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

RHB Research Institute

RHB Equity 360°

26 March 2010 (Construction, Gamuda, Kencana, TM, Maybank; Technical: Kencana)

Top Story : Construction – Investors’ risk appetite to improve Neutral (up from UW)
Sector Update
Sunway – Fair value unchanged at RM1.69 Outperform
Fajarbaru – Fair value maintained at RM1.35 Outperform
IJM Corp – Fair value upgraded to RM4.88 Market Perform (up from UP)
HSL – Fair value unchanged at RM1.56 but share price has performed Market Perform (down from OP)
Gamuda – Fair value unchanged at RM2.05 Underperform
WCT – Fair value unchanged at RM2.10 Underperform
- We are seeing improved investors’ risk appetite for construction stocks following: (1) The massive
underperformance of the sector vis-à-vis the market in 4Q2009 and 1Q2010; and (2) A better sector news
flow and new expectations leading up to the announcement of the 10th Malaysia Plan (10MP) in Jun 2010.
- Gross development expenditure under the 10MP is projected at RM180bn, sharply lower than RM230bn
under the 9MP. However, the shortfall will be met with RM50bn worth of projects to be carried out via PFI.
- We are upgrading IJM’s recommendation to Market Perform from Underperform, but downgrading HSL to
Market Perform from Outperform. Upgrade the construction sector from Underweight to Neutral.

Corporate Highlights

Gamuda : 1HFY07/10 net profit grows 26% yoy from a washout a year ago Underperform
2QFY10 Results/Briefing Note
- 1HFY07/10 net profit came in within our forecast but missed market expectation.
- Splash’s takeover bid for all water assets in the Klang Valley for RM10.75bn should not be construed as
carrying with it the blessing from Selangor state government as Splash's 30% shareholder, the Selangor
state government investment arm Kumpulan Perangsang Selangor (KPS), was not at all involved in the
exercise.
- Gamuda is not too hopeful about securing new construction jobs over the immediate term, as the roll-out of
new projects, both in the local and overseas markets, remains slow.
- Gamuda guided US$170m and US$100m sales from Yenso Park and the Tan Thang project in FY07/11.
- Fair value is RM2.05. Maintain Underperform.

Kencana : Stronger 2HFY10 Outperform

2QFY10 Results
- 1HFY10 core net profit of RM63.1m (+4.7% yoy) accounted for 37.3% and 38.0% of our full-year forecast
and market consensus. However, we consider the results to be largely in line as we expect stronger
2HFY10 with higher contribution from PCSB and Sarawak Shell contracts as well as margin expansion
arising from higher-margin onshore construction services.
- Kencana’s current orderbook now stands at RM1.6bn (vs. RM1.8bn previously). Of the current orders, we
estimate that around RM1bn will be executed in FY10 and the remainder will be carried out in FY11.
- No change to our forecasts for now. We believe there would be upside to our assumption of RM1-1.3bn of
new orders per annum flowing in over the next 24 months given current orderbook replenishment rate of
RM126m/month since Jun 09.
- Maintain Outperform and fair value of RM1.88/share.

TM : UniFi packages and rates announced Market Perform

News Update
- TM announced yesterday the packages and rates for UniFi, i.e. TM’s High Speed Broadband service.
- For residential customers, the packages and their respective monthly prices will be 5Mbps (RM149),
10Mbps (RM199) and 20Mbps (RM249). The packages come bundled with triple-play services of phone,
high-speed internet and video.
- The packages appear to be competitively priced and together with improved network quality, these could
help TM in terms of customer retention and acquisition, in our view. Upgrading activities (e.g. from
 Streamyx to UniFi) would also be positive for TM’s broadband ARPUs.
- With the release of pricing details, we now incorporate the revenue stream from HSBB into our model and
have raised our FY10-12 revenue and net profit projections by 0.5-2% and 2-7.5% respectively.
- Fair value of RM3.55 and Market Perform call are unchanged.

Maybank : Dividend reinvestment plan Outperform

News Update
- Dividend reinvestment plan, if applied by the board, will allow shareholders the option to reinvest their
dividend into new shares.
- Financial impact – EPS dilution but enhance capital ratios.
- Actual impact would base on board decision as well as discount to market price.
- Forecasts unchanged as it is premature to determine the impact.
- Our fair value is pegged at RM8.96 based on 16x (benchmark) CY10 EPS. Maintain Outperform.

Technical Highlights

Daily Trading Strategy : The 10-day SMA and 1,300 supports remains strong…
- Instead of taking a breather, the FBM KLCI extended its recovery leg yesterday amid strong rotational
buying momentum.
- The ability of the market absorbing the constant profit-taking pressure and the close at above the 10-day
SMA of 1,303 and the psychological support level of 1,300, suggest the recent technical breakout signal
remains valid.
- More importantly, the improved trading sentiment and the stronger volume participation of late have
implicated continuous recovery momentum likely ahead.
- Therefore, the FBM KLCI could see further upside towards the recent high of 1,334.34 in the near term.
- Any profit-taking dip, if occurs, will likely to be temporary, with solid supports near 10-day SMA and 1,300.

Daily Technical Watch: Kencana Petroleum – The stock may retest RM1.72 and RM1.81 in the near term…
- 10-day SMA: RM1.509
- 40-day SMA: RM1.494
- Support: IS = RM1.50 S1 = RM1.25 S2 = RM1.05
- Resistance: IR = RM1.72 R1 = RM1.93

Bulletin Board

Co/Sector News Impact Recom

Infrastructure Selangor state government deemed
sector the proposed acquisition of the state's water
assets by Syarikat Pengeluar Air Sungai
Selangor (SPLASH) as falling short of the
intention of the Water Services Industry Act 2006
(WSIA) and said there is no need for an
intermediary situation. Also, the bid by SPLASH
will not affect the state's ongoing discussions
with the Federal Government to consolidate the
state's water assets into a single entity under the
control of the state government. (Starbiz)
Genting Universal Studios Singapore theme park's
Singapore Battlestar Galactica duelling roller-coaster ride
has shut down, after a technical glitch was found
RWS did not elaborate on what the glitch was or
how it occurred. The ride's licence has been
suspended with immediate effect and will be
Neutral, we continue to remain doubtful as to the Neutral
proposed acquisition of Selangor's water
assets by SPLASH as it still does not serve the
purpose of water sector consolidation, i.e. to
house all water assets under one roof. As such,
we remain cautious on the water sub-sector as
we believe the water sector restructuring (in
particular, Selangor) is unlikely to materialise
anytime soon.
Negative, although this depends on how long the OP, FV =
ride is closed for. We believe this is in line with S$1.33
RWS earlier statement that this is a soft opening
for USS and that at any point in time, some rides
may not be available due to technical glitches.
No significant impact to our forecast.
 reinstated only after it is determined safe for
public use. RWS said no one was injured and all
the proper authorities were notified, in keeping
with the theme park's policy.
AEON Tesco kicks off RM30m price cut campaign. We believe this would have a marginal impact on OP, FV =
(Business Times) AEON’s Jusco supermarket earnings as price RM5.85
and volume driven consumers would have
already been shopping in hypermarkets. AEON’s
supermarket generally caters to consumers who
purchase lower volumes and to communities
nearby its supermarket.
Hartalega Hartalega is spending some RM40m to upgrade Positive. We are keeping our earnings forecasts MP, FV =
Plant 1 which will help to almost triple production unchanged for now, as we have already project RM7.93
capacity to 1.7bn pcs from 0.5bn pcs currently by FY11 annual capacity to rise from 7.7 bn pcs to
next year. Hartalega is also in the midst of 10.5 bn pcs by FY12.
completing its Plant 5 by November. Currently,
the group produces 7bn and once all the new
plants are upgraded and completed, the group
will produce 9.7bn pcs of gloves a year.
(BusinessTimes)
Astro TM’s yesterday announced a highly competitive We believe the IPTV introduced by TM is unlikely UP, FV=
scheme for its new HSBB retail offering also to impact Astro in the near and medium term RM4.30
known as UniFi. With an entry price of RM149 currently given that the target households for TM
per month, subscribers will receive up to 5mbps (4 areas) are currently small. It does, however,
transfer rate, a bundle package of internet, IPTV puts a pressure on Astro in the longer terms in
and phone. (Financial Daily) terms of service delivery and pricing.
Freight Signed memorandum of understanding Positive, this is in line with Freight Management's OP, FV =
Management (MoU) with Dang Anh Binh to form a joint venture plan to further expand in the Southeast Asia RM1.40
(JV) to start a freight forwarding business in (SEA) region given the huge untapped demand
Vietnam. Under the MoU, Freight Management potential for freight forwarding in this region. We
will hold a 51% equity stake in the JV and Dang believe Freight Management will further replicate
Anh Binh will hold the remaining 49%.(Bursa its current business model, i.e. offering less-than-
Malaysia) container-load services that have already proven
to be successful in Malaysia and Indonesia.

Important Dates

Company Entitlement details Ex-date Payment date

New entitlements
EPIC Second interim dividend of 2.5 sen less 25% tax 28-Apr-10 18-May-10
Scomi Engineering Interim tax exempt dividend of 5 sen 8-Apr-10 10-May-10
Olympia Industries First scheduled redemption of 15% of outstanding RULS 2007/2013 1-Apr-10 12-Apr-10
Kumpulan H&L High-Tech First and final tax exempt dividend of 1 sen 4-May-10 20-May-10

Going “ex” on 29 Mar

Malaysia Pacific Corp Renounceable two-call rights issue with detachable warrants 29-Mar-10 -
Star 2nd int. div of 7.5 sen less tax + special tax exempt div of 3 sen 29-Mar-10 16-Apr-10
Kawan Food Interim tax exempt dividend of 1.4 sen 29-Mar-10 30-Apr-10

...For more details, see individual reports attached

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