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

RHB Research Institute

RHB Equity 360°

22 March 2010 (Infrastructure, IJM, Hai-O; Technical: Evergreen, Proton)

Top Story : Infrastructure – IFRIC 12 to hit NTA and earnings of concessionaires Neutral
Sector Update
- IFRIC 12 - Service Concession Agreements, which covers the accounting treatment of service concession
agreements in the financial statements of the operator, is targeted to take effect in Malaysia from 1 Jul
2010.
- We reckon that the implementation of IFRIC 12 will impact concessionaires under RHBRI’s infrastructure
sector (i.e. PLUS Expressways and Puncak Niaga) in two major aspects, i.e.: (1) Concessionaires can no
longer recognise concession assets as tangible assets; and (2) Concessionaires that are currently
amortising concession assets using revenue method will have to switch to either straight line or use of
volume method.
- In any case, this is nonetheless accounting entry and it will not affect our DCF-derived indicative fair value
on these companies.
- IFRIC 12 aside, we continue to like PLUS (OP, FV = RM4.13) for its defensive earnings growth and decent
dividend yield of 5-6% per annum. As for Puncak (MP, FV = RM2.95), we continue to believe that the water
sector restructuring in Selangor by the Federal Government is unlikely to materialise any time soon.

Economic Highlights

Inflation : Moderated to 1.2% yoy in February

Economic Highlights (published 19 Mar 2010)
- Despite the Chinese New Year celebration, the headline inflation rate moderated to 1.2% yoy in Feb, from
+1.3% in Jan. This was the first easing after two consecutive months of picking up, indicating that price
pressure has eased somewhat, as traders might have difficulties in raising prices given that economic
recovery is still at its early stage.
- Going forward, inflation rate is expected to inch up, on the back of stronger domestic demand and the
Government’s move to gradually remove some of its subsidies. As a whole, we believe inflation will likely
trend up to 2.0% in 2010, from +0.6% in 2009.
- While the headline inflation is likely to gradually trend up, we believe it will likely be manageable.
Nevertheless, we believe Bank Negara will likely raise its OPR by another 25 basis points in Jul 2010 to
2.5% and stay at this level until the end of the year.

Corporate Highlights

IJM : Award of Besraya Elevated Expressway contract formalised Underperform

News Update
- Besraya (M) Sdn Bhd, the concessionaire of Sungai Besi Expressway, has formally awarded the turnkey
contract of Besraya Elevated Expressway to Road Builder (M) Sdn Bhd for RM600m.
- This is effectively an “internal” transaction as both companies are wholly-owned subsidiaries of IJM.
- The latest contract will boost IJM’s outstanding construction orderbook by 16% from RM3.8bn to RM4.2bn.
- Assuming an EBIT margin of 10%, the contract will fetch a total EBIT of RM60m over the construction
period of 36 months.
- However, we believe the latest news has already been fully priced in. Fair value is RM3.76.

Hai-O : Indonesia coming on stream Outperform

3QFY10 Results
- 9M10 core net profit of RM56.0m (+52.7% yoy) was in line expectations (71% of our and consensus
forecasts). Declared 2nd interim gross dividend of 4 sen (or ex-all 1.7 sen) (less 25% tax), which was
above our expectations given that historically only pays dividend twice p.a..
- Will officially be opening its MLM business in the Indonesian market in Apr 10. As such, we have updated
our earnings forecasts to include 8,000 members with average revenue of RM2,000/member for FY11 and
 13,000 members with average revenue of RM2,000/member for FY12. We have also adjusted down our
CDF/revenue assumption for the Malaysian division by 3-4% for FY11-12 as we believe that its Malaysia
CDF members would now shift its focus to the Indonesia market, which could lead to an initial slowdown in
its Malaysian division. As such, our earnings forecasts have been reduced by 2.5-3.2% for FY11-12.
- Our fair value have been tweaked down to RM5.20 (from RM5.30) based on unchanged 11.5x CY10 EPS,
a 20% discount to our consumer division PE of 14.5x. Together with attractive net dividend yield of 4-6%
p.a., we maintain our Outperform recommendation for the stock.

Technical Highlights

Daily Trading Strategy : Foresee lukewarm sentiment and poor volume participation…
- The FBM KLCI’s immediate outlook has turned negative following its failure to stabilise near the 1,300
support region on last Friday.
- The breaking of 1,300 with a clear negative candle spells more retreats for the benchmark in the near term.
- In our view, this could potentially induce further pullbacks toward a lower technical gap at 1,287.78 and the
40-day SMA near 1,281 in the near term. A stronger support is only at 1,250.
- We expect the local market to track the developments in regional markets, especially after a sudden hike of
interest rates in India on Friday and the immediate impact on the US’ healthcare bill voting on Sunday.
- Meanwhile, we foresee the lukewarm sentiment and the poor volume participation to persist this week.

Daily Technical Watch: Evergreen Fibreboard – A rechallenge of the overhead resistance at RM1.75 soon…
- 10-day SMA: RM1.569
- 40-day SMA: RM1.513
- Support: IS = RM1.59 S1 = RM1.34 S2 = RM1.10
- Resistance: IR = RM1.75 R1 = RM1.86 R2 = RM2.04

Weekly Trading Idea : Proton Holdings – Accumulate near RM4.26 firm support level… Bargain Buy
- Strategy: Bargain Buy above RM4.26 for further rally towards RM5.00.
- Target: IR = RM5.00 R1 = RM5.60 R2 = RM6.28
- Support: IS = RM4.26 S1 = RM3.80 S2 = RM3.40
- Exit: Stop loss will be triggered upon losing the 40-day SMA of RM4.125

Commodities & Currencies – Renewed selling pressure seen on the EUR …

- Light Sweet Crude Oil futures (Crude): Indecisiveness on its immediate-term chart direction.
- Crude Palm Oil futures (CPO): We are of the view that the CPO will survive at above RM2,500.
- Ringgit (RM)/US$: A breach below 3.29 will strengthen the ringgit further towards 3.07.
- Japanese Yen (JPY)/US$: We still hold on to our previous forecast that aims the yen to retest 87 soon.
- Euro Dollar (EUR)/US$: The EUR is ready to be rerated lower to 0.77 and 0.80 in the near term.
- US Dollar (DXY): The index may try to cling closer to 81, despite continuous selling pressure in near term.

Bulletin Board

Co/Sector News Impact Recom

Plantations According to Ta Ann Holdings’ MD Datuk Wong
Kuo Hea, Sarawak oil palm plantation companies
are currently battling increasing cost of
production (COP), which is about 1.5-2x higher
than what their counterparts in Peninsular
Malaysia face. The average COP among efficient
oil palm plantation players in the peninsula is
RM1,100- RM1,200/tonne, while that of new and
smaller planters could be above RM1,900/tonne.
Sarawak planters have higher costs as many are
Neutral, as this information is in line with our OW
expectations and forecasts for the plantation
companies under our coverage that have
Sarawak landbank, like Sime Darby, IOIC and
CBIP. We believe the cost of production of
Sarawak landbank for companies under our
coverage ranges between RM1,500-1,800/tonne
currently, which is slightly lower than the
RM1,900/tonne quoted in the article, which
means that at current CPO prices, there is still a
 planting on peat land which would need relatively decent profit margin to be made.
substantial capex in terms of infrastructure
development, particularly roads and construction
of drains, as well as maintenance works
necessary for planting on peat land areas. Datuk
Wong said that “At current CPO price of
RM2,500/tonne, assuming other factors remain
status quo, Sarawak planters are expected to
break even only after six years.” (The Star)
PLUS PLUS is in talks with several countries in the Positive. This will help PLUS to diversify its OP, FV =
Expressways region to build new highways or upgrade and earnings base from Malaysia that is already RM4.13
maintain existing facilities. (Business Times) saturated. We believe PLUS will continue to
expand its toll road business in the Asian region,
given the region's rising population and
improving economic condition.

Important Dates

Company Entitlement details Ex-date Payment date

New entitlements
MLABS Systems Renounceable rights issue 31-Mar-10 -
Olympia Industries Payment of 4% annual interest on RULS 2007/2013 1-Apr-10 12-Apr-10
Olympia Industries Payment of 4% annual interest on ICB 2007/2013 1-Apr-10 12-Apr-10
Olympia Industries Payment of 2.8% annual interest on ICULS 2007/2013 1-Apr-10 12-Apr-10
Dutaland Payment of 4% annual interest on RULS 2007/2013 1-Apr-10 12-Apr-10
Dutaland Payment of 4% annual interest on ICB 2007/2013 1-Apr-10 12-Apr-10
Dutaland Payment of 2.8% annual interest on ICULS 2007/2013 1-Apr-10 12-Apr-10

Going “ex” on 23 Mar

Excel Force MSC First interim tax exempt dividend of 1.0 sen 23-Mar-10 12-Apr-10
Wah Seong Corporation Special tax exempt share div of treasury shares on basis of 1-for-120 23-Mar-10 13-Apr-10
Wah Seong Corporation Tax exempt 2nd interim div of 3 sen 23-Mar-10 13-Apr-10
Pantech Group Holdings Special second interim single tier dividend of 1.5 sen 23-Mar-10 20-Apr-10
Adventa Final dividend of 4 sen tax exempt 23-Mar-10 20-Apr-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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