PLUS ... Oct10

S & P research:-

Recent Developments
 UEM Group Berhad (UEM) and Employees Provident Fund Board (EPF) are making a MYR23.00 bln offer (equivalent to MYR4.60/share) to acquire the business and undertaking, including all assets and liabilities of PEB.

 A special purpose vehicle (SPV) will be incorporated to undertake the offer, with UEM and EPF holding 51% and 49% stakes, respectively. Following the disposal, it is proposed that PEB shall distribute the
proceeds attributable to minority shareholders by way of special dividend and capital repayment. Meanwhile, PEB will be delisted from Bursa Malaysia after the exercises.

 The offer will remain opened until 5pm on Oct. 29, 2010. In addition, it is subjected to approvals by minority shareholders, creditors and relevant regulatory authorities. It is expected that the offer will take
between eight to 12 months to be completed.

 It was announced in the 2011 Budget that the toll rates on four expressways (North-South Expressway, Elite Expressway, Linkedua Expressway and Butterworth-Kulim Expressway) owned by PEB will
not be raised for the next five years. Meanwhile, PEB will be compensated by the government. We understand that the offerors will discuss with the government on this issue again following the completion of the acquisition.

Recommendation & Investment Risks
 We maintain our Hold recommendation on PEB but revise our 12-month target price to MYR4.60 (from MYR4.00) to be in line with the offer price.

 The offer is fair, in our view, as it represents a 15% premium to our previous target price of MYR4.00 and we advise investors to accept the offer. At MYR4.60, PLUS is being valued at prospective 2011 PER
of 13.5x (vs. its 5-year average PER of around 13.9x) and an implied dividend yield of 5.1%. We believe that this is a good opportunity for investors to cash out given that the stock has appreciated by 35.6%
from its 52-week low of MYR3.20.

 In our opinion, the deal is likely to go through. The offerors already hold a combined 67.6% interest in PEB, and we believe they should be able to gain support from other minority shareholders. Other major
shareholders of the company include Kumpulan Wang Persaraan (Diperbadankan) (5.3%) and Skim Amanah Saham Bumiputera (3.9%).

 Risks to our recommendation and target price include failure to obtain approvals from relevant parties, a delay or an unexpected change in the proposal.