2H 2010 Market Outlook:

Still A Bumpy Ride

24th July 2010 RHB Research Institute

0

Uncertainty persists in the global economy

Investors are nervous about the speed at which countries in Europe withdraw
fiscal support for their economies.

Past experience suggests that premature fiscal tightening is as big a danger as

delayed tightening.

Fiscal Austerity In Europe

Country 2009 2010 2014

Budget Deficit (% of GDP)

Greece 13.6 8.1 <3.0

Portugal 9.4 7.3 4.61
Italy 5.3 3.9 2.72
Spain 11.2 7.3 3.0
Ireland 14.3 11.7 2.9
Germany 3.3 n.a 3.0
UK 11.5 12.6 4.7
1for year 2011
2for year 2012
Source: Various news reports

Page 1
New focus on fiscal austerity in Europe has also revived
worries about consumer price deflation

Japan battling with falling consumer prices for more than a decade, Spain and
Ireland are experiencing falling consumer prices while the US core inflation rate
is at a 4-decade low of 0.9% yoy in June.

With a combination of spending cuts and tax increases and as credit becomes
less available, demand will likely weaken further in Europe leading to a
downward spiral of falling asset prices.

Rising risk of deflation in certain developed countries

% yoy
6
4
2
0
-2
-4 Japan US (core cpi)
-6 Spain (core cpi) Ireland
-8
05 06 07 08 09 10

Source: Bloomberg, RHBRI.

Many emerging / developing economies are facing with a

different set of issues

Unwelcome capital inflows, causing volatility to currencies and surging asset prices.

Fear of unsustainable asset bubble in China.

Surging asset prices in some countries led to fears of asset bubbles

% yoy (Property prices) % yoy (Property prices)

40 40
Hong Australia
30 Kong 30

20
20
10
10
0

0 -10

-10 -20
China Singapore

-30
-20 03 04 05 06 07 08 09 10
06 07 08 09 10

Source: Bloomberg, RHBRI.

Page 2
Some emerging economies also face rising inflation

Normalisation of policies will continue in these countries, albeit at a slower pace.

Rising inflation a concern in some countries

% yoy (CPI / WPI)

30

25
Vietnam
20
India
15

10

-5 China
06 07 08 09 10

Source: Bloomberg, RHBRI.

Risk is a sharper-than-expected slowdown in 2H, not

a “double-dip”

US and Asia ex-Japan firmly on recovery path, Germany can export and provide the
cushion to stabilise the European region.

US labour conditions improving China’s economic growth has peaked,

on moderating trend
(‘000) %
% yoy Index
600 12 40 70
PMI
(RHS)
400
10 35 60

200
50
8 30
0
40
-200 6 25
Fixed-asset 30
-400 Investment
4 20
(LHS) Loan 20
-600 Employment in temporary help services (LHS) growth
Non-farm payrolls (LHS) 2 15 (LHS)
-800 10
Unemployment rate (RHS)
-1000 0 10 0
00 01 02 03 04 05 06 07 08 09 10 06 07 08 09 10

Source: US Bureau of Labor Statistics, RHBRI. Source: Bloomberg, RHBRI

Page 3
Projections Are For The Global Economy To Trend Up,
Though The Pace Of Recovery Is Likely To Be Uneven

Risk is a sharper-than-expected slowdown in the 2H given debt problems in Europe and stimulus
spending packages around the globe fizzling out.

IMF World Bank OECD

2008 2009 2010f 2011f 2010f 2011f 2012f 2010f 2011f

Global Economy 3.0 -0.6 4.6 4.3 3.3 3.3 3.5 4.6 4.5
2.7* 2.8*
US 0.4 -2.4 3.3 2.9 3.3 2.9 3.0 3.2 3.2
Euroland 0.6 -4.1 1.0 1.3 0.7 1.3 1.8 1.2 1.8
UK 0.5 -4.9 1.2 2.1 0.5 2.0 n.a 1.3 2.5
Japan -1.2 -5.2 2.4 1.8 2.5 2.1 2.2 3.0 2.0
Canada 0.5 -2.5 3.6 2.8 1.5 2.5 n.a 3.6 3.2
China 9.6 9.1 10.5 9.6 9.5 8.5 8.2 11.1 9.7
India 6.4 5.7 9.4 8.4 8.2 8.7 8.2 8.3 8.5
Asia ex-Japan 7.7 6.9 9.2 8.5 6.6 7.8 n.a n.a n.a
Malaysia 4.7 -1.7 6.7 5.3 5.7 5.3 5.5 n.a n.a
Advance economies 0.5 -3.2 2.6 2.4 2.3 2.4 2.7 - -
Emerging & developing 6.1 2.5 6.8 6.4 6.2 6.0 6.0 - -
economies

e estimates
f forecasts
*Total OECD growth

M’sia: Slowing economic growth in the 2H

Speed bumps from Europe and China.

“V-shape” export recovery also set to normalise as low base effect fizzles out.

Exports and industrial production in M’sia’s exports to China & Europe will
M’sia showing early signs of easing likely slow down in 2H

% yoy % yoy
Exports 160
50
140
40
China
120
30
100
20 IPI 80
10 60
40
0
20
-10
0
-20
-20
-30 -40
Europe
-40 -60
06 07 08 09 10 06 07 08 09 10

Source: Bloomberg, RHBRI

Page 4
Overall, the Malaysian economic recovery is building momentum
2008 2009 2010 2009 2010f 2011f

Q1 Q2 Q3 Q4 Q1
% Growth in Real Terms
Consumption
Public 10.7 1.6 1.5 9.4 0.7 6.3 3.1 -1.5 4.5
Private 8.5 -0.6 0.3 1.3 1.6 5.1 0.7 5.0 6.0
Fixed capital formation 0.7 -11.2 -9.6 -7.9 8.2 5.4 -5.6 9.0 8.6
Public 0.5 n.a n.a n.a n.a n.a 8.0 10.8 4.9
Private 1.0 n.a n.a n.a n.a n.a -17.2 6.9 12.7
Agg. domestic demand 6.8 -3.1 -2.2 0.1 2.8 5.4 -0.5 4.9 6.4

Exports of goods an7

non-factor services 1.6 -15.5 -17.9 -12.9 6.0 19.3 -10.4 11.5 7.8

Imports of goods and

non-factor services 2.2 -23.0 -19.4 -13.2 7.0 27.5 -12.3 18.0 10.5
GDP 4.7 -6.2 -3.9 -1.2 4.4 10.1 -1.7 6.8 5.0

2008 2009 2010 2009 2010f 2011f

Q1 Q2 Q3 Q4 Q1
% Growth in Real Terms

Agriculture 4.3 -4.4 0.4 -0.4 5.9 6.8 0.4 3.2 2.8

Manufacturing 1.3 -17.9 -14.5 -8.6 5.0 16.9 -9.4 10.7 8.0

Mining & quarrying -2.4 -5.2 -3.5 -3.6 -2.8 2.1 -3.8 1.8 2.0

Construction 4.2 1.2 4.5 7.9 9.3 8.7 5.8 4.8 2.8

Services 7.4 -0.2 1.7 3.4 5.2 8.5 2.6 6.4 4.6

GDP 4.7 -6.2 -3.9 -1.2 4.4 10.1 -1.7 6.8 5.0

f: RHBRI’s forecasts
Source: Dept of Statistics, RHBRI. 8

Corporate earnings growth likely to have peaked

Earnings ceased to surprise on the upside in the last results reporting season.

But the recovery momentum is sustained.

Strong corporate earnings recovery from a low base, growth might have peaked

%
60

+39.1
40
+31.3

20
+11.7 +7.1
+4.0
0
+4.2

-20

-40 qoq yoy

-60
1QCY07

3QCY07

1QCY08
1QCY06

3QCY06

2QCY07

4QCY07

2QCY08

3QCY08
2QCY06

4QCY06

4QCY08

1QCY09

2QCY09

4QCY09

1QCY10
3QCY09

Note: Normalised EPS for RHBRI covered stocks in FBMKLCI

Source: Bursa Malaysia, RHBRI.

Page 5
Regional comparisons

Comparable valuations to Singapore and Indonesian markets

But still a very under-owned market by foreign investors

Just been listed as China QDII destination
 Currently, some 41.8% (US$20bn) of the quota (US$47.8bn) remains to be invested

Also supported by a relatively firm to appreciating ringgit.
M'sia S'pore Thai’d P’pines Indon H.Kong Taiwan Korea

FactSet Asian Consensus Trends report dated 30 June 2010

2009 Net EPS (%) 5.3 0.1 32.9 26.3 40.9 8.3 40.4 42.0
2010 Net EPS (%) 23.8 11.7 16.5 19.1 29.1 23.9 76.5 66.9
2011 Net EPS (%) 13.5 10.0 15.9 7.5 18.1 17.1 11.3 5.9
2009 PER (x) 18.2 16.3 11.8 13.0 16.0 16.1 22.5 14.2
2010 PER (x) 14.5 13.8 11.5 12.4 14.8 13.3 12.5 8.9
2011 PER (x) 12.8 12.6 9.9 11.6 12.5 11.4 11.1 8.4

IBES Consensus dated 15 July 2010

2009 Net EPS (%) -20.5 -15.5 28.2 20.3 9.2 17.3 79.5 -13.1
2010 Net EPS (%) 26.6 21.3 16.8 27.2 25.4 17.9 95.9 59.1
2011 Net EPS (%) 15.6 11.8 17.5 8.5 21.1 13.0 14.3 8.4
2009 PER (x) 18.8 17.1 13.8 16.2 18.9 16.0 25.9 25.2
2010 PER (x) 14.4 13.8 11.9 12.7 14.9 12.0 13.4 9.5
2011 PER (x) 12.4 12.4 10.1 11.7 12.3 10.6 11.6 8.7

Performance* (%)
2008 (YOY) -39.3 -49.2 -47.6 -48.3 -50.6 -48.3 -46.0 -40.7
2009 (YOY) +45.2 +64.5 +63.2 +63.0 +87.0 +52.0 +78.3 +49.7
2010 (YTD)* +5.0 +2.0 +13.4 +11.9 +18.8 -5.9 -6.4 +3.1

* as at 22nd July 2010

10

2H market outlook

Lack of domestic leads suggests that external factors will dominate market
movements in the immediate term.

More negative than positive news flow suggests that global equities may move
into a phase of greater volatility over the next 2-3 months.

Longer-term outlook of the market, however, remains positive given our

expectation of the sustained economic and corporate earnings growth.

End-2010 FBM KLCI target remains unchanged at 1,400 or 14.5x 2011

earnings.

11

Page 6
Catalysts for the market to come back in the 4Q

A clearer picture on the strength of the global economic recovery.

Domestically, award of major infrastructure projects / privatisation of

government land for redevelopment.

Federal land to be awarded

Land Area GDV Potential Master

(acres) (RMm) Developer(s)

Matrade Jalan Duta 65 15,000 Naza TTDI (Awarded)

Rubber Research Institute, Sungai Buloh 3,300 10,000 EPF, MRCB
Royal Malaysian Air Force, Sungai Besi 400 Multi-billion 1Malaysia Development Bhd
(1MDB), Qatar Investment
Authority
Jalan Cochrane 150 Multi-billion To be auctioned
Dataran Perdana, Jalan Davis 85 Multi-billion 1MDB, Mubadala
Batu Cantonment army base, Jalan Ipoh, KL 245 - 1MDB, LTAT (Boustead)
KLCC, Jalan Ampang & U-Thant vicinity - - MRCB

Source: Various news reports

Sarawak state election could be another domestic investment theme.

12

Market strategy

Stock picking is key.

Trim stocks with relatively rich valuations and look for opportunities to
accumulate fundamentally-robust stocks on weakness.

Expect greater price stability in companies that have less or hedged exposure to
overseas markets.

Still optimistic on the earnings prospects of the semiconductor companies, but

also a risk of earnings disappointment should the recovery in external demand
turn up to be weaker than expected.

Banking sector would be a safer bet on weakness.

Constructions and property sectors will likely outperform given expectations of

positive news flow on the potential award of major infrastructure projects /
privatisation of government land.

Opportunities to pick stocks in the power, telco, motor and rubber glove sectors.

We are now more neutral on oil & gas and plantation sectors.

13

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Top Picks
Stocks FYE Price Fair Mkt Cap EPS Eps Growth PER P/BV P/CF GDY
(22/7/10) Value (sen) (%) (X) (x) (x) (%)
(RM/s) (RM/s) RM mil 10f 11f 10f 11f 10f 11f 10f 10f 10f

Maybank Jun 7.69 9.66 54,427 51.3 60.7 35.7 18.1 15.0 12.7 2.0 n.a. 3.8
CIMB Dec 7.20 8.40 50,857 47.8 56.3 20.2 17.9 15.1 12.8 2.3 n.a. 1.7
Maxis Dec 5.28 6.20 39,600 33.2 36.2 6.6 9.1 15.9 14.6 3.9 10.3 6.3
TNB Aug 8.58 10.20 37,181 68.0 78.7 36.6 15.8 12.6 10.9 1.3 4.9 3.2
PLUS Dec 3.65 4.23 18,250 24.1 36.8 1.5 53.1 15.2 9.9 3.0 9.2 4.9
Gamuda Jul 3.36 3.85 6,821 13.6 16.1 40.4 17.9 24.6 20.9 2.0 n.m 3.6
MRCB Dec 1.74 1.96 2,369 6.0 7.3 57.3 21.8 29.1 23.9 1.9 18.2 0.0
Media Prima Dec 2.08 2.80 1,966 16.3 18.0 136.4 10.1 12.8 11.6 2.1 6.4 4.8
KPJ Dec 3.79 4.25 2,000 24.0 26.6 14.6 10.7 15.8 14.2 2.6 15.1 3.7
Mah Sing Dec 1.70 2.09 1,335 13.1 18.3 15.8 39.3 12.9 9.3 1.5 9.2 4.1
Faber Dec 2.89 3.54 1,049 26.5 24.2 16.4 -8.8 10.9 11.9 2.2 6.8 2.4
HSL Dec 1.49 1.95 829 13.4 16.2 30.8 21.4 11.1 9.2 2.3 13.5 1.7

14

Sector Weightings & Valuations

Covered Stocks MktCap Weight EPS Growth PER Recommendation
(RMbn) (%) (%) (x)
FY09a FY10f FY11f FY10f FY11f

Banks & Finance 191.5 25.7 -2.4 19.7 14.4 14.5 12.7 Overweight
Telecommunications 104.6 14.0 -13.6 16.8 11.3 17.2 15.4 Overweight
Power 59.1 7.9 -8.34 25.4 11.3 12.1 10.9 Overweight
Construction^ 20.2 2.7 -4.0 28.6 8.7 17.2 15.8 Overweight
Motor 17.6 2.4 -10.5 61.4 10.4 9.7 8.8 Overweight
Property 15.9 2.1 -2.9 20.1 17.8 12.1 10.2 Overweight
Insurance 3.8 0.5 44.3 18.8 9.8 10.7 9.7 Overweight
Plantation 103.8 13.9 -27.1 0.3 24.5 18.8 15.1 Neutral
Transportation* 55.7 7.5 -10.8 41.3 16.3 21.0 17.8 Neutral
Gaming 50.0 6.7 -16.7 19.3 5.5 13.7 12.9 Neutral
Oil & Gas 30.5 4.1 -3.3 8.0 10.5 15.8 14.3 Neutral
Consumer 30.0 4.0 5.6 7.8 6.4 15.7 14.8 Neutral
Infrastructure 19.4 2.6 20.3 0.5 47.5 14.5 9.8 Neutral
Media 14.3 1.9 -6.3 39.6 7.0 12.7 11.8 Neutral
Building Materials 11.2 1.5 -19.3 5.4 25.1 11.9 9.9 Neutral
Manufacturing 8.4 1.1 40.2 7.6 19.0 12.3 10.4 Neutral
Semiconductors & IT 6.3 0.8 -18.0 64.4 22.2 9.9 8.6 Neutral
Timber 3.4 0.5 -18.6 87.6 33.5 10.3 7.7 Neutral

745.4 100.0
^ Exclude MRCB in 09
* Exclude MAS earnings in 09-10
Note : RHBRI's Basket 15

Page 8
 High Dividend Yielding Stocks
Share Price Gross Div. Yield (%) P/NTA (x) ROE (%) Recommendation
(22/7/10)
(RM/shr) FY10f FY11f FY10f FY10f
AXIS Reit 2.12 7.8 8.4 1.3 9.6 Outperform
YTL Cement 4.00 7.5 7.5 1.2 15.2 Outperform
MCIL^ 0.87 6.9 6.9 1.5 13.2 Outperform
Glomac^ 1.32 6.8 6.8 0.7 16.8 Outperform
Daibochi 3.40 6.6 7.4 3.6 20.5 Outperform
BP Plastics 0.62 6.5 7.1 0.8 12.5 Outperform
Amway 7.80 6.4 6.7 5.2 37.1 Outperform
Maxis 5.28 6.3 6.8 n.m 26.1 Outperform
LPI Capital 17.88 6.1 7.1 2.6 27.3 Outperform
Digi 24.32 6.1 6.7 26.5 70.7 Outperform
TA Ann 5.10 5.8 7.4 1.6 12.4 Outperform
Wellcall 1.28 10.1 11.7 2.0 19.2 Market Perform
YTL Power 2.20 9.1 9.1 1.8 17.1 Market Perform
CSC Steel 1.64 8.5 9.1 0.8 11.3 Market Perform
Quil Capita 1.02 8.0 8.4 0.8 6.6 Market Perform
TM 3.32 7.9 7.9 1.8 6.4 Market Perform
Hai-O-Ent^ 3.69 6.7 7.6 1.3 34.5 Market Perform
STAR 3.48 6.6 6.6 2.1 13.1 Market Perform
P Gas^ 10.24 6.5 6.7 3.2 38.8 Market Perform
B-Toto^ 4.18 6.2 6.5 n.m 82.6 Market Perform
Hunza Prop 1.25 6.0 6.0 0.6 12.5 Market Perform
Tanjong^ 17.84 5.7 5.8 1.8 15.6 Market Perform
WTK 1.12 5.4 5.4 0.6 4.2 Market Perform

^ FY10 & FY11 refer to FY11 & FY12 forecasts.

16

Bank & Finance

Recom Price Fair EPS EPS Gwth PER P/BV GDY Price Chg
(22/7/10) Value (sen) (%) (x) (x) (%) (%)
RM RM 10f 11f 10f 11f 10f 11f 10f 10f 3mths
Maybank OP 7.69 9.66 51.3 60.7 35.7 18.1 15.0 12.7 2.0 3.8 2.5
CIMB OP 7.20 8.40 47.8 56.3 20.2 17.9 15.1 12.8 2.3 1.7 2.3
PBB-F OP 12.30 13.75 82.0 91.7 11.8 11.8 15.0 13.4 3.4 4.9 1.8
PBB-L OP 12.14 13.75 82.0 91.7 11.8 11.8 14.8 13.2 3.3 4.9 0.8
AMMB^ OP 5.09 6.60 39.9 45.7 14.8 14.6 12.8 11.1 1.4 3.7 2.2
Affin OP 3.00 3.55 27.5 29.6 10.5 7.6 10.9 10.1 0.9 2.8 -3.8
RCE^ OP 0.63 1.12 10.8 11.3 4.3 4.6 5.8 5.5 1.0 1.6 -6.7
AFG OP 2.92 3.40 24.4 26.6 25.2 9.1 12.0 11.0 1.4 2.9 -6.4
EON Cap MP 6.91 7.92 53.8 60.9 9.4 13.2 12.8 11.3 1.2 1.4 -3.1
HL Bank MP 8.65 9.20 56.5 56.6 5.1 0.2 15.3 15.3 2.2 2.8 -0.7
RHB Cap# NR 6.15 NR 59.0 67.0 21.9 13.6 10.4 9.2 1.2 3.5 0.8
^ FY10 & FY11 refer to FY11 & FY12 forecasts
# Not under our coverage, IBES estimates are used.

We believe the sector would help take the lead in lifting the market to higher grounds, underpinned by factors such as: 1) earnings growth gaining
momentum; 2) decent valuations relative to the market and historical levels; and 3) relatively lower foreign shareholding levels.

We do not discount the possibility of earnings surprises ahead and believe the areas that could surprise on the upside include: 1) interest income (e.g.
stronger-than-expected loan growth); 2) non-interest income; and 3) impairment allowances.

Valuation-wise, the sector is currently trading at a discount to the market as well as some large-cap peers. The banks are also generally trading below
the previous peak in 2007 and/or one standard deviation above the mean. This suggests there is still room for valuations to expand.

Despite the recent five new banking licences issued, we believe earnings growth of the local banks remain intact. This is because: 1) the new
commercial banking licences are niche banks and unlikely to compete head-on with the domestic institutions; and 2) the local banks are already very
competitive given their increased share of overall assets as well as overseas ventures.

Regulatory adoption of FRS139 – Adjusting 31 Dec ’09 figures for the adoption of FRS139, end-Mar ’10 absolute impaired loans level would have
improved qoq. Basel II IRB approach – banks indicated neutral to positive impact on earnings and capital ratios. Basel III still not clear.

We are maintaining our Overweight stance on the sector. Maybank, CIMB, Public Bank and AMMB are all rated Outperform for big cap and
liquidity exposure while smaller market capitalised stocks like AFG, Affin and RCE are also rated as Outperform.
17

Page 9
Building Materials
Recom Price Fair EPS EPS Growth PER EV/EBITDA P/NTA GDY Price Chg
(22/7/10) Value (sen) (%) (x) (x) (x) (%) (%)
RM RM 10f 11f 10f 11f 10f 11f 10f 10f 10f 3 mths

YTL Cement OP 4.00 5.51 50.1 54.5 -2.2 8.8 8.0 7.3 3.9 1.2 7.5 -6.3
CSC Steel OP 1.64 2.22 21.9 23.3 -8.5 6.4 7.5 7.0 1.4 0.8 8.5 -16.3
Perwaja Holdings OP 1.19 1.24 11.6 13.5 +>100 16.9 4.4 3.8 8.1 0.7 0.0 -17.4
LM Cement MP 6.62 6.83 42.5 48.8 -12.4 14.8 15.6 13.6 11.4 1.8 4.5 -0.9
Hiap Teck MP 1.27 1.38 12.8 15.1 +>100 17.7 9.9 8.4 10.1 0.7 1.6 -11.2
Ann Joo MP 2.58 2.74 30.5 37.4 +>100 22.8 8.5 6.9 7.1 1.2 9.3 -10.4
Kinsteel UP 0.85 0.83 7.6 8.6 +>100 14.4 11.2 9.8 5.2 0.9 1.2 -13.8
Sino Hua An UP 0.37 0.27 -0.7 3.0 64.1 n.a. n.m. 12.4 33.2 0.6 0.0 -20.7

Neutral

Cement: The implementation of large-scale infrastructure projects, coupled with a pick up in property
development activities will boost domestic cement consumption from 2H10 as well as cement producers’
pricing power. However, this will be partly offset by higher production costs (in particular, coal, diesel and
electricity).

Steel: Both prices and demand for steel products will likely stage a rebound in 4Q, as: 1) steel consumption
is seasonally stronger in 4Q; 2) concerns on overcapacity are likely to ease in the near term; and 3) spot
price of iron ore fines (the key steelmaking input for most large steel mills in the world) has bottomed.
However, it is still too early to turn bullish, as: 1) this risk on a sharper-than-expected slowdown in global
economy remains; and 2) overcapacity (in particular, China) remains an issue.

18

Construction
Recom Price Fair EPS EPS Growth PER EV/EBITDA P/NTA GDY Price Chg
(22/7/10) Value (sen) (%) (x) (x) (x) (%) (%)
RM RM 10f 11f 10f 11f 10f 11f 10f 10f 10f 3 mths
Sunway Hldgs OP 1.54 2.35 22.8 25.2 68.0 10.2 6.7 6.1 5.5 1.2 1.8 0.7
HSL OP 1.49 1.95 13.4 16.2 30.8 21.4 11.1 9.2 6.7 2.3 1.7 -2.6
Fajarbaru OP 0.98 1.39 13.6 14.7 -10.1 7.7 7.2 6.6 0.0 1.4 5.6 -8.0
Emas Kiara OP 0.58 1.52 13.1 15.2 15.0 16.7 4.4 3.8 3.6 0.6 2.6 5.5
Gamuda TB 3.36 3.85 13.6 16.1 40.4 17.9 24.6 20.9 31.0 2.2 3.6 10.6
MRCB TB 1.74 1.96 6.0 7.3 57.3 21.8 29.1 23.9 20.3 1.9 0.0 8.7
IJM Corp^ MP 5.11 5.01 31.7 32.6 58.9 2.7 16.1 15.7 9.1 1.3 2.2 1.6
WCT UP 2.78 2.30 18.2 16.9 -3.0 -7.0 15.3 16.4 13.2 1.6 2.2 -9.2
^ FY10 & FY11 refer to FY11 & FY12 forecasts
* To be revised

Overweight. we foresee construction stocks to generally outperform the market in 2H2010, buoyed by news flow, particularly,
from: (1) RM36bn KL MRT; (2) RM7bn Ampang and Kelana Jaya LRT line extension project; and (3) The awards of Federal land.

Gamuda’s share price, particularly, will be buoyed by: (1) Daily doses of news and commentaries on KL MRT; (2) Cabinet
approval; (3) Thumbs up for KL MRT from businesses and the public; and (4) The commencement of the actual physical works on
KL MRT ahead of the formal award of the contract.

LRT extension appears to finally start: “Pre-bid briefing” (22 Jun 2010), “site visit” (27 Jun 2010), submission of tenders (mid-Aug
2010), evaluation of tenders (mid-Aug to mid-Nov 2010), award of contract & commencement of work (mid-Nov 2010).

Market is expected to “brave” the negative elements and forge ahead with its move to position itself ahead of the curve,
underpinned by the collective “buy-first-on-news” mentality.

The negative elements include: (1) A 23% lower “hard” gross development expenditure of RM138bn under 10MP, compared with
RM179bn under 9MP; (2) The still slow pace of the roll-out of public projects; (3) A highly competitive market and declining
dominance of established players in large-scale projects locally; and (4) The not-so-rosy outlook and increased operating risks in
key overseas markets.

Our top “tactical” pick is Gamuda and top “value” pick is Sunway.
19

Page 10
Consumer
Recom Price Fair EPS EPS Growth PER EV/EBITDA P/NTA GDY Price Chg
(22/7/10) Value (sen) (%) (x) (x) (x) (%) (%)
RM RM 10f 11f 10f 11f 10f 11f 10f 10f 10f 3 mths
KPJ Health OP 3.79 4.25 24.0 26.6 14.6 10.7 15.8 14.2 9.2 1.7 3.7 34.4
AEON OP 4.93 5.80 41.4 45.0 8.9 8.7 11.9 10.9 5.0 1.6 2.4 -1.8
KFCH OP 11.12 11.20 77.1 89.5 17.2 16.2 14.4 12.4 7.3 2.6 2.3 39.3
Amway OP 7.80 8.45 54.5 56.5 23.6 3.5 14.3 13.8 9.1 5.2 6.4 6.1
Carlsberg OP 5.04 5.85 40.7 42.8 64.8 5.2 12.4 11.8 8.2 2.7 4.8 -2.7
Parkson OP 5.50 6.40 29.2 36.3 15.0 24.3 18.8 15.2 4.9 2.9 1.3 -5.0
QL R OP 4.22 4.90 30.7 34.7 14.0 13.0 13.7 12.2 5.3 2.9 2.4 12.8
Faber OP 2.89 3.54 26.5 24.2 16.4 -8.8 10.9 11.9 4.4 2.4 2.4 25.1
Daibochi OP 3.40 4.20 35.1 38.0 16.9 8.3 9.7 9.0 6.0 3.6 6.6 4.0
Hai-O^ MP 3.69 4.06 37.3 42.3 6.7 13.2 9.9 8.7 6.3 1.3 6.7 -15.9
BAT UP 43.98 40.25 247.3 236.8 -5.4 -4.3 17.8 18.6 12.6 n.m 5.0 2.8
^ FY10 & FY11 refer to FY11 & FY12 forecasts

Slower increase in consumer spending outlook. Slower increase in consumer spending expected, at +4.6% yoy in 2H2010 vs. +5.4% yoy in
1H2010. Still risk to our consumer spending projections arising from uncertainty in government policies especially on the cut in consumer subsidy.
Prefer more resilient healthcare and F&B sectors than retailers and MLM players.

Healthcare poised for growth and resilient earnings. Both public and private healthcare sector is poised for growth in 2010. For the public sector,
the Government has allocated a sum of RM14.8bn to build and upgrade hospitals and clinics. Meanwhile, private healthcare business will grow on the
back of growing uptake in medical insurance policies. News flow for both Faber and KPJ has been strong as well. For Faber, reports that UEM Group
is looking to dispose off its 34% stake in Faber could further provide trading opportunities for the stock. Meanwhile, with strong news flow on the M&A in
private healthcare sector in the region, we believe that KPJ will be in investors’ spotlight and deserves to be trading at a higher valuation, further
narrowing its discount to regional peers’ PER of 18x.

F&B driven by expansions to new markets and increasing consumer spending. For the F&B industry, main drivers in 2H10 will be expansions
into new markets, either geographically or via introduction of new products, which will augur well for both KFC and QL Resources. Daibochi would
indirectly benefit from the increase in F&B consumption as >90% of its customers are from the F&B sector.

Brewery to be more resilient vs. tobacco. Meanwhile, the brewers’ earnings are expected to be more resilient due to easing cost pressure and FIFA
World Cup celebration, while tobacco players will be facing continued regulatory pressures and competition from illicit market.

Retailers growth could slow down in 2H, following the slower increase in consumer spending outlook coupled with uncertainty on government’s
subsidy policies.

Top pick is KPJ. We like KPJ due to its resilient earnings, leading position and expansion plans in Malaysia coupled with strong news flow from the
sector.
20

Gaming
Recom Price Fair EPS * EPS Growth PER EV/EBITDA P/NTA GDY Price Chg
(22/7/10) Value (sen) (%) (x) (x) (x) (%) (%)
RM RM 10f 11f 10f 11f 10f 11f 10f 10f 10f 3 mths
Genting S'pore OP S$1.20 S$1.65 2.7 3.8 290.8 37.9 44.0 31.9 7.4 4.6 0.0 39.5
Genting Bhd MP 7.58 8.50 53.4 56.4 68.8 5.7 14.2 13.4 5.2 2.4 1.3 13.6
B-Toto^ MP 4.18 4.35 28.8 29.0 -0.3 0.5 14.5 14.4 9.9 n.m 6.2 -6.1
Genting M'sia UP 2.64 2.65 21.0 22.4 -13.4 6.8 12.6 11.8 5.5 1.4 2.6 -7.4
^ FY10 & FY11 refer to FY11 & FY12 forecasts * Normalised

Downgraded to Neutral. Things have changed for the gaming industry overnight, and we are downgrading the sector to NEUTRAL
(from Overweight). We think that an additional risk has emerged for the gaming sector as a whole, as the recent move by the
Government to increase pool betting duties by 2%-pts to 8% from 1 June 2010, as well as the recent abortion of the sports betting
licence deal, could potentially signify a turnaround in policy with regards to the gaming sector and could mean a further crackdown on
industry players. This could also potentially spell an oncoming hike in casino gaming duties (now at 25%) and a non-approval of
Tanjong’s new lotto game application which is still pending. We estimate every 1%-pt hike in casino gaming tax would impact earnings
by 2-3% p.a..

Besides regulatory risk, Genting Malaysia’s latest proposed related party acquisition of Genting’s UK business from Genting Singapore
is non-EPS accretive for Genting Malaysia and is, in our view, expensive and is not putting its cash to good use. Although the negative
impact of the acquisition is contained at 4-5% p.a., we believe this acquisition brings to the fore investor fears that GenM will always
“suffer” for its cash hoard and that related party transactions will continue to play a part of the group’s M&A activities. We now have an
Underperform recommendation on GenM with fair value of RM2.65 and a Market Perform call on Genting with an RM8.50 fair value.

The only bright spark in the group now is Genting Singapore (Outperform, FV = S$1.65), who is the only party which will benefit from
the recent proposal (albeit minimally at +1-2%), as it will now be able to concentrate fully on its RWS property. However, we are now
more watchful of GenS’ planned use of the S$725m cash proceeds from the sale of Genting UK, as well as the S$1.6bn proceeds from
its recently completed rights issue. We continue to be positive on RWS’ prospects as we believe the strength of the whole package will
drive visitor numbers and casino patronage strongly at least for the first few years, especially in view of it being a “family” destination
and the novelty factor, while riding on Singapore’s anticipated tourism-led economic recovery. Note that we will only impute in the
impact of the acquisition/disposal into our forecasts for all the three stocks until the deal has been approved by minorities.

As for BToto, prospects look bleak now after the pool betting duty hike which would reduce its earnings by 12% p.a.. However, this does
not take into account the potential decline in revenue if the NFOs decide to reduce the prize pools to offset the tax hike. We note that
every 1%-pt decline in sales/draw volume growth would affect net earnings by an additional -1% and our fair value by -RM0.05/share,
although we note that a cumulative annual decline in sales/draw volume would have a larger impact on earnings. We now have a
Market Perform recommendation on BToto, with a fair value of RM4.35.
21

Page 11
Infrastructure
Recom Price Fair EPS EPS Growth PER EV/EBITDA P/NTA GDY Price Chg
(22/7/10) Value (sen) (%) (x) (x) (x) (%) (%)

RM RM 10f 11f 10f 11f 10f 11f 10f 10f 10f 3 mths

PLUS OP 3.65 4.23 24.1 36.8 1.5 53.1 15.2 9.9 10.3 3.0 4.9 7.0
Puncak MP 2.75 2.92 31.8 36.3 -8.2 14.1 8.6 7.6 3.3 0.7 2.2 1.5

Neutral.

Puncak Niaga: While the recent news flow (which appears that both state and federal governments have
agreed to acquire water assets at higher prices) will boost trading sentiment of water-related stocks (in
particular, the water concessionaires) in the near term, we believe it would still take a while before the water
sector restructuring could materialise, given that: 1) it is unknown if the water concessionaires would be offered
a much higher price to surrender their prized assets; and 2) the issue on O&M ownership remains unresolved.

PLUS: Past experience indicates that the potential hike in both fuel prices and toll rates are unlikely to hurt
PLUS’s traffic volume significantly. We project traffic volume at PLUS’s core expressways to grow at 3% p.a. in
FY12/10-11, as the impact on traffic impact arising from the potential hike in fuel prices and toll rates will be
partly offset by the travel incentive programme and the 20% rebate for frequent toll users. Higher dividend is
likely, given (1) Its current low debt-to-equity ratio of 1.8x vis-à-vis the global toll road players’ debt-to-equity
ratio of 3.5x that allows it to raise borrowings in the near term; and (2) Its stable free cash flow of RM900m per
annum. Hence, we continue to like PLUS for its defensive earnings and decent dividend yield of 5-6% per
annum.

22

Insurance
Recom Price Fair EPS EPS Gwth PER P/NTA GDY Price Chg
(22/7/10) Value (sen) (%) (x) (x) (%) (%)
RM RM 10f 11f 10f 11f 10f 11f 10f 10f 3mths
Allianz* OP 4.05 5.32 71.9 86.2 -7.0 19.9 5.6 4.7 1.0 0.5 -8.0
Kurnia Asia OP 0.50 0.63 6.6 7.0 73.7 5.3 7.5 7.1 1.9 0.0 -14.5
LPI Capital OP 17.88 19.23 111.4 128.2 22.5 15.1 16.1 14.0 2.6 6.1 26.4
MNRB^ UP 2.70 2.98 22.8 18.1 6.9 -20.8 11.8 14.9 0.6 3.7 -9.7
^ FY10 & FY11 refer to FY11 & FY12forecasts
* Price and fair value are ex-rights. EPS is not diluted until conversion of ICPS to shares.

No clear decision by BNM yet with regards to the new scheme for the TPBID policies. But we believe BNM
would not be able to delay the reforms for too long.

Life insurance growth will be backed by the low penetration rate relative to other countries in the region,
higher medical costs, additional disposable income, the tax relief announced in the 2010 Budget and
increased awareness on life products.

General insurance growth will be backed by increase in demand following increase in business activities from
the economic recovery, and improving Motor TIV growth. Recent merger between HLA’s general insurance
arm and MSIG Insurance indicates a changing competitive landscape, as MSIG will be the second largest
general insurer in the country, with the biggest fire and marine cargo portfolio.

Maintain Overweight. Top Pick is Allianz.

23

Page 12
Manufacturing
Recom Price Fair EPS EPS Growth PER EV/EBITDA P/NTA GDY Price Chg
(22/7/10) Value (sen) (%) (x) (x) (x) (%) (%)
RM RM 10f 11f 10f 11f 10f 11f 10f 10f 10f 3 mths
Adventa OP 3.13 4.92 27.4 37.8 24.4 38.1 11.4 8.3 9.1 2.2 3.8 -10.6
VS Industry OP 1.18 1.87 12.7 24.9 92.2 95.5 9.3 4.7 3.7 0.7 4.2 -7.1
Kossan OP 4.02* 6.70* 41.3 51.5 10.3 24.7 9.7 7.8 6.6 2.7 1.3 1.3
Top Glove OP 6.75 8.20 44.5 48.1 55.3 8.1 15.2 14.0 9.2 4.1 3.4 4.2
Hartalega^ OP 8.14 9.29 71.5 83.6 21.0 16.9 11.4 9.7 8.2 4.0 1.5 5.6
BP Plastics OP 0.62 0.88 10.0 10.9 15.7 8.9 6.1 5.6 1.9 0.8 6.5 -0.8
Wellcall MP 1.28 1.33 11.9 14.7 17.3 23.7 10.7 8.7 5.6 2.0 10.1 -5.2

^ FY10 & FY11refer to FY11 & FY12 forecasts

* Ex-price

Neutral.

We believe the economy will likely grow at a more moderate pace in 2HFY10 given the speed bumps from
Greece and China, and as the sharp “V-shape” export recovery normalised. This would mean that the demand
for the country’s export would eventually experience some slowdown in 2HFY10.

We remain positive on the glove manufacturers given that demand prospects for gloves would continue to be
strong as rubber gloves are considered to be the most basic and affordable form of protection against viruses
in the healthcare industry. As for the rising latex prices and weakening US$ against RM, past trends suggest
that the glove manufacturers would be able to pass on the cost increase to customers. Any time lag in passing
on the cost increase, however, would be mildly negative but not significant. We are reiterating our Overweight
stance on the glove sector.

24

Media
Recom Price Fair EPS EPS Growth PER EV/EBITDA P/NTA GDY Price Chg
(22/7/10) Value (sen) (%) (x) (x) (x) (%) (%)
RM RM 10f 11f 10f 11f 10f 11f 10f 10f 10f 3 mths

Media Prima OP 2.08 2.80 16.3 18.0 136.4 10.1 12.8 11.6 7.3 2.9 4.8 -7.6
Star MP 3.48 3.86 22.6 25.8 15.3 14.0 15.4 13.5 7.0 2.1 6.6 5.5
MCIL^ OP 0.87 1.16 9.0 8.7 12.7 -4.1 9.6 10.0 4.7 1.5 6.9 6.1

^ FY10 & FY11 refer to FY11 & FY12 forecasts

Neutral

While YTD (Jan-May) adex growth stood at 29.9% yoy, we expect the growth rate to slow down in 2H10 following the
strong start to the global economic recovery in 1HFY10 given that adex will now be coming from a higher base.
Nevertheless, adex growth should continue to remain healthy, supported by sporting events such as the FIFA World
Cup and Commonwealth Games.

At the cost side, newsprint prices have eased recently as global economy will likely grow at a more moderate pace
ahead. Thus, demand and input cost for newsprint (main costs are energy and pulp) should stabilise.

We prefer companies that offer high leverage to ad spending and have a cost structure that is relatively fixed as this
means that the bulk of the stronger revenue would flow straight down to bottomline. We expect Media Prima to be a
prime beneficiary of the faster recovery in TV adex while its high fixed cost structure offers favourable operating
leverage effects. In addition, Media Prima now controls NSTP and will be able to fully consolidate NSTP’s strong 2010
earnings growth. Potentially, there could be merger synergies that the enlarged entity may be able to reap. In addition,
another potential catalyst is that the enlarged entity may be able to command better valuations.

We also like MCIL its as valuations are currently trading at a cheaper discount to Star’s despite both companies offering
roughly similar earnings growth.
25

Page 13
Motor
Recom Price Fair EPS EPS Growth PER EV/EBITDA P/NTA GDY Price Chg
(22/7/10) Value (sen) (%) (x) (x) (x) (%) (%)
RM RM 10f 11f 10f 11f 10f 11f 10f 10f 10f 3 mths
T Chong OP 4.49 6.16 39.0 45.3 72.0 16.2 11.5 9.9 8.5 1.8 2.5 -2.2
UMW OP 6.29 7.50 55.3 59.2 64.4 7.2 11.4 10.6 5.2 1.8 3.7 -2.5
MBM OP 3.00 5.31 45.8 48.2 62.3 5.3 6.5 6.2 15.8 0.8 4.0 4.5
Proton^ OP 4.41 5.50 67.4 75.2 49.2 11.6 6.5 5.9 7.3 0.5 0.0 -8.1

^ FY10 & FY11 refer to FY11& FY12 forecasts

We believe it is now the best time to invest in local motor stocks as the motor sector is currently in its second year of a
new 3-year cycle that has started since 2009. A closer look at Malaysia’s TIV reveals that the local motor sector has been
moving in 3-year cycles since 2000 and TIV growth is normally seen in the second and third years of the cycle.

We project Malaysia’s TIV to jump +9.5% (previously +8.9%) in FY10, followed by a decent +4.0% ( previously +2.8%) in
FY11.

We believe our new TIV projection is achievable as TIV for the first 5 months in 2010 already made up 42% of our full-
year forecast. In terms of yoy growth rate, it came in at +19.9% yoy for the first five months in 2010 largely due to the low
base in 1 H2009. Given the higher base for the remaining months, our forecast of +9.5% implies TIV growth would need
to average around 3.0% yoy between Jun and Dec to come in within our forecast.

We have rolled forward our valuation base year for motor stocks to FY11 (from FY10 previously). Indicative fair value for
Tan Chong has been raised to RM6.16/share (previously RM5.26), MBM was revised up to RM5.31/share (previously
RM5.04), Proton remains at RM5.50 based on stripped down book value, while UMW has been reduced slightly to
RM7.50 (previously RM7.52).

Our top-pick remains with Tan Chong (FV= RM6.16) given: 1) sustained strong car sales; 2) impending launching of its
A and B segment cars; 3) earlier-than-expected earnings contribution from its regional expansion; and 4) potential
unlocking of values from the development of the 47-acre Segambut land.
26

Oil & Gas

Recom Price Fair EPS EPS Growth PER EV/EBITDA P/NTA GDY Price Chg
(22/7/10) Value (sen) (%) (x) (x) (x) (%) (%)
RM RM 10f 11f 10f 11f 10f 11f 10f 10f 10f 3 mths
Dialog OP 1.08 1.30 6.1 8.8 14.9 44.8 17.8 12.3 15.6 4.3 3.1 -1.8
EPIC OP 1.85 2.72 26.9 27.2 7.9 1.1 6.9 6.8 5.4 0.9 5.1 14.2
Wah Seong MP 2.34 2.38 16.1 18.3 23.1 14.0 14.6 12.8 5.7 2.9 2.7 -6.4
SapuraCrest ^ MP 2.21 2.46 16.9 18.9 26.5 12.0 13.1 11.7 4.2 2.2 3.2 -3.5
P Gas^ MP 10.24 10.71 62.6 64.4 31.6 2.9 16.4 15.9 8.4 3.2 6.5 3.0
KNM Group UP 0.51 0.36 2.8 3.6 -24.5 27.2 17.8 14.0 11.2 6.6 4.0 -14.4
Kencana UP 1.53 1.27 8.0 9.8 11.3 22.5 19.2 15.7 11.4 3.2 0.4 -4.4
Petra Perdana UP 1.38 1.15 6.8 12.2 -31.1 79.9 20.4 11.3 5.1 0.8 1.4 -7.4
^ FY10 & FY11 refer to FY11 & FY12 forecasts

We believe the oil & gas industry is still facing some uncertainty as the crude oil price direction remains
unconvincing. Sharper-than-expected global economic slowdown, especially in China and US, could have a
negative impact on demand for petroleum products. On the positive side, Petronas’ commitment to maintain
capex levels, and more importantly to focus spending on the domestic business will likely be positive for the local
support services players.

Nevertheless, this will likely only translate into contracts in the longer term. In the near term, the outlook remains
tough, especially for companies with exposure to Europe where the debt crisis has dampened spending. BP’s
accident in the Gulf of Mexico will likely result in oil companies reviewing safety specifications on oil & gas
facilities – this could cause delays for the award of new projects especially in deepwater regions.

We expect short-term trading for the upstream offshore players such as SapuraCrest and Kencana, but we
believe there is risk of continued earnings disappointment in the next few quarters especially for the offshore
vessel players. Instead, we see catalysts for EPCC players like Dialog and Kencana from Petronas’ onshore
projects, including: 1) SOGT; 2) ammonia and urea plant in Kimanis, Sabah; 3) potential expansion of the
Melaka refinery; and 4) LNG regassification terminal in Melaka.

Beyond this normalisation of economic growth, we remain bullish on the longer-term outlook, as global demand
begins to pick up again – moreover, exploration & production will have to pick up pace in order to ensure
replenishment of reserves. Dialog (OP, FV = RM1.30) is our top pick given the potential for more EPCC projects
ahead. 27

Page 14
Plantations
Recom Price Fair EPS * EPS Growth PER ROE P/NTA GDY PriceChg
(22/7/10) Value (sen) (%) (x) (x) (x) (%) (%)
RM RM 10f 11f 10f 11f 10f 11f 10f 10f 10f 3 mths
IOI Corp OP 5.07 6.65 26.8 33.1 -16.3 23.3 18.9 15.3 19.4 3.7 2.4 -7.5
KLK OP 16.74 20.70 87.6 124.4 23.7 42.1 19.1 13.5 16.0 3.1 2.7 -0.8
CBIP OP 3.00 3.70 41.2 49.7 40.5 20.6 7.3 6.0 22.3 1.5 4.7 9.9
First Resources OP S$1.12 S$1.35 7.9 9.5 +>100 19.9 10.2 8.5 19.1 1.8 2.2 1.1
Genting Plant UP 7.01 6.50 40.2 45.0 29.3 11.9 17.4 15.6 11.4 1.9 1.6 1.3
IJM Plantation^ UP 2.46 2.30 13.5 14.6 20.5 8.2 18.2 16.8 9.6 1.7 2.2 -3.1
Sime Darby UP 7.59 8.15 39.7 48.0 5.9 20.9 19.1 15.8 11.1 2.1 2.9 -14.7
^ FY10 & FY11 refer to FY11 & FY12 * Normalised

Adopting a more cautious outlook on sector, as we believe there are no positive catalysts which would move CPO prices up in the short
term, and therefore expect plantation companies’ share prices to remain lacklustre until this scenario changes.

We downgraded our recommendation on the plantation sector to Neutral (from Overweight) due to: (1) the onset of the peak palm oil
production season which will dampen CPO prices in the short term; (2) the reduced possibility of an El Niño impact, although talk of La
Niña has now started; (3) the potential negative impact of exchange rate movements and reduction in crude oil price forecasts; and (4)
valuations of plantation stocks which are no longer as attractive after rolling forward valuation targets to CY11.

Despite more cautious outlook, we maintain CPO price forecasts at RM2,500/tonne for CY2010 and RM2,700/tonne for CY2011, as we
believe the medium- to long- term prospects remain relatively stable, given the still positive stock/usage ratio trends for the global 17
vegetable oils and fats and the still positive news flow which would support prices at above RM2,000/tonne in the longer term.

We rolled forward valuation targets to CY11 (from CY10) and lowered them by 2x PE, as we believe big premium valuations are no
longer justified, especially with Malaysian planters premiums over their Singaporean and Indonesian peers back to excessive levels of
35-45%, versus the traditional 20-30% premium. For big-cap plantation stocks like Sime Darby, IOIC and KLK, we now assign a target
CY11 PE of 16x (from 18x CY10) for their plantation divisions, for mid-cap plantation stocks like Genting Plantations and IJMP, we now
assign a target PE of 14.5x CY11 (from 16.5x CY10) and for small-cap stocks like CBIP, we now assign a target PE of 12x CY11 (from
14x CY10). We also reduce our target PE for First Resources to 10x CY11 (from 11.5x CY11), which is based on an unchanged 30%
discount to our revised target PER for the Malaysian mid-cap plantation stocks. We maintain our Outperform recommendations on
IOIC, KLK and CBIP, and Underperform recommendations on Genting Plantations, IJMP and Sime Darby.
28

Power
Recom Price Fair EPS EPS Growth PER EV/EBITDA P/NTA GDY PriceChg
(22/7/10) Value (sen) (%) (x) (x) (x) (%) (%)
RM RM 10f 11f 10f 11f 10f 11f 10f 10f 10f 3 mths
Tenaga OP 8.58 10.20 68.0 78.7 36.6 15.8 12.6 10.9 7.4 1.3 3.2 2.4
Tanjong^ MP 17.84 18.30 161.2 167.2 -2.4 3.7 11.1 10.7 7.3 1.8 5.7 1.9
YTL Power MP 2.20 2.15 13.7 14.2 18.8 3.6 16.1 15.5 8.7 1.8 9.1 -0.5

^ FY10 & FY11 refer to FY11 & FY12 forecasts

Overweight – Fundamentally, we continue to view TNB as an excellent proxy to a recovering economy. Jun ’10 electricity demand grew 11% yoy (vs.
May ’10 of +11.1% yoy) with all three sectors reporting stronger demand. YTD (Sep’09-Jun ’10), electricity demand was up 9.9% yoy. Our FY10 EPS
growth of +36.6% yoy is underpinned by demand growth assumption of +10%.

Separately, Pemandu has proposed to remove gas subsidy to the power sector by 2015 but TNB would be allowed to raise electricity tariffs
accordingly to pass on the higher cost. We estimate that the impact should be neutral to TNB, depending on demand. TNB would also need an upward
adjustment in tariffs to cover higher coal cost (currently around US$97/tonne vs. benchmark US$85/tonne recoverable under the current tariff
structure). A base tariff review is also past due and, if approved, would be even more positive as this would flow straight down to TNB’s bottomline.
However, the probability that this may take place appears low at this juncture, in our view. In the meantime, potential mitigating factors include: 1)
FY10’s coal requirement has been locked-in at around US$90/tonne; 2) strengthening RM vs. US$; and 3) stronger demand (especially to help cover
higher capacity payments).

With the undersea cables project likely cancelled, there is now potential growth opportunity for the IPPs in Peninsular Malaysia with an estimated
6,000MW of new capacity required to meet the shortfall.

The recent increase in pool betting duties would not impact Tanjong’s earnings too significantly (~3.5% full-year impact) as this would be cushioned by
the group’s diversified operations. In our view, a near-term share price catalyst is the addition of new power assets, although the impact to earnings
would depend on whether these are greenfield or brownfield projects. Our SOP-derived fair value has yet to reflect such additions. Resolution of the
operating losses incurred by the RTO segment would be both earnings and value-accretive, but this may take time.

We think the market would be watching YTLP’s WiMAX rollout (expected 4QCY10) and strategy closely. A potential concern here is that YTLP could
decide to start a price war in order to win subscribers, especially given that it would be coming into the market with a largely unutilised network. For
now, management’s reassurance regarding dividends means that a key investment thesis for the stock remains intact, i.e. attractive dividend yields.

29

Page 15
Property
Recom Price Fair EPS EPS Growth PER ROE P/NTA RNAV GDY Price Chg
(22/7/10) Value (sen) (%) (x) (%) (x) (%) (%)
RM RM 10f 11f 10f 11f 10f 11f 10f 10f RM 10f 3 mths
Sunrise OP 1.91 2.76 32.9 36.2 17.6 10.1 5.8 5.3 15.5 0.8 3.94 2.6 -15.1
Glomac^ OP 1.32 1.56 15.4 19.4 24.7 26.5 8.6 6.8 16.8 0.7 2.23 6.8 -4.3
Sunway City OP 3.55 5.33 34.8 38.8 9.8 11.6 10.2 9.2 7.2 0.7 6.27 2.3 -9.0
Axis REIT OP 2.12 2.55 16.4 17.9 3.0 8.7 12.9 11.9 9.6 1.3 1.60* 7.8 5.5
IJM Land OP 2.22 3.11 18.3 27.3 +>100 49.4 12.2 8.1 11.5 1.3 3.11 0.9 -5.1
Mah Sing OP 1.70 2.09 13.1 18.3 15.8 39.3 12.9 9.3 12.4 1.6 2.09 4.1 3.0
SP Setia MP 4.16 4.66 18.6 21.7 16.4 16.7 22.4 19.2 8.9 1.9 4.66 2.2 1.0
YNH Prop MP 1.65 1.86 16.1 18.0 15.8 11.6 10.2 9.2 8.7 0.9 3.11 3.9 -6.8
Quill Capita MP 1.02 1.17 8.9 9.3 7.3 4.7 11.4 10.9 6.6 0.8 1.38* 8.0 -5.6
KLCC Prop MP 3.09 3.80 26.3 27.3 4.4 3.8 11.7 11.3 12.9 0.5 4.47 3.6 -5.2
Hunza Prop MP 1.25 1.43 24.2 24.7 27.4 2.1 5.2 5.1 12.5 0.6 2.85 6.0 0.8
^ FY10 & FY11 refer to FY11 & FY12 forecasts
* NAV per share

Overweight. In 2H2010, news flow is expected to take precedence over fundamentals in driving the share
price performance of property developers.

Positive news flow: (1) The formal awards of Federal land parcels to “master developers” and the subsequent
farming out of the sub-divided smaller land parcels to various developers; and (2) The increased sentiment and
interest in land and properties in Iskandar Malaysia on expectation of rising investment on improving ties
between Malaysia and Singapore.

Negative news flow: IFRIC 15 (income to be recognised on a “completion” basis) will result in high earnings
volatility due to lumpy profit recognition. Project-driven developers such as Glomac, YNHP, Sunrise and Hunza
will take the full blunt.

Fundamentally, we expect key property developers to continue to report sales growth in 2H2010 as well as into
2011, underpinned by: (1) Improving economic outlook; (2) The still relatively easy monetary conditions; (3)
Rising inflationary expectation.

Cannot ignore REITs given their defensiveness in terms of share price performance and earnings. 30

Semiconductor & IT
Recom Price Fair EPS EPS Growth PER EV/EBITDA P/NTA GDY Price Chg
(22/7/10) Value (sen) (%) (x) (x) (x) (%) (%)
RM RM 10f 11f 10f 11f 10f 11f 10f 10f 10f 3 mths

Notion Vtec OP 2.76 4.68 34.7 46.8 35.3 35.1 8.0 5.9 5.0 2.1 2.4 -18.6
JCY Intl OP 1.43 2.16 14.7 18.0 45.5 22.2 9.7 7.9 7.5 3.1 4.9 -26.7
Unisem MP 3.08 3.26 27.1 29.6 134.8 9.3 11.4 10.4 5.4 1.5 1.6 -6.9
MPI MP 6.29 6.80 45.1 60.8 735.6 34.7 13.9 10.3 4.0 1.3 3.2 -10.7

Neutral. Although SIA has raised its FY10-11 global chip sales growth forecast to 28.4% and 6.3% (from 10.2% and
8.4%), we expect chip sales growth to normalise in line with the slowdown in global economic growth in the 2H.

We also see potential downside risk in demand if the Euro debt crisis is prolonged and China’s economic growth
begins to slow.

We note that regional peers, especially in Taiwan, have already started to price in these concerns and the average
FY11 PER is currently at 11x.

Having lowered our earnings forecast and fair values for Unisem and MPI, we now see limited upside for these two
semiconductor stocks, and have consequently downgraded our recommendation for both stocks to Market Perform.

Hence, on the account of these developments, we have downgraded the sector to Neutral from overweight.

We remain positive on Notion Vtec (OP, FV=4.68) and JCY (OP, FV=2.16) as earnings visibility remains good; given:
1) strong demand for data storage; and 2) riding on the PC replacement cycle.

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Telecommunications
Recom Price Fair EPS EPS Growth PER EV/EBITDA P/NTA GDY PriceChg
(22/7/10) Value (sen) (%) (x) (x) (x) (%) (%)
RM RM 10f 11f 10f 11f 10f 11f 10f 10f 10f 3 mths
Digi.Com OP 24.32 25.70 139.0 152.4 8.0 9.7 17.5 16.0 8.5 26.5 6.1 7.6
Axiata OP 4.07 4.53 24.7 28.5 34.0 15.5 16.5 14.3 6.6 2.9 0.0 8.5
Maxis OP 5.28 6.20 33.2 36.2 6.6 9.1 15.9 14.6 8.9 n.m 6.3 -0.8
TM MP 3.32 3.55 12.5 13.5 -6.1 8.2 26.6 24.6 5.6 1.8 7.9 -3.2

Overweight. We see three key investment themes for the sector : 1) Data traffic – the next wave of growth. While we expect voice
revenue to experience slower growth ahead, we are more optimistic with respect to broadband and data revenue; 2) Strong cash
flows, healthy balance sheets and well articulated dividend policies lend visibility to attractive yields; and 3) Capital management
activities still on the cards. Both Digi and Maxis remain committed to moving towards a more efficient balance sheet while we think
TM has the capacity to pay out cash in excess of its minimum RM700m dividends.

We believe Digi’s key revenue growth drivers include: 1) further penetration into the underserved markets; 2) market share gains for
existing subscribers; and 3) continued focus on CRM activities to upsell to existing customers. Beyond 2010, non-voice revenue
should start to contribute more significantly. The recent announcement on Digi’s target capital structure (i.e. net debt:equity that
ranges from 35:65 to 45:55), coupled with its 1Q dividend payout ratio of close to 100% indicate that it will likely continue to keep
dividends attractive going forward.

For investors with higher risk appetite, Axiata offers investors strong earnings growth and exposure to a recovery in emerging
markets, where mobile penetration remains relatively low. We believe a new economic cycle has begun and Axiata would be a
major beneficiary, in our view.

Maxis, in our view, is well poised to benefit from the rising popularity of mobile broadband and strong data revenue growth
mentioned above due to, among others, its large, high-end customer base (which provides cross-selling opportunities) and strategic
partnerships with application and device providers. Furthermore, its strong cash flows and healthy balance sheet mean there could
be scope for a more aggressive return of cash to shareholders.

TM launched its HSBB service in end-Mar 10. The offering of a bundled service together with improved network quality could help
TM in terms of customer retention and acquisition as well as provide a lift to ARPUs. That said, contribution from HSBB is not
expected to be significant in the near term. In the meantime, we believe investors will continue to view TM as a dividend play.
32

Timber
Recom Price Fair EPS EPS Growth PER EV/EBITDA P/NTA GDY PriceChg
(22/7/10) Value (sen) (%) (x) (x) (x) (%) (%)
RM RM 10f 11f 10f 11f 10f 11f 10f 10f 10f 3 mths
Ta Ann OP 5.10 6.95 44.7 56.3 50.3 25.9 11.4 9.1 7.6 1.6 5.8 -10.8
Evergreen OP 1.62 2.30 21.0 23.0 27.0 9.4 7.7 7.0 6.7 1.1 5.2 0.0
Jaya Tiasa^ OP 3.42 4.95 27.7 48.1 +>100 74.0 12.4 7.1 9.2 0.9 0.0 -6.8
WTKH MP 1.12 1.25 10.4 14.3 +>100 37.3 10.8 7.8 6.3 0.6 5.4 -20.0

^ FY10& FY11 refer to FY11 & FY12 forecasts

Latest Apr 10 Japan housing starts saw a minor improvements (+0.6% yoy) -- the first in 17 months, which signifies that
Japan’s housing recovery may start gaining pace soon. Full-year 2010 housing starts is also expected to recover yoy, but
we do not expect it to cross the one million unit mark in 2010 and we expect this to potentially happen only in 2011.

Nevertheless, we understand from Japan Lumber reports and timber players that plywood prices have started to firm up
since Apr 10 after a 10-22% increase. Log prices have increased as well (+10% from YTD-low) following supply shortages
in Sarawak. We are maintaining Neutral call on the timber sector as the recovery may still be gradual.

Our top picks are Evergreen and Ta Ann. For Evergreen, structural changes in the industry i.e. gradual increase in real
demand and supply shortages from the closure of plants will be major boosters to capacity utilisation and average selling
prices and thus, earnings for the group. For Ta Ann, earnings would be driven mainly by its plantation division while any
further upside to the plywood division would further boost its earnings.

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Transport / Logistics
Recom Price Fair EPS EPS Growth PER EV/EBITDA P/NTA GDY Price Chg
(22/7/10) Value (sen) (%) (x) (x) (x) (%) (%)
RM RM 10f 11f 10f 11f 10f 11f 10f 10f 10f 3 mths
ILB OP 0.90 1.48 10.0 11.4 211.5 13.2 9.0 7.9 5.2 0.5 3.3 -6.8
Freight Mgmt OP 1.00 1.53 13.0 15.1 17.0 16.4 7.7 6.6 4.2 1.0 4.5 24.2
AirAsia OP 1.40 1.88 15.5 19.7 -15.3 26.9 9.0 7.1 10.1 1.3 0.0 4.5
MAHB OP 5.00 6.24 34.1 39.0 19.3 14.4 14.7 12.8 9.6 1.4 3.4 3.1
MAS UP 2.08 2.01 11.4 14.4 128.3 25.8 18.2 14.5 10.7 1.9 0.0 -8.0
MISC ^ UP 8.74 8.02 33.0 36.7 81.2 11.2 26.5 23.8 13.7 1.7 4.1 -0.7
^ FY10 & FY11 refer to FY11& FY12 forecasts

Neutral. The airline sector is poised for better prospects over the near term on improved yields and load factors, thanks to
rising demand for air travel on the back of the recovery in the global economy. This augurs well for airport operators such
as Malaysia Airports as well.

AirAsia has finally done the right things: (1) To adopt a more “disciplined” growth strategy to keep gearing level in check;
(2) To gradually take back financial/non-financial support lent to Thai AirAsia, Indonesia AirAsia and AirAsia X; and (3) To
deliver the earnings.

We remain cautious on MAS: (1) Still saddled with fuel hedges at high prices; (2) Fleet renewal may be derailed by the
uncertainty surrounding its order for the six A380 aircraft; and (3) Its quarterly operating results remain volatile with a loss
in the latest quarter, i.e. 1QFY12/10.

The shipping sector will continue to be weighed down by weak freight rates on the back of just a mild
recovery in volumes while new capacity continues to flood the market.

MISC’s shareholders may be in for a windfall if the listing of its unit MMHE entails an offer for sale (OFS) to MISC’s
shareholders at attractive valuations. On the other hand, there are concerns if MMHE will be hit by cost-overrun too.

One key speed bump to the recovery of the transportation and logistics sector as a whole is rising crude oil prices that
could crimp margins.
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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
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