Market Strategy 2011

INVESTMENT RESEARCH
PP13693/04/2011(029398)
3 January 2011
Market Strategy FBMKLCI : 1,518.91

End 2011 target: 1,650
2011 investment outlook: Make hay while the sun shines

• Global recovery intact amidst uncertainty Sector Calls
Having weathered a stormy summer in 2010, recent economic data
suggests that the global economy has started to resume its recovery. Sector Call Chg
Despite the stabilisation of growth in the developed economies and
acceleration of growth in the emerging economies, the outlook for the Automotive Neutral
Aviation Overweight ▲
global economy remains fraught with risks. Of particular concern are the
Banking Neutral
downside risks associated with (1) policy errors in the containment of Building materials Neutral
inflation and asset price bubbles, (2) intensification of protectionist Construction Overweight ▲
sentiment, (3) substantial deterioration in the health of developed Consumer Overweight
economies, and (4) escalation of the sovereign debt crisis. The recovery Gaming Neutral
will remain uneven and bifocal in nature, characterised by sustained Media Overweight
growth in emerging economies and strengthening recovery in the Oil & gas Overweight
developed economies, punctuated by tail risks. Plantation Overweight
Power Neutral ▼
Property Neutral
• Market poised to perform in early 2011 Technology Neutral
Despite valuations looking a little stretched when compared to regional Telecommunication Neutral
markets, the Malaysian equity market is expected to carry the strong Toll Neutral
momentum in 2H2010 into 2011. Fundamentally, it is driven by resilient Water Neutral
domestic consumption amid an accommodative interest rate environment.
However, it is the positive sentiment which we believe will push the market
higher, even beyond its fundamental valuations. The market will be Top Stock Picks
buoyed by the fast-tracking of M&A activities and implementation of
economic transformation programmes before the widely expected 14
th Target
Stocks Call price
General Election is held in 1H2011. Another driver is the continued strong
RM
participation by foreign investors who are capitalising on the thematic play
of overnight policy rate normalisation and Ringgit appreciation. Maybank Buy 10.26
Sime Darby Trading buy 11.80
• Maintain FBMKLCI target at 1,650 Gamuda Trading buy 4.66
We are maintaining our end-2011 FBMKLCI target of 1,650 which is AirAsia Buy 3.50
premised on expected CY11 and CY12 earnings growth of 13.2% and Parkson Buy 6.70
SapuraCrest Buy 3.50
10% respectively and mid-cycle P/E valuation of 15x. However, in a
Sunway Holdings Buy 2.60
liquidity-driven market as seen in 2007 and early 2009, the market P/E
can expand to the 17x-18x level. In a liquidity-driven rally, the FBMKLCI
could potentially touch 1,870 based on 17x P/E, implying an upside of Bernard Ching
23.1% from current level. hyching@ecmlibra.com
+603 2089 2988
• Make hay while it shines
Given our expectation of a strong market performance in 1H2011, we
favour cyclical stocks (higher beta) over defensive stocks (lower beta). We
prefer stocks which benefit from resilient domestic consumption and
investment. Liquidity is also a key criterion in our stock selections given
the myriad of external risks which may stifle market performance and
trigger a sell down. Our big cap top picks are Maybank, Sime Darby,
Gamuda, AirAsia, Parkson, and SapuraCrest. That said, upside potential
is not great at current valuation levels as we can only expect another 10-
20% in gains across the board for big cap stocks. Although laggards
seem to present good value proposition now, investors should exercise
caution in pursuing such a strategy as liquidity may dry up when the
market reverses. For value stocks, besides being cheap as compared to
big cap stocks, we prefer laggards which are fairly liquid and/or have near
term re-rating catalysts. Our top pick for value stocks is Sunway Holdings.
Among non-rated stocks, we also like Multi-Purpose and Hap Seng
Consolidated.
On sector weighting, we are upgrading the aviation and construction
sectors from neutral to overweight while downgrading the power sector
from overweight to neutral. We maintain our existing overweight calls on
consumer, media, oil & gas, and plantation sectors.
INVESTMENT RESEARCH
TABLE OF CONTENTS
Economic outlook 1
Market outlook 7
2011 strategy 19
Sector overview
Automotive 23
Aviation 25
Banking 27
Building materials 29
Construction 31
Consumer 33
Gaming 35
Media 37
Oil & gas 39
Plantation 41
Power 43
Property 45
Technology 47
Telecommunication 49
Toll 51
Water 53
Top stock picks
AirAsia 57
Gamuda 59
Malayan Banking 61
Parkson 63
SapuraCrest 65
Sime Darby 67
Sunway Holdings 69
Earnings estimate of ECM universe of stocks 71

INVESTMENT RESEARCH
ECONOMIC OUTLOOK
Global economic growth to be sustained but with growing divergence

Going into 2011, we project a baseline scenario of stabilising and sustained growth globally,
underpinned by the continued theme of divergent growth paths. As the gravitational centre
of global growth momentum shifts eastwards, emerging economies and commodity
exporters are expected to see sustained GDP growth via domestic demand. The developed
Western economies worst-affected by the financial crisis have started to transition from
stimulus and inventory-aided recovery to self-sustained growth, but remain hobbled by
difficult structural problems. A direct result of this bipolarity between the emerging and
developed economies is an “unbalanced” global economy, of which fiscal imbalances, trade
imbalances, and interest rate and currency differentials are by-products. Given the
entrenched nature of global structural problems, these issues are unlikely to rescind from
the limelight in 2011.
Figure 1 : Global GDP growth Figure 2 : GDP spread (emerging vs developed)
% (Annual % change) percentage points

10 7
6
8
5
6 4
3
4 2
1
2
0
0 -1
Advanced economies -2
-2 Emerging and developing economies -3
World
-4 -4
80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10
Source: IMF, ECM Libra Source: World Bank
Softening growth in emerging markets will dissipate by end 1Q11

Most emerging market economies withstood the Eurozone sovereign debt scare, Private consumption will lead
protectionist threats, and hard-landing scenarios to recover strongly in 2010. The execution
growth
of exit strategies in 2010 tempered economic activity in 2H 2010. However, purchasing
manager indices (PMI) suggest industrial slowdown should dissipate by the end of 1Q 2011.
Monetary policy tightening and
Private consumption and investment will be key growth drivers in 2011. Focus turns to
mitigating capital inflows will
tightening monetary policy (50-100 bps hikes in benchmark rates expected across emerging
be in focus
markets) and mitigating the effects of capital inflows from easy monetary policies in
developed markets including the second round of quantitative easing (QE2) in the United
States.
Figure 3 : Gross government debt Figure 4 : Purchasing managers indices on the rise
% of GDP %
140 65
China PMI
120 G20 Advanced
60
100 55
Advanced
80 50
60 45
G20 Emerging
Low income
40 40 US PMI
Emerging
20 35
0 30
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2005 2006 2007 2008 2009 2010 2011
Source: IMF Source: ISM, CFLP
1
INVESTMENT RESEARCH
Under great scrutiny is The People’s Bank of China (PBC), which has signalled the start of a China lags behind other Asian
tightening cycle in late 2010 but lags other Asian central banks in the tightening cycle and central banks in tightening
the PBC faces more pressing inflationary concerns as a result of its exchange rate regime. cycle, expect 75bps hike
As a result, further interest rate and RRR hikes are expected in 2011. The benchmark 1-
year lending rate is expected to increase by 75bps in a gradual fashion from 5.81%
currently. The loan quota for 2011 will be lower than 2010, estimated at RMB6.0-6.5trn or a
15% increase in the stock of loans, as opposed to RMB7.5trn in 2010, which equated to a
17% growth. Against this backdrop, RMB is expected to appreciate 5% in 2011 to
RMB6.30/USD.
Developed markets return to self-sustained growth

Developed markets are expected to return to a modest level of self-sustained growth in Modest growth with low
2011, with growth driven by both private consumption and private investment through the inflationary pressure in
utilisation of high levels of corporate cash balances. The significant degree of economic developed markets
slack, as exemplified by the high unemployment rates and low capacity utilisation rates
relative to pre-crisis levels, puts a dampener on inflationary pressures. In 2011, we expect
this to translate to GDP growth rates of 2.8% for the US, 1.0% for Japan and 1.5% for the
Eurozone. Contained inflation in developed markets and low levels of resource utilisation
support the maintenance of easy monetary policy, so no interest rate hikes foreseen for US,
Eurozone, and Japan until 4Q 2011 at the earliest.
Self-sustained growth in the US is expected to come from (1) increased investment from the US growth will come from
wind down of corporate reserves, (2) improved labour market conditions and consumer private investment and
confidence feeding into increased private consumption, (3) supportive monetary policy, and consumption
(4) USD depreciation and external demand driving net exports. The lack of options on the
fiscal front will push the US government to focus on export initiatives. Export will also benefit from
weaker USD
We believe continued global rebalancing will work in US’ favour. Continued budget strains at
the state and local government level, and public backlash against fiscal expansion should Fiscal consolidation will crimp
see government expenditure subtracting from GDP growth. On the flipside, US may surprise growth in US but labour and
to the upside with higher than forecast growth if labour and housing markets recover ahead housing markets recovery may
of expectations. surprise on the upside
The persistence of unemployment is partly a psychological phenomenon. While the

structural component of US unemployment has no quick remedy, given the depth of labour
retrenchment, the strength of economic recovery and the jump in labour productivity, the
cyclical increase in job growth should have been evident by now. As such, we expect steady
improvements in hiring and business sentiment.
Monetary conditions will likely stay supportive as Federal Reserve has indicated willingness
to ease monetary policy further, in the event that it fails to meet its dual mandate of growth
and employment.
Nevertheless, an increasingly tense political environment and the impending jostling for
position ahead of 2012 Elections could pose a policy risk for incumbent administration and
the Federal Reserve, thus heightening uncertainty over the US outlook.
Figure 5 : US real GDP growth Figure 6 : Contribution to US real GDP growth
q-o-q % (SAAR) percentage points

8 (q-o-q, SAAR)
8
6
6 5.4 5.0
4
3.2 3.7
4 3.0 2
2.3 2.9 2.5
1.6 1.7 0
2 1.4 0.9
0.1 0.6
-2
0
-4
-2 -0.7 -0.7
-6
-4 -8
-4.0
-4.9 -10
-6
1Q06 3Q06 1Q07 3Q07 1Q08 3Q08 1Q09 3Q09 1Q10 3Q10
-8 -6.8
Consumption Investment Net Exports
1Q06 3Q06 1Q07 3Q07 1Q08 3Q08 1Q09 3Q09 1Q10 3Q10 Govt Spending Overall
Source: U.S. Bureau of Economic Analysis Source: U.S. Bureau of Economic Analysis
2
INVESTMENT RESEARCH
Figure 7 : US unemployment rate & initial jobless claims Figure 8 : Change in US non-farm payroll
(4-w k moving average) % ('000)
750,000 12 600
11 400
650,000
10 200
550,000 Initial Claims (LHS) 9 0
8
450,000 -200
7
-400
350,000 6
-600
5
250,000 -800
4
Unemployment rate (RHS)
150,000 3 -1000
1965 1969 1974 1979 1984 1989 1994 1999 2004 2009 2008 2009 2010
Source: U.S. Bureau of Labor Statistics, Dept of Labor Source: U.S. Bureau of Labor Statistics
Figure 9 : Recovery in US non-farm payroll Figure 10 : US personal income & consumer spending
110 y-o-y %
109 Trough = 100 1975 1982 1991 2003 2009 7 Real
108 6 Consumer
Spending
107 5
106 4
105 3
104 2
103 1
102 0
101
-1
100 Real Disposable Personal
-2
99 Income
-3
-4 -2 0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Months bef ore and af ter bottom
Source: U.S. Bureau of Labor Statistics Source: U.S. Bureau of Economic Analysis
Figure 11 : US automotive sales Figure 12 : US consumer price index
SAAR (m) y-o-y %

20 7
6
18
5
4
16
3
14 2
Replacement rate = 12 m units 1 Core CPI
12 0
-1
10
-2 Headline CPI
8 -3
2006 2007 2008 2009 2010 2011 00 01 02 03 04 05 06 07 08 09 10 11
Source: Motor Intelligence Survey Source: U.S. Bureau of Labor Statistics
3
INVESTMENT RESEARCH
Major themes in 2011

• Global reflation/QE2
We could potentially witness the boom-bust of asset markets in 2011 as ample liquidity Global reflation will see the
provided by global central banks has increased likelihood of bubble formations. boom-bust of asset markets
Insufficient tightening could stoke bubbles in asset prices. One area of concern is the
property market, especially in China, Hong Kong, and Singapore which will likely face
more administrative curbs to dampen speculative activities.
Rise in asset and commodity
Besides real estates, commodity prices will also likely edge higher in 2011 driven by prices will lead to higher
strong global demand, supply concerns, weak dollar impact on USD-denominated inflation and lower purchasing
prices, and inventory-stocking by major economies affecting prices at the margin. power
Inadvertently, there will be a potential risk of spill over from food and energy price
inflation into broader economy via increased inflation expectations, upward wage Emerging markets most
pressures and lower consumer purchasing power overall. This upside risk to inflation vulnerable due to higher
may be more evident in the emerging markets, where excess demand pervades and proportion of household
food and energy prices comprise a higher proportion of household spending especially spending on energy and food
in China, India, and Vietnam.
Against such a backdrop, we expect control over capital inflows to be a key focus of
central banks in the emerging markets as easy monetary policies in developed markets
has flooded emerging markets with cheap and abundant liquidity. Imperfectly sterilised
inflows of capital will worsen overheating concerns in some economies and large Central banks in emerging
volumes of capital flows from developed to emerging markets may lead to sudden markets will need to curtail
dislocations under circumstances of surprises or increased uncertainty. Foreign capital inflows gradually
exchange intervention, curtailed prescriptions of administrative capital controls, interest
rate and RRR hikes are among the policy tools that central banks in emerging markets
could deploy to stem the tide of massive capital flows. However, introduction of any
measures are likely to be gradual and incremental to reduce the impact to the real
economy, as well as international criticism.
• Global rebalancing
Global rebalancing will be
Road to global rebalancing will be paved with national agendas. Economic players
dominated by domestic
continue to pursue policies that favour domestic priorities, and global efforts remain
relatively toothless. Diplomatic posturing and sabre-rattling likely to occur from time to agendas
time, though exigent circumstances have produced collective and cooperative solutions
in recent instances. A key risk exists if the recovery in the developed markets loses
momentum considerably and slides into double dip recession, in that political pressure
to resort to heavy-handed countervailing protectionism could be damaging to global
growth.
• Intermittent sovereign debt and geopolitical risks
Empirical studies indicate that the economic growth tends to be subdued and the stock
of public debt tends to rise for several more years in the aftermath of financial crises. Lack of systemic solutions to
The lack of a systemic solution with regards to fiscal consolidation, real economic Eurozone sovereign debt woes
adjustment, the restructuring of bank debts, and to tackling sovereign debt funding will see credit spreads rising
shortfalls, heightens the likelihood that market pressures on troubled peripheral
economies will resurface in 2011. In the meantime, sovereign credit spreads will stay
elevated with brief spikes during periods of extreme uncertainty. A combination of
support from core Eurozone countries and the IMF remains the most politically feasible
mechanism in the event that indebted peripheral countries face default risk. With Attention will turn to Spain and
Greece and Ireland already receiving assistance, attention will turn to Portugal and Portugal in 2011
Spain in 2011, and of the adequacy of the USD1trn emergency fund (EFSF). While
European policymakers should continue to display political will and avert contagion, the
risk of policy errors that could spark a contagion and global crisis hides in the
background.
4
INVESTMENT RESEARCH
Malaysia’s economic outlook

Malaysia’s economic outlook for 2011 is expected to be in line with the general outlook for
emerging markets, with growth expected to be above trend and inflationary concerns on the
horizon. Over the medium term, the progress of fiscal consolidation and structural reform
remain the key challenges, though both are being tackled by the government.
We expect moderation in GDP growth from approximately 7% in 2010 to 5.2% in 2011 due Real GDP growth will moderate
to lower export and consumption growth. The softness in manufacturing output and exports to 5.2%
should bottom out in 1Q 2011. Growth outlook rests on the Economic Transformation
Programme (ETP) implementation to drive private investment, and foreign direct investment
(FDI) is estimated to rise alongside domestic private investment. With the announced
budget deficit of 5.4% in 2011 only marginally lower than the 5.6% registered in 2010, fiscal
consolidation has been put on the backburner for 2011, which will provide some support to
overall GDP.
Inflation is expected to rise by 2.7% in 2011, as inflationary pressures are relatively CPI to rise 2.7%
contained due to gradual MYR appreciation and interest rate increases. However, risk pass
through from global commodity price inflation and further subsidy reforms may lend upward
pressure to the CPI towards the tail end of 2011.
The resumption of global growth momentum and the surfacing of reflationary trends in 2H Another 50bps OPR hike
2011 will see BNM hiking interest rates, but by a lower quantum than emerging market expected
average due to its head start in normalising interest rate. We expect another 50bps hike to
bring the OPR to 3.25% by end 2011.
On currency, we expect the MYR to strengthen against the USD further in 2011, driven by
RM/USD to appreciate to 2.97
resumption of BNM policy rate normalisation and depreciation of USD through the
by end 2011
implementation of a second round of quantitative easing in the United States. MYR is
expected to appreciate to RM2.97 by end 2011. Like the MYR, Asia ex Japan currencies
should move more or less in line with the RMB/USD. MYR is also likely to appreciate against
developed market debtor countries, though to lesser extent than US$ (<4%).
Figure 13 : Malaysia economics highlight
2009 2010F 2011F
Real GDP (y-o-y, %) -1.7 7.0 5.2

Real private consumption (y-o-y, %) 0.7 6.7 6.3
Real gross fixed capital formation (y-o-y, %) -5.6 7.7 4.6
Real government expenditure (y-o-y, %) 3.1 0.5 4.5
Real exports (y-o-y, %) -10.4 11.2 6.7
Real imports (y-o-y, %) -12.3 16.9 7.2
Fiscal balance (% of GDP) -7.4 -5.6 -5.4
Current account (% of GDP) 16.5 14.9 13.9
CPI (y-o-y, %) 0.6 2.0 2.7
Benchmark interest rate (OPR) 200 275 325
Exchange rate, end-of-period (RM/USD) 3.40 3.13 2.97
Unemployment rate (%) 3.7 3.3 3.2
Source: BNM, ECM Libra
5
INVESTMENT RESEARCH
Figure 14 : Malaysia real GDP growth Figure 15 : Malaysia real private consumption growth
y-o-y % y-o-y %
12 16
10 14
8 12
6 10
4 8
2 6
0 4
-2 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
2
-4 0
-6 -2
-8 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Source: Department of Statistics Source: Department of Statistics
Figure 16 : Malaysia export growth Figure 17 : Malaysia exports vs OECD CLI
y-o-y % y-o-y %
70 50 6
60 40 5
50 4
30 Total Exports
40 3
Total 20
30 2
20 10 1
10 0 0
0 -1
-10
-10 -2
-20
-20 OECD CLI -3
E&E
-30 -30 -4
-40 -40 -5
Jan-00
Jul-00
Jan-01
Jul-01
Jan-02
Jul-02
Jan-03
Jul-03
Jan-04
Jul-04
Jan-05
Jul-05
Jan-06
Jul-06
Jan-07
Jul-07
Jan-08
Jul-08
Jan-09
Jul-09
Jan-10
Jul-10
Jan-11
Jul-11
Jan-00
Jul-00
Jan-01
Jul-01
Jan-02
Jul-02
Jan-03
Jul-03
Jan-04
Jul-04
Jan-05
Jul-05
Jan-06
Jul-06
Jan-07
Jul-07
Jan-08
Jul-08
Jan-09
Jul-09
Jan-10
Jul-10
Jan-11
Jul-11
Source: Department of Statistics Source: Department of Statistics, OECD
Figure 18 : Malaysia consumer price index (CPI) Figure 19 : Malaysia loans growth vs money supply
y-o-y % y-o-y % y-o-y %

15 60
10 Bank Lending
Grow th (LHS) 50
8
10 40
6
30
4 5
20
2
10
0 0
0
-2
-5 -10
-4 M3 (RHS) -20
Jan-06
Jul-06
Oct-06
Jan-07
Jul-07
Oct-07
Jan-08
Jul-08
Oct-08
Jan-09
Jul-09
Oct-09
Jan-10
Jul-10
Oct-10
Jan-11
Apr-06
Apr-07
Apr-08
Apr-09
Apr-10
-10 -30
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Source: Department of Statistics Source: BNM
Surprises
While we are fairly optimistic about the global and Malaysia economic outlook in 2011,
downside risks which may derail the recovery process include (1) overly aggressive
monetary tightening in China, (2) sharp deterioration in G3 economies, and (3)
intensification of Eurozone debt crisis.
6
INVESTMENT RESEARCH
MARKET OUTLOOK
2010 market review

We started the year 2010 optimistically on improving corporate earnings growth momentum
but remained cautious due to fragile global economic recovery. We initially ascribed an end-
2010 FBMKLCI target of 1,390 and expect the market to be rather volatile. We were right as
the FBMKLCI surged in January but failed to breach the 1,300 level. It tested the 1,350 level
in April and again failed to hold on to earlier gains as market recovery has been tempered
by concerns over Eurozone sovereign debt crisis. The market ended the first half at 1,314 or
just 3.2% higher after two false starts.
However, the second half took us by surprise as corporate earnings grew stronger than
expected while foreign equity net inflows lent a helping hand. A combination of cheap YTD, the Malaysian benchmark
money in the developed markets, and robust economic growth and start of credit tightening is ahead of North Asian
cycle in the emerging markets has seen large foreign equity net inflow to the emerging markets but lags behind
markets, and Malaysia was no different. This has led to a strong rally and we have raised ASEAN
our end 2010 FBMKLCI target to 1,480.
Figure 20 : YTD performance of equity indices
FBMKLCI FBM Small Cap FBM Syariah

Re-indexed
125
+24%
120
+19%
115
+12%
110
105
100
95
90
Jan-10
Feb-10
Mar-10
May-10
Jun-10
Jul-10
Oct-10
Nov-10
Dec-10
Jan-11
Sep-10
Apr-10
Aug-10
Source: Bloomberg, ECM Libra
With the exception of MAS, Tenaga, Maxis, Berjaya Sports Toto (removed on 29 Nov),
Tenaga and Sime Darby, all 30 component stocks within the FBMKLCI posted gains in
2010. The FBMKLCI which was 246.13 pts higher or 19.3%, was predominantly driven by
strong performance of (1) banking stocks which contributed 110.38 pts of index gains or
8.7% due to strong results and a more lenient than expected Basel III rules, (2) Genting
group (39.86 pts of index gain or 3.1%) due to strong numbers from Genting Singapore, and
(3) telco stocks (41.95 pts of index gain or 3.3%) mainly due to continued strong
performance by Axiata. On individual stock performance, CIMB, Axiata and Genting were
the top three performers in terms of contribution to FBMKLCI movement in 2010 while
Maxis, Berjaya Sports Toto and Sime Darby were the worst three performers.
Despite a commendable market performance, Malaysia continues to lag behind regional

markets’ performance. 2010 performances of Indonesia (+46.1%), Thailand (+40.4%) and
Philippines (+37.6%) have far exceeded that of Malaysia.
7
INVESTMENT RESEARCH
Figure 21 : FBMKLCI index movers
Share price YTD price Index

Stocks @ 31 Dec change points
RM RM
CIMB 8.50 +2.08 +38.891

Axiata 4.75 +1.70 +34.639
Genting 11.18 +3.84 +34.356
Maybank 8.50 +1.64 +28.213 The rise in FBMKLCI was
Public Bank 13.02 +1.884 +21.608 mainly driven by banks,
AMMB 7.03 +2.03 +14.738 Genting, and telcos
KL Kepong 22.10 +5.60 +9.606
PLUS 4.52 +1.26 +8.142
IOI Corp 5.81 +0.34 +5.608
Genting Malaysia 3.39 +0.58 +5.506
RHB Capital 8.72 +3.42 +4.742
Tanjong (removed on 20 Sep) 21.68 +4.84 +4.445
DiGi 24.60 +2.64 +3.959
Telekom 3.51 +0.45 +3.857
YTL Corp 8.41 +1.11 +3.397
Astro (removed on 26 May) 4.29 +1.29 +3.198
Petronas Dagangan 11.70 +3.00 +2.883
PPB Group 17.26 +1.30 +2.544
Petronas Gas 11.10 +1.23 +2.258
Hong Leong Bank 9.20 +1.07 +2.187
YTL Power 2.44 +0.20 +1.915
UMW Holdings 7.02 +0.67 +1.849
Petronas Chemical (added on 29 Nov) 5.52 +0.21 +1.602
MMC 2.78 +0.35 +1.391
MISC 8.36 +0.243 +1.103
Hong Leong Financial (added on 26 May) 8.89 +1.08 +1.102
BAT 45.00 +2.20 +1.019
Gamuda (added on 20 Sep) 3.81 +0.07 +0.440
Nestle (removed on 21 Jun) 34.50 +1.40 +0.317
MAS (added on 21 Jun) 2.09 -0.04 -0.133
Tenaga Nasional 8.37 -0.03 -0.301
Maxis 5.30 -0.07 -0.505
Berjaya Sports Toto (removed on 29 Nov) 4.10 -0.25 -0.825
Sime Darby 8.80 -0.17 -2.346
FBMKLCI 1,518.91 +246.13 +246.13
Source: Bloomberg
Figure 22 : YTD performance of regional equity markets
46.1%
40.4% Malaysia’s stock performance
37.6%
lagged regional peers
21.9%
19.3%
16.7%
10.9%
8.8%
5.2%
-1.6% -3.0% -15.8%
Indonesia
Thailand
Malaysia
India
Hong Kong
Japan
China
Philippines
Korea
Singapore
Australia
Taiwan
Source: Bloomberg
8
INVESTMENT RESEARCH
Foreign equity inflows will remain strong

ASEAN countries have enjoyed strong foreign equity net inflows driven by resilient
economic growth and currency appreciation against the USD. The net inflows into this
region have set an all-time high record in Sep 2010 with net inflows of USD2.2bn while Nov
2010 net inflows remains strong at USD1.2bn. YTD, ASEAN has netted USD8.6bn in net
inflows or 81% higher y-o-y. Indonesia led the region with the largest net inflows of
USD433.8m in Nov, followed by Thailand at USD298.8m, Singapore at USD264.1m and
Malaysia at USD122.9m. Four out of the last five monthly net inflows into Malaysia have
exceeded USD180m, which is a level not seen since Feb 2008.
1
Figure 23 : ASEAN net equity flows
USD m
2500
ASEAN has seen the highest
foreign equity net inflows since
2000 Oct 2007
1500
1000
500
0
-500
-1000
-1500
-2000
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
1
Only includes Malaysia, Singapore, Indonesia, Thailand, Philippines and Vietnam
Source: EPFR
Figure 24 : Malaysia net equity flows
> USD180m monthly net

USD m
inflows. Levels not seen
600 since Feb 2008
400 Monthly net inflows in Malaysia

at levels not seen since early
200 2008
-200
-400
-600
Jan-06
Jul-06
Oct-06
Jan-07
Jul-07
Oct-07
Jan-08
Jul-08
Oct-08
Jan-09
Jul-09
Oct-09
Jan-10
Jul-10
Oct-10
Apr-06
Apr-07
Apr-08
Apr-09
Apr-10
Source: EPFR
9
INVESTMENT RESEARCH
Figure 25 : Indonesia net equity flows Figure 26 : Singapore net equity flows
USD m USD m
800 1000
800
600
600
400
400
200 200
0 0
-200
-200
-400
-400 -600
-600 -800
Jan-06
Jul-06
Oct-06
Jan-07
Jul-07
Oct-07
Jan-08
Jul-08
Oct-08
Jan-09
Jul-09
Oct-09
Jan-10
Jul-10
Oct-10
Jan-06
Jul-06
Oct-06
Jan-07
Jul-07
Oct-07
Jan-08
Jul-08
Oct-08
Jan-09
Jul-09
Oct-09
Jan-10
Jul-10
Oct-10
Apr-06
Apr-07
Apr-08
Apr-09
Apr-10
Apr-06
Apr-07
Apr-08
Apr-09
Apr-10
Source: EPFR Source: EPFR
Figure 27 : Thailand net equity flows Figure 28 : Philippines net equity flows
USD m USD m
800 150
600 100
400
50
200
0
0
-50
-200
-100
-400
-600 -150
Jan-06
Jul-06
Oct-06
Jan-07
Jul-07
Oct-07
Jan-08
Jul-08
Oct-08
Jan-09
Jul-09
Oct-09
Jan-10
Jul-10
Oct-10
Apr-06
Apr-07
Apr-08
Apr-09
Apr-10
Jan-06
Jul-06
Oct-06
Jan-07
Jul-07
Oct-07
Jan-08
Jul-08
Oct-08
Jan-09
Jul-09
Oct-09
Jan-10
Jul-10
Oct-10
Apr-06
Apr-07
Apr-08
Apr-09
Apr-10
Figure 29 : MYR is the 3rd strongest Asian currency against USD
Japanese Yen 14.1%

Thai Baht 10.7%
Malaysian Ringgit 10.5%
Taiw anese Dollar 9.8%
Singapore Dollar 8.8%
Philippine Peso 5.2%
Indonesia Rupiah 4.5%
Indian Rupee 3.7%
Chinese Renminbi 3.4%
South Korean Won 2.9%
Hong Kong Dollar -0.4%
Source: Bloomberg
10
INVESTMENT RESEARCH
Portfolio rebalancing among foreign institutional investors has seen Asia ex-Japan funds Foreign investors increasing
allocation to ASEAN increased from a low of 14.5% in Oct 2009 to 18.5% in Nov 2010. As portfolio allocation to ASEAN
much of the net equity inflows went into Indonesia at the inception of the rebalancing
exercise, Indonesia has seen its country allocation more than double from 1.9% in Nov 2008
to 4.5% in Nov 2010. Thailand and Philippines have also seen significant increase in
country allocation. However, Malaysia remains a laggard in the portfolio rebalancing
exercise, while allocation to Singapore has not picked up significantly.
Despite net equity inflows into Malaysia at a 2½ year high, Malaysian equities are still Allocation to Malaysia is off
relatively under-owned by foreign investors. Country allocation to Malaysia has bottomed recent low but remains well
out at around the 2.1%-2.2% level since Dec 2009 from a high of 6.3% in Apr 2007. It has below neutral level
only risen to 2.5% in Nov 2010. We believe the neutral country weighting for Malaysia to be
around 4% and as such, there appears to be significant room for further foreign equity
inflows into Malaysia. This is further supported by low foreign equity ownership of 21.8% as
of Oct 2010 as compared to recent peak of 27.5% in Apr 2007 and recent low of 20.4% in
Dec 2009.
On a cautionary note, foreign equity flows are notoriously short-term in nature. Past
Foreign investors may switch
experience has shown us that such hot money can flow out of a country in reaction to not
out to Asian countries which
only changes in country-specific macroeconomic conditions but also to other global events.
Our view is that in the near term, foreign equity net inflows will continue due to vast interest are laggards in interest rate
rate differential between Malaysia and advanced economies. But as Malaysia is ahead of normalisation
others in the credit tightening cycle, foreign investors may switch out to Asian countries
which are laggards for rotational play. Asian countries which we view to be laggards in the
credit tightening process include China, Indonesia, Philippines, Thailand, and Taiwan.
1
Figure 30 : ASEAN allocation (Asia ex-Japan) Figure 31 : Malaysia allocation (Asia ex-Japan)
% %
23.0 6.5
22.0 6.0
21.0 5.5
20.0 18.5% 5.0
19.0 4.5
18.0 4.0
17.0 3.5
3.0 2.5%
16.0
15.0 2.5
2.0
14.0
Jan-06
Jul-06
Oct-06
Jan-07
Jul-07
Oct-07
Jan-08
Jul-08
Oct-08
Jan-09
Jul-09
Oct-09
Jan-10
Jul-10
Oct-10
Apr-06
Apr-07
Apr-08
Apr-09
Apr-10
Jan-06
Jul-06
Oct-06
Jan-07
Jul-07
Oct-07
Jan-08
Jul-08
Oct-08
Jan-09
Jul-09
Oct-09
Jan-10
Jul-10
Oct-10
Apr-06
Apr-07
Apr-08
Apr-09
Apr-10
1
Only includes M’sia, S’pore, Indonesia, Thailand, Philippines & Vietnam
Figure 32 : Indonesia allocation (Asia ex-Japan) Figure 33 : Singapore allocation (Asia ex-Japan)
% %
4.5%
5.0 9.5
4.5 9.0
8.5
4.0
8.0
3.5
7.5
3.0
7.0
2.5 6.5
6.1%
2.0 6.0
1.5 5.5
Jan-06
Jul-06
Oct-06
Jan-07
Jul-07
Oct-07
Jan-08
Jul-08
Oct-08
Jan-09
Jul-09
Oct-09
Jan-10
Jul-10
Oct-10
Jan-06
Jul-06
Oct-06
Jan-07
Jul-07
Oct-07
Jan-08
Jul-08
Oct-08
Jan-09
Jul-09
Oct-09
Jan-10
Jul-10
Oct-10
Apr-06
Apr-07
Apr-08
Apr-09
Apr-10
Apr-06
Apr-07
Apr-08
Apr-09
Apr-10
11
INVESTMENT RESEARCH
Figure 34 : Thailand allocation (Asia ex-Japan) Figure 35 : Philippines allocation (Asia ex-Japan)
% %
4.5 4.3% 1.5
1.4
4.0 1.3 1.1%
1.2
3.5 1.1
1.0
3.0 0.9
0.8
2.5 0.7
0.6
0.5
2.0
Jan-06
Jul-06
Oct-06
Jan-07
Jul-07
Oct-07
Jan-08
Jul-08
Oct-08
Jan-09
Jul-09
Oct-09
Jan-10
Jul-10
Oct-10
Apr-06
Apr-07
Apr-08
Apr-09
Apr-10
Jan-06
Jul-06
Oct-06
Jan-07
Jul-07
Oct-07
Jan-08
Jul-08
Oct-08
Jan-09
Jul-09
Oct-09
Jan-10
Jul-10
Oct-10
Apr-06
Apr-07
Apr-08
Apr-09
Apr-10
Figure 36 : Foreign equity ownership
%
30 27.5 27.0 26.6
26.5 25.7
25.0
24.1
25
21.7 20.9 21.8
20.7 20.7 20.9 20.4 20.4 20.6 20.8
20
15
10
0
Jan-07
Jul-07
Oct-07
Jan-08
Jul-08
Oct-08
Jan-09
Jul-09
Oct-09
Dec-09
Jan-10
Jul-10
Oct-10
Apr-07
Apr-08
Apr-09
Apr-10
Source: Bursa Malaysia
Figure 37 : Interest rate normalisation among Asian economies
Change Average Potential

Since pre- further
Current Recent Recent recession hike
Country Policy Rate Rate (A) Low Low level (B) [(B) – (A)]
bps bps Bps bps Bps
Leaders
Malaysia Overnight policy rate 275 200 +75 350 +75
India Repo rate 625 475 +150 727 +102
Vietnam Base rate 900 700 +200 825 n/a
Laggards China, Indonesia, Philippines,

China 12-month BLR 581 531 +50 747 +166 Thailand and Taiwan are
Indonesia Reference rate 650 650 nil 860 +210 laggards in interest rate
Philippines Reverse repo rate 400 400 nil 650 +250 normalisation
Thailand Repo rate 200 125 +75 372 +172
Taiwan Discount rate 150 125 +25 320 +170
Source: Bloomberg
12
INVESTMENT RESEARCH
M&A theme expected to continued

M&A activities have picked up significantly in 2H2010. We noted noticeable trend of M&A activities picked up in
consolidation among property, insurance as well as toll players. Three mega property 2H2010, mainly involving
mergers have been announced so far involving UEM Land – Sunrise, IJM Land – MRCB property, insurance and toll
and Sunway City – Sunway Holdings. However, the proposed merger of IJM Land and players
MRCB has been called off last week as both parties could not agree to the terms of the
merger. In the insurance industry, Pacific Insurance, MAA and Jerneh Insurance have all
been acquired by foreign insurance companies. As for toll players, PLUS and MTD Capital
have received takeover offers which will see both companies being privatised.
We expect the M&A momentum to be sustained going into 2011 given favourable valuations M&A momentum expected to
and positive sentiments. The M&A theme will likely be driven by the oil & gas, and property continue in 2011 given
sectors as well as GLCs. In the oil & gas sector, smaller players may consolidate or be favourable valuations and
acquired by bigger players to create national or even regional champions. MMHE seems like positive sentiments
the perfect candidate to lead the consolidation process given its rising job orders and the
need to overcome its capacity constraint. Likely targets include Sime Engineering (a unit of
Sime Darby). Mergers among property players may also continue as smaller players face Property, oil & gas and GLCs
pressure to up their scales, otherwise face risk of being sidelined by investors who prefer are likely M&A candidates
exposure in larger and more liquid property stocks. Property companies which may be
involved in M&As include SP Setia, Mah Sing and E&O. Among GLCs, we identified Pos
Malaysia, BIMB Holdings and Malaysian Building Society as potential takeover targets.
CIMB is prime beneficiary of
One of the prime beneficiaries of a M&A streak in 2011 is CIMB, given its entrenched M&A deal flows
position in the investment banking scene in Malaysia. As such, we expect non-interest
income of investment banks to be underpinned by M&A deals.
Figure 38 : Notable M&A transactions (including privatisations) in 2010
Announcement
Date Sector Acquiree Acquirer
14-Jan-10 Building materials Hume Industries Hong Leong Industries Bhd

21-Jan-10 Banking EON Capital Bhd Hong Leong Financial Group
27-Jan-10 Automotive Edaran Otomobil Nasional Bhd Hicom Holdings Bhd
17-Mar-10 Media Astro All Asia Network PLC Astro Holdings Sdn Bhd
27-May-10 Healthcare Parkway Holdings Ltd Khazanah Nasional
28-Jun-10 Consumer Esmart Holdings Ltd Atlan Holdings Bhd
1-Jul-10 Gaming Genting Singapore PLC (UK casino business) Genting Malaysia Bhd
13-Jul-10 Building materials Malaysian Mosaics Berhad Gek Poh (Holdings) Sdn Bhd
16-Jul-10 Chemicals Titan Chemicals Corp Bhd Honam Petrochemical Corp
16-Jul-10 Steel Southern Steel Bhd Signaland Sdn Bhd
30-Jul-10 Power Tanjong PLC Tanjong Capital Sdn Bhd
4-Aug-10 Banking PT Bank INA Perdana Affin Bank Bhd
9-Sep-10 Consumer Jeco Pte Ltd Bonia Corp Bhd
14-Sep-10 Insurance Jerneh Insurance Bhd ACE INA International Holdings Ltd
24-Sep-10 Technology MCM Technologies Bhd Mezzanine Capital Sdn Bhd
8-Oct-10 Others NV Multi Corporation Bhd Mutual Tactic Sdn Bhd
15-Oct-10 Toll PLUS Expressway Bhd UEM Group Bhd & EPF
19-Oct-10 Banking PT Bank Mestika Dharma RHB Capital Bhd
4-Nov-10 Property Sunrise Bhd UEM Land Holdings Bhd
4-Nov-10 Education Sapura Resources Bhd (APIIT/UCTI) Ekuinas
15-Nov-10 Telecommunication GTC, GTL & AIMS Group TIME dotCom Bhd
17-Nov-10 Building materials Hume Industries Bhd Hong Leong Industries Bhd
23-Nov-10 Property IJM Land & MRCB Newco
24-Nov-10 Property Sunway City Bhd & Sunway Holdings Bhd Sunway Sdn Bhd
17-Dec-10 Marine services Scomi Marine Bhd (4 logistic companies) PT Rig Tenders Indonesia Tbk
20-Dec-10 Toll PLUS Expressway Bhd Jelas Ulung Sdn Bhd
20-Dec-10 Toll MTD Capital Bhd Dato' Dr Nik Hussain bin Abdul Rahman
Source: Bursa Malaysia
13
INVESTMENT RESEARCH
Election play
th
One of the unavoidable themes for 2011 is the 14 General Election, expected to be called
in 1H11. We examined the impact general elections have had on the FBMKLCI in the past.
Our findings indicate that there is no clear trend of market performance before or after the
general election. Consensus assumes that general elections have positive spill over effects
on the FBMKLCI but there were occasions in the past when the FBMKLCI posted strong
gains prior to the general election only to diminish later (1995 and 2004), the FBMKLCI
posted strong gains prior to and after the general election (1986 and 1999) and the
FBMKLCI posted heavy losses prior to and after the general election (1982).
Figure 39 : 1982 general election Figure 40 : 1986 general election
500 360
- 3 Months Election on + 6Months - 3Months Election on + 6Months
-19.4% 29 Mar 1982 -15.8% 15.6% 19 Jul 1986 32.1%
300
400
240
300
180
200
120
100 60
- -
Jan-86
Feb-86
Mar-86
May-86
Jun-86
Jul-86
Oct-86
Nov-86
Dec-86
Jan-87
Sep-86
Oct-81
Nov-81
Dec-81
Jan-82
Feb-82
Mar-82
May-82
Jun-82
Jul-82
Oct-82
Apr-86
Aug-86
Sep-81
Sep-82
Apr-82
Aug-82
Source: Bloomberg, Suruhanjaya Pilihan Raya Source: Bloomberg, Suruhanjaya Pilihan Raya
1,000 1,500
- 3Months Election on + 6Months - 3Months Election on + 6Months
-25.1% 5 Oct 1990 26.0% 4.4% 6 Apr 1995 0.5%
1,200
750
900
500
600
250
300
- -
Oct-94
Nov-94
Dec-94
Jan-95
Feb-95
Mar-95
May-95
Jun-95
Jul-95
Oct-95
Sep-95
May-90
Jun-90
Jul-90
Oct-90
Nov-90
Dec-90
Jan-91
Feb-91
Mar-91
Sep-90
Apr-95
Aug-95
Apr-90
Aug-90
Apr-91
14
INVESTMENT RESEARCH
1,200 1,250
- 3Months Election on + 6Months - 3Months Election on + 6Months
6.0% 11 Nov 1999 25.6% 12.5% 4 Mar 2004 -4.9%
1,000
900
750
600
500
300
250
- -
Oct-03
Nov-03
Dec-03
Jan-04
Feb-04
Mar-04
May-04
Jun-04
Jul-04
Oct-04
May-99
Jun-99
Jul-99
Oct-99
Nov-99
Dec-99
Jan-00
Feb-00
Mar-00
May-00
Jun-00
Sep-03
Sep-04
Sep-99
Apr-04
Aug-04
Aug-99
Apr-00
Figure 45 : 2008 general election
2,000
- 3Months: Election on + 6Months:
-17.6% 8 Mar 2008 -9.4%
1,500
1,000
500
-
Oct-07
Nov-07
Dec-07
Jan-08
Feb-08
Mar-08
May-08
Jun-08
Jul-08
Oct-08
Sep-07
Sep-08
Apr-08
Aug-08
Source: Bloomberg, Suruhanjaya Pilihan Raya
That said, we can draw inferences from the general elections of 1990 and 2008. In 1990, Only surprise results in general
the market expected fierce competition for Barisan Nasional (BN) from newly formed elections impact the FBMKLCI
Semangat 46 (S46). This probably explained the sharp drop in the FBMKLCI three months
before the general election. When BN retained its two thirds majority, the FBMKLCI rallied
three months later.
In 2008, the FBMKLCI was already reeling from the global credit crunch three months
before the general election only for the BN to lose their two thirds majority. This triggered a
massive sell down the following day and was exacerbated by the Jun 2008 steep hike in fuel
prices (+41%) and electricity tariffs (+24%). Therefore, we conclude that by and large
general elections do not impact the FBMKLCI but surprises in the general election results
do.
Figure 46 : Distribution of parliament seats and votes
Barisan Nasional Opposition Surprise general elections’

Year No. of Seats % seats % vote No. of Seats % seats % vote Total seats results in 1990 and 2008
adversely impacted FBMKLCI
1982 132 85.7 60.5 22 14.3 39.5 154
1986 148 83.6 55.8 29 16.4 41.5 177
1990 127 70.6 53.4 53 29.5 46.6 180
1995 162 84.4 65.2 30 15.6 34.8 192
1999 148 76.7 56.5 45 23.3 43.5 193
2004 198 90.4 63.9 21 9.6 36.1 219
2008 140 63.1 52.2 82 36.9 47.8 222
Source: Arah Aliran Malaysia: Penilaian Pilihan Raya
15
INVESTMENT RESEARCH
The key question now is if there will be another surprise result during the next general
election. Recent by-elections indicate growing support for Prime Minister, Datuk Seri Mohd
Najib Tun Abdul Razak and BN. Of the last 13 by-elections, Pakatan Rakyat’s (PR)
constituent parties (Parti Keadilan Rakyat, Parti Islam Se-Malaysia and Democratic Action
Party) won eight but four of the last five by-elections were won by BN. This indicates a
revival in popular support for BN.
Figure 47: Recent by-elections’ results
By-election Date Candidate Party

Permatang Pauh 26-Aug-08 Dato' Seri Anwar bin Ibrahim PKR
Kuala Terengganu 17-Jan-09 Haji Mohd Abdul Wahid bin Endut PAS
Bukit Gantang 7-Apr-09 Mohammad Nizar Bin Jamaluddin PAS
Bukit Selambau 7-Apr-09 Manikumar A/L Subramaniam PKR
Batang Ai 7-Apr-09 Malcom Mussen Anak Lamoh BN
Penanti 31-May-09 Mansor Bin Othman PKR
Manek Urai 14-Jul-09 Mohd Fauzi Bin Abullaj PAS
Permatang Pasir 25-Aug-09 Mohd Salleh Bin Man PAS
Bagan Pinang 11-Oct-09 Mohd Isa Bin Abul samad BN
Hulu Selangor 25-Apr-10 P.Kamalanathan A/L P.Panchanathan BN
Sibu 16-May-10 Wong Ho Leng DAP
Galas 4-Nov-10 Ab Aziz Bin Yusoff BN
Batu Sapi 4-Nov-10 Tsen Thau Lin BN
Source: Suruhanjaya Pilihan Raya
The positive surprise result during the next general election may be BN regaining its two Positive surprise of the next
thirds majority. Recent by-elections indicate that it will likely reduce the losses it suffered in general election is BN re-
the previous general election. This will likely spark a market rally, save for major negative capturing 2/3 majority
external factors.
Following the Mar 2008 General Election which saw changes of state government in four
states (Selangor, Perak, Kedah and Penang), a number of high profile construction jobs
were aborted. Penang was the hardest hit. In addition to the Penang Outer Ring Road and
the Penang Monorail, the RM1.2bn Mengkuang Dam expansion was also scrapped. That
said, as Penang’s water capacity reached a critical stage, the Mengkuang Dam expansion
was reinstated in 2009.
Other projects, although not shelved, experienced delays in implementation as approaches

taken by the federal and state governments differed. For example, the Pahang-Selangor
Interstate Raw Water Transfer project experienced delays in contract awards, particularly for
the RM2bn Langat water treatment plant, because it had been affected by the deadlocked
water industry restructuring exercise in Selangor.
We believe both contract awards for the project and progress in the water industry RM39.2bn in contracts up for
restructuring exercise in Selangor will be expedited in the event BN regained Selangor. grabs should BN retake states
Meanwhile, the high speed rail project has since been included in the country’s Economic it lost in the previous general
Transformation Programme as one of its Entry Point Projects. Other projects which could election
benefit include the West Coast Expressway, which has been included in the 10MP and
Budget 2011.
th
Figure 48 : Projects shelved post-13 general election in 2008
Project State Value (RM bn)

Penang Outer Ring Road Penang 1.2
Penang Monorail Penang 1.6
Channel dredging project at Penang Port Penang 0.3
Penang Global City Centre Penang 25.0
High Speed Rail to Singapore Selangor 8.0
West Coast Expressway Selangor, Perak 3.1
Administrative centre Kelantan n/a
Total 39.2
Source: Various
16
INVESTMENT RESEARCH
Maintain end-2011 FBMKLCI target of 1,650

We are maintaining our end-2011 FBMKLCI target of 1,650 which is premised on expected
CY11 and CY12 earnings growth of 13.2% and 10% respectively and mid-cycle P/E Maintain 1,650 target based on
valuation of 15x. Looking at P/E trend of the FBMKLCI since 2006, the average P/E is 14.8x 15x P/E
and 1x standard deviation above the average is 16.7x. However, in a liquidity-driven market
as seen in 2007 and early 2009, the market P/E can expand to the 17x-18x level. In a In a liquidity-driven rally, 1,870
liquidity-driven rally, the FBMKLCI could potentially touch 1,870 based on 17x P/E, implying can be reached
an upside of 23.1% from current level.
Although Malaysian equities are expensive at CY11 P/E of 15.1x, P/B of 2.1x when Malaysian equities are
compared to regional markets, we believe there is strong impetus for the market to perform expensive but positive
strongly in 1H2011 given the positive sentiment and expected slew of thematic news flow on sentiments and news flow
M&A activities, ETP implementation and general election. We would not be surprised if our contribute to a strong 1H2011
FBMKLCI target 1,650 be exceeded especially with keen accumulation by foreign investors. performance
However, we caution investors that past experience has shown us that such valuation is not
sustainable.
Figure 49 : FBMKLCI P/E (based on consensus earnings)

FBMKLCI can trade up
to 17x-18x in a
x liquidity-driven market
18
17 +1SD @ 16.7x
16
15 Average @ 14.8x
14
13 -1SD @ 12.8x
12
11
10
9
Jan-06
Jul-06
Oct-06
Jan-07
Jul-07
Oct-07
Jan-08
Jul-08
Oct-08
Jan-09
Jul-09
Oct-09
Jan-10
Jul-10
Oct-10
Apr-06
Apr-07
Apr-08
Apr-09
Apr-10
Source: Bloomberg
Figure 50 : FBMKLCI P/B
x
2.6
2.4
+1SD @ 2.3x
2.2
2.0 Average @ 1.9x
1.8
-1SD @ 1.6x
1.6
1.4
1.2
Jan-06
Jul-06
Oct-06
Jan-07
Jul-07
Oct-07
Jan-08
Jul-08
Oct-08
Jan-09
Jul-09
Oct-09
Jan-10
Jul-10
Oct-10
Apr-06
Apr-07
Apr-08
Apr-09
Apr-10
Source: Bloomberg
17
INVESTMENT RESEARCH
Figure 51 : Fundamentals of ECM universe by sector
Adj EPS Growth P/E P/BV ROE Net Div Yield

Sector Weighting 2011 2012 2011 2012 2011 2012 2011 2012 2011 2012
% % % x x x x % % % %
Automotive 1.1 6.9 7.4 10.8 10.1 1.8 1.6 16.7 16.4 4.7 5.1
Aviation 1.9 314.1 10.2 9.9 9.0 1.8 1.5 16.0 15.3 0.0 0.0
Banking 28.7 12.8 14.2 14.3 12.5 2.3 2.1 17.3 18.1 3.7 4.2
Building Materials 1.2 33.2 6.0 11.6 10.9 1.7 1.6 14.0 13.9 4.7 4.8
Construction 2.4 19.4 15.6 17.4 15.1 1.8 1.6 9.9 10.6 2.1 2.2
Consumer 3.0 9.9 12.3 15.9 14.2 15.5 15.1 28.9 28.8 4.2 4.4
Gaming 9.4 12.1 8.4 13.9 12.8 2.8 2.4 20.6 19.3 1.6 1.7
Infrastructure - Toll 3.4 34.2 6.6 13.1 12.3 3.1 2.9 24.0 23.6 5.3 5.7
Infrastructure - Water 0.1 9.1 11.8 6.3 5.6 0.6 0.5 9.0 9.3 4.3 4.3
Media 0.9 3.6 9.9 13.1 12.0 2.0 1.9 15.0 15.6 4.4 4.8
Oil & Gas 5.7 21.7 13.5 16.1 14.2 2.5 2.3 15.5 15.6 3.0 3.1
Plantation 17.9 7.7 -0.7 18.7 18.8 2.7 2.5 14.4 13.3 3.0 3.0
Power 7.5 11.1 15.8 13.0 11.2 1.5 1.4 12.2 10.3 3.8 4.2
Property 1.3 12.2 22.3 15.6 12.8 2.0 1.8 10.2 11.7 2.5 3.1
Technology 0.0 8.1 14.5 6.4 5.6 1.0 0.8 15.0 15.1 3.1 3.6
Telecommunication 15.4 8.2 7.6 16.1 15.0 5.1 5.1 31.1 33.0 4.8 5.1
ECM Universe 100.0 14.8 10.0 14.9 13.6 3.2 3.0 18.9 19.0 3.5 3.8
FBMKLCI 13.2 10.0 15.1 13.7
Source: ECM Libra
Figure 52 : Regional market CY11 P/E Figure 53 : Regional market P/B
16.0 15.8
3.1
15.1 2.8
14.6
14.3
13.7
13.3 2.1 2.1
12.9 2.0
12.4 12.3 1.9 1.8
12.2 1.8 1.7 1.7
1.4
1.2
10.4
Indonesia
China
India
Malaysia
Japan
Hong Kong
Thailand
Philippines
Singapore
Korea
Taiwan
Australia
India
Japan
Malaysia
Indonesia
China
Hong Kong
Thailand
Philippines
Singapore
Korea
Taiwan
Australia
Source: Bloomberg, ECM Libra Source: Bloomberg
Figure 54 : Regional market CY11 earnings growth Figure 55 : Regional market dividend yields
23.1% 4.6%
21.3%
20.4% 3.8%
3.6% 3.6%
3.4%
3.2% 3.2%
17.7%
15.8% 2.3% 2.2%
15.1% 15.0%
14.3% 1.8%
13.5% 13.2%
1.4% 1.3%
9.9%
8.6%
Thailand
Malaysia
Hong Kong
Indonesia
China
Japan
India
Philippines
Singapore
Korea
Australia
Taiwan
Indonesia
China
India
Thailand
Hong Kong
Japan
Malaysia
Philippines
Korea
Singapore
Australia
Taiwan
Source: Bloomberg, ECM Libra Source: Bloomberg
18
INVESTMENT RESEARCH
2011 STRATEGY
Given our expectation of a strong market performance in 1H2011, we favour cyclical stocks
(higher beta) over defensive stocks (lower beta). We prefer stocks which benefit from Prefer cyclical stocks which
resilient domestic consumption and investment. Liquidity is also a key criterion in our stock benefits from domestic
selections given the myriad of external risks which may stifle market performance and consumption and investments
trigger a sell down. Therefore, focus will still be on big caps for ease of entry and exit. That
said, upside potential is not great at current valuation level as we can only expect another Liquidity also a key criterion
10-20% in gains across the board for big cap stocks. Although laggards seem to present
good value proposition now, investors should exercise caution in pursuing such a strategy
as liquidity may dry up when the market reverses. For value stocks, besides being cheap as
compared to big cap stocks, we prefer laggards which are fairly liquid and/or have near term
re-rating catalysts.
Sector weighting
On sector weighting, we are upgrading the aviation sector from neutral to overweight on
improving passenger growth as well as rising revenue yield. The aviation sector is also a Aviation and construction
good proxy for rising consumption growth and disposable income in the ASEAN region. We upgraded to overweight
are also upgrading construction sector from neutral to overweight as job replenishment
outlook has improved following government’s decision to award the massive MRT project in
KL using conventional model rather than PPP model which requires contractor to have
strong balance sheet. The power sector has been downgraded from overweight to neutral Power downgraded to neutral
following our recent earnings and target price cuts on Tenaga due to rising coal prices. We
maintain our existing overweight calls on consumer, media, oil & gas, and plantation
sectors.
Figure 56: Sectors weighting
Neutral Overweight
Automotive Aviation
Banking Construction
Building materials Consumer
Gaming Oil & gas
Power Media
Property Plantation
Telecommunication
Technology
Toll
Water
Source: ECM Libra
Top stock picks

We have dropped Genting, Tenaga and IOI from our top picks and added Sunway Holdings.
Maybank has continued to show improved earnings following the disappointment of a

massive impairment charge in FY09. Maybank still trades below mid-cycle valuation and is
under-owned by foreign investors. Current foreign shareholding level of 13.2% is lower than
CIMB (42.3%) and Public Bank (26.3%). It is also significantly lower than the previous peak
foreign shareholding level of 22.8% seen back in 2007.
Sime Darby has been sold down following recent RM2bn impairment loss which was mainly
contributed by its energy and utilities segment. Sentiments were further dampened by
revelation of alleged criminal breach of trust by several former senior executives of the
conglomerate. That said, we believe the worst is already behind Sime. Despite recent rally
in CPO prices, Sime has lagged behind its peers. Continued strong performance in its motor
division as well as potential write back of impairment loss will also re-rate Sime.
Gamuda is expected to benefit from increasing news flow on the award of MRT project.
Gamuda which has been a favourite among foreign investors continue to be under-owned
by foreign investors.
19
INVESTMENT RESEARCH
AirAsia is benefiting from stronger passenger traffic growth and rising revenue per
passenger. Earnings CAGR of 23% expected over the next 3 years. CY11 P/E of 7.6x is still
undemanding when compared to Tiger Airways which currently trades at 13x CY11 P/E.
Parkson Holdings is expected to ride on strong consumption within Asia due to its
exposure to the fast growing retail markets in China and Vietnam while Malaysia provides a
stable earnings base. Parkson Holdings is also a cheaper proxy to the China retail market
as compared to Parkson Retail.
SapuraCrest has one of the strongest orderbooks within the oil & gas sector due to the
award of the 11 PSC umbrella jobs which spans 5 years and will contribute some RM1.5bn
in revenue per annum. Given recovering job flow in the industry and several new deepwater
fields slated for development, we do not see SapuraCrest running short on jobs. The group
is now in a net cash position which would allow them to gear up for M&A opportunities.
Sunway Holdings is our preferred entry into the enlarged Sunway group upon the merger
rd
of Sunway Holdings with Sunway City. The combined entity will become the 3 largest
property developer by market capitalisation. Based on our combined earnings estimates for
both entities, valuations of the enlarged Sunway group will be less than 10x P/E as
compared to P/E in excess of 20x for the top 2 developers i.e. UEM Land and SP Setia.
Figure 57 : Top stock picks
Price TP Mkt Cap P/E P/BV ROE Net Div Yield

Stocks Ticker Call RM RM RM m CY11 CY12 CY11 CY12 CY11 CY12 CY11 CY12
Maybank MAY MK Buy 8.50 10.26 62,239.0 13.2 11.7 1.9 1.7 14.4 14.9 5.7 6.4
Sime Darby SIME MK Trading buy 8.80 11.80 52,883.3 18.6 19.5 2.3 2.2 12.6 11.3 2.7 2.6
Gamuda GAM MK Trading buy 3.81 4.66 7,796.1 19.2 16.6 2.2 2.0 11.4 12.3 2.4 2.4
AirAsia AIRA MK Buy 2.53 3.50 7,015.9 7.6 7.2 1.7 1.4 18.9 16.7 - -
Parkson PKS MK Buy 5.39 6.70 5,894.7 13.9 11.2 1.9 1.5 17.7 19.1 2.7 3.2
SapuraCrest SCRES MK Buy 3.10 3.50 3,957.8 13.3 11.5 3.1 2.6 23.0 22.9 3.0 3.5
Sunway Holdings SGW MK Buy 2.24 2.60 1,359.0 7.4 6.2 1.2 1.0 16.8 17.3 2.8 3.3
Source: ECM Libra Share price as at 30 Dec 2010
Among non-rated stocks, we also like Multi-Purpose and Hap Seng Consolidated which are Among non-rated stocks, we
undervalued. Multi-Purpose is a conglomerate which is trading at less than 10x P/E. At also like Multi-Purpose and Hap
current valuation, investors only ascribing value to its NFO business but ignoring its Seng Consolidated
undervalued development landbank and other businesses such as general insurance and
stockbroking. Potential re-rating catalysts for Multi-Purpose include potential re-listing of
Magnum, disposal of general insurance and stockbroking businesses, and development of
landbank via joint venture with reputable developers. Hap Seng Consolidated is another
undervalued conglomerate with businesses in plantation, automotive, fertilizer trading,
property and building material. Plantation division will benefit from rising CPO prices and
fertilizer business also growing from increased demand and prices.
20
INVESTMENT RESEARCH
SECTOR OVERVIEW
21
INVESTMENT RESEARCH
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22
INVESTMENT RESEARCH
Sector Overview 3 January 2011
Automotive Neutral
(maintained)
Growth to soften in 2011

• 2010 to exceed expectations, slower growth for 2011 Stock Coverage
Total industry volume (TIV) for Jan-Nov 2010 grew marginally by 1.1% y-
o-y to reach 550k vehicles, making up 96.5% of Malaysian Automotive Bloomberg TP
Association’s (MAA) revised forecast of 570k. Average monthly sales for Company Ticker Call (RM)
11M10 have increased to 55k vehicles, up by 12.5% y-o-y. December’s
UMW Hldgs UMWH MK Buy 7.75
sales are expected to moderate further as consumers normally prefer to
wait and take delivery of 2011’s production stock. Assuming sales volume
of 40k for December, 2010’s TIV should be able to reach 590k,
Azida Nor-Azizi
surpassing MAA’s forecast by 3.5%. The MAA had forecasted a 2% y-o-y nazida_na@ecmlibra.com
growth in 2011, with TIV of 581k vehicles. Sales of passenger vehicles are +603 2089 2983
expected to hit 526k (90.6% of total TIV), while commercial vehicle sales
is projected to reach 54k (9.4%).
• Higher fuel prices

In its latest effort to reduce fuel subsidy, the Government has raised the
pump prices of RON 95 and 97. Effective 1 Dec 2010, prices of RON 95
and RON 97 are higher by 5 sen (to RM1.90/liter) and 15 sen
(RM2.30/liter), respectively. In our view, higher fuel prices will not
necessarily have a negative impact on auto sales as we believe that
consumers are likely to change their preference to more economical and
fuel-efficient vehicles, for instance hybrid cars.
• Possible hike in interest rate

BNM raised the Overnight Policy Rate (OPR) thrice in 2010, each by 25
bps to currently 2.75%. Our in-house economist projects a possible rate
hike in 2011 by 50 bps to 3.25%. This may raise hire purchase interest
rates. Historically, higher interest rates have no substantial impact on car
sales, so we believe MAA’s TIV forecast of 581k vehicles for 2011 should
stay intact.
• Maintain Neutral
Pure auto players such Tan Chong Motors (TCM MK, non-rated), Proton
(PROH MK, non-rated) and MBM Resources (MBM MK, non-rated) should
continue to enjoy decent sales growth in 2011. We also anticipate better
earnings from UMW Holdings (UMWH MK, Buy, TP: RM7.75), mainly on
strong vehicle sales backed by new car models from Toyota (Altis) and
Perodua (Myvi & Viva), as well as the turnaround in its O&G division.
Maintain NEUTRAL on the sector.
Figure 1 : Financial summary of stocks under coverage

Price EPS Growth Net Dividend
(RM) @ Mkt Cap EPS (sen) (%) P/E (x) P/BV (x) ROE (%) Yield (%)
Company 30 Dec (RM m) CY11 CY12 CY11 CY12 CY11 CY12 CY11 CY12 CY11 CY12 CY11 CY12
UMW Holdings 7.02 8,096.7 66.0 70.9 6.9 7.4 10.6 9.9 1.8 1.6 16.7 16.4 4.7 5.1
23
INVESTMENT RESEARCH
Figure 2 : TIV growth at 2%pa for 2011-14 Figure 3 : Passenger vehicle sales by marque (11M10)
Passenger Commercial Nissan

( ' 000) Honda 5%
700 8%
600 58
55 56 57
54 Others
500 51
10% Perodua
400
34%
300 560
486 5 17 526 536 547 Toyota
200 13%
100
0
2009 2010F 2011F 2012F 2013F 2014F Proton
30%
Source: MAA Source: MAA
Figure 4 : Commercial vehicle sales by marque (11M10)
Hino
7%
Isuzu
10%
Toyota
Mitsubishi 33%
13%
Nissan
14% Others
23%
Source: MAA
24
INVESTMENT RESEARCH
Aviation Overweight
(upgraded)
Softer 2011
• Economic recovery led higher growth Stock Coverage
The strong improvement in 2010 was backed by robust economic
recovery which saw a surge in business and consumer confidence. This Bloomberg TP
led to a sharp rebound in demand for air travel. According to the Company Ticker Call (RM)
International Air Transport Association (IATA), 11M10 passenger demand
AirAsia AIRA MK Buy 3.50
(RPK) in Asia Pacific rose 9.7% y-o-y, while capacity (ASK) rose by 3.4%
MAS MAS MK Buy 2.95
y-o-y. Passenger load factor for the period stood at 77.8%. In 2011, IATA
forecasted demand growth to soften to 6.7% y-o-y as economic conditions
in the region stabilise. On the other hand, capacity is expected to increase Azida Nor-Azizi
by 6.9% y-o-y following the rise in aircraft deliveries. nazida_na@ecmlibra.com
+603 2089 2983
• Growth to slow down in 2011
On the local front, we expect a moderate traffic growth in 2011 in line with
our expectation of a slower economic growth. Our 2011 GDP growth is
forecasted at 5.2%, compared to expected growth of 7.0% in 2010.
Potential catalysts for the sector include high tourism activities as airlines
introduce new routes and increase connectivity.
• Yield improvement
We expect passenger yields (RASK) to improve on better unit revenue
and strong demand. Average yields for AirAsia and Malaysia Airlines
(MAS) are expected to improve on strong passenger volume and higher
ancillary income as both airlines will expand its network routes through
introduction of new flights and increased frequencies as well as enhanced
value-added services.
• Fuel prices on the rise

Going forward, airline companies would again have to face the issue of
higher fuel prices. WTI crude oil have risen 7.9% y-o-y to US$91.4/barrel
while jet fuel price rose by 19.7% y-o-y to US$104.4/barrel. We reckon
that airlines would increase passenger fares or fuel surcharge to counter
higher fuel costs.
• Upgraded to Overweight
We have upgraded the sector to Overweight from Neutral as we expect a
strong and better year for AirAsia and Malaysia Airlines, respectively.
AirAsia remains as our top pick backed by its strong volume growth and
rising yield. For MAS, we expect the legacy carrier to report better cost
management and improvement in yields.

AirAsia 2.53 7,015.9 33.5 35.0 10.6 4.4 7.6 7.2 1.7 1.4 18.9 16.7 - -
MAS 2.09 6,985.1 14.7 17.8 189.9 21.2 14.2 11.7 1.9 1.6 13.2 13.8 - -
25
INVESTMENT RESEARCH
Figure 2 : Global aviation statistics Figure 3 : Asia Pacific aviation statistics
Capacity growth Traffic growth Load Factor (RHS) Capacity growth Traffic growth Load Factor (RHS)
% % %
% 15 90
15 85
80
10 10
80 70
5 5 60
75 50
0 0
40
70
-5 -5 30
65 20
-10 -10
10
-15 60 -15 0
Mar-08
Mar-09
Mar-10
Mar-08
Mar-09
Mar-10
Jul-08
Nov-08
Jul-09
Nov-09
Jul-10
Nov-10
Jul-08
Jul-09
Jul-10
Nov-08
Nov-09
Nov-10
Jan-08
Jan-09
Jan-10
May-08
May-09
May-10
Jan-08
May-08
Jan-09
May-09
Jan-10
May-10
Sep-08
Sep-09
Sep-10
Sep-08
Sep-09
Sep-10
Source: IATA Source: IATA
Figure 4 : Fuel prices on the rise Figure 5 : Passenger movements in Malaysian airports
US$ / barrel WTI Crude oil Singapore jet f uel No. of pax
200 60
180
160 50
140
120 40
100
30
80
60
20
40
20 10
0
-
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 200910M10
Source: Bloomberg Source: Malaysia Airports
26
INVESTMENT RESEARCH
Banking Neutral
(maintained)
Loans growth poised to slow down

• Loans growth showing signs of moderation Stock Coverage
For the first 11 months of the year, loans grew at a blistering pace of
11.8% or 12.9% on an annualised basis to RM876.3bn. On y-o-y basis, Bloomberg TP
overall loans grew at 13.2%. This was contributed by both expansion in Company Ticker Call (RM)
household loans (+13.9% y-o-y) as well as business loans (+12.4% y-o-y).
CIMB Group CIMB MK Hold 8.80
Despite strong loans growth in 2010, lending indicators are showing signs Maybank MAY MK Buy 10.26
of moderation in credit expansion going forward. While loans application, Public Bank PBK MK Hold 13.30
approval and disbursement in Nov 2010 continued to be in positive AMMB AMM MK Hold 6.02
territory, growing by 13.2%, 4.7% and 0.7% y-o-y respectively, the y-o-y Hong Leong HLBK MK Hold 9.43
growth rate is tapering off. On m-o-m basis, lending activities have
actually contracted as application, approval and disbursement shrunk by
Bernard Ching
6.7%, 0.6% and 0.7% respectively. hyching@ecmlibra.com
Although the implementation of ETP, which is predominantly financed by +603 2089 2988
the private sector, will result in higher business loans growth, we are
cautious on the prospect of project implementation delay at this juncture.
Furthermore, household loans growth is expected to slowdown as we
expect property sales to slow down amid credit tightening and policy
measures to curb excessive speculative activities.
• Rising loan-deposit ratio may curb loans growth

Loans growth momentum may also be curbed by slow deposit growth
which has continued to lag credit expansion at 6.5% YTD or 7.0% on
annualised basis. Consequently, loan-deposit ratio has increased to 7-
year high at 81.3% while financing-deposit ratio increased to 87.9%.
• Interest margin under pressure

We noted that competition in the mortgage market have resulted in
widening negative spread over the BLR. This is likely the cause for the fall
in average lending rate (ALR) to 4.99% despite average BLR remaining
unchanged at 6.27%. Interest margin is under pressure as the ALR-3
month FD spread has fallen to 2.25%, the lowest level in 12 years.
• M&A activities to underpin non-interest income growth

One bright spot for the banking sector is the expected sustained
momentum in M&A activities which will underpin non-interest income
growth. In this respect, we expect CIMB to be the main beneficiary.
• Maintain NEUTRAL
We are maintaining our neutral call on expected slow down in loans
growth while NIMs is under pressure going forward. Maybank is our only
buy call as it remains undervalued, trading below its historical average
P/BV of 2.3x.

CIMB Group 8.50 63,178.6 56.4 63.5 11.6 12.7 15.1 13.4 2.2 2.0 15.9 15.7 2.2 2.6
Maybank 8.50 62,239.0 64.5 72.4 12.5 12.2 13.2 11.7 1.9 1.7 14.4 14.9 5.7 6.4
Public Bank 13.02 45,985.7 94.7 111.0 14.3 17.2 13.7 11.7 3.5 3.3 26.8 28.8 4.1 4.7
AMMB Holdings 7.03 21,189.7 45.3 50.5 11.7 11.5 15.5 13.9 1.9 1.7 12.0 12.3 2.4 2.8
Hong Leong 9.20 14,537.0 74.1 90.2 6.9 21.8 12.4 10.2 1.6 1.7 14.0 16.4 2.0 2.0
27
INVESTMENT RESEARCH
Figure 2 : Loans growth Figure 3 : Lending indicators
Total loans Overall loan growth Application Approval Disbursements

%
Household loan growth Business loans growth
y-o-y
RM bn grow th 60
900 18% 50
16% 40
850 30
14%
800 12% 20
10% 10
750 0
8%
700 6% -10
4% -20
650 -30
2%
600 0% -40
Jan-09
Feb-09
Mar-09
May-09
Jun-09
Jul-09
Oct-09
Nov-09
Dec-09
Jan-10
Feb-10
Mar-10
May-10
Jun-10
Jul-10
Oct-10
Nov-10
Sep-09
Sep-10
Apr-09
Aug-09
Apr-10
Aug-10
Jan-08
Mar-08
May-08
Jul-08
Nov-08
Jan-09
Mar-09
May-09
Jul-09
Nov-09
Jan-10
Mar-10
May-10
Jul-10
Nov-10
Sep-08
Sep-09
Sep-10
Source: BNM, ECM Libra Source: BNM, ECM Libra
Figure 4 : Loan - deposit ratio Figure 5 : OPR and interest spread
Loan-deposit ratio Financing-deposit ratio OPR ALR-3m FD spread ALR-Savings spread

% %
100 5.5
5.0
95
4.5
90 4.0
85 3.5
3.0
80
2.5
75 2.0
1.5
70
Jan-07
Mar-07
May-07
Jul-07
Nov-07
Jan-08
Mar-08
May-08
Jul-08
Nov-08
Jan-09
Mar-09
May-09
Jul-09
Nov-09
Jan-10
Mar-10
May-10
Jul-10
Nov-10
Sep-07
Sep-08
Sep-09
Sep-10
65
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Figure 6 : Net NPL ratio and loan loss coverage Figure 7 : RWCR and core capital ratios
Net NPL ratio (LHS) Loan loss coverage (RHS) % RWCR Core Capital Ratio
% %
16.0
5.0 100
15.0
4.5 95
4.0 90 14.0
3.5 85 13.0
3.0 80 12.0
2.5 75
11.0
2.0 70
10.0
1.5 65
1.0 60 9.0
Jan-07
Mar-07
May-07
Jul-07
Nov-07
Jan-08
Mar-08
May-08
Jul-08
Nov-08
Jan-09
Mar-09
May-09
Jul-09
Nov-09
Jan-10
Mar-10
May-10
Jul-10
Nov-10
Sep-07
Sep-08
Sep-09
Sep-10
Jan-07
Mar-07
May-07
Jul-07
Nov-07
Jan-08
Mar-08
May-08
Jul-08
Nov-08
Jan-09
Mar-09
May-09
Jul-09
Nov-09
Jan-10
Mar-10
May-10
Jul-10
Nov-10
Sep-07
Sep-08
Sep-09
Sep-10
28
INVESTMENT RESEARCH
Building Materials Neutral

(maintained)
2010 hopes rolled forward

• Anticipated rise in demand did not occur last year Stock Coverage
Cement players will begin the year in much the same way they did in early
2010, carrying hopes of seeing an improvement in demand for cement, Bloomberg TP
which did not materialise last year. The industry had pinned its hopes for Company Ticker Call (RM)
better demand on the roll out of major 9MP projects such as the LCCT
Lafarge LMC MK Hold 7.46
and LRT in mid 2010. However, these major projects were only awarded
YTL Cement YTLC MK Buy 5.27
towards the end of the year.
• Demand to see increase Bernard Ching

As a result of the delay in contract awards, cement demand improvement hyching@ecmlibra.com
was muted in the second half of 2010, but is expected to gradually pick up +603 2089 2982
pace going into 2011, as construction works begin to gain traction and
reach a more meaningful stage. Apart from demand coming from the 9MP
projects, the proposed MRT project under the 10MP will also contribute to
an increase in demand from the second half of 2011. Although the project
has yet to be formally approved, the government expects physical works
to begin in July 2011.
• Cost considerations
We expect cement demand improvement to be weak in 1QCY11, making
it more susceptible to increases in input costs such as coal prices and oil
prices. Average coal prices have been trending up since end 2009,
increasing 37% to close at USD122/mt. Similarly, crude oil price has also
increased 28% to USD91.4/barrel.
The subsidy rationalisation plan poses a further risk of cost escalation, as
the government has approved in principle to raise electricity tariffs. While
there is no indication on the timing of its implementation, margins would
be pinched as electricity accounts for approximately 20% of cost of goods
sold.
In view of a weak improvement in much of 1HCY11 coupled with trend of
increasing input costs, we maintain our Neutral stance on the sector.
Trading at a PE of 14.4x, which is close to its 5-year average PE of 14.0x,
we view Lafarge to be fairly valued. Our top pick is YTL Cement, whose
share price we think has room to run as it is currently trading below its 5-
year average PE of 11.8x, given the brighter outlook of the sector in the
second half of the year.

Lafarge 7.67 6,517.2 53.3 56.7 46.8 6.4 14.4 13.5 2.0 1.9 13.8 14.0 5.0 5.0
YTL Cement 4.76 2,345.4 43.9 46.3 13.8 5.5 10.8 10.3 1.1 0.9 14.3 13.7 4.1 4.3
29
INVESTMENT RESEARCH
Figure 2 : Coal price trend Figure 3 : Crude oil price trend
USD/tonne USD/barrel
140 87
85
120 83
81
100 79
77
80 75
73
60 71
69
40 67
Jan-10
Feb-10
Mar-10
May-10
Jun-10
Jul-10
Oct-10
Nov-10
Dec-10
Sep-10
Apr-10
Aug-10
Jan-09
Feb-09
Mar-09
May-09
Jun-09
Jul-09
Oct-09
Nov-09
Dec-09
Jan-10
Feb-10
Mar-10
May-10
Jun-10
Jul-10
Oct-10
Nov-10
Dec-10
Sep-09
Sep-10
Apr-09
Aug-09
Apr-10
Aug-10
Source: Bloomberg Source: Bloomberg
Figure 4 : Lafarge forward PE band Figure 5 : YTL Cement forward PE band
P/E Average P/E P/E Average P/E
P/E (x) P/E (x)
25 25
20 20
15
15
10
10
5
5
0
0
2006
2007
2008
2009
2010
2006
2007
2008
2009
2010
Source: ECM Libra, Bloomberg Source: ECM Libra, Bloomberg
30
INVESTMENT RESEARCH
Construction Overweight
(upgraded)
The year of mega projects

• The last of the 9MP projects Stock Coverage
Although the new LCCT project was delayed due to a change in designs,
most of the packages were successfully awarded last year, with only the Bloomberg TP
runway portion remaining, estimated to be in the region of RM350m. Company Ticker Call (RM)
However, progress remains slow for the Inter-State Raw Water Transfer
IJM Corp IJM MK Hold 5.71
project owing to the deadlocked water restructuring exercise. On a
Gamuda GAM MK TB 4.66
brighter note, the first phase of the LRT extension has been successfully Sunway Hldg SGW MK Buy 2.60
awarded, and tenders for the second stage worth RM1.7bn are expected
to be called in 2HCY11.
Bernard Ching
• MRT project to kick off in 2011 hyching@ecmlibra.com
The Gamuda-MMC JV has been appointed the Project Delivery Partner +603 2089 2982
(PDP) for the MRT project, while the Land Public Transport Commission
would be the supervising authority and Syarikat Prasarana Negara Bhd
(SPNB) the infrastructure owner. The project will be a strong driver for the
industry when works begin in July 2011, starting with the Sg. Buloh –
Kajang radial line following value management studies.
• High speed rail to Singapore may also take off

We expect news flow on the RM16bn high speed rail project to gain pace
in the coming quarters close on the heels of the MRT project. An
independent consultant will be engaged in January to undertake a
preliminary study, a favourable outcome of which will result in a detailed
study on the routes and stations to be undertaken. Based on the timeline
provided in the 10MP, construction work is targeted to begin in early 2012.
• Other links to Singapore

Sultan Ibrahim of Johor has called for a new bridge to replace the
Causeway. Apart from that, Singapore and Malaysia are conducting
detailed studies for a 1.5km rapid transit link system between Johor Baru
and Woodlands, Singapore which could involve an undersea tunnel.
• Upgrade to Overweight
We were previously sceptical of speed of project implementation using the
PPP model as very few contractors have the balance sheet to finance
projects. However, our concerns have been allayed as the MRT project
will now be funded by the government via SPNB to benefit a much larger
pool of contractors. The project would also be expedited without the need
to raise financing at various levels of the project. In view of the impending
award of the remnant 9MP projects as well as the improving news flow
with regards to mega projects, we upgrade our sector call to Overweight
from Neutral. We are positive on Gamuda as they are a likely beneficiary
of the RM14bn tunnelling portion from the MRT project while Sunway
Holdings is our top pick due to its undemanding valuations and synergies
from the proposed merger with Sunway City.

IJM Corp 6.23 8,416.9 31.0 35.4 12.6 13.9 20.1 17.6 1.5 1.4 7.4 7.9 1.8 1.8
Gamuda 3.81 7,796.1 19.9 22.9 26.4 15.2 19.2 16.6 2.2 2.0 11.4 12.3 2.4 2.4
Sunway Holdings 2.24 1,359.0 30.2 36.3 18.9 20.1 7.4 6.2 1.2 1.0 16.8 17.3 2.8 3.3
31
INVESTMENT RESEARCH
Figure 2 : Construction contracts breakdown Figure 3 : Construction sector GDP
RM m Local Jobs Overseas Jobs Construction GDP Contribution to Total GDP

RM m
4,500 6,000 3.6%
4,000 3.5%
5,000
3,500 3.4%
3.3%
3,000 4,000
3.2%
2,500
3,000 3.1%
2,000 3.0%
1,500 2,000
2.9%
1,000 2.8%
1,000
500 2.7%
0 - 2.6%
Mar 07
Jun 07
Dec 07
Mar 08
Jun 08
Dec 08
Mar 09
Jun 09
Dec 09
Mar 10
Jun 10
Sep 07
Sep 08
Sep 09
Sep 10
Jan-09
Feb-09
Mar-09
May-09
Jun-09
Jul-09
Oct-09
Nov-09
Dec-09
Jan-10
Feb-10
Mar-10
May-10
Jun-10
Jul-10
Oct-10
Nov-10
Sep-09
Sep-10
Apr-09
Aug-09
Apr-10
Aug-10
Source: Bursa Malaysia, Newspapers Source: CEIC, Department of Statistics
Figure 4 : Construction loans approved Figure 5 : KL Construction Index
RM m
2,000
1,800
290
1,600
270
1,400
250
1,200
230
1,000
210
800
190
600
400 170
200 150
Jan 09
Feb 09
Mar 09
May 09
Jun 09
Jul 09
Oct 09
Nov 09
Dec 09
Jan 10
Feb 10
Mar 10
May 10
Jun 10
Jul 10
Oct 10
Nov 10
Dec 10
Sep 09
Sep 10
Apr 09
Aug 09
Apr 10
Aug 10
Jan-09
Feb-09
Mar-09
May-09
Jun-09
Jul-09
Oct-09
Nov-09
Dec-09
Jan-10
Feb-10
Mar-10
May-10
Jun-10
Jul-10
Oct-10
Sep-09
Sep-10
Apr-09
Aug-09
Apr-10
Aug-10
Source: CEIC, Bank Negara Malaysia Source: Bloomberg
32
INVESTMENT RESEARCH
Consumer Overweight
(maintained)
Resilient but not invincible

• 2010 overview Stock Coverage
Consumer spending was robust in 2010, with 9MCY10 retail sales up by
10.7% y-o-y on the back of positive macroeconomic trends (9MCY10 GDP Bloomberg TP
growth of 8.1%). Bellwether big-cap consumer stocks such as Nestle and Company Ticker Call (RM)
F&N saw a run-up in their share prices during the year in response to
BAT ROTH MK Sell 41.80
strong financial results and in-line with the FBMKLCI’s 19.3% gain.
Parkson Hldgs PKS MK Buy 6.70
Pelikan PELI MK Hold 1.20
• Strong 1H 2011 outlook QL Resources QLG MK Buy 7.30
Resilient consumer spending is expected in 2011, particularly in 1H
thanks to sustained consumer confidence due to underlying economic
recovery (2011 GDP growth estimate of 5.2%), seasonally stronger retail Bernard Ching
sales during the Chinese New Year festivities, and prospective boost from hyching@ecmlibra.com
early elections. 2H may benefit from the multiplier effect from the +603 2089 2985
implementation of Economic Transformation Programmes (ETP).
• Key risks: inflation, high commodity prices

However, we expect spending to be moderated by inflationary concern
from ongoing subsidy rationalisation for sugar, flour, cooking oil, fuel and
electricity. Rising global commodity prices threaten profit margins for
manufacturers of food and beverage, with the 11MCY10 price of maize up
by 9%, while garment manufacturers face record cotton prices. The price
of cotton at end-November 2010 has more than doubled y-o-y due to
supply shortage from India’s cap on exports.
• Maintain Overweight
We maintain our overweight call on the consumer sector as it is a key
beneficiary of resilient consumption growth in Asia. Parkson Holdings and
QL Resources are our top stocks for the sector. We favour Parkson
Holdings as it will be a direct beneficiary of China’s rapid retail growth
(11MCY10 retail sales was up by 23.5% y-o-y). QL Resources is also one
of our favourites for its resilient food supply-based business activities and
growth prospects with expansion into ASEAN.

BAT 45.00 12,848.8 257.3 260.1 0.4 1.1 17.5 17.3 24.6 24.2 36.3 35.2 5.5 5.6
Parkson Hldgs 5.39 5,894.7 38.7 48.2 25.0 24.6 13.9 11.2 1.9 1.5 17.7 19.1 2.7 3.2
Pelikan 1.24 635.9 15.2 17.8 20.2 17.3 8.2 7.0 0.9 0.8 10.5 11.1 2.4 2.4
QL Resources 5.84 2,307.8 36.5 47.6 19.9 30.6 16.0 12.3 3.4 2.8 21.0 22.3 1.4 1.5
33
INVESTMENT RESEARCH
Figure 2 : MIER CSI, Private consumption Figure 3 : Consumer price index
Private consumption MIER CSI CPI Grow th y-o-y

CSI CPI %
RM bn
120 140 116 10
114 8
100 120
112 6
100 110
80 4
80 108
60 2
106
60 -
104
40
40 102 (2.0)
20 20 100 (4.0)
Mar-07
Jun-07
Dec-07
Mar-08
Jun-08
Dec-08
Mar-09
Jun-09
Dec-09
Mar-10
Jun-10
Sep-07
Sep-08
Sep-09
Sep-10
- 0
1Q07
2Q07
3Q07
4Q07
1Q08
2Q08
3Q08
4Q08
1Q09
2Q09
3Q09
4Q09
1Q10
2Q10
Source: MIER, Department of Statistics 3Q10 Source: IMF
Figure 4 : Malaysian retail sales Figure 5 : China retail sales
Quarterly Retail Sales Grow th y-o-y Monthly Retail Sales Grow th y-o-y
RM bn % RMB bn %
40 45 1,600 25
35 40 1,400
35 20
30 1,200
30 1,000
25 15
25 800
20
20 600 10
15
15 400
10 5
10 200
5 5 0 0
Mar-09
Jun-09
Dec-09
Mar-10
Jun-10
Sep-09
Sep-10
- -
Mar-07
Jun-07
Dec-07
Mar-08
Jun-08
Dec-08
Mar-09
Jun-09
Dec-09
Mar-10
Jun-10
Sep-07
Sep-08
Sep-09
Sep-10
Source: Department of Statistics Source: China National Bureau of Statistics
Figure 6 : Maize, soybean meal prices
Maize Soybean meal

US$/mt
500
450
400
350
300
250
200
150
100
50
-
Jul-04
Oct-04
Jan-05
Jul-05
Oct-05
Jan-06
Jul-06
Oct-06
Jan-07
Jul-07
Oct-07
Jan-08
Jul-08
Oct-08
Jan-09
Jul-09
Oct-09
Jan-10
Jul-10
Oct-10
Apr-04
Apr-05
Apr-06
Apr-07
Apr-08
Apr-09
Apr-10
Source: IMF
34
INVESTMENT RESEARCH
Gaming Neutral
(maintained)
P is for potential
• Slowdown visible for GENM Stock Coverage
GENM’s 3QCY10 core earnings of RM348.9m (-15% y-o-y) was a
dampener due to the intense competition from sister casino, Resorts Bloomberg TP
World at Sentosa (RWS) and Marina Bay Sands (MBS). Visitor arrivals to Company Ticker Call (RM)
Genting Highlands went from +5% in 1HCY10 to +3% in 9MCY10,
Genting* GENT MK Buy 12.05
indicating a slowdown. Also, the Aqueduct now faces the prospect of
Genting GENM MK Hold 3.52
competing against a full fledged casino half a day’s drive away. Malaysia
Berjaya BST MK Buy 4.88
• Introduction of junkets will boost GENS’ outlook Sports Toto *
After scoring a royal flush in 2QCY10 by recording an EBITDA of * TP under review
SGD513.9m then, GENS’ 3QCY10 EBITDA came in at SGD343.9m or
32% lower q-o-q due to normalising luck factor. That said, we have
already accounted for normal luck factor and there is the potential for the Yin Shao Yang
Singaporean gaming market to grow even further with the potential entry syyin@ecmlibra.com
+603 2089 2987
of junkets. That upside will of course flow to 52% shareholder, GENT.
• Liberalisation of other jurisdictions on the cards

Perusing through the international news, the likes of Japan are
considering liberalising the casino industry while Sri Lanka has already
liberalised its casino industry. GENS being the international vehicle for
GENT is poised to capitalise on these opportunities and compete head on
with Las Vegas Sands and Wynn Resorts. Its plan to refinance up to
SGD4.2bn of its facilities is a telling indication.
• NFOs get a lifeline

After reeling from the increase in pool betting duty from 6% to 8% of net
revenue in Jun 2010, the NFOs secured the approval to reduce the 4D Big
Special Prize by RM20 to RM180 in Dec 2010 or effectively reducing the
theoretical prize payout ratio by 1.2%. We opine that not much market
share will be lost to the illegal operators as the largest three prizes remain
unchanged.
For capital appreciation, we advise investors to switch from GENM to
GENT. For dividend yields and potential capital management exercises,
we advise investors to buy BST instead. Since our recent upgrade on the
prize payout reduction, its share price has come back to life. We
understand that its 47% shareholder, Berjaya Land will once again require
dividends from BST by 1QCY11.

Genting 11.18 41,514.0 79.1 85.3 14.3 7.9 14.1 13.1 2.2 1.9 16.9 15.8 1.0 1.0
Genting M 3.39 20,052.6 26.1 28.7 9.1 9.9 13.0 11.8 1.6 1.5 13.1 13.0 1.8 2.0
Berjaya Toto 4.50 6,079.6 28.7 30.5 7.6 6.1 15.7 14.8 10.2 8.7 70.4 64.0 4.9 5.1
35
INVESTMENT RESEARCH
Figure 2 : Estimated Singaporean gaming market/daily run rate (SGDm)
1QFY10 2QFY10 2QFY10 3QFY10

Normalised
Marina Bay Sands - 5.1 5.5 8.1
Resort World Sentosa 8.2 10.9 9.0 9.7
8.2 15.9 14.5 17.8
Source: Companies
36
INVESTMENT RESEARCH
Media Overweight
(maintained)
Vote for this candidate

• Back with a bang Stock Coverage
Adex sentiment recovered strongly this year with 10MCY10 gross total
adex growing 16% y-o-y. Examining the details, 10MCY10 gross TV adex Bloomberg TP
surged 20% y-o-y. TV adex is a high “beta” segment and frequently Company Ticker Call (RM)
outperforms total adex during periods of economic recovery. Nonetheless,
Media Prima* MPR MK Buy 2.72
newspapers did not fare poorly at all with 10MCY10 gross newspaper
Star STAR MK Hold 3.70
adex growing 14% y-o-y. MCIL MCIL MK Buy 1.08
* TP under review
• Upcycle to continue into 1HCY11
We expect this rally to continue into 1HCY11 on the prospect of a general
election being held then. Taking a leaf out of history, we note that total Yin Shao Yang
adex growth during quarters with general elections surged by more than syyin@ecmlibra.com
20% y-o-y (Figure 2). Thus, there is upside potential to our CY11 total +603 2089 2987
adex growth estimate of 5% or 1x real GDP growth. Historically, general
elections favoured TV and Bahasa Malaysia newspaper adex.
• Newsprint prices appear to have found a ceiling

Newsprint prices are hovering between USD720/MT and USD750/MT
(Figure 3) up from between USD650/MT and USD700/MT in 3QCY10.
That said, newsprint prices have been steady at the USD720/MT to
USD750/MT level for the last three months. Also, we have conservatively
imputed average newsprint prices of USD750/MT. It assumes 50% are
purchased locally at USD720/MT and 50% are imported at USD800/MT.
• Showing you the money

Star recently paid a much awaited special net DPS of 40.6 sen and it may
also upgrade its net DPR policy from 70% to 80% currently. Media Prima
too recently announced that it upgraded its net DPR policy from 25% to
50% to 25% and 75%. Also, we understand that MCIL may upgrade its net
DPR policy from 25% to 50% currently. Investors can only benefit via
dividends from these healthy FCF generators.
• Still an Overweight
We continue to like the media sector. Top picks are Media Prima for
positive earnings surprises and higher net DPR policy of 25% to 75% and
also MCIL for its attractive valuations and net dividend yields. Again, we
understand that MCIL may upgrade its net DPR policy from 25% to 50%
currently.

Media Prima 2.60 2,613.7 15.1 17.2 6.3 14.1 17.2 15.1 2.1 1.9 13.6 14.4 2.9 3.3
Star 3.31 2,444.6 24.6 26.9 4.0 9.7 13.5 12.3 2.3 2.2 17.7 18.5 5.4 5.9
Media C. Intl 0.86 1,448.2 9.0 9.4 0.2 5.1 9.6 9.1 1.2 1.1 13.0 12.9 5.2 5.5
37
INVESTMENT RESEARCH
Figure 2 : Quarterly total adex growth y-o-y (%)
50.0
11th GE 12th GE 13th GE
40.0
30.0
20.0
10.0
-
Mar-98
Mar-99
Mar-00
Mar-01
Mar-02
Mar-03
Mar-04
Mar-05
Mar-06
Mar-07
Mar-08
Mar-09
Mar-10
(10.0)
(20.0)
(30.0)
(40.0)
(50.0)
Source: Nielsen Media Research
Figure 3 : Average newsprint prices (USD/MT)
1,000
900
800
700
600
500
400
300
200
100
-
1987 1990 1993 1996 1999 2002 2005 2008 2Q10
Source: Media Prima
38
INVESTMENT RESEARCH
Oil & Gas Overweight

(maintained)
The ocean is in motion

• 2 down and more to go Stock Coverage
As per our report released back in August of jobs coming back into the
market, 2 projects on our wish list have so far come into fruition. These Bloomberg TP
are the Sabah Oil & Gas Terminal (SOGT, which went to a Samsung- Company Ticker Call (RM)
Naim Holding JV worth RM2.4bn) and the Petronas LNG Regasification
Petronas Gas PTG MK Buy 13.64
project of which Petronas Gas was appointed lead developer. The SOGT,
SapuraCrest SCRES MK Buy 3.50
we believe, represents the start of more deepwater field development off KNM Group KNMG MK Buy 3.43
Sabah as the terminal is to receive gas from several fields of which Wah Seong WSC MK Hold 2.09
Malikai and Kebabangan remain undeveloped as yet. The LNG regas Dayang DEHB MK Hold 2.55
project is likely to have more beneficiaries, with MISC and MMHE slated to Petra Perdana PETR MK TB 0.42
supply 2 floating supply units and Dialog, Kencana and KNM vying for the MMHE MHB MK Hold 5.81
onshore portion. The roll out of these 2 jobs this year, we believe,
reaffirms that more jobs will be tendered out in 2011.
Bernard Ching
• Tapis, Malikai-Kebabangan and marginal fields hyching@ecmlibra.com
We believe that these three developments will take precedence in 2011. +603 2089 2989
The Tapis redevelopment is an enhanced oil recovery project, meant to
boost the output of the Tapis field, which has been online since the
1980’s. Redevelopment involves a complete overhaul of the pooling
platform and also pipelines hence we view contract flow of up to RM5bn to
trickle down to the rest of the industry, from fabricators to vessel
operators. Next, we believe that a new deepwater development will take
off in Sabah (Malikai-Kebabangan), and production will be piped onshore
into the SOGT. We believe this project will be of benefit to our local
deepwater mainstays, MMHE, SapuraCrest and Wah Seong, while
foreigners will also be involved in design and planning activities. Notably,
Kebabangan also has a shallow water portion that other players can
benefit from.
• Stocks to watch
Within our coverage, we like SapuraCrest the best for their solid
orderbook and growing foreign business. Besides that, the group now also
has financial muscle to acquire and that could serve as major catalyst.
Besides that, we also like KNM. As the global natural O&G market
improves (with more LNG projects and FPSO demand), we are seeing
KNM’s orderbook growing as well especially with their recent RM680m job
win in Uzbekistan.
We continue to be Overweight on the sector with the view that many
offshore projects will take off in 2011 and as such, contract flow will pick
up further, driving earnings of service providers.

Petronas Gas 11.10 21,963.9 69.8 69.2 8.3 -0.9 15.9 16.0 2.5 2.4 16.2 15.4 4.5 4.5
MMHE 5.90 9,440.0 29.0 35.7 9.4 22.8 20.3 16.5 2.7 2.4 13.4 14.3 0.5 0.6
SapuraCrest 3.10 3,957.8 23.3 26.9 36.2 15.2 13.3 11.5 3.1 2.6 23.0 22.9 3.0 3.5
KNM Group 2.84 2,843.1 22.9 36.1 37.3 57.6 12.4 7.9 1.2 1.1 9.9 13.7 0.5 0.8
Wah Seong 2.07 1,498.6 13.1 19.1 61.9 45.9 15.8 10.8 1.4 1.3 9.7 12.7 2.4 3.5
Dayang 2.85 1,003.2 21.3 21.4 13.3 0.5 13.4 13.3 2.3 2.1 19.1 17.5 2.6 2.6
Petra P 1.06 477.1 3.3 9.1 128.1 175.9 32.0 11.6 0.9 0.9 2.9 7.5 1.4 1.4
39
INVESTMENT RESEARCH
Figure 2 : Major projects awarded so far
Project Value Description Receipient

Sabah Oil & Gas RM2.4bn EPC of terminal to Awarded to a JV between
Terminal connect to SSGP Samsung Engineering and Naim
Holdings
Petronas LNG RM3bn 2 floating supply units will Petronas Gas signed Heads of
Terminal, Phase 1 connect to an island jetty Agreement with Petronas for
housing an onshore development. MMHE and MISC
terminal and LNG to chip in for FSUs and Dialog,
regasification plan Kencana and KNM vying for
t onshore plant construction
Source: Media, Bursa Malaysia, ECM Libra
Figure 3 : Projects on our wish list
Project Est Value Description Potential Recipients/Bidders

Tapis re- US$1bn Fabrication of Central MMHE, Sime Engineering and Kencana
development Processing Platform for CPP, jacket, topside and wellhead
(CPP), topsides, jackets, platform. SapuraCrest for pipeline
upgrade of wellhead installation and possibly Wah Seong for
platform and pipeline pipe coating. HUC contenders for CPP
replacement. Also hook should be Dayang, Petra Energy and
up and commissioning TL Offshore
Malikai >US$1bn Tension Leg Platform BumiArmada-Floatec, RNX-

floating production SBMOffshore and MODEC in the bid as
system and subsea main contractor for design of the TLP
facilities<. Installation while MMHE chosen as yard to execute
works. construction works
Kebabangan US$1bn Fabrication of Central MMHE, Sime Engineering and Kencana

Cluster processing platform, for fabrication. SapuraCrest, Kencana
topsides, jacket, pipeline or Alam Maritim for pipeline and
and installation. Pipeline installation. Wah Seong for pipe
to SOGT and tieback coating. OSV supply from Petra, or
from Malikai. Bumi Armada. HUC contenders for the
CPP should be Dayang, Petra Energy
and TL Offshore
Sepat RM1bn Floating offshore and Supposed to be awarded to a

supply vessel coupled consortium between Petrofac-Bumi
with MOPU Armada-Kencana Petroleum
Dulang re- US$500m Phase 1 - modification to MMHE, Sime and Kencana again
development existing facilities, Phase 2 should be contenders for any
- addition of 3-5 wellhead fabrication work. HUC, installation and
platforms vessel players to benefit after
fabrication is completed. MMHE strong
chance as Technip is awarded FEED.
Source: Media, Bursa Malaysia, ECM Libra
40
INVESTMENT RESEARCH
Plantation Overweight
(maintained)
Supply crunch
• Palm oil supply crunch in Malaysia Stock Coverage
The palm oil industry in Malaysia, is no doubt facing a shortage in supply.
Exports for 11M10 are up 5% (Figure 2) while production is down 1.8% Bloomberg TP
(Figure 3). Stock levels are hovering at the 1.6m mt level (Figure 4) as we Company Ticker Call (RM)
go into a seasonal production down cycle. We view that exports will
Sime Darby SIME MK TB 11.80
continue to hold up going into 2011 driven by demand from US, Europe,
IOI Corp IOI MK TB 7.22
Pakistan and Egypt (Figure 5). European and US demand comes from KL Kepong KLK MK TB 21.70
edible oil consumption demand (due to palm oil’s non-trans fatty acid Genting P GENP MK TB 10.00
nature), shortfall in soybean supplies and also shortages in the rapeseed Boustead BOUS MK TB 5.96
and sun oil market. For Pakistan and Egypt, we believe demand drivers to IJM P IJMP MK TB 3.99
be edible oil consumption demand and also growing acceptance of palm
oil in these regions. Egypt, we reckon, is a force to contend with as it
serves as a gateway to Africa. Bernard Ching
hyching@ecmlibra.com
• Soybean supply crunch +603 2089 2989
The soybean industry is also currently facing a predicament. Despite that
the US harvest earlier this year turned in record crops (Figure 6), Chinese
demand has been overwhelming, eating into US stock levels. To note, as
of 11M10, Chinese imports of soybean are 16% higher than 12M09
imports. This demand, for now, is unable to be met by supplies as the
rd
Argentinean (world’s 3 largest soybean producer) is expected to turn in a
lower y-o-y crop due to the La Nina, which brings drought to the South
America. As such, going into 2011, there appears no avenue for soybean
prices to weaken in the 1H. Second half prospects are uncertain however,
as there could be recovery in production of other oil seeds like sun oil and
rape seed oil.
• Stocks to watch
Big cap listed players that have so far lagged in this recent rally are Sime
Darby and IOI Corp. On that front, we view them to have the most
potential upside going into 2011. For the rest, like KLK, Genting
Plantations and IJM Plantations, we take a less aggressive stance as
valuations are increasingly high.
We continue to be overweight on the plantation sector and view that CPO
prices could cross the RM4,000/mt barrier in 1QCY11. This is due to palm
oil shortage coupled with soybean shortage. As prices go higher however,
we will begin to take a cautions stance on the sector as demand
destruction could occur. Also, there could be some recovery in production
of other oil seeds come 2H2011 and that would ease supply concerns in
the market. We have a CPO ASP of RM2,700 for 2011 which appears low
for now, but we view that it prices in our concerns for 2H2011.

Sime Darby 8.80 52,883.3 47.4 45.2 1.2 -4.6 18.6 19.5 2.3 2.2 12.6 11.3 2.7 2.6
IOI Corporation 5.81 38,919.5 32.7 31.6 15.2 -3.4 17.8 18.4 3.2 2.9 17.2 15.4 3.8 3.6
KL Kepong 22.10 23,591.9 99.1 105.7 3.9 6.7 22.3 20.9 3.5 3.2 16.0 15.9 2.8 2.9
Genting P 8.80 6,677.9 52.5 58.4 18.5 11.3 16.8 15.1 2.1 1.8 12.9 12.7 0.4 0.4
Boustead Hldgs 5.38 5,058.1 49.7 52.3 28.0 5.3 10.8 10.3 1.3 1.2 10.7 10.9 6.9 7.4
IJM P 2.98 2,388.0 13.4 14.8 26.7 9.9 22.2 20.2 1.8 1.7 4.7 4.7 1.0 1.0
41
INVESTMENT RESEARCH
Figure 2 : Exports Figure 3 : Production
Yearly Exports (m mt) Yearly Production (m mt)

M MT M MT
16.5 20.0% 18.0 17.7 20.0%
17.6
15.9
16.0 17.5
0.0%
15.4 15.4
15.5 17.0 15.0%
-20.0%
15.0 14.6 16.5
14.4 16.0
-40.0% 15.9 15.8 10.0%
14.5 16.0 15.8
14.0 13.7 -60.0% 15.5
13.4 15.0 5.0%
13.5 15.0
-80.0%
13.0 14.5 0.0%
-100.0%
12.5
14.0
12.0 -120.0%
13.5 -5.0%
2005 2006 2007 2008 2009 11M09 11M10
2005 2006 2007 2008 2009 11M09 11M10
Source: MPOB, ECM Libra Source: MPOB, ECM Libra
Figure 4 : Malaysia palm oil stock levels Figure 5 : Malaysia key export destinations
MT of CPO Stock levels 5 yr Average stock level Cumulative 11M10 Cumulative 11M09 % Change y-o-y
2,400,000 M mt % Change
4.0 70
2,200,000
3.5 60
57.3
2,000,000
50
3.0
1,800,000 40
2.5
30
1,600,000 2.0
20
16.1 16.6
1,400,000 1.5 13.9
10
1,200,000 1.0 0.6 0
0.5 -11.0 -10
1,000,000
-15.3
Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 - -20
China India Japan Pakistan US Total EU Egypt
Source: MPOB, ECM Libra Source: MPOB, ECM Libra
Figure 6 : Chinese soybean imports vs. US production Figure 7 : SOI Index
US Soybean production (m mt) China Imports (m mt) % Change in Production SOI Index
m mt % Change
SOI Index
100 91.4 92.8
87.0 25% 30
90 83.5 80.7
80 72.9
70 15% 20
60
49.4
50 42.6 5% 10
37.4
40 30.8
26.6 27.7
30 Mar- May- Jul- Sep- Nov- Jan- Mar- May- Jul- Sep- Nov-0
-5%
20 09 09 09 09 09 10 10 10 10 10 10
10
-15% -10
-
2010^
2005
2006
2007
2008
2009
-25% -20
Source: Bloomberg, USDA (^Chinese imports for 11M10) Source: Australian Bureau of Meteorology , MPOB
42
INVESTMENT RESEARCH
Power Neutral
(downgraded)
2011 to be an eventful year

• Unit demand to moderate Stock Coverage
We expect unit demand growth to moderate to 5% or 1x real GDP growth
in CY11 after clipping 8.4% in the year ending 31 Aug 2010 (TNB’s Bloomberg TP
financial year). This year has been an exceptional one as historically; unit Company Ticker Call (RM)
demand grew at 1.3x to 1.7x real GDP growth in years of economic
Tenaga TNB MK Buy 9.48
recovery. Going forward, we expect unit demand to normalise and grow in
YTL Power YTLP MK Hold 2.36
tandem with real GDP growth.
• Renegotiations with first generation IPPs Yin Shao Yang

An important event to note is the possible renegotiation of first generation syyin@ecmlibra.com
PPAs to lower capacity payments. While it will definitely be NPV positive +603 2089 2987
to TNB, it may not necessarily be NPV negative to the IPPs if their
concessions are extended in return. Although previous renegotiations
failed, this round of talks may gain traction as the first of the first
generation PPAs expire in less than five years in 2015.
• Coal prices are a concern…

Coal prices recently hit USD110/MT (USD95/MT FOB price + USD15/MT
freight cost) (Figure 3). Every USD5/MT increase in average coal prices
will reduce our TNB EPS estimates by 7%. That said, coal prices are
seasonally lower in the 1H due to weaker post-winter demand. We
assume USD100/MT average coal price for FY11.
• … but may be a blessing in disguise

The current average tariff of 31.1 sen/kWh is meant to cover coal prices
until USD85/MT. Now that coal prices are above that threshold, TNB has a
case to lobby for a base tariff hike or fuel cost adjustment. Recall that
despite two rounds of fuel price hikes, electricity tariffs have yet to be
raised. We also understand that renegotiations with the first generation
IPPs were to reduce cost in case coal prices spiral out of control.
• Downgrade to Neutral
Since we trimmed our TP on TNB from RM10.10 to RM9.48, our sector
weighted average upside potential has diminished to less than 8%. This
warrants our downgrade on the power sector from Overweight to Neutral.
YTL Power is a Hold for now. Earnings visibility on its WIMAX and
Jordanian oil shale projects are needed before we revise our call.

Tenaga 8.37 36,497.9 67.7 81.5 13.1 20.3 12.4 10.3 1.2 1.1 9.9 11.1 2.7 3.3
YTL Power 2.44 17,737.6 14.5 15.0 1.8 3.8 16.8 16.2 2.1 2.0 17.0 8.7 6.1 6.1
43
INVESTMENT RESEARCH
Figure 2 : Peninsular Malaysia unit demand growth y-o-y (%)
25.0%
20.0%
15.0%
10.0%
5.0%
0.0%
Dec-07
Mar-08
Jun-08
Dec-08
Mar-09
Jun-09
Dec-09
Mar-10
Jun-10
Sep-07
Sep-08
Sep-09
Sep-10
-5.0%
-10.0%
-15.0%
-20.0%
Source: Nielsen Media Research
Figure 3 : Newcastle coal prices FOB (USD/MT)
160.0
140.0
120.0
100.0
80.0
60.0
40.0
20.0
-
Feb-00
Feb-01
Feb-02
Feb-03
Feb-04
Feb-05
Feb-06
Feb-07
Feb-08
Feb-09
Feb-10
Note: Coal prices reported by TNB include USD15/MT freight cost
Source: Bloomberg
44
INVESTMENT RESEARCH
Property Neutral
(maintained)
Elevated optimism
• Another strong year in 2010 Stock Coverage
Property sector had another good year in 2010. 9M10 residential and
commercial property transaction value of RM36.0bn and RM16.7bn Bloomberg TP
respectively were 27% and 57% higher than corresponding period in Company Ticker Call (RM)
2009. Developers have been reporting record sales as a combination of
SP Setia SPSB MK Hold 5.20
low interest rate and easy financing scheme has spurred buying interest
Sunway City SCITY MK Buy 5.10
despite rising house prices. YNH YNHB MK Hold 1.70
Glomac GLMC MK Buy 1.98
• Tough act to repeat in 2011
Developers are stepping up launches going into 2011, particularly
1H2011. We also noted several developers have set higher sales target. Bernard Ching
For example, SP Setia set a RM3bn target for FY11 while Gamuda set hyching@ecmlibra.com
RM5bn for next 2 years. +603 2089 2988
We opine that current property bull run is liquidity-driven and could

overshoot on the upside before correcting. The problem lies with figuring
out when the market would peak. In the immediate term, we believe
momentum is still strong but property sales growth may taper off towards
late 2011 as influx of completed properties sold under easy financing
schemes may crimp growth going forward. Furthermore, speculative
demand may also slow down due to recent government’s implementation
of loan-to-value cap.
• House prices rising at fastest pace in 10 years

The All House Price Index has increased by 6.2% y-o-y in 2Q10 and 3Q10
which was the fastest pace in over 10 years. This raises concern over
housing affordability going forward. We noted that while house prices
have been increasing, property buying has been sustained by low interest
and lax lending e.g. longer maturity period, lower downpayment, cost
absorption etc. However, residential approval has dropped to the 45%-
55% level from the 55%-65% level previously, indicating that affordability
is becoming an issue.
Fundamentally, we believe property stocks are priced to perfection now
and investor interests would likely be driven by M&A activities. As such,
we maintain our NEUTRAL call on the sector. For stock picks, we like
Sunway City for its undemanding valuation for a big cap developer upon
completion of its merger with Sunway Holdings.

SP Setia 5.95 6,050.0 26.0 32.0 6.7 22.8 22.8 18.6 2.6 2.4 11.6 13.3 2.7 3.3
Sunway City 4.35 2,044.5 40.0 48.4 14.6 21.0 10.9 9.0 0.7 0.7 6.6 7.5 1.5 1.7
YNH Property 1.70 689.8 17.0 21.5 16.6 26.5 10.0 7.9 0.8 0.8 8.4 9.8 3.0 3.8
Glomac 1.65 490.3 22.1 26.4 23.7 19.6 7.5 6.3 0.8 0.7 10.9 11.9 4.3 5.2
45
Source: BNM
Figure 6 : Residential property loan approval rate
Source: NAPIC
Figure 4 : All house price index
Source: NAPIC
Figure 2 : Residential property transactions

40%
45%
50%
55%
60%
65%
70%
75%
10
12
14
16
18
RM bn
100
110
120
130
140
150
160
170
2
4
6
8
80
90
1Q03
Jan-06 1Q00 2Q03
Residential property transaction (LHS)

2Q00 3Q03
Apr-06 3Q00
4Q00 4Q03
Jul-06 1Q01 1Q04
2Q01 2Q04
All House Price Index

Oct-06 3Q01
4Q01 3Q04
Jan-07 1Q02 4Q04
2Q02
3Q02 1Q05
Apr-07 2Q05
4Q02
1Q03 3Q05
Jul-07 2Q03
3Q03 4Q05
Oct-07 4Q03 1Q06
1Q04 2Q06
Jan-08 2Q04
3Q04 3Q06
KL
Apr-08 4Q04 4Q06
INVESTMENT RESEARCH
1Q05 1Q07
Jul-08 2Q05
3Q05 2Q07
y-o-y grow th (RHS)

4Q05 3Q07
Selangor
Oct-08 1Q06 4Q07
2Q06
Jan-09 3Q06 1Q08
4Q06 2Q08
Apr-09 1Q07 3Q08
2Q07
Jul-09 3Q07 4Q08
Johor
4Q07 1Q09
Oct-09 1Q08 2Q09
2Q08
3Q08 3Q09
Jan-10 4Q08 4Q09
1Q09
Penang
Apr-10 2Q09 1Q10
3Q09 2Q10
Jul-10 4Q09 3Q10
1Q10
Oct-10 2Q10
-30%
-20%
-10%
0%
10%
20%
30%
40%
50%
60%
3Q10
46
Source: NAPIC
Figure 5 : Annual change in house price index
Source: NAPIC
Figure 3 : Commercial property transactions

% y-o-y
RM bn
0
7
1Q01 1Q03
2Q01 2Q03
3Q01 3Q03
4Q01 4Q03
1Q02 1Q04
Commercial property transaction (LHS)

2Q02
3Q02 2Q04
4Q02 3Q04
1Q03 4Q04
2Q03 1Q05
3Q03 2Q05
4Q03
1Q04 3Q05
2Q04 4Q05
3Q04 1Q06
4Q04 2Q06
1Q05 3Q06
2Q05
3Q05 4Q06
4Q05 1Q07
1Q06 2Q07
2Q06 3Q07
3Q06 4Q07
4Q06
1Q08
y-o-y grow th (RHS)

1Q07
2Q07 2Q08
3Q07 3Q08
4Q07 4Q08
1Q08 1Q09
2Q08
3Q08 2Q09
4Q08 3Q09
1Q09 4Q09
2Q09 1Q10
3Q09 2Q10
4Q09
3Q10
1Q10
2Q10
-40%
-20%
0%
20%
40%
60%
80%
100%
3Q10
INVESTMENT RESEARCH
Technology Neutral
(maintained)
Valuations getting attractive, but watch out for turning points

• 2010 was not a good year Stock Coverage
Although tech stocks started the year well, following a rebound from the
2009 low-base, they did not end the year well, owing to a myriad of factors Bloomberg TP
such as weak demand from the Western economies of Europe and U.S., Company Ticker Call (RM)
strengthening of the USD against the Ringgit, cost pressures from wage
Notion Vtec NVB MK Sell 1.52
cost and raw material price hikes, and for the HDD players, competition
from substitute products that use solid-state drive (SSD) such as tablet
PCs.
Bernard Ching
• Overhang from USD appreciation still lingers +603 2089 2981
For 2011, our economist is forecasting that the USD will continue to
strengthen against the Ringgit. With the majority of the revenue
denominated in USD, tech stocks are again likely to suffer from lower
revenue upon translation. However, this is partly mitigated by some
companies entering into forward contracts to hedge their USD cash flows.
• Lowering costs by shifting their manufacturing base

In an attempt to be more competitive and to lower their manufacturing
costs, a few forward-looking companies like JCY, Unisem and MPI have
shifted some of their manufacturing capacity to lower-cost countries like
China. We expect to see this being reflected in the form of margin
improvements as their overseas plants ramp-up meaningful capacity.
• Some bright spots for 2011

For 2011, although Gartner forecasts that the overall spending for
worldwide semiconductor capital equipments will be flattish from 2010,
there are two segments which will still experience positive growth, namely,
the packaging and assembly equipment, as well as the automated test
equipment sector, which are projected to grow at 7.0% and 7.9%
respectively (see Figure 4 for more details).
After a decline in their share prices, valuations for local tech stocks are
getting more attractive. Despite the attractive valuations, we are not yet
buyers at this moment, while watching out for macro catalysts to re-rate
the valuations higher.

Notion Vtec 1.70 262.8 26.5 30.4 8.1 14.5 6.4 5.6 1.0 0.8 15.0 15.1 3.1 3.6
47
INVESTMENT RESEARCH
Figure 2 : KL Technology Index Figure 3 : Book-to-build ratio
Index Ratio
35 1.3
1.2
30 1.1
1.0
25
0.9
0.8
20
0.7
15 0.6
0.5
10 0.4
J an-07
J ul-07
O c t-07
J an-08
J ul-08
O c t-08
J an-09
J ul-09
O c t-09
J an-10
J ul-10
O c t-10
J an-07
J ul-07
O c t-07
J an-08
J ul-08
O c t-08
J an-09
J ul-09
O c t-09
J an-10
J ul-10
O c t-10
Apr-07
Apr-08
Apr-09
Apr-10
Apr-07
Apr-08
Apr-09
Apr-10
Source: Bloomberg Source: SEMI
Figure 4 : Breakdown of worldwide semiconductor capital equipment spending 2009-2014F (in USD m)
2009 2010 2011 2012 2013 2014

Semiconductor Capital Spending ($M) 25,876.30 54,050.90 52,017.20 58,326.90 65,565.00 60,712.90
Growth (%) -41.2 108.9 -3.8 12.1 12.4 -7.4
Capital Equipment ($M) 16,606.10 38,385.10 38,008.10 42,592.40 47,697.20 42,798.90
Growth (%) -45.8 131.2 -1 12.1 12 -10.3
Wafer Fab Equipment ($M) 12,747.70 29,698.40 28,689.80 31,446.80 35,885.10 33,258.70
Growth (%) -47.4 133 -3.4 9.6 14.1 -7.3
Packaging and Assembly Equipment ($M) 2,708.50 5,921.30 6,333.40 7,484.60 7,874.60 6,431.20
Growth (%) -32.3 118.6 7 18.2 5.2 -18.3
Automated Test Equipment ($M) 1,149.80 2,765.40 2,984.90 3,661.00 3,937.50 3,109.00
Growth (%) -53 140.5 7.9 22.7 7.6 -21
Other Spending ($M) 9,270.20 15,665.80 14,009.00 15,734.50 17,867.70 17,914.00
Growth (%) -30.7 69 -10.6 12.3 13.6 0.3
Source: Gartner
48
INVESTMENT RESEARCH
Telecommunication Neutral
(maintained)
Capital management theme dominates

• Potential capital management angle Stock Coverage
As 2010 draws to a close, telcos like TM and Maxis are mulling the
possibility of paying out generous special dividends. For TM, its RM3.8bn Bloomberg TP
cash pile is further boosted by the sale of its entire 191.5m Axiata shares Company Ticker Call (RM)
which could potentially bring in proceeds of RM879.4m and gain on
Maxis MAXIS MK Hold 5.70
disposal of RM447.2m. To a smaller extent, Maxis has stated during its
Axiata AXIATA MK Buy 5.23
3QFY10 results conference call that it intends to top-up its regular interim DiGi DIGI MK Hold 23.20
dividend of 8sen/share with a special dividend. For Axiata, management TM T MK Buy 3.80
has admitted that even with a 30% dividend payout policy, its balance
sheet is still lazy, implying further room to return excess cash to
shareholders, as its regional associates show further improvements. Bernard Ching
• Entering the data era +603 2089 2981
For 2011, earnings growth would be driven by the data business, namely
revenue from big-screen wireless broadband as well as small-screen
mobile Internet. Maxis for example targets to grow its data business to
constitute half of its total revenue by 2012 (from current 39.2%), while
Celcom is getting more aggressive to grow its small-screen mobile
Internet revenues, having been successful in mobile broadband with the
largest subscriber market share. We will also start to see data contribution
from new consumer devices like tablet PCs.
• More intense competition in 2011?

On 19 November 2010, we saw the entry of a new competitor into the
telecommunications business. YTL Communications, a subsidiary of YTL
Power launched its 4G Wimax service called Yes with the promise of a
quad play consisting mobile voice, mobile Internet, mobile broadband and
hybrid TV. With this new entrant together with the resurgence of U-Mobile
and the issuance of LTE 4G spectrum to 9 players (compared to current
top 3 players), there is the chance that the competitive environment might
intensify. However, we note that Malaysian telcos have historically behave
rationally in response to new competition.
Axiata is our top pick in the sector given strong growth prospects and
catalysts from maiden dividend payments next year. Valuations are fair for
other stocks under coverage as earnings growth will likely be tepid going
forward as the mobile market in Malaysia is increasingly saturated.

AXIATA 4.75 40,114.5 34.3 37.9 12.5 10.6 13.9 12.5 1.8 1.7 12.9 13.3 2.2 2.4
Maxis 5.30 39,750.0 32.7 34.4 5.8 5.2 16.2 15.4 4.1 4.3 25.6 27.6 6.8 7.1
Digi 24.60 19,126.5 147.4 155.8 4.1 5.7 16.7 15.8 16.1 16.1 96.2 101.7 6.0 6.3
TM 3.51 12,556.7 12.5 13.2 5.6 5.5 28.1 26.7 2.0 2.1 7.2 7.9 5.5 5.5
49
INVESTMENT RESEARCH
Figure 2 : Quarterly subscriber market share Figure 3 : Quarterly revenue market share
Maxis Celcom Digi Maxis Celcom Digi

% %
100% 100%
90%
80% 80%
70%
60% 60%
50%
40% 40%
30%
20% 20%
10%
0% 0%
1Q 07
2Q 07
3Q 07
4Q 07
1Q 08
2Q 08
3Q 08
4Q 08
1Q 09
2Q 09
3Q 09
4Q 09
1Q 10
2Q 10
3Q 10
1Q 07
2Q 07
3Q 07
4Q 07
1Q 08
2Q 08
3Q 08
4Q 08
1Q 09
2Q 09
3Q 09
4Q 09
1Q 10
2Q 10
3Q 10
Source: ECM Libra Source: ECM Libra
Figure 4 : Quarterly EBITDA market share Figure 5 : Quarterly EBITDA margins trend
Maxis Celcom Digi Maxis Celcom Digi

% %
100% 60%
90%
80%
55%
70%
60%
50% 50%
40%
30%
45%
20%
10%
0% 40%
1Q 07
2Q 07
3Q 07
4Q 07
1Q 08
2Q 08
3Q 08
4Q 08
1Q 09
2Q 09
3Q 09
4Q 09
1Q 10
2Q 10
3Q 10
1Q 07
2Q 07
3Q 07
4Q 07
1Q 08
2Q 08
3Q 08
4Q 08
1Q 09
2Q 09
3Q 09
4Q 09
1Q 10
2Q 10
3Q 10
Source: ECM Libra Source: ECM Libra
50
INVESTMENT RESEARCH
Toll Neutral
(maintained)
Toll players to be privatised?

• 2011 originally a year of revenue jump Stock Coverage
According to the concession agreements, the year 2011 should bring
substantial revenue improvements to the two listed toll players under Bloomberg TP
coverage. PLUS was originally due to see a 10% toll rate hike on its North Company Ticker Call (RM)
South Highway and ELITE highway, while Litrak is scheduled to see a
PLUS PLUS MK Buy 5.20
31% toll rate hike on the Lebuhraya Damansara Puchong (LDP).
Litrak LTK MK Hold 3.52
• …but uncertainties arise from subsidy rationalisation

The subsidy rationalisation plan proposes for toll highways to receive Bernard Ching
fares as stated in the respective concession agreements, as opposed to a hyching@ecmlibra.com
subsidised rate. To soften the impact on the general public, PEMANDU +603 2089 2982
proposed that the policy would apply only to toll highways with alternative
routes.
On that front, we think the New North Klang Straits Bypass will likely see a
15% increase in toll fares from RM2.70 to RM3.10 for its Kapar toll plaza.
However, the policy would not apply to Litrak as the LDP is deemed to be
without an alternative route. In light of this, we do not discount the
possibility that the toll rate revision for LDP would be deferred until an
alternative route is built. Although the Damansara-Petaling Jaya Highway
approved under Budget 2011 would relieve traffic on the LDP, we do not
see any earnings impact in the near term as it first undergoes
construction. Instead, traffic on the SPRINT highway may be impacted
should toll rates revert to those as stipulated in the concession
agreement. The subsidy rationalisation plan also proposes for a
renegotiation of LDP’s concession agreement. We are inclined to think
that a renegotiation would entail a reduction of toll rates, and possibly
without compensation as the government seeks to reduce its budget
deficit.
• PLUS and MTD Capital get privatisation bids

Toll rates on all PLUS’ local highways have been frozen for five years
beginning 2011 as the group undergoes a privatisation bid by UEM-EPF
which involves a renegotiation of its concession agreement. Although an
attractive competing offer has been made by Jelas Ulung which provides
13% upside to the UEM-EPF offer of RM4.60, we are not optimistic on the
success of the offer as PLUS’ highways are considered national assets.
However, we think the competing offer could entice a revised offer from
UEM-EPF. We believe UEM-EPF could afford to offer up to RM5.87
without raising toll rates by lowering the required rate of return to say
5.06%, EPF’s 10-year average dividend payout to its contributors, which is
still 100bps above average 10 year MGS yield. The country’s second
largest toll operator, MTD Capital, may also be privatised if the bid by a
consortium of 4 companies pulls through.
With no strong earnings catalyst and many uncertainties arising from the
subsidy rationalisation plan, we maintain our Neutral call on the sector.

PLUS 4.52 22,600.0 34.7 36.9 35.4 6.5 13.0 12.2 3.1 2.9 23.8 23.3 5.4 5.7
Litrak 3.56 1,789.1 25.9 28.1 19.6 8.7 13.8 12.7 3.6 3.4 26.1 26.6 4.8 5.0
51
INVESTMENT RESEARCH
Figure 2 : Schedule of toll rate hikes
Highway Year Toll Rate

2010 2011 2012 2013 Current Concession Agreement
PLUS (Projek Lebuhraya Utara Selatan) √ √ 13.60 cts / km 14.96 cts / km (2010)
16.46 cts / km (2011)
AKLEH (Ampang KL Elevated Highway) √ RM1.50 RM2.50
SPRINT (Sistem Penyuraian Trafik KL Barat) √ RM2.00 RM3.00 (Kiara)
PBSB (Penang Bridge) √ RM7.00 RM9.40
NPE (New Pantai Expressway) √ RM1.60 RM2.00
SILK (Sistem Lingkaran - Lebuhraya Kajang) √ RM1.00 RM1.30
LPT 1 (Lebuhraya Pantai Timur Fasa 1) √ 12.00 cts / km 13.20 cts / km
SMART (Stormwater Management and Road Tunnel) √ RM2.00 RM3.00
LDP (Lebuhraya Damansara Puchong) √ RM1.60 RM2.10
ELITE (Expressway Lingkaran Tengah) √ 14.96 cts/ km 16.46 cts / km
SPDH (Seremban Port Dickson Highway) √ RM2.90 RM3.20 (Mambau)
NNKSB (New North Klang Straits Bypass) √ RM2.70 RM3.10 (Kapar)
KLK (Kuala Lumpur - Karak) √ RM5.00 RM6.50 (Gombak)
GUTHRIE (Shah Alam - Kuang) √ RM1.40 RM1.90
KESAS (Konsortium Expressway Shah Alam Selangor) √ RM2.20 RM3.00
Grand Saga (Cheras - Kajang Highway) √ RM1.00 RM1.40 (Bt .9)
Second Link (Linkedua Malaysia) √ RM10.80 RM13.70 (Tg Kupang)
BKE (Butterworth-Kulim Expressway) √ RM1.60 RM1.90
BORR (Butterworth Outer Ring Road) √ RM1.30 RM1.50 (Perai)
Source: PEMANDU
52
INVESTMENT RESEARCH
Water Neutral
(maintained)
Time is of the essence

• Water restructuring efforts in a bind for two years Stock Coverage
After several rounds of offer by various parties over the course of two
years, the water restructuring exercise remains in a deadlock with the Bloomberg TP
Selangor State Government and the Federal Government adopting Company Ticker Call (RM)
differing approaches to resolving the issue. On its end, the Selangor State
Puncak PNH MK Hold 2.52
Government believes the issue should be discussed in sync with the
Interstate Raw Water Transfer project, specifically the construction of the
Langat water treatment plant, leading to a debate on when a water crisis
Bernard Ching
would plague Selangor. hyching@ecmlibra.com
+603 2089 2982
• Many avenues explored
The scheduled water tariff hike of 37% in 2009 that was not implemented
has affected Syabas’ ability to settle payments to water treatment
operators. Heightening anxiety over the dire circumstances of the water
bondholders has prompted a series of meetings in an attempt to resolve
the current impasse. It was first reported that Syabas could be getting a
partial water tariff hike of 15%-20%. Thereafter, the Federal Government
suggested a swap of water bonds with triple-A government backed bonds.
Due to opposition however, these failed to materialise.
In a bid to salvage the bond industry, water bondholders have submitted a
letter imploring the Federal Government to provide Syabas with a soft loan
of some RM1bn. Things came to a head when Selangor handed a
memorandum to the Istana Negara, subsequent to which they obtained
the go-ahead from the Federal Government to acquire the water
operators.
• A short term remedy?

Even if we adopt an optimistic view that Selangor’s next attempt to
consolidate the water sector would be successful, it may not be in time to
prevent further downgrades in the water bond ratings. Considering the
dire circumstances, we believe a short term measure could be arrived at
in order to ease Syabas’ position and buy time for the completion of the
water restructuring exercise.
With the many complications surrounding the water restructuring exercise,
and its tendency to be protracted, we maintain our Neutral call on the
sector amid an uncertain outlook.

Puncak Niaga 2.30 945.6 36.7 41.0 9.1 11.8 6.3 5.6 0.6 0.5 9.0 9.3 4.3 4.3
53
INVESTMENT RESEARCH
Figure 2 : Malaysia water supply design & capacity Figure 3 : Non revenue water by states
Design Capacity Production 2007 2008

MLD %
18,000 60
55
16,000
50
14,000 45
40
12,000
35
10,000 30
8,000 25
20
6,000 15
4,000 10
P.Pinang
Melaka
N.Sembilan
Perak
Terengganu
Pahang
Johor
Perlis
Labuan
Kedah
Kelantan
Sabah
Selangor
Sarawak
2,000
-
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Source: Malaysia Water Industry Guide Source: Malaysia Water Industry Guide
Figure 4 : Domestic water tariff (2008) Figure 5 : Industrial water tariff (2008)
RM/m3 RM/m3
1.0 3.0
0.9 2.5
0.8
2.0
0.7
0.6 1.5
0.5 1.0
0.4
0.5
0.3
0.2 0.0
P.Pinang
N.Sembilan
Melaka
Perak
Terengganu
Pahang
Johor
Perlis
Kedah
Kelantan
Labuan
Sabah
P.Pinang
N.Sembilan
Melaka
Selangor
Perak
Terengganu
Pahang
Sarawak
Johor
Perlis
Kedah
Kelantan
Labuan
Sabah
Selangor
Sarawak
Source: Malaysia Water Industry Guide Source: Malaysia Water Industry Guide
54
INVESTMENT RESEARCH
TOP STOCK PICKS
55
INVESTMENT RESEARCH
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56
INVESTMENT RESEARCH
Company Brief 3 January 2011
AirAsia Buy
(RM2.53 AIRA MK) Target Price: RM3.50
Exciting year ahead AVIATION

• Expanding its routes Share Price Chart
We remain bullish on AirAsia due to its strong and exciting growth RM %
prospects. Although growth is expected to soften in 2011, we estimated 2.8 80
2.6 60
passenger volume to increase by 7% y-o-y backed by its comprehensive 2.4
2.2 40
coverage in ASEAN. AirAsia will introduce new routes by offering a variety 2.0 20
1.8
of connections between existing destinations which have not been served 1.6 0
1.4 -20
(e.g. Phuket-Bali). This should result in lower incremental cost and 1.2
1.0 -40
increase margins.
Dec-09
Jan-10
Feb-10
Mar-10
May-10
Jun-10
Jul-10
Oct-10
Nov-10
Dec-10
Sep-10
Apr-10
Aug-10
• Thai and Indo listing in 1H11 Share price (lhs) Relative perf (rhs)
Listing of its Thai (TAA) and Indonesian (IAA) is expected to take place in Source: Bloomberg
1H11. We understand that the Group has already obtained the necessary
approvals to list in Thailand and Indonesia, respectively. With the listing of
TAA and IAA, the Group is looking to convert associate debts into shares Price Performance
to maintain its 49% stake in the companies and may transfer other assets Price (RM) 2.53
52-week Range (RM) 1.11 – 2.74
and liabilities to its associates, which will de-leverage its balance sheet.
Avg Daily Volume (‘000) 7,475
• Healthy balance sheet 1M 3M 6M

As at end-Sep, net gearing declined to 2.02x (2Q10: 2.27x; 3Q09: 2.60x), Absolute (%) -3.8 15.5 102.4
while cash balance has increased by 77% y-o-y to RM935m. Including Relative (%) -5.6 11.1 73.8
deposits on aircraft purchases, total cash is close to RM1.2bn. This
amount is expected to increase with gradual debt repayment by
associates, which will be settled within 2 years. (current associates’ debt Key Data
is c.RM750m). AirAsia expects to be at net cash position by 2015. Market Cap (RM m) 7,014
Issued Shares (m) 2,772
• New addition to the family
The Group has recently confirmed plans to form a joint venture unit in the
Philippines to be known as AirAsia Inc. The new unit is looking at starting Major Shareholders %
operations in Sep 2011, with two A320 aircrafts. We find this JV positive Tune Air 26.4
for the Group as it enables the Group to widen its passenger base and Capital World Investors 9.0
strengthen its foothold in ASEAN. Employees Provident Fund 8.5
• Maintain Buy, TP RM3.50

We retain our Buy call on AirAsia with target price of RM3.50 based on Balance Sheet Highlights (RM m)
(@ 31.12.2010) (performance indicator’s annualised)
10x FY11 EPS (based on average peer’s). We like AirAsia for its growth
story and its ability to compete heads on with other legacy carriers on a Total Assets 14,102
low-cost structure. Total Liabilities 10,770
Total Debt (Gross) 9,343
Shareholders’ Equity 3,332
Financial summary
Return on Assets (%) 5.0
FYE 31 Dec 2008 2009 2010F 2011F 2012F
Return on Equity (%) 21.3
Net Cash / Share (RM) -
Revenue (RM m) 2,855.0 3,132.9 3,868.0 4,163.3 4,469.4
EBITDA (RM m) 749.1 1,134.5 1,547.0 1,669.6 1,750.3 Debt/Equity (x) 2.2
Net profit (RM m) -496.6 506.3 710.7 775.4 826.3 Interest Cover (x) 3.2
EPS (sen) 7.5 18.9 30.3 33.5 35.0
ECM / Consensus (%) 131.9 121.6 109.8
Azida Nor-Azizi
EPS growth (%) -36.9 152.8 60.1 10.6 4.4
nazida_na@ecmlibra.com
P/E (x) 33.8 13.4 8.4 7.6 7.2
+603 2089 2983
Net DPS (sen) - - - - -
Dividend yield (%) - - - - -
BVPS (RM) 0.68 0.95 1.21 1.49 1.79

P/BV (x) 3.74 2.66 2.09 1.70 1.41
57
INVESTMENT RESEARCH
AirAsia Bhd Financial Summary Price Date: 30 December 2010

Balance Sheet Income Statement
FY 31 Dec (RM m) 2008A 2009A 2010F 2011F 2012F FY 31 Dec (RM m) 2008A 2009A 2010F 2011F 2012F
PPE 6,594.3 7,942.2 9,679.5 10,206.8 10,945.7 Revenue 2,855.0 3,132.9 3,868.0 4,163.3 4,469.4
Deferred tax assets 856.1 751.3 626.9 478.6 340.7 EBITDAR 749.1 1,134.5 1,547.0 1,669.6 1,750.3
Receivables 1,411.0 1,568.0 1,751.0 1,819.8 1,891.1 Net lease income 86.6 213.1 258.8 344.2 387.3
Deposits on aircraft purchase 334.6 331.0 331.0 331.0 331.0 Depreciation & amortisation (357.2) (457.3) (557.7) (612.7) (681.1)
Other assets 56.2 56.3 62.0 64.0 66.1 Net interest expense (276.5) (364.9) (409.5) (472.0) (484.6)
Cash and ST funds 153.8 746.3 1,651.1 2,397.2 3,165.6 Non-recurring items (1,065.2) 100.7 - - -
Total Assets 9,405.9 11,395.1 14,101.5 15,297.4 16,740.1 Associates / JV - - - - -
Pretax profit (869.2) 622.3 838.7 929.1 971.9
LT borrowings 6,067.7 7,067.7 8,532.7 8,758.8 9,159.8 Taxation (3.8) (11.2) (3.6) (5.5) (7.6)
ST borrowings 539.0 540.3 810.0 894.0 999.0 Deferred taxation 376.4 (104.8) (124.4) (148.3) (138.0)
Payables 782.2 876.4 1,063.1 1,144.0 1,227.9 Net profit (496.6) 506.3 710.7 775.4 826.3
Other liabilities 155.9 9.8 363.8 393.5 419.9 Adj net profit 176.7 464.6 835.1 923.6 964.3
Liabilities 7,544.9 8,494.2 10,769.7 11,190.3 11,806.6
Share capital 237.4 275.8 275.8 275.8 275.8 Key Statistics & Ratios
Reserves 1,368.1 2,345.2 3,056.0 3,831.3 4,657.6 FY 31 Dec 2008A 2009A 2010F 2011F 2012F
Shareholders' equity 1,605.5 2,621.0 3,331.8 4,107.1 4,933.4
Minority interest - - - - - Growth
Total Equity 1,605.5 2,621.0 3,331.8 4,107.1 4,933.4 Revenue 30.4% 9.7% 23.5% 7.6% 7.4%
EBITDAR 6.5% 51.4% 36.4% 7.9% 4.8%
Total Equity and Liabilities 9,150.4 11,115.2 14,101.5 15,297.4 16,740.1 Pretax profit -257.1% -171.6% 34.8% 10.8% 4.6%
Adj net profit -37.2% 162.9% 79.7% 10.6% 4.4%
Cash Flow Statement Adj EPS -36.9% 152.8% 60.1% 10.6% 4.4%
FY 31 Dec (RM m) 2008A 2009A 2010F 2011F 2012F
Profitability
Pretax profit (869.2) 622.3 838.7 929.1 971.9 EBITDAR margin 26.2% 36.2% 40.0% 40.1% 39.2%
Depreciation & amortisation 357.2 457.3 557.7 612.7 681.1 Pretax profit margin -30.4% 19.9% 21.7% 22.3% 21.7%
Changes in working capital (326.3) (117.4) 72.2 39.8 36.9 Adj net profit margin 6.2% 14.8% 21.6% 22.2% 21.6%
Net interest paid (218.8) (316.1) (409.5) (472.0) (484.6) Return on asset -5.3% 4.4% 5.0% 5.1% 4.9%
Tax paid (4.7) (5.6) (3.6) (5.5) (7.6) Return on equity -30.9% 19.3% 21.3% 18.9% 16.7%
Others 645.7 143.1 409.5 472.0 484.6
Operating Cash Flow (416.1) 783.6 1,465.0 1,576.2 1,682.3 Leverage
Total debt / total assets (x) 0.77 0.71 0.69 0.65 0.62
Capex (2,671.2) (1,947.8) (2,295.0) (1,140.0) (1,420.0) Total debt / equity (x) 4.14 2.91 2.81 2.36 2.06
Others 69.3 170.3 - - - Net debt / equity (x) 4.04 2.63 2.31 1.77 1.42
Investing Cash Flow (2,601.9) (1,777.5) (2,295.0) (1,140.0) (1,420.0)
Key Drivers
Issuance of shares 2.9 509.2 - - - FY 31 Dec 2008A 2009A 2010F 2011F 2012F
Net change in borrowings 2,743.7 1,077.2 1,734.8 310.0 506.0
Financing Cash Flow 2,746.6 1,586.4 1,734.8 310.0 506.0 ASK (m km) 18,717 21,977 25,000 27,000 29,250
Passenger load factor (%) 72.0 70.2 76.0 75.0 74.0
Net cash flow (271.4) 592.5 904.7 746.2 768.3 Passenger rev/RPK (sen) 19.8 18.2 18.6 18.9 18.9
Beginning cash 425.2 153.8 746.3 1,651.1 2,397.2 WTI crude oil (USD/barrel) 99.8 62.1 77.0 80.0 80.0
Ending cash 153.7 746.3 1,651.1 2,397.2 3,165.6
Valuation
FY 31 Dec 2008A 2009A 2010F 2011F 2012F
EPS (sen) -21.1 20.6 25.8 28.1 30.0

Adj EPS (Sen) 7.5 18.9 30.3 33.5 35.0
P/E (x) 33.8 13.4 8.4 7.6 7.2
EV/EBITDAR (x) 16.6 12.2 9.5 8.5 8.0
Net DPS (sen) - - - - -

Net dividend yield - - - - -
BV per share (RM) 0.68 0.95 1.21 1.49 1.79

P/BV (x) 3.7 2.7 2.1 1.7 1.4
58
INVESTMENT RESEARCH
Gamuda Trading Buy

(RM3.81 GAM MK) Target Price: RM4.66
Driving the MRT project CONSTRUCTION

• Prime beneficiary of mega projects Share Price Chart
The group’s construction segment has displayed steady margin expansion RM %
over the past quarters arising from the existing Yenso Park Infrastructure 4.0 40
project as well as the EDTP, and this is expected to continue in the 3.5
30
current financial year as projects pick up pace. To add to the positivity, the 20
MRT project jointly proposed with MMC Corp Bhd which was well received 3.0
10
by the general public has been approved by the Cabinet, with the 2.5 0
Gamuda-MMC JV appointed as the Project Delivery Partner. As the JV is
Dec-09
Jan-10
Feb-10
Mar-10
May-10
Jun-10
Jul-10
Oct-10
Nov-10
Dec-10
Sep-10
Apr-10
Aug-10
the only local company with the necessary expertise to undertake such a
complex job, the government has allowed the JV to bid for the tunneling
Share price (lhs) Relative perf (rhs)
portion of the project in a competitive tender open to foreign contractors. Source: Bloomberg
With their in-depth understanding as proponents of the project, we think
that the Gamuda-MMC joint venture is well positioned secure the
tunneling portion of the project worth about RM14bn. As the tunneling Price Performance
works requires significant technical expertise, margins are expected to be Price (RM) 3.81
in the teens, further adding potential upside to earnings estimates. 52-week Range (RM) 2.58 – 3.98
• Rising property segment 1M 3M 6M

With the excitement in the construction segment, the property segment Absolute (%) 2.1 -4.3 19.8
has been somewhat overshadowed. However, this segment is poised to Relative (%) 0.2 -7.9 2.9
take off in a big way when its 2 Vietnam ventures with a combined gross
development value of RM16bn begin maiden contributions in FY11 which
are expected to be more than all its Malaysian projects combined. The Key Data
group has done considerably well on the local front as well, having Market Cap (RM m) 7,796
achieved record sales of RM820m in FY10 and RM350m in 1QFY11. Issued Shares (m) 2,046
Warrant (m) 251
• To achieve record earnings
Foreign interest in the stock has returned since the MRT project was
unveiled. Coupled with improving contract news as earnings contribution Major Shareholders %
from the property segment, the group is on track to record earnings that Skim Amanah Saham Bumiputra 7.7
will trump the all time high of RM325m in FY08. Our target price of Employees Provident Fund 7.2
RM4.66 is derived by pegging FY11 EPS to 25x PE (1x std deviation
above 12yr average).
Balance Sheet Highlights (RM m)
Total Assets 7,984

Total Liabilities 4,463
Financial summary
FYE 31 Jul 2009 2010 2011F 2012F 2013F
Revenue (RM m) 2,727.3 2,455.1 3,231.9 3,991.3 4,637.8
EBITDA (RM m) 177.2 274.5 399.0 519.4 622.6 Debt/Equity (x) 0.3
Net profit (RM m) 193.7 280.7 387.7 450.7 513.7 Interest Cover (x) 3.8
EPS (sen) 9.6 13.7 18.6 21.7 24.7

ECM / Consensus (%) 100.4 95.6 95.4 Bernard Ching
EPS growth (%) -40.5 42.1 36.2 16.3 14.0
P/E (x) 39.6 27.9 20.5 17.6 15.4
+603 2089 2982
Net DPS (sen) 6.0 9.0 9.0 9.0 9.0
Dividend yield (%) 1.6 2.3 2.3 2.3 2.3
BVPS (RM) 1.57 1.61 1.71 1.84 2.01

P/BV (x) 2.4 2.4 2.2 2.1 1.9
59
INVESTMENT RESEARCH
Gamuda Bhd Financial Summary Price Date: 30 December 2010

FYE 31 July (RM m) 2009A 2010A 2011F 2012F 2013F FYE 31 July (RM m) 2009A 2010A 2011F 2012F 2013F
PPE 371.1 306.9 343.0 369.5 386.5 Revenue 2,727.3 2,455.1 3,231.9 3,991.3 4,637.8
Other assets 543.3 1,211.4 1,211.4 1,211.4 1,211.4 EBITDA 177.2 274.5 399.0 519.4 622.6
Associate companies 1,286.7 1,310.5 1,342.0 1,371.4 1,396.5 Depreciation & amortisation (17.9) (14.7) (17.2) (19.8) (22.4)
Property development costs 922.9 829.6 1,307.4 1,356.5 1,135.9 EBIT 159.2 259.9 381.8 499.6 600.2
Inventories 101.1 79.7 122.7 174.3 251.7 Net interest income/(expense) (20.3) (43.8) (23.6) (32.6) (21.3)
Receivables 1,499.4 1,647.1 2,077.9 2,385.3 2,599.9 Share of associates' profits 143.2 154.0 181.5 179.3 175.1
Cash & bank balance 1,154.0 1,165.6 1,580.0 1,504.6 1,059.4 Pretax profit 282.2 370.0 539.7 646.3 754.0
Total assets 5,878.5 6,550.9 7,984.4 8,373.1 8,041.4 Taxation (78.0) (80.5) (143.3) (186.8) (231.6)
Minority interest (10.5) (8.8) (8.8) (8.8) (8.8)
Payables 1,088.3 1,417.9 1,838.5 2,144.3 2,321.9 Net profit 193.7 280.7 387.7 450.7 513.7
LT borrowings 1,210.5 1,278.7 2,284.4 1,635.0 1,275.6
ST borrowings 328.2 511.3 304.6 759.6 269.6
Other liabilities 43.7 35.3 35.3 35.3 35.3 Key Statistics & Ratios
Liabilities 2,670.7 3,243.2 4,462.7 4,574.1 3,902.3 FYE 31 July 2009A 2010A 2011F 2012F 2013F
Share capital 2,009.3 2,025.9 2,025.9 2,025.9 2,025.9 Growth

Reserves 1,151.8 1,231.6 1,436.9 1,705.3 2,036.6 Revenue 13.5% -10.0% 31.6% 23.5% 16.2%
Shareholders' equity 3,161.0 3,257.5 3,462.7 3,731.1 4,062.5 EBITDA -44.0% 55.0% 45.3% 30.2% 19.9%
Minority interest 46.8 50.2 59.0 67.8 76.6 Pretax profit -40.1% 31.1% 45.9% 19.7% 16.7%
Total equity 3,207.8 3,307.7 3,521.7 3,798.9 4,139.1 Net profit -40.4% 44.9% 38.1% 16.3% 14.0%
FD EPS -40.5% 42.1% 36.2% 16.3% 14.0%
Total equity and liabilities 5,878.5 6,550.9 7,984.4 8,373.1 8,041.4
Profitability
EBITDA margin 6.5% 11.2% 12.3% 13.0% 13.4%
Cash Flow Statement Pretax profit margin 10.3% 15.1% 16.7% 16.2% 16.3%
FYE 31 July (RM m) 2009A 2010A 2011F 2012F 2013F Net profit margin 7.1% 11.4% 12.0% 11.3% 11.1%
Effective tax rate 56.1% 37.3% 40.0% 40.0% 40.0%
Pretax profit 282.2 370.0 539.7 646.3 754.0 Return on assets 3.3% 4.3% 5.3% 5.4% 6.4%
Depreciation & amortisation 17.9 19.6 17.2 19.8 22.4 Return on equity 6.1% 8.6% 10.9% 12.1% 12.6%
Change in working cap 379.2 242.6 82.1 210.4 217.5
Dividend from associates 172.4 106.4 150.0 150.0 150.0 Leverage
Net interest received / (paid) (20.3) (63.6) (79.9) (96.7) (72.0) Total debt / total assets (x) 0.26 0.27 0.32 0.29 0.19
Tax paid (106.2) (76.7) (143.3) (186.8) (231.6) Total debt / equity (x) 0.49 0.55 0.75 0.64 0.38
Others (92.0) (53.9) (158.0) (146.7) (153.8) Net debt / equity (x) 0.12 0.19 0.29 0.24 0.12
Operating cash flow 633.2 544.5 407.9 596.3 686.6
Capex (97.4) (25.9) (610.0) (295.0) (100.0) Valuation

Investment (101.2) (683.4) - - - FYE 31 July 2009A 2010A 2011F 2012F 2013F
Others 226.9 30.8 - - -
Investing cash flow 28.3 (678.6) (610.0) (295.0) (100.0) EPS (sen) 9.7 13.9 19.1 22.2 25.4
Adj EPS (Sen) 9.6 13.7 18.6 21.7 24.7
Issuance of shares 7.7 60.5 - - - Adj P/E (x) 39.6 27.9 20.5 17.6 15.4
Net change in borrowings (297.1) 251.3 799.0 (194.4) (849.4) EV/EBITDA (x) 45.6 30.6 22.0 16.7 13.3
Dividend paid (60.2) (151.2) (182.4) (182.3) (182.3)
Others (8.6) (1.2) - - - Net DPS (sen) 6.0 9.0 9.0 9.0 9.0
Financing cash flow (358.2) 159.5 616.5 (376.7) (1,031.7) Net dividend yield 1.6% 2.4% 2.4% 2.4% 2.4%
Net cash flow 303.3 25.4 414.4 (75.4) (445.2) BV per share (RM) 1.57 1.61 1.71 1.84 2.01
Forex difference 5.1 (13.9) - - - P/BV (x) 2.4 2.4 2.2 2.1 1.9
Beginning cash 845.6 1,154.0 1,165.6 1,580.0 1,504.6
Ending cash 1,154.0 1,165.6 1,580.0 1,504.6 1,059.4
60
INVESTMENT RESEARCH
Malayan Banking Buy

(RM8.50 MAY MK) Target Price: RM10.26
Still a laggard big bank BANKING

• Sustained earnings growth momentum Share Price Chart
Following the disappointment of a massive impairment charge in FY09, RM %
Maybank has slowly but surely redeemed itself judging by its recent 9.4 15
9.0
financial performance. Its earnings growth momentum has surprised 8.6 10
street’s estimates for 3 out of the last 4 quarters on the back of stronger 8.2
5
7.8
performance by global markets (treasury), insurance, Singapore, 7.4 0
investment banking and Indonesian operations. We estimate its earnings 7.0
6.6 -5
to continue growing at CAGR of 12.3% over the next 3 years.
Dec-09
Jan-10
Feb-10
Mar-10
May-10
Jun-10
Jul-10
Oct-10
Nov-10
Dec-10
Sep-10
Apr-10
Aug-10
• Regional footprint will support growth
Maybank’s regional footprint, especially in Indonesia, will be a source of Source: Bloomberg
further growth in the near term. Loans growth in Indonesia has been
remarkable at 37.7% in FY10 which was in line with improving economic
conditions. Capital injection into PT Bank Internasional Indonesia (BII) has Price Performance
boosted its RWCR to 18.4% (minimum is 8%) and will, theoretically, Price (RM) 8.50
allows its loans base to increase by 125% to IDR89.3trn. 52-week Range (RM) 6.72 – 9.29
• Asset quality improves further 1M 3M 6M

The Group has shown continued and consistent improvements in its asset Absolute (%) -2.1 -3.5 12.7
quality. Credit charge reduced from 73bps in FY09 to 55bps in FY10 while Relative (%) -3.9 -7.2 -3.2
net NPL ratio reduced from 1.5% to 1.1%. Loan loss coverage has also
improved 112.9% to 124.5%. Similar to banks which have migrated to Key Data
FRS 139, Maybank may report lower credit charge in FY11 when
implementation of FRS139 kicks in. We have not factored this into our Market Cap (RM m) 62,239
earnings estimates. Issued Shares (m) 7,322
• Reiterate BUY call

We expect growth trajectory to be sustained on the back of strong Major Shareholders %
domestic and Indonesia loans growth. Maybank remains a BUY as it is Skim Amanah Saham Bumiputra 47.6
still below mid-cycle valuation as compared to CIMB and Public Bank. Employees Provident Fund 10.8
Target price of RM10.26 is pegged to mid-cycle valuation of 2.3x P/BV.
Maybank is also under-owned by foreign investors. Current foreign
shareholding level of 13.2% is lower than CIMB (42.3%) and Public Bank Balance Sheet Highlights (RM m)
(26.3%). It is also significantly lower than previous peak foreign (@ 30.06.2011) (performance indicators annualised)
shareholding level of 22.8% seen back in 2007.
Total Assets 370,090
Total Liabilities 338,881
Financial summary
FYE 30 June 2009 2010 2011F 2012F 2013F Return on Assets (%) 1.2
Net int income (RM m) 5,919.5 6,770.9 7,308.7 7,978.7 8,850.5
Islamic income (RM m) 1,224.3 1,434.7 1,650.0 1,897.4 2,182.1 Loan/Deposit (x) 85.6
Non-int income (RM m) 3,066.6 4,369.5 4,404.9 4,831.1 5,305.0 RWCR (x) 14.3
Operating profit (RM m) 4,959.9 6,459.6 6,905.7 7,622.5 8,494.1 Loan loss coverage 85.4
Adj net profit (RM m) 2,664.5 3,818.2 4,297.3 4,833.3 5,412.4
EPS (sen) 46.2 53.9 60.7 68.3 76.5 Bernard Ching

ECM / Consensus (%) 99.5 99.8 100.3 hyching@ecmlibra.com
EPS growth (%) (13.3) 16.7 12.5 12.5 12.0 +603 2089 2988
P/E (x) 18.4 15.8 14.0 12.4 11.1
DPS (sen) 6.0 41.3 45.5 51.2 57.4

Dividend yield (%) 0.7 4.9 5.4 6.0 6.7
BVPS (RM) 3.52 3.94 4.27 4.65 5.07

P/BV (x) 2.4 2.2 2.0 1.8 1.7
61
INVESTMENT RESEARCH
Malayan Banking Bhd Financial Summary Price Date: 30 December 2010

FY 30 June (RM m) 2009A 2010A 2011F 2012F 2013F FY 30 June (RM m) 2009A 2010A 2011F 2012F 2013F
Cash and short-term funds 23,608.0 28,708.0 31,865.9 35,371.1 39,261.9 Interest income 11,569.9 10,955.2 13,220.2 15,232.9 16,833.1
Deposits with other FIs 6,299.2 8,915.4 9,896.1 10,984.6 12,192.9 Interest expense (5,650.4) (4,184.3) (5,911.5) (7,254.2) (7,982.6)
Securities under repo 346.5 371.2 412.1 457.4 507.7 Net interest income 5,919.5 6,770.9 7,308.7 7,978.7 8,850.5
Securities held-for-trading 1,489.3 2,651.1 2,940.2 3,261.1 3,617.3 Islamic banking income 1,224.3 1,434.7 1,650.0 1,897.4 2,182.1
Securities available-for-sale 47,877.1 42,576.2 47,205.8 52,344.5 58,048.6 Non-interest income 3,066.6 4,369.5 4,404.9 4,831.1 5,305.0
Securities held-to-maturity 8,360.8 8,942.7 9,926.4 11,018.3 12,230.3 Net income 10,210.4 12,575.1 13,363.5 14,707.2 16,337.6
Derivative financial instruments 973.7 1,306.8 1,463.6 1,639.2 1,835.9 Overheads (5,250.5) (6,115.5) (6,457.8) (7,084.7) (7,843.4)
Loans, advances & financing 185,783.2 205,555.1 226,109.2 249,326.3 275,328.3 Operating profit 4,959.9 6,459.6 6,905.7 7,622.5 8,494.1
Statutory deposits 4,050.9 4,471.4 4,984.3 5,556.1 6,193.5 Loan loss allowance (1,698.8) (1,188.0) (1,101.7) (1,111.1) (1,221.4)
Property, plant & equipments 1,395.6 1,359.9 1,402.4 1,436.2 1,461.2 Other impairment & provision (1,686.3) (23.0) - - -
Goodwill & other intangibles 4,374.0 4,480.7 4,480.7 4,480.7 4,480.7 Share of results of JV 99.5 121.8 146.2 175.4 210.5
Other assets 26,181.0 27,361.3 29,403.1 31,638.7 34,089.3 Pretax profit 1,674.3 5,370.4 5,950.2 6,686.9 7,483.3
Total Assets 310,739.1 336,699.8 370,089.7 407,514.4 449,247.8 Taxation (923.6) (1,402.0) (1,487.6) (1,671.7) (1,870.8)
Deposits from customers 212,598.6 236,909.8 264,154.4 294,532.2 328,403.4 Net profit 691.9 3,818.2 4,297.3 4,833.3 5,412.4
Deposits from other FI's 28,781.9 23,257.9 25,816.2 28,656.0 31,808.2 Adj net profit 2,664.5 3,818.2 4,297.3 4,833.3 5,412.4
Securities sold under repo - 407.1 455.9 510.6 571.9
Derivative financial instruments 1,459.1 1,346.2 1,507.8 1,688.7 1,891.4 Key Statistics & Ratios
Bills and acceptance payable 1,470.1 3,061.6 3,429.0 3,840.5 4,301.3 FY 30 June 2009A 2010A 2011F 2012F 2013F
Recourse loans to Cagamas 516.3 650.0 650.0 650.0 650.0
Bonds & other borrowings 17,222.0 16,872.7 16,872.7 16,872.7 16,872.7 Asset & liability growth
Other liabilities 22,923.3 25,529.6 25,994.7 26,714.9 27,530.8 Loans (net) 12.9% 10.6% 10.0% 10.3% 10.4%
Liabilities 284,971.1 308,034.8 338,880.7 373,465.6 412,029.7 Customer deposits 13.6% 11.4% 11.5% 11.5% 11.5%
Total deposits 14.8% 7.8% 11.5% 11.5% 11.5%
Share capital 7,077.7 7,078.0 7,078.0 7,078.0 7,078.0
Reserves 17,821.1 20,799.2 23,177.9 25,835.9 28,805.2 Income growth
Shareholders' equity 24,898.7 27,877.2 30,255.9 32,913.8 35,883.2 Net interest income 9.1% 14.4% 7.9% 9.2% 10.9%
Minority interest 869.2 787.8 953.1 1,134.9 1,334.9 Non-interest income 5.0% 42.5% 0.8% 9.7% 9.8%
Total Equity 25,768.0 28,664.9 31,209.0 34,048.8 37,218.1 Pretax profit -59.0% 220.8% 10.8% 12.4% 11.9%
Net profit -76.4% 451.9% 12.5% 12.5% 12.0%
Total Equity and Liabilities 310,739.1 336,699.8 370,089.7 407,514.4 449,247.8 Adj EPS -13.3% 16.7% 12.5% 12.5% 12.0%
Profitability
Valuation Net interest margin 2.72% 2.82% 2.79% 2.76% 2.77%
FY 30 June 2009A 2010A 2011F 2012F 2013F Cost-to-income 51.4% 48.6% 48.3% 48.2% 48.0%
Return on average assets 0.2% 1.1% 1.2% 1.2% 1.2%
EPS (sen) 12.0 53.9 60.7 68.3 76.5 Return on average equity 2.8% 13.7% 14.2% 14.7% 15.1%
Adj EPS (Sen) 46.2 53.9 60.7 68.3 76.5
P/E (x) 18.4 15.8 14.0 12.4 11.1 Liquidity
Loans / customer deposits 87.4% 86.8% 85.6% 84.7% 83.8%
Net DPS (sen) 6.0 41.3 45.5 51.2 57.4 Loans / total deposits 77.0% 79.0% 78.0% 77.1% 76.4%
Net dividend yield 0.7% 4.9% 5.4% 6.0% 6.7%
Asset quality
BV per share (RM) 3.52 3.94 4.27 4.65 5.07 Net impaired loan ratio 1.51% 1.10% 2.56% 2.48% 2.52%
P/BV(x) 2.4 2.2 2.0 1.8 1.7 Loan loss coverage 112.9% 124.5% 85.4% 86.0% 83.6%
Credit charge off rate 0.73% 0.55% 0.47% 0.43% 0.43%
Capital adequacy
RWCR 15.0% 14.7% 14.3% 13.8% 13.3%
Core capital 11.0% 11.1% 10.7% 10.4% 10.1%
62
INVESTMENT RESEARCH
Parkson Holdings Buy

(RM5.39 PKS MK) Target Price: RM6.70
What’s in store? CONSUMER

• Improving retail sales to support SSSG
Parkson Holdings (PH) is expected to continue to register double-digit Share Price Chart
FY11 SSSG in China and Vietnam with Malaysia potentially surprising on RM %
the upside. Official monthly data in November 2010 showed that retail 6.2 20
6.0 15
sales growth has continued on an uptrend, increasing by 23% y-o-y in 5.8 10
5
5.6
China, 8% in Malaysia and 22% in Vietnam. The healthy sales data 5.4
0
-5
indicates that consumer spending is resilient with brighter economic 5.2 -10
5.0 -15
outlook. This supports our SSSG forecast of 10% for China, 5% in 4.8 -20
Malaysia and 25% for Vietnam.
Dec-09
Jan-10
Feb-10
Mar-10
May-10
Jun-10
Jul-10
Oct-10
Nov-10
Dec-10
Sep-10
Apr-10
Aug-10
• Extending retail network Share price (lhs) Relative perf (rhs)
PH is committed to its expansion strategy of increasing retail floor space Source: Bloomberg
by 15% each year (currently 1.5m sq m) via the opening of 8-11 stores per
year in new locations and cities it currently operates in, in addition to M&A
Price Performance
opportunities. The group’s main focus is on China given its rapid rise in
Price (RM) 5.39
consumer affluence, urbanization, and domestic demand. However, we 52-week Range (RM) 4.95 – 6.14
understand that Management is actively looking at venturing into Avg Daily Volume (‘000) 915
Indonesia.
1M 3M 6M
• Contribution from 1st self-owned mall in M’sia Absolute (%) -6.3 -6.9 -2.4
New property management income stream in Malaysia as the group’s first Relative (%) -8.0 -10.5 -16.2
self-owned mall, Festival City, begins operations in 1QCY11. Response
from tenants has been positive and PH is likely to meet the target of 90%
occupancy upon opening. Rental rates have also come in above initial Key Data
projections. PH expects a 10% yield on its RM200m cost of investment Market Cap (RM m) 5,895
within the first year of operations. Issued Shares (m) 1,094
• Supported by healthy cash flow

PH’s expansion plans is supported by a strong balance sheet (RM767.6m Major Shareholders %
at end-September 2010) and healthy free cash flow (RM279.5m). Foreign Tan Sri William Cheng 50.6
interest is returning with 22.4% foreign shareholding in November 2010
(from a low of 20% in early-2009).
• On-track to meeting our forecast (@ 30.06.2011) (performance indicator’s annualised)
We have retained our sum-of-parts valuation of RM6.70 with Buy Total Assets 8,492
recommendation and earnings estimates intact. Continue to maintain Total Liabilities 4,875
positive view on PH for its exposure to rapidly growing China retail Total Debt (Gross) 2,530
industry and healthy earnings growth. Shareholders’ Equity 2,330
Return on Asset (%) 4.7

Financial summary Return on Equity (%) 17.1
FY 30 June 2009 2010 2011F 2012F 2013F Net Cash / Share (RM) -
Debt / Equity (x) 0.8

Revenue (RM m) 2,583.7 2,725.5 3,511.4 4,277.9 5,067.5
Interest Cover (x) 1.63
EBITDA (RM m) 845.7 908.5 1,166.9 1,404.3 1,691.3
Adj net profit (RM m) 263.2 284.4 360.7 450.9 565.3
Adj EPS (sen) 25.4 27.4 34.5 42.9 53.5 Bernard Ching
Adj EPS growth (%) 30.0 7.8 25.9 24.3 24.8 +603 2089 2985
Adj PE (x) 21.2 19.7 15.6 12.6 10.1
Net DPS (sen) 10.2 11.2 13.2 15.5 19.0

Net dividend yield (%) 1.9 2.1 2.4 2.9 3.5
BVPS (RM) 1.50 1.67 2.46 3.15 4.00

P/BV (x) 3.6 3.2 2.2 1.7 1.3
63
INVESTMENT RESEARCH
PARKSON HOLDINGS BHD FINANCIAL SUMMARY Price Date: 30 December 2010

FY 30 June (RM m) 2009A 2010A 2011F 2012F 2013F FY 30 June (RM m) 2009A 2010A 2011F 2012F 2013F
PPE 993.7 1,531.0 1,527.0 1,677.0 1,813.9 Revenue 2,583.7 2,725.5 3,511.4 4,277.9 5,067.5
Investment properties 116.7 31.7 111.1 111.1 111.1 EBITDA 845.7 908.5 1,166.9 1,404.3 1,691.3
Prepaid land lease payments 333.5 360.7 333.5 333.5 333.5 Depreciation & amortisation (125.2) (149.2) (176.8) (201.1) (224.2)
Intangible assets 1,216.8 1,244.5 1,216.8 1,216.8 1,216.8 Net interest expense (61.7) (57.1) (113.6) (102.7) (112.7)
Inventories 214.3 213.0 291.2 354.8 420.2 Share of associates 0.7 0.2 0.7 0.7 0.7
Receivables 386.1 358.7 432.9 527.4 624.8 Pretax profit 659.5 702.4 877.1 1,101.2 1,355.1
Other assets 1,171.6 724.8 1,159.1 1,159.1 1,159.1 Taxation (163.6) (169.5) (219.3) (275.3) (338.8)
Deposit, bank and cash 2,093.5 2,340.5 3,420.6 4,049.2 5,167.0 Minority interest (232.7) (248.5) (297.1) (375.0) (451.0)
Total Assets 6,526.2 6,804.8 8,492.2 9,428.9 10,846.4 Net profit 542.7 284.4 360.7 450.9 565.3
Adj net profit 263.2 284.4 360.7 450.9 565.3
LT borrowings 2,027.7 1,695.8 1,164.0 1,900.3 1,500.3
ST borrowings 0.3 328.2 1,366.2 434.7 950.3 Key Statistics & Ratios
Payables 1,563.8 1,743.2 2,094.2 2,551.3 3,022.2 FY 30 June 2009A 2010A 2011F 2012F 2013F
Other liabilities 250.1 164.7 250.1 250.1 250.1
Liabilities 3,841.8 3,931.9 4,874.5 5,136.4 5,722.9 Growth
Revenue 15.2% 5.5% 28.8% 21.8% 18.5%
Share capital 1,036.4 1,036.4 1,036.4 1,036.4 1,036.4 EBITDA 28.8% 7.4% 28.4% 20.3% 20.4%
Reserves 713.2 845.6 1,293.3 1,593.0 1,972.9 Pretax profit 23.2% -25.2% 24.9% 25.5% 23.1%
Shareholders' equity 1,749.6 1,882.0 2,329.7 2,629.4 3,009.4 Net profit 21.1% -47.6% 26.8% 25.0% 25.4%
Minority interest 934.8 990.9 1,288.1 1,663.1 2,114.1 Adj EPS 30.0% 7.8% 25.9% 24.3% 24.8%
Total Equity 2,684.4 2,872.9 3,617.8 4,292.5 5,123.5
Profitability
Total Equity and Liabilities 6,526.2 6,804.8 8,492.2 9,428.9 10,846.4 EBITDA margin 32.7% 33.3% 33.2% 32.8% 33.4%
Net profit margin 21.0% 10.4% 10.3% 10.5% 11.2%
Effective tax rate 24.8% 24.1% 25.0% 25.0% 25.0%
Cash Flow Statement Return on assets 9.1% 4.3% 4.7% 5.0% 5.6%
FY 30 June (RM m) 2009A 2010A 2011F 2012F 2013F Return on equity 36.2% 15.7% 17.1% 18.2% 20.1%
Pretax profit 939.0 702.4 877.1 1,101.2 1,355.1 Leverage

Depreciation & amortisation 125.2 149.2 176.8 201.1 224.2 Total debt / total assets (x) 0.35 0.31 0.30 0.22 0.20
Change in working capital 221.4 238.2 202.1 284.4 292.9 Total debt / equity (x) 0.96 0.76 0.70 0.51 0.44
Net interest received / (paid) 13.3 - - - - Net debt / equity (x) 0.04 nm nm nm nm
Tax paid (156.4) (172.0) (227.3) (275.3) (338.8)
Others (278.6) 2.5 27.7 - - Key Drivers
Operating Cash Flow 863.9 920.3 1,056.5 1,311.4 1,533.5 FY 30 June 2009A 2010A 2011F 2012F 2013F
Capex (571.7) (346.5) (351.1) (351.1) (361.1) No. stores 79 86 93 101 107
Others 175.0 (72.6) 15.6 - - China 41 45 49 53 56
Investing Cash Flow (396.6) (419.1) (335.5) (351.1) (361.1) Malaysia 33 35 37 39 41
Vietnam 5 6 7 9 10
Issuance of shares 21.1 13.4 - - -
Changes in borrowings (28.7) 44.4 506.2 (195.2) 115.6 Same Store Sales Growth
Dividend paid (274.4) (155.0) (128.8) (151.2) (185.3) China 10.7% 9.7% 10.0% 10.5% 11.0%
Others (68.9) (11.4) (18.2) 14.7 15.1 Malaysia 4.0% 11.0% 5.0% 5.5% 5.5%
Financing Cash Flow (351.0) (108.7) 359.2 (331.7) (54.6) Vietnam 17.0% 26.9% 25.0% 26.0% 25.0%
Net cash flow 116.3 392.5 1,080.1 628.6 1,117.8

Forex 137.1 (145.5) - - - Valuation
Beginning cash 1,840.1 2,093.5 2,340.5 3,420.6 4,049.2 FY 30 June 2009A 2010A 2011F 2012F 2013F
Ending cash 2,093.5 2,340.5 3,420.6 4,049.2 5,167.0
EPS (sen) 55.6 29.2 37.0 46.2 58.0
Adj EPS (Sen) 25.4 27.4 34.5 42.9 53.5
P/E (x) 21.2 19.7 15.6 12.6 10.1
EV/EBITDA (x) 6.2 5.4 3.1 2.1 1.1
Net DPS (sen) 10.2 11.2 13.2 15.5 19.0

BV per share (RM) 1.50 1.67 2.46 3.15 4.00

P/BV(x) 3.6 3.2 2.2 1.7 1.3
64
INVESTMENT RESEARCH
SapuraCrest Petroleum Buy

(RM3.10 SCRES MK) Target Price: RM3.50
Laying pipes for the future OIL & GAS

• Beefiest orderbook in town Share Price Chart
SapuraCrest continues to have strongest orderbook amongst listed peers RM %
(at roughly RM10bn) from the award of the 11PSC Umbrella installation 3.2 10
5
job which spans 5 years and will record some RM1.5bn in revenue per Price
2.8 Performance 0
annum. The job provides SapuraCrest with unparalleled earnings visibility. Price
2.4 (RM)
-5
0.00
-10
Recent contracts the group has won include RM496m IPF job from 52-week
2.0
Range (RM) 0.00 – 0.00
-15
Australia and rig renewals contract for 2 rigs in their fleet worth RM422m. Avg Daily Volume (‘000) 7,268
-20
1.6 -25
Dec-09
Jan-10
Feb-10
Mar-10
May-10
Jun-10
Jul-10
Oct-10
Nov-10
Dec-10
Sep-10
Apr-10
Aug-10
• Pipe lay barges gaining traction Absolute (%)
1M
-3.0
3M
17.4
6M
18.0
SapuraCrest took delivery of 2 more pipe lay barges in 2010, the LTS3000 Relative Share
(%) price (lhs)
-5.5 6.9 13.4
Relative perf (rhs)
and Quippo2000, which are owned on a JV basis. Both vessels now serve Source: Bloomberg
in Malaysia for the group’s IPF segment and during the monsoon season,
head to the Indian waters to continue work. With the inclusion of these Key Data
vessels, contributions from JV & associates are slated to grow 84% in Price Performance
Market Cap (RM m)
Price (RM) 1,368
3.10
FY11 alone. For further growth into FY12, we believe the Sapura3000 will
Issued Shares
52-week Range(m)
(RM) 468
1.89 – 3.13
play its part as it gains traction in foreign markets, so far getting jobs from
Convertible
Avg (m) (‘000)
Daily Volume 16
1,739
Japan and Australia. There are jobs we earmark in Malaysia as well,
namely a deepwater pipelay job for the Malikai-Kebabangan development Warrant (m) 190
1M 3M 6M
that could be worth in excess of RM2bn. Absolute (%) 17.0 29.2 41.6
Relative (%) 14.8 24.3 21.5
• Ready to make a purchase Major Shareholders %
ASB Scheme 36.5
SapuraCrest is in a net cash position of RM77m and as such, has room to
gear up to at least 0.5x (a conservative threshold that would raise PNBData
Key 13.6
RM500m). We view that now would be a ripe time for the group to make ForeignCap
Market shareholding
(RM m) 19.9
3,958
another deepwater asset acquisition although there have been some Issued Shares (m) 1,277
rumours in the market that they are looking for an M&A deal.
• Key risks Major Shareholders %
SapuraCrest’s marine charter business continues to bleed losses as its Sapura Technology
Total Assets 38.1
0.0
seismic vessels lay idle but we expect recovery in 2011 as exploration Total Liabilities
Seadrill 0.0
23.6
activities pick up. Besides that, the group suffers translation losses on its Total Debt (Gross) 0.0
Shareholders’ Equity 0.0
foreign jobs which are denominated in USD.
• Maintain BUY (@ 31.01.2011) (performance indicator’s annualised)
We continue to rate SapuraCrest a BUY with a TP of RM3.50 which is Net
TotalCash / Share (RM)
Assets 0.0
3,646
based on its CY11 EPS of (23.3sen) pegging its 5x historical average PE. Total Liabilities 1,962
The group trades at a reasonable forward PE of 12x which is far lower Debt/Equity (x)
Total Debt (Gross) 0.0
623
Interest Cover Equity
Shareholders’ (x) 0.0
1,123
than large listed peers like MMHE (20x).
Financial summary Bernard
Return onChing
Equity (%) 19.8
FYE 31 Jan 2009 2010 2011F 2012F 2013F hyching@ecmlibra.com
Net Cash / Share (RM) 0.24
+603 2178 1204
Revenue (RM m) 3,451.7 3,257.0 3,714.6 3,928.8 4,171.7 Debt/Equity (x) 0.6
EBITDA (RM m) 469.0 454.1 500.7 601.6 644.6 Interest Cover (x) 11.8
Net profit (RM m) 115.8 172.0 222.9 304.7 346.8
EPS (sen) 9.7 13.5 17.5 23.9 27.2 Bernard Ching

EPS growth (%) 44.9 38.9 29.6 36.7 13.8 +603 2089 2989
P/E (x) 32.0 23.0 17.8 13.0 11.4
Net DPS (sen) 5.0 7.0 7.9 9.5 10.9

Dividend yield (%) 1.6 2.3 2.5 3.1 3.5
BVPS (RM) 0.77 0.83 0.88 1.02 1.19

P/BV (x) 4.0 3.7 3.5 3.0 2.6
65
INVESTMENT RESEARCH
SapuraCrest Petroleum Financial Summary Price Date: 30 December 2010

FY 31 Jan (RM m) 2009A 2010A 2011F 2012F 2013F FY 31 Jan (RM m) 2009A 2010A 2011F 2012F 2013F
PPE 903.6 900.5 903.0 899.6 890.2 Revenue 3,451.7 3,257.0 3,714.6 3,928.8 4,171.7
Investment properties 149.5 149.3 149.3 149.3 149.3 EBITDA 469.0 454.1 500.7 601.6 644.6
Property development - - - - - Depreciation & amortisation (84.5) (91.7) (97.4) (103.4) (109.4)
Inventories 50.0 54.3 30.5 32.3 45.7 EBIT 384.4 362.4 403.2 498.2 535.2
Receivables 1,799.0 1,327.4 1,508.6 1,584.9 1,671.4 Net interest expense (57.8) (45.2) (34.3) (33.4) (32.6)
Other assets 35.8 42.6 128.6 224.9 337.4 Share of associates (45.1) 46.8 86.0 96.3 112.5
Deposit, bank and cash 593.5 875.3 925.7 1,171.1 1,423.7 Pretax profit 281.6 364.0 454.9 561.1 615.1
Total Assets 3,531.4 3,349.3 3,645.8 4,062.1 4,517.7 Taxation (31.8) (28.7) (68.2) (84.2) (92.3)
LT borrowings 454.3 405.3 355.3 350.3 345.3 PATMI 115.8 172.0 222.9 304.7 346.8
ST borrowings 501.5 297.6 267.6 257.6 247.6 Adj PATMI 115.8 172.0 222.9 304.7 346.8
Payables 1,228.9 1,170.2 1,323.0 1,399.3 1,485.8
Liabilities 2,207.8 1,888.9 1,961.7 2,023.0 2,094.5 FY 31 Jan 2009A 2010A 2011F 2012F 2013F
Share capital 238.8 255.3 255.3 255.3 255.3 Growth

Reserves 683.6 807.9 867.8 1,050.7 1,258.8 Revenue 52.6% -5.6% 14.0% 5.8% 6.2%
Shareholders' equity 922.4 1,063.2 1,123.2 1,306.0 1,514.1 EBITDA 77.3% -3.2% 10.3% 20.2% 7.2%
Minority interest 401.2 397.1 560.9 733.1 909.0 Pretax profit 64.3% 29.3% 25.0% 23.3% 9.6%
Total Equity 1,323.6 1,460.3 1,684.1 2,039.1 2,423.2 Net profit 48.0% 48.6% 29.6% 36.7% 13.8%
Adj EPS 44.9% 38.9% 29.6% 36.7% 13.8%
Total Equity and Liabilities 3,531.4 3,349.3 3,645.8 4,062.1 4,517.7
Profitability
EBITDA margin 13.6% 13.9% 13.5% 15.3% 15.5%
Cash Flow Statement Net profit margin 3.4% 5.3% 6.0% 7.8% 8.3%
FY 31 Jan (RM m) 2009A 2010A 2011F 2012F 2013F Effective tax rate 9.7% 9.1% 15.0% 15.0% 15.0%
Return on assets 3.3% 5.1% 6.1% 7.5% 7.7%
Pretax profit 281.6 364.0 454.9 561.1 615.1 Return on equity 12.6% 16.2% 19.8% 23.3% 22.9%
Depreciation & amortisation 84.5 91.7 97.4 103.4 109.4
Change in working capital 57.7 453.9 (4.7) (1.8) (13.4) Leverage
Net interest received / (paid) (63.4) (44.6) (34.3) (33.4) (32.6) Total debt / total assets 27.1% 21.0% 17.1% 15.0% 13.1%
Tax paid (33.5) (47.6) (68.2) (84.2) (92.3) Total debt / equity 103.6% 66.1% 55.5% 46.5% 39.2%
Others 115.4 (12.4) (51.7) (62.9) (79.9) Net debt / equity 39.3% -16.2% -27.0% -43.1% -54.9%
Operating Cash Flow 442.3 805.0 393.4 482.2 506.3
Key Drivers
Capex (57.3) (79.2) (100.0) (100.0) (100.0) FY 31 Jan 2009A 2010A 2011F 2012F 2013F
Others (25.7) (149.7) - - - -
Investing Cash Flow (83.0) (228.9) (100.0) (100.0) (100.0) IPF Replenishment 1,500.0 1,700.0 2,100.0 2,500.0 1,500.0
Rig avg Charter Rate 233,679 233,679 233,679 236,493 236,493
Changes in borrowings (128.3) (210.8) (50.0) (5.0) (5.0) Valuation
Dividend paid (17.5) (100.2) (100.3) (121.9) (138.7) FY 31 Jan 2009A 2010A 2011F 2012F 2013F
Others 147.1 118.6 - - -
Financing Cash Flow 19.6 (132.4) (150.3) (126.9) (143.7) EPS (sen) 9.7 13.5 17.5 23.9 27.2
Adj EPS (Sen) 9.7 13.5 17.5 23.9 27.2
Net cash flow 378.8 443.6 143.1 255.3 262.6 P/E (x) 32.0 23.0 17.8 13.0 11.4
Forex 7.6 (14.7) - - - EV/EBITDA (x) 9.5 9.2 8.4 6.9 6.3
Beginning cash 207.1 446.4 832.6 995.7 1,273.8
Ending cash 593.5 875.3 975.7 1,251.1 1,536.3 Net DPS (sen) 5.0 7.0 7.9 9.5 10.9
Net dividend yield % 1.6 2.3 2.5 3.1 3.5
BVPS (RM) 0.77 0.83 0.88 1.02 1.19

P/BV (x) 4.0 3.7 3.5 3.0 2.6
66
INVESTMENT RESEARCH
Company Overview 3 January 2011
Sime Darby Trading Buy

(RM8.80 SIME MK) Target Price: RM11.80
Starting on a clean slate PLANTATION

• 1QCY11 was a good start Share Price Chart
Sime Darby has started FY11 on a positive note with their Motor (+137%) RM %
and Industrial (+23%) business showing strong growth as overseas sales 9.5 0
-5
picked up. We view that prospects are still good for these two segments 9.0
-10
going into 2011. BMW sales in China will boost the Motor segment and 8.5
-15
continued demand for heavy equipment from the Australian mining 8.0 -20
industry will boost the Industrial segment. To note, the group set a net 7.5 -25
profit KPI of RM2.5bn for the year which 1Q profits already made up 26%
Dec-09
Jan-10
Feb-10
Mar-10
May-10
Jun-10
Jul-10
Oct-10
Nov-10
Dec-10
Sep-10
Apr-10
Aug-10
hence we believe that this KPI will easily be beaten this year.
• Plantation sector to see CPO ASP boost Source: Bloomberg
While their plantations segment is bearing the brunt of the poor weather,
the soft yields will be compensated by high CPO prices. We have set a
Price Performance
CPO ASP of RM2,700 for FY11, giving the group some 26% growth in Price (RM) 8.80
their plantation segment this year. We choose to keep our CPO ASP 52-week Range (RM) 7.50 – 9.10
conservative as we view that CPO price fundamentals could change in Avg Daily Volume (‘000) 6,959
2Q11, especially if supply imbalances level out. The coming 2 quarters
should nonetheless show strong earnings, that we view has not been 1M 3M 6M
factored in by the market. Absolute (%) 0.0 3.5 13.0
Relative (%) -1.9 -0.4 -3.0
• Cleaning out the closet

Sime Darby has launched several lawsuits, the largest ones against Dato’ Key Data
Seri Ahmad Zubair @ Ahmad Zubir bin Haji Murshid and other directors Market Cap (RM m) 52,883
who were involved in the Qatar Petroleum, Maersk Oil Qatar Project and
Issued Shares (m) 6,010
other marine projects. We should continue to hear of the progress of
these lawsuits throughout 2011 and there could be possibility of write
backs from FY10’s RM2bn in write offs. Whatever the case, we are of the
view the worst is behind the group, and good news could possibly come in Major Shareholders %
the from of selling Sime Engineering, which has unused, but much ASB 37.0
needed (in the O&G industry) yard space. EPF 13.7
PNB 10.9
• Maintain BUY
Given Sime’s earnings correlation with CPO prices, we view that there is
more upside for the stock. Looking back, when CPO prices reached past Balance Sheet Highlights (RM m)
RM3,000 in early 2008, Sime traded at a rolling forward PE in excess of
30x. Currently, Sime still trades at 17.9x on FY11 EPS. As such, we Total Assets 33,142
believe there is still room to run given the said fundamentals. Pegging Total Liabilities 10,367
FY11 EPS to 24x (+1x std dev PE above historical average) we derive our Total Debt (Gross) 6,811
TP of RM11.80. Shareholders’ Equity 21,953
Financial summary Return on Assets (%) 8.9

FYE 30 Jun 2009 2010 2011F 2012F 2013F Return on Equity (%) 13.5
Revenue (RM m) 31,013.9 32,951.6 33,217.8 33,875.5 34,845.5
EBITDA (RM m) 3,957.1 3,177.4 5,058.8 4,762.4 4,691.5 Debt/Equity (x) 0.3
Net profit (RM m) 2,280.1 726.8 2,956.2 2,735.9 2,694.8 Interest Cover (x) 21.6
EPS (sen) 37.9 44.4 49.2 45.5 44.8

ECM / Consensus (%) 98.2 85.8 79.4 Bernard Ching
EPS growth (%) (35.1) 17.0 10.8 (7.4) (1.5) hyching@ecmlibra.com
P/E (x) 23.2 19.8 17.9 19.3 19.6 +603 2089 2989
Net DPS (sen) 19.0 10.0 24.6 22.8 22.4

Dividend yield (%) 2.2 1.1 2.8 2.6 2.5
BVPS (RM) 3.54 3.38 3.64 3.86 4.09

P/BV (x) 2.5 2.6 2.4 2.3 2.2
67
INVESTMENT RESEARCH
Sime Darby Bhd Financial Summary Price Date: 30 December 2010

FY 30 Jun (RM m) 2009A 2010A 2011F 2012F 2013F FY 30 Jun (RM m) 2009A 2010A 2011F 2012F 2013F
PPE 11,862 13,496 13,152 12,785 12,396 Revenue 31,013.9 32,951.6 33,217.8 33,875.5 34,845.5
Investment properties 316 334 334 334 334 EBITDA 3,957.1 3,177.4 5,058.8 4,762.4 4,691.5
Property development 2,446 2,795 3,095 3,408 3,733 Depreciation & amortisation (722.5) (821.7) (844.2) (866.7) (889.3)
Inventories 5,627 5,217 3,822 3,898 4,010 EBIT 3,234.6 2,355.7 4,214.6 3,895.7 3,802.3
Receivables 9,066 8,933 5,803 5,868 5,963 Net interest income (93.9) (170.1) (195.3) (154.6) (98.7)
Other assets 2,754 2,650 2,760 2,874 2,990 Share of associates 14.5 (364.2) 110.0 113.3 116.7
Deposit, bank and cash 3,369 4,502 4,176 4,756 5,326 Pretax profit 3,071.6 1,741.5 4,129.3 3,854.4 3,820.3
Total Assets 35,440 37,926 33,142 33,922 34,752 Taxation (730.8) (886.7) (1,032.3) (963.6) (955.1)
LT borrowings 2,338 4,611 3,839 3,339 2,839 Net profit 2,280.1 726.8 2,956.2 2,735.9 2,694.8
ST borrowings 3,594 3,302 2,972 2,675 2,407 Adj net profit 2,280.1 2,667.8 2,956.2 2,735.9 2,694.8
Payables 6,625 8,055 2,730 2,784 2,864
Other liabilities 877 827 827 827 827 Key Statistics & Ratios
Liabilities 13,434 16,795 10,367 9,624 8,936 FY 30 Jun 2009A 2010A 2011F 2012F 2013F
Share capital 3,005 3,005 3,005 3,005 3,005 Growth

Reserves 18,380 17,445 18,949 20,317 21,664 Revenue -8.9% 6.2% 0.8% 2.0% 2.9%
Shareholders' equity 21,385 20,450 21,953 23,321 24,669 EBITDA -37.9% -19.7% 59.2% -5.9% -1.5%
Pretax profit -41.0% -43.3% 137.1% -6.7% -0.9%
Minority interest 621 681 822 976 1,147 Adj Net profit -35.1% 17.0% 10.8% -7.4% -1.5%
Total Equity 22,006 21,131 22,775 24,298 25,816 Adj EPS -35.1% 17.0% 10.8% -7.4% -1.5%
Total Equity and Liabilities 35,440 37,926 33,142 33,922 34,752 Profitability
EBITDA margin 12.8% 9.6% 15.2% 14.1% 13.5%
Cash Flow Statement Effective tax rate 23.9% 25.0% 25.0% 25.0% 25.0%
FY 30 Jun (RM m) 2009A 2010A 2011F 2012F 2013F Return on assets 6.4% 1.9% 8.9% 8.1% 7.8%
Return on equity 10.7% 3.6% 13.5% 11.7% 10.9%
Pretax profit 3,072 1,742 4,129 3,854 3,820
Depreciation & amortisation 750 893 844 867 889 Leverage
Change in working capital (1,741) 802 (1,101) (399) (453) Total debt / total assets 0.16 0.20 0.20 0.18 0.15
Net interest received / (paid) - - (195) (155) (99) Total debt / equity 0.26 0.37 0.31 0.26 0.21
Tax paid (1,404) (968) (1,032) (964) (955) Net debt / equity 0.12 0.17 0.12 0.05 0.00
Others 261 1,185 85 41 (18)
Operating Cash Flow 937 3,654 2,730 3,245 3,185 Key Drivers
FY 30 Jun (RM m) 2009A 2010A 2011F 2012F 2013F
Capex (1,713) (2,993) (500) (500) (500)
Others 235 170 - - CPO ASP Malaysia (RM/mt) 2,264 2,342 2,700 2,600 2,600
Investing Cash Flow (1,479) (2,824) (500) (500) (500) CPO ASP Indonesia (RM/mt) 2,013 2,260 2,619 2,522 2,522
FFB Yield Malaysia (mt/ha) 22.9 22.3 22.3 22.3 22.3
Issuance of shares - - - - - FFB Yield Indonesia (mt/ha) 16.6 18.0 18.7 18.7 18.7
Changes in borrowings 535 2,182 (892) (859) (829)
Dividend paid (2,366) (1,404) (1,478) (1,368) (1,347) Valuation
Others (26) (238) (186) (186) (186) FY 30 Jun 2009A 2010A 2011F 2012F 2013F
Financing Cash Flow (1,858) 539 (2,556) (2,413) (2,362)
EPS (sen) 37.9 12.1 49.2 45.5 44.8
Net cash flow (2,399) 1,370 (326) 333 322 Adj EPS (Sen) 37.9 44.4 49.2 45.5 44.8
Forex (42) (133) - - - P/E (x) 23.2 19.8 17.9 19.3 19.6
Beginning cash 5,809 3,265 4,502 4,424 5,004 EV/EBITDA (x) 14.1 17.8 11.1 11.6 11.5
Ending cash 3,369 4,502 4,176 4,756 5,326
Net DPS (sen) 19.0 10.0 24.6 22.8 22.4
BV per share (RM) 3.54 3.38 3.64 3.86 4.09

P/BV(x) 2.5 2.6 2.4 2.3 2.2
68
INVESTMENT RESEARCH
Company Overview 3 January 2011
Sunway Holdings Buy

(RM2.24 SGW MK) Target Price: RM2.60
Growing locally and regionally CONSTRUCTION

• Stronger order book replenishment on the horizon Share Price Chart
Prospects are bright for the construction sector with recent Cabinet RM %
approval of the nation’s largest infrastructure project, the RM36bn Klang 2.4 58
Valley MRT. Apart from the tunnelling portion where foreign contractors 2.2
38
2.0
are allowed to bid, the remaining civil works will be up for grabs by local 1.8 18
contractors with works targeted to begin as soon as July 2011. Before 1.6
-2
then, remnant 9MP such as the new LCCT and LRT projects could buoy 1.4
1.2 -22
the industry. As one of the local construction players with a strong brand
Dec-09
Jan-10
Feb-10
Mar-10
May-10
Jun-10
Jul-10
Oct-10
Nov-10
Dec-10
Sep-10
Apr-10
Aug-10
name, we believe the group is set to benefit from the impending roll out of
contracts. Furthermore, with its track record in the Arzanah development
in Abu Dhabi, we believe the group has a decent chance of securing Share price (lhs) Relative perf (rhs)
Source: Bloomberg
contracts for Phase 2 works.
• Property segment fast gaining pace Price Performance

As its construction segment benefits from a rosy outlook in the local Price (RM) 2.24
construction industry, the property segment extends its reach regionally to 52-week Range (RM) 1.26 – 2.34
tap on fast growing countries such as China, Sri Lanka and Singapore. Avg Daily Volume (‘000) 1,091
After the launch of Jiangyin in mid 2010, the group is now exploring other
1M 3M 6M
projects in Changsha and has made its foray into the capital of Sri Lanka. Absolute (%) -1.8 16.1 49.3
Perhaps most commendable is its successful expansion into Singapore Relative (%) -3.6 11.6 28.2
with 5 projects which will underline its property earnings in the next few
years.
Key Data
• Next stage of growth from merger with SunCity Market Cap (RM m) 1,358
Not only will the proposed merger yield operational efficiencies, a stronger Issued Shares (m) 607
balance sheet from an enlarged entity will allow the group to bid for larger Warrants 247
projects as well as tap into new markets benefiting not just construction
and property, but creating spinoffs for other segments as well.
Major Shareholders %
• Reiterate BUY call Tan Sri Dato Seri Jeffrey Cheah 46.8
Sunway is our top BUY for the construction sector. This is premised on (1)
potential re-rating from the proposed merger with Sunway City, (2)
undemanding forward P/E valuation of 7.4x, (3) more landbank acquisition Balance Sheet Highlights (RM m)
in the pipeline, and (4) strength in securing overseas construction (@ 31.12.2010) (performance indicator’s annualised)
contracts. Although out RNAV estimate stands at RM3.61, our target price
is adjusted to reflect the offer price of RM2.60 in the proposed merger of Total Assets 2,654
the group with sister company Sunway City Bhd. Total Liabilities 1,616
Total Debt (Gross) 793
Shareholders’ Equity 922
Financial summary
FYE 31 Dec 2008 2009* 2010F 2011F 2012F Return on Assets (%) 6.2
Revenue (RM m) 1,825.2 2,639.2 2,227.3 2,870.6 3,122.7 Net Cash / Share (RM) -
EBITDA (RM m) 179.8 204.5 262.0 287.8 355.2
Net profit (RM m) 89.0 109.8 151.0 179.6 218.1 Debt/Equity (x) 0.6
Interest Cover (x) 4.7
EPS (sen) 15.1 20.5 25.4 30.2 36.7
ECM / Consensus (%) 104.7 108.6 118.2
EPS growth (%) nm -9.5 86.5 18.9 21.4 Bernard Ching
P/E (x) 14.9 16.4 8.8 7.4 6.2 hyching@ecmlibra.com
+603 2089 2982
Net DPS (sen) 2.3 2.3 5.7 6.2 7.6
Dividend yield (%) 1.0 1.0 2.5 2.8 3.4
BVPS (RM) 1.14 1.34 1.60 1.86 2.17

P/BV (x) 2.0 1.7 1.4 1.2 1.0
* FYE changed from 30 Jun to 31 Dec. FY09 covers 18 month period.
69
INVESTMENT RESEARCH
Sunway Holdings Bhd Financial Summary Price Date: 30 December 2010

FYE 31 Dec (RM m) 2008A 2009A 2010F 2011F 2012F FYE 31 Dec (RM m) 2008A 2009A 2010F 2011F 2012F
PPE 344.9 402.3 428.2 450.5 469.7 Revenue 1,825.2 2,639.2 2,227.3 2,870.6 3,122.7
Investments in associates / JV 104.4 296.6 350.1 406.2 453.2 EBITDA 179.8 204.5 262.0 287.8 355.2
Property development costs 130.2 177.3 198.4 242.0 182.3 Depreciation & amortisation (42.5) (65.3) (54.1) (57.7) (60.8)
Inventories 292.1 304.9 274.6 353.9 385.0 EBIT 137.3 134.7 209.5 231.8 296.1
Receivables 787.4 713.3 931.4 1,195.0 1,297.8 Net interest expense (40.6) (53.5) (41.1) (43.6) (40.8)
Other assets 220.8 208.0 186.1 186.1 186.1 Share of associates' profits 31.8 71.9 53.5 56.1 47.0
Deposit, bank & cash balances 142.4 204.4 285.3 178.3 189.8 Pretax profit 128.5 153.2 221.9 244.3 302.3
Total assets 2,022.3 2,306.9 2,654.1 3,012.1 3,164.0 Taxation (26.3) (33.0) (29.5) (40.3) (68.9)
LT borrowings 455.6 411.5 411.5 411.5 411.5 Net profit 100.2 109.8 164.4 179.6 215.7
ST borrowings 255.8 281.5 381.5 381.5 281.5 Adj net profit 89.0 109.8 151.0 179.6 215.7
Payables 637.4 702.3 788.8 975.7 1,030.1
Liabilities 1,377.2 1,447.7 1,615.5 1,802.4 1,756.8 FYE 31 Dec 2008A 2009A 2010F 2011F 2012F
Share capital 548.0 600.8 600.8 600.8 600.8 Growth

Reserves 50.5 170.2 321.6 468.3 648.0 Revenue -3.8% -3.6% 26.6% 28.9% 8.8%
Shareholders' equity 598.4 771.0 922.4 1,069.1 1,248.9 EBITDA 17.8% -24.2% 92.2% 9.8% 23.4%
Minority interest 46.7 88.2 116.2 140.6 158.3 Pretax profit 627.0% -20.6% 117.3% 10.1% 23.7%
Total equity 645.2 859.2 1,038.6 1,209.7 1,407.1 Net profit 1167.4% -26.9% 124.5% 9.2% 20.1%
Adj EPS 968.2% -9.5% 86.5% 18.9% 20.1%
Total equity and liabilities 2,022.3 2,306.9 2,654.1 3,012.1 3,164.0
Profitability
Cash Flow Statement EBITDA margin 9.9% 7.7% 11.8% 10.0% 11.4%
FYE 31 Dec (RM m) 2008A 2009A 2010F 2011F 2012F Pretax profit margin 7.0% 5.8% 10.0% 8.5% 9.7%
Pretax profit 128.5 153.2 221.9 244.3 302.3 Effective tax rate 27.2% 40.6% 17.5% 21.4% 27.0%
Depreciation & amortisation 42.5 65.3 54.1 57.7 60.8 Return on assets 5.0% 4.8% 6.2% 6.0% 6.8%
Other non-cash items (13.9) (44.1) (97.7) (52.8) (75.1) Return on equity 16.7% 14.2% 17.8% 16.8% 17.3%
Change in working capital (52.5) 85.5 (122.3) (199.7) (19.8)
Net interest paid (37.5) (55.4) (41.1) (43.6) (40.8) Leverage
Operating cash flow 67.0 204.5 14.8 5.9 227.4 Total debt / total assets (x) 0.35 0.30 0.30 0.26 0.22
Total debt / equity (x) 1.19 0.90 0.86 0.74 0.55
Capex (84.0) (112.5) (80.0) (80.0) (80.0) Net debt / equity (x) 0.95 0.63 0.55 0.57 0.40
Others (18.0) (89.1) 59.0 - -
Investing cash flow (102.0) (201.7) (21.0) (80.0) (80.0) Key Drivers
FYE 31 Dec 2008A 2009A 2010F 2011F 2012F
Net change in borrowings (13.9) (18.5) 100.0 - (100.0) Outstanding order book 2,200.0 2,873.0 2,525.7 2,308.7 2,239.3
Dividends paid - (11.8) (13.0) (32.9) (35.9) Annual replenishment 1,118.3 2,733.5 1,000.0 1,500.0 1,500.0
Others (20.8) 15.3 - - -
Financing cash flow (27.8) 61.7 87.0 (32.9) (135.9) Valuation
FYE 31 Dec 2008A 2009A 2010F 2011F 2012F
Net cash flow (62.8) 64.5 80.8 (107.0) 11.5
Forex difference - (2.5) - - - EPS (sen) 18.5 20.5 28.5 31.2 37.4
Beginning cash 205.2 142.4 204.4 285.3 178.3 Adj EPS (Sen) 15.1 20.5 25.4 30.2 36.3
Ending cash 142.4 204.4 285.3 178.3 189.8 Adj P/E (x) 14.9 16.4 8.8 7.4 6.2
EV/EBITDA (x) 10.3 14.1 7.5 7.3 5.7
Net DPS (sen) 2.3 2.3 5.7 6.2 7.5

BV per share (RM) 1.14 1.34 1.60 1.86 2.17

P/BV (x) 2.0 1.7 1.4 1.2 1.0
70
EARNINGS ESTIMATE OF ECM UNIVERSE OF STOCKS (CALENDARISED)
PRICE DATE 30-Dec-10
Bloomberg Target Last Market Adj EPS Adj EPS Growth P/E P/BV ROE Net Div Yield
Stock Code Call Price Price Cap 2011 2012 2011 2012 2011 2012 2011 2012 2011 2012 2011 2012
RM RM RM m sen sen % % x x x x % % % %
Automotive Neutral
UMW Holdings UMWH MK Buy 7.75 7.02 8,096.7 66.0 70.9 6.9 7.4 10.6 9.9 1.8 1.6 16.7 16.4 4.7 5.1
Sector total 8,096.7 6.9 7.4 10.8 10.1 1.8 1.6 16.7 16.4 4.7 5.1
Aviation Overweight
INVESTMENT RESEARCH
AirAsia AIRA MK Buy 3.50 2.53 7,015.9 33.5 35.0 10.6 4.4 7.6 7.2 1.7 1.4 18.9 16.7 0.0 0.0
MAS MAS MK Buy 2.95 2.09 6,985.1 14.7 17.8 189.9 21.2 14.2 11.7 1.9 1.6 13.2 13.8 0.0 0.0
Sector total 14,001.0 314.1 10.2 9.9 9.0 1.8 1.5 16.0 15.3 0.0 0.0
Banking Neutral
CIMB Group Holdings CIMB MK Hold 8.80 8.50 63,178.6 56.4 63.5 11.6 12.7 15.1 13.4 2.2 2.0 15.9 15.7 2.2 2.6
Maybank MAY MK Buy 10.26 8.50 62,239.0 64.5 72.4 12.5 12.2 13.2 11.7 1.9 1.7 14.4 14.9 5.7 6.4
Public Bank PBK MK Hold 13.30 13.02 45,985.7 94.7 111.0 14.3 17.2 13.7 11.7 3.5 3.3 26.8 28.8 4.1 4.7
AMMB AMM MK Hold 6.02 7.03 21,189.7 45.3 50.5 11.7 11.5 15.5 13.9 1.9 1.7 12.0 12.3 2.4 2.8
Hong Leong Bank HLBK MK Hold 9.43 9.20 14,537.0 74.1 90.2 6.9 21.8 12.4 10.2 1.6 1.7 14.0 16.4 2.0 2.0
Sector total 207,130.0 12.8 14.2 14.3 12.5 2.3 2.1 17.3 18.1 3.7 4.2
71
Building Materials Neutral

Lafarge LMC MK Hold 7.46 7.67 6,517.2 53.3 56.7 46.8 6.4 14.4 13.5 2.0 1.9 13.8 14.0 5.0 5.0
YTL Cement YTLC MK Buy 5.27 4.76 2,345.4 43.9 46.3 13.8 5.5 10.8 10.3 1.1 0.9 14.3 13.7 4.1 4.3
Sector total 8,862.6 33.2 6.0 11.6 10.9 1.7 1.6 14.0 13.9 4.7 4.8
Construction Overweight
IJM Corp IJM MK Hold 5.71 6.23 8,416.9 31.0 35.4 12.6 13.9 20.1 17.6 1.5 1.4 7.4 7.9 1.8 1.8
Gamuda GAM MK Trading buy 4.66 3.81 7,796.1 19.9 22.9 26.4 15.2 19.2 16.6 2.2 2.0 11.4 12.3 2.4 2.4
Sunway Holdings SGW MK Buy 2.60 2.24 1,359.0 30.2 36.3 18.9 20.1 7.4 6.2 1.2 1.0 16.8 17.3 2.8 3.3
Sector total 17,572.0 19.4 15.6 17.4 15.1 1.8 1.6 9.9 10.6 2.1 2.2
Consumer Overweight
BAT ROTH MK Sell 41.80 45.00 12,848.8 257.3 260.1 0.4 1.1 17.5 17.3 24.6 24.2 36.3 35.2 5.5 5.6
Parkson PKS MK Buy 6.70 5.39 5,894.7 38.7 48.2 25.0 24.6 13.9 11.2 1.9 1.5 17.7 19.1 2.7 3.2
Pelikan PELI MK Hold 1.12 1.24 635.9 15.2 17.8 20.2 17.3 8.2 7.0 0.9 0.8 10.5 11.1 2.4 2.4
QL Resources QLG MK Buy 7.30 5.84 2,307.8 36.5 47.6 19.9 30.6 16.0 12.3 3.4 2.8 21.0 22.3 1.4 1.5
Sector total 21,687.2 9.9 12.3 15.9 14.2 15.5 15.1 28.9 28.8 4.2 4.4
Gaming Neutral
Genting GENT MK Buy 12.05 11.18 41,514.0 79.1 85.3 14.3 7.9 14.1 13.1 2.2 1.9 16.9 15.8 1.0 1.0
Genting Malaysia GENM MK Hold 3.52 3.39 20,052.6 26.1 28.7 9.1 9.9 13.0 11.8 1.6 1.5 13.1 13.0 1.8 2.0
Berjaya Toto BST MK Buy 4.88 4.50 6,079.6 28.7 30.5 7.6 6.1 15.7 14.8 10.2 8.7 70.4 64.0 4.9 5.1
Sector total 67,646.3 12.1 8.4 13.9 12.8 2.8 2.4 20.6 19.3 1.6 1.7
INVESTMENT RESEARCH
Infrastructure - Toll Neutral
PLUS PLUS MK Buy 5.20 4.52 22,600.0 34.7 36.9 35.4 6.5 13.0 12.2 3.1 2.9 23.8 23.3 5.4 5.7
LITRAK LTK MK Hold 3.53 3.56 1,789.1 25.9 28.1 19.6 8.7 13.8 12.7 3.6 3.4 26.1 26.6 4.8 5.0
Sector total 24,389.1 34.2 6.6 13.1 12.3 3.1 2.9 24.0 23.6 5.3 5.7
Infrastructure - Water Neutral

Puncak Niaga PNH MK Hold 2.57 2.30 945.6 36.7 41.0 9.1 11.8 6.3 5.6 0.6 0.5 9.0 9.3 4.3 4.3
Sector total 945.6 9.1 11.8 6.3 5.6 0.6 0.5 9.0 9.3 4.3 4.3
Media Overweight
72
Media Prima MPR MK Buy 2.72 2.60 2,613.7 15.1 17.2 6.3 14.1 17.2 15.1 2.1 1.9 13.6 14.4 2.9 3.3
Star STAR MK Hold 3.70 3.31 2,444.6 24.6 26.9 4.0 9.7 13.5 12.3 2.3 2.2 17.7 18.5 5.4 5.9
Media Chinese International
MCIL MK Buy 1.08 0.86 1,448.2 9.0 9.4 0.2 5.1 9.6 9.1 1.2 1.1 13.0 12.9 5.2 5.5
Sector total 6,506.5 3.6 9.9 13.1 12.0 2.0 1.9 15.0 15.6 4.4 4.8
Oil & Gas Overweight

Petronas Gas PTG MK Buy 13.64 11.10 21,963.9 69.8 69.2 8.3 -0.9 15.9 16.0 2.5 2.4 16.2 15.4 4.5 4.5
SapuraCrest SCRES MK Buy 3.50 3.10 3,957.8 23.3 26.9 36.2 15.2 13.3 11.5 3.1 2.6 23.0 22.9 3.0 3.5
KNM Group KNMG MK Buy 3.43 2.84 2,843.1 22.9 36.1 37.3 57.6 12.4 7.9 1.2 1.1 9.9 13.7 0.5 0.8
Wah Seong WSC MK Hold 2.09 2.07 1,498.6 13.1 19.1 61.9 45.9 15.8 10.8 1.4 1.3 9.7 12.7 2.4 3.5
Dayang Enterprise DEHB MK Hold 2.55 2.85 1,003.2 21.3 21.4 13.3 0.5 13.4 13.3 2.3 2.1 19.1 17.5 2.6 2.6
Petra Perdana PETR MK Trading buy 1.09 1.06 477.1 3.3 9.1 -128.1 175.9 32.0 11.6 0.9 0.9 2.9 7.5 1.4 1.4
MMHE MMHE MK Hold 5.81 5.90 9,440.0 29.0 35.7 9.4 22.8 20.3 16.5 2.7 2.4 13.4 14.3 0.5 0.6
Sector total 41,183.8 21.7 13.5 16.1 14.2 2.5 2.3 15.5 15.6 3.0 3.1
Plantation Overweight
Sime Darby SIME MK Trading buy 11.80 8.80 52,883.3 47.4 45.2 1.2 -4.6 18.6 19.5 2.3 2.2 12.6 11.3 2.7 2.6
IOI Corporation IOI MK Trading buy 7.22 5.81 38,919.5 32.7 31.6 15.2 -3.4 17.8 18.4 3.2 2.9 17.2 15.4 3.8 3.6
KL Kepong KLK MK Trading buy 21.70 22.10 23,591.9 99.1 105.7 3.9 6.7 22.3 20.9 3.5 3.2 16.0 15.9 2.8 2.9
Genting Plantation GENP MK Trading buy 10.00 8.80 6,677.9 52.5 58.4 18.5 11.3 16.8 15.1 2.1 1.8 12.9 12.7 0.4 0.4
Boustead Holdings BOUS MK Trading buy 5.96 5.38 5,058.1 49.7 52.3 28.0 5.3 10.8 10.3 1.3 1.2 10.7 10.9 6.9 7.4
IJM Plantations IJMP MK Trading buy 3.99 2.98 2,388.0 13.4 14.8 26.7 9.9 22.2 20.2 1.8 1.7 4.7 4.7 1.0 1.0
Sector total 129,518.6 7.7 -0.7 18.7 18.8 2.7 2.5 14.4 13.3 3.0 3.0
Power Neutral
Tenaga TNB MK Buy 9.48 8.37 36,497.9 67.7 81.5 13.1 20.3 12.4 10.3 1.2 1.1 9.9 11.1 2.7 3.3
YTL Power YTLP MK Hold 2.36 2.44 17,737.6 14.5 15.0 1.8 3.8 16.8 16.2 2.1 2.0 17.0 8.7 6.1 6.1
Sector total 54,235.5 11.1 15.8 13.0 11.2 1.5 1.4 12.2 10.3 3.8 4.2
INVESTMENT RESEARCH
Property Neutral
SP Setia SPSB MK Hold 5.20 5.95 6,050.0 26.0 32.0 6.7 22.8 22.8 18.6 2.6 2.4 11.6 13.3 2.7 3.3
Sunway City SCITY MK Buy 5.10 4.35 2,044.5 40.0 48.4 14.6 21.0 10.9 9.0 0.7 0.7 6.6 7.5 1.5 1.7
YNH Property YNHB MK Hold 1.70 1.70 689.8 17.0 21.5 16.6 26.5 10.0 7.9 0.8 0.8 8.4 9.8 3.0 3.8
Glomac GLMC MK Buy 1.98 1.65 490.3 22.1 26.4 23.7 19.6 7.5 6.3 0.8 0.7 10.9 11.9 4.3 5.2
Sector total 9,274.7 12.2 22.3 15.6 12.8 2.0 1.8 10.2 11.7 2.5 3.1
Technology Neutral
Notion Vtec NVB MK Sell 1.52 1.70 262.8 26.5 30.4 8.1 14.5 6.4 5.6 1.0 0.8 15.0 15.1 3.1 3.6
Sector total 262.8 8.1 14.5 6.4 5.6 1.0 0.8 15.0 15.1 3.1 3.6
73
Telecommunication Neutral
AXIATA AXIATA MK Buy 5.23 4.75 40,114.5 34.3 37.9 12.5 10.6 13.9 12.5 1.8 1.7 12.9 13.3 2.2 2.4
Maxis MAXIS MK Hold 5.70 5.30 39,750.0 32.7 34.4 5.8 5.2 16.2 15.4 4.1 4.3 25.6 27.6 6.8 7.1
Digi DIGI MK Hold 23.20 24.60 19,126.5 147.4 155.8 4.1 5.7 16.7 15.8 16.1 16.1 96.2 101.7 6.0 6.3
TM T MK Buy 3.80 3.51 12,556.7 12.5 13.2 5.6 5.5 28.1 26.7 2.0 2.1 7.2 7.9 5.5 5.5
Sector total 111,547.7 8.2 7.6 16.1 15.0 5.1 5.1 31.1 33.0 4.8 5.1
ECM Universe 722,859.9 14.8 10.0 14.9 13.6 3.2 3.0 18.9 19.0 3.5 3.8
INVESTMENT RESEARCH
Key to stock recommendations: Key to sector recommendations:
Buy = Share price is expected to appreciate by >10% over the next 12 months Overweight = Industry expected to outperform the market over the next 12 months
Hold = Share price is expected to move by less than +/-10% over the next 12 months Neutral = Industry expected to perform in-line with the market over the next 12 months
Sell = Share price is expected to decline by >10% over the next 12 months Underweight = Industry expected to underperform the market over the next 12 months
Trading buy = Share price is expected to appreciate > 10% over the next 6 months arising
from positive newsflow. However, upside may not be sustainable.
This report is for information purposes only and general in nature. The information contained in this report is based on data and obtained from sources believed to be reliable. However, the
data and/or sources have not been independently verified and as such, no representation, express or implied, is made with respect to the accuracy, completeness or reliability of the
information or opinions in this report. Accordingly, neither we nor any of our related companies and associates nor persons related to us accept any liability whatsoever for any direct, indirect
or consequential losses (including loss of profits) or damages that may arise from the use of or reliance on the information or opinions in this publication. Any information, opinions or
recommendations contained herein are subject to change at any time without prior notice.
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should seek financial, legal and other advice regarding the appropriateness of investing in any securities or the investment strategies discussed or recommended in this report.
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Market Strategy 2011

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Market Strategy 2011

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INVESTMENT RESEARCH

Market Strategy FBMKLCI : 1,518.91

2011 investment outlook: Make hay while the sun shines

Oil & gas 39

Top stock picks

Earnings estimate of ECM universe of stocks 71

Global economic growth to be sustained but with growing divergence

Figure 1 : Global GDP growth Figure 2 : GDP spread (emerging vs developed)

% (Annual % change) percentage points

Source: IMF, ECM Libra Source: World Bank

Softening growth in emerging markets will dissipate by end 1Q11

Source: IMF Source: ISM, CFLP

Developed markets return to self-sustained growth

The persistence of unemployment is partly a psychological phenomenon. While the

Figure 5 : US real GDP growth Figure 6 : Contribution to US real GDP growth

q-o-q % (SAAR) percentage points

(4-w k moving average) % ('000)

Figure 11 : US automotive sales Figure 12 : US consumer price index

SAAR (m) y-o-y %

Source: Motor Intelligence Survey Source: U.S. Bureau of Labor Statistics

Major themes in 2011

• Intermittent sovereign debt and geopolitical risks

Malaysia’s economic outlook

Figure 13 : Malaysia economics highlight

2009 2010F 2011F

Real GDP (y-o-y, %) -1.7 7.0 5.2

Source: BNM, ECM Libra

Source: Department of Statistics Source: Department of Statistics

Figure 16 : Malaysia export growth Figure 17 : Malaysia exports vs OECD CLI

y-o-y % y-o-y % y-o-y %

Source: Department of Statistics Source: BNM

2010 market review

Figure 20 : YTD performance of equity indices

FBMKLCI FBM Small Cap FBM Syariah

Source: Bloomberg, ECM Libra

Despite a commendable market performance, Malaysia continues to lag behind regional

Figure 21 : FBMKLCI index movers

Share price YTD price Index

CIMB 8.50 +2.08 +38.891

FBMKLCI 1,518.91 +246.13 +246.13

Figure 22 : YTD performance of regional equity markets

Foreign equity inflows will remain strong

Figure 24 : Malaysia net equity flows

> USD180m monthly net

400 Monthly net inflows in Malaysia

Source: EPFR Source: EPFR

Source: EPFR Source: EPFR

Figure 29 : MYR is the 3rd strongest Asian currency against USD

Japanese Yen 14.1%

Source: EPFR Source: EPFR

Source: EPFR Source: EPFR

Source: EPFR Source: EPFR

Figure 36 : Foreign equity ownership

Source: Bursa Malaysia

Figure 37 : Interest rate normalisation among Asian economies

Change Average Potential

Laggards China, Indonesia, Philippines,

M&A theme expected to continued

Figure 38 : Notable M&A transactions (including privatisations) in 2010

14-Jan-10 Building materials Hume Industries Hong Leong Industries Bhd

Source: Bursa Malaysia

Figure 39 : 1982 general election Figure 40 : 1986 general election