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

RHB Research Institute

RHB Equity 360°

18 May 2010 (LPI, EON Cap, Sunway, Kencana, MISC, Evergreen, MAHB, KLCCP, Sino Hua-An, MAS;
Technical: KLK)

Top Story : LPI – Maintaining a healthy business portfolio Outperform

Visit Note
- We believe that LPI will be able to grow its gross premium by 21%, underpinned by the improvement in the
property market, further expansion of its agency force and continued premium contribution from its
bancassurance tie-up with Public Bank.
- For FY10, we are not expecting significant changes from FY09’s gross premium breakdown as
management indicated that they expect to maintain the composition of its business portfolio.
- Number of agents has increased from 1,388 in FY09 to 1,400 currently. LPI has also introduced three
different classes of elite agents that are determined by the respective agent’s ability to achieve and
maintain a minimum level of profitable premium income.
- We believe LPI may undertake a corporate exercise in FY12/10 to increase the liquidity of its stock. The
options include a bonus issue or a share split, both of which would not require any more capital
commitments by investors. We estimate that it could potentially issue bonus shares of 3-for-4 based on its
reserves as at the latest quarterly results.
- We have changed our forecast assumptions to incorporate: 1) higher gross premium growth of 21%; 2)
higher claims ratio of 48%; and 3) lower management expense ratio of 18.5%. As a result, we have raised
our FY10-12 earnings forecast by 0.3-3.6% p.a..
- Maintain Outperform, with a new fair value of RM16.70 (RM16.65 previously)

Corporate Highlights

EON Capital : Independent adviser says HL Bank offer too low? Outperform
News Update
- According to StarBiz, EON Cap’s independent financial adviser has deemed HL Bank’s offer for the assets
and liabilities of EON Cap as too low.
- Separately, the daily also reported that HL Bank may ask EON Cap to make some additional provisions as
a condition to the deal, stemming from what HL Bank deems as unrecovereable loans. If this materialises,
potentially, the offer price could be adjusted downwards.
- If the news report on the independent financial advisers is true, this would help reaffirm our view that HL
Bank’s offer for EON Cap is too low given improving fundamentals and does not recognise the Group’s
hidden value such as unabsorbed tax losses at MIMB and Section 108 tax credits (available to frank
dividends) at EON Bank.
- Maintain Outperform and fair value of RM8.07 (15x FY10 EPS).

Sunway Holdings : Secures two contracts worth a total of RM154m Outperform

News Update
- Sunway has secured an RM88m construction contract for a 24-storey office tower in Bandar Sunway and
an RM65.7m contract for the supply and installation of stones and tiling works for the Arzanah
Development in Abu Dhabi.
- The Sunway City contract will fetch a total EBIT of RM4.4-6.2m while the Arzanah Development contract
that is a sub-contract to Sunway’s existing turnkey contract for the same project will improve the overall
margins from the turnkey contract.
- No change in our earnings forecasts that already assume Sunway to secure RM1.5bn worth of new jobs in
FY12/10. YTD, Sunway has secured RM198m worth of new jobs.
- Maintain Outperform. Fair value is RM1.69.

Kencana : Bags US$14m contract Outperform

News Update
- The company announced yesterday that it had received a letter of award from Larsen & Toubro for the
fabrication, load-out and sea-fastening of jackets, piles and conductors of well head platforms in offshore
India. The contract is worth US$14m and is expected to be delivered in 1Q11.
- No change to our forecasts as we have already assumed RM1.0-1.3bn new orders per annum flowing in
over the next 24 months to replenish existing ones.
- We therefore reiterate our Outperform recommendation on Kencana with an unchanged fair value of
RM1.88/share (based on 16x FY11 PER).

MISC : Acquiring a 50% stake in an international tank terminal business for US$735m Underperform
News Update
- MISC is acquiring a 50% stake in VTTI, an owner/operator of oil product storage terminals and refineries in
the world for US$735m (RM2.35bn) cash.
- Given the huge capital outlay and defensive nature of the business, we do not expect material earnings
enhancement from the acquisition.
- We expect muted reaction from the market as the market could have hoped for an acquisition by MISC that
is far more exciting than this (for instance, something along the line of American Eagle Tankers in 2003).
- Maintain Underperform. Fair value is RM8.02.

Evergreen Fibreboard : Still strong 1QFY12/10 results Outperform

1QFY10 Results
- 1QFY10 net profit of RM33.1m came in within our expectations but above consensus, accounting for 30%
and 35% of our and consensus expectations respectively.
- Yoy, net profit increased by >100%, on the back of: 1) 54.1% jump in revenue arising from higher average
selling prices and sales volume as demand recovered from the sharp collapse in 1Q10; and 2) recovery in
profit margins due to the higher average selling prices coupled with higher plant utilisation rate (>80% in
1Q10 vs. 54% in 1Q09).
- Qoq, net profit dropped 20.4% due to higher tax provision in 1Q10 vs. 4Q09, as one of its companies no
longer enjoys tax incentive. Recall that in 4Q09, Evergreen had a tax write back of RM6.2m. EBIT margin
was flattish yoy as the increase in average selling prices together with higher operational efficiency qoq
was offset by the impact of the stronger RM on its USD-revenue.
- We maintain our earnings forecasts for now pending a meeting with management. Fair value at RM2.35
based on unchanged target PER of 11x FY12/10 earnings. Maintain Outperform.

MAHB : 1QFY10 Affected by FRS 139 Outperform

1QFY10 Results
- Despite 1QFY12/10 net profit of RM72.6m accounting for 19-20% of our full year forecast and the full year
market consensus, we consider the results within expectations as 4Q is seasonally stronger on the back of
school holidays.
- 1QFY12/10 net profit declined by 26.6% yoy from RM91.9m to RM72.6m mainly due to associate losses
arising from the adoption of FRS139, which required MAHB to recognise concession payable by Sabiha
Gokchen at fair value, which in turn resulted in a loss of RM19m.
- 1QFY12/10 net profit dropped by 48.2% qoq from RM140.2m to RM72.6m mainly due to: (1) Lower airport
services and retail revenue (passenger movement in 4Q is seasonally stronger on the back of schoold
holidays); (2) Associate losses of RM24.0m arising from the adoption of FRS139, which required MAHB to
recognise concession payable by Sabiha Gokchen at fair value, which in turn resulted in a loss of RM19m;
and (3) Higher depreciation expenses.
- Indicative fair value remains unchanged at RM5.45 based on 16x Fy12/10 EPS of 34.1sen.

Sino Hua-An : No turnaround yet Market Perform (down from OP)

1QFY10 Results
- 1QFY12/10 net loss of RM2.5mcame in below our and market expectations of a full-year net profit forecast
of RM55.0-75.6m. We believe the variance against our forecast came largely from narrower-than-expected
spread between metallurgical coal (input) and metallurgical coke (output).
- We are cutting our FY12/10-12 net profit forecasts by 17.0-28.6% to RM39.2-42.2m to reflect: (1) Narrower
price gap assumptions between metallurgical coal and metallurgical coke; and (2) Lower by-product prices.
- Correspondingly, indicative fair value is cut by 28.8% from RM0.59 to RM0.42 based on 12x revised
FY12/10 EPS of 3.5 sen.

KLCCP : Normalised FY03/10 pretax profit grows 7.2% Market Perform

4QFY10 Results
- FY03/10 results came in within expectations. As expected, the company has proposed final net dividend of
6 sen in 4Q10, bringing FY10 total net dividend to 11 sen, translating to a 3.3% yield.
- FY11-12 earnings forecasts are tweaked up by 2%, having updated the latest balance sheet numbers.
RNAV has also been raised from RM4.05 to RM4.47 having reflected the revaluation surplus.
- Fair value has been raised to RM3.80 (from RM3.64) at a 15% discount to its RNAV/share of RM4.47.

MAS : Operationally in the red in 1QFY12/10 Underperform

1QFY10 Results
- Excluding RM329m A380 compensation and RM56.7m derivative gains, MAS reported a normalised net
loss of RM75.6m in 1QFY12/10.
- As we expect MAS to be profitable over the next three quarters, we consider MAS’s 1QFY12/10 results
within our full-year net profit forecast of RM381.4m but above the market consensus of RM30.4m net loss
for the full year.
- Maintain Underperform. Fair value is RM1.60.

Technical Highlights

Daily Trading Strategy : The short-term bearish sign still sound…

- Even though the FBM KLCI chalked up a “hammer-like” candle to suggest a possible immediate-term
rebound, the momentum and other technical readings are pointing at the opposite direction.
- Coupled with the “double sell” signal on the short-term momentum indicators and the declining daily trading
volume, the FBM KLCI is poised for more retreat in the near term.
- As the index remains below the 10-day SMA, the negative short-term technical outlook and the “triple-top”
bearish formation on the chart remain intact.
- Any rebound, if it occurs, would be capped by the 10-day SMA of 1,338 and the tough resistance zone at
1,347 – 1,350.
- On the downside, losing the 40-day SMA of 1,334 will confirm another round of selling towards the recent
low of 1,315.63, followed by the psychological level of 1,300.
- More importantly, investors should also beware of a possible “dead cross”, i.e. a fresh cut of the 10-day
SMA to below the 40-day SMA soon. This will trigger a medium-term bearish sign on the chart.

Daily Technical Watch: Kuala Lumpur Kepong – Take profit …

- 10-day SMA: RM16.648
- 40-day SMA: RM16.709
- Support: IS = RM15.40 S1 = RM13.60 S2 = RM12.40
- Resistance: IR = RM17.00 R1 = RM17.80

Bulletin Board

Co/Sector News Impact Recom

Plantations Palm oil producers in Malaysia and Indonesia are
seriously studying the submission of a complaint
to the WTO against the EU’s treatment of palm-
based biofuel under its Renewable Energy
Directive (RED), which some view as trade
protectionism, and are currently seeking a legal
view. Among the guidelines stated in the RED:
palm-based biofuels leads to a 19% reduction in
carbon emissions, below the 35% threshold
required to receive trade benefits; as well as
sustainable criteria regarding deforestation or
destruction of wetlands to build oil palm
plantations. (Financial Daily)
Plantations The Indonesia Commodity & Derivative Neutral, as we do not expect this new index to OW
Positive, as this would hopefully, get the EU to sit OW
up and rethink some of the more “biased” policies
which have been put in place and hopefully this
will result in a more open EU market for biofuel.
However, we believe this will be a long process
and palm oil producers would probably benefit
more by focusing on satisfying the food market in
the EU, making up for the gap left by rapeseed
oil which is now being used more for biofuel.
 Exchange (ICDX) is due to launch another crude make much of an impact on trading in the
palm oil futures contract on May 21, its second Malaysian CPO futures market, given that the
attempt at creating an Indonesian benchmark lack of regular production statistics in Indonesia
price to better reflect local supply and demand will make it hard for the new contract to attract
while eliminating currency risk. (Business Times) interest.
Motor Malaysian automotive industry’s TIV increased This is in line with our expectation of stronger yoy OW
16.8% yoy in Apr 10 (vs. +17.8% in Mar10) with growth due to strong economic growth and
48,706 units sold (vs. 58,139 units in Mar10). On improvement in consumer sentiment as well as
a mom basis, Apr10 TIV decreased by 13.2% low base factor. Nevertheless, we believe 2010
(vs. +39.1% mom in Mar10) as production could would meet or surpass MAA sales target of 550k
not meet the April delivery deadline. (Bernama) given that average monthly sales only need to
achieve 44,235 units for the balance 3 months of
this year (vs. YTD average of 49,030 units).
AFG AFG has identified Singaporean, Sng Seow Wah While it has been business as usual for the group OP, FV =
as its new group CEO. Sng has more than 24 thus far, nevertheless, the board has been RM3.27
years of experience in corporate and commercial looking for a new CEO to take the group to the
banking with stints in OCBC Bank, Citibank, next level. As for the potential entry by DBS,
Westpac and Banque Nationale De Paris. Sng’s while this remains to be seen, AFG could
appointment could also be a precursor to a move potentially benefit from, e.g. DBS regional
by DBS to buy into the Malaysian bank. (StarBiz) network.
AEON According to external sources, AEON is expected The following news has already been in the OP, FV =
to cease managing the first phase of 1U when market. While we have yet to input any potential RM5.85
the contract comes to an end in Aug 10. loss in property management income from 1U,
However, AEON would get a larger retail space which we will awaiting for further information from
compared to what it has now. (Business Times) management, this could potentially bring FY11
earnings down by 3-5%.
AEON Econsave Cash & Carry to open 7 outlets in We do not believe that Econsave is a direct OP, FV =
CY10. (Business Times) competition to AEON as it caters more towards RM5.85
value-seeking consumers instead of
convenience-seeking consumers.

Important Dates

Corporate Results Quarter Expected date of announcement

MRCB 1QFY12/10 18-May
CIMB 1QFY12/10 20-May
WCT 1QFY12/10 21-May
MRCB 1QFY12/10 18-May
CIMB 1QFY12/10 20-May
WCT 1QFY12/10 21-May

Company Entitlement details Ex-date Payment date

New entitlements
GHL Systems Bonus issue on the basis of 1-for-20 27-May-10 -
Jobstreet Corp Tax exempt final dividend of 1.5 sen 10-Jun-10 28-Jun-10
Classic Scenic First and final tax exempt dividend of 7 sen 22-Jun-10 8-Jul-10
United Plantations Special dividend of 30 sen less 25% tax 24-Jun-10 22-Jul-10
United Plantations Final dividend of 20 sen less 25% tax 24-Jun-10 22-Jul-10
Mitrajaya Holdings First and final single tier dividend of 10 sen 29-Jul-10 25-Aug-10

Going “ex” on 19 May

CIMB Group Holdings Bonus issue on the basis of 1-for-1 19-May-10 -
Yong Kong Galvanising 1st & final dividend of 2.5 sen tax exempt 19-May-10 31-May-10
Tomei Consolidated First and final single tier tax exempt dividend of 3 sen 19-May-10 4-Jun-10
The Store Corporation First and final dividend of 1sen tax exempt. 19-May-10 18-Jun-10
...For more details, see individual reports attached

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The recommendation framework for stocks and sectors are as follows : -

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 three months, but fundamentals are not
strong enough to warrant an Outperform call. It is generally for investors who are willing to take on higher risks.

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Industry/Sector Ratings

Overweight = Industry expected to outperform the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

Neutral = Industry expected to perform in line with the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

Underweight = Industry expected to underperform the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

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