CONSTRUCTION It’S Raining Jobs!

July 4, 2012

CONSTRUCTION It’s raining jobs!

IMPORTANT DISCLOSURES. INCLUDING ANY REQUIRED RESEARCH CERTIFICATIONS, ARE PROVIDED AT THE END OF THIS REPORT. Designed by Eight, Powered by EFA

CONSTRUCTION July 4, 2012

TABLE OF CONTENTS

1. MOMENTUM OF JOB FLOWS IS ON THE RISE ...... 6

2. 2H12 SECTOR THEME ...... 7

3. RAIL AND HIGHWAY JOBS ARE MAIN SECTOR DRIVERS ...... 8

4. MRT MASTERPLAN HAS MORE MILES TO GO ...... 9

5. HIGH SPEED RAIL & GEMAS-JB DOUBLE-TRACKING ...... 11

6. SEVERAL HIGHWAYS UNDER 10MP ...... 12

7. SPECIALISED WORKS FOR FOUNDATION AND EARTHWORKS PACKAGE ...... 16

8. ESTIMATION OF COST ...... 19

9. INDICATION OF TIMING ...... 22

10. SECTOR SWOT ANALYSIS AND RISKS ...... 23

11. POTENTIAL WINNERS ...... 25

12. VALUATION AND RECOMMENDATION ...... 27

13. APPENDIX ...... 33

July 4, 2012

REGIONAL MALAYSIA CONSTRUCTION SHORT TERM (3 MTH) LONG TERM SINGAPORE INDONESIA THAILAND

PHILIPPINES CHINA, HONG KONG Conviction

Notes from the Field It’s raining jobs! Contractors are becoming more upbeat about job award prospects. This ties in with our view that transport infrastructure-driven projects will get the momentum going for even larger jobs from 2H12 onwards. This should lay the foundation for more active newsflow beyond MRT.

Figure 1: Rail and highway jobs Sharizan Rosely RM m 45,000 T (60) 3 20849864 40,000 E [email protected] 40,000

35,000 30,000 30,000

25,000 20,000 “The government has 20,000 15,000

invested more than 10,000 7,100

5,000 2,200 RM50bn on rail transport 1,000 1,600 0 since the 1990s. Dash Suke Kidex WCE MRT SBK Line HSR MRT 2 & 3 Investment for future rail *Values for Dash, Suke, Kidex and MRT 2 & 3 are based on CIMB's estimates

projects is estimated to SOURCES: CIMB, COMPANY REPORTS reach RM160bn by 2020.”

─ Tan Sri Syed Hamid Albar, Likely pre-election driven newsflow We concur with the view of many Chairman, SPAD continues to anchor our Trading Buy contractors that newsflow will call. The sector is not an Overweight continue and may intensify if the given the overhang from Malaysia’s general election is held later rather general election. WCT and Mudajaya than sooner. In light of this, we are now our top picks as contract present three themes for stock flows are likely to pick up, backed by selection in 2H12: (i) order flow better job visibility. They replace IJM recovery and better visibility of job Corp and Gamuda, which still stand wins, (ii) industry laggards which are to benefit from large-scale contracts. at cheap valuations vs. peers, and (iii) land privatisation plays with Focus on transport infrastructure spin-offs. These are the infrastructure key reasons behind our change in top We expect the sector theme for 2H12 picks. Highlighted Companies to be transport infrastructure, specifically large-scale rail and We like WCT and Mudajaya Mudajaya WCT and Mudajaya are more Mudajaya has spare capacity for large-scale highway projects. We estimate that highway jobs. It is vying for two subcontract RM95bn worth of highway and rail optimistic about contract awards, packages from WCE and other highways under jobs could come onstream from this noting that order book visibility for 10MP. Overall, it offers the biggest exposure to potential job wins in 2H12. year onwards. A bonus in 2H12 would 2H12 has improved. We expect both be specialised foundation/earthworks companies to bag some substantial WCT jobs in the near term. Potential job Job visibility has improved and new contracts for Rapid, KLIFD and the RRI land, could top RM1bn in 2H12. New which could be worth a combined wins for these companies could top foundation/earthworks tenders have emerged as RM3bn. We expect total domestic RM1bn in 2H12 and extend beyond another opportunity. The long-awaited decision on a job in Oman could be in the group’s favour. contract job awards in 2012 to hit the MRT. These stocks are trading at RM30bn-35bn, more than triple the the steepest discounts to RNAV MRCB (45-57%), relative cheap CY12-13 MRCB’s share price rerating rides on the EDL record in the past two years. recovery story as there is now clarity in toll P/Es of 5-11x, and offer the largest compensation. Progress on the RRI Land from Jun upside of 27-39%. 12 onwards could spell infrastructure and Themes for stock selection development opportunities for the group.

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KEY CHARTS

We expect job awards worth RM30bn-35bn RM m in 2012 40,000 35,000 We continue to be optimistic on the outlook for 35,000 large-scale projects over the medium term and expect 30,000 the momentum of job awards to be strong in 2H12. We are encouraged by the slew of project awards in 1H12. 30 25,000 local projects totalling RM18.3bn have been awarded 20,000 18,246 since the start of the year and we expect the total value of 15,000 contract awards in 2012 to hit RM30bn-35bn. This is 10,000 8,650 8,100

more than triple the RM8.7bn in 2010 and RM8.1bn last 5,000

year. 0 2010 2011 1H12 2012E

Order book and potential top-ups The visibility of new contracts has improved for all the 9,000 contractors under our coverage, especially WCT and Mudajaya. Contractors under our coverage are looking at 7,500 6,000 1,000 4,000 between RM1bn and RM4bn worth of potential new jobs 1,000 by end-2012, backed by their current outstanding order 4,500 1,000 1,000 books of RM2bn-5.5bn that should last for at least two 3,000 5,500 1,000 1,000 4,800 4,300 4,000 years. Contract wins are expected to come from the 1,500 3,047 rollout of the remaining packages for the MRT (viaducts 2,100 2,200 0 and stations) as well as highways and power plants. Gamuda IJM Corp MRCB Muhibbah Mudajaya Sunway WCT

Outstanding order book YTD (RM m) Potential replenishment by end 2012 (RM m)

RM95bn worth of rail and highway jobs RM m We estimate that RM95bn worth of highway and rail jobs 45,000 40,000 40,000 could come onstream from this year onwards and buoy 35,000 30,000 30,000 construction activities. 25,000 20,000 20,000 15,000 10,000 7,100 2,200 5,000 1,000 1,600 0 Dash Suke Kidex WCE MRT SBK HSR MRT 2 & 3 Line

*Values for Dash, Suke, Kidex and MRT 2 & 3 are based on CIMB's estimates

We prefer WCT and Mudajaya WCT and Mudajaya could emerge as the biggest winners in terms of the number/frequency of job wins. WCT Foundation boasts expertise and a track record in Companies MRT SBK line WCE Kidex Works Viaducts Stations Depots Main Subcontract Rapid Klifd RRI Land foundation/earthworks. Mudajaya remains the likely works works beneficiary of WCE subcontract packages and is Gamuda No No No No No No Yes No No tendering for Kidex. We remain optimistic about its IJM Corp No No No Yes No No Yes Yes No chances of bagging more power plant civil works MRCB Yes Yes No No No No No No Yes Mudajaya Yes Yes No No Yes Yes No No No packages, which could boost newsflow in 2H12. Muhibbah Engineering Yes No No No No No Yes No No Sunway No No No No No No No Yes No WCT No Yes No No Yes No Yes Yes Yes

SOURCE: CIMB, COMPANY REPORTS

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Figure 2: Sector Comparisons Bloomberg Price Target Price Market Cap Core P/E (x) 3-year EPS P/BV (x) Recurring ROE (%) EV/EBITDA (x) Dividend Yield (%) Company Recom. Ticker (local curr) (local curr)(US$ m) CY2011 CY2012CAGR (%) CY2011 CY2012 CY2011 CY2012 CY2013 CY2011 CY2012 CY2011 CY2012 Gamuda GAM MK Trading Buy 3.54 4.45 2,334 15.0 12.4 23.8% 3.77 3.55 25.0% 29.4% 30.3% 20.1 14.8 3.1% 3.2% IJM Corp Bhd IJM MK Trading Buy 5.08 6.40 2,227 17.6 13.4 27.8% 2.80 2.64 16.2% 20.5% 21.5% 12.1 9.8 2.4% 2.6% Malaysian Resources Corp MRC MK Trading Buy 1.83 2.02 805 32.5 31.7 13.9% 2.95 2.70 9.8% 9.0% 10.3% 19.8 12.3 1.1% 1.4% MTD ACPI Engineering ACP MK Underperform 0.38 0.40 28 na na na 0.50 0.54 -14.9% -6.4% -4.3% na 50.4 1.9% 1.9% Muhibbah Engineering MUHI MK Trading Sell 1.03 0.94 133 6.8 6.4 34.1% 0.68 0.67 10.1% 10.7% 11.8% 6.4 6.7 4.8% 4.9% Mudajaya Group MDJ MK Trading Buy 2.73 3.78 476 6.5 4.9 16.2% 1.58 1.22 28.7% 27.8% 23.9% 3.2 2.2 4.0% 4.2% Sunway Bhd SWB MK Trading Buy 2.30 2.70 943 8.0 8.3 -16.0% 1.06 0.86 14.1% 11.4% 10.8% 13.5 7.2 0.0% 3.9% WCT Bhd WCT MK Trading Buy 2.40 3.05 625 11.7 10.8 13.0% 1.39 1.26 12.7% 12.2% 13.3% 13.0 8.4 4.1% 4.1% Malaysia average 14.0 12.6 25.6% 2.75 2.60 16.6% 20.0% 21.2% 14.2 11.1 2.7% 2.8% Adhi Karya ADHI IJ Outperform 1,030 1,200 198 10.2 9.6 13.4% 1.76 1.52 19.6% 18.3% 21.6% 3.6 3.0 2.5% 2.4% Pembangunan Perumahan PTPP IJ Outperform 610.0 760.0 315 12.3 11.6 21.8% 2.04 1.81 18.4% 16.4% 20.6% 4.8 5.0 2.1% 2.1% Total Bangun Persada TOTL IJ Outperform 520.0 675.0 189 14.2 10.5 31.5% 2.61 2.54 20.4% 26.2% 24.8% 5.4 4.7 2.6% 7.7% Wijaya Karya WIKA IJ Outperform 1,060 1,200 686 18.0 14.5 24.7% 2.76 2.38 15.5% 16.6% 17.8% 9.7 9.4 1.0% 1.6% Indonesia average 14.2 12.1 22.0% 2.36 2.08 17.6% 18.0% 20.1% 5.9 5.6 1.7% 2.7% CH. Karnchang CK TB Underperform 7.40 7.00 389 na na na 1.77 1.81 -54.3% -2.2% 4.7% na 92.7 4.6% 0.0% Italian-Thai Development ITD TB Underperform 3.20 3.06 427 na 105.0 5.1% 1.63 1.61 -15.3% 1.5% 4.9% 16.9 10.9 0.0% 0.0% Sino-Thai Eng & Construction STEC TB Outperform 14.50 18.50 547 19.1 17.2 37.7% 2.67 2.49 18.5% 17.3% 18.2% 11.3 9.0 1.6% 3.5% Thailand average na 40.1 56.3% 1.97 1.93 -18.7% 4.8% 8.8% 24.9 13.6 1.9% 1.3% Yongnam Holdings YNH SP Outperform 0.24 0.33 235 4.5 4.4 11.4% 0.99 0.82 24.8% 20.2% 18.2% 3.5 3.6 4.4% 2.6% Singapore average 4.5 4.4 11.4% 0.99 0.82 24.8% 20.2% 18.2% 3.5 3.6 4.4% 2.6% Average (all) 18.5 12.3 13.5% 2.09 1.88 11.6% 16.0% 16.9% 12.4 9.0 2.3% 2.8% SOURCES: CIMB, COMPANY REPORTS

Calculations are performed using EFA™ Monthly Interpolated Annualisation and Aggregation algorithms to December year ends

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It’s raining jobs! Table of Contents 1. MOMENTUM OF JOB FLOWS p.4 1. MOMENTUM OF JOB FLOWS IS ON THE RISE 2. 2H12 SECTOR THEME p.7 3. SECTOR SWOT ANALYSIS p.21 1.1 1H12 laid the foundation for stronger job flows in 2H12 4. POTENTIAL WINNERS p.23 For 2H12, we take a more macro view of the sector as we (i) look at the projects 5. VALUATION AND RECOMMENDATIONS p.25 beyond the MRT SBK line, (ii) analyse the likely implementation timeline, (iii) estimate the costs, (iv) identify the likely developments that would drive sector newsflow, and (v) spot the beneficiaries of the likely rerating of the sector in the coming months. We continue to be optimistic on the outlook for large-scale projects over the medium term and expect the momentum of job awards to be strong in 2H12. We are encouraged by the slew of project awards in 1H12. 30 local projects totalling RM18.3bn have been awarded since the start of the year and we expect the total value of job awards in 2012 to hit RM30bn-35bn compared to RM8.7bn in 2010 and RM8.1bn last year.

Figure 3: Value of local job awards

RM m

40,000 35,000 35,000

30,000

25,000

20,000 18,246

15,000

10,000 8,650 8,100

5,000

0 2010 2011 1H12 2012E

SOURCES: CIMB, COMPANY REPORTS

1.2 MRT awards were the spotlight in 1H12 The focus of sector newsflow in 1H12 was on the award of both the elevated and underground works for the MRT SBK line. MRT-related packages dished out YTD are worth RM15.2bn, representing 83% of the total contracts awarded so far. The highlights for the construction sector YTD were the approval of the RM7.1bn WCE and the following MRT awards: 1) the project development partner (PDP) role to the MMC-Gamuda JV, 2) the RM974m package v5 (elevated guideway/viaduct) to IJM Corp, 3) RM764m package v6 (elevated guideway/viaduct) to AZRB, 4) RM863m package v2 (elevated guideway/viaduct) to Gadang, 5) RM816m package (elevated guideway/viaduct) to Mudajaya, and 6) RM8.3bn underground works (tunnelling and stations) to the MMC-Gamuda JV.

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Figure 4: Project awards YTD Date Contractor Project RM m 16-Jan-12 Mitrajaya Two/three story terrace house and shop office in Putrajaya 33.4 17-Jan-12 Kimlun Corp Two blocks of service apartments and ancillary buildings in Putrajaya 82.1 2-Feb-12 IJM Corp MRT SBK line package v5 (elevated guideways/viaducts) 974.0 2-Feb-12 AZRB MRT SBK line package v6 (elevated guideways/viaducts) 764.0 7-Feb-12 WCT New HQ for Ministry of International Trade & Industry (MITI) 301.0 7-Feb-12 Kimlun Corp Supply of segmental box girders (SBG) for MRT SBK line 223.2 13-Feb-12 Hock Seng Lee Road construction job in Sarawak 82.2 20-Feb-12 Mitrajaya Subcontract works for extension of Kelana Jaya LRT 46.8 20-Feb-12 Mitrajaya Subcontract works for extension of Ampang LRT 55.2 20-Feb-12 Mitrajaya 560 units of medium cost apartments, 8 units of shop houses in Putrajaya 79.4 21-Feb-12 Eversendai Structural steel for steam turbine hall for Janamanjung plant extension 25.0 21-Feb-12 Eversendai Manjung 4 project ducts - Janamanjung plant extension 7.0 22-Feb-12 WCT Kota Kinabalu Medical Centre 331.0 23-Feb-12 Mudajaya 1,000MW extension of Tanjung Bin coal-fired power plant 1,006.0 23-Feb-12 Eversendai Mechanical equipments & structure erection works for Tanjung Bin plant extension 367.0 12-Mar-12 Kimlun Corp Apartment and ancillary buildings in Johor 68.3 14-Mar-12 TRC Synergy Renovation of Komplex Dayabumi 36.0 20-Mar-12 Fajarbaru Builder Demolish and reconstruct Shaw Parade 72.9 20-Mar-12 MMC-Gamuda JV MRT SBK line underground works (9.5km tunnel and 7 stations) 8,300.0 3-May-12 Fajarbaru Builder Depot and traction power substation for Ampang LRT extension 299.8 9-May-12 Syarikat Muhibbah Pembinaan dan Perniagaan Sdn Bhd MRT SBK line package v1 (elevated guideways/viaducts) 1,090.0 9-May-12 Sunway MRT SBK line package v4 (elevated guideways/viaducts) 1,170.0 9-May-12 MTD ACPI MRT SBK line package v7 (elevated guideways/viaducts) 500.0 9-May-12 TRC Synergy MRT SBK line package DPT1(Sg Buloh depot) 459.0 7-Jun-12 WCT Industrial civil works for Vale 72.8 7-Jun-12 Kimlun Corp MRT SBK line precast concrete tunnel segment lining 48.5 21-Jun-12 Hock Seng Lee Damak Laut industrial park infrastructure works, Kuching 26.0 21-Jun-12 Eversendai Supply of structural steel and cable rack for for Vale in Teluk Rubiah 46.0 28-Jun-12 Gadang MRT SBK line package v2 (elevated guideways/viaducts) 863.4 28-Jun-12 Mudajaya MRT SBK line package v3 (elevated guideways/viaducts) 816.2 Total 18,246.2 SOURCES: CIMB, COMPANY REPORTS

2. 2H12 SECTOR THEME 2.1 The anchors are rail and highway jobs We expect the sector theme for 2H12 to be transport infrastructure, anchored by (i) the award of the remaining MRT SBK packages, (ii) progress and implementation of projects beyond the MRT SBK line, i.e. rail (MRT 2 & 3, HSR), (iii) signing of the West Coast Expressway (WCE) concession agreement (CA), and (iv) progress tenders of other highways. For 2H12, the focus will be on large-scale rail and highway projects, driven by traffic alleviation initiatives under the 10th Malaysia Plan (1oMP) and Economic Transformation Programme (ETP). In the case of highways, the need for connectivity for developing urban areas that are beyond the reach of the MRT lines will support the building of urban highways, most of which will be largely elevated and will compensate for the congestion of existing highway networks. Overall, we estimate that RM95bn worth of highway and rail jobs could come onstream from this year onwards and buoy construction activities. There are also other potential specialised jobs, which focus on foundation/earthworks. Values could be sizeable and margins lucrative.

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Figure 5: Rail and highway jobs

RM m 45,000 40,000 40,000

35,000 30,000 30,000

25,000 20,000 20,000

15,000

10,000 7,100

5,000 2,200 1,000 1,600 0 Dash Suke Kidex WCE MRT SBK Line HSR MRT 2 & 3

*Values for Dash, Suke, Kidex and MRT 2 & 3 are based on CIMB's estimates

SOURCES: CIMB, COMPANY REPORTS

3. RAIL AND HIGHWAY JOBS ARE MAIN SECTOR DRIVERS 3.1 Rail-related investments to more than triple by 2020 The Land Public Transport Commission (SPAD) highlighted in a press note recently that investment for future rail projects is estimated to reach RM160bn by 2020. This includes an estimated RM50bn expenditure on the KVMRT project but does not include the cost for the KL-Singapore High Speed Rail (HSR). The RM160bn figure is expected to be realised from 2015 onwards with the launch of the MRT SBK Line. The total value of rail investments should jump in 2013 onwards if MRT 2 & 3 and HSR get off the ground. The RM160bn total expected spending on rail jobs over the next few years is more than triple the c.RM50bn total investments in rail transport since the 1990’s.

Figure 6: SPAD's estimated outlook for total rail investments (RM m)

Rail related investments from 2012 to 2020

Rail related investments in the 1990's

0 25,000 50,000 75,000 100,000 125,000 150,000 175,000

SOURCES: SPAD

3.2 Backed by SPAD’s Urban Rail Development Plan On-going initiatives under the Urban Rail Development Plan (URDP) include (i) studies for the extension of the KL Monorail from Brickfields to Old Klang Road, (ii) KTMB freight relieved line from Subang to Port Klang, (iii) MRT 2 (circle

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line), (iv) MRT 3 north-south line, and (v) feasibility studies for the KL-Singapore High Speed Rail (HSR). The ones that are considered high-impact projects are the two MRT lines and HSR. 3.3 Total urban rail network length to jump 174% by 2020 The total length of the existing urban rail network in Klang Valley is 283km. This comprises (i) KTM Komuter, (ii) Star/Putra LRT, (iii) KL Monorail, and (iv) Express Rail Link (ERL). Including the estimated 320km KL-Singapore HSR, the total length of new rail network in the pipeline works out to be 492km. Other key new rail lines are (i) extension of Ampang and Kelana Jaya LRT, and (ii) KVMRT – SBK line, MRT 2 and MRT 3. Over the next 5-10 years, the overall urban rail network will expand 61% from 283km to 455km given the LRT extensions and the three MRT lines and will jump 174% to 775km with the inclusion of the HSR. The total estimated length of the new MRT lines (all three lines) is 138km, which implies that on top of the 51km on-going SBK line, another 87km of new MRT lines will come onstream by 2020. Of the total 492km of new rail lines, LRT extension constitutes 7%, KVMRT makes up 28% while HSR takes the largest share of 65%.

Figure 7: List of existing and incoming new rail networks Figure 8: Breakdown of rail length by rail types

Length (km) Length (km)

350 350 320 320 300 300 282.6 250 250 200 152 150 200

100 138 65 57 150 51 41 46 50 17.7 16.4 8.6 100 0 50 34.1

KL Monorail Total existing Total new LRT Total new MRT KL-Singapore KTM Komuter KTM

Star/Putra LRT urban rail network lines lines HSR

KVMRT - SBK line - KVMRT KL-Singapore HSR KVMRT - 2 (Circle line) KVMRT - 3 (Radial line) LRT extension - Ampang LRT extension - Kelana Jaya Express Rail Link (ERL) to KLIA to (ERL) Link Rail Express

SOURCES: SPAD, MIGHT

4. MRT MASTERPLAN HAS MORE MILES TO GO 4.1 MRT 2 & 3 will complete entire network For KVMRT, the 52km MRT Sg. Buloh-Kajang (SBK) line is just the beginning as detailed feasibility studies on MRT 2 and 3 began in May 12 and will be completed by end-12. MRT 2 will be a circle line covering the main fringes of KL city centre. This line will take priority over MRT 3 (radial line) as it will integrate the new MRT network with the LRT and monorail. Based on the earlier proposal for the MRT, the remaining two lines will be double the length of the SBK line. The detailed proposal and alignment of MRT 2 (circle line) and MRT 3 (radial line) is scheduled to be ready at end-12. The map below shows the likely coverage of MRT 2 (in red) and MRT 3 (in green). The dashed purple lines are the extensions of Kelana Jaya and Ampang LRT, on which work is on-going. According to the Transport Masterplan, MRT 2 & 3 are likely to be rolled out in phases starting in 2013.

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Figure 9: MRT SBK line (blue) and likely alignments for MRT 2 (red) & 3 (green)

SOURCES: HO CHIN SOON MAPS

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5. HIGH SPEED RAIL & GEMAS-JB DOUBLE-TRACKING 5.1 Two main rail projects outside of Klang Valley There will be two major rail projects with routes that are southbound from KL. The first is the KL-Singapore high speed rail (HSR) project, which is the next major rail job after KVMRT, as outlined in the ETP. This project is undergoing detailed technical study, which should also be completed by end-12. The detailed technical study aims to derive the total estimated cost, preferred alignment and, ultimately, the commercial viability. The next job is the Gemas-JB double-tracking, which is the final double-tracking works for Peninsular Malaysia. It was reported that the project will be undertaken by a consortium made up of Chinese and local contractors.

Figure 10: Coverage for KL-Singapore HSR

SOURCES: PEMANDU

Figure 11: Double-tracking projects in Peninsular Malaysia (km)

350 329

300

250 197 200 179 150 150 100 100

50 8 0 Raw ang - Raw ang - Ipoh Sentul - Batu Ipoh - Padang Seremban - Gemas - Johor Seremban / Sentul (2000-2008) Caves (2006) Besar (2008-2014) Gemas (2008- Bahru (2013-2017) Port Kelang (1989- 2012) 95)

SOURCES: CIMB, COMPANY REPORTS

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6. SEVERAL HIGHWAYS UNDER 10MP 6.1 Seven new highways under 10MP The 10MP has outlined seven new highways to be built over the next 4-5 years. The rollout of these highways kicked off with the approval of the West Coast Expressway (WCE) in early Jan 12 (alignment circled in green). Despite the controversy surrounding the project, we believe that it is just a matter of time before the concession agreement (CA) is finalised, ideally before the upcoming general elections. Other highways will be much shorter than WCE’s 316km. The new highways will traverse highly-populated areas (brown field) compared to WCE’s alignment through the less populated west coast of Selangor. 6.2 Significance of WCE WCE is shaping up to be the most significant highway project since the North South Highway (NSE) was completed in 1994. WCE will be one of the mega jobs rolled out under the 10MP and can be considered the most sizeable highway project in nearly 20 years. It is another milestone in the rollout of large-scale projects since the approval of the RM12.5bn Northern double-tracking project in 2009 and the RM20bn MRT SBK line.

Figure 12: Overview of existing and planned highways in Klang Valley (WCE circled in green)

SOURCES: JPSURVEYS.COM

6.3 WCE is the next catalyst in the west coast Highways on the east coast, such as the East Coast Expressway (ECE), were built primarily to improve road networks to the east coast of Peninsular Malaysia where the economic impact is arguably lower. In comparison, we

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believe that the economic impact of highway infrastructure in the west coast of Peninsular Malaysia could be greater as the area is relatively more developed and heavily populated. WCE is, therefore, likely to have a greater impact on coastal towns and help spur new developments for tourism and other industries. Of the RM7.1bn total cost, there could be c.RM2bn worth of subcontracting opportunities or about 28% of the total cost.

Figure 13: Updated details of WCE Designation : West Coast Expressway (WCE) Length : 316km - 224km tolled, 92km toll-free (original length: 275.5km) Project type : Built-operate-transfer (BOT) Total cost : RM7.1bn (original cost: RM3.1bn) Total cost/km : RM22.3m (original cost/km: RM11.3m) Total toll stops : 16 (9 in Selangor, 7 in Perak) Total land to be acquired : 1,601.7 acres (77.8 acres state land, 1,523.9 acres private land) : Total cost of RM980m to be borne by the gov't Construction period : 5-6 years Concession period : 60 years (33 years as previously reported) Initial/start-up funding : RM2.2bn Gov't support loan (GSL) of RM2.2bn @ 4% p.a. : Interest subsidy up to 3% on commercial loans for 22 years Concession owner : West Coast Expressway Sdn Bhd Major concession owner : Kumpulan Europlus (80%) Other concession owners : IJM Corp (through Road Builder) - 20% Coverage area : Linking Banting (Selangor) with Changkat Jering (Perak)

IJM Corp has a 22.5% stak e in K Euro SOURCES: CIMB, COMPANY REPORTS

6.4 Three urban highways at the planning stage Our checks indicated that three urban highways are already at the planning stage. They are the Sg. Besi-Ulu Kelang Expressway (Suke), Damansara-Shah Alam Highway (Dash) and Kinrara-Damansara Expressway (Kidex). These highways are among the seven planned for development under the 10MP. The total value of the seven highways is estimated to be RM19bn. The three are targeted to be completed within the next five years, i.e. by 2017. Suke and Dash will be owned and managed by Project Lintasan Kota Holdings Sdn Bhd (Prolintas), which currently operates and manages the Ampang-Kuala Lumpur Elevated Highway, Guthrie Corridor Expressway and Lebuhraya Kemuning Shah Alam. 6.5 Suke Suke is a 31.8km, three-lane, dual carriageway expressway that will start at Sri Petaling and pass through Sungai Besi, Alam Damai, Cheras-Kajang, Taman Bukit Permai, Taman Putra, Taman Permai Jaya, Taman Dagang Permai, Taman Kosas, Ampang and Taman Hillview before ending at Ulu Kelang.

Figure 14: Details of SUKE Designation : Sungai Besi-Ulu Kelang Elevated Expressway (SUKE) Length : 31.8km, 3 lane, dual carriageway (fully elevated) Total cost : Unknown Total cost/km : Unknown Total toll stops : 3 toll plazas,11 interchanges Total land to be acquired : Unknown Construction period : 4-5 years Concession period : Unknown Concession owner : Projek Lintasan Kota Holdings Sdn Bhd (Prolintas) - 100%-owned by PNB Coverage area : Alternative route for MRRII, linking major highways in Eastern Klang Valley SOURCES: CIMB, PROLINTAS

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Figure 15: SUKE’s alignment

SOURCES: PROLINTAS

6.6 Dash Dash is a 20.1km, three-lane, dual carriageway expressway that will commence at the Puncak Perdana U10 Shah Alam intersection and serve as a link for Puncak Perdana, Alam Suria, Denai Alam, Kampung Melayu Subang, Jalan Sungai Buloh, the Rubber Research Institute of Malaysia, Kota Damansara, Damansara Perdana and Mutiara Damansara. The expressway ends at the Penchala interchange.

Figure 16: Details of DASH Designation : Damansara-Shah Alam Highway (DASH) Length : 20.1km, 3 lane, dual carriageway (fully elevated) Total cost : Unknown Total cost/km : Unknown Total toll stops : 3 toll plazas,12 interchanges Total land to be acquired : Unknown Construction period : 4-5 years Concession period : Unknown Concession owner : Projek Lintasan Kota Holdings Sdn Bhd (Prolintas) - 100%-owned by PNB Coverage area : Link between east and west of Klang Valley: Shah Alam to Damansara Perdana SOURCES: CIMB, PROLINTAS

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Figure 17: Dash’s alignment

SOURCES: PROLINTAS

6.7 Kidex Kinrara-Damansara Expressway (Kidex) will link Kinrara in Puchong and Pusat Bandar Damansara. The main purpose of this fully-elevated, 50km highway is to ease the heavy traffic on the Lebuhraya Damansara Puchong (LDP).

Figure 18: Details of Kidex Designation : Kinrara-Damansara Expressway (KIDEX) Length : 50km, 3 lane, dual carriageway (fully elevated) Total cost : RM2.2bn Total cost/km : RM44m Total toll stops : 3 toll plazas,11 interchanges Total land to be acquired : Unknown Construction period : 4-5 years Concession period : Unknown Concession owner : Unknown Coverage area : Kinrara-Damansara SOURCES: CIMB, COMPANY REPORTS

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Figure 19: Kidex’s alignment

SOURCES: CIMB, MALAYSIA TODAY

7. SPECIALISED WORKS FOR FOUNDATION AND EARTHWORKS PACKAGE 7.1 Newfound opportunities in foundation/earthworks Apart from transport infra-related projects, our recent ground checks show that prequalification and tender rounds for specialised foundation and earthworks packages have begun for (i) the Rapid oil terminal project in Pengerang, Johor, and (ii) Kuala Lumpur International Financial District (KLIFD). 7.2 Rapid is looking for specialised contractors Rapid is a RM60bn Petronas project involving an independent deepwater petroleum terminal. Rapid will handle storage, blending and distribution of crude oil and petroleum products. For Phase 1, 150 acres of land have been reclaimed so far and the potential earthworks/foundation works are likely to be related to this land parcel. We understand that for the foundation/earthworks, Petronas is seeking contractors with the experience and track record to undertake large-scale works for Phases 1 and 2, which we believe will involve a total land size of over 1k ha. Total land earmarked over the next several years for Rapid is a whopping 4.2k ha.

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Figure 20: Location of Rapid site

SOURCES: CIMB, COMPANY REPORTS

7.3 KLIFD foundation works on 40 acres of land The Kuala Lumpur International Financial District (KLIFD) is earmarked as a new business district under the ETP. Though details on the project structure are still scanty, we gather that the prequalification rounds for the foundation/earthworks have been completed, leaving around 10 contractors eligible to tender. KLIFD sits on 75 acres of land but we gather that foundation/earthworks will begin in 2H12 for the first 40 acres.

Figure 21: Location of KLIFD site

SOURCES: CIMB, COMPANY REPORTS

7.4 RRI land has 2.9k acres that need foundation and infra works The RRI land has been earmarked for a mixed township development. There has been slow development on the transfer/purchase of land from the Rubber Research Institute (RRI) to Kwasa Land, which is a unit of the EPF. However,

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recent newsflow suggests that the RRI land is back in the spotlight. The EPF is targeting to complete the land acquisition in 2H12. There should be more details on the masterplan once the sale is completed. While there will be huge property development opportunities, we expect the initial spin-offs to benefit contractors as major foundation/earthworks need to be laid out. The total size of the RRI land is 3k acres, with 2.9k acres earmarked for development.

Figure 22: RRI land details Total land size : 1,215ha (3,002 acres) Total land size for redevelopment : 926ha (2,288 acres) Allocation for MRT SBK line depot : 73 ha (180 acres) Land owner : Kwasa Land Sdn Bhd - under EPF Tenders to be called : 3Q/4Q 2012 Original target for tenders : Jun-12 Development period : 10-15 years Size of each land parcels : 100-500 acres Size of land to be retained by RRI : 216 ha (534 acres) SOURCES: CIMB, COMPANY REPORTS

Figure 23: Location of RRI land and surroundings

SOURCES: CIMB, COMPANY REPORTS

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8. ESTIMATION OF COST 8.1 Benchmark cost for highways has doubled over the last 10 years Based on our checks with various contractors, the cost/km for fully-elevated urban highways ranged from RM50m to RM80m over the past five years but has risen to around RM80m-100m. It should rise by 10-15% in total over the next five years. The cost/km was RM8m for PLUS Expressway’s 772km North South Expressway (NSE), which was built in 1987-94 largely on flat land. The cost/km for the next mega highway i.e. the WCE, which will be built over the next five years, is RM22.1m (including land acquisition cost) or 185% higher than NSE’s. By comparison, the cost on a per km basis of fully-elevated highways at current material prices is easily double that of non-urban highways.

Figure 24: Comparison between WCE and NSE Details WCE NSE Designation : West Coast Expressway (WCE) North South Expressway (NSE) Length : 316km - 224km tolled, 92km toll-free (original length: 275.5km) 772km Project type : Built-operate-transfer (BOT) Built-operate-transfer (BOT) Total cost : RM7.1bn (original cost: RM3.1bn) RM6bn Total cost/km : RM22.3m (original cost/km: RM11.3m) RM7.8m Total land to be acquired : 1,601.7 acres (77.8 acres state land, 1,523.9 acres private land) na : Total cost of RM980m to be borne by the gov't na Construction period : 5-6 years 7 years (1988-94) Concession period : 60 years (33 years as previously reported) 50 years Initial/start-up funding : RM2.2bn Gov't support loan (GSL) of RM2.2bn @ 4% p.a. na : Interest subsidy up to 3% on commercial loans for 22 years Concession owner : West Coast Expressway Sdn Bhd Project Lebuhraya Utara Selatan (PLUS) Major concession owner : Kumpulan Europlus (80%) UEM (51%) Other concession owners : IJM Corp (through Road Builder) - 20% EPF (49%) Coverage area : Linking Banting (Selangor) with Changkat Jering (Perak) Bukit Kayu Hitam (northern Kedah) to Johor Bahru (South) SOURCES: CIMB, COMPANY REPORTS

8.2 New urban highways could cost up to RM4bn Using the RM50m-80m/km as a guide, (i) Suke could cost RM1.6bn-2.5bn, (ii) Dash could cost RM1bn-1.6bn, and (iii) Kidex may cost RM2.5bn-4bn. Press reports have indicated that Kidex is worth RM2.2bn, implying a cost/km of RM44m.

Figure 25: Estimated cost for new highways Length Cost/ km Estimated cost (km) (RM m) (RM m) @RM50m/km @RM80m/km Suke 31.8 50 80 1,590 2,544 Dash 20.1 50 80 1,005 1,608 Kidex 50.0 50 80 2,500 4,000 SOURCES: CIMB, COMPANY REPORTS

8.3 MRT 2 & 3 could cost RM30bn-40bn Earlier estimates put the total value of all three lines of the KVMRT at RM40bn-50bn. However, it appears that the figure could be higher. Given that the 51km MRT SBK line is likely to cost around RM20bn, MRT 2 & 3 could be valued at almost RM40bn. Our calculation is based on the 150km total length of the KVMRT as proposed earlier and the implied RM392m/km average cost for the MRT SBK line. Excluding the 51km MRT SBK line that is already being implemented, the remaining distance for the two lines is 99km, of which 31km is likely to be the total distance for the tunnelling/underground works. Note that based on the RM8.3bn underground works awarded to the MMC-Gamuda JV, cost/km works out to be RM874m, which is more than double the average cost/km of RM392m for the entire SBK line including the underground portion.

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Figure 26: CIMB's cost estimate for MRT 2 & 3 Total distance Total cost Cost/km MRT SBK line 51km RM20bn RM392.2 MRT 2 & 3 99km RM39bn RM392.2 Total cost for KVMRT 150km RM59bn

150k m total length for KVMRT based on earlier proposal Total tunnelling length for all three lines is 40k m based on earlier proposal Balance tunnelling portion for MRT 2 & 3 work s out to be 31k m Balance elevated portion of MRT 2 & 3 work s out to be 69k m SOURCES: CIMB, COMPANY REPORTS

Figure 27: Details of RM8.3bn MRT SBK line underground works Project value (RM m) : 8,300 Distance (km) : 9.5 Cost/km (RM m) : 874 No. of underground stations : 7 Contractor : Gamuda-MMC JV JV share : 50:50 Target completion : 2016 Gamuda's share of works : 4,100 Guided pretax margins : 10-15% SOURCES: CIMB, COMPANY REPORTS

8.4 RM30bn for HSR? A recent commercial study by the Land Public Transport Commission (SPAD) on the viability of the proposed high speed rail (HSR) project connecting KL and Singapore has found that it may cost RM30bn. Typically, 60% of the capex for any HSR project is for civil works. The RM30bn cost estimate is more than double the RM12bn estimated by SPAD earlier and nearly double the RM16.5bn price tag under the ETP. We also understand that unlike large-scale HSR projects in Taiwan and Europe, which cost at least US$15bn to build, Malaysia’s geography provides a cost advantage as the route largely passes through flat land. We expect a more accurate estimation of cost once it is determined whether the alignment will run along the PLUS highway or more to the west coast.

Figure 28: Details of HSR Project type : Likely privately led with no government subsidy Cost : RM30bn Coverage : KL-JB-Singapore Distance : 320km Completion of feasibility studies : End 2012 or 1Q2013 Development period : 1.5 years - design, 3-4 years - construction Viable passengers p.a. for HSR : 8m Passenger catchment : >2m airline travelers p.a., 2m cars and bus users p.a. SOURCES: CIMB, COMPANY REPORTS

8.5 76% of RM20bn MRT SBK line awarded The four MRT awards in early-May 12 and two new awards in Jun-12 bring the total MRT awards YTD to RM15.2bn or an estimated 76% of the total RM20bn value of the MRT SBK line. The awarded packages up to May-12 are (i) five viaduct/elevated packages worth between RM500m and RM1.2bn each, which were awarded to IJM Corp, AZRB, Syarikat Muhibbah Pembinaan dan Perniagaan Sdn Bhd, MTD ACPI and Sunway, (ii) one underground and tunnelling package worth RM8.3bn, which was awarded to the MMC-Gamuda JV, (iii) segmental box girders (SBG) package to Kimlun Corp worth RM223m, and (iv) the Sg. Buloh depot package worth RM459m to TRC Synergy. The latest awards went to (i) Gadang for package v2 of MRT viaduct portion worth RM863m, and (ii) Mudajaya for package v3 of MRT viaduct portion worth RM816m.

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Figure 29: Details of MRT awards YTD Date Contractor MRT SBK line packages Coverage RM m 2-Feb-12 IJM Corp v5 - elevated guideways/viaducts Maluri-Plaza Phoenix 974.0 2-Feb-12 Ahmad Zaki Resources (AZRB) v6 - elevated guideways/viaducts Plaza Phoenix-Bandar Tun Hussein Onn 764.0 7-Feb-12 Kimlun Corp Supply of segmental box girders (SBG) Unknown 223.2 20-Mar-12 MMC-Gamuda JV Underground works (9.5km tunnel and 7 stations) Semantan-Cochrane 8,300.0 9-May-12 Sykt. Muhibbah Pembinaan & Perniagaan S/B v1 - elevated guideways/viaducts Sq. Buloh-Kota Damansara 1,090.0 9-May-12 Sunway v4 - elevated guideways/viaducts Section 17 PJ-Semantan Portal 1,170.0 9-May-12 MTD ACPI v7 - elevated guideways/viaducts Bandar Tun Hussein Onn-Tmn Mesra 500.0 9-May-12 TRC Synergy DPT1 - Sg. Buloh depot Depot in Sg. Buloh near RRI Land 459.0 7-Jun-12 Kimlun Corp Precast concrete tunnel segment lining Underground 48.5 28-Jun-12 Gadang v2 - elevated guideways/viaducts Kota Damansara-Dataran Sunway 863.4 28-Jun-12 Mudajaya v3 - elevated guideways/viaducts Dataran Sunway-Section 17 816.2 Total 15,208.3 SOURCES: CIMB, COMPANY REPORTS

8.6 c.RM4.9bn worth of balance MRT works in the pipeline Based on the estimated RM20bn total value of the MRT SBK line, we estimate a total of RM4.9bn worth of remaining jobs: (i) one more viaduct/elevated package, (ii) eight station packages, and (iii) one depot package in Kajang. The likely winners will be picked from the 28 prequalified contractors, 13 of which are listed companies.

Figure 30: Exposure for 13 listed contractors for MRT SBK line non-tunnelling packages Listed contractors Elevated civil works Station works Depots Open Bumiputera Open Bumiputera Open Bumiputera Ahmad Zaki Yes Yes No Yes No Yes Fajarbaru Builders No No Yes No Yes No Gadang Yes No Yes No Yes No IJM Corp Yes No Yes No Yes No MRCB Yes No No No No No Mudajaya Yes No No No No No Muhibbah Engineering Yes No Yes No Yes No Naim Holdings No Yes Yes Yes Yes Yes Sunway Yes No Yes No Yes No Trans Resources Corp Yes Yes Yes Yes Yes Yes TSR Capital No Yes No Yes No Yes WCT No No Yes No No No Zecon No Yes No No No No

Won a pack age Pending award SOURCES: CIMB, PRASARANA

Figure 31: Distribution of main packages for the MRT SBK line Viaduct Coverage area Distance Status Station Stations No. of Status package (km) package stations V1 Sg. Buloh-Kota Damansara na Awarded ST1 Sg. Buloh, Kg. Baru Sg. Buloh, Kota Damansara 3 Tender V2 Kota Damansara-Dataran Sunway na Awarded ST2 Tmn. Industry Sg. Buloh, PJU 5, Dataran Sunway 3 Tender V3 Dataran Sunway-Section 16 PJ na Awarded ST3 The Curve, One Utama, Tmn Tun Dr. Ismail 3 Tender V4 Section 16 PJ-Semantan Portal na Awarded ST4 Section 16 PJ, Pusat Bandar Damansara, Semantan 3 Tender V5 Maluri Portal-Plaza Phoenix na Awarded ST5 Tmn. Bukit Ria, Tmn. Bkt Mewah, Leisure Mall 3 Tender V6 Plaza Phoenix-Bandar Tun Hussein Onn na Awarded ST6 Plaza Phoenix, Tmn Suntex, Tmn. Cuepacs 3 Tender V7 Bandar Tun Hussein Onn-Taman Mesra na Awarded ST7 Bandar Tun Hussein Onn, Balakong, Tmn Koperasi 3 Tender V8 Taman Mesra-Kajang na Tender ST8 Saujana Impian, Bandar Kajang 3 Tender SOURCES: CIMB, MRT CORP

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9. INDICATION OF TIMING 9.1 MRT awards are potential short-term triggers Our checks indicate that package v8 for the elevated portion and the eight station packages are likely to be awarded earlier than the original timeline of within 3Q12. The first three station packages that will be up for tender are ST5, ST6 and ST4. Two or three stations for the elevated portion will be grouped for each package.

Figure 32: Original tender/award schedule – see V8 Figure 33: Original tender/award schedule – see ST1-8

SOURCES: MRT CORP

Figure 34: List of stations for MRT SBK Line Stations Type Daily Stations Type Daily ridership ridership Sg Buloh Elevated 2,400 Bukit Bintang Central Underground 77,100 Kg Baru Sg Buloh Elevated 6,600 Pasar Rakyat Underground 67,300 Kota Damansara Elevated 9,000 Cochrane Underground 24,000 Taman Industri Sg Buloh Elevated 36,600 Maluri Underground 28,000 PJU5 Elevated 10,100 Taman Bukit Ria Elevated 36,500 Dataran Sunway Elevated 12,900 Taman Bukit Mewah Elevated 16,000 The Curve Elevated 27,200 Leisure Mall Elevated 13,800 One Utama Elevated 46,900 Plaza Phoenix Elevated 54,000 TTDI Elevated 24,500 Taman Suntex Elevated 9,900 Section 16 Elevated 8,300 Taman Cuepacs Elevated 11,300 Pusat Bandar Damansara Elevated 60,700 Bandar Tun Hussein Onn Elevated 9,100 Semantan Elevated 24,500 Balakong Elevated 11,100 Kl Sentral Underground 22,200 Taman Koperasi Elevated 13,800 Pasar Seni Underground 73,800 Saujana Impian Elevated 2,500 Merdeka Underground 39,100 Bandar Kajang Elevated 48,400 SOURCES: CIMB, KVMRT WEBSITE

9.2 Strong newsflow in 2H12 as most jobs should start in next 18 months Our compilation of major jobs (Figure 35) shows that work on almost all key projects is targeted to begin in 2012-13. This reinforces our view that the highlights for the construction sector from 2H12 should include (i) updates on the feasibility studies as well as the tender process and award of rail and highway jobs, i.e. MRT 2 & 3 and HSR, (ii) progress updates on the tender process of Kidex, and studies of Dash and Suke, and (iii) progress tenders for Rapid, KLIFD and the RRI land. We do not think that there will be any progress on the Gemas-JB double-tracking project just yet as the award is likely to take place after the election.

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9.3 2H12 is crucial period for progress of MRT 2 & 3 and HSR

The award of the remaining packages of the MRT SBK line will remain a priority as the tender process started at the beginning of this year. Awards in 2H12 should also focus on station works for the elevated and underground portions and depot works. The HSR project is expected to take 1½ years to design and 3-4 years to construct. The target is to launch the 320km HSR by 2018 when the Singapore rapid transit connecting Woodlands and Johor Bahru is expected to be completed. SPAD aims to complete the entire technical study by year-end or 1Q13. This suggests that work on the HSR should start in early-2013, which means that the tender process should begin by end-12.

Figure 35: Expected job schedule for major highway, rail projects and specialised foundation works over the next 10 years Projects 2012 2013 2014 2015 2016 2017 2018 2019 2020 MRT SBK line MRT 2 (circle line) MRT 3 (radial line) WCE Kidex Suke Dash Gemas-JB double track HSR RAPID (foundation works) KLIFD (foundation works) IRR Land (foundation works) Start Complete SOURCES: CIMB, COMPANY REPORTS

10. SECTOR SWOT ANALYSIS AND RISKS 10.1 Sector SWOT analysis still looks favourable We summarise the key risks for the construction sector in the sector SWOT analysis below. We identified a list of strengths and opportunities that would sustain the momentum for the implementation of large-scale/high-impact projects over the longer term. Major positives include a clear masterplan on the improvement of transport infrastructure within and beyond the Klang Valley and strong execution by Pemandu, MRT Corp and SPAD. Excitement over sector activity may be driven by a pre-election boost in tenders and awards. However, there are some negatives, such as limited details on the progress of some major jobs, i.e. HSR and MRT 2 & 3. A major threat to the sector is if the upcoming general election results turn out to be unfavourable. In the worst-case scenario, major projects could be reviewed and possibly deferred or cancelled. This scenario is reminiscent of the post-2008 general election which affected several mega jobs.

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Figure 36: SWOT analysis on the construction sector Strengths Weaknesses - Clear road map/masterplan for large scale jobs - Limited progress newsflow for some highway jobs and HSR - Strong execution from Pemandu, MRT Corp, SPAD - Limited details on balance job and tender structures for MRT stations - Encouraging follow through with award flows since 1H12 - Uncertainty in the signing of WCE concession agreement - Clear time project structure and potential tender time lines - Delayed award for Gemas-JB double tracking - Government's commitment to improve transport infra - Slow progress of RRI Land development Opportunities Threats - Greater demand for transport infrastructure beyond KL - Potential delays in completion of feasibility studies for MRT 2 & 3 - Emergence of new highway jobs beyond WCE - Potential delays in completion of feasibility studies for HSR - Emergence of new civil works for RAPID, KLIFD, RRI Land - Likely further delays in signing of WCE concession agreement - Bigger job scopes for MRT 2 & 3 and HSR - RM8bn funding delays for first tranche of MRT financing - Pre-election driven boost to progress of tenders/awards - Review/delay of major jobs if election results are unfavourable SOURCES: CIMB, COMPANY REPORTS

10.2 Ranking of projects by perceived political risk Although it would be premature to identify the projects that are likely to be casualties in the event of political developments, we rank the projects by perceived political risks and likely outcomes. Large-scale projects with huge absolute costs are usually the targets of opposition parties. However, we do not think that the RM20bn MRT SBK line would be derailed by politics as the project is already underway and awards are targeted to approach c.80% of the project value by 3Q12. We also do not think that the RM7.1bn West Coast Expressway (WCE) will be deferred again as the project has already received Cabinet approval. What could be threatened if the election results in a change at the helm is the RM30bn-40bn MRT 2 & 3 and RM30bn KL-Singapore HSR. These two projects are more vulnerable because they are still undergoing detailed feasibility studies, which are targeted to be completed by end-12.

Figure 37: Comparison of perceived political risks on major jobs Perceived political risks Reasons Likely outcome if election results are negative Low Neutral High (Hypothetical scenarios) MRT SBK line √ Project already approved and in tender/awards stage. Slight delay in awards - project of national interest MRT 2 (circle line) √ Under feasibility study. Completion in end 2012 Review; no cancellation - project of national interest MRT 3 (radial line) √ Under feasibility study. Completion in end 2012 Review with possible cancellation - high cost WCE √ Approved by Cabinet, CA has not been signed Delay of CA signing - possible revision to CA terms Kidex √ In tender process but awards time line is unclear Delay - toll highways are a political issue Suke √ Still under study Delay or reviewed - toll highways are a political issue Dash √ Still under study Delay or reviewed - toll highways are a political issue Gemas-JB double track √ Award is likely after elections Delay in award or implementation - overlaps with HSR HSR √ Under feasibility study. Completion in end 2012 Review with possible cancellation - high cost RAPID (foundation works) √ Petronas/private funded job. Oil and gas driven Continue - Petronas funded job KLIFD (foundation works) √ Funding by 1MDB, a key project under ETP Review with possible delay RRI Land (foundation works) √ Selangor government (opposition) teritory Review with possible cancellation SOURCES: CIMB, COMPANY REPORTS

10.3 Uncertainty of tolling and risks to CA terms Uncertainty of tolling is another risk for concessionaires. Case in point is the Eastern Dispersal Link (EDL) in Johor. The highway was completed in early-2012 and was opened to the public on 1 Apr 12 with one month of free tolling. There now appears to be issues with the location of the toll booth, i.e. at the Customs and Immigration Complex (CIQ) into Singapore. Those who oppose the highway claim that because of the location of the toll booths, vehicles that pass the CIQ from Singapore will have to pay toll even if they exit into Johor Bahru town and do not use the entire stretch of the EDL. This is bad news for MRCB, the concessionaire, as it meant that the no-tolling period could be extended with no visibility on potential compensation from the government. However, there is good news. Management recently said that the government has agreed to pay compensation of RM11m-12m/month from May 12, which should more than cover the RM7m/month interest cost for the EDL.

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The group also indicated recently that it is willing to let the government acquire the highway at the right price if no final solution to the EDL tolling is found. 10.4 Financing Project financing is another hurdle that needs to be crossed in 2H12. MRT Corp recently highlighted that DanaInfra Nasional (a unit of the Ministry of Finance) will be raising funds for the estimated RM20bn MRT SBK line. The first tranche of RM8bn government guaranteed (GG) Sukuk bonds will launched soon. This will be utilised to fund the bulk of the MRT awards in 2012. It was reported that Maybank Investment Bank, CIMB Investment Bank, RHB Investment Bank and AmInvestment Bank have been appointed to manage the sale of Islamic (Sukuk) bonds to partly finance the construction of the MRT SBK Line. DanaInfra may issue an additional RM30bn via a 50-year programme, which will be announced later. The first drawdown is expected to be in July-12, with the issuance of Islamic MTNs of RM2.4bn, with targeted tenors of 10, 12 and 15 years. The second issuance of the IMTN of about RM1.5bn will be in Oct-12. 11. POTENTIAL WINNERS 11.1 Job visibility for contractors has improved Contractors under our coverage are looking at RM1bn-4bn worth of new contracts by end-2012. Their current outstanding order books of RM2bn-5.5bn should last for at least two years.

Figure 38: Outstanding order book and potential replenishments

9,000

7,500

4,000 6,000 1,000 1,000 4,500 1,000

1,000 3,000 5,500 1,000 1,000 4,800 4,300 4,000 1,500 3,047 2,100 2,200

0 Gamuda IJM Cor p MRCB Muhibbah Mudajay a Sunw ay WCT

Outstanding order book YTD (RM m) Potential replenishment by end 2012 (RM m)

SOURCES: CIMB, COMPANY REPORTS

11.2 Likely winners among stocks under coverage – WCT and Mudajaya stand out In deciding the sector themes for 2H12, we first looked at the likely major awards in 2H12. Bear in mind that the comparison does not include projects that are likely to begin in the later part of 2013 as newsflow on the awards is not likely to surface so soon. Those jobs are MRT 2 & 3, HSR and Gemas-JB double-tracking. What stands out from the list of potential winners is that WCT and Mudajaya could emerge as the biggest beneficiaries in terms of number/frequency of job wins. WCT’s expertise and track record in foundation/earthworks gives it an edge in the bids for Rapid, KLIFD and the RRI land. Furthermore, the group remains one of the most competitive players in this job segment as it has one of the biggest fleets of machineries locally. Mudajaya, on the other hand, remains the likely beneficiary of WCE subcontract packages and is tendering for Kidex. We remain optimistic about its chances of bagging more MRT packages ie. the station packages.

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Figure 39: Potential awards in 2H12 and likely winners Foundation Companies MRT SBK line WCE Kidex Works Viaducts Stations Depots Main Subcontract Rapid Klifd RRI Land works works Gamuda No No No No No No Yes No No IJM Corp No No No Yes No No Yes Yes No MRCB Yes Yes No No No No No No Yes Mudajaya Yes Yes No No Yes Yes No No No Muhibbah Engineering Yes No No No No No Yes No No Sunway No No No No No No No Yes No WCT No Yes No No Yes No Yes Yes Yes SOURCES: CIMB, COMPANY REPORTS

11.3 Potential key newsflow in 2H12 benefits all contractors equally Our second criterion identifies the potential beneficiaries of possible key sector newsflow, which we think should intensify in the run-up to the general election. It shows that major newsflow should generally benefit all contractors. However, we think that the newsflow on MRT 2 & 3 and HSR may not trigger a huge rerating of share prices as the feasibility studies are still ongoing. The key newsflow which we think would have a strong impact on share price are: (i) the signing of the WCE concession agreement (CA) as details of the potential job sizes for turnkey and subcontracting packages will be known, (ii) the Gemas-JB double-tracking as the three frontrunners have reportedly been identified, (iii) Kidex due to the potential huge project value, and (iv) Rapid, KLIFD and the RRI land as foundation/earthworks packages should be a priority before the masterplan for the township development comes through. Again, WCT and Mudajaya would fare relatively better than other contractors.

Figure 40: Potential newsflow in 2H12 and likely beneficiaries

Companies MRT 2 MRT 3 WCE CA RRI land HSR Gemas-JB Kidex Rapid Klifd RRI Cirle line Radial line signing tenders double track tenders tenders tenders Land Gamuda Yes Yes No No No Yes No Yes No No IJM Corp No No Yes No No Yes No Yes Yes No MRCB No No No Yes No No No No No Yes Mudajaya No No Yes No No No Yes No No No Muhibbah Engineering No No No No No No No Yes No No Sunway No No No No No No No No Yes No WCT No No Yes No No Yes No Yes Yes No SOURCES: CIMB, COMPANY REPORTS

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12. VALUATION AND RECOMMENDATION 12.1 Investors should ride on the pre-election newsflow Despite the strong outlook for job flows, we continue to rate the sector a Trading Buy instead of Overweight because of the election uncertainty. While the timing of the next general election is still unknown, recent newsflow on possible timing suggests that polls could be held in the later part of the year. We concur with the general view among contractors that this is the preferred scenario. Generally, the pre-election period is positive for construction stocks as newsflow tends to be more active, i.e. this is a period of more visibility and progress on outstanding jobs and greater frequency of awards. 12.2 Three themes for stock selection Our three themes for stock selection in 2H12 are (i) order flow recovery, (ii) cheap valuations, and (iii) land privatisation plays with infrastructure spin-offs. These themes are anchored by our macro view in 2H12 which focuses on the progress and implementation of projects beyond the MRT SBK line, i.e. rail, highways and foundation/earthworks. 12.3 Our picks are WCT and Mudajaya Three stocks fit these criteria, i.e. WCT, Mudajaya and MRCB. WCT and Mudajaya are more optimistic about job wins in the medium term, which ties in with our analysis on awards and newsflow in 2H12. Both companies noted that order book visibility for 2H12 has improved. We believe that both companies could bag some jobs in the near term. For WCT, new opportunities for foundation/earthworks have emerged. For Mudajaya, it could bag more jobs beyond the recent MRT win. Potential contract awards for these companies could top RM1bn in 2H12 and extend beyond the MRT. WCT, which has won over RM600m worth of contracts YTD, is targeting a major hospital contract in Sabah worth RM800m-900m and is bidding for MRT station works plus the foundation and earthworks for Rapid and KLIFD. Apart from potential new power plant civil works and highway jobs beyond WCE, Mudajaya could also clinch more civil works for both new coal-fired and combined-cycle power plants. This would be a bonus for newsflow. Separately, MRCB is a play on land privatisation and infrastructure spin-offs via the RRI land. As a GLC, it could bag substantial infrastructure works and undertake a major part of the township development. 12.4 Mudajaya stands out vs. Sunway and Muhibbah on the P/E scale Apart from the newsflow angle, our preference for WCT and Mudajaya is also supported by their relatively attractive valuations. Looking across the list of construction stocks under our coverage, Muhibbah Engineering, Mudajaya and Sunway are trading at attractive single-digit CY12-13 P/Es of 6-8x. Between the three, we have turned negative on Muhibbah in view of the unresolved Asia Petroleum Hub (APH) issue. For Sunway, the outlook for local property sales has been moderating and this could dampen earnings as over 60% of its total earnings come from property. Also, job flows in 2H12 after the sizeable MRT win could taper off although there could be wins on medium-sized jobs. Mudajaya stands out as chances of more job wins in 2H12 are still intact, even after it clinched the recent RM816m MRT package. Although the value of potential jobs is not likely to be as large as the MRT package, margins are likely to be better. Cash flow from the Indian IPP from FY13 onwards will ensure that pretax margins are sustained despite the dilution in the EBITDA margin. Mudajaya’s current double-digit construction margin is the highest in the sector.

CONSTRUCTION July 4, 2012

12.5 WCT is the next play on job wins after Gamuda and IJM Corp For 2H12, we favour WCT over the bigger players such as Gamuda and IJM Corp because it offers equally strong prospects of clinching large-scale jobs. WCT is trading at CY12-13 P/Es of 10-11x, which is a 20-23% discount to the 13-14x for Gamuda and IJM Corp. The reason we prefer WCT is because newsflow on job wins or progress on potential jobs has been lagging behind, compared to Gamuda and IJM Corp. 2H12 is therefore very likely to be a period of more exciting newsflow for WCT as the period could be dominated by job wins, which will contribute to the group’s minimum RM1bn target in 2H12. Gamuda and IJM Corp are still the beneficiaries of large-scale projects, However, we do not foresee any likely developments in 2H12 for these stocks that would excite the market. Gamuda will benefit from the progress newsflow of MRT 2 & 3 but the tender process and awards are likely a 2013 story while investors will turn to IJM Corp once the CA of WCE is signed.

Figure 41: P/E comparison

35 31.5

13.4 15 12.5 10.8 10 8.4 6.3 5 5

0 Gamuda IJM Corp MRCB Muhibbah Mudajaya Sunw ay WCT

Trading P/E (x)

SOURCES: CIMB, COMPANY REPORTS

12.6 Maintain Trading Buy on the construction sector Our conclusion is that there is a lot in store for the sector beyond KVMRT. Over the next 5-10 years, construction activities will be driven by transport infrastructure works. The local construction scene remains buoyant with a slew of rail and highway projects to be awarded in the medium term and new ones coming onstream if they pass feasibility tests and if political factors are favourable. Contract awards will continue to be led by MRT SBK line packages. We, therefore, expect newsflow to be good in 2H12. In view of all this, we believe that there is a good chance that order flows will improve in 2H12 and newsflow on the progress of other large rail and highway jobs will take centre stage. This continues to anchor our Trading Buy stance on the sector, which is not an Overweight because of political risk (review and potential delay of mega projects) if the general election outcome is unfavourable. 12.7 WCT and Mudajaya replace Gamuda and IJM Corp as our top picks WCT and Mudajaya are now our top picks as job flows for the two are likely to be the most active, backed by improved visibility of jobs. They replace IJM Corp and Gamuda, which we believe will still be winners of large-scale contracts over the medium to longer term. WCT and Mudajaya could emerge as the biggest winners in terms of the number/frequency of job wins. WCT boasts expertise

CONSTRUCTION July 4, 2012

and track record in foundation/earthworks. Mudajaya, on the other hand, remains the likely beneficiary of WCE subcontract packages, it is tendering for Kidex and it may win more power plant civil works packages.

Figure 42: Summary of stock recommendations

Companies Ticker Rec. Closing price TP Target price Upside RNAV Trading (RM) (RM) basis (%) /share discount to RNAV Gamuda GAM MK Trading Buy 3.54 4.45 10% RNAV discount 26% 4.94 -28% IJM Corp IJM MK Trading Buy 5.08 6.40 10% RNAV discount 26% 7.11 -29% MRCB MRC MK Trading Buy 1.83 2.02 30% RNAV discount 10% 2.89 -37% Muhibbah MUHI MK Trading Sell 1.03 0.94 40% RNAV discount -9% 1.56 -34% Mudajaya MDJ MK Trading Buy 2.73 3.78 40% RNAV discount 38% 6.30 -57% Sunway SWB MK Trading Buy 2.30 2.70 30% RNAV discount 17% 3.87 -41% WCT WCT MK Trading Buy 2.41 3.05 30% RNAV discount 27% 4.36 -45% Average 19% -39% SOURCES: CIMB, COMPANY REPORTS

12.8 Still see value in Mudajaya; WCT is a major laggard On average, the share prices of the construction stocks under our coverage declined 2% YTD compared to the 17% average decline in 2011. The 2% average drop in share prices was led by IJM Corp’s, MRCB’s and Sunway’s 10-16% decline, which was partially offset by Gamuda’s, Mudajaya’s and WCT’s 1-25% increase. The best performing stock was Mudajaya with a 25% appreciation but we still see value in spite of this as the market has yet to factor in the recovery in the Indian IPP’s pace of progress, which would provide a new recurring income stream from FY13 onwards, and the improved prospects for job wins. WCT is the biggest laggard in terms of share price performance as it only rose by 1%. With the concerns about the prospects of securing new projects diminishing compared to the past 6-9 months, its share price is likely to play catch-up, particularly with the improved job visibility in 2H12.

Figure 43: Share price performance of construction stocks under coverage 31-Dec-09 31-Dec-10 change 31-Dec-10 30-Dec-11 change YTD change Gamuda 2.60 3.81 47% 3.81 3.33 -13% 3.56 7% IJM Corp 4.48 6.23 39% 6.23 5.65 -9% 5.07 -10% MRCB 1.27 1.99 57% 1.99 2.16 9% 1.81 -16% Muhibbah 1.00 1.5 50% 1.50 1.13 -25% 1.03 -9% Mudajaya 4.97 4.27 -14% 4.27 2.19 -49% 2.73 25% *Sunway na na nm *2.80 2.55 -9% 2.30 -10% WCT 2.60 3.19 23% 3.19 2.38 -25% 2.41 1% Average 33% -17% -2%

*Listed in Aug-11 at RM2.80 reference price SOURCES: CIMB, COMPANY REPORTS

12.9 WCT and Mudajaya trading at steepest discounts to RNAV and offer the biggest upside Our final comparison looks at the upside to share prices and the various trading discounts to RNAV. It shows that WCT and Mudajaya are trading at 45-57% discounts to RNAV, the steepest compared to 28-41% for other stocks. This is supported by their 27-39% share price upside compared to 12-26% for other stocks, except for Muhibbah’s 9% downside.

CONSTRUCTION July 4, 2012

Figure 44: Discounts to RNAV

0% WCT MRCB

-10% Gamuda Sunway IJM Corp Mudajaya Muhibbah Muhibbah

-20%

-30% -28% -29%

-34% -40% -37% -41% -45% -50%

-60% -57%

Disc ounts to RNA V

SOURCES: CIMB, COMPANY REPORTS

Figure 45: Comparison of share price upside/downside

50%

38% 40%

27% 30% 25% 26%

20% 17% 12% 10%

0% Gamuda IJM Corp MRCB Muhibbah Mudajaya Sunw ay WCT -10% -9%

-20%

Upside (%)

SOURCES: CIMB, COMPANY REPORTS

CONSTRUCTION July 4, 2012

Figure 46: IJM Corp’s share price performance (RM) Figure 47: Gamuda’s share price performance (RM)

6.50 4.00

3.80 6.00 3.60

3.40 5.50

3.20

5.00 3.00

2.80 4.50 2.60

4.00 2.40 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 May-12 Jul-12 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 May-12 Jul-12

SOURCES: CIMB, COMPANY REPORTS

Figure 48: MRCB’s share price performance (RM) Figure 49: Muhibbah’s share price performance (RM)

2.60 1.60

2.40 1.50

1.40 2.20

1.30 2.00 1.20 1.80 1.10

1.60 1.00

1.40 0.90

1.20 0.80 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 May-12 Jul-12 7/1/11 9/1/11 11/1/11 1/1/12 3/1/12 5/1/12 7/1/12

SOURCES: CIMB, COMPANY REPORTS

CONSTRUCTION July 4, 2012

Figure 50: MTD-ACPI’s share price performance (RM) Figure 51: Mudajaya’s share price performance (RM)

0.60 3.50

3.30 0.55 3.10

2.90 0.50 2.70

0.45 2.50 2.30

0.40 2.10

1.90 0.35 1.70

1.50 0.30 7/1/11 9/1/11 11/1/11 1/1/12 3/1/12 5/1/12 7/1/12 7/1/11 9/1/11 11/1/11 1/1/12 3/1/12 5/1/12 7/1/12

SOURCES: CIMB, COMPANY REPORTS

Figure 52: Sunway’s share price performance (RM) Figure 53: WCT’s share price performance (RM)

2.90 3.30

3.10 2.70

2.90 2.50 2.70 2.30 2.50 2.10 2.30

1.90 2.10

1.70 1.90

1.50 1.70 7/1/11 9/1/11 11/1/11 1/1/12 3/1/12 5/1/12 7/1/12 Aug-11 Oct-11 Nov-11 Dec-11 Jan-12 Mar-12 Apr-12 May-12

SOURCES: CIMB, COMPANY REPORTS

CONSTRUCTION July 4, 2012

13. APPENDIX 13.1 IJM Corp’s RNAV

Figure 54: RNAV IJM's Value Concessions sta ke (RM'm) Kaseh Highway (IRR:9%, 12% discount rate) 50% 175.1 Besraya (DCF 14% IRR, 9.6% discount rate) 100% 1,086.1 New Pantai Expressway (9% IRR, 9.6% discount rate) 100% 1,489.0 Kuantan Port (9.6% WACC) 100% 1,217.0 Kemaman Port (9.6% WACC) 39% 363.9 Swarna, Andhra Pradesh (IRR 13%, 11.6% discount rate) 76% 177.5 Rewa, Madya Pradesh (IRR 13%, 11.6% discount rate) 100% 232.4 Trichy, Tamil Nadu (IRR 13.6%, 11.6% discount rate) 50% 135.1 Jaipur-Mahua, Rajashtan (IRR 13.6%, 11.6% discount rate) 100% 273.9 Gautami, Andra Pradesh (IRR 13.6%, 11.6% discount rate) 20% 70.6 Western Access Tollway, Buenos Aires 20% 181.6 West Coast Expressway (WCE, 60-year, 9% WACC) 20% 208.4 Total value of concessions 5,610.6

Other divisions Market MarketIJM's stakeValue (RM'm) price (RM) cap (RM) IJM Land 2.04 2,831.9 68.1% 1,928.5 Metech Group 0.40 16.2 20.1% 3.3 IJM Plantations 3.00 2,405.1 55.1% 1,325.2 Grupo Concessionario OESTE 1.57 125.6 20.1% 25.2 Kumpulan Europlus 1.04 541.8 22.5% 121.9 Total value 3,404.2

CY13 P/E (x) IJM's stakeValue (RM'm) net profit (RM'm) Construction 191.0 13.0 100% 2,483.1 Concrete products 110.0 10.4 98% 1,121.1 Net current assets net of dev. prop. (4QFY12) 1,811.6 Total debt (4QFY12) (4,530.3) Total RNAV - IJM 9,900.3 Fully diluted RNAV - IJM 10,555.2 FD no. of shares (m) 1,484.2 Fully diluted RNAV/share (RM) 7.11 Discount to RNAV 10% Target price (RM) 6.40 SOURCES: CIMB, COMPANY REPORTS

CONSTRUCTION July 4, 2012

13.2 Gamuda’s RNAV

Figure 55: RNAV DCF value Gamuda's Value Concession assets (RM m) stake (%) (RM m) LDP/Litrak 2,000.9 45% 900.4 SAE 1,380.1 30% 485.4 Sprint 1,519.6 52% 794.8 SSP1&3 1,579.0 40% 631.6 Gamuda Water 500.0 80% 400.0 PPH, India 172.5 50% 86.2 DE, India 115.2 50% 57.6 SMART 575.8 50% 287.9 MRT SBK line PDP 490.6 50% 245.3 Land size Value Property (acres) RM psf Kota Kemuning 40 25.0 50% 21.8 Valencia 20 100.0 99% 86.1 Bandar Botanic 310 30.0 100% 405.1 Bandar Nusajaya 860 28.0 50% 524.5 Jade Hills 260 25.0 100% 283.1 Madge Mansions 2 30.0 100% 2.6 Yenso, Hanoi 500 99.0 100% 2,156.2 Celadon City, HCMC 200 107.8 60% 563.5 New land - Kelana Jaya 4.8 450.0 100% 94.1 CY13 (RM m) P/E (x) Construction 268.5 13 100% 3,490.3 Quarry 13.8 8.0 100% 110.3 Net current assets (net of prop. dev. cost) 953.0 Long term debt (2,036.1) Total RNAV 10,543.6 Cash from warrants (2010/2015) 671.1 FD RNAV 11,214.7 Shares outstanding (m) 2,065.5 Outstanding warrants (2010/2015) 202.8 Enlarged shares (m) 2,268.3 FD RNAV/share (RM) 4.94 RNAV discount 10% Target price (RM) 4.45 SOURCES: CIMB, COMPANY REPORTS

13.3 MRCB’s RNAV

Figure 56: RNAV Market Assets Area (sf) value RM m RM psf KL Sentral (64.4% owned) 0.5m 1650.0 879.4 Alam Sentral Plaza 0.73m 270.0 197.1 Menara MRCB 0.28m 260.0 72.8 Seri Iskandar Township (70% JV stake) 174.2m 7.0 1,219.4 Eastern Dispersal Link (EDL), 14.5% IRR, 7% WACC 1,248.9 Duta Ulu Kelang Expressway (DUKE), 14.5% IRR, 6% WACC 536.5 Construction Net profit (FY13) at 13x P/E 788.1 Investment properties 722.3 Accociated companies and investments 209.3 Net current asset less development properties 294.8 Net debt (1QFY12) (2,337.7) Land swap (0.2m sq ft @RM601 psf, 70% stake) 168.3 RNAV 3,999.1 No. of shares (m) 1,386.0 RNAV/share (RM) 2.89 Discount to RNAV 30% Target price (RM) 2.02 SOURCES: CIMB, COMPANY REPORTS

CONSTRUCTION July 4, 2012

13.4 Muhibbah Engineering’s RNAV

Figure 57: Revised RNAV DCF Value Value (RM m) Stake (%) (RM m) Concessions Cambodian airports 1372.3 21% 288.2 Road maintenance 99.0 21% 20.8 Market cap Muhibbah's RM m stake (%) Cranes division 284.9 56% 158.4

2013 Net profit RM m P/E (x) Infrastructure construction division 39.8 13.0 517.8 Shipyard division 14.0 13.0 182.1

Cash (as at 1QFY12) 320.3 Borrowings (as at 1QFY12) (451.4) Net cash/(debt) (131.0) Less amount due from APH -400.0 Total RNAV 636.3 No. of Shares (m) 408.1 RNAV/share (RM) 1.56 Discount to RNAV 40% Target Price (RM) 0.94 SOURCES: CIMB, COMPANY REPORTS

13.5 Mudajaya’s RNAV

Figure 58: RNAV Concession DCF value Stake Value (RM m) (%) (RM m) IPP RKM Powergen, India (1,440 MW, 20 year DCF) 1,989.2 26% 517.2

Other segments P/E Value Stake Value (x) RM m (%) (RM m) Construction FY14 net profit 13.0 159.9 100% 2,078.6 Manufacturing FY14 net profit 10.4 4.4 100% 45.9

Property m Sq ft RM psf Stake Value (%) (RM m) Jalan Bukit Ledang - Damansara Heights 0.07 200.0 100% 13.1 Commercial land in Mutiara Damansara (For HQ) 0.04 150.0 100% 6.5

Net current assets less property development cost (As at 1QFY12) 549.1 Net cash/(debt) 1QFY12 248.5

Total RNAV 3,458.9 Enlarged no. of shares 549.3 RNAV/share (RM) 6.30 RNAV discount 40% TP (RM) 3.78 SOURCES: CIMB, COMPANY REPORTS

CONSTRUCTION July 4, 2012

13.6 Sunway’s RNAV

Figure 59: RNAV Type Location Size/units Area (sg ft) Price Stake Value Completed buildings RM m Sunway Lagoon Theme Park Petaling, Selangor 59.9 ac 728,326 200.0 100% 145.7 Sunway Medical Centre Petaling, Selangor 4.5 ac 755,940 250.0 80% 151.2 Sunway Hotel Georgetown Penang 240.0 units 0 150,000.0 100% 36.0 Monash University Sunway Campus Petaling, Selangor 12.0 ac 754,000 220.0 100% 165.9 Sunway University College Petaling, Selangor 12.4 ac 615,983 220.0 100% 135.5 Sunway Giza Sunway Damansara, Selangor 1.4 ac 98,000 500.0 60% 29.4 Lost World of Tambun Tambun, Perak 39.8 ac 728,326 80.0 65% 37.9 Sunway Hotel Phnom Penh Phnom Penh, Cambodia 138.0 units 125,313 300,000.0 53% 21.7 Sunway Hotel Hanoi Hanoi, Vietnam 142.0 units 9,365 300,000.0 100% 42.6 On going developments Sunway City Penang Seberang Perai, Penang 15.8 ac 210,394.8 100.0 100% 21.0 Sunway Grand Penang 3.8 ac 768,767.9 100.0 100% 76.9 Sg. Ara - new land Penang 68.3 ac 3,484,800.0 13.0 100% 45.3 Bukit Mertajam - new land Penang 17.8 ac 7,729,724.0 12.0 100% 92.8 Sunway Damansara Petaling, Selangor 18.2 ac 1,048,489.2 120.0 60% 75.5 Sunway City Ipoh Ipoh, Perak 899.2 ac 32,666,515.2 6.0 65% 127.4 Sunway Velocity Kuala Lumpur 19.5 ac 984,456.0 220.0 50% 108.3 Sunway Tower KL 1 Kuala Lumpur 1.0 ac 43,560.0 1,000.0 100% 43.6 Sunway Kayangan Bukit Raja, Selangor 5.4 ac 367,646.4 40.0 100% 14.7 Sunway Integrated Resort Petaling, Selangor 18.5 ac 845,064.0 100.0 100% 84.5 Sunway Semenyih Ulu Langat, Selangor 398.1 ac 17,341,671.6 6.0 100% 104.1 Sunway Cheras Selangor 6.9 ac 301,870.8 25.0 100% 7.5 Sunway South Quay Bandar Sunway, Selangor 52.4 ac 2,517,768.0 250.0 60% 377.7 Casa Kiara III Sri Hartamas, KL 2.8 ac 130,680.0 180.0 80% 18.8 Sunway Duta Kuala Lumpur 3.2 ac 136,342.8 300.0 60% 24.5 Sunway Melawati Setapak, KL 30.6 ac 1,427,896.8 35.0 100% 50.0 Sunway Alam Suria Shah Alam, Selangor 14.1 ac 1,045,440.0 40.0 50% 20.9 Sunway OPUS Grand India Hyderabad, India 23.8 ac 1,524,600.0 20.0 50% 15.2 Sunway MAK Signature Residence Hyderabad, India 14.0 ac 609,840.0 20.0 60% 7.3 Sunway Guanghao Jianyin, China 3.7 ac 740,520.0 80.0 39% 23.1 Tianjin Eco City Tianjin, China 90.9 ac 3,789,720.0 150.0 65% 369.5 Wonderland Business Park Sydney, Australia 65.5 ac 3,971,800.8 150.0 31% 184.7 Bukit Lenang - new land Johor 64.0 ac 2,787,840.0 30.0 80% 66.9 Taman Equine Selangor 33.0 ac 1,437,480.0 20.0 100% 28.7 Bangi Selangor 3.0 ac 130,680.0 10.0 100% 1.3 Sg. Long Balakong 111.0 ac 4,835,160.0 25.0 80% 96.7 Mont Putra Selangor 163.0 ac 7,100,280.0 25.0 100% 177.5 Melawati 2 Selangor 2.0 ac 87,120.0 20.0 100% 1.7 Tampines Singapore 5.0 ac 217,800.0 780.8 30% 51.0 Sembawang Singapore 0.8 ac 34,848.0 732.0 100% 25.5 Yuan Ching Road Singapore 5.0 ac 217,800.0 683.2 30% 44.6 Pasir Ris Rise Singapore 4.3 ac 187,308.0 650.0 30% 36.5 Medini land Iskandar 691.0 ac 30,099,960.0 35.0 38% 400.3 Total value of properties 3,590.1 Market cap Stake Rm m Sunway REIT 3,424.5 37% 1,256.8

FY13 Net profit Stake P/E RM m Construction 81.2 100% 13.0 1,056.0 Quarry & Trading 60.9 100% 10.4 633.6 Property investments 926.0

Net current asset less dev. Properties 190.0 Total borrowings (2,379.0) Total RNAV 5,273.5 No. of shares (m) 1,292.5 Warrants outstanding (m) 258.0 Strike price (RM) 2.80 Proceeds from warrants 722.40 FD no. of shares (m) 1,550.51 FD RNAV (RM) 5,995.85 RNAV/share (RM) 3.87 Discount to RNAV 30% Target price (RM) 2.70 SOURCES: CIMB, COMPANY REPORTS

CONSTRUCTION July 4, 2012

13.7 WCT’s RNAV

Figure 60: RNAV WCT's Concessions DCF value sta ke Value RM m RM m PPH, India 230.1 30.0% 69.0 DE, India 147.3 30.0% 44.2 KLIA2 Integrated Complex (25-year, 13% WACC) 230.0 70.0% 161.0 Property - land Acres/sq ft RM/psf Bandar Bukit Tinggi 1 16.9 60.00 100.0% 44.2 Bandar Bukit Tinggi 2 40.2 60.00 100.0% 105.0 Bandar Bukit Tinggi 3 175.8 60.00 100.0% 459.5 56-acre new land near BBT 3 56.0 60.00 100.0% 146.4 Bukit Jelutong Commercial Centre 2.3 50.00 100.0% 4.9 *1 Medini Residences 11.0 40.00 100.0% 19.2 *Medini Commercial 10.3 40.00 100.0% 17.9 *Bandar Serendah, Ulu Selangor 39.0 8.00 100.0% 13.6 *Rawang Land 437.5 18.00 100.0% 343.0 *Platinum Plaza (HCMC) 22.2 70.00 67.0% 45.4 *OUG - mixed development 56.8 30.00 100.0% 74.2 2013 PAT P/E Construction 157.1 13.0 100.0% 2,041.8

Associated companies & investments 169.1 Net current assets less dev. properties 742.1 Total debt (1QFY12) (1,309.2) Investment properties 826.6 Total RNAV 4,016.9 No. of shares (m) 804.7 No. of outstanding warrants (WB) (m) 139.0 Proceeds from warrants (WB) 347.5 No. of outstanding warrants (WC) (m) 157.0 Proceeds from warrants (WC) 431.8 Fully diluted RNAV 4,796.2 Enlarged no. of shares (m) 1,100.7 FD RNAV/share (RM) 4.36 RNAV discount 30% Target price (RM) 3.05

*surplus value: estimated mark et value less land cost SOURCES: CIMB, COMPANY REPORTS

Construction MALAYSIA July 4, 2012

Gamuda GAM MK / GAMU.KL Current RM3.54 SHORT TERM (3 MTH) LONG TERM Market Cap Avg Daily Turnover Free Float Target RM4.45 US$2,334m US$3.02m 77.3% Previous Target RM4.45 RM7,354m RM9.40m 2,077 m shares Up/downside 25.7%

Convicti

CIMB Analyst It’s raining jobs! Gamuda’s job wins prospects do not end with the MRT SBK line. Being

Sharizan Rosely the PDP and contractor for the underground portion have raised its T (60) 3 20849864 E [email protected] chances of bagging similar packages for MRT 2 & 3. That said, job

replenishment potential is shaping up to be a 2013 story.

Our target price is still based on a undertaking a larger PDP role for 10% RNAV discount. We believe MRT 2 & 3. This is because it now election-driven developments in possesses the cost advantage while, at 2H12 will accelerate the progress of the same time, competition has Share price info major jobs, i.e. MRT 2 & 3. Maintain become less intense. Share price perf. (%) 1M 3M 12M Trading Buy; we are not Outperform Relative 1.9 -2 -12 due to the election overhang on the MRT 2 & 3 is huge Absolute 4.1 -1.9 -10.4 sector. Key catalysts are progress of According to Gamuda, MRT 2 & 3 are Major shareholders % held MRT 2 & 3 and job wins. likely to be implemented concurrently Amanahraya Trustees 8.4 in 2013. Total tunnelling length for KWAP 8.1 Winner of rail jobs both lines is about 20-24km, longer EPF 6.2 Gamuda could emerge as the biggest than the 9.5km of the SBK line. Based beneficiary of rail jobs. Of the major on the RM874m cost/km for the rail and highway projects, which are RM8.3bn SBK line’s 9.5km estimated to be worth a total RM95bn, underground works, the value of that could come onstream from 2H12 underground works for MRT 2 & 3 is onwards, MRT 2 (circle line) and RM17.5bn-21bn. Winning this will MRT 3 (radial line) are the two jobs bump up its order book to that could underpin the growth of the RM14bn-16bn, based on the group’s group’s construction division over the 50% share. longer term. The group’s success in emerging as the main winner of the Pre-election newsflow RM20bn MRT SBK line, both as the Gamuda’s prospects do not end with project development partner (PDP) one MRT line. But potential awards via MMC-Gamuda JV and the main are likely to be a 2013 story. We still contractor for the RM8.3bn expect election-driven newsflow on underground (tunnelling and station) the progress of MRT 2 & 3 to be package, underscores its chances of strong in 2H12. winning similar packages and

Price Close Relative to FBMKLCI (RHS) 4.1 108 Financial Summary 3.9 104 3.7 101 Jul-10A Jul-11A Jul-12F Jul-13F Jul-14F 3.5 97 Revenue (RMm) 2,455 2,673 3,364 4,188 4,829 3.3 93 3.1 89 Operating EBITDA (RMm) 236.6 357.1 508.2 625.3 720.1 2.9 86 2.7 82 Net Profit (RMm) 322.9 425.4 546.1 612.2 684.1 2.525 78 20 Core EPS (RM) 0.16 0.21 0.27 0.30 0.34 15 Vol m Core EPS Growth 66.7% 31.7% 28.4% 12.1% 11.7% 10 5 FD Core P/E (x) 22.10 16.78 13.07 11.66 10.44 Jul-11 Oct-11 Jan-12 Apr-12 DPS (RM) 0.09 0.11 0.11 0.12 0.12 Source: Bloomberg Dividend Yield 2.44% 3.07% 3.19% 3.27% 3.27% EV/EBITDA (x) 36.05 23.75 16.63 13.50 11.72

52-week share price range P/FCFE (x) 137.5 16.3 26.3 28.7 18.0 3.54 Net Gearing 60.9% 56.2% 52.0% 45.7% 40.5% 2.70 3.92 P/BV (x) 3.89 3.82 3.71 3.35 3.02 Recurring ROE 16.6% 23.0% 28.8% 30.2% 30.4% 4.45 Current Target % Change In Core EPS Estimates 0.000% 0.000% 0.000% CIMB/consensus EPS (x) 1.11 1.08 1.06

SOURCE: CIMB, COMPANY REPORTS

IMPORTANT DISCLOSURES. INCLUDING ANY REQUIRED RESEARCH CERTIFICATIONS, ARE PROVIDED AT THE END OF THIS REPORT. Designed by Eight, Powered by EFA

Gamuda July 4, 2012

Profit & Loss Balance Sheet

(RMm) Jul-11A Jul-12F Jul-13F Jul-14F (RMm) Jul-11A Jul-12F Jul-13F Jul-14F Revenue 2,673 3,364 4,188 4,829 Fixed Assets 43.28 24.43 5.07 84.22 Other Operating Income Intangible Assets 18.20 18.02 17.84 17.66 Cost Of Sales - - - - Other Long Term Assets 1,963 1,958 1,952 1,944 Gross Profit 2,673 3,364 4,188 4,829 Total Non-current Assets 2,024 2,000 1,975 2,046 Total Operating Costs (2,335) (2,876) (3,583) (4,130) Total Cash And Equivalents 677.8 643.9 611.7 581.2 Operating Profit 337.8 488.4 604.9 699.2 Inventories 51.5 72.0 89.6 103.3 Operating EBITDA 357.1 508.2 625.3 720.1 Accounts Receivable 1,575 1,815 2,190 2,482 Depreciation And Amortisation (19.35) (19.85) (20.36) (20.86) Other Current Assets 297.9 298.9 299.9 299.9 Operating EBIT 337.8 488.4 604.9 699.2 Total Current Assets 2,602 2,830 3,192 3,467 Net Interest Income (15.70) (20.09) (19.50) (19.20) Trade Creditors 176.7 246.7 306.0 353.8 Exchange Gains - - - - Short-term Debt 400.5 320.4 256.3 205.1 JV/Associates Profit 222.4 238.8 204.3 199.6 Other Current Liabilities 504.7 636.2 746.9 836.9 Other Income - - - - Total Current Liabilities 1,082 1,203 1,309 1,396 Profit Before Tax (pre-EI) 544.5 707.1 789.8 879.6 Total Long-term Debt 1,437 1,437 1,437 1,437 Exceptional Items - - - - Other Liabilities 45.5 50.1 55.1 60.6 Pre-tax Profit 544.5 707.1 789.8 879.6 Deferred Tax - - - - Taxation (111.6) (141.4) (158.0) (175.9) Total Non-current Liabilities 1,482 1,487 1,492 1,497 Exceptional Income - post-tax Shareholders' Equity 1,867 1,925 2,132 2,367 Profit After Tax 432.9 565.7 631.8 703.7 Minority Interests 195.7 215.3 234.9 254.4 Minority Interests (7.53) (19.57) (19.57) (19.57) Preferred Shareholders Funds Other Adjustments - post-tax Total Equity 2,062 2,140 2,366 2,621 Net Profit 425.4 546.1 612.2 684.1

Recurring Net Profit 425.4 546.1 612.2 684.1

Cash Flow Key Ratios

(RMm) Jul-11A Jul-12F Jul-13F Jul-14F Jul-11A Jul-12F Jul-13F Jul-14F Pre-tax Profit 544.5 707.1 789.8 879.6 Revenue Growth 8.9% 25.8% 24.5% 15.3% Depreciation And Non-cash Adj. (187.4) (198.9) (164.5) (159.5) Operating EBITDA Growth 51.0% 42.3% 23.0% 15.2% Change In Working Capital 270.6 (42.4) (201.7) (148.1) Operating EBITDA Margin 13.4% 15.1% 14.9% 14.9% Tax Paid (96.9) (129.0) (150.9) (168.2) Net Cash Per Share (RM) (0.57) (0.55) (0.54) (0.53) Other Operating Cashflow 248.7 249.7 250.7 250.7 BVPS (RM) 0.93 0.95 1.06 1.17 Cashflow From Operations 779.6 586.5 523.4 654.4 Gross Interest Cover 5.74 11.65 15.03 17.98 Capex (13.50) (13.50) (13.50) (13.50) Tax Rate 20.5% 20.0% 20.0% 20.0% Disposals Of FAs/subsidiaries (228.5) (221.8) (196.9) (193.5) Net Dividend Payout Ratio 51.5% 41.7% 38.1% 34.1% Acq. Of Subsidiaries/investments - - - - Accounts Receivables Days 237.3 184.4 174.6 176.6 Other Investing Cashflow - - - - Inventory Days N/A N/A N/A N/A Cash Flow From Investing (242.0) (235.3) (210.4) (207.0) Accounts Payables Days N/A N/A N/A N/A Debt Raised/(repaid) (100.1) (80.1) (64.1) (51.3) ROIC (%) 8.4% 12.2% 14.6% 15.8% Equity Raised/(Repaid) - - - - ROCE (%) 9.7% 13.1% 15.7% 17.3%

Dividends Paid (86.35) (86.35) (86.35) (86.35) Net Cash Interest - - - - Other Financing Cashflow (289.4) (22.2) 63.6 63.6 Cash Flow From Financing (475.9) (188.6) (86.8) (74.0) Total Cash Generated 61.7 162.6 226.1 373.4 Change In Net Cash 161.8 242.7 290.2 424.7 Free Cashflow To Equity 437.5 271.2 248.9 396.1

Key Drivers

(RMm) Jul-11A Jul-12F Jul-13F Jul-14F Outstanding Orderbook 4,100.0 6,100.0 6,600.0 7,100.0 Orderbook Depletion 1,000.0 1,000.0 1,000.0 1,000.0 Orderbook Replenishment 3,000.0 1,500.0 1,500.0 1,500.0 ASP (% chg, main prod./serv.) N/A N/A N/A N/A Unit sales grth (%, main prod./serv.) N/A N/A N/A N/A Util. rate (%, main prod./serv.) N/A N/A N/A N/A ASP (% chg, 2ndary prod./serv.) N/A N/A N/A N/A Unit sales grth (%,2ndary prod/serv) N/A N/A N/A N/A Util. rate (%, 2ndary prod/serv) N/A N/A N/A N/A

SOURCE: CIMB, COMPANY REPORTS

Construction MALAYSIA July 4, 2012

IJM Corp Bhd IJM MK / IJMS.KL Current RM5.08 SHORT TERM (3 MTH) LONG TERM Market Cap Avg Daily Turnover Free Float Target RM6.40 US$2,227m US$4.17m 71.8% Previous Target RM6.40 RM7,019m RM12.98m 1,382 m shares Up/downside 26.0%

Convicti

CIMB Analyst It’s raining jobs! IJM Corp’s prospects for 2H12 lie in the signing of the WCE concession

Sharizan Rosely agreement (CA), which is long overdue. This should pave the way for T (06) 3 20849864 E [email protected] an almost doubling of its order book and a recovery in margins. Other

pockets of opportunity could emerge from building and infra jobs.

Our target price remains pegged to been false starts in terms of the 10% RNAV discount. We expect the timing of the signing of the CA. We signing of the WCE CA to be among now expect the CA to be signed before the key election-driven newsflow in the next general elections, in line with Share price info the coming months, on top of other management’s expectations. Share price perf. (%) 1M 3M 12M job wins. This anchors our Trading Relative -4.3 -10.2 -23.7 Buy call; we are not Outperform due Potential to nearly double Absolute -2.1 -10.1 -22.1 to the election overhang on the sector. order book by end-12 Major shareholders % held Potential catalysts are job awards and The order book will therefore EPF 14.2 the signing of the CA. experience a huge boost from the KWAP 6.1 c.RM4bn share of works from WCE. Amanahraya Trustees 7.9 A major winner of rail and Securing this job will also improve highway jobs construction pretax margins as this is The distribution of total local job a negotiated project. Pretax margins awards since the beginning of the are expected to be 10-15%, compared year shows that IJM Corp is among to open tender margins of 5-8% and the early winners of MRT viaduct the group’s current blended packages with the award of package construction pretax margin of 3%. v5 worth RM974m. The group can IJM Corp holds a direct 20% stake in still tender for the station packages the concession and an indirect 18% but we think competition will be high stake through 22.5%-owned as the group will be bidding against Kumpulan Europlus (KEUR MK, Not the smaller contractors. The next rated). potential boost to its RM4.3bn outstanding order book is the Other jobs beyond WCE RM7.1bn West Coast Expressway Other potential jobs beyond WCE are (WCE), on which IJM Corp is likely to the foundation works for KLIFD and undertake c.RM4bn worth of works. Rapid worth RM2bn-3bn. Awards are Over the past months, there have likely in 2H12.

Price Close Relative to FBMKLCI (RHS) 7.1 103 Financial Summary 6.6 98 Mar-11A Mar-12A Mar-13F Mar-14F Mar-15F 6.1 93 Revenue (RMm) 3,721 4,518 5,677 6,038 7,470 5.6 88 5.1 83 Operating EBITDA (RMm) 573 826 969 1,013 1,092 4.6 78 Net Profit (RMm) 321.3 409.2 536.5 569.9 614.3 4.115 73 Core EPS (RM) 0.20 0.32 0.40 0.42 0.45 Vol m Vol 10 Core EPS Growth (7.8%) 59.2% 24.3% 6.2% 7.8% 5 FD Core P/E (x) 25.34 15.92 12.81 12.06 11.19 Jul-11 Oct-11 Jan-12 Apr-12 DPS (RM) 0.11 0.12 0.13 0.14 0.15 Source: Bloomberg Dividend Yield 2.21% 2.41% 2.61% 2.81% 3.01% EV/EBITDA (x) 16.35 11.33 9.59 9.18 8.97

52-week share price range P/FCFE (x) 51.39 39.61 27.27 26.87 25.16 5.08 Net Gearing 86.5% 80.9% 73.7% 72.7% 94.3% 4.38 6.49 P/BV (x) 2.93 2.76 2.60 2.59 2.77 Recurring ROE 11.7% 17.9% 20.9% 21.5% 23.9% 6.40 Current Target % Change In Core EPS Estimates 0.000% 0.000% 0.000%

CIMB/consensus EPS (x) 1.05 0.98 0.94

SOURCE: CIMB, COMPANY REPORTS

IMPORTANT DISCLOSURES. INCLUDING ANY REQUIRED RESEARCH CERTIFICATIONS, ARE PROVIDED AT THE END OF THIS REPORT. Designed by Eight, Powered by EFA

IJM Corp Bhd July 4, 2012

Profit & Loss Balance Sheet

(RMm) Mar-12A Mar-13F Mar-14F Mar-15F (RMm) Mar-12A Mar-13F Mar-14F Mar-15F Revenue 4,518 5,677 6,038 7,470 Fixed Assets 140.5 150.5 60.3 (32.0) Other Operating Income Intangible Assets 61.12 61.10 61.07 61.04 Cost Of Sales - - - - Other Long Term Assets 1,723 1,724 1,725 1,725 Gross Profit 4,518 5,677 6,038 7,470 Total Non-current Assets 1,924 1,935 1,846 1,754 Total Operating Costs (3,781) (4,798) (5,116) (6,470) Total Cash And Equivalents 209.9 212.6 219.3 229.5 Operating Profit 737.2 879.0 921.9 999.8 Inventories 598.0 631.7 671.9 831.2 Operating EBITDA 826 969 1,013 1,092 Accounts Receivable 3,375 3,565 3,792 4,691 Depreciation And Amortisation (88.77) (89.97) (91.17) (92.37) Other Current Assets 1,657 1,657 1,657 1,657 Operating EBIT 737.2 879.0 921.9 999.8 Total Current Assets 5,840 6,066 6,340 7,409 Net Interest Income 95.5 (183.1) (184.8) (203.1) Trade Creditors 2,390 2,525 2,686 3,322 Exchange Gains 0.00 0.00 0.00 0.00 Short-term Debt 196.1 196.0 196.0 196.0 JV/Associates Profit 2.00 38.50 42.35 46.59 Other Current Liabilities 178.7 178.7 178.7 178.7 Other Income - - - - Total Current Liabilities 2,765 2,900 3,060 3,697 Profit Before Tax (pre-EI) 834.7 734.3 779.4 843.3 Total Long-term Debt 2,238 2,166 2,160 2,657 Exceptional Items (33.00) 0.00 0.00 0.00 Other Liabilities 11.91 21.79 26.11 32.23 Pre-tax Profit 801.7 734.3 779.4 843.3 Deferred Tax - - - - Taxation (251.1) (187.0) (198.8) (215.3) Total Non-current Liabilities 2,250 2,187 2,186 2,690 Exceptional Income - post-tax Shareholders' Equity 2,486 2,640 2,654 2,484 Profit After Tax 550.6 547.3 580.7 627.9 Minority Interests 264.1 274.9 285.7 299.3 Minority Interests (141.4) (10.8) (10.8) (13.6) Preferred Shareholders Funds Other Adjustments - post-tax Total Equity 2,750 2,914 2,939 2,783 Net Profit 409.2 536.5 569.9 614.3

Recurring Net Profit 431.8 536.5 569.9 614.3

Cash Flow Key Ratios

(RMm) Mar-12A Mar-13F Mar-14F Mar-15F Mar-12A Mar-13F Mar-14F Mar-15F Pre-tax Profit 801.7 734.3 779.4 843.3 Revenue Growth 21.4% 25.7% 6.4% 23.7% Depreciation And Non-cash Adj. (8.7) 234.6 233.6 248.9 Operating EBITDA Growth 44.1% 17.3% 4.6% 7.8% Change In Working Capital (344.3) (363.3) (435.6) (816.7) Operating EBITDA Margin 18.3% 17.1% 16.8% 14.6% Tax Paid (127.1) (168.3) (190.5) (203.7) Net Cash Per Share (RM) (1.64) (1.59) (1.58) (1.94) Other Operating Cashflow 38.68 39.68 40.68 40.68 BVPS (RM) 1.84 1.95 1.96 1.84 Cashflow From Operations 360.2 477.0 427.6 112.4 Gross Interest Cover 4.26 4.19 4.45 4.50 Capex (56.10) (56.10) (56.10) (56.10) Tax Rate 31.3% 25.5% 25.5% 25.5% Disposals Of FAs/subsidiaries (106.4) (96.6) (110.3) (280.4) Net Dividend Payout Ratio 40.4% 33.4% 33.9% 33.6% Acq. Of Subsidiaries/investments - - - - Accounts Receivables Days 263.4 223.1 222.4 207.3 Other Investing Cashflow - - - - Inventory Days N/A N/A N/A N/A Cash Flow From Investing (162.5) (152.7) (166.4) (336.5) Accounts Payables Days N/A N/A N/A N/A Debt Raised/(repaid) (24.2) (72.4) (5.5) 497.3 ROIC (%) 10.3% 13.0% 13.5% 14.1% Equity Raised/(Repaid) - - - - ROCE (%) 19.6% 17.3% 17.9% 18.6%

Dividends Paid (51.83) (51.83) (51.83) (51.83) Net Cash Interest - - - - Other Financing Cashflow (196.7) (197.7) (196.7) (196.7) Cash Flow From Financing (272.8) (321.9) (254.1) 248.7 Total Cash Generated (75.07) 2.43 7.22 24.56 Change In Net Cash (50.8) 74.8 12.7 (472.7) Free Cashflow To Equity 173.5 252.0 255.8 273.1

Key Drivers

(RMm) Mar-12A Mar-13F Mar-14F Mar-15F Outstanding Orderbook 9,200.0 9,100.0 9,800.0 9,800.0 Orderbook Depletion N/A N/A N/A N/A Orderbook Replenishment 5,000.0 1,000.0 1,000.0 1,000.0 ASP (% chg, main prod./serv.) N/A N/A N/A N/A Unit sales grth (%, main prod./serv.) N/A N/A N/A N/A Util. rate (%, main prod./serv.) N/A N/A N/A N/A ASP (% chg, 2ndary prod./serv.) N/A N/A N/A N/A Unit sales grth (%,2ndary prod/serv) N/A N/A N/A N/A Util. rate (%, 2ndary prod/serv) N/A N/A N/A N/A

SOURCE: CIMB, COMPANY REPORTS

Construction MALAYSIA July 4, 2012

Malaysian Resources Corp MRC MK / MYRS.KL Current RM1.83 SHORT TERM (3 MTH) LONG TERM Market Cap Avg Daily Turnover Free Float Target RM2.02 US$805.1m US$2.18m 58.1% Previous Target RM2.02 RM2,537m RM6.79m 1,386 m shares Up/downside 10.4%

Convicti

CIMB Analyst It’s raining jobs! While our analysis shows that the group may not emerge as the big

Sharizan Rosely beneficiary of highway jobs, it is still in the running to clinch MRT jobs T (60) 3 20849864 E [email protected] in 2H12. As a GLC, it also stands a good chance of undertaking

infrastructure and property development works on the RRI land.

Our target price is still pegged to 30% reported that tenders for the RRI land RNAV discount. 2H12 should dish up should begin in 2H12. several job wins for the group, given its target of c.RM500m worth of jobs Job flow prospects in 2H12 Share price info by end-2012. Maintain Trading Buy; The group is gunning for RM500m to Share price perf. (%) 1M 3M 12M we are not Outperform given the RM1bn worth of jobs this year and Relative 9.4 -1.7 -18.4 election overhang on the sector. could bag RM300m-400m in local Absolute 11.6 -1.6 -16.8 Potential catalysts are job wins and road jobs soon. The target does not Major shareholders % held the development of the RRI land. include potential works for the RRI EPF 41.9 land. The group is also tendering for Beneficiary of land MRT package v8 (elevated) and privatisation spin-off station package ST4, which combined A play on MRCB in 2H12 dovetails could be worth around RM800m. Its with our third stock selection criteria outstanding order book stood at in this sector note, which is land RM2.1bn and could increase to privatisation spin-offs. The Rubber almost RM3bn by end-12. Research Institute (RRI) land in Sg. Buloh area, which is nearby the Reprieve for EDL beginning of the MRT SBK line Progress of EDL is another positive. alignment in the north, has been The government’s decision to honour earmarked for development into a the toll compensation of large township. The land for RM11m-12m/month from Apr 12 development spans 2.9k acres and onwards for the Eastern Dispersal will be parcelled and tendered out to Link (EDL) in Johor is a reprieve for property developers. There are also its share price, which has fallen from infrastructure opportunities worth at its peak of RM2.22 in Feb 12. The least RM1bn and work should be compensation should more than implemented before property cover the EDL’s RM7m/month development starts. The press has interest cost.

Price Close Relative to FBMKLCI (RHS) 2.8 126 Financial Summary 2.6 117 Dec-10A Dec-11A Dec-12F Dec-13F Dec-14F 2.4 109 2.2 100 Revenue (RMm) 1,057 1,213 1,757 2,006 2,293 2.0 92 Operating EBITDA (RMm) 95.4 117.7 191.8 240.5 890.2 1.8 83 1.6 75 Net Profit (RMm) 68.3 72.2 78.9 100.1 122.7 1.430 66 Core EPS (RM) 0.058 0.056 0.058 0.073 0.090 20 Vol m Core EPS Growth 60.5% (3.5%) 2.8% 26.8% 22.5% 10 FD Core P/E (x) 31.40 32.53 31.65 24.95 20.38 Jul-11 Oct-11 Jan-12 Apr-12 DPS (RM) 0.010 0.020 0.025 0.030 0.030 Source: Bloomberg Dividend Yield 0.55% 1.09% 1.36% 1.64% 1.64% EV/EBITDA (x) 22.68 20.40 12.26 9.86 2.63

52-week share price range P/FCFE (x) 18.65 16.18 12.20 8.44 6.97 1.83 Net Gearing 26.6% 11.8% 6.0% 6.9% 3.5% 1.52 2.55 P/BV (x) 3.26 2.95 2.70 2.44 2.18 Recurring ROE 9.2% 9.5% 8.9% 10.3% 11.3% 2.02 Current Target % Change In Core EPS Estimates 0.000% 0.000% 0.000%

CIMB/consensus EPS (x) 0.98 0.83 0.91

SOURCE: CIMB, COMPANY REPORTS

IMPORTANT DISCLOSURES. INCLUDING ANY REQUIRED RESEARCH CERTIFICATIONS, ARE PROVIDED AT THE END OF THIS REPORT. Designed by Eight, Powered by EFA

Malaysian Resources Corp July 4, 2012

Profit & Loss Balance Sheet

(RMm) Dec-11A Dec-12F Dec-13F Dec-14F (RMm) Dec-11A Dec-12F Dec-13F Dec-14F Revenue 1,213 1,757 2,006 2,293 Fixed Assets 26.9 206.9 366.9 (92.6) Other Operating Income Intangible Assets 10.00 10.00 10.00 10.00 Cost Of Sales 52.17 0.00 0.00 0.00 Other Long Term Assets 1,389 1,389 1,389 1,389 Gross Profit 1,265 1,757 2,006 2,293 Total Non-current Assets 1,426 1,606 1,766 1,306 Total Operating Costs (1,167) (1,586) (1,807) (2,064) Total Cash And Equivalents 780.3 830.2 813.4 847.2 Operating Profit 98.4 170.8 199.4 228.7 Inventories 14.57 14.57 14.57 14.57 Operating EBITDA 117.7 191.8 240.5 890.2 Accounts Receivable 707 982 1,122 1,282 Depreciation And Amortisation (19.2) (21.0) (41.0) (661.5) Other Current Assets 231.8 268.6 287.3 308.7 Operating EBIT 98.4 170.8 199.4 228.7 Total Current Assets 1,734 2,095 2,237 2,452 Net Interest Income 22.40 (49.88) (49.38) (49.12) Trade Creditors 1,112 1,576 1,778 1,413 Exchange Gains - - - - Short-term Debt 177.0 177.0 177.0 177.0 JV/Associates Profit (14.00) (5.23) (4.55) (3.87) Other Current Liabilities 204.4 204.4 204.4 204.4 Other Income - - - - Total Current Liabilities 1,494 1,957 2,160 1,794 Profit Before Tax (pre-EI) 106.8 115.6 145.5 175.7 Total Long-term Debt 713.9 713.9 713.9 713.9 Exceptional Items (5.30) 0.00 0.00 0.00 Other Liabilities 10.34 10.34 10.34 10.34 Pre-tax Profit 101.5 115.6 145.5 175.7 Deferred Tax 1.801.801.801.80 Taxation (15.30) (21.78) (28.90) (34.95) Total Non-current Liabilities 726.0 726.0 726.0 726.0 Exceptional Income - post-tax Shareholders' Equity 846 924 1,023 1,145 Profit After Tax 86.2 93.9 116.6 140.8 Minority Interests 93.78 93.78 93.78 93.78 Minority Interests (14.00) (14.99) (16.49) (18.14) Preferred Shareholders Funds Other Adjustments - post-tax Total Equity 940 1,018 1,117 1,238 Net Profit 72.2 78.9 100.1 122.7

Recurring Net Profit 76.7 78.9 100.1 122.7

Cash Flow Key Ratios

(RMm) Dec-11A Dec-12F Dec-13F Dec-14F Dec-11A Dec-12F Dec-13F Dec-14F Pre-tax Profit 101.5 115.6 145.5 175.7 Revenue Growth 14.8% 44.8% 14.2% 14.3% Depreciation And Non-cash Adj. 10.8 76.1 94.9 714.5 Operating EBITDA Growth 23% 63% 25% 270% Change In Working Capital 50.9 188.8 62.8 (525.9) Operating EBITDA Margin 9.7% 10.9% 12.0% 38.8% Tax Paid (9.55) 4.20 (7.12) (6.05) Net Cash Per Share (RM) (0.08) (0.04) (0.06) (0.03) Other Operating Cashflow - - - - BVPS (RM) 0.62 0.68 0.75 0.84 Cashflow From Operations 153.7 384.7 296.1 358.3 Gross Interest Cover 3.13 1.74 2.03 2.33 Capex - - - - Tax Rate 15.1% 18.8% 19.9% 19.9% Disposals Of FAs/subsidiaries 0.5 (180.0) 0.0 0.0 Net Dividend Payout Ratio 37.7% 43.2% 40.8% 33.3% Acq. Of Subsidiaries/investments - - - - Accounts Receivables Days 196.0 176.0 191.4 191.3 Other Investing Cashflow - - - - Inventory Days (101.9) N/A N/A N/A Cash Flow From Investing 0.5 (180.0) 0.0 0.0 Accounts Payables Days (7,213) N/A N/A N/A Debt Raised/(repaid) - - - - ROIC (%) 14.1% 23.6% 24.2% 24.1% Equity Raised/(Repaid) - - - - ROCE (%) 8.5% 11.7% 12.7% 13.4%

Dividends Paid (16.3) (131.9) (162.1) (192.6) Net Cash Interest - - - - Other Financing Cashflow (66.3) (5.7) (152.9) (152.9) Cash Flow From Financing (82.6) (137.6) (315.0) (345.5) Total Cash Generated 71.70 67.06 (18.83) 12.88 Change In Net Cash 71.70 67.06 (18.83) 12.88 Free Cashflow To Equity 154.3 204.7 296.1 358.3

Key Drivers

(RMm) Dec-11A Dec-12F Dec-13F Dec-14F Outstanding Orderbook 2,000.0 1,900.0 1,800.0 1,900.0 Orderbook Depletion N/A N/A N/A N/A Orderbook Replenishment 500.0 500.0 500.0 500.0 ASP (% chg, main prod./serv.) N/A N/A N/A N/A Unit sales grth (%, main prod./serv.) N/A N/A N/A N/A Util. rate (%, main prod./serv.) N/A N/A N/A N/A ASP (% chg, 2ndary prod./serv.) N/A N/A N/A N/A Unit sales grth (%,2ndary prod/serv) N/A N/A N/A N/A Util. rate (%, 2ndary prod/serv) N/A N/A N/A N/A

SOURCE: CIMB, COMPANY REPORTS

Construction MALAYSIA July 4, 2012

Muhibbah Engineering MUHI MK / MUHI.KL Current RM1.03 SHORT TERM (3 MTH) LONG TERM Market Cap Avg Daily Turnover Free Float Target RM0.94 US$133.4m US$0.39m 72.5% Previous Target RM0.94 RM420.5m RM1.24m 408.2 m shares Up/downside -8.7%

Convicti

CIMB Analyst It’s raining jobs but APH issue is

Sharizan Rosely a dampener

T (60) 3 20849864 E [email protected] The group is still actively bidding for jobs in the construction, oil and

gas and marine/port space. Chances for job wins locally and overseas

in 2H12 are still intact but the APH issue is likely to be protracted and

weigh down share price sentiment.

The group may turn in losses in FY12 for MRT viaduct, station and depot if provisions for the APH project are packages. There could be Share price info made. Our target price is still pegged opportunities in Petronas’s Rapid Share price perf. (%) 1M 3M 12M to a 40% discount to the worst case project in Pengerang. Relative -14.9 -23.2 -27 RNAV. Likely developments in the Absolute -12.7 -23.1 -25.4 coming months do not indicate a APH still a thorny issue Major shareholders % held swift and clear resolution to APH. The progress of the financial Mac Ngan Boon 17.7 Maintain Trading Sell. restructuring of the Asia Petroleum Lembaga Tabung Haji 9.9 Hub (APH) has been a Order book replenishment in disappointment with the latest 2H12 development pointing to CIMB The group remains optimistic about withdrawing its support of the potential awards in 2H12. It has been scheme. We continue to believe actively tendering for jobs within the progress from here on will be stunted. construction, oil and gas and marine/ This raises the possibility that port space. Its total outstanding order Muhibbah will have to make bad debt book stood at RM3bn, of which provisions in FY12 amounting to a RM2.2bn comes from infrastructure, maximum of RM400m. Muhibbah is RM702m from its cranes division one the main contractors for APH. Favelle Favco (FFB MK, Not rated) This figure is the value of jobs done and RM95m from shipyards. but not paid for by APH. Prospects for job wins are more promising for infrastructure and Dampened sentiment cranes (locally and overseas) but Sell into strength. Unfavourable APH there is likely to be a lull period for developments in 2H12 are likely to the shipyard division for the rest of weigh down sentiment on the stock. the year due to depleting orders. In Switch to Mudajaya. the short term, the group is tendering

Price Close Relative to FBMKLCI (RHS) 1.6 114 Financial Summary 1.5 108 1.4 103 Dec-10A Dec-11A Dec-12F Dec-13F Dec-14F 1.3 97 Revenue (RMm) 1,769 1,956 2,517 2,796 3,131 1.2 92 1.1 86 Operating EBITDA (RMm) 64.8 147.1 156.2 175.0 199.8 1.0 80 0.9 75 Net Profit (RMm) 32.94 61.38 65.19 74.06 83.47 0.840 69 Core EPS (RM) 0.08 0.15 0.16 0.18 0.21 30

Vol m 20 Core EPS Growth 120% 86% 6% 14% 13% 10 FD Core P/E (x) 12.58 6.75 6.36 5.59 4.96 Jul-11 Oct-11 Jan-12 Apr-12 DPS (RM) 0.035 0.050 0.050 0.050 0.050 Source: Bloomberg Dividend Yield 3.42% 4.81% 4.86% 4.86% 4.86% EV/EBITDA (x) 13.31 6.46 6.78 6.80 6.76

52-week share price range P/FCFE (x) 4.15 2.48 2.69 2.42 1.72 1.03 Net Gearing 46.0% 54.3% 63.5% 73.1% 83.2% 0.92 1.50 P/BV (x) 0.69 0.68 0.67 0.65 0.61 Recurring ROE 6.3% 10.2% 10.7% 11.8% 12.6% 0.94 Current Target % Change In Core EPS Estimates 0.000% 0.000% 0.000%

CIMB/consensus EPS (x) 0.88 0.86

SOURCE: CIMB, COMPANY REPORTS

IMPORTANT DISCLOSURES. INCLUDING ANY REQUIRED RESEARCH CERTIFICATIONS, ARE PROVIDED AT THE END OF THIS REPORT. Designed by Eight, Powered by EFA

Muhibbah Engineering July 4, 2012

Profit & Loss Balance Sheet

(RMm) Dec-11A Dec-12F Dec-13F Dec-14F (RMm) Dec-11A Dec-12F Dec-13F Dec-14F Revenue 1,956 2,517 2,796 3,131 Fixed Assets 484.7 503.4 519.0 530.9 Other Operating Income Intangible Assets 21.60 21.60 21.60 21.60 Cost Of Sales - - - - Other Long Term Assets 183.1 176.9 174.1 171.9 Gross Profit 1,956 2,517 2,796 3,131 Total Non-current Assets 689.4 701.9 714.7 724.4 Total Operating Costs (1,868) (2,407) (2,670) (2,984) Total Cash And Equivalents 333.6 433.7 563.8 732.9 Operating Profit 87.6 109.7 125.4 147.0 Inventories 340.3 441.5 572.9 743.3 Operating EBITDA 147.1 156.2 175.0 199.8 Accounts Receivable 1,270 1,475 576 854 Depreciation And Amortisation (59.43) (46.44) (49.60) (52.80) Other Current Assets 576 687 1,961 2,122 Operating EBIT 87.6 109.7 125.4 147.0 Total Current Assets 2,520 3,038 3,673 4,452 Net Interest Income (18.56) (25.35) (31.55) (39.49) Trade Creditors 842 993 1,166 1,366 Exchange Gains - - - - Short-term Debt 420.9 496.4 583.2 683.1 JV/Associates Profit 28.00 32.34 36.34 40.83 Other Current Liabilities 842 993 1,166 1,366 Other Income 17.85 0.00 0.00 0.00 Total Current Liabilities 2,104 2,482 2,916 3,415 Profit Before Tax (pre-EI) 114.9 116.7 130.2 148.4 Total Long-term Debt 314.9 427.0 579.0 785.1 Exceptional Items - - - - Other Liabilities 49.84 60.38 74.45 93.21 Pre-tax Profit 114.9 116.7 130.2 148.4 Deferred Tax - - - - Taxation (32.37) (30.35) (33.84) (41.55) Total Non-current Liabilities 364.7 487.3 653.4 878.3 Exceptional Income - post-tax Shareholders' Equity 606.7 615.9 641.3 682.9 Profit After Tax 82.6 86.4 96.3 106.8 Minority Interests 133.5 154.7 177.0 200.4 Minority Interests (21.18) (21.20) (22.26) (23.37) Preferred Shareholders Funds Other Adjustments - post-tax Total Equity 740.2 770.7 818.3 883.3 Net Profit 61.38 65.19 74.06 83.47

Recurring Net Profit 61.38 65.19 74.06 83.47

Cash Flow Key Ratios

(RMm) Dec-11A Dec-12F Dec-13F Dec-14F Dec-11A Dec-12F Dec-13F Dec-14F Pre-tax Profit 114.9 116.7 130.2 148.4 Revenue Growth 10.6% 28.7% 11.1% 12.0% Depreciation And Non-cash Adj. 49.99 39.45 44.81 51.45 Operating EBITDA Growth 127% 6% 12% 14% Change In Working Capital (1.87) 2.74 16.95 46.72 Operating EBITDA Margin 7.52% 6.21% 6.26% 6.38% Tax Paid (7.36) (8.00) (10.55) (8.91) Net Cash Per Share (RM) (1.00) (1.22) (1.49) (1.83) Other Operating Cashflow 0.00 0.00 1.00 1.00 BVPS (RM) 1.51 1.53 1.59 1.70 Cashflow From Operations 155.7 150.9 182.4 238.7 Gross Interest Cover 2.89 3.71 3.37 3.14 Capex (69.00) (68.00) (67.00) (67.00) Tax Rate 28.2% 26.0% 26.0% 28.0% Disposals Of FAs/subsidiaries (15.36) (52.00) (99.26) (99.26) Net Dividend Payout Ratio 32.5% 30.9% 27.2% 24.1% Acq. Of Subsidiaries/investments - - - - Accounts Receivables Days 220.4 199.6 133.9 83.3 Other Investing Cashflow 50.3 73.5 107.5 107.5 Inventory Days N/A N/A N/A N/A Cash Flow From Investing (34.07) (46.46) (58.74) (58.74) Accounts Payables Days N/A N/A N/A N/A Debt Raised/(repaid) 45.28 49.72 47.88 60.47 ROIC (%) 5.51% 6.46% 6.60% 6.61% Equity Raised/(Repaid) 4.05 4.40 4.52 4.42 ROCE (%) 7.14% 7.19% 7.13% 7.13%

Dividends Paid (14.08) (18.10) (20.12) (22.13) Net Cash Interest - - - - Other Financing Cashflow (166.6) (185.6) (184.3) (403.2) Cash Flow From Financing (131.4) (149.6) (152.0) (360.5) Total Cash Generated (9.8) (45.2) (28.4) (180.6) Change In Net Cash (55.0) (94.9) (76.3) (241.0) Free Cashflow To Equity 166.9 154.2 171.5 240.4

Key Drivers

(RMm) Dec-11A Dec-12F Dec-13F Dec-14F Outstanding Orderbook 3,346.0 3,746.0 4,146.0 4,546.0 Orderbook Depletion N/A N/A N/A N/A Orderbook Replenishment 1,000.0 1,000.0 1,000.0 1,000.0 ASP (% chg, main prod./serv.) N/A N/A N/A N/A Unit sales grth (%, main prod./serv.) N/A N/A N/A N/A Util. rate (%, main prod./serv.) N/A N/A N/A N/A ASP (% chg, 2ndary prod./serv.) N/A N/A N/A N/A Unit sales grth (%,2ndary prod/serv) N/A N/A N/A N/A Util. rate (%, 2ndary prod/serv) N/A N/A N/A N/A

SOURCE: CIMB, COMPANY REPORTS

Construction MALAYSIA July 4, 2012

Mudajaya Group MDJ MK / MJYA.KL Current RM2.73 SHORT TERM (3 MTH) LONG TERM Market Cap Avg Daily Turnover Free Float Target RM3.78 US$476.0m US$0.81m 47.9% Previous Target RM3.78 RM1,500m RM2.53m 549.4 m shares Up/downside 38.5%

Convicti

CIMB Analyst It’s raining jobs! Our analysis of job flows for 2H12 prompts us to turn bullish on

Sharizan Rosely Mudajaya’s prospects of securing jobs in the coming months. Margin T (60) 3 20849864 E [email protected] dilution from the recently-secured MRT package is not a concern as

cash flows from the Indian IPP will commence from FY13 onwards.

Our target price is still based on 40% RM400m-500m per package as well RNAV discount. 2H12 should dish up as for other highways under 10MP. A more awards for the group beyond bonus in 2H12 would be securing the MRT and WCE. This anchors our civil works for the new coal-fired and Share price info Trading Buy call, which is not an combined-cycle power plants locally. Share price perf. (%) 1M 3M 12M Outperform due to political overhang Note that Mudajaya has the necessary Relative -4 -6 -20.2 on the sector. Job wins are key track record and expertise for power Absolute -1.8 -5.9 -18.6 catalysts. Mudajaya is now one of our plant construction as it was a big Major shareholders % held top sector picks. power plant contractor for Tenaga in Dataran Sentral (M) Sdn Bhd 24.3 the past. The group is also exploring Mulpha Infrastructure 22.0 Strongest job visibility in power plant EPC opportunities in Holdings Sdn Bhd Brahmal Vasudevan 5.8 2H12 Vietnam and Indonesia. From our analysis of job flows in 2H12, we conclude that Mudajaya Superior construction offers one of the biggest exposures to margins (i) the progress of major jobs in the Despite construction margin dilution coming months, and (ii) strong from the MRT contract, its EBITDA election-driven newsflow for the margin of 17-18% is still superior to construction sector. The group should other contractors’. We expect the also be a beneficiary of the progress of pretax margin to gradually rise on the MRT 2 & 3. Its recent RM816m MRT back of cash flow from its 26%-owned viaduct package win raises the odds of Indian IPP from FY13 onwards. the group prequalifying for other MRT packages. Although Mudajaya is Cheapest in our coverage not positioned to benefit from the Mudajaya also stands out as the foundation works of KLIFD and cheapest stock in our coverage. It is Rapid, it is in the running to clinch trading at CY12-13 P/Es of 4-5x. It sizeable subcontract packages for the offers the biggest upside of 39%. West Coast Expressway (WCE) worth

Price Close Relative to FBMKLCI (RHS) 3.6 104 Financial Summary 100 96 3.1 Dec-10A Dec-11A Dec-12F Dec-13F Dec-14F 92 88 Revenue (RMm) 869 1,347 1,700 1,984 2,237 2.6 84 80 76 Operating EBITDA (RMm) 284.1 298.7 376.2 398.6 390.2 2.1 72 68 Net Profit (RMm) 215.6 231.0 303.0 331.3 381.1 1.610 64 8 Core EPS (RM) 0.39 0.42 0.55 0.60 0.70 Vol m Vol 6 Core EPS Growth 25.8% 7.2% 31.2% 9.3% 15.0% 4 2 FD Core P/E (x) 4.97 5.67 4.94 4.52 3.93 Jul-11 Oct-11 Jan-12 Apr-12 DPS (RM) 0.06 0.11 0.11 0.12 0.13 Source: Bloomberg Dividend Yield 2.04% 3.96% 4.21% 4.46% 4.70% EV/EBITDA (x) 2.55 3.26 2.16 1.34 0.63

52-week share price range P/FCFE (x) NA NA 54.11 10.15 14.72 2.73 Net Gearing (33.5%) (15.4%) (12.6%) (18.0%) (18.7%) 1.80 3.42 P/BV (x) 1.55 1.58 1.22 0.97 0.79 Recurring ROE 39.3% 27.7% 27.8% 23.9% 22.1% 3.78 Current Target % Change In Core EPS Estimates 0.000% 0.000% 0.000% CIMB/consensus EPS (x) 1.20 1.08 1.10

SOURCE: CIMB, COMPANY REPORTS

IMPORTANT DISCLOSURES. INCLUDING ANY REQUIRED RESEARCH CERTIFICATIONS, ARE PROVIDED AT THE END OF THIS REPORT. Designed by Eight, Powered by EFA

Mudajaya Group July 4, 2012

Profit & Loss Balance Sheet

(RMm) Dec-11A Dec-12F Dec-13F Dec-14F (RMm) Dec-11A Dec-12F Dec-13F Dec-14F Revenue 1,347 1,700 1,984 2,237 Fixed Assets 76.7 107.3 137.7 166.9 Other Operating Income Intangible Assets - - - - Cost Of Sales - - - - Other Long Term Assets 430.8 587.6 746.0 961.2 Gross Profit 1,347 1,700 1,984 2,237 Total Non-current Assets 507 695 884 1,128 Total Operating Costs (1,051) (1,327) (1,591) (1,854) Total Cash And Equivalents 154.8 163.6 291.0 371.6 Operating Profit 295.9 372.3 392.8 383.2 Inventories 12.81 25.05 29.23 32.97 Operating EBITDA 298.7 376.2 398.6 390.2 Accounts Receivable 683 1,335 1,558 1,757 Depreciation And Amortisation (2.79) (3.90) (5.74) (6.96) Other Current Assets 53.79 53.79 53.79 53.79 Operating EBIT 295.9 372.3 392.8 383.2 Total Current Assets 904 1,578 1,932 2,216 Net Interest Income 11.58 2.30 3.32 4.88 Trade Creditors 387 875 1,048 1,221 Exchange Gains (10.37) 0.00 0.00 0.00 Short-term Debt - - - - JV/Associates Profit (3.2) (0.4) 32.6 149.3 Other Current Liabilities 15.3 92.5 141.7 126.7 Other Income - - - - Total Current Liabilities 402 968 1,190 1,348 Profit Before Tax (pre-EI) 293.9 374.2 428.8 537.3 Total Long-term Debt - - - - Exceptional Items - - - - Other Liabilities - - - - Pre-tax Profit 293.9 374.2 428.8 537.3 Deferred Tax 0.260.260.260.26 Taxation (17.02) (20.58) (28.60) (89.09) Total Non-current Liabilities 0.26 0.26 0.26 0.26 Exceptional Income - post-tax Shareholders' Equity 946 1,230 1,542 1,902 Profit After Tax 276.9 353.7 400.2 448.3 Minority Interests 61.55 67.71 74.48 81.92 Minority Interests (45.90) (50.65) (68.84) (67.12) Preferred Shareholders Funds - - - - Other Adjustments - post-tax Total Equity 1,008 1,298 1,616 1,984 Net Profit 231.0 303.0 331.3 381.1

Recurring Net Profit 231.0 303.0 331.3 381.1

Cash Flow Key Ratios

(RMm) Dec-11A Dec-12F Dec-13F Dec-14F Dec-11A Dec-12F Dec-13F Dec-14F Pre-tax Profit 293.9 374.2 428.8 537.3 Revenue Growth 54.9% 26.2% 16.7% 12.8% Depreciation And Non-cash Adj. (12.9) 13.7 (17.4) (133.4) Operating EBITDA Growth 5.1% 26.0% 5.9% (2.1%) Change In Working Capital (157.9) (151.9) (45.9) (22.2) Operating EBITDA Margin 22.2% 22.1% 20.1% 17.4% Tax Paid (24.16) (20.58) (28.60) (89.09) Net Cash Per Share (RM) 0.28 0.30 0.53 0.68 Other Operating Cashflow 9.70 (5.47) (5.47) (5.47) BVPS (RM) 1.73 2.24 2.81 3.47 Cashflow From Operations 108.6 210.0 331.3 287.1 Gross Interest Cover N/A N/A N/A N/A Capex (36.13) (36.13) (36.13) (36.13) Tax Rate 5.8% 5.5% 6.7% 16.6% Disposals Of FAs/subsidiaries 7.08 7.08 7.08 7.08 Net Dividend Payout Ratio 19.0% 15.4% 14.9% 13.7% Acq. Of Subsidiaries/investments - - - - Accounts Receivables Days 144.4 217.3 266.2 270.5 Other Investing Cashflow (148.7) (153.3) (154.8) (156.4) Inventory Days N/A N/A N/A N/A Cash Flow From Investing (177.7) (182.3) (183.9) (185.5) Accounts Payables Days N/A N/A N/A N/A Debt Raised/(repaid) - - - - ROIC (%) 98% 67% 54% 43% Equity Raised/(Repaid) (6.3) 0.0 0.0 0.0 ROCE (%) 34.8% 32.5% 27.2% 21.6%

Dividends Paid (38.14) (18.89) (20.01) (21.12) Net Cash Interest - - - - Other Financing Cashflow 13.80 0.00 0.00 0.00 Cash Flow From Financing (30.7) (18.9) (20.0) (21.1) Total Cash Generated (99.8) 8.8 127.4 80.6 Change In Net Cash (99.8) 8.8 127.4 80.6 Free Cashflow To Equity (69.1) 27.7 147.4 101.7

Key Drivers

(RMm) Dec-11A Dec-12F Dec-13F Dec-14F Outstanding Orderbook 3,900.0 3,400.0 3,100.0 2,600.0 Orderbook Depletion 1,500.0 1,500.0 1,500.0 1,500.0 Orderbook Replenishment 1,000.0 1,200.0 1,000.0 1,000.0 ASP (% chg, main prod./serv.) N/A N/A N/A N/A Unit sales grth (%, main prod./serv.) N/A N/A N/A N/A Util. rate (%, main prod./serv.) N/A N/A N/A N/A ASP (% chg, 2ndary prod./serv.) N/A N/A N/A N/A Unit sales grth (%,2ndary prod/serv) N/A N/A N/A N/A Util. rate (%, 2ndary prod/serv) N/A N/A N/A N/A

SOURCE: CIMB, COMPANY REPORTS

Construction MALAYSIA July 4, 2012

Sunway Bhd SWB MK / SWAY.KL Current RM2.30 SHORT TERM (3 MTH) LONG TERM Market Cap Avg Daily Turnover Free Float Target RM2.70 US$943.3m US$0.55m 40.1% Previous Target RM2.70 RM2,973m RM1.73m 1,293 m shares Up/downside 17.4%

Convicti

CIMB Analyst It’s raining jobs! Sunway’s 2H12 outlook for job flows is still promising but the value of

Sharizan Rosely job wins is not likely to be as large as the recently-secured MRT T (60) 3 20849864 E [email protected] package. We still expect the group to clinch medium-sized building jobs

locally.

Our target price is still based on 30% Iskandar. Although project values are RNAV discount. It targets to bag not likely to be as huge as the recent c.RM500m worth of new jobs by MRT win, it should ensure that the end-12. Election-driven newsflow on group meets its targeted RM500m Share price info awards anchors our Trading Buy call, worth of new jobs by end-12. Share price perf. (%) 1M 3M 12M which is not an Outperform due to Relative -1.3 -12 political overhang on the sector. Order book is good for Absolute 0.9 -11.9 Potential catalysts are job wins. another 2-3 years Major shareholders % held Its outstanding construction order Tan Sri Jeffrey Cheah 47.7 Bagged the biggest MRT book stood at RM4bn, of which Government of Singapore 12.2 Investment Corp package RM500m-600m comes from inhouse Sunway recently surprised the market jobs for its property division. The by winning MRT package v4 worth group is not in any rush to secure new RM1.2bn, which is the largest of the jobs as at a run rate of c.RM1bn-1.5bn eight viaduct packages for the MRT p.a., its current order book is good for SBK line. There is potential upside to another 2-3 years. MRT wins in 2H12 as the group will be tendering for station package ST4. Cheap but not that attractive This package comprises three elevated stations worth RM40m-50m On a P/E scale, Sunway is trading each, suggesting a total value of up to cheaply alongside Mudajaya and RM150m. Our analysis on job flows Muhibbah Engineering. But a for 2H12 shows that apart from MRT dampener in 2H12 could be the jobs, Sunway is not positioned to tapering off of big job wins. Also, tender for other rail and highway jobs. moderating local property sales However, we believe there is still the suggest downside risk to property opportunity to bag building and earnings, which constitute over 60% civil/foundation works, such as for of total net profit. the KLIFD, and more building jobs in

Price Close Relative to FBMKLCI (RHS) 2.9 109 Financial Summary 2.7 104 Dec-10A Dec-11A Dec-12F Dec-13F Dec-14F 2.5 99 2.3 94 Revenue (RMm) 3,134 3,739 3,825 4,106 4,479 2.1 89 Operating EBITDA (RMm) 592.0 289.5 520.4 580.7 626.0 1.9 84 1.7 79 Net Profit (RMm) 688.1 369.7 355.7 399.1 444.2 1.515 74 Core EPS (RM) 0.53 0.29 0.28 0.31 0.34 Vol m Vol 10 Core EPS Growth 0.0% (46.3%) (3.8%) 12.2% 11.3% 5 FD Core P/E (x) 4.31 8.28 8.89 7.92 7.06 Aug-11 Nov-11 Jan-12 Apr-12 DPS (RM) 0.10 0.00 0.09 0.10 0.10 Source: Bloomberg Dividend Yield 4.52% 0.00% 3.91% 4.24% 4.24% EV/EBITDA (x) 6.06 13.92 7.17 6.15 5.09

52-week share price range P/FCFE (x) 24.81 7.07 NA NA NA 2.30 Net Gearing 54.6% 65.8% 48.1% 39.5% 28.0% 1.67 2.75 P/BV (x) 1.14 1.06 0.86 0.75 0.66 Recurring ROE 13.7% 11.4% 10.8% 10.6% 2.70 Current Target % Change In Core EPS Estimates 0.000% 0.000% 0.000%

CIMB/consensus EPS (x) 1.04 1.05 1.10

SOURCE: CIMB, COMPANY REPORTS

IMPORTANT DISCLOSURES. INCLUDING ANY REQUIRED RESEARCH CERTIFICATIONS, ARE PROVIDED AT THE END OF THIS REPORT. Designed by Eight, Powered by EFA

Sunway Bhd July 4, 2012

Profit & Loss Balance Sheet

(RMm) Dec-11A Dec-12F Dec-13F Dec-14F (RMm) Dec-11A Dec-12F Dec-13F Dec-14F Revenue 3,739 3,825 4,106 4,479 Fixed Assets 969.8 970.0 969.8 969.2 Other Operating Income Intangible Assets 330.1 330.1 330.1 330.1 Cost Of Sales - - - - Other Long Term Assets 2,967 3,324 3,679 3,840 Gross Profit 3,739 3,825 4,106 4,479 Total Non-current Assets 4,267 4,624 4,979 5,140 Total Operating Costs (3,540) (3,325) (3,546) (3,873) Total Cash And Equivalents 1,256 1,000 922 940 Operating Profit 198.7 500.6 560.6 605.4 Inventories 516.3 552.1 592.6 646.4 Operating EBITDA 289.5 520.4 580.7 626.0 Accounts Receivable 1,957 2,092 2,246 2,450 Depreciation And Amortisation (90.80) (19.78) (20.18) (20.58) Other Current Assets 1,100 1,163 1,232 1,315 Operating EBIT 198.7 500.6 560.6 605.4 Total Current Assets 4,829 4,807 4,993 5,351 Net Interest Income (55.5) (108.6) (97.7) (86.8) Trade Creditors 2,362 2,526 2,711 2,957 Exchange Gains (7.79) 0.00 0.00 0.00 Short-term Debt 454.9 409.4 368.5 331.6 JV/Associates Profit 199.2 121.2 116.8 120.1 Other Current Liabilities 67.61 67.61 67.61 67.61 Other Income 172.4 0.0 0.0 0.0 Total Current Liabilities 2,885 3,003 3,147 3,357 Profit Before Tax (pre-EI) 507.0 513.2 579.7 638.8 Total Long-term Debt 2,916 2,460 2,305 2,019 Exceptional Items - - - - Other Liabilities - - - - Pre-tax Profit 507.0 513.2 579.7 638.8 Deferred Tax 81.13 81.13 81.13 81.13 Taxation (98.8) (118.4) (134.3) (148.4) Total Non-current Liabilities 2,997 2,541 2,386 2,100 Exceptional Income - post-tax Shareholders' Equity 2,795 3,429 3,934 4,483 Profit After Tax 408.2 394.8 445.4 490.4 Minority Interests 418.8 457.9 504.2 550.4 Minority Interests (38.5) (39.1) (46.3) (46.2) Preferred Shareholders Funds Other Adjustments - post-tax Total Equity 3,213 3,887 4,438 5,034 Net Profit 369.7 355.7 399.1 444.2

Recurring Net Profit 369.7 355.7 399.1 444.2

Cash Flow Key Ratios

(RMm) Dec-11A Dec-12F Dec-13F Dec-14F Dec-11A Dec-12F Dec-13F Dec-14F Pre-tax Profit 507.0 513.2 579.7 638.8 Revenue Growth 19.3% 2.3% 7.3% 9.1% Depreciation And Non-cash Adj. 36.5 7.2 1.1 (12.8) Operating EBITDA Growth (51.1%) 79.7% 11.6% 7.8% Change In Working Capital (431.8) (71.1) (77.8) (93.6) Operating EBITDA Margin 7.7% 13.6% 14.1% 14.0% Tax Paid (99.6) (118.4) (134.3) (148.4) Net Cash Per Share (RM) (1.64) (1.45) (1.36) (1.09) Other Operating Cashflow (95.1) (121.2) (116.8) (120.1) BVPS (RM) 2.17 2.66 3.05 3.48 Cashflow From Operations (83.0) 209.7 251.8 263.9 Gross Interest Cover 2.32 3.51 4.43 5.28 Capex (20.00) (20.00) (20.00) (20.00) Tax Rate 19.5% 23.1% 23.2% 23.2% Disposals Of FAs/subsidiaries (281.2) (357.0) (355.2) (160.9) Net Dividend Payout Ratio 0.0% 32.6% 31.5% 28.3% Acq. Of Subsidiaries/investments - - - - Accounts Receivables Days 151.3 193.7 192.8 191.3 Other Investing Cashflow - - - - Inventory Days N/A N/A N/A N/A Cash Flow From Investing (301.2) (377.0) (375.2) (180.9) Accounts Payables Days N/A N/A N/A N/A Debt Raised/(repaid) 859.2 (501.5) (196.0) (323.1) ROIC (%) 5.3% 11.6% 13.3% 14.0% Equity Raised/(Repaid) - - - - ROCE (%) 3.79% 8.01% 8.50% 8.74%

Dividends Paid 96.6 116.0 125.6 125.6 Net Cash Interest (55.5) (108.6) (97.7) (86.8) Other Financing Cashflow 7.5 414.0 227.6 230.9 Cash Flow From Financing 907.8 (80.2) 59.5 (53.3) Total Cash Generated 523.6 (247.5) (63.8) 29.7 Change In Net Cash (335.6) 254.0 132.2 352.8 Free Cashflow To Equity 419.4 (777.5) (417.1) (326.9)

Key Drivers

(RMm) Dec-11A Dec-12F Dec-13F Dec-14F Outstanding Orderbook 2,900.0 3,300.0 3,800.0 4,300.0 Orderbook Depletion N/A N/A N/A N/A Orderbook Replenishment 1,000.0 1,500.0 1,500.0 1,500.0 ASP (% chg, main prod./serv.) N/A N/A N/A N/A Unit sales grth (%, main prod./serv.) N/A N/A N/A N/A Util. rate (%, main prod./serv.) N/A N/A N/A N/A ASP (% chg, 2ndary prod./serv.) N/A N/A N/A N/A Unit sales grth (%,2ndary prod/serv) N/A N/A N/A N/A Util. rate (%, 2ndary prod/serv) N/A N/A N/A N/A

SOURCE: CIMB, COMPANY REPORTS

Construction MALAYSIA July 4, 2012

WCT Bhd WCT MK / WCTE.KL Current RM2.40 SHORT TERM (3 MTH) LONG TERM Market Cap Avg Daily Turnover Free Float Target RM3.05 US$625.1m US$0.48m 56.8% Previous Target RM3.05 RM1,970m RM1.51m 820.7 m shares Up/downside 27.1%

Convicti

CIMB Analyst It’s raining jobs! Our analysis of job flows in 2H12 prompts us to turn bullish on WCT’s

Sharizan Rosely prospects. Wins could top RM1bn, driven by local jobs with possibly a T (60) 3 20849864 E [email protected] sizeable overseas job as a bonus. Positive progress on Meydan

arbitration should reduce overhang on its share price.

Our target price is still based on 30% the viaduct packages. Big contracts RNAV discount. Election-driven could come from a hospital project newsflow on job wins in 2H12 should worth RM800m-900m, a renew interest in the stock, which is RM400m-500m road upgrade job Share price info the laggard in our universe. Maintain and at least RM400m in subcontract Share price perf. (%) 1M 3M 12M Trading Buy; we are not Outperform works from the West Coast Relative -1.4 -3.7 -24.2 due to sector political risks. WCT is Expressway (WCE). A possible bonus Absolute 0.8 -3.6 -22.6 now one of our top picks. Job wins in 2H12 is a sizeable overseas Major shareholders % held are key catalysts. highway job worth RM1bn-2bn. With WCT Capital 20.0 local job wins, we expect outstanding EPF 16.0 Job wins to play catch-up in order book of RM3bn to increase by PNB & Amanah Saham 7.2 33% to RM4bn by end-12. Funds 2H12 Our analysis of job flows in 2H12 points to WCT emerging as one of the Meydan is not a huge issue biggest beneficiaries of positive We still believe that the Meydan newsflow. With just over RM600m arbitration process is not likely to worth of job awards YTD, the group is escalate to the worst-case scenario of likely to clinch at least another further provisions on top of the RM1bn worth of projects in the RM80m made in 4QFY08. coming months. We remain Indications were that management encouraged that management has has strong grounds to contest the turned more positive about its order RM2.5bn claims made against it. book replenishment prospects, which should also alleviate investor Attractive valuations concerns. Local jobs will be the key WCT is the laggard stock in our driver for project wins. Although universe, trading at 20-23% discounts WCT has not secured any MRT to Gamuda’s and IJM Corp’s P/Es of viaduct packages YTD, the group is 13-14x. Job flow potential in 2H12 is gunning for at least one MRT station the most attractive, similar to package, which has lower value than Mudajaya.

Price Close Relative to FBMKLCI (RHS) 3.3 105 Financial Summary 3.1 101 2.9 96 Dec-10A Dec-11A Dec-12F Dec-13F Dec-14F 2.7 92 Revenue (RMm) 1,709 1,539 2,219 2,453 2,657 2.5 88 2.3 83 Operating EBITDA (RMm) 255.0 200.8 321.3 372.5 402.7 2.1 79 1.9 74 Net Profit (RMm) 150.3 162.4 176.7 212.2 229.2 1.78 70 Core EPS (RM) 0.19 0.20 0.22 0.27 0.29 6 Vol m Vol 4 Core EPS Growth 1.5% 8.1% 8.8% 20.1% 8.0% 2 FD Core P/E (x) 13.57 12.60 11.57 9.63 8.90 Jul-11 Oct-11 Jan-12 Apr-12 DPS (RM) 0.10 0.10 0.10 0.10 0.10 Source: Bloomberg Dividend Yield 4.12% 4.07% 4.07% 4.26% 4.26% EV/EBITDA (x) 10.55 13.44 8.40 7.26 6.75

52-week share price range P/FCFE (x) 3.10 34.35 12.12 11.83 10.57 2.40 Net Gearing 44.8% 40.0% 34.9% 30.1% 25.9% 1.87 3.15 P/BV (x) 1.52 1.39 1.26 1.13 1.01 Recurring ROE 12.0% 12.4% 12.2% 13.3% 12.8% 3.05 Current Target % Change In Core EPS Estimates 0.000% 0.000% 0.000%

CIMB/consensus EPS (x) 1.04 1.08 1.06

SOURCE: CIMB, COMPANY REPORTS

IMPORTANT DISCLOSURES. INCLUDING ANY REQUIRED RESEARCH CERTIFICATIONS, ARE PROVIDED AT THE END OF THIS REPORT. Designed by Eight, Powered by EFA

WCT Bhd July 4, 2012

Profit & Loss Balance Sheet

(RMm) Dec-11A Dec-12F Dec-13F Dec-14F (RMm) Dec-11A Dec-12F Dec-13F Dec-14F Revenue 1,539 2,219 2,453 2,657 Fixed Assets 362.3 433.0 521.4 612.5 Other Operating Income Intangible Assets - - - - Cost Of Sales - - - - Other Long Term Assets 1,668 1,681 1,732 1,788 Gross Profit 1,539 2,219 2,453 2,657 Total Non-current Assets 2,030 2,114 2,254 2,400 Total Operating Costs (1,351) (1,913) (2,097) (2,274) Total Cash And Equivalents 1,221 1,282 1,346 1,413 Operating Profit 187.6 306.1 355.3 383.3 Inventories 78.11 82.02 86.12 90.43 Operating EBITDA 200.8 321.3 372.5 402.7 Accounts Receivable 999 1,110 1,227 1,329 Depreciation And Amortisation (13.18) (15.16) (17.21) (19.32) Other Current Assets 574.1 634.5 699.4 762.4 Operating EBIT 187.6 306.1 355.3 383.3 Total Current Assets 2,872 3,108 3,358 3,595 Net Interest Income 2.79 (44.95) (45.25) (45.62) Trade Creditors 938 1,042 1,152 1,248 Exchange Gains - - - - Short-term Debt 708.5 684.5 661.7 640.0 JV/Associates Profit 16.75 8.62 9.05 9.50 Other Current Liabilities 53.37 59.36 70.20 76.39 Other Income - - - - Total Current Liabilities 1,700 1,786 1,884 1,965 Profit Before Tax (pre-EI) 207.1 269.8 319.1 347.2 Total Long-term Debt 1,184 1,243 1,305 1,370 Exceptional Items - - - - Other Liabilities 331.7 331.7 331.7 331.7 Pre-tax Profit 207.1 269.8 319.1 347.2 Deferred Tax 8.03 9.03 10.03 11.03 Taxation (44.20) (59.36) (70.20) (76.39) Total Non-current Liabilities 1,524 1,584 1,647 1,713 Exceptional Income - post-tax Shareholders' Equity 1,375 1,513 1,689 1,887 Profit After Tax 162.9 210.5 248.9 270.8 Minority Interests 303.7 337.5 374.3 415.9 Minority Interests (0.51) (33.78) (36.72) (41.62) Preferred Shareholders Funds Other Adjustments - post-tax Total Equity 1,678 1,850 2,064 2,303 Net Profit 162.4 176.7 212.2 229.2

Recurring Net Profit 162.4 176.7 212.2 229.2

Cash Flow Key Ratios

(RMm) Dec-11A Dec-12F Dec-13F Dec-14F Dec-11A Dec-12F Dec-13F Dec-14F Pre-tax Profit 207.1 269.8 319.1 347.2 Revenue Growth (9.9%) 44.2% 10.5% 8.3% Depreciation And Non-cash Adj. (6.36) 51.50 53.41 55.43 Operating EBITDA Growth (21.3%) 60.0% 15.9% 8.1% Change In Working Capital (81.4) (71.1) (76.1) (73.6) Operating EBITDA Margin 13.0% 14.5% 15.2% 15.2% Tax Paid (18.49) (52.37) (58.36) (69.20) Net Cash Per Share (RM) (0.85) (0.81) (0.78) (0.75) Other Operating Cashflow 23.30 23.30 23.30 23.30 BVPS (RM) 1.73 1.91 2.13 2.38 Cashflow From Operations 124.2 221.1 261.3 283.2 Gross Interest Cover 2.81 5.23 5.97 6.33 Capex (83.3) (85.8) (88.4) (91.1) Tax Rate 21.3% 22.0% 22.0% 22.0% Disposals Of FAs/subsidiaries (16.5) (13.3) (51.2) (55.4) Net Dividend Payout Ratio 47.8% 43.9% 38.3% 35.4% Acq. Of Subsidiaries/investments - - - - Accounts Receivables Days 219.9 173.9 173.9 175.5 Other Investing Cashflow 0.00 0.00 0.00 0.00 Inventory Days N/A N/A N/A N/A Cash Flow From Investing (99.8) (99.1) (139.6) (146.4) Accounts Payables Days N/A N/A N/A N/A Debt Raised/(repaid) 31.1 35.2 39.3 43.6 ROIC (%) 9.2% 13.9% 14.9% 14.8% Equity Raised/(Repaid) 0.00 0.00 0.00 0.00 ROCE (%) 7.38% 8.70% 9.47% 9.55%

Dividends Paid (42.49) (42.49) (42.49) (42.49) Net Cash Interest - - - - Other Financing Cashflow (13.00) (29.75) 14.04 14.04 Cash Flow From Financing (24.4) (37.1) 10.9 15.1 Total Cash Generated (0.0) 85.0 132.6 151.9 Change In Net Cash (31.1) 49.8 93.3 108.3 Free Cashflow To Equity 55.5 157.2 161.1 180.3

Key Drivers

(RMm) Dec-11A Dec-12F Dec-13F Dec-14F Outstanding Orderbook 2,400.0 2,043.0 2,543.0 3,043.0 Orderbook Depletion 500.0 1,000.0 1,000.0 1,000.0 Orderbook Replenishment 143.0 1,500.0 1,500.0 1,500.0 ASP (% chg, main prod./serv.) N/A N/A N/A N/A Unit sales grth (%, main prod./serv.) N/A N/A N/A N/A Util. rate (%, main prod./serv.) N/A N/A N/A N/A ASP (% chg, 2ndary prod./serv.) N/A N/A N/A N/A Unit sales grth (%,2ndary prod/serv) N/A N/A N/A N/A Util. rate (%, 2ndary prod/serv) N/A N/A N/A N/A

SOURCE: CIMB, COMPANY REPORTS

CONSTRUCTION July 4, 2012

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CONSTRUCTION July 4, 2012

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Recommendation Framework #1 *

Stock Sector OUTPERFORM: The stock's total return is expected to exceed a relevant OVERWEIGHT: The industry, as defined by the analyst's coverage universe, is benchmark's total return by 5% or more over the next 12 months. expected to outperform the relevant primary market index over the next 12 months. NEUTRAL: The stock's total return is expected to be within +/-5% of a relevant NEUTRAL: The industry, as defined by the analyst's coverage universe, is expected benchmark's total return. to perform in line with the relevant primary market index over the next 12 months. UNDERPERFORM: The stock's total return is expected to be below a relevant UNDERWEIGHT: The industry, as defined by the analyst's coverage universe, is benchmark's total return by 5% or more over the next 12 months. expected to underperform the relevant primary market index over the next 12 months. TRADING BUY: The stock's total return is expected to exceed a relevant TRADING BUY: The industry, as defined by the analyst's coverage universe, is benchmark's total return by 5% or more over the next 3 months. expected to outperform the relevant primary market index over the next 3 months. TRADING SELL: The stock's total return is expected to be below a relevant TRADING SELL: The industry, as defined by the analyst's coverage universe, is benchmark's total return by 5% or more over the next 3 months. expected to underperform the relevant primary market index over the next 3 months.

* This framework only applies to stocks listed on the Singapore Stock Exchange, Bursa Malaysia, Stock Exchange of Thailand and Jakarta Stock Exchange. Occasionally, it is permitted for the total expected returns to be temporarily outside the prescribed ranges due to extreme market volatility or other justifiable company or industry-specific reasons. CIMB Research Pte Ltd (Co. Reg. No. 198701620M)

CONSTRUCTION July 4, 2012

Recommendation Framework #2 **

Stock Sector OUTPERFORM: Expected positive total returns of 15% or more over the next 12 OVERWEIGHT: The industry, as defined by the analyst's coverage universe, has a months. high number of stocks that are expected to have total returns of +15% or better over the next 12 months. NEUTRAL: Expected total returns of between -15% and +15% over the next 12 NEUTRAL: The industry, as defined by the analyst's coverage universe, has either (i) months. an equal number of stocks that are expected to have total returns of +15% (or better) or -15% (or worse), or (ii) stocks that are predominantly expected to have total returns that will range from +15% to -15%; both over the next 12 months. UNDERPERFORM: Expected negative total returns of 15% or more over the next 12 UNDERWEIGHT: The industry, as defined by the analyst's coverage universe, has a months. high number of stocks that are expected to have total returns of -15% or worse over the next 12 months. TRADING BUY: Expected positive total returns of 15% or more over the next 3 TRADING BUY: The industry, as defined by the analyst's coverage universe, has a months. high number of stocks that are expected to have total returns of +15% or better over the next 3 months. TRADING SELL: Expected negative total returns of 15% or more over the next 3 TRADING SELL: The industry, as defined by the analyst's coverage universe, has a months. high number of stocks that are expected to have total returns of -15% or worse over the next 3 months.

** This framework only applies to stocks listed on the Hong Kong Stock Exchange and China listings on the Singapore Stock Exchange. Occasionally, it is permitted for the total expected returns to be temporarily outside the prescribed ranges due to extreme market volatility or other justifiable company or industry-specific reasons.

Corporate Governance Report of Thai Listed Companies (CGR). CG Rating by the Thai Institute of Directors Association (IOD) in 2011. ADVANC - Excellent, AMATA - Very Good, AOT - Excellent, AP - Very Good, BANPU - Excellent , BAY - Excellent , BBL - Excellent, BCP - Excellent, BEC - Very Good, BECL - Very Good, BGH - not available, BH - Very Good, BIGC - Very Good, BTS - Very Good, CCET - Good, CK - Very Good, CPALL - Very Good, CPF - Very Good, CPN - Excellent, DELTA - Very Good, DTAC - Very Good, GLOBAL - not available, GLOW - Very Good, HANA - Very Good, HEMRAJ - Excellent, HMPRO - Very Good, ITD - Good, IVL - Very Good, KBANK - Excellent, KTB - Excellent, LH - Very Good, LPN - Excellent, MAJOR - Very Good, MCOT - Excellent, MINT - Very Good, PS - Excellent, PSL - Excellent, PTT - Excellent, PTTGC - not available, PTTEP - Excellent, QH - Excellent, RATCH - Excellent, ROBINS - Excellent, SCB - Excellent, SCC - Excellent, SCCC - Very Good, SIRI - Very Good, SPALI - Very Good, STA - Very Good, STEC - Very Good, TCAP - Very Good, THAI - Very Good, TISCO - Excellent, TMB - Excellent, TOP - Excellent, TRUE - Very Good, TUF - Very Good:

CONSTRUCTION July 4, 2012

Asia-Pacific Locations:

CIMB Investment Bank Bhd CIMB Securities (S) Pte Ltd PT CIMB Securities Indonesia (18417-M) (198701621D) (01.353.099.3-054.000) (A Participating Organisation of Bursa Malaysia 50 Raffles Place The Indonesia Stock Exchange Building Securities Bhd) #19-00 Tower II, 20th Floor 10th Floor, Bangunan CIMB Singapore Land Tower (S048623) Jl. Jend. Sudirman, Kav. 52-53 Jalan Semantan Singapore Jakarta 12190 Damansara Heights T: +65 6225-1228 Indonesia 50490 Kuala Lumpur, Malaysia F: +65 6224-6906 T: +62 (21) 515-1330 T: +60 (3) 2084 8888 F: +62 (21) 515-1335 F: +60 (3) 2084 8899

CIMB Securities (HK) Ltd CIMB Securities (Thailand) Co. Ltd. CIMB in Association with (290697) (0105542081800) SB Equities, Inc. Units 7706-08, Level 77 44 CIMB, Thai Bank Building Security Bank Centre, 18th Flr. International Commerce Centre 24-25th Floor, Soi Langsuan 6776 Ayala Avenue, 1 Austin Road West Kowloon Lumpini, Patumwan, Bangkok 10330 Makati City Hong Kong Thailand Philippines 0719 T: +852 2868-0380 T: +66 (2) 657-9000 F: +852 2537-1928 F: +66 (2) 657-9111

CIMB Private Limited CIMB Shanghai Rep Office Level 33, West Tower Unit 802 AZIA Center World Trade Center 1233 Lujiazui Ring Road Echelon Square Pudong New District Colombo 01 Shanghai 200120 China T: +86 (21) 6194-0212 / +86 (21) 6194-0218

International Locations:

CIMB Securities (UK) Ltd CIMB Securities (USA) Inc. (2719607) (52-1971703) 27 Knightsbridge 540 Madison Avenue London, SW1X 7YB 11th Floor, New York, N.Y. 10022 United Kingdom USA T: +44 (20) 7201-2199 T: +1 (212) 616 8600 F: +44 (20) 7201-2191 F: +1 (212) 616 8639

JV Partners:

John Keells Stock Brokers (Pvt) Ltd. SB Equities, Inc. 130 Glennie Street 18F Security Bank Centre Colombo 00200 6776 Ayala Ave. Sri Lanka Makati 0719 T: +00 (20) 0000-0000 Philippines F: +00 (20) 0000-0000 T: +63 (2) 891-1243 / +63 (2) 891-1258 F: +63 (2) 813-3349

CONSTRUCTION July 4, 2012