PP 7767/09/2010(025354)

27 September 2010
RHB Research

Malaysia
Corporate Highlights Institute Sdn Bhd
A member of the
RHB Banking Group
Company No: 233327 -M

M ar k et Up dat e
27 September 2010
MARKET DATELINE

Taking Stock
Catalysts Or Risks?

♦ Two years on ... Two years after the spectacular collapse of Lehman
Table 1. Top Picks
Brothers on 15 Sep, which heralded the downturn of the financial industry
Price# (RM) FV (RM)
and global macroeconomic conditions, we note that most of the Asian
Tactical Plays
market indices (except for China and Japan) have already returned to or
Gamuda 3.84 3.96
surpassed the levels prior to the downturn.
MRCB 1.97 2.09
♦ Long-term uptrend still in place. One year ago, in a similar Market HSL 1.69 1.95
Update (dated 1 Sep 2009), we highlighted that the equity market Tenaga 8.92 10.20
appeared exhausted, but we also noted that the long-term uptrend Faber 3.19 3.82
remained in place. We believe the same situation now applies as we head Longer-Term Picks
into the 4Q2010 and look forward to 2011. As it stands, the FBM KLCI is Maybank 8.58 10.50
up 14.0% YTD on normalised 2010 EPS growth of 24.1%, and this is after CIMB 8.09 9.60
registering 45% growth in 2009. For 2011, we are looking at EPS growth IOI 5.46 6.40
of 12.6%, while our end-2011 target of 1,640 implies 13.2% upside. KLK 16.92 20.70
Mah Sing 1.82 2.06
♦ Catalysts or sell signals? Media Prima 2.11 2.57

o 2011 Budget (15 Oct) – While Government spending in 2011 may KPJ 3.39 4.51

be constrained by the budget deficit, we believe there will be Parkson 5.68 7.72

incentives to drive the Economic Transformation Programme (ETP). Dialog 1.14 1.30

We expect some bad news (higher sin taxes) and good news (for the Carlsberg 5.14 6.03

REITs), but no significant catalysts for the market. In fact, certain # As at 24 Sep

measures (e.g. to curb property speculation) may be announced Source: Bloomberg, RHBRI

ahead of the 2011 Budget.

Table 2. Regional Performances
o Detailed ETP blueprint (26 Oct) – More details of the ETP and the 1M YTD 2Y
Entry Point Projects (EPPs) will be published on 26 Oct. The report Indonesia 9.1 34.1 80.4
will also include more details on the Strategic Reform Initiatives Philippines 15.5 33.6 62.5
(SRI), which we believe will be the enablers for the ETP and New Thailand 6.6 29.3 53.1
Economic Model (NEM). Details of other EPPs will likely trickle out and Malaysia 3.2 14.0 41.1
provide news flow to the market, but the main effect has already MSCI India 7.6 12.2 46.2
been priced into the market. We again highlight the execution risk, Korea 4.9 9.7 23.4
and the long gestation period of some of these projects. Singapore 5.8 6.7 24.8

o Listing of MMHE (end-Oct) – MMHE’s end-Oct listing could renew MSCI AC Asia Pac

investors’ attention in the sector but we believe stronger contract (Ex-Japan) 9.0 5.5 24.5

flows are still necessary. This is only expected end-2010/early-2011. MSCI AC Asia 5.4 5.0 8.1

Our near-term view thus remains clouded by the lack of jobs locally Germany 4.1 3.7 2.1

and regionally and the negative impact on contract pricing. UK 7.5 2.4 8.8
US (DJIA) 6.2 2.2 (1.5)
o Sarawak elections (before May 2011) – The market has already Hong Kong 7.1 1.1 16.7
been anticipating an earlier election date for Sarawak, and this will MSCI China 6.0 0.3 33.4
likely keep Sarawak-related stocks relatively buoyant. However, we MSCI World 7.8 (0.4) (6.5)
note that the sentiment towards these stocks may turn cautious once France 6.1 (5.9) (9.9)
the election date is announced. Italy 2.9 (12.0) (23.2)

♦ Reposition for 2011. As global economic growth continues to normalise,

Ireland 3.1 (19.9) (51.1)
Greece (1.5) (34.3) (56.5)
we believe the market will remain volatile in 2011. Therefore, any pull
# As at 24 Sep
back should be taken as an opportunity to pick stocks and reposition for
Source: Bloomberg, RHBRI
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
Yap Huey Chiang
2011 (CIMB, Maybank, IOI, KLK, Mah Sing, KPJ, Media Prima, Parkson, (603) 92802171
Carlsberg and Dialog). yap.huey.chiang@rhb.com.my

Please read important disclosures at the end of this report.

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Table 3. Performance Of Regional Indices

1M (%) YTD (%) YoY (%) 2Y (%)
Indonesia 9.1 34.1 2.7 80.4
Philippines 15.5 33.6 7.6 62.5
Thailand 6.6 29.3 0.8 53.1
Malaysia (FBM KLCI) 3.2 14.0 4.5 41.1
MSCI India 7.6 12.2 6.3 46.2
Korea 4.9 9.7 (0.7) 23.4
Singapore 5.8 6.7 8.6 24.8
MSCI AC Asia Pacific (Ex-Japan) 9.0 5.5 6.9 24.5
MSCI AC Asia 5.4 5.0 0.5 8.1
Germany 4.1 3.7 6.3 2.1
UK 7.5 2.4 6.6 8.8
US (DJIA) 6.2 2.2 7.4 (1.5)
Hong Kong 7.1 1.1 3.9 16.7
MSCI China 6.0 0.3 7.8 33.4
MSCI World 7.8 (0.4) 4.1 (6.5)
France 6.1 (5.9) 4.7 (9.9)
Italy 2.9 (12.0) 1.1 (23.2)
Ireland 3.1 (19.9) (1.5) (51.1)
Greece (1.5) (34.3) (18.7) (56.5)
As at 24 Sep 2010
Source: Bloomberg

Table 4. RHBRI’s Top Picks

Price FV EPS EPS Growth PER PBV PCF GDY
FYE (RM/s) (RM/s) (sen) (%) (x) (x) (x) (%) Rec
24 Sep FY10 FY11 FY10 FY11 FY10 FY11 FY10 FY10 FY10
Tactical Plays
Gamuda Jul 3.84 3.96 15.4 16.1 13.1 4.5 24.9 23.8 2.1 66.7 3.1 TB
MRCB Dec 1.97 1.94 6.4 6.7 23.5 4.9 30.9 29.5 2.0 19.3 0.0 TB
HSL Dec 1.69 1.95 16.2 17.7 21.4 8.9 10.4 9.6 2.2 12.3 1.5 OP
Tenaga Aug 8.92 10.20 78.7 90.8 15.8 15.4 11.3 9.8 1.3 4.7 3.5 OP
Faber Dec 3.19 3.82 26.4 45.7 0.5 73.5 12.1 7.0 2.1 7.4 2.5 OP

Longer-Term Picks
Maybank Jun 8.58 10.50 61.9 69.6 14.7 12.4 13.9 12.3 2.0 n.a. 4.1 OP
CIMB Dec 8.09 9.60 56.3 64.5 17.2 14.6 14.4 12.5 2.1 n.a. 1.5 OP
IOI Jun 5.46 6.40 33.0 34.8 29.5 5.4 16.5 15.7 3.2 14.6 3.1 OP
KLK Sep 16.92 20.70 124.4 131.4 42.1 5.6 13.6 12.9 2.7 12.9 3.8 OP
Mah Sing Dec 1.82 2.06 17.2 21.2 22.8 23.2 10.6 8.6 1.5 20.5 3.8 OP
Media Prima Dec 2.11 2.57 16.5 19.4 21.3 17.6 12.8 10.9 2.0 6.4 5.3 OP
KPJ Dec 3.39 4.51 26.6 29.9 10.7 12.2 12.7 11.3 2.0 10.0 4.7 OP
Parkson Jun 5.68 7.72 37.3 47.9 26.6 28.5 15.2 11.8 2.6 5.5 1.4 OP
Dialog Jun 1.14 1.30 8.8 10.7 50.4 21.1 12.9 10.7 3.7 11.8 4.3 OP
Carlsberg Dec 5.14 6.03 42.8 47.5 5.2 10.8 12.0 10.8 2.6 10.0 5.0 OP
^ FY10-11 valuations refer to those of FY11-FY12 Source: RHBRI, Bloomberg

IMPORTANT DISCLOSURES

This report has been prepared by RHB Research Institute Sdn (RHBRI) and is for private circulation only to clients of RHBRI and RHB Investment Bank
(previously known as RHB Sakura Merchant Bankers). It is for distribution only under such circumstances as may be permitted by applicable law. The opinions
and information contained herein are based on generally available data believed to be reliable and are subject to change without notice, and may differ or be
contrary to opinions expressed by other business units within the RHB Group as a result of using different assumptions and criteria. This report is not to be
construed as an offer, invitation or solicitation to buy or sell the securities covered herein. RHBRI does not warrant the accuracy of anything stated herein in any
manner whatsoever and no reliance upon such statement by anyone shall give rise to any claim whatsoever against RHBRI. RHBRI and/or its associated persons
may from time to time have an interest in the securities mentioned by this report.

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of persons who receive it. The securities discussed in this report may not be suitable for all investors. RHBRI recommends that investors independently evaluate
particular investments and strategies, and encourages investors to seek the advice of a financial adviser. The appropriateness of a particular investment or

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The recommendation framework for stocks and sectors are as follows : -

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 strong enough to warrant an Outperform call. It is generally for investors who are willing to take
on higher risks.

Market Perform = The stock return is expected to be in line with the FBM KLCI benchmark (+/- five percentage points) over the next 6-12 months.

Underperform = The stock return is expected to underperform the FBM KLCI benchmark by more than five percentage points over the next 6-12 months.

Industry/Sector Ratings

Overweight = Industry expected to outperform the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

Neutral = Industry expected to perform in line with the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

Underweight = Industry expected to underperform the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

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