PP 7767/09/2010(025354)

29 July 2010

Malaysia Corporate Highlights

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

New s Upda te / Br ief in g No te

29 July 2010
MARKET DATELINE

PLUS Expressways Share Price

Fair Value
:
:
RM3.70
RM4.33
Disposes Of 60% Stake In Cimanggis-Cibutung Recom : Outperform
(Maintained)
Tollways; Raises Traffic Volume Guidance

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

Net Core EPS Net
FYE Turnover Profit EPS EPS Growth PER# C.EPS* P/NTA Gearing ROE GDY
Dec (RMm) (RMm) (sen) (sen) (%) (x) (sen) (x) (x) (%) (%)
2009a 3,179.0 1,186.4 23.7 23.7 9.9 15.6 - 3.0 1.4 19.5 4.5
2010f 3,346.4 1,223.8 24.5 24.5 3.1 15.1 24.5 2.9 1.4 19.1 4.9
2011f 4,332.9 1,869.1 37.4 37.4 52.7 9.9 33.0 2.5 1.3 25.6 5.4
2012f 4,465.5 1,902.4 38.0 38.0 1.8 9.7 34.9 2.3 1.2 23.5 5.9
Main Market Listing / Trustee Stock / Syariah-Approved Stock By The SC * Consensus Based On IBES Estimates

Issued Capital (m shares) 5,000

♦ Disposed of 60% stake in PT Cimanggis-Cibutung Tollways. PLUS had Market Cap (RMm) 18,500
on 28 Jul 10 entered into a conditional sale and purchase agreement with PT Daily Trading Vol (m shs) 4.7
Bakrie & Brothers TBK to dispose of its 60% stake in PT Cimanggis Cibutung 52wk Price Range (RM) 3.14 – 3.75
Tollways (which undertakes and implements the Cimanggis-Cibutung toll Major Shareholders: (%)
road project) for Rp57.8bn (or RM20.2m). Assuming the transaction is to Khazanah Nasional 60.6
complete by 1QFY12/11, PLUS will recognise a net gain of approximately EPF 11.5
RM1m on the disposal. KWAP 6.9

♦ Will not affect its KPI on overseas operations. We believe the latest
FYE Dec FY10 FY11 FY12
development is unlikely to affect its long-term KPI on oveseas operations
EPS chg (%) +1.7 +1.5 +1.5
(i.e. overseas operations to account for 15% of Group’s total turnover by
Var to C.EPS (%) -0.3 +11.4 +8.1
FY12/15), as: 1) PLUS has the capacity to acquire/build more highways in
overseas, witnessed by its debt-to-equity (D/E) ratio of 1.8x (as at 31 Mar PE Band Chart
10, which is still lower than its regional peers’ D/E ratio of 3x); and 2) there
is still great potential for more toll road projects in the emerging countries,
PER = 15x
such as India. PER = 13x

♦ Traffic volume guidance raised. Latest development aside, management

PER = 11x

mentioned that it is comfortable at raising its FY12/10 traffic volume

guidance for its core expressways (consisting of NSE, NKVE, Federal Highway
Route 2 and Seremban-Port Dickson Highway) from 3-4% to 5%, given the
encouraging 9.8% growth registered at PLUS’s core expressways in
1HFY12/10. We are raising our FY12/10 traffic volume assumption at PLUS’
core expressways from 4% to 5%, to bring our forecast in line with
management’s guidance. Beyond FY12/10, we are keeping our forecasts Relative Performance To FBM KLCI
unchanged, i.e. 3% p.a., which is much lower than the previous years’ traffic
volume growth and this is mainly on the back of: 1) the high base effect;
and 2) potentially hikes in both petrol price and toll rate that are likely to FBM KLCI
affect PLUS’s traffic volume.
♦ Earnings forecasts. We are raising our FY12/10-12 net profit forecasts by
PLUS

1.5-1.7% to RM1,223.8m, RM1,869.1m, and RM1,902.4m respectively, to

reflect a 1%-pt raise in our FY12/10 traffic volume growth assumption at
PLUS’s core expressways from 4% to 5%.
♦ Risks. These include: (1) FY12/10-12 traffic volume growth rate of PLUS’s
core expressways coming in below our assumption of 5.0% (for FY12/10)
and 3.0% (for FY12/11 and FY12/12) respectively; (2) Higher-than-expected
maintenance cost; and (3) Operating risks in overseas ventures (in
particular, Indonesia and India).
♦ Investment case. Following the upward revision in our FY12/10 traffic
volume growth forecast, DCF-derived fair value for PLUS has been revised
upward by 2.4% from RM4.23 to RM4.33 based on WACC of 7.7%. We Chye Wen Fei
continue to like PLUS for its defensive earnings quality and decent dividend (603) 92802172
yield of 5-6% per annum. Maintain Outperform. chye.wen.fei@rhb.com.my

Please read important disclosures at the end of this report.

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 29 July 2010

Table 2: Earnings Forecast Table 3: Forecast Assumptions

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

Turnover 3,179.0 3,346.4 4,332.9 4,465.5 Traffic Volume Growth

Turnover growth (%) 7.1 5.3 29.5 3.1 - Core expressways 5.0% 3.0% 3.0%
- ELITE 5.0% 4.5% 4.0%
EBITDA 2,606.2 2,674.7 3,601.3 3,668.6 - Linkedua 3.0% 3.0% 3.0%
EBITDA margin (%) 82.0 79.9 83.1 82.2 - KLBK 0.0% 0.0% 0.0%

Depreciation & Risk free rate 4.6%

amortisation -361.1 -384.0 -450.0 -473.0
EBIT 2,245.1 2,290.8 3,151.2 3,195.6 Beta 59.4%
EBIT margin (%) 70.6 68.5 72.7 71.6 Equity risk premium 7.5%
Cost of equity 9.1%
Net interest expense -621.5 -659.1 -659.1 -659.1
Pretax profit 1,623.6 1,631.7 2,492.1 2,536.5 Average cost of debt 7.0%
Pretax margin (%) 51.1 48.8 57.5 56.8
Targeted debt-to-equity
Tax expense -438.5 -407.9 -623.0 -634.1 Debt 65.0%
Minorities 1.3 0.0 0.0 0.0 Equity 35.0%
Net profit 1,186.4 1,223.8 1,869.1 1,902.4
Net profit margin (%) 37.3 36.6 43.1 42.6 WACC 7.7%
Source: RHBRI Source: RHBRI

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Stock Ratings

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

Trading Buy = Short-term positive development on the stock that could lead to a re-rating in the share price and translate into an absolute return of 15% or more
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Industry/Sector Ratings

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