A simple valuation argument
MALAYSIA STRATEGY
Source: BNM, KAF estimates
Source: KLSE, KAF estimates
Source: Bloomberg, KLSE, KAF estimates
150
200
250
300
350
400
450
Dec-97 Jun-00 Dec-02 Jun-05 Dec-07
8,000
10,000
12,000
14,000
16,000
Deposits (RMbn) (LHS) Per capita (RM)
Savings trends: Deposits of individuals 􀂄 Fiscal stimulus and domestic demand are
key GDP drivers for 2009. Timely execution
of the former is critical to incite the latter.
􀂄 Structurally, there is a compelling argument
for further growth in consumption given
attractive demographics and high savings.
􀂄 In fact, the rate of increase in deposits held
by individuals picked up sharply in 2008.
Affordability is clearly there, what is lacking
is confidence.
􀂄 We expect GDP to grow by 3.2% in 2009
and 5.2% in 2010.
2,000
4,000
6,000
8,000
10,000
12,000
14,000
3Q 99 3Q 01 3Q 03 3Q05 3Q07
10%
12%
14%
16%
18%
20%
22%
Norm.Net Prof it (RMm) (LHS) PBT Margin (%)
Quarterly Profit Trends
􀂄 Our earnings estimates still imply some
growth in 2008 and 2009 at 8% and 4%.
􀂄 The risks, however, clearly remain to the
downside.
􀂄 Seven of ten earnings indicators have held
up relatively well in the past few months.
The two that badly need to recover are
CPO prices and the Ringgit.
􀂄 While revenues will be under pressure,
easing cost pressures should help margins
across quite a few sectors.
􀂄 Our YE KLCI target is 1,085. Valuations
are too cheap to ignore, with the earnings
gap now double that of the Asian crisis.
􀂄 While it is hard to see the index gaining
24% in 2009 amidst all the macro doom
and gloom, on many occasions it is the
unexpected that happens.
􀂄 History shows that a year through a bear
market is usually a good time to buy for
investors with a 12-24 month horizon.
􀂄 The two main themes we focus on are
valuations and easing cost pressures.

THE YEAR THAT WAS
The year 2008 is clearly one, which many would like to forget. We certainly would. The
year saw the simultaneous bursting of asset bubbles originating from the developed
world and pretty much across all asset classes. The domino effect starting from the long
awaited correction in US property prices led to an ultimate freeze in credit markets while
equity and commodity markets saw heavy selling through the year topping it off with the
largest monthly decline on record for most indices in October.
In Malaysia, although the KLCI reached a new high at 1,516 in January, it was downhill
from thereon with the market falling 47% from peak to trough (reached in October) and
39% for 2008. The initial slide came from domestic political uncertainties as the ruling
coalition lost its two-thirds majority for the first time since independence in March and
control of five of the 13 state legislatures. Although the political uncertainties continued
throughout the year, it was the notable deterioration in the external environment and
rising cost pressures that accelerated the decline between June and October.
On a relative basis, however, the KLCI outperformed the MSCI Asia ex-Japan index by
31%, the first time since 2002. This is largely due to the fact that the KLCI’s rise during
the bull run between 2003 and 2007 was so much less than most other regional markets
with valuations only trading up to around the historical average PER whereas most other
markets traded well above past averages and many reached new valuation highs. Also,
we think Malaysia’s relatively defensive characteristics helped.

TABLE OF CONTENTS
The Year That Was ................................................................................................................3
Domestic Demand And Fiscal Stimulus Are Key ..............................................................5
3Q08 GDP ...............................................................................................................................5
Going Into 2009 ......................................................................................................................6
Commodity Correction More Significant Than Decline In E&E ..............................................9
Private Consumption: Affordability Vs Confidence ...............................................................11
Flattish Profits With Downward Bias ................................................................................14
An Uninspiring Result Season ..............................................................................................14
Earnings Revisions ...............................................................................................................18
Earnings Indicators ...............................................................................................................19
Revised Estimates .................................................................................................................23
Too Cheap To Ignore...........................................................................................................25
A Little Bit Of History…..........................................................................................................25
Compelling Valuation Argument ............................................................................................26
1,085 On The KLCI By End-2009..........................................................................................28
Key risks ...............................................................................................................................29
Themes And Recommendations........................................................................................30
Sector Strategy ......................................................................................................................30
Top Stock Picks .....................................................................................................................32
SECTOR COVERAGE
Automotive Sector – Downshift...........................................................................................34
Banking Sector – Apples & Oranges...................................................................................36
Transport Sector – On the Defensive..................................................................................40
Plantations Sector – Beyond the Chaos .............................................................................45
Media Sector – Fuzzy Transmission But Clear Fundamentals ............................................49
Property Sector – Deep Intrinsic Value ...............................................................................53
Consumer Sector – Investors’ Umbrella..............................................................................58
Utilities Sector – Out with the old, in with the new ..............................................................62
Gaming Sector – Consumption Outlet .................................................................................66
Construction Sector – Global Pump Priming Initiatives......................................................68
Telecommunications Sector – Infrastructure Roll Out .......................................................70
Oil & Gas Sector – Golden opportunity................................................................................74
Gloves Sector – Resilient Amidst Turbulence .....................................................................78
Technology Sector – Trying Times Ahead..........................................................................80
Timber Sector – Pump-Priming Hopefuls ...........................................................................83