CIMB Research has maintained their “hold” call on Tasek Corp Bhd in view of the decent

dividend yield of 5%. It has retained Tasek’s earnings per share forecasts and target
price, still pegged to calendar year 2015 price to book value ratio of 1.89 times. Tasek
recorded an annualized core net profit of 4% above CIMB’s full-year forecast for the first
half of 2015 ended June 30. However, CIMB said the results were broadly in line as
operating cost could rise in the second half of the year due to the lifting of electricity
rebates and the goods and services tax effect on other cost components. Revenue growth
reflected the industry’s healthy demand. Operating statistics showed a 4% year on year
rise in earnings before interest, tax, depreciation, and amortization (EBITDA) margin to
25% which the research house deems unsustainable. It maintained its full-year EBITDA
margin forecast of 23.9%. Tasek’s competitive outlook revolves around the widely
expected 3%-4% domestic cement demand growth in 2015. Better visibility of job flows
post announcement of the 11th Malaysia Plan is expected to support the increase in
building material orders going into 2016. “We continue to expect the moderation in
launches by selected property developer’s post-GST to be offset by the revival in demand
related to the implementation of non-residential jobs from the second half of the year
onwards,” CIMB said. It added that Tasek was unlikely to pay out handsome dividends
this year onwards, due to the full utilization of tax credits in 2014. The 40 cent first interim
single-tier dividend per share was in line, and if annualized, translates to a decent
dividend yield of 5%. “This remains the stock’s sole appeal and should be sustainable,
backed by its healthy cash balance of RM280mil as of the second quarter of 2015,” CIMB
said.

TASEK CORP BHD

By CIMB Research

Hold (No change)

Target price: RM15.17

TASEK Corp Bhd’s FY15 core net profit made up 93% of CIMB Research’s forecast.
The results were below expectations as the research house had underestimated the drag on associate
profits and the impact of higher operating cost in the fourth quarter of 2015.

Tasek’s fourth-quarter earnings before interest, taxes, depreciation and amortisation (EBITDA) margin
slid 6.3% points year-on-year to 18%, compared with CIMB Research’s full-year target of 24%.

Lower net pricing of cement products also contributed to the margin decline.

The much healthier sales volume in the fourth quarter was the only positive takeaway for the cement
and ready-mix operations.

“Following an initially estimated 3% to 4% cement demand growth in 2015, we expect 2016

total cement demand growth of 5% to 6% due to the timing of the rollout of projects and the pre/post-
GST impact on demand.

“The stronger building material orders should enable Tasek to benefit from sustained healthy sales
volume for both its cement and ready-mix divisions.

“The residential and commercial property segments should continue to be its key revenue drivers,” said
CIMB Research.

The dampening factor when it comes to increasing industry demand is that the price competition could
intensify further, as was the case in 2015.

Thus, the research house believes that 2016 could show a similar trend, especially in view of the boost in
building material demand ahead of major project implementations in 2016, such as the 11th Malaysia
Plan kick off.

New demand is expected to emerge from major infrastructure jobs, such as MRT 2 and LRT 3, while
property and high rise projects, such as the TRX and KL118 should continue to support demand too.
The 50 sen final single-tier divident per share (DPS) for the fourth quarter brought the total full-year DPS
to RM1.10, exceeding CIMB Research’s expectation of 80 sen.

This translates to a very attractive dividend yield of 7.4%.

“At this juncture, we suspect this payout level is unlikely to be sustained as Tasek has fully utilised its
section 108 tax credits since FY14. In light of the challenging earnings outlook, the dividend payout
remains the stock’s sole appeal, backed by its healthy cash balance of RM242mil as at the end of the
fourth quarter.

“We project 7% earnings-per-share growth in FY2016, anchored by healthy sales volume but offset by
stiff competition, selling price volatility and cost pressures,” said CIMB Research.

Conclusion
Domestic consumption of cement in Peninsular Malaysia is predominantly dependent on activities in the
construction sector, in particular the public infrastructural sector whose growth is correlated to
development expenditure by the government. The financial year of 2014 was challenging despite
increase in demand for cement in the domestic market arising from the continued progress from the
implementation of major infrastructure and development projects by the government, such as the MY
Rapid Transit (MRT) system and Light Rail Transit (LRT) line extensions, and partly due to the increased
pace of construction activities in the private sector ahead of the implementation of the goods and
services tax in April 2015. Although the demand for cement was favourable, the increase in transport
costs and in electricity tariffs over the years, the last increase in January 2014 when the tariff was raised
by up to 16%, has significantly added to higher production and operational costs of cement. Intense
price competition was also prevalent during the third and fourth quarters of the year which affected
margins.

Since 2012, construction growth has outperformed the overall gross domestic product and such growth
trend is expected to continue for 2015. The catalysts for the growth would come in the form of the
unveiling of the 11thMalaysia Plan (11MP 2016 to 2020) expected in May 2015, the expected rolled out
of key mega projects such as the MRT Line 2, the LRT Line 3 and the Warisan Merdeka Tower project,
and the tendered portion of the West Coast Expressway, the Sungai Besi-Ulu Kelang Elevated
Expressway and the Damansara-Shah Alam Highway. However, the concerns are the drop in oil prices
and its weakening effect on the Malaysian Ringgit which will have a bearing on development expenditure
by the government. If oil prices continue to fall further, the government may cut its expenditure on
development which will affect economic growth, in particular the construction sector. In the private
sector, the property market is expected to moderate for 2015 as construction activities may be affected
against a backdrop of the cooling residential and property market due to the tight fiscal policies on
mortgage lending and the soon-to-be implemented goods and services tax. The risks the industry may
face in 2015 would be delays in the implementation of the key mega projects by the government that
may affect the demand for consumption of cement, increases in energy costs, in particular coal and
electricity, and intense price competition among manufacturers.
Perform qualitative and perform quantitative risk analysis are two processes
within the project risk management knowledge area, in the planning process
group. Understanding the difference between the two processes may be tested
on the PMP, CAPM, and the PMI-RMP exams.

While qualitative risk analysis should generally be performed on all risks, for
all projects, quantitative risk analysis has a more limited use, based on the
type of project, the project risks, and the availability of data to use to conduct
the quantitative analysis.

A qualitative risk analysis prioritizes the identified project risks using a pre-
defined rating scale. Risks will be scored based on their probability or
likelihood of occurring and the impact on project objectives should they occur.

Probability/likelihood is commonly ranked on a zero to one scale (for

example, .3 equating to a 30% probability of the risk event occurring).

The impact scale is organizationally defined (for example, a one to five scale,
with five being the highest impact on project objectives - such as budget,
schedule, or quality).

A qualitative risk analysis will also include the appropriate categorization of

the risks, either source-based or effect-based.

Quantitative Risk Analysis

A quantitative risk analysis is a further analysis of the highest priority risks
during a which a numerical or quantitative rating is assigned in order to
develop a probabilistic analysis of the project.

A quantitative analysis:
- quantifies the possible outcomes for the project and assesses the probability
of achieving specific project objectives
- provides a quantitative approach to making decisions when there is
uncertainty
- creates realistic and achievable cost, schedule or scope targets

In order to conduct a quantitative risk analysis, you will need high-quality

data, a well-developed project model, and a prioritized lists of project risks
(usually from performing a qualitative risk analysis)

Qualitative or Quantitative?
Risk analysis is conducted in two significant ways — qualitative and quantitative risk analysis. These two type of risk
analysis can be conducted simultaneously or in a chosen order, and even within a defined period gap. Sometimes,
business managers and project leaders are unable to differentiate between these two approaches. It is vital to
understand the basic defining difference between them.
Understanding Qualitative Risk Analysis
The objective of conducting a qualitative risk analysis is to acquire safety against recognized risks and to increase the
alertness of management, team members, and all personnel who are vulnerable to them. This method of risk
analysis is designed to identify issues that are looked upon as project management impediments, but have the
potential to become definite risk factors.
A detailed qualitative analysis will also delve into the resources which are more susceptible to such risks. The
purpose is to identify rectifying measures that can incorporated to restrict or remove the causes that have given rise
to such risks and to ensure that these safety measures become a part of risk-related analytical protocol for future
reference.

Quantitative risk analysis is more focused on the implementation of safety measures that have been established, in

order to protect against every defined risk. By using a quantitative approach, an organization is able to create a very

precise analytical interpretation that can clearly represent which risk-resolving measures have been most well-suited
to various project needs. This makes the quantitative approach favored by many management teams since risk

assessments can be clearly represented in the empirical forms like percentages or probability charts, since it

emphasizes using tools such as metrics.