BPuri ... Apr11

WILSON & YORK Research

INITIATION REPORT
Bina Puri Holdings Bhd (“BPHB”) is mainly engaged in civil engineering/construction, quarry/ready mix concrete and property development. The group was founded in 1975 and was listed in 1995. BPHB derives a substantial portion of its order book overseas, and has completed major highway projects in India, housing projects in Thailand, luxury hotels in Nepal, and various types of buildings in China, Indonesia, and several
countries throughout the Middle East.

INVESTMENT RISKS
Risks to our recommendation and target price include: i) increases in construction materials cost, ii) rising interest rates as the company is highly geared, and iii) a sharp slowdown in the general level of economic
activity in Malaysia or among the many economies where BPHB is active. This company has a global order book, which tends to diminish investment risk. However, a rising exchange rate could have adverse
effects on overall profitability.

RECOMMENDATION
We maintain our BUY recommendation on BPHB with a fair value estimate of MYR 1.60. Value investors will be attracted by the combination of very strong earnings growth at earnings multiples well below the company's peers. Looking ahead, average ROE is heading to levels of 11- 12%, well above the 7-8% average seen over the previous eight quarters. Meanwhile, at current prices, the shares trade on 1.4x trailing book value and 1.1x current book value.

Compared to many of its peers in sales and market cap, BPHB offers a higher ROE at lower multiples. Though net margins have historically been quite thin, BPHB has a proven record of building its order book. The other aspect that may put off investors is the very high debt/equity ratio that the company has historically maintained. It should be noted that the operating profits/interest expense ratio is 4.7x trailing operating profits and is heading above 5.0x current year operating profits.