SEA Navigator

The S.E.A. Navigator – Malaysia 2011

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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.

The S.E.A. Navigator – Malaysia 2011

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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

Affin Axiata Gamuda Kencana MAS MRCB RHB Cap SapuraCrest Sime Darby WCT

Bloomberg ticker AHB MK AXIATA MK GAM MK KEPB MK MAS MK MRC MK RHBC MK SCRES MK SIME MK WCT MK

Recom. O O O O O TB O O TB O

Price (Local) 3.20 4.67 3.76 2.01 2.07 2.01 8.59 2.82 8.74 3.00

Target price Mkt cap (Local) (US$ m) 4.04 1,520 5.90 12,533 5.00 2,443 2.60 1,060 3.00 2,199 2.53 882 10.50 5,878 3.30 1,144 10.78 16,691 4.34 750

Core P/E (x) CY2011 CY2012 8.8 8.0 12.8 11.9 19.6 15.2 14.1 12.2 11.9 4.0 41.3 34.1 10.9 9.5 13.4 12.4 16.3 14.6 13.0 12.5

O = Outperform, N = Neutral, U = Underperform, TB = Trading Buy and TS = Trading Sell Source: Company, CIMB Research

The S.E.A. Navigator – Malaysia 2011

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3-yr EPS CAGR (%) 17.1 35.8 33.8 18.6 178.5 15.6 17.6 19.5 8.7 10.8

P/BV (x) CY2011 0.9 1.8 3.6 10.2 1.6 3.3 1.7 3.8 2.2 1.8

ROE (%) CY2011 10.2 14.5 19.2 78.6 18.4 8.3 16.6 28.9 13.9 15.0

Div yield (%) CY2011 3.8 2.4 3.2 1.5 0.0 0.5 3.7 3.2 4.1 3.3

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 126175%. 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 JCI Index SET Index PCOMP Index FBMKLCI Index SENSEX Index FSSTI Index INDU Index UKX Index HSI Index NKY Index SHCOMP Index

2,745.8 858.1 3,621.6 1,445.0 20,287.0 3,465.6 13,264.8 6,456.9 27,812.7 15,307.8 5,261.6

1,355.4 450.0 1,872.9 876.8 9,647.3 1,761.6 8,776.4 4,434.2 14,387.5 8,859.6 1,820.8

2,534.4 734.5 3,052.7 1,272.8 17,464.8 2,897.6 10,428.1 5,412.9 21,872.5 10,546.4 3,277.1

6 Dec 10

YT D

From end-08

From end-07

3,722.3 1,034.1 4,223.1 1,501.7 19,981.3 3,181.4 11,382.1 5,754.7 23,237.7 10,167.2 2,857.2

46.9% 40.8% 38.3% 18.0% 14.4% 9.8% 9.1% 6.3% 6.2% -3.6% -12.8%

174.6% 129.8% 125.5% 71.3% 107.1% 80.6% 29.7% 29.8% 61.5% 14.8% 56.9%

35.6% 20.5% 16.6% 3.9% -1.5% -8.2% -14.2% -10.9% -16.4% -33.6% -45.7%

Source: Bloomberg, CIMB Research

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) 1000

500

-1000

-1500 Source: EPFR, CIMB Research

The S.E.A. Navigator – Malaysia 2011

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3/31/2010

3/31/2009

3/31/2008

3/31/2007

3/31/2006

3/31/2005

3/31/2004

3/31/2003

3/31/2002

3/31/2001

3/31/2000

3/31/1999

3/31/1998

3/31/1997

-500

3/31/1996

0 3/31/1995

Regional markets, particularly TIPs, performed well in 2010

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 3.0%

2.7% CY10

2.0%

1.0%

1.6%

CY11

2.1%

1.9%

1.8%

1.5% 1.0%

1.1%

0.0%

-1.0% End Feb 2010

End May 2010

End Aug 2010

End Nov 2010

Source: CIMB estimates

Figure 5: Revisions up/revisions down (x) 2.00 1.80 1.60 1.40 1.20 1.00 0.80 0.60 0.40 0.20 0.00

Positive momentum for market

Negative momentum for market

3Q03 1Q04 3Q04 1Q05 3Q05 1Q06 3Q06 1Q07 3Q07 1Q08 3Q08 1Q09 3Q09 1Q10 3Q10 Source: CIMB estimates

Figure 6: Performance of indices in 2010 KLTIN Index FBM70 Index KLPRP Index KLCON Index KLPLN Index KLFIN Index KLCSU Index FBM100 Index FBMEMAS Index FBMSC Index FBMKLCI Index KLSER Index FBMS Index FBMFL Index FBMHS Index KLIND Index KLTEC Index FBMMES Index Average

31 Dec 08 231.01 5,442.06 515.61 164.18 4,142.80 6,791.71 282.03 5,613.94 5,726.46 6,552.82 876.75 117.91 5,949.63 5,420.98 6,640.04 2,063.85 13.69 3,333.59

31 Dec 09 291.81 8,269.22 781.71 224.29 6,362.91 11,053.40 372.39 8,308.89 8,507.61 10,165.81 1,272.78 160.94 8,509.52 7,421.81 9,312.02 2,654.51 18.14 4,299.58

% change 26.3% 52.0% 51.6% 36.6% 53.6% 62.7% 32.0% 48.0% 48.6% 55.1% 46.7% 46.7% 43.0% 36.9% 40.2% 28.6% 32.5% 29.0% 42.8%

Source: CIMB estimates, Bloomberg

The S.E.A. Navigator – Malaysia 2011

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06 Dec 10 571.46 10,561.60 988.77 279.67 7,870.14 13,622.41 451.14 9,960.57 10,189.70 12,098.33 1,501.74 188.09 9,916.55 8,511.95 10,377.91 2,848.73 17.69 4,143.75

% change 95.8% 27.7% 26.5% 24.7% 23.7% 23.2% 21.1% 19.9% 19.8% 19.0% 18.0% 16.9% 16.5% 14.7% 11.4% 7.3% -2.5% -3.6% 21.1%

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 pumppriming 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 loansto-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 rerating 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 1550

22/11 -Ireland fiscal crisis 23/09 -FTSE Ups Status To Advanced Emerging Market From Secondary Emerging Market

15/10 -Budget 2011

1500 13/05 -BNM raised the OPR by 25bps to 2.5% .

23/11 -Korea tension

1450 20/01-Obama To Propose New Limits On Banks

05/05-Europe’s debt crisis

1400 19/10-23/10 -61st UMNO

21/06 -China loosens currency grip

26/01-Obama To Propose 3 Year Spending

General assembly

Freeze On Many Programs

1350 04/02- Greece Crisis

21/09 -Economic Transformation Programme Open Day

1300

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

30/03-New Economic Model (NEM) announcement

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

1250 18/02-Fed raises discount rate from 0.50% to 0.75%

1200 1/1/2010

1/31/2010

3/2/2010

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

4/1/2010

5/1/2010

5/31/2010

6/30/2010

7/30/2010

Source: Bloomberg, CIMB Research

The S.E.A. Navigator – Malaysia 2011

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8/29/2010

9/28/2010

10/28/2010

11/27/2010

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 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% Feb-96 Feb-97 Feb-98 Feb-99 Feb-00 Feb-01 Feb-02 Feb-03 Feb-04 Feb-05 Feb-06 Feb-07 Feb-08 Feb-09 Feb-10

Source: EPFR, CIMB Research

Figure 10: Month-end aggregate holdings by country (US$ m) Feb 08 Weightings in EM Asia September Weightings in EM Asia 31-mth aggregate chg 31-mth weighting chg 31-month net sell Net sell/Feb 08

Hong Kong 31,398 12.5% 27,697 9.8% -12% -22%

Singapore 14,973 6.0% 14,301 5.0% -4% -16%

Malaysia 9,865 3.9% 7,526 2.7% -24% -33%

Indonesia 7,267 2.9% 10,797 3.8% 49% 31%

Thailand 9,555 3.8% 12,387 4.4% 30% 14%

Others 177,379 70.8% 211,123 74.4% 19% 5%

EM Asia 250,437 100.0% 283,830 100.0% 13% 0%

(4,205) -13%

(3,418) -23%

(3,370) -34%

(252) -3%

(195) -2%

11,556 7%

115 0%

Source: EPFR, CIMB Research

Figure 11: Foreign ownership in Malaysia 28.0% 27.0% 26.0% 25.0% 24.0% 23.0% 22.0% 21.0% 20.0% 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

The S.E.A. Navigator – Malaysia 2011

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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 Adventa Affin Holdings Bhd AirAsia Bhd Alam Maritim Alliance Financial Group AMMB Holdings Bhd Ann Joo Resources Asia File Genting Plantation CIMB Berjaya Sports Toto Bhd Bintulu Port Holdings Bhd British American Tobacco Bhd Bursa Malaysia Bhd Carlsberg Brewery (M) Bhd CI Holdings Cocoaland Holdings Daibochi Dialog Group Bhd DiGi.com Bhd RGB International Bhd Ekovest Eksons Corporation Bhd EON Capital Bhd E&O Bhd Fraser & Neave Holdings Bhd Gamuda Bhd Genting Bhd Guinness Anchor Bhd Hap Seng Plantation Hartalega Hong Leong Bank Bhd Hunza Properties Bhd IJM Corp Bhd IOI Corporation Bhd JobStreet Corp Bhd JT International Bhd Kencana Petroleum Bhd KLCC Property Holdings Bhd Kossan Rubber Industries Bhd Kuala Lumpur Kepong Bhd Kurnia Asia Bhd Lafarge Malayan Cement Bhd Latexx

Mid-09 (%) 10.3 25.9 37.0 2.0 44.0 52.6 4.7 10.0 7.0 34.9 18.0 2.9 68.7 17.3 64.0 1.0 1.0 <5.0 11.0 8.2 8.0 5.0 41.8 9.0 61.1 45.0 36.0 66.2 3.0 5.0 7.2 5.9 32.0 26.0 39.0 62.3 6.5 14.7 9.8 14.0 4.3 16.5 1.4

Mid-10 (%) % pt change 10.0 (0.3) 26.5 0.6 48.1 11.1 <1.0 (1.0) 39.7 (4.3) 51.3 (1.3) 5.0 0.3 10.0 6.0 (1.0) 42.1 7.2 18.0 1.4 (1.5) 74.5 5.8 14.3 (3.0) 63.3 (0.7) 5.6 5.6 2.0 1.0 3.0 2.0 10.0 5.0 8.5 (2.5) 10.0 1.8 8.0 5.0 44.0 2.2 25.0 16.0 58.0 (3.1) 33.0 (12.0) 37.0 1.0 71.8 5.6 3.0 5.0 7.3 0.1 4.6 (1.3) 38.0 6.0 20.0 (6.0) 50.0 11.0 61.9 (0.4) 6.0 (0.5) 13.4 (1.3) 9.0 (0.8) 17.0 3.0 3.8 (0.5) 15.4 (1.1) 3.4 2.0

MAHB Mah Sing Malayan Banking Bhd Malaysian Airline System Bhd Malaysian Bulk Carriers Bhd Malaysian Pacific Industries Bhd Maxis Media Chinese International Media Prima Bhd MISC Bhd MRCB MTD ACPI Engineering Mudajaya Nestle (Malaysia) Berhad Pelikan International Corp Bhd Petra Perdana Petronas Dagangan Bhd PLUS Expressways Bhd Proton Holdings Bhd Public Bank Bhd Puncak Niaga Holdings Bhd QSR Brands Genting Malaysia RHB Capital Bhd SapuraCrest Sime Darby Bhd SP Setia Bhd Star Publications Bhd Suria Capital Supermax Corp Bhd Tan Chong Motor Holdings Bhd Telekom Malaysia Bhd Axiata Tenaga Nasional Bhd Tomypak Holdings Top Glove Holdings Bhd Uchi Technologies Bhd UM Land UMW Holdings Bhd Unisem (M) Berhad Wah Seong Corp Bhd WCT Engineering Wellcall Holdings Bhd YTL Power International

Source: Company, CIMB Research

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Mid-09 (%) N/A 14.5 11.0 3.9 2.4 9.7 N/A 20.0 40.0 4.9 19.4 3.0 5.6 72.6 20.0 7.0 <5.0 9.1 5.6 24.9 17.0 3.8 32.0 6.0 31.0 13.7 27.0 6.0 11.5 1.6 14.3 10.5 8.5 10.3 1.0 34.0 37.0 54.5 5.5 10.0 11.6 17.0 6.0 5.0

Mid-10 (%) % pt change 9.0 N/A 16.0 1.6 13.2 2.3 4.6 0.7 2.2 (1.0) 8.7 (1.0) 9.0 N/A 24.0 4.0 28.0 (12.0) 4.7 (0.2) 13.0 (6.4) 3.0 16.0 10.4 73.0 0.4 21.0 1.0 4.0 (3.0) 4.0 (0.6) 9.0 (0.1) 10.0 4.4 26.6 5.0 17.0 4.5 0.7 33.0 1.0 32.1 26.1 30.3 (0.8) 13.0 (0.7) 19.0 (8.0) 6.0 5.5 (6.0) 12.0 10.4 19.0 4.7 10.9 0.4 11.5 3.0 11.0 0.7 2.0 1.0 35.0 1.0 38.0 1.0 54.5 6.2 0.7 13.0 3.0 11.8 0.2 12.0 (5.0) 5.0 (1.0) 5.0 -

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

PAS

PKR win

win

DAP

win

win win

win win

win

win win win

win 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 augur well for the stockmarket as the period leading up to elections is typically investorfriendly. 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 previous elections, 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 1,600 General Election

General Election

General Election

08-Mar-08

08-Mar-08

25-Apr-95

1,400

General Election 1,200

General Election

General Election

21-Oct-90

29-Nov -99

21-Mar-04

1,000 800 UMNO

600

9-Oct-96 400

UMNO

UMNO

UMNO

UMNO

4-Nov -93

11-May -00

23-Sep-04

200 1/2/1990

1/2/1992

1/2/1994

1/2/1996

1/2/1998

1/2/2000

1/2/2002

1/2/2004

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

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1/2/2006

26-Mar-09

1/2/2008

1/2/2010

Figure 15: KLCI performance before and after general elections

1982 1986 1990 1995 1999 2004 2008 Average Avg excluding 2008

12 m ths before GE -34.3% -25.7% 2.0% -5.9% 48.5% 44.0% 9.2% 5.4% 4.8%

9 m ths before GE -33.1% -26.8% -17.0% -3.2% 35.8% 32.7% -4.1% -2.3% -1.9%

6 m ths before GE 2.8% 1.6% -13.4% -13.0% -1.6% 21.5% -0.7% -0.4% -0.3%

3 m ths before GE -11.4% 23.4% -24.4% 10.5% -2.9% 17.5% -9.6% 0.4% 2.1%

3 m ths after GE -18.3% 28.6% 2.2% 8.6% 34.4% -8.7% -3.7% 6.2% 7.8%

6 m ths after GE -12.3% 32.8% 24.9% -1.9% 20.5% -4.3% -17.0% 6.1% 10.0%

9 m ths after GE -4.7% 71.5% 23.6% 8.1% 7.2% 0.2% -35.3% 10.1% 17.7%

12 m ths after GE 15.0% 114.1% 8.3% 19.9% -4.3% -2.1% -33.8% 16.7% 25.2%

3 m ths before UE 20.0% -6.7% 32.7% -12.4% 26.6% 1.0% -7.7% 4.2% 1.8% 6.6% 7.2%

3 m ths after UE -37.7% -8.5% 22.7% 21.0% 17.7% 8.6% -12.2% 5.9% 21.3% 4.3% 2.2%

6 m ths after UE -29.7% -20.7% -15.9% 36.6% 6.6% 1.9% -18.3% 3.0% 37.5% 0.1% -4.5%

9 m ths after UE -42.8% -21.1% -21.7% 17.4% 10.4% -7.3% -21.3% 5.9% 42.7% -4.2% -10.0%

12 m ths after UE -46.4% -21.0% -14.7% 14.5% 9.1% -26.7% -37.7% 8.2% 48.2% -7.4% -14.3%

Source: Bloomberg and CIMB estimates

Figure 16: KLCI performance before and after Umno party elections

1981 1984 1987 1990 1993 1996 2000 2004 2009 Average Avg excluding 2009

12 m ths before UE 90.9% 1.1% 105.4% -8.6% 49.6% 16.0% 30.4% 15.5% -28.0% 30.3% 37.5%

9 m ths before UE 61.1% -8.0% 77.0% -23.0% 52.8% 8.2% 34.7% 10.0% -26.8% 20.7% 26.6%

6 m ths before UE 46.7% 2.1% 43.0% -20.1% 36.2% 0.6% 26.3% -6.2% -13.6% 12.8% 16.1%

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

Figure 17: Companies perceived to have strong political ties

AFFIN HOLDINGS BERHAD BERNAS BOUSTEAD DRB-HICOM BHD CMS EQUINE CAPITAL BHD JAKS RESOURCES BHD KENCANA KUB MALAYSIA BHD KULIM LEBAR DAUN BHD MMC CORP BHD MEDIA PRIMA BHD MALAYSIAN RESOURCES CORP BHD MALTON MASTERSKILL NAIM CORPORATION OPCOM HOLDINGS BHD RHB CAPITAL BHD SAPURACREST PETROLEUM BHD SARAWAK PLANTATIONS STAR PUBLICATIONS TIME ENGINEERING BHD TIME DOTCOM BHD TRADEWINDS CORP UEM LAND UTUSAN MELAYU (MALAYSIA) BHD

Bloomberg code AHB PNL BOUS DRB CMS EQC JAK KEPB KUBM KUL LDB MMC MPR MRC MALT MASEG NHB OHB RHBC SCRES SPLB STAR TIM TDC TWC ULHB UTUS

Business activity Banks Food Producers Support Services Industrial Engineering Construction & Materials Real Estate Industrial Metals & Mining Oil Equipment, Services & Dist General Industrials Food Producers Construction & Materials Gas, Water & Multiutilities Media Construction & Materials Construction & Materials Support Services Construction & Materials Technology Hardware & Equipment Banks Oil Equipment, Services & Dist Food Producers Media Software & Computer Services Fixed Line Telecommunications Travel & Leisure Real Estate Media

Price Market cap (RM) (RM m) 4,783 3.20 2.14 1,007 5,293 5.63 1.53 2,958 857 2.60 0.45 102 313 0.72 2.01 3,335 278 0.50 12.36 3,939 113 0.83 2.75 8,374 2,345 2.34 2.01 2,776 253 0.73 2.14 877 873 3.49 0.74 95 18,498 8.59 2.82 3,600 692 2.47 3.39 2,504 302 0.39 0.66 1,658 1,012 0.92 2.29 8,341 87 0.79

Source: Bloomberg, CIMB estimates

The S.E.A. Navigator – Malaysia 2011

[ 10 ]

Hist. P/E (x) 10.7 5.7 11.0 4.5 9.9 N/A N/A 21.6 8.3 15.6 58.5 24.1 6.1 59.8 12.0 9.0 8.8 9.9 13.5 18.3 13.0 13.1 35.8 17.6 174.8 44.8 N/A

Hist. P/B (x) 0.9 1.0 1.3 0.6 0.7 0.5 0.7 4.4 0.8 1.1 1.1 1.3 2.0 2.3 0.6 3.0 1.2 1.3 1.9 3.4 1.4 2.0 1.4 1.4 0.5 3.3 0.3

Hist. div yld (%) 2.7 16.8 5.8 2.6 1.9 N/A N/A 0.1 4.8 1.4 N/A 1.1 6.0 0.5 N/A 3.3 2.9 6.1 2.6 2.5 3.8 21.7 3.4 N/A N/A N/A N/A

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 Alliance/BN PAS* Keadilan DAP Others Independent Total

59 74 13 14 3 104

64 89 9 6 104

69 74 12 13 44 1 144

74 135 9 10 154

78 130 5 16 1 2 154

82 132 5 9 8 154

86 148 1 24 4 177

90 127 7 20 22 4 180

95 162 7 9 14 192

99 148 27 5 10 3 193

04 199 6 1 12 1 219

08 140 23 31 28 222

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 Year 52

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

71

59 45

51

86

61

88 84 86 84

57 61 57 53

71

65 % popular v otes w on % seats w on

10

20

77

64 50.4

0

84

57

30

40

50

91

63 60

70

80

90

100

Source: Press reports, Election Commission, CIMB Research

Figure 20: Voter turnout in parliamentary elections Year 12

Total v otes polled (m) Voter turnout (%) (RHS)

(%) 80.0

Eligible v oters (m)

10

78.0

8

76.0

6

74.0

4

72.0

2

70.0

0

68.0 59

64

69

74

78

82

86

Source: Press reports, Election Commission, CIMB Research

The S.E.A. Navigator – Malaysia 2011

[ 11 ]

90

95

99

04

08

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 2Q10 to 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 Domestic demand Change in stock

% pt contribution

Net exports Real GDP growth (RHS)

% yoy

12

8

9

6

6

4

3

2

0

0

-3

-2 -4

-6 2001

2002

2003

2004

2005

2006

2007

2008

2009

2010E 2011F 2012F

Source: BNM, CIMB Research

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

Annualised real GDP growth

Leading index - 6-mth smoothed growth rate

25 20 15 10 5 0 -5 -10 Jan-01 Nov-01 Sep-02 Jul-03 May-04 Mar-05 Jan-06 Nov-06 Sep-07 Jul-08 May-09 Mar-10 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.

The S.E.A. Navigator – Malaysia 2011

[ 12 ]

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 and sustained income growth. Firm commodity prices, especially for crude palm oil (our inhouse 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 % yoy 2009

2010E

% pt contribution

2011F

2012F

2009

2010E

2011F

% share 2012F

2009

2010E

2011F

2012F 100.0

Real GDP

-1.7

7.0

5.5

6.5

-1.7

7.0

5.5

6.5

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

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 be reduced 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 % yoy

Private investment

Public investment

60 45 30 15 0 -15 -30 2001

2002

2003

2004

2005

2006

2007

Source: BNM, CIMB Research

The S.E.A. Navigator – Malaysia 2011

[ 13 ]

2008

2009

2010E

2011F

2012F

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 % yoy

Real GDP

% pt contribution

% share

2009

2010E

2011F

2012F

2009

2010E

2011F

2012F

2009

2010E

2011F

2012F

-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

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 inflation upside. 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 S.E.A. Navigator – Malaysia 2011

[ 14 ]

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 % yoy

Inflation

OPR (RHS)

% p.a.

12

4.0

9

3.5

6

3.0

3

2.5

0

2.0

-3

1.5

-6

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

Source: Source: BNM, DOS, CIMB Research

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

The S.E.A. Navigator – Malaysia 2011

[ 15 ]

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.

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 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 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.

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.

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.

Political risks

Policy risks

Execution risks

Corporate earnings risks

Foreign funds flow

Markets to remain volatile

Volatility here to stay? 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.

The S.E.A. Navigator – Malaysia 2011

[ 16 ]

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 rerating 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 24.0 22.0

FBMKLCI's actual PER, now at 14.4x 12M forward

+3 S.D.

20.0

P/E (x)

18.0 +2 S.D.

16.0 14.0

+1 S.D.

12.0

-1 S.D.

10.0

-2 S.D.

8.0

3-year moving avg = 15.3x

-3 S.D.

6.0 Nov-03

Jul-04

Mar-05

Nov-05

Jul-06

Mar-07

Nov-07

Jul-08

Mar-09

Nov-09

Jul-10

Source: CIMB estimates

Figure 28: KLCI targets 3 year m oving avg P/E

end-2011 Target basis KLCI target P/E (x) 1,436 12.2 1,525 13.0 1,615 13.8 1,705 14.5 1,795 15.3 1,884 16.1 1,974 16.8 2,064 17.6 2,154 18.4

20 discount 15% discount 10% discount 5% discount Zero discount 5% premium 10% premium 15% premium 20% premium No te: End-2011target based o n 2012 EP S 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 midcycle 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 latestage 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.

The S.E.A. Navigator – Malaysia 2011

[ 17 ]

12M forward core P/E

Figure 29: FBM KLCI’s 12M forward core P/E (x) 19 18 17 16 15 14 13 12 11 10

Mid-cycle

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 59 Month of upcycle

Source: CIMB estimates

Figure 30: FBM KLCI’s P/BV 2.9

Current P/BV

2.7 2.5 2.3 2.1

Mid-cycle

1.9 1.7 1.5 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 59 Months of upcycle

Source: CIMB estimates

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 Feb 77 to Jun 81 May 86 to Mar 90 Sep 92 to Dec 93 Nov 95 to Feb 97 Aug 98 to Feb 00 May 03 to May 06 Jun 06 to Jan 08 Average

Months 52.0 27.0 15.0 15.0 18.0 36.0 19.0 26.0

Trough 90.77 169.83 567.66 888.91 302.91 627.26 913.63

Peak 225.51 606.94 1,275.32 1,270.69 1,013.27 966.05 1,516.22

Index chg 148.4% 257.4% 124.7% 42.9% 234.5% 54.0% 66.0% 132.6%

Source: CIMB Research

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%.

The S.E.A. Navigator – Malaysia 2011

[ 18 ]

Figure 32: Regional comparisons 2010 HK ( CIMB coverage) JCI (ID) KLCI (MY) FSSTI (SG) SET (TH) Simple Region x KL avg KLCI P/E premium vs region

Core P/E (x) 2011

12.3 17.7 16.4 15.8 14.0 15.0 9.7%

10.8 14.8 14.4 14.2 12.0 13.0 11.2%

Core EPS growth 2011

2012

2010

9.5 12.8 12.7 12.8 10.3 11.4 11.9%

27.2% 26.9% 26.6% 22.3% 33.8% 27.6%

14.1% 20.1% 13.9% 11.5% 16.2% 15.5%

CY2009 19.0 18.8 17.6 -8.6% 2.1 5.4% 9.1 20.7 31.1 26.3% 12.8% 1,273

CY2010 16.1 16.4 16.4 26.6% 2.4 4.7% 8.8 17.5 16.9 19.7% 15.0% 1,502 1.14

CY2011 14.3 14.1 14.4 13.9% 2.2 4.7% 7.8 13.8 12.4 12.0% 15.8% 1,502 1.02

2012 13.4% 15.6% 13.2% 10.9% 16.5% 14.1%

Source: CIMB

Figure 33: KLCI Index data FBMKLCI Index P/E (x, pre-EI) P/E (x, after EI) P/E (x, core) Core EPS growth (%) P/BV (x) Dividend yield (%) EV/EBITDA (x) P/FCF (x, equity) P/FCF (x, firm) Net gearing (%) ROE (%, recurring) FBMKLCI Index CIMB/consensus (x)

CY2003 14.8 14.7 14.6 16.7% 1.9 4.6% 8.6 20.8 27.0 65.5% 14.2% 794

CY2004 15.5 14.6 15.4 8.0% 2.1 6.3% 8.4 17.0 14.6 55.0% 14.2% 907

CY2005 14.7 14.0 15.1 1.5% 2.0 5.9% 8.2 33.9 12.8 39.7% 13.9% 900

CY2006 15.8 15.1 16.8 9.1% 2.3 5.7% 8.6 19.5 17.3 40.6% 15.6% 1,096

CY2007 17.7 16.8 18.3 21.3% 2.9 4.6% 10.2 18.4 14.8 23.9% 17.4% 1,445

CY2008 11.7 13.2 11.1 0.2% 1.7 6.1% 6.5 14.7 (449.3) 30.5% 15.8% 877

CY2012 12.7 12.6 12.7 13.2% 2.0 5.1% 7.0 14.8 11.8 3.5% 16.5% 1,502 1.02

Source: CIMB estimates

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

The S.E.A. Navigator – Malaysia 2011

[ 19 ]

Figure 35: Sector weightings Overweight Airlines Automotive Banking Construction Gaming Media Oil & gas Plantations Property Rubber Gloves Semiconductor Steel Telecommunications Utilities

Neutral Brewery Cement Technology

Underweight Food & beverage Insurance Shipping Tobacco

Source: CIMB estimates

Loke Wei Wern

Automotive 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 1.23.0x. 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.

Winson Ng Gia Yann

Banking

Banking sector to chart 16% The banking sector remains an OVERWEIGHT, underpinned by the favourable EPS growth in 2011 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-stringentthan-expected Basel III capital requirements. RHB Capital is our top pick for the sector.

Sharizan Rosely

Construction 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.

The S.E.A. Navigator – Malaysia 2011

[ 20 ]

Norziana Mohd Inon

Oil & Gas 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 into setting 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. We remain OVERWEIGHT on the sector and SapuraCrest stays as our top pick.

Terence Wong

Property 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.

Terence Wong

GLCs 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.

The S.E.A. Navigator – Malaysia 2011

[ 21 ]

Figure 36: Government-linked companies

Affin Axiata Bursa Malaysia KLCC Property Malayan Banking MAS MRCB Media Prima MISC Petronas Dagangan Proton QSR RHB Cap Sime Darby Star Publications Telekom Malaysia Tenaga Nasional UMW

Bloomberg ticker AHB MK AXIATA MK BURSA MK KLCC MK MAY MK MAS MK MRC MK MPR MK MISC MK PETD MK PROH MK QSR MK RHBC MK SIME MK STAR MK T MK TNB MK UMWH MK

Recom. O O N U O O TB N U O TB N O TB O TB TB O

Price (Local) 3.20 4.67 7.96 3.53 8.41 2.07 2.01 2.34 8.75 11.70 4.84 5.63 8.59 8.74 3.39 3.41 8.44 6.91

Target price Mkt cap (Local) (US$ m) 4.04 1,520 5.90 12,533 8.64 1,344 3.03 1,048 9.50 18,916 3.00 2,199 2.53 882 2.78 745 7.00 12,412 15.40 3,694 5.95 845 6.50 520 10.50 5,878 9.84 16,691 4.31 796 4.04 3,877 10.55 11,694 8.85 2,530

Core P/E (x) CY2011 CY2012 8.8 8.0 12.8 11.9 27.4 24.9 11.9 10.5 12.4 11.0 11.9 4.0 41.3 34.1 12.6 11.0 25.4 22.6 12.2 11.1 6.8 6.4 12.9 12.1 10.9 9.5 16.3 14.6 12.9 10.9 46.6 34.0 13.0 11.8 10.5 10.0 17.0 14.4

O = Outperform, N = Neutral, U = Underperform, TB = Trading Buy and TS = Trading Sell Source: Company, CIMB Research

The S.E.A. Navigator – Malaysia 2011

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3-yr EPS CAGR (%) 17.1 35.8 13.0 10.1 14.5 178.5 15.6 (7.5) 19.4 12.8 23.4 13.6 17.6 8.7 16.8 (16.1) 6.1 25.8 22.5

P/BV (x) CY2011 0.9 1.8 4.8 0.6 2.0 1.6 3.3 4.6 1.7 1.7 0.4 3.5 1.7 2.2 2.2 1.9 1.2 1.7 2.1

ROE (%) CY2011 10.2 14.5 17.6 5.0 16.4 18.4 8.3 41.7 6.5 14.3 6.8 27.2 16.6 13.9 17.6 9.2 9.9 17.2 15.1

Div yield (%) CY2011 3.8 2.4 4.4 4.2 7.5 0.0 0.5 4.0 5.3 7.3 2.1 2.7 3.7 4.1 6.2 7.6 2.8 6.4 4.2

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 narrowand 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 regaining some 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 talkedabout 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 FY1112. 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. The S.E.A. Navigator – Malaysia 2011

[ 23 ]

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 4050% 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.

The S.E.A. Navigator – Malaysia 2011

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SECTOR BRIEFS…

The S.E.A. Navigator – Malaysia 2011

[ 25 ]

Maintained

OVERWEIGHT

Autos

MALAYSIA

2011 OUTLOOK

CIMB Research Report

A good cyclical play

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)

units 700,000

Hy undai 1.6%

Nissan

600,000

Others

Perodua

12.9%

31.1%

5.8%

500,000 400,000

Honda

300,000

7.5%

200,000 100,000 2011F

2010F

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

0

Toy ota

Proton

15.0%

26.4%

Source: MAA, CIMB Research

Sector comparisons

Proton Tan Chong UMW Simple average

Bloomberg ticker PROH MK TCM MK UMWH MK

Recom. TB O O

Price (Local) 4.84 5.44 6.91

Target price Mkt cap (Local) (US$ m) 5.95 845 9.15 1,162 8.85 2,530

Core P/E (x) CY2011 CY2012 6.8 6.4 10.7 7.7 10.5 10.0 9.3 8.0

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

The S.E.A. Navigator – Malaysia 2011

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3-yr EPS CAGR (%) 23.4 45.9 25.8 31.7

P/BV (x) CY2011 0.4 1.8 1.7 1.3

ROE Div (%) yield (%) CY2011 CY2011 6.8 2.1 18.4 2.4 17.2 6.4 14.1 3.6

Maintained

OVERWEIGHT

Banks

MALAYSIA

2011 OUTLOOK

CIMB Research Report

Slower but healthy growth

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

Key drivers

Key risks

• 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.

•

Figure 1: Banking system’s loan base and yoy growth

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 2: Banking system’s NPL ratio & loan loss coverage

Source: Bank Negara Malaysia

Sector comparisons

Affin Alliance AMMB Hldgs Malayan Banking Public Bank RHB Cap Simple average

Bloomberg ticker AHB MK AFG MK AMM MK MAY MK PBK MK RHBC MK

Recom. O U O O O O

Price (Local) 3.20 3.08 6.26 8.41 12.80 8.59

Target price Mkt cap (Local) (US$ m) 4.04 1,520 3.11 1,515 8.20 5,996 10.50 18,916 16.10 14,367 10.50 5,878

Core P/E (x) CY2011 CY2012 8.8 8.0 10.5 9.4 11.2 9.8 12.4 11.0 12.8 10.9 10.9 9.5 11.3 10.1

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

The S.E.A. Navigator – Malaysia 2011

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3-yr EPS CAGR (%) 17.1 20.2 24.9 14.5 19.3 17.6 22.1

P/BV (x) CY2011 0.9 1.4 1.6 2.0 3.0 1.7 1.9

ROE Div (%) yield (%) CY2011 CY2011 10.2 3.8 13.8 4.2 15.0 4.2 16.4 7.5 25.1 5.7 16.6 3.7 17.1 4.6

Maintained

NEUTRAL

Brewers

MALAYSIA

2011 OUTLOOK

CIMB Research Report

Not the choice brew

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

Key drivers

Key risks

• 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 RM/HL

1500

1000

1250

800

1000

600

750

400

500

200

250

Hong

China

Vietnam

Philippines

Thailand

Korea

New

Indonesia

Singapore

Australia

Japan

Malaysia

2011F

2010F

2009

2008

2007

2006

2005

2004

2003

2002

2001

Norway

0

0

Source: Company, CIMB Research

Sector comparisons

Carlsberg Brewery Guinness Anchor Simple average

Bloomberg ticker CAB MK GUIN MK

Recom. N N

Price (Local) 6.05 9.96

Target price Mkt cap (Local) (US$ m) 6.70 592 10.45 956

Core P/E (x) CY2011 CY2012 13.0 12.1 17.3 16.7 15.2 14.4

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

The S.E.A. Navigator – Malaysia 2011

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3-yr EPS CAGR (%) 25.9 6.2 16.1

P/BV (x) CY2011 3.0 5.9 4.5

ROE Div (%) yield (%) CY2011 CY2011 23.9 6.1 35.1 6.6 29.5 6.4

Maintained

NEUTRAL

Building Materials

MALAYSIA

2011 OUTLOOK

CIMB Research Report

If you build it, they will come

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

Key drivers

Key risks

• 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)

2,000

Semi / billets Flat HRC

1000 1,500

Long / rebar Flat CRC

900 800

1,000

700 600

500

500 Nov

Sep

Jul

Jan

Core P/E (x) CY2011 CY2012 9.7 6.8 14.4 13.7 9.6 9.2 11.2 9.9

Mar

Sep-10

May-10

Jan-10

Sep-09

May-09

Jan-09

Sep-08

May-08

Jan-08

Target price Mkt cap (Local) (US$ m) 3.74 490 6.37 2,004 9.00 299

May

400

0

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

Sector comparisons

Ann Joo Lafarge M Cement Tasek Simple average

Bloomberg ticker AJR MK LMC MK TC MK

Recom. TB U O

Price (Local) 2.94 7.40 7.59

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

The S.E.A. Navigator – Malaysia 2011

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3-yr EPS CAGR (%) 92.2 3.5 31.4 42.4

P/BV (x) CY2011 1.4 1.9 1.0 1.4

ROE Div (%) yield (%) CY2011 CY2011 15.3 5.8 13.3 5.7 14.3 1.6 14.3 4.4

Maintained

OVERWEIGHT

Construction

MALAYSIA

2011 OUTLOOK

CIMB Research Report

Mega jobs make tracks

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

Key drivers

Key risks

• 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 RM13bn14bn 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 GamudaMMC’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 MTDACPI, which is facing a depleting order book.

Figure 1: Construction sector’s real GDP growth (%)

Figure 2: Major 10MP projects Key projects

Value (RM bn) KL MRT 36-40 7 LRT Ex tension/upgrade Klang Valle Sev en new highw ay s 19 High Speed Rail (HSR) 10-12 Total 74.0

12.0 10.0 8.0 6.0 4.0 2.0

Status Appointed project manager Aw arded Phase 1 Approv ed in 10MP Feasibility study

1Q10

2Q09

3Q08

4Q07

1Q07

2Q06

3Q05

4Q04

1Q04

2Q03

3Q02

4Q01

-4.0

1Q01

0.0 -2.0 -6.0 -8.0 Construction sector growth % yoy

GDP growth % yoy

Source: Company, CIMB Research

Sector comparisons

IJM Corp Gamuda MRCB Muhibbah MTD ACPI WCT Mudajaya Simple average

Bloomberg ticker IJM MK GAM MK MRC MK MUHI MK ACP MK WCT MK MDJ MK

Recom. O O TB TB U O O

Price (Local) 6.14 3.76 2.01 1.36 0.51 3.00 3.94

Target price Mkt cap (Local) (US$ m) 6.95 2,644 5.00 2,451 2.53 885 2.06 173 0.32 38 4.34 752 7.94 523

Core P/E (x) CY2011 CY2012 21.3 20.2 19.6 15.2 41.3 34.1 10.3 9.0 30.5 11.5 13.0 12.5 5.6 5.1 20.2 15.4

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

The S.E.A. Navigator – Malaysia 2011

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3-yr EPS CAGR (%) 32.6 33.8 15.6 59.0 181.4 10.8 67.1 57.2

P/BV (x) CY2011 3.5 3.6 3.3 0.9 0.7 1.8 1.8 2.2

ROE Div (%) yield (%) CY2011 CY2011 16.4 1.7 19.2 3.2 8.3 0.5 8.8 2.2 2.4 1.8 15.0 3.3 36.7 1.5 15.3 2.0

Maintained

UNDERWEIGHT

Food & Beverages

MALAYSIA

2011 OUTLOOK

CIMB Research Report

Not that tantalising

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

Key drivers

Key risks

• 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 competition and 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)

0.25

2.5

0.20

2.0

0.15

1.5

0.10

1.0

0.05

0.5

0.00 Jan-08

0.0 Aug-08

Mar-09

Oct-09

May -10

Dec-10

Jan-10

Apr-10

Jul-10

Oct-10

Source: Bloomberg, Department of Statistics

Sector comparisons

CI Hldgs Cocoaland F&N Hldgs Nestle (M) QSR Simple average

Bloomberg ticker CIH MK COLA MK FNH MK NESZ MK QSR MK

Recom. B N U U N

Price (Local) 3.68 2.34 16.26 43.50 5.63

Target price Mkt cap (Local) (US$ m) 5.15 166 3.26 128 11.05 1,859 38.85 3,252 6.50 521

Core P/E (x) CY2011 CY2012 12.2 10.9 9.7 9.1 21.5 20.9 22.3 21.3 12.9 12.1 15.7 14.9

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

The S.E.A. Navigator – Malaysia 2011

[ 31 ]

3-yr EPS CAGR (%) 11.5 17.2 (1.1) 10.8 13.6 10.4

P/BV (x) CY2011 4.4 2.1 5.1 11.8 3.5 5.4

ROE Div (%) yield (%) CY2011 CY2011 36.3 3.3 23.2 5.1 22.4 3.3 57.3 4.7 27.2 2.7 33.3 3.8

Maintained

OVERWEIGHT

Gaming

MALAYSIA

2011 OUTLOOK

CIMB Research Report

Win some, lose some

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

Key drivers

Key risks

• 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-thanexpected 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 nonperforming 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) Casino (LHS)

Figure 2: Quarterly NFO revenue trend (RM m)

grow th (%) 25% 20% 15% 10% 5% 0% -5% -10% -15%

1,400 1,300 1,200 1,100 1,000 900

grow th (%)

15%

2,300 2,200

10%

2,100 2,000

0%

5% -5%

1,900 1,800

3Q10

2Q10

1Q10

4Q09

3Q09

2Q09

1Q09

4Q08

3Q08

2Q08

1Q08

800

NFO (LHS)

2,400

-10% Mar- Jun- Sep- Dec- Mar- Jun- Sep- Dec- Mar- Jun08

08

08

08

09

09

09

09

10

10

Source: Company, CIMB Research

Sector comparisons

B Toto Genting Genting Malaysia RGB Simple average

Bloomberg ticker BST MK GENT MK GENM MK RGB MK

Recom. N O N U

Price (Local) 4.25 10.70 3.34 0.06

Target price Mkt cap (Local) (US$ m) 4.67 1,830 15.20 12,665 3.90 6,298 0.06 22

Core P/E (x) CY2011 CY2012 15.9 15.3 13.3 11.5 14.1 12.9 13.5 7.9 14.2 11.9

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

The S.E.A. Navigator – Malaysia 2011

[ 32 ]

3-yr EPS CAGR (%) (0.6) 36.5 3.4 162.1 50.4

P/BV (x) CY2011 8.9 2.1 1.6 0.7 3.3

ROE Div (%) yield (%) CY2011 CY2011 60.3 6.8 17.2 0.7 11.9 2.4 5.5 0.0 23.7 2.5

Maintained

OVERWEIGHT

Media

MALAYSIA

2011 OUTLOOK

CIMB Research Report

Sticking to papers

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

Key drivers

Key risks

• 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)

30%

800

20%

700

10% 600

-20%

Adex growth

2009

2007

2005

2003

2001

1999

-10%

1997

0% 500

400 Jan-08

GDP growth

Jun-08

Nov-08

Apr-09

Sep-09

Feb-10

Source: NMR, Bloomberg

Sector comparisons

Media Prima MCI Star Publications Simple average

Bloomberg ticker MPR MK MCIL MK STAR MK

Recom. N O O

Price (Local) 2.34 0.88 3.39

Target price Mkt cap (Local) (US$ m) 2.78 748 1.52 472 4.52 798

Core P/E (x) CY2011 CY2012 12.6 11.0 9.1 8.5 12.9 10.9 11.5 10.1

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

The S.E.A. Navigator – Malaysia 2011

[ 33 ]

3-yr EPS CAGR (%) (7.5) 10.7 16.8 6.7

P/BV (x) CY2011 4.6 1.1 2.2 2.6

ROE Div (%) yield (%) CY2011 CY2011 41.7 4.0 12.2 5.7 17.6 6.2 23.8 5.3

Maintained

OVERWEIGHT

Oil and Gas

MALAYSIA

2011 OUTLOOK

CIMB Research Report

Oiling growth

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

Key drivers

Key risks

• 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 wellqualified 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)

800

25

700

Crude oil & condensate

20

600

Net production

500

Natural gas

15

400

10

300

5

200

0

100 1980

1984

1988

1992

1996

2000

2004

2008

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Source: Petronas

Sector comparisons

Dialog Kencana Petra Perdana Petronas Dagangan SapuraCrest Wah Seong Simple average

Bloomberg ticker DLG MK KEPB MK PETR MK PETD MK SCRES MK WSC MK

Recom. U O TB O O N

Price (Local) 1.60 2.01 0.77 11.70 2.82 2.00

Target price Mkt cap (Local) (US$ m) 1.15 1,014 2.40 1,063 0.98 110 15.40 3,705 3.30 1,148 2.36 462

Core P/E (x) CY2011 CY2012 22.6 20.1 14.1 12.2 12.9 9.4 12.2 11.1 13.4 12.4 12.7 11.7 14.7 13.0

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

The S.E.A. Navigator – Malaysia 2011

[ 34 ]

3-yr EPS CAGR (%) 12.4 18.6 8.4 12.8 19.5 4.3 12.7

P/BV (x) CY2011 4.2 10.2 0.6 1.7 3.8 3.3 4.0

ROE Div (%) yield (%) CY2011 CY2011 20.0 2.5 78.6 1.5 5.3 2.6 14.3 7.3 28.9 3.2 27.4 2.8 29.1 3.3

Maintained

TRADING BUY

Plantations

MALAYSIA

2011 OUTLOOK

CIMB Research Report

Another year of strong harvest

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

Key drivers

Key risks

• 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 Oct/Set 10/11F Op stocks 16.4 Production 143.2 Imports 61.1 Ex ports 61.0 Consumption 143.9 Ending stocks 15.8 Stock/Usage ratio 11.0%

RM per tonne 4,000 3,500 3,000 2,500 2,000

09/10 16.1 138.0 59.4 59.4 137.7 16.4 11.9%

08/09 15.1 131.6 58.7 58.1 131.3 16.1 12.2%

07/08 14.0 127.8 54.8 55.0 126.5 15.1 11.9%

06/07 14.0 120.8 51.5 51.8 120.5 14.0 11.6%

3-yr EPS CAGR (%) 8.7 15.2 8.6 19.0 22.8 14.9

P/BV (x) CY2011 2.2 2.9 3.4 2.1 1.4 2.4

ROE Div (%) yield (%) CY2011 CY2011 13.9 4.1 18.0 3.8 18.1 4.1 12.6 1.0 10.8 5.9 14.7 3.8

1,500 1,000 1-Jan-09

18-Jun-09

24-Nov -09

24-Mar-10

22-Jul-10

19-Nov -10

Source: Oil World, CIMB Research, Bloomberg

Sector comparisons

Sime Darby IOI Corp KLK Genting Plantations Hap Seng Plant Simple average

Bloomberg ticker SIME MK IOI MK KLK MK GENP MK HAPL MK

Recom. TB N TB N TB

Price (Local) 8.74 5.78 21.58 8.68 3.15

Target price Mkt cap (Local) (US$ m) 10.78 16,743 6.54 12,336 25.00 7,344 9.84 2,100 3.73 803

Core P/E (x) CY2011 CY2012 16.3 14.6 17.8 15.9 19.6 18.1 17.4 16.5 13.5 13.5 16.9 15.7

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

The S.E.A. Navigator – Malaysia 2011

[ 35 ]

Maintained

OVERWEIGHT

Power

MALAYSIA

2011 OUTLOOK

CIMB Research Report

A year of reforms?

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

Key drivers

Key risks

• 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) strongerthan-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 the government 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 shortterm 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)

Coal -IPP

Hy dro Oil & Distil. 5.1% 0.4%

Figure 2: Electricity demand by sector (Sep 08 – present) (Gwh) Industrial

Gwh 4,000

Gas Tenaga

Commercial

Domestic

3,500

22.4%

20.6%

3,000 2,500 2,000 1,500

Coal -

Gas - IPP

Tenaga

1,000

32.0%

19.6%

Sep-08

Jan-09 May -09 Sep-09

Jan-10 May -10 Sep-10

Source: Company, CIMB Research

Sector comparisons

Tenaga Nasional YTL Power Simple average

Bloomberg ticker TNB MK YTLP MK

Recom. TB O

Price (Local) 8.44 2.44

Target price Mkt cap (Local) (US$ m) 10.55 11,731 2.97 5,652

Core P/E (x) CY2011 CY2012 13.0 11.8 13.8 13.1 13.4 12.5

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

The S.E.A. Navigator – Malaysia 2011

[ 36 ]

3-yr EPS CAGR (%) 6.1 13.1 9.6

P/BV (x) CY2011 1.2 2.3 1.8

ROE Div (%) yield (%) CY2011 CY2011 9.9 2.8 17.1 7.2 13.5 5.0

Maintained

OVERWEIGHT

Property

MALAYSIA

2011 OUTLOOK

CIMB Research Report

Piling on the newsflow

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

Key drivers

Key risks

• 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

0.4500

500.0

Malaysia house price index

0.4000

Per Capita Income Index

0.3500

450.0 400.0

0.3000

350.0

Consumer Price Index

300.0

0.2500 0.2000

250.0 200.0

0.1500

150.0

0.1000 0.0500

100.0 50.0

0.0000

0.0 1980

1984

1988

1992

1996

2000

2004

2008

1988 1991 1994 1997 2000 2003 2006 2009

Source: BNM, PMR, CIMB Research

Sector comparisons

E&O KLCC Property SP Setia Simple average

Bloomberg ticker EAST MK KLCC MK SPSB MK

Recom. O U O

Price (Local) 1.14 3.53 5.24

Target price Mkt cap (Local) (US$ m) 1.63 300 3.03 1,048 6.88 1,694

Core P/E (x) CY2012 11.6 10.5 14.6 12.2

RNAV (Local) 2.71 5.05 5.73

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

The S.E.A. Navigator – Malaysia 2011

[ 37 ]

3-yr EPS CAGR (%) 11.8 10.1 25.1 15.3

P/BV (x) CY2011 0.8 0.6 2.2 1.2

ROE Div (%) yield (%) CY2011 CY2011 5.9 3.5 5.0 4.2 13.0 4.5 7.9 4.1

Maintained

OVERWEIGHT

Rubber Gloves

MALAYSIA

2011 OUTLOOK

CIMB Research Report

Nitrile has the upper hand

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

Key drivers

Key risks

• 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-rating catalysts 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) Rubber latex

Nitrile latex

Rubber latex

Nitrile latex

Average glove weight (kg) Latex / nitrile content

5.00 73% 3.63

3.50 93% 3.24

Rubber vs. Nitrile -30% 20% -11%

Total solid content Weight of latex / nitrile (kg)

60% 6.04

44% 7.36

22%

Latex / nitrile price (RM/kg)

9.13

5.74

-37%

Total production cost

55.16

42.23

-23%

(For 1,000 gloves)

Jan-07 Mar-07 May-07 Jul-07 Sep-07 Nov-07 Jan-08 Mar-08 May-08 Jul-08 Sep-08 Nov-08 Jan-09 Mar-09 May-09 Jul-09 Sep-09 Nov-09 Jan-10 Mar-10 May-10 Jul-10 Sep-10 Nov-10

15.0 14.0 13.0 12.0 11.0 10.0 9.0 8.0 7.0 6.0 5.0

Figure 2: Rubber and nitrile latex cost comparison (RM)

Source: Company, CIMB Research, Bloomberg, Companies

Sector comparisons

Adventa Hartalega Kossan Latexx Supermax Top Glove Simple average

Bloomberg ticker ADV MK HART MK KRI MK LTX MK SUCB MK TOPG MK

Recom. O O O O O O

Price (Local) 2.13 5.39 3.34 2.67 4.38 5.55

Target price Mkt cap (Local) (US$ m) 3.79 104 8.43 625 5.41 340 3.85 186 8.22 475 7.27 1,094

Core P/E (x) CY2011 CY2012 7.1 5.7 9.4 8.3 7.4 6.3 6.1 5.6 7.1 6.2 12.0 11.1 8.2 7.2

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

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3-yr EPS CAGR (%) 26.9 18.4 12.5 26.6 22.5 9.7 19.4

P/BV (x) CY2011 1.0 3.2 1.8 1.8 1.6 2.5 2.0

ROE Div (%) yield (%) CY2011 CY2011 15.0 3.0 38.9 3.7 27.6 3.0 33.0 4.1 24.7 2.5 22.4 3.4 26.9 3.3

Maintained

OVERWEIGHT

Semiconductor

MALAYSIA

2011 OUTLOOK

CIMB Research Report

Less chipper

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

Key drivers

Key risks

• 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 and from 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) 100 90 80 70 60 50 40 30 20 10 0

450 400 350 300 250 200 150 100 50 0 1Q07

4Q07

3Q08

2Q09

1Q10

Recom. O O

Price (Local) 1.96 5.45

1Q07

4Q07

3Q08

2Q09

3-yr EPS CAGR (%) 41.3 16.1 28.7

P/BV (x) CY2011 1.1 1.3 1.2

1Q10

Source: Company, CIMB Research

Sector comparisons

Unisem MPI Simple average

Bloomberg ticker UNI MK MPI MK

Target price Mkt cap (Local) (US$ m) 2.82 421 6.90 365

Core P/E (x) CY2011 CY2012 6.5 5.7 9.8 7.4 8.2 6.6

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

The S.E.A. Navigator – Malaysia 2011

[ 39 ]

ROE Div (%) yield (%) CY2011 CY2011 18.0 6.8 14.1 6.7 16.1 6.8

Upgraded

OVERWEIGHT

Telecommunications

MALAYSIA

2011 OUTLOOK

CIMB Research Report

Busy signals for 2011

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

Key drivers

Key risks

• 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 abovemarket. 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 sen/min 29

Max is

Figure 2: Projection of revenue market share Celcom

% 50

DiGi

27

45

25

40

23

Max is Celcom

35

21 19

30

17

25 3Q10

2Q10

1Q10

4Q09

3Q09

2Q09

1Q09

4Q08

3Q08

2Q08

1Q08

15

DiGi

20 2006

2007

2008

2009

2010F

2011F

2012F

Source: Company, CIMB Research

Sector comparisons

Axiata DiGi.com Maxis Telekom Malaysia Simple average

Bloomberg ticker AXIATA MK DIGI MK MAXIS MK T MK

Recom. O N N TB

Price (Local) 4.67 24.80 5.36 3.41

Target price Mkt cap (Local) (US$ m) 5.90 12,572 27.00 6,147 5.60 12,815 4.04 3,889

Core P/E (x) CY2011 CY2012 12.8 11.9 14.8 13.3 15.8 14.5 46.6 34.0 22.5 18.4

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

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3-yr EPS CAGR (%) 35.8 13.2 6.4 (16.1) 9.8

P/BV (x) CY2011 1.8 16.9 5.0 1.9 6.4

ROE Div (%) yield (%) CY2011 CY2011 14.5 2.4 114.1 6.7 30.7 10.0 9.2 7.6 42.1 6.7

Maintained

UNDERWEIGHT

Tobacco

MALAYSIA

2011 OUTLOOK

CIMB Research Report

It's getting tougher to smoke

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

Key drivers

Key risks

• 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 localto-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 nonsmoking 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) 50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0%

14.4%

17.5%

2005

20.8%

2006

23.8%

2007

37.5%

39.7%

2009

2010

27.5%

2008

(Mar-

2011F

2009 2010F

2007 2008

2005 2006

2003 2004

2001 2002

2004

1999 2000

1997 1998

1996

('bn sticks) 21 20 19 18 17 16 15 14 13 12 11 10

May )

Source: Companies, CIMB Research

Sector comparisons

British American JTI Simple average

Bloomberg ticker ROTH MK RJR MK

Recom. U N

Price (Local) 45.48 6.03

Target price Mkt cap (Local) (US$ m) 44.00 4,127 6.35 501

Core P/E (x) CY2011 CY2012 17.3 16.9 12.8 12.3 15.1 14.6

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

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[ 41 ]

3-yr EPS CAGR (%) 0.9 5.7 3.3

P/BV (x) CY2011 22.5 3.6 13.1

ROE Div (%) yield (%) CY2011 CY2011 136.3 7.1 30.5 5.0 83.4 6.1

Maintained

NEUTRAL

Transport

MALAYSIA

2011 OUTLOOK

CIMB Research Report

Aviation to outperform shipping

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

Key drivers

Key risks

• 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

400

1,400

200

Baltic Dirty Tanker Index

1,200

0

1,000

-200 -400

AirAsia

-600

MAS

800 600

-800

400

-1,000 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 07

08

09

10

J FM AM J J A S O N D J FM AM J J A S O N 09

10

Source: Baltic Exchange, Companies, CIMB Research

Sector comparisons

MAS AirAsia MISC Maybulk Simple average

Bloomberg ticker MAS MK AIRA MK MISC MK MBC MK

Recom. O O U U

Price (Local) 2.07 2.61 8.75 2.97

Target price Mkt cap (Local) (US$ m) 3.00 2,205 3.85 2,306 7.00 12,451 2.80 947

Core P/E (x) CY2011 CY2012 11.9 4.0 7.4 5.4 25.4 22.6 13.9 9.3 14.7 10.3

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

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3-yr EPS CAGR (%) 178.5 38.4 19.4 19.8 64.0

P/BV (x) CY2011 1.6 1.3 1.7 1.5 1.5

ROE Div (%) yield (%) CY2011 CY2011 18.4 0.0 17.7 0.0 6.5 5.3 11.2 5.5 13.5 2.7

Downgraded

NEUTRAL

Water

MALAYSIA

2011 OUTLOOK

CIMB Research Report

On a slow boat to consolidation

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

Key drivers

Key risks

• 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 Domestic Industrial Irrigation Total demand (mld) Total supply (m ld)

2000 5,558 3,985 20,139 29,682 11,917

2020 10,582 9,756 17,857 38,195 20,300

2050 16,176 15,452 16,802 48,430 n/a

Figure 2: Key water infrastructure projects (RM m) Kelau Dam & related w orks Langat 2 w ater treatment plant & related w orks Sabah w ater supply project Mengkuang Dam (Penang) Total

Value 2,500.0 5,000.0 2,000.0 1,200.0 10,700.0

Source: CIMB Research

Sector comparisons

Gamuda IJM Corp Puncak Niaga Simple average

Bloomberg ticker GAM MK IJM MK PNH MK

Recom. O O N

Price (Local) 3.76 6.14 2.54

Target price Mkt cap (Local) (US$ m) 5.00 2,451 6.95 2,644 2.89 333

Core P/E (x) CY2011 CY2012 19.6 15.2 21.3 20.2 4.2 3.2 15.0 17.7

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

The S.E.A. Navigator – Malaysia 2011

[ 43 ]

3-yr EPS CAGR (%) 33.8 32.6 32.3 32.9

P/BV (x) CY2011 3.6 3.5 0.5 2.5

ROE Div (%) yield (%) CY2011 CY2011 19.2 3.2 16.4 1.7 12.7 5.3 16.1 3.4

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The S.E.A. Navigator – Malaysia 2011

[ 44 ]

COMPANY BRIEFS…

The S.E.A. Navigator – Malaysia 2011

[ 45 ]

Syariah-compliant stock

Adventa Bhd

OUTPERFORM

Maintained

RM2.13

@07/12/10

Surgical glove specialist

MALAYSIA

2011 OUTLOOK

CIMB Research Report

Target: RM3.79 Rubber Gloves

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 rerating 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: 12-m price range:

RM325m/US$104m 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 Revenue (RM m) EBITDA (RM m) EBITDA margins (%) Pretax profit (RM m) Net profit (RM m) EPS (sen) EPS growth (%) P/E (x) Core EPS (sen) Core EPS growth (%) Core P/E (x) Gross DPS (sen) Dividend yield (%) P/BV (x) ROE (%) Net gearing (%) P/FCFE (x) EV/EBITDA (x) % change in EPS estimates CIMB/Consensus (x)

2008 185.9 23.0 12.3% 13.5 13.8 9.0 (32.5%) 23.6 9.0 (32.5%) 23.6 0.0 0.0% 1.9 8.2% 45.3% 33.9 17.6

2009 282.7 45.0 15.9% 18.6 17.2 11.2 24.3% 19.0 18.2 101.4% 11.7 6.8 3.2% 1.8 9.3% 41.6% 140.3 9.0

2010F 353.5 52.0 14.7% 36.9 34.0 22.3 98.3% 9.6 22.3 22.4% 9.6 4.0 1.9% 1.3 13.4% 35.7% (21.5) 8.0 N/A 0.92

2011F 460.2 62.8 13.7% 47.0 43.3 28.3 27.2% 7.5 28.3 27.2% 7.5 6.0 2.8% 1.0 13.3% 31.6% (59.8) 6.9 N/A 0.87

2012F 554.0 77.4 14.0% 61.7 56.8 37.2 31.3% 5.7 37.2 31.3% 5.7 8.0 3.8% 0.8 13.8% 24.3% 19.1 5.5 N/A 0.91

Source: Company, CIMB Research, Bloomberg

Price chart

Corporate profile 0.80

4.4

0.70 3.9

0.60 0.50

3.4

0.40 2.9

0.30 0.20

2.4

0.10 1.9 Dec-09

0.00 May-10 Volume 10m (R.H.Scale)

Oct-10 Adventa Bhd

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.

Source: Bloomberg

The S.E.A. Navigator – Malaysia 2011

[ 46 ]

Financial tables KEY RATIOS

PROFIT & LOSS (RM m, FYE Oct) Revenue Operating expenses EBITDA Depreciation & amortisation EBIT Net interest & invt income Associates’ contribution Exceptional items Others Pretax profit Tax Minority interests Net profit Adj. wt. shares (m) Unadj. year-end shares (m)

2008 186 (163) 23 (7) 16 (3) 0 0 0 13 0 0 14 153 139

2009 283 (238) 45 (10) 35 (5) 0 (12) 0 19 (2) 0 17 153 141

2010F 354 (302) 52 (12) 40 (3) 0 0 0 37 (3) 0 34 153 153

2011F 460 (397) 63 (13) 50 (3) 0 0 0 47 (4) 0 43 153 153

2012F 554 (477) 77 (14) 63 (1) 0 0 0 62 (5) 0 57 153 153

(FYE Oct) Revenue growth (%) EBITDA growth (%) Pretax margins (%) Net profit margins (%) Interest cover (x) Effective tax rates (%) Net dividend payout (%) Debtors turnover (days) Stock turnover (days) Creditors turnover (days)

2011F 269 3 19 291 36 87 78 28 230 37 69 8 114 71 8 79 327 1 2.12

2012F 317 3 18 339 54 105 94 33 286 42 76 7 126 78 9 86 412 1 2.67

(FYE Oct) Production capacity (m pcs p.a) Capacity utilisation (%) ASP (US$) per 1,000 pieces Exchange rate (RM to US$) Natural rubber price (RM /kilogram) Nitrile latex prices (US$/mt)

2008 156 3 19 178 38 47 52 8 144 24 53 10 86 62 5 67 168 1 1.08

2009 163 3 20 186 39 52 48 21 159 29 57 8 95 58 6 65 184 1 1.18

2010F 222 3 19 245 36 67 60 21 185 33 63 8 104 64 7 71 253 1 1.63

2010F 25.0 15.5 10.4 9.6 9.4 8.0 13.5 62.1 69.4 34.1

2011F 30.2 21.0 10.2 9.4 10.6 8.0 15.9 62.1 69.4 29.6

2012F 20.4 23.2 11.1 10.3 12.3 8.0 16.1 62.1 69.4 27.8

2009 3,300 80.0% 20.00 3.55 4.23 1,100

2010F 3,800 75.0% 22.00 3.17 7.00 1,350

2011F 5,300 75.0% 21.00 3.11 6.50 1,368

2012F 6,800 75.0% 20.00 3.15 6.00 1,483

12M - FORWARD FD CORE P/E (X)

CASH FLOW (RM m, FYE Oct) Pretax profit Depreciation & non–cash adj. Working capital changes Cash tax paid Others Cash flow from operations Capex Net investments & sale of FA Others Cash flow from investing Debt raised/(repaid) Equity raised/(repaid) Dividends paid Cash interest & others Cash flow from financing Change in cash Change in net cash/(debt) Ending net cash/(debt)

2009 52.1 95.9 6.6 6.1 6.3 8.2 45.6 61.5 67.6 37.7

KEY DRIVERS

BALANCE SHEET (RM m, end Oct) Fixed assets Intangible assets Other long-term assets Total non-current assets Cash and equivalents Stocks Trade debtors Other current assets Total current assets Trade creditors Short-term borrowings Other current liabilities Total current liabilities Long-term borrowings Other long-term liabilities Total long-term liabilities Shareholders’ funds Minority interests NTA/share (RM)

2008 (17.4) (21.7) 7.3 7.4 4.6 N/A 0.0 101.8 92.1 46.3

2008 13 7 (4) 0 0 16 (26) 0 1 (26) 19 0 (6) (3) 10 0 (19) (77)

2009 19 10 (7) 0 7 28 (29) 1 0 (27) 2 6 (4) (3) 1 1 0 (77)

2010F 37 12 (24) (2) 0 23 (50) 0 0 (50) 12 0 (3) 16 25 (2) (14) (91)

2011F 47 13 (41) (3) 0 16 (35) 0 0 (35) 13 0 (5) 10 18 0 (13) (104)

2012F 62 14 (35) (4) 0 38 (35) 0 0 (35) 14 0 (7) 8 15 18 4 (100)

17.0 15.0 13.0 11.0 9.0 7.0 5.0 3.0 Dec-07

Apr-08

Aug-08

Source: Company, CIMB Research, Bloomberg

The S.E.A. Navigator – Malaysia 2011

[ 47 ]

Dec-08

Apr-09

Aug-09

Dec-09

Apr-10

Aug-10

Dec-10

Affin Holdings Bhd

OUTPERFORM

Maintained

RM3.20

@07/12/10

Small bank gaining ground

MALAYSIA

2011 OUTLOOK

CIMB Research Report

Target: RM4.04 Banks

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-thanexpected 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 Net interest income (RM m) Non-interest income (RM m) Total income (RM m) Loan loss provisions (RM m) Pretax profit (RM m) Net profit (RM m) EPS (sen) EPS growth (%) P/E (x) Gross DPS (sen) Dividend yield (%) P/BV (x) ROE (%) % change in EPS estimates CIMB/Consensus (x)

2008 724.2 313.3 1,137.8 (100.5) 404.2 292.8 19.6 16% 16.3 5.0 1.6% 1.1 6.8%

2009 818.3 378.7 1,299.1 (185.1) 497.2 371.9 24.9 27% 12.9 8.5 2.7% 1.0 8.1%

2010F 875.3 398.4 1,370.9 (93.3) 623.5 474.3 31.7 28% 10.1 10.6 3.3% 0.9 9.6% 1.00

2011F 967.5 425.6 1,497.6 (95.2) 717.8 546.2 36.6 15% 8.8 12.3 3.8% 0.9 10.2% 1.03

2012F 1,048.9 464.7 1,619.7 (90.7) 785.8 598.0 40.0 9% 8.0 13.4 4.2% 0.8 10.3% 1.04

Source: Company, CIMB Research, Bloomberg

Price chart

Corporate profile 1.00

3.5

0.90

3.3

0.80 3.1

0.70

2.9

0.60 0.50

2.7

0.40

2.5

0.30 0.20

2.3 2.1 Dec-09

0.10 0.00 May-10 Volume 10m (R.H.Scale)

Source: Bloomberg

Oct-10 Affin Holdings Bhd

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.

The S.E.A. Navigator – Malaysia 2011

[ 48 ]

Financial tables KEY RATIOS

PROFIT & LOSS (RM m, FYE Dec) Net interest income Non-interest income Other income Total income Overhead expenses Pre-provision profit Loan loss provisions Associates’ contribution Exceptional items Others Pretax profit Tax Minority interests Net profit Adj. wt. shares (m) Unadj. year-end shares (m)

2008 724 313 100 1,138 (588) 550 (101) (5) 0 (41) 404 (111) 0 293 1,494 1,494

2009 818 379 102 1,299 (605) 695 (185) 12 0 (25) 497 (125) 0 372 1,494 1,494

2010F 875 398 97 1,371 (645) 726 (93) 14 0 (23) 623 (149) 0 474 1,494 1,494

2011F 968 426 104 1,498 (680) 817 (95) 16 0 (20) 718 (172) 0 546 1,494 1,494

2012F 1,049 465 106 1,620 (718) 902 (91) 17 0 (43) 786 (188) 0 598 1,494 1,494

(FYE Dec) Total income growth (%) Pre-provision profit growth (%) Pretax growth (%) Net interest margin (%) Cost-income ratio (%) Effective tax rates (%) Net dividend payout (%)

2008 6,852 6,300 13,152 19,928 603 291 1,038 1,817 23,676 36,828 26,935 3,889 700 893 32,417 4,411 0 2.95

2009 6,225 8,317 14,542 22,497 518 243 1,023 1,131 25,412 39,954 28,599 5,147 300 1,173 35,219 4,735 0 3.17

2010F 6,911 5,388 12,299 26,091 395 254 1,023 1,196 28,960 41,259 30,356 3,827 300 1,652 36,136 5,123 0 3.43

2011F 6,922 5,115 12,037 28,983 371 255 1,023 1,214 31,847 43,883 32,315 4,060 300 1,643 38,318 5,565 0 3.72

2012F 7,161 4,761 11,923 31,844 338 259 1,023 1,224 34,688 46,611 34,387 4,194 300 1,682 40,562 6,048 0 4.05

(FYE Dec) Loan growth (%) Deposit growth (%) Loan-deposit ratio (%) Gross NPL (%) Net NPL (%) Loan loss reserve (%) GP ratio (%) RWCR (%)

2009 14.2 26.2 23.0 2.30 46.5 25.2 25.6

2010F 5.5 4.5 25.4 2.29 47.0 23.9 25.2

2011F 9.2 12.5 15.1 2.41 45.4 23.9 25.2

2012F 8.1 10.4 9.5 2.45 44.3 23.9 25.2

2008 15.3 5.4 74.0 5.8 3.2 71.6 1.5 13.9

2009 12.9 6.2 78.7 3.7 2.2 81.5 1.5 13.8

2010F 16.0 6.1 85.9 3.9 2.1 84.2 1.4 14.2

2011F 2012F 11.1 9.9 6.5 6.4 89.7 92.6 4.1 4.1 2.0 1.9 86.9 89.6 1.5 1.5 13.8 13.3

KEY DRIVERS

BALANCE SHEET (RM m, end Dec) Cash & deposits with FIs Marketable securities Total current assets Net loans & advances Long-term investments Fixed assets Intangible assets Other long-term assets Total long-term assets Total assets Customer deposits Deposits of other FIs Subordinated debts Other long-term liabilities Total liabilities Shareholders’ funds Minority interests BV/share (RM)

2008 (0.3) (2.0) 14.5 2.17 51.6 27.6 18.9

12M - FORWARD FD CORE P/E (X)

CURRENT P/BV (X)

14.0

1.10

13.0

1.00

12.0

0.90

11.0 10.0

0.80

9.0

0.70

8.0

0.60

7.0 6.0

0.50

5.0

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

4.0 Dec-07

Apr-08

Aug-08

Source: Company, CIMB Research, Bloomberg

The S.E.A. Navigator – Malaysia 2011

[ 49 ]

Dec-08

Apr-09

Aug-09

Dec-09

Apr-10

Aug-10

Dec-10

Syariah-compliant stock

AirAsia Bhd

OUTPERFORM

Maintained

RM2.61

@07/12/10

Risks dissipating, business booming

MALAYSIA

2011 OUTLOOK

CIMB Research Report

Target: RM3.85 Airlines

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 Revenue (RM m) EBITDA (RM m) EBITDA margins (%) Pretax profit (RM m) Net profit (RM m) EPS (sen) EPS growth (%) P/E (x) Core EPS (sen) Core EPS growth (%) Core P/E (x) Gross DPS (sen) Dividend yield (%) P/BV (x) ROE (%) Net gearing (%) P/FCFE (x) EV/EBITDA (x) % change in EPS estimates CIMB/Consensus (x)

2008 2,851.8 525.7 18.4% (869.2) (496.6) (20.9) (170.8%) nm 2.8 (70.7%) 92.7 0.0 0.0% 3.9 (26.8%) 407.2% (22.8) 24.2

2009 3,178.9 1,193.7 37.6% 639.6 549.2 22.2 206.3% 11.7 18.2 546.5% 14.3 0.0 0.0% 2.7 25.7% 257.0% 75.9 11.1

2010F 3,944.4 1,585.8 40.2% 1,860.4 1,914.2 69.3 211.5% 3.8 27.5 50.8% 9.5 0.0 0.0% 1.6 52.9% 137.2% 4.4 8.5 N/A 0.96

2011F 4,514.0 1,877.4 41.6% 896.3 887.5 32.0 (53.8%) 8.2 35.1 27.7% 7.4 0.0 0.0% 1.3 17.7% 104.4% 9.6 6.9 N/A 1.13

2012F 5,187.9 2,299.9 44.3% 1,353.3 1,339.5 48.3 50.9% 5.4 48.3 37.8% 5.4 0.0 0.0% 1.1 21.8% 74.6% 6.2 5.4 N/A 1.36

Source: Company, CIMB Research, Bloomberg

Price chart

Corporate profile

2.8

3.50

2.6

3.00

2.4 2.2

2.50

2.0

2.00

1.8

1.50

1.6

1.00

1.4

0.50

1.2 1.0 De c-09

0.00 Ma y-10 Volume 10m (R.H.S ca le )

Source: Bloomberg

Oct-10 AirAs ia Bhd

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.

The S.E.A. Navigator – Malaysia 2011

[ 50 ]

Financial tables KEY RATIOS

PROFIT & LOSS (RM m, FYE Dec) Revenue Operating expenses EBITDA Depreciation & amortisation EBIT Net interest & invt income Associates’ contribution Exceptional items Others Pretax profit Tax Minority interests Net profit Adj. wt. shares (m) Unadj. year-end shares (m)

2008 2,852 (2,326) 526 (279) 247 (224) 0 (940) 48 (869) 373 0 (497) 2,374 2,374

2009 3,179 (1,985) 1,194 (425) 769 (367) 0 192 46 640 (90) 0 549 2,469 2,754

2010F 3,944 (2,359) 1,586 (504) 1,082 (367) 0 1,096 50 1,860 54 0 1,914 2,763 2,772

2011F 4,514 (2,637) 1,877 (565) 1,312 (380) 0 (86) 50 896 (9) 0 888 2,772 2,772

2012F 5,188 (2,888) 2,300 (614) 1,686 (382) 0 0 50 1,353 (14) 0 1,339 2,772 2,772

(FYE Dec) Revenue growth (%) EBITDA growth (%) Pretax margins (%) Net profit margins (%) Interest cover (x) Effective tax rates (%) Net dividend payout (%) Debtors turnover (days) Stock turnover (days) Creditors turnover (days)

2011F 9,862 835 164 10,862 3,159 21 51 1,618 4,849 1,380 496 0 1,876 8,369 0 8,369 5,466 0 1.67

2012F 10,698 836 164 11,698 4,321 21 59 1,618 6,019 1,512 496 0 2,008 8,904 0 8,904 6,805 0 2.15

(FYE Dec) Passenger fleet size (# of planes) Av. seat km (ASK, yoy chg %) Rev. psg km (RPK, yoy chg %) Load factor (%) Passenger yield per RPK (sen) Jet fuel price (US$/barrel) Fuel cost per ASK (sen) Non-fuel cost per ASK (sen)

2008 6,594 856 139 7,589 154 21 46 1,711 1,932 1,061 544 164 1,769 6,147 0 6,147 1,606 0 0.32

2009 7,937 773 164 8,874 748 21 36 1,618 2,422 1,039 496 0 1,535 7,097 0 7,097 2,664 0 0.69

2010F 9,415 833 164 10,412 2,404 21 45 1,618 4,087 1,235 496 0 1,731 8,191 0 8,191 4,578 0 1.35

2010F 24.1 32.8 47.2 48.5 2.8 N/A 0.0 3.8 1.9 105.2

2011F 14.4 18.4 19.9 19.7 3.1 1.0 0.0 3.9 1.7 105.7

2012F 14.9 22.5 26.1 25.8 3.8 1.0 0.0 3.9 1.5 101.8

2009 46 17.8% 16.8% 75.0% 17.02 70.33 4.23 7.93

2010F 50 11.4% 14.4% 77.0% 18.88 95.00 5.24 7.51

2011F 54 8.9% 8.9% 77.0% 19.91 100.00 5.19 7.83

2012F 59 8.7% 8.7% 77.0% 21.10 105.00 5.48 7.52

12M - FORWARD FD CORE P/E (X)

CASH FLOW (RM m, FYE Dec) Pretax profit Depreciation & non–cash adj. Working capital changes Cash tax paid Others Cash flow from operations Capex Net investments & sale of FA Others Cash flow from investing Debt raised/(repaid) Equity raised/(repaid) Dividends paid Cash interest & others Cash flow from financing Change in cash Change in net cash/(debt) Ending net cash/(debt)

2009 11.5 127.1 20.1 17.3 2.1 14.1 0.0 4.7 2.4 120.6

KEY DRIVERS

BALANCE SHEET (RM m, end Dec) Fixed assets Intangible assets Other long-term assets Total non-current assets Cash and equivalents Stocks Trade debtors Other current assets Total current assets Trade creditors Short-term borrowings Other current liabilities Total current liabilities Long-term borrowings Other long-term liabilities Total long-term liabilities Shareholders’ funds Minority interests NTA/share (RM)

2008 48.3 1.3 (30.5) (17.4) 1.0 N/A N/A 4.0 2.5 107.6

2008 (869) 279 (124) (3) 207 (511) (2,621) 100 (34) (2,555) 2,993 0 0 (199) 2,794 (272) (3,265) (6,538)

2009 640 425 (82) (4) 297 1,275 (1,919) 183 (35) (1,771) 902 509 0 (321) 1,090 594 (308) (6,846)

2010F 1,860 504 187 (6) (779) 1,766 (1,982) 0 0 (1,982) 2,189 0 0 (317) 1,872 1,656 (533) (6,283)

2011F 896 565 139 (11) 330 1,919 (1,013) 0 0 (1,013) 178 0 0 (330) (151) 755 577 (5,706)

2012F 1,353 614 124 (15) 332 2,409 (1,450) 0 0 (1,450) 535 0 0 (332) 203 1,162 627 (5,079)

48.0 43.0 38.0 33.0 28.0 23.0 18.0 13.0 8.0 3.0 Dec-07

Apr-08

Aug-08

Source: Company, CIMB Research, Bloomberg

The S.E.A. Navigator – Malaysia 2011

[ 51 ]

Dec-08

Apr-09

Aug-09

Dec-09

Apr-10

Aug-10

Dec-10

Alliance Financial Group

UNDERPERFORM

Maintained

RM3.08

@07/12/10

Continued headwinds for the topline

MALAYSIA

2011 OUTLOOK

CIMB Research Report

Target: RM3.11 Banks

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 Net interest income (RM m) Non-interest income (RM m) Total income (RM m) Loan loss provisions (RM m) Pretax profit (RM m) Net profit (RM m) EPS (sen) EPS growth (%) P/E (x) Gross DPS (sen) Dividend yield (%) P/BV (x) ROE (%) % change in EPS estimates CIMB/Consensus (x)

2009 654.6 365.4 1,054.7 (115.1) 303.3 229.1 14.8 (46%) 20.8 8.3 2.7% 1.7 8.6%

2010 616.9 391.3 1,064.5 31.9 408.9 301.4 19.5 32% 15.8 8.5 2.8% 1.6 10.6%

2011F 679.0 429.9 1,185.4 (61.5) 555.5 416.6 26.9 38% 11.4 11.8 3.8% 1.5 13.5% 1.04

2012F 751.3 468.3 1,292.2 (66.3) 623.5 467.5 30.2 12% 10.2 13.3 4.3% 1.4 13.9% 1.04

2013F 813.4 516.0 1,401.6 (75.6) 698.0 523.4 33.8 12% 9.1 14.4 4.7% 1.2 14.2% 1.01

Source: Company, CIMB Research, Bloomberg

Price chart

Corporate profile

3.4

6.00

3.2

5.00

3.0

4.00

2.8

3.00

2.6

2.00

2.4 2.2 De c-09

1.00 0.00 Ma y-10 Volume 10m (R.H.S ca le )

Source: Bloomberg

Oct-10 Allia nce Fina ncia l Group

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.

The S.E.A. Navigator – Malaysia 2011

[ 52 ]

Financial tables KEY RATIOS

PROFIT & LOSS (RM m, FYE Mar) Net interest income Non-interest income Other income Total income Overhead expenses Pre-provision profit Loan loss provisions Associates’ contribution Exceptional items Others Pretax profit Tax Minority interests Net profit Adj. wt. shares (m) Unadj. year-end shares (m)

2009 655 365 35 1,055 (559) 495 (115) 0 0 (77) 303 (74) 0 229 1,548 1,548

2010 617 391 56 1,065 (555) 510 32 0 0 (133) 409 (107) 0 301 1,548 1,548

2011F 679 430 77 1,185 (566) 619 (61) 0 0 (2) 556 (139) 0 417 1,548 1,548

2012F 751 468 73 1,292 (600) 692 (66) 0 0 (2) 623 (156) 0 467 1,548 1,548

2013F 813 516 72 1,402 (626) 776 (76) 0 0 (2) 698 (175) 0 523 1,548 1,548

(FYE Mar) Total income growth (%) Pre-provision profit growth (%) Pretax growth (%) Net interest margin (%) Cost-income ratio (%) Effective tax rates (%) Net dividend payout (%)

2009 5,189 46 5,235 18,718 6,635 178 369 712 26,611 31,846 25,576 1,183 600 1,721 29,080 2,762 5 1.78

2010 3,715 0 3,715 20,648 6,086 163 362 690 27,949 31,664 23,628 2,290 600 2,194 28,712 2,947 5 1.90

2011F 4,604 19 4,623 22,795 5,938 126 363 755 29,976 34,599 25,876 2,519 600 2,387 31,382 3,213 5 2.08

2012F 5,136 11 5,147 25,279 7,202 125 363 789 33,758 38,905 29,564 2,771 600 2,452 35,386 3,514 5 2.27

2013F 6,229 20 6,249 27,718 8,332 122 363 820 37,355 43,604 33,516 3,048 600 2,578 39,742 3,858 5 2.49

(FYE Mar) Loan growth (%) Deposit growth (%) Loan-deposit ratio (%) Gross NPL (%) Net NPL (%) Loan loss reserve (%) GP ratio (%) RWCR (%)

2010 0.9 2.9 34.8 2.53 52.1 26.3 32.9

2011F 11.4 21.4 35.8 2.48 47.8 25.0 33.0

2012F 9.0 11.8 12.2 2.47 46.5 25.0 33.0

2013F 8.5 12.1 12.0 2.39 44.7 25.0 32.0

2009 19.8 19.8 73.2 4.5 1.8 99.7 1.8 14.8

2010 10.3 (7.6) 87.4 3.8 1.8 94.4 1.5 15.7

2011F 10.4 9.5 88.1 3.2 1.6 97.5 1.5 15.9

2012F 2013F 10.9 9.6 14.3 13.4 85.5 82.7 2.9 3.0 1.7 2.0 92.6 82.9 1.5 1.5 16.0 16.3

KEY DRIVERS

BALANCE SHEET (RM m, end Mar) Cash & deposits with FIs Marketable securities Total current assets Net loans & advances Long-term investments Fixed assets Intangible assets Other long-term assets Total long-term assets Total assets Customer deposits Deposits of other FIs Subordinated debts Other long-term liabilities Total liabilities Shareholders’ funds Minority interests BV/share (RM)

2009 3.7 (9.5) (39.6) 2.73 53.0 24.5 41.9

12M - FORWARD FD CORE P/E (X)

CURRENT P/BV (X) 2.10

20.0

1.90 18.0

1.70 16.0

1.50

14.0

1.30

12.0

1.10

10.0

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

8.0 Dec-07

Apr-08

Aug-08

Source: Company, CIMB Research, Bloomberg

The S.E.A. Navigator – Malaysia 2011

[ 53 ]

Dec-08

Apr-09

Aug-09

Dec-09

Apr-10

Aug-10

Dec-10

AMMB Holdings Bhd

OUTPERFORM

Maintained

RM6.26

@07/12/10

Riding on ANZ momentum

MALAYSIA

2011 OUTLOOK

CIMB Research Report

Target: RM8.20 Banks

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 Net interest income (RM m) Non-interest income (RM m) Total income (RM m) Loan loss provisions (RM m) Pretax profit (RM m) Net profit (RM m) EPS (sen) EPS growth (%) P/E (x) Gross DPS (sen) Dividend yield (%) P/BV (x) ROE (%) % change in EPS estimates CIMB/Consensus (x)

2009 1,776.3 1,160.5 2,927.6 (344.2) 1,217.5 860.8 31.6 15% 19.8 8.0 1.3% 2.2 11.6%

2010 1,886.6 1,671.2 3,577.8 (568.9) 1,376.7 1,008.6 35.2 11% 17.8 12.5 2.0% 2.0 11.6%

2011F 2,272.4 1,888.8 4,174.6 (583.1) 1,945.0 1,403.3 46.6 32% 13.4 21.7 3.5% 1.7 13.7% 1.07

2012F 2,615.3 2,152.8 4,799.6 (620.1) 2,447.5 1,770.0 58.7 26% 10.7 27.4 4.4% 1.5 15.4% 1.17

2013F 2,903.3 2,362.6 5,286.0 (716.7) 2,724.3 1,967.5 65.3 11% 9.6 30.5 4.9% 1.4 15.2% 1.12

Source: Company, CIMB Research, Bloomberg

Price chart

Corporate profile 2.00

6.3 5.8

1.50

5.3

1.00

4.8

0.50

4.3 De c-09

0.00 Ma y-10 Volume 10m (R.H.S ca le )

Source: Bloomberg

Oct-10 AMMB Holding s Bhd

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.

The S.E.A. Navigator – Malaysia 2011

[ 54 ]

Financial tables KEY RATIOS

PROFIT & LOSS (RM m, FYE Mar) Net interest income Non-interest income Other income Total income Overhead expenses Pre-provision profit Loan loss provisions Associates’ contribution Exceptional items Others Pretax profit Tax Minority interests Net profit Adj. wt. shares (m) Unadj. year-end shares (m)

2009 1,776 1,161 (9) 2,928 (1,269) 1,659 (344) 0 0 (97) 1,218 (339) (17) 861 2,723 2,723

2010 1,887 1,671 20 3,578 (1,501) 2,076 (569) (1) 0 (130) 1,377 (334) (34) 1,009 2,869 3,014

2011F 2,272 1,889 13 4,175 (1,593) 2,581 (583) 0 0 (53) 1,945 (512) (29) 1,403 3,014 3,014

2012F 2,615 2,153 31 4,800 (1,693) 3,107 (620) 0 0 (39) 2,448 (641) (37) 1,770 3,014 3,014

2013F 2,903 2,363 20 5,286 (1,798) 3,488 (717) 0 0 (47) 2,724 (716) (41) 1,968 3,014 3,014

2009 17,011 8,026 25,037 56,948 780 228 1,808 5,091 64,855 89,893 64,132 8,256 4,206 5,389 81,981 7,736 175 2.84

2010 13,476 10,807 24,283 64,426 563 230 1,826 5,153 72,197 96,480 68,874 5,715 5,649 6,398 86,636 9,638 206 3.20

2011F 17,268 9,517 26,785 71,794 662 256 1,826 5,535 80,072 106,857 77,930 6,173 5,133 6,580 95,816 10,835 206 3.59

2012F 19,297 12,434 31,731 78,561 823 244 1,826 5,668 87,120 118,852 87,495 6,659 5,305 6,992 106,451 12,195 206 4.05

2013F 23,079 13,411 36,490 85,525 994 240 1,826 5,915 94,499 130,989 97,305 7,168 5,247 7,430 117,150 13,632 206 4.52

2009 (12.7) (8.6) 1.9 2.25 43.3 27.9 19.0

2010 22.2 25.2 13.1 2.19 42.0 24.3 26.7

2011F 16.7 24.3 41.3 2.41 38.2 26.3 35.0

2012F 15.0 20.4 25.8 2.49 35.3 26.2 35.0

2013F 10.1 12.3 11.3 2.48 34.0 26.3 35.0

2009 8.3 15.0 88.8 4.1 2.6 75.1 1.6 15.2

2010 13.1 7.4 93.5 2.8 1.5 99.5 1.5 15.8

2011F 11.4 13.1 92.1 3.4 2.2 80.7 1.5 18.0

2012F 2013F 9.4 8.9 12.3 11.2 89.8 87.9 3.4 3.4 2.2 2.2 80.9 81.8 1.6 1.6 17.7 17.7

KEY DRIVERS

BALANCE SHEET (RM m, end Mar) Cash & deposits with FIs Marketable securities Total current assets Net loans & advances Long-term investments Fixed assets Intangible assets Other long-term assets Total long-term assets Total assets Customer deposits Deposits of other FIs Subordinated debts Other long-term liabilities Total liabilities Shareholders’ funds Minority interests BV/share (RM)

(FYE Mar) Total income growth (%) Pre-provision profit growth (%) Pretax growth (%) Net interest margin (%) Cost-income ratio (%) Effective tax rates (%) Net dividend payout (%)

(FYE Mar) Loan growth (%) Deposit growth (%) Loan-deposit ratio (%) Gross NPL (%) Net NPL (%) Loan loss reserve (%) GP ratio (%) RWCR (%)

12M - FORWARD FD CORE P/E (X)

CURRENT P/BV (X)

14.0

1.90

13.0 12.0

1.70

11.0

1.50

10.0

1.30

9.0

1.10

8.0 7.0

0.90 6.0

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

5.0 Dec-07

Apr-08

Aug-08

Source: Company, CIMB Research, Bloomberg

The S.E.A. Navigator – Malaysia 2011

[ 55 ]

Dec-08

Apr-09

Aug-09

Dec-09

Apr-10

Aug-10

Dec-10

Syariah-compliant stock

Ann Joo Resources

TRADING BUY

Maintained

RM2.94

@07/12/10

Pedal to the metal

MALAYSIA

2011 OUTLOOK

CIMB Research Report

Target: RM3.74 Steel

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 Revenue (RM m) EBITDA (RM m) EBITDA margins (%) Pretax profit (RM m) Net profit (RM m) EPS (sen) EPS growth (%) P/E (x) Core EPS (sen) Core EPS growth (%) Core P/E (x) FD core EPS (sen) FD core P/E (x) Gross DPS (sen) Dividend yield (%) P/BV (x) ROE (%) Net gearing (%) P/FCFE (x) EV/EBITDA (x) % change in EPS estimates CIMB/Consensus (x)

2008 2,222.1 153.6 6.9% 119.5 139.4 26.7 (21.7%) 11.0 23.9 (21.7%) 12.3 15.9 18.4 12.0 4.1% 1.7 16.3% 109.0% 30.1 16.7

2009 1,303.0 103.7 8.0% 36.3 31.6 6.0 (77.3%) 48.6 6.0 (74.7%) 48.6 4.0 72.9 6.0 2.0% 1.7 3.5% 93.5% 598.0 23.3

2010F 1,900.3 245.9 12.9% 179.9 132.1 25.3 317.8% 11.6 25.3 317.8% 11.6 16.8 17.5 14.0 4.8% 1.6 14.0% 81.7% 8.6 9.6 N/A 0.89

2011F 2,045.8 280.5 13.7% 215.9 157.7 30.2 19.4% 9.7 30.2 19.4% 9.7 20.1 14.6 17.0 5.8% 1.4 15.3% 68.5% 151.8 8.2 N/A 0.89

2012F 2,293.2 370.1 16.1% 308.3 224.9 43.0 42.6% 6.8 43.0 42.6% 6.8 28.7 10.3 23.0 7.8% 1.3 19.7% 50.9% 16.0 5.9 N/A 1.12

Source: Company, CIMB Research, Bloomberg

Price chart

Corporate profile

3.5

2.50 3.3 3.1

2.00

2.9

1.50

2.7

1.00

2.5

0.50

2.3 2.1 Dec-09

0.00 May-10 Volume 1m (R.H.Scale)

Oct-10 Ann Joo Resources

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.

Source: Bloomberg

The S.E.A. Navigator – Malaysia 2011

[ 56 ]

Financial tables KEY RATIOS

PROFIT & LOSS (RM m, FYE Dec) Revenue Operating expenses EBITDA Depreciation & amortisation EBIT Net interest & invt income Associates’ contribution Exceptional items Others Pretax profit Tax Minority interests Net profit Adj. wt. shares (m) Unadj. year-end shares (m)

2008 2,222 (2,068) 154 (26) 127 (22) 0 14 0 120 29 (9) 139 523 523

2009 1,303 (1,199) 104 (50) 53 (17) 0 0 0 36 (6) 1 32 523 523

2010F 1,900 (1,654) 246 (59) 187 (7) 0 0 0 180 (45) (3) 132 523 523

2011F 2,046 (1,765) 281 (64) 216 (1) 0 0 0 216 (54) (4) 158 523 523

2012F 2,293 (1,923) 370 (63) 307 1 0 0 0 308 (77) (6) 225 523 523

2008 718 10 87 815 41 995 143 80 1,260 97 828 0 926 211 23 234 886 30 1.68

2009 823 9 80 912 35 882 134 8 1,059 129 896 1 1,026 0 23 23 907 14 1.72

2010F 983 9 78 1,070 180 760 195 6 1,141 188 938 2 1,127 60 23 83 984 17 1.86

2011F 969 9 176 1,153 147 716 210 6 1,079 202 844 13 1,060 54 22 76 1,075 21 2.04

2012F 955 9 124 1,088 179 803 235 6 1,223 227 760 16 1,002 49 22 71 1,210 28 2.30

2008 120 26 (162) (94) 27 (82) (286) 20 0 (265) 421 (25) (77) (28) 291 (57) (478) (997)

2009 36 50 155 64 (21) 284 (131) 12 0 (119) (145) (14) (12) (3) (174) (9) 136 (861)

2010F 180 59 120 (6) (52) 301 (220) 0 4 (216) 101 0 (32) (10) 59 144 43 (818)

2011F 216 64 44 (45) (123) 156 (50) 0 5 (45) (100) 0 (43) (1) (143) (33) 67 (751)

2012F 308 63 (88) (54) 16 246 (50) 0 (11) (61) (90) 0 (64) 1 (153) 32 121 (630)

2010F 45.8 137.1 9.5 7.0 9.9 25.0 41.5 31.6 157.7 30.4

2011F 7.7 14.1 10.6 7.7 11.4 25.0 42.3 36.1 131.7 34.8

2012F 12.1 31.9 13.4 9.8 18.0 25.0 40.1 35.4 120.9 34.1

(FYE Dec) Sales volume ('000 tonnes) Average price/tonne (RM ) Exchange rate (RM to US$)

2009 732 2,000 3.51

2010F 804 2,125 3.02

2011F 846 2,200 3.05

2012F 919 2,300 3.05

12M - FORWARD FD CORE P/E (X)

CASH FLOW (RM m, FYE Dec) Pretax profit Depreciation & non–cash adj. Working capital changes Cash tax paid Others Cash flow from operations Capex Net investments & sale of FA Others Cash flow from investing Debt raised/(repaid) Equity raised/(repaid) Dividends paid Cash interest & others Cash flow from financing Change in cash Change in net cash/(debt) Ending net cash/(debt)

2009 (41.4) (32.5) 2.8 2.4 2.2 15.2 74.4 38.8 262.9 31.7

KEY DRIVERS

BALANCE SHEET (RM m, end Dec) Fixed assets Intangible assets Other long-term assets Total non-current assets Cash and equivalents Stocks Trade debtors Other current assets Total current assets Trade creditors Short-term borrowings Other current liabilities Total current liabilities Long-term borrowings Other long-term liabilities Total long-term liabilities Shareholders’ funds Minority interests NTA/share (RM)

2008 14.1 (42.1) 5.4 6.3 5.1 N/A 33.3 29.7 145.3 17.2

(FYE Dec) Revenue growth (%) EBITDA growth (%) Pretax margins (%) Net profit margins (%) Interest cover (x) Effective tax rates (%) Net dividend payout (%) Debtors turnover (days) Stock turnover (days) Creditors turnover (days)

28.0 26.0 24.0 22.0 20.0 18.0 16.0 14.0 12.0 10.0 8.0 Dec-07

Apr-08

Aug-08

Source: Company, CIMB Research, Bloomberg

The S.E.A. Navigator – Malaysia 2011

[ 57 ]

Dec-08

Apr-09

Aug-09

Dec-09

Apr-10

Aug-10

Dec-10

Syariah-compliant stock

Asia File Corporation

OUTPERFORM

Maintained

RM4.45

@07/12/10

File is at the right location

MALAYSIA

2011 OUTLOOK

CIMB Research Report

Target: RM6.36 Retail

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: 12-m price range:

RM514m/US$164m 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 Revenue (RM m) EBITDA (RM m) EBITDA margins (%) Pretax profit (RM m) Net profit (RM m) EPS (sen) EPS growth (%) P/E (x) Gross DPS (sen) Dividend yield (%) P/BV (x) ROE (%) Net cash per share (RM) P/FCFE (x) EV/EBITDA (x) % change in EPS estimates CIMB/Consensus (x)

2009 298.4 52.9 17.7% 76.4 72.8 64.5 78.9% 6.9 25.3 5.7% 1.8 29.1% 0.01 (28.8) 9.5

2010 267.5 63.1 23.6% 66.0 57.7 51.2 (20.7%) 8.7 27.8 6.2% 1.6 19.4% 0.22 11.0 7.6

2011F 296.7 74.9 25.2% 80.7 66.1 58.6 14.6% 7.6 32.7 7.4% 1.4 19.5% 0.44 14.0 6.0 0.99

2012F 326.3 84.8 26.0% 91.1 75.1 66.6 13.6% 6.7 32.7 7.4% 1.2 19.7% 0.85 7.0 4.8 0.99

2013F 359.0 91.4 25.5% 97.7 80.1 71.0 6.6% 6.3 32.7 7.4% 1.1 18.5% 1.18 7.9 4.0 1.00

Source: Company, CIMB Research, Bloomberg

Price chart

Corporate profile

5.6 5.4

3.00

5.2

2.50

5.0

2.00

4.8 1.50 4.6 1.00

4.4

0.50

4.2 4.0 De c-09

0.00 Ma y-10 Volume 100k (R.H.S c a le )

Source: Bloomberg

Oct-10 As ia File Corpora tion

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. The S.E.A. Navigator – Malaysia 2011

[ 58 ]

Financial tables KEY RATIOS

PROFIT & LOSS (RM m, FYE Mar) Revenue Operating expenses EBITDA Depreciation & amortisation EBIT Net interest & invt income Associates’ contribution Exceptional items Others Pretax profit Tax Minority interests Net profit Adj. wt. shares (m) Unadj. year-end shares (m)

2009 298 (246) 53 (6) 47 2 (1) 28 0 76 (4) 0 73 113 113

2010 268 (204) 63 (7) 56 (1) 10 0 0 66 (8) 0 58 113 113

2011F 297 (222) 75 (7) 68 2 11 0 0 81 (15) 0 66 113 113

2012F 326 (242) 85 (7) 78 1 13 0 0 91 (16) 0 75 113 113

2013F 359 (268) 91 (7) 84 1 13 0 0 98 (18) 0 80 113 113

2009 104 30 95 230 48 54 45 2 148 38 15 10 62 32 7 39 277 0 2.18

2010 98 30 105 233 66 59 51 2 177 34 24 11 70 16 6 22 318 0 2.55

2011F 112 30 105 247 50 66 56 2 173 45 0 11 56 0 6 6 358 0 2.91

2012F 128 30 105 263 95 49 61 2 207 48 0 11 59 0 6 6 405 0 3.32

2013F 144 30 105 279 133 54 67 2 256 48 0 11 59 0 17 17 459 0 3.80

2009 76 6 (17) (4) 11 73 (44) 0 (31) (75) (15) 0 (20) (1) (37) (39) (24) 1

2010 66 7 (15) (8) (3) 46 (1) 0 0 (1) 0 0 (21) 0 (21) 24 24 25

2011F 81 7 (1) (15) (11) 61 (10) 0 0 (10) (15) 0 (26) 0 (41) 10 25 50

2012F 91 7 15 (16) (15) 82 (10) 0 0 (10) 0 0 (26) 0 (26) 46 46 96

2013F 98 7 0 (18) (13) 74 (10) 0 0 (10) 0 0 (26) 0 (26) 38 38 133

2011F 10.9 18.6 27.2 22.3 N/A 18.0 39.6 65.4 77.1 48.7

2012F 10.0 13.3 27.9 23.0 N/A 17.5 34.9 65.4 64.2 52.0

2013F 10.0 7.7 27.2 22.3 N/A 18.0 32.7 65.4 52.1 48.8

(FYE Mar) Exchange rate (Euro/USD) Raw materials as % of op costs Total sales growth (% yoy)

2010 1.40 70.0% -10.0%

2011F 1.35 70.0% 11.0%

2012F 1.35 70.0% 10.0%

2013F 1.35 70.0% 10.0%

12M - FORWARD FD CORE P/E (X)

CASH FLOW (RM m, FYE Mar) Pretax profit Depreciation & non–cash adj. Working capital changes Cash tax paid Others Cash flow from operations Capex Net investments & sale of FA Others Cash flow from investing Debt raised/(repaid) Equity raised/(repaid) Dividends paid Cash interest & others Cash flow from financing Change in cash Change in net cash/(debt) Ending net cash/(debt)

2010 (10.4) 19.3 24.7 21.6 N/A 12.6 38.6 65.1 77.3 49.2

KEY DRIVERS

BALANCE SHEET (RM m, end Mar) Fixed assets Intangible assets Other long-term assets Total non-current assets Cash and equivalents Stocks Trade debtors Other current assets Total current assets Trade creditors Short-term borrowings Other current liabilities Total current liabilities Long-term borrowings Other long-term liabilities Total long-term liabilities Shareholders’ funds Minority interests NTA/share (RM)

2009 43.2 (0.4) 25.6 24.4 N/A 4.7 27.9 60.4 78.0 46.4

(FYE Mar) Revenue growth (%) EBITDA growth (%) Pretax margins (%) Net profit margins (%) Interest cover (x) Effective tax rates (%) Net dividend payout (%) Debtors turnover (days) Stock turnover (days) Creditors turnover (days)

16.0 15.0 14.0 13.0 12.0 11.0 10.0 9.0 8.0 7.0 6.0 Dec-07

Apr-08

Aug-08

Source: Company, CIMB Research, Bloomberg

The S.E.A. Navigator – Malaysia 2011

[ 59 ]

Dec-08

Apr-09

Aug-09

Dec-09

Apr-10

Aug-10

Dec-10

Syariah-compliant stock

Axiata Group Berhad

OUTPERFORM

Maintained

RM4.67

@07/12/10

A one-stop Asian telco shop

MALAYSIA

2011 OUTLOOK

CIMB Research Report

Target: RM5.90 Telecommunications - Mobile

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 rerating 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 Revenue (RM m) EBITDA (RM m) EBITDA margins (%) Pretax profit (RM m) Net profit (RM m) EPS (sen) EPS growth (%) P/E (x) Core EPS (sen) Core EPS growth (%) Core P/E (x) Gross DPS (sen) Dividend yield (%) P/BV (x) ROE (%) Net gearing (%) Net cash per share (RM) P/FCFE (x) EV/EBITDA (x) % change in EPS estimates CIMB/Consensus (x)

2008 11,347.7 4,541.8 40.0% 905.8 444.2 8.1 (76.2%) 57.9 19.7 (33.8%) 23.7 0.0 0.0% 2.3 4.2% 142.7% N/A 22.3 9.4

2009 13,105.5 5,156.7 39.3% 2,666.2 1,652.7 22.9 183.9% 20.4 15.6 (20.8%) 30.0 0.0 0.0% 2.2 11.2% 54.6% N/A (5.1) 8.7

2010F 15,744.0 7,165.5 45.5% 4,181.2 2,745.4 32.5 42.1% 14.4 32.5 108.5% 14.4 10.0 2.1% 2.0 14.3% 26.3% N/A 12.0 6.4 0.98

2011F 17,174.5 7,812.8 45.5% 4,836.1 3,075.5 36.4 12.0% 12.8 36.4 12.0% 12.8 11.0 2.4% 1.8 14.5% 10.7% N/A 10.2 5.6 0.99

2012F 18,426.8 8,349.2 45.3% 5,287.6 3,303.7 39.1 7.4% 11.9 39.1 7.4% 11.9 12.0 2.6% 1.6 14.1% N/A 0.09 9.3 4.9 0.93

Source: Company, CIMB Research, Bloomberg

Price chart

Corporate profile 0.60

4.8

0.50 4.3

0.40 0.30

3.8

0.20 3.3

0.10 2.8 De c-09

0.00 Ma y-10 Volume 100m (R.H.S ca le )

Oct-10 Axia ta Group Be rha d

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 nonmobile assets. Axiata was formerly known as TM International.

Source: Bloomberg

The S.E.A. Navigator – Malaysia 2011

[ 60 ]

Financial tables KEY RATIOS

PROFIT & LOSS 2008 11,348 (6,806) 4,542 (2,338) 2,203 (598) (59) (640) 0 906 (435) (27) 444 5,511 5,511

(RM m, FYE Dec) Revenue Operating expenses EBITDA Depreciation & amortisation EBIT Net interest & invt income Associates’ contribution Exceptional items Others Pretax profit Tax Minority interests Net profit Adj. wt. shares (m) Unadj. year-end shares (m)

2009 13,106 (7,949) 5,157 (2,860) 2,296 (319) 101 587 0 2,666 (910) (103) 1,653 7,223 8,445

2010F 15,744 (8,579) 7,165 (3,160) 4,006 (89) 264 0 0 4,181 (1,083) (353) 2,745 8,445 8,445

2011F 2012F (FYE Dec) 17,174 18,427 Revenue growth (%) (9,362) (10,078) EBITDA growth (%) 7,813 8,349 Pretax margins (%) (3,270) (3,346) Net profit margins (%) 4,543 5,003 Interest cover (x) (6) (93) Effective tax rates (%) 299 377 Net dividend payout (%) 0 0 Debtors turnover (days) 0 0 Stock turnover (days) 4,836 5,288 Creditors turnover (days) (1,247) (1,377) (514) (607) 3,075 3,304 8,445 8,445 8,445 8,445

2009 15.5 13.5 20.3 12.6 2.6 34.1 0.0 43.2 1.6 122.6

2010F 20.1 39.0 26.6 17.4 5.6 25.9 30.0 39.8 0.9 102.7

2011F 9.1 9.0 28.2 17.9 6.9 25.8 30.0 41.6 0.9 102.2

2012F 7.3 6.9 28.7 17.9 7.6 26.0 30.0 41.9 1.0 103.3

2009 10.15 54.3 43.0 98.0 31.4 167.0 34.0

2010F 10.75 51.9 40.9 93.1 37.6 158.7 33.3

2011F 11.23 51.2 38.8 91.2 42.5 150.7 32.0

2012F 11.71 49.7 37.6 88.5 47.4 146.2 31.0

KEY DRIVERS

BALANCE SHEET 2008 14,960 8,326 8,990 32,275 3,331 77 1,540 129 5,077 4,538 9,477 195 14,211 10,546 898 11,444 11,217 481 0.52

2009 15,815 8,563 9,068 33,447 2,006 35 1,559 97 3,698 4,263 2,149 221 6,634 10,173 1,457 11,630 18,184 696 1.14

2010F 16,183 8,563 7,068 31,815 5,303 42 1,873 97 7,316 4,601 2,149 1,045 7,795 8,723 1,457 10,180 20,106 1,049 1.37

2011F 16,164 8,563 7,068 31,796 8,334 46 2,043 97 10,520 5,021 2,149 1,144 8,314 8,723 1,457 10,180 22,259 1,563 1.62

2012F 16,054 8,563 7,068 31,686 11,663 50 2,192 97 14,002 5,405 2,149 1,212 8,767 8,723 1,457 10,180 24,571 2,170 1.90

2008 2009 906 2,666 2,338 2,860 (48) (253) (435) (910) (374) 273 2,388 4,636 (5,324) (3,290) 0 0 (6,238) 97 (11,562) (3,193) 10,928 (7,700) 0 5,345 0 90 (598) (319) 10,330 (2,584) 1,156 (1,140) (9,772) 6,560 (16,692) (10,317)

2010F 4,181 3,160 17 (1,083) 89 6,364 (3,528) 2,000 0 (1,528) (1,450) 0 0 (89) (1,539) 3,297 4,747 (5,570)

2011F 4,836 3,270 246 (1,247) 6 7,111 (3,251) 0 0 (3,251) 0 0 (824) (6) (829) 3,030 3,030 (2,539)

2012F 5,288 3,346 232 (1,377) 93 7,581 (3,236) 0 0 (3,236) 0 0 (923) (93) (1,016) 3,329 3,329 790

(RM m, end Dec) Fixed assets Intangible assets Other long-term assets Total non-current assets Cash and equivalents Stocks Trade debtors Other current assets Total current assets Trade creditors Short-term borrowings Other current liabilities Total current liabilities Long-term borrowings Other long-term liabilities Total long-term liabilities Shareholders’ funds Minority interests NTA/share (RM)

(FYE Dec) Mobile subscribers (m) - Malaysia Blended mobile ARPU (RM) Prepaid ARPU (local currency) Postpaid ARPU (local currency) Mobile subscribers (m) - Indonesia Postpaid ARPU (Rp'000) Prepaid ARPU (Rp'000)

12M - FORWARD FD CORE P/E (X)

CASH FLOW (RM m, FYE Dec) Pretax profit Depreciation & non–cash adj. Working capital changes Cash tax paid Others Cash flow from operations Capex Net investments & sale of FA Others Cash flow from investing Debt raised/(repaid) Equity raised/(repaid) Dividends paid Cash interest & others Cash flow from financing Change in cash Change in net cash/(debt) Ending net cash/(debt)

2008 13.5 11.4 8.0 3.9 2.5 48.0 0.0 39.3 2.4 136.5

28.0

23.0

18.0

13.0

8.0 Apr-08

Aug-08

Dec-08

Source: Company, CIMB Research, Bloomberg

The S.E.A. Navigator – Malaysia 2011

[ 61 ]

Apr-09

Aug-09

Dec-09

Apr-10

Aug-10

Dec-10

Berjaya Sports Toto Bhd

NEUTRAL

Maintained

RM4.25

@07/12/10

Betting on yields

MALAYSIA

2011 OUTLOOK

CIMB Research Report

Target: RM4.67 Gaming

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 Revenue (RM m) EBITDA (RM m) EBITDA margins (%) Pretax profit (RM m) Net profit (RM m) EPS (sen) EPS growth (%) P/E (x) Gross DPS (sen) Dividend yield (%) P/BV (x) ROE (%) Net gearing (%) Net cash per share (RM) P/FCFE (x) EV/EBITDA (x) % change in EPS estimates CIMB/Consensus (x)

2009 3,695.7 613.0 16.6% 585.5 413.6 30.6 18.6% 13.9 33.6 7.9% 11.9 102.0% 5.2% N/A 16.3 9.4

2010 3,392.3 578.1 17.0% 546.2 381.7 28.3 (7.7%) 15.0 34.1 8.0% 12.9 82.4% 40.5% N/A 11.3 10.3

2011F 3,503.7 521.8 14.9% 474.5 332.2 24.6 (13.0%) 17.3 28.4 6.7% 9.7 63.9% 9.4% N/A 8.7 11.1 0.88

2012F 3,578.0 556.1 15.5% 524.4 372.9 27.6 12.2% 15.4 29.2 6.9% 8.5 58.9% N/A 0.02 17.0 10.3 0.94

2013F 3,578.0 557.3 15.6% 527.0 374.8 27.7 0.5% 15.3 30.1 7.1% 7.7 53.0% N/A 0.08 16.5 10.1 0.91

Source: Company, CIMB Research, Bloomberg

Price chart

Corporate profile 1.80

4.8

1.60 1.40

4.6

1.20 1.00

4.4

0.80 4.2

0.60 0.40

4.0

0.20 3.8 De c-09

0.00 Ma y-10 Volume 10m (R.H.S ca le )

Oct-10 Be rja ya S ports Toto Bhd

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.

Source: Bloomberg

The S.E.A. Navigator – Malaysia 2011

[ 62 ]

Financial tables KEY RATIOS

PROFIT & LOSS (RM m, FYE Apr) Revenue Operating expenses EBITDA Depreciation & amortisation EBIT Net interest & invt income Associates’ contribution Exceptional items Others Pretax profit Tax Minority interests Net profit Adj. wt. shares (m) Unadj. year-end shares (m)

2009 3,696 (3,083) 613 (15) 598 (13) 0 0 0 586 (164) (8) 414 1,351 1,351

2010 3,392 (2,814) 578 (16) 562 (16) 0 0 0 546 (160) (5) 382 1,351 1,351

2011F 3,504 (2,982) 522 (17) 505 (23) 0 (8) 0 475 (138) (5) 332 1,351 1,351

2012F 3,578 (3,022) 556 (18) 538 (13) 0 0 0 524 (147) (5) 373 1,351 1,351

2013F 3,578 (3,021) 557 (20) 538 (11) 0 0 0 527 (148) (5) 375 1,351 1,351

2012F 95 644 91 830 620 9 109 6 745 254 131 34 419 465 2 467 672 16 0.02

2013F 93 644 81 818 672 9 109 6 797 254 124 34 413 442 2 444 742 16 0.07

2009 98 618 95 812 237 7 49 15 308 219 138 102 460 124 40 164 481 15 (0.10)

2010 98 644 111 852 263 9 104 6 381 241 145 34 420 305 42 347 446 16 (0.15)

2011F 96 644 101 841 570 9 96 6 682 249 138 34 421 490 2 492 594 16 (0.04)

2010 (8.2) (5.7) 16.1 11.3 22.1 29.2 90.5 8.2 0.9 24.8

2011F 3.3 (9.7) 13.5 9.5 17.3 29.0 86.5 10.4 0.9 25.5

2012F 2.1 6.6 14.7 10.4 19.4 28.0 79.2 10.5 0.9 25.6

2013F 0.0 0.2 14.7 10.5 20.4 28.0 81.2 11.2 0.9 25.9

(FYE Apr) Revenue growth (%) Revenue per draw day (RM m) Prize payout ratio (%) No. of outlets

2010 -8.3% 19.17 64.0% 680

2011F 3.3% 20.50 64.0% 680

2012F 2.1% 20.94 63.4% 680

2013F 0.0% 20.94 63.4% 680

CURRENT P/BV(X)

CASH FLOW (RM m, FYE Apr) Pretax profit Depreciation & non–cash adj. Working capital changes Cash tax paid Others Cash flow from operations Capex Net investments & sale of FA Others Cash flow from investing Debt raised/(repaid) Equity raised/(repaid) Dividends paid Cash interest & others Cash flow from financing Change in cash Change in net cash/(debt) Ending net cash/(debt)

2009 12.7 15.6 15.8 11.2 37.1 27.9 82.4 6.7 0.8 22.9

KEY DRIVERS

BALANCE SHEET (RM m, end Apr) Fixed assets Intangible assets Other long-term assets Total non-current assets Cash and equivalents Stocks Trade debtors Other current assets Total current assets Trade creditors Short-term borrowings Other current liabilities Total current liabilities Long-term borrowings Other long-term liabilities Total long-term liabilities Shareholders’ funds Minority interests NTA/share (RM)

(FYE Apr) Revenue growth (%) EBITDA growth (%) Pretax margins (%) Net profit margins (%) Interest cover (x) Effective tax rates (%) Net dividend payout (%) Debtors turnover (days) Stock turnover (days) Creditors turnover (days)

2009 586 15 13 (144) 27 496 (24) (12) 0 (36) (97) 0 (241) (12) (350) 111 208 (26)

2010 546 16 (35) (160) 78 446 (15) 1 (93) (108) 187 (35) (433) (33) (313) 26 (161) (187)

2011F 475 17 12 (160) 170 514 (16) 10 0 (6) 178 0 (361) (17) (200) 308 130 (57)

2012F 524 18 (14) (138) (3) 389 (17) 10 0 (7) (31) 0 (287) (13) (332) 50 81 24

2013F 527 20 1 (147) (5) 396 (18) 10 0 (8) (30) 0 (295) (10) (335) 53 83 106

20.40

18.40

16.40

14.40

12.40

10.40 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

The S.E.A. Navigator – Malaysia 2011

[ 63 ]

Syariah-compliant stock

Bintulu Port Holdings Bhd

NEUTRAL

Maintained

RM6.60

@07/12/10

A dividend play

MALAYSIA

2011 OUTLOOK

CIMB Research Report

Target: RM6.95 Ports

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 longterm 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 Revenue (RM m) EBITDA (RM m) EBITDA margins (%) Pretax profit (RM m) Net profit (RM m) EPS (sen) EPS growth (%) P/E (x) Gross DPS (sen) Dividend yield (%) P/BV (x) ROE (%) Net cash per share (RM) P/FCFE (x) EV/EBITDA (x) % change in EPS estimates CIMB/Consensus (x)

2008 448.8 213.9 47.7% 205.9 150.6 37.7 11.0% 17.5 55.0 8.3% 3.0 17.0% 1.15 17.4 10.2

2009 439.0 187.2 42.6% 173.5 128.8 32.2 (14.5%) 20.5 50.0 7.6% 3.1 14.9% 0.78 156.7 12.4

2010F 472.9 215.4 45.5% 190.7 143.0 35.8 11.1% 18.5 55.0 8.3% 3.2 17.1% 0.57 39.3 11.2 0.97

2011F 501.8 234.0 46.6% 200.2 150.2 37.5 5.0% 17.6 55.0 8.3% 3.2 18.3% 0.45 25.0 10.5 0.98

2012F 517.9 245.4 47.4% 209.5 157.1 39.3 4.6% 16.8 55.0 8.3% 3.3 19.4% 0.45 17.2 10.0 0.95

Source: Company, CIMB Research, Bloomberg

Price chart

Corporate profile

7.4 7.2

10.00

7.0 8.00

6.8

6.00

6.6 6.4

4.00

6.2 2.00

6.0 5.8 De c-09

0.00 Ma y-10 Volume 100k (R.H.S ca le )

Source: Bloomberg

Oct-10 Bintulu P ort Holding s Bhd

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.

The S.E.A. Navigator – Malaysia 2011

[ 64 ]

Financial tables KEY RATIOS

PROFIT & LOSS (RM m, FYE Dec) Revenue Operating expenses EBITDA Depreciation & amortisation EBIT Net interest & invt income Associates’ contribution Exceptional items Others Pretax profit Tax Minority interests Net profit Adj. wt. shares (m) Unadj. year-end shares (m)

2008 449 (235) 214 (28) 185 20 0 0 0 206 (55) 0 151 400 400

2009 439 (252) 187 (31) 156 18 0 0 0 174 (45) 0 129 400 400

2010F 473 (258) 215 (37) 179 12 0 0 0 191 (48) 0 143 400 400

2011F 502 (268) 234 (43) 191 9 0 0 0 200 (50) 0 150 400 400

2012F 518 (272) 245 (44) 202 8 0 0 0 209 (52) 0 157 400 400

(FYE Dec) Revenue growth (%) EBITDA growth (%) Pretax margins (%) Net profit margins (%) Interest cover (x) Effective tax rates (%) Net dividend payout (%) Debtors turnover (days) Stock turnover (days) Creditors turnover (days)

2011F 721 10 1 732 182 0 45 44 271 116 0 4 120 0 71 71 813 0 2.01

2012F 719 8 1 728 181 0 47 44 272 118 0 4 122 0 71 71 807 0 2.00

(FYE Dec) LNG throughput (m'tonnes) Avg tariff/LNG vessel call (RM'000) Containers handled (TEUs)

2008 516 15 1 532 462 0 39 49 550 140 0 9 149 0 51 51 881 0 2.17

2009 617 13 1 632 314 0 40 44 397 109 0 4 113 0 71 71 845 0 2.08

2010F 683 12 1 695 230 0 43 44 317 112 0 4 116 0 71 71 825 0 2.03

2010F 7.7 15.0 40.3 30.2 N/A 25.0 113.8 31.7 0.0 85.3

2011F 6.1 8.6 39.9 29.9 N/A 25.0 108.4 31.9 0.0 82.9

2012F 3.2 4.9 40.4 30.3 N/A 25.0 103.6 32.3 0.0 82.6

2009 22.8 720.7 261,150

2010F 2011F 2012F 23.7 23.9 23.9 720.7 720.7 720.7 308,510 323,935 340,132

12M - FORWARD FD CORE P/E (X)

CASH FLOW (RM m, FYE Dec) Pretax profit Depreciation & non–cash adj. Working capital changes Cash tax paid Others Cash flow from operations Capex Net investments & sale of FA Others Cash flow from investing Debt raised/(repaid) Equity raised/(repaid) Dividends paid Cash interest & others Cash flow from financing Change in cash Change in net cash/(debt) Ending net cash/(debt)

2009 (2.2) (12.5) 39.5 29.3 N/A 25.8 114.9 32.6 0.0 103.5

KEY DRIVERS

BALANCE SHEET (RM m, end Dec) Fixed assets Intangible assets Other long-term assets Total non-current assets Cash and equivalents Stocks Trade debtors Other current assets Total current assets Trade creditors Short-term borrowings Other current liabilities Total current liabilities Long-term borrowings Other long-term liabilities Total long-term liabilities Shareholders’ funds Minority interests NTA/share (RM)

2008 7.6 9.8 45.9 33.6 N/A 26.8 108.1 25.6 0.0 95.5

2008 206 28 30 (46) (38) 180 (51) 0 23 (28) 0 0 (163) 0 (163) (11) (11) 462

2009 174 31 (31) (40) (27) 106 (131) 0 41 (90) 0 0 (148) (14) (162) (145) (145) 314

2010F 191 37 (1) (48) (12) 167 (100) 0 0 (100) 0 0 (163) 12 (151) (84) (84) 230

2011F 200 43 2 (50) (9) 186 (80) 0 0 (80) 0 0 (163) 9 (154) (48) (48) 182

2012F 209 44 1 (52) (8) 194 (40) 0 0 (40) 0 0 (163) 8 (155) (1) (1) 181

20.0 19.5 19.0 18.5 18.0 17.5 17.0 16.5 16.0 15.5 15.0 Dec-07

Apr-08

Aug-08

Source: Company, CIMB Research, Bloomberg

The S.E.A. Navigator – Malaysia 2011

[ 65 ]

Dec-08

Apr-09

Aug-09

Dec-09

Apr-10

Aug-10

Dec-10

British American Tobacco Bhd

UNDERPERFORM

Maintained

RM45.48

@07/12/10

Feeling the drag

MALAYSIA

2011 OUTLOOK

CIMB Research Report

Target: RM44.00 Tobacco

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 Revenue (RM m) EBITDA (RM m) EBITDA margins (%) Pretax profit (RM m) Net profit (RM m) EPS (sen) EPS growth (%) P/E (x) Gross DPS (sen) Dividend yield (%) P/BV (x) ROE (%) Net gearing (%) P/FCFE (x) EV/EBITDA (x) % change in EPS estimates CIMB/Consensus (x)

2008 4,135.2 1,182.3 28.6% 1,081.2 811.8 284.3 10.9% 16.0 361.0 7.9% 31.9 215.7% 145.2% 17.6 11.5

2009 3,923.4 1,108.9 28.3% 1,005.3 746.8 261.5 (8.0%) 17.4 314.7 6.9% 29.6 176.5% 109.6% 15.7 12.1

2010F 3,951.2 1,080.8 27.4% 973.2 729.9 255.6 (2.3%) 17.8 315.0 6.9% 24.8 151.7% 90.3% 15.2 12.5 1.01

2011F 4,095.7 1,110.2 27.1% 999.2 749.4 262.5 2.7% 17.3 325.0 7.1% 22.5 136.3% 68.6% 17.3 12.1 1.03

2012F 4,142.3 1,132.8 27.3% 1,021.8 766.3 268.4 2.3% 16.9 330.0 7.3% 20.4 126.4% 47.5% 16.2 11.7 1.04

Source: Company, CIMB Research, Bloomberg

Price chart

Corporate profile

51.5

5.00

49.5

4.00

47.5 3.00 45.5 2.00

43.5

1.00

41.5 39.5 De c -09

0.00 Ma y-10

Volume 100k (R.H.S ca le )

Source: Bloomberg

Oct-10 Britis h Ame rica n Toba cco Bhd

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-formoney (VFM) space, BAT is the No. 2 player after JT International.

The S.E.A. Navigator – Malaysia 2011

[ 66 ]

Financial tables KEY RATIOS

PROFIT & LOSS (RM m, FYE Dec) Revenue Operating expenses EBITDA Depreciation & amortisation EBIT Net interest & invt income Associates’ contribution Exceptional items Others Pretax profit Tax Minority interests Net profit Adj. wt. shares (m) Unadj. year-end shares (m)

2008 4,135 (2,953) 1,182 (81) 1,102 (21) 0 0 0 1,081 (269) 0 812 286 286

2009 3,923 (2,815) 1,109 (81) 1,028 (22) 0 0 0 1,005 (259) 0 747 286 286

2010F 3,951 (2,870) 1,081 (86) 994 (21) 0 0 0 973 (243) 0 730 286 286

2011F 4,096 (2,986) 1,110 (90) 1,020 (21) 0 0 0 999 (250) 0 749 286 286

2012F 4,142 (3,009) 1,133 (94) 1,039 (17) 0 0 0 1,022 (255) 0 766 286 286

2011F 447 412 47 906 254 261 199 4 719 247 0 100 347 650 53 703 577 0 0.58

2012F 413 412 47 872 348 264 202 4 818 250 0 102 352 650 53 703 636 0 0.79

2008 459 412 20 891 59 225 258 54 596 286 250 97 632 400 48 448 407 0 (0.02)

2009 431 412 47 890 169 214 165 4 552 219 0 81 300 650 53 703 439 0 0.10

2010F 477 412 47 936 177 252 192 4 626 238 0 97 336 650 53 703 523 0 0.39

2010F 0.7 (2.5) 24.6 18.5 34.0 25.0 92.4 16.5 21.5 21.1

2011F 3.7 2.7 24.4 18.3 34.9 25.0 92.9 17.5 22.8 21.6

2012F 1.1 2.0 24.7 18.5 35.5 25.0 92.2 17.7 23.1 21.9

(FYE Dec) Industry volume growth (% growth) Excise duties (RM per kg) Sales tax (%)

2009 -11.5% 190.00 5.0%

2010F -3.0% 220.00 5.0%

2011F -5.0% 220.00 5.0%

2012F 0.0% 220.00 5.0%

12M - FORWARD FD CORE P/E (X)

CASH FLOW (RM m, FYE Dec) Pretax profit Depreciation & non–cash adj. Working capital changes Cash tax paid Others Cash flow from operations Capex Net investments & sale of FA Others Cash flow from investing Debt raised/(repaid) Equity raised/(repaid) Dividends paid Cash interest & others Cash flow from financing Change in cash Change in net cash/(debt) Ending net cash/(debt)

2009 (5.1) (6.2) 25.6 19.0 36.9 25.7 90.2 19.7 20.4 23.5

KEY DRIVERS

BALANCE SHEET (RM m, end Dec) Fixed assets Intangible assets Other long-term assets Total non-current assets Cash and equivalents Stocks Trade debtors Other current assets Total current assets Trade creditors Short-term borrowings Other current liabilities Total current liabilities Long-term borrowings Other long-term liabilities Total long-term liabilities Shareholders’ funds Minority interests NTA/share (RM)

2008 7.9 5.6 26.1 19.6 39.2 24.9 94.0 19.6 20.7 22.8

(FYE Dec) Revenue growth (%) EBITDA growth (%) Pretax margins (%) Net profit margins (%) Interest cover (x) Effective tax rates (%) Net dividend payout (%) Debtors turnover (days) Stock turnover (days) Creditors turnover (days)

2008 1,081 81 2 (251) 42 955 (102) 7 8 (87) (100) 0 (751) (28) (879) (11) 89 (591)

2009 1,005 81 37 (269) 70 924 (107) 28 5 (74) 0 0 (714) (24) (738) 113 113 (481)

2010F 973 86 (46) (259) 177 932 (60) 0 5 (55) 0 0 (847) (21) (868) 9 9 (473)

2011F 999 90 (8) (243) (11) 827 (60) 0 5 (55) 0 0 (675) (21) (695) 77 77 (396)

2012F 1,022 94 (2) (250) 9 872 (60) 0 5 (55) 0 0 (707) (17) (724) 93 93 (302)

19.0 18.5 18.0 17.5 17.0 16.5 16.0 15.5 15.0 14.5 14.0 Dec-07

Apr-08

Aug-08

Source: Company, CIMB Research, Bloomberg

The S.E.A. Navigator – Malaysia 2011

[ 67 ]

Dec-08

Apr-09

Aug-09

Dec-09

Apr-10

Aug-10

Dec-10

Bursa Malaysia Bhd

NEUTRAL

Maintained

RM7.96

@07/12/10

Taking stock of the swift growth

MALAYSIA

2011 OUTLOOK

CIMB Research Report

Target: RM8.64 Stockbroking & Exchanges

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 Revenue (RM m) EBITDA (RM m) EBITDA margins (%) Pretax profit (RM m) Net profit (RM m) EPS (sen) EPS growth (%) P/E (x) Core EPS (sen) Core EPS growth (%) Core P/E (x) Gross DPS (sen) Dividend yield (%) P/BV (x) ROE (%) Net cash per share (RM) P/FCFE (x) EV/EBITDA (x) % change in EPS estimates CIMB/Consensus (x)

2008 302.3 137.5 45.5% 145.6 104.4 20.0 (56.7%) 39.9 20.0 (56.7%) 39.9 24.3 3.1% 5.7 13.8% 2.19 36.8 22.0

2009 297.6 153.9 51.7% 219.2 177.6 34.0 70.1% 23.4 22.2 11.1% 35.9 40.8 5.1% 5.0 22.6% 2.20 30.9 19.6

2010F 301.9 147.9 49.0% 155.2 118.1 22.6 (33.5%) 35.3 22.6 1.8% 35.3 27.1 3.4% 4.9 13.9% 2.12 42.3 20.7 0.91

2011F 357.6 196.7 55.0% 199.7 151.8 29.0 28.6% 27.4 29.0 28.6% 27.4 34.8 4.4% 4.8 17.6% 2.05 50.3 15.8 1.00

2012F 391.0 219.7 56.2% 220.2 167.3 32.0 10.2% 24.9 32.0 10.2% 24.9 38.4 4.8% 4.7 19.0% 1.98 34.0 14.3 0.97

Source: Company, CIMB Research, Bloomberg

Price chart

Corporate profile

8.9

7.00

8.4

6.00 5.00

7.9

4.00 3.00

7.4

2.00 6.9 1.00 6.4 Dec-09

0.00 May-10 Volume 1m (R.H.Scale)

Source: Bloomberg

Oct-10 Bursa Malaysia Bhd

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. The S.E.A. Navigator – Malaysia 2011

[ 68 ]

Financial tables KEY RATIOS

PROFIT & LOSS (RM m, FYE Dec) Revenue Operating expenses EBITDA Depreciation & amortisation EBIT Net interest & invt income Associates’ contribution Exceptional items Others Pretax profit Tax Minority interests Net profit Adj. wt. shares (m) Unadj. year-end shares (m)

2008 302 (165) 138 (21) 117 29 0 0 0 146 (41) 0 104 523 523

2009 298 (144) 154 (39) 115 28 0 76 0 219 (42) 0 178 523 523

2008 254 45 166 464 1,144 0 48 73 1,266 828 0 119 947 0 51 51 732 0 1.31

2009 243 43 242 528 1,151 0 44 63 1,258 782 0 104 886 0 52 52 840 9 1.52

2010F 302 (154) 148 (43) 105 51 0 0 0 155 (37) 0 118 523 523

2011F 358 (161) 197 (48) 149 51 0 0 0 200 (48) 0 152 523 523

2012F 391 (171) 220 (52) 167 53 0 0 0 220 (53) 0 167 523 523

(FYE Dec) Revenue growth (%) EBITDA growth (%) Pretax margins (%) Net profit margins (%) Interest cover (x) Effective tax rates (%) Net dividend payout (%) Debtors turnover (days) Stock turnover (days) Creditors turnover (days)

2011F 253 43 258 554 1,072 0 53 76 1,201 706 0 114 820 0 55 55 872 9 1.59

2012F 258 43 267 568 1,036 0 59 84 1,179 671 0 120 790 0 56 56 891 9 1.62

(FYE Dec) Average daily value traded (RMm) Derivatives contract traded ('000) Effective clearing rate (%) Velocity (%) Total exchange market cap (RMbn) Price per unit of trade (RM)

2010F 248 43 250 541 1,109 0 49 69 1,227 743 0 109 852 0 53 53 854 9 1.55

2010F 1.5 (3.9) 51.4 39.1 N/A 23.8 90.0 56.0 0.0 921.8

2011F 18.4 33.0 55.9 42.4 N/A 23.9 90.0 52.0 0.0 739.5

2012F 9.4 11.7 56.3 42.8 N/A 24.0 90.0 52.3 0.0 642.4

2009 1,221 25 3.4% 34.0% 999.0 1.36

2010F 2011F 2012F 1,517 1,826 2,008 28 34 41 3.0% 3.4% 3.4% 32.0% 35.0% 35.0% 1,138.1 1,251.9 1,377.1 1.33 1.35 1.34

12M - FORWARD FD CORE P/E (X)

CASH FLOW (RM m, FYE Dec) Pretax profit Depreciation & non–cash adj. Working capital changes Cash tax paid Others Cash flow from operations Capex Net investments & sale of FA Others Cash flow from investing Debt raised/(repaid) Equity raised/(repaid) Dividends paid Cash interest & others Cash flow from financing Change in cash Change in net cash/(debt) Ending net cash/(debt)

2009 (1.6) 11.9 73.7 59.7 191.7 18.9 90.0 56.7 0.0 987.3

KEY DRIVERS

BALANCE SHEET (RM m, end Dec) Fixed assets Intangible assets Other long-term assets Total non-current assets Cash and equivalents Stocks Trade debtors Other current assets Total current assets Trade creditors Short-term borrowings Other current liabilities Total current liabilities Long-term borrowings Other long-term liabilities Total long-term liabilities Shareholders’ funds Minority interests NTA/share (RM)

2008 (31.8) (51.8) 48.2 34.5 167.1 28.3 91.3 53.7 0.0 803.5

2008 146 21 10 (41) (50) 85 (36) 33 31 28 0 5 (161) 10 (146) (33) (33) 1,144

2009 219 39 (13) (42) (74) 130 (30) 6 29 5 0 8 (77) 0 (70) 65 65 1,151

2010F 155 43 61 (37) (84) 138 (90) 20 30 (40) 0 0 (106) (65) (171) (73) (73) 1,109

2011F 200 48 21 (48) (91) 130 (90) 13 29 (47) 0 0 (137) 25 (112) (29) (29) 1,072

2012F 220 52 36 (53) (90) 166 (90) 16 30 (44) 0 0 (151) (13) (164) (42) (42) 1,036

44.0

39.0

34.0

29.0

24.0

19.0 Dec-07

Apr-08

Aug-08

Source: Company, CIMB Research, Bloomberg

The S.E.A. Navigator – Malaysia 2011

[ 69 ]

Dec-08

Apr-09

Aug-09

Dec-09

Apr-10

Aug-10

Dec-10

Carlsberg Brewery (M) Bhd

NEUTRAL

Maintained

RM6.05

@07/12/10

Fizz from down south

MALAYSIA

2011 OUTLOOK

CIMB Research Report

Target: RM6.70 Brewers

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 Revenue (RM m) EBITDA (RM m) EBITDA margins (%) Pretax profit (RM m) Net profit (RM m) EPS (sen) EPS growth (%) P/E (x) Gross DPS (sen) Dividend yield (%) P/BV (x) ROE (%) Net cash per share (RM) P/FCFE (x) EV/EBITDA (x) % change in EPS estimates CIMB/Consensus (x)

2008 960.2 114.9 12.0% 101.3 76.1 24.9 (3.0%) 24.3 12.5 2.1% 3.9 16.2% 0.72 20.9 14.1

2009 1,045.5 117.6 11.2% 102.6 76.1 24.9 0.0% 24.3 20.5 3.4% 3.6 15.4% 0.36 (23.3) 14.6

2010F 1,358.4 196.5 14.5% 169.5 131.2 42.9 72.3% 14.1 35.0 5.8% 3.3 24.2% N/A (19.1) 9.5 1.06

2011F 1,387.9 202.7 14.6% 182.6 141.2 46.2 7.6% 13.1 37.0 6.1% 3.0 23.7% 0.10 13.0 8.9 1.08

2012F 1,415.1 215.8 15.3% 197.1 152.2 49.8 7.8% 12.2 39.0 6.4% 2.7 23.2% 0.33 12.1 8.0 1.21

Source: Company, CIMB Research, Bloomberg

Price chart

Corporate profile 0.50

6.2

0.45 0.40 0.35

5.7

0.30 0.25

5.2

0.20 0.15

4.7

0.10 0.05

4.2 De c-09

0.00 Ma y-10 Volume 1m (R.H.S ca le )

Source: Bloomberg

Oct-10 Ca rls be rg Bre we ry (M) Bhd

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.

The S.E.A. Navigator – Malaysia 2011

[ 70 ]

Financial tables KEY RATIOS

PROFIT & LOSS (RM m, FYE Dec) Revenue Operating expenses EBITDA Depreciation & amortisation EBIT Net interest & invt income Associates’ contribution Exceptional items Others Pretax profit Tax Minority interests Net profit Adj. wt. shares (m) Unadj. year-end shares (m)

2008 960 (845) 115 (21) 94 7 0 0 0 101 (25) 0 76 306 306

2009 1,045 (928) 118 (20) 97 3 2 0 0 103 (26) (1) 76 306 306

2010F 1,358 (1,162) 197 (20) 176 (9) 2 0 0 169 (38) (1) 131 306 306

2011F 1,388 (1,185) 203 (22) 181 (1) 2 0 0 183 (41) (1) 141 306 306

2012F 1,415 (1,199) 216 (22) 194 1 2 0 0 197 (44) (1) 152 306 306

2008 140 8 23 170 227 66 141 23 457 86 6 48 141 0 17 17 469 0 1.51

2009 130 383 32 546 119 59 178 44 399 123 9 224 356 0 72 72 517 0 0.44

2010F 122 406 32 561 (24) 76 231 52 335 160 9 87 256 0 72 72 568 0 0.53

2011F 114 406 32 552 39 78 236 53 406 164 8 90 262 0 72 72 624 0 0.71

2012F 105 406 32 544 109 79 240 54 483 167 8 93 268 0 72 72 687 0 0.92

2008 101 21 15 (23) (9) 105 (12) (11) 4 (19) 2 1 (79) 0 (77) 10 9 221

2009 103 20 25 (34) (6) 107 (12) (171) (6) (188) 2 0 (29) 0 (27) (108) (110) 110

2010F 169 20 (195) (26) 142 111 (12) (199) 0 (211) 0 0 (46) 3 (43) (143) (143) (33)

2011F 183 22 (3) (38) (8) 156 (13) 0 0 (13) 0 0 (78) (1) (79) 63 64 31

2012F 197 22 (3) (41) (10) 166 (13) 0 0 (13) 0 0 (83) 1 (82) 70 70 102

2010F 29.9 67.1 12.5 9.7 N/A 22.2 61.2 54.9 18.1 38.1

2011F 2.2 3.1 13.2 10.2 N/A 22.4 60.1 61.3 20.2 42.6

2012F 2.0 6.5 13.9 10.8 N/A 22.5 58.7 61.4 20.3 42.7

(FYE Dec) Excise duties (RM per litre) Sales tax (%) Unit sales ('000 Hli)

2009 7.40 5.0% 642

2010F 7.40 5.0% 660

2011F 7.40 5.0% 670

2012F 7.40 5.0% 686

12M - FORWARD FD CORE P/E (X)

CASH FLOW (RM m, FYE Dec) Pretax profit Depreciation & non–cash adj. Working capital changes Cash tax paid Others Cash flow from operations Capex Net investments & sale of FA Others Cash flow from investing Debt raised/(repaid) Equity raised/(repaid) Dividends paid Cash interest & others Cash flow from financing Change in cash Change in net cash/(debt) Ending net cash/(debt)

2009 8.9 2.4 9.8 7.3 N/A 25.2 61.7 55.6 21.8 36.7

KEY DRIVERS

BALANCE SHEET (RM m, end Dec) Fixed assets Intangible assets Other long-term assets Total non-current assets Cash and equivalents Stocks Trade debtors Other current assets Total current assets Trade creditors Short-term borrowings Other current liabilities Total current liabilities Long-term borrowings Other long-term liabilities Total long-term liabilities Shareholders’ funds Minority interests NTA/share (RM)

2008 7.0 (0.2) 10.5 7.9 N/A 24.9 37.1 52.5 20.5 30.2

(FYE Dec) Revenue growth (%) EBITDA growth (%) Pretax margins (%) Net profit margins (%) Interest cover (x) Effective tax rates (%) Net dividend payout (%) Debtors turnover (days) Stock turnover (days) Creditors turnover (days)

18.0 17.0 16.0 15.0 14.0 13.0 12.0 11.0 10.0 Dec-07

Apr-08

Aug-08

Source: Company, CIMB Research, Bloomberg

The S.E.A. Navigator – Malaysia 2011

[ 71 ]

Dec-08

Apr-09

Aug-09

Dec-09

Apr-10

Aug-10

Dec-10

Syariah-compliant stock

Daibochi Plastic & Packaging

OUTPERFORM

Maintained

RM2.45

@07/12/10

Stretching its client base

MALAYSIA

2011 OUTLOOK

CIMB Research Report

Target: RM3.92 Packaging

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 USbased 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: 12-m price range:

RM186m/US$59m 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 Revenue (RM m) EBITDA (RM m) EBITDA margins (%) Pretax profit (RM m) Net profit (RM m) EPS (sen) EPS growth (%) P/E (x) Gross DPS (sen) Dividend yield (%) P/BV (x) ROE (%) Net gearing (%) Net cash per share (RM) P/FCFE (x) EV/EBITDA (x) % change in EPS estimates CIMB/Consensus (x)

2008 217.2 16.7 7.7% 9.0 8.1 10.7 (6.9%) 23.0 8.2 3.4% 1.6 7.1% 23.8% N/A 929.8 12.8

2009 221.8 33.1 14.9% 27.1 22.7 29.9 180.2% 8.2 21.2 8.7% 1.5 18.4% 11.8% N/A 7.7 6.1

2010F 245.8 32.4 13.2% 24.2 18.4 24.3 (18.8%) 10.1 16.6 6.8% 1.3 13.9% 3.4% N/A 9.8 5.9 0.87

2011F 282.8 41.6 14.7% 33.2 25.3 33.3 37.1% 7.4 22.8 9.3% 1.2 17.1% N/A 0.01 9.7 4.5 0.98

2012F 311.1 47.2 15.2% 38.7 29.3 38.6 16.0% 6.3 26.4 10.8% 1.1 18.2% N/A 0.25 5.7 3.6 1.04

Source: Company, CIMB Research, Bloomberg

Price chart

Corporate profile 1.60

3.9

1.40 1.20

3.4

1.00 0.80

2.9

0.60 0.40

2.4

0.20 1.9 De c-09

0.00 Ma y-10

Volume 1m (R.H.S ca le )

Oct-10 Da ibochi P la s tic & P a c ka g ing Bhd

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.

Source: Bloomberg

The S.E.A. Navigator – Malaysia 2011

[ 72 ]

Financial tables KEY RATIOS

PROFIT & LOSS (RM m, FYE Dec) Revenue Operating expenses EBITDA Depreciation & amortisation EBIT Net interest & invt income Associates’ contribution Exceptional items Others Pretax profit Tax Minority interests Net profit Adj. wt. shares (m) Unadj. year-end shares (m)

2008 217 (201) 17 (8) 9 1 (1) 0 0 9 (1) 0 8 76 76

2009 222 (189) 33 (8) 25 2 0 0 0 27 (4) 0 23 76 76

2010F 246 (213) 32 (8) 24 1 0 0 0 24 (6) 0 18 76 76

2011F 283 (241) 42 (9) 33 1 0 0 0 33 (8) 0 25 76 76

2012F 311 (264) 47 (9) 38 1 0 0 0 39 (9) (1) 29 76 76

2008 55 0 41 96 10 41 41 4 97 34 32 0 66 6 7 13 114 1 1.50

2009 54 0 29 83 6 37 47 15 104 35 17 1 53 4 7 11 123 1 1.62

2010F 56 0 38 94 35 39 44 15 134 37 35 1 72 6 7 12 141 2 1.86

2011F 53 0 38 91 41 48 51 15 155 42 35 1 78 6 7 12 154 2 2.03

2012F (FYE Dec) 50 Capacity (tonnes p.a.) 0 Capacity utilisation (%) 38 88 59 48 56 15 178 47 35 1 83 6 7 12 169 2 2.22

2008 9 8 4 (1) (2) 17 (19) 0 0 (19) 2 0 (5) 1 (2) (4) (6) (27)

2009 27 8 0 (4) (5) 27 (5) 0 0 (5) 0 0 (11) 2 (9) 13 13 (15)

2010F 24 8 2 (6) (1) 28 (10) 0 0 (10) 0 0 (9) 1 (9) 10 10 (5)

2011F 33 9 (10) (8) 0 25 (6) 0 0 (6) 0 0 (13) 0 (12) 6 6 1

2012F 39 9 0 (9) 0 39 (6) 0 (1) (7) 0 0 (15) 1 (14) 18 18 19

2010F 10.8 (2.1) 9.8 7.5 N/A 23.0 50.0 67.4 56.6 53.1

2011F 15.1 28.4 11.7 8.9 N/A 23.0 50.0 61.4 56.3 51.2

2012F 10.0 13.5 12.4 9.4 N/A 23.0 50.0 62.7 56.1 52.3

2009 20,000 65.0%

2010F 20,800 66.0%

2011F 22,000 66.0%

2012F 22,000 72.0%

12M - FORWARD FD CORE P/E (X)

CASH FLOW (RM m, FYE Dec) Pretax profit Depreciation & non–cash adj. Working capital changes Cash tax paid Others Cash flow from operations Capex Net investments & sale of FA Others Cash flow from investing Debt raised/(repaid) Equity raised/(repaid) Dividends paid Cash interest & others Cash flow from financing Change in cash Change in net cash/(debt) Ending net cash/(debt)

2009 2.1 98.2 12.2 10.2 N/A 14.8 51.8 76.5 60.7 57.1

KEY DRIVERS

BALANCE SHEET (RM m, end Dec) Fixed assets Intangible assets Other long-term assets Total non-current assets Cash and equivalents Stocks Trade debtors Other current assets Total current assets Trade creditors Short-term borrowings Other current liabilities Total current liabilities Long-term borrowings Other long-term liabilities Total long-term liabilities Shareholders’ funds Minority interests NTA/share (RM)

2008 7.3 (4.6) 4.1 3.7 N/A 7.8 56.2 69.6 69.1 56.3

(FYE Dec) Revenue growth (%) EBITDA growth (%) Pretax margins (%) Net profit margins (%) Interest cover (x) Effective tax rates (%) Net dividend payout (%) Debtors turnover (days) Stock turnover (days) Creditors turnover (days)

15.0 13.0 11.0 9.0 7.0 5.0 3.0 1.0 Dec-07

Apr-08

Aug-08

Source: Company, CIMB Research, Bloomberg

The S.E.A. Navigator – Malaysia 2011

[ 73 ]

Dec-08

Apr-09

Aug-09

Dec-09

Apr-10

Aug-10

Dec-10

Syariah-compliant stock

Dialog Group Bhd

UNDERPERFORM

Maintained

RM1.60

@07/12/10

Tanking up in Pengerang

MALAYSIA

2011 OUTLOOK

CIMB Research Report

Target: RM1.15 Oil & Gas - Equipment & Svs

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 Revenue (RM m) EBITDA (RM m) EBITDA margins (%) Pretax profit (RM m) Net profit (RM m) EPS (sen) EPS growth (%) P/E (x) Gross DPS (sen) Dividend yield (%) P/BV (x) ROE (%) Net cash per share (RM) P/FCFE (x) EV/EBITDA (x) % change in EPS estimates CIMB/Consensus (x)

2009 1,104.3 105.5 9.6% 123.5 92.2 4.7 17.6% 34.4 3.6 2.3% 6.5 19.7% 0.09 51.4 26.2

2010 1,139.1 130.7 11.5% 151.0 116.1 5.9 26.0% 27.3 3.1 1.9% 5.2 21.1% 0.11 36.3 20.7

2011F 2,027.6 148.3 7.3% 174.4 130.6 6.6 12.5% 24.3 4.0 2.5% 4.6 20.1% 0.14 30.1 17.8 0.96

2012F 2,558.5 170.1 6.7% 200.5 150.2 7.6 15.0% 21.1 4.0 2.5% 3.9 20.0% 0.18 26.4 15.0 0.93

2013F 2,822.0 185.0 6.6% 219.9 164.7 8.3 9.7% 19.2 4.0 2.5% 3.4 19.0% 0.21 22.6 13.3 0.97

Source: Company, CIMB Research, Bloomberg

Price chart

Corporate profile

1.7 1.6

2.00

1.5 1.4

1.50

1.3 1.2

1.00

1.1 1.0

0.50

0.9 0.8 De c-09

0.00 Ma y-10 Volume 10m (R.H.S ca le )

Source: Bloomberg

Oct-10 Dia log Group Bhd

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.

The S.E.A. Navigator – Malaysia 2011

[ 74 ]

Financial tables KEY RATIOS

PROFIT & LOSS (RM m, FYE Jun) Revenue Operating expenses EBITDA Depreciation & amortisation EBIT Net interest & invt income Associates’ contribution Exceptional items Others Pretax profit Tax Minority interests Net profit Adj. wt. shares (m) Unadj. year-end shares (m)

2009 1,104 (999) 106 (16) 89 7 28 0 0 123 (22) (9) 92 1,980 1,980

2010 1,139 (1,008) 131 (18) 113 4 34 0 0 151 (29) (6) 116 1,980 1,980

2011F 2,028 (1,879) 148 (8) 140 11 23 0 0 174 (44) 0 131 1,980 1,980

2012F 2,559 (2,388) 170 (8) 162 15 23 0 0 201 (50) 0 150 1,980 1,980

2013F 2,822 (2,637) 185 (8) 177 20 23 0 0 220 (55) 0 165 1,980 1,980

2009 275 2 479 756 174 30 162 5 371 169 0 467 636 1 0 1 488 3 0.25

2010 294 2 536 832 217 52 294 5 568 306 1 478 784 1 0 1 610 3 0.31

2011F 313 2 593 908 278 62 354 5 699 368 1 541 910 2 0 2 688 4 0.35

2012F 332 2 610 945 354 78 447 6 885 465 2 543 1,009 2 0 2 814 4 0.41

2013F 352 2 628 982 422 86 491 7 1,005 511 2 547 1,060 3 0 3 921 4 0.46

2009 123 16 (4) (7) (41) 87 (10) 0 3 (7) 0 0 (44) (19) (63) 17 17 174

2010 151 18 (16) (10) (32) 111 (10) 0 3 (7) 1 0 (44) (18) (61) 43 42 216

2011F 174 8 (8) (10) (33) 131 (10) 1 3 (6) 1 0 (44) (21) (64) 61 60 276

2012F 201 8 (13) (12) (36) 148 (10) 2 4 (4) 1 0 (44) (25) (68) 76 75 350

2013F 220 8 (6) (13) (44) 164 (10) 3 5 (2) 1 0 (73) (23) (95) 68 67 417

2011F 2012F 2013F 78.0 26.2 10.3 13.5 14.7 8.8 8.6 7.8 7.8 6.4 5.9 5.8 1,872.6 1,296.9 1,010.6 25.0 25.0 25.0 44.9 39.0 35.6 58.3 57.1 60.7 10.2 10.0 10.6 60.7 59.4 63.1

(FYE Jun) Overseas rev contribution (%) Downstream contribution to rev (%) Upstream contribution to rev (%) Construction margins (%)

2010 35.0% 43.0% 57.0% 9.0%

2011F 35.0% 43.0% 57.0% 9.0%

2012F 35.0% 43.0% 57.0% 9.0%

2013F 35.0% 43.0% 57.0% 9.0%

12M - FORWARD FD CORE P/E (X)

CASH FLOW (RM m, FYE Jun) Pretax profit Depreciation & non–cash adj. Working capital changes Cash tax paid Others Cash flow from operations Capex Net investments & sale of FA Others Cash flow from investing Debt raised/(repaid) Equity raised/(repaid) Dividends paid Cash interest & others Cash flow from financing Change in cash Change in net cash/(debt) Ending net cash/(debt)

2010 3.2 23.9 13.3 10.2 51.7 18.9 39.1 73.0 13.1 76.1

KEY DRIVERS

BALANCE SHEET (RM m, end Jun) Fixed assets Intangible assets Other long-term assets Total non-current assets Cash and equivalents Stocks Trade debtors Other current assets Total current assets Trade creditors Short-term borrowings Other current liabilities Total current liabilities Long-term borrowings Other long-term liabilities Total long-term liabilities Shareholders’ funds Minority interests NTA/share (RM)

2009 38.5 40.5 11.2 8.3 83.6 17.9 57.2 47.1 9.1 49.3

(FYE Jun) Revenue growth (%) EBITDA growth (%) Pretax margins (%) Net profit margins (%) Interest cover (x) Effective tax rates (%) Net dividend payout (%) Debtors turnover (days) Stock turnover (days) Creditors turnover (days)

28.0

23.0

18.0

13.0

8.0 Dec-07

Apr-08

Aug-08

Source: Company, CIMB Research, Bloomberg

The S.E.A. Navigator – Malaysia 2011

[ 75 ]

Dec-08

Apr-09

Aug-09

Dec-09

Apr-10

Aug-10

Dec-10

Syariah-compliant stock

DiGi.com Bhd

NEUTRAL

Maintained

RM24.80

@07/12/10

Squeezing out more cost efficiencies

MALAYSIA

2011 OUTLOOK

CIMB Research Report

Target: RM27.00 Telecommunications - Mobile

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 Revenue (RM m) EBITDA (RM m) EBITDA margins (%) Pretax profit (RM m) Net profit (RM m) EPS (sen) EPS growth (%) P/E (x) Core EPS (sen) Core EPS growth (%) Core P/E (x) Gross DPS (sen) Dividend yield (%) P/BV (x) ROE (%) Net gearing (%) P/FCFE (x) EV/EBITDA (x) % change in EPS estimates CIMB/Consensus (x)

2008 4,814.5 2,158.7 44.8% 1,546.9 1,140.7 146.7 3.6% 16.9 146.7 3.6% 16.9 184.7 7.4% 10.2 65.7% 3.0% 15.3 9.0

2009 4,909.6 2,115.1 43.1% 1,366.5 1,000.5 128.7 (12.3%) 19.3 128.7 (12.3%) 19.3 178.0 7.2% 12.7 58.5% 31.6% 13.1 9.3

2010F 5,338.3 2,348.9 44.0% 1,545.2 1,158.9 149.1 15.8% 16.6 149.1 15.8% 16.6 198.2 8.0% 16.9 87.1% 60.9% 10.5 8.5 1.03

2011F 5,737.7 2,581.9 45.0% 1,732.2 1,299.2 167.1 12.1% 14.8 167.1 12.1% 14.8 167.1 6.7% 16.9 114.1% 57.8% 13.0 7.7 1.09

2012F 6,063.5 2,789.2 46.0% 1,934.2 1,450.7 186.6 11.7% 13.3 186.6 11.7% 13.3 205.2 8.3% 19.4 136.0% 43.1% 11.7 7.1 1.15

Source: Company, CIMB Research, Bloomberg

Price chart

Corporate profile

26.9

2.50

25.9

2.00

24.9 23.9

1.50

22.9

1.00 21.9

0.50

20.9 19.9 De c -09

0.00 Ma y-10 Volume 1m (R.H.S ca le )

Source: Bloomberg

Oct-10 DiGi.com Bhd

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 end07, 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.

The S.E.A. Navigator – Malaysia 2011

[ 76 ]

Financial tables KEY RATIOS

PROFIT & LOSS (RM m, FYE Dec) Revenue Operating expenses EBITDA Depreciation & amortisation EBIT Net interest & invt income Associates’ contribution Exceptional items Others Pretax profit Tax Minority interests Net profit Adj. wt. shares (m) Unadj. year-end shares (m)

2008 4,814 (2,656) 2,159 (636) 1,523 24 0 0 0 1,547 (406) 0 1,141 778 778

2009 4,910 (2,794) 2,115 (731) 1,384 (18) 0 0 0 1,366 (366) 0 1,000 778 778

2010F 5,338 (2,989) 2,349 (782) 1,567 (22) 0 0 0 1,545 (386) 0 1,159 778 778

2011F 5,738 (3,156) 2,582 (809) 1,773 (41) 0 0 0 1,732 (433) 0 1,299 778 778

2012F 6,064 (3,274) 2,789 (818) 1,971 (37) 0 0 0 1,934 (484) 0 1,451 778 778

2011F 2,745 811 12 3,569 864 20 491 0 1,375 215 150 1,634 2,000 1,372 433 1,805 1,139 0 0.42

2012F 2,647 742 12 3,401 1,094 21 519 0 1,634 223 150 1,812 2,186 1,372 484 1,856 994 0 0.32

2008 2,870 994 12 3,876 342 17 421 0 779 180 298 1,789 2,267 100 392 492 1,897 0 1.16

2009 2,896 950 12 3,858 441 13 420 0 874 191 150 1,685 2,026 772 413 1,185 1,521 0 0.73

2010F 2,834 881 12 3,727 828 19 457 0 1,304 204 150 1,780 2,134 1,372 386 1,758 1,139 0 0.33

2010F 8.7 11.1 28.9 21.7 30.8 25.0 133.0 30.0 1.1 13.5

2011F 7.5 9.9 30.2 22.6 23.3 25.0 100.0 30.2 1.2 13.3

2012F 5.7 8.0 31.9 23.9 25.9 25.0 110.0 30.4 1.3 13.2

(FYE Dec) No of mobile subscribers (m) No of postpaid mobile subs (m) No of prepaid mobile subs (m) Postpaid ARPU (local currency) Prepaid ARPU (local currency) Blended mobile ARPU (RM)

2009 7.72 1.24 6.49 83.8 49.0 54.5

2010F 8.56 1.36 7.20 82.5 47.5 53.7

2011F 9.28 1.47 7.81 81.7 46.6 52.1

2012F 9.88 1.56 8.32 80.9 45.6 51.2

12M - FORWARD FD CORE P/E (X)

CASH FLOW (RM m, FYE Dec) Pretax profit Depreciation & non–cash adj. Working capital changes Cash tax paid Others Cash flow from operations Capex Net investments & sale of FA Others Cash flow from investing Debt raised/(repaid) Equity raised/(repaid) Dividends paid Cash interest & others Cash flow from financing Change in cash Change in net cash/(debt) Ending net cash/(debt)

2009 2.0 (2.0) 27.8 20.4 34.1 26.8 138.3 31.3 1.1 13.8

KEY DRIVERS

BALANCE SHEET (RM m, end Dec) Fixed assets Intangible assets Other long-term assets Total non-current assets Cash and equivalents Stocks Trade debtors Other current assets Total current assets Trade creditors Short-term borrowings Other current liabilities Total current liabilities Long-term borrowings Other long-term liabilities Total long-term liabilities Shareholders’ funds Minority interests NTA/share (RM)

2008 10.4 2.3 32.1 23.7 123.2 26.3 125.9 29.3 1.0 12.7

(FYE Dec) Revenue growth (%) EBITDA growth (%) Pretax margins (%) Net profit margins (%) Interest cover (x) Effective tax rates (%) Net dividend payout (%) Debtors turnover (days) Stock turnover (days) Creditors turnover (days)

2008 1,547 636 (51) (374) 260 2,018 (888) 10 0 (878) 98 3 (1,501) 24 (1,376) (236) (333) (56)

2009 1,366 731 15 (392) (48) 1,673 (717) 0 14 (704) 524 0 (1,376) (18) (870) 99 (425) (481)

2010F 1,545 782 (29) (413) 91 1,976 (720) 0 0 (720) 600 0 (1,447) (22) (869) 387 (213) (694)

2011F 1,732 809 (24) (386) 110 2,241 (720) 0 0 (720) 0 0 (1,444) (41) (1,485) 36 36 (658)

2012F 1,934 818 (21) (433) 106 2,405 (720) 0 0 (720) 0 0 (1,418) (37) (1,455) 230 230 (428)

20.0 19.0 18.0 17.0 16.0 15.0 14.0 13.0 Dec-07

Apr-08

Aug-08

Source: Company, CIMB Research, Bloomberg

The S.E.A. Navigator – Malaysia 2011

[ 77 ]

Dec-08

Apr-09

Aug-09

Dec-09

Apr-10

Aug-10

Dec-10

Syariah-compliant stock

Eastern & Oriental Bhd

OUTPERFORM

Maintained

RM1.14

@07/12/10

Takeover candiate?

MALAYSIA

2011 OUTLOOK

CIMB Research Report

Target: RM1.63 Property Devt & Invt

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: 12-m price range:

RM940m/US$300m 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 Revenue (RM m) EBITDA (RM m) EBITDA margins (%) Pretax profit (RM m) Net profit (RM m) EPS (sen) EPS growth (%) P/E (x) Core EPS (sen) Core EPS growth (%) Core P/E (x) FD core EPS (sen) FD core P/E (x) Gross DPS (sen) Dividend yield (%) P/BV (x) ROE (%) Net gearing (%) P/FCFE (x) EV/EBITDA (x) % change in EPS estimates CIMB/Consensus (x)

2009 302.6 27.2 9.0% (38.1) (37.7) (6.4) (124.7%) nm (1.0) (143.9%) nm 1.0 118.9 0.0 0.0% 0.8 (4.9%) 80.5% (2.7) 50.2

2010 352.4 72.2 20.5% 93.7 70.9 9.3 246.2% 12.2 6.4 730.2% 17.9 6.4 17.9 3.8 3.3% 0.8 7.6% 36.2% 5.1 17.8

2011F 395.0 73.1 18.5% 68.8 45.0 5.7 (39.3%) 20.2 5.7 (11.1%) 20.2 5.7 20.0 3.8 3.3% 0.9 4.3% 50.1% (25.1) 20.4 N/A 0.99

2012F 526.1 98.3 18.7% 101.9 70.2 8.8 56.0% 12.9 8.8 56.0% 12.9 8.0 14.3 4.0 3.5% 0.8 6.5% 59.8% (19.3) 16.6 N/A 1.00

2013F 656.8 134.4 20.5% 117.0 80.6 10.1 14.8% 11.3 10.1 14.8% 11.3 8.9 12.8 5.0 4.4% 0.8 7.1% 58.0% (136.6) 12.3 N/A 0.87

Source: Company, CIMB Research, Bloomberg

Price chart

Corporate profile

1.4

3.50

1.3

3.00

1.2

2.50 2.00

1.1

1.50 1.0

1.00

0.9 0.8 De c-09

0.50 0.00 Ma y-10 Volume 10m (R.H.S ca le )

Source: Bloomberg

Oct-10 Ea s te rn & Orie nta l Bhd

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 1,400 acres 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.

The S.E.A. Navigator – Malaysia 2011

[ 78 ]

Financial tables KEY RATIOS

PROFIT & LOSS (RM m, FYE Mar) Revenue Operating expenses EBITDA Depreciation & amortisation EBIT Net interest & invt income Associates’ contribution Exceptional items Others Pretax profit Tax Minority interests Net profit Adj. wt. shares (m) Unadj. year-end shares (m)

2009 303 (275) 27 (12) 15 (19) (3) (32) 0 (38) 6 (5) (38) 592 592

2010 352 (280) 72 (16) 56 2 8 28 0 94 (19) (4) 71 762 762

2009 341 0 758 1,099 246 95 105 426 872 75 395 95 565 524 47 571 814 22 1.37

2010 395 0 755 1,150 559 55 73 342 1,029 19 382 98 499 564 47 611 1,042 26 1.37

2011F 395 (322) 73 (19) 54 (17) 32 0 0 69 (19) (5) 45 796 796

2012F 526 (428) 98 (20) 79 (21) 44 0 0 102 (25) (6) 70 796 796

2013F 657 (522) 134 (20) 115 (23) 26 0 0 117 (29) (7) 81 796 796

(FYE Mar) Revenue growth (%) EBITDA growth (%) Pretax margins (%) Net profit margins (%) Interest cover (x) Effective tax rates (%) Net dividend payout (%) Debtors turnover (days) Stock turnover (days) Creditors turnover (days)

2012F 366 0 1,091 1,456 504 45 109 415 1,074 28 421 100 549 769 64 833 1,110 38 1.39

2013F 351 0 1,128 1,479 494 40 136 458 1,129 35 442 101 578 750 73 824 1,161 45 1.46

(FYE Mar) Undeveloped landbank (acres) Company's targeted sales (RMm) Margin - Property development (%) Gross Margin (%)

2011F 380 0 922 1,302 531 50 82 376 1,039 21 401 98 520 679 47 726 1,064 32 1.34

2011F 12.1 1.3 17.4 11.4 1.8 27.0 50.4 71.7 48.5 18.6

2012F 33.2 34.4 19.4 13.3 2.3 25.0 34.0 66.4 32.8 17.2

2013F 24.8 36.7 17.8 12.3 3.2 25.0 37.0 68.3 23.6 17.7

2010 1,463 1,000 40.0% 20.5%

2011F 1,443 585 23.7% 18.5%

2012F 1,423 700 22.4% 18.7%

2013F 1,403 850 23.5% 20.5%

CURRENT P/BV(X)

CASH FLOW (RM m, FYE Mar) Pretax profit Depreciation & non–cash adj. Working capital changes Cash tax paid Others Cash flow from operations Capex Net investments & sale of FA Others Cash flow from investing Debt raised/(repaid) Equity raised/(repaid) Dividends paid Cash interest & others Cash flow from financing Change in cash Change in net cash/(debt) Ending net cash/(debt)

2010 16.5 165.0 26.6 20.1 2.4 19.9 30.6 92.2 78.0 48.5

KEY DRIVERS

BALANCE SHEET (RM m, end Mar) Fixed assets Intangible assets Other long-term assets Total non-current assets Cash and equivalents Stocks Trade debtors Other current assets Total current assets Trade creditors Short-term borrowings Other current liabilities Total current liabilities Long-term borrowings Other long-term liabilities Total long-term liabilities Shareholders’ funds Minority interests NTA/share (RM)

2009 (41.4) (74.1) (12.6) (12.5) 0.5 N/A N/A 169.2 74.0 85.6

2009 (38) 12 (111) (23) 22 (138) (104) 216 (265) (153) 57 387 0 (361) 83 (208) (265) (672)

2010 94 16 100 (16) (10) 184 (70) 3 22 (45) 28 157 (22) 11 174 313 285 (387)

2011F 69 19 (35) (19) (15) 19 (5) (167) 0 (172) 134 0 (23) 15 126 (27) (161) (548)

2012F 102 20 (54) (6) (23) 38 (5) (169) 0 (174) 110 0 (24) 23 110 (27) (137) (685)

2013F 117 20 (59) (19) (2) 57 (5) (38) 0 (43) 2 0 (30) 2 (25) (11) (13) (698)

1.60 1.40 1.20 1.00 0.80 0.60 0.40 0.20 Dec-07

Apr-08

Aug-08

Source: Company, CIMB Research, Bloomberg

The S.E.A. Navigator – Malaysia 2011

[ 79 ]

Dec-08

Apr-09

Aug-09

Dec-09

Apr-10

Aug-10

Dec-10

Syariah-compliant stock

Eksons Corporation Bhd

OUTPERFORM

Maintained

RM1.00

@07/12/10

Property is a new plank for earnings

MALAYSIA

2011 OUTLOOK

CIMB Research Report

Target: RM1.26 Timber

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: 12-m price range:

RM163m/US$52m 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 Revenue (RM m) EBITDA (RM m) EBITDA margins (%) Pretax profit (RM m) Net profit (RM m) EPS (sen) EPS growth (%) P/E (x) Gross DPS (sen) Dividend yield (%) P/BV (x) ROE (%) Net cash per share (RM) P/FCFE (x) EV/EBITDA (x) % change in EPS estimates CIMB/Consensus (x)

2009 291.1 33.3 11.4% 20.7 26.0 15.8 (38.1%) 6.3 2.7 2.7% 0.5 8.6% 0.32 14.1 3.9

2010 279.1 27.0 9.7% 13.9 17.4 10.6 (33.1%) 9.4 4.1 4.2% 0.5 5.3% 0.09 (5.9) 6.3

2011F 348.7 53.6 15.4% 39.6 34.9 21.3 100.7% 4.7 5.9 5.9% 0.4 9.8% 0.31 6.3 2.5 1.01

2012F 367.8 61.8 16.8% 47.3 42.1 25.6 20.5% 3.9 7.1 7.1% 0.4 10.9% 0.57 3.3 1.5 0.99

2013F 382.3 76.4 20.0% 61.4 54.2 33.0 28.8% 3.0 9.2 9.2% 0.4 12.7% 0.89 2.5 0.5 1.00

Source: Company, CIMB Research, Bloomberg

Price chart

Corporate profile

1.2

1.80 1.60

1.1

1.40 1.20

1.0

1.00 0.80

0.9

0.60 0.40

0.8

0.20 0.7 De c-09

0.00 Ma y-10 Volume 1m (R.H.S ca le )

Oct-10 Eks ons Corpora tion Bhd

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.

Source: Bloomberg

The S.E.A. Navigator – Malaysia 2011

[ 80 ]

Financial tables KEY RATIOS

PROFIT & LOSS (RM m, FYE Mar) Revenue Operating expenses EBITDA Depreciation & amortisation EBIT Net interest & invt income Associates’ contribution Exceptional items Others Pretax profit Tax Minority interests Net profit Adj. wt. shares (m) Unadj. year-end shares (m)

2009 291 (258) 33 (13) 20 0 0 0 0 21 5 0 26 164 164

2010 279 (252) 27 (13) 14 0 0 0 0 14 5 (1) 17 164 164

2011F 349 (295) 54 (14) 40 0 0 0 0 40 (5) 0 35 164 164

2012F 368 (306) 62 (15) 47 0 0 0 0 47 (5) 0 42 164 164

2013F 382 (306) 76 (15) 61 0 0 0 0 61 (7) 0 54 164 164

2009 202 15 0 217 67 70 19 85 242 17 15 5 37 0 84 84 318 19 1.84

2010 178 27 9 214 54 86 35 51 226 31 40 4 75 0 3 3 343 20 1.93

2011F 174 27 9 210 73 83 34 51 241 32 21 4 57 0 3 3 371 20 2.10

2012F 170 27 9 206 114 80 34 51 279 32 21 4 57 0 3 3 404 20 2.30

2013F 165 27 9 201 168 75 34 51 328 32 21 4 57 0 3 3 448 20 2.56

2009 21 13 (1) 5 0 38 (24) 0 (3) (26) 0 13 (4) 0 9 20 20 53

2010 14 13 (4) 0 11 35 (70) 0 0 (70) 8 0 (5) 2 4 (31) (39) 14

2011F 40 14 6 (5) 0 55 (10) 0 0 (10) (19) 0 (7) 0 (26) 19 38 52

2012F 47 15 3 (5) 0 60 (10) 0 0 (10) 0 0 (8) 0 (8) 41 41 93

2013F 61 15 5 (7) 0 74 (10) 0 0 (10) 0 0 (11) 0 (11) 53 53 146

2011F 25.0 98.5 11.4 10.0 N/A 11.5 20.0 36.1 88.6 32.8

2012F 5.5 15.3 12.9 11.4 N/A 10.8 20.0 33.7 80.9 31.8

2013F 4.0 23.6 16.1 14.2 N/A 11.5 20.0 32.5 74.0 30.6

(FYE Mar) Average plywood price (US$/cu m) Annual prodn capacity (cu m) Production (cu m p.a.) Average log price (US$/cu m)

2010 425 285,000 185,250 145

2011F 2012F 2013F 450 450 450 285,000 285,000 285,000 203,000 228,000 228,000 165 165 165

12M - FORWARD FD CORE P/E (X)

CASH FLOW (RM m, FYE Mar) Pretax profit Depreciation & non–cash adj. Working capital changes Cash tax paid Others Cash flow from operations Capex Net investments & sale of FA Others Cash flow from investing Debt raised/(repaid) Equity raised/(repaid) Dividends paid Cash interest & others Cash flow from financing Change in cash Change in net cash/(debt) Ending net cash/(debt)

2010 (4.1) (18.9) 5.0 6.2 N/A N/A 28.2 35.3 102.2 31.1

KEY DRIVERS

BALANCE SHEET (RM m, end Mar) Fixed assets Intangible assets Other long-term assets Total non-current assets Cash and equivalents Stocks Trade debtors Other current assets Total current assets Trade creditors Short-term borrowings Other current liabilities Total current liabilities Long-term borrowings Other long-term liabilities Total long-term liabilities Shareholders’ funds Minority interests NTA/share (RM)

2009 (19.6) (34.6) 7.1 8.9 N/A N/A 12.3 31.1 81.8 23.7

(FYE Mar) Revenue growth (%) EBITDA growth (%) Pretax margins (%) Net profit margins (%) Interest cover (x) Effective tax rates (%) Net dividend payout (%) Debtors turnover (days) Stock turnover (days) Creditors turnover (days)

9.0

8.0

7.0

6.0

5.0

4.0

3.0 Dec-07

Apr-08

Aug-08

Source: Company, CIMB Research, Bloomberg

The S.E.A. Navigator – Malaysia 2011

[ 81 ]

Dec-08

Apr-09

Aug-09

Dec-09

Apr-10

Aug-10

Dec-10

Fraser & Neave Holdings Bhd

UNDERPERFORM

Maintained

RM16.26

@07/12/10

Growth is fizzling out

MALAYSIA

2011 OUTLOOK

CIMB Research Report

Target: RM11.05 Food & Beverages

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 CocaCola 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 be ready 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 Revenue (RM m) EBITDA (RM m) EBITDA margins (%) Pretax profit (RM m) Net profit (RM m) EPS (sen) EPS growth (%) P/E (x) Gross DPS (sen) Dividend yield (%) P/BV (x) ROE (%) Net cash per share (RM) P/FCFE (x) EV/EBITDA (x) % change in EPS estimates CIMB/Consensus (x)

2009 3,737.1 453.0 12.1% 299.8 224.4 63.0 34.5% 25.8 53.4 3.3% 5.8 21.9% 0.18 38.7 13.0

2010 3,637.7 519.4 14.3% 776.1 695.3 195.1 209.8% 8.3 182.7 11.2% 4.4 60.0% 1.13 9.3 10.7

2011F 4,929.9 454.7 9.2% 362.7 267.2 74.9 (61.6%) 21.7 53.4 3.3% 5.1 21.8% 0.96 21.6 12.4 0.93

2012F 5,040.8 465.2 9.2% 373.0 274.8 77.1 2.8% 21.1 53.4 3.3% 5.1 24.2% 1.23 25.4 11.9 0.94

2013F 5,093.9 481.2 9.4% 384.4 283.2 79.4 3.1% 20.5 53.4 3.3% 5.1 24.8% 1.51 24.8 11.3 0.99

Source: Company, CIMB Research, Bloomberg

Price chart

Corporate profile

16.8

1.00

15.8

0.80

14.8 13.8

0.60

12.8

0.40

11.8

0.20

10.8 9.8 De c -09

0.00 Ma y-10

Volume 1m (R.H.S ca le )

Source: Bloomberg

Oct-10 Fra s e r & Ne a ve Holdings Bhd

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 market after 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.

The S.E.A. Navigator – Malaysia 2011

[ 82 ]

Financial tables KEY RATIOS

PROFIT & LOSS (RM m, FYE Sep) Revenue Operating expenses EBITDA Depreciation & amortisation EBIT Net interest & invt income Associates’ contribution Exceptional items Others Pretax profit Tax Minority interests Net profit Adj. wt. shares (m) Unadj. year-end shares (m)

2009 3,737 (3,284) 453 (139) 314 (14) 0 0 0 300 (57) (18) 224 356 356

2010 3,638 (3,118) 519 (145) 374 0 0 402 0 776 (82) 1 695 356 356

2011F 4,930 (4,475) 455 (89) 365 (3) 0 0 0 363 (83) (12) 267 356 356

2012F 5,041 (4,576) 465 (93) 372 1 0 0 0 373 (86) (12) 275 356 356

2013F 5,094 (4,613) 481 (98) 383 1 0 0 0 384 (88) (13) 283 356 356

2012F 207 0 3 210 590 678 944 0 2,211 840 15 15 870 136 87 224 1,142 186 3.20

2013F 110 0 3 113 682 685 955 0 2,322 850 14 15 879 129 87 216 1,141 199 3.20

2009 532 0 3 534 243 578 806 0 1,627 717 21 15 753 159 86 245 1,005 159 2.82

2010 388 0 3 390 572 680 947 0 2,199 843 19 15 877 151 86 237 1,313 162 3.68

2011F 299 0 3 302 503 661 921 0 2,085 820 17 15 852 143 86 230 1,132 174 3.18

2011F 35.5 (12.5) 7.4 5.4 32.6 23.0 51.3 69.1 49.6 61.6

2012F 2.2 2.3 7.4 5.5 35.2 23.0 49.9 67.5 48.5 60.1

2013F 1.1 3.4 7.5 5.6 38.3 23.0 48.4 68.0 48.8 60.5

(FYE Sep) Manufacturing overhead growth (%) Capacity utilisation (%) Raw material price growth (%) SKU

2010 6.0% 95.0% 12.0% 422

2011F 6.0% 95.0% 12.0% 423

2012F 6.0% 95.0% 12.0% 424

2013F 6.0% 95.0% 12.0% 425

12M - FORWARD FD CORE P/E (X)

CASH FLOW (RM m, FYE Sep) Pretax profit Depreciation & non–cash adj. Working capital changes Cash tax paid Others Cash flow from operations Capex Net investments & sale of FA Others Cash flow from investing Debt raised/(repaid) Equity raised/(repaid) Dividends paid Cash interest & others Cash flow from financing Change in cash Change in net cash/(debt) Ending net cash/(debt)

2010 (2.7) 14.6 21.3 19.1 52.2 10.6 67.4 87.9 63.1 78.3

KEY DRIVERS

BALANCE SHEET (RM m, end Sep) Fixed assets Intangible assets Other long-term assets Total non-current assets Cash and equivalents Stocks Trade debtors Other current assets Total current assets Trade creditors Short-term borrowings Other current liabilities Total current liabilities Long-term borrowings Other long-term liabilities Total long-term liabilities Shareholders’ funds Minority interests NTA/share (RM)

2009 4.1 22.3 8.0 6.0 17.8 19.0 61.1 73.3 52.6 65.2

(FYE Sep) Revenue growth (%) EBITDA growth (%) Pretax margins (%) Net profit margins (%) Interest cover (x) Effective tax rates (%) Net dividend payout (%) Debtors turnover (days) Stock turnover (days) Creditors turnover (days)

2009 300 139 (92) (60) (42) 245 (84) 0 0 (84) (11) 0 (141) 1 (151) 10 21 63

2010 776 145 (117) (72) (107) 625 (97) 103 0 6 (10) 0 (294) 1 (303) 328 339 402

2011F 363 89 22 (85) 0 389 (112) 0 0 (112) (9) 0 (337) 1 (346) (68) (59) 343

2012F 373 93 (19) (83) 2 366 (128) 0 0 (128) (9) 0 (143) 1 (151) 87 96 439

2013F 384 98 (9) (86) 2 390 (148) 0 0 (148) (8) 0 (143) 1 (150) 92 100 539

22.0

20.0

18.0

16.0

14.0

12.0

10.0 Dec-07

Apr-08

Aug-08

Source: Company, CIMB Research, Bloomberg

The S.E.A. Navigator – Malaysia 2011

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Dec-08

Apr-09

Aug-09

Dec-09

Apr-10

Aug-10

Dec-10

Syariah-compliant stock

Gamuda Bhd

OUTPERFORM

Maintained

RM3.76

@07/12/10

Riding on the MRT

MALAYSIA

2011 OUTLOOK

CIMB Research Report

Target: RM5.00 Construction

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 end2010. This is positive for Gamuda as it has a good chance of bagging the RM13bn14bn 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 Revenue (RM m) EBITDA (RM m) EBITDA margins (%) Pretax profit (RM m) Net profit (RM m) EPS (sen) EPS growth (%) P/E (x) FD core EPS (sen) FD core P/E (x) Gross DPS (sen) Dividend yield (%) P/BV (x) ROE (%) Net gearing (%) P/FCFE (x) EV/EBITDA (x) % change in EPS estimates CIMB/Consensus (x)

2009 2,727.3 303.4 11.1% 282.2 193.7 9.6 (33.8%) 39.1 9.6 39.1 7.9 2.1% 3.7 8.2% 41.1% 30.0 28.5

2010 2,455.1 236.6 9.6% 370.1 280.7 13.9 44.9% 27.0 13.7 27.4 12.0 3.2% 4.1 14.4% 60.9% 109.4 37.9

2011F 3,106.7 233.7 7.5% 479.2 335.0 16.6 19.3% 22.6 16.3 23.1 12.0 3.2% 3.7 17.2% 51.4% 225.9 38.2 0.89

2012F 4,107.8 327.2 8.0% 646.1 458.5 22.7 36.9% 16.5 22.1 17.0 12.0 3.2% 3.6 21.9% 47.4% (201.0) 27.2 1.01

2013F 4,587.9 417.9 9.1% 780.8 558.2 27.7 21.7% 13.6 32.9 11.4 12.0 3.2% 3.4 25.6% 43.7% (151.5) 21.3 1.09

Source: Company, CIMB Research, Bloomberg

Price chart

Corporate profile

4.2 4.0

3.00

3.8

2.50

3.6

2.00

3.4

1.50

3.2 3.0

1.00

2.8

0.50

2.6 2.4 De c-09

0.00 Ma y-10 Volume 10m (R.H.S ca le )

Oct-10 Ga muda Bhd

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.

Source: Bloomberg

The S.E.A. Navigator – Malaysia 2011

[ 84 ]

Financial tables KEY RATIOS

PROFIT & LOSS (RM m, FYE Jul) Revenue Operating expenses EBITDA Depreciation & amortisation EBIT Net interest & invt income Associates’ contribution Exceptional items Others Pretax profit Tax Minority interests Net profit Adj. wt. shares (m) Unadj. year-end shares (m)

2009 2,727 (2,424) 303 (18) 285 (146) 143 0 0 282 (78) (11) 194 2,016 2,016

2010 2,455 (2,219) 237 (19) 218 (2) 154 0 0 370 (81) (9) 281 2,016 2,016

2011F 3,107 (2,873) 234 (19) 214 (22) 286 0 0 479 (125) (20) 335 2,016 2,016

2012F 4,108 (3,781) 327 (20) 307 (20) 359 0 0 646 (168) (20) 459 2,016 2,017

2013F 4,588 (4,170) 418 (20) 398 (20) 403 0 0 781 (203) (20) 558 2,017 2,017

2012F 24 18 1,958 2,000 644 88 2,154 299 3,185 301 320 729 1,350 1,437 50 1,487 2,131 215 1.05

2013F 5 18 1,952 1,975 612 98 2,373 300 3,382 335 256 803 1,394 1,437 55 1,492 2,237 235 1.10

2009 79 19 1,644 1,742 751 35 1,665 231 2,682 120 626 388 1,133 1,037 38 1,074 2,061 157 1.01

2010 62 19 1,814 1,895 714 63 1,900 265 2,942 215 501 564 1,280 1,437 112 1,549 1,833 176 0.90

2011F 43 18 1,963 2,024 678 66 1,894 298 2,936 228 401 593 1,221 1,437 46 1,482 2,061 196 1.01

2011F 26.5 (1.2) 15.4 10.8 4.8 26.0 52.0 222.9 7.6 26.0

2012F 32.2 40.0 15.7 11.2 7.3 26.0 38.0 179.8 6.9 23.5

2013F 11.7 27.7 17.0 12.2 9.9 26.0 31.2 180.1 7.4 25.3

(FYE Jul) Construction margins (%) Orderbook replenishment (RM m) Outstanding orderbook (RM m)

2010 5.0% 500 8,500

2011F 9.0% 500 9,200

2012F 9.0% 1,000 10,600

2013F 9.0% 1,000 12,000

12M - FORWARD FD CORE P/E (X)

CASH FLOW (RM m, FYE Jul) Pretax profit Depreciation & non–cash adj. Working capital changes Cash tax paid Others Cash flow from operations Capex Net investments & sale of FA Others Cash flow from investing Debt raised/(repaid) Equity raised/(repaid) Dividends paid Cash interest & others Cash flow from financing Change in cash Change in net cash/(debt) Ending net cash/(debt)

2010 (10.0) (22.0) 15.1 11.4 5.0 21.8 62.1 265.1 7.3 24.9

KEY DRIVERS

BALANCE SHEET (RM m, end Jul) Fixed assets Intangible assets Other long-term assets Total non-current assets Cash and equivalents Stocks Trade debtors Other current assets Total current assets Trade creditors Short-term borrowings Other current liabilities Total current liabilities Long-term borrowings Other long-term liabilities Total long-term liabilities Shareholders’ funds Minority interests NTA/share (RM)

2009 13.5 20.6 10.3 7.1 1.6 27.6 59.5 240.7 5.8 19.9

(FYE Jul) Revenue growth (%) EBITDA growth (%) Pretax margins (%) Net profit margins (%) Interest cover (x) Effective tax rates (%) Net dividend payout (%) Debtors turnover (days) Stock turnover (days) Creditors turnover (days)

2009 282 18 164 (80) 249 634 (14) (212) 0 (225) (156) 0 (86) (261) (504) (95) 62 (910)

2010 370 19 (376) (104) 95 4 (14) (234) 0 (247) 312 0 (86) 27 253 10 (302) (1,224)

2011F 479 19 70 (120) (16) 433 (14) (256) 0 (270) (130) 0 (86) (14) (231) (67) 63 (1,161)

2012F 646 20 (55) (156) (89) 366 (14) (308) 0 (322) (82) 0 (86) 90 (78) (34) 48 (1,113)

2013F 781 20 (103) (192) (133) 373 (14) (340) 0 (353) (70) 0 (86) 99 (57) (38) 32 (1,082)

43.0

38.0

33.0

28.0

23.0

18.0

13.0 Dec-07

Apr-08

Aug-08

Source: Company, CIMB Research, Bloomberg

The S.E.A. Navigator – Malaysia 2011

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Dec-08

Apr-09

Aug-09

Dec-09

Apr-10

Aug-10

Dec-10

Genting Bhd

OUTPERFORM

Maintained

RM10.70

@07/12/10

Top gaming pick

MALAYSIA

2011 OUTLOOK

CIMB Research Report

Target: RM15.20 Gaming

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-thanexpected 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 nonperforming 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 Revenue (RM m) EBITDA (RM m) EBITDA margins (%) Pretax profit (RM m) Net profit (RM m) EPS (sen) EPS growth (%) P/E (x) Core EPS (sen) Core EPS growth (%) Core P/E (x) Gross DPS (sen) Dividend yield (%) P/BV (x) ROE (%) Net cash per share (RM) P/FCFE (x) EV/EBITDA (x) % change in EPS estimates CIMB/Consensus (x)

2008 9,082.5 3,470.1 38.2% 1,733.1 567.6 15.3 (71.5%) 69.8 45.9 6.4% 23.3 7.0 0.7% 3.2 4.6% 0.97 69.2 12.8

2009 8,893.6 3,776.3 42.5% 2,528.4 1,044.3 28.2 84.0% 38.0 36.7 (20.2%) 29.2 7.2 0.7% 2.9 7.9% 0.32 6.9 13.1

2010F 14,850.2 6,508.2 43.8% 4,301.6 2,229.5 60.2 113.5% 17.8 65.7 79.3% 16.3 7.5 0.7% 2.5 15.0% 0.38 11.2 7.8 1.39

2011F 18,002.3 7,958.6 44.2% 5,893.2 2,974.1 80.3 33.4% 13.3 80.3 22.2% 13.3 7.5 0.7% 2.1 17.2% 1.95 4.9 5.8 1.08

2012F 20,039.7 8,595.2 42.9% 6,564.9 3,458.6 93.4 16.3% 11.5 93.4 16.3% 11.5 7.9 0.7% 1.8 17.0% 3.58 7.2 4.9 1.13

Source: Company, CIMB Research, Bloomberg

Price chart

Corporate profile 2.50

10.9

2.00 9.9

1.50

8.9

1.00

7.9

0.50

6.9 5.9 De c -09

0.00 Ma y-10 Volume 10m (R.H.S c a le )

Source: Bloomberg

Oc t-10 Ge nting Bhd

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. The S.E.A. Navigator – Malaysia 2011

[ 86 ]

Financial tables KEY RATIOS

PROFIT & LOSS (RM m, FYE Dec) Revenue Operating expenses EBITDA Depreciation & amortisation EBIT Net interest & invt income Associates’ contribution Exceptional items Others Pretax profit Tax Minority interests Net profit Adj. wt. shares (m) Unadj. year-end shares (m)

2008 9,083 (5,612) 3,470 (625) 2,846 (54) 74 (1,133) 0 1,733 (751) (414) 568 3,704 3,704

2009 8,894 (5,117) 3,776 (687) 3,089 (136) 20 (445) 0 2,528 (746) (739) 1,044 3,704 3,705

2010F 14,850 (8,342) 6,508 (1,228) 5,280 (183) 20 (815) 0 4,302 (944) (1,128) 2,230 3,705 3,705

2011F 2012F (FYE Dec) 18,002 20,040 Revenue growth (%) (10,044) (11,444) EBITDA growth (%) 7,959 8,595 Pretax margins (%) (1,884) (1,952) Net profit margins (%) 6,075 6,644 Interest cover (x) (202) (99) Effective tax rates (%) 20 20 Net dividend payout (%) 0 0 Debtors turnover (days) 0 0 Stock turnover (days) 5,893 6,565 Creditors turnover (days) (1,349) (1,396) (1,570) (1,710) 2,974 3,459 3,705 3,705 3,705 3,705

2008 10,692 3,523 5,103 19,317 9,467 376 1,090 201 11,133 1,512 442 251 2,206 5,414 1,417 6,832 12,442 8,971 2.41

2009 16,450 3,914 6,590 26,955 14,707 387 1,097 356 16,547 2,382 853 202 3,436 12,659 1,693 14,352 13,887 11,825 2.69

2010F 20,510 3,914 6,512 30,936 17,834 646 1,831 594 20,906 3,977 767 883 5,628 15,659 1,693 17,352 15,908 12,953 3.24

2011F 19,626 3,914 6,528 30,068 25,559 784 2,220 721 29,283 4,822 691 1,289 6,801 17,659 1,693 19,352 18,674 14,523 3.98

2012F 18,674 3,914 6,543 29,131 30,668 872 2,471 802 34,814 5,367 621 1,340 7,329 16,776 1,693 18,469 21,913 16,233 4.86

2010F 67.0 72.3 29.0 15.0 13.1 21.9 9.0 36.0 12.7 78.2

2011F 21.2 22.3 32.7 16.5 12.9 22.9 6.7 41.1 14.5 89.2

2012F 11.3 8.0 32.8 17.3 13.8 21.3 6.1 42.7 15.1 92.8

(FYE Dec) Number of tables Number of slots Net win per table p.a. (RM m) Net win per slot p.a. (RM m) Average occupancy rate (%) Number of rooms - Total Universal Studios visitor (m) Net win per table (S$ m)

2009 420 3,500 8.546 0.289

2010F 420 3,500 8.525 0.289 75.0% 1,350 4.1 10

2011F 420 3,500 8.649 0.293 95.0% 1,350 4.6 11

2012F 420 3,500 8.908 0.302 85.0% 1,500 5.6 11

12M - FORWARD FD CORE P/E (X)

CASH FLOW (RM m, FYE Dec) Pretax profit Depreciation & non–cash adj. Working capital changes Cash tax paid Others Cash flow from operations Capex Net investments & sale of FA Others Cash flow from investing Debt raised/(repaid) Equity raised/(repaid) Dividends paid Cash interest & others Cash flow from financing Change in cash Change in net cash/(debt) Ending net cash/(debt)

2009 (2.1) 8.8 28.4 11.7 11.8 29.5 18.4 44.9 15.7 79.9

KEY DRIVERS

BALANCE SHEET (RM m, end Dec) Fixed assets Intangible assets Other long-term assets Total non-current assets Cash and equivalents Stocks Trade debtors Other current assets Total current assets Trade creditors Short-term borrowings Other current liabilities Total current liabilities Long-term borrowings Other long-term liabilities Total long-term liabilities Shareholders’ funds Minority interests NTA/share (RM)

2008 7.1 (6.6) 19.1 6.2 10.6 43.4 32.9 38.6 13.8 57.9

2008 1,733 625 (180) (886) 1,646 2,938 (2,500) (345) 0 (2,846) 535 (174) (524) (54) (217) (125) (660) 3,608

2009 2,528 687 852 (863) 326 3,531 (5,205) (100) 0 (5,305) 7,655 0 (504) (136) 7,014 5,240 (2,415) 1,193

2010F 4,302 1,228 602 (746) 808 6,194 (5,288) (100) 0 (5,388) 2,915 0 (408) (183) 2,323 3,128 214 1,407

2011F 5,893 1,884 318 (944) 361 7,512 (1,000) (100) 0 (1,100) 1,923 0 (408) (202) 1,313 7,725 5,802 7,209

2012F 6,565 1,952 206 (1,349) 296 7,669 (1,000) (100) 0 (1,100) (952) 0 (408) (99) (1,460) 5,109 6,061 13,270

17.0

15.0

13.0

11.0

9.0

7.0 Dec-07

Apr-08

Aug-08

Source: Company, CIMB Research, Bloomberg

The S.E.A. Navigator – Malaysia 2011

[ 87 ]

Dec-08

Apr-09

Aug-09

Dec-09

Apr-10

Aug-10

Dec-10

Genting Malaysia Bhd

NEUTRAL

Maintained

RM3.34

@07/12/10

A dicey bet

MALAYSIA

2011 OUTLOOK

CIMB Research Report

Target: RM3.90 Gaming

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 nearterm 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 Revenue (RM m) EBITDA (RM m) EBITDA margins (%) Pretax profit (RM m) Net profit (RM m) EPS (sen) EPS growth (%) P/E (x) Core EPS (sen) Core EPS growth (%) Core P/E (x) Gross DPS (sen) Dividend yield (%) P/BV (x) ROE (%) Net gearing (%) Net cash per share (RM) P/FCFE (x) EV/EBITDA (x) % change in EPS estimates CIMB/Consensus (x)

2008 4,886.7 2,034.5 41.6% 1,125.3 632.7 10.8 (60.8%) 31.0 23.8 18.1% 14.1 7.0 2.1% 2.4 7.7% N/A 0.77 10.8 7.4

2009 4,991.8 2,038.7 40.8% 1,764.5 1,323.6 22.4 107.9% 14.9 23.5 (1.3%) 14.2 7.3 2.2% 1.9 14.3% N/A 0.89 18.3 7.1

2010F 5,134.4 1,932.5 37.6% 1,617.3 1,229.6 20.8 (7.1%) 16.0 22.7 (3.3%) 14.7 7.9 2.4% 1.8 11.5% N/A 1.08 13.6 6.9 1.01

2011F 7,003.3 2,165.7 30.9% 1,941.0 1,403.1 23.8 14.1% 14.1 23.8 4.7% 14.1 7.9 2.4% 1.6 11.9% N/A 1.28 13.0 5.6 0.97

2012F 7,688.1 2,309.1 30.0% 2,081.5 1,530.7 25.9 9.1% 12.9 25.9 9.1% 12.9 8.2 2.5% 1.5 11.9% N/A 1.47 12.9 4.8 0.97

Source: Company, CIMB Research, Bloomberg

Price chart

Corporate profile

3.9

8.00

3.7

7.00

3.5

6.00

3.3

5.00

3.1

4.00

2.9

3.00

2.7

2.00

2.5 2.3 De c-09

1.00 0.00 Ma y-10 Volume 10m (R.H.S ca le )

Source: Bloomberg

Oct-10 Ge nting Ma la ys ia Bhd

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. The S.E.A. Navigator – Malaysia 2011

[ 88 ]

Financial tables KEY RATIOS

PROFIT & LOSS (RM m, FYE Dec) Revenue Operating expenses EBITDA Depreciation & amortisation EBIT Net interest & invt income Associates’ contribution Exceptional items Others Pretax profit Tax Minority interests Net profit Adj. wt. shares (m) Unadj. year-end shares (m)

2008 4,887 (2,852) 2,035 (262) 1,773 114 1 (762) 0 1,125 (493) 0 633 5,866 5,902

2009 4,992 (2,953) 2,039 (270) 1,769 78 0 (81) 0 1,765 (441) 0 1,324 5,903 5,905

2010F 5,134 (3,202) 1,933 (276) 1,657 106 0 (145) 0 1,617 (388) 0 1,230 5,905 5,905

2011F 7,003 (4,838) 2,166 (332) 1,834 107 0 0 0 1,941 (538) 0 1,403 5,905 5,905

2012F 7,688 (5,379) 2,309 (358) 1,951 131 0 0 0 2,081 (551) 0 1,531 5,905 5,905

(FYE Dec) Revenue growth (%) EBITDA growth (%) Pretax margins (%) Net profit margins (%) Interest cover (x) Effective tax rates (%) Net dividend payout (%) Debtors turnover (days) Stock turnover (days) Creditors turnover (days)

2011F 3,675 0 2,318 5,993 7,548 87 261 25 7,922 891 0 329 1,220 0 367 367 12,322 6 2.09

2012F 3,752 0 2,318 6,070 8,705 96 286 28 9,115 978 0 345 1,323 0 367 367 13,489 6 2.28

(FYE Dec) Number of tables Number of slots Net win per table p.a. (RM m) Net win per slot p.a. (RM m) Revenue growth (%)

2008 3,638 0 963 4,602 4,555 60 186 20 4,821 541 0 238 779 0 319 319 8,318 7 1.41

2009 3,482 0 2,318 5,800 5,272 62 186 18 5,538 635 0 200 835 0 367 367 10,137 7 1.72

2010F 3,587 0 2,318 5,904 6,381 64 191 19 6,655 653 0 264 918 0 367 367 11,268 7 1.91

2010F 2.9 (5.2) 31.5 23.9 N/A 24.0 27.3 13.4 4.5 45.8

2011F 36.4 12.1 27.7 20.0 N/A 27.7 23.9 11.8 3.9 40.3

2012F 9.8 6.6 27.1 19.9 N/A 26.5 22.8 13.0 4.3 44.4

2009 420 3,500 8.546 0.289 2.9%

2010F 420 3,500 8.525 0.289 2.1%

2011F 420 3,500 8.649 0.293 36.6%

2012F 420 3,500 8.908 0.302 9.8%

12M - FORWARD FD CORE P/E (X)

CASH FLOW (RM m, FYE Dec) Pretax profit Depreciation & non–cash adj. Working capital changes Cash tax paid Others Cash flow from operations Capex Net investments & sale of FA Others Cash flow from investing Debt raised/(repaid) Equity raised/(repaid) Dividends paid Cash interest & others Cash flow from financing Change in cash Change in net cash/(debt) Ending net cash/(debt)

2009 2.1 0.2 35.3 26.5 N/A 25.0 23.4 13.6 4.5 43.0

KEY DRIVERS

BALANCE SHEET (RM m, end Dec) Fixed assets Intangible assets Other long-term assets Total non-current assets Cash and equivalents Stocks Trade debtors Other current assets Total current assets Trade creditors Short-term borrowings Other current liabilities Total current liabilities Long-term borrowings Other long-term liabilities Total long-term liabilities Shareholders’ funds Minority interests NTA/share (RM)

2008 12.3 15.6 23.0 12.9 1,077.6 43.8 47.0 14.0 4.5 38.6

2008 1,125 262 50 (416) 735 1,756 (518) 639 0 121 (175) 0 (288) 105 (358) 1,519 1,694 4,573

2009 1,765 270 92 (469) (127) 1,531 (130) (402) 0 (532) 0 (74) (300) 78 (296) 703 703 5,276

2010F 1,617 276 11 (441) 287 1,750 (400) 0 0 (400) 0 0 (350) 106 (244) 1,105 1,105 6,381

2011F 1,941 332 145 (388) (241) 1,789 (400) 0 0 (400) 0 0 (350) 128 (222) 1,167 1,167 7,548

2012F 2,081 358 53 (538) (177) 1,777 (404) 0 0 (404) 0 0 (368) 151 (217) 1,157 1,157 8,705

18.0 17.0 16.0 15.0 14.0 13.0 12.0 11.0 10.0 9.0 8.0 Dec-07

Apr-08

Aug-08

Source: Company, CIMB Research, Bloomberg

The S.E.A. Navigator – Malaysia 2011

[ 89 ]

Dec-08

Apr-09

Aug-09

Dec-09

Apr-10

Aug-10

Dec-10

Syariah-compliant stock

Genting Plantations Bhd

NEUTRAL

Maintained

RM8.68

@07/12/10

Planting roots in Indonesia

MALAYSIA

2011 OUTLOOK

CIMB Research Report

Target: RM9.84 Palm Oil & Rubber

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 Revenue (RM m) EBITDA (RM m) EBITDA margins (%) Pretax profit (RM m) Net profit (RM m) EPS (sen) EPS growth (%) P/E (x) Gross DPS (sen) Dividend yield (%) P/BV (x) ROE (%) Net cash per share (RM) P/FCFE (x) EV/EBITDA (x) % change in EPS estimates CIMB/Consensus (x)

2008 1,036.0 488.1 47.1% 482.9 373.3 49.3 8.4% 17.6 10.0 1.2% 2.8 17.0% 0.66 49.4 12.5

2009 755.6 312.5 41.4% 301.9 235.7 31.1 (36.9%) 27.9 9.0 1.0% 2.6 9.7% 0.61 31.7 19.7

2010F 932.5 456.3 48.9% 446.3 326.0 43.1 38.3% 20.1 9.0 1.0% 2.3 12.1% 0.74 43.3 13.3 0.98

2011F 1,043.7 523.1 50.1% 503.0 377.3 49.9 15.7% 17.4 9.0 1.0% 2.1 12.6% 0.94 32.6 11.3 1.02

2012F 1,126.3 549.2 48.8% 529.9 397.4 52.5 5.3% 16.5 16.0 1.8% 1.9 12.0% 1.25 20.7 10.3 0.97

Source: Company, CIMB Research, Bloomberg

Price chart

Corporate profile

9.2

5.00

8.7 4.00

8.2

3.00

7.7 7.2

2.00

6.7 1.00

6.2 5.7 De c-09

0.00 Ma y-10 Volume 1m (R.H.S c a le )

Source: Bloomberg

Oct-10 Ge nting P la nta tions Bhd

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.

The S.E.A. Navigator – Malaysia 2011

[ 90 ]

Financial tables KEY RATIOS

PROFIT & LOSS (RM m, FYE Dec) Revenue Operating expenses EBITDA Depreciation & amortisation EBIT Net interest & invt income Associates’ contribution Exceptional items Others Pretax profit Tax Minority interests Net profit Adj. wt. shares (m) Unadj. year-end shares (m)

2008 1,036 (548) 488 (22) 467 12 4 0 0 483 (106) (4) 373 757 755

2009 756 (443) 313 (26) 286 10 5 0 0 302 (64) (2) 236 757 757

2008 437 0 1,253 1,690 521 140 131 69 861 48 19 64 131 1 55 56 2,332 33 3.09

2009 493 0 1,485 1,978 526 152 156 56 889 75 2 59 135 66 53 119 2,548 67 3.37

2010F 933 (476) 456 (31) 426 6 5 10 0 446 (118) (2) 326 757 757

2011F 1,044 (521) 523 (34) 490 8 5 0 0 503 (126) (2) 377 757 757

2012F 1,126 (577) 549 (37) 513 12 5 0 0 530 (132) (2) 397 757 757

(FYE Dec) Revenue growth (%) EBITDA growth (%) Pretax margins (%) Net profit margins (%) Interest cover (x) Effective tax rates (%) Net dividend payout (%) Debtors turnover (days) Stock turnover (days) Creditors turnover (days)

2011F 829 0 1,484 2,313 781 172 126 69 1,149 49 0 76 124 66 53 119 3,151 71 4.16

2012F 893 0 1,484 2,377 1,009 178 137 76 1,401 52 0 79 131 66 53 119 3,458 73 4.57

(FYE Dec) CPO price per tonne (RM) FFB output (000' tonnes) FFB yield per ha (tonnes) Mature area (ha) FFB growth (%)

2010F 663 0 1,484 2,147 629 164 114 63 971 43 0 65 108 66 53 119 2,824 69 3.73

2010F 23.4 46.0 47.9 35.0 N/A 26.5 15.5 52.8 61.9 23.1

2011F 11.9 14.6 48.2 36.1 N/A 25.0 13.4 42.1 58.9 16.1

2012F 7.9 5.0 47.0 35.3 N/A 25.0 22.5 42.7 56.8 16.4

2009 2,240 1,148 21 54,982 -6.9%

2010F 2,620 1,220 22 56,982 6.3%

2011F 2,720 1,324 22 61,721 8.5%

2012F 2,720 1,435 22 71,721 8.4%

12M - FORWARD FD CORE P/E (X)

CASH FLOW (RM m, FYE Dec) Pretax profit Depreciation & non–cash adj. Working capital changes Cash tax paid Others Cash flow from operations Capex Net investments & sale of FA Others Cash flow from investing Debt raised/(repaid) Equity raised/(repaid) Dividends paid Cash interest & others Cash flow from financing Change in cash Change in net cash/(debt) Ending net cash/(debt)

2009 (27.1) (36.0) 40.0 31.2 N/A 21.2 21.4 69.2 70.5 29.7

KEY DRIVERS

BALANCE SHEET (RM m, end Dec) Fixed assets Intangible assets Other long-term assets Total non-current assets Cash and equivalents Stocks Trade debtors Other current assets Total current assets Trade creditors Short-term borrowings Other current liabilities Total current liabilities Long-term borrowings Other long-term liabilities Total long-term liabilities Shareholders’ funds Minority interests NTA/share (RM)

2008 14.3 5.7 46.6 36.0 N/A 21.9 15.0 41.0 45.7 15.9

2008 483 22 (44) (157) (16) 287 (111) (85) 5 (192) 18 0 (88) (1) (71) 25 6 501

2009 302 26 (19) (64) (15) 231 (86) 0 5 (82) 48 1 (56) (137) (144) 5 (43) 458

2010F 446 31 (6) (118) (10) 343 (200) 0 5 (195) (2) 1 (50) 6 (46) 102 104 562

2011F 503 34 (10) (126) (12) 388 (200) 0 5 (195) 0 1 (50) 8 (41) 152 152 714

2012F 530 37 (17) (132) (17) 400 (100) 0 5 (95) 0 1 (50) (27) (76) 229 229 943

20.0

18.0

16.0

14.0

12.0

10.0

8.0 Dec-07

Apr-08

Aug-08

Source: Company, CIMB Research, Bloomberg

The S.E.A. Navigator – Malaysia 2011

[ 91 ]

Dec-08

Apr-09

Aug-09

Dec-09

Apr-10

Aug-10

Dec-10

Guinness Anchor Bhd

NEUTRAL

Maintained

RM9.96

@07/12/10

More reason for cheer

MALAYSIA

2011 OUTLOOK

CIMB Research Report

Target: RM10.45 Brewers

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 Revenue (RM m) EBITDA (RM m) EBITDA margins (%) Pretax profit (RM m) Net profit (RM m) EPS (sen) EPS growth (%) P/E (x) Gross DPS (sen) Dividend yield (%) P/BV (x) ROE (%) Net cash per share (RM) P/FCFE (x) EV/EBITDA (x) % change in EPS estimates CIMB/Consensus (x)

2009 1,285.4 217.4 16.9% 191.2 142.0 47.0 12.8% 21.2 54.5 5.5% 6.8 33.3% 0.54 32.9 13.1

2010 1,341.7 234.5 17.5% 205.0 152.7 50.5 7.5% 19.7 60.0 6.0% 6.4 33.4% 0.50 27.3 12.2

2011F 1,390.1 256.6 18.5% 227.6 170.7 56.5 11.8% 17.6 64.5 6.5% 6.1 35.3% 0.57 18.7 11.1 1.04

2012F 1,432.2 264.7 18.5% 236.0 177.0 58.6 3.7% 17.0 67.0 6.7% 5.8 34.8% 0.64 18.2 10.6 1.03

2013F 1,475.7 272.9 18.5% 244.2 183.2 60.6 3.5% 16.4 69.0 6.9% 5.5 34.3% 0.70 17.4 10.2 1.01

Source: Company, CIMB Research, Bloomberg

Price chart

Corporate profile

10.2

6.00

9.7

5.00

9.2 4.00

8.7

3.00

8.2 7.7

2.00

7.2 1.00

6.7 6.2 De c -09

0.00 Ma y-10

Volume 100k (R.H.S c a le )

Source: Bloomberg

Oct-10 Guinne s s Anchor Bhd

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.

The S.E.A. Navigator – Malaysia 2011

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Financial tables KEY RATIOS

PROFIT & LOSS (RM m, FYE Jun) Revenue Operating expenses EBITDA Depreciation & amortisation EBIT Net interest & invt income Associates’ contribution Exceptional items Others Pretax profit Tax Minority interests Net profit Adj. wt. shares (m) Unadj. year-end shares (m)

2009 1,285 (1,068) 217 (29) 189 2 0 0 0 191 (49) 0 142 302 302

2010 1,342 (1,107) 234 (31) 203 2 0 0 0 205 (52) 0 153 302 302

2011F 1,390 (1,133) 257 (31) 225 2 0 0 0 228 (57) 0 171 302 302

2012F 1,432 (1,168) 265 (31) 233 3 0 0 0 236 (59) 0 177 302 302

2013F 1,476 (1,203) 273 (32) 241 3 0 0 0 244 (61) 0 183 302 302

2012F 242 0 0 242 192 81 136 73 482 104 0 68 171 0 32 32 521 0 1.72

2013F 245 0 0 245 212 83 140 76 511 107 0 70 177 0 32 32 548 0 1.81

2009 236 0 0 236 164 69 122 55 410 93 0 80 173 0 31 31 442 0 1.46

2010 240 0 0 240 150 76 127 70 423 97 0 63 160 0 32 32 471 0 1.56

2011F 240 0 0 240 172 78 132 71 454 101 0 66 166 0 32 32 495 0 1.64

2011F 3.6 9.5 16.4 12.3 652.9 25.0 85.6 34.1 20.2 26.0

2012F 3.0 3.1 16.5 12.4 675.9 25.0 85.8 34.2 20.3 26.1

2013F 3.0 3.1 16.6 12.4 698.9 25.0 85.3 34.2 20.3 26.1

(FYE Jun) Excise duties (RM per litre) Sales tax (%) Unit sales ('000 Hli)

2010 7.40 5.0% 849

2011F 7.40 5.0% 870

2012F 7.40 5.0% 888

2013F 7.40 5.0% 914

12M - FORWARD FD CORE P/E (X)

CASH FLOW (RM m, FYE Jun) Pretax profit Depreciation & non–cash adj. Working capital changes Cash tax paid Others Cash flow from operations Capex Net investments & sale of FA Others Cash flow from investing Debt raised/(repaid) Equity raised/(repaid) Dividends paid Cash interest & others Cash flow from financing Change in cash Change in net cash/(debt) Ending net cash/(debt)

2010 4.4 7.8 15.3 11.4 589.4 25.5 89.0 33.9 19.7 25.9

KEY DRIVERS

BALANCE SHEET (RM m, end Jun) Fixed assets Intangible assets Other long-term assets Total non-current assets Cash and equivalents Stocks Trade debtors Other current assets Total current assets Trade creditors Short-term borrowings Other current liabilities Total current liabilities Long-term borrowings Other long-term liabilities Total long-term liabilities Shareholders’ funds Minority interests NTA/share (RM)

2009 7.6 12.5 14.9 11.0 257.2 25.7 87.0 33.4 19.1 25.5

(FYE Jun) Revenue growth (%) EBITDA growth (%) Pretax margins (%) Net profit margins (%) Interest cover (x) Effective tax rates (%) Net dividend payout (%) Debtors turnover (days) Stock turnover (days) Creditors turnover (days)

2009 191 29 (47) (48) (4) 121 (29) 1 (2) (30) 0 0 (111) 0 (111) (20) (20) 164

2010 205 31 (34) (49) (10) 143 (30) 1 (5) (33) 0 0 (124) 0 (124) (14) (14) 150

2011F 228 31 (4) (52) (13) 189 (31) 1 0 (30) 0 0 (139) 2 (136) 23 23 172

2012F 236 31 (4) (57) (13) 194 (33) 1 0 (32) 0 0 (145) 3 (142) 20 20 192

2013F 244 32 (4) (59) (10) 203 (35) 1 0 (34) 0 0 (153) 3 (150) 20 20 212

17.0 16.0 15.0 14.0 13.0 12.0 11.0 10.0 9.0 Dec-07

Apr-08

Aug-08

Source: Company, CIMB Research, Bloomberg

The S.E.A. Navigator – Malaysia 2011

[ 93 ]

Dec-08

Apr-09

Aug-09

Dec-09

Apr-10

Aug-10

Dec-10

Syariah-compliant stock

Hap Seng Plantations Holdings

TRADING BUY

Maintained

RM3.15

@07/12/10

Richest dividend pickings among planters

MALAYSIA

2011 OUTLOOK

CIMB Research Report

Target: RM3.73 Palm Oil & Rubber

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 Revenue (RM m) EBITDA (RM m) EBITDA margins (%) Pretax profit (RM m) Net profit (RM m) EPS (sen) EPS growth (%) P/E (x) Gross DPS (sen) Dividend yield (%) P/BV (x) ROE (%) Net gearing (%) Net cash per share (RM) P/FCFE (x) EV/EBITDA (x) % change in EPS estimates CIMB/Consensus (x)

2009 373.1 160.5 43.0% 135.1 100.7 12.6 (29.5%) 25.0 12.6 4.0% 1.5 6.1% 1.5% N/A 11.2 15.9

2010F 432.4 242.5 56.1% 217.5 163.1 20.4 62.0% 15.4 16.3 5.2% 1.5 9.7% 0.0% N/A 15.6 10.4 1.02

2011F 473.4 275.7 58.2% 249.4 187.1 23.4 14.7% 13.5 18.7 5.9% 1.4 10.8% N/A 0.02 17.2 9.1 -0.92

2012F 482.8 276.9 57.4% 248.8 186.6 23.3 (0.2%) 13.5 18.7 5.9% 1.4 10.3% N/A 0.09 18.8 8.8 0.88

Source: Company, CIMB Research, Bloomberg

Price chart

Corporate profile

3.3

5.00

3.1

4.00

2.9 3.00

2.7 2.5

2.00

2.3 1.00

2.1 1.9 De c-09

0.00 Ma y-10

Volume 1m (R.H.S ca le )

Source: Bloomberg

Oct-10 Ha p S e ng P la nta tions Holdings

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.

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[ 94 ]

Financial tables KEY RATIOS

PROFIT & LOSS (RM m, FYE Dec) Revenue Operating expenses EBITDA Depreciation & amortisation EBIT Net interest & invt income Associates’ contribution Exceptional items Others Pretax profit Tax Minority interests Net profit Adj. wt. shares (m) Unadj. year-end shares (m)

2009 373 (213) 161 (24) 136 (1) 0 0 0 135 (34) 0 101 800 800

2010F 432 (190) 242 (27) 216 2 0 0 0 218 (54) 0 163 800 800

2011F 473 (198) 276 (29) 247 2 0 0 0 249 (62) 0 187 800 800

2012F 483 (206) 277 (31) 246 3 0 0 0 249 (62) 0 187 800 800

(FYE Dec) Revenue growth (%) EBITDA growth (%) Pretax margins (%) Net profit margins (%) Interest cover (x) Effective tax rates (%) Net dividend payout (%) Debtors turnover (days) Stock turnover (days) Creditors turnover (days)

2011F 297 0 1,645 1,942 119 37 25 14 195 69 80 6 155 20 196 216 1,770 0 2.21

2012F 325 0 1,645 1,970 106 41 27 15 188 77 35 6 118 0 196 196 1,845 0 2.31

(FYE Dec) CPO price per tonne (RM) FFB output (000' tonnes) FFB yield per ha (tonnes) Immature area (ha) Mature area (ha) Planted area (ha) CPO extraction rate (%) FFB growth (%)

2009 241 0 1,645 1,886 122 38 24 11 196 68 80 6 154 67 196 263 1,665 0 2.08

2010F 269 0 1,645 1,914 130 32 22 13 196 74 80 6 160 50 196 246 1,705 0 2.13

2011F 9.5 13.7 52.7 39.5 308.8 25.0 60.0 18.0 26.7 55.1

2012F 2.0 0.4 51.5 38.7 N/A 25.0 60.0 19.5 29.5 55.1

2009 2,303 667 21 1,712 32,532 34,244 21.8% -15.0%

2010F 2,500 705 22 1,912 32,332 34,244 21.8% 5.7%

2011F 2,750 705 22 2,112 32,332 34,444 21.8% 0.0%

2012F 2,750 716 22 1,612 32,832 34,444 21.8% 1.5%

12M - FORWARD FD CORE P/E (X)

CASH FLOW (RM m, FYE Dec) Pretax profit Depreciation & non–cash adj. Working capital changes Cash tax paid Others Cash flow from operations Capex Net investments & sale of FA Others Cash flow from investing Debt raised/(repaid) Equity raised/(repaid) Dividends paid Cash interest & others Cash flow from financing Change in cash Change in net cash/(debt) Ending net cash/(debt)

2010F 15.9 51.1 50.3 37.7 108.0 25.0 60.0 19.4 29.7 59.9

KEY DRIVERS

BALANCE SHEET (RM m, end Dec) Fixed assets Intangible assets Other long-term assets Total non-current assets Cash and equivalents Stocks Trade debtors Other current assets Total current assets Trade creditors Short-term borrowings Other current liabilities Total current liabilities Long-term borrowings Other long-term liabilities Total long-term liabilities Shareholders’ funds Minority interests NTA/share (RM)

2009 (13.1) (19.6) 36.2 27.0 51.2 25.5 75.0 18.6 33.0 49.9

2009 249 24 (18) (53) 1 203 (28) (42) 0 (70) 90 0 (95) (15) (20) 113 23 (25)

2010F 218 27 13 (34) (2) 221 (28) 0 0 (28) (30) 0 (60) (108) (199) (5) 25 0

2011F 249 29 (14) (54) (2) 207 (28) 0 0 (28) (30) 0 (98) (62) (190) (10) 20 19

2012F 249 31 1 (62) (3) 215 (28) 0 0 (28) (50) 0 (112) (23) (186) 1 51 71

20.0

18.0

16.0

14.0

12.0

10.0 Jan-08

May-08

Sep-08

Source: Company, CIMB Research, Bloomberg

The S.E.A. Navigator – Malaysia 2011

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Jan-09

May-09

Sep-09

Jan-10

May-10

Sep-10

Syariah-compliant stock

Hartalega Holdings

OUTPERFORM

Maintained

RM5.39

@07/12/10

Hands down the best

MALAYSIA

2011 OUTLOOK

CIMB Research Report

Target: RM8.43 Rubber Gloves

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 Revenue (RM m) EBITDA (RM m) EBITDA margins (%) Pretax profit (RM m) Net profit (RM m) EPS (sen) EPS growth (%) P/E (x) Core EPS (sen) Core EPS growth (%) Core P/E (x) Gross DPS (sen) Dividend yield (%) P/BV (x) ROE (%) Net gearing (%) Net cash per share (RM) P/FCFE (x) EV/EBITDA (x) % change in EPS estimates CIMB/Consensus (x)

2009 443.2 107.9 24.3% 95.5 84.5 23.3 21.5% 23.2 21.9 14.7% 24.6 8.0 1.5% 7.7 39.0% 7.7% N/A 52.8 18.3

2010 571.9 202.7 35.4% 177.8 142.9 39.3 69.1% 13.7 40.0 82.2% 13.5 13.3 2.5% 5.5 47.0% N/A 0.09 23.7 9.5

2011F 711.5 254.2 35.7% 231.1 184.7 50.8 29.3% 10.6 50.8 27.1% 10.6 17.3 3.2% 4.0 43.7% N/A 0.30 21.1 7.3 N/A 1.02

2012F 821.7 295.1 35.9% 269.8 215.7 59.3 16.8% 9.1 59.3 16.8% 9.1 20.7 3.8% 3.0 37.8% N/A 0.65 11.7 5.8 N/A 1.06

2013F 899.4 329.1 36.6% 301.7 241.1 66.3 11.8% 8.1 66.3 11.8% 8.1 24.0 4.5% 2.4 32.6% N/A 0.91 14.1 5.0 N/A 1.02

Source: Company, CIMB Research, Bloomberg

Price chart

Corporate profile 5.00

5.6

4.00 5.1

3.00 4.6

2.00 4.1

3.6 Dec-09

1.00 0.00 May-10 Volume 1m (R.H.Scale)

Oct-10 Hartalega Holdings

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.

Source: Bloomberg

The S.E.A. Navigator – Malaysia 2011

[ 96 ]

Financial tables KEY RATIOS

PROFIT & LOSS (RM m, FYE Mar) Revenue Operating expenses EBITDA Depreciation & amortisation EBIT Net interest & invt income Associates’ contribution Exceptional items Others Pretax profit Tax Minority interests Net profit Adj. wt. shares (m) Unadj. year-end shares (m)

2009 443 (335) 108 (16) 92 (2) 0 5 0 95 (11) 0 85 363 242

2010 572 (369) 203 (20) 183 (2) 0 (3) 0 178 (35) 0 143 363 242

2011F 712 (457) 254 (23) 232 0 0 0 0 231 (46) 0 185 363 363

2012F 822 (527) 295 (26) 269 1 0 0 0 270 (54) 0 216 363 363

2013F 899 (570) 329 (30) 300 2 0 0 0 302 (60) 0 241 363 363

(FYE Mar) Revenue growth (%) EBITDA growth (%) Pretax margins (%) Net profit margins (%) Interest cover (x) Effective tax rates (%) Net dividend payout (%) Debtors turnover (days) Stock turnover (days) Creditors turnover (days)

2012F 384 0 0 385 252 41 82 8 383 41 10 29 80 5 31 36 651 0 1.79

2013F 462 0 0 462 335 45 90 9 479 45 0 30 76 5 32 37 828 0 2.28

(FYE Mar) Production capacity (m pcs p.a) Capacity utilisation (%) ASP (US$) per 1,000 pieces Exchange rate (RM to US$) Natural rubber price (RM /kilogram) Nitrile latex prices (US$/mt)

2009 246 0 0 246 38 25 58 8 128 18 15 20 53 43 25 67 254 0 0.70

2010 284 0 9 293 75 28 78 5 186 24 14 31 69 28 28 55 354 0 0.97

2011F 362 0 0 362 136 36 71 7 250 36 12 28 75 15 29 45 492 0 1.35

2011F 24.4 25.4 32.5 26.0 109.5 20.0 25.6 38.4 16.3 15.2

2012F 15.5 16.1 32.8 26.2 203.9 20.0 26.1 34.1 17.0 17.0

2013F 9.5 11.5 33.5 26.8 470.2 20.0 27.1 34.9 17.5 17.5

2010 7,000 75.7% 32.66 3.46 5.26 1,014

2011F 8,800 85.0% 35.00 3.15 8.15 1,320

2012F 9,562 85.0% 34.65 3.04 7.89 1,412

2013F 10,562 85.0% 34.48 3.05 7.54 1,556

12M - FORWARD FD CORE P/E (X)

CASH FLOW (RM m, FYE Mar) Pretax profit Depreciation & non–cash adj. Working capital changes Cash tax paid Others Cash flow from operations Capex Net investments & sale of FA Others Cash flow from investing Debt raised/(repaid) Equity raised/(repaid) Dividends paid Cash interest & others Cash flow from financing Change in cash Change in net cash/(debt) Ending net cash/(debt)

2010 29.0 87.9 31.1 25.0 54.2 19.5 25.4 43.4 16.8 13.3

KEY DRIVERS

BALANCE SHEET (RM m, end Mar) Fixed assets Intangible assets Other long-term assets Total non-current assets Cash and equivalents Stocks Trade debtors Other current assets Total current assets Trade creditors Short-term borrowings Other current liabilities Total current liabilities Long-term borrowings Other long-term liabilities Total long-term liabilities Shareholders’ funds Minority interests NTA/share (RM)

2009 72.1 25.8 21.5 19.1 38.0 11.5 25.5 37.3 19.2 12.3

2009 95 16 (23) (4) 0 84 (61) 0 0 (61) 14 0 (8) (1) 4 27 13 (19)

2010 178 20 (15) (22) 4 164 (67) 0 0 (67) (15) 0 (45) 0 (59) 38 53 33

2011F 231 23 6 (35) (19) 206 (100) 0 0 (100) (14) 0 (31) (1) (45) 61 75 108

2012F 270 26 (9) (46) 39 280 (100) 0 0 (100) (12) 0 (53) 1 (64) 116 128 236

2013F 302 30 (7) (54) (21) 249 (100) 0 0 (100) (10) 0 (58) 2 (66) 83 93 330

12.0 11.0 10.0 9.0 8.0 7.0 6.0 5.0 4.0 3.0 2.0 Apr-08

Aug-08

Dec-08

Source: Company, CIMB Research, Bloomberg

The S.E.A. Navigator – Malaysia 2011

[ 97 ]

Apr-09

Aug-09

Dec-09

Apr-10

Aug-10

Dec-10

Syariah-compliant stock

IJM Corp Bhd

OUTPERFORM

Maintained

RM6.14

@07/12/10

Stoked by a merger play

MALAYSIA

2011 OUTLOOK

CIMB Research Report

Target: RM6.95 Construction

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 Revenue (RM m) EBITDA (RM m) EBITDA margins (%) Pretax profit (RM m) Net profit (RM m) EPS (sen) EPS growth (%) P/E (x) Core EPS (sen) Core EPS growth (%) Core P/E (x) FD core EPS (sen) FD core P/E (x) Gross DPS (sen) Dividend yield (%) P/BV (x) ROE (%) Net gearing (%) P/FCFE (x) EV/EBITDA (x) % change in EPS estimates CIMB/Consensus (x)

2009 4,601.3 618.8 13.4% 528.7 290.2 22.0 147.9% 27.9 22.0 9.8% 27.9 20.4 30.1 24.9 4.1% 3.4 12.4% 80.6% 44.6 16.9

2010 4,013.5 567.5 14.1% 578.0 332.6 24.6 11.7% 25.0 21.5 (2.4%) 28.6 20.0 30.8 10.7 1.7% 3.6 14.2% 91.1% 40.5 19.1

2011F 4,961.1 747.7 15.1% 516.1 377.8 27.9 13.6% 22.0 27.9 30.0% 22.0 25.9 23.7 10.7 1.7% 3.5 16.1% 82.3% 34.6 14.4 0.93

2012F 5,354.0 775.2 14.5% 540.9 393.4 29.1 4.1% 21.1 29.1 4.1% 21.1 27.0 22.8 10.7 1.7% 3.5 16.6% 86.8% 33.4 14.0 0.82

2013F 5,656.1 814.1 14.4% 572.9 417.0 30.8 6.0% 19.9 30.8 6.0% 19.9 46.6 13.2 10.7 1.7% 3.7 18.0% 91.1% 31.7 13.4 0.76

Source: Company, CIMB Research, Bloomberg

Price chart

Corporate profile

6.5 1.20 6.0

1.00 0.80

5.5

0.60 5.0 0.40 4.5 4.0 De c-09

0.20 0.00 Ma y-10 Volume 10m (R.H.S ca le )

Source: Bloomberg

Oct-10 IJ M Corp Bhd

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.

The S.E.A. Navigator – Malaysia 2011

[ 98 ]

Financial tables KEY RATIOS

PROFIT & LOSS (RM m, FYE Mar) Revenue Operating expenses EBITDA Depreciation & amortisation EBIT Net interest & invt income Associates’ contribution Exceptional items Others Pretax profit Tax Minority interests Net profit Adj. wt. shares (m) Unadj. year-end shares (m)

2009 4,601 (3,983) 619 (81) 538 (32) 22 0 0 529 (127) (112) 290 1,319 1,319

2010 4,014 (3,446) 568 (85) 482 8 31 58 0 578 (155) (91) 333 1,353 1,353

2011F 4,961 (4,213) 748 (88) 660 (176) 32 0 0 516 (130) (8) 378 1,353 1,353

2012F 5,354 (4,579) 775 (89) 686 (180) 35 0 0 541 (137) (11) 393 1,353 1,353

2013F 5,656 (4,842) 814 (90) 724 (190) 39 0 0 573 (145) (11) 417 1,353 1,353

2012F 41 61 1,723 1,825 210 596 3,362 1,657 5,825 2,381 196 179 2,756 2,279 3 2,282 2,347 264 1.69

2013F (47) 61 1,724 1,737 213 629 3,552 1,657 6,051 2,516 196 179 2,890 2,340 6 2,347 2,276 275 1.64

2009 168 61 1,721 1,950 231 477 2,692 2,394 5,795 1,907 196 844 2,947 2,143 39 2,182 2,377 238 1.76

2010 83 61 1,721 1,864 218 549 3,097 1,619 5,483 2,193 196 44 2,434 2,334 39 2,374 2,294 245 1.65

2011F 129 61 1,722 1,912 212 552 3,116 1,657 5,536 2,207 196 179 2,581 2,205 1 2,206 2,407 253 1.73

2011F 23.6 31.8 10.4 7.6 3.1 25.2 27.6 228.5 40.5 161.9

2012F 7.9 3.7 10.1 7.3 3.2 25.3 26.5 220.8 39.1 156.4

2013F 5.6 5.0 10.1 7.4 3.3 25.3 25.0 223.1 39.5 158.0

(FYE Mar) Construction margins (%) Orderbook replenishment (RM m) Outstanding orderbook (RM m)

2010 7.2% 1,000 4,000

2011F 8.1% 1,000 4,800

2012F 8.1% 1,000 4,500

2013F 8.1% 1,000 4,900

12M - FORWARD FD CORE P/E (X)

CASH FLOW (RM m, FYE Mar) Pretax profit Depreciation & non–cash adj. Working capital changes Cash tax paid Others Cash flow from operations Capex Net investments & sale of FA Others Cash flow from investing Debt raised/(repaid) Equity raised/(repaid) Dividends paid Cash interest & others Cash flow from financing Change in cash Change in net cash/(debt) Ending net cash/(debt)

2010 (12.8) (8.3) 14.4 8.3 2.4 26.8 31.4 263.3 46.6 186.4

KEY DRIVERS

BALANCE SHEET (RM m, end Mar) Fixed assets Intangible assets Other long-term assets Total non-current assets Cash and equivalents Stocks Trade debtors Other current assets Total current assets Trade creditors Short-term borrowings Other current liabilities Total current liabilities Long-term borrowings Other long-term liabilities Total long-term liabilities Shareholders’ funds Minority interests NTA/share (RM)

2009 26.0 96.9 11.5 6.3 2.8 24.0 81.6 197.7 35.0 140.0

(FYE Mar) Revenue growth (%) EBITDA growth (%) Pretax margins (%) Net profit margins (%) Interest cover (x) Effective tax rates (%) Net dividend payout (%) Debtors turnover (days) Stock turnover (days) Creditors turnover (days)

2009 529 81 (320) (97) 46 239 (51) (205) 0 (256) 199 0 (52) (149) (3) (20) (218) (2,108)

2010 578 85 (348) (107) (2) 207 (56) (137) 0 (193) 192 0 (52) (185) (45) (31) (223) (2,312)

2011F 516 88 (199) (114) 182 473 (56) (47) 0 (103) (130) 0 (52) (174) (355) 15 145 (2,189)

2012F 541 89 (344) (132) 184 337 (56) (106) 0 (163) 74 0 (52) (198) (176) (1) (75) (2,265)

2013F 573 90 (363) (139) 191 351 (56) (97) 0 (153) 61 0 (52) (196) (186) 12 (49) (2,324)

28.0

23.0

18.0

13.0

8.0 Dec-07

Apr-08

Aug-08

Source: Company, CIMB Research, Bloomberg

The S.E.A. Navigator – Malaysia 2011

[ 99 ]

Dec-08

Apr-09

Aug-09

Dec-09

Apr-10

Aug-10

Dec-10

Syariah-compliant stock

IOI Corporation Bhd

NEUTRAL

Maintained

RM5.78

@07/12/10

Less fruitful than peers

MALAYSIA

2011 OUTLOOK

CIMB Research Report

Target: RM6.54 Palm Oil & Rubber

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 La Nina 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 Revenue (RM m) EBITDA (RM m) EBITDA margins (%) Pretax profit (RM m) Net profit (RM m) EPS (sen) EPS growth (%) P/E (x) Core EPS (sen) Core EPS growth (%) Core P/E (x) FD core EPS (sen) FD core P/E (x) Gross DPS (sen) Dividend yield (%) P/BV (x) ROE (%) Net gearing (%) Net cash per share (RM) P/FCFE (x) EV/EBITDA (x) % change in EPS estimates CIMB/Consensus (x)

2009 14,600.4 1,954.3 13.4% 1,550.5 983.9 15.1 (55.9%) 38.3 22.2 (26.5%) 26.1 21.8 26.5 9.1 1.6% 4.4 11.8% 35.3% N/A (172.5) 20.1

2010 12,543.0 2,879.7 23.0% 2,550.6 2,035.7 31.3 107.2% 18.5 24.3 9.7% 23.8 24.0 24.1 20.8 3.6% 3.5 21.3% 8.0% N/A 17.3 12.7

2011F 16,369.6 3,024.3 18.5% 2,757.8 2,090.8 31.3 0.0% 18.5 29.9 23.1% 19.3 29.4 19.7 20.0 3.5% 3.1 18.1% N/A 0.11 8.1 12.2 0.96

2012F 17,519.7 3,300.2 18.8% 3,108.6 2,345.8 35.1 12.2% 16.5 35.1 17.2% 16.5 34.3 16.8 23.4 4.0% 2.8 17.9% N/A 0.26 20.2 10.8 1.02

2013F 18,475.7 3,436.8 18.6% 3,327.9 2,511.2 37.6 7.1% 15.4 37.6 7.1% 15.4 36.7 15.7 25.0 4.3% 2.4 16.9% N/A 0.44 22.1 9.9 1.00

Source: Company, CIMB Research, Bloomberg

Price chart

Corporate profile

6.2

2.50

6.0 5.8

2.00

5.6 1.50

5.4 5.2

1.00

5.0 4.8

0.50

4.6 4.4 De c-09

0.00 Ma y-10 Volume 10m (R.H.S ca le )

Source: Bloomberg

Oct-10 IOI Corpora tion Bhd

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. The S.E.A. Navigator – Malaysia 2011

[ 100 ]

Financial tables KEY RATIOS

PROFIT & LOSS (RM m, FYE Jun) Revenue Operating expenses EBITDA Depreciation & amortisation EBIT Net interest & invt income Associates’ contribution Exceptional items Others Pretax profit Tax Minority interests Net profit Adj. wt. shares (m) Unadj. year-end shares (m)

2009 14,600 (12,646) 1,954 (243) 1,711 (171) 10 0 0 1,551 (487) (80) 984 6,522 6,327

2010 2011F 12,543 16,370 (9,663) (13,345) 2,880 3,024 (244) (250) 2,635 2,773 (174) (149) 89 133 0 0 0 0 2,551 2,758 (486) (614) (29) (53) 2,036 2,091 6,512 6,685 6,512 6,685

2012F 2013F (FYE Jun) 17,520 18,476 Revenue growth (%) (14,220) (15,039) EBITDA growth (%) 3,300 3,437 Pretax margins (%) (256) (264) Net profit margins (%) 3,042 3,171 Interest cover (x) (143) (138) Effective tax rates (%) 210 295 Net dividend payout (%) 0 0 Debtors turnover (days) 0 0 Stock turnover (days) 3,109 3,328 Creditors turnover (days) (715) (765) (48) (51) 2,346 2,511 6,685 6,685 6,685 6,685

2009 4,570 513 4,868 9,951 2,459 1,647 951 950 6,007 223 199 854 1,276 5,355 577 5,932 8,346 426 1.24

2010 4,604 514 5,035 10,153 3,877 1,575 853 855 7,160 336 409 687 1,433 4,348 493 4,841 10,780 289 1.58

2011F 6,019 514 4,926 11,459 6,760 1,884 1,561 1,001 11,205 642 1,088 1,956 3,686 4,936 628 5,563 12,272 1,143 1.76

2012F 6,519 514 5,136 12,170 7,743 2,016 1,671 1,039 12,468 681 1,088 2,164 3,932 4,936 628 5,563 13,952 1,191 2.01

2013F 6,755 514 5,431 12,700 8,768 2,016 1,762 1,121 13,667 721 1,088 2,215 4,024 4,736 628 5,363 15,797 1,191 2.29

2011F 30.5 5.0 16.8 12.8 13.8 22.3 47.9 26.9 38.6 10.9

2012F 7.0 9.1 17.7 13.4 15.2 23.0 50.0 33.7 40.6 13.8

2013F 5.5 4.1 18.0 13.6 15.8 23.0 50.0 33.9 39.8 13.8

2010 139,500 2,372 3,409 24 21.4%

(FYE Jun) Mature area (ha) CPO price per tonne (RM) FFB output (000' tonnes) FFB yield per ha (tonnes) CPO extraction rate (%)

2011F 2012F 2013F 142,500 145,500 148,500 2,710 2,800 2,800 3,534 3,710 3,861 25 26 26 21.4% 21.4% 21.4%

12M - FORWARD FD CORE P/E (X)

CASH FLOW (RM m, FYE Jun) Pretax profit Depreciation & non–cash adj. Working capital changes Cash tax paid Others Cash flow from operations Capex Net investments & sale of FA Others Cash flow from investing Debt raised/(repaid) Equity raised/(repaid) Dividends paid Cash interest & others Cash flow from financing Change in cash Change in net cash/(debt) Ending net cash/(debt)

2010 (14.1) 47.3 20.3 16.2 11.9 19.0 50.0 26.2 46.9 8.1

KEY DRIVERS

BALANCE SHEET (RM m, end Jun) Fixed assets Intangible assets Other long-term assets Total non-current assets Cash and equivalents Stocks Trade debtors Other current assets Total current assets Trade creditors Short-term borrowings Other current liabilities Total current liabilities Long-term borrowings Other long-term liabilities Total long-term liabilities Shareholders’ funds Minority interests NTA/share (RM)

2009 (0.4) (42.4) 10.6 6.7 7.4 31.4 44.1 30.2 51.2 10.6

2009 1,551 243 (967) (561) 803 1,069 (422) (294) 0 (717) (401) 11 (434) 34 (789) (437) (36) (3,095)

2010 2,551 244 632 (544) (231) 2,652 (427) 917 0 489 (797) 1,200 (1,018) (1,108) (1,723) 1,418 2,215 (880)

2011F 2,758 250 1,770 (614) 16 4,180 (500) 0 0 (500) 1,266 (10) (1,001) (1,053) (798) 2,883 1,617 737

2012F 3,109 256 (34) (715) (65) 2,552 (500) 0 0 (500) 0 2 (1,173) 103 (1,068) 983 983 1,720

2013F 3,328 264 (82) (765) (155) 2,589 (500) 0 0 (500) (200) 2 (1,256) 389 (1,064) 1,025 1,225 2,945

30.0

25.0

20.0

15.0

10.0 Dec-07

Apr-08

Aug-08

Source: Company, CIMB Research, Bloomberg

The S.E.A. Navigator – Malaysia 2011

[ 101 ]

Dec-08

Apr-09

Aug-09

Dec-09

Apr-10

Aug-10

Dec-10

Syariah-compliant stock

JCY International

UNDERPERFORM

Maintained

RM0.80

@07/12/10

A dislocated disk

MALAYSIA

2011 OUTLOOK

CIMB Research Report

Target: RM0.92 Technology Components

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 Revenue (RM m) EBITDA (RM m) EBITDA margins (%) Pretax profit (RM m) Net profit (RM m) EPS (sen) EPS growth (%) P/E (x) Core EPS (sen) Core EPS growth (%) Core P/E (x) Gross DPS (sen) Dividend yield (%) P/BV (x) ROE (%) Net gearing (%) Net cash per share (RM) P/FCFE (x) EV/EBITDA (x) % change in EPS estimates CIMB/Consensus (x)

2009 1,758.0 287.5 16.4% 205.9 207.3 10.1 2.2% 7.9 10.1 2.2% 7.9 5.1 6.3% 2.0 25.5% N/A 0.03 10.4 5.5

2010 2,044.6 296.9 14.5% 184.3 176.4 8.6 (14.9%) 9.3 9.3 (8.0%) 8.6 3.9 4.9% 1.9 21.0% 24.5% N/A (58.0) 6.2

2011F 2,112.3 280.2 13.3% 169.5 168.8 8.3 (4.3%) 9.7 8.3 (11.4%) 9.7 4.1 5.2% 1.7 18.3% 21.5% N/A 70.6 6.6 N/A 0.65

2012F 2,439.7 354.2 14.5% 225.6 224.7 11.0 33.1% 7.3 11.0 33.1% 7.3 5.5 6.9% 1.5 22.0% 16.9% N/A 11.9 5.1 N/A 0.71

2013F 2,701.9 413.2 15.3% 267.8 266.8 13.0 18.7% 6.1 13.0 18.7% 6.1 6.5 8.2% 1.4 23.3% 10.6% N/A 8.7 4.3 N/A 0.77

Source: Company, CIMB Research, Bloomberg

Price chart

Corporate profile

2.1

7.00

1.9

6.00

1.7

5.00

1.5

4.00

1.3

3.00

1.1

2.00

0.9 0.7 Fe b-10

1.00 0.00 Ma y-10 Volume 10m (R.H.S ca le )

Aug-10

Nov-10

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.

J CY Inte rna tiona l Bhd

Source: Bloomberg

The S.E.A. Navigator – Malaysia 2011

[ 102 ]

Financial tables KEY RATIOS

PROFIT & LOSS (RM m, FYE Sep) Revenue Operating expenses EBITDA Depreciation & amortisation EBIT Net interest & invt income Associates’ contribution Exceptional items Others Pretax profit Tax Minority interests Net profit Adj. wt. shares (m) Unadj. year-end shares (m)

2009 1,758 (1,471) 287 (82) 206 (5) 0 0 5 206 1 0 207 2,045 2,045

2010 2,045 (1,748) 297 (94) 203 (8) 0 0 (11) 184 (8) 0 176 2,045 2,045

2011F 2,112 (1,832) 280 (110) 171 (3) 0 0 2 170 (1) 0 169 2,045 2,045

2012F 2,440 (2,086) 354 (128) 227 (4) 0 0 3 226 (1) 0 225 2,045 2,045

2013F 2,702 (2,289) 413 (145) 268 (3) 0 0 3 268 (1) 0 267 2,045 2,045

2012F 850 0 19 870 96 252 439 0 787 289 163 1 453 115 13 128 1,076 0 0.53

2013F 880 0 19 900 150 282 496 0 928 326 163 1 490 115 13 128 1,210 0 0.59

2009 643 0 48 692 239 185 345 0 769 292 186 175 653 0 6 6 803 0 0.39

2010 754 0 19 774 125 209 367 0 701 241 263 1 505 77 13 90 880 0 0.43

2011F 799 0 19 818 71 230 401 0 701 264 163 1 427 115 13 128 964 0 0.47

2010 16.3 3.3 9.0 8.6 19.4 4.3 37.1 63.6 35.2 47.6

2011F 3.3 (5.6) 8.0 8.0 34.9 0.4 41.0 66.3 37.9 43.6

2012F 15.5 26.4 9.2 9.2 46.4 0.4 41.0 62.8 36.0 41.3

2013F 10.7 16.7 9.9 9.9 54.8 0.4 41.0 63.1 36.1 41.6

(FYE Sep) Unit sales (million units) Baseplate Unit sales (million units) Top cover Unit sales ( mn units) Actuator arm

2010 214 126 80

2011F 229 144 84

2012F 263 174 97

2013F 288 196 109

12M - FORWARD FD CORE P/E (X)

CASH FLOW (RM m, FYE Sep) Pretax profit Depreciation & non–cash adj. Working capital changes Cash tax paid Others Cash flow from operations Capex Net investments & sale of FA Others Cash flow from investing Debt raised/(repaid) Equity raised/(repaid) Dividends paid Cash interest & others Cash flow from financing Change in cash Change in net cash/(debt) Ending net cash/(debt)

2009 (4.2) 4.7 11.7 11.8 27.8 N/A 41.0 70.2 39.1 60.9

KEY DRIVERS

BALANCE SHEET (RM m, end Sep) Fixed assets Intangible assets Other long-term assets Total non-current assets Cash and equivalents Stocks Trade debtors Other current assets Total current assets Trade creditors Short-term borrowings Other current liabilities Total current liabilities Long-term borrowings Other long-term liabilities Total long-term liabilities Shareholders’ funds Minority interests NTA/share (RM)

(FYE Sep) Revenue growth (%) EBITDA growth (%) Pretax margins (%) Net profit margins (%) Interest cover (x) Effective tax rates (%) Net dividend payout (%) Debtors turnover (days) Stock turnover (days) Creditors turnover (days)

2009 206 82 (12) 0 (1) 275 (141) (2) 3 (141) 23 0 (60) (3) (40) 94 71 53

2010 184 94 (89) (7) (170) 13 (226) 29 2 (195) 154 0 (80) (6) 68 (114) (268) (215)

2011F 170 110 (32) (8) (1) 238 (154) 0 1 (153) (62) 0 0 (77) (140) (54) 8 (207)

2012F 226 128 (36) (1) (1) 316 (179) 0 1 (178) 0 0 (84) (28) (112) 25 25 (182)

2013F 268 145 (50) (1) (2) 361 (175) 0 2 (173) 0 0 (112) (21) (133) 54 54 (128)

22.0 20.0 18.0 16.0 14.0 12.0 10.0 8.0 Feb-10 Mar-10

Apr-10 May-10

Source: Company, CIMB Research, Bloomberg

The S.E.A. Navigator – Malaysia 2011

[ 103 ]

Jun-10

Jul-10

Aug-10

Sep-10 Oct-10

Nov-10 Dec-10

Syariah-compliant stock

JobStreet Corp Bhd

OUTPERFORM

Maintained

RM2.88

@07/12/10

Doing a better job through more marketing

MALAYSIA

2011 OUTLOOK

CIMB Research Report

Target: RM3.73 Technology - Others

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: 12-m price range:

RM916m/US$292m 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 Revenue (RM m) EBITDA (RM m) EBITDA margins (%) Pretax profit (RM m) Net profit (RM m) EPS (sen) EPS growth (%) P/E (x) Core EPS (sen) Core EPS growth (%) Core P/E (x) Gross DPS (sen) Dividend yield (%) P/BV (x) ROE (%) Net cash per share (RM) P/FCFE (x) EV/EBITDA (x) % change in EPS estimates CIMB/Consensus (x)

2008 102.3 47.2 46.2% 39.9 32.8 10.6 12.6% 27.2 12.5 30.6% 23.1 4.7 1.6% 8.2 33.8% 0.16 134.5 17.8

2009 92.3 36.9 40.0% 35.6 26.7 8.6 (18.7%) 33.4 8.6 (31.0%) 33.4 4.0 1.4% 7.1 22.6% 0.17 77.7 22.8

2010F 111.5 47.3 42.4% 50.6 37.5 11.9 38.7% 24.1 11.9 38.7% 24.1 7.8 2.7% 6.2 27.7% 0.19 33.5 18.0 N/A 1.02

2011F 125.9 54.5 43.3% 61.9 46.5 14.8 23.8% 19.5 14.8 23.8% 19.5 9.6 3.3% 5.4 29.7% 0.26 19.6 15.2 N/A 1.03

2012F 140.0 61.0 43.6% 69.6 51.9 16.5 11.8% 17.4 16.5 11.8% 17.4 10.8 3.7% 4.7 28.7% 0.34 17.8 13.2 N/A 1.00

Source: Company, CIMB Research, Bloomberg

Price chart

Corporate profile

3.1

1.60

2.9

1.40

2.7

1.20

2.5

1.00

2.3

0.80

2.1

0.60

1.9

0.40

1.7

0.20

1.5 1.3 De c-09

0.00 Ma y-10 Volume 1m (R.H.S ca le )

Source: Bloomberg

Oct-10 J obS tre e t Corp Bhd

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.

The S.E.A. Navigator – Malaysia 2011

[ 104 ]

Financial tables KEY RATIOS

PROFIT & LOSS (RM m, FYE Dec) Revenue Operating expenses EBITDA Depreciation & amortisation EBIT Net interest & invt income Associates’ contribution Exceptional items Others Pretax profit Tax Minority interests Net profit Adj. wt. shares (m) Unadj. year-end shares (m)

2008 102 (55) 47 (1) 46 1 (1) (7) 0 40 (5) (2) 33 310 310

2009 92 (55) 37 (1) 36 1 (1) 0 0 36 (7) (2) 27 310 310

2010F 111 (64) 47 (1) 46 1 3 0 0 51 (12) (1) 38 314 314

2011F 126 (71) 55 (2) 53 2 7 0 0 62 (14) (2) 46 314 314

2012F 140 (79) 61 (2) 59 2 9 0 0 70 (15) (2) 52 314 314

2011F 14 3 89 106 84 0 7 10 100 9 0 22 31 1 0 1 168 6 0.53

2012F (FYE Dec) 14 Paid job postings (number) 3 Active customer accounts 95 112 109 0 6 10 124 10 0 22 32 1 0 1 194 9 0.61

2008 14 3 41 58 51 0 9 21 81 8 0 19 27 1 0 1 109 2 0.34

2009 14 3 69 85 53 0 7 10 70 7 0 19 26 1 0 1 126 3 0.40

2010F 14 3 84 101 61 0 7 10 78 8 0 21 29 1 0 1 145 4 0.45

2010F 20.7 28.1 45.4 33.7 N/A 23.4 48.9 24.0 0.0 24.0

2011F 12.9 15.2 49.2 36.9 N/A 21.9 48.9 19.9 0.0 24.1

2012F 11.2 12.0 49.8 37.1 N/A 22.0 48.9 16.0 0.0 24.0

2009 316,132 59,501

2010F 2011F 2012F 363,552 436,262 527,877 65,452 71,997 79,916

12M - FORWARD FD CORE P/E (X)

CASH FLOW (RM m, FYE Dec) Pretax profit Depreciation & non–cash adj. Working capital changes Cash tax paid Others Cash flow from operations Capex Net investments & sale of FA Others Cash flow from investing Debt raised/(repaid) Equity raised/(repaid) Dividends paid Cash interest & others Cash flow from financing Change in cash Change in net cash/(debt) Ending net cash/(debt)

2009 (9.8) (21.8) 38.6 28.9 N/A 20.7 34.5 32.1 0.0 29.9

KEY DRIVERS

BALANCE SHEET (RM m, end Dec) Fixed assets Intangible assets Other long-term assets Total non-current assets Cash and equivalents Stocks Trade debtors Other current assets Total current assets Trade creditors Short-term borrowings Other current liabilities Total current liabilities Long-term borrowings Other long-term liabilities Total long-term liabilities Shareholders’ funds Minority interests NTA/share (RM)

2008 23.2 43.7 39.0 32.1 N/A 12.4 32.7 34.0 0.0 40.1

(FYE Dec) Revenue growth (%) EBITDA growth (%) Pretax margins (%) Net profit margins (%) Interest cover (x) Effective tax rates (%) Net dividend payout (%) Debtors turnover (days) Stock turnover (days) Creditors turnover (days)

2008 40 1 (4) (5) 15 47 (1) (32) 0 (33) 0 0 (11) (7) (17) (4) (4) 50

2009 36 1 0 (7) 3 32 (1) (21) 0 (22) 0 0 (9) 0 (9) 2 2 52

2010F 51 1 1 (12) (1) 41 (2) (14) 0 (15) 0 0 (19) 1 (17) 8 8 60

2011F 62 2 2 (14) (5) 47 (2) 0 0 (2) 0 0 (23) 2 (22) 23 23 83

2012F 70 2 2 (15) (6) 51 (2) 0 0 (2) 0 0 (26) 3 (23) 26 26 108

20.0

18.0

16.0

14.0

12.0

10.0 Dec-07

Apr-08

Aug-08

Source: Company, CIMB Research, Bloomberg

The S.E.A. Navigator – Malaysia 2011

[ 105 ]

Dec-08

Apr-09

Aug-09

Dec-09

Apr-10

Aug-10

Dec-10

JT International Bhd

NEUTRAL

Maintained

RM6.03

@07/12/10

Keeping the fire alive

MALAYSIA

2011 OUTLOOK

CIMB Research Report

Target: RM6.35 Tobacco

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 Revenue (RM m) EBITDA (RM m) EBITDA margins (%) Pretax profit (RM m) Net profit (RM m) EPS (sen) EPS growth (%) P/E (x) Gross DPS (sen) Dividend yield (%) P/BV (x) ROE (%) Net cash per share (RM) P/FCFE (x) EV/EBITDA (x) % change in EPS estimates CIMB/Consensus (x)

2008 1,038.5 147.7 14.2% 134.1 98.2 37.5 21.1% 16.1 67.8 11.3% 3.4 20.5% 1.02 13.8 8.9

2009 1,158.2 163.7 14.1% 143.6 108.3 41.4 10.3% 14.6 30.0 5.0% 5.0 27.8% 0.48 14.0 8.9

2010F 1,223.5 173.1 14.2% 154.8 114.6 43.8 5.8% 13.8 30.0 5.0% 4.2 33.4% 0.65 15.1 8.1 0.94

2011F 1,297.3 183.8 14.2% 166.5 123.2 47.1 7.5% 12.8 30.0 5.0% 3.6 30.5% 0.88 13.3 7.3 0.96

2012F 1,317.4 188.6 14.3% 172.7 127.8 48.9 3.7% 12.3 35.0 5.8% 3.2 27.5% 1.10 13.6 6.8 0.96

Source: Company, CIMB Research, Bloomberg

Price chart

Corporate profile

6.5

4.00

6.3

3.50

6.1

3.00

5.9 5.7

2.50

5.5

2.00

5.3

1.50

5.1

1.00

4.9

0.50

4.7 4.5 De c-09

0.00 Ma y-10 Volume 100k (R.H.S ca le )

Source: Bloomberg

Oct-10 J T Inte rna tiona l Bhd

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.

The S.E.A. Navigator – Malaysia 2011

[ 106 ]

Financial tables KEY RATIOS

PROFIT & LOSS (RM m, FYE Dec) Revenue Operating expenses EBITDA Depreciation & amortisation EBIT Net interest & invt income Associates’ contribution Exceptional items Others Pretax profit Tax Minority interests Net profit Adj. wt. shares (m) Unadj. year-end shares (m)

2008 1,039 (891) 148 (21) 126 8 0 0 0 134 (36) 0 98 262 262

2009 1,158 (994) 164 (22) 141 2 0 0 0 144 (35) 0 108 262 262

2010F 1,223 (1,050) 173 (23) 151 4 0 0 0 155 (40) 0 115 262 262

2011F 1,297 (1,114) 184 (23) 161 6 0 0 0 166 (43) 0 123 262 262

2012F 1,317 (1,129) 189 (23) 166 7 0 0 0 173 (45) 0 128 262 262

2011F 122 0 5 128 230 85 66 24 405 62 0 13 75 0 21 21 436 0 1.67

2012F 124 0 5 129 287 86 67 23 463 63 0 13 76 0 21 21 495 0 1.89

2008 102 0 5 107 267 88 68 14 438 54 0 12 66 0 17 17 462 0 1.77

2009 121 0 5 126 125 76 58 27 286 55 0 19 75 0 21 21 316 0 1.21

2010F 121 0 5 126 171 80 62 26 338 58 0 13 72 0 21 21 371 0 1.42

2010F 5.6 5.8 12.7 9.4 N/A 26.0 51.4 17.9 23.2 17.0

2011F 6.0 6.1 12.8 9.5 N/A 26.0 47.8 17.9 23.1 16.9

2012F 1.5 2.6 13.1 9.7 N/A 26.0 53.7 18.3 23.6 17.3

(FYE Dec) Industry volume growth (% growth) Sales tax (%) Excise duties (RM per kg)

2009 -11.7% 5.0% 190.00

2010F -3.0% 5.0% 220.00

2011F -5.0% 5.0% 220.00

2012F 0.0% 5.0% 220.00

12M - FORWARD FD CORE P/E (X)

CASH FLOW (RM m, FYE Dec) Pretax profit Depreciation & non–cash adj. Working capital changes Cash tax paid Others Cash flow from operations Capex Net investments & sale of FA Others Cash flow from investing Debt raised/(repaid) Equity raised/(repaid) Dividends paid Cash interest & others Cash flow from financing Change in cash Change in net cash/(debt) Ending net cash/(debt)

2009 11.5 10.9 12.4 9.3 N/A 24.6 54.4 20.0 25.8 17.2

KEY DRIVERS

BALANCE SHEET (RM m, end Dec) Fixed assets Intangible assets Other long-term assets Total non-current assets Cash and equivalents Stocks Trade debtors Other current assets Total current assets Trade creditors Short-term borrowings Other current liabilities Total current liabilities Long-term borrowings Other long-term liabilities Total long-term liabilities Shareholders’ funds Minority interests NTA/share (RM)

2008 20.1 13.3 12.9 9.5 N/A 26.8 133.7 23.7 33.6 16.5

(FYE Dec) Revenue growth (%) EBITDA growth (%) Pretax margins (%) Net profit margins (%) Interest cover (x) Effective tax rates (%) Net dividend payout (%) Debtors turnover (days) Stock turnover (days) Creditors turnover (days)

2008 134 21 27 (41) (16) 126 (20) 1 8 (12) 0 0 (131) 0 (131) (17) (17) 267

2009 144 22 24 (36) (12) 141 (22) (18) 2 (38) 0 (196) (59) 10 (245) (142) (142) 125

2010F 155 23 (4) (35) (14) 123 (23) 0 0 (23) 0 0 (59) 4 (55) 46 46 171

2011F 166 23 (5) (40) (7) 137 (24) 0 0 (24) 0 0 (59) 6 (53) 59 59 230

2012F 173 23 (1) (43) (18) 133 (24) 0 0 (24) 0 0 (59) 7 (52) 57 57 287

14.0 13.5 13.0 12.5 12.0 11.5 11.0 10.5 10.0 9.5 9.0 Dec-07

Apr-08

Aug-08

Source: Company, CIMB Research, Bloomberg

The S.E.A. Navigator – Malaysia 2011

[ 107 ]

Dec-08

Apr-09

Aug-09

Dec-09

Apr-10

Aug-10

Dec-10

Syariah-compliant stock

Kencana Petroleum Bhd

OUTPERFORM

Maintained

RM2.01

@07/12/10

Drilling for more growth

MALAYSIA

2011 OUTLOOK

CIMB Research Report

Target: RM2.60 Oil & Gas - Equipment & Svs

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 alltime 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 Revenue (RM m) EBITDA (RM m) EBITDA margins (%) Pretax profit (RM m) Net profit (RM m) EPS (sen) EPS growth (%) P/E (x) Gross DPS (sen) Dividend yield (%) P/BV (x) ROE (%) Net gearing (%) Net cash per share (RM) P/FCFE (x) EV/EBITDA (x) % change in EPS estimates CIMB/Consensus (x)

2009 1,140.8 174.9 15.3% 153.1 118.5 13.1 39.0% 15.3 1.5 0.7% 8.0 51.2% 7.9% N/A 80.5 10.5

2010 1,089.7 196.7 18.1% 171.3 135.8 10.1 (23.1%) 19.9 1.5 0.7% 10.7 56.5% 3.8% N/A 89.9 13.8

2011F 1,702.5 310.5 18.2% 302.4 213.2 12.9 27.4% 15.6 2.5 1.2% 10.6 75.3% N/A 0.00 63.7 10.7 1.02

2012F 2,686.0 373.1 13.9% 364.4 270.8 16.3 27.0% 12.3 3.5 1.7% 9.7 82.6% N/A 0.01 47.6 8.9 1.07

2013F 3,146.0 396.1 12.6% 387.9 279.3 16.8 3.1% 11.9 4.5 2.2% 9.1 78.8% N/A 0.01 38.4 8.4 1.02

Source: Company, CIMB Research, Bloomberg

Price chart

Corporate profile

2.2

3.50 3.00

2.0

2.50 1.8

2.00 1.50

1.6

1.00 1.4 1.2 De c-09

0.50 0.00 Ma y-10 Volume 10m (R.H.S ca le )

Source: Bloomberg

Oct-10 Ke nca na P e trole um Bhd

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.

The S.E.A. Navigator – Malaysia 2011

[ 108 ]

Financial tables KEY RATIOS

PROFIT & LOSS (RM m, FYE Jul) Revenue Operating expenses EBITDA Depreciation & amortisation EBIT Net interest & invt income Associates’ contribution Exceptional items Others Pretax profit Tax Minority interests Net profit Adj. wt. shares (m) Unadj. year-end shares (m)

2009 1,141 (966) 175 (16) 159 (6) 0 0 0 153 (35) 0 118 903 903

2010 1,090 (893) 197 (18) 179 (6) (1) 0 0 171 (36) 0 136 1,346 1,346

2011F 1,703 (1,392) 310 (8) 302 0 1 0 0 302 (89) 0 213 1,658 1,658

2012F 2,686 (2,313) 373 (9) 364 0 1 0 0 364 (94) 0 271 1,658 1,658

2013F 3,146 (2,750) 396 (9) 387 0 1 0 0 388 (109) 0 279 1,658 1,658

2009 147 1 4 152 99 26 330 37 492 288 73 3 363 44 9 53 228 0 0.25

2010 153 1 5 159 109 29 363 41 541 317 75 3 394 44 9 53 253 0 0.19

2011F 192 1 5 198 120 32 399 45 595 348 76 4 427 44 9 53 313 0 0.19

2012F 200 1 6 207 132 35 439 49 655 383 77 5 464 45 10 55 343 0 0.21

2013F 199 1 6 207 145 39 483 54 720 422 78 6 505 46 11 57 366 0 0.22

2009 153 16 (6) (32) 183 314 (35) 0 0 (35) (3) 0 (14) (254) (271) 9 12 (18)

2010 171 18 (7) (44) 187 326 (35) 0 4 (31) 2 0 (20) (266) (285) 10 8 (10)

2011F 302 8 (7) (55) 182 430 (34) 0 7 (27) 1 0 (41) (351) (392) 11 10 0

2012F 364 9 (8) (89) 181 457 (33) 0 11 (22) 2 0 (58) (366) (422) 12 10 10

2013F 388 9 (9) (94) 181 475 (32) 0 13 (19) 2 1 (75) (371) (442) 13 11 21

2011F 56.2 57.8 17.8 12.5 42.2 29.5 14.0 81.7 6.5 71.3

2012F 57.8 20.2 13.6 10.1 42.8 25.7 15.4 56.9 4.6 49.7

2013F 17.1 6.1 12.3 8.9 39.2 28.0 19.2 53.5 4.3 46.7

(FYE Jul) Overseas rev contribution (%) Order book (RM m) Size of fabrication yard (acres) Yard annual capacity (tonnes) Yard utilisation rate (%)

2010 55.0% 2,500 169 60,000 80.0%

2011F 55.0% 2,500 169 60,000 80.0%

2012F 55.0% 2,500 169 60,000 80.0%

2013F 55.0% 2,500 169 60,000 80.0%

12M - FORWARD FD CORE P/E (X)

CASH FLOW (RM m, FYE Jul) Pretax profit Depreciation & non–cash adj. Working capital changes Cash tax paid Others Cash flow from operations Capex Net investments & sale of FA Others Cash flow from investing Debt raised/(repaid) Equity raised/(repaid) Dividends paid Cash interest & others Cash flow from financing Change in cash Change in net cash/(debt) Ending net cash/(debt)

2010 (4.5) 12.5 15.7 12.5 15.6 20.8 10.7 116.0 9.3 101.3

KEY DRIVERS

BALANCE SHEET (RM m, end Jul) Fixed assets Intangible assets Other long-term assets Total non-current assets Cash and equivalents Stocks Trade debtors Other current assets Total current assets Trade creditors Short-term borrowings Other current liabilities Total current liabilities Long-term borrowings Other long-term liabilities Total long-term liabilities Shareholders’ funds Minority interests NTA/share (RM)

2009 (21.4) 30.1 13.4 10.4 15.2 22.6 8.2 100.7 8.1 87.9

(FYE Jul) Revenue growth (%) EBITDA growth (%) Pretax margins (%) Net profit margins (%) Interest cover (x) Effective tax rates (%) Net dividend payout (%) Debtors turnover (days) Stock turnover (days) Creditors turnover (days)

15.0 14.0 13.0 12.0 11.0 10.0 9.0 8.0 7.0 6.0 5.0 Dec-07

Apr-08

Aug-08

Source: Company, CIMB Research, Bloomberg

The S.E.A. Navigator – Malaysia 2011

[ 109 ]

Dec-08

Apr-09

Aug-09

Dec-09

Apr-10

Aug-10

Dec-10

Syariah-compliant stock

KLCC Property Holdings Bhd

UNDERPERFORM

Maintained

RM3.53

@07/12/10

Switch to REITs or developers

MALAYSIA

2011 OUTLOOK

CIMB Research Report

Target: RM3.03 Property Investment

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 Revenue (RM m) EBITDA (RM m) EBITDA margins (%) Pretax profit (RM m) Net profit (RM m) EPS (sen) EPS growth (%) P/E (x) Core EPS (sen) Core EPS growth (%) Core P/E (x) FD core EPS (sen) FD core P/E (x) Gross DPS (sen) Dividend yield (%) P/BV (x) ROE (%) Net gearing (%) P/FCFE (x) EV/EBITDA (x) % change in EPS estimates CIMB/Consensus (x)

2009 861.2 661.0 76.7% 1,032.2 646.8 69.2 16.2% 5.1 25.1 6.7% 14.1 18.6 19.0 14.0 4.0% 0.7 14.2% 19.8% (24.4) 11.1

2010 881.3 683.0 77.5% 1,291.5 896.6 96.0 38.6% 3.7 25.7 2.4% 13.7 19.1 18.5 14.7 4.2% 0.6 17.8% 16.2% (13.1) 11.1

2011F 917.8 739.3 80.6% 576.1 259.1 27.7 (71.1%) 12.7 27.7 7.8% 12.7 20.4 17.3 15.0 4.2% 0.6 4.8% 16.1% 42.1 10.5 N/A 0.82

2012F 1,003.2 777.2 77.5% 618.5 281.9 30.2 8.8% 11.7 30.2 8.8% 11.7 22.2 15.9 15.0 4.2% 0.6 5.1% 15.9% 11.7 10.2 N/A 1.08

2013F 1,148.0 833.2 72.6% 686.7 323.7 34.7 14.8% 10.2 34.7 14.8% 10.2 25.4 13.9 15.0 4.2% 0.6 5.6% 15.7% 10.4 9.7 N/A 1.04

Source: Company, CIMB Research, Bloomberg

Price chart

Corporate profile

3.8 3.6

20.00

3.4

15.00

3.2 10.00 3.0 5.00

2.8 2.6 De c-09

0.00 Ma y-10

Volume 1m (R.H.S c a le )

Source: Bloomberg

Oct-10 KLCC P rope rty Holding s Bhd

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.

The S.E.A. Navigator – Malaysia 2011

[ 110 ]

Financial tables KEY RATIOS

PROFIT & LOSS (RM m, FYE Mar) Revenue Operating expenses EBITDA Depreciation & amortisation EBIT Net interest & invt income Associates’ contribution Exceptional items Others Pretax profit Tax Minority interests Net profit Adj. wt. shares (m) Unadj. year-end shares (m)

2009 861 (200) 661 (34) 627 (140) 36 508 0 1,032 (195) (190) 647 934 934

2010 881 (198) 683 (36) 647 (130) 16 758 0 1,291 (173) (222) 897 934 934

2011F 918 (179) 739 (42) 697 (135) 14 0 0 576 (144) (173) 259 934 934

2012F 1,003 (226) 777 (44) 733 (129) 14 0 0 619 (155) (182) 282 934 934

2013F 1,148 (315) 833 (46) 787 (115) 15 0 0 687 (172) (191) 324 934 934

2009 885 0 9,107 9,992 579 1 48 21 648 48 194 136 378 1,875 878 2,752 4,763 2,747 5.10

2010 1,021 0 9,864 10,885 601 1 42 21 665 59 216 144 420 1,754 903 2,656 5,312 3,162 5.69

2011F 1,039 0 10,091 11,130 541 0 27 22 590 22 194 147 363 1,754 854 2,607 5,466 3,283 5.85

2012F 1,055 0 10,102 11,157 487 0 29 225 742 24 175 161 359 1,754 733 2,486 5,643 3,410 6.04

2013F 1,070 0 10,334 11,404 438 1 33 466 937 27 158 184 368 1,754 813 2,567 5,862 3,544 6.28

2009 1,032 34 11 (119) 104 1,061 (78) (527) (317) (922) (134) 312 (98) (253) (173) (34) 100 (1,488)

2010 1,291 36 17 (141) 113 1,317 (172) (757) (409) (1,338) (101) 414 (103) (171) 39 18 119 (1,369)

2011F 576 42 (22) (285) 121 432 (60) (227) 0 (287) 68 0 (105) (78) (115) 30 (38) (1,407)

2012F 619 44 (1) (103) 115 673 (60) (11) 0 (72) (191) 0 (105) (532) (828) (226) (35) (1,442)

2013F 687 46 (1) (90) 101 743 (60) (232) 0 (292) (18) 0 (105) (376) (499) (48) (31) (1,473)

2011F 4.1 8.2 62.8 28.2 4.5 25.0 40.6 13.7 0.3 16.1

2012F 9.3 5.1 61.7 28.1 4.8 25.0 37.3 10.1 0.2 8.2

2013F 14.4 7.2 59.8 28.2 5.5 25.0 32.5 9.9 0.2 8.0

(FYE Mar) Mandarin Oriental occupancy (%) Mandarin Oriental room rate (RM) Suria KLCC occupancy rates (%) Suria KLCC rental (RMpsf/month) Twin Towers rental (RMpsf/month)

2010 55.0% 635.00 100.0% 22.27 8.52

2011F 2012F 2013F 57.0% 59.0% 61.0% 654.05 673.67 693.88 100.0% 100.0% 100.0% 23.16 24.08 25.05 8.75 8.98 9.22

CURRENT P/BV(X)

CASH FLOW (RM m, FYE Mar) Pretax profit Depreciation & non–cash adj. Working capital changes Cash tax paid Others Cash flow from operations Capex Net investments & sale of FA Others Cash flow from investing Debt raised/(repaid) Equity raised/(repaid) Dividends paid Cash interest & others Cash flow from financing Change in cash Change in net cash/(debt) Ending net cash/(debt)

2010 2.3 3.3 146.5 101.7 4.6 13.4 11.5 18.6 0.3 22.2

KEY DRIVERS

BALANCE SHEET (RM m, end Mar) Fixed assets Intangible assets Other long-term assets Total non-current assets Cash and equivalents Stocks Trade debtors Other current assets Total current assets Trade creditors Short-term borrowings Other current liabilities Total current liabilities Long-term borrowings Other long-term liabilities Total long-term liabilities Shareholders’ funds Minority interests NTA/share (RM)

2009 2.2 0.5 119.9 75.1 4.0 18.9 15.2 16.6 0.2 14.3

(FYE Mar) Revenue growth (%) EBITDA growth (%) Pretax margins (%) Net profit margins (%) Interest cover (x) Effective tax rates (%) Net dividend payout (%) Debtors turnover (days) Stock turnover (days) Creditors turnover (days)

0.90 0.85 0.80 0.75 0.70 0.65 0.60 0.55 0.50 Dec-07

Apr-08

Aug-08

Source: Company, CIMB Research, Bloomberg

The S.E.A. Navigator – Malaysia 2011

[ 111 ]

Dec-08

Apr-09

Aug-09

Dec-09

Apr-10

Aug-10

Dec-10

Syariah-compliant stock

Kossan Rubber Industries Bhd

OUTPERFORM

Maintained

RM3.34

@07/12/10

Handled with care

MALAYSIA

2011 OUTLOOK

CIMB Research Report

Target: RM5.41 Rubber Gloves

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 Revenue (RM m) EBITDA (RM m) EBITDA margins (%) Pretax profit (RM m) Net profit (RM m) EPS (sen) EPS growth (%) P/E (x) Core EPS (sen) Core EPS growth (%) Core P/E (x) Gross DPS (sen) Dividend yield (%) P/BV (x) ROE (%) Net gearing (%) Net cash per share (RM) P/FCFE (x) EV/EBITDA (x) % change in EPS estimates CIMB/Consensus (x)

2008 897.2 107.9 12.0% 72.9 58.6 18.3 6.5% 18.2 18.3 8.8% 18.2 3.0 0.9% 3.6 21.3% 70.1% N/A (22.0) 11.9

2009 842.1 128.5 15.3% 85.8 66.7 20.9 13.7% 16.0 37.4 104.1% 8.9 4.5 1.3% 3.0 20.3% 50.8% N/A (252.1) 9.7

2010F 1,209.5 198.7 16.4% 153.0 118.5 37.1 77.8% 9.0 37.1 (0.9%) 9.0 8.0 2.4% 2.3 29.0% 26.8% N/A 16.6 6.0 (3.6%) 1.01

2011F 1,343.9 242.8 18.1% 189.2 144.7 45.3 22.1% 7.4 45.3 22.1% 7.4 10.0 3.0% 1.8 27.6% 5.4% N/A 9.9 4.5 (5.9%) 1.13

2012F 1,489.9 287.8 19.3% 225.7 170.4 53.3 17.7% 6.3 53.3 17.7% 6.3 12.0 3.6% 1.4 25.7% N/A 0.26 7.9 3.4 (5.4%) 1.21

Source: Company, CIMB Research, Bloomberg

Price chart

Corporate profile 3.00

4.3

2.50 3.8

2.00 1.50

3.3

1.00 2.8

0.50 2.3 Dec-09

0.00 May-10 Volume 1m (R.H.Scale)

Source: Bloomberg

Oct-10 Kossan Rubber Industries Bhd

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.

The S.E.A. Navigator – Malaysia 2011

[ 112 ]

Financial tables KEY RATIOS

PROFIT & LOSS (RM m, FYE Dec) Revenue Operating expenses EBITDA Depreciation & amortisation EBIT Net interest & invt income Associates’ contribution Exceptional items Others Pretax profit Tax Minority interests Net profit Adj. wt. shares (m) Unadj. year-end shares (m)

2008 897 (789) 108 (26) 82 (9) 0 0 0 73 (14) (1) 59 320 160

2009 842 (714) 129 (34) 95 (9) 0 0 0 86 (18) (1) 67 320 160

2010F 1,210 (1,011) 199 (36) 163 (10) 0 0 0 153 (34) (1) 119 320 320

2011F 1,344 (1,101) 243 (44) 199 (10) 0 0 0 189 (44) (1) 145 320 320

2012F 1,490 (1,202) 288 (53) 235 (10) 0 0 0 226 (54) (1) 170 320 320

2011F 410 1 0 411 187 175 255 0 617 161 176 34 371 43 23 66 588 3 1.84

2012F 426 1 0 427 308 194 283 0 785 179 185 44 407 41 25 65 737 4 2.30

2008 361 1 2 364 17 112 161 0 290 115 173 1 289 54 11 65 299 1 0.93

2009 359 1 1 361 25 110 193 0 328 97 159 4 261 47 21 69 357 2 1.12

2010F 386 1 1 387 88 157 230 0 475 145 167 18 331 45 22 67 462 2 1.44

2010F 43.6 54.6 12.6 9.8 15.6 22.0 16.2 63.9 40.3 36.6

2011F 11.1 22.2 14.1 10.8 18.5 23.0 16.6 65.9 45.1 41.6

2012F 10.9 18.6 15.1 11.4 21.2 24.0 16.9 66.0 45.1 41.7

(FYE Dec) Production capacity (m pcs p.a) Capacity utilisation (%) ASP (US$) per 1,000 pieces Exchange rate (RM to US$) Natural rubber price (RM /kilogram) Nitrile latex prices (US$/mt)

2009 11,000 77.3% 30.46 3.43 5.25 1,362

2010F 12,500 90.0% 35.00 3.02 8.20 1,300

2011F 14,000 90.0% 34.30 3.05 8.00 1,381

2012F 15,500 90.0% 34.30 3.05 7.55 1,503

12M - FORWARD FD CORE P/E (X)

CASH FLOW (RM m, FYE Dec) Pretax profit Depreciation & non–cash adj. Working capital changes Cash tax paid Others Cash flow from operations Capex Net investments & sale of FA Others Cash flow from investing Debt raised/(repaid) Equity raised/(repaid) Dividends paid Cash interest & others Cash flow from financing Change in cash Change in net cash/(debt) Ending net cash/(debt)

2009 (6.1) 19.2 10.2 7.9 10.4 21.5 16.2 76.8 48.1 46.0

KEY DRIVERS

BALANCE SHEET (RM m, end Dec) Fixed assets Intangible assets Other long-term assets Total non-current assets Cash and equivalents Stocks Trade debtors Other current assets Total current assets Trade creditors Short-term borrowings Other current liabilities Total current liabilities Long-term borrowings Other long-term liabilities Total long-term liabilities Shareholders’ funds Minority interests NTA/share (RM)

2008 27.7 19.2 8.1 6.5 7.8 18.8 12.1 60.6 40.4 42.2

(FYE Dec) Revenue growth (%) EBITDA growth (%) Pretax margins (%) Net profit margins (%) Interest cover (x) Effective tax rates (%) Net dividend payout (%) Debtors turnover (days) Stock turnover (days) Creditors turnover (days)

2008 73 26 0 (14) (60) 25 (66) 0 0 (66) 2 0 (11) 0 (10) (51) (52) (210)

2009 86 34 0 (18) (28) 73 (41) 0 4 (36) (32) 0 (8) 0 (40) (4) 28 (182)

2010F 153 36 0 (34) (26) 129 (60) 0 0 (60) 6 0 (11) 0 (5) 64 58 (124)

2011F 189 44 0 (44) (18) 172 (60) 0 0 (60) 6 0 (19) 0 (13) 99 93 (32)

2012F 226 53 0 (54) (25) 199 (60) 0 0 (60) 7 0 (24) 0 (17) 121 115 83

11.0 10.0 9.0 8.0 7.0 6.0 5.0 4.0 3.0 Dec-07

Apr-08

Aug-08

Source: Company, CIMB Research, Bloomberg

The S.E.A. Navigator – Malaysia 2011

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Dec-08

Apr-09

Aug-09

Dec-09

Apr-10

Aug-10

Dec-10

Syariah-compliant stock

Kuala Lumpur Kepong Bhd

TRADING BUY

Maintained

RM21.58

@07/12/10

Tapping into higher rubber and CPO prices

MALAYSIA

2011 OUTLOOK

CIMB Research Report

Target: RM25.00 Palm Oil & Rubber

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 Revenue (RM m) EBITDA (RM m) EBITDA margins (%) Pretax profit (RM m) Net profit (RM m) EPS (sen) EPS growth (%) P/E (x) Gross DPS (sen) Dividend yield (%) P/BV (x) ROE (%) Net gearing (%) P/FCFE (x) EV/EBITDA (x) % change in EPS estimates CIMB/Consensus (x)

2009 6,658.3 1,102.7 16.6% 887.4 612.5 57.4 (41.1%) 37.6 53.2 2.5% 4.1 11.0% 7.7% 39.4 21.4

2010 7,490.6 1,637.9 21.9% 1,382.8 1,012.3 94.8 65.3% 22.8 79.8 3.7% 3.8 17.4% 6.8% 54.5 14.4

2011F 8,972.6 1,861.0 20.7% 1,585.5 1,143.0 107.1 12.9% 20.2 86.5 4.0% 3.5 18.0% 9.1% 125.1 12.8 0.94

2012F 9,565.0 2,042.0 21.3% 1,755.1 1,265.2 118.5 10.7% 18.2 93.1 4.3% 3.2 18.2% 5.4% 22.9 11.6 0.95

2013F 10,158.0 2,094.4 20.6% 1,798.0 1,296.1 121.4 2.4% 17.8 97.1 4.5% 3.0 17.2% 2.4% 22.4 11.2 0.92

Source: Company, CIMB Research, Bloomberg

Price chart

Corporate profile

22.7

0.70

21.7

0.60

20.7

0.50

19.7

0.40

18.7 0.30

17.7

0.20

16.7

0.10

15.7 14.7 De c-09

0.00 Ma y-10

Volume 10m (R.H.S ca le )

Source: Bloomberg

Oct-10 Kua la Lumpur Ke pong Bhd

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%).

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[ 114 ]

Financial tables KEY RATIOS

PROFIT & LOSS (RM m, FYE Sep) Revenue Operating expenses EBITDA Depreciation & amortisation EBIT Net interest & invt income Associates’ contribution Exceptional items Others Pretax profit Tax Minority interests Net profit Adj. wt. shares (m) Unadj. year-end shares (m)

2009 6,658 (5,556) 1,103 (218) 885 (32) 35 0 0 887 (245) (30) 613 1,068 1,068

2010 7,491 (5,853) 1,638 (234) 1,404 (58) 37 0 0 1,383 (316) (55) 1,012 1,068 1,068

2011F 8,973 (7,112) 1,861 (257) 1,604 (60) 41 0 0 1,586 (381) (62) 1,143 1,068 1,068

2012F 9,565 (7,523) 2,042 (276) 1,765 (55) 45 0 0 1,755 (421) (69) 1,265 1,068 1,068

2013F 10,158 (8,064) 2,094 (295) 1,798 (50) 50 0 0 1,798 (432) (70) 1,296 1,068 1,068

(FYE Sep) Revenue growth (%) EBITDA growth (%) Pretax margins (%) Net profit margins (%) Interest cover (x) Effective tax rates (%) Net dividend payout (%) Debtors turnover (days) Stock turnover (days) Creditors turnover (days)

2012F 3,280 329 2,723 6,331 979 1,616 762 699 4,057 403 800 545 1,748 600 295 895 7,250 494 6.48

2013F 3,503 329 2,772 6,604 1,201 1,716 811 735 4,462 428 800 576 1,804 600 295 895 7,803 565 7.00

(FYE Sep) CPO price per tonne (RM) FFB output (000' tonnes) FFB yield per ha (tonnes) Mature area (ha) CPO extraction rate (%) FFB growth (%)

2009 2,488 328 2,600 5,415 1,292 882 628 386 3,189 281 1,123 336 1,741 627 295 923 5,634 309 4.97

2010 2,569 322 2,877 5,768 1,255 1,288 328 524 3,395 316 580 374 1,270 1,107 461 1,568 6,005 320 5.32

2011F 3,037 329 2,677 6,043 756 1,515 718 657 3,645 377 800 515 1,692 600 295 895 6,675 426 5.95

2011F 19.8 13.6 17.7 12.7 26.7 24.0 60.6 21.3 57.0 14.1

2012F 6.6 9.7 18.3 13.2 32.1 24.0 58.9 28.2 59.7 14.9

2013F 6.2 2.6 17.7 12.8 36.0 24.0 60.0 28.3 59.9 14.9

2010 2,402 3,178 23 157,041 21.0% 11.1%

2011F 2012F 2013F 2,620 2,737 2,737 3,636 4,025 4,253 22 23 23 169,041 184,041 194,041 21.5% 21.5% 21.5% 14.4% 10.7% 5.7%

12M - FORWARD FD CORE P/E (X)

CASH FLOW (RM m, FYE Sep) Pretax profit Depreciation & non–cash adj. Working capital changes Cash tax paid Others Cash flow from operations Capex Net investments & sale of FA Others Cash flow from investing Debt raised/(repaid) Equity raised/(repaid) Dividends paid Cash interest & others Cash flow from financing Change in cash Change in net cash/(debt) Ending net cash/(debt)

2010 12.5 48.5 18.5 13.5 24.1 22.8 63.1 23.3 52.9 14.6

KEY DRIVERS

BALANCE SHEET (RM m, end Sep) Fixed assets Intangible assets Other long-term assets Total non-current assets Cash and equivalents Stocks Trade debtors Other current assets Total current assets Trade creditors Short-term borrowings Other current liabilities Total current liabilities Long-term borrowings Other long-term liabilities Total long-term liabilities Shareholders’ funds Minority interests NTA/share (RM)

2009 (15.2) (32.6) 13.3 9.2 12.9 27.6 69.5 34.3 57.6 15.2

2009 887 218 134 (356) 31 914 (371) 112 0 (259) (39) 0 (572) 79 (532) 124 162 (458)

2010 1,383 234 (356) (296) (181) 784 (333) 69 0 (264) (39) 0 (479) (15) (533) (13) 26 (432)

2011F 1,586 257 (548) (316) 52 1,031 (500) 0 0 (500) (287) 0 (692) (54) (1,033) (502) (215) (647)

2012F 1,755 276 (132) (381) 44 1,563 (500) 0 0 (500) 0 0 (745) (92) (837) 226 226 (421)

2013F 1,798 295 (128) (421) 35 1,579 (500) 0 0 (500) 0 0 (777) (79) (856) 222 222 (199)

26.0

24.0

22.0 20.0 18.0

16.0

14.0 12.0 Dec-07

Apr-08

Aug-08

Source: Company, CIMB Research, Bloomberg

The S.E.A. Navigator – Malaysia 2011

[ 115 ]

Dec-08

Apr-09

Aug-09

Dec-09

Apr-10

Aug-10

Dec-10

Kurnia Asia Bhd

UNDERPERFORM

Maintained

RM0.35

@07/12/10

Murky earnings outlook

MALAYSIA

2011 OUTLOOK

CIMB Research Report

Target: RM0.20 Insurance - General

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% for FY11-12. 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: 12-m price range:

RM525m/US$167m 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 Gross premium (RM m) Investment & other income (RM m) Revenue (RM m) Operating profit (RM m) Pretax profit (RM m) Net profit (RM m) EPS (sen) EPS growth (%) P/E (x) Gross DPS (sen) Dividend yield (%) P/BV (x) ROE (%) % change in EPS estimates CIMB/Consensus (x)

2008 1,121.8 81.3 1,011.2 (314.4) (314.4) (301.8) (20.1) (12,174% nm 0.0 0.0% 3.5 (97.8%)

2009 977.7 85.2 854.3 102.4 102.4 112.2 7.5 137% 4.7 0.0 0.0% 1.7 49.6%

2010F 1,023.8 90.0 901.0 47.6 47.6 32.4 2.2 (71%) 16.2 0.0 0.0% 1.6 10.2% 0.90

2011F 1,095.5 91.8 964.1 47.8 47.8 35.8 2.4 11% 14.7 0.0 0.0% 1.4 10.2% 0.61

2012F 1,161.2 93.6 1,021.9 49.8 49.8 37.3 2.5 4% 14.1 0.4 1.1% 1.3 9.7% 0.58

Source: Company, CIMB Research, Bloomberg

Price chart

Corporate profile

0.8

1.40

0.8

1.20

0.7 0.7

1.00

0.6

0.80

0.6 0.5

0.60

0.5

0.40

0.4 0.20

0.4 0.3 Dec-09

0.00 May-10 Volume 10m (R.H.Scale)

Source: Bloomberg

Oct-10 Kurnia Asia Bhd

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.

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Financial tables KEY RATIOS

PROFIT & LOSS (RM m, FYE Dec) Gross premium Reinsurance Net premium (Inc)/Dec in UPR Net commissions Net claims incurred Management expenses Investment income Others Operating profit Associates’ contribution Exceptional items Others Pretax profit Tax Minority interests Net profit Adj. wt. shares (m) Unadj. year-end shares (m)

2008 1,122 (111) 1,011 (5) (98) (1,082) (235) 81 13 (314) 0 0 0 (314) 13 0 (302) 1,500 1,500

2009 978 (123) 854 59 (97) (612) (192) 85 4 102 0 0 0 102 10 0 112 1,500 1,500

2010F 1,024 (123) 901 (81) (82) (598) (172) 90 (10) 48 0 0 0 48 (15) 0 32 1,500 1,500

2011F 1,095 (131) 964 (87) (88) (640) (183) 92 (10) 48 0 0 0 48 (12) 0 36 1,500 1,500

2012F 1,161 (139) 1,022 (92) (93) (679) (194) 94 (8) 50 0 0 0 50 (12) 0 37 1,500 1,500

2008 202 11 0 213 96 1,625 94 88 1,902 64 1,433 18 1,515 448 0 448 152 0 0.10

2009 182 5 0 187 58 1,786 78 93 2,015 78 1,031 424 1,533 369 0 369 300 0 0.20

2010F 245 5 0 250 58 1,928 87 101 2,174 89 1,113 439 1,642 450 0 450 332 0 0.22

2011F 236 5 0 241 121 2,063 93 109 2,386 95 1,191 436 1,722 536 0 536 368 0 0.25

2012F 227 5 0 232 197 2,187 98 117 2,599 101 1,263 436 1,800 628 0 628 403 0 0.27

(30.0) N/A N/A

2009 (12.8) (15.5) 132.6 11.2 12.3 N/A 0.0

2010F 2011F 2012F 4.7 7.0 6.0 5.5 7.0 6.0 (53.5) 0.3 4.3 5.8 5.4 5.4 3.9 4.1 4.0 32.0 25.0 25.0 0.0 0.0 12.0

2008 106.7 9.7 23.2 90.1 140.5 (40.6) 4.8

2009 67.0 10.6 20.6 87.4 100.8 1.4 4.7

2010F 2011F 2012F 73.0 73.0 73.0 10.0 10.0 10.0 20.0 20.0 20.0 88.0 88.0 88.0 101.1 101.1 101.0 (3.9) (3.9) (3.8) 4.8 4.6 4.4

KEY DRIVERS

BALANCE SHEET (RM m, end Dec) Fixed assets Intangible assets Other long-term assets Total non-current assets Cash and equivalents Investments Trade debtors Other current assets Total current assets Trade creditors Provision for claims Other current liabilities Total current liabilities Unearned premium reserves Other long-term liabilities Total long term liabilities Shareholders’ funds Minority interests BV/share (RM)

2008 1.0 (1.1) (2,464. 2) (31.2)

(FYE Dec) Gross premium growth (%) Net premium growth (%) Operating profit growth (%) Pretax margins (%) Net profit margins (%) Effective tax rates (%) Net dividend payout (%)

CURRENT P/BV (X)

(FYE Dec) Net claims ratio (%) Net commission ratio (%) Management expenses ratio (%) Retention ratio (%) Combined ratio (%) Underwriting margin (%) Investment return (%)

12M - FORWARD FD CORE P/E (X) 48.0

6.40

38.0 28.0

5.40

18.0 8.0

4.40

-2.0

3.40

-12.0 -22.0

2.40

-32.0

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

-42.0 Dec-07

Apr-08

Aug-08

Source: Company, CIMB Research, Bloomberg

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Dec-08

Apr-09

Aug-09

Dec-09

Apr-10

Aug-10

Dec-10

Syariah-compliant stock

Lafarge Malayan Cement Bhd

UNDERPERFORM

Maintained

RM7.42

@04/12/10

The cement giant

MALAYSIA

2011 OUTLOOK

CIMB Research Report

Target: RM6.37 Cement

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 Revenue (RM m) EBITDA (RM m) EBITDA margins (%) Pretax profit (RM m) Net profit (RM m) EPS (sen) EPS growth (%) P/E (x) Core EPS (sen) Core EPS growth (%) Core P/E (x) Gross DPS (sen) Dividend yield (%) P/BV (x) ROE (%) Net gearing (%) Net cash per share (RM) P/FCFE (x) EV/EBITDA (x) % change in EPS estimates CIMB/Consensus (x)

2008 2,530.8 544.6 21.5% 397.8 367.7 43.3 31.1% 17.1 40.0 21.3% 18.5 30.0 4.0% 2.1 12.4% 10.8% N/A 30.1 12.2

2009 2,483.1 602.6 24.3% 441.9 412.2 48.5 12.1% 15.3 48.5 21.1% 15.3 38.0 5.1% 2.0 13.2% N/A 0.06 12.1 10.4

2010F 2,470.7 510.1 20.6% 360.6 297.8 35.0 (27.8%) 21.2 35.0 (27.8%) 21.2 34.0 4.6% 2.0 9.3% N/A 0.16 25.9 12.1 N/A 0.88

2011F 2,624.5 666.9 25.4% 526.2 435.3 51.2 46.2% 14.5 51.2 46.2% 14.5 42.0 5.7% 1.9 13.3% N/A 0.40 12.7 9.0 N/A 1.00

2012F 2,680.5 691.2 25.8% 552.9 457.4 53.8 5.1% 13.8 53.8 5.1% 13.8 45.0 6.1% 1.8 13.4% N/A 0.68 11.8 8.3 N/A 0.98

Source: Company, CIMB Research, Bloomberg

Price chart

Corporate profile 8.00

8.2

7.00 6.00

7.7

5.00 7.2

4.00 3.00

6.7

2.00

6.2 5.7 Dec-09

1.00 0.00 May-10 Volume 1m (R.H.Scale)

Source: Bloomberg

Oct-10 Lafarge Malayan Cement Bhd

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.

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[ 118 ]

Financial tables KEY RATIOS

PROFIT & LOSS (RM m, FYE Dec) Revenue Operating expenses EBITDA Depreciation & amortisation EBIT Net interest & invt income Associates’ contribution Exceptional items Others Pretax profit Tax Minority interests Net profit Adj. wt. shares (m) Unadj. year-end shares (m)

2008 2,531 (1,986) 545 (168) 376 (17) 9 30 0 398 (30) (1) 368 850 850

2009 2,483 (1,881) 603 (154) 449 (6) (2) 0 0 442 (36) 6 412 850 850

2010F 2,471 (1,961) 510 (155) 355 3 3 0 0 361 (61) (2) 298 850 850

2011F 2,624 (1,958) 667 (159) 508 5 13 0 0 526 (89) (2) 435 850 850

2012F 2,681 (1,989) 691 (162) 529 9 15 0 0 553 (94) (2) 457 850 850

2011F 1,691 1,209 135 3,035 560 327 313 66 1,266 286 16 118 419 207 314 521 3,336 25 2.50

2012F 1,608 1,209 128 2,945 795 334 320 67 1,516 292 17 121 430 203 307 510 3,492 29 2.69

2008 1,946 1,209 166 3,321 143 435 341 63 982 324 116 134 573 359 312 671 3,032 27 2.15

2009 1,845 1,209 152 3,205 414 309 296 62 1,081 270 146 110 527 216 329 545 3,194 21 2.34

2010F 1,770 1,209 143 3,122 365 308 295 62 1,029 269 14 111 394 211 321 533 3,202 22 2.35

2010F (0.5) (15.3) 14.6 12.1 66.9 17.0 72.8 43.6 45.6 39.8

2011F 6.2 30.8 20.1 16.6 97.0 17.0 61.5 42.2 44.1 38.6

2012F 2.1 3.6 20.6 17.1 102.1 17.0 62.7 43.1 45.0 39.3

(FYE Dec) Cement ASP - domestic (RM/tonne) Export ASP (US$/t) Thermal coal price (US$/tonne) Exchange rate (RM to US$)

2009 270 40.9 70 3.50

2010F 275 41.6 92 3.17

2011F 275 42.8 92 3.11

2012F 275 42.8 92 3.15

12M - FORWARD FD CORE P/E (X)

CASH FLOW (RM m, FYE Dec) Pretax profit Depreciation & non–cash adj. Working capital changes Cash tax paid Others Cash flow from operations Capex Net investments & sale of FA Others Cash flow from investing Debt raised/(repaid) Equity raised/(repaid) Dividends paid Cash interest & others Cash flow from financing Change in cash Change in net cash/(debt) Ending net cash/(debt)

2009 (1.9) 10.6 17.8 16.6 25.8 8.1 58.7 46.8 54.7 43.6

KEY DRIVERS

BALANCE SHEET (RM m, end Dec) Fixed assets Intangible assets Other long-term assets Total non-current assets Cash and equivalents Stocks Trade debtors Other current assets Total current assets Trade creditors Short-term borrowings Other current liabilities Total current liabilities Long-term borrowings Other long-term liabilities Total long-term liabilities Shareholders’ funds Minority interests NTA/share (RM)

2008 16.4 14.4 15.7 14.5 14.2 7.4 51.3 48.8 56.8 42.6

(FYE Dec) Revenue growth (%) EBITDA growth (%) Pretax margins (%) Net profit margins (%) Interest cover (x) Effective tax rates (%) Net dividend payout (%) Debtors turnover (days) Stock turnover (days) Creditors turnover (days)

2008 398 168 (20) (23) (9) 515 (98) (33) 0 (130) (175) 0 (253) 13 (415) (31) 144 (332)

2009 442 154 95 (18) 2 674 (60) 6 0 (54) (100) 0 (255) 12 (343) 278 378 51

2010F 361 155 (1) (66) 0 448 (80) 8 0 (72) (134) 0 (289) 0 (423) (46) 87 139

2011F 526 159 (18) (94) 0 572 (80) 8 0 (72) (3) 0 (302) 0 (305) 196 199 337

2012F 553 162 (7) (99) 1 611 (80) 7 0 (73) (3) 0 (302) (1) (305) 234 236 575

19.0 17.0 15.0 13.0 11.0 9.0 7.0 5.0 Dec-07

Apr-08

Aug-08

Source: Company, CIMB Research, Bloomberg

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Dec-08

Apr-09

Aug-09

Dec-09

Apr-10

Aug-10

Dec-10

Syariah-compliant stock

Latexx Partners

OUTPERFORM

Maintained

RM2.67

@07/12/10

Good things come in small packages

MALAYSIA

2011 OUTLOOK

CIMB Research Report

Target: RM3.85 Rubber Gloves

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: 12-m price range:

RM584m/US$186m 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 Revenue (RM m) EBITDA (RM m) EBITDA margins (%) Pretax profit (RM m) Net profit (RM m) EPS (sen) EPS growth (%) P/E (x) FD core EPS (sen) FD core P/E (x) Gross DPS (sen) Dividend yield (%) P/BV (x) ROE (%) Net gearing (%) Net cash per share (RM) P/FCFE (x) EV/EBITDA (x) % change in EPS estimates CIMB/Consensus (x)

2008 223.3 24.1 10.8% 15.2 15.2 6.9 212.6% 38.5 5.5 48.3 0.0 0.0% 4.8 13.4% 47.0% N/A 115.5 26.6

2009 328.5 66.7 20.3% 51.8 51.3 23.5 237.8% 11.4 18.7 14.3 2.0 0.7% 3.4 35.3% 43.0% N/A 42.5 9.9

2010F 437.4 118.8 27.2% 101.6 81.3 37.1 58.4% 7.2 29.6 9.0 7.5 2.8% 2.4 38.9% 12.5% N/A 10.9 5.2 N/A 1.00

2011F 531.8 140.2 26.4% 119.6 95.7 43.7 17.8% 6.1 34.8 7.7 11.0 4.1% 1.8 33.0% N/A 0.02 9.6 4.1 N/A 1.02

2012F 537.6 154.4 28.7% 130.3 104.2 47.6 8.9% 5.6 37.9 7.0 14.0 5.2% 1.4 27.8% N/A 0.25 6.7 3.4 N/A 0.89

Source: Company, CIMB Research, Bloomberg

Price chart

Corporate profile 1.60 1.40

4.7

1.20 4.2

1.00 3.7

0.80 0.60

3.2

0.40 2.7 2.2 Dec-09

0.20 0.00 May-10 Volume 10m (R.H.Scale)

Source: Bloomberg

Oct-10 Latexx Partners

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.

The S.E.A. Navigator – Malaysia 2011

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Financial tables KEY RATIOS

PROFIT & LOSS (RM m, FYE Dec) Revenue Operating expenses EBITDA Depreciation & amortisation EBIT Net interest & invt income Associates’ contribution Exceptional items Others Pretax profit Tax Minority interests Net profit Adj. wt. shares (m) Unadj. year-end shares (m)

2008 223 (199) 24 (6) 18 (3) 0 0 0 15 0 0 15 219 195

2009 328 (262) 67 (8) 58 (7) 0 0 0 52 0 0 51 219 198

2010F 437 (319) 119 (11) 107 (6) 0 0 0 102 (20) 0 81 219 219

2011F 532 (392) 140 (15) 126 (6) 0 0 0 120 (24) 0 96 219 219

2012F 538 (383) 154 (18) 136 (6) 0 0 0 130 (26) 0 104 219 219

(FYE Dec) Revenue growth (%) EBITDA growth (%) Pretax margins (%) Net profit margins (%) Interest cover (x) Effective tax rates (%) Net dividend payout (%) Debtors turnover (days) Stock turnover (days) Creditors turnover (days)

2011F 254 20 6 280 114 64 90 0 268 106 43 0 149 67 1 68 331 0 1.42

2012F 289 20 6 315 177 65 91 0 333 108 44 0 151 77 2 79 418 0 1.82

(FYE Dec) Production capacity (m pcs p.a) Capacity utilisation (%) ASP (US$) per 1,000 pieces Exchange rate (RM to US$) Natural rubber price (RM /kilogram) Nitrile latex prices (US$/mt)

2008 119 20 7 146 10 36 44 0 90 48 37 0 85 30 1 31 121 0 0.46

2009 173 20 21 215 19 38 59 0 116 68 43 0 111 50 1 51 170 0 0.68

2010F 215 20 6 242 69 52 74 0 196 87 43 0 130 57 1 59 249 0 1.04

2010F 33.2 78.2 23.2 18.6 17.2 20.0 15.1 55.5 37.9 64.9

2011F 21.6 18.0 22.5 18.0 18.4 20.0 18.9 56.5 39.9 66.5

2012F 1.1 10.1 24.2 19.4 18.2 20.0 22.0 61.7 43.6 72.6

2009 4,500 84.8% 24.50 3.43 4.50 1,014

2010F 8,000 70.0% 31.00 3.02 8.20 1,300

2011F 9,000 70.0% 29.45 3.05 8.00 1,381

2012F 9,000 70.0% 27.98 3.05 7.55 1,503

12M - FORWARD FD CORE P/E (X)

CASH FLOW (RM m, FYE Dec) Pretax profit Depreciation & non–cash adj. Working capital changes Cash tax paid Others Cash flow from operations Capex Net investments & sale of FA Others Cash flow from investing Debt raised/(repaid) Equity raised/(repaid) Dividends paid Cash interest & others Cash flow from financing Change in cash Change in net cash/(debt) Ending net cash/(debt)

2009 47.1 176.9 15.8 15.6 8.8 0.9 6.4 57.1 41.4 64.3

KEY DRIVERS

BALANCE SHEET (RM m, end Dec) Fixed assets Intangible assets Other long-term assets Total non-current assets Cash and equivalents Stocks Trade debtors Other current assets Total current assets Trade creditors Short-term borrowings Other current liabilities Total current liabilities Long-term borrowings Other long-term liabilities Total long-term liabilities Shareholders’ funds Minority interests NTA/share (RM)

2008 48.1 130.4 6.8 6.8 5.6 0.1 0.0 65.1 52.3 81.8

2008 15 6 (23) 0 2 (1) (23) 0 0 (23) 29 0 0 (21) 8 (16) (44) (57)

2009 52 8 1 0 2 63 (48) 1 0 (47) (2) 2 (4) (30) (35) (18) (16) (73)

2010F 102 12 (10) 0 (8) 95 (50) 0 0 (50) 8 0 (8) 5 4 50 42 (31)

2011F 120 15 (8) 20 (45) 101 (50) 0 0 (50) 10 0 (12) (4) (6) 45 35 4

2012F 130 18 (1) 24 (46) 126 (50) 0 0 (50) 12 0 (20) (5) (13) 63 51 56

11.0

9.0

7.0

5.0

3.0

1.0 Dec-07

Apr-08

Aug-08

Source: Company, CIMB Research, Bloomberg

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Dec-08

Apr-09

Aug-09

Dec-09

Apr-10

Aug-10

Dec-10

Malayan Banking Bhd

OUTPERFORM

Maintained

RM8.41

@07/12/10

Recharging BII

MALAYSIA

2011 OUTLOOK

CIMB Research Report

Target: RM10.50 Banks

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 5.9 Berhad

FYE Jun Net interest income (RM m) Non-interest income (RM m) Total income (RM m) Loan loss provisions (RM m) Pretax profit (RM m) Net profit (RM m) EPS (sen) EPS growth (%) P/E (x) Core EPS (sen) Core EPS growth (%) Core P/E (x) Gross DPS (sen) Dividend yield (%) P/BV (x) ROE (%) % change in EPS estimates CIMB/Consensus (x)

2009 5,919.5 4,599.5 10,519.0 (1,698.8) 1,674.3 691.9 11.1 (80%) 76.0 34.9 (42%) 24.1 8.0 1.0% 2.4 3.1%

2010 6,770.9 6,100.8 12,871.7 (1,188.0) 5,370.4 3,818.2 53.8 387% 15.6 53.8 54% 15.6 55.0 6.5% 2.1 14.5%

2011F 7,670.2 4,710.2 14,117.6 (1,393.5) 6,166.7 4,532.5 63.9 19% 13.2 63.9 19% 13.2 59.6 7.1% 2.1 15.9% 1.05

2012F 8,401.6 4,847.0 15,132.5 (1,136.9) 6,917.4 5,084.3 71.7 12% 11.7 71.7 12% 11.7 66.9 8.0% 1.9 16.8% 1.05

2013F 9,211.7 5,288.3 16,541.3 (1,100.1) 7,795.1 5,729.4 80.8 13% 10.4 80.8 13% 10.4 75.4 9.0% 1.8 17.6% 1.08

Source: Company, CIMB Research, Bloomberg

Price chart

Corporate profile

9.8 3.00 9.3 2.50 8.8 2.00

8.3

1.50

7.8

1.00

7.3

0.50

6.8 6.3 De c-09

0.00 Ma y-10 Volume 10m (R.H.S ca le )

Source: Bloomberg

Oct-10 Ma la ya n Ba nking Bhd

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.

The S.E.A. Navigator – Malaysia 2011

[ 122 ]

Financial tables KEY RATIOS

PROFIT & LOSS (RM m, FYE Jun) Net interest income Non-interest income Other income Total income Overhead expenses Pre-provision profit Loan loss provisions Associates’ contribution Exceptional items Others Pretax profit Tax Minority interests Net profit Adj. wt. shares (m) Unadj. year-end shares (m)

2009 5,920 4,600 0 10,519 (5,559) 4,960 (1,699) 100 (1,686) 0 1,674 (924) (59) 692 6,255 7,093

2010 6,771 6,101 0 12,872 (6,412) 6,460 (1,188) 99 0 0 5,370 (1,402) (150) 3,818 7,093 7,093

2011F 7,670 4,710 1,737 14,118 (6,668) 7,450 (1,393) 111 0 0 6,167 (1,542) (93) 4,533 7,093 7,093

2012F 8,402 4,847 1,884 15,133 (7,202) 7,930 (1,137) 124 0 0 6,917 (1,729) (104) 5,084 7,093 7,093

2013F 9,212 5,288 2,041 16,541 (7,785) 8,756 (1,100) 139 0 0 7,795 (1,949) (117) 5,729 7,093 7,093

2009 30,254 50,340 80,594 185,783 8,361 1,422 4,374 30,205 230,145 310,739 212,599 30,241 16,232 25,899 284,971 24,899 869 3.51

2010 37,995 46,534 84,529 205,555 8,943 1,405 4,481 31,787 252,171 336,700 236,910 24,604 16,873 29,648 308,035 27,877 788 3.93

2011F 37,859 48,098 85,957 229,257 6,504 1,489 4,481 33,447 275,179 361,135 245,433 35,441 16,873 33,474 331,220 29,088 827 4.10

2012F 39,374 44,621 83,995 254,086 5,311 1,522 4,481 35,965 301,365 385,361 262,268 38,412 16,873 35,587 353,140 31,353 868 4.42

2013F 39,120 42,113 81,233 279,169 5,342 1,546 4,481 38,159 328,696 409,929 278,821 41,706 16,873 37,730 375,129 33,889 912 4.78

2009 10.0 (6.7) (59.0) 2.31 52.8 55.2 54.2

2010 22.4 30.2 220.8 2.36 49.8 26.1 76.6

2011F 9.7 15.3 14.8 2.47 47.2 25.0 70.0

2012F 7.2 6.5 12.2 2.53 47.6 25.0 70.0

2013F 9.3 10.4 12.7 2.60 47.1 25.0 70.0

2009 12.9 13.6 87.4 3.5 1.5 112.9 2.0 15.0

2010 10.6 11.4 86.8 2.9 1.1 124.5 1.8 15.2

2011F 11.5 3.6 93.4 2.9 1.1 124.5 1.8 15.2

2012F 2013F 10.8 9.9 6.9 6.3 96.9 100.1 2.9 2.9 1.2 1.2 120.5 118.9 1.8 1.8 15.5 15.8

KEY DRIVERS

BALANCE SHEET (RM m, end Jun) Cash & deposits with FIs Marketable securities Total current assets Net loans & advances Long-term investments Fixed assets Intangible assets Other long-term assets Total long-term assets Total assets Customer deposits Deposits of other FIs Subordinated debts Other long-term liabilities Total liabilities Shareholders’ funds Minority interests BV/share (RM)

(FYE Jun) Total income growth (%) Pre-provision profit growth (%) Pretax growth (%) Net interest margin (%) Cost-income ratio (%) Effective tax rates (%) Net dividend payout (%)

(FYE Jun) Loan growth (%) Deposit growth (%) Loan-deposit ratio (%) Gross NPL (%) Net NPL (%) Loan loss reserve (%) GP ratio (%) RWCR (%)

12M - FORWARD FD CORE P/E (X)

CURRENT P/BV (X) 2.60

19.0

2.40 17.0

2.20 2.00

15.0

1.80

13.0

1.60 11.0

1.40 1.20

9.0

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

7.0 Dec-07

Apr-08

Aug-08

Source: Company, CIMB Research, Bloomberg

The S.E.A. Navigator – Malaysia 2011

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Dec-08

Apr-09

Aug-09

Dec-09

Apr-10

Aug-10

Dec-10

Malaysia Airports Holdings Bhd

OUTPERFORM

Maintained

RM6.27

@07/12/10

Still on a high plane

MALAYSIA

2011 OUTLOOK

CIMB Research Report

Target: RM7.50 Airports

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 nonaeronautical 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 3940% 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 Revenue (RM m) EBITDA (RM m) EBITDA margins (%) Pretax profit (RM m) Net profit (RM m) EPS (sen) EPS growth (%) P/E (x) Core EPS (sen) Core EPS growth (%) Gross DPS (sen) Dividend yield (%) P/BV (x) ROE (%) Net gearing (%) Net cash per share (RM) P/FCFE (x) EV/EBITDA (x) % change in EPS estimates CIMB/Consensus (x)

2008 1,435.0 534.6 37.3% 422.2 298.3 27.1 2.8% 23.1 24.5 (7.0%) 18.6 3.0% 2.2 9.7% N/A 0.61 50.4 11.5

2009 1,637.1 603.2 36.8% 480.1 379.3 34.5 27.1% 18.2 31.7 29.2% 22.9 3.7% 2.0 11.6% 7.1% N/A (29.3) 11.6

2010F 1,824.2 711.3 39.0% 507.9 375.2 34.1 (1.1%) 18.4 34.1 7.7% 22.9 3.7% 2.0 11.0% 35.6% N/A 24.0 11.3 1.04

2011F 1,917.0 761.4 39.7% 553.3 414.3 37.7 10.4% 16.6 37.7 10.4% 25.1 4.0% 1.9 11.6% 72.4% N/A 4,333.9 12.4 0.97

2012F 2,187.8 857.2 39.2% 520.3 389.6 35.4 (6.0%) 17.7 35.4 (6.0%) 25.1 4.0% 1.8 10.3% 72.4% N/A 22.9 11.2 0.95

Source: Company, CIMB Research, Bloomberg

Price chart

Corporate profile

6.5

3.50

6.0

3.00

5.5

2.50 2.00

5.0

1.50 4.5

1.00

4.0

0.50

3.5 De c-09

0.00 Ma y-10

Volume 1m (R.H.S ca le )

Source: Bloomberg

Oct-10 Ma la ys ia Airports Holdings Bhd

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. The S.E.A. Navigator – Malaysia 2011

[ 124 ]

Financial tables KEY RATIOS

PROFIT & LOSS (RM m, FYE Dec) Revenue Operating expenses EBITDA Depreciation & amortisation EBIT Net interest & invt income Associates’ contribution Exceptional items Others Pretax profit Tax Minority interests Net profit Adj. wt. shares (m) Unadj. year-end shares (m)

2008 1,435 (900) 535 (155) 380 0 2 40 0 422 (123) (1) 298 1,100 1,100

2009 1,637 (1,034) 603 (150) 453 (14) 3 39 0 480 (100) (1) 379 1,100 1,100

2010F 1,824 (1,113) 711 (159) 553 (25) (20) 0 0 508 (132) (1) 375 1,100 1,100

2011F 1,917 (1,156) 761 (170) 592 (24) (15) 0 0 553 (138) (1) 414 1,100 1,100

2012F 2,188 (1,331) 857 (226) 631 (101) (10) 0 0 520 (130) (1) 390 1,100 1,100

2008 1,911 1,188 486 3,585 677 58 668 4 1,407 503 3 869 1,375 0 434 435 3,179 4 1.81

2009 1,951 1,758 547 4,256 268 60 634 0 964 638 0 47 685 508 653 1,161 3,370 5 1.46

2010F 2,832 1,715 547 5,094 244 314 707 1 1,265 711 0 30 741 1,482 653 2,136 3,477 5 1.60

2011F 4,509 1,672 547 6,727 38 330 743 1 1,111 747 0 40 787 2,708 653 3,361 3,684 6 1.83

2012F 4,824 1,628 547 6,999 133 376 848 1 1,357 853 0 42 895 2,935 653 3,589 3,866 7 2.03

2008 422 155 45 (128) (53) 442 (282) (206) 4 (485) 180 0 (145) 0 35 (8) (188) 674

2009 480 150 (296) (97) (544) (306) (326) 5 (99) (420) 505 0 (186) (14) 305 (421) (926) (240)

2010F 508 159 (253) (100) (26) 288 (950) 0 0 (950) 975 0 (312) (25) 638 (24) (999) (1,239)

2011F 553 170 (16) (132) (76) 499 (1,700) 0 0 (1,700) 1,226 0 (207) (24) 995 (206) (1,431) (2,670)

2012F 520 226 (46) (138) (15) 547 (450) 0 0 (450) 227 0 (207) (22) (2) 94 (133) (2,803)

2009 14.1 12.8 29.3 23.2 31.9 20.9 49.1 145.2 13.2 127.2

2010F 11.4 17.9 27.8 20.6 22.3 26.0 50.4 134.2 37.4 134.9

2011F 5.1 7.0 28.9 21.6 25.1 25.0 50.0 138.0 61.2 138.8

2012F 14.1 12.6 23.8 17.8 6.2 25.0 53.2 132.7 58.9 133.4

(FYE Dec) Int'l passenger traffic growth (%) Domestic pax traffic grwth (%) Int'l pax service charge (RM) Dom pax serv charge (RM)

2009 9.6% 7.1% 51 9

2010F 10.2% 9.9% 51 9

2011F 8.0% 8.0% 51 9

2012F 6.0% 6.0% 51 9

12M - FORWARD FD CORE P/E (X)

CASH FLOW (RM m, FYE Dec) Pretax profit Depreciation & non–cash adj. Working capital changes Cash tax paid Others Cash flow from operations Capex Net investments & sale of FA Others Cash flow from investing Debt raised/(repaid) Equity raised/(repaid) Dividends paid Cash interest & others Cash flow from financing Change in cash Change in net cash/(debt) Ending net cash/(debt)

2008 4.0 (2.5) 29.4 20.8 1,346.2 29.2 49.9 131.9 14.6 78.6

KEY DRIVERS

BALANCE SHEET (RM m, end Dec) Fixed assets Intangible assets Other long-term assets Total non-current assets Cash and equivalents Stocks Trade debtors Other current assets Total current assets Trade creditors Short-term borrowings Other current liabilities Total current liabilities Long-term borrowings Other long-term liabilities Total long-term liabilities Shareholders’ funds Minority interests NTA/share (RM)

(FYE Dec) Revenue growth (%) EBITDA growth (%) Pretax margins (%) Net profit margins (%) Interest cover (x) Effective tax rates (%) Net dividend payout (%) Debtors turnover (days) Stock turnover (days) Creditors turnover (days)

16.0

14.0

12.0

10.0

8.0

6.0 Dec-07

Apr-08

Aug-08

Source: Company, CIMB Research, Bloomberg

The S.E.A. Navigator – Malaysia 2011

[ 125 ]

Dec-08

Apr-09

Aug-09

Dec-09

Apr-10

Aug-10

Dec-10

Malaysian Airline System Bhd

OUTPERFORM

Maintained

RM2.07

@07/12/10

Radical transformation on the cards

MALAYSIA

2011 OUTLOOK

CIMB Research Report

Target: RM3.00 Airlines

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 Revenue (RM m) EBITDA (RM m) EBITDA margins (%) Pretax profit (RM m) Net profit (RM m) EPS (sen) EPS growth (%) P/E (x) Core EPS (sen) Core EPS growth (%) Core P/E (x) FD core EPS (sen) FD core P/E (x) Gross DPS (sen) Dividend yield (%) P/BV (x) ROE (%) Net gearing (%) Net cash per share (RM) P/FCFE (x) EV/EBITDA (x) % change in EPS estimates CIMB/Consensus (x)

2008 15,034.2 344.0 2.3% 302.7 244.4 11.9 (74.9%) 17.4 6.8 (86.0%) 30.4 7.0 29.7 0.0 0.0% 1.0 6.0% N/A 1.56 (7.2) 3.1

2009 11,309.8 (375.9) (3.3%) 462.0 490.2 23.9 100.6% 8.7 (111.8) (1,739.1%) nm (104.1) nm 0.0 0.0% 5.8 19.9% N/A 0.31 (2.6) (9.7)

2010F 12,633.7 242.0 1.9% 106.3 92.5 3.0 (87.6%) 70.0 (29.0) 74.1% nm (27.3) nm 0.0 0.0% 2.0 4.4% 27.4% N/A (2.3) 30.8 N/A (4.43)

2011F 13,827.6 1,386.1 10.0% 722.9 708.8 21.2 617.3% 9.8 17.3 159.8% 11.9 17.1 12.1 0.0 0.0% 1.6 18.4% 37.1% N/A 22.1 6.1 N/A 1.53

2012F 15,561.4 2,526.9 16.2% 1,751.8 1,734.1 51.9 144.7% 4.0 51.9 199.2% 4.0 50.3 4.1 0.0 0.0% 1.2 34.2% 14.0% N/A 4.4 3.1 N/A 2.26

Source: Company, CIMB Research, Bloomberg

Price chart

Corporate profile

2.7 2.00 2.5 1.50 2.3 1.00

2.1

0.50

1.9 1.7 De c-09

0.00 Ma y-10

Volume 10m (R.H.S ca le )

Source: Bloomberg

Oct-10 Ma la ys ia n Airline S ys te m Bhd

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.

The S.E.A. Navigator – Malaysia 2011

[ 126 ]

Financial tables KEY RATIOS

PROFIT & LOSS (RM m, FYE Dec) Revenue Operating expenses EBITDA Depreciation & amortisation EBIT Net interest & invt income Associates’ contribution Exceptional items Others Pretax profit Tax Minority interests Net profit Adj. wt. shares (m) Unadj. year-end shares (m)

2008 2009 2010F 15,034 11,310 12,634 (14,690) (11,686) (12,392) 344 (376) 242 (328) (316) (366) 16 (692) (124) 162 (25) (94) 20 12 10 104 1,167 314 0 0 0 303 462 106 (57) 31 (11) (3) (3) (1) 490 92 244 2,053 2,053 3,127 2,054 2,053 3,342

2011F 2012F (FYE Dec) 13,828 15,561 Revenue growth (%) (12,441) (13,035) EBITDA growth (%) 1,386 2,527 Pretax margins (%) (542) (613) Net profit margins (%) 844 1,913 Interest cover (x) (146) (172) Effective tax rates (%) 10 10 Net dividend payout (%) 15 0 Debtors turnover (days) 0 0 Stock turnover (days) 723 1,752 Creditors turnover (days) (11) (15) (3) (3) 709 1,734 3,342 3,342 3,342 3,342

2008 2,465 108 571 3,144 4,617 380 1,932 0 6,928 2,409 433 2,045 4,887 986 2 987 4,186 11 1.99

2009 3,044 144 545 3,733 2,952 385 1,447 0 4,785 2,236 319 3,214 5,769 2,001 0 2,001 736 12 0.29

2010F 6,710 144 555 7,409 2,817 408 1,617 0 4,842 2,372 319 2,584 5,274 3,461 0 3,461 3,502 15 1.00

2011F 7,745 144 565 8,454 3,131 410 1,770 0 5,310 2,381 319 2,455 5,154 4,381 0 4,381 4,211 18 1.22

2012F 8,612 144 575 9,331 4,710 429 1,992 0 7,131 2,495 319 2,455 5,268 5,229 0 5,229 5,945 21 1.74

2010F 11.7 164.4 0.8 0.7 (0.9) 10.2 0.0 44.3 11.5 66.6

2011F 9.4 472.8 5.2 5.1 4.4 1.5 0.0 44.7 10.8 62.7

2012F 12.5 82.3 11.3 11.1 8.3 0.8 0.0 44.1 9.8 57.2

(FYE Dec) Passenger fleet size (# of planes) Av. seat km (ASK, yoy chg %) Rev. psg km (RPK, yoy chg %) Load factor (%) Passenger yield per RPK (sen) Jet fuel price (US$/barrel) Fuel cost per ASK (sen) Non-fuel cost per ASK (sen)

2009 86 -9.5% -8.3% 68.8% 25.79 106.06 7.31 17.12

2010F 84 3.3% 14.3% 76.1% 25.03 107.00 8.85 16.23

2011F 84 5.0% 2.5% 74.4% 27.26 102.64 8.33 15.65

2012F 79 5.0% 5.0% 74.4% 29.66 105.00 8.35 15.58

12M - FORWARD FD CORE P/E (X)

CASH FLOW (RM m, FYE Dec) Pretax profit Depreciation & non–cash adj. Working capital changes Cash tax paid Others Cash flow from operations Capex Net investments & sale of FA Others Cash flow from investing Debt raised/(repaid) Equity raised/(repaid) Dividends paid Cash interest & others Cash flow from financing Change in cash Change in net cash/(debt) Ending net cash/(debt)

2009 (24.8) (209.3) 4.1 4.3 (8.3) N/A 0.0 54.5 12.3 75.0

KEY DRIVERS

BALANCE SHEET (RM m, end Dec) Fixed assets Intangible assets Other long-term assets Total non-current assets Cash and equivalents Stocks Trade debtors Other current assets Total current assets Trade creditors Short-term borrowings Other current liabilities Total current liabilities Long-term borrowings Other long-term liabilities Total long-term liabilities Shareholders’ funds Minority interests NTA/share (RM)

2008 0.3 (70.7) 2.0 1.6 0.3 18.8 0.0 36.0 9.0 52.3

2008 303 328 (1,213) (15) (27) (624) (764) 41 214 (509) 559 0 (56) (14) 490 (643) (1,202) 3,197

2009 462 316 307 (5) (2,677) (1,597) (914) (22) 54 (882) 901 0 (2) (83) 815 (1,664) (2,565) 633

2010F 106 366 (58) (11) (503) (99) (4,032) 0 0 (4,032) 1,460 2,674 0 (137) 3,996 (135) (1,595) (962)

2011F 723 542 (145) (11) 52 1,161 (1,576) 0 0 (1,576) 920 0 0 (191) 729 313 (607) (1,569)

2012F 1,752 613 (128) (15) 221 2,443 (1,480) 0 0 (1,480) 848 0 0 (231) 617 1,580 732 (837)

44.0 34.0 24.0 14.0 4.0 -6.0 -16.0 -26.0 -36.0 -46.0 Dec-07

Apr-08

Aug-08

Source: Company, CIMB Research, Bloomberg

The S.E.A. Navigator – Malaysia 2011

[ 127 ]

Dec-08

Apr-09

Aug-09

Dec-09

Apr-10

Aug-10

Dec-10

Syariah-compliant stock

Malaysian Bulk Carriers Bhd

UNDERPERFORM

Maintained

RM2.97

@07/12/10

Avoid the bulk and tanker space

MALAYSIA

2011 OUTLOOK

CIMB Research Report

Target: RM2.80 Dry Bulk Shipping

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 Revenue (RM m) EBITDA (RM m) EBITDA margins (%) Pretax profit (RM m) Net profit (RM m) EPS (sen) EPS growth (%) P/E (x) Core EPS (sen) Core EPS growth (%) Core P/E (x) Gross DPS (sen) Dividend yield (%) P/BV (x) ROE (%) Net gearing (%) Net cash per share (RM) P/FCFE (x) EV/EBITDA (x) % change in EPS estimates CIMB/Consensus (x)

2008 721.1 341.9 47.4% 525.8 460.9 46.1 (15.4%) 6.4 27.9 (21.5%) 10.7 51.4 17.3% 1.6 25.8% N/A 0.44 18.0 5.3

2009 303.7 105.3 34.7% 260.1 255.7 25.6 (44.5%) 11.6 18.5 (33.8%) 16.1 20.3 6.8% 1.7 13.9% N/A 0.11 166.9 18.6

2010F 427.3 222.9 52.2% 220.4 212.8 21.3 (16.8%) 14.0 21.3 15.2% 14.0 13.5 4.6% 1.6 11.7% N/A 0.08 16.4 8.8 N/A 1.01

2011F 436.2 221.1 50.7% 220.6 214.3 21.4 0.7% 13.9 21.4 0.7% 13.9 16.2 5.5% 1.5 11.2% 1.2% N/A (416.4) 9.2 N/A 0.94

2012F 604.5 330.8 54.7% 326.7 317.7 31.8 48.3% 9.3 31.8 48.3% 9.3 27.0 9.1% 1.4 15.4% 1.8% N/A 28.6 6.1 N/A 1.20

Source: Company, CIMB Research, Bloomberg

Price chart

Corporate profile

3.5 4.50

3.4

4.00

3.3

3.50

3.2

3.00

3.1

2.50

3.0

2.00

2.9

1.50

2.8

1.00

2.7

0.50

2.6 De c-09

0.00 Ma y-10

Volume 1m (R.H.S c a le )

Source: Bloomberg

Oct-10 Ma la ys ia n Bulk Ca rrie rs Bhd

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.

The S.E.A. Navigator – Malaysia 2011

[ 128 ]

Financial tables KEY RATIOS

PROFIT & LOSS (RM m, FYE Dec) Revenue Operating expenses EBITDA Depreciation & amortisation EBIT Net interest & invt income Associates’ contribution Exceptional items Others Pretax profit Tax Minority interests Net profit Adj. wt. shares (m) Unadj. year-end shares (m)

2008 721 (379) 342 (30) 312 9 21 184 0 526 (4) (61) 461 1,000 1,000

2009 304 (198) 105 (32) 73 7 97 71 12 260 (1) (4) 256 1,000 1,000

2010F 427 (204) 223 (33) 190 (8) 38 0 0 220 0 (8) 213 1,000 1,000

2011F 436 (215) 221 (39) 183 (4) 42 0 0 221 0 (6) 214 1,000 1,000

2012F 605 (274) 331 (48) 283 (4) 48 0 0 327 0 (9) 318 1,000 1,000

(FYE Dec) Revenue growth (%) EBITDA growth (%) Pretax margins (%) Net profit margins (%) Interest cover (x) Effective tax rates (%) Net dividend payout (%) Debtors turnover (days) Stock turnover (days) Creditors turnover (days)

2011F 865 0 1,054 1,919 385 7 42 199 632 88 8 1 97 401 0 401 1,964 88 1.96

2012F 1,046 0 1,102 2,148 368 9 58 199 634 112 8 1 121 401 0 401 2,162 97 2.16

(FYE Dec) Fleet size (number of vessels) Baltic Dry Index (yoy change %) Bulk rates (US$/day) Clean tanker TCE rates (US$/day)

2008 600 0 859 1,459 806 7 26 186 1,025 90 7 4 101 357 0 357 1,884 142 1.88

2009 628 0 974 1,602 460 7 29 199 695 82 8 1 90 345 0 345 1,787 74 1.79

2010F 676 0 1,012 1,688 492 7 41 199 738 84 8 1 93 401 0 401 1,850 82 1.85

2010F 40.7 111.6 51.6 49.8 25.0 0.0 47.0 29.7 5.9 70.7

2011F 2.1 (0.8) 50.6 49.1 22.3 0.0 56.0 34.4 6.0 72.1

2012F 38.6 49.6 54.0 52.6 34.6 0.0 62.9 29.9 5.1 60.6

2009 15 -59.0% 19,076 15,975

2010F 17 7.6% 26,706 12,780

2011F 2012F 20 24 -17.9% -13.0% 25,371 29,177 13,419 14,761

12M - FORWARD FD CORE P/E (X)

CASH FLOW (RM m, FYE Dec) Pretax profit Depreciation & non–cash adj. Working capital changes Cash tax paid Others Cash flow from operations Capex Net investments & sale of FA Others Cash flow from investing Debt raised/(repaid) Equity raised/(repaid) Dividends paid Cash interest & others Cash flow from financing Change in cash Change in net cash/(debt) Ending net cash/(debt)

2009 (57.9) (69.2) 85.6 84.2 5.2 0.2 58.7 33.0 8.2 103.2

KEY DRIVERS

BALANCE SHEET (RM m, end Dec) Fixed assets Intangible assets Other long-term assets Total non-current assets Cash and equivalents Stocks Trade debtors Other current assets Total current assets Trade creditors Short-term borrowings Other current liabilities Total current liabilities Long-term borrowings Other long-term liabilities Total long-term liabilities Shareholders’ funds Minority interests NTA/share (RM)

2008 18.6 (12.6) 72.9 63.9 11.5 0.8 82.6 17.4 3.4 38.2

2008 526 30 46 (4) (161) 437 (40) (243) 41 (241) 15 0 (386) (45) (417) (221) (236) 442

2009 260 32 (12) (1) (155) 125 (83) 14 (18) (87) (11) 0 (363) (9) (383) (345) (334) 108

2010F 220 33 (9) 0 (30) 213 (81) 0 0 (81) 56 0 (150) (8) (101) 31 (25) 83

2011F 221 39 3 0 (38) 224 (228) 0 0 (228) 0 0 (100) (4) (104) (107) (107) (24)

2012F 327 48 6 0 (44) 337 (229) 0 0 (229) 0 0 (120) (4) (124) (16) (16) (41)

18.0 17.0 16.0 15.0 14.0 13.0 12.0 11.0 Dec-07

Apr-08

Aug-08

Source: Company, CIMB Research, Bloomberg

The S.E.A. Navigator – Malaysia 2011

[ 129 ]

Dec-08

Apr-09

Aug-09

Dec-09

Apr-10

Aug-10

Dec-10

Syariah-compliant stock

Malaysian Pacific Industries Bhd

OUTPERFORM

Maintained

RM5.45

@07/12/10

A more muted outlook

MALAYSIA

2011 OUTLOOK

CIMB Research Report

Target: RM6.90 Semiconductor

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 Revenue (RM m) EBITDA (RM m) EBITDA margins (%) Pretax profit (RM m) Net profit (RM m) EPS (sen) EPS growth (%) P/E (x) Core EPS (sen) Core EPS growth (%) Core P/E (x) Gross DPS (sen) Dividend yield (%) P/BV (x) ROE (%) Net gearing (%) P/FCFE (x) EV/EBITDA (x) % change in EPS estimates CIMB/Consensus (x)

2009 1,150.6 258.1 22.4% (61.7) (39.9) (20.5) (135.6%) nm 16.0 (74.6%) 34.2 26.7 4.9% 1.5 (5.4%) 20.6% 55.2 5.7

2010 1,386.2 355.1 25.6% 85.0 105.4 54.1 364.2% 10.1 54.0 238.8% 10.1 33.3 6.1% 1.4 14.7% 9.1% 8.5 3.9

2011F 1,441.7 338.8 23.5% 123.1 94.2 48.3 (10.7%) 11.3 48.3 (10.6%) 11.3 33.3 6.1% 1.4 12.5% 12.1% 20.4 4.2 N/A 0.89

2012F 1,614.6 387.5 24.0% 165.3 123.5 63.3 31.1% 8.6 63.3 31.1% 8.6 40.0 7.3% 1.3 15.6% 7.9% 7.5 3.6 N/A 1.11

2013F 1,776.1 435.1 24.5% 220.7 164.9 84.6 33.6% 6.4 84.6 33.6% 6.4 50.0 9.2% 1.2 19.4% 2.5% 5.7 3.2 N/A 1.52

Source: Company, CIMB Research, Bloomberg

Price chart

Corporate profile

7.9

1.20

7.4

1.00

6.9

0.80

6.4

0.60

5.9

0.40

5.4

0.20

4.9 De c-09

0.00 Ma y-10

Volume 1m (R.H.S ca le )

Source: Bloomberg

Oct-10 Ma la ys ia n P a cific Indus trie s Bhd

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.

The S.E.A. Navigator – Malaysia 2011

[ 130 ]

Financial tables KEY RATIOS

PROFIT & LOSS (RM m, FYE Jun) Revenue Operating expenses EBITDA Depreciation & amortisation EBIT Net interest & invt income Associates’ contribution Exceptional items Others Pretax profit Tax Minority interests Net profit Adj. wt. shares (m) Unadj. year-end shares (m)

2009 1,151 (893) 258 (241) 18 (8) 0 (71) 0 (62) (4) 26 (40) 195 195

2010 1,386 (1,031) 355 (214) 141 (5) 0 (52) 0 85 41 (20) 105 195 195

2011F 1,442 (1,103) 339 (208) 131 (8) 0 0 0 123 (12) (17) 94 195 195

2012F 1,615 (1,227) 388 (217) 171 (6) 0 0 0 165 (17) (25) 123 195 195

2013F 1,776 (1,341) 435 (209) 226 (5) 0 0 0 221 (22) (34) 165 195 195

2009 1,051 12 20 1,084 77 72 166 0 316 149 193 0 343 74 63 137 699 221 3.52

2010 962 12 20 994 129 88 228 0 445 241 130 4 375 86 16 101 740 223 3.73

2011F 1,054 12 20 1,086 94 94 238 0 426 258 130 4 392 86 25 111 769 239 3.88

2012F 1,087 12 20 1,120 131 104 266 0 502 287 130 7 424 86 32 118 814 265 4.11

2013F (FYE Jun) 1,128 Global semicon sales (US$bn) 12 EBITDA Margin (%) 20 1,160 186 114 293 0 593 313 130 9 452 86 35 120 882 298 4.46

2011F 4.0 (4.6) 8.5 6.5 N/A 10.0 51.8 59.0 23.0 63.1

2012F 12.0 14.4 10.2 7.6 N/A 10.0 47.4 56.9 22.4 61.5

2013F 10.0 12.3 12.4 9.3 N/A 10.0 44.3 57.4 22.5 61.6

2010 265 25.6%

2011F 310 23.5%

2012F 325 24.0%

2013F 342 24.5%

12M - FORWARD FD CORE P/E (X)

CASH FLOW (RM m, FYE Jun) Pretax profit Depreciation & non–cash adj. Working capital changes Cash tax paid Others Cash flow from operations Capex Net investments & sale of FA Others Cash flow from investing Debt raised/(repaid) Equity raised/(repaid) Dividends paid Cash interest & others Cash flow from financing Change in cash Change in net cash/(debt) Ending net cash/(debt)

2010 20.5 37.6 6.1 7.6 N/A N/A 46.2 52.0 21.0 51.4

KEY DRIVERS

BALANCE SHEET (RM m, end Jun) Fixed assets Intangible assets Other long-term assets Total non-current assets Cash and equivalents Stocks Trade debtors Other current assets Total current assets Trade creditors Short-term borrowings Other current liabilities Total current liabilities Long-term borrowings Other long-term liabilities Total long-term liabilities Shareholders’ funds Minority interests NTA/share (RM)

2009 (25.2) (38.0) (5.4) (3.5) N/A N/A N/A 62.2 28.1 55.6

(FYE Jun) Revenue growth (%) EBITDA growth (%) Pretax margins (%) Net profit margins (%) Interest cover (x) Effective tax rates (%) Net dividend payout (%) Debtors turnover (days) Stock turnover (days) Creditors turnover (days)

2009 (62) 241 41 (4) 16 232 (124) 0 0 (124) (82) 0 (52) (8) (142) (33) 48 (190)

2010 85 214 13 41 0 353 (189) 0 0 (189) (44) 0 (67) 6 (105) 58 102 (87)

2011F 123 208 2 (12) 40 360 (300) 0 0 (300) 0 0 (87) (8) (95) (35) (35) (122)

2012F 165 217 (10) (17) 41 396 (250) 0 0 (250) 0 0 (104) (6) (110) 37 37 (85)

2013F 221 209 (10) (22) 42 440 (250) 0 0 (250) 0 0 (130) (5) (135) 55 55 (30)

43.0 38.0 33.0 28.0 23.0 18.0 13.0 8.0 Dec-07

Apr-08

Aug-08

Source: Company, CIMB Research, Bloomberg

The S.E.A. Navigator – Malaysia 2011

[ 131 ]

Dec-08

Apr-09

Aug-09

Dec-09

Apr-10

Aug-10

Dec-10

Syariah-compliant stock

Malaysian Resources Corp Bhd

TRADING BUY

Maintained

RM2.01

@07/12/10

The urge to merge

MALAYSIA

2011 OUTLOOK

CIMB Research Report

Target: RM2.53 Construction

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 Revenue (RM m) EBITDA (RM m) EBITDA margins (%) Pretax profit (RM m) Net profit (RM m) EPS (sen) EPS growth (%) P/E (x) Core EPS (sen) Core EPS growth (%) Core P/E (x) Gross DPS (sen) Dividend yield (%) P/BV (x) ROE (%) Net gearing (%) P/FCFE (x) EV/EBITDA (x) % change in EPS estimates CIMB/Consensus (x)

2008 788.6 3.8 0.5% (42.1) (56.6) (6.2) (191.6%) nm (3.4) (149.5%) nm 0.0 0.0% 2.7 (8.2%) 39.3% 14.9 504.9

2009 921.6 45.3 4.9% 46.5 34.6 3.8 161.1% 52.7 3.8 213.0% 52.7 1.0 0.5% 2.6 5.0% 37.0% 199.5 42.3

2010F 1,065.6 121.8 11.4% 68.4 51.3 3.8 (1.3%) 53.4 3.8 (1.3%) 53.4 1.0 0.5% 3.6 6.9% 26.6% 19.4 22.7 0.96

2011F 1,182.2 140.5 11.9% 88.4 66.4 4.9 29.4% 41.3 4.9 29.4% 41.3 1.0 0.5% 3.3 8.3% 14.8% 16.2 19.0 0.89

2012F 1,313.0 156.3 11.9% 107.0 80.4 5.9 21.0% 34.1 5.9 21.0% 34.1 1.0 0.5% 3.0 9.2% 2.3% 14.1 16.4 0.98

Source: Company, CIMB Research, Bloomberg

Price chart

Corporate profile

2.3

5.00

2.1

4.00

1.9

3.00

1.7 2.00 1.5 1.00

1.3 1.1 De c-09

0.00 Ma y-10

Volume 10m (R.H.S ca le )

Source: Bloomberg

Oct-10 Ma la ys ia n Re s ource s Corp Bhd

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.

The S.E.A. Navigator – Malaysia 2011

[ 132 ]

Financial tables KEY RATIOS

PROFIT & LOSS (RM m, FYE Dec) Revenue Operating expenses EBITDA Depreciation & amortisation EBIT Net interest & invt income Associates’ contribution Exceptional items Others Pretax profit Tax Minority interests Net profit Adj. wt. shares (m) Unadj. year-end shares (m)

2008 789 (785) 4 (8) (4) 3 (15) (26) 0 (42) (20) 5 (57) 908 908

2009 922 (876) 45 (9) 36 27 (16) 0 0 46 (9) (3) 35 908 908

2008 28 10 1,389 1,427 587 15 504 205 1,310 855 177 204 1,236 714 12 726 681 94 0.74

2009 28 10 1,389 1,427 592 15 555 211 1,373 886 177 204 1,267 714 12 726 713 94 0.77

2010F 1,066 (944) 122 (10) 112 (64) 21 0 0 68 (16) (1) 51 1,364 1,364

2011F 1,182 (1,042) 141 (11) 130 (63) 21 0 0 88 (21) (1) 66 1,364 1,365

2012F 1,313 (1,157) 156 (12) 145 (60) 22 0 0 107 (26) (1) 80 1,365 1,365

2011F 27 10 1,389 1,426 754 15 661 226 1,655 1,048 177 204 1,430 714 12 726 831 94 0.60

2012F 26 10 1,389 1,425 868 15 734 235 1,852 1,164 177 204 1,546 714 12 726 911 94 0.66

2010F 27 10 1,389 1,426 662 15 596 217 1,490 950 177 204 1,331 714 12 726 765 94 0.55

2010F 15.6 168.9 6.4 4.8 1.1 24.0 20.3 197.2 5.0 314.4

2011F 10.9 15.4 7.5 5.6 1.3 24.0 16.6 194.0 4.5 308.5

2012F 11.1 11.2 8.1 6.1 1.5 24.0 13.9 193.9 4.0 307.5

(FYE Dec) Orderbook depletion (RM' m) Orderbook replenishment (RM m) Outstanding orderbook (RM m)

2009 500 500 2,000

2010F 400 500 2,100

2011F 600 500 2,000

2012F 600 500 1,900

12M - FORWARD FD CORE P/E (X)

CASH FLOW (RM m, FYE Dec) Pretax profit Depreciation & non–cash adj. Working capital changes Cash tax paid Others Cash flow from operations Capex Net investments & sale of FA Others Cash flow from investing Debt raised/(repaid) Equity raised/(repaid) Dividends paid Cash interest & others Cash flow from financing Change in cash Change in net cash/(debt) Ending net cash/(debt)

2009 16.9 1,089.9 5.0 3.8 0.9 19.4 20.8 209.8 5.8 344.7

KEY DRIVERS

BALANCE SHEET (RM m, end Dec) Fixed assets Intangible assets Other long-term assets Total non-current assets Cash and equivalents Stocks Trade debtors Other current assets Total current assets Trade creditors Short-term borrowings Other current liabilities Total current liabilities Long-term borrowings Other long-term liabilities Total long-term liabilities Shareholders’ funds Minority interests NTA/share (RM)

2008 (8.7) (97.6) (5.3) (7.2) (0.1) N/A N/A 228.5 6.7 362.1

(FYE Dec) Revenue growth (%) EBITDA growth (%) Pretax margins (%) Net profit margins (%) Interest cover (x) Effective tax rates (%) Net dividend payout (%) Debtors turnover (days) Stock turnover (days) Creditors turnover (days)

2008 (42) 8 124 30 12 132 (8) (1) 0 (9) 0 0 0 (27) (27) 96 96 (304)

2009 46 9 (20) (16) (10) 9 0 0 0 0 0 0 (6) 2 (4) 5 5 (299)

2010F 68 10 24 (5) 44 141 0 1 0 1 0 0 (10) (61) (71) 70 70 (229)

2011F 88 11 33 (5) 42 169 0 1 0 1 0 0 (13) (65) (78) 92 92 (137)

2012F 107 12 43 (4) 38 195 0 0 0 0 0 0 (57) (24) (81) 114 114 (23)

43.0

38.0

33.0

28.0

23.0

18.0 Dec-07

Apr-08

Aug-08

Source: Company, CIMB Research, Bloomberg

The S.E.A. Navigator – Malaysia 2011

[ 133 ]

Dec-08

Apr-09

Aug-09

Dec-09

Apr-10

Aug-10

Dec-10

Syariah-compliant stock

Masterskill Education Group

OUTPERFORM

Maintained

RM2.14

@06/12/10

Making the grade for long-term investment

MALAYSIA

2011 OUTLOOK

CIMB Research Report

Target: RM4.48 Education

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: 12-m price range:

RM877m/US$279m 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 Revenue (RM m) EBITDA (RM m) EBITDA margins (%) Pretax profit (RM m) Net profit (RM m) EPS (sen) EPS growth (%) P/E (x) Gross DPS (sen) Dividend yield (%) P/BV (x) ROE (%) Net cash per share (RM) P/FCFE (x) EV/EBITDA (x) % change in EPS estimates CIMB/Consensus (x)

2008 202.9 90.1 44.4% 80.1 72.1 17.6 40.2% 12.2 0.0 0.0% 5.5 60.7% 0.02 227.3 9.6

2009 273.4 123.5 45.2% 112.3 97.4 23.8 35.1% 9.0 0.0 0.0% 3.1 43.8% 0.17 20.0 6.5

2010F 326.4 139.5 42.7% 127.1 103.7 25.3 6.5% 8.5 12.6 5.9% 2.2 30.6% 0.49 6.9 4.8 0.98

2011F 363.0 159.0 43.8% 149.2 118.9 29.0 14.7% 7.4 14.5 6.8% 1.7 26.4% 0.75 6.2 3.6 0.95

2012F 410.0 182.4 44.5% 176.8 140.5 34.3 18.2% 6.2 17.1 8.0% 1.3 24.2% 1.07 6.9 2.4 0.94

Source: Company, CIMB Research, Bloomberg

Price chart

Corporate profile 8.00

4.4

7.00 3.9

6.00 5.00

3.4

4.00 2.9

3.00 2.00

2.4

1.00 1.9 Ma y-10

0.00 Aug -10

Volume 10m (R.H.S ca le )

Source: Bloomberg

Nov-10 Ma s te rs kill Educa tion Group

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.

The S.E.A. Navigator – Malaysia 2011

[ 134 ]

Financial tables KEY RATIOS

PROFIT & LOSS (RM m, FYE Dec) Revenue Operating expenses EBITDA Depreciation & amortisation EBIT Net interest & invt income Associates’ contribution Exceptional items Others Pretax profit Tax Minority interests Net profit Adj. wt. shares (m) Unadj. year-end shares (m)

2008 203 (113) 90 (9) 81 (1) 0 0 0 80 (8) 0 72 410 410

2009 273 (150) 124 (11) 113 0 0 0 0 112 (15) 0 97 410 410

2010F 326 (187) 140 (12) 128 (1) 0 0 0 127 (23) 0 104 410 410

2011F 363 (204) 159 (14) 145 4 0 0 0 149 (30) 0 119 410 410

2012F 410 (228) 182 (14) 169 8 0 0 0 177 (36) 0 141 410 410

(FYE Dec) Revenue growth (%) EBITDA growth (%) Pretax margins (%) Net profit margins (%) Interest cover (x) Effective tax rates (%) Net dividend payout (%) Debtors turnover (days) Stock turnover (days) Creditors turnover (days)

2011F 148 0 0 148 466 0 162 43 672 6 0 146 153 156 2 158 509 0 1.24

2012F 154 0 0 154 611 0 184 48 843 7 0 165 172 172 2 174 650 0 1.59

(FYE Dec) Number of students Average school fees (RM/student) Campus utilisation rates (%)

2008 97 0 0 97 39 0 89 23 151 2 0 56 58 30 2 32 158 0 0.39

2009 140 0 0 140 104 0 130 34 269 4 0 82 86 35 2 37 287 0 0.70

2010F 144 0 0 144 307 0 146 38 492 6 0 133 138 105 2 107 390 0 0.95

2010F 19.4 12.9 38.9 31.8 34.7 18.4 38.0 154.5 0.0 5.3

2011F 11.2 14.0 41.1 32.8 26.6 20.3 38.0 155.2 0.0 6.1

2012F 13.0 14.7 43.1 34.3 28.0 20.5 38.0 154.0 0.0 6.1

2009 17,402 48,500 43

2010F 19,594 48,500 55

2011F 21,831 48,500 58

2012F 23,989 49,955 60

12M - FORWARD FD CORE P/E (X)

CASH FLOW (RM m, FYE Dec) Pretax profit Depreciation & non–cash adj. Working capital changes Cash tax paid Others Cash flow from operations Capex Net investments & sale of FA Others Cash flow from investing Debt raised/(repaid) Equity raised/(repaid) Dividends paid Cash interest & others Cash flow from financing Change in cash Change in net cash/(debt) Ending net cash/(debt)

2009 34.7 37.2 41.1 35.6 86.9 13.3 0.0 146.0 0.0 4.0

KEY DRIVERS

BALANCE SHEET (RM m, end Dec) Fixed assets Intangible assets Other long-term assets Total non-current assets Cash and equivalents Stocks Trade debtors Other current assets Total current assets Trade creditors Short-term borrowings Other current liabilities Total current liabilities Long-term borrowings Other long-term liabilities Total long-term liabilities Shareholders’ funds Minority interests NTA/share (RM)

2008 60.4 40.3 39.5 35.5 40.8 10.0 0.0 128.6 0.0 3.6

2008 80 9 (12) (7) (1) 69 (46) 0 0 (47) (21) 2 0 13 (6) 16 37 9

2009 112 11 (8) (14) 0 101 (67) 0 15 (52) (4) 0 0 11 7 56 60 69

2010F 127 12 (14) (23) 33 135 (16) 0 0 (16) 70 0 (52) 65 84 203 133 202

2011F 149 14 (16) (30) (10) 106 (17) 0 0 (17) 51 0 (59) 78 69 158 107 309

2012F 177 14 (21) (36) (15) 119 (19) 0 0 (19) 16 0 (70) 100 46 145 129 438

16.0 15.0 14.0 13.0 12.0 11.0 10.0 9.0 8.0 7.0 May-10

Jun-10

Source: Company, CIMB Research, Bloomberg

The S.E.A. Navigator – Malaysia 2011

[ 135 ]

Jul-10

Aug-10

Sep-10

Oct-10

Nov-10

Dec-10

Syariah-compliant stock

Maxis Berhad

NEUTRAL

Maintained

RM5.36

@07/12/10

Not maxed out

MALAYSIA

2011 OUTLOOK

CIMB Research Report

Target: RM5.60 Telecommunications - Mobile

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 midsingle 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 that data 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 Revenue (RM m) EBITDA (RM m) EBITDA margins (%) Pretax profit (RM m) Net profit (RM m) EPS (sen) EPS growth (%) P/E (x) Core EPS (sen) Core EPS growth (%) Core P/E (x) Gross DPS (sen) Dividend yield (%) P/BV (x) ROE (%) Net gearing (%) P/FCFE (x) EV/EBITDA (x) % change in EPS estimates CIMB/Consensus (x)

2008 8,449.8 4,402.0 52.1% 3,227.7 2,394.7 31.9 20.9% 16.8 31.9 1.7% 16.8 0.0 0.0% 9.4 69.5% N/A 17.7 9.0

2009 8,611.0 4,318.0 50.1% 3,007.0 2,232.0 29.8 (6.8%) 18.0 30.8 (3.6%) 17.4 73.0 13.6% 4.5 33.7% 42.8% 5.8 10.2

2010F 8,899.8 4,426.1 49.7% 3,165.6 2,320.4 30.9 4.0% 17.3 30.9 0.5% 17.3 50.7 9.5% 4.7 26.6% 57.0% 10.7 10.2 1.00

2011F 9,405.0 4,790.2 50.9% 3,472.4 2,545.3 33.9 9.7% 15.8 33.9 9.7% 15.8 53.3 10.0% 5.0 30.7% 64.1% 15.6 9.5 1.03

2012F 9,980.0 5,093.1 51.0% 3,790.8 2,778.7 37.0 9.2% 14.5 37.0 9.2% 14.5 57.3 10.7% 5.2 35.2% 71.3% 13.8 9.0 1.07

Source: Company, CIMB Research, Bloomberg

Price chart

Corporate profile

5.8 5.7

2.00

5.6 5.5

1.50

5.4 5.3

1.00

5.2 5.1

0.50

5.0 4.9 4.8 De c-09

0.00 Ma y-10 Volume 10m (R.H.S ca le )

Source: Bloomberg

Oct-10 Ma xis Be rha d

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. The S.E.A. Navigator – Malaysia 2011

[ 136 ]

Financial tables KEY RATIOS

PROFIT & LOSS (RM m, FYE Dec) Revenue Operating expenses EBITDA Depreciation & amortisation EBIT Net interest & invt income Associates’ contribution Exceptional items Others Pretax profit Tax Minority interests Net profit Adj. wt. shares (m) Unadj. year-end shares (m)

2008 8,450 (4,048) 4,402 (1,192) 3,210 18 0 0 0 3,228 (833) 0 2,395 7,500 7,500

2009 8,611 (4,293) 4,318 (1,165) 3,153 (43) 0 (103) 0 3,007 (775) 0 2,232 7,500 7,500

2010F 8,900 (4,474) 4,426 (1,054) 3,372 (206) 0 0 0 3,166 (845) 0 2,320 7,500 7,500

2011F 9,405 (4,615) 4,790 (1,076) 3,714 (242) 0 0 0 3,472 (927) 0 2,545 7,500 7,500

2012F 9,980 (4,887) 5,093 (1,067) 4,026 (235) 0 0 0 3,791 (1,012) 0 2,779 7,500 7,500

2008 4,456 90 284 4,830 1,692 108 744 1,065 3,609 1,978 930 655 3,563 73 519 591 4,284 1 0.56

2009 4,555 11,019 92 15,666 1,192 134 790 16 2,132 2,496 31 784 3,311 4,992 550 5,542 8,945 0 (0.28)

2010F 4,901 11,019 92 16,012 2,157 73 735 16 2,981 2,186 0 784 2,970 6,992 550 7,542 8,481 0 (0.34)

2011F 4,924 11,019 92 16,035 1,800 77 751 16 2,644 2,255 0 784 3,039 6,992 550 7,542 8,099 0 (0.39)

2012F 4,905 11,019 92 16,016 1,512 82 770 16 2,379 2,387 0 784 3,171 6,992 550 7,542 7,682 0 (0.44)

2008 3,228 1,192 (853) (789) 443 3,222 (796) 1 (8) (803) (167) 1 (720) (568) (1,454) 965 1,132 690

2009 3,007 1,165 447 (775) (719) 3,125 (1,222) 0 1,010 (212) 4,020 0 (5,441) (1,992) (3,413) (500) (4,520) (3,830)

2010F 3,166 1,054 (195) (845) 206 3,386 (1,400) 0 0 (1,400) 1,969 0 (2,784) (206) (1,022) 965 (1,004) (4,834)

2011F 3,472 1,076 49 (927) 242 3,912 (1,100) 0 0 (1,100) 0 0 (2,927) (242) (3,169) (357) (357) (5,191)

2012F 3,791 1,067 110 (1,012) 235 4,191 (1,048) 0 0 (1,048) 0 0 (3,195) (235) (3,431) (288) (288) (5,479)

2009 1.9 (1.9) 34.9 25.9 40.9 25.8 245.3 32.5 5.1 94.8

2010F 3.4 2.5 35.6 26.1 14.3 26.7 122.8 31.3 4.2 96.0

2011F 5.7 8.2 36.9 27.1 13.5 26.7 117.9 28.8 2.9 86.2

2012F 6.1 6.3 38.0 27.8 14.6 26.7 116.1 27.8 2.9 84.9

(FYE Dec) Blended mobile ARPU (RM) Postpaid ARPU (local currency) Prepaid ARPU (local currency) Broadband ARPU (RM) No of mobile subscribers (m) No of postpaid mobile subs (m) No of prepaid mobile subs (m) No. of broadband subscribers (m)

2009 61.7 104.0 41.0 97.0 12.03 2.71 9.32 0.25

2010F 63.9 103.0 34.9 63.1 12.99 2.65 10.34 0.70

2011F 55.2 103.0 33.1 56.7 13.53 2.71 10.82 1.20

2012F 49.5 99.9 31.5 51.1 14.07 2.77 11.30 1.70

12M - FORWARD FD CORE P/E (X)

CASH FLOW (RM m, FYE Dec) Pretax profit Depreciation & non–cash adj. Working capital changes Cash tax paid Others Cash flow from operations Capex Net investments & sale of FA Others Cash flow from investing Debt raised/(repaid) Equity raised/(repaid) Dividends paid Cash interest & others Cash flow from financing Change in cash Change in net cash/(debt) Ending net cash/(debt)

2008 9.9 22.6 38.2 28.3 82.5 25.8 0.0 31.0 3.5 92.6

KEY DRIVERS

BALANCE SHEET (RM m, end Dec) Fixed assets Intangible assets Other long-term assets Total non-current assets Cash and equivalents Stocks Trade debtors Other current assets Total current assets Trade creditors Short-term borrowings Other current liabilities Total current liabilities Long-term borrowings Other long-term liabilities Total long-term liabilities Shareholders’ funds Minority interests NTA/share (RM)

(FYE Dec) Revenue growth (%) EBITDA growth (%) Pretax margins (%) Net profit margins (%) Interest cover (x) Effective tax rates (%) Net dividend payout (%) Debtors turnover (days) Stock turnover (days) Creditors turnover (days)

18.0

17.5

17.0

16.5

16.0

15.5

15.0 Nov-09

Mar-10

Source: Company, CIMB Research, Bloomberg

The S.E.A. Navigator – Malaysia 2011

[ 137 ]

Jul-10

Nov-10

Syariah-compliant stock

Media Chinese International Ltd

OUTPERFORM

Maintained

RM0.88

@06/12/10

A clearer print

MALAYSIA

2011 OUTLOOK

CIMB Research Report

Target: RM1.52 Media - Integrated

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 50.0 King

FYE Mar Revenue (RM m) EBITDA (RM m) EBITDA margins (%) Pretax profit (RM m) Net profit (RM m) EPS (sen) EPS growth (%) P/E (x) Core EPS (sen) Core EPS growth (%) Core P/E (x) Gross DPS (sen) Dividend yield (%) P/BV (x) ROE (%) Net cash per share (RM) P/FCFE (x) EV/EBITDA (x) % change in EPS estimates CIMB/Consensus (x)

2009 1,437.8 119.7 8.3% 113.2 61.2 3.6 (40.6%) 24.2 4.1 (32.8%) 21.5 2.9 3.2% 1.3 5.6% 0.18 38.2 9.8

2010 1,226.7 176.4 14.4% 179.8 134.2 8.0 119.2% 11.1 7.8 90.5% 11.3 4.2 4.8% 1.2 11.5% 0.22 11.7 6.3

2011F 1,636.5 206.8 12.6% 196.6 151.4 9.0 12.8% 9.8 9.0 14.9% 9.8 5.0 5.7% 1.1 12.1% 0.26 12.0 5.0 N/A 2.99

2012F 1,698.5 227.6 13.4% 216.4 166.6 9.9 10.0% 8.9 9.9 10.0% 8.9 5.0 5.7% 1.0 12.2% 0.32 10.2 4.2 N/A 3.09

2013F 1,822.4 245.3 13.5% 232.5 178.8 10.6 7.3% 8.3 10.6 7.3% 8.3 5.0 5.6% 1.0 12.1% 0.36 11.3 3.5 N/A 3.21

Source: Company, CIMB Research, Bloomberg

Price chart

Corporate profile

1.0 1.0

5.00

0.9 0.9

4.00

0.8 3.00

0.8 0.7

2.00

0.7 0.6

1.00

0.6 0.5 De c-09

0.00 Ma y-10

Volume 1m (R.H.S ca le )

Oct-10 Me dia Chine s e Inte rna tiona l Ltd

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.

Source: Bloomberg

The S.E.A. Navigator – Malaysia 2011

[ 138 ]

Financial tables KEY RATIOS

PROFIT & LOSS (RM m, FYE Mar) Revenue Operating expenses EBITDA Depreciation & amortisation EBIT Net interest & invt income Associates’ contribution Exceptional items Others Pretax profit Tax Minority interests Net profit Adj. wt. shares (m) Unadj. year-end shares (m)

2009 1,438 (1,318) 120 (11) 109 19 0 (14) 0 113 (50) (2) 61 1,686 1,686

2010 1,227 (1,050) 176 (12) 165 14 0 1 0 180 (45) (1) 134 1,686 1,686

2011F 1,637 (1,430) 207 (12) 195 2 0 0 0 197 (45) 0 151 1,686 1,686

2012F 1,699 (1,471) 228 (12) 215 1 0 0 0 216 (50) 0 167 1,686 1,686

2013F 1,822 (1,577) 245 (13) 233 0 0 0 0 233 (54) 0 179 1,686 1,686

2009 184 46 17 247 445 485 289 0 1,219 193 91 2 286 43 11 54 1,126 0 0.64

2010 186 46 17 249 498 497 297 0 1,293 181 91 18 290 43 11 54 1,201 0 0.69

2011F 188 46 17 251 576 513 314 0 1,403 204 91 2 297 43 11 54 1,302 0 0.75

2012F 189 46 17 252 670 528 326 0 1,524 210 91 2 303 43 11 54 1,419 0 0.81

2013F (FYE Mar) 191 Adex revenue growth (%) 46 Market share of adex (%) 17 254 748 566 350 0 1,664 225 91 2 318 43 11 54 1,545 0 0.89

2010 (14.7) 47.3 14.7 10.9 67.0 24.8 27.0 87.3 146.1 55.7

2011F 33.4 17.2 12.0 9.3 N/A 23.0 30.0 68.1 112.6 43.0

2012F 3.8 10.1 12.7 9.8 N/A 23.0 30.0 68.7 111.9 44.5

2013F 7.3 7.8 12.8 9.8 N/A 23.1 30.2 67.6 109.5 43.6

2010 -3.0% 85.0%

2011F 6.0% 86.0%

2012F 3.0% 87.0%

2013F 8.0% 87.0%

12M - FORWARD FD CORE P/E (X)

CASH FLOW (RM m, FYE Mar) Pretax profit Depreciation & non–cash adj. Working capital changes Cash tax paid Others Cash flow from operations Capex Net investments & sale of FA Others Cash flow from investing Debt raised/(repaid) Equity raised/(repaid) Dividends paid Cash interest & others Cash flow from financing Change in cash Change in net cash/(debt) Ending net cash/(debt)

2009 2.2 (15.6) 7.9 4.3 23.1 44.1 56.6 71.0 119.2 47.4

KEY DRIVERS

BALANCE SHEET (RM m, end Mar) Fixed assets Intangible assets Other long-term assets Total non-current assets Cash and equivalents Stocks Trade debtors Other current assets Total current assets Trade creditors Short-term borrowings Other current liabilities Total current liabilities Long-term borrowings Other long-term liabilities Total long-term liabilities Shareholders’ funds Minority interests NTA/share (RM)

(FYE Mar) Revenue growth (%) EBITDA growth (%) Pretax margins (%) Net profit margins (%) Interest cover (x) Effective tax rates (%) Net dividend payout (%) Debtors turnover (days) Stock turnover (days) Creditors turnover (days)

2009 113 11 (38) (34) (3) 49 (13) 0 0 (13) 0 0 (35) 35 1 37 37 311

2010 180 12 (15) (36) (2) 138 (13) 0 0 (13) 0 0 (36) (35) (71) 54 54 364

2011F 197 12 (26) (45) (2) 135 (14) 0 0 (14) 0 0 (45) 3 (43) 79 79 442

2012F 216 12 (21) (50) (1) 157 (14) 0 0 (14) 0 0 (50) 3 (47) 96 96 536

2013F 233 13 (46) (54) 0 145 (14) 0 0 (14) 0 0 (54) 2 (52) 79 79 614

20.0 18.0 16.0 14.0 12.0 10.0 8.0 6.0 May-08

Sep-08

Jan-09

Source: Company, CIMB Research, Bloomberg

The S.E.A. Navigator – Malaysia 2011

[ 139 ]

May-09

Sep-09

Jan-10

May-10

Sep-10

Jan-11

Media Prima Bhd

NEUTRAL

Maintained

RM2.34

@06/12/10

Fruits of consolidation

MALAYSIA

2011 OUTLOOK

CIMB Research Report

Target: RM2.78 Media - Integrated

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 Revenue (RM m) EBITDA (RM m) EBITDA margins (%) Pretax profit (RM m) Net profit (RM m) EPS (sen) EPS growth (%) P/E (x) Core EPS (sen) Core EPS growth (%) Core P/E (x) FD core EPS (sen) FD core P/E (x) Gross DPS (sen) Dividend yield (%) P/BV (x) ROE (%) Net gearing (%) Net cash per share (RM) P/FCFE (x) EV/EBITDA (x) % change in EPS estimates CIMB/Consensus (x)

2008 781.3 190.1 24.3% 159.3 117.7 12.0 0.2% 19.4 12.3 4.1% 19.1 10.9 21.5 5.8 2.5% 9.5 58.0% 93.1% N/A 16.0 13.2

2009 744.1 146.7 19.7% 275.8 251.8 25.8 114.0% 9.1 27.4 123.1% 8.6 24.3 9.6 12.0 5.1% 8.0 96.0% 44.4% N/A 7.8 16.5

2010F 1,418.9 309.7 21.8% 199.5 158.2 16.2 (37.2%) 14.5 16.2 (40.8%) 14.5 14.7 15.9 8.1 3.5% 6.0 47.6% 15.9% N/A 18.1 7.6 1.5% 0.95

2011F 1,500.3 340.2 22.7% 225.4 181.7 18.6 14.9% 12.6 18.6 14.9% 12.6 16.9 13.9 9.3 4.0% 4.6 41.7% 0.0% N/A 17.6 6.8 3.0% 1.07

2012F 1,593.5 375.3 23.6% 255.8 207.4 21.2 14.2% 11.0 21.2 14.2% 11.0 19.2 12.2 10.8 4.6% 3.7 37.1% N/A 0.08 14.6 5.9 8.2% 1.08

Source: Company, CIMB Research, Bloomberg

Price chart

Corporate profile 0.80

2.5

0.70 0.60

2.3

0.50 2.1

0.40 0.30

1.9

0.20 1.7 1.5 De c-09

0.10 0.00 Ma y-10 Volume 10m (R.H.S c a le )

Source: Bloomberg

Oct-10 Me dia P rima Bhd

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. The S.E.A. Navigator – Malaysia 2011

[ 140 ]

Financial tables KEY RATIOS

PROFIT & LOSS (RM m, FYE Dec) Revenue Operating expenses EBITDA Depreciation & amortisation EBIT Net interest & invt income Associates’ contribution Exceptional items Others Pretax profit Tax Minority interests Net profit Adj. wt. shares (m) Unadj. year-end shares (m)

2008 781 (591) 190 (47) 143 (2) 21 (3) 0 159 (42) 0 118 977 977

2009 744 (597) 147 (50) 96 (15) 17 178 0 276 (24) 0 252 977 977

2010F 1,419 (1,109) 310 (93) 217 (18) 0 0 0 200 (36) (5) 158 977 977

2011F 1,500 (1,160) 340 (96) 244 (18) 0 0 0 225 (38) (6) 182 977 977

2012F 1,593 (1,218) 375 (100) 275 (19) 0 0 0 256 (45) (3) 207 977 977

2008 182 35 324 541 231 2 336 0 569 359 49 22 431 407 31 438 240 2 0.21

2009 154 35 324 514 328 2 320 0 650 365 49 22 436 407 31 438 285 5 0.26

2010F 212 35 324 571 394 2 609 0 1,006 674 49 22 746 407 31 438 380 10 0.35

2011F 265 35 324 625 456 2 645 0 1,103 705 49 22 777 407 31 438 492 16 0.47

2012F 314 35 324 673 534 2 685 0 1,220 741 49 22 812 407 31 438 625 19 0.60

2008 159 47 11 (42) (16) 160 (20) (13) 0 (33) 0 0 (43) 16 (27) 100 100 (225)

2009 276 50 124 (37) 2 415 (19) (103) 0 (122) 0 0 (26) (171) (197) 96 96 (129)

2010F 200 93 20 (36) 5 281 (150) 0 0 (150) 0 0 (59) (5) (65) 67 67 (62)

2011F 225 96 (4) (38) 18 297 (150) 0 0 (150) 0 0 (68) (17) (86) 62 62 0

2012F 256 100 (5) (45) 18 324 (149) 0 0 (149) 0 0 (79) (18) (98) 77 77 77

2010F 90.7 111.1 14.1 11.1 12.4 18.0 37.5 119.6 0.6 133.7

2011F 5.7 9.8 15.0 12.1 13.3 16.8 37.5 152.5 0.6 167.8

2012F 6.2 10.3 16.1 13.0 14.2 17.7 38.3 152.2 0.5 165.6

(FYE Dec) Market share of adex (%) Market share of viewers (%) Programming costs (% of op costs) Programming costs (RM' million)

2009 30.0% 50.0% 25.0% 150

2010F 30.0% 50.0% 25.0% 277

2011F 30.0% 50.0% 25.0% 290

2012F 30.0% 50.0% 25.0% 305

12M - FORWARD FD CORE P/E (X)

CASH FLOW (RM m, FYE Dec) Pretax profit Depreciation & non–cash adj. Working capital changes Cash tax paid Others Cash flow from operations Capex Net investments & sale of FA Others Cash flow from investing Debt raised/(repaid) Equity raised/(repaid) Dividends paid Cash interest & others Cash flow from financing Change in cash Change in net cash/(debt) Ending net cash/(debt)

2009 (4.8) (22.8) 37.1 33.8 3.9 8.7 10.3 160.8 1.1 177.7

KEY DRIVERS

BALANCE SHEET (RM m, end Dec) Fixed assets Intangible assets Other long-term assets Total non-current assets Cash and equivalents Stocks Trade debtors Other current assets Total current assets Trade creditors Short-term borrowings Other current liabilities Total current liabilities Long-term borrowings Other long-term liabilities Total long-term liabilities Shareholders’ funds Minority interests NTA/share (RM)

2008 13.0 17.7 20.4 15.1 84.3 26.1 36.7 147.8 1.1 159.2

(FYE Dec) Revenue growth (%) EBITDA growth (%) Pretax margins (%) Net profit margins (%) Interest cover (x) Effective tax rates (%) Net dividend payout (%) Debtors turnover (days) Stock turnover (days) Creditors turnover (days)

21.0 19.0 17.0 15.0 13.0 11.0 9.0 7.0 5.0 3.0 Dec-07

Apr-08

Aug-08

Source: Company, CIMB Research, Bloomberg

The S.E.A. Navigator – Malaysia 2011

[ 141 ]

Dec-08

Apr-09

Aug-09

Dec-09

Apr-10

Aug-10

Dec-10

Syariah-compliant stock

MISC Bhd

UNDERPERFORM

Maintained

RM8.75

@07/12/10

Battling cyclical and structural negatives

MALAYSIA

2011 OUTLOOK

CIMB Research Report

Target: RM7.00 Tanker Shipping

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 Revenue (RM m) EBITDA (RM m) EBITDA margins (%) Pretax profit (RM m) Net profit (RM m) EPS (sen) EPS growth (%) P/E (x) Core EPS (sen) Core EPS growth (%) Core P/E (x) Gross DPS (sen) Dividend yield (%) P/BV (x) ROE (%) Net gearing (%) P/FCFE (x) EV/EBITDA (x) % change in EPS estimates CIMB/Consensus (x)

2009 15,783.4 4,943.9 31.3% 3,271.4 3,081.0 79.9 26.8% 10.9 79.9 39.1% 10.9 46.7 5.3% 1.6 15.6% 38.2% 10.8 8.5

2010 13,775.0 2,514.4 18.3% 911.8 681.9 17.4 (78.2%) 50.2 23.3 (70.8%) 37.5 50.1 5.7% 1.7 3.1% 20.5% 104.5 15.7

2011F 14,056.7 3,332.8 23.7% 1,624.3 1,330.5 29.8 71.1% 29.4 29.8 27.8% 29.4 46.7 5.3% 1.7 5.6% 27.1% (279.8) 13.9 N/A 0.74

2012F 14,350.7 3,643.5 25.4% 2,013.9 1,603.2 35.9 20.5% 24.4 35.9 20.5% 24.4 46.7 5.3% 1.7 6.8% 25.4% 21.0 12.7 N/A 0.75

2013F 15,319.7 3,805.8 24.8% 2,208.6 1,771.6 39.7 10.5% 22.0 39.7 10.5% 22.0 46.7 5.3% 1.6 7.5% 24.4% 23.1 12.2 N/A 0.76

Source: Company, CIMB Research, Bloomberg

Price chart

Corporate profile 0.90

9.4

0.80 0.70 8.9

0.60 0.50

8.4

0.40 0.30

7.9

0.20 0.10

7.4 De c-09

0.00 Ma y-10 Volume 10m (R.H.S ca le )

Source: Bloomberg

Oct-10 MIS C Bhd

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.

The S.E.A. Navigator – Malaysia 2011

[ 142 ]

Financial tables KEY RATIOS

PROFIT & LOSS (RM m, FYE Mar) Revenue Operating expenses EBITDA Depreciation & amortisation EBIT Net interest & invt income Associates’ contribution Exceptional items Others Pretax profit Tax Minority interests Net profit Adj. wt. shares (m) Unadj. year-end shares (m)

2009 2010 2011F 15,783 13,775 14,057 (10,840) (11,261) (10,724) 4,944 2,514 3,333 (1,676) (1,288) (1,688) 3,268 1,226 1,645 (356) (316) (293) 37 33 118 0 (231) 0 324 199 155 3,271 912 1,624 (68) (90) (65) (140) (229) (123) 682 1,331 3,081 3,854 3,915 4,464 3,720 4,464 4,464

2012F 2013F (FYE Mar) 14,351 15,320 Revenue growth (%) (10,707) (11,514) EBITDA growth (%) 3,643 3,806 Pretax margins (%) (1,677) (1,681) Net profit margins (%) 1,966 2,124 Interest cover (x) (306) (302) Effective tax rates (%) 199 231 Net dividend payout (%) 0 0 Debtors turnover (days) 155 155 Stock turnover (days) 2,014 2,209 Creditors turnover (days) (81) (88) (330) (349) 1,603 1,772 4,464 4,464 4,464 4,464

2009 27,385 1,028 961 29,373 3,725 442 2,844 373 7,384 3,380 3,104 102 6,586 8,748 129 8,877 20,953 341 5.17

2010 28,229 963 1,642 30,834 7,849 345 1,994 39 10,226 3,959 3,577 78 7,614 9,194 215 9,410 23,662 374 5.09

2011F 28,041 963 3,316 32,320 6,239 328 2,035 39 8,640 3,771 3,577 78 7,426 9,194 215 9,410 23,522 603 5.05

2012F 27,864 963 3,515 32,342 6,540 328 2,077 39 8,983 3,765 3,577 78 7,420 9,194 215 9,410 23,563 933 5.06

2013F 28,182 963 3,746 32,892 6,666 352 2,217 39 9,275 4,048 3,577 78 7,703 9,194 215 9,410 23,772 1,282 5.11

2011F 2.0 32.5 11.6 9.5 3.8 4.0 117.4 52.3 8.7 100.4

2012F 2.1 9.3 14.0 11.2 4.5 4.0 97.4 52.3 8.3 95.8

2013F 6.8 4.5 14.4 11.6 4.9 4.0 88.2 51.2 8.1 93.1

(FYE Mar) Fleet size (number of vessels) No of LNG tankers No of petroleum tankers No of chemical tankers No of container shipped No of offshore vessels Petroleum TCE rate (yoy chg %) Chemical TCE rate (yoy chg %) Liner rates (yoy change %)

2010 174 29 75 24 35 7 -31.1% -12.3% -30.0%

2011F 191 29 84 32 35 7 10.0% -5.0% 0.0%

2012F 194 29 87 32 35 7 -5.0% 10.0% 10.0%

2013F 194 29 87 32 35 7 -5.0% 10.0% 10.0%

12M - FORWARD FD CORE P/E (X)

CASH FLOW (RM m, FYE Mar) Pretax profit Depreciation & non–cash adj. Working capital changes Cash tax paid Others Cash flow from operations Capex Net investments & sale of FA Others Cash flow from investing Debt raised/(repaid) Equity raised/(repaid) Dividends paid Cash interest & others Cash flow from financing Change in cash Change in net cash/(debt) Ending net cash/(debt)

2010 (12.7) (49.1) 6.6 5.0 3.3 9.8 215.7 64.1 10.4 97.2

KEY DRIVERS

BALANCE SHEET (RM m, end Mar) Fixed assets Intangible assets Other long-term assets Total non-current assets Cash and equivalents Stocks Trade debtors Other current assets Total current assets Trade creditors Short-term borrowings Other current liabilities Total current liabilities Long-term borrowings Other long-term liabilities Total long-term liabilities Shareholders’ funds Minority interests NTA/share (RM)

2009 21.8 31.4 20.7 19.5 8.1 2.1 43.8 58.7 9.7 69.6

2009 3,271 1,676 85 (68) (1,556) 3,409 (4,011) 0 81 (3,930) 4,324 0 (1,349) (693) 2,282 1,761 (2,563) (8,127)

2010 912 1,288 1,527 (90) (119) 3,518 (4,696) 0 (26) (4,722) 920 5,203 (1,408) 612 5,327 4,124 3,204 (4,923)

2011F 1,624 1,688 (213) (65) 20 3,055 (1,500) (1,556) 0 (3,056) 0 0 (1,471) (138) (1,609) (1,610) (1,610) (6,533)

2012F 2,014 1,677 (48) (81) (48) 3,515 (1,500) 0 0 (1,500) 0 0 (1,562) (151) (1,714) 301 301 (6,232)

2013F 2,209 1,681 119 (88) (84) 3,836 (2,000) 0 0 (2,000) 0 0 (1,562) (147) (1,710) 127 127 (6,105)

34.0

29.0

24.0

19.0

14.0

9.0 Dec-07

Apr-08

Aug-08

Source: Company, CIMB Research, Bloomberg

The S.E.A. Navigator – Malaysia 2011

[ 143 ]

Dec-08

Apr-09

Aug-09

Dec-09

Apr-10

Aug-10

Dec-10

Syariah-compliant stock

MTD ACPI Engineering

UNDERPERFORM

Maintained

RM0.51

@07/12/10

Down and out for now

MALAYSIA

2011 OUTLOOK

CIMB Research Report

Target: RM0.32 Construction

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 MTDACPI 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: 12-m price range:

RM118m/US$38m 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 Revenue (RM m) EBITDA (RM m) EBITDA margins (%) Pretax profit (RM m) Net profit (RM m) EPS (sen) EPS growth (%) P/E (x) Gross DPS (sen) Dividend yield (%) P/BV (x) ROE (%) Net gearing (%) Net cash per share (RM) P/FCFE (x) EV/EBITDA (x) % change in EPS estimates CIMB/Consensus (x)

2009 966.4 28.0 2.9% (4.0) (12.8) (5.8) (455.6%) nm 0.0 0.0% 0.5 (5.3%) 3.9% N/A 4.0 4.7

2010 642.1 5.0 0.8% (11.7) (18.5) (8.0) (38.3%) nm 0.9 1.8% 0.7 (9.5%) 2.5% N/A 24.7 26.4

2011F 677.0 4.4 0.6% (14.0) (18.4) (7.9) 0.5% nm 0.9 1.8% 0.7 (10.9%) 2.8% N/A 107.6 30.6 1.00

2012F 701.8 35.5 5.1% 20.5 11.3 4.9 161.2% 10.5 0.9 1.8% 0.7 6.9% N/A 0.13 3.3 2.9 0.99

2013F 601.8 34.0 5.7% 19.0 10.0 4.3 (11.4%) 11.9 0.9 1.8% 0.7 5.8% N/A 0.23 5.0 2.5 1.00

Source: Company, CIMB Research, Bloomberg

Price chart

Corporate profile

0.8 0.8

25.00

0.7 0.7

20.00

0.6 15.00

0.6 0.5

10.00

0.5 0.4

5.00

0.4 0.3 De c-09

0.00 Ma y-10 Volume 1m (R.H.S ca le )

Source: Bloomberg

Oct-10 MTD ACP I E ngine e ring

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 in higher-margin specialised precast concrete products like segmental box girders (SBG), precast tunnel lining segment and concrete railway sleepers. The S.E.A. Navigator – Malaysia 2011

[ 144 ]

Financial tables KEY RATIOS

PROFIT & LOSS (RM m, FYE Mar) Revenue Operating expenses EBITDA Depreciation & amortisation EBIT Net interest & invt income Associates’ contribution Exceptional items Others Pretax profit Tax Minority interests Net profit Adj. wt. shares (m) Unadj. year-end shares (m)

2009 966 (938) 28 (19) 10 (16) 3 0 0 (4) (14) 5 (13) 222 222

2010 642 (637) 5 (19) (14) 4 (2) 0 0 (12) (5) (2) (19) 232 232

2011F 677 (673) 4 (19) (14) 0 1 0 0 (14) (2) (2) (18) 232 232

2012F 702 (666) 36 (19) 17 3 1 0 0 21 (6) (4) 11 232 232

2013F 602 (568) 34 (19) 16 3 1 0 0 19 (5) (4) 10 232 232

(FYE Mar) Revenue growth (%) EBITDA growth (%) Pretax margins (%) Net profit margins (%) Interest cover (x) Effective tax rates (%) Net dividend payout (%) Debtors turnover (days) Stock turnover (days) Creditors turnover (days)

2012F 121 57 27 205 132 70 260 52 514 409 98 1 507 4 25 29 168 14 0.48

2013F 113 57 32 201 154 75 260 52 542 409 98 1 507 4 38 42 176 18 0.51

(FYE Mar) Construction margins (%) Production capacity (million tonnes) Utilisation rate (%)

2009 149 60 31 240 128 67 232 80 506 380 133 1 513 4 11 15 209 9 0.67

2010 138 57 27 222 61 44 246 52 403 357 57 1 415 9 12 21 180 9 0.53

2011F 130 57 27 213 33 77 259 52 421 409 34 1 443 4 17 21 159 11 0.44

2011F 5.4 (12.3) (2.1) (2.7) (36.8) N/A N/A 136.1 32.4 206.5

2012F 3.7 709.8 2.9 1.6 N/A 28.0 14.2 135.0 38.1 212.5

2013F (14.3) (4.2) 3.2 1.7 N/A 28.0 16.0 157.7 44.0 247.8

2010 1.0% 1.5 50.0%

2011F -3.0% 1.5 55.0%

2012F 3.0% 1.5 60.0%

2013F 3.0% 1.5 65.0%

12M - FORWARD FD CORE P/E (X)

CASH FLOW (RM m, FYE Mar) Pretax profit Depreciation & non–cash adj. Working capital changes Cash tax paid Others Cash flow from operations Capex Net investments & sale of FA Others Cash flow from investing Debt raised/(repaid) Equity raised/(repaid) Dividends paid Cash interest & others Cash flow from financing Change in cash Change in net cash/(debt) Ending net cash/(debt)

2010 (33.6) (82.1) (1.8) (2.9) N/A N/A N/A 135.6 31.3 209.5

KEY DRIVERS

BALANCE SHEET (RM m, end Mar) Fixed assets Intangible assets Other long-term assets Total non-current assets Cash and equivalents Stocks Trade debtors Other current assets Total current assets Trade creditors Short-term borrowings Other current liabilities Total current liabilities Long-term borrowings Other long-term liabilities Total long-term liabilities Shareholders’ funds Minority interests NTA/share (RM)

2009 10.9 (26.5) (0.4) (1.3) 0.6 N/A N/A 108.1 25.4 138.0

2009 (4) 19 (26) (2) 67 54 (10) 2 (2) (10) 0 0 0 83 83 127 127 (9)

2010 (12) 19 (30) 0 3 (21) (10) 17 14 21 0 0 (2) 5 3 4 4 (5)

2011F (14) 19 5 1 (1) 9 (10) 2 0 (8) 0 0 (2) 0 (1) 0 0 (5)

2012F 21 19 6 0 (4) 40 (10) 2 0 (8) 0 0 (2) 4 2 34 34 30

2013F 19 19 (5) 0 (4) 29 (10) 2 0 (8) 0 0 (2) 4 2 23 23 52

-5.0 -10.0 -15.0 -20.0 -25.0 -30.0 -35.0 -40.0 -45.0 -50.0 Dec-07

Apr-08

Aug-08

Source: Company, CIMB Research, Bloomberg

The S.E.A. Navigator – Malaysia 2011

[ 145 ]

Dec-08

Apr-09

Aug-09

Dec-09

Apr-10

Aug-10

Dec-10

Syariah-compliant stock

Muhibbah Engineering

TRADING BUY

Maintained

RM1.36

@06/12/10

Dig in

MALAYSIA

2011 OUTLOOK

CIMB Research Report

Target: RM2.06 Construction

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 major contributor 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: 12-m price range:

RM542m/US$172m 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 Revenue (RM m) EBITDA (RM m) EBITDA margins (%) Pretax profit (RM m) Net profit (RM m) EPS (sen) EPS growth (%) P/E (x) Core EPS (sen) Core EPS growth (%) Core P/E (x) Gross DPS (sen) Dividend yield (%) P/BV (x) ROE (%) Net gearing (%) P/FCFE (x) EV/EBITDA (x) % change in EPS estimates CIMB/Consensus (x)

2008 2,033.5 55.2 2.7% 44.9 21.8 5.5 (68.9%) 24.8 2.5 (85.9%) 54.9 4.7 3.4% 1.2 5.3% 6.9% 6.7 12.1

2009 2,252.0 76.2 3.4% 68.2 12.7 3.2 (41.8%) 42.7 3.8 51.7% 36.2 3.0 2.2% 1.2 2.8% 10.7% 10.5 9.2

2010F 1,756.6 86.7 4.9% 65.5 31.6 7.9 149.0% 17.1 7.9 111.0% 17.1 2.5 1.8% 0.9 6.0% 45.8% 4.9 11.4 0.72

2011F 1,931.9 130.5 6.8% 95.6 52.7 13.3 67.0% 10.3 13.3 67.0% 10.3 3.0 2.2% 0.9 8.8% 55.5% 4.1 8.3 1.00

2012F 2,028.4 146.6 7.2% 107.0 60.3 15.1 14.3% 9.0 15.1 14.3% 9.0 3.5 2.6% 0.9 10.1% 65.5% 3.7 8.1 1.04

Source: Company, CIMB Research, Bloomberg

Price chart

Corporate profile

1.5

4.50

1.4

4.00

1.3

3.50 3.00

1.2

2.50

1.1

2.00

1.0

1.50

0.9

1.00

0.8 0.7 De c-09

0.50 0.00 Ma y-10 Volume 10m (R.H.S ca le )

Source: Bloomberg

Oct-10 Muhibba h E ngine e ring

Set up in 1972 as a marine and civil engineering construction company, Muhibbah Engineering 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. The S.E.A. Navigator – Malaysia 2011

[ 146 ]

Financial tables KEY RATIOS

PROFIT & LOSS (RM m, FYE Dec) Revenue Operating expenses EBITDA Depreciation & amortisation EBIT Net interest & invt income Associates’ contribution Exceptional items Others Pretax profit Tax Minority interests Net profit Adj. wt. shares (m) Unadj. year-end shares (m)

2008 2,034 (1,978) 55 (30) 25 (7) 27 0 0 45 (10) (13) 22 398 398

2009 2,252 (2,176) 76 (25) 51 (6) 23 0 0 68 (39) (16) 13 398 398

2010F 1,757 (1,670) 87 (40) 46 (7) 26 0 0 65 (18) (16) 32 398 398

2011F 1,932 (1,801) 131 (43) 87 (20) 29 0 0 96 (26) (17) 53 398 398

2012F 2,028 (1,882) 147 (46) 100 (25) 32 0 0 107 (29) (18) 60 398 398

2008 481 24 170 675 213 223 739 742 1,916 784 135 1,002 1,921 115 25 141 441 88 1.05

2009 515 22 190 727 197 202 940 411 1,750 803 86 829 1,717 171 36 207 451 102 1.08

2010F 463 22 187 672 257 262 1,092 485 2,097 709 355 709 1,773 232 42 274 603 118 1.46

2011F 485 22 183 689 334 340 1,270 576 2,520 846 423 846 2,116 315 50 365 594 135 1.44

2012F (FYE Dec) 503 Outstanding orderbook (RM m) 22 Construction margins (%) 177 702 434 442 1,475 687 3,038 1,000 500 1,000 2,499 427 60 487 600 153 1.45

2008 45 30 (132) (19) (20) (96) (138) (3) 20 (121) 298 5 (19) 233 518 301 3 (37)

2009 68 25 224 (11) (17) 289 (67) 9 24 (34) (203) 3 (12) (268) (481) (226) (23) (59)

2010F 65 40 (9) (7) (19) 71 (70) 36 34 0 39 4 (10) (335) (303) (232) (270) (330)

2011F 96 43 (2) (7) (8) 121 (69) (15) 50 (34) 45 4 (12) (154) (117) (29) (75) (404)

2012F 107 46 3 (8) (7) 141 (68) (52) 74 (46) 50 4 (14) (175) (135) (40) (89) (494)

2010F (22.0) 13.9 3.7 1.8 4.7 27.0 23.3 211.1 48.2 157.1

2011F 10.0 50.5 4.9 2.7 3.7 27.0 16.8 223.1 56.9 147.0

2012F 5.0 12.3 5.3 3.0 3.4 27.0 17.1 247.0 70.3 166.1

2009 3,118 2.0%

2010F 2,946 5.0%

2011F 3,346 6.0%

2012F 3,746 7.0%

12M - FORWARD FD CORE P/E (X)

CASH FLOW (RM m, FYE Dec) Pretax profit Depreciation & non–cash adj. Working capital changes Cash tax paid Others Cash flow from operations Capex Net investments & sale of FA Others Cash flow from investing Debt raised/(repaid) Equity raised/(repaid) Dividends paid Cash interest & others Cash flow from financing Change in cash Change in net cash/(debt) Ending net cash/(debt)

2009 10.7 38.0 3.0 0.6 5.7 57.6 70.5 136.0 34.4 128.6

KEY DRIVERS

BALANCE SHEET (RM m, end Dec) Fixed assets Intangible assets Other long-term assets Total non-current assets Cash and equivalents Stocks Trade debtors Other current assets Total current assets Trade creditors Short-term borrowings Other current liabilities Total current liabilities Long-term borrowings Other long-term liabilities Total long-term liabilities Shareholders’ funds Minority interests NTA/share (RM)

2008 44.1 (48.0) 2.2 1.1 2.5 22.4 62.9 100.4 34.3 109.4

(FYE Dec) Revenue growth (%) EBITDA growth (%) Pretax margins (%) Net profit margins (%) Interest cover (x) Effective tax rates (%) Net dividend payout (%) Debtors turnover (days) Stock turnover (days) Creditors turnover (days)

47.0 42.0 37.0 32.0 27.0 22.0 17.0 12.0 7.0 Dec-07

Apr-08

Aug-08

Source: Company, CIMB Research, Bloomberg

The S.E.A. Navigator – Malaysia 2011

[ 147 ]

Dec-08

Apr-09

Aug-09

Dec-09

Apr-10

Aug-10

Dec-10

Syariah-compliant stock

Nestle (Malaysia) Berhad

UNDERPERFORM

Maintained

RM43.50

@07/12/10

No sugar rush

MALAYSIA

2011 OUTLOOK

CIMB Research Report

Target: RM38.85 Food & Beverages

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 Revenue (RM m) EBITDA (RM m) EBITDA margins (%) Pretax profit (RM m) Net profit (RM m) EPS (sen) EPS growth (%) P/E (x) Gross DPS (sen) Dividend yield (%) P/BV (x) ROE (%) Net gearing (%) P/FCFE (x) EV/EBITDA (x) % change in EPS estimates CIMB/Consensus (x)

2008 3,877.1 538.9 13.9% 441.4 340.9 145.4 16.7% 29.9 258.4 5.9% 24.8 60.6% 51.3% 37.3 19.3

2009 3,744.2 548.9 14.7% 440.3 351.8 150.0 3.2% 29.0 202.7 4.7% 20.9 78.2% 61.8% 35.1 19.1

2010F 3,837.2 610.8 15.9% 518.9 435.9 185.9 23.9% 23.4 202.7 4.7% 14.0 71.6% 15.5% 20.1 16.9 1.00

2011F 3,952.3 634.9 16.1% 544.3 457.2 195.0 4.9% 22.3 202.7 4.7% 11.8 57.3% 8.6% 28.3 16.2 1.00

2012F 4,070.8 659.9 16.2% 570.5 479.1 204.3 4.8% 21.3 202.7 4.7% 9.9 50.7% 3.6% 28.1 15.5 0.99

Source: Company, CIMB Research, Bloomberg

Price chart

Corporate profile

46.8 44.8

5.00

42.8

4.00

40.8

3.00

38.8 36.8

2.00

34.8

1.00

32.8 30.8 De c -09

0.00 Ma y-10

Volume 100k (R.H.S c a le )

Source: Bloomberg

Oct-10 Ne s tle (Ma la ys ia ) Be rha d

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. The S.E.A. Navigator – Malaysia 2011

[ 148 ]

Financial tables KEY RATIOS

PROFIT & LOSS (RM m, FYE Dec) Revenue Operating expenses EBITDA Depreciation & amortisation EBIT Net interest & invt income Associates’ contribution Exceptional items Others Pretax profit Tax Minority interests Net profit Adj. wt. shares (m) Unadj. year-end shares (m)

2008 3,877 (3,338) 539 (74) 465 (23) 0 0 0 441 (100) 0 341 235 235

2009 3,744 (3,195) 549 (88) 461 (21) 0 0 0 440 (88) 0 352 235 235

2010F 3,837 (3,226) 611 (84) 527 (9) 1 0 0 519 (83) 0 436 235 235

2011F 3,952 (3,317) 635 (84) 551 (7) 1 0 0 544 (87) 0 457 235 235

2012F 4,071 (3,411) 660 (85) 575 (4) 0 0 0 571 (91) 0 479 235 235

2011F 682 51 8 740 93 351 440 66 950 316 110 228 654 57 113 170 865 0 3.47

2012F 1,123 47 9 1,178 114 361 452 67 994 326 105 556 987 46 114 160 1,026 0 4.17

2008 520 64 6 589 30 303 385 64 782 273 129 336 738 112 111 223 411 0 1.48

2009 703 59 6 768 (90) 321 406 64 701 290 122 368 780 90 111 200 489 0 1.83

2010F 513 55 7 574 74 340 428 65 908 307 116 147 570 72 112 183 729 0 2.88

2010F 2.5 11.3 13.5 11.4 75.1 16.0 80.7 39.7 31.5 28.4

2011F 3.0 4.0 13.8 11.6 88.3 16.0 76.9 40.1 31.9 28.8

2012F 3.0 3.9 14.0 11.8 102.9 16.0 73.4 40.0 31.9 28.8

(FYE Dec) Manufacturing overhead growth (%) Capacity utilisation (%) SKU

2009 10.0% 96.0% 580

2010F 10.0% 96.0% 609

2011F 10.0% 96.0% 640

2012F 10.0% 96.0% 700

12M - FORWARD FD CORE P/E (X)

CASH FLOW (RM m, FYE Dec) Pretax profit Depreciation & non–cash adj. Working capital changes Cash tax paid Others Cash flow from operations Capex Net investments & sale of FA Others Cash flow from investing Debt raised/(repaid) Equity raised/(repaid) Dividends paid Cash interest & others Cash flow from financing Change in cash Change in net cash/(debt) Ending net cash/(debt)

2009 (3.4) 1.9 11.8 9.4 21.8 20.1 100.0 38.6 30.4 27.5

KEY DRIVERS

BALANCE SHEET (RM m, end Dec) Fixed assets Intangible assets Other long-term assets Total non-current assets Cash and equivalents Stocks Trade debtors Other current assets Total current assets Trade creditors Short-term borrowings Other current liabilities Total current liabilities Long-term borrowings Other long-term liabilities Total long-term liabilities Shareholders’ funds Minority interests NTA/share (RM)

2008 16.9 10.9 11.4 8.8 N/A 22.8 131.5 35.8 28.1 25.4

(FYE Dec) Revenue growth (%) EBITDA growth (%) Pretax margins (%) Net profit margins (%) Interest cover (x) Effective tax rates (%) Net dividend payout (%) Debtors turnover (days) Stock turnover (days) Creditors turnover (days)

2008 441 74 (11) (111) (10) 383 (82) 8 0 (74) (35) 0 (434) 0 (468) (160) (125) (211)

2009 440 88 (23) (112) 1 395 (83) 8 0 (75) (29) 0 (411) 0 (440) (120) (91) (302)

2010F 519 84 (24) (113) 141 607 (84) 8 0 (76) (24) 0 (342) 0 (366) 165 189 (113)

2011F 544 84 (13) (83) (75) 458 (85) 8 0 (77) (20) 0 (342) 0 (362) 19 39 (75)

2012F 571 85 (13) (87) (97) 458 (86) 8 0 (78) (17) 0 (342) 0 (359) 21 38 (37)

23.0

22.0

21.0

20.0

19.0

18.0

17.0 Dec-07

Apr-08

Aug-08

Source: Company, CIMB Research, Bloomberg

The S.E.A. Navigator – Malaysia 2011

[ 149 ]

Dec-08

Apr-09

Aug-09

Dec-09

Apr-10

Aug-10

Dec-10

Syariah-compliant stock

Pelikan International Corp Bhd

NEUTRAL

Maintained

RM1.21

@07/12/10

Flying low in Europe

MALAYSIA

2011 OUTLOOK

CIMB Research Report

Target: RM1.40 Retail

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: 12-m price range:

RM620m/US$198m 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 Revenue (RM m) EBITDA (RM m) EBITDA margins (%) Pretax profit (RM m) Net profit (RM m) EPS (sen) EPS growth (%) P/E (x) Gross DPS (sen) Dividend yield (%) P/BV (x) ROE (%) Net gearing (%) P/FCFE (x) EV/EBITDA (x) % change in EPS estimates CIMB/Consensus (x)

2008 1,286.6 108.3 8.4% 53.7 40.5 7.9 (56.5%) 15.3 1.8 1.5% 0.8 7.9% 47.8% (55.9) 8.4

2009 1,153.8 115.6 10.0% 58.7 43.1 8.4 6.3% 14.4 1.8 1.5% 0.7 7.7% 54.3% (33.3) 8.4

2010F 1,798.0 152.1 8.5% 79.4 65.0 12.7 51.0% 9.5 1.8 1.5% 0.7 9.0% 45.2% (2.4) 7.0 1.03

2011F 2,013.8 155.6 7.7% 90.8 76.2 14.9 17.2% 8.1 1.8 1.5% 0.7 8.5% 32.6% 6.8 6.3 0.97

2012F 2,315.8 172.1 7.4% 115.2 100.4 19.6 31.7% 6.2 1.8 1.5% 0.6 10.2% 21.0% 6.4 5.2 1.03

Source: Company, CIMB Research, Bloomberg

Price chart

Corporate profile

1.5 2.50 1.4 2.00 1.3 1.50

1.2

1.00

1.1

0.50

1.0 0.9 De c-09

0.00 Ma y-10

Volume 1m (R.H.S ca le )

Source: Bloomberg

Oct-10 P e lika n Inte rna tiona l Corp Bhd

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.

The S.E.A. Navigator – Malaysia 2011

[ 150 ]

Financial tables KEY RATIOS

PROFIT & LOSS (RM m, FYE Dec) Revenue Operating expenses EBITDA Depreciation & amortisation EBIT Net interest & invt income Associates’ contribution Exceptional items Others Pretax profit Tax Minority interests Net profit Adj. wt. shares (m) Unadj. year-end shares (m)

2008 1,287 (1,178) 108 (27) 82 (32) 4 0 0 54 (12) (1) 41 513 342

2009 1,154 (1,038) 116 (33) 83 (28) 4 0 0 59 (8) (7) 43 513 342

2010F 1,798 (1,646) 152 (40) 112 (35) 2 0 0 79 (7) (7) 65 513 513

2011F 2,014 (1,858) 156 (41) 114 (27) 4 0 0 91 (7) (7) 76 513 513

2012F 2,316 (2,144) 172 (41) 131 (19) 4 0 0 115 (7) (7) 100 513 513

2011F 567 119 285 971 120 518 598 31 1,267 466 299 28 794 139 330 469 934 42 1.59

2012F 556 119 285 960 213 537 598 49 1,396 483 299 28 810 139 330 469 1,027 49 1.77

2008 364 119 285 768 77 312 311 31 731 249 165 28 442 182 313 494 543 20 1.24

2009 360 122 317 799 63 290 311 34 697 207 235 21 463 153 280 433 573 27 1.32

2010F 579 119 285 983 102 515 596 31 1,245 464 369 28 860 139 329 468 864 34 1.45

2010F 55.8 31.6 4.4 3.6 3.3 8.8 10.6 92.1 81.7 68.1

2011F 12.0 2.3 4.5 3.8 4.2 7.9 9.0 108.2 93.7 84.3

2012F 15.0 10.6 5.0 4.3 6.8 6.4 6.9 94.2 83.1 74.8

(FYE Dec) Revenue growth-Germany (%) Exchange rate (Euro/USD) Rev growth-Latin America, Asia (%)

2009 -10.0% 1.40 5.0%

2010F -5.0% 1.35 5.0%

2011F -3.0% 1.35 5.0%

2012F 6.0% 1.35 0.0%

12M - FORWARD FD CORE P/E (X)

CASH FLOW (RM m, FYE Dec) Pretax profit Depreciation & non–cash adj. Working capital changes Cash tax paid Others Cash flow from operations Capex Net investments & sale of FA Others Cash flow from investing Debt raised/(repaid) Equity raised/(repaid) Dividends paid Cash interest & others Cash flow from financing Change in cash Change in net cash/(debt) Ending net cash/(debt)

2009 (10.3) 6.7 5.1 3.7 3.0 14.1 16.0 98.3 95.2 72.2

KEY DRIVERS

BALANCE SHEET (RM m, end Dec) Fixed assets Intangible assets Other long-term assets Total non-current assets Cash and equivalents Stocks Trade debtors Other current assets Total current assets Trade creditors Short-term borrowings Other current liabilities Total current liabilities Long-term borrowings Other long-term liabilities Total long-term liabilities Shareholders’ funds Minority interests NTA/share (RM)

2008 7.7 (30.7) 4.2 3.1 2.6 22.5 17.0 89.9 90.0 78.3

(FYE Dec) Revenue growth (%) EBITDA growth (%) Pretax margins (%) Net profit margins (%) Interest cover (x) Effective tax rates (%) Net dividend payout (%) Debtors turnover (days) Stock turnover (days) Creditors turnover (days)

2008 54 27 (44) (11) 29 55 (34) 11 (12) (35) 1 0 (7) (52) (57) (38) (39) (269)

2009 59 33 (21) (18) 26 78 (43) 8 (68) (102) 33 0 (7) (25) 2 (22) (55) (324)

2010F 79 40 (95) (8) 8 24 (250) 0 0 (250) 0 185 (7) (35) 143 (83) (83) (407)

2011F 91 41 (4) (8) 29 149 (30) 0 0 (30) 0 0 (7) (24) (30) 89 89 (319)

2012F 115 41 (23) (8) 21 146 (30) 0 (1) (31) 0 0 (7) (16) (22) 93 93 (225)

50.0 45.0 40.0 35.0 30.0 25.0 20.0 15.0 10.0 5.0 Dec-07

Apr-08

Aug-08

Source: Company, CIMB Research, Bloomberg

The S.E.A. Navigator – Malaysia 2011

[ 151 ]

Dec-08

Apr-09

Aug-09

Dec-09

Apr-10

Aug-10

Dec-10

Syariah-compliant stock

Petra Perdana

TRADING BUY

Maintained

RM0.77

@07/12/10

In calmer waters

MALAYSIA

2011 OUTLOOK

CIMB Research Report

Target: RM0.98 Oil & Gas - Equipment & Svs

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: 12-m price range:

RM347m/US$110m 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 Revenue (RM m) EBITDA (RM m) EBITDA margins (%) Pretax profit (RM m) Net profit (RM m) EPS (sen) EPS growth (%) P/E (x) Core EPS (sen) Core EPS growth (%) Core P/E (x) FD core EPS (sen) FD core P/E (x) Gross DPS (sen) Dividend yield (%) P/BV (x) ROE (%) Net gearing (%) P/FCFE (x) EV/EBITDA (x) % change in EPS estimates CIMB/Consensus (x)

2008 669.6 163.8 24.5% 119.3 84.9 28.5 (45.5%) 2.7 21.0 (19.5%) 3.7 21.0 3.7 2.8 3.6% 0.5 19.0% 35.2% 32.0 2.8

2009 605.7 85.3 14.1% 48.7 29.3 9.9 (65.5%) 7.8 5.7 (72.9%) 13.6 5.7 13.6 2.0 2.6% 0.4 5.8% 26.6% 38.4 5.7

2010F 448.7 19.5 4.3% (36.7) (40.3) (12.0) (222.1%) nm (9.3) (264.1%) nm (7.9) nm 2.0 2.6% 0.4 (6.9%) 25.1% 4.9 26.4 1.19

2011F 501.2 84.3 16.8% 37.9 31.6 7.0 158.4% 11.0 6.0 163.9% 12.9 5.2 14.7 2.0 2.6% 0.6 5.3% 24.8% 42.0 7.2 0.71

2012F 536.2 99.3 18.5% 48.2 41.9 9.3 32.5% 8.3 8.2 38.3% 9.4 7.2 10.6 2.0 2.6% 0.6 7.1% 24.5% 41.7 6.1 0.82

Source: Company, CIMB Research, Bloomberg

Price chart

Corporate profile

1.7

2.50 1.5

2.00 1.3

1.50 1.1

1.00

0.9 0.7 De c-09

0.50 0.00 Ma y-10 Volume 10m (R.H.S ca le )

Source: Bloomberg

Oct-10 P e tra P e rda na

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. The S.E.A. Navigator – Malaysia 2011

[ 152 ]

Financial tables KEY RATIOS

PROFIT & LOSS (RM m, FYE Dec) Revenue Operating expenses EBITDA Depreciation & amortisation EBIT Net interest & invt income Associates’ contribution Exceptional items Others Pretax profit Tax Minority interests Net profit Adj. wt. shares (m) Unadj. year-end shares (m)

2008 670 (506) 164 (42) 121 (25) 0 23 0 119 (18) (17) 85 298 298

2009 606 (520) 85 (49) 36 0 0 12 0 49 (12) (7) 29 298 298

2010F 449 (429) 20 (36) (16) (12) 0 (9) 0 (37) (1) (3) (40) 335 335

2011F 501 (417) 84 (40) 44 (12) 0 5 0 38 (1) (5) 32 450 450

2012F 536 (437) 99 (45) 55 (12) 0 5 0 48 (1) (5) 42 450 450

2008 444 0 0 444 56 36 212 110 414 53 230 66 349 1 10 11 439 59 1.47

2009 492 0 0 492 58 36 217 151 461 54 230 6 290 1 10 11 570 82 1.91

2010F 493 0 0 493 59 36 221 174 490 57 230 0 287 1 11 12 599 85 1.79

2011F 493 0 0 493 61 37 225 174 497 61 230 1 292 1 12 13 594 90 1.32

2012F 493 0 0 493 63 37 230 174 503 64 230 1 295 1 13 14 591 95 1.31

2008 119 42 (1) (18) 313 456 (451) 1 3 (448) 10 0 (6) (12) (8) 1 (9) (175)

2009 49 49 (4) (18) 487 563 (678) 130 3 (545) 0 0 (4) (12) (16) 2 2 (173)

2010F (37) 36 (2) (16) 714 695 (678) 1 0 (677) 46 0 (5) (12) 30 48 2 (172)

2011F 38 40 (1) 0 618 696 (678) 2 0 (676) 0 0 (6) (12) (18) 2 2 (170)

2012F 48 45 (2) (1) 605 695 (678) 3 0 (675) 0 0 (6) (12) (18) 2 2 (168)

2010F (25.9) (77.1) (8.2) (9.0) (1.3) N/A N/A 178.0 29.4 45.2

2011F 11.7 332.5 7.6 6.3 3.6 2.9 21.1 162.6 26.6 43.1

2012F 7.0 17.7 9.0 7.8 4.4 2.3 15.9 155.0 25.1 42.7

(FYE Dec) Charter rate (US$ per horse power) Number of vessels Order book (RM m) Overseas rev contribution (%) Vessel utilisation rate (%)

2009 2.30 20 1,500 16.0% 55.0%

2010F 2.50 29 1,500 16.0% 60.0%

2011F 2.70 29 1,500 16.0% 65.0%

2012F 2.80 29 1,500 16.0% 70.0%

12M - FORWARD FD CORE P/E (X)

CASH FLOW (RM m, FYE Dec) Pretax profit Depreciation & non–cash adj. Working capital changes Cash tax paid Others Cash flow from operations Capex Net investments & sale of FA Others Cash flow from investing Debt raised/(repaid) Equity raised/(repaid) Dividends paid Cash interest & others Cash flow from financing Change in cash Change in net cash/(debt) Ending net cash/(debt)

2009 (9.5) (47.9) 8.0 4.8 1.1 25.4 15.0 129.3 21.5 32.4

KEY DRIVERS

BALANCE SHEET (RM m, end Dec) Fixed assets Intangible assets Other long-term assets Total non-current assets Cash and equivalents Stocks Trade debtors Other current assets Total current assets Trade creditors Short-term borrowings Other current liabilities Total current liabilities Long-term borrowings Other long-term liabilities Total long-term liabilities Shareholders’ funds Minority interests NTA/share (RM)

2008 0.7 1.4 17.8 12.7 3.7 14.8 7.3 114.7 19.3 28.0

(FYE Dec) Revenue growth (%) EBITDA growth (%) Pretax margins (%) Net profit margins (%) Interest cover (x) Effective tax rates (%) Net dividend payout (%) Debtors turnover (days) Stock turnover (days) Creditors turnover (days)

41.0 31.0 21.0 11.0 1.0 -9.0 -19.0 -29.0 -39.0 -49.0 Dec-07

Apr-08

Aug-08

Source: Company, CIMB Research, Bloomberg

The S.E.A. Navigator – Malaysia 2011

[ 153 ]

Dec-08

Apr-09

Aug-09

Dec-09

Apr-10

Aug-10

Dec-10

Syariah-compliant stock

Petronas Dagangan Bhd

OUTPERFORM

Maintained

RM11.70

@07/12/10

Refuel for dividends here

MALAYSIA

2011 OUTLOOK

CIMB Research Report

Target: RM15.40 Oil & Gas - Retail

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 23 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 Revenue (RM m) EBITDA (RM m) EBITDA margins (%) Pretax profit (RM m) Net profit (RM m) EPS (sen) EPS growth (%) P/E (x) Gross DPS (sen) Dividend yield (%) P/BV (x) ROE (%) Net cash per share (RM) P/FCFE (x) EV/EBITDA (x) % change in EPS estimates CIMB/Consensus (x)

2009 24,367.6 1,039.0 4.3% 810.3 578.7 58.2 (12.5%) 20.1 45.0 3.8% 2.2 11.7% 0.62 23.1 10.6

2010 20,687.0 1,280.4 6.2% 1,046.0 752.9 75.8 30.1% 15.4 60.0 5.1% 1.9 13.2% 0.69 17.7 8.6

2011F 25,395.6 1,460.2 5.8% 1,220.2 883.8 89.0 17.4% 13.2 85.0 7.3% 1.8 14.1% 0.76 12.7 7.5 1.13

2012F 27,932.3 1,592.1 5.7% 1,341.7 972.5 97.9 10.0% 12.0 85.0 7.3% 1.6 14.3% 0.83 12.6 6.8 1.17

2013F 30,782.3 1,753.6 5.7% 1,492.3 1,082.1 108.9 11.3% 10.7 85.0 7.3% 1.5 14.4% 0.91 12.5 6.1 1.21

Source: Company, CIMB Research, Bloomberg

Price chart

Corporate profile

12.1

2.50

11.6 11.1

2.00

10.6

1.50

10.1 9.6

1.00

9.1

0.50

8.6 8.1 De c -09

0.00 Ma y-10

Volume 1m (R.H.S ca le )

Source: Bloomberg

Oct-10 P e trona s Da g a ng a n Bhd

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.

The S.E.A. Navigator – Malaysia 2011

[ 154 ]

Financial tables KEY RATIOS

PROFIT & LOSS (RM m, FYE Mar) Revenue Operating expenses EBITDA Depreciation & amortisation EBIT Net interest & invt income Associates’ contribution Exceptional items Others Pretax profit Tax Minority interests Net profit Adj. wt. shares (m) Unadj. year-end shares (m)

2009 2010 2011F 24,368 20,687 25,396 (23,329) (19,407) (23,935) 1,039 1,280 1,460 (235) (246) (258) 804 1,034 1,202 6 11 17 0 0 1 0 0 0 0 0 0 810 1,046 1,220 (229) (288) (329) (5) (7) (3) 753 884 579 993 993 993 993 993 993

2012F 2013F (FYE Mar) 27,932 30,782 Revenue growth (%) (26,340) (29,029) EBITDA growth (%) 1,592 1,754 Pretax margins (%) (270) (284) Net profit margins (%) 1,322 1,470 Interest cover (x) 19 21 Effective tax rates (%) 1 1 Net dividend payout (%) 0 0 Debtors turnover (days) 0 0 Stock turnover (days) 1,342 1,492 Creditors turnover (days) (362) (403) (7) (7) 972 1,082 993 993 993 993

2009 4,446 0 487 4,933 620 971 2,746 0 4,337 3,315 0 525 3,840 0 90 90 5,290 50 5.33

2010 5,201 0 576 5,777 682 1,067 2,870 0 4,619 3,390 0 775 4,165 0 90 90 6,091 50 6.13

2011F 5,437 0 670 6,107 751 1,252 3,278 0 5,281 3,757 0 1,052 4,809 0 90 90 6,439 50 6.48

2012F 5,737 0 769 6,505 826 1,454 3,695 0 5,974 4,132 0 1,086 5,218 0 91 91 7,120 50 7.17

2013F 6,125 0 872 6,998 908 1,687 4,163 0 6,758 4,554 0 1,128 5,682 0 92 92 7,932 50 7.98

2011F 2012F 2013F 22.8 10.0 10.2 14.0 9.0 10.1 4.8 4.8 4.8 3.5 3.5 3.5 1,997.7 2,196.0 2,442.3 27.0 27.0 27.0 70.7 64.3 57.7 44.2 45.6 46.6 16.7 17.7 18.6 51.4 51.5 51.5

2010 936 371 43.5% 15.4

(FYE Mar) No. of petrol stations Capex (RMm) Market share (%) Sales volume (bn litres)

2011F 966 500 44.0% 17.1

2012F 996 500 44.0% 18.7

2013F 1,026 500 44.0% 20.6

12M - FORWARD FD CORE P/E (X)

CASH FLOW (RM m, FYE Mar) Pretax profit Depreciation & non–cash adj. Working capital changes Cash tax paid Others Cash flow from operations Capex Net investments & sale of FA Others Cash flow from investing Debt raised/(repaid) Equity raised/(repaid) Dividends paid Cash interest & others Cash flow from financing Change in cash Change in net cash/(debt) Ending net cash/(debt)

2010 (15.1) 23.2 5.1 3.6 304.2 27.6 58.6 49.5 18.0 59.1

KEY DRIVERS

BALANCE SHEET (RM m, end Mar) Fixed assets Intangible assets Other long-term assets Total non-current assets Cash and equivalents Stocks Trade debtors Other current assets Total current assets Trade creditors Short-term borrowings Other current liabilities Total current liabilities Long-term borrowings Other long-term liabilities Total long-term liabilities Shareholders’ funds Minority interests NTA/share (RM)

2009 9.3 (7.0) 3.3 2.4 365.6 28.2 57.2 39.3 13.6 48.0

2009 810 235 (142) (200) 0 703 (500) 0 (65) (565) 0 0 (447) 366 (81) 56 56 620

2010 1,046 246 (145) (301) 68 915 (500) 0 (68) (568) 0 0 (596) 312 (284) 62 62 682

2011F 1,220 258 (226) (329) 256 1,179 (500) 0 (75) (575) 0 0 (844) 309 (535) 68 68 751

2012F 1,342 270 (243) (362) 257 1,264 (500) 0 (78) (578) 0 0 (844) 234 (610) 75 75 826

2013F 1,492 284 (280) (403) 259 1,353 (500) 0 (81) (581) 0 0 (844) 155 (689) 83 83 908

15.0

14.0

13.0

12.0

11.0

10.0

9.0 Dec-07

Apr-08

Aug-08

Source: Company, CIMB Research, Bloomberg

The S.E.A. Navigator – Malaysia 2011

[ 155 ]

Dec-08

Apr-09

Aug-09

Dec-09

Apr-10

Aug-10

Dec-10

Proton Holdings Bhd

TRADING BUY

Maintained

RM4.84

@06/12/10

Steering a restructuring course

MALAYSIA

2011 OUTLOOK

CIMB Research Report

Target: RM5.95 Autos

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 Revenue (RM m) EBITDA (RM m) EBITDA margins (%) Pretax profit (RM m) Net profit (RM m) EPS (sen) EPS growth (%) P/E (x) Core EPS (sen) Core EPS growth (%) Core P/E (x) Gross DPS (sen) Dividend yield (%) P/BV (x) ROE (%) Net cash per share (RM) P/FCFE (x) EV/EBITDA (x) % change in EPS estimates CIMB/Consensus (x)

2009 6,518.8 347.0 5.3% (319.2) (301.8) (55.0) (263.5%) nm (4.3) (154.4%) nm 5.0 1.0% 0.5 (5.7%) 1.01 (13.6) 5.6

2010 8,226.9 667.2 8.1% 260.9 218.9 39.9 172.5% 12.1 41.2 1,064.4% 11.7 20.0 4.1% 0.5 4.2% 2.69 3.7 1.5

2011F 9,001.6 838.2 9.3% 414.5 360.6 65.7 64.7% 7.4 65.7 59.2% 7.4 10.0 2.1% 0.5 6.6% 2.10 (6.8) 1.6 1.13

2012F 9,531.6 915.3 9.6% 458.1 398.5 72.6 10.5% 6.7 72.6 10.5% 6.7 10.0 2.1% 0.4 6.8% 2.76 6.8 1.1 1.14

2013F 10,012.7 964.0 9.6% 489.6 426.0 77.6 6.9% 6.2 77.6 6.9% 6.2 10.0 2.1% 0.4 6.9% 3.52 6.0 0.6 1.15

Source: Company, CIMB Research, Bloomberg

Price chart

Corporate profile

5.2

4.50

5.0

4.00 3.50

4.8

3.00

4.6

2.50

4.4

2.00

4.2

1.50

4.0

1.00

3.8 3.6 De c-09

0.50 0.00 Ma y-10 Volume 1m (R.H.S ca le )

Oct-10 P roton Holding s Bhd

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.

Source: Bloomberg

The S.E.A. Navigator – Malaysia 2011

[ 156 ]

Financial tables KEY RATIOS

PROFIT & LOSS (RM m, FYE Mar) Revenue Operating expenses EBITDA Depreciation & amortisation EBIT Net interest & invt income Associates’ contribution Exceptional items Others Pretax profit Tax Minority interests Net profit Adj. wt. shares (m) Unadj. year-end shares (m)

2009 6,519 (6,172) 347 (450) (103) 28 20 (278) 15 (319) 17 0 (302) 549 549

2010 8,227 (7,560) 667 (433) 235 16 6 (9) 13 261 (42) 0 219 549 549

2011F 9,002 (8,163) 838 (458) 380 28 6 0 0 414 (54) 0 361 549 549

2012F 9,532 (8,616) 915 (483) 432 20 6 0 0 458 (60) 0 399 549 549

2013F 10,013 (9,049) 964 (508) 456 27 6 0 0 490 (64) 0 426 549 549

(FYE Mar) Revenue growth (%) EBITDA growth (%) Pretax margins (%) Net profit margins (%) Interest cover (x) Effective tax rates (%) Net dividend payout (%) Debtors turnover (days) Stock turnover (days) Creditors turnover (days)

2012F 3,238 593 398 4,228 1,657 1,422 1,066 81 4,226 1,889 115 346 2,350 26 67 93 6,010 0 9.86

2013F 3,197 593 393 4,184 2,061 1,494 1,120 81 4,755 1,984 104 363 2,451 23 67 91 6,395 0 10.56

(FYE Mar) Production capacity (units) Car sales (units) Market share (%)

2009 2,827 461 407 3,694 914 1,395 890 206 3,405 1,278 306 300 1,884 55 59 114 5,102 0 8.45

2010 2,633 593 407 3,634 1,652 1,227 920 81 3,881 1,630 142 300 2,073 32 67 99 5,333 0 8.63

2011F 3,253 593 403 4,248 1,308 1,343 1,007 81 3,738 1,784 128 326 2,238 29 67 96 5,652 0 9.21

2011F 9.4 25.6 4.6 4.0 51.2 13.0 11.4 39.1 52.1 69.2

2012F 5.9 9.2 4.8 4.2 64.7 13.0 10.3 39.7 52.9 70.3

2013F 5.0 5.3 4.9 4.3 75.8 13.0 9.7 39.9 53.1 70.6

2010 380,000 156,653 26.9%

2011F 2012F 2013F 380,000 380,000 380,000 170,885 178,005 186,577 27.0% 27.0% 27.8%

12M - FORWARD FD CORE P/E (X)

CASH FLOW (RM m, FYE Mar) Pretax profit Depreciation & non–cash adj. Working capital changes Cash tax paid Others Cash flow from operations Capex Net investments & sale of FA Others Cash flow from investing Debt raised/(repaid) Equity raised/(repaid) Dividends paid Cash interest & others Cash flow from financing Change in cash Change in net cash/(debt) Ending net cash/(debt)

2010 26.2 92.3 3.2 2.7 19.5 16.1 37.6 40.2 58.2 64.5

KEY DRIVERS

BALANCE SHEET (RM m, end Mar) Fixed assets Intangible assets Other long-term assets Total non-current assets Cash and equivalents Stocks Trade debtors Other current assets Total current assets Trade creditors Short-term borrowings Other current liabilities Total current liabilities Long-term borrowings Other long-term liabilities Total long-term liabilities Shareholders’ funds Minority interests NTA/share (RM)

2009 16.0 16.5 (4.9) (4.6) (7.2) N/A N/A 52.1 69.9 70.4

2009 (319) 450 (234) 40 365 302 (500) 0 (142) (642) 117 0 (21) (68) 28 (312) (429) 553

2010 261 433 609 17 (30) 1,290 (500) 0 108 (392) (186) 0 0 27 (160) 738 925 1,478

2011F 414 458 (49) (42) (684) 98 (500) 0 0 (500) (17) 0 (82) 157 58 (344) (327) 1,151

2012F 458 483 (33) (54) 33 886 (500) 0 0 (500) (16) 0 (41) 20 (37) 349 365 1,516

2013F 490 508 (30) (60) 24 932 (500) 0 0 (500) (14) 0 (41) 27 (28) 404 418 1,933

43.0 38.0 33.0 28.0 23.0 18.0 13.0 8.0 3.0 Dec-07

Apr-08

Aug-08

Source: Company, CIMB Research, Bloomberg

The S.E.A. Navigator – Malaysia 2011

[ 157 ]

Dec-08

Apr-09

Aug-09

Dec-09

Apr-10

Aug-10

Dec-10

Public Bank Bhd

OUTPERFORM

Maintained

RM12.80

@07/12/10

Banking on its tradition of consistency

MALAYSIA

2011 OUTLOOK

CIMB Research Report

Target: RM16.10 Banks

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, led by 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 Net interest income (RM m) Non-interest income (RM m) Total income (RM m) Loan loss provisions (RM m) Pretax profit (RM m) Net profit (RM m) EPS (sen) EPS growth (%) P/E (x) Gross DPS (sen) Dividend yield (%) P/BV (x) ROE (%) % change in EPS estimates CIMB/Consensus (x)

2008 3,727.3 1,609.7 5,739.2 (548.6) 3,379.1 2,581.2 70.1 20% 18.2 87.0 6.8% 4.9 27.3%

2009 4,036.4 1,874.7 6,124.9 (691.0) 3,321.4 2,517.3 69.3 (1%) 18.5 77.2 6.0% 4.2 24.5%

2010F 4,745.8 2,036.6 6,998.6 (596.6) 4,159.3 3,027.3 85.1 23% 15.0 62.4 4.9% 3.5 25.2% 1.00

2011F 5,499.7 2,254.4 7,992.8 (675.1) 4,894.1 3,525.5 99.8 17% 12.8 73.2 5.7% 3.0 25.1% 1.04

2012F 6,283.6 2,454.0 8,999.7 (711.8) 5,756.2 4,150.3 117.5 18% 10.9 86.2 6.7% 2.6 25.4% 1.08

Source: Company, CIMB Research, Bloomberg

Price chart

Corporate profile

13.2

1.20

12.7

1.00

12.2

0.80

11.7

0.60

11.2

0.40

10.7

0.20

10.2 De c-09

0.00 Ma y-10 Volume 10m (R.H.S ca le )

Source: Bloomberg

Oct-10 P ublic Ba nk Bhd

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.

The S.E.A. Navigator – Malaysia 2011

[ 158 ]

Financial tables KEY RATIOS

PROFIT & LOSS (RM m, FYE Dec) Net interest income Non-interest income Other income Total income Overhead expenses Pre-provision profit Loan loss provisions Associates’ contribution Exceptional items Others Pretax profit Tax Minority interests Net profit Adj. wt. shares (m) Unadj. year-end shares (m)

2008 3,727 1,610 402 5,739 (1,791) 3,948 (549) 12 0 (33) 3,379 (757) (41) 2,581 3,680 3,532

2009 4,036 1,875 214 6,125 (2,110) 4,015 (691) 12 0 (15) 3,321 (770) (34) 2,517 3,635 3,532

2010F 4,746 2,037 216 6,999 (2,247) 4,752 (597) 10 0 (6) 4,159 (1,008) (124) 3,027 3,558 3,532

2011F 5,500 2,254 239 7,993 (2,393) 5,599 (675) 11 0 (41) 4,894 (1,235) (134) 3,525 3,532 3,532

2012F 6,284 2,454 262 9,000 (2,535) 6,465 (712) 11 0 (8) 5,756 (1,450) (156) 4,150 3,532 3,532

2008 43,680 11,940 55,620 118,386 13,913 1,303 2,072 4,868 140,543 196,163 151,185 21,221 7,163 6,365 185,934 9,537 692 2.59

2009 47,863 8,268 56,131 135,336 18,786 1,341 2,058 3,485 161,005 217,136 170,892 22,636 8,032 3,861 205,421 11,023 692 3.08

2010F 50,194 10,204 60,397 157,670 16,578 1,394 2,058 3,456 181,156 241,554 190,959 24,735 8,032 4,125 227,851 13,011 692 3.68

2011F 53,314 9,501 62,814 181,965 18,070 1,439 2,058 3,623 207,156 269,970 214,522 27,035 8,032 4,561 254,150 15,127 692 4.28

2012F 58,071 10,507 68,578 207,562 18,375 1,483 2,058 3,767 233,245 301,823 241,017 29,556 8,032 5,025 283,631 17,501 692 4.95

2008 12.3 15.5 12.5 2.24 31.2 22.4 91.8

2009 6.7 1.7 (1.7) 2.21 34.4 23.2 83.6

2010F 14.3 18.4 25.2 2.32 32.1 24.2 55.0

2011F 14.2 17.8 17.7 2.38 29.9 25.2 55.0

2012F 12.6 15.5 17.6 2.41 28.2 25.2 55.0

2008 19.1 9.0 78.3 1.0 0.9 159.7 1.5 13.7

2009 14.4 13.0 79.2 1.0 0.8 172.4 1.5 14.7

2010F 16.6 11.7 82.6 1.0 0.8 175.5 1.5 15.5

2011F 2012F 15.5 14.1 12.3 12.4 84.8 86.1 1.0 1.0 0.7 0.7 181.8 185.0 1.5 1.5 15.4 15.5

KEY DRIVERS

BALANCE SHEET (RM m, end Dec) Cash & deposits with FIs Marketable securities Total current assets Net loans & advances Long-term investments Fixed assets Intangible assets Other long-term assets Total long-term assets Total assets Customer deposits Deposits of other FIs Subordinated debts Other long-term liabilities Total liabilities Shareholders’ funds Minority interests BV/share (RM)

(FYE Dec) Total income growth (%) Pre-provision profit growth (%) Pretax growth (%) Net interest margin (%) Cost-income ratio (%) Effective tax rates (%) Net dividend payout (%)

(FYE Dec) Loan growth (%) Deposit growth (%) Loan-deposit ratio (%) Gross NPL (%) Net NPL (%) Loan loss reserve (%) GP ratio (%) RWCR (%)

12M - FORWARD FD CORE P/E (X)

CURRENT P/BV (X)

17.0

4.60

16.0

4.10

15.0 14.0

3.60

13.0 12.0

3.10

11.0 10.0

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

9.0 Dec-07

Apr-08

Aug-08

Source: Company, CIMB Research, Bloomberg

The S.E.A. Navigator – Malaysia 2011

[ 159 ]

Dec-08

Apr-09

Aug-09

Dec-09

Apr-10

Aug-10

Dec-10

Syariah-compliant stock

Puncak Niaga Holdings Bhd

NEUTRAL

Maintained

RM2.54

@06/12/10

Waiting for the takeover lifeboat

MALAYSIA

2011 OUTLOOK

CIMB Research Report

Target: RM2.89 Water Treatment & Services

PNH MK / PNHB.KL

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

• Maintain NEUTRAL. The takeover of water assets in Selangor made little progress in 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 Revenue (RM m) EBITDA (RM m) EBITDA margins (%) Pretax profit (RM m) Net profit (RM m) EPS (sen) EPS growth (%) P/E (x) Gross DPS (sen) Dividend yield (%) P/BV (x) ROE (%) Net gearing (%) Net cash per share (RM) P/FCFE (x) EV/EBITDA (x) % change in EPS estimates CIMB/Consensus (x)

2008 1,476.1 649.6 44.0% 57.0 24.9 6.1 (81.4%) 41.9 13.5 5.3% 0.7 1.7% 9.5% N/A (4.5) 2.0

2009 1,885.4 1,072.3 56.9% 313.1 142.6 34.7 472.7% 7.3 13.5 5.3% 0.6 9.0% 39.9% N/A 1.7 1.9

2010F 2,214.8 1,354.4 61.2% 312.4 193.2 47.0 35.5% 5.4 13.5 5.3% 0.6 11.0% 40.4% N/A 3.3 1.6 1.25

2011F 2,342.1 1,449.5 61.9% 418.1 248.8 60.5 28.8% 4.2 13.5 5.3% 0.5 12.7% 35.9% N/A 1.7 1.5 1.30

2012F 3,095.9 2,169.4 70.1% 701.2 330.6 80.4 32.9% 3.2 13.5 5.3% 0.4 14.9% N/A 1.26 0.8 0.5 1.24

Source: Company, CIMB Research, Bloomberg

Price chart

Corporate profile 4.50

3.2

4.00 3.50

3.0

3.00 2.50

2.8

2.00 2.6

1.50 1.00

2.4

0.50 2.2 De c-09

0.00 Ma y-10

Volume 1m (R.H.S c a le )

Oct-10 P unc a k Nia g a Holding s Bhd

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.

Source: Bloomberg

The S.E.A. Navigator – Malaysia 2011

[ 160 ]

Financial tables KEY RATIOS

PROFIT & LOSS (RM m, FYE Dec) Revenue Operating expenses EBITDA Depreciation & amortisation EBIT Net interest & invt income Associates’ contribution Exceptional items Others Pretax profit Tax Minority interests Net profit Adj. wt. shares (m) Unadj. year-end shares (m)

2008 1,476 (827) 650 (433) 217 (160) 0 0 0 57 (36) 4 25 411 411

2009 1,885 (813) 1,072 (509) 563 (250) 0 0 0 313 (85) (86) 143 411 411

2010F 2,215 (860) 1,354 (1,016) 339 (26) 0 0 0 312 (81) (38) 193 411 411

2011F 2,342 (893) 1,449 (1,074) 375 43 0 0 0 418 (109) (61) 249 411 411

2012F 3,096 (926) 2,169 (1,420) 750 (49) 0 0 0 701 (182) (188) 331 411 411

2011F 3,555 0 1,232 4,786 3,278 47 243 71 3,638 1,405 71 7 1,483 4,056 517 4,573 2,073 294 5.04

2012F 3,450 0 1,232 4,681 4,637 62 243 87 5,028 1,858 64 8 1,929 4,056 867 4,923 2,375 483 5.78

2008 1,164 0 1,232 2,396 1,299 29 243 50 1,621 869 97 7 974 1,356 69 1,425 1,495 123 3.64

2009 2,762 0 1,232 3,993 2,397 42 243 64 2,746 1,257 88 7 1,352 3,056 460 3,516 1,676 196 4.08

2010F 3,059 0 1,232 4,290 2,694 44 243 67 3,049 1,329 79 7 1,415 3,456 386 3,842 1,848 234 4.49

2010F 17.5 26.3 14.1 8.7 1.6 26.0 20.7 40.0 7.1 213.0

2011F 5.7 7.0 17.9 10.6 2.1 26.0 16.0 37.8 7.1 213.0

2012F 32.2 49.7 22.6 10.7 5.2 26.0 12.1 28.6 6.4 192.3

(FYE Dec) Utilisation rate (%) Tafiff hike (%) Tariff rate (RM per cubic metre)

2009 90.0% 37.0% 2

2010F 90.0% 0.0% 2

2011F 90.0% 0.0% 3

2012F 90.0% 25.0% 4

12M - FORWARD FD CORE P/E (X)

CASH FLOW (RM m, FYE Dec) Pretax profit Depreciation & non–cash adj. Working capital changes Cash tax paid Others Cash flow from operations Capex Net investments & sale of FA Others Cash flow from investing Debt raised/(repaid) Equity raised/(repaid) Dividends paid Cash interest & others Cash flow from financing Change in cash Change in net cash/(debt) Ending net cash/(debt)

2009 27.7 65.1 16.6 7.6 1.6 27.1 28.0 47.0 6.9 205.8

KEY DRIVERS

BALANCE SHEET (RM m, end Dec) Fixed assets Intangible assets Other long-term assets Total non-current assets Cash and equivalents Stocks Trade debtors Other current assets Total current assets Trade creditors Short-term borrowings Other current liabilities Total current liabilities Long-term borrowings Other long-term liabilities Total long-term liabilities Shareholders’ funds Minority interests NTA/share (RM)

2008 7.5 (27.3) 3.9 1.7 0.7 62.5 160.3 60.0 7.0 209.3

(FYE Dec) Revenue growth (%) EBITDA growth (%) Pretax margins (%) Net profit margins (%) Interest cover (x) Effective tax rates (%) Net dividend payout (%) Debtors turnover (days) Stock turnover (days) Creditors turnover (days)

2008 57 433 42 (188) 0 344 (563) 0 0 (563) (11) 0 (15) 230 205 (14) (3) (154)

2009 313 509 361 287 0 1,470 (858) 0 0 (858) (10) 0 (15) (1,189) (1,214) (601) (592) (746)

2010F 312 1,016 66 (162) 0 1,233 (912) 0 0 (912) (9) 0 (15) (400) (424) (103) (94) (840)

2011F 418 1,074 70 14 0 1,576 (970) 0 0 (970) (8) 0 (15) (598) (621) (14) (7) (847)

2012F 701 1,420 421 154 0 2,696 (1,315) 0 0 (1,315) (7) 0 (15) 0 (22) 1,359 1,366 520

44.0 39.0 34.0 29.0 24.0 19.0 14.0 9.0 4.0 Dec-07

Apr-08

Aug-08

Source: Company, CIMB Research, Bloomberg

The S.E.A. Navigator – Malaysia 2011

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Dec-08

Apr-09

Aug-09

Dec-09

Apr-10

Aug-10

Dec-10

Syariah-compliant stock

QSR Brands

NEUTRAL

Maintained

RM5.63

@07/12/10

No birdie for suitors

MALAYSIA

2011 OUTLOOK

CIMB Research Report

Target: RM6.50 Food & Beverages

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 Revenue (RM m) EBITDA (RM m) EBITDA margins (%) Pretax profit (RM m) Net profit (RM m) EPS (sen) EPS growth (%) P/E (x) FD core EPS (sen) FD core P/E (x) Gross DPS (sen) Dividend yield (%) P/BV (x) ROE (%) Net gearing (%) P/FCFE (x) EV/EBITDA (x) % change in EPS estimates CIMB/Consensus (x)

2008 532.8 90.0 16.9% 97.7 85.3 29.8 8.6% 18.9 26.0 21.6 11.0 2.0% 3.5 18.5% 39.1% 80.5 14.7

2009 2,760.3 354.0 12.8% 230.3 90.9 31.8 6.6% 17.7 27.7 20.3 13.0 2.3% 3.5 19.8% 40.1% 89.9 3.7

2010F 2,830.9 400.7 14.2% 254.4 110.1 38.5 21.1% 14.6 33.6 16.8 15.0 2.7% 3.5 24.1% 40.8% 63.7 3.3 0.87

2011F 2,979.5 436.1 14.6% 274.5 125.1 43.7 13.5% 12.9 38.1 14.8 15.0 2.7% 3.5 27.2% 40.8% 47.6 3.0 0.87

2012F 3,137.9 466.6 14.9% 287.4 133.2 46.5 6.5% 12.1 40.6 13.9 15.0 2.7% 3.5 28.7% 41.4% 38.4 2.9 0.76

Source: Company, CIMB Research, Bloomberg

Price chart

Corporate profile

6.5

6.00

6.0

5.00

5.5

4.00 5.0

3.00

4.5

2.00

4.0

1.00

3.5 3.0 De c-09

0.00 Ma y-10 Volume 1m (R.H.S ca le )

Source: Bloomberg

Oct-10 QS R Bra nds

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. The S.E.A. Navigator – Malaysia 2011

[ 162 ]

Financial tables KEY RATIOS

PROFIT & LOSS (RM m, FYE Dec) Revenue Operating expenses EBITDA Depreciation & amortisation EBIT Net interest & invt income Associates’ contribution Exceptional items Others Pretax profit Tax Minority interests Net profit Adj. wt. shares (m) Unadj. year-end shares (m)

2008 533 (443) 90 (25) 65 (8) 41 0 0 98 (14) 2 85 286 286

2009 2,760 (2,406) 354 (115) 239 (9) 0 0 0 230 (72) (67) 91 286 286

2010F 2,831 (2,430) 401 (128) 273 (18) 0 0 0 254 (80) (64) 110 286 286

2011F 2,979 (2,543) 436 (143) 293 (19) 0 0 0 274 (84) (66) 125 286 286

2012F 3,138 (2,671) 467 (159) 308 (20) 0 0 0 287 (88) (67) 133 286 286

2008 313 0 558 870 36 15 21 20 92 17 8 44 69 208 222 430 463 0 1.62

2009 314 0 558 871 37 15 21 21 95 17 9 45 70 212 226 439 457 0 1.60

2010F 320 0 558 877 39 15 22 21 98 17 9 45 71 216 230 447 457 0 1.60

2011F 334 0 559 892 41 16 22 21 100 17 9 45 72 221 235 456 464 0 1.62

2012F 341 0 560 900 43 16 23 20 102 17 10 46 73 225 239 464 464 0 1.62

2008 98 25 0 (23) 25 125 (51) 0 (91) (141) 4 6 (31) 38 18 2 (3) (181)

2009 230 115 0 (76) (133) 135 (50) 0 (90) (140) 5 6 (37) 33 6 2 (3) (184)

2010F 254 128 0 (80) (151) 151 (50) 0 (90) (140) 5 6 (43) 24 (9) 2 (3) (186)

2011F 274 143 0 (84) (178) 155 (50) 0 (94) (144) 5 6 (43) 23 (9) 2 (3) (189)

2012F 287 159 0 (88) (199) 159 (49) 0 (98) (147) 5 6 (43) 22 (10) 2 (3) (192)

2010F 2.6 13.2 9.0 3.9 12.0 31.4 28.9 2.8 2.0 2.2

2011F 5.3 8.8 9.2 4.2 12.0 30.5 25.4 2.7 1.9 2.1

2012F 5.3 7.0 9.2 4.2 11.5 30.5 23.9 2.6 1.8 2.0

(FYE Dec) Consumer: EBITDA margins (%) Raw material price change (%) No. of outlets Same store sales growth (%) Average ticket price (RM)

2009 12.8% -2.4% 265 -5.0% 36

2010F 14.2% 25.9% 281 6.0% 40

2011F 14.6% 4.7% 297 6.0% 40

2012F 14.9% 5.0% 313 6.0% 40

12M - FORWARD FD CORE P/E (X)

CASH FLOW (RM m, FYE Dec) Pretax profit Depreciation & non–cash adj. Working capital changes Cash tax paid Others Cash flow from operations Capex Net investments & sale of FA Others Cash flow from investing Debt raised/(repaid) Equity raised/(repaid) Dividends paid Cash interest & others Cash flow from financing Change in cash Change in net cash/(debt) Ending net cash/(debt)

2009 418.1 293.3 8.3 3.3 20.5 31.2 30.3 2.8 2.0 2.2

KEY DRIVERS

BALANCE SHEET (RM m, end Dec) Fixed assets Intangible assets Other long-term assets Total non-current assets Cash and equivalents Stocks Trade debtors Other current assets Total current assets Trade creditors Short-term borrowings Other current liabilities Total current liabilities Long-term borrowings Other long-term liabilities Total long-term liabilities Shareholders’ funds Minority interests NTA/share (RM)

2008 14.2 28.8 18.3 16.0 6.9 14.3 27.3 14.1 10.3 11.4

(FYE Dec) Revenue growth (%) EBITDA growth (%) Pretax margins (%) Net profit margins (%) Interest cover (x) Effective tax rates (%) Net dividend payout (%) Debtors turnover (days) Stock turnover (days) Creditors turnover (days)

15.0 14.0 13.0 12.0 11.0 10.0 9.0 8.0 7.0 6.0 Dec-07

Apr-08

Aug-08

Source: Company, CIMB Research, Bloomberg

The S.E.A. Navigator – Malaysia 2011

[ 163 ]

Dec-08

Apr-09

Aug-09

Dec-09

Apr-10

Aug-10

Dec-10

RGB International Bhd

UNDERPERFORM

Maintained

RM0.06

@07/12/10

Bad dream coming to an end?

MALAYSIA

2011 OUTLOOK

CIMB Research Report

Target: RM0.06 Gaming

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: 12-m price range:

RM69m/US$22m 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 Revenue (RM m) EBITDA (RM m) EBITDA margins (%) Pretax profit (RM m) Net profit (RM m) EPS (sen) EPS growth (%) P/E (x) Core EPS (sen) Core EPS growth (%) Core P/E (x) Gross DPS (sen) Dividend yield (%) P/BV (x) ROE (%) Net gearing (%) P/FCFE (x) EV/EBITDA (x) % change in EPS estimates CIMB/Consensus (x)

2008 227.8 73.7 32.3% (3.3) (2.9) (0.3) (107.3%) nm 1.0 (78.7%) 6.2 0.0 0.0% 0.3 (1.6%) 63.6% (2.7) 2.3

2009 170.2 20.3 11.9% (60.5) (57.8) (5.6) (1,585.3%) nm (3.2) (427.7%) nm 0.0 0.0% 0.4 (35.8%) 82.2% (1.1) 9.0

2010F 159.1 45.2 28.4% (46.2) (39.0) (3.7) 32.6% nm (3.7) (17.7%) nm 0.0 0.0% 0.8 (34.4%) 232.6% (12.6) 5.3 1.01

2011F 238.6 93.2 39.0% 5.8 4.6 0.4 111.9% 13.5 0.4 111.9% 13.5 0.0 0.0% 0.7 5.5% 161.5% 1.3 2.1 1.11

2012F 266.4 102.3 38.4% 10.0 7.9 0.8 70.9% 7.9 0.8 70.9% 7.9 0.0 0.0% 0.7 8.7% 92.1% 1.0 1.4 0.95

Source: Company, CIMB Research, Bloomberg

Price chart

Corporate profile

0.2

1.20

0.2 0.2

1.00

0.1

0.80

0.1 0.1

0.60

0.1

0.40

0.1 0.0

0.20

0.0 0.0 De c-09

0.00 Ma y-10 Volume 10m (R.H.S c a le )

Source: Bloomberg

Oct-10 RGB Inte rna tiona l Bhd

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.

The S.E.A. Navigator – Malaysia 2011

[ 164 ]

Financial tables KEY RATIOS

PROFIT & LOSS (RM m, FYE Dec) Revenue Operating expenses EBITDA Depreciation & amortisation EBIT Net interest & invt income Associates’ contribution Exceptional items Others Pretax profit Tax Minority interests Net profit Adj. wt. shares (m) Unadj. year-end shares (m)

2008 228 (154) 74 (56) 17 (9) 0 (11) 0 (3) 0 1 (3) 872 872

2009 170 (150) 20 (48) (28) (8) 0 (25) 0 (61) 0 3 (58) 1,042 1,042

2010F 159 (114) 45 (82) (37) (10) 1 0 0 (46) 1 6 (39) 1,042 1,042

2011F 239 (145) 93 (76) 17 (12) 1 0 0 6 0 (1) 5 1,042 1,042

2012F 266 (164) 102 (82) 21 (11) 1 0 0 10 0 (2) 8 1,042 1,042

(FYE Dec) Revenue growth (%) EBITDA growth (%) Pretax margins (%) Net profit margins (%) Interest cover (x) Effective tax rates (%) Net dividend payout (%) Debtors turnover (days) Stock turnover (days) Creditors turnover (days)

2011F 243 0 10 253 69 22 122 37 250 145 194 68 408 11 1 12 87 (3) 0.08

2012F 207 0 11 218 129 25 137 41 331 162 204 78 444 11 1 12 95 (1) 0.09

(FYE Dec) Number of machines sold Average price per machine (RM) No. of revenue sharing machines Avg net win/machine/day (RM)

2008 238 0 9 247 36 12 91 25 163 60 128 13 201 25 1 25 178 5 0.20

2009 283 0 9 292 27 16 87 26 156 103 138 50 291 10 1 11 144 2 0.14

2010F 275 0 9 284 22 15 82 24 143 97 194 46 337 10 1 11 82 (4) 0.08

2010F (6.5) 122.6 (29.0) (24.5) (3.4) N/A N/A 193.6 35.6 229.2

2011F 49.9 106.0 2.4 1.9 1.4 2.5 0.0 156.0 28.7 184.6

2012F 11.7 9.9 3.7 3.0 1.6 2.5 0.0 177.4 32.6 210.0

2009 1,213 73,337 5,348 35

2010F 750 73,337 6,160 39

2011F 1,030 74,804 7,275 50

2012F 1,150 76,300 7,702 53

12M - FORWARD FD CORE P/E (X)

CASH FLOW (RM m, FYE Dec) Pretax profit Depreciation & non–cash adj. Working capital changes Cash tax paid Others Cash flow from operations Capex Net investments & sale of FA Others Cash flow from investing Debt raised/(repaid) Equity raised/(repaid) Dividends paid Cash interest & others Cash flow from financing Change in cash Change in net cash/(debt) Ending net cash/(debt)

2009 (25.3) (72.4) (35.6) (34.0) (3.0) N/A N/A 190.8 29.6 175.3

KEY DRIVERS

BALANCE SHEET (RM m, end Dec) Fixed assets Intangible assets Other long-term assets Total non-current assets Cash and equivalents Stocks Trade debtors Other current assets Total current assets Trade creditors Short-term borrowings Other current liabilities Total current liabilities Long-term borrowings Other long-term liabilities Total long-term liabilities Shareholders’ funds Minority interests NTA/share (RM)

2008 (17.6) (15.3) (1.4) (1.3) 1.8 N/A N/A 171.6 15.2 115.4

2008 (3) 56 5 (1) 13 70 (99) 6 0 (93) 12 5 (4) 3 15 (7) (19) (116)

2009 (61) 48 42 0 61 90 (136) 0 0 (136) (5) 25 0 16 36 (9) (4) (121)

2010F (46) 82 0 0 (48) (12) (40) 0 0 (40) 57 0 0 (10) 47 (5) (62) (183)

2011F 6 76 0 1 26 109 (50) 0 0 (50) 1 0 0 (12) (12) 47 47 (136)

2012F 10 82 0 0 22 113 (53) 0 0 (53) 10 0 0 (11) (1) 60 50 (87)

43.0 33.0 23.0 13.0 3.0 -7.0 -17.0 -27.0 -37.0 -47.0 Dec-07

Apr-08

Aug-08

Source: Company, CIMB Research, Bloomberg

The S.E.A. Navigator – Malaysia 2011

[ 165 ]

Dec-08

Apr-09

Aug-09

Dec-09

Apr-10

Aug-10

Dec-10

RHB Capital Bhd

OUTPERFORM

Maintained

RM8.59

@07/12/10

Surfing on brisk loan growth

MALAYSIA

2011 OUTLOOK

CIMB Research Report

Target: RM10.50 Banks

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 Net interest income (RM m) Non-interest income (RM m) Total income (RM m) Loan loss provisions (RM m) Pretax profit (RM m) Net profit (RM m) EPS (sen) EPS growth (%) P/E (x) Gross DPS (sen) Dividend yield (%) P/BV (x) ROE (%) % change in EPS estimates CIMB/Consensus (x)

2008 2,216.4 841.3 3,445.1 (499.6) 1,422.4 1,048.7 48.7 36% 17.6 19.6 2.3% 2.4 14.1%

2009 2,413.2 946.4 3,665.0 (578.8) 1,538.5 1,201.4 55.8 15% 15.4 22.5 2.6% 2.1 14.5%

2010F 2,737.1 1,188.9 4,243.8 (595.3) 1,941.7 1,455.2 67.6 21% 12.7 27.0 3.1% 1.9 15.8% 1.05

2011F 3,014.1 1,372.9 4,722.3 (629.1) 2,280.3 1,701.0 79.0 17% 10.9 31.6 3.7% 1.7 16.6% 1.09

2012F 3,330.2 1,427.7 5,113.8 (581.3) 2,620.9 1,956.5 90.9 15% 9.5 36.3 4.2% 1.5 16.9% 1.10

Source: Company, CIMB Research, Bloomberg

Price chart

Corporate profile 1.00

8.9

0.90

8.4

0.80

7.9

0.70

7.4

0.60

6.9

0.50 0.40

6.4

0.30

5.9

0.20

5.4 4.9 De c-09

0.10 0.00 Ma y-10 Volume 10m (R.H.S ca le )

Source: Bloomberg

Oct-10 RHB Ca pita l Bhd

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.

The S.E.A. Navigator – Malaysia 2011

[ 166 ]

Financial tables KEY RATIOS

PROFIT & LOSS (RM m, FYE Dec) Net interest income Non-interest income Other income Total income Overhead expenses Pre-provision profit Loan loss provisions Associates’ contribution Exceptional items Others Pretax profit Tax Minority interests Net profit Adj. wt. shares (m) Unadj. year-end shares (m)

2008 2,216 841 387 3,445 (1,513) 1,932 (500) 0 0 (10) 1,422 (373) (1) 1,049 2,154 2,154

2009 2,413 946 305 3,665 (1,566) 2,099 (579) 1 0 18 1,539 (330) (7) 1,201 2,154 2,154

2010F 2,737 1,189 318 4,244 (1,677) 2,567 (595) 0 0 (30) 1,942 (476) (10) 1,455 2,154 2,154

2011F 3,014 1,373 335 4,722 (1,781) 2,941 (629) 0 0 (32) 2,280 (570) (9) 1,701 2,154 2,154

2012F 3,330 1,428 356 5,114 (1,894) 3,220 (581) 0 0 (18) 2,621 (655) (9) 1,956 2,154 2,154

2008 2009 15,008 20,489 11,539 9,953 26,547 30,441 60,596 66,923 9,617 10,980 895 931 3,786 3,786 3,092 1,890 77,986 84,510 104,533 114,951 73,962 84,841 7,416 8,682 6,662 5,673 7,292 8,375 96,692 106,211 8,708 7,814 32 27 4.04 3.63

2010F 19,117 10,427 29,544 76,770 10,728 933 3,786 1,853 94,070 123,615 91,014 7,787 6,662 8,442 113,904 9,677 34 4.49

2011F 20,740 9,459 30,199 85,503 10,045 936 3,786 1,853 102,123 132,322 97,556 8,176 6,662 9,024 121,418 10,868 36 5.05

2012F 21,781 9,501 31,282 94,177 9,605 941 3,786 1,903 110,412 141,695 104,478 8,585 6,662 9,685 129,409 12,248 38 5.69

2008 1.7 2.6 14.1 2.49 43.9 26.2 29.8

2009 6.4 8.6 8.2 2.62 42.7 21.4 30.2

2010F 15.8 22.3 26.2 2.69 39.5 24.5 30.0

2011F 11.3 14.6 17.4 2.72 37.7 25.0 30.0

2012F 8.3 9.5 14.9 2.76 37.0 25.0 30.0

2008 11.2 (2.4) 81.9 4.5 2.2 90.3 1.8 12.7

2009 10.3 14.7 78.9 4.7 2.2 83.4 1.4 14.0

2010F 14.5 7.3 84.4 4.0 1.8 93.4 1.5 15.7

2011F 2012F 11.3 10.0 7.2 7.1 87.6 90.1 3.8 3.7 1.7 1.7 96.4 95.9 1.5 1.6 16.5 17.1

KEY DRIVERS

BALANCE SHEET (RM m, end Dec) Cash & deposits with FIs Marketable securities Total current assets Net loans & advances Long-term investments Fixed assets Intangible assets Other long-term assets Total long-term assets Total assets Customer deposits Deposits of other FIs Subordinated debts Other long-term liabilities Total liabilities Shareholders’ funds Minority interests BV/share (RM)

(FYE Dec) Total income growth (%) Pre-provision profit growth (%) Pretax growth (%) Net interest margin (%) Cost-income ratio (%) Effective tax rates (%) Net dividend payout (%)

(FYE Dec) Loan growth (%) Deposit growth (%) Loan-deposit ratio (%) Gross NPL (%) Net NPL (%) Loan loss reserve (%) GP ratio (%) RWCR (%)

12M - FORWARD FD CORE P/E (X)

CURRENT P/BV (X)

13.0

1.90

12.0 11.0

1.70

10.0

1.50

9.0

1.30

8.0

1.10

7.0 6.0

0.90 5.0

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

4.0 Dec-07

Apr-08

Aug-08

Source: Company, CIMB Research, Bloomberg

The S.E.A. Navigator – Malaysia 2011

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Dec-08

Apr-09

Aug-09

Dec-09

Apr-10

Aug-10

Dec-10

Syariah-compliant stock

SapuraCrest Petroleum

OUTPERFORM

Maintained

RM2.82

@07/12/10

Pumped up by a huge order book

MALAYSIA

2011 OUTLOOK

CIMB Research Report

Target: RM3.30 Oil & Gas - Equipment & Svs

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 Revenue (RM m) EBITDA (RM m) EBITDA margins (%) Pretax profit (RM m) Net profit (RM m) EPS (sen) EPS growth (%) P/E (x) Gross DPS (sen) Dividend yield (%) P/BV (x) ROE (%) Net gearing (%) P/FCFE (x) EV/EBITDA (x) % change in EPS estimates CIMB/Consensus (x)

2009 3,483.8 463.4 13.3% 280.0 114.7 9.0 37.1% 31.2 5.0 1.8% 3.8 13.2% 25.1% 13.2 9.3

2010 3,257.3 339.0 10.4% 364.4 170.2 13.4 47.9% 21.1 7.0 2.5% 4.2 18.8% 19.4% 35.6 13.0

2011F 4,245.3 589.6 13.9% 458.4 213.5 16.8 25.4% 16.8 8.0 2.8% 4.0 24.2% 13.1% 32.2 7.4 0.96

2012F 4,661.2 649.2 13.9% 550.1 272.5 21.4 27.6% 13.2 9.0 3.2% 3.7 29.3% 7.2% 29.2 6.8 1.09

2013F 5,117.7 678.6 13.3% 601.7 290.9 22.8 6.7% 12.3 10.0 3.5% 3.7 30.2% 1.7% 25.7 6.5 0.97

Source: Company, CIMB Research, Bloomberg

Price chart

Corporate profile 0.80

2.9

0.70

2.7

0.60

2.5

0.50 0.40

2.3

0.30 2.1

0.20 1.9 1.7 De c-09

0.10 0.00 Ma y-10 Volume 10m (R.H.S ca le )

Source: Bloomberg

Oct-10 S a pura Cre s t P e trole um

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.

The S.E.A. Navigator – Malaysia 2011

[ 168 ]

Financial tables KEY RATIOS

PROFIT & LOSS (RM m, FYE Jan) Revenue Operating expenses EBITDA Depreciation & amortisation EBIT Net interest & invt income Associates’ contribution Exceptional items Others Pretax profit Tax Minority interests Net profit Adj. wt. shares (m) Unadj. year-end shares (m)

2009 3,484 (3,020) 463 (81) 382 (58) (44) 0 0 280 (31) (134) 115 1,269 1,269

2010 3,257 (2,918) 339 0 339 (22) 47 0 0 364 (31) (163) 170 1,272 1,272

2011F 4,245 (3,656) 590 (90) 500 (75) 33 0 0 458 (83) (162) 213 1,272 1,272

2012F 4,661 (4,012) 649 (94) 555 (56) 51 0 0 550 (99) (179) 272 1,272 1,273

2013F 5,118 (4,439) 679 (99) 580 (15) 37 0 0 602 (114) (196) 291 1,273 1,273

2012F 1,061 140 110 1,311 791 50 1,814 0 2,654 1,309 481 99 1,888 428 8 436 957 684 0.64

2013F 1,097 141 111 1,349 871 50 1,832 0 2,753 1,322 482 115 1,919 419 10 429 967 788 0.65

2009 904 150 118 1,171 594 50 1,760 0 2,404 1,270 478 17 1,765 454 9 463 946 401 0.63

2010 949 140 108 1,196 653 50 1,778 0 2,481 1,283 479 69 1,830 445 8 453 860 534 0.57

2011F 1,014 122 109 1,245 719 50 1,796 0 2,564 1,296 480 83 1,858 436 8 444 903 604 0.61

2011F 30.3 73.9 10.8 5.0 6.1 18.0 35.8 153.6 4.3 110.8

2012F 9.8 10.1 11.8 5.8 8.7 18.0 31.5 141.3 3.9 102.0

2013F 9.8 4.5 11.8 5.7 25.2 19.0 32.8 130.0 3.6 93.8

(FYE Jan) Overseas rev contribution (%) Downstream contribution to rev (%) Upstream contribution to rev (%) Order book (RM m) Overall Gross Margin (%) Charter rate (US$ per horse power) Number of vessels Vessel utilisation rate (%) O&G contribution to order book (%)

2010 30.0% 1.0% 99.0% 15,000 10.4% 1.80 3 90.0% 100.0%

2011F 2012F 2013F 40.0% 50.0% 50.0% 1.0% 1.0% 1.0% 99.0% 99.0% 99.0% 13,500 12,000 10,500 13.9% 13.9% 13.3% 2.00 2.00 2.00 4 4 4 90.0% 90.0% 90.0% 100.0% 100.0% 100.0%

12M - FORWARD FD CORE P/E (X)

CASH FLOW (RM m, FYE Jan) Pretax profit Depreciation & non–cash adj. Working capital changes Cash tax paid Others Cash flow from operations Capex Net investments & sale of FA Others Cash flow from investing Debt raised/(repaid) Equity raised/(repaid) Dividends paid Cash interest & others Cash flow from financing Change in cash Change in net cash/(debt) Ending net cash/(debt)

2010 (6.5) (26.8) 11.2 5.2 7.5 8.6 38.7 198.2 5.6 143.0

KEY DRIVERS

BALANCE SHEET (RM m, end Jan) Fixed assets Intangible assets Other long-term assets Total non-current assets Cash and equivalents Stocks Trade debtors Other current assets Total current assets Trade creditors Short-term borrowings Other current liabilities Total current liabilities Long-term borrowings Other long-term liabilities Total long-term liabilities Shareholders’ funds Minority interests NTA/share (RM)

2009 54.0 35.5 8.0 3.3 5.8 11.1 40.4 165.0 5.6 110.2

(FYE Jan) Revenue growth (%) EBITDA growth (%) Pretax margins (%) Net profit margins (%) Interest cover (x) Effective tax rates (%) Net dividend payout (%) Debtors turnover (days) Stock turnover (days) Creditors turnover (days)

2009 280 81 72 (31) 164 566 (200) (5) 62 (143) (125) 15 (47) (26) (183) 240 365 (338)

2010 364 0 (5) (69) (74) 217 (80) (5) 0 (85) (8) 15 (56) (23) (73) 59 68 (270)

2011F 458 90 (5) (83) (179) 281 (300) (5) 0 (305) (8) 15 (61) 143 89 65 73 (197)

2012F 550 94 (5) (99) (193) 347 (300) (5) 0 (305) (8) 15 (66) 89 30 72 80 (117)

2013F 602 99 (5) (114) (182) 399 (79) (4) 0 (83) (8) 16 (75) (169) (236) 80 88 (30)

22.0 20.0 18.0 16.0 14.0 12.0 10.0 8.0 6.0 4.0 Dec-07

Apr-08

Aug-08

Source: Company, CIMB Research, Bloomberg

The S.E.A. Navigator – Malaysia 2011

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Dec-08

Apr-09

Aug-09

Dec-09

Apr-10

Aug-10

Dec-10

Syariah-compliant stock

Sime Darby Bhd

TRADING BUY

Maintained

RM8.74

@07/12/10

Making a fresh start

MALAYSIA

2011 OUTLOOK

CIMB Research Report

Target: RM10.78 Conglomerate

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 Revenue (RM m) EBITDA (RM m) EBITDA margins (%) Pretax profit (RM m) Net profit (RM m) EPS (sen) EPS growth (%) P/E (x) Core EPS (sen) Core EPS growth (%) Core P/E (x) Gross DPS (sen) Dividend yield (%) P/BV (x) ROE (%) Net gearing (%) P/FCFE (x) EV/EBITDA (x) % change in EPS estimates CIMB/Consensus (x)

2009 31,013.7 3,901.0 12.6% 3,071.6 2,280.1 37.9 (35.1%) 23.0 37.9 (34.8%) 23.0 25.7 2.9% 2.5 10.6% 8.9% 1,346.7 13.8

2010 32,951.6 2,805.0 8.5% 1,741.5 726.8 12.1 (68.1%) 72.3 48.2 27.1% 18.1 13.6 1.6% 2.6 3.5% 12.1% 18.9 19.5

2011F 35,659.2 5,384.2 15.1% 4,186.7 2,943.2 49.0 305.0% 17.8 49.0 1.6% 17.8 33.1 3.8% 2.3 13.5% 23.0% 20.3 10.8 0.94

2012F 37,585.9 6,245.4 16.6% 4,948.9 3,479.1 57.9 18.2% 15.1 57.9 18.2% 15.1 39.1 4.5% 2.1 14.4% 22.0% 30.3 9.3 1.02

2013F 39,413.9 6,705.7 17.0% 5,290.2 3,719.0 61.9 6.9% 14.1 61.9 6.9% 14.1 41.8 4.8% 2.0 14.3% 21.5% 23.7 8.8 1.00

Source: Company, CIMB Research, Bloomberg

Price chart

Corporate profile

9.6 4.00 9.1

3.50 3.00

8.6

2.50 2.00

8.1

1.50 1.00

7.6

0.50 7.1 De c-09

0.00 Ma y-10 Volume 10m (R.H.S ca le )

Source: Bloomberg

Oct-10 S ime Da rby Bhd

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 landmark merger 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.

The S.E.A. Navigator – Malaysia 2011

[ 170 ]

Financial tables KEY RATIOS

PROFIT & LOSS (RM m, FYE Jun) Revenue Operating expenses EBITDA Depreciation & amortisation EBIT Net interest & invt income Associates’ contribution Exceptional items Others Pretax profit Tax Minority interests Net profit Adj. wt. shares (m) Unadj. year-end shares (m)

2009 2010 2011F 31,014 32,952 35,659 (27,113) (30,147) (30,275) 3,901 2,805 5,384 (750) (893) (1,100) 3,151 1,912 4,284 (94) (170) (97) 15 0 0 0 0 0 0 0 0 3,072 1,742 4,187 (731) (887) (1,089) (128) (155) (61) 727 2,943 2,280 6,009 6,009 6,009 6,009 6,009 6,009

2012F 2013F (FYE Jun) 37,586 39,414 Revenue growth (%) (31,340) (32,708) EBITDA growth (%) 6,245 6,706 Pretax margins (%) (1,200) (1,300) Net profit margins (%) 5,045 5,405 Interest cover (x) (96) (115) Effective tax rates (%) 0 0 Net dividend payout (%) 0 0 Debtors turnover (days) 0 0 Stock turnover (days) 4,949 5,290 Creditors turnover (days) (1,287) (1,375) (183) (196) 3,479 3,719 6,009 6,009 6,009 6,009

2009 9,740 81 7,756 17,578 3,638 5,627 5,875 2,724 17,863 6,421 3,594 592 10,607 2,013 814 2,827 21,385 621 3.55

2010 10,844 109 8,175 19,128 5,033 5,217 5,263 3,275 18,787 6,919 3,302 1,468 11,689 4,287 819 5,106 20,450 681 3.39

2011F 14,300 109 7,728 22,138 4,000 6,470 6,833 3,275 20,577 7,188 4,594 592 12,374 4,968 1,172 6,140 23,309 860 3.86

2012F 16,300 109 7,448 23,857 4,000 6,819 7,240 3,275 21,334 7,440 5,594 592 13,627 4,146 1,370 5,516 25,049 1,043 4.15

2013F 18,300 109 7,664 26,073 4,000 7,151 7,631 3,275 22,056 7,765 6,594 592 14,952 3,459 1,459 4,918 26,908 1,239 4.46

2011F 8.2 92.0 11.7 8.3 15.3 26.0 50.0 61.9 59.8 72.2

2012F 5.4 16.0 13.2 9.3 18.0 26.0 50.0 68.3 64.5 71.0

2013F 4.9 7.4 13.4 9.4 18.0 26.0 50.0 68.9 64.7 70.4

2010 2,350 9,573 75,615 633,607 484,420 560,035

(FYE Jun) CPO price per tonne (RM) FFB output (000' tonnes) Immature area (ha) Land bank (ha) Mature area (ha) Planted area (ha)

2011F 2012F 2013F 2,650 2,780 2,780 9,785 10,307 10,967 70,324 66,453 63,616 633,607 633,607 633,608 491,605 497,884 503,517 561,929 564,338 567,132

12M - FORWARD FD CORE P/E (X)

CASH FLOW (RM m, FYE Jun) Pretax profit Depreciation & non–cash adj. Working capital changes Cash tax paid Others Cash flow from operations Capex Net investments & sale of FA Others Cash flow from investing Debt raised/(repaid) Equity raised/(repaid) Dividends paid Cash interest & others Cash flow from financing Change in cash Change in net cash/(debt) Ending net cash/(debt)

2010 6.2 (28.1) 5.3 2.2 6.9 50.9 83.0 61.7 60.1 73.9

KEY DRIVERS

BALANCE SHEET (RM m, end Jun) Fixed assets Intangible assets Other long-term assets Total non-current assets Cash and equivalents Stocks Trade debtors Other current assets Total current assets Trade creditors Short-term borrowings Other current liabilities Total current liabilities Long-term borrowings Other long-term liabilities Total long-term liabilities Shareholders’ funds Minority interests NTA/share (RM)

2009 (8.9) (34.3) 9.9 7.4 12.5 23.8 50.2 68.9 62.9 79.2

2009 3,072 750 (1,957) (731) (391) 742 (2,123) 0 736 (1,387) 778 0 (2,366) (94) (1,682) (2,327) (3,105) (1,970)

2010 1,742 893 802 (887) 1,104 3,654 (2,885) 0 0 (2,885) 2,182 0 (1,404) (170) 607 1,377 (805) (2,556)

2011F 4,187 1,100 (913) (757) (906) 2,711 (2,000) 0 0 (2,000) 1,973 0 (1,472) (97) 404 1,115 (857) (5,562)

2012F 4,949 1,200 (504) (1,089) (907) 3,650 (2,000) 0 0 (2,000) 178 0 (1,740) (96) (1,658) (8) (186) (5,740)

2013F 5,290 1,300 (397) (1,287) (888) 4,019 (2,000) 0 0 (2,000) 313 0 (1,859) (115) (1,662) 357 44 (6,053)

27.0 25.0 23.0 21.0 19.0 17.0 15.0 13.0 11.0 Dec-07

Apr-08

Aug-08

Source: Company, CIMB Research, Bloomberg

The S.E.A. Navigator – Malaysia 2011

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Dec-08

Apr-09

Aug-09

Dec-09

Apr-10

Aug-10

Dec-10

Syariah-compliant stock

SP Setia Bhd

OUTPERFORM

Maintained

RM5.24

@07/12/10

Raring for the good fight

MALAYSIA

2011 OUTLOOK

CIMB Research Report

Target: RM6.88 Property Devt & Invt

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 Revenue (RM m) EBITDA (RM m) EBITDA margins (%) Pretax profit (RM m) Net profit (RM m) EPS (sen) EPS growth (%) P/E (x) Core EPS (sen) Core EPS growth (%) Core P/E (x) FD core EPS (sen) FD core P/E (x) Gross DPS (sen) Dividend yield (%) P/BV (x) ROE (%) Net gearing (%) P/FCFE (x) EV/EBITDA (x) % change in EPS estimates CIMB/Consensus (x)

2009 1,408.4 194.6 13.8% 231.1 171.2 16.8 (19.8%) 31.2 16.3 (14.7%) 32.1 14.0 40.0 14.0 2.7% 2.8 8.5% 27.1% 13.3 31.9

2010 1,745.9 293.6 16.8% 331.0 251.8 24.8 47.1% 21.1 21.1 30.0% 24.8 18.1 30.8 20.0 3.8% 2.6 11.9% 26.4% 17.7 21.2

2011F 1,934.6 367.5 19.0% 377.7 283.3 27.9 12.5% 18.8 27.9 31.8% 18.8 23.9 23.3 22.0 4.2% 2.5 12.6% 15.0% 11.1 16.3 N/A 1.15

2012F 2,398.5 468.6 19.5% 485.7 364.3 35.8 28.6% 14.6 35.8 28.6% 14.6 30.7 18.2 24.0 4.6% 2.3 15.2% 11.3% 15.0 12.6 N/A 1.29

2013F 2,346.2 477.8 20.4% 499.2 374.4 36.8 2.8% 14.2 36.8 2.8% 14.2 31.6 17.7 26.0 5.0% 2.1 14.5% 8.1% 13.8 12.3 N/A N/A

Source: Company, CIMB Research, Bloomberg

Price chart

Corporate profile 0.90 0.80

5.4

0.70 0.60

4.9

0.50 0.40

4.4

0.30 0.20

3.9

0.10 3.4 De c-09

0.00 Ma y-10 Volume 10m (R.H.S ca le )

Source: Bloomberg

Oct-10 S P S e tia Bhd

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.

The S.E.A. Navigator – Malaysia 2011

[ 172 ]

Financial tables KEY RATIOS

PROFIT & LOSS (RM m, FYE Oct) Revenue Operating expenses EBITDA Depreciation & amortisation EBIT Net interest & invt income Associates’ contribution Exceptional items Others Pretax profit Tax Minority interests Net profit Adj. wt. shares (m) Unadj. year-end shares (m)

2009 1,408 (1,214) 195 0 195 29 0 8 0 231 (60) 0 171 1,017 1,017

2010 1,746 (1,452) 294 (18) 275 7 0 48 0 331 (79) 0 252 1,017 1,017

2011F 1,935 (1,567) 368 (17) 351 27 0 0 0 378 (94) 0 283 1,017 1,017

2012F 2,399 (1,930) 469 (17) 451 34 0 0 0 486 (121) 0 364 1,017 1,017

2013F 2,346 (1,868) 478 (18) 460 39 0 0 0 499 (125) 0 374 1,017 1,017

2012F 84 0 1,704 1,789 1,534 54 619 1,005 3,211 564 797 134 1,494 1,016 3 1,019 2,486 0 2.44

2013F 72 0 1,780 1,852 1,705 52 606 1,050 3,412 546 905 132 1,582 1,016 3 1,019 2,662 0 2.62

2009 146 0 1,469 1,615 886 27 437 987 2,337 406 331 69 805 1,107 2 1,110 2,037 0 2.00

2010 108 0 1,564 1,672 1,059 24 669 963 2,714 471 621 86 1,178 1,016 2 1,019 2,189 0 2.15

2011F 97 0 1,632 1,729 1,375 43 499 946 2,863 458 703 107 1,268 1,016 3 1,019 2,305 0 2.27

2010 24.0 50.9 19.0 14.4 29.9 23.9 60.6 115.6 5.3 91.7

2011F 10.8 25.2 19.5 14.6 24.3 25.0 59.2 110.2 6.3 87.6

2012F 24.0 27.5 20.3 15.2 29.7 25.0 50.2 85.1 7.4 77.7

2013F (2.2) 2.0 21.3 16.0 28.6 25.0 53.0 95.3 8.2 86.3

(FYE Oct) Margin - Property development (%) Undeveloped landbank (acres) Sales (RMm) Company's targeted sales (RMm) Unrecognised billings (RMm)

2010 21.4% 3,678 1,231 2,000 1,780

2011F 20.9% 3,478 1,735 3,000 2,000

2012F 21.1% 3,278 2,195

2013F 22.0% 3,078 2,137

2,200

2,300

CURRENT P/BV(X)

CASH FLOW (RM m, FYE Oct) Pretax profit Depreciation & non–cash adj. Working capital changes Cash tax paid Others Cash flow from operations Capex Net investments & sale of FA Others Cash flow from investing Debt raised/(repaid) Equity raised/(repaid) Dividends paid Cash interest & others Cash flow from financing Change in cash Change in net cash/(debt) Ending net cash/(debt)

2009 6.0 (22.0) 16.4 12.2 24.2 25.9 62.4 101.1 7.4 93.4

KEY DRIVERS

BALANCE SHEET (RM m, end Oct) Fixed assets Intangible assets Other long-term assets Total non-current assets Cash and equivalents Stocks Trade debtors Other current assets Total current assets Trade creditors Short-term borrowings Other current liabilities Total current liabilities Long-term borrowings Other long-term liabilities Total long-term liabilities Shareholders’ funds Minority interests NTA/share (RM)

(FYE Oct) Revenue growth (%) EBITDA growth (%) Pretax margins (%) Net profit margins (%) Interest cover (x) Effective tax rates (%) Net dividend payout (%) Debtors turnover (days) Stock turnover (days) Creditors turnover (days)

2009 231 0 (142) (60) 2 31 (65) (38) (8) (111) 477 5 (107) (1) 374 294 (183) (551)

2010 331 18 (127) (73) 2 151 19 (95) 38 (38) 199 15 (153) (3) 58 172 (27) (579)

2011F 378 17 160 (79) 2 477 (5) (69) 0 (74) 82 0 (168) (2) (87) 316 234 (345)

2012F 486 17 (66) (112) 2 327 (5) (72) 0 (77) 94 0 (183) (2) (91) 159 65 (280)

2013F 499 18 (51) (124) 2 344 (5) (76) 0 (81) 108 0 (198) (2) (92) 171 63 (216)

3.00 2.80 2.60 2.40 2.20 2.00 1.80 1.60 1.40 1.20 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

The S.E.A. Navigator – Malaysia 2011

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Syariah-compliant stock

Star Publications Bhd

OUTPERFORM

Maintained

RM3.39

@06/12/10

Still a dividend play

MALAYSIA

2011 OUTLOOK

CIMB Research Report

Target: RM4.52 Newspaper

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 Revenue (RM m) EBITDA (RM m) EBITDA margins (%) Pretax profit (RM m) Net profit (RM m) EPS (sen) EPS growth (%) P/E (x) Core EPS (sen) Core EPS growth (%) Core P/E (x) Gross DPS (sen) Dividend yield (%) P/BV (x) ROE (%) Net cash per share (RM) P/FCFE (x) EV/EBITDA (x) % change in EPS estimates CIMB/Consensus (x)

2008 831.0 223.7 26.9% 201.3 138.7 18.8 (13.0%) 18.0 22.1 2.3% 15.4 21.1 6.2% 2.0 11.2% 0.44 20.2 9.7

2009 974.4 232.3 23.8% 197.1 144.6 19.6 4.2% 17.3 19.6 (11.3%) 17.3 21.0 6.2% 2.0 11.4% 0.47 14.3 9.3

2010F 1,189.9 305.6 25.7% 271.3 184.3 25.0 27.5% 13.6 25.0 27.5% 13.6 73.6 21.7% 2.3 15.8% 0.05 36.5 8.1 1.04

2011F 1,284.1 337.5 26.3% 293.7 193.5 26.2 5.0% 12.9 26.2 5.0% 12.9 21.0 6.2% 2.2 17.6% 0.14 13.0 7.2 1.02

2012F 1,337.3 365.7 27.3% 325.4 230.3 31.2 19.0% 10.9 31.2 19.0% 10.9 21.0 6.2% 2.0 19.4% 0.29 10.9 6.3 1.09

Source: Company, CIMB Research, Bloomberg

Price chart

Corporate profile

4.3 5.00

4.1 3.9

4.00

3.7

3.00

3.5 2.00 3.3 1.00

3.1 2.9 Dec-09

0.00 May-10 Volume 1m (R.H.Scale)

Source: Bloomberg

Oct-10 Star Publications Bhd

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.

The S.E.A. Navigator – Malaysia 2011

[ 174 ]

Financial tables KEY RATIOS

PROFIT & LOSS (RM m, FYE Dec) Revenue Operating expenses EBITDA Depreciation & amortisation EBIT Net interest & invt income Associates’ contribution Exceptional items Others Pretax profit Tax Minority interests Net profit Adj. wt. shares (m) Unadj. year-end shares (m)

2008 831 (607) 224 (44) 180 22 0 0 0 201 (63) 0 139 739 739

2009 974 (742) 232 (48) 184 18 (5) 0 0 197 (48) (5) 145 739 739

2008 763 34 21 818 573 200 112 12 897 96 0 7 103 250 102 352 1,261 0 1.66

2009 759 34 21 814 597 190 98 12 897 91 0 7 98 250 102 352 1,266 0 1.67

2010F 1,190 (884) 306 (53) 252 19 0 0 0 271 (76) (11) 184 739 739

2011F 1,284 (947) 338 (53) 285 9 0 0 0 294 (82) (18) 193 739 739

2012F 1,337 (972) 366 (53) 313 12 0 0 0 325 (91) (4) 230 739 739

(FYE Dec) Revenue growth (%) EBITDA growth (%) Pretax margins (%) Net profit margins (%) Interest cover (x) Effective tax rates (%) Net dividend payout (%) Debtors turnover (days) Stock turnover (days) Creditors turnover (days)

2011F 748 34 21 803 356 342 176 12 885 164 0 7 171 250 102 352 1,135 22 1.49

2012F 741 34 21 796 461 351 183 12 1,006 169 0 7 176 250 102 352 1,242 26 1.63

(FYE Dec) Adex revenue growth (%) Ad rate per ccm (RM) Cover price (RM) Newsprint cost (US$/tonne) Newsprint usage (tonnes p.a.)

2010F 753 34 21 809 287 319 163 12 781 154 0 7 160 250 102 352 1,066 11 1.40

2010F 22.1 31.5 22.8 15.5 N/A 28.0 205.5 40.1 78.1 37.6

2011F 7.9 10.5 22.9 15.1 N/A 28.0 64.1 48.2 94.0 45.2

2012F 4.1 8.4 24.3 17.2 N/A 28.0 53.9 49.0 94.5 45.5

2009 -14.9% 56 1.20 638 75,690

2010F 12.3% 57 1.20 660 79,474

2011F 14.4% 58 2.20 660 80,666

2012F 7.1% 59 3.20 680 82,615

12M - FORWARD FD CORE P/E (X)

CASH FLOW (RM m, FYE Dec) Pretax profit Depreciation & non–cash adj. Working capital changes Cash tax paid Others Cash flow from operations Capex Net investments & sale of FA Others Cash flow from investing Debt raised/(repaid) Equity raised/(repaid) Dividends paid Cash interest & others Cash flow from financing Change in cash Change in net cash/(debt) Ending net cash/(debt)

2009 17.3 3.8 20.2 14.8 11.7 24.2 80.7 39.5 73.1 35.1

KEY DRIVERS

BALANCE SHEET (RM m, end Dec) Fixed assets Intangible assets Other long-term assets Total non-current assets Cash and equivalents Stocks Trade debtors Other current assets Total current assets Trade creditors Short-term borrowings Other current liabilities Total current liabilities Long-term borrowings Other long-term liabilities Total long-term liabilities Shareholders’ funds Minority interests NTA/share (RM)

2008 6.6 (5.7) 24.2 16.7 12.7 31.2 84.1 48.2 87.0 41.8

2008 201 44 (8) (63) (22) 152 (50) 0 0 (50) 0 0 (117) 65 (51) 51 51 323

2009 197 48 19 (45) (19) 200 (49) 0 0 (49) 0 0 (117) (11) (128) 24 24 347

2010F 271 53 (132) (76) (19) 98 (48) 0 0 (48) 0 0 (379) 19 (360) (310) (310) 37

2011F 294 53 (25) (82) (9) 231 (47) 0 0 (47) 0 0 (124) 9 (115) 69 69 106

2012F 325 53 (12) (91) (12) 263 (46) 0 0 (46) 0 0 (124) 12 (112) 105 105 211

17.0 16.5 16.0 15.5 15.0 14.5 14.0 13.5 13.0 12.5 12.0 Dec-07

Apr-08

Aug-08

Source: Company, CIMB Research, Bloomberg

The S.E.A. Navigator – Malaysia 2011

[ 175 ]

Dec-08

Apr-09

Aug-09

Dec-09

Apr-10

Aug-10

Dec-10

Supermax Corp Bhd

OUTPERFORM

Maintained

RM4.38

@07/12/10

Supercharged

MALAYSIA

2011 OUTLOOK

CIMB Research Report

Target: RM8.22 Rubber Gloves

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 Revenue (RM m) EBITDA (RM m) EBITDA margins (%) Pretax profit (RM m) Net profit (RM m) EPS (sen) EPS growth (%) P/E (x) Core EPS (sen) Core EPS growth (%) Core P/E (x) Gross DPS (sen) Dividend yield (%) P/BV (x) ROE (%) Net gearing (%) Net cash per share (RM) P/FCFE (x) EV/EBITDA (x) % change in EPS estimates CIMB/Consensus (x)

2008 811.8 98.9 12.2% 52.0 47.0 13.8 (16.0%) 31.7 18.2 10.9% 24.0 2.6 0.6% 3.6 11.7% 90.0% N/A 58.1 17.7

2009 803.6 169.0 21.0% 151.5 126.6 37.2 169.3% 11.8 38.5 111.2% 11.4 8.8 2.0% 2.7 26.0% 31.5% N/A 13.9 8.9

2010F 946.5 226.4 23.9% 216.2 183.8 54.0 45.2% 8.1 54.0 40.2% 8.1 9.0 2.1% 2.0 28.0% 14.0% N/A 13.4 6.3 N/A 1.01

2011F 1,184.2 261.5 22.1% 245.5 208.7 61.4 13.5% 7.1 61.4 13.5% 7.1 11.0 2.5% 1.6 24.7% 0.5% N/A 8.2 5.0 N/A 1.06

2012F 1,381.4 306.2 22.2% 283.5 241.0 70.9 15.5% 6.2 70.9 15.5% 6.2 12.0 2.7% 1.3 23.1% N/A 0.42 6.4 3.8 N/A 1.08

Source: Company, CIMB Research, Bloomberg

Price chart

Corporate profile

6.9

1.00

6.4

0.90 0.80

5.9

0.70

5.4

0.60

4.9

0.50

4.4

0.40 0.30

3.9

0.20

3.4 2.9 Dec-09

0.10 0.00 May-10 Volume 10m (R.H.Scale)

Oct-10 Supermax Corp Bhd

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.

Source: Bloomberg

The S.E.A. Navigator – Malaysia 2011

[ 176 ]

Financial tables KEY RATIOS

PROFIT & LOSS (RM m, FYE Dec) Revenue Operating expenses EBITDA Depreciation & amortisation EBIT Net interest & invt income Associates’ contribution Exceptional items Others Pretax profit Tax Minority interests Net profit Adj. wt. shares (m) Unadj. year-end shares (m)

2008 812 (713) 99 (29) 70 (20) 19 (17) 0 52 (5) 0 47 340 265

2009 804 (635) 169 (32) 137 (22) 42 (5) 0 151 (25) 0 127 340 268

2010F 947 (720) 226 (39) 187 (15) 44 0 0 216 (32) 0 184 340 340

2011F 1,184 (923) 262 (46) 215 (16) 46 0 0 246 (37) 0 209 340 340

2012F 1,381 (1,075) 306 (54) 253 (17) 48 0 0 284 (43) 0 241 340 340

2008 383 29 127 539 31 136 125 116 407 68 231 49 347 175 8 183 416 0 1.14

2009 368 29 167 564 119 116 79 67 381 38 129 46 214 166 7 173 559 0 1.56

2010F 406 29 190 625 203 104 142 72 521 43 135 32 210 174 7 181 755 0 2.14

2011F 427 29 199 655 334 130 178 74 716 53 148 36 237 191 8 199 936 0 2.67

2012F 441 29 208 678 514 152 207 76 949 62 162 39 263 210 8 218 1,146 0 3.29

2008 52 29 (43) (2) 17 53 (39) 0 (19) (57) 30 (6) (9) (19) (4) (8) (38) (375)

2009 151 32 75 (13) (19) 226 (17) 0 0 (17) (101) 27 (15) (22) (111) 97 199 (176)

2010F 216 39 (64) (25) 0 167 (70) 0 0 (70) 14 0 (28) 1 (13) 84 70 (106)

2011F 246 46 (49) (32) 0 210 (60) 0 0 (60) 30 0 (26) (24) (19) 131 101 (4)

2012F 284 54 (40) (37) 0 260 (60) 0 0 (60) 33 0 (28) (26) (21) 179 146 142

2010F 17.8 34.0 22.8 19.4 12.4 15.0 16.7 42.6 42.5 15.6

2011F 25.1 15.5 20.7 17.6 13.3 15.0 17.9 49.3 36.1 14.8

2012F 16.7 17.1 20.5 17.4 14.2 15.0 16.9 50.8 37.3 15.3

(FYE Dec) Production capacity (m pcs p.a) Capacity utilisation (%) ASP (US$) per 1,000 pieces Exchange rate (RM to US$) Natural rubber price (RM /kilogram) Nitrile latex prices (US$/mt)

2009 14,476 83.7% 23.35 3.50 4.50 1,014

2010F 17,588 85.0% 23.00 3.02 8.20 1,300

2011F 21,738 85.0% 23.23 3.05 8.00 1,381

2012F 23,238 85.0% 23.69 3.05 7.55 1,503

12M - FORWARD FD CORE P/E (X)

CASH FLOW (RM m, FYE Dec) Pretax profit Depreciation & non–cash adj. Working capital changes Cash tax paid Others Cash flow from operations Capex Net investments & sale of FA Others Cash flow from investing Debt raised/(repaid) Equity raised/(repaid) Dividends paid Cash interest & others Cash flow from financing Change in cash Change in net cash/(debt) Ending net cash/(debt)

2009 (1.0) 70.9 18.8 15.8 6.2 16.4 23.6 46.3 57.2 24.1

KEY DRIVERS

BALANCE SHEET (RM m, end Dec) Fixed assets Intangible assets Other long-term assets Total non-current assets Cash and equivalents Stocks Trade debtors Other current assets Total current assets Trade creditors Short-term borrowings Other current liabilities Total current liabilities Long-term borrowings Other long-term liabilities Total long-term liabilities Shareholders’ funds Minority interests NTA/share (RM)

2008 41.4 32.1 6.4 5.8 3.4 9.6 18.8 49.9 54.4 29.9

(FYE Dec) Revenue growth (%) EBITDA growth (%) Pretax margins (%) Net profit margins (%) Interest cover (x) Effective tax rates (%) Net dividend payout (%) Debtors turnover (days) Stock turnover (days) Creditors turnover (days)

11.0

9.0

7.0

5.0

3.0

1.0 Dec-07

Apr-08

Aug-08

Source: Company, CIMB Research, Bloomberg

The S.E.A. Navigator – Malaysia 2011

[ 177 ]

Dec-08

Apr-09

Aug-09

Dec-09

Apr-10

Aug-10

Dec-10

Syariah-compliant stock

Tan Chong Motor Holdings Bhd

OUTPERFORM

Maintained

RM5.44

@06/12/10

Following a regional roadmap

MALAYSIA

2011 OUTLOOK

CIMB Research Report

Target: RM9.15 Autos

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 Revenue (RM m) EBITDA (RM m) EBITDA margins (%) Pretax profit (RM m) Net profit (RM m) EPS (sen) EPS growth (%) P/E (x) Gross DPS (sen) Dividend yield (%) P/BV (x) ROE (%) Net gearing (%) P/FCFE (x) EV/EBITDA (x) % change in EPS estimates CIMB/Consensus (x)

2008 3,195.8 374.9 11.7% 307.2 245.8 36.6 318.6% 14.9 10.0 1.8% 2.6 18.5% 17.5% 58.0 10.4

2009 2,856.9 234.0 8.2% 177.2 153.3 22.8 (37.6%) 23.8 11.0 2.0% 2.4 10.4% 6.3% 37.1 16.0

2010F 3,518.8 451.5 12.8% 393.3 274.4 40.8 78.9% 13.3 12.0 2.2% 2.1 16.9% 7.2% 183.7 8.3 1.03

2011F 4,072.0 516.3 12.7% 458.5 342.9 51.0 25.0% 10.7 13.0 2.4% 1.8 18.4% 0.4% 17.8 7.1 1.03

2012F 5,314.8 696.9 13.1% 636.7 476.6 70.9 39.0% 7.7 14.0 2.6% 1.5 21.6% 0.4% 35.5 5.2 1.18

Source: Company, CIMB Research, Bloomberg

Price chart

Corporate profile

6.3 5.8

6.00

5.3

5.00

4.8

4.00

4.3

3.00

3.8 2.00

3.3

1.00

2.8 2.3 De c-09

0.00 Ma y-10

Volume 1m (R.H.S ca le )

Source: Bloomberg

Oct-10 Ta n Chong Motor Holdings Bhd

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.

The S.E.A. Navigator – Malaysia 2011

[ 178 ]

Financial tables KEY RATIOS

PROFIT & LOSS (RM m, FYE Dec) Revenue Operating expenses EBITDA Depreciation & amortisation EBIT Net interest & invt income Associates’ contribution Exceptional items Others Pretax profit Tax Minority interests Net profit Adj. wt. shares (m) Unadj. year-end shares (m)

2008 3,196 (2,821) 375 (58) 317 (10) 1 0 0 307 (61) 0 246 672 672

2009 2,857 (2,623) 234 (51) 183 (6) 0 0 0 177 (23) (1) 153 672 672

2010F 3,519 (3,067) 452 (51) 400 (7) 0 0 0 393 (118) (1) 274 672 672

2011F 4,072 (3,556) 516 (54) 462 (4) 0 0 0 458 (115) (1) 343 672 672

2012F 5,315 (4,618) 697 (58) 639 (3) 0 0 0 637 (159) (1) 477 672 672

2008 521 0 280 801 320 854 276 0 1,450 214 379 7 600 191 36 226 1,421 4 2.12

2009 494 0 393 887 553 673 352 0 1,578 267 388 1 656 261 31 292 1,514 4 2.25

2010F 522 0 393 916 524 872 441 0 1,837 329 388 7 724 261 31 292 1,728 5 2.57

2011F 548 0 393 941 659 1,010 519 0 2,189 381 407 35 823 261 31 292 2,005 6 2.98

2012F 591 0 393 984 678 1,321 690 0 2,689 497 427 34 959 261 31 292 2,411 7 3.59

2008 307 58 (293) (61) 15 27 (79) (1) 1 (79) 115 (7) (49) 0 58 6 (109) (250)

2009 177 51 60 (52) 4 241 (56) (144) (20) (220) 78 (12) (49) 0 18 38 (40) (95)

2010F 393 51 (226) (23) (96) 100 (80) 0 0 (80) 0 0 (64) 15 (49) (29) (29) (125)

2011F 458 54 (165) (118) 36 266 (80) 0 0 (80) 19 0 (69) (1) (50) 136 116 (8)

2012F 637 58 (365) (115) (32) 183 (100) 0 0 (100) 20 0 (74) (10) (64) 19 (1) (9)

2010F 23.2 92.9 11.2 7.8 18.5 30.0 22.0 41.2 80.2 30.9

2011F 15.7 14.3 11.3 8.4 21.0 25.0 19.1 43.0 84.4 31.8

2012F 30.5 35.0 12.0 9.0 28.2 25.0 14.8 41.5 80.1 30.2

(FYE Dec) Unit sales Unit sales growth (%) Exchange rate (RM to US$)

2009 31,731 2.6% 3.60

2010F 35,077 10.5% 3.30

2011F 39,949 13.9% 3.25

2012F 55,453 38.8% 3.25

12M - FORWARD FD CORE P/E (X)

CASH FLOW (RM m, FYE Dec) Pretax profit Depreciation & non–cash adj. Working capital changes Cash tax paid Others Cash flow from operations Capex Net investments & sale of FA Others Cash flow from investing Debt raised/(repaid) Equity raised/(repaid) Dividends paid Cash interest & others Cash flow from financing Change in cash Change in net cash/(debt) Ending net cash/(debt)

2009 (10.6) (37.6) 6.2 5.4 9.0 12.9 36.2 40.1 97.6 30.8

KEY DRIVERS

BALANCE SHEET (RM m, end Dec) Fixed assets Intangible assets Other long-term assets Total non-current assets Cash and equivalents Stocks Trade debtors Other current assets Total current assets Trade creditors Short-term borrowings Other current liabilities Total current liabilities Long-term borrowings Other long-term liabilities Total long-term liabilities Shareholders’ funds Minority interests NTA/share (RM)

2008 71.4 178.6 9.6 7.7 14.8 20.0 20.2 33.3 82.1 24.8

(FYE Dec) Revenue growth (%) EBITDA growth (%) Pretax margins (%) Net profit margins (%) Interest cover (x) Effective tax rates (%) Net dividend payout (%) Debtors turnover (days) Stock turnover (days) Creditors turnover (days)

13.0 12.0 11.0 10.0 9.0 8.0 7.0 6.0 5.0 4.0 Dec-07

Apr-08

Aug-08

Source: Company, CIMB Research, Bloomberg

The S.E.A. Navigator – Malaysia 2011

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Dec-08

Apr-09

Aug-09

Dec-09

Apr-10

Aug-10

Dec-10

Syariah-compliant stock

Tasek Corporation Bhd

OUTPERFORM

Maintained

RM7.59

@07/12/10

Concrete prospects

MALAYSIA

2011 OUTLOOK

CIMB Research Report

Target: RM9.00 Cement

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: 12-m price range:

RM938m/US$299m 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 Revenue (RM m) EBITDA (RM m) EBITDA margins (%) Pretax profit (RM m) Net profit (RM m) EPS (sen) EPS growth (%) P/E (x) Core EPS (sen) Core EPS growth (%) Core P/E (x) P/BV (x) ROE (%) Net cash per share (RM) P/FCFE (x) EV/EBITDA (x) % change in EPS estimates CIMB/Consensus (x)

2008 509.8 122.6 24.0% 98.6 75.1 40.7 99.8% 18.7 40.7 99.8% 18.7 1.6 9.2% 1.39 27.4 9.0

2009 526.8 124.2 23.6% 87.2 67.1 36.3 (10.8%) 20.9 36.3 (10.8%) 20.9 1.5 7.6% 1.90 13.0 8.5

2010F 575.9 139.0 24.1% 161.4 121.0 97.9 169.6% 7.8 66.7 83.6% 11.4 1.1 13.7% 3.00 12.9 4.1 N/A 0.68

2011F 611.2 157.1 25.7% 174.5 130.9 105.9 8.2% 7.2 79.4 19.2% 9.6 1.0 14.3% 3.82 5.2 3.0 N/A 0.75

2012F 620.6 158.8 25.6% 135.9 101.9 82.4 (22.1%) 9.2 82.4 3.8% 9.2 0.9 9.9% 4.75 6.9 2.2 N/A 1.01

Source: Company, CIMB Research, Bloomberg

Price chart

Corporate profile

8.8

25.00 8.3 7.8

20.00

7.3

15.00

6.8

10.00

6.3

5.00

5.8 5.3 Dec-09

0.00 May-10 Volume 100k (R.H.Scale)

Oct-10 Tasek Corporation Bhd

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.

Source: Bloomberg

The S.E.A. Navigator – Malaysia 2011

[ 180 ]

Financial tables KEY RATIOS

PROFIT & LOSS (RM m, FYE Dec) Revenue Operating expenses EBITDA Depreciation & amortisation EBIT Net interest & invt income Associates’ contribution Exceptional items Others Pretax profit Tax Minority interests Net profit Adj. wt. shares (m) Unadj. year-end shares (m)

2008 510 (387) 123 (45) 78 14 7 0 0 99 (24) 0 75 184 184

2009 527 (403) 124 (47) 77 9 1 0 0 87 (20) 0 67 185 185

2010F 576 (437) 139 (41) 98 12 0 52 0 161 (40) 0 121 124 124

2011F 611 (454) 157 (41) 116 15 0 44 0 175 (44) 0 131 124 124

2012F 621 (462) 159 (41) 118 18 0 0 0 136 (34) 0 102 124 124

2011F 369 1 5 375 475 134 84 0 693 84 3 0 87 0 15 15 967 0 7.81

2012F (FYE Dec) 368 Cement ASP - domestic (RM/tonne) 1 Utilisation rate (%) 5 374 590 136 85 0 811 85 3 0 88 0 14 14 1,083 0 8.75

2008 371 1 90 462 261 121 86 3 470 66 5 0 70 0 7 7 854 0 4.63

2009 361 1 6 368 356 113 70 77 615 54 4 0 58 0 16 16 908 0 4.91

2010F 370 1 5 376 374 126 79 0 579 79 3 0 82 0 15 15 858 0 6.93

2010F 9.3 11.9 28.0 21.0 N/A 25.0 10.2 47.2 75.7 42.3

2011F 6.1 13.0 28.6 21.4 N/A 25.0 11.3 48.6 77.7 48.6

2012F 1.5 1.1 21.9 16.4 N/A 25.0 15.8 49.6 79.4 49.6

2009 277 66.0%

2010F 300 70.0%

2011F 300 70.0%

2012F 300 70.0%

12M - FORWARD FD CORE P/E (X)

CASH FLOW (RM m, FYE Dec) Pretax profit Depreciation & non–cash adj. Working capital changes Cash tax paid Others Cash flow from operations Capex Net investments & sale of FA Others Cash flow from investing Debt raised/(repaid) Equity raised/(repaid) Dividends paid Cash interest & others Cash flow from financing Change in cash Change in net cash/(debt) Ending net cash/(debt)

2009 3.3 1.3 16.5 12.7 N/A 23.0 82.6 53.9 80.8 41.6

KEY DRIVERS

BALANCE SHEET (RM m, end Dec) Fixed assets Intangible assets Other long-term assets Total non-current assets Cash and equivalents Stocks Trade debtors Other current assets Total current assets Trade creditors Short-term borrowings Other current liabilities Total current liabilities Long-term borrowings Other long-term liabilities Total long-term liabilities Shareholders’ funds Minority interests NTA/share (RM)

2008 151.1 119.0 19.3 14.7 N/A 23.9 24.6 52.9 66.9 39.1

(FYE Dec) Revenue growth (%) EBITDA growth (%) Pretax margins (%) Net profit margins (%) Interest cover (x) Effective tax rates (%) Net dividend payout (%) Debtors turnover (days) Stock turnover (days) Creditors turnover (days)

2008 99 45 (46) (13) (7) 78 (31) 0 0 (31) 5 0 0 0 5 52 47 257

2009 87 48 20 (11) (1) 142 (37) 4 0 (34) (1) 1 (14) 1 (13) 95 96 352

2010F 161 42 (2) (4) (74) 123 (50) 1 0 (50) (1) 0 (12) (42) (55) 18 19 371

2011F 175 41 8 (4) (1) 219 (40) 1 0 (40) 0 0 (15) (63) (78) 101 101 472

2012F 136 41 2 (3) (1) 175 (40) 1 0 (40) 0 0 (16) (5) (22) 114 114 587

18.0

16.0

14.0

12.0

10.0

8.0 Dec-07

Apr-08

Aug-08

Source: Company, CIMB Research, Bloomberg

The S.E.A. Navigator – Malaysia 2011

[ 181 ]

Dec-08

Apr-09

Aug-09

Dec-09

Apr-10

Aug-10

Dec-10

Syariah-compliant stock

Telekom Malaysia Bhd

TRADING BUY

Maintained

RM3.41

@07/12/10

Capital management potential

MALAYSIA

2011 OUTLOOK

CIMB Research Report

Target: RM4.04 Telecommunications - Integrated

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 its Axiata 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 end2010 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 Revenue (RM m) EBITDA (RM m) EBITDA margins (%) Pretax profit (RM m) Net profit (RM m) EPS (sen) EPS growth (%) P/E (x) Core EPS (sen) Core EPS growth (%) Core P/E (x) Gross DPS (sen) Dividend yield (%) P/BV (x) ROE (%) Net gearing (%) P/FCFE (x) EV/EBITDA (x) % change in EPS estimates CIMB/Consensus (x)

2008 8,674.9 2,738.4 31.6% 353.8 167.0 4.8 (83.9%) 70.8 20.4 28.7% 16.7 27.3 8.0% 1.2 1.7% 44.2% (65.9) 6.1

2009 8,608.0 2,936.8 34.1% 921.6 643.0 18.2 277.8% 18.8 17.3 (15.1%) 19.7 124.4 36.5% 1.7 7.5% 41.1% 2.8 5.2

2010F 8,715.9 2,806.5 32.2% 1,254.0 970.2 27.2 49.4% 12.5 16.3 (6.2%) 20.9 43.0 12.6% 1.7 13.7% 37.0% 106.3 5.4 0.85

2011F 8,910.4 2,453.1 27.5% 916.1 613.4 17.1 (37.0%) 19.9 7.3 (55.0%) 46.6 26.0 7.6% 1.9 9.2% 47.2% 11.2 6.3 0.45

2012F 9,075.8 2,553.1 28.1% 1,056.6 717.4 19.9 16.4% 17.1 10.0 37.1% 34.0 25.9 7.6% 2.0 11.6% 39.0% 8.4 5.9 0.56

Source: Company, CIMB Research, Bloomberg

Price chart

Corporate profile 1.80

3.8

1.60 3.6

1.40 1.20

3.4

1.00 0.80

3.2

0.60 0.40

3.0

0.20 2.8 De c-09

0.00 Ma y-10 Volume 10m (R.H.S ca le )

Source: Bloomberg

Oct-10 Te le kom Ma la ys ia Bhd

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. The S.E.A. Navigator – Malaysia 2011

[ 182 ]

Financial tables KEY RATIOS

PROFIT & LOSS (RM m, FYE Dec) Revenue Operating expenses EBITDA Depreciation & amortisation EBIT Net interest & invt income Associates’ contribution Exceptional items Others Pretax profit Tax Minority interests Net profit Adj. wt. shares (m) Unadj. year-end shares (m)

2008 8,675 (5,937) 2,738 (2,099) 640 (27) 0 (259) 0 354 (78) (109) 167 3,469 3,469

2009 8,608 (5,671) 2,937 (2,038) 899 (18) 1 41 0 922 (248) (30) 643 3,536 3,536

2010F 8,716 (5,909) 2,807 (1,933) 874 (107) 0 487 0 1,254 (253) (31) 970 3,570 3,570

2011F 8,910 (6,457) 2,453 (1,944) 510 (81) 0 487 0 916 (257) (46) 613 3,585 3,601

2012F 9,076 (6,523) 2,553 (1,906) 647 (78) 0 487 0 1,057 (285) (54) 717 3,601 3,601

2008 11,772 2 1,347 13,121 2,373 123 2,891 4,025 9,412 2,813 35 624 3,471 6,965 1,622 8,587 10,248 227 2.95

2009 12,330 2 1,431 13,763 3,785 111 2,284 0 6,179 2,935 917 590 4,441 5,797 2,575 8,372 6,988 143 1.98

2010F 12,597 2 1,179 13,778 3,068 107 2,193 0 5,369 2,914 0 590 3,504 5,769 2,575 8,344 7,127 173 2.00

2011F 12,504 2 1,179 13,684 2,703 110 2,120 0 4,933 3,184 0 590 3,774 5,769 2,575 8,344 6,281 219 1.75

2012F 11,797 2 1,179 12,978 3,280 112 2,159 0 5,551 3,217 0 590 3,806 5,769 2,575 8,344 6,107 273 1.70

2008 354 2,099 1,188 (78) (312) 3,251 (1,839) 1,000 (2,735) (3,574) 170 43 (2,631) 489 (1,928) (2,251) (2,421) (4,627)

2009 922 2,038 708 (248) (364) 3,056 (2,516) 8 38 (2,471) 3,739 216 (4,419) 4,670 4,206 4,791 1,052 (2,929)

2010F 1,254 1,933 74 (253) 107 3,114 (2,200) 0 252 (1,948) (945) 93 (924) (107) (1,883) (717) 228 (2,701)

2011F 916 1,944 341 (257) 81 3,025 (1,850) 0 0 (1,850) 0 41 (1,499) (81) (1,539) (365) (365) (3,065)

2012F 1,057 1,906 (9) (285) 78 2,746 (1,200) 0 0 (1,200) 0 43 (935) (78) (969) 577 577 (2,489)

2010F 1.3 (4.4) 14.4 11.1 2.4 20.2 158.0 93.7 4.6 122.5

2011F 2.2 (12.6) 10.3 6.9 1.6 28.0 152.1 88.3 4.5 124.9

2012F 1.9 4.1 11.6 7.9 2.0 27.0 130.1 86.1 4.5 128.7

(FYE Dec) Residential fixed line ARPU (RM) Business fixed line ARPU (RM) Residential fixed line subs (m) Business fixed line subs (m) Broadband ARPU (RM) No. of broadband subscribers (m)

2009 45.0 131.0 2.77 1.55 87.0 1.57

2010F 44.1 126.7 2.76 1.56 82.7 1.73

2011F 45.7 127.1 2.76 1.57 78.5 1.89

2012F 45.2 127.1 2.77 1.58 76.2 2.01

12M - FORWARD FD CORE P/E (X)

CASH FLOW (RM m, FYE Dec) Pretax profit Depreciation & non–cash adj. Working capital changes Cash tax paid Others Cash flow from operations Capex Net investments & sale of FA Others Cash flow from investing Debt raised/(repaid) Equity raised/(repaid) Dividends paid Cash interest & others Cash flow from financing Change in cash Change in net cash/(debt) Ending net cash/(debt)

2009 (0.8) 7.2 10.7 7.5 2.5 26.9 647.8 109.7 5.0 121.8

KEY DRIVERS

BALANCE SHEET (RM m, end Dec) Fixed assets Intangible assets Other long-term assets Total non-current assets Cash and equivalents Stocks Trade debtors Other current assets Total current assets Trade creditors Short-term borrowings Other current liabilities Total current liabilities Long-term borrowings Other long-term liabilities Total long-term liabilities Shareholders’ funds Minority interests NTA/share (RM)

2008 4.6 (11.1) 4.1 1.9 1.4 21.9 419.2 130.1 4.8 121.6

(FYE Dec) Revenue growth (%) EBITDA growth (%) Pretax margins (%) Net profit margins (%) Interest cover (x) Effective tax rates (%) Net dividend payout (%) Debtors turnover (days) Stock turnover (days) Creditors turnover (days)

39.0

34.0

29.0

24.0

19.0

14.0 Dec-07

Apr-08

Aug-08

Source: Company, CIMB Research, Bloomberg

The S.E.A. Navigator – Malaysia 2011

[ 183 ]

Dec-08

Apr-09

Aug-09

Dec-09

Apr-10

Aug-10

Dec-10

Syariah-compliant stock

Tenaga Nasional Bhd

TRADING BUY

Maintained

RM8.44

@07/12/10

Sparks to fly soon?

MALAYSIA

2011 OUTLOOK

CIMB Research Report

Target: RM10.55 Power

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 Revenue (RM m) EBITDA (RM m) EBITDA margins (%) Pretax profit (RM m) Net profit (RM m) EPS (sen) EPS growth (%) P/E (x) Core EPS (sen) Core EPS growth (%) Core P/E (x) Gross DPS (sen) Dividend yield (%) P/BV (x) ROE (%) Net gearing (%) P/FCFE (x) EV/EBITDA (x) % change in EPS estimates CIMB/Consensus (x)

2009 28,785.6 7,260.4 25.2% 1,543.1 917.9 21.2 (64.6%) 39.9 56.7 (4.0%) 14.9 17.8 2.1% 1.4 3.6% 63.1% 50.4 7.3

2010 30,320.1 8,208.4 27.1% 4,022.1 3,201.9 73.6 247.6% 11.5 63.5 11.9% 13.3 26.0 3.1% 1.3 11.7% 44.8% 15.9 6.0

2011F 31,812.0 7,956.7 25.0% 3,661.8 2,982.2 68.5 (6.9%) 12.3 63.0 (0.8%) 13.4 22.7 2.7% 1.2 10.0% 35.0% 60.1 5.9 0.95

2012F 33,337.3 8,360.0 25.1% 3,859.3 3,110.2 71.5 4.3% 11.8 69.4 10.2% 12.2 24.7 2.9% 1.1 9.8% 28.2% 69.9 5.5 0.95

2013F 34,299.6 8,794.1 25.6% 4,123.6 3,303.5 75.9 6.2% 11.1 75.9 9.4% 11.1 24.0 2.8% 1.0 9.7% 21.0% 89.0 5.0 0.95

Source: Company, CIMB Research, Bloomberg

Price chart

Corporate profile 2.00 1.80

9.4

1.60 1.40

8.9

1.20 1.00

8.4

0.80 0.60

7.9

0.40 0.20

7.4 De c-09

0.00 Ma y-10 Volume 10m (R.H.S ca le )

Source: Bloomberg

Oct-10 Te na g a Na s iona l Bhd

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.

The S.E.A. Navigator – Malaysia 2011

[ 184 ]

Financial tables KEY RATIOS

PROFIT & LOSS (RM m, FYE Aug) Revenue Operating expenses EBITDA Depreciation & amortisation EBIT Net interest & invt income Associates’ contribution Exceptional items Others Pretax profit Tax Minority interests Net profit Adj. wt. shares (m) Unadj. year-end shares (m)

2009 2010 2011F 28,786 30,320 31,812 (21,525) (22,112) (23,855) 7,260 8,208 7,957 (3,562) (3,950) (3,812) 3,699 4,258 4,145 (950) (861) (773) 33 45 49 0 (76) 0 (1,239) 656 241 1,543 4,022 3,662 (690) (825) (684) 5 5 65 3,202 2,982 918 4,337 4,353 4,353 4,337 4,353 4,353

2012F 2013F (FYE Aug) 33,337 34,300 Revenue growth (%) (24,977) (25,506) EBITDA growth (%) 8,360 8,794 Pretax margins (%) (3,917) (4,013) Net profit margins (%) 4,443 4,781 Interest cover (x) (728) (717) Effective tax rates (%) 54 59 Net dividend payout (%) 0 0 Debtors turnover (days) 91 0 Stock turnover (days) 3,859 4,124 Creditors turnover (days) (754) (825) 5 5 3,110 3,304 4,353 4,353 4,353 4,353

2009 58,227 0 1,177 59,404 6,172 1,956 2,468 1,344 11,939 4,150 1,158 1,955 7,263 21,458 16,596 38,054 26,006 40 6.00

2010 58,032 0 1,254 59,286 8,352 2,450 2,468 1,507 14,778 3,870 3,163 2,668 9,701 18,101 17,465 35,566 28,779 36 6.61

2011F 60,081 0 1,278 61,359 8,352 2,420 2,108 1,982 14,862 5,092 2,361 2,619 10,072 16,766 18,610 35,375 30,760 31 7.07

2012F 61,850 0 1,305 63,156 8,352 2,537 2,210 2,073 15,173 5,332 2,310 2,730 10,372 15,284 19,883 35,166 32,782 26 7.53

2013F 63,542 0 1,335 64,877 8,352 2,611 2,274 2,131 15,369 5,444 2,344 2,800 10,588 13,362 21,295 34,657 34,997 22 8.04

2009 2010 2011F 1,543 4,022 3,662 3,562 3,950 3,812 369 (609) 1,092 (250) (579) (692) 732 1,457 825 6,681 7,609 8,606 (4,128) (3,708) (4,530) 66 (74) 0 230 0 0 (3,833) (3,782) (4,530) (1,205) (703) (2,786) 23 106 106 (477) (621) (741) (1,490) 220 (1,305) (3,148) (998) (4,725) (300) 2,829 (649) 904 3,532 2,137 (16,444) (12,911) (10,775)

2012F 3,859 3,917 7 (574) 682 7,892 (5,200) 0 0 (5,200) (1,533) 106 (805) (461) (2,692) 0 1,533 (9,242)

2013F 4,124 4,013 (46) (632) 665 8,124 (5,200) 0 0 (5,200) (1,888) 106 (783) (359) (2,924) 0 1,888 (7,354)

2011F 4.9 (3.1) 11.5 9.4 4.2 18.7 24.8 26.2 27.9 51.4

2012F 4.8 5.1 11.6 9.3 4.7 19.5 25.9 23.6 27.1 57.1

2013F 2.9 5.2 12.0 9.6 5.2 20.0 23.7 23.9 27.4 57.3

(FYE Aug) Average selling price per kwh (sen) Capacity (MW) Demand growth (%) Exchange rate (RM to US$)

2010 31 21,794 12.5% 3.34

2011F 31 21,794 5.0% 3.16

2012F 31 21,794 5.0% 3.17

2013F 31 21,794 3.0% 3.15

12M - FORWARD FD CORE P/E (X)

CASH FLOW (RM m, FYE Aug) Pretax profit Depreciation & non–cash adj. Working capital changes Cash tax paid Others Cash flow from operations Capex Net investments & sale of FA Others Cash flow from investing Debt raised/(repaid) Equity raised/(repaid) Dividends paid Cash interest & others Cash flow from financing Change in cash Change in net cash/(debt) Ending net cash/(debt)

2010 5.3 13.1 13.3 10.6 4.0 20.5 26.5 29.7 26.5 48.3

KEY DRIVERS

BALANCE SHEET (RM m, end Aug) Fixed assets Intangible assets Other long-term assets Total non-current assets Cash and equivalents Stocks Trade debtors Other current assets Total current assets Trade creditors Short-term borrowings Other current liabilities Total current liabilities Long-term borrowings Other long-term liabilities Total long-term liabilities Shareholders’ funds Minority interests NTA/share (RM)

2009 16.3 (2.0) 5.4 3.2 3.3 44.7 62.2 28.9 26.5 51.7

17.0 16.0 15.0 14.0 13.0 12.0 11.0 10.0 9.0 Dec-07

Apr-08

Aug-08

Source: Company, CIMB Research, Bloomberg

The S.E.A. Navigator – Malaysia 2011

[ 185 ]

Dec-08

Apr-09

Aug-09

Dec-09

Apr-10

Aug-10

Dec-10

Syariah-compliant stock

Tomypak Holdings

OUTPERFORM

Maintained

RM1.00

@07/12/10

A solid package

MALAYSIA

2011 OUTLOOK

CIMB Research Report

Target: RM1.80 Packaging

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: 12-m price range:

RM109m/US$35m 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 Revenue (RM m) EBITDA (RM m) EBITDA margins (%) Pretax profit (RM m) Net profit (RM m) EPS (sen) EPS growth (%) P/E (x) Gross DPS (sen) Dividend yield (%) P/BV (x) ROE (%) Net gearing (%) Net cash per share (RM) P/FCFE (x) EV/EBITDA (x) % change in EPS estimates CIMB/Consensus (x)

2008 182.8 18.1 9.9% 7.9 7.6 7.6 406.7% 13.2 1.6 1.6% 1.7 12.9% 58.8% N/A 250.0 7.4

2009 159.1 31.6 19.9% 20.8 20.1 20.1 164.5% 5.0 6.5 6.5% 1.3 26.1% 11.5% N/A 3.6 3.4

2010F 182.9 27.1 14.8% 17.0 15.6 14.5 (27.6%) 6.9 7.4 7.4% 1.2 19.1% 8.1% N/A 13.6 4.2 0.86

2011F 194.6 36.9 19.0% 27.5 24.8 23.0 58.2% 4.3 8.5 8.5% 1.0 25.8% N/A 0.18 3.4 2.4 1.00

2012F 212.2 40.2 18.9% 30.5 27.1 25.3 9.7% 4.0 9.6 9.6% 0.9 23.7% N/A 0.30 5.1 1.9 1.01

Source: Company, CIMB Research, Bloomberg

Price chart

Corporate profile 8.00

1.6

7.00 6.00

1.4

5.00 1.2

4.00 3.00

1.0

2.00 0.8 0.6 De c-09

1.00 0.00 Ma y-10 Volume 1m (R.H.S ca le )

Source: Bloomberg

Oct-10 Tomypa k Holding s

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 remains the 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. The S.E.A. Navigator – Malaysia 2011

[ 186 ]

Financial tables KEY RATIOS

PROFIT & LOSS (RM m, FYE Dec) Revenue Operating expenses EBITDA Depreciation & amortisation EBIT Net interest & invt income Associates’ contribution Exceptional items Others Pretax profit Tax Minority interests Net profit Adj. wt. shares (m) Unadj. year-end shares (m)

2008 183 (165) 18 (9) 9 (1) 0 0 0 8 0 0 8 100 100

2009 159 (128) 32 (10) 22 (1) 0 0 0 21 (1) 0 20 100 100

2010F 183 (156) 27 (10) 17 0 0 0 0 17 (1) 0 16 108 108

2011F 195 (158) 37 (10) 27 1 0 0 0 28 (3) 0 25 108 108

2012F 212 (172) 40 (10) 30 1 0 0 0 31 (3) 0 27 108 108

2008 52 0 3 55 9 27 35 0 70 16 35 1 52 8 7 15 59 0 0.59

2009 55 0 3 58 9 26 35 0 70 25 11 1 37 7 7 14 77 0 0.77

2010F 54 0 3 57 2 27 37 0 66 18 4 1 23 5 7 12 87 0 0.81

2011F 51 0 3 53 26 29 31 0 86 19 2 1 23 5 7 12 105 0 0.97

2012F (FYE Dec) 47 Capacity (tonnes p.a.) 0 Capacity utilisation (%) 3 50 39 38 34 0 111 21 2 1 25 5 7 12 124 0 1.15

2008 8 9 (2) 0 (6) 9 (7) 1 0 (6) (3) 0 0 0 (3) 0 3 (35)

2009 21 10 9 (1) 0 39 (11) 0 0 (11) 0 0 (5) 3 (2) 26 26 (9)

2010F 17 10 (10) (1) 0 16 (8) 0 0 (8) 0 0 (6) 0 (6) 2 2 (7)

2011F 28 10 5 (3) 0 40 (7) 0 0 (7) (2) 0 (7) 0 (8) 24 26 19

2012F 31 10 (9) (3) 0 28 (7) 0 0 (7) 0 0 (8) 0 (8) 13 13 32

2010F 14.9 (14.2) 9.3 8.6 57.7 8.0 38.4 71.1 53.7 43.1

2011F 6.4 36.2 14.1 12.7 N/A 10.0 27.8 63.5 53.1 35.4

2012F 9.0 8.9 14.4 12.8 N/A 11.0 28.5 56.0 57.5 35.0

2009 14,000 90.0%

2010F 15,200 88.0%

2011F 16,300 86.0%

2012F 17,500 87.0%

12M - FORWARD FD CORE P/E (X)

CASH FLOW (RM m, FYE Dec) Pretax profit Depreciation & non–cash adj. Working capital changes Cash tax paid Others Cash flow from operations Capex Net investments & sale of FA Others Cash flow from investing Debt raised/(repaid) Equity raised/(repaid) Dividends paid Cash interest & others Cash flow from financing Change in cash Change in net cash/(debt) Ending net cash/(debt)

2009 (13.0) 74.6 13.1 12.6 17.0 3.4 23.9 79.6 60.6 57.1

KEY DRIVERS

BALANCE SHEET (RM m, end Dec) Fixed assets Intangible assets Other long-term assets Total non-current assets Cash and equivalents Stocks Trade debtors Other current assets Total current assets Trade creditors Short-term borrowings Other current liabilities Total current liabilities Long-term borrowings Other long-term liabilities Total long-term liabilities Shareholders’ funds Minority interests NTA/share (RM)

2008 22.7 56.0 4.3 4.2 8.0 3.8 15.8 69.5 52.9 31.5

(FYE Dec) Revenue growth (%) EBITDA growth (%) Pretax margins (%) Net profit margins (%) Interest cover (x) Effective tax rates (%) Net dividend payout (%) Debtors turnover (days) Stock turnover (days) Creditors turnover (days)

8.0 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0 Dec-07

Apr-08

Aug-08

Source: Company, CIMB Research, Bloomberg

The S.E.A. Navigator – Malaysia 2011

[ 187 ]

Dec-08

Apr-09

Aug-09

Dec-09

Apr-10

Aug-10

Dec-10

Syariah-compliant stock

Top Glove Corporation

OUTPERFORM

Maintained

RM5.55

@07/12/10

It’s a whole new ball game

MALAYSIA

2011 OUTLOOK

CIMB Research Report

Target: RM7.27 Rubber Gloves

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 4bn6bn 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 Revenue (RM m) EBITDA (RM m) EBITDA margins (%) Pretax profit (RM m) Net profit (RM m) EPS (sen) EPS growth (%) P/E (x) Gross DPS (sen) Dividend yield (%) P/BV (x) ROE (%) Net cash per share (RM) P/FCFE (x) EV/EBITDA (x) % change in EPS estimates CIMB/Consensus (x)

2009 1,529.1 286.2 18.7% 222.0 169.1 27.4 53.7% 20.3 10.9 2.0% 4.2 22.7% 0.27 62.1 11.5

2010 2,079.4 362.3 17.4% 306.0 245.3 39.7 45.0% 14.0 16.0 2.9% 3.1 25.6% 0.48 26.3 8.7

2011F 2,009.2 406.0 20.2% 352.4 276.0 44.6 12.5% 12.4 18.0 3.2% 2.6 23.0% 0.79 13.3 7.3 N/A 1.10

2012F 2,298.2 440.3 19.2% 386.8 302.9 49.0 9.8% 11.3 20.0 3.6% 2.2 21.3% 1.09 13.0 6.3 N/A 1.13

2013F 2,427.2 466.8 19.2% 413.9 324.1 52.4 7.0% 10.6 22.0 4.0% 1.9 19.5% 1.45 11.4 5.5 N/A 1.07

Source: Company, CIMB Research, Bloomberg

Price chart

Corporate profile 1.20

7.3

1.00

6.8

0.80 6.3

0.60

5.8

0.40

5.3

0.20

4.8 4.3 Dec-09

0.00 May-10 Volume 10m (R.H.Scale)

Oct-10 Top Glove Corporation

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.

Source: Bloomberg

The S.E.A. Navigator – Malaysia 2011

[ 188 ]

Financial tables KEY RATIOS

PROFIT & LOSS (RM m, FYE Aug) Revenue Operating expenses EBITDA Depreciation & amortisation EBIT Net interest & invt income Associates’ contribution Exceptional items Others Pretax profit Tax Minority interests Net profit Adj. wt. shares (m) Unadj. year-end shares (m)

2009 1,529 (1,243) 286 (57) 229 (6) (1) 0 0 222 (54) 1 169 618 304

2010 2,079 (1,717) 362 (59) 303 4 (1) 0 0 306 (56) (5) 245 618 618

2011F 2,009 (1,603) 406 (59) 347 5 1 0 0 352 (78) 1 276 618 618

2012F 2,298 (1,858) 440 (61) 379 7 1 0 0 387 (85) 1 303 618 618

2013F 2,427 (1,960) 467 (63) 404 10 1 0 0 414 (91) 1 324 618 618

2012F 621 20 18 659 680 184 276 34 1,174 115 1 115 231 4 38 41 1,540 20 2.46

2013F 639 20 17 677 899 194 291 36 1,420 121 1 123 245 4 40 44 1,788 21 2.86

2009 564 20 36 621 186 119 198 8 511 92 12 140 244 9 33 42 825 21 1.30

2010 579 20 19 618 303 169 233 32 737 104 1 95 200 3 34 37 1,093 24 1.74

2011F 600 20 18 638 493 161 241 30 925 100 1 97 198 3 36 39 1,307 19 2.08

2011F 2012F 2013F (3.4) 14.4 5.6 12.1 8.4 6.0 17.5 16.8 17.1 13.7 13.2 13.4 1,126.4 1,119.8 1,083.9 22.0 22.0 22.0 30.2 30.6 31.5 43.1 41.0 42.6 29.9 27.4 28.4 18.6 17.1 17.8

(FYE Aug) Production capacity (m pcs p.a) Capacity utilisation (%) ASP (US$) per 1,000 pieces Exchange rate (RM to US$) Natural rubber price (RM /kilogram) Nitrile latex prices (US$/mt)

2010 33,000 80.0% 24.13 3.54 4.41 1,191

2011F 41,250 65.0% 27.00 3.08 8.13 1,327

2012F 42,750 75.0% 24.00 3.04 7.85 1,422

2013F 43,750 80.0% 23.00 3.05 7.53 1,574

12M - FORWARD FD CORE P/E (X)

CASH FLOW (RM m, FYE Aug) Pretax profit Depreciation & non–cash adj. Working capital changes Cash tax paid Others Cash flow from operations Capex Net investments & sale of FA Others Cash flow from investing Debt raised/(repaid) Equity raised/(repaid) Dividends paid Cash interest & others Cash flow from financing Change in cash Change in net cash/(debt) Ending net cash/(debt)

2010 36.0 26.6 14.7 11.8 475.4 18.2 30.2 37.9 25.2 17.2

KEY DRIVERS

BALANCE SHEET (RM m, end Aug) Fixed assets Intangible assets Other long-term assets Total non-current assets Cash and equivalents Stocks Trade debtors Other current assets Total current assets Trade creditors Short-term borrowings Other current liabilities Total current liabilities Long-term borrowings Other long-term liabilities Total long-term liabilities Shareholders’ funds Minority interests NTA/share (RM)

2009 11.0 47.2 14.5 11.1 26.9 24.3 29.8 49.2 33.0 24.5

(FYE Aug) Revenue growth (%) EBITDA growth (%) Pretax margins (%) Net profit margins (%) Interest cover (x) Effective tax rates (%) Net dividend payout (%) Debtors turnover (days) Stock turnover (days) Creditors turnover (days)

2009 222 57 34 (39) 22 296 (67) 3 (10) (74) (166) 11 (32) 33 (155) 67 234 165

2010 306 59 (73) (74) 14 232 (85) 0 0 (85) (17) 113 (109) (17) (30) 117 134 299

2011F 352 59 (17) (56) (1) 338 (80) 0 0 (80) 0 0 (74) 5 (69) 190 189 489

2012F 387 61 (36) (78) 8 343 (80) 0 0 (80) 0 0 (83) 7 (76) 187 187 675

2013F 414 63 (16) (85) 6 382 (80) 0 0 (80) 0 0 (93) 10 (83) 219 218 894

17.0

15.0

13.0

11.0

9.0

7.0

5.0 Dec-07

Apr-08

Aug-08

Source: Company, CIMB Research, Bloomberg

The S.E.A. Navigator – Malaysia 2011

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Dec-08

Apr-09

Aug-09

Dec-09

Apr-10

Aug-10

Dec-10

Syariah-compliant stock

Uchi Technologies Bhd

OUTPERFORM

Maintained

RM1.34

@07/12/10

An unknown brew for 2011

MALAYSIA

2011 OUTLOOK

CIMB Research Report

Target: RM1.68 Technology - Others

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: 12-m price range:

RM503m/US$160m 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 Revenue (RM m) EBITDA (RM m) EBITDA margins (%) Pretax profit (RM m) Net profit (RM m) EPS (sen) EPS growth (%) P/E (x) Core EPS (sen) Core EPS growth (%) Core P/E (x) Gross DPS (sen) Dividend yield (%) P/BV (x) ROE (%) Net cash per share (RM) P/FCFE (x) EV/EBITDA (x) % change in EPS estimates CIMB/Consensus (x)

2008 122.8 53.5 43.6% 60.7 58.7 15.8 (24.7%) 8.5 15.8 (24.7%) 8.5 16.7 12.5% 2.9 34.1% 0.37 7.9 6.8

2009 83.1 41.1 49.4% 27.7 27.0 7.3 (53.9%) 18.5 10.1 (36.1%) 13.3 8.0 6.0% 3.0 16.2% 0.34 15.3 9.1

2010F 100.4 46.6 46.4% 45.0 44.7 12.1 66.1% 11.1 12.1 19.9% 11.1 13.3 10.0% 2.9 26.8% 0.34 12.5 7.9 N/A 1.07

2011F 110.5 50.9 46.1% 49.0 48.9 13.2 9.2% 10.2 13.2 9.2% 10.2 14.1 10.5% 2.8 27.8% 0.36 11.1 7.1 N/A 1.01

2012F 121.5 55.7 45.9% 53.8 53.7 14.5 9.8% 9.3 14.5 9.8% 9.3 15.4 11.5% 2.6 28.8% 0.38 10.0 6.4 N/A 1.03

Source: Company, CIMB Research, Bloomberg

Price chart

Corporate profile

1.6

4.00

1.6

3.50

1.5

3.00

1.5 1.4

2.50

1.4

2.00

1.3

1.50

1.3

1.00

1.2

0.50

1.2 1.1 De c-09

0.00 Ma y-10 Volume 1m (R.H.S ca le )

Source: Bloomberg

Oct-10 Uchi Te chnolog ie s Bhd

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.

The S.E.A. Navigator – Malaysia 2011

[ 190 ]

Financial tables KEY RATIOS

PROFIT & LOSS (RM m, FYE Dec) Revenue Operating expenses EBITDA Depreciation & amortisation EBIT Net interest & invt income Associates’ contribution Exceptional items Others Pretax profit Tax Minority interests Net profit Adj. wt. shares (m) Unadj. year-end shares (m)

2008 123 (69) 54 (2) 52 9 0 0 0 61 (2) 0 59 373 372

2009 83 (42) 41 (2) 39 (1) 0 (11) 0 28 (1) 0 27 371 371

2010F 100 (54) 47 (3) 44 1 0 0 0 45 0 0 45 371 371

2011F 110 (60) 51 (3) 48 1 0 0 0 49 0 0 49 371 371

2012F 122 (66) 56 (3) 53 1 0 0 0 54 0 0 54 371 371

2011F 36 0 8 45 133 14 18 1 166 16 0 14 30 0 1 1 181 0 0.49

2012F (FYE Dec) 39 Average selling price (RM/unit) 0 Units of microcontrollers (m) 8 47 140 16 19 1 176 17 0 14 31 0 1 1 191 0 0.52

2008 28 0 13 41 136 16 14 1 167 13 0 25 38 0 1 1 169 0 0.45

2009 32 0 8 40 125 10 13 1 149 11 0 14 25 0 1 1 163 0 0.44

2010F 34 0 8 43 128 13 16 1 158 14 0 14 28 0 1 1 171 0 0.46

2010F 20.8 13.3 44.8 44.6 N/A 0.6 83.0 53.5 42.4 45.7

2011F 10.0 9.4 44.4 44.2 N/A 0.4 80.0 55.8 45.6 49.1

2012F 10.0 9.4 44.3 44.2 N/A 0.3 80.0 55.8 45.8 49.3

2009 130 0.6

2010F 140 0.7

2011F 150 0.9

2012F 160 0.9

12M - FORWARD FD CORE P/E (X)

CASH FLOW (RM m, FYE Dec) Pretax profit Depreciation & non–cash adj. Working capital changes Cash tax paid Others Cash flow from operations Capex Net investments & sale of FA Others Cash flow from investing Debt raised/(repaid) Equity raised/(repaid) Dividends paid Cash interest & others Cash flow from financing Change in cash Change in net cash/(debt) Ending net cash/(debt)

2009 (32.3) (23.2) 33.3 32.4 N/A 2.7 70.0 59.8 56.9 52.6

KEY DRIVERS

BALANCE SHEET (RM m, end Dec) Fixed assets Intangible assets Other long-term assets Total non-current assets Cash and equivalents Stocks Trade debtors Other current assets Total current assets Trade creditors Short-term borrowings Other current liabilities Total current liabilities Long-term borrowings Other long-term liabilities Total long-term liabilities Shareholders’ funds Minority interests NTA/share (RM)

2008 (21.7) (28.3) 49.4 47.8 N/A 3.2 78.4 50.7 56.7 43.3

(FYE Dec) Revenue growth (%) EBITDA growth (%) Pretax margins (%) Net profit margins (%) Interest cover (x) Effective tax rates (%) Net dividend payout (%) Debtors turnover (days) Stock turnover (days) Creditors turnover (days)

2008 61 2 9 (1) (6) 65 (10) 8 5 3 0 0 (75) (5) (80) (11) (11) 136

2009 28 2 4 (1) (2) 31 (5) 4 3 3 0 0 (44) (1) (46) (12) (12) 125

2010F 45 3 (3) 0 (1) 44 (5) 0 0 (5) 0 0 (37) 1 (36) 3 3 127

2011F 49 3 (2) 0 (1) 49 (5) 0 0 (5) 0 0 (39) 1 (38) 6 6 133

2012F 54 3 (2) 0 (1) 54 (5) 0 0 (5) 0 0 (43) 1 (42) 7 7 140

17.0 16.0 15.0 14.0 13.0 12.0 11.0 10.0 9.0 8.0 7.0 Dec-07

Apr-08

Aug-08

Source: Company, CIMB Research, Bloomberg

The S.E.A. Navigator – Malaysia 2011

[ 191 ]

Dec-08

Apr-09

Aug-09

Dec-09

Apr-10

Aug-10

Dec-10

Syariah-compliant stock

UMW Holdings Bhd

OUTPERFORM

Maintained

RM6.91

@07/12/10

Vehicle for auto exposure

MALAYSIA

2011 OUTLOOK

CIMB Research Report

Target: RM8.85 Autos

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 Revenue (RM m) EBITDA (RM m) EBITDA margins (%) Pretax profit (RM m) Net profit (RM m) EPS (sen) EPS growth (%) P/E (x) Gross DPS (sen) Dividend yield (%) P/BV (x) ROE (%) Net gearing (%) Net cash per share (RM) P/FCFE (x) EV/EBITDA (x) % change in EPS estimates CIMB/Consensus (x)

2008 12,769.6 1,268.2 9.9% 1,276.7 565.8 52.2 16.6% 13.2 37.3 5.4% 2.1 17.0% N/A 0.27 20.9 6.5

2009 10,699.0 1,013.5 9.5% 846.5 382.4 34.6 (33.8%) 20.0 27.0 3.9% 2.0 10.5% 8.4% N/A 8.9 9.1

2010F 12,361.3 1,505.5 12.2% 1,417.2 652.7 58.3 68.6% 11.8 39.0 5.6% 1.9 16.6% 1.2% N/A 13.0 6.1 1.04

2011F 12,917.6 1,553.2 12.0% 1,505.6 736.6 65.8 12.8% 10.5 44.0 6.4% 1.7 17.2% N/A 0.41 11.9 5.8 1.06

2012F 13,716.4 1,616.6 11.8% 1,573.2 771.3 68.9 4.7% 10.0 45.9 6.6% 1.6 16.6% N/A 0.89 11.0 5.4 0.97

Source: Company, CIMB Research, Bloomberg

Price chart

Corporate profile

7.4

0.80

7.2

0.70

7.0

0.60

6.8

0.50

6.6

0.40

6.4

0.30

6.2

0.20

6.0

0.10

5.8 5.6 De c-09

0.00 Ma y-10 Volume 10m (R.H.S ca le )

Oct-10 UMW Holdings Bhd

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.

Source: Bloomberg

The S.E.A. Navigator – Malaysia 2011

[ 192 ]

Financial tables KEY RATIOS

PROFIT & LOSS (RM m, FYE Dec) Revenue Operating expenses EBITDA Depreciation & amortisation EBIT Net interest & invt income Associates’ contribution Exceptional items Others Pretax profit Tax Minority interests Net profit Adj. wt. shares (m) Unadj. year-end shares (m)

2008 12,770 (11,501) 1,268 (195) 1,074 3 200 0 0 1,277 (321) (390) 566 1,084 1,092

2009 2010F 10,699 12,361 (9,686) (10,856) 1,013 1,506 (236) (290) 778 1,216 (2) (12) 71 213 0 0 0 0 846 1,417 (199) (357) (265) (407) 382 653 1,106 1,119 1,119 1,119

2011F 2012F (FYE Dec) 12,918 13,716 Revenue growth (%) (11,364) (12,100) EBITDA growth (%) 1,553 1,617 Pretax margins (%) (294) (294) Net profit margins (%) 1,260 1,322 Interest cover (x) (45) (29) Effective tax rates (%) 291 280 Net dividend payout (%) 0 0 Debtors turnover (days) 0 0 Stock turnover (days) 1,506 1,573 Creditors turnover (days) (388) (401) (381) (401) 737 771 1,119 1,119 1,119 1,119

2008 1,792 133 1,973 3,898 1,538 1,454 683 255 3,930 990 528 925 2,443 720 60 780 3,522 1,083 3.10

2009 2,781 241 1,870 4,892 1,733 1,304 642 255 3,934 889 294 785 1,968 1,851 88 1,938 3,774 1,146 3.16

2010F 2,845 241 1,966 5,053 1,842 1,506 742 295 4,385 1,027 244 863 2,134 1,666 88 1,753 4,099 1,451 3.45

2011F 2,855 241 2,063 5,159 2,177 1,574 775 308 4,834 1,073 220 909 2,203 1,499 88 1,587 4,466 1,737 3.77

2012F 2,862 241 2,159 5,262 2,543 1,671 823 327 5,364 1,140 199 960 2,299 1,349 88 1,437 4,853 2,038 4.12

2008 1,277 195 (286) (177) (411) 597 (630) (174) 75 (728) 486 92 (479) 3 102 (29) (515) 290

2009 846 236 22 (321) (15) 768 (601) (5) (198) (803) 897 131 (492) (283) 253 218 (679) (411)

2010F 1,417 290 (112) (199) (156) 1,240 (300) (97) 0 (397) (235) 0 (262) (12) (509) 334 569 (67)

2011F 1,506 294 (37) (357) (123) 1,282 (300) (97) 0 (397) (190) 0 (361) (45) (596) 289 479 457

2012F 1,573 294 (54) (388) (128) 1,298 (300) (97) 0 (397) (171) 0 (364) (29) (564) 337 508 994

2010F 15.5 48.6 11.5 5.3 26.1 25.2 50.2 20.4 41.5 28.3

2011F 4.5 3.2 11.7 5.7 19.8 25.7 50.1 21.4 43.5 29.7

2012F 6.2 4.1 11.5 5.6 23.1 25.5 49.9 21.3 43.2 29.4

(FYE Dec) Unit sales Unit sales growth (%) Exchange rate (RM to US$)

2009 79,422 -15.2% 3.60

2010F 91,026 14.6% 3.30

2011F 2012F 94,576 100,568 3.9% 6.3% 3.25 3.25

12M - FORWARD FD CORE P/E (X)

CASH FLOW (RM m, FYE Dec) Pretax profit Depreciation & non–cash adj. Working capital changes Cash tax paid Others Cash flow from operations Capex Net investments & sale of FA Others Cash flow from investing Debt raised/(repaid) Equity raised/(repaid) Dividends paid Cash interest & others Cash flow from financing Change in cash Change in net cash/(debt) Ending net cash/(debt)

2009 (16.2) (20.1) 7.9 3.6 22.4 23.5 58.6 22.6 47.0 32.1

KEY DRIVERS

BALANCE SHEET (RM m, end Dec) Fixed assets Intangible assets Other long-term assets Total non-current assets Cash and equivalents Stocks Trade debtors Other current assets Total current assets Trade creditors Short-term borrowings Other current liabilities Total current liabilities Long-term borrowings Other long-term liabilities Total long-term liabilities Shareholders’ funds Minority interests NTA/share (RM)

2008 28.0 55.6 10.0 4.4 22.3 25.1 52.8 18.8 36.3 26.9

16.0 15.0 14.0

13.0 12.0

11.0 10.0 9.0 Dec-07

Apr-08

Aug-08

Source: Company, CIMB Research, Bloomberg

The S.E.A. Navigator – Malaysia 2011

[ 193 ]

Dec-08

Apr-09

Aug-09

Dec-09

Apr-10

Aug-10

Dec-10

Syariah-compliant stock

Unisem (M) Berhad

OUTPERFORM

Maintained

RM1.96

@07/12/10

All eyes on China

MALAYSIA

2011 OUTLOOK

CIMB Research Report

Target: RM2.82 Semiconductor

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 Revenue (RM m) EBITDA (RM m) EBITDA margins (%) Pretax profit (RM m) Net profit (RM m) EPS (sen) EPS growth (%) P/E (x) Core EPS (sen) Core EPS growth (%) Core P/E (x) FD core EPS (sen) FD core P/E (x) Gross DPS (sen) Dividend yield (%) P/BV (x) ROE (%) Net gearing (%) P/FCFE (x) EV/EBITDA (x) % change in EPS estimates CIMB/Consensus (x)

2008 1,233.4 235.7 19.1% 24.0 19.8 3.7 (85.5%) 53.7 10.0 (28.9%) 19.6 10.0 19.6 3.0 1.5% 1.4 2.4% 54.9% (210.7) 6.5

2009 1,036.3 245.4 23.7% 58.4 61.8 9.2 151.1% 21.4 10.2 1.8% 19.3 10.2 19.3 2.5 1.3% 1.4 6.9% 34.4% (17.7) 6.8

2010F 1,396.8 342.7 24.5% 197.9 178.7 26.5 189.1% 7.4 26.5 160.5% 7.4 22.5 8.7 8.0 4.1% 1.2 17.7% 29.4% 20.8 4.8 N/A 1.04

2011F 1,605.3 412.2 25.7% 230.3 204.0 30.3 14.2% 6.5 30.3 14.2% 6.5 25.4 7.7 13.3 6.8% 1.1 18.0% 25.2% 15.5 4.0 N/A 1.10

2012F 1,748.2 455.1 26.0% 267.5 231.9 34.4 13.7% 5.7 34.4 13.7% 5.7 28.7 6.8 13.3 6.8% 1.0 18.4% 14.7% 8.3 3.4 N/A 1.14

Source: Company, CIMB Research, Bloomberg

Price chart

Corporate profile

3.0 2.8

2.50

2.6

2.00

2.4 2.2

1.50

2.0 1.8

1.00

1.6 1.4

0.50

1.2 1.0 De c-09

0.00 Ma y-10 Volume 10m (R.H.S ca le )

Oct-10

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.

Unis e m (M) Be rha d

Source: Bloomberg

The S.E.A. Navigator – Malaysia 2011

[ 194 ]

Financial tables KEY RATIOS

PROFIT & LOSS (RM m, FYE Dec) Revenue Operating expenses EBITDA Depreciation & amortisation EBIT Net interest & invt income Associates’ contribution Exceptional items Others Pretax profit Tax Minority interests Net profit Adj. wt. shares (m) Unadj. year-end shares (m)

2008 1,233 (998) 236 (157) 79 (10) 0 (45) 0 24 (6) 2 20 542 613

2009 1,036 (791) 245 (164) 82 (17) 0 (7) 0 58 2 1 62 674 674

2010F 1,397 (1,054) 343 (154) 188 10 0 0 0 198 (18) (1) 179 674 674

2011F 1,605 (1,193) 412 (175) 238 (7) 0 0 0 230 (23) (3) 204 674 674

2012F 1,748 (1,293) 455 (180) 275 (8) 0 0 0 267 (32) (3) 232 674 674

2008 1,149 97 32 1,278 102 114 147 0 364 192 268 1 461 300 32 332 836 13 1.21

2009 1,118 93 30 1,241 66 127 186 0 380 230 270 1 501 127 31 157 950 12 1.27

2010F 1,214 93 22 1,329 76 169 251 0 497 307 270 1 578 127 33 160 1,075 13 1.46

2011F 1,289 93 37 1,419 72 191 289 0 552 348 250 1 598 127 41 167 1,190 16 1.63

2012F (FYE Dec) 1,309 Global semicon sales (US$bn) 93 EBITDA Margin (%) 57 1,460 141 207 315 0 663 377 250 1 627 90 54 144 1,332 20 1.84

2010F 34.8 39.7 14.2 12.8 N/A 9.0 22.5 57.2 38.7 70.2

2011F 14.9 20.3 14.3 12.7 N/A 10.0 32.9 61.4 41.0 74.4

2012F 8.9 10.4 15.3 13.3 N/A 12.0 29.0 63.0 41.6 75.6

2009 229 23.7%

2010F 302 24.5%

2011F 317 25.7%

2012F 333 26.0%

12M - FORWARD FD CORE P/E (X)

CASH FLOW (RM m, FYE Dec) Pretax profit Depreciation & non–cash adj. Working capital changes Cash tax paid Others Cash flow from operations Capex Net investments & sale of FA Others Cash flow from investing Debt raised/(repaid) Equity raised/(repaid) Dividends paid Cash interest & others Cash flow from financing Change in cash Change in net cash/(debt) Ending net cash/(debt)

2009 (16.0) 4.1 5.6 6.0 N/A N/A 20.7 58.8 42.5 74.4

KEY DRIVERS

BALANCE SHEET (RM m, end Dec) Fixed assets Intangible assets Other long-term assets Total non-current assets Cash and equivalents Stocks Trade debtors Other current assets Total current assets Trade creditors Short-term borrowings Other current liabilities Total current liabilities Long-term borrowings Other long-term liabilities Total long-term liabilities Shareholders’ funds Minority interests NTA/share (RM)

2008 26.8 3.7 1.9 1.6 N/A 23.8 59.9 51.4 37.7 74.2

(FYE Dec) Revenue growth (%) EBITDA growth (%) Pretax margins (%) Net profit margins (%) Interest cover (x) Effective tax rates (%) Net dividend payout (%) Debtors turnover (days) Stock turnover (days) Creditors turnover (days)

2008 24 157 (94) (5) 96 177 (119) 0 (7) (126) (28) 0 (24) (28) (79) (29) (1) (466)

2009 58 164 (13) 2 25 236 (134) 0 3 (131) (155) 67 (12) (24) (124) (20) 136 (330)

2010F 198 154 (30) (18) 0 304 (250) 0 0 (250) 0 0 (54) 10 (44) 10 10 (320)

2011F 230 175 (19) (23) 0 363 (250) 0 0 (250) (20) 0 (89) (7) (117) (4) 16 (304)

2012F 267 180 (13) (32) 0 403 (200) 0 0 (200) (37) 0 (90) (8) (134) 69 105 (199)

12.0

10.0

8.0

6.0

4.0

2.0 Dec-07

Apr-08

Aug-08

Source: Company, CIMB Research, Bloomberg

The S.E.A. Navigator – Malaysia 2011

[ 195 ]

Dec-08

Apr-09

Aug-09

Dec-09

Apr-10

Aug-10

Dec-10

Syariah-compliant stock

Wah Seong Corp Bhd

NEUTRAL

Maintained

RM2.00

@07/12/10

In need of a stronger coating of growth

MALAYSIA

2011 OUTLOOK

CIMB Research Report

Target: RM2.36 Oil & Gas - Equipment & Svs

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 Revenue (RM m) EBITDA (RM m) EBITDA margins (%) Pretax profit (RM m) Net profit (RM m) EPS (sen) EPS growth (%) P/E (x) FD core EPS (sen) FD core P/E (x) Gross DPS (sen) Dividend yield (%) P/BV (x) ROE (%) Net gearing (%) Net cash per share (RM) P/FCFE (x) EV/EBITDA (x) % change in EPS estimates CIMB/Consensus (x)

2008 2,343.2 247.2 10.5% 152.9 115.6 17.7 13.6% 11.3 14.1 14.2 6.5 3.3% 3.2 31.2% 38.6% N/A 40.2 7.3

2009 1,950.3 452.1 23.2% 245.8 121.3 17.8 0.6% 11.2 14.3 14.0 7.4 3.7% 3.2 29.3% N/A 0.01 4.5 3.6

2010F 1,372.6 129.5 9.4% 67.3 51.9 7.6 (57.2%) 26.2 6.1 32.6 2.7 1.3% 3.7 13.0% N/A 0.39 4.5 10.8 0.83

2011F 1,639.3 221.3 13.5% 156.3 107.4 15.8 106.7% 12.7 12.7 15.8 5.5 2.8% 3.3 27.4% N/A 0.40 40.9 6.4 1.05

2012F 1,712.6 273.2 16.0% 205.0 137.7 20.2 28.2% 9.9 16.2 12.3 7.1 3.5% 3.1 32.4% N/A 0.74 5.0 4.5 1.18

Source: Company, CIMB Research, Bloomberg

Price chart

Corporate profile 0.60

2.8

0.50 2.6

0.40 2.4

0.30

2.2

0.20

2.0 1.8 De c-09

0.10 0.00 Ma y-10 Volume 10m (R.H.S ca le )

Source: Bloomberg

Oct-10 Wa h S e ong Corp Bhd

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.

The S.E.A. Navigator – Malaysia 2011

[ 196 ]

Financial tables KEY RATIOS

PROFIT & LOSS (RM m, FYE Dec) Revenue Operating expenses EBITDA Depreciation & amortisation EBIT Net interest & invt income Associates’ contribution Exceptional items Others Pretax profit Tax Minority interests Net profit Adj. wt. shares (m) Unadj. year-end shares (m)

2008 2,343 (2,096) 247 (75) 172 (25) 6 0 0 153 (20) (17) 116 652 652

2009 1,950 (1,498) 452 (248) 204 40 1 0 0 246 (40) (85) 121 681 681

2010F 1,373 (1,243) 130 (28) 102 (39) 5 0 0 67 (11) (5) 52 724 724

2011F 1,639 (1,418) 221 (30) 191 (40) 6 0 0 156 (25) (24) 107 724 724

2012F 1,713 (1,439) 273 (33) 240 (41) 7 0 0 205 (33) (35) 138 724 724

2011F 753 63 35 851 722 126 81 109 1,038 237 330 258 825 118 202 319 413 332 0.51

2012F 619 65 37 721 967 258 166 111 1,502 486 343 259 1,088 118 205 322 437 376 0.55

2008 1,164 60 33 1,257 167 109 73 107 455 205 297 256 757 118 195 312 403 240 0.53

2009 975 61 33 1,069 433 114 76 107 730 215 307 256 778 118 196 313 426 283 0.54

2010F 681 62 34 777 702 120 78 108 1,008 226 318 257 800 118 199 316 371 298 0.45

2010F (29.6) (71.4) 4.9 3.8 2.3 16.0 25.9 20.5 31.2 58.6

2011F 19.4 70.9 9.5 6.5 4.2 16.0 25.9 17.8 27.4 51.5

2012F 4.5 23.4 12.0 8.0 5.0 16.0 25.9 26.4 41.0 77.0

(FYE Dec) Order book (RM m) Overseas rev contribution (%) Number of oil & gas plants O&G contribution to order book (%) Oil & gas plants' utilisation (%)

2009 1,500 74.0% 10 85.0% 94.0%

2010F 1,500 74.0% 10 85.0% 94.0%

2011F 1,500 70.0% 10 85.0% 94.0%

2012F 1,500 70.0% 10 85.0% 94.0%

12M - FORWARD FD CORE P/E (X)

CASH FLOW (RM m, FYE Dec) Pretax profit Depreciation & non–cash adj. Working capital changes Cash tax paid Others Cash flow from operations Capex Net investments & sale of FA Others Cash flow from investing Debt raised/(repaid) Equity raised/(repaid) Dividends paid Cash interest & others Cash flow from financing Change in cash Change in net cash/(debt) Ending net cash/(debt)

2009 (16.8) 82.9 12.6 6.2 5.6 16.1 30.8 13.9 20.9 39.3

KEY DRIVERS

BALANCE SHEET (RM m, end Dec) Fixed assets Intangible assets Other long-term assets Total non-current assets Cash and equivalents Stocks Trade debtors Other current assets Total current assets Trade creditors Short-term borrowings Other current liabilities Total current liabilities Long-term borrowings Other long-term liabilities Total long-term liabilities Shareholders’ funds Minority interests NTA/share (RM)

2008 19.8 51.8 6.5 4.9 5.7 13.0 27.3 45.4 16.6 31.1

(FYE Dec) Revenue growth (%) EBITDA growth (%) Pretax margins (%) Net profit margins (%) Interest cover (x) Effective tax rates (%) Net dividend payout (%) Debtors turnover (days) Stock turnover (days) Creditors turnover (days)

2008 153 75 442 (22) (50) 598 (500) (93) (18) (611) 10 0 (17) 35 28 15 5 (248)

2009 246 248 2 (31) (40) 426 (60) (93) (18) (171) 10 0 (33) 35 12 267 257 9

2010F 67 28 2 (34) 410 473 (59) (91) (17) (167) 11 0 (36) (13) (38) 268 257 266

2011F 156 30 2 (11) 26 204 (58) (89) (16) (163) 12 0 (13) (20) (21) 20 8 274

2012F 205 33 32 (25) 192 437 (57) (87) (15) (159) 13 0 (27) (19) (33) 245 232 506

30.0

25.0

20.0

15.0

10.0

5.0 Dec-07

Apr-08

Aug-08

Source: Company, CIMB Research, Bloomberg

The S.E.A. Navigator – Malaysia 2011

[ 197 ]

Dec-08

Apr-09

Aug-09

Dec-09

Apr-10

Aug-10

Dec-10

Syariah-compliant stock

WCT Bhd

OUTPERFORM

Maintained

RM3.00

@07/12/10

Moving to higher ground in 2011

MALAYSIA

2011 OUTLOOK

CIMB Research Report

Target: RM4.34 Construction

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 Revenue (RM m) EBITDA (RM m) EBITDA margins (%) Pretax profit (RM m) Net profit (RM m) EPS (sen) EPS growth (%) P/E (x) Core EPS (sen) Core EPS growth (%) Core P/E (x) FD core EPS (sen) FD core P/E (x) Gross DPS (sen) Dividend yield (%) P/BV (x) ROE (%) Net gearing (%) P/FCFE (x) EV/EBITDA (x) % change in EPS estimates CIMB/Consensus (x)

2008 3,711.5 292.9 7.9% 158.4 101.3 12.9 (39.7%) 23.2 21.9 1.9% 13.7 20.8 14.4 8.8 2.9% 2.6 12.1% 43.4% (29.1) 9.9

2009 4,666.6 359.6 7.7% 207.9 143.9 18.4 42.0% 16.3 18.4 (16.0%) 16.3 17.5 17.2 10.0 3.3% 2.3 15.0% 35.2% 22.9 7.9

2010F 3,087.0 425.2 13.8% 284.8 151.2 19.3 5.1% 15.6 19.3 5.1% 15.6 18.3 16.4 10.0 3.3% 2.1 14.2% 30.1% 35.3 6.8 N/A 1.08

2011F 3,597.4 476.7 13.3% 325.2 180.8 23.1 19.5% 13.0 23.1 19.5% 13.0 22.6 13.3 10.0 3.3% 1.8 15.0% 22.8% 21.5 6.0 N/A 1.02

2012F 3,619.1 494.8 13.7% 331.8 187.7 23.9 3.8% 12.5 23.9 3.8% 12.5 23.8 12.6 10.0 3.3% 1.6 13.8% 18.7% 32.2 5.8 N/A 0.95

Source: Company, CIMB Research, Bloomberg

Price chart

Corporate profile

3.5 1.40 3.3

1.20 1.00

3.1

0.80

2.9

0.60 2.7 0.40 2.5 2.3 De c-09

0.20 0.00 Ma y-10 Volume 10m (R.H.S ca le )

Oct-10 WCT Bhd

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%.

Source: Bloomberg

The S.E.A. Navigator – Malaysia 2011

[ 198 ]

Financial tables KEY RATIOS

PROFIT & LOSS (RM m, FYE Dec) Revenue Operating expenses EBITDA Depreciation & amortisation EBIT Net interest & invt income Associates’ contribution Exceptional items Others Pretax profit Tax Minority interests Net profit Adj. wt. shares (m) Unadj. year-end shares (m)

2008 3,712 (3,419) 293 (110) 183 25 21 0 (70) 158 (13) (44) 101 784 784

2009 4,667 (4,307) 360 (128) 231 (41) 17 0 0 208 5 (69) 144 784 784

2010F 3,087 (2,662) 425 (141) 285 (35) 36 0 0 285 (71) (62) 151 784 784

2011F 3,597 (3,121) 477 (157) 320 (35) 40 0 0 325 (81) (63) 181 784 784

2012F 3,619 (3,124) 495 (173) 322 (34) 44 0 0 332 (83) (61) 188 784 784

2011F 125 0 1,697 1,822 1,033 1 1,608 842 3,483 1,103 448 1,109 2,660 962 29 991 1,276 380 1.63

2012F 38 0 1,936 1,974 1,086 1 1,618 890 3,595 1,109 426 1,117 2,652 1,010 31 1,042 1,435 441 1.83

2008 305 0 1,165 1,470 865 1 1,227 642 2,735 842 522 851 2,214 831 35 866 904 220 1.15

2009 258 0 1,271 1,529 924 1 1,396 714 3,035 957 496 949 2,402 873 25 898 1,009 255 1.29

2010F 198 0 1,479 1,677 954 1 1,380 749 3,083 946 471 953 2,370 916 30 946 1,128 317 1.44

2010F (33.8) 18.2 9.2 4.9 4.3 25.0 37.2 164.1 0.1 112.5

2011F 16.5 12.1 9.0 5.0 4.8 25.0 31.2 151.6 0.1 103.9

2012F 0.6 3.8 9.2 5.2 4.7 25.0 30.0 162.7 0.1 111.5

(FYE Dec) Construction margins (%) Orderbook replenishment (RM m) Outstanding orderbook (RM m)

2009 9.0% 500 2,200

2010F 10.0% 1,700 3,900

2011F 12.0% 1,000 4,900

2012F 12.5% 1,000 5,900

12M - FORWARD FD CORE P/E (X)

CASH FLOW (RM m, FYE Dec) Pretax profit Depreciation & non–cash adj. Working capital changes Cash tax paid Others Cash flow from operations Capex Net investments & sale of FA Others Cash flow from investing Debt raised/(repaid) Equity raised/(repaid) Dividends paid Cash interest & others Cash flow from financing Change in cash Change in net cash/(debt) Ending net cash/(debt)

2009 25.7 22.8 4.5 3.1 4.6 25.0 39.1 102.6 0.1 70.4

KEY DRIVERS

BALANCE SHEET (RM m, end Dec) Fixed assets Intangible assets Other long-term assets Total non-current assets Cash and equivalents Stocks Trade debtors Other current assets Total current assets Trade creditors Short-term borrowings Other current liabilities Total current liabilities Long-term borrowings Other long-term liabilities Total long-term liabilities Shareholders’ funds Minority interests NTA/share (RM)

2008 33.4 (6.3) 4.3 2.7 4.2 8.3 48.9 108.2 0.1 74.2

(FYE Dec) Revenue growth (%) EBITDA growth (%) Pretax margins (%) Net profit margins (%) Interest cover (x) Effective tax rates (%) Net dividend payout (%) Debtors turnover (days) Stock turnover (days) Creditors turnover (days)

2008 158 110 (23) (47) (30) 169 (76) (724) 0 (800) 550 0 (33) 166 683 52 (497) (489)

2009 208 128 (36) (66) 47 281 (79) (106) 0 (184) 5 0 (33) (19) (47) 50 45 (444)

2010F 285 141 (58) (56) 23 334 (82) (208) 0 (290) 23 0 (33) (1) (11) 33 10 (434)

2011F 325 157 (39) (70) 18 391 (84) (218) 0 (302) 21 0 (33) 0 (12) 77 56 (378)

2012F 332 173 (66) (80) 13 372 (87) (239) 0 (326) 27 0 (33) 15 9 55 28 (350)

23.0 21.0 19.0 17.0 15.0 13.0 11.0 9.0 7.0 5.0 Dec-07

Apr-08

Aug-08

Source: Company, CIMB Research, Bloomberg

The S.E.A. Navigator – Malaysia 2011

[ 199 ]

Dec-08

Apr-09

Aug-09

Dec-09

Apr-10

Aug-10

Dec-10

Syariah-compliant stock

Wellcall Holdings

NEUTRAL

Maintained

RM1.19

@07/12/10

Overstretched by rubber

MALAYSIA

2011 OUTLOOK

CIMB Research Report

Target: RM1.28 Ind Goods & Services - Others

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: 12-m price range:

RM157m/US$50m 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 Revenue (RM m) EBITDA (RM m) EBITDA margins (%) Pretax profit (RM m) Net profit (RM m) EPS (sen) EPS growth (%) P/E (x) Gross DPS (sen) Dividend yield (%) P/BV (x) ROE (%) Net cash per share (RM) P/FCFE (x) EV/EBITDA (x) % change in EPS estimates CIMB/Consensus (x)

2009 79.0 16.3 20.6% 14.3 13.2 10.3 (22.8%) 11.5 14.7 12.3% 1.9 17.1% 0.33 6.7 6.8

2010 96.6 18.6 19.3% 16.0 14.6 11.1 7.4% 10.7 14.7 12.3% 2.0 18.5% 0.30 10.1 6.3

2011F 117.6 25.3 21.5% 22.0 16.7 12.7 14.5% 9.4 15.2 12.8% 2.0 21.4% 0.19 (560.1) 5.2 1.00

2012F 130.5 28.5 21.8% 25.2 19.2 14.5 14.5% 8.2 17.4 14.6% 1.9 24.0% 0.18 10.1 4.7 1.04

2013F 144.9 29.7 20.5% 26.4 20.1 15.2 4.8% 7.8 18.3 15.4% 1.9 24.5% 0.16 9.6 4.6 1.01

Source: Company, CIMB Research, Bloomberg

Price chart

Corporate profile

1.6

1.80 1.60

1.5

1.40

1.4

1.20 1.00

1.3

0.80

1.2

0.60 0.40

1.1 1.0 De c-09

0.20 0.00 Ma y-10 Volume 1m (R.H.S ca le )

Source: Bloomberg

Oct-10 We llca ll Holdings Bhd

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. The S.E.A. Navigator – Malaysia 2011

[ 200 ]

Financial tables KEY RATIOS

PROFIT & LOSS (RM m, FYE Sep) Revenue Operating expenses EBITDA Depreciation & amortisation EBIT Net interest & invt income Associates’ contribution Exceptional items Others Pretax profit Tax Minority interests Net profit Adj. wt. shares (m) Unadj. year-end shares (m)

2009 79 (63) 16 (4) 13 2 0 0 0 14 (1) 0 13 128 128

2010 97 (78) 19 (3) 15 1 0 0 0 16 (1) 0 15 132 132

2011F 118 (92) 25 (3) 22 0 0 0 0 22 (5) 0 17 132 132

2012F 131 (102) 29 (3) 25 0 0 0 0 25 (6) 0 19 132 132

2013F 145 (115) 30 (3) 26 0 0 0 0 26 (6) 0 20 132 132

2009 29 0 2 31 42 10 2 1 55 2 0 3 5 0 1 1 80 0 0.63

2010 28 0 2 30 40 11 4 1 56 4 0 4 8 0 1 1 77 0 0.59

2011F 39 0 2 41 25 11 11 1 47 5 0 4 8 0 1 1 79 0 0.60

2012F 41 0 2 43 23 12 12 1 47 5 0 4 9 0 1 1 81 0 0.61

2013F (FYE Sep) 42 Capacity (tonnes p.a.) 0 Capacity utilisation (%) 2 45 21 13 13 1 48 6 0 4 9 0 1 1 83 0 0.63

2009 14 4 11 (1) (1) 26 (5) 0 0 (5) 0 1 (9) 2 (6) 15 15 42

2010 16 3 0 (2) (1) 17 (2) 0 0 (2) 0 (4) (14) 1 (17) (2) (2) 40

2011F 22 3 (6) (5) 1 15 (15) 0 0 (15) 0 0 (15) 0 (15) (15) (15) 25

2012F 25 3 (2) (6) 0 20 (5) 0 0 (5) 0 0 (17) 0 (17) (2) (2) 23

2013F 26 3 (3) (6) 0 21 (5) 0 0 (5) 0 0 (18) 0 (18) (2) (2) 21

2011F 21.7 36.0 18.7 14.2 N/A 24.0 89.7 22.2 34.0 13.7

2012F 11.0 12.6 19.3 14.7 N/A 24.0 89.8 31.2 31.2 13.9

2013F 11.0 4.2 18.2 13.8 N/A 24.0 90.0 31.2 31.2 13.9

2010 33,000 53.9%

2011F 33,000 60.0%

2012F 46,000 49.0%

2013F 46,000 53.0%

12M - FORWARD FD CORE P/E (X)

CASH FLOW (RM m, FYE Sep) Pretax profit Depreciation & non–cash adj. Working capital changes Cash tax paid Others Cash flow from operations Capex Net investments & sale of FA Others Cash flow from investing Debt raised/(repaid) Equity raised/(repaid) Dividends paid Cash interest & others Cash flow from financing Change in cash Change in net cash/(debt) Ending net cash/(debt)

2010 22.3 14.1 16.6 15.1 N/A 8.8 99.3 11.1 40.4 12.1

KEY DRIVERS

BALANCE SHEET (RM m, end Sep) Fixed assets Intangible assets Other long-term assets Total non-current assets Cash and equivalents Stocks Trade debtors Other current assets Total current assets Trade creditors Short-term borrowings Other current liabilities Total current liabilities Long-term borrowings Other long-term liabilities Total long-term liabilities Shareholders’ funds Minority interests NTA/share (RM)

2009 (33.7) (16.8) 18.1 16.7 N/A 7.7 106.8 15.9 73.2 19.4

(FYE Sep) Revenue growth (%) EBITDA growth (%) Pretax margins (%) Net profit margins (%) Interest cover (x) Effective tax rates (%) Net dividend payout (%) Debtors turnover (days) Stock turnover (days) Creditors turnover (days)

14.0 13.0 12.0 11.0 10.0 9.0 8.0 7.0 Dec-07

Apr-08

Aug-08

Source: Company, CIMB Research, Bloomberg

The S.E.A. Navigator – Malaysia 2011

[ 201 ]

Dec-08

Apr-09

Aug-09

Dec-09

Apr-10

Aug-10

Dec-10

Syariah-compliant stock

Xingquan International

OUTPERFORM

Maintained

RM1.53

@07/12/10

Full of sole

MALAYSIA

2011 OUTLOOK

CIMB Research Report

Target: RM3.04 Retail

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: 12-m price range:

RM470m/US$150m 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 15.0

FYE Jun Revenue (RM m) EBITDA (RM m) EBITDA margins (%) Pretax profit (RM m) Net profit (RM m) EPS (sen) EPS growth (%) P/E (x) Gross DPS (sen) Dividend yield (%) P/BV (x) ROE (%) Net cash per share (RM) P/FCFE (x) EV/EBITDA (x) % change in EPS estimates CIMB/Consensus (x)

2009 434.2 119.1 27.4% 110.8 92.2 42.9 38.3% 3.6 0.0 0.0% 2.7 84.0% 0.34 3.3 2.2

2010 609.3 136.5 22.4% 130.2 105.2 34.2 (20.1%) 4.5 5.0 3.3% 1.3 44.5% 0.81 7.1 1.6

2011F 762.5 186.8 24.5% 183.9 137.7 44.8 30.9% 3.4 6.7 4.4% 1.0 33.6% 0.65 (15.4) 1.5 0.51

2012F 880.0 201.8 22.9% 198.0 148.5 48.3 7.8% 3.2 7.2 4.7% 0.8 27.9% 0.88 5.0 1.0 0.47

2013F 1,002.9 218.5 21.8% 215.9 161.9 52.7 9.1% 2.9 7.9 5.2% 0.6 24.4% 1.16 4.3 0.5 0.47

Source: Company, CIMB Research, Bloomberg

Price chart

Corporate profile

2.0

5.00

1.9 1.8

4.00

1.7 1.6

3.00

1.5 1.4

2.00

1.3 1.2

1.00

1.1 1.0 De c-09

0.00 Ma y-10 Volume 1m (R.H.S ca le )

Source: Bloomberg

Oct-10 Xingqua n Inte rna tiona l

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. The S.E.A. Navigator – Malaysia 2011

[ 202 ]

Financial tables KEY RATIOS

PROFIT & LOSS (RM m, FYE Jun) Revenue Operating expenses EBITDA Depreciation & amortisation EBIT Net interest & invt income Associates’ contribution Exceptional items Others Pretax profit Tax Minority interests Net profit Adj. wt. shares (m) Unadj. year-end shares (m)

2009 434 (315) 119 (6) 113 (2) 0 0 0 111 (19) 0 92 215 215

2010 609 (473) 137 (6) 131 0 0 0 0 130 (25) 0 105 307 307

2011F 763 (576) 187 (6) 181 3 0 0 0 184 (46) 0 138 307 307

2012F 880 (678) 202 (6) 196 2 0 0 0 198 (49) 0 148 307 307

2013F 1,003 (784) 218 (6) 213 3 0 0 0 216 (54) 0 162 307 307

2009 32 5 0 37 104 20 71 0 195 75 31 5 111 0 0 0 121 0 0.54

2010 79 7 0 86 281 19 57 0 356 55 30 5 90 0 0 0 352 0 1.12

2011F 219 7 0 226 230 42 71 0 343 23 30 46 100 0 0 0 469 0 1.50

2012F 262 7 0 269 302 51 82 0 435 29 30 49 109 0 0 0 595 0 1.91

2013F 306 7 0 313 386 61 93 0 540 36 30 54 120 0 0 0 733 0 2.36

2009 111 6 (3) (17) 2 99 (5) 0 0 (5) 8 0 (70) 24 (38) 56 48 73

2010 130 6 (5) (23) 0 109 (56) 0 (1) (57) 15 0 (7) 133 140 192 177 250

2011F 184 6 (69) (5) (3) 113 (146) 0 0 (146) 0 0 (21) 3 (18) (51) (51) 199

2012F 198 6 (14) (46) (2) 142 (49) 0 0 (49) 0 0 (22) 2 (20) 73 73 272

2013F 216 6 (14) (49) (3) 155 (49) 0 0 (49) 0 0 (24) 3 (21) 84 84 356

2010 40.3 14.7 21.4 17.3 108.3 19.2 14.6 38.3 11.6 39.0

2011F 25.2 36.9 24.1 18.1 103.1 25.1 15.0 30.5 14.7 18.7

2012F 15.4 8.0 22.5 16.9 111.7 25.0 15.0 31.6 19.4 10.9

2013F 14.0 8.3 21.5 16.1 121.2 25.0 15.0 31.8 20.5 11.9

(FYE Jun) Number of points of sales Footwear (Rmb/pair) Apparel (Rmb/piece) Footwear sales (m pairs) Apparel sales (m pieces)

2010 2,000 88 44 7.2 8.0

2011F 2,400 89 44 9.0 12.0

2012F 2,883 93 44 10.0 13.0

2013F 2,884 95 44 12.0 14.0

12M - FORWARD FD CORE P/E (X)

CASH FLOW (RM m, FYE Jun) Pretax profit Depreciation & non–cash adj. Working capital changes Cash tax paid Others Cash flow from operations Capex Net investments & sale of FA Others Cash flow from investing Debt raised/(repaid) Equity raised/(repaid) Dividends paid Cash interest & others Cash flow from financing Change in cash Change in net cash/(debt) Ending net cash/(debt)

2009 32.5 44.7 25.5 21.2 50.7 16.8 0.0 64.7 14.6 56.1

KEY DRIVERS

BALANCE SHEET (RM m, end Jun) Fixed assets Intangible assets Other long-term assets Total non-current assets Cash and equivalents Stocks Trade debtors Other current assets Total current assets Trade creditors Short-term borrowings Other current liabilities Total current liabilities Long-term borrowings Other long-term liabilities Total long-term liabilities Shareholders’ funds Minority interests NTA/share (RM)

(FYE Jun) Revenue growth (%) EBITDA growth (%) Pretax margins (%) Net profit margins (%) Interest cover (x) Effective tax rates (%) Net dividend payout (%) Debtors turnover (days) Stock turnover (days) Creditors turnover (days)

6.0 5.5 5.0 4.5 4.0 3.5 3.0 2.5 2.0 Jul-09

Nov-09

Source: Company, CIMB Research, Bloomberg

The S.E.A. Navigator – Malaysia 2011

[ 203 ]

Mar-10

Jul-10

Nov-10

Syariah-compliant stock

YTL Power International

OUTPERFORM

Maintained

RM2.44

@07/12/10

All eyes on Yes

MALAYSIA

2011 OUTLOOK

CIMB Research Report

Target: RM2.97 IPP

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 longdrawn 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 10.5

FYE Jun Revenue (RM m) EBITDA (RM m) EBITDA margins (%) Pretax profit (RM m) Net profit (RM m) EPS (sen) EPS growth (%) P/E (x) Core EPS (sen) Core EPS growth (%) Core P/E (x) FD core EPS (sen) FD core P/E (x) Gross DPS (sen) Dividend yield (%) P/BV (x) ROE (%) Net gearing (%) P/FCFE (x) EV/EBITDA (x) % change in EPS estimates CIMB/Consensus (x)

2009 6,093.4 2,482.7 40.7% 1,386.9 646.6 10.9 (45.3%) 22.3 18.4 (7.8%) 13.2 14.1 17.4 17.5 7.2% 2.4 10.4% 278.0% (5.2) 12.2

2010 13,442.9 2,875.5 21.4% 1,694.0 1,212.1 16.7 52.9% 14.6 16.7 (9.2%) 14.6 15.4 15.9 17.5 7.2% 2.4 18.1% 187.7% (9.7) 10.6

2011F 13,240.1 2,989.9 22.6% 1,749.2 1,251.5 17.3 3.2% 14.1 17.3 3.2% 14.1 15.8 15.4 17.5 7.2% 2.4 16.9% 186.7% (22.0) 10.3 1.04

2012F 13,430.8 3,015.3 22.5% 1,837.3 1,314.5 18.1 5.0% 13.5 18.1 5.0% 13.5 16.6 14.7 17.5 7.2% 2.3 17.3% 184.9% 320.2 10.2 1.02

2013F 13,576.6 3,115.9 23.0% 1,924.6 1,377.0 19.0 4.8% 12.8 19.0 4.8% 12.8 17.4 14.0 17.5 7.2% 2.2 17.6% 181.1% 87.5 9.9 1.04

Source: Company, CIMB Research, Bloomberg

Price chart

Corporate profile

2.8 2.7

3.00

2.6

2.50

2.5

2.00

2.4

1.50 2.3

1.00

2.2

0.50

2.1 2.0 De c-09

0.00 Ma y-10 Volume 10m (R.H.S ca le )

Source: Bloomberg

Oct-10 YTL P owe r Inte rna tiona l

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 assets in 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 end2011, it will emerge as a quad play with the offering of hybrid TV as well. The S.E.A. Navigator – Malaysia 2011

[ 204 ]

Financial tables KEY RATIOS

PROFIT & LOSS 2009 2010 2011F 6,093 13,443 13,240 (3,611) (10,567) (10,250) 2,483 2,875 2,990 (539) (682) (665) 1,944 2,193 2,325 (783) (726) (793) 225 227 217 0 0 0 0 0 0 1,387 1,694 1,749 (740) (482) (498) 0 0 0 1,212 1,251 647 5,910 7,247 7,247 5,910 7,247 7,247

(RM m, FYE Jun) Revenue Operating expenses EBITDA Depreciation & amortisation EBIT Net interest & invt income Associates’ contribution Exceptional items Others Pretax profit Tax Minority interests Net profit Adj. wt. shares (m) Unadj. year-end shares (m)

2012F 2013F (FYE Jun) 13,431 13,577 Revenue growth (%) (10,416) (10,461) EBITDA growth (%) 3,015 3,116 Pretax margins (%) (672) (678) Net profit margins (%) 2,344 2,438 Interest cover (x) (718) (729) Effective tax rates (%) 212 216 Net dividend payout (%) 0 0 Debtors turnover (days) 0 0 Stock turnover (days) 1,837 1,925 Creditors turnover (days) (523) (548) 0 0 1,314 1,377 7,247 7,247 7,247 7,247

2010 120.6 15.8 12.6 9.0 2.6 28.5 78.5 59.2 19.7 6.7

2011F (1.5) 4.0 13.2 9.5 2.6 28.5 76.0 56.7 16.7 10.0

2012F 1.4 0.8 13.7 9.8 2.7 28.5 72.4 57.6 16.9 9.8

2013F 1.1 3.3 14.2 10.1 2.8 28.5 69.1 76.2 16.9 9.9

2010 71.8% 4,739

2011F 71.8% 4,739

2012F 71.8% 4,739

2013F 71.8% 4,739

KEY DRIVERS

BALANCE SHEET 2009 17,283 6,332 1,875 25,491 6,012 859 2,353 0 9,224 126 2,527 2,349 5,002 20,388 3,244 23,632 6,081 0 (0.04)

(RM m, end Jun) Fixed assets Intangible assets Other long-term assets Total non-current assets Cash and equivalents Stocks Trade debtors Other current assets Total current assets Trade creditors Short-term borrowings Other current liabilities Total current liabilities Long-term borrowings Other long-term liabilities Total long-term liabilities Shareholders’ funds Minority interests NTA/share (RM)

2010 15,949 6,149 1,811 23,909 7,419 593 2,008 0 10,020 370 2,405 2,155 4,930 18,777 3,009 21,786 7,333 0 0.16

2011F 16,313 5,964 1,947 24,224 6,113 618 2,104 0 8,834 359 1,592 2,145 4,095 18,556 2,888 21,445 7,519 0 0.21

2012F 16,538 5,785 2,090 24,414 5,591 628 2,134 0 8,353 365 1,512 2,180 4,057 18,340 2,656 20,996 7,713 0 0.27

2013F (FYE Jun) 16,248 Average capacity utilisation (%) 5,612 Capacity (MW) 2,243 24,102 5,228 631 3,534 0 9,392 373 1,437 3,190 4,999 18,128 2,449 20,578 7,918 0 0.32 12M - FORWARD FD CORE P/E (X)

CASH FLOW (RM m, FYE Jun) Pretax profit Depreciation & non–cash adj. Working capital changes Cash tax paid Others Cash flow from operations Capex Net investments & sale of FA Others Cash flow from investing Debt raised/(repaid) Equity raised/(repaid) Dividends paid Cash interest & others Cash flow from financing Change in cash Change in net cash/(debt) Ending net cash/(debt)

2009 43.6 4.1 22.8 10.6 2.2 53.4 120.0 100.8 30.3 5.6

2009 2010 2011F 2012F 2013F 1,387 1,694 1,749 1,837 1,925 539 682 665 672 678 2,031 (855) 132 34 0 (347) (740) (482) (498) (523) 89 198 313 (2,409) 941 1,200 1,722 2,153 2,243 2,393 (8,566) (1,387) (1,435) (1,478) (1,478) 3 4 4 4 4 0 0 0 0 0 (8,563) (1,383) (1,431) (1,474) (1,474) 5,355 (1,432) (734) 4 12 0 0 0 0 0 (776) (993) (993) (993) (993) (675) 3,793 (2) (2) (2) 3,905 1,368 (1,729) (991) (982) (3,458) 1,707 (1,007) (222) (64) (8,813) 3,140 (273) (226) (76) (16,902) (13,763) (14,036) (14,261) (14,336)

15.0

14.0

13.0

12.0

11.0

10.0

9.0 Dec-07

Apr-08

Aug-08

Source: Company, CIMB Research, Bloomberg

The S.E.A. Navigator – Malaysia (2011)

[ 205 ]

Dec-08

Apr-09

Aug-09

Dec-09

Apr-10

Aug-10

Dec-10

APPENDICES…

The S.E.A. Navigator – Malaysia (2011)

[ 206 ]

Malaysia Price as at 07-Dec-10

Earnings Summary No. of Stocks

Mkt Cap (RM m)

Mkt Cap (%w t)

Mkt Cap (%wt)

FD Core P/E (x) 2010 2011F 2012F

FD Core EPS growth (%) 2011F 2012F

Div yld (%) 2011F 2012F

P/BV (x) 2010E 2011F

Core ROE (%) 2011F 2012F

EV/EBITDA (x) 2012F

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

4.5

Av 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

4.2

Conglomerates

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

9.0

Construction 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

14.4

Consumer

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

11.5

Financial 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

14.3

Forestry 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

0.7

Industrial 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

5.0

Media

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

5.6

Oil 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

6.3

Oil 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

9.5

Plantations

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

10.7

Property

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

12.0

Technology

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

5.8

Telecommunications

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

6.9

Serv 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

2.4

Shipping

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

11.9

Transport 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

8.9

Trav 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

5.3

Utilities

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

6.8

100.0

16.7

15.3

13.7

10.2

12.7 <

4.9

5.1

3.5

3.3

22.5

23.4

8.4

16.6

15.5

13.9

8.1

12.2 <

5.1

5.2

3.4

3.2

22.1

23.3

8.2

Overall *

84

758,028 100.0%

KLCI **

24

647,599

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

The S.E.A. Navigator – Malaysia (2011)

[ 207 ]

Malaysia

Earnings Guide Div Latest

Prices as at 07-Dec-10

Net Profit (RM m)

Bloomberg

Price

Actual

Code

(RM)

FY

FY2010

TB PROH MK O TCM MK O UMWH MK

4.84 5.44 6.91

Mar 10 Dec 09 Dec 09

219 274 653

361 343 737

Rec.

FD Core EPS (sen)

FD Core P/E (x)

P/BV (x)

FY2011 FY2012

PEG (x)

Net

Avg.

Yield gearing Market (%)

FY2010 FY2011

Free

Daily

float

T/o.

FY2010 (RM m) (RM m)

(m)

(%)

cap.

FY2010

FY2011

FY2012

FY2010

FY2011

FY2012

FY2010

399 477 771

41.2 40.8 58.3

65.7 51.0 65.8

72.6 70.9 68.9

11.7 13.3 11.8

7.4 10.7 10.5

6.7 7.7 10.0

0.5 2.1 1.9

0.4 0.4 1.4

2.1 2.4 6.4

cash 7.2 1.2

2,658 3,656 7,960

890 1,353 2,388

0.3 0.5 2.4

Automobiles and Parts Proton Holdings Bhd Tan Chong Motor Holdings Bhd UMW Holdings Bhd Aviation AirAsia Bhd Malay sian Airline Sy stem Bhd

O O

AIRA MK MAS MK

2.61 2.07

Dec 09 Dec 09

1,914 92

888 709

1,339 1,734

27.5 -27.3

35.1 17.1

48.3 50.3

9.5 n.m.

7.4 12.1

5.4 4.1

1.6 2.0

0.3 n.m.

0.0 0.0

137.2 27.4

7,235 6,918

5,064 1,038

9.6 2.7

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

O O U TB U TB O O

GAM MK IJM MK LMC MK MRC MK ACP MK MUHI MK TC MK WCT MK

3.76 6.14 7.40 2.01 0.51 1.36 7.59 3.00

Jul 10 Mar 10 Dec 09 Dec 09 Mar 10 Dec 09 Dec 09 Dec 09

281 333 298 51 -19 32 121 151

335 378 435 66 -18 53 131 181

459 393 457 80 11 60 102 188

13.7 20.0 35.0 3.8 -8.0 7.9 66.7 18.3

16.3 25.9 51.2 4.9 -7.9 13.3 79.4 22.6

22.1 27.0 53.8 5.9 4.9 15.1 82.4 23.8

27.4 30.8 21.1 53.4 n.m. 17.1 11.4 16.4

23.1 23.7 14.4 41.3 n.m. 10.3 9.6 13.3

17.0 22.8 13.7 34.1 10.5 9.0 9.2 12.6

4.1 3.6 2.0 3.6 0.7 0.9 1.1 2.1

1.0 1.9 0.9 2.1 n.m. 0.4 1.0 1.2

3.2 1.7 5.7 0.5 1.8 2.2 1.6 3.3

60.9 91.1 cash 26.6 2.5 45.8 cash 30.1

7,687 8,295 6,288 2,776 118 542 938 2,359

6,102 5,574 1,920 1,613 30 395 111 1,205

8.1 3.6 0.8 5.8 0.6 8.3 0.0 2.5

O U N N U N N U N N O

AF MK ROTH MK CAB MK COLA MK FNH MK GUIN MK RJR MK NESZ MK PELI MK QSR MK XISH MK

4.45 45.48 6.05 2.34 16.26 9.96 6.03 43.50 1.21 5.63 1.53

Mar 10 Dec 09 Dec 09 Dec 09 Sep 10 Jun 10 Dec 09 Dec 09 Dec 09 Dec 09 Jun 10

58 730 132 20 695 153 115 436 65 110 105

66 749 142 32 267 171 123 457 76 125 138

75 766 153 34 275 177 128 479 100 133 148

51.2 255.6 43.1 15.2 82.2 50.5 43.8 185.9 12.7 33.6 34.2

58.6 262.5 46.5 24.2 74.9 56.5 47.1 195.0 22.3 38.1 44.8

66.6 268.4 49.9 25.6 77.1 58.6 48.9 204.3 29.4 40.6 48.3

8.7 17.8 14.0 15.4 19.8 19.7 13.8 23.4 9.5 16.8 4.5

7.6 17.3 13.0 9.7 21.7 17.6 12.8 22.3 5.4 14.8 3.4

6.7 16.9 12.1 9.1 21.1 17.0 12.3 21.3 4.1 13.9 3.2

1.6 24.8 3.3 2.4 4.4 6.4 4.2 14.0 0.7 3.5 1.3

0.6 7.2 1.8 0.5 n.m. 2.6 2.5 4.8 0.2 1.7 0.2

7.4 7.1 6.1 5.1 3.3 6.5 5.0 4.7 1.5 2.7 4.4

cash 90.3 cash 4.0 cash cash cash 15.5 45.2 40.8 cash

514 12,986 1,864 402 5,832 3,009 1,577 10,201 620 1,635 470

206 3,896 559 161 1,243 903 473 2,024 217 688 146

0.0 0.1 0.2 0.1 0.1 0.1 0.0 0.0 0.5 1.5 0.3

Conglomerates Sime Darby Bhd Construction and Materials Gamuda Bhd IJM Corp Bhd Lafarge Malay an Cement Bhd Malay sian Resources Corp Bhd MTD ACPI Engineering Muhibbah Engineering Tasek Corporation Bhd WCT Bhd Consumer Asia File Corporation British American Tobacco Bhd Carlsberg Brew ery (M) Bhd Cocoaland Holdings Fraser & Neav e Holdings Bhd Guinness Anchor Bhd JT International Bhd Nestle (Malay sia) Berhad Pelikan International Corp Bhd QSR Brands Xingquan International

[ continued on the following page… ]

The S.E.A. Navigator – Malaysia (2011)

[ 208 ]

[ continued from the previous page… ]

Div Latest Prices as at 07-Dec-10

Rec.

Net Profit (RM m)

Bloomberg

Price

Actual

Code

(RM)

FY

FY2010

FD Core EPS (sen)

FY2011 FY2012

FD Core P/E (x)

P/BV

PEG

(x)

(x)

FY2010

FY2011

FY2012

FY2010

FY2011

FY2012

FY2010

Net

Avg.

Yield gearing Market (%)

FY2010 FY2011

Free

Daily

float

T/o.

FY2010 (RM m) (RM m)

(m)

(%)

cap.

Financial Services Affin Holdings Bhd Alliance Financial Group AMMB Holdings Bhd Bursa Malay sia Bhd EON Capital Bhd Hong Leong Bank Bhd Kurnia Asia Bhd Malay an Banking Bhd Public Bank Bhd RHB Capital Bhd

O AHB MK U AFG MK O AMM MK N BURSA MK O EON MK U HLBK MK U KUAB MK O MAY MK O PBK MK O RHBC MK

3.20 3.08 6.26 7.96 6.96 9.40 0.35 8.41 12.80 8.59

Dec 09 Mar 10 Mar 10 Dec 09 Dec 08 Jun 09 Dec 09 Jun 10 Dec 09 Dec 09

474 301 1,009 118 480 957 32 3,818 3,027 1,455

546 417 1,403 152 531 1,046 36 4,533 3,525 1,701

598 467 1,770 167 590 1,121 37 5,084 4,150 1,956

31.7 19.5 33.4 22.6 69.2 60.6 2.2 53.8 85.1 67.6

36.6 26.9 46.6 29.0 76.6 66.2 2.4 63.9 99.8 79.0

40.0 30.2 58.7 32.0 85.1 70.9 2.5 71.7 117.5 90.9

10.1 15.8 18.7 35.3 10.1 15.5 16.2 15.6 15.0 12.7

8.8 11.4 13.4 27.4 9.1 14.2 14.7 13.2 12.8 10.9

8.0 10.2 10.7 24.9 8.2 13.3 14.1 11.7 10.9 9.5

0.9 1.6 2.0 4.9 1.2 2.5 1.6 2.1 3.5 1.9

0.8 0.6 0.6 1.9 0.9 1.9 2.2 1.0 0.9 0.8

3.8 3.8 3.5 4.4 3.9 2.6 0.0 7.1 5.7 3.7

cash cash cash cash cash cash cash cash cash cash

4,783 4,768 18,869 4,230 4,825 14,853 525 59,526 45,209 18,498

1,100 3,099 11,321 2,538 2,509 4,010 197 30,358 33,906 3,237

0.5 1.6 3.8 0.9 0.2 0.3 0.8 9.0 1.7 2.7

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

Forestry and Paper Eksons Corporation Bhd Industrial Goods and Services Adv enta Bhd Ann Joo Resources Daibochi Plastic & Packaging Bhd Hartalega Holdings Kossan Rubber Industries Bhd Latex x Partners Tomy pak Holdings Top Glov e Corporation Wellcall Holdings Bhd

O TB O O O O O O N

ADV MK AJR MK DPP MK HART MK KRI MK LTX MK TOMY MK TOPG MK WELL MK

2.13 2.94 2.45 5.39 3.34 2.67 1.00 5.55 1.19

Oct 09 Dec 09 Dec 09 Mar 10 Dec 09 Dec 09 Dec 09 Aug 10 Sep 10

34 132 18 143 119 81 16 245 15

43 158 25 185 145 96 25 276 17

57 225 29 216 170 104 27 303 19

22.3 16.8 24.3 40.0 37.1 29.6 14.5 39.7 11.1

28.3 20.1 33.3 50.8 45.3 34.8 23.0 44.6 12.7

37.2 28.7 38.6 59.3 53.3 37.9 25.3 49.0 14.5

9.6 17.5 10.1 13.5 9.0 9.0 6.9 14.0 10.7

7.5 14.6 7.4 10.6 7.4 7.7 4.3 12.4 9.4

5.7 10.3 6.3 9.1 6.3 7.0 4.0 11.3 8.2

1.3 1.6 1.3 5.5 2.3 2.4 1.2 3.1 2.0

0.3 0.6 0.4 0.6 0.5 0.7 0.2 1.3 0.7

2.8 5.8 9.3 3.2 3.0 4.1 8.5 3.2 12.8

35.7 81.7 3.4 cash 26.8 12.5 8.1 cash cash

325 1,537 186 1,959 1,068 584 109 3,432 157

162 581 93 738 388 377 43 1,899 47

0.2 0.4 0.1 0.2 0.5 1.2 0.3 1.1 0.2

O N O

MCIL MK MPR MK STAR MK

0.88 2.34 3.39

Mar 10 Dec 09 Dec 09

134 158 184

151 182 193

167 207 230

7.8 14.7 25.0

9.0 16.9 26.2

9.9 19.2 31.2

11.3 15.9 13.6

9.8 13.9 12.9

8.9 12.2 10.9

1.2 6.0 2.3

0.9 1.1 1.2

5.7 4.0 6.2

cash 15.9 cash

1,482 2,345 2,504

741 917 1,905

0.6 1.2 0.6

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

U DLG MK O KEPB MK TB PETR MK O SCRES MK N WSC MK

1.60 2.01 0.77 2.82 2.00

Jun 10 Jul 10 Dec 09 Jan 10 Dec 09

116 136 -40 170 52

131 213 32 213 107

150 271 42 272 138

5.9 10.1 -7.9 13.4 6.1

6.6 12.9 5.2 16.8 12.7

7.6 16.3 7.2 21.4 16.2

27.3 19.9 n.m. 21.1 32.6

24.3 15.6 14.7 16.8 15.8

21.1 12.3 10.6 13.2 12.3

5.2 10.7 0.4 4.2 3.7

2.0 0.7 n.m. 0.8 0.5

2.5 1.2 2.6 2.8 2.8

cash 3.8 25.1 19.4 cash

3,181 3,335 347 3,600 1,448

1,866 1,777 211 1,013 763

7.8 9.3 4.1 1.9 0.7

Media Media Chinese International Ltd Media Prima Bhd Star Publications Bhd Oil and Gas Petronas Dagangan Bhd Oil Equipment and Services Dialog Group Bhd Kencana Petroleum Bhd Petra Perdana SapuraCrest Petroleum Wah Seong Corp Bhd [ continued on the following page… ]

The S.E.A. Navigator – Malaysia (2011)

[ 209 ]

[ continued from the previous page… ]

Div Latest Bloomberg

Price

Actual

Rec.

Code

(RM)

FY

FY2010

TB N N TB

HAPL MK IOI MK GENP MK KLK MK

3.15 5.78 8.68 21.58

Dec 09 Jun 10 Dec 09 Sep 10

163 2,036 326 1,012

187 2,091 377 1,143

O U O O

EAST MK KLCC MK SPSB MK SCITY MK

1.14 3.53 5.24 4.50

Mar 10 Mar 10 Oct 10 Dec 09

71 897 252 398

O MASEG MK

2.14

Dec 09

U U

MBC MK MISC MK

2.97 8.75

U O O O O

JCYH MK JOBS MK MPI MK UCHI MK UNI MK

0.80 2.88 5.45 1.34 1.96

O AXIATA MK N DIGI MK N MAXIS MK TB T MK

4.67 24.80 5.36 3.41

Prices as at 07-Dec-10

Net Profit (RM m)

FD Core EPS (sen)

P/BV

FD Core P/E (x)

(x)

FY2011 FY2012

PEG (x)

Net

Avg.

Yield gearing Market (%)

FY2010 FY2011

Free

Daily

float

T/o.

FY2010 (RM m) (RM m)

(m)

(%)

cap.

FY2010

FY2011

FY2012

FY2010

FY2011

FY2012

FY2010

187 2,346 397 1,265

20.4 24.0 43.4 94.8

23.4 29.4 49.9 107.1

23.3 34.3 52.5 118.5

15.4 24.1 20.0 22.8

13.5 19.7 17.4 20.2

13.5 16.8 16.5 18.2

1.5 3.5 2.3 3.8

2.2 1.2 2.0 1.9

5.9 3.5 1.0 4.0

0.0 8.0 cash 6.8

2,520 38,698 6,587 23,037

861 22,739 2,135 9,745

1.7 7.6 0.7 0.8

45 259 283 202

70 282 364 232

6.4 19.1 21.1 27.7

5.7 20.4 27.9 34.2

8.0 22.2 35.8 39.0

17.9 18.5 24.8 16.3

20.0 17.3 18.8 13.1

14.3 15.9 14.6 11.5

0.8 0.6 2.4 0.9

1.5 2.3 1.0 0.9

3.3 4.2 4.5 2.2

36.2 16.2 26.5 1.9

940 3,297 5,674 2,115

631 1,563 2,930 741

2.8 0.7 2.1 0.7

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

Dec 09 Mar 10

213 682

214 1,331

318 1,603

21.3 23.3

21.4 29.8

31.8 35.9

14.0 37.5

13.9 29.4

9.3 24.4

1.6 1.7

0.6 1.6

5.5 5.3

cash 20.5

2,970 39,058

921 6,640

0.4 1.7

Sep 10 Dec 09 Jun 10 Dec 09 Dec 09

176 38 105 45 179

169 46 94 49 204

225 52 123 54 232

9.3 11.9 54.0 12.1 22.5

8.3 14.8 48.3 13.2 25.4

11.0 16.5 63.3 14.5 28.7

8.6 24.1 10.1 11.1 8.7

9.7 19.5 11.3 10.2 7.7

7.3 17.4 8.6 9.3 6.8

1.9 6.2 1.4 2.9 1.2

1.0 1.4 1.2 1.2 0.7

5.2 3.3 6.1 10.5 6.8

24.5 cash 9.1 cash 29.4

1,636 916 1,144 503 1,321

393 142 240 133 466

6.3 0.1 0.1 0.5 1.4

09 09 09 09

2,745 1,159 2,320 970

3,075 1,299 2,545 613

3,304 1,451 2,779 717

32.5 149.1 30.9 16.2

36.4 167.1 33.9 7.3

39.1 186.6 37.0 10.1

14.4 16.6 17.3 21.0

12.8 14.8 15.8 46.5

11.9 13.3 14.5 33.8

2.0 16.9 4.7 1.7

1.5 1.4 1.8 n.m.

2.4 6.7 10.0 7.6

26.3 60.9 57.0 37.0

39,439 19,282 40,200 12,199

15,046 9,151 12,060 4,244

18.1 0.3 4.2 6.5

Dec 09 Dec 09 Dec 09

143 375 1,282

150 414 1,669

157 390 1,763

35.8 34.1 25.6

37.5 37.7 33.4

39.3 35.4 35.3

18.5 18.4 17.1

17.6 16.6 13.1

16.8 17.7 12.4

3.2 2.0 3.9

3.8 9.6 1.0

8.3 4.0 5.9

cash 35.6 57.5

2,640 6,897 21,900

571 2,069 10,359

0.0 0.5 5.2

Plantations Hap Seng Plantations Holdings IOI Corporation Bhd Genting Plantations Bhd Kuala Lumpur Kepong Bhd Property Eastern & Oriental Bhd KLCC Property Holdings Bhd SP Setia Bhd Sunw ay City Services Masterskill Education Group Shipping Malay sian Bulk Carriers Bhd MISC Bhd Technology JCY International Bhd JobStreet Corp Bhd Malay sian Pacific Industries Bhd Uchi Technologies Bhd Unisem (M) Berhad Telecommunications Ax iata Group Berhad DiGi.com Bhd Max is Berhad Telekom Malay sia Bhd

Dec Dec Dec Dec

Transport Infrastructure Bintulu Port Holdings Bhd Malay sia Airports Holdings Bhd PLUS Ex pressw ay s Bhd

N O O

BPH MK MAHB MK PLUS MK

6.60 6.27 4.38

[ continued on the following page… ]

The S.E.A. Navigator – Malaysia (2011)

[ 210 ]

[ continued from the previous page… ]

Div Latest Bloomberg

Price

Actual

Rec.

Code

(RM)

FY

FY2010

N O N U

BST MK GENT MK GENM MK RGB MK

4.25 10.70 3.34 0.06

Apr 10 Dec 09 Dec 09 Dec 09

382 2,230 1,230 -39

332 2,974 1,403 5

N TB O

PNH MK TNB MK YTLP MK

2.54 8.44 2.44

Dec 09 Aug 10 Jun 10

193 3,202 1,212

249 2,982 1,251

Prices as at 07-Dec-10

Net Profit (RM m)

FD Core EPS (sen)

P/BV

FD Core P/E (x)

(x)

FY2011 FY2012

PEG (x)

Net

Avg.

Yield gearing Market (%)

FY2010 FY2011

Free

Daily

float

T/o.

FY2010 (RM m) (RM m)

(m)

(%)

cap.

FY2010

FY2011

FY2012

FY2010

FY2011

FY2012

FY2010

373 3,459 1,531 8

28.3 65.7 22.7 -3.7

25.0 80.3 23.8 0.4

27.6 93.4 25.9 0.8

15.0 16.3 14.7 n.m.

17.0 13.3 14.1 13.5

15.4 11.5 12.9 7.9

12.9 2.5 1.8 0.8

n.m. 0.8 2.1 n.m.

6.7 0.7 2.4 0.0

40.5 cash cash 232.6

5,742 39,729 19,756 69

2,010 19,865 9,878 17

1.4 7.1 5.5 0.4

331 3,110 1,314

47.0 63.5 15.4

60.5 63.0 15.8

80.4 69.4 16.6

5.4 13.3 15.9

4.2 13.4 15.4

3.2 12.2 14.7

0.6 1.3 2.4

0.2 2.9 n.m.

5.3 2.7 7.2

40.4 44.8 187.7

1,044 36,799 17,729

638 13,244 3,546

0.2 7.9 7.2

Travel and Leisure Berjay a Sports Toto Bhd Genting Bhd Genting Malay sia Bhd RGB International Bhd Utilities Puncak Niaga Holdings Bhd Tenaga Nasional Bhd YTL Pow er International

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

The S.E.A. Navigator – Malaysia (2011)

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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 abovementioned 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.

The S.E.A. Navigator – Malaysia (2011)

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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.

The S.E.A. Navigator – Malaysia (2011)

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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]

The S.E.A. Navigator – Malaysia (2011)

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T: +1 (212) 616 8600 F: +1 (212) 616 8639

10th Floor Bangunan CIMB Jalan Semantan Damansara Heights 50490 Kuala Lumpur Malaysia T: +60 (3) 2084 8888 F: +60 (3) 2084 8899

The S.E.A. Navigator – Malaysia (2011)

CIMB Securities (Thailand) Co Ltd

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CIMB Securities (UK) Ltd

CIMB Securities (USA) Inc