PP 7767/09/2010(025354)

24 May 2010

Malaysia Corporate Highlights

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

R e su l ts / B r ief ing N o t e
24 May 2010
MARKET DATELINE

PLUS Expressways Share Price

Fair Value
:
:
RM3.34
RM4.13
1QFY12/09 Traffic Volume Rises By 9.1% Recom : Outperform
(Maintained)

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

Net Net
FYE Revenue Profit EPS Growth PER C. EPS * P/NTA Gearing ROE GDY
Dec (RMm) (RMm) (sen) (%) (x) (sen) (x) (x) (%) (%)
2009a 3,179.0 1,186.4 23.7 9.9 14.1 - 2.7 1.4 19.5 4.9
2010f 3,290.7 1,181.9 23.6 -0.4 14.1 24.5 2.6 1.5 18.5 5.4
2011f 4,260.1 1,814.5 36.3 53.5 9.2 33.0 2.3 1.3 25.2 6.0
2012f 4,390.5 1,846.1 36.9 1.7 9.0 34.9 2.1 1.2 23.2 6.6
Main Market Listing / Trustee Stock / Syariah-Approved Stock By The SC * Consensus Based On IBES Estimates

RHBRI Vs. Consensus

Above
♦ In line. 1QFY12/10 came in within expectations, accounting for 25.0-
In Line
25.3% of our full-year forecast and the full-year market consensus. Below

♦ Traffic volume growth to moderate in the remaining quarters. Issued Capital (m shares) 5,000
Despite having achieved a yoy traffic volume growth of 9.1% at PLUS’s core Market Cap(RMm) 16,700.0
expressways, management expects traffic volume growth to moderate to 3- Daily Trading Vol (m shs) 4.4
4% in the remaining quarters, due mainly to the high-base effect. 52wk Price Range (RM) 3.12 - 3.51
Major Shareholders: (%)
♦ Financial impact arising from the implementation of FRS 139. The Khazanah Nasional 60.6
adoption of FRS 139 (effective 1 Jan 10) has resulted in a RM309.1m EPF 11.5
decline in PLUS’s net assets, arising from: (1) The fair value adjustment of KWAP 6.9

toll compensation recoverable from the Government, which is now

FYE Dec FY10 FY11 FY1
measured as the difference between the carrying amount and the DCF; and EPS Revision (%) - - -
(2) The amortisation of interest-free amount owing to immediate holding Var to Cons (%) -3.4 10.1 5.6
company (which was previously stated at cost) using the effective interest
method based on appropriate interest rate at inception. PE Band Chart

♦ Update on Indu Navatuga Infra Project. Toll operations of the newly-

PER = 15x
acquired Padalur-Trichy Highway has commenced since 6 May 10 (which PER = 13x
PER = 11x
means revenue contribution to PLUS) and the conditions precedent have
been complied with and completed on 18 May 10.

♦ Risks. The risks include: (1) FY12/10 traffic volume growth rate of PLUS’s
core expressways coming in below our assumption of 3.0%. Ceteris paribus,
our sensitivity analysis indicates that PLUS’s DCF-derived NPV and FY12/10
Relative Performance To FBM KLCI
earnings will fall by 2.4% and 1.8% for every 1%-pt shortfall to our
FY12/10 traffic volume growth assumption; (2) Higher-than-expected FBM KLCI
maintenance cost; and (3) Operating risks in overseas ventures (in
particular, Indonesia and India).
PLUS
♦ Forecasts. Unchanged.

♦ Investment case. Indicative fair value is RM4.13, equivalent to PLUS’s

DCF-derived NPV (based on WACC of 7.7%, FY12/09 traffic volume growth
rate of 5.5% and long-term traffic volume growth rate of 3% p.a. for its
core expressways). We continue to like PLUS for its defensive earnings Coverage Under CMDF-Bursa
growth and decent dividend yield of 5-6% per annum. Also, investors may Malaysia Research Scheme
be in for a windfall if the rumoured privatisation materialises at a high price.
Chye Wen Fei
Maintain Outperform.
(603) 92802172
chye.wen.fei@rhb.com.my
Please read important disclosures at the end of this report.

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FY1Q12/10 Results

♦ In line. FY12/09 net profit of RM1,186.4m came in within expectations, accounting for 99.3-102.3% of our
forecast and the market consensus.

♦ YoY. 1QFY12/10 net profit grew by 7.4% from RM278.6m to RM299.1m due to: (1) A 10.3% increase in toll
collection (arising from a 9.1% traffic volume growth registered at PLUS’s core expressways); (2) A 10% increase
in toll compensation that more than offset a 9.6% increase in interest expense (resulting from the issuance of
additional Islamic securities in mid-09) and higher tax expense.

♦ QoQ. 1QFY12/10 net profit declined by 5.0% from RM315.0m to RM299.1m mainly due to a 4.8% decline in toll
revenue on the back of seasonal factors (4Q traffic volume is traditionally stronger on the back of year-end school
holidays).

Key Takeaways From Conference Call

♦ Traffic volume growth to moderate in the remaining months of FY12/10. Despite having achieved a yoy
traffic volume growth of 9.1% at PLUS’s core expressways, management expects traffic volume growth to
moderate to 3-4% in the remaining quarters, due mainly to the high-base effect. In our forecast, we are
projecting traffic volume at PLUS’s core expressways (consisting of North-South Expressway, New Klang Valley
Expressway, Federal Highway Route 2, and Seremban-Port Dickson Highway) to grow at 3% in FY12/10.

♦ Financial impact arising from the implementation of FRS 139. The adoption of FRS 139 (effective 1 Jan 10)
has resulted in a RM309.1m decline in PLUS’s net assets, arising from: (1) The fair value adjustment of toll
compensation recoverable from the Government, which is now measured as the difference between the carrying
amount and the DCF; and (2) The amortisation of interest-free amount owing to immediate holding company
(which was previously stated at cost) using the effective interest method based on appropriate interest rate at
inception.

♦ Update on Indu Navatuga Infra Project. Toll operations of the newly acquired Padalur-Trichy Highway has
commenced since 6 May 10 (which means revenue contribution to PLUS, albeit insignificant) and the conditions
precedent have been complied with and completed on 18 May 10. To recap, PLUS proposed to acquire a 74%
stake in Indu Navatuga Infra Project Private Ltd, India, which owns Padalur-Trichy Highway in India for Rs999m
(or RM73.9m) in Jan 2010. The highway is currently 95% completed and the remaining work is expected to be
completed by end-Mar 2010.

Risks

♦ Risks to our view. The risks include: (1) FY12/10 traffic volume growth rate of PLUS’s core expressways coming
in below our assumption of 3.0% respectively. Ceteris paribus, our sensitivity analysis indicates that PLUS’s DCF-
derived NPV and FY12/10 earnings will fall by 2.4% and 1.8% for every 1%-pt shortfall to our FY12/10 traffic
volume growth assumption; (2) Higher-than-expected maintenance cost; and (3) Operating risks in overseas
ventures (in particular, Indonesia and India).

Earnings Forecasts

♦ Earnings forecasts. Maintained

Valuations And Recommendation

♦ Investment case. Indicative fair value is RM4.13, equivalent to PLUS’s DCF-derived NPV (based on WACC of
7.7%, FY12/09 traffic volume growth rate of 5.5% and long-term traffic volume growth rate of 3% p.a. for its
core expressways). We continue to like PLUS for its defensive earnings growth and decent dividend yield of 5-6%
per annum. Also, investors may be in for a windfall if the rumoured privatisation materialises at a high price.
Maintain Outperform.

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Table 2: Earnings Review (YoY Cumulative)

FYE Dec 2009 2010 % YoY Observations/ Comments
(RMm) 3M 3M Chg
Turnover 737.8 813.2 10.2 Boosted by: (1) A 10.3% increase in toll collection; and (2) An 10%
increase in toll compensation.
Toll collection 550.5 607.2 10.3 Mainly driven by a 9.1% growth in traffic volume registered at PLUS’s core
expressways.
Toll compensation 187.3 206.0 10.0
EBIT 535.4 605.4 13.1 Due to: (1) Higher toll revenue; and (2) Lower operating expenditure
arising from cost-cutting measures.
Net inc/(exp) -164.5 -187.9 14.2 Due to higher cost of financing.
Pretax profit 370.9 417.5 12.6 Eroded by higher net interest expense.
Taxation -92.0 -118.6 28.9 Due to a lower effective tax rate.
Minority interests -0.2 0.2 >100
Net profit 278.6 299.1 7.4 Filtered down from pretax profit.
EPS (sen) 5.6 6.0 7.4

EBIT margin (%) 72.6 74.4 1.9 pts

Pretax margin (%) 50.3 51.3 1.1 pts
Net profit margin (%) 37.8 36.8 -1.0 pt
Effective tax rate (%) 24.8 28.4 3.6 pts

Table 3: Earnings Review (QoQ)

FYE Dec 2009 2010 % QoQ Observations/ Comments
(RMm) 4Q 1Q Chg
Turnover 853.8 813.2 -4.8 Boosted by: (1) A 4.3% decline in toll collection; and (2) A 6.1% decline in
toll compensation.
Toll collection 634.2 607.2 -4.3 Traffic volume at PLUS’s core expressways eased by 3.9% qoq (4Q is
seasonally strong on the back of year-end school holidays).
Toll compensation 219.6 206.0 -6.2
EBIT 595.8 605.4 1.6 Boosted by lower operating expenses that more than offset lower turnover.
Net inc/(exp) -159.4 -187.9 17.9 Due to higher cost of financing.
Pretax profit 436.4 417.5 -4.3 Eroded by higher net interest expense.
Taxation -123.2 -118.6 -3.7
Minority interests 1.8 0.2 -86.2
Net profit 315.0 299.1 -5.0 Filtered down from pretax profit.
EPS (sen) 6.3 6.0 -5.0

EBIT margin (%) 69.8 74.4 4.7 pts

Pretax margin (%) 51.1 51.3 0.2 pt
Net profit margin (%) 36.9 36.8 -0.1 pt
Effective tax rate (%) 28.2 28.4 0.2 pt

Table 4: Earnings Forecast Table 5: Forecast Assumptions

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

Turnover 3,179.0 3,290.7 4,260.1 4,390.5 Traffic Volume Growth

Turnover growth (%) 7.1 3.5 29.5 3.1 - Core expressways 3.0% 3.0% 3.0%
- ELITE 5.0% 4.5% 4.0%
EBITDA 2,608.4 2,619.0 3,528.4 3,593.6 - Linkedua 3.0% 3.0% 3.0%
EBITDA margin (%) 82.1 79.6 82.8 81.8 - KLBK 0.0% 0.0% 0.0%

Depreciation & -363.3 -383.9 -450.0 -472.9 Risk free rate 4.6%
amortisation
EBIT 2,245.1 2,235.0 3,078.5 3,120.6 Beta 59.4%
EBIT margin (%) 70.6 67.9 72.3 71.1 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 1,575.9 2,419.3 2,461.5 Average cost of debt 7.0%
Pretax margin (%) 51.1 47.9 56.8 56.1
Targeted debt-to-equity
Tax expense -438.5 -394.0 -604.8 -615.4 Debt 65.0%
Minorities 1.3 0.0 0.0 0.0 Equity 35.0%
Net profit 1,186.4 1,181.9 1,814.5 1,846.1
Net profit margin (%) 37.3 35.9 42.6 42.0 WACC 7.7%
Source: RHBRI Source: RHBRI

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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
manner whatsoever and no reliance upon such statement by anyone shall give rise to any claim whatsoever against RHBRI. RHBRI and/or its associated persons
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
of persons who receive it. The securities discussed in this report may not be suitable for all investors. RHBRI recommends that investors independently evaluate
particular investments and strategies, and encourages investors to seek the advice of a financial adviser. The appropriateness of a particular investment or
strategy will depend on an investor’s individual circumstances and objectives. Neither RHBRI, RHB Group nor any of its affiliates, employees or agents accepts
any liability for any loss or damage arising out of the use of all or any part of this report.

RHBRI and the Connected Persons (the “RHB Group”) are engaged in securities trading, securities brokerage, banking and financing activities as well as providing
investment banking and financial advisory services. In the ordinary course of its trading, brokerage, banking and financing activities, any member of the RHB
Group may at any time hold positions, and may trade or otherwise effect transactions, for its own account or the accounts of customers, in debt or equity
securities or loans of any company that may be involved in this transaction.

“Connected Persons” means any holding company of RHBRI, the subsidiaries and subsidiary undertaking of such a holding company and the respective directors,
officers, employees and agents of each of them. Investors should assume that the “Connected Persons” are seeking or will seek investment banking or other
services from the companies in which the securities have been discussed/covered by RHBRI in this report or in RHBRI’s previous reports.

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
information known to, professionals in other business areas of the “Connected Persons,” including investment banking personnel.

The research analysts, economists or research associates principally responsible for the preparation of this research report have received compensation based
upon various factors, including quality of research, investor client feedback, stock picking, competitive factors and firm revenues.

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.

RHBRI is a participant of the CMDF-Bursa Research Scheme and will receive compensation for the participation. Additional information on recommended
securities, subject to the duties of confidentiality, will be made available upon request.

This report may not be reproduced or redistributed, in whole or in part, without the written permission of RHBRI and RHBRI accepts no liability whatsoever for the
actions of third parties in this respect.

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