Market Dateline PP 7767/09/2010(025354)

RHB Research Institute

RHB Equity 360°

27 September 2010 (Market, Motor, YTL Cement; Technical: KNM, DRB-Hicom)

Top Story : Taking stock – Two years on

Market Update
- One year ago, in a similar Market Update (dated 1 Sep 2009), we highlighted that the equity market
appeared exhausted, but we also noted that the long-term uptrend remained in place. We believe the same
situation now applies as we head into the 4Q2010 and look forward to 2011.
- As it stands, the FBM KLCI is up 14.0% YTD on normalised 2010 EPS growth of 24.1%, and this is after
registering 45% growth in 2009. For 2011, we are looking at EPS growth of 12.6%, while our end-2011
target of 1,640 implies 13.2% upside.
- We see a number of catalysts in the 4Q, which could also turn out to be risks, including: 1) 2011 Budget on
15 Oct; 2) launch of detailed ETP blueprint; 3) listing of MMHE; 4) Sarawak state election.
- We believe the market will remain volatile in 2011 therefore any pull back should be taken as an
opportunity to pick stocks and reposition for the new year. Our top picks are a mix of tactical plays for 4Q
(MRCB, Gamuda, HSL, TNB and Faber), and longer-term compelling stories for 2011 (CIMB, Maybank,
IOI, KLK, Mah Sing, KPJ, Media Prima, Parkson, Carlsberg and Dialog).

Sector Call

Motor : Another month of good numbers Overweight

Sector Update
Proton - Fair value is RM5.50 based on stripped down book value Outperform
Tan Chong - Fair value at RM6.16 Market Perform (down from OP)
MBM - Fair value at RM5.31 Outperform
UMW - Fair value at RM7.50 Outperform
APM - Fair value at RM 5.53 Outperform
- August’s TIV reached 55,208 units and was up 13.7% yoy and 3.2% mom. Better numbers were mainly
due to the rush for car deliveries before the Hari Raya festivities. Going into Sep, MAA mentioned that TIV
numbers will be lower due to consolidation after the rush for deliveries and clearing of back order. YTD TIV
of 409,806 achieved 70% of our full-year forecasts of 587,698 and 72% of MAA’s forecast of 570,000.
- Perodua and Proton remained the market leaders accounting for 31.1% (+0.6% pts) and 26.3% (+0.3%-
pts) market share respectively.
- Given the likelihood of some moderation to TIV numbers going into the 4Q, we maintain our 2010 TIV
projection. We expect TIV to grow 9.5%, 4.0% and 3.2% in 2010-2012, following a 2% contraction in 2009.
- TIV numbers have soared since the beginning of the year, reaffirming our view that 2010 is the second
year of a new 3-year cycle for motor stocks. We reiterate our Overweight stance on the sector.

Corporate Highlights

YTL Cement : Acquiring remaining 35.16% stake in Perak-Hanjoong Simen Outperform

News Update
- YTL Cement announced that its offer to acquire the remaining 35.16% equity interest in Perak-Hanjoong
for RM200m has been accepted by Gopeng. Financing for the purchase will be internally-generated.
- Perak-Hanjoong is the second largest integrated cement producer in Malaysia and operates two plants
located in Padang Rengas, Perak. It has a capacity of 3m metric tonnes per annum for clinker and 3.4m
metric tonnes per annum for cement
- Based on an estimated net debt of RM500m at Perak-Hanjoong’s level, we estimate that the acquisition is
priced at an estimated EV/tonne of US$115 based on an exchange rate of RM3.10/US$.
- We have revised up our earnings forecasts for FY06/11-12 by 8.1-9.5% after adjusting for lower minority
interest and lower interest income due to the acquisition. We also introduce our FY06/13 forecast.
- Indicative fair value is RM4.69 based on 11x CY2011 fully diluted EPS of 42.7sen. Maintain Outperform.
 Technical Highlights

Daily Trading Strategy : A technical rebound likely today…

- Technically, the loss of the 10-day SMA near 1,464 recently has spelt a negative reversal pattern on the
index’s near-term outlook. Should it continue to lose the next critical level of 1,450 on last Friday, the
technical outlook would have turn instantly back to bearish.
- But given a “dragonfly doji” candle on the chart, and the recent retracement of the “grossly overbought”
short-term momentum indicators, we believe the index is due to stage a technical rebound today.
- Added with a powerful 2% rally in the Wall Street on last Friday, the expected positive sentiment from the
regional markets today should be able to revive risk appetite amongst the local and foreign investors on the
local bourse today, in our view.
- As a result, we stay optimistic and expect buying to resume after the recent consolidation.
- Critically, the 1,450 level will continue to buffer the immediate-term selling pressure.

Daily Technical Watch: KNM – Mid-term outlook will turn bullish only if removes RM0.50-0.54 resistance zone
- 10-day SMA: RM0.439
- 40-day SMA: RM0.4746
- Support: IS = RM0.439 S1 = RM0.385
- Resistance: IR = RM0.50 R1 = RM0.54 R2 = RM0.59

Weekly Trading Idea : DRB-Hicom – Upside targets of RM1.31 and RM1.39 in near term … Bargain Buy
- Strategy: Bargain buy near RM1.20 for a further rally ahead.
- Target: IR = RM1.31 R1 = RM1.39 R2 = RM1.55
- Support: IS = RM1.17 S1 = RM1.12 S2 = RM1.05
- Exit: Cut loss at below the 40-day SMA near RM1.12.

Commodities & Currencies – US Dollar Likely To Stay In A Weakening Trend…

- Light Sweet Crude Oil futures (Crude): It could trade rangebound in the near term.
- Crude Palm Oil futures (CPO): We stick to our rangebound trading view on the CPO this week.
- Ringgit (RM)/US$: We are keeping our bullish outlook on the ringgit.
- Japanese Yen (JPY)/US$: Maintain bullish outlook and foresee the pair to head towards 79.8 soon.
- Euro Dollar (EUR)/US$: The EUR is expected to test the level of 0.73 this week.
- US Dollar Index (DXY): The index could continue to retreat this week to a lower support level of 78.

Bulletin Board

Co/Sector News Impact Recom

Plantations According to Dorab Mistry, Malaysian CPO
futures could rise at least 11% to RM3,000-
3,200/tonne by Jan as demand strengthens but
prices may weaken slightly by about RM150-
200/tonne next month as output and stocks rise.
This forecast was given at the Globoil conference
in Mumbai. Another forecast given at the
conference by Thomas Mielke of Oil World, said
that CPO prices could rise to RM3,000 in five
months, helped by robust biofuel demand and a
rising soyoil price. (Financial Daily)
Positive, if these predictions come through. We N
hold the same view that prices could fall in the
next few weeks, before picking up again at the
end of the year, after the peak production period
is over. However, our forecasts are less bullish,
as we do not expect prices to breach the
RM3,000/tonne mark.

Important Dates

Company Entitlement details Ex-date Payment date

New entitlements
OSK Property Interim dividend of 2.5 sen less 25% tax 11-Oct-10 27-Oct-10

Going “ex” on 28 Sep

 Press Metal Interim tax exempt dividend of 2% 28-Sep-10 7-Oct-10
SCGM First and final tax exempt dividend of 3 sen 28-Sep-10 11-Oct-10
KPJ Healthcare Interim dividend of 3.25 sen less 25% tax 28-Sep-10 14-Oct-10
Star Publications (M) First interim div of 7.5 sen + special tax exempt div of 3 sen 28-Sep-10 18-Oct-10
Genting Plantations Interim dividend of 4 sen less 25% tax 28-Sep-10 18-Oct-10
EPIC First interim dividend of 2.5 sen tax exempt 28-Sep-10 18-Oct-10
UAC 1st interim dividend of 12 sen less 25% tax 28-Sep-10 21-Oct-10
Genting Malaysia Interim dividend of 3.6 sen less 25% tax 28-Sep-10 21-Oct-10
Eng Teknologi Holdings First interim tax exempt dividend of 6% 28-Sep-10 22-Oct-10
Proton Holdings First and final dividend of 20 sen less 25% tax 28-Sep-10 22-Oct-10
Genting Interim dividend of 3.3 sen less 25% tax 28-Sep-10 26-Oct-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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