PP 7767/09/2010(025354)

20 August 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
20 August 2010
MARKET DATELINE

PLUS Expressways Share Price

Fair Value
:
:
RM3.98
RM4.33
1HFY10 Net Profit Rises On Higher Traffic Volume 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 23.7 9.9 16.8 - 3.3 1.4 19.5
2010f 3,346.4 1,223.8 24.5 24.5 3.1 16.3 24.5 3.1 1.4 19.1
2011f 4,332.9 1,869.1 37.4 37.4 52.7 10.6 33.0 2.7 1.3 25.6
2012f 4,465.5 1,902.4 38.0 38.0 1.8 10.5 34.9 2.5 1.2 23.5
Main Market Listing / Trustee Stock / Syariah-Approved Stock By The SC * Consensus Based On IBES Estimates

RHBRI Vs. Consensus

Above
♦ In line. 1HFY12/10 reported net profit of RM618.7m, in line with
In Line
expectations, accounting for 50.6% of our and 50.5% of consensus full-year Below
estimates.
Issued Capital (m shares) 5,000
♦ YoY. 1HFY12/10 net profit rose by 10.5% to RM618.7m from RM560.0m a Market Cap (RMm) 19,900
year ago due to: 1) An 11.2% increase in toll collection (which was in turn Daily Trading Vol (m shs) 4.9
driven by a 9.8% traffic volume growth registered at PLUS’s core 52wk Price Range (RM) 3.19 – 4.03
expressways; and 2) A 9.1% increase in toll compensation that more than Major Shareholders: (%)
Khazanah Nasional 60.6
offset higher net interest and tax expenses.
EPF 11.5
♦ QoQ. 2QFY12/10 net profit rose by 6.8% to RM319.6m from RM299.1m in KWAP 6.9

the previous quarter mainly due to a 5.7% qoq increase in turnover.

FYE Dec FY10 FY11 FY12

♦ Declares 7.5 sen interim dividend. PLUS declared an interim single-tier

EPS Revision (%) - - -
Var to Cons (%) -0.3 11.4 8.1
DPS of 7.5 sen, which translates into a net yield of 1.9%. The entitlement
date for the interim dividend is 6 Sep 10 while payment date is 24 Sep 10. PE Band Chart
For the full-year, we expect PLUS to declare a total DPS of 18 sen
(translating to a total net yield of 4.5%), which is in line with management’s
PER = 15x
targeted payout ratio of 75% of its FY12/10 net profit. PER = 13x
PER = 11x

♦ Traffic volume growth to moderate in the remaining quarters.

Despite having achieved traffic volume growth of 9.8% at PLUS’s core
expressways in 1HFY12/10, management is keeping its traffic volume
guidance of 5% in FY12/10, as traffic volume growth is likely to moderate in
the remaining two quarters on the back of the high base effect in
Relative Performance To FBM KLCI
2HFY12/09.

♦ Risks. These include: 1) FY12/10-12 traffic volume growth rate of PLUS’s FBM KLCI
core expressways coming in below our assumption of 5.0% for FY12/10,
PLUS
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).

♦ Forecasts. Unchanged.

♦ Investment case. DCF-derived fair value is RM4.33 (based on WACC of

Coverage Under CMDF-Bursa
7.7%, FY12/10 traffic volume growth assumption of 5% and long-term Malaysia Research Scheme
traffic volume growth assumption of 3% p.a. for its core expressways). We
continue to like PLUS for its defensive earnings quality and decent dividend Chye Wen Fei
yield of 4.5-5.5% per annum. Maintain Outperform. (603) 9280 2172
chye.wen.fei@rhb.com.my
Please read important disclosures at the end of this report.

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Table 2: Earnings Review (YoY Cumulative)

FYE Dec 2009 2010 % YoY Observations/ Comments
(RMm) 6M 6M Chg
Turnover 1,510.0 1,672.9 10.8 Boosted by: (1) An 11.2% increase in toll collection; and (2) A 9.1%
increase in toll compensation.
Toll collection 1,127.1 1,252.9 11.2 Mainly driven by a 9.8% growth in traffic volume registered at PLUS’s core
expressways.
Toll compensation 382.9 417.7 9.1
Others 0.0 2.3 NM
EBIT 1,107.1 1,237.1 11.7 Due to higher topline.
Net inc/(exp) -341.8 -376.4 10.1 Net debt increased to RM8,345.1m from RM7,674.5m a year ago.
Associate - 0.3 NM
Pretax profit 765.4 861.1 12.5 Filtered down from EBIT.
Taxation -205.0 -243.2 18.6
Minority interests -0.4 0.8 >100
Net profit 560.0 618.7 10.5 Partly mitigated by higher tax expense.
EPS (sen) 11.2 12.4 10.5

EBIT margin (%) 73.3 73.9 0.6 pt

Pretax margin (%) 50.7 51.5 0.8 pt
Net profit margin (%) 37.1 37.0 -0.1 pt Due to higher effective tax rate.
Effective tax rate (%) 26.8 28.2 1.5 pts

Table 3: Earnings Review (QoQ)

FYE Dec 2010 2010 %QoQ Observations/ Comments
(RMm) 1Q 2Q Chg
Turnover 813.2 859.7 5.7 Boosted by: (1) A 6.3% increase in toll collection; and (2) A 6.3% increase
in toll compensation.
Toll collection 607.2 645.7 6.3 Traffic volume at PLUS’s core expressways increased by 10.5% qoq.
Toll compensation 206.0 211.7 2.7
Other revenue 2.3 NM
EBIT 605.4 631.7 4.3 Higher topline was partly mitigated by higher operating expenses.
Net inc/(exp) -187.9 -188.5 0.3 Due to higher cost of financing that more than offset lower net debt.
Associate - 0.3 NM
Pretax profit 417.5 443.6 6.2 Helped by positive contribution from associate.
Taxation -118.6 -124.6 5.0
Minority interests 0.2 0.6 >100
Net profit 299.1 319.6 6.8 Filtered down from pretax profit.
EPS (sen) 6.0 6.4 6.8

EBIT margin (%) 74.4 73.5 -1.0 pt

Pretax margin (%) 51.3 51.6 0.3 pt
Net profit margin (%) 36.8 37.2 0.4 pt
Effective tax rate (%) 28.4 28.1 -0.3 pt

Table 4: Earnings Forecast Table 5: 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

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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
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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
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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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securities, subject to the duties of confidentiality, will be made available upon request.

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