asia pacific equity research - gamudagamuda.listedcompany.com/misc/research_reports/jp... · 9.6%...

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Asia Pacific Equity Research28 March 2014

GamudaOverweightGAMU.KL, GAM MK

MRT Line 2 good news overshadowed by water restructuring fears

Price: M$4.64

Price Target: M$5.50

Malaysia

Construction

Hoy Kit Mak AC

(60-3) 2718-0713

[email protected]

Bloomberg JPMA MAK <GO>

JPMorgan Securities (Malaysia) Sdn. Bhd. (18146-X)

Vanice Siew

(603) 2718-0708

[email protected]

JPMorgan Securities (Malaysia) Sdn. Bhd. (18146-X)

Karen Li, CFA

(852) 2800-8589

[email protected]

J.P. Morgan Securities (Asia Pacific) Limited

YTD 1m 3m 12mAbs -3.4% 0.9% -4.0% 11.1%Rel -3.1% 0.1% -3.2% 0.3%

Gamuda Berhad (Reuters: GAMU.KL, Bloomberg: GAM MK)

M$ in mn, year-end Jul FY12A FY13A FY14E FY15E FY16ERevenue (M$ mn) 3,087 3,883 3,940 4,596 4,700Net Profit (M$ mn) 547 630 725 934 1,052EPS (M$) 0.26 0.30 0.32 0.41 0.47DPS (M$) 0.08 0.09 0.11 0.14 0.14Revenue growth (%) 15.5% 25.8% 1.5% 16.6% 2.3%EPS growth (%) 27.8% 15.1% 6.2% 28.9% 12.6%ROCE 7.1% 5.2% 5.6% 6.7% 7.1%ROE 14.2% 14.1% 14.9% 17.2% 17.2%P/E (x) 17.6 15.3 14.4 11.2 9.9P/BV (x) 2.4 2.0 1.9 1.7 1.6EV/EBITDA (x) 18.8 22.4 19.9 14.7 12.4Dividend Yield 1.7% 1.9% 2.4% 3.0% 3.0%Source: Company data, Bloomberg, J.P. Morgan estimates.

Company DataShares O/S (mn) 2,079Market Cap (M$ mn) 9,648Market Cap ($ mn) 2,925Price (M$) 4.64Date Of Price 27 Mar 14Free Float(%) 71.4%3M - Avg daily vol (mn) 6.413M - Avg daily val (M$ mn) 28.603M - Avg daily val ($ mn) 8.7FBMKLCI 1839.14Exchange Rate 3.30Price Target End Date 31-Dec-14Price Target (M$) 5.50

See page 9 for analyst certification and important disclosures, including non-US analyst disclosures.J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.

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M$

Mar-13 Jun-13 Sep-13 Dec-13 Mar-14

Price Performance

GAMU.KL share price (M$)

FBMKLCI (rebased)

We attended an analysts’ briefing after release of the 2Q FY14 results. PDP role for the MRT Line 2 appears confirmed, but we believe this is overshadowed by the Selangor water sector restructuring fears with possible invocation of Section 114, which in our worst-case scenario would erode 9.6% from our SoTP valuation. We would view any potential share price weakness as an opportunity to accumulate.

2Q FY14 net profit of M$170MM was within our expectation. See “Gamuda: 2QFY14 results preview: Stronger sequential earnings growth expected”. 1H FY14 net profit accounted for 46% of our full year forecast, where we expect a stronger 2H on the back of favorable MRT Line 1 execution. Net profit rose 8.4% Y/Y on the back of stronger construction billings.

Management indicated that the Project Delivery Partner role for the M$25B MRT Line 2 has been approved by cabinet, and we believe it is awaiting an appointment letter from the MRT Corp. This is a major catalyst for Gamuda, in our view. The intention is to try and speed up the roll out of the project to 4Q 2015 from early 2016.

Good news for MRT Line 2 PDP role overshadowed by uncertainty about the potential invocation of Section 114 under WASIA. Although Section 114 does not confer the right for the takeover of water assets (Gamuda owns 40% in Splash), management believes there is uncertainty over concession/O&M returns. This puts at risk our M$0.53/share valuation for Gamuda’s 40% stake in Splash and Gamuda Water O&M, implying 9.6% downside risk to our SoTP valuation for Gamuda. The company views any forceful takeover of water concessionaires without adequate and mutually agreeable compensation as a breach of contract, and we believe that management will hold out against accepting any offer deemed detrimental to shareholders. It also has broader implications for the debt/capital market, in our view, due to the breach of sanctity of contracts (current and future).

https://jpmm.com/research/content/GPS-1352098-0

https://jpmm.com/research/content/GPS-1352098-0

2


Hoy Kit Mak(60-3) [email protected]

Key catalysts for the stock price: Upside risks to our view: Downside risks to our view:

• Securing Project Delivery Partner and tunneling role for MRT Line 2 • Securing other railway infrastructure projects including Gemas-Johor Bahru electrified double tracking and High Speed Rail• Earnings surprise from favorable construction execution

• Vietnam property sales accelerates (very low expectations now)• Dividend surprises on the upside from potential concession asset sale • Construction and property margins exceed expectation on favorable execution

• Delays in projects award and execution• Sharp spikes in building material costs that affect margins• Lower-than-expected property sales

Key financial metrics FY13A FY14E FY15E FY16E Valuation and price target basis

Revenues (LC)

3,883.1

3,883.1

3,940.4

4,595.5 Our Dec-14 SoTP-based PT of M$5.50 assumes 18x P/E on CY15Econstruction earnings, in line with the historical average. Property division is valued based on16x P/E on CY15E property earnings, at a 10% discount to the implied sector average target P/E. Highway concessionaire Litrak (LTK MK), in which Gamuda has a 45.8% stake, is marked to market at M$4.40/share. Other concessions are valued based on DCF using a WACC of 9%, while its Indian toll concessions are based on a WACC of 15.4%.

Revenue growth (%) 25.8% 1.5% 16.6% 2.3%EBITDA (LC) 471.4 526.4 691.9 783.6

EBITDA margin (%) 12.1% 13.6% 17.6% 17.1%Tax rate (%) 20.6% 14.5% 14.9% 15.0%

Net profit (LC) 541.4 724.7 933.8 1051.7EPS (LC) 0.26 0.32 0.41 0.46

EPS growth (%) -1.2% 23.8% 27.4% 12.1% Chart to support valuation and price target

DPS (LC) 0.09 0.11 0.14 0.14

BVPS (LC) 2.3 2.4 2.6 2.9Sum of Parts Value

(M$ MM)M$/Share

Operating cash flow (LC mn)

(4.2)

268.1

118.7

204.2 Construction (includes MRT PDP fees NPV at WACC of 9%)

3,174.7

1.39

Free cash flow (LC mn)

(80.7)

(28.7)

(177.6)

(91.3)Property

6,284.5 2.76

Interest cover (X)

(127.0)

138.4

159.1

149.3 Litrak

1,012.3 0.44

Net margin (%) 13.9% 18.7% 23.7% 22.9% Malaysian toll concessions 908.5 0.40

Sales/assets (X)

0.42

0.39

0.42

0.40 Indian toll concessions 264.7 0.12

Debt/equity (%) 48.1% 48.6% 43.7% 39.1%Water concession

1,198.2 0.53

Net debt/equity (%) 14.0% 16.5% 16.1% 14.0%Net cash/(debt)

(215.8)

(0.09)

ROE (%) 14.1% 14.9% 17.2% 17.2%Total SoTP

12,627.0 5.55

Key model assumptions FY13A FY14E FY15E FY16E FD SoTP/share (M$) 5.55

New construction order (M$ B) - 7.9 4.5 - Dec14 SoTP/share (M$) 5.50

Construction PBT margin (%) 9.9 6.8 9 10.5New property sales (M$B) 1.8 1.9 1.9 1.9

Source: Bloomberg, Company and J.P. Morgan estimates. Source: Bloomberg, J.P. Morgan estimates.

Sensitivity analysis EBITDA EPS JPMe vs. consensus, change in estimatesSensitivity to FY14E FY15E FY14E FY15E EPS FY14E FY15EM$1b chg to new construction orders 6.8% 5.2% 3.7% 2.9% JPMe old 0.32 0.411ppt chg in construction PBT margin 4.0% 4.0% 2.2% 2.6% JPMe new 0.32 0.415% chg in property sales 1.7% 1.2% 0.9% 0.7% % chg 0% 0%1ppt chg in property PBT margin 2.8% 2.5% 1.5% 1.4% Consensus 0.31 0.34

Source: J.P. Morgan estimates. Source: Bloomberg, J.P. Morgan.

Construction sector peer comparison

As at: 27 Mar-14 Ticker Mkt cap Price Rating Target P/E (x) 2yr EPS CAGR ROE (%) Div Yld Net gearing(US$MM) (LC) (LC) CY14E CY15E 2013-2015E FY14E FY15E FY14E FY15E FY14E

Gamuda GAM MK 3,246 4.64 OW 5.50 12.8 10.7 21.3% 14.9 17.2 2.4% 3.0% 16.4%Hock Seng Lee HSL MK 291 1.74 NC - 9.9 9.5 9.3% 16.8 15.4 2.3% 2.4% -49.3%IJM Corp IJM MK 2,647 6.12 OW 7.40 13.4 11.3 25.5% 9.1 11.3 2.1% 2.1% 26.8%WCT Holdings WCTHG MK 708 2.14 N 2.30 12.3 11.5 30.5% 10.8 9.8 2.6% 3.9% 2.8%Weighted average 6,891 12.9 10.9 23.3% 12.4 14.1 2.3% 2.7% 16.2%

Source: Bloomberg, J.P. Morgan. Consensus estimates for non-covered (NC) stocks, J.P. Morgan estimates for all others.

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Water asset restructuring uncertainty

Gamuda on Mar 10 rejected the Selangor state government’s unchanged offer to buy SPLASH, citing that the equity value offered of M$250.6MM is below its NAV of M$2.54B, which would have resulted in a divestment loss of M$920MM. With the latest lower offer price (see Gamuda: Yet another new twist to water sector restructuring, published 27 March), this suggests that even the equity value of M$250.6MM offered is at stake. It is also unclear what has happened to the M$2B Federal government ‘top up’ as per press reports earlier. The company is willing to accept international arbitration as proposed by the Selangor state, subject to ‘internationally accepted’ valuation methods.

The company views any forceful takeover of water concessionaires without adequate and mutually agreeable compensation as a breach of contract and we believe that management will hold out against accepting any offer deemed detrimental to shareholders. It also has broader implications for the debt/capital market, in our view, due to the breach of sanctity of contracts (current and future).

2Q FY14 results review

Table 1: Gamuda’s 2Q FY14 results summary

M$MM, YE Jul. 2QFY14 2QFY13 Y/Y change 1QFY14 Q/Q change 1HFY14 1HFY13 Y/Y changeRevenue 1,334 875 52% 1,206 11% 2,540 1,647 54%Pretax 221 202 9% 211 5% 432 385 12%Pretax margin (%) 17% 23% 18% 17% 23%

Core net profit 170 157 8% 165 3% 336 302 11%Core net profit margin (%) 13% 18% 14% 13% 18%Core FD EPS (M$ sen) 7.3 7.2 0% 7.1 2% 14.3 14.0 3%

Note: The earnings summary table above is before taking into effect of FRS 11. Source: Company

2Q FY14 net profit of M$170MM was within our expectation. 1H FY14 net profit accounted for 46% of our full year forecast, where we expect a stronger 2H on the back of favorable MRT Line 1 execution. Net profit rose 8.4% Y/Y on the back of stronger construction billings.

Adjusting for FRS11 accounting changes that saw joint venture profits being equity accounted instead, construction PBT margins expanded from 7.6% in 1QFY14 to 7.8% in 2QFY14.

Property division achieved lower new sales of M$405MM in 2QFY14 vs. M$575MM in 1QFY14, with M$1.7B unbilled sales. Management is confident of achieving M$1.9B new sales target for FY14 despite slowing Iskandar sales.

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Figure 1: Gamuda’s headline earnings trend

Source: Company

Figure 2: Gamuda’s construction PBT margin trend

Source: Company

Figure 3: Gamuda’s 1YR forward P/E band

Source: Bloomberg, J.P. Morgan estimates

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+2SD = 36.2x

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Figure 4: Gamuda’s 1YR forward P/BV band


Figure 5: Gamuda’s discount to SoTP


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+2SD = 2.8x

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Investment Thesis, Valuation and Risks

Gamuda (Overweight; Price Target: M$5.50)

Investment Thesis

The three key drivers of our Overweight recommendation on Gamuda are:

1. Gamuda is a key beneficiary of the government’s M$160B rail-related infrastructure spending given its superior heavy engineering skillsets and large-scale project interface capabilities.

2. There could be positive dividend surprises from potential concession asset sales.

3. Over the medium term, there is the potential for remaining concession assets injection into a Business Trust to unlock value.

Valuation

Our Dec-14 SoTP-based PT of M$5.50 assumes 18x P/E on CY15E construction earnings, in line with the historical average. We value the property division at 16x P/E on CY15E property earnings, at a 10% discount to the implied sector average target P/E. Highway concessionaire Litrak (LTK MK), in which Gamuda has a 45.8% stake, is marked to market at M$4.40/share. Other concessions are valued based on DCF using a WACC of 9%, while its Indian toll concessions are based on a WACC of 15.4%.

Gamuda’s SoTP valuation

Sum of Parts Value (M$ MM)

M$/Share

Construction (includes MRT PDP fees NPV at WACC of 9%) 3,174.7 1.39Property 6,284.5 2.76Litrak 1,012.3 0.44Malaysian toll concessions 908.5 0.40Indian toll concessions 264.7 0.12Water concession 1,198.2 0.53Net cash/(debt) (215.8) (0.09)Total SoTP 12,627.0 5.55FD SoTP/share (M$) 5.55

Dec-14 SoTP/share (M$) 5.50

Source: J.P. Morgan estimates.

Risks to Rating and Price Target

The rise in Real Property Gains Tax (RPGT) announced in Budget 2014 and foreign minimum thresholds could curtail property demand growth, especially in Iskandar Malaysia. Greater-than-expected delays in infrastructure project rollouts, and a higher-than-expected increase in building material costs could negatively affect the earnings outlook.

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JPM Q-ProfileGamuda Bhd. (MALAYSIA / Industrials)As Of: 21-Mar-2014 [email protected]

Local Share Price Current: 4.58 12 Mth Forward EPS Current: 0.34

Earnings Yield (& local bond Yield) Current: 7% Implied Value Of Growth* Current: 14.94%

PE (1Yr Forward) Current: 13.6x Price/Book Value Current: 2.1x

ROE (Trailing) Current: 12.15 Dividend Yield (Trailing) Current: 2.65

Summary

Gamuda Bhd. 3184.84 As Of:

MALAYSIA 6.9638 SEDOL 6359881 Local Price: 4.58

Industrials Construction & Engineering EPS: 0.34

Latest Min Max Median Average 2 S.D.+ 2 S.D. - % to Min % to Max % to Med % to Avg12mth Forward PE 13.55x 7.13 24.40 13.82 14.72 21.34 8.09 -47% 80% 2% 9%P/BV (Trailing) 2.07x 0.97 6.06 2.11 2.23 3.75 0.71 -53% 193% 2% 8%

Dividend Yield (Trailing) 2.65 0.58 14.10 2.77 3.15 7.50 -1.20 -78% 431% 4% 19%

ROE (Trailing) 12.15 6.24 18.57 12.71 12.64 19.91 5.36 -49% 53% 5% 4%

Implied Value of Growth 14.9% -0.59 0.60 0.27 0.26 0.62 -0.10 -498% 300% 79% 75%

Source: Bloomberg, Reuters Global Fundamentals, IBES CONSENSUS, J.P. Morgan Calcs * Implied Value Of Growth = (1 - EY/Cost of equity) where cost of equity =Bond Yield + 5.0% (ERP)

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Gamuda: Summary of FinancialsIncome Statement Cash flow statementM$ in millions, year end Jul FY12 FY13 FY14E FY15E FY16E M$ in millions, year end Jul FY12 FY13 FY14E FY15E FY16E

Revenues 3,087 3,883 3,940 4,596 4,700 EBIT 539 448 501 664 753

% change Y/Y 15.5% 25.8% 1.5% 16.6% 2.3% Depr. & amortization 22 24 26 28 31

EBITDA 561 471 526 692 783 Change in working capital (103) (429) (34) (90) (55)% change Y/Y 40.9% (16.0%) 11.7% 31.4% 13.3% Others (126) (56) (232) (483) (524)

EBIT 539 448 501 664 753 Cash flow from operations 332 (13) 261 119 204

% change Y/Y 42.7% (16.9%) 11.8% 32.6% 13.4%

EBIT Margin 17.5% 11.5% 12.7% 14.4% 16.0% Capex (83) (73) (300) (300) (300)

Net Interest (17) 4 (4) (4) (5) Disposal/(purchase) 0 0 0 0 0Earnings before tax 728 693 858 1,107 1,246 Net Interest (17) 4 (4) (4) (5)

% change Y/Y 33.7% (4.9%) 23.8% 29.1% 12.6% Other (8) (2) (4) (3) (4)

Tax (162) (143) (124) (165) (187) Free cash flow 262 (90) (36) (178) (92)

as % of EBT 22.3% 20.6% 14.5% 14.9% 15.0%

Core net profit 547 630 725 934 1,052 Equity raised/(repaid) 15 197 0 0 0% change Y/Y 28.7% 15.1% 15.0% 28.9% 12.6% Debt raised/(repaid) - - - - -

Shares outstanding 2,079 2,079 2,251 2,251 2,251 Other 0 0 0 0 0

Core EPS 0.26 0.30 0.32 0.41 0.47 Dividends paid (166) (177) (217) (281) (315)

% change Y/Y 27.8% 15.1% 6.2% 28.9% 12.6% Beginning cash 1,386 1,616 1,745 1,793 1,720

Fully diluted EPS 0.26 0.28 0.33 0.41 0.46 Ending cash 1,616 1,745 1,793 1,720 1,749% change Y/Y 27.8% 4.5% 18.3% 27.4% 12.1% DPS 0.08 0.09 0.11 0.14 0.14

Balance sheet Ratio Analysis

M$ in millions, year end Jul FY12 FY13 FY14E FY15E FY16E M$ in millions, year end Jul FY12 FY13 FY14E FY15E FY16ECash and cash equivalents 1,616 1,745 1,793 1,720 1,749 EBITDA margin 18.2% 12.1% 13.4% 15.1% 16.7%

Accounts receivable 1,729 1,963 1,992 2,323 2,376 Operating margin 17.5% 11.5% 12.7% 14.4% 16.0%

Inventories 1,878 2,008 2,038 2,077 2,124 Net margin 17.7% 16.2% 19.4% 21.2% 23.2%

Others 0 0 0 0 0Current assets 5,223 5,717 5,823 6,120 6,249

. Sales per share growth 14.7% 25.8% (6.3%) 16.6% 2.3%

LT investments 480 577 577 576 575 Sales growth 15.5% 25.8% 1.5% 16.6% 2.3%

Investments in associates 1,660 1,803 2,111 2,481 2,888 Net profit growth 28.7% 15.1% 15.0% 28.9% 12.6%

Other long term assets 123 145 141 138 135 EPS growth 27.8% 15.1% 6.2% 28.9% 12.6%Net fixed assets 1,009 1,568 1,845 2,120 2,393

Total Assets 8,494 9,809 10,498 11,436 12,240 Interest coverage (x) 33.6 NM 140.1 165.1 157.7

.

Liabilities Net debt to equity 13.3% 14.0% 16.4% 16.0% 13.9%

Short-term loans 1,327 741 511 511 511 Sales/assets 0.4 0.4 0.4 0.4 0.4Payables 1,721 1,657 1,682 1,961 2,006 Assets/equity 2.1 2.0 2.0 1.9 1.9

Others 53 82 17 58 80 ROE 14.2% 14.1% 14.9% 17.2% 17.2%

Total current liabilities 3,100 2,481 2,210 2,530 2,597 ROCE 7.1% 5.2% 5.6% 6.7% 7.1%

.

Long-term debt 855 1,717 2,200 2,199 2,199Other liabilities 270 504 504 504 504

Total Liabilities 4,225 4,702 4,914 5,234 5,300

Minorities 221 226 226 226 226

Shareholder's equity 4,048 4,881 5,358 5,977 6,713

BVPS 1.95 2.35 2.38 2.65 2.98

Source: Company reports and J.P. Morgan estimates.

9



Analyst Certification: The research analyst(s) denoted by an “AC” on the cover of this report certifies (or, where multiple research analysts are primarily responsible for this report, the research analyst denoted by an “AC” on the cover or within the document individually certifies, with respect to each security or issuer that the research analyst covers in this research) that: (1) all of the views expressed in this report accurately reflect his or her personal views about any and all of the subject securities or issuers; and (2) no part of any of the research analyst's compensation was, is, or will be directly or indirectly related to the specific recommendations or views expressed by the research analyst(s) in this report. For all Korea-based research analysts listed on the front cover, they also certify, as per KOFIA requirements, that their analysis was made in good faith and that the views reflect their own opinion, without undue influence or intervention.

Important Disclosures

Client: J.P. Morgan currently has, or had within the past 12 months, the following company(ies) as clients: Gamuda.

Company-Specific Disclosures: Important disclosures, including price charts, are available for compendium reports and all J.P. Morgan–covered companies by visiting https://jpmm.com/research/disclosures, calling 1-800-477-0406, or e-mailing [email protected] with your request. J.P. Morgan’s Strategy, Technical, and Quantitative Research teams may screen companies not covered by J.P. Morgan. For important disclosures for these companies, please call 1-800-477-0406 or e-mail [email protected].

Date Rating Share Price (M$)

Price Target (M$)

12-Nov-06 OW 2.30 2.65

30-Jan-07 OW 3.45 3.90

28-Mar-07 OW 4.12 4.75

18-Oct-07 UW 5.00 4.75

11-Nov-07 UW 4.62 4.40

21-Feb-08 UW 4.98 3.30

02-May-08 N 3.16 3.30

26-Jun-08 N 2.33 2.60

24-Sep-08 N 2.29 2.20

17-Dec-08 N 1.82 1.80

03-Mar-09 OW 1.95 2.30

16-Jun-09 N 2.68 2.60

15-Sep-09 UW 3.20 3.00

10-Mar-10 UW 2.79 2.70

24-Nov-10 N 3.65 3.80

29-Sep-11 N 2.86 3.10

15-Dec-11 N 3.03 3.20

20-Mar-12 N 3.74 3.70

09-Nov-12 OW 3.66 4.30

12-Jun-13 OW 4.72 6.00

27-Sep-13 OW 4.59 5.50

The chart(s) show J.P. Morgan's continuing coverage of the stocks; the current analysts may or may not have covered it over the entire period. J.P. Morgan ratings or designations: OW = Overweight, N= Neutral, UW = Underweight, NR = Not Rated

Explanation of Equity Research Ratings, Designations and Analyst(s) Coverage Universe: J.P. Morgan uses the following rating system: Overweight [Over the next six to twelve months, we expect this stock will outperform the average total return of the stocks in the analyst’s (or the analyst’s team’s) coverage universe.] Neutral [Over the next six to twelve months, we expect this stock will perform in line with the average total return of the stocks in the analyst’s (or the analyst’s team’s) coverage universe.] Underweight [Over the next six to twelve months, we expect this stock will underperform the average total return of the stocks in the analyst’s (or the analyst’s team’s) coverage universe.] Not Rated (NR): J.P. Morgan has removed the rating and, if applicable, the price target, for this stock because of either a lack of a sufficient fundamental basis or for legal, regulatory or policy reasons. The previous rating and, if applicable, the price target, no longer should be relied upon. An NR designation is not a recommendation or a rating. In our Asia (ex-Australia) and U.K. small- and mid-cap equity research, each stock’s expected total return is compared to the expected total return of a benchmark country market index, not to those analysts’ coverage universe. If it does not appear

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Price(M$)

Oct06

Apr08

Oct09

Apr11

Oct12

Apr14

Gamuda (GAMU.KL, GAM MK) Price Chart

OW M$4.75 N M$2.6OW M$2.3 N M$3.7

OW M$3.9UW M$4.4N M$3.3 N M$1.8 UW M$3 N M$3.2

OW M$2.65 UW M$4.75UW M$3.3N M$2.2 N M$2.6 UW M$2.7 N M$3.8 N M$3.1 OW M$4.3OW M$6OW M$5.5

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends.

Initiated coverage Nov 12, 2006.

mailto:[email protected]


https://jpmm.com/research/disclosures

10



in the Important Disclosures section of this report, the certifying analyst’s coverage universe can be found on J.P. Morgan’s research website, www.jpmorganmarkets.com.

Coverage Universe: Mak, Hoy Kit: Berjaya Sports Toto (BSTB.KL), Gamuda (GAMU.KL), IJM Corporation (IJMS.KL), MMC Corporation Berhad (MMCB.KL), Malaysia Airports Holdings Berhad (MAHB.KL), WCT Holdings Bhd (WCTE.KL)

J.P. Morgan Equity Research Ratings Distribution, as of January 1, 2014

Overweight(buy)

Neutral(hold)

Underweight(sell)

J.P. Morgan Global Equity Research Coverage 43% 45% 12%IB clients* 57% 49% 36%

JPMS Equity Research Coverage 43% 50% 7%IB clients* 75% 66% 59%

*Percentage of investment banking clients in each rating category.For purposes only of FINRA/NYSE ratings distribution rules, our Overweight rating falls into a buy rating category; our Neutral rating falls into a hold rating category; and our Underweight rating falls into a sell rating category. Please note that stocks with an NR designation are not included in the table above.

Equity Valuation and Risks: For valuation methodology and risks associated with covered companies or price targets for covered companies, please see the most recent company-specific research report at http://www.jpmorganmarkets.com, contact the primary analyst or your J.P. Morgan representative, or email [email protected].

Equity Analysts' Compensation: The equity research analysts responsible for the preparation of this report receive compensation based upon various factors, including the quality and accuracy of research, client feedback, competitive factors, and overall firm revenues.

Registration of non-US Analysts: Unless otherwise noted, the non-US analysts listed on the front of this report are employees of non-US affiliates of JPMS, are not registered/qualified as research analysts under NASD/NYSE rules, may not be associated persons of JPMS, and may not be subject to FINRA Rule 2711 and NYSE Rule 472 restrictions on communications with covered companies, public appearances, and trading securities held by a research analyst account.

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http://www.optionsclearing.com/publications/risks/riskstoc.pdf


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"Other Disclosures" last revised December 7, 2013.

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