ANN JOO RESOURCES BUY. Riding on the MRT ticket. Company report. (Maintained) Rationale for report: Company Update STEEL

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1 TEEL ANN JOO REOURCE (AJR MK, ANNJ.KL) 2 Frary 22 Comany rort Hoy Kn Mak mak-hoy-kn@amankgro.om Riding on th MRT tikt Rational for rort: Comany Udat BUY (Maintaind) Pri Fair Val 52-wk High/Low Ky Changs Fair val EP RM2. RM2.73 RM3./RM.63 YE to FY FYF FY2F FY3F Rvn (RMmil),83.,78.5 2,452. 2,6.8 Cor nt rofit (RMmil) EP (n) EP growth (%) 24.8 (56.8) Consnss EP (n) P (n) PE (x) EV/EBITA (x) iv yild (%)....2 ROE (%) Nt Garing (%) tok and Finanial ata hars Otstanding (million) Markt Ca (RMmil),7.7 Book val (RM/shar) 2.3 P/BV (x). ROE (%) 2.2 Nt Garing (%) 32.3 Major harholdrs Ann Joo Cor (62.8%) Lmaga Tang Haji (4.%) Fr Float (%) 32.3 Avg aily Val (RMmil).8 Pri rforman 3mth 6mth 2mth Asolt (%) 8.7 (7.8) (27.3) Rlativ (%) 2.3 (23.) (3.) 6.,674 Invstmnt Highlights Maintain BUY on Ann Joo Rsors with a slightly lowr fair val RM2.73/shar (rviosly: RM2.7/shar) to fator in a mor mtd 4QFY and initial start- ost for its nw last frna rojt. Notwithstanding, w rojt FY2F to a trnarond yar for Ann Joo on aont of : (i) trongr domsti dmand with th imminnt roll-ot of domsti rojts, artilarly th g.bloh-kajang (BK) MRT; (ii) Earnings ar at an infltion oint (4.7x jm in FY2F nt rofit to RM3mil); (iii) Normalisation of ky int osts (.g. iron or, sra, oking oal); and (iv) Fll-yar imat from its last frna orations. Aftr a rnt r-rating of onstrtion stoks, w rommnd invstors to ath th nxt MRT wav throgh domsti stl lays. With ax front-loadd, Ann Joo is on of only fiv intgratd loal slirs of onstrtion stl that an rid on th imminnt roll-ot of MRT works, irrstiv of th ontrators involvd maidn ordrs may kik in from Jn onwards. Jst on th BK lin alon, or hks indiat that som 5, tonns of stl rodts ar rqird with a fairly signifiant ortion alloatd to th.5km-long tnnl of this nw lin. This rrsnts som % of th annal rolling aaity of th fiv major stl millrs in Malaysia. Aart from th LRT/MRT rojts, othr right sots for infrastrtr snding in th mid-trm inld th Wst Coast Exrssway, KLIF, RRIM r-dvlomnt, Mnara Warisan, Gmas-JB dol traking as wll as th growth orridors of Iskandar Johor and CORE. 4.5 ) M 3. (R,55,336 In d x P o in ts To sr, domsti ar ris hav gaind RM/tonn ost th Chins Nw Yar riod to RM2,2/tonn sggsting that som r-stoking ativitis old alrady on th ards. This is also in tandm with th rnt inras in rgional smi-finishd stl ris..5. F - 7 A g - 7 F - 8 A g - 8 F A F g - - Ann Joo FBM KLCI A g F A g,67 F 8 2 W rojt Ann Joo s garing lvls to ak at.2x for FYF with th sssfl roll-ot of its last frna in Otor 2, imroving to x and.8x rstivly y FY2F3F. Avrag tilisation rat has rahd 8% (or assmtion: 6%) sin last mr on an imrovmnt in orational ffiinis and iron or sintring mix. PP 2247/6/22 (36) Ann Joo s arnings ar at its infltion oint, rising from RM3mil in FYF to RM3mil-RM7mil in FY2F3F amid attrativ forward PEs of 7x-x, low its six-yar avrag historial PE of x.

2 Ann Joo Rsors 2 Frary 22 MAINTAIN BUY ON ANN JOO Trnarond yar W maintain or BUY rommndation on Ann Joo Rsors with a slightly lowr fair val RM2.73/shar (rviosly: RM2.7/shar), t with or targt PE liftd y a noth to 2x. Whil th lowr fair val is to aont for start- ost in its last frna whih was sssflly ommissiond in 4QFY, w rais or targt PE to aont for ttr dmand rosts with an xtd r-alration of domsti ontrat flows. W xt FY2F3F to trnarond yars for Ann Joo, artilarly th lattr. Ky rasons ar: (i) Th gro wold ra a fll-yar imat from its nw lant; (ii) omsti stl dmand shold on th asndny, artilarly with th roll-ot of th MRT rojt (iii) A normalisation of ky int osts (.g. oal, sra, iron or) sin 4QFY. Th ky risk in or viw is a dtrioration in gloal maro onditions within th Erozon and slowr-than-xtd onomi growth in China. TURNAROUN YEAR Ordr flows ar rtrning W draw omfort that domsti stl dmand rmaind rlativly stal in 2 dsit an aarnt lak of largsal infrastrtr rojts, dlays in som othrs and worsning gloal maro ositions towards th sond half of last yar. In fat, or hannl hks indiat that th avrag tilisation of th major rolling mill layrs in Malaysia was still a rstal 7%-75% on avrag. Progrss on slt infrastrtr rojts is xtd to go into fll-swing this yar (.g. Ioh-Rawang dol traking rojt, ond Pnang Bridg, Klang Vally LRT Extnsion works). On othr hand, or otimism on ordr flows has n frthr oostd y an imminnt roll-ot of othr ig tikt jos in th ilin (Klang Vally MRT, Wst Coast Exrssway, Mnara Warisan and th KL Intgratd Finanial istrit, r-dvlomnt of RRIM land, Gmas- JB dol traking). This is in addition to rising infrastrtr ativitis within th CORE and Iskandar growth orridors in arawak and Johor rstivly. CHART : MRT TATION MAP or: PNB, AmRsarh AmRsarh dn Bhd 2

3 Ann Joo Rsors 2 Frary 22 RIING ON THE MRT TICKET Blk of major ontrats to awardd y 22 Earlir this wk, th MMC-JV Gamda JV signd a rojt dlivry artnr (PP) agrmnt for th g.bloh- Kajang (BK) MRT lin. Th JV will lad manag th ovrall rojt in rtrn for a 6% f and allowal laims for ontingny ost of to 5%. In addition, th JV wold riv ~RM2.8il in rimrsmnt for ovrhads and nginring-rlatd fs ( Chart ). At th sam tim, MRT Co had also rvald dtails of th ntir akags for th BK lin. Ths wold inld information on whn th tndrs will ond, its valation and award riods, as wll as th stimatd omltion tim of th said rojts. Exlding land ost of ~RM2il, w stimat that thr ar ovr RM2il worth of onstrtion jos availal. Ths wold inld oortnitis for grond works, mhanial & ltrial (M&E), ICT systms, viadts and stations. In Agst last yar, th Fdral govrnmnt shortlistd 28 ontrators for 25 work akags that onsist of lvatd ivil works, stations and dots ( Tal ). MRT Co had indiatd that th alan of ovr 8 work akags shold awardd y yar-nd. Ths far, rliminary works involving th rloation of tilitis and land laring in aras sh as g.bloh, mantan ortal as wll as Cohran ortal hav ommnd. For th ig akags, oth IJM Cor and Ahmad Zaki Rsors (AZRB) had in Frary startd th all rolling whn thy linhd th lvatd ontrats for Pakag V5 and V6 worth RM74mil and RM764mil, rstivly, for th aov-grond stions in Chras. Not long aftr, Kim Ln Cor annond that th gro had n aointd as dsignatd slir of sgmntal ox girdrs (BG) for rtain arts of th BK MRT lin. For th alan six akags ndr th lvatd ortion, w ndrstand that th lk of thm old tndrd ot y nd-jn. W also xt tndrs for th stations (8 akags) and dots (2 akags) to dishd rogrssivly y 2Q 22 to k within th stimatd rojt datlin in Jly 27. For th ndrgrond works, th MMC-Gamda JV has rortdly smittd th lowst id among th fiv ontrators shortlistd for th tnnlling works (~RM7il- RM8il) whr a dision shold known y Aril. LRT xtnsion gathring momntm On th Klang Vally LRT xtnsions, a total of RM6.5il rrsnting to % of th rojt hasn awardd: - Amang lin (RM2il) - Klana Jaya Lin (RM2.5il) TABLE : PRE-QUALIFIE COMPANIE FOR MRT ELEVATE WORK Elvatd Civil Works (8 akags) On Catgory (5 akags) tations (8 akags) On Catgory (5 akags) ots (2 akags) On Catgory ( akag). nway Constrtion dn Bhd. Trans Rsors Cor dn Bhd. nway Constrtion dn Bhd 2. Mdajaya Cor 2. nway Constrtion dn Bhd 2. Trans Rsors Cor dn Bhd 3. Tran Rsors Cor dn Bhd 3. Naim Enginring dn Bhd 3. Naim Enginring dn Bhd 4. Mhiah Enginring (M) dn Bhd 4. Fajarar Bildrs dn Bhd 4. Mhiah Enginring (M) dn Bhd 5. IJM Constrtion dn Bhd 5. IJM Constrtion dn Bhd 5. IJM Constrtion dn Bhd 6. Ahmad Zaki dn Bhd 6. Loh & Loh Constrtion dn Bhd 6. Fajarar Bildrs dn Bhd 7. MT Constrtion dn Bhd 7. Mhiah Enginring (M) dn Bhd 7. Loh & Loh Constrtion dn Bhd 8. MRCB Enginring dn Bhd 8. Gadang Enginring (M) dn Bhd 8. Gadang Enginring (M) dn Bhd. Gadang Enginring (M) dn Bhd. Pminaan Mitrajaya dn Bhd. Knana Torso dn Bhd - Al Amia JV. Loh & Loh Constrtion dn Bhd. WCT Bhd. Konsortim Ptra Prdana Const &. Knana Torso dn Bhd - Al Amia JV Worthy Bildr JV Konsortim PPC - WB JV (Ptra Prdana 2. Const. & Worthy Bildrs /B) Bmitra Catgory (3 akags) Bmitra Catgory (3 akags) Bmitra Catgory ( akag). Naim Enginring dn Bhd. Trans Rsors Cor dn Bhd. Trans Rsors Cor dn Bhd 2. Trans Rsors Cor dn Bhd 2. Naim Enginring dn Bhd 2. Naim Enginring dn Bhd 3. TR Bina dn Bhd 3. TR Bina dn Bhd 3. Ahmad Zaki dn Bhd 4. Ahmad Zaki dn Bhd 4. Ahmad Zaki dn Bhd 4. TR Bina dn Bhd 5. HRA Tgh dn Bhd 5. HRA Tgh dn Bhd 5. HRA Tgh dn Bhd 6. MT Constrtion dn Bhd 6. N Akmida Holdings dn Bhd 6. Prkasa tra dn Bhd 7. yarikat Mhiah Prniagaan & yarikat Mhiah Prniagaan & 7. Kmang ranta dn Bhd 7. Pminaan dn Bhd Pminaan dn Bhd 8. Zon dn Bhd 8. Ax Commniation dn Bhd 8. kon dn Bhd. Crgas Mrni dn Bhd. Pminaan Bkit Timah dn Bhd. Tidal Marin Enginring dn Bhd. Prkasa tra dn Bhd. kon dn Bhd 2. yarikat Mhiah Prniagaan & Pminaan dn Bhd or: PNB, AmRsarh AmRsarh dn Bhd 3

4 Ann Joo Rsors 2 Frary 22-2 nw trains for th Amang lin (RMil) - ystm works (inlding signalling and tlommniation): RMil TRC ynrgy and th Bina Pri-Tim kata JV had arlir won Pakag A of th ivil works for th Klana Jaya (RM5mil) and Amang lins (RM634mil), rstivly, in Otor 2. Thn in Agst last yar, oth nway and MRCB won th RM56il and RM.3il ontrats for th rmaining ortion of works for oth lins ndr Pakag B. Manwhil, som 2% of th main works along oth lins hav ommnd, with th Amang and Klana Jaya lins d to omltd y Otor 24 and mr 24, rstivly. What will rmain from th tndring ross ar two stations and th main dot for th Amang lin. rrsnts som % of th annal rolling aaity of th fiv major stl millrs in Malaysia. With this, w rkon that th maidn ordrs for stl will om in thik-and-fast whn th major MRT rojt work akags ar rolld-ot in stags y th nd of this yar, starting with th Pakag V5 and V6 (awardd to IJM and Ahmad Zaki) lvatd ontrats and th sly of BG y Kim Ln. Anothr RM3il in snding with additional two MRT lins Thr is frthr sid for loal stl onsmtion if th Fdral govrnmnt arovs anothr two nw MRT lans worth a omind RM3il i.. Cirl lin and th g.bloh-rdang lin (whih has an otion to xand to Ptrajaya). Th rojt shdl is to rokn down as follows:- (i) Undrgrond ortion (RM2il): 23-2 THE NEXT MRT WAVE UPPLIER OF TEEL Maidn ordrs as arly as Jn W xt th rising rolifration of infrastrtr roll-ots notaly for th MRT/LRT rojts to rod a strongr ralration in domsti stl onsmtion from 2HFY2 onwards. Undr th Klang Vally MRT rojt, all rormnt of raw matrials that wold inld stl is to ntralisd ndr MRT Co. With MRT Co in th itr, this wold fftivly rd olltion risk among slirs of loal stl. Jst on th BK MRT alon, or hannl hks indiat that som 5, tonns of stl rodts TABLE 2: CHEULE FOR TATION WORK (ii) Elvatd ortion (RM8il): From or hks on th grond, MRT Co has alrady otlind th dsignatd orridors for dvlomnt, and will sk fdak from varios stakholdrs in ordr to finalis th rot alignmnt. W gathr that Caint aroval is to soght y arly nxt yar. If vrything gos as lannd, oth rojts ar tid to kik-off y 2H 23. Intrstingly, th govrnmnt s riority is to omlt th ndrgrond ortion of th oth lins y 22 to lar ongstion within th KL ity ntr, whr th lk of th tnnlling works wold om from. If arovd, th front-loading of th ndrgrond ortion ovr th nxt ight yars wold rod a mlti-yar r-rating TABLE 3: CHEULE FOR ELEVATE WORK or: MRT Co, AmRsarh ar rqird with a fairly signifiant ortion alloatd to th.5km-long tnnl of this nw lin. This or: MRT Co, AmRsarh AmRsarh dn Bhd 4

5 Ann Joo Rsors 2 Frary CHART 2: PB BAN CHART 55. CHART 3: PE BAN CHART ) (x.2 +s Avg 34.6 ) (x s.6 s 4.2 Avg. - - M a ṟ J n in domsti stl onsmtion, whr thr is a highr ontnt of stl sag for tnnlling works. Ann Joo to ik for lvrag into Malaysian stl lays Aftr th rnt r-rating of onstrtion-rlatd stoks, w thrfor rommnd invstors to ath th nxt MRT wav throgh domsti stl lays for dirt xosr irrstiv of th ontrators involvd. With its ax alrady front-loadd, Ann Joo is on of only fiv intgratd loal slirs of onstrtion stl that is wll-oisd to rid on an antation in dmand with th imminnt roll-ot of th MRT rojt. M a ṟ J n M a ṟ J n Th ward momntm in arnings shold xtnd frthr to FY3F (+33%) and FY4F (+5%) whn th ostsavings imrovmnts from its last frna gin to filtr throgh mor maningflly. () Nt garing shold ak in FY2F With th sssfl roll-ot of Ann Joo s last frna osting ~RM65mil ndr Phas w xt Ann Joo s nt garing ratio to ak at.2x in FY2F, for imroving frthr to x and.8x, rstivly, in FY3F- 4F. Ths far, th avrag tilisation rat has rahd 8% (or assmtion: 6%) sin last mr on an imrovmnt in orational ffiinis and iron or sintring mix. M a ṟ J n s To sr, domsti ar ris hav gaind RM/tonn ost th Chins Nw yar riod to RM2,2/tonn sggsting that som r-stoking ativitis old alrady on th ards. This is also in tandm with th rnt inras in rgional smifinishd stl ris. EARNING AN RECOMMENATION Earnings at infltion oint W ar tting or FYF nt rofit forast y 57% to RM3mil. This is to aont for: (i) tart- ost (.g. driation, intrst) that rlats to th ommissioning of its last frna whih was sssflly ommissiond on 6 Otor 2. (ii) Writ-down on rtain highr-ost ints (.g. oking oal) srd arlir dring th lant s kik-off rogramm. Bt w xt FY2F arnings to stag a strong rovry (+3.7x) on an xtd rsrgn in domsti stl dmand, artilarly with th LRT/MRT rojts gathring a. AmRsarh dn Bhd 5

6 Ann Joo Rsors 2 Frary CHART 4: ANN JOO HITORICAL PE PE (x) PE +σ,. 5.. PE µ,.4 5. PE σ, 3.6. Ot Ag Jn Ar F Ot Ag Jn Ar F - Ot- Ag- Jn- Ar- F- -8 Ot-8 Ag-8 Jn-8 Ar-8 F-8-7 Ot-7 Ag-7 Jn-7 Ar-7 F-7-6 Ot-6 Ag-6 Jn-6 Ar-6 F-6 or: Bloomrg, AmRsarh AmRsarh dn Bhd 6

7 Ann Joo Rsors 2 Frary 22 TABLE 2: FINANCIAL ATA Inom tatmnt (RMmil, YE 3 ) 2 2 2F 22F 23F Rvn,33.,83.,78.5 2,452. 2,6.8 EBITA riation (65.5) (65.4) (82.) (3.2) (6.6) Orating inom (EBIT) Othr inom & assoiats Nt intrst (22.8) (7.4) (28.) (25.) (22.7) Extional itms..... Prtax rofit Taxation (5.5) (.3) (7.3) (24.4) (32.6) Minoritis/rf dividnds.8 (.6) 2.. (.) Nt rofit Cor nt rofit Balan ht (RMmil, YE 3 ) 2 2 2F 22F 23F Fixd assts 873.7,78.,6.6,3.,47. Intangil assts Othr long-trm assts Total non-rrnt assts.5,8.3,45.4,32.2,75.6 Cash & qivalnt tok 882.,23.,2.4,.6,7.3 Trad dtors Othr rrnt assts Total rrnt assts,55.4,6.8,458.4,532.,67.7 Trad rditors hort-trm orrowings 83., Othr rrnt liailitis Total rrnt liailitis,23., Long-trm orrowings Othr long-trm liailitis Total long-trm liailitis harholdrs fnds 6.6,6.,64.8,5.6,284.2 Minority intrsts BV/shar (RM) Cash Flow (RMmil, YE 3 ) 2 2 2F 22F 23F Prtax rofit riation (38.3) Nt hang in working aital 5.6 (58.3) (.7) Othrs 3.6 (44.2) (.) Cash flow from orations 283. (347.3) Caital xnditr (3.) (6.4) (2.) (8.) (4.) Nt invstmnts & sal of fixd assts Othrs (.2).7... Cash flow from invsting (.5) (55.5) (2.) (8.) (4.) t raisd/(raid) (4.4) 568. (.) (.) (25.) Eqity raisd/(raid)..... ividnds aid (.3) (33.) (24.) (52.3) (46.4) Othrs (.) (.8) (28.) (25.) (22.7) Cash flow from finaning (72.5) (52.) (78.2) (4.2) Nt ash flow (8.) 3.5 (8.) Nt ash/(dt) /f Nt ash/(dt) /f Ky Ratios (YE 3 ) 2 2 2F 22F 23F Rvn growth (%) n/a 4.6 n/a EBITA growth (%) n/a 78.7 n/a Prtax margins (%) Nt rofit margins (%) Intrst ovr (x) Efftiv tax rat (%) Nt dividnd ayot (%) tors trnovr (days) tok trnovr (days) Crditors trnovr (days) or: Ann Joo, AmRsarh AmRsarh dn Bhd 7

8 Ann Joo Rsors 2 Frary 22 Anhor oint for dislaimr txt ox Plishd y AmRsarh dn Bhd (3355-P) (A mmr of th AmInvstmnt Bank Gro) 5 t h F l oor B a ng n an A mb a n k Gro 55 Jalan Raja Chlan 52 Kala Lmr Tl: ( 3 ) ( r sa r h) F a x: ( 3 ) Printd y AmRsarh dn Bhd (3355-P) (A mmr of th AmInvstmnt Bank Gro) 5 t h F l oor B a ng n an A mb a n k Gro 55 Jalan Raja Chlan 52 Kala Lmr Tl: ( 3 ) ( r sa r h) F a x: ( 3 ) Th information and oinions in this rort wr rard y AmRsarh dn Bhd. Th invstmnts disssd or rommndd in this rort may not sital for all invstors. This rort has n rard for information ross only and is not an offr to sll or a soliitation to y any sritis. Th dirtors and mloys of AmRsarh dn Bhd may from tim to tim hav a osition in or with th sritis mntiond hrin. Mmrs of th AmInvstmnt Gro and thir affiliats may rovid srvis to any omany and affiliats of sh omanis whos sritis ar mntiond hrin. Th information hrin was otaind or drivd from sors that w liv ar rlial, t whil all rasonal ar has n takn to nsr that statd fats ar arat and oinions fair and rasonal, w do not rrsnt that it is arat or omlt and it shold not rlid on as sh. No liaility an atd for any loss that may aris from th s of this rort. All oinions and stimats inldd in this rort onstitt or jdgmnt as of this dat and ar sjt to hang withot noti. For AmRsarh dn Bhd Bnny Chw Managing irtor AmRsarh dn Bhd 8