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

RHB Research Institute

RHB Equity 360°

3 May 2010 (O&G, Banks, Notion Vtec, MAS; Technical: Maybank, Genting)

Top Story : Oil & Gas – Upturn in FPSO market Overweight

Sector Update
- According to Fred Olsen (a Norwegian floater specialist), the marked recovery is a continuation of the pick-
up in activity since 4Q 2009 which saw the award of seven contracts followed by another four contracts in
Jan-Feb 2010. Going forward, we believe the market for FPSO is on track for a strong rebound driven
mainly by: 1) stronger E&P spending beginning 2H 2010; and 2) increase in deepwater E&P activities.
- We highlight the potential shortages for the ‘High Case’ forecast of around 25-30 vessels p.a. in 2010-11, in
the event of stronger-than-expected demand stemming from increased E&P activity in deepwater and ultra-
deepwater fields (Brazil, Africa, Malaysia, Vietnam and Gulf of Mexico). Hence, we expect FPSO charter
rates to rise significantly over the next two years, driven by strong demand amidst a shortage of supply in
the market.
- We believe the outlook for the FPSO market is directly correlated to the interests of the broader support
services sector, and underscores the fundamental shift in major oil companies’ activities to new areas of
development, both in terms of location (i.e. deepwater, ultra-deepwater and oil sands) as well as
technology (e.g. enhanced oil recovery, oil sands). Therefore, support services companies (i.e. Wah
Seong, Sapuracrest, KNM and Petra Perdana) which are able to follow this fundamental shift would be
better able to secure new and higher-margin contracts from these projects. Reiterate Overweight.

Sector Call

Banks : Mar ‘10 system data – Underlying trends still positive Overweight
Sector Update
- According to BNM’s statistics, Mar ’10 loans growth stood at +9.8% yoy (Feb ’10: +10% yoy). This growth
was led by the household segment (Jan ’10: +11.8% vs. Feb ’10: +11.2% yoy) while the business segment
saw loans growth expand by 4.7% yoy (vs. Feb ’10: +4.2% yoy).
- Leading indicators were still strong despite BNM’s move to normalise interest rate and this helps lend
support to our view that, barring the global economy suffering a double dip, the gradual normalisation of
interest rate is unlikely to impact loans growth. We are thus, maintaining our 2010 loans growth projection
of +9% for now.
- Absolute NPLs, gross and net NPL ratios and LLC all improved mom. This appears in line with our earlier-
mentioned belief that while the industry could remain under stress from the festive season, asset quality
would resume its improving trend from Mar/Apr 2010 onwards.
- ALR was up but spread fell, which is largely a reflection of interbank rates being re-priced faster than ALR.
- LD ratio decreased slightly as yoy loan growth accelerated while yoy deposit growth decelerated. Overall,
liquidity is still ample.
- No change to our Overweight stance on the sector.

Corporate Highlights

Notion Vtec : Rapid expansion ahead Outperform

Briefing Note
- Management expects the strong revenue and earnings growth to be sustained over the next two years,
driven by: 1) stronger-than-expected demand for mobile PC and consumer electronics; and 2) higher
utilisation rate for the camera segment.
- The company highlighted that the potential growth in the HDD segment is likely to be tremendous. Notion
plans to ramp up its monthly production targets for 2.5” base plates to 1m by Sep-10, 5m in FY11, and 7m
in FY12 vs. previous targets of 3m in FY11 and 5m in FY12. This could potentially raise our FY11-12
revenue estimates by 35% and 25% p.a. respectively. Management thus expects the HDD segment to
drive revenue growth, with the segment contributing 60% of total revenue in FY10.
- Management plans to spend RM120m in capex in FY10, of which RM80m would be used to expand its 2.5”
 base plate capacity while the balance would be for capacity expansion for other product lines. The capex
includes construction of a 150K sq ft plant in Klang as well as purchase of CNS and die casting machinery.
- Maintain Outperform and fair value of RM4.64.

MAS : Deliveries of A380 delayed for a third time Underperform

News Update
- The deliveries of MAS’s six A380 aircraft on order have been delayed to 1H2012 (vis-à-vis Aug and Jan
2011 according to the second and first revised schedules, and Jan 2007 based on the original schedule).
- We are not perturbed by the latest development as MAS is not the only airline affected by the delays in the
A380 aircraft deliveries.
- We believe MAS can make do with its existing wide-bodied fleet pending the deliveries of the A380 aircraft.
- Fair value is RM1.60. Maintain Underperform.

Technical Highlights

Daily Trading Strategy : A potential “double top” formation …

- As last Friday’s impressive rebound managed to chalk up fresh year high at 1,348.15, the FBM KLCI has
renewed its chance to reverse the recent sluggish sentiment.
- And as it successfully rebounded back to above the 10-day SMA of 1,337 with a third positive candle, the
short-term technical outlook has returned to positive. The next target is to cover a technical gap at 1,354.79
and the 1,390 ultimate medium-term resistance.
- However, in order to confirm the breakout and convince more buyers, the index needs to penetrate the
previous high of 1,347.61 and Friday’s high of 1,348.15.
- Besides, the daily turnover must also exceed the 1.0-1.2bn shares mark to boost up the trading interests.
- If not, the index will retreat on swift profit-taking pressure today.
- Moreover, given the plunge in the US market last Friday, sellers are expected to return, forcefully diverting
Friday’s market rebound today, hence giving way for the potential “double top” formation soon.
- In that case, the index will revisit the 10-day SMA and threaten the newly positive outlook again in our view.

Daily Technical Watch: Malayan Banking – Further rebound if it removes RM7.70 today…
- 10-day SMA: RM7.49
- 40-day SMA: RM7.447
- Support: IS = RM7.32 S1 = RM6.86 S2 = RM6.26
- Resistance: IR = RM7.70 R1 = RM8.15 R2 = RM8.56

Weekly Trading Idea : Genting – Potential medium-term positive signal ahead… Bargain Buy
- Strategy: Bargain Buy near the RM6.80 level.
- Target: IR = RM7.45 R1 = RM8.15 R2 = RM8.90
- Support: IS = RM6.80 S1 = RM6.00 S2 = RM5.15
- Exit: Cut loss if the stock loses the 40-day SMA near RM6.60

Commodities & Currencies – Uncertainties continue on the US Dollar’s near-term trend …

- Light Sweet Crude Oil futures (Crude): We keep our positive bias view for the commodity.
- Crude Palm Oil futures (CPO): Expect a rangebound trading this week from RM2,500 to RM2,579
- Ringgit (RM)/US$: Trading could be volatile in the near term.
- Japanese Yen (JPY)/US$: The pair may risk falling below the 60-week SMA near 93.2 this week.
- Euro Dollar (EUR)/US$: The EUR may gain back some strength against the US dollar this week.
- US Dollar Index (DXY): The chart is suggesting more profit-taking activities this week.

Bulletin Board

Co/Sector News Impact Recom

KNM The company announced that it had revised up Neutral. While the tax incentive would increase UP, FV =
 its FY12/09 net profit to RM260.6m (from its FY09-12 operating cash flow by 28-35%, we RM0.51
RM170.7m) after factoring in the adjustments have accounted this as an EI item given the
arising from the recognition of tax incentive potential removal of this tax incentive arising from
granted for Borsig. (Bursa) take-over attempts that have impact on
shareholding structure of KNM Process Systems
(KPS). Recall that 50% of the stake in KPS must
be held by Malaysians during the first year of the
acquisition of Borsig and thereafter, to be at least
60% for the following years; and that KPS must
hold at least 51% of the equity interest in Borsig
for at least five years from the completion of the
Borsig acquisition.

Changes To Foreign Shareholdings (%)

Stock Mar-10 Apr-10 Chg (%)
Media Prima 40.0 31.7 -8.3
Top Glove 37.0 35.0 -2.0

Important Dates

Company Entitlement details Ex-date Payment date

New entitlements
Samchem Holdings First and final single tier dividend of 2.8 sen 31-May-10 23-Jun-10
Tong Herr Resources Tax exempt final dividend of 5 sen 9-Jun-10 22-Jun-10
Stemlife First and final tax exempt dividend of 1 sen 18-Jun-10 6-Jul-10
Chemical Co of Msia Final tax exempt dividend o 8 sen 21-Jun-10 9-Jul-10
Ewein First and final tax exempt dividend of 2.5 sen 16-Jul-10 20-Aug-10

Going “ex” on 4 May

Hirotako Holdings Distribution of treasury shares on basis of 1-for-35 4-May-10 -
Hirotako Holdings Distribution of 1 treasury share for every 35 shares held 4-May-10 -
Tecnic Group Final Dividend of 16 sen tax exempt 4-May-10 18-May-10
Plus Expressways Final single tier dividend of 10 sen 4-May-10 18-May-10
Kumpulan H & L First and final tax exempt dividend of 1 sen 4-May-10 20-May-10
Suria Capital Holdings Final dividend of 1 sen less 25% tax + 2 sen tax exempt 4-May-10 21-May-10
QSR Brands Final dividend of 9 sen less 25% tax 4-May-10 27-May-10
KFC Holdings Final dividend of 16 sen less 25% tax 4-May-10 27-May-10
Malaysia Building Society First and final dividend of 4% less 25% tax 4-May-10 27-May-10

...For more details, see individual reports attached

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Stock Ratings
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Industry/Sector Ratings

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