Market Dateline PP 7767/09/2010(025354)

RHB Research Institute

RHB Equity 360°

30 March 2010 (KFC, SP Setia; Technical: WTK)

Top Story : KFC – Upbeat on growth prospects Outperform (up from MP)
Visit Note
- Management plans to open about 40 new outlets per year in FY10-12, which will be focused on small
towns and East Malaysia. As this is a more aggressive network expansion target than earlier guided (of 20-
30 outlets p.a.), we have raised our FY10-12 new outlet assumptions in Malaysia to 40 p.a. from 20-30
outlets previously.
- Management seems more upbeat on prospects now given that SSS for YTD Feb FY10 has been growing
at approximately 10%, which is significantly above our forecasts of 4% p.a.. As such, we are raising our
SSS projections to 7% p.a. for FY10-12.
- We understand that one outlet is now scheduled to be opened in Pune on 31 Mar and another in Mumbai in
the first week of April. We believe the long-term potential for the India market continues to be exciting, as
we expect growth to be strongly backed by the approximately 19.1m combined population in both cities,
coupled with potential SSS growth of over 20% p.a. (which is based on the SSS growth achieved by the
existing KFC restaurants operated by other franchisees in India).
- All in, our FY10-12 forecasts are raised by 9-15.8%. Given the marked improvement in earnings prospects
as the company becomes more aggressive in its growth plans, as well as better growth trajectory from the
recovering economy, our fair value has been lifted to RM9.63 (based on unchanged 12.5x FY10 PE, 14%
discount to consumer sector PE of 14.5x) from RM8.84 previously. Upgrade to Outperform.

Corporate Highlights

SP Setia : Buys land in Australia Market Perform

News Update
- SP Setia has proposed to acquire 1.07 acres land in Melbourne for AUD30m cash, or AUD642.2 psf
(RM92.4m / RM1,977.9 psf)). The company will develop the land into a high density inner-city integrated
residential and commercial project and it will be launched within 18-24 months from now.
- We are positive on this deal over the longer term as SP Setia can tap into the pool of Asian/Malaysian born
immigrants in Melbourne. Nevertheless, in the short term, we are cautious on local property demand as it
may be impaired by Australia government’s tightening measures to prevent an asset bubble from building.
- No changes to our forecasts and fair value of RM4.66 based on RNAV valuation method.

Technical Highlights

Daily Trading Strategy : Trading sentiment to remain upbeat…

- With the recent positive development on the technical layout, the FBM KLCI has confirmed its breakout of
the previous heavy resistance zone at 1,250-1,300 region.
- Technically, the breakout carries a medium-term target of 1,390.
- But, for a nearer-term chart outlook, the index may head towards the previous high of 1,334.34, before
showing additional signs of a potential follow-through rally.
- Given the improvement in sentiment due to today’s Invest Malaysia conference, to be officially open by PM
Najib Tun Razak, trading appetite is expected to stay buoyant in the near term.
- If daily trading volume can be maintained at around 1.2bn shares, trading sentiment should remain upbeat.
- All said the index must stay above the 10-day SMA of 1,305 and the psychological support level of 1,300,
to avoid a sudden reversal in technical outlook.

Daily Technical Watch: WTK Holdings – Fresh breakout of the 9-month old sideways trend…
- 10-day SMA: RM1.204
- 40-day SMA: RM1.158
- Support: IS = RM1.34 S1 = RM1.09 S2 = RM0.71
- Resistance: IR = RM1.71 R1 = RM2.08 R2 = RM2.48
Bulletin Board

Co/Sector News Impact Recom

Market The PM will unveil the initial details of the New Positive as the NEM has been delayed since -
Economic Model at the InvestMalaysia 2010 end-Feb. Nevertheless according to the Financial
conference today. (Financial Daily) Daily article, which quotes from a draft of the
plans, there are no firm measures to be
announced. We wrote in our 28 Jan report that
the NEM will likely be the over-arching theme for
the 10MP to be launched in June, although there
will not be any quick wins.
Infrastructure Asas Serba (which proposed to the Government Neutral, we believe Asas Serba's proposal is Neutral
sector to acquire all 22 toll roads in Malaysia for unlikely to succeed as this is unlikely to succeed,
RM50bn last year) is waiting for an opportunity to as: (1) We are doubtful if Asas Serba could raise
make its presentation on the matter to enough funding to finance the proposed
Government. Recall, Asas Serba proposed to acquisition; and (2) Toll roads (in particular,
reduce toll rates by 20% and hoping that the PLUS Expressways) are the national assets with
reduction in toll rates will be more than offset by strong free cash flow generation ability.
higher traffic volumes and lower operating
expenditure. (Starbiz)
Genting Genting Plantations has extended the completion Negative, as this delay would mean completion UP, FV =
Plantations date of its JV agreement with Chelsea Malaysia of the agreement would only be due by Jun 2010 RM6.65
to set up a Premium Outlet mall in Johor from 6 (from Mar) and the completion of the building and
months to 9 months. (Bursa Malaysia) commencement of operations would also be
subsequently delayed. We believe the potential
delay could come from either not finalising the
details of the service and royalty agreements
between the two parties, not receiving enough
commitments from prospective tenants or not
settling the terms of the financial budget of the
project, being some of the more salient
conditions of the JV agreement. Nevertheless,
this would not have any impact to our earnings
forecasts, given that we had not imputed any
contribution from this venture in the first place.
IOIC Unilever says it will not cancel palm oil supply Positive for IOIC, as it is a vote of confidence that OP, FV =
contracts with IOI Corp Bhd and that it is IOIC is different from SinarMas, in that it already RM6.65
confident the planter will address concerns over has RSPO-certified estates and is in the process
logging forests raised by NGO Friends of the of certifying the rest of its plantation estates and
Earth. Unilever’s head of sustainability Jan-Kees mills. Unilever has so far blacklisted SinarMas
Vis said Unilever had already contacted IOI over (parent company of SGX-listed Golden Agri) after
the report and that "We believe IOI is a very verifying reports of the firm felling forests and
responsible supplier and are confident that if clearing peatlands to expand - practices that
there is truth in the current allegations, IOI will release global warming emissions.
address them". (Business Times)
Astro Astro has successfully migrated to the Neutral. This would help ease concerns that the TB, FV =
Communications and Multimedia Act 1998 (CMA) move could see Astro lose its exclusivity to RM4.30
licensing regime on terms that are no worse off provide satellite DTH transmission (until 2017),
as compared to its previous licenses issued among others.
under the Telecommunications Act and
Broadcasting Act. (Financial Daily)
Important Dates

Company Entitlement details Ex-date Payment date

New entitlements
Wong Engineering Fist and final tax exempt dividend of 1 sen 28-Apr-10 10-May-10
Ajiya Final dividend of 6 sen less 25% tax 12-May-10 25-May-10

Going “ex” on 31 Mar

Mlabs Systems Renounceable rights issue 31-Mar-10 -
Chin Well Holdings Tax exempt interim dividend of 0.6 sen 31-Mar-10 16-Apr-10
Latitude Tree Holdings Interim dividend of 3 sen tax exempt 31-Mar-10 30-Apr-10

...For more details, see individual reports attached

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