PP 7767/09/2010(025354)

7 July 2010

Malaysia Corporate Highlights

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

New s Upda te
7 July 2010
MARKET DATELINE

PLUS Expressways Share Price

Fair Value
:
:
RM3.39
RM4.13
Obtains Approval To Construct Fourth Lane For Recom : Outperform
(Maintained)
Certain Stretches of NSE & NKVE

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 14.3 - 2.8 1.4 19.5 4.9
2010f 3,290.7 1,181.9 23.6 23.6 -0.4 14.3 24.5 2.7 1.5 18.5 5.3
2011f 4,260.1 1,814.5 36.3 36.3 53.5 9.3 33.0 2.4 1.3 25.2 5.9
2012f 4,390.5 1,846.1 36.9 36.9 1.7 9.2 34.9 2.1 1.2 23.2 6.5
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) 16,950.0
♦ Greenlight to expand certain stretches of NSE and NKVE. PLUS had on
Daily Trading Vol (m shs) 4.6
yesterday obtained greenlight from the Government to undertake the
52wk Price Range (RM) 3.14 – 3.51
construction of the fourth lane along certain stretches of the North-South
Major Shareholders: (%)
Expressway (NSE) and New Klang Valley Expressway (NKVE) consisting of: Khazanah Nasional 60.6
1) Shah Alam – Rawang; 2) Shah Alam – Jalan Duta; and 3) Nilai (north) – EPF 11.5
Seremban (in order to ease the heavy traffic volume flow) for RM1,143m. KWAP 6.9

♦ While the details of the proposed funding and other arrangement for the FYE Dec FY10 FY11 FY12
fourth lane widening works are currently under review and subject to EPS chg (%) - - -
approval of the Government and stakeholders (likely be finalised and Var to C.EPS (%) -3.9 8.8 5.3
announced in a few months’ time), we believe the arrangement is unlikely to
PE Band Chart
have an adverse impact on PLUS’s fundamentals, as any unfavourable
funding terms would likely be voted against by the bondholders.
PER = 15x

♦ Unlikely to result in traffic diversion, may boost traffic volume in the PER = 11x
PER = 13x

longer term. While the construction of the fourth lane widening works
would likely to last for the next 2-3 years, we believe the lane expansion is
unlikely to result in traffic diversion, using its past experience (when the
third lane widening works were carried out) as a guide. Over the longer
term, we believe the lane expansion will boost PLUS’s core expressways’
traffic volume, as this would help ease the heavy traffic flow at these
stretches. Relative Performance To FBM KLCI

♦ 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, FBM KLCI
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 PLUS
and India).

♦ Earnings forecasts. Our traffic volume growth and earnings forecasts are
currently under review with upside bias.

♦ Investment case. Indicative fair value is maintained at RM4.13 that is

equivalent to PLUS’s DCF-derived NPV (based on WACC of 7.7% and long-
term traffic volume growth rate of 3% p.a. for its core expressways). We Chye Wen Fei
(603) 92802172
continue to like PLUS for its defensive earnings growth and decent dividend
chye.wen.fei@rhb.com.my
yield of 5-6% per annum. Maintain Outperform.

Please read important disclosures at the end of this report.

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 7 July 2010

Table 2: Earnings Forecast Table 3: 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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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
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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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