BUY QUALITY ASSETS AT GOOD PRICE ISSUES TO CONSIDER ACTIONABLE IDEAS KEY CATALYSTS KEY RISKS MALAYSIAN RESEARCH

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1 16 October 2009 YTL Power International BUY RM2.17 QUALITY ASSETS AT GOOD PRICE YTL Power is extracting much more value from its PowerSeraya acquisition than we initially thought. The company continues to grow from strength to strength and we believe that any concerns on Wessex Water or the group s plans to participate in WiMax have been overblown. We upgrade our recommendation to Buy (from Outperform) and raise fair value to RM2.60 (from RM1.90). Financial Highlights (RMm) FYE June FY07A FY08A FY09A FY10F FY11F Revenue 4,068 4,243 6,102 12,275 12,370 Pretax profit 1,297 1,386 1,352 1,629 1,631 Net profit 1,176 1, ,305 1,306 Normalised net profit 1,043 1,039 1,133 1,305 1,306 Normalised EPS (sen) EPS growth (%) 19 (16) Gross DPS (sen) Normalised P/E (x) Normalised ROE (%) Gross yield (%) Net gearing (%) P/B (x) Source: Company, KAF ISSUES TO CONSIDER We believe that PowerSeraya will be a strong growth driver for the overall group, making up 57% of the power division s earnings (overtaking the domestic IPPs) and 27% of total operating profit. We expect group earnings to expand structurally from RM1-1.1bn in FY07-FY09 to the RM bn range. Our revised forecasts exceed consensus estimates by 17% in FY10 and 8% in FY11. There are two issues that YTL Power is currently saddled with, namely (1) Wessex Water regulatory risk and weakness in the GBP currency and (2) dividends risk of a cut in payouts if a lot of cash is diverted to an aggressive roll-out of WiMax infrastructure. We show that these risks are largely manageable. The stock has been a significant underperformer YTD. Valuations are undemanding at 13.3x FY10 PER and 2.2x P/B. ACTIONABLE IDEAS Buy YTL Power for its well diversified portfolio of quality assets. It offers a 7% gross yield as well as potential M&A-driven growth. KEY CATALYSTS Strong pick-up in Singaporean economy, PowerSeraya gains market share, strength in the S$ and GBP currencies, positive outcome in Ofwat s final determination for Wessex Water, consistent earnings delivery, generous dividend distributions. Market Data Bloomberg code YTLP MK Shares o/s (m) 5,967 Mkt Cap (RMm) 12, week high/low (RM) 2.25/1.62 Avg daily trading value (RMm) 10.5 KLCI 1,247 Target Price Methodology Target (RM) : 2.60 (+20%) Methodology : DCF Key Assumptions : WACC = 7.5%, g = 3% FY10 PER (x) : 15.9 FY10 P/B (x) : 2.6 FY10 Yield : 5.8% Share Price Performance 1m 3m 12m Absolute Relative to KLCI (3) (11) (6) Share Price Movement Price (RM) Volume (m) Oct08 Jan09 Apr09 Jul09 Oct09 Source: Bloomberg Analyst Mabel Tan (603) mabel@kaf.com.my KEY RISKS Cuts in dividend payments, high capex commitments for WiMax roll-out, weakness in the S$ and GBP currencies, regulatory risks. MALAYSIAN RESEARCH

2 QUALITY ASSETS AT GOOD PRICE YTL Power has been a significant underperformer YTD, with the share price only appreciating by 18% compared to the broader market s 42% rally. We view this as surprising considering that the group underwent a positive structural change earlier this year with the successful acquisition of PowerSeraya, the second largest power generation company in Singapore. Not only does it offer exposure into South-East Asia s only power pooling market (hence providing excellent learning ground for YTL Power), the subsidiary also posted a fantastic earnings contribution in the quarter to June 2009, substantially beating management s guidance as well as analysts expectations. Chart 1: YTL Power has significantly underperformed the broader market YTD 50% 40% 30% 20% 10% 0% Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09-10% Source: Bloomberg YTL Pow er KLCI We believe that investors are unduly worried about a couple of things. Firstly, Wessex Water is undergoing a periodic change of certain profit parameters where there is an element of regulatory risk. The outcome for the FY10-FY15 period will be finalised by next month. Compounding this is the fact that earnings are susceptible to the GBP weakness. The second issue is the possibility of dividend cuts following the news that YTL Power would be used as the vehicle to fund its plans to roll out WiMax infrastructure over the next 3-5 years. However, we show in the note that these concerns are largely manageable and the potential risks are already reflected in the price. For a steady utility company with a solid track record, YTL Power trades at undemanding multiples of 13.3x FY10 PER and 2.2x P/B. More importantly, it offers a 7% gross yield, which we believe can be sustained even after assuming relatively high capex requirements. We also see option value in potential M&A opportunities which the group could capitalise on, given its massive cash hoard of RM6bn. Following a detailed review, we have raised earnings substantially mainly to account for stronger contributions from PowerSeraya. Consequently, our DCF-based target price is revised upwards to RM2.60 from RM1.90 previously, and we upgrade our recommendation to Buy (from Outperform). 2

3 YTL Power International POWERSERAYA THE GROWTH ENGINE In the quarter to June 2009, the consolidation of PowerSeraya s earnings into YTL Power s financials resulted in a significant upward surprise. The group s new venture into the Singapore power generation market contributed RM197m to pretax profit in the 4- month period to June, a far cry from the RM76m annual net profit target that management had initially guided for. The strong contributions from PowerSeraya generally came as a surprise to the overall analyst fraternity, judging from the immediate earnings upgrades following the release of YTL Power s 4QFY09 results in August. Consensus estimates were revised up from RM990m to RM1.1bn for FY10 (June) and from RM1.1bn to RM1.2bn for FY11. We notice that current forecasts are similar to what the street was targeting throughout CY08, before PowerSeraya was even in the picture. In other words, the recent revisions only seem to have cancelled out previous downgrades (likely reacting to the poorer-thanexpected results announcement back in February) and are probably not completely reflective of PowerSeraya s true potential. Chart 2: Changes in consensus net profit projections for YTL Power 1,350 1,300 1,250 1,200 RM m 1,150 1,100 1,050 1, May-07 Nov-07 May-08 Nov-08 May-09 FY10 FY11 Source: Bloomberg In our opinion, the earnings upgrades of circa RM100m per annum appear too low to account for the start of full year contributions from PowerSeraya. This is especially so in light of the stronger-than-expected pick-up in the Singaporean economy, as evidenced by the government recently boosting its 2009 GDP forecast to a contraction of 2-2.5% from a previous expectation of a fall of 4-6%. Clearly, there are positive knock-on implications for electricity demand recovery in Singapore, and PowerSeraya is well positioned to ride the upswing. We believe analysts forecasts are conservative, leaving room for substantial upgrades in the near future. Historically, this power generation company consistently grew earnings from S$88m back in FY04 (March) to a high of S$218m in FY08 before recording a lower profit level of S$172m in FY09 when it began to feel the effects of the global recession. While earnings may take some time to get back to the record it achieved in FY08, we believe it is fair to expect growth from last year s level, given gradually improving demand conditions in the country. 3

4 Chart 3: PowerSeraya s earnings trajectory S$ m FY04 FY05 FY06 FY07 FY08 FY09 FY10F FY11F FY12F Source: PowerSeraya annual reports, KAF We expect earnings to increase to and sustain at just over S$200m per annum over the medium term. This is premised on assumptions of 3% annual growth in electricity consumption from CY10 onwards, unchanged market share of 25.3% going forward, and a flat operating margin of 7.5% (at the lower-end of its historical range of 6.3%-10.6%) for the power generation business. We have also imputed flat electricity tariff parameters, essentially assuming that any major changes in fuel input costs are passed on to the consumers. For the smaller energy retailing and physical oil trading/storage segments, we have assumed flat contributions going forward but these divisions are relatively small constituting only 12-15% of PowerSeraya s net profit. Based on our forecasts, PowerSeraya would make an operating profit of around S$270m per annum, on a sustainable basis. This translates to about RM650m which constitutes 57% of the power division s earnings (hence overtaking the Malaysian power plants) and 27% of group profit, at the operating level. Chart 4: FY10 group operating profit breakdown Wessex Water 48% Investment holding 5% Malaysian pow er plants 20% Pow erseraya 27% * Note that associate contributions from Jawa Power and Electranet are not included Source: KAF We believe that PowerSeraya will be a strong growth driver for the overall group, coming off a low base last year (with only 4-months earnings contributions). Despite flattish or potentially lower contributions from YTL Power s other business segments, we expect group net profit to expand structurally from the RM1-1.1bn levels in FY07-FY09 (June) to the RM bn range in the next few years. Our revised forecasts exceed consensus estimates by 17% in FY10 and 8% in FY11. 4

5 YTL Power International CONCERNS OVERBLOWN From our understanding, there have been two primary issues that YTL Power has been saddled with of late, namely: Wessex Water Regulatory risk and weakness in the GBP currency. Dividends Risk of a cut in payouts if a lot of cash is diverted to an aggressive rollout of WiMax infrastructure. In this section of the note, we show that both risks are largely manageable and, in our opinion, should not derail investors from participating in the interesting investment proposition of growth and yield that YTL Power currently offers. WESSEX WATER To recap, the regulatory body for water companies in the UK, Ofwat, is in charge of laying out a master plan every five years that essentially determines the maximum allowable revenue for each firm over the subsequent 5-year period. The next period will come into effect starting April Thus far, Ofwat has published a draft outcome highlighting the key changes that it intends to apply compared to the previous period. After considering private and collective appeals by the water companies as well as other stakeholders, the final determination incorporating further refinements is scheduled to be released next month. There have been recent concerns that the draft outcome for the FY10-FY15 (March) period reflects less favourable terms to the water companies in the UK. The key parameter that essentially establishes a firm s profitability is the WACC, where a higher benchmark would result in better revenues and earnings. This time around, the WACC was set at 4.5% versus 5.1% in the preceding 5-year period. While it was generally regarded as being too low, we highlight that the regulator usually attempts to find some middle ground in setting the final determination. Another important variable is the Regulatory Capital Value (RCV) which maps out each water company s expected capital expenditure plans over the 5-year timeframe. This is also given by Ofwat. Multiplying the two factors gives the regulated annual profit of each firm, in real terms. Table 1: Aggregate 5-year financial information for Wessex Water GBP m Operating costs 684 Infrastructure renewals charge 170 Current cost depreciation 462 Return on capital 576 Taxation 67 Total revenue requirement (in real terms) 1,959 Source: Ofwat Table 2: Wessex Water s regulatory capital value: movement between and GBP million ( financial year end prices) Closing regulatory capital value as at 31 March ,150 Opening adjustments 28 Regulatory capital value at 1 April 2,178 2,184 2,229 2,309 2,375 New investment Capital maintenance charges (124) (126) (129) (131) (133) Adjustment for roll-out of past capital efficiency (17) (17) (17) (17) (17) Regulatory capital value at 31 March 2,184 2,229 2,309 2,375 2,410 Source: Ofwat 5

6 Our forecasts for Wessex Water play an important role in determining the earnings projections for the overall group, given that this subsidiary constituted 67% of operating profit last year. We expect contributions to fall to around 48% moving forward, following the full year consolidation of PowerSeraya. Given the significance of Wessex Water s contributions, we have run several sensitivity tests and conclude the following: WACC A 20bps change in the WACC benchmark set by Ofwat would impact YTL Power s operating profit by 1.2% and net profit by 1.7%, all else remaining constant. Retail price index (RPI) A 1ppt change in the UK RPI would affect YTL Power s operating profit by 1.7% and net profit by 2.4%, all else remaining constant. RM/GBP exchange rate A RM0.20/GBP change in the cross rate would alter YTL Power s operating profit by 1.8% and net profit by 2.5%, all else remaining constant. Table 3: Earnings sensitivities to the WACC WACC 4.1% 4.3% 4.5% 4.7% 4.9% 5.1% Operating profit (RM m) 2,346 2,375 2,404 2,433 2,462 2,491 Net profit (RM m) 1,262 1,284 1,306 1,329 1,351 1,373 Operating profit sensitivity -2.4% -1.2% 0.0% 1.2% 2.4% 3.6% Net profit sensitivity -3.4% -1.7% 0.0% 1.7% 3.4% 5.1% Source: KAF Table 4: Earnings sensitivities to the RPI RPI 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% Operating profit (RM m) 2,325 2,364 2,404 2,444 2,485 2,526 Net profit (RM m) 1,246 1,276 1,306 1,337 1,368 1,400 Operating profit sensitivity -3.3% -1.6% 0.0% 1.7% 3.4% 5.1% Net profit sensitivity -4.6% -2.3% 0.0% 2.4% 4.8% 7.2% Source: KAF Table 5: Earnings sensitivities to the RM/GBP exchange rate RM/GBP exchange rate Operating profit (RM m) 2,320 2,362 2,404 2,446 2,489 2,531 Net profit (RM m) 1,241 1,274 1,306 1,339 1,371 1,404 Operating profit sensitivity -3.5% -1.8% 0.0% 1.8% 3.5% 5.3% Net profit sensitivity -5.0% -2.5% 0.0% 2.5% 5.0% 7.5% Source: KAF There is a direct positive link between the UK RPI and the tariffs that water companies are allowed to charge their customers. Generally speaking, a higher inflation rate is good for earnings as the positive impact on the larger revenue base more than offsets the increase in certain cost components. Moreover, fixed costs such as depreciation and interest expense are unaffected by inflationary pressures. The relative strength of the GBP against the Ringgit does not affect Wessex Water from an operational standpoint, but would impact the profits from this subsidiary in domestic currency terms. While the company has reported relatively stable earnings over the past few quarters, there have been wide fluctuations in YTL Power s results announcements and this mainly pertains to swings in the RM/GBP exchange rate. 6

7 YTL Power International Chart 5: Wessex Water s operating profit contributions versus the RM/GBP rate RM m Sep-07 Dec-07 Mar-08 Jun-08 Sep-08 Dec-08 Mar-09 Jun-09 RM/GBP Sep-09 Wessex Water operating profit RM/GBP exchange rate Source: Company, Bloomberg While uncertainties do exist, both on the regulatory front as well as the recent weakness in the GBP, we point out that the business continues to be a cash cow. Annual free cash flows have ranged between GBP29m and GBP94m since YTL Power s acquisition back in FY02, except for one year where FCF turned negative. We expect FCF to be in excess of GBP75m per annum going forward, most of which can be paid out as dividends to the parent company. We do not think our forecasts are aggressive where we have imputed a regulatory WACC of 4.5% (from FY11 onwards), RPI of 2%, and a flat exchange rate of RM5.60/GBP over the next few years. Based on these assumptions, we expect Wessex Water s net profit (in GBP terms) to contract by 9% CAGR between FY09 (March) and FY11, and thereafter experience single-digit annual growth. Chart 6: Wessex Water s FCF trajectory GBP m 20 - (20) (40) (60) (80) FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10F FY11F FY12F Source: Wessex Water annual reviews, KAF 7

8 Chart 7: Wessex Water s earnings trajectory GBP m Source: Wessex Water annual reviews, KAF DIVIDENDS FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10F FY11F FY12F Perhaps a more worrisome issue to analysts and investors alike is YTL Power s latest announcement on a proposal to venture into a whole new type of utility offering, namely the WiMax space. Management has indicated that the group intends to spend about RM2.5bn over a span of 3-5 years, to roll out the necessary infrastructure and for asset development. We understand that offering mobile internet services is a relatively competitive industry in a Malaysian context, where incumbent telecom players may have an edge in terms of existing reach to customers. Nevertheless, we think that there are two mitigating factors in support of YTL Power s decision to be involved in this venture, namely: The group is engaging reputable global technology partners such as Samsung, Clearwire, and Cisco. In our opinion, this reduces the risk profile of the project, to a large extent. Management has always been prudent and, we believe, likely to invest in several phases and to reassess the venture at each stage. In other words, if the roll-out does not deliver the expected results, the group can easily discontinue at any point instead of spending the RM2.5bn all at one go. Due to lack of clarity on the potential earnings enhancement from this endeavour, we have not included it in our estimates. However, we have imputed the cash flow requirements of the project in order to be conservative, where we have assumed additional annual capex of RM600m over the next four years. Yet, with the exception of FY10, free cash flows remain decent and, we believe, sufficient to cover the bulk of its high dividend commitment which management assures that the group will continue to pay (barring any new major M&A exercise). We have assumed that YTL Power would declare an annual net dividend of sen per share moving forward, which is consistent with what it distributed in FY07 and FY08 but slightly lower than the sen in FY09. Management has also indicated that it is willing to raise further borrowings in order to meet its capex and dividend targets. This is plausible given that EBITDA interest cover remains healthy at 4x and net gearing levels are largely under control, thanks to strong cash generation contributed by each of its utility assets. 8

9 YTL Power International Chart 8: YTL Power s FCF per share and net DPS trajectories sen 5 0 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10F FY11F FY12F -5 FCF per share Net DPS Source: Company, KAF Chart 9: Healthy EBITDA interest cover X FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10F FY11F FY12F Source: Company, KAF Chart 10: Net gearing levels are largely under control 300% 250% 200% 150% 100% 50% 0% Source: Company, KAF FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10F FY11F FY12F 9

10 UPGRADE TO BUY (FROM OUTPERFORM) Following an extensive review of our forecasts, we upgrade our net profit estimates by 27-34% for FY10-FY11 and introduce maiden projections for FY12. Broadly speaking, the anticipated 11% jump in earnings in FY10 is a function of full year contributions from PowerSeraya from just 4-months in FY09. We expect other major drivers like Wessex Water as well as the Paka, Pasir Gudang, and Jawa Power plants to be relatively unexciting in terms of earnings growth. Correspondingly, our target price is raised to RM2.60 from RM1.90 previously. This fair value is based on a discounted cash flow (DCF) methodology. We have extrapolated our forecast period to FY16 and then grown free cash flows by a terminal rate of 3% thereafter. We have assumed no further contributions from the Malaysian power plants upon expiry of the power purchase agreements (PPAs) in Hence, nothing is ascribed to these assets in our terminal value calculations. Discounting the free cash flows at a WACC of 7.5%, adding proceeds from potential conversion of outstanding warrants, and taking out net debt gives YTL Power an equity value of RM22bn. This translates to a fair value of just over RM2.60 per share, on a fully diluted basis. Our target price offers 20% upside from current levels. We also upgrade our recommendation to Buy (from Outperform). Table 6: Target price derivation RM m WACC (%) 7.5 Terminal growth rate (%) 3.0 NPV of forecasts 6,886 NPV of terminal value 28,762 Warrants conversion 2,566 Enterprise value 38,214 Less net debt 16,304 Equity value 21,910 Fully diluted number of shares (m) 8,353 Per share equity value (RM) 2.62 Source: KAF At fair value, the stock would trade at acceptable valuations of 16x FY10 PER and 2.6x P/B. More importantly, it would offer a sustainable gross yield of 5.8% which we believe is decent for investors seeking exposure into a stable company that also offers potential upside from M&A and/or expansion of existing utility assets. 10

11 YTL Power International FINANCIAL STATEMENTS PROFIT AND LOSS STATEMENT FYE June (RM m) F 2011F 2012F Turnover 4, , , , , ,525.8 Operating costs (2,063.1) (2,069.1) (3,377.6) (9,467.5) (9,483.5) (9,487.0) EBITDA 2, , , , , ,038.9 Depreciation and amortisation (588.5) (599.6) (608.0) (696.4) (740.8) (783.5) EBIT 1, , , , , ,255.3 Net interest income (437.7) (398.0) (481.9) (706.9) (739.8) (771.3) Associates Exceptionals (507.5) Pretax profit 1, , , , , ,709.5 Taxation (121.1) (346.9) (726.6) (324.7) (325.2) (343.2) Minority interest Net profit 1, , , , ,366.3 Normalised net profit 1, , , , , ,366.3 Fully diluted no. of shares (m) 6, , , , , ,353.3 Fully diluted EPS (sen) Fully diluted normalised EPS (sen) BALANCE SHEET FYE June (RM m) F 2011F 2012F Non-current assets Property, plant and equipment 14, , , , , ,462.6 Prepaid lease payment Intangible assets , , , ,331.8 Associated companies , , ,273.4 Investments Prepayments and others Total non-current assets 16, , , , , ,966.3 Current assets Inventories , , ,763.1 Receivables, deposits and prepayments , , , , ,830.5 Short term investments Fixed deposits 6, , , , , ,056.7 Cash and bank balances Total current assets 7, , , , , ,761.1 Total Assets 24, , , , , ,727.4 Current liabilities Payables and accrued expenses , , , , ,722.3 Provision for taxation Bonds , Borrowings , , , , ,806.1 Others Total current liabilities 2, , , , , ,423.9 Financed by: Share capital 2, , , , , ,526.5 Share premium 1, , , , , ,824.6 Merger and other reserves (2,089.5) (2,037.9) (2,663.3) (2,663.3) (2,663.3) (2,663.3) Treasury shares (402.8) (360.1) (119.8) (119.8) (119.8) (119.8) Retained earnings 3, , , , , ,748.7 Shareholders' funds 6, , , , , ,316.7 Minority interest Deferred taxation 2, , , , , ,783.4 Bonds 9, , , , , ,660.5 Borrowings 3, , , , , ,082.1 Others Total Liabilities & Shareholders' Funds 24, , , , , ,727.4 Source: Company, KAF 11

12 CASHFLOW STATEMENT FYE June (RM m) F 2011F 2012F Cashflow from operations (CFO) Pretax profit 1, , , , , ,709.5 Non-cash items , , , ,329.4 Net change in working capital 71.6 (52.4) (793.7) (922.2) (14.3) (23.3) Tax paid (209.4) (268.4) (726.6) (324.7) (325.2) (343.2) Interest paid (626.2) (666.2) (878.1) (998.0) (998.0) (998.0) Others (88.6) (84.3) (62.6) CFO 1, , , , ,674.4 Cashflow from investing (CFI) Purchase of plant and equipment (CAPEX) (1,097.6) (1,645.6) (520.6) (1,800.0) (1,800.0) (1,800.0) Interest received Dividends received Others (8,568.0) CFI (398.7) (1,107.2) (8,565.8) (1,382.1) (1,415.1) (1,446.6) Cashflow from financing (CFF) Dividends paid (746.7) (584.0) (503.4) (775.7) (793.5) (793.5) Equity raised/(repaid) (158.9) (338.8) (919.8) Borrowings raised/(repaid) , , Bonds raised/(repaid) 1, ,898.1 (1,638.7) (645.4) - - Proceeds from issue of warrants HP/Finance lease liabilities raised/(repaid) (11.7) (35.6) CFF , , (793.5) (793.5) Net change in cash and cash equivalents 1, ,532.6 (3,469.2) (619.9) (659.4) (565.7) Per Share Data FYE June F 2011F 2012F Fully diluted EPS (sen) Fully diluted normalised EPS (sen) Gross DPS (sen) Book value per share (RM) Cash earnings per share (sen) FCF per share (sen) (3.4) Operational ratios FYE June F 2011F 2012F EBITDA margin (%) EBIT margin (%) Pretax margin (%) Net margin (%) Normalised net margin (%) EBITDA interest cover (X) Net gearing (%) Normalised ROE (%) FCF/Revenue (%) (2.0) Valuation ratios FYE June F 2011F 2012F PER (X) Normalised PER (X) P/B (X) Gross yield (%) Dividend payout (%) Source: Company, KAF 12

13 YTL Power International Disclaimer This report has been prepared solely for the information of clients of KAF Group of companies. It is meant for private circulation only, and shall not be reproduced, distributed or published either in part or otherwise without the prior written consent of KAF-Seagroatt & Campbell Securities Sdn Bhd. The information and opinions contained in this report have been compiled and arrived at based on information obtained from sources believed to be reliable and made in good faith. Such information has not been independently verified and no guarantee, representation or warranty, express or implied, is made by KAF-Seagroatt & Campbell Securities Sdn Bhd as to the accuracy, completeness or correctness of such information and opinion. Any recommendations referred to herein may involve significant risk and may not be suitable for all investors, who are expected to make their own investment decisions at their own risk. Descriptions of any company or companies or their securities are not intended to be complete and this report is not, and should not, be construed as an offer, or a solicitation of an offer, to buy or sell any securities or any other financial instruments. KAF-Seagroatt & Campbell Securities Sdn Bhd, their Directors, Representatives or Officers may have positions or an interest in any of the securities or any other financial instruments mentioned in this report. All opinions are solely of the author, and subject to change without notice. Dato Ahmad Bin Kadis Managing Director Recommendation Structure KAF-Seagroatt & Campbell Securities Sdn Bhd uses the following rating system: Buy High conviction stock with an expected price appreciation in excess of 20% in the next 12 months Outperform The stock is expected to perform ahead of the sector and market in the next 12 months Neutral The stock is expected to perform in line with the sector and market in the next 12 months Underperform The stock is expected to perform below the sector and market in the next 12 months Sell High conviction stock with an expected price depreciation in excess of 20% 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. KAF-Seagroatt & Campbell Securities Sdn Bhd ( U) Level 14, Chulan Tower, No. 3, Jalan Conlay, Kuala Lumpur, Malaysia General : (603) Research : (603) / 96 Fax : (603) research@kaf.com.my Website : 13