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

RHB Research Institute

RHB Equity 360°

16 March 2010 (Tanjong, Telecommunications, Top Glove, BToto; Technical: Genting)

Top Story : Tanjong – A weaker 4Q, but largely expected Outperform

Results Preview
- Tanjong is expected to report its 4QFY01/10 results sometime next week. Our full-year net profit estimate
implies that 4Q net profit could be down by around 20% yoy (ex-4QFY09 exceptionals) and 30% qoq.
- For the power division, lumpy items such as business development and bidding costs as well as scheduled
maintenance expenses were relatively minimal in 9MFY10 but could skew 4Q’s numbers.
- As for the gaming segment, we expect weaker operating profit for the quarter largely on expectations of a
higher prize payout for the NFO division as the ratio normalises. We also expect a qoq drop in contribution
from Tropical Island largely due to seasonality.
- We expect Tanjong to declare an interim gross DPS of 17.5 sen (4QFY09: 17.5 sen) and a final gross DPS
of 22 sen (FY09 final gross DPS: 20 sen). This will bring the total gross DPS for FY10 to 92 sen (FY09: 90
- No change to our earnings forecasts for now.
- SOP-derived fair value of RM19.10 and Outperform call maintained.

Sector Update

Telecommunications: ST Telemedia to buy 33% stake in U Mobile Overweight

Sector Update
- According to StarBiz, Singapore Technologies Telemedia (ST Telemedia) will buy a 33% stake in U Mobile
for RM625m as part of its RM1bn investment commitment to enter into the Malaysian telecommunications
market. The balance would be used to participate in a planned rights issue by U Mobile.
- At this juncture, it is unclear whether the change in strategic partners would result in any significant change
in U Mobile’s business direction, but we think U Mobile’s main focus would remain on tapping into the
strong wireless broadband and data revenue growth ahead.
- We believe U Mobile has been hampered by the lack of coverage for its 3G service. While fresh funding
could help accelerate its 3G network rollout, this still takes time and hence, we do not expect the entry of
ST Telemedia to alter the landscape significantly in the near-mid term.
- Also, there could be questions whether ST Telemedia would be able to succeed when two previous large
mobile players had not made much headway. Potentially, ST Telemedia’s advantage over U Mobile’s
previous partners is its proximity to the market and hence, better understanding.
- No change to our overweight stance on the sector.

Corporate Highlights

Top Glove : Expect Yet Another Strong Set Of Results Outperform

Results Preview
- Top Glove is expected to announce its 2Q results on 17 Mar. We believe the results could, once again,
surprise on the upside on the back of stronger-than-expected margins.
- We expect revenue growth on the back of: 1) upward adjustments made to selling prices; and 2) increase in
sales volume as a result of full contribution from F19. 2Q bottom line growth is likely to mirror that of
revenue as we understand that margins were flattish qoq.
- Commercial production for 16 new lines (+1.5 bn pieces p.a.) at F20 has been pushed back to the end of
this month (initial target was Feb’10) due to the slight delay in the installation of the lines while, progress for
F21 (+1.5 bn pieces p.a.) is on track. Top Glove is also adding another 8-new lines (+0.75 bn pieces p.a.)
at F18 (Medi-Flex’s factory). All-in, Top Glove’s annual production capacity is expected to rise to 35.3bn
pieces by end-FY10, from 31.5bn pieces p.a. currently.
- We have revised up our FY10-12 EBITDA margin projections by 1.3-2.0%-pts to 17.8-19.9% (from 16.5-
17.9% respectively) and accordingly have raised our FY10-12 net profit projections by 9.6-13.3%.
- Our fair value now has been raised to RM15.50 (from RM13.80) based on unchanged target CY10 PER of
17x. Maintain our Outperform call on the stock.
BToto : No Surprises Outperform
Results Update
- BToto’s 9MFY04/10 net profit was in line with our and consensus expectations, accounting for 72-72.1% of
forecasts. No dividend was declared in 3QFY10 (versus 5 sen gross DPS in 3QFY09). To meet our net
dividend payout assumption of about 75% for FY10, BToto would have to declare another 4.5 sen net DPS
in 4QFY04/10.
- We believe 4QFY04/10 should see stronger earnings, coming from: (1) the peak sales period of Chinese
New Year; (2) larger number of special draws; and (3) the one and a half month impact of the replacement
game for Super 6/42, Supreme 6/58, which has its first draw on 20 Mar. Note we have not taken into
account any potential positive impact of this new game into our forecasts as we prefer to monitor the new
game’s popularity first.
- We believe all the bad news regarding market share loss to Magnum’s jackpot 4D game has already been
reflected in BToto’s share price and that there is not much downside left. At current valuation levels, we
believe BToto provides better dividend yield prospects and at prospective PE of 13.6x FY04/11, is at the
lower-end of its 10-year historical PE range of 11-19x. As such, we maintain our DCF-based fair value of
RM4.95 (WACC 9.8%) and our Outperform recommendation.

Technical Highlights

Daily Trading Strategy : Must Stabilise Around 1,300 To Attract Bargain Hunters
- In the absence of strong bargain-hunting supports, the FBM KLCI dropped further to end at barely below
the important psychological support level of 1,300 yesterday.
- Judging from the current technical readings, the current consolidation could be prolonged with a possible
downside risk towards a lower technical gap near 1,287.78 and the 40-day SMA near 1,281.
- Nevertheless, we are not changing our positive view on the recent bullish breakout rally, unless the local
benchmark gives up the 1,300 level decisively.
- In fact, if the market can stabilise at around the 1,300 support region, this could encourage some mild
bargain-hunting activities.
- In the meantime, most investors are likely to stay sideline, pending the outcome of the US FOMC meeting
on Tuesday.

Daily Technical Watch: Genting – A rebound is possible, if it can sustain above the 10-day SMA …
- 10-day SMA: RM6.572
- 40-day SMA: RM6.825
- Support: IS = RM6.00 S1 = RM5.15 S2 = RM4.60
- Resistance: IR = RM6.80 R1 = RM7.45 R2 = RM8.15

Bulletin Board

Co/Sector News Impact Recom

Astro Astro has requested for a suspension of trading Potential corporate exercises that have been UP,
of its securities until 5 p.m. on 17 Mar pending an mentioned in the past include a privatisation FV=RM3.10
announcement of a corporate proposal involving exercise as well as Astro splitting up its local
the shareholders of the company. (Bursa and foreign operations. We await further
Malaysia) details from the company.
MBM The company announced that its 86%-owned Positive. We believe the investment would OP
Federal Auto Holdings (FAHB) has entered into a enable FAHB to further develop its network of FV=RM3.93
conditional agreement with Kiara Seleksi to dealerships as well as the 3S (sales, service
purchase a land in Sri Hartamas for RM20m and spare parts) centres in the Klang Valley.
cash. (Bursa Malaysia)
MBM The company announced that it has entered into Positive. The disposal of WCC would enable OP
a share sale agreement with Datuk Dr. Wan the company to further expand its other core FV=RM3.93
Mohammad for the disposal of 73.3% stake in business. In addition, MBM is expected to
WSA Capital Corporation (WCC). The realise a gross gain of RM0.25m from the
consideration for the disposal is RM11.1m. Note disposal.
that WCC is principally involved in the .
manufacturing, designing and supplying of
automotive components. (Bursa Malaysia)

Important Dates

Company Entitlement details Ex-date Payment date

New entitlements
Malaysian Airline Systems Final tax-exempt dividend of 3 sen 26-Mar-10 08-Apr-10
Kawan Food Interim tax exempt dividend of 1.4 sen 29-Mar-10 30-Apr-10
Luxchem Corporation Special div of 2 sen + final div of 3 sen, single-tier 11-Jun-10 30-Jun-10
Iris Corporation Renounceable rights issue of new warrants on the basis of 3-for-20 25-Mar-10 -

Going “ex” on 16 Mar

Huat Lai Resources Last interest payment on 5% ICULS 2005/2010 17-Mar-10 29-Mar-10
Mui Properties Interim dividend of 1 sen less 25% tax 17-Mar-10 15-Apr-10
Dominant Enterprise 3rd interim dividend of 1 sen less 25% tax 17-Mar-10 29-Mar-10
Metro Kajang Holdings Bonus issue on the basis of 1-for-20 17-Mar-10 -

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