a potential improvement in its loan growth, (2) increased contributions from Greater China, and (3) stronger-than-expected non-interest income. We retain our earnings forecasts and target price of RM16.10, pegged to an unchanged 10% premium over the DDM value. Also intact are the key DDM parameters, including a cost of equity of 11.2% and dividend growth rates of 10.2% in the interim growth phase and 5% in the long-term growth phase.

• Healthy earnings growth. Although net earnings growth is expected to slow down from a projected 20.3% for FY10, the pace will remain healthy at 16.5% in FY11. This will be driven by the 14.2% rise in the topline, emanating from a (1) 15.9% increase in net interest income, on the back of mid-teens loan growth, and (2) 11% expansion of non-interest income, partly from the wealth management and bancassurance businesses.

• Projecting loan growth in the mid-teens. The group will continue its tradition of expanding loans at a robust pace. We estimate loan growth of 15.5% for FY11, ledby an 18% rise in residential mortgages. Auto and general commerce loans are projected to expand 10-11%.

Financial summary

Stock Information Market cap: RM45,209m/US$14,411m 12-m price range: RM12.84 RM10.76 3-m avg daily vol: 2.5m No. of shrs (m): 3,532 Est. free float (%): 75.0 Conv. secs (m): None Major shareholders (%): - Tan Sri Dr. Teh Hong Piow 24.1 - EPF 9.6 - Valuecap 3.0

FYE Dec 2008 2009 2010F 2011F 2012F Net interest income (RM m) 3,727.3 4,036.4 4,745.8 5,499.7 6,283.6 Non-interest income (RM m) 1,609.7 1,874.7 2,036.6 2,254.4 2,454.0 Total income (RM m) 5,739.2 6,124.9 6,998.6 7,992.8 8,999.7 Loan loss provisions (RM m) (548.6) (691.0) (596.6) (675.1) (711.8) Pretax profit (RM m) 3,379.1 3,321.4 4,159.3 4,894.1 5,756.2 Net profit (RM m) 2,581.2 2,517.3 3,027.3 3,525.5 4,150.3 EPS (sen) 70.1 69.3 85.1 99.8 117.5 EPS growth (%) 20% (1%) 23% 17% 18% P/E (x) 18.2 18.5 15.0 12.8 10.9 Gross DPS (sen) 87.0 77.2 62.4 73.2 86.2 Dividend yield (%) 6.8% 6.0% 4.9% 5.7% 6.7% P/BV (x) 4.9 4.2 3.5 3.0 2.6 ROE (%) 27.3% 24.5% 25.2% 25.1% 25.4% % change in EPS estimates - - - CIMB/Consensus (x) 1.00 1.04 1.08



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Volume 10m (R.H.S ca le ) Public Ba nk Bhd Source: Bloomberg

Public Bank is Malaysia’s third largest banking group with assets totalling RM220.6bn. As an anchor bank, it acquired Hock Hua Bank, Advance Finance and Sime Merchant Bank in 2000-01. The bank also took Public Finance private in 2003 and merged it with its banking business in Sep 04. The group’s major operations include commercial banking, Islamic banking, investment banking and management of unit trust funds. As part of its overseas expansion, Public acquired HK-based Asia Commercial Bank in 2006 for HK$4.5bn. It also forged a strategic alliance with ING Asia in 2007 to distribute the latter’s bancassurance products.



(RM m, FYE Dec) 2008 2009 2010F 2011F 2012F (FYE Dec) 2008 2009 2010F 2011F 2012F Net interest income 3,727 4,036 4,746 5,500 6,284 Total income growth (%) 12.3 6.7 14.3 14.2 12.6 Non-interest income 1,610 1,875 2,037 2,254 2,454 Pre-provision profit growth (%) 15.5 1.7 18.4 17.8 15.5 Other income 402 214 216 239 262 Pretax growth (%) 12.5 (1.7) 25.2 17.7 17.6 Total income 5,739 6,125 6,999 7,993 9,000 Net interest margin (%) 2.24 2.21 2.32 2.38 2.41 Overhead expenses (1,791) (2,110) (2,247) (2,393) (2,535) Cost-income ratio (%) 31.2 34.4 32.1 29.9 28.2 Pre-provision profit 3,948 4,015 4,752 5,599 6,465 Effective tax rates (%) 22.4 23.2 24.2 25.2 25.2 Loan loss provisions (549) (691) (597) (675) (712) Net dividend payout (%) 91.8 83.6 55.0 55.0 55.0 Associates’ contribution 12 12 10 11 11 Exceptional items 0 0 0 0 0 Others (33) (15) (6) (41) (8) Pretax profit 3,379 3,321 4,159 4,894 5,756 Tax (757) (770) (1,008) (1,235) (1,450) Minority interests (41) (34) (124) (134) (156) Net profit 2,581 2,517 3,027 3,525 4,150 Adj. wt. shares (m) 3,680 3,635 3,558 3,532 3,532 Unadj. year-end shares (m) 3,532 3,532 3,532 3,532 3,532 BALANCE SHEET KEY DRIVERS (RM m, end Dec) 2008 2009 2010F 2011F 2012F (FYE Dec) 2008 2009 2010F 2011F 2012F Cash & deposits with FIs 43,680 47,863 50,194 53,314 58,071 Loan growth (%) 19.1 14.4 16.6 15.5 14.1 Marketable securities 11,940 8,268 10,204 9,501 10,507 Deposit growth (%) 9.0 13.0 11.7 12.3 12.4 Total current assets 55,620 56,131 60,397 62,814 68,578 Loan-deposit ratio (%) 78.3 79.2 82.6 84.8 86.1 Net loans & advances 118,386 135,336 157,670 181,965 207,562 Gross NPL (%) 1.0 1.0 1.0 1.0 1.0 Long-term investments 13,913 18,786 16,578 18,070 18,375 Net NPL (%) 0.9 0.8 0.8 0.7 0.7 Fixed assets 1,303 1,341 1,394 1,439 1,483 Loan loss reserve (%) 159.7 172.4 175.5 181.8 185.0 Intangible assets 2,072 2,058 2,058 2,058 2,058 GP ratio (%) 1.5 1.5 1.5 1.5 1.5 Other long-term assets 4,868 3,485 3,456 3,623 3,767 RWCR (%) 13.7 14.7 15.5 15.4 15.5 Total long-term assets 140,543 161,005 181,156 207,156 233,245 Total assets 196,163 217,136 241,554 269,970 301,823 Customer deposits 151,185 170,892 190,959 214,522 241,017 Deposits of other FIs 21,221 22,636 24,735 27,035 29,556 Subordinated debts 7,163 8,032 8,032 8,032 8,032 Other long-term liabilities 6,365 3,861 4,125 4,561 5,025 Total liabilities 185,934 205,421 227,851 254,150 283,631 Shareholders’ funds 9,537 11,023 13,011 15,127 17,501 Minority interests 692 692 692 692 692 BV/share (RM) 2.59 3.08 3.68 4.28 4.95 CURRENT P/BV (X) 12M - FORWARD FD CORE P/E (X)

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NEUTRAL Maintained Puncak Niaga Holdings Bhd RM2.54 @06/12/10 Waiting for the takeover lifeboat Target: RM2.89

Water Treatment & Services

MA

LAYS

IA

PNH MK / PNHB.KL Sharizan Rosely +60 (3) 2084 9864 – [email protected]

• Maintain NEUTRAL. The takeover of water assets in Selangor made little progressin 2010, which was a disappointment. As the takeover is likely to be protracted, we remain NEUTRAL on the stock at this juncture but would relook at our call if the takeover progress picks up. Also intact is our target price of RM2.89, which imputes a 40% discount to its DCF value to reflect the risks of further delays. Puncak’s effective takeover price is backed by Splash’s RM4.54/share offer in Mar 10.

• Looking to 2011 for progress on takeover. Although the takeover of water assets in Selangor has made little headway, we expect it to advance in 2011, with the push factor being the risk that the concessionaires (PNSB, Syabas, Abass and Splash) will default on their bond redemptions in 2011. Splash’s bonds, for example, are due in Jul 2011. A successful takeover of the concessionaires would resolve the payment issues, which stem from the absence of a water tariff increase for Puncak Niaga in 2009.

• Takeover likely to remain long-drawn. Unless (i) the payment issues are dealt with, (ii) consideration is given to Syabas’s outstanding compensation, and (iii) the state government pushes for a resolution to all the issues, the takeover is likely to be protracted.

Financial summary

Stock Information Market cap: RM1,044m/US$332m 12-m price range: RM3.15 RM2.38 3-m avg daily vol: 0.2m No. of shrs (m): 411 Est. free float (%): 61.1 Conv. secs (m): None Major shareholders (%): - Central Plus (M) Sdn Bhd 30.0 - EPF 9.0

FYE Dec 2008 2009 2010F 2011F 2012F Revenue (RM m) 1,476.1 1,885.4 2,214.8 2,342.1 3,095.9 EBITDA (RM m) 649.6 1,072.3 1,354.4 1,449.5 2,169.4 EBITDA margins (%) 44.0% 56.9% 61.2% 61.9% 70.1% Pretax profit (RM m) 57.0 313.1 312.4 418.1 701.2 Net profit (RM m) 24.9 142.6 193.2 248.8 330.6 EPS (sen) 6.1 34.7 47.0 60.5 80.4 EPS growth (%) (81.4%) 472.7% 35.5% 28.8% 32.9% P/E (x) 41.9 7.3 5.4 4.2 3.2 Gross DPS (sen) 13.5 13.5 13.5 13.5 13.5 Dividend yield (%) 5.3% 5.3% 5.3% 5.3% 5.3% P/BV (x) 0.7 0.6 0.6 0.5 0.4 ROE (%) 1.7% 9.0% 11.0% 12.7% 14.9% Net gearing (%) 9.5% 39.9% 40.4% 35.9% N/A Net cash per share (RM) N/A N/A N/A N/A 1.26 P/FCFE (x) (4.5) 1.7 3.3 1.7 0.8 EV/EBITDA (x) 2.0 1.9 1.6 1.5 0.5 % change in EPS estimates - - - CIMB/Consensus (x) 1.25 1.30 1.24



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Volume 1m (R.H.S c a le ) P unc a k Nia g a Holding s Bhd Source: Bloomberg

Puncak Niaga is the largest water supply concessionaire in Malaysia, holding two concessions from the Selangor state government. The first, awarded in 1994, allows Puncak to operate water treatment plants formerly under the management of Perbadanan Urus Air Selangor (PUAS). The second concession, awarded in 1995, allows Puncak to operate a new water treatment plant at Bukit Badoh. Both concessions will expire in 2020. 70%-owned Syabas holds a 30-year concession and is the biggest water supply privatisation in Malaysia.



(RM m, FYE Dec) 2008 2009 2010F 2011F 2012F (FYE Dec) 2008 2009 2010F 2011F 2012F Revenue 1,476 1,885 2,215 2,342 3,096 Revenue growth (%) 7.5 27.7 17.5 5.7 32.2 Operating expenses (827) (813) (860) (893) (926) EBITDA growth (%) (27.3) 65.1 26.3 7.0 49.7 EBITDA 650 1,072 1,354 1,449 2,169 Pretax margins (%) 3.9 16.6 14.1 17.9 22.6 Depreciation & amortisation (433) (509) (1,016) (1,074) (1,420) Net profit margins (%) 1.7 7.6 8.7 10.6 10.7 EBIT 217 563 339 375 750 Interest cover (x) 0.7 1.6 1.6 2.1 5.2 Net interest & invt income (160) (250) (26) 43 (49) Effective tax rates (%) 62.5 27.1 26.0 26.0 26.0 Associates’ contribution 0 0 0 0 0 Net dividend payout (%) 160.3 28.0 20.7 16.0 12.1 Exceptional items 0 0 0 0 0 Debtors turnover (days) 60.0 47.0 40.0 37.8 28.6 Others 0 0 0 0 0 Stock turnover (days) 7.0 6.9 7.1 7.1 6.4 Pretax profit 57 313 312 418 701 Creditors turnover (days) 209.3 205.8 213.0 213.0 192.3 Tax (36) (85) (81) (109) (182) Minority interests 4 (86) (38) (61) (188) Net profit 25 143 193 249 331 Adj. wt. shares (m) 411 411 411 411 411 Unadj. year-end shares (m) 411 411 411 411 411 BALANCE SHEET KEY DRIVERS (RM m, end Dec) 2008 2009 2010F 2011F 2012F (FYE Dec) 2009 2010F 2011F 2012FFixed assets 1,164 2,762 3,059 3,555 3,450 Utilisation rate (%) 90.0% 90.0% 90.0% 90.0% Intangible assets 0 0 0 0 0 Tafiff hike (%) 37.0% 0.0% 0.0% 25.0% Other long-term assets 1,232 1,232 1,232 1,232 1,232 Tariff rate (RM per cubic metre) 2 2 3 4 Total non-current assets 2,396 3,993 4,290 4,786 4,681 Cash and equivalents 1,299 2,397 2,694 3,278 4,637 Stocks 29 42 44 47 62 Trade debtors 243 243 243 243 243 Other current assets 50 64 67 71 87 Total current assets 1,621 2,746 3,049 3,638 5,028 Trade creditors 869 1,257 1,329 1,405 1,858 Short-term borrowings 97 88 79 71 64 Other current liabilities 7 7 7 7 8 Total current liabilities 974 1,352 1,415 1,483 1,929 Long-term borrowings 1,356 3,056 3,456 4,056 4,056 Other long-term liabilities 69 460 386 517 867 Total long-term liabilities 1,425 3,516 3,842 4,573 4,923 Shareholders’ funds 1,495 1,676 1,848 2,073 2,375 Minority interests 123 196 234 294 483 NTA/share (RM) 3.64 4.08 4.49 5.04 5.78 CASH FLOW 12M - FORWARD FD CORE P/E (X) (RM m, FYE Dec) 2008 2009 2010F 2011F 2012FPretax profit 57 313 312 418 701Depreciation & non–cash adj. 433 509 1,016 1,074 1,420Working capital changes 42 361 66 70 421Cash tax paid (188) 287 (162) 14 154Others 0 0 0 0 0Cash flow from operations 344 1,470 1,233 1,576 2,696Capex (563) (858) (912) (970) (1,315)Net investments & sale of FA 0 0 0 0 0Others 0 0 0 0 0Cash flow from investing (563) (858) (912) (970) (1,315)Debt raised/(repaid) (11) (10) (9) (8) (7)Equity raised/(repaid) 0 0 0 0 0Dividends paid (15) (15) (15) (15) (15)Cash interest & others 230 (1,189) (400) (598) 0Cash flow from financing 205 (1,214) (424) (621) (22)Change in cash (14) (601) (103) (14) 1,359Change in net cash/(debt) (3) (592) (94) (7) 1,366Ending net cash/(debt) (154) (746) (840) (847) 520

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NEUTRAL Maintained QSR Brands RM5.63 @07/12/10 No birdie for suitors Target: RM6.50

Food & Beverages

MA

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IA

QSR MK / QSRB.KL Norziana Mohd Inon +60(3) 2084 9645 – [email protected]

• Maintain NEUTRAL. We retain our EPS forecasts and target price of RM6.50, pegged to an unchanged 16x forward P/E, which factors in a 10% discount to the average valuation of bigger F&B producers. QSR remains a NEUTRAL after our recent downgrade which was prompted by the limited share price upside after an earlier rise on the expectation of a race for control. Our top F&B pick is CI Holdings.

• Not for sale. The statements issued by Kulim and QSR after they turned down the takeover bids by Carlyle and Idaman Saga as well as the news that Johor Corp has engaged CIMB to restructure its debt suggest that QSR and KFC Holdings will remain within Johor Corp, at least for now. We are not disappointed that the two offers were rejected. Johor Corp has done a commendable job growing the Pizza Hut and KFC franchises at home and abroad since the emergence of Kulim as the controlling shareholder of QSR in Jun 06.

• Spicy India. We believe that the main factor that influenced the decision to keep both companies is the growth opportunities in India. KFC India is now operating three outlets, which are raking in encouraging monthly sales of RM450,000/outlet vs. RM250,000/outlet in Malaysia. This may increase KFC India’s chances of taking over five profitable outlets which are now under Yum!.

• Record average ticket prices. Operationally, QSR and KFCH are at their strongest. As at end-Sep, the same-store sales growth was encouraging at 5% for Pizza Hut and 3% for KFC. There were no selling price revisions in 9M10. Also, average ticket prices remained at all-time highs of RM40 for Pizza Hut and RM20 for KFC for the second consecutive quarter in 2Q10.

Financial summary

Stock Information Market cap: RM1,635m/US$521m 12-m price range: RM6.26 RM3.17 3-m avg daily vol: 1.3m No. of shrs (m): 290 Est. free float (%): 42.1 Conv. secs (m): 40.9 Major shareholders (%): - Kulim 57.9

FYE Dec 2008 2009 2010F 2011F 2012F Revenue (RM m) 532.8 2,760.3 2,830.9 2,979.5 3,137.9 EBITDA (RM m) 90.0 354.0 400.7 436.1 466.6 EBITDA margins (%) 16.9% 12.8% 14.2% 14.6% 14.9% Pretax profit (RM m) 97.7 230.3 254.4 274.5 287.4 Net profit (RM m) 85.3 90.9 110.1 125.1 133.2 EPS (sen) 29.8 31.8 38.5 43.7 46.5 EPS growth (%) 8.6% 6.6% 21.1% 13.5% 6.5% P/E (x) 18.9 17.7 14.6 12.9 12.1 FD core EPS (sen) 26.0 27.7 33.6 38.1 40.6 FD core P/E (x) 21.6 20.3 16.8 14.8 13.9 Gross DPS (sen) 11.0 13.0 15.0 15.0 15.0 Dividend yield (%) 2.0% 2.3% 2.7% 2.7% 2.7% P/BV (x) 3.5 3.5 3.5 3.5 3.5 ROE (%) 18.5% 19.8% 24.1% 27.2% 28.7% Net gearing (%) 39.1% 40.1% 40.8% 40.8% 41.4% P/FCFE (x) 80.5 89.9 63.7 47.6 38.4 EV/EBITDA (x) 14.7 3.7 3.3 3.0 2.9 % change in EPS estimates - - - CIMB/Consensus (x) 0.87 0.87 0.76



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Volume 1m (R.H.S ca le ) QS R Bra nds Source: Bloomberg

QSR is Malaysia’s biggest quick-service restaurant operator with three main brands under its belt: Pizza Hut, KFC and Ayamas. The other brands are RasaMas and Life. In Malaysia, the Pizza Hut chain is run by QSR while the KFC and Ayamas chains are under 51.3%-owned KFC Holdings. The Pizza Hut and KFC brands are owned by Yum!, which also owns the Long John Silver’s, Taco Bell and A&W brands. The home-grown Ayamas, RasaMas and Life brands are owned by the QSR group. The group has a presence in Malaysia, Singapore, Brunei, Cambodia and India. QSR is 57.9% owned by Kulim, which is 54.3% held by Johor Corp.



(RM m, FYE Dec) 2008 2009 2010F 2011F 2012F (FYE Dec) 2008 2009 2010F 2011F 2012F Revenue 533 2,760 2,831 2,979 3,138 Revenue growth (%) 14.2 418.1 2.6 5.3 5.3 Operating expenses (443) (2,406) (2,430) (2,543) (2,671) EBITDA growth (%) 28.8 293.3 13.2 8.8 7.0 EBITDA 90 354 401 436 467 Pretax margins (%) 18.3 8.3 9.0 9.2 9.2 Depreciation & amortisation (25) (115) (128) (143) (159) Net profit margins (%) 16.0 3.3 3.9 4.2 4.2 EBIT 65 239 273 293 308 Interest cover (x) 6.9 20.5 12.0 12.0 11.5 Net interest & invt income (8) (9) (18) (19) (20) Effective tax rates (%) 14.3 31.2 31.4 30.5 30.5 Associates’ contribution 41 0 0 0 0 Net dividend payout (%) 27.3 30.3 28.9 25.4 23.9 Exceptional items 0 0 0 0 0 Debtors turnover (days) 14.1 2.8 2.8 2.7 2.6 Others 0 0 0 0 0 Stock turnover (days) 10.3 2.0 2.0 1.9 1.8 Pretax profit 98 230 254 274 287 Creditors turnover (days) 11.4 2.2 2.2 2.1 2.0 Tax (14) (72) (80) (84) (88) Minority interests 2 (67) (64) (66) (67) Net profit 85 91 110 125 133 Adj. wt. shares (m) 286 286 286 286 286 Unadj. year-end shares (m) 286 286 286 286 286 BALANCE SHEET KEY DRIVERS (RM m, end Dec) 2008 2009 2010F 2011F 2012F (FYE Dec) 2009 2010F 2011F 2012FFixed assets 313 314 320 334 341 Consumer: EBITDA margins (%) 12.8% 14.2% 14.6% 14.9% Intangible assets 0 0 0 0 0 Raw material price change (%) -2.4% 25.9% 4.7% 5.0% Other long-term assets 558 558 558 559 560 No. of outlets 265 281 297 313 Total non-current assets 870 871 877 892 900 Same store sales growth (%) -5.0% 6.0% 6.0% 6.0% Cash and equivalents 36 37 39 41 43 Average ticket price (RM) 36 40 40 40 Stocks 15 15 15 16 16 Trade debtors 21 21 22 22 23 Other current assets 20 21 21 21 20 Total current assets 92 95 98 100 102 Trade creditors 17 17 17 17 17 Short-term borrowings 8 9 9 9 10 Other current liabilities 44 45 45 45 46 Total current liabilities 69 70 71 72 73 Long-term borrowings 208 212 216 221 225 Other long-term liabilities 222 226 230 235 239 Total long-term liabilities 430 439 447 456 464 Shareholders’ funds 463 457 457 464 464 Minority interests 0 0 0 0 0 NTA/share (RM) 1.62 1.60 1.60 1.62 1.62 CASH FLOW 12M - FORWARD FD CORE P/E (X) (RM m, FYE Dec) 2008 2009 2010F 2011F 2012FPretax profit 98 230 254 274 287Depreciation & non–cash adj. 25 115 128 143 159Working capital changes 0 0 0 0 0Cash tax paid (23) (76) (80) (84) (88)Others 25 (133) (151) (178) (199)Cash flow from operations 125 135 151 155 159Capex (51) (50) (50) (50) (49)Net investments & sale of FA 0 0 0 0 0Others (91) (90) (90) (94) (98)Cash flow from investing (141) (140) (140) (144) (147)Debt raised/(repaid) 4 5 5 5 5Equity raised/(repaid) 6 6 6 6 6Dividends paid (31) (37) (43) (43) (43)Cash interest & others 38 33 24 23 22Cash flow from financing 18 6 (9) (9) (10)Change in cash 2 2 2 2 2Change in net cash/(debt) (3) (3) (3) (3) (3)Ending net cash/(debt) (181) (184) (186) (189) (192)

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UNDERPERFORM Maintained RGB International Bhd RM0.06 @07/12/10 Bad dream coming to an end? Target: RM0.06

Gaming

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RGB MK / RGBI.KL Ivy Ng Lee Fang CFA +60(3) 2084 9697 – [email protected]

• Still an UNDERPERFORM. RGB remains an UNDERPERFORM in our books, with the key de-rating catalyst being slow turnaround efforts. Although RGB has been showing qoq improvements, its still-struggling key TSM division remains our main concern. We retain our end-CY11 target price of RM0.061 based on 8x P/E or an unchanged 50% discount to its larger peers.

• Starting to turn around? RGB’s three straight quarters of narrowing losses could be an early sign of a turnaround after two disastrous years of regulatory changes, outlet closures, slow machine mobilisations and weak sales. Although the worst may be over, we remain cautious as the TSM division is still grappling with idle machines and underperforming sites. Meanwhile, machine sales could see some boost as Galaxy Macau is slated to open in early 2011 and both the Singapore IRs still have room for more slot machines. Orders from the Philippines are also expected to pick up after the completion of the May 10 election.

• Back to basics. RGB remains in active negotiations to dispose of a 40% equity interest in its 60%-owned Chateau de Bavet. The stake sale is expected to be completed in late 2010 or early next year. Given the uninspiring performance of its Bavet casino so far, the disposal should help reduce losses and shift RGB’s focus back to its core strengths, i.e. slot machines and the Indochina market.

Financial summary

Stock Information Market cap: RM69m/US$22m 12-m price range: RM0.18 RM0.06 3-m avg daily vol: 0.8m No. of shrs (m): 1,151 Est. free float (%): 25.0 Conv. secs (m): None Major shareholders (%): - Datuk Chuah Kim Seah 29.4 - Gerak Juara Sdn Bhd 14.1 - Chuah Kim Chiew 2.3

FYE Dec 2008 2009 2010F 2011F 2012F Revenue (RM m) 227.8 170.2 159.1 238.6 266.4 EBITDA (RM m) 73.7 20.3 45.2 93.2 102.3 EBITDA margins (%) 32.3% 11.9% 28.4% 39.0% 38.4% Pretax profit (RM m) (3.3) (60.5) (46.2) 5.8 10.0 Net profit (RM m) (2.9) (57.8) (39.0) 4.6 7.9 EPS (sen) (0.3) (5.6) (3.7) 0.4 0.8 EPS growth (%) (107.3%) (1,585.3%) 32.6% 111.9% 70.9% P/E (x) nm nm nm 13.5 7.9 Core EPS (sen) 1.0 (3.2) (3.7) 0.4 0.8 Core EPS growth (%) (78.7%) (427.7%) (17.7%) 111.9% 70.9% Core P/E (x) 6.2 nm nm 13.5 7.9 Gross DPS (sen) 0.0 0.0 0.0 0.0 0.0 Dividend yield (%) 0.0% 0.0% 0.0% 0.0% 0.0% P/BV (x) 0.3 0.4 0.8 0.7 0.7 ROE (%) (1.6%) (35.8%) (34.4%) 5.5% 8.7% Net gearing (%) 63.6% 82.2% 232.6% 161.5% 92.1% P/FCFE (x) (2.7) (1.1) (12.6) 1.3 1.0 EV/EBITDA (x) 2.3 9.0 5.3 2.1 1.4 % change in EPS estimates - - - CIMB/Consensus (x) 1.01 1.11 0.95



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Volume 10m (R.H.S c a le ) RGB Inte rna tiona l Bhd Source: Bloomberg

Owned by the Chuah family of Penang, RGB International, previously Dreamgate, is an agent and distributor of gaming equipment to all Asia ex-Japan countries. Besides representing many renowned global gaming machine manufacturers, this company has also started selling its in-house RGBGames and Elaut gaming machines. Its key earnings contributor is its revenue sharing operations with casino operators under its technical support and management division (TSM). Despite only opening its maiden casino venture, Chateau De Bavet in Aug-09, RGB is currently exploring options to divest a stake in the venture to focus on its core strengths.



(RM m, FYE Dec) 2008 2009 2010F 2011F 2012F (FYE Dec) 2008 2009 2010F 2011F 2012F Revenue 228 170 159 239 266 Revenue growth (%) (17.6) (25.3) (6.5) 49.9 11.7 Operating expenses (154) (150) (114) (145) (164) EBITDA growth (%) (15.3) (72.4) 122.6 106.0 9.9 EBITDA 74 20 45 93 102 Pretax margins (%) (1.4) (35.6) (29.0) 2.4 3.7 Depreciation & amortisation (56) (48) (82) (76) (82) Net profit margins (%) (1.3) (34.0) (24.5) 1.9 3.0 EBIT 17 (28) (37) 17 21 Interest cover (x) 1.8 (3.0) (3.4) 1.4 1.6 Net interest & invt income (9) (8) (10) (12) (11) Effective tax rates (%) N/A N/A N/A 2.5 2.5 Associates’ contribution 0 0 1 1 1 Net dividend payout (%) N/A N/A N/A 0.0 0.0 Exceptional items (11) (25) 0 0 0 Debtors turnover (days) 171.6 190.8 193.6 156.0 177.4 Others 0 0 0 0 0 Stock turnover (days) 15.2 29.6 35.6 28.7 32.6 Pretax profit (3) (61) (46) 6 10 Creditors turnover (days) 115.4 175.3 229.2 184.6 210.0 Tax 0 0 1 0 0 Minority interests 1 3 6 (1) (2) Net profit (3) (58) (39) 5 8 Adj. wt. shares (m) 872 1,042 1,042 1,042 1,042 Unadj. year-end shares (m) 872 1,042 1,042 1,042 1,042 BALANCE SHEET KEY DRIVERS (RM m, end Dec) 2008 2009 2010F 2011F 2012F (FYE Dec) 2009 2010F 2011F 2012FFixed assets 238 283 275 243 207 Number of machines sold 1,213 750 1,030 1,150 Intangible assets 0 0 0 0 0 Average price per machine (RM) 73,337 73,337 74,804 76,300 Other long-term assets 9 9 9 10 11 No. of revenue sharing machines 5,348 6,160 7,275 7,702 Total non-current assets 247 292 284 253 218 Avg net win/machine/day (RM) 35 39 50 53 Cash and equivalents 36 27 22 69 129 Stocks 12 16 15 22 25 Trade debtors 91 87 82 122 137 Other current assets 25 26 24 37 41 Total current assets 163 156 143 250 331 Trade creditors 60 103 97 145 162 Short-term borrowings 128 138 194 194 204 Other current liabilities 13 50 46 68 78 Total current liabilities 201 291 337 408 444 Long-term borrowings 25 10 10 11 11 Other long-term liabilities 1 1 1 1 1 Total long-term liabilities 25 11 11 12 12 Shareholders’ funds 178 144 82 87 95 Minority interests 5 2 (4) (3) (1) NTA/share (RM) 0.20 0.14 0.08 0.08 0.09 CASH FLOW 12M - FORWARD FD CORE P/E (X) (RM m, FYE Dec) 2008 2009 2010F 2011F 2012FPretax profit (3) (61) (46) 6 10Depreciation & non–cash adj. 56 48 82 76 82Working capital changes 5 42 0 0 0Cash tax paid (1) 0 0 1 0Others 13 61 (48) 26 22Cash flow from operations 70 90 (12) 109 113Capex (99) (136) (40) (50) (53)Net investments & sale of FA 6 0 0 0 0Others 0 0 0 0 0Cash flow from investing (93) (136) (40) (50) (53)Debt raised/(repaid) 12 (5) 57 1 10Equity raised/(repaid) 5 25 0 0 0Dividends paid (4) 0 0 0 0Cash interest & others 3 16 (10) (12) (11)Cash flow from financing 15 36 47 (12) (1)Change in cash (7) (9) (5) 47 60Change in net cash/(debt) (19) (4) (62) 47 50Ending net cash/(debt) (116) (121) (183) (136) (87)

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OUTPERFORM Maintained RHB Capital Bhd RM8.59 @07/12/10 Surfing on brisk loan growth Target: RM10.50

Banks

MA

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RHBC MK / RHBC.KL Winson Ng Gia Yann CFA +60(3) 2084 9686 – [email protected]

• Reaffirm OUTPERFORM. RHB Capital remains an OUTPERFORM and our top pick among the Malaysian banks in light of the potential re-rating catalysts of (1) bright earnings outlook, (2) group revamp, (3) vibrant investment banking income, (4) brisk loan growth, (5) stronger overseas growth prospects, and (6) attractive valuations. We retain our EPS forecasts and target basis of 10% premium over the DDM value (cost of equity of 12.9% and dividend growth rates of 16.2% for the interim growth phase and 5% for the long-term growth phase). This leads to an unchanged target price of RM10.50.

• Positive outlook. We are forecasting 16.9% growth in the group’s FY11 net profit to RM1.7bn, which is expected to be driven by 11.3% expansion at the topline coming from a 10.1% increase in net interest income and 13.8% rise in non-interest income. The credit charge-off rate is also projected to improve from 80bp in FY10 to 75bp in FY11, thanks to stable asset quality.

• Fastest loan growth. Among the local banks, RHB Capital recorded the fastest loan growth of 19.6% yoy in Sep 10 vs. 11.9% for the industry. This was fuelled by the 229% yoy jump in loans classified as “others”, which are believed to be mostly extended to government agencies, and double-digit rates for residential mortgages, auto loans and construction loans. Management is targeting strong loan growth of 15% for FY11-12, higher than our forecasts of 11.3% for FY11 and 10% for FY12.

Financial summary

Stock Information Market cap: RM18,498m/US$5,897m 12-m price range: RM8.59 RM5.17 3-m avg daily vol: 2.1m No. of shrs (m): 2,153 Est. free float (%): 17.5 Conv. secs (m): None Major shareholders (%): - EPF 54.0 - Abu Dhabi Commercial 25.0 - Amanah Saham Bumiputera 2.0

FYE Dec 2008 2009 2010F 2011F 2012F Net interest income (RM m) 2,216.4 2,413.2 2,737.1 3,014.1 3,330.2 Non-interest income (RM m) 841.3 946.4 1,188.9 1,372.9 1,427.7 Total income (RM m) 3,445.1 3,665.0 4,243.8 4,722.3 5,113.8 Loan loss provisions (RM m) (499.6) (578.8) (595.3) (629.1) (581.3) Pretax profit (RM m) 1,422.4 1,538.5 1,941.7 2,280.3 2,620.9 Net profit (RM m) 1,048.7 1,201.4 1,455.2 1,701.0 1,956.5 EPS (sen) 48.7 55.8 67.6 79.0 90.9 EPS growth (%) 36% 15% 21% 17% 15% P/E (x) 17.6 15.4 12.7 10.9 9.5 Gross DPS (sen) 19.6 22.5 27.0 31.6 36.3 Dividend yield (%) 2.3% 2.6% 3.1% 3.7% 4.2% P/BV (x) 2.4 2.1 1.9 1.7 1.5 ROE (%) 14.1% 14.5% 15.8% 16.6% 16.9% % change in EPS estimates - - - CIMB/Consensus (x) 1.05 1.09 1.10



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Volume 10m (R.H.S ca le ) RHB Ca pita l Bhd Source: Bloomberg

RHB Capital is the fourth largest banking group in Malaysia with total assets of RM127.1bn. RHB Bank started out as D&C Bank and merged with Kwong Yik Bank in 1997, Sime Bank in 1999 and Utama Bank in 2002. In 1H07, EPF acquired 82% of RHB Capital via its full control of RHB and a general offer. Subsequently, the group embarked on corporate exercises to acquire the remaining 30% stake in RHB Bank on 12 Jul 07 and refinance the INCPS in 1Q08. EPF sold a 25% stake in RHB Capital to Abu Dhabi Commercial Bank on 8 May 08. In Oct 09, the group announced the acquisition of an 80% stake in PT Bank Mestika, which will be completed in 1Q11.



(RM m, FYE Dec) 2008 2009 2010F 2011F 2012F (FYE Dec) 2008 2009 2010F 2011F 2012F Net interest income 2,216 2,413 2,737 3,014 3,330 Total income growth (%) 1.7 6.4 15.8 11.3 8.3 Non-interest income 841 946 1,189 1,373 1,428 Pre-provision profit growth (%) 2.6 8.6 22.3 14.6 9.5 Other income 387 305 318 335 356 Pretax growth (%) 14.1 8.2 26.2 17.4 14.9 Total income 3,445 3,665 4,244 4,722 5,114 Net interest margin (%) 2.49 2.62 2.69 2.72 2.76 Overhead expenses (1,513) (1,566) (1,677) (1,781) (1,894) Cost-income ratio (%) 43.9 42.7 39.5 37.7 37.0 Pre-provision profit 1,932 2,099 2,567 2,941 3,220 Effective tax rates (%) 26.2 21.4 24.5 25.0 25.0 Loan loss provisions (500) (579) (595) (629) (581) Net dividend payout (%) 29.8 30.2 30.0 30.0 30.0 Associates’ contribution 0 1 0 0 0 Exceptional items 0 0 0 0 0 Others (10) 18 (30) (32) (18) Pretax profit 1,422 1,539 1,942 2,280 2,621 Tax (373) (330) (476) (570) (655) Minority interests (1) (7) (10) (9) (9) Net profit 1,049 1,201 1,455 1,701 1,956 Adj. wt. shares (m) 2,154 2,154 2,154 2,154 2,154 Unadj. year-end shares (m) 2,154 2,154 2,154 2,154 2,154 BALANCE SHEET KEY DRIVERS (RM m, end Dec) 2008 2009 2010F 2011F 2012F (FYE Dec) 2008 2009 2010F 2011F 2012F Cash & deposits with FIs 15,008 20,489 19,117 20,740 21,781 Loan growth (%) 11.2 10.3 14.5 11.3 10.0 Marketable securities 11,539 9,953 10,427 9,459 9,501 Deposit growth (%) (2.4) 14.7 7.3 7.2 7.1 Total current assets 26,547 30,441 29,544 30,199 31,282 Loan-deposit ratio (%) 81.9 78.9 84.4 87.6 90.1 Net loans & advances 60,596 66,923 76,770 85,503 94,177 Gross NPL (%) 4.5 4.7 4.0 3.8 3.7 Long-term investments 9,617 10,980 10,728 10,045 9,605 Net NPL (%) 2.2 2.2 1.8 1.7 1.7 Fixed assets 895 931 933 936 941 Loan loss reserve (%) 90.3 83.4 93.4 96.4 95.9 Intangible assets 3,786 3,786 3,786 3,786 3,786 GP ratio (%) 1.8 1.4 1.5 1.5 1.6 Other long-term assets 3,092 1,890 1,853 1,853 1,903 RWCR (%) 12.7 14.0 15.7 16.5 17.1 Total long-term assets 77,986 84,510 94,070 102,123 110,412 Total assets 104,533 114,951 123,615 132,322 141,695 Customer deposits 73,962 84,841 91,014 97,556 104,478 Deposits of other FIs 8,682 7,416 7,787 8,176 8,585 Subordinated debts 5,673 6,662 6,662 6,662 6,662 Other long-term liabilities 8,375 7,292 8,442 9,024 9,685 Total liabilities 96,692 106,211 113,904 121,418 129,409 Shareholders’ funds 7,814 8,708 9,677 10,868 12,248 Minority interests 27 32 34 36 38 BV/share (RM) 3.63 4.04 4.49 5.05 5.69 CURRENT P/BV (X) 12M - FORWARD FD CORE P/E (X)

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OUTPERFORM Maintained SapuraCrest Petroleum RM2.82 @07/12/10 Pumped up by a huge order book Target: RM3.30


MA

LAYS

IA

SCRES MK / SCRS.KL Norziana Mohd Inon +60(3) 2084 9645 – [email protected]

• Maintain OUTPERFORM. We maintain our forecasts but raise our target price from RM3.14 to RM3.30, pegged to a revised target market P/E of 14.5x (13.8x previously). SapuraCrest remains an OUTPERFORM and our top pick in the oil & gas sector. The potential re-rating catalysts are 1) active order book replenishment, 2) success in new markets (i.e. Australia, Japan and the Middle East), and 3) a growing fleet of strategic assets (i.e. pipelay barges and drilling rigs).

• Fleet expansion. Two new pipelay barges, namely the LTS3000 and the Quippo Prakash, joined the Sapura3000 this year. The barges are held through JVs with Indian partners. Through the partnerships, SapuraCrest will have access to the sought-after barges without having to incur an otherwise substantial capital outlay. The two new barges are suitable for shallow-water works while the Sapura3000 is a deepwater barge. The Sapura3000 will be used to execute the recently-announced US$160m Montara decommissioning project in Australia. We believe the ownership of the barge tilted the odds in SapuraCrest’s favour.

• RM13.6bn order book. To date, SapuraCrest has clinched three contracts valued at RM935m inclusive of the Montara contract. The estimated order book value stands at RM13.6bn, of which 84% comes from the installation of pipelines and facilities activities. The jobs in hand will keep the company busy for the next four years. Although management concedes that the flow has contracts has slowed significantly this year, it foresees an increase in deepwater activities in Asia (Malaysia, Indonesia, India and China) and Australia in the next three years.

Financial summary

Stock Information Market cap: RM3,600m/US$1,148m 12-m price range: RM2.83 RM1.89 3-m avg daily vol: 1.6m No. of shrs (m): 1,277 Est. free float (%): 28.1 Conv. secs (m): None Major shareholders (%): - Sapura Technology 40.1 - Seadrill 23.6 - EPF 8.2

FYE Jan 2009 2010 2011F 2012F 2013F Revenue (RM m) 3,483.8 3,257.3 4,245.3 4,661.2 5,117.7 EBITDA (RM m) 463.4 339.0 589.6 649.2 678.6 EBITDA margins (%) 13.3% 10.4% 13.9% 13.9% 13.3% Pretax profit (RM m) 280.0 364.4 458.4 550.1 601.7 Net profit (RM m) 114.7 170.2 213.5 272.5 290.9 EPS (sen) 9.0 13.4 16.8 21.4 22.8 EPS growth (%) 37.1% 47.9% 25.4% 27.6% 6.7% P/E (x) 31.2 21.1 16.8 13.2 12.3 Gross DPS (sen) 5.0 7.0 8.0 9.0 10.0 Dividend yield (%) 1.8% 2.5% 2.8% 3.2% 3.5% P/BV (x) 3.8 4.2 4.0 3.7 3.7 ROE (%) 13.2% 18.8% 24.2% 29.3% 30.2% Net gearing (%) 25.1% 19.4% 13.1% 7.2% 1.7% P/FCFE (x) 13.2 35.6 32.2 29.2 25.7 EV/EBITDA (x) 9.3 13.0 7.4 6.8 6.5 % change in EPS estimates - - - CIMB/Consensus (x) 0.96 1.09 0.97



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Volume 10m (R.H.S ca le ) S a pura Cre s t Pe trole um Source: Bloomberg

SapuraCrest came into being in Jan 03 when Sapura Telecommunications bought a 38.56% stake in Crest Petroleum from Renong for RM105.2m. It was transferred to the Main Board in Feb 06. Today, SapuraCrest is the leader in drilling and installation of pipelines and facilities, which are the company’s two biggest income generators with more than 80% contribution. Other businesses are marine services and operations & maintenance. SapuraCrest owns a fleet of assets, which include drilling rigs, barges and support vessels. The rigs are jointly owned with Seadrill, which is also a substantial shareholder.



(RM m, FYE Jan) 2009 2010 2011F 2012F 2013F (FYE Jan) 2009 2010 2011F 2012F 2013F Revenue 3,484 3,257 4,245 4,661 5,118 Revenue growth (%) 54.0 (6.5) 30.3 9.8 9.8 Operating expenses (3,020) (2,918) (3,656) (4,012) (4,439) EBITDA growth (%) 35.5 (26.8) 73.9 10.1 4.5 EBITDA 463 339 590 649 679 Pretax margins (%) 8.0 11.2 10.8 11.8 11.8 Depreciation & amortisation (81) 0 (90) (94) (99) Net profit margins (%) 3.3 5.2 5.0 5.8 5.7 EBIT 382 339 500 555 580 Interest cover (x) 5.8 7.5 6.1 8.7 25.2 Net interest & invt income (58) (22) (75) (56) (15) Effective tax rates (%) 11.1 8.6 18.0 18.0 19.0 Associates’ contribution (44) 47 33 51 37 Net dividend payout (%) 40.4 38.7 35.8 31.5 32.8 Exceptional items 0 0 0 0 0 Debtors turnover (days) 165.0 198.2 153.6 141.3 130.0 Others 0 0 0 0 0 Stock turnover (days) 5.6 5.6 4.3 3.9 3.6 Pretax profit 280 364 458 550 602 Creditors turnover (days) 110.2 143.0 110.8 102.0 93.8 Tax (31) (31) (83) (99) (114) Minority interests (134) (163) (162) (179) (196) Net profit 115 170 213 272 291 Adj. wt. shares (m) 1,269 1,272 1,272 1,272 1,273 Unadj. year-end shares (m) 1,269 1,272 1,272 1,273 1,273 BALANCE SHEET KEY DRIVERS (RM m, end Jan) 2009 2010 2011F 2012F 2013F (FYE Jan) 2010 2011F 2012F 2013FFixed assets 904 949 1,014 1,061 1,097 Overseas rev contribution (%) 30.0% 40.0% 50.0% 50.0% Intangible assets 150 140 122 140 141 Downstream contribution to rev (%) 1.0% 1.0% 1.0% 1.0% Other long-term assets 118 108 109 110 111 Upstream contribution to rev (%) 99.0% 99.0% 99.0% 99.0% Total non-current assets 1,171 1,196 1,245 1,311 1,349 Order book (RM m) 15,000 13,500 12,000 10,500 Cash and equivalents 594 653 719 791 871 Overall Gross Margin (%) 10.4% 13.9% 13.9% 13.3% Stocks 50 50 50 50 50 Charter rate (US$ per horse power) 1.80 2.00 2.00 2.00 Trade debtors 1,760 1,778 1,796 1,814 1,832 Number of vessels 3 4 4 4 Other current assets 0 0 0 0 0 Vessel utilisation rate (%) 90.0% 90.0% 90.0% 90.0% Total current assets 2,404 2,481 2,564 2,654 2,753 O&G contribution to order book (%) 100.0% 100.0% 100.0% 100.0% Trade creditors 1,270 1,283 1,296 1,309 1,322 Short-term borrowings 478 479 480 481 482 Other current liabilities 17 69 83 99 115 Total current liabilities 1,765 1,830 1,858 1,888 1,919 Long-term borrowings 454 445 436 428 419 Other long-term liabilities 9 8 8 8 10 Total long-term liabilities 463 453 444 436 429 Shareholders’ funds 946 860 903 957 967 Minority interests 401 534 604 684 788 NTA/share (RM) 0.63 0.57 0.61 0.64 0.65 CASH FLOW 12M - FORWARD FD CORE P/E (X) (RM m, FYE Jan) 2009 2010 2011F 2012F 2013FPretax profit 280 364 458 550 602Depreciation & non–cash adj. 81 0 90 94 99Working capital changes 72 (5) (5) (5) (5)Cash tax paid (31) (69) (83) (99) (114)Others 164 (74) (179) (193) (182)Cash flow from operations 566 217 281 347 399Capex (200) (80) (300) (300) (79)Net investments & sale of FA (5) (5) (5) (5) (4)Others 62 0 0 0 0Cash flow from investing (143) (85) (305) (305) (83)Debt raised/(repaid) (125) (8) (8) (8) (8)Equity raised/(repaid) 15 15 15 15 16Dividends paid (47) (56) (61) (66) (75)Cash interest & others (26) (23) 143 89 (169)Cash flow from financing (183) (73) 89 30 (236)Change in cash 240 59 65 72 80Change in net cash/(debt) 365 68 73 80 88Ending net cash/(debt) (338) (270) (197) (117) (30)

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TRADING BUY Maintained Sime Darby Bhd RM8.74 @07/12/10 Making a fresh start Target: RM10.78

Conglomerate

MA

LAYS

IA

SIME MK / SIME.KL Ivy Ng Lee Fang CFA +60(3) 2084 9697 – [email protected]

• Maintain TRADING BUY. We continue to like Sime Darby for its attractive valuations, its new management’s restructuring efforts and the potential turnaround of its energy and utilities (E&U) division. Its CY12 P/E of 14.5x is below the ratings of other big-cap plantation plays in Malaysia. There is earnings upside if the group succeeds in selling some of its non-core assets, enhancing the value of its property landbank and turning around its loss-making E&U unit. Our EPS forecasts are unchanged but we raise our SOP-based target price from RM9.84 to RM10.78 as we apply a higher plantation P/E multiple of 17x (prev. 16x) and remove the 5% SOP discount given management’s restructuring efforts. Potential share price triggers include rising CPO price and better-than-expected earnings.

• Better earnings prospects. We project an 18% rise in Sime’s FY11 net profit due to higher earnings contribution from all major business segments and lower losses from its oil and gas division.

• Sime’s KPIs below estimates. Sime Darby’s FY11 KPI targets include a net profit of RM2.5bn and an ROE of 11.5%. The net profit target is 15% below our forecast due to lower sales estimates for the non-plantation divisions. We suspect that Sime is choosing to err on the conservative side given the uncertain external markets. The disappointing KPI target is offset by the group’s plans to unlock the value of its property landbank and its expectation of a narrowing of oil & gas losses if it secures some local projects soon.

Financial summary

Stock Information Market cap: RM52,523m/US$16,743m 12-m price range: RM9.10 RM7.50 3-m avg daily vol: 6.3m No. of shrs (m): 6,009 Est. free float (%): 38.1 Conv. secs (m): None Major shareholders (%): - Permodalan Nasional 53.0 - Employees Provident Fund 15.7

FYE Jun 2009 2010 2011F 2012F 2013F Revenue (RM m) 31,013.7 32,951.6 35,659.2 37,585.9 39,413.9 EBITDA (RM m) 3,901.0 2,805.0 5,384.2 6,245.4 6,705.7 EBITDA margins (%) 12.6% 8.5% 15.1% 16.6% 17.0% Pretax profit (RM m) 3,071.6 1,741.5 4,186.7 4,948.9 5,290.2 Net profit (RM m) 2,280.1 726.8 2,943.2 3,479.1 3,719.0 EPS (sen) 37.9 12.1 49.0 57.9 61.9 EPS growth (%) (35.1%) (68.1%) 305.0% 18.2% 6.9% P/E (x) 23.0 72.3 17.8 15.1 14.1 Core EPS (sen) 37.9 48.2 49.0 57.9 61.9 Core EPS growth (%) (34.8%) 27.1% 1.6% 18.2% 6.9% Core P/E (x) 23.0 18.1 17.8 15.1 14.1 Gross DPS (sen) 25.7 13.6 33.1 39.1 41.8 Dividend yield (%) 2.9% 1.6% 3.8% 4.5% 4.8% P/BV (x) 2.5 2.6 2.3 2.1 2.0 ROE (%) 10.6% 3.5% 13.5% 14.4% 14.3% Net gearing (%) 8.9% 12.1% 23.0% 22.0% 21.5% P/FCFE (x) 1,346.7 18.9 20.3 30.3 23.7 EV/EBITDA (x) 13.8 19.5 10.8 9.3 8.8 % change in EPS estimates - - - CIMB/Consensus (x) 0.94 1.02 1.00



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Volume 10m (R.H.S ca le ) S ime Da rby Bhd Source: Bloomberg

Sime Darby, Malaysia’s leading multinational conglomerate, is one of the largest conglomerates in Southeast Asia. It was founded in 1910 and listed on the Main Board of Bursa Malaysia in 1980. In 2007, Sime was restructured through a landmarkmerger with Golden Hope and Kumpulan Guthrie. Today, it is the world’s largest-listed oil palm player by planted area and the largest listed Malaysian property developer by landbank. It retains three other core businesses, i.e. motor, heavy equipment and energy & utilities. It is also the fourth largest listed company on Bursa Malaysia, accounting for 8.7% of the FBM30 weighting as at 28 November 2010.



(RM m, FYE Jun) 2009 2010 2011F 2012F 2013F (FYE Jun) 2009 2010 2011F 2012F 2013F Revenue 31,014 32,952 35,659 37,586 39,414 Revenue growth (%) (8.9) 6.2 8.2 5.4 4.9 Operating expenses (27,113) (30,147) (30,275) (31,340) (32,708) EBITDA growth (%) (34.3) (28.1) 92.0 16.0 7.4 EBITDA 3,901 2,805 5,384 6,245 6,706 Pretax margins (%) 9.9 5.3 11.7 13.2 13.4 Depreciation & amortisation (750) (893) (1,100) (1,200) (1,300) Net profit margins (%) 7.4 2.2 8.3 9.3 9.4 EBIT 3,151 1,912 4,284 5,045 5,405 Interest cover (x) 12.5 6.9 15.3 18.0 18.0 Net interest & invt income (94) (170) (97) (96) (115) Effective tax rates (%) 23.8 50.9 26.0 26.0 26.0 Associates’ contribution 15 0 0 0 0 Net dividend payout (%) 50.2 83.0 50.0 50.0 50.0 Exceptional items 0 0 0 0 0 Debtors turnover (days) 68.9 61.7 61.9 68.3 68.9 Others 0 0 0 0 0 Stock turnover (days) 62.9 60.1 59.8 64.5 64.7 Pretax profit 3,072 1,742 4,187 4,949 5,290 Creditors turnover (days) 79.2 73.9 72.2 71.0 70.4 Tax (731) (887) (1,089) (1,287) (1,375) Minority interests (61) (128) (155) (183) (196) Net profit 2,280 727 2,943 3,479 3,719 Adj. wt. shares (m) 6,009 6,009 6,009 6,009 6,009 Unadj. year-end shares (m) 6,009 6,009 6,009 6,009 6,009 BALANCE SHEET KEY DRIVERS (RM m, end Jun) 2009 2010 2011F 2012F 2013F (FYE Jun) 2010 2011F 2012F 2013FFixed assets 9,740 10,844 14,300 16,300 18,300 CPO price per tonne (RM) 2,350 2,650 2,780 2,780 Intangible assets 81 109 109 109 109 FFB output (000' tonnes) 9,573 9,785 10,307 10,967 Other long-term assets 7,756 8,175 7,728 7,448 7,664 Immature area (ha) 75,615 70,324 66,453 63,616 Total non-current assets 17,578 19,128 22,138 23,857 26,073 Land bank (ha) 633,607 633,607 633,607 633,608 Cash and equivalents 3,638 5,033 4,000 4,000 4,000 Mature area (ha) 484,420 491,605 497,884 503,517 Stocks 5,627 5,217 6,470 6,819 7,151 Planted area (ha) 560,035 561,929 564,338 567,132 Trade debtors 5,875 5,263 6,833 7,240 7,631 Other current assets 2,724 3,275 3,275 3,275 3,275 Total current assets 17,863 18,787 20,577 21,334 22,056 Trade creditors 6,421 6,919 7,188 7,440 7,765 Short-term borrowings 3,594 3,302 4,594 5,594 6,594 Other current liabilities 592 1,468 592 592 592 Total current liabilities 10,607 11,689 12,374 13,627 14,952 Long-term borrowings 2,013 4,287 4,968 4,146 3,459 Other long-term liabilities 814 819 1,172 1,370 1,459 Total long-term liabilities 2,827 5,106 6,140 5,516 4,918 Shareholders’ funds 21,385 20,450 23,309 25,049 26,908 Minority interests 621 681 860 1,043 1,239 NTA/share (RM) 3.55 3.39 3.86 4.15 4.46 CASH FLOW 12M - FORWARD FD CORE P/E (X) (RM m, FYE Jun) 2009 2010 2011F 2012F 2013FPretax profit 3,072 1,742 4,187 4,949 5,290Depreciation & non–cash adj. 750 893 1,100 1,200 1,300Working capital changes (1,957) 802 (913) (504) (397)Cash tax paid (731) (887) (757) (1,089) (1,287)Others (391) 1,104 (906) (907) (888)Cash flow from operations 742 3,654 2,711 3,650 4,019Capex (2,123) (2,885) (2,000) (2,000) (2,000)Net investments & sale of FA 0 0 0 0 0Others 736 0 0 0 0Cash flow from investing (1,387) (2,885) (2,000) (2,000) (2,000)Debt raised/(repaid) 778 2,182 1,973 178 313Equity raised/(repaid) 0 0 0 0 0Dividends paid (2,366) (1,404) (1,472) (1,740) (1,859)Cash interest & others (94) (170) (97) (96) (115)Cash flow from financing (1,682) 607 404 (1,658) (1,662)Change in cash (2,327) 1,377 1,115 (8) 357Change in net cash/(debt) (3,105) (805) (857) (186) 44Ending net cash/(debt) (1,970) (2,556) (5,562) (5,740) (6,053)

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OUTPERFORM Maintained SP Setia Bhd RM5.24 @07/12/10 Raring for the good fight Target: RM6.88

Property Devt & Invt

MA

LAYS

IA

SPSB MK / SETI.KL Terence Wong CFA +60(3) 20849689 – [email protected]

• Still our top property pick. FY10/10 was an excellent year for SP Setia as property sales amounted to RM2.31bn, beating its full-year target of RM2bn. SP Setia is aiming to sell RM3bn worth of properties in FY11, a figure we believe is achievable. The group may not be actively seeking M&A partners but is on an aggressive landbanking and organic growth path. In view of its excellent execution track record, it stands a good chance of keeping its position as the top developer in terms of sales and profit. We maintain our OUTPERFORM recommendation and target price of RM6.88, based on an unchanged 20% premium over its FD RNAV of RM5.73. Potential re-rating catalysts include 1) continued robust sales, 2) newsflow on landbanking and 3) strong earnings growth. SP Setia remains our top pick in the property sector.

• KL EcoCity excitement. The RM6bn KL EcoCity project will be launched in Jan/Feb 2011. The commercial component of the first phase is worth RM1bn while the residential portion is worth RM800m. Pricing of both the office space and residential properties is at least RM1,000 psf. Despite the high selling price, indicative demand is very strong, being 2-3x the available supply. The attraction of the project, besides its strategic location next to Bandar MidValley, is its excellent accessibility. The LRT, KTM and MRT will all stop at the project.

Financial summary

Stock Information Market cap: RM5,674m/US$1,808m 12-m price range: RM5.36 RM3.53 3-m avg daily vol: 2.3m No. of shrs (m): 1,017 Est. free float (%): 57.0 Conv. secs (m): 168.2 Major shareholders (%): - PNB 31.0 - EPF 16.0 - Tan Sri Liew Kee Sin 12.0

FYE Oct 2009 2010 2011F 2012F 2013F Revenue (RM m) 1,408.4 1,745.9 1,934.6 2,398.5 2,346.2 EBITDA (RM m) 194.6 293.6 367.5 468.6 477.8 EBITDA margins (%) 13.8% 16.8% 19.0% 19.5% 20.4% Pretax profit (RM m) 231.1 331.0 377.7 485.7 499.2 Net profit (RM m) 171.2 251.8 283.3 364.3 374.4 EPS (sen) 16.8 24.8 27.9 35.8 36.8 EPS growth (%) (19.8%) 47.1% 12.5% 28.6% 2.8% P/E (x) 31.2 21.1 18.8 14.6 14.2 Core EPS (sen) 16.3 21.1 27.9 35.8 36.8 Core EPS growth (%) (14.7%) 30.0% 31.8% 28.6% 2.8% Core P/E (x) 32.1 24.8 18.8 14.6 14.2 FD core EPS (sen) 14.0 18.1 23.9 30.7 31.6 FD core P/E (x) 40.0 30.8 23.3 18.2 17.7 Gross DPS (sen) 14.0 20.0 22.0 24.0 26.0 Dividend yield (%) 2.7% 3.8% 4.2% 4.6% 5.0% P/BV (x) 2.8 2.6 2.5 2.3 2.1 ROE (%) 8.5% 11.9% 12.6% 15.2% 14.5% Net gearing (%) 27.1% 26.4% 15.0% 11.3% 8.1% P/FCFE (x) 13.3 17.7 11.1 15.0 13.8 EV/EBITDA (x) 31.9 21.2 16.3 12.6 12.3 % change in EPS estimates N/A N/A N/A CIMB/Consensus (x) 1.15 1.29 N/A



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Volume 10m (R.H.S ca le ) S P S e tia Bhd Source: Bloomberg

Incorporated in Aug 1974 and listed on the Second Board in Apr 1993, SP Setia was transferred to the Main Board in 1996. The group has four ongoing township projects in Johor, one key one in the Klang Valley and another in Vietnam. It also has smaller parcels of landbank for development in the Klang Valley, Penang, Sabah and Vietnam. Recently, the group made inroads into China where it is developing 25 acres in the growth corridor of XiaoShan, Hangzhou in the Zhejiang province. The group’s landbank totals some 3,500 acres. Its flagship project remains the 3,930-acre Bandar Setia Alam township in Klang/Shah Alam.



(RM m, FYE Oct) 2009 2010 2011F 2012F 2013F (FYE Oct) 2009 2010 2011F 2012F 2013F Revenue 1,408 1,746 1,935 2,399 2,346 Revenue growth (%) 6.0 24.0 10.8 24.0 (2.2) Operating expenses (1,214) (1,452) (1,567) (1,930) (1,868) EBITDA growth (%) (22.0) 50.9 25.2 27.5 2.0 EBITDA 195 294 368 469 478 Pretax margins (%) 16.4 19.0 19.5 20.3 21.3 Depreciation & amortisation 0 (18) (17) (17) (18) Net profit margins (%) 12.2 14.4 14.6 15.2 16.0 EBIT 195 275 351 451 460 Interest cover (x) 24.2 29.9 24.3 29.7 28.6 Net interest & invt income 29 7 27 34 39 Effective tax rates (%) 25.9 23.9 25.0 25.0 25.0 Associates’ contribution 0 0 0 0 0 Net dividend payout (%) 62.4 60.6 59.2 50.2 53.0 Exceptional items 8 48 0 0 0 Debtors turnover (days) 101.1 115.6 110.2 85.1 95.3 Others 0 0 0 0 0 Stock turnover (days) 7.4 5.3 6.3 7.4 8.2 Pretax profit 231 331 378 486 499 Creditors turnover (days) 93.4 91.7 87.6 77.7 86.3 Tax (60) (79) (94) (121) (125) Minority interests 0 0 0 0 0 Net profit 171 252 283 364 374 Adj. wt. shares (m) 1,017 1,017 1,017 1,017 1,017 Unadj. year-end shares (m) 1,017 1,017 1,017 1,017 1,017 BALANCE SHEET KEY DRIVERS (RM m, end Oct) 2009 2010 2011F 2012F 2013F (FYE Oct) 2010 2011F 2012F 2013FFixed assets 146 108 97 84 72 Margin - Property development (%) 21.4% 20.9% 21.1% 22.0% Intangible assets 0 0 0 0 0 Undeveloped landbank (acres) 3,678 3,478 3,278 3,078 Other long-term assets 1,469 1,564 1,632 1,704 1,780 Sales (RMm) 1,231 1,735 2,195 2,137 Total non-current assets 1,615 1,672 1,729 1,789 1,852 Company's targeted sales (RMm) 2,000 3,000 Cash and equivalents 886 1,059 1,375 1,534 1,705 Unrecognised billings (RMm) 1,780 2,000 2,200 2,300 Stocks 27 24 43 54 52 Trade debtors 437 669 499 619 606 Other current assets 987 963 946 1,005 1,050 Total current assets 2,337 2,714 2,863 3,211 3,412 Trade creditors 406 471 458 564 546 Short-term borrowings 331 621 703 797 905 Other current liabilities 69 86 107 134 132 Total current liabilities 805 1,178 1,268 1,494 1,582 Long-term borrowings 1,107 1,016 1,016 1,016 1,016 Other long-term liabilities 2 2 3 3 3 Total long-term liabilities 1,110 1,019 1,019 1,019 1,019 Shareholders’ funds 2,037 2,189 2,305 2,486 2,662 Minority interests 0 0 0 0 0 NTA/share (RM) 2.00 2.15 2.27 2.44 2.62 CASH FLOW CURRENT P/BV(X) (RM m, FYE Oct) 2009 2010 2011F 2012F 2013FPretax profit 231 331 378 486 499Depreciation & non–cash adj. 0 18 17 17 18Working capital changes (142) (127) 160 (66) (51)Cash tax paid (60) (73) (79) (112) (124)Others 2 2 2 2 2Cash flow from operations 31 151 477 327 344Capex (65) 19 (5) (5) (5)Net investments & sale of FA (38) (95) (69) (72) (76)Others (8) 38 0 0 0Cash flow from investing (111) (38) (74) (77) (81)Debt raised/(repaid) 477 199 82 94 108Equity raised/(repaid) 5 15 0 0 0Dividends paid (107) (153) (168) (183) (198)Cash interest & others (1) (3) (2) (2) (2)Cash flow from financing 374 58 (87) (91) (92)Change in cash 294 172 316 159 171Change in net cash/(debt) (183) (27) 234 65 63Ending net cash/(debt) (551) (579) (345) (280) (216)

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OUTPERFORM Maintained Star Publications Bhd RM3.39 @06/12/10 Still a dividend play Target: RM4.52

Newspaper

MA

LAYS

IA

STAR MK / STAR.KL Sharizan Rosely +60 (3) 2084 9864 – [email protected]

• Maintain OUTPERFORM. Star Publications remains the key beneficiary of the continued recovery of English newspaper adex. We maintain our OUTPERFORM call but raise our target price from RM4.31 to RM4.52 as we apply our revised CY12 target market P/E of 14.5x (13.8x previously) to the stock. Potential re-rating catalysts include better-than-expected quarterly performances and advertising volume. Star remains one of our top picks for the media sector.

• Bright sparks for 2011. Newspaper adex chalked up 15% yoy growth in Jan-Sep 10, driven by 18% growth in the Chinese segment and 15% in the English segment. Growth was only 13% for the Malay segment. Ad volume momentum continues to be encouraging and should spill over into 2011. This trend is positive for Star which dominates the English segment with 70% share of English newspaper adex.

• Margin and dividend attraction. Our FY10-12 forecasts factor in a rise in EBITDA margins, backed by the low average newsprint cost of US$650-700/tonne which is good for another 12 months. Our FY11-12 DPS forecasts of 21 sen, which do not factor in a repeat of the recent 53 sen bumper special dividend, translate into an attractive dividend yield of 6%, which is the highest in the media sector.

Financial summary

Stock Information Market cap: RM2,504m/US$798m 12-m price range: RM4.13 RM3.14 3-m avg daily vol: 1.0m No. of shrs (m): 739 Est. free float (%): 76.1 Conv. secs (m): None Major shareholders (%): - EPF 16.6 - Amanah Raya Nominees 7.3

FYE Dec 2008 2009 2010F 2011F 2012F Revenue (RM m) 831.0 974.4 1,189.9 1,284.1 1,337.3 EBITDA (RM m) 223.7 232.3 305.6 337.5 365.7 EBITDA margins (%) 26.9% 23.8% 25.7% 26.3% 27.3% Pretax profit (RM m) 201.3 197.1 271.3 293.7 325.4 Net profit (RM m) 138.7 144.6 184.3 193.5 230.3 EPS (sen) 18.8 19.6 25.0 26.2 31.2 EPS growth (%) (13.0%) 4.2% 27.5% 5.0% 19.0% P/E (x) 18.0 17.3 13.6 12.9 10.9 Core EPS (sen) 22.1 19.6 25.0 26.2 31.2 Core EPS growth (%) 2.3% (11.3%) 27.5% 5.0% 19.0% Core P/E (x) 15.4 17.3 13.6 12.9 10.9 Gross DPS (sen) 21.1 21.0 73.6 21.0 21.0 Dividend yield (%) 6.2% 6.2% 21.7% 6.2% 6.2% P/BV (x) 2.0 2.0 2.3 2.2 2.0 ROE (%) 11.2% 11.4% 15.8% 17.6% 19.4% Net cash per share (RM) 0.44 0.47 0.05 0.14 0.29 P/FCFE (x) 20.2 14.3 36.5 13.0 10.9 EV/EBITDA (x) 9.7 9.3 8.1 7.2 6.3 % change in EPS estimates - - - CIMB/Consensus (x) 1.04 1.02 1.09



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Volume 1m (R.H.Scale) Star Publications Bhd Source: Bloomberg

Star Publications publishes The Star, Malaysia’s largest circulating English daily with a readership of over 1m. Apart from publishing various magazines and publications, it operates two radio stations. The Star (English) online newspaper was the first in Malaysia to establish its presence on the Internet and is recognised as the most widely read in Malaysia. In 2008, Star acquired a stake in Cityneon for exposure to the meetings, incentives, conventions and exhibitions (MICE) sector in Asia and the Middle East. The Star is the single largest source of adex in the country and extended its coverage to East Malaysia in late 2009.



(RM m, FYE Dec) 2008 2009 2010F 2011F 2012F (FYE Dec) 2008 2009 2010F 2011F 2012F Revenue 831 974 1,190 1,284 1,337 Revenue growth (%) 6.6 17.3 22.1 7.9 4.1 Operating expenses (607) (742) (884) (947) (972) EBITDA growth (%) (5.7) 3.8 31.5 10.5 8.4 EBITDA 224 232 306 338 366 Pretax margins (%) 24.2 20.2 22.8 22.9 24.3 Depreciation & amortisation (44) (48) (53) (53) (53) Net profit margins (%) 16.7 14.8 15.5 15.1 17.2 EBIT 180 184 252 285 313 Interest cover (x) 12.7 11.7 N/A N/A N/A Net interest & invt income 22 18 19 9 12 Effective tax rates (%) 31.2 24.2 28.0 28.0 28.0 Associates’ contribution 0 (5) 0 0 0 Net dividend payout (%) 84.1 80.7 205.5 64.1 53.9 Exceptional items 0 0 0 0 0 Debtors turnover (days) 48.2 39.5 40.1 48.2 49.0 Others 0 0 0 0 0 Stock turnover (days) 87.0 73.1 78.1 94.0 94.5 Pretax profit 201 197 271 294 325 Creditors turnover (days) 41.8 35.1 37.6 45.2 45.5 Tax (63) (48) (76) (82) (91) Minority interests 0 (5) (11) (18) (4) Net profit 139 145 184 193 230 Adj. wt. shares (m) 739 739 739 739 739 Unadj. year-end shares (m) 739 739 739 739 739 BALANCE SHEET KEY DRIVERS (RM m, end Dec) 2008 2009 2010F 2011F 2012F (FYE Dec) 2009 2010F 2011F 2012FFixed assets 763 759 753 748 741 Adex revenue growth (%) -14.9% 12.3% 14.4% 7.1% Intangible assets 34 34 34 34 34 Ad rate per ccm (RM) 56 57 58 59 Other long-term assets 21 21 21 21 21 Cover price (RM) 1.20 1.20 2.20 3.20 Total non-current assets 818 814 809 803 796 Newsprint cost (US$/tonne) 638 660 660 680 Cash and equivalents 573 597 287 356 461 Newsprint usage (tonnes p.a.) 75,690 79,474 80,666 82,615 Stocks 200 190 319 342 351 Trade debtors 112 98 163 176 183 Other current assets 12 12 12 12 12 Total current assets 897 897 781 885 1,006 Trade creditors 96 91 154 164 169 Short-term borrowings 0 0 0 0 0 Other current liabilities 7 7 7 7 7 Total current liabilities 103 98 160 171 176 Long-term borrowings 250 250 250 250 250 Other long-term liabilities 102 102 102 102 102 Total long-term liabilities 352 352 352 352 352 Shareholders’ funds 1,261 1,266 1,066 1,135 1,242 Minority interests 0 0 11 22 26 NTA/share (RM) 1.66 1.67 1.40 1.49 1.63 CASH FLOW 12M - FORWARD FD CORE P/E (X) (RM m, FYE Dec) 2008 2009 2010F 2011F 2012FPretax profit 201 197 271 294 325Depreciation & non–cash adj. 44 48 53 53 53Working capital changes (8) 19 (132) (25) (12)Cash tax paid (63) (45) (76) (82) (91)Others (22) (19) (19) (9) (12)Cash flow from operations 152 200 98 231 263Capex (50) (49) (48) (47) (46)Net investments & sale of FA 0 0 0 0 0Others 0 0 0 0 0Cash flow from investing (50) (49) (48) (47) (46)Debt raised/(repaid) 0 0 0 0 0Equity raised/(repaid) 0 0 0 0 0Dividends paid (117) (117) (379) (124) (124)Cash interest & others 65 (11) 19 9 12Cash flow from financing (51) (128) (360) (115) (112)Change in cash 51 24 (310) 69 105Change in net cash/(debt) 51 24 (310) 69 105Ending net cash/(debt) 323 347 37 106 211

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OUTPERFORM Maintained Supermax Corp Bhd RM4.38 @07/12/10 Supercharged Target: RM8.22

Rubber Gloves

MA

LAYS

IA

SUCB MK / SUPM.KL Terence Wong CFA +60(3) 20849689 – [email protected]

• Reiterate OUTPERFORM. Supermax, the most liquid rubber glove stock, remains an OUTPERFORM. Our EPS forecasts are unchanged. However, our target price increases from RM7.82 to RM8.22 after raising Top Glove’s CY11 target P/E from 13.8x to 14.5x while maintaining Supermax at a 20% discount to Top Glove or 11.6x P/E. Potential re-rating catalysts include 1) higher nitrile glove sales, 2) refurbishment of the company’s Sungai Buloh plant to manufacture surgical gloves, and 3) tax savings from the company’s regional distribution hub in Malaysia.

• Unique business model. Supermax’s own brand gloves make up 63% of its sales, making it the sector’s largest original brand glovemaker and giving it superior pricing power. Through its ownership of distributors, the group has gained its own distribution channels that give it direct access to customers. Distribution income now accounts for 44% of net profit compared with just 21% in 2001.

• Flexible glovemaking capabilities. 60-70% of Supermax’s production lines are dual mode, enabling the company to switch seamlessly between natural rubber and nitrile glove production. In our view, this enhances Supermax’s ability to gain market share and maintain high utilisation rates by meeting market demand quickly.

Financial summary

Stock Information Market cap: RM1,490m/US$475m 12-m price range: RM6.55 RM3.11 3-m avg daily vol: 2.7m No. of shrs (m): 340 Est. free float (%): 49.3 Conv. secs (m): None Major shareholders (%): - Thai Kim Sim, Stanley 20.7 - Tan Bee Geok, Cheryl 14.8 - Koperasi Permodalan Felda 5.2

FYE Dec 2008 2009 2010F 2011F 2012F Revenue (RM m) 811.8 803.6 946.5 1,184.2 1,381.4 EBITDA (RM m) 98.9 169.0 226.4 261.5 306.2 EBITDA margins (%) 12.2% 21.0% 23.9% 22.1% 22.2% Pretax profit (RM m) 52.0 151.5 216.2 245.5 283.5 Net profit (RM m) 47.0 126.6 183.8 208.7 241.0 EPS (sen) 13.8 37.2 54.0 61.4 70.9 EPS growth (%) (16.0%) 169.3% 45.2% 13.5% 15.5% P/E (x) 31.7 11.8 8.1 7.1 6.2 Core EPS (sen) 18.2 38.5 54.0 61.4 70.9 Core EPS growth (%) 10.9% 111.2% 40.2% 13.5% 15.5% Core P/E (x) 24.0 11.4 8.1 7.1 6.2 Gross DPS (sen) 2.6 8.8 9.0 11.0 12.0 Dividend yield (%) 0.6% 2.0% 2.1% 2.5% 2.7% P/BV (x) 3.6 2.7 2.0 1.6 1.3 ROE (%) 11.7% 26.0% 28.0% 24.7% 23.1% Net gearing (%) 90.0% 31.5% 14.0% 0.5% N/A Net cash per share (RM) N/A N/A N/A N/A 0.42 P/FCFE (x) 58.1 13.9 13.4 8.2 6.4 EV/EBITDA (x) 17.7 8.9 6.3 5.0 3.8 % change in EPS estimates N/A N/A N/A CIMB/Consensus (x) 1.01 1.06 1.08



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Volume 10m (R.H.Scale) Supermax Corp Bhd Source: Bloomberg

Founded by Dato' Seri Stanley Thai in 1987, Supermax exports to over 145 countries. It is Malaysia’s first and largest original brand glove manufacturer, with brands such as Supermax, Aurelia and Maxter. Although traditionally a natural rubber glovemaker, Supermax has ramped up nitrile glove production to 20-24% of capacity. Today, the company produces 16.5bn pieces of gloves p.a., meeting 11% of the world’s glove demand. Supermax also has six of its own distribution centres in the US, Brazil, Germany, Belgium and Canada.



(RM m, FYE Dec) 2008 2009 2010F 2011F 2012F (FYE Dec) 2008 2009 2010F 2011F 2012F Revenue 812 804 947 1,184 1,381 Revenue growth (%) 41.4 (1.0) 17.8 25.1 16.7 Operating expenses (713) (635) (720) (923) (1,075) EBITDA growth (%) 32.1 70.9 34.0 15.5 17.1 EBITDA 99 169 226 262 306 Pretax margins (%) 6.4 18.8 22.8 20.7 20.5 Depreciation & amortisation (29) (32) (39) (46) (54) Net profit margins (%) 5.8 15.8 19.4 17.6 17.4 EBIT 70 137 187 215 253 Interest cover (x) 3.4 6.2 12.4 13.3 14.2 Net interest & invt income (20) (22) (15) (16) (17) Effective tax rates (%) 9.6 16.4 15.0 15.0 15.0 Associates’ contribution 19 42 44 46 48 Net dividend payout (%) 18.8 23.6 16.7 17.9 16.9 Exceptional items (17) (5) 0 0 0 Debtors turnover (days) 49.9 46.3 42.6 49.3 50.8 Others 0 0 0 0 0 Stock turnover (days) 54.4 57.2 42.5 36.1 37.3 Pretax profit 52 151 216 246 284 Creditors turnover (days) 29.9 24.1 15.6 14.8 15.3 Tax (5) (25) (32) (37) (43) Minority interests 0 0 0 0 0 Net profit 47 127 184 209 241 Adj. wt. shares (m) 340 340 340 340 340 Unadj. year-end shares (m) 265 268 340 340 340 BALANCE SHEET KEY DRIVERS (RM m, end Dec) 2008 2009 2010F 2011F 2012F (FYE Dec) 2009 2010F 2011F 2012FFixed assets 383 368 406 427 441 Production capacity (m pcs p.a) 14,476 17,588 21,738 23,238 Intangible assets 29 29 29 29 29 Capacity utilisation (%) 83.7% 85.0% 85.0% 85.0% Other long-term assets 127 167 190 199 208 ASP (US$) per 1,000 pieces 23.35 23.00 23.23 23.69 Total non-current assets 539 564 625 655 678 Exchange rate (RM to US$) 3.50 3.02 3.05 3.05 Cash and equivalents 31 119 203 334 514 Natural rubber price (RM /kilogram) 4.50 8.20 8.00 7.55 Stocks 136 116 104 130 152 Nitrile latex prices (US$/mt) 1,014 1,300 1,381 1,503 Trade debtors 125 79 142 178 207 Other current assets 116 67 72 74 76 Total current assets 407 381 521 716 949 Trade creditors 68 38 43 53 62 Short-term borrowings 231 129 135 148 162 Other current liabilities 49 46 32 36 39 Total current liabilities 347 214 210 237 263 Long-term borrowings 175 166 174 191 210 Other long-term liabilities 8 7 7 8 8 Total long-term liabilities 183 173 181 199 218 Shareholders’ funds 416 559 755 936 1,146 Minority interests 0 0 0 0 0 NTA/share (RM) 1.14 1.56 2.14 2.67 3.29 CASH FLOW 12M - FORWARD FD CORE P/E (X) (RM m, FYE Dec) 2008 2009 2010F 2011F 2012FPretax profit 52 151 216 246 284Depreciation & non–cash adj. 29 32 39 46 54Working capital changes (43) 75 (64) (49) (40)Cash tax paid (2) (13) (25) (32) (37)Others 17 (19) 0 0 0Cash flow from operations 53 226 167 210 260Capex (39) (17) (70) (60) (60)Net investments & sale of FA 0 0 0 0 0Others (19) 0 0 0 0Cash flow from investing (57) (17) (70) (60) (60)Debt raised/(repaid) 30 (101) 14 30 33Equity raised/(repaid) (6) 27 0 0 0Dividends paid (9) (15) (28) (26) (28)Cash interest & others (19) (22) 1 (24) (26)Cash flow from financing (4) (111) (13) (19) (21)Change in cash (8) 97 84 131 179Change in net cash/(debt) (38) 199 70 101 146Ending net cash/(debt) (375) (176) (106) (4) 142

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OUTPERFORM Maintained Tan Chong Motor Holdings Bhd RM5.44 @06/12/10 Following a regional roadmap Target: RM9.15

Autos

MA

LAYS

IA

TCM MK / TNCS.KL Loke Wei Wern +60 (3) 2084 9946 – [email protected]

• Maintain OUTPERFORM; top auto pick. Although Tan Chong’s share price has risen 73% relative to the KLCI’s 18%, we still see value in the stock. It is trading at close to 10% discount to its average historical P/E of 8.5x. In addition to the strategic expansion of its model mix and excitement from its regional plans, we think that Tan Chong is a good cyclical play on the economy. We continue to rate it an OUTPERFORM and our top pick in the auto sector. Potential re-rating catalysts include 1) a stronger earnings growth trajectory, 2) new model pipeline, and 3) strategic positioning which will help it tap into regional demand. Our SOP-based target price stays at RM9.15.

• New models to drive earnings growth next year. For 2011, Tan Chong plans to launch three new facelifts, two new CKD models and two CBUs. Among them will be the Nissan March, which is currently produced by Nissan’s Thai plant with a localisation rate of close to 90%. This model is expected to hit Malaysian shores towards end-2011. 2011 will also capture the full-year contribution from Nissan Teana, which was officially launched on 23 Nov 10. The launch of the Teana marked Nissan’s re-entry into the D-segment after a five-year hiatus.

• Building a platform for sustainable growth. Tan Chong’s FY11-12 earnings should be largely driven by the domestic market. However, the group is building a regional platform that should provide a new leg of growth post FY12 when the local auto industry will be closer to saturation point. Having gained a foothold in the Indochina region, Tan Chong is paving the way for a possible entry into Indonesia. It was recently awarded a manufacturing licence in Sabah that could give the group a springboard into Indonesia given Sabah’s proximity to Kalimantan and Sulawesi.

Financial summary

Stock Information Market cap: RM3,656m/US$1,162m 12-m price range: RM6.00 RM2.46 3-m avg daily vol: 0.7m No. of shrs (m): 672 Est. free float (%): 37.0 Conv. secs (m): None Major shareholders (%): - Tan Chong Consolidated 45.6 - Nissan Motor Corp 5.6 - Employees Provident Fund 5.2

FYE Dec 2008 2009 2010F 2011F 2012F Revenue (RM m) 3,195.8 2,856.9 3,518.8 4,072.0 5,314.8 EBITDA (RM m) 374.9 234.0 451.5 516.3 696.9 EBITDA margins (%) 11.7% 8.2% 12.8% 12.7% 13.1% Pretax profit (RM m) 307.2 177.2 393.3 458.5 636.7 Net profit (RM m) 245.8 153.3 274.4 342.9 476.6 EPS (sen) 36.6 22.8 40.8 51.0 70.9 EPS growth (%) 318.6% (37.6%) 78.9% 25.0% 39.0% P/E (x) 14.9 23.8 13.3 10.7 7.7 Gross DPS (sen) 10.0 11.0 12.0 13.0 14.0 Dividend yield (%) 1.8% 2.0% 2.2% 2.4% 2.6% P/BV (x) 2.6 2.4 2.1 1.8 1.5 ROE (%) 18.5% 10.4% 16.9% 18.4% 21.6% Net gearing (%) 17.5% 6.3% 7.2% 0.4% 0.4% P/FCFE (x) 58.0 37.1 183.7 17.8 35.5 EV/EBITDA (x) 10.4 16.0 8.3 7.1 5.2 % change in EPS estimates - - - CIMB/Consensus (x) 1.03 1.03 1.18



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Volume 1m (R.H.S ca le ) Ta n Chong Motor Holdings Bhd Source: Bloomberg

Tan Chong Motor is the exclusive assembler and distributor of the Nissan and Renault marques in Malaysia. It is 5.6% owned by Nissan Motor Japan. Through Nissan and Renault, Tan Chong accounts for close to 6% share of total vehicle sales in Malaysia currently compared with a mere 3.8% in 2007. Beyond the domestic market, Tan Chong holds the exclusive distribution rights for Nissan vehicles in Cambodia and Laos. Recently, it rounded off its Indochina strategy with the proposed acquisition of a 74% stake in the exclusive importer and distributor of Nissan vehicles in Vietnam.



(RM m, FYE Dec) 2008 2009 2010F 2011F 2012F (FYE Dec) 2008 2009 2010F 2011F 2012F Revenue 3,196 2,857 3,519 4,072 5,315 Revenue growth (%) 71.4 (10.6) 23.2 15.7 30.5 Operating expenses (2,821) (2,623) (3,067) (3,556) (4,618) EBITDA growth (%) 178.6 (37.6) 92.9 14.3 35.0 EBITDA 375 234 452 516 697 Pretax margins (%) 9.6 6.2 11.2 11.3 12.0 Depreciation & amortisation (58) (51) (51) (54) (58) Net profit margins (%) 7.7 5.4 7.8 8.4 9.0 EBIT 317 183 400 462 639 Interest cover (x) 14.8 9.0 18.5 21.0 28.2 Net interest & invt income (10) (6) (7) (4) (3) Effective tax rates (%) 20.0 12.9 30.0 25.0 25.0 Associates’ contribution 1 0 0 0 0 Net dividend payout (%) 20.2 36.2 22.0 19.1 14.8 Exceptional items 0 0 0 0 0 Debtors turnover (days) 33.3 40.1 41.2 43.0 41.5 Others 0 0 0 0 0 Stock turnover (days) 82.1 97.6 80.2 84.4 80.1 Pretax profit 307 177 393 458 637 Creditors turnover (days) 24.8 30.8 30.9 31.8 30.2 Tax (61) (23) (118) (115) (159) Minority interests 0 (1) (1) (1) (1) Net profit 246 153 274 343 477 Adj. wt. shares (m) 672 672 672 672 672 Unadj. year-end shares (m) 672 672 672 672 672 BALANCE SHEET KEY DRIVERS (RM m, end Dec) 2008 2009 2010F 2011F 2012F (FYE Dec) 2009 2010F 2011F 2012FFixed assets 521 494 522 548 591 Unit sales 31,731 35,077 39,949 55,453 Intangible assets 0 0 0 0 0 Unit sales growth (%) 2.6% 10.5% 13.9% 38.8% Other long-term assets 280 393 393 393 393 Exchange rate (RM to US$) 3.60 3.30 3.25 3.25 Total non-current assets 801 887 916 941 984 Cash and equivalents 320 553 524 659 678 Stocks 854 673 872 1,010 1,321 Trade debtors 276 352 441 519 690 Other current assets 0 0 0 0 0 Total current assets 1,450 1,578 1,837 2,189 2,689 Trade creditors 214 267 329 381 497 Short-term borrowings 379 388 388 407 427 Other current liabilities 7 1 7 35 34 Total current liabilities 600 656 724 823 959 Long-term borrowings 191 261 261 261 261 Other long-term liabilities 36 31 31 31 31 Total long-term liabilities 226 292 292 292 292 Shareholders’ funds 1,421 1,514 1,728 2,005 2,411 Minority interests 4 4 5 6 7 NTA/share (RM) 2.12 2.25 2.57 2.98 3.59 CASH FLOW 12M - FORWARD FD CORE P/E (X) (RM m, FYE Dec) 2008 2009 2010F 2011F 2012FPretax profit 307 177 393 458 637Depreciation & non–cash adj. 58 51 51 54 58Working capital changes (293) 60 (226) (165) (365)Cash tax paid (61) (52) (23) (118) (115)Others 15 4 (96) 36 (32)Cash flow from operations 27 241 100 266 183Capex (79) (56) (80) (80) (100)Net investments & sale of FA (1) (144) 0 0 0Others 1 (20) 0 0 0Cash flow from investing (79) (220) (80) (80) (100)Debt raised/(repaid) 115 78 0 19 20Equity raised/(repaid) (7) (12) 0 0 0Dividends paid (49) (49) (64) (69) (74)Cash interest & others 0 0 15 (1) (10)Cash flow from financing 58 18 (49) (50) (64)Change in cash 6 38 (29) 136 19Change in net cash/(debt) (109) (40) (29) 116 (1)Ending net cash/(debt) (250) (95) (125) (8) (9)

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OUTPERFORM Maintained Tasek Corporation Bhd RM7.59 @07/12/10 Concrete prospects Target: RM9.00

Cement

MA

LAYS

IA

TC MK / TKCS.KL Terence Wong CFA +60(3) 20849689 – [email protected]

• Maintain OUTPERFORM. Tasek remains an OUTPERFORM given our upbeat outlook for the construction sector and the potential improvement in cement selling prices. Our target price remains RM9.00 as we continue to use a blend of 12.4x P/E and 1.0x BV. Potential re-rating catalysts for Tasek include 1) construction starts, 2) stable selling prices for cement, and 3) product diversification.

• Positive on M&A. In November, it was reported that Tasek could use its RM354m net cash to acquire MTD ACPI’s (ACP MK, Underperform) precast concrete business. We would view this positively as Tasek would be able to take advantage of MTD ACPI’s presence in Johor since Tasek’s parent company, Hong Leong Asia Ltd is a leading supplier of cement and prefabrication products in Singapore.

• Mega construction jobs. The 10th Malaysia Plan and Budget 2011 revealed big projects such as the KL MRT, LRT, new LCCT and high-speed rail project, which should boost construction activities and reinvigorate demand for building materials such as cement. Awards for RM1.6bn out of the RM7bn LRT extension have already been announced and we expect more announcements in 2011.

Financial summary

Stock Information Market cap: RM938m/US$299m 12-m price range: RM8.57 RM5.66 3-m avg daily vol: 0.0m No. of shrs (m): 124 Est. free float (%): 11.8 Conv. secs (m): None Major shareholders (%): - HL Cement (M) Sdn Bhd 72.6 - Amanah Raya 8.6 - Lembaga Tabung Haji 6.5

FYE Dec 2008 2009 2010F 2011F 2012F Revenue (RM m) 509.8 526.8 575.9 611.2 620.6 EBITDA (RM m) 122.6 124.2 139.0 157.1 158.8 EBITDA margins (%) 24.0% 23.6% 24.1% 25.7% 25.6% Pretax profit (RM m) 98.6 87.2 161.4 174.5 135.9 Net profit (RM m) 75.1 67.1 121.0 130.9 101.9 EPS (sen) 40.7 36.3 97.9 105.9 82.4 EPS growth (%) 99.8% (10.8%) 169.6% 8.2% (22.1%) P/E (x) 18.7 20.9 7.8 7.2 9.2 Core EPS (sen) 40.7 36.3 66.7 79.4 82.4 Core EPS growth (%) 99.8% (10.8%) 83.6% 19.2% 3.8% Core P/E (x) 18.7 20.9 11.4 9.6 9.2 P/BV (x) 1.6 1.5 1.1 1.0 0.9 ROE (%) 9.2% 7.6% 13.7% 14.3% 9.9% Net cash per share (RM) 1.39 1.90 3.00 3.82 4.75 P/FCFE (x) 27.4 13.0 12.9 5.2 6.9 EV/EBITDA (x) 9.0 8.5 4.1 3.0 2.2 % change in EPS estimates N/A N/A N/A CIMB/Consensus (x) 0.68 0.75 1.01



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Volume 100k (R.H.Scale) Tasek Corporation Bhd Source: Bloomberg

Tasek Corporation was incorporated in 1962 as Tasek Cement Limited and was listed on Bursa Malaysia in 1963. It commenced cement production in 1964 with an annual rated production capacity of 250,000 tonnes at its present plant in the Tasek Industrial Estate, Ipoh. Over the years, it undertook a series of expansion to keep pace with Malaysia’s economic and infrastructure development. Its continuous upgrade of its plants, equipment and technology has pushed its capacity to 2.3m mt of clinker per year. Tasek now ranks as the fourth largest cement player in the country.



(RM m, FYE Dec) 2008 2009 2010F 2011F 2012F (FYE Dec) 2008 2009 2010F 2011F 2012F Revenue 510 527 576 611 621 Revenue growth (%) 151.1 3.3 9.3 6.1 1.5 Operating expenses (387) (403) (437) (454) (462) EBITDA growth (%) 119.0 1.3 11.9 13.0 1.1 EBITDA 123 124 139 157 159 Pretax margins (%) 19.3 16.5 28.0 28.6 21.9 Depreciation & amortisation (45) (47) (41) (41) (41) Net profit margins (%) 14.7 12.7 21.0 21.4 16.4 EBIT 78 77 98 116 118 Interest cover (x) N/A N/A N/A N/A N/A Net interest & invt income 14 9 12 15 18 Effective tax rates (%) 23.9 23.0 25.0 25.0 25.0 Associates’ contribution 7 1 0 0 0 Net dividend payout (%) 24.6 82.6 10.2 11.3 15.8 Exceptional items 0 0 52 44 0 Debtors turnover (days) 52.9 53.9 47.2 48.6 49.6 Others 0 0 0 0 0 Stock turnover (days) 66.9 80.8 75.7 77.7 79.4 Pretax profit 99 87 161 175 136 Creditors turnover (days) 39.1 41.6 42.3 48.6 49.6 Tax (24) (20) (40) (44) (34) Minority interests 0 0 0 0 0 Net profit 75 67 121 131 102 Adj. wt. shares (m) 184 185 124 124 124 Unadj. year-end shares (m) 184 185 124 124 124 BALANCE SHEET KEY DRIVERS (RM m, end Dec) 2008 2009 2010F 2011F 2012F (FYE Dec) 2009 2010F 2011F 2012FFixed assets 371 361 370 369 368 Cement ASP - domestic (RM/tonne) 277 300 300 300 Intangible assets 1 1 1 1 1 Utilisation rate (%) 66.0% 70.0% 70.0% 70.0% Other long-term assets 90 6 5 5 5 Total non-current assets 462 368 376 375 374 Cash and equivalents 261 356 374 475 590 Stocks 121 113 126 134 136 Trade debtors 86 70 79 84 85 Other current assets 3 77 0 0 0 Total current assets 470 615 579 693 811 Trade creditors 66 54 79 84 85 Short-term borrowings 5 4 3 3 3 Other current liabilities 0 0 0 0 0 Total current liabilities 70 58 82 87 88 Long-term borrowings 0 0 0 0 0 Other long-term liabilities 7 16 15 15 14 Total long-term liabilities 7 16 15 15 14 Shareholders’ funds 854 908 858 967 1,083 Minority interests 0 0 0 0 0 NTA/share (RM) 4.63 4.91 6.93 7.81 8.75 CASH FLOW 12M - FORWARD FD CORE P/E (X) (RM m, FYE Dec) 2008 2009 2010F 2011F 2012FPretax profit 99 87 161 175 136Depreciation & non–cash adj. 45 48 42 41 41Working capital changes (46) 20 (2) 8 2Cash tax paid (13) (11) (4) (4) (3)Others (7) (1) (74) (1) (1)Cash flow from operations 78 142 123 219 175Capex (31) (37) (50) (40) (40)Net investments & sale of FA 0 4 1 1 1Others 0 0 0 0 0Cash flow from investing (31) (34) (50) (40) (40)Debt raised/(repaid) 5 (1) (1) 0 0Equity raised/(repaid) 0 1 0 0 0Dividends paid 0 (14) (12) (15) (16)Cash interest & others 0 1 (42) (63) (5)Cash flow from financing 5 (13) (55) (78) (22)Change in cash 52 95 18 101 114Change in net cash/(debt) 47 96 19 101 114Ending net cash/(debt) 257 352 371 472 587

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TRADING BUY Maintained Telekom Malaysia Bhd RM3.41 @07/12/10 Capital management potential Target: RM4.04

Telecommunications - Integrated

MA

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IA

T MK / TLMM.KL Kelvin Goh CFA +60(3) 2084 9699 – [email protected]

• Telekom Malaysia is a TRADING BUY because of potential capital management given its burgeoning cash. Its net debt/EBITDA is 0.9x and would be 0.6x if itsAxiata shares were included. Operationally, we are concerned about the take-up of its Unifi HSBB, rising competition from wireless broadband operators and continued decline in voice revenues. We raise our SOP-based target price from RM3.80 to RM4.04 after including its Axiata shares which are worth RM0.25/TM share. Likely re-rating catalysts are the sale of its Axiata shares and special dividends or capital repayment.

• Concerns over take-up of Unifi. We are concerned that the take-up of Unifi could be limited due to affordability issues and consumers’ lack of need for high speeds. An indication of this is the low take-up of 5% for TM’s upselling of Streamyx residential users since Nov 09 to higher-end plans.

• Crowded broadband playing field. Broadband competition will intensify with the entry of YTL Communications, the re-emergence of U Mobile and SK Telecom’s investment in Packet One. Given YTLC’s strong financial backing, good execution, and plan to launch pay TV, we think it will be the biggest threat to TM.

• Special dividends? We think there is a possibility of a special dividend at end-2010 or 2011 given the rising cash bolstered by RM0.07/share by the sale of its Measat stake. Expectations of capital management will be raised further if it sells its shares in Axiata. However, TM may keep its balance sheet conservative given that it has US$260m (RM810m) debt due at end-2010 and RM2bn due in 2011.

Financial summary

Stock Information Market cap: RM12,199m/US$3,889m 12-m price range: RM3.58 RM2.99 3-m avg daily vol: 6.2m No. of shrs (m): 3,577 Est. free float (%): 34.8 Conv. secs (m): None Major shareholders (%): - Khazanah Nasional 43.1 - Employees Provident Fund 16.2 - Amanah Saham Bumi 5.9

FYE Dec 2008 2009 2010F 2011F 2012F Revenue (RM m) 8,674.9 8,608.0 8,715.9 8,910.4 9,075.8 EBITDA (RM m) 2,738.4 2,936.8 2,806.5 2,453.1 2,553.1 EBITDA margins (%) 31.6% 34.1% 32.2% 27.5% 28.1% Pretax profit (RM m) 353.8 921.6 1,254.0 916.1 1,056.6 Net profit (RM m) 167.0 643.0 970.2 613.4 717.4 EPS (sen) 4.8 18.2 27.2 17.1 19.9 EPS growth (%) (83.9%) 277.8% 49.4% (37.0%) 16.4% P/E (x) 70.8 18.8 12.5 19.9 17.1 Core EPS (sen) 20.4 17.3 16.3 7.3 10.0 Core EPS growth (%) 28.7% (15.1%) (6.2%) (55.0%) 37.1% Core P/E (x) 16.7 19.7 20.9 46.6 34.0 Gross DPS (sen) 27.3 124.4 43.0 26.0 25.9 Dividend yield (%) 8.0% 36.5% 12.6% 7.6% 7.6% P/BV (x) 1.2 1.7 1.7 1.9 2.0 ROE (%) 1.7% 7.5% 13.7% 9.2% 11.6% Net gearing (%) 44.2% 41.1% 37.0% 47.2% 39.0% P/FCFE (x) (65.9) 2.8 106.3 11.2 8.4 EV/EBITDA (x) 6.1 5.2 5.4 6.3 5.9 % change in EPS estimates - - - CIMB/Consensus (x) 0.85 0.45 0.56



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Volume 10m (R.H.S ca le ) Te le kom Ma la ys ia Bhd Source: Bloomberg

Telekom Malaysia (TM) is Malaysia’s third largest telecom service provider in terms of revenue and the fourth largest by market capitalisation. It is the incumbent fixed line telecom service provider offering consumer and business voice, broadband and data services. It also has a 100% stake in VADS, a leading IT systems integrator, managed network service provider and contact centre service provider. In 2008, TM undertook a demerger exercise where its domestic mobile and overseas operations were carved out and listed separately as TM International, which was later renamed Axiata Group.



(RM m, FYE Dec) 2008 2009 2010F 2011F 2012F (FYE Dec) 2008 2009 2010F 2011F 2012F Revenue 8,675 8,608 8,716 8,910 9,076 Revenue growth (%) 4.6 (0.8) 1.3 2.2 1.9 Operating expenses (5,937) (5,671) (5,909) (6,457) (6,523) EBITDA growth (%) (11.1) 7.2 (4.4) (12.6) 4.1 EBITDA 2,738 2,937 2,807 2,453 2,553 Pretax margins (%) 4.1 10.7 14.4 10.3 11.6 Depreciation & amortisation (2,099) (2,038) (1,933) (1,944) (1,906) Net profit margins (%) 1.9 7.5 11.1 6.9 7.9 EBIT 640 899 874 510 647 Interest cover (x) 1.4 2.5 2.4 1.6 2.0 Net interest & invt income (27) (18) (107) (81) (78) Effective tax rates (%) 21.9 26.9 20.2 28.0 27.0 Associates’ contribution 0 1 0 0 0 Net dividend payout (%) 419.2 647.8 158.0 152.1 130.1 Exceptional items (259) 41 487 487 487 Debtors turnover (days) 130.1 109.7 93.7 88.3 86.1 Others 0 0 0 0 0 Stock turnover (days) 4.8 5.0 4.6 4.5 4.5 Pretax profit 354 922 1,254 916 1,057 Creditors turnover (days) 121.6 121.8 122.5 124.9 128.7 Tax (78) (248) (253) (257) (285) Minority interests (109) (30) (31) (46) (54) Net profit 167 643 970 613 717 Adj. wt. shares (m) 3,469 3,536 3,570 3,585 3,601 Unadj. year-end shares (m) 3,469 3,536 3,570 3,601 3,601 BALANCE SHEET KEY DRIVERS (RM m, end Dec) 2008 2009 2010F 2011F 2012F (FYE Dec) 2009 2010F 2011F 2012FFixed assets 11,772 12,330 12,597 12,504 11,797 Residential fixed line ARPU (RM) 45.0 44.1 45.7 45.2 Intangible assets 2 2 2 2 2 Business fixed line ARPU (RM) 131.0 126.7 127.1 127.1 Other long-term assets 1,347 1,431 1,179 1,179 1,179 Residential fixed line subs (m) 2.77 2.76 2.76 2.77 Total non-current assets 13,121 13,763 13,778 13,684 12,978 Business fixed line subs (m) 1.55 1.56 1.57 1.58 Cash and equivalents 2,373 3,785 3,068 2,703 3,280 Broadband ARPU (RM) 87.0 82.7 78.5 76.2 Stocks 123 111 107 110 112 No. of broadband subscribers (m) 1.57 1.73 1.89 2.01 Trade debtors 2,891 2,284 2,193 2,120 2,159 Other current assets 4,025 0 0 0 0 Total current assets 9,412 6,179 5,369 4,933 5,551 Trade creditors 2,813 2,935 2,914 3,184 3,217 Short-term borrowings 35 917 0 0 0 Other current liabilities 624 590 590 590 590 Total current liabilities 3,471 4,441 3,504 3,774 3,806 Long-term borrowings 6,965 5,797 5,769 5,769 5,769 Other long-term liabilities 1,622 2,575 2,575 2,575 2,575 Total long-term liabilities 8,587 8,372 8,344 8,344 8,344 Shareholders’ funds 10,248 6,988 7,127 6,281 6,107 Minority interests 227 143 173 219 273 NTA/share (RM) 2.95 1.98 2.00 1.75 1.70 CASH FLOW 12M - FORWARD FD CORE P/E (X) (RM m, FYE Dec) 2008 2009 2010F 2011F 2012FPretax profit 354 922 1,254 916 1,057Depreciation & non–cash adj. 2,099 2,038 1,933 1,944 1,906Working capital changes 1,188 708 74 341 (9)Cash tax paid (78) (248) (253) (257) (285)Others (312) (364) 107 81 78Cash flow from operations 3,251 3,056 3,114 3,025 2,746Capex (1,839) (2,516) (2,200) (1,850) (1,200)Net investments & sale of FA 1,000 8 0 0 0Others (2,735) 38 252 0 0Cash flow from investing (3,574) (2,471) (1,948) (1,850) (1,200)Debt raised/(repaid) 170 3,739 (945) 0 0Equity raised/(repaid) 43 216 93 41 43Dividends paid (2,631) (4,419) (924) (1,499) (935)Cash interest & others 489 4,670 (107) (81) (78)Cash flow from financing (1,928) 4,206 (1,883) (1,539) (969)Change in cash (2,251) 4,791 (717) (365) 577Change in net cash/(debt) (2,421) 1,052 228 (365) 577Ending net cash/(debt) (4,627) (2,929) (2,701) (3,065) (2,489)

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TRADING BUY Maintained Tenaga Nasional Bhd RM8.44 @07/12/10 Sparks to fly soon? Target: RM10.55

Power

MA

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IA

TNB MK / TENA.KL Ivy Ng Lee Fang CFA +60(3) 2084 9697 – [email protected]

• Key heavyweight laggard; reiterate TRADING BUY. Tenaga remains a TRADING BUY as we see potential re-rating catalysts for this heavyweight laggard in the form of i) newsflow on gas subsidy rollback and a corresponding tariff hike, ii) revival of foreign interest and iii) stronger-than-expected demand with the rollout of major construction projects. We retain our end-CY11 target price of RM10.55 (unchanged 1.5x forward P/BV) and continue to rate it our top pick in the power sector.

• Expecting positive sector-wide reforms. We expect sector-wide reforms to be a key theme in the coming months. A focus on subsidies could pave the way for a gas-led tariff hike, which could also mean an upward revision of its coal reference price and base tariff. Attention on other themes like i) plant-up of new supply and ii) PPA renegotiations are also long-term positives for Tenaga.

• Power demand to normalise. After an impressive 8.8% rise in FY10, demand growth is set to moderate to about 5% p.a. for FY11-12. We believe there is room for upside to demand growth, especially if the massive construction projects under the 10MP and ETP initiatives take off over the near term.

• A heavyweight laggard. Having underperformed the FBM KLCI YTD, Tenaga is clearly a laggard play. Given its low foreign shareholdings of under 13%, it is also a prime beneficiary of a potential inflow of foreign funds into the Malaysian market.

Financial summary

Stock Information Market cap: RM36,799m/US$11,731m 12-m price range: RM9.24 RM7.81 3-m avg daily vol: 7.6m No. of shrs (m): 4,360 Est. free float (%): 36.0 Conv. secs (m): None Major shareholders (%): - Khazanah Nasional 35.7 - Employees Provident Fund 12.5 - Skim ASB 9.6

FYE Aug 2009 2010 2011F 2012F 2013F Revenue (RM m) 28,785.6 30,320.1 31,812.0 33,337.3 34,299.6 EBITDA (RM m) 7,260.4 8,208.4 7,956.7 8,360.0 8,794.1 EBITDA margins (%) 25.2% 27.1% 25.0% 25.1% 25.6% Pretax profit (RM m) 1,543.1 4,022.1 3,661.8 3,859.3 4,123.6 Net profit (RM m) 917.9 3,201.9 2,982.2 3,110.2 3,303.5 EPS (sen) 21.2 73.6 68.5 71.5 75.9 EPS growth (%) (64.6%) 247.6% (6.9%) 4.3% 6.2% P/E (x) 39.9 11.5 12.3 11.8 11.1 Core EPS (sen) 56.7 63.5 63.0 69.4 75.9 Core EPS growth (%) (4.0%) 11.9% (0.8%) 10.2% 9.4% Core P/E (x) 14.9 13.3 13.4 12.2 11.1 Gross DPS (sen) 17.8 26.0 22.7 24.7 24.0 Dividend yield (%) 2.1% 3.1% 2.7% 2.9% 2.8% P/BV (x) 1.4 1.3 1.2 1.1 1.0 ROE (%) 3.6% 11.7% 10.0% 9.8% 9.7% Net gearing (%) 63.1% 44.8% 35.0% 28.2% 21.0% P/FCFE (x) 50.4 15.9 60.1 69.9 89.0 EV/EBITDA (x) 7.3 6.0 5.9 5.5 5.0 % change in EPS estimates - - - CIMB/Consensus (x) 0.95 0.95 0.95



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Volume 10m (R.H.S ca le ) Te na g a Na s iona l Bhd Source: Bloomberg

Tenaga Nasional is Malaysia’s national utility company. It was privatised and listed on Bursa Malaysia in May 92. Tenaga has a monopoly of the power transmission and distribution (T&D) business in Peninsular Malaysia. Its share of the peninsula’s generating capacity currently stands at about 47%. Via its 80% stake in Sabah Electricity Sdn Bhd (SESB), Tenaga also controls power-related matters in Sabah. On the overseas front, it owns a 235MW power plant in Pakistan and an effective 6%stake in the Shoaiba water and power project in Saudi Arabia. The government, directly and indirectly, owns around 85% of Tenaga. Since Jan 10, Tenaga’s foreign shareholding has been creeping up mom to 12.7% as at end-Sep 10.



(RM m, FYE Aug) 2009 2010 2011F 2012F 2013F (FYE Aug) 2009 2010 2011F 2012F 2013F Revenue 28,786 30,320 31,812 33,337 34,300 Revenue growth (%) 16.3 5.3 4.9 4.8 2.9 Operating expenses (21,525) (22,112) (23,855) (24,977) (25,506) EBITDA growth (%) (2.0) 13.1 (3.1) 5.1 5.2 EBITDA 7,260 8,208 7,957 8,360 8,794 Pretax margins (%) 5.4 13.3 11.5 11.6 12.0 Depreciation & amortisation (3,562) (3,950) (3,812) (3,917) (4,013) Net profit margins (%) 3.2 10.6 9.4 9.3 9.6 EBIT 3,699 4,258 4,145 4,443 4,781 Interest cover (x) 3.3 4.0 4.2 4.7 5.2 Net interest & invt income (950) (861) (773) (728) (717) Effective tax rates (%) 44.7 20.5 18.7 19.5 20.0 Associates’ contribution 33 45 49 54 59 Net dividend payout (%) 62.2 26.5 24.8 25.9 23.7 Exceptional items 0 (76) 0 0 0 Debtors turnover (days) 28.9 29.7 26.2 23.6 23.9 Others (1,239) 656 241 91 0 Stock turnover (days) 26.5 26.5 27.9 27.1 27.4 Pretax profit 1,543 4,022 3,662 3,859 4,124 Creditors turnover (days) 51.7 48.3 51.4 57.1 57.3 Tax (690) (825) (684) (754) (825) Minority interests 65 5 5 5 5 Net profit 918 3,202 2,982 3,110 3,304 Adj. wt. shares (m) 4,337 4,353 4,353 4,353 4,353 Unadj. year-end shares (m) 4,337 4,353 4,353 4,353 4,353 BALANCE SHEET KEY DRIVERS (RM m, end Aug) 2009 2010 2011F 2012F 2013F (FYE Aug) 2010 2011F 2012F 2013FFixed assets 58,227 58,032 60,081 61,850 63,542 Average selling price per kwh (sen) 31 31 31 31 Intangible assets 0 0 0 0 0 Capacity (MW) 21,794 21,794 21,794 21,794 Other long-term assets 1,177 1,254 1,278 1,305 1,335 Demand growth (%) 12.5% 5.0% 5.0% 3.0% Total non-current assets 59,404 59,286 61,359 63,156 64,877 Exchange rate (RM to US$) 3.34 3.16 3.17 3.15 Cash and equivalents 6,172 8,352 8,352 8,352 8,352 Stocks 1,956 2,450 2,420 2,537 2,611 Trade debtors 2,468 2,468 2,108 2,210 2,274 Other current assets 1,344 1,507 1,982 2,073 2,131 Total current assets 11,939 14,778 14,862 15,173 15,369 Trade creditors 4,150 3,870 5,092 5,332 5,444 Short-term borrowings 1,158 3,163 2,361 2,310 2,344 Other current liabilities 1,955 2,668 2,619 2,730 2,800 Total current liabilities 7,263 9,701 10,072 10,372 10,588 Long-term borrowings 21,458 18,101 16,766 15,284 13,362 Other long-term liabilities 16,596 17,465 18,610 19,883 21,295 Total long-term liabilities 38,054 35,566 35,375 35,166 34,657 Shareholders’ funds 26,006 28,779 30,760 32,782 34,997 Minority interests 40 36 31 26 22 NTA/share (RM) 6.00 6.61 7.07 7.53 8.04 CASH FLOW 12M - FORWARD FD CORE P/E (X) (RM m, FYE Aug) 2009 2010 2011F 2012F 2013FPretax profit 1,543 4,022 3,662 3,859 4,124Depreciation & non–cash adj. 3,562 3,950 3,812 3,917 4,013Working capital changes 369 (609) 1,092 7 (46)Cash tax paid (250) (579) (692) (574) (632)Others 1,457 825 732 682 665Cash flow from operations 6,681 7,609 8,606 7,892 8,124Capex (4,128) (3,708) (4,530) (5,200) (5,200)Net investments & sale of FA 66 (74) 0 0 0Others 230 0 0 0 0Cash flow from investing (3,833) (3,782) (4,530) (5,200) (5,200)Debt raised/(repaid) (1,205) (703) (2,786) (1,533) (1,888)Equity raised/(repaid) 23 106 106 106 106Dividends paid (477) (621) (741) (805) (783)Cash interest & others (1,490) 220 (1,305) (461) (359)Cash flow from financing (3,148) (998) (4,725) (2,692) (2,924)Change in cash (300) 2,829 (649) 0 0Change in net cash/(debt) 904 3,532 2,137 1,533 1,888Ending net cash/(debt) (16,444) (12,911) (10,775) (9,242) (7,354)

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OUTPERFORM Maintained Tomypak Holdings RM1.00 @07/12/10 A solid package Target: RM1.80

Packaging

MA

LAYS

IA

TOMY MK / TOMY.KL Nigel Foo +60(3) 2084 9293 – [email protected]

• Maintain OUTPERFORM. Tomypak, Malaysia’s 2nd largest flexible packaging producer, remains an OUTPERFORM for its exposure to the resilient F&B sector and its stable MNC customer base. We continue to value the stock at a 30% discount to Daibochi’s revised target P/E of 10.1x, which reduces our target price from RM2.00 to RM1.80, based on 7.1x CY12 P/E. Potential re-rating catalysts include i) a margin recovery from 1Q11 onwards, ii) stronger-than-expected revenue, and iii) attractive P/E valuations.

• Indirect play on F&B sector. Tomypak derives 90% of its revenue from the resilient F&B sector, which should provide a stable revenue base in the long term, especially with major MNCs such as Nestle, Kraft and Unilever being its customers. MNCs currently contribute around 40-45% of the group’s revenue and Nestle is Tomypak’s largest MNC customer. MNC and domestic listed companies contribute around 70% of Tomypak’s revenue.

• Quarterly price revisions. Tomypak and its MNC customers review selling prices every quarter for changes in raw materials and forex fluctuations. This enables the company to pass on rising raw material costs and allows management to focus on its operations.

• Quarterly dividend paymaster. Tomypak pays dividends on a quarterly basis. Gross dividend yield is projected to be around 8% this year but could surprise on the upside as it works out to a net payout ratio of less than 30%. Given the company’s projected net cash position in 2011, the net dividend payout ratio could be much higher at around 40-50%.

Financial summary

Stock Information Market cap: RM109m/US$35m 12-m price range: RM1.52 RM0.65 3-m avg daily vol: 0.2m No. of shrs (m): 109 Est. free float (%): 40.0 Conv. secs (m): None Major shareholders (%): - Chow family 32.0 - Lim Hun Swee 13.6

FYE Dec 2008 2009 2010F 2011F 2012F Revenue (RM m) 182.8 159.1 182.9 194.6 212.2 EBITDA (RM m) 18.1 31.6 27.1 36.9 40.2 EBITDA margins (%) 9.9% 19.9% 14.8% 19.0% 18.9% Pretax profit (RM m) 7.9 20.8 17.0 27.5 30.5 Net profit (RM m) 7.6 20.1 15.6 24.8 27.1 EPS (sen) 7.6 20.1 14.5 23.0 25.3 EPS growth (%) 406.7% 164.5% (27.6%) 58.2% 9.7% P/E (x) 13.2 5.0 6.9 4.3 4.0 Gross DPS (sen) 1.6 6.5 7.4 8.5 9.6 Dividend yield (%) 1.6% 6.5% 7.4% 8.5% 9.6% P/BV (x) 1.7 1.3 1.2 1.0 0.9 ROE (%) 12.9% 26.1% 19.1% 25.8% 23.7% Net gearing (%) 58.8% 11.5% 8.1% N/A N/A Net cash per share (RM) N/A N/A N/A 0.18 0.30 P/FCFE (x) 250.0 3.6 13.6 3.4 5.1 EV/EBITDA (x) 7.4 3.4 4.2 2.4 1.9 % change in EPS estimates - - - CIMB/Consensus (x) 0.86 1.00 1.01



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Volume 1m (R.H.S ca le ) Tomypa k Holding s Source: Bloomberg

Tomypak, the country’s second largest plastic flexible packaging (PFP) materials producer, was listed on the Main Board in 1996. Its founder, the Chow family remainsthe group’s largest shareholder with around 32% equity stake. Management and direction of the group is driven by its MD Chow Yuen Liong who has been with Tomypak since 1980. Tomypak handles mainly the demands of MNCs in Malaysia. MNC customers include Nestle, Kraft and Unilever. Local customers include Apollo Food, Zhulian and Mamee-Double Decker. The group has been supplying to Nestle since 1980.



(RM m, FYE Dec) 2008 2009 2010F 2011F 2012F (FYE Dec) 2008 2009 2010F 2011F 2012F Revenue 183 159 183 195 212 Revenue growth (%) 22.7 (13.0) 14.9 6.4 9.0 Operating expenses (165) (128) (156) (158) (172) EBITDA growth (%) 56.0 74.6 (14.2) 36.2 8.9 EBITDA 18 32 27 37 40 Pretax margins (%) 4.3 13.1 9.3 14.1 14.4 Depreciation & amortisation (9) (10) (10) (10) (10) Net profit margins (%) 4.2 12.6 8.6 12.7 12.8 EBIT 9 22 17 27 30 Interest cover (x) 8.0 17.0 57.7 N/A N/A Net interest & invt income (1) (1) 0 1 1 Effective tax rates (%) 3.8 3.4 8.0 10.0 11.0 Associates’ contribution 0 0 0 0 0 Net dividend payout (%) 15.8 23.9 38.4 27.8 28.5 Exceptional items 0 0 0 0 0 Debtors turnover (days) 69.5 79.6 71.1 63.5 56.0 Others 0 0 0 0 0 Stock turnover (days) 52.9 60.6 53.7 53.1 57.5 Pretax profit 8 21 17 28 31 Creditors turnover (days) 31.5 57.1 43.1 35.4 35.0 Tax 0 (1) (1) (3) (3) Minority interests 0 0 0 0 0 Net profit 8 20 16 25 27 Adj. wt. shares (m) 100 100 108 108 108 Unadj. year-end shares (m) 100 100 108 108 108 BALANCE SHEET KEY DRIVERS (RM m, end Dec) 2008 2009 2010F 2011F 2012F (FYE Dec) 2009 2010F 2011F 2012FFixed assets 52 55 54 51 47 Capacity (tonnes p.a.) 14,000 15,200 16,300 17,500 Intangible assets 0 0 0 0 0 Capacity utilisation (%) 90.0% 88.0% 86.0% 87.0% Other long-term assets 3 3 3 3 3 Total non-current assets 55 58 57 53 50 Cash and equivalents 9 9 2 26 39 Stocks 27 26 27 29 38 Trade debtors 35 35 37 31 34 Other current assets 0 0 0 0 0 Total current assets 70 70 66 86 111 Trade creditors 16 25 18 19 21 Short-term borrowings 35 11 4 2 2 Other current liabilities 1 1 1 1 1 Total current liabilities 52 37 23 23 25 Long-term borrowings 8 7 5 5 5 Other long-term liabilities 7 7 7 7 7 Total long-term liabilities 15 14 12 12 12 Shareholders’ funds 59 77 87 105 124 Minority interests 0 0 0 0 0 NTA/share (RM) 0.59 0.77 0.81 0.97 1.15 CASH FLOW 12M - FORWARD FD CORE P/E (X) (RM m, FYE Dec) 2008 2009 2010F 2011F 2012FPretax profit 8 21 17 28 31Depreciation & non–cash adj. 9 10 10 10 10Working capital changes (2) 9 (10) 5 (9)Cash tax paid 0 (1) (1) (3) (3)Others (6) 0 0 0 0Cash flow from operations 9 39 16 40 28Capex (7) (11) (8) (7) (7)Net investments & sale of FA 1 0 0 0 0Others 0 0 0 0 0Cash flow from investing (6) (11) (8) (7) (7)Debt raised/(repaid) (3) 0 0 (2) 0Equity raised/(repaid) 0 0 0 0 0Dividends paid 0 (5) (6) (7) (8)Cash interest & others 0 3 0 0 0Cash flow from financing (3) (2) (6) (8) (8)Change in cash 0 26 2 24 13Change in net cash/(debt) 3 26 2 26 13Ending net cash/(debt) (35) (9) (7) 19 32

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OUTPERFORM Maintained Top Glove Corporation RM5.55 @07/12/10 It’s a whole new ball game Target: RM7.27

Rubber Gloves

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TOPG MK / TPGC.KL Terence Wong CFA +60(3) 20849689 – [email protected]

• Maintain OUTPERFORM. Top Glove remains an OUTPERFORM and the key proxy for the glove sector due to its size and liquidity. We retain our EPS forecasts. Although we continue to value the stock at our target market P/E, our target price rises from RM6.92 to RM7.27 as our target market P/E has been revised from 13.8x to 14.5x. Potential re-rating catalysts include 1) distributors’ restocking of inventories, which have been whittled down to as low as a month, 2) diversification of its product mix, and 3) commissioning of its two nitrile glove factories with a capacity of 1.5bn pieces of gloves each in FY11.

• Potential upstream diversification. Top Glove has signed an MOU with a Cambodian party and is expected to formalise an agreement to acquire a brownfield rubber plantation in Cambodia over the next few months. Although the earnings impact is negligible given the 4-6 year gestation period for rubber, we take a positive view of this development as it will give Top Glove its own source of rubber latex over the longer term. This will smooth out earnings by reducing the company’s exposure to the volatile rubber latex market.

• Catching up quickly. At 7% of its capacity, Top Glove has the least nitrile capacity in the sector. However, we expect this percentage to increase to 10-15% or 4bn-6bn pieces over the next two years as the company will be commissioning its two nitrile plants and converting exiting lines to nitrile. Moreover, Top Glove has RM260m cash that could be used to acquire nitrile expertise, distribution networks and key customers.

Financial summary

Stock Information Market cap: RM3,432m/US$1,094m 12-m price range: RM7.24 RM4.60 3-m avg daily vol: 1.9m No. of shrs (m): 618 Est. free float (%): 55.3 Conv. secs (m): None Major shareholders (%): - Tan Sri Dr. Lim Wee Chai 29.0 - Top Glove Holdings 5.2 - Matthews International 5.2

FYE Aug 2009 2010 2011F 2012F 2013F Revenue (RM m) 1,529.1 2,079.4 2,009.2 2,298.2 2,427.2 EBITDA (RM m) 286.2 362.3 406.0 440.3 466.8 EBITDA margins (%) 18.7% 17.4% 20.2% 19.2% 19.2% Pretax profit (RM m) 222.0 306.0 352.4 386.8 413.9 Net profit (RM m) 169.1 245.3 276.0 302.9 324.1 EPS (sen) 27.4 39.7 44.6 49.0 52.4 EPS growth (%) 53.7% 45.0% 12.5% 9.8% 7.0% P/E (x) 20.3 14.0 12.4 11.3 10.6 Gross DPS (sen) 10.9 16.0 18.0 20.0 22.0 Dividend yield (%) 2.0% 2.9% 3.2% 3.6% 4.0% P/BV (x) 4.2 3.1 2.6 2.2 1.9 ROE (%) 22.7% 25.6% 23.0% 21.3% 19.5% Net cash per share (RM) 0.27 0.48 0.79 1.09 1.45 P/FCFE (x) 62.1 26.3 13.3 13.0 11.4 EV/EBITDA (x) 11.5 8.7 7.3 6.3 5.5 % change in EPS estimates N/A N/A N/A CIMB/Consensus (x) 1.10 1.13 1.07



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Volume 10m (R.H.Scale) Top Glove Corporation Source: Bloomberg

Top Glove is the world’s largest rubber glove manufacturer with a global market share of 23% based on its existing capacity of 33.75bn pieces. Established in 1991, the group was listed on Bursa Malaysia in 2001. Currently, it has 379 production lines in 18 glove manufacturing factories located in Malaysia, Thailand and China. It also has two latex concentrate plants in Thailand with a combined capacity of 93,200 tonnes p.a. The company produces a diversified range of high-quality and value-added gloves for the medical, food & services, high technology and industrial markets.



(RM m, FYE Aug) 2009 2010 2011F 2012F 2013F (FYE Aug) 2009 2010 2011F 2012F 2013F Revenue 1,529 2,079 2,009 2,298 2,427 Revenue growth (%) 11.0 36.0 (3.4) 14.4 5.6 Operating expenses (1,243) (1,717) (1,603) (1,858) (1,960) EBITDA growth (%) 47.2 26.6 12.1 8.4 6.0 EBITDA 286 362 406 440 467 Pretax margins (%) 14.5 14.7 17.5 16.8 17.1 Depreciation & amortisation (57) (59) (59) (61) (63) Net profit margins (%) 11.1 11.8 13.7 13.2 13.4 EBIT 229 303 347 379 404 Interest cover (x) 26.9 475.4 1,126.4 1,119.8 1,083.9 Net interest & invt income (6) 4 5 7 10 Effective tax rates (%) 24.3 18.2 22.0 22.0 22.0 Associates’ contribution (1) (1) 1 1 1 Net dividend payout (%) 29.8 30.2 30.2 30.6 31.5 Exceptional items 0 0 0 0 0 Debtors turnover (days) 49.2 37.9 43.1 41.0 42.6 Others 0 0 0 0 0 Stock turnover (days) 33.0 25.2 29.9 27.4 28.4 Pretax profit 222 306 352 387 414 Creditors turnover (days) 24.5 17.2 18.6 17.1 17.8 Tax (54) (56) (78) (85) (91) Minority interests 1 (5) 1 1 1 Net profit 169 245 276 303 324 Adj. wt. shares (m) 618 618 618 618 618 Unadj. year-end shares (m) 304 618 618 618 618 BALANCE SHEET KEY DRIVERS (RM m, end Aug) 2009 2010 2011F 2012F 2013F (FYE Aug) 2010 2011F 2012F 2013FFixed assets 564 579 600 621 639 Production capacity (m pcs p.a) 33,000 41,250 42,750 43,750 Intangible assets 20 20 20 20 20 Capacity utilisation (%) 80.0% 65.0% 75.0% 80.0% Other long-term assets 36 19 18 18 17 ASP (US$) per 1,000 pieces 24.13 27.00 24.00 23.00 Total non-current assets 621 618 638 659 677 Exchange rate (RM to US$) 3.54 3.08 3.04 3.05 Cash and equivalents 186 303 493 680 899 Natural rubber price (RM /kilogram) 4.41 8.13 7.85 7.53 Stocks 119 169 161 184 194 Nitrile latex prices (US$/mt) 1,191 1,327 1,422 1,574 Trade debtors 198 233 241 276 291 Other current assets 8 32 30 34 36 Total current assets 511 737 925 1,174 1,420 Trade creditors 92 104 100 115 121 Short-term borrowings 12 1 1 1 1 Other current liabilities 140 95 97 115 123 Total current liabilities 244 200 198 231 245 Long-term borrowings 9 3 3 4 4 Other long-term liabilities 33 34 36 38 40 Total long-term liabilities 42 37 39 41 44 Shareholders’ funds 825 1,093 1,307 1,540 1,788 Minority interests 21 24 19 20 21 NTA/share (RM) 1.30 1.74 2.08 2.46 2.86 CASH FLOW 12M - FORWARD FD CORE P/E (X) (RM m, FYE Aug) 2009 2010 2011F 2012F 2013FPretax profit 222 306 352 387 414Depreciation & non–cash adj. 57 59 59 61 63Working capital changes 34 (73) (17) (36) (16)Cash tax paid (39) (74) (56) (78) (85)Others 22 14 (1) 8 6Cash flow from operations 296 232 338 343 382Capex (67) (85) (80) (80) (80)Net investments & sale of FA 3 0 0 0 0Others (10) 0 0 0 0Cash flow from investing (74) (85) (80) (80) (80)Debt raised/(repaid) (166) (17) 0 0 0Equity raised/(repaid) 11 113 0 0 0Dividends paid (32) (109) (74) (83) (93)Cash interest & others 33 (17) 5 7 10Cash flow from financing (155) (30) (69) (76) (83)Change in cash 67 117 190 187 219Change in net cash/(debt) 234 134 189 187 218Ending net cash/(debt) 165 299 489 675 894

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OUTPERFORM Maintained Uchi Technologies Bhd RM1.34 @07/12/10 An unknown brew for 2011 Target: RM1.68

Technology - Others

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UCHI MK / UCHI.KL Terence Wong CFA +60(3) 20849689 – [email protected]

• Reiterate OUTPERFORM as we raise our target price. Uchi remains an OUTPERFORM in view of the potential re-rating catalysts of better-than-expected FY11 guidance, stronger-than-expected order flows and higher contribution from higher-margin products. Although we maintain our EPS forecasts and valuation basis of 20% discount to our target market P/E, our target price rises from RM1.60 to RM1.68, purely because of the upgrade of our target market P/E from 13.8x to 14.5x.

• Guidance for 2011 unknown but signs are positive. Uchi is unable to provide any guidance for FY11 as it is only meeting its clients in early Dec. Nevertheless, there are some encouraging signs as it has received some orders for as late as Apr 11 and lead times from some of its customers have been increasing. Meanwhile, Uchi has already raised its guidance for FY10 from 25-30% topline growth in US$ terms to 33-34%.

• Future sources of revenue growth. Uchi’s revenue growth will depend on increasing outsourcing, either by i) piggybacking on Jura’s ambition of growing the market or ii) convincing its existing customers to outsource more to it. It is also perpetually working on 20-30 new products each year to help drive revenue and broaden its product offerings.

Financial summary

Stock Information Market cap: RM503m/US$160m 12-m price range: RM1.46 RM1.17 3-m avg daily vol: 0.3m No. of shrs (m): 376 Est. free float (%): 26.4 Conv. secs (m): None Major shareholders (%): - Eastbow International 24.6 - Lembaga Tabung Haji 10.1 - EPF 5.6

FYE Dec 2008 2009 2010F 2011F 2012F Revenue (RM m) 122.8 83.1 100.4 110.5 121.5 EBITDA (RM m) 53.5 41.1 46.6 50.9 55.7 EBITDA margins (%) 43.6% 49.4% 46.4% 46.1% 45.9% Pretax profit (RM m) 60.7 27.7 45.0 49.0 53.8 Net profit (RM m) 58.7 27.0 44.7 48.9 53.7 EPS (sen) 15.8 7.3 12.1 13.2 14.5 EPS growth (%) (24.7%) (53.9%) 66.1% 9.2% 9.8% P/E (x) 8.5 18.5 11.1 10.2 9.3 Core EPS (sen) 15.8 10.1 12.1 13.2 14.5 Core EPS growth (%) (24.7%) (36.1%) 19.9% 9.2% 9.8% Core P/E (x) 8.5 13.3 11.1 10.2 9.3 Gross DPS (sen) 16.7 8.0 13.3 14.1 15.4 Dividend yield (%) 12.5% 6.0% 10.0% 10.5% 11.5% P/BV (x) 2.9 3.0 2.9 2.8 2.6 ROE (%) 34.1% 16.2% 26.8% 27.8% 28.8% Net cash per share (RM) 0.37 0.34 0.34 0.36 0.38 P/FCFE (x) 7.9 15.3 12.5 11.1 10.0 EV/EBITDA (x) 6.8 9.1 7.9 7.1 6.4 % change in EPS estimates N/A N/A N/A CIMB/Consensus (x) 1.07 1.01 1.03



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Volume 1m (R.H.S ca le ) Uchi Te chnolog ie s Bhd Source: Bloomberg

Uchi was listed on the now-defunct Second Board in 2000. It is an original design manufacturer (ODM) of controller and power modules for fully automated coffee makers and scientific instruments. Uchi is the largest producer of fully automated coffee modules in the world. These products contribute around 80% of its revenue. Uchi supplies them to Eugster which supplies the completed coffee machines to Saeco (Italian), Jura (Swiss), Krups (German), AG (German), Bosch (German), Siemens (German) and Nestle (Swiss). The remaining 20% of Uchi’s revenue comes from the biotech division, namely weighing scales and lab products.



(RM m, FYE Dec) 2008 2009 2010F 2011F 2012F (FYE Dec) 2008 2009 2010F 2011F 2012F Revenue 123 83 100 110 122 Revenue growth (%) (21.7) (32.3) 20.8 10.0 10.0 Operating expenses (69) (42) (54) (60) (66) EBITDA growth (%) (28.3) (23.2) 13.3 9.4 9.4 EBITDA 54 41 47 51 56 Pretax margins (%) 49.4 33.3 44.8 44.4 44.3 Depreciation & amortisation (2) (2) (3) (3) (3) Net profit margins (%) 47.8 32.4 44.6 44.2 44.2 EBIT 52 39 44 48 53 Interest cover (x) N/A N/A N/A N/A N/A Net interest & invt income 9 (1) 1 1 1 Effective tax rates (%) 3.2 2.7 0.6 0.4 0.3 Associates’ contribution 0 0 0 0 0 Net dividend payout (%) 78.4 70.0 83.0 80.0 80.0 Exceptional items 0 (11) 0 0 0 Debtors turnover (days) 50.7 59.8 53.5 55.8 55.8 Others 0 0 0 0 0 Stock turnover (days) 56.7 56.9 42.4 45.6 45.8 Pretax profit 61 28 45 49 54 Creditors turnover (days) 43.3 52.6 45.7 49.1 49.3 Tax (2) (1) 0 0 0 Minority interests 0 0 0 0 0 Net profit 59 27 45 49 54 Adj. wt. shares (m) 373 371 371 371 371 Unadj. year-end shares (m) 372 371 371 371 371 BALANCE SHEET KEY DRIVERS (RM m, end Dec) 2008 2009 2010F 2011F 2012F (FYE Dec) 2009 2010F 2011F 2012FFixed assets 28 32 34 36 39 Average selling price (RM/unit) 130 140 150 160 Intangible assets 0 0 0 0 0 Units of microcontrollers (m) 0.6 0.7 0.9 0.9 Other long-term assets 13 8 8 8 8 Total non-current assets 41 40 43 45 47 Cash and equivalents 136 125 128 133 140 Stocks 16 10 13 14 16 Trade debtors 14 13 16 18 19 Other current assets 1 1 1 1 1 Total current assets 167 149 158 166 176 Trade creditors 13 11 14 16 17 Short-term borrowings 0 0 0 0 0 Other current liabilities 25 14 14 14 14 Total current liabilities 38 25 28 30 31 Long-term borrowings 0 0 0 0 0 Other long-term liabilities 1 1 1 1 1 Total long-term liabilities 1 1 1 1 1 Shareholders’ funds 169 163 171 181 191 Minority interests 0 0 0 0 0 NTA/share (RM) 0.45 0.44 0.46 0.49 0.52 CASH FLOW 12M - FORWARD FD CORE P/E (X) (RM m, FYE Dec) 2008 2009 2010F 2011F 2012FPretax profit 61 28 45 49 54Depreciation & non–cash adj. 2 2 3 3 3Working capital changes 9 4 (3) (2) (2)Cash tax paid (1) (1) 0 0 0Others (6) (2) (1) (1) (1)Cash flow from operations 65 31 44 49 54Capex (10) (5) (5) (5) (5)Net investments & sale of FA 8 4 0 0 0Others 5 3 0 0 0Cash flow from investing 3 3 (5) (5) (5)Debt raised/(repaid) 0 0 0 0 0Equity raised/(repaid) 0 0 0 0 0Dividends paid (75) (44) (37) (39) (43)Cash interest & others (5) (1) 1 1 1Cash flow from financing (80) (46) (36) (38) (42)Change in cash (11) (12) 3 6 7Change in net cash/(debt) (11) (12) 3 6 7Ending net cash/(debt) 136 125 127 133 140

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OUTPERFORM Maintained UMW Holdings Bhd RM6.91 @07/12/10 Vehicle for auto exposure Target: RM8.85

Autos

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UMWH MK / UMWS.KL Loke Wei Wern +60 (3) 2084 9946 – [email protected]

• Reiterate OUTPERFORM. With 46% share of the domestic market through Perodua and Toyota, UMW is a good proxy for the auto sector, which has done very well in terms of sales. But UMW’s share price hardly reflects this, having risen only 9% YTD against the KLCI’s 18% gain. We maintain our OUTPERFORM rating given the potential share price triggers of 1) rising contribution from the auto segment, 2) recovery of its O&G earnings, and 3) listing of its O&G division. No changes are made to our earnings projections or SOP-based target price of RM8.85, which continues to tag target P/Es of 13.8x to its auto division, 10x to manufacturing & equipment and 7.5x to O&G.

• Auto division to remain the key earnings driver. Due to the liberalisation of the auto sector, we think that competition will remain intense as consumers have increasingly broader product choices. But we think that UMW Toyota and Perodua will continue to introduce new models to enhance their model line-up and sustain orders. In 2011, Perodua is slated to release the replacement for the Myvi, which we expect will be a key volume driver for the national carmaker. 2011 will also see the full-year impact from the recent launch of the Toyota Avanza.

• Oil & gas division to recover in 2011? Sentiment on the stock could be weighed down by the losses at its O&G division. But we expect prospects for its O&G division to improve in 2011. Recall that Naga 2 started operations at end-Sep 10, which means that its maiden full-year contribution will be reflected in 2011. UMW has also taken delivery of Naga 3 and is in active negotiations with potential clients. However, UMW may incur pre-operating expenses in the period leading up to the successful deployment of the new premium jack-up rig.

Financial summary

Stock Information Market cap: RM7,960m/US$2,538m 12-m price range: RM7.01 RM5.96 3-m avg daily vol: 2.3m No. of shrs (m): 1,152 Est. free float (%): 30.0 Conv. secs (m): None Major shareholders (%): - Permodalan Nasional Bhd 61.0 - EPF 10.2 - Kumpulan Wang Persaraan 5.1

FYE Dec 2008 2009 2010F 2011F 2012F Revenue (RM m) 12,769.6 10,699.0 12,361.3 12,917.6 13,716.4 EBITDA (RM m) 1,268.2 1,013.5 1,505.5 1,553.2 1,616.6 EBITDA margins (%) 9.9% 9.5% 12.2% 12.0% 11.8% Pretax profit (RM m) 1,276.7 846.5 1,417.2 1,505.6 1,573.2 Net profit (RM m) 565.8 382.4 652.7 736.6 771.3 EPS (sen) 52.2 34.6 58.3 65.8 68.9 EPS growth (%) 16.6% (33.8%) 68.6% 12.8% 4.7% P/E (x) 13.2 20.0 11.8 10.5 10.0 Gross DPS (sen) 37.3 27.0 39.0 44.0 45.9 Dividend yield (%) 5.4% 3.9% 5.6% 6.4% 6.6% P/BV (x) 2.1 2.0 1.9 1.7 1.6 ROE (%) 17.0% 10.5% 16.6% 17.2% 16.6% Net gearing (%) N/A 8.4% 1.2% N/A N/A Net cash per share (RM) 0.27 N/A N/A 0.41 0.89 P/FCFE (x) 20.9 8.9 13.0 11.9 11.0 EV/EBITDA (x) 6.5 9.1 6.1 5.8 5.4 % change in EPS estimates - - - CIMB/Consensus (x) 1.04 1.06 0.97



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Volume 10m (R.H.S ca le ) UMW Holdings Bhd Source: Bloomberg

UMW Holdings, a 61%-owned subsidiary of Permodalan Nasional, is the exclusive assembler and distributor of the Toyota marque in Malaysia. Within the auto sector, it has the biggest exposure to the sector with a 46% market share through Toyota (15%) and Perodua (31%). Its other major divisions include the oil & gas (O&G), manufacturing and engineering (M&E) as well as the equipment divisions. The auto division remains UMW’s biggest earnings contributor, accounting for close to 80% of group revenue.



(RM m, FYE Dec) 2008 2009 2010F 2011F 2012F (FYE Dec) 2008 2009 2010F 2011F 2012F Revenue 12,770 10,699 12,361 12,918 13,716 Revenue growth (%) 28.0 (16.2) 15.5 4.5 6.2 Operating expenses (11,501) (9,686) (10,856) (11,364) (12,100) EBITDA growth (%) 55.6 (20.1) 48.6 3.2 4.1 EBITDA 1,268 1,013 1,506 1,553 1,617 Pretax margins (%) 10.0 7.9 11.5 11.7 11.5 Depreciation & amortisation (195) (236) (290) (294) (294) Net profit margins (%) 4.4 3.6 5.3 5.7 5.6 EBIT 1,074 778 1,216 1,260 1,322 Interest cover (x) 22.3 22.4 26.1 19.8 23.1 Net interest & invt income 3 (2) (12) (45) (29) Effective tax rates (%) 25.1 23.5 25.2 25.7 25.5 Associates’ contribution 200 71 213 291 280 Net dividend payout (%) 52.8 58.6 50.2 50.1 49.9 Exceptional items 0 0 0 0 0 Debtors turnover (days) 18.8 22.6 20.4 21.4 21.3 Others 0 0 0 0 0 Stock turnover (days) 36.3 47.0 41.5 43.5 43.2 Pretax profit 1,277 846 1,417 1,506 1,573 Creditors turnover (days) 26.9 32.1 28.3 29.7 29.4 Tax (321) (199) (357) (388) (401) Minority interests (390) (265) (407) (381) (401) Net profit 566 382 653 737 771 Adj. wt. shares (m) 1,084 1,106 1,119 1,119 1,119 Unadj. year-end shares (m) 1,092 1,119 1,119 1,119 1,119 BALANCE SHEET KEY DRIVERS (RM m, end Dec) 2008 2009 2010F 2011F 2012F (FYE Dec) 2009 2010F 2011F 2012FFixed assets 1,792 2,781 2,845 2,855 2,862 Unit sales 79,422 91,026 94,576 100,568 Intangible assets 133 241 241 241 241 Unit sales growth (%) -15.2% 14.6% 3.9% 6.3% Other long-term assets 1,973 1,870 1,966 2,063 2,159 Exchange rate (RM to US$) 3.60 3.30 3.25 3.25 Total non-current assets 3,898 4,892 5,053 5,159 5,262 Cash and equivalents 1,538 1,733 1,842 2,177 2,543 Stocks 1,454 1,304 1,506 1,574 1,671 Trade debtors 683 642 742 775 823 Other current assets 255 255 295 308 327 Total current assets 3,930 3,934 4,385 4,834 5,364 Trade creditors 990 889 1,027 1,073 1,140 Short-term borrowings 528 294 244 220 199 Other current liabilities 925 785 863 909 960 Total current liabilities 2,443 1,968 2,134 2,203 2,299 Long-term borrowings 720 1,851 1,666 1,499 1,349 Other long-term liabilities 60 88 88 88 88 Total long-term liabilities 780 1,938 1,753 1,587 1,437 Shareholders’ funds 3,522 3,774 4,099 4,466 4,853 Minority interests 1,083 1,146 1,451 1,737 2,038 NTA/share (RM) 3.10 3.16 3.45 3.77 4.12 CASH FLOW 12M - FORWARD FD CORE P/E (X) (RM m, FYE Dec) 2008 2009 2010F 2011F 2012FPretax profit 1,277 846 1,417 1,506 1,573Depreciation & non–cash adj. 195 236 290 294 294Working capital changes (286) 22 (112) (37) (54)Cash tax paid (177) (321) (199) (357) (388)Others (411) (15) (156) (123) (128)Cash flow from operations 597 768 1,240 1,282 1,298Capex (630) (601) (300) (300) (300)Net investments & sale of FA (174) (5) (97) (97) (97)Others 75 (198) 0 0 0Cash flow from investing (728) (803) (397) (397) (397)Debt raised/(repaid) 486 897 (235) (190) (171)Equity raised/(repaid) 92 131 0 0 0Dividends paid (479) (492) (262) (361) (364)Cash interest & others 3 (283) (12) (45) (29)Cash flow from financing 102 253 (509) (596) (564)Change in cash (29) 218 334 289 337Change in net cash/(debt) (515) (679) 569 479 508Ending net cash/(debt) 290 (411) (67) 457 994

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OUTPERFORM Maintained Unisem (M) Berhad RM1.96 @07/12/10 All eyes on China Target: RM2.82

Semiconductor

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UNI MK / UNSM.KL Terence Wong CFA +60(3) 20849689 – [email protected]

• Reiterate OUTPERFORM. We maintain our OUTPERFORM rating on Unisem in view of the potential catalysts of earnings surprises, more tier 1 customer qualification and demand revival. Also intact are our EPS forecasts and target price of RM2.82 as we continue to value the stock at 1.6x P/BV, a 20% discount to its mid-cycle valuation.

• Gunning for 20% revenue growth. Unisem aims to expand its topline by 20% for 2011 as it plans to increase its market share for advanced packages. It is also looking to raise its market share as a whole by growing its business from existing customers, bringing in new customers and qualifying one or two tier-1 customers. The guidance is slightly above our own forecast of a 15% growth as we are a bit more cautious about the uptick in demand and visibility is limited.

• Pouring capex into China. Unisem’s China operations are still expected to be the main driver for the group. This unit will be raising its capacity by 30-40% and the revenue growth profile for 2011 is expected to be similar to its capacity expansion there. Capex for FY11 will be RM200m-250m, and will mostly be spent on China.

• Test-only facility. Unisem is constructing its test-only facility in Ipoh which should be ready by 4Q11. It will give it more capacity, free up space in its existing facility and allow for a more streamlined and efficient operation.

Financial summary

Stock Information Market cap: RM1,321m/US$421m 12-m price range: RM3.48 RM1.15 3-m avg daily vol: 2.5m No. of shrs (m): 674 Est. free float (%): 35.3 Conv. secs (m): 168.5 Major shareholders (%): - John Chia 32.0 - LTAT 5.4 - EPF 3.7

FYE Dec 2008 2009 2010F 2011F 2012F Revenue (RM m) 1,233.4 1,036.3 1,396.8 1,605.3 1,748.2 EBITDA (RM m) 235.7 245.4 342.7 412.2 455.1 EBITDA margins (%) 19.1% 23.7% 24.5% 25.7% 26.0% Pretax profit (RM m) 24.0 58.4 197.9 230.3 267.5 Net profit (RM m) 19.8 61.8 178.7 204.0 231.9 EPS (sen) 3.7 9.2 26.5 30.3 34.4 EPS growth (%) (85.5%) 151.1% 189.1% 14.2% 13.7% P/E (x) 53.7 21.4 7.4 6.5 5.7 Core EPS (sen) 10.0 10.2 26.5 30.3 34.4 Core EPS growth (%) (28.9%) 1.8% 160.5% 14.2% 13.7% Core P/E (x) 19.6 19.3 7.4 6.5 5.7 FD core EPS (sen) 10.0 10.2 22.5 25.4 28.7 FD core P/E (x) 19.6 19.3 8.7 7.7 6.8 Gross DPS (sen) 3.0 2.5 8.0 13.3 13.3 Dividend yield (%) 1.5% 1.3% 4.1% 6.8% 6.8% P/BV (x) 1.4 1.4 1.2 1.1 1.0 ROE (%) 2.4% 6.9% 17.7% 18.0% 18.4% Net gearing (%) 54.9% 34.4% 29.4% 25.2% 14.7% P/FCFE (x) (210.7) (17.7) 20.8 15.5 8.3 EV/EBITDA (x) 6.5 6.8 4.8 4.0 3.4 % change in EPS estimates N/A N/A N/A CIMB/Consensus (x) 1.04 1.10 1.14



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Volume 10m (R.H.S ca le ) Unis e m (M) Be rha d Source: Bloomberg

Unisem is a leading semiconductor packaging and test services company in Malaysia. It has its main packaging and test facilities in Ipoh, Malaysia. It completed the acquisition of a competitor in Mauritius in July 2007, making it one of the global top 10 semiconductor and test services (SATS) players. Unisem offers an integrated suite of packaging and test services such as wafer bump, wafer probe, wafer grinding and a wide range of leadframe and substrate IC packaging, among others.



(RM m, FYE Dec) 2008 2009 2010F 2011F 2012F (FYE Dec) 2008 2009 2010F 2011F 2012F Revenue 1,233 1,036 1,397 1,605 1,748 Revenue growth (%) 26.8 (16.0) 34.8 14.9 8.9 Operating expenses (998) (791) (1,054) (1,193) (1,293) EBITDA growth (%) 3.7 4.1 39.7 20.3 10.4 EBITDA 236 245 343 412 455 Pretax margins (%) 1.9 5.6 14.2 14.3 15.3 Depreciation & amortisation (157) (164) (154) (175) (180) Net profit margins (%) 1.6 6.0 12.8 12.7 13.3 EBIT 79 82 188 238 275 Interest cover (x) N/A N/A N/A N/A N/A Net interest & invt income (10) (17) 10 (7) (8) Effective tax rates (%) 23.8 N/A 9.0 10.0 12.0 Associates’ contribution 0 0 0 0 0 Net dividend payout (%) 59.9 20.7 22.5 32.9 29.0 Exceptional items (45) (7) 0 0 0 Debtors turnover (days) 51.4 58.8 57.2 61.4 63.0 Others 0 0 0 0 0 Stock turnover (days) 37.7 42.5 38.7 41.0 41.6 Pretax profit 24 58 198 230 267 Creditors turnover (days) 74.2 74.4 70.2 74.4 75.6 Tax (6) 2 (18) (23) (32) Minority interests 2 1 (1) (3) (3) Net profit 20 62 179 204 232 Adj. wt. shares (m) 542 674 674 674 674 Unadj. year-end shares (m) 613 674 674 674 674 BALANCE SHEET KEY DRIVERS (RM m, end Dec) 2008 2009 2010F 2011F 2012F (FYE Dec) 2009 2010F 2011F 2012FFixed assets 1,149 1,118 1,214 1,289 1,309 Global semicon sales (US$bn) 229 302 317 333 Intangible assets 97 93 93 93 93 EBITDA Margin (%) 23.7% 24.5% 25.7% 26.0% Other long-term assets 32 30 22 37 57 Total non-current assets 1,278 1,241 1,329 1,419 1,460 Cash and equivalents 102 66 76 72 141 Stocks 114 127 169 191 207 Trade debtors 147 186 251 289 315 Other current assets 0 0 0 0 0 Total current assets 364 380 497 552 663 Trade creditors 192 230 307 348 377 Short-term borrowings 268 270 270 250 250 Other current liabilities 1 1 1 1 1 Total current liabilities 461 501 578 598 627 Long-term borrowings 300 127 127 127 90 Other long-term liabilities 32 31 33 41 54 Total long-term liabilities 332 157 160 167 144 Shareholders’ funds 836 950 1,075 1,190 1,332 Minority interests 13 12 13 16 20 NTA/share (RM) 1.21 1.27 1.46 1.63 1.84 CASH FLOW 12M - FORWARD FD CORE P/E (X) (RM m, FYE Dec) 2008 2009 2010F 2011F 2012FPretax profit 24 58 198 230 267Depreciation & non–cash adj. 157 164 154 175 180Working capital changes (94) (13) (30) (19) (13)Cash tax paid (5) 2 (18) (23) (32)Others 96 25 0 0 0Cash flow from operations 177 236 304 363 403Capex (119) (134) (250) (250) (200)Net investments & sale of FA 0 0 0 0 0Others (7) 3 0 0 0Cash flow from investing (126) (131) (250) (250) (200)Debt raised/(repaid) (28) (155) 0 (20) (37)Equity raised/(repaid) 0 67 0 0 0Dividends paid (24) (12) (54) (89) (90)Cash interest & others (28) (24) 10 (7) (8)Cash flow from financing (79) (124) (44) (117) (134)Change in cash (29) (20) 10 (4) 69Change in net cash/(debt) (1) 136 10 16 105Ending net cash/(debt) (466) (330) (320) (304) (199)

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NEUTRAL Maintained Wah Seong Corp Bhd RM2.00 @07/12/10 In need of a stronger coating of growth Target: RM2.36


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WSC MK / WAHE.KL Norziana Mohd Inon +60(3) 2084 9645 – [email protected]

• Maintain OUTPERFORM. We maintain our forecasts but raise our target price from RM2.24 to RM2.36, pegged to a revised target market P/E of 14.5x (13.8x previously). Wah Seong remains a NEUTRAL. Our top oil & gas pick is SapuraCrest.

• Gorgon project interrupted. The 3-year, RM551m Chevron Australia’s Gorgon project, which involves the coating of 850km of pipes, commenced in Apr 10 but was halted for a few weeks beginning Jun. The project resumed in late Jul but at a slow pace. Putting the production hiccup behind, management stated that the project is already back on track and that the company’s 4Q performance should better reflect the execution of the project. Now in full production, the project takes up about 70% of the Kuantan facility’s capacity and will contribute for the first full year in FY11. Management has expressed its interest in other Australian pipe coating contracts that are yet to be awarded including two by Woodside and Inpex estimated to be worth some RM1.3bn.

• Engineering unit shows progress. While the pipe coating and corrosion protection business awaits the award of new contracts, the engineering business has picked up new jobs worth US$60m, which have helped to boost the company’s order book value to RM1.3bn. Engineering jobs contribute 30% to the order book. Pipe coating and corrosion protection remains the company’s main business with a 43% order book contribution.

Financial summary

Stock Information Market cap: RM1,448m/US$462m 12-m price range: RM2.75 RM1.97 3-m avg daily vol: 0.9m No. of shrs (m): 724 Est. free float (%): 57.9 Conv. secs (m): 30.7 Major shareholders (%): - Wah Seong (Malaya) 26.7 - Chan Cheu Leong 8.6 - EPF 6.8

FYE Dec 2008 2009 2010F 2011F 2012F Revenue (RM m) 2,343.2 1,950.3 1,372.6 1,639.3 1,712.6 EBITDA (RM m) 247.2 452.1 129.5 221.3 273.2 EBITDA margins (%) 10.5% 23.2% 9.4% 13.5% 16.0% Pretax profit (RM m) 152.9 245.8 67.3 156.3 205.0 Net profit (RM m) 115.6 121.3 51.9 107.4 137.7 EPS (sen) 17.7 17.8 7.6 15.8 20.2 EPS growth (%) 13.6% 0.6% (57.2%) 106.7% 28.2% P/E (x) 11.3 11.2 26.2 12.7 9.9 FD core EPS (sen) 14.1 14.3 6.1 12.7 16.2 FD core P/E (x) 14.2 14.0 32.6 15.8 12.3 Gross DPS (sen) 6.5 7.4 2.7 5.5 7.1 Dividend yield (%) 3.3% 3.7% 1.3% 2.8% 3.5% P/BV (x) 3.2 3.2 3.7 3.3 3.1 ROE (%) 31.2% 29.3% 13.0% 27.4% 32.4% Net gearing (%) 38.6% N/A N/A N/A N/A Net cash per share (RM) N/A 0.01 0.39 0.40 0.74 P/FCFE (x) 40.2 4.5 4.5 40.9 5.0 EV/EBITDA (x) 7.3 3.6 10.8 6.4 4.5 % change in EPS estimates - - - CIMB/Consensus (x) 0.83 1.05 1.18



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Volume 10m (R.H.S ca le ) Wa h S e ong Corp Bhd Source: Bloomberg

Wah Seong is principally involved in the provision of highly specialised pipe coating services via its pipe coating and corrosion protection business, which has a major presence across Asia. The company’s client base of oil & gas majors and state-run oil & gas companies shows that it can compete internationally in an industry with high entry barriers. In recent years, Wah Seong has made inroads into the engineering business with the fabrication of gas compressors through GSI International. After completing works in Turkmenistan, the company is now eyeing more pipe coating jobs in Australia.



(RM m, FYE Dec) 2008 2009 2010F 2011F 2012F (FYE Dec) 2008 2009 2010F 2011F 2012F Revenue 2,343 1,950 1,373 1,639 1,713 Revenue growth (%) 19.8 (16.8) (29.6) 19.4 4.5 Operating expenses (2,096) (1,498) (1,243) (1,418) (1,439) EBITDA growth (%) 51.8 82.9 (71.4) 70.9 23.4 EBITDA 247 452 130 221 273 Pretax margins (%) 6.5 12.6 4.9 9.5 12.0 Depreciation & amortisation (75) (248) (28) (30) (33) Net profit margins (%) 4.9 6.2 3.8 6.5 8.0 EBIT 172 204 102 191 240 Interest cover (x) 5.7 5.6 2.3 4.2 5.0 Net interest & invt income (25) 40 (39) (40) (41) Effective tax rates (%) 13.0 16.1 16.0 16.0 16.0 Associates’ contribution 6 1 5 6 7 Net dividend payout (%) 27.3 30.8 25.9 25.9 25.9 Exceptional items 0 0 0 0 0 Debtors turnover (days) 45.4 13.9 20.5 17.8 26.4 Others 0 0 0 0 0 Stock turnover (days) 16.6 20.9 31.2 27.4 41.0 Pretax profit 153 246 67 156 205 Creditors turnover (days) 31.1 39.3 58.6 51.5 77.0 Tax (20) (40) (11) (25) (33) Minority interests (17) (85) (5) (24) (35) Net profit 116 121 52 107 138 Adj. wt. shares (m) 652 681 724 724 724 Unadj. year-end shares (m) 652 681 724 724 724 BALANCE SHEET KEY DRIVERS (RM m, end Dec) 2008 2009 2010F 2011F 2012F (FYE Dec) 2009 2010F 2011F 2012FFixed assets 1,164 975 681 753 619 Order book (RM m) 1,500 1,500 1,500 1,500 Intangible assets 60 61 62 63 65 Overseas rev contribution (%) 74.0% 74.0% 70.0% 70.0% Other long-term assets 33 33 34 35 37 Number of oil & gas plants 10 10 10 10 Total non-current assets 1,257 1,069 777 851 721 O&G contribution to order book (%) 85.0% 85.0% 85.0% 85.0% Cash and equivalents 167 433 702 722 967 Oil & gas plants' utilisation (%) 94.0% 94.0% 94.0% 94.0% Stocks 109 114 120 126 258 Trade debtors 73 76 78 81 166 Other current assets 107 107 108 109 111 Total current assets 455 730 1,008 1,038 1,502 Trade creditors 205 215 226 237 486 Short-term borrowings 297 307 318 330 343 Other current liabilities 256 256 257 258 259 Total current liabilities 757 778 800 825 1,088 Long-term borrowings 118 118 118 118 118 Other long-term liabilities 195 196 199 202 205 Total long-term liabilities 312 313 316 319 322 Shareholders’ funds 403 426 371 413 437 Minority interests 240 283 298 332 376 NTA/share (RM) 0.53 0.54 0.45 0.51 0.55 CASH FLOW 12M - FORWARD FD CORE P/E (X) (RM m, FYE Dec) 2008 2009 2010F 2011F 2012FPretax profit 153 246 67 156 205Depreciation & non–cash adj. 75 248 28 30 33Working capital changes 442 2 2 2 32Cash tax paid (22) (31) (34) (11) (25)Others (50) (40) 410 26 192Cash flow from operations 598 426 473 204 437Capex (500) (60) (59) (58) (57)Net investments & sale of FA (93) (93) (91) (89) (87)Others (18) (18) (17) (16) (15)Cash flow from investing (611) (171) (167) (163) (159)Debt raised/(repaid) 10 10 11 12 13Equity raised/(repaid) 0 0 0 0 0Dividends paid (17) (33) (36) (13) (27)Cash interest & others 35 35 (13) (20) (19)Cash flow from financing 28 12 (38) (21) (33)Change in cash 15 267 268 20 245Change in net cash/(debt) 5 257 257 8 232Ending net cash/(debt) (248) 9 266 274 506

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OUTPERFORM Maintained WCT Bhd RM3.00 @07/12/10 Moving to higher ground in 2011 Target: RM4.34

Construction

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WCT MK / WCTE.KL Sharizan Rosely +60 (3) 2084 9864 – [email protected]

• Top construction pick. WCT’s upbeat view on its outlook in 2011 ties in with our overall positive stance on the construction sector. Locally, it will be driven by the implementation of mega jobs and focus projects under the government’s Economic Transformation Programme (ETP). The group is also optimistic about its prospects in the Middle East (ex-Dubai) and long-term positive on its positioning in Vietnam. Order book replenishment potential remains good, with RM2bn targeted for 2011. We reiterate our OUTPERFORM rating while raising our RNAV-based target price from RM4.21 to RM4.34 as we apply our revised target market P/E of 14.5x (prev. 13.8x) to its construction net profit component. The main potential re-rating catalyst is contract awards. WCT is one of our top picks for the construction sector.

• 2010 target for new jobs in the bag; RM2bn in 2011. In 2010, the group clinched four jobs worth slightly over RM2bn, meeting its target. The outstanding order book stands at RM3.9bn with a roughly equal split between local and overseas jobs. The RM1.4bn Qatar government building project which was secured recently is a significant milestone for the group as it represents the biggest open tender overseas job awarded to a local contractor. The recently clinched RM486m new LCCT was another milestone that will boost the group’s recurring income base.

Financial summary

Stock Information Market cap: RM2,359m/US$750m 12-m price range: RM3.27 RM2.48 3-m avg daily vol: 3.0m No. of shrs (m): 786 Est. free float (%): 51.1 Conv. secs (m): 139.9 Major shareholders (%): - EPF 20.5 - WCT Capital 22.0 - KWAP 6.4

FYE Dec 2008 2009 2010F 2011F 2012F Revenue (RM m) 3,711.5 4,666.6 3,087.0 3,597.4 3,619.1 EBITDA (RM m) 292.9 359.6 425.2 476.7 494.8 EBITDA margins (%) 7.9% 7.7% 13.8% 13.3% 13.7% Pretax profit (RM m) 158.4 207.9 284.8 325.2 331.8 Net profit (RM m) 101.3 143.9 151.2 180.8 187.7 EPS (sen) 12.9 18.4 19.3 23.1 23.9 EPS growth (%) (39.7%) 42.0% 5.1% 19.5% 3.8% P/E (x) 23.2 16.3 15.6 13.0 12.5 Core EPS (sen) 21.9 18.4 19.3 23.1 23.9 Core EPS growth (%) 1.9% (16.0%) 5.1% 19.5% 3.8% Core P/E (x) 13.7 16.3 15.6 13.0 12.5 FD core EPS (sen) 20.8 17.5 18.3 22.6 23.8 FD core P/E (x) 14.4 17.2 16.4 13.3 12.6 Gross DPS (sen) 8.8 10.0 10.0 10.0 10.0 Dividend yield (%) 2.9% 3.3% 3.3% 3.3% 3.3% P/BV (x) 2.6 2.3 2.1 1.8 1.6 ROE (%) 12.1% 15.0% 14.2% 15.0% 13.8% Net gearing (%) 43.4% 35.2% 30.1% 22.8% 18.7% P/FCFE (x) (29.1) 22.9 35.3 21.5 32.2 EV/EBITDA (x) 9.9 7.9 6.8 6.0 5.8 % change in EPS estimates N/A N/A N/A CIMB/Consensus (x) 1.08 1.02 0.95



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Volume 10m (R.H.S ca le ) WCT Bhd Source: Bloomberg

WCT made its debut on the Second Board on 16 Feb 95 and was elevated to the Main Board on 7 Jan 99. Today, it is a well-diversified group with businesses in civil engineering, building & infrastructure construction, property development, property investment and toll highway concession. The group is one of the highly regarded contractors in the Gulf region. Over the past 28 years, WCT has completed over 300 projects worth RM9.5bn. The construction business is the biggest earnings contributor, accounting more than 60% of earnings, followed by property at 30%.



(RM m, FYE Dec) 2008 2009 2010F 2011F 2012F (FYE Dec) 2008 2009 2010F 2011F 2012F Revenue 3,712 4,667 3,087 3,597 3,619 Revenue growth (%) 33.4 25.7 (33.8) 16.5 0.6 Operating expenses (3,419) (4,307) (2,662) (3,121) (3,124) EBITDA growth (%) (6.3) 22.8 18.2 12.1 3.8 EBITDA 293 360 425 477 495 Pretax margins (%) 4.3 4.5 9.2 9.0 9.2 Depreciation & amortisation (110) (128) (141) (157) (173) Net profit margins (%) 2.7 3.1 4.9 5.0 5.2 EBIT 183 231 285 320 322 Interest cover (x) 4.2 4.6 4.3 4.8 4.7 Net interest & invt income 25 (41) (35) (35) (34) Effective tax rates (%) 8.3 25.0 25.0 25.0 25.0 Associates’ contribution 21 17 36 40 44 Net dividend payout (%) 48.9 39.1 37.2 31.2 30.0 Exceptional items 0 0 0 0 0 Debtors turnover (days) 108.2 102.6 164.1 151.6 162.7 Others (70) 0 0 0 0 Stock turnover (days) 0.1 0.1 0.1 0.1 0.1 Pretax profit 158 208 285 325 332 Creditors turnover (days) 74.2 70.4 112.5 103.9 111.5 Tax (13) 5 (71) (81) (83) Minority interests (44) (69) (62) (63) (61) Net profit 101 144 151 181 188 Adj. wt. shares (m) 784 784 784 784 784 Unadj. year-end shares (m) 784 784 784 784 784 BALANCE SHEET KEY DRIVERS (RM m, end Dec) 2008 2009 2010F 2011F 2012F (FYE Dec) 2009 2010F 2011F 2012FFixed assets 305 258 198 125 38 Construction margins (%) 9.0% 10.0% 12.0% 12.5% Intangible assets 0 0 0 0 0 Orderbook replenishment (RM m) 500 1,700 1,000 1,000 Other long-term assets 1,165 1,271 1,479 1,697 1,936 Outstanding orderbook (RM m) 2,200 3,900 4,900 5,900 Total non-current assets 1,470 1,529 1,677 1,822 1,974 Cash and equivalents 865 924 954 1,033 1,086 Stocks 1 1 1 1 1 Trade debtors 1,227 1,396 1,380 1,608 1,618 Other current assets 642 714 749 842 890 Total current assets 2,735 3,035 3,083 3,483 3,595 Trade creditors 842 957 946 1,103 1,109 Short-term borrowings 522 496 471 448 426 Other current liabilities 851 949 953 1,109 1,117 Total current liabilities 2,214 2,402 2,370 2,660 2,652 Long-term borrowings 831 873 916 962 1,010 Other long-term liabilities 35 25 30 29 31 Total long-term liabilities 866 898 946 991 1,042 Shareholders’ funds 904 1,009 1,128 1,276 1,435 Minority interests 220 255 317 380 441 NTA/share (RM) 1.15 1.29 1.44 1.63 1.83 CASH FLOW 12M - FORWARD FD CORE P/E (X) (RM m, FYE Dec) 2008 2009 2010F 2011F 2012FPretax profit 158 208 285 325 332Depreciation & non–cash adj. 110 128 141 157 173Working capital changes (23) (36) (58) (39) (66)Cash tax paid (47) (66) (56) (70) (80)Others (30) 47 23 18 13Cash flow from operations 169 281 334 391 372Capex (76) (79) (82) (84) (87)Net investments & sale of FA (724) (106) (208) (218) (239)Others 0 0 0 0 0Cash flow from investing (800) (184) (290) (302) (326)Debt raised/(repaid) 550 5 23 21 27Equity raised/(repaid) 0 0 0 0 0Dividends paid (33) (33) (33) (33) (33)Cash interest & others 166 (19) (1) 0 15Cash flow from financing 683 (47) (11) (12) 9Change in cash 52 50 33 77 55Change in net cash/(debt) (497) 45 10 56 28Ending net cash/(debt) (489) (444) (434) (378) (350)

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NEUTRAL Maintained Wellcall Holdings RM1.19 @07/12/10 Overstretched by rubber Target: RM1.28

Ind Goods & Services - Others

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WELL MK / WELL.KL Nigel Foo +60(3) 2084 9293 – [email protected]

• Maintain NEUTRAL. Despite its high dividend yields, Wellcall remains a NEUTRAL as there are no re-rating catalysts in sight. Although we continue to value the stock at a 40% discount to Top Glove’s target P/E, our target price rises from RM1.22 to RM1.28 as we are raising Top Glove’s CY12 target P/E from 13.8x to 14.5x, in line with the revision of our target market P/E. For exposure to small-cap stocks in the rubber sector, we prefer glove producers, Latexx and Adventa.

• Raw material price at record high. Rubber prices are at all-time highs. The price of SMR20 climbed 30% in the past three months to reach above the RM13/kg in November, even higher than the 2008 peak of RM10.50/kg. As there is a 2-3 months lag before Wellcall is able to pass on the cost rise to its customers, more margin erosion can be expected for 1QFY9/11. The margin deterioration could continue if raw material costs continue to trend higher. Our current forecast for the average SMR20 price is RM10/kg for FY11-12 compared with an average of RM9.50/kg in FY10.

• Strong demand. Demand remains strong, with an order backlog of 2-3 months for extrusion hoses and around two months for mandrel. The company is already operating on two shifts to meet demand. But Wellcall is concerned that if raw material prices stay high, orders may slow down as customers fear that they could be caught with high-priced inventory when prices come off eventually.

• Balance sheet is healthy. With RM40m net cash as at end-Sep, the company is able to pay out most of its earnings as dividends. In FY10, the net dividend payout ratio was 99%. Wellcall is looking at a major expansion in the long term. Land, factory and machinery capex could be around RM20m. Funding of the capex is not a concern in view of its net cash.

Financial summary

Stock Information Market cap: RM157m/US$50m 12-m price range: RM1.46 RM1.13 3-m avg daily vol: 0.2m No. of shrs (m): 132 Est. free float (%): 30.0 Conv. secs (m): None Major shareholders (%): - Maximum Perspective S/B 11.3 - PTB Ventures Sdn. Bhd. 10.9 - Chew Chee Chek 9.6

FYE Sep 2009 2010 2011F 2012F 2013F Revenue (RM m) 79.0 96.6 117.6 130.5 144.9 EBITDA (RM m) 16.3 18.6 25.3 28.5 29.7 EBITDA margins (%) 20.6% 19.3% 21.5% 21.8% 20.5% Pretax profit (RM m) 14.3 16.0 22.0 25.2 26.4 Net profit (RM m) 13.2 14.6 16.7 19.2 20.1 EPS (sen) 10.3 11.1 12.7 14.5 15.2 EPS growth (%) (22.8%) 7.4% 14.5% 14.5% 4.8% P/E (x) 11.5 10.7 9.4 8.2 7.8 Gross DPS (sen) 14.7 14.7 15.2 17.4 18.3 Dividend yield (%) 12.3% 12.3% 12.8% 14.6% 15.4% P/BV (x) 1.9 2.0 2.0 1.9 1.9 ROE (%) 17.1% 18.5% 21.4% 24.0% 24.5% Net cash per share (RM) 0.33 0.30 0.19 0.18 0.16 P/FCFE (x) 6.7 10.1 (560.1) 10.1 9.6 EV/EBITDA (x) 6.8 6.3 5.2 4.7 4.6 % change in EPS estimates - - - CIMB/Consensus (x) 1.00 1.04 1.01



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Volume 1m (R.H.S ca le ) We llca ll Holdings Bhd Source: Bloomberg

Wellcall Holdings is Malaysia’s largest industrial rubber hose exporter, producing two main products – mandrel and extrusion hoses. Its products are in a niche market segment as they are made to order. Exports to markets like Asia, the Middle East, Europe and the US make up more than 90% of its sales. Asia remains its largest export market, with the Middle East coming in second. Wellcall has more than 130 customers in over 50 countries. Its customers are mainly involved in the distribution of rubber hoses to OEM producers. Its dividend yields are among the highest in our stock coverage.



(RM m, FYE Sep) 2009 2010 2011F 2012F 2013F (FYE Sep) 2009 2010 2011F 2012F 2013F Revenue 79 97 118 131 145 Revenue growth (%) (33.7) 22.3 21.7 11.0 11.0 Operating expenses (63) (78) (92) (102) (115) EBITDA growth (%) (16.8) 14.1 36.0 12.6 4.2 EBITDA 16 19 25 29 30 Pretax margins (%) 18.1 16.6 18.7 19.3 18.2 Depreciation & amortisation (4) (3) (3) (3) (3) Net profit margins (%) 16.7 15.1 14.2 14.7 13.8 EBIT 13 15 22 25 26 Interest cover (x) N/A N/A N/A N/A N/A Net interest & invt income 2 1 0 0 0 Effective tax rates (%) 7.7 8.8 24.0 24.0 24.0 Associates’ contribution 0 0 0 0 0 Net dividend payout (%) 106.8 99.3 89.7 89.8 90.0 Exceptional items 0 0 0 0 0 Debtors turnover (days) 15.9 11.1 22.2 31.2 31.2 Others 0 0 0 0 0 Stock turnover (days) 73.2 40.4 34.0 31.2 31.2 Pretax profit 14 16 22 25 26 Creditors turnover (days) 19.4 12.1 13.7 13.9 13.9 Tax (1) (1) (5) (6) (6) Minority interests 0 0 0 0 0 Net profit 13 15 17 19 20 Adj. wt. shares (m) 128 132 132 132 132 Unadj. year-end shares (m) 128 132 132 132 132 BALANCE SHEET KEY DRIVERS (RM m, end Sep) 2009 2010 2011F 2012F 2013F (FYE Sep) 2010 2011F 2012F 2013FFixed assets 29 28 39 41 42 Capacity (tonnes p.a.) 33,000 33,000 46,000 46,000 Intangible assets 0 0 0 0 0 Capacity utilisation (%) 53.9% 60.0% 49.0% 53.0% Other long-term assets 2 2 2 2 2 Total non-current assets 31 30 41 43 45 Cash and equivalents 42 40 25 23 21 Stocks 10 11 11 12 13 Trade debtors 2 4 11 12 13 Other current assets 1 1 1 1 1 Total current assets 55 56 47 47 48 Trade creditors 2 4 5 5 6 Short-term borrowings 0 0 0 0 0 Other current liabilities 3 4 4 4 4 Total current liabilities 5 8 8 9 9 Long-term borrowings 0 0 0 0 0 Other long-term liabilities 1 1 1 1 1 Total long-term liabilities 1 1 1 1 1 Shareholders’ funds 80 77 79 81 83 Minority interests 0 0 0 0 0 NTA/share (RM) 0.63 0.59 0.60 0.61 0.63 CASH FLOW 12M - FORWARD FD CORE P/E (X) (RM m, FYE Sep) 2009 2010 2011F 2012F 2013FPretax profit 14 16 22 25 26Depreciation & non–cash adj. 4 3 3 3 3Working capital changes 11 0 (6) (2) (3)Cash tax paid (1) (2) (5) (6) (6)Others (1) (1) 1 0 0Cash flow from operations 26 17 15 20 21Capex (5) (2) (15) (5) (5)Net investments & sale of FA 0 0 0 0 0Others 0 0 0 0 0Cash flow from investing (5) (2) (15) (5) (5)Debt raised/(repaid) 0 0 0 0 0Equity raised/(repaid) 1 (4) 0 0 0Dividends paid (9) (14) (15) (17) (18)Cash interest & others 2 1 0 0 0Cash flow from financing (6) (17) (15) (17) (18)Change in cash 15 (2) (15) (2) (2)Change in net cash/(debt) 15 (2) (15) (2) (2)Ending net cash/(debt) 42 40 25 23 21

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OUTPERFORM Maintained Xingquan International RM1.53 @07/12/10 Full of sole Target: RM3.04

Retail

MA

LAYS

IA

XISH MK / XING.KL Nigel Foo +60(3) 2084 9293 – [email protected]

• Maintain OUTPERFORM. Xingquan remains an OUTPERFORM with an unchanged target price of RM3.04, based on 6x CY12 P/E. The stock offers one of the most attractive valuations in our regional footwear coverage as it is trading at huge discounts of 70-80% to its bigger peers. Potential re-rating catalysts for Xingquan include better-than-expected trade fair orders and sharp declines in raw material prices.

• Indirect play on consumer spending in China’s second-tier cities. Xingquan is an indirect play on China’s consumer market. Its “Addnice” brand is strong in China’s second- and third-tier cities whose growth is expected to outpace first-tier cities.

• First-mover advantage in outdoor wear. Xingquan has established itself as one of China’s top shoe brands in outdoor wear with its “Addnice” brand. Due to stiff competition in the sports shoe market in China, the company diversified into the casual outdoor wear a few years ago. This has given the company first-mover advantage as many sport shoe companies in China have only just started to diversify into other markets such as casual or outdoor wear.

• New capacity by early-2011. Xingquan’s new shoe factory, once ready by early 2011, will boost its annual production capacity to 10m pairs of shoes and 28m pairs of shoe soles. Its existing capacity is 6m pairs of shoes and 14m pairs of soles.

• TDR expected to be completed by end-FY. Xingquan has proposed a Taiwan Depositary Receipts (TDR) programme involving the issue of 46.1m new Xingquan shares amounting to 15% of its existing share capital. Assuming completion of the exercise by end-FY11, FY12 EPS dilution would be around 12%.

Financial summary

Stock Information Market cap: RM470m/US$150m 12-m price range: RM1.90 RM1.06 3-m avg daily vol: 0.3m No. of shrs (m): 307 Est. free float (%): 31.0 Conv. secs (m): None Major shareholders (%): - Tai Zhen Xiang Hldgs 58.4 - Koon Yew Yin

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FYE Jun 2009 2010 2011F 2012F 2013F Revenue (RM m) 434.2 609.3 762.5 880.0 1,002.9 EBITDA (RM m) 119.1 136.5 186.8 201.8 218.5 EBITDA margins (%) 27.4% 22.4% 24.5% 22.9% 21.8% Pretax profit (RM m) 110.8 130.2 183.9 198.0 215.9 Net profit (RM m) 92.2 105.2 137.7 148.5 161.9 EPS (sen) 42.9 34.2 44.8 48.3 52.7 EPS growth (%) 38.3% (20.1%) 30.9% 7.8% 9.1% P/E (x) 3.6 4.5 3.4 3.2 2.9 Gross DPS (sen) 0.0 5.0 6.7 7.2 7.9 Dividend yield (%) 0.0% 3.3% 4.4% 4.7% 5.2% P/BV (x) 2.7 1.3 1.0 0.8 0.6 ROE (%) 84.0% 44.5% 33.6% 27.9% 24.4% Net cash per share (RM) 0.34 0.81 0.65 0.88 1.16 P/FCFE (x) 3.3 7.1 (15.4) 5.0 4.3 EV/EBITDA (x) 2.2 1.6 1.5 1.0 0.5 % change in EPS estimates - - - CIMB/Consensus (x) 0.51 0.47 0.47



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Volume 1m (R.H.S ca le ) Xingqua n Inte rna tiona l Source: Bloomberg

Listed in 2009, Xingquan International is the first foreign IPO in Bursa Malaysia. Its founder and executive chairman Wu Qingquan set up his shoe operations in Jinjiang, China in 1995. The company produces and distributes shoe soles and shoes under the “Addnice” brand and outsources the production of apparel and accessories. From producing just sports shoes, the company diversified into the outdoor market a few years ago and is now one of the top outdoor wear brands in China, competing with brands such as Timberland, North Face and Columbia. Currently, Xingquan has a distribution network of around 2,000.



(RM m, FYE Jun) 2009 2010 2011F 2012F 2013F (FYE Jun) 2009 2010 2011F 2012F 2013F Revenue 434 609 763 880 1,003 Revenue growth (%) 32.5 40.3 25.2 15.4 14.0 Operating expenses (315) (473) (576) (678) (784) EBITDA growth (%) 44.7 14.7 36.9 8.0 8.3 EBITDA 119 137 187 202 218 Pretax margins (%) 25.5 21.4 24.1 22.5 21.5 Depreciation & amortisation (6) (6) (6) (6) (6) Net profit margins (%) 21.2 17.3 18.1 16.9 16.1 EBIT 113 131 181 196 213 Interest cover (x) 50.7 108.3 103.1 111.7 121.2 Net interest & invt income (2) 0 3 2 3 Effective tax rates (%) 16.8 19.2 25.1 25.0 25.0 Associates’ contribution 0 0 0 0 0 Net dividend payout (%) 0.0 14.6 15.0 15.0 15.0 Exceptional items 0 0 0 0 0 Debtors turnover (days) 64.7 38.3 30.5 31.6 31.8 Others 0 0 0 0 0 Stock turnover (days) 14.6 11.6 14.7 19.4 20.5 Pretax profit 111 130 184 198 216 Creditors turnover (days) 56.1 39.0 18.7 10.9 11.9 Tax (19) (25) (46) (49) (54) Minority interests 0 0 0 0 0 Net profit 92 105 138 148 162 Adj. wt. shares (m) 215 307 307 307 307 Unadj. year-end shares (m) 215 307 307 307 307 BALANCE SHEET KEY DRIVERS (RM m, end Jun) 2009 2010 2011F 2012F 2013F (FYE Jun) 2010 2011F 2012F 2013FFixed assets 32 79 219 262 306 Number of points of sales 2,000 2,400 2,883 2,884 Intangible assets 5 7 7 7 7 Footwear (Rmb/pair) 88 89 93 95 Other long-term assets 0 0 0 0 0 Apparel (Rmb/piece) 44 44 44 44 Total non-current assets 37 86 226 269 313 Footwear sales (m pairs) 7.2 9.0 10.0 12.0 Cash and equivalents 104 281 230 302 386 Apparel sales (m pieces) 8.0 12.0 13.0 14.0 Stocks 20 19 42 51 61 Trade debtors 71 57 71 82 93 Other current assets 0 0 0 0 0 Total current assets 195 356 343 435 540 Trade creditors 75 55 23 29 36 Short-term borrowings 31 30 30 30 30 Other current liabilities 5 5 46 49 54 Total current liabilities 111 90 100 109 120 Long-term borrowings 0 0 0 0 0 Other long-term liabilities 0 0 0 0 0 Total long-term liabilities 0 0 0 0 0 Shareholders’ funds 121 352 469 595 733 Minority interests 0 0 0 0 0 NTA/share (RM) 0.54 1.12 1.50 1.91 2.36 CASH FLOW 12M - FORWARD FD CORE P/E (X) (RM m, FYE Jun) 2009 2010 2011F 2012F 2013FPretax profit 111 130 184 198 216Depreciation & non–cash adj. 6 6 6 6 6Working capital changes (3) (5) (69) (14) (14)Cash tax paid (17) (23) (5) (46) (49)Others 2 0 (3) (2) (3)Cash flow from operations 99 109 113 142 155Capex (5) (56) (146) (49) (49)Net investments & sale of FA 0 0 0 0 0Others 0 (1) 0 0 0Cash flow from investing (5) (57) (146) (49) (49)Debt raised/(repaid) 8 15 0 0 0Equity raised/(repaid) 0 0 0 0 0Dividends paid (70) (7) (21) (22) (24)Cash interest & others 24 133 3 2 3Cash flow from financing (38) 140 (18) (20) (21)Change in cash 56 192 (51) 73 84Change in net cash/(debt) 48 177 (51) 73 84Ending net cash/(debt) 73 250 199 272 356

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OUTPERFORM Maintained YTL Power International RM2.44 @07/12/10 All eyes on Yes Target: RM2.97

IPP

MA

LAYS

IA

YTLP MK / YTLP.KL Ivy Ng Lee Fang CFA +60(3) 2084 9697 – [email protected]

• Reiterate OUTPERFORM. YTL Power remains an OUTPERFORM as we like its i) multi-utility focus and ii) still-sizeable cash hoard in excess of RM7.8bn. We retain our SOP-based target price of RM2.97 and see potential share price triggers in i) good response for its WiMax service, Yes, ii) potential M&As and/or higher yields from its burgeoning cash pile and iii) positive earnings surprises from PowerSeraya.

• Balancing core assets ... 2011 could finally see a win-win conclusion to the long-drawn PPA talks for its local power plants based on recently set deadlines. While there could be risk to Wessex Water’s translated earnings because of the weak £,this will be cushioned by PowerSeraya’s strong showing where margins are set to expand further with the commission of its new cogen plant in Oct 10.

• ... with upside from Yes? Strong take-up and better awareness of Yes would be positive as we believe that the market does not fully appreciate the potential of YTL Power’s WiMAX venture given the limited details. We think that Yes’s product flexibility, bundling proposition and rebate for higher data usage could appeal.

• RM7.8bn cash pile. YTL Power’s cash pile settled at RM7.8bn as at end-Sep 10. We expect this cash hoard to diminish as YTL Power channels cash to the enhancement of its WiMAX network and adds on hybrid TV for its eventual quad play offering. Having said that, we still believe that the group has sufficient funds to at least sustain dividend yields of 7-8% and/or snap up assets.

Financial summary

Stock Information Market cap: RM17,729m/US$5,652m 12-m price range: RM2.60 RM2.14 3-m avg daily vol: 5.9m No. of shrs (m): 7,266 Est. free float (%): 20.0 Conv. secs (m): 1,202 Major shareholders (%): - YTL Corporation 52.0 - Employees Provident Fund

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FYE Jun 2009 2010 2011F 2012F 2013F Revenue (RM m) 6,093.4 13,442.9 13,240.1 13,430.8 13,576.6 EBITDA (RM m) 2,482.7 2,875.5 2,989.9 3,015.3 3,115.9 EBITDA margins (%) 40.7% 21.4% 22.6% 22.5% 23.0% Pretax profit (RM m) 1,386.9 1,694.0 1,749.2 1,837.3 1,924.6 Net profit (RM m) 646.6 1,212.1 1,251.5 1,314.5 1,377.0 EPS (sen) 10.9 16.7 17.3 18.1 19.0 EPS growth (%) (45.3%) 52.9% 3.2% 5.0% 4.8% P/E (x) 22.3 14.6 14.1 13.5 12.8 Core EPS (sen) 18.4 16.7 17.3 18.1 19.0 Core EPS growth (%) (7.8%) (9.2%) 3.2% 5.0% 4.8% Core P/E (x) 13.2 14.6 14.1 13.5 12.8 FD core EPS (sen) 14.1 15.4 15.8 16.6 17.4 FD core P/E (x) 17.4 15.9 15.4 14.7 14.0 Gross DPS (sen) 17.5 17.5 17.5 17.5 17.5 Dividend yield (%) 7.2% 7.2% 7.2% 7.2% 7.2% P/BV (x) 2.4 2.4 2.4 2.3 2.2 ROE (%) 10.4% 18.1% 16.9% 17.3% 17.6% Net gearing (%) 278.0% 187.7% 186.7% 184.9% 181.1% P/FCFE (x) (5.2) (9.7) (22.0) 320.2 87.5 EV/EBITDA (x) 12.2 10.6 10.3 10.2 9.9 % change in EPS estimates - - - CIMB/Consensus (x) 1.04 1.02 1.04



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Volume 10m (R.H.S ca le ) YTL Powe r Inte rna tiona l Source: Bloomberg

Established in Oct 96, YTL Power is the global utilities arm of YTL Corp. Over the years, the group has evolved from just a local power play with two power generating assets into a global multi-utility group. YTL Power currently owns power plant assetsin Malaysia, Indonesia and Singapore as well. It has exposure to water concession assets in the UK through Wessex Water and a 33.5% stake in Electranet, which owns and operates a power transmission network in Australia. The group recently launched its presence within the telco arena with the rollout of its WiMAX network, Yes. By end-2011, it will emerge as a quad play with the offering of hybrid TV as well.

The S.E.A. Navigator – Malaysia (2011) [ 205 ]


(RM m, FYE Jun) 2009 2010 2011F 2012F 2013F (FYE Jun) 2009 2010 2011F 2012F 2013F Revenue 6,093 13,443 13,240 13,431 13,577 Revenue growth (%) 43.6 120.6 (1.5) 1.4 1.1 Operating expenses (3,611) (10,567) (10,250) (10,416) (10,461) EBITDA growth (%) 4.1 15.8 4.0 0.8 3.3 EBITDA 2,483 2,875 2,990 3,015 3,116 Pretax margins (%) 22.8 12.6 13.2 13.7 14.2 Depreciation & amortisation (539) (682) (665) (672) (678) Net profit margins (%) 10.6 9.0 9.5 9.8 10.1 EBIT 1,944 2,193 2,325 2,344 2,438 Interest cover (x) 2.2 2.6 2.6 2.7 2.8 Net interest & invt income (783) (726) (793) (718) (729) Effective tax rates (%) 53.4 28.5 28.5 28.5 28.5 Associates’ contribution 225 227 217 212 216 Net dividend payout (%) 120.0 78.5 76.0 72.4 69.1 Exceptional items 0 0 0 0 0 Debtors turnover (days) 100.8 59.2 56.7 57.6 76.2 Others 0 0 0 0 0 Stock turnover (days) 30.3 19.7 16.7 16.9 16.9 Pretax profit 1,387 1,694 1,749 1,837 1,925 Creditors turnover (days) 5.6 6.7 10.0 9.8 9.9 Tax (740) (482) (498) (523) (548) Minority interests 0 0 0 0 0 Net profit 647 1,212 1,251 1,314 1,377 Adj. wt. shares (m) 5,910 7,247 7,247 7,247 7,247 Unadj. year-end shares (m) 5,910 7,247 7,247 7,247 7,247 BALANCE SHEET KEY DRIVERS (RM m, end Jun) 2009 2010 2011F 2012F 2013F (FYE Jun) 2010 2011F 2012F 2013FFixed assets 17,283 15,949 16,313 16,538 16,248 Average capacity utilisation (%) 71.8% 71.8% 71.8% 71.8% Intangible assets 6,332 6,149 5,964 5,785 5,612 Capacity (MW) 4,739 4,739 4,739 4,739 Other long-term assets 1,875 1,811 1,947 2,090 2,243 Total non-current assets 25,491 23,909 24,224 24,414 24,102 Cash and equivalents 6,012 7,419 6,113 5,591 5,228 Stocks 859 593 618 628 631 Trade debtors 2,353 2,008 2,104 2,134 3,534 Other current assets 0 0 0 0 0 Total current assets 9,224 10,020 8,834 8,353 9,392 Trade creditors 126 370 359 365 373 Short-term borrowings 2,527 2,405 1,592 1,512 1,437 Other current liabilities 2,349 2,155 2,145 2,180 3,190 Total current liabilities 5,002 4,930 4,095 4,057 4,999 Long-term borrowings 20,388 18,777 18,556 18,340 18,128 Other long-term liabilities 3,244 3,009 2,888 2,656 2,449 Total long-term liabilities 23,632 21,786 21,445 20,996 20,578 Shareholders’ funds 6,081 7,333 7,519 7,713 7,918 Minority interests 0 0 0 0 0 NTA/share (RM) (0.04) 0.16 0.21 0.27 0.32 CASH FLOW 12M - FORWARD FD CORE P/E (X) (RM m, FYE Jun) 2009 2010 2011F 2012F 2013FPretax profit 1,387 1,694 1,749 1,837 1,925Depreciation & non–cash adj. 539 682 665 672 678Working capital changes 2,031 (855) 132 34 0Cash tax paid (347) (740) (482) (498) (523)Others (2,409) 941 89 198 313Cash flow from operations 1,200 1,722 2,153 2,243 2,393Capex (8,566) (1,387) (1,435) (1,478) (1,478)Net investments & sale of FA 3 4 4 4 4Others 0 0 0 0 0Cash flow from investing (8,563) (1,383) (1,431) (1,474) (1,474)Debt raised/(repaid) 5,355 (1,432) (734) 4 12Equity raised/(repaid) 0 0 0 0 0Dividends paid (776) (993) (993) (993) (993)Cash interest & others (675) 3,793 (2) (2) (2)Cash flow from financing 3,905 1,368 (1,729) (991) (982)Change in cash (3,458) 1,707 (1,007) (222) (64)Change in net cash/(debt) (8,813) 3,140 (273) (226) (76)Ending net cash/(debt) (16,902) (13,763) (14,036) (14,261) (14,336)

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APPENDICES…


Malaysia Earnings Summary

No. Mkt Mkt Mkt EV/EBITDAPrice as at of Cap Cap Cap07-Dec-10 Stocks (RM m) (%w t) (%wt) 2010 2011F 2012F 2011F 2012F 2011F 2012F 2010E 2011F 2011F 2012F 2012F

FD CoreFD Core P/E (x) EPS growth (%) Div yld (%) P/BV (x) Core ROE (%) (x)

Automobiles and Parts 3 14,274 1.9% 1.9 11.5 9.8 8.7 17.1 14.1 < 4.5 4.7 1.7 1.5 15.5 16.0 4.5Av iation 2 14,153 1.9% 1.9 1.4 9.7 4.8 93.7 114.0 < 0.0 0.0 1.8 1.5 17.2 27.8 4.2Conglomerates 1 52,523 6.9% 6.9 18.0 16.3 14.6 10.0 12.1 < 4.1 4.6 2.4 2.2 13.9 14.4 9.0Construction and Materials 8 29,003 3.8% 3.8 25.6 20.7 15.7 26.8 31.9 < 3.0 3.1 3.0 2.9 15.2 16.7 14.4Consumer 11 39,109 5.2% 5.2 18.9 18.2 17.5 5.2 4.3 < 5.4 5.5 13.6 12.3 71.0 66.0 11.5Financial Serv ices 10 176,085 23.2% 23.2 14.5 12.4 11.0 16.6 13.6 < 5.6 6.4 2.7 2.4 20.1 20.4 14.3Forestry and Paper 1 163 0.0% 0.0 5.3 4.1 3.2 31.7 27.1 < 6.8 8.7 0.4 0.4 10.6 12.3 0.7Industrial Goods and Serv ices 9 9,357 1.2% 1.2 11.9 10.2 8.7 17.0 16.8 < 3.9 4.7 2.7 2.1 25.5 23.9 5.0Media 3 6,331 0.8% 0.8 13.6 12.4 10.8 9.9 14.5 < 5.3 5.5 3.4 2.8 25.1 24.1 5.6Oil and Gas 1 11,623 1.5% 1.5 13.7 12.2 11.1 11.6 10.4 < 7.3 7.3 1.8 1.7 14.3 14.3 6.3Oil Equipment and Serv ices 5 11,911 1.6% 1.6 20.9 16.4 14.6 37.0 12.7 < 2.4 2.7 5.9 5.6 39.7 42.3 9.5Plantations 4 70,842 9.3% 9.3 21.4 18.4 16.8 16.5 9.5 < 3.7 4.1 3.3 3.0 17.1 16.8 10.7Property 4 11,681 1.5% 1.5 22.2 18.8 17.1 17.9 10.9 < 3.4 3.6 1.5 1.4 8.8 9.1 12.0Technology 5 5,520 0.7% 0.7 11.9 10.7 9.0 9.5 21.0 < 6.2 7.1 2.4 2.2 20.5 22.1 5.8Telecommunications 4 111,120 14.7% 14.7 16.6 18.0 15.5 3.8 12.1 < 6.4 7.1 5.5 5.6 36.5 42.0 6.9Serv ices 1 877 0.1% 0.1 8.5 7.4 6.2 14.7 18.2 < 6.8 8.0 2.2 1.7 26.4 24.2 2.4Shipping 2 42,028 5.5% 5.5 29.8 24.6 21.6 20.4 15.2 < 5.3 5.6 1.7 1.6 6.9 7.9 11.9Transport Infrastructure 3 31,437 4.1% 4.1 17.5 14.3 13.7 23.7 2.8 < 5.7 5.4 3.4 3.4 24.7 26.2 8.9Trav el and Leisure 4 65,296 8.6% 8.6 15.8 13.8 12.2 15.2 13.0 < 1.7 1.8 3.0 2.6 19.4 18.8 5.3Utilities 3 55,572 7.3% 7.3 13.9 13.5 12.6 3.7 8.2 < 4.2 4.3 1.6 1.5 11.8 12.1 6.8Overall * 84 758,028 100.0% 100.0 16.7 15.3 13.7 10.2 12.7 < 4.9 5.1 3.5 3.3 22.5 23.4 8.4KLCI ** 24 647,599 16.6 15.5 13.9 8.1 12.2 < 5.1 5.2 3.4 3.2 22.1 23.3 8.2

Notes: 1) Dividend yields are computed on gross basis 2) * Based on CIMB's coverage 3) ** Based on index components in CIMB's coverage Source: CIMB estimates


Malaysia Earnings Guide

Div Net Avg. Latest P/BV PEG Yield gearing Market Free Daily

Prices as at Bloomberg Price Actual (x) (x) (%) (%) cap. float T/o.07-Dec-10 Rec. Code (RM) FY FY2010 FY2011 FY2012 FY2010 FY2011 FY2012 FY2010 FY2011 FY2012 FY2010 FY2010 FY2011 FY2010 (RM m) (RM m) (m)

Net Profit (RM m) FD Core EPS (sen) FD Core P/E (x)

Automobiles and PartsProton Holdings Bhd TB PROH MK 4.84 Mar 10 219 361 399 41.2 65.7 72.6 11.7 7.4 6.7 0.5 0.4 2.1 cash 2,658 890 0.3Tan Chong Motor Holdings Bhd O TCM MK 5.44 Dec 09 274 343 477 40.8 51.0 70.9 13.3 10.7 7.7 2.1 0.4 2.4 7.2 3,656 1,353 0.5UMW Holdings Bhd O UMWH MK 6.91 Dec 09 653 737 771 58.3 65.8 68.9 11.8 10.5 10.0 1.9 1.4 6.4 1.2 7,960 2,388 2.4

AviationAirAsia Bhd O AIRA MK 2.61 Dec 09 1,914 888 1,339 27.5 35.1 48.3 9.5 7.4 5.4 1.6 0.3 0.0 137.2 7,235 5,064 9.6Malay sian Airline Sy stem Bhd O MAS MK 2.07 Dec 09 92 709 1,734 -27.3 17.1 50.3 n.m. 12.1 4.1 2.0 n.m. 0.0 27.4 6,918 1,038 2.7

ConglomeratesSime Darby Bhd TB SIME MK 8.74 Jun 10 727 2,943 3,479 48.2 49.0 57.9 18.1 17.8 15.1 2.6 1.9 3.8 12.1 52,523 20,011 5.9

Construction and MaterialsGamuda Bhd O GAM MK 3.76 Jul 10 281 335 459 13.7 16.3 22.1 27.4 23.1 17.0 4.1 1.0 3.2 60.9 7,687 6,102 8.1IJM Corp Bhd O IJM MK 6.14 Mar 10 333 378 393 20.0 25.9 27.0 30.8 23.7 22.8 3.6 1.9 1.7 91.1 8,295 5,574 3.6Lafarge Malay an Cement Bhd U LMC MK 7.40 Dec 09 298 435 457 35.0 51.2 53.8 21.1 14.4 13.7 2.0 0.9 5.7 cash 6,288 1,920 0.8Malay sian Resources Corp Bhd TB MRC MK 2.01 Dec 09 51 66 80 3.8 4.9 5.9 53.4 41.3 34.1 3.6 2.1 0.5 26.6 2,776 1,613 5.8MTD ACPI Engineering U ACP MK 0.51 Mar 10 -19 -18 11 -8.0 -7.9 4.9 n.m. n.m. 10.5 0.7 n.m. 1.8 2.5 118 30 0.6Muhibbah Engineering TB MUHI MK 1.36 Dec 09 32 53 60 7.9 13.3 15.1 17.1 10.3 9.0 0.9 0.4 2.2 45.8 542 395 8.3Tasek Corporation Bhd O TC MK 7.59 Dec 09 121 131 102 66.7 79.4 82.4 11.4 9.6 9.2 1.1 1.0 1.6 cash 938 111 0.0WCT Bhd O WCT MK 3.00 Dec 09 151 181 188 18.3 22.6 23.8 16.4 13.3 12.6 2.1 1.2 3.3 30.1 2,359 1,205 2.5

ConsumerAsia File Corporation O AF MK 4.45 Mar 10 58 66 75 51.2 58.6 66.6 8.7 7.6 6.7 1.6 0.6 7.4 cash 514 206 0.0British American Tobacco Bhd U ROTH MK 45.48 Dec 09 730 749 766 255.6 262.5 268.4 17.8 17.3 16.9 24.8 7.2 7.1 90.3 12,986 3,896 0.1Carlsberg Brew ery (M) Bhd N CAB MK 6.05 Dec 09 132 142 153 43.1 46.5 49.9 14.0 13.0 12.1 3.3 1.8 6.1 cash 1,864 559 0.2Cocoaland Holdings N COLA MK 2.34 Dec 09 20 32 34 15.2 24.2 25.6 15.4 9.7 9.1 2.4 0.5 5.1 4.0 402 161 0.1Fraser & Neav e Holdings Bhd U FNH MK 16.26 Sep 10 695 267 275 82.2 74.9 77.1 19.8 21.7 21.1 4.4 n.m. 3.3 cash 5,832 1,243 0.1Guinness Anchor Bhd N GUIN MK 9.96 Jun 10 153 171 177 50.5 56.5 58.6 19.7 17.6 17.0 6.4 2.6 6.5 cash 3,009 903 0.1JT International Bhd N RJR MK 6.03 Dec 09 115 123 128 43.8 47.1 48.9 13.8 12.8 12.3 4.2 2.5 5.0 cash 1,577 473 0.0Nestle (Malay sia) Berhad U NESZ MK 43.50 Dec 09 436 457 479 185.9 195.0 204.3 23.4 22.3 21.3 14.0 4.8 4.7 15.5 10,201 2,024 0.0Pelikan International Corp Bhd N PELI MK 1.21 Dec 09 65 76 100 12.7 22.3 29.4 9.5 5.4 4.1 0.7 0.2 1.5 45.2 620 217 0.5QSR Brands N QSR MK 5.63 Dec 09 110 125 133 33.6 38.1 40.6 16.8 14.8 13.9 3.5 1.7 2.7 40.8 1,635 688 1.5Xingquan International O XISH MK 1.53 Jun 10 105 138 148 34.2 44.8 48.3 4.5 3.4 3.2 1.3 0.2 4.4 cash 470 146 0.3

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[ continued from the previous page… ] Div Net Avg.

Latest P/BV PEG Yield gearing Market Free DailyPrices as at Bloomberg Price Actual (x) (x) (%) (%) cap. float T/o.07-Dec-10 Rec. Code (RM) FY FY2010 FY2011 FY2012 FY2010 FY2011 FY2012 FY2010 FY2011 FY2012 FY2010 FY2010 FY2011 FY2010 (RM m) (RM m) (m)


Financial ServicesAffin Holdings Bhd O AHB MK 3.20 Dec 09 474 546 598 31.7 36.6 40.0 10.1 8.8 8.0 0.9 0.8 3.8 cash 4,783 1,100 0.5Alliance Financial Group U AFG MK 3.08 Mar 10 301 417 467 19.5 26.9 30.2 15.8 11.4 10.2 1.6 0.6 3.8 cash 4,768 3,099 1.6AMMB Holdings Bhd O AMM MK 6.26 Mar 10 1,009 1,403 1,770 33.4 46.6 58.7 18.7 13.4 10.7 2.0 0.6 3.5 cash 18,869 11,321 3.8Bursa Malay sia Bhd N BURSA MK 7.96 Dec 09 118 152 167 22.6 29.0 32.0 35.3 27.4 24.9 4.9 1.9 4.4 cash 4,230 2,538 0.9EON Capital Bhd O EON MK 6.96 Dec 08 480 531 590 69.2 76.6 85.1 10.1 9.1 8.2 1.2 0.9 3.9 cash 4,825 2,509 0.2Hong Leong Bank Bhd U HLBK MK 9.40 Jun 09 957 1,046 1,121 60.6 66.2 70.9 15.5 14.2 13.3 2.5 1.9 2.6 cash 14,853 4,010 0.3Kurnia Asia Bhd U KUAB MK 0.35 Dec 09 32 36 37 2.2 2.4 2.5 16.2 14.7 14.1 1.6 2.2 0.0 cash 525 197 0.8Malay an Banking Bhd O MAY MK 8.41 Jun 10 3,818 4,533 5,084 53.8 63.9 71.7 15.6 13.2 11.7 2.1 1.0 7.1 cash 59,526 30,358 9.0Public Bank Bhd O PBK MK 12.80 Dec 09 3,027 3,525 4,150 85.1 99.8 117.5 15.0 12.8 10.9 3.5 0.9 5.7 cash 45,209 33,906 1.7RHB Capital Bhd O RHBC MK 8.59 Dec 09 1,455 1,701 1,956 67.6 79.0 90.9 12.7 10.9 9.5 1.9 0.8 3.7 cash 18,498 3,237 2.7

Forestry and PaperEksons Corporation Bhd O EKSON MK 1.00 Mar 10 17 35 42 10.6 21.3 25.6 9.4 4.7 3.9 0.5 0.2 5.9 cash 163 49 0.1

Industrial Goods and ServicesAdv enta Bhd O ADV MK 2.13 Oct 09 34 43 57 22.3 28.3 37.2 9.6 7.5 5.7 1.3 0.3 2.8 35.7 325 162 0.2Ann Joo Resources TB AJR MK 2.94 Dec 09 132 158 225 16.8 20.1 28.7 17.5 14.6 10.3 1.6 0.6 5.8 81.7 1,537 581 0.4Daibochi Plastic & Packaging Bhd O DPP MK 2.45 Dec 09 18 25 29 24.3 33.3 38.6 10.1 7.4 6.3 1.3 0.4 9.3 3.4 186 93 0.1Hartalega Holdings O HART MK 5.39 Mar 10 143 185 216 40.0 50.8 59.3 13.5 10.6 9.1 5.5 0.6 3.2 cash 1,959 738 0.2Kossan Rubber Industries Bhd O KRI MK 3.34 Dec 09 119 145 170 37.1 45.3 53.3 9.0 7.4 6.3 2.3 0.5 3.0 26.8 1,068 388 0.5Latex x Partners O LTX MK 2.67 Dec 09 81 96 104 29.6 34.8 37.9 9.0 7.7 7.0 2.4 0.7 4.1 12.5 584 377 1.2Tomy pak Holdings O TOMY MK 1.00 Dec 09 16 25 27 14.5 23.0 25.3 6.9 4.3 4.0 1.2 0.2 8.5 8.1 109 43 0.3Top Glov e Corporation O TOPG MK 5.55 Aug 10 245 276 303 39.7 44.6 49.0 14.0 12.4 11.3 3.1 1.3 3.2 cash 3,432 1,899 1.1Wellcall Holdings Bhd N WELL MK 1.19 Sep 10 15 17 19 11.1 12.7 14.5 10.7 9.4 8.2 2.0 0.7 12.8 cash 157 47 0.2

MediaMedia Chinese International Ltd O MCIL MK 0.88 Mar 10 134 151 167 7.8 9.0 9.9 11.3 9.8 8.9 1.2 0.9 5.7 cash 1,482 741 0.6Media Prima Bhd N MPR MK 2.34 Dec 09 158 182 207 14.7 16.9 19.2 15.9 13.9 12.2 6.0 1.1 4.0 15.9 2,345 917 1.2Star Publications Bhd O STAR MK 3.39 Dec 09 184 193 230 25.0 26.2 31.2 13.6 12.9 10.9 2.3 1.2 6.2 cash 2,504 1,905 0.6

Oil and GasPetronas Dagangan Bhd O PETD MK 11.70 Mar 10 753 884 972 75.8 89.0 97.9 15.4 13.2 12.0 1.9 1.1 7.3 cash 11,623 2,811 0.3

Oil Equipment and ServicesDialog Group Bhd U DLG MK 1.60 Jun 10 116 131 150 5.9 6.6 7.6 27.3 24.3 21.1 5.2 2.0 2.5 cash 3,181 1,866 7.8Kencana Petroleum Bhd O KEPB MK 2.01 Jul 10 136 213 271 10.1 12.9 16.3 19.9 15.6 12.3 10.7 0.7 1.2 3.8 3,335 1,777 9.3Petra Perdana TB PETR MK 0.77 Dec 09 -40 32 42 -7.9 5.2 7.2 n.m. 14.7 10.6 0.4 n.m. 2.6 25.1 347 211 4.1SapuraCrest Petroleum O SCRES MK 2.82 Jan 10 170 213 272 13.4 16.8 21.4 21.1 16.8 13.2 4.2 0.8 2.8 19.4 3,600 1,013 1.9Wah Seong Corp Bhd N WSC MK 2.00 Dec 09 52 107 138 6.1 12.7 16.2 32.6 15.8 12.3 3.7 0.5 2.8 cash 1,448 763 0.7



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PlantationsHap Seng Plantations Holdings TB HAPL MK 3.15 Dec 09 163 187 187 20.4 23.4 23.3 15.4 13.5 13.5 1.5 2.2 5.9 0.0 2,520 861 1.7IOI Corporation Bhd N IOI MK 5.78 Jun 10 2,036 2,091 2,346 24.0 29.4 34.3 24.1 19.7 16.8 3.5 1.2 3.5 8.0 38,698 22,739 7.6Genting Plantations Bhd N GENP MK 8.68 Dec 09 326 377 397 43.4 49.9 52.5 20.0 17.4 16.5 2.3 2.0 1.0 cash 6,587 2,135 0.7Kuala Lumpur Kepong Bhd TB KLK MK 21.58 Sep 10 1,012 1,143 1,265 94.8 107.1 118.5 22.8 20.2 18.2 3.8 1.9 4.0 6.8 23,037 9,745 0.8

PropertyEastern & Oriental Bhd O EAST MK 1.14 Mar 10 71 45 70 6.4 5.7 8.0 17.9 20.0 14.3 0.8 1.5 3.3 36.2 940 631 2.8KLCC Property Holdings Bhd U KLCC MK 3.53 Mar 10 897 259 282 19.1 20.4 22.2 18.5 17.3 15.9 0.6 2.3 4.2 16.2 3,297 1,563 0.7SP Setia Bhd O SPSB MK 5.24 Oct 10 252 283 364 21.1 27.9 35.8 24.8 18.8 14.6 2.4 1.0 4.5 26.5 5,674 2,930 2.1Sunw ay City O SCITY MK 4.50 Dec 09 398 202 232 27.7 34.2 39.0 16.3 13.1 11.5 0.9 0.9 2.2 1.9 2,115 741 0.7

ServicesMasterskill Education Group O MASEG MK 2.14 Dec 09 104 119 141 25.3 29.0 34.3 8.5 7.4 6.2 2.2 0.5 6.8 cash 877 359 2.6

ShippingMalay sian Bulk Carriers Bhd U MBC MK 2.97 Dec 09 213 214 318 21.3 21.4 31.8 14.0 13.9 9.3 1.6 0.6 5.5 cash 2,970 921 0.4MISC Bhd U MISC MK 8.75 Mar 10 682 1,331 1,603 23.3 29.8 35.9 37.5 29.4 24.4 1.7 1.6 5.3 20.5 39,058 6,640 1.7

TechnologyJCY International Bhd U JCYH MK 0.80 Sep 10 176 169 225 9.3 8.3 11.0 8.6 9.7 7.3 1.9 1.0 5.2 24.5 1,636 393 6.3JobStreet Corp Bhd O JOBS MK 2.88 Dec 09 38 46 52 11.9 14.8 16.5 24.1 19.5 17.4 6.2 1.4 3.3 cash 916 142 0.1Malay sian Pacific Industries Bhd O MPI MK 5.45 Jun 10 105 94 123 54.0 48.3 63.3 10.1 11.3 8.6 1.4 1.2 6.1 9.1 1,144 240 0.1Uchi Technologies Bhd O UCHI MK 1.34 Dec 09 45 49 54 12.1 13.2 14.5 11.1 10.2 9.3 2.9 1.2 10.5 cash 503 133 0.5Unisem (M) Berhad O UNI MK 1.96 Dec 09 179 204 232 22.5 25.4 28.7 8.7 7.7 6.8 1.2 0.7 6.8 29.4 1,321 466 1.4

TelecommunicationsAx iata Group Berhad O AXIATA MK 4.67 Dec 09 2,745 3,075 3,304 32.5 36.4 39.1 14.4 12.8 11.9 2.0 1.5 2.4 26.3 39,439 15,046 18.1DiGi.com Bhd N DIGI MK 24.80 Dec 09 1,159 1,299 1,451 149.1 167.1 186.6 16.6 14.8 13.3 16.9 1.4 6.7 60.9 19,282 9,151 0.3Max is Berhad N MAXIS MK 5.36 Dec 09 2,320 2,545 2,779 30.9 33.9 37.0 17.3 15.8 14.5 4.7 1.8 10.0 57.0 40,200 12,060 4.2Telekom Malay sia Bhd TB T MK 3.41 Dec 09 970 613 717 16.2 7.3 10.1 21.0 46.5 33.8 1.7 n.m. 7.6 37.0 12,199 4,244 6.5

Transport InfrastructureBintulu Port Holdings Bhd N BPH MK 6.60 Dec 09 143 150 157 35.8 37.5 39.3 18.5 17.6 16.8 3.2 3.8 8.3 cash 2,640 571 0.0Malay sia Airports Holdings Bhd O MAHB MK 6.27 Dec 09 375 414 390 34.1 37.7 35.4 18.4 16.6 17.7 2.0 9.6 4.0 35.6 6,897 2,069 0.5PLUS Ex pressw ay s Bhd O PLUS MK 4.38 Dec 09 1,282 1,669 1,763 25.6 33.4 35.3 17.1 13.1 12.4 3.9 1.0 5.9 57.5 21,900 10,359 5.2



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Travel and LeisureBerjay a Sports Toto Bhd N BST MK 4.25 Apr 10 382 332 373 28.3 25.0 27.6 15.0 17.0 15.4 12.9 n.m. 6.7 40.5 5,742 2,010 1.4Genting Bhd O GENT MK 10.70 Dec 09 2,230 2,974 3,459 65.7 80.3 93.4 16.3 13.3 11.5 2.5 0.8 0.7 cash 39,729 19,865 7.1Genting Malay sia Bhd N GENM MK 3.34 Dec 09 1,230 1,403 1,531 22.7 23.8 25.9 14.7 14.1 12.9 1.8 2.1 2.4 cash 19,756 9,878 5.5RGB International Bhd U RGB MK 0.06 Dec 09 -39 5 8 -3.7 0.4 0.8 n.m. 13.5 7.9 0.8 n.m. 0.0 232.6 69 17 0.4

UtilitiesPuncak Niaga Holdings Bhd N PNH MK 2.54 Dec 09 193 249 331 47.0 60.5 80.4 5.4 4.2 3.2 0.6 0.2 5.3 40.4 1,044 638 0.2Tenaga Nasional Bhd TB TNB MK 8.44 Aug 10 3,202 2,982 3,110 63.5 63.0 69.4 13.3 13.4 12.2 1.3 2.9 2.7 44.8 36,799 13,244 7.9YTL Pow er International O YTLP MK 2.44 Jun 10 1,212 1,251 1,314 15.4 15.8 16.6 15.9 15.4 14.7 2.4 n.m. 7.2 187.7 17,729 3,546 7.2

Note: 1) Dividend yield is gross. O = Outperform, N=Neutral, U = Underperform, TB = Trading Buy, TS = Trading Sell and NR = Not Rated Source: CIMB estimates


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(i) As of 13 December 2010, CIMB has a proprietary position in the following securities in this report: (a) Proton Holdings, Proton Holdings CW, Tan Chong, Tan Chong CW, UMW Holdings, UMW Holdings CW, AirAsia, AirAsia CW, MAS, MAS CW, Sime Darby,

Sime Darby CW, Gamuda, Gamuda CW, IJM Corp, IJM Corp CW, MRCB, MRCB CW, Mudajaya, WCT, WCT CW, Malayan Banking, Maybank CW, Public Bank, Public Bank CW, AMMB Holdings, AMMB Holdings CW, Affin Holdings, Affin Holdings CW, Hong Leong Bank, Hong Leong Bank CW, RHB Capital, RHB Capital CW, Bursa Malaysia, Bursa Malaysia CW, Hartalega, Hartalega CW, Supermax, Supermax CW, Top Glove, Top Glove CW, Kencana Petroleum, Kencana Petroleum CW, SapuraCrest Petroleum, SapuraCrest Petroleum CW, Petronas Dagangan, Petra Perdana, Petra Perdana CW, Wah Seong, Wah Seong CW, IOI Corp, IOI Corp CW, KLK, KLK CW, SP Setia, SP Setia CW, Maybulk, MISC, MISC CW, JCY, JCY CW, Unisem, Unisem CW, Axiata, Axiata CW, DiGi, DiGi CW, Maxis, Maxis CW, Telekom Malaysia, Telekom Malaysia CW, Malaysia Airport Holdings, Malaysia Airport Holdings CW, PLUS Expressways, Berjaya Sports Toto, Berjaya Sports Toto CW, Genting, Genting CW, Genting Malaysia, Genting Malaysia CW, Tenaga Nasional, Tenaga Nasional CW, YTL Power, YTL Power CW.

(ii) As of 17 December 2010, the analyst, Terence Wong / Kelvin Goh / Ivy Ng / Raymond Yap / Nigel Foo / Winson Ng / Sharizan Rosely / Norziana Mohd Inon / Loke Wei Wern who prepared this report, has / have an interest in the securities in the following company or companies covered or recommended in this report: (a) -.

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United Arab Emirates: The distributor of this report has not been approved or licensed by the UAE Central Bank or any other relevant licensing authorities or governmental agencies in the United Arab Emirates. This report is strictly private and confidential and has not been reviewed by, deposited or registered with UAE Central Bank or any other licensing authority or governmental agencies in the United Arab Emirates. This report is being issued outside the United Arab Emirates to a limited number of institutional investors and must not be provided to any person other than the original recipient and may not be reproduced or used for any other purpose. Further, the information contained in this report is not intended to lead to the sale of investments under any subscription agreement or the conclusion of any other contract of whatsoever nature within the territory of the United Arab Emirates. United Kingdom: This report is being distributed by CIMB Securities (UK) Limited only to, and is directed at selected persons on the basis that those persons are (a) persons falling within Article 19 of the Financial Services and Markets Act 2000 (Financial Promotions) Order 2005 (the “Order”) who have professional experience in investments of this type or (b) high net worth entities, and other persons to whom it may otherwise lawfully be communicated, falling within Article 49(1) of the Order, (all such persons together being referred to as “relevant persons”). A high net worth entity includes a body corporate which has (or is a member of a group which has) a called-up share capital or net assets of not less than (a) if it has (or is a subsidiary of an undertaking which has) more than 20 members, £500,000, (b) otherwise, £5 million, the trustee of a high value trust or an unincorporated association or partnership with assets of no less than £5 million. Directors, officers and employees of such entities are also included provided their responsibilities regarding those entities involve engaging in investment activity. Persons who do not have professional experience relating to investments should not rely on this document. United States: This research report is distributed in the United States of America by CIMB Securities (USA) Inc, a U.S.-registered broker-dealer and a related company of CIMB Research Pte Ltd solely to persons who qualify as "Major U.S. Institutional Investors" as defined in Rule 15a-6 under the Securities and Exchange Act of 1934. This communication is only for Institutional Investors and investment professionals whose ordinary business activities involve investing in shares, bonds and associated securities and/or derivative securities and who have professional experience in such investments. Any person who is not an Institutional Investor must not rely on this communication. However, the delivery of this research report to any person in the United States of America shall not be deemed a recommendation to effect any transactions in the securities discussed herein or an endorsement of any opinion expressed herein. For further information or to place an order in any of the above-mentioned securities please contact a registered representative of CIMB Securities (USA) Inc. Other jurisdictions: In any other jurisdictions, except if otherwise restricted by laws or regulations, this report is only for distribution to professional, institutional or sophisticated investors as defined in the laws and regulations of such jurisdictions.


RECOMMENDATION FRAMEWORK #1*

STOCK RECOMMENDATIONS SECTOR RECOMMENDATIONS OUTPERFORM: The stock's total return is expected to exceed a relevant benchmark's total return by 5% or more over the next 12 months.

OVERWEIGHT: The industry, as defined by the analyst's coverage universe, is expected to outperform the relevant primary market index over the next 12 months.

NEUTRAL: The stock's total return is expected to be within +/-5% of a relevant benchmark's total return.

NEUTRAL: The industry, as defined by the analyst's coverage universe, is expected to perform in line with the relevant primary market index over the next 12 months.

UNDERPERFORM: The stock's total return is expected to be below a relevant benchmark's total return by 5% or more over the next 12 months.

UNDERWEIGHT: The industry, as defined by the analyst's coverage universe, is expected to underperform the relevant primary market index over the next 12 months.

TRADING BUY: The stock's total return is expected to exceed a relevant benchmark's total return by 5% or more over the next 3 months.

TRADING BUY: The industry, as defined by the analyst's coverage universe, is expected to outperform the relevant primary market index over the next 3 months.

TRADING SELL: The stock's total return is expected to be below a relevant benchmark's total return by 5% or more over the next 3 months.

TRADING SELL: The industry, as defined by the analyst's coverage universe, is expected to underperform the relevant primary market index over the next 3 months.

* This framework only applies to stocks listed on the Singapore Stock Exchange, Bursa Malaysia, Stock Exchange of Thailand and Jakarta Stock Exchange. Occasionally, it is permitted for the total expected returns to be temporarily outside the prescribed ranges due to extreme market volatility or other justifiable company or industry-specific reasons.

CIMB Research Pte Ltd (Co. Reg. No. 198701620M)

RECOMMENDATION FRAMEWORK #2 **

STOCK RECOMMENDATIONS SECTOR RECOMMENDATIONS OUTPERFORM: Expected positive total returns of 15% or more over the next 12 months.

OVERWEIGHT: The industry, as defined by the analyst's coverage universe, has a high number of stocks that are expected to have total returns of +15% or better over the next 12 months.

NEUTRAL: Expected total returns of between -15% and +15% over the next 12 months.

NEUTRAL: The industry, as defined by the analyst's coverage universe, has either (i) an equal number of stocks that are expected to have total returns of +15% (or better) or -15% (or worse), or (ii) stocks that are predominantly expected to have total returns that will range from +15% to -15%; both over the next 12 months.

UNDERPERFORM: Expected negative total returns of 15% or more over the next 12 months.

UNDERWEIGHT: The industry, as defined by the analyst's coverage universe, has a high number of stocks that are expected to have total returns of -15% or worse over the next 12 months.

TRADING BUY: Expected positive total returns of 15% or more over the next 3 months.

TRADING BUY: The industry, as defined by the analyst's coverage universe, has a high number of stocks that are expected to have total returns of +15% or better over the next 3 months.

TRADING SELL: Expected negative total returns of 15% or more over the next 3 months.

TRADING SELL: The industry, as defined by the analyst's coverage universe, has a high number of stocks that are expected to have total returns of -15% or worse over the next 3 months.

** This framework only applies to stocks listed on the Hong Kong Stock Exchange and China listings on the Singapore Stock Exchange. Occasionally, it is permitted for the total expected returns to be temporarily outside the prescribed ranges due to extreme market volatility or other justifiable company or industry-specific reasons.


CIMB INVESTMENT BANK – ANALYSTS’ COVERAGE

TOH Hoon Chew, CFA (Reg. Head of Research) +60 (3) 2084-9684 – [email protected]

Terence WONG, CFA (Head of Research) +60 (3) 2084-9689 – [email protected] Strategy Property Eastern & Oriental KLCC Property Mah Sing (Bursa scheme) SP Setia Sunway City UM Land (Bursa scheme)

Kelvin GOH, CFA +60 (3) 2084-9699 – [email protected] Telecommunications Axiata Group DiGi.com Maxis Telekom Malaysia

Ivy NG, CFA +60 (3) 2084-9697 – [email protected] Conglomerates Sime Darby Gaming Berjaya Sports Toto Genting Genting Malaysia RGB International Plantations Genting Plantations Hap Seng Plantations IOI Corp KL Kepong Utilities Tenaga Nasional YTL Power

Nigel FOO +60 (3) 2084-9293 – [email protected] Mid-small Caps Asia File Cocoaland Daibochi Plastic Eksons Corporation Lingui (Bursa scheme) MTD-ACPI Engineering Pelikan International Corporation Tomypak Wellcall Holdings Retail Xingquan International Regional Technicals

Raymond YAP, CFA +60 (3) 2084-9769 – [email protected] Aviation AirAsia MAS Shipping Maybulk MISC

Winson NG, CFA +60 (3) 2084-9686 – [email protected] Financial Services Affin Holdings Alliance Financial Group AMMB Holdings Bursa Malaysia EON Capital Hong Leong Bank Kurnia Asia Malayan Banking Public Bank RHB Capital

Norziana Mohd INON +60 (3) 2084-9645 – [email protected] Food & Beverage C.I. Holdings (Bursa scheme) F&N Holdings Bhd Nestle Malaysia QSR Brands Oil & Gas Alam Maritim (Bursa scheme) Dialog Kencana Petronas Dagangan Petra Perdana SapuraCrest Petroleum Wah Seong

Sharizan ROSELY +60 (3) 2084-9864 – [email protected] Education Masterskill Infrastructure Cahya Mata Sarawak (Bursa scheme) Gamuda IJM MRCB Mudajaya (Bursa scheme) Muhibbah Engineering PLUS Expressways Puncak Niaga WCT Engineering Media Media Chinese International Media Prima Star Publications Simeon KOH +60 (3) 2084-9807 – [email protected] Technology JobStreet MPI Uchi Technologies Unisem

TEE Sze Chiah +60 (3) 2084-9620 – [email protected] Industrial Imaspro (Bursa scheme) Retail Research Retail Technicals

KONG Seh Siang +60 (3) 2084-9289 – [email protected] Retail Technicals

LOKE Wei Wern +60 (3) 2084-9946 - [email protected] Breweries Carlsberg Brewery (M) Guinness Anchor Motor Proton Tan Chong UMW Tobacco BAT JT International Transport Infrastructure Bintulu Port Malaysia Airports Holdings

YEOH Yung Juen +60 (3) 2084-9911 – [email protected] Building Materials Ann Joo Resources Lafarge Malayan Cement Tasek Corporation Industrial Adventa Hartalega Holdings Kossan Rubber Industries Latexx Partners Supermax (Bursa scheme) Top Glove

Jonathan NG +65 6210-8650 – [email protected] Technology JCY International

CIMB INVESTMENT BANK – ECONOMICS RESEARCH

LEE Heng Guie (Head of Economics) +60 (3) 2084-9667 – [email protected]

Julia GOH (Senior Manager) +60 (3) 2084-9698 – [email protected]

Kenneth WONG (Assistant Manager) +60 (3) 2084-8940 – [email protected]

LOKE Siew Ting (Executive) +60 (3) 2084-9867 – [email protected]


CIMB SECURITIES OFFICES

CIMB Investment Bank Bhd

CIMB Securities (S) Pte Ltd

PT CIMB Securities Indonesia

CIMB Securities (HK) Limited

CIMB Securities (Thailand) Co Ltd

CIMB Securities (UK) Ltd

CIMB Securities (USA) Inc

(18417-M) (A Participating Organisation of Bursa Malaysia Securities Bhd)

10th Floor Bangunan CIMB Jalan Semantan

Damansara Heights 50490 Kuala Lumpur

Malaysia

(198701621D) 50 Raffles Place #19-00 Singapore Land Tower

Singapore 048623

(01.353.099.3-054.000) The Jakarta Stock Exchange Building Tower II, 20th Floor Jl. Jend. Sudirman

Kav. 52-53 Jakarta 12190

Indonesia

(290697) 25th Floor

Central Tower 28 Queen’s Road

Central, Hong Kong

(0105542081800) 44 CIMB Thai Bank

Building 24-25th Floor Soi Langsuan

Lumpini, Patumwan Bangkok 10330

Thailand

(2719607) 27 Knightsbridge

London SW1X 7YB United Kingdom

(52-1971703) 540 Madison Avenue

11th Floor New York

N.Y. 10022 USA

T: +60 (3) 2084 8888 F: +60 (3) 2084 8899

T: +65 6225-1228 F: +65 6224-6906

T: +62 (21) 515-1330 F: +62 (21) 515-1335

T: +852 2868-0380 F: +852 2537-1928

T: +66 (2) 657-9000 F: +66 (2) 657-9111

T: +44 (20) 7201-2199 F: +44 (20) 7201-2191

T: +1 (212) 616 8600 F: +1 (212) 616 8639

2010 12 17 (cimb) my strategy 2011 mal-nav-2011-171210

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