PP16832/01/2013 (031128) Malaysia Economics & Market Update 19 November 2012 th Neutral (unchanged) ETP 11 Progress Update Building Blocks For The Future Current KLCI: 1,629 (16 Nov 2012) YE KLCI target: 1,620 (unchanged) Market-neutral. We believe the 20 new high-impact projects announced by PM Najib last Friday, which have a total investment value of MYR10.08b and projected GNI contribution of MYR26.09b into Wong Chew Hann 2020, will help build a stronger economic base. Apart from this, the [email protected] latest Economic Transformation Programme (ETP) progress update is (03) 2297 8686 market-neutral. The new projects mainly involve the participation of non-PLCs except for the MYR1.02b O&G-related Tanjung Bin venture in which MMC Corp (and, we believe, MISC) are involved. Lifts total ETP investments to MYR212m. PM Najib delivered the 11th ETP update since its Oct 2010 launch last Friday, the last update for the year. Of the 20 new projects, 11, with a total investment value of MYR6.68b, are ETP/NKEA-specific, while the rest (with an investment value of MYR3.4b) are corridor-specific, i.e. to the Sabah, Northern and Iskandar Malaysia corridors. Of the total investment value of MYR10.08b, 10%/52% are oil & gas/real estate-related. The latest announcement lifts the total number of ETP high-impact projects announced to date to 149 with MYR211.9b in total committed investments, meeting 27% of its MYR794.5b target into 2020. MYR1.02b Tanjung Bin project. The Tanjung Bin Petrochemical and Maritime Industrial Centre will be developed by privately-owned Seaport Worldwide, a 100%-owned indirect subsidiary of MMC Corp (MMC MK; Not Rated). Although reported in major news outlets since August 2012, confirmation of this project last Friday strengthens the government’s plan to make Johor a petroleum storage and trading hub following major investments into tank farms and PETRONAS’ RAPID project in the last two years. We believe MISC (MISC MK; HOLD; TP: MYR4.80) could feature as a tenant in this project, in a JV with Vitol Group. MYR5.23b PJ Sentral project. The project, with an estimated MYR11b GDV) will be developed by Nusa Gapurna (60% owned by Gapurna and 40% by the EPF), and have office space, hotel, service apartment and even a mall component. This project reinstates our concerns on the likely over-capacity of office space in the Klang Valley alongside upcoming major developments like the Tun Razak Exchange (estd. 9.6m sq ft of office space) and Menara Warisan Merdeka (2.2m sq ft). The current supply of office space in the city centre and fringes is about 64m sq ft with an average occupancy rate of 86%, according to Knight Frank Malaysia (source: Edge Weekly, 19-25 Nov 2012). Nusa Gapurna is presently in early stages of discussing a share swap deal with Malaysian Resources Corp Bhd (MRC MK; Not Rated), which could see its MD Datuk Mohamad Salim Fateh Din gaining a 20% stake in the latter (source: today’s Malaysia Reserve). SEE APPENDIX I FOR IMPORTANT DISCLOSURES AND ANALYST CERTIFICATIONS Economics & Market: ETP 11th Progress Update ETP Progress: Investment values and number of projects todate 250 200 138 149 Cumulative value (LHS) 131 200 110 160 Cumulative EPPs 87 100 150 120 72 60 100 37 199.7 205.3 211.9 80 169.8 171.2 179.2 50 18 106.4 40 9 80.3 95.0 13.5 0 5.3 0 No. of Sep 11) Mar 11) Mar Oct 10) Oct Upd 7 (8 7 (8 Upd Upd 4 (8 4 (8 Upd Apr 11) Apr 11) Jun RM b 11) Jan Nov 11) Nov 12) May Nov 10) Nov Sep 12) 12) Nov Upd 8 (10 8 (10 Upd 9 (28 Upd Upd 5 (19 5 (19 Upd 6 (13 Upd Upd 1 (25 1 (25 Upd 2 (30 Upd 3 (11 Upd pjts Upd 10 (13 10 (13 Upd 11 (15 Upd Source: PEMANDU, Maybank KE O&G related initiatives in Johor Project Name Investor Nature of investment Invt amt Start date Date (MYR m) announced RAPID PETRONAS (driver) Refinery and Petrochem complex 60,000 2017 Jun-12 Vopak Tank Terminal na Na - Itochu, PTT Global 2 separate Petrochem complexes na Na May-12 Versalis Elastomer plants na Na Jul-12 Pengerang Petroleum Dialog/Johor State/Vopak Deepwater Petroleum Terminal 4,170 2014 2009 Terminal Dialog/Johor State/Vopak Pengerang LNG Terminal 4,500 2016-2018 Sep-12 Tj Bin Petrochemical and MMC Corp (manager) Petrochemical and maritime 1,020 2012 na Maritime Industrial Centre industries specific MISC/Vitol Tank Terminal 2,400 2012 2009 Tj Langsat Petroleum Dialog/ MISC/ Transfigura Tank Terminal 1,540 2010 2007 Terminal Pengerang Integrated (not available) (not available) na na na Petroleum Complex Source: Media (various); compiled by Maybank KE ETP’s 11th Progress Update Details National Key Economic . 11 projects under 7 NKEAs with total investment value of MYR6.68b and projected MYR1.129b GNI Areas (NKEA) contribution, both into 2020. The 7 NKEAs are Oil, Gas and Energy; Greater KL/KV; Communications Content and Infrastructure; Business Services; Healthcare; Tourism and Education. Major projects: 1. Greater KL NKEA: PJ Sentral Garden City A real estate development on 40 acres to revitalise the Section 52 surrounding area in Petaling Jaya, Selangor. Investment value is MYR5.23b, with projected GNI impact of MYR522.9m into 2020. Estimated GDV is MYR11b. The development is poised to become a new central business district of Selangor. It is undertaken by Nusa Gapurna S/B (60% owned by Gapurna S/B, 40% by EPF). 19 November 2012 Page 2 of 7 Economics & Market: ETP 11th Progress Update ETP’s 11th Progress Update (continued) Details National Key Economic 2. Oil, Gas, Energy NKEA: Tanjung Bin Petrochemical and Maritime Industrial Centre Areas (NKEA) A 2,255-acre development in Southwest Johor catering to the petrochemical and maritime industries, it will be developed in two phases. Investment value is MYR1.02b, with projected GNI impact of MYR128.96m into 2020. The area has been gazetted as a Free Industrial Zone effective 10 May 2012 and will be leased to domestic and international players in these industries. Phase 1 activities will focus on storage, blending and transit of petroleum products. ATT Tanjung Bin S/B will be the first to operate with a storage capacity of almost 0.9m cbm of petroleum products within a 296,000 m² area. The manager is Seaport Worldwide S/B, a 100%-subsidiary of Johor Port Bhd, in turn a 100%- subsidiary of MMC Corp. Strategic Reform . Updates on two SRIs: Competition, Standards and Liberalisation; Narrowing Disparities. Initiatives (SRI) . Competition, Standards and Liberalisation SRI Liberalisation of 6 more sub-sectors: legal services, medical specialist services, dental specialist services, international schools, private universities and telecommunications - Network Facilities Providers (NFP) and Network Services Providers (NSP). This means that 15 out of the 17 sub-sectors announced during Budget 2012 are now liberalised. The remaining two - engineering and architectural services, and a new sub-sector, quantity surveying - will be announced once the amended legislation is passed. Regional Economic . 9 projects under three corridors by Sabah Economic Development Corporation (SEDC), Northern Corridors Corridor Implementation Authority (NCIA) and Iskandar Region Development Authority (IRDA), will complement the ETP. These projects will contribute MYR8.95b in GNI, attract MYR19.41b investments into 2020. Major projects: 1. Sabah Economic Development and Investment Authority (SEDIA) Kimanis 300MW combined cycle power plant (construction is ahead of schedule and Phase 1 will be completed by Dec 2013). Palm Oil Industrial Cluster (POIC) Lahad Datu (Malaysia's first dedicated palm oil logistics hub in Sabah; the first two phases will cover 1,150 acres0. Sungai Kalumpang resort by Sipadan Mangrove Resort S/B (spread across 200 acres of aquaculture park and 700 acres of mangrove reserve island). Cultured prawn commercialisation in Kampung Pintasan, Kota Belud and Sungai Telaga, Pitas by Borneo Shrimp (Sabah) S/B. Alila Dalit Bay Integrated Resort (comprising 452 rooms and 134 villas, the hotel will complement the Sabah West Coast tourism zone). 2. Iskandar Region Development Authority (IRDA) Damansara Assets S/B, a 100%-owned unit of Johor Corp, will invest MYR440m to redevelop two tourism outlets, KOMTAR (renamed Aira Shopping Mall) and Plaza Kotaraya (renamed Galleria @ Kotaraya). Source: PEMANDU 19 November 2012 Page 3 of 7 Economics & Market: ETP 11th Progress Update RESEARCH OFFICES REGIONAL ECONOMICS P K BASU Suhaimi ILIAS Regional Head, Research & Economics Chief Economist (65) 6432 1821 [email protected] . Singapore | Malaysia (603) 2297 8682 [email protected] WONG Chew Hann, CA Acting Regional Head of Institutional Research Luz LORENZO (603) 2297 8686 [email protected] Economist THAM Mun Hon, CFA . Philippines | Indonesia (63) 2 849 8836 [email protected] Regional Strategist (852) 2268 0630 [email protected] ONG Seng Yeow Regional Products & Planning (852) 2268 0644 [email protected] MALAYSIA INGAPO E THAILAND WONG Chew Hann, CAHead of Research Stephanie WONGHead of Research Mayuree CHOWVIKRANHead of Research (603) 2297 8686 [email protected] (65) 6432 1451 [email protected] (66) 2658 6300 ext 1440 [email protected] . Strategy . Strategy . Strategy . Construction & Infrastructure . Small & Mid Caps Maria BRENDA SANCHEZ LAPIZ Co-Head of Research Desmond CH’NG, ACA Gregory YAP Dir (66) 2257 0250 | (66) 2658 6300 ext 1399 (603) 2297 8680 [email protected] (65) 6432 1450 [email protected] [email protected] . Banking - Regional . Technology & Manufacturing . Consumer/ Big Caps LIAW Thong Jung . Telcos - Regional (603) 2297 8688 [email protected] Wilson LIEW Andrew STOTZ Strategist .