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

RHB Research Institute

RHB Equity 360°

7 June 2010 (KPJ; Technical: AirAsia, Gamuda)

Top Story : KPJ – Moving to a new valuation benchmark Outperform (up from MP)
Company Update
- There has been an increase in M&A activity in the healthcare sector recently, including Khazanah
Nasional’s partial general offer for Singapore-listed Parkway Holdings’ shares and the start of bidding for
Australia-listed Healthscope by private equity groups and US-based healthcare companies.
- Khazanah’s partial offer for Parkway values the shares at FY10-11 PER of 27.2x and 20.1x respectively,
vs. 22.3x and 16.5x before the offer was announced (i.e. a premium of around 22%). As for Australia-listed
Healthscope, the top bid of A$1.84bn (or A$5.80/share) so far values the company at a CY10 PER of
17.1x. These large takeover premiums support our view that there is significant growth potential for the
healthcare sector in the region.
- We highlight that KPJ’s FY10-11 PERs of 13.7x and 12.9x respectively are significantly lower than for
Parkway, as well as other healthcare groups in Singapore, Thailand, India and Australia. Consensus
estimates suggest a regional average FY10-11 PER of 17.9x and 14.8x respectively, or 31% and 15%
above that of KPJ.
- Given KPJ’s leading position and expansion plans in Malaysia’s growing healthcare market, we believe the
stock’s discount valuations to regional peers should narrow. As such, we have raised our target FY10 PER
to 16x (vs. 14.5x previously based on the target PER for the consumer sector), after imputing a 10%
discount to regional peers average of 17.9x to reflect the stock’s relatively lower liquidity. Our fair value has
thus been raised to RM3.50/share (from RM3.20). Upgrade to Outperform.

Economic Highlights

Trade : Exports slowed down faster-than-expected in April

Economic Highlights (published 4 Jun)
- Exports slowed down at a much faster pace than expected to 26.6% yoy in April, after a strong rebound to
+36.4% in March and compared with a peak of +37.1% in January. The growth came in weaker than
consensus estimate of 38%, indicating that global demand for the country’s exports is beginning to ease.
- Slower growth was driven by slower increases in the exports of electronic & electrical (E&E) products and
non-E&E manufactured goods. These were, however, mitigated a pick-up in the exports of major
commodity products during the month, due partly to higher prices.
- Going forward, the global economy will likely expand at a more moderate pace in 2H 2010, as the impact of
government stimulus spending around the globe fades and austerity measures in some European countries
to address fiscal deficit and debt problems begin to bite. At the same time, the normalisation and policies
tightening measures in some countries will likely slow down economic activities in these countries.
- Despite the weakness, we do not expect the global economy to fall off the cliff and into a double dip. As a
whole, we expect the country’s exports to slow down in 2H 2010, after a strong pick-up in the 1H.

Technical Highlights

Daily Trading Strategy : Investors will stay further at bay for FIFA 2010 World Cup…
- Worst than what we had expected, the FBM KLCI failed to even retest the 1,300 psychological level, before
closing flat on Friday, with a “doji” candle, indicating further uncertainties for the early part of this week.
- As the short-term momentum indicators turned weaker, the recent recovery is showing signs of exhaustion.
- Potentially, the key index may resume its previous selling momentum, and force a retest to the 10-day SMA
of 1,276, before heading to 1,250 and the recent low of 1,243.86.
- Should the index fail to defend these levels, it will continue its major retracement towards the 23.6%
Fibonacci Retracement (FR) level at 1,229 and the 38.2% FR level at 1,154. Between these levels, the
index will see a strong psychological level of 1,200.
- Given Friday’s over 3% crash on the US markets, the FBM KLCI is expected to trade negatively upon
opening and track the regional sentiment closely for the near term.
- In our view, investors will likely to stay further at bay, taking excuses from the current markets’ volatility to
halt their trading ahead of the grand kick-off of the FIFA 2010 World Cup in South Africa later this week.

Daily Technical Watch: AirAsia – Stabilising around RM1.28 – RM1.40 in the near term…
- 10-day SMA: RM1.196
- 40-day SMA: RM1.288
- Support: IS = RM1.28 S1 = RM1.17 S2 = RM1.09
- Resistance: IR = RM1.40 R1 = RM1.50

Weekly Trading Idea: Gamuda – Expect limited upside ahead… Sell Into Strength
- Strategy: Sell into Strength as the stock moves closer to RM3.06.
- Resistance: IR = RM3.06 R1 = RM3.33 R2 = RM3.64
- Support: IS = RM2.59 S1 = RM2.20 S2 = RM1.87
- Exit: It will return to bulishness only if it crosses RM3.06 convincingly

Commodities & Currencies – Fresh weakness on EUR to continue…

- Light Sweet Crude Oil futures (Crude): If it is unable to launch any rebound this week, it will resume its
bearish sentiment.
- Crude Palm Oil futures (CPO): Risk is higher on the downside, if it loses the support of the 40-week SMA.
- Ringgit (RM)/US$: The chart suggests a volatile trading this week.
- Japanese Yen (JPY)/US$: The pair will continue to trend sideways between the lower support of 87, the
DRL near 88, and the 95.5 key resistance level.
- Euro Dollar (EUR)/US$: The pair could trade towards the 0.85 – 0.92 higher range in the near term if it
breaks out form 0.85.
- US Dollar Index (DXY): Breaking the 89 tough resistance level will mean the index moving into an
uncharted territory.

Bulletin Board

Co/Sector News Impact Recom

Plantation Pakistan reduces duty on palm oil imports by
more than 11% to 8,000 rupees/tn (from 9,000
rupees/tn) as part of 2010/11 budget with
immediate effect. Pakistan is the fourth-largest
buyer of vegetable oils in the world and
consumes 3m tonnes p.a. (80% imported).
Malaysia provides roughly 95% of Pakistan’s
yearly total palm oil import and is being charged
15% less duty than the standard rate as a result
of a tariff agreement signed in 2007. (Business
Times)
Unisem Unisem plans to spend US$200m in capex within
the next two years, with US$100m expected to
be spent this year. Majority of the spending will
be on capacity expansion in Chengdu (75%) and
the balance on assembly and test capacity in
Batam and Ipoh (25%). Unisem expects to set up
five more factories in Chengdu, from two plants
currently. (Financial Daily)
Proton The deal between Proton and VW which
was expected to be announced by Proton has
once again been called off with VW's camp
saying they want to concentrate on their existing
operations with Suzuki and Porsche. Recall in
Neutral. We believe that Malaysia will still be the OW
preferred CPO supplier for Pakistan. However,
the risk is if Pakistan imposes the same tariff
agreement with other major CPO producing
counties such as Indonesia, which could reduce
the demand of CPO from Malaysia.
Capex is higher than our assumption and OP, FV =
management’s previous guidance of US$70m for RM4.06
FY10 but we are maintaining our forecasts until
we speak with management. Nevertheless, we
believe that there will be resilient earnings going
forward from the industry stemming from
stronger-than-expected demand for consumer
electronics.
Neutral. The company is also having talks with OP, FV =
Mitsubishi and Renault to collaborate on engines RM5.50
and products. Proton needs to secure a strategic
alliance in order to optimise their plants’
utilisation and ensure long-term survival.
 2007 both parties failed to come to an agreement
for a strategic partnership. (Financial Daily )
Gamuda Sources said that the Government is in the final The KL MRT is not quite new news. The UP, FV =
stage of considering a new mass rapid transit RM10bn project has been talked about for years RM2.05
(MRT) system in KL. Gamuda and MMC Corp but never come close to materialising. We do not
“have been bandied about” for the project. believe the implementation of the project will be a
(Financial Daily) stroll in the park, the much delayed RM7bn
Ampang/Kelana jaya LRT line extension project
is a good example. We do not expect the market
to get overly excited over the news.

Important Dates

Company Entitlement details Ex-date Payment date

New entitlements
Petra Energy Final single tier tax exempt dividend of 1 sen 28-Jun-10 27-Jul-10
Unisem Final dividend of 2.5 sen tax exempt 16-Jul-10 30-Jul-10
KSL Holdings First and final dividend of 5 sen less 25% tax 26-Jul-10 25-Aug-10
Seacera Tiles Tax exempt final dividend of 1 sen 7-Sep-10 29-Sep-10

Going “ex” on 8 Jun

Lion Diversified Holdings Interest Payment on 5-year 4% ICULS 2008/2013 8-Jun-10 16-Jun-10
Digi.Com First interim single tier dividend of 35 sen 8-Jun-10 18-Jun-10
Loh & Loh Corporation Final dividend of 10 sen less 25% tax 8-Jun-10 18-Jun-10
Putrajaya Perdana Final single tier dividend of 5 sen 8-Jun-10 18-Jun-10
Glomutual Final dividend of 0.5 sen less 25% tax 8-Jun-10 18-Jun-10
Ken Holdings 1st and final div of 2 sen (tax exempt) + franked div of 2 sen (less tax) 8-Jun-10 23-Jun-10
HL Financial Group Second interim dividend of 8 sen less 25% tax 8-Jun-10 29-Jun-10
Cocoaland Holdings Interim dividend of 2.5 sen less 25% tax 8-Jun-10 30-Jun-10
MRCB Final dividend of 1 sen less 25% tax 8-Jun-10 7-Jul-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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