PP16832/01/2012 (029059) PP16832/01/2012 (029059)

Malaysia

Sector Update 10 January 2012 17 October 2011

Neutral (from Overweight) Telecommunications

Defensive but valuations a bugbear

Downgrade to Neutral. Economic growth is expected to slow but

telcos will continue to focus on expanding new earnings channels such

Wong Chew Hann as mobile Internet and fixed broadband, as well as maintain cost control [email protected] through collaboration on physical infrastructure. has a stable (603) 2297 8686 competitive telco environment and well-established monetisation strategies for mobile data. However, with valuations at a premium, we

downgrade the sector to Neutral, with Telekom being our top pick. Gregory Yap [email protected] Margin pressure expected as handset subsidies expected to rise. (65) 6432 1450 At the same time that dongle subscriber growth is slowing down, users on smartphone mobile data plans are not growing as fast, most likely due to the fact that smartphone penetration is still low. In order to attract

more users to purchase smartphones and take up data plans, telcos will need to provide more handset subsidies in 2012. This will depress margins until the subsidies are fully expensed off and the higher ARPUs

begin to filter through to telco margins.

Risks in spectrum refarming, more multiplay competition. There is still no clarity on when and how MCMC will be refarming the current

spectra of the existing telcos when they expire in 2012 to 2015. The key

concern is whether spectrum bidding (if an auction is the chosen

method) will push prices too high. We also expect more competition in

the IPTV space, as telcos aim to improve their non-voice revenue and do more bundling deals that can help improve customer stickiness.

Still, dividends should stay the course as capex trends down. For the basket of telco stocks under our coverage, we project core earnings growth of 6.0% in 2012, with average free cashflow yield of 7.1% backing up average dividend yield of 4.5%, with the highest yields coming from Maxis followed by Digi and Telekom. Capex is expected to trend down following the earlier surge in 3G network investment and we expect greater potential for cost savings from network collaboration to flow through in 2012 for , Axiata and Digi.Com.

Valuations not compelling relative to the region. Malaysian wireless telco stocks lead the region in terms of valuations, trading at an average PBR of 9.9x and PER of 18.2x based on FY12 forecasts, compared to 3.2x and 12.1x respectively for the rest of the Asia Pacific ex-Japan region. In balancing slowing economic growth ahead and a potential margin squeeze by handset subsidies against stable forecasts for earnings and cashflow, we are Neutral on the sector. Our sole Buy call is on Telekom Malaysia.

Telco Sector – Peer Valuation Summary Source: Maybank IB Stock Rec Shr px Mkt cap TP PER (x) PER (x) P/B (x) P/B (x) ROAE (%) ROAE (%) Div yld Div yld (RM) (RMm) (RM) CY11E CY12E CY11E CY12E CY11E CY12E FY11E FY12E Axiata Hold 5.00 40,881 5.10 15.6 14.0 2.0 1.8 13.4 13.5 2.1 2.1 DiGi.com Hold 3.70 27,524 3.46 24.9 23.6 23.2 25.3 87.4 102.7 4.6 4.6 Maxis Hold 5.48 40,650 5.40 18.6 19.0 5.2 5.8 26.5 28.8 7.4 7.4 Telekom Buy 4.73 15,597 4.84 23.8 21.2 2.0 2.0 8.5 9.6 4.5 4.5 Simple average 20.7 19.5 8.1 8.7 34.0 38.6 4.6 4.6

Kim Eng is a subsidiary of Malayan Banking Berhad SEE APPENDIX I FOR IMPORTANT DISCLOSURES AND ANALYST CERTIFICATIONS Page 1 of 2

Telecommunications 17 October 2011

Stable earnings growth, decent yields

Malaysia has one of the most defensive telco markets in the region with a stable competitive environment and well-established monetisation strategies for mobile data packages practised by the telcos. Risks exist, true, especially in the areas of new competitors on the block and uncertainties surrounding spectrum allocation, but generally, they are well known and can be anticipated by the telcos. For telco stocks under coverage, we project core earnings growth of 6.0% in 2012, with average free cashflow yield of 7.1% backing up average dividend yield of 4.5%, with the highest yields coming from Maxis followed by DiGi and Telekom. With capex trending down after an earlier surge in 3G network investment, capital management should remain a recurring theme. Although economic growth is expected to slow, we believe telcos will continue to focus on expanding new earnings channels such as mobile Internet and fixed broadband. However, high valuations are a bugbear as the defensiveness of the industry is well-recognised. We recently downgraded DiGi.com following a period of outperformance just prior to its 1-into-10 stock split. Currently, the only buy call we have is in Telekom Malaysia. As such, we have a neutral stance on the telco sector.

2012 earnings likely to remain defensive…

Defend the traditional, grow the new. In 2012, we expect telcos to place emphasis on defending their traditional revenue sources and to keep new sources of revenue such as data revving in third gear. On the voice side, while Digi and have been able to sustain their voice revenue, Maxis has seen voice revenue decline in the last two years. Its latest response of increasing the charging block of its Hot Ticket prepaid plan from 30 seconds to 60 seconds should help to stem the steady erosion, at least for now. To mitigate the erosion in voice, we expect all three mobile telcos to continue pushing for more mobile data usage on their networks, coming out with more innovative pricing plans and improving their brand image as well as make more innovative applications available to increase subscriber stickiness. Increasing shift from 2G to 3G to drive mobile data. Although smartphone penetration in Malaysia is still low, estimated at only 20- 25% of the postpaid base compared to 70-75% for , we believe this figure can only rise as people continue to switch from 2G to 3G driven by new applications such as social networking (eg Facebook), video streaming (eg Youtube) and online chats. This change in user behaviour is revolutionary, in our view, and will be almost unstoppable. In the latest “Global Mobile Data Traffic Forecast” white paper, global networking equipment giant Cisco Systems noted that world mobile data grew by almost 3x in 2010 from 2009, and expects it to increase by another 26x by 2015. Further, it noted that smartphones represented only 13% of total global handsets in use today, but they represented over 78% of total mobile data traffic as the average amount of traffic per smartphone doubled in 2010 to 79MB per month from 35MB per month. Most notably for users in Singapore and Malaysia, Android phone users are approaching iPhone levels of data use.

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Telecommunications 17 October 2011

According to Cisco, "it is a testament to the momentum of the mobile industry that this growth persisted despite the continued economic downturn, the introduction of tiered mobile data packages, and an increase in the amount of mobile traffic offloaded to the fixed network”.

Cisco forecasts 2015 mobile data traffic to grow 26x over 2010

Source: Cisco VNI Mobile, 2011

Western Europe and Asia Pacific will account for over half of global mobile traffic by 2015

Source: Cisco VNI Mobile, 2011

New devices and applications carry higher multiplier effect. Having said that, the growth of mobile broadband subscribers has been slowing rapidly in Malaysia since it peaked in mid-2010. In our view, the introduction of more tablet computers and high-end mobile handsets onto mobile networks will be a major generator of mobile traffic to revive this growth, because they will offer the consumer content and applications not supported by previous generations of mobile devices. As shown below, one smart phone can generate as much traffic as 24 feature phones and one tablet as much as 122 feature phones.

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Telecommunications 17 October 2011

High-end mobile devices can multiply traffic

Source: Cisco VNI Mobile, 2011

In this context, it is encouraging to see Android devices come into their own against the iPhone, as generally these phones are more affordable. Market research firm Gartner recently reported that Android’s share of the worldwide smartphone market doubled to 52.3% in 3Q11 from a year ago, while Apple’s iOS dropped to 15%.

Mobile operating system market shares Operating 3Q11 Units 3Q11 Share 3Q10 Units 3Q10 Share Androidsystem 60,490.4(‘000) 52.5(%) 20(‘000),544.0 25.3(%) Symbian 19,500.1 16.9 29,480.1 36.3 iOS 17,295.3 15.0 13,484.4 16.6 RIM 12,701.1 11.0 12,508.3 15.4 Bada 2,478.5 2.2 920.6 1.1 Microsoft 1,701.9 1.5 2,203.9 2.7 Others 1,018.1 0.9 1,991.3 2.5 Total 115,185.4 100.0 81,132.6 100.0

Source: Gartner

Telcos will continue to upgrade regardless of economic conditions. As the Malaysian telcos have invested heavily in HSDPA (High Speed Downlink Packet Access, or 3.5G, capable of a maximum downlink access speed of 14Mbps) networks, they will continue to push for more mobile data usage on their networks. Operators are likely to offer mobile broadband packages that are comparable in price and speed to those of fixed broadband, thereby encouraging mobile broadband substitution.

At the same time, Malaysian telcos are making steady progress toward upgrading their 3G networks to support HSPA+ (Evolved High Speed Packet Access, with a faster downlink speed of 42Mbps) and LTE. At this point, DiGi and Celcom have awarded upgrade contracts to vendors such as ZTE, Huawei and Ericsson, with completion planned within the next two years. Maxis claims 95% of its network is HSPA ready, while , StarHub’s sister company, already has coverage in the Klang Valley, JB, Butterworth and parts of Penang.

None of the Malaysian telcos has revealed any plans yet for investments in LTE, given that the spectrum issue is still up in the air. As it is almost already the year’s end and the licences are supposed to start in Jan 2013, we would expect more to be announced on the LTE front only in 2012.

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Telecommunications 17 October 2011

We are assuming the Malaysian regulator has yet to decide on the proposed allocation of the 2.6GHz LTE/4G spectrum although it was thought to have allocated 20MHz each to nine separate contenders. So far, it has been reported that Maxis and Celcom have trialed LTE on the 900Mhz spectrum band but we understand that trials are not strictly necessary as all the telcos are interested and ready for LTE. Given the network collaboration between Celcom and DiGi, it would be reasonable to assume that both may also collaborate on LTE.

HSPA+ and LTE upgrade path

Maxis In late 2009, Maxis first announced an upgrade of its 3G/HSDPA network to HSPA+ with downlink speeds up to 21Mbps for two areas in JB and KL on a trial basis. There has been no update since then although Malaysian Wireless believes coverage areas should have improved through 2010/2011 and downlink speeds may have risen to 42Mbps.

Digi.Com In Apr 2011, Digi awarded a network contract to ZTE Corp to build a unified network that will give the telco a combined 2G/3G/4G network, starting from 3Q11. The network will be capable of delivering download speeds of up to 42Mbps using HSPA+ and thereafter up to 4 times faster when the LTE spectrum becomes available. The upgrade will involve over 5,000 existing sites over the next two years, with new sites to be added for better capacity and coverage.

Celcom Axiata In Mar 2011, Celcom appointed Huawei and Ericsson to upgrade its HSPA network to HSPA+ with a download speed of up to 42Mbps and build a new LTE network. This RM700m deal is expected to be complete within 3 years.

U Mobile U Mobile first announced its upgrade to HSPA+ in Sep 2010 with the first deployment in Berjaya Time Square where its headquarters are. It has selected Ericsson as the technology partner and the new deployment will allow download speeds up to 42Mbps. Current coverage is available in Klang Valley, Johor Bahru, Butterworth and parts of Penang.

Source: Companies, various websites

But margins could come under pressure

Data subscriber growth rates slowing down. Despite kicking off optimistically two years ago, mobile data adoption has slowed considerably in the last few quarters. The following charts show how, for the most part, wireless broadband subscribers accessing the Internet on their laptops with USB modems have flattened out in the last four quarters.

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Telecommunications 17 October 2011

Wireless broadband subscriber base

'000 1,000 900 800 700 600 500 400 300 200 100

-

1Q08 2Q08 4Q08 1Q09 3Q09 4Q09 1Q10 2Q10 4Q10 1Q11 3Q11 3Q08 2Q09 3Q10 2Q11

Celcom Maxis Digi

Source: Companies, postpaid dongles only

Dongle net adds slowing down (% YoY chg)

(% YoY chg) 900 800 700 600 500 400 300 200 100 0 -100 -200 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11

Celcom Maxis Digi

Source: Companies

Handset subsidies need to rise to drive smartphone penetration. At the same time that dongle subscriber growth is slowing down, users on smartphone mobile data plans are not growing as fast as earlier thought. We think this is most likely due to the fact that smartphone penetration in Malaysia is still low, estimated at only 20-25% of the postpaid base compared to Singapore, currently at 70-75%. In order to attract more users to purchase smartphones and take up the data plans, we think the Malaysian telcos will need to provide more handset subsidies in 2012. We reckon this will have the effect of depressing margins in the initial phase until the subsidies are fully expensed off and the higher ARPUs begin to filter through to telco margins.

Telcos moving to save costs through network sharing. With the voice part of their revenue base under threat, telcos in Malaysia have been aggressive in making structural changes to their cost base. Given that network-related costs can account for north of 20% of running costs and 60% of capital expenditure, telcos have been increasingly using the network sharing approach to reduce operating costs as well as cope with the need to keep investments in data capacity from outrunning rapidly rising data demand. The network sharing will remove the duplication and optimise the deployment of base stations, avoid redeployment of equipment between redundant and new sites, reduce utility bills and transmission costs as well as mitigate rising rental fees.

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Telecommunications 17 October 2011

There are 2 kinds of network sharing – sharing of the active infrastructure or passive infrastructure. Passive infrastructure refers mainly to the sharing of physical sites, buildings, shelters, towers/masts, power supply and battery backup, etc, while active infrastructure refers to active equipment e.g. antenna systems, cables, filters, allocated frequency spectrum and backhaul transmission.

In Malaysia, both active and passive network sharing is used.

 Celcom and DiGi are at the forefront of network sharing, having signed a comprehensive agreement in Jan 2011. The scope of the tie-up will initially focus on the sharing of telecommunication sites, access transmission (microwave links), aggregation transmission and trunk fibre transmission. Celcom has also been active in hosting MVNOs such as , Merchantrade, XOX and Redtone to eke out extra revenue from excess capacity. Both Celcom and DiGi expect to save above RM100m-150m respectively in 2012.

 Most recently, Maxis and U Mobile announced in Oct 2011 that Maxis will be opening up its 3G radio access network to U Mobile for a period of 10 years. The agreement covers existing 3G spectrum in non-urban centres such as Klang Valley, Penang, JB and Ipoh where U Mobile already has active coverage, and may include LTE subject to spectrum availability.

Fixed line growth prospects are roaring

Growth being driven by pent-up demand. Fixed broadband in Malaysia, both in terms of connection speed and penetration, has long lagged behind other countries in the region, as TM’s ADSL broadband service Streamyx (with a maximum speed of only 4Mbps compared to Singapore’s 100Mbps) was the only game in town until the arrival of Unifi in 2010. With connection speeds of up to 20Mbps, Unifi subscriber growth has accelerated every quarter since the high speed broadband (HSBB) service was launched in 3Q10.

Fixed broadband user base

Source: Company

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Telecommunications 17 October 2011

We believe growth will continue to be driven by TM’s bundling of fixed voice and broadband into this service, general pent-up demand for faster broadband by both home and mobile users and the soaring number of premises passed, which hit 1.029m premises in mid-Nov 2011 and is targeted to hit 1.3m in 2012. The fact that TM’s achieved ARPU of RM184 is significantly higher than Streamyx’s maximum monthly commitment fee of RM140 a month does not appear to have dented demand, suggesting a high level of pent-up demand.

Further adding to TM’s prospects from soaring take-ups is the fact that Celcom, Maxis and most recently, P1, a WiMax broadband operator, have signed up to buy wholesale capacity on TM’s HSBB network, although margins may be somewhat impacted.

Risks – spectrum, competition

Spectrum refarming still the biggest looming issue. Although 2011 is coming to an end, there is still no clarity on when and how the regulator will be refarming the current spectra of the existing telcos as and when they expire in 2012 to 2015. Refarmed spectra refer to existing 800Mhz-900Mhz and 1800Mhz spectra that, upon expiry, will be allocated back to the industry. Winning bidders will be able to utilise the spectrum after they expire and control is relinquished by the incumbents.

The key issue is whether spectrum bidding (if an auction is the chosen method) will push prices too high, as there is always a fine balance between governmental desire to maximise revenue from a scarce resource and causing financial detriment to the industry. Depending on the price, DiGi.com could turn out to be the biggest winner as it has the scarcest spectra at the most flexible 800Mhz-900Mhz range.

Multi-play competition should intensify. We also expect more multi- play competition as more players are entering the IPTV space, with an aim to improve their non-voice revenue and do more bundling deals that can help improve customer stickiness. Currently, there are two IPTV services available – Hypp.TV by Telekom and DETV by MVNO RedTone. Maxis has also teamed up with Australia-based Fetch TV to launch IPTV by next year, while sister company Astro is reported to be trialling an IPTV service in JV with Time Dot Com although coverage is still quite small and limited to selected Klang Valley areas with reportedly less than 200k premises passed.

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Telecommunications 17 October 2011

Valuations not compelling…

Valuations not compelling relative to the region. Malaysian wireless telco stocks lead the region in valuations, trading at an average PBR of 9.8x and PER of 18.1x based on FY12 forecasts, compared to 3.3x and 12.2x respectively for the rest of the Asia Pacific ex-Japan region.

Regional valuations PE (x) PB (x) Yield (%) ROE (%) EPS Growth (%) Mobile operators 2011 2012 2011 2011 2011 2011 2012 Korea 12.2 10.2 0.9 5.2 15.7 -27.7 15.0 20.0 17.4 2.6 4.5 12.4 0.6 15.0 Thailand 17.6 17.1 7.6 7.9 26.5 15.6 4.2 Hong Kong 12.4 11.1 3.4 5.5 24.5 12.3 10.0 Malaysia 19.3 18.1 9.8 4.7 39.3 18.2 6.7 18.1 13.9 1.9 1.5 10.7 46.0 26.3 Singapore 13.1 12.4 7.8 6.3 56.2 6.9 5.9 Average of mobile operators excl Malaysia 13.8 12.2 3.3 4.4 19.2 9.4 12.0

Integrated telcos Korea 7.1 6.6 0.8 6.4 10.9 6.0 7.8 Taiwan 16.4 16.1 2.2 5.5 12.9 0.1 1.3 Hong Kong 12.2 10.6 1.5 5.3 12.5 5.2 14.6 Malaysia 27.8 24.9 2.7 5.4 16.4 -49.9 11.8 Indonesia 11.8 11.0 3.0 4.7 27.8 1.5 7.4 Singapore 14.6 13.6 181.6 6.1 154.4 7.3 7.7 Average of integrated telcos excl Malaysia 11.2 10.3 41.6 4.5 45.5 4.2 8.4 Source: Bloomberg, Maybank IB

Taking this into consideration, we balanced the likelihood of slowing economic growth ahead and the need to raise handset subsidies which could potentially put the squeeze on margins against the likelihood that earnings growth on average is likely to remain stable while free cashflow generation should remain strong. On that balance, we are Neutral on the Malaysian telco sector.

Our sole BUY call at this point is Telekom Malaysia. While PERs are also high relative to the region, we argue its current transformation from a staid fixed line player to a more dynamic fibre broadband play where it currently faces no competition justifies that premium. Even within Malaysia, TM stands out for its superior earnings growth potential and reasonable dividend yields relative to the other telcos.

Current 2012 Earnings Growth versus Dividend Yield

Source: Maybank IB

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Telecommunications 17 October 2011

Current 2012 Earnings Growth versus PER

Source: Maybank IB

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Telecommunications 17 October 2011

APPENDIX 1

Definition of Ratings

Maybank Investment Bank Research uses the following rating system: BUY Total return is expected to be above 10% in the next 12 months HOLD Total return is expected to be between -5% to 10% in the next 12 months SELL Total return is expected to be below -5% in the next 12 months

Applicability of Ratings The respective analyst maintains a coverage universe of stocks, the list of which may be adjusted according to needs. Investment ratings are only applicable to the stocks which form part of the coverage universe. Reports on companies which are not part of the coverage do not carry investment ratings as we do not actively follow developments in these companies.

Some common terms abbreviated in this report (where they appear):

Adex = Advertising Expenditure FCF = Free Cashflow PE = Price Earnings BV = Book Value FV = Fair Value PEG = PE Ratio To Growth CAGR = Compounded Annual Growth Rate FY = Financial Year PER = PE Ratio Capex = Capital Expenditure FYE = Financial Year End QoQ = Quarter-On-Quarter CY = Calendar Year MoM = Month-On-Month ROA = Return On Asset DCF = Discounted Cashflow NAV = Net Asset Value ROE = Return On Equity DPS = Dividend Per Share NTA = Net Tangible Asset ROSF = Return On Shareholders’ Funds EBIT = Earnings Before Interest And Tax P = Price WACC = Weighted Average Cost Of Capital EBITDA = EBIT, Depreciation And Amortisation P.A. = Per Annum YoY = Year-On-Year EPS = Earnings Per Share PAT = Profit After Tax YTD = Year-To-Date EV = Enterprise Value PBT = Profit Before Tax

Disclaimer This report is for information purposes only and under no circumstances is it to be considered or intended as an offer to sell or a solicitation of an offer to buy the securities referred to herein. Investors should note that income from such securities, if any, may fluctuate and that each security’s price or value may rise or fall. Opinions or recommendations contained herein are in form of technical ratings and fundamental ratings. Technical ratings may differ from fundamental ratings as technical valuations apply different methodologies and are purely based on price and volume-related information extracted from Bursa Malaysia Securities Berhad in the equity analysis.Accordingly, investors may receive back less than originally invested. Past performance is not necessarily a guide to future performance. This report is not intended to provide personal investment advice and does not take into account the specific investment objectives, the financial situation and the particular needs of persons who may receive or read this report. Investors should therefore seek financial, legal and other advice regarding the appropriateness of investing in any securities or the investment strategies discussed or recommended in this report. The information contained herein has been obtained from sources believed to be reliable but such sources have not been independently verified by Maybank Investment Bank Berhad and consequently no representation is made as to the accuracy or completeness of this report by Maybank Investment Bank Berhad and it should not be relied upon as such. Accordingly, no liability can be accepted for any direct, indirect or consequential losses or damages that may arise from the use or reliance of this report. Maybank Investment Bank Berhad, its affiliates and related companies and their officers, directors, associates, connected parties and/or employees may from time to time have positions or be materially interested in the securities referred to herein and may further act as market maker or may have assumed an underwriting commitment or deal with such securities and may also perform or seek to perform investment banking services, advisory and other services for or relating to those companies. Any information, opinions or recommendations contained herein are subject to change at any time, without prior notice. This report may contain forward looking statements which are often but not always identified by the use of words such as “anticipate”, “believe”, “estimate”, “intend”, “plan”, “expect”, “forecast”, “predict” and “project” and statements that an event or result “may”, “will”, “can”, “should”, “could” or “might” occur or be achieved and other similar expressions. Such forward looking statements are based on assumptions made and information currently available to us and are subject to certain risks and uncertainties that could cause the actual results to differ materially from those expressed in any forward looking statements. Readers are cautioned not to place undue relevance on these forward- looking statements. Maybank Investment Bank Berhad expressly disclaims any obligation to update or revise any such forward looking statements to reflect new information, events or circumstances after the date of this publication or to reflect the occurrence of unanticipated events. This report is prepared for the use of Maybank Investment Bank Berhad's clients and may not be reproduced, altered in any way, transmitted to, copied or distributed to any other party in whole or in part in any form or manner without the prior express written consent of Maybank Investment Bank Berhad and Maybank Investment Bank Berhad accepts no liability whatsoever for the actions of third parties in this respect. This report is not directed to or intended for distribution to or use by any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation.

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Telecommunications 17 October 2011

APPENDIX 1

Additional Disclaimer (for purpose of distribution in Singapore) This report has been produced as of the date hereof and the information herein maybe subject to change. Kim Eng Research Pte Ltd ("KERPL") in Singapore has no obligation to update such information for any recipient. Recipients of this report are to contact KERPL in Singapore in respect of any matters arising from, or in connection with, this report. If the recipient of this report is not an accredited investor, expert investor or institutional investor (as defined under Section 4A of the Singapore Securities and Futures Act), KERPL shall be legally liable for the contents of this report, with such liability being limited to the extent (if any) as permitted by law. As of 10 January 2012, KERPL does not have an interest in the said company/companies.

Additional Disclaimer (for purpose of distribution in the United States) This research report prepared by Maybank Investment Bank Berhad is distributed in the United States (“US”) to Major US Institutional Investors (as defined in Rule 15a-6 under the Securities Exchange Act of 1934, as amended) only by Kim Eng Securities USA, a broker- dealer registered in the US (registered under Section 15 of the Securities Exchange Act of 1934, as amended). All responsibility for the distribution of this report by Kim Eng Securities USA in the US shall be borne by Kim Eng. All resulting transactions by a US person or entity should be effected through a registered broker-dealer in the US. This report is for distribution only under such circumstances as may be permitted by applicable law. The securities described herein may not be eligible for sale in all jurisdictions or to certain categories of investors. This report is not directed at you if Kim Eng Securities is prohibited or restricted by any legislation or regulation in any jurisdiction from making it available to you. You should satisfy yourself before reading it that Kim Eng Securities is permitted to provide research material concerning investments to you under relevant legislation and regulations. Without prejudice to the foregoing, the reader is to note that additional disclaimers, warnings or qualifications may apply if the reader is receiving or accessing this report in or from other than Malaysia. As of 10 January 2012, Maybank Investment Bank Berhad and the covering analyst does not have any interest in in any companies recommended in this Market themes report. Analyst Certification: The views expressed in this research report accurately reflect the analyst's personal views about any and all of the subject securities or issuers; and no part of the research analyst's compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in the report.

Additional Disclaimer (for purpose of distribution in the United Kingdom) This document is being distributed by Kim Eng Securities Limited, which is authorised and regulated by the Financial Services Authority and is for Informational Purposes only.This document is not intended for distribution to anyone defined as a Retail Client under the Financial Services and Markets Act 2000 within the UK. Any inclusion of a third party link is for the recipients convenience only, and that the firm does not take any responsibility for its comments or accuracy, and that access to such links is at the individuals own risk. Nothing in this report should be considered as constituting legal, accounting or tax advice, and that for accurate guidance recipients should consult with their own independent tax advisers.

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Maybank Investment Bank Berhad (15938-H) (A Participating Organisation of Bursa Malaysia Securities Berhad) 33rd Floor, Menara Maybank, 100 Jalan Tun Perak, 50050 Tel: (603) 2059 1888; Fax: (603) 2078 4194 Stockbroking Business: Level 8, Tower C, Dataran Maybank, No.1, Jalan Maarof 59000 Kuala Lumpur Tel: (603) 2297 8888; Fax: (603) 2282 5136 http://www.maybank-ib.com

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