Outlook: US Market

Investors cheered a speech by Janet Yellen

in Chicago
Monday
morning in
which she
MARKET INDICES
maintained
the Fed will
US
support the
economy
CLOSE | CHANGE |
"for some
(%) CHG
time to
DOW 16,457.66 134.60
come.
0.82
Investors
hope strong
S&P500 1,872.34 14.72
economic
0.79%
data and
fading
NASDAQ 4,198.99
geopolitical
43.23 1.04
risks in
Ukraine and
_________________________
beyond will
___________
help stocks
continue
EUROPE
their fiveyear bull
CLOSE | CHANGE |
run.
(%) CHG
Sources
from
DAX
9,555.91 31.28
Bloomberg.
0.33
Outlook:
European
Market
CAC
4,391.50 19.76
Russia
began
-0.45
pulling back
_________________________
some
troops from
___________
Ukraines
ASIA
eastern
border
as
CLOSE | CHANGE |
diplomatic
(%) CHG
moves
continued
NIKKEI
14,828 132
to ease the
0.90
crisis over
its
HSI 22,151.06 85.53
annexation
0.39
of Crimea.
The
euro
bounced
back against the U.S. dollar even as softerthan-forecast inflation numbers added to
the discussion of whether the European
Central Bank will cut interest rates when it
meets later this week.
FTSE100 6,598.37 17.21
0.26

Sources from Reuters.

Outlook: Asian Market
Investors were unmoved by news that
North and South Korea had traded live
artillery fire across their disputed maritime
border Monday, forcing South Korean
islanders to take shelter. The exchange
came a day after the North drove up
tensions by threatening a new nuclear
test.
Traders are awaiting the release Tuesday
of the Bank of Japan's Tankan survey of
Japanese business sentiment, while the US
Labor Department will on Friday unveil
closely watched non-farm payrolls data for
March.
Sources from Reuters.
Outlook: KLCI
The FBM KLCI index 1.52 points or 0.1% on
Monday, led by the decline in plantation
shares included Kuala Lumpur Kepong
Bhd, IOI Corp Bhd and PPB Group Bhd
mostly caused by Crude Palm Oil prices on
decline from RM3,000 per tonne.
KLCI wavered between a high of 1,852.29
points and low of 1,839.03 saw 1.94 billion
shares worth RM2.38 billion with 408
decliners outpacing 384 gainers.
Top gainer was Syarikat Takaful Malaysia
Bhd while top decliner was American
Tobacco
(
M
)
Bhd
and
RA
Telecommunication Group Bhd was the
most-active counter.

[STC MARKET UPDATE]

April 2, 2014
STC: Sandakan Branch

Strictly For Internal Circulation Only

Stock Recommendation
PROTASCO (5070)
Company Background
Protasco Berhad is an investment holding company operates in four segments: Construction Contracts,
Engineering Services, Training and Education, and Trading. The road construction and maintenance
activities involve construction of new roads, rehabilitation works, road upgrading, and road
maintenance. It provides a range of engineering and consultancy services, such as site investigations,
laboratory testing, slope studies, traffic studies, product listing, research and development and quality
control and assurance. Kuala Lumpur Infrastructure University College offers a range of foundation,
diploma, degree and postgraduate programmes. It markets products, such as bitumen, petroleum
products, building materials and MAXON paving machine. In October 2011, its wholly owned
subsidiary, HCM Engineering Sdn. Bhd, acquired HCM Kasturi Sdn Bhd and Alkatech Sdn Bhd. On
October 20, 2011, it wholly owned subsidiary HCM Engineering Sdn. Bhd., acquired 51% interest in
Empayar Indera Sdn. Bhd championed by Dato Hasnur Rabiain Bin Ismail and the present Group
Managing Director, Dato Sri Ir Chong Ket Pen. The group was involved in subcontracting works for
clients like Projek Penyelenggaraan Lebuhraya Bhd (PROPEL) and Jabatan Kerja Raya (JKR) in the early
years. Protasco has completed more than RM3b worth of road and maintenance projects, both
domestically and internationally.
Board:

Main Market

Sector:

Construction

Avg Volume (4 weeks):

2,602,340

4 Weeks Range:

1.49 - 2.04

52 Weeks Range:

1.00 - 2.04

Average Price Target:

Price Target
Upside/Downside:

2.35
+0.35

Disclaimer:
The information and opinions in these slides were prepared by RHB Branch Broking. The investments discussed or recommended in
these slides may not be suitable for all investors. These slides have been prepared for discussion purposes only and are not an offer
to sell or a solicitation to buy any securities. The employees of RHB Branch Broking may from time to time have a position in or with
the securities mentioned herein. Members of the RHB Group and their affiliates may provide services to any company and affiliates
of such companies whose securities are mentioned herein. The information herein was obtained or derived from sources that we
believe are reliable, but while all reasonable care has been taken to ensure that stated facts are accurate and opinions fair and
reasonable, we do not represent that it is accurate or complete and it should not be relied upon as such. No liability can be accepted
for any loss that may arise from the use of these slides. All opinions and estimates included in this session constitute our judgement
as of this date and are subject to change without notice.

[STC MARKET UPDATE]

April 2, 2014
STC: Sandakan Branch

Strictly For Internal Circulation Only

Financial Review
*Protasco has generated a solid 6-year revenue CAGR of +9.1%, reaching revenue of RM972.2m in
FY13. Meanwhile, its profit after tax and non-controlling interest (PATANCI) 6-year CAGR grew an
impressive +11%. The growth in revenue and PATANCI are undoubtedly linked to its robust road
construction and maintenance projects.
*Growth also Contributed by strong progress billings from the property development segment. During
last five years, it also experienced a sustainable PATANCI margin mainly due to improvement in the
construction costs and high profit margin for some projects
*Consistent dividend payout. Protasco has declared a first interim dividend of 4.0sen per share in
November last year and we are anticipating the group to announce a final dividend of 6.0sen, raising
its total dividend payout to 10.0sen per share for FY13. High dividend payment in the past years as the
group has a strong cash position. We believe that moving forward, the groups solid earnings growth
coupled with its relatively low debt and high cash reserves will be able to reward investors with a
consistent dividend payout.

Disclaimer:
The information and opinions in these slides were prepared by RHB Branch Broking. The investments discussed or recommended in
these slides may not be suitable for all investors. These slides have been prepared for discussion purposes only and are not an offer
to sell or a solicitation to buy any securities. The employees of RHB Branch Broking may from time to time have a position in or with
the securities mentioned herein. Members of the RHB Group and their affiliates may provide services to any company and affiliates
of such companies whose securities are mentioned herein. The information herein was obtained or derived from sources that we
believe are reliable, but while all reasonable care has been taken to ensure that stated facts are accurate and opinions fair and
reasonable, we do not represent that it is accurate or complete and it should not be relied upon as such. No liability can be accepted
for any loss that may arise from the use of these slides. All opinions and estimates included in this session constitute our judgement
as of this date and are subject to change without notice.

Investment Highlights
* Strong construction jobs in the pipeline
The groups outstanding construction orderbook stands at RM709m and with a burn-rate of around
two to three years. Protasco could also expand its orderbook with another few projects this year worth
RM300m from roads infrastructure projects under 10th Malaysia Plan, including the Pan- Borneo
Highway project and roads upgrading works. In the Budget 2014, the Government has allocated
RM0.5b and RM1b for the Pan-Borneo Highway and for nationwide rural roads network upgrades
respectively. Its earnings growth is also likely to be supported by large-scale public housing projects
such as PR1MA and PPA1M.
Maintenance concession will be renewed
Protasco has submitted bids to vie for the soon-to-be expired major road maintenance concession for
federal roads covering Pahang, Terengganu Kelantan and Selangor. Nonetheless, we believe that the
group is well positioned to renew its road maintenance concession upon expiry given its vast
experience in handling road maintenance works and its strong partner with Bumiputera contractors.
The group has also submitted a Letter of Intent for the extension of this expiring road maintenance
concession last year and is confident in receiving a Letter of Award in the medium term. Thus,
expecting a large portion of the group's earnings to be contributed from this renewal.

* De Centrum to be key growth driver for the group.

Proposed development of De Centrum to be a key growth driver for the groups earnings going
forward. We view that there will be minimal impact from the various property cooling measures
imposed of late on its property development unit as its strength lies in its strategic accessibility,
amenities and urban and green design development. De Centrum is strategically situated in the South
of Kuala Lumpur and is surrounded by two major highways, namely the North-South Expressway and
SILK Highway. Apart from the locatin, the growing university population will also drive its property
demand for students accommodations.

*Johor project

Protasco is set not to miss on Iskandar development in the Southern Johor region to broaden its
earnings base. The group has recently acquired five parcels of 14.4-acre commercial land in Pasir
Gudang, Johor for a cost of RM29.6m of approximately between six and eight years. It is expected to
launch the Phase 1 next year with a projected GDV of RM800m.
*Profit guarantee in the Oil & Gas business.
In January 2014, Protasco officially ventured into the oil & gas industry in Indonesia at a relatively
attractive cost of USD22m or RM68.4m through the acquisition of 63% equity interest in PT Anglo
Slavic Indonesia (PT ASI) from PT Anglo Slavic Utama (PT ASU).
*Healthy balance sheet.
We note that the group is sitting on a large cash pile of RM221.2m (as of December 2013)
which should be sufficient for project execution and for acquisition of related businesses without the
backing of higher borrowings. Nonetheless, we believe that the group will continue to use its cash to
reward shareholders in the range of 10-14sen dividend to investors, translating highly attractive yield
of 7.2% and 8.4% for FY14 and FY15 respectively.

Risk
*Slow down in property sales
*Dependency on government jobs
*Deferment of 10MP projects

Valuation and recommendation

- closed at RM2.00 yesterday with total volume of 5.6m units shares

-Buy recommendation on a TP of RM 2.50 RM2.90 per share.
- start accumulate