Kimeng: 27 feb PLUS (hold)

> Overtaking expectations
> FY07 EPS of 25 sen exceeded our estimate of 17.8 sen, thanks to
> better-than-expected traffic, an exceptional gain of RM70m and a lower
> tax charge. Traffic grew 7.7% (FY06: 1.3%), slightly ahead of our
> estimate of 7.0%. With that, Plus Expressway's (PEB) toll revenue rose
> 7.7% in 2007. Pretax profit rose a higher 18% thanks to a negative
> goodwill of RM70m arising from the acquisition of Linkedua. The tax
> charge was only 5% versus our estimate of 27% (which assumed provision
> of deferred tax), as PEB made no provision for income tax on its
> expressway profits due to the availability of tax allowances and tax
> losses, notwithstanding the expiration of its tax-exempt status on 31
> Dec 2006. Excluding the one-off gain of RM70m, core FY07 EPS would have
> been 23.5 sen (+6% Y/Y). PEB declared a final dividend of 8 sen
> (tax-exempt), bringing the total tax-exempt dividend in 2007 to 14 sen.
>
>
> Possibly more acquisitions to achieve performance targets
> In order to meet its targets, PEB is buying completed expressways,
> embarking on green field projects and expanding its existing
> expressways. Its key performance indicators (KPIs) are: a) 30% growth in
> the length of expressways by end-2009, with 20% to be achieved by
> end-2008; b) minimum revenue growth of 25% for FY08 and 5% for FY09 &
> FY10, of which a minimum 15% of the revenue in FY08 will be derived from
> the expansion of the business; and c) minimum dividend growth of 12% in
> FY08. PEB completed the purchases of Elite and Linkedua for RM866m in
> Dec 2007 (adding 573 lane-km or 15.7% of existing 3640 lane-km), and is
> on track to complete the purchase of Kulim-Butterworth Expressway by end
> Q1 2008 for RM134m. In Indonesia, it secured the concession for the
> 25.4-km Cimaggis-Cibitung Toll Road, in addition to the 116-km
> Cikampek-Palimanan Highway, which should start construction by end-2008.
> In India, its 21.6-km highway should start levying tolls by end-Q1 2008.
> As for the widening of the existing NSE, the southern stretches have
> been completed while the modifications of through traffic between Ipoh
> Selatan and Jelapang should be completed in Q3 2008. Despite these
> initiatives, PEB is still short of its 2009 target. As such, we believe
> PEB may make more acquisitions in the future.