Market Dateline PP 7767/09/2011(028730)

RHB Research Institute

RHB Equity 360°

20 October 2010 (Property, Motor, Quill Capita; Technical: Kump. Hartanah Selangor)

Top Story : Property – Going from strength to strength Overweight

Sector Update
- We upgrade our valuations for the property stocks, as many have almost hit our target prices recently. We
still see values in the sector led by sustained property prices and demand, and valuations are still attractive
at about +1 stdev above the average of P/B.
- We believe the LTV ratio will eventually be capped. Even so, property sales momentum will continue as
long as developers continue with their aggressive incentives/rebates, which typically bring down the “entry
costs” for buyers and investors.
- The influx of liquidity led by low interest rate will drive both the physical property sales and property stocks.
The potential delay in rate hike will be good for the property sector, as the resulting cheap financing will
continue to support property buying momentum.
- With liquidity-led asset reflation coming into play, we expect margin expansion to kick in as property prices
continue to head north. SP Setia and IJM Land will benefit, given their large parcels of relatively cheap
landbank in hand (Setia Alam and Canal City in Klang Valley).
- We expect the liquidity play and margin expansion will first flow to the big caps. Our favourite four are SP
Setia (Upgrade to OP, FV upgraded to RM5.94); IJM Land (OP; FV upgraded to RM3.50), Suncity (OP, FV
upgraded to RM5.80) and Mah Sing (OP, FV = RM2.33). Maintain Overweight on the sector.

Sector Call

Motor : Lower TIV on shorter working month Overweight

Sector Update
Proton : Fair value maintained at RM5.50 Outperform
MBM : Fair value unchanged at RM5.30 Outperform
APM Automotive : Maintain fair value of RM5.53 Outperform
Tan Chong : Fair value of RM6.16 Market Perform
UMW : Fair value of RM7.27 Market Perform
- Yoy TIV down 5.8%, mom TIV down 21.3%. September TIV of 43,443 was marginally down. The mom fall
in TIV for Sep was unsurprising, as it was a shorter working month and Aug TIV was a high base as
consumers rushed to purchase cars before the Hari Raya festivities.
- YTD TIV of 453,249 achieved 77% of our full-year forecasts of 587,698 and 80% of MAA’s forecast of
570,000. YTD yoy growth was 13.9% (vs. 398k units for YTD FY09), reflective of the general improvement
in the local motor sector.
- Perodua and Proton undoubted market leaders, while Toyota leads the non-national segment. Proton and
Perodua maintained their grip on around 50% of the domestic market with 26.8% and 28.7% respectively,
while Toyota continues with 15.5% of market share.
- No changes are made to our 2010-2012 TIV numbers even though annualised TIV numbers stand at
604,332 as we expect the moderation in TIV for 2HFY10 to continue going into the final quarter of the year.
- Maintain Overweight on the sector. No changes to the valuations and recommendations for the stocks
under our coverage. We expect the strong TIV numbers to be sustained going into 2011.

Corporate Highlights

Quill Capita : Flattish 3Q10 numbers Outperform

3QFY10 Results
- Quill Capita’s (QC) 3Q10 realised net income of RM8.7m came in below ours and consensus estimates.
Apart from the filter-down of positive growth in rental contribution, effective capital, tenancy and asset
management by the REIT manager, as well as some write-back of administrative expenses have also led
to a 7% increase in realised net income.
- Going forward, we expect earnings to remain flattish, as rental of some properties were locked in at a
relatively flat rate 1-2 years ago during economic slowdown. Next year, lease agreement for Wisma
Technip and Quill Building 9-DHL (XPJ) will be due for renewal. Some rental reversion of +2-5% can be
 expected, and hence it should contribute positively to net income from 2011 onwards.
- No change in our forecasts. Despite less encouraging outlook, QC’s 7-8% yield will still be sustainable. We
maintain our Outperform call on QC.

Technical Highlights

Daily Trading Strategy : Tracking the regional volatile sentiment…

- Yesterday’s recovery was indeed in line with our earlier expectation, as we have anticipated bargain-
hunting activities to return after the selldown following the uninspiring 2011 Budget last Friday.
- In fact, the improvement in daily turnover suggests that the underlying trading sentiment remains strong.
- As a result, should the index sustain above the 10-day SMA of 1,487 today, it will accelerate its upward
momentum and resume its bullish short-term outlook once it removes the recent high of 1,503.82. Further
resistance level is at 1,524.69, i.e. at the all-time high level.
- However, given the surprise interest rate hike by China’s government yesterday, prompting the US markets
to end steeply lower in the overnight trading, the regional markets’ performance is expected to dictate the
local market direction in the immediate term, in our view.
- Nevertheless, we see the medium-term support at the 1,450 level and the 40-day SMA near 1,455. Without
breaching these levels, the medium- to long-term view of the FBM KLCI will stay positive.

Daily Technical Watch: Kumpulan Hartanah Selangor – Strong support at 10-day and 40-day SMAs …
- 10-day SMA: RM0.403
- 40-day SMA: RM0.3936
- Support: IS = RM0.38 S1 = RM0.33
- Resistance: IR = RM0.44 R1 = RM0.54 R2 = RM0.60

Bulletin Board

Co/Sector News Impact Recom

Rubber Members of Malaysian Rubber Glove Neutral for now given that in our view, the near- N
Glove Manufacturers Association (Margma) have been term outlook for the rubber glove manufacturers
advised to increase and adjust prices according remains challenging due to slowdown in orders
to the rising raw material costs and continued for rubber gloves as latex prices remains high
weakening US$ against RM (StarBiz). despite the weaker US$, which, we believe will
hamper some glove manufacturers from
adjusting prices for the higher costs.

Important Dates

Company Entitlement details Ex-date Payment date

New entitlements
Eastern & Oriental 1st Interest Payment on 7% 10-year ICULS 04-Nov-10 16-Nov-10
Khee San First and final dividend of 2% less 25% tax 11-Jan-11 10-Feb-11

Going “ex” on 21 Oct

YTL Cement 10th interest payment on 10-year ICULS 2005/2015 21-Oct-10 10-Nov-10
Keck Seng (M) Interim dividend of 4% gross less 25% tax 21-Oct-10 22-Nov-10

...For more details, see individual reports attached

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