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

RHB Research Institute

RHB Equity 360°

22 July 2010 (Media; Technical: Pos)

Top Story : Media – 1H10 ad spending up 23.2% yoy Neutral

Sector Update
- According to Nielsen Media Research, Jun’s gross adex for print and TV media rose 25.5% yoy and grew
6.4% mom, led by TV (+31.4% yoy; +11.9% mom) while print reported commendable growth of 20.7% yoy
(+1.9% mom). For 1H10, ad spend grew 23.3% yoy as adex for both TV and print media grew 29.4% and
18.6% respectively. Once again, we believe this strong yoy growth was mainly due to the low base effect
as a result of the weak economic conditions a year ago, coupled with improving conditions and sporting
events such as FIFA World Cup and Thomas/Uber Cup.
- Media Prima (FV=RM2.80) remains our preferred pick as we believe adex (especially TV) will be a prime
beneficiary of a recovering economy. We maintain our Outperform call on Media Chinese (FV=RM1.16)
and Market Perform call on Star (FV=RM3.86).
- Maintain Neutral stance on the sector.

Macro View

Inflation : Picked up in June and will likely accelerate following the removal of fuel and sugar subsidies
Economic Highlights (published 21 July 2010)
- The headline inflation rate grew at a faster pace of 1.7% yoy in Jun, compared with +1.6% in May and a
low of +1.2% in Feb. This was the fourth consecutive month of picking up and the fastest rate of increase in
13 months, indicating that price pressure is gradually building up and as the high base effect dissipates.
- Going forward, inflation is expected to accelerate following the Government’s move to raise fuel and sugar
prices with effect from 16 Jul. Still, we believe the direct impact on the CPI is not likely to be very significant
and it will likely be one-off given that the increase was gradual.
- This, together with some spill-over effect, will likely push up the CPI to 2.0% yoy in Jul and it will likely
accelerate to a high of +2.7% in Dec. For the full-year, we expect inflation to trend up to an average of
2.0% in 2010, from +0.6% in 2009.

Technical Highlights

Daily Trading Strategy : Selling on the recent highflyers may dampen sentiment …
- Nevertheless, yesterday’s candlestick pattern still points to a possible pullback ahead.
- Added with a decline on daily turnover, the active lower liners, which were seen as the key drivers for the
improved market sentiment of late, could be vulnerable for continuous selling pressure due to T+3 and T+4
factors, if turnover on those highflyers fail to improve soon.
- That said, given the firmer momentum readings and the solid support from the 10-day SMA of 1,332, any
pullback is expected to be shallow.
- We remain hopeful that sentiment should continue to improve, with active rotational plays spilling over to
other sectors, like banking stocks, and that FBM KLCI may gear up to retest the 1,350 key resistance level.
- However, as we highlighted, the overall market turnover should maintain around 800m-1.0bn shares mark
in the near term, to keep up the upbeat sentiment.

Daily Technical Watch: Pos Malaysia – Potential short-term weakness to the 10-day SMA soon…
- 10-day SMA: RM3.08
- 40-day SMA: RM2.901
- Support: IS = RM3.07 S1 = RM2.80 S2 = RM2.54
- Resistance: IR = RM3.26 R1 = RM3.40

Bulletin Board
Co/Sector News
Plantations Kulim has entered into a Share Sale Agreement
(Kulim and (SSA) with PGEO Group Sdn Bhd, a subsidiary
Wilmar) of Wilmar to dispose its entire 91.38% stake in
NatOleo for a cash consideration of RM450m.
NatOleo incurred a loss of RM22.97m in FY12/09
on the back of revenue of RM1.1bn, while net
assets amounted to RM308.2m. The remaining
8.62% of Natoleo is owned by the National Land
Finance Co-operative Society, an independent
third party. Kulim would recognise a gain of
RM168.3m or RM0.54/share from this sale.
(Bursa and SGX)
Healthcare Khazanah announced that it had received
acceptances for 15.7m shares for its proposed
partial takeover of Parkway. This represents 5%
of the 313m shares needed to raise Khazanah’s
stake to 51.5%. (Starbiz)
CIMB CIMB Thai reported 2QFY10 net profit of Neutral. If annualised, CIMB Thai’s results form OP, FV =
THB366m vs. 1QFY10: THB348m (2QFY09: net <5% of our net profit forecast for CIMB Group. RM8.40
loss of THB245m). This brought 1HFY10 net
profit to THB714m (1HFY09: net loss of
THB502m). The turnaround was led by an
expansion in NIM to 4.3% in 1H10 from 2.9% in
1H09 mainly from rightsizing the deposit book as
well as lower loan loss charge of 0.8%
(annualised) vs. 1HFY09: 2.3%. Gross NPL ratio
improved further to 9.4% (1QFY10: 10.4%,
4Q09: 14.9%) while Tier 1 capital and total
capital adequacy ratios were 6.3% and 12.4%
respectively. (Bursa)
Tanjong Unconfirmed market speculation has identified
Tanjong and MMC as among the parties planning
to purchase a significant stake in Mudajaya.
Potentially, Tanjong’s link could be due to
Brahmal Vasudevan’s (board member of Usaha
Tegas) 6.5% stake in Mudajaya. Mudajaya is
currently involved in a 1,440MW power project in
India (through a 26% associate), where Tanjong
does not have exposure. (Financial Daily)
Impact Recom
Recall Kulim has been trying to sell NatOleo for N
some time, given that it is loss making. As
NatOleo has an oleochemical capacity of
500,000 tonnes, the cost for Wilmar’s 91.39%
stake would work out to be RM985/tonne. As this
is comparable to the price paid by KLK for its
recent acquisition of Uniqema in Germany with
capacity of 150,000 tonnes at RM977/tonne, we
think it is fair. However, this is on the assumption
that no debt is to be assumed by Wilmar, as no
details disclosed. We believe Wilmar would be
able to turn around NatOleo, especially since the
operations are in Pasir Gudang, Johor where
Wilmar also downstream facilities under PGEO.
As such, we believe Wilmar would be able to
obtain operational synergies from this acquisition.
The level of acceptances is, in our view, the more OW
important figure compared to the 604.9m votes
received approving the partial takeover (although KPJ, OP,
we estimate there are only 580.1m Parkway FV =
shares not owned by Khazanah and Fortis). RM4.25
Khazanah needs 51.5% to take control of the
company and protect its interests, especially with
regards to Parkway’s 40% stake in Pantai
Holdings. There are just 3 days to go to the
extended closing date of 26 Jul. We expect
Khazanah to launch a full takeover bid at a
higher price. Assuming S$4.00, this would imply
FY10-11 PER of 28.8x and 21.3x based on
consensus EPS. We believe this continues to be
a price catalyst for KPJ.
Tanjong plans to double its power generation MP, FV =
capacity to 8,000MW over the next five years. RM18.30
Based on Mudajaya’s effective interest of
374MW in the current project, Tanjong may need
to acquire a sizeable stake in order to obtain a
more meaningful (indirect) exposure to the India
market. While we would not rule out the
possibility of Tanjong acquiring a stake in
Mudajaya, key, we think, would be Mudajaya’s
ability to secure more power projects in India.
Important Dates

Company Entitlement details Ex-date Payment date

New entitlements
None

Going “ex” on 23 Jul

Kejuruteraan Samudra Timur Renounceable rights issue on the basis of 3-for-5 23-Jul-10 -
Yee Lee Corporation First & final div of 4 sen tax-exempt + 1 sen less 25% tax 23-Jul-10 10-Aug-10
Prestar Resources Final tax exempt dividend of 3.0% 23-Jul-10 18-Aug-10

...For more details, see individual reports attached

IMPORTANT DISCLOSURES

This report has been prepared by RHB Research Institute Sdn Bhd (RHBRI) and is for private circulation only to clients of RHBRI and RHB Investment Bank Berhad (previously known as RHB Sakura Merchant Bankers
Berhad). It is for distribution only under such circumstances as may be permitted by applicable law. The opinions and information contained herein are based on generally available data believed to be reliable and are
subject to change without notice, and may differ or be contrary to opinions expressed by other business units within the RHB Group as a result of using different assumptions and criteria. This report is not to be construed as
an offer, invitation or solicitation to buy or sell the securities covered herein. RHBRI does not warrant the accuracy of anything stated herein in any manner whatsoever and no reliance upon such statement by anyone shall
give rise to any claim whatsoever against RHBRI. RHBRI and/or its associated persons may from time to time have an interest in the securities mentioned by this report.

This report does not provide individually tailored investment advice. It has been prepared without regard to the individual financial circumstances and objectives of persons who receive it. The securities discussed in this
report may not be suitable for all investors. RHBRI recommends that investors independently evaluate particular investments and strategies, and encourages investors to seek the advice of a financial adviser. The
appropriateness of a particular investment or strategy will depend on an investor’s individual circumstances and objectives. Neither RHBRI, RHB Group nor any of its affiliates, employees or agents accepts any liability for
any loss or damage arising out of the use of all or any part of this report.

RHBRI and the Connected Persons (the “RHB Group”) are engaged in securities trading, securities brokerage, banking and financing activities as well as providing investment banking and financial advisory services. In the
ordinary course of its trading, brokerage, banking and financing activities, any member of the RHB Group may at any time hold positions, and may trade or otherwise effect transactions, for its own account or the accounts of
customers, in debt or equity securities or loans of any company that may be involved in this transaction.

“Connected Persons” means any holding company of RHBRI, the subsidiaries and subsidiary undertaking of such a holding company and the respective directors, officers, employees and agents of each of them. Investors
should assume that the “Connected Persons” are seeking or will seek investment banking or other services from the companies in which the securities have been discussed/covered by RHBRI in this report or in RHBRI’s
previous reports.

This report has been prepared by the research personnel of RHBRI. Facts and views presented in this report have not been reviewed by, and may not reflect information known to, professionals in other business areas of
the “Connected Persons,” including investment banking personnel.

The research analysts, economists or research associates principally responsible for the preparation of this research report have received compensation based upon various factors, including quality of research, investor
client feedback, stock picking, competitive factors and firm revenues.

The recommendation framework for stocks and sectors are as follows : -

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
strong enough to warrant an Outperform call. It is generally for investors who are willing to take on higher risks.

Market Perform = The stock return is expected to be in line with the FBM KLCI benchmark (+/- five percentage points) over the next 6-12 months.

Underperform = The stock return is expected to underperform the FBM KLCI benchmark by more than five percentage points over the next 6-12 months.

Industry/Sector Ratings

Overweight = Industry expected to outperform the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

Neutral = Industry expected to perform in line with the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

Underweight = Industry expected to underperform the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

RHBRI is a participant of the CMDF-Bursa Research Scheme and will receive compensation for the participation. Additional information on recommended securities, subject to the duties of confidentiality, will be made
available upon request.

This report may not be reproduced or redistributed, in whole or in part, without the written permission of RHBRI and RHBRI accepts no liability whatsoever for the actions of third parties in this respect.