Market Dateline PP 7767/09/2010(025354) RHB Research Institute

RHB Equity 360°
2 April 2010 (Property, Banks, Sunway, Tan Chong, MAHB, KLCC; Technical: Tanjong) Top Story : Property – Bullish outlook for developers Overweight Sector Update - Three key points support our bullish stance on the property sector: a) Strong sales momentum despite rate hike, supported by: a) high affordability; and b) home buyers are rushing to buy properties to capitalise on current cheap financial packages before further rate hike amidst the economic recovery; b) Pent-up demand is supported by aggressive property launches by developers. Apart from higher property sales, we also expect better margins for developers due to the gradual withdrawals of housing incentives offered; and c) No housing bubble in the local property market, hence, lesser policy risk compared to regional peers. - Prices are expected to be well supported with continued buying interest by the locals. We also expect increasing participation of foreign buyers ahead given: a) relatively cheap property prices in Malaysia compared to regional peers; b) anticipation of stronger exchange rate; and c) expect more active foreign participation as confidence in the new economic model gathers momentum. - Maintain Overweight on the property sector. - Top picks: IJM Land (OP, FV = RM3.19), Suncity (OP, FV = RM5.33) and Mah Sing (OP, FV = RM2.45).

Sector Update Banks : HL Bank ups offer for EON Cap Overweight Sector Update - HL Bank (MP, FV=RM9.05) has upped its cash offer to acquire EON Cap’s (OP, FV=RM8.07) assets and liabilities to RM5,060.4m from RM4,921.8m (Offer). The revised Offer translates into RM7.30/EON Cap share (from RM7.10/share) or 1.42x FY09 BV/share (1.39x previously). - According to press reports, the sweetened deal was made as EON Cap’s independent directors were of the view that they could not present the same offer to shareholders. The Board of EON Cap has until 5 Apr to reply to the Offer. - We highlight two differences between the earlier offer and yesterday’s offer. Firstly, the condition on distributions has been revised such that any dividend declared or paid from the date of the revised Offer shall be deducted from the Offer price and this, we believe, would include EON Cap’s FY09 final TE DPS of 10 sen. In contrast, this DPS would not have been deducted from the previous offer price. - Secondly, the revised Offer now includes an additional exclusivity clause whereby EON Cap can only negotiate solely with HL Bank. - In our view, the revised Offer price is still a good deal for HL Bank, especially when viewed relative to the full takeover transaction P/BV multiple of above 2x during the second round of consolidations. - From EON Cap’s perspective, we are maintaining our view that the takeout offer is too low given, among others, improving fundamentals. While we believe EON Cap’s “new board” is likely to accept the offer and table it to the shareholders, approval is still uncertain.

Corporate Highlights Sunway Holdings : Secures RM88m KLCC building job Outperform News Update - Sunway has been awarded by KLCC Holdings a RM88m contract for the construction of Impiana KLCC (Phase 2), comprising a 3-storey car park podium and a 22-storey tower block. - This is the second job Sunway has secured in FY12/10, boosting its outstanding construction orderbook by 4% to RM2.2bn. - Assuming an EBIT margin of 5-7%, the latest contract will fetch a total EBIT of RM4.4-6.2m. - No change in our earnings forecasts that already assume Sunway to secure RM1.5bn worth of new jobs in FY12/10. YTD, Sunway has secured RM110m worth of new jobs. - Maintain Outperform. Fair value is RM1.69.

Tan Chong : Signed Nissan’s distribution rights for Laos Outperform News Update - Tan Chong’s wholly-owned subsidiary, ETCM (C) Pty Ltd and Nissan Motor Co Ltd (Nissan) has signed another Distribution Agreement on Wednesday. With the signing of the new agreement, Tan Chong will be the sole and exclusive distributor of Nissan’s CBU vehicles in Laos for a period of two years with the option of renewal every year after. - Similar to the agreement made for the distribution in Cambodia, this agreement is also expected to take effect in the second quarter of 2010 with an initial sales volume of 200 units. - We believe Tan Chong is in talks with Nissan for distribution agreements with other ASEAN countries in order for them to tap into the growing emerging market. - FY10-11 forecasts maintained as the new venture is not expected to contribute significantly in the short term. Pending our meeting with management, we maintain our Outperform call and fair value of RM3.60. MAHB : Releases 5-year business plan Outperform Briefing Note - MAHB yesterday released its 5-year business plan “Runway to Success”, which outlined three key objectives to be achieved by 2014, which are: 1) To increase passenger volume to more than 60m/annum, with a focus on strengthening KLIA as the next generation hub; 2) To maintain top service levels, benchmarked against the best airports worldwide; and 3) Commercial development will be the main driver to achieve EBITDA and ROE in excess of RM1bn and 10% respectively. - MAHB is targeting to raise total passenger volume to 60.2m by FY12/14, and this will be underpinned by: 1) MAHB’s aim to add five new destinations each year; 2) Rising disposable income in the region and rising trend in low-cost and leisure travel; and 3) Malaysia Airlines’ and AirAsia’s continuous efforts in expanding their networks to increase services and connections. - Having acknowledged the huge potential revenue growth at the commercial revenue segment, MAHB has identified several key drivers to expand its commercial revenue, which include: 1) Increasing retail capacity at the airports that will in turn drive spending/passenger; and 2) Capitalising on large areas of land surrounding MAHB’s airports, in particularly, Sepang. - Indicative fair value remains unchanged at RM5.45 based on 16x FY12/10 EPS of 34.1 sen. KLCC Property : Positive rental revisions will push short term earnings Market Perform Briefing Note - Three key highlights from the analysts briefing yesterday: a) no indication on conversion of RCULS from its major shareholder yet; b) Lot C is close to securing a major tenant for the office portion; and c) positive rental revisions will support the company’s FY11 earnings. - We are downgrading our FY11-12 earnings forecasts by 2.1-9.7% to factor in the slight delay in Lot C construction works. - No change to our indicative fair value of RM3.64, or 10% discount to its RNAV/share of RM4.05.

Technical Highlights Daily Trading Strategy : Low volume the main dampener to short-term trading sentiment … - Thanks to the favourable regional sentiment, the FBM KLCI has removed Tuesday’s high of 1,323.83, this lead the index closer to rechallenging Mar’s high of 1,334.34. - Breaking 1,334.34 will mark another breakout pattern on the chart and jotting a fresh new high since Mar 2008. It will also mean the index is well underway to retest our medium-term target of 1,390. - But the main concern on the technical platform now is the pathetic volume participation that has just fallen to below the 1.0bn shares mark for the second day yesterday. - As we reiterated earlier, poor volume will dampen short-term trading sentiment, hence increasing the selling pressure that could cap near-term upswing on the index. - Daily turnover should rise back to 1.0 – 1.2bn shares to maintain the market’s activeness, in our view. - Otherwise, profit-taking activities will increase, leading the index to retreat towards the strong support near the 10-day SMA of 1,312 and the 1,300 psychological level. Daily Technical Watch: Tanjong plc – The target for the “triangle breakout” pattern points to RM19.50…


10-day SMA: 40-day SMA: Support: Resistance:

RM17.954 RM17.739 IS = RM18.00 IR = RM19.50

S1 = RM16.70

S2 = RM15.40

Bulletin Board
Co/Sector Plantations News SinarMas, the holding company of SGX-listed Golden Agri, has appointed 2 RSPO certification bodies, namely Control Union Certification and BSI, to investigate Greenpeace’s claims that it destroyed rainforest areas. This was in response to the cancellation of its contracts by Nestle SA and Unilever NV, and the threat of cancellation of contracts with Cargill Inc, who said they may do so if these allegations are proven true. (Bloomberg) MGM Mirage is now being investigated by the Illinois Gaming Board that its Macau partner, Pansy Ho, has links to Chinese organised crime. This comes after New Jersey regulators made the same ruling, forcing MGM to put its 50% stake in the Borgota casino in Atlantic City up for sale recently. Besides Illinois, Mississippi Gaming Board is also now reviewing the New Jersey report. (Reuters) Impact Recom

Positive, as this means SinarMas is finally OW making moves to assure its customers and investors that this is something which they are serious about and that they are willing to take action to correct their errors, if any. This would be a move other planters would likely have to take, should they also come under scrutiny by NGOs like Greenpeace.


Negative for US-based gaming operators in OW Macau in general. We believe by conceding to the New Jersey regulators and agreeing to sell its stake in the Atlantic City Borgota casino, this has led, instead to a “domino-effect” of investigations by other state regulators. Nevertheless in Nevada, where MGM operates 14 casinos, the report is not being reviewed and no action is being taken against MGM there. The silver lining is that this could be an opportunity for the Genting group to buy into these casinos owned by MGM, should the regulators force MGM to sell them, just like they did in Atlantic City. We maintain our view that U Mobile would find it OW a challenging task to compete at this stage given that the mobile penetration rate in Malaysia has already reached 106%, the three big mobile operators are already well-entrenched and rising competition from new entrants such as MVNOs. Possible higher compliance cost for timber N concession players i.e. for the training of staffs. Until further details are obtained from this regulation, we maintain our earnings forecasts for the timber players for now.


Multi-Purpose Holdings has raised its stake in U Mobile to 6.33% from 1.98% for RM69m, following a 1-for-1 rights issue and additional acquisition of shares. (Financial Daily)


The Forest Department has targeted 1 Jul 2010 for enforcement of regulations that will make it mandatory for the timber industry to employ only trained workers to carry out any prescribed forest activity including logging and transportation of timber or other forest produce. (The Star)

Important Dates
Company New entitlements Jaycorp VS Industry Help International Malaysian Mosaics Going “ex” on 5 Apr Mah Sing Group Entitlement details Single tier interim dividend of 3.75 sen Single tier interim dividend of 1.5 sen First and final dividend of 3 sen less 25% tax Final dividend of 3 sen less 25% tax Ex-date 14-Apr-10 16-Apr-10 5-May-10 26-May-10 Payment date 30-Apr-10 30-Apr-10 27-May-10 7-Jun-10

Bonus issue on the basis of 1-for-5



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