PP 7767/09/2010(025354)

3 August 2010

Malaysia Corporate Highlights

RHB Research
Institute Sdn Bhd
A member of the
RHB Banking Group
Company No: 233327 -M

Resu lts Pr eview

3 August 2010
MARKET DATELINE

PLUS Expressways Share Price

Fair Value
:
:
RM3.80
RM4.33
Expecting Strong 2QFY12/10 Performance Recom : Outperform
(Maintained)

Table 1 : Investment Statistics (PLUS; Code: 5052) Bloomberg: PLUS MK

Net Core EPS Net
FYE Turnover Profit EPS EPS Growth PER# C.EPS* P/NTA Gearing ROE GDY
Dec (RMm) (RMm) (sen) (sen) (%) (x) (sen) (x) (x) (%) (%)
2009a 3,179.0 1,186.4 23.7 23.7 9.9 16.0 - 3.1 1.4 19.5 4.3
2010f 3,346.4 1,223.8 24.5 24.5 3.1 15.5 24.5 3.0 1.4 19.1 4.7
2011f 4,332.9 1,869.1 37.4 37.4 52.7 10.2 33.0 2.6 1.3 25.6 5.3
2012f 4,465.5 1,902.4 38.0 38.0 1.8 10.0 34.9 2.3 1.2 23.5 5.8
Main Market Listing / Trustee Stock / Syariah-Approved Stock By The SC * Consensus Based On IBES Estimates

Issued Capital (m shares) 5,000

Market Cap (RMm) 19,000
♦ Stronger 2Q results (both yoy and qoq). We believe PLUS’s 2QFY12/10
Daily Trading Vol (m shs) 4.7
results (due out by end-Aug) will likely to come in stronger (both yoy and 52wk Price Range (RM) 3.14 – 3.91
qoq), thanks to the encouraging growth registered at PLUS’s core Major Shareholders: (%)
expressways (consisting of North-South Expressway, New Klang Valley Khazanah Nasional 60.6
Expressway, Federal Highway Route 2, and Seremban-Port Dickson Highway) EPF 11.5
in 2QFY12/10 (+10.5% yoy and 5.8% qoq). KWAP 6.9

♦ Results likely to be within expectations. Based on an actual traffic FYE Dec FY10 FY11 FY12
volume of 4,069.9m PCU-km registered at PLUS’s core expressways in EPS chg (%) - - -
Var to C.EPS (%) -0.3 +11.4 +8.1
2QFY12/10, we believe PLUS will likely to register a net profit of RM321.7m
in 2QFY12/10. This means PLUS’s 1HFY12/10 net profit is likely to come in at PE Band Chart
RM620.8m, which is 50.6-50.7% of our full-year forecast and the full-year
market consensus. PER = 15x
PER = 13x
♦ Recent hike in petrol price likely to have a temporary and contained PER = 11x

impact on PLUS’s traffic volume. While the increase in petrol price will
hurt PLUS’s traffic volume, we believe the impact will likely be temporary.
Recall, traffic volume at PLUS’s core expressways contracted by 0.1% yoy in
2QFY12/06 (down from a 1.4% yoy growth in registered in 1QFY12/06),
following the 30sen/litre hike in RON97 petrol price in end-Feb 06. However,
PLUS had already started to shrug off the impact, recording a 0.8% yoy
Relative Performance To FBM KLCI
growth in traffic volume in 3QFY12/06 (the 2nd full quarter after the petrol
price hike) and the traffic volume subsequently normalised in 4QFY12/06
(+4.2% yoy). This time around, we believe the impact is also likely to be FBM KLCI
contained given that the quantum raised is small relative to the previous PLUS

petrol price hikes in Feb 06 and Jun 08.

♦ Earnings forecasts. Maintained.

♦ Risks. These include: (1) FY12/10-12 traffic volume growth rate of PLUS’s
core expressways coming in below our assumption of 5.0% for FY12/10, and
3.0% p.a. for FY12/11 and FY12/12; (2) Higher-than-expected maintenance
cost; and (3) Operating risks in overseas ventures (in particular, Indonesia
and India).

♦ Investment case. Although PLUS’s share price has risen by 12.7% since 5
Jul 10 due to strong traffic volume growth, we are maintaining our
Chye Wen Fei
Outperform recommendation and DCF-derived fair value of RM4.33 (based (603) 9280 2172
on WACC of 7.7%). We continue to like PLUS for its defensive earnings chye.wen.fei@rhb.com.my
quality and decent dividend yield of 5-6% per annum.

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Table 2: Earnings Forecasts Table 3: Forecast Assumptions

FYE Dec (RMm) 2009a 2010f 2011f 2012f 2010f 2011f 2012f

Turnover 3,179.0 3,346.4 4,332.9 4,465.5 Traffic Volume Growth

Turnover growth (%) 7.1 5.3 29.5 3.1 - Core expressways 5.0% 3.0% 3.0%
- ELITE 5.0% 4.5% 4.0%
EBITDA 2,606.2 2,674.7 3,601.3 3,668.6 - Linkedua 3.0% 3.0% 3.0%
EBITDA margin (%) 82.0 79.9 83.1 82.2 - KLBK 0.0% 0.0% 0.0%

Depreciation & Risk free rate 4.6%

amortisation -361.1 -384.0 -450.0 -473.0
EBIT 2,245.1 2,290.8 3,151.2 3,195.6 Beta 59.4%
EBIT margin (%) 70.6 68.5 72.7 71.6 Equity risk premium 7.5%
Cost of equity 9.1%
Net interest expense -621.5 -659.1 -659.1 -659.1
Pretax profit 1,623.6 1,631.7 2,492.1 2,536.5 Average cost of debt 7.0%
Pretax margin (%) 51.1 48.8 57.5 56.8
Targeted debt-to-equity
Tax expense -438.5 -407.9 -623.0 -634.1 Debt 65.0%
Minorities 1.3 0.0 0.0 0.0 Equity 35.0%
Net profit 1,186.4 1,223.8 1,869.1 1,902.4
Net profit margin (%) 37.3 36.6 43.1 42.6 WACC 7.7%
Source: RHBRI Source: RHBRI

Chart 1: Plus Technical View Point

♦ PLUS has been trading within a long-term Uptrend
Channel (UTC) since Jul 2008.

♦ But in recent months, after the stock broke out

from the key resistance of RM3.40, it triggered a
steep rally and pushed its share price to an all-time
high of RM3.91 in late Jul 2010.

♦ But yesterday, it registered a small negative candle

on the chart due to mild profit-taking pressure.

♦ Although both the momentum indicators were

pointing downward, indicating a likely retreat in the
immediate term, its outlook remains positive so
long as it can sustain at above RM3.70 or the upper
band line of the UTC.

♦ Even if it falls into the UTC, it is still trading within

the long-term uptrend.

♦ Major support level is seen near the RM3.40 level,

near the 40-day SMA at RM3.49. This means its
long-term positive view will only be threatened if it
loses RM3.40.

♦ Overhead resistance is at RM3.91.

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IMPORTANT DISCLOSURES

This report has been prepared by RHB Research Institute Sdn Bhd (RHBRI) and is for private circulation only to clients of RHBRI and RHB Investment Bank Berhad
(previously known as RHB Sakura Merchant Bankers Berhad). It is for distribution only under such circumstances as may be permitted by applicable law. The
opinions and information contained herein are based on generally available data believed to be reliable and are subject to change without notice, and may differ or
be contrary to opinions expressed by other business units within the RHB Group as a result of using different assumptions and criteria. This report is not to be
construed as an offer, invitation or solicitation to buy or sell the securities covered herein. RHBRI does not warrant the accuracy of anything stated herein in any
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may from time to time have an interest in the securities mentioned by this report.

This report does not provide individually tailored investment advice. It has been prepared without regard to the individual financial circumstances and objectives
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This report has been prepared by the research personnel of RHBRI. Facts and views presented in this report have not been reviewed by, and may not reflect
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The research analysts, economists or research associates principally responsible for the preparation of this research report have received compensation based
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The recommendation framework for stocks and sectors are as follows : -

Stock Ratings

Outperform = The stock return is expected to exceed the FBM KLCI benchmark by greater than five percentage points over the next 6-12 months.

Trading Buy = Short-term positive development on the stock that could lead to a re-rating in the share price and translate into an absolute return of 15% or more
over a period of three months, but fundamentals are not strong enough to warrant an Outperform call. It is generally for investors who are willing to take on
higher risks.

Market Perform = The stock return is expected to be in line with the FBM KLCI benchmark (+/- five percentage points) over the next 6-12 months.

Underperform = The stock return is expected to underperform the FBM KLCI benchmark by more than five percentage points over the next 6-12 months.

Industry/Sector Ratings

Overweight = Industry expected to outperform the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

Neutral = Industry expected to perform in line with the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

Underweight = Industry expected to underperform the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

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