PP16832/01/2013 (031128)

Malaysia
Sector Update

5 April 2013

Aviation

Overweight (from Neutral)

Cautiously Optimistic
BUY with caution. The aviation sector has underperformed the KLCI in
2012 due to depressed earnings, escalating fuel prices and regulatory
uncertainty. The sector has de-rated with an average decline of 27.6%
in 2012. 2013-YTD however saw our top pick, MAHB gaining 15% while
the airlines are both up modestly with 6% rise in share prices. We are
now Overweight on the sector as traffic growth will accelerate and
profits will rise, in our view. Furthermore, valuations are undemanding
and exhibit value. Volatile fuel price is the primary risk factor. Our top
picks in order of preference are MAHB, MAS and AirAsia.

Mohshin Aziz
mohshin.aziz@maybank-ib.com
(603) 2297 8692

2012 was tough, but relatively well managed. In 2012, passenger

traffic growth in Malaysia was 5.0%, lower than its 10-year CAGR of
7.0% and the regional peers growth of 5%-14%. This slower growth
was due to MAS cutting capacity by 12% on its underperforming routes.
This action has benefited AirAsia and AirAsia X immensely as seen by
their record load factors. Airlines across the region faced severe profit
drops of 30%-40% YoY but Malaysian airlines performed much better;
AirAsias 2012 core net profit grew 0.3% YoY and MAS managed to
reduce its losses by 44.5% YoY. MAHB posted a 2.2% YoY growth.
The worst is likely behind us. We think the current aviation cycle is
about to turn from the bottom and enter into a consolidation stage. The
global economy is showing early signs of improvement and this should
help to accelerate traffic growth, stabilise yields and raise the sectors
earnings outlook. Consolidation typically lasts 6-18 months depending
on the pace of economic growth and industry supply-demand balance.
But in Malaysia, things are heating up. Things in Malaysia are
heating up due to the entry of a new competitive force namely Malindo
Air. There appears to be an overcapacity risk looming as AirAsia,
AirAsia X and Malindo will collectively take in 27 aircraft in 2013. This is
unprecedented as our base case traffic growth of 10% YoY implies 1012 aircraft addition is sufficient. It is looking very likely that a fare war is
in the making as oversupply in the system often leads to this outcome.
MAS seems to be in the better position as it is reducing 10 aircraft from
its fleet, which suggests it will be less susceptible to the oversupply risk.
Modest profit growth in 2013. In our first look at the 2013 outlook, we
believe there will be modest profit growth stemming from economies of
scale benefits and from cost saving initiatives. Revenue growth will
continue at healthy levels supported by stable GDP growth (+5.3% in
2013) and we expect the yield environment to be benign.

Aviation: Research Universe

Stock Name

Ticker

AirAsia

AIRA MK

Share
Price
2.87

Target
Price
3.00

Malaysian Airlines

MAS MK

0.75

0.97

Malaysia Airports

MAHB MK

6.00

6.70

MAS to turnaround in 2013 and deliver a profit of MYR385.6m

(versus a loss of MYR566.1m in 2012), we estimate. This is driven
by its multitude of business turnaround initiatives and the benefits of
new aircraft in its fleet.

Note: 4 April 2013 share price cut-off

Source: Maybank KE

SEE APPENDIX I FOR IMPORTANT DISCLOSURES AND ANALYST CERTIFICATIONS

Aviation

AirAsias core net profit to be flattish, with a 1.4% growth YoY to

MYR840.4m. We think Malindo Airs entry of services will intensify
the budget market competitive level and will inhibit AirAsias ability
to push up yields.

MAHBs profits to fall by 48.4% YoY, to MYR235.5m in 2013.

But, this is purely relating to accounting treatment relating to
KLIA2s initial capitalized depreciation and once-off charges after it
starts operations in end-Jun 2013.

Other risks. The main downside risk for the airline sector in 2013 is
fuel prices the largest cost item, comprising 40%-45% of total costs.
The outcome of the 13GE may also impact travel demand in the short
term (1-2 months), as was the case in the 12GE in 2008. There are
fears about potential delays in the launch of KLIA2, currently scheduled
for 28 Jun 2013 management affirms it is on track for completion in
May 2013 and KLIA2 construction is >82% completed at the moment.
Aviation underperformed the KLCI in 2012. The chart below maps
the Malaysia aviation stocks performance relative to the KLCI in 2012.
All the stocks under our coverage have underperformed the KLCIs gain
of 10.3% in 2012. On a relative basis, the best performer was MAHB
with its share price declining by 10.2%. AirAsia contracted by 27.3%
and MAS was the worst performer with a decline of 45.4%. 2013-YTD
however saw our top pick, MAHB gaining 15% while the airlines, MAS
and AirAsia are flattish in share price direction.
Malaysia aviation stocks performance relative to KLCI (2012)
Points

KLCI

AirAsia

MAS

MAHB

150

130

110

90

70

50
Jan

Apr

Jul

Dec

Oct

Source: Bloomberg

Mixed valuations. MAHBs valuations are undemanding versus the

other global airports and its own history, based on PER and P/BV. This
is also supported by superior ROE relative to its peer group. AirAsias
valuations are attractive relative to its global peers with deep discounts
of 15% on an adjusted EV/EBITDAR basis and 28% on a PER basis.
MAS is expected to post a modest profit in 2013, and therefore
valuations are unattractive relative to its peer group. But as we look
beyond the year into 2014, we believe MAS will exhibit good value.
Aviation sector Peer Valuation Summary
Stock

Rec

AirAsia
MAS
MAHB

Buy
Buy
Buy

Shr $
(MYR)
2.87
0.75
6.00

Mkt cap
(MYRm)
7,976
2, 507
7,260

TP
(MYR)
3.00
0.97
6.70

PER (x)
2013E
2014E
9.5
8.3
15.9
8.5
31.2
20.3

EV / EBITDAR (x)
2013E
2014E
8.7
8.0
7.8
6.7
11.1
9.2

P/B (x)
2013E
1.4
1.2
1.6

ROE (%)
2013E
20.9
10.3
6.8

ROAE (%)
2013E
6.7
2.3
3.3

Div (%)
2013E
8.0
0
2.8

# Based on 4 April 2013 closing (cut-off); Source: Maybank KE

5 April 2013

Page 2 of 21

Aviation

2012 in a snapshot
2012 was a tough year for the Malaysian aviation industry.
Passenger traffic growth for Malaysia in 2012 was at 5.0%, which was
much lower than 2011s growth rate of 10.7% and its 10-year CAGR of
7.0%. This was also a significantly lower growth rate in comparison to
the levels achieved by other regional peers.
Passenger traffic growth
2010

2011

2012

12.4%
13.0%

10.7%
10.7%

5.0%
10.0%

Thailand

8.0%

14.0%

14.7%

Indonesia

17.4%

17.1%

n/a

Vietnam

30.3%

9.9%

8.4%

Philippines

-0.2%

9.6%

n/a

Hong Kong

10.3%

5.9%

5.1%

Malaysia
Singapore

Sources: Respective companies website, Maybank KE

Challenges in 2012 included:

a) High fuel prices. Jet fuel averaged USD129.5/bbl in 2012, the
highest ever in recorded history. This was 3.1% higher than the
previous record set in 2008 of USD125.6/bbl. Airlines have re-imposed
and tweaked their fuel surcharges in 2Q 2012 in an effort to recoup
some of the fuel cost increase.
Fuel price and 365 days moving average price
Singapore Jet Kerosene

365-day Moving Average

USD / bbl
200

USD129.5/bbl,
highest ever in
history

175
150
125
100
75
50
25
0
2006

2007

2008

2009

2010

2011

2012

2013

Sources: Bloomberg, Maybank KE

b) Weak yield environment. Yields have weakened by 2%-3% YoY

after adjusting for stage-length. This was partly due to consumers being
more cost conscious and airlines competing aggressively to capture
market share. In addition, many tourists have also opted to travel shorthaul which has put significant pressure on long-haul flights.
c) Shrinking cargo market. Cargo market was again in the doldrums
with a decline of 1.4% in 2012. Air cargo has been in a secular decline
for the past five years; the total amount carried in 2012 was 11% below
of the levels that was hauled back in 2007.
5 April 2013

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Aviation
Malaysia air cargo and growth rates
Cargo (LHS)

'000 tons

YoY growth (RHS)

1,200

40%

1,000

30%

800

20%

600

10%

400

0%

200

-10%

-20%
93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12F

Sources: MAHB, MMC, Maybank KE

Positively, however:
a) Discipline capacity management. Total capacity (ASK) among the
local airlines declined 2.4% YoY in 2012. MAS have ceased operations
on some underperforming routes and reduced frequency as part of its
route rationalization program. AirAsia X has ceased its services to
London, Paris and Christchurch in mid-2012 which had lowered its
overall capacity for 2012. AirAsia was the only growing airline in 2012.
Malaysian airlines passenger capacity (ASK) deployment
ASK in millions

2012

2011

Difference

MAS and Firefly

AirAsia

49,742
28,379

52,998
26,074

(6.1%)
+8.8%

AirAsia X

16,231

17,648

(4.6%)

Grand Total

94,352

96,720

(2.4%)

Sources: AirAsia, MAS, AirAsia X, Maybank KE

b) Record load factor. The combination of capacity reduction by the

local airlines and sustained traffic growth has helped to push load
factors to record levels. AirAsia X and AirAsias load factors are
particularly impressive at >80%. MAS underperformed in the first half of
2012, but subsequently produced an impressive set of number in 4Q12.
Load factors for selected airlines
AirAsia

AirAsia X

MAS
84.4%

85%
80.7%
80.1%

80.1%

80%
76.2%

76.8%

76.5% 76.3%
75.6%

75.0%

75%

70%

74.7%

68.8%

65%
2009

2010

2011

2012

Sources: AirAsia, AirAsia X, MAS, Maybank KE

5 April 2013

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Aviation

c) MAS pain, is AirAsias gain. The share swap reversal between

Khazanah and Tune in May, the early exits of new senior management,
and issues with the employee unions have set back MAS business
transformation efforts by a year, in our view.
During the turbulent period, MAS was not able to implement proper
marketing strategy and its competitors have taken full advantage to
capture market share at MAS expenses and raised average fares. We
believe, the new management team at MAS only took full control in
April 2012 and stated implementing reforms since then. MAS has
eventually managed to make positive initiatives and has turned
profitable since 3Q12.
Core net profit for Malaysian airline stocks
MYR million

4Q12

4Q11

YoY

2012

2011

YoY

AirAsia
MAS

358.3
34.6

308.0
(231.3)

16.3%
n/a

828.5
(571.4)

826.4
(1,028.9)

0.3%
44.5%

Sources: Respective companies, Maybank KE

MAHB was impacted as well. The scaling down of routes by MAS

directly impacted MAHB with lower than expected traffic numbers.
MAHBs core net profit grew by 2.2% YoY in 2012, on the back of 5.0%
passenger traffic growth and 6.5% higher unit revenue. However, cost
increases in the form of staff salary adjustments, and higher overheads
relating to the KLIA2 construction have weighed down on its
performance and profit growth. MAHBs operating performance in 2012
was significantly behind regional peers such as Airports of Thailand
(AOT) and Singapore Airport Terminal Services (SATS).
d) Supportive infrastructure. KLIA handled 39.8m passengers in
2012, which was on par to its design capacity of 40.0m p.a.. On
average, 12.5% of flights were delayed with an average delay time of
25 minutes. This was a substantially better performance compared to
many other regional airports which faced severe delay profile of 23%37%. We can expect the on-time performance to improve after KLIA2
and the third runway is ready for service.
KLIA flight delay profile

KLIA average flight delay profile

Flights on-time
100%

3.0

Flight delays tend

to intensify in the
afternoon & night

95%

Severe delays tend

to happen late
morning & lunch

>45 mins
2.0

90%
85%

30-45
mins
1.0

80%
75%

15-30
mins

70%

0.0

12-3

3-6

6-9

9-12

12-15

15-18

18-21

21-24

12-3

3-6

6-9

9-12

12-15

Time

Sources: KLIA, DCA, FlightStats, Maybank KE

5 April 2013

15-18

18-21

21-24
Time

Sources: KLIA, DCA, FlightStats, Maybank KE

Page 5 of 21

Aviation

2013 will be challenging as it is exciting

Volume growth in 2013 will outpace 2012. We expect passenger
traffic growth in 2013 to outpace 2012s 5.0% growth due to the
following reasons:
a) Stable economic growth. Our in-house economics team projects
real GDP growth of 5.3% in 2013. Consumer spending is resilient,
buoyed by recent hikes in civil service salaries and the new minimum
wage implementation along with low unemployment and benign interest
rate. The chart below shows the historical relationship between traffic to
GDP growth the average ratio for Malaysia in the past 18 years is
1.4x and the past 10 years average has increased to 1.6x. Based on
these trends, we can expect traffic growth to exceed 7% in 2013.
Malaysias air traffic and GDP growth rates
Traffic growth

20%

GDP growth

15%
10%
5%
0%
-5%

94

96

98

00

02

04

-10%

06

08

10

12

Average traffic/GDP = 1.4x

Past 10 years
= 1.6x

-15%

Sources: MAHB, MMC, Bank Negara Malaysia, Maybank KE

b) Higher number of aircraft deployment. The table below shows the

planned net fleet addition by all the Malaysian airlines. There will be a
net addition of 17 aircraft in 2013, breaking the record 13 aircraft net
additions in 2012. MAS will take delivery of 12 new aircraft and retire 22
old aircraft that are currently sitting idle or rarely used for the past 12
months. Therefore, we think the real organic growth is actually 27
aircraft addition in 2013 after filtering MAS fleet disposal. All the
industry executives have voiced confidently that demand is strong and
their aircraft will be filled up.
Net fleet addition
MAS and Firefly
AirAsia
AirAsia X

2012

2013

Difference

+8
+5

(10)
+10

>>
+100%

+7

n/a

Malindo

n/a

+10

n/a

Grand Total

+13

+17

>>

Sources: Respective companies website

c) MAS will grow again in 2013. MAS is adding new routes (e.g Kuala
Lumpur to Kathmandu) and adding frequency on selected routes.
Management has stated that enhancing their aircraft utilization is one of
the pillars for business transformation. Furthermore, the new aircraft
induction (Airbus A380, A330-300 and Boeing 737-800) has a higher
seat count and will automatically add capacity per every flight.
5 April 2013

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Aviation

Traffic growth of 10% projected in 2013. MAHBs official guidance for

traffic growth in 2013 is 7.1%. We think this figure is conservative, and
have imputed 10% growth as our base forecast. This is in-line with the
growth rate of regional peers. Furthermore, we believe the launch of
KLIA2 will be a catalyst for many airlines to start their maiden services
to Malaysia.
Malaysia air traffic and growth rates
millions

Passengers (LHS)

YoY growth (RHS)

80

20%

70

15%

60

10%

50

5%

40

0%

30

-5%

20

-10%

10

-15%
-20%

0
93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12F 13F

Sources: MAHB, MMC, Maybank KE

Pricing power will however be benign in 2013. We think airlines will

struggle to raise yields in 2013 due to the following reasons:
a) Supply exceeds demand. We do not think the projected air traffic
demand, growing at a projected 10% in 2013, will be able to support the
ambitious fleet deployment plan of 17 new aircraft in 2013 (27,
excluding MAS fleet deployment plans). Under normal circumstances,
a net addition of 10-12 aircraft is sufficient, we estimate.
b) Forward yield indicator is soft. The graphs below show the
forward ticket sales as a percentage of trailing 12-month revenue. This
analysis provides a reliable forward indicator on yield trends.
Both AirAsia and MAS exhibit a downward trend since 2Q12. This is a
clear indication that both airlines lack pricing power in the current
market environment. It does appear that downward yield trend is more
pronounced to AirAsia as seen by the massive dip in 4Q12.
AirAsia sales in advance as percentage of revenue

MAS sales in advance as percentage of revenue

11%

18%

10%

16%

9%

14%

8%

12%

7%
1Q
2010

10%

2Q

3Q

4Q

1Q
2011

Sources: AirAsia, Maybank KE

5 April 2013

2Q

3Q

4Q

1Q
2012

2Q

3Q

4Q

1Q
2010

2Q

3Q

4Q

1Q
2011

2Q

3Q

4Q

1Q
2012

2Q

3Q

4Q

Sources: MAS, Maybank KE

Page 7 of 21

Aviation

c) Price war is inevitable. It is looking very likely that a fare war is in

the making as the entry of a new competitor often leads to this
outcome. Everyone will try their best to capture or retain market share
and will compete on the basis of service and/or price. Since Malaysia
can be defined as a fairly mature market, we think ticket prices will be
the defining variable. There has been many promotional campaigns
lately and we list down the pertinent ones below:
MAS offered 50% discount to redeem frequent flyer miles for a free
flight passengers only need to pay fuel surcharge and airport taxes.
This campaign was extremely successful; we visited the MAS sales
office at KL Sentral on 31 Dec 2012 (last day of campaign) and saw
about 400-500 people queuing to purchase their tickets. This campaign
has helped MAS to generate positive mileage from the public as well as
help to boost load factors and revenues.
AirAsia and AirAsia X have also have reciprocated with multiple 1
million free seats campaign (1st = Sep 2012, 2nd = Jan 2013, 3rd = Apr
2013) on its entire network, and there are market whispers that there
could be more of the same in the later part of the year. In addition,
AirAsia will also give away 10,000 free seats to eligible Malaysians to
promote integration between East and West Malaysia, as a means to
commemorate the 1 Malaysia concept. This is a tactical masterstroke
by AirAsia; it created a market buzz.
Malindo Air has secured its Aircraft Operators Certificate (AOC) on 7
March 2013. Its maiden services are to Kota Kinabalu (3x per day) and
Kuching (4x per day) on 23 March 2013. Miri, Sandakan, Bintulu and
Sibu are next on the line. Currently, Malindo has a fleet size of two
Boeing 737-900ER aircraft and it plans to deploy 10-12 aircraft within
the first year of operations. Malindo claims to match or be lower than
AirAsias pricing points. Its introductory offers of MYR38 to Kuching and
MYR68 to Kota Kinabalu are extremely attractive and is generating
significant interest from the public.
Berjaya Air, which historically served a niche clientele base, has turned
offensive by providing attractively priced tickets for its Subang-Penang
route. This route was previously monopolized by Firefly.

5 April 2013

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Aviation

Good for customers, but not necessarily for business. Customers

have been inundated with great fare offers in 2013 thus far. But the
combination of looming overcapacity and intensified competition will
likely negatively impact on load factors and yields. Should the price war
really happen, this will certainly depress yields for the budget segment
and ultimately erode profits.
Looking back into history as a guide: During the brief existence of
Firefly jet operation services to East Malaysia (Jan-Aug 2011), AirAsias
airline related yields declined and average fares on overlapping routes
tumbled by as much as 10%-20%. AirAsias airline related yields
tumbled by 10.4% YoY in 2011, partly due to the softening market and
impact from Firefly. Firefly only had a fleet of six jet aircraft and already
the impact was pronounced. This episode demonstrates that the market
is responsive and a change in equilibrium could happen fast.
AirAsias airline related yields 2010-2012
YoY change (LHS)
40%

Yield (RHS)

sen / RPK
20

Decline in yields
coincides with Firefly
jet operation launch

19

20%
18

12.5%
9.5%

8.9%
3.5%

6.2%
3.2%

1.6%

17

0%
1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12
-7.1%

-20%

-14.6% -14.9%

-5.0%

16

15

Sources: AirAsia, Maybank KE

We think it will be less severe this time, because the market has
evolved to be more mature, AirAsia will be savvier in its pricing and it
also has a 25%-30% larger route network as compared to 2011 which
should provide it with defensive qualities. We also think MAS will be
relatively immune to the impending price war because it is adding
modest capacity growth of 2%-3% in 2013 and it caters to the premium
segment which is not overly price sensitive.
Malindo also needs time to learn, on the intricacies of the Malaysian
market and also to develop its infrastructure. With the support of its
parent Lion Air, and the fact that Chandran Ramamuthy (Malindo Air
CEO) is an ex AirAsia employee, this will shorten the learning curve
period, we believe. But nonetheless, we think 2013 will an orientation
year for Malindo, and its impact against AirAsia will be limited. We think
2014 onwards, it could be a force to reckon with if it plays its cards well.

5 April 2013

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Aviation

Operating profits to be mixed

Costs expected to be flattish. Fuel remains the single largest cost
item for the airlines, comprising 40%-45% of total costs. We use an
average USD126/bbl as our base case fuel price assumption in 2013
and beyond; this is 2.7% below 2012s record setting USD129.5/bbl
average. The year-to-date fuel price is at USD128.3/bbl, which makes
our assumption look conservative for now. Our fuel price assumption
will be revised on a quarterly basis as required.
Rising staff cost is a concern. Malindo Air will be scouting for
qualified airline staffs to support its ambitious growth plans. Its plan to
take in 12 aircraft p.a implies that it needs to recruit 900-1,100 people
p.a. in 2013-14. About 50% of the positions are for highly skilled and
licensed personnel. Malindo will have to poach people from its
competitors and this will drive wages up for the industry.
MAS is overstaffed. AirAsia and AirAsia X on the other hand, operate a
lean operation and need to retain all of their talent. We heard market
whispers that AirAsia paid an average of three months bonus to its staff
for 2012. This is exceptionally high by AirAsias historical, and we think
it could be a deterrent strategy preventing people from joining Malindo.
GE 13 is a minor concern. The outcome of the 13GE may also impact
travel demand in the short term (1-2 months), as was the case in the
12GE in 2008. The extend of the earnings impact depends on when the
GE is held; Feb and Apr are strong months for the aviation industry.
MAS to turnaround, AirAsia flattish and MAHB down. We estimate
MAS to deliver a profit of MYR385.6m in 2013 thanks to its business
turnaround initiatives and benefits of new aircraft in its fleet. AirAsias
core net income is expected to increase slightly by 1.4% YoY to
MYR840.4m due to intensified competition in its domestic market. We
expect MAHBs net profit to plummet by 48.4% YoY to MYR235.5m but
this is due to new depreciation and interest costs to be directly charged
into the P&L after the commencement of KLIA2 operations. This is an
accounting treatment issue and masks the growth in cash flow.
Core net profit for Malaysian aviation stocks
R MYR million

2010A

2011A

2012A

2013F

2014F

AirAsia
Growth YoY

919.1
+67.4%

826.4
(10.1%)

828.5
+0.3%

840.4
+1.4%

958.5
+14.1%

MAS
Growth YoY

(314.7)
n/a

(1,260.2)
n/a

(571.4)
n/a

385.6
n/a

718.8
+86.4%

MAHB
Growth YoY

378.1

432.5

442.2

235.5

361.6

+7.9%

+25.9%

(5.2%)

(48.4%)

+53.5%

Sources: Respective companies, Maybank KE

5 April 2013

Page 10 of 21

Aviation

Valuation
Even though AirAsia, MAS and MAHB are all aviation stocks based in
Malaysia, they are best valued against regional peers on an individual
basis. This is due to their distinct business model and the distinct risks
affecting their businesses. Therefore, there is no suitable benchmark for
Malaysian aviation on a collective basis. AirAsia is best to compared
against other LCCs globally, MAS against FSCs in the Asia Pacific
region and MAHB against other global airports.

AirAsia (BUY, Target price MYR3.00/share)

Cheap relative to peers. AirAsias valuations are cheap relative to its

global peers as evident by its 13% discount to peers on current
adjusted EV/EBITDAR and 28% discount to peers based on PER. Our
fair value of MYR3.00/share is derived by applying the market average
2013 adjusted EV/EBITDAR of 8.9x.
The other positive attribute of AirAsia is its generous dividends. The
Company has announced a special dividend of 18sen/share single-tier
to be paid on 12 Apr 2013, on top of a final dividend of 6sen/share
single-tier for FY12 to be paid after the AGM. The total upcoming DPS
of 24sen translates to a 8.9% yield at current share price. AirAsia has
adopted a 20% dividend payout policy.
Global low cost carriers valuation comparison
Current

PE Ratio
2013F

2014F

Adjusted EV / EBITDAR
Current
2013F

AirAsia
Thai AirAsia (AAV)
Tiger
Cebu Pacific
Air Arabia
Jazeera
EasyJet
Norweigan Air Shuttle
Ryanair
JetBlue
SouthWest
WestJet
GOL

9.6
1.9
n/a
11.8
8.7
12.7
23.5
16.2
14.3
15.9
19.2
14.1
n/a

9.5
21.0
n/a
14.1
8.4
14.8
14.3
10.2
16.1
10.7
12.7
12.3
n/a

8.3
16.0
15.3
12.0
7.2
12.3
13.2
7.8
14.4
8.7
10.5
10.9
28.1

8.2
n/a
30.7
9.0
8.2
5.8
6.1
11.9
7.5
6.5
5.3
4.2
n/a

8.7
10.4
22.2
8.0
6.4
10.7
9.2
7.6
9.8
5.9
4.9
5.1
6.9

8.0
7.5
11.8
7.9
5.3
9.9
8.5
5.9
9.1
5.3
4.5
4.7
6.0

SIMPLE AVERAGE

13.4

13.1

12.7

9.4

8.9

7.3

2014F

* excluded from average calculations as it significantly off the mark

Prices updated on 4 April 2013
Sources: Bloomberg, Kim Eng securities

5 April 2013

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Aviation

MAS (BUY, Target price MYR0.97/share)

On earnings drive. We forecast MAS to turnaround and make modest

profits in 2013. Therefore, MAS valuations relative to the peer group
will appear on the high side for 2013. We think looking 1 year forward to
2014 will be a more reflective valuation metric for MAS.
Our fair value of MYR0.97/share is derived by applying a 7.2x 2014
adjusted EV/EBITDAR. This is a 20% premium to the peer groups 6.0x;
we think the premium is justified given our expectations for a stellar
profit growth of 86.4% in 2014. The market will likely re-rate MAS for its
successful business turnaround, in our view.
Asia Pacific full service airline valuation comparison
Current

PE Ratio
2013F

2014F

55.0*
37.5
11.0
17.5
4.2
12.5
n/a
n/a
13.5
n/a
n/a
16.0

15.8
19.2
11.2
9.2
4.7
15.9
11.8
16.0
10.9
12.0
15.9
12.1

10.7
13.2
7.7
5.8
4.9
14.3
8.8
12.1
13.1
7.6
8.5
9.3

8.7
3.0
9.7
9.6
n/a
4.7
15.8
9.5
6.8
4.7
10.7
8.3

7.1
2.9
8.4
8.3
2.9
5.1
9.7
7.0
6.3
3.9
7.8
6.3

6.4
2.1
7.7
7.1
3.0
4.8
8.7
6.4
5.6
3.3
6.7
5.6

Chinese Airlines
Air China
China Eastern
China Southern
Hainan Airlines
China Average

14.1
9.4
12.8
11.6
12.0

11.6
8.5
9.1
14.7
11.0

9.5
7.3
8.0
11.4
9.1

9.1
6.8
7.5
n/a
7.8

8.1
7.0
7.4
9.0
7.9

7.2
6.2
6.5
8.4
7.1

SIMPLE AVERAGE

18.1

11.8

9.2

8.2

6.7

6.0

Asia Pacific
Cathay Pacific
Singapore Airlines
Korean Airlines
Asiana
Japanese Airlines
All Nippon Airways
China Air
EVA Air
Garuda Airways
Thai Airways
MAS
Asia Pacific Average

Adjusted EV / EBITDAR
Current
2013F

2014F

* excluded from average calculations as it significantly off the mark

Prices updated on 4 April 2013
Sources: Bloomberg, Kim Eng securities

5 April 2013

Page 12 of 21

Aviation

MAHB (BUY, Target price MYR6.70/share)

MAHBs valuations are undemanding, versus the World Airport Index

and its own history, based on PER and P/BV. Its EV/EBITDA appears
expensive but this is due to the ongoing construction of KLIA2, which is
heavily cash consuming. The latter is also reflected in MAHBs fastrising gearing levels since late 2011. MAHBs ROE is much higher than
WAI and relative to its own history.
MAHB and World Airports Index PE Ratio
MAHB

PER (x)

MAHB and World Airports Index EV / EBITDA

World Airports Index

EV/ EBITDA (x)

30

MAHB

World Airports Index

12

10.7

25
10
20

+ = 9.3

+ = 18.0 17.1

Mean = 8.8
8

15

Mean = 14.5
6

10

- = 6.8

- = 11.0

5
2007

2008

2009

2010

2011

2012

4
2007

2013

MAHB and World Airports Index P/BV

P/BV (x)

MAHB

2008

2009

2010

2011

2012

2013

MAHB and World Airports Index ROE

ROE (%)

World Airports Index

MAHB

World Airports Index

15

3.0
2.5

13

+ = 11.6
+ = 1.8

2.0

1.6

Mean = 1.4

1.5

11

10.0
Mean = 10.0

1.0

- = 1.0

- = 8.4
7

0.5
0.0
2007

2008

2009

2010

2011

2012

MAHB and World Airports Index Dividend Yield

DY (%)

MAHB

5
2007

2013

2008

2009

2010

2011

2012

2013

MAHB and World Airports Index Gearing

Gearing (%)

World Airports Index

10

MAHB

World Airports Index

75

80

+ = 66

8
60

+ = 5.8

6
5

40

Mean = 4.1

Mean = 35

3.6

4
3

20

- = 2.3

- = 4

1
0
2007

2008

2009

2010

2011

2012

2013

0
2007

2008

2009

2010

2011

2012

2013

Sources: Bloomberg, Maybank KE

5 April 2013

Page 13 of 21

Aviation

Company Briefs
AirAsia
Malaysian Airlines
Malaysia Airports

5 April 2013

Page 14 of 21

Aviation

Market Cap (MYR m):

Shares Issued (m):
Current price (MYR):
Target price (MYR):
Recommendation:

AirAsia (AIRA MK)

All ready for a price war

FYE Dec
2012A
2013F
2014F
2015F

Revenue
(MYR m)

EBITDAR
(MYR m)

Net Profit
(MYR m)

Basic EPS
(sen)

4,995.9
5,594.0
6,140.1
6,641.1

1,879.4
1,944.6
2,132.3
2,202.6

828.5
840.4
958.5
1,010.8

29.8
30.2
34.5
36.4

EPS gwth
(%)
0.2
1.4
14.1
5.5

A class above the rest. AirAsia performed well in 2012

with a flattish profit YoY, relative to the industry which
experienced 30%-40% profit decline. Its cost leadership
and strong brand has enabled it to endure the challenging
period unscathed. AirAsias dominance in the Malaysian
market will soon be put to the test due to the entry of a new
player and MAS has become a much leaner outfit as well.

Malindo threat remains, but sufficiently priced in. We

believe there will be a price war between Malindo and
AirAsia later in the year. AirAsias share price has
retraced by >30% since the announcement of Malindos
intention to commence services (Oct 2012); we think this
more than sufficiently discounts the risk of higher
competition.
2013 will be supported by associates. We think that the
Malaysian operations will incur YoY profit decline due to the
stiffened level of competition. However, the operations in
Thailand and Indonesia should do well and offset the
impact of lower profits in the Malaysian operations.

INCOME STATEMENT

192.6
210.8
241.0
275.3

PER EV/EBITDAR
(x)
(x)
9.6
9.5
8.3
7.9

8.2
8.7
8.0
7.8

P/BV
(x)

Net Gearing
(%)

ROE
(%)

1.5
1.4
1.2
1.0

116.2
124.5
116.2
107.0

35.1
20.9
18.7
18.9

Other foreign foray will continue to be loss making.

AirAsias foray to Japan and the Philippines, and soon to
come India, will continue to be loss making in 2013. It has
yet to reach critical size and is incurring start-up losses.
We think it will take another 2-3 years at least, for the
new start ups to start contributing to the Group. We are
undeterred with the start-up losses, given that the longterm benefits significantly outweigh the risks.
AirAsia X and AirAsia Indonesia on track for listing.
AirAsias 18.3% owned AirAsia X and 49% owned AirAsia
Indonesia is slated for public listing in 2H13. This will
crystallize significant value creation for AirAsia and raise
its book value by 20%-30%, by our estimate.
BUY for dividends too. The lure of generous dividends
amounting to MYR666m cash payout for FY12 (both yet
to be paid) is too good to ignore. We think its new
dividend policy increases the stocks appeal too. This is
an opportune time to load up on AirAsia, in our view.

BALANCE SHEET

FYE Dec (MYR m)

2012A

2013F

2014F

2015F

4,995.9
1,879.4
562.2

5,594.0
1,944.6
626.8

6,140.1
2,132.3
702.8

6,641.1
2,202.6
776.8

1,157.7
(299.4)
(1.6)
1,197.4
2,054.0
(175.5)
0.0
1,878.5
(1,050.0)
828.5

1,103.3
(362.3)
111.1
0.0
852.1
319.3
0.0
1,171.4
(331.0)
840.4

1,161.0
(400.3)
145.1
0.0
905.8
268.3
0.0
1,174.1
(215.6)
958.5

1,157.4
(422.2)
257.2
0.0
992.4
362.9
0.0
1,355.3
(344.5)
1,010.8

11.1
1.7
(1.8)
233.0
0.3
8.5

12.0
3.5
(4.7)
(37.6)
1.4
(37.5)

9.8
9.7
5.2
0.2
14.1
(29.6)

8.2
3.3
(0.3)
15.4
5.5
(36.6)

Revenue
EBITDAR
Depreciation & Amortisation
Operating Profit
Associates
Interest (Exp)/Inc
Exceptional Items
Pre-Tax Profit
Tax
Minority Interest
Reported Net Profit
Non-cash items
Core Net Profit

BVPS
(sen)

7,976
2,779
2.87
3.00
BUY

Revenue Growth %
EBITDAR Growth (%)
EBIT Growth (%)
Reported Net Profit Growth (%)
Core Net Profit Growth (%)
Tax Rate %

FYE Dec (MYR m)

2012A

2013F

2014F

2015F

Fixed Assets
Other LT Assets
Cash/ST Investments

9,786.0
2,915.9
2,225.8

11,121.7
3,260.4
1,882.6

12,255.6
3,551.3
2,016.4

13,343.1
3,937.5
2,277.9

Other Current Assets

Total Assets

1,719.4
16,647.1

1,837.9
18,102.5

1,986.5
19,809.8

2,097.8
21,656.4

ST Debt
Other Current Liabilities
LT Debt
Other LT Liabilities
Minority Interest
Shareholders' Equity
Total Liabilities-Capital

726.2
2,305.2
7,718.2
544.4
0.0
5,353.0
16,647.1

726.2
2,524.5
8,450.4
544.4
0.0
5,857.0
18,102.5

726.2
2,768.6
9,073.0
544.4
0.0
6,697.6
19,809.8

726.2
2,992.5
9,741.5
544.4
0.0
7,651.9
21,656.4

Share Capital (m)

Net Debt
Capitalised leases
Working Capital
Adjusted Net Gearing %

2,779.1
2,225.8
1,257.9
913.7
65.1

2,779.1
1,882.6
1,592.5
469.7
59.3

2,779.1
2,016.4
1,324.1
508.1
49.9

2,779.1
2,277.9
1,055.6
657.1
43.6

Sources: Company, Maybank KE

5 April 2013

Page 15 of 21

Aviation

Market Cap (MYR m):

Shares Issued (m):
Current price (MYR):
Target price (MYR):
Recommendation:

Malaysian Airlines (MAS MK)

Cheap, but where is the interest?

2,507
3,342
0.75
0.97
BUY

FYE Dec

Revenue
(MYR m)

EBITDAR
(MYR m)

Net Profit
(MYR m)

Basic EPS
(sen)

EPS gwth
(%)

BVPS
(sen)

PER
(x)

EV/EBITDAR
(x)

P/BV
(x)

Net Gearing
(%)

ROE
(%)

2012A
2013F
2014F
2015F

13,270.9
14,296.0
14,595.8
14,240.5

1,664.0
2,885.7
3,250.2
3,329.7

(571.4)
385.6
718.8
857.1

(17.1)
4.8
8.9
10.6

n/a
n/a
86.4
19.2

64.0
65.6
74.4
85.0

n/a
15.9
8.5
6.0

7.8
7.8
6.7
6.0

1.2
1.2
1.0
0.9

346.1
135.9
133.0
98.8

n/a
10.3
12.7
13.3

Show me some love. MAS is on the path for a profitable

2013, having successfully turnaround in 3Q12. The
Company is achieving higher unit revenue whilst at the
same time able to reduce unit cost-excluding fuel. MAS will
grow capacity modestly in 2013, which is contrary to the
market. We favor this approach as it will help MAS to retain
its yields and insulate itself from the imminent price war.
Business significantly repaired. MAS have undertaken
major reforms to its business. Among the notable ones are:
1) terminated underperforming routes; 2) rejuvenate its fleet
by removing old aircraft and replacing with new ones
MAS average fleet is <8 years, on par with Cathay and
SIA; 3) simplified operations and focus on higher utilization.
2013, year of the turnaround. We note that MAS service
levels (on-time performance, in-flight service, call centers)
have improved and MAS is also more active and
competitive in its marketing campaigns. This is enabling
MAS to record higher load factors that are on par with
Cathay and SIA. Yields are also on an uptrend and unit cost
excluding fuel is coming down. These factors will ensure
that MAS is sustainably profitable going forward.
INCOME STATEMENT

Revenue Growth %
EBITDAR Growth (%)
EBIT Growth (%)
Net Profit Growth (%)
Recurring Net Profit Growth (%)
Tax Rate %

50:50 chance rights issue to proceed. MAS share price

has plunged since announcing its rights issue proposal.
The market clearly does not like it, and we sense minority
shareholders are not keen to participate. Furthermore, the
current share price is close to its book value (P/BV 1.04x)
which limits its ability to provide sufficient discount for the
rights issue. Should the rights issue be abandoned, MAS
will likely tap into its existing sukuk facility and raise
MYR1.0b.
Cheap on a fundamental basis. Our MYR0.97/share
target price is based on 2014 adjusted EV/EBITDAR of
7.2x which is 20% above the Asia Pacific airline peers
given that it is in the midst of a turnaround followed by
strong profit growth thereafter.

BALANCE SHEET

FY Dec
Revenue
EBITDAR
Depreciation & Amortisation
Operating Profit
Interest (Exp)/Inc
Associates
Exceptional Items
Pre-Tax Profit
Tax
Minority Interest
Reported Net Profit
Core Net Profit

Rights issue continues to dominate investors mind.

Despite the positive performance, we think the market will
largely ignore and wait for more successive positive data
to be sure. Furthermore, the ongoing rights issue is a big
noose on MAS share price. We expect the stock to trade
sideways until the rights issue is completed in Apr 2013.

2012A

2013F

2014F

2015F

13,270.9
1,664.0
(2,025.0)
(361.0)
(235.3)
(1.3)
(140.7)
(738.3)
(5.9)
1.8
(430.7)
(571.4)

14,296.0
2,885.7
(2,187.8)
697.8
(297.5)
(1.4)
0.0
399.0
(13.4)
1.8
385.6
385.6

14,595.8
3,250.2
(2,197.6)
1,052.5
(316.8)
(1.5)
0.0
734.2
(15.4)
1.8
718.8
718.8

14,240.5
3,329.7
(2,150.8)
1,178.8
(303.6)
(1.7)
0.0
873.6
(16.5)
1.8
857.1
857.1

(5.8%)
139.7%
(80.4%)
(79.2%)
(54.7%)
(0.8%)

7.7%
73.4%
NA
NA
NA
3.4%

2.1%
12.6%
50.8%
86.4%
86.4%
2.1%

(2.4%)
2.4%
12.0%
19.2%
19.2%
1.9%

FY Dec

2012A

2013F

2014F

2015F

Fixed Assets
Other LT Assets
Cash/ST Investments
Other Current Assets
Total Assets

12,853.6
592.6
2,148.5
1,696.5
17,291.1

15,761.9 17,360.3
337.0
337.0
2,471.9
2,641.3
2,086.1
2,128.4
20,656.9 22,467.0

16,904.0
337.0
3,198.4
2,080.2
22,519.6

ST Debt
Other Current Liabilities
LT Debt
Other LT Liabilities
Minority Interest
Shareholders' Equity
Total Liabilities-Capital

1,338.7
5,574.9
8,209.8
29.7
0.0
2,138.0
17,291.1

410.8
5,614.0
9,293.0
18.6
0.0
5,320.5
20,656.9

-91.0
5,726.8
10,762.2
29.7
0.0
6,039.3
22,467.0

-592.7
5,593.1
10,604.3
18.6
0.0
6,896.3
22,519.6

Share Capital (m)

Net Debt
Working Capital
Gross Gearing (%)

3,342.2
7,400.1
(3,068.7)
346.1

811.5
7,231.9
(1,466.9)
135.9

811.5
8,030.0
(866.1)
133.0

811.5
6,813.1
278.2
98.8

Sources: Company, Maybank KE

5 April 2013

Page 16 of 21

Aviation

Market Cap (MYR m):

Shares Issued (m):
Current price (MYR):
Target price (MYR):
Recommendation:

Malaysia Airports Holdings (MAHB MK)

KLIA2 opening to drive interests

FYE Dec
2012A

Revenue
(MYR m)
3,548.1

Net Profit
(MYR m)
442.2

Basic EPS
(sen)
37.3

EPS gwth
(%)
(5.2)

2013F

3,878.3

235.5

19.2

2014F

2,775.3

361.6

29.5

2015F

2,954.6

402.5

32.9

DPS
(sen)
15.5

PER
(x)
16.1

EV/EBITDA
(x)
10.2

Div yield
(%)
2.6

P/BV
(x)
1.7

Net Gearing
(X)
0.53

(48.4)

14.9

31.2

11.1

2.5

1.6

0.55

6.8

53.5

17.0

20.3

9.2

2.8

1.6

0.43

7.8

11.3

16.8

18.3

8.3

2.8

1.5

0.33

8.4

Safe proxy to Malaysian aviation. We look forward to a

promising 2013 with many positive drivers: 1) sustained
economic growth of 5.3% for Malaysia and 3.5% for global;
2) record number of aircraft addition by AirAsia and Malindo
Air; and 3) Malaysian Airlines boosting its utilization rates
and adding new routes and frequency to its route network
vs shrinking capacity back in 2012. Other regional airports
have performed exceptionally well in 2012 and MAHB is still
the laggard, despite share price up 15% YTD. With more
positive global and domestic macro indicators and with the
KLIA2 opening in June 2013, the stock should rerate this
year.
2012 disappointed. There was a surfeit of accounting
adjustments and rise in cost items that had weighed down
on 2012s performance. This had masked the increase in
passenger service charges (PSC) and landing charges
imposed in Nov 2011 which greatly aids to boost revenues.
The underlying business remains healthy and churns strong
cashflow, as demonstrated by the 39% YoY growth in
9M12s OCF.
INCOME STATEMENT
FY Dec
Revenue
EBITDA
Depreciation & Amortisation
Operating Profit (EBIT)
Interest (Exp)/Inc
Associates
One-offs
Pre-Tax Profit
Tax
Minority Interest
Reported Net Profit
Recurring Net Profit
Revenue Growth %
EBITDA Growth (%)
EBIT Growth (%)
Net Profit Growth (%)
Recurring Net Profit Growth (%)
Tax Rate %

7,260
1,210.0
6.00
6.70
BUY
ROE
(%)
9.8

2013 looks exciting. Passenger traffic growth is expected

to accelerate to 10% in 2013, we estimate, higher than
2012s 5.0% growth. Sustained economic growth, record
number of firm aircraft deployment and Malaysian Airlines
re-igniting its capacity growth are the main drivers.
Furthermore, the rise of the third force Malindo Air, is
expected to spark a price war among the airlines and help
churn strong traffic growth.
KLIA2s official launch on 28 Jun. The Prime Minister
has requested for the KLIA2 to be launched on 28 June
2013 the same opening date for KLIA launch 15 years
ago. However, the internal target for handover from
contractors to MAHB remains on 30 Apr. The opening of
KLIA2 was originally targeted for May. An official launch on
28 June would mean a two month delay.
BUY maintained for its strong fundamentals and exciting
growth prospects. Our target price of MYR6.70/share is
DCF-based using a 21-year cashflow projection, with 0%
terminal value and a WACC of 6.80%.

BALANCE SHEET
2012A

2013F

2014F

2015F

3,548.1
930.2
(227.0)
703.2
(19.0)
(17.8)
(68.9)
597.5
(208.5)
0.0
389.0
442.2

3,878.3
882.5
(410.8)
471.7
(72.0)
3.0
0.0
402.6
(100.7)
0.0
302.0
235.5

2,775.3
1,024.6
(405.5)
619.1
(140.6)
3.6
0.0
482.1
(120.5)
0.0
361.6
361.6

2,954.6
1,089.0
(416.0)
673.0
(140.6)
4.3
1.0
536.7
(134.2)
0.0
402.5
402.5

28.8%
12.2%
7.4%
-3.1%
2.2%
34.9%

9.3%
-5.1%
-32.9%
-22.4%
-46.7%
25.0%

-28.4%
16.1%
31.3%
19.7%
53.5%
25.0%

6.5%
6.3%
8.7%
11.3%
11.3%
25.0%

FY Dec

2012A

2013F

2014F

2015F

Fixed Assets
Other LT Assets
Cash/ST Investments
Other Current Assets
Total Assets

290.8
7,035.4
774.2
739.4
8,839.8

4,146.7
3,244.3
612.8
1,273.3
9,277.0

4,114.3
3,028.5
1,062.7
1,013.4
9,219.0

4,064.9
2,888.8
1,464.7
1,041.9
9,460.3

ST Debt
Other Current Liabilities
LT Debt
Other LT Liabilities
Minority Interest
Shareholders' Equity
Total Liabilities-Capital

0.0
833.6
3,100.0
546.9
0.1
4,359.3
8,839.8

0.0
1,078.3
3,100.0
536.3
0.1
4,562.4
9,277.0

0.0
877.6
3,100.0
525.6
0.1
4,715.7
9,219.0

0.0
932.3
3,100.0
515.0
0.1
4,912.9
9,460.3

Share Capital (m)

Gross Debt/(Cash)
Net Debt/(Cash)
Working Capital

1,186.3
3,100.0
2,325.8
680.0

1,225.0
3,100.0
2,487.2
807.8

1,225.0
3,100.0
2,037.3
1,198.5

1,225.0
3,100.0
1,635.3
1,574.3

Sources: Company, Maybank KE

5 April 2013

Page 17 of 21

Aviation

RESEARCHOFFICES
REGIONAL
P K BASU
Regional Head, Research & Economics
(65) 6432 1821 pk.basu@maybank-ke.com.sg
WONG Chew Hann, CA
Acting Regional Head of Institutional Research
(603) 2297 8686 wchewh@maybank-ib.com
ONG Seng Yeow
Regional Products & Planning
(852) 2268 0644 ongsengyeow@maybank-ke.com.sg

ECONOMICS
Suhaimi ILIAS
Chief Economist
Singapore | Malaysia
(603) 2297 8682 suhaimi_ilias@maybank-ib.com
Luz LORENZO
Economist
Philippines | Indonesia
(63) 2 849 8836 luz_lorenzo@maybank-atrke.com

MALAYSIA
WONG Chew Hann, CA Head of Research
(603) 2297 8686 wchewh@maybank-ib.com
Strategy
Construction & Infrastructure
Desmond CHNG, ACA
(603) 2297 8680 desmond.chng@maybank-ib.com
Banking - Regional
LIAW Thong Jung
(603) 2297 8688 tjliaw@maybank-ib.com
Oil & Gas
Automotive
Shipping
ONG Chee Ting
(603) 2297 8678 ct.ong@maybank-ib.com
Plantations
Mohshin AZIZ
(603) 2297 8692 mohshin.aziz@maybank-ib.com
Aviation
Petrochem
Power
YIN Shao Yang, CPA
(603) 2297 8916 samuel.y@maybank-ib.com
Gaming Regional
Media
Power
WONG Wei Sum, CFA
(603) 2297 8679 weisum@maybank-ib.com
Property & REITs
LEE Yen Ling
(603) 2297 8691 lee.yl@maybank-ib.com
Building Materials
Manufacturing
Technology
LEE Cheng Hooi Head of Retail
chenghooi.lee@maybank-ib.com
Technicals

HONG KONG / CHINA

Edward FUNG Head of Research
(852) 2268 0632 edwardfung@kimeng.com.hk
Construction
Ivan CHEUNG
(852) 2268 0634 ivancheung@kimeng.com.hk
Property
Industrial
Ivan LI
(852) 2268 0641 ivanli@kimeng.com.hk
Banking & Finance
Jacqueline KO
(852) 2268 0633 jacquelineko@kimeng.com.hk
Consumer Staples
Andy POON
(852) 2268 0645 andypoon@kimeng.com.hk
Telecom & equipment
Alex YEUNG
(852) 2268 0636 alexyeung@kimeng.com.hk
Industrial
Anita HWANG, CFA
(852) 2268 0142 anitahwang@kimeng.com.hk
Consumer Discretionaries
Special Situations

INDIA
Jigar SHAH Head of Research
(91) 22 6623 2601 jigar@kimeng.co.in
Oil & Gas
Automobile
Cement
Anubhav GUPTA
(91) 22 6623 2605 anubhav@kimeng.co.in
Metal & Mining
Capital goods
Property
Ganesh RAM
(91) 226623 2607 ganeshram@kimeng.co.in
Telecom
Contractor

5 April 2013

SINGAPORE
Stephanie WONG Head of Research
(65) 6432 1451 swong@maybank-ke.com.sg
Strategy
Small & Mid Caps
Gregory YAP
(65) 6432 1450 gyap@maybank-ke.com.sg
Technology & Manufacturing
Telcos - Regional
Wilson LIEW
(65) 6432 1454 wilsonliew@maybank-ke.com.sg
Hotel & Resort
Property & Construction
James KOH
(65) 6432 1431 jameskoh@maybank-ke.com.sg
Logistics
Resources
Consumer
Small & Mid Caps
YEAK Chee Keong, CFA
(65) 6433 5730 yeakcheekeong@maybank-ke.com.sg
Healthcare
Offshore & Marine
Alison FOK
(65) 6433 5745 alisonfok@maybank-ke.com.sg
Services
S-chips
Bernard CHIN
(65) 6433 5726 bernardchin@maybank-ke.com.sg
Transport (Land, Shipping & Aviation)
ONG Kian Lin
(65) 6432 1470 ongkianlin@maybank-ke.com.sg
REITs / Property
Wei Bin
(65) 6432 1455 weibin@maybank-ke.com.sg
S-chips
Small & Mid Caps

INDONESIA
Katarina SETIAWAN Head of Research
(62) 21 2557 1125 ksetiawan@kimeng.co.id
Consumer
Strategy
Telcos
Lucky ARIESANDI, CFA
(62) 21 2557 1127 lariesandi@kimeng.co.id
Base metals
Coal
Oil & Gas
Rahmi MARINA
(62) 21 2557 1128 rmarina@kimeng.co.id
Banking
Multifinance
Pandu ANUGRAH
(62) 21 2557 1137 panugrah@kimeng.co.id
Auto
Heavy equipment
Plantation
Toll road
Adi N. WICAKSONO
(62) 21 2557 1130 anwicaksono@kimeng.co.id
Generalist
Anthony YUNUS
(62) 21 2557 1134 ayunus@kimeng.co.id
Cement
Infrastructure
Property
Arwani PRANADJAYA
(62) 21 2557 1129 apranadjaya@kimeng.co.id
Technicals

THAILAND
Mayuree CHOWVIKRAN Head of Research
(66) 2658 6300 ext 1440 mayuree.c@maybank-ke.co.th
Strategy
Maria BRENDA SANCHEZ LAPIZ Co-Head of Research
Dir (66) 2257 0250 | (66) 2658 6300 ext 1399
Maria.L@maybank-ke.co.th
Consumer/ Big Caps
Andrew STOTZ Strategist
(66) 2658 6300 ext 5091
Andrew@maybank-ke.co.th
Suttatip PEERASUB
(66) 2658 6300 ext 1430 suttatip.p@maybank-ke.co.th
Media
Commerce
Sutthichai KUMWORACHAI
(66) 2658 6300 ext 1400 sutthichai.k@maybank-ke.co.th
Energy
Petrochem
Termporn TANTIVIVAT
(66) 2658 6300 ext 1520 termporn.t@maybank-ke.co.th
Property
Woraphon WIROONSRI
(66) 2658 6300 ext 1560 woraphon.w@maybank-ke.co.th
Banking & Finance
Jaroonpan WATTANAWONG
(66) 2658 6300 ext 1404 jaroonpan.w@maybank-ke.co.th
Transportation
Small cap.
Suchot THIRAWANNARAT
(66) 2658 6300 ext 1550 suchot.t@maybank-ke.co.th
Automotive
Construction Materials
Soft commodity
Pongrat RATANATAVANANANDA
(66) 2658 6300 ext 1398 pongrat.R@maybank-ke.co.th
Services/ Small Caps

VIETNAM
Michael KOKALARI, CFA Head of Research
+84 838 38 66 47 michael.kokalari@kimeng.com.vn
Strategy
Nguyen Thi Ngan Tuyen
+84 844 55 58 88 x 8081 tuyen.nguyen@kimeng.com.vn
Food and Beverage
Oil and Gas
Ngo Bich Van
+84 844 55 58 88 x 8084 van.ngo@kimeng.com.vn
Banking
Nguyen Quang Duy
+84 844 55 58 88 x 8082 duy.nguyenquang@kimeng.com.vn
Rubber
Dang Thi Kim Thoa
+84 844 55 58 88 x 8083 thoa.dang@kimeng.com.vn
Consumer
Nguyen Trung Hoa
+84 844 55 58 88 x 8088 hoa.nguyen@kimeng.com.vn
Steel
Sugar
Macro

PHILIPPINES
Luz LORENZO Head of Research
+63 2 849 8836 luz_lorenzo@maybank-atrke.com
Strategy
Laura DY-LIACCO
(63) 2 849 8840 laura_dyliacco@maybank-atrke.com
Utilities
Conglomerates
Telcos
Lovell SARREAL
(63) 2 849 8841 lovell_sarreal@maybank-atrke.com
Consumer
Media
Cement
Kenneth NERECINA
(63) 2 849 8839 kenneth_nerecina@maybank-atrke.com
Conglomerates
Property
Ports/ Logistics
Katherine TAN
(63) 2 849 8843 kat_tan@maybank-atrke.com
Banks
Construction
Ramon ADVIENTO
(63) 2 849 8842 ramon_adviento@maybank-atrke.com
Mining

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Aviation
APPENDIX I: TERMS FOR PROVISION OF REPORT, DISCLAIMERS AND DISCLOSURES
DISCLAIMERS
This research report is prepared for general circulation and for information purposes only and under no circumstances should it be considered or intended as an
offer to sell or a solicitation of an offer to buy the securities referred to herein. Investors should note that values of such securities, if any, may fluctuate and that
each securitys price or value may rise or fall. Opinions or recommendations contained herein are in form of technical ratings and fundamental ratings.
Technical ratings may differ from fundamental ratings as technical valuations apply different methodologies and are purely based on price and volume-related
information extracted from the relevant jurisdictions stock exchange in the equity analysis. Accordingly, investors returns may be less than the original sum
invested. Past performance is not necessarily a guide to future performance. This report is not intended to provide personal investment advice and does not
take into account the specific investment objectives, the financial situation and the particular needs of persons who may receive or read this report. Investors
should therefore seek financial, legal and other advice regarding the appropriateness of investing in any securities or the investment strategies discussed or
recommended in this report.
The information contained herein has been obtained from sources believed to be reliable but such sources have not been independently verified by Maybank
Investment Bank Berhad, its subsidiary and affiliates (collectively, MKE) and consequently no representation is made as to the accuracy or completeness of
this report by MKE and it should not be relied upon as such. Accordingly, MKE and its officers, directors, associates, connected parties and/or employees
(collectively, Representatives) shall not be liable for any direct, indirect or consequential losses or damages that may arise from the use or reliance of this
report. Any information, opinions or recommendations contained herein are subject to change at any time, without prior notice.
This report may contain forward looking statements which are often but not always identified by the use of words such as anticipate, believe, estimate,
intend, plan, expect, forecast, predict and project and statements that an event or result may, will, can, should, could or might occur or be
achieved and other similar expressions. Such forward looking statements are based on assumptions made and information currently available to us and are
subject to certain risks and uncertainties that could cause the actual results to differ materially from those expressed in any forward looking statements.
Readers are cautioned not to place undue relevance on these forward-looking statements. MKE expressly disclaims any obligation to update or revise any such
forward looking statements to reflect new information, events or circumstances after the date of this publication or to reflect the occurrence of unanticipated
events.
MKE and its officers, directors and employees, including persons involved in the preparation or issuance of this report, may, to the extent permitted by law, from
time to time participate or invest in financing transactions with the issuer(s) of the securities mentioned in this report, perform services for or solicit business
from such issuers, and/or have a position or holding, or other material interest, or effect transactions, in such securities or options thereon, or other investments
related thereto. In addition, it may make markets in the securities mentioned in the material presented in this report. MKE may, to the extent permitted by law,
act upon or use the information presented herein, or the research or analysis on which they are based, before the material is published. One or more directors,
officers and/or employees of MKE may be a director of the issuers of the securities mentioned in this report.
This report is prepared for the use of MKEs clients and may not be reproduced, altered in any way, transmitted to, copied or distributed to any other party in
whole or in part in any form or manner without the prior express written consent of MKE and MKE and its Representatives accepts no liability whatsoever for the
actions of third parties in this respect.
This report is not directed to or intended for distribution to or use by any person or entity who is a citizen or resident of or located in any locality, state, country or
other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation. This report is for distribution only under such
circumstances as may be permitted by applicable law. The securities described herein may not be eligible for sale in all jurisdictions or to certain categories of
investors. Without prejudice to the foregoing, the reader is to note that additional disclaimers, warnings or qualifications may apply based on geographical
location of the person or entity receiving this report.
Malaysia
Opinions or recommendations contained herein are in the form of technical ratings and fundamental ratings. Technical ratings may differ from fundamental
ratings as technical valuations apply different methodologies and are purely based on price and volume-related information extracted from Bursa Malaysia
Securities Berhad in the equity analysis.
Singapore
This report has been produced as of the date hereof and the information herein may be subject to change. Maybank Kim Eng Research Pte. Ltd. (Maybank
KERPL) in Singapore has no obligation to update such information for any recipient. For distribution in Singapore, recipients of this report are to contact
Maybank KERPL in Singapore in respect of any matters arising from, or in connection with, this report. If the recipient of this report is not an accredited investor,
expert investor or institutional investor (as defined under Section 4A of the Singapore Securities and Futures Act), Maybank KERPL shall be legally liable for the
contents of this report, with such liability being limited to the extent (if any) as permitted by law.
Thailand
The disclosure of the survey result of the Thai Institute of Directors Association (IOD) regarding corporate governance is made pursuant to the policy of the
Office of the Securities and Exchange Commission. The survey of the IOD is based on the information of a company listed on the Stock Exchange of Thailand
and the market for Alternative Investment disclosed to the public and able to be accessed by a general public investor. The result, therefore, is from the
perspective of a third party. It is not an evaluation of operation and is not based on inside information.The survey result is as of the date appearing in the
Corporate Governance Report of Thai Listed Companies. As a result, the survey may be changed after that date. Maybank Kim Eng Securities (Thailand)
Public Company Limited (MBKET) does not confirm nor certify the accuracy of such survey result.
Except as specifically permitted, no part of this presentation may be reproduced or distributed in any manner without the prior written permission of MBKET.
MBKET accepts no liability whatsoever for the actions of third parties in this respect.
US
This research report prepared by MKE is distributed in the United States (US) to Major US Institutional Investors (as defined in Rule 15a-6 under the
Securities Exchange Act of 1934, as amended) only by Maybank Kim Eng Securities USA Inc (Maybank KESUSA), a broker-dealer registered in the US
(registered under Section 15 of the Securities Exchange Act of 1934, as amended). All responsibility for the distribution of this report by Maybank KESUSA in
the US shall be borne by Maybank KESUSA. All resulting transactions by a US person or entity should be effected through a registered broker-dealer in the
US. This report is not directed at you if MKE is prohibited or restricted by any legislation or regulation in any jurisdiction from making it available to you. You
should satisfy yourself before reading it that Maybank KESUSA is permitted to provide research material concerning investments to you under relevant
legislation and regulations.
UK
This document is being distributed by Maybank Kim Eng Securities (London) Ltd (Maybank KESL) which is authorized and regulated, by the Financial
Services Authority and is for Informational Purposes only. This document is not intended for distribution to anyone defined as a Retail Client under the Financial
Services and Markets Act 2000 within the UK. Any inclusion of a third party link is for the recipients convenience only, and that the firm does not take any
responsibility for its comments or accuracy, and that access to such links is at the individuals own risk. Nothing in this report should be considered as
constituting legal, accounting or tax advice, and that for accurate guidance recipients should consult with their own independent tax advisers.

5 April 2013

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DISCLOSURES
Legal Entities Disclosures
Malaysia: This report is issued and distributed in Malaysia by Maybank Investment Bank Berhad (15938-H) which is a Participating Organization of Bursa
Malaysia Berhad and a holder of Capital Markets and Services License issued by the Securities Commission in Malaysia. Singapore: This material is issued
and distributed in Singapore by Maybank KERPL (Co. Reg No 197201256N) which is regulated by the Monetary Authority of Singapore. Indonesia: PT Kim
Eng Securities (PTKES) (Reg. No. KEP-251/PM/1992) is a member of the Indonesia Stock Exchange and is regulated by the BAPEPAM LK. Thailand:
MBKET (Reg. No.0107545000314) is a member of the Stock Exchange of Thailand and is regulated by the Ministry of Finance and the Securities and
Exchange Commission.Philippines:MATRKES (Reg. No.01-2004-00019) is a member of the Philippines Stock Exchange and is regulated by the Securities
and Exchange Commission. Vietnam: Kim Eng Vietnam Securities Company (KEVS) (License Number: 71/UBCK-GP) is licensed under the
StateSecuritiesCommission of Vietnam.Hong Kong: KESHK (Central Entity No AAD284) is regulated by the Securities and Futures Commission. India: Kim
Eng Securities India Private Limited (KESI) is a participant of the National Stock Exchange of India Limited (Reg No: INF/INB 231452435) and the Bombay
Stock Exchange (Reg. No. INF/INB 011452431) and is regulated by Securities and Exchange Board of India. KESI is also registered with SEBI as Category 1
Merchant Banker (Reg. No. INM 000011708) US: Maybank KESUSA is a member of/ and is authorized and regulated by the FINRA Broker ID 27861. UK:
Maybank KESL (Reg No 2377538) is authorized and regulated by the Financial Services Authority.

Disclosure of Interest
Malaysia: MKE and its Representatives may from time to time have positions or be materially interested in the securities referred to herein and may further act
as market maker or may have assumed an underwriting commitment or deal with such securities and may also perform or seek to perform investment banking
services, advisory and other services for or relating to those companies.
Singapore: As of 5 April 2013, Maybank KERPL and the covering analyst do not have any interest in any companies recommended in this research report.
Thailand: MBKET may have a business relationship with or may possibly be an issuer of derivative warrants on the securities /companies mentioned in the
research report. Therefore, Investors should exercise their own judgment before making any investment decisions. MBKET, its associates, directors, connected
parties and/or employees may from time to time have interests and/or underwriting commitments in the securities mentioned in this report.
Hong Kong: KESHK may have financial interests in relation to an issuer or a new listing applicant referred to as defined by the requirements under Paragraph
16.5(a) of the Hong Kong Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission.
As of 5 April 2013, KESHK and the authoring analyst do not have any interest in any companies recommended in this research report.
MKE may have, within the last three years, served as manager or co-manager of a public offering of securities for, or currently may make a primary market in
issues of, any or all of the entities mentioned in this report or may be providing, or have provided within the previous 12 months, significant advice or investment
services in relation to the investment concerned or a related investment.

OTHERS
Analyst Certification of Independence
The views expressed in this research report accurately reflect the analysts personal views about any and all of the subject securities or issuers; and no part of
the research analysts compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in the report.
Reminder
Structured securities are complex instruments, typically involve a high degree of risk and are intended for sale only to sophisticated investors who are capable
of understanding and assuming the risks involved. The market value of any structured security may be affected by changes in economic, financial and political
factors (including, but not limited to, spot and forward interest and exchange rates), time to maturity, market conditions and volatility and the credit quality of any
issuer or reference issuer. Any investor interested in purchasing a structured product should conduct its own analysis of the product and consult with its own
professional advisers as to the risks involved in making such a purchase.
No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior consent of MKE.

Definition of Ratings
Maybank Kim Eng Research uses the following rating system:
BUY

Total return is expected to be above 10% in the next 12 months

HOLD

Total return is expected to be between -10% to +10% in the next 12 months

SELL

Total return is expected to be below -10% in 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.

Some common terms abbreviated in this report (where they appear):

Adex = Advertising Expenditure
BV = Book Value
CAGR = Compounded Annual Growth Rate
Capex = Capital Expenditure
CY = Calendar Year
DCF = Discounted Cashflow
DPS = Dividend Per Share
EBIT = Earnings Before Interest And Tax
EBITDA = EBIT, Depreciation And Amortisation
EPS = Earnings Per Share
EV = Enterprise Value

5 April 2013

FCF = Free Cashflow

FV = Fair Value
FY = Financial Year
FYE = Financial Year End
MoM = Month-On-Month
NAV = Net Asset Value
NTA = Net Tangible Asset
P = Price
P.A. = Per Annum
PAT = Profit After Tax
PBT = Profit Before Tax

PE = Price Earnings
PEG = PE Ratio To Growth
PER = PE Ratio
QoQ = Quarter-On-Quarter
ROA = Return On Asset
ROE = Return On Equity
ROSF = Return On Shareholders Funds
WACC = Weighted Average Cost Of Capital
YoY = Year-On-Year
YTD = Year-To-Date

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Malaysia

Maybank Investment Bank Berhad

(A Participating Organisation of
Bursa Malaysia Securities Berhad)
33rd Floor, Menara Maybank,
100 Jalan Tun Perak,
50050 Kuala Lumpur
Tel: (603) 2059 1888;
Fax: (603) 2078 4194

Stockbroking Business:

Level 8, Tower C, Dataran Maybank,

No.1, Jalan Maarof
59000 Kuala Lumpur
Tel: (603) 2297 8888
Fax: (603) 2282 5136

Singapore

Maybank Kim Eng Securities Pte Ltd

Maybank Kim Eng Research Pte Ltd
9 Temasek Boulevard
#39-00 Suntec Tower 2
Singapore 038989

Hong Kong

Kim Eng Securities (HK) Ltd

Level 30,
Three Pacific Place,
1 Queens Road East,
Hong Kong

Philippines

Maybank ATR Kim Eng Securities

Inc.
17/F, Tower One & Exchange Plaza
Ayala Triangle, Ayala Avenue
Makati City, Philippines 1200

Tel: (63) 2 849 8888

Fax: (63) 2 848 5738

Thailand

Maybank Kim Eng Securities

(Thailand) Public Company
Limited
999/9 The Offices at Central World,
20th - 21st Floor,
Rama 1 Road Pathumwan,
Bangkok 10330, Thailand
Tel: (66) 2 658 6817 (sales)
Tel: (66) 2 658 6801 (research)

South Asia Sales Trading

Connie TAN
connie@maybank-ke.com.sg
Tel: (65) 6333 5775
US Toll Free: 1 866 406 7447

Indonesia

PT Kim Eng Securities

Plaza Bapindo
Citibank Tower 17th Floor
Jl Jend. Sudirman Kav. 54-55
Jakarta 12190, Indonesia

Vietnam

In association with

New York

Maybank Kim Eng Securities

USA Inc
777 Third Avenue, 21st Floor
New York, NY 10017, U.S.A.
Tel: (212) 688 8886
Fax: (212) 688 3500

Tel: (62) 21 2557 1188

Fax: (62) 21 2557 1189

Tel: (852) 2268 0800

Fax: (852) 2877 0104

Maybank Kim Eng Securities

(London) Ltd
6/F, 20 St. Dunstans Hill
London EC3R 8HY, UK
Tel: (44) 20 7621 9298
Dealers Tel: (44) 20 7626 2828
Fax: (44) 20 7283 6674

Tel: (65) 6336 9090

Fax: (65) 6339 6003

London

India

Kim Eng Securities India Pvt Ltd

2nd Floor, The International 16,
Maharishi Karve Road,
Churchgate Station,
Mumbai City - 400 020, India
Tel: (91).22.6623.2600
Fax: (91).22.6623.2604

Saudi Arabia

In association with

Kim Eng Vietnam Securities

Company
1st Floor, 255 Tran Hung Dao St.
District 1
Ho Chi Minh City, Vietnam

Anfaal Capital
Villa 47, Tujjar Jeddah
Prince Mohammed bin Abdulaziz
Street P.O. Box 126575
Jeddah 21352

Tel : (84) 838 38 66 36

Fax : (84) 838 38 66 39

Tel: (966) 2 6068686

Fax: (966) 26068787

North Asia Sales Trading

Eddie LAU
eddielau@kimeng.com.hk
Tel: (852) 2268 0800
US Toll Free: 1 866 598 2267

www.maybank-ke.com | www.kimengresearch.com.sg

5 April 2013

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