PP 7767/09/2010(025354)

20 August 2010

Malaysia Corporate Highlights

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

R e su l ts N o t e
20 August 2010
MARKET DATELINE

YTL Cement Share Price

Fair Value
:
:
RM4.05
RM5.35
4QFY06/10 Performance Rises on Higher Sales Recom : Outperform
Volume (Maintained)

Table 1 : Investment Statistics (YTLCMT; Code: 9737) Bloomberg: YTLC MK

Core Core EPS Net
Net
FYE Turnover EPS EPS# Growth PER# C.EPS* P/NTA Gearing ROE GDY
Profit
Jun (RMm) (RMm) (sen) (sen) (%) (x) (sen) (x) (x) (%) (%)
2009a 1,972.8 239.3 48.6 48.6 24.9 8.3 - 1.4 0.1 14.7 7.4
2010a 1,843.1 250.9 54.2 51.0 -8.2 7.9 - 1.3 Cash 14.8 7.4
2011f 1,914.9 268.1 54.5 54.5 8.8 7.4 - 1.1 Cash 15.2 7.4
2012f 1,922.1 258.2 52.5 52.5 -3.7 7.7 - 1.0 Cash 12.8 7.4
Main Market Listing / Trustee Stock / Syariah-Approved Stock By The SC * Consensus Based On IBES Estimates

♦ In line. Full year FY06/10 core net profit of RM250.9m came in line within RHBRI Vs. Consensus
our expectation at 101.8% of our full-year forecast. During the financial Above -
year, YTLC recorded a RM16m exceptional one-off gain arising from the In Line -
disposal of its 21.5% stake in Jurong Cement Ltd. Below -

Issued Capital (m shares) 492.2

♦ Dividends. YTLC declared a final single-tier dividend of 1.875 sen (subject Market Cap (RMm) 1993.3
to the approval of shareholders), bringing total dividend declared YTD to Daily Trading Vol (m shs) 0.03
13.125 sen. 52wk Price Range (RM) 3.8-4.37
Major Shareholders: (%)
♦ YoY. Despite lower sales volume, FY06/10 net profit increased by 11.5% YTL Group 49.0
Deustche Bank 9.1
from RM239.3m to RM266.9m mainly due to; 1) one-off RM16m gain
arising from the disposal of its 21.5% stake in Jurong Cement Ltd; 2)
improved operational efficiences; and 3) lower finance costs. FYE Jun FY10 FY11 FY12
EPS Revision (%) - - -
♦ QoQ. Stripping out an exceptional gain of RM16m, 4QFY06/10, net profit Var to Cons (%) - - -
rose by 8.2% qoq, mainly due to higher sales volume and higher domestic
PE Band Chart
cement prices. Recall, domestic cement prices were raised by 10% effective
May 10. PER = 15x
PER = 12x
PER = 9x
♦ Future prospects. We expect YTLC to benefit from the anticipated pick-up PER = 6x
in cement consumption from FY06/11, on the back of the rollout/resumption
of several large-scale projects as well as the pick-up in property
development in the central region. Over the longer term, we believe cement
consumption is likely to be sustained on the back of the 10MP. However, we
believe better performance at YTLC’s domestic operations will be partly
offset by: (1) Weaker performance at its China operations on the back of Relative Performance To FBM KLCI
intense competition arising from overcapacity; and (2) higher energy costs,
in particular thermal coal. FBM KLCI

♦ Risks to our view. The risks include: (1) Lower-than-expected roll-out of

public infrastructure projects, resulting in lower demand for cement; and
YTL Cement
(2) Escalation in energy costs, such as coal and diesel prices and electricity
tariff.

♦ Forecasts. Maintained.
Chye Wen Fei
♦ Investment case. Indicative fair value has been lowered by 2.9% from (603) 92802172
chye.wen.fei@rhb.com.my
RM5.51 to RM5.35 as we roll forward our valuation base year from CY2010
to CY2011. Maintain Outperform.

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Table 2: Earnings Review (YoY Cumulative)

FYE June 2009 2010 % YoY Observations/ Comments
12M 12M Chg
Turnover 1,968.3 1,841.7 -6.4 Due mainly to lower sales volume.
Operating profit 404.9 443.0 9.4 Boosted by: (1) Margin expansion arising from improved operational
efficiencies; and (2) One-off gain arising from the disposal of 21.5% stake in
Jurong Cement Ltd.
Finance costs -42.7 -31.8 -25.4
Associates -1.9 -0.8 -56.2
Pretax profit 360.3 410.4 13.9 Helped further by lower finance costs.
Taxation -95.5 -101.3 6.1
Minority interest -25.6 -42.1 64.6 Reflecting improved performance from 64.8%-owned Perak Hanjoong.
Net profit 239.3 266.9 11.5 Filtered down from pretax profit.
Core Net profit 239.3 250.9 4.8 One-off gain of RM16m
EPS 48.6 54.2 11.5
Core EPS 48.6 51.0 4.8

Operating margin (%) 20.6 24.1 3.5 pts

Pretax margin (%) 18.3 22.3 4.0 pts
Net profit margin (%) 12.2 14.5 2.3 pts
Effective tax rate 26.5 24.7 -1.8 pts

Table 3: Earnings Review (QoQ)

FYE Jun 2010 2010 2010 2010 % QoQ Observations/ Comments
(RMm) 1Q 2Q 3Q 4Q Chg
Turnover 447.6 483.6 429.0 481.5 12.2
Operating profit 113.0 104.6 113.9 111.6 -2.1
Finance cost -6.6 -9.0 -8.1 -8.1 -0.1 Stable.
Associates 0.1 -0.7 -0.1 -0.1 -12.5
Pretax profit 106.5 94.8 105.7 103.4 -2.2 Lower due to a gain on disposal of an investment of
RM16 mln in previous quarter.
Taxation -27.8 -25.9 -22.4 -25.2 12.7
Minority interest -9.4 -12.4 -7.2 -13.1 81.8 Improved performance from 64.8%-owned Perak
Hanjoong Simen, hence higher minority interest.
Net profit 69.3 56.5 76.1 65.0 -14.5 Filtered down from pretax profit.
Core Net profit 69.3 56.5 60.1 65.0 8.2
EPS (sen) 14.1 11.5 15.5 13.2 -14.5
Core EPS (sen) 14.1 11.5 12.2 13.2 8.2

Operating margin (%) 25.2 21.6 26.5 23.2 -3.4 pts

Pretax margin (%) 23.8 19.6 24.6 21.5 -3.2 pts Exceptional gain in previous quarter
Net profit margin (%) 15.5 11.7 17.7 13.5 -4.2 pts
Effective tax rate 26.1 27.3 21.2 24.4 -3.2 pts

Table 4: Earnings Forecasts Table 5: Forecast Assumptions

FYE Jun FY09A FY10A FY11F FY12F FYE Jun FY11F FY12F

Turnover 1,968.3 1,841.7 1,914.9 1,922.1 Malaysia Operations ('000 tonnes p.a.)
Turnover growth (%) 34.7 -6.6 3.9 0.4 Clinker Capacity 4,200 4,200
Grinding Capacity 5,700 5,700
EBITDA 497.4 493.0 513.4 491.6
EBITDA margin (%) 25.3 26.8 26.8 25.6 Malaysia Operations ('000 tonnes p.a.)
Clinker Capacity 1,550 1,550
Depreciation -92.5 -89.1 -85.8 -82.2 Grinding Capacity 1,500 1,500
Finance costs -42.7 -31.8 -46.4 -41.4
Associate -1.9 -0.8 3.0 3.0 Exchange Rate Assumptions
Exceptional income 0.0 16.0 0.0 0.0 RM/RMB 0.52 0.52
Pretax profit 360.3 410.4 384.2 370.9 US$/RM 3.50 3.50
Taxation -95.5 -101.3 -96.0 -92.7
Minority interests -25.6 -42.1 -20.0 -20.0
Net profit 239.3 266.9 268.1 258.2
Exceptional income 0.0 -16.0 0.0 0.0
Core net profit 239.3 250.9 268.1 258.2
Source: Company data, RHBRI estimates

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IMPORTANT DISCLOSURES

This report has been prepared by RHB Research Institute Sdn Bhd (RHBRI) and is for private circulation only to clients of RHBRI and RHB Investment Bank Berhad
(previously known as RHB Sakura Merchant Bankers Berhad). It is for distribution only under such circumstances as may be permitted by applicable law. The
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be contrary to opinions expressed by other business units within the RHB Group as a result of using different assumptions and criteria. This report is not to be
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may from time to time have an interest in the securities mentioned by this report.

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The research analysts, economists or research associates principally responsible for the preparation of this research report have received compensation based
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The recommendation framework for stocks and sectors are as follows : -

Stock Ratings

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

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

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

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

Industry/Sector Ratings

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

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

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

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