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

RHB Research Institute

RHB Equity 360°


14 April 2010 (Vietnam, Semicon, JAKS; Technical: Pos)

Top Story : Vietnam Focus – On a recovery path


Market Update
- Since our report on Vietnam in Jun 2008 and the significant market correction, latest technical indicators
suggest that conditions have bottomed and are on a recovery path.
- The recovery in the Vietnam stock market mirrors the brighter outlook for the country’s economy. As it
stands, we highlight Vietnam’s GDP growth of 6.4% for 2010, 88.6m population, and the government’s
efforts to attract foreign investments.
- We see significant opportunities in the power sector, given the inadequate power supply infrastructure and
the country’s plans to shift its reliance on hydropower to coal. We highlight that JAKS Resources last week
signed agreements for a 1,200MW coal-fired IPP to come onstream in 2014-2015.
- The property plays of 2007 such as Gamuda, SP Setia and Berjaya Land are still there, and interestingly,
other companies like MRCB are now also scouting for property projects in Vietnam.
- Since 2008, we note that manufacturers like Box-Pak have expanded their operations in Vietnam while
furniture manufacturers such as Poh Huat and Latitude Tree are generating almost all their profits from
their Vietnam operations. Global economic recovery and favourable operating conditions will likely continue
to maintain this growth trend.
- Overall, while the recovery is still at an early stage, we believe the outlook for Malaysian companies in
Vietnam is positive. In particular, we highlight Box-Pak (FV = RM2.35), JAKS (FV = RM2.00), Tan Chong
(FV = RM5.26) and Parkson (FV = RM6.40) where we see significant growth potential.

Sector Call

Semiconductor : Intel 1Q earnings boosted by stronger-than-expected pc sales Overweight


Sector Update
Unisem : Fair value raised to RM3.74 on earnings upgrade Outperform
MPI : Fair value raised to RM8.46 on earnings upgrade Outperform
- Intel reported 1QFY10 revenue of US$10.3bn (+44% yoy, +-3% qoq) and earnings of US$2.4bn (+288%
yoy, +7% qoq) on the back of stronger-than-expected demand for microprocessor arising from notebook
sales and network servers.
- In the same vein, TSMC (world’s largest foundry) and UMC reported stronger-than-expected results with
1Q10 revenue growing by a whopping 133.4% and 146.5% yoy respectively. We understand the increase
in 1Q sales was due to strong demand in the panel sector i.e. laptops and smartphones from China.
- In addition, major Japanese LCD TV producers (i.e. Sharp and Panasonic) are expected to ramp up output
significantly in 2010, given the sharp recovery in flat-screen TV demand as well as the launch of 3-D TV in
a major way. Thus, we believe medium-term chips demand from the TV segment would likely be driven by
the stronger roll-out of 3-D TV as well as resilient panel demand from the emerging market (i.e. China).
- Hence, against the backdrop of improved earnings visibility and stronger chip sales, we have raised our fair
value for Unisem and MPI to RM3.74 and RM8.46 respectively. We are reiterating our Overweight stance
on the sector. Our top pick for the sector is Unisem.

Corporate Highlights

JAKS : Powering up Not Rated


Company Update
- We note that JAKS has primarily been identified with the water sector, including construction of water
infrastructure projects and the manufacture of steel pipes and steel hollow sections. Although the water
business is still important, we believe JAKS has been very busy over the last year spreading its wings to
property and power.
- We believe JAKS’ outlook is about to change for the better, given three major positive developments since
Mar. These include: (1) The joint development agreement by 51%-subsidiary and Star Publications to
develop a piece of land in Petaling Jaya; (2) Letter of award for construction of the Paya Peda Dam in
Besut, Terengganu for a total contract sum of RM333m; and (3) MOA with various Vietnam authorities for a
2x600 MW coal-fired power plant in Hai Duong province near Hanoi.
- Upon successful completion of this power plant in FY15, we believe JAKS will be in the running for other
IPP projects there. From this first IPP, we estimate an incremental net profit of around RM52.7m in FY16,
or 5x of our projected FY10/10 net profit of RM11.1m.
- We estimate a SOP fair value for JAKS of RM2.00, which implies an upside of 157.1% from current levels.

Technical Highlights

Daily Trading Strategy : Crucial to reclaim the 10-day SMA to sustain the upward momentum…
- Instead of extending its rebound from the 10-day SMA, the FBM KLCI ended marginally below the
supportive SMA near 1,336 on constant profit-taking pressure yesterday.
- From the technical perspective, a failure to reclaim the supportive 10-day SMA will mean a fall into a
consolidation phase, after the recent sharp rally.
- Therefore, it is crucial for the benchmark index to stage an immediate technical rebound today, to above
the 10-day SMA in order to prolong the recent robust trading sentiment.
- Otherwise, the index will head south towards the 2.6-pts technical gap near the 40-day SMA of 1,305 and
possibly retesting the key psychological level at 1,300 soon.
- In addition, if the daily turnover dips to below the 1.0bn shares mark, with further deterioration in the market
breadth, the T+3 factor from the recent 1.2bn shares transaction will adversely impact the current rotational
plays.
- On the upside, the index must overtake the recent high of 1,347.61 to resume its previous upward
momentum.

Daily Technical Watch: Pos Malaysia – The stock must sustain at above RM3.07 to avoid further retreat…
- 10-day SMA: RM2.905
- 40-day SMA: RM2.282
- Support: IS = RM3.07 S1 = RM2.80 S2 = RM2.54
- Resistance: IR = RM3.40 R1 = RM4.00

Bulletin Board

Co/Sector News Impact Recom


O&G International Energy Agency (IEA) raised 2010 Positive. We have highlighted that contracts will OW
global oil demand to 1.67m barrels per day (bpd) likely flow more substantially in 2H 2010 given
(vs. 1.57m bpd) given the increase in oil demand the gradual pick up in energy demand as well as
from North America, Asia and Middle East. increased reserve replenishment activities by
(Financial Daily) national oil companies and major E&P players.
Motor Perodua monthly sales for March have reached an Positive for MBM and UMW. We reiterates our view OW
all-time high of 18,500 units. Managing Director, that the motor sector is seeing a stronger rebound in
Aminar Rashid Salleh expects sales to improve 2010 as unit sales growth continue to get stronger
further in 2Q10 with target sales of 176,000 units since 4Q09 attributed to 1) increase in econimc
this year. (Starbiz) activities; 2) better business conditions; and 3)
improving consumer sentiment.

Important Dates

Company Entitlement details Ex-date Payment date


New entitlements
Choo Bee Metal Distribution of treasury shares on the basis of 1-for-25 21-Jul-10 20-Aug-10
TH Plantations Final gross dividend of 8.5 sen less 25% tax 6-May-10 21-May-10
Going “ex” on 16 Apr
Opcom Holdings Single tier interim dividend of 1.5 sen 16-Apr-10 28-Apr-10
Malaysian Bulk Carriers Final single tier dividend of 15 sen 16-Apr-10 30-Apr-10
V.S. Industry Single tier interim dividend of 1.5 sen 16-Apr-10 30-Apr-10
Guinness Anchor Interim dividend of 10 sen tax exempt 16-Apr-10 6-May-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

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