Market Dateline PP 7767/09/2010(025354)

RHB Research Institute

RHB Equity 360°

3 September 2010 (Telecom, Insurance; Technical: MRCB)

Top Story : Telecom – 2QFY10 report card Overweight

Sector Update
- Among the four telecommunication stocks that are under coverage, two came in within our expectation,
one came in above and one came in below our expectation.
- All three mobile players continued to register positive qoq revenue growth in 2QFY10 mainly due to: 1)
higher mobile revenue (which in turn rose qoq on the back of rising non-voice revenue); and 2) higher
handset sales. However (with the exception of Celcom), EBITDA margin for both Digi and Maxis in 2QFY10
declined by 1.3%-pts and 3.4%-pts. We believe the qoq decline in EBITDA margin for both Digi and Maxis
was mainly due to higher handset subsidies.
- Qoq, net debt and net debt/ EBITDA for the mobile players generally improved in 2QFY10 on the back of
stable free cash flow. We believe the financial standing of the mobile players would remain firm and this is
mainly on the back of: 1) mid-high single-digit revenue growth; 2) stable EBITDA margins; and 3) declining
capex requirement. With these coupled with the mobile players’ well-articulated dividend policy, we are
keeping our view that most of the telcos (with the exception of Axiata, which we think is still very much a
growth story) will continue to offer generous yields to investors.
- No change to our earnings forecasts and Overweight stance on the sector.

Sector Call

Insurance : Four new takaful licences awarded Neutral (down from OW)
Sector Update
- Bank Negara Malaysia has awarded takaful licenses to four JV of local and foreign entities.
- The total number of family takaful operators in Malaysia is now 12. We believe that the presence of the new
operators would increase competition for the life insurance industry.
- We expect competition to be more intense from FY12-13 onwards as the new operators will likely take
some time before they start operating and build up their market share.
- We maintain Allianz as our top pick for the sector, although we are downgrading our stance on the sector to
Neutral as we have downgraded LPI Capital to Market Perform due the limited upside to its share price.

Technical Highlights

Daily Trading Strategy : The Current Uptrend Remains Intact…

- Technically, the FBM KLCI has continued to show signs that it could undergo a mild retracement soon,
following the formation of a “hangman” candle and the grossly overbought short-term momentum readings
yesterday.
- However, as long as it can sustain at above the 10-day SMA of 1,411, the 1,400 psychological level and
the crucial turning point of 1,390, the current uptrend is still intact.
- In our opinion, any pullback is still considered healthy, as this will neutralise the overbought momentum on
the FBM KLCI, paving the way for another rally on renewed buying support.
- And even if the heavyweights were to take a breather on constant profit-taking activities, we still expect the
broader market sentiment to stay upbeat, on the back of solid rotational plays on other second and third
liner stocks, with increased daily participants in the near term.
- Having said that, the local trading sentiment will still be influenced by the volatile regional markets’
performance in the near term.

Daily Technical Watch: Malaysian Resources Corporation – Breaking out from RM1.79 will signal an
extended rally towards RM1.95…
- 10-day SMA: RM1.689
- 40-day SMA: RM1.688
- Support: IS = RM1.70 S1 = RM1.51 S2 = RM1.33
- Resistance: IR = RM1.95 R1 = RM2.20
Important Dates

Company Entitlement details Ex-date Payment date

New entitlements
Berjaya Land Share split on the basis of 1-into-2 17-Sep-10 -
Berjaya Land Bonus issue on the basis of 1-for-1 17-Sep-10 -
DFZ Capital Interim dividend of 5% less 25% tax 17-Sep-10 5-Oct-10
CCM Duopharma Biotech Interim tax exempt dividend of 4.5 sen 6-Oct-10 28-Oct-10
INS Bioscience First and final single tier dividend of 0.55 sen 6-Oct-10 28-Oct-10
SKP Resources Final tax exempt dividend of 0.5 sen 28-Oct-10 25-Nov-10
Asia File Corp Final dividend of 16% less 25% tax 29-Nov-10 24-Dec-10
OSK Holdings Interim dividend of 2.5 sen less 25% tax 17-Sep-10 28-Sep-10

Going “ex” on 6 Sep

Paramount Corporation Interim div of 11% tax exempt + 4% less 25% tax 6-Sep-10 17-Sep-10
Wijaya Baru Global 6th interest payment on 7% 5-year ICULS 2007/2012 6-Sep-10 17-Sep-10
Elsoft Research Tax exempt interim dividend of 10% 6-Sep-10 22-Sep-10
WCT Interim dividend of 5 sen less 25% tax 6-Sep-10 23-Sep-10
KKB Engineering Interim dividend of 5 sen less 25% tax 6-Sep-10 24-Sep-10
Kian Joo Can Factory Interim div of 2.5 sen + special div of 3.75 sen, single-tier exempt 6-Sep-10 27-Sep-10
Tan Chong Motor Holdings Interim dividend of 12% less tax 6-Sep-10 28-Sep-10
Luxchem Corporation Interim dividend of 3 sen single tier 6-Sep-10 30-Sep-10
QL Resources Final dividend of 7.5 sen single tier tax-exempt 6-Sep-10 30-Sep-10
Shell Refining Company Interim dividend of 20 sen less 25% tax 6-Sep-10 30-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.

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
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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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