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

RHB Research Institute

RHB Equity 360°

30 April 2010 (Market, CSC Steel, Notion Vtec; Technical: Perisai)

Top Story : Taking Stock – Position for more volatility ahead

Market Update
- We expect the market volatility to continue due to changing external factors including rising interest rates,
fluctuating exchange rates, rising commodity prices, and balanced against the global economic recovery.
- We caution that May has tended to be volatile with the FBM EMAS and FBM KLCI showing a decline for
end-May vs. end-Apr prices in six out of the last 10 years. The 2010 FIFA World Cup in South Africa in
Jun/Jul could also have a negative impact. Price charts for the last five World Cup years indicate the FBM
EMAS and FBM KLCI generally having a downswing in the early part of each event.
- Star performers including Daibochi, Faber and Kossan have already seen some correction in the last five
days if not the last month, while others such as Unisem, Tan Chong and Media Prima have continued to
outperform. Nevertheless, we remain bullish on star performers whose strong earnings growth through
FY11 should sustain share price performance through the volatility. We also highlight YTD performance
laggards like Genting Bhd, IOI, KLK, TNB, IJM Land and Maxis which we believe deserve more attention,
given their resilient earnings and better stock liquidity.
- While the early-stage recovery in global economies has to some extent already been priced in to the
market, we see price weakness as an opportunity to accumulate the big banks, commodities (plantations
and O&G) and power (TNB) stocks as well as consumer-related stocks like Tan Chong, IJM Land and
Notion Vtec. We also advocate a balanced portfolio to include Alpha+ stocks such as Maxis, PLUS and
Carlsberg that have resilient earnings as well as attractive dividend yields.

Corporate Highlights

CSC Steel : 1QFY12/10 result to beat expectations Outperform

Results Preview
- We believe 1QFY12/10 result (due out on next Friday evening) is likely to beat our as well as market
expectations, driven by higher input prices and improved downstream demand that boost demand and
prices of flat steel products.
- We are raising our FY12/10-12 net profit forecasts by 26.1%, 32.1% and 46.5% to RM107.5m, RM113.0m,
and RM122.1m respectively, largely to reflect higher sales volumes and selling price assumptions.
- Correspondingly, indicative fair value is raised by 26.2% from RM2.02 to RM2.55 based on 9x revised
FY12/10 EPS of 28.3 sen.
- We continue to like CSC Steel for its: (1) Strong earnings outlook, underpinned by the improving demand
for downstream products that will boost demand and prices of CRC; and (2) Strong balance sheet position.

Notion Vtec : Proposes private placement and warrants issue Outperform

2QFY10 Results
- 1HFY09/10 net profits were in line with our and market expectations, accounting for 47% and 50% of our
full-year and market consensus respectively. Lower net profit was due to 1) seasonal factors and 2) higher
expenses incurred from the capacity ramp up coming into 2Q.
- Notion has proposed a private placement of 10% of its issued share capital, and an issue of free warrants
on the basis of 1 for every 5 shares. The issue price for the placement shares is to be based on the five-
day volume weighted average price, subject to a discount of up to 10%. If we assume the issue price is
RM2.98 per share, the private placement could raise as much as RM45.9m cash.
- The private placement alone will dilute Notion’s FY09/11 EPS by 6.5%. Together with the potential dilution
from the free warrants, we estimate FY09/11 fully-diluted EPS of 38.7 sen or a dilution of 16.4%. Notion
previously announced a proposal to acquire 60% of Autic Mekki for RM3.4m cash. Upon completion, Autic
Mekki will become a wholly subsidiary. We estimate this to increase net profit by RM0.5-0.6m per quarter.
- Accordingly, we have raised FY11-12 by 1.1% and 1.3% to reflect higher contribution from the associates.
- Our fair value has been raised to RM4.64 based on target PER of 10x FY11 PER. Maintain Outperform.
 Technical Highlights

Daily Trading Strategy : Lack of positive confirmation, stay cautious…

- Indeed, the FBM KLCI staged a mild recovery towards the 10-day SMA near 1,335 yesterday, as we had
expected earlier.
- However, as it merely closed on the dot of the 10-day SMA, the candlestick pattern lacks confirmation and
is less convincing for a strong follow-through buying momentum ahead.
- In our view, it must register more positive candles in order to jump-start the lacklustre trading sentiment, in
view of the slower daily turnover of late.
- Ideally, the daily market volume should be around 1.0bn – 1.2bn shares, with a positive market breadth to
be able to churn up enough trading activities to sustain a technical rebound.
- Or else, the sellers will more likely capitalise on the mild rebound to trim their positions further.
- As such, we stay cautious pending more technical points before revising our short-term expectation.
- Supports remain at the 40-day SMA of 1,324, a technical gap near 1,305 and the 1,300 psychological level.

Daily Technical Watch: Perisai Petroleum Teknologi – Poised for further retreat today…
- 10-day SMA: RM0.632
- 40-day SMA: RM0.52
- Support: IS = RM0.57 S1 = RM0.52 S2 = RM0.465
- Resistance: IR = RM0.61 R1 = RM0.65

Bulletin Board

Co/Sector News Impact Recom

Power MMC said that it is keen to spend as much as
US$1.2 billion (RM3.9 billion) to expand its
2,100-megawatt (MW) Tanjung Bin Power Plant
by another 800MW if the government is
agreeable. (Business Times)
CIMB CIMB Niaga reported 1QFY10 net profit of
IDR524bn (+100% yoy). The strong growth yoy
was mainly due to a combination of: 1) 60bps
expansion in NIM; and 2) absence of merger
costs that was incurred in 1Q09. Gross NPL ratio
was stable at 3.06% (4Q09: 3.06%). (Bursa)
Axiata XL reported 1Q normalised net profit
IDR578bn. (Company)
This comes after TNB CEO’s comment after its OW
2QFY10 results that Peninsular Malaysia will
have to add some 6,000MW of capacity to
replace the cancelled undersea cables project.
TNB on its own has proposed to expand its
Manjung plant by a further 2,000MW by 2015.
If annualised, CIMB Niaga’s results form around OP, FV =
22% of our net profit forecast for CIMB Group but RM16.24
the strong growth would help support our FY10
+20% net profit growth projected for the group.
of 1Q10 net profit of IDR578bn came in above our OP, FV =
expectation, accounting for 38.5% of our full-year RM4.05
forecast. The key variances were: (1) stronger-
than-expected mobile revenue; and (2) better-
than-expected margins with 1Q EBITDA margin
of 51% vis-a-vis our full-year projection of 45.5%.
This reaffirms our earlier belief that there could
be potential upside to our forecasts (which are
currently lower compared to its headline KPIs)
and this would likely to come from XL. We are
keeping our forecasts unchanged for now,
pending release of Axiata's 1Q results.

Important Dates

Company Entitlement details Ex-date Payment date

New entitlements
MHC Plantations First and final dividend of 3 sen less 25% tax 11-May-10 27-May-10
 Homeritz Corporation Second interim single tier tax exempt dividend of 1.8 sen 12-May-10 8-Jun-10
Rexit Tax exempt interim dividend of 1.5 sen 13-May-10 25-May-10
Paos Holdings Second interim dividend of 1.25 sen tax exempt 13-May-10 29-May-10
Hap Seng Plantations Final dividend of 5 sen single tier tax exempt 25-May-10 8-Jun-10
Hap Seng Consolidated Final dividend of 7 sen single tier tax exempt 31-May-10 11-Jun-10
Muar Ban Lee Group Final dividend of 1.5 sen single tier tax exempt 9-Jun-10 23-Jun-10
Engtex Group Final dividend of 1 sen less 25% tax 11-Jun-10 2-Jul-10
Far East Holdings Final single tier dividend of 15 sen (amended ex-date) 14-Jun-10 30-Jun-10
BP Plastics First and final tax exempt dividend of 3 sen 14-Jun-10 5-Jul-10
Kossan Rubber Final dividend of 9 sen tax exempt 24-Jun-10 19-Jul-10
Uchi Technologies Final tax exempt dividend of 3 sen 28-Jun-10 19-Jul-10
Cahya Mata Sarawak First and final dividend of 5 sen less 25% tax 28-Jun-10 23-Jul-10
Kim Hin Industry First and final dividend of 5 sen tax exempt 6-Jul-10 28-Jul-10
DKLS Industries First and final dividend of 3 sen less 25% tax 28-Jul-10 20-Aug-10

Going “ex” on 3 May

Carlsberg Final div of 7.5 sen + special div of 10.5 sen, less tax 3-May-10 18-May-10
KAF-Seagroatt & Campbell Interim dividend of 7.5 sen less 25% tax 3-May-10 19-May-10

...For more details, see individual reports attached

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Stock Ratings

Outperform = The stock return is expected to exceed the FBM KLCI benchmark by greater than five percentage points over the next 6-12 months.

Trading Buy = Short-term positive development on the stock that could lead to a re-rating in the share price and translate into an absolute return of 15% or more over a period of three months, but fundamentals are not
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Industry/Sector Ratings

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