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

RHB Research Institute

RHB Equity 360°

16 July 2010 (Market, PLUS, Tanjong, Gamuda; Technical: Kencana)

Top Story : Government Measures – Fuel price hike

Market Update
- The Government announced a fuel price hike involving petrol, diesel, LPG and sugar. The fuel price hikes
were on an even more gradual basis than that proposed by Pemandu at the end of May, and the market’s
reaction will likely be relatively muted.
- However, the market will now be anticipating future measures, including price hikes for natural gas and
electricity. This will be positive for TNB (if the fuel cost pass through mechanism is approved), but negative
for energy-intensive industries like building materials and rubber glove manufacturers. We note however,
that rubber glove manufacturers normally are able to pass on the higher costs with a short time lag.
- Overall, we continue to advocate a bottom-up strategy, preferring stocks with strong underlying businesses,
good management and robust balance sheet.

PLUS : Petrol price hike likely to have knee jerk impact on PLUS's traffic volume Outperform
News Update
- The Government yesterday announced the increase in both RON95 and RON97 petrol prices by 5 sen/litre,
effective 16 Jul 10.
- While an increase in petrol price would normally hurt PLUS’s traffic volume, the impact is usually
temporary. This time around, we believe the impact is also likely to be contained given the quantum raised
is small relative to the previous price increases in Feb 06 and Jun 08.
- We maintain our forecasts as well as DCF-derived fair value of RM4.23 (based on WACC of 7.7%).

Macro View

Subsidies : Fuel and sugar prices were raised to reduce subsidy

Economic Highlights (published 16 July 2010)
- The Government announced that, effective 16 July, prices for fuel, specifically petrol, diesel and liquefied
petroleum gas (LPG), as well as sugar, will be raised in a move to gradually reduce the Government’s
subsidy as set out under the subsidy rationalisation programme.
- Given that the increase was gradual, we believe the direct impact on the CPI is not likely to be very
significant and we believe it will likely be one-off.
- Meanwhile, we believe the gradual and marginal increase in fuel and sugar prices are unlikely to affect
consumer spending and private investment significant, as the move will likely take away around RM750m
or about 0.1% of GDP from the consumers’ coffer.

Economy : Business Conditions And Consumer Sentiment Weakened In The 2Q

Economic Highlights (published 16 July 2010)
- Both business conditions and consumer sentiments indices fell in the 2Q, suggesting that businesses and
consumers have turned cautious, in view of rising economic uncertainties due to the sovereign debt
problem in Europe and policy normalisation as well as tightening undertaken by countries in Asia.
- As a whole, the drop in BCI index suggests that private investment will likely ease in 2H 2010, after
showing signs of improvement in the 1H of the year, while we expect consumer spending to ease in the 2H
of the year as well.

Corporate Highlights

Tanjong : Gaming under pressure Market Perform

Visit Note
- We gather that management is still exploring various steps via the reduction of the prize payout to mitigate
the recent 2%-pt hike in pool betting duties and this could involve either: 1) a direct reduction in individual
prizes; 2) reduction in the total number of consolation prizes; and/or 3) a combination thereof.
- We believe the NFOs would likely lobby for a reduction in the 4D prize pool for the secondary prizes (20
prizes in all) and not for the first prize. This is because a reduction in the first prize pool could impact
 average sales/draw. At this juncture, we have not imputed any reduction in our prize payout assumptions,
pending approval from the Government.
- As for the power division, the next leg of growth would depend on additions of new power assets. We
believe Tanjong has a strong chance of securing some of the greenfield projects in countries such as
Bangladesh, Egypt and UAE given their existing presence in these places.
- Tanjong has been selected as one of the 10 prequalified bidders for the Dairut power plant project
(1,500MW), which is expected to be awarded in early-2011. Potentially, there could be more news flow on
the outcome of other bids in the months ahead.
- For Tropical Islands (TI), visitor arrivals and ARPUs have been trending up while construction of
accommodation (23 homes built and sold thus far) should further help address the challenge of low
weekday visitor attendances and short stay visitors. As for TGV, we expect its FY10 operating profit
contribution of RM14.8m to hold steady going forward.
- We have fine-tuned our earnings forecasts and coupled with the higher operating losses assumed for FY11
for RTO, we reduced our FY11-13 net profit forecasts by 1.3-4% p.a..
- Following the revision to our earnings forecasts, our SOP-derived fair value has been reduced by 1.3% to
RM18.30. Market Perform call, however, is unchanged.

Gamuda : Buys commercial land in Pudu for RM105m Trading Buy

News Update
- Gamuda is acquiring a 2.94-acre commercial land parcel located at the intersection of Jalan Pudu and
Jalan Robertson for RM105m or RM820psf. The land will house a mixed commercial development with
shop-offices and serviced apartments with a total GDV of RM600m.
- Assuming a PBT margin of 20%, the project will fetch RM120m PBT over the project’s life.
- Forecasts are maintained as the latest acquisition will only help to replenish Gamuda’s landbank and
sustain its property profits over the longer term.
- Fair value is RM3.85. Maintain Trading Buy.

Technical Highlights

Daily Trading Strategy : Good support seen at the 10-day SMA …

- The FBM KLCI finally surrendered to the profit-taking activities yesterday, and recorded its first negative
candle for the past eight trading days to suggest a technical retracement ahead.
- While we see an immediate pullback risk ahead, the benchmark is expected to find a good support near the
10-day SMA of 1,320 in the near term.
- As such, any pullback nearer to the SMA will reattract fresh buying interest, in our view.
- However, if the daily trading volume remains low, there could be some selling pressure from the shrinkage
in volume after the 802m shares traded on Wednesday.
- Also, the knee-jerk reaction from a fuel price hike, as announced by the government yesterday, could
dampen the market sentiment in the short term.
- Going forward, the index must still retake the 1,350 important resistance before it can turn more bullish on
the medium-term outlook, in our view.

Daily Technical Watch: Kencana Petroleum – Near-term outlook has improved significantly …
- 10-day SMA: RM1.478
- 40-day SMA: RM1.428
- Support: IS = RM1.50 S1 = RM1.23 S2 = RM1.05
- Resistance: IR = RM1.72 R1 = RM1.90

Bulletin Board

Co/Sector News Impact Recom

Plantations GAPKI, the Indonesian Oil Producers Association Neutral, as the impact would only be felt by those Neutral
says that the Indonesian government’s two year companies who do not have any new plantation
moratorium on concessions to clear natural landbank to plant up currently, as these
 forests and peatland would have an impact on companies would be actively looking for ways to
Malaysian plantation companies’ expansion expand their business. All of the Malaysian
plans. (The Star) plantation companies we cover already have
unplanted landbank in Indonesia or elsewhere
which would occupy them for the next few years,
by which time the moratorium would have ended
in Indonesia.
Plantations Diesel costs up by 2.9% w.e.f. 16 July. As transportation costs make up about 10-15% of Neutral
total production costs, this would have the impact
of raising production costs for most plantation
companies by 0.45%, which is relatively minimal,
in our view.
Infrastructure Pengurusan Aset Air Bhd (PAAB) is hoping to Neutral. We remain doubtful on the deadline set MP, FV =
- water complete its planned acquisition of water assets by PAAB, given that the total offer price of RM2.92
in Selangor by end-2010. (Financial Daily) above RM10bn (that was hinted by PAAB's
CEO Datuk Ahmad Faizal) may not be attractive
enough for the water concessionaires to part
their prized assets.
Proton Proton has launched an improved model of the Positive as the Exora has been one of Proton's OP, FV =
Exora and expects to launch the Waja best-selling models since its launch in Apr 09. On RM5.50
replacement model by 4Q10 which will be another note, we understand that the much
manufactured at its Shah Alam plant. (Financial anticipated Waja replacement model would be
Daily) simillar to the Mitsubishi Lancer and selling price
is expected to be between RM80k-100k. The
launch is also in line with Proton's commitment to
introduce one new model each year.
EON Cap EON Cap announced yesterday that HL Bank HL Bank’s decision to extend the deadline was MP, FV =
has agreed to revise the timeline for its offer to not too surprising given: 1) EON Cap Board’s RM7.92
acquire the assets and liabilities of EON Cap. decision that acceptance of HL Bank’s offer
Under the revised terms, EON Cap’s EGM would would also depend on the court’s decision with
need to be held by 20 Aug while all approvals respect to Primus’ petition (apart from approvals
and acceptance of the offer by EON Cap would from shareholders and MoF); and 2) the court
need to be given by 30 Nov. (Bursa) case is only scheduled to go to trial from 20 Sep.
Lafarge Lafarge SA has sold its 11.2% of Lafarge (M) at a Neutral. The deal does not affect our forecasts. MP, FV =
price of between RM6.18-6.37 per share, which RM6.83
represented a discount of 1.7%-4.6% versus
yesterday’s close of RM6.48. The deal was
completed through a block trade after the market
closed. (FinanceAsia)
Genting Aqueduct Bidding Process halted due to a Negative, as this would delay the process of Under
Malaysia lawsuit brought by a consortium that had won the announcing the winner of the bid to potentially as Review
casino rights in a previous bidding round. This is late as Jan 2011 (from Aug 3 originally). Based
in relation to the New York racino that Genting on the initial minimum bid of US$300m and the
Msia is bidding for. (Various media sources) 4,500 machines slated to be in the racino, this
could have potentially added 15% to Genting
Msia's PBT.
Sime Darby Dato’ Mohd Bakke Salleh’s appointment as Positive, although we reiterate our view that the UP, FV =
Acting President & Group Chief Executive took extent of the positive effect will only be known RM8.15
effect on 15 July 2010, while Dato’ Azhar Abdul once there are signs that he will be able to do the
Hamid, who was the Acting Group Chief job well and revamp Sime’s operations, via a
Executive prior to the appointment of Dato’ Mohd detailed audit of all the divisions and
Bakke Salleh, has been redesignated as Special operations.
Adviser to Acting President & Group Chief
Executive. (Bursa Malaysia)
Important Dates

Company Entitlement details Ex-date Payment date

New entitlements
Amanahraya REIT 2nd income distribution of 1.6242 sen taxable + 0.3755 sen tax exempt 27-Jul-10 26-Aug-10
CBIP Interim tax exempt dividend of 5 sen 28-Jul-10 25-Aug-10
Scomi Engineering Special int. div of 6 sen less tax + 11 sen (TE) + 12.5 sen single tier 28-Jul-10 26-Aug-10
Bonia Corporation Interim tax exempt dividend of 2.5 sen 29-Jul-10 18-Aug-10
Ajinomoto (M) First and final dividend of 9 sen less 25% tax + 9 sen tax exempt 12-Aug-10 7-Sep-10

Going “ex” on 19 Jul

Zhulian Bonus issue on the basis of 1-for-3 19-Jul-10 -
DKSH Holdings Final div of 1.8 sen less 25% tax + final single tier div of 1.65 sen 19-Jul-10 18-Aug-10

...For more details, see individual reports attached

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Stock Ratings

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Industry/Sector Ratings

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