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

RHB Research Institute

RHB Equity 360°

24 February 2010 (Market, Motor, Sime Darby, CIMB, MRCB, PLUS, Wah Seong, Parkson, ILB, Ta Ann,
AEON, Kurnia Asia, YNH, UMW, Lion Forest; Technical: Maxis)

Top Story : Star Search – The trader’s stock picks

Market Update
- After two months of trading, the market is hovering at 1,266, below where it started 2010 at 1,273. We
expect the equity market to remain volatile until these concerns of policy changes are addressed and
investors begin to look forward to the next catalyst i.e. more consistent 2011 economic recovery. In the
meantime, investors should be prepared for bumpiness ahead, and continue to trade the volatilities.
- We highlight five key trading stocks: MRCB, KLK, Genting, Proton and CIMB. They share a number of
attributes i.e. high average daily traded volume (>1m shares), rising beta trend and disappointing
performance (+/- 10% YTD relative to the FBM KLCI). In addition, Adventa and HL Bank have seen a
significant increase in their beta over the last six months on price catalysts. We also note Sino Hua An and
HSL, which have conversely become less volatile with lower betas but we believe this may be temporary.
- The market’s volatility will likely be driven by general and external news flow and sentiment, as much as
stock-specific factors. Our trader’s stock picks are underpinned by fundamentally-sound companies with
positive price catalysts.

Sector Call

Motor : Jan 10 TIV up a stronger 32.8% yoy Overweight

Sector Update
- Malaysian automotive industry’s TIV surged 32.8% yoy in Jan 10 (vs. +19.7% yoy in Dec 09) with 50,622
units sold (vs. 38,107 units in Jan 09). We believe the stronger growth in Jan 10 TIV is largely due to the
low base factor arising from the sharp contraction beginning Oct 08 (-12.6% yoy) and Jan 09 (-16.8% yoy)
as well as pent-up demand stemming from car buyers postponing big-ticket purchases in 2009.
- We believe there are potential upside to our passenger and commercial motor vehicles unit sales projection
given: 1) rising positive sentiment; 2) better business conditions supported by Government’s stimulus
packages; 3) higher economic activities; and 4) introduction of new models to help spur demand. Thus, we
have raised our 2010-11 TIV projections by 8.2% and 6.8% respectively to reflect stronger demand driven
by the above factors.
- Hence, we expect TIV for motor vehicles to turn around from a contraction of 2.0% in 2009 to a positive
growth of 8.5% in 2010 and 2.5% in 2011 (vs. previous assumptions of 5.9% and 4.1% respectively).

Corporate Highlights

Sime Darby : Mix of good news and bad Outperform

Visit Note
- Seven key takeaways: 1) CPO price view more optimistic, no change in forward selling policy; 2) FFB
yields to continue to increase in Indonesia, production to rise 5-8% yoy; 3) Planting of 10,000 ha in Liberia
to start in CY10; 4) Industrial – order visibility still weak from Australasia, better from Southeast Asia; 5)
Some delays in property launches; 6) Some orderbook replenishment for oil & gas, but still relatively low,
while power & utilities to continues to record strong growth; and 7) Motor earnings better than expected.
- All in, we reduce our core net profit forecasts for Sime by 6-8.8% p.a. for FY10-12, after: (1) revising our
EBIT projections for the heavy equipment division downwards by 25-30% for FY10-12; (2) revising our
EBIT forecasts for the property division down by 15-20% p.a. for FY10-12; (3) raising our energy & utilities
division EBIT projections by 40-50% p.a.; and (4) raising our EBIT forecasts for the motor division by 14-
16% p.a. for FY10-12.
- Post-earnings revision, we reduce our SOP-based fair value for Sime to RM10.00 (from RM10.60). We
have also raised our target PE valuation for the energy and utilities division to 15x CY10 (from 12.5x), to be
in line with the oil and gas and power sector target PEs. Maintain Outperform recommendation

Unisem : Embarking on organic growth Outperform

Briefing Note
- Unisem forecasts 1QFY12/10 revenue to increase 3-5% qoq (vs. 11.7% in 4QFY12/10) driven by strong
demand of QFN and leadframe packages (PDIPW 8L and SOIC 8L).
- The company expects FY10 earnings to double on the back of higher capacity (i.e. rising QFN capacity)
from expansion exercises in Chengdu and Ipoh.
- Going forward, Unisem’s earnings visibility remains strong given stronger-than-expected chip sales in 1Q10
and extending into 2Q-3Q10, we are reiterating our Outperform call on the stock with our fair value of
RM3.07/share on unchanged 15x FY10 EPS.

CIMB : Record earnings for year & quarter Outperform

4QFY09 Results/Briefing Note
- 4QFY09 results in line – T.E dividend of 18.5 sen. Record year and quarter – Consumer bank, CIMB Niaga
and treasury the star. Asset quality improved.
- New FY10 KPIs – ROE of 16% on the back of 10 key priorities to push organic growth.
- FY10-11 forecasts raised by 9-14%. Proposed 1-for-1 bonus issue. Possible sale of bad bank in FY10.
- Regulatory adoption – FRS139 already made adjustment; Basel II IRB approach, maximum 100-150bps
impact on bank capital ratio but will remain well capitalized; and Basel III premature to assess.
- Do not need equity capital.
- Maintain Outperform. Fair value has been raised from RM14.70 to RM16.24 (following the upward revision
in our forecasts) based on unchanged 17x CY10 EPS.

MRCB : Back in the black in FY12/09 Trading Buy

4QFY09 Results
- FY12/09 net profit came in within our forecast and the market consensus.
- MRCB has a new irresistible angle on its property business, i.e. the possibility of bagging two prime
Federal land parcels in KL, namely: (1) 150 acres in Jalan Cochrane; and (2) 20-30 acres in Jalan Ampang
Hilir near the Jalan U-Thant area.
- We estimate that the land parcels could enhance MRCB’s valuation by RM624m or 46sen per share.
- Fair value is RM1.66 based on “sum of parts”. Maintain Trading Buy.

PLUS : FY12/09 net profit grows 9.9%; announces FY12/10 headline KPI targets Outperform
4QFY09 Results/Briefing Note
- FY12/09 net profit of RM1,186.4m came in within expectations.
- PLUS guided slower traffic volume growth in FY12/10 on the back of the high-base effect as well as
potential petrol price hike.
- PLUS announced its FY12/10 headline KPI targets of: 1) Revenue growth of 5%; 2) Minimum ROE of 18%;
3) Minimum dividend payout ratio of 75%; and 4) Response time of less than 20 minutes for 94% of its
patrolling services.
- PLUS expects a payback period of 8 years from the newly acquired Padalur-Trichy Highway. For a start,
PLUS projects Padalur-Trichy Highway to contribute to a revenue of 34-35 Crores (RM2.5-2.6m) p.a..
- Indicative fair value is RM4.13, equivalent to PLUS’s DCF-derived NPV.

Wah Seong : No surprises Outperform

4QFY09 Results
- FY12/09 core net profit was largely in line, accounting for 96% and 105% of our full-year forecast and
market consensus respectively.
- Wah Seong’s orderbook now stands at around RM1.4bn (vs. RM1.1bn previously). Of the current orders,
we estimate around 72% is from O&G and the balance from industrial services business. Wah Seong is
currently tendering for another RM5.3bn worth of orders of which 60% would come from pipe-coating jobs,
and the balance from industrial service division (25%) gas compressor business (14%).
- Maintain Outperform with unchanged fair value of RM3.09, based on 16x FY10 EPS.

Parkson : CNY booster in 3QFY06/10 Outperform

2QFY10 Results
- 1H10 net profit of RM145m (+10%) were within our and consensus expectations. SSS grew by 8.1%, 7%
and >30% yoy in China, Malaysia and Vietnam respectively.
- Management targets SSS growth of 10-12% yoy in CY10 and 14-15% yoy in CY11 for China, 3-4% yoy in
 FY10 for Malaysia and 15-20% yoy in FY10 for Vietnam.
- Increased earnings forecasts by 3-5% p.a. for FY10-12. SOP-based target price increased to RM6.00 (from
RM5.75) after updating latest cash position (ex-PRG). Maintain Outperform.

Integrated Logistics : 4QFY12/09 results hit by “kitchen sinking” Outperform

4QFY09 Results
- Excluding disposal gains, ILB reported an adjusted net loss of RM17.7m in FY12/09, substantially higher
than our net loss forecast of RM1.9m.
- We understand that the wider-than-expected net loss was largely due to adjustments made ahead of ILB’s
disposal of its core operating unit in Malaysia, Integrated Logistics Solutions Sdn Bhd (ILS), including the
provision for disposal stamp duty and write-off of office renovation expenses.
- As such, we do not believe ILB’s weak performance in 4QFY12/09 should be a major cause for concern.
- ILB has declared a first and final dividend of 3 sen (less 25% tax) coupled with a 1-for-20 share dividend.
- Fair value is RM1.24. Maintain Outperform.

Ta Ann : Within expectations Outperform

4QFY09 Results
- Core net profit of RM61.2m (-8.5% yoy) was within our but below consensus expectations.
- Key earnings drivers were logging (c.50%) and plantation division (c.40%) while plantation division (ex-EI)
was in the red. Future earnings to be driven by plantation following higher CPO prices and FFB yield due to
the move into peak maturity age profile but plywood division may provide further upside to earnings.
- FY10-11 earnings forecasts tweaked by -0.8% to 0.1% p.a.. FY12 earnings forecasts introduced. SOP-
based fair value adjusted to RM5.95 (from RM6.00) based on unchanged 14x FY10 timber EPS and 12x
FY10 plantation EPS. Maintain Outperform.

AEON : Above expectations Outperform (up from MP)

4QFY09 Results
- FY09 net profit of RM133.5m (+10.7% yoy) was above our and consensus expectations. Key variances
include stronger-than-expected rebound in property management and retail EBIT margin. First and final
dividend of 12 sen (less 25% tax) was proposed, in line with expectations.
- Expect EBIT margin to improve moving forward following lower A&P activities due to improving consumer
spending and normalisation of property management margin.
- FY10-11 earnings forecasts raised by 9-12% p.a.. FY12 earnings forecast introduced. Fair value raised to
RM5.85 (from RM5.30) based on unchanged 14x FY10 EPS. Upgrade to Outperform (from MP).

Kurnia Asia : Below expectations Market Perform (down from OP)

FY09 Results
- FY12/09 results were below our and consensus expectations largely due to the higher than expected tax
rate due to one-off, taxable prior year adjustments made under RBC framework.
- FY12/10-11 forecasts were cut by 18.7-28.8%, after taking into account: 1) post results adjustment; 2)
higher claims ratio of 67% vs. 64-64.5% in FY12/10-11; and 3) lower gross premium base for FY12/10-11.
- Fair value has been reduced to RM0.74 from RM1.04 (based on unchanged 11x FY12/10 EPS).
Downgraded to Market Perform from outperform.

YNH : Not a good year Market Perform (down from OP)

4QFY09 Results/Briefing Note
- 12MFY12/09 normalised net profit was below expectations due to slowdown in property demand for all its
existing projects as well as lack of new property launches. YTD, the company has unbilled sales of
RM890m, or 2.7x of our FY10 revenue forecast.
- Key highlights from analyst briefing: a) the company will launch three projects in 2010 with total GDV of
about RM1.2bn; b) intends to jointly develop Genting land with foreign partners; and c) delay in
commencing construction works for Pantai Hospital, Kiara 163 and Menara YNH – retail.
- Downgrade FY10-11 earnings forecasts by 15.8-27.1% to factor in delay in commencing construction
works, changes in margin assumptions and changes on balance sheet assumptions post FY09 results.
- Fair value is lowered to RM1.86, based on 40% discount to RNAV (from RM2.19, 30% discount to RNAV).
Downgrade to Market Perform.
 UMW : Turning stronger in FY10 Market Perform
4QFY09 Results
- FY12/09 results were largely in line with our and market expectations, accounting for 98% and 97% of our
full-year forecast and market consensus respectively.
- We maintain our 2010-10 TIV for Toyota of 89.5K and 91.1K units respectively, as it is in line with
management’s expectation and YTD sales are on track to hit our projection.
- We expect brighter prospects for Toyota as it will benefit from improving sentiment and affordability on the
back of economic recovery, where preference towards premium products will start to improve. However,
after updating 4Q net cash position, we have lowered our fair value to RM6.71 (from RM7.08).

Lion Forest : 1HFY06/10 results boosted by EI and higher tyre profits Outperform (up from UP)
4QFY09 Results
- Excluding exceptional gain of RM57.1m, 1HFY12/10 net profit of RM28.4m came in above our expectation,
accounting for 72.4% of our full-year forecast. We believe the variance came largely from better-than-
expected sales volume at the tyre manufacturing division.
- We are raising our FY06/10-12 net profit forecasts by 43.4-51.5%, to reflect higher sales volume at the tyre
manufacturing division.
- Fair value raised by 43.9% to RM1.80 based on 7x revised CY2010 core EPS of 25.7 sen.

Technical Highlights

Daily Trading Strategy : Underlying sentiment remains weak …

- Although the FBM KLCI managed to stage a late recovery, lifting it higher from the afternoon selldown, it
has failed to close positive for the day.
- This implies the weak underlying sentiment on the market in general.
- As the daily trading volume remains pathetically low, our view on the near-term direction of the FBM KLCI
remains negative.
- In other words, unless the benchmark overcomes the immediate resistance barrier near the 40-day SMA of
1,276, we do not expect the recent recovery to last.
- Nonetheless, we see strong support near the 10-day SMA of 1,253 and the 1,250 stronghold.
- Besides, we believe the announcement of Malaysia’s 4Q GDP number today and the US Federal
Reserve’s chairman Ben Bernanke’s testimony to the US Congress on Wednesday and Thursday will
influence sentiment flow in the local bourse for the rest of the week.

Daily Technical Watch: Maxis – RM5.50 remains as a tough technical resistance …

- 10-day SMA: RM5.391
- 40-day SMA: RM5.38
- Support: IS = RM5.40 S1 = RM5.33 S2 = RM5.30
- Resistance: IR = RM5.50

Bulletin Board

Co/Sector News Impact Recom

TNB The proposal for a hike in electricity tariffs will be
discussed at the Cabinet meeting today and, if
approved, the new tariff structure is expected to
take effect next month. (StarBiz)
A tariff hike to cover higher gas prices (if raised) OP, FV =
would likely be earnings neutral for TNB (TNB RM9.50
estimates its average coal cost for FY10 would
amount to around US$85/tonne, on par with the
current benchmark price). However, a base tariff
review is past due for TNB and a hike would help
provide a lift to earnings. By our estimates, every
1% increase in electricity tariffs could raise our
FY11 earnings projections by 5-6%.

Important Dates
 Company Entitlement details Ex-date Payment date
New entitlements
Chuan Huat Resources Interim dividend of 1.5 sen less 25% tax 10-Mar-10 8-Apr-10
CIMB Interim single tier dividend of 18.5 sen 11-Mar-10 12-Apr-10
Yoong Onn Corp Interim div of 0.436 sen (tax-exempt) + 2.564 sen single tier exempt 19-Mar-10 5-Apr-10
Wah Seong Special tax exempt share div of treasury shares on basis of 1-for-120 19-Mar-10 13-Apr-10
Wah Seong Tax exempt 2nd interim div of 3 sen 23-Mar-10 13-Apr-10
NCB Holdings Special div of 11 sen less 25% tax + final div of 10 sen less 25% tax 21-Apr-10 7-May-10
Cycle & Carriage Bintang Final dividend of 5 sen less 25% tax 26-May-10 25-Jun-10

Going “ex” on 25 Feb

APB Resources Final single tier dividend of 3sen 25-Feb-10 10-Mar-10
Hartelega Second interim single tier dividend of 5 sen 25-Feb-10 25-Mar-10

...For more details, see individual reports attached

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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.

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