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

RHB Research Institute

RHB Equity 360°

2 August 2010 (Banks, Tanjong, Unisem; Technical: IJM Land, Mah Sing)

Top Story : Banks – Jun ‘10 system data – YoY loan growth at a high Overweight
Sector Update
- Jun ’10 loan growth stood at +12.5% yoy (May ’10: +11.7% yoy) the strongest monthly growth rate
achieved thus far this year. Growth was largely broad-based with the household and business segments up
+12.9% yoy (May ’10: +12.5% yoy) and +7.2% yoy (May ‘10: +6.1% yoy) respectively.
- Total applications were broadly stable mom but absolute loan approvals accelerated to RM33.3bn (+24.2%
yoy) vs. RM28bn (+11.2% yoy) in May ’10 with the pickup mainly from the business segment (+35.6% yoy;
+37.3% mom).
- Jun’s statistics suggest that demand for loans has not been dampened by the two hikes in Mar and May in
the Overnight Policy Rate (OPR) by BNM and the strong numbers have prompted us to raise our 2010 loan
growth projection for the banking system to +10-11% from +9%.
- Absolute NPLs as at end-Jun ‘10 was broadly stable mom and consequently, Jun ‘10 system-wide three-
month gross and net non-performing loan (NPL) ratios remained at 3.5% (May ‘10: 3.5%) and 2.2% (May
‘10: 2.2%) respectively.
- Jun ‘10 LD ratio increased to 81.4% (May ‘10: 80.5%) while industry core capital ratio and RWCR were at
12.9% (May ‘10: 13.1%) and 14.8% (May ‘10: 15%) respectively.
- No change to our Overweight stance on the sector.

Macro View

Economy : Broad monetary aggregate moderated but loan growth picked up in June
Economic Highlights (published 30 Jul 2010)
- Money supply, M3, eased to +8.8% yoy in Jun, from +9.5% in May and compared with +8.1% in Apr. This
suggests that the underlying economic activities, though resilient, are moderating.
- Loan growth, on the other hand, strengthened to 12.5% yoy in June, from +11.7% in May. This was the
strongest growth in more than a year, on account of a pick-up in household and corporate loans during the
month. As a whole, we expect the banking system’s loans to expand at a stronger pace of 10-11% in 2010,
compared with +7.8% in 2009.
- Although the change in administrative pricing will lead to higher inflationary pressure, we believe Bank
Negara will unlikely act on it. Indeed, we believe the Central Bank is likely to have done with its interest rate
hike this year, on the back of normalising its policy. This suggests that the overnight policy rate (OPR) will
likely stay at 2.75% for the rest of the year.

Corporate Highlights

Tanjong : Major shareholder privatising Tanjong at RM21.80/share Trading Buy (up from MP)
News Update
- Tanjong Capital, an SPV ultimately owned by Tan Sri T. Ananda Krishnan, last Friday offered to buy all
Tanjong shares at RM21.80/share cash. We note that his private companies currently own 47.0% and have
given their irrevocable undertaking to accept the offer.
- The offer price is at a 24% premium to Tanjong’s last traded price of RM17.58, and at a 19% premium to
our SOP fair value of RM18.30 (gaming business at 15x FY1/12 PER and the power business at DCF
value of RM11.17).
- Based on our estimates, we note that the offer price values Tanjong’s gaming business at 28.5x FY1/12
PER, assuming full DCF value for its power business. Alternatively, assuming the gaming business is being
valued at a similar PER to that of Berjaya Sports Toto (its closest comparison) at 15x, the implied value for
the power business would then be RM14.69.
- In our view, the privatisation will likely go through, although not without some resistance from investors who
want to ride on Tanjong’s long-term prospects in regional power projects, notwithstanding the earnings risk
from the tough regulatory environment in Malaysia as highlighted above.
- We have raised our target price to the offer price of RM21.80 and upgraded our call on the stock to Trading
Buy (from market perform).
Unisem : Strong 2Q earnings but remain cautious Market Perform
2QFY10 Results
- Unisem reported 2Q revenue of RM359.5m (+9.2% qoq, 40.8% yoy) on the back of stronger sales for its
broad-based packages i.e. QFN as well as for its legacy packages i.e. SOIC and PDIP.
- Furthermore, 6MFY12/10 net profit of RM89.7m was above our expectation but in line with market
consensus, accounting for 61.2% and 53.1% of our and consensus full-year forecast respectively.
- Also, EBITDA margins remained stable at around 26% despite incurring additional costs stemming from
capacity expansion, partly offset by higher contribution from its higher-margin chip packages and higher
utilisation rate.
- No change in forecast pending an analyst briefing today.
- Maintain Market Perform. Fair value of RM2.36/share based on unchanged 11x FY11 PER.

Technical Highlights

Daily Trading Strategy : Heading towards the 1,390 level soon…

- The FBM KLCI’s current run-up appeared more resilience than expected in the wake of broad-based
selldown in the overseas markets late last week.
- In fact, given the strong rotational plays on blue chips and lower liners, we continue to stay bullish on the
market direction for short-, medium- and long-term period.
- Not only that, the constant profit-taking pressure was also well absorbed in recent sessions, as what we
had expected earlier, should the index sustain at above the 1,350 resistance-turn-support level.
- This has strongly portrayed the strength on the current upswing, and suggested more upside potential on
the back of growing buying support.
- And as long as the daily turnover remains firm at between 800m and 1.0bn shares mark, and the market
goes without any external negative shock, we believe the FBM KLCI will rechallenge the next upside target
at 1,390 soon.
- For a support, the solid resistance-turn-support level at 1,350 will capped any surprise downside potential.

Daily Technical Watch: IJM Land – A prolong rally towards the RM2.74 and RM2.93 levels likely…
- 10-day SMA: RM2.258
- 40-day SMA: RM2.196
- Support: IS = RM2.18 S1 = RM1.93 S2 = RM1.66
- Resistance: IR = RM2.50 R1 = RM2.74 R2 = RM2.93

Weekly Trading Idea : Mah Sing Group – The overall chart outlook has turned bullish… Bargain Buy
- Strategy: Bargain Buy at above RM1.80 resistance-turn-support level
- Target: IR = RM1.95 R1 = RM2.11
- Support: IS = RM1.80 S1 = RM1.64 S2 = RM1.44
- Exit: Cut loss if it falls to below the 10-day SMA of RM1.75

Commodities & Currencies – Weakness on the US Dollar returns…

- Light Sweet Crude Oil futures (Crude): We expect a resumption of the rally to the US$87 level soon.
- Crude Palm Oil futures (CPO): Downside is still protected as it still sustain at above the RM2,500 level and
the 40-day SMA near RM2,493.
- Ringgit (RM)/US$: We remain bullish on ringgit.
- Japanese Yen (JPY)/US$: Further strength on the yen could be expected if it breaches the DRL.
- Euro Dollar (EUR)/US$: The EUR is likely to resume its strength against the US dollar.
- US Dollar Index (DXY): Expect a retest of the key support level at 81.00 this week.

Bulletin Board

Co/Sector News Impact Recom

Gaming According to Multi-Purpose Holding’s managing Neutral. This is not a surprise as MPHB has been N
director, Datuk Lau Kim Khoon @ Surin talking about relisting Magnum for a while now.
 Upatkoon, MPHB plans to relist Magnum via a Based on previous management guidance, we
restricted offer for sale, which will allow MPHB’s believe the relisting is not likely to take place in
5,000-odd shareholders to own Magnum shares. 2010, but is more likely to be in 2011. We would
Lau said the timing will depend on the exit also be concerned about investors’ reaction to
strategy by CVC Capital Partners, who owns another NFO stock in the market, given the
47% of Magnum, but as yet, no timeframe has negative newsflow on the sector lately.
been given. MPHB holds 51% in Magnum. (BT)
Genting The EGM to approve the disposal of Genting UK Neutral, as it is likely that shareholders of GenS OP, FV =
Singapore to Genting Singapore has been scheduled for 18 would approve the transaction. We note that S$1.65
Aug, while details of the transaction are set out in there has been no news yet as to when the EGM
a circular to shareholders dated 30 Jul 10. (SGX) for Genting Malaysia will be held.

Important Dates

Company Entitlement details Ex-date Payment date

New entitlements
Natural Bio Resources Final dividend of 2 sen tax exempt 11-Aug-10 30-Aug-10
Chin Teck Plantations Second interim dividend of 24 sen less 25% tax 13-Aug-10 30-Aug-10
OKA Corp First and final single tier dividend of 3 sen 1-Nov-10 26-Nov-10
Leong Hup Holdings Proposed final dividend of 2.9% less 25% tax 8-Nov-10 19-Nov-10

Going “ex” on 3 Aug

Evergreen Fibreboard Tax exempt final dividend of 4 sen 3-Aug-10 16-Aug-10
TAHPS Group First and final dividend of 12 sen tax exempt 3-Aug-10 12-Aug-10
Public Bank First interim dividend of 25 sen less 25% tax 3-Aug-10 13-Aug-10
HIL Industries First and final dividend of 3.25 sen less 25% tax 3-Aug-10 18-Aug-10
Petronas Gas Special dividend of 15 sen + final dividend of 30 sen, less 25% tax 3-Aug-10 24-Aug-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.

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Industry/Sector Ratings

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