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

RHB Research Institute

RHB Equity 360°

22 April 2010 (Axiata, Furniture, Kossan; Technical: IJM)

Top Story : Axiata – Mixed outlook for regional cellcos Outperform

Visit Note
- Having addressed congestion issues late-2009, management remains positive on the growth potential in
the mobile broadband segment. This is mainly due to: (1) The low broadband penetration in Malaysia
suggesting that there is still tremendous room for this segment to grow; (2) Different market segmentation
(not all players are focusing on the mobile broadband segment); and (3) Marketing activities for Celcom
have started to intensify following the recent network upgrade.
- Management indicated that XL is unlikely to engage in M&A activities in Indonesia as management opines
that the benefits from such an exercise do not appear to be compelling enough.
- The bids for 3G spectrum in India have increased by as much as 63%. While this may raise the risk of Idea
requiring a cash call, potential mitigating factors include: (1) Idea’s spectrum bids are only for circles where
it is strong in; (2) Idea has sufficient capacity to raise debt further; and (3) Idea could raise another US$1bn
via the disposal of Indus Tower, if needed.
- Given the improving performance from most subsidiaries and expected lower capex going forward,
management indicated that it may start paying dividends from FY11 (i.e. a year earlier than initial planned).
- We are keeping our SOP-derived fair value of RM4.05.

Sector Call

Manufacturing : A look at the furniture sector Neutral

Sector Update
- Over the years, exports of furniture products have contributed significantly to Malaysia’s total exports. In
2009, exports of Malaysian furniture products were valued at RM7.8bn or 1.8% of total exports in Malaysia,
at the same time achieving a commendable CAGR of 19.2% (from 1998-2009). Malaysia exports to more
than 160 countries with the main export destinations being the US, Japan and Australia and currently ranks
as the tenth largest exporter of furniture in the world and second in Asia after China.
- Given the market size for global furniture was approximately US$302bn (approx. RM970bn) in 2008, this
would mean that Malaysia held around 1% of the global furniture industry market share in 2008 (based on
the export furniture value for Malaysia worth RM9bn in 2008).
- Jaycorp is an integrated furniture manufacturer that is involved in: 1) upstream activities, which include
sourcing of rubberwood, pressure treatment and kiln drying; 2) downstream activities, i.e. furniture
manufacturing (mainly dining sets); and 3) packaging of materials. For the 1HFY07/10, approximately
88.2% of its sales product mix was from furniture manufacturing. Jaycorp exported more than 75% of its
1HFY10 revenue overseas, where the key markets are the US, Europe and Australia.
- Latitude has carved out a strong niche in the household furniture segment, specifically dining and bedroom
sets and today the group has since made great advances to position itself as one of the largest rubberwood
furniture manufacturers and exporters in Malaysia and Vietnam.
- We value both Jaycorp and Latitude based on 7x FY10 PER, which is at 40% discount to our
manufacturing sector PER of 12.2x FY10. This suggests a fair value of RM1.20 for Jaycorp (on an ex-cash
basis) and RM3.85 for Latitude respectively.

Corporate Highlights

Kossan : Proposed 1-for-1 bonus issue Outperform

News Update
- Kossan yesterday declared a 1-for-1 bonus issue that will, upon completion, increase its outstanding
number of shares by 159.9m shares to 319.7m shares. Kossan has also proposed a share buy-back
programme to repurchase not more than 10% of its issued and paid-up share capital.
- At the same time, Kossan also declared a final tax-exempt DPS of 9 sen (FY08: 3.5 sen gross, 2.5 sen
TE), which was above our expectations of total gross DPS of 8.5 sen. This represents a net payout ratio of
 12.0% and a net yield of 1.1% respectively.
- Although the bonus issue would not have any impact on valuations, it may help improve the stock’s liquidity
and could help buoy retail sentiment towards the stock.
- No change to our earnings forecasts for now. We maintain our fair value of RM10.74 and reiterate our
Outperform call on the stock.

Technical Highlights

Daily Trading Strategy : The short-term trend on the FBM KLCI remains negative…
- Although the increase on yesterday’s turnover and the improved rotational sentiment on selective sectors
might appear encouraging, it was clearly not enough to convince a technical rebound for the FBM KLCI.
- In fact, the failure to recapture the 10-day SMA of 1,334 yesterday has indicate a likely resumption of the
recent selling momentum, in our view.
- This means that the index has remained in a short-term negative trend.
- We expect the FBM KLCI to retreat further on follow-through selling pressure towards its short-term
downside targets at the 40-day SMA of 1,316, a 2.6-pts technical gap near 1,305, and the 1,300
psychological level soon.
- To reverse the current negative short-term trend, the index must again, rebound to above the 10-day SMA
and to surpass the previous high of 1,347.61.

Daily Technical Watch: IJM Corporation – A false breakout signal, if it loses RM5.00 today…
- 10-day SMA: RM4.891
- 40-day SMA: RM4.702
- Support: IS = RM5.00 S1 = RM4.57 S2 = RM4.17
- Resistance: IR = RM5.30 R1 = RM5.76 R2 = RM6.16

Bulletin Board

Co/Sector News Impact Recom

Motor Malaysian automotive industry’s TIV This is not unexpected given the strong OW
increased 17.8 % yoy in Mar 10 (vs. + 8.7 % economic growth as well as improvement in
in Feb 10) with 56,139 units sold (vs. 40,354 consumer sentiment. We believe the numbers
units in Feb 10). On a mom basis, Mar 10 will keep on growing in the months to come.
TIV increased by 39.1 %. (vs. -19.7 % mom
in Feb 10). (Bernama)
CIMB CIMB Thai reported 1QFY10 net profit of Neutral. If annualised, CIMB Thai’s results OP, FV =
THB348m vs. 1QFY09: net loss of THB257m. account for <5% of our net profit forecast for RM16.24
The turnaround was led by an expansion in NIM CIMB Group.
to 4.3% in 1Q10 from 2.6% in 1Q09 as strategies
to right size the deposit book bore fruits. CIR also
improved to 71.8% in 1Q10 (1Q09: 97.1%) in the
absence of provisions for contingent liabilities last
year. Gross NPL ratio was 10.4% (4Q09: 14.9%)
while Tier 1 capital and total capital adequacy
ratios were 6.1% and 12.1% respectively. (Bursa
Malaysia)

Important Dates

Company Entitlement details Ex-date Payment date

New entitlements
Hirotako Distribution of 1 treasury share for every 35 shares held 4-May-10 -
Success Transformer Interim tax exempt dividend of 3.5 sen 13-May-10 16-Jun-10
 Supermax Final tax exempt dividend of 4 sen 7-Jun-10 28-Jun-10
CCM Duopharma Final gross div of 7 sen less 25% tax + final tax exempt div of 5 sen 9-Jun-10 25-Jun-10

Going “ex” on 26 Apr

Sime Darby Interim single tier dividend of 7 sen 26-Apr-10 10-May-10
Puncak Niaga Holdings Semi annual coupon payment No 17 for 15-year RUJN 26-Apr-10 20-May-10

...For more details, see individual reports attached

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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
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Industry/Sector Ratings

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