PLUS Expressways

Recommendation: HOLD

Stock Code: 5052 Bloomberg: PLUS MK Price: MYR3.98 12-Month Target Price: MYR4.00 Date: August 20, 2010

Board: Main Pr ice 30 Day Moving Aver age Price (MYR) 4.00

Sector: Trading/Services 3.80 3.60

GICS: Industrials/Highways & Railtracks 3.40 Market Value - Total: MYR19,900.0 mln 3.20 3.00 Summary: PLUS Expressways (PEB) builds and operates 2.80 2.60 tolled expressways in Asia. Its assets total more than 1,000 2.40 km and includes Malaysia’s key national expressway (North- South Expressway). The stock is a component of the FBM Vol ume Vol ('000) 16,000 KLCI and FBM EMAS. 12,000 8,000 Analyst: Chok Wai Lee, CFA 4,000 0 Aug 07 Oct 07 Dec 07 Mar 08 May 08 Jul 08 Sep 08 Dec 08 Feb 09 Apr 09 Jun 09 Aug 09 Nov 09 Jan 10 Mar 10 May 10 Aug 10

Results Review & Earnings Outlook Recommendation & Investment Risks • PEB reported 1H10 net profit of MYR618.7 mln (+10.5% YoY), in line • We maintain our Hold recommendation with a higher 12-month target with consensus and our expectations. The stronger results were price of MYR4.00 (from MYR3.50), after revising our valuation mainly due to the higher traffic volume growth, with PLUS, ELITE, parameters. We believe that PEB’s share price will continue to be Linkedua and Butterworth-Kulim Expressway registering YoY growth supported by its stable operating cash flow and decent dividend yield of 9.8%, 14.2%, 21.4% and 10.8%, respectively. The solid traffic of 4.6%. volume growth was attributed to increased domestic traveling. Nevertheless, traffic volume growth is expected to be slower in 2H10, • We have valued PEB based on an average of the discounted cash due to a higher base. flow value (WACC: 8.5%-12.2%) of PEB’s toll assets over the life of their concessions and its dividend discount model value (cost of equity: • PEB has acquired a 100% stake in Teras Teknologi Sdn Bhd (TERAS) 12.3%). We have lowered our discount to the derived value to 10% for MYR44.0 mln. TERAS’ wholly owned subsidiary, Teras Control (from 20%), in view of investors’ preference for defensive stocks Systems Sdn Bhd, is principally involved in the supply, installation and currently. maintenance of toll systems and equipment for expressway projects. The acquisition price appears fair at 10.0x 2009 earnings. Although • PEB has decided to dispose of its entire equity interest (60%) in PT the acquisition is in line with PEB’s expansion plans in toll roads and Cimanggis Cibitung Tollways (CCTW) to PT Bakrie & Brothers TBK for toll-related ventures, we do not expect it to contribute meaningfully to a total cash consideration of about MYR20.2 mln. Recall that PEB had PEB’s bottom line. won the tender bid for the proposed 25.4km package 4 Cimanggis- Cibitung toll road project in Indonesia in 2007. However, due to the • Management upgraded PLUS’ 2010 traffic volume growth forecast to change of the Indonesian government’s policy on the terms of the 5% (from 3%-4%). We believe that the recent petrol price hike is concession, the concession agreement has not yet been executed. We unlikely to have much impact on traffic, given that the quantum of are slightly positive on the news as PEB can now focus its resources increase is not large. to its other businesses in Indonesia.

• While we increase our traffic growth forecast for PLUS to 5% (from • Risks to our recommendation and target price include government 3%) in 2010, this was mitigated by higher tax expenses. As a result, policies that reduce PEB’s toll rates (without full compensation) and our earnings estimates are largely unchanged. additional petrol price hikes.

Key Stock Statistics Per Share Data FY Dec. 2009 2010E FY Dec. 2007 2008 2009 2010E Reported EPS (sen) 23.7 24.6 Book Value (MYR) 1.07 1.14 1.22 1.28 PER (x) 16.8 16.2 Cash Flow (sen) 25.5 34.3 36.9 41.7 Dividend/Share (sen) 16.5 18.5 Reported Earnings (sen) 25.0 21.6 23.7 24.6 NTA/Share (MYR) 1.22 1.28 Dividend (sen) 14.0 16.0 16.5 18.5 Book Value/Share (MYR) 1.22 1.28 Payout Ratio (%) 59.4 74.1 69.5 75.2 No. of Outstanding Shares (mln) 5,000.0 PER (x) 15.9 18.4 16.8 16.2 52-week Share Price Range (MYR) 3.20 - 3.98 P/Cash Flow (x) 15.6 11.6 10.8 9.6 Major Shareholders: % P/Book Value (x) 3.7 3.5 3.3 3.1 Khazanah Nasional Berhad 55.3 Dividend Yield (%) 3.5 4.0 4.1 4.6 Employees Provident Fund Board 12.4 ROE (%) 23.9 19.6 20.2 19.7 Kumpulan Wang Persaraan (Diperbadankan) 6.5 Net Gearing (%) 147.0 148.0 135.8 121.9 *Stock deemed Shariah compliant by the Securities Commission All required disclosures and analyst certification appear on the last two pages of this report. Additional information is available upon request. Redistribution or reproduction is prohibited without written permission. Copyright © 2010 The McGraw-Hill Companies, Inc. Page 1 of 4

PLUS Expressways Recommendation: HOLD

Stock Code: 5052 Bloomberg: PLUS MK Price: MYR3.98 12-Month Target Price: MYR4.00 Date: August 20, 2010

Quarterly Performance FY Dec. / MYR mln 2Q10 2Q09 % Change Reported Revenue 859.7 772.2 11.3 Reported Operating Profit 632.0 552.6 14.4 Depreciation & Amortization -107.5 -99.8 7.8 Net Interest Income / (Expense) -188.5 -158.2 19.1 Reported Pre-tax Profit 443.6 394.4 12.5 Reported Net Profit 319.6 281.3 13.6 Reported Operating Margin (%) 73.5 71.6 - Reported Pre-tax Margin (%) 51.6 51.1 - Reported Net Margin (%) 37.2 36.4 - Source: Company data

Profit & Loss FY Dec. / MYR mln 2008 2009 2010E 2011E Reported Revenue 2,968.0 3,179.0 3,355.2 4,012.8 Reported Operating Profit 2,065.0 2,245.1 2,360.6 2,957.9 Depreciation & Amortization -383.4 -410.3 -405.4 -435.5 Net Interest Income / (Expense) -549.3 -621.5 -652.2 -626.1 Reported Pre-tax Profit 1,515.7 1,623.6 1,708.3 2,331.8 Effective Tax Rate (%) 28.7 27.0 28.0 27.0 Reported Net Profit 1,079.3 1,186.4 1,230.0 1,702.2 Reported Operating Margin (%) 69.6 70.6 70.4 73.7 Reported Pre-tax Margin (%) 51.1 51.1 50.9 58.1 Reported Net Margin (%) 36.4 37.3 36.7 42.4 Source: Company data, S&P Equity Research

All required disclosures and analyst certification appear on the last two pages of this report. Additional information is available upon request. Redistribution or reproduction is prohibited without written permission. Copyright © 2010 The McGraw-Hill Companies, Inc. Page 2 of 4

Required Disclosures

Standard & Poor’s Equity Research Services Standard & Poor's and its affiliates provide a wide range of services to, or relating Standard & Poor’s Equity Research Services U.S. includes Standard & Poor’s to, many organizations, including issuers of securities, investment advisers, broker- Investment Advisory Services LLC; Standard & Poor’s Equity Research Services dealers, investment banks, other financial institutions and financial intermediaries, Europe includes Standard & Poor’s LLC- London; Standard & Poor’s Equity and accordingly may receive fees or other economic benefits from those Research Services Asia includes Standard & Poor’s LLC’s offices in Hong Kong organizations, including organizations whose securities or services they may and Singapore, Standard & Poor’s Malaysia Sdn Bhd, and Standard & Poor’s recommend, rate, include in model portfolios, evaluate or otherwise address. Information Services (Australia) Pty Ltd. CMDF-Bursa Research Scheme (“CBRS”) Glossary This report has been prepared by S&PM for purposes of CBRS administered by

Bursa Malaysia Berhad, independent from any influence from CBRS or the subject Strong Buy: Total return is expected to outperform the total return of the KLCI or company. S&P will receive total compensation of RM15,000 each year for each KL Emas Index respectively, by a wide margin over the coming 12 months, with company covered by it under CBRS. For more information about CBRS, please shares rising in price on an absolute basis. visit Bursa Malaysia’s website at: http://www.bursamalaysia.com/website/bm/ Buy: Total return is expected to outperform the total return of the KLCI or KL Emas

Index respectively, over the coming 12 months, with shares rising in price on an absolute basis. Disclaimers Hold: Total return is expected to closely approximate the total return of the KLCI or This material is based upon information that we consider to be reliable, but neither KL Emas Index respectively, over the coming 12 months with shares generally S&P nor its affiliates warrant its completeness, accuracy or adequacy and it should rising in price on an absolute basis. not be relied upon as such. With respect to reports issued to clients in Japan and in Sell: Total return is expected to underperform the total return of the KLCI or KL the case of inconsistencies between the English and Japanese version of a report, Emas Index respectively, over the coming 12 months and share price is not the English version prevails. With respect to reports issued to clients in Germany anticipated to show a gain. and in the case of inconsistencies between the English and German version of a Strong Sell: Total return is expected to underperform the total return of the KLCI or report, the English version prevails. Neither S&P nor its affiliates guarantee the KL Emas Index respectively, over the coming 12 months by a wide margin, with accuracy of the translation. Assumptions, opinions and estimates constitute our shares falling in price on an absolute basis. judgment as of the date of this material and are subject to change without notice. Neither S&P nor its affiliates are responsible for any errors or omissions or for results obtained from the use of this information. Past performance is not S&P 12 Month Target Price – The S&P equity analyst’s projection of the market necessarily indicative of future results. price a given security will command 12 months hence, based on a combination of intrinsic, relative, and private market valuation metrics. This material is not intended as an offer or solicitation for the purchase or sale of any security or other financial instrument. Securities, financial instruments or Shariah-compliant stock - As defined by the Shariah Advisory Council of strategies mentioned herein may not be suitable for all investors. Any opinions Malaysia’s Securities Commission expressed herein are given in good faith, are subject to change without notice, and are only correct as of the stated date of their issue. Prices, values, or income from any securities or investments mentioned in this report may fall against the interests Required Disclosures of the investor and the investor may get back less than the amount invested. Where an investment is described as being likely to yield income, please note that the All of the views expressed in this research report accurately reflect the amount of income that the investor will receive from such an investment may research analyst's personal views regarding any and all of the subject fluctuate. Where an investment or security is denominated in a different currency to securities or issuers. No part of analyst compensation was, is, or will be, the investor’s currency of reference, changes in rates of exchange may have an directly or indirectly, related to the specific recommendations or views adverse effect on the value, price or income of or from that investment to the expressed in this research report. investor. The information contained in this report does not constitute advice on the tax consequences of making any particular investment decision. This material is not Additional information is available upon request. intended for any specific investor and does not take into account your particular investment objectives, financial situations or needs and is not intended as a Other Disclosures recommendation of particular securities, financial instruments or strategies to you. This report has been prepared and issued by Standard & Poor’s and/or one of its Before acting on any recommendation in this material, you should consider whether affiliates. In the United States, research reports are prepared by Standard & Poor’s it is suitable for your particular circumstances and, if necessary, seek professional Investment Advisory Services LLC (“SPIAS”). In the United States, research reports advice. are issued by Standard & Poor’s (“S&P”); in the United Kingdom by Standard & For residents of the U.K. This report is only directed at and should only be relied on Poor’s LLC (“S&P LLC”), which is authorized and regulated by the Financial by persons outside of the United Kingdom or persons who are inside the United Services Authority; in Hong Kong by Standard & Poor’s LLC, which is regulated by Kingdom and who have professional experience in matters relating to investments the Hong Kong Securities Futures Commission; in Singapore by Standard & Poor’s or who are high net worth persons, as defined in Article 19(5) or Article 49(2) (a) to LLC, which is regulated by the Monetary Authority of Singapore; in Malaysia by (d) of the Financial Services and Markets Act 2000 (Financial Promotion) Order Standard & Poor’s Malaysia Sdn Bhd (“S&PM”), which is regulated by the 2005, respectively. Securities Commission; in Australia by Standard & Poor’s Information Services

(Australia) Pty Ltd (“SPIS”), which is regulated by the Australian Securities & For residents of Singapore - Anything herein that may be construed as a Investments Commission; and in Korea by SPIAS, which is also registered in Korea recommendation is intended for general circulation and does not take into account as a cross-border investment advisory company. the specific investment objectives, financial situation or particular needs of any particular person. Advice should be sought from a financial adviser regarding the The research and analytical services performed by SPIAS, S&P LLC, S&PM, and suitability of an investment, taking into account the specific investment objectives, SPIS are each conducted separately from any other analytical activity of Standard financial situation or particular needs of any person in receipt of the & Poor’s. recommendation, before the person makes a commitment to purchase the investment product. A reference to a particular investment or security by Standard & Poor’s and/or one of its affiliates is not a recommendation to buy, sell, or hold such investment or For residents of Malaysia. All queries in relation to this report should be referred to security, nor is it considered to be investment advice. Alexander Chia, Desmond Ch’ng or Ching Wah Tam. Indexes are unmanaged, statistical composites and their returns do not include payment of any sales charges or fees an investor would pay to purchase the securities they represent. Such costs would lower performance. It is not possible to invest directly in an index.

Required Disclosures

Recommendation and Target Price History Price (M YR)

Date Recommendation Target Price 4.0 New Hold 4.00 23-Nov-09 Hold 3.50 3.8 29-May-09 Hold 3.40 27-Feb-09 Buy 3.40 3.6 30-Jun-08 Hold 3.10 3.4

3.2

3.0

2.8

2.6

2.4 Aug 07 Nov 07 Feb 08 May 08 Aug 08 Nov 08 Feb 09 May 09 Aug 09 Nov 09 Feb 10 May 10 Aug 10