Rhbinvest Smallcap 2014

TOP MALAYSIA
SMALL CAP COMPANIES

30 JEWELS
2014 Edition
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Berjaya Auto ..................................................................................................................................................................19
Inari Amertron ................................................................................................................................................................39
OCK Group ....................................................................................................................................................................45
SBC Corporation ...........................................................................................................................................................61
Press Metal....................................................................................................................................................................55
Listing of Companies By Alphabetical Order
Barakah Offshore Petroleum .........................................................................................................................................17
Berjaya Auto ..................................................................................................................................................................19
Caring Pharmacy ...........................................................................................................................................................21
Catcha Media ................................................................................................................................................................23
Complete Logistics ........................................................................................................................................................25
EITA Resources ........................................................................................................................................................... 27
Esthetics International ...................................................................................................................................................29
Gadang Holdings ...........................................................................................................................................................31
GDEX ............................................................................................................................................................................33
Hong Leong Industries ..................................................................................................................................................35
Hovid .............................................................................................................................................................................37
Inari Amertron ................................................................................................................................................................39
Kossan Rubber Industries .............................................................................................................................................41
LBS Bina........................................................................................................................................................................43
OCK Group ....................................................................................................................................................................45
Pantech Group ..............................................................................................................................................................47
Perisai Petroleum ..........................................................................................................................................................49
Pintaras Jaya .................................................................................................................................................................51
POS Malaysia ................................................................................................................................................................53
Press Metal....................................................................................................................................................................55
Prestariang ....................................................................................................................................................................57
REDtone International ...................................................................................................................................................59
SBC Corporation ...........................................................................................................................................................61
Scientex .........................................................................................................................................................................63
Syarikat Takaful Malaysia..............................................................................................................................................65
Suria Capital ..................................................................................................................................................................67
Ta Ann Holdings ............................................................................................................................................................69
Tambun Indah ...............................................................................................................................................................71
Tune Insurance..............................................................................................................................................................73
Yinson Holdings.............................................................................................................................................................75
CONTENTS
Listing of Top 5 By Alphabetical Order
Listing of Companies By Industry Classifcation
Automotive
Berjaya Auto...............................................................................................................................................................19
Basic Materials
Pantech Group ...........................................................................................................................................................47
Press Metal ................................................................................................................................................................55
Hong Leong Industries ...............................................................................................................................................35
Construction
Pintaras Jaya .............................................................................................................................................................51
Gadang Holdings .......................................................................................................................................................31
EITA Resources .........................................................................................................................................................27
Consumer
Scientex .....................................................................................................................................................................63
Education
Prestariang .................................................................................................................................................................57
Healthcare
Esthetics International ................................................................................................................................................29
Hovid ..........................................................................................................................................................................37
Caring Pharmacy .......................................................................................................................................................21
Logistics
Complete Logistics .....................................................................................................................................................25
GDEX .........................................................................................................................................................................33
POS Malaysia ............................................................................................................................................................53
Suria Capital...............................................................................................................................................................67
Media
Catcha Media .............................................................................................................................................................23
Non-bank Financial Institution
Syarikat Takaful Malaysia ..........................................................................................................................................65
Tune Insurance ..........................................................................................................................................................73
Oil & Gas
Barakah Offshore Petroleum......................................................................................................................................17
Perisai Petroleum .......................................................................................................................................................49
Yinson Holdings .........................................................................................................................................................75
Plantations/Timber
Ta Ann Holdings.........................................................................................................................................................69
Property
LBS Bina ....................................................................................................................................................................43
SBC Corporation ........................................................................................................................................................61
Tambun Indah ............................................................................................................................................................71
Rubber Gloves
Kossan Rubber Industries ..........................................................................................................................................41
Technology
Inari Amertron ............................................................................................................................................................39
Telecommunications
OCK Group ................................................................................................................................................................45
REDtone International ................................................................................................................................................59
FOREWORD
We proudly welcome you back to the RHB Top Malaysia Small Cap Companies book. This edition marks
the 10th anniversary of a publication that saw its humble beginnings in 2005.
RHB Investment Bank fully intends to continue the OSK legacy of sifting through lesser known companies
in search of undiscovered and under-researched gems that we hope to nurture and promote into glittering
Jewels. Our small cap franchise has been painstakingly built-up over the past decade, with the Malaysia
book complemented by similar publications from our research teams in Singapore, Thailand and Indonesia.
This compendium offers a unique Pan-Asean repository of reports and ideas on 125 companies that remain
unmatched in the region.
RHB Research continues to have the broadest investment research coverage in Malaysia. We actively
cover 170 stocks up from 155 last year that are a blend of large, mid and small cap companies,
supplemented by a steady stream of non-rated research ideas. Our team of experienced analysts continuously
seek out new ideas and go where no investor has been to uncover alpha for our clients. The continuous
addition of new smaller capitalised companies into our coverage list refects the vibrant Malaysian economy
and strong entrepreneurial spirit. In time, we hope to see these companies graduating to the mid and large
tier categories.
RHB Research is always grateful to the management teams of the companies we cover, for their time
freely given to explain how their business models operate and to elaborate on their future growth strategies.
The 2014 Edition of the Top Malaysia Small Cap Companies book is the culmination of endless hours of visits,
meetings with managements, fact checking and re-checking by the RHB Malaysia Research Team, and is
the distillation of our best ideas. We remain motivated by, and thankful for, the support and encouragement
of the esteemed clients of RHB Investment Bank.
RHB Malaysia Research
RHB Research Institute Sdn Bhd
29 April 2014
Research
11
Top Malaysia Small Cap Companies 2014
Introduction
We proudly present the 10th Anniversary Edition of the RHB Top Malaysia Small Cap Companies Book. The 2014
Edition also returns to its normal slot in our event calendar after being delayed in 2013 due to the then ongoing RHB-OSK
merger process. The RHB Asean Small Cap Compendium comprising of complementary publications from Malaysia,
Singapore, Thailand and Indonesia is still believed to be the largest annual repository of small cap stock ideas from
across the region. This years book continues to feature 30 Jewels. We have tried to ensure that the selection provides
a diverse mix of companies representing a broad spectrum of the overall market.
Since last years book, smaller cap companies continue to provide superior returns. Small cap stocks, as measured
by the FBM Small Cap Index (FBMSCI) and FBM Fledgling Index (FBMFI) have generated returns of 14.0% and 29.5%
respectively compared to the 3.2% for the FBMKLCI over the same period. In addition to coming from a smaller base,
we believe the strong outperformances of these companies are a refection of their strong entrepreneurial drive and
sprit that encourages innovation and ingenuity.
In this years stock selection process, the rules of engagement were relatively simple. We limited the market
capitalisation of the stocks to not more than MYR3bn (no lower limit) and not impose any liquidity hurdle as we expect
liquidity concerns to gradually diminish as the companies grow. Kossan Rubber is the largest cap stock at MYR2.73bn,
while at the opposite end, Complete Logistics is the smallest at MYR87m. We note that 83% of this years Jewels have
a market cap of less than MYR2bn. Our effort to provide a broad selection of stocks has also been successful with
15 sectors represented compared to 13 last year and 12 the year before. As in previous years, other than spread and
size considerations, key screening variables include management credibility, industry fundamentals, earnings growth
potential and track record.
Our 2014 Jewels are broadly in line with the RHB top down view of the market where our key OVERWEIGHT
sectors are Banks, Oil & Gas, Property, Plantations and Construction. While the banking sector is comprised of large
cap entities, we have strong representation from the Oil & Gas, Property, Construction, Logistics, Basic Materials
and Healthcare sectors. The 12 Jewels unearthed in 2014 include Hong Leong Industries (Basic Materials), Gadang
(Construction), EITA (Construction), Hovid (Healthcare), Complete Logistics (Logistics), GDEX (Logistics), Barakah
(O&G), LBS Bina (Property), SBC Corporation (Property), Inari Amertron (Technology), OCK and REDtone International
(both Telecommunications). The average P/E of our 2014 Jewels is 16.6x with a three-year net proft CAGR of 32%.
While investment in small cap companies can be hugely proftable, they are also sometimes not for the faint of
heart owing to their greater inherent volatility. Other investment risks that are typical for these stocks include liquidity
constrictions, more limited fnancial and corporate governance track record. We hope this book will come in useful to
help you make your investment decisions.
Happy investing!
22
Figure 1: Distribution by sector
Auto
3%
Basic Materials
10%
Construction
10%
Consumer
3%
Education
3%
Healthcare
10%
Logistics
13%
Media
3%
NBFI
7%
Oil & Gas
10%
Plantations/
Timber
3%
Property
10%
Rubber Gloves
3%
Technology
3%
Telecoms
7%

Source: RHB
Figure 2: Distribution by market cap (MYRm)
2,500m-3,000m
7%
2,000m-2,500m
10%
1,500m- 2,000m
13%
1,000m-1,500m
13%
500m-1,000m
23%
0- 500m
34%
Figure 3: FBMSCI vs FBMKLCI vs FBMFI
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
20,000
1,550
1,600
1,650
1,700
1,750
1,800
1,850
1,900
Jul
2013
Aug
2013
Sep
2013
Oct
2013
Nov
2013
Dec
2013
Jan
2014
Feb
2014
Mar
2014
FBMKLCI (LHS) FBMSCI (RHS) FBMFL (RHS)
Figure 4: Number of stocks by sector
Sector 2013 2012 2011
Auto 1 0 2
Basic Materials 3 3 0
Conglomerate 0 0 0
Construction 3 5 2
Consumer 1 4 6
Education 1 1 2
Finance 0 0 0
Industrials 0 1 0
Insurance 2 1 2
Healthcare 3 0 0
Logistics 4 2 2
Media 1 1 1
Oil and Gas 3 5 5
Others 0 0 1
Plantations/Timber 1 2 0
Ports 0 1 0
Property 3 3 3
REIT 0 0 0
Rubber gloves 1 0 2
Steel and Metals 0 0 2
Technology 1 0 0
Telecoms 2 1 0
Total 30 30 30
Source: RHB
Source: Bloomberg
Source: RHB
33
Figure 5: 2013s small caps relative share price performance
-40% -20% 0% 20% 40% 60% 80% 100% 120%
TDM
Scientex
Malton Bhd
KKB Engineering
Dayang
Integrax
Freight Management
Tambun Indah
Wellcall
NTPM Holdings^
Protasco
Uzma
Syarikat Takaful Malaysia
CBIP
Prestariang
Cahya Mata Sarawak
Brahim's
Deleum
FBMKLCI
FBM Small Cap
FBMFl
% change 30 Jul 2013 - 8 Apr 2014
Wah Seong
Pos Malaysia^
Naim
Pantech^
Alam Maritim
KimLun
Hai -O^
Media Prima
Hua Yang Bhd^
Ahmad Zaki Resources
Instacom
Eversendai
How our 2013 picks fared
Looking back at the stocks featured in the 2013 Edition, 18 of the 30 stocks recorded positive returns and outperformed
the FBM KLCI with an average gain of 44.4%. With the FBM Small Cap Index (FBM SCI) having outperformed the
FBM KLCI in 2013 by over 10%, 14 stocks delivered returns in excess of the 14.0% posted by the FBM SCI, or an
average 54.2% outperformance. The top ranking stocks by share price returns were Deleum, up 97.1% followed by
Brahim (+82.8%), Cahya Mata Sarawak (+82.1%) and Prestariang (+74.1%). With the exception of Instacom which
underwhelmed expectations, four of the fve top picks posted spectacular returns averaging 63.5% in 2013. Eversendai
(-31.4%) was the worst performer of our 2013 small cap selection.
Source: Bloomberg
44
Market capitalisation of the Top 30 (MYRm)
0 400 800 1,200 1,600 2,000 2,400 2,800
Complete Logistics
Catcha Media
EITA Resources
Esthetics International
Gadang Holdings
Hovid
SBC Corporation
REDtone International
OCK Group
Caring Pharmacy
Pintaras Jaya
Pantech Group
Suria Capital
Tambun Indah
LBS Bina
Prestariang
Barakah Offshore
Petroleum
Press Metal
Scientex
Inari Amertron
GDEX
Tune Insurance
Ta Ann Holdings
Perisai Petroleum
Berjaya Auto
Hong Leong Industries
Takaful Malaysia
Yinson Holdings
POS Malaysia
Kossan Rubber
Industries

Source: Bloomberg
FY13 Return on Equity (ROE) of the Top 30 (%)
Catcha Media
-20% 0% 20% 40% 60% 80%
Press Metal
Suria Capital
Gadang Holdings
Ta Ann Holdings
SBC Corporation
Perisai Petroleum
EITA Resources
Complete Logistics
Pantech Group
Yinson Holdings
Hovid
POS Malaysia
Scientex
OCK Group
Pintaras Jaya
Kossan Rubber Industries
GDEX
Tambun Indah
Takaful Malaysia
Barakah Offshore Petroleum
Tune Insurance
Inari Amertron
Berjaya Auto
Caring Pharmacy
Prestariang
LBS Bina

Source: Company Data
55
FY13 P/E of the Top 30 (x)
0 20 40 60 80 100 120
Catcha Media
SBC Corporation
Complete Logistics
Pantech Group
EITA Resources
LBS Bina
Press Metal
Scientex
Pintaras Jaya
Suria Capital
Tambun Indah
Gadang Holdings
Hovid
Takaful Malaysia
POS Malaysia
Kossan Rubber
Industries
Prestariang
Caring Pharmacy
Ta Ann Holdings
Perisai Petroleum
Tune Insurance
OCK Group
Berjaya Auto
Barakah Offshore
Petroleum
Inari Amertron
Yinson Holdings
GDEX
FY13 Dividend Yield for Top 30 (%)
0% 5% 10%
Berjaya Auto
Hovid
Caring Pharmacy
Complete Logistics
Catcha Media
Perisai Petroleum
Yinson Holdings
OCK Group
Press Metal
Ta Ann Holdings
Inari Amertron
Tune Insurance
Gadang Holdings
SBC Corporation
GDEX
Suria Capital
POS Malaysia
Tambun Indah
Prestariang
EITA Resources
Pantech Group
Pintaras Jaya
Scientex
LBS Bina
Takaful Malaysia
Source: Bloomberg
66
The Screening Methodology
The selection of the 30 companies are guided by the following:-
Market Capitalisation* (<= MYR3bn)
Proft and management track record
Price earnings ratio (P/E)
Price to NTA (P/NTA)
Net gearing
Return on Equity (ROE)
Compounded Annual Growth Rate (CAGR)
Dividend prospects
Stock and industry related factors
* the actual market capitalisation of the stocks may difer slightly based on the closing stock prices used for publication
The companies are ranked by the following parameters:-
Lowest FY14 P/E
Lowest FY14 Price/Book Value
Highest FY14 Dividend Yield
Highest FY14 ROE
Highest 3 year EPS CAGR
Lowest Price/Earnings Growth (PEG)
Lowest Relative Sector P/E
The sectors represented in the 2014 Edition are:
Automotive
Basic Materials
Construction
Consumer
Education
Healthcare
Logistics
Media
Non-bank fnancial institutions/Insurance
Oil & Gas
Plantations/Timber
Property
Rubber Gloves
Technology
Telecoms
77
Ranking Based on Forward FY14 P/E (x)
Stock (X)
1 Press Metal 5.97
2 Complete Logistics 6.02
3 SBC Corporation 6.91
4 Gadang Holdings 7.06
5 EITA Resources 8.55
6 Tambun Indah 8.64
7 Scientex 8.92
8 Pintaras Jaya 9.88
9 Pantech Group 9.90
10 Barakah Offshore Petroleum 10.35
Source: RHB estimates
Ranking Based on Forward FY14 P/BV(x)
Stock (X)
1 GDEX 19.72
2 Prestariang 7.07
3 Catcha Media 6.16
4 Berjaya Auto 6.04
5 Inari Amerton 5.49
6 Yinson Holdings 4.15
8 OCK Group 3.90
9 Tune Insurance 3.82
10 Caring Pharmacy 3.71
88
Ranking Based on Highest FY14 Dividend Yield (%)
Stock (%)
1 LBS Bina 5.9
2 Hong Leong Industries 4.9
3 Pantech Group 4.4
4 Tambun Indah 4.2
5 Takaful Malaysia 3.9
6 Pintaras Jaya 3.8
7 EITA Resources 3.4
8 Scientex 3.3
9 GDEX 3.2
10 Prestariang 3.1
Ranking Based on Highest FY14 ROE (%)
Stock (%)
1 Berjaya Auto 52.6
2 Prestariang 46.8
3 Inari Amertron 46.5
5 GDEX 36.9
6 Gadang Holdings 27.0
7 Tambun Indah 26.9
8 Syarikat Takaful Malaysia 25.9
9 REDtone International 24.3
10 Caring Pharmacy 23.7
99
Ranking based on Highest 3-Year CAGR (FY11-FY14) (%)
Stock (%)
2 Tambun Indah 58.72
3 GDEX 57.33
5 Perisai Petroleum 51.48
6 Berjaya Auto 48.46
9 Yinson Holdings 36.15
10 Kossan Rubber Industries 26.50
Ranking based on lowest PEG (x)
Stock (X)
2 Tambun Indah 0.15
5 Press Metal 0.24
6 Berjaya Auto 0.29
8 Scientex 0.39
9 Pantech Group 0.41
10 LBS Bina 0.44
10 10
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<This page has been left blank intentionally>
13 13
Sector Sector Snapshot Featured Stocks
Automotive 2014 fnally saw the launch of the third iteration of the National Automotive Policy (NAP) with a core
objective to make Malaysia a regional automotive hub for energy effcient vehicles (EEV). While we
believe the NAP is vital in setting the policy direction for the industry, the fruits in terms of attracting
foreign direct investment (FDI) from global original equipment manufacturers (OEMs), revitalising
automotive exports and lowering car prices will take time to realise. Going forward, we believe
competition will intensify in the market place, with new marques entering the market and existing
players expanding their model line-ups. We forecast total industry volume (TIV) of 675,000 units
(+2.9% y-o-y) this year, driven by accelerating GDP growth (2014F: +5.4%), positive demographics,
low unemployment rates, an improving external environment and a progressively more competitive
market. We remain NEUTRAL on the automotive sector, as we see few catalysts to spur the segment
higher. Berjaya Auto remains our sector Top Pick, given its strong sales and earnings growth. While
the broader auto market has limited growth in the near term, there is potential for smaller marques
like Mazda to take market share from the more established players.
Berjaya Auto
Basic Materials We are relieved that there was no cancellation or deferment of any mega projects in the 2014 Budget.
Instead, the Government pledged to develop affordable homes. On top of that, we are confdent that
the Mass Rapid Transit (MRT) Line 2 will soon receive formal approvals, although the awarding of
contracts may be a year away. These factors point to accelerating demand for basic materials like
cement and steel. However, the excess capacity and threat from imports continue to dampen the steel
industrys outlook. That said, we continue to like the cement players as there is only one producer
each in Sabah and Sarawak while the West Malaysia market is dominated by an oligopoly. We also
think that the basic materials players in Sarawak and niche operators are still worth a look. The
Sarawak Corridor of Renewable Energy (SCORE) benefts from cheap energy, with the states vast
hydro energy resources helping to create a competitive business environment for heavy industries
like Press Metal and its aluminium smelter. We also like Pantechs growth potential, particularly its
manufacturing and trading division that supplies mainly to the robust oil &gas industry. Hong Leong
Industrys impending disposal of 175m irredeemable convertible preference shares (ICPS) in Hume
Cement SB and its concrete business for 348m shares of Narra Industries which is transforming
into a sexy counter is value-accretive in our opinion. Nonetheless, with most basic materials
counters under our coverage appearing less exciting in the meantime, we maintain our NEUTRAL
rating on the sector.
Pantech Group
Press Metal
Construction The earnings visibility of the construction sector over the immediate to medium term is strong, backed
by: i) record or close-to-record outstanding orderbook for most players, and ii) more new jobs in the
pipeline. The strong outstanding orderbook for most players have been fuelled by a new wave of
spending and investments over the last two to three years by the Government, government-linked
companies (GLCs) and the private sector (including foreign direct investors). This is under, or in
response to, the Economic Transformation Programme (ETP) introduced in Oct 2010, anchored by
the MYR23bn Line 1 of the Klang Valley MRT project. We expect more new jobs in the pipeline for
the construction players over the immediate to medium term. Already, the public housing segment has
been in the limelight with the award of several large scale public housing contracts since end-2013
and a surprisingly low-key ground breaking (actual work, not ceremony) for Warisan Merdeka on
the award of MYR74m worth of foundation works in March. We see this as a precursor to the award
of more work packages, i.e. the redevelopment of the 19-acre Stadium Merdeka site in the heart of
Kuala Lumpur into a new MYR5bn business district, with the key feature being an iconic 118-storey
skyscraper. We also expect news fows on several other fronts to pick up from 2Q2014, including
those from Line 2 of the Klang Valley MRT project, Kwasa Damansara (the redevelopment of the
Rubber Research Institute (RRI) land in Sungai Buloh), the refnery and petrochemical and integrated
development (RAPID) project in Pengerang (Johor), several new toll roads and the Track 3A and
Track 3B power plant projects. We maintain our OVERWEIGHT stance on the construction sector.
Pintaras Jaya
Gadang Holdings
EITA Resources
RHB SMALL CAP JEWELS 2014
14 14
Consumer We believe Malaysias economic outlook will brighten in tandem with the gradual recovery in the
US and Eurozone economies. Our economist projects that Malaysias real GDP will likely expand
to 5.4% in 2014 from 4.7% in 2013.We expect consumer spending to continue to grow due to high
savings, low unemployment and better tourist arrivals, albeit at a more moderate 6% pace in 2014,
after the relatively strong 7.6% expansion in 2013. We expect to see consumers spending more
prudently given the higher cost of living on the back of the governments subsidy rationalisation
programme and relatively high household debt. QL Resources is our Top Pick in the sector given
its strong earnings for the next two years.
Scientex
Education We continue to see a challenging environment for the education sector as student enrolment remains
slow amidst increasing competition. We also expect the delays in foreign student visa approvals to
crimp foreign student enrolment and turn prospective students away, thus hampering industry growth.
Hence, we maintain our NEUTRAL call on the industry. Prestariang remains the sole bright spot
as we are positive on its long-term solid fundamentals as well as its expansion into oil&gas-related
training, which will drive future earnings.
Prestariang
Healthcare We reiterate our NEUTRAL call on the healthcare sector due to rich valuations and limited upside
expected from the major healthcare players, i.e. KPJ Healthcare and IHH Healthcare. Hidden gems
in the form of small players in the pharmaceutical industry are more appealing. We believe the
sector will continue to see rising demand from health-conscious and ageing consumers, spurred by
greater affuence. The Governments incentives to promote local drug manufacturing will in turn drive
the demand for generic drugs, health supplements and other pharmaceutical-related products. Our
Top Picks are Caring and Hovid, which enjoy: i) robust revenue pipeline, ii) rapid expansion plans,
iii) resilience against business seasonality or cyclicality, and iv) decent ROEs.
Hovid
Caring Pharmacy
Logistics We believe that global economy has strengthened and is on track to chart stronger growth this
year, which will likely boost the countrys trade activities in the period ahead. This, in general, will be
favourable for logistics companies. Our economists expect domestic demand to remain resilient and
act as the main engine of growth for the economy in 2014. This will be driven by a new investment
cycle arising from the Governments efforts to transform the economy,and investments in the various
economic corridors and oil & gas projects. This will likely be aided by sustained growth in consumer
spending. As a whole, we expect real GDP to expand at a faster 5.4% in 2014 after moderating to
4.7% in 2013. The growth of e-commerce is becoming more apparent while the demand for fast,
effcient and safe delivery is on the rise. This is evidenced by the revenue growth recorded by Pos
Malaysias logistics arm where turnover surged 45% y-o-y in 3QFY14. Courier companies have
since evolved and now offer third-party logistics services by providing warehousing and inventory
management services. We keep our OVERWEIGHT stance on the logistics sector, as we believe
the industry has strong growth potential backed by improved trade activities and buoyant domestic
demand, and driven by a growing e-commerce segment.
Complete Logistics
GDEX
POS Malaysia
Suria Capital
Media FIFAs World Cup 2014 is one of the key events that will kick off on 12 June in Brazil. Based on
historical data, the tournament plays an important role in boosting advertising expenditure (adex)
growth during the period. In 2010, overall adex grew 15.7% y-o-y and 6.2% m-o-m during the
World Cup season, and 17.0% q-o-q during that quarter. As such, we are hopeful that World Cup
2014 will boost 2014 adex. That said, we are concerned that market sentiment may affect overall
adex growth, given the rise in the cost of living. This was evident in 4Q13, when the Government
began to dial back subsidies for fuel and sugar. This caused adex growth to slow to 11.4% q-o-q vs
a strong 14.0% q-o-q growth in 4Q12. We are of the view that the internet will eventually become
an important medium - shown by Media Primas and Astros ventures into the Internet TV space.
Media Primas Internet platform, TonTon, has been growing strongly with total subscribers hitting
3.5m as at Dec 2013. Astros Internet platform, Astro On The Go, has also been well received by its
subscribers. In the meantime, Catcha Media has also joined the fray by capturing a large base in the
social media space following its merger with Says SB. With the improvement in data infrastructure
and a higher penetration rate, the internet will eventually evolve to become the main media platform.
We keep our NEUTRAL recommendation unchanged for the sector, as we think that an 8% growth
in overall adex is mediocre.
Catcha Media
15 15
Non-bank Financial
Institution/Insurance
We maintain OVERWEIGHT and advocate investors to be selective on quality insurers. Our call is
premised on positive sector fundamentals from: i) a better economic outlook with real GDP expanding
5.4% in 2014 (2013: +4.7%), ii) a recovery in topline growth, iii) low insurance penetration of ~4%
to gross national income, and iv) a robust regulatory framework. The insurance industry, especially
general insurance (GI), is enjoying the best underwriting margins for the past eight years of around
12-13%. We expect premium growth to pick up from low single-digit growth in CY13, partly due to
the expected repricing of premiums to take into account infation and the impact of the goods and
services tax (GST). However, we expect margins to remain stable. Some insurers are looking to
boost their agency size for organic growth. The insurance industry has charted stronger capitalisation
strength than in the past, with the capital adequacy ratio at 245.9% vs FY12s 222.3%.
Syarikat Takaful
Malaysia
Tune Insurance
Oil & Gas Malaysias national oil company Petroliam Nasional (Petronas) will remain the driver for the local oil
& gas (O&G) industry throughout 2014 and 2015. We are currently heading towards the second half
of its 5-year planned capex of MYR300bn that kick-started the furry of investments in 2011 from the
private sector to help the former arrest the countrys declining oil production. We reiterate our belief
that there should be an acceleration in spending by Petronas in the next two years. Marginal felds
and deepwater developments will still be the theme of the sector going forward, as emphasised at
the recently concluded Offshore Technologies Conference (OTC) Asia 2014. This suggests that
there may be more contracts to be awarded by Petronas in the near future. We believe that such
contracts will mostly beneft the small- to mid-cap companies, especially those coming from a small
earnings base. Also, we expect M&As to hog the sectors headlines in CY14. With the local market
getting increasingly saturated and reinvestment opportunities decreasing, acquisitions will be the
next phase to grow earnings. We maintain our OVERWEIGHT call on the sector. Top Picks: Perisai
Petroleum Teknologi, Yinson Holdings and Barakah Offshore Petroleum.
Barakah Offshore
Petroleum
Perisai Petroleum
Yinson Holdings
Timber We are positive on the prospects of the timber sector in view of: i) the ban on tropical log exports
by Myanmar that came into effect on 1 April 2014, which will likely result in a supply shortage and
rising prices,ii) stable log demand in India coming from investments in the infrastructure and industrial
sectors,iii) recovering plywood demand in Japan on the back of rising housing starts (Jan 2014: +12.3%
y-o-y) and an improving economy, iv) the weakening of MYR vs USD will beneft export-derived
revenue, and iv) the rise in CPO prices, which will beneft timber stocks with rising plantation exposure.
Ta Ann Holdings
Property We have an OVERWEIGHT rating on the Malaysian property sector. While we have yet to see a
meaningful uptick in take-up rates, our call is mainly underpinned by: i) undemanding sector valuations,
ii) catalysts from upcoming infrastructure projects, iii) a stronger GDP growth outlook for 2014, and
iv) a negative interest rate environment. We expect the demand for property to recover in 2H14, as
buyers are likely to frontload the purchase of big-ticket items ahead of the implementation of the
goods and services tax (GST) on 1 April 2015.
LBS Bina
SBC Corporation
Tambun Indah
Rubber Gloves Our positive stance on the glove sector is based on: i) overall resilient global demand for gloves, ii)
increased health and hygiene awareness in developing countries that could potentially lead to an
increase in glove usage, iii) glove manufacturers embarking on capacity expansion to improve their
product mix that will lift their revenue and earnings, and iv) a conducive operating environment given
the appreciation of the USD vs MYR coupled with the downtrend in raw material prices (i.e. latex
and nitrile). Health pandemics that occur from time to time could also lead to a surge in demand for
gloves, as seen during the SARS and H1N1 outbreaks in recent years. As such, we maintain our
OVERWEIGHT stance on the sector.
Kossan Rubber
Industries
Technology Recent industry data continues to be encouraging. In February, global chip sales rose 12% y-o-y,
marking the 10
th
consecutive month of positive growth. It grew by 10% y-o-y YTD, which outpaced
the World Semiconductor Trade Statistics (WSTS) 2014 forecast of 4%. Furthermore, the book-to-bill
ratio of the semiconductor equipment industry remained at parity during the month as bookings and
billings accelerated by 20-30%. Given the extended period of positive traction, we think the worst
is over for the semiconductor industry and a structural recovery for the sector is in the offng. That
said, however, the key growth drivers for semiconductor companies will still ultimately depend upon
their product mix and strategies going forward. Maintain NEUTRAL on the sector.
Inari Amertron
16 16
Telecom We remain NEUTRAL on the Malaysian telco sector due to: i) tepid industry revenue growth, ii)
pronounced cannibalisation of SMS revenue by over-the-top (OTT) usage, and iii) valuations that do
not look attractive. We note that OTT applications continue to make a negative material impact on
SMS revenue, which make it diffcult for the mobile operators to sustain high data growth going forward
(SMS is a component of data, along with mobile internet and value-added services). Nonetheless,
demand for new towers and base stations is expected to remain strong in particular within Sabah
and Sarawak, as the Government seeks to address coverage issues at rural and underserved areas.
In view of this, we see other telco-related stocks such as OCK Group and REDtone International as
potential benefciaries. OCK is experienced in building telco sites, and would be keen to win a slice
of the 1,000 new telco sites to be predominantly rolled out in Sabah and Sarawak via the Universal
Service Provision (USP) fund, while REDtone International has expertise in infrastructure telco
engineering (i.e. building, operating and maintaining radio access network infrastructure).
OCK Group
17

Target (diluted): MYR1.90
Price: MYR1.51

Expanding Beyond Its Domestic Dominance

0
1,000
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4,000
5,000
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7,000
8,000
9,000
10,000
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0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1.8
2.0
Barakah Offshore Petroleum (Barakah MK)
Price Close Relative to FTSE Bursa Malaysia KLCI Index (RHS)
10
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30
40
50
60
70
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Source: Bloomberg

Stock Profile
Bloomberg Ticker Barakah MK
Avg Turnover (MYR/USD) 8.63m/2.62m
Net Gearing (%) 23.5
Market Cap (MYRm) 971m
Beta (x) na
BVPS (MYR) 0.36
52-wk Price low/high (MYR) 0.98 - 1.87
Free float (%) 39

Major Shareholders (%)
Nik Hamdan Bin Daud 57.7
(Major RCULS Holder) Areca
Capital SB
66.2

Share Performance (%)
1m 3m 6m 12m
Absolute 2.0 2.6 7650.0 7650.0
Relative 0.3 1.5 7645.2 7639.9

Kong Ho Meng +603 9207 7620
kong.ho.meng@rhbgroup.com

Investment Merits
Experienced management with long-standing Petronas relationship
Current orderbook of MYR2.1bn provides 3-year visibility
High hit rate for local jobs
Actively bidding for a total of >70 jobs worth MYR3bn, with half of
this tenderbook amount being overseas jobs

Company Profile
Barakah Offshore Petroleum (Barakah) specialises in offshore
transportation, installation and maintenance works. The company has
carried out over MYR1.6bn worth of projects in the last 13 years that
comprise pipeline and commissioning works (59% of revenue), and
installation and construction (41% of revenue).

Highlights
Milestone transportation and installation (T&I) projects. Barakah
was a major beneficiary of the MYR1.5bn Pan Malaysia T&I (Package
A). Its 300-pax accommodation/pipelay barge, KL101 the key tool to
carry out Package A jobs is expected to be deployed to Petronas by
mid 2014. The contract period is three years up to Dec 2016.
Elsewhere, management is looking for short accommodation contracts
for KL101. In the past, the barges contracts garnered rates of
USD40,000-50,000/day. Meanwhile, the company is also developing in-
house diving services.
Overseas projects. Barakah is bidding for more than 70 projects worth
about MYR3bn in Saudi Arabia and Indonesia over a 3-year horizon.
The outcome of the tenders the company submitted for Saudi Arabian
T&I jobs was supposed to be made known by end-February but this has
been delayed. That said, announcements of any positive progress in
these project bids will be positive catalysts for Barakah. While the hit
rate may not be as high as that for Malaysian jobs, we understand that
the company stands a better chance over international bidders due to
its track record and the fact that it has a marketing office in Saudi
Arabia. These potential contracts are expected to fetch higher day rates
than the current ones from Package A, although third-party chartering
may be a consideration.
Refinancing opportunities. Management said at our recent oil & gas
(O&G) corporate day that it is looking at refinancing its existing
borrowings. The loans it secured in 2010 to fund KL101 carried a high
8.1% interest rate. Given the currently favourable conditions KL101
being operational and soon to be deployed for Petronas T&I jobs
there are opportunities to refinance at lower rates. Our forecasts
assume cheaper finance costs.

Profit & Loss Sep-12 Sep-13 Dec-14F
Total turnover (MYRm) 202 299 716
Reported net profit (MYRm) 33 41 117
Recurring net profit (MYRm) 33 41 124
Recurring net profit growth (%) (2.9) 23.8 201.7
Recurring EPS (MYR) 0.04 0.05 0.15
Recurring P/E (x) 38.66 31.23 10.35
Return on average equity (%) 29.1 27.1 40.5
P/B (x) 9.82 7.43 4.02
P/CF (x) 18.31 84.08 17.00

Source: Company data, RHB estimates

Balance Sheet (MYRm) Sep-12 Sep-13 Dec-14F
Total current assets 95 165 334
Total assets 415 471 690
Total current liabilities 59 74 152
Total non-current liabilities 226 223 219
Total liabilities 284 298 371
Shareholders' equity 131 173 319
Minority interests 0 0 0
Total equity 131 173 319
Total liabilities & equity 415 471 690
Total debt 232 244 268
Net debt 192 188 193

Cash Flow (MYRm) Sep-12 Sep-13 Dec-14F
Cash flow from operations 71 15 95
Cash flow from investing activities (45) (4) (20)
Cash flow from financing activities (4) (5) (30)
Cash at beginning of period 12 34 39
Total cash generated 21 6 45
Forex effects
0 0 (0)
Implied cash at end of period 34 39 24

Getting a piece of the action in RAPID. The company may potentially
be involved in certain onshore pipeline and infrastructure contracts, the
most notable being the refinery and petrochemicals integrated
development (RAPID) complex in Johor. We understand that the market
size for the installation of a trunk line for the complex is estimated at
MYR200-300m.

Company Report Card
Latest results. Barakahs 1QFY14 results were deemed in line with
consensus expectations, excluding its one-off listing expenses
amounting to MYR7.1m. We expect a weak 1HFY14 due to the
monsoon season, while barge income will remain low and T&I works
are expected to kick in only towards June. Note that FY14 is a financial
period covering 15 months.
Balance sheet/cash flow. Barakah has a lean balance sheet, with a
net gearing of 0.2x (gross gearing: 0.8x) as at Dec 2013. This provides
ample room for future growth.
ROE. We expect ROEs to surge to 37-41% given the earnings accretion
arising from the commencement of the T&I work packages.
Dividend. The company does not pay any dividends at this juncture, as
it is in a growth phase.
Management. Barakah is spearheaded by a strong management team
that has vast experience in the O&G industry. Its founders, Nik Hamdan
Daud and Azman Shah Mohd Zakaria, have more than 30 years of
combined experience in O&G upstream projects. The companys
extensive ties with Petronas have helped it to become a success story
in pre-commissioning and commissioning works in the national oil
companys vendor development programme (VDP) since 2006. Barakah
was the VDPs 2008/2009 best KPI achiever. Under managements
stewardship, the company has continued to garner achievement awards
from Petronas as well as various Government ministries for outstanding
performance and its safety track record.

Recommendation
NR, diluted TP of MYR1.90 (non-diluted TP: MYR2.50). We have a
Not Rated call on this stock, with a diluted TP of MYR1.90, premised on
a 15x adjusted FY14F P/E. Our dilution scenario assumes that all of
Barakahs 208m redeemable convertible secured loan stocks are
converted into shares (conversion is allowable from 25 Oct 2014).
We like Barakah as a key beneficiary of the demand for T&I jobs, as it
has the appetite to expand beyond Malaysia. Its current MYR2.1bn-
strong orderbook should provide stable 3-year earnings visibility. The
stocks catalysts include its: i) success in securing overseas jobs, and ii)
expanding capability for deepwater projects.
18

Target (diluted): MYR1.90
Price: MYR1.51

Expanding Beyond Its Domestic Dominance

0
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0.0
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0.4
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0.8
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1.2
1.4
1.6
1.8
2.0
Barakah Offshore Petroleum (Barakah MK)
10
20
30
40
50
60
70
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Source: Bloomberg

Stock Profile
Bloomberg Ticker Barakah MK
Beta (x) na
BVPS (MYR) 0.36
Free float (%) 39

Nik Hamdan Bin Daud 57.7
(Major RCULS Holder) Areca
Capital SB
66.2

1m 3m 6m 12m
Absolute 2.0 2.6 7650.0 7650.0
Relative 0.3 1.5 7645.2 7639.9

Kong Ho Meng +603 9207 7620

Investment Merits
Experienced management with long-standing Petronas relationship
Current orderbook of MYR2.1bn provides 3-year visibility
High hit rate for local jobs
Actively bidding for a total of >70 jobs worth MYR3bn, with half of
this tenderbook amount being overseas jobs

Company Profile
Barakah Offshore Petroleum (Barakah) specialises in offshore
transportation, installation and maintenance works. The company has
carried out over MYR1.6bn worth of projects in the last 13 years that
comprise pipeline and commissioning works (59% of revenue), and
installation and construction (41% of revenue).

Highlights
Milestone transportation and installation (T&I) projects. Barakah
was a major beneficiary of the MYR1.5bn Pan Malaysia T&I (Package
A). Its 300-pax accommodation/pipelay barge, KL101 the key tool to
carry out Package A jobs is expected to be deployed to Petronas by
mid 2014. The contract period is three years up to Dec 2016.
Elsewhere, management is looking for short accommodation contracts
for KL101. In the past, the barges contracts garnered rates of
USD40,000-50,000/day. Meanwhile, the company is also developing in-
house diving services.
Overseas projects. Barakah is bidding for more than 70 projects worth
about MYR3bn in Saudi Arabia and Indonesia over a 3-year horizon.
The outcome of the tenders the company submitted for Saudi Arabian
T&I jobs was supposed to be made known by end-February but this has
been delayed. That said, announcements of any positive progress in
these project bids will be positive catalysts for Barakah. While the hit
rate may not be as high as that for Malaysian jobs, we understand that
the company stands a better chance over international bidders due to
its track record and the fact that it has a marketing office in Saudi
Arabia. These potential contracts are expected to fetch higher day rates
than the current ones from Package A, although third-party chartering
may be a consideration.
Refinancing opportunities. Management said at our recent oil & gas
(O&G) corporate day that it is looking at refinancing its existing
borrowings. The loans it secured in 2010 to fund KL101 carried a high
8.1% interest rate. Given the currently favourable conditions KL101
being operational and soon to be deployed for Petronas T&I jobs
there are opportunities to refinance at lower rates. Our forecasts
assume cheaper finance costs.

Profit & Loss Sep-12 Sep-13 Dec-14F
Recurring P/E (x) 38.66 31.23 10.35
P/B (x) 9.82 7.43 4.02
P/CF (x) 18.31 84.08 17.00


Balance Sheet (MYRm) Sep-12 Sep-13 Dec-14F
Net debt 192 188 193

Cash Flow (MYRm) Sep-12 Sep-13 Dec-14F
Forex effects
0 0 (0)

Getting a piece of the action in RAPID. The company may potentially
be involved in certain onshore pipeline and infrastructure contracts, the
most notable being the refinery and petrochemicals integrated
development (RAPID) complex in Johor. We understand that the market
size for the installation of a trunk line for the complex is estimated at
MYR200-300m.

Company Report Card
Latest results. Barakahs 1QFY14 results were deemed in line with
consensus expectations, excluding its one-off listing expenses
amounting to MYR7.1m. We expect a weak 1HFY14 due to the
monsoon season, while barge income will remain low and T&I works
are expected to kick in only towards June. Note that FY14 is a financial
period covering 15 months.
Balance sheet/cash flow. Barakah has a lean balance sheet, with a
net gearing of 0.2x (gross gearing: 0.8x) as at Dec 2013. This provides
ample room for future growth.
ROE. We expect ROEs to surge to 37-41% given the earnings accretion
arising from the commencement of the T&I work packages.
Dividend. The company does not pay any dividends at this juncture, as
it is in a growth phase.
Management. Barakah is spearheaded by a strong management team
that has vast experience in the O&G industry. Its founders, Nik Hamdan
Daud and Azman Shah Mohd Zakaria, have more than 30 years of
combined experience in O&G upstream projects. The companys
extensive ties with Petronas have helped it to become a success story
in pre-commissioning and commissioning works in the national oil
companys vendor development programme (VDP) since 2006. Barakah
was the VDPs 2008/2009 best KPI achiever. Under managements
stewardship, the company has continued to garner achievement awards
from Petronas as well as various Government ministries for outstanding
performance and its safety track record.

Recommendation
NR, diluted TP of MYR1.90 (non-diluted TP: MYR2.50). We have a
Not Rated call on this stock, with a diluted TP of MYR1.90, premised on
a 15x adjusted FY14F P/E. Our dilution scenario assumes that all of
Barakahs 208m redeemable convertible secured loan stocks are
converted into shares (conversion is allowable from 25 Oct 2014).
We like Barakah as a key beneficiary of the demand for T&I jobs, as it
has the appetite to expand beyond Malaysia. Its current MYR2.1bn-
strong orderbook should provide stable 3-year earnings visibility. The
stocks catalysts include its: i) success in securing overseas jobs, and ii)
expanding capability for deepwater projects.
19

Berjaya Auto
Target: MYR2.55
Price: MYR2.19

A Compelling Growth Story

Source: Bloomberg

Stock Profile
Bloomberg Ticker BAUTO MK
Net Gearing (%) -38.3
Market Cap (MYRm) 1,767m
Beta (x) NA
BVPS (MYR) 0.36
Free float (%) 25

Berjaya Group Berhad 67.6
Podium Success Sdn BhdSB 7.1

1m 3m 6m 12m
Absolute 21.7 25.9
Relative 20.0 24.2

Alexander Chia +603 9207 7621
alexander.chia@rhbgroup.com

79
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Berjaya Auto (BAUTO MK)
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Investment Merits
The sole importer and distributor of Mazda vehicles in Malaysia
and the Philippines
Compelling growth story with a 3-year (2013-2016F) earnings
CAGR of 54.4%, backed by aggressive expansion in both its model
line-up and completely-knocked-down (CKD) operations
BUY with a MYR2.55 TP, based on 11.5x CY15 EPS

Company Profile
Berjaya Auto Berhad is involved in the distribution, assembling, retailing
and also the provision of after sales service of Mazda vehicles in
Malaysia. The Group is also involved in the domestic distribution of
locally assembled Mazda vehicles and the export of the locally
assembled Mazda vehicles.

Highlights
Strong product pipeline. Mazda sales in Malaysia are set to enjoy
exponential growth (2013: +45.2% y-o-y) over the next several
years, with sales beginning from a low base and helped by a pipeline of
attractive new products. Five all-new models are set to be introduced
between now and 2016, one of them being the new Mazda 2.
Mazda to enjoy market share gains. We are forecasting for Mazda
sales in Malaysia to grow at a FY13-16F CAGR of 26.7%, coming off a
low base. Mazdas 2013 new vehicle registrations of 9,197 units in
Malaysia were merely a tenth of Toyota sales and a fifth each of Honda
and Nissans. Mazda Malaysias expected robust sales growth will be
fuelled by gaining market share not only from its Big 3 Japanese peers
ie Toyota, Honda and Nissan but also from Korean and other
continental marques.
Increased localisation. Berjaya Autos new assembly facility within the
Inokom plant commissioned in April will ramp up production of
Mazdas CX-5 sport utility vehicle (two-thirds of which are slated for
export to Thailand). The facility is set to introduce locally-assembled
variants of the Mazda 3 by October and the Mazda 6 in 2015. The
higher rate of localisation will bring about lower effective excise
duty rates, enabling Mazda to price its products more
competitively. This, in turn, will boost sales volume, with improved
operating leverage helping to lift total profit.
Philippines contribution trending up. With only 657 units sold in
FY13, we see Mazdas Philippines sales growing at a FY13-16F
CAGR of 89%. BAP adopts a simpler business model, ie the wholesale
distribution of fully-imported vehicles, spare parts, accessories and
tools. The models distributed include the 2, 3, 6, CX-5, CX-9 and BT-50.




Profit & Loss Apr-13 Apr-14F Apr-15F
Total turnover (MYRm) 1,064 1,551 2,113
Recurring net profit growth (%) 27.8 141.5 24.1
DPS (MYR) - 0.04 0.05
Dividend Yield (%) - 1.7 2.2
Recurring P/E (x) 30.32 14.06 11.32
P/B (x) 9.93 6.04 4.31
P/CF (x) 29.72 22.55 13.09
Balance Sheet (MYRm) Apr-13 Apr-14F Apr-15F
Other equity 0 0 -
Net debt (53) (117) (182)
Cash flow (MYRm) Apr-13 Apr-14F Apr-15F
Cash flow from financing activities 91 (87) (40)
Total cash generated 105 (37) 65

Potential beneficiary of 2014 National Automotive Policy (NAP). In
line with the Governments plan to promote Malaysia as a regional
energy-efficient vehicle (EEV) hub, it is offering customised incentives
that include a mix of lower taxes, grants and other incentives for the
production of such vehicles in Malaysia. Berjaya Auto could be a
beneficiary of the new NAP as its key growth drivers, i.e. the CX-5, 3
and 6, all qualify as EEVs.
Company Report Card
Latest results. Berjaya Autos 9MFY14 net profit of MYR84.3m
(+214.5% y-o-y) was solid and reached 77.5% of our previous
estimates. We have lifted our earnings estimates since then in view of
higher sales volume assumptions.
Balance sheet/cash flow. It has a solid balance sheet with a net cash
pile of MYR196.2 as at end-Jan 2014.
ROE. The companys strong earnings growth will enable it to deliver
double-digit ROEs for FY14F/15F.
Dividend. Berjaya Autos dividend policy is to pay out up to 40% of its
earnings to shareholders. It declared a single-tier dividend of 1.75 sen
per share in 1H14.
Management. The companys experienced management team is
helmed by CEO Dato Sri Ben Yeoh, who has more than 40 years of
experience in the automotive industry. Dato Sri Yeoh has held various
positions from technical manager to executive director, and led the team
that successfully turned Hyundai into a major player in the domestic
automotive market. He managed the South Korean marques
distribution and retailing operations in Malaysia between 1997 and
2007.
Recommendation
Berjaya Auto is our Top Pick in the automotive sector as we continue to
like its strong growth potential and attractive product offerings going
forward. We are confident that the group will deliver high double-digit
earnings growth for FY14/15, backed by an expanding model line-up
and CKD operations. Our valuation of MYR2.55 is derived from an
11.5x CY15F EPS, in line with its peer target valuation of 9-12x.
Maintain BUY.

20

Berjaya Auto
Target: MYR2.55
Price: MYR2.19

A Compelling Growth Story

Source: Bloomberg

Stock Profile
Bloomberg Ticker BAUTO MK
Beta (x) NA
BVPS (MYR) 0.36
Free float (%) 25

Berjaya Group Berhad 67.6
Podium Success Sdn BhdSB 7.1

1m 3m 6m 12m
Absolute 21.7 25.9
Relative 20.0 24.2

Alexander Chia +603 9207 7621
alexander.chia@rhbgroup.com

79
107
135
162
190
218
246
273
301
0.5
0.7
0.9
1.1
1.3
1.5
1.7
1.9
2.1
2.3
Berjaya Auto (BAUTO MK)
10
20
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40
50
60
70
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Investment Merits
The sole importer and distributor of Mazda vehicles in Malaysia
and the Philippines
Compelling growth story with a 3-year (2013-2016F) earnings
CAGR of 54.4%, backed by aggressive expansion in both its model
line-up and completely-knocked-down (CKD) operations
BUY with a MYR2.55 TP, based on 11.5x CY15 EPS

Company Profile
Berjaya Auto Berhad is involved in the distribution, assembling, retailing
and also the provision of after sales service of Mazda vehicles in
Malaysia. The Group is also involved in the domestic distribution of
locally assembled Mazda vehicles and the export of the locally
assembled Mazda vehicles.

Highlights
Strong product pipeline. Mazda sales in Malaysia are set to enjoy
exponential growth (2013: +45.2% y-o-y) over the next several
years, with sales beginning from a low base and helped by a pipeline of
attractive new products. Five all-new models are set to be introduced
between now and 2016, one of them being the new Mazda 2.
Mazda to enjoy market share gains. We are forecasting for Mazda
sales in Malaysia to grow at a FY13-16F CAGR of 26.7%, coming off a
low base. Mazdas 2013 new vehicle registrations of 9,197 units in
Malaysia were merely a tenth of Toyota sales and a fifth each of Honda
and Nissans. Mazda Malaysias expected robust sales growth will be
fuelled by gaining market share not only from its Big 3 Japanese peers
ie Toyota, Honda and Nissan but also from Korean and other
continental marques.
Increased localisation. Berjaya Autos new assembly facility within the
Inokom plant commissioned in April will ramp up production of
Mazdas CX-5 sport utility vehicle (two-thirds of which are slated for
export to Thailand). The facility is set to introduce locally-assembled
variants of the Mazda 3 by October and the Mazda 6 in 2015. The
higher rate of localisation will bring about lower effective excise
duty rates, enabling Mazda to price its products more
competitively. This, in turn, will boost sales volume, with improved
operating leverage helping to lift total profit.
Philippines contribution trending up. With only 657 units sold in
FY13, we see Mazdas Philippines sales growing at a FY13-16F
CAGR of 89%. BAP adopts a simpler business model, ie the wholesale
distribution of fully-imported vehicles, spare parts, accessories and
tools. The models distributed include the 2, 3, 6, CX-5, CX-9 and BT-50.




Profit & Loss Apr-13 Apr-14F Apr-15F
DPS (MYR) - 0.04 0.05
Recurring P/E (x) 30.32 14.06 11.32
P/B (x) 9.93 6.04 4.31
P/CF (x) 29.72 22.55 13.09
Balance Sheet (MYRm) Apr-13 Apr-14F Apr-15F
Other equity 0 0 -
Net debt (53) (117) (182)
Cash flow (MYRm) Apr-13 Apr-14F Apr-15F

Potential beneficiary of 2014 National Automotive Policy (NAP). In
line with the Governments plan to promote Malaysia as a regional
energy-efficient vehicle (EEV) hub, it is offering customised incentives
that include a mix of lower taxes, grants and other incentives for the
production of such vehicles in Malaysia. Berjaya Auto could be a
beneficiary of the new NAP as its key growth drivers, i.e. the CX-5, 3
and 6, all qualify as EEVs.
Company Report Card
Latest results. Berjaya Autos 9MFY14 net profit of MYR84.3m
(+214.5% y-o-y) was solid and reached 77.5% of our previous
estimates. We have lifted our earnings estimates since then in view of
higher sales volume assumptions.
Balance sheet/cash flow. It has a solid balance sheet with a net cash
pile of MYR196.2 as at end-Jan 2014.
ROE. The companys strong earnings growth will enable it to deliver
double-digit ROEs for FY14F/15F.
Dividend. Berjaya Autos dividend policy is to pay out up to 40% of its
earnings to shareholders. It declared a single-tier dividend of 1.75 sen
per share in 1H14.
Management. The companys experienced management team is
helmed by CEO Dato Sri Ben Yeoh, who has more than 40 years of
experience in the automotive industry. Dato Sri Yeoh has held various
positions from technical manager to executive director, and led the team
that successfully turned Hyundai into a major player in the domestic
automotive market. He managed the South Korean marques
distribution and retailing operations in Malaysia between 1997 and
2007.
Recommendation
Berjaya Auto is our Top Pick in the automotive sector as we continue to
like its strong growth potential and attractive product offerings going
forward. We are confident that the group will deliver high double-digit
earnings growth for FY14/15, backed by an expanding model line-up
and CKD operations. Our valuation of MYR2.55 is derived from an
11.5x CY15F EPS, in line with its peer target valuation of 9-12x.
Maintain BUY.

21

CARiNG Pharmacy
Target: MYR2.57
Price: MYR1.97

The CARiNG Way Forward

92
107
122
137
152
167
182
1.1
1.3
1.5
1.7
1.9
2.1
2.3
Caring Pharmacy (CARING MK)
5
10
15
20
25
30
35
40
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Source: Bloomberg

Stock Profile
Bloomberg Ticker CARING MK
Beta (x) n/a
BVPS (MYR) 0.53
Free float (%) 31

Motivasi Optima SB 50.4
Jitumaju SB 17.1

1m 3m 6m 12m
Absolute 2.6 3.1 - -
Relative 0.9 2.0 - -

The Research Team +603 9207 7663
research2@rhbgroup.com

Investment Merits
Third-largest leading community pharmacy chain in Malaysia with a
total of 88 outlets nationwide
High growth potential expected from 12-15 new outlets per year,
concentration on healthcare business, further penetration into
greater Klang Valley as well as suburban areas and potential M&As
We arrive at a TP of MYR2.57 for Caring derived from 18x FY15
EPS. The valuation is a discount to the larger cap healthcare
stocks and comparable to mid-cap consumer players

Company Profile
Caring Pharmacy (Caring) was founded by a group of four pharmacists
bonded by friendship and passion for the pharmaceutical field. Carings
journey began with the opening of its first branch in Taman Muda,
Cheras, in 1994. The company was incorporated in 2012 in preparation
for its listing on Bursa Malaysia. To date, Caring has 88 outlets under its
CARiNG brand name nationwide.
Highlights
Healthcare-centric business. Caring is currently the only pure
pharmacy retail operator in Malaysia with more than 50% of its revenue
coming from pharmaceutical products comprising scheduled, over the
counter (OTC) products and health supplements while the rest are
from personal care products. Carings competitive edge comes in the
form of consultation provided by qualified pharmacists at each outlet
throughout its operating hours to ensure customers are able to make
informed purchases on their pharmaceutical products. We think the
relationship built between pharmacists and customers will forge loyalty
helping to build recurring future revenue.
Expansion plan to drive growth. Caring has recently disclosed its
plan to open 12-15 new outlets per year moving forward to cement its
growth prospect. At the same time, it has also expressed its intention to
concentrate on further penetrating the Greater Klang Valley and other
suburban areas,which includes an outlet in the newly constructed KLIA2
airport terminal.This is due to the higher profit generated from these
outlets and the far lower rental costs incurred typically. As at Feb 2014,
Caring has opened an additional 10 new outlets, taking its total
nationwide to 88. We believe this could be the catalyst for a sustainable
profit growth in the near future.

Potential M&As to accelerate earnings. The current state of
Malaysias fragmented pharmacy industry gives room for M&A
opportunities between the local players. To date, out of 605 corporate
companies registered with Malaysian Pharmacy Board, only eight
operators have more than 20 outlets each. Caring sees earnings could
potentially further accelerate if M&As between the players were to take
place. This would also indirectly expand its reach to untapped areas.

Profit & Loss May-13 May-14F May-15F
Recurring P/E (x) 20.76 16.71 13.72
P/B (x) 4.28 3.71 3.19
P/CF (x) 41.43 14.01 10.20

Source: Company data, , RHB estimates

Balance Sheet (MYRm) May-11 May-12 May-13
Total current assets - - 130
Total assets - - 176
Total current liabilities - - 62
Total non-current liabilities - - 9
Total liabilities - - 71
Shareholders' equity - - 100
Minority interests - - 5
Total equity - - 105
Total liabilities & equity - - 176
Total debt - - 9
Net debt - - (44)



Cash flow (MYRm) May-11 May-12 May-13
Cash flow from operations - - 10
Cash flow from investing activities - - (34)
Cash flow from financing activities - - 36
Total cash generated - - 12
Implied cash at end of period - - 12
Company Report Card
Latest results. Carings 1HFY14 results were broadly within
expectations. Net profit was recorded at MYR7.2m, or only 28% of our
FY14 forecasts. This was mainly due to the one-off IPO-related costs
and expenses incurred during the opening of seven new outlets during
this period. Despite the weak 1H financial performance, we believe
earnings will rebound and normalise in 2H, with sales from newly-
opened stores starting to kick in as well as bettereconomies of scale.
Balance sheet/cashflow. Carings balance sheet is healthy with net
gearing at just 5.0% in FY13. This is expected to reduce to 3.0-1.3% in
FY14-15 respectively. Caring generates strong cash flow with free cash
flow of MYR9.3mln in FY13.
ROE. Caring is forecast to registerROEof about 24-25% in FY14-15.
The decline is mainly due to expenses incurred on the opening of new
outlets in the coming years.
Dividend. Carings current dividend policy stands at 30%. However,
management recently expressed its intention to increase the payout
going forward. In the current FY14, Caring has paid out an interim
dividend of 1.5sen.
Management. Carings management team consists of a group of
registered pharmacists. Managing director Chong Yeow Siang, who is
also the founder, has 20 years experience as a pharmacist. He was
appointed in 2002 after joining the company in 1997. He is also assisted
by a 10-member senior management team, with eight out of the 10
being registered pharmacists.

Recommendation
We value Caring at MYR2.57, which is derived from 18x FY15 EPS.
The valuation is a discount to the larger cap healthcare stocks and
comparable to mid-cap consumer counters. We like this stock due to: i)
its focus in maintaining a pure pharmacy retail business structure, ii) the
lack of pure pharmacy players locally and regionally, iii) its resilient
store sales against any seasonality or cyclicality iv) its experienced
management team, and v) solid 20% ROE.
22

CARiNG Pharmacy
Target: MYR2.57
Price: MYR1.97

The CARiNG Way Forward

92
107
122
137
152
167
182
1.1
1.3
1.5
1.7
1.9
2.1
2.3
Caring Pharmacy (CARING MK)
5
10
15
20
25
30
35
40
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Source: Bloomberg

Stock Profile
Bloomberg Ticker CARING MK
Beta (x) n/a
BVPS (MYR) 0.53
Free float (%) 31

Motivasi Optima SB 50.4
Jitumaju SB 17.1

1m 3m 6m 12m
Absolute 2.6 3.1 - -
Relative 0.9 2.0 - -


Investment Merits
Third-largest leading community pharmacy chain in Malaysia with a
total of 88 outlets nationwide
High growth potential expected from 12-15 new outlets per year,
concentration on healthcare business, further penetration into
greater Klang Valley as well as suburban areas and potential M&As
We arrive at a TP of MYR2.57 for Caring derived from 18x FY15
EPS. The valuation is a discount to the larger cap healthcare
stocks and comparable to mid-cap consumer players

Company Profile
Caring Pharmacy (Caring) was founded by a group of four pharmacists
bonded by friendship and passion for the pharmaceutical field. Carings
journey began with the opening of its first branch in Taman Muda,
Cheras, in 1994. The company was incorporated in 2012 in preparation
for its listing on Bursa Malaysia. To date, Caring has 88 outlets under its
CARiNG brand name nationwide.
Highlights
Healthcare-centric business. Caring is currently the only pure
pharmacy retail operator in Malaysia with more than 50% of its revenue
coming from pharmaceutical products comprising scheduled, over the
counter (OTC) products and health supplements while the rest are
from personal care products. Carings competitive edge comes in the
form of consultation provided by qualified pharmacists at each outlet
throughout its operating hours to ensure customers are able to make
informed purchases on their pharmaceutical products. We think the
relationship built between pharmacists and customers will forge loyalty
helping to build recurring future revenue.
Expansion plan to drive growth. Caring has recently disclosed its
plan to open 12-15 new outlets per year moving forward to cement its
growth prospect. At the same time, it has also expressed its intention to
concentrate on further penetrating the Greater Klang Valley and other
suburban areas,which includes an outlet in the newly constructed KLIA2
airport terminal.This is due to the higher profit generated from these
outlets and the far lower rental costs incurred typically. As at Feb 2014,
Caring has opened an additional 10 new outlets, taking its total
nationwide to 88. We believe this could be the catalyst for a sustainable
profit growth in the near future.

Potential M&As to accelerate earnings. The current state of
Malaysias fragmented pharmacy industry gives room for M&A
opportunities between the local players. To date, out of 605 corporate
companies registered with Malaysian Pharmacy Board, only eight
operators have more than 20 outlets each. Caring sees earnings could
potentially further accelerate if M&As between the players were to take
place. This would also indirectly expand its reach to untapped areas.

Recurring P/E (x) 20.76 16.71 13.72
P/B (x) 4.28 3.71 3.19
P/CF (x) 41.43 14.01 10.20


Total current assets - - 130
Total assets - - 176
Total current liabilities - - 62
Total non-current liabilities - - 9
Total liabilities - - 71
Shareholders' equity - - 100
Minority interests - - 5
Total equity - - 105
Total liabilities & equity - - 176
Total debt - - 9
Net debt - - (44)



Cash flow from operations - - 10
Cash flow from investing activities - - (34)
Cash flow from financing activities - - 36
Total cash generated - - 12
Implied cash at end of period - - 12
Company Report Card
Latest results. Carings 1HFY14 results were broadly within
expectations. Net profit was recorded at MYR7.2m, or only 28% of our
FY14 forecasts. This was mainly due to the one-off IPO-related costs
and expenses incurred during the opening of seven new outlets during
this period. Despite the weak 1H financial performance, we believe
earnings will rebound and normalise in 2H, with sales from newly-
opened stores starting to kick in as well as bettereconomies of scale.
Balance sheet/cashflow. Carings balance sheet is healthy with net
gearing at just 5.0% in FY13. This is expected to reduce to 3.0-1.3% in
FY14-15 respectively. Caring generates strong cash flow with free cash
flow of MYR9.3mln in FY13.
ROE. Caring is forecast to registerROEof about 24-25% in FY14-15.
The decline is mainly due to expenses incurred on the opening of new
outlets in the coming years.
Dividend. Carings current dividend policy stands at 30%. However,
management recently expressed its intention to increase the payout
going forward. In the current FY14, Caring has paid out an interim
dividend of 1.5sen.
Management. Carings management team consists of a group of
registered pharmacists. Managing director Chong Yeow Siang, who is
also the founder, has 20 years experience as a pharmacist. He was
appointed in 2002 after joining the company in 1997. He is also assisted
by a 10-member senior management team, with eight out of the 10
being registered pharmacists.

Recommendation
We value Caring at MYR2.57, which is derived from 18x FY15 EPS.
The valuation is a discount to the larger cap healthcare stocks and
comparable to mid-cap consumer counters. We like this stock due to: i)
its focus in maintaining a pure pharmacy retail business structure, ii) the
lack of pure pharmacy players locally and regionally, iii) its resilient
store sales against any seasonality or cyclicality iv) its experienced
management team, and v) solid 20% ROE.
23

Catcha Media
Target: MYR1.10
Price: MYR0.86

A Growing Presence In Internet Media

86
109
132
155
177
200
223
246
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1.0
Catcha Media (CHM MK)
1
2
3
4
5
6
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Source: Bloomberg

Stock Profile
Bloomberg Ticker CHM MK
Beta (x) 0.82
BVPS (MYR) 0.14
Free float (%) 23

Catcha Group 58.0
HSC Healthcare 5.3

1m 3m 6m 12m
Absolute (5.0) 28.4 52.2 115.0
Relative (6.1) 27.3 48.0 105.3

Jerry Lee 603 9207 7622
jerry.lee@rhbgroup.com

Investment Merits
One of the regions largest internet media companies
Market value mismatch shows that Catcha Media is worth more
than what it is today
Earnings improvement after merging with SAYS SB and ceased
operating its loss-making e-commerce division

Company Profile
Catcha Media is one of South-East Asias most dynamic media
companies whose integrated strategy incorporates publishing, online
advertising and social media. The company has meaningful
partnerships with Microsoft Corp (MSFT US, NR) whereby it manages
the advertising space of these portals. With a reach of approximately
10m unique visitors per month, Catcha Media is one of the regions
most dominant online media companies.
Highlights
One of the regions largest internet media companies. Post the
SAYS merger, Catcha Media is one of the regions largest internet
media companies, especially as the former has undergone a tough
infancy stage and is now profitable. SAYS reported a net profit of
MYR3m for the 15 months ended Dec 2012 and MYR0.4m for the first
six months of 2013. The earnings contraction was attributed to higher
operating expenses as it expands its business regionally to solidify its
market position. Hence, we believe this merger will expedite Catcha
Medias turnaround as SAYS has started contributing to Catcha Medias
bottomline from 4QFY13.
Market capitalisation mismatch. Catcha Medias 27.4%-owned iCar
Asia (ICQ AU, NR), which performed well since IPO, currently has a
market cap of AUD235m (MYR710.9m). This translates into
MYR194.8m, or MYR1.45/share for Catcha Medias portion, which is
higher than the groups own market cap. This not only shows that there
is a significant market value mismatch, but also investors in Catcha
Media essentially own a stake in iCar Asia at a discount while owning
the formers current operations for free.
Earnings improvement. Catcha Media reported slightly wider-than-
expected losses in FY13, mainly due to weaker contributions from its
print and online media segments, continued losses from its e-commerce
business arm, Haute Avenue, as well as its share of losses from 27.4%-
owned iCar (ICQ AU, NR). Nonetheless, there was a bright spot in its
4QFY13 results. Catcha Media has started recognising contributions
from the social media division upon completion of its merger with SAYS
in Oct 2013. We believe this will help improve its bottomline and
expedite its turnaround. Furthermore, as the group closed down its loss-
making e-commerce division in 1QFY14, we expect it to report healthier
numbers in FY14.

Profit & Loss Dec-12 Dec-13 Dec-14F
Reported net profit (MYRm) 5 (3) (4)
Recurring net profit (MYRm) (14) (7) (4)
Recurring net profit growth (%) (4,949.3) (46.5) (52.4)
Recurring EPS (MYR) (0.10) (0.05) (0.03)
Recurring P/E (x) na na na
Return on average equity (%) 18.8 (12.3) (17.3)
P/B (x) 4.08 5.30 6.16
P/CF (x) 71.04 na na


Balance Sheet (MYRm) Dec-12 Dec-13 Dec-14F
Minority interests - (1) (1)
Other equity - 0 -
Total debt - 5 6
Net debt (1) 3 4


Cash flow (MYRm) Dec-12 Dec-13 Dec-14F
Cash flow from operations 2 (14) (3)
Cash flow from investing activities (6) 14 (1)
Cash flow from financing activities - 5 4
Total cash generated (4) 5 (0)


Company Report Card
Latest results. Catcha Medias MYR7.4m FY13 core net loss, after
stripping out the MYR4.3m in exceptional items that include: i) a windfall
gain received from the Catcha Group, ii) dilution of interest in
associates, and iii) impairments made, was slightly below our estimates.
While its publishing and online media businesses continued to
contribute positively, the groups overall performance was again
dragged down by investment losses incurred by its e-commerce division
as it seeks to capture market share.
Balance sheet/cash flow. Slightly geared, but this does not pose much
concern as the companys cash flow is still healthy. However, it is
necessary to monitor the cash burn rate.
ROE. Not meaningful as we still expect it to report losses, mainly due to
its share of losses from its iCar associate.
Dividend. No dividend payout.
Management. Catcha Media is helmed by CEO Patrick Grove. Together
with Kensuke Tsurumaru and Luke Elliot, the trio earlier founded Asias
most successful property web portal, iProperty.com (Catchas sister
company), which was listed on the Australia Stock Exchange in 2007 under
the companys name IPGA Ltd. iPropertys market cap has grown 172% to
AUD220m since its listing.

Recommendation
We remain positive on Catcha Medias outlook in view of its merger with
SAYS and its ongoing efforts to garner a larger market share. Maintain
BUY, with our SOP-based FV maintained at MYR1.10, ascribing a 20%
discount to the valuation of iCar. There are also no changes to our
earnings forecasts.
24

Catcha Media
Target: MYR1.10
Price: MYR0.86

A Growing Presence In Internet Media

86
109
132
155
177
200
223
246
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1.0
Catcha Media (CHM MK)
1
2
3
4
5
6
A
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1
3
J
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Source: Bloomberg

Stock Profile
Bloomberg Ticker CHM MK
Beta (x) 0.82
BVPS (MYR) 0.14
Free float (%) 23

Catcha Group 58.0
HSC Healthcare 5.3

1m 3m 6m 12m
Absolute (5.0) 28.4 52.2 115.0
Relative (6.1) 27.3 48.0 105.3

Jerry Lee 603 9207 7622

Investment Merits
One of the regions largest internet media companies
Market value mismatch shows that Catcha Media is worth more
than what it is today
Earnings improvement after merging with SAYS SB and ceased
operating its loss-making e-commerce division

Company Profile
Catcha Media is one of South-East Asias most dynamic media
companies whose integrated strategy incorporates publishing, online
advertising and social media. The company has meaningful
partnerships with Microsoft Corp (MSFT US, NR) whereby it manages
the advertising space of these portals. With a reach of approximately
10m unique visitors per month, Catcha Media is one of the regions
most dominant online media companies.
Highlights
One of the regions largest internet media companies. Post the
SAYS merger, Catcha Media is one of the regions largest internet
media companies, especially as the former has undergone a tough
infancy stage and is now profitable. SAYS reported a net profit of
MYR3m for the 15 months ended Dec 2012 and MYR0.4m for the first
six months of 2013. The earnings contraction was attributed to higher
operating expenses as it expands its business regionally to solidify its
market position. Hence, we believe this merger will expedite Catcha
Medias turnaround as SAYS has started contributing to Catcha Medias
bottomline from 4QFY13.
Market capitalisation mismatch. Catcha Medias 27.4%-owned iCar
Asia (ICQ AU, NR), which performed well since IPO, currently has a
market cap of AUD235m (MYR710.9m). This translates into
MYR194.8m, or MYR1.45/share for Catcha Medias portion, which is
higher than the groups own market cap. This not only shows that there
is a significant market value mismatch, but also investors in Catcha
Media essentially own a stake in iCar Asia at a discount while owning
the formers current operations for free.
Earnings improvement. Catcha Media reported slightly wider-than-
expected losses in FY13, mainly due to weaker contributions from its
print and online media segments, continued losses from its e-commerce
business arm, Haute Avenue, as well as its share of losses from 27.4%-
owned iCar (ICQ AU, NR). Nonetheless, there was a bright spot in its
4QFY13 results. Catcha Media has started recognising contributions
from the social media division upon completion of its merger with SAYS
in Oct 2013. We believe this will help improve its bottomline and
expedite its turnaround. Furthermore, as the group closed down its loss-
making e-commerce division in 1QFY14, we expect it to report healthier
numbers in FY14.

Reported net profit (MYRm) 5 (3) (4)
Recurring net profit (MYRm) (14) (7) (4)
Recurring net profit growth (%) (4,949.3) (46.5) (52.4)
Recurring EPS (MYR) (0.10) (0.05) (0.03)
Recurring P/E (x) na na na
Return on average equity (%) 18.8 (12.3) (17.3)
P/B (x) 4.08 5.30 6.16
P/CF (x) 71.04 na na


Minority interests - (1) (1)
Other equity - 0 -
Total debt - 5 6
Net debt (1) 3 4


Cash flow from operations 2 (14) (3)
Cash flow from financing activities - 5 4
Total cash generated (4) 5 (0)


Company Report Card
Latest results. Catcha Medias MYR7.4m FY13 core net loss, after
stripping out the MYR4.3m in exceptional items that include: i) a windfall
gain received from the Catcha Group, ii) dilution of interest in
associates, and iii) impairments made, was slightly below our estimates.
While its publishing and online media businesses continued to
contribute positively, the groups overall performance was again
dragged down by investment losses incurred by its e-commerce division
as it seeks to capture market share.
Balance sheet/cash flow. Slightly geared, but this does not pose much
concern as the companys cash flow is still healthy. However, it is
necessary to monitor the cash burn rate.
ROE. Not meaningful as we still expect it to report losses, mainly due to
its share of losses from its iCar associate.
Dividend. No dividend payout.
Management. Catcha Media is helmed by CEO Patrick Grove. Together
with Kensuke Tsurumaru and Luke Elliot, the trio earlier founded Asias
most successful property web portal, iProperty.com (Catchas sister
company), which was listed on the Australia Stock Exchange in 2007 under
the companys name IPGA Ltd. iPropertys market cap has grown 172% to
AUD220m since its listing.

Recommendation
We remain positive on Catcha Medias outlook in view of its merger with
SAYS and its ongoing efforts to garner a larger market share. Maintain
BUY, with our SOP-based FV maintained at MYR1.10, ascribing a 20%
discount to the valuation of iCar. There are also no changes to our
earnings forecasts.
25

Complete Logistic Services
Target: MYR0.97
Price: MYR0.73

An Undervalued Gem With Great Potential

89
104
119
134
149
164
0.30
0.40
0.50
0.60
0.70
0.80
0.90
Complete Logistic Services (CLSB MK)
100
200
300
400
500
A
p
r
-
1
3
J
u
n
-
1
3
A
u
g
-
1
3
O
c
t
-
1
3
D
e
c
-
1
3
F
e
b
-
1
4
V
o
l

t
h

Source: Bloomberg

Stock Profile
Bloomberg Ticker CLSB MK
Net Gearing (%) 0.6
Market Cap (MYRm) 87.4m
Beta (x) 0.64
BVPS (MYR) 0.85
Free float (%) 27

Major Shareholders(%)
Dolphin Assets SB 29.2
Law Hee Ling 19.9
Pusaka Unggul SB 9.2

1m 3m 6m 12m
Absolute 3.5 14.1 7.4 69.8
Relative 2.2 12.7 3.7 61.3

Jerry Lee 603 9207 7622

Investment Merits
Restructuring of business model yields positive results
Innovative logistics business model to drive earnings growth
Trading at an undemanding P/E of 5.3x, which is below the peer
average of 13x

Company Profile
Principally an investment holding company, Complete Logistic Services
(Complete Logistic) wholly-owned subsidiaries are involved in owning
ships, trading of freight, as well as providing services in marine
transportation, container haulage, custom brokerage & forwarding and
warehousing. It also provides lorry and trucking as well as total logistics
services. It went through a restructuring process about 4-5 years ago,
aiming to develop its land logistic unit to offset the effects of an
anticipated deterioration in the shipping industry.
Highlights
A new beginning in FY13. Complete Logistic began restructuring its
business model 4-5 years ago, to focus on land logistic services in
order to counter effects of the then-anticipated deterioration in the
shipping industry. It completed the acquisition of Guper Integrated
Logistics SB in FY12, followed by Pengangkutan Sekata SB in FY13, to
expand its land logistics arm. The group also made a provision for
impairment losses on certain vessels amounting to MYR18.6m in order
to clean up its books in FY12. These changes were proven successful
as core earnings jumped >100% y-o-y in FY13, while its profit margin
improved from low single digits to 11.7%. Complete Logistic continued
to grow positively in 9MFY14, with net profit surging 51% y-o-y.
Shipping is profitable despite a challenging environment. As the
shipping business has been a very challenging one in the past few
years, Complete Logistic has decided to downsize its fleet. As a result,
it is now placing greater focus on land logistic services. Nonetheless,
with an experienced management team and prudent cost controls, its
shipping division has always recorded profits even though low freight
rates have caused most shipping companies to be in the red. Its
shipping division reported a pre-tax profit of MYR2.5m in FY13.
New business plan for logistics unit to propel earnings. We
understand that Complete Logistic is currently restructuring the
business model of its logistics unit to drive growth. One of the initiatives
is to expand its land logistic services by expanding its fleet and
warehousing facilities. As management has realised the traditional
logistics industry is both fragmented and competitive, it is working on
more innovative solutions to drive earnings growth.

Profit & Loss Mar-12 Mar-13 Mar-14F
Reported net profit (MYRm) (16) 12 15
Recurring P/E (x) 37.27 7.28 6.02
Return on average equity (%) (19.4) 14.7 15.3
P/B (x) 1.15 1.00 0.85
P/CF (x) 2.61 6.06 5.48


Balance Sheet (MYRm) Mar-12 Mar-13 Mar-14F
Other equity (0) (0) (0)
Total debt 21 19 18
Net debt 11 7 1


Cash flow (MYRm) Mar-12 Mar-13 Mar-14F
Forex effects 1 (3) -


Trading at an undemanding valuation. Complete Logistic is currently
trading at a mere 5.3x P/E, which is far below its logistics peers
average 13x. As such, we believe that the stock is a hidden gem that
has yet to be uncovered.
Company Report Card
Latest results. Complete Logistics 9MFY14 net profit grew by 51% y-
o-y to MYR13.2m on the back of a surge in revenue to MYR92.7m (15%
y-o-y). Of its divisions (ie shipping, logistics and trading), logistics
chartered the strongest growth in net profit. Earnings from logistics
segment expanded by 17% y-o-y, mainly contributed by newly-acquired
Pengangkutan Sekata SB during the financial year.
Balance sheet/cash flow. Its net gearing was at 7.7% in 9MFY14,
compared with 8.1% in FY13. Cash flow remains healthy.
ROE. Complete Logistic achieved a ROE of 14.7% in FY13.
Dividend. There were no dividends paid in the last two financial years.
Management. The management team is helmed by Mr Johnny Law, the
managing director and founder of the group. Mr Law has over 30 years
of experience in the shipping industry, and expanded the groups fleet
and grew its business activities to cover marine transportation services,
logistics operations and general trading. He is responsible for the
overall management and operations of the group.

Recommendation
We think that Complete Logistic is an undervalued gem, based on its
potential earnings growth and low P/E. At the current price, the stock is
currently trading at a 5.3x P/E, which is 60% below the local logistics
peer average of 13x. We value the stock at an 8x forward P/E, which is
still 38% below the industry average. Our FV of MYR0.97 implies an
upside of 33% from its last closing price of MYR0.73.

26

Complete Logistic Services
Target: MYR0.97
Price: MYR0.73

An Undervalued Gem With Great Potential

89
104
119
134
149
164
0.30
0.40
0.50
0.60
0.70
0.80
0.90
Complete Logistic Services (CLSB MK)
100
200
300
400
500
A
p
r
-
1
3
J
u
n
-
1
3
A
u
g
-
1
3
O
c
t
-
1
3
D
e
c
-
1
3
F
e
b
-
1
4
V
o
l

t
h

Source: Bloomberg

Stock Profile
Bloomberg Ticker CLSB MK
Net Gearing (%) 0.6
Market Cap (MYRm) 87.4m
Beta (x) 0.64
BVPS (MYR) 0.85
Free float (%) 27

Major Shareholders(%)
Dolphin Assets SB 29.2
Law Hee Ling 19.9
Pusaka Unggul SB 9.2

1m 3m 6m 12m
Absolute 3.5 14.1 7.4 69.8
Relative 2.2 12.7 3.7 61.3

Jerry Lee 603 9207 7622

Investment Merits
Restructuring of business model yields positive results
Innovative logistics business model to drive earnings growth
Trading at an undemanding P/E of 5.3x, which is below the peer
average of 13x

Company Profile
Principally an investment holding company, Complete Logistic Services
(Complete Logistic) wholly-owned subsidiaries are involved in owning
ships, trading of freight, as well as providing services in marine
transportation, container haulage, custom brokerage & forwarding and
warehousing. It also provides lorry and trucking as well as total logistics
services. It went through a restructuring process about 4-5 years ago,
aiming to develop its land logistic unit to offset the effects of an
anticipated deterioration in the shipping industry.
Highlights
A new beginning in FY13. Complete Logistic began restructuring its
business model 4-5 years ago, to focus on land logistic services in
order to counter effects of the then-anticipated deterioration in the
shipping industry. It completed the acquisition of Guper Integrated
Logistics SB in FY12, followed by Pengangkutan Sekata SB in FY13, to
expand its land logistics arm. The group also made a provision for
impairment losses on certain vessels amounting to MYR18.6m in order
to clean up its books in FY12. These changes were proven successful
as core earnings jumped >100% y-o-y in FY13, while its profit margin
improved from low single digits to 11.7%. Complete Logistic continued
to grow positively in 9MFY14, with net profit surging 51% y-o-y.
Shipping is profitable despite a challenging environment. As the
shipping business has been a very challenging one in the past few
years, Complete Logistic has decided to downsize its fleet. As a result,
it is now placing greater focus on land logistic services. Nonetheless,
with an experienced management team and prudent cost controls, its
shipping division has always recorded profits even though low freight
rates have caused most shipping companies to be in the red. Its
shipping division reported a pre-tax profit of MYR2.5m in FY13.
New business plan for logistics unit to propel earnings. We
understand that Complete Logistic is currently restructuring the
business model of its logistics unit to drive growth. One of the initiatives
is to expand its land logistic services by expanding its fleet and
warehousing facilities. As management has realised the traditional
logistics industry is both fragmented and competitive, it is working on
more innovative solutions to drive earnings growth.

Reported net profit (MYRm) (16) 12 15
Recurring P/E (x) 37.27 7.28 6.02
Return on average equity (%) (19.4) 14.7 15.3
P/B (x) 1.15 1.00 0.85
P/CF (x) 2.61 6.06 5.48


Total debt 21 19 18
Net debt 11 7 1




Trading at an undemanding valuation. Complete Logistic is currently
trading at a mere 5.3x P/E, which is far below its logistics peers
average 13x. As such, we believe that the stock is a hidden gem that
has yet to be uncovered.
Company Report Card
Latest results. Complete Logistics 9MFY14 net profit grew by 51% y-
o-y to MYR13.2m on the back of a surge in revenue to MYR92.7m (15%
y-o-y). Of its divisions (ie shipping, logistics and trading), logistics
chartered the strongest growth in net profit. Earnings from logistics
segment expanded by 17% y-o-y, mainly contributed by newly-acquired
Pengangkutan Sekata SB during the financial year.
Balance sheet/cash flow. Its net gearing was at 7.7% in 9MFY14,
compared with 8.1% in FY13. Cash flow remains healthy.
ROE. Complete Logistic achieved a ROE of 14.7% in FY13.
Dividend. There were no dividends paid in the last two financial years.
Management. The management team is helmed by Mr Johnny Law, the
managing director and founder of the group. Mr Law has over 30 years
of experience in the shipping industry, and expanded the groups fleet
and grew its business activities to cover marine transportation services,
logistics operations and general trading. He is responsible for the
overall management and operations of the group.

Recommendation
We think that Complete Logistic is an undervalued gem, based on its
potential earnings growth and low P/E. At the current price, the stock is
currently trading at a 5.3x P/E, which is 60% below the local logistics
peer average of 13x. We value the stock at an 8x forward P/E, which is
still 38% below the industry average. Our FV of MYR0.97 implies an
upside of 33% from its last closing price of MYR0.73.

27

Corp Logo
EITA Resources
Target: MYR1.58
Price: MYR1.21

Up, Up And Away

88
101
113
126
138
151
163
176
188
0.6
0.7
0.8
0.9
1.0
1.1
1.2
1.3
1.4
EITA Resources (EITA MK)
1
1
2
2
3
3
A
p
r
-
1
3
J
u
n
-
1
3
A
u
g
-
1
3
O
c
t
-
1
3
D
e
c
-
1
3
F
e
b
-
1
4
V
o
l

m

Source: Bloomberg

Stock Profile
Bloomberg Ticker EITA MK
Net Gearing (%) 1.0
Beta (x) 0.88
BVPS (MYR) 0.95
Free float (%) 31

Ruby Technique SB 23.8
Fu Wing Hoong 20.2
Lim Joo Swee 15.3

1m 3m 6m 12m
Absolute 9.0 24.7 65.8 77.9
Relative 7.9 23.6 61.6 68.2

Kong Heng Siong +603 9207 7666
kong.heng.siong@rhbgroup.com

Research2@rhbgroup.com

Investment Merits
One-stop elevator and busduct manufacturer in Malaysia
Benefitting from the burgeoning construction sector
Local and regional presence

Company Profile
EITA Resources (EITA) is a manufacturer and distributor of elevators,
busduct systems, and electrical and electronics (E&E) equipment. EITA
Resources (EITA) is a manufacturer and distributor of elevators,
busduct systems, and electrical and electronics (E&E) equipment. We
believe the group will benefit from the growth in the local construction
sector as its elevator and busduct manufacturing segments mature.
Highlights
Elevator and busduct manufacturer. EITA is a one-stop elevator
service provider that is able to provide the whole spectrum of services
from design and manufacturing to maintenance. The group also
manufactures busduct systems, ie electrical connectors that are put in
place of normal wires and used in buildings and industrial areas that
require a heavy current load. Given the slew of upcoming construction
projects, along with its complementary E&E equipment and components
trading businesses, we believe that there is potential for EITAs
earnings to be boosted.
Service and maintenance. EITA also provides maintenance services
for the groups own-brand elevators as well as third-party ones. It is also
able to provide preventative maintenance services for its elevators and
for those of other manufacturers. Through the use of an effective zoning
system in the Klang Valley, Penang, Johor Bahru, Ipoh and Kuantan,
EITAs technicians are able to provide technical and mechanical
assistance within 30 minutes of being called on average. The group is
also able to provide refurbishment, modernisation and upgrading works
for already installed elevators. In FY13, this division contributed 8.2% to
EITAs total revenue. We expect this segments topline to grow by 15%
in FY14 as the groups installed base of elevators expands.
Regional player. In its 13 years of business, EITA has delivered
numerous busducts and 1,880 elevator systems in Malaysia and
throughout Asean. The Middle East has also been an important export
market too. In FY13, the local market accounted for about 78% of the
groups total revenue while the rest came from overseas sales.
Although most of EITAs business is currently from Malaysia, the group
is looking to further expand its regional and international presence in
the future, given the booming demand from the construction sector in
those markets. EITA is already in 11 countries in Asia and the Middle
Eastit is looking to further expand its direct regional presence in
growth markets like Indonesia.

Profit & Loss Sep-13 Sep-14F Sep-15F
DPS (MYR) 0.04 0.04 0.05
Dividend Yield (%) 3.2 3.4 3.8
Recurring P/E (x) 10.15 8.55 7.78
P/B (x) 1.43 1.28 1.15
P/CF (x) 106.03 27.78 11.74

Source: Company data, RHB estimates.

Balance Sheet (MYRm) Sep-13 Sep-14F Sep-15F
Other equity 0 - 0
Total debt 12 20 18
Net debt (12) 1 1


Cash flow (MYRm) Sep-13 Sep-14F Sep-15F
Cash flow from financing activities (8) 2 (9)
Total cash generated (7) (5) (2)
Forex effects 0 - -


Company Report Card
Latest results. Note that EITA recently changed its financial year-end
from December to September, for comparison purposes we are
annualising the groups FY13 numbers. For EITAs recently ended
FY13, it posted revenue of MYR142.1m (MYR190.9m annualised), with
elevator and busduct manufacturing making up 52% of this total, and its
marketing & distribution and technical services contributing 40% and
8% respectively. EITA registered a PAT of MYR11.7m (MYR15.3m
annualised) with an 8.2% PAT margin a 7.1% y-o-y increase.
Balance sheet/cash flow. EITA has a healthy net cash balance sheet,
with its operations generating a positive cash flow.
ROE. We expect EITA to return an ROE of 15.8% in FY14, driven by
the demand for its manufacturing segments products.
Dividend. We expect a full-year DPS of 4.1 sen for FY14, based on a
30% payout ratio assumption. Given its net cash position, we do not
discount the possibility of management increasing this ratio.
Management. The company is currently led by group chairman Dato
Siew Kim Lun while the management team is led by MD Mr Fu Wing
Hoong. The latter is an engineer by training and is a co-founder of EITA.
He is ably assisted by Mr Lim Joo Swee and Mr Chong Yoke Peng, who
are both executive directors and co-founders of the group.

Recommendation
Ascribing a CY14F P/E of 11.0x for EITA, we arrive at our FV of
MYR1.58. We believe the growth potential for the group will be driven
by the growing demand for its elevators and busducts from the local,
regional and international construction sector.
28

Corp Logo
EITA Resources
Target: MYR1.58
Price: MYR1.21

Up, Up And Away

88
101
113
126
138
151
163
176
188
0.6
0.7
0.8
0.9
1.0
1.1
1.2
1.3
1.4
EITA Resources (EITA MK)
1
1
2
2
3
3
A
p
r
-
1
3
J
u
n
-
1
3
A
u
g
-
1
3
O
c
t
-
1
3
D
e
c
-
1
3
F
e
b
-
1
4
V
o
l

m

Source: Bloomberg

Stock Profile
Bloomberg Ticker EITA MK
Net Gearing (%) 1.0
Beta (x) 0.88
BVPS (MYR) 0.95
Free float (%) 31

Ruby Technique SB 23.8
Fu Wing Hoong 20.2
Lim Joo Swee 15.3

1m 3m 6m 12m
Absolute 9.0 24.7 65.8 77.9
Relative 7.9 23.6 61.6 68.2



Investment Merits
One-stop elevator and busduct manufacturer in Malaysia
Benefitting from the burgeoning construction sector
Local and regional presence

Company Profile
EITA Resources (EITA) is a manufacturer and distributor of elevators,
busduct systems, and electrical and electronics (E&E) equipment. EITA
Resources (EITA) is a manufacturer and distributor of elevators,
busduct systems, and electrical and electronics (E&E) equipment. We
believe the group will benefit from the growth in the local construction
sector as its elevator and busduct manufacturing segments mature.
Highlights
Elevator and busduct manufacturer. EITA is a one-stop elevator
service provider that is able to provide the whole spectrum of services
from design and manufacturing to maintenance. The group also
manufactures busduct systems, ie electrical connectors that are put in
place of normal wires and used in buildings and industrial areas that
require a heavy current load. Given the slew of upcoming construction
projects, along with its complementary E&E equipment and components
trading businesses, we believe that there is potential for EITAs
earnings to be boosted.
Service and maintenance. EITA also provides maintenance services
for the groups own-brand elevators as well as third-party ones. It is also
able to provide preventative maintenance services for its elevators and
for those of other manufacturers. Through the use of an effective zoning
system in the Klang Valley, Penang, Johor Bahru, Ipoh and Kuantan,
EITAs technicians are able to provide technical and mechanical
assistance within 30 minutes of being called on average. The group is
also able to provide refurbishment, modernisation and upgrading works
for already installed elevators. In FY13, this division contributed 8.2% to
EITAs total revenue. We expect this segments topline to grow by 15%
in FY14 as the groups installed base of elevators expands.
Regional player. In its 13 years of business, EITA has delivered
numerous busducts and 1,880 elevator systems in Malaysia and
throughout Asean. The Middle East has also been an important export
market too. In FY13, the local market accounted for about 78% of the
groups total revenue while the rest came from overseas sales.
Although most of EITAs business is currently from Malaysia, the group
is looking to further expand its regional and international presence in
the future, given the booming demand from the construction sector in
those markets. EITA is already in 11 countries in Asia and the Middle
Eastit is looking to further expand its direct regional presence in
growth markets like Indonesia.

Profit & Loss Sep-13 Sep-14F Sep-15F
DPS (MYR) 0.04 0.04 0.05
Recurring P/E (x) 10.15 8.55 7.78
P/B (x) 1.43 1.28 1.15
P/CF (x) 106.03 27.78 11.74


Balance Sheet (MYRm) Sep-13 Sep-14F Sep-15F
Other equity 0 - 0
Total debt 12 20 18
Net debt (12) 1 1


Cash flow (MYRm) Sep-13 Sep-14F Sep-15F
Cash flow from financing activities (8) 2 (9)
Total cash generated (7) (5) (2)
Forex effects 0 - -


Company Report Card
Latest results. Note that EITA recently changed its financial year-end
from December to September, for comparison purposes we are
annualising the groups FY13 numbers. For EITAs recently ended
FY13, it posted revenue of MYR142.1m (MYR190.9m annualised), with
elevator and busduct manufacturing making up 52% of this total, and its
marketing & distribution and technical services contributing 40% and
8% respectively. EITA registered a PAT of MYR11.7m (MYR15.3m
annualised) with an 8.2% PAT margin a 7.1% y-o-y increase.
Balance sheet/cash flow. EITA has a healthy net cash balance sheet,
with its operations generating a positive cash flow.
ROE. We expect EITA to return an ROE of 15.8% in FY14, driven by
the demand for its manufacturing segments products.
Dividend. We expect a full-year DPS of 4.1 sen for FY14, based on a
30% payout ratio assumption. Given its net cash position, we do not
discount the possibility of management increasing this ratio.
Management. The company is currently led by group chairman Dato
Siew Kim Lun while the management team is led by MD Mr Fu Wing
Hoong. The latter is an engineer by training and is a co-founder of EITA.
He is ably assisted by Mr Lim Joo Swee and Mr Chong Yoke Peng, who
are both executive directors and co-founders of the group.

Recommendation
Ascribing a CY14F P/E of 11.0x for EITA, we arrive at our FV of
MYR1.58. We believe the growth potential for the group will be driven
by the growing demand for its elevators and busducts from the local,
regional and international construction sector.
29

Esthetics International Group
Target: MYR1.86
Price: MYR1.26

A Pretty Picture

66
99
133
166
199
233
266
0.3
0.5
0.7
0.9
1.1
1.3
1.5
Esthetics International Group (EIG MK)
100
200
300
400
500
600
700
A
p
r
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1
3
J
u
n
-
1
3
A
u
g
-
1
3
O
c
t
-
1
3
D
e
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-
1
3
F
e
b
-
1
4
V
o
l

t
h

Source: Bloomberg

Stock Profile
Bloomberg Ticker EIG MK
Beta (x) 0.000
BVPS (MYR) 0.67
Free float (%) 39

Providence Capital 60.9

1m 3m 6m 12m
Absolute 5.0 (4.6) 37.0 142.3
Relative 3.9 (5.7) 32.8 132.6



Investment Merits
An established partnership with the renowned Dermalogica skin
care group
Extensive domestic and regional distribution network
complemented by premium brand offerings
Decent earnings growth supported by a sturdy balance sheet

Company Profile
EIG is involved in the beauty and wellness industry. The group focuses
on the distribution of skin care, cosmetics and wellness products and
services through its network of self-owned and third-party salons.
Currently, EIG has a business presence in Malaysia, Singapore, Hong
Kong and Thailand.
Highlights
Dermalogicas exclusive distributor. The groups mainstay is its
exclusive distributorship of Dermalogica Incs skin care products in
markets in Malaysia, Singapore, Hong Kong and other Asean nations.
US-based Dermalogica Inc is one of the worlds largest professional
skin care brands, with products that are sold in more than 80 countries
worldwide. Currently, EIG distributes its products to >1,000 independent
salons and spa operators throughout the region. Dermalogica currently
counts EIG as its largest distributor in terms of volume.
Extensive chain of salons. EIG owns and operates the AsterSpring
chain of beauty salons that carries Dermalogicas skin care products.
Starting off as the Leonard Drake Skin Care Health Spa, AsterSpring is
now a premier skin care and beauty salon provider located mostly in
premier shopping outlets in Malaysia, Singapore, Thailand and Hong
Kong. This is complemented by its retail kiosks offering consultation as
well as distributing Dermalogica products. EIGs consultation pods cum
retail kiosks are manned by trained skin therapists whose role is to
advise and recommend Dermalogica products to customers. The group
currently owns 52 AsterSpring skin care salons and 18 Dermalogica
retail kiosks. To strengthen its market presence, EIG is looking to
increase the collective number of its own salons and retail kiosks to 100
outlets over the next 3-5 years from 70 currently.
Product diversification. EIG has also secured exclusive distributorship
for Davines, an aromatherapy and beauty products brand, as well as
Tisserand, a hair care product brand, to complement its current product
offerings. EIG also has a presence in the fast-moving consumer goods
(FMCG) business through its wholly-owned skin care brand, Clinelle.
Parked as a sub-segment under its distribution arm, Clinelle is sold to
pharmacies and high traffic outlets like Guardian, Watsons and SaSa
throughout Malaysia and Hong Kong.

Profit & Loss Mar-13 Mar-14F Mar-15F
DPS (MYR) 0.03 0.03 0.04
Recurring P/E (x) 28.55 14.74 12.47
P/B (x) 2.06 1.89 1.73
P/CF (x) 13.08 12.07 11.00


Balance Sheet (MYRm) Mar-13 Mar-14F Mar-15F
Net debt (58) (68) (78)


Cash flow (MYRm) Mar-13 Mar-14F Mar-15F
Forex effects 0 - -


Company Report Card
Latest results. EIGs 9MFY14 revenue of MYR109.3m (+8.7% y-o-y)
was in line with our forecast, with its corporate salon segment
contributing MYR62.3m (+10.9 y-o-y) owing to higher contributions from
its new and existing outlets in Malaysia and Singapore. The product
distribution segment contributed revenue of MYR46.9m (+6.1% y-o-y),
mainly buoyed by higher distribution and sales in Malaysia and Hong
Kong. 9MFY14 net profit jumped to MYR13.3m (+113.3% y-o-y) due to
higher margins from the corporate salons and professional distribution
segments.
Balance sheet/cash flow. EIG possesses a solid balance sheet with a
net cash position, while its operations generate positive cash flow.
ROE. We expect EIG to deliver ROE of 13.4% in FY14F, backed by
strong growth in its professional distribution and corporate salons
segment.
Dividend. We expect a full-year DPS of 3.0 sen for FY14, based on an
assumption of a 30% payout ratio. In view of EIGs healthy balance
sheet, we expect management to increase the companys payout ratio
to 40-50% in the future.
Management. Management is currently led by executive chairman
Eddy Chieng, who founded of Nationwide Express Courier (NAT MK,
NR) and was responsible for bringing FedEx (FDX US, NR) to Malaysia.
He is currently assisted by his sons group MD and CEO Roderick
Chieng (a former investment banker with Macquarie Group Australia)
and non-executive non-independent director Brian Chieng, also an ex-
investment banker. EIGs headquarters in Bukit Jelutong, Shah Alam, is
equipped with facilities for training its own professional skin care
therapists.

Recommendation
Maintain BUY. Our FV of MYR1.86 is based on an unchanged CY14F
P/E of 15x. We see growth potential for EIG, backed by its extensive
distribution segment as well as its corporate salon arm, complemented
by its strong balance sheet.
30

Esthetics International Group
Target: MYR1.86
Price: MYR1.26

A Pretty Picture

66
99
133
166
199
233
266
0.3
0.5
0.7
0.9
1.1
1.3
1.5
Esthetics International Group (EIG MK)
100
200
300
400
500
600
700
A
p
r
-
1
3
J
u
n
-
1
3
A
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1
3
O
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1
3
D
e
c
-
1
3
F
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b
-
1
4
V
o
l

t
h

Source: Bloomberg

Stock Profile
Bloomberg Ticker EIG MK
Beta (x) 0.000
BVPS (MYR) 0.67
Free float (%) 39

Providence Capital 60.9

1m 3m 6m 12m
Absolute 5.0 (4.6) 37.0 142.3
Relative 3.9 (5.7) 32.8 132.6



Investment Merits
An established partnership with the renowned Dermalogica skin
care group
Extensive domestic and regional distribution network
complemented by premium brand offerings
Decent earnings growth supported by a sturdy balance sheet

Company Profile
EIG is involved in the beauty and wellness industry. The group focuses
on the distribution of skin care, cosmetics and wellness products and
services through its network of self-owned and third-party salons.
Currently, EIG has a business presence in Malaysia, Singapore, Hong
Kong and Thailand.
Highlights
Dermalogicas exclusive distributor. The groups mainstay is its
exclusive distributorship of Dermalogica Incs skin care products in
markets in Malaysia, Singapore, Hong Kong and other Asean nations.
US-based Dermalogica Inc is one of the worlds largest professional
skin care brands, with products that are sold in more than 80 countries
worldwide. Currently, EIG distributes its products to >1,000 independent
salons and spa operators throughout the region. Dermalogica currently
counts EIG as its largest distributor in terms of volume.
Extensive chain of salons. EIG owns and operates the AsterSpring
chain of beauty salons that carries Dermalogicas skin care products.
Starting off as the Leonard Drake Skin Care Health Spa, AsterSpring is
now a premier skin care and beauty salon provider located mostly in
premier shopping outlets in Malaysia, Singapore, Thailand and Hong
Kong. This is complemented by its retail kiosks offering consultation as
well as distributing Dermalogica products. EIGs consultation pods cum
retail kiosks are manned by trained skin therapists whose role is to
advise and recommend Dermalogica products to customers. The group
currently owns 52 AsterSpring skin care salons and 18 Dermalogica
retail kiosks. To strengthen its market presence, EIG is looking to
increase the collective number of its own salons and retail kiosks to 100
outlets over the next 3-5 years from 70 currently.
Product diversification. EIG has also secured exclusive distributorship
for Davines, an aromatherapy and beauty products brand, as well as
Tisserand, a hair care product brand, to complement its current product
offerings. EIG also has a presence in the fast-moving consumer goods
(FMCG) business through its wholly-owned skin care brand, Clinelle.
Parked as a sub-segment under its distribution arm, Clinelle is sold to
pharmacies and high traffic outlets like Guardian, Watsons and SaSa
throughout Malaysia and Hong Kong.

Profit & Loss Mar-13 Mar-14F Mar-15F
DPS (MYR) 0.03 0.03 0.04
Recurring P/E (x) 28.55 14.74 12.47
P/B (x) 2.06 1.89 1.73
P/CF (x) 13.08 12.07 11.00


Balance Sheet (MYRm) Mar-13 Mar-14F Mar-15F
Net debt (58) (68) (78)


Cash flow (MYRm) Mar-13 Mar-14F Mar-15F
Forex effects 0 - -


Company Report Card
Latest results. EIGs 9MFY14 revenue of MYR109.3m (+8.7% y-o-y)
was in line with our forecast, with its corporate salon segment
contributing MYR62.3m (+10.9 y-o-y) owing to higher contributions from
its new and existing outlets in Malaysia and Singapore. The product
distribution segment contributed revenue of MYR46.9m (+6.1% y-o-y),
mainly buoyed by higher distribution and sales in Malaysia and Hong
Kong. 9MFY14 net profit jumped to MYR13.3m (+113.3% y-o-y) due to
higher margins from the corporate salons and professional distribution
segments.
Balance sheet/cash flow. EIG possesses a solid balance sheet with a
net cash position, while its operations generate positive cash flow.
ROE. We expect EIG to deliver ROE of 13.4% in FY14F, backed by
strong growth in its professional distribution and corporate salons
segment.
Dividend. We expect a full-year DPS of 3.0 sen for FY14, based on an
assumption of a 30% payout ratio. In view of EIGs healthy balance
sheet, we expect management to increase the companys payout ratio
to 40-50% in the future.
Management. Management is currently led by executive chairman
Eddy Chieng, who founded of Nationwide Express Courier (NAT MK,
NR) and was responsible for bringing FedEx (FDX US, NR) to Malaysia.
He is currently assisted by his sons group MD and CEO Roderick
Chieng (a former investment banker with Macquarie Group Australia)
and non-executive non-independent director Brian Chieng, also an ex-
investment banker. EIGs headquarters in Bukit Jelutong, Shah Alam, is
equipped with facilities for training its own professional skin care
therapists.

Recommendation
Maintain BUY. Our FV of MYR1.86 is based on an unchanged CY14F
P/E of 15x. We see growth potential for EIG, backed by its extensive
distribution segment as well as its corporate salon arm, complemented
by its strong balance sheet.
31

Gadang Holdings
Target: MYR1.79
Price: MYR1.27

Staying Relevant With Earthworks

84
97
111
124
137
151
164
177
191
0.5
0.6
0.7
0.8
0.9
1.0
1.1
1.2
1.3
1.4
Gadang Holdings (GADG MK)
5
10
15
20
A
p
r
-
1
3
J
u
n
-
1
3
A
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g
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1
3
O
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t
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1
3
D
e
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1
3
F
e
b
-
1
4
V
o
l

m

Source: Bloomberg

Stock Profile
Bloomberg Ticker GADG MK
Net Gearing (%) n.m.
Beta (x) 1.16
BVPS (MYR) 1.34
Free float (%) 64

Tan Sri Dato' Kok Onn 36.2

1m 3m 6m 12m
Absolute 9.5 10.4 54.9 96.9
Relative 8.4 9.3 50.7 87.2

Joshua Ng +603 9207 7606
joshuang@rhbgroup.com

Investment Merits
Gadang has reinvented itself by moving into large-scale
earthworks, allowing it to stay relevant in the highly-crowded and
competitive construction sector
It is a strong contender for Phase 2 earthworks of the refinery and
petrochemical integrated development (RAPID) project worth
MYR400m-500m, given its involvement in Phase 1
Its property profits will be underpinned by MYR3bn-4bn GDV from
various projects in the Klang Valley and Johor

Company Profile
Gadang is a construction company that is also engaged in property
development. It also owns a small oil palm plantation of about 2,000 ha
in Sabah and three water concessions in Indonesia. Its current
outstanding construction orderbook of MYR1.1bn, which can last the
company for 2-3 years, comprises of: i) Package V2 of the Klang Valley
MRT project (MYR725m), ii) a hospital project in Shah Alam
(MYR191m), and iii) Phase 1 earthworks of RAPID in Pengerang,
Johor. For 1HFY14, construction contributed 50% of its earnings,
followed by property development (36%) and water concessions (14%).
The plantation division is currently still loss-making due to the young
age of its trees.

Highlights
Reinvented itself by moving into earthworks. Gadang has reaped
the benefits of its key strategies back in 2010, ie aggressively bidding
for the KLIA2s earthworks package (which it eventually won for
MYR291.2m) and investing heavily in a new earthworks equipment
fleet. Having established itself as a niche player in the large-scale
earthworks segment, in addition to general contracting, Gadang has
successfully reinvented itself, allowing it to stay relevant in the highly-
crowded and competitive construction sector.
Earthworks offer high margins. Large-scale earthworks jobs still offer
high margins (estimated at about 10% vs 5% for general contracting)
due to limited competition from a handful of established players other
than Gadang like: i) Sunway (SWB MK, BUY, FV: MYR3.33), ii) WCT
(WCTHG MK, NEUTRAL, FV: MYR2.21), and iii) privately-owned Menta
Construction SB. The entry barrier for new players is high due to steep
ownership costs (costs incurred whether or not the equipment is used,
including depreciation and funding costs) of earthworks equipment. For
the same reason, established players also will not aggressively expand
their capacity unless it is backed by firm contracts.

Profit & Loss May-12 May-13 May-14F
Recurring net profit growth (%) na 41.7 73.0
DPS (MYR) 0.02 0.02 0.03
Recurring P/E (x) 17.29 12.20 7.06
P/B (x) 1.02 0.95 na
P/CF (x) 5.92 2.17 na


Other equity (0) - (0)
Net debt 87 43 (53)


Cash flow from operations (20) 42 115
Forex effects (0) 1 1


Sizeable earthworks contracts in the offing. On the other hand, the
prospects for the large-scale earthworks segment over the immediate
term are strong, underpinned by at least two imminent sizeable
contracts in the pipeline, namely: i) Phase 2 of RAPID in Pengerang,
Johor, worth MYR400m-500m, and ii) Phase 1 of Kwasa Damansara
(redevelopment of the 2,330-acre Rubber Research Institute in Sungai
Buloh) worth about MYR1bn. We believe Gadang stands the best
chance of winning RAPIDs Phase 2 earthworks given its in-depth
knowledge of the facilitys sites and ground conditions after having
carried out RAPIDs MYR313m Phase 1 earthworks (40% completed).
Gadang is also a small-cap proxy to the MYR73bn Klang Valley MRT
project. It is the main contractor for Line 1 (16% completed)s
MYR863m Package V2 (viaduct between Kota Damansara and Dataran
Sunway). Gadang intends to bid for Line 2s work packages, which are
expected to break ground in 1Q2016.
Gadangs current property projects are in Kuala Lumpur (MYR500m
Residensi Vyne condominium project in Sungai Besi) and Johor Bahru
(MYR174m Jentayu Residensi mixed project in Tampoi). Both projects
have been well-received with: i) a sell-out of non-bumiputera units for
the MYR165m Phase 1 of Residensi Vyne, and ii) take-up rates of 93%
and 33% for serviced apartments and retail/office units for Jentayu
Residensi. Over the medium to long term, Gadangs property profits will
be underpinned by MYR3bn-4bn GDV from the remaining phases of
Residensi Vyne, Capital City (a MYR2.2bn integrated project with a
mall, hotels and office blocks on a 14-acre site next to Jentayu
Residensi), the K-Workers housing project (a MYR1.06bn housing
project on an 109-acre site in Cyberjaya), and a MYR300m township
project on a 200-acre site in Pokok Sena, Kedah.

Company Report Card
Latest results. Gadangs FY13 net profit surged 42%, thanks to
improved construction billings and substantial gains from land disposal.
Balance sheet/cash flow. As at end-FY13, Gadang was in a net cash
of MYR53.4m position, translating into 27 sen per share. Commendable
operating performance coupled with limited capex gave rise to a
substantial free cash flow of MYR111.3m, or 57 sen per share in FY13.
ROE. Its ROE of 8.1% in FY13 was below industry average of 11%, but
should rise to 12.7% in FY14 based on our projection on improved
earnings.
Dividend. FY13 DPS was 3 sen less 25% tax, translating into a net
yield of 1.8%.
Management. At the helm of the company is managing director cum
chief executive officer Tan Sri Dato Kok Onn. He has had more than 40
years of experience in the construction sector.

Recommendation
Our valuation is MYR1.79, based on 10x fully-diluted (for 19.7m
outstanding warrants with an exercise price of MYR1.00) CY14 EPS of
17.9 sen. This is in line with our 1-year forward target P/E for the
construction sector of 10-16x.

32

Gadang Holdings
Target: MYR1.79
Price: MYR1.27

Staying Relevant With Earthworks

84
97
111
124
137
151
164
177
191
0.5
0.6
0.7
0.8
0.9
1.0
1.1
1.2
1.3
1.4
Gadang Holdings (GADG MK)
5
10
15
20
A
p
r
-
1
3
J
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n
-
1
3
A
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g
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1
3
O
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1
3
D
e
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1
3
F
e
b
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1
4
V
o
l

m

Source: Bloomberg

Stock Profile
Bloomberg Ticker GADG MK
Beta (x) 1.16
BVPS (MYR) 1.34
Free float (%) 64

Tan Sri Dato' Kok Onn 36.2

1m 3m 6m 12m
Absolute 9.5 10.4 54.9 96.9
Relative 8.4 9.3 50.7 87.2

Joshua Ng +603 9207 7606

Investment Merits
Gadang has reinvented itself by moving into large-scale
earthworks, allowing it to stay relevant in the highly-crowded and
competitive construction sector
It is a strong contender for Phase 2 earthworks of the refinery and
petrochemical integrated development (RAPID) project worth
MYR400m-500m, given its involvement in Phase 1
Its property profits will be underpinned by MYR3bn-4bn GDV from
various projects in the Klang Valley and Johor

Company Profile
Gadang is a construction company that is also engaged in property
development. It also owns a small oil palm plantation of about 2,000 ha
in Sabah and three water concessions in Indonesia. Its current
outstanding construction orderbook of MYR1.1bn, which can last the
company for 2-3 years, comprises of: i) Package V2 of the Klang Valley
MRT project (MYR725m), ii) a hospital project in Shah Alam
(MYR191m), and iii) Phase 1 earthworks of RAPID in Pengerang,
Johor. For 1HFY14, construction contributed 50% of its earnings,
followed by property development (36%) and water concessions (14%).
The plantation division is currently still loss-making due to the young
age of its trees.

Highlights
Reinvented itself by moving into earthworks. Gadang has reaped
the benefits of its key strategies back in 2010, ie aggressively bidding
for the KLIA2s earthworks package (which it eventually won for
MYR291.2m) and investing heavily in a new earthworks equipment
fleet. Having established itself as a niche player in the large-scale
earthworks segment, in addition to general contracting, Gadang has
successfully reinvented itself, allowing it to stay relevant in the highly-
crowded and competitive construction sector.
Earthworks offer high margins. Large-scale earthworks jobs still offer
high margins (estimated at about 10% vs 5% for general contracting)
due to limited competition from a handful of established players other
than Gadang like: i) Sunway (SWB MK, BUY, FV: MYR3.33), ii) WCT
(WCTHG MK, NEUTRAL, FV: MYR2.21), and iii) privately-owned Menta
Construction SB. The entry barrier for new players is high due to steep
ownership costs (costs incurred whether or not the equipment is used,
including depreciation and funding costs) of earthworks equipment. For
the same reason, established players also will not aggressively expand
their capacity unless it is backed by firm contracts.

Profit & Loss May-12 May-13 May-14F
Recurring net profit growth (%) na 41.7 73.0
DPS (MYR) 0.02 0.02 0.03
Recurring P/E (x) 17.29 12.20 7.06
P/B (x) 1.02 0.95 na
P/CF (x) 5.92 2.17 na


Other equity (0) - (0)
Net debt 87 43 (53)




Sizeable earthworks contracts in the offing. On the other hand, the
prospects for the large-scale earthworks segment over the immediate
term are strong, underpinned by at least two imminent sizeable
contracts in the pipeline, namely: i) Phase 2 of RAPID in Pengerang,
Johor, worth MYR400m-500m, and ii) Phase 1 of Kwasa Damansara
(redevelopment of the 2,330-acre Rubber Research Institute in Sungai
Buloh) worth about MYR1bn. We believe Gadang stands the best
chance of winning RAPIDs Phase 2 earthworks given its in-depth
knowledge of the facilitys sites and ground conditions after having
carried out RAPIDs MYR313m Phase 1 earthworks (40% completed).
Gadang is also a small-cap proxy to the MYR73bn Klang Valley MRT
project. It is the main contractor for Line 1 (16% completed)s
MYR863m Package V2 (viaduct between Kota Damansara and Dataran
Sunway). Gadang intends to bid for Line 2s work packages, which are
expected to break ground in 1Q2016.
Gadangs current property projects are in Kuala Lumpur (MYR500m
Residensi Vyne condominium project in Sungai Besi) and Johor Bahru
(MYR174m Jentayu Residensi mixed project in Tampoi). Both projects
have been well-received with: i) a sell-out of non-bumiputera units for
the MYR165m Phase 1 of Residensi Vyne, and ii) take-up rates of 93%
and 33% for serviced apartments and retail/office units for Jentayu
Residensi. Over the medium to long term, Gadangs property profits will
be underpinned by MYR3bn-4bn GDV from the remaining phases of
Residensi Vyne, Capital City (a MYR2.2bn integrated project with a
mall, hotels and office blocks on a 14-acre site next to Jentayu
Residensi), the K-Workers housing project (a MYR1.06bn housing
project on an 109-acre site in Cyberjaya), and a MYR300m township
project on a 200-acre site in Pokok Sena, Kedah.

Company Report Card
Latest results. Gadangs FY13 net profit surged 42%, thanks to
improved construction billings and substantial gains from land disposal.
Balance sheet/cash flow. As at end-FY13, Gadang was in a net cash
of MYR53.4m position, translating into 27 sen per share. Commendable
operating performance coupled with limited capex gave rise to a
substantial free cash flow of MYR111.3m, or 57 sen per share in FY13.
ROE. Its ROE of 8.1% in FY13 was below industry average of 11%, but
should rise to 12.7% in FY14 based on our projection on improved
earnings.
Dividend. FY13 DPS was 3 sen less 25% tax, translating into a net
yield of 1.8%.
Management. At the helm of the company is managing director cum
chief executive officer Tan Sri Dato Kok Onn. He has had more than 40
years of experience in the construction sector.

Recommendation
Our valuation is MYR1.79, based on 10x fully-diluted (for 19.7m
outstanding warrants with an exercise price of MYR1.00) CY14 EPS of
17.9 sen. This is in line with our 1-year forward target P/E for the
construction sector of 10-16x.

33

GD Express Courier
Target: MYR2.20
Price: MYR1.75

Riding On The Uptrend In Express Delivery

72
105
139
172
205
239
272
305
339
372
0.3
0.5
0.7
0.9
1.1
1.3
1.5
1.7
1.9
2.1
GD Express Courier (GDX MK)
1
2
3
4
5
6
7
8
A
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1
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J
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V
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Source: Bloomberg

Stock Profile
Bloomberg Ticker GDX MK
Net Gearing (%) 3.5
Beta (x) 0.39
BVPS (MYR) 0.09
Free float (%) 27

GD Express Holdings 31.4
Singapore POST 26.0
GD Holdings 9.8

1m 3m 6m 12m
Absolute 1.2 56.3 68.8 228.3
Relative 0.1 55.2 64.6 218.6

Jerry Lee 603 9207 7622

Investment Merits
Solid and prudent management team
Proven earnings track record with 5-year pre-tax profit CAGR of
34.6%
Undergoing aggressive expansion and is poised for stronger
growth on the back of strong demand for courier services

Company Profile
Formed in 1997, GD Express Courier (GD Express) provides express
delivery services in both the domestic and international markets. It
operates a network of 136 stations, comprising 59 branches, two
affiliate stations, 52 agents and 23 lodge-in centres throughout East and
West Malaysia. GD Express has a fleet of more than 400 trucks and
vans used primarily for hauling of documents and parcels between
stations and the national hub (termed "line-haul" fleet) for local pick-ups
and deliveries. The company's express delivery service operation is
structured along the "hub and spoke" concept. The group currently
employs more than 2,000 staff.
Highlights
Tapping the fast-growing express delivery industry. The express
delivery industry has strong growth potential. The industry generated
MYR2.0bn revenue in 2011 and the figure is expected to rise to
MYR4.0bn by 2020, driven by sustained growth in economic activities,
as indicated by the Malaysian Communications and Multimedia
Commission (MCMC). GD Express is in a sweet spot to tap into this
fast-growing trend.
E-commerce gaining popularity. The household broadband
penetration rate is rising (67% in Sept 2013) with the usage of
smartphones becoming more mainstreamed, as consumers alter their
lifestyle in pursuit of convenience and efficiency. Some major e-
commerce companies have been very active in the domestic market
with the likes of Groupon, Lazada and Zalora. Furthermore, the
emergence of blog shops, ie online retail businesses through blogging
platforms, is among the recent trends in the fast-paced online business
environment.
Evolving trend in courier services. As e-commerce is growing rapidly,
there is a rising demand for fast, efficient and safe delivery services.
This is evidenced by a 45% y-o-y jump in revenue for Pos Malaysia
(POSM MK, BUY, FV: MYR5.45)s logistics arm in 3QFY14. Courier
companies have transformed in recent years and are now offering third-
party logistics services by providing warehousing and inventory
management services.
Proven earnings track record. GD Express achieved a 5-year pre-tax
profit CAGR of 34.6% in FY13 while its pre-tax profit margin expanded
to 14.2% in FY13. This was mainly buoyed by sustained growth in

Profit & Loss Jun-12 Jun-13 Jun-14F
DPS (MYR) 0.02 0.04 0.06
Recurring P/E (x) 186.41 112.51 59.87
P/B (x) 31.27 25.09 19.72
P/CF (x) 106.65 90.28 66.18


Balance Sheet (MYRm) Jun-12 Jun-13 Jun-14F
Total debt 28 26 28
Net debt 16 8 3


Cash flow (MYRm) Jun-12 Jun-13 Jun-14F


revenue and operational efficiency.
Quality assured; ambitious expansion plan. GD Express is the first
local express delivery company to attain ISO 9001:2000 (quality
management system) in 2003. The company also plans to expand and
become a premier regional express carrier.
Company Report Card
Latest results. GD Express 1HFY14 earnings grew >100% y-o-y,
bolstered by higher revenue, improved efficiency and tax incentive
recognition from the Malaysian Investment Development Authority
(MIDA).
Balance sheet/cash flow. The companys 1HFY14 balance sheet
strengthened as it turned into a net cash position, with total cash of
about MYR30m, covering borrowings (including hire purchase) of
MYR26m.
ROE. It achieved ROE of 23.2% in FY13.
Dividend. The company paid out a 2.25 sen dividend in FY13, which
translated into a payout ratio of 43%.
Management. GD Express is led by Mr Teong Teck Lean, who has
successfully turned around the company and is actively involved in its
operations. He is responsible for the companys business development,
strategic direction and overall management.
Recommendation
Despite its high P/E valuation, we think GD Express is undervalued, as
we expect the company to report 56% y-o-y growth in FY15F, after its
strong forecast earnings growth of 83% y-o-y in FY14F. With such
strong growth, GD Express PEGs are estimated at 0.6x and 0.8x for
FY14F and FY15F respectively. Pegging the stock to a 1.0x FY15F
PEG, this company should be worth MYR2.20.

34

GD Express Courier
Target: MYR2.20
Price: MYR1.75

Riding On The Uptrend In Express Delivery

72
105
139
172
205
239
272
305
339
372
0.3
0.5
0.7
0.9
1.1
1.3
1.5
1.7
1.9
2.1
GD Express Courier (GDX MK)
1
2
3
4
5
6
7
8
A
p
r
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1
3
J
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1
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A
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D
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1
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Source: Bloomberg

Stock Profile
Bloomberg Ticker GDX MK
Net Gearing (%) 3.5
Beta (x) 0.39
BVPS (MYR) 0.09
Free float (%) 27

GD Express Holdings 31.4
Singapore POST 26.0
GD Holdings 9.8

1m 3m 6m 12m
Absolute 1.2 56.3 68.8 228.3
Relative 0.1 55.2 64.6 218.6

Jerry Lee 603 9207 7622

Investment Merits
Solid and prudent management team
Proven earnings track record with 5-year pre-tax profit CAGR of
34.6%
Undergoing aggressive expansion and is poised for stronger
growth on the back of strong demand for courier services

Company Profile
Formed in 1997, GD Express Courier (GD Express) provides express
delivery services in both the domestic and international markets. It
operates a network of 136 stations, comprising 59 branches, two
affiliate stations, 52 agents and 23 lodge-in centres throughout East and
West Malaysia. GD Express has a fleet of more than 400 trucks and
vans used primarily for hauling of documents and parcels between
stations and the national hub (termed "line-haul" fleet) for local pick-ups
and deliveries. The company's express delivery service operation is
structured along the "hub and spoke" concept. The group currently
employs more than 2,000 staff.
Highlights
Tapping the fast-growing express delivery industry. The express
delivery industry has strong growth potential. The industry generated
MYR2.0bn revenue in 2011 and the figure is expected to rise to
MYR4.0bn by 2020, driven by sustained growth in economic activities,
as indicated by the Malaysian Communications and Multimedia
Commission (MCMC). GD Express is in a sweet spot to tap into this
fast-growing trend.
E-commerce gaining popularity. The household broadband
penetration rate is rising (67% in Sept 2013) with the usage of
smartphones becoming more mainstreamed, as consumers alter their
lifestyle in pursuit of convenience and efficiency. Some major e-
commerce companies have been very active in the domestic market
with the likes of Groupon, Lazada and Zalora. Furthermore, the
emergence of blog shops, ie online retail businesses through blogging
platforms, is among the recent trends in the fast-paced online business
environment.
Evolving trend in courier services. As e-commerce is growing rapidly,
there is a rising demand for fast, efficient and safe delivery services.
This is evidenced by a 45% y-o-y jump in revenue for Pos Malaysia
(POSM MK, BUY, FV: MYR5.45)s logistics arm in 3QFY14. Courier
companies have transformed in recent years and are now offering third-
party logistics services by providing warehousing and inventory
management services.
Proven earnings track record. GD Express achieved a 5-year pre-tax
profit CAGR of 34.6% in FY13 while its pre-tax profit margin expanded
to 14.2% in FY13. This was mainly buoyed by sustained growth in

DPS (MYR) 0.02 0.04 0.06
Recurring P/E (x) 186.41 112.51 59.87
P/B (x) 31.27 25.09 19.72
P/CF (x) 106.65 90.28 66.18


Total debt 28 26 28
Net debt 16 8 3




revenue and operational efficiency.
Quality assured; ambitious expansion plan. GD Express is the first
local express delivery company to attain ISO 9001:2000 (quality
management system) in 2003. The company also plans to expand and
become a premier regional express carrier.
Company Report Card
Latest results. GD Express 1HFY14 earnings grew >100% y-o-y,
bolstered by higher revenue, improved efficiency and tax incentive
recognition from the Malaysian Investment Development Authority
(MIDA).
Balance sheet/cash flow. The companys 1HFY14 balance sheet
strengthened as it turned into a net cash position, with total cash of
about MYR30m, covering borrowings (including hire purchase) of
MYR26m.
ROE. It achieved ROE of 23.2% in FY13.
Dividend. The company paid out a 2.25 sen dividend in FY13, which
translated into a payout ratio of 43%.
Management. GD Express is led by Mr Teong Teck Lean, who has
successfully turned around the company and is actively involved in its
operations. He is responsible for the companys business development,
strategic direction and overall management.
Recommendation
Despite its high P/E valuation, we think GD Express is undervalued, as
we expect the company to report 56% y-o-y growth in FY15F, after its
strong forecast earnings growth of 83% y-o-y in FY14F. With such
strong growth, GD Express PEGs are estimated at 0.6x and 0.8x for
FY14F and FY15F respectively. Pegging the stock to a 1.0x FY15F
PEG, this company should be worth MYR2.20.

35

Target: MYR8.57
Price: MYR6.53

Buy One, Free One

Source: Bloomberg

Stock Profile
Bloomberg Ticker HLI MK
Beta (x) 0.81
BVPS (MYR) 3.89
Free float (%) 21

Hong Leong Manufacturing Group
Sdn. Bhd.
75.4

1m 3m 6m 12m
Absolute 0.0 36.9 22.5 51.9
Relative (1.1) 35.8 18.3 42.2

Ng Sem Guan, CFA +603 9207 7678
ng.sem.guan@rhbgroup.com

91
101
111
121
131
141
151
3.9
4.4
4.9
5.4
5.9
6.4
6.9
Hong Leong Industries (HLI MK)
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Investment Merits
All eyes are on the proposed disposal of 175m ICPS in HCement
that we deem as a Buy one, get one free deal
HLI will remain a growing dragon post the exercise as its Yamaha
business is growing from strength to strength
Its building materials business comprising its tiles and fibreboard
units are turning around while other businesses continue to grow at
a healthy clip

Company Profile
Hong Leong Industries Berhad (HLI) is a Malaysia-based investment
holding company. The company operates through Consumer Products
and Industrial Products segments. The Consumer Products segment
manufactures, assembles, and distributes motorcycles, scooters, and
related parts and products; and manufactures and sells ceramic tiles.
The Industrial Products segment manufactures and sells fiber cement
and concrete products. The Company's associated companies are
involved in the manufacture and assembly of motorcycles, motorcycle
engines and spare parts and manufacture and sale of newsprint and
related paper products. HLI was incorporated in 1964 and is a
subsidiary of Hong Leong Manufacturing Group Sdn Bhd.

Highlights
A Buy one, free one exercise. HLI has kept a very low profile until it
recently proposed to dispose of 175m irredeemable convertible
preference shares (ICPS) in Hume Cement SB (HCement), as well as
its entire concrete business. This will be in exchange for 348m Narra
Industries (NARR MK, NR) shares that will be distributed as dividend-in-
specie, on a basis of 1.08 NARR shares for every HLI share. Following
the entire exercise, NARR will transform into a sexy cement stock from
a bland furniture stock, as the exercise will also involve it acquiring a
stake in HCement from HLMG. This will give investors an attractive
alternative to HLIs rather illiquid, yet pricier, peers.
Yamaha growing from strength to strength. HLIs prospects remain
bright despite the ongoing asset disposal. Through its subsidiary, Hong
Leong Yamaha Motor (HLYM) and associate, Yamaha Vietnam, the
group is involved in the manufacture and distribution of Yamaha
motorcycles both in Malaysia and Vietnam. HLYM holds an
approximately 33% market share behind leader Honda. It is worth
noting that the Yamaha business contributes almost two-thirds of HLIs
total earnings. We expect earnings from this division to be sustainable
going forward, backed by the high proportion of the population under
the age of 30, as well as launches of new big bike models that fetch
wide margins.




Profit & Loss Jun-13 Jun-14F Jun-15F
DPS (MYR) 0.21 0.32 0.36
Recurring P/E (x) 14.13 13.57 12.20
P/B (x) 1.78 1.68 1.57
P/CF (x) 9.36 11.86 9.12
Balance Sheet (MYRm) Jun-13 Jun-14F Jun-15F
Total current assets 1,013 1,148 1,410
Total assets 2,489 2,641 2,228
Total liabilities 1,206 1,243 693
Shareholders' equity 1,170 1,242 1,328
Total equity 1,283 1,398 1,536
Total liabilities & equity 2,489 2,641 2,228
Net debt 481 424 (414)
Cash flow (MYRm) Jun-13 Jun-14F Jun-15F
Cash flow from investing activities (262) (27) 673
Forex effects (0) - -
Building materials business a turnaround story. After suffering
losses in FY12, we see the tiles division rebounding to profitability in
FY13. Its Kluang plant, which was previously in the red due to the
expansion of its porcelain production line, is now back in the black, and
is now looking to fire up its second kiln. This is not forgetting the groups
fibre cement board (FCB) division, for which we believe the worst is
over, given: i) the better EBIT margins on improved utilisation post plant
expansion, ii) extra capacity to cater for increasing demand in a market
buoyed by a robust construction sector, and iii) anti-dumping duties
imposed on FCB imports from Thailand. Elsewhere, other businesses
continue to grow at a healthy pace. The redemption of HLIs high-cost
medium term note (MTN), utilising its lower-yield unit trust investments
to bring about savings that may contribute up to MYR10m in annual net
profit, is timely. This will compensate for any loss of income from its
concrete business and ICPS dividend.

Company Report Card
Latest results. HLI recorded revenue of MYR1.1bn (0.9% y-o-y) and a
net profit of MYR78.2m (48.7% y-o-y) in 1HFY14. These earnings made
up 51% of our full-year estimates.
Balance sheet/cash flow. The groups net gearing was a fairly
manageable 37.5% as at end-FY13. With the bulk of its borrowings
being in MTNs that will be redeemed by August 2015 through its unit
trust investments, HLI will be in a net cash position by end-FY15.
ROE. As we expect HLI to remain a growing dragon post exercise, its
ROEs should stay in the attractive mid-teens.
Dividend. While HLI does not have a dividend policy, its dividend
payout has been fairly consistent at 50%-60% in the past three years.
Hence, we expect a 25 sen DPS in FY14, derived from our assumed
50% payout ratio.
Management. Chairman Dato Kwek Leng San, who heads the
management team, has extensive experience in various business
sectors. He is the brother of Tan Sri Quek Leng Chan, who helms the
Hong Leong Group.

Recommendation
Cum-dividend FV of MYR8.57. Valuing HLI prior to the completion of
the corporate exercise, targeted for completion at end-FY14, involves
blending the value of its stock with 1.08 NARR shares. Meanwhile, our
SOP-based FV for HLI on a standalone basis post exercise stands at
MYR6.12, while NARRs MYR2.27 FV is based on a 15x FY6/15 P/E.
All in, we derive a cum-dividend FV of MYR8.57 for HLI, which offers a
potential upside of 31.8%.

36

Target: MYR8.57
Price: MYR6.53

Buy One, Free One

Source: Bloomberg

Stock Profile
Bloomberg Ticker HLI MK
Beta (x) 0.81
BVPS (MYR) 3.89
Free float (%) 21

Hong Leong Manufacturing Group
Sdn. Bhd.
75.4

1m 3m 6m 12m
Absolute 0.0 36.9 22.5 51.9
Relative (1.1) 35.8 18.3 42.2

Ng Sem Guan, CFA +603 9207 7678

91
101
111
121
131
141
151
3.9
4.4
4.9
5.4
5.9
6.4
6.9
Hong Leong Industries (HLI MK)
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Investment Merits
All eyes are on the proposed disposal of 175m ICPS in HCement
that we deem as a Buy one, get one free deal
HLI will remain a growing dragon post the exercise as its Yamaha
business is growing from strength to strength
Its building materials business comprising its tiles and fibreboard
units are turning around while other businesses continue to grow at
a healthy clip

Company Profile
Hong Leong Industries Berhad (HLI) is a Malaysia-based investment
holding company. The company operates through Consumer Products
and Industrial Products segments. The Consumer Products segment
manufactures, assembles, and distributes motorcycles, scooters, and
related parts and products; and manufactures and sells ceramic tiles.
The Industrial Products segment manufactures and sells fiber cement
and concrete products. The Company's associated companies are
involved in the manufacture and assembly of motorcycles, motorcycle
engines and spare parts and manufacture and sale of newsprint and
related paper products. HLI was incorporated in 1964 and is a
subsidiary of Hong Leong Manufacturing Group Sdn Bhd.

Highlights
A Buy one, free one exercise. HLI has kept a very low profile until it
recently proposed to dispose of 175m irredeemable convertible
preference shares (ICPS) in Hume Cement SB (HCement), as well as
its entire concrete business. This will be in exchange for 348m Narra
Industries (NARR MK, NR) shares that will be distributed as dividend-in-
specie, on a basis of 1.08 NARR shares for every HLI share. Following
the entire exercise, NARR will transform into a sexy cement stock from
a bland furniture stock, as the exercise will also involve it acquiring a
stake in HCement from HLMG. This will give investors an attractive
alternative to HLIs rather illiquid, yet pricier, peers.
Yamaha growing from strength to strength. HLIs prospects remain
bright despite the ongoing asset disposal. Through its subsidiary, Hong
Leong Yamaha Motor (HLYM) and associate, Yamaha Vietnam, the
group is involved in the manufacture and distribution of Yamaha
motorcycles both in Malaysia and Vietnam. HLYM holds an
approximately 33% market share behind leader Honda. It is worth
noting that the Yamaha business contributes almost two-thirds of HLIs
total earnings. We expect earnings from this division to be sustainable
going forward, backed by the high proportion of the population under
the age of 30, as well as launches of new big bike models that fetch
wide margins.




DPS (MYR) 0.21 0.32 0.36
Recurring P/E (x) 14.13 13.57 12.20
P/B (x) 1.78 1.68 1.57
P/CF (x) 9.36 11.86 9.12
Total assets 2,489 2,641 2,228
Total liabilities 1,206 1,243 693
Total equity 1,283 1,398 1,536
Net debt 481 424 (414)
Building materials business a turnaround story. After suffering
losses in FY12, we see the tiles division rebounding to profitability in
FY13. Its Kluang plant, which was previously in the red due to the
expansion of its porcelain production line, is now back in the black, and
is now looking to fire up its second kiln. This is not forgetting the groups
fibre cement board (FCB) division, for which we believe the worst is
over, given: i) the better EBIT margins on improved utilisation post plant
expansion, ii) extra capacity to cater for increasing demand in a market
buoyed by a robust construction sector, and iii) anti-dumping duties
imposed on FCB imports from Thailand. Elsewhere, other businesses
continue to grow at a healthy pace. The redemption of HLIs high-cost
medium term note (MTN), utilising its lower-yield unit trust investments
to bring about savings that may contribute up to MYR10m in annual net
profit, is timely. This will compensate for any loss of income from its
concrete business and ICPS dividend.

Company Report Card
Latest results. HLI recorded revenue of MYR1.1bn (0.9% y-o-y) and a
net profit of MYR78.2m (48.7% y-o-y) in 1HFY14. These earnings made
up 51% of our full-year estimates.
Balance sheet/cash flow. The groups net gearing was a fairly
manageable 37.5% as at end-FY13. With the bulk of its borrowings
being in MTNs that will be redeemed by August 2015 through its unit
trust investments, HLI will be in a net cash position by end-FY15.
ROE. As we expect HLI to remain a growing dragon post exercise, its
ROEs should stay in the attractive mid-teens.
Dividend. While HLI does not have a dividend policy, its dividend
payout has been fairly consistent at 50%-60% in the past three years.
Hence, we expect a 25 sen DPS in FY14, derived from our assumed
50% payout ratio.
Management. Chairman Dato Kwek Leng San, who heads the
management team, has extensive experience in various business
sectors. He is the brother of Tan Sri Quek Leng Chan, who helms the
Hong Leong Group.

Recommendation
Cum-dividend FV of MYR8.57. Valuing HLI prior to the completion of
the corporate exercise, targeted for completion at end-FY14, involves
blending the value of its stock with 1.08 NARR shares. Meanwhile, our
SOP-based FV for HLI on a standalone basis post exercise stands at
MYR6.12, while NARRs MYR2.27 FV is based on a 15x FY6/15 P/E.
All in, we derive a cum-dividend FV of MYR8.57 for HLI, which offers a
potential upside of 31.8%.

37

Hovid
Target: MYR0.42
Price: MYR0.35

Expiry Of Drug Patents To Power Growth

81
94
108
121
134
148
161
0.10
0.15
0.20
0.25
0.30
0.35
0.40
Hovid Bhd (HOV MK)
5
10
15
20
25
30
35
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Source: Bloomberg

Stock Profile
Bloomberg Ticker HOV MK
Beta (x) 0.81
BVPS (MYR) 0.24
Free float (%) 57

Ho Sue San 37.6
Lembaga Tabung Haji 5.2

1m 3m 6m 12m
Absolute (1.5) 1.5 15.5 45.7
Relative (3.2) 0.4 10.7 35.6


Investment Merits
Small-cap pharmaceutical manufacturer of more than 350 types of
generic drugs with a global presence in 45 countries
Strong growth potential with the patent cliff, export market drug
registrations, internally-developed drugs and original equipment
manufacturing (OEM) products to boost revenue growth
We value Hovid at MYR0.42, based on a 16x fully-diluted FY15
EPS, which is a discount to its global peer average of 17x. Our
valuation takes into account its size (relative to global peers) and
the number of warrants issued during FY13

Company Profile
Hovid was founded by Dr Ho Kai Cheong in the 1940s, with its maiden
Ho Yan Hor herbal tea product. In the 1980s, it ventured into the
pharmaceutical manufacturing business and is now a drug
manufacturer based in Ipoh, Perak. Its products are manufactured and
marketed locally as well as exported to 45 countries. Hovid currently
has two manufacturing plants located in Ipoh and Chemor, Perak in
addition to a research and development centre in Penang.
Highlights
Patented drugs expiry to boost revenue. Hovid is expected to be one
of the beneficiaries of a patent cliff or major lifestyle drugs going off-
patent in the coming years. Between 2014 and 2016, more than 20
lifestyle drugs are expected to go off-patent. The lifestyle drugs include:
i) Micardis, ii) Renagel and iii) Advicor which are drugs meant to combat
diseases such as hypertension, kidney and cholesterol respectively.
These soon-to-expire drugs are worth an estimated USD34bn -
USD66bn in worldwide sales during FY14-15. Hence, we believe that
Hovid will be able to grow its revenue substantially by tapping into this
revenue pool.
Existing drugs pending approval in FY14-15. Hovid is set for a good
year ahead with several drugs pending approval in Malaysia and
several other countries that will drive FY15 earnings. To date, it has
about 250 product registrations currently pending approval in various
countries. These are expected to generate MYR30.0m in sales within
18 months of the drugs being officially registered in the respective
countries.
Developing in-house lifestyle drugs. Hovid is currently working on
two lifestyle in-house drugs targeted towards liver and stroke patients.
The drugs, the first of its kind, will tap further into the potential of
TocovidSuprabio. These drugs, currently undergoing intensive research
and development at the Ohio State University - Hovids research
partner in the United States are anticipated to hit the shelves within
three to five years. TocovidSuprabio, which is expected to be Hovids
breakthrough as a drug innovator,will be produced and marketed under

Recurring P/E (x) 12.70 11.38 9.29
P/B (x) 1.67 1.44 1.23
P/CF (x) 8.04 10.93 8.80


Balance Sheet (MYRm) Jun-11 Jun-12 Jun-13
Other equity 0 - 0
Total debt 50 43 12
Net debt 41 20 (15)


Cash flow (MYRm) Jun-11 Jun-12 Jun-13
Cash flow from investing activities - - 0
Total cash generated (272) 3 30
Implied cash at end of period (263) 12 53


the companys label.
Capacity expansion.Hovid is currently in the midst of increasing its
production capacity with the expansion of its Chemor manufacturing
plant. The new plant will have equipment for high-volume production of
capsules and tablets. The expansion is expected to raise production
capacity by 30%. Hovid is also currently setting up its own
bioequivalence test center, located in UniversitiSains Malaysia (USM),
Penang as well as a centralised warehouse in Ipoh to improve product
distribution to facilitate business growth.
The management believes that despite the lacklustre performance in
6MFY14, Hovid is still on track to achieve its target projected net profit
of MYR23-28m for FY14-15. Historically, the company performs better
in the second half of the FY and benefits from the appreciation of USD
against MYR. Management is also guiding for double-digit net profit
growth in FY14-15.
Company Report Card
Latest results. Hovids 6MFY14 results were broadly within our and
consensus expectations, with its MYR8.5m in net profit account for 37%
of our full-year forecast. The weak performance was mainly due to
lower sales to export markets, a different sales mix with a lower profit
margin and higher operational costs. Future sales are expected to be
derived from newly-registered drugs.
Balance sheet/cash flow. The companys balance sheet as at 6MFY14
remained, healthy with its gearing ratio at just 7.0%, compared with its
larger local peer Pharmaniaga (PHRM MK, NR)s 50.3%. Hovids free
cash flow (FCF) for the past two years has also been positive,
registering MYR28.8m and MYR14.0m in FY12-13 respectively.
ROE. We expect ROE of around 13-14% in FY14-15, down marginally
from 15.6% ROE in FY13.
Dividend. Currently, Hovid does not have a fixed dividend payout
policy. However, it has conveyed its intention to do so in the near future.
It has paid out interim dividends of 1.3 sen and 0.5 sen with respect to
FY13 and FY14. Historically, the company paid out 4.5 sen per share in
FY12 but nil in FY11.
Management. Hovids management is spearheaded by Mr. David Ho,
who is the chairman and managing director. Mr. Andrew Goh is the
companys CFO. Mr. Ho, a pharmacist by profession, was a member of
various pharmaceutical associations, including the Malaysian
Pharmacist Board and Pharmaceutical Society of New Zealand before
being appointed to the board on 31 Jan 2008.
Recommendation
Our TP for Hovid is MYR0.42, derived by ascribing a 16x fully-diluted
FY15 EPS. Our target P/E is at a discount to its global peer average of
17x FY15 earnings. We have taken into account the 381.0m warrants
issued in 2013. We like this stock for its: i) robust revenue pipeline, ii)
strong and wide exposure to the export market, and iii) decent expected
ROE of 14% in FY15.

38

Hovid
Target: MYR0.42
Price: MYR0.35

Expiry Of Drug Patents To Power Growth

81
94
108
121
134
148
161
0.10
0.15
0.20
0.25
0.30
0.35
0.40
Hovid Bhd (HOV MK)
5
10
15
20
25
30
35
40
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Source: Bloomberg

Stock Profile
Bloomberg Ticker HOV MK
Beta (x) 0.81
BVPS (MYR) 0.24
Free float (%) 57

Ho Sue San 37.6

1m 3m 6m 12m
Absolute (1.5) 1.5 15.5 45.7
Relative (3.2) 0.4 10.7 35.6


Investment Merits
Small-cap pharmaceutical manufacturer of more than 350 types of
generic drugs with a global presence in 45 countries
Strong growth potential with the patent cliff, export market drug
registrations, internally-developed drugs and original equipment
manufacturing (OEM) products to boost revenue growth
We value Hovid at MYR0.42, based on a 16x fully-diluted FY15
EPS, which is a discount to its global peer average of 17x. Our
valuation takes into account its size (relative to global peers) and
the number of warrants issued during FY13

Company Profile
Hovid was founded by Dr Ho Kai Cheong in the 1940s, with its maiden
Ho Yan Hor herbal tea product. In the 1980s, it ventured into the
pharmaceutical manufacturing business and is now a drug
manufacturer based in Ipoh, Perak. Its products are manufactured and
marketed locally as well as exported to 45 countries. Hovid currently
has two manufacturing plants located in Ipoh and Chemor, Perak in
addition to a research and development centre in Penang.
Highlights
Patented drugs expiry to boost revenue. Hovid is expected to be one
of the beneficiaries of a patent cliff or major lifestyle drugs going off-
patent in the coming years. Between 2014 and 2016, more than 20
lifestyle drugs are expected to go off-patent. The lifestyle drugs include:
i) Micardis, ii) Renagel and iii) Advicor which are drugs meant to combat
diseases such as hypertension, kidney and cholesterol respectively.
These soon-to-expire drugs are worth an estimated USD34bn -
USD66bn in worldwide sales during FY14-15. Hence, we believe that
Hovid will be able to grow its revenue substantially by tapping into this
revenue pool.
Existing drugs pending approval in FY14-15. Hovid is set for a good
year ahead with several drugs pending approval in Malaysia and
several other countries that will drive FY15 earnings. To date, it has
about 250 product registrations currently pending approval in various
countries. These are expected to generate MYR30.0m in sales within
18 months of the drugs being officially registered in the respective
countries.
Developing in-house lifestyle drugs. Hovid is currently working on
two lifestyle in-house drugs targeted towards liver and stroke patients.
The drugs, the first of its kind, will tap further into the potential of
TocovidSuprabio. These drugs, currently undergoing intensive research
and development at the Ohio State University - Hovids research
partner in the United States are anticipated to hit the shelves within
three to five years. TocovidSuprabio, which is expected to be Hovids
breakthrough as a drug innovator,will be produced and marketed under

Recurring P/E (x) 12.70 11.38 9.29
P/B (x) 1.67 1.44 1.23
P/CF (x) 8.04 10.93 8.80


Balance Sheet (MYRm) Jun-11 Jun-12 Jun-13
Other equity 0 - 0
Total debt 50 43 12
Net debt 41 20 (15)


Cash flow (MYRm) Jun-11 Jun-12 Jun-13
Cash flow from investing activities - - 0


the companys label.
Capacity expansion.Hovid is currently in the midst of increasing its
production capacity with the expansion of its Chemor manufacturing
plant. The new plant will have equipment for high-volume production of
capsules and tablets. The expansion is expected to raise production
capacity by 30%. Hovid is also currently setting up its own
bioequivalence test center, located in UniversitiSains Malaysia (USM),
Penang as well as a centralised warehouse in Ipoh to improve product
distribution to facilitate business growth.
The management believes that despite the lacklustre performance in
6MFY14, Hovid is still on track to achieve its target projected net profit
of MYR23-28m for FY14-15. Historically, the company performs better
in the second half of the FY and benefits from the appreciation of USD
against MYR. Management is also guiding for double-digit net profit
growth in FY14-15.
Company Report Card
Latest results. Hovids 6MFY14 results were broadly within our and
consensus expectations, with its MYR8.5m in net profit account for 37%
of our full-year forecast. The weak performance was mainly due to
lower sales to export markets, a different sales mix with a lower profit
margin and higher operational costs. Future sales are expected to be
derived from newly-registered drugs.
Balance sheet/cash flow. The companys balance sheet as at 6MFY14
remained, healthy with its gearing ratio at just 7.0%, compared with its
larger local peer Pharmaniaga (PHRM MK, NR)s 50.3%. Hovids free
cash flow (FCF) for the past two years has also been positive,
registering MYR28.8m and MYR14.0m in FY12-13 respectively.
ROE. We expect ROE of around 13-14% in FY14-15, down marginally
from 15.6% ROE in FY13.
Dividend. Currently, Hovid does not have a fixed dividend payout
policy. However, it has conveyed its intention to do so in the near future.
It has paid out interim dividends of 1.3 sen and 0.5 sen with respect to
FY13 and FY14. Historically, the company paid out 4.5 sen per share in
FY12 but nil in FY11.
Management. Hovids management is spearheaded by Mr. David Ho,
who is the chairman and managing director. Mr. Andrew Goh is the
companys CFO. Mr. Ho, a pharmacist by profession, was a member of
various pharmaceutical associations, including the Malaysian
Pharmacist Board and Pharmaceutical Society of New Zealand before
being appointed to the board on 31 Jan 2008.
Recommendation
Our TP for Hovid is MYR0.42, derived by ascribing a 16x fully-diluted
FY15 EPS. Our target P/E is at a discount to its global peer average of
17x FY15 earnings. We have taken into account the 381.0m warrants
issued in 2013. We like this stock for its: i) robust revenue pipeline, ii)
strong and wide exposure to the export market, and iii) decent expected
ROE of 14% in FY15.

39

Inari Amertron
Target: MYR3.72
Price: MYR2.75

Going Great Guns

41
158
274
391
508
624
741
0.1
0.6
1.1
1.6
2.1
2.6
3.1
Inari Amertron (INRI MK)
2
4
6
8
10
12
14
16
A
p
r
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1
3
J
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1
3
A
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1
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3
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1
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V
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Source: Bloomberg

Stock Profile
Bloomberg Ticker INRI MK
Beta (x) 1.35
BVPS (MYR) 0.50
Free float (%) 40

Insas Bhd 33.4
Macronion SB 6.9
Ho Phon Guan 6.4

1m 3m 6m 12m
Absolute 34.1 63.7 154.6 580.7
Relative 32.4 61.6 149.8 570.4


Investment Merits
Offering decent yields of 2-4% on top of strong projected earnings
growth of 25-35% for FY15-16
Recent industry data is pointing north, suggesting recovery in the
semiconductor sector
Right product exposure, targeting growth in the consumer
electronic space
Impending transfer to the Main Board of Bursa Malaysia

Company Profile
Inari Amertron (Inari) is an electronics manufacturing service provider in
the semiconductor and optoelectronics industries that also develops
precision test and measurement products for various technological
applications.

Highlights
Riding high with Avago. Inaris growth potential remains intact owing
to the bright outlook for its major customer, Avago Technologies (AVGO
US, NR). The latter is a leading analog, mixed signal and optoelectronic
components supplier targeting the wireless communications, wired
infrastructure and industrial markets. Its radio frequency (RF) chips are
among the best in the world, and Inari is poised to benefit by virture of
being one of Avagos main contractors assembling and testing its RF
integrated circuits. This in turn opens doors for Inari to tap into the
smartphone and tablet markets. The recent acquisition of Amertron also
gives Inari the opportunity to make inroads into the data centre
business by offering fibre optics-related products to Avago.
Internet of Things a driving force. We reckon the Internet of
Things (IoT) will further spearhead and propel the growth of both
companies as data consumption rockets. In the near future, we believe
IoT will dominate the consumer product space and quickly make strides
into our daily lives, while smartphones and tablets are becoming basic
devices for machine-to-machine (M2M) connectivity. Also, there are
transformational effects on data centres given that IoT deployment
generates large amounts of data that need to be managed and
analysed in real time, leaving providers to deal with new challenges in
capacity, security and analytics.
Ceedtec a budding gem. Another contributor of growth would come
from the test and measurement (T&M) business, on which Inaris 51%-
owned Ceedtec is focused. Notably, it is being incubated to become an
original design manufacturer for Agilent Technologies (A US, NR), a
leader in the T&M space. In addition, the company is a key beneficiary
of the Economic Transformation Programme, as one of Agilents
Malaysian ecosystem partners.

DPS (MYR) 0.03 0.08 0.10
Recurring P/E (x) 32.40 14.42 10.56
P/B (x) 8.62 5.49 4.02
P/CF (x) 18.93 15.77 10.23


Minority interests (1) (1) (2)
Other equity 0 0 (0)
Total debt 69 74 79
Net debt 25 (21) (69)


Cash flow from financing activities 61 0 (33)
Forex effects 0 - -


Company Report Card
Latest results. In 1HFY14, Inari reported a stellar set of financials,
thanks to the completion of its acquisition of Amertron in June last year.
Its revenue jumped 224% while core earnings spiked up 176% y-o-y
respectively.
Balance sheet/cash flow. As at 31 Dec 2013, Inaris balance sheet
was robust, with a net gearing ratio of 0.1x. Similarly, it has been
generating robust operating cash flow, posting positive numbers for the
past three years.
ROE. Its ROE of >40% is above the industry average of 5-10%.
Dividend. Inari has a policy of paying up to 40% of its earnings as
dividends. Based on our FY14-15 estimates, we can expect yields of
between 2-4%.
Management. Inari is led by co-founder Dr Tan Seng Chuan and CEO
KC Lau, together with a team of highly experienced managers.

Recommendation
FV of MYR3.72. We opine that Inari is still undervalued despite its
significant share price rally over the last one year. Our fair value is
MYR3.72, based on 17x CY15 EPS. We ascribe a 15% P/E premium to
the stock vis-a-vis its local peers to reflect its: i) strong growth
prospects, ii) right product diversity, and iii) robust balance sheet. We
think our valuation is fair given the stocks implied CY15 PEG of a mere
0.7x. Inaris valuation is also attractive when stacked against FBM KLCI,
which is currently trading at a forward PEG of >2x.
40

Inari Amertron
Target: MYR3.72
Price: MYR2.75

Going Great Guns

41
158
274
391
508
624
741
0.1
0.6
1.1
1.6
2.1
2.6
3.1
Inari Amertron (INRI MK)
2
4
6
8
10
12
14
16
A
p
r
-
1
3
J
u
n
-
1
3
A
u
g
-
1
3
O
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1
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D
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1
3
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1
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V
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Source: Bloomberg

Stock Profile
Bloomberg Ticker INRI MK
Beta (x) 1.35
BVPS (MYR) 0.50
Free float (%) 40

Insas Bhd 33.4
Macronion SB 6.9
Ho Phon Guan 6.4

1m 3m 6m 12m
Absolute 34.1 63.7 154.6 580.7
Relative 32.4 61.6 149.8 570.4


Investment Merits
Offering decent yields of 2-4% on top of strong projected earnings
growth of 25-35% for FY15-16
Recent industry data is pointing north, suggesting recovery in the
semiconductor sector
Right product exposure, targeting growth in the consumer
electronic space
Impending transfer to the Main Board of Bursa Malaysia

Company Profile
Inari Amertron (Inari) is an electronics manufacturing service provider in
the semiconductor and optoelectronics industries that also develops
precision test and measurement products for various technological
applications.

Highlights
Riding high with Avago. Inaris growth potential remains intact owing
to the bright outlook for its major customer, Avago Technologies (AVGO
US, NR). The latter is a leading analog, mixed signal and optoelectronic
components supplier targeting the wireless communications, wired
infrastructure and industrial markets. Its radio frequency (RF) chips are
among the best in the world, and Inari is poised to benefit by virture of
being one of Avagos main contractors assembling and testing its RF
integrated circuits. This in turn opens doors for Inari to tap into the
smartphone and tablet markets. The recent acquisition of Amertron also
gives Inari the opportunity to make inroads into the data centre
business by offering fibre optics-related products to Avago.
Internet of Things a driving force. We reckon the Internet of
Things (IoT) will further spearhead and propel the growth of both
companies as data consumption rockets. In the near future, we believe
IoT will dominate the consumer product space and quickly make strides
into our daily lives, while smartphones and tablets are becoming basic
devices for machine-to-machine (M2M) connectivity. Also, there are
transformational effects on data centres given that IoT deployment
generates large amounts of data that need to be managed and
analysed in real time, leaving providers to deal with new challenges in
capacity, security and analytics.
Ceedtec a budding gem. Another contributor of growth would come
from the test and measurement (T&M) business, on which Inaris 51%-
owned Ceedtec is focused. Notably, it is being incubated to become an
original design manufacturer for Agilent Technologies (A US, NR), a
leader in the T&M space. In addition, the company is a key beneficiary
of the Economic Transformation Programme, as one of Agilents
Malaysian ecosystem partners.

DPS (MYR) 0.03 0.08 0.10
Recurring P/E (x) 32.40 14.42 10.56
P/B (x) 8.62 5.49 4.02
P/CF (x) 18.93 15.77 10.23


Minority interests (1) (1) (2)
Total debt 69 74 79
Net debt 25 (21) (69)


Forex effects 0 - -


Company Report Card
Latest results. In 1HFY14, Inari reported a stellar set of financials,
thanks to the completion of its acquisition of Amertron in June last year.
Its revenue jumped 224% while core earnings spiked up 176% y-o-y
respectively.
Balance sheet/cash flow. As at 31 Dec 2013, Inaris balance sheet
was robust, with a net gearing ratio of 0.1x. Similarly, it has been
generating robust operating cash flow, posting positive numbers for the
past three years.
ROE. Its ROE of >40% is above the industry average of 5-10%.
Dividend. Inari has a policy of paying up to 40% of its earnings as
dividends. Based on our FY14-15 estimates, we can expect yields of
between 2-4%.
Management. Inari is led by co-founder Dr Tan Seng Chuan and CEO
KC Lau, together with a team of highly experienced managers.

Recommendation
FV of MYR3.72. We opine that Inari is still undervalued despite its
significant share price rally over the last one year. Our fair value is
MYR3.72, based on 17x CY15 EPS. We ascribe a 15% P/E premium to
the stock vis-a-vis its local peers to reflect its: i) strong growth
prospects, ii) right product diversity, and iii) robust balance sheet. We
think our valuation is fair given the stocks implied CY15 PEG of a mere
0.7x. Inaris valuation is also attractive when stacked against FBM KLCI,
which is currently trading at a forward PEG of >2x.
41

Target: MYR5.10
Price: MYR4.28

Well-balanced Glove Player

83
109
134
160
186
212
237
263
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
Kossan Rubber Industries (KRI MK)
1
2
3
4
5
6
7
8
A
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1
3
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1
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A
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V
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Source: Bloomberg

Stock Profile
Bloomberg Ticker KRI MK
Beta (x) 0.84
BVPS (MYR) 1.31
Free float (%) 37

Kossan Holdings SB 51.2
Kumpulan Wang Persaraan 5.6
Invesco Ltd 5.4

1m 3m 6m 12m
Absolute (1.2) 4.4 22.1 133.2
Relative (2.9) 3.3 17.3 123.1


Investment Merits
A well-balanced glove manufacturer with a 47:53 product mix of
natural rubber (NR) and nitrile gloves
One of the worlds latest powder-free medical glove manufacturers
Expanding its technical rubber product (TRP) segment
Maintain BUY with a FV of MYR5.10, based on an 18x FY14 P/E

Company Profile
Kossan was founded in 1979 by company managing director and CEO
Dato Lim Kuang Sia, a qualified chemist-engineer with more than 32
years of experience in the rubber glove industry. The company was
listed on the Main Board of Bursa Malaysia in 1996. Kossan is
principally involved in the manufacturing of medical examination gloves
for the pharmaceutical industry and TRP for the automotive,
construction and civil industries.

Highlights
Well-balanced glove player. Kossan is mainly an original equipment
manufacturer (OEM) and supplier of latex medical gloves and TRP to
leading multinational companies around the globe. It differentiates itself
from other glove manufacturers through its well-balanced product mix of
47% NR and 53% nitrile, which allows it to tap into the demand from
both developed and developing markets. As it caters to both markets
almost equally, we believe that it should have no difficulty in getting new
customers as well as tapping into new markets in an event of a product
switch.
Riding on the nitrile wave. Kossan has rolled out its expansion plans
for both CY14 and CY15, focusing mainly on nitrile gloves. The
company acquired a 9.26-acre parcel of land in Dec 2013, which is
earmarked for capacity expansion plans. This would boost its total
installed production capacity by approximately 5-6bn pieces annually to
27bn pieces (an addition to its ongoing capacity expansion, which
would boost the companys capacity to 22bn pieces by May 2014).
Moving forward, we believe that this would bolster and secure Kossans
production and earnings as it targets for the new lines to be
commissioned latest by 1H15.
Expanding TRP segment. Given lower production costs and the
favourable operating environment, we understand that Kossan is
looking to expand its TRP division in Indonesia where it plans to begin
the construction of its new plants by 1H14. We are optimistic on the
companys planned capacity expansion and the prospects of its TRP
segment, which enable it to diversify its clientele base. Note that as of
FY13, its TRP segment registered positive sales and PBT growth of
13.9% and 20.3% y-o-y respectively.

DPS (MYR) 0.09 0.07 0.09
Recurring P/E (x) 26.79 19.46 15.02
P/B (x) 4.53 3.86 3.27
P/CF (x) 29.45 17.44 17.81


Total assets 990 1,103 1,255
Other equity (0) - -
Total liabilities & equity 990 1,103 1,255
Net debt 99 71 123


Total cash generated 46 (7) (48)


Company Report Card
Latest results. Kossans commendable FY13 core earnings of
MYR141m came in line with our estimates, mainly attributed to a higher
sales volume, stabilising raw material prices as well as better operating
efficiency at its plants.
Balance sheet/cash flow. As of FY13, the companys net gearing
stood at 0.11x vs 0.16x in FY12. We believe that its net gearing ratio is
still at a comfortable level and should not pose a concern.
ROE. Kossan has been consistently delivering strong ROE growth,
which improved to 21.4% in 2013 from 18.6% in 2012. Moving forward,
we expect the company to continue delivering double-digit ROEs as we
see its capacity expansion gradually kick in in CY14 and CY15. We
believe that this is attainable given the nature of the recession-proof
rubber glove industry as well as growing demand in both developed and
developing countries amid increasing healthcare awareness.
Dividend. The company has been consistently paying dividends since
its listing in 1996 and we expect it to continuously reward shareholders
with generous dividends, given its sustainable and resilient business
model.
Management. Founder, managing director and CEO Dato Lim Kuang
Sia leads Kossans management team and carries with him more than
32 years of experience in the rubber glove industry.

Recommendation
Maintain BUY. Our FV of MYR5.10 for Kossan is based on a P/E of
18x on FY14 earnings. We continue to like the companys solid
fundamentals and strong management team, as well as its: i) robust
earnings outlook for the next two years, backed by capacity expansion,
ii) balanced product mix, and iii) steady operating environment, given
stable raw material prices and a favourable USD.

42

Target: MYR5.10
Price: MYR4.28

Well-balanced Glove Player

83
109
134
160
186
212
237
263
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
Kossan Rubber Industries (KRI MK)
1
2
3
4
5
6
7
8
A
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r
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1
3
J
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1
3
A
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Source: Bloomberg

Stock Profile
Bloomberg Ticker KRI MK
Beta (x) 0.84
BVPS (MYR) 1.31
Free float (%) 37

Kossan Holdings SB 51.2
Kumpulan Wang Persaraan 5.6
Invesco Ltd 5.4

1m 3m 6m 12m
Absolute (1.2) 4.4 22.1 133.2
Relative (2.9) 3.3 17.3 123.1


Investment Merits
A well-balanced glove manufacturer with a 47:53 product mix of
natural rubber (NR) and nitrile gloves
One of the worlds latest powder-free medical glove manufacturers
Expanding its technical rubber product (TRP) segment
Maintain BUY with a FV of MYR5.10, based on an 18x FY14 P/E

Company Profile
Kossan was founded in 1979 by company managing director and CEO
Dato Lim Kuang Sia, a qualified chemist-engineer with more than 32
years of experience in the rubber glove industry. The company was
listed on the Main Board of Bursa Malaysia in 1996. Kossan is
principally involved in the manufacturing of medical examination gloves
for the pharmaceutical industry and TRP for the automotive,
construction and civil industries.

Highlights
Well-balanced glove player. Kossan is mainly an original equipment
manufacturer (OEM) and supplier of latex medical gloves and TRP to
leading multinational companies around the globe. It differentiates itself
from other glove manufacturers through its well-balanced product mix of
47% NR and 53% nitrile, which allows it to tap into the demand from
both developed and developing markets. As it caters to both markets
almost equally, we believe that it should have no difficulty in getting new
customers as well as tapping into new markets in an event of a product
switch.
Riding on the nitrile wave. Kossan has rolled out its expansion plans
for both CY14 and CY15, focusing mainly on nitrile gloves. The
company acquired a 9.26-acre parcel of land in Dec 2013, which is
earmarked for capacity expansion plans. This would boost its total
installed production capacity by approximately 5-6bn pieces annually to
27bn pieces (an addition to its ongoing capacity expansion, which
would boost the companys capacity to 22bn pieces by May 2014).
Moving forward, we believe that this would bolster and secure Kossans
production and earnings as it targets for the new lines to be
commissioned latest by 1H15.
Expanding TRP segment. Given lower production costs and the
favourable operating environment, we understand that Kossan is
looking to expand its TRP division in Indonesia where it plans to begin
the construction of its new plants by 1H14. We are optimistic on the
companys planned capacity expansion and the prospects of its TRP
segment, which enable it to diversify its clientele base. Note that as of
FY13, its TRP segment registered positive sales and PBT growth of
13.9% and 20.3% y-o-y respectively.

DPS (MYR) 0.09 0.07 0.09
Recurring P/E (x) 26.79 19.46 15.02
P/B (x) 4.53 3.86 3.27
P/CF (x) 29.45 17.44 17.81


Total assets 990 1,103 1,255
Other equity (0) - -
Total liabilities & equity 990 1,103 1,255
Net debt 99 71 123


Total cash generated 46 (7) (48)


Company Report Card
Latest results. Kossans commendable FY13 core earnings of
MYR141m came in line with our estimates, mainly attributed to a higher
sales volume, stabilising raw material prices as well as better operating
efficiency at its plants.
Balance sheet/cash flow. As of FY13, the companys net gearing
stood at 0.11x vs 0.16x in FY12. We believe that its net gearing ratio is
still at a comfortable level and should not pose a concern.
ROE. Kossan has been consistently delivering strong ROE growth,
which improved to 21.4% in 2013 from 18.6% in 2012. Moving forward,
we expect the company to continue delivering double-digit ROEs as we
see its capacity expansion gradually kick in in CY14 and CY15. We
believe that this is attainable given the nature of the recession-proof
rubber glove industry as well as growing demand in both developed and
developing countries amid increasing healthcare awareness.
Dividend. The company has been consistently paying dividends since
its listing in 1996 and we expect it to continuously reward shareholders
with generous dividends, given its sustainable and resilient business
model.
Management. Founder, managing director and CEO Dato Lim Kuang
Sia leads Kossans management team and carries with him more than
32 years of experience in the rubber glove industry.

Recommendation
Maintain BUY. Our FV of MYR5.10 for Kossan is based on a P/E of
18x on FY14 earnings. We continue to like the companys solid
fundamentals and strong management team, as well as its: i) robust
earnings outlook for the next two years, backed by capacity expansion,
ii) balanced product mix, and iii) steady operating environment, given
stable raw material prices and a favourable USD.

43

LBS Bina Group
Target: MYR3.39
Price: MYR1.82

Getting The Attention It Deserves

74
91
108
125
143
160
177
0.7
0.9
1.1
1.3
1.5
1.7
1.9
2.1
LBS Bina Group (LBS MK)
10
20
30
40
50
A
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3
J
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Source: Bloomberg

Stock Profile
Bloomberg Ticker LBS MK
Beta (x) 1.13
BVPS (MYR) 1.86
Free float (%) 37

Gaterich SB 54.7

1m 3m 6m 12m
Absolute 5.8 13.0 (0.6) 75.0
Relative 4.7 11.9 (4.8) 65.3



Investment Merits
Sizeable landbank in strategic locations
Disposal of China assets presents more landbank acquisition
opportunities
Committed family-led management team

Company Profile
LBS was founded in the 1960s as a small construction outfit in Petaling
Jaya, Selangor. In 1992, the group ventured into property development
via its maiden project, Jelapang Maju Light Industrial Park in Ipoh,
Perak. Today, it is an established and reputable property developer with
existing projects in Selangor, Pahang, Johor and Perak. It is currently
sitting on 1,787.8 acres of undeveloped landbank with an outstanding
GDV of MYR16.8bn.

Highlights
Disposes of China assets. In Aug 2013, LBS Bina Group (LBS)
disposed of its 60% interest in two plots of land in Zhuhai, China to
Zhuhai International Holdings (908 HK, NR) for a total consideration of
HKD1.65bn. However, the group still holds a 60% stake in the 264-acre
Zhuhai International Circuit (ZIC), which we believe is worth at least
MYR900m, based on LBS disposal price. We think this stake could
fetch as much as MYR1.26bn following the recent appreciation in land
prices, and given that ZIC has a commercial land title. We believe the
market may have overlooked the possible cash infusion from the
potential sale of this asset, which we expect to materialise soon, since
management is keen to expand its presence in Malaysia in the medium
to long term. Once the disposal materialises, it will give the group
ammunition to expand its domestic landbank.
Domestic operations. LBS current total GDV amounts to MYR16.8bn,
based on its undeveloped landbank of 1,787.8 acres. Most of the
groups landbank is in Selangor and Johor, at 43% and 26% of total
group acreage respectively, with the rest being predominantly in
Pahang and Perak. As of 31 Jan 2014, the companys unbilled sales
stood at MYR650m.
New launches in FY14-15. Following the sale of its China asset, the
group will concentrate more on its domestic operations. LBS plans to
launch new properties worth a total GDV of MYR1.96bn in FY14 and
MYR1.87bn in FY15. These will be from its flagship projects DIsland
Residence in Puchong and Bandar Saujana Putra, as well as its
developments in Batu Pahat, Cameron Highlands, Kuantan and
Gohtong Jaya. In view of a relatively less bullish property market
outlook, we adopt a conservative stance and project a take-up rate of
45-50% for FY14-15F.

Profit & Loss Dec-13 Dec-14F Dec-15F
DPS (MYR) 0.09 0.11 0.12
Recurring P/E (x) 10.51 11.36 8.75
P/B (x) 1.00 0.98 0.93
P/CF (x) na 5.93 4.81


Balance Sheet (MYRm) Dec-13 Dec-14F Dec-15F
Total current assets 833 927 1,079
Total assets 2,011 2,035 2,116
Total liabilities 1,139 1,132 1,163
Other equity (0) 0 -
Net debt 89 (86) (268)


Cash flow (MYRm) Dec-13 Dec-14F Dec-15F
Cash flow from investing activities 158 100 100


Company Report Card
Latest results. LBS FY13 revenue rose 4.7% to MYR533.5m vs FY12
on the back of contributions from its ongoing projects in the Klang
Valley and Cameron Highlands. Core earnings surged 38% to
MYR51.3m in FY13 from MYR31.2m in FY12 as the group registered
higher net margins from its property launches.
Balance sheet / cash flow. As of Dec 2013, LBS net gearing stood at
0.10x, improving from 0.62x in FY12 following the disposal of its assets
in China. Factoring in the promissory notes, of which MYR103.2m will
be due by end-FY14, and the remaining MYR247.7m spread equally
over three years from FY15 to FY17, we expect the group to revert to a
net cash position by end-FY14.
ROE. We expect LBS to deliver an ROE of 8.7% as the group launches
new development projects on top of the ongoing ones.
Dividend. LBS has committed to distributing an annual DPS of 6.0 sen
upon receiving the outstanding proceeds of around MYR351.0m. This
will translate into 73.1 sen per share based on LBS 480.3m outstanding
shares. On top of that, management is also committed to a minimum
30% payout ratio. Based on our projections, this will translate into a total
DPS of 10.8-13.4 sen per share over the next three years, implying a
decent annual dividend yield of 6.4-7.9%.
Management. LBS was founded by Dato Seri Lim Bock Seng in the
1960s. The senior management team is now led by his sons: group
managing director Dato Seri Lim Hock San, together with executive
directors Datuk Lim Hock Guan, Dato Seri Lim Hock Sing, Datuk Lim
Hock Seong and Ms Lim Mooi Pang.
Recommendation
We value the company based on SOP, being: i) a 45% discount on the
equity value of its Malaysian property development division, ii) its 16.7%
stake in Zhuhai Holdings based on the current market value, and iii) an
estimated value for its 60.0% stake in ZIC based on the previous
disposal price. All in, we value LBS at a FV of MYR3.39.
44

LBS Bina Group
Target: MYR3.39
Price: MYR1.82

Getting The Attention It Deserves

74
91
108
125
143
160
177
0.7
0.9
1.1
1.3
1.5
1.7
1.9
2.1
LBS Bina Group (LBS MK)
10
20
30
40
50
A
p
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1
3
J
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1
3
A
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1
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1
3
D
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-
1
3
F
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-
1
4
V
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m

Source: Bloomberg

Stock Profile
Bloomberg Ticker LBS MK
Beta (x) 1.13
BVPS (MYR) 1.86
Free float (%) 37

Gaterich SB 54.7

1m 3m 6m 12m
Absolute 5.8 13.0 (0.6) 75.0
Relative 4.7 11.9 (4.8) 65.3



Investment Merits
Sizeable landbank in strategic locations
Disposal of China assets presents more landbank acquisition
opportunities
Committed family-led management team

Company Profile
LBS was founded in the 1960s as a small construction outfit in Petaling
Jaya, Selangor. In 1992, the group ventured into property development
via its maiden project, Jelapang Maju Light Industrial Park in Ipoh,
Perak. Today, it is an established and reputable property developer with
existing projects in Selangor, Pahang, Johor and Perak. It is currently
sitting on 1,787.8 acres of undeveloped landbank with an outstanding
GDV of MYR16.8bn.

Highlights
Disposes of China assets. In Aug 2013, LBS Bina Group (LBS)
disposed of its 60% interest in two plots of land in Zhuhai, China to
Zhuhai International Holdings (908 HK, NR) for a total consideration of
HKD1.65bn. However, the group still holds a 60% stake in the 264-acre
Zhuhai International Circuit (ZIC), which we believe is worth at least
MYR900m, based on LBS disposal price. We think this stake could
fetch as much as MYR1.26bn following the recent appreciation in land
prices, and given that ZIC has a commercial land title. We believe the
market may have overlooked the possible cash infusion from the
potential sale of this asset, which we expect to materialise soon, since
management is keen to expand its presence in Malaysia in the medium
to long term. Once the disposal materialises, it will give the group
ammunition to expand its domestic landbank.
Domestic operations. LBS current total GDV amounts to MYR16.8bn,
based on its undeveloped landbank of 1,787.8 acres. Most of the
groups landbank is in Selangor and Johor, at 43% and 26% of total
group acreage respectively, with the rest being predominantly in
Pahang and Perak. As of 31 Jan 2014, the companys unbilled sales
stood at MYR650m.
New launches in FY14-15. Following the sale of its China asset, the
group will concentrate more on its domestic operations. LBS plans to
launch new properties worth a total GDV of MYR1.96bn in FY14 and
MYR1.87bn in FY15. These will be from its flagship projects DIsland
Residence in Puchong and Bandar Saujana Putra, as well as its
developments in Batu Pahat, Cameron Highlands, Kuantan and
Gohtong Jaya. In view of a relatively less bullish property market
outlook, we adopt a conservative stance and project a take-up rate of
45-50% for FY14-15F.

DPS (MYR) 0.09 0.11 0.12
Recurring P/E (x) 10.51 11.36 8.75
P/B (x) 1.00 0.98 0.93
P/CF (x) na 5.93 4.81


Total current assets 833 927 1,079
Total assets 2,011 2,035 2,116
Other equity (0) 0 -
Net debt 89 (86) (268)


Cash flow from investing activities 158 100 100


Company Report Card
Latest results. LBS FY13 revenue rose 4.7% to MYR533.5m vs FY12
on the back of contributions from its ongoing projects in the Klang
Valley and Cameron Highlands. Core earnings surged 38% to
MYR51.3m in FY13 from MYR31.2m in FY12 as the group registered
higher net margins from its property launches.
Balance sheet / cash flow. As of Dec 2013, LBS net gearing stood at
0.10x, improving from 0.62x in FY12 following the disposal of its assets
in China. Factoring in the promissory notes, of which MYR103.2m will
be due by end-FY14, and the remaining MYR247.7m spread equally
over three years from FY15 to FY17, we expect the group to revert to a
net cash position by end-FY14.
ROE. We expect LBS to deliver an ROE of 8.7% as the group launches
new development projects on top of the ongoing ones.
Dividend. LBS has committed to distributing an annual DPS of 6.0 sen
upon receiving the outstanding proceeds of around MYR351.0m. This
will translate into 73.1 sen per share based on LBS 480.3m outstanding
shares. On top of that, management is also committed to a minimum
30% payout ratio. Based on our projections, this will translate into a total
DPS of 10.8-13.4 sen per share over the next three years, implying a
decent annual dividend yield of 6.4-7.9%.
Management. LBS was founded by Dato Seri Lim Bock Seng in the
1960s. The senior management team is now led by his sons: group
managing director Dato Seri Lim Hock San, together with executive
directors Datuk Lim Hock Guan, Dato Seri Lim Hock Sing, Datuk Lim
Hock Seong and Ms Lim Mooi Pang.
Recommendation
We value the company based on SOP, being: i) a 45% discount on the
equity value of its Malaysian property development division, ii) its 16.7%
stake in Zhuhai Holdings based on the current market value, and iii) an
estimated value for its 60.0% stake in ZIC based on the previous
disposal price. All in, we value LBS at a FV of MYR3.39.
45

OCK Group
Target: MYR1.72
Price: MYR1.38

Towering Growth

78
111
145
178
211
245
278
0.4
0.6
0.8
1.0
1.2
1.4
1.6
OCK Group (OCK MK)
5
10
15
20
A
p
r
-
1
3
J
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1
3
A
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-
1
3
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1
3
D
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1
3
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1
4
V
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Source: Bloomberg

Stock Profile
Bloomberg Ticker OCK MK
Net Gearing (%) 5.7
Beta (x) 1.1
BVPS (MYR) 0.35
Free float (%) 27

Aliran Armada Sdn Bhd 52.2
Lembaga Tabung Angkatan
Tentera
14.5
Low Hock Keong 2.6

1m 3m 6m 12m
Absolute 74.7 79.2 98.6 176.0
Relative 73.6 78.1 94.4 166.3

Lim Tee Yang, CFA +603 9207 7607
lim.tee.yang@rhbgroup.com

Investment Merits
Largest Tier 1 telecom network service provider
Well-positioned to benefit from the potential rollout of new towers
for broadband services in underserved areas of Sabah and
Sarawak under the 2014 Budget
Diversification into renewable energy provides an extra source of
recurring income

Company Profile
OCK is the largest telecommunication service provider in Malaysia. It
primarily focuses on the building and renting out of telecommunication
towers. It also has a smaller division focusing on solar energy. The
company has also ventured overseas with tie-ups in Cambodia and
China.

Highlights
Strong contender for universal service provision(USP) funding in
East Malaysia. OCK is one of the biggest beneficiaries of the proposed
construction of 1,000 telco sites valued at MYR1.5bn under the USP
fund to improve broadband coverage and infrastructure in the
underserved areas of Sabah and Sarawak. According to industry
sources, the outcome of the first round of tenders for the towers is
expected in 2H2014. We think OCK stands a good chance of securing
the USP project, given its strong execution track record. To date, the
company has put up about 220 telco sites.
Exploring recurring income from renewal energy (RE). We see
several similarities between the solar energy and tower businesses.
While both require significant capex upfront, the operational and
maintenance costs are fairly low, and both provide a good stream of
steady recurring income. OCK is not new in RE, as the company is
already involved in green energy and power solutions via the supply of
power generation equipment and other related equipment. The
Sustainable Energy Development Authority of Malaysia (SEDA) is
expected to unveil the reviewed degression rates for RE feed-in tariffs
(FiTs) in 2Q14.
Diversifying into foreign markets. OCK is eyeing several contracts
outside Malaysia to boost its current MYR60m orderbook for
maintenance and engineering services. In China, it has inked a contract
with a unit of China Mobile to provide network optimisation services
while in Myanmar, the group hopes to collaborate with vendors to
undertake the deployment of new mobile networks in the country. In
Cambodia, OCK is working alongside Axiata Groups subsidiary, Hello
(merged with Smart Mobile in FY13), to roll out networks.

Recurring P/E (x) 29.09 24.40 12.02
P/B (x) 4.97 3.90 2.94
P/CF (x) 23.50 17.83 na


Total debt 59 41 40
Net debt 42 6 28


Cash flow from operations 16 22 (17)
Total cash generated 4 15 (28)
Forex effects (1) (1)

Source: Company data,RHB estimates

Company Report Card
Latest results. OCKs FY13 revenue rose 8.5% mainly on the back of a
more than doubling of contributions from its RE business. However, its
core business of telecom network services, contributing 57% of total
revenue, saw topline contract 13% due to slower roll out by the telcos.
We expect revenue from this segment to accelerate in FY14/15 as the
telcos focus on expanding their 4G/LTE coverage.
Balance sheet/cash flow. OCKs net debt/equity of 0.2x as at 4Q13
suggests that there is room for more gearing to expand its business or
undertake a M&A exercise, supported by a cash balance of MYR16.8m.
The company completed a MYR150m sukuk facility in May 2013, with
only MYR5m drawn down so far.
ROE. ROE stood at 15.5% in FY13. While this is down from FY12s
22.8%, the company undertook a share placement exercise in FY13
which contributed to the 42.9% increase in shareholder equity. We
expect OCKs ROE to remain stable or improve further, supported by
robust earnings growth.
Dividend. As OCK needs to reinvest for growth, the company does not
currently distribute dividends.
Management. Sam Ooi Chin Khoon, its managing director, is the
largest shareholder of OCK and responsible for the growth,
development and strategic direction of the group. He controls OCK via
Aliran Armada SB, which has a direct 53% stake. Lembaga Tabung
Angkatan Tentera (LTAT) is the second largest shareholder of the
company with a 15% stake.

Recommendation
Our valuation is MYR1.72, based on 15x FY15 EPS of 11.5 sen, at a
25% discount to the large cap telecom sector average of 20x due to the
companys significantly smaller scale of operations.

46

OCK Group
Target: MYR1.72
Price: MYR1.38

Towering Growth

78
111
145
178
211
245
278
0.4
0.6
0.8
1.0
1.2
1.4
1.6
OCK Group (OCK MK)
5
10
15
20
A
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1
3
J
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1
3
A
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V
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Source: Bloomberg

Stock Profile
Bloomberg Ticker OCK MK
Net Gearing (%) 5.7
Beta (x) 1.1
BVPS (MYR) 0.35
Free float (%) 27

Aliran Armada Sdn Bhd 52.2
Lembaga Tabung Angkatan
Tentera
14.5
Low Hock Keong 2.6

1m 3m 6m 12m
Absolute 74.7 79.2 98.6 176.0
Relative 73.6 78.1 94.4 166.3


Investment Merits
Largest Tier 1 telecom network service provider
Well-positioned to benefit from the potential rollout of new towers
for broadband services in underserved areas of Sabah and
Sarawak under the 2014 Budget
Diversification into renewable energy provides an extra source of
recurring income

Company Profile
OCK is the largest telecommunication service provider in Malaysia. It
primarily focuses on the building and renting out of telecommunication
towers. It also has a smaller division focusing on solar energy. The
company has also ventured overseas with tie-ups in Cambodia and
China.

Highlights
Strong contender for universal service provision(USP) funding in
East Malaysia. OCK is one of the biggest beneficiaries of the proposed
construction of 1,000 telco sites valued at MYR1.5bn under the USP
fund to improve broadband coverage and infrastructure in the
underserved areas of Sabah and Sarawak. According to industry
sources, the outcome of the first round of tenders for the towers is
expected in 2H2014. We think OCK stands a good chance of securing
the USP project, given its strong execution track record. To date, the
company has put up about 220 telco sites.
Exploring recurring income from renewal energy (RE). We see
several similarities between the solar energy and tower businesses.
While both require significant capex upfront, the operational and
maintenance costs are fairly low, and both provide a good stream of
steady recurring income. OCK is not new in RE, as the company is
already involved in green energy and power solutions via the supply of
power generation equipment and other related equipment. The
Sustainable Energy Development Authority of Malaysia (SEDA) is
expected to unveil the reviewed degression rates for RE feed-in tariffs
(FiTs) in 2Q14.
Diversifying into foreign markets. OCK is eyeing several contracts
outside Malaysia to boost its current MYR60m orderbook for
maintenance and engineering services. In China, it has inked a contract
with a unit of China Mobile to provide network optimisation services
while in Myanmar, the group hopes to collaborate with vendors to
undertake the deployment of new mobile networks in the country. In
Cambodia, OCK is working alongside Axiata Groups subsidiary, Hello
(merged with Smart Mobile in FY13), to roll out networks.

Recurring P/E (x) 29.09 24.40 12.02
P/B (x) 4.97 3.90 2.94
P/CF (x) 23.50 17.83 na


Total debt 59 41 40
Net debt 42 6 28


Cash flow from operations 16 22 (17)
Forex effects (1) (1)

Source: Company data,RHB estimates

Company Report Card
Latest results. OCKs FY13 revenue rose 8.5% mainly on the back of a
more than doubling of contributions from its RE business. However, its
core business of telecom network services, contributing 57% of total
revenue, saw topline contract 13% due to slower roll out by the telcos.
We expect revenue from this segment to accelerate in FY14/15 as the
telcos focus on expanding their 4G/LTE coverage.
Balance sheet/cash flow. OCKs net debt/equity of 0.2x as at 4Q13
suggests that there is room for more gearing to expand its business or
undertake a M&A exercise, supported by a cash balance of MYR16.8m.
The company completed a MYR150m sukuk facility in May 2013, with
only MYR5m drawn down so far.
ROE. ROE stood at 15.5% in FY13. While this is down from FY12s
22.8%, the company undertook a share placement exercise in FY13
which contributed to the 42.9% increase in shareholder equity. We
expect OCKs ROE to remain stable or improve further, supported by
robust earnings growth.
Dividend. As OCK needs to reinvest for growth, the company does not
currently distribute dividends.
Management. Sam Ooi Chin Khoon, its managing director, is the
largest shareholder of OCK and responsible for the growth,
development and strategic direction of the group. He controls OCK via
Aliran Armada SB, which has a direct 53% stake. Lembaga Tabung
Angkatan Tentera (LTAT) is the second largest shareholder of the
company with a 15% stake.

Recommendation
Our valuation is MYR1.72, based on 15x FY15 EPS of 11.5 sen, at a
25% discount to the large cap telecom sector average of 20x due to the
companys significantly smaller scale of operations.


Pantech
Target: MYR1.25
Price: MYR0.95

A Bright Star

89
99
109
119
129
139
149
0.60
0.70
0.80
0.90
1.00
1.10
1.20
Pantech (PGHB MK)
5
10
15
20
25
30
35
A
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1
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J
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Source: Bloomberg

Stock Profile
Bloomberg Ticker PGHB MK
Beta (x) 1.25
BVPS (MYR) 0.73
Free float (%) 34

CTL Capital Holding 20.0
GL Management Agency SB 14.9
Koperasi Permodalan Felda 10.2

1m 3m 6m 12m
Absolute 3.8 (6.9) 0.0 22.6
Relative 2.7 (8.0) (4.2) 12.9

Jerry Lee 603 9207 7622

Investment Merits
Strong growth potential with exposure to the booming O&G sector
Solid foundation and established business relationships with
globally-renowned oil majors
Oil majors continuing to spend on capex amid favourable oil prices

Company Profile
Pantech is primarily involved in the manufacturing and trading of pipes,
fittings and flow controls. It also manufactures carbon steel fittings,
stainless pipes and fittings, induction long bends and copper nickel
fittings.

Highlights
Solid foundation. Pantech has established itself as the industrys one-
stop provider of pipes, fittings and flanges. Its products cater to
industries dealing with flowing liquid or gas, including the oil and gas
(O&G), chemicals, and palm oil sectors. The group is currently focusing
on expanding its clientele in the O&G sector, as it believes the sector
has strong growth potential, both locally and abroad.
Nautic Steels a successful investment. Pantech started to see
significant growth in FY13 following its acquisition of UK-based Nautic
Steels (Holdings) Ltd (Nautic Steels). This subsidiary manufactures
exotic products such as copper nickel, duplex and super duplex fittings.
Furthermore, with Nautic Steels on board, its business network now has
access to most of the global oil majors, which should facilitate
Pantechs cross-selling efforts.
Local O&G sector looks bright. Petronas 2011-2016 capex budget of
MYR300bn is expected to boost the local O&G sector. The high capex
should lead to rising demand for Pantechs products, which should
support local sales growth. Petronas has recently given the green light
to its much-awaited final investment decision (FID) for the Pengerang
integrated complex (PIC) in South Johor with a commitment of
USD27bn (RM88.56bn), although the project will start a year later than
expected in 2019. The FID marks a significant milestone for PIC, of
which the refinery and petrochemical integrated development (RAPID)
is a key component. This is positive for Pantech, as its FY14F earnings
were largely affected by the slow execution of local O&G projects.
Given Petronas new commitment, we believe the groups trading
division revenue will improve significantly in FY15F which we expect
to be a good year.

Profit & Loss Feb-12 Feb-13 Feb-14F
DPS (MYR) 0.04 0.04 0.04
Recurring P/E (x) 12.56 8.78 9.90
P/B (x) 1.28 1.28 1.31
P/CF (x) 29.34 12.60 8.33


Balance Sheet (MYRm) Feb-12 Feb-13 Feb-14F
Other equity 0 0 0
Net debt (4) 58 43


Cash flow (MYRm) Feb-12 Feb-13 Feb-14F
Cash flow from financing activities (17) 23 5
Total cash generated (36) (23) 17
Forex effects (0) (0) -


More upside potential. Our earnings forecasts are very conservative,
as we have yet to include any possible upside from the RAPID project.
Assuming normal organic growth in the manufacturing division, our
base case scenario estimates low trading revenue of MYR329m due to
slow execution of local O&G projects. However, should the RAPID
project bring benefits to Pantechs trading division and boost its trading
revenue to FY13s level of about MYR380m, we expect the groups
FY15F net profit to reach MYR66.9m. Earnings will be even stronger
should its manufacturing division grow faster and fetch higher margins.
Hence, we are positive that Pantech will be able to chalk up stronger
results in FY15F.
Company Report Card
Latest results. Pantechs 9MFY14 net profit of MYR41.2m (-2.9% y-o-
y) came in below our forecast. Revenue from the trading division
declined 21% y-o-y, mainly attributed to higher operating costs and
weaker sales from the O&G segment that was hit by slower project
execution. This translated into a 48% y-o-y decline in pre-tax profit. On
a positive note, its manufacturing division continued to improve with a
15% y-o-y revenue growth, driven by an increase in output from all its
manufacturing plants to meet rising local and export sales demand. The
manufacturing divisions pre-tax profit surged 87% y-o-y on higher niche
product sales. Pantech declared a dividend of 1.0 sen in 3QFY14
(cumulative 9MFY14 dividend: 3.4 sen).
Balance sheet/cash flow. Its gearing of 10.3% is not a concern as its
borrowings mainly comprise short-term debts to facilitate its trading
activities. Long-term borrowings are minimal and its free cash flow
remains positive.
ROE. We expect Pantech to deliver a 13.8% ROE in FY15F.
Dividend. The group has been very generous in paying good dividends
to its shareholders. For the past three financial years, the payout ratio
has been greater than 40%. Our assumptions are based on a
conservative 30% dividend payout in FY15F.
Management. Pantech is led by an experienced management team
comprising chairman/group MD Dato Jimmy Chew, who has more than
30 years of experience in the PFF industry; deputy MD Dato Goh Teoh
Kean, who has 20 years experience in PFF solutions; and executive
director Arian Tan, who is also the MD of subsidiary, Pantech Steel
Industries SB. Collectively, the trio is a formidable driving force behind
Pantechs success.
Recommendation
Reiterate BUY. We remain bullish on Pantechs solid foundation and
attractive growth potential. We think that the stock rightly justifies our
12x target P/E as its O&G customers are global majors such as
Petronas, Petrobras and Saudi Aramco. Note that almost 70-80% of its
earnings come from the O&G sector and, as such, the stock provides a
cheap exposure to the O&G play. We reiterate our BUY call and
MYR1.25 FV.

47

Pantech
Target: MYR1.25
Price: MYR0.95

A Bright Star

89
99
109
119
129
139
149
0.60
0.70
0.80
0.90
1.00
1.10
1.20
Pantech (PGHB MK)
5
10
15
20
25
30
35
A
p
r
-
1
3
J
u
n
-
1
3
A
u
g
-
1
3
O
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t
-
1
3
D
e
c
-
1
3
F
e
b
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1
4
V
o
l

m

Source: Bloomberg

Stock Profile
Bloomberg Ticker PGHB MK
Beta (x) 1.25
BVPS (MYR) 0.73
Free float (%) 34

CTL Capital Holding 20.0
GL Management Agency SB 14.9
Koperasi Permodalan Felda 10.2

1m 3m 6m 12m
Absolute 3.8 (6.9) 0.0 22.6
Relative 2.7 (8.0) (4.2) 12.9

Jerry Lee 603 9207 7622

Investment Merits
Strong growth potential with exposure to the booming O&G sector
Solid foundation and established business relationships with
globally-renowned oil majors
Oil majors continuing to spend on capex amid favourable oil prices

Company Profile
Pantech is primarily involved in the manufacturing and trading of pipes,
fittings and flow controls. It also manufactures carbon steel fittings,
stainless pipes and fittings, induction long bends and copper nickel
fittings.

Highlights
Solid foundation. Pantech has established itself as the industrys one-
stop provider of pipes, fittings and flanges. Its products cater to
industries dealing with flowing liquid or gas, including the oil and gas
(O&G), chemicals, and palm oil sectors. The group is currently focusing
on expanding its clientele in the O&G sector, as it believes the sector
has strong growth potential, both locally and abroad.
Nautic Steels a successful investment. Pantech started to see
significant growth in FY13 following its acquisition of UK-based Nautic
Steels (Holdings) Ltd (Nautic Steels). This subsidiary manufactures
exotic products such as copper nickel, duplex and super duplex fittings.
Furthermore, with Nautic Steels on board, its business network now has
access to most of the global oil majors, which should facilitate
Pantechs cross-selling efforts.
Local O&G sector looks bright. Petronas 2011-2016 capex budget of
MYR300bn is expected to boost the local O&G sector. The high capex
should lead to rising demand for Pantechs products, which should
support local sales growth. Petronas has recently given the green light
to its much-awaited final investment decision (FID) for the Pengerang
integrated complex (PIC) in South Johor with a commitment of
USD27bn (RM88.56bn), although the project will start a year later than
expected in 2019. The FID marks a significant milestone for PIC, of
which the refinery and petrochemical integrated development (RAPID)
is a key component. This is positive for Pantech, as its FY14F earnings
were largely affected by the slow execution of local O&G projects.
Given Petronas new commitment, we believe the groups trading
division revenue will improve significantly in FY15F which we expect
to be a good year.

Profit & Loss Feb-12 Feb-13 Feb-14F
DPS (MYR) 0.04 0.04 0.04
Recurring P/E (x) 12.56 8.78 9.90
P/B (x) 1.28 1.28 1.31
P/CF (x) 29.34 12.60 8.33


Balance Sheet (MYRm) Feb-12 Feb-13 Feb-14F
Other equity 0 0 0
Net debt (4) 58 43


Cash flow (MYRm) Feb-12 Feb-13 Feb-14F
Cash flow from financing activities (17) 23 5
Forex effects (0) (0) -


More upside potential. Our earnings forecasts are very conservative,
as we have yet to include any possible upside from the RAPID project.
Assuming normal organic growth in the manufacturing division, our
base case scenario estimates low trading revenue of MYR329m due to
slow execution of local O&G projects. However, should the RAPID
project bring benefits to Pantechs trading division and boost its trading
revenue to FY13s level of about MYR380m, we expect the groups
FY15F net profit to reach MYR66.9m. Earnings will be even stronger
should its manufacturing division grow faster and fetch higher margins.
Hence, we are positive that Pantech will be able to chalk up stronger
results in FY15F.
Company Report Card
Latest results. Pantechs 9MFY14 net profit of MYR41.2m (-2.9% y-o-
y) came in below our forecast. Revenue from the trading division
declined 21% y-o-y, mainly attributed to higher operating costs and
weaker sales from the O&G segment that was hit by slower project
execution. This translated into a 48% y-o-y decline in pre-tax profit. On
a positive note, its manufacturing division continued to improve with a
15% y-o-y revenue growth, driven by an increase in output from all its
manufacturing plants to meet rising local and export sales demand. The
manufacturing divisions pre-tax profit surged 87% y-o-y on higher niche
product sales. Pantech declared a dividend of 1.0 sen in 3QFY14
(cumulative 9MFY14 dividend: 3.4 sen).
Balance sheet/cash flow. Its gearing of 10.3% is not a concern as its
borrowings mainly comprise short-term debts to facilitate its trading
activities. Long-term borrowings are minimal and its free cash flow
remains positive.
ROE. We expect Pantech to deliver a 13.8% ROE in FY15F.
Dividend. The group has been very generous in paying good dividends
to its shareholders. For the past three financial years, the payout ratio
has been greater than 40%. Our assumptions are based on a
conservative 30% dividend payout in FY15F.
Management. Pantech is led by an experienced management team
comprising chairman/group MD Dato Jimmy Chew, who has more than
30 years of experience in the PFF industry; deputy MD Dato Goh Teoh
Kean, who has 20 years experience in PFF solutions; and executive
director Arian Tan, who is also the MD of subsidiary, Pantech Steel
Industries SB. Collectively, the trio is a formidable driving force behind
Pantechs success.
Recommendation
Reiterate BUY. We remain bullish on Pantechs solid foundation and
attractive growth potential. We think that the stock rightly justifies our
12x target P/E as its O&G customers are global majors such as
Petronas, Petrobras and Saudi Aramco. Note that almost 70-80% of its
earnings come from the O&G sector and, as such, the stock provides a
cheap exposure to the O&G play. We reiterate our BUY call and
MYR1.25 FV.

48

Perisai Petroleum Teknologi
Target: MYR2.05
Price: MYR1.58

Drilling Rigs To Provide Steady Income

89
97
104
112
119
127
134
142
149
1.0
1.1
1.2
1.3
1.4
1.5
1.6
1.7
1.8
Perisai Petroleum Teknologi (PPT MK)
5
10
15
20
25
30
A
p
r
-
1
3
J
u
n
-
1
3
A
u
g
-
1
3
O
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t
-
1
3
D
e
c
-
1
3
F
e
b
-
1
4
V
o
l

m

Source: Bloomberg

Stock Profile
Bloomberg Ticker PPT MK
Beta (x) 1.51
BVPS (MYR) 0.83
Free float (%) 62

Mercury Pacific Marine 8.0
Emas Offshore (M) 6.5
EPF 6.3

1m 3m 6m 12m
Absolute 3.3 (0.6) 22.5 32.8
Relative 2.2 (1.7) 18.3 23.1


Investment Merits
Now a drilling rig owner new business division set to provide
steady income for the group
Geographical footprint expansion now possible with the new drilling
division
Its expertise has grown to include drilling and the management of
floating production, storage & offloading (FPSO) vessel

Company Profile
Perisai Petroleum is an oil & gas service provider owning a
floating production, storage and offloading (FPSO) vessel, a
mobile
operating production unit (MOPU), a pipelay barge and eight offshore
support vessels (OSVs) with up to two jack-up rigs on order.

Highlights
Growing out of its traditional role. Perisai has largely been involved
in the OSV and MOPU segments. It is a relatively small player in both
businesses, dwarfed by other domestic players with larger vessel fleets.
Banking on buoyant offshore O&G activities regionally, the group has
decided to acquire three JUs.
Drilling division to give earnings visibility. Perisais first JU, the
Perisai Pacific 101 (PP101) is being built by Sembcorp Marine (SMM
SP, BUY, FV: SGD5.40) and is scheduled for delivery in 2QFY14. The
group will also take delivery of its second and third JUs in 2QFY15 and
3QFY16 respectively. We believe that Perisai will be able to secure
charter contracts considering the strong demand for premium JUs in
Asean.
Perisai Kamelia to contribute significantly in FY14. Perisais 51%-
owned Perisai Kamelia FPSO is expected to contribute significantly to
its bottomline from FY14 onwards. This vessel has been deployed to
the North Malay Basins Kamelia Field since mid-2013 and has started
production in Dec 2013.

Company Report Card
Latest results. Perisais MYR71.8m FY13 net profit made up only 93%
and 91% of our and consensus estimates respectively. The poor
performance was attributed to the non-extension of contracts to both
the Rubicone MOPU and the Enterprise 3 (E3) derrick lay barge in
2QFY13 and 3QFY13 respectively. We had expected 4QFY13 to be a
bad quarter mainly because Rubicone and E3 effectively stopped
contributing after 3QFY13 and 4QFY13 respectively. These vessels had

Recurring net profit growth (%) 336.1 (22.1) 2.2
Recurring P/E (x) 18.54 23.87 25.69
P/B (x) 3.54 1.90 1.91
P/CF (x) 10.33 113.31 14.72


Total assets 1,129 1,443 1,492
Total equity 565 1,003 1,098
Net debt 317 291 167


Cash flow from financing activities 93 88 429


previously accounted for around 40% of its earnings; hence, the overall
13%/22% y-o-y decline in FY13 revenue/net profit.
Balance sheet/cash flow. Perisai is currently undertaking a drive to
expand its income-producing assets. Understandably, this will raise
questions over financing. We believe the group may need to further tap
into debt and equity financing. Note that Perisai has just recently
concluded a 10% private placement.
ROE. We forecast ROEs to fall to 7.8% from 10.4% following the heavy
capex and the idling Rubicone and E3. Having said that, we are
comforted by the fact that the companys new drilling division will be
able to shore up earnings in FY14.
Dividend. No dividend was declared for FY13. We believe Perisai is
conserving cash for asset acquisitions and, therefore, we do not expect
the group to declare dividends for at least the next two years.
Management. Perisais senior management is currently headed by En
Zainol Izzet Mohamed Ishak, the groups managing director. His
industry experience includes his 18-year stint in Sapura Group, where
his last held position was as chief executive officer of SapuraCrest
Petroleum, which is now known as SapuraKencana Petroleum (SAKP
MK, BUY, FV: MYR5.61). Zainol Izzet left the Malaysian O&G giant in
2010. Perisais management is commended for its efforts to expand the
groups bottomline and expertise via other sub-segments within the
O&G industry.

Recommendation
We view the events that happened in FY13 as temporary noise to
Perisais otherwise decent financial performance. The new drilling and
FPSO segments are expected to drive earnings from FY14 onwards.
We value the group based on a FY14/15 blended EPS to capture the
estimated FY15 earnings growth of more than 100%. This will be driven
by: i) contributions from two drilling rigs, and ii) full-year contributions
from both Rubicone and E3 in FY15. Our new FV also reflects the
recent 10% private placement. We maintain our BUY call on Perisai,
with a FV of MYR2.05, which is based on an unchanged target P/E of
20x, at a 35% discount to UMW Oil & Gas (UMWOG MK, NR)s 31x.

49

Perisai Petroleum Teknologi
Target: MYR2.05
Price: MYR1.58

Drilling Rigs To Provide Steady Income

89
97
104
112
119
127
134
142
149
1.0
1.1
1.2
1.3
1.4
1.5
1.6
1.7
1.8
Perisai Petroleum Teknologi (PPT MK)
5
10
15
20
25
30
A
p
r
-
1
3
J
u
n
-
1
3
A
u
g
-
1
3
O
c
t
-
1
3
D
e
c
-
1
3
F
e
b
-
1
4
V
o
l

m

Source: Bloomberg

Stock Profile
Bloomberg Ticker PPT MK
Beta (x) 1.51
BVPS (MYR) 0.83
Free float (%) 62

Mercury Pacific Marine 8.0
Emas Offshore (M) 6.5
EPF 6.3

1m 3m 6m 12m
Absolute 3.3 (0.6) 22.5 32.8
Relative 2.2 (1.7) 18.3 23.1


Investment Merits
Now a drilling rig owner new business division set to provide
steady income for the group
Geographical footprint expansion now possible with the new drilling
division
Its expertise has grown to include drilling and the management of
floating production, storage & offloading (FPSO) vessel

Company Profile
Perisai Petroleum is an oil & gas service provider owning a
floating production, storage and offloading (FPSO) vessel, a
mobile
operating production unit (MOPU), a pipelay barge and eight offshore
support vessels (OSVs) with up to two jack-up rigs on order.

Highlights
Growing out of its traditional role. Perisai has largely been involved
in the OSV and MOPU segments. It is a relatively small player in both
businesses, dwarfed by other domestic players with larger vessel fleets.
Banking on buoyant offshore O&G activities regionally, the group has
decided to acquire three JUs.
Drilling division to give earnings visibility. Perisais first JU, the
Perisai Pacific 101 (PP101) is being built by Sembcorp Marine (SMM
SP, BUY, FV: SGD5.40) and is scheduled for delivery in 2QFY14. The
group will also take delivery of its second and third JUs in 2QFY15 and
3QFY16 respectively. We believe that Perisai will be able to secure
charter contracts considering the strong demand for premium JUs in
Asean.
Perisai Kamelia to contribute significantly in FY14. Perisais 51%-
owned Perisai Kamelia FPSO is expected to contribute significantly to
its bottomline from FY14 onwards. This vessel has been deployed to
the North Malay Basins Kamelia Field since mid-2013 and has started
production in Dec 2013.

Company Report Card
Latest results. Perisais MYR71.8m FY13 net profit made up only 93%
and 91% of our and consensus estimates respectively. The poor
performance was attributed to the non-extension of contracts to both
the Rubicone MOPU and the Enterprise 3 (E3) derrick lay barge in
2QFY13 and 3QFY13 respectively. We had expected 4QFY13 to be a
bad quarter mainly because Rubicone and E3 effectively stopped
contributing after 3QFY13 and 4QFY13 respectively. These vessels had

Recurring net profit growth (%) 336.1 (22.1) 2.2
Recurring P/E (x) 18.54 23.87 25.69
P/B (x) 3.54 1.90 1.91
P/CF (x) 10.33 113.31 14.72


Total assets 1,129 1,443 1,492
Total equity 565 1,003 1,098
Net debt 317 291 167




previously accounted for around 40% of its earnings; hence, the overall
13%/22% y-o-y decline in FY13 revenue/net profit.
Balance sheet/cash flow. Perisai is currently undertaking a drive to
expand its income-producing assets. Understandably, this will raise
questions over financing. We believe the group may need to further tap
into debt and equity financing. Note that Perisai has just recently
concluded a 10% private placement.
ROE. We forecast ROEs to fall to 7.8% from 10.4% following the heavy
capex and the idling Rubicone and E3. Having said that, we are
comforted by the fact that the companys new drilling division will be
able to shore up earnings in FY14.
Dividend. No dividend was declared for FY13. We believe Perisai is
conserving cash for asset acquisitions and, therefore, we do not expect
the group to declare dividends for at least the next two years.
Management. Perisais senior management is currently headed by En
Zainol Izzet Mohamed Ishak, the groups managing director. His
industry experience includes his 18-year stint in Sapura Group, where
his last held position was as chief executive officer of SapuraCrest
Petroleum, which is now known as SapuraKencana Petroleum (SAKP
MK, BUY, FV: MYR5.61). Zainol Izzet left the Malaysian O&G giant in
2010. Perisais management is commended for its efforts to expand the
groups bottomline and expertise via other sub-segments within the
O&G industry.

Recommendation
We view the events that happened in FY13 as temporary noise to
Perisais otherwise decent financial performance. The new drilling and
FPSO segments are expected to drive earnings from FY14 onwards.
We value the group based on a FY14/15 blended EPS to capture the
estimated FY15 earnings growth of more than 100%. This will be driven
by: i) contributions from two drilling rigs, and ii) full-year contributions
from both Rubicone and E3 in FY15. Our new FV also reflects the
recent 10% private placement. We maintain our BUY call on Perisai,
with a FV of MYR2.05, which is based on an unchanged target P/E of
20x, at a 35% discount to UMW Oil & Gas (UMWOG MK, NR)s 31x.

50

Pintaras Jaya
Target: MYR4.61
Price: MYR3.26

Firm Foundation Built In

87
115
143
171
199
1.3
1.8
2.3
2.8
3.3
3.8
Pintaras Jaya (PINT MK)
1
1
1
1
1
A
p
r
-
1
3
J
u
n
-
1
3
A
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-
1
3
O
c
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-
1
3
D
e
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1
3
F
e
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1
4
V
o
l

m

Source: Bloomberg

Stock Profile
Bloomberg Ticker PINT MK
Avg Turnover (MYR/USD) 0.48|m/0.15||m
Beta (x) 0.72
BVPS (MYR) 1.92
Free float (%) 36

Dr Chiu Hong Keong & family 58.2
Khoo Keow Pin 6.3
| |

1m 3m 6m 12m
Absolute 11.3 14.0 8.1 117.3
Relative 10.2 12.9 3.9 107.6

Joshua Ng +603 9207 7606

Investment Merits
Strong prospects for the piling segment backed by the Klang Valley
MRT project, high-rise developments and capacity shortage
Its competitive edge lies in its in-sourcing model, backed by a full-
range of piling machines and in-depth knowledge of the ground
conditions
It is able to capitalise on the growing piling segment with
MYR100m capex in recent years that has doubled its capacity

Company Profile
Pintaras Jaya (Pintaras) is a piling specialist. Leveraging on its core
competence in piling, the company has also extended the range of
services it offers to the provision of foundation systems, earth retaining
systems, substructures, basements and earthworks. Among the more
notable projects that Pintaras has completed are piling and related
works for: i) Customs, Immigration & Quarantine (CIQ) complex and JB
Sentral in Johor Bahru, ii) various high-end residential projects in Mont
Kiara and in the heart of Kuala Lumpur, and iii) the Guthrie Corridor
Expressway. It has a smallish but profitable manufacturing outfit that
produces industrial metal containers.

Highlights
Positive industry outlook. The prospects for the piling segment are
strong, backed by: i) the MYR73bn Klang Valley MRT project that will
keep the entire value chain of the construction sector (including piling)
busy until 2021, ii) a proliferation of high-rise developments (residential,
commercial and office) on rising land scarcity in prime locations that
require extension piling, and iii) the chronic shortage of piling capacity in
the market, which will boost piling rates. Typically, piling and related
works make up 5-10% of total project value. It could be higher, ie 10-
20% for certain infrastructure works like bridges, or if the ground
conditions are inferior.
Strong market position. Pintaras is one of the top 4-5 piling
companies in Malaysia, whereby each company in this top grouping
controls a market share of 5-10%. Pintaras key competitive edge over
its rivals are its: i) full range of piling machines, tools and accessories
that reduces the need for outsourcing, which in turn means better
margin preservation, quality control and timeliness of completion; ii) in-
depth knowledge of the ground conditions that enables it to pick the
best jobs to bid and put in the winning bids for such jobs, and iii) ability
to secure cash discounts for key inputs like cement/cement products
and steel bars, as it normally buys them on cash terms, backed by a
cash-rich balance sheet.

DPS (MYR) 0.10 0.13 0.13
Recurring P/E (x) 17.47 11.79 9.99
P/B (x) 2.20 1.93 1.70
P/CF (x) 10.73 11.86 10.05


Net debt (84) (125) (120)




New capacity to drive growth. Backed by about MYR100m capex in
recent years, Pintaras can now take on jobs with a combined
outstanding value of about MYR300m at any one point, doubling from
MYR150m. At present, the company outstanding orderbook is worth
MYR295m, with the most notable job being a MYR74m contract
secured in March 2014 for foundation works comprising diaphragm wall,
piling and excavation for the Warisan Merdeka project.

Company Report Card
Latest results. FY13 core net profit surged 48%, thanks to margin
expansion on improved piling rates.
Balance sheet/cash flow. As at end-FY13, Pintaras was in a net cash
of MYR125.3m, translating into 78 sen per share. FY13 free cash flow
remained strong at MYR41m, or 26 sen, after accounting for capex of
MYR8.5m.
ROE. FY13s 21% was way above the industry average of 11%.
Dividend. Single-tier 12.5 sen per share in FY13, translating into a net
yield of 4%.
Management. At the helm of the company is founder, chairman and
managing director Dr Chiu Hong Keong. Dr Chiu holds a Bachelor of
Civil Engineering degree (First Class Honours) from the University of
Auckland, New Zealand, and a Doctorate of Philosophy degree in
Engineering from Monash University, Australia. He has had more than
30 years of experience in the construction sector. Prior to starting
Pintaras, he had a professional career as an engineer with the Victorian
Country Roads Board of Australia, Pilecon Engineering and Ho Hup
Construction Company (HO MK, NR).

Recommendation
Our valuation is MYR4.61, based on 12x CY15 EPS of 38.4 sen. This is
in line with our 1-year forward target P/E of 10-16x for the construction
sector. BUY.

51

Pintaras Jaya
Target: MYR4.61
Price: MYR3.26

Firm Foundation Built In

87
115
143
171
199
1.3
1.8
2.3
2.8
3.3
3.8
Pintaras Jaya (PINT MK)
1
1
1
1
1
A
p
r
-
1
3
J
u
n
-
1
3
A
u
g
-
1
3
O
c
t
-
1
3
D
e
c
-
1
3
F
e
b
-
1
4
V
o
l

m

Source: Bloomberg

Stock Profile
Bloomberg Ticker PINT MK
Avg Turnover (MYR/USD) 0.48|m/0.15||m
Beta (x) 0.72
BVPS (MYR) 1.92
Free float (%) 36

Dr Chiu Hong Keong & family 58.2
Khoo Keow Pin 6.3
| |

1m 3m 6m 12m
Absolute 11.3 14.0 8.1 117.3
Relative 10.2 12.9 3.9 107.6

Joshua Ng +603 9207 7606

Investment Merits
Strong prospects for the piling segment backed by the Klang Valley
MRT project, high-rise developments and capacity shortage
Its competitive edge lies in its in-sourcing model, backed by a full-
range of piling machines and in-depth knowledge of the ground
conditions
It is able to capitalise on the growing piling segment with
MYR100m capex in recent years that has doubled its capacity

Company Profile
Pintaras Jaya (Pintaras) is a piling specialist. Leveraging on its core
competence in piling, the company has also extended the range of
services it offers to the provision of foundation systems, earth retaining
systems, substructures, basements and earthworks. Among the more
notable projects that Pintaras has completed are piling and related
works for: i) Customs, Immigration & Quarantine (CIQ) complex and JB
Sentral in Johor Bahru, ii) various high-end residential projects in Mont
Kiara and in the heart of Kuala Lumpur, and iii) the Guthrie Corridor
Expressway. It has a smallish but profitable manufacturing outfit that
produces industrial metal containers.

Highlights
Positive industry outlook. The prospects for the piling segment are
strong, backed by: i) the MYR73bn Klang Valley MRT project that will
keep the entire value chain of the construction sector (including piling)
busy until 2021, ii) a proliferation of high-rise developments (residential,
commercial and office) on rising land scarcity in prime locations that
require extension piling, and iii) the chronic shortage of piling capacity in
the market, which will boost piling rates. Typically, piling and related
works make up 5-10% of total project value. It could be higher, ie 10-
20% for certain infrastructure works like bridges, or if the ground
conditions are inferior.
Strong market position. Pintaras is one of the top 4-5 piling
companies in Malaysia, whereby each company in this top grouping
controls a market share of 5-10%. Pintaras key competitive edge over
its rivals are its: i) full range of piling machines, tools and accessories
that reduces the need for outsourcing, which in turn means better
margin preservation, quality control and timeliness of completion; ii) in-
depth knowledge of the ground conditions that enables it to pick the
best jobs to bid and put in the winning bids for such jobs, and iii) ability
to secure cash discounts for key inputs like cement/cement products
and steel bars, as it normally buys them on cash terms, backed by a
cash-rich balance sheet.

DPS (MYR) 0.10 0.13 0.13
Recurring P/E (x) 17.47 11.79 9.99
P/B (x) 2.20 1.93 1.70
P/CF (x) 10.73 11.86 10.05


Net debt (84) (125) (120)




New capacity to drive growth. Backed by about MYR100m capex in
recent years, Pintaras can now take on jobs with a combined
outstanding value of about MYR300m at any one point, doubling from
MYR150m. At present, the company outstanding orderbook is worth
MYR295m, with the most notable job being a MYR74m contract
secured in March 2014 for foundation works comprising diaphragm wall,
piling and excavation for the Warisan Merdeka project.

Company Report Card
Latest results. FY13 core net profit surged 48%, thanks to margin
expansion on improved piling rates.
Balance sheet/cash flow. As at end-FY13, Pintaras was in a net cash
of MYR125.3m, translating into 78 sen per share. FY13 free cash flow
remained strong at MYR41m, or 26 sen, after accounting for capex of
MYR8.5m.
ROE. FY13s 21% was way above the industry average of 11%.
Dividend. Single-tier 12.5 sen per share in FY13, translating into a net
yield of 4%.
Management. At the helm of the company is founder, chairman and
managing director Dr Chiu Hong Keong. Dr Chiu holds a Bachelor of
Civil Engineering degree (First Class Honours) from the University of
Auckland, New Zealand, and a Doctorate of Philosophy degree in
Engineering from Monash University, Australia. He has had more than
30 years of experience in the construction sector. Prior to starting
Pintaras, he had a professional career as an engineer with the Victorian
Country Roads Board of Australia, Pilecon Engineering and Ho Hup
Construction Company (HO MK, NR).

Recommendation
Our valuation is MYR4.61, based on 12x CY15 EPS of 38.4 sen. This is
in line with our 1-year forward target P/E of 10-16x for the construction
sector. BUY.

52

POS Malaysia
Target: MYR5.45
Price: MYR4.66

Still Solid

91
96
100
105
109
114
118
123
127
132
136
4.1
4.3
4.5
4.7
4.9
5.1
5.3
5.5
5.7
5.9
6.1
POS Malaysia (POSM MK)
2
4
6
8
10
12
14
A
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1
3
J
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A
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Source: Bloomberg

Stock Profile
Bloomberg Ticker POSM MK
Beta (x) 1.11
BVPS (MYR) 1.89
Free float (%) 55

DRB HICOM 32.2
Mitsubishi USJ Financial Group 13.1
Aberdeen 10.6

1m 3m 6m 12m
Absolute (7.5) (17.8) (14.5) 7.4
Relative (8.6) (18.9) (18.7) (2.3)

Jerry Lee 603 9207 7622

Investment Merits
Strong growth prospects for all its business segments
Its Five-Year Strategic Plan aims to propel POS to become a
regional postal/logistics service provider
BUY, with our MYR5.45 FV derived from an 18x FY15F P/E

Company Profile
POS Malaysia is the Malaysia's exclusive mail services provider. The
company has undergone a massive restructuring since 2011 after DRB-
HICOM (DRB MK, BUY, FV: MYR3.20) emerged as its controlling
shareholder. Its Five-Year Strategic Plan, which was released in late
2011, aims to propel POS to the next level of growth, with the ultimate
goal of making it a regional postal/logistics service provider.
Highlights
Solid business units. POS has been restructured and reorganised to
cope with the decline in traditional postal volume, which has plagued
most postal services companies worldwide. Its courier arm, POS Laju
has chalked up strong growth thus far, due to the proliferation of online
SME businesses and subsequently growing demand for its services.
POS Laju has also ventured into the logistics services business by
providing logistics services to POS sister company, Proton. Meanwhile,
its Islamic pawn broking unit Ar Rahnu is the main growth driver of its
retail segment. POS has grown its Ar Rahnu outlets to 100 and expects
positive results from this expansion.
Expansion on track. POS is currently in the midst of its second phase
transformation plan to expand into new businesses, particularly in the
logistics and digital space. The first phase of its plan has proven to be
successful, with its courier arm growing strongly while its mail segment
has stopped bleeding with increased contributions from direct mail
services.
Second phase of transformation. POS named the second phase of
its transformation New Business Quantum Leap Phase, in which the
company will focus mainly on diversifying the income stream of its
supply chain solution services (logistics), creating innovative solutions
across channels, expanding its digital business and providing services
beyond postal.
Various growth catalysts. Apart from strong growth prospects for its
business operations, we see various growth catalysts that could
materialise in the future: i) there may be some interesting M&As in the
offing, since M&A is the fastest way to expand, ii) it may monetise a
valuable asset its strategically-located landbank. Although
management did not guide for any land development, we see potential
surprises as POS has indicated that it plans to monetise its assets.

Recurring net profit growth (%) - (1.1) (6.9)
DPS (MYR) 0.13 0.13 0.13
Recurring P/E (x) 16.53 16.70 17.94
P/B (x) 2.79 2.64 2.46
P/CF (x) 6.85 10.79 9.12


Total assets 1,498 1,615 1,791
Shareholders' equity 898 947 1,017
Minority interests - 1 1
Other equity - (0) (0)
Total equity 898 948 1,017
Net debt (544) (666) (533)




Company Report Card
Latest results. POS 9MFY14 results surprised the market as earnings
came in below expectations. Although its revenue was in line with our
forecast, higher-than-expected operating expenses squeezed earnings.
Nonetheless, we believe POS fundamentals remain solid and its
prospects intact, driven by potential growth in its courier segment once
its automated processing centre begins operations.
Balance sheet/cash flow. POS has a solid balance sheet with a huge
cash pile of MYR397m and minimal borrowings.
ROE. We expect ROE of 15.4% for FY14F, driven mainly by its strong
earnings growth.
Dividend. The company has been paying 16.5 sen gross dividend over
the last three financial years, which translated into an annual payout of
about 50%. As management did not guide for any possible increase in
dividend payout, we are of the view that it may want to retain cash for
expansion.
Management. Since DRB-HICOM came on board in 2011 and
introduced a new transformation plan, POS financial health has been
improving. As such, we believe the company would continue to grow
positively under the helm of the current management team, led by its
newly-appointed CEO Datuk Iskandar Mizal Mahmood.

Recommendation
BUY. We maintain our BUY call on POS for its solid business growth
coupled with potential positive surprises from its landbank
developments. Our valuation of MYR5.45 is pegged to an 18x FY15F
P/E, on par with its global peers, as we believe POS is on the right
track to become an established regional postal/logistics player.

53

POS Malaysia
Target: MYR5.45
Price: MYR4.66

Still Solid

91
96
100
105
109
114
118
123
127
132
136
4.1
4.3
4.5
4.7
4.9
5.1
5.3
5.5
5.7
5.9
6.1
POS Malaysia (POSM MK)
2
4
6
8
10
12
14
A
p
r
-
1
3
J
u
n
-
1
3
A
u
g
-
1
3
O
c
t
-
1
3
D
e
c
-
1
3
F
e
b
-
1
4
V
o
l

m

Source: Bloomberg

Stock Profile
Bloomberg Ticker POSM MK
Beta (x) 1.11
BVPS (MYR) 1.89
Free float (%) 55

DRB HICOM 32.2
Mitsubishi USJ Financial Group 13.1
Aberdeen 10.6

1m 3m 6m 12m
Absolute (7.5) (17.8) (14.5) 7.4
Relative (8.6) (18.9) (18.7) (2.3)

Jerry Lee 603 9207 7622

Investment Merits
Strong growth prospects for all its business segments
Its Five-Year Strategic Plan aims to propel POS to become a
regional postal/logistics service provider
BUY, with our MYR5.45 FV derived from an 18x FY15F P/E

Company Profile
POS Malaysia is the Malaysia's exclusive mail services provider. The
company has undergone a massive restructuring since 2011 after DRB-
HICOM (DRB MK, BUY, FV: MYR3.20) emerged as its controlling
shareholder. Its Five-Year Strategic Plan, which was released in late
2011, aims to propel POS to the next level of growth, with the ultimate
goal of making it a regional postal/logistics service provider.
Highlights
Solid business units. POS has been restructured and reorganised to
cope with the decline in traditional postal volume, which has plagued
most postal services companies worldwide. Its courier arm, POS Laju
has chalked up strong growth thus far, due to the proliferation of online
SME businesses and subsequently growing demand for its services.
POS Laju has also ventured into the logistics services business by
providing logistics services to POS sister company, Proton. Meanwhile,
its Islamic pawn broking unit Ar Rahnu is the main growth driver of its
retail segment. POS has grown its Ar Rahnu outlets to 100 and expects
positive results from this expansion.
Expansion on track. POS is currently in the midst of its second phase
transformation plan to expand into new businesses, particularly in the
logistics and digital space. The first phase of its plan has proven to be
successful, with its courier arm growing strongly while its mail segment
has stopped bleeding with increased contributions from direct mail
services.
Second phase of transformation. POS named the second phase of
its transformation New Business Quantum Leap Phase, in which the
company will focus mainly on diversifying the income stream of its
supply chain solution services (logistics), creating innovative solutions
across channels, expanding its digital business and providing services
beyond postal.
Various growth catalysts. Apart from strong growth prospects for its
business operations, we see various growth catalysts that could
materialise in the future: i) there may be some interesting M&As in the
offing, since M&A is the fastest way to expand, ii) it may monetise a
valuable asset its strategically-located landbank. Although
management did not guide for any land development, we see potential
surprises as POS has indicated that it plans to monetise its assets.

Recurring net profit growth (%) - (1.1) (6.9)
DPS (MYR) 0.13 0.13 0.13
Recurring P/E (x) 16.53 16.70 17.94
P/B (x) 2.79 2.64 2.46
P/CF (x) 6.85 10.79 9.12


Total assets 1,498 1,615 1,791
Shareholders' equity 898 947 1,017
Minority interests - 1 1
Total equity 898 948 1,017
Net debt (544) (666) (533)




Company Report Card
Latest results. POS 9MFY14 results surprised the market as earnings
came in below expectations. Although its revenue was in line with our
forecast, higher-than-expected operating expenses squeezed earnings.
Nonetheless, we believe POS fundamentals remain solid and its
prospects intact, driven by potential growth in its courier segment once
its automated processing centre begins operations.
Balance sheet/cash flow. POS has a solid balance sheet with a huge
cash pile of MYR397m and minimal borrowings.
ROE. We expect ROE of 15.4% for FY14F, driven mainly by its strong
earnings growth.
Dividend. The company has been paying 16.5 sen gross dividend over
the last three financial years, which translated into an annual payout of
about 50%. As management did not guide for any possible increase in
dividend payout, we are of the view that it may want to retain cash for
expansion.
Management. Since DRB-HICOM came on board in 2011 and
introduced a new transformation plan, POS financial health has been
improving. As such, we believe the company would continue to grow
positively under the helm of the current management team, led by its
newly-appointed CEO Datuk Iskandar Mizal Mahmood.

Recommendation
BUY. We maintain our BUY call on POS for its solid business growth
coupled with potential positive surprises from its landbank
developments. Our valuation of MYR5.45 is pegged to an 18x FY15F
P/E, on par with its global peers, as we believe POS is on the right
track to become an established regional postal/logistics player.

54

Press Metal
Target: MYR5.47
Price: MYR2.50

Pressing On In Volume And Price

90
98
107
115
123
132
140
1.6
1.8
2.0
2.2
2.4
2.6
2.8
Press Metal (PRESS MK)
1
2
3
4
5
A
p
r
-
1
3
J
u
n
-
1
3
A
u
g
-
1
3
O
c
t
-
1
3
D
e
c
-
1
3
F
e
b
-
1
4
V
o
l

m

Source: Bloomberg

Stock Profile
Bloomberg Ticker PRESS MK
Beta (x) 1.09
BVPS (MYR) 3.49
Free float (%) 43

Dato' Paul Koon & brothers 51.0

1m 3m 6m 12m
Absolute 8.7 3.3 13.6 35.9
Relative 7.6 2.2 9.4 26.2

Ng Sem Guan, CFA +603 9207 7678

Investment Merits
Press Metal has rapidly emerged as a company with world-class
low-cost aluminium smelters
Aluminium market shows early signs of bottoming out, as almost a
decade of capacity curtailment coupled with the moderate growth in
demand may finally translate into a supply deficit from 2014
With its Mukah and Samalaju smelters back in action since April
2014, the group is all ready to ride on the market upturn
BUY with FV at MYR5.47, derived by applying a 20% discount to
our fully diluted conservative DCF

Company Profile
Press Metal is a Malaysian-based aluminium company with an
extensive global presence. Today, the group has a downstream
extrusion operation that is integrated with its greenfield aluminium
smelting plants in Mukah and Samalaju in Sarawak, which have an
annual combined capacity of 440,000 tonnes. It also operates
aluminium extrusion plants in Selangor, Malaysia, and Guangdong and
Hubei, both in China.

Highlights
Early signs of aluminium market bottoming out. Aluminium prices
have risen of late, particularly after the London Metal Exchange (LME)
lost a lawsuit that forced it to shelve its new warehousing policy that
was designed to reduce deadlocked inventory, which many believe was
tied to contango financing. While we believe that the event may have
boosted market sentiment and resulted in an uptick in aluminium prices,
we think it also coincides with improving fundamentals of the aluminium
industry. After almost a decade of capacity curtailment, the moderate
growth in demand may finally translate into a supply deficit in the global
ex-China market from 2014. This may suggest that the aluminium
industry is hitting a bottom.
Get set for a great restart. The respective full commissioning and
recommissioning of its Samalaju and Mukah smelters started in early
April 2014. The combined upstream aluminium production from both
smelters are estimated to increase to 405,200 tonnes in 2014 and
435,600 tonnes in 2015, vs 290,772 tonnes in 2013. Considering that
the smelting business is a volume game, every additional tonnage is
crucial to the groups earnings. Management has decided to focus on
billet production in Mukah plant. In the meantime, its Samalaju plant will
produce the standard P1020 ingot, while we estimate 15/20% of its total
production to consist of A356 ingots in FY14/15. Billets and A356 ingots
are value-added products that offer an additional margin of USD50-80 a
tonne, based on market demand.

DPS (MYR) 0.03 0.02 0.04
Recurring P/E (x) 18.53 11.13 5.97
P/B (x) 1.01 1.01 0.72
P/CF (x) na 2.23 2.85


Total assets 4,785 5,027 5,325
Total current liabilities 2,147 2,242 1,909
Total non-current liabilities 1,234 1,387 1,357
Total equity 1,405 1,398 2,060
Total debt 2,592 2,621 1,999
Net debt 2,331 2,378 1,679


Forex effects 6 25 -


All geared for a better tomorrow. News flow seems to have improved
after the company disposed of its loss-making Hubei smelter while
acquiring a profitable extrusion unit via an asset swap in Sept 2013. We
are also excited about its recent landmark USD140m deal with
Sumitomo Corp (8053 JP, NR), in which the latter took up a 20% stake
in its Samalaju smelter, which implied a standalone valuation of
MYR2.3bn for this unit. Although the disposal consideration of Samalaju
smelter will be subject to certain adjustments until end-FY18, we deem
them fair. For the time being, we are more hopeful about a potential
reward of not more than USD21m upon Press Metal meeting certain
production cost targets by end-FY18 which are generally within
managements control. However, we are looking out for a potential
negative earn-out adjustment (ie penalty) of up to USD16m, as the
target set on Samalaju smelters yearly free cash flow until FY18 is
highly dependent on aluminium prices, which management cannot
control.

Company Report Card
Latest results. Investors may have missed the fact that Press Metals
2H13 results incorporated a loss, mainly due to losses incurred from the
disposal of the Hubei smelter, on top of an operating loss recorded and
an asset write-off for its Mukah smelter, pending compensation from its
insurer. Excluding the loss, its core earnings would have been a
commendable MYR30.9/38.1m in 3Q/4Q13.
Balance sheet/cash flow. Cash flow improved significantly from 2Q14
onwards from the disposal of its 20% stake in its Samalaju smelter on 1
April 2014. As a result, its gearing is expected to fall to 0.93x by end-
FY14, with robust cash generated from its operation.
ROE. Core ROE is expected in the teens, when the Samalaju smelter is
fully operational from FY14.
Dividend. Press Metal does not have any dividend policy in place, but
we expect yields to improve with contributions from its smelting
business.
Management. The group was founded by Dato Paul Koon and his
brothers in 1986. Dato Paul remains fully involved in the business and
actively drives Press Metals day-to-day operations.

Recommendation
Press Metal is set to enjoy the fruits of years of investments in world-
class low-cost aluminium smelters. This is on the back of aluminium
prices bottoming out (and rising in the future), while both smelters are
now in full production mode. We expect group earnings to surge
87.7/29% in FY14/15 largely unchanged from our previous numbers.
We value the stock at MYR5.47, a 20% discount to our newly-derived
fully-diluted conservative DCF, which implies 13.2/10.2x P/Es and
1.6/1.4x P/BVs on FY14/15 estimates respectively.

55

Press Metal
Target: MYR5.47
Price: MYR2.50

Pressing On In Volume And Price

90
98
107
115
123
132
140
1.6
1.8
2.0
2.2
2.4
2.6
2.8
Press Metal (PRESS MK)
1
2
3
4
5
A
p
r
-
1
3
J
u
n
-
1
3
A
u
g
-
1
3
O
c
t
-
1
3
D
e
c
-
1
3
F
e
b
-
1
4
V
o
l

m

Source: Bloomberg

Stock Profile
Bloomberg Ticker PRESS MK
Beta (x) 1.09
BVPS (MYR) 3.49
Free float (%) 43

Dato' Paul Koon & brothers 51.0

1m 3m 6m 12m
Absolute 8.7 3.3 13.6 35.9
Relative 7.6 2.2 9.4 26.2

Ng Sem Guan, CFA +603 9207 7678

Investment Merits
Press Metal has rapidly emerged as a company with world-class
low-cost aluminium smelters
Aluminium market shows early signs of bottoming out, as almost a
decade of capacity curtailment coupled with the moderate growth in
demand may finally translate into a supply deficit from 2014
With its Mukah and Samalaju smelters back in action since April
2014, the group is all ready to ride on the market upturn
BUY with FV at MYR5.47, derived by applying a 20% discount to
our fully diluted conservative DCF

Company Profile
Press Metal is a Malaysian-based aluminium company with an
extensive global presence. Today, the group has a downstream
extrusion operation that is integrated with its greenfield aluminium
smelting plants in Mukah and Samalaju in Sarawak, which have an
annual combined capacity of 440,000 tonnes. It also operates
aluminium extrusion plants in Selangor, Malaysia, and Guangdong and
Hubei, both in China.

Highlights
Early signs of aluminium market bottoming out. Aluminium prices
have risen of late, particularly after the London Metal Exchange (LME)
lost a lawsuit that forced it to shelve its new warehousing policy that
was designed to reduce deadlocked inventory, which many believe was
tied to contango financing. While we believe that the event may have
boosted market sentiment and resulted in an uptick in aluminium prices,
we think it also coincides with improving fundamentals of the aluminium
industry. After almost a decade of capacity curtailment, the moderate
growth in demand may finally translate into a supply deficit in the global
ex-China market from 2014. This may suggest that the aluminium
industry is hitting a bottom.
Get set for a great restart. The respective full commissioning and
recommissioning of its Samalaju and Mukah smelters started in early
April 2014. The combined upstream aluminium production from both
smelters are estimated to increase to 405,200 tonnes in 2014 and
435,600 tonnes in 2015, vs 290,772 tonnes in 2013. Considering that
the smelting business is a volume game, every additional tonnage is
crucial to the groups earnings. Management has decided to focus on
billet production in Mukah plant. In the meantime, its Samalaju plant will
produce the standard P1020 ingot, while we estimate 15/20% of its total
production to consist of A356 ingots in FY14/15. Billets and A356 ingots
are value-added products that offer an additional margin of USD50-80 a
tonne, based on market demand.

DPS (MYR) 0.03 0.02 0.04
Recurring P/E (x) 18.53 11.13 5.97
P/B (x) 1.01 1.01 0.72
P/CF (x) na 2.23 2.85


Total assets 4,785 5,027 5,325
Total current liabilities 2,147 2,242 1,909
Total non-current liabilities 1,234 1,387 1,357
Total equity 1,405 1,398 2,060
Total debt 2,592 2,621 1,999
Net debt 2,331 2,378 1,679


Forex effects 6 25 -


All geared for a better tomorrow. News flow seems to have improved
after the company disposed of its loss-making Hubei smelter while
acquiring a profitable extrusion unit via an asset swap in Sept 2013. We
are also excited about its recent landmark USD140m deal with
Sumitomo Corp (8053 JP, NR), in which the latter took up a 20% stake
in its Samalaju smelter, which implied a standalone valuation of
MYR2.3bn for this unit. Although the disposal consideration of Samalaju
smelter will be subject to certain adjustments until end-FY18, we deem
them fair. For the time being, we are more hopeful about a potential
reward of not more than USD21m upon Press Metal meeting certain
production cost targets by end-FY18 which are generally within
managements control. However, we are looking out for a potential
negative earn-out adjustment (ie penalty) of up to USD16m, as the
target set on Samalaju smelters yearly free cash flow until FY18 is
highly dependent on aluminium prices, which management cannot
control.

Company Report Card
Latest results. Investors may have missed the fact that Press Metals
2H13 results incorporated a loss, mainly due to losses incurred from the
disposal of the Hubei smelter, on top of an operating loss recorded and
an asset write-off for its Mukah smelter, pending compensation from its
insurer. Excluding the loss, its core earnings would have been a
commendable MYR30.9/38.1m in 3Q/4Q13.
Balance sheet/cash flow. Cash flow improved significantly from 2Q14
onwards from the disposal of its 20% stake in its Samalaju smelter on 1
April 2014. As a result, its gearing is expected to fall to 0.93x by end-
FY14, with robust cash generated from its operation.
ROE. Core ROE is expected in the teens, when the Samalaju smelter is
fully operational from FY14.
Dividend. Press Metal does not have any dividend policy in place, but
we expect yields to improve with contributions from its smelting
business.
Management. The group was founded by Dato Paul Koon and his
brothers in 1986. Dato Paul remains fully involved in the business and
actively drives Press Metals day-to-day operations.

Recommendation
Press Metal is set to enjoy the fruits of years of investments in world-
class low-cost aluminium smelters. This is on the back of aluminium
prices bottoming out (and rising in the future), while both smelters are
now in full production mode. We expect group earnings to surge
87.7/29% in FY14/15 largely unchanged from our previous numbers.
We value the stock at MYR5.47, a 20% discount to our newly-derived
fully-diluted conservative DCF, which implies 13.2/10.2x P/Es and
1.6/1.4x P/BVs on FY14/15 estimates respectively.

56

Prestariang
Target: MYR4.90
Price: MYR3.90

O&G Training To Propel Growth

69
112
155
198
240
283
326
369
0.8
1.3
1.8
2.3
2.8
3.3
3.8
4.3
Prestariang (PRES MK)
2
4
6
8
10
12
14
A
p
r
-
1
3
J
u
n
-
1
3
A
u
g
-
1
3
O
c
t
-
1
3
D
e
c
-
1
3
F
e
b
-
1
4
V
o
l

m

Source: Bloomberg

Stock Profile
Bloomberg Ticker PRES MK
Beta (x) 1.60
BVPS (MYR) 0.55
Free float (%) 45

Dr Abu Hasan Ismail 36.5
Kumpulan Modal Perdana 6.3
Employees Provident Fund 5.2

1m 3m 6m 12m
Absolute 12.4 34.5 94.0 212.0
Relative 11.3 33.4 89.8 202.3


Investment Merits
The largest provider of ICT training, certification, and software
license management and distribution in Malaysia
Recurring income stream from its new UniMy boutique university
New oil & gas (O&G) training academy launched
BUY, MYR4.90 FV, based on 17.5x P/E on FY15F EPS

Company Profile
Prestariang is principally involved in the provision of information and
communication technology (ICT) services that focus on professional
training and certification, as well as the distribution and management of
software licenses. It currently offers more than 50 certification courses
from several technology and software providers and organisations,
which include Microsoft, IBM, Oracle, Autodesk, the International
Council of Electronic Commerce Consultants (EC-Council) and Adobe.

Highlights
Malaysias first ICT boutique university. In 2012, Prestariang set up
Malaysias first boutique university, University Malaysia of Computer
Science and Engineering (UniMy), through a Government-led initiative.
UniMy focuses on providing specialised computer science and
engineering education to meet the countrys demand for ICT-related
professions. The university also works closely with industry partners like
Microsoft, IBM, Autodesk, EC-Council and Huawei to provide an
industry-relevant curriculum coupled with exposure for its students.
UniMy is targeting an enrolment of 500 students in FY14 to break even,
with its upcoming intake in March. Assuming an average fee of
MYR30,000 per student, we believe that this will translate into recurring
earnings of MYR15m-20m per annum for the company when UniMy
reaches its full capacity of 3,000 students.
Petroleum Academy Malaysia (PAM) is born. Prestariang announced
last month that it had entered into a joint venture (JV) with the Johor
Education Fund (JEF) to establish PAM in Johor. We are optimistic on
this, given that we believe there is a gap to be filled in terms of skilled
workers, particularly for the upcoming refinery and petrochemicals
integrated development (RAPID) project in the state. We forecast the
academy will able to train 2,000 students in FY14 and 3,500 students in
FY15. Going forward, we see further growth potential in the industry
with Prestariang working closely with the Government and industry
players to offer more training and certification programmes.

DPS (MYR) 0.12 0.12 0.14
Recurring P/E (x) 20.39 16.88 13.94
P/B (x) 8.85 7.07 5.64
P/CF (x) 24.18 19.94 14.80


Total debt 1 1 1
Net debt (70) (81) (104)




Further development on in-house innovation. To reduce its
dependence on external partners for the provision of professional
training and certification, Prestariang aims to develop new and
innovative in-house training and certification programmes like the IC
Citizen (ICC), SmartGreen (SG) and proficiency in enterprise
communications (PEC). In 2013, the company launched its new in-
house programme called the Green IT certification and training
programme. Going forward, we believe that management may consider
developing ICC@2.0 to cater to different market segments, following the
success of its first ICC programme in 2010. We are positive on
Prestariangs focus and commitment in developing in-house products
effectively, which will in turn boost margins through its patented
rights and serve as a platform for rolling out its regional expansion plan.

Company Report Card
Latest results. Prestariang reported FY13 earnings of MYR42.1m a
record for the company since listing in July 2011. This was in line with
our expectations.
Balance sheet/cash flow. Prestariangs balance sheet is unstressed,
with a net cash balance of MYR43.7m or MYR0.19/share. Moving
forward, we expect its balance sheet to continue strengthening in
tandem with its growth prospects.
ROE. Historically, Prestariang has been delivering double-digit ROEs
and we anticipate for it to continue posting strong ROEs in the future,
supported by minimal capex requirements and low overhead costs.
Dividend. Given Prestariangs robust balance sheet and asset-light
business model, management has a policy of paying up to 50% of
earnings in dividends. It paid out a DPS of 12 sen in FY13, which
translated to a 63% dividend payout ratio. We expect the company to
distribute a dividend of 12 sen for FY14, which will translate to a decent
yield of more than 3%.
Management. The management team is led by founder Dr Abu Hasan
Ismail. He holds an effective 36.5% stake and is also the companys
single largest shareholder. Dr Abu started out as an academician and
rose to become a professor before being appointed as the first dean of
the faculty of creative multimedia at the Multimedia University. He
entered the ICT industry in 2000 while continuing to be involved in
academic advisory work.

Recommendation
Maintain BUY. We continue to see growth potential for Prestariang in
providing training and certification services for the lucrative O&G sector.
Other than that, UniMy is expected to contribute to the companys
recurring income, which will, in turn, boost future margins. All in,
Prestariang remains the cheapest proxy to the education sector and we
continue to see huge potential for the company, given its strong net
cash balance sheet and high dividend payout policy. We maintain our
BUY recommendation on the stock with our FV of MYR4.90, based on a
FY15F earnings P/E of 17.5x.

57

Prestariang
Target: MYR4.90
Price: MYR3.90

O&G Training To Propel Growth

69
112
155
198
240
283
326
369
0.8
1.3
1.8
2.3
2.8
3.3
3.8
4.3
Prestariang (PRES MK)
2
4
6
8
10
12
14
A
p
r
-
1
3
J
u
n
-
1
3
A
u
g
-
1
3
O
c
t
-
1
3
D
e
c
-
1
3
F
e
b
-
1
4
V
o
l

m

Source: Bloomberg

Stock Profile
Bloomberg Ticker PRES MK
Beta (x) 1.60
BVPS (MYR) 0.55
Free float (%) 45

Dr Abu Hasan Ismail 36.5
Kumpulan Modal Perdana 6.3
Employees Provident Fund 5.2

1m 3m 6m 12m
Absolute 12.4 34.5 94.0 212.0
Relative 11.3 33.4 89.8 202.3


Investment Merits
The largest provider of ICT training, certification, and software
license management and distribution in Malaysia
Recurring income stream from its new UniMy boutique university
New oil & gas (O&G) training academy launched
BUY, MYR4.90 FV, based on 17.5x P/E on FY15F EPS

Company Profile
Prestariang is principally involved in the provision of information and
communication technology (ICT) services that focus on professional
training and certification, as well as the distribution and management of
software licenses. It currently offers more than 50 certification courses
from several technology and software providers and organisations,
which include Microsoft, IBM, Oracle, Autodesk, the International
Council of Electronic Commerce Consultants (EC-Council) and Adobe.

Highlights
Malaysias first ICT boutique university. In 2012, Prestariang set up
Malaysias first boutique university, University Malaysia of Computer
Science and Engineering (UniMy), through a Government-led initiative.
UniMy focuses on providing specialised computer science and
engineering education to meet the countrys demand for ICT-related
professions. The university also works closely with industry partners like
Microsoft, IBM, Autodesk, EC-Council and Huawei to provide an
industry-relevant curriculum coupled with exposure for its students.
UniMy is targeting an enrolment of 500 students in FY14 to break even,
with its upcoming intake in March. Assuming an average fee of
MYR30,000 per student, we believe that this will translate into recurring
earnings of MYR15m-20m per annum for the company when UniMy
reaches its full capacity of 3,000 students.
Petroleum Academy Malaysia (PAM) is born. Prestariang announced
last month that it had entered into a joint venture (JV) with the Johor
Education Fund (JEF) to establish PAM in Johor. We are optimistic on
this, given that we believe there is a gap to be filled in terms of skilled
workers, particularly for the upcoming refinery and petrochemicals
integrated development (RAPID) project in the state. We forecast the
academy will able to train 2,000 students in FY14 and 3,500 students in
FY15. Going forward, we see further growth potential in the industry
with Prestariang working closely with the Government and industry
players to offer more training and certification programmes.

DPS (MYR) 0.12 0.12 0.14
Recurring P/E (x) 20.39 16.88 13.94
P/B (x) 8.85 7.07 5.64
P/CF (x) 24.18 19.94 14.80


Total debt 1 1 1
Net debt (70) (81) (104)




Further development on in-house innovation. To reduce its
dependence on external partners for the provision of professional
training and certification, Prestariang aims to develop new and
innovative in-house training and certification programmes like the IC
Citizen (ICC), SmartGreen (SG) and proficiency in enterprise
communications (PEC). In 2013, the company launched its new in-
house programme called the Green IT certification and training
programme. Going forward, we believe that management may consider
developing ICC@2.0 to cater to different market segments, following the
success of its first ICC programme in 2010. We are positive on
Prestariangs focus and commitment in developing in-house products
effectively, which will in turn boost margins through its patented
rights and serve as a platform for rolling out its regional expansion plan.

Company Report Card
Latest results. Prestariang reported FY13 earnings of MYR42.1m a
record for the company since listing in July 2011. This was in line with
our expectations.
Balance sheet/cash flow. Prestariangs balance sheet is unstressed,
with a net cash balance of MYR43.7m or MYR0.19/share. Moving
forward, we expect its balance sheet to continue strengthening in
tandem with its growth prospects.
ROE. Historically, Prestariang has been delivering double-digit ROEs
and we anticipate for it to continue posting strong ROEs in the future,
supported by minimal capex requirements and low overhead costs.
Dividend. Given Prestariangs robust balance sheet and asset-light
business model, management has a policy of paying up to 50% of
earnings in dividends. It paid out a DPS of 12 sen in FY13, which
translated to a 63% dividend payout ratio. We expect the company to
distribute a dividend of 12 sen for FY14, which will translate to a decent
yield of more than 3%.
Management. The management team is led by founder Dr Abu Hasan
Ismail. He holds an effective 36.5% stake and is also the companys
single largest shareholder. Dr Abu started out as an academician and
rose to become a professor before being appointed as the first dean of
the faculty of creative multimedia at the Multimedia University. He
entered the ICT industry in 2000 while continuing to be involved in
academic advisory work.

Recommendation
Maintain BUY. We continue to see growth potential for Prestariang in
providing training and certification services for the lucrative O&G sector.
Other than that, UniMy is expected to contribute to the companys
recurring income, which will, in turn, boost future margins. All in,
Prestariang remains the cheapest proxy to the education sector and we
continue to see huge potential for the company, given its strong net
cash balance sheet and high dividend payout policy. We maintain our
BUY recommendation on the stock with our FV of MYR4.90, based on a
FY15F earnings P/E of 17.5x.

58

Target: MYR0.87
Price: MYR0.74

A Better Tone Ahead

Source: Bloomberg

Stock Profile
Bloomberg Ticker RIB MK
Beta (x) 1.35
BVPS (MYR) 0.25
Free float (%) 40

Indah PusakaSdnBhdSB 30.9
Berjaya Corp Bhd 12.4
WarisanJutamasSdnBhdSB 7.5

1m 3m 6m 12m
Absolute 12.2 14.8 7.3 75.0
Relative 10.9 13.3 2.4 65.2


83
106
130
153
176
200
223
0.30
0.40
0.50
0.60
0.70
0.80
0.90
REDtone International (RIB MK)
5
10
15
20
25
30
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Investment Merits
A good turnaround story
Capex-light business model
Recurring income from its network sharing agreement (NSA) with
Maxis
Multiple large projects in telco engineering services

Company Profile
REDtone International Bhd (Redtone) is principally involved in the
provision of data and broadband solutions to the enterprise segments,
which include corporates, SMEs and government agencies. Redtone is
also involved in the management and building of Wi-Fi networks. The
company will soon be the newest entrant in the mobile virtual network
operator (MVNO) market.

Highlights
Profitable and focused. Redtone finally turned the corner in FY12,
following the divestment of several loss-making businesses and a few
overseas forays that did not turn out very well. The company is now
very much focused on growing its data business while keeping its
traditional voice business steady.
Growing recurring income. Redtone generates a steady but growing
recurring income from its NSA with Maxis. It was awarded a 20Mhz
block of the 2.6Ghz LTE spectrum by the regulator in Dec 2012. We
understand that Redtone derives its recurring income from every unique
LTE device connected in relation to the NSA. This recurring income
stream will grow further as more consumers embrace LTE devices.
Note that Maxis is the market leader in LTE coverage, which is
expected to reach 20% population coverage by year-end.
Entering the MVNO market. Redtone is expected to roll out mobile
services as a MVNO in 2HCY14, which is part of the network sharing
and alliance (NSA) agreement with Maxis. Under the terms of the NSA,
Redtone will pay Maxis usage fee for the use of its network. This mobile
service is expected to target niche areas only.
Leading the Wi-Fi market. Redtone is currently the countrys largest
Wi-Fi builder. It even does outsourcing work for larger telecom players
in rolling out their Wi-Fi hotspots. This offers Redtone another recurring
income stream, albeit small, based on the build-operate-own (BOO)
model that typically comes with 3+2 years renewable contract terms.
AmongRedtones accomplishments are the successful rollout of Penang
Free Wi-Fi project, which involves the deployment of 1,550 hotspots
and KampungTanpaWayar project(wireless broadband) in hundreds of
villages viathe UniversalService Provision (USP) fund.




Recurring net profit growth (%) 1,068.0 13.0 3.7
Recurring P/E (x) 14.04 13.14 12.66
P/B (x) 3.33 2.93 2.50
P/CF (x) 21.66 10.98 10.65
Balance Sheet (MYRm) May-13 May-14F May-15F
Total debt 5 5 5
Net debt (32) (57) (87)
Cash flow (MYRm) May-13 May-14F May-15F
Cash flow from financing activities (2) - -
An eye on the mobile basestation or RANmarket. Redtone is no
stranger to the telco infra engineering servicesbusiness, having been
awarded a MYR82.5m contract from the regulator in 4Q12 to build,
operate and maintain the radio access network (RAN) infrastructure in
rural areas within Sabah. We understand that management is keen to
win a slice of the 1,000 towers/base stations expected to be
predominantly rolled out in Sabah and Sarawak.

Company Report Card
Latest results. Redtones 2HFY14 revenue rose 16.1% on the back of
stronger revenue contribution from its data and broadband business. Its
2HFY14 earnings grew at a faster pace of 62.0%, although this was due
to a net gain of MYR5m booked in 2QFY14from the disposal of an
associate company.
Balance sheet/cash flow. As at 2QFY14, Redtone had minimal
gearing, with a gross debt/equity ratio of just 0.02x. In fact, the company
is in a net cash position of MYR6m. Redtones under-leveraged balance
sheet offers ample room to gear up to expand its data and broadband
business, as well as tap into any other opportunities that may arise.
ROE. 2QFY14 ROE stood at 8.4%, representing a 2.7ppts improvement
from 2QFY13s 5.7%. With ample room to gear up and little need to
raise new equity funds, we believe there is more room for its ROE to
improve.
Dividend. With Redtone back in the black and its capex expected to
remain fairly stable in the MYR5m-10m per annum range, management
has in place a 25% minimum payoutdividend policy. For FY13,
management declared a DPS of 1.5 sen, which translated into a 28.5%
payout ratio. With improving cash flow, we believe there is upside to
Redtones future dividend payout.
Management. Managing director Dato Wei ChuanBeng helms the
company and is responsible for its growth, development, transformation
and strategic direction. He holds a 5.5% direct stake in Redtone.

Recommendation
Our valuation is MYR0.87, based on 15x FY15 EPS of 5.8 sen. Our
target P/E is at a 25% discount to the large-cap telecom sector average
of 20x due to Redtones significantly smaller scale of operations.

59

Target: MYR0.87
Price: MYR0.74

A Better Tone Ahead

Source: Bloomberg

Stock Profile
Bloomberg Ticker RIB MK
Beta (x) 1.35
BVPS (MYR) 0.25
Free float (%) 40

Indah PusakaSdnBhdSB 30.9
Berjaya Corp Bhd 12.4
WarisanJutamasSdnBhdSB 7.5

1m 3m 6m 12m
Absolute 12.2 14.8 7.3 75.0
Relative 10.9 13.3 2.4 65.2


83
106
130
153
176
200
223
0.30
0.40
0.50
0.60
0.70
0.80
0.90
REDtone International (RIB MK)
5
10
15
20
25
30
A
p
r
-
1
3
J
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n
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1
3
A
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3
D
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1
3
F
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1
4
V
o
l

m

Investment Merits
A good turnaround story
Capex-light business model
Recurring income from its network sharing agreement (NSA) with
Maxis
Multiple large projects in telco engineering services

Company Profile
REDtone International Bhd (Redtone) is principally involved in the
provision of data and broadband solutions to the enterprise segments,
which include corporates, SMEs and government agencies. Redtone is
also involved in the management and building of Wi-Fi networks. The
company will soon be the newest entrant in the mobile virtual network
operator (MVNO) market.

Highlights
Profitable and focused. Redtone finally turned the corner in FY12,
following the divestment of several loss-making businesses and a few
overseas forays that did not turn out very well. The company is now
very much focused on growing its data business while keeping its
traditional voice business steady.
Growing recurring income. Redtone generates a steady but growing
recurring income from its NSA with Maxis. It was awarded a 20Mhz
block of the 2.6Ghz LTE spectrum by the regulator in Dec 2012. We
understand that Redtone derives its recurring income from every unique
LTE device connected in relation to the NSA. This recurring income
stream will grow further as more consumers embrace LTE devices.
Note that Maxis is the market leader in LTE coverage, which is
expected to reach 20% population coverage by year-end.
Entering the MVNO market. Redtone is expected to roll out mobile
services as a MVNO in 2HCY14, which is part of the network sharing
and alliance (NSA) agreement with Maxis. Under the terms of the NSA,
Redtone will pay Maxis usage fee for the use of its network. This mobile
service is expected to target niche areas only.
Leading the Wi-Fi market. Redtone is currently the countrys largest
Wi-Fi builder. It even does outsourcing work for larger telecom players
in rolling out their Wi-Fi hotspots. This offers Redtone another recurring
income stream, albeit small, based on the build-operate-own (BOO)
model that typically comes with 3+2 years renewable contract terms.
AmongRedtones accomplishments are the successful rollout of Penang
Free Wi-Fi project, which involves the deployment of 1,550 hotspots
and KampungTanpaWayar project(wireless broadband) in hundreds of
villages viathe UniversalService Provision (USP) fund.




Recurring net profit growth (%) 1,068.0 13.0 3.7
Recurring P/E (x) 14.04 13.14 12.66
P/B (x) 3.33 2.93 2.50
P/CF (x) 21.66 10.98 10.65
Balance Sheet (MYRm) May-13 May-14F May-15F
Total debt 5 5 5
Net debt (32) (57) (87)
Cash flow (MYRm) May-13 May-14F May-15F
Cash flow from financing activities (2) - -
An eye on the mobile basestation or RANmarket. Redtone is no
stranger to the telco infra engineering servicesbusiness, having been
awarded a MYR82.5m contract from the regulator in 4Q12 to build,
operate and maintain the radio access network (RAN) infrastructure in
rural areas within Sabah. We understand that management is keen to
win a slice of the 1,000 towers/base stations expected to be
predominantly rolled out in Sabah and Sarawak.

Company Report Card
Latest results. Redtones 2HFY14 revenue rose 16.1% on the back of
stronger revenue contribution from its data and broadband business. Its
2HFY14 earnings grew at a faster pace of 62.0%, although this was due
to a net gain of MYR5m booked in 2QFY14from the disposal of an
associate company.
Balance sheet/cash flow. As at 2QFY14, Redtone had minimal
gearing, with a gross debt/equity ratio of just 0.02x. In fact, the company
is in a net cash position of MYR6m. Redtones under-leveraged balance
sheet offers ample room to gear up to expand its data and broadband
business, as well as tap into any other opportunities that may arise.
ROE. 2QFY14 ROE stood at 8.4%, representing a 2.7ppts improvement
from 2QFY13s 5.7%. With ample room to gear up and little need to
raise new equity funds, we believe there is more room for its ROE to
improve.
Dividend. With Redtone back in the black and its capex expected to
remain fairly stable in the MYR5m-10m per annum range, management
has in place a 25% minimum payoutdividend policy. For FY13,
management declared a DPS of 1.5 sen, which translated into a 28.5%
payout ratio. With improving cash flow, we believe there is upside to
Redtones future dividend payout.
Management. Managing director Dato Wei ChuanBeng helms the
company and is responsible for its growth, development, transformation
and strategic direction. He holds a 5.5% direct stake in Redtone.

Recommendation
Our valuation is MYR0.87, based on 15x FY15 EPS of 5.8 sen. Our
target P/E is at a 25% discount to the large-cap telecom sector average
of 20x due to Redtones significantly smaller scale of operations.

60

SBC Corporation
Target: MYR2.98
Price: MYR2.18

Jesselton The Quay To Long-Term Earnings Growth

83
105
127
150
172
194
216
239
261
283
0.6
0.8
1.0
1.2
1.4
1.6
1.8
2.0
2.2
2.4
SBC Corp (SBC MK)
2
4
6
8
10
A
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V
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m

Source: Bloomberg

Stock Profile
Bloomberg Ticker SBC MK
Net Gearing (%) 5.7
Beta (x) 1.47
BVPS (MYR) 2.33
Free float (%) 64

Lom Holdings SB 20.7
Sia Teong Heng 11.3

1m 3m 6m 12m
Absolute 30.5 63.9 82.3 170.8
Relative 29.4 62.8 78.1 161.1

Alia Arwina +603 9207 7608
alia.arwina@rhbgroup.com

Investment Merits
The upcoming Jesselton Quay project on the site of the former
Sabah port, with estimated total GDV of MYR1.8bn, will sustain
earnings growth over the next five to eight years
Recent launches of its Kiara East project, with a remaining GDV of
MYR1.5bn, have seen healthy take-up rates, which will strengthen
SBCs position in the Klang Valley
Stock is valued at MYR2.98, based on a 30% discount to its RNAV
of MYR4.26.

Company Profile
SBC Corporation (SBC) is a mid-cap developer with landbank totaling
1,056 acres and a remaining GDV of MYR4.8bn. Its landbank is mainly
located in Kota Kinabalu (Sabah), Segambut and Batang Kali. Its past
projects include the construction of prominent landmarks such as the
Bank Negara Malaysia building, Concorde Shah Alam and Petaling
Jaya Exchange (PJX).
Highlights
Jesselton Quay a significant potential earnings driver. In May 2013,
SBC entered into a JV agreement with Suria Capital (SURIA MK, BUY,
FV: MYR3.50) for the development of Jesselton Quay (JQ) in Kota
Kinabalu (KK) in Sabah. The 16.25-acre land owned by Suria Capital
was previously the site of the KK container port, and is adjacent to
Jesselton Point. The project, with an estimated GDV of MYR1.8bn, will
consist of residential, retail and commercial components. It is expected
to take about eight years to complete.

Pioneer in developing KKs high-rise residences. SBC was one of
the first developers to build high-rises in KK. This venture has been
successful, as proven by its iconic project in KK The Peak Collection
whose residential units are selling at MYR800 - 1,000 psf. This has
prompted SBC to indicate that it will be pricing its residential units in the
JQ project on par, or at a slight premium to prices of The Peak
Collection, given its strategic location. Meanwhile, the indicative pricing
for JQs commercial properties will be between MYR1,000 and
MYR1,200 psf, while the retail lots will start from MYR2,000 psf. The
groundbreaking for JQ is slated for the third week of April 2014 at the
time of writing, with its maiden project launch in 2HCY14.
Kiara East: SBCs jewel in the Klang Valley. Kiara East is SBCs
flagship development in the Klang Valley region. The project, covering
20 acres, has a total remaining GDV of MYR1.5bn. The site is about
five minutes from Mont Kiara and 15 minutes from the Kuala Lumpur
city centre. It is also adjacent to the Batu Metropolitan Park and Taman
Wahyu KTM station, and is accessible via major highways such as the
DUKE, NKVE and MRR2. Reputable developers such as Eco World
(ECW MK, NR) and Mah Sing (MSGB MK, BUY, FV: MYR2.44) have

DPS (MYR) 0.03 0.04 0.06
Recurring P/E (x) 7.92 6.72 6.91
P/B (x) 0.68 0.62 0.93
P/CF (x) 2.85 11.36 14.47


Other equity 0 0 0
Total debt 86 75 92
Net debt 77 68 21


Cash flow from financing activities (3) (9) 40


also recently ventured into the area at higher land costs. SBCs
development will comprise condo-styled suites, retail lots and park front
villas. In FY14, SBC launched two new projects with a total GDV of
about MYR544m, which are: i) the Dex Suites (GDV: MYR544m); and ii)
some retail space worth MYR200m. The take-up rates have been
relatively strong, with Dex Tower A being fully taken up while Dex
Tower B (launched in February) saw a decent take-up rate of 30%.
Other projects. SBCs other sizeable projects include a landed
affordable housing development project in Batang Kali, which has a
remaining landbank of 1,000 acres and carries a future GDV of
MYR500m. The units are priced at MYR200,000 to MYR400,000 each,
depending on the size. The new phases have been fully sold. SBC also
has smaller projects such as Cantonment Exchange in Jalan Ipoh,
Kuala Lumpur (GDV: MYR200m) and 20 acres of undeveloped
landbank in Kuantan.

Company Report Card
Latest results. SBCs 3QFY14 earnings were strong, with 9M net profit
surging 54.4% y-o-y, driven by progress billings from The Peak Soho in
Kota Kinabalu and the Dex Suites in Kiara East. We expect similar
results for 4QFY14, attributable to increasing contributions from these
two projects. The company will likely maintain its growth momentum
going into FY15, underpinned by contributions from Kiara East, Batang
Kali as well as JQs possible maiden contribution.
Balance sheet/cash flow. SBCs net gearing currently stands at a
decent 0.24x, but we expect this to go up once works on JQ get
underway. Its management has set a conservative gearing cap of about
0.5x.
ROE. ROE is expected to pick up gradually only from FY15 onwards, as
more earnings from property projects such as Phase 1 of JQ start to
kick in.
Dividend. On 18 Feb 2014, SBC announced that, going forward, it will
be paying out at least 20% of its net profit as dividend every financial
year. As such, we estimate a dividend of 6.3 sen for FY14 and 5.4 sen
for FY15, translating into a yield of 2-3%.
Management. SBCs management is spearheaded by Managing
Director Sia Teong Heng, who has been with SBC since 1991. Given
the success of recent projects such as The Peak Collection, Mr Sia has
the necessary track record, capabilities and expertise to propel SBCs
growth going forward.
Recommendation
We value SBC at MYR2.98, based on a 30% discount to its RNAV of
MYR4.26. This implies an upside of more than 30% from the current
share price. We have conservatively applied a wider discount to RNAV
for SBC vs some of its peers as its future earnings largely hinge on the
success of its JQ project.

61

SBC Corporation
Target: MYR2.98
Price: MYR2.18

Jesselton The Quay To Long-Term Earnings Growth

83
105
127
150
172
194
216
239
261
283
0.6
0.8
1.0
1.2
1.4
1.6
1.8
2.0
2.2
2.4
SBC Corp (SBC MK)
2
4
6
8
10
A
p
r
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1
3
J
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1
3
A
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V
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Source: Bloomberg

Stock Profile
Bloomberg Ticker SBC MK
Net Gearing (%) 5.7
Beta (x) 1.47
BVPS (MYR) 2.33
Free float (%) 64

Lom Holdings SB 20.7
Sia Teong Heng 11.3

1m 3m 6m 12m
Absolute 30.5 63.9 82.3 170.8
Relative 29.4 62.8 78.1 161.1

Alia Arwina +603 9207 7608
alia.arwina@rhbgroup.com

Investment Merits
The upcoming Jesselton Quay project on the site of the former
Sabah port, with estimated total GDV of MYR1.8bn, will sustain
earnings growth over the next five to eight years
Recent launches of its Kiara East project, with a remaining GDV of
MYR1.5bn, have seen healthy take-up rates, which will strengthen
SBCs position in the Klang Valley
Stock is valued at MYR2.98, based on a 30% discount to its RNAV
of MYR4.26.

Company Profile
SBC Corporation (SBC) is a mid-cap developer with landbank totaling
1,056 acres and a remaining GDV of MYR4.8bn. Its landbank is mainly
located in Kota Kinabalu (Sabah), Segambut and Batang Kali. Its past
projects include the construction of prominent landmarks such as the
Bank Negara Malaysia building, Concorde Shah Alam and Petaling
Jaya Exchange (PJX).
Highlights
Jesselton Quay a significant potential earnings driver. In May 2013,
SBC entered into a JV agreement with Suria Capital (SURIA MK, BUY,
FV: MYR3.50) for the development of Jesselton Quay (JQ) in Kota
Kinabalu (KK) in Sabah. The 16.25-acre land owned by Suria Capital
was previously the site of the KK container port, and is adjacent to
Jesselton Point. The project, with an estimated GDV of MYR1.8bn, will
consist of residential, retail and commercial components. It is expected
to take about eight years to complete.

Pioneer in developing KKs high-rise residences. SBC was one of
the first developers to build high-rises in KK. This venture has been
successful, as proven by its iconic project in KK The Peak Collection
whose residential units are selling at MYR800 - 1,000 psf. This has
prompted SBC to indicate that it will be pricing its residential units in the
JQ project on par, or at a slight premium to prices of The Peak
Collection, given its strategic location. Meanwhile, the indicative pricing
for JQs commercial properties will be between MYR1,000 and
MYR1,200 psf, while the retail lots will start from MYR2,000 psf. The
groundbreaking for JQ is slated for the third week of April 2014 at the
time of writing, with its maiden project launch in 2HCY14.
Kiara East: SBCs jewel in the Klang Valley. Kiara East is SBCs
flagship development in the Klang Valley region. The project, covering
20 acres, has a total remaining GDV of MYR1.5bn. The site is about
five minutes from Mont Kiara and 15 minutes from the Kuala Lumpur
city centre. It is also adjacent to the Batu Metropolitan Park and Taman
Wahyu KTM station, and is accessible via major highways such as the
DUKE, NKVE and MRR2. Reputable developers such as Eco World
(ECW MK, NR) and Mah Sing (MSGB MK, BUY, FV: MYR2.44) have

DPS (MYR) 0.03 0.04 0.06
Recurring P/E (x) 7.92 6.72 6.91
P/B (x) 0.68 0.62 0.93
P/CF (x) 2.85 11.36 14.47


Other equity 0 0 0
Total debt 86 75 92
Net debt 77 68 21


Cash flow from financing activities (3) (9) 40


also recently ventured into the area at higher land costs. SBCs
development will comprise condo-styled suites, retail lots and park front
villas. In FY14, SBC launched two new projects with a total GDV of
about MYR544m, which are: i) the Dex Suites (GDV: MYR544m); and ii)
some retail space worth MYR200m. The take-up rates have been
relatively strong, with Dex Tower A being fully taken up while Dex
Tower B (launched in February) saw a decent take-up rate of 30%.
Other projects. SBCs other sizeable projects include a landed
affordable housing development project in Batang Kali, which has a
remaining landbank of 1,000 acres and carries a future GDV of
MYR500m. The units are priced at MYR200,000 to MYR400,000 each,
depending on the size. The new phases have been fully sold. SBC also
has smaller projects such as Cantonment Exchange in Jalan Ipoh,
Kuala Lumpur (GDV: MYR200m) and 20 acres of undeveloped
landbank in Kuantan.

Company Report Card
Latest results. SBCs 3QFY14 earnings were strong, with 9M net profit
surging 54.4% y-o-y, driven by progress billings from The Peak Soho in
Kota Kinabalu and the Dex Suites in Kiara East. We expect similar
results for 4QFY14, attributable to increasing contributions from these
two projects. The company will likely maintain its growth momentum
going into FY15, underpinned by contributions from Kiara East, Batang
Kali as well as JQs possible maiden contribution.
Balance sheet/cash flow. SBCs net gearing currently stands at a
decent 0.24x, but we expect this to go up once works on JQ get
underway. Its management has set a conservative gearing cap of about
0.5x.
ROE. ROE is expected to pick up gradually only from FY15 onwards, as
more earnings from property projects such as Phase 1 of JQ start to
kick in.
Dividend. On 18 Feb 2014, SBC announced that, going forward, it will
be paying out at least 20% of its net profit as dividend every financial
year. As such, we estimate a dividend of 6.3 sen for FY14 and 5.4 sen
for FY15, translating into a yield of 2-3%.
Management. SBCs management is spearheaded by Managing
Director Sia Teong Heng, who has been with SBC since 1991. Given
the success of recent projects such as The Peak Collection, Mr Sia has
the necessary track record, capabilities and expertise to propel SBCs
growth going forward.
Recommendation
We value SBC at MYR2.98, based on a 30% discount to its RNAV of
MYR4.26. This implies an upside of more than 30% from the current
share price. We have conservatively applied a wider discount to RNAV
for SBC vs some of its peers as its future earnings largely hinge on the
success of its JQ project.

62

Scientex
Target: MYR7.19
Price: MYR5.85

World Class Stretch Film Producer

87
99
110
122
134
145
157
3.2
3.7
4.2
4.7
5.2
5.7
6.2
Scientex (SCI MK)
1
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3
4
5
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Source: Bloomberg

Stock Profile
Bloomberg Ticker SCI MK
Beta (x) 1.26
BVPS (MYR) 3.29
Free float (%) 54

Scientex Holdings SB 20.7
Scientex Leasing SB 10.5
Sim Swee Tin 5.6

1m 3m 6m 12m
Absolute 2.6 5.8 7.7 55.6
Relative 1.5 4.7 3.5 45.9



Investment Merits
Third-largest stretch film producer in the world
Total remaining GDV of MYR4.4bn from its 990-acre landbank
Capacity expansion and selective property development to sustain
growth

Company Profile
Scientex is involved in the plastic film manufacturing industry as well as
property development. The group manufactures resin-based films for
the logistics, food & beverage (F&B) and fast-moving consumer goods
(FMCG) segments. Scientexs property development arm is mostly
concentrated in Johor, where the group was founded in 1968.

Highlights
Film manufacturing. In 1QFY14, Scientexs manufacturing division
contributed 79% to topline and 54% of its consolidated EBITDA. The
group has 10 production facilities in Malaysia and Vietnam. Its key
products include stretch film, consumer film and strapping bands. It is
worth noting that the groups stretch film business has an annual
production capacity of 194,000 tonnes, making it the worlds third-
largest stretch film producer. Overall, it exports over 75% of its
manufactured products to countries like Japan, South Korea, Taiwan,
Russia and Australia.
Niche property developer. Scientexs property development division is
currently sitting on 990 acres of undeveloped landbank that carries a
remaining GDV totalling MYR4.4bn, to be developed over the next 10
years. Currently, it has ongoing developments in Pasir Gudang, Kulai,
Skudai and Senai (all in Johor) as well as in Ayer Keroh, Melaka.
Management is looking at new launches with a total GDV of MYR600m
in FY14. As at Oct 2013, its unbilled sales stood at MYR406.9m.
Grwoing from strength to strength. The growth of Scientexs
manufacturing segment will be driven by the expansion of its existing
production lines. Out of its 194,000 tonnes of annual stretch film
production capacity, three new lines at its Pulau Indah plant totalling
40,000 tonnes annually came onstream in Dec 2013. Management is
targeting to fill the new production capacity in a years time, with full-
year contributions likely to come in by FY15. Scientexs consumer
packaging production capacity will also be increased by 50% to 51,000
tonnes annually (from 34,000 tonnes), as five new blown film extrusion
machines which will be delivered in stages are expected to be fully-
installed by August. Meanwhile, growth of the groups property
development arm will be fuelled by the selective launches of a mix of
affordable and middle- to high-end homes. These will be dependent
upon demand and market conditions, and backed by its sizeable
landbank.

Profit & Loss Jul-13 Jul-14F Jul-15F
DPS (MYR) 0.27 0.19 0.23
Recurring P/E (x) 11.43 8.92 7.57
P/B (x) 2.01 1.78 1.53
P/CF (x) 5.91 6.51 5.70


Balance Sheet (MYRm) Jul-13 Jul-14F Jul-15F
Total assets 1,286 1,422 1,565
Net debt 183 149 31


Cash flow (MYRm) Jul-13 Jul-14F Jul-15F

Source: Company dataRHB estimates

Company Report Card
Latest results. Scientexs 1HFY14 topline of MYR748.3m (+45.9% y-o-
y) was contributed by: i) MYR577.7m in revenue from its manufacturing
segment (+57.8% y-o-y; 77.2% of total topline), and ii) MYR170.6m
revenue from its property segment (+16.4% y-o-y; 22.8% of total
topline). Scientexs 1HFY14 core earnings expanded 25.3% y-o-y to
MYR63.3m, making up 43.3% and 41.8% of our and consensus full-
year estimates respectively.
Balance sheet/cash flow. In FY13, Scientexs net gearing stood at
0.3x. For FY14F and FY15F, we expect this ratio to go down to 0.2x
and 0.03x respectively.
ROE. We expect the group to deliver ROEs of 21.1% on the back of its
expanding film manufacturing segment and selective property launches.
Dividend. We expect management to declare a DPS of 19.0 sen,
absed on the companys 30% minimum payout ratio. This will likely
translate into an annual dividend yield of >3%.
Management. Management is currently led by Lim Peng Jin, who is the
group MD. A chemical engineer by training, he is also the son of
founder Lim Teck Meng. Peng Jin has been with Scientex for the last 20
years. Currently, the founding family collectively owns a 60% stake in
the group. Listed on the Main Market of Bursa Malaysia in Feb 1990,
Scientexs market capitalisation has increased by over 10-fold in the last
23 years to MYR1.24bn currently.

Recommendation
Maintain BUY. We reiterate our BUY recommendation on the stock,
with our SOP-based FV of MYR7.19. We continue to like Scientexs: i)
fast-expanding plastic film manufacturing segment, ii) reputable brand
name in southern Malaysias property market, and iii) committed
management team under the founding Lim family.
63

Scientex
Target: MYR7.19
Price: MYR5.85

World Class Stretch Film Producer

87
99
110
122
134
145
157
3.2
3.7
4.2
4.7
5.2
5.7
6.2
Scientex (SCI MK)
1
2
3
4
5
6
A
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Source: Bloomberg

Stock Profile
Bloomberg Ticker SCI MK
Beta (x) 1.26
BVPS (MYR) 3.29
Free float (%) 54

Scientex Holdings SB 20.7
Scientex Leasing SB 10.5
Sim Swee Tin 5.6

1m 3m 6m 12m
Absolute 2.6 5.8 7.7 55.6
Relative 1.5 4.7 3.5 45.9



Investment Merits
Third-largest stretch film producer in the world
Total remaining GDV of MYR4.4bn from its 990-acre landbank
Capacity expansion and selective property development to sustain
growth

Company Profile
Scientex is involved in the plastic film manufacturing industry as well as
property development. The group manufactures resin-based films for
the logistics, food & beverage (F&B) and fast-moving consumer goods
(FMCG) segments. Scientexs property development arm is mostly
concentrated in Johor, where the group was founded in 1968.

Highlights
Film manufacturing. In 1QFY14, Scientexs manufacturing division
contributed 79% to topline and 54% of its consolidated EBITDA. The
group has 10 production facilities in Malaysia and Vietnam. Its key
products include stretch film, consumer film and strapping bands. It is
worth noting that the groups stretch film business has an annual
production capacity of 194,000 tonnes, making it the worlds third-
largest stretch film producer. Overall, it exports over 75% of its
manufactured products to countries like Japan, South Korea, Taiwan,
Russia and Australia.
Niche property developer. Scientexs property development division is
currently sitting on 990 acres of undeveloped landbank that carries a
remaining GDV totalling MYR4.4bn, to be developed over the next 10
years. Currently, it has ongoing developments in Pasir Gudang, Kulai,
Skudai and Senai (all in Johor) as well as in Ayer Keroh, Melaka.
Management is looking at new launches with a total GDV of MYR600m
in FY14. As at Oct 2013, its unbilled sales stood at MYR406.9m.
Grwoing from strength to strength. The growth of Scientexs
manufacturing segment will be driven by the expansion of its existing
production lines. Out of its 194,000 tonnes of annual stretch film
production capacity, three new lines at its Pulau Indah plant totalling
40,000 tonnes annually came onstream in Dec 2013. Management is
targeting to fill the new production capacity in a years time, with full-
year contributions likely to come in by FY15. Scientexs consumer
packaging production capacity will also be increased by 50% to 51,000
tonnes annually (from 34,000 tonnes), as five new blown film extrusion
machines which will be delivered in stages are expected to be fully-
installed by August. Meanwhile, growth of the groups property
development arm will be fuelled by the selective launches of a mix of
affordable and middle- to high-end homes. These will be dependent
upon demand and market conditions, and backed by its sizeable
landbank.

Profit & Loss Jul-13 Jul-14F Jul-15F
DPS (MYR) 0.27 0.19 0.23
Recurring P/E (x) 11.43 8.92 7.57
P/B (x) 2.01 1.78 1.53
P/CF (x) 5.91 6.51 5.70


Balance Sheet (MYRm) Jul-13 Jul-14F Jul-15F
Total assets 1,286 1,422 1,565
Net debt 183 149 31


Cash flow (MYRm) Jul-13 Jul-14F Jul-15F

Source: Company dataRHB estimates

Company Report Card
Latest results. Scientexs 1HFY14 topline of MYR748.3m (+45.9% y-o-
y) was contributed by: i) MYR577.7m in revenue from its manufacturing
segment (+57.8% y-o-y; 77.2% of total topline), and ii) MYR170.6m
revenue from its property segment (+16.4% y-o-y; 22.8% of total
topline). Scientexs 1HFY14 core earnings expanded 25.3% y-o-y to
MYR63.3m, making up 43.3% and 41.8% of our and consensus full-
year estimates respectively.
Balance sheet/cash flow. In FY13, Scientexs net gearing stood at
0.3x. For FY14F and FY15F, we expect this ratio to go down to 0.2x
and 0.03x respectively.
ROE. We expect the group to deliver ROEs of 21.1% on the back of its
expanding film manufacturing segment and selective property launches.
Dividend. We expect management to declare a DPS of 19.0 sen,
absed on the companys 30% minimum payout ratio. This will likely
translate into an annual dividend yield of >3%.
Management. Management is currently led by Lim Peng Jin, who is the
group MD. A chemical engineer by training, he is also the son of
founder Lim Teck Meng. Peng Jin has been with Scientex for the last 20
years. Currently, the founding family collectively owns a 60% stake in
the group. Listed on the Main Market of Bursa Malaysia in Feb 1990,
Scientexs market capitalisation has increased by over 10-fold in the last
23 years to MYR1.24bn currently.

Recommendation
Maintain BUY. We reiterate our BUY recommendation on the stock,
with our SOP-based FV of MYR7.19. We continue to like Scientexs: i)
fast-expanding plastic film manufacturing segment, ii) reputable brand
name in southern Malaysias property market, and iii) committed
management team under the founding Lim family.
64
65

Target: MYR15.00
Price: MYR12.36

Consistently Rewarding Investors And Customers

84
97
109
122
134
147
159
172
184
6
7
8
9
10
11
12
13
14
Syarikat Takaful Malaysia (STMB MK)
200
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1000
1200
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Source: Bloomberg

Stock Profile
Bloomberg Ticker STMB MK
Net Gearing (%) na
Beta (x) 1.28
BVPS (MYR) 3.98
Free float (%) 32

BIMB 60.5
EPF 8.4

1m 3m 6m 12m
Absolute 20.4 26.2 44.1 88.4
Relative 18.7 25.1 39.3 78.3

Kong Ho Meng +603 9207 7620

Investment Merits
Long-standing history in operating takaful
Top 2 market share and above-industry growth
Most improved ROEs among listed local insurers
Unique "15% No-Claim Rebate/Cash-Back" proposition
Ample surplus reserves provide buffer against regulatory risks

Company Profile
Syarikat Takaful Malaysia (STMB) is in the business of providing
shariah-compliant general and family insurance, whereby the risk is
voluntarily and collectively shared by a group of participants.

Highlights
Wakalah model the way forward. Under the takaful concept, a group
of people (participants) provide guarantees for mutual financial aid on a
reciprocal basis, with the emphasis on the virtues of cooperation and
profit sharing (mudharabah). Previously, STMB adopted the
mudharabah model, which dictated how surplus profits are to be shared
between the participants as the providers of capital and the takaful
operator as the entrepreneur. Most takaful players now adopt a
modified wakalah model, which is essentially an agency fee-based
system that is most prevalent in the Middle East. This model allows the
company to act as an agent on behalf of the participants. In return, it is
entitled to a recurring wakalah fee, which is usually paid up-front.
Compared with the mudharabah model, wakalah is deemed to have
less uncertainty (gharar) an element prohibited under Islamic
principles and also gives a takaful player greater control over earnings
volatility. Due to this change in business model, STMB experienced a
two-fold surge in wakalah income in FY11-13.
Proxy to a fast-growing industry. STMB is the best proxy to the
takaful industry. In fact, it has been surpassing industry growth,
capturing close to 40% of the family takaful market and 23% of the
combined (general and family) Islamic insurance market share in 3Q13
vs 40% and 20% in 2012 respectively. According to Bank Negaras
statistics, the takaful industry's net contributions charted a CAGR of
15.7% through 2009-2013, ie above the conventional industry's net
premium CAGR of 7.8% in the same period. This was partly due to the
Islamic insurance sectors significantly lower penetration rate,
contributing only 0.7% of gross national income (GNI) vs the overall
insurance and takaful's 4.9%. Despite the industrys relatively smaller
size, the Malaysian family takaful market (the equivalent of life
insurance) was valued at MYR4bn and is relatively sophisticated,
accounting for a staggering 73% of the global familys takaful market.

Total operating income (MYRm) 1,644.0 1,852.1 1,984.6
DPS (MYR) 0.25 0.82 0.50
Recurring P/E (x) 21.50 15.23 13.42
P/B (x) 4.24 3.70 3.27


Total assets 6,372 6,925 7,871

Key Ratios Dec-12 Dec-13 Dec-14F
Reinsurance ratio (%) 11.7 12.1 10.9
Retention ratio (%) 88.3 87.9 89.1
Claims ratio (%) 51.7 53.1 55.0
Commission ratio (%) 10.8 10.2 9.7
Expense ratio (%) 20.4 19.7 20.0
Combined ratio (%) 82.9 83.0 84.7
Underwriting margin (%) 17.1 17.0 15.3
Investment yield (%) 7.7 7.4 7.3
Liquidity ratio (%) 148.0 179.9 183.1

Unique proposition. Given the low industry penetration rate of takaful,
STMB has invested wisely in portraying itself in its advertisements as a
leading "insurance" provider that caters to all customer segments. It is
the only local Islamic insurance player that offers a unique 15% Cash-
Back (CB) to customers should they make no claims during the
coverage period. The company also offers an additional 5% CB on top
of the existing 15% on all its maturing non-motor policies. STMB paid
out MYR29.6m CBs to its customers and business partners in 2013.
Indonesia a longer-term picture. STMB has an 18-year presence in
Indonesia through three subsidiaries and a tie-up with Bank Muamalat
Indonesia, which has 3,000 branches. Its Indonesian operations are
currently facing stiff competition from local conventional players that are
still permitted to sell Islamic products via a window concept. On a
longer-term basis (possibly from 2015), we see STMB as a beneficiary
of expected regulatory changes that disallow the operating of an Islamic
window by conventional insurers. Indonesia, which carries a sizable
Muslim population and rising income levels, is a huge potential for the
companys takaful business in the near future.

Company Report Card
Latest results. STMB's FY13 core earnings improved 44% y-o-y on
increased recognition of wakalah income, and improved claims and
expense ratios. These factors outweighed the 6% revenue growth that
was attributed to the moderation of the companys retail products amid
Bank Negaras tightening measures on household debt since July 2013
and weaker performance from its Indonesia operations.
ROE. STMBs ROE has been improving tremendously since 2007,
rising to 25.9% in FY13 from 13.4% in FY11. Going forward, we expect
the company to register similar levels of ROEs, ie within 25-26%.
Dividend. While STMB has no official dividend policy, it has been
consistently raising its payout to >40% in FY12 (FY09: 20%) and 97%
dividend payout in FY13. We are still projecting on a sustainable 50%
payout in the future, which is supported by the company's ample surplus
reserves and above-industry profit growth.
Management. Group managing director, Dato Mohamed Hassan Md
Kamil has vast experience in both conventional insurance and takaful
industries, with numerous awards and recognitions. He repositioned the
company by setting up competitive standards. Under his leadership,
STMB has launched rebranding campaigns and has grown in strength.
His ultimate goal is to firmly establish the company as the preferred
choice for insurance and not merely a takaful provider. The company is
benchmarking itself against the giants in the conventional insurance
landscape, not just among the Islamic insurance players.
Recommendation
Top BUY for insurance. Our MYR15.00 FV is pegged to 13x FY15F
EPS. We believe the stock deserves a P/E in line with our 13-20x sector
valuations, supported by double-digit earnings growth, good dividend
yields and its niche in the promising takaful industry. While our FV
implies a FY15F P/BV of 3.4x, we deem this fair given STMBs superior
ROE vs the insurance stocks under our coverage.

66

Target: MYR15.00
Price: MYR12.36

Consistently Rewarding Investors And Customers

84
97
109
122
134
147
159
172
184
6
7
8
9
10
11
12
13
14
Syarikat Takaful Malaysia (STMB MK)
200
400
600
800
1000
1200
A
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r
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3
J
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A
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D
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3
F
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1
4
V
o
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t
h

Source: Bloomberg

Stock Profile
Bloomberg Ticker STMB MK
Net Gearing (%) na
Beta (x) 1.28
BVPS (MYR) 3.98
Free float (%) 32

BIMB 60.5
EPF 8.4

1m 3m 6m 12m
Absolute 20.4 26.2 44.1 88.4
Relative 18.7 25.1 39.3 78.3

Kong Ho Meng +603 9207 7620

Investment Merits
Long-standing history in operating takaful
Top 2 market share and above-industry growth
Most improved ROEs among listed local insurers
Unique "15% No-Claim Rebate/Cash-Back" proposition
Ample surplus reserves provide buffer against regulatory risks

Company Profile
Syarikat Takaful Malaysia (STMB) is in the business of providing
shariah-compliant general and family insurance, whereby the risk is
voluntarily and collectively shared by a group of participants.

Highlights
Wakalah model the way forward. Under the takaful concept, a group
of people (participants) provide guarantees for mutual financial aid on a
reciprocal basis, with the emphasis on the virtues of cooperation and
profit sharing (mudharabah). Previously, STMB adopted the
mudharabah model, which dictated how surplus profits are to be shared
between the participants as the providers of capital and the takaful
operator as the entrepreneur. Most takaful players now adopt a
modified wakalah model, which is essentially an agency fee-based
system that is most prevalent in the Middle East. This model allows the
company to act as an agent on behalf of the participants. In return, it is
entitled to a recurring wakalah fee, which is usually paid up-front.
Compared with the mudharabah model, wakalah is deemed to have
less uncertainty (gharar) an element prohibited under Islamic
principles and also gives a takaful player greater control over earnings
volatility. Due to this change in business model, STMB experienced a
two-fold surge in wakalah income in FY11-13.
Proxy to a fast-growing industry. STMB is the best proxy to the
takaful industry. In fact, it has been surpassing industry growth,
capturing close to 40% of the family takaful market and 23% of the
combined (general and family) Islamic insurance market share in 3Q13
vs 40% and 20% in 2012 respectively. According to Bank Negaras
statistics, the takaful industry's net contributions charted a CAGR of
15.7% through 2009-2013, ie above the conventional industry's net
premium CAGR of 7.8% in the same period. This was partly due to the
Islamic insurance sectors significantly lower penetration rate,
contributing only 0.7% of gross national income (GNI) vs the overall
insurance and takaful's 4.9%. Despite the industrys relatively smaller
size, the Malaysian family takaful market (the equivalent of life
insurance) was valued at MYR4bn and is relatively sophisticated,
accounting for a staggering 73% of the global familys takaful market.

Total operating income (MYRm) 1,644.0 1,852.1 1,984.6
DPS (MYR) 0.25 0.82 0.50
Recurring P/E (x) 21.50 15.23 13.42
P/B (x) 4.24 3.70 3.27


Total assets 6,372 6,925 7,871

Claims ratio (%) 51.7 53.1 55.0
Expense ratio (%) 20.4 19.7 20.0
Combined ratio (%) 82.9 83.0 84.7
Liquidity ratio (%) 148.0 179.9 183.1

Unique proposition. Given the low industry penetration rate of takaful,
STMB has invested wisely in portraying itself in its advertisements as a
leading "insurance" provider that caters to all customer segments. It is
the only local Islamic insurance player that offers a unique 15% Cash-
Back (CB) to customers should they make no claims during the
coverage period. The company also offers an additional 5% CB on top
of the existing 15% on all its maturing non-motor policies. STMB paid
out MYR29.6m CBs to its customers and business partners in 2013.
Indonesia a longer-term picture. STMB has an 18-year presence in
Indonesia through three subsidiaries and a tie-up with Bank Muamalat
Indonesia, which has 3,000 branches. Its Indonesian operations are
currently facing stiff competition from local conventional players that are
still permitted to sell Islamic products via a window concept. On a
longer-term basis (possibly from 2015), we see STMB as a beneficiary
of expected regulatory changes that disallow the operating of an Islamic
window by conventional insurers. Indonesia, which carries a sizable
Muslim population and rising income levels, is a huge potential for the
companys takaful business in the near future.

Company Report Card
Latest results. STMB's FY13 core earnings improved 44% y-o-y on
increased recognition of wakalah income, and improved claims and
expense ratios. These factors outweighed the 6% revenue growth that
was attributed to the moderation of the companys retail products amid
Bank Negaras tightening measures on household debt since July 2013
and weaker performance from its Indonesia operations.
ROE. STMBs ROE has been improving tremendously since 2007,
rising to 25.9% in FY13 from 13.4% in FY11. Going forward, we expect
the company to register similar levels of ROEs, ie within 25-26%.
Dividend. While STMB has no official dividend policy, it has been
consistently raising its payout to >40% in FY12 (FY09: 20%) and 97%
dividend payout in FY13. We are still projecting on a sustainable 50%
payout in the future, which is supported by the company's ample surplus
reserves and above-industry profit growth.
Management. Group managing director, Dato Mohamed Hassan Md
Kamil has vast experience in both conventional insurance and takaful
industries, with numerous awards and recognitions. He repositioned the
company by setting up competitive standards. Under his leadership,
STMB has launched rebranding campaigns and has grown in strength.
His ultimate goal is to firmly establish the company as the preferred
choice for insurance and not merely a takaful provider. The company is
benchmarking itself against the giants in the conventional insurance
landscape, not just among the Islamic insurance players.
Recommendation
Top BUY for insurance. Our MYR15.00 FV is pegged to 13x FY15F
EPS. We believe the stock deserves a P/E in line with our 13-20x sector
valuations, supported by double-digit earnings growth, good dividend
yields and its niche in the promising takaful industry. While our FV
implies a FY15F P/BV of 3.4x, we deem this fair given STMBs superior
ROE vs the insurance stocks under our coverage.

67

Suria Capital Holdings
Target: MYR3.50
Price: MYR2.59

Multi-Year Growth Prospects Remain Intact

84
95
107
118
129
140
152
163
174
1.3
1.5
1.7
1.9
2.1
2.3
2.5
2.7
2.9
Suria Capital (SURIA MK)
1
1
2
2
3
3
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Source: Bloomberg

Stock Profile
Bloomberg Ticker SURIA MK
Beta (x) 0.88
BVPS (MYR) 3.11
Free float (%) 30

Warisan Harta 46.2

1m 3m 6m 12m
Absolute 0.0 (2.6) 44.7 61.9
Relative (1.1) (3.7) 40.5 52.2

Jerry Lee 603 9207 7622

Investment Merits
Its Jesselton Quay JV is expected to materialise soon, for which
the salient terms are favourable to Suria Capital
Its key operating divisions are yielding stable and positive
performance
Our conservative assumptions give room for potential earnings
upside

Company Profile
Suria Capital Holdings (Suria Capital)s main core business is the
operation of eight major ports in Sabah, namely Kota Kinabalu Port,
Sapangar Bay Oil Terminal, Sandakan Port, Lahad Datu Port, Kunak
Port, Kudat Port, Tawau Port and Sapangar Bay Container Port. The
group also has other businesses, such as equipment supply and
maintenance, logistics and bunkering services, contract and
engineering, and ferry terminal operations. Suria Capital is looking to
diversify its operations into property and tourism sectors.

Highlights
Jesselton Quay the key catalyst. Suria Capitals riskless
diversification into the property sector is expected to materialise soon,
as management targets the JV to be completed within 1H2014. We
deem the salient terms of the agreement favourable to Suria, as it only
needs to provide the land and facilitate the implementation of the
project. All other costs and expenses relating to the project, including
the implementation and completion of Jesselton Quay, will be borne by
SBC Corp (SBC MK, NR). The group is also guaranteed a minimum
return of MYR324m in cash, or in kind, over eight tranches.
Core operations are improving. Other than the immediate catalyst
from the Jesselton Quay project, Suria Capitals core earnings are
improving as well. On its ports division, although the overall throughput
volume declined (cargo: -0.1% y-o-y, container: -0.4% y-o-y) in FY13,
revenue from port operations grew 3% y-o-y, mainly attributed to
heightened palm oil and bulk oil handling at the port, as well as a
MYR2.8m increase in machinery sales. This, coupled with a 3% y-o-y
drop in operating expenses (repair and maintenance, dredging and
stevedoring), translated into a 13% y-o-y jump in FY13 operating profit.
Meanwhile, the logistics business improved y-o-y, boosted by the
supply of bunkering fuel to cruise ships in Kota Kinabalu Port, as well as
the commencement of the Samur project in June 2013. This led to
narrowing losses at its bunkering division in 2013, which should help
improve Suria Capitals profitability.

DPS (MYR) 0.06 0.06 0.08
Recurring P/E (x) 13.78 11.93 11.27
P/B (x) 0.92 0.87 0.83
P/CF (x) 5.37 4.93 6.19


Total assets 1,178 1,179 1,196
Other equity 0 (0) 0
Net debt 56 (23) 116


Cash flow from investing activities 28 (26) (170)


Our assumptions are conservative. Our earnings forecasts are
conservative, as: i) we do not incorporate any tariff hikes into our
earnings forecasts, ii) our assumptions for container and non-container
volume growth are relatively low, and iii) our assumptions for higher
operating expenses result in a lower gross profit margin forecast. This
gives Suria Capital more earnings upside potential.

Company Report Card
Latest results. Suria Capitals FY13 core net profit of MYR62m met our
earnings forecast, with its port operations contributing 88% of the
groups revenue, followed by logistics and bunkering services at 11%.
The remaining revenue came from contract and engineering as well as
ferry terminal operations.
Balance sheet/cash flow. The group is slightly geared but this is not a
concern as both its operating cash flow and free cash flow are still
positive.
ROE. We project Suria Capitals ROE in FY14F at 7.5%.
Dividend. In FY13, the company declared a 3 sen dividend for
4QFY13, bringing its full-year FY13 dividend to 6.15 sen, or a 28%
payout ratio. Historically, Suria Capitals dividend payout ratio has been
hovering at around 25-30%.
Management. The management team was led by Datuk Dr Mohd Fowzi
Hj Razi, the managing director and Ng Kiat Min, the chief financial
officer.

Recommendation
As Suria Capitals core operations are expected to generate organic
earnings growth, we keep conservative assumptions in our forecasts
and do not factor in any tariff hikes. As it is, we find Suria still
undervalued vs its closest peer Integrax (INTEG MK, NEUTRAL, FV:
MYR2.32), which is trading at a higher P/E multiple. We think the
market has yet to price in the cash inflow from Suria Capitals Jesselton
Quay JV. Thus, we maintain BUY on the stock with a MYR3.50 FV,
based on a 20% discount to its DCF (at a WACC of 7.2%).
68

Suria Capital Holdings
Target: MYR3.50
Price: MYR2.59

Multi-Year Growth Prospects Remain Intact

84
95
107
118
129
140
152
163
174
1.3
1.5
1.7
1.9
2.1
2.3
2.5
2.7
2.9
Suria Capital (SURIA MK)
1
1
2
2
3
3
A
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1
3
J
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1
3
A
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1
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1
3
D
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3
F
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4
V
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Source: Bloomberg

Stock Profile
Bloomberg Ticker SURIA MK
Beta (x) 0.88
BVPS (MYR) 3.11
Free float (%) 30

Warisan Harta 46.2

1m 3m 6m 12m
Absolute 0.0 (2.6) 44.7 61.9
Relative (1.1) (3.7) 40.5 52.2

Jerry Lee 603 9207 7622

Investment Merits
Its Jesselton Quay JV is expected to materialise soon, for which
the salient terms are favourable to Suria Capital
Its key operating divisions are yielding stable and positive
performance
Our conservative assumptions give room for potential earnings
upside

Company Profile
Suria Capital Holdings (Suria Capital)s main core business is the
operation of eight major ports in Sabah, namely Kota Kinabalu Port,
Sapangar Bay Oil Terminal, Sandakan Port, Lahad Datu Port, Kunak
Port, Kudat Port, Tawau Port and Sapangar Bay Container Port. The
group also has other businesses, such as equipment supply and
maintenance, logistics and bunkering services, contract and
engineering, and ferry terminal operations. Suria Capital is looking to
diversify its operations into property and tourism sectors.

Highlights
Jesselton Quay the key catalyst. Suria Capitals riskless
diversification into the property sector is expected to materialise soon,
as management targets the JV to be completed within 1H2014. We
deem the salient terms of the agreement favourable to Suria, as it only
needs to provide the land and facilitate the implementation of the
project. All other costs and expenses relating to the project, including
the implementation and completion of Jesselton Quay, will be borne by
SBC Corp (SBC MK, NR). The group is also guaranteed a minimum
return of MYR324m in cash, or in kind, over eight tranches.
Core operations are improving. Other than the immediate catalyst
from the Jesselton Quay project, Suria Capitals core earnings are
improving as well. On its ports division, although the overall throughput
volume declined (cargo: -0.1% y-o-y, container: -0.4% y-o-y) in FY13,
revenue from port operations grew 3% y-o-y, mainly attributed to
heightened palm oil and bulk oil handling at the port, as well as a
MYR2.8m increase in machinery sales. This, coupled with a 3% y-o-y
drop in operating expenses (repair and maintenance, dredging and
stevedoring), translated into a 13% y-o-y jump in FY13 operating profit.
Meanwhile, the logistics business improved y-o-y, boosted by the
supply of bunkering fuel to cruise ships in Kota Kinabalu Port, as well as
the commencement of the Samur project in June 2013. This led to
narrowing losses at its bunkering division in 2013, which should help
improve Suria Capitals profitability.

DPS (MYR) 0.06 0.06 0.08
Recurring P/E (x) 13.78 11.93 11.27
P/B (x) 0.92 0.87 0.83
P/CF (x) 5.37 4.93 6.19


Total assets 1,178 1,179 1,196
Other equity 0 (0) 0
Net debt 56 (23) 116


Cash flow from investing activities 28 (26) (170)


Our assumptions are conservative. Our earnings forecasts are
conservative, as: i) we do not incorporate any tariff hikes into our
earnings forecasts, ii) our assumptions for container and non-container
volume growth are relatively low, and iii) our assumptions for higher
operating expenses result in a lower gross profit margin forecast. This
gives Suria Capital more earnings upside potential.

Company Report Card
Latest results. Suria Capitals FY13 core net profit of MYR62m met our
earnings forecast, with its port operations contributing 88% of the
groups revenue, followed by logistics and bunkering services at 11%.
The remaining revenue came from contract and engineering as well as
ferry terminal operations.
Balance sheet/cash flow. The group is slightly geared but this is not a
concern as both its operating cash flow and free cash flow are still
positive.
ROE. We project Suria Capitals ROE in FY14F at 7.5%.
Dividend. In FY13, the company declared a 3 sen dividend for
4QFY13, bringing its full-year FY13 dividend to 6.15 sen, or a 28%
payout ratio. Historically, Suria Capitals dividend payout ratio has been
hovering at around 25-30%.
Management. The management team was led by Datuk Dr Mohd Fowzi
Hj Razi, the managing director and Ng Kiat Min, the chief financial
officer.

Recommendation
As Suria Capitals core operations are expected to generate organic
earnings growth, we keep conservative assumptions in our forecasts
and do not factor in any tariff hikes. As it is, we find Suria still
undervalued vs its closest peer Integrax (INTEG MK, NEUTRAL, FV:
MYR2.32), which is trading at a higher P/E multiple. We think the
market has yet to price in the cash inflow from Suria Capitals Jesselton
Quay JV. Thus, we maintain BUY on the stock with a MYR3.50 FV,
based on a 20% discount to its DCF (at a WACC of 7.2%).
69

Ta Ann Holdings
Target: MYR5.00
Price: MYR4.17

Plantation Contributions On The Rise

87
92
97
102
107
112
117
122
3.2
3.4
3.6
3.8
4.0
4.2
4.4
4.6
Ta Ann Holdings (TAH MK)
1
1
2
2
3
3
A
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1
3
J
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1
3
A
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1
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O
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1
3
D
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1
3
F
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1
4
V
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m

Source: Bloomberg

Stock Profile
Bloomberg Ticker TAH MK
Beta (x) 1.10
BVPS (MYR) 2.96
Free float (%) 34

Mountex SB 21.0
Datuk Wahab b Hj Dollah 11.0
EPF 9.7

1m 3m 6m 12m
Absolute (1.7) (1.7) 8.9 18.5
Relative (2.8) (2.8) 4.7 8.8

Hoe Lee Leng +603 9207 7605
hoe.lee.leng@rhbgroup.com

Investment Merits
Ban on Myanmar log exports positive for Malaysian log producers
Beneficiary of weakening MYR:USD exchange rate
Rising CPO prices positive for Ta Anns rising mature hectarage

Company Profile
Ta Ann is mainly involved in the manufacture and sale of plywood,
trading of timber logs and cultivation of oil palms. It has 359,180ha of
timber concessions in Sarawak and 97,855ha of oil palm plantation
landbank in Sarawak. 37,716ha of its oil palm landbank has been
planted, of which 28,611ha was mature as at end-2013. The company
also has 310,713ha of forest plantation areas, of which 35,020ha has
been planted as at end-2013.

Highlights
Improvements in timber sector dynamics. We are positive on the
prospects of the timber sector in view of:
i) The ban on tropical log exports by Myanmar that came into effect on 1
April 2014, which will likely result in a supply shortage and rising prices.
Myanmar is the fifth-largest tropical log producer and the third-biggest
exporter in the Asia-Pacific region. By comparison, Malaysia is the third-
largest producer and the biggest exporter of tropical logs in the region.
With the ban in place, we expect tropical log prices to start rising again
from 2H14 after any existing log inventory held by importing countries
are depleted;
ii) Stable log demand in India coming from investments in the
infrastructure and industrial sectors. The country is the largest importer
of Malaysian tropical logs currently;

iii) Recovering plywood demand in Japan on the back of rising housing
starts (+12.3% y-o-y in Jan 2014) and an improving economy. The East
Asian nation is the largest importer of Malaysian tropical timber
currently; and

iv) Weakening of MYR against USD will benefit export-derived revenue.
Currently, USD-based exports comprise 40-45% of Ta Anns revenue.

Rising CPO prices to benefit Ta Ann. The rise in CPO prices will also
benefit Ta Ann, given its rising plantation exposure. Currently,
plantations contribute 55% to its PBT. We expect this to rise in tandem
with Ta Anns rising fresh fruit bunches (FFB) production output as well
as on the back of rising CPO prices. FFB growth is estimated at +10-
20% per annum for FY14-15 as more oil palm plantation land comes
into maturity. We project CPO prices to average MYR2,700/tonne in
2014 and MYR2,900/tonne in 2015. We expect Ta Anns plantation
division to contribute 70-80% of PBT within the next few years.

Total turnover (MYRm) 774 1,022 1,275
DPS (MYR) 0.05 0.11 0.12
Recurring P/E (x) 21.70 12.04 10.59
P/B (x) 1.53 1.41 1.29
P/CF (x) 6.94 12.14 8.28


Total assets 1,806 1,913 2,040
Other equity (0) 0 0
Total equity 1,038 1,124 1,223
Net debt 258 224 182




Company Report Card
Latest results. Ta Anns FY13 core net profit fell 30% y-o-y on the back
of a 3% dip in revenue. Topline in the timber division fell due to lower
log volume and lower plywood prices, which were offset by higher log
prices and plywood volume. However, PBT margins improved to 14.8%
(from 10.1% in FY12) due to higher profit in the log division and lower
losses in its plywood business. The plantation divisions FY13 PBT
dived 33% as prices fell 21%, although production volume rose by 5%.
Plantations contributed 55% to PBT in FY13.
Balance sheet/cash flow. As at end-2013, Ta Anns net debt stood at
MYR257.6m (or 26% net gearing), which is still very manageable given
its interest cover of >10x. Operating cash flow is relatively stable at
MYR150-250m per year.
ROE. Ta Anns ROE started to improve since 2012, on the back of
rising timber product prices. We project ROEs to rise to 12-13% in
FY14-15 from FY13s 9.3%.
Dividend. Ta Ann does not have an official dividend policy, but
generally tries to stick to a net payout ratio of close to 30%. This is
expected to translate to net yields of 2.5-3% per annum.
Management. Ta Anns management is very experienced, having been
in the timber industry for many years. It is led by Dato Wong Kuo Hea,
who has been serving as managing director and CEO since 1999. Dato
Wong was responsible for leading the group to become an established
timber player from a small trading company and spearheading its
commitment towards the sustainability of timber resources.

Recommendation
We have a BUY rating on Ta Ann, on the back of stronger earnings
from its plantation division, a stable-to-improving outlook for the timber
industry and the added benefit of the recent softening MYR against the
USD. Our SOP-based FV is MYR5.00, based on target P/Es of 12.0x
CY14F for the timber division and 16.0x CY14F for the plantation unit
in line with the companys peers.
70

Ta Ann Holdings
Target: MYR5.00
Price: MYR4.17

Plantation Contributions On The Rise

87
92
97
102
107
112
117
122
3.2
3.4
3.6
3.8
4.0
4.2
4.4
4.6
Ta Ann Holdings (TAH MK)
1
1
2
2
3
3
A
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1
3
J
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1
3
A
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D
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Source: Bloomberg

Stock Profile
Bloomberg Ticker TAH MK
Beta (x) 1.10
BVPS (MYR) 2.96
Free float (%) 34

Mountex SB 21.0
Datuk Wahab b Hj Dollah 11.0
EPF 9.7

1m 3m 6m 12m
Absolute (1.7) (1.7) 8.9 18.5
Relative (2.8) (2.8) 4.7 8.8

Hoe Lee Leng +603 9207 7605
hoe.lee.leng@rhbgroup.com

Investment Merits
Ban on Myanmar log exports positive for Malaysian log producers
Beneficiary of weakening MYR:USD exchange rate
Rising CPO prices positive for Ta Anns rising mature hectarage

Company Profile
Ta Ann is mainly involved in the manufacture and sale of plywood,
trading of timber logs and cultivation of oil palms. It has 359,180ha of
timber concessions in Sarawak and 97,855ha of oil palm plantation
landbank in Sarawak. 37,716ha of its oil palm landbank has been
planted, of which 28,611ha was mature as at end-2013. The company
also has 310,713ha of forest plantation areas, of which 35,020ha has
been planted as at end-2013.

Highlights
Improvements in timber sector dynamics. We are positive on the
prospects of the timber sector in view of:
i) The ban on tropical log exports by Myanmar that came into effect on 1
April 2014, which will likely result in a supply shortage and rising prices.
Myanmar is the fifth-largest tropical log producer and the third-biggest
exporter in the Asia-Pacific region. By comparison, Malaysia is the third-
largest producer and the biggest exporter of tropical logs in the region.
With the ban in place, we expect tropical log prices to start rising again
from 2H14 after any existing log inventory held by importing countries
are depleted;
ii) Stable log demand in India coming from investments in the
infrastructure and industrial sectors. The country is the largest importer
of Malaysian tropical logs currently;

iii) Recovering plywood demand in Japan on the back of rising housing
starts (+12.3% y-o-y in Jan 2014) and an improving economy. The East
Asian nation is the largest importer of Malaysian tropical timber
currently; and

iv) Weakening of MYR against USD will benefit export-derived revenue.
Currently, USD-based exports comprise 40-45% of Ta Anns revenue.

Rising CPO prices to benefit Ta Ann. The rise in CPO prices will also
benefit Ta Ann, given its rising plantation exposure. Currently,
plantations contribute 55% to its PBT. We expect this to rise in tandem
with Ta Anns rising fresh fruit bunches (FFB) production output as well
as on the back of rising CPO prices. FFB growth is estimated at +10-
20% per annum for FY14-15 as more oil palm plantation land comes
into maturity. We project CPO prices to average MYR2,700/tonne in
2014 and MYR2,900/tonne in 2015. We expect Ta Anns plantation
division to contribute 70-80% of PBT within the next few years.

Total turnover (MYRm) 774 1,022 1,275
DPS (MYR) 0.05 0.11 0.12
Recurring P/E (x) 21.70 12.04 10.59
P/B (x) 1.53 1.41 1.29
P/CF (x) 6.94 12.14 8.28


Total assets 1,806 1,913 2,040
Other equity (0) 0 0
Total equity 1,038 1,124 1,223
Net debt 258 224 182




Company Report Card
Latest results. Ta Anns FY13 core net profit fell 30% y-o-y on the back
of a 3% dip in revenue. Topline in the timber division fell due to lower
log volume and lower plywood prices, which were offset by higher log
prices and plywood volume. However, PBT margins improved to 14.8%
(from 10.1% in FY12) due to higher profit in the log division and lower
losses in its plywood business. The plantation divisions FY13 PBT
dived 33% as prices fell 21%, although production volume rose by 5%.
Plantations contributed 55% to PBT in FY13.
Balance sheet/cash flow. As at end-2013, Ta Anns net debt stood at
MYR257.6m (or 26% net gearing), which is still very manageable given
its interest cover of >10x. Operating cash flow is relatively stable at
MYR150-250m per year.
ROE. Ta Anns ROE started to improve since 2012, on the back of
rising timber product prices. We project ROEs to rise to 12-13% in
FY14-15 from FY13s 9.3%.
Dividend. Ta Ann does not have an official dividend policy, but
generally tries to stick to a net payout ratio of close to 30%. This is
expected to translate to net yields of 2.5-3% per annum.
Management. Ta Anns management is very experienced, having been
in the timber industry for many years. It is led by Dato Wong Kuo Hea,
who has been serving as managing director and CEO since 1999. Dato
Wong was responsible for leading the group to become an established
timber player from a small trading company and spearheading its
commitment towards the sustainability of timber resources.

Recommendation
We have a BUY rating on Ta Ann, on the back of stronger earnings
from its plantation division, a stable-to-improving outlook for the timber
industry and the added benefit of the recent softening MYR against the
USD. Our SOP-based FV is MYR5.00, based on target P/Es of 12.0x
CY14F for the timber division and 16.0x CY14F for the plantation unit
in line with the companys peers.
71

Tambun Indah Land
Target: MYR2.50
Price: MYR1.99

Best Penang Mainland Property Play

Tambun Indah Land (TILB MK)
0.7
0.9
1.1
1.3
1.5
1.7
1.9
2.1
88
108
128
148
168
188
208
228
1
2
3
4
5
6
A
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1
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J
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A
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Source: Bloomberg

Stock Profile
Bloomberg Ticker TILB MK
Beta (x) 0.94
BVPS (MYR) 0.93
Free float (%) 50

Ir. Teh Kiak Seng 38.0

1m 3m 6m 12m
Absolute 18.5 36.3 38.2 122.3
Relative 16.8 35.2 33.4 112.2

Loong Kok Wen CFA +603 9207 7614
loong.kok.wen@rhbgroup.com

Investment Merits
Deserves scarcity premium valuations as a pure Penang Mainland
play
Prime beneficiary of investment news flow on Batu Kawan
Record land prices will re-rate Tambun Indahs RNAV

Company Profile
Tambun Indah Land Bhd (Tambun Indah) is a developer based in
Penang mainland. Its flagship project, the Pearl City township, is
located in Seberang Perai Selatan, just 15 minutes from the Penang
Second Bridge and Batu Kawan.
Highlights
Tambun Indahs value is underpinned by its strategic anchor landbank,
capable management, quality products, and solid balance sheet. It has
593 acres of land in the Pearl City township, and together with its
projects in Seberang Perai Tengah and Seberang Perai Utara, the
company commands a 15% share of the residential property market in
Penang mainland. Being close to many established industrial parks, the
growing working population creates a natural demand for properties
particularly in a proper residential community.
Why scarcity premium? We argue that Tambun Indah deserves a
scarcity premium to its valuations. Currently, there is no pure listed
Penang mainland play in the property scene. Other competitors in the
area, such as Wing Tai (WING MK, NR), Asas Dunia (ASAS MK, NR),
Global Oriental (GOB MK, NR) and Malton (MALT MK, NR) are either
not a pure play or have weaker earnings track record. By contrast,
Tambun Indahs concentration is solely on Penang mainland, and it has
achieved a marvelous earnings track record with a 3-year net profit
CAGR of 37%. We are confident that it will be able to sustain its strong
growth momentum.
Prime beneficiary of investment news flow on Batu Kawan. We
expect more news on Batu Kawan over the next few months, and
Tambun Indah will be the prime beneficiary of the positive spillover of
the investment flows there. The Batu Kawan developments, which are
spearheaded by the Penang state government, have garnered strong
investment interest from domestic and foreign players. Since last year,
a few education players such as the University of Hull and KDU
University College have announced plans to set up schools in Batu
Kawan, while Ikano/Aspen and PE Land/CBRE will develop a lifestyle
furniture/shopping mall and a premier shopping outlet there. In addition,
new factories such as Haemonetics plant are under construction. As
job opportunities and business activities increase, these will translate
into higher demand for properties. In 1Q14, Tambun Indah saw strong
sales and bookings amounting to MYR160m. This can easily surpass
managements full-year target of MYR500m.

DPS (MYR) 0.06 0.08 0.10
Recurring P/E (x) 12.07 8.64 7.02
P/B (x) 2.53 2.13 1.79
P/CF (x) 13.54 14.41 9.96


Other equity (0) - 0
Total debt 98 98 98
Net debt (28) (52) (90)


Forex effects 6


Record land prices to re-rate Tambun Indahs RNAV. The upcoming
land tender in Batu Kawan will likely further drive up land value in
Seberang Perai Selatan. Eco World Development (ECW MK, NR) has
been speculated to be the likely winner of the international golf course
project, and many new developers have been actively scouting for
landbank in the area. The last transacted prices in Batu Kawan were
MYR45-55 psf. Based on a land value assumption of MYR40 psf,
Tambun Indahs 593 acres are worth MYR1.06bn vs the companys
current market cap of about RM780m.

Company Report Card
Latest results. The companys FY13 earnings were strong, with an
EPS growth of 21%. Unbilled sales currently stand at MYR455.5m.
Balance sheet/cash flow. Its balance sheet is solid with a net cash of
MYR28m.
ROE. Tambun Indahs ROE is on an expansionary trend. Its ROE was
at 17% in FY11, and is expected to rise to 28% in FY15.
Dividend. The company has a policy of paying 40-60% of earnings as
dividend. As such, we forecast DPS of 8 and 9.5 sen for FY14-15,
translating into 4-5% yields.
Management. With a shareholding of 38%, Mr Teh Kiak Seng is the
founder and managing director of the company. A civil engineer, Mr The
has more than 30 years of experience in the housing industry. Tambun
Indah is well managed by a group of architects, engineers and finance
professionals. Its financial controller, Steve Neoh, joined the company in
2008 from Tejari Technologies Bhd. His cumulative experience includes
providing assurance and consulting services to public listed and local
corporations involved in the property development, construction,
manufacturing and trading services sectors.

Recommendation
We value Tambun Indah at MYR2.50, on par with its RNAV/share. The
implied P/E based on our FV is 8.8x for FY15. Our valuations are
backed by the market value of the companys landbank, plus net current
assets minus long-term liabilities, amounting to MYR2.81 per share.
The companys sales and earnings growth drivers are well in place.

72

Tambun Indah Land
Target: MYR2.50
Price: MYR1.99

Best Penang Mainland Property Play

Tambun Indah Land (TILB MK)
0.7
0.9
1.1
1.3
1.5
1.7
1.9
2.1
88
108
128
148
168
188
208
228
1
2
3
4
5
6
A
p
r
-
1
3
J
u
n
-
1
3
A
u
g
-
1
3
O
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-
1
3
D
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-
1
3
F
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-
1
4
V
o
l

m

Source: Bloomberg

Stock Profile
Bloomberg Ticker TILB MK
Beta (x) 0.94
BVPS (MYR) 0.93
Free float (%) 50

Ir. Teh Kiak Seng 38.0

1m 3m 6m 12m
Absolute 18.5 36.3 38.2 122.3
Relative 16.8 35.2 33.4 112.2

Loong Kok Wen CFA +603 9207 7614
loong.kok.wen@rhbgroup.com

Investment Merits
Deserves scarcity premium valuations as a pure Penang Mainland
play
Prime beneficiary of investment news flow on Batu Kawan
Record land prices will re-rate Tambun Indahs RNAV

Company Profile
Tambun Indah Land Bhd (Tambun Indah) is a developer based in
Penang mainland. Its flagship project, the Pearl City township, is
located in Seberang Perai Selatan, just 15 minutes from the Penang
Second Bridge and Batu Kawan.
Highlights
Tambun Indahs value is underpinned by its strategic anchor landbank,
capable management, quality products, and solid balance sheet. It has
593 acres of land in the Pearl City township, and together with its
projects in Seberang Perai Tengah and Seberang Perai Utara, the
company commands a 15% share of the residential property market in
Penang mainland. Being close to many established industrial parks, the
growing working population creates a natural demand for properties
particularly in a proper residential community.
Why scarcity premium? We argue that Tambun Indah deserves a
scarcity premium to its valuations. Currently, there is no pure listed
Penang mainland play in the property scene. Other competitors in the
area, such as Wing Tai (WING MK, NR), Asas Dunia (ASAS MK, NR),
Global Oriental (GOB MK, NR) and Malton (MALT MK, NR) are either
not a pure play or have weaker earnings track record. By contrast,
Tambun Indahs concentration is solely on Penang mainland, and it has
achieved a marvelous earnings track record with a 3-year net profit
CAGR of 37%. We are confident that it will be able to sustain its strong
growth momentum.
Prime beneficiary of investment news flow on Batu Kawan. We
expect more news on Batu Kawan over the next few months, and
Tambun Indah will be the prime beneficiary of the positive spillover of
the investment flows there. The Batu Kawan developments, which are
spearheaded by the Penang state government, have garnered strong
investment interest from domestic and foreign players. Since last year,
a few education players such as the University of Hull and KDU
University College have announced plans to set up schools in Batu
Kawan, while Ikano/Aspen and PE Land/CBRE will develop a lifestyle
furniture/shopping mall and a premier shopping outlet there. In addition,
new factories such as Haemonetics plant are under construction. As
job opportunities and business activities increase, these will translate
into higher demand for properties. In 1Q14, Tambun Indah saw strong
sales and bookings amounting to MYR160m. This can easily surpass
managements full-year target of MYR500m.

DPS (MYR) 0.06 0.08 0.10
Recurring P/E (x) 12.07 8.64 7.02
P/B (x) 2.53 2.13 1.79
P/CF (x) 13.54 14.41 9.96


Other equity (0) - 0
Total debt 98 98 98
Net debt (28) (52) (90)


Forex effects 6


Record land prices to re-rate Tambun Indahs RNAV. The upcoming
land tender in Batu Kawan will likely further drive up land value in
Seberang Perai Selatan. Eco World Development (ECW MK, NR) has
been speculated to be the likely winner of the international golf course
project, and many new developers have been actively scouting for
landbank in the area. The last transacted prices in Batu Kawan were
MYR45-55 psf. Based on a land value assumption of MYR40 psf,
Tambun Indahs 593 acres are worth MYR1.06bn vs the companys
current market cap of about RM780m.

Company Report Card
Latest results. The companys FY13 earnings were strong, with an
EPS growth of 21%. Unbilled sales currently stand at MYR455.5m.
Balance sheet/cash flow. Its balance sheet is solid with a net cash of
MYR28m.
ROE. Tambun Indahs ROE is on an expansionary trend. Its ROE was
at 17% in FY11, and is expected to rise to 28% in FY15.
Dividend. The company has a policy of paying 40-60% of earnings as
dividend. As such, we forecast DPS of 8 and 9.5 sen for FY14-15,
translating into 4-5% yields.
Management. With a shareholding of 38%, Mr Teh Kiak Seng is the
founder and managing director of the company. A civil engineer, Mr The
has more than 30 years of experience in the housing industry. Tambun
Indah is well managed by a group of architects, engineers and finance
professionals. Its financial controller, Steve Neoh, joined the company in
2008 from Tejari Technologies Bhd. His cumulative experience includes
providing assurance and consulting services to public listed and local
corporations involved in the property development, construction,
manufacturing and trading services sectors.

Recommendation
We value Tambun Indah at MYR2.50, on par with its RNAV/share. The
implied P/E based on our FV is 8.8x for FY15. Our valuations are
backed by the market value of the companys landbank, plus net current
assets minus long-term liabilities, amounting to MYR2.81 per share.
The companys sales and earnings growth drivers are well in place.

73

Tune Ins Holdings
Target: MYR2.70
Price: MYR2.16

A Regional Insurer With Much In Store

90
96
102
108
114
120
126
132
138
144
1.3
1.4
1.5
1.6
1.7
1.8
1.9
2.0
2.1
2.2
2.3
Tune Insurance Holdings (TIH MK)
1
2
3
4
5
6
7
8
A
p
r
-
1
3
J
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1
3
A
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1
3
O
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1
3
D
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1
3
F
e
b
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1
4
V
o
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m

Source: Bloomberg

Stock Profile
Bloomberg Ticker TIH MK
Net Gearing (%) na
Beta (x) na
BVPS (MYR) 0.55
Free float (%) 41

Tune Group SB 25.1
AirAsia 16.2
CIMB SI II SB 14.1

1m 3m 6m 12m
Absolute 9.9 6.4 (1.0) 39.9
Relative 8.2 5.3 (5.8) 29.8

Kong Ho Meng +603 9207 7620

Investment Merits
Margin expansion via superior growth from highly profitable travel
insurance
Market expansion and new customer markets through a unique
distribution model with its major shareholder
Acquisition opportunities through Thailand and Indonesia, and
more tie-ups and partnerships with airlines and travel providers
Innovation in product segments could improve Tune Ins product
offerings across the value chain

Company Profile
Tune Insurance (Tune Ins) is engaged in the provision of various
general and life insurance products in the Asia-Pacific region. The
company offers a range of online products, including travel, lifestyle
protection and guest personal accident insurance.

Highlights
Insuring a safe journey. Tune Ins niche exposure in the online
insurance market sets it apart from its listed peers. With a proprietary
technology and exclusive partnerships, its Tune Insure travel insurance
product is tailored for customers of its key shareholder, AirAsia (AIRA
MK, BUY, FV: MYR3.08). Customers accessing the latter's website for
flight or hotel bookings are given the option of purchasing Tune Insure
products through a pre-checked box. Due to the low claims ratio
(consistently at ~4%) from travel insurance, this business carrying a
50% profit margin is extremely profitable for the group. Tune Ins also
owns 83.3% in Tune Insurance Malaysia (TIMB), its Malaysian general
insurance arm, which has undertaken a vast portfolio rebalancing to
shift away from high-risk motor insurance.
Expansion plans. The company is in the midst of securing insurance
licenses in Indonesia and Thailand, possibly by 1HFY14. This is a key
ingredient of Tune Ins expansion plans since its IPO listing, as it will
allow direct underwriting of online premiums especially in its travel
insurance business major markets. The company is also actively
looking at a few more tie-ups with airlines and travel providers. Tune Ins
has demonstrated to investors that it is not totally reliant on AirAsias
partnership, as it had secured partnership agreements with Cebu
Pacific and Cozmo Travel (owned by Air Arabia Group, (AIRARABI UH,
NR)). Tune Ins is also penetrating into markets that it has yet to have a
presence in.
TIMB ready to grow. We are also excited that the companys
Malaysian subsidiary, TIMB, has streamlined its claims efficiency and is
ready to boost topline growth, ie more Petronas policies, small and
medium enterprise (SME) accounts, as well as targeting an additional
>400 agents in CY14 (from 1,138).

Total operating income (MYRm) 217 241 265
Recurring net profit growth (%) -3.6 48.9 18.3
DPS (MYR) - 0.04 0.04
Recurring P/E (x) 33.29 25.23 19.46
P/B (x) 14.66 4.33 3.82



Claims ratio (%) 45.9 39.0 35.0
Expense ratio (%) 20.5 24.1 23.8
Combined ratio (%) 80.6 77.9 72.3
Liquidity ratio (%) 9.8 0.2 0.7

More surprises? We believe Tune Ins future plans have more to offer.
The company has yet to: i) exploit/maximise the potential of its product
innovation and data analytics to focus on key customer segments, ii)
replicate its proprietary technology to other online distributors and direct
channel sales, iii) improve product mix to customers of Tune Hotel and
other travel solutions providers, and iv) be a potential beneficiary of
markets that are progressing towards mandatory travel insurance.
Company Report Card
Latest results. Tune Ins FY13 core profit grew 45% vs revenue growth
of 15%. This was supported by improved blended margins, given strong
growth in the profitable online travel sales. Online premiums contributed
40.8% of the total net earned premium vs FY12s 31.3%, as the
company taps on the growing regional customer base of its airline
partners.
ROE. ROE is expected to remain high at >20%, as Tune Ins utilises an
asset-light business model. More importantly, the companys de-risking
strategies have resulted in TIMBs capital adequacy ratio (CAR)
improved significantly to 270% (FY12: 221%; FY11: 177%). These
justify the premium valuations this stock is trading at.
Dividend. Tune Ins dividend policy is a minimum of 40% payout. In
FY13, the company declared its first and final dividend 3.86 sen,
translating into a yield of approximately 1.7%.
Management. CEO Peter Miller has been involved in the insurance
industry for many years. This includes working for global insurance
brokers, and assuming various positions in prominent banks and
insurers. Through his extensive experience in bancassurance/
distribution strategies, Tune Ins has achieved many landmarks, forging
multiple relationships and tie-ups within a span of three years since he
joined the Tune Group in 2010. Staff strength has also grown to 358 (as
at FY12) from merely 14. We expect more partnerships with various
distributors across the value chain, as the companys proposition has
much to offer.

Recommendation
Maintain BUY, MYR2.70 FV. Our FV is pegged to 20x FY15F P/E. We
view Tune Ins as a growth stock that deserves to trade at a premium to
the sectors 14-18x P/Es. This is given its high earnings growth
expectations and margins expansion. We also like its market expansion
angle, as it is the only listed insurer that has an Asean customer base. It
is potentially moving towards a global customer base.
Tune Ins unique and profitable business model, as well as its travel
insurance partnerships, combine the best of both insurance and
consumer stocks. Notable online-centric consumer brands that offer
travel solutions, like Expedia (EXPE US, NR), CTrip (CTRIP US, NR)
and MakeMyTrip (MMYT US, NR), are all trading at forward P/Es of
between 18.5-40x.
74

Tune Ins Holdings
Target: MYR2.70
Price: MYR2.16

A Regional Insurer With Much In Store

90
96
102
108
114
120
126
132
138
144
1.3
1.4
1.5
1.6
1.7
1.8
1.9
2.0
2.1
2.2
2.3
Tune Insurance Holdings (TIH MK)
1
2
3
4
5
6
7
8
A
p
r
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1
3
J
u
n
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1
3
A
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1
3
O
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1
3
D
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F
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b
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1
4
V
o
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m

Source: Bloomberg

Stock Profile
Bloomberg Ticker TIH MK
Net Gearing (%) na
Beta (x) na
BVPS (MYR) 0.55
Free float (%) 41

Tune Group SB 25.1
AirAsia 16.2
CIMB SI II SB 14.1

1m 3m 6m 12m
Absolute 9.9 6.4 (1.0) 39.9
Relative 8.2 5.3 (5.8) 29.8

Kong Ho Meng +603 9207 7620

Investment Merits
Margin expansion via superior growth from highly profitable travel
insurance
Market expansion and new customer markets through a unique
distribution model with its major shareholder
Acquisition opportunities through Thailand and Indonesia, and
more tie-ups and partnerships with airlines and travel providers
Innovation in product segments could improve Tune Ins product
offerings across the value chain

Company Profile
Tune Insurance (Tune Ins) is engaged in the provision of various
general and life insurance products in the Asia-Pacific region. The
company offers a range of online products, including travel, lifestyle
protection and guest personal accident insurance.

Highlights
Insuring a safe journey. Tune Ins niche exposure in the online
insurance market sets it apart from its listed peers. With a proprietary
technology and exclusive partnerships, its Tune Insure travel insurance
product is tailored for customers of its key shareholder, AirAsia (AIRA
MK, BUY, FV: MYR3.08). Customers accessing the latter's website for
flight or hotel bookings are given the option of purchasing Tune Insure
products through a pre-checked box. Due to the low claims ratio
(consistently at ~4%) from travel insurance, this business carrying a
50% profit margin is extremely profitable for the group. Tune Ins also
owns 83.3% in Tune Insurance Malaysia (TIMB), its Malaysian general
insurance arm, which has undertaken a vast portfolio rebalancing to
shift away from high-risk motor insurance.
Expansion plans. The company is in the midst of securing insurance
licenses in Indonesia and Thailand, possibly by 1HFY14. This is a key
ingredient of Tune Ins expansion plans since its IPO listing, as it will
allow direct underwriting of online premiums especially in its travel
insurance business major markets. The company is also actively
looking at a few more tie-ups with airlines and travel providers. Tune Ins
has demonstrated to investors that it is not totally reliant on AirAsias
partnership, as it had secured partnership agreements with Cebu
Pacific and Cozmo Travel (owned by Air Arabia Group, (AIRARABI UH,
NR)). Tune Ins is also penetrating into markets that it has yet to have a
presence in.
TIMB ready to grow. We are also excited that the companys
Malaysian subsidiary, TIMB, has streamlined its claims efficiency and is
ready to boost topline growth, ie more Petronas policies, small and
medium enterprise (SME) accounts, as well as targeting an additional
>400 agents in CY14 (from 1,138).

Total operating income (MYRm) 217 241 265
Recurring net profit growth (%) -3.6 48.9 18.3
DPS (MYR) - 0.04 0.04
Recurring P/E (x) 33.29 25.23 19.46
P/B (x) 14.66 4.33 3.82



Claims ratio (%) 45.9 39.0 35.0
Expense ratio (%) 20.5 24.1 23.8
Combined ratio (%) 80.6 77.9 72.3
Liquidity ratio (%) 9.8 0.2 0.7

More surprises? We believe Tune Ins future plans have more to offer.
The company has yet to: i) exploit/maximise the potential of its product
innovation and data analytics to focus on key customer segments, ii)
replicate its proprietary technology to other online distributors and direct
channel sales, iii) improve product mix to customers of Tune Hotel and
other travel solutions providers, and iv) be a potential beneficiary of
markets that are progressing towards mandatory travel insurance.
Company Report Card
Latest results. Tune Ins FY13 core profit grew 45% vs revenue growth
of 15%. This was supported by improved blended margins, given strong
growth in the profitable online travel sales. Online premiums contributed
40.8% of the total net earned premium vs FY12s 31.3%, as the
company taps on the growing regional customer base of its airline
partners.
ROE. ROE is expected to remain high at >20%, as Tune Ins utilises an
asset-light business model. More importantly, the companys de-risking
strategies have resulted in TIMBs capital adequacy ratio (CAR)
improved significantly to 270% (FY12: 221%; FY11: 177%). These
justify the premium valuations this stock is trading at.
Dividend. Tune Ins dividend policy is a minimum of 40% payout. In
FY13, the company declared its first and final dividend 3.86 sen,
translating into a yield of approximately 1.7%.
Management. CEO Peter Miller has been involved in the insurance
industry for many years. This includes working for global insurance
brokers, and assuming various positions in prominent banks and
insurers. Through his extensive experience in bancassurance/
distribution strategies, Tune Ins has achieved many landmarks, forging
multiple relationships and tie-ups within a span of three years since he
joined the Tune Group in 2010. Staff strength has also grown to 358 (as
at FY12) from merely 14. We expect more partnerships with various
distributors across the value chain, as the companys proposition has
much to offer.

Recommendation
Maintain BUY, MYR2.70 FV. Our FV is pegged to 20x FY15F P/E. We
view Tune Ins as a growth stock that deserves to trade at a premium to
the sectors 14-18x P/Es. This is given its high earnings growth
expectations and margins expansion. We also like its market expansion
angle, as it is the only listed insurer that has an Asean customer base. It
is potentially moving towards a global customer base.
Tune Ins unique and profitable business model, as well as its travel
insurance partnerships, combine the best of both insurance and
consumer stocks. Notable online-centric consumer brands that offer
travel solutions, like Expedia (EXPE US, NR), CTrip (CTRIP US, NR)
and MakeMyTrip (MMYT US, NR), are all trading at forward P/Es of
between 18.5-40x.
75

Yinson Holdings
Target: MYR10.90
Price: MYR8.88

Emerging From The Winds Of Change

76
114
151
189
226
264
301
339
376
2
3
4
5
6
7
8
9
10
Yinson Holdings (YNS MK)
1
1
2
2
3
3
4
A
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r
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1
3
J
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-
1
3
A
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1
3
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F
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V
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Source: Bloomberg

Stock Profile
Bloomberg Ticker YNS MK
Beta (x) 1.32
BVPS (MYR) 2.14
Free float (%) 51

Han Weng Lim 26.0
Kencana Capital SB 18.5
Kim Lian Bah 9.0

1m 3m 6m 12m
Absolute 3.9 29.4 83.3 231.7
Relative 2.2 28.3 78.5 221.6

Kong Ho Meng +603 9207 7620

Investment Merits
Fortified equity branding propelled the company to be the sixth
largest floating, production, offloading and storage (FPSO) player
globally, and Asias second-largest
A foothold in all high-growth FPSO markets Asia, Africa and South
America
Long-term earnings visibility all FPSO contracts have average
remaining firm periods for at least the next four years
Conservative policies aims for contracts with long firm periods and
value fast paybacks

Company Profile
Yinson Holdings is an investment holding company. Through
subsidiaries, it provides offshore support services such as trading and
logistics to the upstream oil and gas sector. It is also involved in
commodity trading.

Highlights
Transformation story. Yinson has emerged as a significant FPSO
player from its original core business in logistics and commodity trading.
This transformation story was essentially spurred by two major events:
i) its joint ventures (JVs) with Vietnam Oil & Gas Group (Petrovietnam)
on the floating, offloading and storage vessel (FSO) the FSO Bien Dong
and the FPSO Lam Son, and ii) its acquisition of Fred Olsen Production
ASA (now Yinson Production AS) that owns three FPSOs and operates
a mobile offshore production unit (MOPU).
Reaping synergies. Yinson Production AS was a strategic acquisition
for the group. The opportunity came about via a negotiation with Fred
Olsen Production, which had to pull out from the FPSO Lam Son project
due to financing issues. Yinson gained: i) Fred Olsens expertise as a
Norwegian offshore firm with over 150 years of experience and 450
capable employees, ii) its track record of over 10 successful projects
delivered and a niche in low- to mid-sized FPSO jobs, iii) an additional
fleet, iv) an additional clientele base in West Africa and South America,
and v) its existing orderbook of over MYR3.5bn. Moreover, the business
marriage was synergistic, as it offered engineering capabilities that
Yinson did not previously have.
FPSO strategy. Yinson is well-positioned in its niche as an operator of
mid-sized FPSOs (capex in the range of USD250-700m). This
separates itself from the Top 5 global FPSO players, which have bigger
scale to manage more complicated, bigger FPSO projects. The
company is actively bidding for a number of FPSO projects in regions
that see good demand for such vessels.

Profit & Loss Jan-13 Jan-14 Jan-15F
Total turnover (MYRm) 865 946 1,484
Recurring P/E (x) 54.98 43.36 18.76
P/B (x) 8.0 4.1 2.0
P/CF (x) na 79.42 31.56


Balance Sheet (MYRm) Jan-13 Jan-14 Jan-15F
Total debt 449 1290 998
Net debt 425 1012 712


Cash Flow (MYRm) Jan-13 Jan-14 Jan-15F
Cash flow from operations (52) (26) 63
Forex effects (13) (3) 0


Conservatism. Management adopts a prudent strategy and will only
accept projects with long firm contract periods. This is consistent with its
risk management policies of sustaining stable cash flow and hedging
itself against industry risks. Compared with the majority of its peers, we
note that Yinson has a higher proportion of firm periods in its average
contract life (about ~60%).

Securing a Petronas licence. Aside from bidding for global FPSO
jobs, Yinson is expected to be more involved in oil & gas (O&G) projects
in Malaysia possibly in marginal fields as it is in the midst of
securing a Petronas license through its associate. At this juncture, the
company is not keen to expand its capabilities into floating liquefied
natural gas (FLNG) projects, as the substantial capex requirements are
not in line with its mid-sized FPSO niche.

Company Report Card
Latest results. Yinsons FY14 core profit rose 26.8% on the back of
higher contributions from the chartering of two vessels, ie a 1-month
contribution from Yinson Productions FPSO fleet and maiden
contributions from the FSO Bien Dong, which is accounted for as
income from JVs.
Balance sheet/cash flow. Net gearing rose to 1.9x in FY14 as a result
of the consolidation of debts of Yinson Production and a MYR400m
acquisition loan. However, Yinson is carrying out a rights issue that will
raise up to MYR500-600m in gross proceeds, partially to pare down its
net gearing to our 0.6-0.7x forecast.
ROE. We expect ROE to be diluted to 11-12% due to the series of
capital-raising carried out in the past. This is in line with the ROE of its
competitor, Bumi Armada (BAB MK, BUY, FV: MYR4.45).
Dividend. Yinson has been consistently paying a 2.5% dividend for the
past five financial years. We expect the company to announce its FY14
dividend closer to its AGM.
Management. Mr Lim Chern Yuan, the son of the founder and group
chairman Mr Lim Han Weng, was recently appointed as the CEO of
Yinson. He was spearheading various operations of the group prior to
this appointment. Given the young blood of the current management
team, we believe Yinson will be actively hunting for more business
opportunities.

Recommendation
BUY with a FV of MYR10.90. Our FV is based on SOP, which uses a
DCF valuation on Yinsons FPSO business (valued on both firm and
extension contracts). This implies a 23x FY15F P/E, in line with that of
Bumi Armadas. We like the companys transformation story and
managements prudent strategies in undertaking a business that can be
cyclical in nature.
Our FV will be adjusted to MYR2.70-3.00 post rights issue and share
split (completion expected towards 2HCY14). We are assuming Yinson
will: i) secure an average of one floating production unit contract every
two years, and ii) repay its MYR240m debt from the proceeds of the
rights issue.
76

Yinson Holdings
Target: MYR10.90
Price: MYR8.88

Emerging From The Winds Of Change

76
114
151
189
226
264
301
339
376
2
3
4
5
6
7
8
9
10
Yinson Holdings (YNS MK)
1
1
2
2
3
3
4
A
p
r
-
1
3
J
u
n
-
1
3
A
u
g
-
1
3
O
c
t
-
1
3
D
e
c
-
1
3
F
e
b
-
1
4
V
o
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m

Source: Bloomberg

Stock Profile
Bloomberg Ticker YNS MK
Beta (x) 1.32
BVPS (MYR) 2.14
Free float (%) 51

Han Weng Lim 26.0
Kencana Capital SB 18.5
Kim Lian Bah 9.0

1m 3m 6m 12m
Absolute 3.9 29.4 83.3 231.7
Relative 2.2 28.3 78.5 221.6

Kong Ho Meng +603 9207 7620

Investment Merits
Fortified equity branding propelled the company to be the sixth
largest floating, production, offloading and storage (FPSO) player
globally, and Asias second-largest
A foothold in all high-growth FPSO markets Asia, Africa and South
America
Long-term earnings visibility all FPSO contracts have average
remaining firm periods for at least the next four years
Conservative policies aims for contracts with long firm periods and
value fast paybacks

Company Profile
Yinson Holdings is an investment holding company. Through
subsidiaries, it provides offshore support services such as trading and
logistics to the upstream oil and gas sector. It is also involved in
commodity trading.

Highlights
Transformation story. Yinson has emerged as a significant FPSO
player from its original core business in logistics and commodity trading.
This transformation story was essentially spurred by two major events:
i) its joint ventures (JVs) with Vietnam Oil & Gas Group (Petrovietnam)
on the floating, offloading and storage vessel (FSO) the FSO Bien Dong
and the FPSO Lam Son, and ii) its acquisition of Fred Olsen Production
ASA (now Yinson Production AS) that owns three FPSOs and operates
a mobile offshore production unit (MOPU).
Reaping synergies. Yinson Production AS was a strategic acquisition
for the group. The opportunity came about via a negotiation with Fred
Olsen Production, which had to pull out from the FPSO Lam Son project
due to financing issues. Yinson gained: i) Fred Olsens expertise as a
Norwegian offshore firm with over 150 years of experience and 450
capable employees, ii) its track record of over 10 successful projects
delivered and a niche in low- to mid-sized FPSO jobs, iii) an additional
fleet, iv) an additional clientele base in West Africa and South America,
and v) its existing orderbook of over MYR3.5bn. Moreover, the business
marriage was synergistic, as it offered engineering capabilities that
Yinson did not previously have.
FPSO strategy. Yinson is well-positioned in its niche as an operator of
mid-sized FPSOs (capex in the range of USD250-700m). This
separates itself from the Top 5 global FPSO players, which have bigger
scale to manage more complicated, bigger FPSO projects. The
company is actively bidding for a number of FPSO projects in regions
that see good demand for such vessels.

Profit & Loss Jan-13 Jan-14 Jan-15F
Total turnover (MYRm) 865 946 1,484
Recurring P/E (x) 54.98 43.36 18.76
P/B (x) 8.0 4.1 2.0
P/CF (x) na 79.42 31.56


Balance Sheet (MYRm) Jan-13 Jan-14 Jan-15F
Total debt 449 1290 998
Net debt 425 1012 712


Cash Flow (MYRm) Jan-13 Jan-14 Jan-15F
Cash flow from operations (52) (26) 63
Forex effects (13) (3) 0


Conservatism. Management adopts a prudent strategy and will only
accept projects with long firm contract periods. This is consistent with its
risk management policies of sustaining stable cash flow and hedging
itself against industry risks. Compared with the majority of its peers, we
note that Yinson has a higher proportion of firm periods in its average
contract life (about ~60%).

Securing a Petronas licence. Aside from bidding for global FPSO
jobs, Yinson is expected to be more involved in oil & gas (O&G) projects
in Malaysia possibly in marginal fields as it is in the midst of
securing a Petronas license through its associate. At this juncture, the
company is not keen to expand its capabilities into floating liquefied
natural gas (FLNG) projects, as the substantial capex requirements are
not in line with its mid-sized FPSO niche.

Company Report Card
Latest results. Yinsons FY14 core profit rose 26.8% on the back of
higher contributions from the chartering of two vessels, ie a 1-month
contribution from Yinson Productions FPSO fleet and maiden
contributions from the FSO Bien Dong, which is accounted for as
income from JVs.
Balance sheet/cash flow. Net gearing rose to 1.9x in FY14 as a result
of the consolidation of debts of Yinson Production and a MYR400m
acquisition loan. However, Yinson is carrying out a rights issue that will
raise up to MYR500-600m in gross proceeds, partially to pare down its
net gearing to our 0.6-0.7x forecast.
ROE. We expect ROE to be diluted to 11-12% due to the series of
capital-raising carried out in the past. This is in line with the ROE of its
competitor, Bumi Armada (BAB MK, BUY, FV: MYR4.45).
Dividend. Yinson has been consistently paying a 2.5% dividend for the
past five financial years. We expect the company to announce its FY14
dividend closer to its AGM.
Management. Mr Lim Chern Yuan, the son of the founder and group
chairman Mr Lim Han Weng, was recently appointed as the CEO of
Yinson. He was spearheading various operations of the group prior to
this appointment. Given the young blood of the current management
team, we believe Yinson will be actively hunting for more business
opportunities.

Recommendation
BUY with a FV of MYR10.90. Our FV is based on SOP, which uses a
DCF valuation on Yinsons FPSO business (valued on both firm and
extension contracts). This implies a 23x FY15F P/E, in line with that of
Bumi Armadas. We like the companys transformation story and
managements prudent strategies in undertaking a business that can be
cyclical in nature.
Our FV will be adjusted to MYR2.70-3.00 post rights issue and share
split (completion expected towards 2HCY14). We are assuming Yinson
will: i) secure an average of one floating production unit contract every
two years, and ii) repay its MYR240m debt from the proceeds of the
rights issue.
77 77
APPENDICES
Appendix 1
Ranking Based on Market Cap & FY14 ROE (%)
Ranking Company Mkt Cap (MYRm) FY14 ROE Page
1 Kossan Rubber Industries 2736.8 24% 41
2 POS Malaysia 2502.5 14% 53
3 Yinson Holdings 2294.8 12% 75
4 Syarikat Takaful Malaysia 2117.0 26% 65
5 Hong Leong Industries 2086.1 13% 35
6 Berjaya Auto 1766.9 53% 19
7 Perisai Petroleum 1713.2 8% 49
8 Ta Ann Holdings 1545.1 12% 69
9 Tune Insurance 1503.8 21% 73
10 GDEX 1458.5 37% 33
11 Inari Amertron 1364.4 47% 39
12 Scientex 1293.8 21% 63
13 Press Metal 1289.4 14% 55
14 Barakah Offshore Petroleum 971.3 41% 17
15 Prestariang 858.0 47% 57
16 LBS Bina 857.4 9% 43
17 Tambun Indah 787.0 27% 71
18 Suria Capital 733.8 8% 67
19 Pantech Group 538.9 14% 47
20 Pintaras Jaya 522.0 18% 51
21 Caring Pharmacy 426.7 24% 21
22 OCK Group 393.2 18% 45
23 REDtone International 370.9 24% 59
24 SBC Corporation 341.3 10% 61
25 Hovid 259.7 14% 37
26 Gadang Holdings 249.8 13% 31
27 Esthetics International 233.0 13% 29
28 EITA Resources 157.3 16% 27
29 Catcha Media 115.8 -17% 23
30 Complete Logistics 87.4 15% 25
78 78
Appendix 2
Ranking Based on FY14 Dividend Yield (%) & FY14 DPS (sen)
Ranking Company FY14 Div Yield FY14 DPS (sen) Page
1 LBS Bina 5.9% 10.8 43
2 Hong Leong Industries 4.9% 32.0 35
3 Pantech Group 4.4% 3.8 47
4 Tambun Indah 4.2% 8.4 71
5 Syarikat Takaful Malaysia 3.9% 50.4 65
6 Pintaras Jaya 3.8% 13.0 51
7 EITA Resources 3.4% 4.2 27
8 Scientex 3.3% 19.4 63
9 GDEX 3.2% 3.7 33
10 Prestariang 3.1% 12.0 57
11 Suria Capital 3.1% 8.0 67
12 SBC Corporation 2.9% 6.0 61
13 POS Malaysia 2.8% 13.1 53
14 Inari Amertron 2.8% 7.6 39
15 Ta Ann Holdings 2.5% 10.5 69
16 Esthetics International 2.4% 3.0 29
17 Gadang 2.4% 3.0 31
18 Caring Pharmacy 2.4% 5.7 21
19 Tune Insurance 2.2% 4.3 73
20 Kossan Rubber Industries 2.0% 8.5 41
21 REDtone International 1.9% 1.4 59
22 Berjaya Auto 1.7% 3.7 19
23 Press Metal 1.7% 4.2 55
24 Hovid 0.0% 0.0 37
25 Complete Logistics 0.0% 0.0 25
26 Catcha Media 0.0% 0.0 23
27 Barakah Offshore Petroleum 0.0% 0.0 17
28 Perisai Petroleum 0.0% 0.0 49
29 Yinson Holdings 0.0% 0.0 75
30 OCK Group 0.0% 0.0 45
79 79
Appendix 3
Ranking based on FY14 P/E (x) & FY14 EPS (sen)
Ranking Company PF14 P/E (x) FY14 EPS (sen) Page
1 Press Metal 6.0 41.9 55
2 Complete Logistics 6.0 12.0 25
3 SBC Corporation 6.9 32.0 61
4 Gadang Holdings 7.1 18.0 31
5 EITA Resources 8.6 14.4 27
6 Tambun Indah 8.6 23.0 71
7 Scientex 8.9 65.6 63
8 Pintaras Jaya 9.9 33.0 51
9 Pantech Group 9.9 9.6 47
10 Barakah Offshore Petroleum 10.4 15.0 17
11 Suria Capital 11.3 23.0 67
12 LBS Bina 11.4 16.0 43
13 Hovid 11.4 3.2 37
14 Ta Ann Holdings 12.0 34.6 69
15 REDtone International 13.1 5.8 59
16 Syarikat Takaful Malaysia 13.4 96.8 65
17 Hong Leong Industries 13.6 48.1 35
18 Berjaya Auto 14.1 15.6 19
19 Inari Amertron 14.4 19.1 39
20 Esthetics International 14.7 8.5 29
21 Kossan Rubber Industries 15.0 28.5 41
22 Caring Pharmacy 16.7 11.7 21
23 Prestariang 16.9 23.1 57
24 POS Malaysia 17.9 26.0 53
25 Tune Insurance 19.5 10.8 73
26 OCK Group 24.4 5.7 45
27 Perisai Petroleum 25.7 6.2 49
28 Yinson Holdings 42.3 21.0 75
29 GDEX 59.9 2.9 33
30 Catcha Media nm -2.6 23
80 80
Appendix 4
Ranking Based on FY14 P/B (x) & FY14 BVPS (MYR)
Ranking Company FY14 P/B (x) FY14 BVPS (MYR) Page
1 Press Metal 0.72 3.49 55
2 Gadang Holdings 0.77 1.66 31
3 Suria Capital 0.83 3.11 67
4 Complete Logistics 0.85 0.85 25
5 SBC Corporation 0.93 2.55 61
6 LBS Bina 0.98 1.86 43
7 EITA Resources 1.28 0.95 27
8 Pantech Group 1.31 0.73 47
9 Ta Ann Holdings 1.41 2.96 69
10 Hovid 1.44 0.28 37
11 Hong Leong Industries 1.68 3.89 35
12 Pintaras Jaya 1.70 1.92 51
13 Scientex 1.78 3.29 63
14 Esthetics Internatioanl 1.89 0.67 29
15 Perisai Petroleum 1.91 0.83 49
16 Tambun Indah 2.13 0.93 71
17 POS Malaysia 2.46 1.89 53
18 REDtone International 2.93 0.29 59
19 Syarikat Takaful Malaysia 3.27 3.98 65
20 Kossan Rubber Industries 3.27 1.31 41
21 Caring Pharmacy 3.71 0.53 21
22 Tune Insurance 3.82 0.55 73
23 OCK Group 3.90 0.35 45
24 Barakah Offshore Petroleum 4.02 0.39 17
25 Yinson Holdings 4.15 2.14 75
26 Inari Amertron 5.49 0.50 39
27 Berjaya Auto 6.04 0.36 19
28 Catcha Media 6.16 0.14 23
29 Prestariang 7.07 0.55 57
30 GDEX 19.72 0.09 33
81 81
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^

c
l
o
s
i
n
g

s
h
a
r
e

p
r
i
c
e

a
s

a
t

8

A
p
r
i
l

2
0
1
4
S
o
u
r
c
e
:

C
o
m
p
a
n
y

d
a
t
a
,

R
H
B

e
s
t
i
m
a
t
e
s

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