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net research4Q FYE DEC 2012 RESULTS REPORT 5 March 2013

Name of PLC: OSK Holdings Bhd Target Price: RM1.60

Business Summary : Regional investment banking group

Major Shareholders : Tan Sri Ong Leong Huat 30.47%

PLC Website : www.osk.com.my Recommendation: HOLD

IR Contact : Lee Choon Meng, Chief Financial Officer Market Capitalisation: RM1.38bn

Constituent of:-

- FBM Mid 70 - FBM Emas

Current Price : RM1.43

Market / Sector: Main / Finance

Stock Code: 5053

Analyst : Corinna Cheah / Lim Boon Ngee Tel : +603 2163 3200; Email : corinnacheah@nra.com.my / bnlim@nra.com.my

Key Stock Statistics FY12 FY13F FY14F EPS (sen) 1.5 22.7 24.4 P/E on EPS (x) 95.7 6.3 5.9 Dividend/Share (sen) 7.5 7.5 7.5 NTA/Share (RM) 2.21 2.39 2.62 Book Value/Share (RM) 2.21 2.39 2.63 Issued Capital (m shares) 969.1 965.4 965.4 52-weeks Share Price Range (RM) 1.35-1.79 Per Share Data FY11 FY12 FY13F FY14F Year-end 31 Dec Book Value (RM) 2.85 2.21 2.39 2.63 Cash Flow (sen) (6.5) (99.0) 43.1 46.4 Earnings (sen) 5.3 1.5 22.7 24.4 Dividend (sen) 4.5 7.5 7.5 7.5 Payout Ratio (%) 61.6 366.4 24.2 22.5 PER (x) 26.8 95.7 6.3 5.9 P/Cash Flow (x) (22.0) (1.4) 3.3 3.1 P/Book Value (x) 0.5 0.6 0.6 0.5 Dividend Yield (%) 3.1 5.2 5.2 5.2 ROE (%) 1.9 0.7 9.5 9.3 Net Gearing (%) 21.4 7.3 n.c. n.c. n.c. - net cash P&L Analysis (RMm) FY11 FY12 FY13F FY14F Year-end 31 Dec Revenue 1051.4 41.8 50.7 53.2 Operating Profit 165.2 8.2 31.3 32.9 Depreciation (18.4) (0.8) (1.7) (2.6) Net Interest 100.7 10.5 0.2 0.1 Pre-tax profit 93.2 15.0 226.5 243.3 Effective Tax Rate (%) 23.0 3.3 25.0 25.0 Net Profit 51.4 14.5 218.7 235.1 Operating Margin (%) 15.7 19.7 61.9 61.9 Pre-tax margin (%) 8.9 35.8 447.2 457.5 Net margin (%) 4.9 34.6 431.7 442.0

1. 4Q2012 Results Highlight / Review Year-end 31 Dec 4Q12 4Q11 Chg RMm RMm % Continuing operations: Revenue 11.0 6.0 83.4 Operating Profit (5.1) 16.0 nm Finance costs (19.9) (47.6) (58.3) Associate 33.1 0.7 >100 Pre-tax Profit 3.4 15.7 (78.2) Net profit 9.9 14.1 (29.9) Operating Margin (%) (46.3) 266.4 Pre-tax Margin (%) 31.2 262.1 Net-Margin (%) 90.2 236.1 Year-end 31 Dec 2012 2011 Chg RMm RMm % Continuing operations: Revenue 41.8 29.0 44.4 Operating Profit 8.2 24.7 (66.9) Finance costs (179.7) (200.0) (10.2) Associate 35.2 2.8 >100 Pre-tax Profit 15.0 26.4 (43.1) Net profit 14.5 21.3 (31.9) Operating Margin (%) 19.5 85.3 Pre-tax Margin (%) 35.9 91.0 Net-Margin (%) 34.7 73.6

OSK Holdings’s (OSKH) reported stronger 4Q12 revenue from its continuing operations, on improved investment holding activities but higher operating expenses (sharply higher salaries, allowances and bonuses YoY) and allowance for impairment losses on loans resulted in lower pre-tax and net profits YoY. The relatively lower YoY decline at the net profit level was due to income tax benefits.

The group completed the disposal of its investment banking (IB) and related operations to RHB Capital (RHBC) on 9 Nov 2012. Post the disposal of the IB and related businesses, the group’s profitability will be mainly driven by equity accounted profits from its 9.82%-associate RHBC, followed by the capital financing business under OSK Capital, rental income from investment properties held under

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net researchKe-Zan Holdings, and property investment and development activities under OSK Realty.

We are maintaining our HOLD recommendation on OSKH with an unchanged price target of RM1.60 per share. Our price target is based on our RNAV estimate, which was arrived at by applying an estimated PE of 12x to the group’s remaining businesses post disposal of the OSKIB group of companies, and including the 9.82% stake in listed RHBC. We have also assumed a 30% discount to our RNAV estimate given the group’s lack of significant core operating assets post disposal of OSKIB as well

as its holding company status. At our price target of RM1.60 per share for OSKH, the implied 2013F PER and PBR for the stock are 7.1x and 0.7x, respectively.

Despite low prospective valuations and an improved balance sheet position post disposal of OSKIB group, we are maintaining our neutral stance on the stock for the moment, pending the inclusion of any new core business operations, in addition to the group’s remaining businesses under OSK Capital, Ke-Zan Holdings and OSK Realty.

2. Key Investment Risks Key investment risks for the group’s remaining operations in money lending and property investment include:

a) Softening of demand in the property market with tighter bank lending rules and economic uncertainties, which would affect the property investment operations; and

b) Volatile stockmarket, economic and political conditions, which would affect the money lending operations.

3. Recent Developments On 29 Sep 2011, the group submitted an application letter to Bank Negara (BNM) to seek an approval in principle to commence negotiations with RHB Capital (RHBC) for a possible merger of businesses between OSK investment banking (OSKIB) group and RHB banking group. On 28 May 2012, OSKIB on behalf of the group had announced that it had entered into a conditional share purchase agreement (CSPA) with RHBC in relation to the disposal of:

a) OSKH’s 100% stake in OSKIB to RHBC; b) OSKH’s 20% stake in OSKTB to RHBC; c) OSKH’s 20% stake in MTB to RHBC; d) OSKH’s 100% stake in OSKL to RHBC,

for a total consideration of RM1.977bn to be satisfied through the issuance of 245m new RHBC shares at an effective issue price of RM7.22 per RHBC share and cash of RM208.5m (being RM174.3m cash consideration plus RM34.2m cash from RHBC’s final dividend). OSKH is expected to utilise the total cash proceeds of RM208.5m to cover estimated expenses of the proposed disposal (RM20m), repayment of bank borrowings (RM180m) and for working capital purposes (RM8.5m). On 9 Nov 2012, the above proposals were completed and OSKH currently holds approximately 9.82% equity interest in RHBC. On 29 May 2012, OSKIB had on behalf of OSKH submitted an application to Bursa for a waiver from being classified as a PN17 company. On 3 Jul 2012, Bursa confirmed that the disposal will not result in OSKH triggering criteria 2.1(g) and (h) of PN17. Post the disposal of OSKIB group, OSKH does not have any profit consolidation from OSKIB, OSKTB, MTB and OSKL. The board does not currently have any intentions to inject any new assets or businesses into the OSKH group although news reports have indicated that the board will possibly look for a new core business. After the proposed disposal of the OSKIB group and in the absence of any new asset injections, OSKH will focus on the development and future growth of its existing businesses and expects the profitability of the group to be driven mainly by the equity accounting of profit from its 9.82% stake in RHBC, followed by its capital financing business under OSK Capital, rental income from existing properties held under Ke-Zan Holdings, and property investment activities under OSK Realty.

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net research

Source: OSK Holdings

4. Earnings Outlook Our 2013-2014F projections for the group are largely supported by estimated associate contributions from 9.82%-owned RHBC (circa 85-90% of group PBT), and to a lesser extent, contributions from the remaining businesses under OSK Capital, Ke-Zan Holdings and OSK Realty.

5. Valuation & Recommendation We are maintaining our HOLD recommendation on OSKH with an unchanged price target of RM1.60 per share. Our price target is based on our RNAV estimate, which was arrived at by applying an estimated PE of 12x to the group’s remaining businesses post disposal of the OSKIB group of companies, and including the 9.82% stake in listed RHBC. We have also assumed a 30% discount to our RNAV estimate given the group’s lack of significant core operating assets post disposal of OSKIB as well as its holding company status. At our price target of RM1.60 per share for OSKH, the implied 2013F PER and PBR for the stock are 7.1x and 0.7x, respectively. Despite low prospective valuations and an improved balance sheet position post disposal of OSKIB group, we are maintaining our neutral stance on the stock for the moment, pending the inclusion of any new core business operations, in addition to the group’s remaining businesses under OSK Capital, Ke-Zan Holdings and OSK Realty.

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net research Disclosures/Disclaimer Investment ratings: Buy (generally >10% upside over the next 12 months) Hold (generally negative 10% downside to positive 10% upside over the next 12 months) Sell (generally >10% downside over the next 12 months) This report has been prepared by Netresearch-Asia Sdn Bhd for purposes of CMDF-Bursa Research Scheme (“CBRS”) III, administered by Bursa Malaysia Berhad (“Administrator”) and has been compensated to undertake the scheme. Netresearch-Asia Sdn Bhd has produced this report independent of any influence from the Administrator or the subject company. For more information about CBRS and other research reports, please visit Bursa Malaysia’s website at: http://www.bursamalaysia.com/website/bm/listed_companies/cmdf_bursa_research_scheme/eResearch.jsp The information and opinion in this document has been obtained from various sources believed to be reliable. This publication is for information purpose only, and must not be relied upon as authoritative or taken in substitution for the exercise of judgment. This document is not to be construed as an offer or a solicitation of an offer to buy or sell any securities. Opinions expressed in this publication are subject to change without notice and any recommendation herein does not have regard to the specific investment objectives, financial situation and the particular needs of any specific addressee. No representation, express or implied, is made with respect to the accuracy, completeness or reliability of the information or opinions in this publication. Accordingly, neither we nor any of our affiliates nor persons related to us accept any liability whatsoever for any direct, indirect or consequential losses (including loss and profit) or damages that may arise from the use of information or opinions in this publication. Netresearch-Asia Sdn Bhd and its related companies, their associates, directors, connected parties and/or employees may own or have positions in any securities mentioned herein or any securities related thereto and may from time to time add or dispose of or may materially be interested in any such securities. Netresearch-Asia Sdn Bhd and its related companies may from time to time perform advisory, investment, communications or other services for, or solicit such advisory, investment, communications or other services from any entity mentioned in this report. In reviewing these materials, you should be aware that any or all of the foregoing, among other things, may give rise to real or potential conflicts of interest.