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

RHB Research Institute

RHB Equity 360°

12 March 2010 (Fajarbaru, O&G, Axiata, B-Toto, Tan Chong; Technical: Unisem)

Top Story : Fajarbaru – Eyeing RM400m PFI teaching-hospital in Kuantan Outperform

Visit Note
- Fajarbaru expects good margins from the recently secured RM70m earth, infrastructure and civil works for
Phase 1 of an equa-culture project in Setiu, Terengganu.
- While the project is relatively small in terms of size, it does stand testimony to Fajarbaru’s ability to excel
under a competitive environment.
- Fajarbaru is currently bidding for a RM400m teaching-hospital project in Kuantan based on the PFI model.
It has also been pre-qualified to bid for the parking apron package of the new LCCT worth about RM200m.
- In addition, it is eyeing a bridge/road project in Peninsula Malaysia. For the LRT line extension project,
Fajarbaru will join hands with a foreign group that will bring along with it to the JV its track record and
possibly certain specialised equipment.
- Fair value is RM1.35. Maintain Outperform.

Sector Update

Oil & Gas : Stronger contract flows in 2H 2010 Overweight

Sector Update
- We note that crude oil futures curve has flattened with the 9 March 2010 spread between spot delivery and
one-month futures narrowed to its 18-month low of 40 cents (vs. US$2.35 on 30 Dec 2009). The potential
backwardation (i.e. spot price rising above longer-dated futures) suggests that oil demand would catch up
with supply going forward, thus capping downside risk to crude oil price over the medium term.
- Leading indicators such as improving rigs activities and increase in oil sands investment as well as uptick in
FPSO leasing market further reinforce our view that E&P spending would pick up momentum in 2H 2010.
- With global energy demand expected to surge in the next 5-10 years and declining supply from
conventional oil & gas resources, we expect many of the larger players are looking to acquire or enter into
a j.v. with smaller companies, whose expertise and assets will help them thrive in a more competitive
environment going forward.
- Given stronger outlook of E&P spending as well as still-low asset prices, we believe companies with strong
balance sheet (i.e. Dialog and Kencana) would be in the better position to acquire strategic assets over the
medium term. We note that Wah Seong is already in acquisition mode. In addition, we believe investors
should also focus on companies with the assets and expertise related to E&P gas projects (Wah Seong,
Dialog and KNM). Reiterate Overweight. Top picks are Wah Seong and Dialog.

Corporate Highlights

Axiata : Raising XL’s free float Outperform

News Update
- Axiata has proposed an international private placement of up to 1.7bn XL shares (20% of XL’s issued share
capital) to eligible investors via a bookbuilding exercise. The selling price and final number of XL shares will
be determined and announced after completion of the bookbuilding exercise.
- XL’s share price closed yesterday at a 52-week high of Rp3,550/share. Assuming the shares are placed
out at a 15% discount to this price, we estimate Axiata could potentially raise a (gross) total of around
RM1.7bn (RM0.20/share).
- According to the announcement, Axiata is currently evaluating various options with respect to the use of the
proceeds from the proposed offering. The proposed offering is expected to be completed by Apr 2010.
- Assuming the proceeds raised are used to repay borrowings, we estimate the proposed offering could be
marginally dilutive to earnings (up to 2%). However, we estimate Axiata’s proforma net debt/EBITDA as at
end-2009 would fall further to 1.5x from 1.8x currently.
- No change to earnings forecasts and SOP-derived fair value of RM4.05 for now.
B-Toto : New RM8.88m minimum jackpot game to start 18 Mar Outperform (up from MP)
News Update
- BToto has obtained approval to replace its Super 6/49 minimum RM1m jackpot game with a new minimum
RM8.88m jackpot lotto game called Supreme Toto 6/58, making it the highest minimum jackpot game in the
market. Minimum bet for the new game is RM2 instead of RM1 for the Super 6/49 game, which is the same
as the minimum bet for Magnum’s 4D jackpot game, and there will be no maximum jackpot, just like its
other two remaining jackpot lotto games. We believe the minimum jackpot for the first draw of Supreme
6/58 on 20 Mar could be close to RM10.5m, which is higher than any of BToto’s existing games’ jackpots
currently, after including the balance jackpot from Super 6/49, assuming it has not been won.
- We expect this to be positive for BToto, as the new game would create bigger jackpots than those
previously under the Mega 6/52 game (of >RM20m), and bigger than Magnum’s 4D jackpot game, resulting
in higher sales per draw day. Depending on luck and the jackpot buildup, this could also help BToto regain
market share lost to Magnum (est at 0.2-0.5%-pt) since its 4D jackpot game was launched in Sep-09.
- Despite the positive potential, we are not revising our forecasts for now, as we prefer to monitor the new
game’s popularity first. We have assumed an 8% yoy decline in revenue per draw day for FY10 and 7%
growth for FY11. We have however, upped our DCF-based fair value to RM4.95 (from RM4.35) after rolling
forward our base year to FY11 and raising our terminal growth rate to 3% (from 2.5%) to reflect the better
long-term prospects. As such, we upgrade our recommendation to Outperform (from market perform).

Tan Chong : Signed Nissan's distribution rights for Cambodia Outperform

News Update
- Tan Chong’s wholly-owned subsidiary, ETCM (C) Pty Ltd and Nissan Motor Co Ltd has signed a new sole
distribution agreement yesterday for Cambodia.
- The agreement is expected to take effect in the 2Q2010 with an initial sales volume of 200 units.
- We believe the company is in talks with Nissan for the similar distribution agreement for other ASEAN
countries as this would allow Tan Chong to tap into the growing emerging market.
- Maintain Outperform with an unchanged fair value of RM3.60.

Technical Highlights

Daily Trading Strategy : In cautious mode!

- Yesterday’s sharp negative reversal on the FBM KLCI calls for a temporary consolidation ahead.
- Dampened further by the T+4 forced-selling activities from Monday’s 1.16bn shares high volume, the index
could see follow-through retracement towards a lower technical gap near the 1,300.74 - 1,312.18 region
soon.
- Apart from that, with the March school holiday just around the corner, coupled with the upcoming US
FOMC meeting next Tuesday, investors are likely to take a cautious stance for the near term, in our view.
- Nevertheless, we stay bullish on the FBM KLCI’s medium-term outlook on expectation that the 1,300
psychological level will cap immediate bearish momentum.
- Following yesterday’s sharp reversal, the 1,334.34 high will become the immediate resistance for the index,
followed by the upper technical gap near 1,354.79.
- Medium-term target resistance remains at 1,390.

Daily Technical Watch: Unisem – Possible setbacks towards the 40-day SMA and RM2.10 soon …
- 10-day SMA: RM2.378
- 40-day SMA: RM2.233
- Support: IS = RM2.10 S1 = RM1.80 S2 = RM1.59
- Resistance: IR = RM2.40 R1 = RM2.60

Bulletin Board

Co/Sector News Impact Recom

Transport IATA halved its loss forecast for the global airline This is consistent with our view of a mild recovery N
 industry for 2010 to US$2.8bn (compared with in the airline sector in 2010. We expect MAS to
US$5.6bn loss forecast in Dec 09) and also turn around while AirAsia to report lower profit
lowered its 2009 loss estimate to US$9.4bn (from (due to high base in 1HFY12/09 on lower jet fuel
the earlier US$11bn loss). This is on the back of prices)
a much stronger recovery in demand seen by
year-end gains that continued into the first
months of 2010 (The Edge).
Rubber Glove counters dominated the list of losers Neutral. We understand from the glove OW
Glove yesterday after some traders turned cautious on manufacturers that they have all raised their
the industry due to the high record of latex prices glove prices to pass on the higher raw material
and a strong ringgit. (StarBiz) costs and weaker US$. Any time lag in passing
on the cost increase, however, would be mildly
negative but not significant.

Important Dates

Company Entitlement details Ex-date Payment date

New entitlements
Excel Force MSC First interim tax exempt dividend of 1 sen 23-Mar-10 12-Apr-10

Going “ex” on 15 Mar

Oriental Food Industries Interim dividend of 2 sen tax exempt 15-Mar-10 29-Mar-10
YTL Cement Second interim dividend of 3.75 sen single tier 15-Mar-10 31-Mar-10
YTL Power Second interim dividend of 3.75 sen single tier 15-Mar-10 31-Mar-10
Lafarge Malayan Cement Second interim single-tier dividend of 23 sen 15-Mar-10 14-Apr-10

...For more details, see individual reports attached

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