Market Dateline PP 7767/09/2010(025354)

RHB Research Institute

RHB Equity 360°

14 September 2010 (MREITS; Technical: IJM)

Top Story : Property – MREITs – The wish list for the 2011 Budget Overweight
Sector Update
- For the upcoming Budget 2011, we expect withholding tax rate for local and foreign individual MREIT
unitholders to be reduced/removed from the current level of 10%, vs. 0% in Singapore and Hong Kong. We
believe this is a necessary move to attract foreign interest and gradually align MREITs with SREITs. Note
that the tax structure has not been adjusted since 2008. Last year, RPGT was re-imposed (to curb
speculative buying in real estate), but no announcement was made on the REIT sector.
- MREITs would also like to propose to regulators a further relaxation on REIT guidelines: i) To allow REITs
with AUM under RM2bn to have multiple placement to grow their market cap, but rules can be enforced if
AUM exceeds RM2bn; and ii) Faster process for rights issue exercise for REITs.
- We examined the performance of the two newly-listed REITs – Sunway REIT and CMMT. Performance of
both REITs is generally in line with the sector. Given the size and the resulting higher liquidity, valuations of
both REITs are higher with a yield of 7% vs. MREIT average yield of 8%. However, if we compare against
Singapore retail-based REITs, valuations for both Sunway REIT and CMMT are still a tad lower, even with
comparable asset size.
- We maintain our Overweight stance on the sector, due to: i) Continuous economic growth and hence
stronger private consumption, industrial and economic activities; ii) Rising young population profile, which is
the key driver of consumption; iii) Higher investibility of MREITs following the listing of the two sizeable
REITs – Sunway REIT and CMMT; and (iv) REITs provide a good hedge against rising inflation.

Technical Highlights

Daily Trading Strategy : Next resistance only at 1,524.69!

- As more investors returned from their Raya break, total turnover surged back to the healthy 800m-1.0bn
shares level yesterday, indicating a further improvement from last Thursday’s surge in trading activities.
- This, coupled with robust regional markets, has lifted the local trading sentiment one notch higher.
- With the huge bullish candle registered across the immediate resistance level of 1,450, the FBM KLCI is
poised to stage further rally today, on follow-through buying support.
- As highlighted earlier, beyond 1,450, the index has ventured into its highest trading range with the next
effective resistance only seen at 1,524.69, the all-time high level.
- Any pullback will see a firm support near the 10-day SMA of 1,434.
- Only if it loses the 1,390-1,400 region will it refresh the previous cautious sentiment and call for more profit-
taking dips ahead.

Daily Technical Watch: IJM Corporation – Further upside if it sustains at above RM5.00 …
- 10-day SMA: RM5.06
- 40-day SMA: RM5.022
- Support: IS = RM5.00 S1 = RM4.57 S2 = RM4.17
- Resistance: IR = RM5.30 R1 = RM5.76 R2 = RM6.10

Bulletin Board

Co/Sector News Impact Recom

Tanjong Tanjong Capital’s (TCSB) take-over offer to
acquire all the shares in Tanjong PLC has
become unconditional after having met the 90%
acceptance condition on 13 Sep. Accordingly,
TCSB will now procure Tanjong to take the
necessary steps to withdraw its listing status from
Bursa Securities. (Bursa)
This is in line with our expectations that the Cease
privatisation exercise will likely go through. coverage
Remaining Tanjong shareholders that have yet to
accept the offer have until 27 Sep to do so.
However, the last day of trading on the shares
will be 21 Sep.
 Paramount The company has requested for the shares to be According to media reports, the acquirer is a US OP, FV =
suspended from trading on 14 Sep pending an based insurance firm named ACE Ltd. While RM5.80
announcement related to the proposed disposal official announcement has not been made, we
of Jerneh Insurance (JI). (Bursa) gather that valuations for the disposal of Jerneh
Insurance will be around 2x. Assuming the
disposal is priced at 2.2x price to book,
Paramount’s 20% stake in JI would translate into
about RM120-130m, giving a cash flow per share
of close to RM1. As such, the company may
surprise shareholders with a special dividend.

Important Dates

Company Entitlement details Ex-date Payment date

New entitlements
Hua Yang Bonus issue on the basis of 1-for-5 24-Sep-10 -

Going “ex” on 15 Sep

Ta Ann Holdings Bonus issue on the basis of 1-for-5 15-Sep-10 -
DXN Holdings First interim dividend of 1 sen less 25% tax + 1 sen tax exempt 15-Sep-10 30-Sep-10
RHB Capital Interim dividend of 5% less 25% tax 15-Sep-10 30-Sep-10
Wah Seong Corporation First interim tax exempt dividend of 2 sen 15-Sep-10 1-Oct-10
Supermax Corporation Interim tax exempt dividend of 5% 15-Sep-10 1-Oct-10
See Hup Consolidated Final dividend of 5.4% less 25% tax 15-Sep-10 8-Oct-10
Syarikat Takaful Malaysia Interim dividend of 7% less 25% tax 15-Sep-10 8-Oct-10
Naim Holdings Interim single tier dividend of 5 sen 15-Sep-10 11-Oct-10
Esthetics International Final dividend of 1% less 25% tax 15-Sep-10 15-Oct-10

...For more details, see individual reports attached

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