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

RHB Research Institute

RHB Equity 360°

24 May 2010 (First Resources, QL, IJM, EON Cap, PLUS, WCT, Furniweb; Technical: Hai-O, CIMB)

Top Story : First Resources – Exponential earnings growth at inexpensive valuations Outperform
New Coverage
- First Resources (FR) is a small (by Indonesian standards) but efficient pure plantation company listed in
Singapore. FR has 113,010ha of landbank in Indonesia and currently operates 8 palm oil mills. It has also
ventured downstream via a 250k tonne capacity refinery and a 250k tonne capacity biodiesel plant. It is
currently constructing a 300k tonne fractionation plant which will be completed by 1HFY12/011.
- We believe there are five major reasons for investing in FR: 1) Its strong growth profile, given its young
plantation age profile; 2) Aggressive planting targets, given its unplanted landbank; 3) Efficient planter, with
below average cost of production; 4) Downstream expansion to boost bottomline; and 5) Valuations at
unjustifiable significant discount to peers. We project FR to post a core net earnings (ex-EI and biological
gains/losses) CAGR of 59.8% over the next three years to FY12.
- FR is currently trading at 8.7x CY10 EPS and 7.2x CY11 EPS, which is a significant discount to the
Malaysian plantation sector’s average PE of 19.2x for FY10 and 15.4x for FY11 and even to the regional
plantation sector average of 12.6x for FY10 and 10.6x for FY11. Given FR’s efficiently-run estates, clean
operating structure and sustainable earnings growth for the medium to long term, we believe FR does not
deserve to trade at such a large discount to industry peers. We assign a target PE of 11.5x to FR’s FY11
EPS, which is a 30% discount to our Malaysian target PER for the mid-cap plantation stocks, to obtain our
target price of S$1.55/share. We initiate coverage with an Outperform recommendation.

Corporate Highlights

QL : Expecting strong FY10 results Outperform

Results Preview
- 4QFY3/10 results (due out today) are likely to come in within expectations. In 4Q10, we expect net profit to
post double-digit % growth yoy driven mainly by its marine product manufacturing division, due to higher
sales volume of surimi-based products coupled with increase in surimi prices of around 10% yoy.
- QL is still targeting 10-15% net profit growth for FY11 on the back of higher sales volume from all divisions,
margin improvement from continuous operating efficiency and lower cost of feedmeal, which is in line with
our forecasts. In FY11 as well, QL’s palm pellet project will be undergoing commercialisation and there
could be potential earnings contribution from this project during the year. We have yet to input any potential
earnings from this project into our forecasts.
- No changes to forecasts. Maintain Outperform with unchanged fair value of RM3.93 (13x CY10 PER).

IJM Corp : Kajang-Seremban Highway’s traffic falls short of projection Market Perform
News Update
- Concessionaire Lekas expects the average daily traffic volume of the 44km Kajang-Seremban Highway to
come in at only 70-80k in its first year of full opening, vis-à-vis the initial projection of 100k.
- It expects the RM1.8bn highway to break even in 8-10 years. IJM owns a 50% stake in Lekas.
- In our forecasts, we only assume construction profits but not tolling profits from the highway over our
forecast period.
- Maintain Market Perform. Fair value is RM4.88.

EON Capital : Board decides to proceed with EGM Outperform

News Update (published 21 May 2010)
- EON Cap announced last Friday that the Board had decided to proceed and table HL Bank’s proposal to
acquire the entire assets and liabilities of EON Cap for RM5.06bn (Offer or Proposed Disposal) for
shareholders’ approval.
- This is notwithstanding the independent financial adviser’s (IFA) view that the Offer by HL Bank was “not
fair from a financial perspective”.
- The Board’s decision does not come as a surprise to us as we had previously mentioned that the Board
would still likely proceed with the EGM, regardless of the IFA’s opinion.
- EON Cap also announced a proposal to distribute the cash proceeds arising from the Proposed Disposal to
its shareholders. This will comprise a special dividend, which is estimated to be about RM3.3bn, followed
by a capital repayment exercise for the balance of the proceeds.
- No change to our Outperform call and fair value of RM8.07 (15x FY10 EPS).

EON Capital : Starting off on a strong note Outperform

1QFY10 Results/Briefing Note
- 1QFY10 net profit (+22.9% yoy; +58.8% qoq) was in line with our and consensus expectations.
- Net interest income registered qoq growth for the third consecutive quarter. This was on the back of 2.4%
qoq (9.3% yoy) loan growth while NIMs were roughly stable.
- Non-interest income remained healthy, supported mainly by sustainable transactional fee income while CIR
improved to 54.3% (4Q09: 64.6%; 1Q09: 57.1%).
- Impairment allowances for loans were higher qoq and yoy, but this was largely a reflection of higher
collective impairment allowance.
- Following the adoption of EON Cap’s gross impaired loans ratio as at end-Mar’10 stood at 4.2%, as
compared to the gross NPL ratio of 3.8% as at end-Dec’09 (4.3% based on FRS139). LLC stood at 76.6%
as at end-1Q10 (4Q09: 78.5%; 1Q09: 70.6%).
- Core capital ratio at end-1Q10 was 10.8% (4Q09: 11.2%; 1Q09: 9.5%).
- No change to our forecasts. Fair value of RM8.07 (15x FY10 EPS) and Outperform call maintained.

PLUS : 1QFY12/10 traffic volume rises by 9.1% Outperform

1QFY10 Results/Briefing Note
- 1QFY12/10 came in within expectations, accounting for 25.0-25.3% of our full-year forecast and the full-
year market consensus.
- Despite having achieved yoy traffic volume growth of 9.1% at PLUS’s core expressways, management
expects traffic volume growth to moderate to 3-4% in remaining quarters, due mainly to high-base effect.
- Toll operations of the newly-acquired Padalur-Trichy Highway has commenced since 6 May 10 (which
means revenue contribution to PLUS) and the conditions precedent have been complied with and
completed on 18 May 10.
- Indicative fair value is RM4.13, equivalent to PLUS’s DCF-derived NPV.

WCT : 1QFY12/10 net profit declines 11% yoy Underperform

1QFY10 Results
- 1QFY12/10 net profit came in within expectations at 22-25% of our full-year forecast and the full-year
market consensus.
- 1QFY12/10 net profit declined 11% yoy as lumpy overseas jobs were already at tail-ends, while new local
contracts had yet to hit significant billing milestones to fill up the vacuum.
- WCT did not make any provision with regards to additional cost-overrun from Bakun. WCT owns an
effective 7.7% stake in the consortium that was awarded the contract.
- Maintain Underperform. Fair value is RM2.10.

Furniweb : Above expectations Outperform

1QFY10 Results
- 1QFY12/10 core net profit of RM1.6m (-15.4% qoq) accounted for 22.9% and 23.8% of our and consensus
full-year estimates respectively. We consider this to be above our expectations given that 1Q is typically the
weakest quarter.
- We have raised our FY10-12 EBIT margin assumptions to 9.2%, 8.2%, and 8.2% respectively, but also
raised our effective tax rate assumption to 30% p.a. (vs. 17.5% previously).
- Consequently, our FY10 EPS forecast has been raised by 8.5%, while our FY11-12 EPS forecasts have
been trimmed by 4.1% and 4.3% respectively.
- We have raised our fair value estimate to RM0.71 (from RM0.66 previously) based on 8.5 FY10 PER.

Technical Highlights

Daily Trading Strategy : Strong resistance-turn-support level at 1,300…

 - Due to the latest technical break down below the important psychological threshold of 1,300 last Friday, the
FBM KLCI has confirmed a bearish medium-term outlook on the technical chart.
- Not only that, the weak closing with another bearish candle suggests that it is well underway to revisit the
lower immediate support level of 1,250 soon.
- Should 1,250 give way to sellers, meaningful support is only near the next psychological level at 1,200.
- Having said that, with a triple-digit bounce on the US DJIA on last Friday, a mild rebound may appear on
bargain-hunting activities today.
- Still, we remain bearish on the overall market direction, as we believe the rebound, if any will unlikely to be
sustainable, and that it should meet a strong support-turn-resistance level at 1,300.
- On hind side, as we continue to expect investors to trim their positions in view of further correction ahead,
we foresee investors to “sell into strength” as the market has moved into a retracement phase.

Daily Technical Watch: Hai-O Enterprise – Selling momentum to persist in the coming week …
- 10-day SMA: RM4.015
- 40-day SMA: RM4.278
- Support: IS = RM3.67 S1 = RM3.20 S2 = RM2.59
- Resistance: IR = RM4.12 R1 = RM4.40 R2 = RM4.93

Weekly Trading Idea : CIMB – The 10-day SMA will cut below the 40-day SMA soon… Take Profit
- Strategy: Take Profit ahead of an imminent correction ahead.
- Resistance: IR = RM7.03 R1 = RM7.41
- Support: IS = RM6.70 S1 = RM6.00 S2 = RM5.43
- Exit: It will return to bulishness if it removes the high at RM7.41.

Commodities & Currencies – Weakness likely on the US Dollar …

- Light Sweet Crude Oil futures (Crude): Potentially indicates a technical rebound underway.
- Crude Palm Oil futures (CPO): Sentiment should remain negative bias.
- Ringgit (RM)/US$: The ringgit will head towards the 35-week SMA near 3.35 soon.
- Japanese Yen (JPY)/US$: A likelihood of selling resumption in US$ against the Japanese yen.
- Euro Dollar (EUR)/US$: A possible halt in the previous rally on the US$ against the EUR.
- US Dollar Index (DXY): A critical support level at 85.

Bulletin Board

Co/Sector News Impact Recom

IJM IJM Land has acquired a 70% stake in Sova Assuming a 51% stake in the JV, 15% pretax OP, FV =
Land Holdings for RM18m cash that is currently margin and development period of 3 years, the RM3.19
developing high-rise residential apartments and project is expected to boost IJM Land’s FY12
retail and commercial properties on a 2.85 ha site earnings forecast by about 3%.
in Dong Nai Province, Vietnam. The project,
which is located in close proximity to six industrial
parks four international standard golf clubs, is
estimated to generate a total GDV of US$150m.
It is expected to be launched by 3Q10. (Bursa)

Important Dates

Company Entitlement details Ex-date Payment date

New entitlements
Leader Universal First interim dividend of 1.5 sen less 25% tax 4-Jun-10 30-Jun-10
Jobstreet Corp First tax exempt interim dividend of 1.25 sen 17-Jun-10 28-Jun-10
Padiberas Nasional Final dividend of 12 sen less 25% tax 28-Jun-10 14-Jul-10
PBA Holdings Final tax exempt dividend of 2 sen 28-Jun-10 16-Jul-10
Kinsteel Final dividend of 1 sen tax exempt 21-Jul-10 20-Aug-10
 Central Industrial Corp Final dividend of 1.5 sen less 25% tax 12-Aug-10 13-Sep-10

Going “ex” on 25 May

PIE Industrial 1st and final div of 12 sen + special div of 23 sen, less 25% tax 25-May-10 8-Jun-10
Hap Seng Plantation Final dividend of 5 sen tax exempt 25-May-10 8-Jun-10
Warisan TC Holdings Final dividend of 6 sen less income tax 25-May-10 17-Jun-10
Edaran Otomobil Nasional Selective capital repayment and repayment exercise 25-May-10 17-Jun-10
Atlan Holdings First interim dividend of 5 sen single-tier 25-May-10 18-Jun-10
Atlan Holdings Distribution of treasury shares on basis of 1-for-20 25-May-10 18-Jun-10
Tan Chong Motor Holdings Final dividend of 6 sen less tax 25-May-10 18-Jun-10
Hartalega Holdings Third interim single tier dividend of 5 sen 25-May-10 25-Jun-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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