PP 7767/09/2010(025354)

Malaysia Corporate Highlights

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

R e su l ts N o t e
26 May 2010
MARKET DATELINE

Malaysian Pacific Industries Share Price

Fair Value
:
:
RM6.00
RM8.46
FY11 Earnings Growth To Be Driven By X3-MLP Recom : Outperform
(Maintained)

Table 1: Investment Statistics (MPI; Code: 3867) Bloomberg: MPI MK

Core Net Core Core EPS Core EV/ Net
FYE Revenue Profit # EPS Growth PER P/NTA C.EPS* EBITDA P/CF Gearing GDY
Jun (RMm) (RMm) (sen) (%) (x) (x) (sen) (x) (x) (x) (%)
2009a 1,150.6 (14.9) (7.1) (113) (84.5) 1.4 - 9.4 7.3 0.5 3.3
2010f 1,332.4 94.7 45.1 736 13.3 1.3 43 3.9 3.3 0.3 5.5
2011f 1,459.0 141.9 67.6 50 8.9 1.3 63 3.9 2.6 0.3 8.3
2012f 1,619.5 132.8 63.3 (6) 9.5 1.2 72 3.4 3.1 0.1 8.3
# Adjusted for exceptional items
Main Market Listing / Trustee Stock / Syariah-Approved Stock By The SC * Consensus Based On IBES Estimates

RHBRI Vs. Consensus

♦ In line. 9M06/10 results were in line with our but above market Above
consensus, accounting for 74.6% and 82.7% of our full-year forecast and In Line
market consensus respectively. 3Q06/10 reported turnover of RM353.7m Below
(+2.0% qoq, 75.7% yoy) was mainly due to higher MLP sales stemming
from stronger-than-expected demand from the automotive segment and Issued Capital (m shares) 209.9
Market Cap (RMm) 1,313.9
consumer electronics.
Daily Trading Vol (m shs) 0.1
♦ Improving margins. MPI’s 3QFY06/10 EBITDA margin increased 18%-pts 52wk Price Range (RM) 4.22-7.50
yoy and 0.5%-pt qoq to 25.8% mainly due to higher utilisation rates of Major Shareholders: (%)

around 90% (vs. 3QFY06/09 and 2QFY06/10 utilisation rates of 35% and Hong Leong Industries 62.7

80% respectively), as well as lower operating expenses stemming from MPI 5.2

cost-cutting measures.
FYE June FY10 FY11 FY12
♦ X3-MLP to drive earnings growth in FY11. We understand from EPS chg (%) - - -
management that one of its top three customers has completed the Var to Cons (%) +4.9 +7.3 -12.0
higher-margin X3-MLP qualification and pilot production to commence in
mid-3QFY06/10. With more customers expected to complete the product Share Price Chart

qualification by 3QFY06/10, MPI expects X3-MLP to go into high volume

production by 4QFY06/10. Management expects X3-MLP capacity to ramp
up to 1m/day by 4QFY06/10. Note that X3-MLP is the smallest package
(approximately 50% of current MLP footprint) and would be used in the
mobile phone application (i.e. for the transient voltage suppression
technology).

♦ Second interim dividend. MPI announced a second interim dividend of

15 sen, bringing gross DPS to-date to 33 sen or yield of 5.5%. Relative Performance To FBM KLCI

♦ Risks to our view. 1) Slower-than-expected economic recovery

dampening demand for equipment and consumer electronics; 2) MPI

strengthening of RM against US$; and 3) higher raw material cost.

♦ Forecasts. No change to our forecasts for now. FBM KLCI

♦ Investment case. Going forward, we believe MPI’s medium-term

earnings visibility remains bright given still-resilient chips demand from
China. Further-out, we highlight that earnings growth would be driven by
Wong Chin Wai
stronger chips demand from US and Europe as well as margin expansion (603) 92802158
stemming from higher contribution of high-density packages and module wong.chin.wai@rhb.com.my
packages. Hence, we reiterate our Outperform call with fair value of
RM8.46/share which is based on unchanged 15x CY10 PER. Yap Huey Chiang
(603)92802166
yap.huey.chiang@rhb.com.my
Please read important disclosures at the end of this report.

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 26 May 2010

Table 2. MPI Quarterly Results

FYE Jun 3Q09 2Q10 3Q10 % qoq % yoy 9M09 9M10 % yoy Comments
Revenue 201.3 346.6 353.7 2.0 75.7 888.9 1012.6 13.9 Up qoq and yoy due to higher
MLP sales stemming from
stronger-than-expected demand
from the automotive segment

Operating (149.5) (259.4) (266.9) 2.9 78.6 (662.9) (759.5) 14.6

expenses
Other op (36.1) 0.5 4.5 >100 >100 (68.2) 4.3 >100
(exp)/inc

EBITDA 15.7 87.6 91.3 4.1 >100 157.8 257.5 63.1

EBITDA margin 7.8 25.3 25.8 47.6 76.2 Higher qoq and yoy due to
(%) higher utilisation rates as well
as cost-cutting measures. Note
that 3QFY06/10 utilisation rate
increased to 90% (vs. 85% in
2QFY06/10 and 35% in
3QFY06/09)

Depreciation & (61.0) (53.7) (52.5) (2.2) (13.9) (181.4) (161.8) (10.8)
amortisation

EBIT (45.3) 34.0 38.8 14.1 >100 (23.5) 95.7 >100

EBIT margin (%) (22.5) 9.8 11.0 (18.5) 28.1

Interest Income 0.6 0.3 0.6 103.7 (4.5) 2.2 1.2 (47.7)
Interest Expense (2.4) (1.3) (1.5) 17.0 (36.5) (8.7) (4.5) (49.0)
0.0
Profit Before (72.0) 33.0 37.9 14.8 >100 (55.0) 92.4 >100 Filtered down from EBIT and
Tax partially lifted by higher interest
income
PBT margin (%) (35.8) 9.5 10.7 (33.2) 27.1

Taxation (0.7) (3.0) (3.8) 25.3 >100 (6.2) (9.2) 49.5

Effective tax rate 1.0 (9.1) (9.9) 2.5 (30.4)
(%)

Minority Interest 18.9 (4.3) (7.0) 62.7 ->100 20.4 (12.6) ->100

Net Profit (53.9) 25.7 27.1 5.6 >100 (40.8) 70.6 >100
Core Net Profit (28.9) 25.7 27.1 5.6 >100 (15.8) 70.6 >100 Filtered down from EBIT and
partially lifted by higher interest
income

Source: Company, RHBRI estimates

Table 3. Earnings Forecasts Table 4. Forecast Assumptions

FYE June (RMm) FY09 FY10F FY11F FY12F FYE June FY10F FY11F FY12F
Capacity utilisation
Turnover 1150.6 1332.4 1459.0 1619.5 Ipoh (%) 70.0 90.0 90.0
Turnover growth (%) (20.0) 15.8 9.5 11.0 Suzhou (%) 75.0 85.0 85.0

Cost of Sales 1068.7 (1132.6) (1203.7) (1376.6)

Gross Profit 82.0 199.9 255.3 242.9

EBITDA 153.3 371.0 427.9 416.8

EBITDA margin (%) 13.3 27.8 29.3 0.0

Depreciation (231.9) (236.5) (241.2) (245.9)

Interest income (70.2) 3.7 4.4 5.3
Interest exp (79.0) (82.2) (85.4) (88.9)

Pretax Profit (61.7) 121.4 174.3 159.4

Tax (4.2) (9.1) (14.8) (13.5)
Minority interest 26.0 (17.6) (17.6) (13.0)

Net Profit (39.9) 94.7 141.9 132.8

Core Net Profit (14.9) 94.7 141.9 132.8
Source: Company data, RHBRI estimates

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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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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.

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.

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actions of third parties in this respect.

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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