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

RHB Research Institute

RHB Equity 360°

18 March 2010 (Semicon, Top Glove, Astro, Genting; Technical: Globetronics)

Top Story : Semicon – Turning stronger in 2010 Overweight

Sector Update
- Gartner expects 2010 silicon wafer demand to increase 29.5% largely due to production ramp-up by major
foundries to replenish the low-inventory level to replenish the low-inventory level plus anticipation of higher
chips demand ahead.
- Global chip sales growth will be driven mainly by CE. We believe general theme for new product features
going forward would include smaller form factor and lower ownership cost as well as greater wireless
compatibility.
- Capex spending is expected to increase significantly over the next two years. Jan 10 equipment bookings
were 3.5x higher than the 12-year low of US$247m in Mar 09.
- We believe chip players would likely focus on specific segments in which they have technological advance
to improve its profit margins. We are positive on the latest development as this would benefit chip
assemblers as margins for Unisem and MPI would likely remain resilient, supported by its customers’
higher-margin products.
- Reiterating our Overweight stance on the sector. Our top pick for the sector is Unisem.

Corporate Highlights

Genting Malaysia: Another MGM Notes Investment Of US$18m Market Perform

News Update
- Genting Malaysia has subscribed for US$18m (RM60m) of MGM's new US$845m 9% senior secured notes
due 2020. The notes are secured against MGM Grand Las Vegas and MGM Grand Hotel LLC, and are
senior obligations of MGM. This is GM's third investment in US gaming bonds, although we note that the
rate of return on these notes are higher than its US$15m investment in Wynn's motgage notes (of slightly
>8%), albeit lower than its initial US$50m investment in MGM's senior notes which bear rates of 10.375-
11.125%.
- We believe this investment indicates that GM has yet to find any suitable, earnings-accretive expansion
opportunities, as this investment would provide it with better rates of return than current fixed deposit rates
for its net cash hoard of RM5.3bn.
- No change to earnings and SOP-based fair value of RM2.90. Maintain Market Perform.

Top Glove : 2Q10 Results Within Expectations Outperform

Results note
- Top Glove’s 2QFY08/10 net profit of RM70.5m was within our but above consensus expectations with 6M
net profit of RM135.7m (+93.5% yoy) accounting for 51.7% and 54.8% of our and consensus full-year
estimates respectively.
- Qoq, revenue grew 8.0% as a result of: 1) upward adjustments made to selling prices to pass on the higher
latex cost and weakening US$; and 2) higher sales volume with F19 commencing operations on Oct ‘09.
Despite the higher latex cost and weaker US$, 2Q EBITDA margin remained flat at 21.5% as both of these
were compensated by higher selling prices and cost savings from better economies of scale.
Consequently, 2Q10 net profit rose 8.2% qoq.
- Top Glove’s net cash position grew further to RM269.8m (17.6 sen/share) as at end-Feb from RM222.0m
(14.5 sen/share) as end-Nov. This, we think, should comfortably support the company’s revised dividend
payout ratio of 40%, from 30% previously.
- We maintain our FY10-12 earnings unchanged for now.
- Our fair value of RM15.50 and Outperform call on the stock remains unchanged.

Astro : Receives notice of conditional offer for RM4.30/share Trading Buy (upgrade from UP)
News Update
- Astro Holdings Sdn Bhd (AHSB), a special-purpose vehicle, has served a notice of conditional offer that it
intends to acquire all the ordinary shares in Astro for RM4.30/share, satisfied in cash (Offer).
- The Offer is conditional upon AHSB achieving an acceptance level of more than 90% and approval from
the relevant authorities. On 17 Mar, AHSB has secured irrevocable undertakings from parties that hold a
collective stake of 72.9% in Astro to accept the Offer.
- According to press reports, the privatisation exercise would accord Astro more flexibility in accelerating its
domestic and international growth, which would require a substantial amount of funding. A relisting of Astro
could also be on the cards once it achieved a more stable earnings profile.
- In our view, the Offer price appears fair and Astro’s minorities are likely to accept the privatisation offer.
Furthermore, the privatisation exercise would allow the value of the overseas investments to be unlocked
immediately, which otherwise, may take time as these assets are loss-making. Finally, we expect earnings
in the coming quarters would be weak, potentially hampering share price performance in the absence of
such a corporate exercise.
- No change to our earnings forecasts. We raised our indicative fair value to the conditional offer price of
RM4.30 (previously RM3.10, based on SOP) and upgraded our recommendation to Trading Buy from
Underperform.

Technical Highlights

Daily Trading Strategy : Stay Cautious Pending Clearer Technical Signals…

- After the recent sharp pullback, the FBM KLCI finally staged a mild technical rebound yesterday, returning
to above the 1,300 psychological level.
- However, the strength of the rebound was weaker than our expectation, as the FBM KLCI fell short of
reclaiming the 10-day SMA near 1,309 to confirm a meaningful technical rebound.
- In fact, the off-high closing yesterday with a small negative candle on the chart suggests continuous
resistance near the 10-day SMA going forward.
- As such, we do not discount the probability of a prolonged consolidation nearer to the 1,300 support region
in the near term, unless it can regain momentum by crossing over the 10-day SMA in the immediate term.
- Moreover, the lower participation amid the uncertainties in the regional markets’ direction will also weigh
down on hte near-term market sentiment in the local bourse, in our view.
- Hence, investors will likely stay cautious pending clearer technical signals before taking further
commitments.

Daily Technical Watch: Globetronics Technology – A likely reversal from the recent uptrend …

- 10-day SMA: RM1.069

- 40-day SMA: RM0.981
- Support: IS = RM0.975 S1 = RM0.84 S2 = RM0.695
- Resistance: IR = RM1.29 R1 = RM1.47 R2 = RM1.72

Bulletin Board

Co/Sector News Impact Recom

Wah Seong The company went through a rebranding and
restructuring exercise where 25 of its subsidiaries
would be placed under six divisions i.e. pipe coating,
pipe manufacturing, engineering, renewable energy,
trading and E&P services. The six divisions would be
parked under Wasco Energy. (Financial Daily)
Neutral. Nevertheless, the exercise will allow OP (FV=RM3.09)
the company to be more focused in managing
the diverse portfolio of businesses (i.e. from
pipe coating to renewable energy).

O&G According to Will Rowley (UK’s Acteon Group
economic analyst), global capex spending in oil fields
is expected to increase by 6-7% to US$500bn in
2010, driven by exploration activities in Asia as well
as deepwater and subsea activities. He also cited
No surprise as we believe contracts will likely OW
flow more substantially in 2H 2010 given the
gradual pick up in energy demand as well as
increased reserve replenishment activities by
national oil companies and major E&P players.
 that the E&P investment comfort zone for oil majors
is in the range of US$40-73. (Financial Daily)

Important Dates

Company Entitlement details Ex-date Payment date

New entitlements
Malaysia Pacific
Corporation Renounceable two-call rights issue with detachable warrants 29-Mar-10 -

Going “ex” on 19 Mar

Yoong Onn Corporation Interim div of 0.436 sen tax-exempt + 2.564 sen single tier exempt 19-Mar-10 05-Apr-10

...For more details, see individual reports attached

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