Healthcare & Pharmaceuticals

1 July 2013

KDN: PP 10251/07/2013(032736)

Company Brief

Spreading its wings regionally

Pharmaniaga
PHRM MK

RM4.49
NOT RATED
6.00
5.00
4.00
3.00
2.00
1.00
0.00
Jun-07

Jun-08

Jun-09

Jun-10

Jun-11

Jun-12

Jun-13

Moving regionally
Over the past several months, Pharmaniaga has entered into a venture
agreement (JVA) and completed a couple of corporate exercises. These moves
are part of the groups overall strategy to becoming a one-stop solution within the
pharmaceutical industry and to expand its presence beyond Malaysian shores.
This includes a 50:50 JVA in Saudi Arabia as well as a proposed acquisition
(75:25) in Indonesia. In addition, the group has completed the pre EU final audit
inspection in June 2013 and is waiting to secure the GMP certification (good
manufacturing practice).
Malaysia still a sweet spot
Locally, the rising purchasing power from the expanding middle income segment
will continue to be the key growth driver for the group. Recap that,
Pharmaniagas 10-year Concession Agreement with the government will extend
until 2019. Whilst the Concession Agreement with the government is significant
to the group, contributing 59% to groups FY12 revenue, management reaffirmed
that the private sector will continue to be the groups emphasis. Less than 7% of
the groups revenue is derived from the private sector, which is as large as
RM2.2bn per annum.

Stock Data

Forecast 3-year CAGR of 16.7%

For FY13-FY15E, we have modelled in a conservative 5-6% topline growth. This
would be driven by 5-8% growth from the trading and logistic segment and 8-10%
growth from the manufacturing business. All in, we project Pharmaniaga to
achieve a FY12-15 EPS CAGR of 16.7%. We have not imputed any contribution
from the proposed joint ventures as it is still premature and any earnings flow will
likely come on stream from 2015/16 onwards.

Issued shares (m)

258.9
Mkt cap (RMm)
1,154.6
Avg daily vol - 6mth (m)
9.5
52-wk range (RM)
3.20-5.07
Est free float
28.1%
NTA per share (RM)
1.3
P/NTA (x)
3.4
Net cash/ (debt) (RMm)(1Q13) (304.3)
ROE (FY13F)
14.3%
Derivatives
Nil

Indicative fair value of RM5.09

In our view, a blue sky valuation for Pharmaniaga would be at 18x PER which
implies a 10% discount to KPJs target PER of 20x. Assuming a target PER of
15x (at par to markets PER), the stock is valued at RM5.09. Re-rating catalysts
for the stock include; 1) growth delivery and, 2) an alternative and more modest
comparable valuation to KPJ Healthcare and IHH. In addition, based on a 60%
payout ratio for FY13, we forecast a DPS of 17.6 sen. This translates into a
decent gross dividend yield of 3.0%. We believe the payout is sustainable
considering the defensiveness of its healthcare earnings.

Key Shareholders

Earnings & Valuation Summary

Price Performance
1M
Absolute
-2.1%
Rel to KLCI -1.3%

3M
+17.6%
+11.7%

Boustead Holdings
LTAT

12M
-1.9%
-11.3%

54.7%
12.4%

Earnings & Valuation Revisions

13E
Prev EPS (sen)
Curr EPS (sen) 29.4
Chg (%)
Indicative fair value (RM)

14E
33.9
-

15E
37.9
5.09

Sharifah Farah
(603) 2145 0327
farah@affininvestmentbank.com.my

Important disclosures at end of report

FYE Dec
Revenue (RMm)
EBITDA (RMm)
Pretax profit (RMm)
Net profit (RMm)
EPS (sen)
PER (x)
Core net profit (RMm)
Core EPS (sen)
Core EPS grow th (%)
Core PER (x)
Gross DPS (sen)
Dividend Yield (%)
Consensus profit
Affin/Concensus (x)
EV/EBITDA (x)

2011
1,521.0
99.2
73.2
52.2
20.1
22.1
61.0
23.5
21.0
18.9
13.6
2.3
13.0

2012
1,812.3
161.7
103.3
61.7
23.8
18.7
61.7
23.8
1.2
18.7
15.9
2.7
9.0

2013F
1,920.6
173.8
115.2
76.1
29.4
15.1
76.1
29.4
23.3
15.1
17.6
3.0
70.0
1.1
8.3

2014F
2,036.4
194.0
132.8
87.8
33.9
13.1
87.8
33.9
15.4
13.1
20.4
3.4
103.0
0.9
7.3

2015F
2,138.3
209.5
148.3
98.1
37.9
11.7
98.1
37.9
11.7
11.7
24.6
5.5
108.0
0.9
6.7

Page 1 of 12

Expanding regionally into the Middle East

Moving up and expanding regionally
Over the past several months, Pharmaniaga has entered into a joint venture
agreement (JVA) and completed a couple of corporate exercises. These moves
are part of the groups overall strategy to becoming a one-stop solution within the
pharmaceutical industry and to expand its presence beyond Malaysian shores.
Signed a JV with Modern Healthcare
In May 2013, Pharmaniaga entered into a JVA with Modern Healthcare Solutions
to form a joint venture company in Saudi Arabia. The company will primarily be
involved in manufacturing pharmaceutical products in Sudair Economic City. The
products produced at the plant will be marketed within the MEENA region. This
includes countries like Algeria, Bahrain, Egypt, Sudan, Tunisia, Turkey and
United Arab Emirates. The initial duration of the JV will be 15 years effective from
the date of the corporation being registered. The plant is expected to only come
on-stream two years after the JV signing. Initial work will include the design of the
plant as well as the type of generic drugs to be produced at the plant.
Primarily involved in the supply of healthcare products
Modern Healthcare Solutions is primarily involved in the supply of healthcare
products and services as well as retail business of medical equipment and
accessories, import & export of products and marketing on behalf of third parties.
Modern Healthcare is owned by HRH Prince Turki bin Abdulrahman, as majority
shareholder and Engr. Abdulaziz F.Al Hamwah.
Pharmaniagas main role to impart knowledge and technical know-how
We view the proposed JV as a stepping stone for Pharmaniaga to penetrate and
capture the opportunities within the growing MEENA and North Africa regions.
The JV which will be on a 50:50 basis will have an initial share capital of SAR1m,
of 100,000 shares. This suggests that Pharmaniagas initial monetary exposure is
only SAR500k (c.RM430k). However, the main role of Pharmaniaga in this JV is
to provide expertise and technical know-how within the Pharmaceutical industry,
whilst we gather that the partner will likely be the main bearer in terms of funding.
Risks include currency fluctuation and change in business landscape
Amongst the key risks to this venture, we opine, include a change in the political
and business landscape of the country as well as fluctuations in the currency and
exchange rate.
Competition will be amongst patented drugs
In terms of competition, we gather that most multinationals (MNCs) like
GlaxoSmithKline and Astra Zeneca already have presence within the MEENA
region. However, the JV will not be competing head on with the MNCS, as the
MNCs supply patented drugs, whilst the JV will be manufacturing and supplying
generic drugs, which is currently unpopular within the region.

Page 2 of 12

Making further inroads into Indonesia

Proposed acquisition of PT Errita Pharma
Pharmaniaga and Glen Rahyu Adli Ariff have recently signed a memorandum of
understanding (MoU) with Sutjipto Tjengudororo and Hendrijanto Surjosuseno to
acquire 40,000 shares or 100% stake in PT Errita Pharma. PT Errita Pharma is
principally involved in the manufacturing of generic pharmaceutical products in
Indonesia. Pharmaniaga will hold a 75% stake in the company whilst the
Indonesia partner will hold the remaining 25%. The total indicative purchase
consideration is US$28m, of which Pharmarniaga will have to fork out US$21m
for its 75% stake. Funding for the acquisition will likely be via bank borrowings.
Plant in Bandung, but distributors across the country
Whilst PT Erritas plant is located in Bandung, the products are well distributed
across Indonesia. Based on its website, the company has distributors in all the
major cities in Indonesia including Medan, Riau, Semarang, Makasar,
Balikpapan, Palembang and Padang.
Currently, Indonesia contributes 21% of groups revenue
The proposed acquisition will further enhance Pharmaniagas foothold in
Indonesia. Currently, its 55%-owned PT Millennium Pharmacon International
(MPI) is amongst the top 10 pharmaceutical distributors in Indonesia with a
distribution network of 29 branches across the country. In 2012, at RM389m, MPI
contributed to 21% of groups total revenue, an increase from the RM337m
revenue registered in 2011.
Acquisition suggests a strong growth impetus
Indonesias population which exceeds 240m suggest a vast potential for growth
in terms of demand. Although IMF ranks Indonesia 108th in terms of GDP/capita
(comparatively, Malaysia is ranked 68th), we think the absolute addressable
market of a rising disposable income segment is huge. As such, we believe the
proposed acquisition will be a strong growth impetus for Pharmaniaga.
Fig 1: Pharmaniagas Indonesian distribution network

Source: Company

Page 3 of 12

Malaysia still a sweet spot

Growing middle income to spur local demand growth
Locally, the rising purchasing power from the expanding middle income segment
will continue to be the key growth driver for the group. The Pharmaceutical
Association of Malaysia estimates that the Malaysian market for over-the counter
and prescription drugs will experience a compounded growth of 9.5% p.a. from
2009 to 2014, with a projected worth of RM5.3bn. In addition, the government
has allocated a 15% increase in the national budget towards healthcare
management and development services in 2013. Recap that, Pharmaniagas 10year Concession Agreement with the government will extend until 2019.
Private sector still on the cards
Whilst the Concession Agreement with the government is significant to the group,
contributing 59% to groups FY12 revenue, management reaffirmed that private
sector will continue to be the groups emphasis to further penetrate into the
segment. The private healthcare sector is worth an estimated RM2.2bn and
remains a huge untapped market for the group as the private sector accounts for
less than 7% of the groups FY12 revenue.
Certification for more potential export opportunities
Excluding the Indonesian market, sales contribution from other countries
contributes less than 1% of groups FY12 revenue. Pharmaniagas proposed joint
venture in Saudi Arabia is its first step to making further inroads into the Middle
East markets. A key limiting factor to this has been an absence of required
certification to enable its products to be sold in the EU and US. However, the
group has completed the pre EU final audit inspection in June 2013 and is
waiting to secure the GMP certification (good manufacturing practice). The
certification will pave the way for the group to secure contract manufacturing jobs
from European pharmaceuticals and biotech companies. In addition, it is also in
the midst of working to secure the US FDA certification, which would allow the
group to penetrate into the US markets.
Fig 2: An overview of Malaysias pharmaceutical industry

Malaysian Pharmaceutical Industry

RM5.3 billion

Ministry of Health
RM3.1 billion

Pharmaniaga
Concession
RM1.0 billion

Non-Concession
RM2.1 billion

Pharmaniagas
market share : 32%
of MOHs market size

Pharmaniagas market
share : 11.9% of MOHs
Non-Concession market
size

Private Sector
RM2.2 billion

Pharmaniagas
market share: 5%
of private sector
market size

Source: Company data

Page 4 of 12

Financial Outlook
The logistics & distribution segment contributed lower to 1Q13 earnings
In 1Q13, Pharmaniaga reported a profit before tax (PBT) of RM36.9m, down 14%
yoy mainly dragged down by lower contribution from the logistics and distribution
segment. The segment a lower PBT of RM12.6m compared to the RM43.0m
reported in 1Q12. This was due to provision for doubtful debts and lower profit
margins as a result of higher direct overhead cost. However, the manufacturing
division fared better registering a PBT of RM24.3m (1Q12:RM11.6m).
1Q13 topline grew by 12% yoy
On the topline basis, the group posted revenue of RM500.3m, which was 12%
higher yoy, on increased demand from both government and private sector. In the
near term, we expect revenue growth will be bolstered by its Indonesian
operation, whilst longer term, its JV in Saudi Arabia as well as the necessary
certifications should aid topline growth.
Forecast 3-year CAGR of 16.7%
For FY13-FY15E, we have modelled in a conservative 5-6% topline growth. This
would be driven by 5-8% growth from the trading and logistic segment and 8-10%
growth from the manufacturing business. All in, we project Pharmaniaga to
achieve a FY12-15 EPS CAGR of 16.7%. We have not imputed any contribution
from the proposed joint ventures as it is still premature and any earnings flow will
likely come on stream from 2015/16 onwards.

Fig 3: EPS and EBITDA margin trend

CoreEPS(sen)(LHS)

EBITDAmargin(%)(RHS)

2%

0%
2015E

5
2014E

4%

2013E

10

2012

6%

2011

15

2010

8%

2009

20

2008

10%

2007

12%

25

2006

30

2005

14%

2004

35

2003

16%

2002

40

Source: Company, Affin estimates

Page 5 of 12

Valuation
Share split and bonus issue
Pharmaniaga has recently completed a corporate exercise which involved a
share split exercise of subdividing every existing share of RM1.00 into two shares
of RM0.50. This doubles its share base to 235.3m shares. In addition, the group
also awarded its shareholder with bonus issuance of one ordinary share for every
ten (10) existing shares (post share split) held. Overall, this has raised the
groups share base by 2.2x to 258.9m shares.
Premium is warranted
At current price level, Pharmaniaga is trading at 13x CY14 EPS, a premium to the
sectors PER average of 11x. We believe the premium is justifiable given; 1)
Pharmaniagas defensive government hospitals concession operations, 2) strong
growth potential from its Indonesia business, 3) positive sentiments within the
healthcare sector, 4) reasonable earnings growth (FY13-15F core EPS growth of
12-23% p.a.) and, 5) strong management team and stakeholders.
An indicative fair value of RM5.09
In Figure 4, we simulate the indicative fair values for Pharmaniaga based on
various PER targets on CY14 EPS. In our view, a blue sky valuation for
Pharmaniaga would be at 18x PER which implies a 10% discount to KPJs target
PER of 20x. Assuming a target PER of 15x (at par to markets PER), the stock is
valued at RM5.09. Re-rating catalysts include; 1) growth delivery and, 2)
alternative and more modest valuation to KPJ Healthcare and IHH.
Assume a dividend payout of 60% of PATAMI
In FY12, Pharmaniaga paid out a DPS of 15.9 sen (adjusted for share split and
bonus issuance), which translated to a payout ratio of 67%. Going forward, we
understand that management is targeting a payout ratio of 60%, although the
company has not formalised a dividend policy. Based on a 60% payout ratio for
FY13, we forecast a DPS of 17.6 sen. This translates into a decent gross
dividend yield of 3.0%. We believe the payout is sustainable considering the
defensiveness of its healthcare earnings.

Fig 4: Indicative fair value range

PER (x)
FY14 EPS of RM0.34
Indicative fair value

11

12

13

14

15

16

17

18

3.73

4.07

4.41

4.75

5.09

5.42

5.76

6.10

Source: Affin estimates

Fig 5: Peers comparison

Stock
Pharmaniaga
CCM Duopharma
Apex Healthcare
Hovid
YSP
Simple average

Rating Price (RM)

N.R.
N.R.
N.R.
N.R.
N.R.

4.49
2.38
4.49
0.23
1.29

Mkt Cap
(m)
1162.4
330.4
420.8
175.3
171.6

FYE
Dec
Dec
Dec
Jun
Dec

P/E (x)
CY13
15.1
N/A
11.6
8.2
9.7
11.1

CY14
13.1
N/A
10.0
N/A
9.0
10.7

Core EPS growth (%)

CY13
CY14
23.3
15.4
N/A
N/A
15.8
N/A
1782.1
N/A
7.7
0.00

EV/EBITDA
CY13
CY14
8.3
7.3
N/A
N/A
N/A
N/A
5.2
15.0
4.2
4.0
5.9
8.8

P/BV (x)
CY13
CY14
2.3
2.1
N/A
N/A
1.8
1.6
N/A
N/A
N/A
N/A
2.0
1.9

ROE (%)
CY13
CY14
13.5
18.0
N/A
N/A
15.3
16.0
17.1
10.8
7.5
7.6
13.4
13.1

Net Yield (%)

FY13
FY14
3.0
3.4
N/A
N/A
4.5
4.5
4.3
N/A
3.0
3.3
3.7
3.7

Source: Company, Bloomberg

Page 6 of 12

Risks
Risks include losing the concession business
Key risk to investing in Pharmaniaga is the non-renewal of its concession
business. However, we believe the risk is mitigated given the groups extensive
distribution network, their ability to execute the delivery of medical supplies and
equipment efficiently, as well as limited substitute to Pharmaniaga. In addition,
given the GLIC status of its ultimate parent (LTAT), we believe the risk is low.
Meanwhile, any adverse changes in the concession terms could also impair
future revenue and profitability for the group.
Loss of certification
The pharmaceutical industry is highly regulated and any loss of certification from
the authorities could result in a closure of its manufacturing facilities.
M&A and new market risk
Apart from foreign currency volatility and exchange rate fluctuations,
Pharmaniagas recent proposed joint ventures in Saudi Arabia and Indonesia
pose the risk of failure as well as implementation risk which could result to
impairment losses and higher start-up costs. However, we believe the risk is
mitigated given the groups existing foothold in Indonesia and established partner
in Saudi Arabia.

Page 7 of 12

Brief Background
Largest pharmaceutical operator in Malaysia
Pharmaniaga is primarily involved in trading and logistics of pharmaceutical
products and manufacturing of generic pharmaceuticals. The group is the sole
concession holder for the procurement and distribution of drugs and non-drugs to
Government hospitals and clinics throughout Malaysia. Effectively, it supplies
drugs and medical supplies to 148 hospitals and over 2,000 clinics. Its 10-year
concession, which is an extension from its 1994-2009 concession, will end in
November 2019.
Acquisition of Idaman in 2011 to complement its operations
In 2011, the company successfully acquired Idaman Pharma Manufacturing Sdn
Bhd, which subsequently increased the groups manufacturing sites by two i)
Sg. Petani, Kedah; and ii) Seri Iskandar, Perak. This complements their existing
manufacturing plants in Bangi and Puchong as well as their 4 distribution
warehouses across Malaysia and Indonesia. PT Millennium Pharmacon
International TBK (MPI), a 55%-owned subsidiary of Pharmaniaga, focuses
largely on trading and distribution operations in Indonesia with 29 spread across
Indonesia.
Close to 500 registered products
With the consolidation of Idaman Pharma, the group has in total 485 registered
products, of which 185 products have been registered across South East Asia,
East Asia as well as Africa. It has a combined logistics capacity of 27,750 pallets
over 239, 348 sq ft.
Fig 6. Snapshot of Pharmaniaga

Source: Company data

Page 8 of 12

Fig 7. Corporate structure

Lembaga Tabung Angkatan Tentera

12.4%

Boustead Holdings Bhd

54.7%

Pharmaniaga Berhad

Idaman Pharma Manufacturing Sdn Bhd

100%

Pharmaniaga Manufacturing Bhd

100%

Pharmaniaga Pegasus (Seychelles) Co Ltd

100%

Pharmaniaga Research Centre Sdn Bhd

100%

Insugree Sdn Bhd

100%

Pharmaniaga Marketing Sdn Bhd

100%

Pharmaniaga LifeScience Sdn Bhd

100%

Safire Pharmaceuticals Sdn Bhd

100%

Pharmaniaga International Corporation Sdn Bhd

100%

Pharmaniaga Logistics Sdn Bhd

100%

PT Millennium Pharmacon International Tbk (Indonesia)

55%

Pharmaniaga Biomedical Sdn Bhd

100%

Pharmaniaga Biovention Sdn Bhd

100%
Source: Company data

Fig 8. Malaysias logistics network

Kangar
Alor Setar Kota Bahru
Jitra

Lan gk awi

Tumpat

Ku dat

P.Mas

Sik
T.Merah

Yan
Sg. Petani
Balin g

Kota Belud
Tuaran

P.Putih

Bukit Mertajam

Kota Kinabalu

Gerik

Kulim

Pulau Pinang

K.Krai

Du ng un
Besu t

Selama
Sg .Bak ap
Parit Bu ntar
Sg.Sip ut
K.Kang
sar
Taipin
g

Balik Pu lau

Sri Man ju ng
Bt.Gajah

Tj.Karan g

Sip itang

Kuala Teren gg anu

Ipoh

Kening au
Teno m

Ko ta Kinabatangan
Lah ad Datu

Lawas

Limbang

Kemaman

Tapah
Kampar
Teluk
Intan Tg. Malim
T.Intan

Ko ta Maru du
San dakan
Tamb unanBeluran

Papar
Lab uan Beu fo rt

Marud i
Semp orna
Ben to ng
Mentak ab

Miri

Kuantan

K.Kub u
Baru
Kajan g
Jelebu

Tawau

Pek an

Banting
Ku ala Pilah

Bintu lu
Mersin g

Melaka

Sibu

Seg amat
Kluang

Seremban
P.Dick so n

Tan gkak

Muk ah

Daro

Ko ta Ting gi

Muar
Sarakei
Batu Pahat
Pontian

Johor Bahru

Kanawit

Kap it

Kuching

Lun da

Simu njan
Beton g

Bau
Serian

Sri Aman

Source: Company data

Page 9 of 12

Focus Charts
Fig 9. EPS and EBITDA margin trend

CoreEPS(sen)(LHS)

Fig 10. Net profit and margin trend

EBITDAmargin(%)(RHS)

Netprofit (RMm)(LHS)

40

Netprofit margin(RHS)

16%

0%
2015E

2%
2014E

5
2012

4%

2013E

10

2011

6%

2010

15

2009

8%

2008

20

2007

10%

2006

25

2005

12%

2004

30

2003

14%

2002

35

100

5%
5%

80

4%
4%

60

3%
3%
2%

40

2%
1%

20

1%
0%

0
2005 2006 2007 2008 2009 2010 2011 2012 2013E 2014E 2015E

Source: Company data, Affin estimates

Source: Company data, Affin estimates

Fig 11. Revenue breakdown by segment in 2012

Fig 12. Revenue breakdown by geography in 2012

Others,6%
Others
1%

Indonesian
operation,21%

Tender
business,14%

Indonesia
21%

Government
concession,
59%

Malaysia
78%

Source: Company data

Source: Company data

Fig 13. EPS and dividend trend

Fig 14. DPS and yield

EPS(sen)

NetDPS(sen)
DPS(sen)(LHS)

40.0
35.0

Dividendyield(%)(RHS)

30

6.0
Dividendyields
expectedtorise

15

3.0

15.0

10

2.0

1.0

0.0

Source: Company data, Affin estimates

2015E

2014E

2013E

2012

2011

2010

2009

2007 2008 2009 2010 2011 2012 2013E 2014E 2015E

2008

0.0

2007

5.0

5.0

2006

10.0

2005

4.0

2004

20

20.0

2003

25

25.0

2002

30.0

Source: Company data, Affin estimates

Page 10 of 12

Pharmaniaga FINANCIAL SUMMARY

Profit & Loss Statem ent
FYE 31 Dec (RMm )
Revenue
Operating expenses

Key Financial Ratios and Margins

2011
1521.0

2012
1812.3

2013E
1920.6

2014E
2036.4

2015E
2138.3

2011

2012

2013E

2014E

2015E
5.0

Grow th
Revenue (%)

10.3

19.2

6.0

6.0

99.2

161.7

173.8

194.0

209.5

EBITDA (%)

55.6

63.0

7.4

11.6

8.0

(22.5)

(44.1)

(39.0)

(40.1)

(39.1)

Core net profit (%)

21.0

1.2

23.3

15.4

11.7

EBIT

76.7

117.7

134.8

153.9

170.5

Net int income/(expense)

(3.2)

(14.4)

(19.6)

(21.1)

(22.2)

Associates' contribution

(0.3)

0.0

0.0

0.0

0.0

EBITDA margin (%)

6.5

8.9

9.0

9.5

9.8

Pretax profit

73.2

103.3

115.2

132.8

148.3

PBT margin (%)

4.8

5.7

6.0

6.5

6.9

(20.4)

(40.1)

(37.2)

(42.8)

(47.8)

Net profit margin (%)

3.4

3.4

4.0

4.3

4.6

Minority interest

(0.6)

(1.5)

(1.8)

(2.1)

(2.4)

Effective tax rate (%)

27.5

38.5

32.0

32.0

32.0

Net profit

52.2

61.7

76.1

87.8

98.1

EBITDA
Depreciation

Tax

(1421.8) (1650.6) (1746.9) (1842.4) (1928.7)

FYE 31 Dec (RMm )

Balance Sheet Statem ent

Profitability

4.6

5.0

5.8

6.2

6.6

Core ROE (%)

ROA (%)

12.6

12.6

14.3

15.1

15.9

ROCE (%)

10.2

13.6

14.3

31.5

33.0

Dividend payout ratio (%)

57.9

66.7

60.0

60.0

65.0

FYE 31 Dec (RMm )

2011

2012

2013E

2014E

2015E

Fixed assets

346.3

339.7

350.7

360.6

351.6

Other long term assets

117.4

159.8

159.8

159.8

159.8

Liquidity

Total non-current assets

463.7

499.5

510.5

520.4

511.4

Current ratio (x)

Cash and equivalents

1.0

1.0

1.0

1.1

1.1

Op. cash flow (RMm)

(65.1)

16.7

98.6

110.5

122.3

(95.6)

(54.7)

48.6

60.5

92.3

(0.4)

(0.2)

0.2

0.2

0.4

55.1

34.6

83.0

122.8

171.1

Free cashflow (RMm)

Stocks

384.6

464.9

492.7

522.3

548.4

FCF/share (sen)

Debtors

221.6

218.3

231.3

245.3

257.5

Other current assets

Total current assets

8.5

5.7

5.7

5.7

5.7

Asset m anagenm ent

669.8

723.4

812.8

896.0

982.7

Debtors turnover (days)

Creditors

437.3

377.5

400.1

424.2

445.4

Short term borrow ings

188.2

341.0

375.1

393.8

413.5

Other current liabilities

Total current liabilities
Long term borrow ings

15.6

5.3

5.3

5.3

5.3

641.2

723.7

780.5

823.2

864.1

0.1

0.1

0.1

0.1

0.1

Other long term liabilities

8.9

11.2

11.2

11.2

11.2

Total long term liabilities

9.0

11.2

11.2

11.2

11.2

468.9

472.0

513.9

562.2

596.5

14.4

15.8

17.7

19.8

22.2

Shareholders' Funds
Minority interest

53.2

44.0

44.0

44.0

44.0

Stock turnover (days)

108.5

111.7

111.7

111.7

111.7

Creditors turnover (days)

123.4

90.7

90.7

90.7

90.7

Net gearing (%)

27.6

62.8

55.0

46.6

39.2

Interest cover (x)

18.4

7.9

6.7

7.1

7.5

Capital structure

Quarterly Profit & Loss

Cash Flow Statem ent
FYE 31 Dec (RMm )

FYE 31 Dec (RMm )

2011

2012

2013E

2014E

2015E

PBT

73.2

103.3

115.2

132.8

148.3

Depreciation & amortisation

22.5

44.1

39.0

40.1

39.1

(126.5)

(136.8)

(18.3)

(19.5)

Cash tax paid

(23.5)

(36.1)

(37.2)

Others

(10.8)

42.3

Cashflow from operation

(65.1)

Capex
Others
Cash flow from investing

Working capital changes

Debt raised/(repaid)
Dividends paid
Others
Cash flow from financing
Free Cash Flow
Source: Company, Affin estimates

Revenue

3Q11

4Q11

1Q12

1Q12

371.4

367.8

446.7

456.7

(376.1)

(354.8)

(350.2)

(400.6)

(456.7)

EBIT

20.3

16.7

17.6

46.2

30.8

(17.2)

Net int income/(expense)

(0.7)

(1.0)

(1.2)

(3.2)

(3.1)

(42.8)

(47.8)

Associates' contribution

(0.2)

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

16.7

98.6

110.5

122.3

Pretax profit

19.4

15.6

16.4

43.0

27.6

(30.5)

(71.4)

(50.0)

(50.0)

(30.0)

Tax

(5.3)

(4.7)

(4.2)

(13.9)

(11.5)

(101.3)

(55.9)

0.0

0.0

0.0

Minority interest

(0.1)

(0.1)

(0.2)

(0.4)

(0.4)

(131.8)

(127.3)

(50.0)

(50.0)

(30.0)

Net profit

13.9

10.8

11.9

28.7

15.7

155.2

152.7

34.1

18.8

19.7

Core net profit

13.9

10.8

11.9

28.7

15.7

(61.4)

(34.3)

(39.5)

(63.8)

0.0
(6.2)
149.0
(95.6)

(1.9)

0.0

0.0

0.0

89.5

(0.2)

(20.8)

(44.1)

(54.7)

48.6

60.5

92.3

Operating expenses

2Q11
396.4

Exceptional Items

Margins (%)
EBIT

5.1

4.5

4.8

10.3

6.7

PBT

4.9

4.2

4.5

9.6

6.0

Net profit

3.5

2.9

3.2

6.4

3.4

Page 11 of 12

Equity Rating Structure and Definitions

BUY
Total return is expected to exceed +15% over a 12-month period
TRADING BUY Total return is expected to exceed +15% over a 3-month period due to short-term positive development, but fundamentals are
(TR BUY)
not strong enough to warrant a Buy call. This is to cater to investors who are willing to take on higher risks
ADD

Total return is expected to be between 0% to +15% over a 12-month period

REDUCE
TRADING SELL
(TR SELL)
SELL
NOT RATED

Total return is expected to be between 0% to -15% over a 12-month period

Total return is expected to exceed -15% over a 3-month period due to short-term negative development, but fundamentals are
strong enough to avoid a Sell call. This is to cater to investors who are willing to take on higher risks
Total return is expected to be below -15% over a 12-month period
Affin Investment Bank does not provide research coverage or rating for this company. Report is intended as information only
and not as a recommendation

OVERWEIGHT Industry, as defined by the analysts coverage universe, is expected to outperform the KLCI benchmark over the next 12
months
NEUTRAL
Industry, as defined by the analysts coverage universe, is expected to perform inline with the KLCI benchmark over the next
12 months
UNDERWEIGHT Industry, as defined by the analysts coverage universe is expected to under-perform the KLCI benchmark over the next 12
months

This report is intended for information purposes only and has been prepared by Affin Investment Bank Berhad (Affin Investment Bank) based
on sources believed to be reliable. However, such sources have not been independently verified by Affin Investment Bank, and as such, Affin
Investment Bank does not give any guarantee, representation or warranty (express or implied) as to the adequacy, accuracy, reliability or
completeness of the information and/or opinion provided or rendered in this report. Facts, information, views and/or opinions presented in this
report have not been reviewed by, may not reflect information known to, and may present a differing view expressed by other business units
within Affin Investment Bank, including investment banking personnel. Reports issued by Affin Investment Bank are prepared in accordance with
Affin Investment Banks policies for managing conflicts of interest arising as a result of publication and distribution of investment research
reports. Under no circumstances shall Affin Investment Bank, its affiliates and related companies, their directors, associates, connected parties
and/or employees be liable in any manner whatsoever for any consequences (including but are not limited to any direct, indirect or
consequential losses, loss of profit and damages) arising from the use of or reliance on the information and/or opinion provided or rendered in
this report. Any opinions or estimates in this report are that of Affin Investment Bank as of this date and subject to change without prior notice.
Under no circumstances shall this report be construed as an offer to sell or a solicitation of an offer to buy any securities.
Affin Investment Bank and/or any of its directors and/or employees may have an interest in the securities mentioned therein. Affin Investment
Bank may also make investment decisions or take proprietary positions that are inconsistent with the recommendations or views in this report.
Further, Affin Investment Bank, its affiliates and its related companies may do and seek to do business with the company(ies) covered in this
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services for or relating to such company(ies) as well as solicit such investment, advisory or other services from any entities mentioned in this
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Comments and recommendations stated here rely on the individual opinions of the ones providing these comments and recommendations.
These opinions may not fit to your financial status, risk and return preferences and hence, an independent evaluation is essential. In addition,
this report is general in nature and it is intended for circulation for Affin Investment Bank and its affiliates clients generally and does not have
regard to the specific investment objectives, financial situations and the particular needs of any specific person who may receive this report.
Investors are advised to independently evaluate particular investments and strategies and to seek independent financial, legal and other advice
on the information and/or opinion contained in this report before investing or participating in any of the securities or investment strategies or
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Page 12 of 12