BIMB SECURITIES RESEARCH

MARKET INSIGHT
PP16795/03/2013(031743)

13 June 2012

Strategy

Strategy

Market Outlook 2H12
Hampered by “Euro-geddon”...
We asked ourselves if recent events will mirror that of 2011. Although the epicentre has moved venue, the manner and timing of the entire scenario is rather similar. This time, the Euro zone will be the torch bearer unfortunately not for the 2012 Olympics. Though investors are now more resilient having seen through the 2011 vagaries, how far will they stay resolute remains to be seen. In this report, we will try to analyse the impact if and when such situation arises and our stance on the local bourse. Already we have seen some downgrades on the FBMKLCI for 2012 preempting that the situation may turn for the worse. Judging by the recent earnings report for 1Q2012, we see no reasons for us to change our interim 2012 target of 1,630 at this juncture.

“Euro-geddon”? Recent financial relapse in the Euro zone had many of us recalling the incidences in 2011. The Greeks and now the Spanish had rendered Europe now as the epicentre for another potential meltdown of the global financial markets. The ongoing saga in Greece coupled with Spain’s potential financial time bomb could very well derail any faint hopes for a global recovery. Spain in particular is our main concern with a reported €300bn required to recapitalise its banking sector and if the EU leaders do not act swiftly to arrest the nation’s mounting problem, a “Eurogeddon” could be in the offing. Let’s hope this can be averted. Corporate Malaysia. Subsequent to the 1Q2012 earnings, apart from some minor tweaks to our forecasts primarily on the CPO Planters attributed to higher operational costs there were no major revisions. However, we believe bearish undertones are getting louder and whether the research fraternity prefers to wait until the next quarterly reporting season for an earnings overhaul remains to be seen. As for now, our FBMKLCI estimates for CY12 and CY13 are maintained at 10.2% and 9.6% not far from our initial forecasts of 10.5% and 9.1%. Our 2012 target? We are maintaining our 2012 FBMKLCI target at 1,630. Though there could be a likelihood of a surprise upside, we reckon it would only be during 4Q2012 as Europe and GE13 are still dictating investment sentiments. Over the immediate term, there could be some knee jerk reactions in tandem with the negative news out of Europe, the US and now possibly from China. What we like. We remained staunch advocators for the Consumer based and selective Oil & Gas stocks. Though we are positive on Plantation, recent hike in costs coupled with the softer CPO price may curtail any strong buying interests for now. The weakening RM and latex may be positive to the Rubber Gloves makers but again the sector is plagued by negative sentiments at the moment. The Construction sector remains enigmatic as there is a massive lag against expectations. The Banking sector though well capitalised we are wary of its growth momentum for 2H12. We may also opt to look at high yielding stocks which are usually deemed as defensive amid the mounting uncertainty. All said, 2H12 may pose yet another testing period for most. Then again as always, “We’ll be back”!

Kenny Yee kenny.yee@bimbsec.com.my 603-2691 1251

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Strategy
Our observation so far... It was another so near yet so far situation for the equity markets. Our FBMKLCI ascended to the high of almost 1,610 in April before the sell-down instigated by the Europeans. Obviously we are expecting a more volatile 2H12 after an impressive 1Q12 going forward. With the heightened volatility, naturally there will be a flight of funds out of equities to other asset classes particularly to the much touted safe haven in US denominated treasuries.
2011 Close China Hong Kong Korea Taiwan Indonesia Malaysia Philippines Thailand Singapore 2,199.42 18,434.39 1,843.47 7,072.08 3,821.99 1,530.73 4,371.96 1,025.32 2,646.35 As at 31/5/12 2,372.23 18,629.52 1,843.47 7,301.50 3,832.82 1,580.67 5,091.23 1,141.50 2,772.54 YTD chg 7.9% 1.1% 1.0% 3.2% 0.3% 3.3% 16.5% 11.3% 4.8% 2012 High 2,478.38 21,760.34 2,057.28 8,170.72 4,234.73 1,609.33 5,329.76 1,247.72 3,035.78 From 2011 low 9.5% 14.6% 11.5% 10.1% 17.2% 18.7% 36.8% 33.4% 9.6% From 2012 high -4.3% -14.4% -10.4% -10.6% -9.5% -1.8% -4.5% -8.5% -8.7% 180 day Volatility 19.4 26.9 24.2 22.4 23.2 11.6 19.4 22.3 17.7
Source: Bloomberg

A trader’s playground. Recent spike-up in regional volatility has rendered the equity markets a more interesting proposition for market traders especially from May 2012 onwards when the Euro zone debacle began to spew its ashes globally (again). Prior to this as depicted by the charts below, market volatility for most had been rather subdued and on a declining trend since February this year. We envisaged that market’s volatility to increase following more negatives from the recent depressing US job data. Further to this, we believe equity markets to be hampered on all three fronts namely the Euro zone (the epicentre), the US (if no immediate recovery) and China (an emerging bubble?).

Regional Market Volatility

11.70 11.60 11.50 11.40 11.30 11.20 11.10 11.00 10.90 10.80 12-Mar 19-Mar 26-Mar 6-Feb 16-Jan 23-Jan 30-Jan 5-Mar 16-Apr 23-Apr 30-Apr 2-Jan 9-Jan 2-Apr 9-Apr 7-May 14-May 21-May 28-May 13-Feb 20-Feb 27-Feb

MALAYSIA

FBMKLCI-Volatility Source: Bloomberg/BIMB Securities

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Regional Volatility
19.80 19.60 19.40 19.20 19.00 18.80 18.60 12-Mar 26-Mar 16-Jan 30-Jan 9-Apr 23-Apr 21-May 2-Jan 7-May 13-Feb 27-Feb SHANGHAI 26.20 26.15 26.10 26.05 26.00 25.95 25.90 25.85 25.80 25.75 25.70 12-Mar 16-Jan 30-Jan 2-Jan 13-Feb 27-Feb

HONG KONG

26-Mar

9-Apr

23-Apr

SHCOMP-Volatility 26.70 26.60 26.50 26.40 26.30 26.20 26.10 26.00 25.90 23-Apr 9-Apr 7-May 21-May 13-Feb 27-Feb 12-Mar 26-Mar 2-Jan 16-Jan 30-Jan KOREA 22.65 22.55 22.45 22.35 22.25 22.15 22.05 21.95 21.85 21.75

HSI-Volatility

TAIWAN

12-Mar

26-Mar

16-Jan

30-Jan

23-Apr

2-Jan

9-Apr

7-May 7-May 7-May

KOSPI-Volatility 23.80 23.60 23.40 23.20 23.00 22.80 22.60 22.40 22.20 22.00 12-Mar 16-Jan 30-Jan 2-Jan 13-Feb 27-Feb 18.80 18.70 INDONESIA 18.60 18.50 18.40 18.30 18.20 18.10 26-Mar 9-Apr 23-Apr 21-May 7-May

TWSE-Volatility

SINGAPORE

9-Apr

23-Apr

JCI-Volatility 18.70 18.50 PHILIPPINES 18.30 18.10 17.90 17.70 12-Mar 26-Mar 16-Jan 30-Jan 23-Apr 2-Jan 9-Apr 7-May 21-May 13-Feb 27-Feb 22.50 22.30

FSSTI-Volatility

THAILAND 22.10 21.90 21.70 21.50 21.30 12-Mar 26-Mar 16-Jan 30-Jan 23-Apr 2-Jan 9-Apr 21-May 13-Feb 27-Feb

PCOMP-Volatility

SET-Volatility Source: Bloomberg/BIMB Securities

21-May

13-Feb

27-Feb

12-Mar

26-Mar

16-Jan

30-Jan

2-Jan

21-May

13-Feb

27-Feb

21-May

7-May

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Weakening RM, a concern? Not really since the downtrend is a regional affair. We reckon such scenario reflects a possible flight of funds out of the region following the revival of the Euro zone crisis back in April. Notice that Bank Negara’s preferred band for the RM is wider now without any apparent intervention detected. We believe the band for RM/USD could be as wide as RM2.80-RM3.30, so long it is in sync with the regional currencies. YTD Regional currencies vs USD
6.00 4.00 2.00 0.00 01/02/12 -2.00 -4.00 -6.00 China Malaysia Korea Philippines Taiwan Thailand Indonesia Singapore Source: Bloomberg/BIMB Securities

02/02/12

03/02/12

04/02/12

05/02/12

Have we overestimated (again)? We have to admit that the research fraternity has the tendency to overestimate expectations during any market uptrend. For 2012, we are glad to say that such phenomena are not happening just yet since we have not detected any major downgrades thus far. We have been tracking analysts’ expectations via a bottom-up approach for all the 30 constituents of the FBMKLCI and based on the prevailing figures (ours plus consensus), the “fair value” for the benchmark FBMKLCI is slated at 1,680 (see chart below). Having said that, bearish undertones are becoming more apparent in view of the recent earnings disappointments and we believe analysts may look to downgrade their figures following the prevailing dismal global investment environment.

Tracking the Consensus

FBMKLCI
1,700 1,680 1,660 1,640 1,620 1,600 1,580 1,560 1-Oct-11

1-Nov-11 1-Dec-11

1-Jan-12

1-Feb-12 1-Mar-12

1-Apr-12 1-May-12

1-Jun-12

Source: Bloomberg/BIMB Securities

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Marginal downgrades. By dissecting prevailing figures, we deduced that sentiments remain sanguine on the banking and consumer industries. Though we are confident of the consumer sector, we are less comfortable on the banking industry as top line growth may surprise on the downside in the 2H particularly now with the stringent approval rates coupled with the declining NIM. Whilst the three IPOs may indeed buoy non-interest income for some, on the whole we believe most will find it difficult to sustain bottom line growth. With regards to the oil & gas players, we still believe values are to be found amongst the smaller players though the bigger ones may be weighed down by delays in contract allocations.

Sectoral Consensus
155.0 150.0 145.0 140.0 135.0 130.0 125.0 120.0 Aug-10 Aug-11 Dec-10 Dec-11 Oct-10 Feb-11 Apr-11 Oct-11 Feb-12 Apr-12 Jun-10 Jun-11 70.0 Aug-10 Feb-11 Apr-11 Aug-11 Feb-12 Feb-12 Feb-12 Dec-10 Dec-11 Dec-11 Apr-12 Apr-12 Apr-12 Jun-10 Oct-10 Jun-11 Jun-11 Jun-11 Oct-11 Oct-11 Oct-11 80.0 75.0

Banking

95.0 90.0 85.0

Plantation

140.0 135.0 130.0 125.0 120.0 115.0 110.0 105.0 100.0 95.0 Aug-10

Consumer

135.0 130.0 125.0 120.0 115.0 110.0 105.0 100.0

Construction

Feb-11

Apr-11

Aug-11

Feb-12

Dec-10

Dec-11

Apr-12

Jun-10

Oct-10

Jun-11

Oct-11

Aug-10

120.0

320.0

Oil&Gas
115.0 110.0 105.0 100.0 95.0 Aug-10 Feb-11 Apr-11 Aug-11 Feb-12 Dec-10 Dec-11 Apr-12 Jun-10 Oct-10 Jun-11 Oct-11

300.0 280.0 260.0 240.0 220.0 200.0 180.0 160.0 Aug-10

Rubber Glove

Feb-11

Apr-11

Aug-11

Jun-10

Dec-10

Aug-11

Dec-10

Oct-10

Feb-11

Apr-11

Jun-10

Source: Bloomberg/BIMB Securities

Dec-11

Oct-10

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Exodus of foreigners? Based on the net participation of net foreign funds so far, there are no signs of any great migration of funds out of Malaysia. In fact, net foreign fund participation on the local bourse YTD is still positive totalling RM7bn. Having said that, the quantum of net foreign participation had dropped drastically from the high in March of RM3.4bn to the current RM447m and it will be interesting to see if the figure will decline further over the immediate period. Total Participation by segment Net Foreign Participation (RMm)
800.00 600.00 400.00 200.00 1,500.00 0.00 1,450.00 (200.00) (400.00) (600.00) (800.00) Jan-11 1,400.00 1,350.00 1,300.00 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 May-12

FBMKLCI
1,650.00 1,600.00 1,550.00

Foreign Net (RM m)

FBMKLCI
Source: Bursa Malaysia/BIMB Securities

Foreign presence. From our foreign shareholding analysis, we doubt there will be another steep sell-off as seen in July last year. This is down to the fact that foreign shareholding amongst our compilation of Top 50 market capitalised companies in Bursa is now at a cumulative holding of a low 20.26% as opposed to the 22.1% level last July.

Foreign Shareholdings
26.0 25.0 24.0 23.0 22.0 21.0 20.0 19.0 18.0 Feb-09 Apr-09 Feb-10 Apr-10 Feb-11 Apr-11 Feb-12 Aug-09 Aug-10 Aug-11 Dec-04 Dec-06 Dec-08 Dec-09 Dec-10 Dec-11 Apr-12 Jun-09 Jun-10 Oct-09 Oct-10 Jun-11 Oct-11 Foreign shareholding currently @ 20.26% from 21.48% @ end-April

Source: Bloomberg/BIMB Securities

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Short term pain, long term gain. The impending IPOs namely Felda Group Venture Holdings (FGVH), Gas Malaysia and Integrated Healthcare Holdings could collectively mop up some RM16bn from the market. This will invariably create a liquidity vacuum within the local bourse as investors would opt for the IPOs amid some reshuffling of their portfolios. Nonetheless, upon listing, the scenario should improve as the 3 potential “giants” will certainly enhance the market’s overall liquidity thereafter.

Company Gas Malaysia Felda Global Ventures Holdings Integrated Healthcare Holdings

Possible listing June 2012 June 2012 July 2012 TOTAL

Estimated Market Cap RM2.8-3.2bn RM17-20bn RM10-15bn RM30-38bn

IPO RM734m RM10bn RM4.5-6bn RM15-17bn

Source: Prospectus and various

GE13. The General Election conundrum rages on. It had been awhile where various dates had been posted since last year. We reckon the whole speculation is becoming rather tiresome and should leave it to the politicians. Then again, one cannot totally ignore the fact that GE13 does have some bearing on the market. At time of writing and after numerous false alarms, the latest date rumoured is November. High yielding stocks back in favour? If prevailing uncertainty is prolonged, it is only natural that most funds would divert their focus back to the defensive/high dividend yielding stocks. Though we are not strong advocators, we have to accept that such strategy has a strong case so long when the yields are above the 5% level and not otherwise. Append below are the Top high yielding stocks of which we believe are worth the while.

Company Dutch Lady Amway Maxis Tasek Corp

Potential Div Yield (%) 7.9 6.8 6.1 5.8

Company Shell Refining Bintulu Port Digi.Com Batu Kawan

Potential Div Yield (%) 5.4 5.2 5.0 5.0
Source: Bloomberg/BIMB Securities

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Sectorally speaking.
SECTORS CONSTRUCTION OVERWEIGHT Prognosis Despite the aggressive contract flows, most construction related players disappoint with their performances so far. Overall, the KLCON fell by 5.20% versus the 1.6% up for the FBMKLCI. To date, a total RM16.8bn worth had been announced. Of the total, 79.9% is derived from KVMRT of SBK line or RM13.5bn. Though we expect shrinkage in contract flows for the 3Q12, we foresee the sector to be well supported th by the prospective projects under 10 MP and Budget 2012 valuing at about RM67.7bn encompassing SCORE and GemasJohor EDT project, further development of West Coast Expressway as well as the remaining of KVMRT. We are Overweight on the sector given the stream of incoming projects to be announced. Our picks for the sector are Kimlun (BUY, FV: 2.24) and WCT (BUY, FV: RM3.19). Amid the current uncertainties, we believe consumer-related stocks would continue to attract investor interest. This sector is also set to benefit from the recent Government’s introduction of the new Malaysia Remuneration System that had increased the civil servants pay by 7-13% as well as the minimum wage policy of between RM800-RM900 for some 3.2m workers within the private sectors. Despite the volatile raw material prices (although most of the raw materials have soften this year), we also believe that the resilient domestic consumer spending would provide F&B players with stable earnings growth moving forward. Latest quarterly earnings for companies under our coverage were largely below expectations mainly due to slow contract awards where Petronas only spent RM8.7bn in the 1Q. However, bidding activities and contract pipeline remain intact and continue to point towards an active 2H focusing on marginal fields, floating solutions, fabrications and maintenance. While receding geopolitical risk and growing economic headlines have caused crude price to contract, we have yet to see signs of capex contractions by upstream players. On the domestic front, we believe most of the ongoing projects/tenders will proceed to arrest declining production and to meet Petronas’ export commitments. We are OVERWEIGHT on the sector and have BUY recommendations on Bumi Armada (TP: RM4.44), Dayang (TP: RM2.43), Dialog (TP: RM2.78) and Uzma (TP: RM2.70). YTD average CPO price of RM3,235/mt is slightly above our full year estimates of RM3,200/mt. Despite recent weakness, we believe CPO price to recover to between RM3,000/mt and RM3,300/mt due to lower production figures. Nonetheless, we do not discount the possibility of prolonged uncertainty which could drag CPO price and put our price assumption under pressure. As a result, we did a sensitivity analysis by applying lower CPO price assumption of RM3,000/mt for 2012 and RM2,850/mt for 2013. Even with the lower CPO price assumption, we are still comfortable with the BUY rating on Hap Seng Plant, TH Plant, and also IOI Corp. For the moment, we are maintaining our price assumption at RM3,200/mt and have BUY on Hap Seng Plant (TP: RM3.80), IOI Corp (TP: RM6.20), KLK (TP: RM25.10), Batu Kawan (TP: RM19.80), and IJM Plant (TP: RM3.50). TH Plant (TP: RM2.80) is also a BUY following recent sharp decline. Top Picks Kimlun (TP: RM2.24)

CONSUMER – F&B OVERWEIGHT

QL Resources (TP: RM3.70)

OIL & GAS OVERWEIGHT

Uzma (TP: RM2.70) Dayang (TP: RM2.43)

PLANTATION OVERWEIGHT

Hap Seng Plantations (TP: RM3.80)

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Strategy
RUBBER GLOVES OVERWEIGHT Earnings reported in the recent quarter were mixed. Whilst Top Glove and Hartalega came in within expectations, Supermax and Kossan were below our estimates. The underperformances were mainly due to softer selling price resulted from stronger competition. Meanwhile, latex price has been trending below RM8/kg in the past 3 months without much fluctuation. Despite the Thai Government intervention to support rubber price earlier this year, it has dropped below RM7/kg early June. Meanwhile, the weakening of MYR against USD would be welcome news for glove makers as well. If the current latex price and currency exchange level are sustained for a longer period, earnings shall improve further in the coming quarters. We maintain OVERWEIGHT on the sector with BUY recommendation on Top Glove (TP: RM5.66), Supermax (TP: RM2.11) and Kossan (TP: RM3.66). Competition within the telco industry has intensified following the launch of Maxis new affordable prepaid plan despite voice revenue is near saturation point. Then, Digi introduced its Prepaid Smart Plan providing customers four times more value. We believe other mobile operators would retaliate soon. Despite growing number of users, we expect margin to decline for mobile operator due to the introduction of cheaper plans which would reduce the overall ARPU. In the meantime, DiGi is modernising its network to cater for the huge data demand and ultimately, will be Long Term Evolution (LTE) enabled. As for TM, subscribers for Unifi are growing faster than expected; while Axiata is expecting strong growth from its Indonesian operations. Nonetheless, we are maintaining our NEUTRAL view on the sector as we do not foresee any major changes in the telco landscape as yet. We like Maxis (TP: RM6.90) for its defensive nature with dividend yield of more than 6%. We maintain our BUY recommendation on Digi (TP: RM4.50) while NEUTRAL on Axiata (TP: RM5.60) and TM (TP: RM5.70). Top Glove (TP: RM5.66)

TELECOMMUNICATIONS NEUTRAL

Maxis (TP: RM6.90; Div Yield: 6.1%)

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Just in case. Though we do not envisage such a scenario to unfold, nonetheless we have conducted a study to gauge the “floor” for the FBMKLCI in case when someone triggered the panic button. Here we have fundamentally and quantitatively set the floor value for each of the FBMKLCI constituents. Though there may be detractors with some of the values, we have to qualify that the set of figures for the stocks are merely indicative and may not react concurrently. Based on our revised value and a bottom approach, the FBMKLCI will be scrapping the bottom of the barrel at 1,375.

A Bottom-up Approach
Company Air Asia AMMB Axiata BAT Bumi Armada CIMB DIGI Genting Genting Malaysia Hong Leong Bank Hong Leong FG IOI Corp KLK Maybank MMHE Maxis MMC Corp P Chem P Dagangan P Gas PPB Group Public Bank RHB Sime Darby Telekom Tenaga UEM Land UMW YTL Corp YTL Power FBMMKLCI Est. Market PE Current price* RM 3.52 6.21 5.37 54.44 4.00 7.50 4.00 10.00 3.69 12.28 11.85 5.25 22.36 8.75 4.98 6.51 2.70 6.70 20.57 17.20 17.00 13.76 7.43 9.68 5.39 6.67 2.01 7.99 1.84 1.66 1580.67 14.5x Consensus target 4.07 6.70 5.45 51.01 4.40 7.82 3.90 11.82 4.15 13.32 14.37 5.32 23.40 9.30 4.80 6.02 3.16 7.24 19.42 17.08 15.63 15.03 7.96 11.08 5.41 7.20 2.53 8.85 1.67 2.02 1,678.98 15.5x BIMB’s floor value 3.20 5.43 4.35 43.58 3.82 6.76 3.69 9.72 3.48 8.09 8.79 4.42 20.58 7.17 3.84 5.58 2.40 6.15 16.61 14.43 10.72 12.86 7.17 8.97 4.62 5.37 1.91 6.45 1.37 1.53 1,375.22 13.0x
Source: Bloomberg/ BIMB Securities

Potential change -9.1% -12.5% -19.0% -19.9% -4.5% -9.9% -7.8% -2.8% -5.8% -34.1% -25.9% -15.8% -8.0% -18.0% -23.0% -9.8% -11.3% -8.2% -19.3% -16.1% -37.0% -6.5% -3.5% -7.3% -14.3% -19.5% -5.0% -19.3% -25.7% -7.8% -13.0%

Valuation Methodology PER PB PER DDM PER PB DDM PER PER PB PB PER PER PB PER DDM PER PER DDM DDM PER PB PB PER DDM PER PB PER PER PER

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Destination ASIA. As always, we believe funds will eventually return to the region as we still see Asia as a solid value proposition as compared to the others. We are confident that once the funds have had exhausted the various asset classes, it is inevitable that Asia will be their preferred destination. Recent selloff has rendered regional valuations more appealing as well. In view of this, we are maintaining our 2012 FBMKLCI target at 1,630 (unchanged since November 2011) for now and that the market may surprise on the upside with the benchmark index to possibly test 1,680 by year end as we rollover to 2013.

Current PER Country China Hong Kong Korea Taiwan Indonesia Malaysia Philippines Thailand Singapore Trailing PER 12.73 8.93 22.62 21.80 19.43 15.35 17.38 14.69 9.03 2012e 10.22 9.51 9.54 14.24 13.07 14.72 15.62 11.71 12.73 2013f 8.77 8.58 8.35 11.68 11.07 13.31 13.92 10.09 11.36

EPS Growth 2012e 21.7% -10.3% 85.2% 16.1% 29.3% 10.2% 14.0% 18.1% -38.3% 2013f 16.6% 10.9% 14.3% 21.9% 18.0% 9.6% 12.2% 16.1% 12.1%
Source: Bloomberg

Solid, Visible and Friendly. Visibility supported by solid sovereign ratings should ensure Asia as the place to be as most will welcome inflow of foreign funds. Although Malaysia may not be ranked amongst the top must visit list, we should benefit in tandem with the regional uptrend, if any.
Moody's China Malaysia Indonesia Singapore Thailand South Korea Japan Philippines Hong Kong POS STABLE STABLE STABLE STABLE POS STABLE POS POS Aa1 A3 Baa3 Aaa Baa1 A1 Aa3 STABLE STABLE POS STABLE STABLE STABLE NEG POS STABLE S&P AAABB+ AAAu BBB+ A AA-u BB AAA STABLE STABLE STABLE STABLE POS NEG STABLE STABLE Fitch A+ ABBBAAA BBB A+ A+ BB+ AA+

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Still wealthy. The main reason for our faith in “Destination Asia” solely lies on the fact that Asian countries remain the wealthiest region as most have seen their respective foreign reserves improved since our last update end-2011. Based on the latest figures, Asia’s foreign reserves had expanded by a further USD351bn YTD to USD6.64tril or 53% of the world’s foreign reserves. Therefore, in terms of stability, visibility and liquidity Asia remains as the best destination for funds. Then again, investors gravitating towards the US 10year Treasury with yields of 1.4-1.6% still astound us. However, the adage “Home is where the heart is” still holds, we suppose.

Regional Foreign Reserves
450000 400000 350000 HONG KONG 300000 250000 200000 150000 100000 50000 0 11/1/2000 11/1/2002 11/1/2004 11/1/2006 11/1/2008 11/1/2010 7/1/2001 3/1/2002 7/1/2003 3/1/2004 7/1/2005 3/1/2006 7/1/2007 3/1/2008 7/1/2009 3/1/2010 7/1/2011 3/1/2012 INDIA INDONESIA MALAYSIA PHILIPPINES SINGAPORE SOUTH KOREA TAIWAN THAILAND

Finally, unearthing our Top picks. Without a doubt, picking out solid value propositions are getting more difficult by the day. Although we would prefer to recommend the smaller and mid cap stocks, liquidity is still the utmost concern hence we have also include Maxis as one of our top selection purely from the dividend yield perspective. As for exposure on the Construction and Oil & Gas sectors, small remain beautiful. CPO planters may now be besieged by concerns over the softening CPO prices, nonetheless we like Hap Seng Plant for its solid margins and attractive yields.

BIMB’s top picks.
Company DAYANG HAP SENG PLANT KIMLUN MAXIS QL UZMA Price 2.00 2.98 1.47 6.51 3.12 2.09 Target price 2.43 3.80 2.24 6.90 3.70 2.70 2012 PE 11.9 10.9 7.3 20.8 19.7 7.7 2013 PE 10.1 10.1 5.9 20.5 16.0 5.8 Dividend yield 2.5% 6.0% 4.3% 6.1% 1.8% 1.9% Potential total returns 24.0% 27.5% 54.2% 12.1% 18.6% 31.1%

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Dayang Enterprise
Keeping Fingers Crossed
Stock Data Bloomberg Ticker Market Cap Issued shares 52-week range (H) 52-week range (L) 3-mth avg daily volume Free Float Shariah Compliant Share Performance (%) Absolute vs. KLCI Financial Highlights FYE 31 Dec Turnover RMm) EBIT Pretax profit Core Net Profit EBIT margin Pretax margin Effective tax rate ROE ROA Net Gearing (x) Core EPS (sen) Core EPS growth PER (%) (x) DPS (sen) Div. Yield (%) NTA/share (RM) Growth ratios Turnover EBIT Pretax profit Core Net profit Share Price Chart DEHB MK 1,100.00 Equity 550 2.25 1.41 0.4 28.1% Y Altman Z-score YTD price chg YTD KLCI chg Beta Major Shareholders Naim Cendera Holding Tengku Dato' Yusof Ling Suk Kiong 3mth (0.2) (7.0) 5.5 9.3% 2.6% 1.1 33.6% 10.1% 10.0% 12mth 0.0% (3.2)

Buy◄►
Price: Target Price: RM2.00 (+21.5% upside) RM2.43
While we have tweaked our FY12 and FY13 earnings estimates lower for Dayang recently, we still like the company which has a niche exposure in Topside Maintenance (TSM) and Hook-up and Commissioning (HUC) for offshore platforms for its i) commendable orderbook size of RM1.4bn ~ 3.4x of FY11 revenue, ii) bright prospects of adding sizeable contract this year and iii) potential further investment in Perdana Petroleum (PP) which would in our view value and operation accretive. Maintain our Buy call at target price of RM2.43. Solid with recurring income. While its business model may not be as complicated as its other bigger peers, Dayang’s business is supported by its long term contracts entered with PSCs which offers recurring income offering a certain level of earnings stability and visibility. Strong ordebook with pleasant surprises. With orderbook estimated at RM1.4bn or 3.4x of FY11 revenue, strong earnings visibility is envisaged over the next 2-3 years. Orderbook replenishment is bright with a total of RM7bn HUC tenders up for grabs this year. Formal tender is expected to be called in June this year and contract is likely to be awarded by end of this year as existing contracts are expected to expire by then. Looking back, we rate Dayang’s chances as superior in securing part of the combined RM7bn contract, more so, the merger between Sapura and Kencana has reduced 1 license holder from competing. Further investment in PP. As PP has recently proposed to offload its 26.9% stake in Petra Energy we are expecting Dayang to further increase its investment in the latter from the current 11.53%. This will continue to foster the two groups’ existing commercial corporations and allowing Dayang to have a more effective business diversification. With Dayang’s vessel utilization running tight, PP also offer the best solution at an attractive price. View & Valuation. Given the potential of a sizable contract procurement later this year and the potential higher participation in PP, we continue to favour the stock and recommend a Buy call with a target price of RM2.43 based on PER of 14.5x on FY12 EPS of 16.8sen.

1mth (2.9) (1.7)

2009 197.0 50.9 52.4 44.8 25.9% 26.6% -14.5% 13.8% 9.7% 0.2 8.1 55.2% 24.6 3.20 1.6% 0.6

2010 255.4 83.2 83.1 67.7

2011 382.3 111.8 106.6 83.9

2012E 403.1 121.2 116.8 92.3

2013E 479.9 143.6 138.2 109.2 29.9% 28.8% -21.0% 15.9% 12.3% Net Cash 19.9 18.3% 10.1 5.96 3.0% 1.2

32.6% 29.2% 30.1% 32.5% 27.9% 29.0% -18.5% -21.3% -21.0% 18.2% 16.0% 15.7% 12.4% 12.3% 11.7% 0.1 Net Cash Net Cash 12.3 15.3 16.8 51.2% 23.9% 10.0% 16.2 13.1 11.9 3.20 5.00 5.03 1.6% 2.5% 2.5% 0.7 1.0 1.1

54.9% 19.1% 33.6% 55.2%

29.7% 63.5% 58.5% 51.2%

49.7% 34.3% 28.3% 23.9%

5.4% 8.5% 9.6% 10.0%

19.0% 18.5% 18.3% 18.3%

2.50

2.00

1.50

1.00 Jun-11

Sep-11

Dec-11

Mar-12

Jun-12

Chiong Tong Chai chiongtc@bimbsec.com.my 03-26918887 ext 175

www.bimbsec.com.my

| 13

Strategy

Hap Seng Plantations
Dividend Play
Stock Data Bloomberg Ticker Market Cap (RM'mn) Issued shares (mn) 52-week high 52-week low 3-mth avg daily volume ('000) Free Float Shariah Compliant Share Performance (%) Absolute vs. KLCI Financial Highlights FYE 31 Dec FFB Prod. ('000 mt) Turnover EBIT Pretax profit Net Profit EPS (sen) Gross DPS (sen) Div Yield (%) NTA/share (RM) PE Ratio EBIT Margin Pretax Margin Effective tax rate ROE ROA Net Gearing (x) Growth Ratios FFB Turnover EBIT Pretax profit Net profit Share Price Chart 3.30 3.10 2.90 2.70 2.50 2.30 2.10 Jun-11 2010 677.1 473.8 227.3 226.4 169.1 21.14 13.00 4.36 2.20 14.10 47.98% 47.78% 25.30% 9.83% 8.44% N. Cash 0.64% 26.97% 65.60% 67.52% 68.95% 2011 739.0 654.9 337.1 339.5 253.0 31.62 20.00 6.71 2.35 9.42 51.47% 51.84% 25.48% 13.90% 12.24% N. Cash 9.14% 38.23% 48.27% 49.96% 49.59% HAPL MK 2,384.0 800.0 3.23 2.29 7,114.26 17.76% Y Altman Z-score 7.72 YTD price chg 7.97 YTD KLCI chg 2.67 Beta 0.80 Major Shareholders Haps Seng Cons. 55.16% Innoprise Corp 15.00% EPF 6.22% 1mth (0.33) 0.87 2012E 658.6 610.4 289.9 292.7 219.5 27.44 18.00 6.04 2.44 10.86 47.49% 47.95% 25.00% 11.46% 10.20% N. Cash -10.88% -6.78% -14.00% -13.77% -13.22% 3mth (1.97) (1.55) 2013E 703.1 681.4 312.0 315.8 236.9 29.61 20.00 6.71 2.54 10.06 45.78% 46.35% 25.00% 11.89% 10.62% N. Cash 6.76% 11.63% 7.62% 7.90% 7.90% 12mth 18.27 8.98 2014E 774.4 714.9 322.8 327.8 245.8 30.73 21.00 7.05 2.64 9.70 45.15% 45.85% 25.00% 11.88% 10.65% N. Cash 10.14% 4.91% 3.47% 3.77% 3.77%

Buy◄►
Price: Target Price: RM2.98 (+27.5% upside) RM3.80
Hap Seng Plantations growth over the past 2 years had been solid thanks to favourable palm products prices and a significant improvement in FFB yield. Despite the encouraging achievements in the past 2 years, the latest quarterly result was below expectation due to a sharp decline in FFB production. In view of this, we have recently revised down our target price slightly to RM3.80. Maintain the stock as our top pick for the sector due to the attractive dividend yield and undemanding valuation. Double digit growth. Hap Seng Plantations has shown a robust growth in the past 2 years with revenue increasing 27.0% and 38.2% for FY10 and FY11 respectively largely due to favourable palm product prices and a significant improvement in FFB yield. Higher revenue coupled with favourable palm products prices enabled the Group to enjoy better margins and allowed it to record higher net income growth rate of 68.9% and 49.6% for the same period.
'000 tonnes 750 740.1 730 710 690 670 650 2008 2009 FFB Production 672.8 677.1 RM /mt 3,350 739.0 3,100 2,850 2,600 2,350 2,100 2010 2011 Average CPO Price Realised

Latest quarterly result below expectation. Despite the encouraging result for the past 2 years, the latest quarterly result was below expectation due to a steeper than expected fall in FFB production. As a result, we have revised downward our revenue and earnings forecast by 7.6% and 1.0% for FY12 and FY13 respectively. More than 6.0% dividend yield. The Group is committed to ensure a healthy dividend payout of 60% of their net income. For the past 3 years, it has been paying more than what has been promised. Based on this, we anticipate a total dividend of 18.0 sen for FY12, translating into a net dividend yield of more than 6.0%. Valuation & View. Following the recent earnings revision, We have revised down our target price slightly to RM3.80 (from RM3.85 previously). Despite the reduction, Hap Seng Plantations remains our top pick for the sector due to the attractive dividend yield and a relatively low valuation as compared to the industry average. Maintain BUY.

Aug-11

Oct-11

Dec-11

Feb-12

Apr-12

Ng Keat Yung nkyung@bimbsec.com.my 03-26918887 ext 181

www.bimbsec.com.my

| 14

Strategy

Kimlun Berhad
Small But Beautiful
Stock Data Bloomberg Ticker Market Cap (m) Issued shares 52-week range (H) 52-week range (L) 3-mth avg daily volume Free Float Shariah Compliant Share Performance (%) Absolute vs. KLCI Financial Highlights FYE Dec (RMm) Revenue EBIT Pretax profit Net Profit EPS (sen) EPS growth (%) PER (x) DPS (sen) Div. Yield (%) NTA/share (RM) EBIT margin Pretax margin Effective tax rate ROE ROA Net Gearing (x) Growth ratios Turnover EBIT Pretax profit Net profit Share Price Chart
KICB MK 358.3 Equity

Buy◄►
Price: Target Price: RM1.47 (+54.2% upside) RM2.24
3.4 8.8% 2.6% 2.0 39.5% 5.8% 4.5% 12mth (13.5) (17.3)

240.5 1.89 1.00 313,791 50.3% Y

Altman Z-score YTD price chg YTD KLCI chg Beta Major Shareholders
Pang Tin Pang Khang Hau Phang Piow

Kimlun has transformed from a small to one of the main contractors for a big value projects. YTD Kimlun has secured 8 projects worth RM794.2m. In addition, with a strong orderbook of RM1.9bn with more opportunities ahead as well as expansion into property development, Kimlun would be the best candidate to position itself in this sector. BUY with a target price of RM2.24 translating to a potential upside of more than 54%. Solid orderbook. Kimlun’s orderbook now stands at RM1.9bn circa. 2.5x of FY11’s construction revenue. YTD, Kimlun has secured 8 projects with total contract value of RM794.2m including the precast concrete TLS for the KVMRT Project (SBK Line) worth at RM48.49m from MMC-Gamuda JV. In addition, we expect Kimlun to obtain more contract packages for construction of KVMRT and other project under 10th MP as well as potential beneficiaries for MRT 2 and 3 which are expected to announce in 2H2013. Backed by solid orderbook, we estimate the group to register a steady growth of 24.3% in FY12. More opportunities awaiting. Given its strong track record in supplying tunnel lining segments, Kimlun is set to benefit from both Malaysia and Singapore as the company has been supplying to Singapore’s MRT projects since 2005. The Singapore MRT & LRT rail network is expected to expand additional 130.3km by 2020. For the next 10 years, Singapore is projected to allocate some SGD60bn for rail lines and complex expressway. In 2013, two new lines namely the Thomson Line and the Eastern Region Line are up for tender and we believe Kimlun are amongst the parties involved. Healthy financial position. Kimlun has maintained its current ratio above 1.5 for the past 3 years, whereas debt-to-equity ratio remains below 2 despite the aggressive investments in higher level of operations. Kimlun’s Altman Z-score of 3.4 indicates that the financial position of the Group is solid. View & Valuation. We expect lower profit margin going forward due to i) the higher set-up costs for new manufacturing plant in Negeri Sembilan; ii) engagement of specialist contractors for certain projects; and iii) higher financing costs to fund capex, however, its strong orderbook should negate the shock of lower profit margin. We peg a target price of RM2.24 based on peer’s PER of 11.3x over its FY12 EPS forecast of 19.78sen translating to a potential upside of more than 54% based on its strong fundamental and high potential for upcoming projects. We have a BUY rating on this stock.

1mth (5.1) (17.3)

3mth (3.9) (3.4)

2009 435.4 45.2 42.8 31.5 13.8 42.0% 10.5 0.0 0.0 0.46 10.4% 9.8% 26.4% 30.0% 10.6% Ncash

2010 527.6 50.9 47.9 36.6 16.0 16.0% 9.1 4.8 3.3% 0.81 9.6% 9.1% 23.7% 19.8% 9.3% Ncash

2011 652.1 61.4 58.3 42.7 18.6 16.7% 7.8 5.1 3.5% 0.94 9.4% 8.9% 26.8% 19.7% 8.3% Ncash

2012E 810.6 68.6 64.3 47.6 19.8 6.1% 7.3 6.2 4.3% 1.09 8.5% 7.9% 26.0% 19.1% 7.7% 0.2

2013E 946.6 85.9 79.6 58.9 24.5 23.8% 5.9 6.4 4.4% 1.28 9.1% 8.4% 26.0% 20.1% 8.0% 0.2

5.4% 41.1% 46.6% 42.0%

21.2% 12.5% 11.9% 16.0%

23.6% 20.8% 21.6% 16.7%

24.3% 11.7% 10.3% 11.5%

16.8% 25.2% 23.8% 23.8%

2.00 1.80
1.60

1.40
1.20

1.00 Jun-11

Sep-11

Dec-11

Mar-12

Jun-12

The Research Team research@bimbsec.com.my 03-26918887 ext 141

www.bimbsec.com.my

| 15

Strategy

Maxis
Riding on Dividend Yield
Stock Data Bloomberg Ticker Market Cap Issued shares 52-week range (H) 52-week range (L) 3-mth avg daily volume Free Float Shariah Compliant Share Performance (%) Absolute vs. KLCI Financial Highlights FY 31 Dec (RMm) Turnover EBITDA Pretax profit Core Net Profit EPS (sen) PER (x) DPS (sen) Div. Yield (%) NTA/share (RM) EBITDA margin Pretax margin Effective tax rate ROE ROA Net Gearing (x) Growth ratios Turnover EBITDA Pretax profit Core Net profit EPS Share Price Chart
6.60 6.40 6.20 6.00 5.80 5.60
5.40 5.20 5.00
Maxis MK 47,475.0 Equity 7,500.0 6.40 5.16 4,663,661 19.7% Y

Buy▲
Price: Target Price:
6.4 16.1% 2.1% 0.5 70.0% 5.2% 5.1%

RM6.51 (+6.0% upside) RM6.90

Altman Z-score YTD price chg YTD KLCI chg Beta Major Shareholders Binariang GSM SB EPF Skim Amanah Saham BU 1mth 3mth 3.8 8.5 15.7 8.9

12mth 24.5 15.7

2009 7,611 2,624 1,939 1,578 21.0 31.0 15.0 2.3% (0.28) 34.5% 25.5% 18.6% 30.1% 15.1% net cash

2010 8,869 4,395 3,133 2,295 30.6 21.3 40.0 6.1% (0.31) 49.6% 35.3% 26.7% 26.1% 12.7% 0.48

2011 8,800 4,380 3,004 2,527 33.7 19.3 40.0 6.1% (0.40) 49.8% 34.1% 15.7% 30.2% 14.0% 0.62

2012E 9,210 4,672 3,128 2,346 31.3 20.8 40.0 6.1% (0.31) 50.7% 34.0% 25.0% 28.1% 12.8% 0.47

2013E 9,601 4,861 3,173 2,380 31.7 20.5 40.0 6.1% (0.21) 50.6% 33.0% 25.0% 26.7% 12.5% 0.28

Since December last year, Maxis has been making aggressive moves to enhance market share. Its BAGUS plan offers the best rates for voice, text, mobile Internet, IDD and roaming plus the introduction of “Loker”, a personal cloud service with 5GB storage space for free and having the ability to sync, store and share their digital content. These attractive offers have begun to show positive trends in winning back subscribers. Outlook for Maxis remains positive in the immediate term. Target price revised upwards to RM6.90 by using DCF methodology. The current share price offers upside of 6.1%, couple with dividend yield of 6.1% going forward, the stock offers potential return of more than 12%; hence we upgrade Maxis to BUY. Offering cheaper rates. Earlier, Maxis has rolled out its new hotlink prepaid plan; BAGUS offering affordable rates for voice calls, SMS, surfing the Internet, IDD and roaming at RM5. For an additional commitment of RM5, customers can subscribe to the BAGUS 5 Pass, which offers up to 50% discount on calls and SMS for three days inclusive of data services of 10MB. Collaboration with U Mobile. Earlier, Maxis and U Mobile entered into an agreement to share Maxis’ 3G radio access networks (RAN), making the partnership the first active 3G RAN sharing arrangement to be deployed in Malaysia for an initial period of 10 years that will result in greater cost savings for both companies. Most recently, Maxis and U Mobile, together with their technology vendors have successfully completed laboratory trials and are now implementing the solution in their live networks and working towards a full launch in the coming months. Over 1,300 sites will be consolidated and fully shared by Q3 2012 delivering significant financial benefits to both parties. Personal cloud-based service. In May 2012, Maxis has announced the launch of “Loker”, Malaysia’s first personal cloud service which is available on multiple devices allowing users to receive 5GB storage space for free with the ability to sync, store and share their digital content including pictures, videos, music, and contacts from their mobile phones, tablets or PCs. Attractive dividend yield. Maxis proposed its 1st interim dividend of 8sen each and we expect total dividend of 40sen to be declared for FY12, translating into yield of 6.1%. Valuation & View. We rolled over our valuation to FY13, hence, target price is increased to RM6.90 based on DCF valuation (WACC assumption of 7.5%). The current share price offers upside of 6.1%, couple with dividend yield of 6.1% going forward, the stock offers potential return of more than 12%. Upgrade to BUY.

5.9% 720.5% 42098% 42098% -1600%

16.5% 67.5% 61.6% 61.6% 45.7%

-0.8% -0.3% -4.1% -4.1% 10.1%

4.7% 6.7% 4.1% 4.1% -7.1%

4.2% 4.1% 1.4% 1.4% 1.3%

4.80 Jun-11

Aug-11

Oct-11

Dec-11

Feb-12

Apr-12

Thong Pak Leng pakleng.thong@bimbsec.com.my 03-26918887 ext 186

www.bimbsec.com.my

| 16

Strategy

QL Resources Berhad
2013 A Year of Reckoning
Stock Data Bloomberg Ticker Market Cap Issued shares 52-week range (H) 52-week range (L) 3-mth avg daily volume Free Float Shariah Compliant Share Performance (%) Absolute vs. KLCI Financial Highlights FYE Mar(RMm) 2010 Revenue 1,476.4 EBIT 148.6 Pretax profit 136.2 Net Profit 106.4 CY Net Profit 120.0 EPS (sen) 12.8 EPS growth (%) 19.2% CY EPS (sen) 14.4 PER (x) 24.4 DPS (sen) 3.6 Div. Yield (%) 1.1% NTA/share (RM) 0.60 EBIT margin Pretax margin Effective tax rate ROE ROA Net Gearing (x) Growth ratios Turnover EBIT Pretax profit Net profit 10.1% 9.2% 15.8% 23.1% 9.6% 0.61 QLG MK 2,595.8 Equity 832.0 3.40 2.51 328,262 41.1% Y Altman Z-score YTD price chg YTD KLCI chg Beta Major Shareholders CBG Holdings S/B Farsathy Holdings SD 3.6 1.3% 2.6% 0.9 44.9% 12.9%

Buy◄►
Price: Target Price: RM3.12 (+18.6% upside) RM3.70
QL’s track record is second to none with a 11-year net profit CAGR of 20.8%. Being the rare few that was not affected by global vagaries, the company managed to display positive growth amid events like the Asian financial crisis, SARS and the sub-prime financial crisis. We foresee QL’s growth momentum sustainable attributed to its recession proof business model that is able to balance out the negative effects attributed to seasonal or cyclical factor of its MPM and POA divisions. We expect net earnings to grow by 23% and 9% for FY13 and FY14 respectively. We peg a target price of RM3.70 based on 19x PER over FY13 EPS of 19.5sen and rate QL to BUY. Earnings growth intact. We believe earnings growth will remain intact stemming from its regional expansion on both oil palm plantation and poultry farm. QL key earnings growth catalyst will come from its POA division especially from its Indonesia plantation with about 9.5k ha planted todate (of the total 20k ha), starts to contribute from FY13 onwards. Apart from oil palm plantation, its palm biogas, palm pellet is targeted to be commercialised in FY13 and together with growth from Boilermech’s palm biomass business, this division is expected to provide higher contribution from FY13 onwards. Group’s earnings will also be support by its poultry farm in Indonesia and Vietnam where total production of egg is expected to increase from 1bn/year currently to 1.6bn/year by March 2013. MPM growth strategy. With a CAPEX of RM51m, QL is expected to boost its operations by constructing 2 new surimi-based product i.e. one cold-room in Johor Bahru (capacity of 5k MT/year- completion Aug 2012), and another frozen fish cold-room in Endau (capacity of 2k MT/yearcompletion Q1FY14), plus a new frozen surimi-based products factory with capacity of 15k MT/year in Hutan Melintang which is expected to commerce operation by June 2013. View & Valuation. We expect QL to register net earnings of RM162.1m and RM176.7m for FY13 and FY14 respectively. Backed by strong fundamentals, hands on management team and expectation that regional expansion are starting to provide significant contribution in FY13 onwards, we maintain our BUY call on QL with an unchanged target price of RM3.70 by applying FY13 EPS over its PER multiple of 19X which is +1std.dev of its 3-years average PER.

1mth (3.4) (6.3)

3mth (4.9) (4.4)

12mth (3.8) (6.3)

2011 1,776.8 174.6 160.8 124.6 130.2 15.0 17.0% 15.7 20.8 4.3 1.4% 0.87 9.8% 9.1% 16.8% 20.1% 8.5% 0.51

2012 1,946.9 190.3 172.8 132.1 154.6 15.9 6.0% 18.6 19.7 4.5 1.4% 0.84 9.8% 8.9% 19.3% 17.1% 7.9% 0.61

2013E 2,269.2 230.0 212.0 162.1 173.1 19.5 22.7% 20.8 16.0 5.5 1.8% 0.98 10.1% 8.1% 19.0% 18.6% 9.1% 0.59

2014E 2,476.4 248.8 230.1 176.7 196.4 21.2 9.0% 23.6 14.7 6.0 1.9% 1.13 10.0% 8.1% 19.0% 17.8% 9.2% 0.53

5.6% 18.4% 23.9% 19.2%

20.3% 17.5% 18.1% 17.0%

9.6% 9.0% 7.5% 6.0%

16.6% 20.9% 22.6% 22.7%

9.1% 8.2% 8.5% 9.0%

Share Price Chart 3.50 3.40 3.30 3.20 3.10 3.00 2.90 2.80 2.70 2.60 2.50 May-11 Jul-11

Sep-11

Nov-11

Jan-12

Mar-12

The Research Team research@bimbsec.com.my 03-26918887 ext 169

www.bimbsec.com.my

| 17

Strategy

Uzma Berhad
Full Swing In The Horizon
Stock Data Bloomberg Ticker Market Cap Issued shares 52-week range (H) 52-week range (L) 3-mth avg daily volume Free Float Shariah Compliant Share Performance (%) Absolute vs. KLCI Financial Highlights FYE 31 Dec 2009 Turnover 98.8 RMm) EBIT (12.0) Pretax profit (12.5) Core Net Profit (12.0) 183.92 88 2.1 1.51 0.0 35.7% Y 183.92 Altman Z-score YTD price chg YTD KLCI chg Beta Major Shareholders Muhamed Kamarul Shah Rozita Mat Redz Lembaga Tabung Haji 1mth -0.5% 1.5% 3mth 0.2% 9.9% 3.3 21.3% 2.6% 0.7 45.5% 9.6% 7.7% 12mth 0.1% 3.0%

Buy◄►
Price: Target Price: RM2.09 (+29.2% upside) RM2.70
Since our coverage on the company back in Dec 11, the company’s performance has been very encouraging on several fronts to say the least. During the period, the company i) returned 21.3% of capital appreciation, ii) secured additional RM350m long term contract, iii) improve service offering through a RM7.5m investment in Setegap Venture Petroleum which forte is in coil tubing and v) financially, continue to post record quarterly earnings and concluded its RM16m cash call exercise to support its project undertakings. Updates on contract executions are pointing towards full swing of projects implementation this year. Maintain Buy call at RM2.70. YTD outperformer. YTD, the stock has delivered a capital return of 21.3%, second only to Deleum in the broad Oil and Gas space encompassing 24 companies. At current price, the stock is trading at PE multiple of 7.7x on FY12 EPS of 27sen, unbelievably cheap versus its peers. In tandem with our expectation on earnings growth, we see Uzma’s valuation gap with its peers to narrow and even converge. Gearing up effort to improve liquidity. While the stock’s price outperformed its peers YTD, lacklustre level of liquidity has much affected further price advancement of the counter and could be partly contributed to the valuation gap. With the proposed 1:2 bonus issue, we expect its liquidity to improve and could facilitate better price discovery. Still the same word: Execution. With firm orderbook of about RM1bn, earnings potential for the next 3 years are well anchored with execution remains as the most vital fortune determinant. Based on updates on major contracts which include the RM350m well testing contract from Petronas secured early this year where its first deployment commenced in April 2012 and the installation unit 6 and 7 of UzmaPres by first half this year, we expect project executions to progressively enter into full swing this year. View & Valuation. With record quarterly earnings posted consecutively in the last five quarters, the Group is clearly embedded on a solid growth path. With the expected improvement in its liquidity level, we expect valuation gap to narrow or even converge with its peers. Maintain our top small cap pick with target price RM2.70 which is based on PER of 10x on FY12 EPS of 27sen.

2010 116.1 (0.8) (2.2) (2.0)

2011 192.3 17.5 16.7 12.1 9.1% 8.7% -23.3% 19.9% 9.2% 0.0 13.7 688.4% 15.3 0.0 0.0% 0.7

2012E 287.2 33.7 32.4 23.8

2013E 366.5 44.9 43.1 31.7

EBIT margin -12.1% -0.6% Pretax margin -12.6% -1.9% Effective tax n.a n.a ROE -23.5% -2.4% rate ROA -16.1% -1.4% Net Gearing (x) 0.0 Net Cash Core EPS (sen) (13.6) (2.3) Core EPS -216.4% 82.9% PER (x) (15.4) (89.8) growth (%) DPS (sen) 2.3 0.0 Div. Yield (%) 1.1% 0.0% NTA/share (RM) 0.6 0.6 Growth ratios Turnover EBIT Pretax profit Core Net profit Share Price Chart

11.7% 12.3% 11.3% 11.8% -25.0% -25.0% 24.2% 25.3% 13.7% 14.5% Net Cash Net Cash 27.0 36.1 97.1% 33.6% 7.7 5.8 4.1 5.4 1.9% 2.6% 1.1 1.4

-26.6% -188.0% -195.2% -216.4%

17.5% 93.7% 82.6% 82.9%

65.6% 2430.5% 868.7% 688.4%

49.4% 92.2% 94.7% 97.1%

27.6% 33.1% 32.9% 33.6%

2.20
2.00

1.80 1.60 1.40
1.20 Jul-11

Oct-11

Jan-12

Apr-12

Chiong Tong Chai chiongtc@bimbsec.com.my 03-26918887 ext 175

www.bimbsec.com.my

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Strategy
DEFINITION OF RATINGS BIMB Securities uses the following rating system: STOCK RECOMMENDATION BUY Total return (price appreciation plus dividend yield) is expected to exceed 10% in the next 12 months. TRADING BUY Share price may exceed 15% over the next 3 months, however longer-term outlook remains uncertain. NEUTRAL Share price may fall within the range of +/- 10% over the next 12 months TAKE PROFIT Target price has been attained. Fundamentals remain intact. Look to accumulate at lower levels. TRADING SELL Share price may fall by more than 15% in the next 3 months. SELL Share price may fall by more than 10% over the next 12 months. NOT RATED Stock is not within regular research coverage. SECTOR RECOMMENDATION OVERWEIGHT The Industry as defined by the analyst’s coverage universe, is expected to outperform the relevant primary market index over the next 12 months NEUTRAL The Industry as defined by the analyst’s coverage universe, is expected to perform in line with the relevant primary market index over the next 12 months UNDERWEIGHT The Industry as defined by the analyst’s coverage universe, is expected to underperform the relevant primary market index over the next 12 months Applicability of ratings The respective analyst maintains a coverage universe of stocks, the list of which may be adjusted according to needs. Investment ratings are only applicable to the stocks which form part of the coverage universe. Reports on companies which are not part of the coverage do not carry investment ratings as we do not actively follow developments in these companies. Disclaimer The investments discussed or recommended in this report not be suitable for all investors. This report has been prepared for information purposes only and is not an offer to sell or a solicitation to buy any securities. The directors and employees of BIMB securities Sdn Bhd may from time to time have a position in or either the securities mentioned herein. Members of the BIMB Group and their affiliates may provide services to any company and affiliates of such companies whose securities are mentioned herein. The information herein was obtained or derived from sources that we believe are reliable, but while all reasonable care has been taken to ensure that stated facts are accurate and opinions fair and reasonable, we do not represent that it is accurate or complete and it should not be relied upon as such. No liability can be accepted for any loss that may arise from the use of this report. All opinions and estimates included in this report constitute our judgements as of this and are subject to change without notice. BIMB Securities Sdn Bhd accepts no liability for any direct, indirect or consequential loss arising from use of this report.

Published by

BIMB SECURITIES SDN BHD (290163-X) A Participating Organisation of Bursa Malaysia Securities Berhad Level 32, Menara Multi Purpose, Capital Square, No. 8 Jalan Munshi Abdullah, 50100 Kuala Lumpur Tel: 03-2691 8887, Fax: 03-2691 1262 http://www.bimbsec.com.my

Kenny Yee Head of Research

www.bimbsec.com.my

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