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

RHB Research Institute

RHB Equity 360°

19 August 2010 (Parkson, KLK, AirAsia, Tan Chong, APM, Carlsberg, Hunza; Technical: KLK, AFG)

Top Story : Parkson – Encouraging growth Outperform

Visit Note
- We understand that 1HCY10 same-store sales (SSS) growth for Malaysia was at a phenomenal 17%, while
the momentum is expected to carry on to the 2H. Together with 1HFY10 SSS growth of 7%, this will bring
full-year FY06/10 SSS growth to approximately 11-12%.
- Parkson opened 3 stores in FY06/10, which was above our assumption of 2 stores. We understand that
management plans 2 stores in FY06/11, and 1 store in FY06/12, in line with our forecasts.
- For the 1HCY10, Vietnam chalked up a respectable SSS growth of 27%, which is slightly above
management’s earlier guidance of 20-25% but significantly above our expectations of 15% for FY10.
- For 1HCY10, China recorded SSS growth of 10-11%, while the beginning of 2HCY10 continues to see
double-digit SSS growth. Assuming this growth is maintained for the rest of the CY, this would be in line
with our SSS assumptions of 10% for FY12/10. Store openings in China have also been on track, with the
latest store opening at Shaoxing in May, and another store in Beijing due to open in end-August 2010.
- FY10-12 earnings raised by 0.9-4.2%, after accounting for changes in assumptions for SSS growth and
new stores for Malaysia and Vietnam, and new store assumptions for China.
- We like Parkson as it provides a cheaper alternative to the robust China retail industry, at less demanding
valuations than its HK listed subsidiary, Parkson Retail Group. Reiterate Outperform, with an increased fair
value of RM7.72 after the earnings upgrade.

Macro View

GDP : Real GDP growth moderated to 8.9% yoy in the 2Q, full-year 2010 estimate raised to +7.3%
Economic Highlights (published 19 Aug 2010)
- The economy softened to 8.9% yoy in the 2Q, from +10.1% in the 1Q, in line with a moderation in exports
and as the exceptionally high export growth normalised.
- This was, however, mitigated by a pick-up in domestic demand, underpinned by a resilient consumer
spending and a pick-up in private investment.
- In view of stronger-than-expected real GDP growth in 1H 2010, we have raised our forecast for the full-year
to 7.3% in 2010, from +6.8% projected previously.

CPI : Inflation picked up in July, in line with the increase in fuel and sugar prices
Economic Highlights (published 19 Aug 2010)
- The headline inflation rate picked up to 1.9% yoy in July, from +1.7% in June and a low of +1.2% in
February. This was the fifth consecutive month of rising and the fastest rate of increase in 14 months, due
partly to the increase in prices of fuel and sugar in mid-July and partly the lower base effect given that
inflation contracted by a larger magnitude in the same month last year.
- Going forward, we expect inflation to trend up to an average of 2.0% in 2010, from +0.6% in 2009.
Although the Central Bank appears to have done with its interest rate hike this year, another 25 basis point
increase in Sep cannot be ruled out altogether in a move to normalise its monetary conditions and it will
likely be data dependent.

Corporate Highlights

KLK : Impressive turnaround for retail division Outperform

3QFY10 Results
- 9MFY09/10 core net profit was within expectations, comprising 69-71% of our and consensus full year
FY10 core net profit forecasts. We expect stronger numbers in the final quarter, given the higher CPO
prices currently and as FFB production gears up towards peak harvest season. Core net profit rose 36%
yoy on the back of a 10% rise in turnover in 9MFY10. All divisions except the property division saw
improvements in revenue, while the relatively larger rise in net profit was due to improved profit margins for
the plantations, manufacturing and retail divisions, offset slightly by lower margins for the property division.
The retailing division recorded a notable turnaround to profitability in 3QFY10, the first time in many years,
 as a result of lower expenses after the closure of some of its US stores.
- Our forecasts are unchanged. Nevertheless, we revise our SOP-based fair value up slightly to RM20.75
(from RM20.70), after taking into account the latest net debt figure.
- We like KLK for its inexpensive valuations (as it remains cheapest amongst big-cap plantation stocks) and
for its strong management with a good track record. Further catalysts could come from better-than-
expected FFB production growth as well as sustainable return to profitability of the retail division.

AirAsia : 1HFY12/10 performance sustained yoy despite sharply higher fuel cost Outperform
2QFY10 Results
- Normalised 1HFY12/10 PBT of RM280.5m came in at 56% of our full-year forecast.
- However, we consider the results within our expectation as we expect a soft 3QFY12/10 on the back of the
Muslims’ fasting month.
- Forward bookings appear generally stronger vis-à-vis a year ago. Cumulative load factors as at 31 Jul for
Aug-Oct 2010 departures were 54%, 37%, and 24% vis-à-vis 57%, 30% and 22% a year ago.
- AirAsia’s net debt remained unchanged at RM6.2bn while net gearing eased to 2.1x as at 30 Jun from 2.1x
three months ago.
- Fair value is RM2.08. Maintain Outperform.

Tan Chong : Stronger car sales and favourable forex rates Outperform
2QFY10 Results
- 2QFY12/10 results meet expectations. 1H10 net profit of RM128.3m achieved 49% and 50% both our and
of consensus estimates as the company’s car sales grew in line with the general pick up in the Malaysian
automotive sectors’ total industry volume (TIV) seen since the start of 2010.
- Orders growth going into 2H10 is guided to be volatile, as management foresees some months to be busy
(August and October to November) and others to be quieter (July and December). We are generally in line
with the sentiment. Earnings for FY11-12 could be better as the company looks to introduce a new model in
the D-segment later this year.
- No changes to our forecasts and our SOP fair value at RM6.16.

APM Auto : Strong earnings driven by higher margins Outperform

2QFY10 Results
- 6MFY10 core net profit of RM54.9m (ex one time price adjustment of RM7.6m) achieved 63.8% of our full
year estimates of RM86m and 54.4% of street’s full year estimates on the back of stronger growth in the
vehicle sales since the beginning of 2010.
- APM’s growth should moderate in 2HFY10 in line with the general trend of its customers’; however, on
overall we still are very positive on the full year earnings, given the swift recovery of the auto sector since
beginning of 2010. For FY11, growth prospects will be underpinned by a) Tan Chong’s entry into the small
car segment and the Indochina market; and the b) consolidation of their Seri Kembangan facilities to Port
Klang that would improve its operating efficiency.
- We raise our FY10-12 net profit forecasts by 10.1%, 6.2% and 4.2% on higher revenue and margin.
- Our fair value is thus raised to RM5.53 based on unchanged 11x FY12/11 EPS.

Carlsberg : No surprises Outperform

2QFY10 Results
- 1HFY12/10 net profit was within expectations, accounting for 55% and 60% of our and consensus full year
forecasts, respectively.
- Yoy, net profit grew by 139% on the back of: 1) higher sales volume (+56.8% yoy) arising from the
acquisition of Carlsberg Singapore together with strong demand during the World Cup season; 2) higher
EBIT margin (+4.8%-pt) arising from synergies and contribution from Singapore, lower raw materials costs
and more favorable US$ vs. RM exchange rate.
- We believe the 2HFY10 will not be so easy on operating margins due to the rise in wheat prices caused by
Russia’s ban on wheat exports due to a severe drought in the country. Although we believe that Carlsberg
has already sourced some of its raw materials requirement for the year, we are cautious as the time length
of the export ban is uncertain
- We maintain our DCF-based fair value of RM6.03, using an unchanged WACC of 9.2%.
Hunza : Bringing forward Alila II Trading Buy
Briefing Note
- Hunza plans to bring forward the launch of Alila II to end 2010 (from 3Q2011 previously). The project is
located at Tanjung Bungah Penang. It has a GDV of RM300m, comprises 260 high end condo units. Gross
margin is expected to be higher than Infinity’s 40%.
- As part of the effort to relocate squatters for Hunza’s land at Bayan Baru, management is hopeful to fast
track its approval process with authorities, to kick start its low cost component to accommodate most of the
squatters by end 2011. The remaining of the project will comprise medical centre, hotel, service
apartments, performance hall etc. If the project can be kicked off earlier than expected, it will give upside to
our earnings forecast for FY13.
- Due to the earlier-than-expected launch of Alila II, and to incorporate the contribution of rental income, we
revise up our FY11-13 earnings forecasts by 5.7 – 32.5%.
- Maintain Trading Buy at a fair value of RM1.58, based on 50% discount to RNAV.

Technical Highlights

Daily Trading Strategy : Further upside possible to 1,390 and 1,400…

- Based on the current chart layout and healthy rotational plays on core blue chips, the FBM KLCI could
challenge the immediate resistance level of 1,390 and 1,400 psychological level, as early as today.
- Technically, if it can overcome these barriers on follow-through buying momentum, the chart will point to a
higher target at 1,450, in our view.
- On the other hand, failure to surpass these hurdles will exaggerate the selling momentum and cause a
pullback on the chart. The short-term momentum readings have reached the grossly overbought region to
indicate a potential reversal on the current buying mode, nonetheless.
- But, for now, we are banking on the bullish short-, medium- and long-term outlook on the FBM KLCI, due to
the recent outstanding performance.
- The current uptrend will change only if the index loses the strong support near the 10-day SMA of 1,364
and the major resistance-turn-support level of 1,350.

Daily Technical Watch: Kuala Lumpur Kepong – Tough resistance at RM17.00 remains…
- 10-day SMA: RM16.912
- 40-day SMA: RM16.67
- Support: IS = RM15.40 S1 = RM13.60 S2 = RM12.40
- Resistance: IR = RM17.00 R1 = RM17.80

Short-term Trading Idea : AFG – Next resistances at RM3.10 and RM3.30… Bargain Buy
- Strategy: Bargain buy nearer to RM3.00 for further rally ahead.
- Target: IR = RM3.10 R1 = RM3.30
- Support: IS = RM2.95 S1 = RM2.80 S2 = RM2.59
- Exit: Cut loss if the stock falls to below the 40-day SMA of RM2.95

Bulletin Board

Co/Sector News Impact Recom

Plantations Indonesia’s planned two-year moratorium on the This is negative for the industry as a whole, N
clearing of natural forest from 2011 may lead to although a shortage of palm oil land would be
the revocation of some firms’ existing permits positive for CPO prices. We have checked with
and may even be extended beyond the two-year management of the companies we cover, and
period. (Reuters) none of them have land which would be affected
by the moratorium, as the greenfield land
acquired by these companies all have the correct
licences. However, this could affect future
planned expansions in Indonesia, as land
scarcity would increase.
Eon Cap EON Cap announced yesterday that it will not be According to the announcement, the Board’s MP, FV =
convening its EGM for shareholders to decide on decision to hold a fresh EGM reflects its desire to RM8.33;
 HL Bank’s offer, which was originally slated to be avoid EON Cap being dragged into another
held today. This was in compliance with the potential litigation, which could turn out to be a
consent order of the High Court in relation to a lengthy affair. EON Cap plans to write to HL
suit filed by a minority shareholder, who claimed Bank and seek its concurrence to extend the
that, among others, insufficient notice period was deadline for the EGM from 19 Aug to 30 Sep. We
given for the EGM. A new EGM date will be fixed believe HL Bank is likely to agree to EON Cap’s
later. (Bursa Malaysia) request.
HL Bank Following the latest development at EON Cap, The latest developments mean that uncertainties MP, FV =
HL Bank announced that it plans to seek surrounding the deal would likely drag on further RM9.20
shareholders’ consent at its forthcoming EGM on and could weigh on share price performance for
23 Aug to adjourn the said EGM to a later date to both companies.
be decided by the Board. (Bursa Malaysia)
Genting Genting Malaysia yesterday acquired 6.3m of its Positive, as this share buyback is much more MP, FV =
Malaysia own shares for total consideration of RM18.99m aggressive than GenM’’s previous share RM3.00
at an average price of RM3.01 each. Based on buybacks and its announcement of its intention to
the company’s issued capital of 5.91bn shares as continue buying back another 6.37% in the space
at 18 August 2010, and after taking into account of 10 months is positive, as it indicates that
the cumulative net outstanding treasury shares management intends to do a capital distribution
to-date of 214.5m shares (or 3.63%), the after it reaches the 10% maximum mark. We
company intends to purchase up to a further believe this will alleviate some of the capital
376.2m shares (or 6.37%) of its issued capital management concerns shareholders may have
within the next 10 months. (Bursa Malaysia) regarding this stock and improve sentiment
somewhat. We are putting our fair value of
RM3.00 under review, as we await the results of
the EGM on the Genitng UK acquisition. Note
that our fair value assumes a 10% discount on its
SOP for corporate governance risk.
Genting Shareholders have approved the disposal of This is unsurprising. The real test is whether OP, FV =
Singapore Genting UK to Genting Malaysia in an EGM held Genting Malaysia minority shareholders would S$2.40
yesterday. (SGX) approve the acquisition of Genting UK, which will
be known after its EGM on Aug 24.
QL Subsidiary, QL Palm Pellet will begin to Positive. We expect the contribution from the OP (FV =
Resources commercialise the first EFB treatment and project to come in beginning FY11 the earliest. RM4.90)
pelletising plant of 40k MT annual production However, we are leaving our projections
capacity within its palm oil mill in Sabah. The unchanged for the time being, pending numerical
commercial plant will be developed as an integral guidance from management.
part of the group’s initiative to achieve
sustainable, zero-waste palm oil milling. (Bursa)
Hartalega Hartalega’s MD mentioned that the company has Positive. Given that Hartalega’s product mix is OP, FV =
never relied on flu outbreaks like the one that predominantly 85% nitrile gloves, Hartalega was RM9.29
happened last year to grow its business as this not really affected by the surge in latex prices as
would result in a temporary surge in rubber glove nitrile prices has been rather stable. Although we
demand. Hartalega targets to achieve 15-25% are expecting FY11 and FY12 earnings to grow
top and bottomline growth p.a. for the next three by 21% and 17% respectively, we maintain our
years (StarBiz). FY13 net profit forecast growth of 6% pending
further clarification from the management on the
expansion plans in FY13.
Media Prima Media Prima has extended its voluntary general Neutral. Currently, Media Prima owns 97% of OP, FV =
offer for the remaining shares of NSTP to Sep 14 NSTP. We believed remaining shareholders will 2.80
(StarBiz). accept the offer or they will risk owning unlisted
NSTP shares upon the closing of the offer.

Important Dates

Company Quarter Expected Results Date

EON Capital 2QFY12/10 Week beginning 16-Aug
AFG 1QFY3/11 Week beginning 16-Aug
HL Bank 4QFY6/10 Week beginning 16-Aug
 MISC 1QFY3/11 19-Aug
PLUS Expressways 2QFY12/10 19-Aug
WCT 2QFY12/10 19-Aug
Maybank 4QFY6/10 20-Aug
UMW Holdings 2QFY12/10 20-Aug

Company Entitlement details Ex-date Payment date

New entitlements
Hartalega Final dividend of 5 sen single tier 1-Sep-10 17-Sep-10
Hartalega Bonus issue on the basis of 1-for-2 2-Sep-10 -
APM Automotive Interim dividend of 8% less 25% tax 2-Sep-10 20-Sep-10
Kian Joo Can Factory Interim dividend of 2.5 sen single tier exempt 6-Sep-10 27-Sep-10
Kian Joo Can Factory Special dividend of 3.75 sen single tier exempt 6-Sep-10 27-Sep-10
Tan Chong Motor Interim dividend of 12% less tax 6-Sep-10 28-Sep-10
Konsortium Logistik Interim share dividend of treasury shares on the basis of 1-for-40 13-Sep-10 30-Sep-10
Carlsberg Brewery (M) Interim div of 5 sen + interim special div of 2.5 sen, less 25% tax 22-Sep-10 8-Oct-10
UAC First interim dividend of 12 sen less 25% tax 28-Sep-10 21-Oct-10
Yi-Lai Interim single tier dividend of 3 sen 7-Oct-10 8-Nov-10
Century Bond Final tax exempt dividend of 2 sen 3-Nov-10 30-Nov-10

Going “ex” on 20 Aug

Huat Lai Resources Interim tax exempt dividend of 3 sen 20-Aug-10 15-Sep-10
Sunway City Final dividend of 5% less 25% income tax 20-Aug-10 22-Sep-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.

Market Perform = The stock return is expected to be in line with the FBM KLCI benchmark (+/- five percentage points) over the next 6-12 months.

Underperform = The stock return is expected to underperform the FBM KLCI benchmark by more than five percentage points over the next 6-12 months.

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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