More excitement ahead. The eventual award of the RM1.3b Pahang- Selangor raw water transfer tunnel works on 28 Apr confirms that the new administration sees the urgency for construction in stimulating the economy. Langat 2 should be next in the limelight, together with the massive Klang Valley LRT system. We expect more positive news flow over the near-term. Continue to Overweight Construction. Langat 2 next. Langat 2, the downstream portion of the water transfer project, comprises a 2,180 mld treatment plant and the distribution pipelines. The estimated RM5b construction contract was awarded in Feb ’08 to Kumpulan Darul Ehsan, which holds 60% of Kumpulan Perangsang Selangor (KPS). As KPS does not have a major construction arm, we think that potential beneficiaries are Gamuda, Loh & Loh and Taliworks, which have had working experience with, and/or are affiliated to KPS via shareholdings. Klang Valley LRT to follow. Local companies have been invited to submit “expressions of interest” for the LRT extension and upgrading works, with the government keen to see construction works start within the next 3-4 months, according to today’s Edge. The extension works could cost RM7b, including RM1b to buy rolling stocks. Our view is that the project may be parcelled out and experienced contractors like IJM, Gamuda, UEM Builders and YTL Corp may bid as turnkey contractors. Overweight Construction. We continue to expect mid-sized projects to lead the momentum of construction sector recovery under the fiscal stimulus. Meanwhile, the inter-state water transfer (including Langat 2) and Klang Valley LRT extension are also two priority projects under the 9th Malaysia Plan with works expected to start before the decade turns. IJM, WCT and HSL remain on our Buy list. Meanwhile, Gamuda is a strong contender for the two mega water and LRT projects. Our Hold call on the stock is under review, with upward revision potential.

1. Equity Research
PP11072/03/2010 (023549)
Sector Update 5 May 2009
Maintain Overweight: The mega
Construction projects are rolling in …
Overweight (unchanged) More excitement ahead. The eventual award of the RM1.3b Pahang-
Selangor raw water transfer tunnel works on 28 Apr confirms that the
new administration sees the urgency for construction in stimulating the
economy. Langat 2 should be next in the limelight, together with the
massive Klang Valley LRT system. We expect more positive news flow
over the near-term. Continue to Overweight Construction.
Wong Chew Hann, CA
wchewh@maybank-ib.com
Langat 2 next. Langat 2, the downstream portion of the water transfer
(603) 2297 8686
project, comprises a 2,180 mld treatment plant and the distribution
pipelines. The estimated RM5b construction contract was awarded in
Feb ’08 to Kumpulan Darul Ehsan, which holds 60% of Kumpulan
Perangsang Selangor (KPS). As KPS does not have a major
construction arm, we think that potential beneficiaries are Gamuda, Loh
& Loh and Taliworks, which have had working experience with, and/or
are affiliated to KPS via shareholdings.
Klang Valley LRT to follow. Local companies have been invited to
submit “expressions of interest” for the LRT extension and upgrading
works, with the government keen to see construction works start within
the next 3-4 months, according to today’s Edge. The extension works
could cost RM7b, including RM1b to buy rolling stocks. Our view is that
the project may be parcelled out and experienced contractors like IJM,
Gamuda, UEM Builders and YTL Corp may bid as turnkey contractors.
Overweight Construction. We continue to expect mid-sized projects
to lead the momentum of construction sector recovery under the fiscal
stimulus. Meanwhile, the inter-state water transfer (including Langat 2)
and Klang Valley LRT extension are also two priority projects under the
th
9 Malaysia Plan with works expected to start before the decade turns.
IJM, WCT and HSL remain on our Buy list. Meanwhile, Gamuda is a
strong contender for the two mega water and LRT projects. Our Hold
call on the stock is under review, with upward revision potential.
Sector comparison table
Stock Rec Shr px Mkt cap TP Basis PER PER Gross yldGross yld P/B P/B O/s Order
CY09 CY10 FY09 FY10 FY09 FY10 Book
(RM) (RMm) (RM) (x) (x) (%) (%) (x) (x) (RMm)
Gamuda Hold 2.48 4,976 2.50 RNAV 22.9 17.6 3.2 3.2 1.6 1.5 8,500
IJM Corp Buy 5.30 4,992 5.50 RNAV 14.7 12.3 4.7 3.8 1.0 0.9 4,800
WCT Eng Buy 1.59 1,227 1.70 10x PER 9.6 9.8 4.4 4.4 1.0 0.9 2,200
Sunway # Hold 0.86 469 0.90 0.8x P/B 5.5 4.9 5.3 3.5 0.6 0.5 2,780
HSL * Buy 0.72 420 0.97 8x PER 7.9 6.0 5.3 5.6 1.4 1.2 1,270
Loh & Loh # Hold 4.10 279 4.32 1.4x P/B 12.9 11.7 2.0 2.0 1.4 1.2 630
* HSL’s TP upgraded from RM0.60 after the shift in valuation basis to 8x 2010 PER from 1.2x P/B.
# TPs of Sunway and Loh & Loh are under review as we look to restore our earnings-based valuation from asset-based.
Source: Company, Maybank-IB

2. Construction
Definition of Ratings
Maybank Investment Bank Research uses the following rating system:
STRONG BUY Total return is expected to exceed 20% in the next 12 months; high conviction call
BUY Total return is expected to be above 10% in the next 12 months
HOLD Total return is expected to be between above 0% to 10% in the next 12 months
FULLY VALUED Total return is expected to be between -10% and 0% in the next 12 months
SELL Total return is expected to be below -10% in the next 12 months
TRADING BUY Total return is expected to be between 10-20% in the next 6 months arising from positive newsflow e.g. mergers and
acquisition, corporate restructuring, and potential of obtaining new projects. However, the upside may or may not be
sustainable
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
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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
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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
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5 May 2009 Page 2 of 2