Securities Commission of MalaysiaAugust 2007

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1. Confidently able to discharge their duties as evaluation officers

2. Competent in the use of financial models to evaluate proposals

3. Knowledgeable in contemporary issues

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4. Competent in their understanding of practical issues in the areas such as:

◦ Evaluating Business Strategy◦ Reconstructions◦ M & A and divestments◦ Pricing of Issues and Shareholder Value

creation

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DAY ONE◦ Global Financial Markets◦ Business Strategy

DAY TWO◦ Valuation Bases◦ Pricing Issues

DAY THREE◦ Reconstruction◦ Industry & Sector Analysis◦ Presentation of Case Study

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Global Financial Markets◦ Update on contemporary trends in Global

Financial Markets◦ Tracking Regional and Malaysian Market◦ Quiz on Market Intelligence

Business Strategy◦ Evaluation of Strategy Application◦ Creating Actionable Grid from SWOT and

Strategy Statement◦ Establishing KPIs◦ Evaluating business projections against the

KPIs

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Headline inflation remained unchanged at 1.4% in June.

Higher gross private sector financing during the month was supported by increases in loan disbursements and new PDS issuances.

Net funds raised in the capital market were significantly higher at RM8.9 billion in June.

The net NPL ratio of banking institutions improved further to 4.1% in June.

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Discussion Q : WHY ARE LISTED COMPANIES NOT COMING INTO THE EQUITIES MARKET ?

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WHERE THE BORROWED MONEY GOES … SECTORAL ANALYSIS

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GLOBALMARKETS

INDICES

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The Dow Jones Industrial Average is a price-weighted average of 30 blue-chip

stocks that are generally the leaders in their industry. It has been a widely

followed indicator of the stock market since October 1, 1928.

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Standard and Poor's 500 Index is a capitalization-weighted index of 500 stocks. The index is designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all

major industries. The index was developed with a base level of 10 for the 1941- 43 base period.

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The FTSE 100 Index is a capitalization-weighted index of the 100 most highly capitalized companies traded on the London Stock Exchange. The equities use

an investibility weighting in the index calculation. The index was developed with a base level of 1000 as of January 3, 1984.

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The Nikkei-225 Stock Average is a price-weighted average of 225 top-rated

Japanese companies listed in the First Section of the Tokyo Stock Exchange.

The Nikkei Stock Average was first published on May 16, 1949, where the average price was ¥176.21 with a divisor of 225.

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GLOBALCURRENCIES

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The Yen and YuanCould do with someUpward revisionIn valueAgainst the US – UKMarkets ….

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In the period 1 June – 27 July 2006, the ringgit depreciated against the US dollar. The ringgit’s depreciation against the US dollar was in line with the broad trend in regional currencies, which were weighed down mostly by the weakness in emerging market equities.

The US dollar, in turn, was supported by market expectations for further increases of US benchmark interest rates, as well as safehaven flows in reaction to geopolitical tensions in the Middle East.

The ringgit, however, appreciated against other major currencies, while depreciating against the regional currencies in the range of 0.5% - 3.4%.

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Malaysian Resources Corporation Bhd (MRCB) is awaiting the government's response to its bid for the Bakun undersea cable project, said its group managing director Shahril Ridza Ridzuan.

He said MRCB had proposed to the government to undertake the project ever since the Bakun dam project resumed construction in 2001.

Shahril said: “There has been no formal bid process for the project, but we have expressed interest to the government.”

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He said the company had spoken to the government, via presentations, of how its expertise as the country’s largest transmission developer was right for the job.

MRCB’s subsidiary, Transmission Technology Sdn Bhd, provides transmission solutions for Tenaga Nasional Bhd.

Its current projects include the 500KV transmission development system in the development system in the peninsular and the Sabah East-West 275KV grid interconnection project.

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KUALA LUMPUR: Some 600,000 tourists visited Malaysia in the first fifteen days of the month. 

Tourism Minister Datuk Seri Tengku Adnan Tengku Mansor said the tourists were mainly from Asian countries, and that the figures were very encouraging since the launch of Visit Malaysia Year 2007. 

He said tourists from Singapore, Thailand, China, Indonesia, Russia, Hong Kong, Japan, Korea and Taiwan visited mainly Kuala Lumpur, Langkawi and Kota Kinabalu. 

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AUGUST 4TH 2007KUALA LUMPUR: While Malaysia’s economy is expected to

grow at 6.5% next year, the stagnant unemployment rate must be addressed to prevent problems later on, an economist said. 

Malaysian Institute of Economic Research (MIER) executive director Dr Mohd Ariff said the country is now experiencing what he termed as a "jobless growth," in which the economic growth is at 5.9% during the last five to six years, but 200,000 fewer jobs were created last year. 

He added one of the factors was because various sectors were moving from unskilled labour-intensive into more knowledge and technology-skilled intensive activities. 

The service sector had also become an important engine of growth for the Malaysian economy, which he said was contributing 32% to the country’s gross domestic product.

On the expectations for the local economy, he said it was expected to ease somewhat given the uncertainty for the global economic outlook for this year.  He also said Malaysia needs to join trade agreements and impart trade liberalisations policies to ensure good economic growth.

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ABOLISHING the real property gains tax (RPGT) will definitely help kick start the sluggish property market in Malaysia.  

This is the consensus of industry players as well as many house buyers who welcomed the news.  

The RPGT has long been seen as an “unnecessary” obstacle to the nation’s attempt to attract more foreign direct investment, particularly in our property sector. 

Although the tax might discourage rampant speculation in an over-heated economy, it is felt that having the RPGT in a not so robust economy would only add to the cost of purchasing property. 

As it is purchasers have to pay stamp duty that can amount to quite a large sum for upmarket properties like bungalows, semi-detached houses, villas and condominiums in prime locations. 

Doing away with the RPGT will spur foreigners to snap up our property as they would not have to worry about having to pay a flat 30% RPGT when they sell it off in say, one to five years’ time.

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g KUALA LUMPUR: SP Setia Bhd is targeting for new

property sales to hit RM1.2bil in the financial year ending Dec 31. 

This will be achieved on an expected surge in demand for homes and commercial units in prime locations in the Klang Valley, south Johor and Penang, group managing director Tan Sri Liew Kee Sin said at the Invest Malaysia 2007 conference. 

A third of the sales would come from developments in Johor, where demand is expected to rise with the implementation of projects in the Iskandar Development Region, he added. 

Yesterday, the Government announced that it would scrap real property capital gains tax effective April 1.  

“The new rules is a big boost to the property market,'' Liew, also SP Setia chief executive officer, said.  

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KUALA LUMPUR: The Iskandar Development Region (IDR) is finalising a RM4bil investment for one of its zones and details would be announced in the third quarter. 

To spearhead the development of hubs within the IDR, certain zones within its flagship zones requiring billions of ringgit in investment will be granted special incentives. 

The location of those zones and other details would be announced by the Iskandar Regional Development Authority (IRDA) in the third quarter, an IRDA statement said yesterday. 

With IDR drawing foreign direct investments worth a projected US$40bil in the first seven years, the Government has committed more than RM4bil towards infrastructure development in the region. 

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The Government also announced a slew of incentives for qualified companies and this include corporate tax exemption for 10 years. 

Foreign workers in IDR would be able to import or purchase a duty-free car for their personal use.  

While companies will be free to employ foreign workers within the IDR, IRDA expects Malaysians to make up the majority of the workforce there. 

“The Comprehensive Development Plan projects that 817,500 jobs will be created in the region up to year 2025. 

“Companies undertaking activities in sectors other than the targeted sectors will continue to be eligible for the existing incentives,'' IRDA said. 

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Mission

Vision

Goals

Objectives

Measures

How will we get thereHow will we get there

What we want to beWhat we want to be

Indicators and Indicators and Monitors of successMonitors of success

Desired level of Desired level of performance and performance and timelinestimelines

Planned Actions to Planned Actions to Achieve Objectives Achieve Objectives

O1 O2

AI1 AI2 AI3

M1 M2 M3

T1 T1 T1

Specific outcomes expressed in Specific outcomes expressed in measurable terms (NOT measurable terms (NOT activities)activities)

Strategic Plan

Action Plans

Evaluate Progress

Targets

Initiatives

What we must achieve to be successfulWhat we must achieve to be successful

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WHERE WE ARE (Assessment - SWOT)

WHERE DO WE WANT TO GO (Gap Analysis between where we are and where we want to go)

HOW ARE WE GOING TO GET THERE◦ The Roadmap◦ The Scorecard◦ Becoming a SFO

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• Strength’s – Those things that you do well, theStrength’s – Those things that you do well, the high value or performance pointshigh value or performance points• Strengths can be tangible: Loyal customers,Strengths can be tangible: Loyal customers, efficient distribution channels, very high qualityefficient distribution channels, very high quality products, excellent financial conditionproducts, excellent financial condition• Strengths can be intangible: Good leadership,Strengths can be intangible: Good leadership, strategic insights, customer intelligence, solidstrategic insights, customer intelligence, solid reputation, high skilled workforcereputation, high skilled workforce• Often considered “Core Competencies” – Best Often considered “Core Competencies” – Best leverage points for growth without draining your leverage points for growth without draining your resourcesresources

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• Weaknesses – Those things that prevent you Weaknesses – Those things that prevent you from doing what you really need to dofrom doing what you really need to do

• Since weaknesses are internal, they are withinSince weaknesses are internal, they are within your controlyour control• Weaknesses include: Bad leadership, unskilledWeaknesses include: Bad leadership, unskilled workforce, insufficient resources, poor productworkforce, insufficient resources, poor product quality, slow distribution and delivery channels,quality, slow distribution and delivery channels, outdated technologies, lack of planning, . . .outdated technologies, lack of planning, . . .

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• Opportunities – Potential areas for growth andOpportunities – Potential areas for growth and higher performancehigher performance• External in nature – marketplace, unhappy External in nature – marketplace, unhappy customers with competitor’s, better economiccustomers with competitor’s, better economic conditions, more open trading policies, . . conditions, more open trading policies, . . • Internal opportunities should be classified asInternal opportunities should be classified as Strength’s Strength’s • Timing may be important for capitalizing onTiming may be important for capitalizing on opportunitiesopportunities

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• Threats – Challenges confronting the Threats – Challenges confronting the organization, external in natureorganization, external in nature• Threats can take a wide range – bad pressThreats can take a wide range – bad press coverage, shifts in consumer behavior, substitutecoverage, shifts in consumer behavior, substitute products, new regulations, . . . products, new regulations, . . . • May be useful to classify or assign probabilities toMay be useful to classify or assign probabilities to threatsthreats• The more accurate you are in identifying threats, The more accurate you are in identifying threats, the better position you are for dealing with thethe better position you are for dealing with the “ “sudden ripples” of change sudden ripples” of change

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• Address critical performance issues• Create the right balance between what the organization is capable of doing vs. what the organization would like to do • Cover a sufficient time period to close the performance gap• Visionary – convey a desired future end state• Flexible – allow and accommodate change• Guide decision making at lower levels – operational, tactical, individual

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gFinancial Processes of Scheme Write off the P & L Write off any and all

◦ Fictitious assets◦ Formation expenses still capitalised◦ Deferred Expenditures

Revalue all assets Select those that will be taken to ‘new’

Balance Sheet Consider new capital structure Work on new capital to be raised

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gBalance Sheet Pre - Construction Set time line for events and action Compute holding cost per period = cost of

maintaining downsized business VIABILITY ASSESSMENT

◦ Determine Financing returns required by providers of new capital = TRR

◦ Projected profits & Cash Flows◦ Determine Critical Mass of business volume ◦ NPV > 0

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Sources of new money Unbundling and de-merger MBOs VC White knights Merchant / Investment Banks Other stakeholders

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New Balance Sheet KPIs Revenue generation Margins Gearing & Target Interest Cover FCFE returns Time to get EVA to become (+)

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Lets Evaluate this case based on: STRENGTHS & WEAKNESSES WHY THINGS MIGHT HAVE GONE WRONG IN

TERMS OF◦ Timing◦ Location◦ Strategy◦ Financials

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End of Day One