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

RHB Research Institute

RHB Equity 360°

13 July 2010 (Plantation, Fajarbaru; Technical: TimedotCom)

Top Story : Plantation – Peak production period to start soon Neutral

Sector Update
- Malaysia’s CPO production rose in June 10 by a minimal 2.5% mom, while exports rose by a larger 5.5%
mom. As a result, closing CPO stock levels fell to 1.45m tonnes in June (from 1.56m tonnes in May) and
stock/usage ratio fell further to 7.8% (from 8.5% in May and versus the 7-year average of 9.1%). However,
going forward, notwithstanding any effects of adverse weather, we expect this to potentially start reversing
from next month onwards, as it approaches the peak seasonal production period.
- We noted a few main developments in the sector. Long-term positives are: 1) continued decline in
stock/usage ratios for the 8 vegetable oils expected in 2011; 2) an increase in the biodiesel mandate in
Argentina for 4Q2010 and 2011; and 3) a continuation of La Niña temperatures which could have a longer-
term impact on production. Short-term negatives are: 1) the possibility of a reduction of Argentine export
tax; 2) the USDA planting data report – which showed increased soybean acreage; and 3) the reduction in
competitiveness of CPO vs soyoil.
- No change to our forecasts. We maintain our Neutral stance on the plantation sector, as we believe there
are not many positive catalysts which would move CPO prices up in the near term, and therefore expect
plantation companies’ share prices to remain lacklustre until this scenario changes. Despite this, we
continue to have Outperform calls on some stocks within the sector including SGX-listed First Resources
(FV = S$1.35), KLK (FV = RM20.55), IOIC (FV = RM6.65) and CBIP (FV = RM3.70), while we maintain our
Underperform call on Sime Darby (FV = RM8.15), Genting Plant (FV = RM6.50) and IJMP (FV = RM2.30).

Corporate Highlights

Fajarbaru : Buying out minority shareholders of land in Port Dickson Outperform

News Update
- Fajarbaru has proposed to buy out the minority shareholders of Potential Region who own a combined
49.75% in the company for RM16m cash.
- Currently 50.25%-owned by Fajarbaru, Potential Region holds some 140.3 acres of freehold land in PD
Homestead Resort, Off Jalan Si-Rusa-Sunggala, Port Dickson, Negeri Sembilan.
- We believe Fajarbaru’s latest move is purely tactical, i.e. to have full control over Potential Region. We do
not believe Fajarbaru is in the hurry to relaunch this PD Homestead Resort project, given the generally soft
property market in Port Dickson.
- Maintain Outperform, fair value is RM1.39.

Technical Highlights

Daily Trading Strategy : Likely to take a breather after the recent rally…
- Though the FBM KLCI’s recent stunning rally entered its fifth day yesterday, the afternoon profit-taking
activities have pressured it with a potential “shooting star” candle on the chart.
- Also, the daily turnover that had failed to improve yesterday post-FIFA World Cup Finals suggests most
investors were still in doubt over a sustainable technical rebound ahead. Investors appeared to be waiting
for more positive news flow, particularly from the US’ earnings reporting season ahead before committing
more resources.
- Moreover, with the “shooting star-like” candlestick pattern on the local futures index yesterday, sentiment in
Bursa Malaysia may take a breather after the recent rally.
- Therefore, unless the FBM KLCI can swiftly take out June’s high of 1,335.31 with a stronger daily turnover
soon, the risk of an immediate pullback in the near term will increase.
- Having said that, the immediate support near the 10-day SMA of 1,314, followed by the 40-day SMA near
1,304 and 1,300 will buffer the selling pressure in the near term, unless there is a sharp pullback in the US
and regional markets.
 Daily Technical Watch: TdC – Further rally to RM0.60 and RM0.705 if it removes RM0.54 on next push…
- 10-day SMA: RM0.462
- 40-day SMA: RM0.4304
- Support: IS = RM0.47 S1 = RM0.41 S2 = RM0.345
- Resistance: IR = RM0.54 R1 = RM0.60 R2 = RM0.705

Bulletin Board

Co/Sector News Impact Recom

Petronas 20%-associate Gas Malaysia has signed a Marginally positive. The 27% additional sales MP, FV =
Gas supplemental agreement with Petronas for the volume will enhance Gas Malaysia’s earnings, RM10.71
additional supply of 82mmscfd natural gas, Assuming margins are maintained, we estimate
effective until 31 Dec 2011. this will boost PetGas’ FY11-12 EPS by around
1-2% p.a.. Gas Malaysia currently accounts for
around 5% of PetGas’ total net profit.

Important Dates

Company Entitlement details Ex-date Payment date

New entitlements
SEG International Renounceable rights issue of warrants on the basis of 1-for-2 22-Jul-10 -
Starhill REIT Final income distribution of 3.199 sen 30-Jul-10 24-Aug-10
United Malacca Final div of 11 sen less 25% tax + 4.5 sen TE + 9.5 sen single tier 5-Oct-10 26-Oct-10

Going “ex” on 14 Jul

Pacific & Oriental Share split 1-into-2 14-Jul-10 -
Oriental Holdings Bonus issue on the basis of 1-for-5 14-Jul-10 -
Eastern & Oriental 4th interest payment for 8% ICULS 2006/2011 14-Jul-10 23-Jul-10
Encorp Single tier final dividend of 5 sen 14-Jul-10 30-Jul-10
George Kent (M) Final dividend of 2 sen less 25% tax 14-Jul-10 2-Aug-10
Allianz Malaysia First and final dividend of 2 sen less 25 tax 14-Jul-10 3-Aug-10
Bintulu Port Holdings First interim single tier dividend of 7.5 sen 14-Jul-10 4-Aug-10
Kuala Lumpur Kepong Interim single tier dividend of 15 sen 14-Jul-10 9-Aug-10
Batu Kawan Single tier interim dividend of 15 sen 14-Jul-10 11-Aug-10
WTK Holdings Final gross dividend of 3 sen less 25% tax 14-Jul-10 12-Aug-10
KLCC Property Final dividend of 6 sen tax exempt 14-Jul-10 13-Aug-10

...For more details, see individual reports attached

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