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

RHB Research Institute

RHB Equity 360°

4 August 2010 (Fajarbaru, Ann Joo, Gent Msia, IJM Plant; Technical: TNB, L&G)

Top Story : Fajarbaru – FY06/10 results to beat our expectation Outperform

Results Preview
- We expect Fajarbaru’s FY06/10 full-year results, due out by the end of the month, to come in at RM24-25m
at the net level, beating our forecast by 7-12%.
- The stronger-than-expected performance will likely to have been driven by higher-than-expected progress
billings and margins from key on-going construction projects, particularly, the Seremban-Gemas double-
tracking and Tampin hospital projects, in 4QFY06/10.
- We are raising FY06/10 net profit forecast by 9%, having revised up progress billings and margins in
4QFY06/10. We are leaving our FY06/11-12 forecasts largely unchanged.
- Fair value is RM1.40. Maintain Outperform.

Macro View

Trade : Exports slackened in June, as global demand softened

Economic Highlights (published 3 Aug 2010)
- Exports slowed down to 17.2% yoy in Jun, from +21.9% in May and a high of +36.4% in Mar. This was the
slowest pace of growth in seven months and the third consecutive month of easing, suggesting that
Malaysia’s exports are weakening, on the back of a slowdown in global demand and as high export growth
due to the low base effect normalised.
- Going forward, the global economy is likely to slow down in 2H 2010, as worldwide stimulus spending
dissipates and austerity measures in some European countries to address fiscal deficit and debt problems
begin to bite. This will likely be compounded by policy normalisation and tightening measures introduced in
some countries, particularly in Asia, that will likely slow down economic activities in these countries. As a
whole, we expect the country’s exports to slow down in 2H 2010, after a strong pick-up in the 1H.

Corporate Highlights

Ann Joo : 2QFY12/10 net profit rises 71% QoQ Outperform (up from MP)
2QFY10 Results/Briefing Note
- 1HFY12/10 net profit of RM112.4m came in above expectations at 68.8-70.5% of our and the full-year
market estimates. The key variance vs. our forecast came largely from higher-than-expected selling prices.
- Ann Joo declared a first interim DPS of 6 sen (less 25% tax), which translates to a gross yield of 2.4%. We
are keeping our full-year gross DPS forecast of 24 sen equivalent to 71.2% payout ratio and 9.4% yield.
- Management expects demand for steel to recover by 4Q, underpinned by: 1) Recent conclusion of EU
banks’ stress testing (which was well received); 2) Global supply discipline, coupled with China’s continued
efforts to eliminate excessive and obsolete production capacity; and 3) Post-summer re-stocking rally.
- Commissioning of the new mini blast furnace has been delayed by two months to end-Aug. Also,
management revealed that it had recently secured a portion of its iron ore fines requirement (with iron
content of above 60%) domestically.
- We are raising our FY12/10-12 net profit forecasts by 4.5-10.5%, largely to reflect higher selling prices.
- Correspondingly, our fair value is upgraded by 3.6% from RM2.74 to RM2.84 based on 9x revised FY12/10
fully-diluted EPS of 31.6 sen. Upgrade to Outperform.

Genting Malaysia: Wins New York racino bid Market Perform

News Update
- Genting Malaysia’s (GM) subsidiary, Genting New York has won the bid to operate the Aqueduct racino in
New York, with a financial offer of US$380m (RM1.2bn) as an upfront licensing fee. GM still needs to
obtain the approvals of the Governor of New York, temporary President of the Senate, and Speaker of the
Assembly, followed by Attorney General and Comptroller. Besides this, there is one other decision which
has to be made by a state judge in an outstanding court case which Aqueduct is appealing.
- This is mildly positive for GM, as we believe this project will be earnings accretive. However, based on
GM’s outlay of US$380m, we believe IRR for the project is likely to only be about 10%, based on our back-
 of-the envelope calculations. We estimate that this can add approx. 7-9% to GM’s bottomline, assuming
4,525 machines and on a full year basis. In reality, given the phased development, we expect this to add
only about 4-5% in the first year of operations (presumably in FY11), before rising to 7-9% by FY12/13.
- Forecasts are unchanged for now, pending final approvals and court case decision. However, after taking
into account the potential additional earnings from the racino and reducing our net cash balance, our SOP-
based fair value for GM is raised to RM3.00 (from RM2.90). Maintain Market Perform.

IJM Plantation : Buys more land in Indonesia Underperform

News Update
- IJMP has entered into a conditional S&P agreement to acquire a 90% stake in PT Indonesia Plantation
Synergy (IPS) for a total cash consideration of Rp.900m (approximately RM318,000). IPS has the
plantation permit (Izin Usaha Perkebunan) to develop a land of approximately 7,000 ha in Sanggata, Kutai
Timur, East Kalimantan. Part of the land is within the Izin Lokasi granted previously to another of IJMP’s
subsidiaries, PT Zarhasih Kaltim Perkasa (PTZKP), which has 10,000ha of land.
- As we are not given any details on the amount of overlap between the IPS and PTZKP land, we have
assumed the entire 7,000ha is acquired, which will translate to a cost of RM50/ha, based on IJMP’s 90%
stake. Although this sounds very inexpensive, note that this is only for the land bearing a plantation permit.
We expect the cost to successfully obtain the lease title for the land (HGU) to be about RM1,200/ha. Recall
IJMP acquired a 95% stake in PTZKP in Apr 2007, at a cost of RM111/ha.
- No change to our forecasts as we expect contributions from these plantations to only come in from
FY03/14 onwards, assuming IJMP starts planting in FY11. Maintain fair value of RM2.30, based on
unchanged target PER of 14.5x CY11 earnings. Maintain Underperform, as valuations remain stretched.

Technical Highlights

Daily Trading Strategy : Firm support near 1,350…

- Thanks to the last-minute push-up on selective heavyweights, the FBM KLCI survived the strong profit-
taking day with a marginal gain yesterday, hence continuing the recent winning streak.
- Still, the record of the second “star-like” candle continued to point to further weakness ahead. Potentially,
mild T+4 forced-selling activities can be expected today due to heavy delivery yesterday.
- However, we believe the market’s setback, if any, will be limited and short-lived, as bargain-hunters are
likely to re-emerge near the 10-day SMA of 1,353 and the strong resistance-turned-support at 1,350.
- Moreover, with the recent robust daily turnover, we are of the view that the positive trading sentiment would
likely persist in the near term.
- As such, investors should stay bullish and look forward to a fast resumption of bargain-buying activities.

Daily Technical Watch: Tenaga Nasional – Poised to extend a rally towards RM9.00 soon…
- 10-day SMA: RM8.605
- 40-day SMA: RM8.493
- Support: IS = RM8.50 S1 = RM7.95 S2 = RM7.50
- Resistance: IR = RM9.00 R1 = RM9.60

Short-term Trading Idea : L&G – Outlook still firm at above RM0.50 and 10-day SMA … Buy on Weakness
- Strategy: Buy on weakness for a resumption of buying support soon.
- Resistance: IR = RM0.56 R1 = RM0.635 R2 = RM0.725
- Support: IS = RM0.50 S1 = RM0.425 S2 = RM0.36
- Exit: Cut loss if it falls to below RM0.50 and the 10-day SMA.

Bulletin Board

Co/Sector News Impact Recom

Steel Rising iron ore production, coupled with lower Neutral, We believe China’s reduced reliance on N
steel output in China, have resulted in a decline imported iron ore would only help steel players
in the import of iron ore by steel producers in gain bargaining power against the iron ore
China since 2Q10, witnessed by a noticeable producers (given that China is the main
 decline in the top three global iron ore miners’ consumer of imported iron ore) in the short term,
share in the China market. (Financial Daily)
HL Bank Both parties announced yesterday that they have
received the approval of the Minister of Finance
for HL Bank to acquire the entire assets and
EON Cap liabilities of EON Cap. (Bursa)
KFC KFC plans to open at least 20 new outlets
nationwide next year with a total investment of
RM45m, of which 12 will be under the drive-thru
concept. (Bernama)
as steel producers in China will raise capacity
utilisation as and when steel prices become
attractive (which, we believe is likely to happen in
4Q), hence weakening their bargaining power
against the iron ore producers again.
The key milestones that now remain include: 1) MP, FV =
the approval of EON Cap’s shareholders (EGM RM9.20;
on 19 Aug); 2) approval of HL Bank’s
shareholders (EGM on 23 Aug); and 3) final MP, FV =
decision of the High Court on the petition filed by RM7.92
Primus (expected mid-Oct).
Neutral. We have assumed KFC to open a total OP, FV =
of 40 outlets for FY11, of which 5 are under the RM12.97
drive-thru concept. However, assuming KFC only
opens 20 outlets (12 drive-thru), our projected
net earnings for FY11-12 will be reduced by 1.3-
2.4%. On the other hand, if KFC opens a total of
40 outlets as our projections, of which 12 are
drive-thrus (versus our forecast of 5), our FY11-
12 earnings forecast will only rise by less than
1% for both years.

Important Dates

Company Entitlement details Ex-date Payment date

New entitlements
Hektar REIT Second interim dividend of 2.5 sen 16-Aug-10 3-Sep-10
Ann Joo Resources Interim dividend of 6 sen less 25% tax 16-Aug-10 9-Sep-10
Pantech Group Final single tier dividend of 1.2 sen 26-Aug-10 22-Sep-10
Esthetics International Final dividend of 1% less 25% tax 15-Sep-10 15-Oct-10

Going “ex” on 5 Aug

Tower REIT Interim income distribution of 4.5 sen 5-Aug-10 23-Aug-10
EP Manufacturing Final dividend of 1 sen less 25% income tax 5-Aug-10 23-Aug-10
Atrium Second interim income distribution of 2.15 sen 5-Aug-10 27-Aug-10
BLD Plantation 1st and final dividend of 6.68 sen less 25% tax + 3.32 sen tax exempt 5-Aug-10 30-Aug-10
Coastal Contracts First and final div of 2.4 sen + special div of 2.6 sen, tax exempt 5-Aug-10 3-Sep-10

...For more details, see individual reports attached

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