PP 7767/09/2010(025354)

31 May 2010

Malaysia Corporate Highlights

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

New s Upda te
31 May 2010
MARKET DATELINE

PLUS Expressways Share Price

Fair Value
:
:
RM3.20
RM4.13
Potentially Higher Toll Rates And Fuel Price in 2H Recom : Outperform
(Maintained)

Table 1 : Investment Statistics (PLUS; Code: 5052) Bloomberg: PLUS MK

Net Core EPS Net
FYE Turnover Profit EPS EPS Growth PER# C.EPS* P/NTA Gearing ROE GDY
Dec (RMm) (RMm) (sen) (sen) (%) (x) (sen) (x) (x) (%) (%)
2009a 3,179.0 1,186.4 23.7 23.7 9.9 13.5 - 2.6 1.4 19.5 5.2
2010f 3,290.7 1,181.9 23.6 23.6 -0.4 13.5 24.5 2.5 1.5 18.5 5.6
2011f 4,260.1 1,814.5 36.3 36.3 53.5 8.8 33.0 2.2 1.3 25.2 6.3
2012f 4,390.5 1,846.1 36.9 36.9 1.7 8.7 34.9 2.0 1.2 23.2 6.9
Main Market Listing / Trustee Stock / Syariah-Approved Stock By The SC * Consensus Based On IBES Estimates

Issued Capital (m shares) 5,000

♦ Government proposed to stop subsidising toll rates. During the Market Cap (RMm) 16,000.0
Performance Management and Delivery Unit (Pemandu) briefing, the Daily Trading Vol (m shs) 4.5
Government proposed that it would no longer subsidise toll rates for 52wk Price Range (RM) 3.12 – 3.51
highways that have alternative roads from mid-2010 as part of its plan to Major Shareholders: (%)
reduce the total subsidies. This means toll rates at most of PLUS’s highways Khazanah Nasional 60.6
EPF 11.5
(if not all) will be raised should the proposal is accepted.
KWAP 6.9
♦ Higher toll rates and fuel prices bad for traffic volume. Higher toll
rates, coupled with potentially higher fuel prices (as the Government also FYE Dec FY10 FY11 FY12
proposed to cut fuel subsidies, which will in turn result in higher fuel prices) EPS chg (%) - - -
would have negative impact on PLUS’s traffic volume. Recall, traffic volume Var to C.EPS (%) -3.4 10.1 5.6
at PLUS’s core expressways contracted by 0.1% yoy in 2QFY12/06 (down
PE Band Chart
from a 1.4% yoy growth in registered in 1QFY12/06), following the
30sen/litre hike in RON97 petrol price in end-Feb 06.
♦ But impact is likely to be temporary and contained. However, the PER = 15x
PER = 13x
impact is likely to be temporary and contained, in our view. Again, recall, by PER = 11x
3QFY12/06 (the 2nd full quarter after the petrol price hike), PLUS was already
starting to shrug off the impact, recording a 0.8% yoy growth in traffic
volume and the traffic volume subsequently normalised in 4QFY12/06
(+4.2% yoy).
♦ Risks. The risks include: (1) FY12/10 traffic volume growth rate of PLUS’s
core expressways coming in below our assumption of 3.0%. Ceteris paribus, Relative Performance To FBM KLCI
our sensitivity analysis indicates that PLUS’s DCF-derived NPV and FY12/10
earnings will fall by 2.4% and 1.8% for every 1%-pt shortfall to our FY12/10 FBM KLCI
traffic volume growth assumption; (2) Higher-than-expected maintenance
cost; and (3) Operating risks in overseas ventures (in particular, Indonesia
and India).
♦ Earnings forecasts. We are keeping our traffic volume growth rate PLUS
assumption of 3% for PLUS’s core expressways (consisting of North-South
Expressway, New Klang Valley Expressway, Federal Highway Route 2, and
Seremban-Port Dickson Highway) in FY12/10, which is lower than FY12/09’s
traffic volume growth of 7.1%, due to the high-base effect as well as
potential petrol price hike sometime this year. A strong actual traffic volume
growth of 9.1% (yoy) registered in 1QFY12/10 should also provide a buffer
to a potential contraction in traffic volume in 2H.
♦ Investment case. Indicative fair value is RM4.13, equivalent to PLUS’s
DCF-derived NPV (based on WACC of 7.7% and long-term traffic volume
Chye Wen Fei
growth rate of 3% p.a. for its core expressways). We continue to like PLUS (603) 92802172
for its defensive earnings growth and decent dividend yield of 5-6% per chye.wen.fei@rhb.com.my
annum. Maintain Outperform.

Please read important disclosures at the end of this report. Page 1 of 2

A comprehensive range of market research reports by award-winning economists and analysts are exclusively
available for download from www.rhbinvest.com
 31 May 2010

Table 2: Earnings Forecast Table 3: Forecast Assumptions

FYE Dec (RMm) 2009a 2010a 2011f 2012f 2010f 2011f 2012f

Turnover 3,179.0 3,290.7 4,260.1 4,390.5 Traffic Volume Growth

Turnover growth (%) 7.1 3.5 29.5 3.1 - Core expressways 3.0% 3.0% 3.0%
- ELITE 5.0% 4.5% 4.0%
EBITDA 2,608.4 2,619.0 3,528.4 3,593.6 - Linkedua 3.0% 3.0% 3.0%
EBITDA margin (%) 82.1 79.6 82.8 81.8 - KLBK 0.0% 0.0% 0.0%

Depreciation & -363.3 -383.9 -450.0 -472.9 Risk free rate 4.6%
amortisation
EBIT 2,245.1 2,235.0 3,078.5 3,120.6 Beta 59.4%
EBIT margin (%) 70.6 67.9 72.3 71.1 Equity risk premium 7.5%
Cost of equity 9.1%
Net interest expense -621.5 -659.1 -659.1 -659.1
Pretax profit 1,623.6 1,575.9 2,419.3 2,461.5 Average cost of debt 7.0%
Pretax margin (%) 51.1 47.9 56.8 56.1
Targeted debt-to-equity
Tax expense -438.5 -394.0 -604.8 -615.4 Debt 65.0%
Minorities 1.3 0.0 0.0 0.0 Equity 35.0%
Net profit 1,186.4 1,181.9 1,814.5 1,846.1
Net profit margin (%) 37.3 35.9 42.6 42.0 WACC 7.7%
Source: RHBRI Source: RHBRI
IMPORTANT DISCLOSURES

This report has been prepared by RHB Research Institute Sdn Bhd (RHBRI) and is for private circulation only to clients of RHBRI and RHB Investment Bank Berhad
(previously known as RHB Sakura Merchant Bankers Berhad). It is for distribution only under such circumstances as may be permitted by applicable law. The
opinions and information contained herein are based on generally available data believed to be reliable and are subject to change without notice, and may differ or
be contrary to opinions expressed by other business units within the RHB Group as a result of using different assumptions and criteria. This report is not to be
construed as an offer, invitation or solicitation to buy or sell the securities covered herein. RHBRI does not warrant the accuracy of anything stated herein in any
manner whatsoever and no reliance upon such statement by anyone shall give rise to any claim whatsoever against RHBRI. RHBRI and/or its associated persons
may from time to time have an interest in the securities mentioned by this report.

This report does not provide individually tailored investment advice. It has been prepared without regard to the individual financial circumstances and objectives
of persons who receive it. The securities discussed in this report may not be suitable for all investors. RHBRI recommends that investors independently evaluate
particular investments and strategies, and encourages investors to seek the advice of a financial adviser. The appropriateness of a particular investment or
strategy will depend on an investor’s individual circumstances and objectives. Neither RHBRI, RHB Group nor any of its affiliates, employees or agents accepts
any liability for any loss or damage arising out of the use of all or any part of this report.

RHBRI and the Connected Persons (the “RHB Group”) are engaged in securities trading, securities brokerage, banking and financing activities as well as providing
investment banking and financial advisory services. In the ordinary course of its trading, brokerage, banking and financing activities, any member of the RHB
Group may at any time hold positions, and may trade or otherwise effect transactions, for its own account or the accounts of customers, in debt or equity
securities or loans of any company that may be involved in this transaction.

“Connected Persons” means any holding company of RHBRI, the subsidiaries and subsidiary undertaking of such a holding company and the respective directors,
officers, employees and agents of each of them. Investors should assume that the “Connected Persons” are seeking or will seek investment banking or other
services from the companies in which the securities have been discussed/covered by RHBRI in this report or in RHBRI’s previous reports.

This report has been prepared by the research personnel of RHBRI. Facts and views presented in this report have not been reviewed by, and may not reflect
information known to, professionals in other business areas of the “Connected Persons,” including investment banking personnel.

The research analysts, economists or research associates principally responsible for the preparation of this research report have received compensation based
upon various factors, including quality of research, investor client feedback, stock picking, competitive factors and firm revenues.

The recommendation framework for stocks and sectors are as follows : -

Stock Ratings

Outperform = The stock return is expected to exceed the FBM KLCI benchmark by greater than five percentage points over the next 6-12 months.

Trading Buy = Short-term positive development on the stock that could lead to a re-rating in the share price and translate into an absolute return of 15% or more
over a period of three months, but fundamentals are not strong enough to warrant an Outperform call. It is generally for investors who are willing to take on
higher risks.

Market Perform = The stock return is expected to be in line with the FBM KLCI benchmark (+/- five percentage points) over the next 6-12 months.

Underperform = The stock return is expected to underperform the FBM KLCI benchmark by more than five percentage points over the next 6-12 months.

Industry/Sector Ratings

Overweight = Industry expected to outperform the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

Neutral = Industry expected to perform in line with the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

Underweight = Industry expected to underperform the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

RHBRI is a participant of the CMDF-Bursa Research Scheme and will receive compensation for the participation. Additional information on recommended
securities, subject to the duties of confidentiality, will be made available upon request.

This report may not be reproduced or redistributed, in whole or in part, without the written permission of RHBRI and RHBRI accepts no liability whatsoever for the
actions of third parties in this respect.

Page 2 of 2

A comprehensive range of market research reports by award-winning economists and analysts are exclusively
available for download from www.rhbinvest.com