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

RHB Research Institute

RHB Equity 360°

19 April 2010 (TNB, Sime Darby; Technical: MAS, AirAsia)

Top Story : TNB – Improving demand helps support bottomline Outperform

Results Preview
- TNB will release its 2QFY10 results on 20 Apr. We estimate 2Q core net profit could be up by low-mid
single digit qoq and flat yoy, which would bring 1H core net profit to around 52-53% of our revised FY10 net
profit forecast and around 51-52% of consensus estimates.
- Overall, 2Q unit sales were up 13.8% yoy with the industrial/commercial/domestic segments reporting
growth of +20.1%/+9.9%/+7.5% yoy respectively. Hence, we estimate that 2QFY10 revenue could rise by
around 6-7% yoy but could stay flat qoq.
- YoY bottomline growth, however, would be dragged by: 1) generation mix; 2) higher capacity payments;
and 3) higher effective tax rate. QoQ, the better net profit performance expected would be due to the
absence of the RM94m provision for unutilised staff leave in 1QFY10, partly offset by higher coal costs.
- We expect TNB to declare an interim gross DPS of 10 sen (2QFY09: total gross DPS of 4.7 sen).
- We have raised our FY10 electricity demand growth assumption to +5.5% (+3.8% previously) while for
FY11 and FY12, we have assumed annual electricity demand growth of +5% (from +4.5%). Overall, we
have raised our FY10-12 net profit projections by 3.8-5.5%
- Fair value raised to RM9.90 (from RM9.50) based on unchanged target CY10 PER of 14x.

Corporate Highlights

Sime Darby : To list units in Jakarta and Hong Kong? Outperform

News Update
- According to a report in the Edge weekly, Sime Darby is planning to list its Indonesian plantations on the
Jakarta Stock Exchange in 2011, and its China and Hong Kong motor operations on the HKSE in 2012.
- We believe the listing of the Indonesian plantation assets would be positive as it could help unlock some
value for the group, given that the medium-term growth of Sime’s plantation division earnings is expected
to come mainly from the Indonesian estates and not the Malaysian estates, due to its younger age profile.
Assuming about 30% of Sime’s plantations profit comes from Indonesia, and applying a PE of 14.5x (being
20% discount to our sector target PE of large Malaysian plantations companies and in line with the average
PE for Indonesian listed companies currently), we estimate Sime’s Indonesia-listed plantations could be
worth RM6.5-7bn, at least. Nevertheless, while the listing would help bring in extra funds to the group, we
do not expect it to add any significant value to the Malaysian-listed entity, unless the funds are put to use
elsewhere with higher returns.
- On the listing of the motor division in Hong Kong, we believe this may not necessarily be a good idea, given
the operating environment in China is intensely competitive, and sustainability of earnings and therefore
added value from the listing may not be meaningful. Currently China contributes 41% to Sime’s motor
division earnings and is the fastest growing market for the group, but we note that margins are diminishing,
at just 3.3% in 1HFY10 (versus 5.9% in 1HFY09).
- Our forecasts are unchanged. We maintain our SOP-based fair value of RM9.85.

Technical Highlights

Daily Trading Strategy : Short-term technical “sell” mode ahead…

- As we warned earlier, a fall below the 10-day SMA near 1,338 would cause more selling activities on the
FBM KLCI. As such, last Friday’s selldown signalled a negative twist on the near-term technical outlook.
- More worrying, the recent highflyers like glove makers, technology stocks and some automakers also
suffered a sharp setback on Friday, which implies the market’s trading sentiment has turned bearish.
- Technically, with the benchmark FBM KLCI trading below the supportive 10-day SMA, the market is now
trading on a short-term “sell” mode.
- Not helping either, the sharp retreat on the Wall Street and European markets last Friday and uncertainties
in the US financial sector could dampen trading sentiment further in local bourse.
- Therefore, given the current situation, we expect the FBM KLCI to consolidate further towards the 40-day
SMA of 1,310, a 2.6-pts technical gap near 1,305 and the 1,300 psychological level soon.
- Although we maintain that the medium-term outlook for the FBM KLCI remains positive above the 1,300
level, we expect investors to stay sideline in the near term amid the current bearish scenario

Daily Technical Watch: MAS – Losing 10-day SMA and RM2.20 will mean further retreat towards RM2.03…
- 10-day SMA: RM2.238
- 40-day SMA: RM2.107
- Support: IS = RM2.20 S1 = RM2.03
- Resistance: IR = RM2.38 R1 = RM2.50 R2 = RM2.80

Weekly Trading Idea : AirAsia – Bargain-hunting activities to resurface soon… Buy On Weakness
- Strategy: Buy on weakness to RM1.28 resistance-turn-support level.
- Target: IR = RM1.40 R1 = RM1.50 R2 = RM1.66
- Support: IS = RM1.28 S1 = RM1.17 S2 = RM1.09
- Exit: Cut loss if it loses Nov 2009’s low of RM1.22.

Commodities & Currencies – A weaker commodity prices likely this week …

- Light Sweet Crude Oil futures (Crude): If it registers another negative candle, it will revisit the US$78
support level soon.
- Crude Palm Oil futures: The CPO must launch a technical rebound this week, to avoid further selldown.
- Ringgit (RM)/US$: An “inverted hammer” candle suggests a retreat on the ringgit this week.
- Japanese Yen (JPY)/US$: Should retest the crucial Downtrend Resistance Line (DRL) near 90 this week.
- Euro Dollar (EUR)/US$: The EUR could strengthen further if it loses 0.73 soon.
- US Dollar Index (DXY): Likely revisit 21-week SMA of 79.28 soon before reaching stronger support of 78.

Bulletin Board

Co/Sector News Impact Recom

EON Cap Primus Pacific Partners, EON Cap’s largest Despite Primus commitment, it only owns 20.2% OP, FV =
shareholder, said that it has not sold nor plan to of EON Cap and the sale of EON Cap’s assets RM8.07
sell any of its shareholdings in any of its and liabilities to HL Bank could still go through if
investment companies. In addition, its the other shareholders agree to the deal. That
commitment to EON Cap remains strong. said, we are of the view that the takeout offer is
(Business Times) too low given improving fundamentals and does
not recognise the Group’s hidden value such as
unabsorbed tax losses at MIMB and Section 108
tax credits at EON Bank.
Parkson Parkson is keen to own up to 25% of the retail Neutral, as we had already imputed an increase MP, FV =
space that it operates on (from about 20% in ownership of new stores into our forecasts as RM6.40
currently) in the longer term. Parkson Retail well as projected 2 new stores to be opened in
Group MD said that it is looking at ownership in Malaysia in FY06/10. In the longer term, we
both future openings as well as existing stores, believe owning more of its own stores would be
should an opportunity arise. In Malaysia, the next positive for the group, as it would boost its asset
store to open (targeted by end 2010) is the KL base and reduce its overhead costs.
Festival City on Jalan Genting Klang, which will
be the first mall that Parkson will own and
operate (Business Times).
JAKS JAKS sees property, dam and IPP jobs to boost Positive, as these three projects will NR, FV =
Resources its earnings outlook. (Financial Daily) progressively boost JAKS' earnings over the next RM2.00
5-6 years, with construction of dam in
Terengganu coming in first (2010-2011), followed
by the Star property project (2010-2016), and the
Vietnam IPP (2015).
 MAS Vocanic ash from Iceland continued to disrupt Slightly negative. MAS generates about 20% of UP, FV =
flights across Europe. (The Star) its total turnover from the “Europe and Middle RM1.60
East” segment. We believe the negative impact
on both topline and bottomline will be contained,
assuming the flight disruption will be temporary
and should end within days. Based on our rough
estimate, the flight disruption may cost MAS up
to RM47m per week in the worst case scenario.

Important Dates

Company Entitlement details Ex-date Payment date

New entitlements
Mesiniaga First and final dividend of 19 sen less 25% tax 18-Jun-10 7-Jul-10

Going “ex” on 20 Apr

Sunway Holdings Tax exempt interim dividend of 2.25 sen 20-Apr-10 21-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.

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Industry/Sector Ratings

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