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

RHB Research Institute

RHB Equity 360°


10 August 2010 (AEON, Amway, CSC Steel; Technical: Lion Corp, Lion Industries)

Top Story : AEON – Slower-than-expected SSS growth in 1HFY12/10 Market Perform (down from OP)
Visit Note
- We understand that 1HFY12/10 same-store sales (SSS) growth was around 2%, while management is
expecting full-year SSS growth to be similar to 1H10 at around 2-3%. We are thus adjusting our SSS
growth assumptions to 2.5% for FY10 and 3.5% for FY11 (from 3.5% and 5% respectively).
- Despite intense competition arising from smaller players such as 99 Speedmart and big hypermarket
players such as Carrefour, AEON does not plan to change its business model and expects to maintain its
supermarket revenue contribution at 40%, while the rest coming from department stores.
- AEON is expecting to open its Bandar Seri Permaisuri store as well as its Kinta (Ipoh) store at end FY11
the earliest. The reason for the delay in the Bandar Sri Permaisuri store is due to various issues arising
from the property developers and a few hiccups in terms of government approvals.
- We have lowered our FY10-12 earnings forecasts by 0.8%, 2.2% and 7.9% respectively after revising our
SSS growth assumptions and number of store assumptions.
- We have trimmed our fair value to RM5.28 (from RM6.30) based on target of 12x FY12/11 EPS (from 14x
previously). Our lowered target PE is to reflect the weaker outlook caused by the erosion of AEON’s market
share given intensifying market conditions. Downgrade to Market Perform.

Corporate Highlights

Amway : 2H FY12/10 growth expected to remain at same level as 1H Market Perform


Briefing Note
- 1H revenue was largely driven by new product launches and well-received product promotions.
Management expects revenue growth for FY12/10 to be more along the lines of 1H, at 7-8% p.a., which will
be supported by further product launches and promotional/branding activities
- With regards to the forex, management highlighted that due to a hedging position it has taken and its
normal inventory position of 10-12 weeks, swings in the USD-MYR will not impact margins for the
remainder of the year. Thus, we believe our assumptions of a sustained operating margin of 16-17% for the
full year could be achieved, which is in line with 1QFY10 operating margin of 17.2%.
- Amway has YTD opened two more shops (in Taiping and Mentakab) bringing the total to 10 shops all over
the country. It is planning to open one more shop in Segamat in 2010.
- The opening of new shops is not expected to raise capex significantly as each shop would cost RM0.5-1m
to renovate, while on the operating level, the rental payments for the location of the shop will be offset by
savings from delivery costs.
- Our DCF-derived fair value remains unchanged at RM8.45, using a WACC of 8.1%. Despite the lack of
capital appreciation upside in Amway’s share price, we believe that it continues to be attractive as a
dividend play, which is expected to yield 6.7% for the full year. Maintain Market Perform.

CSC Steel : 1HFY12/10 performance soars on improved margins Outperform


2QFY10 Results
- Despite 1HFY12/10 net profit of RM62.2m accounting for 74.6% of our and 70.8% of the consensus full-
year estimates, we consider the results within expectations as we believe CSC Steel’s performance is
likely to weaken significantly in 3Q.
- Indicative fair value is RM2.10, based on unchanged 9x FY12/11 EPS of 23.3 sen.

Technical Highlights

Daily Trading Strategy : Volume must stay robust to avoid T+3 selling …
- The FBM KLCI retested the 10-day SMA of 1,360 yesterday but managed to sustain at above the SMA at
day end. This signals a bullish underlying tone for the market going forward.
- Although the closing with a “doji” candle and the weak technical indicators still point to more uncertainties
ahead, we believe the recent uptrend is still intact, and the index can still install a fresh rally in the near
term, if it rebuilds a base near the 10-day SMA and the key resistance-turn-support level of 1,350.
- Rather, more important to the short-term sentiment is that the daily turnover must stay robustly near the
800m-1.0bn shares in the near term. This is important to avoid the T+3 selling pressure in sessions ahead.
- Upon resumption of the buying supports, the index will likely retest the recent high of 1,370.52, before
moving higher to the next upside target at 1,390.
- On the downside, our bullish view will be threatened only if the FBM KLCI unexpectedly breaches below
the breakout point of 1,350.

Daily Technical Watch: Lion Corporation – A “double buy” signal on the momentum indicators …
- 10-day SMA: RM0.2845
- 40-day SMA: RM0.2791
- Support: IS = RM0.265 S1 = RM0.215
- Resistance: IR = RM0.31 R1 = RM0.36 R2 = RM0.40

Short-term Trading Idea : Lion Industries – Bullish chart breakout Bargain Buy
- Strategy: Bargain buy at above RM1.60 for further rally ahead.
- Resistance: IR = RM1.70 R1 = RM1.87 R2 = RM2.16
- Support: IS = RM1.60 S1 = RM1.50 S2 = RM1.40
- Exit: For trading purposes, put a stop loss at the 10-day SMA of RM1.59.

Bulletin Board

Co/Sector News Impact Recom


Power According to the Energy Commission chairman, No surprises here as this had been mentioned OW
the commission had shortlisted three sites, i.e. before by TNB’s management. We believe TNB
Tanjung Bin, Jimah and Manjung, for planting up stands a strong chance with its bid given that the
another 1,000MW in generation capacity. The basic infrastructure at its existing facility at
Government is expected choose one of the three Manjung is already in place and thus, TNB would
shortlisted sites soon. (StarBiz) be able to put in a competitive bid.
Genting The EGM to approve the acquisition of Genting Neutral, as we believe the impact of the MP, FV =
Malaysia UK from Genting Singapore has been scheduled acquisition has already been priced in to GenM’s RM2.90
for 24 Aug, while details of the transaction has share price.
been set out in a circular to shareholders dated 9
Aug. (Bursa Malaysia)
Gaming The Philippines president said his government Based on Pagcor’s net profit in 2008, the price OW
would study a US$10bn (RM31.4bn) offer from tag of US$10bn would translate to a historical PE
Ramon Ang, vice-chairman of food and beverage of 15x, which we believe is reasonable for a
giant San Miguel, to take over the government's gaming monopoly in Philippines and is in line
monopoly casino franchise with Malaysian help. with regional averages.
Aquino had said earlier that he is looking at
privatising state assets to help deal with a
growing budget deficit, and that the Philippine
Amusement and Gaming Corp (Pagcor) could be
sold off. Ang said he intended to make a formal
bid to acquire Pagcor once it was formally put on
the auction block for privatisation and that he
intended to do this independently of San Miguel.
He also said that he intended to enter into
partnership with Malaysian magnates Tan Sri
Robert Kuok, Tan Sri Ananda Krishnan and Tan
Sri Francis Yeoh. A spokesman for Pagcor, Jay
Santiago, said privatisation would not occur
anytime soon. Pagcor, which operates 41
casinos, reported a net income of 29.62 billion
pesos (RM2.07bn) in 2008. (AFP)
Motor Perodua is confident sales for FY10 will reach Positive for MBM and UMW. To date, OW
185k units surpassing its earlier forecast of Perodua has sold 95k units. Going forward, we
176k units. (Starbiz) expect sales to remain resilient in 3Q10 and cool
down in 4Q10 due to seasonal factor.
We maintain our FY10 forecast of 195k.

Important Dates

Company Quarter Expected Results Date


AMMB 1QFY03/11 Week beginning 9-Aug
EON Capital 2QFY12/10 Week beginning 9-Aug
Hartalega 1QFY11/03 10-Aug
Genting Singapore 2QFY12/10 12-Aug
RCE 1QFY03/11 13-Aug
WCT 2QFY12/10 13-Aug

Company Entitlement details Ex-date Payment date


New entitlements
Huat Lai Resources Interim tax exempt dividend of 3 sen 20-Aug-10 15-Sep-10
Guan Chong Fourth interim dividend of 2 sen less 25% tax 24-Aug-10 2-Sep-10
I-Berhad Final dividend of 1.77% less tax + 1.23% single tier 24-Aug-10 15-Sep-10

Going “ex” on 11 Aug


Alliance Financial Group First interim dividend of 3.3 sen tax-exempt 11-Aug-10 27-Aug-10
Natural Bio Resources Final dividend of 2 sen tax-exempt 11-Aug-10 30-Aug-10
Zhulian Corporation Second interim single tier dividend of 3 sen 11-Aug-10 30-Aug-10
Texchem Resources Interim dividend of 2% less 25% tax 11-Aug-10 1-Sep-10
Daibochi Plastic Interim tax exempt dividend of 2.5 sen 11-Aug-10 3-Sep-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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