Malaysia Infrastructure Report - Q2 2015

Q2 2015
www.bmiresearch.com
MALAYSIA
INFRASTRUCTURE REPORT
INCLUDES 10-YEAR FORECASTS TO 2024
ISSN 1752-7848
Published by:BMI Research
Malaysia Infrastructure Report Q2 2015
Part of BMIs Industry Report & Forecasts Series
Published by: BMI Research
Copy deadline: February 2015
BMI Research 2015 Business Monitor International Ltd

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All information contained in this publication has been researched and compiled from sources believed to be accurate and reliable at the time of
publishing. However, in view of the natural scope for human and/or mechanical error, either at source or during production, Business Monitor
International Ltd accepts no liability whatsoever for any loss or damage resulting from errors, inaccuracies or omissions affecting any part of the
publication. All information is provided without warranty, and Business Monitor International Ltd makes no representation of warranty of any kind
as to the accuracy or completeness of any information hereto contained.
Part of BMIs Industry Report & Forecasts Series
Published by: BMI Research
Copy deadline: February 2015
BMI Research 2015 Business Monitor International Ltd

Senator House All rights reserved.
85 Queen Victoria Street
London All information contained in this publication is
EC4V 4AB copyrighted in the name of Business Monitor
United Kingdom International Ltd, and as such no part of this
Tel: +44 (0) 20 7248 0468 publication may be reproduced, repackaged,
Fax: +44 (0) 20 7248 0467 redistributed, resold in whole or in any part, or used
Email: subs@bmiresearch.com in any form or by any means graphic, electronic or
Web: http://www.bmiresearch.com mechanical, including photocopying, recording,
taping, or by information storage or retrieval, or by
any other means, without the express written consent
of the publisher.
DISCLAIMER
All information contained in this publication has been researched and compiled from sources believed to be accurate and reliable at the time of
publishing. However, in view of the natural scope for human and/or mechanical error, either at source or during production, Business Monitor
International Ltd accepts no liability whatsoever for any loss or damage resulting from errors, inaccuracies or omissions affecting any part of the
publication. All information is provided without warranty, and Business Monitor International Ltd makes no representation of warranty of any kind
as to the accuracy or completeness of any information hereto contained.
CONTENTS
BMI Industry View ............................................................................................................... 7
SWOT .................................................................................................................................... 8
Industry Forecast .............................................................................................................. 10

Construction And Infrastructure Forecast Scenario ........................................................................................ 10
Table: Construction And Infrastructure Industry Data (Malaysia 2013-2018) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Table: Construction And Infrastructure Industry Data (Malaysia 2019-2024) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Table: Key Infrastructure Related Entry Point Projects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Transport Infrastructure - Outlook And Overview .......................................................................................... 23
Table: Transport Infrastructure Industry Data (Malaysia 2013-2018) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Table: Transport Infrastructure Industry Data (Malaysia 2019-2024) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Table: Competitiveness Of Malaysia's Infrastructure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Roads .................................................................................................................................................. 26
Table: Factbox - Penang Integrated Road Project . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Airports ................................................................................................................................................ 30
Railways .............................................................................................................................................. 32
Table: Key Construction Packages For USD11.5bn Greater KL MRT project . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Ports ................................................................................................................................................... 40
Table: Major Projects - Transport . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Energy And Utilities Infrastructure - Outlook And Overview ............................................................................ 43
Table: Energy And Utilities Infrastructure Data (Malaysia 2013-2018) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Table: Energy And Utilities Infrastructure Data (Malaysia 2019-2024) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Table: Factbox - Shortlisted Bidders For Project 3B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Table: Major Projects - Energy And Utilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Residential/Non-Residential Construction - Outlook And Overview ................................................................... 63
Table: Residential and Non-Residential Building Industry Data (Malaysia 2013-2018) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Table: Residential and Non-Residential Building Industry Data (Malaysia 2019-2024) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Table: Malaysia - Real Property Gains Tax From January 2013 And January 2014, By Type . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
Table: Major Projects - Residential/Non-Residential Construction And Social Infrastructure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
Industry Risk Reward Index ............................................................................................. 77

Malaysia Industry Risk/Reward Index .......................................................................................................... 77
Rewards .............................................................................................................................................. 77
Risks .................................................................................................................................................. 77
Asia Pacific - Infrastructure Risk/Reward Index ............................................................................................ 79
Developed Markets: Favoured .................................................................................................................. 80
Giants Of Asia: Rewards Sizeable, Risks Sizeable ......................................................................................... 82
South East Asia: Environment Deteriorating Slightly .................................................................................... 83
Table: Asia Pacific Infrastructure Risk Reward Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
Market Overview ............................................................................................................... 86

Competitive Landscape ............................................................................................................................. 86
Business Monitor International Ltd Page 4

Table: Economic Transformation Programme - Key Construction Entry Point Projects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
Company Profile ................................................................................................................ 93

IJM ....................................................................................................................................................... 93
Gamuda ................................................................................................................................................. 98
WCT ................................................................................................................................................... 102
Global Infrastructure Overview ...................................................................................... 108

Industry Trend Analysis .......................................................................................................................... 108
Table: Multilaterals And Development Bank Infrastructure Support Programmes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112
Methodology .................................................................................................................... 114

Industry Forecast Methodology .............................................................................................................. 114
Sector-Specific Methodology .................................................................................................................. 115
Risk/Reward Index Methodology ............................................................................................................. 119
Sector-Specific Methodology .................................................................................................................. 120
Table: Infrastructure Risk/Reward Index Indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120
Table: Weighting Of Indicators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121

BMI Industry View

BMI View: While we expect the construction sector to see a slight slowdown from 2015 due to a weakening
property market, we maintain our bullish growth forecast of 10.9% for 2015. Our outlook is underpinned by
the government's commitment to expenditure on infrastructure and we see opportunities in the transport
(road and rail) as well as energy sector.
We believe the Malaysian federal government's spending on transport and energy infrastructure will be
the main driver for construction activity in 2015 and maintain our strong real growth forecast of 10.9%
for the overall construction industry.
We highlight our positive forecast is still a slight slowdown from growth in the sector for 2014 at
11.5%. A combination of factors including an oversupply of residential property, the implementation of
GST in April 2015 and cooling measures on the property market will weigh on sales and construction of
residential property.
Despite lower oil prices prompting the government to revise its budget, development expenditure has
been maintained at MYR50.5bn (USD13.4bn), highlighting commitment to infrastructure development.
We expect the country's 12th masterplan, which will be rolled out in June 2015, to continue supporting
infrastructure development, as well as provide fresh impetus for the country to reach targets set out in its
Economic Transformation Programme (ETP).
Beyond 2015, we forecast the construction sector to grow by an annual average of 6.2% between 2016
and 2019 in real terms. We see long-term growth opportunities in the transport segment, particularly in
development of roads and railways as this is in line with goals of the ETP. The energy sector will also
benefit from the country's power deficit.

SWOT
SWOT Analysis
Strengths
Malaysia has a competitive environment for infrastructure companies, despite some
instances of local bias.

Policy continuity and a stable overall investment framework for foreign players to
continue following the victory by the ruling incumbent in the 2013 elections.

Low inflation and stable exchange rate.

Relatively robust financial sector and a global leader in Islamic bond (sukuk) financing.
Weaknesses
Limited construction sector growth potential.

Poor contract enforceability.

Bias towards domestic players.
Opportunities
The government announced a 10-year, USD444bn Economic Transformation
Programme in September 2010, with specific focus on attracting investment to key
sectors such as infrastructure.

Significant investment in the power sector is envisaged, with 12 hydropower projects
planned for Sarawak state.

Implementation of GST and fuel subsidy cuts is increasing the long-term scope for
infrastructure spending.
Threats
Risk of a slowdown in global trade activity could reduce the government's ability to
finance infrastructure projects as a cooling in the demand for Malaysian exports could
reduce the amount of taxes collected, placing fresh strain on central government
revenues.

Inability by the government to rein in cash handouts, which reduces the potential for
infrastructure spending.

SWOT Analysis - Continued

The allure of other infrastructure markets in the region, such as Indonesia and
Vietnam. Despite Malaysia's business environment having a competitive advantage,
the potential long-term rewards are lower.

An extended low oil price environment will have a negative impact on the country's
fiscal health, possibly resulting in a knock-on impact on funds being available for
future development expenditure.

Industry Forecast
Construction And Infrastructure Forecast Scenario
Table: Construction And Infrastructure Industry Data (Malaysia 2013-2018)
2013 2014e 2015f 2016f 2017f 2018f
Construction industry value, MYRbn 41.28 47.30 53.91 59.31 64.31 69.19
Construction industry value, USDbn 13.1 14.5 15.3 16.6 19.9 24.3
Construction Industry Value, Real
10.94 11.43 10.94 7.41 6.29 5.48
Growth, % y-o-y
Construction Industry Value, % of 4.2 4.4 4.7 4.8 4.9 5.0
GDP
Total capital investment, MYRbn 264.58 298.84 325.82 352.00 378.27 405.14
Total capital investment, USDbn 83.97 91.39 92.47 98.46 117.29 142.40
Total capital investment, % of GDP 26.88 27.81 28.23 28.55 28.85 29.05
Capital investment per capita, USD 2,825.77 3,027.32 3,016.70 3,165.43 3,717.48 4,451.36
Real capital investment growth, % y- 9.30 9.50 5.80 5.30 5.20 4.90
o-y
Construction sector employment, '000 1,416.4 1,545.3 1,682.8 1,786.1 1,880.3 1,967.6
Construction industry employment, % 8.52 9.10 8.90 6.14 5.27 4.64
y-o-y
Active population, total, '000 20,355.94 20,760.68 21,147.62 21,516.12 21,866.30 22,196.05
Construction industry employees as 6.96 7.44 7.96 8.30 8.60 8.86
% of total labour force
Infrastructure industry value, % of 35.5 34.0 34.9 35.0 35.2 35.3
total construction
Infrastructure industry value, MYRbn 14.67 16.10 18.79 20.78 22.61 24.43
Infrastructure industry value, USDbn 4.66 4.92 5.33 5.81 7.01 8.59
Infrastructure industry value real 12.6 6.6 13.7 8.0 6.7 5.9
growth, % y-o-y
GDP
Residential and Non-residential
Building Industry Value As % of Total 64.46 65.96 65.14 64.97 64.84 64.68
Construction
Residential and Non-residential 26.61 31.20 35.12 38.53 41.70 44.75
Building Industry Value, MYRbn
Building Industry Value, USDbn
Building Industry Value Real Growth 9.77 14.11 9.53 7.11 6.07 5.23
(%)
Building Industry Value as % of GDP

Construction And Infrastructure Industry Data (Malaysia 2013-2018) - Continued
2013 2014e 2015f 2016f 2017f 2018f
Cement production (including 23,199,229 24,240,610 24,957,804 25,647,246 26,361,760 27,067,601

imported clinker), tonnes
Cement production (including 5.8 4.5 3.0 2.8 2.8 2.7
imported clinker), tonnes, % y-o-y
Cement consumption, tonnes 23,112,049 24,151,497 24,860,162 25,533,373 26,233,340 26,919,572
Cement consumption, tonnes, % y-o- 6.0 4.5 2.9 2.7 2.7 2.6
y
Cement net exports, tonnes 87,179 89,113 97,641 113,872 128,419 148,029
Cement net exports, tonnes, % y-o-y -27.6 2.2 9.6 16.6 12.8 15.3
e/f = BMI estimate/forecast. Source: National sources, BMI
Table: Construction And Infrastructure Industry Data (Malaysia 2019-2024)
2019f 2020f 2021f 2022f 2023f 2024f
Construction industry value, MYRbn 74.43 80.00 85.83 91.65 97.86 105.01
Construction industry value, USDbn 26.3 28.3 30.5 32.7 35.0 36.6
Construction Industry Value, Real 5.48 5.38 5.18 4.68 4.68 4.70
Growth, % y-o-y
Construction Industry Value, % of 5.0 5.1 5.1 5.2 5.2 5.2
GDP
Total capital investment, MYRbn 433.92 464.29 495.85 529.55 565.54 606.94
Total capital investment, USDbn 153.06 164.35 176.15 188.79 202.34 211.48
Total capital investment, % of GDP 29.31 29.52 29.67 29.85 30.05 30.25
Capital investment per capita, USD 4,720.19 5,001.85 5,291.57 5,599.65 5,927.53 6,120.83
Real capital investment growth, % y- 4.90 4.80 4.60 4.60 4.60 4.60
o-y
Construction sector employment, '000 2,059.6 2,155.0 2,251.6 2,343.5 2,439.7 2,541.0
Construction industry employment, % 4.68 4.63 4.49 4.08 4.11 4.15
y-o-y
Active population, total, '000 22,503.18 22,786.89 23,045.76 23,282.07 23,503.36 23,719.86
Construction industry employees as 9.15 9.46 9.77 10.07 10.38 10.71
% of total labour force
total construction
Infrastructure industry value, MYRbn 26.39 28.48 30.67 32.86 35.21 37.90
Infrastructure industry value, USDbn 9.31 10.08 10.89 11.71 12.60 13.21
Infrastructure industry value real 5.9 5.8 5.6 5.1 5.0 5.1
growth, % y-o-y

Construction And Infrastructure Industry Data (Malaysia 2019-2024) - Continued
2019f 2020f 2021f 2022f 2023f 2024f

GDP
Building Industry Value As % of Total 64.54 64.40 64.27 64.15 64.02 63.90
Construction
Building Industry Value, MYRbn
Building Industry Value, USDbn
Building Industry Value Real Growth 5.24 5.15 4.96 4.47 4.48 4.50
(%)
Building Industry Value as % of GDP
Cement production (including 27,810,792 28,573,970 29,341,496 30,145,859 30,986,986 31,866,561
imported clinker), tonnes
Cement production (including 2.7 2.7 2.7 2.7 2.8 2.8
imported clinker), tonnes, % y-o-y
Cement consumption, tonnes 27,646,765 28,392,479 29,141,183 29,928,657 30,756,073 31,622,285
Cement consumption, tonnes, % y-o- 2.7 2.7 2.6 2.7 2.8 2.8
y
Cement net exports, tonnes 164,027 181,491 200,313 217,201 230,913 244,275
Cement net exports, tonnes, % y-o-y 10.8 10.6 10.4 8.4 6.3 5.8
f = BMI forecast. Source: National sources, BMI
BMI View: The outlook for Malaysia's construction sector remains positive and we forecast real growth of
10.9% in 2015, despite an expected slowdown in the residential and non-residential segment. Growth will
be underpinned by fiscal expenditure on infrastructure as the government works to achieve targets set out
under the Economic Transformation Programme.
We believe Malaysia's construction growth will see a slight slowdown in 2015, weighed down by a
softening residential property market, and forecast the industry to grow by 10.9% in 2015. Our outlook,
nonetheless, remains positive and the double digit growth forecast is underpinned by an expected increase
in government expenditure on infrastructure, as the government gains greater impetus to accelerate various
projects through the country's 11th Master Plan (11MP) and the Economic Transformation Programme
(ETP).

Moderation Expected
Malaysia - Construction Industry Value Forecasts
80 20
60 15
40 10
20 5
0 0
2008 2009 2010 2011 2012 2013 2014e 2015f 2016f
Construction industry value, MYRbn (LHS)
Construction Industry Value Real Growth, % chg y-o-y (RHS)
e/f = BMI estimate/forecast. Source: Malaysia Department of Statistics, BMI
According to Malaysia's Department of Statistics, real growth for the construction sector came in at 8.7% in
2014, bringing the full year real growth to 11.5%. The full year results are largely in line with our initial
forecast of 11.4% and the past two quarterly growth rates are also indicative of the weaker growth we
expect over the coming quarters.

Moderation Taking Place

Malaysia - Quarterly Construction Industry Data
Source: Malaysia Department of Statistics, BMI
The slowing construction sector in Q414 is largely attributed to the residential building segment, with the
value of construction work done on residential buildings growing by 6.0% year-on-year (y-o-y) in Q414,
significantly slower than the 21.5% and 18.1% seen in Q314 and Q214 respectively. Growth for
construction on civil engineering, however, is on an uptrend, expanding by 5.7% y-o-y in Q414, higher than
the 2.2% y-o-y in Q314.

Residential Slowdown
Malaysia - Construction Work Done, By Quarter, By Sector, % of Total In Q414 (LHC); Growth, % chg
y-o-y (RHC)
Source: Malaysia Department of Statistics, BMI
Residential And Non-Residential To Slowdown
Malaysia's slowdown in construction activity will largely be underpinned by a weakening property market,
as various factors such as fuel subsidy cuts, the implementation of the Goods and Services Tax in April
2015 and property market cooling measures weigh on consumer sentiment. The country's household debt-
to-disposable income ratio remains high at 146% as of Q414, and will also put a cap on household
spending.

On A Downtrend
Malaysia - Housing Prices, % chg y-o-y
*Not Seasonally Adjusted, 2000=100. Source: Ministry of Finance, Malaysia
According to data from Malaysia's Ministry of Finance, growth in housing prices have shown a significant
slowdown over the past six months and this could deter developers from constructing new residential
projects. In addition, we have yet to witness the worst of China's economic slowdown and could see
lacklustre demand for Malaysian real estate over the coming quarters particularly from overseas buyers (see
'Economy To Cool Further Despite GDP Outperformance', October 21 2014).

Growth To Slow
Residential And Non-Residential Building Industry Value (2013-2019)
60 15
12.5
40
10
7.5
20
0 2.5
2013 2014e 2015f 2016f 2017f 2018f 2019f
Residential & Non-residential Building Value, MYRbn (LHS)
Residential & Non-residential Building Value Real Growth (%) (RHS)
e/f = BMI estimate/forecast. Source: BMI
Weakness in the Chinese economy is also expected to limit the demand for non-residential buildings in
Malaysia. Malaysia's export sector, a major component of the economy, has a sizeable exposure to the
Chinese economy. China accounted for 12.1% of Malaysia's total exports in 2014, while Singapore, a major
exporter to China, accounted for 14.2% of Malaysia's total exports over the same period. An economic
slowdown in China could therefore reduce its demand for Malaysian exports. This could in turn dampen the
demand for industry and office buildings from Malaysian exporters.

Non-Residential Pipeline Close To Record-Lows

Malaysia - Non-Residential Buildings By Sector, Planned Supply
Source: National Property Information
Fiscal Spending Supports Positive Outlook
Meanwhile, we believe an increase in government expenditure on infrastructure projects, as well as efforts

to speed up public works will provide a lift to construction activity (see 'Government Spending Bolsters
Construction Outlook', February 3 2015). Despite the government revising its budget in January 2015 as the
government works to rein in fiscal deficit amidst a weak oil market, development expenditure has
unchanged at MYR50.5bn (USD13.4bn). This represents an 8.6% increase from the previous year's
expenditure of MYR46.5bn (USD12.9bn) and further highlights the government's commitment to
infrastructure development.

Infrastructure Support
Malaysia - Allocation Of Federal Budget
Note: 2015 = forecast. Source: The Star Online, BMI
Consequently, we expect the country's 11th Master Plan (11MP) - expected to be rolled out in June 2015 -
to continue supporting infrastructure projects. Such a thrust will also be particularly important given that the
11MP will the final 5-year plan before the 2020 deadline for Malaysia to achieve developed country status
as targeted under the Malaysia's Economic Transformation Programme (ETP). The ETP was implemented
in 2010 as part of the government's New Economic Model (NEM) and identified 131 projects that will help
to achieve this goal - a significant portion of which are infrastructure related.

Table: Key Infrastructure Related Entry Point Projects
Greater Kuala Lumpur/Klang Valley High-Speed Rail Connection to Singapore

Building an Integrated Urban Mass Rapid
Transit System
Revitalising the Klang River into a Heritage
and Commercial Centre
Creating Iconic Places and Attractions
Creating a Comprehensive Pedestrian
Network
Developing an Efficient Solid Waste
Management System
Oil, Gas and Energy Building a Regional Storage and Trading Hub
Building up Renewable Energy and Solar Power Capacity
Deploying Nuclear Energy for Power Generation
Tapping Malaysia's Hydroelectricity Potential
Increase Petrochemical Outputs
Wholesale and Retail Increasing the Number of Large Format Stores
Developing Makan Bazaars
Developing 1Malaysia Malls
Setting Up Wellness Resorts
Transforming Kuala Lumpur International Airport into a Retail Hub
Developing Big Box Boulevards
Palm Oil and Rubber Developing Biogas Facilities at Palm Oil Mills
Tourism Designating Bukit Bintang-Kuala Lumpur City Centre Area as a Vibrant
Shopping Precinct
Establishing Premium Outlets in Malaysia
Developing an Eco-Nature Integrated Resort
Dedicated Entertainment Zones (DEZ)
Improving Rates, Mix and Quality of Hotels
Education Scaling up International Schools
Building a Health Science Education Discipline Cluster
Building a Hospitality and Tourism Cluster
Launching EduCity@Iskandar
Healthcare Developing a Health Metropolis: A World-Class Campus for Healthcare and
Bioscience
Reinvigorating Healthcare Travel

Key Infrastructure Related Entry Point Projects - Continued
Greater Kuala Lumpur/Klang Valley High-Speed Rail Connection to Singapore

Retirement Villages
Source: Pemandu, Economic Transformation Programme Annual Report 2013, BMI
Between 2015 and 2020, we believe construction for key sectors such as railways, roads, and energy will
benefit from the government's push for infrastructure. For railways, key upcoming developments under the
ETP include the High-Speed Rail Connection to Singapore as well as development of an urban Mass Rapid
Transit (MRT) system. As announced by Malaysia's Land Public Transport Commission in October 2014,
the high-speed rail (HSR) project connecting Singapore and Kuala Lumpur will have seven stops in
Malaysia (Kuala Lumpur, Putrajaya, Seremban, Ayer Keroh, Muar, Batu Pahat and Nusajaya), with
construction expected to begin in 2015. The government also plans to have three lines for the 156km Klang
Valley Mass Rapid Transit (MRT) project, with construction works already underway for the first line and a
project development partner already selected for the second line.
In the road segment, the MYR27bn (USD7.5bn) Pan-Borneo Highway spanning 1,633km between Sabah
and Sarawak is scheduled for completion by 2025 and will provide significant opportunities considering
that the government is looking to implement the remaining construction projects through the private sector.
Meanwhile, fears of a power shortage in Peninsular Malaysia have prompted the government to award
construction contracts for several large-scale thermal power plants such as a 2,000MW coal-fired power
plant project in the state of Negri Sembilan in February 2014 and a 1,200MW co-generation plant project in
Johor in May 2014 (see '2015: An Unusually Slow Year', October 24 2014).

Power Plants, Rails And Roads To Drive Growth

Malaysia- Infrastructure Industry Value, By Industry, MYRbn (LHS); Real Growth, % chg y-o-y (RHS)
60 30
40 20
20 10
0 0
2010 2011 2012 2013 2014e 2015f 2016f
Infrastructure Industry Value Real Growth, % chg y-o-y (LHS)
Transport Infrastructure Industry Value, MYRbn (RHS)
Energy And Utilities Infrastructure Industry Value, MYRbn (RHS)
Moreover, these developments will be supported by an increasingly hardnosed approach taken by the
government to drive infrastructure projects. Prime Minister Seri Najib Razak announced on February 10
that the government will engage the Supreme Audit Institutions (SAI) Malaysia audit large public projects
in a bid to improve government transparency and productivity. This would help improve the efficiency of
various projects and ensuring that projects are carried out with minimal delays.

Transport Infrastructure - Outlook And Overview
Table: Transport Infrastructure Industry Data (Malaysia 2013-2018)
2013 2014e 2015f 2016f 2017f 2018f
Transport infrastructure industry value, % of total infrastructure 69.4 68.5 69.3 69.7 70.0 70.3
Transport infrastructure industry value, MYRbn 10.18 11.03 13.02 14.48 15.83 17.17
Transport infrastructure industry value, USDbn 3.23 3.37 3.70 4.05 4.91 6.04
Transport infrastructure industry value real growth, % y-o-y 11.0 5.2 15.0 8.6 7.2 6.4
Transport infrastructure industry value, % of total construction 24.7 23.3 24.2 24.4 24.6 24.8
Roads and bridges infrastructure industry value, % of transport 20.6 20.8 20.5 20.1 19.9 19.8
infrastructure
Roads and bridges infrastructure industry value, MYRbn 2.10 2.29 2.66 2.91 3.15 3.40
Roads and bridges infrastructure industry value, USDbn 0.67 0.70 0.76 0.81 0.98 1.20
Roads and Bridges Infrastructure Industry Value Real Growth, % y-o-y 13.4 6.1 13.1 6.7 6.1 5.9
Roads and bridges infrastructure Industry, % of total Infrastructure 14.3 14.2 14.2 14.0 13.9 13.9
Roads and bridges infrastructure Industry, % of total construction 5.1 4.8 4.9 4.9 4.9 4.9
Railways infrastructure industry value, % of transport infrastructure 70.9 70.4 71.2 71.8 72.1 72.3
Railways infrastructure industry value, MYRbn 7.22 7.76 9.27 10.40 11.42 12.42
Railways infrastructure industry value, USDbn 2.29 2.37 2.63 2.91 3.54 4.37
Railways infrastructure industry value real growth, % y-o-Y 7.7 4.4 16.3 9.6 7.7 6.7
Railways Infrastructure Industry Value, % of Total Infrastructure 49.2 48.2 49.3 50.0 50.5 50.8
Railways Infrastructure Industry Value, % of Total Construction 17.5 16.4 17.2 17.5 17.8 18.0
Airports infrastructure industry value, % of transport infrastructure 3.1 3.0 2.6 2.4 2.3 2.2
Airports infrastructure industry value, MYRbn 0.32 0.33 0.34 0.35 0.37 0.38
Airports infrastructure industry value, USDbn 0.10 0.10 0.10 0.10 0.11 0.13
Airports infrastructure industry value real growth, % y-o-y 21.0 1.0 0.7 1.0 1.6 1.7
Airports Infrastructure Industry Value, % of Total Infrastructure 2.2 2.0 1.8 1.7 1.6 1.6
Airports Infrastructure Industry Value, % of Total Construction 0.8 0.7 0.6 0.6 0.6 0.6
Ports, Harbours and Waterways Infrastructure Industry Value, % of 5.4 5.9 5.8 5.7 5.7 5.6
Transport Infrastructure
Ports, Harbours and Waterways Infrastructure Industry Value, MYRbn 0.55 0.65 0.75 0.82 0.90 0.96
Ports, Harbours and Waterways Infrastructure Industry Value, USDbn 0.17 0.20 0.21 0.23 0.28 0.34
Ports, Harbours and Waterways Infrastructure Industry Value Real Growth, 52.8 14.6 12.6 6.9 6.8 5.6
% y-o-y
Ports, Harbours and Waterways Infrastructure Industry Value, % of Total 3.8 4.0 4.0 4.0 4.0 3.9
Infrastructure

Transport Infrastructure Industry Data (Malaysia 2013-2018) - Continued
2013 2014e 2015f 2016f 2017f 2018f
Construction
Table: Transport Infrastructure Industry Data (Malaysia 2019-2024)
2019f 2020f 2021f 2022f 2023f 2024f
Transport infrastructure industry value, % of total infrastructure 70.5 70.8 71.0 71.2 71.4 71.6
Transport infrastructure industry value, MYRbn 18.62 20.16 21.78 23.40 25.14 27.14
Transport infrastructure industry value, USDbn 6.57 7.14 7.74 8.34 8.99 9.46
Transport infrastructure industry value real growth, % y-o-y 6.3 6.2 5.9 5.4 5.3 5.4
Transport infrastructure industry value, % of total construction 25.0 25.2 25.4 25.5 25.7 25.8
Roads and bridges infrastructure industry value, % of transport 19.7 19.7 19.6 19.5 19.5 19.4
infrastructure
Roads and bridges infrastructure industry value, MYRbn 3.67 3.96 4.27 4.57 4.89 5.26
Roads and bridges infrastructure industry value, USDbn 1.30 1.40 1.52 1.63 1.75 1.83
Roads and Bridges Infrastructure Industry Value Real Growth, % y-o-y 5.9 5.8 5.5 5.0 5.0 5.0
Roads and bridges infrastructure Industry, % of total Infrastructure 13.9 13.9 13.9 13.9 13.9 13.9
Roads and bridges infrastructure Industry, % of total construction 4.9 5.0 5.0 5.0 5.0 5.0
Railways infrastructure industry value, % of transport infrastructure 72.6 72.8 73.0 73.2 73.4 73.6
Railways infrastructure industry value, MYRbn 13.51 14.67 15.89 17.13 18.45 19.97
Railways infrastructure industry value, USDbn 4.77 5.19 5.65 6.11 6.60 6.96
Railways infrastructure industry value real growth, % y-o-Y 6.7 6.5 6.2 5.7 5.6 5.7
Railways Infrastructure Industry Value, % of Total Infrastructure 51.2 51.5 51.8 52.1 52.4 52.7
Railways Infrastructure Industry Value, % of Total Construction 18.2 18.3 18.5 18.7 18.9 19.0
Airports infrastructure industry value, % of transport infrastructure 2.1 2.0 2.0 1.9 1.9 1.8
Airports infrastructure industry value, MYRbn 0.40 0.41 0.43 0.45 0.47 0.49
Airports infrastructure industry value, USDbn 0.14 0.15 0.15 0.16 0.17 0.17
Airports infrastructure industry value real growth, % y-o-y 1.8 1.9 2.0 2.1 2.2 1.8
Airports Infrastructure Industry Value, % of Total Infrastructure 1.5 1.4 1.4 1.4 1.3 1.3
Airports Infrastructure Industry Value, % of Total Construction 0.5 0.5 0.5 0.5 0.5 0.5
Ports, Harbours and Waterways Infrastructure Industry Value, % of 5.6 5.5 5.4 5.4 5.3 5.2
Transport Infrastructure
Ports, Harbours and Waterways Infrastructure Industry Value, MYRbn 1.04 1.11 1.19 1.26 1.33 1.41

Transport Infrastructure Industry Data (Malaysia 2019-2024) - Continued
2019f 2020f 2021f 2022f 2023f 2024f
Ports, Harbours and Waterways Infrastructure Industry Value, USDbn 0.37 0.39 0.42 0.45 0.48 0.49
Ports, Harbours and Waterways Infrastructure Industry Value Real Growth, 5.4 5.1 4.6 3.8 3.7 3.7
% y-o-y
Infrastructure
Construction
Railways Dominate
Transport Infrastructure Value By Sector (2013-2019)
20
15
10
0
2013 2014e 2015f 2016f 2017f 2018f 2019f
Railways infra industry value
Ports, Harbours and Waterways Infra Industry Value
Roads and bridges infra industry value Airports infra industry value
e/f = BMI estimate/forecast. Source: Department Of Statistics Malaysia, BMI
The project opportunities in Malaysia's 10-year economic plan, the 2011-2020 Economic Transformation
Programme (ETP), have helped maintain the transport sector's dominance in infrastructure development.
The sector is forecast to account for about 70% of infrastructure between 2015 and 2019.

Railways are expected to be the main driver of growth in the transport sector, accounting for around 51%
and 73% of total infrastructure and transport infrastructure industry value by 2019, respectively. It is also
forecast to be the fastest-growing infrastructure sub-sector in Malaysia, averaging 9.4% growth per annum
between 2015 and 2019. This outperformance is because Malaysia is constructing and planning several
large-scale railway projects. Construction work to expand the light railway system in Kuala Lumpur already
has taken place (the project involves two lines costing more than USD700mn), while several rapid transit
projects, such as the MRT system in Kuala Lumpur and the Malaysia-Singapore high-speed railway line,
are at various stages of development.
With the ETP now in mid-swing, we believe the transport sector will remain a priority for the government.
Coupled with that is the upcoming release of the country's 11th Master Plan (11MP), the final five-year plan
before the 2020 deadline for Malaysia to achieve developed country status. We believe the 11MP will
continue to support infrastructure development and provide fresh impetus for an acceleration of transport
projects.
Table: Competitiveness Of Malaysia's Infrastructure
Rank/133 Rank/139 Rank/142 Rank/144 Rank/148 Rank/144

in 2009/10 in 2010/11 in 2011/12 in 2012/13 in 2013/14 in 2014/15
Quality of Roads 24 21 18 27 23 19
Quality of Railroad Infrastructure 19 20 18 17 18 12
Quality of Port Infrastructure 19 19 15 21 24 19
Quality of Air Transport Infrastructure 27 29 20 24 20 19
Quality of Overall Infrastructure 27 27 23 29 25 20
Source: World Economic Forum, Global Competitiveness Report
Roads
Peninsular Malaysia is well connected by an extensive road network, totalling 98,721km, 81% of which is
paved. The total includes 1,821km of expressways. The major cities and conurbations such as Klang Valley,
Johor Bahru and Penang all connect through the Malaysian expressway network, which has more than
1,400km of paved roads. The North-South Expressway, the major highway that runs from the northern to
the southern tips of the peninsula, is part of the Asian Highway network, which goes on to connect Thailand
and Singapore. Roads on the eastern coast of the peninsula and in East Malaysia are still undeveloped.
These roads are highly curved and pass through mountainous territory, and are for the most part unsealed
gravel roads.

Recent Developments
The overall quality of roads in Malaysia is relatively high, but there continues to be relatively strong
construction activity in the sub-sector. Real growth for roads and bridges is forecast to average 7.5% per
annum between 2015 and 2019. The government continues to release projects that expand and improve
Malaysia's road network.
In mid-2010, Ali Hamsa, former director general of Malaysia's Public-Private Partnership Unit (3PU),
said that seven new highways, worth a total of MYR20bn, will be constructed and operated by the private
sector, though no timeframe was specified (see 'Highway Projects Create Opportunities In Sluggish
Infrastructure Industry', July 29 2010). Since that announcement, we believe that only three large-scale
PPP expressways projects have been awarded - the Penang integrated road project, the MYR1.6bn East
Klang Valley Expressway and the MYR7.0bn West Coast Expressway. Other large-scale PPP
expressways projects that could be awarded in the coming years include: the MYR4.8bn Sungai Besi-Ulu
Kelang Expressway, the MYR3.0bn Damansara-Shah Alam Highway, the MYR2.3bn Kinrara-
Damansara Expressway, the MYR2.0bn Serdang-Kinrara-Putrajaya Highway and the Kota Bahru-
Pengerang costal highway.
In January 2013, West Coast Expressway (WCE), the subsidiary of Malaysian investment holding
company Kumpulan Europlus (KEB), signed a 50-year concession agreement with the Malaysian
government to develop the West Coast Expressway under a Build-Operate-Transfer (BOT) format. The
concession is valued at MYR7.07bn and involves the construction of a 233km expressway that runs
between Banting in Selangor and Taiping in Perak (another 40km will be built at a later date). The
government will provide a MYR2.24bn (USD739mn) loan, which will go towards the cost of the project
and finance the necessary land acquisition together with a further USD322mn. IJM, which has stakes in
both entities, is aiming to secure up to MYR4bn worth of works from the WCE project. IJM owns a 20%
stake in WCE and a 25.1% stake in Kumpulan Europlus, which owns the remaining 80% in WCE. Some
71% of the highway will be tolled with revenue shared by the Malaysian government and West Coast
Expressway.
In February 2013, Malaysia-based construction company Ahmad Zaki Resources was awarded a
MYR1.55bn (USD500mn) concession to develop the 35.5km East Klang Valley Expressway (EKVE)
under a PPP framework. Under the terms of the concession, Ahmad Zaki will design, construct, operate,
upgrade, manage and maintain the expressway and its ancillary infrastructure over a period of 50 years.
Ahmad Zaki will also receive a government loan of MYR635mn (USD205mn) to carry out the project,
and retain the right to keep tolls collected over the concessionary period. The EKVE is expected to take at
least three years to complete. Once completed, the EKVE would link the Kajang Silk Expressway and the
Karak Expressway, completing the Kuala Lumpur Outer Ring Road.
In July 2013, the Malaysian Highway Authority stated that the government was considering plans to
construct a new coastal highway along the east coast of Peninsular Malaysia, from Kota Bahru in the
state of Kelantan to Pengerang in Johor. The government would consider the viability of the project
before undertaking it, according to the Malaysian Highway Authority's Director Datuk Ismail Md Salleh.
There is a need to improve connectivity and accessibility in the eastern coast of the country, while most
parts in the western coast areas are well-connected and served with roads and highways, Salleh added.
The project is expected to create economic spillover effects and open new growth centres in the east-
coast areas.
In October 2013, A consortium led by Chinese state-owned construction companies has signed the
preliminary agreement with the state government of Penang to develop the state's MYR6.3bn
(USD1.97bn) integrated road project, which includes Malaysia's first undersea tunnel. The consortium,

known as Consortium Zenith BUCG, consists of Malaysia companies Zenith Construction, Sri
Tinggi, and Juteras as well as Chinese state-owned construction companies Beijing Urban
Construction Group (BUCG) and China Railway Construction (CRCC). The project will be carried
out over four phases under a 30-year concession, with the consortium in charge of conducting the
feasibility and environmental studies as well as designing, building and operating the different roads. The
project is scheduled to start construction works in 2015 and be completed by 2025.
Table: Factbox - Penang Integrated Road Project
Phases Project Description Timeline

Initial Feasibilities Studies, Detailed Design And Environmental Impact Assessment 2013-2015
1a 11.5km 4 lane road from Tanjung Bungah to Teluk Bahang 2015-2018
1b 2.0km elevated 4 lane expressway and 2.2km tunnel from Tun Dr Lim Chong Ew 2015-2018
Expressway to Ayer Itam Bypass
2 4.0km 2 double-lane underground tunnel from Tun Dr Lim Chong Ew Expressway to 2017-2020
Gurney Drive
3 6.5km 4 lane undersea tunnel from Penang to Butterworth 2019-2023
Source: BMI, Consortium Zenith BUCG
In December 2013, Malaysian builder Ekovest announced that its whole subsidiary Konsortium
Lebuhraya Utara-Timur (Kesturi) secured a MYR1.18bn (USD370mn) contract to be the master
contractor for the phase two of the 18km Duta-Ulu Kelang Expressway (DUKE) in Kuala Lumpur. The
project is expected to be completed at the end of 2016. Kesturi is the concession holder of the DUKE.
The concession agreement started on August 11 2005 and ends in August 2039.
There are also several plans to boost road connectivity to the Kuala Lumpur International Airport (KLIA)
in Sepang. In December 2013, UEM Group, which owns a 51% stake in toll concessionaire PLUS
Malaysia, submitted a plan to the Government to build the Paroi-Senawang-KLIA-Salak Tinggi (SKLIA)
highway. The construction cost for the highway is estimated to be at MYR2.2bn, excluding land
acquisitions that could increase the project cost by another MYR500mn. Besides the SKLIA highway, the
concessionaire of the KL-Putrajaya highway, Maju Expressway, was conducting a study to construct an
18km extension between its Putrajaya interchange and the KLIA. The construction cost for this extension
is estimated to be about MYR1bn.
In May 2014, KEB announced that a consortium consisting of IJM and KEB was appointed by the
government as the main EPC contractor for the MYR5.04bn West Coast Expressway (WCE) project. The
project has 11 packages and IJM has been selected to complete Sections 3,4,5,8 and 9 of the 233km WCE
project for MYR2.83bn. The remaining packages of Sections 1,2,6,7,10 and 11, worth a combined
MYR2.22bn is scheduled to be awarded on an open tender basis. Once completed, the expressway will be
the second longest highway in Peninsular Malaysia, after the North-South Expressway.
In October 2014, Malaysia's Prime Minister Najib Razak announced plans to invest USD23bn on the
country's transport infrastructure. Razak said the government would build a 1,663km Pan-Borneo
Highway in eastern Malaysia. The estimated USD8.3bn highway would stretch from Sabah in the north
of the island to Sarawak, which is on the Indonesian border in the south. The government also plans to
upgrade the east coast railway, build a USD7bn mass rail transit system in Kuala Lumpur, four highways
worth USD4.9bn and a light railway worth USD2.8bn.

Risks
We highlight there is significant political risk associated with these PPP expressway projects. Policies on
Malaysia's toll road sector are often changed to suit the government's needs as toll prices are a major
political issue within the country. Approximately one in three citizens owns a car in Malaysia and the
current incumbent, the Barisan Nasional (BN), has often made changes in toll regulations to maintain
political support.
Several examples are listed:
During the global recession in 2009, the BN government revoked a ruling on an increase in toll rates for
five expressways in March 2009 in order to forestall a public outcry.
In January 2011, Prime Minister Najib Razak asked all of the country's highway concessionaires to
freeze, cut or abolish toll rates without compensation following similar moves by two of the sector's
largest players. MTD Capital, Malaysia's second largest road operator, will freeze toll rates on two of its
expressways - the KL-Karak Highway and the East Coast Highway Phase 1 - for five years without
compensation and without an extension to toll concessions. A toll concession for a third highway - a
section on the East-West link highway - also belonging to MTD, was to be abolished in May 2010, ahead
of its expiry in 2018, according to Reuters.
In September 2012, the Malaysian government made a decision to acquire the Eastern Dispersal Link
(EDL) in Johor from Malaysia Resources Corp (MRCB). The acquisition of the 8.1km EDL is expected
to cost the government around MYR1.2bn (USD390mn) and will aid MRCB in meeting its repayments
for the bonds it had issued to fund the development of the toll road. MRCB's funding entity for the EDL,
MRCB Southern Link, was set to default on its bond repayments in December 2012 because it was barred
by the government from collecting tolls when the EDL was completed in March 2012.
Fiscal concerns has also prompted the government to slash fuel subsidies by hiking retail prices of gasoline
and diesel by around 10.5-11.0% on September 2 2013. This was again done in October 2014 as the
government capitalised on a low oil price environment and cut subsidies on various oil products. This
increase in costs could deter commuters from purchasing vehicles in Malaysia.
As a result of this political risk, few foreign investors are directly participating in the sector and the sector is
dominated by the government. For example, the largest toll road operator in Malaysia, PLUS Expressways,
was acquired by Malaysian state-linked funds, Employees Provident Fund and Khazanah Nasional in
late-2010, while the second largest toll road operator in Malaysia, MTD Capital, was wholly acquired by a
consortium led by its chairman in Q211.

Road projects in Malaysia could also be delayed by environmental concerns. According to the Penang state
government, the state's integrated road project will only proceed to the construction phase if it complies
with the recommendations set for construction impact mitigation. An environmental impact assessment for
the project will be conducted while feasibilities studies and detailed design work are being done on the
project. This phase is expected to last till the first half of 2015
That said, the sub-sector continues to attract significant interest from domestic investors. In January 2012,
Malaysian toll road operator PLUS Expressway successfully closed a USD9.7bn sukuk issuance offering -
the world's largest ever sukuk offering - to finance the purchase and capital expenditures of five toll road
concessions.
In December 2013, the board of Amcorp Properties accepted, in principle, an offer by Gamuda to acquire
the company's 20% equity stake in highway toll operator Kesas Holdings. Gamuda already owns 30% of
Kesas, with the other shareholders of Kesas being the Selangor state government (30% stake), Amcorp
Properties (20%) and state-run investment fund Permodalan Nasional (20%). Kesas is the toll
concessionaire for the 35km Shah Alam Expressway under a concession agreement that is valid until
August 18 2023. As of February 2014, Gamuda's offer to fully acquire Kesas Holdings has failed, with the
Selangor state government and Permodalan Nasional rejecting Gamuda's offer to acquire their stakes in the
toll-road operator.
Airports
Kuala Lumpur International Airport (KLIA) is the largest airport in Malaysia. It is capable of handling more
than 35mn passengers and 1.2mn tonnes of cargo. Other major airports include Kota Kinabalu International
Airport, Penang International Airport, Kuching International Airport, Langkawi International Airport and
Senai International Airport. The country has 117 airports, 39 have of which have paved runways and eight
have runways longer than 3,047m. In many cases, the most practical way to travel between the two parts of
the country is by the low-cost air carriers, such as AirAsia.
Demand for low-cost airports is especially prevalent in Malaysia. The country is separated into two parts by
the South China Sea, making low-cost air travel the most practical way of travelling between them. The
country is also located in the heart of the Asia Pacific region, making it a natural hub for low-cost air travel.
KLIA is already serving as the headquarters for AirAsia, the region's largest budget airline, with flights to
nearly 70 destinations worldwide. The Malaysian government has recognised the importance of air travel
and during the 2014 budget announcement, allocated MYR700mn for the construction of a new air traffic

management centre at the KLIA and MYR312mn to the upgrading of several airports in Sabah and
Sarawak.
In May 2011, Malaysian airport operator Malaysian Airports Holdings (MAHB) announced that it
would open a new USD675mn Low-Cost Carrier Terminal (LCCT) at the KLIA in Q412, according to
Airport Technology. The terminal, which is jointly built by UEM Construction and Bina Puri, will have
the capacity to handle 30mn passengers per annum and will measure 242,000aquare metres (sq m). An
integrated complex is also being built at the site.
However, plans changed in December 2011, when MAHB announced that it intended to add superior
facilities, including an automated baggage system and aerobridges to the LCCT in KLIA 2. The plan would
nearly double the project cost to MYR3.9bn (USD1.2bn) and meant that the airport would start commercial
operations in April 2013 - nearly a year later than the initial date. Moreover, the plant will have an annual
passenger handling capacity of 45mn, compared with the previously expected 30mn. The revised project
cost has been criticised by AirAsia CEO Tony Fernandes, who said on November 30 2011 that amenities,
such as aerobridges, are a waste of money.
On May 2 2014, the KLIA 2 officially started operations. The project's previous official opening date was
June 28 2012, but MAHB announced in June 2013 that the opening of the new terminal as been delayed
until May 2 2014, the project's fifth delay since its construction contract was awarded to UEM and Bina
Puri in August 2010.The airport operator added contractors hired for the terminal building of the new
airport have requested additional time to complete the facility and set a new target of April 2014 for
completion. The MYR4bn (USD1.27bn) airport was originally slated to open in mid-2012, but the opening
was postponed owing to design changes.
In our opinion, the delays were primarily due to poor coordination and planning between MAHB and
AirAsia, the main user of KLIA 2. According MAHB in June 2011 (cited from the Star), AirAsia had made
the request to raise the passenger handling capacity to 45mn passengers a year (from the original target of
30mn) and to switch from a semi-automated baggage system to a fully automated one. On the other hand,
MAHB wanted the construction of aerobridges, which AirAsia declined to use, citing high operating cost.
These delays and changes to the project have ballooned the cost of the project from an original MYR1.9bn
to potentially more than MYR4bn. MAHB has said that it would impose liquidated and ascertained
damages (LAD) on the parties responsible for the delay. This could lead to further delays to the project as
the affected parties are likely to contest these allegations. There could also be further delays due to

certification as the UEM-Bina Puri consortium has not received the certificate of completion compliance for
the KLIA 2.
Railways
Malaysia has railways stretching a total of 1,849km, the vast majority of which (97%) are made up of
narrow 1.00m gauge, with only 57km of broad-gauge (1.435m) track. Most of Malaysia's urban railway
network is located in the Klang Valley, a region that includes the capital city, Kuala Lumpur, and adjoining
cities and towns located in the state of Selangor. The network consists of two Light Rail Transit (LRT) lines
- the Kelana Jaya Line and the Ampang Line - one monorail line, four electrified commuter railway lines
and an airport railway link. Malaysia's railway industry is expected to provide significant opportunities over
the next few years.
In June 2012, the Chairman of Suruhanjaya Pengangkutan Awam Darat (SPAD), Tan Sri Syed Hamid
Albar, announced that the Malaysian railway industry will invest up to MYR160bn (USD50.63bn) in future
railway projects through to 2020. This announcement was reiterated by Prime Minister Datuk Seri Najib
Tun Razak in September 2013. SPAD has started a series of studies under the Urban Rail Development Plan
including the Gemas-Johor Bahru electrified double tracking project (the entire 1,000km Pedang Besar-
Johor Bahru electrified double tracking project is expected to be completed by 2018), the KL Monorail
extension plan, Mass Rapid Transit (MRT) 2 circle line, MRT 3 north-south line (Red line) and the KTMB
freight relieved line. A feasibility study on a high-speed rail project has also been started.
In August 2013, the feasibility study for the MYR30bn East Coast Rail Link - a 620km line between
Tumpat in Kelantan to Kuantan in Pahang via Kuala Lumpur - is expected to be completed in early 2014.
Urban Rail
In late 2010, as part of the ETP, the Malaysian government announced plans for the construction of a MRT
system to improve transportation coverage and alleviate severe traffic congestion in the Klang Valley. The
proposed MRT system will span 156km (about 40km underground) with three major routes serving Kuala
Lumpur city. It is estimated to cost about MYR48bn (USD16bn), which includes the railway tracks and
rolling stock. The Mass Rapid Transit Corporation (MRT Corp) is the state-owned entity in charge MRT
project; it has selected a joint venture (JV) between Gamuda and MMC as the project development partner
(PDP) for the MRT system.
The 86 packages (including the 19 key construction contracts for viaducts and stations) have been awarded
for the first phase of the MRT project, a 51km line connecting Sungai Buloh in the north-western suburbs of

Kuala Lumpur to Kajang in the south-east, via the city centre. The line, known as the Blue line, is already
under construction (about 33% completed as of February 2014) and is expected to be completed in two
phases. The first and second phase of the urban railway line - the Sungai Buloh to Semantan section and the
Semantan to Kajang section - are expected to complete civil engineering works in July 2015 and be
operational by December 2016 and July 2017 respectively.
Table: Key Construction Packages For USD11.5bn Greater KL MRT project
Bumiputera
Name Project Name Type Tender Awarded
Package
Sungai (Sg) Buloh-Kota Syarikat Muhibbah Perniagaan &
V1 Viaduct Yes
Damansara Pembinaan
Kota Damansara-Dataran
V2 Viaduct No Gadang Holdings
Sunway
V3 Dataran Sunway-Section 16 Viaduct No Mudajaya Group
V4 Section 16-Semantan portal Viaduct No Sunway Construction
V5 Maluri protal-Plaza Phoenix Viaduct No IJM Construction
Plaza Phoenix-Bdr tun Hussein
V6 Viaduct Yes Ahmad Zaki
Onn
Bdr Tun Hussein Onn-Taman
V7 Viaduct Yes MTD Construction
Mesra
V8 Taman Mesra-Kajang Viaduct No Malaysia Resources Corporation
Underground
UGS Semantan portal-Maluri portal section (tunnel No Gamuda, MMC
and stations)
Depot 1 Sg Buloh depot Depot No Trans Resources Corporation
Depot 2 Kajang depot Depot Yes TSR Bina
Sungai Buloh, Kg Baru Sungai Elevated
ST 1 Yes Trans Resources Corporation
Buloh, Kota Damansara Stations
Taman Industri Sg Buloh, PJU 5, Elevated
ST 2 Yes Naim Engineering
Dataran Sunway Stations
Elevated
ST 3 The Curve, One Utama, TTDI No UEM Construction
Stations
Seksyen 16, Pusat, Bandar Elevated
ST 4 No Naim Holdings
Damansara, Semantan Stations
Taman Bukit Ria, Taman Buki Elevated
ST 5 No IJM Construction
Mewah, Leisure Mall Stations
Plaza Phoenix, Taman Suntex, Elevated
ST 6 Yes Ahmad Zaki
Taman Cuepacs Stations
Bdr tun Hussein Onn, Balakong, Elevated
ST 7 Yes Apex Communication
Taman Koperasi Stations

Key Construction Packages For USD11.5bn Greater KL MRT project - Continued
Bumiputera
Name Project Name Type Tender Awarded
Package
Saujana Impian, Bandar Kajang, Elevated
ST 8 Yes Apex Communication
Kajang Stations
Source: Mass Rapid Transit Corporation (MRT Corp), BMI Key Projects Database
The existing LRT lines in Kuala Lumpur - the Ampang and Kelana Jaya lines - are also expected to be
developed. The final contract to extend the Ampang light rapid transit line by 17.7km was awarded to a
joint venture between Malaysian companies George Kent and Lion Pacific in July 2012. The Ampang line
extension project has a total length of 17.7km and runs from Sri Petaling Station to Putra Heights section. In
November 2010, SPNB awarded Package A - a 7.4km section from Seri Petaling Station to Station 5 worth
MYR635mn - to a JV between Bina Puri Holdings and Tim Sekata. The extensions for the Ampang and
Kelana Jaya Lines are expected to be fully completed by June 2015 and be connected at the Putra Heights
station.
There are currently plans to develop a third line for the LRT system in Kuala Lumpur. The study for the
extension, which involves the construction of a new LRT line from Bandar Utama in Damansara to Port
Klang through Shah Alam, was completed by state-owned company Syarikat Prasarana Negara in May
2014. The third LRT line (LRT-3) is expected to about 36km long and cost around MYR9bn to construct In
October 2014, Parasarana announced that the LRT-3 line is expected to start the construction tendering
process in Q315 and start construction works by end-2015. The project is still at preliminary planning stage.
There are also plans to develop an urban railway system in Johor. In April 2011, Malaysian JV Metropolitan
Commuter Network submitted a MYR1.23bn (USD408mn) rail transit network proposal for the Iskandar
Malaysia special economic zone, according to the Malaysian Star. The 100km network will connect all
suburbs within the zone and will carry around 30mn people per annum once operations begin in 2013. It
will also include seven stations and will be connected to a planned bus system.
In January 2012, Gamuda became part of a consortium that is in pole position to win the MYR7bn
(USD2.22bn) Gemas-Johor Bharu double-tracking and electrification project. The consortium is headed by
China Railway Construction Corporation (CRCC) and a domestic company, according to a source.
Despite the consortium being the favourite to win the project, the government aims to oversee measures that
will be taken by the consortium's management and engineers, in order to prevent an expected over-run in

the project's cost. There are two other contenders for the project: China Railway Engineering
Corporation and China Communication Construction Company.
Politically Safe
Location Of Malaysia-Singapore Railway Projects
Source: BMI, Economic Transformation Programme

High-Speed Railways
Another key project in the Economic Transformation Programme (ETP) is the construction of a high-speed
railway line between Kuala Lumpur and Singapore, connecting two of the largest economic agglomerations
in South East Asia.
The high-speed rail project, to be carried out under a public-private partnership (PPP) format and to be
completed by 2020 at the earliest, was formally announced by the Singaporean and Malaysian governments
in a joint statement in February 2013.
Fast At A Cost
Travel Time Between Singapore And Kuala Lumpur, By Mode Of Transport, hours
*Air transport estimate does not include check-in, baggage pick-up. Source: BMI, Channel News Asia, The Straits Times
We expect the high-speed railway project to not only transform the transport landscape between both
countries, but also to bring economic benefits to cities connected by the project. The project is expected to
provide the greatest ease of travel among the various modes of transport between Singapore and Kuala
Lumpur, reducing travelling time to around 90 minutes. With a decline in commuting time, companies and

residents from both countries could be more inclined to conduct business, and travel for leisure, in both
locations. This could lead to an increase in the demand for retail and tourism services in both cities, as well
as for housing in both locations.
The high-speed railway link could also unlock the economic growth potential of several Malaysian cities
located along the high-speed railway line. Preliminary details on the project (as stated in Malaysia's report
on its ETP in September 2010) envisage several intercity stops at cities such as Seremban and Malacca.
With greater ease of travel, these cities could become attractive locations for tourists and for business
owners to outsource their operations. As it is, the Singapore to Kuala Lumpur route already enjoys
substantial traffic (according to the ETP report), with over 9.2mn trips taken each year between the two
cities.
However, the impact of these changes and benefits would depend on the cost of utilising the high-speed rail
link. Such large-scale projects have long construction periods, making them susceptible to a host of risks
that could cause project delays and cost overruns. Some of the potential risks for the Singapore-Kuala
Lumpur high-speed railway link include:
Unforeseen downturns in economic activity, which could stifle access to financing. According to
Malaysian Prime Minister Najib Razak (quoted from the Straits Times), the private sector would operate
the rail link, while the public sector would provide 'infrastructure support'. In our opinion, this suggests
the project could be financed from bank loans taken on by the private sector and not from government
funds.
Delays in obtaining land, permits and environmental clearances. Noise pollution has often been a source
of concern for residents located near to high-speed rail links, and they could voice objections to the
projects. Both countries are also experiencing a housing shortage, thus land owners might prefer to hold
on to their assets in anticipation of future price appreciation.
Engineering conundrums, which could delay construction works. The topography between Singapore and
Kuala Lumpur is relatively flat, but there are several water bodies (the Maur River and the Straits of
Johor) and urbanised areas (the city-state of Singapore is densely populated). These landforms could pose
a design challenge for the location of terminals and tracks.
Labour and building material shortages. In addition to the high-speed rail link, both Malaysia and
Singapore are planning to carry out several large-scale construction plans such as affordable housing and
new urban railway lines. This could not only raise the cost of labour and building materials, but create a
shortage.
Cross-border traffic issues such as customs. These issues often take a considerable time to resolve due to
the need to reconcile differing regulations from the involved countries.
Deteriorations in the bilateral relations between the Singaporean and Malaysian governments. Although
relations between the two countries have improved markedly in recent years, future general elections in
Singapore and Malaysia could unravel any progress made. Historically, relations between the two
countries have been stormy due to a wide range of disagreements such as the ownership of Pedra Branca.

Malaysia's fiscal concerns. On July 31 2013, Fitch Ratings downgraded its 'A-' credit outlook for
Malaysia from stable to negative, citing the lack of progress on budgetary reforms to address the
country's deteriorating fiscal position. To strengthen the country's fiscal position, Malaysia Prime
Minister Najib Razak hinted in early September that some of the government's large-scale construction
projects with 'low-multiplier effect and high import content' could be postponed as part of its fiscal
reform plans. In our opinion, the high-speed railway line could be one of the projects to be deferred due
to its high cost and its perceived potential benefits to foreign companies and foreign economies residing
in Singapore.
We therefore believe that the construction cost of the Singapore-Kuala Lumpur high-speed railway line
could prove to be prohibitively high due to these risks. Should that be the case, it would most likely require
investors of the project to price fares at levels much higher than the fares for existing modes of transport to
stay economically viable. Such a scenario could deter commuters from utilising the high-speed rail link,
creating a vicious cycle where investors would need to maintain costly fares for an extended period of time
to make up for the shortfall in passenger volumes. This scenario has been seen in numerous high-speed
railway projects such as those in Taiwan and China. The investment cost of the project was originally
estimated to be MYR16.5bn (USD5.3bn) in Malaysia's ETP report, but it is currently estimated to be around
MYR40bn.
Furthermore, increased competition on the Singapore to Kuala Lumpur route could push existing transport
providers (airlines and buses) to seek greater efficiencies in their operations to reduce fare prices. For
example, Malaysia-based budget airline, AirAsia, announced that it could allow free flights over the
coming years, with passengers only paying for ancillary services such as meals and travel insurance (the
Strait Times reports). Such a scenario could make it more difficult for the Singapore-Kuala Lumpur high-
speed railway line to be economically sustainable.
As of November 2014, the Singapore-Kuala Lumpur high-speed railway project has completed the
preliminary engineering study and is moving on to the next phase, which is a detailed design of the line. In
April 2014, Singapore's Land Transport Authority launched the tender to find consultants to conduct an
engineering feasibility study for the Singapore leg of the Singapore-Kuala Lumpur high-speed railway
project. The study will develop options for the project and assess the technical feasibility of the possible
high-speed railway corridors. This includes the transportation connectivity for the three possible high-speed
railway terminal station locations in the vicinity of Tuas West, Jurong East and the city centre. The
appointed consultant will also be required to study the impact on existing transport facilities. The study is
expected to be completed in the Q115.
Meanwhile, in May 2014, Malaysia's Land Public Transport Commission stated that it plans to complete
Phase 2A of the project's feasibility study in 2014, including government-to-government engagement and

agreement with Singapore. The commission had previously announced in September 2013 that Malaysia
aims to complete the engagement process with Singapore over the Singapore-Kuala Lumpur high-speed rail
project by Q413. The commission is also planning to invite bids for the project by end-2013. The
commission has been involved in a detailed assessment on the technical and engineering aspects, cost,
financial and operations, as well as benefits of the rail project.
In May 2013, Railway Technology reports that a consortium consisting of Aecom Singapore, Aecom
Perunding and SA Architects won a SGD52.8mn contract to carry out an architectural and engineering
consultancy study on the proposed project. Under the deal, the consortium will be responsible for
developing alignment options for the RTS Link, as well as carrying out detailed design on the preferred
route, which will be finalised by the Iskandar Malaysia Joint Ministerial Committee. The governments of
Singapore and Malaysia have also agreed to equally share the cost of the rapid transit system link study,
according to Channel News Asia. Five consortiums have expressed an interest in the project, with the only
known interested party to be YTL.
There are also plans to construct a Rapid Transit System (RTS) between Malaysia and Singapore. In
mid-2012, Malaysia's Land Public Transport Commission and Singapore's Land Transport Authority
awarded US engineering firm, AECOM Technology, a USD42mn contract for the design and engineering
study of the cross-strait rapid transit link between Singapore and Johor Baru, the capital of the Johor state.
According to Malaysian authorities (cited by the Star), the first phase of the engineering study would focus
on resolving the route alignment (the project could be a land bridge, an elevated bridge or a tunnel), the
location of multimodal terminals (the project is currently expected to start from a terminal in JB Sentral in
Johor and end in a terminal near Singapore's Republic Polytechnic in Woodlands) and cross-border traffic
issues, such as customs and immigration.
As of December 2013, the Singapore-Johor Baru rapid transit system is in the final stages of planning, with
a joint-committee comprising of ministers from both governments accepting the findings from the joint
engineering study (phase 1). The committee also agreed in December 2013 to select a preferred option for
the rapid transit system by the end of 2014. The project is expected to be completed by 2018.

Ports
Table: Major Projects - Transport
Value Capacity/ Timeframe

Project Name (USDmn) Length Companies Start Status
AIRPORTS
Malaysia Airports Holdings
Kuala Lumpur International Airport 32516square (MAHB) (Sponsor), WCT Berhad 2010 -
2 (KLIA2) Gateway 157 metres (Sponsor,70) 2014 Completed
Penang International Airport 1.5mn Malaysia Airports Holdings 2010 -
Expansion Project 80 passengers/yr (MAHB) (Operator) 2013 Completed
Kuala Lumpur International Airport
2 (KLIA2), Low Cost Carrier 45mn Malaysia Airports Holdings 2010 -
Terminal 1270 passengers/yr (MAHB) 2014 Completed
New Mukah Airport, Mukah, Hock Peng Furniture & General 2014 - Under
Sarawak 185 Contractor (Construction) 2018 construction
PORTS
Port Klang Container Terminal 8 2015 -
(CT8) Expansion project 300 2800000TEU Wesports Holdings (Sponsor) 2016 Announced
Royal Vopak (Sponsor,40),
Johor Government (Sponsor,
10), Dialog Group Berhad
Pengerang Deep Water Terminal - 3.7mn m3 per (Sponsor,25), Petroliam At planning
Phase II 346.85 year Nasional Berhad (Sponsor,25) - 2017 stage
Port of Lumut Teluk Rubiah 30000'000 2013 -
Terminal, Perak 1370 tonnes Vale (Operator) 2014 Completed
Strait of Malacca Port 1400 Vale S.A (Sponsor) na Completed

Tanjung Pelepas Port expansion Pelabuhan Tanjung Pelepas Sdn 2012 -
project, Berths 13 and 14 470 18000TEU Bhd (PTP) (Operator) 2014 Completed
Port of Tanjung Pelepas Pelabuhan Tanjung Pelepas Sdn 2012 -
Expansion Project 433 2500000TEU Bhd (PTP) (Operator) 2014 Completed
Samalaju Port Development,
Sarawak Corridor of Renewable 18000'000 Bintulu Port Holdings Bhd Contract
Energy (Score), Bintulu 546.36 tonnes (Operator) - 2016 Awarded
Johor Government (Sponsor,
10), Dialog Group Berhad
(Sponsor,25), Royal Vopak
2023430squar (Sponsor,40), Petroliam Under
Pengerang Deep Water Terminal 1488 e metres Nasional Berhad (Sponsor,25) - 2017 construction
Johor Government
(Construction), Royal Vopak
Pengerang Deep Water Terminal - 1.3mn m3 per (Construction), Dialog Group Under
Phase I 580.3 year Berhad (Construction) - 2014 construction
Kuantan Port Expansion Project -
Phase II, Pahang, Peninsular 26000'000 2013 - Under
Malaysia 1130 tonnes IJM Corporation (Construction) 2016 construction
RAIL
Rapid Transit System Railway 146mn At planning
linking Woodlands to JB Sentral passengers/yr AECOM - 2019 stage

Major Projects - Transport - Continued

Malaysia Steel Works (KL) Bhd
(Masteel) (Sponsor,60), KUB
Iskandar intercity commuter rail Malaysia Berhad (Sponsor,40), At planning
project, Johor 380 100km RHB Bank - 2017 stage
Natural gas powered Tram At planning
Network, Melaka City 87.7 40km Mrails International (Sponsor,65) na stage
Klang Valley Mass Rapid Transit
project, Circle Line, Greater Kuala
Lumpur, KL Ecocity - Pusat
Bandar Damansara - Sentul At planning
(Brown Line) MRT Corporation (Operator) - 2020 stage
Seremban - Gemas Electrified 2008 -
double-tracking project (EDTP) 1065.1 98km IRCON (Construction) 2013 Completed
Mass Rapid Transit Corporation
Klang Valley Mass Rapid Transit (MRT Corp) (Operator), Gamuda
project Line 2, Sungai Buloh - (Construction), MMC Contract
Serdang - Putrajaya 7080 56km Corporation (Construction) na Awarded
Singapore Land Transport
Authority (Sponsor), SA
Architects (Consultant/Project
Management), AECOM Feasibility
Singapore - Johor Bahru Rapid (Consultant/Project studies/EIA
Transit System Management) - 2019 underway
Feasibility
Singapore - Kuala Lumpur High AECOM (Feasibility), SA 2016 - studies/EIA
Speed Railway Line Project Architects (Feasibility) 2020 underway
China Railway Construction
Corporation (CRCC), Gamuda,
China Railway Engineering
Corporation (CREC), China In tender/
Gemas-Johor Baru link, Electrified Communications Construction Tender
Double Track Project (EDTP) 2398 197km Company (CCCC) 2014 - launched
Kelana Jaya Line Extension Intria Bina (Equipment), UEM
Project, Klang Valley (Lembah Builders (Equipment), Trans
Subang Kelana Business Centre - Resources Corporation 2010 - Under
Putra Heights) 17km (Construction) 2016 construction
CSR ZhuZhou Electric
Locomotive (Equipment), Tim
Ampang line Extension Project, Sekata (Construction), Bina Puri 2010 - Under
Klang Valley 17.7km Holdings Bhd (Construction) 2016 construction
Klang Valley Mass Rapid Transit
project Line 1, Greater Kuala
Lumpur, Sungai Buloh - Kajang MMC Corporation (Sponsor), 2011 - Under
Line (Blue Line) 6280 51km Gamuda (Sponsor), Sumitomo 2017 construction
Ansaldo STS (Construction),
Gamuda (Construction), Balfour
Ipoh - Padang Besar Electrified Beatty (Construction), MMC 2008 - Under
Railway Project 4652.35 329km Corporation (Construction) 2014 construction
ROADS & BRIDGES

2015 -
Samarahan Bridge 42 2016 Approved

Major Projects - Transport - Continued

Pan-Borneo Highway, Sabah - Government of Malaysia At planning
Sarawak 8300 1663km (Sponsor) na stage
Simpang Nyabau - Simpang
Bakun, Pan Borneo Road At planning
Upgrade Project PPP 2015 - stage
Bukit Kayu Hitam Road PPP
project, Kedah, Malaysia-Thai At planning
Border 120 2011 - stage
Hock Seng Lee (HSL) 2011 -
Gedong - Simunjan Road Project 36.45 18km (Construction) 2014 Completed
China Harbour Engineering
Sultan Abdul Halim Muadzam Company (CHEC)
Shah Bridge, Second Penang (Construction), UEM Builders 2008 -
Bridge Project PPP 1350 24km (Construction) 2014 Completed
Gurney Drive-Butterworth Contract
undersea tunnel project 6.5km 2017 - Awarded
IJM Corporation (Construction),
Access road (Bintulu-Bakun road Loh & Loh Corporation Berhad Contract
to Murum dam), Kapit 192 62km (Construction) 2011 - Awarded
East Klang Valley Expressway
PPP Project (Kuala Lumpur Outer Ahmad Zaki Resources Contract
Ring Road project) 500 39.5km (Construction) 2015 - Awarded
Kota Baru, Kelantan to Malaysian Highway Authority Feasibility
Pengerang, Johor Coastal (Lembaga Lebuhraya Malaysia) studies/EIA
Highway Project (Operator) na underway
Sri Tinggi Sdn (Construction),
Juteras Sdn. Bhd
(Construction), China Railway
Construction Corporation
(CRCC) (Design/Architect),
Beijing Urban Construction
Group (BUCG) (Construction), Feasibility
Penang Undersea Tunnel road Zenith Construction Sdn Bhd studies/EIA
project 1876.12 6.5km (Construction) 2016 - underway
In tender/
Emart Matang - Stapok Road Tender
Project 40.63 na launched
Sarikei - Tanjung Manis Road
project na Suspended
Kumpulan Europlus
West Coast expressway (Construction), IJM Corporation
(Lebuhraya Pantai Barat) BOT (Construction), Sinclair Knight Under
project, Peninsular Malaysia 1865.4 233km Merz (SKM) 2014 - construction
*where blank = not available. Source: BMI Key Projects Database

Energy And Utilities Infrastructure - Outlook And Overview
Table: Energy And Utilities Infrastructure Data (Malaysia 2013-2018)
2013 2014e 2015f 2016f 2017f 2018f
Energy and utilities infrastructure industry value, % of total infrastructure 30.6 31.5 30.7 30.3 30.0 29.7
Energy and utilities infrastructure industry value, MYRbn 4.49 5.07 5.77 6.30 6.79 7.26
Energy and utilities infrastructure industry value, USDbn 1.43 1.55 1.64 1.76 2.10 2.55
Energy and utilities infrastructure industry value real growth, % y-o-y 16.5 9.6 10.8 6.5 5.6 4.9
Energy and utilities infrastructure industry value, % of total construction 10.9 10.7 10.7 10.6 10.6 10.5
Power plants and transmission grids infrastructure industry value, % of total 63.1 64.3 65.7 66.3 66.8 67.3
energy and utilities
Power plants and transmission grids infrastructure industry value, MYRbn 2.84 3.26 3.79 4.18 4.54 4.89
Power plants and transmission grids infrastructure industry value, USDbn 0.90 1.00 1.08 1.17 1.41 1.72
Power plants and transmission grids infrastructure industry value real 22.0 11.7 13.3 7.6 6.5 5.6
growth, % y-o-y
Power Plants and Transmission Grids Infrastructure Industry Value, % of 19.3 20.2 20.2 20.1 20.1 20.0
Total Infrastructure
Power plants and transmission grids infrastructure industry, % of total 6.9 6.9 7.0 7.0 7.1 7.1
construction
Oil and gas pipelines infrastructure industry value, % of total energy and 0.6 0.5 0.5 0.4 0.4 0.4
utilities
Oil and gas pipelines infrastructure industry value, MYRbn 0.03 0.03 0.03 0.03 0.03 0.03
Oil and gas pipelines infrastructure industry value, USDbn 0.01 0.01 0.01 0.01 0.01 0.01
Oil and gas pipelines infrastructure industry value real growth, % y-o-y -6.3 0.6 0.5 0.8 1.2 1.3
Oil and Gas Pipelines Infrastructure Industry Value, % of Total Infrastructure 0.2 0.2 0.1 0.1 0.1 0.1
Oil and Gas Pipelines Infrastructure Industry Value, % of Total Construction 0.1 0.1 0.1 0.0 0.0 0.0
Water infrastructure industry value, % of total energy and utilities 36.3 35.2 33.9 33.2 32.7 32.3
Water infrastructure industry value, MYRbn 1.63 1.78 1.95 2.09 2.22 2.35
Water infrastructure industry value, USDbn 0.52 0.55 0.55 0.59 0.69 0.83
Water infrastructure industry value real growth, % y-o-y 8.3 6.1 6.5 4.5 4.0 3.6
Water Infrastructure Industry Value, % of Total Infrastructure 11.1 11.1 10.4 10.1 9.8 9.6
Water Infrastructure Industry Value, % of Total Construction 4.0 3.8 3.6 3.5 3.5 3.4

Table: Energy And Utilities Infrastructure Data (Malaysia 2019-2024)
2019f 2020f 2021f 2022f 2023f 2024f
Energy and utilities infrastructure industry value, % of total infrastructure 29.5 29.2 29.0 28.8 28.6 28.4
Energy and utilities infrastructure industry value, MYRbn 7.78 8.32 8.89 9.46 10.07 10.77
Energy and utilities infrastructure industry value, USDbn 2.74 2.95 3.16 3.37 3.60 3.75
Energy and utilities infrastructure industry value real growth, % y-o-y 5.0 4.9 4.7 4.3 4.3 4.3
Energy and utilities infrastructure industry value, % of total construction 10.4 10.4 10.4 10.3 10.3 10.3
Power plants and transmission grids infrastructure industry value, % of total
67.7 68.0 68.4 68.7 69.0 69.3
energy and utilities
Power plants and transmission grids infrastructure industry value, MYRbn 5.26 5.66 6.08 6.50 6.94 7.46
Power plants and transmission grids infrastructure industry value, USDbn 1.86 2.00 2.16 2.32 2.48 2.60
Power plants and transmission grids infrastructure industry value real 5.6 5.5 5.3 4.8 4.8 4.8
growth, % y-o-y
Power Plants and Transmission Grids Infrastructure Industry Value, % of 19.9 19.9 19.8 19.8 19.7 19.7
Total Infrastructure
Power plants and transmission grids infrastructure industry, % of total 7.1 7.1 7.1 7.1 7.1 7.1
construction
Oil and gas pipelines infrastructure industry value, % of total energy and 0.4 0.4 0.4 0.4 0.4 0.3
utilities
Oil and gas pipelines infrastructure industry value, MYRbn 0.03 0.03 0.03 0.03 0.04 0.04
Oil and gas pipelines infrastructure industry value, USDbn 0.01 0.01 0.01 0.01 0.01 0.01
Oil and gas pipelines infrastructure industry value real growth, % y-o-y 1.3 1.3 1.3 1.3 1.3 0.8
Oil and Gas Pipelines Infrastructure Industry Value, % of Total Infrastructure 0.1 0.1 0.1 0.1 0.1 0.1
Oil and Gas Pipelines Infrastructure Industry Value, % of Total Construction 0.0 0.0 0.0 0.0 0.0 0.0
Water infrastructure industry value, % of total energy and utilities 31.9 31.6 31.2 30.9 30.7 30.4
Water infrastructure industry value, MYRbn 2.48 2.63 2.78 2.93 3.09 3.27
Water infrastructure industry value, USDbn 0.88 0.93 0.99 1.04 1.10 1.14
Water infrastructure industry value real growth, % y-o-y 3.7 3.7 3.6 3.3 3.4 3.4
Water Infrastructure Industry Value, % of Total Infrastructure 9.4 9.2 9.1 8.9 8.8 8.6
Water Infrastructure Industry Value, % of Total Construction 3.3 3.3 3.2 3.2 3.2 3.1

Robust Investment
Energy And Utilities Infrastructure Value And Share Of Infrastructure Value Forecasts (2013-2019)
10 68
7.5
66
64
2.5
0 62
2013 2014e 2015f 2016f 2017f 2018f 2019f
Energy and utilities industry value, bn (LHS)
Power plants and transmission grids value, % of total (RHS)
e/f = BMI estimate/forecast. Source: Department of Statistics Malaysia, BMI
The power plants and transmission grids sub-sector is the main growth driver of Malaysia's energy and
utilities infrastructure sector, accounting for 20% and 67% of total infrastructure industry value and total
energy and utilities infrastructure industry value by 2019 respectively. Malaysia has substantial reserves of
natural gas and oil. It is therefore no surprise the majority of Malaysia's electricity comes from thermal
sources, with about 60% of total generation coming from gas-fired plants, according to estimates from
BMI. However, the country is looking to reduce its gas dependency by increasing capacity in hydropower
and coal, and we have seen a significant number of hydropower and coal-fired power projects being planned
or developed in West and East Malaysia.
Peninsular Malaysia
Malaysia is concerned about a potential electricity shortage taking place in West Malaysia, which accounts
for about 80% of the country's total population. Since plans to use the Bakun dam to address power
demands were scrapped, Tenaga Nasional Berhad (TNB) needs to expand its generation capacity to avert
a power shortage in Peninsular Malaysia.

According to Malaysia's Energy Commission, in January 2012, the country wanted to increase the country's
power generation capacity by 4,500MW in the period up to 2017. This desire to increase power generation
capacity was reiterated by the government, when it promised to expand electricity supply to another 6,000
homes in Peninsular Malaysia, 60,000 in Sabah and 80,000 in Sarawak.
The country's first generation of power purchase agreements (PPA) are also due to expire by 2016, and the
commission has initiated a series of open tendering processes (known as 'Track Two bidding') to extend
these PPAs in due course. However, it would only extend 50% of the first-generation PPAs as Malaysia is
looking to move to a more competitive rate for the power industry. The Energy Commission was expected
to make a decision on the PPAs by September 2012. The private companies holding these first-generation
PPAs were Genting Sanyen Power, Powertek, Dickson Power, Segari Energy Ventures and YTL
Power. TNB and the five companies operate 11 first-generation power plants with a combined capacity of
6,320MW.
As of November 2013, TNB has signed new power purchase agreements at reduced rates with three
independent power producers. Genting Sanyen Power and Segari Energy Ventures were awarded an
extension of 10 years to their PPAs, while TNB Pasir Gudang was awarded a five-year extension to its
PPA. TNB Pasir Gudang is currently operating the 275MW Pasir Gudang power plant in Johor under an
agreement and will operate as an IPP after 2017. The reduced rates for electricity took effect from March 1
2013. As for YTL Power, the company's PPA is set to expire at the end of September 2015.
To avert this power shortage, the Energy Commission of Malaysia announced in January 2012 that it had
started a tendering process for the development of new combined-cycle power plants in the country
according to btimes.com.
We believe one of the projects is the Prai combined-cycle gas turbine (CCGT) power project. In October
2012, Tenaga Nasional (TNB) secured a MYR3bn (USD978mn) contract from Malaysia's Energy
Commission to construct, own and operate a power plant in the northern state of Penang, Malaysia. The
company will build the 1,071MW combined-cycle gas turbine (CCGT) plant in Prai. The plant, which will
become operational by May 2016, is aimed at fulfilling an increase in power requirements for peninsular
Malaysia by 2016 and 2017. TNB has since awarded an EPC contract to Samsung Engineering &
Construction and a service agreement with Siemens for 20 years for the Prai plant project. TNB, through
its unit TNB Northern Energy, has also carried out a sukuk issuance valued at MYR1.625bn to finance the
construction of the project in May 2013.

Another combined-cycle power plant project could be the plant in Pengerang. In January 2013, Singapore-
based Keppel was evaluating a proposal to acquire a 30% stake in a 1,200MW gas-fired cogeneration
power plant owned by Malaysia-based oil giant Petroliam Nasional (Petronas). The proposed power plant,
located in Pengerang, Johor, is part of the Petronas Refinery and Petrochemical Integrated Development
(RAPID) project, a MYR60bn (USD19.52bn) refinery and petrochemicals integrated complex. If
implemented, the Pengerang power plant is expected to supply electricity to the integrated complex, with
surplus electricity sold to third parties such as Singapore's power grid. Petronas expects the Pengerang
power plant to start pre-construction activities by mid-2013 after reaching its final investment decision. The
deal between Petronas and Keppel could be the first investment involving a Singaporean company in the
Malaysian power sector, which is dominated by domestic companies.
In May 2014, Pengerang Power, the subsidiary of Malaysian oil giant Petronas, awarded the engineering,
procurement, construction and commissioning (EPCC) contract for the 1,200MW Pengerang gas-fired co-
generation plant project in Johor to a consortium consisting of Germany's Siemens, Siemens Malaysia and
Malaysia's MMC Engineering Services. The plant's first unit is expected to be operational by mid-2017 and
is one of the six associated facilities to be developed within Petronas' Pengerang Integrated Complex
project. The complex houses the Refinery and Petrochemicals Integrated Development (RAPID) project and
other ancillary facilities.
The country also plans to award two gas-fired plants in Peninsular Malaysia, known as project 4A and 4B.
The two gas-fired plants with capacities of between 1,000-1,400MW each are expected to come online in
2018 and 2020. We highlight 4A was initially awarded to YTL Power on May 31 via a directly negotiated
basis, but YTL chose to withdraw from the MYR3bn project, following concerns about preferential
treatment. As a result, TNB and SIPP Energy have decided to go ahead with the Track 4A power project by
themselves. Meanwhile, we believe project 4B has been awarded to 1Malaysia Development Berhad,
although the government has not released an official result.

Diversification
Location Of Proposed Power Plants For Electricity Export To Singapore
Source: BMI
Another major plan to avert a power shortage in Peninsular Malaysia is the development of new coal-fired
power plants.
In August 2013, Malaysian state-owned utility Tenaga Nasional (TNB) announced that it, along with its
partner, Marubeni, had accepted the letter of award issued by Malaysia's Electricity Commission (EC) for
Project 3A, which involves the development of a 1,000MW coal-fired power plant near an existing
transmission substation. Project 3A will use Hitachi's ultra-supercritical boiler technology and be located
on TNB's existing power plant site in the Peninsular Malaysian city of Manjung, Perak. This will boost the
generation capacity of the Manjung power complex from 3,100MW to 4,100MW. In the same month, the
utility awarded a USD1bn EPC contract for the project to a Japanese-South Korea consortium. The
consortium consists of South Korea's Daelim Industrial, Japan's Sumitomo, Sumi-Power Malaysia and
Daelim Malaysia. Work at the plant is currently ahead of schedule, with the plant now due to come online
by October 2017, instead of 2018.
In February 2014, the Energy Commission of Malaysia awarded Project 3B to a consortium comprising of
sovereign wealth fund 1Malaysia Development (1MDB) and Japanese construction company Mitsui.
Project 3B involves the development of a new USD3.6bn coal-fired supercritical power plant with a
capacity of 2,000MW. The project would be developed in Jimah, Negeri Sembilan, and would receive a
levelised tariff of MYR0.253/kWh. The plant, to be located in Jimah, Negri Sembilan, will be
commissioned in stages by October 2018 (Unit 1) and April 2019 (Unit 2).

Table: Factbox - Shortlisted Bidders For Project 3B
Shortlisted Bidders Proposed Site

1Malaysia Development, Mitsui & Co. Jimah, Negri Sembilian
Formis Resources, SIPP Energy Posco Energy, Posco Engineering & Tanjung Tohor, Johor
Construction
Tenaga Nasional, Global Power Ventures, China National Machinery Import & Tanjung Hantu - Segari, Perak
Export
Malakoff, Sumitomo Pulau Carey, Selangor
YTL Power International, Ranhill Power Tanjung Tohor, Johor
Source: Electricity Commission
This EPC contract award by Daelim marks a change in the competitive landscape for Malaysia's power
infrastructure sector. We have long highlighted Alstom's dominant position in the Malaysia power
infrastructure sector. The French company is not only one of the largest original equipment manufacturer
for power plants in Malaysia, but is also the favoured EPC foreign contractor for power projects in
Peninsular Malaysia (see 'Tanjung Bin Coal-Fired Power Project To Benefit Many', February 24 2012). For
example, Alstom has been heavily involved in the development of the Manjung power complex. The
company has completed the complex's first three units in 1999 and is currently developing its fourth unit
(see 'Alstom win Highlights Opportunities And Favoured Status In Power Sector', April 5 2011).
On the other hand, Daelim stated (cited from the Korea JoongAng Daily) that Project 3A will be the
company's first construction project in Malaysia in 13 years. This disparity in experience leads us to believe
that Daelim's strong business relationship with Japanese companies could have proved decisive in its
selection as the EPC contractor for Project 3A. Japanese companies are expected to be heavily involved in
the project as they are not only providing the equipment - Project 3A will use Hitachi's ultra-supercritical
boiler technology - but could also be providing financing for the project. TNB, along with its Japanese
partner Marubeni, are expected to reach financial closure for the project by January 2014 and have Project
3A operational in October 2017.
Project 3B could also see heavy involvement from Japanese companies, given that Japan's Mitsui is a
consortium member for the project.
This successful bid by TNB for Project 3A and by 1MDB for Project 3B also means that since the
government initiated a competitive bidding process for new power capacity in 2012, state-linked companies
have consecutively secured all of the power plant projects released by the EC. In October 2012, TNB,

which is also the sole electricity off-taker in Peninsula Malaysia, won a MYR3bn contract from the EC to
construct, own and operate the 10,171MW Prai gas-based power plant in the northern state of Penang.
This supports our view that state-owned enterprises are more likely to secure Project 3A and 3B (see 'Power
Potential Dampened By Environmental And Viability Concerns', December 27 2012). In our opinion,
independent power producers (IPP) are unwilling to offer bids as competitive as TNB (which offered the
lowest bid for Project 3A) due to perceived threats to the project's profitability. This questionable financial
viability is brought on by two factors.
Growing Competitiveness: Malaysia's electricity sector is set to become more competitive over the
coming years as the government is not only looking to start large-scale electricity trading with its
neighbours, but also requiring Malaysian IPPs to bear a greater burden for increases in fuel costs.
In June 2012, Malaysia's state-owned electricity utility Tenaga Nasional (TNB) signed a memorandum of
understanding with two Indonesian state-owned companies - utility PLN and coal miner Bukit Asam - to
develop the necessary infrastructure to sell electricity from Sumatra to Peninsular Malaysia. Initial
construction works have started for the cross-border transmission line as of September 2012. PLN expects
construction to be completed by end-2014.
Besides the cross-border transmission line, Malaysia plans to carry out a series of open tenders for new
power purchase agreements (PPAs) among the first-generation IPPs in 2012. The PPAs for these IPPs are
due to expire in 2016 and will only be renewed if they bear a greater burden for increases in fuel costs.
Furthermore, only 50% of these PPAs will be renewed, with new IPPs introduced to the market. This move
would dramatically reduce the rate of return for the first-generation IPPs, making them significantly less
profitable. According to an analyst at Malaysian bank Maybank (cited by the Star in March 2012), the
internal rate of return for these first-generation IPPs would fall from an excess of 15% to the current rate of
6%.
Lack Of Pricing Reforms: In previous years, Malaysia has been reluctant to raise electricity tariffs, even
though the price of electricity sold to consumers is still below the cost of production. In October 2012, the
Malaysian government rejected a review of the electricity tariff rate, with the rate maintained at the current
level. We believe that this unwillingness to raise tariffs is primarily due to a fear of losing popular support
and could resurface again as a downside risk to profitability when Project 3A and 3B are completed.
This has indeed taken place in 2014. In November 2014, the Malaysian federal government announced that
the electricity tariff to consumers in Malaysia will be maintained at the existing level until June 30 2015.

According to Malaysia's Energy, Green Technology and Water Minister Datuk Seri Maximus Ongkili, the
decision was made to reduce the impact of fuel tariff hikes on consumers (cited from the Bernama). Ongkili
stated that the cost of maintaining electricity tariffs at current rates was MYR1.68bn (USD504mn) for
generation and fuel costs, with the government absorbing MYR846mn of the cost and the remaining
MYR836mn by state-owned oil and gas giant Petronas. Furthermore, the Putrajaya announced in February
15 that electricity tariffs in Peninsular Malaysia will be reduced by MYR2.25 cents per kWh beginning
March 1 2015 and will end in June 2015, but would only affect those who consumed more than 300kWh a
month. According to Maximus Ongkili, the reduction was made after the government reviewed the
Imbalance Cost Pass Through system.
Therefore these two factors - growing competitiveness and stagnant tariffs - are prompting several IPPs to
sell their Malaysian power assets:
In March 2012, Malaysia's sovereign fund 1Malaysia Development (1MDB) paid MYR8.5bn for
Tanjong Energy, the power generation company owned by Malaysian tycoon Ananda Krishnan.
In August 2012, 1MDB bought Genting's 97.7% stake in Mastika Lagenda, which owns the 720MW
Kuala Langat gas-based power plant in Selangor, for MYR2.3bn.
In July 2013, 1MDB agreed to pay MYR1.2bn to acquire a 75% stake in Jimah Energy Ventures, an
IPP that operates the 1,400MW Mukim Jimah coal-fired power plant in Negri Sembilan. The IPP is 80%
owned by the Negri Sembilan royal family and 20% owned by TNB.
With these purchases, 1MDB has become the second largest IPP in Malaysia after Malakoff, which has a
net capacity of 5.0GW (excluding Project 3B). In our opinion, both purchases are part of Malaysia's plan to
gain greater leeway in restructuring PPAs to favour the state, making the country's electricity market more
competitive and economically sustainable over the long term. As of November 2014, 1MDB is planning to
launch an initial public offering for its power assets, which could raise up to around USD3bn.
Peninsular Malaysia - Nuclear
The development of a nuclear power sector has featured prominently in Malaysia's Economic
Transformation Programme. As part of the ETP, a nuclear company, named the Malaysia Nuclear Power
Corporation, has been created to advance the development planning of a nuclear power plant in the country.
An official decision on whether to proceed with the nuclear option is expected in 2013, while indications
point to a nuclear plant possibly being commissioned in the early 2020s. In early 2010, USD7bn was
allocated to the nuclear plant project, with the Ministry of Energy, Green Technology and Water looking for
a suitable site for the first unit, and identifying eight possible locations.

Malaysia will need to put in place the appropriate regulations and framework in order to move the project
forward, in addition to providing training programmes and boosting domestic expertise. Malaysia is looking
to court international cooperation to further this aim, and France has offered to help the country develop a
nuclear power sector.
Peninsular Malaysia - Solar
Solar generation could also become a presence in addressing Malaysia's electricity demand. On October 11
2012, Malaysian Prime Minister Datuk Seri Najib Tun Razak reaffirmed the country's renewable energy
capacity targets of 5.5% by 2015 and 11% by 2020. The government had previously set this target in its
10th Malaysia Plan for the period 2011-2015.
Ope conditions in the sector have grown increasingly positive over the past three years as the government
has introduced measures such as feed-in tariffs and financing schemes (see '2015: An Unusually Slow Year',
October 24 2014). This has led to a surge in private interest in the sector, with the development of the
largest single solar project in Malaysia taking place in late-May 2013 (see 'Solar Sector Heating Up, But
Challenges Remain', June 3 2013). However, we note that there are still a number of regulations that are
holding back growth in the sector such as a high degression rate and a cap on privately-owned solar
capacity.
The largest solar power project under development in Malaysia is a 50MW solar farm in Kedah. In April
2014, Malaysia-based Tenaga Nasional signed a power purchase agreement with local developer 1Malaysia
Development (1MDB) to construct a 50MW solar farm in Kedah state, Malaysia. 1MDB will own, design
and construct the photovoltaic solar park. The 25-year agreement will also see 1MDB operate and maintain
the facility. The development of the plant supports the Malaysian government's efforts to promote the use of
renewable energy.
East Malaysia
The government is looking to spur economic development in the Malaysian states in Borneo (Sabah and
Sarawak) and is constructing several hydropower and coal power plants to support this economic
development. In Sarawak alone, there are plans to develop 28,000MW of generation capacity to meet the
needs of its energy intensive industries, with hydropower (20,000MW) and coal (50,00MW) the main
energy resources to be developed by 2020. According to Sarawak Energy's 2010 Annual Report (published
in mid-2012), the state government has already started planning for 12 hydroelectric projects with a

combined capacity of 7,000MW, while the Star reported in October 2012 that Sarawak Energy plans to
build an additional five coal-fired power plants with a combined generation capacity of 2,400MW in
Sarawak. This plan is known as the Sarawak Corridor of Renewable Energy (Score), a major initiative to
drive economic development in selected parts of Sarawak by 2020.
Ambitious Government Plans

Map Of Hydropower Projects In Sarawak (2010)
Source: Sarawak Energy Berhad
However, Score does not appear to be progressing well. On February 8 2013, Sarawak's state minister of
land development, James Masing, announced that only four of the 12 dams originally planned - namely
Bakun, Murum, Baleh, and Baram - would be developed. Construction on the Bakun dam was completed in
early-2013, and construction is under way on the Murum dam. The Baleh and Baram dams remain in early
planning stages.
In February 2014, Sarawak state officials stated that Sarawak was currently conducting pre-tender activities
for the development of the 1,200MW Baram and 1,295MW Balleh dams. According to Sarawak Energy
(cited from the Star), the Baram dam project's social environmental impact assessment study was in the
final stage and its report was near completion. The Baram dam is also expected to supply electricity to

Sabah and Brunei, with up to 20,000 residents likely to be relocated for the project. The Baram dam project
is located in northern Sarawak, while the Baleh dam project is in upper Rajang Basin.
We continue to see a strong possibility for the Baleh and Baram dams to be cancelled. This is for three main
reasons:
Electricity Glut: Electricity demand in Sarawak is currently estimated to be under 1,000MW (according
to Sarawak Energy Bhd), significantly lower than existing nameplate capacity - the Bakun and Murum
dams alone have a combined capacity of 3,34MW.
Stagnant Electricity Demand: We do not expect electricity demand in Sarawak to increase significantly
in the medium to long term. Global mining company Rio Tinto Alcan announced in March 2012 that it
was pulling out of the much-touted aluminium smelter venture, Sarawak Aluminium Company. This was
the flagship project that was supposed to form the backbone of the government's plans to employ the
huge surge of hydro-electricity from the various hydropower projects. As of now, we have yet to see any
other international companies commit to investing in Sarawak, and we believe that much of the planned
hydropower capacity might never reach completion due to a lack of demand.
Public Discontent: The Baram and Baleh dams are expected to displace a large number of people, which
will potentially create significant public opposition to the dams. Peter Kallang, a member of a Sarawak
tribe, said that the Baram dam would displace about 20,000 people (according to the Qatar Tribune).
However, there are plans to construct a cross-border power transmission line between West Kalimantan and
Sarawak. This could potentially be a major avenue for Sarawak to sell off its electricity.
In August 2013, the Asian Development Bank (ADB) announced that it would provide a USD49.5mn loan
to Indonesian state-owned utility Perusahaan Listrik Negara (PLN) for the construction of new
transmission and distribution (T&D) infrastructure in West Kalimantan. The ADB would also help to
administer additional loans of USD49.5mn from the French development agency Agence Franaise de
Dvelopment and USD2mn from the Clean Energy Fund. The funds would be used to improve the
reliability and capacity of the West Kalimantan grid by building a 145km distribution line, a distribution
feeder extension and a new substation in West Kalimantan.
The improvement of the West Kalimantan grid is necessary for the development of the 83km cross-border
high-voltage transmission line between Sarawak and West Kalimantan. Both countries have agreed to
complete the construction of the transmission line by December 2014 and power flow will start from
January 1 2015. This would allow electricity generated by Malaysia's hydropower plants to be transmitted
to Indonesia. An estimated 230MWh of power could be exchanged every hour between the two systems.
ADB is currently preparing a second loan to finance the section of the transmission line that is located in
Malaysia.

Sarawak is also planning to build a transmission line to Brunei Darussalam. In 2010, Sarawak Energy had
announced plans to construct a 40km long power transmission line in the next two years connecting Miri in
northern Sarawak with Brunei. The project was expected to commence in 2011 and come online in 2012,
but no progress has been made on the project thus far. However, we believe that this is likely to change as
the amount of excess electricity increases in Sarawak.
East Malaysia - Transmission
Besides cross-border power transmission lines, Sarawak is also improving domestic transmission
capabilities. In June 2013, Trenergy Infrastructure, a unit of Sarawak Cable, secured a
MYR32.87mn contract from Sarawak Energy (a major shareholder of Sarawak Cable) for the Tudan-Miri
Airport 132kV transmission line project. The project is expected to be completed in September 2014.
In March 2014, a joint venture (JV) between Trenergy Infrastructure and China's Sinohydro secured a
MYR619mn (USD188.7mn) contract for the 500kV transmission backbone construction works in Malaysia.
The contract has been awarded by state-owned power plant developer Sarawak Energy. The JV, which will
develop two sections of the 500kV backbone, will construct one section from Mapai to Lachau in Package
B, while another one will be constructed from Lachau to Tondong under Package C. The project is expected
to be completed in Q116.
Over the near-term, the Sarawak state government is expected to release the tenders for the Tanjung Manis-
Bintulu and Mambong-Kalimantan lines as well as the long-delayed 500 kilovolt (kV) backbone power line
project (cited from the Star). The 500kV backbone project is valued at MYR1bn and is expected to be
awarded by the end of 2013, pending state approval. The state government is also expected to accelerate its
rural electrification scheme in 2013. At present, only 60% of the scheme is completed, while the
government's original target is to complete 95% of the scheme by end-2013.
As for Sabah, the development of hydropower and thermal sources, particularly coal, faces greater public
opposition in Sabah, due to the economic importance of eco-tourism. In February 2011, the Sabah state
government halted all bids for the Lahad Batu plant, and Malaysian Prime Minister Najib Tun Razak
requested that state-owned companies TNB and Petronas to find a cleaner energy source than coal for
Sabah. According to Sabah Chief Minister, Musa Aman, the state needs to increase its power supply to
continue developing economically, but it cannot do so at the expense of its natural environment. Sabah's
natural landscape has made it a major eco-tourism destination, and the growth of this industry depends upon
the preservation of the state's natural environment.

The tourism sector is an important part of Sabah's economy and a major source of foreign exchange. The
Sabah Tourism Board said revenues from the tourism sector reached about MYR3.88bn (USD127mn) in
2009, while visitor arrivals into Sabah reached an estimated record high of 2.5mn. Most tourists are drawn
to Sabah because of its rich and untamed landscape. Damage to its natural environment could dampen the
interest of tourists and reduce revenues for the tourism sector. The Lahad Batu plant would probably have
caused environmental damage: a detailed environmental assessment of the plant failed to win approval from
Malaysia's environmental department, according to local media reports.
TNB has since announced plans for the construction of a gas-fired power plant to replace the coal-based
plant. In July 2011, Malaysian state-owned company Petronas Gas (PetGas) planned to raise project
financing of MYR1.2bn (USD400mn) for the construction of the 300MW Kimanis gas-based power plant in
Sabah, one of two Malaysian states on the island of Borneo. The fundraising is expected to cover 80% of
the total cost of the MYR1.5bn project and to be conducted through Islamic bonds (sukuk) or a term loan.
The project is jointly owned by PetGas and Malaysia-based NRG Consortium, while the engineering,
procurement, construction and commissioning contract has been awarded to a consortium made up
of CTCI, Synerlitz and SCHB Engineering. The first unit of the Kimanis plant is scheduled to be
commissioned by end-2013, with the remaining two units due in 2014.
There are several positive factors driving the plant's implementation. Firstly, Petronas is planning to build
an LNG import terminal in Sabah, and the construction of a gas-based power plant will provide a constant
source of revenue for the terminal - a major consideration for its implementation, The terminal, known as
the Sabah Oil & Gas Terminal, is expected to have the capacity to handle 300,000 barrels per day (b/d) of
crude oil and 1bn standard cubic feet (cu ft) of gas per day from Malaysia's offshore fields. Secondly, Sabah
derives a sizeable portion of its tax revenue from the tourism sector, and this is due to the state's rich and
untamed landscape. The construction of a gas-fuelled plant would be likely to do less damage to Sabah's
natural environment than a coal-fired power plant, which produces twice as much in terms of carbon
emissions, and a hydropower power plant, which requires the damming and cutting of rivers and forests,
which could potentially damage the states' landscape.
Water Utilities
The growing industrialisation in the Malaysian states in Borneo (Sabah and Sarawak) is also increasing the
demand for freshwater. In late 2011, engineering firm Hock Seng Lee (HSL) won a MYR90.28mn contract
to build a new water treatment plant on the island of Borneo, reports water-technology.net. HSL will

construct the plant in Sarawak over the course of 17 months, and the project will include a pump house,
chemical house, aerators, flocculation tanks, sedimentation tanks, and other filtration process facilities.
In Peninsular Malaysia, opportunities in the water utilities sector are not only on increasing water supply,
but also on social development. One of the key projects under the ETP is the River of Life (RoL) project,
estimated to cost around MYR4.4bn. The RoL project is a three-part project of cleaning, master planning
and beautification, and land development that aims to transform specific areas within Kuala Lumpur facing
the Klang River into a vibrant urban waterfront. The project would involve:
River Cleaning: A 110km stretch of the river covering the municipalities under the jurisdiction of
Selayang Municipal Council, Ampang Jaya Municipal Council and Kuala Lumpur City Hall will be
cleaned to raise the water standard in the Klang River to recreational standards by 2020.
River Master Planning And Beautification: The goal of this component is to increase the economic
viability of the river area, specifically a 10.7km tract along the Klang and Gombak River corridors. The
beautification plan will affect landmarks in the area including Dataran Merdeka, Bangunan Sultan Abdul
Samad and Masjid Jamek in the city centre.
Land Development: Areas immediately adjoining the river corridor will be developed under a master
plan aiming to spur economic investment. Government land will be tendered out to private investors to
catalyse this programme.
The entire ROL project will encompass the setting up of 14 water treatment plants, 361 gross pollutant
traps, eight trash rakes and river bank stabilisation.
The ROL project is coordinated and executed by Ekovest-MRCB JV (EMJV), a joint venture between
Ekovest and Malaysian Resources. In late-2011, Malaysia's government appointed EMJV as a Project
Delivery Partner for the ROL project and in January 2014, EMJV was awarded a MYR130mn contract -
Precinct 7 - which is part of the ROL project.
There are opportunities for water treatment facilities in Peninsular Malaysia, but they appear to suffer from
significant political risks. The development of the MYR1.2bn Langat 2 water treatment plant in the state of
Selangor was stalled in mid-2012 because the Selangor state government, a political party that is opposed to
the federal government, was blocking the federal government-backed project. As a result, the project is
currently around three years behind schedule - as of September 2013, five companies have been shortlisted
by Pengurusan Aset Air for the first package of the project, which has a capacity of 1.13mn cubic meters
per day. These companies are (cited from the Star) IJM, Gamuda, UEM Construction, a joint venture
between Salcon, MMC and Ahmad Zaki Resources, and Asia Baru Construction. JAKS Resources is
also seen as the frontrunner for the project's piping package worth MYR800mn (USD247.97mn).The
project is expected to be awarded in 2014. According to Deputy Minister for Energy, Green Technology

and Water, Datuk Seri Mahdzir Khalid, construction for the Langat 2 Water Treatment Plant (LRAL2)
project in Malaysia reached 15% as of November 2014 and the projects is expected to be completed on
April 2017.
In addition, recent decisions by the government to arbitrarily seize water assets belonging to the private
sector were a negative signal to private investors.
In May 2014, three of the four water concessionaires agreed to terms for the sale of their assets to the
Selangor state government. As a result, the federal government agreed to not invoke Section 114 of Water
Services Industry Act 2006 (WSIA) to assume control of these water assets. The remaining concessionaire
yet to reach an agreement with the government is Gamuda's 40%-owned water concessionaire Splash.
In March 2014, the federal government of Malaysia decided to invoke the Water Services Industry Act 2006
(Wasia), including Section 114, to pave the way for the Selangor state government to take over the water
concessionaires in the state. Under the act, the Selangor state government would only need to pay
MYR7.65bn for all of the water assets. This decision comes after Gamuda and Puncak Niaga rejected the
state's offer to acquire their water assets - namely Gamuda's 40%-owned water concessionaire Splash.
In March 2014, Gamuda received notification that its 40%-owned water concessionaire Syarikat Pengeluar
Air Sungai Selangor Sdn Bhd (Splash) had received a letter from Lembaga Urus Air Selangor (Luas),
informing Splash that its existing licence to extract raw water expiring on June 30 2014 would not be
renewed.
Having said that, the business environment for Malaysia's water utilities sector could potentially improve in
2014. In April 2013, the National Water Services Commission announced it is in the process of developing
a new water tariff that could be 'more transparent and structured'. The commission expected the
development of the new tariff to take about six to 12 months.
New water treatment facilities are still being awarded in Malaysia. In May 2014, a joint venture (JV)
comprising, Salcon Bhd, MMC Corp and Ahmad Zaki Resources, secured a MYR993.88mn
(USD305.7mn) water treatment plant and reticulation contract in Malaysia from Pengurusan Aset Air.
Salcon holds a 36% stake in the JV, MMC 34% and Ahmad Zaki 30%. Under the contract, the JV will
undertake package 2A, which includes building the 1,130mn litre per day Langat 2 water treatment plant.
The contract is for 36 months and is likely to contribute positively to the incomes of the three firms.

Table: Major Projects - Energy And Utilities
Value Capacity/
Project Name (USDmn) Length Companies Timeframe Status
OIL & GAS PIPELINES

Second commercial floating Petronas (Operator), JGC
liquefied natural gas (LNG) Corporation (Construction),
project, Sabah state, Borneo 1500'000 Samsung Heavy Industries Contract
island - tonnes (Construction) - 2018 Awarded
Barakah Offshore Petroleum Bhd
Kerteh - Malaysia/ Thailand (Consultant/Project Management),
Joint Development Area Border GOM Resources Sdn Bhd Contract
Pipeline Project - 282km (Operator) 2014 - 2015 Awarded
POWER PLANTS &
TRANSMISSION GRIDS
Balingian II coal-fired power Sarawak Energy Berhad (SEB)
plant, Mukah Division, Sarawak - 300MW (Sponsor) - Announced
Tenaga Nasional Berhad
(Sponsor), 1Malaysia
Kedah Solar Park Project - 50MW Development Berhad (Operator) - Approved
Sarawak Energy Berhad (SEB) At planning
Baram dam, Sarawak 1246.25 1200MW (Operator) 2013 - stage
Baleh dam, Upper Rejang Sarawak Energy Berhad (SEB) At planning
Basin, Sarawak - 1295MW (Operator) - 2020 stage
Berjaya Corporation (Sponsor,60),
Balingian I coal-fired power KUB Malaysia Berhad (Sponsor, At planning
plant, Mukah Division, Sarawak 897 600MW 40) 2014 - 2018 stage
Berjaya Corporation (Sponsor,60),
Bukit Tagar Solar Power Plant, KUB Malaysia Berhad (Sponsor, At planning
Selangor 314 100MW 40) - stage
African Development Bank
(Financier), Perusahaan Listrik
Negara (PT PLN), PT Bukit Asam
Melaka - Pekanbaru (PTBA), Asean Infrastructure Fund
interconnection project (AIF) (Sponsor), Tenaga Nasional At planning
(Malaysia -Indonesia) - 600MW Berhad - 2018 stage
Transmission line connecting At planning
Miri with Brunei - 40km Sarawak Energy Berhad (SEB) 2011 - stage
Co-generation unit, Petronas
refinery and petrochemicals At planning
integrated complex, Pengerang 980 1200MW MMC Corporation (Construction) 2014 - 2017 stage
Merit Pila coal-fired power At planning
plant, Kapit, Sarawak - 300MW Sarawak Energy Berhad (SEB) - stage
Kejuruteraan Bintai Kindenko Sdn
Mukim Jimah Coal-fired Power Bhd, Kinden Corporation,
Plant, IPP, Port Dickson, Negeri Sumitomo, Jimah Energy
Sembilan 2000 1400MW Ventures - 2009 Completed
Ultra Supe-critical Coal Fired
power plant IPP, Manjung Daelim Industrial Company
power station, Unit 5 (Fast (Construction), Sumitomo
Track Project 3A Coal-Fired (Construction), Tenaga Nasional Contract
Power Plant) 1200 1000MW Berhad (Sponsor) 2014 - 2017 Awarded

Major Projects - Energy And Utilities - Continued
Value Capacity/
Backbone Transmission Project, Sinohydro Corporation
Sarawak (Lachau to Tondong) (Construction), Trenergy Inc Contract
Package C 110 500kV (Construction) 2013 - 2016 Awarded
Backbone Transmission Project, Sinohydro Corporation
Sarawak (Mapai to Lachau) (Construction), Trenergy Inc Contract
Package B 84 500kV (Construction) - 2016 Awarded
Backbone Transmission Project, Xian Electric Engnee-ring Co Ltd Contract
Sarawak (Similajau to Mapai) - 500kV JV, Toshiba - 2016 Awarded
Backbone Transmission Project, Toshiba, Xian Electric Engnee-ring Contract
Sarawak (Mapai to Oya) - 275kV Co Ltd JV - 2016 Awarded
Backbone Transmission Project,
Sarawak (Mambong &
Entinggan Substation Contract
Extension) - 275kV KEC International India - 2016 Awarded
Thai National Power (TNB),
Malaysian Government-run power
utility, Daelim Industrial Company,
Manjung coal fired power plant Sumitomo Corporation, Tenaga Contract
extension IPP, Perak 1400 1000MW Nasional Berhad, EPC 2014 - 2017 Awarded
Tenaga Nasional Berhad
(Operator), Siemens
Combined-cycle gas turbine (Construction), Samsung
power plant, Seberang Prai, Construction & Trading (Samsung Contract
Penang 751.1 1071MW C&T) (Construction) - 2016 Awarded
Daelim Industrial Company,
Fast Track Project 3A Coal- Sumitomo, Tenaga Nasional Contract
Fired Power Plant Project 1153 1000MW Berhad, Hitachi (Equipment) 2014 - 2017 Awarded
Project 3B Coal-Fired Power Mitsui & Co. (Construction),
Plant Project, Jimah, Negeri 1Malaysia Development Berhad Contract
Sembilan 3726 2000MW (Construction) - 2019 Awarded
Limbang dam, Sarawak - 245MW Government of Malaysia 2013 - Delayed
Tambatuon dam, Kota Belud,
Sabah 147 - - - Delayed
Feasibility
studies/EIA
Pelagus dam, Sarawak 3830 410MW Sarawak Energy Berhad (SEB) - underway
Lahad Datu Coal Power Station,
Lahad Datu, Sabah 300MW - Suspended
Mukah West I coal-fired power Sarawak Energy Berhad (SEB)
plant, Sarawak 916 600MW (Operator) - 2018 Suspended
Mukah West II coal-fired power Sarawak Energy Berhad (SEB)
plant, Sarawak - 600MW (Operator) - 2018 Suspended
China Machinery Engineering
Ultra Super-critical Coal Fired Corporation (Construction),
power plant IPP, Manjung Alstom SA (Construction), TNB Under
power station, Ipoh, Unit 4 1157 1000MW Janamanjung Sdn Bhd (Sponsor) 2011 - 2015 construction
SNC-Lavalin (Consultant/Project
Hulu Terengganu Hydroelectric Management), Tenaga Nasional Under
underground Project 315 265MW Berhad (Operator), Alstom SA - 2015 construction

Value Capacity/
(Equipment), Sinohydro
Corporation
Tindakan Mewah (Construction),
SMEC International (Consultant/
Project Management), Tenaga
Ulu Jelai Hydroelectric Project, Nasional Berhad (Operator), Salini Under
Pahang 400 372MW Group (Construction) 2011 - 2016 construction
Nishimatsu Construction
Company (Sponsor), Kumpulan
Lahad Datu Gas Power Station, Europlus (Sponsor), Hock Seng Under
Lahad Datu, Sabah 158.4 - Lee (HSL) (Construction) 2008 - 2015 construction
Tanjung Bin Supercritical Coal-
Fired Power Plant Extension, Under
South Johor 1500 1000MW Alstom SA (Construction) 2012 - 2016 construction
NRG Energy (Sponsor,40),
Kimanis Combined Cycle Gas- Petronas (Sponsor,60), Synerlitz,
Fired Power Plant BOOT SCHB Engineering, CTCI Corp, Under
Project, Sabah 500 300MW GE 2011 - 2014 construction
West Kalimantan - Sarawak
interconnection Tenaga Nasional Berhad Under
project (Malaysia - Indonesia) - 275kV (Construction) 2014 - 2015 construction
Murum Dam Hydropower Sarawak Energy Berhad (SEB) Under
Project, Sarawak 1250 944MW (Operator) 2008 - construction
WATER
Malaysian Ministry of Energy -
Green Technology and Water
(KeTTHA) (Operator), Shimizu
Corporation (Construction),
Company (Construction), UEM
Drinking water transfer tunnel I, Builders (Malaysia) (Construction),
Pahang to Selangor - 11.77km IJM Corporation (Construction) 2010 - 2013 Completed
UEM Builders (Construction), IJM
689.85mn Nishimatsu Construction
Pahang - Selangor Raw Water m3 per Company (Construction), Shimizu
Tunnel 2800 year Corporation (Construction) 2010 - 2014 Completed
Putra Perdana (Construction),
Raw Water Supply Project to Asia Baru Construction Sdn Bhd
the Pengerang Integrated 94.9mn m3 (Construction), Petronas Contract
Complex, PAMER - per year (Construction) - 2016 Awarded
Technip (Construction), Malaysia
Marine and Heavy Engineering
TLP Malikai Deepwater Project, Holdings (Construction), Sabah Contract
Sarawak 747.55 - Shell Petroleum (Operator) - 2015 Awarded
Drinking water transfer tunnel II, Builders (Malaysia) (Construction),
Pahang to Selangor - 11.8km IJM Corporation (Construction) 2010 - 2017 Delayed

Value Capacity/
Sungai Langat 2 Water 0.7mn m3 Ahmad Zaki Resources (30), MMC Under
Treatment Plant, Selangor 1075.4 per year Corporation (34), Salcon (36) - 2017 construction
Drinking water transfer tunnel Builders (Malaysia) (Construction), Under
III, Pahang to Selangor 11.3km IJM Corporation (Construction) 2011 - 2017 construction
Kuching Centralised Sewerage Europlus (Sponsor), Hock Lian Under
System Project - Phase II 239.02 - Seng Infrastructure (Construction) - construction
Kuching Centralised Sewerage Europlus (Sponsor), Hock Seng Under
System Project 1195 - Lee (HSL) (Construction) 2008 - construction
Hock Seng Lee (HSL)
(Construction), Kumpulan
Kuching Centralised Sewerage Europlus (Sponsor), Nishimatsu Under
System Project - Phase I 158.4 - Construction Company (Sponsor) 2008 - 2015 construction
Malaysian Resources Corporation
Beautification and rehabilitation Berhad (MRCB) (Sponsor,40),
of River of Life (ROL) project, Ekovest Construction (Sponsor, Under
Kuala Lumpur 1312.26 - 60) 2011 - construction

Residential/Non-Residential Construction - Outlook And Overview
Table: Residential and Non-Residential Building Industry Data (Malaysia 2013-2018)
2013 2014e 2015f 2016f 2017f 2018f
Residential and Non-residential Building Industry Value As % of Total 64.46 65.96 65.14 64.97 64.84 64.68
Construction
Residential and Non-residential Building Industry Value, MYRbn 26.61 31.20 35.12 38.53 41.70 44.75
Residential and Non-residential Building Industry Value, USDbn 8.44 9.54 9.97 10.78 12.93 15.73
Residential and Non-residential Building Industry Value Real Growth (%) 9.77 14.11 9.53 7.11 6.07 5.23
Residential and Non-residential Building Industry Value as % of GDP 2.70 2.90 3.04 3.12 3.18 3.21
Table: Residential and Non-Residential Building Industry Data (Malaysia 2019-2024)
2019f 2020f 2021f 2022f 2023f 2024f
Residential and Non-residential Building Industry Value As % of Total 64.54 64.40 64.27 64.15 64.02 63.90
Construction
Residential and Non-residential Building Industry Value, MYRbn 48.04 51.52 55.16 58.79 62.66 67.11
Residential and Non-residential Building Industry Value, USDbn 16.95 18.24 19.60 20.96 22.42 23.38
Residential and Non-residential Building Industry Value Real Growth (%) 5.24 5.15 4.96 4.47 4.48 4.50
Residential and Non-residential Building Industry Value as % of GDP 3.24 3.28 3.30 3.31 3.33 3.34
f = BMI forecast. Souece: BMI

Growth To Slow
Residential And Non-Residential Building Industry Value (2013-2019)
60 15
12.5
40
10
7.5
20
0 2.5
2013 2014e 2015f 2016f 2017f 2018f 2019f
Residential & Non-residential Building Value, MYRbn (LHS)
Residential & Non-residential Building Value Real Growth (%) (RHS)
We believe it is unlikely for construction activity to continue to grow at the blistering pace of 2014 in 2015.
We are estimating real growth in the residential and non-residential building sector reached 9.5% in 2015,
down from 14.1% in 2014. This outlook is underpinned by our belief that headwinds from a weakening
global economy are not over, which could dampen demand for residential and non-residential buildings.
Residential Construction
We expect the demand for housing in Malaysia to weaken over the near-term and this will negatively affect
residential building activity. This is due to:
Oversupply: At present, the planned supply for residential properties has reached a three-year high of
622,698 units at the end of June 2014, while the number of residential properties under construction reached
a 10-year high of 687,000 units at the end of June 2014. However we highlight that the overall demand for
housing in Malaysia is weakening fast. Housing prices in Malaysia appear to have topped out since the

introduction of new government measures to curb speculation in the property market (see 'Fresh Property
Curbs On The Way', August 23 2013).
According to the Malaysia House Price Index provided by the Ministry of Finance, property prices in the
country only grew by 4.6% y-o-y in Q314, the slowest rate of growth since Q309. Should housing demand
in Malaysia continue to weaken, we believe this could deter developers from constructing new residential
projects. In addition, we believe we have yet to see the worst of China's economic slowdown and could see
demand for Malaysian real estate stall over the coming quarters, particularly from overseas buyers (see
'Economy To Cool Further Despite GDP Outperformance', October 21 2014).
Expecting Further Moderation

Malaysia - House Price Index (LHS), % chg y-o-y (RHS)
*Not Seasonally Adjusted, 2000=100. Source: Ministry of Finance, Malaysia
Curbing Measures: The government has also been introducing new government measures to curb
speculation in the property market and reduce household debt. Since the start of 2012, banks have been
using net income instead of gross income to calculate the debt service ratio for loans. This is aimed at
reducing the level of household debt, which we believe to be one of the highest in South East Asia. The
2014 budget announcement (in October 2013) also saw the government significantly increased the real

property gains tax (RPGT) for properties disposed within a holding period of less than five years (effective
as of January 1 2014), particularly for foreign buyers (see table). Developers are also prohibited from
implementing projects that have features of the Developer Interest Bearing Scheme (DIBS) - the scheme
had allowed developers, particularly at the high-end segment, to absorb interest payments during the
property's construction phase. This followed with the government announcing in November 2013 that it will
no longer allow the use of the Interest Capitalisation Scheme or any other permutation to approve housing
development licence, place advertisements and obtain sales permit by any housing developer. All property
buyers would also need to use the net selling price of a property to determine the loan-to-value ratio. This
increases the upfront payment for all property purchases.
Table: Malaysia - Real Property Gains Tax From January 2013 And January 2014, By Type
Date Year 6 And

Type Year 1 Year 2 Year 3 Year 4 Year 5 Beyond
Jan-13 Companies 15% 15% 10% 10% 10% 0%
Individuals 15% 15% 10% 10% 10% 0%
Individuals 15% 15% 10% 10% 10% 0%

(foreigners)
Jan-14 Companies 30% 30% 30% 20% 15% 5%
Individuals 30% 30% 30% 20% 15% 0%
Individuals 30% 30% 30% 30% 30% 5%

(foreigners)
Source: BMI, Lembaga Hasil Dalam Negeri Malaysia, Ministry Of Finance, The Star
China Slowdown: Lastly, we see the potential for a renewed slowdown in the Chinese economy in 2015 as
the structural hurdles within Chinese economy (shaky financial system, overvalued property market,
expensive infrastructure build-up, and huge industrial overcapacity) still remain. This could curb property
purchases in Malaysia, particularly at the high-end market, as they have been primarily driven by overseas
buyers, particularly from China.
We highlight that the affordable housing segment and the potential increase in speculative foreign capital
inflows could provide support to residential building activity in 2015, but we do not believe they would be
sufficient to offset the bearish factors above.

During the 2013 budget announcement in September 2012, the government said that it was aiming to build
80,000 houses under its affordable housing programme (PR1MA) in 2013 and had introduced new measures
and provided funds to PR1MA to realise this target. Additional measures and subsidies were introduced
during the 2014 budget to incentivise developers to build affordable housing (classified by the Malaysian
government as having a price range of MYR100,000 to MYR400,000 per unit). During the 2014 budget
announcement in October 2013, the government introduced the Private Affordable Ownership Housing
Scheme (MyHome). Under the scheme, private developers will received a MYR30,000 subsidy for each
housing unit in a housing project if they build at least 20% low-cost houses (maximum price of
MYR45,000) and 20% medium-cost houses (maximum price of MYR170,000) in the housing project. The
scope of the subsidies and measures introduced in 2013 and 2014 were further expanded in 2015. During
the 2015 budget announcement, the Malaysian government announced that the cap on household income
eligible for the Rent-to-Own scheme was increased from MYR8,000 per month to MYR10,000 per month.
A 50% exemption on stamp duties for first-time homebuyers was also extended till December 2016,
covering housing units worth up to MYR500,000 per unit (MYR400,000 previously).
Meanwhile, newly introduced measures aimed at curbing speculation and cooling the property markets in
Hong Kong and Singapore could push speculative demand to other markets in the region. As Malaysia
shares similar macro-fundamentals with both cities (i.e. stage of economic development, existing policies
on foreign investment, the quality of infrastructure, and the business environment), Malaysia could presents
an attractive alternative for foreign investors seeking to maintain their geographical exposure. Anecdotal
evidence suggests that investors from Singapore are increasingly looking across the border in search of
higher returns in Malaysia's investment property market. According to local media reports, prices in the
speculative high-end segment of Malaysia's property market may have risen by more than 80.0% since
2009.
High-End Housing
Having hit a bottom at the end of 2009 as the Malaysian economy contracted, residential construction levels
have improved significantly, but are still a long way off the highs seen between 2003 and 2007. A key
driver behind this recovery has been, and continues to be, high-end construction, which has risen sharply as
the economic recovery in the country has gained traction.
Government policy has also been a key growth driver in this sector. One of the key targets for the ETP is to
provide housing for 1mn new residents in the Greater Kuala Lumpur (KL)/Klang Valley by 2020, with 85%
of the housing developed for the upper middle class. The government has been very successful in this

regard, with the states of KL and Selangor accounting for most of the total work done in the Malaysian
residential sector. Johor is also becoming a prominent location for high-end residential buildings,
particularly in the Iskandar Malaysia zone.
However, due to the greater profit margins available to developers on high-end projects, we believe that
developers have over saturated the market, resulting in an oversupply situation. According to figures
published by DTZ Research, around 4,500 high-end condominiums are scheduled for completion in Kuala
Lumpur in 2012, compared with just 1,200 in 2011. The government is also carrying out measures to
temper housing prices and this could reduce demand for high-end housing.
BMI notes that compared to a number of other emerging market (EM) economies in the region, the growth
potential within the country's housing market is relatively modest. The country's mortgage to GDP ratio - a
useful indicator of market maturity - stands at over 30%, according to the Association of Builders and
Developers (ABAD), which is well above that of other Asia Pacific EMs such as Indonesia, Thailand and
the Philippines. This reflects our broader view for Malaysia's construction industry as a whole that, despite
having one of the more investor-friendly economies in the region, this is partly offset by the lack of
potential rewards on offer.
Affordable Housing
While the high-end market is becoming increasingly saturated, there remains significant growth potential
within the low to middle income segment. The escalation in housing prices has made it more costly to
purchase property on a broad-based level, prompting home buyers to seek cheaper alternatives. There
appears to be massive demand for cheaper housing. In February 2013, the government 201-unit affordable
housing project, known as Nusantara Pr1ma, in Bandar Nusajaya, Johor, was oversubscribed by six times.
The project is expected to be completed in 2015 and is a joint venture between Denia Development and
UEM Land Holdings.
The government has made notable efforts to boost the supply of housing in this underinvested sector and the
passing of the Perumahan Rakyat 1Malaysia (PR1MA) Bill 2011 in November 2011 aims to further
enshrine social housing provision within the country's legal framework. Government-owned housing
developer PR1MA will be responsible for building housing in urban areas that are affordable to young
people earning MYR3,000/month or less.
Furthermore, since the start of 2012, the government has been trying to increase the access to affordable
housing for the general populace. It has increased the cap for the value of homes that can be subsided under

its first-time home-buying scheme (ie My First Home Scheme), and the cap on household income that is
eligible for the Rent-to-Own scheme. It has also allocated PR1MA several plots of land in Sungai Besi
(Kuala Lumpur) and Sungai Buloh (Selangor) and MYR500mn in the 2013 budget for affordable housing.
It has, in addition, extended the 50% stamp duty waiver for first-time home buyers to December 2014 and
aims for PR1MA to construct 80,000 houses in locations like Kuala Lumpur, Shah Alam, Seremban,
Kuantan and Penang.
PR1MA also announced in December 2013 that it plans to introduce a homebuyer assistance programme in
early-2014. The programme is aimed at providing loans to people that were choosen to own a 1Malaysia
home, but were unable to secure bank financing.
Some of these affordable housing projects are expected to have access to transport services such as the new
Kuala Lumpur (KL) Mass Rapid Transit (MRT) project. PR1MA is expected to build a large number of
affordable housing in areas such Sungai Buloh, Kentonmen and Serdang, which are located along the KL
MRT Line 2. At the end of June 2013, the government reported that 20,000 affordable houses were under
construction.
With large amounts of land at the government's disposal and the successful electoral victory by the
incumbent party, there is considerable potential for new greenfield projects in partnership with private
developers. However, with much of this land owned by state governments, there will need to be effective
cooperation between state and central government in implementing these new measures.
We believe one threat to the government's ability to provide affordable housing is the rise in building
material prices. Anecdotal evidence suggests that building material prices increased rapidly in 2012 and this
could make it difficult for developers to sell houses below market price.
One of the largest affordable housing projects is the 1,879-acre Bandar Rimbayu township in the Klang
Valley. The project, valued at MYR11bn, is being developed by IJM Land and was scheduled to be
launched in September 2012. Another company that is targeting affordable housing project is Mah Sing
Group, which on January 2014 (cited from the Star), announced that it was going ahead with five projects
(mainly affordable housing) worth a total of MYR10.35bn in 2014.

Non-Residential Pipeline Growing
Malaysia - Non-Residential Buildings By Sector, Planned Supply
Source: National Property Information
Non-Residential Construction
Weakness in the Chinese economy is also expected to dampen demand for non-residential buildings over
the short-term. We expect Malaysian exporters (a major component in Malaysia's economy) to continue to
face a challenging economic environment in 2015. This is mainly due to the country's close trading ties with
China - Malaysia's trade exports to China as a share of GDP has surged from 14.4% in 2008 to 23.1% in
2011, the highest among our group of ASEAN countries. China accounted for 11.9% of Malaysia's total
exports in 9M14, while Singapore, a major exporter to China, accounted for 14.2% of Malaysia's total
exports in 9M14.
We expect this slowdown in exports to dampen the demand for industrial and office buildings in 2015, and
we have already seen weakness in the planned supply for such buildings. Latest data from Malaysia's
National Property Information Centre show that the planned supply for office buildings is very close to its
six-year lows. Although the planned supply for industrial buildings has bottomed out (due to a boost from

projects in Malaysia's petrochemical and resource-related manufacturing sectors), it is still significantly

lower than previous years.
In addition, the introduction of new fuel subsidy cuts as well as the goods and service tax in 2015 is likely
to dampen personal consumption in Malaysia. This could in turn deter developers from building new
shopping complexes. At present, the planned supply for shopping complexes remains close to five-year
lows.
Economic uncertainties have also dampened private and foreign investor interest in the country's Economic
Transformation Programme (ETP). Data from Performance Management Delivery Unit, the agency tasked
with implementing the ETP, show that the total committed investment in the ETP for 2013 was only
MYR8.0bn (USD2.5bn), much lower than the MYR32.1bn garnered in 2012 and MYR179.2bn in 2011.
Having said that, the ETP still presents significant project opportunities in the non-residential buildings
sector. The ETP has been categorised under 12 National Key Economic Areas (NKEAs), with a heavy
emphasis on the development of the oil and gas sector as well as the development of Kuala
Lumpur. Tallying the government's estimates for GNI for each of the 12 individual NKEAs by 2020, we
note that the oil and gas sector is estimated to contribute MYR272.8bn (or 33.8% share) to the ETP's target
GNI of MYR807.8bn by 2020, while the development of Kuala Lumpur is estimated to contribute another
MYR196.4bn (24.3% share). These project opportunities include the MYR26bn Tun Razak Exchange
(TRX), formerly known as the KL International Financial District, the MYR48bn Sepang International City,
the KL Metropolis mixed-use property project and the MYR6.3bn Tropicana Metropark mixed development
project. The TRX is expected to start construction in early 2015 and is slated for completion by 2017.
Some of these projects are allocated for domestic contractors, known as bumiputra contractors. In August
2013, Najib announced that four non-residential building projects - Menara Warisan Merdeka skyscraper,
Bukit Bintang City Centre, Rubber Research Institute, Malaysia External Trade Development Corporation
exhibition centre - will create MYR2.4bn worth of opportunities for bumiputra companies.Meanwhile,
investment channelled towards the government's 10-year economic plan, the Economic Transformation
Programme (ETP), remains substantial. According to a recent report published by the Performance
Management & Delivery Unit in August 2013, 86% or MYR25.4bn in committed investments for projects
in 2011 and 2012 have already been realised, and the ETP is right on track to meet its 2013 targets.
We also highlight that Malaysia's petrochemical and resource-related manufacturing sector could provide
support to non-residential building activity over the coming years. Malaysia has big investment plans for the

petrochemical sectors such as the development of the USD19bn Refinery and Petrochemical Integrated
Development (RAPID) project in Pengerang and the development of a USD500mn integrated aroma
ingredients production facility in Gebeng, Kuantan by Petronas Chemicals and Germany-based
BASF. Petronas announced its final decision on the project in early April 2014, with several sections of the
project already under feasibility study and/or awarded, such as a USD2.3bn contract to Japan's Toyo
Engineering for the building of a steam cracker complex project. Petronas expects the entire RAPID
project to be completed by 2019, but we believe the project is likely to face execution delays and be
completed after 2020.
Meanwhile, China appears to be keen to develop Malaysia's resource-related manufacturing sector. In

February 2013, Road Builder (M) Holdings, the wholly-owned subsidiary of IJM, signed a MOU to divest
40% of its 100% stake in Kuantan Port Consortium to China's Guangxi Beibu Gulf International Port
Group. The sale, valued at MYR310mn, is part of a joint-venture (JV) between IJM and Guangxi to develop
the Kuantan port and a Malaysia-China industrial hub (the Kuantan Industrial Park) near the city. A
definitive agreement for the project was executed in March 2014. IJM had also stated (cited from the Star)
that the success of the JV would depend on its ability to secure 700 acres of industrial land north of the
Kuantan Port. As for developments at the industrial park, Guangxi is expected to lead investments of
MYR5bn for the development of a steel mill, an aluminium-processing plant and an edible palm oil
processing plant. These investments will be 100% owned by Chinese companies, according Ong Ka Ting,
Najib's special envoy to China (cited by Reuters).
Social Infrastructure
Several social infrastructure projects have also been listed as key priorities in the ETP. These projects
include the International Islamic University Malaysia Teaching Hospital in Kuantan; the Women and
Children's Hospital in Kuala Lumpur; the Integrated Health Research Institute Complex in Kuala Lumpur;
and the Academic Medical Centre, which is also in Kuala Lumpur. The 2013 budget also saw the Malaysian
government announced that it would allocate MYR1bn to upgrade schools.
In August 2013, Zecon was awarded a MYR606mn, 30-year concession from the Education Ministry to
build a children's specialist hospital at University Kebangsaan Malaysia.
In April 2013, Zecon was awarded a MYR495mn contract from the Public Works Department for the
construction of the Petra Jaya Hospital in Kuching, Sarawak. The project is expected to be completed at the
end of 2016.

In July 2012, Zelan's wholly owned subsidiary Konsesi Pusat Asasi Gambang has reached a concession
agreement with the government of Malaysia and International Islamic University Malaysia (IIUM) to
construct a centre in Pahang. The 23-year concession will see Zelan undertake the development of the
Centre for Foundation Studies at IIUM's Gambang campus on a build-lease-manage-transfer basis. The
company will require three years to construct the centre, which will be developed under a private finance
initiative scheme. Construction will require an investment of MYR391.65mn (USD122.95mn), with the
centre to provide complete teaching, learning and boarding facilities for students.
Under the terms of the concession, Zelan will build the centre, along with its facilities and infrastructure.
The concession will also see the company carry out asset management services for the centre, including the
maintenance services charges of MYR504.68mn (USD158.44mn) and the asset management programme,
which is worth MYR132.79mn (USD41.69mn). Commercial and retail services for the centre will be
provided by Zelan, with MYR835.61mn (USD262.33mn) to be paid to Zelan as total availability charges.
Development will include: the construction of a hospital block comprising one sub-basement level for
radiotherapy treatment, a car park, four levels of oncology diagnostic and treatment services and two blocks
of seven levels for inpatient wards, according to details released in a filing from Bursa Malaysia
Securities.

Table: Major Projects - Residential/Non-Residential Construction And Social Infrastructure
Value
Project Name (USDmn) Capacity/Length Companies Timeframe Status
COMMERCIAL CONSTRUCTION
Integrated eco-city, Sepang
International City, Sepang, 16187000square At planning
Selangor 14285 metres Gucoland Ltd (Operator) - 2020 stage
Pelli Clarke Pelli (Design/
Architect), Daewoo
Menara Carigali Tower (KLCC Engineering &
Petronas Tower 3), Kuala Lumpur Construction Company
City centre, Kuala Lumpur 185 (Construction) - 2013 Completed
Strand Aerospace
Asia Aerospace City Project, 328000square Malaysia (Construction), Contract
Subang metres Atkins (Design/Architect) 2015 - 2017 Awarded
Benoy (Design/Architect),
Naza TTDI (Operator),
KL Metropolis, Jalan Duta, Kuala 43760square Lend Lease Group Contract
Lumpur 4466 metres (Sponsor) 2012 - 2025 Awarded
Naim Holdings
(Construction), Sinohydro
Bintulu Paragon Integrated 130064square Corporation Under
Development Project 310.08 metres (Construction) 2013 - construction
Movenpick Hotels and
Resorts (Consultant/
Project Management),
Luxury spa and beachside resort, Qatari Diar Real Estate
village of Chendering, 180420square (Sponsor,50), Eclipse Under
Terengganu metres Portfolio (Sponsor,50) 2014 - 2016 construction
Arup Engineering firm,
1Malaysia Development
Tun Razak Exchange (TRX), Kuala Berhad, Mubadala
Lumpur International Financial 283000square Development Company Under
District 7789 metres (Sponsor) 2012 - 2027 construction
Pintaras Jaya Bhd
(Construction),
Permodalan Nasional
Berhad (PNB) (Sponsor),
Fender Katsalidis
Warisan Merdeka 118-storey 190000square Architects (Design/ Under
tower, Kuala Lumpur 1576 metres Architect) 2014 - 2020 construction
INDUSTRIAL CONSTRUCTION
Cool Planet Energy Systems Bio- Cool Planet Energy At planning
refinery, Johor 60 System Inc (Equipment) 2014 - stage
MyBiomass industrial bio-refinery MyBiomass Sdn Bhd At planning
plant, Johor 124 60'000 tonnes (Operator) 2014 - 2016 stage
Solar photovoltaic module facility, Hanwha Q Cells At planning
Cyberjaya (Construction) 2015 - 2016 stage
Aluminium Corporation of
China (Chalco)
Sarawak Aluminium Smelter (Construction), Gulf
Project, Samalaju Industrial Park, International Investment At planning
Bintulu 1600 370'000 tonnes Group (Construction) - stage

Major Projects - Residential/Non-Residential Construction And Social Infrastructure - Continued
Value
Refinery and Petrochemicals
Integrated Development (RAPID),
Pengerang Integrated Complex, At planning
Southern Johor 16000 62420000b/d Petronas - 2019 stage
Kulim Hi-Tech Park Solar Panel
Manufacturing Plant, Kedah 538 300MW Panasonic 2012 - 2012 Completed
Project Management &
Development Company,
Cosmos Petroleum and
Mining, National Bank of
Abu Dhabi (NBAD) Contract
Polysilicon factory, Sarawak 1600 25'000 tonnes (Sponsor) - 2016 Awarded
Green Energy Group
Biodiesel (biofuel) Production 8000000'000 (Operator), Incbio Contract
Plant, Kuala Lumpur tonnes Biodiesel (Equipment) - Awarded
Phosphate complex project, Cahya Mata Sarawak Under
Samalaju Industrial Park, Bintulu 310 500'000 tonnes Berhad (Operator) 2014 - construction
Construction of Cement grinding Cahya Mata Sarawak Under
factory, Mambong 58.77 1000'000 tonnes Berhad (Operator) 2014 - construction
Fluor Corporation
(Construction), Petronas
Aroma Ingredients Facility, (Operator), BASF Under
Gebeng Industrial Park, Kuantan 460 (Operator) 2014 - 2016 construction
Train and locomotive factory, CSR ZhuZhou Electric
CSR Rolling Stock Centre, Batu 165000square Locomotive (Consultant/ Under
Gajah 124.6 metres Project Management) - 2014 construction
Pembinaan Sahabatjaya
Aquaint Danga Residences, Azea SDN BHD, Imperial At planning
Properties, Johor 269.2 818units Marina, Danga Bay - 2018 stage
Symphony Life
(Operator), United
Malayan Land (Operator),
Samsung Construction &
Trading (Samsung C&T) Contract
Star Development, Kuala Lumpur 310 (Construction) - 2019 Awarded
EDUCATION
Ahmad Zaki Resources,
Bank Muamalat Malaysia
(Sponsor), Bank
International Islamic University Kerajasma Rakyat
Malaysia Teaching Hospital PPP, Malaysia, CIMB Thai At planning
Kuantan 130 735pupils Bank - 2015 stage
Centre for Foundation Studies, Konsesi Pusat Asasi
International Islamic University, 607028square Gambang, Zelan Contract
Gambang campus, Pahang 123 metres Construction Sdn Bhd 2012 - 2015 Awarded
HEALTHCARE
At planning
New Sri Aman Hospital Project 56.05 2015 - 2016 stage
University Malaya Health 125000square At planning
Metropolis, Kuala Lumpur 370 metres Universiti Malaya (UM) - stage

Major Projects - Residential/Non-Residential Construction And Social Infrastructure - Continued
Value
Allianze University
College of Medical
Sciences (AUCMS) At planning
Kepala Batas Hospital, Penang 132 200beds (Construction) - 2015 stage
Allianze University
College of Medical
Sciences (AUCMS) At planning
Bertam Hospital, Penang 530 800beds (Construction) - 2015 stage
KPJ Pasir Gudang Specialist KPJ Healthcare Bhd
Hospital 120beds (Sponsor) - 2013 Completed
Multi Storey Car Parking Project,
Sarawak General Hospital 2015 - Delayed
UKM Permata Children's ZECON Berhad Under
Specialist Hospital (HPKK) 190 250beds (Construction) 2014 - 2017 construction
Najcom (Sponsor,35),
Women and Children's Hospital, UEM Builders (Sponsor, Under
Kuala Lumpur 272 600beds 65) 2013 - 2016 construction
Gleneagles Medini Hospital, Pantai Holdings Bhd Under
Iskandar 156 300beds (Operator) - construction
HOUSING
Feasibility
Integrated Construction Workers 14164square Zenith Construction Sdn studies/EIA
Complex (ICWC) metres Bhd, Koperasi Staff CIDB 2015 - underway

Industry Risk Reward Index

Malaysia Industry Risk/Reward Index
Malaysia's overall score is supported by strong support for infrastructure development by the private and
public sectors. However, the country is let down by a poor score for its Industry Rewards sub-category,
which drags down its overall rewards score. However, Malaysia scores much better in the risks category.
Rewards
Industry Rewards
Malaysia's construction industry is performing strongly in recent quarters largely due to the government's
success with increasing foreign and private sector participation in its10-year economic investment plan,
known also as the Economic Transformation Programme (ETP). The announcement of the USD444bn ETP
in September 2010 is tailored to support private participation in infrastructure. This political endorsement of
private participation has attracted interest, with private investment in Malaysia reaching record highs in
2011 and 2012. These elevated levels in private investment have translated into robust rewards in the
construction sector, although we highlight government expenditure on infrastructure development continues
to make no significant contribution to the country's GDP.
Country Rewards
The country does not possess a sound labour market infrastructure. As domestic labour is in short supply,
Malaysia has had to rely heavily on migrant labour. Nonetheless, the country has an impressive physical
infrastructure. Financial services in the country are reasonably good and power supply is abundant. As such,
Malaysia fares well for this indicator.
Risks
Industry Risks
Local contractors in the country are reasonably competent and can execute most projects. Many of them
have secured contracts abroad, particularly in India and the Middle East. Although the construction industry
is reasonably competitive, the government does display a bias towards local players, by supporting foreign
participation only in projects that cannot be handled by local players. The bidding procedure is relatively

opaque, marked by frequent cases of selective tendering and bidding. A key drag on the country's score for
this variable is the fact it suffers from regular bureaucratic delays and lack of information.
Country Risks
On balance, Malaysia is one of the more investor-friendly economies in South East Asia. Corruption levels
are low by regional standards and the law is reasonably well-defined, with policies known to be relatively
stable and predictable. Although Malaysia's economy is closely associated with those of its export markets,
it does not face abnormally high levels of external risk. The country's fiscal deficit is a growing concern and
after its credit outlook was downgraded by a ratings agency in July 2013, the government took decisive
steps to bring the country's fiscal accounts back in order during its 2014 budget announcement. There is a
strong track record of policy continuity, with the victory by the ruling incumbent party in the 2013 general
elections likely to strengthen this record.

Asia Pacific - Infrastructure Risk/Reward Index
BMI View: The average Risk/Reward score for the Asian infrastructure sector has declined slightly, due to
a weaker outlook in Japan as well as the Philippines. Overall, Asia's infrastructure sector retains
considerable potential for returns, reinforcing the region's status as the world's largest infrastructure and
construction market by industry value.
The average Risk/Reward Index (RRI) score for Asia has declined marginally from 56.2 to 56.0 in Q215, on
the back of a weaker outlook in Japan as well as the Philippines. However, there is still a substantial
disparity in the demand for infrastructure throughout Asia. This translates into a significant divergence in
rewards and risks among the Asia Pacific infrastructure markets, and a sizeable 40-point differential exists
between the top- and bottom-ranked countries in our regional infrastructure index table. This wide
dispersion presents investors with a range of rewards for different risk appetites.
The key findings from this quarter's update can be summarised as follows:
The more developed countries in the region continue to present the most attractive business environments
to realise their relatively sizeable rewards.
Australia retained its top place ranking in our Asia Pacific regional index table due to the presence of a
mature public-private partnership (PPP) market, a conducive monetary environment through lower
interest rates supporting private companies for infrastructure development and greater project execution
by the public sector.
Japan has moved down by one position to sixth place, in view of unsustainable stimulus measures that
will see growth in the construction sector slow down over the coming quarters.
The most populous countries in the region (China, India, and Indonesia) continue to present sufficient
scope in rewards to overcome risks, underpinned by efforts to push through reforms, but these risks
remain considerable, particularly political and policy risks.
Emerging South East Asian (SEA) countries continue to offer sizeable rewards for their level of risk as
they push forward with their multi-billion dollar infrastructure-building programmes.

A Mixed Bag
Asia - Infrastructure BE Risk/Reward Ratings, Scores out of 100
Source: BMI
Developed Markets: Favoured
The top spots in our Asia Pacific Risk/Reward infrastructure regional index table continue to be dominated
by countries that have attained developed market status in terms of their infrastructure market maturity, with
Australia, New Zealand and South Korea coming in first, second, and third place respectively.
Despite their maturity, these markets still offer significant greenfield opportunities. The average score for
rewards in these developed markets is 59.4 out of 100, higher than the other 10 Asian markets (higher
scores indicate higher rewards) with an average score of 49.9. Meanwhile, they offer the best business
environments for realising returns on investment as they are highly developed in terms of their legislative
and regulatory environments, and present very little in the way of risks to sponsors and financiers. The
average score for risks in these developed markets is 79.1 out of 100, significantly higher than the other 10
Asian markets (higher scores indicate lower risks) which have an average of 48.9.

Greatest Potential To Realise Rewards

Developed Countries In Asia - Infrastructure Rewards (LHS) And Risks (RHS) BER, Scores out of 100
*Higher Score = Lower Risks. Source: BMI
Looking at the individual countries, Australia retains its top place ranking in our Asia Pacific regional index
table this quarter, with an overall Risk/Reward score of 73.1. The combination of a conducive monetary
environment through low interest rates which will benefit private developers with lower cost of capital and
greater project execution by the public sector is creating multiple opportunities in Australia's infrastructure
sector, providing a counterbalance to the decline in mining-related infrastructure opportunities. Moreover,
the country's attractive operating market for public-private partnerships (PPPs) - in addition to the
AUD100bn (USD80.7bn) privatisation plan to private various public assets which will create opportunities
for private investors - is also creating project opportunities. Along with the UK and Canada, Australia has
one of the world's most mature PPP markets and over the last two decades has pioneered the delivery of
complex PPP projects. This credibility, combined with lower project execution risks, should ensure that
such projects continue to reach financial closure in Australia.
Notably, Japan has dropped to sixth place from fifth position since the previous quarter, with the country's
Risk/Reward score for Q215 declining slightly to 62.9 from 63.9. The downgrade is largely on the back of a
deteriorating outlook for the construction sector - which we forecast to grow by an average of 0.3% between
2015 and 2019 annually in real terms - as monetary and fiscal stimulus measures implemented by the
government in 2013 lose steam. Despite the expansion of the government's quantitative easing program in
October, banks have remained reluctant to boost lending, which further highlights the fragile state of Japan's

economy. These measures will also continue to weigh on the country's fiscal woes over the long term, and
hamper any sustainable impact on the sector.
We continue to believe that structural reforms are necessary for Japan to ensure long term growth in the
construction sector. Such reforms include the launch of strategic special zones to attract foreign investment,
the full liberalisation of the electricity market, and the increased use of public-private partnerships (PPP)
and private finance initiatives (PFI) to implement infrastructure projects.
Giants Of Asia: Rewards Sizeable, Risks Sizeable
These developed markets however, do not necessarily offer the highest rewards to investors. Asia's largest
emerging economies - China, India and Indonesia - continue to rank highly in terms of their Reward score,
securing second, fourth and seventh place respectively for this category. The combination of high industry
values, positive long-term macro fundamentals, large fiscal expenditure on infrastructure and expectations
of relatively high growth in construction and infrastructure industry value underpin the high scores in this
category. However, they also present numerous risks, as indicated by their below-average Risks scores.
Above Average Rewards, Below Average Risks

China, India And Indonesia - Infrastructure Rewards (LHS) And Risks*(RHS) BER, Scores out of 100
China, for example, is expected to face greater threats to its rewards in the near future. Although the
Chinese government could continue with the use of monetary and fiscal stimulus measures to prevent a

deep economic slowdown over the near-term by accelerating infrastructure projects, such measures will
come at the expense of future growth in the country's infrastructure sector. Further use of these measures
would aggravate the structural imbalances within the Chinese economy such as a shaky financial system,
overvalued property market, expensive infrastructure build-up, and huge industrial overcapacity. In our
opinion, aggravating these imbalances increases the potential for a deep slowdown in China's economy over
the long-term, which could cap infrastructure demand.
India also faces threats to its rewards. Even though the historic win by the pro-business Bharatiya Janata
Party during the 2014 Lok Sabha elections increases the likelihood for policy formation and execution as
well as greater coordination between ministries, other factors dampening construction and infrastructure
activity are unlikely to be resolved anytime soon. These factors include the high cost of domestic capital,
high cost of overseas inputs due to a relatively weak Indian rupee, the lack of fiscal capacity to finance
fixed asset investment and the numerous business environment issues that continue to delay infrastructure
development (e.g. environmental clearances, land acquisition, convoluted bureaucracy).
For Indonesia, political risk in the country is still elevated. Even though the inauguration of Joko Widodo
(Jokowi) as Indonesia's president in October 2014 brings about newfound political stability, the parties
supporting Jokowi do not have a majority in the Indonesian parliament. This means that parties not aligned
with Jokowi have sufficient clout to stonewall Jokowi's legislative agenda. Such a scenario could allow
policy inertia to continue to persist in Indonesia, resulting in a lack of resolution over the numerous business
environment issues that continue to delay infrastructure development in the country.
South East Asia: Environment Deteriorating Slightly
Emerging South East Asian (SEA) countries continue to offer sizeable rewards for their level of risk as they
push forward with their multi-billion dollar infrastructure-building programmes. However, there has been a
slight decline in the average Reward scores for these emerging SEA (which excludes Singapore and
Indonesia), Falling from 45.8 to 45.6.

Business Environment Deteriorating

Emerging South East Asia (ex Indonesia) - Infrastructure Rewards (LHS) And Risks* (RHS) BER,
Scores out of 100
The slight dip in scores is attributed to a lower Reward score for the Philippines, which declined to 48.5
from 50.2. While the country's Public-Private Partnership (PPP) scheme appears to be gaining traction,
given the progress of the six airport projects that moved to the bidding phase in December 2013, we note
that the lack of business environment maturity continues to create significant scope for projects under the
PPP programme to experience delays. Possibilities of project delays will continue to hamper the growth
potential of the Philippines' construction sector.

Table: Asia Pacific Infrastructure Risk Reward Index
Rewards Risks
Industry Country Industry Country Infrastructure Regional
Rewards Rewards Rewards Risks Risk Risks RR Index Ranking
Australia 60.0 86.1 69.1 90.0 77.0 82.2 73.1 1
New Zealand 57.5 85.1 67.2 90.0 80.0 84.0 72.2 2
South Korea 47.5 88.9 62.0 70.0 78.2 74.9 65.9 3
China 72.5 60.9 68.4 40.0 68.5 57.1 65.0 4
Singapore 37.5 86.2 54.6 90.0 88.6 89.2 64.9 5
Japan 40.0 90.1 57.5 85.0 71.6 77.0 63.4 6
Hong Kong 42.5 87.0 58.1 75.0 73.7 74.2 62.9 7
India 75.0 45.4 64.6 55.0 52.5 53.5 61.3 8
Malaysia 52.5 64.3 56.6 55.0 64.3 60.6 57.8 9
Indonesia 65.0 48.2 59.1 35.0 57.4 48.4 55.9 10
Taiwan 32.5 74.0 47.0 75.0 69.9 71.9 54.5 11
Vietnam 50.0 60.4 53.6 40.0 61.7 53.0 53.4 12
Philippines 32.5 72.3 46.4 50.0 60.4 56.3 49.4 13
Thailand 45.0 55.1 48.5 35.0 60.1 50.1 49.0 14
Pakistan 27.5 43.6 33.1 35.0 47.4 42.5 35.9 15
Myanmar 37.5 25.9 33.4 25.0 42.3 35.4 34.0 16
Cambodia 40.0 24.7 34.6 25.0 37.4 32.4 34.0 17
Regional
Average 47.9 64.6 53.8 57.1 64.2 61.3 56.0
Scores out of 100, with 100 highest. Source: BMI

Market Overview
Competitive Landscape
The Malaysian electricity sector is a regulated industry with vertically integrated utilities. There are three
main electricity utilities: Tenaga Nasional Berhad (TNB) supplies electricity in Peninsular Malaysia;
Sabah Electricity Supply (SESB) in Sabah; and Sarawak Electricity Supply Corporation (SESCO) in
Sarawak. The utilities undertake generation, transmission, distribution and supply activities in the respective
areas.
Eventually, Malaysia expects to achieve a fully competitive power market, with generation, transmission
and distribution decoupled - although reform is still at an early stage. Many observers have voiced caution
in light of the experiences of other deregulated utilities.
TNB holds a monopoly on electricity generation, transmission and distribution in Peninsular Malaysia. The
same functions are performed in Sabah by SESB and in Sarawak by SESCO. However, the government has
created competition in generation - to a certain extent - by licensing the private sector to build, own and
operate (BOO) power-generating plants as independent power producers (IPPs) and supplying electricity to
the utilities through negotiated power purchase agreements (PPA). The other form of licensing is a private
licence, which permits the licensee to generate electricity for its own use. Other ways of supplying power
are through co-generation, thermal storage (district cooling) and Centralised Utility Facility (CUF).
TNB accounts for almost 60% of overall generating capacity. Malakoff has an estimated market share of
23% in terms of installed capacity, while Powertek has around 8% and YTL Power has just more than 6%.
There are two power producers on Borneo with regional transmission grids. SESCO has an estimated
750MW of installed capacity, while SESB has 785MW. The Energy Commission was established in 2001,
under the Energy Commission Act, as a regulatory body charged with prescribing, monitoring and
enforcing the energy supply laws and regulations in Malaysia. Existing legislation comprises the Energy
Commission Act 2001, Electricity Supply Act 1990 and Electricity Supply Regulations 1994.
There is a growing presence of China-based companies in Malaysia's transport infrastructure sector. In

early-2013, Road Builder Holdings, the wholly-owned subsidiary of IJM, signed a memorandum of
understanding to divest 40% of its 100% stake in Kuantan Port Consortium to China's Guangxi Beibu Gulf
International Port Group. The MYR334mn sale was finalised in September 2013 and the proceeds from
the sale will be used to finance the expansion of the Kuantan Port. The expansion project is expected to be
carried out over two phases, with the first phase costing MYR2bn and to be completed in 2015 or 2016. In

October 2013, a consortium led by Chinese state-owned construction companies has signed the preliminary
agreement with the state government of Penang to develop the state's MYR6.3bn integrated road project,
which includes Malaysia's first undersea tunnel. The consortium, known as Consortium Zenith BUCG,
consists of Malaysia companies Zenith Construction, Sri Tinggi, and Juteras as well as Chinese state-
owned construction companies Beijing Urban Construction Group (BUCG) and China Railway
Construction (CRCC). The project will be carried out over four phases under a 30-year concession, with
the consortium in charge of conducting the feasibility and environmental studies as well as designing,
building and operating the different roads. The project is scheduled to start construction works in 2015 and
be completed by 2025.
Special Focus: Economic Transformation Programme
As part of the New Economic Model (NEM), Prime Minister Najib Razak's administration introduced the
Economic Transformation Programme (ETP) in late September 2010 as a key driver to enable Malaysia to
attain developed country status by 2020. The ETP aims to attract investment worth USD444bn between
2011 and 2020 to propel the country's gross national income (GNI) to MYR1.7trn (USD523bn).
The ETP is aimed at attracting foreign direct investment to develop targeted sectors (such as oil and gas,
infrastructure, tourism and agribusiness) that are expected to generate higher-income jobs and move the
country's production up the value chain. Accordingly to the plan, 60% of the investment will be funded by
the private sector, 32% from government-linked companies, and the remaining 8% directly from the
government. Given that private sector participation will play a dominant role in financing large-scale
investment projects under the public-private partnership (PPP) model, confidence in the government's
ability to maintain policy continuity over the coming years will be crucial.
These sectors have been categorised under 12 National Key Economic Areas (NKEAs), with a heavy
emphasis on the development of the oil and gas sector as well as the development of Greater Kuala Lumpur/
Klang Valley region. Tallying the government's estimates for GNI for each of the 12 individual NKEAs by
2020, we note that the oil and gas sector is estimated to contribute MYR272.8bn (or 33.8% share) to the
ETP's target GNI of MYR807.8bn by 2020, while the development of Kuala Lumpur is estimated to
contribute another MYR196.4bn (24.3% share).

Banking On Greater Kuala Lumpur And Oil & Gas Sector

Malaysia - Economic Targets For NKEAs By 2020
Source: BMI, Performance Management & Delivery Unit (PEMANDU)
For the construction sector, some of the major targets under the ETP are to provide housing for 1mn new
residents in the Greater Kuala Lumpur (KL)/Klang Valley area by 2020, develop a high-speed railway line
between KL and Singapore, develop a MYR48bn mass rapid transit (MRT) system in Greater KL, and
create a MYR60bn refinery and petrochemicals integrated zone in Johor.
Table: Economic Transformation Programme - Key Construction Entry Point Projects
Sectors Entry Point Projects

Greater Kuala Lumpur/Klang High-Speed Rail Connection to Singapore
Valley
Building an Integrated Urban Mass Rapid Transit System
Revitalising the Klang River into a Heritage and Commercial Centre
Creating Iconic Places and Attractions
Creating a Comprehensive Pedestrian Network
Developing an Efficient Solid Waste Management System
Oil, Gas and Energy Building a Regional Storage and Trading Hub
Building up Renewable Energy and Solar Power Capacity
Deploying Nuclear Energy for Power Generation
Tapping Malaysia's Hydroelectricity Potential
Increase Petrochemical Outputs

Economic Transformation Programme - Key Construction Entry Point Projects - Continued
Sectors Entry Point Projects

Wholesale and Retail Increasing the Number of Large Format Stores
Developing Makan Bazaars
Developing 1Malaysia Malls
Setting Up Wellness Resorts
Transforming Kuala Lumpur International Airport into a Retail Hub
Developing Big Box Boulevards
Palm Oil and Rubber Developing Biogas Facilities at Palm Oil Mills
Tourism Designating Bukit Bintang-Kuala Lumpur City Centre Area as a Vibrant Shopping
Precinct
Establishing Premium Outlets in Malaysia
Developing an Eco-Nature Integrated Resort
Dedicated Entertainment Zones (DEZ)
Improving Rates, Mix and Quality of Hotels
Education Scaling up International Schools
Building a Health Science Education Discipline Cluster
Building a Hospitality and Tourism Cluster
Launching EduCity@Iskandar
Healthcare Developing a Health Metropolis: A World-Class Campus for Healthcare and
Bioscience
Reinvigorating Healthcare Travel
Retirement Villages
Source: BMI, Pemandu, Economic Transformation Programme Annual Report 2013
As of May 2014, the ETP appears to be achieving significant success. According to the 2013 annual report
published by the Performance Management & Delivery Unit (PEMANDU) on the ETP, 196 projects have
been launched under the National Key Economic Areas or NKEAs, accounting for MYR219.3bn in total
committed investments since 2010. These, in turn, are expected to generate MYR143.5bn in GNI and create
437,816 jobs. We believe that with the roll-out of Malaysia's 12th masterplan - which will be the final five-
year plan before the 2020 deadline for the ETP - in June 2015 will provide fresh impetus for various
projects under the ETP and also expect continued funding in the sector.

Special Focus: Islamic Financing
The government is looking to attract the private sector in financing the majority (60%) of the ETP. One
such method of acquiring the necessary financing is the issuance of sukuk. We believe this move to raise
funds through sukuk is positive, as there is likely to be significant demand for Islamic financial products
from investors around the world. Many investors from low growth economies are in search of markets with
more dynamic growth potential and many Islamic countries, particularly in the Middle East and South East
Asia, fall into this category. Furthermore, a sukuk issuance could attract investors from the Middle East.
These countries, flushed with cash from rising oil prices, are also seeking investments in countries that not
only provide strong returns, but also have a culture of adherence to Muslim principles.
Malaysia The Global Sukuk Leader

New Sukuk Issuance, January-August 2013, By Country, %
Source: BMI, Malaysia Securities Commission, The Star
Malaysia's status as the global hub for Islamic finance places it in a firm position to raise the required
capital. The country is already the world's largest sukuk issuance market, where data from Malaysia'
Securities Commission showed that Malaysia accounted for around 70% of all new sukuk issuance globally

between January and August 2013. The country's banking regulations are more transparent than those in the
Middle East, and the country practices the Sharia code of law along with its standard judiciary, which is
heavily influenced by the English common law. In early 2011, the Malaysian government unveiled the
Sharia governance framework, which is designed to reduce legal uncertainty in Sharia-compliant financing
activities. The 2009 Central Banking Act also says the Sharia Advisory Council - the highest Islamic
finance authority in Malaysia - will have the final say in the event of any disputes, thereby helping to
provide a sound legal framework in Malaysia. The high court has appointed a judge who specialises in
Islamic finance-related litigation, providing Malaysia with an attractive legal environment for Islamic
banks. In early 2013, Malaysia also enacted the Financial Services Act 2013 (FSA) and the Islamic
Financial Services Act 2013 (IFSA). Both acts are expected to come into full force in the second half of
2013 and are an indication that the country is keen to reinforce its position as a leader in the Islamic banking
industry by establishing the world's first comprehensive legal framework on Islamic banking. These factors
make Western investors more receptive to their sukuk issuances.
In addition, the Malaysian authorities has allow three of its domestic banks - CIMB Group Holdings, RHB
Capital, and Malaysia Building Society- to discuss the possibility of a merger in July 2014. The idea is
that a merger would create a stand-alone Islamic banking unit, separate from the conventional banking
operation of the enlarged bank, which would have significant regional presence, allowing it to gain a greater
foothold in the fast growing global industry. The creation of a so-called mega Islamic bank (defined by
Bank Negara Malaysia as a banking entity with a minimum of USD1bn in paid-up capital), would not only
allow the bank itself to gain access to lucrative deals, such as designing and distributing sukuk, but it would
also pave the way for other Malaysian entities to expand. Given the regional scope that a merger between
CIMB, RHB, and Malaysia Building Society would have, there would be significant potential to
internationalise Malaysia's model of Islamic finance, allowing Malaysia to become the dominant player in
an industry that is set to rise rapidly over the coming years. Given the varying interpretations of Islamic law,
industry practices tend to differ, and Malaysia has an opportunity to internationalise its own brand of
Islamic finance, which is considered to follow a more straightforward method.
The new entity would have the financial clout to compete against the Islamic finance arms of large Western
banks, which have had some success in winning large sukuk issuances in recent years. Meanwhile, there is
scope for penetration into markets in the Middle East, which, despite boasting the largest Islamic banks by
assets, lack the financial expertise in areas such as sukuk issuance.
Malaysia has been very successful in utilising sukuk to attract investors in financing its infrastructure
developments. In October 2011, state-owned Malaysian utility Tenaga Nasional (TNB) successfully closed

a MYR4.85bn (USD1.52bn) sukuk to finance the Manjung coal-fired power plant in Perak. This issuance
was the second largest sukuk in Malaysia in terms of value in 2011 and was more than four times
oversubscribed, highlighting the popularity of Malaysian sukuk issuances. This was subsequently topped in
January 2012, when Malaysian toll road operator PLUS Expressway successfully closed a USD9.7bn
sukuk issuance offering - the world's largest ever sukuk offering - to finance the purchase and capitals
expenditures of five toll road concessions. In addition, the retail sukuk offering for the first KL MRT line
was oversubscribed by 0.61 times.
We expect sukuk to continue to play a big part in financing the ETP and various infrastructure projects.
There continues to be significant demand for the country's Islamic bonds, with Malaysia's corporate sukuk
issuance expected to grow by 15-20% to MYR90bn in 2012, according to the president of the Association
of Islamic Banking Institutions Malaysia, Datuk Mohd Redza Shah Abdul Wahid (quoted from the Star).
In February 2014, Bright Focus, which owns 96.8% of the 26km Maju Expressway, announced that it
proposed to issue Islamic securities of up to MYR1.35bn for the construction of the Seri Kembangan
interchange.
In January 2014, IJM announced that it planned to establish a 20-year Sukuk Murabahah Programme of
up to MYR3.0bn. The programme had received approved by Malaysia's Securities Commission and to
start in 2014.
In November 2013, Syarikat Prasarana Negara successfully completed a MYR1bn sukuk issuance in two
tranches of seven years and 15 years. The issuance was more than three times oversubscribed, with the
funds raised from the issuance to be used to develop the extension of a light railway system.
In September 2013, airport operator Malaysia Airports successfully completed MYR500mn sukuk
issuance in two tranches of three years and five years.
In May 2013, TNB, through its unit TNB Northern Energy, carried out a sukuk issuance valued at
MYR1.625bn to finance the construction of the Prai combined-cycle gas turbine power plant.
In March 2013, Petronas Gas announced plans to launch a sukuk issuance to raise up to MYR5bn. The
funds would be used for the development of two degasification plants in Johor and Sabah respectively.
In January 2013, Syarikat Prasarana Negara announced plans to issue up to MYR6bn in sukuk to finance
the light rail transit (LRT) extension projects and various infrastructure projects.

Company Profile
IJM
SWOT Analysis
Strengths
Well established presence in Malaysia.

Sector diversification mitigates sector risk.
Geographic diversification.
Weaknesses
Holdings across a wide range of sectors erode niche advantage and strategic
coherence.
Opportunities
IJM Corp is well positioned to benefit from projects as part of the government's
USD444bn Economic Transformation Programme.

With local market expertise, the company is well placed to benefit from a glut of road
and urban railway contracts issued in India.
Threats
Government fiscal constraints, brought on by generous subsidies, could make it
difficult to maintain the increase in public sector infrastructure investment seen in
previous years.
Company Overview IJM's origins can be traced back to at least 1982-1984, when IJM Engineering emerged
as a result of a friendly merger of several engineering, construction and property
entities. IJM Engineering became IJM Corporation in 1989.
IJM includes various subsidiaries spread across sectors and countries (mainly Malaysia
and India). The primary operating sectors are: infrastructure, construction, property
development, quarrying and plantations. Among the subsidiaries are: IJM (India)
Infrastructure, IJM Land Bhd, IJM Construction (Vietnam), Sova Holdings, Hexagon
Construction, Industrial Concrete Products, IJM Australia, IJM Plantations and Road
Builder Holdings.
Strategy IJM maintains interests across a vast range of infrastructure and construction-related
sectors and across different parts of Asia. This enables it to benefit from a significant
degree of risk diversification, in terms of geography and public and private contracts.

That said, the stiff competition and poor economic performance in its main overseas
market, India, continues to be a drag to IJM's financial performance in FY12/13. The
depreciation in the Indian rupee had contributed to IJM's forex losses remaining at an
elevated level (MYR28.2mn in FY11/12, MYR24.4mn in FY12/13). These losses could
lessen going forward due to the sale of a 35.6% stake in Trichy Tollway to Macquarie
SBI Infrastructure Investments for MYR60.1mn. Trichy Tollway is the concessionaire for
a two-lane highway widening BOT project on the NH-45 in Tamil Nadu.
IJM however remains keen on capturing opportunities in India, having acquired a

25.08% stake in oil and gas company Scomi Group in October 2012. Scomi has been
increasingly focused on the development of monorails, with a sizeable number of its
monorail projects in India. IJM could therefore be seeking to jointly develop monorails in
India with Scomi over the coming years.
Despite this continued interest in India, we expect IJM to continue to secure most of its
growth opportunities in Malaysia over the coming years. The victory by the ruling
Barisan Nasional party in the May 2013 general elections makes it very likely that the
projects under the Economic Transformation Programme, put on hold due to the
elections, will be launched as planned, providing IJM with numerous projects
opportunities.
In terms of infrastructure opportunities from the ETP, IJM had acquired a 20% stake in
the West Coast Expressway (WCE), the entity that won the BOT concession for the
MYR7.1bn West Coast Expressway, the second largest expressway in Peninsular
Malaysia if completed. Combined with a 22.7% stake in Kumpulan Europlus (KEuro),
WCE's majority shareholder at 80% stake, IJM already has an effective 38.2% stake in
the WCE project and is keen to purchase another 27.6% stake of KEuro, making it the
majority shareholder of WCE.
This places it in pole position to carry out the bulk of the infrastructure works for the
WCE, which will almost certainly double its currently project backlog of MYR4.2bn. The
WCE project is expected to be a strong source of revenues for IJM given the generous
terms provided by the government (i.e. 60 year concession, MYR2.2bn government
support loan at 4% interest and MYR1bn provided by government for land acquisition).
IJM is aiming to reach financial closure for the project by the end of 2013, with
construction works to start in 2014.
The ETP is also creating significant opportunities for IJM's property development
business as one of the goals under the ETP is to provide housing for 1mn new residents
in the Greater KL/Klang Valley area by 2020. We do, however, highlight that there are
strong factors that could dampen housing demand such as the current oversupply
situation in Malaysia's housing market and the introduction of new government
measures to curb speculation in the property market. At present, this focus on property
development in Malaysia appears to be paying benefits for IJM. According to the
company, its property development division was the biggest contributor to overall
earnings before taxation for FY2012/13. IJM's property division is expected to launch

another RM3.0bn worth of properties such as The Light Waterfront, Sebana Cove,
Bandar Rimbayu and Seremban 2.
A strategy being pursued by IJM is the sale or partial sale of assets to finance the
development of its assets. This strategy was pursued with the partial sale of the
concessionaire for the Kuantan port and the proposed partial sale of Konsortium
Pelabuhan Kemaman. These funds are expected to be used for the development of the
WCE and the expansion of the Kuantan port.
Recent In January 2015, IJM announced it secured a MYR538.5mn contract to complete the
Developments superstructure works for the proposed mixed development known as Puteri Cove
Residences in Johor. The construction period is 33 months.
In December 2014, IJM Corporation Bhd secured MYR435.33mn in contracts from

Sime Darby Sunrise Development Sdn to build a mixed development project at Bukit
Jelutong, Selangor. The first contract is valued at MYR263.0mn and involves building
commercial complexes, service apartments and car parks and will start on December
15, and will last for 26 months. The second contract is valued at MYR172.4mn and
involves construction of commercial complexes, service apartments and car parks. The
second contract will start on June 15 2015 and will alst for 26 months.
In November 2014, IJM announced it secured a MYR355.7m deal from Utama Lodge
Sdn Bhd for the construction of a proposed commercial development known as 'The
Potpourri' in Ara Damansara for. The project will be built in 28 months.
In August 2014, IJM announced a proposed privatisation of IJM Land, a subsidiary of

which IJM already has a 64% equity interest in. IJM Land will offer its shareholders
MYR3.55 per share in a privatisation exercise that will cost IJM Corp
MYR1.98bn. According to IJM Land managing director and chief executive officer (CEO)
Datuk Soam Heng Choon, the takeover was largely due to the low liquidity of IJM
Land's shares. The privatisation will also allow IJM Land access to IJM's larger balance
sheet and scale up to handle larger projects. The deal is expected to be completed by
April 2015.
In May 2014, IJM's 25.1%-owned associate, Kumpulan Europlus (KEB) announced that
a consortium consisting of IJM and KEB was appointed by the government as the main
EPC contractor for the MYR5.04bn West Coast Expressway (WCE) project. The project
has 11 packages and IJM has been selected to complete Sections 3,4,5,8 and 9 of the
WCE project for MYR2.83bn. The remaining packages of Sections 1, 2, 6, 7, 10 and 11,
worth a combined MYR2.22bn is scheduled to be awarded on an open tender basis.
In March 2014, IJM announced that Road Builder (M) Holdings, the wholly-owned
subsidiary of IJM, had completed the move to divest 38% of its 100% stake in Kuantan
Port Consortium to China's Guangxi Beibu Gulf International Port Group. The sale,
valued at MYR310mn, is part of a collaboration between IJM and Guangzi to develop
the Kuantan port and a Malaysia-China industrial hub near the city.In March 2014, the
federal government of Malaysia approved the construction of Line 2 of the Greater

Kuala Lumpur Mass Rapid Transit (MRT) project. In 2012, IJM was previously awarded
Package V5 - the construction and completion of Viaduct Guideway and other
associated works from Maluri Portal to Plaza Phoenix Station - for Line 1 of the MRT
project. Contracts for Line 2 are expected to be awarded in 2015 - the project is valued
at MYR25bn.
In February 2014, the metro operator in New Delhi, Delhi Metro Rail Corporation
(DMRC), announced that a joint-venture (JV) between IJM and IJM's Indian subsidiary,
IJM (India) Infrastructure (IJMII), was disqualified from participating in DMRC's Phase III
tenders. This was due to defects found in the Delhi Metro Airport Express line (DAME).
The IJM-IJMII JV was previously awarded the contract to build the viaduct and Dhaula
Kuan section for DAME.
In January 2014, IJM announced that it planned to establish a 20-year Sukuk

Murabahah Programme of up to MYR3.0bn. The programme had received approved by
Malaysia's Securities Commission and to start in 2014.
In December 2013, the Star reported that West Coast Expressway (WCE), the
subsidiary of Malaysian investment holding company Kumpulan Europlus, received
written confirmation from the government that WCE had complied with all the
conditions precedent in respect of the concession agreement, with December 20 2013
as the effective date of the agreement. IJM owns a 20% stake in WCE and a 23% stake
in Kumpulan Europlus, which owns the remaining 80% in WCE.
In November 2013, IJM announced that it was only acquiring a 89.8% stake in Indian
highway concession firm Vijayawada Tollway Pte Ltd (VTPL) and no longer a 99.97%
stake. This is because the National Highway Authority of India only approved the stake
sale if India Infrastructure Fund (IIF) held at least 10% of the VTPL. IIF now holds a
10.17% stake in IIF. VTPL is a concession to transform an existing four-lane road in the
state of Andhra Pradesh to a six-lane road totalling 82.5km on a build-operate-transfer
basis. In October 2013, IJM announced that it was awarded a MYR238mn contract
from JKG Tower to construct two commercial blocks at Jalan Raja Laut, Kuala Lumpur.
The project is expected to be completed Q116.
In June 2013, IJM Land announced it will be investing a total of MYR275mn to improve
accessibility and road infrastructure to three of its core developments, namely, MYR3bn
Pantai Sentral Park, Rimbayu Shah Alam and The Light in Penang.
In May 2013, IJM announced that its subsidiaries comprising Road Building Holdings,
Arena Wiramas and RB Port, have entered into an agreement to sell a 39% stake in
Konsortium Pelabuhan Kemaman (KPK) to Eastern Pacific Industrial Corporation (EPIC)
for a total cash consideration of MYR240mn. The Proposed Disposal is conditional
upon EPIC obtaining the approval from the Economic Planning Unit and is expected to
be completed within 3 months with a further extension period of one month.

In March 2013, IJM sold its 35.6% stake in Trichy Tollway to Macquarie SBI
Infrastructure Investments for MYR60.1mn. Trichy Tollway is the concessionaire for a
two-lane highway widening BOT project on the NH-45 in Tamil Nadu.
Financial Data IJM had a record year in FY2012/13. Revenues and net profits reached an all-time high
of MYR4.7bn and MYR421mn in FY2012/13. However, growth was relatively mild when
compared to FY2011/12. Revenues and net profits grew by 3.2% and 2.9% in
FY2012/13, compared to 21% and 34% in the previous year. This lack of growth in
profits was primarily due to a lack of growth in operating profits. Operating profits fell by
5.9% to reach MYR839mn. This decline in operating profit is due to a decline in
revenues from its plantation division and was contributed to by a fall margins, with
operating margins falling from 19.7% in FY11/12 to 18.0% in FY12/13. The record high
profits were primarily due to a record high non-operating profit. Non-operating profits
grew by 16.5% to reach MYR187mn in FY2012/13.
The company net gearing is very low at 0.30x at the end of FY11/12. The order book at
the end of May 2013 stood in a reasonably healthy condition as the company has the
potential to secure construction contracts from the West Coast Expressway project and
the Kuantan Port expansion project.
In terms of geographical diversification, the company mainly derived its revenues from
two markets - Malaysia and, decreasingly, India. In terms of businesses, the company
derived its revenues from five segments: construction at 34% of total revenues,
property development at 28%, industry at 18%, plantation at 10%, and infrastructure at
10%.
FY 2012/13 (April - March)
Net Profit (FY2012/13): MYR421mn, 2.9% y-o-y

Revenue (FY2012/13): MYR4,663mn, 3.2% y-o-y

Gamuda
SWOT Analysis
Strengths
Sector diversification mitigates sector risk.

Geographic diversification (Middle East is key for the company).

Project Delivery Partner for the 51km Mass Rapid Transit project (Sungai Buloh -
Kajang Line), Malaysia's largest public infrastructure project.
Significant tunnelling expertise - it completed the underground tunnel for the

Kaohsiung Mass Rapid Transit System in Taiwan.
Weaknesses
Large number of business divisions and competing interests makes strategic
coherence difficult.
Opportunities
Nam Theun 1 Project in Laos is a major contract, helping to diversify revenues
geographically, as is the Yen So Park project in Vietnam.

The government unveiled a USD444bn Economic Transformation Programme in
September 2010, focusing on a number of key sectors including infrastructure.
Threats
Government fiscal constraints, brought on by generous subsidies, could make it hard
to maintain the increase in public sector infrastructure investment in the few past
years.
Company Overview Gamuda is Malaysia's largest infrastructure group. Its core activities focus on
engineering and construction, infrastructure concessions and property development.
Gamuda's proven track record allowed it to be prequalified for several huge

infrastructure projects in the Middle East and South East Asia, notably the mass rail
transit (MRT) contracts in Bangkok valued at over MYR30bn (USD8.1bn). Gamuda is
one of the few players in South East Asia with tunnelling expertise. It owns water
concession SPLASH and water O&M company, Gamuda Water. The company also
owns toll-road concessions in Malaysia and India.

Strategy The company's strong technical expertise in tunnelling and urban railway projects is set
to pay dividends over coming years. Not only has the company won the key
underground package for the 51km Sungai Buloh-Kajang Mass Rapid Transit (MRT)
Blue in Greater Kuala Lumpur, the largest infrastructure project on offer in Malaysia, but
it has formed a joint venture with MMC to serve as the Project Delivery Partner (PDP) for
the 51km Sungai Buloh-Kajang Blue line. This competitive advantage in tunnelling is
further boosted by the likelihood that most of Gamuda's tunnelling equipment is located
in Malaysia, allowing it to achieve greater economies of scale than its international
competitors.
With the Malaysian government planning to release several more railway projects by
2020, there is significant scope for Gamuda to boost its order book over the coming
years. The Greater Kuala Lumpur Mass Rapid Transit (MRT) project is expected to
consist of a total of three lines, with the Red and Circle lines currently undergoing their
feasibility studies. These lines are expected to have significant underground sections.
Gamuda's experience with the Blue Line could also place it in pole position to be the
PDP for both the Red and Circle lines.
Recent In November 2014, Gamuda announced that it had incorporated a wholly-owned

Developments property development subsidiary in Australia, named Gamuda Australia.
In October 2014, a 50:50 joint venture (JV) between Malaysian construction companies
Gamuda and MMC, named as MMC Gamuda KVMRT (PDP SSP), was selected by the
Malaysian government to be the project development partner (PDP) for Line 2 of the
156km Klang Valley Mass Rapid Transit (MRT) project. The JV was previously selected
to be the PDP partner for Line 1 of the MRT system. Line 2 is estimated to have an
investment cost of MYR23bn USD6.9bn) and designed with a total length of 56km,
running from Sungai Buloh to Putrajaya via Serdang. Construction of Line 2 is expected
to start in 2015 and should be completed in five years.In June 2014, Gamuda
announced that it had reached an agreement with Permodalan Nasional to acquire a
20% stake in Kesas Holdings for MYR290mn.
In May 2014, three of the four water concessionaires agreed to terms for the sale of
their assets to the Selangor state government. As a result, the federal government
agreed to not invoke Section 114 of Water Services Industry Act 2006 (WSIA) to assume
control of these water assets. The remaining concessionaire yet to reach an agreement
with the government is Gamuda's 40%-owned water concessionaire Splash.
In March 2014, Gamuda's Vietnamese property subsidiary, Gamuda Land Vietnam, held
a handover ceremony for phase one of the Gamuda Gardens Township, a 364-unit
high-end township in Hanoi. Gamuda plans to complete the handover process by the
end of 2014.
In March 2014, the federal government of Malaysia approved the construction of Line 2
of the Greater Kuala Lumpur Mass Rapid Transit (MRT) project. A joint venture
comprising of MMC and Gamuda was previously selected to be the project delivery

partner for Line 1 of the MRT system. Contracts for Line 2 are expected to be awarded
in 2015 - the project is valued at MYR25bn.
In March 2014, the federal government of Malaysia decided to invoke the Water
Services Industry Act 2006 (Wasia), including Section 114, to pave the way for the
Selangor state government to take over the water concessionaires in the state. Under
the act, the Selangor state government would only need to pay MYR7.65bn for all of the
water assets. This decision comes after Gamuda and Puncak Niaga rejected the state's
offer to acquire their water assets - namely Gamuda's 40%-owned water
concessionaire Splash.In March 2014, Gamuda received notification that its 40%-
owned water concessionaire Syarikat Pengeluar Air Sungai Selangor Sdn Bhd (Splash)
had received a letter from Lembaga Urus Air Selangor (Luas), informing Splash that its
existing licence to extract raw water expiring on June 30 2014 would not be renewed.
In February 2014, the Malaysian government cancelled a plan to contract out national
railway KTMB's train operating activities to MMC and Gamuda (cited from Railway
Gazette). MMC and Gamuda have been in negotiations with the government over the
plan for more than two years.
Since February 2014, Gamuda's offer to fully acquire Kesas Holdings has failed, with
the Selangor state government and Permodalan Nasional rejecting Gamuda's offer to
acquire their stakes in the toll road operator.
In December 2013, the board of Amcorp Properties accepted, in principle, an offer by

Gamuda to acquire the company's 20% equity stake in highway toll operator Kesas
Holdings. Gamuda already owns 30% of Kesas, with the other shareholders of Kesas
being the Selangor state government (30% stake), Amcorp Properties (20%) and state-
run investment fund Permodalan Nasional (20%). Kesas is the toll concessionaire for
the 35km Shah Alam Expressway under a concession agreement that is valid until
August 18 2023.
In December 2013, Gamuda announced that it remains keen on acquiring all of the
water utilities assets in the state of Selangor, Peninsular Malaysia. This announcement
(cited from the Star) was made after Gamuda rejected the offer from Selangor state
government to acquire Syarikat Pengeluar Air Sungai Selangor (Splash), the
concessionaire for Gamuda's Selangor water assets. Gamuda owns 40% of Splash,
with State-owned company Kumpulan Perangsang Selangor and Tan Sri Wan Azmi
Wan Hamzah each holding a 30% stake in Splash.
In June 2013, Gamuda announced that it was buying from TPPT 293ha of land worth
MYR620mn in Rawang, western Selangor, for residential and commercial development.
The purchase is expected to be completed byQ313 and generate gross development
value of MYR5bn over 16 years.
In June 2013, Gamuda announced that it has completed 30% of the underground
section of the 51km Sungai Buloh-Kajang Line.
In April 2013, a joint venture (JV) between Gamuda and WCT was ordered to pay
QAR62.8mn (MYR52.4mn) to Bahrain Asphalt Establishment following the end of

arbitration proceedings regarding the 43km Dukhan Highway project in Qatar. WCT's
share in the JV is 49% and it will need to pay MYR26.3mn. In February 2006, BAE was
appointed as a subcontractor by the JV for the Dukhan Highway project. In March 2010,
BAE launched arbitration proceedings against the JV over several allegations pertaining
to delays on the main project, which lead to delays in the sub-contractor work and cost
overruns. The JV has stated that it will still pursue its claims with Qatar's Public Works
Authority in respect of the main contract.
In March 2013, Gamuda had written to Kumpulan Darul Ehsan with regards to its
interest in acquiring a 100% stake in Syarikat Pengeluar Air Selangor Holdings, the
concessionaire appointed by the Selangor state government in January 2000 to build,
operate and maintain the Sungai Selangor Water Supply Scheme Phase 3 (SSp3) for 30
years.
In February 2013, Mass Rapid Transit Corporation and MMC-Gamuda KVMRT signed a
MYR8.28bn (USD2.66bn) deal to carry out underground work on a 9.5km section of the
51km Sungai Buloh-Kajang Line in Malaysia. The companies will complete the
underground section between the Semantan North Portal and Maluri South Portal. The
companies will install 10 tunnel boring machines to excavate the section of the SBK
line, which will involve an estimated cost of MYR23bn (USD7.39bn). The section will
include seven underground stations - KL Sentral, Pasar Seni, Merdeka, Bukit Bintang,
Pasar Rakyat, Cochrane and Maluri.
Financial Data Gamuda saw a slight decline in its top-line financials in FY2013/14 (August-July).
Revenues contracted by 1.0% to MYR2.2bn in FY12/13 (accounting for changes to FRS
11 and one-off items). Excluding changes in FRS 11 and one-offs, revenue grew by
19% to MYR4.6bn. Despite a weaker top line, the company saw its net income grow by
33.0% to MYR719.4mn, underpinned by a strong EBIT (earnings before interest and
tax) margin as well as higher earnings contribution from JVs. EBIT margin came in at
21.6%, higher than the 20.4% in the previous year, While EBIT grew by 5% to
MYR481.2mn.
The company's net gearing increased significantly to 29%, up from 14% in FY2012/13
as Gamuda took on a greater amount loans. The order book at the end of FY13/14
stood in reasonably healthy condition, at MYR2.0bn, with most of the projects from
Malaysia.
In terms of geographical diversification, the company mainly derived its revenues from
Malaysia in FY13/14. In terms of businesses, the company derived its revenues from
three segments: Engineering and Construction at 68.1% of total revenues, property
development at 28.2%, and water and expressway concession at 3.7%.
FY 2012/13
Net Profit (FY2013/14): MYR719.4mn, +33.0% y-o-y

Revenue (FY2012/13): MYR2,229.6mn, -1.0% y-o-y

WCT
SWOT Analysis
Strengths
Well-established presence in Malaysia.
Geographic diversification mitigates country risk.
Strong expertise in earthworks.
Weaknesses
Successive failures in securing and completing projects in the Middle East.
Opportunities
WCT is well positioned to benefit from projects as part of the government's
USD444bn Economic Transformation Programme.

Significant portfolio of long-term residential and commercial building projects in
Malaysia. The projected development value of its land bank is MYR17bn at the end of
March 2013.
Threats
Government fiscal constraints, brought on by generous subsidies, could make it hard
to maintain the increase in public sector infrastructure investment in the past few
years.
Company Overview WCT (formerly WCT Engineering) was established in 1981. The company is a civil
engineering company that works across a broad range of projects and specialises in
earthworks for housing and commercial development, highway construction and related
infrastructure works, investment and/or resale of investment properties.
The company operates in three segments: civil engineering and construction, property
development, and property investment, which is engaged in holding of assets for capital
appreciation and rental income. It has an international presence and has been involved
in projects in the Middle East (Bahrain, the UAE) and Vietnam. Some of the company's
major projects include infrastructure works for the New Doha International Airport in
Qatar and the Formula 1 circuits in Sepang (Malaysia), Bahrain and Abu Dhabi.
Strategy The company generated stellar profits in 2012, which is a testament to its strong and
diversified revenue streams. This however was not due to geographic diversification,
but rather sector diversification. The company continues to faces difficulties in

expanding its engineering and construction business overseas, particularly the Middle
East, WCT's main overseas market. Two of its previous projects - the Dukhan Highway
project in Qatar and the Nad Al-Sheba Racecourse project in Dubai - underwent
arbitration proceedings due to allegations of project delays, with the Dukham Highway
arbitration resulting in a negative impact on earnings and the other still on-going (see
'Recent Developments' Section). In addition, WCT lost the Batinah Expressway-
Package 2 contract - awarded in August 2012 - after Oman decided to terminate the
project in April 2013, while progress on its remaining project in the Middle East - the
Qatar Ministry of Defence building - is slow.
This resulted in lower profit contributions from overseas projects, which impacted the
overall performance of the civil engineering and construction division - the division's
performance was also weighted down by delays in the KLIA2 project. Revenues and
operating profits from the division fall by 16% and 33% in FY2012 respectively.
On the other hand, WCT's property business (which is concentrated in Malaysia)

continues to grow in strength. Revenues for the property development division and
investment division grew by 66% and 62% in FY2012 respectively, while operating
profits for both divisions grew by 114% and 542% in the same year respectively. WCT's
property business has performed so well that at the end of Q313, the company is to
separate its civil engineering & construction division and property development division
into two separate entities - WCT and WCT Land respectively - with a new investment
holding company - WCT Holdings - to assume the listing status of WCT.
This internal restructuring could be aim at re-listing WCT Land and raise additional
funds to capture growth opportunities in Malaysia's property sector. WCT has been
aggressively acquiring land for property development, with the company's total land
bank at 2040 acres and estimated to have a development value of MYR16.9bn at the
end of March 2013.
The separation of WCT Land could also streamline WCT's operations for the continued
expansion into the hospitality and commercial property sectors. The company is
becoming increasingly keen to own and operate hotels and shopping centres. WCT
recently opened the Paradigm Mall in May 2012, with another three malls scheduled to
be completed by 2016.
We believe that the company could continue to achieve greater success in Malaysia
than in the Middle East and a focus on Malaysia's construction sector would pay
greater dividends for WCT. Competition for construction projects in the Middle East is
expected to be intense due to the lack of opportunities in the domestic markets for the
major construction companies eg Japan, Europe and South Korea.
On the other hand, WCT's well-established position in Malaysia puts it in a strong

position to benefit from the country's Economic Transformation Programme (ETP). The
victory by the ruling Barisan Nasional party in the May 2013 general elections makes it
very likely that the projects under the ETP, put on hold due to the elections, will be
launched as planned. According to WCT's management, the company is keen to take

on several construction projects such as the MYR1bn project development partner

contract for the Kwasa Damansara Land Civil Works project, the MYR800mn Universiti
Malaysia Sabah teaching hospital, the proposed high-speed railway line between Kuala
Lumpur (KL) and Singapore, sections of the West Coast Expressway, and the
MYR500mncivil works (phase 2) contract for the Refinery and Petrochemical Integrated
Development project in Pengerang. WCT could also be awarded the other contracts to
carry out earthworks and civil engineering works for the Tun Razak Exchange (TRX) in
KL. WCT had only secured the first contract - valued at MYR169.3mn - for the TRX
earthworks, but the entire earthworks for the financial district is estimated to worth
MYR1.0bn.
In addition, a focus on property development and management within Malaysia could

secure recurring income and reduce volatility in its revenues. We do, however,
highlight there are strong factors that could dampen housing demand, such as the
current oversupply situation in the housing market and the introduction of new
government measures to curb speculation in the property market. Having said that, one
of the goals under the ETP is to provide housing for 1mn new residents in the Greater
KL/Klang Valley area by 2020, therefore we believe there are still significant
opportunities for WCT. WCT is aiming to achieve sales of MYR775mn in FY2013 from
its property development division, which is mainly launching projects in the Klang Valley
and south Johor.
In June 2013, the company stated that (cited from the Business Times) it was confident
of securing MYR1.5bn worth of domestic and overseas construction projects in 2013.
According to the company, it is tendering for MYR3bn worth of domestic contracts and
MYR2bn worth of overseas contracts - the company is working with Oman's Transport
and Communication Ministry to re-tender for the Batinah Expressway Package 2
project. We believe this new orders target is achievable given that the company has
already achieved a third of this target - WCT secured MYR511mn worth of new
contracts at the end of April 2013.
Over the long-term, WCT plans to derive the majority of its earnings from its property
development and management businesses; in June 2013, the company stated that
(cited from the Business Times) by 2016, it aims to have a portfolio of 45% contribution
from engineering and construction business to the company's bottom line, 30% from
property development business and 25% from investment properties business. This
statement is another indication of the company's focus in Malaysia.
In 2015, the firm is targeting to clinch jobs worth MYR1.0bn in Malaysia and another
MYR1.0bn from the Middle East. The group also plans to expand its property business
in the north, particularly in Penang and is also looking to set up its own real estate
investment trust (REIT). Such an exercise will help to unlock value in some of WCT's
older properties and provide the firm with additional sources of funding for new
projects.

Recent In October 2014, WCT announced that its subsidiary, WCT, accepted a MYR652mn
Developments contract from Boustead to development a building in Kuala Lumpur.
In October 2014, WCT announced that its subsidiary, Jubilant Courtyard, entered into a
conditional sale and purchase agreement with Matad, valued at MYR115mn, for the
acquisition of four pieces of vacant freehold land in the state of Selangor.
In August 2014, WCT won a USD107.7mn contract from Petronas to set up the
permanent and construction access roads for the Refinery and Petrochemical
Integrated Development complex. The complex is being built by Petronas in the state of
Johor, Malaysia.
In July 2013, WCT completed the integrated complex for the Kuala Lumpur International
Airport, also known as Gateway@KLIA2.
In April 2013, WCT was awarded a MYR169.3mn contract from 1Malaysia Development
(1MDB) for earthworks, retaining walls and foundation works for zone 3 (phase 1) of the
Tun Razak Exchange (TRX). Works are expected to be contractually completed by June
2015. This is the first in a series of TRX earthworks and civil engineering packages to be
awarded, with the first phase of the TRX be completed by 2017.
In April 2013, a joint venture (JV) between Gamuda and WCT was ordered to pay
QAR62.8mn (MYR52.4mn) to Bahrain Asphalt Establishment following the end of
arbitration proceedings regarding the 43km Dukhan Highway project in Qatar. WCT's
share in the JV is 49% and will need to pay MYR26.3mn. In February 2006, BAE was
appointed as a subcontractor by the JV for the Dukhan Highway project. In March 2010,
BAE launched arbitration proceedings against the JV over several allegations pertaining
to delays on the main project, which lead to delays in the sub-contractor work and cost
overruns. The JV has stated that it will still pursue its claims is with Qatar's Public
Works Authority in respect of the main contract.
In April 2013, WCT lost the Batinah Expressway-Package 2 contract after Oman
decided to terminate the MYR1bn (USD327mn) project. The company and its joint
venture Oman Roads Engineering Company were notified on April 6 2013 by the
director of the tenders and contracts department of the Ministry of Transport and
Communications of the Sultanate of Oman regarding their decision of not to proceed
with the project. WCT said that it respects and will adhere to the decision made. WCT
was awarded the project in August 2012.
In March 2013, WCT announced that Arabtec, its joint venture (JV) partner for the Nad
Al-Sheba Racecourse project in Dubai, has agreed to terminate all arbitration
proceedings against the project's employer, Meydan. Arbitration proceedings between
WCT and Meydan will, however, continue. In September 2007, the WCT-Arabtec JV
was awarded a MYR3.9bn contract to be the main contractor for the Nad Al-Sheba
Racecourse. This contract was terminated by Meydan in January 2009 due to perceived

delays in construction works. This prompted the JV to initiate arbitration proceedings

against Meydan.
In March 2013, WCT was awarded a MYR315mn contract from Putrajaya Holdings for
the construction of office buildings and external works in Precinct 2, Putrajaya. The
contract includes the completion of two office blocks comprising a seven-storey
podium office and a 14-floor tower. The contract duration is for 32 months, with the
project expected to be completed end-2015.
In January 2013, WCT with its wholly owned subsidiary, WCT Land, disposed a 30%
stake in property developer Jelas Puri Sdn Bhd (JPSB) to pension fund Employees
Provident Fund Board for MYR87.36mn. With the sale, WCT would hold a 70% stake in
JPSB.
In August 2012, WCT, in a JV with Oman Roads Engineering, was awarded a MYR1.0bn
contract to build Package 2 of the Batinah Expressway in Oman. The 44.75km
expressway is expected to be completed in 36 months.
In February 2012, WCT was awarded a MYR331mn contract by Riverson Corporation

Sdn Bhd for the construction and completion of the proposed mixed commercial
development with purpose built medical centre and related facilities at Coastal
Highway, Kota Kinabalu, Sabah, Malaysia.
In February 2012, WCT was awarded a MYR300mn contract for the proposed design,
construction and completion of the government building (Headquarters of the Ministry
of International Trade & Industry) and external works on Jalan Khidmat Usaha, Mukim
Batu, Kuala Lumpur by Putrajaya Management Sdn Bhd.
Financial Data WCT experienced a vast improvement in its financial performance in FY2012. Even
though revenues only grew by 1.4% to reach MYR1.6bn, net profits grew by 124% to
reach MYR364mnin FY2012. This surge in net profits was primarily due to an
improvement in operating profits and margin. Operating profits grew by 88% in FY2012
to reach MYR464mn, while operating margins increased from 16.0% in FY2011 to an
all-time high of 29.8% in FY2012. This increase in FY2012 operating profits and margin
was due to a MYR211mn revaluation gain made on its investment properties - mainly
the Paradigm Mall - in Q412.
The company's net gearing remains low at 0.35x at the end of March 2013, while
its outstanding order book at the end of April 2013 stood in reasonably healthy
condition, at MYR3.1bn.
In terms of geographical diversification, the company derived its revenues from two
markets in 2012 - Malaysia at 81% of total revenues and the Middle East at 19%. In
terms of businesses, the company derived its revenues in 2012 from three segments:
civil engineering and construction at 65% of total revenues, property development at
30% and property investment and management at 5%. The company however derived
most of its operating profits from property investment and management at 51%,

followed by property development at 25% and civil engineering and construction at

24%.
FY 2012
Net Profit (2012): MYR364mn, 124% y-o-y

Revenue (2012): MYR1,560mn, 1.4% y-o-y

Global Infrastructure Overview

Industry Trend Analysis
BMI View: The global infrastructure sector is experiencing a transition period, with new entrants
expanding their market share. Private equity, regional players and Chinese companies are all strengthening
their global footprint. Conversely, the global majors continue to consolidate their presence while seeking
strategic partnerships and acquisitions to target new opportunities. In this changing competitive landscape,
countries will have to work harder to attract investment, and reforms in emerging market business
environments will be key in securing much-needed infrastructure upgrades.
Five key themes for the infrastructure sector in 2015:
1. Increased Consolidation And M&A Activity
2. Expansion Of Private Equity Role In Infrastructure
3. China Infrastructure Focus Going Global
4. Multilaterals And Development Banks: Changing Role
5. Reforms Crucial To Sustain Infrastructure Investment
Increased Consolidation And M&A Activity
We expect 2015 to see a rise in merger and acquisition (M&A) activity, with major players consolidating,
offloading non-core assets and acquiring access to strategic sectors. The post-financial crisis construction
sector continues to present the challenges of reduced contract opportunities, more challenging client
demands and a constrained financing environment, and we expect mergers will be a popular tool to improve
economies of scale and enhance bidding positions. The acquisition trend is also likely to accelerate as
companies seek to target new markets or provide the whole range of services to meet more demanding
clients.
Equally, companies will continue to cut non-core assets, leading to acquisition opportunities. On the other
side of the trend, we see increased M&A activity as creating opportunities for regional players to continue
to expand their market share in the global competitive landscape. The sale of assets to meet competition

regulation for example, will be one factor providing smaller regional players the opportunity to consolidate
their positions both domestically and regionally.
Consolidating To Compete
Major North American And British Engineering Firms, FY2013 Revenues (USDbn)
Source: Company reports, BMI
Expansion Of Private Equity Role In Infrastructure
We expect the volume of capital from private equity invested into infrastructure to expand significantly in
2015. At the same time, the elevated fundraising rate is expected to continue, with a wider array of investors
entering the sector.
With volatility returning to the financial markets, infrastructure's appeal will only expand, especially to
institutional investors. We expect the level of pension fund investment into the sector, especially in the US
and the UK to increase in 2015.
Infrastructure fundraising has been expanding since 2012, with infrastructure assets under management at a
record high as of mid-2014. The level of un-invested capital in funds is at its highest level, and we expect

investments into the sector to step up in 2015. Developed markets will continue to account for the majority
of investment targets, with North America and Europe and utilities and transport assets popular. Conversely,
the trend of targeting energy and mining assets is under threat from lower commodity prices hitting asset
valuations.
We expect fundraising to expand beyond the traditional remit over 2015, and emerging markets will
increasingly be targeted by funds. Asia has been the one exception to the primarily developed market-
focused fundraising over recent years. However, we expect increasingly funds will target a more global
emerging market picture.
Ready To Be Deployed
Value Of Assets Under Management, 2007-2014 (USDbn)
Source: Preqin
China Infrastructure Focus Going Global
We expect that Chinese companies will continue to expand the scope of their engagement in the global
infrastructure sector in 2015 (see 'Special Report: China's Infrastructure Focus Goes Global', September 9
2014). The role of Chinese engineering and construction players, as well as sector investors, is expected to

continue to evolve beyond the traditional resource model, with implications for developed and emerging
markets. To offset a slowing domestic construction sector, China is making greater efforts to improve the
reputation of and export its expertise and secure access to more stable assets and project opportunities in
developed markets. At the same time, it is extending its engagement beyond Sub-Saharan Africa, with
investment targeted in Latin America and Eastern Europe, and is expanding its presence in developed
markets.
Real estate, energy and infrastructure assets and investment are high on the list for Chinese companies and
investors. We expect this trend to gather pace in 2015 as governments remain cash strapped and therefore
more open to Chinese investment and financial support. Chinese companies, meanwhile, are looking to
offset domestic weakness through greater international operations. Acquiring stable assets in developed
markets and building a better brand to compete in the global construction sector are on the agenda. In
emerging markets, gaining greater market share and influence and diversifying commodity sources are
motivating investments, with Latin America and Eastern Europe prime targets for investment.
China's Expanding Investments
Chinese Investments And Contracts, By Country, 2005-2014 (USDmn)
Source: Heritage Foundation

Multilaterals And Development Banks: Changing Role
The role of multilateral financial institutions and development banks in supporting infrastructure investment
is expected to evolve in 2015 (see 'Multilaterals To Engender Greater Bankability', October 14 2014). We
expect their role will shift from primarily capital contributions to projects to the provision of support on a
technical and regulatory front. Regional and global development agencies are increasingly providing capital
to help countries build up expertise, regulatory environments and overall lend credibility to projects in the
hope of creating a more attractive environment for private investors. Multilateral agencies have a strong role
to play in anchoring investors, lending project expertise and guarantees that enable governments to attract
private capital. We expect a proliferation of programmes and platforms to provide this support and the
execution of these programmes to increase over 2015.
Table: Multilaterals And Development Bank Infrastructure Support Programmes
Date Initiative Platform/ Description BMI analysis

announced supporter programme
Aimed at tackling project delivery by Africa50 Aims To Tackle
African improving institutional capacity and Obstacles To
October 2013 Development Africa50 providing legal, financial and technical Infrastructure Growth,
Bank training. October 2 2013
USD100bn multinational development BRICS Bank: Long-Term
BRICS bank expected to initially invest in Impact Positive, Near-
July 2014 BRICS development infrastructure projects within the BRICS Term Impact Immaterial,
bank countries. Scheduled to start lending in July 17 2014
2016.
Intended to improve emerging market
Global Multilaterals To Engender
September project planning by sharing information,
G20 Infrastructure Greater Bankability,
2014 matching projects and investors, and
Initiative October 14 2014
reducing red tape.
Aimed at boosting the number of
Global bankable projects that achieve financial Multilaterals To Engender
October 2014 World Bank Infrastructure close. Designed to improve the level of Greater Bankability,
Facility sophistication in project development, October 14 2014
planning and tendering of projects.
Officially expressed support for G20
global infrastructure hub. Offered
World's top
November expertise, resources, and financing
development na na
2014 instruments to contribute to closing the
banks global infrastructure gap (estimated at
USD1trn/year).
Infrastructure Aimed at sharing successful experiences
November Project
EBRD that can be replicated in and improving na
2014 Preparation efficiency and quality of project planning.
Facility
na = not available/applicable. Source: Media sources, Press releases, BMI

Reforms Crucial To Sustain Infrastructure Investment
The growing need for reforms in emerging markets' infrastructure sectors is increasingly apparent. Growing
pressure on country balance sheets, especially in the large commodity producers, is further underlining the
need for private investment to develop much needed infrastructure. In this context, reforms at the regulatory
level will be crucial for countries to attract private investment. In particular, we highlight risks in financing,
tendering, permitting and labour as key areas in need of reform across major emerging markets.
We believe Latin America and Sub-Saharan Africa on average are making the greatest strides in reforming
to compete for infrastructure investment, whilst the BRICS (Brazil, Russia, India, China and South Africa)
countries will continue to lag behind over the near term (see 'Latin America And SSA Pull Ahead In
Infrastructure Reform Drive', October 28 2014). In 2015 we see some potential for tangible progress from
China and India, but expect little change in Brazil, Russia and South Africa.

Methodology
Industry Forecast Methodology
BMI's Industry forecasts are generated using the best-practice techniques of time-series modelling and
causal/econometric modelling. The precise form of model we use varies from industry to industry, in each
case being determined, as per standard practice, by the prevailing features of the industry data being
examined.
Common to our analysis of every industry, is the use of vector autoregressions. Vector autoregressions
allow us to forecast a variable using more than the variable's own history as explanatory information. For
example, when forecasting oil prices, we can include information about oil consumption, supply and
capacity.
When forecasting for some of our industry sub-component variables, however, using a variable's own
history is often the most desirable method of analysis. Such single-variable analysis is called univariate
modelling. We use the most common and versatile form of univariate models: the autoregressive moving
average model (ARMA).
In some cases, ARMA techniques are inappropriate because there is insufficient historic data or data quality
is poor. In such cases, we use either traditional decomposition methods or smoothing methods as a basis for
analysis and forecasting.
We mainly use OLS estimators and in order to avoid relying on subjective views and encourage the use of
objective views, we use a 'general-to-specific' method. BMI mainly uses a linear model, but simple non-
linear models, such as the log-linear model, are used when necessary. During periods of 'industry shock', for
example poor weather conditions impeding agricultural output, dummy variables are used to determine the
level of impact.
Effective forecasting depends on appropriately selected regression models. We select the best model
according to various different criteria and tests, including but not exclusive to:
R2 tests explanatory power; adjusted R2 takes degree of freedom into account
Testing the directional movement and magnitude of coefficients
Hypothesis testing to ensure coefficients are significant (normally t-test and/or P-value)
All results are assessed to alleviate issues related to auto-correlation and multi-collinearity

BMI uses the selected best model to perform forecasting.
It must be remembered that human intervention plays a necessary and desirable role in all of our industry
forecasting. Experience, expertise and knowledge of industry data and trends ensure that analysts spot
structural breaks, anomalous data, turning points and seasonal features where a purely mechanical
forecasting process would not.
Sector-Specific Methodology
Construction Industry
Construction Industry Value
Our data is derived from GDP by output figures from each country's national statistics office (or
equivalent). Specifically, it measures the output of the construction industry over the reported 12-month
period in nominal values (ie domestic currency terms). As it is derived from GDP data, it is a measure of
value added within the industry (ie the additional contribution of the construction industry over other
industries, such as cement production). Consequently, it does not measure the nominal value of all inputs
used in the construction industry, which, for most states would increase the overall figure by 50-60%.
Furthermore, it is important to note that the data does not provide an indication of the total value of a
country's buildings, only the construction sector's output in a given year.
This data is used because it is reported by virtually all countries and can therefore be used for comparative
purposes.
Construction Industry Value Real Growth
Our data and forecasts for real construction measures the real increase in output (rather than nominal
growth, which would also incorporate inflationary increases). In short, it is an inflation-adjusted value of the
output of the construction industry year-on-year. Consequently, real growth will be lower than the nominal
growth of our 'construction value' indicator, except in instances where deflation is present in the industry.
Data for this is sourced from the constant values for construction value added, using the same sources noted
above. We use officially calculated data to accurately account for inflation specific to the construction
industry.

Construction Industry, % Of GDP/Construction Value (USD)
These are derived indicators. We use BMI's Country Risk team's GDP and exchange rate forecasts to
calculate these indicators.
Capital Investment
Total Capital Investment
Our data is derived from GDP by expenditure data from each country's national statistics office (or
equivalent). It is a measure of total capital formation (excluding stock build) over the reported 12-month
period. Total capital formation is a measure of the net additions to a country's capital stock, so takes into
account depreciation as well as new capital. In this context, capital refers to structures, equipment, vehicles
etc. As such, it is a broader definition than construction or infrastructure, but is used by BMI as a proxy for
a country's commitment to development.
Capital Investment (USD), % Of GDP, Per Capita
These are derived indicators. We use our Country Risk team's population, GDP and exchange rate forecasts
to calculate them. As a rule of thumb, we believe an appropriate level of capital expenditure is 20% of GDP,
although in rapidly developing emerging markets it may, and arguably should, account for up to 30%.
Government Capital Expenditure
This is obtained from government budgetary data and covers all non-current spending (ie spending on
transfers, salaries to government employees, etc). Due to the absence of global standards for reporting
budgetary expenditure, this measure is not as comparable as construction/capital investment.

Government Capital Expenditure, USDbn, % Of Total Spending
These are derived indicators.
Construction Sector Employment
Total Construction Employment
This data is sourced from either the national statistics office or the International Labor Organization (ILO).
It includes all those employed within the sector.
Construction Employment, % y-o-y; % Of Total Labour Force
These are derived indicators.
Average Wage In Construction Sector
This data is sourced from either the national statistics office or the ILO.
Infrastructure Data Sub-Sectors
BMI's Infrastructure data examines the industry from the top down and bottom up in order to calculate the
industry value of infrastructure and its sub-sectors. We use a combination of historic data as reported by the
central banks, national statistics agencies and other official data sources, and BMI's Infrastructure Key
Projects Database tool.
Where possible we source historic data for the relative portion of either infrastructure spend or value
generated by the various sub-sectors we classify as infrastructure. We seek to segment official infrastructure
data into pre-set categories classified by us, across all countries, in order to optimise the ability to compare
industry value across the sub-sectors of infrastructure. We then apply ratios to the infrastructure subsector
value in order to derive the value. Real growth is calculated using the official construction inflation rate.
In those instances where historic data is not available, we use a top down and bottom up approach
incorporating full use of BMI's Infrastructure Key Projects Database, in most cases dating back to 2005.
This allows us to calculate historical ratios between general infrastructure industry value and its sub-sectors,

which we then use for forecasting. Our Key Projects Database is not exhaustive, but it is comprehensive
enough to provide a solid starting point for our calculations.
The top down approach uses data proxies. We have separated countries into three tiers. Each tier comprises
a group of countries on a similar economic development trajectory and with similar patterns in terms of
infrastructure spending, levels of infrastructure development and sector maturity. This enables us to confirm
and overcome any deficiencies of infrastructure-specific data by applying an average group ratio (calculated
from the countries for which official data exists) to the countries for which data is limited.
Tier I - Developed States. Common characteristics include:
Mature infrastructure markets;
Investments typically target maintenance of existing assets or highly advanced projects at the top of the
value chain;
Infrastructure as percent of total construction averages around 30%.
Tier I countries: Canada, Germany, Greece, UK, US, France, Hong Kong, Taiwan, Singapore, Israel,
Japan, Australia.
Tier II - Core Emerging Markets. Common characteristics include
The most rapidly growing emerging markets, where infrastructure investments are a government
priority;
Significant scope for new infrastructure facilities from very basic levels (eg highways, heavy rail) to
more high value projects (renewables, urban transport);
Infrastructure as percent of total construction averages around 45% and above.
Tier II countries: Colombia, Malaysia, Mexico, South Korea, Peru, Philippines, Turkey, Vietnam,
Poland, Hungary, South Africa, Nigeria, Russia, China, India, Brazil, Indonesia.
Tier III- Emerging Europe. Common characteristics include:
Regional socioeconomic trajectories;
Development defined by recent or pending accession to European structures such as the EU.
Infrastructure development to a large degree dictated by EU development goals and financed through
vehicles such as the PHARE and ISPA programmes, and institutions such as the EBRD and EIB;
Infrastructure as percent of total construction averages between 30% and 40%.
Tier III countries: Czech Republic, Romania, Bulgaria, Slovakia, Slovenia, Estonia, Latvia, Lithuania,
Croatia, Ukraine.
This methodology has enabled us to calculate infrastructure industry values for states where this was not
previously possibly. Furthermore, it has enabled us to create comparable indicators.

The top down hypothesis-led approach has been used solely to calculate the infrastructure industry value as
a percentage of total construction. For all sub-sector calculations we apply the bottom-up approach, ie
calculating the ratios from our Key Projects Database where data was not otherwise available.
Risk/Reward Index Methodology
BMI's Risk/Reward Index (RRI) provide a comparative regional ranking system evaluating the ease of
doing business and the industry-specific opportunities and limitations for potential investors in a given
market.
The RRI system divides into two distinct areas:
Rewards: Evaluation of sector's size and growth potential in each state, and also broader industry/state
characteristics that may inhibit its development. This is further broken down into two sub categories:
Industry Rewards (this is an industry-specific category taking into account current industry size and
growth forecasts, the openness of market to new entrants and foreign investors, to provide an overall
score for potential returns for investors).
Country Rewards (this is a country-specific category, and the score factors in favourable political and
economic conditions for the industry).
Risks: Evaluation of industry-specific dangers and those emanating from the state's political/economic
profile that call into question the likelihood of anticipated returns being realised over the assessed time
period. This is further broken down into two sub categories:
Industry Risks (this is an industry-specific category whose score covers potential operational risks to
investors, regulatory issues inhibiting the industry, and the relative maturity of a market).
Country Risks (this is a country-specific category in which political and economic instability,
unfavourable legislation and a poor overall business environment are evaluated to provide an overall
score).
We take a weighted average, combining industry and country risks, or industry and country rewards. These
two results in turn provide an overall Risk/Reward Index, which is used to create our regional ranking
system for the risks and rewards of involvement in a specific industry in a particular country.
For each category and sub-category, each state is scored out of 100 (100 being the best), with the overall
Risk/Reward Index a weighted average of the total score. Importantly, as most of the countries and
territories evaluated are considered by us to be 'emerging markets', our score is revised on a quarterly basis.
This ensures that the score draws on the latest information and data across our broad range of sources, and

the expertise of our analysts. Our approach in assessing the Risk/Reward balance for infrastructure industry
investors globally is fourfold:
First, we identify factors (in terms of current industry/country trends and forecast industry/country
growth) that represent opportunities to would-be investors.
Second, we identify country and industry-specific traits that pose or could pose operational risks to
would-be investors.
Third, we attempt, where possible, to identify objective indicators that may serve as proxies for issues/
trends to avoid subjectivity.
Finally, we use BMI's proprietary Country Risk Index (CRI) in a nuanced manner to ensure that only the
aspects most relevant to the infrastructure industry are incorporated. Overall, the system offers an
industry-leading, comparative insight into the opportunities/risks for companies across the globe.
Sector-Specific Methodology
In constructing these indices, the following indicators have been used. Almost all indicators are objectively
based.
Indicators
Table: Infrastructure Risk/Reward Index Indicators
Rationale
Rewards
Industry rewards
Construction expenditure, USDbn Objective measure of size of sector. The larger the sector, the greater the
opportunities available.
Sector growth, Objective measure of growth potential. Rapid growth results in increased
% y-o-y opportunities.
Capital investment, % of GDP Proxy for the extent the economy is already oriented towards the sector.
Government spending, % of GDP Proxy for extent to which structure of economy is favourable to infrastructure/
Country rewards
Labour market infrastructure From BMI's Country Risk Index (CRI). Denotes availability/cost of labour. High
costs/low quality will hinder company operations.
Financial infrastructure From CRI. Denotes ease of obtaining investment finance. Poor availability of
finance will hinder company operations across the economy.
Access to electricity From CRI. Low electricity coverage is proxy for pre-existing limits to
infrastructure coverage.
Risks
Industry risks

Infrastructure Risk/Reward Index Indicators - Continued
Rationale
No. of companies Subjective evaluation against BMI-defined criteria. This indicator evaluates
barriers to entry.
Transparency of tendering process Subjective evaluation against BMI-defined criteria. This indicator evaluates
predictability of operating environment.
Country risks
Structure of economy From CRI. Denotes health of underlying economic structure, including seven
indicators such as volatility of growth; reliance on commodity imports, reliance
on single sector for exports.
External risk From CRI. Denotes vulnerability to external shock - principal cause of economic
crises.
Policy continuity Subjective score from CRI. Denote predictability of policy over successive
governments.
Legal framework From CRI. Denotes strength of legal institutions in each state. Security of
investment can be a key risk in some emerging markets.
Corruption From CRI. Denotes risk of additional illegal costs/possibility of opacity in
tendering/business operations affecting companies' ability to compete.
Source: BMI
Weighting
Given the number of indicators/datasets used, it would be inappropriate to give all sub-components equal
weight. Consequently, the following weighting has been adopted:
Table: Weighting Of Indicators
Component Weighting, %
Rewards 70, of which
- Industry rewards 65
- Country rewards 35
Risks 30, of which
- Industry risks 40
- Country risks 60
Source: BMI

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BMI Research 2015 Business Monitor International Ltd

Part of BMIs Industry Report & Forecasts Series

Published by: BMI Research

Copy deadline: February 2015

BMI Research 2015 Business Monitor International Ltd

BMI Industry View ............................................................................................................... 7

Industry Forecast .............................................................................................................. 10

Industry Risk Reward Index ............................................................................................. 77

Market Overview ............................................................................................................... 86

Business Monitor International Ltd Page 4

Table: Economic Transformation Programme - Key Construction Entry Point Projects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88

Company Profile ................................................................................................................ 93

Global Infrastructure Overview ...................................................................................... 108

Methodology .................................................................................................................... 114

Business Monitor International Ltd Page 5

BMI Industry View

Business Monitor International Ltd Page 7

Business Monitor International Ltd Page 8

SWOT Analysis - Continued

Business Monitor International Ltd Page 9

Table: Construction And Infrastructure Industry Data (Malaysia 2013-2018)

2013 2014e 2015f 2016f 2017f 2018f

Business Monitor International Ltd Page 10

Construction And Infrastructure Industry Data (Malaysia 2013-2018) - Continued

2013 2014e 2015f 2016f 2017f 2018f

Cement production (including 23,199,229 24,240,610 24,957,804 25,647,246 26,361,760 27,067,601

e/f = BMI estimate/forecast. Source: National sources, BMI

Table: Construction And Infrastructure Industry Data (Malaysia 2019-2024)

2019f 2020f 2021f 2022f 2023f 2024f

Business Monitor International Ltd Page 11

Construction And Infrastructure Industry Data (Malaysia 2019-2024) - Continued

2019f 2020f 2021f 2022f 2023f 2024f

Infrastructure industry value, % of 1.8 1.8 1.8 1.9 1.9 1.9

f = BMI forecast. Source: National sources, BMI

Business Monitor International Ltd Page 12

e/f = BMI estimate/forecast. Source: Malaysia Department of Statistics, BMI

Business Monitor International Ltd Page 13

Moderation Taking Place

Source: Malaysia Department of Statistics, BMI

Business Monitor International Ltd Page 14

Source: Malaysia Department of Statistics, BMI

Residential And Non-Residential To Slowdown

Business Monitor International Ltd Page 15

*Not Seasonally Adjusted, 2000=100. Source: Ministry of Finance, Malaysia

Business Monitor International Ltd Page 16

e/f = BMI estimate/forecast. Source: BMI

Business Monitor International Ltd Page 17

Non-Residential Pipeline Close To Record-Lows

Source: National Property Information

Fiscal Spending Supports Positive Outlook

Meanwhile, we believe an increase in government expenditure on infrastructure projects, as well as efforts

Business Monitor International Ltd Page 18

Note: 2015 = forecast. Source: The Star Online, BMI

Business Monitor International Ltd Page 19

Table: Key Infrastructure Related Entry Point Projects

Greater Kuala Lumpur/Klang Valley High-Speed Rail Connection to Singapore

Business Monitor International Ltd Page 20

Key Infrastructure Related Entry Point Projects - Continued

Greater Kuala Lumpur/Klang Valley High-Speed Rail Connection to Singapore

Source: Pemandu, Economic Transformation Programme Annual Report 2013, BMI